CC Growth Pty Ltd v Amiga Growth No. 2 Pty Ltd [2019] VSC 340

DECLARATIONS - Whether equitable defences are available to a claim for declaratory relief.

FIDUCIARY DUTIES - Scope of the duty to exercise director's powers in good faith in the best interests of the corporation considered - Scope of the duty not to place oneself in a position of conflict in which a personal interest or duty conflicts with the duty to the company considered.

CONTRACT - Whether implied duty to co-operate extends to non-parties to the contract. CONTRACT - Breach of duty of good faith - Repudiation - Whether Childcare Centre was trading profitably.

1 By Originating Process filed 17 April 2018, the plaintiffs seek declarations, specific performance, injunctions and other relief arising out of a Shareholders' Agreement dated 27 June 2017. For the reasons that follow, I refuse to grant the relief sought and dismiss the claim.

2 Except where otherwise indicated the following facts are not contested.

3 The eighth plaintiff ('Amiga Partners') was incorporated on 24 May 2017 to operate as a joint venture vehicle in owning and operating Amiga Montessori child care centres.

4 The first plaintiff ('CC Growth') was incorporated on the same day to be a shareholder in Amiga Partners. CC Growth represents the interests of Henry Townsing and the Townsing family. Its founding shareholder is CVC Venture Managers Pty Ltd ('CVCV') which is part of the Townsing family's venture capital structure, which has investments in property and various businesses.

5 The second to seventh plaintiffs are subsidiaries of Amiga Partners ('the Amiga Partners' subsidiaries').

6 The seventh defendant ('Amanda Bergh') is a director of the first to sixth defendant corporations.

7 The first defendant ('Amiga Growth') was also incorporated on 24 May 2017 to be the other shareholder in Amiga Partners. Amiga Growth represents the interests of Amanda Bergh and is part of the Amiga Montessori Group which owns and operates childcare centres in Victoria.

8 The second defendant ('Amiga Montessori Pty Ltd'), the third defendant, the fourth defendant, the fifth defendant ('Amiga Montessori Golden Grove') and the sixth defendant ('Amiga Montessori Cranbourne West') are corporations related to Amiga Growth. Relevantly, Amiga Montessori Golden Grove has operated a childcare centre at Golden Grove ('the Golden Grove centre') and Amiga Montessori Cranbourne West has operated a centre at Cranbourne West ('the Cranbourne West centre').

9 In March 2017, during negotiations of the proposed joint venture, Henry Townsing prepared a document entitled 'Amiga growth funding' for discussion with Amanda Bergh. The objectives of the joint venture were set out as follows:

1. Rewards Amiga through enabling immediate and ongoing payment of dividends from open centres to stakeholders.
2. Total funding solution for Amiga's development pipe line that provides start up funding and pathway to 100% Amiga ownership.

C. CVCV Childcare initial cash investment of up to $5.0 million.[1]

10 The objectives of Amiga Partners at the time of entry into the Shareholders' Agreement were described by Henry Townsing, in an Investment Update distributed by email on 23 October 2017, as follows:

At inception in June 2017 it was the objective of Amiga Partners to be a funding vehicle for Amiga Montessori to open pipeline centres and act as the incubator of these new childcare centre businesses for Amiga Montessori to grow into a leading childcare operator.

11 The financial arrangements at the time of entry into the Shareholders' Agreement were described, in the background to a Board Circular Resolution dated 14 November 2017 as follows:

In June 2017 Amiga Partners was established by Amiga Growth No.2 Pty Ltd as trustee for the Amiga Growth Trust No.2 (AG2) and CC Growth Pty Ltd (CCG) for the purpose of owning 7 childcare centres to be operated as Amiga Montessori schools.

At establishment Amiga Partners was capitalised at $1.45 million to invest in the 7 Seed Centres comprised of:

1. Equity: $1.2 million

1. Issuance of 3,000,000 shares at $0.20 raising $600,000 cash
2. Issuance of 3,000,000 shares at $0.20 to acquire the Maddingley centre

2. Loan: $0.25 million

The $1.45 million raised was in the form of $850,000 cash to invest in 6 Seed Centres and $600,000 acquisition of an established and profitable centre, Maddingley centre. As at September 2017:

1. The Maddingley centre occupancy was approaching sufficient levels to achieve breakeven operations. Work has commenced to transfer the ownership of the centre from Amiga Montessori to Amiga Partners ...

12 By the Shareholders' Agreement dated 27 June 2017, CC Growth and Amiga Growth (together with Amiga Partners) agreed 'to regulate the subscription and sale of Shares in the Company and to regulate their relationship as Shareholders of the Company and the activities of the Company'. The terms of the Shareholders' Agreement included the following:

Share capital: Upon incorporation, the Company issued and allotted 6,000,000 $0.20 Shares.

It is the intention of the Parties that at the date of this Agreement the Company's issued shares of 6,000,000 will be held [50% by CC Growth and 50% by Amiga Growth].

The parties acknowledge and agree that until each of CC Growth and Amiga hold 50% of the 6,000,000 Shares issued or to be issued by the Company:

1. no amendments may be made to this Agreement, the Finance Agreement or the Services Agreement without the unanimous, written consent of the Shareholders;
2. any and all dealings between the Shareholders under this Agreement is deemed to occur on the basis that each of CC Growth and Amiga hold 50% of the 6,000,000 Shares issued, or to be issued by the Company;

1. Amiga Shares are to be attained via contribution of a trading and profitable childcare centre of not less than 70 licensed places; and

1. In the event the process contemplated by clause 3.2c is not commenced by 31 December 2017, subject to any reasonable delays caused in the finalisation of the childcare centre management accounts or the procurement of tax advice relating to Amiga Partners acquisition of the childcare centre under clause 3.2c, then clause 3.2a and 3.2b, will be deemed null and void as at 1 January 2018.

(Clause 3.2)

Seed Centres: Amiga and its associates irrevocably agree to transfer to the Company or its nominees the ownership, management, assets, licenses, material contracts and/or any other rights held in relation to the Seed Centres for the consideration of Share Capital in the Company as set out in Table 1, clause 3.2

3.9.1 The Seed Centres will be subject to all the provisions and operative agreements in this Agreement.

3.9.2 The parties to this Agreement will enter into all agreements to acquire and operate the Seed Centres in accordance with this Agreement.

(Clause 3.9)

First Right Centres: Amiga and its Related Entities irrevocably grant Amiga Partners all interests and benefits in the First Right Centres for the consideration of $1.00 per Centre, including but not limited to the assignment of any Services Agreement on the same terms and conditions as the Seed Centres.

3.10.1 The 3 First Right Centres are to be approved by the Board and will be considered a Financial Matter.

3.10.2 Should Amiga and its Related Entities own and/or operate a Centre that is not trading at the date of this Agreement that Amiga Partners has not been offered the opportunity to acquire as set out in this clause 3.10, then Amiga Partners will have the right to acquire any Centre from Amiga or its Related Entities for consideration of $1.00 at any time up to a maximum of 3 Centres.

(Clause 3.10)

The Board

Number and appointment of directors: The Company will operate under the Directorship of two Directors, with each of CC Growth and Amiga entitled to nominate and appoint one such Director, or as otherwise determined by the Shareholders through the passage of a Special Resolution. As at the date of this Agreement:

1. Amanda Bergh has been nominated, consented to act and been duly appointed as a Director by Amiga; and
2. Henry George Townsing Jnr has been nominated, consented to act and been duly appointed as a Director by CC Growth.

(Clause 4.1)

Voting: All matters presented to the Board shall be decided by a simple majority vote of the Directors present and voting and recorded in writing. In the event of an equality of votes at any meeting of the Board, or at any General meeting of Shareholders, the following person shall be entitled to a second or casting vote:

4.10.1 The Amiga nominated Director shall have the casting vote on Operational Matters.

4.10.2 The CC Growth nominated Director shall have the casting vote on Financial Matters.

(Clause 4.10)

Shareholders' consent (Special): The Shareholders shall exercise all rights available to them in relation to the Company so as to procure (so far as they are able) that the Company shall not without the prior written Special Resolution of Shareholders resolve to:

...

6.2.4 repurchase or redeem the Company's securities or debts except to the extent that such debt is due in accordance with its terms;

...

6.2.7 approve any transactions with any Shareholder or any company or business in which any of the Shareholders have financial interests or enter into any contract, agreement or arrangement with any Shareholder or any company or business in which any of the Shareholders have financial interests other than the Services Agreement and Finance Agreement;

6.2.8 issue, allot, redeem, purchase or grant any new securities in the Company;

6.2.9 issue, allot, redeem, purchase or grant any options over any of the Company's Shares or other securities or reorganize or reclassify the Company's Shares in any way;

6.2.10 sell, transfer, lease, assign, or otherwise dispose of a material part of the Company's undertaking, property, goodwill or assets (or any interest in them. including investment in a subsidiary company, Related Entity or associated company). Or contract to do so otherwise than in the ordinary and proper course of the Business or in accordance with clause 9.0; and/or

6.2.11 enter into a contract, arrangement or commitment involving expenditure or the realisation of assets if the amount or the aggregate amount of the expenditure or realisation by the Company would exceed $100.000 in relation to any one Centre.

(Clause 6.2)

Reacquisition of centres

At any time in the 3rd and 4th year of the ownership and/or management of a Centre by the Company, Amiga Montessori Pty Ltd and/or its Related Entity may acquire any Centre from the Company on the following terms:

1. Amiga Montessori Pty Ltd or its Related Entity will serve written notice on the Company of its intention to purchase a Centre of not less than 12 months.
2. The sale price for a Centre shall be equal to 4.0 times Invested Capital.

1. In the event of dispute as to the sale price of a Centre, an expert will be appointed as nominated by the Institute of Chartered Accountants or as agreed by the Parties to determine the price in accordance with clause 7.1 b).

(Clause 7.1)

Exercise of Voting Rights

Without limiting the operation of clause 6.2.7, all dealings between the Company and the Shareholders (or their companies) shall be in good faith. and on a fair and equitable basis both as regards the interests of the Shareholders and the transaction and the balancing of the interests of the Shareholders (and their companies).

(Clause 10.4)

13 The Shareholders' Agreement defined the following terms:

(a) 'First Right Centres' was defined to mean that Amiga Partners holds the first right of refusal to purchase 3 Centres from the Amiga Pipeline in accordance with the Shareholders Agreement.

(b) 'Amiga Pipeline' was defined to mean any childcare centre that was not included in Appendix 1 but is owned and operated by Amiga Growth and its Related Entities. Appendix 1 set out the following:

(c) 'Seed Centres' was defined to mean the following centres:

1. Maddingley: 8-12 Labilliere St, Maddingley, VIC Australia 3340;

2. Laverton: 1-19 Thomas St, Laverton VIC Australia 3028;

1. Officer: Corner of Timbertop Boulevard and Upton Drive, Officer VIC Australia 3809;

4. Mildura: 638 Etiwanda Avenue, Mildura VIC Australia 3500;

5. Hoppers Crossing: 429 Sayers Rd, Hoppers Crossing VIC 3029;

6. Preston: 235-239 Murray Rd, Preston VIC 3072; and

7. Thomastown: 251 Settlement Rd, Thomastown VIC 3074.

(d) 'Operational matters' was defined to mean any matter:

(i) specified in Appendix 2 [which was blank, and so did not specify any matters] and to which clause 6.2.7 does not apply; and

(ii) determined to be an Operational Matter by a unanimous resolution of the Shareholders in writing.

(e) 'Financial matters' was defined to mean any matter that is not an operational matter and to which clause 6.2.7 does not apply.

(f) 'Related Entity' has the meaning ascribed to this term by the Corporations Act 2001 (Cth).

14 Minutes of board meeting dated 27 June 2017 relevantly recorded:

(a) A resolution to enter into a loan agreement with CVCV, CC Growth and Anglo Australian Christian & Charitable Trust;

(b) [Amiga Growth] will be issued 2,999,998 shares at $0.20 per share at the date [Amiga Partners] becomes the sole owner of the Maddingley Childcare Centre (MCC).

(c) [CC Growth] will be issued 2,999,998 shares at $0.20 per share or a pro-rate proportion on a monthly basis upon investment of up to $499,999.60 (sic $599,999.60).

(d) The Company Business Plan was tabled and the Board noted that there was sufficient funding for the 3rd quarter of 2017; but additional funding would be required for the 4th quarter.

15 On 27 June 2017, Amiga Partners entered into a loan agreement with Newstreet 15 Pty Ltd acting as the agents for the following named lenders for the following loans:

Anglo Australian Christian & Charitable Trust $120,000.

Henry Townsing signed as a director of Amiga Partners, Newstreet 15 Pty Ltd, CC Growth and CVCV. Only Anglo Australian Christian & Charitable Trust was not an entity related to Townsing interests.

16 On 28 July 2017, Waihan Low (the accountant for CVCV) circulated the Amiga Partners' board meeting pack for the August meeting. The pack included the Amiga Partners Business Plan which included the following with respect to shareholder investment:

Amiga Growth No 2 will be issued 2,999,998 shares at $0.20 per share at the date Amiga Partners becomes the sole owner of the Maddingley childcare centre.

CC Growth will be issued 2,999,998 at $0.20 per share or a pro-rata proportion on the date(s) it invests up to $599,999.60.

Further, CC Growth will make available a loan facility of $250,000 on the following terms;

>- Term: 2 years

>- Interest rate: 10% pa payable semi-annually in arrears

>- Security: 1st lien charge over Amiga Partners and subsidiaries.

17 Minutes of meeting dated 1 August 2017 relevantly recorded:

(a) Maddingley trading in July had improved, however, it was still operating below breakeven; but had not achieved the hurdles to be acquired by Amiga Partners as at July 2017;

(b) There was sufficient committed funding for Quarter 3 of 2017; but additional funding was required for Quarter 4 of 2017;

18 By email of 22 September 2017, Henry Townsing circulated the Amiga Partners' board meeting pack for the September meeting. The pack included the Amiga Partners Business Plan which included the following with respect to seed funding requirements as at September 2017:

~ In May 2017 Amiga Partners received investment commitments of $1,450,000 to fund the acquisition and/or operation of 7 schools (Seed Schools);

~ $600,000 equity contribution of the Maddingley school;

~ $600,000 cash equity;

~ $250,000 loan facility.

~ It is estimated that the cash investment required to bring the Amiga Partners Seed Schools portfolio to breakeven is $3,000,000 calculated as 6 schools x $500,000 as the seventh school, Maddingley, will be acquired by Amiga Partners at the date profitability is attained.

~ A further $2,150,000 cash is estimated to be required by Amiga Partners for the Seed School portfolio.

It was noted that Amiga Montessori Pty Ltd had agreed to accrue the Service Fee and CVC Venture Managers had agreed to accrue the Service Fee in lieu of cash payments.

19 By minutes of meeting dated 26 September 2017, it was relevantly recorded:

(a) With respect to Maddingley:

(i) Kinder funding was being applied for which would increase revenues based on current occupancy[2]

(ii) Staff rostering was being reviewed by Amiga Services with a resultant reduction in wage to revenue ratio

(iii) It was anticipated that the combination of the impact of (i) and (ii) above would bring Maddingley to breakeven.

(b) Resolution that documentation and due diligence for the acquisition of Maddingley be prepared.

(c) With respect to the Business Plan:

(i) AP had undrawn committed funding of approximately $250,000.

(ii) Additional funding was required by end of October to operate the AP schools that were operating at a loss.

(iii) Amiga had a committed pipeline of a further 9 schools due to commence trading in 2018.

(d) Amanda Bergh to consider funding options for capital call in October and revert to Henry Townsing.

20 By circular resolution dated 14 November 2017, it was relevantly resolved as follows:

(a) Amiga Partners to make a 1 for 5 rights issue of an additional 1,200,000 shares at $0.60 per share.

(b) Amiga Growth to be issued the shares in lieu of monthly service fees.

(c) CC Growth to be issued shares after monthly cash contributions.

(d) Amiga Partners' loan facility to be increased from $250,000 to $400,000.

21 By email of 27 November 2017, Henry Townsing circulated the Amiga Partners board meeting pack for the December meeting. The pack included the Amiga Partners Business Plan which recorded the following:

(a) Amiga Growth and CC Growth had each committed to make further capital investment of $960,000 and CC Growth had committed to a loan of $400,000.

(b) Section 3 dealt with financial issues and relevantly stated:

3.1 Amiga Partners business plan

3.1.1 At establishment of Amiga Partners - Key deal principles

➢ Amiga Partners Centres

• Amiga Partners Seed Centre portfolio to be comprised of 7 centres
• Amiga Partners to hold an option to acquire a further 3 centres

➢ Shareholder contributions

➢ Jun-17: $600k (equity - Maddingley)

➢ Nov-17: $360k (Cash - Service Fee forgiveness)

➢ Raise cash in period from Jun-17 to Dec-17 through:

1. Russian centre loan increase

2. Closure of Reservoir West and fold into Reservoir

3. Address cost structure to achieve free cash flow generation from mature centre portfolio

4. Sale of Coburg

5. New loan facility

   • Resolve HTR dispute
   • Corporate restructure

Amiga Growth No 2 has been issued 264,160 shares at 24 November 2017. Amiga Growth No 2 will be issued a further;

>- 2,999,998 shares at $0.20 per share at the date Amiga Partners becomes the sole owner of the Maddingley childcare centre. Acquisition by Amiga Partners is contingent upon Maddingley achieve profitability

>- 335,842 shares at $0.60 per share to be issued monthly in arrears in lieu of the Service Fee payable

CC Growth has been issued 3,138,291 shares at 24 November 2017. CC Growth will be issued an additional 461,709 shares at $0.60 per share upon further capital contribution of $277,025.

Further, CC Growth will make available a loan facility of $400,000 on the following terms;

>- Term: To June 2019

>- Interest rate: 10% pa payable semi-annually in arrears

>- Security: 1st lien charge over Amiga Partners and subsidiaries

22 The December 2017 directors' meeting extended over 3 days being 1, 5 and 7 December 2017. The events were the subject of dispute. I set out the draft minutes below, and my findings about the relevant conversations at these meetings are set out in [97] to [102] below.

23 Draft minutes of meeting dated 1 December 2017 relevantly recorded:

(a) It was discussed and noted that, with respect to Maddingley:

Staff rostering review had been completed by Amiga and no changes made due to the longer hours of operation of this centre compared to other centres operated by Amiga therefore no resultant reduction in wage to revenue ratio was able to be achieved.

(i) Amiga provide a marketing plan for Hoppers Crossing and Thomastown targeting the waitlisted children at nearby Amiga Montessori centres;

(ii) Maddingley have not achieved the hurdles to be acquired by Amiga Partners at November 2017;

(iii) Bergh to consider funding options for the 2018 capital call and revert to [Henry Townsing].

(iv) [Henry Townsing] informed the meeting as follows:

1. Supportive of the continuation of a progressive capital raising policy;
2. Capacity to invest the required $3.0 million to fund Seed Centres and First Rights Centres in H1'CY2018;
3. For the reasons set out in s 3.1.1 [set out in paragraph 21(b)] of the December 2017 Amiga Partners Notice of Board Meeting there was no reasonable grounds to make any further commitment to invest capital in Amiga Partners as currently structured;
4. Pre-requisite to making any further commitment to invest in Amiga Partners would be an amendment to the terms of the deal to reflect;

1. An equity investment as opposed to a funding arrangement; 2. Certainty that further capital could be raised by Amiga Partners should the Seed Centres and/or First Rights Centres require further capital beyond the $3.0 million required in Hl'CY2018 as per the Amiga Partners quarterly forecast;

1. Implementation of direct management team and head office space for Amiga Partners to address the operational deficiencies in the current structure.
2. Bergh advised that Amiga was working through options to raise capital but was not able to commit to participation in a capital raising at this time due to a lack of funds.

(c) Henry Townsing advised that Cranbourne West centre and Golden Grove centre were nominated as First Rights Centres.

24 After the board meeting, by email of 1 December 2017 to Bergh and Karatselios, Henry Townsing attached 3 draft resolutions to be considered at the resumed board meeting. The draft resolutions are detailed and, as they are significant, they are set out in full in Schedule 1. In summary, the critical parts of the proposed resolutions were as follows:

Amiga Partners to move to leased premises at 70 Dorcas Street, Southbank, Victoria (CCVC's business premises) and Amiga Partners to employ Ian Townsing at $100,000 p.a. ('Resolution 1').

Amiga Partners raise $2,000,000 to fund seed operations by debt and equity; and shareholder meeting be convened to:

(i) reclassify clauses 6.2.4 and 6.2.8 to 6.2.11 of the Shareholders' Agreement from Special Resolution Matters to Ordinary Resolution Matters;

(ii) delete clause 7 of the Shareholders' Agreement; and

(iii) issue new shares

('Resolution 2').

Amiga Partners nominate Golden Grove and Cranbourne West as First Rights Centres and raise $1,000,000 to fund First Right Centres by debt and equity ('Resolution 3').

25 Bergh and Karatselios gave evidence that, in a telephone conference call on or about 2 December 2017, Henry Townsing said words to the effect that he would not proceed with Amiga Partners and would not provide further funding unless Amiga Growth's shareholding was diluted and its buyout right under clause 7 of the Shareholders' Agreement was removed. Henry Townsing could not recall this conversation but did not deny it.

26 Draft minutes of the resumed meeting on 5 December 2017 relevantly recorded:

(a) The proposed resolutions, attached to the email of 1 December 2017, were tabled.

(b) In response to Amanda Bergh's enquiry as to why Resolution 2 required:

(ii) reclassification of those matters set out in clauses 6.2.4 and 6.2.8 to 6.2.11 from Special Resolution matters to Ordinary Resolution matters;

the minutes repeat the statements of Henry Townsing recorded in the 1 December 2017 minutes, which are set out in paragraph 23(b)(iv)i-iv above.

(c) Amiga was actively seeking a sale of a minority stake in childcare centres to raise $1.5 million; but '[i]f a sale were able to be achieved [they] would not have any funds until early 2018'.

(d) Henry Townsing refused to confirm that 'should Amiga invest a further $1.5 million in Amiga Partners that Henry Townsing would vote to approve a resolution for the Company to undertake a capital raising with no change to any Company document or the Shareholders Agreement'.

27 After the board meeting, by email of 5 December 2017 to Henry Townsing senior (the father of Ian and Henry) and Ian Townsing, Henry Townsing stated as follows:

The meeting opened with Amanda stating - she won't agree to being diluted and won't waive the 4x buyout right - for me this statement means we can not go forward with Amanda. The question is now no longer if we can go forward with Amanda but how do we negotiate out of the Partnership with Amanda and use our investment to date to build out a 100% owned business?

The board meeting was once again adjourned and will re-convene on Thursday evening at 5pm. Prior to this I would like to resolve our position so I have your blessing on an agreed position to take with me to try and broker at that meeting. Our options as best as I can figure are:

Option 1: 'Continuation of original deal'

Proposed deal:

► Amanda puts in $1.5 million cash & CVCV Partners put in $1.5 million cash into Amiga Partners which would fund the 7 Seed Centres to profitability;

► If Amanda can not put in $1.5 million cash by say 31 January 2018 then CVCV Partners have right to fund under following terms

o Amanda 4x invested capital buyout option is cancelled

• Amiga Service Agreement is cancelled and direct management team employed
• Full financial control of Amiga Partners seeded to CVCV Partners through changing requisite items from special resolution to ordinary resolution
• Shares issued at a price based on Amiga Partners valuation policy, estimated at $0.80 at Dec- 17 vs $0.20 seed investment price

Issues:

► Even if Amanda is able to raise and put in $1.5 million in cash - I have no reasonable basis/position that Amanda can perform under the 4x buyout deal ... how can I go to CVCV Partners and seek money under a deal premise I believe to be false?

• Only way would be to say CVCV Partners are happy to own the Centres privately for 4 years, Amanda may cherry pick a couple and come Day 1 Year 5 for the rump of centres CVCV exercise its rights to sell to ASX listed Barkly II (would be in mid to late 2021)

► If we exercise our right for Amiga Partners to take on Golden Grove (Adelaide) and Cranbourne West then Amiga Partners centres grows to 9 which would mean Amiga Partners is not fully funded from the $1.5m + $1.5m raising above-> would be $1.2m short ($600k p/centre)

Option 2: 'Cocktail deal'

Proposed deal:

► Amiga Partners centres owned reduced to a size whereby Amanda can meet capital commitment today & perform on 4x buyout in year 3 to 4 of Amiga Partners ownership

► Centres 'lifted out' of Amiga Partners becoming solely owned by CVCV Partners

► Amanda assigns pipeline of 8 or so centres to CVCV Partners

Issues:

► We would in essence be entrusting our money invested in the Amiga Partners centres to be managed and returned by Amanda ... we do not believe she is a competent business manager ...

► Given Amanda attitude of 'its (sic) all mine' I do not believe the probability of negotiating this outcome to be high

Option 3: 'Negotiated divorce at Dec-17 deal'

Proposed deal:

► Carve up Amiga Partners centres between Amiga and CVCV Partners and go our separate ways

► At today

1. CVCV Partners own 90% of Amiga Partners/Amanda 10%

O Amiga Partners has 8 centres

► Proposal might be?

1. Amanda picks 1 centre/CVCV Partners take balance of 7 centres

Issues:

► We would need to move quickly to get a management team in place

► Given Amanda attitude of 'its (sic) all mine' I do not believe the probability of negotiating this outcome to be high

Option 4: 'Divorce through receiver'

Proposed deal:

► Amiga Partners lenders appoint a receiver (CCG is a lender of which CVCV is the major shareholder) to run the centres

Issues:

► Expensive

Would appreciate your thoughts/input before Thursday afternoon my time as board meeting re-convenes on Thursday at 5pm.

28 Draft minutes of the resumed meeting on 7 December 2017 relevantly recorded:

(a) The proposed resolutions, attached to the email of 1 December 2017, were again tabled.

(b) Henry Townsing informed the meeting that CC Growth's position remained unchanged and the minutes again repeat the statements of Henry Townsing recorded in the 1 December 2017 minutes, which are set out in paragraph 23(b)(iv)i-iv above.

(c) Bergh said she would not vote in favour of the resolutions.

(d) Henry Townsing said Maddingley had not met the conditions set by cl 3.2(c) of the Shareholders' Agreement.

(e) It was resolved that Maddingley did not satisfy the criteria of a Qualifying Centre.

29 By letter dated 14 December 2017 to the directors of Amiga Partners, Philip Good of Business Lighthouse Group Pty Ltd ('Business Lighthouse') (the accountant for Amiga Growth) attached revised November 2017 accounts for the Maddingley childcare centre showing that it was profitable for the month of November 2017. It states that the Maddingley centre was contributed pursuant to cl 3.2(c) of the Shareholders' Agreement and requested the issue of 3,000,000 shares.

30 On 15 December 2017, Henry Townsing started communicating by email and telephone with Grant Thornton, the accountants and insolvency practitioners, who would later be appointed as administrators.

31 On 18 December 2017, Ian Townsing lodged an Application for Provider Approval to the Australian Children Education & Care Quality Authority.

32 By letter dated 22 December 2017 to Philip Good of Business Lighthouse, Henry Townsing stated that CC Growth did not agree that the contribution of Maddingley satisfied cl 3.2(c) of the Shareholders' Agreement. However, he stated CC Growth was prepared to reconsider its position on the eligibility of the Maddingley centre on the provision of specified information.

33 By letter dated 29 December 2017 to Henry Townsing, Karatselios replied to the letter of 22 December 2017 to Business Lighthouse and stated:

(a) Amiga Growth had complied with cls 3.2(c) and (d) of the Shareholders' Agreement by commencing the process of committing the Maddingley centre to Amiga Partners.

(b) Maddingley centre is a Qualifying Centre pursuant to cl 3.2(c).

(c) Amiga Partners has access to the relevant accounts for the Maddingley centre, known as the Xero accounts, and can access the full range of financial reports for the Maddingley centre.

It suggested a meeting of shareholders as soon as practicable after Amanda Bergh returned from leave on 14 January 2018.

34 By email of 31 December 2017 to Vanda Gould (the representative of Anglo Australian Christian & Charitable Trust), Henry Townsing stated that '[w]e have hit troubled waters with our operating partner at the childcare business' and attached two slide decks, being:

(a) Summary of the situation/issues and possible solution, "Amiga JV" file; and

(b) Business plan/investment thesis for building a childcare platform, 'CVCV childcare plan' file.

35 In the attached material, Henry Townsing included the following 'CCG/CVCV proposed solutions':

(a) Convene Amiga Partners Board meeting and pass following resolutions:

(i) The special purpose vehicles that were the Amiga Partners' subsidiaries, which operated each of its childcare centres, to be informed no further funding 'as the Amiga Partners shareholders have been unable to agree terms to facilitate further investment';

(ii) Amiga Partners consent to each special purpose vehicle raising its own capital; and

(iii) CC Growth to appoint 2 directors to each subsidiary special purpose vehicle and Amiga Growth to have one director.

CC Growth to pass resolutions on the basis that each is a financial matter and therefore its director has a casting vote.

(c) 'If above resolutions are blocked/frustrated by AG legal actions, administrator or CC Growth's receiver to be appointed to Amiga Partners'.[3]

36 By letter dated 3 January 2018 to Karatselios, Henry Townsing responded to the letter of 29 December 2017 and stated:

(a) CC Growth remained of the view that the Maddingley centre failed to satisfy the criteria of a Qualifying Centre and that cl 3.2 is null and void as at 1 January 2018; and

(b) he is available to attend any duly convened meeting of shareholders.

37 On 9 January 2018, the Townsings incorporated Amiga Montessori GG Pty Ltd and Amiga Montessori Cranbourne West Pty Ltd, as the subsidiaries for the Golden Grove and Cranbourne West centres respectively, with Henry Townsing and Lo Fai Tsim as directors and CC Growth as the ultimate holding company.

38 By letter dated 11 January 2018 to Henry Townsing, Karatselios replied to the letter of 3 January 2018 and stated:

(a) Amiga Growth reasserted that the contribution of the Maddingley centre was validly effected under cl 3.2(c);

(b) Amiga Growth was not obliged to provide further supporting documents; and

(c) Amiga Growth gave a notice of dispute pursuant to cl 11 of the Shareholders' Agreement.

39 By letter dated 16 January 2018 to Karatselios, Henry Townsing replied to the letter of 11 January 2018 and stated:

(a) CC Growth disagreed with the assertion that Amiga Growth had no obligation to provide supporting documents with respect to the Maddingley centre; and

(b) Amiga Growth's notice of dispute was acknowledged and, to facilitate the resolution process, he reiterated the request for the information previously requested.

40 By letter dated 16 January 2018 to Bergh, Henry Townsing formally advised as follows:

(a) On 1 December 2017, the board of Amiga Partners nominated the Cranbourne West centre and the Golden Grove centre as First Rights Centres and approved the acquisition of the centres from Amiga Montessori for consideration of $1 per centre in accordance with cl 3.10 of the Shareholders' Agreement.

(b) Amiga Montessori was required to grant Amiga Partners all interests and benefits in these nominated First Rights Centres.

41 By letter dated 22 January 2018 to Henry Townsing, Karatselios replied to the letter dated 16 January 2018 and responded to the request for the documentation. It stated that Amiga Growth wished to work in good faith to resolve the dispute regarding the Maddingley contribution.

42 By emailed letter dated 22 January 2018 to the directors of Amiga Partners, Karatselios responded to the letter of 16 January 2018 and stated:

(a) Amanda Bergh disputed that there was a resolution on 1 December 2017 that Amiga Partners exercise its right to nominate the Golden Grove centre and the Cranbourne West centre as First Rights Centres; and

(b) Amiga Montessori Pty Ltd was not a party to the Shareholders' Agreement and has not received any notice from Amiga Partners exercising its option to acquire the Golden Grove centre and the Cranbourne West centre.

43 On 23 January 2018, there was a meeting of the directors of the board of Amiga Partners. There are no minutes of the meeting but the agenda for the meeting included:

(a) tabling of draft minutes of the previous meeting held on 1, 5 and 7 December 2017; and

(b) appointment of new directors of the Amiga Partners' subsidiaries incorporated for the Seed Centres and First Rights Centres.

(i) it was resolved to suspend the provision of further loans to Amiga Partners' subsidiaries; and

(ii) Henry Townsing voted in favour of a resolution that Henry Townsing and Lo Fai Tsim be appointed as directors of each of the Amiga Partners' subsidiaries. Amanda Bergh voted against it. Henry Townsing asserted that the resolution was a 'Financial Matter' and exercised his casting vote in favour, which was disputed by Amanda Bergh who stated that the resolution was an 'Operational Matter'.

44 By letter dated 23 January 2018 to Amanda Bergh, Henry Townsing 'formally advised' Amiga Growth that:

(a) on 23 January 2018, the board resolved to nominate the Golden Grove centre and the Cranbourne West centre as First Rights Centres; and

(b) Amiga Growth was required to grant Amanda Bergh the nominated 'First Rights Centres' for the consideration of $1 per centre including but not limited to the assignment of any 'Services Agreement'.

45 By email of 24 January 2018 to Henry Townsing, Karatselios referred to the board meeting and disputed that the resolution to appoint two new directors to Amiga Partners' subsidiaries was passed because the resolution was an 'Operational Matter' rather than a 'Financial Matter' and therefore Amanda Bergh, not Henry Townsing, had the casting vote.

46 By letter dated 24 January 2018 to the Amiga Partners' subsidiaries that operated the Cranbourne West, Golden Grove, Hoppers Crossing, Laverton, Mildura, Officer and Thomastown Childcare Centres, Henry Townsing advised that Amiga Partners had resolved to:

(a) suspend further loans to the Amiga Partners' subsidiaries from 23 January 2018; and

(b) approve, authorise and direct the Company to undertake fund raising for each of Amiga Partners' subsidiaries.

47 By email of 25 January 2018 to Henry Townsing, Karatselios attached a draft Transfer of Lease for each of the Golden Grove centre and the Cranbourne West centre for the approval of Amiga Partners.

48 By emailed letter of 26 January 2018 to Amanda Bergh, Henry Townsing confirmed that the following matters had been resolved or discussed at the board meeting on 23 January 2018:

(a) It was resolved to suspend the provision of further loans to Amiga Partners' subsidiaries.

(b) With respect to a resolution that Henry Townsing and Lo Fai Tsim be appointed as directors of each of the Amiga Partners' subsidiaries, Henry Townsing voted in favour and Amanda Bergh voted against. Henry Townsing asserted that the resolution was a 'Financial Matter' and exercised his casting vote in favour, which was disputed by Amanda Bergh who stated that the resolution was an 'Operational Matter'.

(c) If Amanda Bergh did not reconsider her vote on the resolution, Henry Townsing requested that she consent to a shareholder meeting of Amiga Partners to be held on 29 January 2018 to ratify and approve the appointment of the directors to the Amiga Partners' subsidiaries.

(d) The withdrawal of financial support for the Amiga Partners' subsidiaries would result in all of them becoming insolvent by 30 January 2018. The insolvency of the subsidiaries would constitute an event of default under Amiga Partners' loan agreement, and the lender's agent (New Street 15 Pty Ltd) continued to closely monitor the position and reserved its rights to appoint an insolvency practitioner.

(e) Henry Townsing has sought funding commitments from a lender, which will only be prepared to provide loans if Lo Fai Tsim and Henry Townsing are directors of each subsidiary.

49 By email of 27 January 2018 to Henry Townsing, Karatselios replied to the letter of 26 January stating:

(a) Amanda Bergh would agree to attend a shareholders' meeting subject to her receiving satisfactory answers to the following matters:

(i) Why were the Amiga Partners' subsidiaries set up with Henry Townsing and Lo Fai Tsim as directors without Amanda Bergh's consent?

(ii) Why was Amanda Bergh not appointed as a director?

(iii) A response to Amanda Bergh's requests to access Amiga Partners' financials.

(b) Amanda Bergh denied she was not acting in the best interests of Amiga Partners.

50 By emailed letter of 28 January 2018 to Karatselios, Henry Townsing referred to the email of 27 January 2018 to Henry Townsing from Karatselios and:

(a) asserted that the First Rights Centres were nominated by the board during its December 2017 meeting and the new Amiga Partners' subsidiaries were incorporated after that meeting; and

(b) requested that Amiga Growth consent to the meeting of company shareholders on short notice on 29 January 2018.

51 By email of 29 January 2018 to Henry Townsing and Amanda Bergh, Karatselios replied to the letter dated 28 January 2018 with a number of questions with respect to the proposed director and funding arrangements in other matters. Subject to a satisfactory response, he said Amanda Bergh would agree to a shareholders' meeting occurring on 30 January 2018.

52 By email of 30 January 2018 to Amanda Bergh and Mr Tsim, Henry Townsing stated that the Amiga Partners' subsidiaries each had a clear, urgent and immediate need to raise capital and that, 'in the absence of funding, all of the Subsidiaries would become insolvent by today/1 February 2018'. The letter calls for an urgent board meeting so that a loan, in accordance with an attached letter, could be taken out 'for the purpose of meeting payroll obligations and other obligations due by 1 February'.

53 By email of 30 January 2018 to Henry Townsing, Karatselios challenged the appointment of Henry Townsing and Mr Tsim as directors of the Amiga Partners' subsidiaries and asserted that until the Maddingley contribution dispute is resolved each party is deemed to own 50% of the shares in Amiga Partners.

54 By loan agreements dated 30 January 2018 secured by Henry Townsing and Mr Tsim on behalf of each of the Amiga Partners' subsidiaries, CC Emelo Pty Ltd ('CC Emelo'), a company related to Townsing interests, agreed to provide loan facilities for the Thomastown subsidiary of $135,000, the Hoppers Crossing subsidiary of $90,000, the Mildura subsidiary of $90,000, the Laverton subsidiary $60,000, the Officer subsidiary $100,000, the Golden Grove subsidiary of $200,000, the Cranbourne West subsidiary of $75,000 - all at an interest rate of 17.5%.

55 By email of 31 January 2018 to Henry Townsing, Karatselios requested access to the financial records of Amiga Partners and a response to the email of 29 January 2018.

56 On 20 February 2018 at a meeting of shareholders, CC Growth asserted that it held over 90% of the shares in Amiga Partners and ratified the board resolution appointing Henry Townsing and Mr Tsim as directors of the Amiga Partners' subsidiaries.

57 On 22 February 2018, Matthew Byrnes and Andrew Hewitt of Grant Thornton were appointed joint and several voluntary administrators of Amiga Partners pursuant to s 436C of the Corporations Act 2001 (Cth) ('the Act').

58 By report dated 29 March 2018, the administrator recommended that Amiga Partners execute the Deed of Company Arrangement ('DOCA') proposal of Henry Townsing of 27 March 2018. Under the DOCA the Amiga Partners' subsidiaries were to be transferred to Mobe Growth Pty Ltd ('Mobe Growth'), a related entity of the Townsings, on the following terms:

(A) $319,152.72 in repayment of the emergency loans to the Amiga Partners' subsidiaries; and

(B) $134,459.07 in repayment of further loans to the Amiga Partners' subsidiaries.

(b) Amiga Partners would transfer all of its shares in the Amiga Partners' subsidiaries to Mobe Growth.

(c) Amiga Partners would issue 279,663 new ordinary shares to CC Growth for total consideration of $167,797.90 provided between November 2017 and February 2018, being $0.60 per share.

(d) Any loans from Amiga Partners to the Amiga Partners' subsidiaries be forgiven.

(e) Any Amiga Partners assets relating to the Amiga Partners' subsidiaries, including material contracts, software, customer information, Department of Education and Training (DET) information, correspondence or regulatory documentation be transferred to the appropriate subsidiary.

(f) The secured loan over Amiga Partners be assigned to Mobe Growth in consideration of $100,000 to be paid by Mobe Growth to Newstreet 15 Pty Ltd.

(g) Amanda Bergh be removed as a director either by her resignation or by the Deed Administrators pursuant to s 442A(a) of the Act.

(h) A contingent contribution sum of $200,000 be payable by Mobe Growth to the Deed Administrators in exchange for Amiga Growth, Amanda Bergh and other related entities agreeing to do certain things, including transferring the leases and share transfer forms.

59 On 3 April 2018, the 2nd Meeting of Creditors approved the proposed DOCA.

60 On 23 April 2018, the DOCA was executed by Andrew Hewitt on behalf of the Deed Administrators and Henry Townsing as director of Mobe Growth.

61 By Originating Process S ECI 2018 00052 filed 19 March 2018 ('the related proceeding'), Amiga Growth sought relief against CC Growth, Amiga Partners and the Amiga Partners' subsidiaries on the ground of oppressive conduct in substance constituted by the circumstances referred to above. On 6 April 2018, I granted leave to discontinue the related proceeding.

62 The plaintiffs' rights with respect to the Seed Centres were not in dispute. However, the defendants disputed that the plaintiffs were entitled to transfers of the Golden Grove centre and the Cranbourne West centre as First Rights Centres.

63 The plaintiffs claimed relief on the following bases:

(a) Breach of an implied contractual duty to co-operate.

(c) Breach of director's fiduciary and statutory duties.

64 The defendants positively alleged the following:

65 The plaintiffs conceded that the only shareholders to the Shareholders' Agreement were Amiga Growth and CC Growth. However, it was submitted that, if Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West had been parties to the Shareholders' Agreement, they would have been bound by cl 3.10 (which provided for a grant by Amiga Growth and its Related Entities to Amiga Partners of the nominated First Rights Centres) to transfer the Golden Grove centre and the Cranbourne West centre to Amiga Partners. Accordingly, the plaintiffs contended as follows:

A term obliging [Amiga Growth] and the [Amiga Montessori Centre Pty Ltd, Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West] to do whatever is reasonably necessary to enable Amiga Partners to reap that benefit, and to act in good faith to achieve that result can be implied on the basis of the duty of co-operation identified as a universal implied term in Mackay v Dick.[4]

66 It may well be that a duty of co-operation could be implied into the Shareholders' Agreement. However, I reject the submission that such an implied term may trump privity of contract and bind non-parties. Not surprisingly, no authority was cited in which an implied duty to co-operate extended to non-parties.

67 Counsel for the plaintiffs did contend that 'a notable example of the implication of a term to overcome privity obstacles is BP Refinery (Westernport) Pty Ltd v Shire of Hastings'.[5]

68 In that case the relevant facts, for present purposes, were as follows:

(a) BP Refinery entered into a rating agreement with the Shire of Hastings under which it was to pay rates at a preferential level with respect to its refinery site for a period of 40 years.

(b) After approximately five years, as part of a company restructure, BP Refinery yielded up occupation of the refinery site to another company in the BP group ('Transferee Co'); and the Shire of Hastings ceased to apply the preferential rate to the new occupant.

(c) As a result, BP Refinery resumed occupation of the refinery site and claimed the preferential rate under the agreement.

(d) The Privy Council rejected the Shire's contention that a term should be implied in the rating agreement to the effect that it would come to an end on assignment; and held that, as the party to the rating agreement, BP Refinery was entitled to the benefit of the preferential rate.[6]

69 In my opinion, the case provides no support for the plaintiffs' contention that an implied term can apply to non-parties to a contract. As noted above, BP Refinery was a party to the original contract and resumed its occupation of premises, after the Full Court of the Supreme Court of Victoria found that Transferee Co was not entitled to the benefit of the rating agreement.[7] In fact, it was accepted before the Full Court that under the rating agreement, as a non-party, Transferee Co could not be entitled to the benefit of the preferential rate.

70 It was submitted on behalf of the plaintiffs as follows:

(a) CC Growth and Amiga Partners acted on the basis of an assumption that Amiga Growth's Related Entities (including Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West) were bound to transfer the leases and service approvals for the First Rights Centres to Amiga Partners' nominees in accordance with cl 3.10 of the Shareholders' Agreement.

(b) Amiga Partners will suffer detriment if Amiga Growth and its Related Entities are allowed to set up rights that are inconsistent with the assumption.

(c) Amiga Growth and its Related Entities played a part in the assumption so that it would be unconscionable to allow these entities now to act inconsistently with the assumption.

(d) The conduct that makes it unconscionable for Amiga Growth and its Related Entities to act other than in accordance with the assumption are as follows:

(i) Amiga Partners and CC Growth entered into the Shareholders' Agreement.

(ii) Amiga Partners and CC Growth advanced funds for rent, landlord security and salaries in respect of the childcare centres. Various accounts were tendered that showed loans owed by the Amiga Partners' subsidiaries but the Deed Administrator's Report included a balance sheet as at 16 March 2018 showing the loans to the centres by Amiga Partners of $1,385,007 and CC Emelo of $327,003 calculated as follows:[8]

(iii) On or about 30 January 2018, CC Growth arranged for loan agreements providing for emergency loans to the Seed Centres and the Golden Grove and Cranbourne West Centres.

(iv) In or about January 2018, Amiga Montessori GG Pty Ltd and Amiga Montessori Cranbourne West Pty Ltd, the sixth and seventh plaintiffs respectively, were incorporated by CC Growth to operate the Golden Grove and Cranbourne West centres.

(v) By an affidavit of Henry Townsing affirmed on 21 March 2018, filed pursuant to the order of Judd J made 20 March 2018 in the related proceeding, Townsing confirmed that CC Growth would meet and procure funding for the normal operating costs and outgoings of Amiga Montessori Thomastown Pty Ltd, Amiga Montessori Hoppers Crossing Pty Ltd, Amiga Montessori Mildura Pty Ltd, Amiga Montessori Laverton Pty Ltd, Amiga Montessori Officer Pty Ltd, Amiga Montessori GG Pty Ltd and Amiga Montessori Cranbourne Pty Ltd.

(vi) CC Growth, CVCV and New Street 15 Pty Ltd entered into a Deed of Indemnity for the Deed Administrators of Amiga Partners dated 20 February 2018.

(vii) CC Growth voted in favour of the resolution to authorise Amiga Partners to execute the DOCA.

71 In summary, counsel for the plaintiffs contended that 'the detriment is the performance of the agreement, and then going beyond the performance of the agreement to the new relationship post 1 December, or post 31 December or 1 January, where funding is provided to prop up the businesses and avoid insolvency by the group'.

72 Counsel for the defendants submitted as follows:

(a) A reasonable person in the position of Henry Townsing would not have considered any of the representations by Amanda Bergh to be a binding promise by the Related Parties because the terms of the proposed transfers were not entirely clear and were subject to third party approvals.

(b) Any assumption and knowledge of Amanda Bergh at the time of entering into the Shareholders' Agreement should not be attributed to Amiga Montessori Golden Grove or Amiga Montessori Cranbourne West.

(c) The plaintiffs have not suffered any detriment sufficient to support an estoppel in relation to the Golden Grove centre and the Cranbourne West centre. All investments made by the Townsing Related Entities were directed to the Seed Centres, which the Townsing family now operates.

(d) The plaintiffs and the Townsing Related Entities have in fact received a significant commercial benefit in that Henry Townsing has received the leases, service approvals and Seed Centre businesses at a significant undervalue through the DOCA process.

(e) Any reasonable assumptions or expectations have been extinguished by the following change of circumstances:

(i) Henry Townsing's insistence that the terms of the Shareholders' Agreement be amended and Amiga Growth's shareholding in Amiga Partners be diluted before any further capital would be provided to Amiga Partners.

(ii) The appointment of Deed Administrators on 22 February 2018.

(iii) The commencement of legal proceedings between the parties to the Shareholders' Agreement.

(iv) The repudiation and termination of the Shareholders' Agreement.

(v) The entering of the DOCA that, although not permitted by Amanda Bergh, was always going to be passed as the creditors controlled by the Townsings had the majority vote.

73 Further, it was submitted that the plaintiffs were not entitled to equitable relief because Henry Townsing and his family had decided to terminate the partnership with Amanda Bergh and take control of Amiga Partners as evidenced by the following:

(a) The Townsings' insistence on the deletion of cl 7.1 of the Shareholders' Agreement.

(b) Henry Townsing's email of 5 December 2017 to his father.

(c) The fact that from 15 December 2017, Henry Townsing began communicating with the Deed Administrators without Amanda Bergh's knowledge.

(d) In December 2017, Ian Townsing obtaining approved provider accreditation.

(e) The memoranda and presentations sent by Henry Townsing to the lenders on 31 December 2017.

(f) The appointment of Tsim as a director of the Amiga Partners' subsidiaries.

(g) The rejection of the Maddingley Centre and assumption of rights as majority shareholder.

Counsel for the defendants contended that this conduct constituted unclean hands, a breach of the duty of good faith under the Shareholders' Agreement and a breach of fiduciary duties to Amiga Partners.

74 With respect to the defence of unclean hands, counsel for the plaintiffs relied on the multiple limitations to the operation of the defence identified by Le Miere J in Edenham Pty Ltd v Meares,[11] and submitted as follows:

(a) It was not a defence to the claims for breach of statutory duty and related only to claims in equity.

(b) The alleged impropriety must be in a legal as well as a moral sense.

(c) The defence is not triggered by any act or wrongful conduct. The plaintiff's impropriety must be directly related to the defendants' wrongful conduct.

(d) The defence is not available if the alleged wrongful conduct is simply taking advantage of a bad business decision or judgment.

(e) The Court will consider the consequences of refusing relief and will not do so if it conflicts with other polices of equity or statute.

(f) The defence is itself discretionary and is impacted by the circumstances of each individual case.

75 Applying those tests, it was contended on behalf of the plaintiffs as follows:

(a) The Townsings' conduct was not a breach of good faith because it was reasonably based on a loss of faith in Amanda Bergh.

(b) The Townsings' conduct with respect to the appointment of the Deed Administrator and the DOCA was justified on the proper consideration by Henry Townsing, as a director of Amiga Partners, of the interests of the creditors of Amiga Partners.

(c) It could only be said that the Townsings' conduct was taking advantage of a bad business decision by Amanda Bergh being an inability to come up with a cash proposal or some other proposal which would have allowed CC Growth to have confidence going forward.[12]

(d) The alleged conduct of the plaintiffs does not go to the root of the relief being sought and therefore does not have the necessary immediate and necessary relation to the equity sued for.[13]

76 Further, it was submitted that the defence of unclean hands is not available to a claim merely for declaratory relief because the jurisdiction to make declarations is not truly equitable, it is merely statutory.[14]

77 In Giumelli v Giumelli, the plurality stated that equitable estoppel may be applied for 'the fundamental purpose ... [of] protect[ing] the plaintiff from the detriment which would flow from the defendant's change of position if the defendant were to be permitted to resile from his or her promise'.[15]

78 In Grundt v Great Boulder Pty Gold Mines Ltd, Dixon J explained the principle upon which estoppel in pais is founded as follows:

[T]he law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. ... [providing] [t]hat other [has] so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer detriment if the opposite party were afterwards allowed to set up rights inconsistent with the assumption.[16]

79 Dixon J acknowledged that this was a very general statement; but said 'it is the basis of the rules governing estoppel. Those rules work out the more precise grounds upon which the law holds a party disentitled to depart from an assumption in the assertion of rights against another'.[17]

80 In fact, Grundt v Great Boulder Pty Gold Mines Ltd concerned a claim at law; but Dixon J's analysis has been held by the High Court to be applicable to promissory estoppel,[18] and equitable estoppel by encouragement.[19] In Walsh v Walsh, Meagher JA also held that this analysis extended to equitable claims for promissory and proprietary estoppels stating:

The action or abstaining from action in reliance upon the assumption or expectation encouraged is what invites the intervention of equity; and the detriment that makes the estoppel enforceable is that which "would flow from the change of position if the assumption were deserted that led to it".

Although that statement [of Dixon J in Grundt's case at 674] was made in relation to common law estoppel, it has been held to apply equally to promissory and proprietary estoppels.[20]

81 The elements, which plaintiffs are required to prove, to found a claim for estoppel in equity have been set out in various ways;[21] but for the purposes of the present case, I will summarise the relevant elements through the following questions:

(a) Question 1: Did the plaintiffs assume or expect that a state of affairs or a particular legal relationship existed; or would exist?

(b) Question 2: Did the defendants play a part in the adoption of the assumption or expectation?

(c) Question 3: Have the plaintiffs changed their position to their detriment on the basis of the assumption or expectation?

(d) Question 4: Is the defendants' departure from the assumption or expectation unconscientious in all the circumstances, including:

(i) the part played by the defendant in the adoption of the assumption or expectation;

(ii) the nature and extent of the detriment;

(iii) how the detriment can be cured;

(iv) the proportionality of such cure to the terms and character of the part played by the defendant in the adoption of the assumption or expectation; and

(v) the conformity with good conscience of keeping a party to the relevant assumption or expectation?[22]

82 With respect to detriment, the following general propositions may be accepted:

(a) The detriment which is sufficient to found a claim has been variously described as real, material, significant and substantial. As was explained by the plurality in Australian Financial Services v Hills Industries:

Detriment has not been considered to be a narrow or technical concept in connection with estoppel. So long as it is substantial, it need not consist of expenditure of money or other quantifiable financial detriment, as Robert Walker LJ observed in Gillett v Holt. His Lordship went on to say that the requirement of detriment must be approached as "part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances".[23]

(b) The detriment is that which flows from the change of position in reliance on the assumption or expectation. The relevant detriment is not that which flows from the non-fulfilment of the promise or assurance,[24] although that may be the appropriate relief if the estoppel is established.[25]

(c) The assumption or expectation must be a cause of the plaintiff acting to its detriment and 'it is necessary for a person claiming the benefit of a conventional estoppel to demonstrate that he or she would have acted differently but for the agreed assumption'.[26] As was explained by Gageler J in Sidhu:

To establish that the belief to which she was induced by the appellant's representations was a contributing cause to the course of action or inaction which she took, the respondent needed to establish more than that she had the belief and took the belief into account when she acted or refrained from acting. She needed to establish that having the belief and taking the belief into account made a difference to her taking the course of action or inaction: that she would not have so acted or refrained from acting if she did not have the belief.[27]

On the basis of this statement and statements by the plurality in Sidhu,[28] the New South Wales Court of Appeal in Miller Heiman Pty Ltd v Sales Principles Pty Ltd[29] concluded that it was necessary for a plaintiff to establish that, but for the assumption or expectation, it would not have acted as it did.

(d) Detriment is not limited to the expenditure of money or other financial costs.[30] The detriment may well result from personal non-financial consequences. As Nettle JA observed in Donis v Donis:[31]

[H]ere, the detriment suffered is of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature ... beyond the measure of money and such that the equity raised by the promisor's conduct can only be accounted for by substantial fulfilment of the assumption upon which the respondent's actions were based.

(e) The time for judging the issue of detriment is the moment when the person, who is giving the assurance, seeks to go back on it.[32]

83 With respect to the appropriate relief, although the relevant detriment is measured by reference to the established change of position, 'the relief granted may require the taking of active steps by the defendant including the performance of the promise and the performance of the expectation generated by the promise'.[33] However, this is not always the case. As was stated by the plurality in Sidhu:

The requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief. In The Commonwealth v Verwayen, Deane J noted that:

"There could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party."

If the respondent had been induced to make a relatively small, readily quantifiable monetary outlay on the faith of the appellant's assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for her outlay.[34]

84 Although the plurality in Sidhu noted there may be cases where it would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption, their Honours identified the proper approach as follows:

While it is true to say that "the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct", where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party's detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise.[35]

85 If the plaintiff's equity has been diminished by later events, the Court may reduce or refuse relief.[36] An example was provided by the facts of Sledmore v Dalby,[37] where the plaintiff had made improvements but had had the benefit of 18 years rent free occupation.

86 In determining whether departure from a promise may be justified the court looks backwards rather than forwards.[38] Accordingly, the Court may take into account a supervening circumstance, such as a defendant's unexpected financial reverse;[39] and will not grant a remedy which works an injustice to the party estopped.[40]

Question 1: Did CC Growth and Amiga Partners assume or expect that a state of affairs or a particular legal relationship existed; or would exist?

87 It was contended that CC Growth and Amiga Partners entered into the Shareholders' Agreement on the assumption or expectation that Amiga Growth and its Related Entities (which relevantly included Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West):

the obligations or undertakings which had been entered into or given on their behalf in the Shareholders' Agreement.

88 The first of those allegations is that Amiga Partners and CC Growth, through their common director Henry Townsing, assumed that Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were each contractually bound to transfer their respective interests in the Golden Grove and Cranbourne West Centres for consideration of $1, if nominated by Amiga Partners, pursuant to cl 3.10 of the Shareholders' Agreement.

89 I do not accept that Henry Townsing, Amiga Partners or CC Growth assumed that Amiga Growth's Related Entities were so contractually bound. The reasons for this finding are as follows:

(a) Henry Townsing is a venture capitalist, and a director or alternate director of several companies. He was involved in the negotiation and drafting of the Shareholders' Agreement. Although he is not a lawyer, it would have been plainly obvious to an experienced business person that the only parties to the Shareholders' Agreement were Amiga Partners and its two shareholders, Amiga Growth and CC Growth. It was not suggested that the omission of the Related Entities as named parties or signatories was an oversight and no claim has been made for rectification.

(b) Henry Townsing gave no evidence that he assumed that the Related Entities were parties to the Shareholders' Agreement, or otherwise (somehow) contractually bound to it.

90 However, I find that Henry Townsing, in his capacity as a director of Amiga Partners and CC Growth, did expect that the Related Entities would transfer their interests in their respective centres, if so nominated, in accordance with cl 3.10 of the Shareholders' Agreement. The reasons for this finding are as follows:

(a) The transfer of the Seed Centres and the First Rights Centres was a fundamental component of:

(i) the Shareholders' Agreement and, in particular,

(ii) Amiga Growth's consideration for its right to receive a 50% shareholding.

(b) Amanda Bergh was the sole director of each of the First Rights Centres, and negotiated and executed the Shareholders' Agreement on behalf of Amiga Growth and Amiga Partners.

(c) Amiga Partners was established as a joint venture vehicle for the operation of the Seed Centres and the First Rights Centres.

Question 2: Did Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West play a part in the adoption of the assumption or expectation?

91 Amanda Bergh was the sole director of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West and the other Related Entities. For the reasons set out in the previous paragraph, Amanda Bergh's involvement in the negotiation and execution of the Shareholders' Agreement meant that the Related Entities were aware of and involved in the adoption by CC Growth and Amiga Partners of the expectation.

Question 3: Did CC Growth and Amiga Partners change their position to their detriment on the basis of the assumption or expectation?

92 Counsel for the plaintiffs principally relied upon the expenditure by CC Growth on the Seed Centres as set out in sub-paragraph 70(d)(ii). However, the expectation of Amiga Partners and CC Growth with respect to the transfer of the Seed Centres has been fulfilled. The relevant expectation that has not been fulfilled is the transfer of the Golden Grove and Cranbourne West Centres. In my opinion, Amiga Partners and CC Growth failed to establish that they changed their position to their detriment in reliance on the relevant expectation for the following reasons:

(a) The plaintiffs' witnesses did not give any evidence that, but for the expectation, the plaintiffs would 'have adopted a different course (of either action or refraining from action) to that which [they] did had the relevant assumption not been induced'.[41] This is of particular significance in a case in which there has been substantial compliance with the plaintiffs' expectations under the Shareholders' Agreement. There was no evidence led for the purpose of establishing the significance or the value of the Golden Grove or Cranbourne West Centres. Nothing can be inferred from the consideration payable under the Shareholders' Agreement, which was only $1 per centre.

(b) Whether CC Growth suffered any detriment must be judged at the moment when the defendants sought to depart from the expectation.[42] The case proceeded on the basis that the defendants communicated their intention to depart in its letter of 29 March 2018 ('the departure date'), which purported to terminate the Shareholders' Agreement on the grounds of alleged repudiation by CC Growth. On the evidence, CC Growth and Amiga Partners expended $1,377,013 on the Seed Centres by the departure date. However, CC Growth and Amiga Partners ultimately received those very Seed Centres under the Shareholders' Agreement. There is no evidence that the value of the Seed Centres received by CC Growth and Amiga Partners is less than the amounts expended by them (including the unquantified additional amounts spent as a result of the incorporation of the two subsidiary companies, the preparation of two loan agreements, the 'undertaking' to the Court on 28 March 2018, the entry into the Deed Agreement dated 20 February 2018, and voting in favour of the DOCA).

(c) This is a case where detriment is measured in purely commercial terms. It was not pleaded or proved that there were any relevant personal issues which contributed to the detriment. This case falls into the same category of cases as Argot v National Mutual,[43] in which the Court of Appeal said:

This is not a case in which the effects of unconscionable conduct are to be measured in the imponderables of human feelings. There is nothing personal or heartfelt or otherwise special about the appellants' disappointment at the respondent's departure from the assumed state of dealing. The case is simply about money and more precisely about how much of it each side sought to make out of the other.

93 The above analysis is sufficient to dispose of the claim for estoppel on the basis of the plaintiffs' failure to establish detriment. However, there is a further reason why the plaintiffs' cannot establish detriment. By the departure date, the Deed Administrators had recommended the acceptance of a proposed DOCA under which the Townsing interests behind CC Growth and Amiga Partners would acquire total control of the assets of Amiga Partners, namely the Seed Centres. In contrast, under the Shareholders' Agreement, the Townsing interests were only entitled to 50% control of the assets of Amiga Partners. The fact that, by the time of the departure date, the Townsing interests had acquired total control of the Seed Centres makes it only more difficult to infer, in the absence of evidence, that the plaintiffs have any suffered detriment by reason of entering into the Shareholders' Agreement, the expenditure of funds and the other alleged items of detriment.

Question 4: Was the departure by Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West from the assumption or expectation unconscientious?

94 The question of whether the plaintiffs' conduct:

(b) was itself the real cause of the non-fulfilment of the expectation; and

(c) constituted the plaintiffs acting with unclean hands;

such that it would be unjust to prevent the defendants from resiling from the expectation, requires further consideration of the plaintiffs' conduct from the outset of the joint venture.

95 At the time of entry into the Shareholders' Agreement, it was the intention of the shareholders that:

(a) each would hold a 50% stake in the joint venture vehicle Amiga Partners;

(b) Amiga Partners would initially be capitalised at $1,200,000 with:

(i) Amiga Growth's contribution being the contribution of a trading and profitable childcare centre of not less than 70 licensed places; and

(ii) CC Growth's contribution being $600,000 in cash;

(c) Amiga Partners would be funded until the 4th quarter of 2017 from CC Growth's cash contribution and a loan of $250,000 from financiers substantially associated with the Townsings; and

(d) after the initial capital contributions provided for in the Shareholders' Agreement, each shareholder would contribute to working capital on a 50/50 basis ('the Original Capital Proposal').

96 By circular resolution dated 14 November 2017, it was resolved, in accordance with the prior agreement, that further funding would be raised by:

(a) increasing the loan from the financiers to $400,000;

(b) Amiga Montessori Pty Ltd being issued further shares in Amiga Partners in lieu of the service fees to which it was entitled; and

(c) CC Growth being issued further shares in Amiga Partners after monthly cash contributions.

97 I am satisfied that a principal agenda item at the board meeting on 1 December 2017 was the Amiga Partners' funding requirements long term for 2018; and, in substance, the discussions included the following:

(a) Henry Townsing proposed that $3,000,000 was required by 31 January 2018 to be contributed 50/50 by the partners.

(b) After Amanda Bergh's proposal for the funding to be contributed by instalments was rejected by Henry Townsing, she said that Amiga Growth and CC Growth should each fund $1,500,000.

(c) After Henry Townsing said that he would speak to his 'backers', Amanda Bergh asked whether, if the backers were prepared to loan $1.5m to CC Growth, they would be prepared to loan the whole of the funding requirement of $3m.

(d) Henry Townsing said that he would try to do that, but that there would be conditions, the substance of which he was not then presently aware.

98 By email at 6.41 pm on 1 December 2017, Henry Townsing attached a draft of Resolutions 1, 2 and 3 to be considered at the resumption of the meeting on Tuesday 5 December 2017 at 10.00 am. These resolutions are set out in Schedule 1 and summarised in paragraph [24]; but critically required amendments to the Shareholders' Agreement including the removal of cl 7.

99 I am satisfied that, on or about 2 December 2017, Henry Townsing told Amanda Bergh and Karatselios by telephone that CC Growth would not provide further funding unless Amiga Growth's shareholding was diluted and cl 7 of the Shareholders' Agreement was removed.

100 At the board meeting on 5 December 2017, I am satisfied that the discussion about the future financing of Amiga Partners was substantially in accordance with the evidence of Amanda Bergh which was as follows:

... How did that meeting unfold?---So we sat down and I said to, um, Henry: "Henry, um, I can't, you know, I can't agree to these resolutions. Why can't we just go back 50-50. Why can't Amiga Growth just put in 1.5m, CC Growth put in 1.5m, we put the money in and we move forward? Why can't we just do that?" And Henry said, "No, can't do it. The resolutions have to be passed".

And I said, "I can't do it". And then we just sat there and then Henry said, um, "All right. There could be another way". So I said, "What is that way?" And then he said to me, "Why don't we open another company and we put in those schools into that company" - - -

...

And I said, "We can't do that. It's just doing exactly the same thing. You know, the reason why I'm here is I can buy my schools back". So then he said, "Well, then there's no other way". And I said, "Well, you know".

Do you recall what you said?---Um, I just said, "I can't agree to these resolutions and, um, you know, let's" - I kept re-emphasising. Let's just go back to I'll put in 1.5m, CC Growth puts in 1.5m and we move forward. And - and Henry just said no.

101 On 5 December 2017, after the board meeting, Henry Townsing sent an email to his father, the details of which are set out in paragraph [27]. Critically, it presents the following four options:

(a) Option 1 is 'Continuation of original deal' but he states that Amanda Bergh 'won't agree to being diluted and won't waive the 4X buyout right - for me this statement means we can not go forward with Amanda but how do we negotiate out of the partnership with Amanda and use our investment to date to build out a 100% owned business?'.[44] As to the continuation of the current deal, he states:

I have no reasonable basis/position that Amanda can perform under the 4x buyout deal ... how can I go to CVCV Partners and seek money under a deal premise I believe to be false?

(b) Option 2, the 'Cocktail Deal' and Option 3, the 'Negotiated Divorce at Dec-17 Deal' both require Amiga Growth to withdraw from the Shareholders' Agreement and accept a minor interest in the childcare centres.

(c) Option 4, the 'Divorce through receiver' proposed:

Amiga Partners lenders appoint a receiver (CCG is a lender of which CVCV is the major shareholder) to run the centres.

102 At the continuation of the board meeting on 7 December 2017, I find that Amanda Bergh requested again that the parties continue the joint venture on the basis that each party contribute $1.5 million and Henry Townsing refused stating that CC Growth would only contribute if Amiga Growth agreed to Resolutions 1, 2 and 3. I accept Amanda Bergh's evidence that Henry Townsing said 'Why don't you just appoint administrators?'

103 I am satisfied that by mid December 2017, Henry Townsing as director of CC Growth had formed the view that Amanda Bergh was insisting on proceeding with the Original Capital Proposal and was not prepared to accept Resolutions 1, 2 and 3 or Options 2 or 3 referred to in his email of 5 December 2017. Accordingly, from that point, CC Growth, Amiga Partners and its common director Henry Townsing commenced steps to take control of Amiga Partners' assets through its related entities - the majority lenders to Amiga Partners - by, in summary:

(a) CC Growth refusing to continue with the Original Capital Proposal;

(b) Amiga Partners suspending funding to the Amiga Partners' subsidiaries;

(c) The Townsings incorporating Amiga Partners' subsidiaries with Henry Townsing and Lo Fai Tsim as directors, without the consent of Amanda Bergh;

(d) Amiga Partners, by Henry Townsing as CC Growth's appointed director, exercising his casting vote with respect to financial matters, electing Lo Fai Tsim and himself, as directors on the boards of Amiga Partners' subsidiaries;

(e) Amiga Partners, by Henry Townsing as CC Growth's appointed director, refusing to accept Maddingley as a qualifying centre;

(f) Amiga Partners, by CC Growth purporting to act on the basis that it held over 90% of its shares, ratifying the board decision to give the appointed CC Growth directors control of the boards of the Amiga Partners' subsidiaries; and

(g) CC Growth, with related and the other creditors, appointing Deed Administrators and, through related entities, acquiring the assets of Amiga Partners through the DOCA.

104 I find that the intention of CC Growth and later Amiga Partners was to engage in the Takeover Plan from the conduct of Henry Townsing, in particular, at the meetings in December 2017, referred to in paragraphs [97] to [102] above, his email of 5 December 2017, referred to in paragraph [101] above; and the following:

(a) On 15 December 2017, Henry Townsing started communicating by email and telephone with Grant Thornton, the accountants and insolvency practitioners, who were later appointed as administrators.

(b) On 18 December 2017, Ian Townsing lodged an Application for Provider Approval to Australian Children Education & Care Quality Authority, so that CC Growth and Amiga Partners were no longer reliant on Amanda Bergh's Provider Approval.

(c) By letter dated 22 December 2017 to Philip Good of Business Lighthouse, Henry Townsing stated that CC Growth did not agree that the contribution of Maddingley satisfied cl 3 of the Shareholders' Agreement.

(d) By email of 31 December 2018 to the Anglo Australian Christian and Charitable Trust, Henry Townsing proposed that CC Growth take control by Amiga Partners appointing two directors to each of Amiga Partners' subsidiaries, which would have two CC Growth directors and one Amiga Growth director. The email states:

If above resolutions are blocked/frustrated by [Amiga Growth] legal actions, administrator or CCG's receiver to be appointed to Amiga Partners.

(e) At the board meeting on 23 January 2018, the provision of further funding to the Amiga Partners' subsidiaries was suspended; and Henry Townsing purported to use his casting vote, with respect to Financial Matters, to resolve that Henry Townsing and Lo Fai Tsim be appointed as directors of each of the Amiga Partners' subsidiaries.

(f) At a shareholders' meeting on 20 February 2017, CC Growth asserted that it held 91% of the shares in Amiga Partners and ratified the board resolution appointing Henry Townsing and Lo Fai Tsim as directors of the Amiga Partners' subsidiaries.

(g) On 22 February 2018, Matthew Byrnes and Andrew Hewitt of Grant Thornton were appointed joint and several voluntary administrators pursuant to s 446C of the Act by CC Growth, CVCV and the Anglo Australian Christian and Charitable Trust.

(h) On 27 February 2018, Henry Townsing proposed the DOCA, which was approved on 3 April 2018.

105 In my opinion, the conduct of CC Growth and its associated interests in engaging in the Takeover Plan, in particular:

(a) in refusing to contribute in accordance with the Original Capital Proposal;

(b) requiring amendments to the Shareholders' Agreement as a precondition of funding; and

(c) using the powers of its associated entities to appoint administrators and acquire control of Amiga Partners through a DOCA:

(i) was in breach of its duty of good faith under the Shareholders' Agreement;

(ii) was the real cause of the departure by Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West from the expectation such that it was not unconscientious for those parties to so resile; and

106 Critical to this conclusion is that I find that CC Growth did not have any legitimate basis to refuse to continue funding in accordance with the Original Capital Proposal and, by refusing to fund, contrived to bring about the insolvency of Amiga Partners. Henry Townsing offered the following four different justifications for the refusal to continue funding in accordance with the Original Capital Proposal:

(a) Townsing did not believe that Amiga Growth had the capacity to raise any funds and his confidence in Amanda Bergh was undermined.

I reject this evidence for the following reasons:

(i) The financing of Amiga Partners proceeded as planned under the Shareholders' Agreement with the addition of a further loan and some equity funding in November 2017. The minutes show that the parties expected that by December 2017 further funding arrangements would be required to be put in place; and the evidence discloses no failure by Amiga Growth to respond to requests by CC Growth.

(ii) I accept Amanda Bergh's evidence that, at the December 2017 Board meeting, she offered to provide her half share of the $3 million which Henry Townsing said was required, and that she had the capacity to raise those funds by 31 January 2018.

(iii) The alleged concern about Amanda Bergh's capacity to raise the necessary finance, as the reason for Townsing's refusal to continue with the Original Capital Proposal, is not consistent with his position stated in oral evidence and his email of 5 December 2017 that, if Amiga Growth provided $1.5 million in cash, he was not prepared to continue with the existing financial arrangements.

(b) Townsing required that cl 7 be removed because he did not believe that Amanda Bergh could raise sufficient money to exercise the right to buy out CC Growth.

I reject this evidence for the following reasons:

(i) Clause 7 did not require Amiga Growth to buy out CC Growth and accordingly, if Amiga Growth did not exercise its option or only exercised its option to purchase some of the childcare centres, it would not be a breach of the Shareholders' Agreement. In the circumstances, even if Townsing held the belief, it was not a legitimate basis to require an amendment of the Shareholder' Agreement.

(ii) Henry Townsing was unable to explain why, if he did not believe that Amiga Growth could exercise the option under cl 7, he therefore considered it necessary for that clause to be deleted from the Shareholders' Agreement. I consider it more likely that Townsing wanted cl 7 to be deleted because he was concerned that it would be exercised.

(c) Townsing and Amanda Bergh could not agree on 'terms' for the provision of further funds.

I reject this evidence. Henry Townsing gave evidence that the reason why CC Growth refused to continue the existing funding arrangements was 'we could never agree the terms of that money'. In response to direct enquiry, he said that he was not referring to CC Growth's requirement that cl 7 be deleted but, after numerous opportunities to provide further explanation, he could not identify the terms that could not be agreed. As later evidence made plain, this evidence of Mr Townsing was not truthful. CC Growth was not prepared to enter into a funding arrangement with Amiga Growth unless Amiga Growth agreed to the proposed resolutions.

(d) The draft minutes of the 1 December 2017 meeting state that:

For the reasons set out in s 3.1.1 of the December 2017 Amiga Partners Notice of Board Meeting there was no reasonable grounds to make any further commitment to invest capital in Amiga Partners as currently structured.

Section 3.1.1 is set out in paragraph [21] above; but it gives no reason for CC Growth's departure from the Original Capital Proposal. In his evidence, Henry Townsing did not explain how this section provided a legitimate explanation.

107 I consider that it is most likely that Henry Townsing put forward the above explanations to conceal the fact that his real purpose was to take control of the childcare centres rather than continuing with 'partnership' arrangements. Henry Townsing stated his intentions in his email of 5 December 2017, as 'negotiat[ing] out of the Partnership with Amanda and us[ing] our investment to date to build out a 100% owned business'.

108 In Burger King Corporation v Hungry Jack's Pty Ltd, Sheller, Beazley and Stein JJA said, with respect to the content of a duty of good faith between parties to a commercial agreement, that:

[A duty of good faith] does not mean that Burger King Corporation is not entitled to have regard only to its own legitimate interests in exercising its discretion. However, it must not do so for a purpose extraneous to the contract - for example, by withholding financial or operational approval where there is no basis to do so, so as to thwart Hungry Jack's Pty Ltd's rights under the contract.[45]

109 Similarly, in my opinion, for the reasons set out above, the refusal of CC Growth to continue with the Original Capital Proposal was without legitimate cause and constituted a breach of the CC Growth's duty of good faith under cl 10.4 of the Shareholders' Agreement.

110 The principle that a party seeking equity may be deprived of a remedy because of unclean hands was explained by Baron Eyre in Dering v Earl of Winchelsea as follows:

It is not laying down any principle to say that [the plaintiff's] ill conduct disables him from having any relief in this Court. If this can be founded on any principle, it must be, that a man must come into a Court of Equity with clean hands; but when this is said, it does not mean a general depravity; it must have an immediate and necessary relation to the equity sued for; it must be a depravity in a legal as well as in a moral sense.[46]

111 The Court of Appeal, in Bullhead Pty Ltd v Brickmakers Place Pty Ltd (in liq),[47] recently adopted this formulation and identified the necessary elements of the defence as being:

(a) an immediate and necessary relation to the equity sued for; and

(b) a depravity in a legal as well as in a moral sense.[48]

112 I am satisfied that the plaintiffs' conduct satisfies both of these elements.

113 First, in my opinion, there was an immediate connection between the plaintiffs' refusal to continue with the Original Capital Proposal and the defendants' departure from the expectation. In fact, I am satisfied that it was the plaintiffs' refusal to continue with the Original Capital Proposal and the adoption of the Takeover Plan that was the real cause of the defendants' refusal to transfer the assets of the Golden Grove and Cranbourne West centres to Amiga Partners. But for the Takeover Plan, which caused the insolvency of Amiga Partners, the defendants would have transferred the assets of the Golden Grove centre and the Cranbourne West centre to Amiga Partners.

114 Second, the Takeover Plan was both unlawful and immoral. To bring about the insolvency of a joint venture by refusing to contribute in accordance with the Original Capital Proposal for the collateral purpose of assuming total ownership of the joint venture property is unconscionable and immoral; and a blatant breach of the duty of good faith.

115 Accordingly, if the plaintiffs had otherwise made out their claims for equitable relief, I would refuse to grant such relief because in the circumstances:

(a) it would work an injustice on the defendants; [49] and

(b) the plaintiffs do not come to equity with clean hands.

Is the unclean hands defence available as a defence to a declaration?

116 The principal relief sought by the plaintiffs is for declarations that Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West hold their respective centres on trust for Amiga Partners or the Amiga Partners' subsidiaries.

117 Counsel for the plaintiffs submitted that as a declaration is a statutory remedy, equitable defences including unclean hands are not available. Reliance was placed on the statement of the learned authors of Meagher, Gummow & Lehane's Equity: Doctrines & Remedies:

The reason why ... unclean hands is no defence to a claim for merely declaratory relief is that the jurisdiction to make merely declaratory relief is that the jurisdiction is not truly equitable, it is merely statutory. If this be so, unclean hands is no defence to any merely statutory remedy.[50]

118 I have emphasised the words 'merely declaratory relief' because the jurisdiction of the Supreme Court to give declaratory judgments 'without granting consequential relief' is statutory.[51] However, as a superior court, it also has inherent power to grant general declaratory relief.[52]

119 In either event, the relief, of itself, is not equitable and not subject to equitable defences.

120 However, 'as a remedy, the function of the constructive trust is ... to reflect and enforce the principles of the law of equity';[53] and as it is an equitable remedy, it is subject to equitable defences. As was observed by Vickery J in Ambridge Investments Pty Ltd v Baker:[54]

[T]he imposition of a constructive trust by declaration being an equitable remedy should reflect the principles of equity, including, where warranted, application of the classic equitable defences. The remedy of a declaration of a constructive trust may be lost by reason of the operation of such doctrines of equity, including unclean hands.

121 In the circumstances, I reject the plaintiffs' contention that the defendants' defence based on unclean hands is unavailable. Relief by way of a declaration of a constructive trust, which is sought by the plaintiffs, is an equitable remedy subject to the availability of equitable defences, including unclean hands.

122 Counsel for the plaintiffs also contended that a constructive trust over the Golden Grove centre and the Cranbourne West centre leases and licences should be imposed in the following circumstances:

(a) Amanda Bergh was a director of Amiga Partners when the Golden Grove and Cranbourne West centres were nominated as First Rights Centres.

(b) The nomination created a conflict between the interests of Amiga Partners, on one part, and the interests of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West, on the other part, with respect to the leases and service approvals relating to those First Rights Centres.

(c) Because of her fiduciary duties, Amanda Bergh could not benefit or gain by retaining those assets in her wholly owned entities.

(d) Accordingly, Amanda Bergh could not retain (through her alter ego entities) the leases and service approvals of the First Rights Centres and she was obliged to account to Amiga Partners for the benefit or gain - even if there was no pre-existing obligation on Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West to transfer the assets to Amiga Partners.

(e) A director's fiduciary duties require, in addition to the proscriptive rules, that the director exercise his or her powers, duties and discretions in the best interests of the company.[55]

(f) Amanda Bergh's breach of fiduciary duty was her failure to procure the assignment of the leases and service approvals of the First Rights Centres in circumstances where those assets were retained by entities of which Amanda Bergh was a sole director. That conduct was not in the best interests of Amiga Partners or its nominees. It was also conduct from which Amanda Bergh and her Related Entities benefitted at the expense of Amiga Partners and its nominees.

123 Apart from liability under the principles of Barnes v Addy, Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were liable as constructive trustees for Amanda Bergh's breach of fiduciary duty because in each case the third party was 'the corporate creature, vehicle or alter ego of [her] who use[d] it to secure the profits of, or to inflict the losses by, [her] breach of fiduciary duty'.[56]

124 The same breach of fiduciary duty constituted contraventions of ss 181, 182 and 183 of the Act.

125 Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were both persons involved, as defined by s 79 of the Act, because each had actual knowledge of the essential facts constituting the contravention through its sole director Amanda Bergh.

126 Accordingly, the plaintiffs were entitled to injunctive relief under s 1324 of the Act requiring the assignment of the leases and service approvals to Amiga Partners' nominees.

127 Counsel for the defendants submitted as follows:

(a) If Amanda Bergh had an obligation to use her best endeavours to procure the transfer of the leases and service approvals, that obligation did not survive the termination of the Shareholders' Agreement.

(b) Amanda Bergh fulfilled her director's duties to Amiga Partners up to the repudiation of the Shareholders' Agreement on 22 February 2019 and commenced the transfer process of the Golden Grove Centre 'notwithstanding the fact that there was not necessarily a contractual obligation or any other obligation to do so' .

(c) There was no conflict of interest because there was never a real or substantial possibility of conflict because Amiga Partners did not have any rights to the assets held by Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West.

(d) Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were not liable as third parties because there was no breach of director's duties and, as there was no obligation to transfer those assets to Amiga Partners, they did not knowingly receive any assets that ought be accounted for.

(e) With respect to statutory duties, there was no basis for any injunctive relief because there was no breach of director's statutory duties for the same reasons as there was no breach of the fiduciary duties.

128 In general terms, the duties of directors are to manage and conduct the business of the company. Directors exercise all the powers of the company except those which the Act or the company's constitution require the company to exercise in general meeting.[57] The functions of a board of directors, except for statutory functions, are usually:

(c) to oversee the plans of managers for the acquisition and organisation of financial and human resources towards the attainment of the corporation's goals; and

(d) to review, at reasonable intervals, the corporation's progress towards attaining its goals.[58]

129 The directors of a company owe fiduciary duties, including the duties relied on by the plaintiffs, in this case being:

(a) to exercise their powers in good faith in the best interests of the corporation; and

(b) to not place themselves in a position of conflict in which a personal interest or duty conflicts with their duty to the company.

The duty to exercise powers in good faith in the best interests of the corporation

130 The director/company relationship is one of the recognised categories of fiduciary relationships.[59] However, such a statement is of limited utility for, at least, the following two reasons:

(a) The fact that a director may owe a fiduciary duty does not mean all the duties owed to the company are fiduciary.[60]

(b) It says 'nothing' to describe a person as a 'fiduciary', unless one identifies the purposes and object of the fiduciary obligations. As PD Finn noted in Fiduciary Obligations:

Once one looks to the rules and principles which actually had been involved, it quickly becomes apparent that it is pointless to describe a person - or for that matter a power - as being fiduciary unless at the same time it is said for the purposes of which particular rules and principles that description is being used. These rules are everything. The description "fiduciary", nothing.

...

It is not because a person is a 'fiduciary' or a 'confidant' that a rule applies to him. It is because a particular rule applies to him that he is a fiduciary or confidant for its purposes. In this Equity has developed in a way somewhat similar to the law of torts, in that particular obligations will be imposed upon particular persons because these persons are carrying on particular activities which require the law's regulation. To reflect this development this work has been entitled 'Fiduciary Obligations' rather than 'Fiduciary Relationships'. [61]

131 The obligation that directors must exercise their powers for the purpose for which they were conferred is a fiduciary duty.[62] In the leading case of Howard Smith Ltd v Ampol Petroleum Ltd,[63] Wilberforce LJ proposed a two-step test for determining whether a director had acted improperly:

[I]t is necessary to start with a consideration of the power whose exercise is in question, in this case a power to issue shares. Having ascertained, on a fair view, the nature of this power, and having defined as can best be done in the light of modern conditions the, or some, limits within which it may be exercised, it is then necessary for the court, if a particular exercise of it is challenged, to examine the substantial purpose for which it was exercised, and to reach a conclusion whether that purpose was proper or not. In doing so it will necessarily give credit to the bona fide opinion of the directors, if such is found to exist, and will respect their judgment as to matters of management; having done this, the ultimate conclusion has to be as to the side of a fairly broad line on which the case falls.[64]

132 As the above authority demonstrates, the fiduciary duty attaches to the powers and discretions exercised by company directors. As was explained by French CJ and Keane J in Howard v Federal Commissioner of Taxation:

As fiduciary agents, directors must exercise their powers "honestly in furtherance of the purposes for which they are given" and not for their personal benefit or gain or for that of a third party.[65]

133 A person who is a director is not required to make every decision in their life in the best interests of the company. It is only the director's exercise of powers, qua a director, in the service of the company, which is the subject of the relevant fiduciary duty. As Jessup J said in Links Golf Tasmania v Sattler:

A company cannot throw the mantle of conflict over every decision its director makes: it is only in respect of those decisions which involve the exercise of powers or functions in the service of the company (including the omission to do so where a duty exists) that the director can be held to account as fiduciary.[66]

Duty not to place oneself in a position of conflict in which a personal interest or duty conflicts with the duty to the company

134 The no conflict and no profit rules may extend beyond the exercise of powers and discretions flowing from the fiduciary relationship.[67] The no conflict and no profit rules are explained (by reference to the liability to account) in Warman International Ltd v Dwyer as follows:

A fiduciary must account for a profit or benefit if it was obtained either

(1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or

(2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position. ...

The objectives which the rule seeks 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.[68]

135 With respect to the first limb, liability to account will only arise if the conflict is between a personal interest and the fiduciary duty. This requires an examination of the subject matter over which the fiduciary obligations extend.[69] As explained by French CJ and Keane J in Howard v Federal Commissioner of Taxation:

The limits of those duties were to be determined by the character of the venture for which the partnership existed, the express agreement of the parties and the course of dealings actually pursued by the firm. The scope of the fiduciary duty generally in relation to conflicts of interest must accommodate itself to the particulars of the underlying relationship which give rise to the duty so that it is consistent with and conforms to the scope and limits of that relationship. It is to be "moulded according to the nature of the relationship and the facts of the case".[70]

136 With respect to the second limb, liability to account will not arise unless the profit is obtained by use or by reason of that fiduciary position. Accordingly, if the gain or benefit is not obtained by use or by reason of the fiduciary position, the fiduciary is not liable to account for the gain or benefit.

137 As noted above, in summary, the plaintiffs allege that Amanda Bergh has a liability to account because:

(a) by failing to procure the assignment of the leases and service approvals from Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West, she failed to exercise her powers in the best interests of the company; and

(b) on the exercise of the option to purchase Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West, there was a conflict between her interests as a director of Amiga Partners and her interests as a director of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West; and 'because of her fiduciary obligations, Amanda Bergh could not benefit or gain by retaining those assets in her wholly owned entities'.

138 In my opinion, the submissions are misconceived for the following reasons.

139 It may be accepted that on an issue arising (after nomination of the Golden Grove and Cranbourne West centres) Amanda Bergh was in a position of conflict in her capacity:

(a) as a director of Amiga Partners, on one part; and

(b) as a director of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West, on the other part.

The conflict would have precluded her from voting or otherwise exercising her powers as a director of Amiga Partners with respect to the disputed transaction - such as what action should be taken by Amiga Partners to enforce its rights.

140 However, it is not alleged that Amanda Bergh exercised any of her powers as a director of Amiga Partners with respect to the disputed transaction. The plaintiffs complain about her refusal to exercise her powers as a director of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West to transfer those companies' assets pursuant to the disputed obligation. The exercise of these powers are not within the scope of the subject matter of Amanda Bergh's fiduciary obligations to Amiga Partners. At most, it could be said that Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West had contractual obligations to transfer their assets but, in the circumstances of this case, it is no part of Amanda Bergh's fiduciary obligations to Amiga Partners to exercise her powers as a director of other companies for the purpose of benefiting Amiga Partners.

141 The claim for Amanda Bergh to account under the no conflict and no profit rules must also fail because the assets of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were not obtained by her:

(a) where there was a conflict between her personal interest and her fiduciary duty to Amiga Partners; or

(b) by reason of her fiduciary position or her taking advantage of an opportunity or knowledge derived from her fiduciary position.

142 As noted above, her interests in the assets of Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were obtained prior to her being appointed as a director of Amiga Partners; and her refusal to transfer the assets was outside the scope of her fiduciary duty to Amiga Partners.

143 In my opinion, the misconception in the plaintiffs' submissions can be demonstrated by the example where:

(a) a director owes money to the company under a loan account; and

(b) the company seeks to recover the amount of the loan.

The director would be precluded under the no conflict rule from exercising any powers as a director adverse to the recovery of the loan. However, it could not be contended that the director's failure to pay the loan was a breach of his or her fiduciary duty. In my opinion, such an allegation would be nothing more than an attempt 'to throw a fiduciary mantle over commercial and personal relationships and dealings which might not have been thought previously to contain a fiduciary element'.[71]

144 In this case, the plaintiffs relied upon the breach of fiduciary duty claim in the alternative to the claim that Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West were bound to transfer their assets. In other words, it was contended that, even if Amiga Partners had no entitlement at law or equity to the disputed assets, each company was subject to a constructive trust by reason of its participation in Amanda Bergh's alleged breach of the no conflict rule. I reject this contention. If Amiga Montessori Golden Grove and Amiga Montessori Cranbourne West are entitled to retain their assets it cannot be said that any gain or benefit had been obtained by reason of Amanda Bergh's position as a fiduciary of Amiga Partners; and neither she nor Amiga Montessori Golden Grove or Amiga Montessori Cranbourne West are liable to account. The forensic purpose of this 'attempt to throw a fiduciary mantle over a commercial relationship' would appear to have been the availability of the equitable remedy of a constructive trust.[72]

145 Accordingly, the plaintiffs' claims for breaches of fiduciary duties must fail. The plaintiffs' claims alleging breaches of Amanda Bergh's duties to Amiga Partners under ss 181, 182 and 183 of the Act fail for the same reasons.

146 By way of defence and set-off, the defendants allege that CC Growth repudiated the Shareholders' Agreement. The above findings make it unnecessary to consider this defence; but, as it was fully argued, I will make the following factual findings with respect to the issue of repudiation.

147 The defendants submitted that they were not obliged to transfer the First Rights Centres to the plaintiffs because the Shareholders' Agreement came to an end when the defendants accepted the plaintiffs repudiation. The plaintiffs were said to have repudiated the Shareholders' Agreement by not issuing shares to Amiga Growth when it offered to transfer the Maddingley centre to Amiga Partners. This submission was premised on the contention that, as at December 2017, the Maddingley centre was a trading and profitable childcare centre of not less than 70 licensed places within the meaning of cl 3.2(c) of the Shareholders' Agreement.

148 It was not disputed that the Maddingley centre was trading and had not less than 70 licensed places; but it was submitted on behalf of the plaintiffs that, as at December 2017, the Maddingley centre was not a profitable centre for the following reasons:

(i) the Maddingley centre accounts should not have made provision for government subsidy; and

(ii) the Maddingley centre accounts should have included the monthly service fee.

(b) Even if the Maddingley centre was profitable for the month of November 2017, it did not constitute it as a profitable centre for the purposes of cl 3.2(c) of the Shareholders' Agreement.

At the time of the offer, was the Maddingley centre a trading and profitable childcare centre of not less than 70 licensed places?

149 Clause 3.2(c) of the Shareholders' Agreement states that 'Amiga shares are to be attained by a contribution of a trading and profitable childcare centre of not less than 70 licensed places'.

150 On the day of entering into the Shareholders' Agreement, the minutes of the meeting of directors of Amiga Partners of 27 June 2017 recorded that Amiga Growth had been issued with two shares on 24 May 2017 (the day Amiga Partners was incorporated) and would be issued the balance of the 3,000,000 shares 'at the date Amiga Partners becomes the sole owner of the Maddingley Childcare Centre'.

151 Maddingley was trading and had not less than 70 licensed places when Amiga Growth offered to contribute to it, under cl 3.2(c) of the Shareholders' Agreement, by letter from Business Lighthouse dated 14 December 2017. Attached to this letter were revised November accounts for Maddingley which showed the net profit (loss) of Maddingley for each month between July and November 2017 as follows:

152 These figures were later revised by Mr Good in a report dated 7 June 2018 as follows:

153 Mr Taplin, an expert chartered accountant engaged by CC Growth, considered that proper accounting principles, on an accrual basis, required expenses in some other months to be reallocated which resulted in the above figures being adjusted as follows:

154 Mr Michael Smith, the expert chartered accountant engaged by Amiga Growth, accepted Mr Taplin's adjustments with respect to November 2017; and did not dispute the other months. Accordingly, the residual accounting issues were whether, on the application of proper accounting principles, the Maddingley centre accounts should not have made provision for:

Should the Maddingley accounts have made provision for government subsidy?

155 The accounting issue with respect to the financial performance of Maddingley in November 2017, in respect of which the experts differed, was whether the government subsidy received in July 2018, in respect of the financial year 2017-18, should be applied on an accruals basis across each of the months in the financial year and, in particular, in the sum of $1,460.62 for November 2017.

156 Subject to the issue of the monthly service fee not being payable to a related company,[73] it was common ground between the experts that if the government subsidy was applied to each month, Maddingley did operate at a profit in November 2017; but, if it should not be so applied, Maddingley did not operate at a profit in November 2017.

157 The government subsidy is paid on the basis of places provided by the facility to pupils on a monthly basis.

158 Mr Taplin considered that the relevant accounting standard was AASB 118 'Revenue' which provides as follows:

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:

(a) the amount of revenue can be measured reliably;

(b) it is probable that the economic benefits associated with the transaction will flow to the entity;

(c) the stage of completion of the transaction at the reporting date can be measured reliably; and

(d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.

159 Mr Taplin opined that the government subsidy could not be estimated with reasonable accuracy as at mid December 2017; and therefore no allowance should properly have been made in the accounts at that time.

160 Mr Smith considered that the relevant accounting standard was AASB 120 'Accounting for Government Grants and Disclosure of Government Assistance' which provides as follows:

A government grant is not recognised until there is reasonable assurance that the entity will comply with the conditions attaching to it, and that the grant will be received. Receipt of a grant does not of itself provide conclusive evidence that the conditions attaching to the grant have been or will be fulfilled. ...

It is fundamental to the income approach that government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. Recognition of government grants in profit or loss on a receipts basis is not in accordance with the accrual accounting assumption (see AASB 101 Presentation of Financial Statements) and would be acceptable only if no basis existed for allocating a grant to periods other than the one in which it was received.

161 Mr Smith opined that, on the basis that the government website indicated that the amount of the government subsidy payable was available as at November 2017, the amount of the government subsidy payable for each month was reasonably ascertainable as at mid December 2017. In his opinion, applying either accounting standard required an allowance to be made for the government subsidy for the financial year to date, as at mid December 2017 and, in particular, in the preparation of the accounts for November 2017.

(a) The kindergarten fee subsidy was expected and a significant source of income for childcare centres and, in particular, Maddingley. In fact, the minutes of the board meeting of Amiga Partners of 16 September 2017 recorded, with respect to Maddingley that 'Kinder funding was being applied for which would increase revenues based on current occupancy'. The Maddingley centre did qualify for the subsidy in the 2017-18 financial year; and there was no evidence suggesting that, as at December 2017, there was any basis for doubting that the Maddingley centre, or any other centre, would comply with qualifying conditions.

(b) As at mid December 2017, the amount of the kindergarten fee subsidy was reasonably ascertainable from the DET and, in particular, from its website.

163 Accordingly, in my opinion, the application of either AASB 118 or AASB 120 would require a provision being made for income from the kindergarten fee subsidy; and failing to include a provision for the kindergarten fee subsidy would result in the accounts not giving a fair reflection of the trading performance of Maddingley.

Should the Maddingley accounts have included the monthly service fee?

164 On behalf of CC Growth, it was contended that nonetheless, Maddingley did not make a profit in November 2017 because the accounts should have included a monthly service fee to its related company, Amiga Montessori Pty Ltd in the sum of $1,104. The relevant facts are as follows:

(a) The monthly accounts to November 2017 were prepared with an expense item being a service fee payable to Amiga Montessori Pty Ltd of which Amanda Bergh was also sole director. Amanda Bergh and Mr Philip Good, the accountant with Business Lighthouse responsible for the preparation of the financial accounts for the Amiga Montessori group including the Maddingley centre, gave evidence that:

(i) it was the policy of Amiga Montessori Pty Ltd to not charge fees to centres until the centre had become profitable; and

(ii) the inclusion of a service fee in the accounts of the Maddingley centre in the months of July to November 2017 was an error.

(b) Amanda Bergh identified the error when reviewing the accounts of the Maddingley centre for the purpose of determining whether the centre was profitable on 11 December 2017. As a result, on 11 December 2017, Amanda Bergh, as the sole director of Amiga Montessori Pty Ltd, resolved as follows:

RESOLUTION - following discussions with the company's accountants (Business Lighthouse Group), the company in its capacity as Trustee for the Amiga Montessori Trust hereby resolves to forgive the management/ service fee payable to it by Maddingley Montessori Centre Pty Ltd ACN 159 372 184 as trustee for the Maddingley Montessori Centre Unit Trust for the twelve (12) month period 1 July 2017 to 30 June 2018.

This decision is consistent with the treatment of other Amiga Montessori Centres to assist these Centres to build their levels of profitability in the early stages of their operations through either reduced or nil management/ service fee charges.

165 I accept the evidence of Amanda Bergh and Mr Good in this respect for the following reasons:

(b) The practice of not charging fees was supported by the evidence of Mr Good with respect to other centres in the Amiga Montessori group.

(c) There was no contention or evidence that there would be any commercial purpose to the Amiga Montessori group for a related company to charge a service fee to a centre which was not in profit.

166 For the above reasons, I have concluded that on the application of proper accounting principles:

(a) the Maddingley centre accounts should have made provision for government subsidy; and

(b) the Maddingley centre accounts should not have included the monthly service fee.

According, I find that the Maddingley centre properly recorded a profit for the month of November 2017.

Does the fact that the Maddingley centre recorded a profit in November 2017 constitute it as a 'profitable centre' for the purposes of the Shareholders' Agreement?

167 Mr Taplin's evidence was that even if the Maddingley centre was profitable in November 2017, that would not constitute it as a 'profitable centre' as at 14 December 2017. He based his opinion on the fact that, as at 14 December 2017, the Maddingley centre had incurred past losses of about $50,000 since inception.

168 It should be noted that Mr Taplin's oral evidence was given after the following series of leading questions by counsel for the plaintiffs:

MR CORBETT: ... Could I just - I'll start with you, Mr Taplin: in relation to the question, which His Honour just asked you about the profitability assuming kinder funding going forward from December, as I understood your first report, you've taken a holistic approach to profitability based upon the end of year result and the total losses; is that correct?

WITNESS TAPLIN: That's correct, yes.

MR CORBETT: So taking into account the total losses and the balance sheet, what was the position - what do you say the position of the centre was?

HIS HONOUR: Assuming kinder funding.

MR CORBETT: Assuming kinder funding but taking into account the totality of the losses and the balance sheet.

WITNESS TAPLIN: Well, it still showed a significant deficiency.

MR CORBETT: Significant deficiency?

WITNESS TAPLIN: At 30 June 18, yes.

MR CORBETT: And, based upon that deficiency, if you put yourself in the shoes of an accountant on 14 December, what is your opinion about profitability of December?

WITNESS TAPLIN: Well, at 14 December, it had, I think, incurred losses of about $270,000 since inception. And then the November - initially, the November accounts showed - I think we agreed on $458 profit, which, after reallocation of expenses, I worked out to be a $423 loss. So we're talking about minute numbers in relation to $270,000 losses that had been incurred up to that date. I - from my point of view, I couldn't say that the centre was profitable at 14 December.

169 This evidence of Mr Taplin was contrary to his evidence in response to my questioning of both expert witnesses immediately prior to the above passage, which included:

HIS HONOUR: If, in fact, the kinder funding is taken into account, Mr Taplin, would you consider the Maddingley Centre to be a profitable centre as at 14 December?

WITNESS TAPLIN: If an amount of 1460 [being the amount of the kinder funding applicable to November 2017] was taken into account, yes, it would be profitable.

HIS HONOUR: The figures show, respectively, as it turned out, that December and January were, effectively, lower income months and that losses were sustained even with the kinder subsidy - and I think I'm right in saying, I'll be corrected if I'm wrong - from that time, outside the [holiday] period, there was then a consistent profit for the balance of the financial year.

WITNESS TAPLIN: That's correct.

HIS HONOUR: In those circumstances, as at 14 December, what would you say about whether - assuming that the kinder funding was to be taken into account - would you say that Maddingley was a profitable centre at 14 December?

WITNESS TAPLIN: If the kinder funding was to be taken into account, yes, it would be.

HIS HONOUR: Mr Smith?

WITNESS SMITH: Yes.

170 Mr Smith deposed that, in his opinion, the Maddingley centre could be properly described as profitable as at 14 December 2017 on the basis that:

(b) it was reasonably foreseeable that it would continue to be profitable based on the increasing occupancy rate of the Maddingley centre at the time.

171 The word 'profitable' is a common English word. It is defined in the Macquarie Dictionary, 6th edition as '1. Yielding profits; remunerative. 2. Beneficially useful'.

172 Although there was no objection to the expert evidence of Mr Taplin and Mr Smith, I consider that whether the Maddingley centre was profitable within the meaning of the Shareholders' Agreement as at 14 December 2017 is to be determined as a matter of contract construction rather than the application of any accounting principle.

173 To determine the meaning of the terms of a commercial contract, the Court will ask the question 'What would a reasonable business person have understood those terms to mean?'[74] For the purpose of answering that question, 'the reasonable businessperson [is] placed in the position of the parties',[75] and the Court applies the following principles:

(a) The terms are construed objectively and the subjective intentions of the parties are irrelevant.[76] A court 'cannot receive oral evidence from one party as to its intentions and construe the contract by reference to those intentions'.[77]

(b) The Court will consider not only the text and the ordinary meaning but also:

(i) the context, being the entire text of the contract including matters referred to in the text of the contract; and

(ii) the commercial purpose and object of the contract. [78]

174 The identification of the commercial purpose and object of a contract 'presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating'.[79] For this purpose, the Court may have regard to the surrounding circumstances known to the parties.[80] It is entitled to assume 'that the parties intended to produce a commercial result'; [81] and will avoid a construction that renders it 'commercial nonsense or working commercial inconvenience'.[82]

175 Accordingly, the Court may 'have regard to more than internal linguistic considerations',[83] but ordinarily, where there is no ambiguity, the intention can be discerned by reference to the contract alone.

Conclusion on whether the Maddingley centre was profitable within the meaning of the Shareholders' Agreement

176 In my opinion, the Maddingley centre was profitable within the meaning of the Shareholders' Agreement as at 14 December 2017 for the following reasons:

(a) The Maddingley centre had demonstrated a steady increase in occupancy rates from July 2017 as follows:

(b) The occupancy rate achieved as at November 2017 allowed the Maddingley centre to operate profitably during a normal month. Apart from the effect of the holiday period in December 2017 and January 2018, there was no reason to expect that the occupancy rate and profitability would not continue to increase in the foreseeable future.

(c) There was no evidence to suggest that the actual occupancy rate of the Maddingley centre in the second half of the financial year 2017-2018 was due to factors other than the demonstrated steady increase in the first half of the financial year 2017-2018, which was known and expected by the parties in December 2017:

177 I do not consider that a reasonable business person in the position of the parties would have considered that the expression in cl 3.2(c) of the Shareholders' Agreement 'profitable childcare centre' would have required a qualifying centre to be profitable over the entire period between the date of the Shareholders' Agreement being 27 June 2017 and 1 January 2018 (being the cut-off date under cl 3.2(d)). My conclusion is based on the following surrounding circumstances known to the parties at the time of entering into the Shareholders' Agreement:

(a) The parties had proposed that the profitable childcare centre would be the Maddingley centre.

(b) The Maddingley centre had only recently been established, in late 2016, and was significantly unprofitable as at the date of the Shareholders' Agreement.

(c) It was the intention of the parties that Amiga Growth would hold 50% of the shares issued by Amiga Partners; and that would only occur if Amiga Growth contributed a trading and profitable childcare centre of not less than 70 licensed places. With monthly losses at the time of entry into the agreement of in excess of $20,000, the prospect of the Maddingley centre, not only reaching profitability prior to 1 January 2018, but recouping the historical monthly losses by that date would have been thought remote.

178 In my opinion, the terms of the Shareholders' Agreement and the surrounding circumstances, referred to above, indicate that the parties intended to produce a commercial result being the transfer by 1 January 2018 of a childcare centre which had achieved profitability by that date; rather than one which had made a profit over the previous six months or over any other period longer than one month.

179 In other words, I think it is consistent with the commercial purpose of the Shareholders' Agreement that, as at 1 January 2018, Amiga Growth was required to contribute a childcare centre, which had, by that time, reached profitability, rather than one which had established historical profitability. Conversely, if Amiga Growth had offered to contribute an established business in decline which, as of December, was no longer profitable (although could demonstrate a profit over the previous 12 months), I do not consider that reasonable business persons in the position of the contracting parties would have understood the term 'profitable childcare centre' to include such a centre.

180 I propose to enter judgment for the defendants and order that the plaintiffs' claims be dismissed.

181 I will hear the parties on further and consequential orders.

1. The Company enter into a lease agreement to lease the premises at 70 Dorcas Street, Southbank, Victoria on the following terms:

1. Rent: 1. Property: $500m2 plus GST x 150m2 = $75,000 per annum plus outgoings; 2. Car park: $350 plus GST per month per car 2. Rental increase: 3.0% per annum;

1. Commencement date: Upon Issuance of the occupancy permit;

1. Term: 3 years; 2. Option: 2 years; 3. Subletting rights; 4. Landlord works: 1. Flooring; 2. Ceilings; 3. Bathrooms; 4. Kitchen joinery; 5. Electrical points; 6. Partitioning; 5. Tenant works: All works not described as Landlord works.
2. The Elster Development Pty Ltd engagement be varied such that previous terms be deleted and replaced with the Company to employ Ian Townsing at a rate of $100,000.00 per annum commencing 1 December 2017.
3. The Amiga Montessori Services Agreement to be amended to reflect the direct employment of Management staff and the leasing of the head office.

1. Amiga Partners Seed Centre quarterly cashflow forecast

1. The Company to raise $2.0 million to fund Seed Centre operations from January 2018.
2. Subject to Investor demand the $2.0 million to be raised in the form of:
   1. Increase to the existing 1st mortgage loan facility on the following indicative terms:
      1. Ranking pari passu with existing 1st mortgage loan facility;

1. Semi-annual cash pay coupon: 10%-12%
2. Capitalising coupon to end of Term: 15%-18%;

1. Term in accordance with existing facility to June 2019; and
2. The Increase in the 1st mortgage loan facility to be subject to consent from current lenders

b. Issuance of new shares in Amiga Partners on the following indicative terms:

1. New Shareholders to enter into the Shareholder and any other Agreements required;
2. New share issue price be determined in accordance with the Company valuation policy at December 2017, estimated to be $1.00 per shares;
3. The issue of new shares to be subject to Shareholder approval.

1. A meeting of shareholders be convened once the $2.0 million capital raising is committed by investors to approve:
   1. Reclassification of those matters set out in clauses 6.2.4 and 6.2.8 to 6.2.11 from Special Resolution matters to Ordinary Resolution matters;
   2. Deletion of clause 7 from the Shareholders Agreement;

1. Amiga Partners Seed Centre + First Rights Centres quarterly cashflow forecast

1. The Company nominates the following centres as First Rights Centres:
   1. Cranbourne: 85 Everlasting Drive, Cranbourne, Victoria
   2. Golden Grove: Corner of Golden Grove Road and Crouch Road, Golden Grove, South Australia.
2. The Company to acquire the nominated First Rights Centres for consideration of $1.00 per centre.
3. The Company to raise $1.0 million to fund First Rights Centres acquisition, fitout and commencement of operations in 2018.
4. Subject to investor demand the $1.0 million to be raised in the form of:
   1. Increase to the existing 1st mortgage loan facility on the following indicative terms; and
      1. Ranking pari passu with existing 1st mortgage loan facility;
      2. Interest rate:
         1. Cash pay semi-annual coupon: 10%-12%
         2. Capitalising coupon to end of Term: 15%=18%;
      3. Term in accordance with existing facility to June 2019; and
      4. The Increase in the 1st mortgage loan facility to be subject to consent from current lenders
   2. Issuance of new shares in Amiga Partners on the following indicative terms:
      1. Ordinary shares;
      2. New Shareholders to enter into the Shareholder and any other Agreements required;
      3. New share issue price be determined in accordance with the Company valuation policy at December 2017, estimated to be $0.80 per share;
      4. The issue of new shares to be subject to Shareholder approval.
5. A meeting of shareholders be convened once the $1.0 million capital raising is committed by investors to:
   1. Approve the nomination of the First Rights Centres; and
   2. Approve the issuance of new shares.

[4] (1881) 6 App Cas 251, 263.

[5] (1977) 180 CLR 266 (Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel; Lord Wilberforce and Lord Morris of Borth-y-Gest dissenting).

[7] BP Australia Ltd v Shire of Hastings [1973] VicRp 17; [1973] VR 194 (Smith ACJ, Adam and Newton JJ).

[8] There was no submission or evidence as to how the sums advanced by CC Emelo constituted a detriment to CC Growth or Amiga Partners; but the evidence did establish that CC Growth had contributed $600,000 to Amiga Partners, which was applied to the Amiga Partners subsidiaries.

[9] This amount was repaid by the defendants.

[10] This amount was for a sandpit at Cranbourne and was invoiced to Amiga Partners but paid by Mobe Growth Pty Ltd on 26 June 2018.

[11] [2016] WASC 301 [79].

[14] J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2014), 83 [3-120].

[15] (1999) 196 CLR 101, 112 [6], 123-125 [40]-[48] (Gleeson CJ, McHugh, Gummow and Callinan JJ) as adopted in S_idhu v Van Dyke_ [2014] HCA 19; (2014) 251 CLR 505, 529 [82] (French CJ, Kiefel, Bell and Keane JJ) ('Sidhu').

[16] [1937] HCA 58; (1937) 59 CLR 641, 674.

[18] Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, 437 (Mason and Deane JJ).

[19] S_idhu_ [2014] HCA 19; (2014) 251 CLR 505, 529 [82] (French CJ, Kiefel, Bell and Keane JJ).

[20] [2012] NSWCA 57 [13]. Also see Donis v Donis [2007] VSCA 89; (2007) 19 VR 577, 593-4 [54] (Nettle JA with whom Maxwell P and Ashley JA agreed) citing with approval the statement of Robert Walker LJ in Gillett v Holt [2001] Ch 210, 233. These authorities were endorsed by Handley AJA (with whom Allsop P and Giles JA agreed) in Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483, 491 [43].

[21] See for example Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 404 (Mason CJ and Wilson J); Commonwealth v Verwayen (1990) 170 CLR 394, 445 (Deane J); Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674-5 (Dixon J); and Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, 547 (Dixon J). In particular the formulation by Brennan J in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-9 has been widely applied including by Ginnane J in Moala v Free Wesleyan Church of Tonga (Ruling No 4) [2017] VSC 635 [53] and Hargrave J in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40 [108]. Although an appeal from the decision of Hargrave J was allowed, Brennan J's elements in Walton Stores were adopted by the Court of Appeal - see [2008] VSCA 86 [125] (Dodds-Streeton JA, with whom Ashley JA and Forrest AJA agreed). In Bullhead Pty Ltd v Brickmakers Place Pty Ltd [2017] VSC 206 [184] Sifris J considered Brennan J's 'elements are a useful starting point, although not universally accepted, but sufficient for present purposes'. This aspect was not disturbed on appeal in [2018] VSCA 316 (Kyrou, McLeish and Hargrave JJA).

[22] Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483, 485 [3] (Allsop P).

[23] [2014] HCA 14; (2014) 253 CLR 560, 600 [88] (Hayne, Crennan, Kiefel, Bell and Keane JJ).

[24] Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483, 491 [41] (Handley AJA with whom Allsop P and Giles JA agreed).

[26] Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106; (2017) 94 NSWLR 500, 510 [49] (Macfarlan JA with whom McColl JA and Sackville AJA agreed) (Emphasis added).

[27] [2014] HCA 19; (2014) 251 CLR 505, 531 [91].

[28] Ibid 525 [67], 528 [78] (French CJ, Kiefel, Bell and Keane JJ).

[29] [2017] NSWCA 106; (2017) 94 NSWLR 500, 510 [45]-[49] (Macfarlan JA with whom McColl JA and Sackville AJA agreed).

[30] Walsh v Walsh [2012] NSWCA 57 [14] (Meagher JA).

[31] [2007] VSCA 89; (2007) 19 VR 577, 588-9 [34].

[32] Gillett v Holt [2001] Ch 210, 232-3 (Robert Walker LJ); DHJPM Pty Limited v Blackthorn Resources Limited (formerly called AIM Resources Limited) [2011] NSWCA 348; (2011) 83 NSWLR 728, 746 [72]-[73] (Meagher JA with whom Macfarlan JA agreed).

1. [33] Sidhu [2014] HCA 19; (2014) 251 CLR 505, 529 [82] citing Giumelli v Giumelli (1999) 196 CLR 101, 112 [6], 123-5 [40]-[48] (Gleeson CJ, McHugh, Gummow and Callinan JJ).

[34] Sidhu [2014] HCA 19; (2014) 251 CLR 505, 529 [83]-[84] (French CJ, Kiefel, Bell and Keane JJ).

[36] Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483, 493 [61] (Handley AJA with whom Allsop P and Giles JA agreed).

[37] [1996] EWCA Civ 1305.

[38] Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483, 496 [81]-[83] (Handley AJA with whom Allsop P and Giles JA agreed) quoting from Walton v Walton (Court of Appeal, Hoffman LJ, 14 April 1994, unreported).

[39] Milling v Hardie [2014] NSWCA 163 [55](2) (Macfarlan JA with whom Beazley P and Sackville AJA agreed).

1. [40] Blacket v Barnett [2017] NSWSC 1032 [286] (Hallen J); Sullivan v Sullivan [2006] NSWCA 312 [24]-[28] (Handley JA).

[41] Sidhu [2014] HCA 19; (2014) 251 CLR 505, 531 [93] (Gageler J) citing Spence, Protecting Reliance: The Emergent Doctrine of Equitable Estoppel (1999), p 43 and Spencer Bower, The Law Relating to Estoppel by Representation, 4th ed (2004), pp 99-100.

[42] Gillett v Holt [2001] Ch 210, 232 (Robert Walker LJ, with whom Waller and Beldam LJJ agreed).

[43] [2008] VSCA 247; (2008) 21 VR 351, 396 [180] (Buchanan, Nettle and Dodds-Streeton JJA).

[45] [2001] NSWCA 187; (2001) 69 NSWLR 558, 573 [185] (Sheller, Beazley and Stein JJA).

[46] (1787) 1 Cox 318, 319-20; 29 ER 1184, 1185.

[47] [2018] VSCA 316 (Kyrou, McLeish and Hargrave JJA).

[49] Blacket v Barnett [2017] NSWSC 1032 [286] (Hallen J).

[50] J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2014), 83 [3-120] (emphasis added).

[51] Supreme Court Act 1986 (Vic), s 36.

[52] Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, 581 (Mason CJ, Dawson, Toohey and Gaudron JJ).

[53] Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 615 (Deane J).

[54] [2010] VSC 59 [77].

[55] Grimaldi v Chameleon Mining (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 345 (Finn, Stone and Perram JJ).

[57] Corporations Act 2001 (Cth) s 198A.

[58] AWA Ltd v Daniels (1992) 7 ACSR 759, 865-6 (Rogers CJ in Comm Div).

[59] Breen v Williams (1996) 186 CLR 71, 107 (McHugh and Gaudron JJ).

[60] For example, a director's duty to exercise reasonable care is not a fiduciary duty. Permanent Building Society (in liq) v Wheeler (1994) 14 ACSR 109, 157 (Ipp J).

[61] PD Finn, Fiduciary Obligations (Law Book Company, 1977) 1-2 (emphasis in original).

[62] Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 292 (Mason, Deane and Dawson JJ), 310 (Brennan J).

[63] [1974] 1 NSWLR 68.

[64] Ibid 77-8; adopted in Falkingham v Peninsula Kingswood Country Golf Club (2015) 318 ALR 140, 158-9 [103] (Whelan JA with whom Warren CJ and Beach JA agreed) (emphasis added).

[65] [2014] HCA 21; (2014) 253 CLR 83, 99 [31] (French CJ and Keane J) (emphasis added).

[66] [2012] FCA 634; (2012) 213 FCR 1, 191 [565].

[67] Howard v Federal Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83, 99 [33] (French CJ and Keane J).

[68] [1995] HCA 18; (1995) 182 CLR 544, 557-8 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) (Paragraphing added).

[69] Birtchnell v Equity Trustees Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408 (Dixon J).

[70] [2014] HCA 21; (2014) 253 CLR 83, 100 [34].

1. [71] Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 463-4 (Brennan CJ, Gaudron, McHugh and Gummow JJ); also see Howard v Federal Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83, 101 [35] (French CJ and Keane J).

[72] Howard v Federal Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83, 101 [35] (French CJ and Keane J).

[73] See paragraphs [164]-[166] below.

[74] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656-7 [35] (French CJ,

Hayne, Crennan, and Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, 116 [47] (French CJ, Nettle and Gordon JJ).

[75] Ecosse Property Holdings Pty td v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 343 ALR 58, 63 [16] (Kiefel, Bell and Gordon JJ).

[77] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 429 (Stephen, Mason and Jacobs JJ).

[78] Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95, [45]-[47] (Santamaria, Ferguson and McLeish JJA).

[79] Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989, 995-6 (Lord Wilberforce) cited with approval by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 350 which in turn was cited in Royal Botanical Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45, 52-3 (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) and Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ).

[80] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40].

[81] Ecosse Property Holdings Pty td v Gee Dee Nominees Pty Ltd [2017] HCA 12; (2017) 261 CLR 544, 551 [17] (Keifel, Bell and Gordon JJ).

[82] Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530, 559 [82] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ); cited with approval in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at 656-657 [35] (French CJ, Hayne , Crennan and Kiefel JJ); and Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85, 111 [78] (Gageler, Nettle and Gordon JJ).

[83] Royal Botanical Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45, 52 [10] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).