CHAFFEY SERVICES PTY LTD AS TRUSTEE FOR CATABY SERVICES TRUST, T/A CATABY SERVICES -v- DOBLE [No 4] [2023] WASC 361 (22 September 2023)

CITATION : CHAFFEY SERVICES PTY LTD AS TRUSTEE FOR CATABY SERVICES TRUST, T/A CATABY SERVICES -v- DOBLE [No 4] [2023] WASC 361

HEARD : 20, 21, 24, 26, 27, 28 APRIL, 1, 2, 3 & 4 MAY 2023

BETWEEN : CHAFFEY SERVICES PTY LTD AS TRUSTEE FOR CATABY SERVICES TRUST, T/A CATABY SERVICES

Employment law - Where employee takes preparatory steps to compete with employer - Where employee negotiated the acquisition by own company of a third party's contract with employer's major customer - Where employee's duties included the provision of quotes to employer's major customer - Where no reliance placed on common law duty of fidelity - Whether employee owed fiduciary duties to employer - No fiduciary duty restricting employee's freedom to negotiate acquisition of third party contract - Fiduciary duties owed in relation to the provision of quotes - Breach of fiduciary duty to employee diverting work to own company - Employee entitled to equitable compensation

Corporations - Whether employee an officer of employer - Whether employee's conduct in taking preparatory steps constituted a breach of duties owed under s 182 and s 183 of Corporations Act 2001 (Cth) - Diversion of work to own company constituted breach of duties owed under s 182 and s 183 of Corporations Act (Cth) - Use of employer's information for employee's purpose of establishing own business constituted breach of duties owed under s 183 of Corporations Act - Employer entitled to compensation order

Equity - Equitable obligations of confidence - Employee using employer's confidential information for purpose of establishing own business - Application of springboard doctrine - Employer entitled to equitable compensation

Practice and procedure - Pleading - Adequacy of pleading of knowing assistance in a dishonest and fraudulent breach of fiduciary duty - Knowing assistance claim not open on the pleadings

Corporations Act 2001 (Cth) s 182; s 183; s 9; s 79; s 83; s 105; s 108; s 180; s 181; s 182; s 183; s 1317DA, s 1317E; s 1317S; s 1317H; s 1318

1. This action involves a dispute between the plaintiff and its former employee, Mr Mick Doble (the first defendant), and his company Kirahnley Pty Ltd (the second defendant). The dispute raises the question of where the line is to be drawn between the activities an employee is permitted to undertake in preparation for future competition with an employer and those that are not permitted and whether, in the circumstances of this case, Mr Doble crossed that line.
2. The essential facts are as follows. The plaintiff was incorporated by Mr Iain McGregor in April 2019 to purchase a business that provided mine site maintenance services on a mine site in the mid-west of Western Australia. The vendor of the business was a company, Chafco Pty Ltd, which was controlled by Mr David Chaffey. Chafco employed Mr Doble as its site supervisor. Between 2016 and late 2018 Mr Chaffey and Mr Doble discussed the possibility of Mr Doble purchasing the business but they were unable to agree terms. Following completion of the sale to the plaintiff in July 2019 the plaintiff employed Mr Doble as its site supervisor. In late 2019, while still employed by the plaintiff, Mr Doble took steps to set up a business with a view to providing both mine site maintenance and mine rehabilitation services to the mine owner, Tronox Management Pty Ltd. Those steps included incorporating Kirahnley, negotiating the purchase by Kirahnley of a contract for mine rehabilitation services from another contractor, arranging finance (for which purpose the plaintiff alleges Mr Doble used its confidential information), and purchasing equipment. Kirahnley began providing services to Tronox some weeks before Mr Doble's employment with the plaintiff came to an end on 31 March 2020 and continued to do so thereafter.
3. The plaintiff alleges Mr Doble's activities constituted breaches of fiduciary duties, breaches of statutory duties and breaches of an equitable obligation of confidence. It alleges that Kirahnley was knowingly concerned in those breaches and that Kirahnley is liable both under the Corporations Act 2001 (Cth) and in equity. The amount claimed by the plaintiff ranges between $1.5 million and $6.5 million depending on the approach taken to quantification. The quantum of the plaintiff's claims was heavily dependent on the success of its contentions in relation to the rehabilitation services contract ('the VMS contract').

(a) Did Mr Doble owe duties in equity and under the Corporations Act 2001 to the plaintiff, and if so, what were those duties?

(b) Did Mr Doble's conduct in establishing Kirahnley's business constitute a breach of any equitable or statutory duties?

(c) If Mr Doble's conduct constituted breaches of any equitable or statutory duties, does Kirahnley have any liability to the plaintiff?

(d) Has Mr Doble made out any of the positive defences pleaded by him?

(e) If no defence is established, what loss or damage, if any, has the plaintiff suffered, or what gains have Mr Doble and Kirahnley made, as a result of any breaches, and what, if any, remedy should be ordered?

1. In summary the defendants' position on each of the issues is as follows:

(a) Mr Doble did not owe the plaintiff fiduciary duties of the nature alleged by the plaintiff.

(b) Mr Doble was not an 'officer' of the plaintiff within the meaning of s 9 of the Corporations Act and thus did not owe statutory duties pursuant to s 180 or s 181 of the Corporations Act.

(c) In any event Mr Doble's conduct did not constitute a breach of any equitable or statutory duties.

(d) The information used by Mr Doble for the purposes of obtaining finance was not confidential information and Mr Doble was not the subject of any equitable obligation of confidence in respect of that information.

(e) The plaintiff has not pleaded a Barnes v Addy knowing assistance case against Kirahnley and should not be permitted to advance such a claim at trial.

(f) Kirahnley's acquisition of the VMS contract did not cause the plaintiff any loss because it would never have succeeded in acquiring that contract.

(g) Mr Doble had informed both Mr Chaffey and Mr McGregor of his intention to incorporate Kirahnley, acquire the VMS contract and perform site rehabilitation and other related work on the Tronox site. Mr McGregor was a director of the plaintiff and controlled its activities and Mr Chaffey was a director of the plaintiff until March 2020. Consequently, the defendants contend the plaintiff consented to the establishment of the Kirahnley business or that the plaintiff acquiesced in it and is now estopped from denying that consent.

(h) Alternatively, the defendants acted honestly and should be relieved of liability pursuant to s 1318(1) or of the .

(a) Mr Doble owed fiduciary obligations in respect of one aspect of his responsibilities, that is, the preparation of quotes and invoices for Tronox and that he breached those obligations by causing Kirahnley to quote for work instead of submitting quotes on the plaintiff's behalf. In effect, while still employed by the plaintiff he diverted work away from it to Kirahnley.

(b) Mr Doble was not an officer of the plaintiff within the meaning of that term in the Corporations Act but that the diversion of work to Kirahnley was a contravention of the duties owed under s 182 and s 183 of the Corporations Act and Kirahnley was involved in that contravention.

(c) Mr Doble misused confidential information about the plaintiff's turnover for the purposes of his application for finance and in so doing breached the equitable duty of confidence he owed to the plaintiff. This breach enabled Mr Doble to obtain finance six weeks sooner than would have been the case had he not misused the confidential information.

(d) Mr Doble's misuse of the plaintiff's confidential information also constituted breaches of the duties owed by him under s 182 and s 183 of the Corporations Act. Kirahnley was involved in that contravention.

(e) Mr Doble did not owe the plaintiff any fiduciary duty or any statutory duty that restricted his freedom to cause Kirahnley to secure the VMS contract.

(f) The plaintiff's claim against Kirahnley on the basis that it knowingly assisted in Mr Doble's breach of fiduciary duty is not open on the pleadings.

1. A substantial volume of documentary evidence was received. Wherever possible I have relied on the contemporaneous documents and inferences drawn from those documents for the purposes of making factual findings.
2. In assessing the evidence of all witnesses I take into account the corrosive effect of the passage of time on human memory. The relevant events occurred principally between late 2018 and early 2020 and, when they occurred, they would not have seemed significant or particularly memorable. I also take account of the ever-present risk that recollections may be impaired by the intrusion of false memories generated (consciously or otherwise) by self-interest in the outcome of the litigation or a sense of loyalty by a non‑party witness to one side or the other. These factors led me to examine the evidence of all witnesses in this trial with caution.
3. Mr McGregor and Mr Chaffey gave evidence about their dealings with Mr Doble and with each other. The defendants' counsel, Mr Solomon, submitted that the evidence of each of Mr McGregor and Mr Chaffey was unreliable except in so far as it was corroborated or amounted to admissions. Mr Solomon supported that submission with references to the transcript.[2]
4. I have considered the evidence relied on by Mr Solomon for his submission in respect of Mr McGregor's evidence. In my assessment, those passages of Mr McGregor's evidence, and indeed his evidence generally, show him to be a cautious witness who was perhaps overly defensive at times. I do not accept, however, that the matters relied on by Mr Solomon are sufficient to support the conclusion that Mr McGregor's evidence was unreliable except to the extent to which it was corroborated or amounted to admissions. To the contrary, my assessment was that Mr McGregor was a truthful witness whose evidence was generally reliable but, for the reasons I have mentioned, his evidence like that of all of the witnesses required careful consideration. In general, where there was a conflict between Mr McGregor's evidence and that of Mr Doble there were objective factors that supported Mr McGregor's account and I refer to these as I set out the facts.
5. Mr Chaffey presented as a forthright witness who gave his evidence in an open and direct manner. Notwithstanding this I have more significant reservations about the reliability of his evidence. My impression was that he and Mr Doble had been friends and that the failure of the negotiations between them for the sale of Chafco's business to Mr Doble, the subsequent sale to the plaintiff and the dispute that had arisen presented Mr Chaffey with a number of conflicts both personally and financially and these affected the reliability of his evidence. A more specific basis for regarding his evidence generally with caution was his own evidence to the effect that statements made by him in one of his emails to Mr Doble in October 2018 were false. I refer to this evidence at [51].

The facts Mr Chaffey establishes Cataby General Services

1. Mr Chaffey established Cataby General Services in 1995 to provide mine site maintenance services on the Tronox site. Before he commenced trading as Cataby General Services Mr Chaffey was employed by Tiwest Pty Ltd which later changed its name to Tronox Management Pty Ltd. In April 2004 Mr Chaffey incorporated Chafco Pty Ltd and thereafter Chafco owned and operated Cataby General Services. Mr Chaffey is Chafco's sole director, secretary and shareholder.
2. As the expression suggests, mine site maintenance services are the services required to keep a mine site running. They are ancillary to the activities of mining and rehabilitation. At the Tronox site Cataby General Services undertook road maintenance, wet hire of machinery (most commonly involving the hire of machinery with fuel and an operator), vehicle hire, bore removal and servicing, building maintenance, minor civil works and waste removal. Mining was undertaken by a mining contractor, Piacentini & Son, and site rehabilitation was undertaken by VMS Contractors.
3. Mr Todd Johnson of VMS Contractors described the work undertaken by his business as follows:[4]

The core of our work was rehab. So we used to harvest the bush ahead of the mine site. The mine site would move along like a big hole in the ground. We would take everything from the front of the mine site, put it at the back of the mine site and use that to rehab with. So seeds, bushes, everything. We would try to make the back look like the front, if that made any sense. That was our main work.

1. The VMS contract was originally for a contract period of 24 months with two 12 month extension options but further extensions were granted and relevantly, in 2019 it was extended until 2023. The scope of the contract was set out in Schedule 2 and specified in some detail the nature of the rehabilitation work to be undertaken. In overview the work included pasture rehabilitation, native rehabilitation and 'other duties'. The other duties were related to rehabilitation but included 'Adhock [sic] Services'. These were defined as including mechanical maintenance of equipment, fencing and installation of rehabilitation signage, water monitoring and sample gathering and 'other adhock works as directed from time to time by the Works Supervisor'.[5] Cataby General Services did not undertake any rehabilitation work.
2. Until early 2017 Tronox was Cataby General Services' main client. In 2017 Cataby General Services started providing services to Iluka Resources Ltd (Iluka). Iluka had begun the development of a mine site close to Mr Chaffey's home near the Cataby town site. The services provided by Cataby General Services to Iluka were fuel supply, road construction, minor civil works, waste removal, dust suppression and road maintenance.
3. Mr Chaffey's involvement with Cataby General Services was 'hands‑on' in that he undertook much of the work himself. It was not until 2005 that the business started to employ others.[6] By early 2016 there were four people working in the business, Mr Geoff Sawyer, Mr Phil Martin, Mr Gregory Wood and Mr Mark Doble. Mr Mark Doble was Mr Doble's brother.
4. When Tronox wanted Cataby General Services to undertake work it asked for a quote. If the quote was accepted Tronox issued a purchase order. When the work was completed an invoice was issued. Cataby General Services had standard rates that had been agreed with Tronox. There were specific rates for the hire of each item of machinery, rates for labour hire and for the hire of facilities such as crib rooms, toilets and lighting towers.[7]

1. Mr Doble had started work in the mining industry in 1986. He had experience in a number of different roles including machinery operator, supervisor and scheduler.[8] In 1999 he started work on the Tronox site as the site supervisor for an earthworks contractor and he met Mr Chaffey not long thereafter. Subsequently, between 2001 and 2015 Mr Doble was employed by Tronox. When he was working for Tronox one of Mr Doble's responsibilities was giving directions to VMS Contractors. Mr Johnson of VMS described him as 'our boss for a long time'.[9] In 2015 Mr Doble was made redundant by Tronox.

1. In late 2015 and early 2016 Mr Chaffey started to think about 'wind[ing] it back a bit'.[10] Around that time Mr Mark Doble resigned from Cataby General Services and Mr Chaffey was looking for someone to replace him.
2. In about April 2016 Mr Doble and Mr Chaffey travelled to Perth together in Mr Doble's car. During the journey the two men discussed the possibility of Mr Doble working for Cataby General Services with a view to ultimately buying the business. They discussed some terms and MrChaffey proposed that Mr Doble would be paid a salary of $130,000 per annum. In addition, they discussed the price at which the machinery then used on the Tronox site might be sold. The figure mentioned was $650,000.
3. Following those discussions in mid‑2016 Mr Chaffey employed Mr Doble to supervise the day to day running of Cataby General Services on the Tronox site. There was no written contract of employment. Mr Doble's family home was in Geraldton and during the working week Mr Doble lived in an accommodation unit on the Tronox site.

1. When Mr Doble first started working for Cataby General Services he and Mr Chaffey discussed the pricing of work for the purposes of submitting quotes to Tronox but, as Mr Chaffey put it, Mr Doble 'cottoned on pretty quick'.[11] Much of the quoting involved applying Cataby General Services' standard rates to the estimated duration of the period of hire of equipment or the estimated duration of the work to be undertaken.[12] When Cataby General Services was asked to quote for a larger job, or where 'major costs [were] involved' Mr Doble discussed the amount to quote with Mr Chaffey,[13] but otherwise quoting was Mr Doble's responsibility. By about September 2016 Mr Doble had taken over the task of preparing invoices. This was not complex. Using his laptop computer Mr Doble prepared invoices that corresponded with the quotes, sent the invoices to Tronox and provided Mr Chaffey with copies. Remittance advices were issued by Tronox (and later Iluka). Mr Doble checked the remittance advices against the invoices to which they related.[14]
2. On occasions Cataby General Services was asked to provide quotes for labour or machinery to an electrical contractor, Curtis Electrical, which provided services to Tronox, and in those instances invoices were rendered to Curtis Electrical rather than Tronox.
3. Cataby General Services was a small business with no more than four full time employees providing a limited range of services to two mine sites. There was no requirement for an elaborate management structure and relations between Mr Chaffey, Mr Doble and other employees were informal and, I infer, generally cordial.[15]
4. By mid-2018 in addition to the four full time employees there were two casual employees.[16] In his capacity as site supervisor the other employees reported to Mr Doble but Mr Chaffey also had 'hands on' involvement.[17] When Cataby General Services required casual employees they were found either by Mr Doble or by Mr Chaffey.[18]
5. Mr Doble did not make any decisions independently of Mr Chaffey in relation to the hiring of employees. [19] The circumstances in which Mr Gregory Wood was employed by Cataby General Services in about 2019 provides a useful illustration of the way in which Mr Doble and Mr Chaffey worked together in relation to employees. Mr Wood knew Mr Doble through their shared interest in motorsports and he asked Mr Doble whether there were any positions available at Cataby General Services. Mr Doble spoke to Mr Chaffey about Mr Wood and subsequently they met with Mr Wood and he was offered a job. No employees were dismissed while Mr Doble worked for Cataby General Services and, having regard to all the evidence of Mr Doble's role, I find that Mr Doble's authority did not extend to either employing or dismissing employees. Further, the limited nature of the dealings between Mr Doble and Mr Chaffey regarding the recruitment of new employees was insufficient to establish a course of conduct from which it is possible to infer an agreement that imposed a contractual obligation on Mr Doble to make recommendations about the hiring and dismissal of employees.

[L]iais[ing] with people at Tronox, people that want to work - jobs done, and then Mick would go out and organise to get those jobs done.

...

- he had the use of the gear, the machinery, and he deployed it where he thought it was necessary with the blokes that were there.

1. I find that from late 2016 Mr Doble was responsible for providing quotes to Tronox, scheduling and supervising the work that was the subject of Tronox purchase orders and rendering invoices. I find that in so doing he ran the day-to-day operation of the Cataby General Services business on the Tronox site.
2. As will be seen later in these reasons, the description of his role given by Mr Doble to his bank, although expressed in language both self‑serving and self‑aggrandising, did not differ materially from Mr Chaffey's evidence that Mr Doble 'virtually ran the day-to-day workings of the business'.[23]
3. Mr Doble had authority to use a Cataby General Services credit card to purchase materials for the business up to the credit limit of $10,000 and used the card from time to time to buy materials for the business and pay other routine expenses, 'the day-to-day stuff'.[24]
4. Beyond his responsibilities for quoting and invoicing Mr Doble had no role in the financial management of Cataby General Services. Indeed in 2018 Mr Chaffey expressed some frustration with what he viewed as Mr Doble's failure to observe instructions in relation to the timing of the rendering of invoices designed to assist in financial management.[25] Mr Doble was not involved in arranging or managing the business's working capital requirements, monitoring its cashflow (other than checking that invoices were paid), or in the acquisition and financing of equipment. He had no responsibility for administering the payroll of the business. He had no responsibility for the lodging of business activity statements. Mr Doble was a salaried employee with no entitlement to any share in the profits of the business.
5. The volume of work undertaken by Cataby General Services increased between 2016 and 2019 and I find that this was due in part to Mr Doble's efforts. I accept, however, Mr Chaffey's evidence that the number of employees had increased because there was an increase in profitable work and this was attributable to 'everyone's quality of work' rather than solely Mr Doble's quality of work.[26] Mr Chaffey did not suggest that Mr Doble's duties extended to developing the business by finding new customers.
6. Mr Chaffey, Mr Doble and the other Cataby General Services' employees, Mr Sawyer, Mr Wood and Mr Martin, often gathered at Mr Chaffey's farm for drinks after work. On many of those occasions Mr Chaffey and Mr Doble discussed the purchase by Mr Doble of Cataby General Services in the presence of the other employees. Nothing was reduced to writing until emails were exchanged in 2018 as described in the following paragraphs.

1. The defences of consent, acquiescence and estoppel require the negotiations between Mr Chaffey and Mr Doble and the subsequent negotiations between Mr Chaffey and Mr McGregor to be recounted in some detail.
2. Mr Doble sent Mr Chaffey an email on 9 July 2018. In the introductory paragraphs to that email Mr Doble wrote that he was finding it increasingly difficult to speak to Mr Chaffey about matters and that he wanted to put things on the table without getting heated. He said, 'over the last few months it has become increasingly difficult to continue working for Cataby General Services'. Mr Doble raised various operational issues and continued as follows:[28]

When we drove to Perth you made me an offer. The day I started you told me you could not afford to pay me that much and drastically reduced my wage. You have since increased it by $10,000 and it is still $10,000 below what your original offer was. You have told me I can buy whatever I want on the credit card but I would not of spent $15,000 on personal stuff since I started. Of late there seems to be no credit on it as three times I have gone to use it for work including the roller hire and to get the ute serviced on Friday to be told its declined due to insufficient funds

We spoke about you wanting to retire and I was to start taking the business over within 2 years and you would set up a payment plan of somewhere around $50-$60,000 per year for 10 years to pay for it.

In March when things started to come to a head you then offered a profit share deal. 4 months later that also has not eventuated.

The last offer you said was to work out what equipment I wanted and you would work out a price for it, your suggestion was that if I could not afford it maybe I could find a silent partner to buy in. Very different to any previous discussions. With this offer less than a few days old you took the blue drop deck to Perth and a few days later Greg tells me you had sold it. I would have thought maybe if you were asking me what gear I wanted maybe I would have been asked if that was something I would be interested in or even told that it had been sold.

When I started it all sounded good and things were going well, I was working to build your business and increase your profit with the aim of the business eventually becoming mine this is looking less and less likely. The way I feel at the moment I have worked my arse off over the last 2 years to increase turn over and set your business up where it has a great name for supplying a service no matter when we are called on.

I don't know what the answer is, I can not continue to try and run things only to find out you have done or set up things that I don't know about. Maybe the answer is I just hand all the book work etc back to you and all jobs just go through you. I enjoy the work just not the hurdles that continue to be put in front of us.

1. Mr Chaffey responded to Mr Doble by email sent on 30 July 2018 and stated:[29]

When I talked to you about you buying the business was when all that existed was Tronox, and it was for the gear that is mainly at Tronox and that was what it was based on with a smidgen of goodwill. I also said that any extra equipment etc would of course have to be added to the payout or we could go until it was payed for as not to leave you with to much of a burden later and i remember saying that at the end of our chats. Then came lluka and off course the extra gear and with all sorts·of equipment, bores etc. Hence i asked you for a list of the equipment you wanted because it all has a price and remembering some of the gear is my private stuff I noticed you wanting to have access to everything, and once again when i questioned something going you would get irate so it is best to work out what you want and if I will part with it.

...

I have spent the last 15 years talking with lluka people and have been nurturing that side of things along, i also have some contacts in lluka a little higher up in lluka than you think and i for one have not wanted to disappoint them. The simple things like the invoicing although not big to you is big to them and myself. Even now i have not received a copy of the invoices that have been sent up till the end of June. Those are the things that can ruin business relations as all paper work has to be tidied up in case an audit needs to be done (all about the money and tax).

It does worry me that you became flippant about the invoicing and where the money came from and that was why I am thinking you may either want to get someone else or yourself to front up with the money to buy the business, as i don't feel comfortable doing the vendor finance. Otherwise we do the share arrangement and work some way of buying into it with shares. It is not easy setting these things up and they have to be done through the legal channels and also my will has to reflect some of those things. This gear is for me to live off later (my super so to speak) and i am surprised if you thought I would fire sale it all to you and then end up with nothing later on to live on.

Having said what i have said if there is constant bitterness about everything then the show is not going to work well, so if you want to give me that list of gear you require so we can start sorting out or if you want out of it, will be up to you. I really can't add much more than what has been said and I hope that clears the air.

1. Mr Doble responded by email later the same day, 30 July 2018.[30] In response to Mr Chaffey's invitation for Mr Doble to prepare 'a list of gear' Mr Doble said:

I will do a list up and I guess we will discuss it, I would like to look at the option of maybe buying the Tronox part of the business and some of the equipment that you have that is required to operate this. In the mean time I am happy to hand you back all of the invoicing etc and that should make it easier for you to plan how the money comes in. An option is that maybe I concentrate on running the Tronox side of the business and you run the Iluka work for the time being.

I do not want any ill feeling between us, we have been friends for a long time and I hope this continues. Yes there is a lot of pressure with the work load I have taken on. But at the end of the day I have been doing it for your business with the hope eventually I would also benefit out of all the work. I do not expect instant reward and in my previous email I had only stated the offers you had made.

1. Mr Doble sent Mr Chaffey a list of the equipment he was interested in buying on 15 August 2018.[31]
2. On 9 October 2018 Mr Chaffey sent Mr Doble an email in which he wrote:[32]

Mick, can you send through the trading entity that you want to operate Cataby General Services under. Also when all the vehicles get signed over there will be stamp duty but if we cut the value of the gear and add more good will it will cut that back and also gst, if any but hopefully will not have any if done right. Chaf.

I will get back to you on the name.

Have you come up with a figure you are after for the equipment and business? Also a time frame on handover?

Mick

1. Later on 9 October 2018 Mr Chaffey replied:[34]

Have already had a draft agreement done but it was a bit rigid in legality so am working on another draft. Supposedly 1/1/19 would be yours but may work some money into your business December to give you carry on funds. Will talk money next week if they have sorted.

1. In cross-examination Mr Chaffey accepted the statement to the effect that he had prepared a draft agreement already and was working on another draft was 'probably' untrue and 'must have been' untrue.[35] He accepted it 'must have been' untrue because in answer to a subpoena seeking production of any such draft agreements Chafco's solicitors had written to the court stating Chafco had no such draft agreements in its possession. The plaintiff submitted that Mr Chaffey's evidence needed to be understood in its full context which was that he could not remember what had happened some four and a half years earlier and could not find any documents that were required to be produced in answer to the second subpoena. The cross‑examination was as follows:[36]

And your statement in exhibit 23 that you had already had a draft agreement prepared and were working on another draft was untrue, wasn't it?---Probably. I can't - I can't recall that. It - why that - why that came in.

You instructed lawyers for CHAFCO, Rowe Bristol Lawyers, to inform the court by a letter dated 13 April 2023 responding to a subpoena that CHAFCO Pty Ltd had no draft agreement or draft agreements with Mr Doble or an entity associated with Doble in its possession, didn't you?---Yes.

And that - that's a letter on the court - in the court records?---Yes.

You recall instructing your lawyers to - - -?---Well, yes, because I couldn't find anything. I have nothing and I can't remember why - yes, don't - don't recall what happened there.

Well, it was - - - ?---No, I certainly don't have anything at home. I had stuff scribbled on paper and whatever, but that got thrown out. So I couldn't find anything.

And in truth, Mr Chaffey, with the very early stage that your negotiations with Mr Doble was at, you hadn't had a draft legal agreement drawn up at all, had you?---Well, it depends what you call a draft. I'm thinking about scribbling on paper.

No, no, I'm talking about what you spoke about in exhibit 23, your email of 9 October 2018 at 3.37 pm, exhibit 23:

Have already had a draft agreement done, but it was a bit rigid in legality.

?---Yes. Well, obviously I didn't. Obviously I didn't.

No. So it was untrue, wasn't it?---Yes. it must have been.

1. While I accept that Mr Chaffey was giving evidence about events that had occurred four and a half years earlier, I do find his evidence troubling. It strikes me as odd that Mr Chaffey would have written that he 'already had a draft agreement done but it was a bit rigid in legality' and 'Will talk money next week if they have sorted', if he did not wish to convey to Mr Doble that he had taken the step of having an agreement prepared by a third party. Further, having an agreement prepared by a third party is something that I would expect Mr Chaffey to have remembered if 'it was a bit rigid in legality' and he was working on another draft. Finally, Mr Chaffey's apparent readiness to accept that he had made a statement to Mr Doble, someone who he had known for a long time and with whom he was generally on friendly terms, was untrue was rather surprising. It is difficult to know what to make of this evidence but, as I have said, it causes me to have reservations about the reliability of Mr Chaffey's evidence generally.
2. On 1 November 2018 Mr Chaffey sent an email to Mr Doble in which he wrote:[37]

Well here it is Mick. The price for the business is $930000.00. I will be splitting into two components $465000 good will, and $465000 equipment.

As far as i know there is no GST on the sale, there will however be stamp duty. There will be an interest component of 4.5% for 5 years rising to commercial bank rate after 5 years. There will be a PPR put on the equipment.

Obviously you will need to organise an overdraft facility and your business entity you wish to transfer Cataby General Services into.

I hope this will be done and dusted by 30/12/18, we may work around that one, as depends on lawyers and as i will be helping with finance for the first 6 weeks or so as the accounts are sorted. If all ok with you and of course the accountants and lawyers I will carry on with the change over.

1. Mr Chaffey was cross-examined about the apportionment of the purchase price he proposed to Mr Doble, that is $465,000 for the equipment and $465,000 for goodwill. He explained what he was trying to do by that apportionment as follows:[38]

What I was trying to do was - I was under the assumption if you can bring the goodwill into it and get the price of the equipment down, you can work stuff around the equipment. It might have saved stamp duty or something for Mick paying on the vehicles.

1. I accept that Mr Chaffey's concern to apportion the purchase price between the equipment to be sold and goodwill was based on an understanding held by him that the apportionment might have beneficial tax consequences, and that he genuinely held that view, whether or not there were, in fact, any such beneficial tax consequences.
2. Mr Doble replied to Mr Chaffey's email of 1 November 2018 by email sent on 5 November 2018 in which he wrote:[39]

Before I agree to any price I will need to get my accountant to look at the any financial records etc (Preferably 5 years but a minimum of 3 years). I would also need a breakdown and valuation of what plant and equipment I am receiving for the figure you have stated and proof of contracts/ ongoing work with Tronox and Iluka.

The concerns that I have is that once the Iluka construction is finished there is no certainty that there will be any ongoing work and to date we have not done any work for operations, it has all been for the construction department and contractors that will mostly be finished by the end of the year. Iluka have given many jobs to other contractors on site that we had been told we had and only time will tell if this will continue. Yes we are also busy with Tronox at the moment but they are also in a construction/transition phase with moving to the north and also with the regular work on the dredges while they are in hard digging. (This is expected to be over within the next 12 months). As we both know Tronox and Iluka have both shut down or significantly cut spending numerous times in the last few years and this can happen again at any time. You have said to me many times that just when you think things are going good they always seem to find a way to throw a spanner in the works.

Your business has grown significantly over the last 2 years and I feel that a large part of this has been due to my determination to build the business with the aim of hopefully purchasing it from you. I understand you have been dealing with Iluka for many years to secure work with them, however you stated many times that you only wanted to do the small jobs around the edges. I was the person that continued to push for more work at both the Tronox and Iluka sites and I was the one that did what ever it took to get these jobs done.

I understand that things have changed, and I realise the amount you want for your business would need to change accordingly. However, when I started to work for you, the figure of 50 to 60K per year for 10 years was what you stated, you did say that any additional equipment would need to be added. I feel that $930,000 an increase of $330,000 seems excessive and is a big risk for me to take with little certainty that work will continue. There is no guarantee that any business will continue as previously when they change hands but to commit to $930,000 + 4.5% interest is more than I feel comfortable with.

1. On 9 November 2018 Mr Chaffey responded to Mr Doble's email of 5 November 2018 and explained his position in relation to the value of the business and the price he was seeking for it.[40] Under cover of a further email sent on 9 November 2018 Mr Chaffey sent Mr Doble a summary of Cataby General Services profit and loss figures for the financial years of 2014, 2015, 2016, 2017 and 2018.[41]
2. Mr Chaffey's evidence was to the effect that he did not give Mr Doble permission to use the financial documents provided to him other than for the purpose of discussions with his accountant but he accepted that he had not told Mr Doble that the documents were being provided to him in confidence.[42]
3. On 13 November 2018 Mr Chaffey forwarded Mr Doble an email he had received from his accountant which contained details of wages paid in the first quarter of the 2018/2019 financial year.[43]
4. On 3 December 2018 Mr Chaffey forwarded to Mr Doble an email he had received from his accountant attaching a 'Sale of Equipment List' which in two columns ascribed two values to each item of equipment to be sold.[44] One column was entitled 'Sale Proceeds' and gave a lower value that the other column entitled 'Fair Value per David'. The total of the 'Fair Value per David' column was $916,000 to which the figure of $14,000 was added to bring the 'Total Proceeds Required to purchase Business & Equipment' to $930,000. The total in the 'Sale Proceeds' column was $430,000. This was a revised version of an earlier list prepared by Mr Chaffey's accountant.
5. On 12 December 2018 Mr Chaffey sent an email to Mr Doble. It was apparent from this email that Mr Doble and Mr Chaffey had reached a stalemate in their negotiations. Mr Chaffey wrote:[45]

Hello Mick. There are a couple of questions.

If I put the business on the market would you be willing to work for someone else if sells. I was assuming the other day that you wanted all the gear for $200 k less or did you mean the water cart, Hino crane, grader etc was not worth having as there would probably be no work later for them or crane to slow.

I got a phone call last night to do the potable water at grounded. I did it Saturday for commissioning crew but will have to check with Mick M.

Can you also work out the holidays etc I will owe you, do you have a gst registered business.

Would you be able to stay till the end of January and see what happens if I put the business on open market. I will talk to you later on. Chaffey

1. Mr Doble replied to Mr Chaffey on the same day. It was evident from the content and tone of Mr Doble's response that he was disappointed that he had not been able to reach an agreement with Mr Chaffey and that he had told Mr Chaffey that he would be leaving Cataby General Services. In answer to Mr Chaffey's question as to whether he would work for someone else if the Cataby General Services business was sold Mr Doble responded:[46]

I don't think I will be staying to work for someone else when you sell the business. Effectively you would be selling the rapport and knowledge I have built up with these sites over a long time. If that was the case, I would be better off starting my own business and doing the work direct. This is something I do not want to do but looking forward anything can happen.

What I said the other day was that with all the equipment I do not think it is worth $930,000 and I am thinking around $200,000 less. Honestly $700,000 would even be stretching it in my opinion.

I have sacrificed a lot of time and effort to continue to build your business over the last couple of years when I was given the impression that I was working towards a goal. I do appreciate your generosity over a lot of years and I feel that has been a two-way street with the amount of work I have helped you with as NCH and also sent your way when I worked for Tiwest/Tronox.

I understand that you have put a lot of time, effort and money into setting up your business with Tronox and Iluka and without this effort there would be no business. But I am the person that pushed to do most of the work on the Iluka site even after you said all you wanted to do was the little things like fencing around the outside. I feel without the effort I put in CGS would not have had the rapport it has with Iluka and its contractors. (emphasis added)

1. In evidence Mr Doble said that the reference in his email to 'what I said the other day' was a reference to a face-to-face conversation with Mr Chaffey.[48] Mr Doble's evidence was to the effect the conversation occurred at Mr Chaffey's property some days earlier. He said he and Mr Chaffey were standing around Mr Chaffey's grader. He had said that the most he was willing to offer Mr Chaffey was $700,000 and Mr Chaffey said he would not accept that offer and that he needed $930,000 because the sale proceeds were to be his superannuation. Mr Doble's evidence as to his response was as follows:[49]

I said to him that I couldn't make a deal, and I would look at putting my own equipment on there and starting my own business.

Did you say whether or not you would do that if you didn't purchase the business?---That's what I said I was intending to do. Yes

...

And did Mr Chaffey say anything in response to that?---He said, 'If that's what you want to do.'

1. In cross-examination Mr Doble's evidence about starting his own business was as follows:[50]

And you told him - do you say what you told Mr Chaffey was that you wanted to start a new business on the site?---I said to him that if we couldn't come to an arrangement with his business, I would look at starting my own business.

1. Mr Chaffey denied that the conversation described by Mr Doble occurred. His evidence was to the effect that the negotiations were conducted by email and they involved no face-to-face communication.[51]
2. In his defence Mr Doble pleaded that the conversation to which reference has just been made occurred between 13 and 25 December 2018.[52] In his evidence-in-chief Mr Doble said that the meeting occurred in 'early December, I would say, I don't know, 15/16 December, somewhere in that ballpark' but he was clear that the discussion preceded the email exchange of 12 December 2018.[53] In cross-examination Mr Doble's evidence that the grader conversation occurred before the email exchange of 12 December 2018 was not challenged and the inconsistency between the pleading of the date of the conversation in his defence and his evidence was not drawn to his attention.[54]
3. I find that there was a face-to-face conversation between Mr Doble and Mr Chaffey at Mr Chaffey's property shortly before the exchange of emails between them on 12 December 2018. During that conversation they discussed the price sought by Mr Chaffey for Cataby General Services' machinery. When it was clear that they could not reach agreement on the price Mr Doble said that he intended to leave Cataby General Services. These findings are based substantially on the emails exchanged on 12 December 2018 from which it is clear that the negotiations between the two men had broken down and that Mr Doble had made a statement to the effect that he intended to leave Cataby General Services. That is, he had made such a statement to Mr Chaffey before Mr Chaffey sent his email of 12 December 2018 asking whether Mr Doble would be willing to work for someone else. This is apparent from Mr Chaffey asking Mr Doble whether he would 'work out' his holidays. Further, a statement to the effect that Mr Doble intended to leave Cataby General Services does not appear in any email preceding the 12 December 2018 email. I find the statement that Mr Doble intended to leave Cataby General Services was made in the grader conversation. The reference to 'what I said the other day' in Mr Doble's email also supports the finding that there had been a conversation between the two men. Further, there is no reference in emails exchanged before 12 December 2018 to Mr Doble being prepared to offer $700,000, the figure to which implicit reference was made in Mr Chaffey's email (Mr Doble 'wanted all the gear for $200 k less) and which was referred to expressly in Mr Doble's reply.

1. Mr McGregor has been involved in the mining industry for 21 years. He operates a civil earthmoving business known as Breakaway Earthmoving. He is also involved in farming. He is the sole director, secretary and shareholder of the plaintiff.
2. Mr McGregor met Mr Chaffey at a funeral of a mutual acquaintance in about 2016 and they discussed their respective businesses.[56] Mr McGregor told Mr Chaffey that he would be interested in having a look at his business if he ever tired of it.[57] Mr Chaffey said that he had someone in mind to take the business on being the person who had been running it for him, Mr Doble. Based on what Mr Chaffey had told him Mr McGregor understood that the business was doing 'small-scale ancillary works' and was 'under management from Mr Doble'.[58] Mr McGregor thought nothing further about the matter until Mr Chaffey spoke to him in 2019 and asked whether Mr McGregor was still interested in the business and, if so, he should come and have a chat.[59]
3. In March 2019 Mr McGregor went to Mr Chaffey's farm to discuss the possible acquisition of Cataby General Services. Mr Chaffey told Mr McGregor that Mr Doble was no longer interested in the business and that he would offer the business to Mr McGregor on the same terms that had been offered to Mr Doble. They discussed the business and at the end of the discussion Mr McGregor said that he was interested.
4. Mr McGregor telephoned Mr Chaffey the following day and said that he was very interested and that he 'better have a look at the equipment'.[60] Mr McGregor had seen some of the equipment because it was on Mr Chaffey's farm but the majority of the equipment was on the Tronox site. Mr Chaffey and Mr McGregor visited the Tronox site the following Saturday to look at the equipment. On that visit they had a further discussion about the work undertaken by Cataby General Services.
5. At the conclusion of the visit to the Tronox site Mr McGregor thought that, although some of the equipment was in poor repair, the business was 'a good buy' given the price and the terms of sale (Mr Chaffey was offering vendor finance).[61] Mr McGregor's evidence was to the effect that the positive attributes of the business included that Mr Doble was running the business, it had a fairly stable workforce and the business had no competitors. At that stage Mr McGregor knew that VMS Contractors undertook rehabilitation work on the Tronox site but he did not view VMS Contractors as a competitor because his experience was that mining companies did not prioritise rehabilitation work.

Your business has grown significantly over the last 2 years and I feel that a large part of this has been due to my determination to build the business with the aim of hopefully purchasing it from you. I understand you have been dealing with Iluka for many years to secure work with them, however you stated many times that you only wanted to do the small jobs around the edges. I was the person that continued to push for more work at both the Tronox and Iluka sites and I was the one that did what ever it took to get these jobs done.

1. Mr Doble's email of 5 November 2018 was part of an email chain that began with an email from Mr Chaffey to Mr Doble sent on 1 November 2018 in which Mr Chaffey had stated that the price for the Cataby General Services business was $930,000.
2. When he forwarded Mr Doble's 5 November 2018 email to Mr McGregor on 25 April 2019 Mr Chaffey attached to it the summary of Chafco's profit and loss figures for the years 30 June 2014 to 30 June 2018 that he had provided to Mr Doble in November 2018. In the version of the email forwarded to Mr McGregor the first sentence in the paragraph quoted above was highlighted green.
3. Mr Chaffey's evidence was to the effect that he sent the email of 25 April 2019 to Mr McGregor because he knew that Mr McGregor wanted someone to supervise the business and he wanted him to see Mr Doble's email and make sure that he was happy with the people running the business.[69] The effect of Mr Chaffey's evidence was that he had highlighted the first sentence of the extracted passage to make sure that Mr McGregor knew that 'Mick wasn't happy with - he was a bit grumpy about running the business'.[70] Mr Chaffey denied that he sent the email to persuade Mr McGregor to pay the goodwill component of $500,000 of the purchase price and for the reasons I have given above I accept Mr Chaffey's evidence in this respect.
4. Mr McGregor could not remember why Mr Chaffey had forwarded him the email exchange with Mr Doble from November 2019. He thought that Mr Chaffey had sent it to be 'clear and upfront with [him] on the sale'.[71]
5. Mr McGregor was cross-examined about whether, after the email of 25 April 2019 was sent to him, he was told by Mr Chaffey that there was a possibility that Mr Doble might not continue as an employee if the business was sold to someone other than Mr Doble. The general effect of Mr McGregor's evidence was that he had no recollection of any such discussion and he did not believe there was such a discussion. Mr Chaffey, however, said that he did discuss with Mr McGregor the possibility that Mr Doble would not stay on and run the business and he had told Mr McGregor that if Mr Doble left, he would run the business until Mr McGregor found someone else.[72] Mr McGregor denied that Mr Chaffey had said to him that if Mr Doble resigned, he, Mr Chaffey, would step in and take over Mr Doble's job. Mr McGregor said that he would not have wanted that to happen. It is unnecessary to resolve this conflict in the evidence.

1. An agreement was prepared recording the terms of the sale by Chafco to the plaintiff. The agreement was prepared by lawyers instructed by Mr McGregor, Mount Barker Legal. The agreement included provisions to the effect that Mr Chaffey would continue to serve as a director after completion and would be available to be consulted about the business.[75] Mr McGregor was unable to recall who proposed those provisions be included in the agreement. Ultimately it is a matter of little consequence but I find it is likely that the proposal that Mr Chaffey have some ongoing involvement with the business came from Mr McGregor.
2. Mr McGregor denied that he had caused clauses to be included in the agreement that required Mr Chaffey to have continuing involvement in the business because he was concerned about the possibility that Mr Doble might leave shortly after the agreement. Mr McGregor explained that he thought there was no point in including a condition of the agreement that Mr Doble stay on with the plaintiff after the sale. Mr McGregor explained that if Mr Doble was not happy in the job then he should leave. I accept Mr McGregor's evidence.[76]
3. The agreement provided for vendor finance. The whole of the purchase price was to be paid by monthly instalments of $18,500 per month.[77] Parenthetically I record that Mr Chaffey agreed with the proposition that because he was still receiving payment for the business he had a financial interest in the outcome of the litigation.[78]
4. The agreement for the sale and purchase of Cataby General Services was not dated.[79] Neither Mr McGregor nor Mr Chaffey had a reliable recollection of when it was executed. Against that background all that can be found is that the parties entered the agreement sometime between April and mid to late June 2019.

1. In mid-June 2019 Mr Chaffey told Mr Doble about Mr McGregor's interest in Cataby General Services. He did so when he and Mr Doble were sitting in a vehicle in the driveway to Mr Chaffey's house having a conversation about problems that arisen with the invoicing of work to Tronox. Mr Chaffey's evidence was that he told Mr Doble that 'I've sold the business and that the new bloke would like to meet you' and he asked Mr Doble whether he could organise a meeting. Mr Chaffey said that Mr Doble said 'well, I'm not sure what I will be doing'.[80]
2. Mr Doble's evidence about that conversation was that Mr Chaffey said he may have found a 'prospective buyer' and asked if he would like to meet him.[81] Mr Doble said that he told Mr Chaffey he would not guarantee that he would stay and work for another owner. Mr Doble said that he told Mr Chaffey that 'it was not what I came down here for after our agreement with taking over the business, that was still what I had come down for'.[82] In cross-examination Mr Doble said that he told Mr Chaffey that he 'still intended to start [his] own business' but he accepted that this was different from his reference in evidence‑in‑chief to taking over Mr Chaffey's business.[83]
3. Mr Doble did not plead that he had told Mr Chaffey in mid‑June 2019 that he would not guarantee that he would stay and work with another owner and that he intended to start his own business. That is a surprising omission from the defence given the reliance placed by Mr Doble on his version of the grader conversation in December 2018 and that by mid‑June 2019 Mr Chaffey was a director of the plaintiff.
4. While I think it is possible that Mr Doble told Mr Chaffey that he would not guarantee that he would stay and work for another owner, I am not satisfied that he told Mr Chaffey that he intended to start his own business. This is a gloss that Mr Doble has placed on his conversation with Mr Chaffey. By that observation I do not mean that Mr Doble was knowingly giving untruthful evidence. Rather by the time of the trial he had convinced himself that his version of the conversation was correct.
5. Mr McGregor's evidence was to the effect that Mr Doble's continued involvement was 'very important' because of the role played by Mr Doble in hiring staff, maintaining the existing staff, receiving purchase orders, seeking out work, and getting paid for work. I accept Mr McGregor's evidence that he regarded Mr Doble's continued involvement in the business as very important. In this respect Mr McGregor's evidence is consistent with Mr Chaffey's evidence that 'the new bloke', Mr McGregor, wanted to meet Mr Doble. Although Mr McGregor referred to Mr Doble's role as one that involved 'seeking out work', I do not accept that Mr Doble had any contractual obligation to 'seek out work' beyond providing quotes to Tronox. Indeed the plaintiff did not plead that Mr Doble had any such responsibilities.

Ian said to Mick he wanted him to run the business as it is and carry on and Mick's comments is - Mick's comment was, 'Yes, but I'm not sure what I will be doing.'

1. Mr Chaffey said he was sure that at the meeting Mr Doble did not say that he wanted to establish a competitor business. Mr Chaffey said that Mr Doble had never expressed any intent to commence a 'competitor business'.[91]
2. Mr Doble's evidence was as follows:[92]

Did Mr McGregor ask you anything at that meeting?---He asked me if I was willing to stay and work for him. I told him that it wasn't what I came down for. I said that I was happy to talk to him and see what he offered, but I wouldn't guarantee that I would stay and work for him.

Did you tell him what you had come down to do?---I told him I had come down to own a business.

Did he ask you that once or more than once?---More than once.

And was your response any different on either occasion?---No. The second time I told him, look, you know, I'm happy to talk to him, I just wasn't going to guarantee I would stay and work for him.

And did he react to what you said?---He looked surprised.

Did he ask you anything?---He - look, somewhere along the line he asked me why not, but - yes. And that was because it wasn't what I came down for.

1. I infer that Mr Doble used the expressions 'come down' and 'came down' to refer to the fact that his home was in Geraldton and the Tronox mine site is situated south of Geraldton.
2. In a subsequent passage of his evidence-in-chief Mr Doble said that following the kitchen table meeting he told his work colleagues Mr Sawyer, Mr Wood and Mr Martin about his conversation with Mr McGregor and Mr Chaffey. His evidence was as follows:[93]

Now, after that meeting at the McGregor's, did you later that day have any discussions with other employees of Cataby General Services?---Yes. I talked to all of the guys.

All right. And what took place in those discussions?---I basically told them that, you know - - -

Well, who did you speak to?---I spoke to Jeff Sawyer, Greg Wood, and Phil Martin.

Okay. Together or individually?---Separately at that stage. They were - - -

Separately?--- - - - all off on different jobs.

Okay. And do you recall the effect of what you said to each of them?---Basically, it was that, you know, there was no chance of me buying the business. It had all fallen over. Iain McGregor was the new owner and taking it over on 1 July, and that I told them that I wouldn't guarantee I would stay and work for them.

Did you tell them what you might do instead?---I told them that I was continuing looking at starting my own business up now.

...

Did Phil ask you anything about the response of David Chaffey and Iain McGregor when you told them you wouldn't guarantee you would continue working for them?---Yes, he did. He just asked something along the lines of that.

Did you reply?---I - I did. I replied that they seemed surprised.

1. Mr Wood's evidence of what Mr Doble told him that after the kitchen table meeting was as follows:[94]

If my memory recalls, I think Mick said to me he actually mentioned that he couldn't be positive of how long he would stay around.

1. Mr Doble did not plead that he told Mr McGregor that he had said that he intended to start up his own business on the Tronox site at the kitchen table meeting. In the paragraphs of his witness outline that dealt with the kitchen table meeting Mr Doble did not record either that he said he intended to start his own business on the Tronox site or he had 'come down' to own a business. When cross-examined about these discrepancies (with leave in respect of the witness outline) Mr Doble maintained that his evidence to the court was correct.[95]
2. I find that Mr Doble did not say to Mr McGregor that he would not guarantee that he would continue to work for the business when Mr McGregor bought it because he had 'come down' to own a business. Further, I find that Mr Doble did not say that he intended to start his own business on the Tronox site. I prefer the evidence of Mr McGregor and Mr Chaffey of what was said at the kitchen table meeting. Had Mr Doble told Mr McGregor and Mr Chaffey that he was intending to start his own business on the Tronox site it is not only likely that this would have been remembered by them but that Mr McGregor would not have entrusted the ongoing supervision of the work at the Tronox site to Mr Doble. I think it is also unlikely that Mr McGregor would have said that Mr Doble should go ahead with the holiday that he had booked.
3. Settlement of the sale and purchase of the business took place on 1 July 2019. The name of the business was changed to Cataby Services. For a period after settlement Chafco continued to invoice Iluka under the business name Cataby General Services for work done on the Iluka site. Mr Chaffey's explanation of why this occurred was to the effect that it took some time for the plaintiff to be registered as a supplier of Iluka.[96] I accept this explanation.
4. It was a term of the agreement that the plaintiff was obliged to offer all the employees of Cataby General Services an offer of employment. There is no evidence of any formal offer of employment was made to Mr Doble and no written contract of employment was prepared.
5. In the period following settlement of the purchase three meetings occurred that were the subject of evidence. A meeting between Mr McGregor, Mr Chaffey and Mr Mike Hardingham of Tronox; a meeting between Mr McGregor, Mr Doble and the other Cataby Services employees working on the Tronox site; and a further meeting between Mr McGregor and Mr Doble at Mr McGregor's farm. I will deal with the meetings in that order because it is the order in which I find the meetings occurred.

1. Mr Hardingham was Tronox's contracts manager on site. Mr McGregor and Mr Chaffey met with him on site. Mr Doble was not invited to attend the meeting. Mr Chaffey's evidence was to the effect that the intention behind meeting Mr Hardingham was to let the Tronox contracts department know that Mr Chaffey had sold the business and to introduce Mr McGregor as the buyer. It was suggested to each of Mr McGregor and Mr Chaffey in cross-examination that Mr Doble was not invited to the meeting because Mr McGregor and Mr Chaffey knew that Mr Doble was intending to start up his own business on the site and they did not want Mr Doble to hear about Tronox's plans.[97] Both Mr McGregor and Mr Chaffey denied that was the reason why Mr Doble was not invited to the meeting. I accept the evidence given by Mr McGregor and Mr Chaffey about the reason why they met Mr Hardingham. Their evidence in this respect was plausible and there was no reason for Mr Doble to be present at a meeting the primary purpose was to introduce Mr McGregor to Mr Hardingham.
2. On 27 June 2019 Mr Hardingham had sent an email to Mr Doble asking him for a copy of Cataby General Services' rate card.[98] Mr Doble sent Mr Hardingham the schedule of rates under cover of an email on 1 July 2019 and stated, '[p]lease keep in mind that with the change of ownership these may be updated'. I infer from Mr Doble's reference to the change of ownership that Mr Hardingham knew about the sale and purchase of Cataby General Services and that the meeting with Mr McGregor and Mr Chaffey took place around the time these emails were exchanged.

1. Mr McGregor visited the Tronox site shortly after 1 July 2019 to meet the 'crew on the site'.[99] Mr Doble drove Mr McGregor around the site and introduced the other employees to him,[100] and a meeting was held in the crib room.[101] In his evidence-in-chief about the meeting Mr Wood said that at the meeting Mr Doble said he could not be certain 'how long he would be hanging around' and 'he still had intentions to start his own business'.[102] Leave was given for Mr Wood to be cross‑examined on the witness outline that had been prepared on his behalf and which referred to the crib room meeting and recorded Mr Wood's recollection that Mr Doble had said that 'he wasn't sure how long he would stay working for Cataby Services' but did not make any reference to Mr Doble having said that he intended to start his own business.[103] I am not persuaded that Mr Doble said anything about starting his own business at the meeting in the crib room. Mr Wood's evidence was to the effect that Mr Doble often spoke to him and the other employees about his intention to start his own business and I think that he had conflated his general recollection of these conversations with his recollection of what was said in the crib room meeting. In reaching this conclusion I attach some weight to the inconsistency between Mr Wood's witness outline and his evidence‑in‑chief. Further, had Mr Doble said anything to the effect that he was intending to start his own business this would have caused Mr McGregor to ask Mr Doble about his intentions.
2. After meeting the employees Mr McGregor and Mr Doble spoke to each other on their own. Among the matters discussed between them were which suppliers Mr Doble used and what accounts with suppliers needed to be set up.
3. Mr Doble's evidence about this conversation included the following:[104]

I asked Iain if Chaffey had told him that I was starting up my own business. He told me that he didn't know that. I said, 'Well, that's exactly what I'm going to do,' and his reply was, 'Okay.'

So when you asked him that - what he had been told, that you were starting up your own business, did you mention what that business was going to be?---I said that I was going to start up a business on site.

So when he said to you that he didn't know that, how did you respond?

---I told him that that's exactly what I was going to do.

And did he respond to you when - - - ?---He said - - -

- - - you said that?---He said, 'Okay.'

1. Mr McGregor denied that a conversation along the lines recounted by Mr Doble took place. Mr McGregor's evidence was to the effect if he had been told by Mr Doble that he was going to start up a business on site '[Mr Doble] wouldn't have had a job'.[105] I do not accept Mr Doble's evidence of this conversation. It is highly unlikely that Mr McGregor would have reacted with such a lack of concern to a disclosure that Mr Doble was going to leave Cataby Services and start up his own business on the Tronox site. I accept Mr McGregor's evidence that if Mr Doble had told him that he intended to start up a business on site, Mr Doble would have been out of a job.
2. Mr Doble sought to rebut any suggestion that his evidence that he had told Mr McGregor on this visit to the Tronox site that he intended to start up his own business on site was not fabricated after the dispute had arisen by adducing evidence from Mr Wood about a conversation he said he had with Mr Doble. Mr Wood said that on the day on which Mr McGregor visited the site, Mr Doble told him that he, Mr Doble, had told Mr McGregor that he intended to start his own business and that Mr McGregor had responded 'well, okay'.[106] Mr Doble's counsel made it clear that the statement attributed by Mr Wood to Mr Doble was not relied on for the truth of its contents but simply for the fact it was made.[107]
3. Without suggesting that Mr Wood was giving evidence which he knew to be untrue, given Mr Wood's evidence that Mr Doble's intentions to start his own business were a regular subject of discussion between Mr Doble and the other employees, I have significant reservations about the reliability of Mr Wood's evidence of what Mr Doble told him and when this occurred. Further, when weighed against the manifest improbability that Mr McGregor would simply have said 'well, okay' if told by Mr Doble that he intended to start up his own business on site Mr Wood's evidence does not persuade me to accept Mr Doble's version of his conversation with Mr McGregor.
4. There is a further reason why I do not accept Mr Doble's evidence that he told Mr McGregor that he 'was starting up [his] own business' on this occasion and that is because there is no evidence that as at that date Mr Doble had taken any steps towards starting up his own business. In my view it is unlikely that Mr Doble would have disclosed any plans he had to start up his own business before he had taken any steps to do so, especially when Mr Doble was going on a six week overseas holiday shortly. It would have been inherently risky for Mr Doble to disclose his plans to Mr McGregor until he was confident that he could bring those plans to fruition. There was no evidence that in July 2019 Mr Doble had firm grounds for confidence that he would be able to establish his own business. He had not taken any of the preparatory steps that he took in the period between October 2019 and February 2020.

1. Mr Doble gave evidence that after the change of ownership he called in at Mr McGregor's property when he was returning from a trip to Morawa having picked up some fencing equipment. Mr Doble said that Mr McGregor drove him around his property and in the course of their conversation Mr Doble asked Mr McGregor 'what [his] conditions would be' to which Mr McGregor responded by saying nothing had changed and that his salary was $130,000.[108] Mr Doble said that he told Mr McGregor that he had been paid $175,000 the previous year and that Mr McGregor then agreed to pay him a bonus of $3,000 per quarter.[109] Mr McGregor had no recollection of that conversation but did recall that there had been a discussion with Mr Doble about a bonus.[110]
2. I find that Mr Doble and Mr McGregor had a conversation about Mr Doble's pay as described by Mr Doble. I find that this conversation took place after Mr McGregor's visit to the Tronox site at which he had met Mr Doble and the other employees. That Mr Doble raised the issue of his conditions with Mr McGregor after Mr Doble claims that he had told Mr McGregor of his intention to start up his own business on site and, that Mr McGregor agreed to pay Mr Doble a bonus, points to the inherent improbability of Mr Doble's account that he had, in fact, told Mr McGregor that he intended to start up his own business.

Roles of Mr Chaffey and Mr Doble in Cataby Services

1. Mr McGregor said that after the change in ownership Mr Doble reported to him in relation to everything concerning the Tronox site and to Mr Chaffey in relation to 'some things' on the Iluka site.[111] Mr McGregor said it was not entirely correct to describe him (that is Mr McGregor) as the manager of Cataby Services because he was not directly involved in management because that responsibility was that of Mr Doble.[112] He accepted, however, that Mr Doble was referred to in the statement of claim as the 'site supervisor'.[113]
2. Mr Chaffey described his role in Cataby Services as follows:[114]

I continued to liaise with Iluka and - to try and get the business established there because it was still very early days and there was a lot of Iluka people all - everyone was new. So you really had to go along and sell everything and try and, yes, get the business established there even though we had done all the project work or done work there on projects.

And how long did your liaison role with Iluka continue?---Well, it was maybe, you know, probably six months that it - a bit longer. So, yes, I probably went for year. Yes, I'm still talking to them anyway. So - - -

Did you have any involvement on the Tronox site after 1 July 2019?---I had none.

1. I accept Mr Chaffey's description of his role in Cataby Services. I find that Mr Chaffey had primary responsibility for the relationship with Iluka.
2. Save for some relatively minor organisational changes I find that Mr Doble performed the same role with Cataby Services as he had performed with Cataby General Services and that Cataby Services undertook the same scope of work for Tronox as Cataby General Services had done. Mr Doble continued to provide quotes to Tronox and Iluka. Mr Doble worked with Mr Chaffey in relation to Iluka and he provided quotes to Iluka. He resumed responsibility for preparing invoices. He sent copies of the invoices to Mr McGregor's secretary, Ms Whitney Perret, who together with Mrs McGregor, kept the books of Cataby Services. He also completed electronic time sheets recording the hours worked by each employee and sent the time sheets to Ms Perrett and Mrs McGregor so that the employees could be paid. This was a procedure that had not been necessary when Chafco owned the business because, the employees had been paid a fixed wage rather than wages based on hourly rates and the number of hours worked.[115]
3. Mr McGregor attended the Tronox site once or twice after the change in ownership. Generally, Mr McGregor and Mr Doble communicated by telephone and by text message. From time‑to‑time Mr Doble consulted Mr McGregor in relation to the pricing of work and materials and about the availability of machinery but generally Mr Doble managed the work undertaken by Cataby Services for Tronox in the manner he had done for Cataby General Services. Mr McGregor's evidence was that to the effect that the standard rates covered between 85 to 90% of the work.[116]
4. Some of the equipment on the Tronox site was in poor condition and Mr McGregor and Mr Doble discussed replacing certain items of machinery. Some new machinery was purchased. This new machinery included a loader, a telehandler and some light vehicles.[117]
5. Arrangements were made for a Cataby Services credit card with a credit limit of $5,000 to be issued to Mr Doble but the card was not in fact issued because Mr Doble did not complete the necessary paperwork.[118] Mr Doble had authority to buy materials or otherwise incur expenditure with suppliers with whom Cataby Services held accounts.

1. In late October 2019 Mr Doble had discussions with his accountant, Mr Kim Hunter, about setting up a business.[120] Mr Doble also spoke with Ms Danniele Sweetman of the National Australia Bank about the possibility of obtaining a business loan. In an email sent to Ms Sweetman on 1 November 2019 Mr Doble wrote:[121]

I have spoken to the Tronox contracts manager and they are happy to set us up as a supplier and he has given me all the information I will need to supply to them.

...

We have also spoken to our accountant and he is in the process of setting up our business name etc.

1. The reference in that email to the 'Tronox contracts manager' was a reference to Mr Hardingham. Mr Doble had asked Mr Hardingham whether it would be possible for a business he proposed establishing to supply ancillary services on the Tronox site and Mr Hardingham had said 'yes'.[122]
2. On 2 November 2019 Ms Sweetman sent Mr Doble an email setting out the information the NAB required for the purposes of considering any application for finance.[123] Among other matters the NAB required copies of contracts with major customers or suppliers. Mr Doble could not provide contracts with major customers but he could provide the NAB with a letter from Tronox saying that he would be the new supplier of services to Tronox.[124]
3. On 4 November 2019 Mr Doble received an email at his work email address from Ms Faye Lamb, of Tronox about a Tronox Online Induction program. Mr Doble forwarded the email to his personal email address. Although the email was sent to Mr Doble by Ms Lamb it was in fact a generic email apparently authored by Ms Amanda Fletcher, Tronox's Learning & Development Coordinator'. It was addressed 'To whom it may concern' and set out in tabular form the training requirements for each of Tronox's sites in Western Australia and contained instructions as to how to access the training modules completion of which was required for access to each site. It was clear from the opening paragraph of the email (and its contents generally) that all employees and contractors were required to complete the induction process and that it was a pro-forma email sent to all prospective employees or contractors. The opening paragraph read:[125]

On behalf of Tronox, I welcome you as a new employee / contractor of Tronox Management.

1. Although Mr Doble's evidence was initially to the effect that he could not understand why Ms Lamb had sent him this email,[126] he subsequently said that the induction materials had been sent to him to enable his son Riley to complete the induction process so that Riley could work for Cataby Services on the Tronox site.[127] He explained that 'induction' was a process undertaken by individuals to be able to work on the site and obtain a 'swipe card'.[128] He distinguished the induction process from the process of a business registering to provide services to Tronox.[129] Mr Doble's explanation of the reason he received the induction materials was plausible and I am not satisfied that he received the email from Ms Lamb as a consequence of his inquiries about becoming a Tronox supplier or that it was one of the steps taken by him to set up Kirahnley's business. Not only was Mr Doble's explanation plausible but by 4 November 2019, Mr Doble had not incorporated Kirahnley, he had only made initial inquiries about finance, he was a long way from being in a position to need to make arrangements for anyone to complete onsite other than as an employee of Cataby Services. In any event, it is not alleged that Mr Doble did anything in relation to the email in November 2019 that constituted a breach of any duty owed by him. An allegation of breach is made in respect of his sending the email to himself on 15 March 2020.
2. At the beginning of November 2019 Mr Doble spoke to Mr Todd Johnson of VMS and asked him whether he would be interested in selling the VMS contract to him. Mr Doble's evidence‑in‑chief about how he came to know Mr Johnson was as follows:[130]

From working with him on the Tronox site. I had a lot of dealings with Todd in my role as a mining contract supervisor at Tronox. We dealt quite regularly.

1. Mr Johnson said that he was not interested but that he would think about it. In his evidence Mr Johnson explained that he did not want to do anything that would damage VMS Contractors' reputation with Tronox because he wanted to be in a position to explore the opportunity of obtaining work from Tronox on another of its mine sites in the south‑west of Western Australia. For that reason, it was important to Mr Johnson that a purchaser of the VMS contract was someone who was trusted by Tronox. He considered Mr Doble was a suitable purchaser because, as he put it:[131]

[Mr Doble's] probably one of the few people that knew inside what we do just because he had been our boss for a long time, I guess, from the mining side of what we do.

1. Mr Johnson's evidence was that when VMS started work on the site he understood Mr Doble to be:[132]

[A] high ranking person on the site and he knew what was going on all over the site at all times. I don't think he was the mine manager but he kind of knew what was going on, what everybody was doing.

...

That was when he was working for Tronox or Tiwest.

1. Mr Johnson contacted Mr Doble three days after Mr Doble's telephone call and gave Mr Doble a price at which he was willing to sell the contract. He said that the price was based on the length of the contract and explained that the contract had recently been renewed for another three years.[133]
2. Mr Johnson telephoned Mr Hardingham at Tronox and asked him whether 'hypothetically' Tronox would have any difficulty if VMS was to transfer its contract with Tronox to Mr Doble. Mr Hardingham said that 'hypothetically' it would be 'okay' for VMS Contractors to sell its contract to Mr Doble.[134]
3. Mr Johnson's evidence was to the effect that he did not take any steps to investigate the market for the potential sale of VMS Contractors' contract with Tronox.[135] He did not know Mr McGregor and he had met Mr Chaffey only on a few occasions. His evidence was to the effect that if he had been approached to sell the VMS contract to Mr McGregor or Mr Chaffey he would have proceeded 'with caution' because of his concern about preserving his business's reputation with Tronox.[136]
4. Mr Johnson said that he did not regard Cataby General Services as a competitor of VMS Contractors. Although VMS Contractors main work was rehabilitation work as described earlier in these reasons, VMS had been asked to do 'extras' but it had not taken on 'extras' in 'the last couple of years' because it was too busy and there was a shortage of people to do the work.[137] The effect of Mr Johnson's evidence was that the 'extras' were any jobs, ancillary to mining itself, which Tronox wanted undertaken and which VMS had the capacity to undertake.[138]
5. On 8 November 2019 Kirahnley was registered. Mr Doble and his then wife, Ms Kim Doble, were appointed directors and one share was issued to each of them. Ms Doble was appointed the company secretary.
6. In an email sent to Ms Jo Gardiner of the NAB on 8 November 2019 Mr Doble discussed his plans to acquire the VMS contract. He stated:[139]

I have spoken to Danniele about a potential small business loan. Originally we were looking at starting a small mining contract business doing the work I am currently doing for another company.

...

I have now been offered a small mine sit rehabilitation company that has been operating onsite for over 11 years and has just renewed a two year contract. The offer is all plant and equipment including offices etc for $350,000. The mine is happy for us to continue with the current contract with the intention to continue beyond the current contract.

I am still looking at purchasing additional equipment to fulfill the works I had spoken to Danniele about, however I will not be needing the full amount for that equipment.

Is it possible to borrow $350,000 for the business and $300,000 for the purchase of the additional equipment?

...

What I am asking is what guarantees do I need? I am adjusting the business plan I have been working on and all the other forms I have been sent.

Is it possible to borrow $350,000 for the business and $300,000 for the purchase of the additional equipment? How would the loan be set up, would it be two loans or one loan.

Sorry to bombard you with questions, the timing isn't great with Danniele and my accountant both being away.

Is it possible to give you a call sometime or if you can call me on the number below.

1. Mr Doble also made inquiries with the Bendigo Bank about the possibility of obtaining finance.[140] For this purpose he prepared a monthly cash flow forecast using a pro-forma template provided by the NAB. The template was divided into rows for 'receipts' and 'payments' and columns comprising 'cells' for each month of the financial year starting with July. The first row of the receipts section was described as follows: 'Kirahnley. Based on previouse [sic] 3 years turnover'. In the cell for each month Mr Doble had inserted a figure for turnover that he had derived from the amounts Cataby General Services and Cataby Services had invoiced Tronox.[141]
2. On 20 November 2019 Mr Doble sent an email to Ms Gardiner of the NAB attaching various documents that constituted Kirahnley's application for finance. The documents were entitled, 'Application for Business Finance', a 'Statement of Position', a 'Conceptual Rehab Plan', a 'LOM Rehab forcast', a 'start‑up‑costs-calculator', a 'CGS turn over' spreadsheet and a 'Business Plan'. In the email Mr Doble wrote:[142]

The start up cost calculator I can not get to work as we really only have 1 customer at the moment (Tronox). I have put in the expected turnover etc, however it doesn't look right to me.

...

I have also attached the turnover for the company I am working for with the old and new owners.

1. The 'start up costs calculator' to which Mr Doble referred in his email was an excel spreadsheet template with various sections that required completion by an applicant for finance.[143] It was divided into sections: an introductory section, a capital costs section, a monthly costs section, a revenue calculator and a summary section. The summary section consisted of two parts entitled 'Concept' and 'Description'. Mr Doble completed these parts as follows:

Concept

Purchase existing business and equipment to fullfill curent work

Description

Purchase of existing business with a 2 year contract as well as additional equipment to carryout work I am currently doing with another company. With contracted and expected workload the business stands to have over $1,000,000.00 turn over with in the first 2 years. There will be additional scope to increase further with expected planned work.

1. The 'Business Plan' attachment to the email of 20 November 2019 consisted of a NAB online template that was completed by Mr Doble.[144] The online template was made up of various sections with pre-printed questions designed to elicit relevant information.[145] One section was entitled 'Business summary' and required certain information of a formal nature and a description of the products and services that were to be offered by the business and its target market. Mr Doble completed those sections as follows:[146]

Products and services offered:

Wet hire of earthmoving and construction equipment. Mine site rehabilitation, mine site maintenance services and labor hire.

Target market:

Mineral sands mining and construction projects with in the midwest region.

1. The next section of the Business Plan template required more detail of the business plan under various subject headings: 'Background', 'SWOT analysis', 'Market overview', 'Business structure', 'Staff', and 'Operational factors'. Mr Doble completed those sections as follows:

Background

I have worked in this industry for over 32 years with the majority being within the mineral sands and construction sector. I started working on the Tronox site, formally Tiwest, in 1999 as the site supervisor for an earthmoving contract company. After 2 years I was offered a contract supervisory position with Tiwest looking after the day to day runnings of their mining contractors. After this contract I received an offer to join the Tiwest team as the Mining contracts supervisor, a roll I held for 12 years. I have currently been running a small mine services company on the Tronox and Iluka site's for the last 3 and a half years. In this time I have taken the business from 1 full time and 1 part time employees to 4 full time and 1 permanent casual employees with the scope for further expansion over the next 24 months as projects come to fruition.

I am in a great position to be able to continue to grow this business with my vast experience within the mineral sands mining and construction industries. I have demonstrated to the management within Tronox that I am committed to providing a value adding service and that we can provide a wide range of services that can be completed safely, in a timely manner and to the standard our clients expect.

Over the past 3 and a half years Tronox has invested in my development by way of on site and external training to ensure we are both equipped to be able work towards a common goal.

SWOT analysis

Strengths

Industry knowledge

Site knowledge with safety, expectations and work criteria

Range of experience with in mining and construction

Ability to work as part of a team and encourage others to strive to succeed

Willingness to adapt to change in a dynamic work environment.

My rapport with all Tronox, Iluka and other site contractors.

Having a great team of employees that are happy in their roles and are willing to except any challenge put to them.

Weaknesses

Lack of skilled personnel with in the local area. The need to train younger people will take time however will be beneficial.

Opportunities

To continue to expand into additional roles on the Tronox site.

They choose suppliers based on safety, quality, cost and availability. We have an excellent safety record and have demonstrated we can carry out any given task to a high standard within budget. With a majority of local work force this gives our clients the flexibility of having resources on call 24/7

Competitors

The main competitor in the market I am targeting is the company I currently work for. I am currently running every aspect of the business from quoting, organizing, purchasing, ensuring tasks are completed to expected KPI's through to invoicing. The owner of the current company does not at this stage have a relationship with the key stakeholders on site and has no experience within the mineral sands mining industry.

Their strength is that they are a larger company with extensive earthmoving equipment based in Kalgoorlie.

Their weaknesses are that they bought into this business recently and have not been able to follow through with the commitments made to stakeholders and employees. All current employees are willing to transfer to our new venture.

Business structure

Ownership

• Who will be the owner/s of your business and what organisational structure will you have?

The owners of the business will be Michael and Kim Doble

The manager will be Michael Doble

Staff

• Will you be recruiting staff for your business?

All the staff currently working with myself are willing to transfer to the new business. I have also approached local people that are willing to take up trainee positions as the company grows

Utilizing existing staff on site working under me as well as attracting experienced staff members and trainees from the local area by offering them a safe, rewarding and enjoyable work environment

...

Operational factors

Business location and premises

The business will be based on the Tronox mine site 12 kilometers north of Cataby. VMS currently have an administration building on site and storage and maintenance areas. Tronox's intention is to have us set up in a larger area they have allocated and are in the process of allocating funds to build a new facility to house the rehab equipment (VMS).

There is currently an administration building and storage with the business I am looking to purchase, I also have aditional transportable buildings I intend to utilize as needed. We have the availability of on site infrastructure like workshops to use as needed.

Equipment

• What equipment will you need for your business?

The established business has all equipment needed to carryout the rehabilitation side of the business plus some equipment we intend to use with in the side of the business I currently manage. I will need to purchase an 18 ton loader, 3.5 ton excavator Truck and flat top trailer 2 light vehicles and a crane truck.

The equipment will be used for wet hire to carry out day works, shut downs and projects as set out by the clients

1. The 'CGS turn over' was a further spreadsheet completed by Mr Doble and attached to his email to the NAB of 20 November 2019.[147] It contained three workbooks one for each of the 2017/18, 2018/19 and 2019/20 financial years. Mr Doble had completed this spreadsheet by recording the monthly turnover (exclusive of GST) for each Cataby General Services and Cataby Services customer for each of the 2017/18 and 2018/19 financial years and for the first four months of the 2019/20 financial year using information derived from the invoices rendered by the two businesses.[148]
2. The statement of position document which was attached to Mr Doble's email of 20 November 2019 to the NAB set out the assets and liabilities of both Mr Doble and Mrs Kim Doble.[149] Mrs Doble was responsible for providing Mr Doble with the figures required to complete this statement of position.[150]
3. Finally, in relation to the application for finance I infer that the document bearing the description 'LOM Rehab forcast' was a schedule disclosing Tronox's planned schedule for rehabilitation works over the length of the life of the mine. There was no evidence as to how Mr Doble obtained this document but the plaintiff did not allege that the document was obtained from it.
4. On 25 November 2019 Mr Doble sent an email to Ms Gardiner of the NAB[151] attaching a copy of the VMS Contract and a copy of a letter dated 21 May 2019 from Tronox to Mr Johnson of VMS Contractors extending the 'completion date' of the VMS contract to 31 August 2022.[152]
5. In November and December 2019 Mr Doble purchased a prime mover and a truck for use in the business.[153] In January 2020 Mr Doble obtained public liability insurance cover for a business described in the policy as undertaking 'site preparation services/ earthmoving/ excavation / land clearing & levelling/ trench digging'.[154] In cross‑examination Mr Doble said that these were the insurance brokers' terms for describing the business but agreed that they described the business of Cataby Services.[155]

I am looking at opening a business account today so I can finish the registration on the Tronox system.

I have a couple of questions, the first is what is the best account to open and also what is the best way to open it?

I am guessing I will need to bring in the registration certificate for the business and Kim and I will need to come in to the bank. Do we need to book an appointment and do we just ring the bank to do this?

1. On 4 February 2020 Mr Doble sent an email to Ms Sweetman at the NAB expressing frustration at the delays in processing the application for finance. In that email Mr Doble said:[159]

Thank you again for getting this application moving. I am just so disappointed and frustrated that we are just now starting to get to this stage, from the emails that I received from Jo I was under the impression that all the valuations had been done and it was just a case of making the changes and submitting it for approval. We are now at 11 weeks and still no indication when or even if it will be approved.

The worst thing for me is that I am sitting here quoting on work through to the end of March that we (if the loan gets approved) will never see and March is one of the biggest months for turn over we have. I have also missed out on some equipment that was perfect for what we are doing and at great prices while the application has been stalled.

1. In early February 2020 Mr Doble asked a 'Think Water Geraldton' for a quote to provide a total of 17 water meters of different sizes and a quote dated 3 February 2020 and numbered C9036 was provided to him.[160] The total price quoted was $58,895.40. The quote was addressed simply to 'Mike' who was described as a 'cash customer'. The defence contains an admission in the following terms:

[the defendants] admit Mr Doble obtained a quote numbered C9036 for the purchase of equipment from Think Water Geraldton and say that Mr Doble did not purchase any of the equipment the subject of that quote.

1. The defence did not assert that Mr Doble obtained the quote for the purposes of the plaintiff's business yet in cross‑examination when it was put to Mr Doble that he had obtained the quote for the purpose of Kirahnley's business in anticipation of receiving work servicing water bores he denied that was so and said that the quote was obtained for Cataby Services and was 'way too high'.[161] Mr Doble did accept, however, that Kirahnley did supply and instal the same number of flow meters, which were the subject of Think Water's quote, for Tronox in April 2020 for a price of $23,639.[162] I am satisfied that Mr Doble obtained the quote from Think Water Geraldton for Kirahnley's business but I am also satisfied that the equipment was not purchased. Had Mr Doble obtained the quote for the purposes of Cataby Services I am sure that would have been stated in the defence.
2. On 12 February 2020 Ms Sweetman of the NAB sent an email to Mr Doble in which she reported to him on the progress of his application for finances and stated:[163]

I have had a chance to read over the notes from credit.

They seem to be pretty happy with the application but they want some information regarding the business you are purchasing.

They have asked for the following:

• copy of the Vendors Financials for a 2 year period
• An amended Cash Flow Forecast that is in line with the vendors financials (matching trends in sales, expenses ETC). If there is a significant variance in sales/profits, we need assumptions as to why.

1. Under cover of an email sent on 13 February 2020,[164] Mr Doble provided Ms Sweetman with a document described by him as 'Kirahnley cash flow' being a cash flow forecast in the form of an excel spreadsheet.[165] This cashflow spreadsheet was a revised version of the spreadsheet that Mr Doble provided to his accountant Mr Hunter on 12 November 2019.[166] Mr Doble did not revise the figures for 'receipts' rows but did revise some of the figures in the payment rows. The spreadsheet included two rows of receipt figures one entitled 'Kirahnley. Based on previouse years turnover' and the other entitled 'VMS Average of last 3.5 years turnover'. Each row gave monthly turnover figures for each month from July to June. These figures were the turnover figures of Cataby General Services and Cataby Services that Mr Doble had derived by averaging the value of invoices rendered to Tronox. [167] The total of the figures in the 'Kirahnley' row was $830,443 and the total in the 'VMS' row was $216,000. I interpolate that Mr Doble did not in fact provide 'a copy of the Vendors Financials for a 2 year period' for which Ms Sweetman asked.

1. It is necessary to deal with the serious credit issue raised by the plaintiff in respect of various versions of the cashflow spreadsheet produced by Mr Doble. So far in these reasons I have referred to the version of the cashflow spreadsheet attached to Mr Doble's email to Mr Hunter of 12 November 2019 [168] and the revised version of that spreadsheet provided to Ms Sweetman of the NAB on 13 February 2020.[169] The November 2019 spreadsheet was produced to the court in answer to a subpoena served on Mr Hunter. The February 2020 spreadsheet was produced to the court on 22 December 2021 in answer to a subpoena served on the NAB. In an affidavit of discovery sworn on 8 May 2022 Mr Doble discovered a further version of the cashflow forecast dated 12 October 2020,[170] (the discovered spreadsheet).
2. In the discovered spreadsheet the description of the first row of 'Receipts' was 'Kirahnley. Based on estimate' which is to be contrasted with the description of the first row of 'Receipts' in the November 2019 and February 2020 spreadsheets which is 'Kirahnley. Based on previouse [sic] 3 years turnover'. Mr Doble was cross‑examined on this difference. The cross‑examination bears significantly on Mr Doble's credit and it is sufficiently important to reproduce it in full:[171]

So this is the version that was produced by the defendants pursuant to discovery, and this is [the discovered spreadsheet]. Do you see there in the first row under receipts, Kirahnley?---Yes.

You see there it says 'based on estimate'?---Yes.

You typed that, didn't you, based on estimate?---I guess I did, yes.

Well, yes - no - when you say you guess you did because no one else was producing these documents?---No, that's right. Correct.

Yes. You changed the line from Kirahnley previous three years turnover to Kirahnley based on estimate, didn't you?---I guess so, yes.

And you changed that before you discovered this document to the plaintiff?---I would have thought that document would have been discovered earlier but ‑ ‑ ‑

When you say you would have thought that document would have been discovered, are you talking about the one that says 'based on three years' ‑ ‑ ‑?---A cashflow ‑ ‑ ‑

Sorry, three years - previous three years turnover?---A cashflow template. Look, whatever. I don't where or why I changed that.

All right. Well, what I'm putting to you is that you changed it just before you discovered this document to the plaintiff?---I must have done, yes.

Yes. And you changed it to try and hide from the plaintiff that you had used turnover figures from Cataby General Services and Cataby Services in preparing the cashflow document?---I guess so.

Yes. Well, you guess so. You did so, didn't you?---I must have done, yes.

Yes. And that was because you did not want the plaintiff to know that that first row of figures had been prepared based on Cataby General Services and Cataby Services turnover information?---I guess so, yes.

And so when you use the words 'based on estimate', you thought that that would convey that, in effect, you had just come up with these numbers based on your own experience and - within the mining services injury as to how much you thought Kirahnley could turn over for each of these months, not related to what Cataby General Services and Cataby Services had turned over?---Yes.

And you did that because you wanted the plaintiff to think that this was just a mere estimate and not a use of any information which it contended was confidential to Cataby General Services or Cataby Services?---I guess so.

1. In re-examination Mr Doble was asked whether he could offer any explanation for the differences in the description of the first row of 'receipts' in the November 2019 and February 2020 spreadsheets and the discovered spreadsheet other than the one given by him in cross‑examination. He answered:[172]

I would say they would be different drafts. Just - I don't recall changing it or why I changed it.

1. In closing submissions Mr Doble's counsel, Mr Solomon, contended that the cashflow that became the October 2020 spreadsheet was submitted to the NAB in support of Mr Doble's application for finance in November 2019 and that the reason why Mr Doble was asked to provide a further cashflow 'in line with the vendor's financials' on 12 February 2020 was because the October 2020 spreadsheet was based on estimates rather than on trading performance.[173] Mr Solomon contended that had Mr Doble's attention been drawn to the email from the NAB asking for the further cashflow 'in line with the vendor's financials' it would have been apparent to Mr Doble that the cashflow that became the February 2020 spreadsheet was a revised draft of the discovered spreadsheet and that he had changed the description of the 'Receipts' row from 'Based on estimates' to 'Based on previouse 3 years turnover' to make it clear that the figures were based on the 'vendor's financials' as requested by the NAB.
2. I do not accept Mr Solomon's explanation of how the discovered spreadsheet came into existence and, in particular, how the first row of Receipts came to be described as 'Based on estimates' for the following reasons.
3. First, there is no evidence that the discovered spreadsheet was ever provided to the NAB. Mr Doble attached to his email to Ms Gardiner of the NAB sent on 20 November 2019 the cashflow spreadsheet entitled 'CGS turnover', exhibit 197, not the discovered spreadsheet.
4. Secondly, the admissions made by Mr Doble about the creation of the discovered spreadsheet, the circumstances in which the document in that form was brought into existence and the purpose for which the document was brought into existence were unequivocal. The admissions were made not long after the start of the hearing on day six of the trial. Mr Doble was not 'browbeaten' and he did not give the impression of being confused by the questions asked of him.
5. Thirdly, had there been an innocent explanation for the production of the discovered spreadsheet, even if Mr Doble was unable to recall what that explanation was, I would have expected him to have protested his innocence rather than make the admissions he made. This is especially so because when cross‑examined on other matters Mr Doble did not readily accept general propositions put to him and was careful to express his answers in precise terms, and he was ready and able to defend his position whenever he was able to do so.

1. On 21 February 2020 the NAB offered Kirahnley two finance facilities, a 'Business Options Instalment Loan' of $350,000 (required to purchase the VMS contract) and a 'revolving leasing' facility of $300,000 (required to purchase equipment).[174] Mr Doble and Mrs Doble guaranteed repayment of the Business Options Instalment Loan and granted the NAB a registered mortgage over their family home as further security.[175] Mr Doble and Mrs Doble accepted the NAB's offer on behalf of Kirahnley on 4 March 2020.

1. Mr Doble telephoned Mr McGregor on 25 February 2020 and told him that he was resigning. Mr Doble's mobile telephone records show that the telephone conversation lasted two minutes and 33 seconds.[176] There is a conflict of evidence as to what was said in the conversation. The focus of the conflict was whether, as Mr Doble said, he told Mr McGregor that he had purchased the VMS contract and had expressed the hope that he and Mr McGregor could work together in the future. It was common ground that Mr Doble agreed to continue working for Cataby Services although whether this was until a shutdown of the mine site was completed, as Mr Doble said,[177] or until Mr McGregor found a replacement, as Mr McGregor said, was in dispute.[178]
2. I do not accept Mr Doble's account of this conversation. I think that it is unlikely that Mr McGregor would have agreed to Mr Doble continuing to work for Cataby Services if he had known that Mr Doble was going to be continuing to work on the Tronox site. Mr McGregor telephoned Mr Chaffey and told him that Mr Doble had resigned. Mr Chaffey was 'a little bit surprised' and said that he would see if he could find a replacement.[179] Subsequently on 9 March 2020 Mr Chaffey sent Mr McGregor an email with a link to draft legislation before the State Parliament in respect of the development of a mine at Dongara and wrote in the email 'Maybe Mick will go to Dongara'.[180] The inference to be drawn from this statement is that as at 9 March 2020 neither Mr Chaffey nor Mr McGregor knew of Mr Doble's plans to purchase the VMS contract or start his own business on the Tronox site. This inference reinforces my conclusion that Mr Doble did not tell Mr McGregor that he had purchased the VMS contract.
3. Mr McGregor learnt from another Cataby Services employee that Mr Doble was staying on the Tronox site and starting another business sometime after his resignation.[181]

1. Mr Chaffey resigned as director and secretary of the plaintiff on or shortly before 30 March 2020 and transferred the share he held in trust for Mr McGregor to him.[182]

1. Between 25 February and 26 March 2020 Mr Doble caused quotes to be issued by Kirahnley to Tronox as follows:

(a) On 26 February 2020 a quote for $21,490 to install parts on turbine water meters.[183]

(b) On 27 February 2020 a quote for $3,400 to inspect and tag lifting equipment.[184]

(c) On 27 February 2020 a quote for $285 to supply five sets of tyre deflators for light vehicles.[185]

(d) On 11 March 2020 a quote for $276 to wash and polish light vehicles.[186]

(e) On 18 March 2020 a quote for $5,800 to remove four bores for cleaning.[187]

(f) On 18 March 2020 a quote for $7,250 to remove five bores for cleaning.[188]

(g) On 18 March 2020 a quote for $5,800 to remove four bores for cleaning.[189]

(h) On 25 March 2020 a quote for $4,230 to undertake fencing and concreting.[190]

(i) On 26 March 2020 a quote for $480 to inspect and service four Biomax systems.[191]

1. At the beginning of March 2020 Mr Doble himself undertook the inspection and tagging of lifting equipment that was the subject of the quote issued to Tronox on 27 February 2020. It appears that a purchase order was issued on 27 March 2020 after the work had been carried out.[192] Kirahnley issued an invoice to Tronox for $3,400 (excluding GST) and was paid.[193]
2. On 28 February 2020 Tronox issued Kirahnley with a purchase order in respect of tyre deflators.[194] that were the subject of Kirahnley's quote provided on 27 February 2020.[195]
3. On 20 March 2020 Mr Doble sent an email to Ms Geraldine Ross at the NAB referring to difficulties that had been experienced in obtaining finance for a truck he wished to purchase. Mr Doble explained:[196]

The problem is I need this truck on Monday the 30th for a 3 week job I have won.

1. The quotes issued by Kirahnley on 18 March 2020 for removing and cleaning bores stated that the work was to start on Monday, 30 March 2020 and I infer from those statements as to start date and Mr Doble's explanation that he needed the truck on Monday, 30 March that the '3 week job he had won' was the job or removing and cleaning bores.
2. On 30 March 2020 Tronox issued a purchase order in response to Kirahnley's quote for fencing and concreting.[197]
3. Between 24 and 31 March 2020 Kirahnley provided labour to Tronox for 'Covid-19 cleaning'. The work was invoiced by Kirahnley and paid by Tronox.[198]

1. On 5 March 2020 VMS Contractors sent Kirahnley an invoice for the purchase of its contract with Tronox.[199]
2. On 10 March 2020 Mr Johnson of VMS Contractors sent an email to Ms Christine Lane of Tronox stating:[200]

Im sure you aware we are in the process of selling our Tronox contract ... to Mick Doble.

...

What do you need from me to change everything over to Mick so he can start invoicing Tronox the day he purchases our operations and equipment

This could happen in the next week or two if Tronox is happy and ready to move forward.

1. On 15 March 2020 Mr Doble forwarded from his Cataby Services email account to his personal email account the email he had received from Ms Lamb on 4 November 2019.[201] Mr Doble's evidence was to the effect that he forwarded this email to his personal account so that he could refresh his induction because his 'induction was due' and that refreshing his induction was a process that was distinct from registering Kirahnley as a supplier to Tronox.[202] He said that it was necessary to send the email to his home computer because his work laptop did not have a speaker, a facility required to complete the oral elements of the induction process, but his home computer had a speaker.[203] Mr Doble's explanation of why he sent the 4 November 2019 email to his home computer does not seem entirely implausible. My reservations about Mr Doble's evidence generally, however, and the fact that Mr Doble sent this email to himself after he had resigned supports a finding that it was sent for the purposes of Kirahnley's business and for the purpose of avoiding any delay that might otherwise occur in completing the induction formalities when Kirahnley formally started work on the Tronox site.
2. Under cover of an email sent on 17 March 2020 Mr Doble provided Ms Christine Lane of Tronox various policies developed by Kirahnley for occupational health and safety and similar matters.[204] In an accompanying letter Mr Doble identified Mr Sawyer as one of Kirahnley's personnel who would be on site 'at the commencement of the contract'. Mr Doble described Mr Sawyer as a 'plant operator and labor hire' and stated, 'Geoff Sawyer has indicated that he intends to resign from Cataby Services and take up the roll with KTR Services'.[205] Mr Doble was cross-examined about what he had said in his email about Mr Sawyer taking up employment with Kirahnley. Mr Doble was insistent that he had not made an offer of employment to Mr Sawyer but I found his evidence in that respect to be unconvincing because it was contradicted by what he had said in his email to Ms Lane.[206] I find that Mr Doble had made an offer of employment to Mr Sawyer while he was still employed by the plaintiff as its site supervisor. Mr Sawyer did not, however, take up employment with Kirahnley and at the time of the trial was still employed by the plaintiff.

1. The duties the plaintiff alleges were owed by Mr Doble must be considered in the context of the plaintiff's allegations about his 'responsibilities'. Reflecting the difficulties created by the absence of either a written contract of employment or clearly expressed oral contract the plaintiff has not pleaded the terms on which Mr Doble was employed by the plaintiff in the conventional way. Rather in par 7 of the statement of claim the plaintiff adopts a descriptive approach as follows:
   1. In his capacity as Site Supervisor of the plaintiff, Mr Doble:

7.1 was a senior employee of the plaintiff and the most senior person employed by the plaintiff on the Tronox Site;

7.2 was responsible for or made recommendations about the hiring and dismissal of staff of the plaintiff on the Tronox Site;

7.3 was responsible for the provision of quotes to Tronox for works to be undertaken by the plaintiff on the Tronox Site;

7.4 was responsible for invoicing Tronox for work undertaken by the plaintiff on the Tronox Site;

7.5 gained or held knowledge of confidential information of the Business as acquired by the plaintiff (by the terms of the Sale Agreement) and further gained such knowledge of the Business as operated by the plaintiff thereafter:

7.5.1 concerning the charge out rates and tendering practices of the Business; and

7.5.2 concerning the financial information of the Business.

7.6 was physically present on the Tronox Site and was the authorised representative of the plaintiff at all times on that site; and

7.7 received a salary of $158,706.04 per annum (including superannuation and quarterly bonuses) commensurate to his employment as Site Supervisor.

1. The plaintiff pleads the duties owed by Mr Doble as follows:
   1. By reason of Mr Doble's employment and the responsibility entrusted to Mr Doble, he at all material times owed to the plaintiff:

9.1 fiduciary duties of good faith and fidelity implied in equity and law;

9.1.1 to act honestly in the service of the plaintiff'

9.1.2 not to use his position to obtain a personal benefit or a benefit for another such as the second defendant, closely associated with him, [that is, the second defendant];

9.1.3 not to misuse confidential information to obtain a personal benefit or a benefit for another such as the second defendant;

9.1.4 not to promote the personal interests of himself (or another such as the second defendant) by making or pursuing a gain in circumstances in which there is a conflict, or a real or substantial possibility of a conflict between his own personal interests or those of another such as the second defendant and those of the plaintiff; and

9.1.5 not to compete with the plaintiff;

9.2 duties and obligations in terms of sections 180, 181, 182 and 183 of the Corporations Act 2001 (Cth) (the Act), with Mr Doble being at all material times:

9.2.1 an employee of the plaintiff; and

9.2.2 an 'officer' of the plaintiff within the meaning of the Act on the basis that he was a person who made or participated in making decisions that affected the whole or a substantial part of the plaintiff's said business and/or had the capacity to affect significantly the plaintiff's financial standing by reason of the matters set out in paragraph 7 above; and

9.3 pursuant to the above and in equity, a duty to preserve the confidentiality of information received concerning the Business of the plaintiff and in particular:

9.3.1 not to disclose, use or divulge the information imparted or obtained in confidence to his own advantage or that of the second defendant;

9.3.2 not to take unfair advantage of information imparted or obtained in confidence; and

9.3.3 a duty in the same terms pleaded in paragraph 9.1.3 above.

1. The critical feature of fiduciary relationships was described by Mason J (as his Honour then was) in Hospital Products Ltd v United States Surgical Corporation as follows:[218]

[T]he fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.

1. In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd[219] Gageler J described a fiduciary duty as one of absolute and disinterested loyalty owed when the person in the fiduciary position has assumed a responsibility to act in the exclusive interests of the person to whom the duty is owed. His Honour observed:[220]

That duty of loyalty is imposed in equity by means of two overlapping 'proscriptive obligations'. Each proscriptive obligation, or 'theme', is 'descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies'.

'The first', often referred to as the 'conflict rule', 'is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest.' The unconscionability which attracts equitable remedies in circumstances where the conflict rule alone is invoked lies not so much in receipt by the fiduciary of the benefit or gain (over which the fiduciary need not have control) as in retention by the fiduciary of the benefit or gain which in conscience ought to be disgorged to the principal.

'The second', often referred to as the 'profit rule', 'is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of [the] fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing [the fiduciary's] position for [the fiduciary's] personal advantage.' The unconscionability which attracts equitable remedies in such circumstances lies in pursuit by the fiduciary of self‑interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal.

Consistently with the objective of imposing each obligation, in neither case does the benefit or gain to the fiduciary need to be at the expense of the principal, though it may be. And in neither case does the fiduciary need to act dishonestly or fraudulently, or otherwise than in good faith, though again the fiduciary may do so.

1. Even though the plaintiff does not press a claim for common law damages it is helpful to note that the ordinary relationship of employer and employee is one into which the common law imports implied duties of loyalty, honesty, confidentiality and mutual trust.[221] It is also helpful to note that an employee who takes preparatory steps before cessation of his employment to set up a competing business does not breach the common law duty of loyalty unless the employee 'fraudulently undermines [the employer] by breaking the confidence reposed in the [employee]'.[222]
2. The duties implied by the common law into the employment relationship are not to be automatically equated with fiduciary obligations but, as discussed below, they bear upon the question of whether fiduciary duties are owed.
3. The distinction between the common law duty of loyalty and the absolute and disinterested loyalty owed by a person in a fiduciary position was one element of the comprehensive analysis of the circumstances in which fiduciary obligations may arise in the context of employment relationships undertaken by Elias J's in Nottingham University v Fishel,[223] a decision frequently cited in Australian jurisdictions. His Lordship contrasted relationships that can be categorised as fiduciary relationships in the 'classic sense' (trustees, company directors, liquidators) with employment relationships and observed:

[S]imply labelling the relationship as fiduciary tells us nothing about which particular fiduciary duties will arise. As Lord Browne-Wilkinson has recently observed in Henderson v. Merrett Syndicates Ltd. [I 995] 2 A.C. 145, 206A: 'The phrase "fiduciary duties" is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case.' This is particularly true in the employment context. The employment relationship is obviously not a fiduciary relationship in the classic sense. It is to be contrasted with a number of other relationships which can readily and universally be recognised as 'fiduciary relationships' because the very essence of the relationship is that one party must exercise his powers for the benefit of another.

...

By contrast, the essence of the employment relationship is not typically fiduciary at all. Its purpose is not to place the employee in a position where he is obliged to pursue his employer's interests at the expense of his own. The relationship is a contractual one and the powers imposed on the employee are conferred by the employer himself. The employee's freedom of action is regulated by the contract, the scope of his powers is determined by the terms (express or implied) of the contract, and as a consequence the employer can exercise (or at least he can place himself in a position where he has the opportunity to exercise) considerable control over the employee's decision making powers. This is not to say that fiduciary duties cannot arise out of the employment relationship itself. But they arise not as a result of the mere fact that there is an employment relationship. Rather they result from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations. Where this occurs, the scope of the fiduciary obligations both arises out of, and is circumscribed by, the contractual terms; it is circumscribed because equity cannot alter the terms of the contract validly undertaken.

...

The problem of identifying the scope of any fiduciary duties arising out of the relationship is particularly acute in the case of employees. This is because of the use of potentially ambiguous terminology in describing an employee's obligations, which use may prove a trap for the unwary. There are many cases which have recognised the existence of the employee's duty of good faith, or loyalty, or the mutual duty of trust and confidence - concepts which tend to shade into one another. As I have already indicated, Lord Millett has used precisely this language when describing the characteristic features which trigger fiduciary obligations. But he was not using the concepts in quite the same sense as they tend to be used in the employment field. Lord Millett was applying the concepts of loyalty and good faith to circumstances where a person undertakes to act solely in the interests of another.

1. Applying the principles he had stated in the passages cited above, Elias J held that Dr Fishel, the scientific director of a research and treatment unit in reproductive medicine, was not liable to account as a fiduciary to his employer, the plaintiff university, for income he had received from providing his services to clinics located outside the United Kingdom. The critical aspect of his Lordship's reasoning was follows:

In my opinion the crucial question is whether Dr. Fishel was under a specific duty to secure the work abroad for the university. It is not relevant that his fiduciary duty may have been engaged in other circumstances, such as if he had treated patients at a competing clinic. In such circumstances the nature and scope of Dr. Fishel's duties, when considered against the background of the factors relied upon by the university, may very well have been sufficient to trigger his fiduciary duty and make him accountable for any profits. The question, however, is whether it was engaged in these particular circumstances. I do not think that it was. He was under no contractual obligation to seek to obtain work abroad of this nature on behalf of the university, nor in my opinion could he have been contractually obliged to do the work abroad that he did.

1. The following points may be taken from the analysis in Nottingham University v Fishel.
2. First, while the relationship between employer and employee is often described as falling within the category of accepted fiduciary relationships,[224] the existence of an employment relationship does not of itself establish the existence of a fiduciary relationship.[225]
3. Secondly, fiduciary duties do not operate at large. In Breen v Williams,[226] Brennan CJ made the point as follows:

[I]t is necessary to identify 'the subject matter over which the fiduciary obligations extend'. It is erroneous to regard the duty owed by a fiduciary to his beneficiary as attaching to every aspect of the fiduciary's conduct, however irrelevant that conduct may be to the agency or relationship that is the source of fiduciary duty. As Fletcher Moulton LJ pointed out in In re Coomber, fiduciary relations are of many different types and where there is a fiduciary relation the court may interfere and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. (footnotes omitted)

1. In In re Coomber,[227] Fletcher Moulton LJ gave the example of an errand boy who was obliged to return change to the person for whom he was running an errand and was under a fiduciary obligation to account for the change but was otherwise not subject to fiduciary obligations.
2. Thirdly, in the employment context it is necessary to identify specific contractual obligations (the powers or discretions to adopt Mason J's words) that the employee has undertaken which have placed the employee in a situation where equity imposes fiduciary duties in addition to contractual obligations. This requires a careful consideration of the precise activity to be undertaken by the particular employee and to ask if that employee had agreed to perform that activity solely in the interests of the employer to the exclusion of his or her own interests.[228] In undertaking this exercise a court will be guided not only by the terms of any express agreement but also by the course of dealing between the parties and the nature of the business. [229] When considering the contractual provisions on which the fiduciary duties are to be imposed care must be taken to ensure that the imposition of the fiduciary duties does not alter the operation which the contract was intended to have according to its true construction.[230]
3. The necessity to identify with precision the specific contractual obligations owed by an employee which attract the imposition of fiduciary duties was reflected in the analysis of an allegation that an employee has breached fiduciary obligations by taking steps to set up a competing business undertaken by McDougall J in Manildra Laboratories v Campbell[231] McDougall J referred to the judgment of Bryson J in Weldon & Co Services Pty Ltd v Harbinson,[232] and noted that although in Weldon Bryson J had found that the defendant owed fiduciary obligations, the effect of which included that she could not divert to herself maturing business opportunities of the plaintiff, it was clear that Bryson J did not regard the mere fact that the defendant had taken steps during the currency of her employment to leave and set up business in competition with the plaintiff as of itself demonstrating a breach of her implied contractual or fiduciary obligations. McDougall J went on to observe:

The judgment demonstrates that it is necessary to pay close attention to the individual steps taken, to see whether they demonstrate a breach of obligation. If none of those steps individually involves a breach of any contractual or fiduciary obligation, then collectively they will not do so.

Of course, his Honour's decision does not support the proposition that it can never be a breach of contractual or fiduciary obligation to take steps, during the currency of employment, to set up a business that will, after the termination of employment, compete with the employer. What it does show is that if this conclusion is to be reached, it will be because some or all of the steps taken involve a breach of duty, not because, collectively, they can be described as "preparing to compete".

In this case, it is not sufficient to say that Mr Campbell breached his fiduciary or contractual obligations to Manildra simply because, during the currency of his employment, he took steps to set up a business that would, after the termination of his employment, compete with Manildra. It is necessary to look at the steps that he took to see whether any of them involved a breach of obligation.

1. Fourthly, except in relation to the activities in respect of which an employee owes fiduciary obligations the employee retains 'economic liberty'.[233]
2. Fifthly, there is no single test that may be applied to determine whether an employee owes fiduciary obligations to an employer. The inquiry is always fact specific involving questions of degree. Factors relevant to the determination of whether an employee owes fiduciary obligations are owed include the following:[234]

(a) The seniority of the employee and whether the employee has managerial responsibilities. The title given to the employee's role is not determinative. It is the nature of duties entrusted to the employee that is relevant.

(b) The scope of the activities the employee is required to undertake and whether the activity that is alleged to have given rise to a breach of a fiduciary duty falls within the scope of that activity.

(c) The latitude afforded to the employee in discharging their duties.

(d) The level of vulnerability arising from a potential misuse of power granted by the employer to the employee.

(e) Whether the employment relationship demands a standard of loyalty exceeding the duty of fidelity implied at common law.

1. In Nexygen Sydney Pty Ltd v Barakat,[235] Ward CJ in Eq (as her Honour then was) expressed the test more succinctly as follows:

[T]he test requires one to take into account the features of the particular employment relationship in question (including matters such as ascendancy, influence, vulnerability, trust, confidence or dependence) as to whether there is a reasonable expectation that a party will act in another's interest to the exclusion of his or her own or a third party's interest.

1. Sixthly, although the application of the principles to the facts in each of the authorities is instructive it is unwise to seek to generalise from one case, involving its own particular facts, to another.[236]
2. Seventhly, there is no general rule that an employee, who owes a fiduciary duty, and who takes steps to set up business in competition with the employer before terminating the employment is in breach of the conflict rule. In Balston Ltd v Headline Filters Ltd,[237] a case in which it was alleged that the defendant (a director and employee of the plaintiff) had formed an intention to set up competitive business and had taken preparatory steps to do so, Falconer J stated:[238]

In my judgment an intention by a director of a company to set up business in competition with the company after his directorship has ceased is not to be regarded as a conflicting interest within the context of the principle, having regard to the rules of public policy as to restraint of trade, nor is the taking of preliminary steps to investigate or forward that intention so long as there is no actual competitive activity, such as, for instance, competitive tendering or actual trading, while he remains a director.

1. Falconer J's statement of principle was cited with approval by Harper J in GlaxoSmithKline Australia Pty Ltd v Ritchier,[239] and by Vickery J in Hodgson v Amcor Ltd.[240]
2. The principles outlined strive to balance the principle that employees should honour their contractual obligations to their employers with the principle that individuals are entitled to use their skill, knowledge and experience to promote their own interests by competing in the market and thereby promoting the public interest.[241]
3. There are two further aspects of the plaintiff's pleading of the fiduciary duties it alleges were owed by Mr Doble that arise for comment at this stage. First, the plaintiff pleads that Mr Doble owed a fiduciary obligation 'to act honestly in the service of the plaintiff' and secondly, the plaintiff characterises the obligation of confidence as fiduciary. In the context of this case neither matter requires detailed analysis, it is sufficient to say:

(a) The weight of High Court authority is that fiduciary duties are proscriptive in nature and the authorities do not include the imposition of a duty on an employee 'to act honestly in the service of the [employer].'[242]

(b) Although the equitable obligation of confidence is sometimes referred to as a fiduciary duty, 'the better view is that the equitable duty of confidence had now sufficiently developed ... to be regarded as occupying a specific field of its own ... '.[243] I have dealt with the equitable obligation of confidence separately later in these reasons.

1. Counsel for the defendants, Mr Solomon, argued forcefully that no 'fiduciary duties of good faith and fidelity implied in law and equity', as pleaded by the plaintiff in par 9 of the statement of claim, were known to the law. The analysis undertaken in the previous section of these reasons demonstrates that this is correct. The rolled-up pleading of the duties the plaintiff alleges were owed by Mr Doble was embarrassing. That said, once the plaintiff clarified that it did not rely on a claim for common law damages or fiduciary duties arising 'in law', there could be no confusion about the plaintiff's case. The plaintiff alleges that Mr Doble was a senior employee who owed fiduciary duties to the plaintiff in addition to any contractual obligations of fidelity he may have owed though no reliance is placed on the latter.
2. Cataby Services was a small business. It operated informally. It did not have a management hierarchy that categorised employees by reference to their seniority. That being so, little assistance is gained in this case by attaching a label to Mr Doble's position be that label 'senior employee' or 'top management' as opposed to a 'mere employee'.[244] What is important is to consider the activities that Mr Doble had agreed to undertake as part of his employment - the powers or discretions he was obliged to exercise.
3. The absence of a written contract of employment or a clear oral contract means the plaintiff is unable to point to express contractual obligations imposed on Mr Doble. The plaintiff's case relies on description of Mr Doble's role as distilled in par 7 into the matters for which Mr Doble is alleged to have been responsible. On my findings Mr Doble's responsibilities may be summarised as follows:

(a) In response to requests from Tronox Mr Doble was responsible for the preparation and provision of quotes for mine site maintenance services using, where applicable, the plaintiff's schedule of standard rates, and otherwise using his discretion and experience, consulting Mr McGregor when necessary.

(b) On receipt of a purchase order from Tronox Mr Doble was responsible for giving directions to the plaintiff's other employees to undertake the work. He was responsible for supervising the work and ensuring it was completed. Thereafter, he was responsible for preparing and rendering invoices in respect of that work. These activities required him to be physically present on the site.

(c) Related to (b), when required Mr Doble was responsible for purchasing materials from the plaintiff's suppliers.

1. Although Mr Doble had been involved in hiring three employees, (Mr Wood, his son, Riley, and Mr Furness) his contractual obligations did not extend either to hiring or dismissing employees or making recommendations in respect of those matters. Similarly, although Mr Doble made recommendations to Mr McGregor about the purchase of equipment he was not subject to a contractual obligation to do so.
2. In preparing quotes for Tronox Mr Doble exercised discretion and was generally not subject to direct supervision. He did not have complete discretion, however, because he was required to apply the plaintiff's standard rates to work to which they applied. Also, when it was necessary for him to do so, he would liaise with Mr McGregor in relation to the preparation of quotes. While Mr Doble did not have complete latitude the plaintiff was dependent on him performing this role in accordance with its interests and was vulnerable if he did not do so. The plaintiff was vulnerable also if Mr Doble did not prepare its invoices to Tronox in accordance with the quotes he had prepared. The critical activity in respect of which Mr Doble exercised a discretion was the preparation of quotes because the invoices had to comply with the quotes.
3. Simply finding that the plaintiff was dependent on Mr Doble and was vulnerable if he did not quote and invoice in accordance with its interests, is not of itself a sufficient basis for holding that Mr Doble owed the plaintiff fiduciary duties in respect of those activities. It is necessary to consider whether the employment relationship demanded a standard of loyalty exceeding the duty of fidelity implied at common law. This is a difficult question. On one view, that the plaintiff had not asked Mr Doble to sign a formal employment contract specifying his obligations and perhaps, including a covenant against competition, is inconsistent both with the degree to which it now contends it was dependent on Mr Doble and with the notion that the common law duty of fidelity is not sufficient to protect its interests.
4. As I noted when setting out the applicable principles whether a fiduciary duty is owed is often a question of degree. In my judgment, the degree of the plaintiff's dependence on Mr Doble in respect of the tasks of quoting and invoicing and its vulnerability if those activities were not undertaken exclusively in accordance with its interests required observance of a duty of absolute loyalty, encompassing the proscriptive no conflict and no profit themes or rules, that is, a standard of loyalty beyond that imposed by the common law duty of fidelity.

Corporations Act duties Statutory provisions and principles

1. Section 180 imposes an obligation on a director or other officer of a corporation to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of the corporation in the corporation's circumstances and occupied the office held by and had the same responsibilities within the corporation as the director or officer. Although the plaintiff pleads that Mr Doble owed a duty under s 180 in the statement of claim it did not develop a case that Mr Doble had failed to exercise care and diligence. No further reference to s 180 is required.
2. Section 181 of the Corporations Act provides:

(1) A director or other officer of a corporation must exercise their powers and discharge their duties:

(a) in good faith in the best interests of the corporation; and

(b) for a proper purpose.

(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.

1. Section 182(1) of the Corporations Act provides that:

A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

1. Section 183(1) of the Corporations Act provides that:

A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a) gain an advantage for themselves or someone else; or

(b) cause detriment to the corporation.

1. 'Information' in s 183(1) covers any information that a person may have acquired because of their position in the company.
2. The duty owed under s 183(1) continues after a person ceases to be an officer or employee of the company.
3. Impropriety for the purposes of s 182 and s 183 involves a breach of the standards of conduct that would be expected of a person in the position of the defendant by reasonable persons with knowledge of the duties, powers, and authority of the position and the circumstances of the case.[245] Impropriety is to be determined objectively; it does not depend upon the officer's or employee's consciousness of impropriety.
4. The accrual of an advantage or the suffering of detriment is not necessary to establish a breach of the statutory duties. It is sufficient to establish that the conduct was carried out in order to gain an advantage, not that the advantage was actually achieved.[246]
5. In Dreamtime Supply Company Pty Ltd v Steadfast ICT Security Pty Ltd (No 2)[247] Stewart J (with Elkaim J and McWilliam AJ agreeing) accepted the submission by the defendant that s 182 and s 183 are to be construed consistently with fiduciary obligations.[248]
6. An officer is defined in s 9 of the to include:

(b) a person:

(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii) who has the capacity to affect significantly the corporation's financial standing; or

(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation)

1. In Shafron v Australian Securities and Investments Commission,[249] the plurality of the High Court analysed s 9(b)(i) as follows:[250]

(a) In determining whether a person is an officer the inquiry is directed to the role the person plays in the corporation.

(b) The inquiry is not confined to the role played in relation to the particular issue in respect of which it is alleged there is a breach of duty but the person's actions in this respect may demonstrate that para b(i) is satisfied.

(c) It is not the case that a person who comes within para (b)(i) must be in substantially the same position as the directors - those to whom the management and direction of the business of the company is usually given.

(d) Paragraph (b)(i) distinguishes between making decisions that affect the whole or a substantial part of the business of the corporation and participating in making those decisions. Participation directs attention to the role that a person has in the ultimate act of making a decision, even if the final act of making a decision in question must be examined.

1. In Australian Securities and Investments Commission v King,[251] in their joint judgment, Nettle and Gordon JJ made the following observations in relation to the meaning of 'officer':[252]

Paragraph (b) is thus 'essentially functional in character, its concern being with the stipulated quality of a person's actions or capacity and their effects'. Sub-paragraphs (i) and (ii) are 'concerned with identifying persons who are involved in management of the corporation' - that is, people 'involved in policy making and decisions that affect the whole or a substantial part of the business of the corporation'. And, of course, a person may, by their conduct, satisfy more than one of the categories of officer in para (b)(i)-(iii).

Shafron was concerned with para (b)(i) of the definition of 'officer' and is instructive. Six members of the Court stated that determining whether a person falls under para (b)(i) of the definition requires consideration of the role the person played in the corporation. The inquiry is not limited to any particular issue or act which the person was involved in, and which is said to constitute a breach of duty. The text of para (b)(i) draws a distinction between those who make decisions and those who participate in making decisions. The notion of participation 'directs attention to the role that a person has in the ultimate act of making a decision, even if that final act is undertaken by some other person or persons'. Consistent with that view, their Honours held that s 180(1) applies to whatever responsibilities a person has, as opposed to responsibilities which attach to a particular office.

The question of how significant a role a person played is one of fact and degree. The person's contribution to the making of a decision must be assessed, and that decision must be (in accordance with the words of para (b)(i)) one which affects the whole, or a substantial part, of the business of the corporation. Not just 'any' decision will suffice. Nor is it a question only of what the person did. It depends on 'identifying the relationship between [the person's] actions and the decision to adopt [a] proposal'.

Similarly, determination of whether a person falls under para (b)(ii) of the definition of "'officer' of a corporation" requires consideration of the role the person played in the management of the corporation. The inquiry is not limited to any particular issue or act which the person was involved in, and which is said to constitute a breach of duty. The text of para (b)(ii) is directed to those who have the capacity to affect significantly a corporation's financial standing: not just any capacity will suffice. Determining whether a person has such a capacity depends on identifying their role in relation to the corporation, what they did or did not do (whether on a particular occasion or over time) and the relationship between their actions or inaction and the financial standing of the corporation.

1. In Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd,[253] Jacobson J made observations to the same effect as those made by Nettle and Gordon JJ in Australian Securities and Investments Commission v King, that is subparagraphs b(i) and (ii) are concerned with identifying persons who are involved in the management of the corporation. Jacobson J considered that the Ormiston J's comprehension of the concept of management in Commissioner for Corporate Affairs v Bracht [1989] VR 821,[254] corresponded in large measure with the definition of 'officer' in subparagraphs (b)(i) and (ii). In Commissioner for Corporate Affairs v Bracht, Ormiston J described the concept of management as follows:[255]

... activities which involve policy and decision making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs.

1. In Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd, Jacobson J held that a share trader with a daily trading limit of $10 million was not an officer because he had no involvement in policy making or decisions that affected the whole or a substantial part of the business of Citigroup and there was no evidence that anyone reported to the share trader or that he had any responsibilities other than his trading responsibilities.[256]
2. In Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 77 ACSR 410,[257] White J followed the approach to identifying officers taken by Jacobson J in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd.[258]

1. The first question that must be addressed is whether Mr Doble was an officer of the plaintiff. In support of the plaintiff's contention that Mr Doble was an officer it relies on the decision of Vickery J in Hodgson v Amcor Ltd and the decision of Santow J in Forkserve Pty Ltd v Jack,[259] to support the proposition that a person may be an officer if they are involved in the management of a component of a company's business.
2. In Hodgson v Amcor Ltd, Vickery J made the point that a company's business is not governed entirely by its board and held that Mr Hodgson was an officer of Amcor even though he was not in a role in which ultimate control of the company was exercised. Mr Hodgson was, however, the senior manager of the largest division of Amcor (he was responsible for over 2,600 employees and the division managed by him had an annual revenue of $970 million) and he took part in decisions that affected the company at a high level.[260] In Forkserve Pty Ltd v Jack,[261] the question was whether a person employed in a family business engaged in servicing and repairing forklifts was an officer. The employee performed a role that Santow J found was akin to that of a Service Manager. The employee was concerned with the management of staff and was involved in the pricing and general 'management' side of the forklift repair business. His role was closer in nature to that performed by Mr Doble for the plaintiff than that undertaken by Mr Hodgson for Amcor.
3. Santow J's assessment of the role of the defendant service manager might be contrasted (if for no other reason than to highlight the fact specific nature of the inquiry) with the doubt expressed by McMeekin J in Deeson Heavy Haulage Pty Ltd v Cox,[262] as to whether the first defendant, the operations manager of the plaintiff's business who was a former director of the business, was an officer of the plaintiff.
4. In my judgment Mr Doble was not an officer of the plaintiff. In reaching this conclusion I have reflected on the terms used by Mr Doble to describe his role in the application for bank finance. The issue must be decided, however, against the background of the allegations in par 7 of the statement of claim and my factual findings. As I have found as the plaintiff's site supervisor on the Tronox site Mr Doble not only prepared quotes but was responsible for giving directions to the plaintiff's employees. It may be accepted to that limited extent he could be described as managing the plaintiff's business on the Tronox site but the area of operations within which he made decisions and exercised discretions was confined to the day to day running of the Tronox site. In my view, decision making on that scale falls short by some margin of what is required by the concept of management as explained in the authorities to which I have referred above, that is being involved in policy and decision making the consequences of which may have a significant bearing on the financial standing of the company. In reaching this view it may be thought that I have taken a narrower view of the concept of management than that taken by Santow J in Forkserve Pty Ltd v Jack, but my view is dictated by the facts as I have found them. To reiterate, none of the decisions Mr Doble was required to make could be described as policy decisions or decisions that affected the direction of the plaintiff's business or decisions that otherwise affected its organisational structure or its financial management.

1. In Corrs Pavey Whiting & Byrne v Collector of Customs (Vic),[263] Gummow J set out what was required to invoke equity's protection of confidential information as follows:

It is now settled that in order to make out a case for protection in equity of allegedly confidential information, a plaintiff must satisfy certain criteria. The plaintiff: (i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question; and must also be able to show that (ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge); (iii) the information was received by the defendant in such circumstances as to import an obligation of confidence; and (iv) there is actual or threatened misuse of that information: Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215; The Commonwealth v John Fairfax and Sons Ltd [1980] HCA 44; (1980) 147 CLR 39 at 50-51; O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 at 326-328. It may also be necessary, as Megarry J thought probably was the case (Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 48), and as Mason J (as he then was) accepted in the Fairfax decision was the case (at least for confidences reposed within government), that unauthorised use would be to the detriment of the plaintiff.

1. In Wright v Gasweld Pty Ltd,[264] Kirby P identified various considerations which courts had found to be relevant in determining whether information was confidential. They were:[265]

(a) the fact that skill and effort was expended to acquire the information;

(b) the fact that the information is jealously guarded by the employer, it is not readily made available to employees and could not, without considerable effort and/or risk, be acquired by others;

(c) the fact that it was plainly made known to the employee that the material was regarded by the employer as confidential;

(d) the fact that it was plainly made known to the employee that the material was regarded by the employer as confidential;

(e) the fact that the usages and practices of the industry support the assertion of confidentiality;

(f) the fact that the employee in question has been permitted to share the information only by reason of his or her seniority or high responsibility within the employer's organisation.

1. As Professor Dal Pont explains in Law of Confidentiality:[266]

The law distinguishes 'know-how' from confidential information. In a relationship within which confidential information is (likely to be) communicated - here typically one between an employer and employee - it can safely be assumed that the employee has accumulated knowledge, skill and experience in the particular field derived, whether partly or otherwise, by reason of that relationship. But this accumulation, merely as a result of being under the auspices of a (partly) confidential relationship, is not equatable with confidential information. Accumulated knowledge, skill, talent and experience derived whether wholly or partly, from an employment relationship is qualitatively distinct from confidential information or trade secrets. The same is necessarily so regarding information brought by an employee brought from sources other than the employer, even if useful and valuable to the latter's business. Accordingly, the general law does not protect know-how even if imparted under a confidential badge. The cases nonetheless evince litigation directed to the distinction, suggestive (arguable inaccurately) of a distinction in degree, operating along a continuum. It is inherent, for instance, in the judicial observation that if confidential information 'cannot be easily isolated from the ordinary stock of knowledge and experience of an ex‑employee, the courts would be reluctant to come to the ex-employer's aid with an injunction.

1. The equitable duty of confidence only arises in relation to specific information that possesses the necessary quality of confidentiality and is information received in such circumstances as to import an obligation of confidence.
2. The confidential information that the plaintiff alleges Mr Doble misused falls into two categories.
3. The first category is described in par 13 of the statement of claim as follows:

(a) the usual works undertaken by the plaintiff;

(b) the amounts charged by the plaintiff for those specific works;

(c) the profitability of various items of work.

1. The 'usual works undertaken by the plaintiff' were not capable of being the subject information that was confidential. There was nothing in the evidence to suggest that the fact that the plaintiff undertook mine site maintenance works on the Tronox site nor what made up 'the usual works' was confidential. I assume that the confidential information in (b) above (the amounts charged by the plaintiff for those specific works) are the rates for labour and machinery hire in the schedule of rates that was provided by Cataby General Services to Tronox. Information as to pricing may in some cases be confidential but Mr Chaffey's evidence fell short of establishing the rates were confidential. His evidence-in-chief was as follows:[267]

Now, before, in one of your answers to the court, you described how there were rates for machinery and labour; do you remember that?---Yes.

Who set those rates?---I set them initially. I think - well, they stayed pretty much the same, yes, up until I sold it, I think.

All right. Now, who did you tell about those rates?---Well, they were - they were pretty well - on the site, amongst the people that were asking us to do jobs, it was pretty well common knowledge. If they wanted to get our rates, they could go to the contracts department - get our rates.

All right. Now, outside of the site, did you tell anyone about those?---No, no one, really. They weren't bandied about outside the site. No.

All right?---Unless someone took it home. I've got no idea.

Did you give anyone permission to take the rates home?---No.

Did you give anyone permission to tell anyone other than someone on site about what the rates were of the business?---No.

Did you advertise the rates publicly anywhere?---No.

1. That the rates were 'pretty well common knowledge on site' is inconsistent with the rates being sufficiently confidential to merit the protection of equity.
2. I do not accept that the profitability of various items of work constituted confidential information. Mr Doble had worked on the Tronox site for many years. He had long experience in various roles on the site. Identifying those items of work which were more profitable than others was part of the know-how he had accumulated over the years of working on the Tronox site.
3. The second category of information is described in par 17 of the statement of claim and consists of the revenue figures for each month between July 2017 and October 2019 from customers of Cataby General Services and Cataby Services reproduced in the CGS turnover spreadsheet provided by Mr Doble to the NAB in November 2019,[268] and revenue figures calculated by reference to the revenue of Cataby General Services and Cataby Services and included in the 'Monthly Cashflow Forecast Template'[269] provided by Mr Doble to the NAB on 13 February 2019.
4. I am satisfied that the turnover of a business is information that possesses the necessary quality of confidence to be protected by equity. It is not information that is generally available to those not involved in the financial management of a business and there are a variety of reasons why the owner of a business might wish to ensure that its turnover was not disclosed to customers, employees, competitors or other third parties. This is so even though turnover figures represent the cumulative total of invoices rendered and the invoices themselves are not confidential.
5. An issue in this case was whether the plaintiff had any rights in respect of the turnover figures of Cataby General Services. The plaintiff contended its rights derived from the provisions of sale agreement. It argued that the agreement provided for a sale of the business as a going concern and that the turnover figures of formed part of the assets sold and relied on the definitions contained in the Agreement of 'Assets' and 'Intellectual Property'. Those definitions are as follows:

Assets means the assets of the Business on the Completion Date including the Plant, fittings, the Intellectual Property, telephone, facsimile and postal services and the goodwill of the Business but excluding any debts to be collected by the Seller under clause 9.1;

Intellectual Property means the Business Names, telephone and facsimile numbers, domain names, copyrights, patents, trade marks, service marks, trade names, designs and similar industrial, commercial and intellectual property, (whether registered or not and whether protected by statute or not and including formulae, recipes and know‑how) of the Seller relating to the Business including the [the business name Cataby General Services];

1. The plaintiff contended that the turnover information formed part of the Assets on the basis that it fell within the definition of Intellectual Property or formed part of the goodwill.
2. In my judgment the intention of the parties assessed objectively by reference to the express terms of the agreement was that, subject to express exceptions, the entirety of the enterprise of Cataby General Services was to be transferred to the plaintiff. A reasonable businessperson in the position of these parties would regard Cataby General Services' trading records containing information as to its turnover and trading history with customers as forming part of its assets and thus falling within the definition of Assets which is expressed in inclusionary rather than exhaustive terms.
3. In Elecon Australia Pty Ltd v PIV Drives GmbH,[270] the Full Court of the Federal Court (Emmett J, Perram and Yates JJ) observed:[271]

Although confidential information is not property in the usual sense, it may be transferred by one person to another and the person to whom it is transferred has standing to take action to protect the confidentiality of the information. The Court may therefore grant at the behest of the person to whom, as a purchaser, the confidential information is transferred, injunctions and equitable compensation for breaches of the confidence (see TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151; (2007) 158 FCR 444 at [72]- [77]).

1. Accordingly, I conclude that the turnover figures contained in the CGS turnover spreadsheet and the 'Monthly Cashflow Forecast Template' constitute confidential information and that it is open to the plaintiff to maintain an action for breach of confidence in relation to that information.
2. The plaintiff's ability to invoke equity's protection in relation to the turnover figures of Cataby General Services is not undermined by the disclosure of those figures by Mr Chaffey to Mr Doble in November 2018. That disclosure was made to Mr Doble for the limited purpose of enabling him to assess whether he wished to buy the business at the price sought by Mr Chaffey and not for any other purpose. The disclosure did not amount to a general release of the obligation of confidence in respect of the turnover information.

1. As recorded earlier the defendants pleaded that the plaintiff had consented to, alternatively acquiesced in, alternatively is estopped from denying that it consented to Mr Doble establishing Kirahnley's business.
2. Each of the defences depended on factual findings in relation to: the conversations between Mr Doble and Mr Chaffey, the conversations between Mr Doble and Mr McGregor and Mr Chaffey, and the conversations between Mr Doble and Mr McGregor, being made in accordance with Mr Doble's evidence. Essentially, success of the defences depended on findings to the effect that Mr Doble had disclosed to either or both of Mr Chaffey or Mr McGregor that he intended to set up Kirahnley and acquire the VMS contract. The factual findings I have made do not support the defences and they fail.

1. The approach taken by the plaintiff to the pleading its allegations of breach was to plead the steps taken by Mr Doble to set up Kirahnley's business in chronological order (statement of claim - pars 10.1 to 10.28) and in subsequent paragraphs to specify those acts and omissions which constituted breaches of the fiduciary duties (par 11), those which constituted breaches of statutory duties (pars 12 and 26), and those which constituted breaches of the equitable obligation of confidence (pars 13 and 17). Some of Mr Doble's acts and omissions are alleged to constitute breaches of more than one of the pleaded duties and some are not alleged of themselves to constitute breaches in and of themselves and are pleaded solely as context.
2. There is a substantial overlap in the facts alleged to constitute breaches of the different duties. The substance of the plaintiff's case is that Mr Doble enabled Kirahnley to derive revenue from work which the plaintiff would or could have undertaken and by so doing he used his position as site supervisor to obtain a benefit for Kirahnley and for himself and to cause a detriment to the plaintiff.[272] Separately, the plaintiff alleges that Mr Doble's misuse of its confidential turnover information deprived it of the valuable opportunity to negotiate and acquire the VMS contract.[273]
3. Before considering the detail of the plaintiff's allegations it is to be remembered that the plaintiff does not allege that Mr Doble's conduct breached any express or implied contractual terms. Mr Doble was not subject to any contractual obligation that restricted his freedom to takes steps in his own time to establish a competitive business. The authorities make it clear that to determine whether Mr Doble's conduct involved a breach of fiduciary duty, it is necessary to identify the powers or discretions exercised by him in the discharge of his contractual obligations as a fiduciary, that is those power or discretions he had agreed to exercise solely in the plaintiff's interests to the exclusion of his own interests. Relatedly, as McDougall J said in Manildra, it is not sufficient to identify those activities that meet the description 'preparing to compete' it is necessary to specify which obligations are breached by those activities.
4. For the purposes of the analysis that follows I have assessed Mr Doble's conduct under the following headings:

(a) General preparatory work.

(b) Acquisition and novation of the VMS contract.

(c) Applying for and obtaining finance.

(d) Soliciting the plaintiff's employees.

(e) Soliciting and undertaking mine site maintenance work.

General preparatory work - statement of claim pars 10.1, 10.2, 10.12, 10.5 10.10, 10.11, 10.13, 10.24 10.25

1. The conduct that I have classified as general preparatory work involved Mr Doble discussing with the Tronox contracts manager his intention to start his own business,[274] registering Kirahnley as a supplier to Tronox,[275] meeting and corresponding with representatives of the NAB about his new business venture,[276] incorporating Kirahnley,[277] purchasing three trucks,[278] obtaining public liability insurance for Kirahnley,[279] obtaining a copy of the 'the Tronox mine forecast to the end of mine life disclosing a planned increase in Tronox's rehabilitation schedule and additional planned works',[280] and on 15 March 2020 forwarding to his private email the email he had received on 4 November 2019 from Ms Lamb with instructions for accessing the Tronox online learning system and the induction modules.[281]
2. Much of the conduct described in the preceding paragraph is relied on by the plaintiff solely for context. The acts which the plaintiff alleges constituted breaches of Mr Doble's fiduciary and Corporations Act duties were limited to, first, obtaining the Tronox mine life forecast, secondly, registering Kirahnley as a Tronox contractor and, thirdly, Mr Doble forwarding the 4 November 2019 email to himself.
3. There is no dispute that Mr Doble obtained a copy of the Tronox mine forecast and that he provided this to the NAB with the application for finance. Brief reference is made to Mr Doble obtaining the forecast in the plaintiff's outline of closing submissions but the basis upon which it was contended to be a breach of any duty owed to the plaintiff is not elucidated.[282] A number of points may be made. First and most importantly, it is not pleaded that Mr Doble's contractual obligations or responsibilities extended to obtaining or dealing with the mine life forecast (ostensibly concerned primarily with rehabilitation work) on the plaintiff's behalf. No power or discretion was conferred on him in relation to forecasts of that kind and it is not alleged that he obtained the forecast in the course of his employment. Thus, there is simply no foundation for the imposition of any fiduciary duty in respect of Mr Doble's dealing with the mine life forecast. Secondly, it cannot sensibly be argued (and it was not alleged) that the document formed part of the plaintiff's confidential information in respect of which Mr Doble owed an equitable obligation of confidence. Thirdly, it is not apparent how obtaining the forecast and using it for his own purposes might constitute a breach of any duty. There is no evidence that Mr Doble obtained the mine life forecast in the course of exercising his powers and duties as an employee or that as an employee, he was subject to any duties in respect of it.

Acquisition and novation of the VMS contract - statement of claim - pars 10.3, 10.9, 10.17, 10.18 and 10.26.

1. Mr Doble's conduct in relation to the VMS contract that the plaintiff alleged constituted breaches of duty involved his becoming aware of the opportunity of purchasing the VMS contract and obtaining a copy of the VMS contract and contract extension letter and providing it to the NAB,[283] causing Kirahnley to purchase the VMS contract and thereby act in direct competition with the plaintiff,[284] failing to bring the opportunity to purchase the VMS contract to the plaintiff's attention and instead causing Kirahnley to acquire it,[285] novating the VMS contract with Tronox,[286] and arranging for the scope of the contract to be increased to include works ordinarily undertaken by the plaintiff.[287]
2. The plaintiff contends that the negotiation by Mr Doble of Kirahnley's acquisition of the VMS contract involved a breach of his fiduciary duties. The difficulty with this contention is that the plaintiff does not plead in par 7 of the statement of claim that his responsibilities in relation to obtaining work from Tronox extended beyond providing quotes to Tronox and nor does the evidence support that the conclusion that his responsibilities extended any further than that. That the VMS contract included provision for VMS to undertake works on an 'ad hoc' basis that could be described as mine site maintenance works does not undermine the fundamental point that it was not Mr Doble's responsibility to expand the plaintiff's operations by the acquisition of other contracts. Relevantly, his contractual responsibility (duty) was to respond to requests from Tronox for quotes for mine site maintenance work it needed undertaken and to supervise that work.
3. The acquisition of the VMS contract was not a maturing business opportunity that was being pursued by the plaintiff and, as I explain below when dealing with allegations of breach of statutory duty, it was not opportunity that Mr Doble learned about in the course of his duties. The VMS contract was for rehabilitation services that were not the services provided by the plaintiff. In this respect it was immaterial that Mr McGregor's other company, Breakaway Earthmoving, had both the experience and equipment required to undertake rehabilitation work.

Applying for and obtaining finance - statement of claim - pars 10.7, 10.8, 10.15, 10.16, 17 and 26

1. Mr Doble's activities in relation to obtaining finance that are alleged to constitute breaches of the various duties the plaintiff alleges were owed by him are as follows: making the application for finance,[288] using the plaintiff's turnover information to complete the CGS turnover spreadsheet that was provided to the NAB in November 2019 to support the application for finance,[289] using the plaintiff's turnover information to complete the monthly turnover forecast provided to the NAB on 13 February 2020,[290] and actually obtaining finance or accepting the NAB's offer of finance.[291]
2. The act of applying for finance did not of itself involve Mr Doble breaching any duty owed by him to the plaintiff and neither did the act of accepting the NAB's offer of finance. Mr Doble owed no contractual or fiduciary obligation that restricted his ability to apply for finance or to accept an offer of finance. Mr Doble was not, however, free to use the plaintiff's confidential information for the purposes of supporting the application for finance.
3. The information concerning the turnover of both Cataby General Services and Cataby Services contained in the CGS spreadsheet provided to the NAB on 20 November 2019,[292] and the information contained in the monthly cash flow forecast provided to the NAB on 13 February 2020,[293] was the plaintiff's confidential information. Mr Doble was not permitted to use it for the purposes of obtaining finance and by using it for his own purposes Mr Doble breached the equitable obligation of confidence he owed to the plaintiff and the obligation imposed on him by s 183(1) of the Corporations Act not to use information he obtained as an employee improperly.
4. Further, judged by the standards of ordinary decent people, I consider that Mr Doble's use of the plaintiff's turnover information was dishonest conduct. He was using information obtained legitimately in one context and for the purposes of the plaintiff, his employer, for his own purposes in circumstances in which he must have known that the plaintiff would have objected to its information being used in this way (especially given that it was the target of future competition).

Soliciting the plaintiff's employees - statement of claim - pars 10.6 and 10.27

1. There are two aspects of Mr Doble's conduct in relation to the plaintiff's employees that are alleged to involve breach of fiduciary and statutory duties. First, it is alleged that before submitting the application for finance on 20 November 2019 Mr Doble had 'approached employees of the plaintiff and invited them to take up employment with [Kirahnley]' and the second is that at some time before 17 March 2020, on behalf of Kirahnley, he had made an offer of employment to Mr Geoff Sawyer.
2. I have found that before Mr Doble made the application for finance on 20 November 2019 he had discussed his plans to establish Kirahnley's business with the plaintiff's other employees, that he had conveyed to them that he would like them to become employees of his new business when it was established. He was confident that they would accept offers of employment from Kirahnley if and when he made them offers. But in he made no offers of employment before making the application for finance on 20 November 2019 because, apart from anything else, until Kirahnley obtained finance, he was not in a position to make offers.
3. I have found that Mr Doble offered Mr Sawyer employment with Kirahnley before he sent his email of 17 March 2020 to Ms Lane of Tronox in which he referred to Mr Sawyer as someone who would be employed by Kirahnley in the capacity as 'plant operator and labor hire'.
4. Mr Doble had no contractual duties or responsibilities in relation to the hiring of employees to which fiduciary obligations could attach. Consequently, Mr Doble's discussions with employees before he made the application for finance did not constitute a breach of fiduciary duty. Arguably, his discussions with the other employees may have involved a breach of Mr Doble's common law duty of fidelity but that is not the case the plaintiff has advanced.
5. Applying the same reasoning, Mr Doble's offer of employment to Mr Sawyer did not involve a breach of any fiduciary duty though, in my view, it most certainly amounted to a breach of Mr Doble's common law duty of fidelity.
6. Mr Doble's relationship with the plaintiff's employees commenced before he and they were employed by the plaintiff. Discussing his plans with them and conveying to them that he would like them to join his new business and making the offer of employment to Mr Sawyer did not involve him in using his position as an employee of the plaintiff or using information he had derived from his employment. His conduct did not amount to a breach of the duties owed pursuant to or of the .

Soliciting and undertaking mine site maintenance work - statement of claim 10.14, 10.20, 10.22, 10.23, 10.28, and 13

1. Mr Doble's conduct that forms the basis of these allegations of breach involved obtaining a quote for equipment for use in bore servicing for the purposes of Kirahnley's business,[294] causing Kirahnley to receive purchase orders from Tronox in direct competition with the plaintiff,[295] improperly using the plaintiff's confidential information concerning charge out rates and tendering practices,[296] and undertaking work in direct competition with the plaintiff.[297] The period over which the impugned conduct is alleged to have taken place began in February 2020 and is continuing.
2. The work which was the subject of the quotes that Mr Doble issued in Kirahnley's name before his employment came to an end was work that was ordinarily undertaken by the plaintiff. As I have found Mr Doble's duties included the preparation of quotes for the plaintiff in respect of mine site maintenance work that Tronox wanted undertaken. In respect of this obligation Mr Doble owed fiduciary obligations. Essentially by not providing quotes in the plaintiff's name as he was obliged to do and instead providing quotes in Kirahnley's name Mr Doble diverted work from the plaintiff to Kirahnley. By doing so he breached his fiduciary obligation by preferring his own interests over those of the plaintiff. Mr Doble's conduct also involved a breach of the duties owed by him pursuant to s 182(1) and s 183(1) of the Corporations Act. He used his position as site supervisor to gain advantage for Kirahnley and he improperly used information as to the work Tronox wanted done obtained by him because of his position as an employee to obtain an advantage for the plaintiff.
3. Further, I find that Mr Doble's conduct in diverting work from the plaintiff to Kirahnley was dishonest.
4. As recorded earlier Mr Doble's knowledge of the plaintiff's standard rates and its approach to tendering formed part of the know‑how accumulated by him over the years in which he worked on the Tronox site and did not constitute the confidential information in respect of which the plaintiff could invoke equity's assistance. Other than in that respect I find that the breaches alleged by the plaintiff in relation to the solicitation of the Tronox's work before Mr Doble's employment came to an end are established.

1. The plaintiff's case is that Kirahnley is liable to it both under the Corporations Act and in equity. First, the plaintiff contends Kirahnley was a person involved in Mr Doble's contraventions of his statutory duties and thus it is a person against whom a compensation order under s 1317H of the Corporations Act may be made. Secondly, the plaintiff contends that Kirahnley is liable under the second limb of Barnes v Addy as a person who knowingly assisted Mr Doble to breach his fiduciary duties. [298]

Corporations Act claim

1. Section 182(2) provides:

A person who is involved in a contravention of subsection (1) contravenes this subsection.

1. Section 183(2) is in identical terms to s 182(2).
2. Section 79 specifies when a person is involved in a contravention and, relevantly by s 79(c), provides that a person is involved in a contravention if that person has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention.
3. A person is a party to a contravention if the person is an intentional participant, the necessary intent being based on knowledge of the essential elements of the contravention.[299] In Australian Securities and Investments Commission v Adler,[300] Santow J said that the knowledge required by s 79(c) is:[301]

... knowledge not merely of some potential occurrence, constituting the offence, but of the actual events, though only the essential ones, which constitute that offence. That knowledge must embrace all essential material factual ingredients of a contravention ... Knowledge may be inferred from the fact of exposure to the obvious, though that does not obviate the need for actual knowledge of the essential facts constituting the contravention.

1. When a company is said to be the participant, its intention and knowledge can be imputed from the intention and knowledge of the directing or governing mind and will.[302]
2. Sections 182 and 183 are civil penalty provisions.[303]
3. Relevantly, s 1317H provides:

1317H(1) Compensation for damages suffered. A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if:

(a) the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and

(b) the damage resulted from the contravention.

The order must specify the amount of the compensation.

1317H(2) Damage includes profits. In determining the damage suffered by the corporation or scheme for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence.

...

1317H(5) Recovery of damage. A compensation order may be enforced as if it were a judgment of the Court.

1. In the prayer for relief in the statement of claim included 'an order for compensation pursuant to s 1317H of the Corporations Act 2001 (Cth) or an order for an account of profits pursuant to s 1317H(2) of the Act'. This does not accurately reflect the structure of s 1317H(2) that, as can be seen from its terms, does not provide for an account of profits as an alternative to a compensation order. Rather, it provides for a compensation order that may include the profits made by a person resulting from the contravention.
2. The plaintiff contends that as Kirahnley acted through Mr Doble and because Mr Doble knew of the breaches, Kirahnley must have been a party to the contravention and thus a person involved in the contravention.
3. I accept that contention and I find that Kirahnley was a party to Mr Doble's contraventions of s 182(1) and s 183(1) and thus was itself a person involved in those contraventions.

1. A person who assists a fiduciary to breach his or her fiduciary duties, with knowledge of a dishonest and fraudulent design on the part of the fiduciary, is liable as though that person were the fiduciary.[304] Such a claim is commonly referred to as a claim under the second limb of Barnes v Addy.
2. The elements of a claim based on the second limb of Barnes v Addy are as follows: the existence of a fiduciary duty owed by the fiduciary; a dishonest and fraudulent design on the part of the fiduciary; assistance by the third party in that design; and knowledge on the part of the third party of the circumstances constituting that design.[305]
3. For the purpose of the second limb of Barnes v Addy a dishonest and fraudulent design can include not only breaches of trust but also breaches of fiduciary duty but any breach of trust or breach of fiduciary duty relied on must be dishonest and fraudulent.[306]
4. Allegations of participation in a dishonest and fraudulent design is a serious allegation that must be specifically pleaded and particularised.[307] In Yeshiva Properties No 1 Pty Ltd v Marshall, [308] the Court of Appeal in New South Wales (Mason P, Beazley and Bryson JJA) stated:[309]

Where an equitable claim is based on alleged dishonesty, or otherwise on Barnes v Addy [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244, it is inappropriate that there should be anything less than a fully distinct statement in the pleading of what it is in substance that is charged against the alleged accessary.

1. The only claim against Kirahnley referred to in the writ of summons was based on Kirahnley having been knowingly concerned in, or a party, to Mr Doble's alleged breaches of statutory duty. No reference was made to a claim under the second limb in Barnes v Addy.
2. In par 3.3 of the statement of claim the plaintiff pleads that Kirahnley was under the control of Mr Doble and was used by him in furtherance of his activities 'set out in paragraphs 10.4 and 10.7 to 10.28'. Otherwise, the plaintiff's case against Kirahnley is confined to the pleading in par 27 of the statement of claim that is as follows:

By reason of the matters set out in paragraphs 3.3 and 10 above, the second defendant was, from the date of its registration, knowingly concerned with, or a party to, the first defendant's breaches set out in paragraphs 11 to 26 above pursuant to section 79 of the Corporations Act 2001 (Cth), as a person involved in terms of sections 181(2), 182(2) and 1317(4)(b) [sic] of that Act, and in equity. (emphasis supplied)

1. In its written outline of opening submissions the plaintiff outlined a claim against Kirahnley on the basis that 'a party may be held to be liable as an accessory if it assisted in a dishonest and fraudulent design on the part of the fiduciary with notice'.[310] In the defendants' outline of opening submissions they contended that the trial must be limited to the pleaded issues and stated that they would not accede to the determination of any issue that was not open on the pleadings.[311] The defendants argued that adding the words 'and in equity' onto the end of par 27 of the statement of claim was insufficient to plead a case of accessorial liability under the second limb in Barnes v Addy.
2. In my view the plaintiff's attempted pleading of a case of accessorial liability under the second limb of Barnes v Addy is inadequate and inconsistent with the requirement that allegations of participation in a dishonest and fraudulent design must be the subject of a separate plea that is distinct from other matters pleaded and must be adequately particularised. Adding the words 'and in equity' to par 27 falls a long way short of what is required. Moreover, a claim under the second limb of Barnes v Addy was not included in the indorsement on the writ of summons.
3. In my judgment it is not open on the pleadings for the plaintiff to advance a knowing assistance claim against Kirahnley. Ultimately, this is not a matter of consequence because, on the facts of this case, an order under s 1317H of the Corporations Act will provide compensation equivalent to the equitable compensation that that would have been available had a knowing assistance claim been open.

Corporations Act defences

1. Section 1317S provides, in effect, that in proceedings brought for a contravention of a civil penalty provision a court may relieve a person wholly or partly from a liability to which the person would otherwise be subject if it appears to the court that the person has acted honestly and having regard to the circumstances of the case the person ought fairly to be excused from the contravention.
2. Section 1318(1) provides:

If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.

1. I have found that Mr Doble's conduct in using the plaintiff's turnover information for the purposes of his application for finance and separately his conduct in diverting work from the plaintiff to Kirahnley were contraventions of civil penalty provisions that involved dishonest conduct. Consequently, the defences under s 1317S and s 1318(1) of the Corporations Act are not open to him.

Relief Work diverted to Kirahnley while Mr Doble employed by the plaintiff

1. I have found that while still employed by the plaintiff Mr Doble submitted quotes to Tronox on Kirahnley's behalf and that thereafter Kirahnley completed the work and rendered invoices in accordance with the quotes. The work was work that the plaintiff could and would have undertaken had Mr Doble not submitted quotes on Kirahnley's behalf. The plaintiff has lost the profits that it would have derived from that work and Kirahnley has derived profits that it would otherwise not have made. The total value of the relevant Kirahnley invoices was $35,525 excluding GST.[312]
2. The plaintiff retained Mr Barry Honey, a chartered accountant with long and extensive experience, to give opinion evidence on various issues including the question of what profits were derived by Kirahnley from the work that Mr Doble diverted to it while he was employed by the plaintiff. Mr Honey calculated the profits by deducting his estimate of the direct costs of the work from the amount of each invoice. He explained why he did not deduct indirect costs, that is, because they are generally incurred regardless of whether the works are undertaken. Mr Honey explained that in the absence of detailed wages and job cost records he assessed the direct costs attributable to undertaking the work by establishing an average rate of direct costs by reference to special purpose financial statements for Kirahnley covering the period between the start of its business and 30 June 2021. Using this approach Mr Honey calculated that direct costs (the cost of wages, superannuation, materials and supplies) amounted to 52% of Kirahnley's turnover yielding an estimated gross profit figure of 48%. On that basis the gross profits derived by Kirahnley from the relevant invoices amounted to $15,132.
3. In my view Mr Honey's approach to calculating Kirahnley's gross profit was both valid and entirely conventional. The only respect in which I will diverge from Mr Honey's approach is in respect of the invoice rendered for the tagging of lifting equipment, invoice 1004.[313] Mr Doble's evidence was that he undertook this work while employed by the plaintiff. That being so, in my view no allowance for costs should be made against this invoice. I find that Kirahnley made a gross profit of $13,500 in respect of the work that was the subject of invoices 1002, 1003 and 1005 (total value of invoices - $28,125 x 48% = $13,500). The full value of invoice numbered 1004 ($3,400) should be added to this figure making a total gross profit figure of $16,900.

(a) The plaintiff is entitled to equitable compensation from Mr Doble for breach of his fiduciary duties in diverting work away from the plaintiff to Kirahnley in the sum of $15,132.

(b) The plaintiff is entitled to a compensation order against Mr Doble and Kirahnley in respect of the damage resulting from the contraventions of statutory duties constituted by the diversion of work away from the plaintiff to Kirahnley in the sum of $16,900.

1. There is no evidence that Mr Doble, as opposed to Kirahnley, received any profits from his breach of fiduciary duty so there is nothing for which he personally may be liable to account.

1. Assessing the financial consequences of the misuse of confidential information is invariably difficult. The difficulty is compounded where, as in this case, the confidential information has no intrinsic value. Unlike trade secrets or information of that nature, the plaintiff's turnover information was not of itself valuable, which is not to say, of course, that there were not legitimate reasons for the plaintiff to keep the turnover information confidential.
2. In par 27 of the statement of claim the plaintiff pleads:

In engaging in the conduct set out in paragraph 10 and by reason of the breaches set out in paragraphs 11 - 26 above, [Mr Doble] gained an advantage of approximately at least 5 months to springboard into the business of [Kirahnley].

1. In Meagher, Gummow and Lehane's Equity Doctrines and Remedies the learned editors comment on the springboard doctrine in the context of the equitable obligation of confidence as follows (footnotes omitted):[314]

The 'doctrine' is attributed to Roxburgh J in Terrapin Ltd v Builders Supply Co (Hayes) Ltd. The Court of Appeal in the same case expressed the principle as forbidding use of information by a defendant 'as a springboard' for activities detrimental to the plaintiff, even when all the information has otherwise reached the public domain; because of the headstart over other members of the public, the defendant must be placed under a special disability in the field of competition. The defendant may therefore be restrained from use for that period which competitors would need to put their product on the market by, for example, 'tooling-up' and organising production and distribution. If the defendant has only known of and has not wrongly used the information before it became public, then the doctrine does not apply and no special restraint will be ordered.

The authorities on this subject were reviewed by the New South Wales Court of Appeal in the United States Surgical Corporation v Hospital Products International Pty Ltd. The court concluded that the 'springboard doctrine' was 'not based on some artificial or arbitrary doctrine to be applied regardless of the facts of the case' and concluded:

It is a principle to be applied in conformity with the more generally principle that a person misusing confidential information must answer for his default according to his gain. A headstart may often be the gain in these cases. If it is the gain, damages will be assessed accordingly and any other relief, such as an injunction, will be moulded. If it is not the gain the method of assessing damages or the appropriateness of some other remedy has to be considered in the light of what that gain is.

1. The facts of this case differ from the facts of the cases for which the springboard doctrine was originally developed but the general principle that a person misusing confidential information must answer for his default in accordance with this gain applies.
2. The plaintiff's pleaded claim that Mr Doble gained a springboard into the establishment of Kirahnley's business of at least five months is based on all of the breaches of duties alleged by it being made good. What falls to be assessed, however, is what gain was made by Mr Doble by using the turnover information in support of the original application for finance and again in answer to the query raised by 'credit' on 12 February 2020.
3. Objectively, Mr Doble's use of the plaintiff's turnover information in support of his application for finance strengthened the application because it created the impression of an established trading record. That Mr Doble used the plaintiff's turnover information evidences its importance to the success of the application as does the request made by the NAB on 12 February 2020 asking for 'the Vendors Financials for a 2 year period' and 'an amended Cash Flow forecast that is in line with the vendors financials'. The use of the plaintiff's turnover information conferred a significant advantage on Mr Doble in relation to the application for finance. If he had not used the plaintiff's turnover information the only actual trading figures available to Mr Doble to support the application for finance were those of VMS but its turnover was significantly lower than that of the plaintiff. I infer that if Mr Doble had been confined to the use of VMS's figures this would have reduced the amount he could have borrowed. I am satisfied that Mr Doble would have obtained finance for the acquisition of the VMS contract without using the plaintiff's turnover figures but it would have taken him longer to do so.
4. The application for finance was made on 20 November 2019 and an offer of finance was received on 21 February 2020, 12 weeks later. I infer from the NAB's request for financial information from the vendor that had Mr Doble been unable to provide figures that established an historical trading record it would have been more difficult for Mr Doble to obtain finance and the process would have taken longer. The evidence provides little assistance in terms of establishing objective criteria that may be used to determine how long it would have taken Mr Doble to obtain finance had he not used the plaintiff's turnover information. My assessment, however, is that having regard to the time it took to process the application relying on the plaintiff's turnover information and the importance of that information, without the information, it would have taken up to a further six weeks for Mr Doble to obtain an offer of finance, that is he would not have received an offer of finance until 3 April 2020. It took Mr Doble just over five weeks from receiving the NAB's offer to receive the finance and be in a position to cause Kirahnley to start trading. Making an allowance of a further five weeks from 3 April 2020 Kirahnley would not have been in a position to start trading until 8 May 2020.

Misuse of the induction information in the 4 November 2019 email

1. I have found that Mr Doble received the email containing information about Tronox's online learning module in the course of his employment and that he used it to gain an advantage for Kirahnley. The information in the email related to the Tronox online management system that was made available by Tronox to all contractors and employees who wished to work on its sites. Mr Doble may have saved a short amount of time by sending himself the email rather than arranging for Tronox to send it to him again but any such saving was subsumed in the time saved by him in using the plaintiff's turnover information and did not give rise to a separate gain by Kirahnley or loss by the plaintiff.

1. The plaintiff's claim included a claim for repayment of the salary paid to Mr Doble between 1 November 2019 and 31 March 2020. The plaintiff cited no authority to support the validity of such a claim and I have been unable to find any authority. I do not accept that such a claim has a sound basis in legal principle and, in any event, as I have found earlier there is no evidence to suggest that, leaving to one side the diversion of work to Kirahnley, Mr Doble's effectiveness as site supervisor was diminished by the preparatory steps taken by him to establish Kirahnley's business.

1. The plaintiff is entitled to the relief set out in the preceding section of these reasons and is entitled to elect between the alternate forms of relief available to it. I will hear from the plaintiff as to its election and to the parties as to the terms of the final orders and costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] Plaintiff's outline of opening submissions filed 3 April 2023 [49], plaintiff's outline of closing submissions filed 4 May 2023 [32].

[2] Defendants' closing submissions filed 2 May 2023 [28] and [29].

[28] Exhibit 18. The parties' documents are reproduced in these reasons as they appear in their original form. No spelling or typographical corrections have been made.

[52] First defendant's and second defendant's fifth further re-amended defence filed 27 September 2022 par 37, particular A.

[133] ts 698. See Exhibit 209, in May 2019 the VMS contract period had been extended to 31 August 2022.

[145] In the extracts from the business plan template that follow the headings and pre-printed questions are reproduced in bold typeface.

[218] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 [68].

[219] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1.

[220] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [67] - [70] (Gageler J).

[221] Concut Pty Ltd v Worrell [2000] HCA 64, (2000) 176 ALR 693 at 706. Kirby J citing Dixon and McTiernan JJ in Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66 at 81 - 2.

[222] Robb v Green [1895] UKLawRpKQB 58; [1895] 2 QB 1 at 15.

[223] Nottingham University v Fishel [2000] IRLR 471, 483 (Elias J) cited with approval in Woolworths Ltd v Olson [2004] NSWSC 849; (2004) 184 FLR 121 and Anderson v Canaccord Genuity Financial Ltd [2022] NSWSC 58, [1839].

[224] Hospital Products Ltd v United States Surgical Corporation (96) - (97).

[225] Woolworths Ltd v Olson [2004] NSWSC 849; (2004) 184 FLR 121 [212].

[226] Breen v Williams (1996) 186 CLR 71, 82.

[227] In re Coomber v Coomber [1911] UKLawRpCh 45; 1911 1 Ch 723, 728.

[228] Woolworths Ltd v Olson [212], (see also [214] where Einstein J cites the judgment of Elias J in Nottingham University v Fishel [2000] IRLR 471), cited with approval in Anderson v Canaccord Genuity Financial Ltd at [1839].

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

[230] Hospital Products Ltd v United States Surgical Corporation (97).

[231] Mandrilla Laboratories v Campbell [2009] NSWSC 987.

[232] Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272.

[233] Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 15 (Bryson J).

[234] Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 [230] - [232], (Foster J); Anderson v Canaccord Genuity Financial Ltd [1843]; Nottingham University v Fishel.

[235] Nexgen Sydney Pty Ltd v Barakat [2022] NSWSC 312.

[236] Edmonds v Donovan [2005] VSCA 27; (2005) 12 VR 513 537, [58] (Phillips JA, Winneke P and Charles JA agreeing).

[237] Balston v Headline Filters Ltd (1990) FSR 385 and by Vickery J in Hodgson v Amcor Ltd [2012] VSC 93; (2012) 264 FLR 1 [1369].

[238] Balston Ltd v Headline Filters Ltd, 412.

[239] GlaxoSmithKline Australia Pty Ltd v Ritchier [2008] VSC 164; (2008) 77 IPR 306 [125].

[240] Hodgson v Amcor Ltd [2012] VSC 93; (2012) 264 FLR 1 [1369].

[241] Searle & Co Ltd v Celltech [1982] FSR 82, 99 (Cumming Bruce LJ).

[242] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (5th ed, 2015) [5-380] - [5-440] ('Meagher, Gummow and Lehane's Equity: Doctrines and Remedies').

[243] Meagher, Gummow and Lehane's Equity: Doctrines and Remedies [42‑070].

[244] Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 at (16) (Kennedy J).

[245] R v Byrnes & Hopwood [1995] HCA 1; (1995) 183 CLR 501, 514 - 515 (Brennan, Deane, Toohey & Gaudron JJ).

[246] Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [253].

[247] Dreamtime Supply Company Pty Ltd v Steadfast ICT Security Pty Ltd (No 2) [2022] ACTCA 57.

[248] Dreamtime Supply Company Pty Ltd v Steadfast ICT Security Pty Ltd (No 2) [1], [174], [196].

[249] Shafron v Australian Securities and Investments Commission [2012] HCA 18; (2012) 247 CLR 465

[250] Shafron v Australian Securities and Investments Commission [23] - [26].

[251] Australian Securities and Investments Commission v King [2020] HCA 4.

[252] Australian Securities and Investments Commission v King [88] - [93].

[253] Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; 160 FCR 35; 241 ALR 705; 62 ACSR 427.

[254] Commissioner for Corporate Affairs v Bracht [1989] VicRp 72; [1989] VR 821.

[255] Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) [489] - [490].

[256] Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) [497].

[257] Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd [2010] NSWSC 233; (2010) 77 ACSR 410.

[258] Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd [93] - [127].

[259] Hodgson v Amcor Ltd [2012] VSC 93; (2012) 264 FLR 1.

[260] Hodgson v Amcor Ltd [1321] - [1330].

[261] Forkserve Pty Ltd v Jack [2000] NSWSC 1064; (2000) 19 ACLC 299.

[262] Deeson Heavy Haulage Pty Ltd v Cox [2009] QSC 277; (2009) 82 IPR 521 [133].

[263] Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266 (1987); 14 FCR 434, 443.

[264] Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317.

[265] Wright v Gasweld Pty Ltd (334) (Kirby P).

[266] Dal Pont G E, Law of Confidentiality (2nd ed, 2015) [5.30].

[270] Elecon Australia Pty Ltd v PIV Drives GmbH [2010] FCAFC 56; (2010) 93 IPR 174.

[271] Elecon Australia Pty Ltd v PIV Drives GmbH, [35].

[278] Statement of claim 10.10, 10.11 and 10.25.

[282] Plaintiff's outline of closing submissions 4 May 2023 par 66.

[283] Statement of claim 10.3 and 10.9.

[285] Statement of claim 10.18 and 10.26.

[298] Barnes v Addy [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244.

[299] Yorke v Lucas (1985) 158 CLR 661, 670 (Mason ACJ, Wilson, Deane and Dawson JJ).

[300] Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253.

[301] Australian Securities and Investments Commission v Adler at [209].

[302] ASIC v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; (2015) 235 FCR 181, [406] (White J).

[303] Corporations Act 2001 (Cth) s 1317DA, s 1317E.

[304] Farah Construction Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, [160].

[305] Farah Construction Pty Ltd v Say-Dee Pty Ltd.

[306] Farah Construction Pty Ltd v Say-Dee Pty Ltd [179].

[307] Farah Construction Pty Ltd v Say-Dee Pty Ltd [170].

[308] Yeshiva Properties No 1 Pty Ltd v Marshall [2005] NSWCA 23; (2005) 219 ALR 112.

[309] Yeshiva Properties No 1 Pty Ltd v Marshall [14].

[310] Plaintiff's outline of opening submissions filed 3 April 2023 at par 45.

[311] Defendants' outline of opening submissions filed 4 April 2023 at par 4.

[314] Meagher, Gummow and Lehane's Equity: Doctrines and Remedies [42 - 125].