244 The plaintiffs submitted that it was not the case that KNG and/or Stamoulis' conduct generated a profit that would otherwise have been unobtainable by COTC and the participants. The evidence does not support that submission. Stamoulis and S Stamoulis made every effort to convince the other participants to fund the Joint Venture and fund the acquisition of the Land. Those efforts were in vain. It was not the intention of the parties at the commencement of the Joint Venture that KNG would fund the whole of the process. As it turned out it was just not possible to obtain external funding. Even BHE was reticent about commitment because of the lack of evidence of support from the Clubs for the Club of the Clubs concept. There was a real risk that the participants would be in further and perhaps severe financial distress if KNG did not provide further funding. COTC and Dalglish were committed to the Club of the Clubs concept and it was that so-called intellectual property that enabled them to claim they had made a money's worth contribution to the Joint Venture. The Macquarie Joint Venture was not based on that concept and the evidence does not support a finding that COTC/Dalglish would have been willing, let alone able, to put the required capital into the Macquarie Joint Venture.
245 The term "gains" is to be construed in its context in clause 5(b)(iii). It is used in contrast to "losses". I agree that its ordinary usage is "profits" and I am satisfied that is what it means in this clause. I am also satisfied that its use was not intended to enable the other participants to reach into profits from sources other than the sale of the Land. Although there was no express mechanism in the Supplemental Agreement by which the Land Play was to be completed, clause 5(b)(iii) used the expression "Real Estate Transaction only". That expression was used to contrast the Land Play to the other options then available to KNG of the various ways to complete the Project. This was a far more limited option, thus the use of the word "only". It was the losses or gains from that "Transaction" that the other participants were to share in on a pari passu basis.
246 The plaintiffs submitted that KNG should be deprived of its "antecedent share" consistently with the principles outlined in Williamson v Hine [1891] 1 Ch 390; O'Sullivan v Management Agency and Music Ltd [1985] QB 428; and Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd (1988) 2 Qd R 1 at 13. It was submitted that depriving KNG of its antecedent share in the Joint Venture, meaning its share of any profit from the Land Play, is essential to give effect to the deterrent purpose of fiduciary law. It was also submitted that looked at another way, permitting a defaulting partner or Joint Venturer to attain the antecedent share of ill-gotten gains is dramatically inconsistent with that underlying purpose. It was submitted that if such discretion was not exercised the fiduciary would not be exposed to any risk of being materially worse off by reason of the breach of fiduciary duty creating a very considerable incentive to breach fiduciary duties that is clearly antithetical to the body of strict principles that regulate this area of the law. It was also submitted that a discretion should not be exercised in favour of KNG to recognise the commercial risk it took and it should not be granted a due allowance for time, energy, skill and financial contribution expended by it.
247 The cases relied upon in support of this submission are distinguishable from the facts of this case. The first case, Williamson v Hine, does not seem to me to support the proposition upon which the submission is made. The second case, O'Sullivan v Management Agency and Music Ltd is more on point and seems to me to support the retention by KNG an "element" of its gains. The third case, Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd, is quite distinguishable in that there was no consent to the defendant obtaining the lease, whereas in this case the participants agreed to KNG completing the Land Play pursuant to the Supplemental Agreement.
248 Williamson v Hine was a case in which Williamson, the plaintiff, was a co-owner with Messrs Hine Brothers, the defendants, of a ship, the Castle Holme. The defendants were the managing owners of the ship and their remuneration of £130 per annum was fixed by resolution of a meeting of the co-owners. The plaintiff sought a declaration that the defendants were not entitled to retain for their own benefit alleged secret profits obtained during the performance of their role as managing owners. The plaintiff sought an account or alternatively damages. The defendants were held liable to account to the plaintiff for only certain of the claimed categories of payments they had received, being commissions on freights and charters. Kekewich J held that if the defendants received such commission "it belongs to the shipowner as the principal, and cannot properly be received by them for their own benefit" (at 395). Of course the owner was both the plaintiff and the defendants and there is no suggestion in the report of this case that the defendants were not entitled to their share of the commission as owner.
249 O'Sullivan v Management Agency and Music Ltd was a case in which the contracts between a manager/producer (personally and through a number of companies) and the plaintiff, a composer and performer of popular music, were held to be in restraint of trade and, because the parties were in a fiduciary relationship, were also held to have been obtained by undue influence. Although the contracts had been performed and had lapsed by the time the matter came on for trial it was held that the court had jurisdiction to make such orders as were "practically just": per Fox LJ at 466. In that case, although undue influence had been applied by the defendants, the Court of Appeal held that the defendants were entitled to not only an allowance for skill and labour but also a "profit element": per Dunn LJ at 459 and Fox LJ at 468-469. This seems to have been in recognition of the "significant contribution" the defendants made to the plaintiff's success.
250 In Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd there was no concluded partnership agreement but Williams J held that the parties were in a fiduciary relationship. The plaintiff conducted a business retailing sunglasses from a leased shop in a shopping centre. The landlord had offered the plaintiff a lease on new/additional premises in the centre on advantageous terms by reason of the plaintiff's good leasing history. After discussions between the plaintiff and the defendants with a view to conducting the business together from the new premises, the defendants decided to "go it alone" (at 7) but his Honour found that the plaintiff was not advised of this decision and that the obtaining of the lease was in breach of fiduciary duty. Williams J held that there had to be just allowances for the defendants' time, energy and skill in building up "the value of the property subject to the trust" (at 12) but because of the nature of the breaches of trust a "stricter approach" should be adopted in fixing such allowance (at 13). Although the defendants were held liable to pay the plaintiff equitable damages the Court ordered that the business be sold and the net proceeds be shared between the plaintiff and the second defendant.
251 This is not a case, as is so often seen, in which a fiduciary proceeds to obtain a commercial advantage by reason of the fiduciary position resulting from unauthorised conduct. In those cases the defaulting fiduciary is liable to account for the profits or advantages obtained by reason of that unauthorised conduct. In this case the other participants expressly authorised KNG to complete the Land Play and they did so in a manner that I am satisfied gave KNG a large amount of freedom as to the mechanism(s) it could use to complete the Land Play.
252 It was not KNG's obligation to take the other participants into the Macquarie Joint Venture. This was not the completion of the Project as that term is defined in Joint Venture Agreement. It was a different project and contained no aspect of the Club of the Clubs concept. The contractual documents (excluding the OSJVA) and the dealings between the parties made clear that if certain pre-requisites were satisfied KNG had three options. The first two options involved the completion of the Project. If KNG had elected for either of those options and entered into agreements with the Macquarie Joint Venture parties as a means of completing the Project, then KNG's fiduciary obligations to COTC would have been more complex. However the Land Play option was different and KNG's fiduciary obligation to COTC was to look after its interest (as well as the other participants' interests) in the Land Play and not to prefer KNG's interest in the Land Play. It was a more limited obligation. KNG certainly had to complete the Land Play in accordance with its fiduciary duty to the participants but it was not prohibited from taking part, with others, in a different joint venture in respect of the Land after it was sold. Indeed any of the other participants could have taken part in a new joint venture in relation to the development of the Land after the Land Play had been completed. KNG utilised the Macquarie Joint Venture to sell the Land and in doing so compromised its duty to COTC by preferring the interests of S Stamoulis and KDG and settling for a figure on the basis that KDG (of which he was a shareholder) obtained an interest in the Macquarie Joint Venture.
253 KNG was a party to the Macquarie Joint Venture Deed but was not a participant in the Project that was the subject of the Macquarie Joint Venture. It was a party to that deed for the purpose of selling the Land. That was a mechanism that could have been used consistently with its obligations to the participants in the present Joint Venture so long as it had used its best endeavours to obtain the fair or market value for the Land. However KNG did not achieve fair or market value for the Land because it preferred the interests of S Stamoulis, who wished to take a role in the Macquarie Joint Venture, to the interests of COTC. It compromised its duty and accepted $3 million less than the asking price because S Stamoulis said he was "comfortable" with $25 million and Mr Ray persuaded Stamoulis that the balance of the asking price, $3 million, would be recouped from the Macquarie Joint Venture. The acceptance of that lesser price was in clear breach of KNG's fiduciary duty to COTC.
254 The expert accountants agreed that KNG's net accounting loss for the 4 years ending 30 June 2003 was $586,565 (Ex PD1). It was submitted on the defendants' behalf that the capital loss written off by KNG in its accounts of $2.5 million should be added to that figure. I am not persuaded that should occur. I accept the plaintiffs' submissions on this aspect of the matter that the $2.5 million represents capital that was sunk into the Joint Venture in return for its increased equity. The loss of $586,565 should be adjusted by at least the figure of $3 million between the asking price and the compromised price, resulting in a "gain" or profit on the Land Play of $2,413,435.