Club of the Clubs Pty Limited v King Network Group Pty Limited

3.2 In relation to COTC's contractual claim against KNG: (a) KNG breached its contractual obligations to share the profits of the Land Play with COTC on a pari passu basis: [311], [312], [337]. (b) KNG breached its contractual obligations to sell the Land for no less than fair or market value: [313], [337]. (c) Stamoulis, S Stamoulis and KDG induced those breaches of contract: [340], [342]. 3.3 In relation to KCOTC's claim for breach of fiduciary duty: (a) Stamoulis is liable for breach of fiduciary duty to KCOTC. However, the breach only gives rise to nominal damages because KCOTC was the participants' nominee in the Land Play and therefore did not have a beneficial interest in the Land: [307], [308], [309]; (b) S Stamoulis and KDG are not liable as accessories for Stamoulis's breach of fiduciary duty: [310]. 3.4 In relation to the indemnity debt claims relating to the unpaid debts of KCOTC (Indemnity Claims): (a) KNG is liable to indemnify KCOTC in the amount of $230,174.17 [345]; (b) COTC is liable to indemnify KCOTC in the amount of $49,323.04 [346].

Matters not in issue 4 It is agreed between the parties that in relation to the equitable claims, the plaintiffs are required to make an election between equitable compensation and an account of profits. On 14 December 2006 it was noted by consent that: (1) COTC had made an election to seek equitable compensation as against: (a) KNG for its breach of fiduciary duty owed to COTC; (b) Stamoulis as an accessory to KNG's breach of fiduciary duty; and (c) S Stamoulis as an accessory to KNG's breach of fiduciary duty; (2) COTC had made an election to seek an account of profits as against KDG as an accessory to KNG's breach of fiduciary duty; and (3) IMF had made an election to seek equitable compensation against Stamoulis for his breach of fiduciary duty to KCOTC. Although the plaintiffs sought to vary these purported elections in their written submissions of 28 March 2007, in oral submissions on 28 March 2007 and in written submissions and 5 April 2007, their solicitors' letter dated 23 May 2007 advised that the defendants no longer pressed the purported varied elections. The plaintiffs' purported election, as noted on 14 December 2006, has been referred to in submissions as the "split election". The defendants claim that it is not open to the plaintiffs to make such an election. 5 It is agreed between the parties that the enforcement of the plaintiffs' damages claims is constrained by the principle of "full satisfaction" because they all relate to the same head of loss. The defendants submitted that if the plaintiffs are entitled to make a split election, the principle of "full satisfaction" should apply to prevent COTC from enforcing its cumulative judgments beyond the higher of the quantum of its claim for equitable compensation and the quantum of its claim for an account of profits against KDG. Split Election 6 COTC claims that it is entitled to seek equitable compensation from KNG, Stamoulis and S Stamoulis and to seek an account of profits against KDG. The plaintiffs submitted that the House of Lords decision in United Australia Limited v Barclays Bank Limited [1941] AC 1 strongly supports an entitlement to make a split election. In that case United's company secretary endorsed a cheque to make it payable to a company, M. F. G. Trust Ltd (MFG), of which he was a director and deposited it into MFG's account with Barclays (the Bank). The Bank knew that the company secretary was also a director of MFG, however it collected the proceeds of the cheque without making any enquiries and placed the proceeds to the credit of MFG's account. United commenced proceedings against the Bank for damages for conversion, alternatively damages for negligence or for money had and received. The Bank claimed that it was relieved from liability by reason of earlier proceedings brought by United against MFG for recovery of the amount of the cheque on the basis either of money lent or money had and received. The proceedings against MFG were automatically stayed before trial and no judgment was ever obtained because a winding up order was made against MFG on the petition of another creditor. 7 At first instance and in the Court of Appeal the "view taken" was that by bringing its action against MFG, United had elected to "waive the tort" and "thereby became irrevocably committed, even against a different defendant, to the view that Emons [the company secretary] was, as he professed to be, duly authorised" to deal with the cheque as he did (per Viscount Simon LC at 9). United was precluded from proceeding against the Bank however this view did not prevail. The appeal to the House of Lords was allowed. Viscount Simon LC traced the history of the concept of "waiving the tort" and said at 13: Where "waiving the tort" was possible, it was nothing more than a choice between possible remedies derived from a time when it was not permitted to combine them or to pursue them in the alternative, and when there were procedural advantages in selecting the form of assumpsit. For example, there were no pitfalls in drawing the declaration in assumpsit, and the cause of action did not drop with death; on the other hand, there were advantages that the defendant, too, for an action framed in assumpsit permitted the defendant to plead the general issue (Stephen's Principles of Pleading, 2nd ed., 1827, p. 197). 8 After reviewing a number of the authorities, Viscount Simon LC referred, at 15, to the following observations made by Bovill CJ in Smith v Baker L.R. 8 C.P. 350 at 355: The law is clear that a person who is entitled to complain of a conversion of his property, but who prefers to waive the tort, may do so and bring his action for money had and received for the proceeds of goods wrongfully sold. The law implies, under such circumstances, a promise on the part of the tortfeasor that he will pay over the proceeds of the sale to the rightful owner. But if an action for money had and received is so brought, that is in point of law a conclusive election to waive the tort; and so the commencement of an action of trespass or trover is a conclusive election the other way. The principles which govern the subject are very well illustrated in the case of Buckland v. Johnson [(1854) 15 C.B. 145], where it is held that the plaintiff having sued one of two joint tortfeasors in tort could not afterwards sue the other for money had and received. 9 Viscount Simon LC exposed a history of misunderstanding arising in part from the fact that Buckland v. Johnson was not authority for the stated proposition and also from a failure to give appropriate recognition to the fact that Bovill CJ's observations were obiter. The Lord Chancellor made the following withering analysis, at 17 (citations omitted): My Lords, it is remarkable that the passage above cited from Bovill C.J. in Smith v. Baker , together with his reference to Buckland v. Johnson, should have been quoted and relied upon in some subsequent judgments, as well as in some text-books, without due note being taken of the fact that Bovill C.J.'s proposition was a mere obiter dictum, that the other judges in that case did not agree with him on the point, that the decision of Buckland v. Johnson did not support the proposition at all, and that as long ago as the time of Sir John Holt the true proposition had been laid down that it is judgment in the first action, and not merely the bringing of the claim, which constitutes a bar of the second action. The contradiction between these two views becomes yet more striking when one examines the judgments of the Court of Appeal in Rice v. Reed. The members of the Court reached a unanimous conclusion on a view of the facts and yet A.L. Smith L.J. expresses his agreement with Bovill C.J.'s proposition, while that very accurate common lawyer, Vaughan Williams L.J. lays down the true rule that where there had been no judgment the plaintiff has not lost his alternative remedy. This review of the authorities convinces me that the oft-quoted dictum of Bovill C.J. in Smith v. Baker is wrong. There is, as far as I can discover, no reported case which has ever laid it down as matter of decision that when the plaintiff "waives the tort" and starts an action in assumpsit, he then and there debars himself from a future proceeding based on the tort. 10 Viscount Simon LC concluded at 18-19: For it is now possible to combine in a single writ a claim based on tort with a claim based on assumpsit, and it follows inevitably that the making of the one claim cannot amount to an election which bars the making of the other. No doubt, if the plaintiff proved the necessary facts, he could be required to elect on which of his alternative causes of action he would take judgment, but that has nothing to do with the unfounded contention that election arises when the writ is issued. There is nothing conclusive about the form in which the writ is issued, or about the claims made in the statement of claim. A plaintiff may at any time before judgment be permitted to amend. The substance of the matter is that on certain facts he is claiming redress either in the form of compensation, i.e., damages as for a tort, or in the form of restitution of money to which he is entitled, but which the defendant has wrongfully received. The same set of facts entitles the plaintiff to claim either form of redress. At some stage of the proceedings the plaintiff must elect which remedy he will have. There is, however, no reason of principle or convenience why that stage should be deemed to be reached until the plaintiff applies for judgment. 11 Lord Porter found it unnecessary to determine whether the dictum of Bovill CJ was supportable, however his Lordship did express the view that "the allegation" in Smith v Baker that the plaintiff was precluded from bringing an action in tort against the defendant against whom it had brought an action for money had and received was "at least open to considerable doubt" (at 49-50). His Lordship said at 50-51: It is plain that an action against one such separate tortfeasor for conversion is no bar to an action against another, nor indeed does the signing of judgment against the first end the matter. The plaintiff can even then proceed to judgment against the second, and his rights are not exhausted until from one or both he has obtained the full measure of his loss. 12 Lord Atkin analysed the issue of waiver this way at 28-29: If the plaintiff in truth treats the wrong doer as having acted as his agent, overlooks the wrong, and by consent of both parties is content to receive the proceeds this will be a true waiver. It will arise necessarily where the plaintiff ratifies in the true sense and unauthorized act of an agent: in that case the lack of authority disappears, and the correct view is not that the tort is waived, but by retroaction of the ratification has never existed. But in the ordinary case the plaintiff has never the slightest intention of waiving, excusing or in any kind of way palliating the tort… I protest that a man cannot waive a wrong unless he either has a real intention to waive it, or can fairly have imputed to him such an intention, and in the cases which we have been considering there can be no such intention either actual or imputed. These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have now disappeared should not in these days be allowed to affect actual rights. When these ghosts of the past stand in the path of justice clanking their mediæval chains the proper course of the judge is to pass through them undeterred. 13 In relation to election Lord Atkin emphasised that it was essential to bear in mind "the distinction between choosing one of two alternative remedies, and choosing one of two inconsistent rights" (at 29). After observing that it was "now" not necessary to choose between alternative remedies his Lordship said at 30: On the other hand, if a man is entitled to one of two inconsistent rights it is fitting that when with full knowledge he has done an unequivocal act showing that he has chosen the one he cannot afterwards pursue the other, which after the first choice is by reason of the inconsistency no longer his to choose. 14 Lord Atkin supported the above proposition with the statement of Lord Blackburn in Scarf v Jardine (1882) 7 App. Cas. 345 at 360 that "where a man has an option to choose one or other of two inconsistent things when once he has made his election it cannot be retracted" and observed that in a later passage although Lord Blackburn spoke of a choice between two remedies (as opposed to rights), it appeared he was speaking of a choice between two rights (at 30). Lord Atkin concluded at 30: I therefore think that on a question of alternative remedies no question of election arises until one or other claim has been brought to judgment. Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other; but he can take judgment only for the one, and his cause of action on both will then be merged in the one. 15 In agreeing with the Lord Chancellor and Lord Atkin, Lord Romer added what he described as "only a very few words" at 33. Relevantly they included the following at 34: A person whose goods have been wrongfully converted by another has the choice of two remedies against the wrongdoer. He may sue for the proceeds of the conversion as money had and received to his use, or he may sue for the damages that he has sustained by the conversion. If he obtains judgment for the proceeds, it is certain that he is precluded from thereafter claiming damages for the conversion. But, in my opinion, this is not due to his having waived the tort but to his having finally elected to pursue one of his two alternative remedies. The phrase "waive the tort" is a picturesque one. It has a pleasing sound. Perhaps it was for these reasons that it was regarded with so much affection by the old Common Lawyers, one of whom, indeed, was moved to break into verse upon the subject. But with all respect to their memories, I firmly believe that the phrase was an inaccurate one if and so far as it meant that the tortious act was affirmed. What was waived by the judgment was not the tort, but the right to recover damages for the tort. 16 Lord Thankerton agreed with the opinions of the Lord Chancellor and Lord Atkin (at 33). The appeal was allowed and judgment was entered for United for the full amount of the cheque with interest.

17 The defendants submitted that United Australia Limited v Barclays Limited is not authority for the proposition for which the plaintiffs contend and highlighted the following distinguishing features: (1) it involved two discrete and independent causes of action; (2) it was not a case, as is the present, involving a situation where a plaintiff sues one defendant in respect of primary liability and other defendants in respect of accessorial or derivative liability; and (3) both causes of action were common law causes of action and did not involve an account of profits. 18 As to the first of the distinguishing features, it is true that the causes of action against the first defendant and the Bank were independent causes of action, however the cause of action against the Bank would not have arisen or have been available to the plaintiff unless the first defendant had breached its obligations to the plaintiff. In a somewhat similar vein in the present case there would be no cause of action against the accessories unless the principal, KNG, had breached its fiduciary duty to COTC. This observation relates also to the second distinguishing feature identified by the defendants. It is obvious however that in United Australia Limited v Barclays Bank Limited there was no claim of accessorial liability as there is in the present case. The third distinguishing feature is indisputable.

19 The defendants submitted that a plaintiff is unable to have the benefit of both remedies, equitable compensation and an account of profits, in respect of conduct arising from the same breach because the remedies are inherently inconsistent. It was submitted that the premise upon which the remedy of an account of profits is based is that the breach is condoned or excused and that it is impermissible to simultaneously claim an account of profits against an accessory whilst seeking compensation in respect of the same breach against the principal and co-accessory. In support of this submission the defendants relied upon what they described as the "statement of principle" by Lord Westbury in Neilson v Betts (1871) LR 5 HL 1 at 22 as follows: My Lords, I have only farther to observe that the decree of the Court below directed not only an inquiry as to damages, but also an account of profits. The two things are hardly reconcilable, for if you take an account of profits you condone the infringement. I therefore think, my Lords, that we were right in calling upon the Respondent's Counsel to elect between the two which he would adopt. He has adopted the inquiry as to damages, and the other, the account of profits, must be struck out of the decree. 20 It was submitted that this statement of principle was approved by the High Court in Dart Industries Inc v The Decor Corporation Pty Limited (1993) 179 CLR 101. In that case Neilson v Betts was referred to in footnote 39 on page 110 as supporting the statement in the judgement of Mason CJ, Deane, Dawson and Toohey JJ that: "Damages and an account of profits are alternative remedies". The passage of which this was the first sentence continued at 110-111 as follows (citations omitted): An account of profits was a form of relief granted by equity whereas damages were originally a pure common law remedy. As Windeyer J pointed out in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, even now an account of profits retains its equitable characteristics in that a defendant is made to account for, and is then stripped of, profits which it has dishonestly made by the infringement and which it would be unconscionable for it to retain. An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent its unjust enrichment. The ordinary requirement of the principles of unjust enrichment that regard be paid to matters of substance rather than technical form is applicable.

21 The defendants also relied on Gzell J's observation in Acme Office Service Pty Limited v Ludstrom [2002] NSWSC 277 that the plaintiff in that case could not have "both damages for loss and an account of profits for the two forms of relief are mutually exclusive": at [39]. His Honour also said that if one takes an account of profits "one condones the breach of fiduciary duty" and cited Neilson v Betts as authority for that proposition: at [39]. In Acme the plaintiff, a commercial printer, sued two former employees, the first and second defendants, and the company established by them to compete with the plaintiff, the third defendant. The plaintiff claimed that the defendants received cash payments from its customers for work carried out by the plaintiff, that the defendants diverted sales for work carried out by the plaintiff to the third defendant and that the defendants caused the plaintiff to permanently lose part of its customer base. 22 Gzell J was satisfied that the plaintiff had made out a case that the first defendant received and retained cash belonging to the plaintiff in breach of contract and in breach of fiduciary duty: [16]. His Honour was also satisfied that the plaintiff had made out a case of breach of contract and breach of fiduciary duty with respect to the diversion of customers of the plaintiff to the third defendant and that the third defendant was a "knowing participant": [30]. His Honour took what he described as a "robust approach" to the quantification of the loss the plaintiff suffered in respect of the misappropriations of cash and assessed the loss at $50,000: [22]. In respect of the relief claimed for the diversion of sales/customers, his Honour said at [41]: I have already said that it is appropriate to grant damages for loss due to breach of contract with respect to the misappropriations of cash sales. Such an order would ordinarily exclude restitutionary relief. However, I regard the misappropriations as a separate vice from the diversion of customers. It has been held that one can recover damages for breach of a contractual duty of good faith as well as an account of profits made in breach of fiduciary duty ( Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488). I propose to follow that course and make orders that the first and second defendants pay to the plaintiff an amount assessed by me to represent the profits wrongly diverted to the third defendant. Since the third defendant was a knowing recipient of those profits, I intend to make an order that it, too, pay such an amount to the plaintiff. 23 Although the defendants relied upon Acme to submit that Neilson v Betts had been recently approved at first instance, the approach adopted by Gzell J does not seem to support the proposition for which the defendants contend, that a party must make the same election against each of the defendants whether they are principals or accessories. Rather his Honour allowed the plaintiff to elect for damages as against the first defendant for misappropriation of cash and to elect for an account of profits - although described by his honour as relief of a "restitutionary kind" [40] - against each of the defendants in respect of the diversion of sales/customers. In respect of this relief his Honour said at [38]: The distinction between an account of profits and damages is that the former requires the infringer to give up ill-gotten gains to the party whose rights have been infringed whereas the latter compensates the wronged party for the loss it has suffered ( Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 32). The plaintiff's preference under this second head is for relief in the form of an account of profits. Strictly speaking the relief sought is not for an account of profits, presumably to be taken by a master or referee, but for an order of the court that the defendants pay to the plaintiff a sum of money calculated to restore to the plaintiff the profits wrongly earned by the third defendant in breach of the fiduciary duties of the first and second defendants. If restitutionary relief is appropriate, I am of the view that the court can make such an order without accounts being taken. Equity will mould an order to suit the justice of the case. Since both the plaintiff and the first defendant conducted their cases upon the basis that the court would decide all issues before it including an ultimate amount to be paid to the plaintiff if it was successful, I am of the view that the justice of this case demands my making an order for restitutionary relief if that is the appropriate form of relief. 24 In declining to make any order in favour of the plaintiff in relation to the alleged permanent loss of part of the plaintiff's customer base, Gzell J said at [46]: I do not find that any permanent loss of custom stems from a breach different from that which gave rise to the diversion of customers to the third defendant for which the appropriate form of relief is restitution of lost profits. Once that form of relief is claimed, a party cannot also have damages for loss. 25 When a plaintiff sues a defendant and establishes liability it must choose between the "remedy" of equitable compensation or an account of profits. In my view the cases relied upon by the defendants do not support the proposition that a plaintiff must choose the same "remedy" for all defendants involved in the breach of fiduciary duty either as a principal or as an accessory. Those cases are authority for the proposition that when a plaintiff sues a single defendant it must elect between the alternative remedies of equitable compensation and an account of profits. 26 Mr Coles submitted that sometimes a plaintiff may not be able to sue or obtain satisfaction from all defendants who may be liable either as principals or as accessories. It was submitted that it is quite common, for example, that the principal actor in a breach of fiduciary duty may be an insolvent corporation or individual, leaving the plaintiff with a remedy only against the person who has procured the breach by that insolvent party, typically a director of the insolvent corporation. Mr Coles submitted that such a plaintiff may elect against that remaining accessorial defendant to proceed by way of an account of profits or equitable compensation. It was submitted that such right of election is in no sense dependent upon what the plaintiff might have chosen to do in respect of the principal actor, but for the insolvency. 27 Mr Coles accepted that one cannot have inconsistent elections against the one defendant but submitted that there is no immediate answer to the question why one defendant against whom an election has been made to proceed by way of an account of profits would be entitled to claim that a plaintiff is precluded from proceeding in that way because it had claimed equitable compensation against another defendant. It was submitted that where there are different defendants and notwithstanding that the origin of their liability has a common factual substratum, there is no particular reason precluding a split election.

28 Mr Coles also submitted that policy and/or remedial efficiency supports the plaintiff's entitlement to make a split election. He submitted that some fiduciaries take the benefit of their breach of fiduciary duty whilst others do not and that in the latter instance a fiduciary who has made nothing out of the consequences of the breach may act in concert with others who "down the line" pocket the profits for themselves. It was submitted that it would be anomalous if a plaintiff were to be precluded from having a remedy against one defaulting fiduciary (either primary or accessory) who profited from wrongful conduct simply because the other defaulting fiduciary had taken no benefit to himself.

29 In the present case COTC has a "right" to seek, as against each defendant, equitable compensation or an account of profits. The issue is whether having chosen or elected to exercise the right to seek equitable compensation from the principal (KNG) and co-accessories (Stamoulis and S Stamoulis) COTC has a right to seek an account of profits from KDG as an accessory to KNG's breach of fiduciary duty.

30 In Tang Man Sit v Capacious Investments Limited [1996] AC 514 Lord Nicholls said at 522: Like all procedural principles, the established principles regarding election between alternative remedies are not fixed and unyielding rules. These principles are the means to an end, not the end in themselves. They are no more than practical applications of a general and overriding principle governing the conduct of legal proceedings, namely, that proceedings should be conducted in a manner which strikes a fair and reasonable balance between the interests of the parties, having proper regard also to the wider public interest in the conduct of court proceedings. Thus in Johnson v Agnew [1980] AC 367 the House of Lords held that when specific performance fails to be realised, an order for specific performance may subsequently be discharged and an inquiry as to damages ordered. Lord Wilberforce observed, at p. 398: "Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity". 31 The requirement on a defendant to account for its profits is limited to the profits actually made by that defendant. If a co-defendant has not had the benefit of those profits, equity will not require that co-defendant to pay to the plaintiff the profits made by the other defendant: Colbeam Palmer Limited v Stock Affiliates Pty Limited (1968) 122 CLR 25 per Windeyer J at 34. 32 In Warman International Limited v Dwyer (1995) 182 CLR 544 Warman had been appointed as an exclusive Australian distributor of gearboxes and other components manufactured in Italy by the Bonfiglioli group of companies. Bonfiglioli subsequently advised Warman that it wanted to enter into a joint arrangement for the local assembly of its products in Australia. Warman advised Bonfiglioli that it was not interested. Dwyer, the general manager of Warman's Queensland branch, informed Bonfiglioli that he was considering leaving Warman to set up his own business. Dwyer declined the subsequent offer from Warman to purchase the division which included the Bonfiglioli contract. He set up two companies Bonfiglioli Transmission (Aust.) Pty Ltd (BTA) and Engineering Transmission Agencies Pty Ltd (ETA) and negotiated with Bonfiglioli for a joint-venture. Bonfiglioli then terminated the agency agreement with Warman and Dwyer resigned from Warman. Shares in BTA were issued to Dwyer and his wife jointly and to Bonfiglioli. A joint-venture agreement was executed between Bonfiglioli and BTA for assembly and distribution of Bonfiglioli gearboxes in Australia for a 20 year term. ETA remained wholly owned by Dwyer and his wife and distributed Bonfiglioli products and a range of non-Bonfiglioli products in conjunction with the joint-venture. Warman sued Dwyer, BTA and ETA for, inter alia, an account of profits. 33 The trial judge, Derrington J, ordered an account of profits against each of the three defendants, the first as principal (Dwyer) and the second (BTA) and third (ETA) as accessories. His Honour held that Dwyer's conduct amounted to a breach of fiduciary duty owed to Warman and that BTA and ETA were equally liable with Dwyer because their controlling minds were fully aware of and joined in the breach. His Honour held that Warman was entitled to an account of profits and awarded it $957,821. The Queensland Court of Appeal (Macrossan CJ and Pincus JA, McPherson JA dissenting) allowed an appeal by the defendants on the ground that, instead of an account of profits, Warman was entitled to recover only its loss flowing from the breaches of duty. The majority held that Dwyer did not make any profits for himself and that the profits were made by BTA and ETA. The majority said that they had been unable to find any authority for the view "that if a fiduciary, in breach of duty, takes part in the formation of a company which earns profits which would have gone to the plaintiff but for the breach, then the fiduciary is liable to account as if he had himself earned the profits". The majority also expressed the view that it was unclear on what basis Dwyer should have been held liable to pay the one-half of the value of the goodwill of BTA and ETA because he did not personally receive that benefit. 34 On appeal to the High Court the argument was confined to whether Warman was entitled to an account of profits and, if so, the basis upon which such an account should be taken. It was not argued by the defendants that any amount awarded by way of an account of profits or equitable compensation should not be made against all three defendants jointly: [555-556]. On the topic of election the Court (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) said at 569-70: It is arguable that any order, such as that made by the trial judge, for payment of a sum determined by an account of BTA's and ETA's profits should be divided into two orders, one against BTA alone for the amount determined by reference to its profits and the other against ETA alone for the amount determined by reference to its profits. It is also arguable that any order for an account of equitable compensation for the loss sustained by Warman should have been made against Dwyer only. As has been mentioned, however, Dwyer, BTA and ETA did not argue in this Court or in the Court of Appeal that the respective orders made in the courts below should not have been made against the three of them jointly. In the absence of any such argument, it has effectively been common ground that any orders made should be against all three. 35 Although the High Court referred to the separate order of equitable compensation against Dwyer as being "arguable" and refrained from taking that matter any further by reason of a lack of any application by any of the parties, it may suggest that a split election was envisaged in which equitable compensation might have been sought against the principal (Dwyer) and an account of profits might have been sought against the accessories (BTA and ETA). Alternatively the Court's observation that equitable compensation may have been ordered only against Dwyer may have been intended to exclude an account of profits as against BTA and ETA. In any event a split election was not argued for in that case and it really does not assist in the present consideration.

36 In the present case the defendants focused on the "same breach" as the denominator of whether a split election was permissible. It was submitted that such an election is prohibited where the plaintiff's remedy is in relation to the "same" conduct that amounted to the breach of fiduciary duty. It is true that the breach by KNG was to sell the Land at an undervalue. It is also true that Stamoulis, S Stamoulis and KDG were accessories to KNG's breach of fiduciary duty in selling the land at an undervalue. The defendants submitted that because an account of profits is based on the premise that the plaintiff condones or excuses the breach for the purposes of taking the profits earned by reason of that breach, it is not possible thereafter to complain about the breach in seeking alternative remedies.. As can be seen from the above authorities there are differing views as to whether the election of an account of profits actually condones or excuses the breach. However, even if that is so, the above-mentioned authorities relate to an election of alternative remedies available to a plaintiff as against a single defendant. 37 In applying commonsense and equity, to use Lord Wilberforce's words adopted by Lord Nicholls, it does not seem to me that at a procedural level there is a prohibition on the plaintiff making a split election as between different defendants. The authorities relied upon by each of the parties are distinguishable from the circumstances of the present case. The plaintiff is entitled to choose the most advantageous remedy available to it in all the circumstances of the case. It will very much depend upon the facts of the particular case as to whether there is any unfairness in allowing the plaintiff to make a split election. As a matter of principle, it does not seem to me that the plaintiff is precluded from making a split election. 38 I am satisfied that COTC is entitled to make the election to seek equitable compensation against KNG, Stamoulis and S Stamoulis and to seek an account of profits as against KDG. Equitable compensation 39 Although the parties were initially at issue in relation to the quantification of the equitable compensation claims against KNG, Stamoulis and S. Stamoulis, by the time the final round of written submissions had concluded, it was agreed that the amount of compensation against each of those parties is $631,123.91. The only issue in relation to the quantification arises from the plaintiffs' submission that such sum should be increased by $600,000 representing COTC's 15% interest in the alleged payment of $4 million which was made (or due) by KNG under the Joint Venture Agreement. The defendants deny that there should be any increase in the amount. The determination of the plaintiffs' entitlement to any increase in the amount of equitable compensation depends in part upon a review of the provisions of the various agreements relating to the provision of the $4 million guarantee. 40 The Judgment deals with the history of the provisions relating to the $4 million bank guarantee. Under the Joint Venture Agreement, Arts Investments agreed to procure a guarantee for a minimum amount of $4 million on or before 13 August 1999. That was not done and other arrangements were proposed by KPMG and adopted by the parties to the Joint Venture Agreement by executing the Supplemental Agreement on 10 February 2000. Clause 2.1 of the Supplemental Agreement provided that the $2 million paid to Lenen by 10 December 1999 was paid on the basis that the Joint Venturers had a right to substitute it for a $4 million bank guarantee "in accordance with the provisions of the Put & Call Option Agreement". Stamoulis expressed concerns about putting forward the $4 million guarantee having regard to the various problems that had been experienced with the Project: [46]. The parties entered into the May Agreement, the relevant parts of which are recorded in the Judgment: [51]. That agreement included the provision that KNG would provide the $4 million guarantee to Lenen "in the terms of the 'Supplemental JV Agreement'" (cl 2). In exchange for the provision of the $4 million guarantee in addition to the provision of $250,000 for pre-sales and marketing expenses and $500,000 Research and Development expenses to Dalglish, KNG's share in the Joint Venture, and its responsibility for the debts of the Joint Venture, increased to 70%. 41 The May Agreement included an "Action Plan", Step 1 of which provided as follows: · KNG to fulfil obligations to KH CotC Joint Venture to pay $4.0 Mio. guarantee to David Beattie Trust Account on behalf of Lenen Pty Ltd by Wednesday, 31 May 2000. · This will ensure the release of $2.0 Mio. from the David Beattie Trust Account and to be paid into KingsHeath CotC Limited bank account at Westpac Sydney.

SEE NOTE 1. 42 Note 1 as referred to in Step 1 above provided as follows: NOTE 1

· $4,000,000 Bank Guarantee provided to Lenen, as per agreement, will be transferred to be held on deposit by the Insurer, as support of the issuance of a bankable $10.5 Mio. as outlined.

· It is necessary to arrange funding for the land payment as detailed: $10,500,000 then the title transfers - by arrangement to be negotiated with Lenen $12,000,000 guarantee to Lenen on remaining payment by utilising $4,000,000 Bank Guarantee recovered from Lenen as a deposit. This will entitle the insurance/guarantee arranger to a 5% equity in the Joint Venture. 43 Step 2 of the Action Plan provided for a process to seek Lenen's consent to substitute the obligation to pay $4 million on or about 1 August 2000, plus a further $4 million on or about 1 March 2001, with a $10.5 million bank guarantee, payable on or around 1 April 2001. 44 In June 2000 Ryssal-One provided to Lenen a $4 million bank guarantee on behalf of the Joint Venture and the $2 million deposit was released into the KCOTC account: [53]. Lenen granted an extension of time for the provision of the second $4 million instalment to 29 September 2000, in exchange for which the purchase price of the land was increased from $8 million to $8.2 million: [54]. Lenen also imposed a term that the $4 million that had been due on 1 September 2000 was varied by requiring the Joint Venture to provide a $10.7 million bank guarantee at which time the existing $4 million guarantee would be returned: [54]. 45 The plaintiffs submitted that the $4 million guarantee should be brought to account in the calculation of the award of equitable compensation on the basis that: (a) KNG was obliged to contribute the sum of $4 million by way of capital contribution to the Joint Venture, in consideration for the increase of its joint venture interest from 52.5% to 70% under the May Agreement; and (b) it is therefore not appropriate that KNG should account for that sum as a private additional expense associated with the exercise of the Land Play, of which account should be taken in calculating "any losses" or "any gains" for the purpose of the reconciliation contemplated by clause 5.1(b)(iii) of the Supplemental Agreement. 46 The plaintiffs submitted that a critical aspect of the contractual context in this case is the fact that the May Agreement specified that KNG would "provide the guarantee" and also specified in Note 1 that funding for the purchase of the Land would be arranged by "utilising $4,000,000 Bank Guarantee recovered from Lenen as a deposit". In oral submissions on behalf of the plaintiffs, Mr Coles referred to the problems presented by intractably difficult language in "home made contracts" and accepted that the terms of Note 1 to Step 1 of the May Agreement were a "little obscure" (tr 8-9). However it was submitted that one starts with the provision of the $4 million guarantee that was later to be replaced by $10.5 million guarantee (or later the $10.7 million guarantee) and that (tr 9): … the $4 million guarantee is standing there, as it were, assisting by way of whatever it was that was underpinning the $4 million guarantee, as going to assist the replacement guarantee of $10.5 million. The final stage is the $10.5 million guarantee is no longer needed either, because in the consummation of the transaction the funds are paid. In neither case either of the guarantees are called upon. But that is not the point. The parties were contemplating that it was a three stage process, the $4 million guarantee replaced by the $10.5 million guarantee, replaced by the actual payment upon completion. 47 Mr Coles also submitted that it was intended by the parties that there was a $4 million sum that was to be provided by KNG towards the purchase price of the land, and that such provision was part of the consideration for KNG securing an uplift of 17.5% interest in the Joint Venture (being from 52.5% to 70%). It was submitted that unless KNG was obliged to contribute the $4 million by way of capital, the increase of its interest from 52.5% to 70% made no commercial sense. 48 The defendants submitted that the plaintiffs' approach is misconceived on the following bases: (1) the consideration for KNG's increased share of 70% was the provision of the $4 million guarantee rather than any payment of money and the plaintiffs' submissions are based on an erroneous proposition that the provision of the $4 million guarantee was a "sunk capital payment" or an effective contribution of $4 million cash; (2) the plaintiffs' contention ignores the events post May 2000, in particular the fact that the $4 million guarantee was replaced by a guarantee of $10.7 million provided in respect of the Put and Call Option dated 18 August 1999 which was subsequently terminated by Lenen in April 2001; (3) the guarantee for $4 million was not brought to account in calculating KNG's net loss because it was never called on; and (4) the suggestion that the appropriate accounting treatment in relation to the $4 million guarantee is somewhat analogous to the treatment of $2.5 million capital loss in the Judgment is misconceived because the $2.5 million comprised cash contributions made by KNG in respect of its participation in the Joint Venture. 49 The plaintiffs submitted that the characterization of the provision of the $4 million guarantee should be approached analogously to the characterization of the $2.5 million that was referred to in the Judgment at paragraph [254] as "sunk" capital. I disagree. Notwithstanding that KNG's interest in the Joint Venture and its obligations for the debts of the Joint Venture increased to 70% at the time when it agreed to provide, inter alia, the $4 million guarantee, its provision was on an interim basis and was never called on. It is quite different to the $2.5 million amount that was written off by KNG in its accounts as a capital loss. 50 The expression "pay" the $4 million guarantee in Step 1 of the May Agreement is not apt. As Mr Jackman submitted, the guarantee was only a contingent liability and Note 1 to Step 1 means that the insurer was to be the party providing the $10.5 million guarantee and the $4 million was to be transferred from Lenen to the insurer. Mr Jackman submitted that the proposition that the $4 million bank guarantee should be treated as a contribution of capital by way of part payment of the purchase price of the Land is wrong for two fundamental reasons: (1) it is not a contribution of capital - it is only for a contingent liability and that liability never crystallised; and (2) the $4 million guarantee was being recovered from Lenen to be deposited with the insurer that was providing the new bank guarantee for $10.5 million (later $10.7 million) on the assumption that Lenen would be happy to have the benefit ultimately of a $10.5 million bank guarantee instead of the instalment of money that had originally been agreed. It was submitted that the guarantee was not a "sunk capital payment", was only ever a contingent liability, and was not a part payment of the purchase price because Lenen gave it back. 51 It is true that KNG's share in the Joint Venture (and its debts) was increased to 70% pursuant to the provisions of the May Agreement. It is also true that one of the matters referred to in clause 2 of that agreement was that KNG "will provide" the $4 million guarantee. I do not agree with the plaintiffs' submissions that the fact that the guarantee was not called on is irrelevant. Mr Coles accepted that in respect of some aspects of Note 1 to Step 1 of the May Agreement, in particular the reference to the "arranger", no light illuminated the dark corner of whatever it was the parties had in mind (tr 35). When Ryssal-One provided the guarantee to Lenen, the Joint Venture obtained the benefit of the release of the funds from Lenen's solicitors' trust account which enabled it to pay some of the expenses of the Project. However the guarantee was never called on. 52 The reality is that the guarantee was only provided as some form of interim security until the purchase price was paid. In those circumstances I am not satisfied that the agreement by KNG to "provide" the $4 million was a capital contribution that should be taken into account to increase the award of equitable compensation. Accordingly the award of equitable compensation to COTC as against each of KNG, Stamoulis and S Stamoulis will be $631,123.91. Account of profits 53 On the basis of the decision that COTC is entitled to make a split election the remaining issue between the parties in respect of the claim for an account of profits against KDG is the extent of the profits that KDG is required to disgorge. In their written submissions of 16 March 2007 (par 1) the defendants relied on the following as "critical findings" in the Judgment: (a) KNG was expressly authorised to complete the Land Play pursuant to clause 5 of the Supplemental Agreement [242]; (b) KNG owed a fiduciary duty to COTC to ensure that, in the Land Play pursuant to the Supplemental Agreement, it protected COTC's interest and shared any gains from that Land Play with COTC [242]; (c) the duty that KNG owed to COTC in the Land Play was to do its best to ensure that as few "losses" as possible were incurred and as many "gains" as possible were achieved as it endeavoured to sell the Land at the fair or market value [242]; (d) the term "gains" is to be construed in the context of clause 5 (b)(iii) of the Supplemental Agreement. Its use in that context was not intended to enable other participants to reach into profits from sources other than the sale of the Land [245]; (e) 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. The Land Play 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 pari passu basis [245]; (f) the other participants in the Joint Venture expressly authorised KNG to complete the Land Play and they did so in a manner that gave KNG a large amount of freedom as to the mechanism(s) it could use to complete the Land Play [251]; (g) the lack of specificity as to how the Land Play was to be completed allowed KNG to complete the Land Play in the most effective and efficient way it thought fit so long as it sold the Land for fair or market value and did its best for the other participants in ensuring as many "gains" as possible were achieved and as few "losses" were incurred in which they were to share on a pari passu basis [306]; (h) 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 the Joint Venture Agreement. It was a different project and contained no aspect of the Club of the Clubs concept [252]; (i) KNG's fiduciary duty in exercising the Land Play option under the Supplemental Agreement was a far more limited obligation than those involved in completing the Project [252]; (j) 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 [252]; (k) the sale of the Land by KNG to the Macquarie Bank Joint Venture was a mechanism that could have been used consistently with the obligations of KNG to the participants in the Joint Venture so long as KNG used its best endeavours to obtain a fair or market value for the Land [253]; (l) KNG breached its fiduciary duty to COTC by accepting a price less than the asking price or fair or market value for the Land [253; 260]; (m) Stamoulis, S Stamoulis and KDG were accessories to the breach of fiduciary duty by KNG because each of them knew that KNG was accepting less than the asking price or fair value for the Land [285; 292]; (n) the analysis of the accessorial liability of Stamoulis is limited to the primary liability of KNG, namely its failure to achieve the best price for the Land in discharge of its obligations to the other participants, in the completion of the Land Play pursuant to the Supplemental Agreement [260].

54 The defendants submitted, correctly in my view, that in determining the proper basis for an account of profits it is important to ascertain precisely what was acquired in consequence of the fiduciary's breach of duty: Warman International Limited v Dwyer (1995) 182 CLR 544 at 565. In this regard the defendants focused on the "critical finding" set out in paragraph 53(n) above and submitted that although there was no express finding, by parity of reasoning, the analysis contained in paragraph [260] of the Judgment of the accessorial liability of S Stamoulis, KDG is likewise limited to the primary liability of KNG. Emphasis was placed upon the express approval in Warman at 559 of the statement of principle by Lord Upjohn in Phipps v Boardman [1967] 2 AC 46 at 127D as follows: Finally, having established accountability it only goes so far as to render the agent accountable for profits made within the scope and ambit of his duty. 55 The defendants submitted that KNG's primary liability was its breach of fiduciary duty in the completion of the Land Play in failing to achieve the best price for the Land in discharge of its obligations to the other participants, in particular to COTC. It was submitted that the accessory liability of KDG is limited to that primary liability and that on a proper analysis, what KDG acquired in consequence of KNG's breach of fiduciary duty was the purchase of the Land, in conjunction with others, for $25 million as opposed to its market value in January 2002 of $30.135 million. It was also submitted that since KDG was only entitled to one third share of the Macquarie Bank Joint Venture, the benefit that it gained from its participation in KNG's breach is 33.3% of $5.135 million. Given that the duty that was breached was owed to the Joint Venture as a whole, of which COTC had a 15% interest, it was submitted that COTC is only entitled to 15% of that amount. It is claimed that COTC's entitlement in respect of any account of profits from KDG is $256,493.25, being 15% of $1,709,955 and that this amount cannot be recovered if COTC recovers $631,123.91 against any of KNG, Stamoulis or S Stamoulis by way of equitable compensation. 56 The defendants also submitted that if KNG had sold the Land in January 2002 to the Macquarie Bank Joint Venture for its fair or market value it would not have breached its fiduciary duty to COTC. In that event, given the absence of primary liability, KDG would not be liable as an accessory. Accordingly any profit made by KDG or others as a consequence of their participation in the Macquarie Bank Joint Venture would not be recoverable. The defendants claimed that the attempts by the plaintiffs to reach into the profits made by KDG in the Macquarie Bank Joint Venture ignores the findings in the Judgment as to the nature of KNG's breach of fiduciary duty and involves an attempt by the plaintiffs to reargue the case. 57 In Warman International Limited v Dwyer the High Court described the remedy of an account of profits as "ancient and notoriously difficult in practice" and distinguished the application of the remedy in a case involving the "infringer" of intellectual property [as in Dart Industries] from a case involving a liability of a "fiduciary" to account: [556-7]. The Court also emphasised: (1) the need to "keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts": [559]; and (2) that in cases involving fiduciary relationships, above all other cases, the facts of the case "ought more carefully" be borne in mind: [at 559-60 citing Fletcher Moulton LJ in In Re Coomber; Coomber v Coomber [1911] 1 Ch 723 at 728-729]. In respect of the conduct by BTA and ETA the High Court said at 564-565: In these circumstances, the conclusion was clearly warranted that the two companies had knowingly and actively participated in Dwyer's breach of fiduciary obligation to the extent necessary to bring them within the principle identified by Gibbs J. in Consul Development [(1975) 132 CLR 373 at 397]: "a person who knowingly participates in a breach of fiduciary duty is liable to account to the person to whom the duty was owed for any benefit he has received as a result of such participation ."

58 Accessories are fixed with what has been described as "transmitted fiduciary obligations": Queensland Mines Limited v Hudson (1975-76) CLC 40-266 at 28,709; Timber Engineering Co Pty Limited v Anderson [1980] 2 NSWLR 488 at 495; Natural Extracts Pty Limited v Stotter (1997) 24 ACSR 110 at 138. An accessory is treated as the fiduciary and must accordingly account to the same extent the actual fiduciary would have had to account, if the fiduciary had made the profit: Lewis v Nortex Pty Limited (in liq) [2005] NSWSC 482 per Hamilton J at [33]. In applying the remedy in this way Equity avoids the inequitable result of a fiduciary retaining a profit (albeit indirectly through an accessory in which it has a shareholding) merely because it was shrewd enough to have a third party, rather than itself, obtain the profit. There will be cases in which the third party's intervention knowingly induces a fiduciary to breach its duty and does so to pocket a profit considerably larger than the profit of the defaulting fiduciary. The plaintiffs claim that this is what happened in the present case. 59 KNG sold the Land at less than market or fair value because KDG made clear to KNG that S Stamoulis/KDG wanted to be part of the Macquarie Bank Joint Venture and that S Stamoulis was "comfortable" with the $25 million offer for the Land. Stamoulis gave evidence that both he and his father formed the view that participation in the Macquarie Bank Joint Venture was potentially a good investment (tr 318). S Stamoulis informed Stamoulis that he wanted to become involved in the Macquarie Bank Joint Venture (tr 319). The sale of the Land at the price offered by the prospective Macquarie Bank Joint Venturers was clearly for the purpose of ensuring KDG (and thus S Stamoulis) could become involved in that joint venture. The only way the fair market value could be obtained was by the "recoupment" of the balance out of the profits of that joint venture. As Mr Ray said to Stamoulis: " the money you want for the land will be recouped in the project. This is an opportunity. Harry look at the players we have here ready to deal" [316].

60 The breach by KNG of its duty to COTC (and the other participants) was for the specific purpose of enabling KDG to take part in the Macquarie Bank Joint Venture or as the Judgment records, gave S Stamoulis "an entrée" into that Joint Venture: [285]. Although the Judgment records that I had little doubt that the asking price for the Land could have been achieved, such view was based solely on an impression of the financial substance of the other companies involved in the Macquarie Bank Joint Venture: [335]. Mr Coles submitted that there is no reasonable basis for supposition that the Macquarie Bank Joint Venture would have gone forward with KDG's involvement had KNG held out for the full value of the Land. Indeed he submitted that such a claim is against the tendency of the evidence and that KDG had never sought to make out a case that it would have been let into the Macquarie Bank Joint Venture in any other circumstances. It was submitted that Mr Ray's statement to Stamoulis "to take a bath on the purchase price" because it would be recouped in the Project is really inconsistent with any suggested claim that KDG would have been let into the Joint Venture at a higher purchase price (tr 17). I am satisfied that this is the probable and reasonable conclusion to be drawn from the evidence. 61 As was recorded in the Judgment, any of the participants in the original Joint Venture could have taken part in the Macquarie Bank Joint Venture: [252]. It was not KNG's obligation in completing the Land Play to take the participants in the original Joint Venture into the Macquarie Bank Joint Venture: [252]. The use of the word "gains" in the Supplemental Agreement has been construed in the Judgment as not including profits from the Macquarie Bank Joint Venture: [245]. These findings were made on the premise that KNG would be complying with its duty in completing the Land Play. Had it complied with its duty and had it taken part in the Macquarie Bank Joint Venture, the limit of its obligations to the other participants in the original Joint Venture would have been to share in the profits, or "gains", it made from the sale of the Land. It would have been entitled to keep the profits from the Macquarie Bank Joint Venture so long as it had not breached its fiduciary duty to the other participants in the Joint Venture. The construction of the word "gains" in the Judgment does not prohibit the plaintiff from reaching into profits made by reason of a breach of fiduciary duty. For instance if KNG had obtained the entrée into the Macquarie Bank Joint Venture by reason of its breach of fiduciary duty in selling the Land at an undervalue, it would have had to account to its co-participants in the original Joint Venture for those profits made as a direct result of its breach of fiduciary duty. 62 KNG was not true to its duty to COTC (and the other participants). The defendant characterised the finding that Stamoulis' accessorial liability was limited to KNG's primary liability [260] as "critical" in seeking, by parity of reasoning, to confine KDG's accessorial liability to that primary liability. This is not a controversial matter. Rather the controversy is the extent of the remedy for the breach against each of the principal, KNG, and the accessory, KDG. KNG caused loss to COTC by selling the Land at an undervalue and is liable to COTC for that loss. KNG did not make any profit from that breach of fiduciary duty. However KDG obtained a number of benefits as a result of its conduct as an accessory to KNG's breach of fiduciary duty. It obtained its right of participation in and the making of profits from the Macquarie Bank Joint Venture as a direct result of the breach by KNG of its fiduciary duty. I do not agree with the defendants' submissions that all that KDG achieved was the purchase of the Land at a lesser price. 63 When S Stamoulis advised that he was "comfortable" with the lesser purchase price he was, as recorded in the Judgment, "calling the shots" for KNG, himself and KDG [292]. KNG's acceptance of the lesser price enabled KDG to make the profits that it did. On balance I am satisfied that KDG is liable to disgorge the profits made as a result of that conduct to COTC. The next question is whether COTC is entitled to the whole of those profits or to some more limited amount. 64 The plaintiffs submitted that the only amount that KDG should be entitled to retain by way of credit is $5,628,908, comprising $3,086,565 representing KNG's total losses arising from its participation in the original Joint Venture and $2,542,343 representing interest on KDG's capital contribution in the Macquarie Bank Joint Venture. It was submitted that KDG should disgorge the balance of the profit to COTC. The net amount of the profits claimed to have been made by KDG from the Macquarie Bank Joint Venture is, as recorded in the Judgment, $14,310,914.80: [243]. The plaintiffs argued for an increase of that amount to $16,143,507 by reducing the amount of interest that was paid to Ryssal One Pty Ltd by KDG for the years ended 30 June 2003 and 30 June 2004 at the rate of 25% per annum to 7.55%. It was submitted that no explanation was given for the increase of the initial interest rate of 7.55% to 25% and there was no probative evidence supporting the reasonableness of the 25% rate. Assuming that the higher profit of $16,143,507 is applicable the plaintiffs claim that KDG should disgorge $10,514,599 (plus interest). Alternatively, if the lower figure, $14,310,914.80, is applicable KDG should disgorge $8,682,006 (plus interest). 65 The defendants submitted that the plaintiffs' claim that it was a matter of discretion as to whether an order should be made for the disgorgement of the whole of KDG's profits to COTC was fundamentally erroneous. It was submitted that as a matter of principle, in cases where a partner or joint-venturer profits from a breach of fiduciary duty, that person holds the profits thus derived for the benefit of the partners or joint-venturers as a whole. It was submitted that each partner or joint-venturer then takes according to the agreed shares in the partnership or joint-venture as the case may be: Featherstonehaugh v Fenwick (1810) 34 ER 115 at 120; Dean v MacDowell (1878) 8 Ch D 345 at 351; Birtchnell v Equity Trustees, Executors and Agency Co Limited (1929) 42 CLR 384; Chan v Zacharia (1984) 154 CLR 178; United Dominions Corp Limited v Brian Pty Limited (1985) 157 CLR 1. 66 It was also submitted that any profits derived by KNG, or by KDG as an accessory to KNG's breach in selling the Land at an undervalue, are held for the benefit of the original Joint Venturers as a whole. COTC's entitlement in the joint venture was 15% and it was submitted there is no basis on which its entitlement could exceed 15% of the relevant profit. It was also submitted that there are circumstances in which an innocent joint venturerer may recover proportionately less than its share if: (a) the Court took the view that a proportion of the profit was attributable to matters other than the breach of fiduciary duty and apportioned the profit accordingly; or (b) the Court may make just allowance for the time, energy, skill and financial contribution which the defaulting fiduciary has made. In this regard the defendants relied upon what was said in Warman at 561 as follows: This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful role to play; it is simply that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff. 67 I am satisfied that COTC's share of the relevant profit should be limited to its percentage share in the original Joint Venture of 15%. It is true that the balance of profits made by KDG from the Macquarie Bank Joint Venture will be retained by it subject to any other proceedings brought by any of the other original Joint Venturers. The fact that KDG will retain those profits seems to me to be a factor to be taken into account in deciding whether a just allowance should be factored into the fixation of the amount of profits that is to be the subject of the order in COTC's favour. Having regard to what was said in the Judgment in relation to the more stringent approach to be adopted in this case, I am satisfied that I should not make any adjustment to the amount of profits by way of an allowance. In the absence of evidence to establish the unreasonableness of the interest rate I am not satisfied that I should increase the amount of profit to the higher figure propounded by the plaintiffs and accordingly the relevant profit of which COTC is entitled to 15% is $14,310,914.80, being $2,146,637.22. 68 Findings have already been made in the Judgment that Stamoulis acted in breach of his fiduciary duty by involving KCOTC in unauthorised transactions in the OSJVA Land Play. However as recorded in paragraph 308 of the Judgment, any involvement of KCOTC in the Land Play under the Supplemental Agreement would not have been in breach of such duty. Paragraph 309 of the Judgment recorded that KCOTC was probably entitled to "nominal damages". On reflection the more accurate expression would probably be "nominal equitable compensation", but in any event no submissions were made on this topic during this aspect of the proceedings and accordingly it is unnecessary to make any assessment in this regard.

Conclusion 69 COTC is entitled to an order in its favour against KDG in the amount of $2,146,637.22 plus interest. There will be an order in COTC's favour against KNG, Stamoulis and S Stamoulis for the payment of equitable compensation and damages in the contract claims in the amount of $631,123.91 plus interest, however it will not be entitled to recover those amounts in excess of the amount awarded in respect of the account of profits against KDG. 70 There have already been findings made in the Judgment in relation to the indemnity claim. KNG is liable to indemnify KCOTC in the amount of $230,174.17. COTC is liable to indemnify KCOTC in the amount of $49,323.04. 71 The parties are to bring in Short Minutes of Order reflecting these findings on this aspect of the matter including the calculation of interest in respect of each award. If the parties are unable to agree on a costs order, I will hear argument when the matter is listed for the filing of Short Minutes. The parties should make contact with my Associate to have the matter re-listed for that purpose.

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