Coonwarra Pty Ltd v CornoNero Pty Ltd [2023] VSC 781

A special resolution of the board is required in respect of the following matters (except where they have been included in a Budget and/or Business Plan approved by the Board):

...

• The execution of any contract or entering into any commitment with a value of $500,000 or more in a financial year.

1. It will be seen then, a special resolution was required for the execution of contracts of a certain value (of which the Development Guarantee was one) but that was attenuated by the caveat that no special resolution was required where a 'matter' was 'included' in a budget or business plan that was approved by the Board. It is implicit in the text of that provision that a contract of the relevant value could be 'included' in a budget or business plan. There was no evidence concerning the practice that the Board adopted in respect of the inclusion of contracts in a budget. The evidence (which is unnecessary to set out here) established a lengthy history of discussion at Board level about the Mernda project and specific discussions about the Mernda Development Agreement, a copy of which was produced to the Board in May 2016. The budget for the Mernda project was approved by the Board at its meeting on 8 August 2016. Breckenridge had provided the Guarantee to Coonwarra three days earlier. There was no evidence that the Development Guarantee itself was the subject of discussion or that it was produced to the Board or that it was referred to in any way, in the approved budget.
2. I accept that Breckenridge understood the Guarantee as being intimately connected with the Mernda Project because proffering it was the price, in effect, for Coonwarra agreeing to execute the contract of sale to MJSC. However, on the evidence, I do not consider that it is established that the Development Guarantee was 'included' in the budget approved by the Board. The question of 'inclusion' ought be understood in relation to what was before the Board, in one way or another, in connection with the budget that it was being asked to approve.
3. As CornoNero's CEO, Breckenridge was expressly authorised under the Shareholders Agreement with managing the daily business of the company including by managing all contracts relating to projects undertaken by the company and negotiating terms for new projects, but was to do so in accordance with the business plan and budgets approved by the Board. The general conferral of authority, in the particular context of CornoNero as expressed in its governing documents, did not give rise to implied actual authority to execute contracts other than in accordance with the provisions of the Shareholders Agreement.
4. I conclude that Breckenridge did not have actual authority to enter into the Development Guarantee.
5. CornoNero separately submitted that if the Development Guarantee was executed on its behalf, it was on binding on it because it was not validly executed in any of the ways permitted by CornoNero's constitution. The constitution provided relevantly that the company may execute documents without affixing a common seal, by the signature of two directors. However, the Shareholders Agreement (which provided that it was to prevail over the constitution in the event of an inconsistency) dealt directly with issue of the authority required to enter contracts for the company.
6. CornoNero then referred to ss 127 to 129 of the Corporations Act 2001 (Cth) (Corporations Act) which are relevant to the effect that, a person is entitled to make certain assumptions in relation to dealings with a company, including that a document has been duly executed by the company if it appears to have been executed in accordance with s 127(1). That sub-section provides that a company may execute a document without using a common seal if it is signed by two directors. The point was that Coonwarra was not entitled to assume that the document had been duly executed. That did not take the matter very far. Those provisions do not replace general law principles concerning agency, noting that the assumptions in s 129 in some respects overlap with common law doctrine of ostensible authority. The substantive question was whether Breckenridge had the authority to bind CornoNero to the Guarantee.
7. Coonwarra ultimately rested its case on Breckenridge's ostensible authority, which CornoNero denied. Coonwarra submitted that Breckenridge had dealt with Ben and Martin Van der Burgt from the outset in relation to the development of the Mernda Land and the ADA. It was apparent from the manner in which he dealt with Coonwarra that he had the authority of Trimont and then CornoNero. Martin and Ben were told expressly in relation to the transition from Trimont to CornoNero, that Coonwarra would continue to deal with Breckenridge in the same way that they dealt with him before, as Trimont. Breckenridge accepted in his evidence that the Van der Burgts dealt with him thereafter, 'as Trimont Australia'. Nothing changed once Breckenridge was representing CornoNero. He ran the project and plainly had decision-making authority at all relevant times. Breckenridge was 'the person' who, as far as Coonwarra was aware from all of its dealings with CornoNero, held the authority for CornoNero in respect of the Mernda project.
8. Coonwarra said that there was nothing in the evidence to suggest that Breckenridge lacked any authority to deal with Coonwarra. The contention that Coonwarra was put on notice (and that a reasonable person would have appreciated) that the activities in which Breckenridge was engaged in in relation to the Mernda development was outside the scope of CornoNero's business, finds no support in any objective evidence, which is in fact to the contrary.[130]
9. CornoNero submitted as follows:

(a) Estoppel is the foundation of ostensible authority, that is, reasonable reliance on a representation by a principal as to the contractual authority of the agent, from which it would be unjust for the principal thereafter to resile.[131]

(b) The representation may consist solely in investing the agent with a particular office. In that case, evidence must be adduced of the usual authority of the office.[132] For a representation to give rise to ostensible authority it must be a representation of the principal, and not merely by the agent.[133] As CornoNero put it, a person who claims to have authority cannot pull himself up by his own bootstraps. A representation by the principal - an independent act - must be found, by which it held out Breckenridge as having authority to enter the Development Guarantee. CornoNero did not hold out that Breckenridge had authority to enter into the Development Guarantee. Coonwarra did not establish the conduct of CornoNero by which that occurred. Breckenridge was one of several directors and had no such usual authority as a single director.

(c) The Development Guarantee was not offered in the usual course of CornoNero's business, nor was it incidental to some other transaction taking place between CornoNero and Trimont. CornoNero was not engaged in any dealing with Coonwarra in August 2015.

(d) Coonwarra was not relying on the authority of Breckenridge, but rather was 'leveraging from Breckenridge's entreaties that Coonwarra sign the contract of sale of its land in order to bargain for a guarantee that promises made by Trimont to Coonwarra, almost two years prior, would be met'.

1. CornoNero said that by the relevant time, Coonwarra knew:

(a) CornoNero was a different company to Trimont;

(b) Geoff Brady was a significant investor or shareholder in CornoNero but he was not an investor or shareholder of Trimont;

(c) Trimont was party to the ADA, but CornoNero was not a party to the ADA and had not assumed the obligations owed by Trimont under the ADA to Coonwarra nor was the ADA novated to CornoNero by Trimont;

(d) It was no part of Trimont's role (or CornoNero's, if it assumed the ADA) to be selling land under development. The purchaser of the Land would decide what occurred in respect of the development, not Trimont or Coonwarra. A reasonable person in Coonwarra's position would have appreciated that the work that was being carried on in relation to the Land was for the benefit of the purchaser and not pursuant to the ADA, which had been abandoned.

(e) The sale process of CornoNero developing the Mernda Land pursuant to the Mernda Development Agreement could not generate the profits necessary to make good the Development Guarantee. The purpose of CornoNero, as a building company, was to generate profits, and you would expect the CEO to be taking steps to generate profits. It must have been apparent to Coonwarra (or more relevantly to a reasonable person in its position) that Breckenridge was not pursuing the interests of CornoNero in the transaction in which he was dealing with Coonwarra. It must have been apparent that Breckenridge was acting contrary to his duty in promising Coonwarra that CornoNero would also pay Coonwarra the value of the Mernda Land and one half of any profit accruing to CornoNero from performing the work required by the Mernda Development Agreement.

1. Further, the statement in clause 1(b) of the Development Guarantee that 'the Developer commits to continue this relationship under this ADA' was nonsensical and objectively put Coonwarra on notice that Coonwarra could not assume that Breckenridge had any authority to enter into such agreement. It was for the purchasers of the Land to determine whether, when and how, they developed the Mernda Land, and they had excluded Coonwarra from any role under the Mernda Development Agreement. These matters would have caused a reasonable observer to conclude that Breckenridge was acting outside his authority.

Consideration - ostensible authority

Legal Principles

1. An agent may bind its principal only if it has actual or ostensible authority to do so.[134] Ostensible authority will arise where a putative agent is 'held out as having authority' to act on behalf of the principal, and a third party has dealt with that agent on the basis of the principal's holding out.[135] As Nettle JA said in NIML Ltd v Man Financial Australia Ltd:[136]

a third party dealing in good faith with an agent acting within the scope of ostensible authority is not prejudiced by the fact that the agent is in fact acting in abuse of his authority. So much is the consequence of a doctrine of ostensible authority that represents a species of estoppel operating within the framework of agency principles.

1. His Honour went on, in the context of that case, to say:[137]

If, therefore, an agent, acting within the scope of ostensible authority, although in fact beyond authority, draws a cheque in favour of a named payee and the named payee, while knowing no more than that the drawing is within the scope of the agent's ostensible authority, receives payment on the cheque, the drawing may be binding as between the agent's principal and the named payee.

1. Ostensible authority may arise where the agent has been permitted to assume a particular position that carries a usual authority, and where a specific representation has been made as to the agent's authority. However, it is not confined to cases in those categories. The representation that created the authority may take a variety of forms. A course of conduct or dealing may constitute a relevant representation. Ostensible authority arising out of a course of dealing is a form of conventional estoppel.[138]
2. Whelan J helpfully summarised the principles concerning 'holding out' in Flexirent Capital Pty Ltd v EBS Consulting Pty Ltd, in the following terms:[139]

The principles which I draw from this analysis of the authorities having particular relevance here are the following:

(a) Apparent authority operates as an estoppel preventing a principal from asserting that the principal is not bound by a contract where the principal has held the agent out as having authority.

(b) The holding out may be of a general character, arising for example out of an office or position in which the principal places the agent, or it may be specific to a particular transaction. The holding out may take the form of the setting up of an organisation or structure which presents to outsiders an appearance of authority in the agent.

(c) The holding out must be conduct by the principal, not the agent.[140] A third party cannot rely upon the agent's own representation as to authority. But this does not mean that the agent's conduct is to be ignored. The principal may hold out the agent as having authority by permitting the agent to act in a certain way or to make representations about himself or herself, or the principal may hold the agent out by equipping or arming the agent with a document or thing which enables the agent to assert authority with the hallmark of authenticity.

(d) The holding out may also result from permitting an agent to act in a certain manner, or by equipping or arming the agent, or by a failure to take proper safeguards against misrepresentation by the agent.

(e) The principal's conduct is to be assessed as a whole and in its totality.

(f) The apparent strictness of the approach in Russo-Chinese Bank and in Armagas in relation to the known existence of a limitation upon the agent's authority must be read in the light of the High Court's emphasis in Pacific Carriers upon the need to consider the totality of the principal's conduct, and in the light of the High Court's analysis in Crabtree Vickers and in Pacific Carriers of the circumstances in which an agent's assertion of authority may, in the particular context, be a representation or holding out by the principal. As the decision in Essington well demonstrates, the issue is to be resolved upon an analysis of the particular facts of each case. In a particular case a known limitation upon an agent's authority might prevent an estoppel from arising. It seems to me that that would not invariably be the case, as it is necessary to assess the whole of the principal's conduct in the particular circumstances, and, in particular circumstances, a holding out may exist which it would be inequitable to allow the principal to resile from, notwithstanding the existence of a known limitation upon the agent's authority.

1. Ostensible authority bind the principal to the 'full extent of the apparent authority'. The nature of the representation (whether by words or conduct) therefore determines the scope of the authority.[141]
2. Because ostensible authority is concerned with representations (as understood in the context of estoppel), private instructions to the agent (of which the third party has no notice) cannot operate to limit the scope of ostensible authority.[142] An agent's ostensible authority will only be confined by 'publicised' limits placed on it.[143] As the English Court of Appeal said in AMB Generali Holding AG v SEB Trygg LIV Holding AB:[144]

An alteration on the principal's part of the relationship between himself and the agent cannot, once the estoppel has been created, alter or withdraw the representation if the representation is not communicated to the representee.

1. In order to satisfactorily show that a putative principal is estopped from resiling from the third party's assumed belief as to the agent's authorities, the third party must show that it relied upon the principal's representation. Reliance is what makes departure from an assumed state of affairs unconscionable or unconscientious. Accordingly, proof of reliance is essential. Furthermore, the question of whether departure from the assumed state of affairs would be unconscionable must be resolved by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption.[145]

1. If Breckenridge did have ostensible authority to enter into the Guarantee, it was by a course of conduct by CornoNero holding him out as having such authority. The relevant evidence (which I shall state in summary form with reference to relevant findings, having regard to what has been sent out at length earlier) was as follows:

(a) CornoNero was in existence from 1 June 2015. Ascenzo was its sole director from that date until 14 September 2015.

(b) Breckenridge was CornoNero's CEO, and started acting in that role from 1 July 2015. He was doing so with the authority of Ascenzo. Ascenzo's evidence was that Breckenridge became the CEO of Trimont Australia and 'ran the project' (meaning Mernda) with the assistance of James Hunt, who had also commenced employment with Trimont Australia.

(c) It was evident from the manner in which Breckenridge dealt with the Mernda project in all of his communications with Coonwarra that he had broad authority to make any and all decisions in respect of the project.

(d) The purpose of the Asset Development Agreement was the development of the Mernda Land. Coonwarra and Trimont had worked together under the ADA, and agreed that the Land would be developed in a 'fund-through' structure that would ultimately involve the sale of the Land. That was to occur in context where the ADA provided that Coonwarra was to be reimbursed for the land value and, among other things, the parties would share profits. In pursuit of that objective, Trimont and Coonwarra took steps to develop the Land. The pursuit of that objective did not involve an abandonment of the ADA.

(e) Breckenridge told Ben and Martin in July 2015 that the ADA would transfer across to Trimont Australia and that Coonwarra would continue to deal with Breckenridge as the key person as it had done previously.

(f) Breckenridge accepted that from then on, Ben and Martin Van der Burgt dealt with him (Breckenridge) 'as Trimont Australia'.

(g) What happened thereafter, was the continued pursuit of the development of the land, between CornoNero and Coonwarra, as set out in Part II of these Reasons. As I have said earlier, the course of their subsequent dealing was consistent with CornoNero and Coonwarra conducing a contractual relationship on the terms expressed in the ADA as originally documented.

(h) Negotiations continued with BidCo in respect of the anticipated agreement for the development of the Mernda site. Ongoing negotiations occurred with Coles in relation to the proposed agreement for lease. Coonwarra knew that those things were occurring, by Breckenridge or under his direction, with the assistance of CornoNero staff.

(i) Breckenridge told Coonwarra it would need to execute a contract for the sale of the land and the agreement for lease with Coles. In December 2015, Breckenridge sent Ben Van der Burgt a summary of projected returns for the Mernda project.

(j) Ben Van der Burgt, for Coonwarra, pursued a guarantee because he was concerned about the fact that the development agreement was to be entered into between CornoNero and MJSC, to which Coonwarra was a not a party.

(k) On the question of who Breckenridge was acting for when dealing with Ben Van der Burgt, in the context of Breckenridge urging Ben to have the contract of sale of land executed and of Ben seeking a guarantee, Ben gave the following evidence when cross-examined by CornoNero:

1. Mr Breckenridge was urging you to sell. He was acting for Coonwarra, wasn't he, in terms of selling for Coonwarra, Coonwarra's land, as you understood it?

A No. He was acting for the benefit of the ADA.

1. The party to the ADA who was to benefit by this was Coonwarra?

A Coonwarra and CornoNero.

Q What interest was it of CornoNero that the land be sold"

1. It formed part of the development agreement. We were doing it together. It was an ADA between us and at that point, CornoNero.

Q That was your state of mind?

A Yes.

1. Ben's evidence was consistent with the fact that the sale of the Mernda Land was required in order for the deal with MJSC to go ahead. The land that was to be sold to MJSC had been developed to that point (including by obtaining planning authority and a lead tenant in Coles) and was ready for construction. With a guarantee in place, that deal was understood to be one in which both parties (Coonwarra and CornoNero) would benefit, consistently with the objectives of the ADA. In bringing about that arrangement, Ben understood Breckenridge to have been acting, under the ADA, for both Coonwarra and CornoNero. That evidence was coherent and reflected a rational understanding of the facts, in accordance with what Coonwarra had been told.
2. As to the question whether CornoNero's business extended to development activities (as opposed to merely building), the evidence was as follows:

(a) Stannard's due diligence report dated 1 May 2015, prepared for the Brady interests, stated that Trimont was a 'design, construct and development organization that manages the project process from first building concepts to final handover to clients'. It was said to have two revenue streams including the provision of complete building services from design, planning and construction to final handover.

(b) CornoNero's Business Development Report, dated 24 July 2015, was circulated ahead of the informal board meeting on 28 July 2015. It listed projects alongside a brief description. For 'Iona Toorak' it stated 'five high end apartments lodging into Council', while the description for the Hawthorn project was 'awaiting advertising. Large scale residential development'.

(c) Under the BSA, CornoNero acquired the rights to six written contracts and eight unwritten contracts described in Sch 6 (including Plenty Road, Mernda). The unwritten contracts meant the listed 'proposed and/or current building, development and construction projects', which were not subject to any written terms and conditions. Schedule 2 of the BSA indicated that CornoNero had 18 employees, eight of whom were tradespeople.

(d) The September 2015 Board reports included a report on the South Melbourne project. It referred to CornoNero receiving stamped plans and a permit, needing to seek an amendment to accommodate design changes and the commencement of a pre-marketing sales campaign.

(e) The September 2015 report for Ringwood referred to CornoNero receiving support from the Council, the possibility of objections and the anticipated period for endorsement. The report for Kensington said that CornoNero was working with consultants to have the property rezoned, with an anticipated council approval date. Following rezoning, CornoNero was then to submit plans for 'the usual development application process'. Reference was made in the Dandenong Board Report to an amendment being lodged after some design changes were requested. Details of tenants and associated rents and terms were provided.

(f) The September 2015 report for Mernda similarly described development work. It was reported that a permit was received in August 2014, through the Victorian planning minister and that plans had been submitted for endorsement. A copy of those plans were included in the report, with a tenancy schedule. Other reports about Mernda to the Board (to which reference was made earlier) also described design work.

(g) The CornoNero business plan for 2016, prepared 9 September 2016 (after but close to the date of the MDA) described CornoNero's products and services in these terms:

CornoNero is a construction business with the added ability to provide an end-to-end solution for any property development. CornoNero can acquire property, manage all stages of planning and documentation, find commercial tenants and finally construct the project which allows the investor to take a passive position in maximizing the value of their project.

Products/services: At CornoNero we offer the following services. We can be turned 'on' and 'off' as required in any stage of the development process.

Services:

1. Acquisition

2. DA application

3. Council Meetings

4. Lodgement of DA / VCAT management

5. Construction drawings

6. Tenants for commercial properties

7. Sales and marketing management

8. Bank funding assistance

9. Construction

10. Settlement management.

(h) Hartwig described the operations of CornoNero as a 'cradle to grave service'. He said in this evidence that 'it took projects from their commencement, assisted developers in obtaining planning permits, development approvals as required, leasing, sales and then positioned itself as the builder'. He said in relation to the Cheltenham Road, Dandenong project, that CornoNero did all of the design and planning work and negotiated agreements for lease with BP and Red Rooster. Similarly, a lot of planning work was done on the West Gosford project before it was 'ready to go' in 2017, in the sense of construction commencing.

(i) Geoff Brady was cross-examined on his contention that CornoNero was only a builder. His evidence was relevantly as follows:

(i) When the proposition that Trimont was a development company was put to him, he replied: 'I think if you look at the original presentation, the opportunity was to come into a building [sic] and work with builders, work with developers and financiers. I understood this business to be a building company'. He said that the meaning of 'Strong Development "Pipeline" established' in the Trimont Business Update/Proposal was that Trimont 'had developers looking for builders to build their properties for them'. Although he stated that he did not understand that Trimont was a development company, he acknowledged that Trimont was developing the Preston project (with his money).

(ii) When taken to the Stannards due diligence report and its statement that Trimont was a 'design, construct and development organization', he said that he knew Trimont was 'design and construct', but was a developer regarding Preston only. Although he acknowledged that was not reflected in the document, he continued to reject the proposition that Trimont was a design, construct and development organisation overall. When shown the reference to 'building services' in the report, he maintained his position that other than in relation to Preston, Trimont was strictly a construction company.

(iii) Geoff agreed that in relation to the BSA, that one or more of the schedule 6 projects could be building 'and/or' development 'and/or' construction projects. As to Mernda, he agreed that it was a development site and that Ascenzo was the developer. He said that '[Ascenzo] couldn't go on with it' and 'they were looking for a developer to take over the property'.

(iv) Regarding the report on the Toorak project (a Brady project) he said that he did not like the initial drawings that CornoNero had done, so he engaged someone else. When it was put to him that it was development work, he replied: 'Yes. No, no, it's development work for a person. It's building work for the person who is paying for it'. Upon further questioning, he sought to draw a distinction between work that was 'preparatory to building work' and 'development work'.

(v) Regarding the Hawthorn project (another Brady project), Geoff said that CornoNero had 'set up probably one of the ugliest building designs' he had seen from an architect. He agreed that a description of 'application and planning' in relation to Kensington sounded like development work. He accepted that it was not a surprise that CornoNero was doing that sort of work. Although he initially sought to describe the work referred to in the South Melbourne Board Report as preparatory work, he agreed that receiving permits and stamped plans, being permitted to commence demolition and undertaking sales campaigns was development work.

(vi) On the basis of the November 2015 Mernda PCG Report, he accepted that at a minimum, Mernda was a design and construction contract. It did not concern him that CornoNero was involved in the design and development of the project, 'in the early stages ... because [that was] common'.

(vii) After being taken to the February 2016 board report for Mernda, he gave evidence that he understood that CornoNero was progressing with works -designs, 'getting people in', looking for tenants, and that he would have been aware of that.

(viii) As to the Business Plan 2016, Geoff agreed that the description of products and services was consistent with his understanding. He agreed that CornoNero did things beyond construction like planning and documentation, finding commercial tenants and maximising the value of the project, all of which may be described as development work. He agreed that such work was within his contemplation in 2015 and 2016. He agreed that the list ran from acquisition right through to settlement management, covering things that might be required ahead of construction. He accepted that that was part of what CornoNero did and what Breckenridge and his staff were expected to do.

1. In my assessment, the evidence is sufficient to support the conclusion that CornoNero engaged in a course of conduct by which it held out to Coonwarra that Breckenridge had broad authority to act for CornoNero in respect of the Mernda project, including by entering into contracts and advising Coonwarra about actions that it should take in relation to the development under the ADA.
2. The course of conduct included a specific representation that Coonwarra could deal with Breckenridge for CornoNero (Trimont Australia) and in context, that representation conveyed that Breckenridge would be representing CornoNero in the same way that he had been representing Trimont, in connection with Coonwarra and the ADA.
3. The proffering of a guarantee to Coonwarra in the circumstances in which the land had been developed to that point under the ADA, employing Coonwarra's resources (its borrowings), would not in my view put a reasonable observer on notice that Breckenridge must have been acting outside of his authority. Because of the parties' relationship under the ADA and what had occurred in the development of the Land to that point, a reasonable observer would not have been put on notice that offering a guarantee to Coonwarra of a payment of land value and other entitlements as set out in the guarantee including a profit share, was acting contrary to the interest of CornoNero.
4. That conduct (proffering a guarantee, of the kind given and in the particular circumstances) was not so separate from the business of CornoNero as to lead a reasonable observer to think that Breckenridge cannot have been acting with authority.
5. The fact that Geoff Brady was (though GJB) a new shareholder in CornoNero and had not been a shareholder in Trimont would not in my view lead a reasonable observer to conclude that Breckenridge was somehow acting outside of his authority.
6. The course of conduct by CornoNero commenced when Ascenzo was in sole control of CornoNero. The difficulty inherent in the issue of authority for CornoNero's present directors is that CornoNero's internal structure changed significantly on and from 15 September 2015. After that point, Ascenzo was no longer the company's sole director, CornoNero acted through a board, and the authority of the CEO, Breckenridge, was subject to the provisions of the Shareholders Agreement. That internal change, however, was not communicated to Coonwarra. There was nothing about the change that would have put a reasonable person on notice. The fact that it occurred was not sufficient to curtail the scope of Breckenridge's ostensible authority.
7. That Coonwarra in fact relied on CornoNero's holding out of Breckenridge as having relevant authority is demonstrated by Ben Van der Burgt's communications with Breckenridge, including in respect of the progress of the development and the need, from Coonwarra's perspective, for a guarantee. The evidence set out above is sufficient to establish that its reliance was reasonable.
8. Accordingly, I conclude that Breckenridge acted within the scope of his ostensible authority in giving the Development Guarantee to Coonwarra. The same conclusion applies to the 5 August Letter.

E.2 Was the Guarantee supported by consideration?

1. CornoNero submitted that the Development Guarantee is a simple contract, not made under seal, that was not supported by any consideration moving from Coonwarra to CornoNero. It was not contested that consideration was required.
2. I accept Coonwarra's submission that if not for the proffering of the Development Guarantee, Coonwarra would not have sold the Land to MJSC. If not for the sale of the land, the contract with MJSC could not be executed. The importance of that deal to CornoNero at the time, is established on the evidence. Breckenridge's evidence was that he intended that Coonwarra would rely upon the Development Guarantee and Letter to enter into the contract of sale. He said that, 'with that satisfaction, they could sign a contract of sale'. The sale provided CornoNero with the opportunity to undertake development works pursuant to the Development Agreement with MJSC.
3. Coonwarra's agreement to sign the contract of the sale of land was at least, consideration moving from Coonwarra. The requirement that consideration must move from the promisee does not require that it move to the promisor. Consideration that takes the form of a detriment to the promisee need not confer a benefit on the promisor.[146] In any case, Coonwarra's agreement did, for the reasons explained, confer a benefit on CornoNero.

E.3 Did the Guarantee oblige CornoNero to pay Coonwarra as alleged?

1. Coonwarra contended that CornoNero was bound by the terms of the Guarantee, to pay by no later than the Sunset Date of 1 November 2018, the land value amount being $6,500,000 plus CPI annual increases from 2013, and moneys pursuant to the ongoing income term.
2. CornoNero submitted that even if the Development Guarantee was binding, CornoNero did not breach it because, on a proper construction of the Development Guarantee, the obligation was to pay the guaranteed amount from the Residual Amount, in the alternative of Centre Completion. The Mernda Development Agreement was not completed not was there any Residual Payment. Accordingly, CornoNero says that no obligation would have arisen and therefore there could be no breach of the Development Guarantee.
3. When construing guarantees:

(a) The Court must consider what a reasonable person in the position of the parties would have understood the words to mean by reference to the ordinary principles of contractual construction, which includes reference to the text, the surrounding circumstances known to the parties and the purpose and object of the transaction.[147]

(b) In interpreting the words and resolving any ambiguity, the Court should proceed in a common sense and non-technical way and reach a commercially sensible construction.[148]

(c) Where two competing constructions are open, the preferred construction is the one that avoids capricious, unreasonable, inconvenient or unjust consequences.[149]

(d) Any ambiguity should be construed in favour of the surety (i.e. against Coonwarra).[150]

...This guarantee will be in the form of the Land Value payment upon "Centre Completion" as defined in the Development Agreement.

The current estimated date for Centre Completion is noted as the Date for Practical Completion ... in the Development Agreement.

The Development Agreement (i.e. the MDA) was attached to the Guarantee and defined in the Guarantee.

The Guaranteed amount is to be made in full no later than the Sunset Date.

...

The Guaranteed amount will be paid from the Residual Amount.

'Sunset Date' was defined as 1 November 2018. Read in context, the reference to Sunset Date was a reference to that date as stipulated in the MDA. Clause 24.2 of the MDA provided that owner (MJSC) could terminate the MDA by written notice to the Developer (CornoNero) if centre completion did not occur by the Sunset Date.

'Residual Amount' was defined as 'that amount referred to as the Residual Payment between MJSC and CornoNero in the Development Agreement'. The MDA employed the expression, 'Residual Amount', which was defined as, 'the Development Sum less the aggregate amount of progress claim paid under clause 19'. The development sum was the amount of $25,408,680 adjusted in accordance with specified clauses. Under clause 19.1 the residual amount was to be paid within seven days after Centre Completion, subject to the satisfaction of certain conditions. Centre completion required certain milestones to be reached including a certificate of practical completion, the issue of an occupancy permit and Coles commencing trading.

1. Taken by itself, without reference to the balance of the agreement, the term in clause 2 that, 'the Guaranteed amount is to be made in full no later than the Sunset Date' might be read as a promise to pay the guaranteed amount by the Sunset Date, absolutely. But that reading would be a-contextual. Read contextually, that clause is a time-specification predicated on the assumption that the work under the MDA has proceeded. It does not overcome the effect of the clear meaning of the terms set out above, which is that the guaranteed amount was to be paid from the residual sum, upon centre completion. That had the result that in order for Coonwarra to be entitled to a payment under the Guarantee, a residual payment had to be available under the MDA.
2. There was nothing in the commercial context (as evidenced by the negotiations between Breckenridge and Ben Van der Burgt) that suggests that this reading is uncommercial. The Guarantee was said to be made in accordance with the ADA. The ADA itself provided that from the 'revenue' from the development, any finance including mortgages were to be paid, followed by a payment to Coonwarra for the 'agreed land value'. Coonwarra was never, under the ADA, entitled to a payment other than out of development revenue.
3. No residual payment was made under the MDA. CornoNero terminated the MDA and did not proceed with the development. It follows that there was no breach of the Development Guarantee.

1. On 5 August 2016 (after a meeting held on that day, as set out earlier), Breckenridge sent on CornoNero letterhead addressed to Martin Van der Burgt, with Breckenridge's signature and title as CEO of CornoNero. The letter relevantly read:

Re: MERNDA DEVELOPMENT - ASSET DEVELOPMENT AGREEMENT ("ADA") GUARANTEE

As per my discussion with Ben Van Der Burgt today, I confirm that in accordance with our previous ADA, I as a Director and CEO of CornoNero Pty Ltd confirm acceptance of this agreement. I appreciate your commitment and involvement to date, and I wish to personally guarantee the following payments from the Development Sum payable to CornoNero under its Development Agreement with Mernda Junction Shopping Centre Pty Ltd.

It is proposed that the following payments will be guaranteed from the Residual Payment at the completion of the Development Agreement, less any progress claims to Coonwarra as agreed along the way:

1. Land Payment (as per ADA) of $6.5m plus the specified interest payable.

2. 50% of any profit payable after audited/agreed costs are deducted from the Development Sum.

I look forward to formalising this agreement and the type of security with you, however as discussed with Ben, I am comfortable in underwriting a guaranteed level of profit a per our original ADA and its associated Estate Master Feasibility.

1. By this letter, Coonwarra claims that Breckenridge personally guaranteed that he would pay to Coonwarra $6.5 million plus interest as specified in the ADA, and a payment of 50 percent of profits after audited or agreed costs are deducted from the Development Sum (as defined in the ADA).
2. Breckenridge denied that he was liable under the Guarantee. He submitted that:

(a) The Letter should not be construed as a guarantee, but is properly construed as statement of an intended proposal to be effected by a formally-prepared guarantee;

(b) If the Letter was construed as containing a binding guarantee, it binds CornoNero, not Breckenridge personally. A reasonable person in the position of the directors of Coonwarra would have understood the 5 August Letter as a guarantee from CornoNero, not Breckenridge personally.

(c) Any obligation it contains was conditional on CornoNero first receiving the residual payment under the Mernda Development Contract, and that contingency never materialised.

(d) The evidence shows that Coonwarra rejected the 5 August Letter when it demanded a more formal document (the Development Guarantee), and any rights Coonwarra may have had pursuant to the 5 August Letter have merged with or have been discharged by the Development Guarantee.

1. In respect of the third-mentioned point, the conclusion I have reached in respect of the Development Guarantee applies a fortiori to the Letter. It plainly expresses that the 'guaranteed' payments will be paid 'from the residual payment at the completion of the development agreement, less any progress claims to Coonwarra agreed along the way'. There is nothing in the Letter to the contrary. I accept Breckenridge's submission.
2. As to the fourth-mentioned point, Breckenridge's evidence was that having received the Letter, Ben told him that Coonwarra wanted a more formal document, to be prepared by CornoNero. That evidence was not contradicted. Breckenridge in fact proceeded to prepare a guarantee which he provided to Coonwarra, and Coonwarra executed the Guarantee before it agreed to execute, and executed the contract for the sale of the Land. I accept Breckenridge's submission.
3. It is unnecessary to determine the first and second issues raised in Breckenridge's submissions.

F Breaches of fiduciary duty and third party liability

1. Coonwarra's case was that Trimont and CornoNero acted in breach of their fiduciary duties by conduct connected with the procuring of, and use of funds drawn under the three Loans. Trimont is not party to these proceedings but allegations were made concerning it for the purposes of Coonwarra pursuing 'third party' liability for fiduciary breaches against Ascenzo and Breckenridge.
2. Given the findings I have made elsewhere in these Reasons, the framework for approaching the breach of fiduciary duty and third party liability questions is as follows:
3. First, Trimont and Coonwarra were in a fiduciary relationship, under the ADA, in and after December 2014. The First Loan was obtained and funds disbursed under it in December 2014. No breach arises in respect of that loan. I have not specifically addressed breach of fiduciary duty to this point, but that conclusion follows from the conclusions reached in respect of Coonwarra's agreement concerning the payment of funds borrowed under the First Loan, to Trimont, for the reasons set out earlier. Further, the evidence does not establish that that part of the First Loan that was not designated 'reimbursement' for Trimont's past work was not used for the Mernda Development.[151]
4. Second, the ADA was novated to CornoNero in July 2015. At that time CornoNero assumed fiduciary obligations to Coonwarra (as described). The Second and Third Loans were obtained and drawn down in August 2015 and February 2016 respectively.
5. The issues for decision, on Coonwarra's claim are therefore:

(a) Whether CornoNero breached its fiduciary duty to Coonwarra by conduct attributable to it in respect of the Second Loan or the Third Loan;

(b) Whether Ascenzo or Breckenridge procured CornoNero to commit any breach of fiduciary duty;

(c) Whether CornoNero knowingly received funds drawn down under Second or Third Loans as property the subject of fiduciary duties;

(d) Whether the breaches were a dishonest and fraudulent design by CornoNero to use the Land as security to obtain funds to be used for purposes other than the development of the Land and if so, whether Ascenzo or Breckenridge knowingly assisted CornoNero to commit the breaches to give effect to the dishonest and fraudulent design.

Attribution of conduct and knowledge to a company

1. In respect of the claims against or concerning CornoNero, questions of attribution of the conduct and state of mind of the individual actors (Ascenzo and Breckenridge) to the company become relevant. It is convenient to set out the relevant principles.
2. As Brennan J said in Northside Developments Pty Ltd v Register-General:

A company, being a corporation, is a legal fiction. Its existence, capacities and activities are only such as the law attributes to it. The acts and omissions attributed to a company are perforce the acts and omissions of natural persons.[152]

1. Rules have been developed to identify the circumstances in which the conduct or knowledge of a natural person ought be attributed to a company. Broadly, two overlapping analytical frameworks have been recognised in this regard: the 'organic theory' of attribution and the rules of attribution as identified in Meridian Global Funds Management Asia Ltd v Securities Commission.[153]
2. In most circumstances, the principles of agency will apply to determine whether the actions and state of mind of a director of a company can be attributed to the company.[154]
3. The relevant principles of agency regarding ostensible authority are discussed earlier (in the context of the guarantee claims). It will be recalled that ostensible authority may arise where the agent has been permitted to assume a particular position that carries a usual authority, and where a specific representation has been made as to the agent's authority. However, it is not confined to cases in those categories. The representation that created the authority may take a variety of forms. A course of conduct or dealing may constitute a relevant representation. Ostensible authority arising out of a course of dealing is a form of conventional estoppel.[155] Because ostensible authority is concerned with representations (as understood in the context of estoppel), private instructions to the agent, of which the third party has no notice, cannot operate to limit the scope of ostensible authority.[156] An agent's ostensible authority will only be confined by 'publicised' limits placed on it.[157] As the English Court of Appeal said in AMB Generali Holding AG v SEB Trygg LIV Holding AB:[158]

An alteration on the principal's part of the relationship between himself and the agent cannot, once the estoppel has been created, alter or withdraw the representation if the representation is not communicated to the representee.

1. One basis of attribution is what has become known as the 'alter-ego' doctrine, which provides that where an officer or agent's state of knowledge is so centrally concerned with the company's operations as to be considered its 'directing mind or will', that agent's state of mind may be considered the company's state of mind for the purposes of the relevant transaction.[159] That doctrine has been developed in civil and criminal jurisdictions, 'a company having no mind or will of its own, the need for it arises because the criminal law often requires mens rea as a constituent of the crime and the civil law intention or knowledge as an ingredient of the cause of action or defence'.[160]
2. The role of the 'directing mind and will' analysis has received some criticism since Meridian.[161] However, it is still regarded of assistance and is approached pragmatically, with a focus on the particular acts or omissions in issue.[162] In Commonwealth Bank of Australia v Kojic,[163] Edelman J said that although 'directing mind and will' involves an anthropomorphism which can be misleading, in many cases it presents no difficulty.[164] It obviously has ready application in the case of a 'one-person company' which is 'an easy case for attribution'.[165] Where a director is the directing mind and will of two companies, each company will know what the other knows.[166]
3. Knowledge is not to be imputed to a corporation 'generally or in the round'. It is necessary to identify a 'specific natural person or persons whose knowledge is to be imputed to the corporation in relation to the particular act or omission at issue'.[167]
4. According to principles of agency, the knowledge of an agent acquired while acting for their principal will ordinarily be attributed to the principal.[168] That general proposition is subject to numerous exceptions. There is 'no overarching principle that a principal is deemed to know at all times and for all purposes that which the agent knows'.[169] Usually, for the agent's knowledge to be attributed to the principal, the knowledge must have been gained within the scope of the agent's actual or ostensible authority. Provided that an agent is acting within the scope of his or her authority,[170] a principal will be liable for acts performed within the agent's actual or ostensible authority.[171] However, the principal will not incur liability where an agent acts in excess of actual authority and the third party had notice that in doing the act the agent may have been exceeding her or his authority.[172]
5. Whether the agent is acting in a particular transaction within the scope of his authority can be examined by reference to whether the agent was under a duty to communicate the knowledge gained in the course of his engagement. As the High Court said in Sargent v ASL Developments Ltd:

As against a third party the law imputes to a principal knowledge gained by his agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty of the agent to communicate it to the principal.[173]

1. Whether the knowledge of a director is attributable to the company depends on considerations of the context and the purpose for which the attribution is relevant.
2. The inquiry begins with identifying the relevant legal rule or cause of action which necessitates the consideration of whether a director's knowledge ought to be attributed to the company.[174] For example, in the context of a equitable claim against a company for knowing assistance in a dishonest and fraudulent breach of fiduciary duty, the relevant inquiry is whether the conduct and knowledge of the company's director, through whom the company acts, ought to be attributed to the company for the purpose of satisfying the elements of the knowing assistance claim.[175]
3. Having regard to the principles of agency set out above, the question must be asked, in the course of engaging in the impugned conduct, was the director acting within the actual or apparent authority in their capacity as director of the company.[176] If answered in the affirmative, then the knowledge of the director is attributable to the company, even if the director was acting fraudulently.[177] As the New South Wales Court of Appeal said in Beach Petroleum NL v Kennedy,[178] 'acts of agents within the scope of their actual or apparent authority do not cease to bind the principal merely because the agents were acting fraudulently and in furtherance of their own interests'.
4. In certain circumstances an exception to that proposition will apply. A director's knowledge that would otherwise be attributable to the company, will not be so attributed if the conduct of the director was 'totally in fraud of the company'.[179] 'Total fraud upon the company' has variously been defined as acts or activities 'directed against the interests of the company',[180] 'illegal acts adverse to the company's interest'[181] and 'conduct that is entirely contrary to, and an abandonment of, the company's principal interests',[182] and is said to extend to breach of fiduciary duty 'at least where the fiduciary's conduct is morally reprehensible'.[183] An act will not be considered 'totally in fraud of the company' if it 'by design or result partly benefits the company'.[184]
5. It is, however, recognised that authorities which lend support to the 'fraud exception' have concerned cases between companies and their fraudulent directors or agents. In those circumstances, attributing the director's knowledge of fraudulent design to the company so as to defeat the company's claim against the director is said to be irrational[185] and paradoxical.[186] On the other hand, where the circumstances of attribution arises in the context of a third party suing the company and the company seeks to prevent the attribution to it of the knowledge of its defaulting director, different considerations apply.[187] In the course of discussing the 'fraud exception' the Victorian Court of Appeal in Australia Kunqian International Energy Co Pty Ltd v Flash Lighting Company Ltd observed that:[188]

[English authorities] have ... stated that there is a distinction between attributing a directors knowledge to the company where the purpose of the attribution is to apportion responsibility between the company and its agents so as to determine their rights and liabilities to one another on the one hand, and where the purpose is to apportion responsibility between the company and a third party on the other. In Bilta (UK) Ltd (in liq) v Nazir [No 2], that distinction was articulated by Lord Toulson and Lord Hodge JJSC in the following terms:

[A]s between the company and the defrauded third party, the company should be treated as a perpetrator of the fraud; but in the different context of a claim between the company and the directors, the defaulting directors should not be able to rely on their own breach of duty to defeat the operation of the provisions of the Companies Act 2006 in cases where those provisions were intended to protect the company.[189]

1. Coonwarra accepted that it must prove its accessorial liability claims to the Briginshaw[190] standard. The assessment required by Briginshaw must be kept in mind when analysing the serious allegation that a third party is liable as a knowing participant in a dishonest and fraudulent design.[191] Clear and cogent proof is necessary.[192] As the Victorian Court of Appeal said in GP Building Holdings v Voitin[193], the application of s 140 of the Evidence Act and Briginshaw is not binary, but operates on a spectrum. Where an allegation is one of fraud, it must be distinctly pleaded and proved. A court should not make a finding on inexact proofs, indefinite testimony or indirect inferences.[194] The Court of Appeal referred to the observation of Gageler J in Henderson v Queensland[195] that the process of inferential reasoning involved in drawing inferences from facts proved by evidence adduced in a civil proceeding cannot be reduced to a formula and is informed by a number of principles including Briginshaw, and all the evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.
2. In GP Building Holdings v Voitin,[196] the Court of Appeal held that the trial judge had erred in treating allegations that the defendant had knowingly received trust moneys as akin to fraud in applying the Briginshaw test. The Court said that of course, the judge had to be satisfied in the sense of an 'actual persuasion' of the occurrence of the thing in issue, and that the gravity of the allegation was a relevant factor.[197]

F.1 Breach of fiduciary duty by CornoNero

1. Coonwarra alleged (relevantly) that at the instigation of Ascenzo, Breckenridge and CornoNero, Coonwarra entered into the Second and Third Loan Agreements in order to borrow moneys for the ADA and the development of the Mernda Land. The funds drawn under the loan were not used for the development but were used for the payment of unrelated debts. The purpose of the ADA was clear - to develop the Land for joint (mutual) benefit of both parties. In paying or receiving funds as it did, CornoNero breached its fiduciary duties to Coonwarra not to gain a profit or advantage for itself or for Trimont.
2. Since Breen v Williams,[198] it has been settled law in Australia that fiduciary duty consists of two proscriptive duties, namely:

(a) the duty of the fiduciary not to position himself in a conflict of interest without the beneficiary's informed consent (conflict rule);[199] and

(b) the duty of the fiduciary not to profit for himself or another from his position as a fiduciary without the beneficiary's informed consent (profit rule).[200]

1. The object of the imposition of fiduciary duties is to deter the fiduciary from acting against the best interest of the beneficiary.[201] The obligation of the fiduciary to account 'arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed'.[202] In other words, the fiduciary will be held liable his conduct amount to a breach of duty, regardless of the subjective intention of the fiduciary.[203]
2. Coonwarra submitted in respect of the funds from the Second Loan:
3. It is not disputed that the Second Loan Funds were paid to Trimont, BCP and other creditors of Trimont. Those funds were the subject of fiduciary duties owed by CornoNero to Coonwarra because the ADA had been novated to CornoNero at the time of (albeit just before) entry into the Second Loan.
4. Despite its fiduciary duties, CornoNero breached those duties by allowing the moneys to be disbursed for purposes other than the development of the Mernda property, i.e. by allowing Trimont to receive those funds.
5. CornoNero knew this through Ascenzo, who was at the time its sole director, and through Breckenridge, who was its CEO.
6. Breckenridge admitted in cross-examination that he told Ben Van der Burgt that more moneys were need for the development. He also accepted that he knew that the moneys drawn down on the Second Loan were used for purposes unrelated to Mernda. He said, 'I definitely knew that they weren't paying invoices because I was doing work at Trimont Australia'. He agreed that he knew that 'Trimont was using this money to pay other bills'. He also accepted that he knew where the moneys were being directed from the Second Loan. He agreed that the $3.6 million advance wasn't used for the advance of the Mernda development. He had the same knowledge in respect of the Third Loan.
7. In respect of the Third Loan, Coonwarra submitted that CornoNero received $1.64 million from BCP directly. The funds were not used for the development of the Mernda property, as Breckenridge admitted. Those funds were subject to fiduciary duties. The knowledge of Breckenridge, who was by then its director, was imputed to CornoNero. It was also fixed with the knowledge of Ascenzo, who was its director.
8. It said that the mere fact that Geoff and Rachael Brady were unaware of this does not negate the knowledge of CornoNero. CornoNero holds the sum of $1.64 million on constructive trust for Coonwarra.
9. CornoNero submitted in respect of the alleged August 2015 breaches that by the time CornoNero commenced trading, the funds under the Second Loan Agreement had been disbursed. There can therefore be no breach by CornoNero.
10. As to the Third Loan and the February 2016 conduct, CornoNero submitted:

(a) The $1.8 million that was disbursed was 'money belonging to BCP and not to Coonwarra'. That submission was put on the basis that Coonwarra had not authorised BCP to make the payments that were made.

(b) Breckenridge did not, in any event, tell BCP how to make the disbursements.

(c) Information held by an agent is not automatically attributed to the agent's principal. Indeed, information is not imputed unless the agent is under a legal duty to disclose the information. It is an agent's duty to disclose to the principal information gained by the agent 'in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal'. Information held by Breckenridge and Ascenzo in relation to the misleading procurement of Coonwarra's funds (which were to be misapplied) was not information gained in the course of their employment with CornoNero.

(d) It is undisputed that Breckenridge was the CEO of CornoNero in February 2016, and that he knew of the improper procurement of funds on the security of the Mernda land and their intended misuse. While Breckenridge breached his duty in not communicating this knowledge to CornoNero, the fact is the knowledge was not communicated to CornoNero and is not to be imputed to CornoNero.

1. Breckenridge submitted that no fiduciary duty arose between Coonwarra and CornoNero, and it follows that there could be no breach of duty. His submissions otherwise concentrated on the allegations concerning his involvement. Ascenzo made the same submissions.

Analysis - conduct in August 2015 (Second Loan)

1. As set out earlier, I have concluded that Trimont owed a fiduciary duty to Coonwarra not to exercise its powers to carry out the development by expending funds obtained for the purposes of the development, or to call on Coonwarra to secure borrowings against its land, so as to, or in order to gain an advantage for itself at the expense of the joint interest, and thereby at the expense of Coonwarra's interest. The obligation not to benefit itself extends, as a matter of law, to the obligation not to benefit others. The same duty was assumed by CornoNero when the ADA was novated to it and became an agreement between Coonwarra and CornoNero.
2. At the time at which the Second Loan was obtained and funds drawn down and disbursed, Ascenzo was in sole control of CornoNero. He was its 'directing mind and will' in the sense discussed in the authorities.
3. Breckenridge was CornoNero's CEO. He was operating in that role with the authority of Ascenzo, including specifically in respect of the Mernda project. Whilst it is not material to say that CornoNero was not trading at the time, in fact it was.
4. As set out in the context of the Guarantee claims,

(a) It was evident from the manner in which Breckenridge dealt with Coonwarra in respect of the Mernda project ('as Trimont Australia (CornoNero)', as he accepted in his evidence) that he had broad authority to make any and all decisions in respect of the project.

(b) The purpose of the Asset Development Agreement was the development of the Mernda Land. Coonwarra and Trimont had worked together under the ADA, in pursuit of the development. After the novation of the ADA to CornoNero, CornoNero, together with Coonwarra, continued the pursuit of the development of the land, as set out in Part II of these Reasons.

(c) That was no notional arrangement. Serious commercial dealings occurred. Negotiations continued with BidCo in respect of the anticipated agreement for the development of the Mernda site. Ongoing negotiations occurred with Coles in relation to the proposed agreement for lease. Coonwarra knew that those things were occurring, by Breckenridge or under his direction, with the assistance of CornoNero staff. It participated in, on Breckenridge's advice, doing what it, as the landowner, was required to do to progress the development.

(d) Breckenridge told Coonwarra it would need to execute a contract for the sale of the land and the agreement for lease with Coles, which it did (the former, after the provision of a guarantee).

1. For the reasons set out earlier, I have concluded that CornoNero engaged in a course of conduct by which it held out to Coonwarra that Breckenridge had broad authority to act for CornoNero in respect of the Mernda project and the ADA, including by entering into contracts and advising Coonwarra about actions that it should take in relation to the development under the ADA.
2. The conduct of the ADA was in fact core business for CornoNero, as the dealings in relation to the Land and between and Coonwarra reveal. The Mernda project was, as Breckenridge later told the board, a very important project for CornoNero. He was bringing it to fruition, with Coonwarra as landowner.
3. Against that background, the following events occurred (as set out in Part II):

(a) The December 2014 loan required repayment by March 2015. It was Ascenzo who determined that the December 2014 loan would be repaid by applying funds from the Second Loan. Coonwarra did not object to that course of action.

(b) The proposal that a second loan be taken by Coonwarra originated with Ascenzo, who instructed Breckenridge to arrange it though Hartwig and BCP. Ascenzo admitted by his defence, that Coonwarra entered the Second Loan at his initiation. The amount borrowed was arrived at by reference to the maximum amount that could be borrowed against the Land, as assessed by Hartwig, and not by an assessment of the likely quantum of the costs to be incurred for the purposes of the development of the Mernda Land. Hartwig made that assessment at the request of Breckenridge. Ascenzo asked Breckenridge to find out how much could be borrowed against the security of the land.

(c) In about late July or early August 2015, Coonwarra was told of the need for repayment of the First Loan and of the requirement to borrow additional funds in order to progress the development. Breckenridge told the Van der Burgts that further funding was required to advance the project and repay the First Loan. Ascenzo told them of the need to obtain further funds in order to advance the development. Martin and Ben were told at that time that they could expect an imminent sale of the land in an arrangement that would involve repayment of the loan, and funding through to the completion of the development.

(d) Martin Van der Burgt believed that the borrowed funds would be applied to the stated purposes of the loan. He did not know that they would be or were applied to meet Trimont's need to satisfy its creditors, including on unrelated projects. He was never told that the funds were to be applied in that manner. Likewise, Ben Van der Burgt understood that moneys advanced under the loan would be used for the sole purpose of developing the Mernda Land. Nothing was disclosed to Coonwarra to put it on notice that the funds would be used for any other purpose.

(e) Coonwarra understood and accepted that Breckenridge would deal with BCP in relation to the Second Loan and give BCP instructions for the disbursement of the funds.

(f) Ascenzo asserted in his evidence, as a justification for the use to which the funds were put, an agreement with Coonwarra that the money could be used by Trimont for its own purposes. I have rejected that asserted agreement as unsupported by the evidence. During one part of his evidence Ascenzo claimed that he (or Trimont) was entitled to take $3 million by way of 'advance profit', with the rest being for costs incurred.

(g) The funds drawn under the Second Loan were disbursed to the third parties described earlier. All of the funds were used for the payment of expenses associated with Trimont or Ascenzo. None of the funds were used for the Mernda development.

(h) Ascenzo knew that the moneys drawn under the Second Loan were used to pay Trimont's creditors and expenses, and that they were not used for the Mernda project. He also knew that Coonwarra had been told that the Second Loan was required for the purpose of repaying the First Loan and in order to progress the development.

(i) Breckenridge gave inconsistent evidence about the permitted use of the funds borrowed under the Second Loan. On the one hand, he said that he did not pay attention to how the funds were disbursed because it was not his role to decide how the money was used, and because that was determined by an agreement between Ascenzo and Martin. On the other hand, he said that he wanted to ensure that the costs of doing what was expected to be substantial work could be serviced. He accepted that he discussed with Ben and Martin the need to access funds to 'do the necessary work' on the Mernda Development. To the extent that Breckenridge sought by his evidence to characterise himself as essentially disinterested in what occurred with the moneys borrowed by Coonwarra including how they were disbursed, I have rejected his evidence.

(j) Breckenridge knew that all of the moneys drawn under the Second Loan were not used for the Mernda development, and that it was used to pay Trimont or Ascenzo creditors and expenses.

1. BCP disbursed $5.2 million under the Second Loan:

(a) The first tranche (paid between 1 and 10 August 2015) was disbursed as follows:

(i) $100,000 was paid to Multifit Projects Pty Ltd;

(ii) $100,000 was paid to Renda Air Services Pty Ltd;

(iii) $107,847.30 was paid to Marijohn Group Pty Ltd;

(iv) $1,907,252.70 was paid to Trimont;

(v) $284,900 was paid to BCP.

(b) As to BCP's instructions to disburse those funds:

(i) For the payments at sub‑paragraphs (a), (b) and (c) above, BCP received instructions in the form of an email from Clay to Breckenridge to Hartwig entitled, 'direct transfers for Trimont creditors', and acted on those instructions.

(ii) For the payment to Trimont at sub‑paragraph (d) above, Hartwig asked for Ascenzo's authority to include in the disbursement of funds, the payment of various BCP invoices. Ascenzo gave that authority and BCP acted on it. Of the $284,900, an amount of $2,200 was paid in satisfaction of an invoice dated 23 December 2014 from BCP to Coonwarra in respect of the First Loan.

(iii) BCP received and acted on instructions in respect of the balance of the moneys from Breckenridge verbally, and by receipt of an email from Trimont's construction manager who forward to BCP an email from Trimont's finance manager setting out Trimont's account details.

(c) The second tranche of the Second Loan was drawn down between 21 and 25 August 2015:

(i) $1,625,694.36 was paid to Aida Nominees, in repayment of the First Loan, with Coonwarra's consent;

(ii) Amounts of $400,000, $151,523.91 and $274,305.64 were paid to Trimont; and

(iii) $248,476.09 was paid to Minc Sallon (Laverton) Pty Ltd.

(d) In each case, BCP received verbal instructions from Bill Thurgood and acted on those instructions.

(e) I have found that Ascenzo authorised the disbursements of the funds borrowed under the Second Loan. He did so for the most part through persons working with or for him, including Breckenridge.

1. As to the costs that had been spent or were anticipated to be spent on the project:

(a) The ADA contained an estimate of what were in effect pre‑construction costs, at $1.5 million to $1.9 million excluding GST. The First Loan (obtained in December 2014) was in the sum of $1.5 million. $1 million was to be paid to Trimont, taken as 'reimbursement' in respect of costs incurred in developing the land to that point, although quantification of those costs was not given; and the payment to Trimont was agreed on the basis that Trimont assumed responsibility for the borrowing. The remaining $500,000 was for working capital for the development going forward. Breckenridge did not have any knowledge of the quantum of the costs expended at the point at which the First Loan was initiated.

(b) At the point at which the Second Loan was initiated, the only work that had been undertaken on the development had been commissioned by Breckenridge, but he did not know the value of the costs incurred. He recorded an estimate of a total of $1.9 million in consultancy costs for the development up until the point of construction. If the $1.5 million from the First Loan was taken to be allocated against that estimate, the remaining estimated costs to be incurred would be $400,000. Documents produced by the parties recorded only $81,000 as having between spent on the project. There was little work undertaken in the second half of 2015. The works that Breckenridge nominated as requiring consultants did not occur until later in 2016. Of the information about costs of which there was evidence, Breckenridge said that he considered his estimates to be reliable, although he had no actual knowledge of the costs incurred or to be incurred.

1. For the reasons discussed in respect of the claims against BCP, I do not accept that moneys paid out under the Second Loan were 'BCP's moneys' as CornoNero contended.
2. Subject to the question of attribution, was there a breach of fiduciary duty by CornoNero of the duty not to exercise its powers to carry out the development by expending funds obtained for the purposes of the development, or to call on Coonwarra to secure borrowings against its land, so as to gain an advantage for itself at the expense of the joint interest, and thereby at the expense of Coonwarra's interest?
3. I consider that there was. Ascenzo admitted that Coonwarra entered the Second Loan at his instigation. The funds were borrowed by Coonwarra in the belief that they were to be used for the purposes of the development and not for any other purpose. Coonwarra's evidence was to that effect. Coonwarra was never told otherwise. The borrowed funds were used for other purposes, to gain an advantage for Trimont or Ascenzo. They were, relative to Coonwarra and CornoNero, third parties.
4. On the evidence as a whole, it has not been shown that the benefits to third parties were compensated by a benefit in quid pro quo to Coonwarra, by Trimont or Ascenzo using their own funds instead, for the benefit of the ADA.
5. That conclusion does not apply to the payment of $1,625,694.36 that was paid to Aida Nominees, in repayment of the First Loan, with Coonwarra's consent.[204] Nor does it apply to the payment of $2,200 from the first tranche of the Second Loan which was paid in satisfaction of an invoice dated 23 December 2014 from BCP to Coonwarra in respect of the First Loan. With those deductions, the balance of the moneys paid in breach of duty is $3,572,105.64.
6. I conclude that that conduct was attributable to CornoNero. Ascenzo, the 'directing mind and will' of CornoNero at that that time, initiated the Second Loan and authorised the disbursements. Insofar as Breckenridge's involvement is relevant, he was clothed with the relevant authority, and what he did in advising Coonwarra about borrowings required for the development of the Land and providing instructions to BCP for disbursement of funds, was within the scope of that authority. There was nothing about the circumstances that would have put a reasonable observer on notice of the fact that Breckenridge doing those things was not within the scope of his authority.
7. As set out, the fact that what was done was in breach of duty and in fact for the benefit of others does not take the conduct outside the scope of the authority of the company's agent.
8. CornoNero did not invoke the 'fraud exception' in response to this claim, in its pleaded case, and made no submissions about it.

Analysis - conduct in February 2016 (Third Loan)

1. As to the Third Loan, the conduct was as follows (as set out in Part II, by reference to the evidence discussed there).
2. The Third Loan was drawn down as follows:

(a) BCP paid a total of $1,608,711.14 to CornoNero on 23 and 24 February 2016 by making three deposits into its bank account.[205]

(b) BCP made a further payment of $31,288.90 to CornoNero on 24 February 2016;

(c) BCP made a payment of $160,000 to Minc Sallon (Laverton) Pty Ltd on 24 February 2016.

1. Hartwig received an email from Thurgood, forwarded by Breckenridge instructing him to make the deposits in sub‑paragraph (a). He received verbal instructions from Thurgood for the remaining two payments. He acted on those instructions. Hartwig, for BCP, disbursed the funds in accordance with instructions received from Thurgood and Breckenridge.
2. Breckenridge maintained that he was just passing on instructions to BCP. His evidence was that he was speaking to Thurgood about 'the state of Trimont's outstanding debts owed to CornoNero' and would have asked Thurgood 'how we should apply moneys we were about to receive from Silvio'. Having had that conversation he then forwarded an email from Thurgood to Hartwig, 'so he would know how to apply the loan funds'. However he characterised his own role, as a matter of fact, Breckenridge gave instructions to BCP for the disbursement of the first tranche of the funds, in the sum of $1,608,711.14.
3. The balance of the funds were disbursed on instructions from Thurgood who was neither a director nor an employee of CornoNero. There was no evidence of any involvement of Ascenzo in the disbursement of the funds under the Third Loan.
4. The manner in which those funds were deposited gave the appearance, to any reasonable person viewing the bank statements, that they were payments made in respect of the named developments or projects for which Kanyon was CornoNero's developer client. The funds were not used for the progression of the Mernda development.
5. Breckenridge knew, at the time, that Coonwarra had borrowed the money and allowed it to be disbursed to CornoNero for the specific purposes of advancing the Mernda development. He knew that the Van der Burgts were told that the loan was required for that purpose. Breckenridge also knew at the time, that the borrowed moneys were paid into CornoNero's bank account, purportedly for the purposes of Trimont reducing a debt that it owed to CornoNero.
6. The essential contention that Breckenridge advanced was that Coonwarra 'forwarded or lent the money or paid the money to Trimont, and Trimont paid the money Australia/CornoNero'. It was said that whatever the arrangement, it was effected by paying the money directly to CornoNero instead of paying it to Trimont first. In any case, the base proposition was that Coonwarra permitted Trimont to use the money for its own purposes, and as it happened, Trimont used the money to reduce its indebtedness to CornoNero. Coonwarra did not give that permission. There was no agreement between Coonwarra and Trimont to that effect.
7. In parts of his evidence Breckenridge, attempted to link the payment of money to Trimont (so it could reduce its indebtedness to CornoNero) with the creation of a 'facility' that would allow work to be done. That evidence was lacking in coherence and not supported by any other evidence. I have rejected that evidence. The descriptions applied to the deposits into CornoNero's bank account did not indicate that they repaid a debt owed to CornoNero by Trimont.
8. Ascenzo knew, at the time, that moneys borrowed under the Third Loan, were being paid to CornoNero. He asserted a positive belief that the money was then being used for the Mernda project. Ascenzo was no longer the company's sole director in February 2016.
9. For the reasons discussed in respect of the claims against BCP, I do not accept that moneys paid out under the Third Loan were 'BCP's moneys' as CornoNero contended.
10. Subject to the question of attribution, was there a breach of fiduciary duty by CornoNero of the duty not to exercise its powers to carry out the development by expending funds obtained for the purposes of the development, or to call on Coonwarra to secure borrowings against its land, so as to gain an advantage for itself at the expense of the joint interest, and thereby at the expense of Coonwarra's interest?
11. I consider that there was. Breckenridge advised Coonwarra that further funding was needed to for the development. He organised the loan, through BCP. He gave instructions to BCP to disburse some of the funds, to CornoNero. It was accepted that those funds were not used for the Mernda development or the ADA.
12. As CornoNero accepted, nothing about Breckenridge's course of conduct in relation to Coonwarra, changed between August 2015 and throughout 2016. The conduct described was within the scope of Breckenridge's ostensible authority. The fact that the internal board structure of CornoNero had changed since August 2015, did not take it outside the scope of his authority, for the reasons discussed earlier. As set out, the fact what was done was in breach of duty and in fact for the benefit of others, does not take the conduct outside the scope of the company's agent's authority. CornoNero did not invoke the 'fraud exception' in response to this claim, in its pleaded case, and made no submissions about it.
13. On the evidence as a whole it has not been shown that the benefits to third parties were compensated by a benefit in quid pro quo to Coonwarra, by Trimont or Ascenzo using their own funds instead, for the benefit of the ADA.
14. Those conclusions apply only to the disbursement of funds to CornoNero in the sum of $1,608,711.14.

F.2 Knowing receipt of trust funds by CornoNero

1. Coonwarra alleged that CornoNero received the borrowed funds advanced by BCP knowing (to the requisite degree) of the fact that the sums received were the subject of fiduciary duties. Coonwarra relied on the respective roles of Ascenzo and Breckenridge in CornoNero to attribute their knowledge to the company, and their roles in the relevant dealings in respect of the borrowed funds.

1. Knowing receipt, being the claim under the first limb of Barnes v Addy, turns on whether the third party has knowingly received trust property.[206] Unlike knowing assistance, it is not necessary to show that the fiduciary has carried out a dishonest and fraudulent design.[207] 'Trust property' in this context extends beyond the conventional meaning to 'property held or controlled subject to a fiduciary obligation'.[208]
2. In Farah Constructions, the High Court held that a third party who receives trust property only becomes liable if it is established that they received the trust property with notice of the trust.[209] Notice in this context means knowledge that the beneficial receipt is of trust property transferred in breach of trust or fiduciary duty.[210]
3. In Farah Constructions, the High Court applied the Baden scale of knowledge only in the context of a claim for knowing assistance. Consequently, there is no co-ordinate High Court authority in respect of knowing receipt. Nevertheless, there is intermediate appellate authority to the effect that knowledge of the kind falling within Baden categories will be sufficient to prove that the recipient has received the money on notice of the trust or fiduciary relationship.[211] It is therefore open to assess the knowledge requirement for knowing receipt according to the relevant categories of the Baden scale.[212] Categories (i) to (iv) are repeated below:

(a) actual knowledge;

(b) the wilful shutting of eyes to the obvious;

(c) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; and

(d) knowledge of circumstances which would indicate the facts to an honest and reasonable person.

Knowledge in the nature of category (d) (knowledge of circumstances which would put an honest and reasonable person on inquiry) has been said to be insufficient to found a claim for either knowing receipt or knowing assistance.[213]

1. In Imobilari Pty Ltd v Opes Prime Stockbroking Ltd,[214] Finkelstein J helpfully summarised the application of Baden category (iv) to a claim for knowing receipt:

Precisely what constitutes knowledge for purposes of a Barnes v Addy knowing receipt claim has not been explicitly settled by the High Court, but I consider that the cases establish that it is sufficient to plead and prove knowledge of facts that would put an honest and reasonable person on notice (but not merely enquiry) of a real and not remote risk that the transfer was in breach of trust or fiduciary duty or involved the misapplication of trust property.

1. In respect of the Third Loan, Coonwarra submitted that CornoNero received $1.64 million from BCP directly. The funds were not used for the development of the Mernda property, as Breckenridge admitted. Those funds were subject to fiduciary duties. The knowledge of Breckenridge, who was by then its director, was imputed to CornoNero. It was also fixed with the knowledge of Ascenzo who was its director.
2. It said that the mere fact that Geoff and Rachael Brady were unaware of this does not negate the knowledge of CornoNero. CornoNero holds the sum of $1.64 million on constructive trust for Coonwarra.
3. CornoNero submitted that:

(a) BCP had no authority to debit Coonwarra's account in respect of the $5.2 million paid under the Second Loan or the $1.64 million paid under the Third Loan. Accordingly, the amounts disbursed or deposited were 'BCP money' and do not attract fiduciary obligations.

(b) In respect of the Second Loan, CornoNero had not yet commenced operations at the time the payments were made. Therefore, no fiduciary duties were owed to Coonwarra.

(c) CornoNero admits that BCP paid four amounts totalling $1.64 million into its bank account on 24 February 2016, described in the manner earlier discussed. The remaining sum ($200,000) was paid directly to Minc Sallon.

(d) CornoNero did not receive the moneys paid into its bank account with the relevant actual or constructive knowledge. Geoff Brady was not cross-examined on the subject of his knowledge.

(e) There was no evidence that CornoNero was aware that it owed fiduciary duties to Coonwarra.

(f) The Board did not know that the deposited moneys were Coonwarra's.

(g) The knowledge of Breckenridge and Ascenzo 'as directors of Trimont' in relation to matters concerning the ADA is not attributed to CornoNero simply because they sat on its board.

1. CornoNero received the sum of $1.64 million. For the reasons discussed, that money was money subject to a fiduciary obligation. It is well settled that although a company is the beneficial owner and not the trustee of it own funds, those funds are treated for the purposes of Barnes v Addy as 'trust property'.[215]
2. As set out earlier, Breckenridge knew, at the time, that Coonwarra had borrowed the money and allowed it to be disbursed to CornoNero for the specific purposes of advancing the Mernda development. He knew that the Van der Burgts were told that the loan was required for that purpose. Breckenridge also knew at the time, that the borrowed moneys were paid into CornoNero's bank account, purportedly for the purposes of Trimont reducing a debt that it owed to CornoNero. He knew that the money was used for Trimont's own purposes. I have rejected his evidence that there was a basis to think that Coonwarra permitted Trimont to use the money for its own purposes.
3. Breckenridge was cross‑examined by Coonwarra about the disbursement of funds under the Third Loan. He agreed that none of the funds drawn down under the Third Loan were used for the progression of the Mernda development. Initially he said, 'not directly, no', but when pressed, his answer was, 'I don't believe so'.
4. Breckenridge said that Thurgood had formulated the descriptions for his own accounting reasons, but 'the money that came in was a direct reduction of the Trimont Loan Account'. He then gave the following evidence:

Q But it's Coonwarra's money, you accept?

1. Yes. Coonwarra lent it to Trimont and Trimont reduced its loan account.

2. It lent the money for the express purpose of progressing the Mernda development didn't it?

A Yes.

Q That's what the Van der Burgts were told what the loan was for.

A I agree.

Q The Van der Burgts were told that.

1. The facility was originally set up definitely to allow there to be a working capital facility to start construction for Trimont and Trimont disbursed those funds to allow itself to be able to cash flow that work if it happened but I didn't get involved with why the descriptions exactly work that way but that was the intention of what happened.

2. What the money was used for Mr Breckenridge was to decrease Trimont's debts to CornoNero.

A That is correct.

Q And it had nothing to do with the Mernda development.

1. It didn't pay the Mernda builders directly but it was in order to allow us to complete work, have a facility in place to be able to do it. The money was put in to reduce the loan account at that time.

1. I need not repeat the context for that evidence, which has been discussed at length throughout these Reasons.
2. Breckenridge's knowledge is attributable to the company, for the reasons discussed.
3. Having regard to the need to reach a state of 'actual persuasion', I am satisfied that the evidence has established that CornoNero received trust property with notice of the trust. The evidence would support a finding of knowledge in any of the first three categories in the 'Baden scale'.

F.3 Procurement of breach of fiduciary duty by Ascenzo and Breckenridge - Submissions and Principles

1. Coonwarra alleged that Ascenzo and Breckenridge procured CornoNero to commit the alleged breaches, as set out earlier.

1. In Farah Constructions,[216] the High Court acknowledged that a third party might be treated as a participant in a breach of trust where the third party had knowingly induced or immediately procured breaches of duty by a trustee. This basis of liability is recognised as distinct from knowing assistance in a breach of fiduciary duty by the fiduciary's own dishonest and fraudulent design. It is unnecessary for the purposes of establishing a procurement of a breach of duty, to establish that the trustee itself was acting with an improper purpose or pursuant to a fraudulent scheme.[217]
2. A third party's liability for inducing or procuring a breach of trust or fiduciary duty has two elements. The first is intentional conduct which causes, and is intended to cause, the breach of trust or fiduciary duty. It is sufficient that the inducer or procurer intended to do the thing which is in fact a breach of trust or duty.[218]
3. The second is that the third party knew that he or she was bringing about a breach of trust or fiduciary duty. What is required is knowledge of the essential matters that go to make up the breach of trust or duty, even if the procurer or inducer does not know that those matters amount to a breach of trust or duty. It is sufficient if the procurer or inducer knew of the facts which, to a reasonable person, would indicate a breach of trust or fiduciary duty.[219]
4. The elements required to establish liability were summarised in Chickabo v Zphere,[220] in these terms:

(a) the existence of a fiduciary duty owed by the fiduciary;

(b) a breach of duty on the part of the fiduciary;

(c) inducement or procurement of that breach by the third party; and

(d) 'knowingly' on the part of the third party of the breach of duty.

1. In Pittmore v Chan, Leeming JA (with whom Bell P and Brereton JA agreed) held that 'inducing' and 'procuring' a breach of fiduciary duty are substantial equivalents, and that there is no sound basis for distinguishing them.[221] Importantly, the same mental state is required of the 'inducer' and 'procurer' in order to attract liability. That is, the adverb 'knowing' qualifies both the inducement and procurement limbs.[222]
2. There, Leeming JA discussed the difficulty with employing a test of dishonesty in this context and doubted that 'dishonesty' is the right word to describe a test of liability of a person who procures or induces a breach of trust or fiduciary duty.[223] The Court went on to approve Sloss J's articulation of the requirements for establishing knowledge for inducement or procurement of a breach of fiduciary duty in Australian Super Development Pty Ltd v Marriner, namely:[224]

(a) actual knowledge;

(b) a deliberate shutting of one's eyes to the breach;

(c) a calculated abstention from making enquiries which an honest and reasonable person would make; or

(d) actual knowledge of the facts which, to a reasonable person, would suggest a breach of trust.

1. Coonwarra made the following submissions.
2. Ascenzo and Breckenridge procured the breaches of fiduciary duty of CornoNero by:

(a) arranging the three loans through BCP;

(b) falsely advising that the loans were necessary for the development of the Mernda property;

(c) knowing full well that the moneys were going to be used for other purposes and to pay creditors for other Trimont businesses and the reduction of the indebtedness of Trimont to CornoNero.

1. Ascenzo was a director of both companies, and Breckenridge was CEO of both Trimont and CornoNero and (from September 2015) a director of CornoNero. He was also in charge of the development of the Mernda property, for CornoNero.
2. It is agreed that none of the funds were used in the progression of the Mernda development. Breckenridge admitted in his evidence that the funds drawn under the Second and Third Loans were not used in the progression of the Mernda development.
3. Ascenzo and Breckenridge asserted the existence of 'advance agreements' whereby Ascenzo and Trimont were said to have been entitled to use funds borrowed by Coonwarra for the purposes of the joint venture. If the advance agreement is found not to have existed (as Coonwarra says it must be), it follows that the use of those funds for Trimont and Ascenzo's own purposes amounts to a breach of duty by benefiting Trimont and Ascenzo, and that the breaches have been procured by Breckenridge and Ascenzo.
4. Ascenzo knew that the moneys were not being paid for the Mernda development but they were being used for pressing creditors of the Trimont business, as his evidence revealed. Furthermore, as sole director of Trimont he must have known that the moneys were being used to benefit Trimont.
5. Breckenridge also knew that the monies were not used for the Mernda development.
6. The loans were procured by both Ascenzo and Breckenridge in the full knowledge that those loans would be used for purposes other than that which Breckenridge and Ascenzo explained to Martin and Ben, and in knowing breach of Trimont's fiduciary obligations to Coonwarra.
7. The amount of work done up to December 2014 is uncertain and the extent of work done and invoiced is even more uncertain. An aide memoire was produced but is no longer relied upon, which on the face of it, deducting the Kelly Hazell Quill invoices, left approximately $538,000 in work done for Mernda. An aide memoire was prepared of a summary of the documents produced for work done from January 2015 to 30 June 2015. Total invoices amounted to $81,575.81. After cross-examination and a call, only three further invoices were produced, totalling $27,987.32. At that time, there was only development work, and no construction work being done on the Mernda site which was solely in the control and purview of Breckenridge.
8. Knowing all of this, in order to procure the Second Loan, Breckenridge asked Hartwig what was the maximum amount that could be borrowed against the Mernda property. It was a net $3.6 million, being a total of $5.2 million. Ascenzo and Breckenridge then met with Martin and advised him that it was necessary to borrow further moneys to progress the development. They knew that the amount of $3.6 million was nowhere near the amount that could have been needed. As they knew, Martin, himself, did not have property development experience.
9. Each was instrumental in applying the moneys for the other creditors and knew that the moneys were to be applied in breach of Trimont's fiduciary duties to Coonwarra.
10. The Third Loan was procured by Ascenzo and Breckenridge via BCP at a time when both persons knew that Trimont was not going to use the moneys for the development of the Mernda property but was going to be used for reduction of debt to CornoNero, in breach of Trimont's and CornoNero's fiduciary duties to Coonwarra. Both Ascenzo and Breckenridge knew that moneys were not needed for the development of the Mernda property, particularly when it was almost sold to MJSC. The moneys were paid to CornoNero and Hartwig and Breckenridge now say that the funds were used as payments for the reduction of Trimont's debts to CornoNero.
11. Breckenridge submitted that no conduct on his part that would be sufficient to establish procurement has been established. The alleged breaches were said to have been entry into loan agreements, which were executed by Coonwarra, i.e. with its consent. In any case, Coonwarra has not established that Breckenridge had knowledge of the requisite kind.
12. Ascenzo submitted that in respect of the Second Loan there was no breach of duty because Coonwarra had agreed to allow Ascenzo to use the funds pursuant to the 'advance agreement'. In respect of the Third Loan, Ascenzo had almost no involvement in its procurement or disbursement of the moneys borrowed. The Third Loan was entered into in February 2016. At that time, Breckenridge had been the CEO of CornoNero for almost eight months and had continued during that time to progress the development of the Mernda project. He no longer worked for Trimont and therefore did so entirely in his capacity as agent for CornoNero. Although Ascenzo was a director of CornoNero he had no involvement in the operation of the business whatsoever and therefore no involvement in the progression of the Mernda project at CornoNero. He had contracted cancer by that stage and stepped back from work.
13. The Third Loan was negotiated directly between Breckenridge and Martin and Ben Van der Burgt. Martin accepted that after the middle of 2015, he had no substantive dealings with Ascenzo and that his dealings were all with staff of CornoNero - in particular, Breckenridge and James Hunt. Ben accepted likewise that he did not have much contact with Ascenzo from mid-2015, and that in late-2015 and 2016 all of his contact was with Breckenridge and Hunt.
14. At the meeting at the Mernda Hotel in February 2016, where the loan was finalised, it was Breckenridge that spoke to the need for the Third Loan. Martin said when cross-examined, 'basically [Mr Ascenzo] was just there', and Ascenzo did not speak to the need for the loan. Ben did not even remember Ascenzo being at the meeting. That is not surprising, in that the Third Loan was required in order for CornoNero to commence the construction of the Mernda development - something in respect of which Ascenzo and Trimont were not involved.
15. The proceeds of the Third Loan were directed to CornoNero, rather than Trimont, for the purposes of CornoNero developing the Land. It was Breckenridge, together with Thurgood, who directed Hartwig as to the manner in which the funds were to be disbursed and the manner in which those transactions were to be described. Ascenzo was not challenged on his evidence that he had no involvement in that process or on his evidence that he understood that the proceeds of the Third Loan were being used by CornoNero to progress the development. It was not put to him that he engaged in any fraud or dishonesty in respect of the Third Loan.
16. The only evidence of Ascenzo's connection with the negotiation and disbursement of the Third Loan is his presence at the meeting in February 2016, in which Martin Van der Burgt says he said nothing and Ben does not remember his presence. That cannot give rise to a breach of fiduciary duties by Ascenzo or his knowing involvement in any breach of fiduciary duties by CornoNero.
17. Breckenridge gave evidence for the first time at trial that the Third Loan was in fact made to Trimont in order to pay off indebtedness to CornoNero, and it ought not be accepted as being an accurate characterisation of the Third Loan.

1. In respect of the conduct in August 2015 concerning the Second Loan, for the reasons discussed, the existence of a fiduciary duty and a breach of fiduciary duty has been established in the respect of the Second Loan (as to the sum of $3,572,105.64).
2. Was there intentional conduct by Ascenzo that caused and was intended to cause the breach of trust or fiduciary duty, and did Ascenzo know the essential matters that went to make up the breach of trust or duty, even if he did not know that they amounted to a breach of trust or duty? I have found that:

(a) Ascenzo had dealt with Coonwarra for years, in their project to develop the Land. He understood that the relationship was one in which the parties exhibited trust in one another, and said as much in his evidence. He understood that the purpose of their relationship was to conduct the Mernda development under the ADA;

(b) Ascenzo initiated the Second Loan (he admitted that Coonwarra entered the loan agreement at his instigation);

(c) Ascenzo told Coonwarra of the need to borrow funds in order to advance the development;

(d) He authorised the disbursements of moneys under the Second Loan, to pay his creditors and expenses;

(e) Ascenzo knew that the moneys drawn under the Second Loan were used in that way and not for the Mernda project;

(f) Ascenzo knew that Coonwarra had been told that the Second Loan was required for the repayment of the First Loan and otherwise to progress the development;

(g) Despite his assertions to the contrary, there was no basis for him to believe that he was entitled to use the borrowed money for his own purposes;

(h) The moneys were distributed to his benefit or that of his company, Trimont.

1. From that evidence, it may be inferred that Ascenzo engaged in intentional conduct that caused and was intended to cause what was in fact a breach of trust. That is, he intended to do the thing which is a breach of trust.
2. I do not find that Ascenzo subjectively knew that he was causing a breach of trust. But he knew of the essential matters that went to make up the breach of trust. As Leeming J said in Pittmore, what someone knows is distinct from the degree of certainty with which it is known.[225] The evidence at least supports a conclusion that Ascenzo had actual knowledge of the facts which, to a reasonable person, would suggest a breach of trust.
3. I have taken into account the seriousness of the matter and the need for actual persuasion. I am satisfied on that basis that the evidence establishes the conclusions set out.
4. In Pittmore, Leeming J said there was support in the authorities for the proposition that the actions of a sole director in causing a breach of trust to occur could at the same time amount to a procurement of breach, but observed that in analogous contexts (such as inducing breach of contract) some authorities have doubted that a sole director should be held liable for inducing a breach of legal obligation where that director's conduct was in effect, the company's conduct.[226] That point was not run in this case so I need say no more about it.
5. I find that Ascenzo induced or procured the breaches of duty of CornoNero in respect of the Second Loan, as described.
6. There is no basis in the evidence to conclude that Ascenzo procured or induced the Third Loan. The evidence about what he did and what he knew, was limited in the manner described in his submissions.

1. In respect of the Second Loan, I have found that Breckenridge knew that the funds were not used for the purposes of the Mernda development.
2. However, I do not consider that there is sufficient evidence in respect of Breckenridge's conduct to conclude that it was conduct intended to cause what in fact amounted to a breach of duty. I have reached that view because in respect of the critical actions, he was substantially acting at Ascenzo's request. I do not consider that there is sufficient evidence to reach a state of actual persuasion that he was intending to cause what amounted in fact to a breach of duty. There was insufficient evidence about his agency to attribute that state of mind to him.
3. In respect of the Third Loan:

(a) Breckenridge initiated the Third Loan;

(b) Breckenridge gave instructions to BCP to disburse some of the funds, to CornoNero. He said that he was passing on instructions from someone else (Thurgood). He willingly and actively sought those instructions;

(c) Breckenridge knew, at the time, that Coonwarra had borrowed the money and allowed it to be disbursed to CornoNero for the specific purposes of advancing the Mernda development. He knew that the Van der Burgts were told that the loan was required for that purpose. He knew that they were not told otherwise;

(d) Breckenridge also knew at the time, that the borrowed moneys were paid into CornoNero's bank account and were not used for the Mernda development. He knew that the moneys were being used to pay for what he understood or asserted were Trimont's debts to CornoNero.

1. From that evidence it may be inferred that Breckenridge engaged in intentional conduct that caused and was intended to cause what was in fact a breach of trust. That is, he intended to do the thing which is a breach of trust. I do not find that Breckenridge subjectively knew that he was causing a breach of trust. But he knew of the essential matters that went to make up the breach of trust. The evidence at least supports a conclusion that Breckenridge had actual knowledge of the facts which, to a reasonable person, would suggest a breach of trust.
2. I have taken into account the seriousness of the matter and the need for actual persuasion. I am satisfied on that basis that the evidence establishes the conclusions set out. I find that Breckenrige induced or procured the breaches of duty of CornoNero in respect of the Third Loan, as described.

F.4 Knowing assistance - dishonest and fraudulent design

1. Coonwarra alleged that 'the breaches' meaning relevantly the procurement of the loans and disbursement of funds, were a dishonest and fraudulent design by CornoNero and/or Trimont to use the Land as security to obtain funds to be used for purposes other than for the development of the Land. The design was to be inferred from the circumstances in which the advice was given to Coonwarra to take out the borrowings, the quantum of the borrowings, the fact that despite the quantum of the borrowings little development work had actually been carried out of the land, and the interest rates were uncommercial. It alleged that Breckenridge and Ascenzo assisted CornoNero to commit the breaches so as to give effect to the scheme, knowing that they constituted a dishonest and fraudulent design.

1. In Barnes v Addy, Lord Selborne LC held that a third party may be held liability for a breach of trust where they knowingly receive trust property (first limb); or knowingly assist in a dishonest and fraudulent design by the trustee (second limb).
2. In Harstedt Pty Ltd v Tomanek,[227] the Victorian Court of Appeal identified the following four elements are being necessary to establish liability for knowing assistance:

(a) the existence of a fiduciary duty owed by the fiduciary (as trustee or otherwise);

(b) a 'dishonest and fraudulent design' on the part of the fiduciary;

(c) assistance by the third party in that design; and

(d) knowledge on the part of the third party of the circumstances constituting that design.

1. Having established the existence of a fiduciary duty, the Court must then determine whether the gravity of the fiduciary's conduct is such that it can be characterised as 'dishonest and fraudulent'.[228] Breaches that are well-intentioned, trivial or insignificant do not therefore meet that description.[229]
2. There is a divergence of opinion amongst the authorities as to the meaning of 'dishonest and fraudulent design' of a fiduciary in the context of a knowing assistance claim, as recently recognised by Sifris J in Chickabo v Zphere.[230]
3. On one view, it is not necessary to demonstrate conscious awareness of wrongdoing or moral iniquity by the fiduciary in order to establish a 'dishonest and fraudulent design'. It is sufficient if the breach of duty can be characterised as dishonest or fraudulent according to equitable principles. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3),[231] Drummond AJA (Lee AJA agreeing) relevantly said that 'a person may be fraudulent in the eyes of equity, even though he acted with subjective honesty', so long as the breach is too serious to be excusable as a matter of discretionary judgment.
4. Conversely, other authorities have considered that the concept of 'dishonest and fraudulent design' as expressed in Barnes v Addy requires an element of actual dishonesty, namely, 'a transgression of ordinary standards of honest behaviour'.[232] On this view, 'dishonest and fraudulent design' requires conduct in the nature of common law (as opposed to equitable) fraud. In Hasler v Singtel v Singtel Optus Pty Ltd, Leeming JA criticised the approach of Drummond AJA in Bell Group (No 3), and found that a 'dishonest and fraudulent design' must involve actual dishonesty contrary to the ordinary standards of honest behaviour.[233]
5. The weight of subsequent authorities favour the approach of Leeming JA regarding the meaning of 'dishonest and fraudulent design' in Hasler.[234] In Ancient Order of Foresters v Lifespan, Gageler J endorsed the formulation of Leeming JA in Hasler, and said that 'the requisite element of dishonesty and fraud on the part of the fiduciary is met where the conduct which constitutes the breach transgresses ordinary standards of honest behaviour'.[235] Leeming JA's approach in Hasler as endorsed by Gageler J in Forester was also recently approved by the Full Federal Court in Zibara v Ultra Management (Sports).[236] On that basis, it is appropriate to adopt the formulation of Leeming JA of the requisite element of dishonesty and fraud, which is met where the conduct constitutes a 'transgression of ordinary standards of honest behaviour'.
6. The Court must next consider whether a third party's conduct, at the time of the implementation of the dishonest and fraudulent design, constituted 'assistance' in respect of that scheme.[237] In this regard, the Victorian Court of Appeal in Harstedt noted that whether a third party has so assisted is 'plainly' a question of fact, and that the ways in which a third party may provide assistance are 'myriad'.[238] However, the two principles below are apposite:[239]

First, there will be assistance where, but for the action or inaction of the third party, the breach of fiduciary duty would not have occurred.[240] A common example is the role of a bank or other financial intermediary the function of which is essential to effect a transaction that amounts to a breach of trust.[241]

Secondly, there may also be assistance where the third party has facilitated a breach of fiduciary duty that would have occurred in any event.[242] It is difficult to see how, in view of equity's broad concern with prevent unconscionability,[243] a third party in these circumstances could not be liable under the second limb of Barnes v Addy, even if there is evidence to suggest that the commission of the primary breach was a foregone conclusion.

1. Finally, the third party must have the requisite knowledge of the circumstances constituting the dishonest and fraudulent design in order to attract liability. To establish this element, it must be shown that the third party knew, or had reason to know, of the dishonest and fraudulent design of the fiduciary.[244] Importantly, it is not necessary to show that the third party acted dishonestly.[245]
2. It is customary to assess whether a third party had knowledge of the dishonest and fraudulent design by reference to the categories of knowledge recognised by Gibson J in Baden (the so-called 'Baden scale'),[246] as follows:[247]

(a) actual knowledge (category (i));

(b) wilfully shutting one's eyes to the obvious (category (ii));

(c) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make (category (iii));

(d) knowledge of circumstances which would indicate the facts to an honest and reasonable person (category (iv) constructive notice); and

(e) knowledge of circumstances which would put an honest and reasonable person on inquiry (category (v) constructive notice).

1. In Grimaldi v Chameleon Mining NL (No 2),[248] the Full Federal Court provided this instructive summary of those categories:

The first two categories of 'knowledge' require no comment. The third involves such a calculated abstention from inquiry as would disentitle the third party to rely upon lack of actual knowledge of the trustee's or fiduciary's wrongdoing. The fourth reflects what seems to have been accepted provisionally by three judges of the High Court in Consul Development Pty Ltd v DPC Estates Pty Ltd.[249] It is, in essence, an understandable, objective, default rule designed to prevent a third party setting up his or her own 'moral obtuseness' as the reason for not recognising an impropriety that would have been apparent to an ordinary person.[250] It is the surrogate of actual knowledge. The form of constructive notice used in category (v) derives from the bona fide purchaser for value without notice doctrine.

1. Knowledge falling within any of the first four categories of the Baden scale will satisfy the knowledge requirement for knowing assistance.[251] Knowledge of the fifth category, which is tantamount to constructive notice, has been said to be insufficient to found a claim for knowing assistance.[252] Succinctly put, for a third party accessory to be liable, they must have known, or had reason to know, of the essential matters surrounding the relevant breach that go toward the fiduciary's dishonest and fraudulent design (even if the third party is not aware that those matters constitute the relevant breach).[253]
2. It is not necessary that the third party itself acted dishonestly.[254] Whether or not that person knew that what was occurring was dishonest or fraudulent is also immaterial. What is material is that the facts known to the third party (in the sense of any of the first four categories of the Baden scale), regarded objectively, demonstrate a dishonest and fraudulent breach of fiduciary duty by the fiduciary (and the activities of the accessory assisted in, or facilitated or furthered the occurrence of that breach).[255]

1. Coonwarra made the following submissions.
2. The breaches of the ADA and fiduciary duties CornoNero occurred as a result of Ascenzo and Breckenridge telling Martin and Ben that the loans were necessary to progress the development of the Mernda property, despite knowing that that the loans were not, in fact, necessary for the development of the Mernda Land; knowing and intending that the loan monies would be used not for the development of the Mernda Land but for other purposes; purporting to authorise the disbursement of the loan moneys to pay various creditors, which had nothing to do with the development of the Mernda property.
3. The fraudulent and dishonest design was, simply put, obtaining funds from the loans that could only be obtained by using the security of the Mernda Land, for the purposes of Trimont's business (directly or via CornoNero) when those funds were to be advanced to Coonwarra, whilst asserting that they were needed and would be used for the development. More particularly, it was constituted by the following:

(a) advice to Coonwarra that the loans were needed to progress the Mernda development;

(b) procuring loans (having obtained Coonwarra's agreement to do so) ostensibly for the purpose of progressing the development of the Land;

(c) the personal actors (Breckenridge and Ascenzo) knowing full well that the proceeds of the loans were not going to be used for the progression of the Mernda development but instead used to pay for other expenses and creditors, which had nothing to do with the Mernda property or its development.

(d) Ascenzo and Breckenridge were the people who proposed the loans and said what the purpose of the borrowing was and they were the people who directed where the moneys would go. They were the moving minds behind the loans and disbursement of the moneys. They held positions of power and influence in respect of Trimont and CornoNero. They were integral in the obtaining of the loans and knew precisely that the loans were not being used for the purposes as stated in the loans and in breach of the fiduciary duties owed by Trimont and then CornoNero.

1. Breckenridge's assistance was established by these facts:

(a) he was the CEO of Trimont and then CornoNero, and a director of CornoNero. he was the architect of the scheme. He was the main point of contact for Coonwarra, through Martin and Ben;

(b) he advised Martin and Ben that more money was needed to progress the development when in fact there was no further monies being used to progress the development at those times;

(c) He knew that the moneys were not being used for the progression of the development.

(d) Ascenzo was the sole director of Trimont and, at the time of the Second Loan, the sole director of CornoNero. He assisted in the same way that Breckenridge did and knew that the moneys were not being used for the progression of the development of the Mernda Land. He knew the stated purposes of the Land and their intended purpose as far as Coonwarra was concerned but instead used the borrowed moneys for other purposes. More specifically, Ascenzo gave instructions in respect of certain payments including BCP commission payments and for renovations to his wife's house. Hartwig's evidence about the disbursement of the funds was uncontradicted by Ascenzo. He assisted Trimont and CornoNero in the same way Breckenridge did and knew that the moneys were not being used for the progression of the development of the Mernda land. He knew what the purpose of the loans was for, but instead used those moneys for other purposes.

1. CornoNero submitted that there was no dishonest and fraudulent design by it. However, from December 2014 Trimont implemented a fraudulent design to procure funds on the security of the Mernda Land for purposes unrelated to the development and continued that design until the sale of the Mernda Land.
2. Breckenridge made the following submissions.
3. The requirement that there be a dishonest and fraudulent design on the part of the fiduciary means that the breach of fiduciary duty must itself be dishonest and fraudulent.[256] Coonwarra must demonstrate consciousness on the part of Breckenridge that what he was doing was wrong. The causes of action arising out of the alleged fraudulent design are confected. No adequate allegation of a fraudulent design has ever been articulated and the evidence does not rise high enough to support a finding of that kind. The dishonest breach must be proved to the Briginshaw standard which requires that the seriousness of an allegation and the gravity of the consequences of it is to be regarded in reaching a sufficient degree of satisfaction that the allegation has been proved on the balance of probabilities.
4. Ascenzo submitted that (for the reasons advanced in connection with the dealings between Coonwarra and Trimont and CornoNero) none of the loans were procured pursuant to a fraudulent design. For the same reasons, it cannot be established that Ascenzo knew that Trimont or CornoNero were carrying out such a design or that he assisted in it. Furthermore, Coonwarra contravened the rule in Browne v Dunn by failing to cross-examine Ascenzo about whether he in fact acted dishonestly or fraudulently by engaging in a fraudulent design against Coonwarra and set out to deceive it. As a result, no findings should be made.

1. For the Reasons set out above, I consider that on the evidence there is a sufficient basis on which to conclude that by the conduct of Ascenzo and Breckenridge attributable to CornoNero, it was in breach of its fiduciary duties, and that each of Ascenzo and Breckenridge had actual knowledge of facts which, to a reasonable person, would suggest a breach of trust. Their respective states of mind suggested a deliberate shutting of one's eyes to the breach.
2. CornoNero has proved breaches of trust, and knowledge of the facts constituting breaches of trust. It has established what happened, what the consequences were, and, in respect of the two principal actors (whose mindset and conduct were attributable to CornoNero), knowledge of what happened and of the consequences.
3. It might be thought that given the breaches of trust involved, there 'must have been' dishonesty involved. As the defendants submitted, that is effectively where Coonwarra's case ends. But that is not sufficient. In cases of this kind, actual dishonesty and fraud must be specifically proved. My assessment of Coonwarra's case is that it has not sufficiently established that actual dishonesty and fraud arises from the facts proved, as a necessary inference.

1. In Schmidt v AHRKalimpa Pty Ltd, the Victorian Court of Appeal recently summarised the principles applicable to an award of equitable compensation as follows:[257]

The Court, in its equitable jurisdiction, has the power to award compensation for a breach of fiduciary duty.

Equitable compensation is aimed at restoring the innocent party, as nearly as possible, to the position in which he or she would have been had the breach of fiduciary duty not occurred. This can be contrasted to an account of profits where the errant fiduciary will be ordered to render an account of the profits made within the scope and ambit of his or her duty.

As the obligation imposed upon defaulting fiduciaries is more absolute than the common law obligation to pay damages for tort or breach of contract, the obligation is not limited or influenced by common law principles relating to remoteness of damage, foreseeability or causation. In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd, Gageler J stated:

[A] causal connection sufficient for the fiduciary to be liable to the equitable remedy of compensation will exist if a loss to the person to whom the fiduciary obligation is owed would not have been sustained but for the breach.

The normal rule is that equitable compensation is assessed not as at the date of the breach but as at the time of the trial, with the full benefit of hindsight. Up until a fiduciary who is in breach of his or her fiduciary duties makes full restitution and pays appropriate compensation, the fiduciary's breaches are presumed to continue.

In accordance with the 'cardinal principle' of equity, 'the remedy must be fashioned to fit the nature of the case and the particular facts'. As to the method of assessing equitable compensation, it has been said that this will vary according to the nature of the fiduciary obligation whose breach is to be redressed. Equitable compensation is often calculated by reference to the loss suffered by the innocent party. However, in some cases, it may be appropriate to compensate the claimant by reference to the profits earned or gain made by the person who committed the breach of fiduciary duty.

In a claim for equitable compensation, the person to whom the fiduciary duties are owed has the onus of establishing the quantum of his or her claim.

Whilst a fiduciary need not act dishonestly or fraudulently in order to be liable for a breach of fiduciary duty, consideration of the severity of the breach of the fiduciary obligation and the extent of the fiduciary's involvement and culpability may be relevant to the assessment of compensation.

In the context of an account of profits, it has been said that in determining the remedy for a breach of fiduciary duty, the claimant should not obtain a windfall or be unjustly enriched. Further, a breaching fiduciary may be able to establish that some profit or benefit is beyond the scope of liability for which he or she should account, such as where the profit or benefit has no reasonable connection to the wrongdoing. However, once a causal link to the profit or benefit claimed is established, the onus is on the errant fiduciary to show that he or she should not account for the full value of the profit or benefit...

1. In Foresters,[258] Gagelar J addressed the necessary causal connection as follows:

A causal connection between a fiduciary's breach of fiduciary obligation and a benefit or gain sufficient for the fiduciary or knowing participant to be liable to the equitable remedy of account will exist if the benefit or gain to the fiduciary or knowing participant would not have been obtained "but for" the breach, in the same way as a causal connection sufficient for the fiduciary to be liable to the equitable remedy of compensation will exist if a loss to the person to whom the fiduciary obligation is owed would not have been sustained but for the breach. Because the concern of equity is to vindicate the equitable obligation that has been breached, the "but for" connection will be sufficient even though other contributing causes might be in play. That the fiduciary's breach of fiduciary obligation is dishonest and fraudulent is also good reason for treating a sufficient causal connection as existing if the dishonest and fraudulent breach can be concluded to have played a material part in contributing to the benefit or gain of the fiduciary or knowing participant even in circumstances where it cannot be concluded that the benefit or gain would not have been obtained but for the breach.

1. With respect to joint or several liability between a fiduciary and a knowing assistant, the High Court in Michael Wilson & Partners Ltd v Nicholls,[259] stated:

As MWP rightly pointed out, this Court has held that liability to account as a constructive trustee is imposed directly upon a person who knowingly assists in a breach of fiduciary duty. The reference to the liability of a knowing assistant as an "accessorial" liability does no more than recognise that the assistant's liability depends upon establishing, among other things, that there has been a breach of fiduciary duty by another. It follows, as MWP submitted, that the relief that is awarded against a defaulting fiduciary and a knowing assistant will not necessarily coincide in either nature or quantum. So, for example, the claimant may seek compensation from the defaulting fiduciary (who made no profit from the default) and an account of profits from the knowing assistant (who profited from his or her own misconduct). And if an account of profits were to be sought against both the defaulting fiduciary and a knowing assistant, the two accounts would very likely differ.

(a) CornoNero is liable 'for the amounts under the Second and Third Loans, with interest' and that that amount is crystalised by the payment to BCP upon settlement of the sale of the Mernda property of $8,516,035.43. That amount includes interest and fees paid under the loans. The amounts of interest and fees were separately specified.

(b) Breckenridge and Ascenzo are each liable to pay equitable compensation to Coonwarra by reason of knowing assistance in a dishonest and fraudulent design in the amount that was paid to BCP upon settlement of the land.

(c) Coonwarra is also entitled to interest.

(a) He did not receive any of the funds from the loans, so no account of profits is appropriate.

(b) Coonwarra must establish that its loss would not have been sustained but for the alleged breach. The necessary inquiry is whether loss would have been sustained had there been no breach, not whether loss was caused or flowed from the breach. While that is a lower standard than applies to damages at common law, Coonwarra has not discharged that burden.

(c) Any loss was suffered by the conduct of the Bradys in terminating the Mernda contract. It was always the intention of Coonwarra to proceed with the development. Had it proceeded, the evidence (on Breckenridge's predictions) is that it would either have made a profit or suffered a modest loss. Under the arrangements between the parties, Coonwarra would have been entitled to receive its payments under the Development Guarantee.

(d) Had the borrowed moneys been applied as Coonwarra alleges they should have been those funds would have been applied to the development. that would leave Coonwarra in the same place it found itself in late 2016. What has caused loss to Coonwarra was the decision of CornoNero, under the control of the Bradys, to neither prosecute the development nor honour the Development Guarantee.

(e) Coonwarra has failed to establish that loss would not have been sustained but for the alleged breach.

(a) In respect of the Second Loan, moneys were paid out in breach of duty in the sum of $3,572,105.64;

(b) In respect of the Third Loan, moneys were paid out in breach of duty in the sum of $1,608,711.14;

(c) CornoNero received the sum of $1.64 million in respect of the third loan, with notice of trust, for which it is liable to account to CornoNero.

(d) Coonwarra received the sum of $50,000 as a payment by CornoNero. That payment must be brought into account.

1. Turning to the moneys paid out in breach of fiduciary duty, has Coonwarra established that but for the breaches it would not have suffered loss?
2. Coonwarra's loss (on its case) arose this way: it borrowed money from BCP under the Second and Third Loans, under which it was liable to repay the principal with interest. The moneys borrowed were used for purposes unrelated to the ADA, but Coonwarra still incurred a liability to repay and to pay interest, under the terms of each loan. That liability crystalised upon the sale of the Mernda land to MJSC, when the loans were repaid. On the sale, Coonwarra was paid the price of its land as agreed which was in the amount necessary to clear the loans. In the result it received no payment at all. Had Coonwarra sold its land without those liabilities being secured against the land, it would have received the purchase price on the sale of the land, meaning the price that would have been agreed in the prevailing circumstances.
3. Breckenridge's analysis posits that but for the breaches, the loans would have been obtained in the same amount and applied to the development. The development would have continued, producing the same result that in fact occurred.
4. Whilst it is correct to say that by the breaches of fiduciary duty the borrowed funds were disbursed for purposes other than the development, assessing the causal effect of the breaches by positing that but for the breaches the funds would have been properly applied, does not properly reflect the scope and effect of the infringing conduct. On the whole the evidence, having regard to the scope of the fiduciary obligation, the conduct included procuring the loans, not just disbursing the loans. Given the manner in which the funds were paid out, the better view on the evidence is to conclude that but for the breaches, the borrowings would not have been obtained. The amounts sought as advised by Breckenridge and Ascenzo were not shown to have been related to the work that was to occur on the Land. It has not been established that had the breaches not occurred, loans of that kind or indeed any loan beyond the First Loan would nevertheless have been procured. Coonwarra incurred a liability to repay principal and interest on the Second and Third Loans in circumstances where what was borrowed was not calibrated to the needs of the development.
5. The measure of compensation can be tailored to the circumstances of the case. The breaches involved a course of conduct involving advising Coonwarra that borrowing was necessary and using funds for improper purposes. Having regard to both of those aspects, it is appropriate to take into account the way in which the disbursement of funds has occurred. I have done that in assessing the proportion of the Second Loan that was paid out in breach of duty. Coonwarra should be entitled to compensation in those amounts together with a proportional share of the interest on the borrowings, less the $50,000 that it has received.
6. Coonwarra is obviously not entitled to double recovery under any overlapping head of claim.
7. The parties made no submission on the consequences of a finding of procurement of breach of fiduciary duty.
8. I will invite the parties to make submissions about the appropriate orders arising out of these Reasons.

G Is Breckenridge or Ascenzo liable by reason of misleading or deceptive conduct?

1. Coonwarra's claim (made under s 18 of the Australian Consumer Law[260]) is that in reliance on misleading representations by Breckenridge and Ascenzo, it entered the First Loan Agreement, and in reliance on representations by Breckenridge alone, it entered into the Second and Third Loan Agreements.
2. It will be necessary to consider each representation separately, but it is convenient to first consider the terms of the pleaded representations and then to consider whether in respect of each loan the relevant representation was misleading or deceptive.

G.1 Pleaded representations

The First Loan

1. In respect of the First Loan, Coonwarra alleged that representations were made, as follows:

In or around December 2014, Breckenridge and Ascenzo, either in their own capacities or on behalf of Trimont, represented to Coonwarra that:

(a) it was necessary for Coonwarra to borrow funds in order to carry out the development of the Land pursuant to the ADA; and

(b) it was necessary for the Land to be used as security for that borrowing.

1. By way of particulars to that allegation, it was said that the representations were oral, and were made in the course of a number of conversations between Ascenzo and Breckenridge on the one hand, and Martin Van der Burgt on the other which were in substance that 'the preliminary costs had been expended in respect of the development of the Land and that those preliminary costs had to be reimbursed and paid'. The particularised conversations were not put as a stand-alone representation but were given in support of the allegation that the representation alleged was made.
2. Coonwarra alleged that the representations were false, because 'the funds advanced under the December 2014 Loan were not in fact used for the purpose of developing the Land pursuant to the ADA or for repayment of preliminary costs as no work had been carried out in respect of the development of the Land' and the funds were paid directly to Trimont and used to pay expenses unrelated to the ADA.
3. Coonwarra's written closing submissions re-formulated the pleaded representations this way:

(a) It was Coonwarra's obligation under the ADA to enter into the First Loan and provide those funds of $1.5 million to Trimont, including by providing a first mortgage and personal guarantee in respect of the borrowed amount;

(b) Trimont needed those funds, firstly, to reimburse itself for considerable costs incurred up to that time, and secondly, in order to progress the development of the Mernda property;

(c) Trimont would apply all of the funds advanced under the First Loan to the development of the Mernda property either by way of reimbursement of costs already incurred or in respect of future costs;

(d) Trimont would repay BCP, on Coonwarra's behalf, all principal, interest and fees under the First Loan.

(e) Trimont would make those repayments within the specified term of the First Loan.

1. Furthermore, it was said by way of submissions that insofar as those representations were as to future matters, Breckenridge and Ascenzo did not have reasonable grounds to make them.
2. Ascenzo admitted that he made the pleaded representation.[261] Breckenridge did not. Because of the conclusions I have reached about the representation (it was not shown to have been misleading) it is unnecessary to determine whether Breckenridge spoke the words attributed to him.
3. Ascenzo and Breckenridge both submitted that it was not open to Coonwarra to reformulate its claim in closing submissions.
4. Coonwarra did not make any substantive submission in support of its attempt at repleading a case in closing submissions. No application to amend the pleadings was made (say, in order to bring the proceedings into conformity with the evidence). It was not argued that the claim had been run on that basis or somehow accepted as having been re-articulated in running, save in respect of what was said about the representation articulated in sub-paragraph (c) above. The representations set out at sub-paragraphs (a), (d) and (e) above were not pleaded. Nor was it alleged that the representation that was pleaded was as to a future matter. Those representations can be put to one side because they are outside Coonwarra's case. The articulation of additional representations likely reflected a sense that the real issues in the case and the pleadings, diverged. The representation in sub-paragraph (b) is close to the pleaded representation. Nothing material turns on the difference between them for present purposes.
5. Representation (c) was said by Coonwarra to be necessarily implied in its pleaded representation.
6. Ascenzo and Breckenridge each said that the way in which the pleaded representation had been formulated was fatal to Coonwarra's claim. That submission rested on two related contentions. First, that the pleaded representation could not be read as Coonwarra contended in final submissions (as though it carried an implication as to the purpose for which the funds would be deployed) and second, that if the pleaded representation were properly confined, it was not shown to be misleading or deceptive (or false, as Coonwarra put it).
7. It is necessary to be clear about the issue in contention concerning the pleadings. Assuming the words had been spoken as alleged, the issue was not whether the words, if proved, were capable of carrying the implication pleaded. The issue was rather, whether the pleaded representation could be read as intended to convey something more than the literal words pleaded. It concerned the proper scope of Coonwarra's case. The defendants sought to confine Coonwarra to the strictly pleaded cased.
8. Coonwarra's pleaded case was that by words spoken in a number of conversations, Breckenridge and Ascenzo had made two representations to Coonwarra - that it was necessary for Coonwarra to borrow funds in order to carry out the development of the Land pursuant to the ADA, and that it was necessary for the Land to be used as security for that borrowing.
9. Coonwarra's case concentrated on the first representation. It submitted that the words, 'it was necessary for Coonwarra to borrow funds in order to carry out the development' should be construed as including by implication the allegation of a representation that the funds would be used for the purposes of the development. That was because it could only be said that funds were 'needed' for a particular purpose if they were to be used for a particular purpose. If they were not to be used for that purpose they could hardly be said to be necessary for that purpose. Coonwarra's submission made clear that its case rested on its pleaded representation being read in that way. If so read, there was a direct correspondence between the representation and the reason by which it was said to have been false (the funds were not used for the purposes of the development). The nuanced reading of its plea was urged by Coonwarra because of the disconnect between the literal reading of the allegation and the facts by reason of which it was said to have been false.
10. If the issue in contention was whether by spoken words to the effect that, 'it was necessary for Coonwarra to borrow funds in order to progress the development' (or to like effect) the defendants in fact represented that they would use the funds for that purpose, the question for decision would be whether the words conveyed that meaning in all of the circumstances, charactering the notional effect of the conduct by reference to its context.[262] A statement that something was needed for a particular purpose might or might not in the circumstances, give rise to a representation that if the thing were supplied it would in fact be used in that way. Much would depend upon the context. Coonwarra's submissions were in substance addressed to the question whether the words spoken conveyed that representation.
11. That is not the issue in contest, though. That question only arises if Coonwarra's case, properly understood, was that the defendants represented that the borrowed funds would be used for the purposes of the development.
12. The purpose of pleadings is to confine the issues and give notice to the opposite party of the case against it. Notice of the case that must be met is a basic requirement of procedural fairness.[263] Allegations should be sufficiently precise where the words chosen have a specific legal connotation, to avoid ambiguity.[264]
13. It must be recognised that the question is 'not whether the facts pleaded are in themselves sufficient to give rise to a cause of action. Rather, the question is whether it would be open to the applicant upon the pleadings to prove facts at the trial which would constitute a cause of action'.[265] Acknowledging that principle, it nevertheless remains that in this case, the words spoken were said to convey _particular representation_s. Coonwarra has, by pleading in the way that it has, confined its case to those representations. The issues between the parties have then become whether the words alleged were spoken, whether they conveyed the representations alleged (and not some other representations) and whether those representations were misleading or deceptive.
14. Can the first pleaded representation be fairly and reasonably read as including the representation that the borrowed funds would be used for the purposes of the development?
15. The difference between the two types of representation is exposed by asking how each might be falsified (shown to have been misleading or deceptive).
16. As a matter of ordinary language and in this legal context, a statement that a thing to be given or supplied will be used in a particular way, concerns a future state of affairs and, depending upon the context, it may concern an intention. If read as concerning a future state of affairs, whether a representation that borrowed funds would be used for the purposes of developing the Land was misleading or deceptive, would be determined by whether or not the representor had reasonable grounds to make the representation. There will not be reasonable grounds for making the representation if, at the time, the person who made it did not have facts sufficient to induce in the mind of a reasonable person a basis for making the representation.[266] If read as a statement of present intention, it would be necessary to first identify whose intention was relevant, and next to identify the circumstances from which the intention might be inferred. Likewise, where the representation is that something will or would be used for a particular purpose, whether that representation was misleading would be determined by exposing the basis for the representation that the use of the thing (the borrowed funds in this case) would be confined to that purpose.
17. A statement that something is needed for a particular purpose (or needed so that that it can be used for a particular purpose) describes a state of affairs or condition. A need arises where something is required in order to bring about a desired condition or result. It is not a statement of intention. Such a representation can be falsified (or shown to have in fact been true) by interrogating what the needs of the thing in question in fact were; that is, by inquiring about a factual state of affairs.
18. Having identified those issues, we return to the function of pleadings. Had the issues been exposed by a different pleading (such as expressed in Coonwarra's closing submissions) questions about how the relevant intention was to be inferred and how the purpose (of Trimont or Coonwarra as the case may be) was to be ascertained, and whether, at the time the representations were made, the defendants had reasonable grounds for what they said, could have been explored and forensic decisions made accordingly. That did not occur because the pleading was confined in the way it was. It is not sufficient that those issues have been raised in the case generally. Regard must be had to the particular causes of action upon which a party proceeds.
19. As Breckenridge submitted, on Coonwarra's case the allegation of falsity goes to the use to be made of the funds advanced by Coonwarra to Trimont, and not to the necessity of borrowings.
20. For those reasons, I accept the defendants' submission that the pleaded case did not encompass the representation that the borrowed funds would be used for the purpose of the development.

1. In respect of the Second Loan, Coonwarra alleged that Breckenridge made representations, as follows:

In or around July and August 2015, Breckenridge, either in his own capacity or on behalf of Trimont and/or CornoNero, represented to Coonwarra that:

(a) it was necessary for Coonwarra to borrow further funds in order to carry out the development of the Land pursuant to the ADA; and

(b) it was necessary for the Land to be used as security for that borrowing.

1. By way of particulars to that allegation, it was said that the representations were oral, and made in the course of a number of conversations between Breckenridge and Martin Van der Burgt which were to the effect that unless the funds were borrowed, Coles Supermarkets' timetable for the commencement of construction under the ADA would not be able to be met and that they were necessary for the development of the Land under the ADA. The particularised conversations were not put as a stand-alone representation but were given in support of the allegation that the representation alleged was made. Coonwarra alleged that the representations were false, because 'the funds advanced under the December 2014 were not in fact used for the purpose of developing the land pursuant to the ADA' but were used to make various payments unrelated to the ADA.
2. Coonwarra's written closing submissions re-formulated the pleaded representations this way, stating that Breckenridge represented to Coonwarra that:

(a) CornoNero had taken over Trimont's interests under the ADA;

(b) It continued to be Coonwarra's obligation under the ADA to enter into the Second Loan and provide those funds of $5.2 million to CornoNero, including by providing a first mortgage and personal guarantee in respect of the borrowed amount;

(c) CornoNero needed those funds in order to progress the development of the Mernda property;

(d) CornoNero would apply all of the funds advanced under the Second Loan to the development of the Menda property;

(e) CornoNero would repay to BCP, on Coonwarra's behalf, all principal, interest and fees under the Second Loan.

(f) CornoNero would make those repayments within the specified term of the First Loan.

1. It was said by those submissions that insofar as those representations were as to future matters, Breckenridge did not have reasonable grounds to make them.
2. The analysis in respect of the representation said to have been made regarding the First Loan, applies equally to the representation alleged in respect of the Second Loan.

1. Breckenridge said that the evidence did not establish that he had made the alleged representation. The relevant evidence about the relevant conversation is set out in Part II, and was as follows (without repeating some of the contextual detail):

(a) A meeting occurred between Ascenzo, Breckenridge, Martin and Ben that Breckenridge placed in late July 2015, Ben placed in early August 2015 and Ascenzo placed in 'mid 2015'. Martin did not recall when in 2015 it occurred. It in fact occurred sometime before the date on which the Second Loan Agreement was executed. I conclude that the meeting occurred in late July or early August (meaning before 7 August) 2015.

(b) Ascenzo's evidence was that 'we put forward what Trimont needed the money for, to keep the project going, to keep Trimont going'. In context, the 'we' in that sentence, refers to Breckenridge. He also gave evidence about an agreement as to an advance profit, which I have rejected.

(c) Breckenridge's evidence was Ascenzo had told him in July 2015 that he had spent all the money lent under the ADA and would need more funds to move the Mernda project forward while negotiations with potential buyers were happening. Ascenzo asked Breckenridge to talk to Hartwig about raising money via a loan secured against the Mernda Land and to ask Hartwig what amount could be borrowed. Against that background, he met with Ascenzo, Martin and Ben. His evidence was:

At this meeting I talked about the need to access funds to keep the development moving and that Trimont Australia would need to have access to funds to do the necessary work. Silvio said words to the effect that he needed more money to keep the ADA going.

(d) Breckenridge went on to say that Ascenzo spoke about the costs Trimont had incurred to that point and wanting to 'reimburse costs' and 'access the uplift'.

(e) Martin's evidence was that Breckenridge told him that further funding was required to advance the project, which was to be a loan for $5.2 million, part of which was to be applied to repay the December 2014 loan advance of $1.5 million.

(f) Ben's evidence was that Breckenridge told him and Martin that the funders of the First Loan required repayment in full and as a result they would need to establish a second loan to pay out the first loan and also to provide funds to begin construction of the development.

1. In determining whether oral representations were made one must be mindful of the injunction in Watson v Foxman that:[267]

Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether the spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence of absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene and the processes of memory are overlaid .. by perceptions or self-interest as well as conscious considerations of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, often subconsciously, constructed. All that is a matter of ordinary human experience.

Whether the evidence of spoken words is sufficiently precise to enable the court to be reasonably satisfied that the words spoken were in fact misleading is plainly a question of degree, not a demand for unattainable perfection. In some cases, that may depend upon the use of a specific word or phrase, but in many cases the court can be reasonably satisfied of the misleading nature of an oral statement from evidence of the substance of what was said.[268]

1. Having regard to the substantial correspondence between the accounts of all witnesses on the issue of funds being necessary to progress the development, the context in which the discussion occurred (Breckenridge having been instructed by Ascenzo to have Hartwig arrange a loan, and then meeting with the Van der Burgts) I am reasonably satisfied that Breckenridge told Ben and Martin that further funding was required to progress the development, and that those funds were to be borrowed, in repayment of the First Loan. I find that Breckenridge made the representation that 'it was necessary for Coonwarra to borrow funds in order to carry out the development of the land pursuant to the ADA'.

1. In respect of the Third Loan, Coonwarra alleged that Breckenridge made representations, as follows:

In or around February 2016 Breckenridge, either in his own capacity or on behalf of CornoNero, represented to Coonwarra that:

(a) Additional funds were required to pay the Responsible Authority the contribution for the construction of the proposed road that was to transact the Land;

(b) Additional funds were needed to develop the land under the ADA;

(c) it was necessary for Coonwarra to borrow further funds in order to carry out the development of the Land pursuant to the ADA; and

(b) it was necessary for the Land to be used as security for that borrowing.

1. By way of particulars to that allegation, it was said that the representations were oral, and made in the course of a number of conversations between Breckenridge and Martin Van der Burgt in or around February 2016, which were to the effect alleged. The particularised conversations were not put as a stand-alone representation but were given in support of the allegation that the representation alleged was made.
2. Coonwarra alleged that the representations were false, because 'the funds advanced under the December 2014 were not in fact used for the purpose of developing the Land pursuant to the ADA' but were used to make various payments unrelated to the ADA and the development of the Land.
3. Coonwarra's written closing submissions re-formulated the pleaded representations this way, stating that Breckenridge represented to Coonwarra that:

(a) It continued to be Coonwarra's obligation under the ADA to enter into the Third Loan and provide those funds of $2.4 million to CornoNero, including by providing a first mortgage and personal guarantee in respect of the borrowed amount;

(b) CornoNero needed those funds in order to progress the development of the Mernda property and without those funds the delivery of the project would be delayed;

(c) The Second Loan had been expended on the Mernda development;

(d) CornoNero would apply all of the funds advanced under the Third Loan to the development of the Menda property;

(e) CornoNero would repay to BCP, on Coonwarra's behalf, all principal, interest and fees under the Third Loan.

(f) CornoNero would make those repayments within the specified term of the Third Loan.

1. It was said by those submissions that insofar as those representations were as to future matters, Breckenridge did not have reasonable grounds to make them.
2. The analysis in respect of the representation said to have been made regarding the First Loan, applies equally to the representation alleged in respect of the Third Loan.

1. Breckenridge admitted that he made the first two alleged representations, but not the others.
2. Ben's evidence was that Breckenridge said that further funds were needed for the construction of the intersection at Bridge Inn Road and Sissinghurst Parade, and also to begin construction on the site. He said that if Coonwarra did not take the loan, it would delay the delivery of the project, and that a decision was needed quickly.
3. Martin's evidence was that in February 2016, Breckenridge told him that he had arranged a further loan for the sum of $2.5 million and said that the extra funding was required to construct the road that was to be known as Sissinghurst Parade that ran between Lots A and B on the Plan of Subdivision. That discussion occurred at the Mernda Hotel at which he, Breckenridge, Ben and Ascenzo were present. Martin understood, from what Breckenridge told him, that the funds were required for bonds, council contributions and road construction works. Breckenridge said that if funds were not obtained, the project would stall; but with funds, construction would commence immediately.
4. Breckenridge said that he explained that there were immediate costs to be incurred with the construction of a new road, including the payment of bonds. He said that both Martin and Ascenzo said that they wanted to keep the project going and that he should talk to Hartwig about getting a further loan. He said that Ben said there was a need to cap construction costs to ensure that there would be enough money left in the development agreement to ensure that Coonwarra got its money out at the end. Breckenridge told Ben that the estimated construction costs had not changed from the last feasibility document he had sent to Ben and, on that basis, Coonwarra could get the $6.5 million payment for the Land on completion of the development.
5. Ascenzo accepted that the Van der Burgts were told, 'more money was needed' to progress the Mernda development.
6. Having regard to the substantial correspondence between the evidence on the essential point that further funds were needed to progress the development and the context, which was that Coonwarra was being asked to take out a further loan, I am reasonably satisfied that Breckenridge made the representation that it was necessary for Coonwarra to borrow further funds in order to carry out the development.

Were the representations misleading or deceptive?

The First Loan

1. Was the representation in December 2014 that it was necessary for Coonwarra to borrow funds in order to carry out the development of the Land pursuant to the ADA, shown to be misleading or deceptive?
2. In my view it was not, for the following reasons.
3. Coonwarra submitted that it was not established that there were reasonable grounds for representing that the moneys were necessary in order to reimburse Trimont's costs. Breckenridge believed that the costs were in the order of $1 million but the evidence, taken at its highest, suggest that the costs were roughly half of that.
4. The difficulty with that contention was, as Ascenzo submitted, that the evidence was that the agreed purpose of the First Loan was at least in part, to compensate Trimont for costs incurred to date. The 20 February 2015 letter puts the portion of the First Loan directed to reimbursement, at $1 million. Given Coonwarra's acceptance in fact, that Trimont should receive reimbursement of that amount, it cannot be shown that the representation was misleading or deceptive, insofar as it concerns the reimbursement of Trimont's costs.
5. Ascenzo submitted that the second aspect of the First Loan was for 'Trimont's working capital' and it is only that portion of the loan to which the December 2014 representations could apply. I agree (save for the reference to Trimont's working capital). As set out earlier, I have found that the agreement that Trimont was entitled to be paid 'in recognition of funds expended' (as documented in the 20 February 2015 letter) was limited to the sum of $1 million. The remaining $500,000 was said to be for 'future costs and working capital requirements'. The letter did not include the expression, 'Trimont's working capital'. I have found that the context in which the letter was written and in which the discussions occurred makes clear that future costs and working capital requirements were in respect of the Mernda development.
6. Ascenzo submitted that the word, 'necessary' could be read in a number of ways.
7. Ascenzo submitted that insofar as the alleged representation should be read as necessary from a cashflow perspective meaning that Trimont could not perform the development without further funds, it was not misleading or deceptive, because Trimont was plainly unable to fund the development by itself and required funding. I consider that Coonwarra's case was directed to this reading of the representation. The issue was whether the moneys to be borrowed were needed.
8. Ascenzo submitted that on the evidence, 'the precise amount spent by Trimont (whether on its own account or to the benefit of Ascenzo Industries) may have been anywhere between $500,000 and $1 million'. The submission was addressed to the point in time at which the First Loan was procured. Breckenridge submitted that the evidence was that a substantial amount of work had been undertaken and continued into 2015, involving negotiations with potential tenants, communications with consultants, and negotiation with the Council to have drawings endorsed, and negotiations with potential fund-through purchasers.
9. The evidence about the work performed on the development is set out in Part II. To summarise the evidence relevant to all three loans:

(a) There was evidence that work was done on the site, as described by Breckenridge. Coonwarra did not contest that work had been done but said that little could be established about the cost of the work.

(b) At the point at which the First Loan was initiated, Ascenzo did not know what costs had been incurred. Breckenridge did not have any knowledge of the quantum of the costs expended at the point at which the First Loan was initiated. He had detailed knowledge of what work had been done. Coonwarra agreed that Trimont was entitled to be 'reimbursed' in the sum of $1 million.

(c) The ADA contained an estimate of what were in effect pre‑construction costs, at $1.5 to $1.9 million excluding GST.

(d) At the point at which the Second Loan was initiated (August 2015), the only work that had been undertaken on the development had been commissioned by Breckenridge, but he did not know the value of the costs incurred. He recorded an estimate of a total of $1.9 million in consultancy costs for the development up until the point of construction. If the $1.5 million from the First Loan was taken to be allocated against that estimate, the remaining estimated costs to be incurred would be $400,000. Documents produced by the parties recorded only $81,000 as having between spent on the project. There was little work undertaken in the second half of 2015. The works that Breckenridge nominated as requiring consultants did not occur until later in 2016.

(e) Ascenzo said in cross-examination that in relation to the combined total of the First and Second Loans ($5.1 million) he thought that $3 million was taken out for 'advance profits'. He did not know the value of the costs expended, and by implication the balance of the borrowed moneys were used on development costs.

(f) For the purposes of initiating the Third Loan (obtained in February 2016), Coonwarra was told that further funding was required for road construction, including the payment of bonds to the Council.

(g) In March 2016, in response to Ben Van der Burgt's pursuit of information about costs, Breckenridge sent Ben a spreadsheet setting out an estimate for consultancy costs. It included $92,000 for 'contribution offset for tree removal' and $100,000 for 'bond for tree removal'. The spreadsheet stated that those funds were 'held in trust'. It recorded the sum of $1,864,321 for 'consultancy costs occurred to date by Trimont Pty Ltd'.

(h) Breckenridge stated in March 2016 in response to Ben pursuing information about costs, that $1,864,321 had been incurred for consultancy costs to that point. The figure was an estimate and Breckenridge denied that he had actual knowledge of the costs incurred. He said only that his estimates given in his Estate Master Spreadsheet were probably reliable.

1. Concentrating only on the First Loan, although the evidence was limited in the ways discussed and although the actual value of the costs incurred could not be determined, on the whole of the evidence it was not established that the representation that funds were needed to develop the Land under ADA, was misleading.
2. Insofar as the representation was to be read as 'necessary according to the terms of the ADA', Ascenzo did not, on the evidence, make that representation. Were such a representation made, Ascenzo accepted that it would have been misleading. I agree that the evidence does not support the conclusion that Ascenzo represented that the borrowing was 'necessary according to the terms of the ADA'.
3. Ascenzo submitted that insofar as the representation should be read as conveying that the loan was necessary from a structuring perspective (meaning the only way to structure the financing of the development was by a direct loan from Coonwarra), such a representation was a consequence of advice from Hartwig about the way that borrowings to finance the development of the Land were to be structured. Hartwig accepted in his evidence that he advised Breckenridge that Coonwarra should take out a direct loan secured by the Mernda Land rather than Trimont taking out a loan with the Mernda Land as third party security. He gave that advice in order to protect the lender. The evidence was that Coonwarra acted upon what it believed was the necessary or preferable course of action in respect of borrowings for the purposes of the development, in light of what it was told.
4. Coonwarra's evidence did not address that case in any substantive way, and did not establish that that representation, if made, was misleading or deceptive.

1. As with the December 2014 representation, Coonwarra's case was that the representation concerned the need for money to progress the development (rather than the terms of the ADA).
2. Coonwarra submitted (relevantly, in respect of the pleaded representation that it was necessary for Coonwarra to borrow funds in order to carry out the development) that it was misleading or deceptive because on Breckenridge's own evidence the Second Loan funds of $1.6 million (in round figures) were used to repay the First Loan (which itself had not been used for the Mernda development) and the balance of the $3.6 million was not applied to the Mernda development at all. Furthermore, Hartwig's evidence was that Breckenridge phoned him in about July 2015 and asked him 'how much could be borrowed' against the Mernda property. From that evidence, the inference should be drawn that Breckenridge was not concerned about the actual costs of the Mernda development but only to maximise the funding that he could access. The burden of the submissions was concerned with the question whether there were reasonable grounds for the representation that the funds would be used for the development.
3. Breckenridge submitted that Coonwarra's case about the falsity of the representations was directed to the use made of the funds advanced by Coonwarra to Trimont.
4. The difficulty with Coonwarra's case was, as Breckenridge submitted, that it did not seek to prove that funds were not necessary to develop the land. Coonwarra also did not seek to establish (and did not make submissions in support of) the proposition that funding to a particular amount was necessary but beyond that it was not.
5. When regard is had to the evidence concerning the costs actually incurred, it may be said that the 'estimates' all pointed to the fact that at most, about $1.8 to $2 million might have been spent in total or expected to be spent in total before the commencement of construction. It could then be said that that number falls short of the amounts borrowed, by a very large measure. Coonwarra did not seek to construct a case to the effect that those statements were misleading because they conveyed the impression that funding of a particular amount was required, but in fact, only a lesser amount of funding was required. If it was going to do that it would have been required to discharge an onus of proof in establishing that case, both in respect of the representation and the basis on which it was said to have been false.
6. The evidence concerning the value of the work and the use to which the funds were put, was relevant to the other causes of action upon which Coonwarra relied, but as I have said, this particular cause of action was framed in a particular way. Because of the way that the case was framed, it has not been established that the representations were misleading or deceptive. It is not the role of the Court to decide a different case to that which was run, by assembling a case from the evidence, when the submissions were directed at a different point.

1. Coonwarra submitted (relevantly, in respect of the pleaded representation that it was necessary for Coonwarra to borrow funds in order to carry out the development) that the representation was misleading or deceptive because on Breckenridge's own evidence the Third Loan funds were not applied to the Mernda development at all.
2. As Breckenridge submitted, the case concerning the falsity of the representations was once again directed to the use to which the funds were to be put and not the necessity of obtaining such funds.
3. The conclusions in respect of the representation that it was necessary for Coonwarra to borrow funds in order to carry out the development made in respect of the August 2015 representation, apply equally to the February 2016 representation.
4. The remaining representations have not been shown to have been misleading or deceptive.

H Is BCP liable to Coonwarra for breach of contract?

1. For the purposes of developing the Mernda Land under the ADA, Coonwarra entered into three written loan agreements with BCP:

(a) Under the First Loan Agreement made in December 2014, Coonwarra borrowed $1.5 million. The loan was for a term of three months, with an interest rate of 12 percent per annum and a default interest rate of 25 percent. Interest was to be capitalised monthly.

(b) Under the Second Loan Agreement, made in August 2015, Coonwarra borrowed $5.2 million, of which $1.5 million repaid the funds borrowed under the First Loan. The loan was for a term of three months from the date of drawdown of the first tranche of funds, with an interest rate of 15 percent per annum and a default interest rate of 25 percent. Interest was to be capitalised monthly.

(c) The Third Loan Agreement, made in February 2016, was described as an amended and restated agreement and made reference to three 'tranches' of funds which encompassed the First and Second Loans, but under which only an additional $1.8 million was advanced. The loan was for a term of nine months. Interest was charged at 15 percent until 7 November 2016 then 25 percent thereafter for tranches 1 and 2, and 30 percent on the remaining tranches. Default interest was at 25 percent for tranches 1 and 2 and 35 percent for the remaining tranches. Interest was to be capitalised monthly.

1. Pursuant to the agreements, Coonwarra executed a mortgage over the Land, registered on 31 August 2015, which secured the indebtedness of Coonwarra under each of the loan agreements. Martin Van der Burgt provided personal guarantees.
2. Coonwarra's claim is that BCP breached each of the loan agreements by disbursing the loans to parties other than Coonwarra, without direction or consent from Coonwarra, contrary to the stated purposes for which funds were to be advanced under the Loans. BCP's dealing with the funds in that way is said to have been contrary to terms implied in each agreement, that BCP would advance the moneys the subject of the agreements to Coonwarra or to other parties only at the direction and with the consent of Coonwarra, and that it would not advance any sum to any party for purposes other than those stated in the loan agreement. The funds were to be advanced for the purposes of funding fees and costs in relation to the proposed development of the Mernda Land whereas in fact they were disbursed to pay unrelated creditors and expenses. Coonwarra also alleges an implied term requiring BCP to act in good faith and act honestly and to do all things necessary to allow Coonwarra to have the benefit of the loan agreement.[269] Coonwarra seeks damages for breach of contract in the sum of the moneys advanced by BCP under the Loan Agreements. Alternatively it seeks from BCP the sum of $7 million (the principal sums under the Second and Third Loans) by way of repayment of a debt.
3. The claims against BCP treat it as a principal and contracting party. So much is necessary for Coonwarra to succeed on any of its claims against BCP. Coonwarra accepted that BCP acted as an agent for disclosed principals in respect of each of the loans, but said that BCP also contracted in its own right and was accordingly a concurrent principal in respect of each agreement.
4. In closing submissions, Coonwarra contended that BCP had acted outside of the scope of its authority as agent, with the consequence that it was personally liable to Coonwarra for breach of the loan agreements. That claim was said to rest on a clause in each of the agreements that Coonwarra construed as an explicit acceptance by BCP of personal liability in the event that it acted outside the scope of its authority. It was also said to reflect the principle that an agent who acts beyond authority cannot bind its principal and may be personally liable to a person with whom it contracts on behalf of its principal. However, in view of the submissions advanced by BCP (which need not be set out here), Coonwarra accepted that it had neither pleaded nor opened that case. Coonwarra did not contend that the issue had been 'brought into the ring' as it were, by the parties' conduct of the case. I accept that the case that BCP acted outside the scope of its authority was neither pleaded not run at trial.
5. BCP's defence was that the loan agreements make plain that BCP contracted only as agent of a disclosed principal. It did not bind itself personally. The claims, brought in contract, must fail in circumstances where BCP was not a party to the loan agreements other than as agent for a disclosed principal. The 'debt' claim is misconceived and rises no higher than the contract claims.
6. Alternatively, BCP says that if it was a party to a loan agreement with obligations of its own, Coonwarra has not established the terms that it pleads, or the breaches that it asserts.
7. BCP admits it made the disbursements of funds as alleged by Coonwarra. However, it says that it did so on the instructions of various people who were authorised by Coonwarra to give it instructions. Coonwarra and BCP acted on a common assumption that BCP was permitted to act on the instructions of Trimont and CornoNero, from which it would be unconscionable of Coonwarra to depart.
8. BCP submitted that the evidence established that Martin and Ben Van der Burgt understood, and believed, that Coonwarra had provided security for and was liable to repay to the lender each loan, but that Coonwarra had operated on the expectation that Trimont or CornoNero would, on behalf of Coonwarra, repay the loans. Coonwarra then acknowledged that it borrowed funds which it on‑lent to Trimont or CornoNero in an undocumented arrangement. Coonwarra permitted the funds from the First Loan to be wholly disbursed to Trimont. It subsequently signed two further loan agreements, the funds from which were used to pay out the first loan agreement and were otherwise also on‑lent to Trimont and CornoNero in a continuation of the undocumented arrangement. Trimont and CornoNero failed to repay the loans to, or on behalf of, Coonwarra. Coonwarra now looks to BCP (and others) to make good the loss it has suffered after it assumed commercial risks associated with successive borrowings and undocumented on‑lending of funds and those risks were realised.

Did BCP enter the Loan Agreements only as agent for disclosed principals?

1. It is convenient to deal first with the capacity in which BCP entered the loan agreements.

1. The applicable principles are well settled.
2. Where an agent enters a transaction on behalf of a principal and discloses to the other contracting party the existence and the identity of the principal, as a general rule the agent is not liable under the contract.[270] A contractual relationship will exist between the principal and the third party directly, and not between the agent and the other contracting party, with the consequence that the agent cannot be sued, or sue on, the contract.[271] The principal is the true party to the contract, the agent having acted merely as an instrument on behalf of the principal. Different consequences follow where the principal is undisclosed.
3. However, as Lord Scarman said in Yeung Kai Yung v Hong Kong and Shanghai Banking Corp, it is not the law that if a principal is liable, his agent cannot be liable.[272] Rights and obligations can arise between the agent of a disclosed principal and third party if the contract so provides and it can thus be established that the agent was contracting personally. As was said in Queensland Nickel, it is not true to say that for every case involving a disclosed and identified principal, the agent always 'drops out'.[273] As the Full Court of the Federal Court of Australia said in Australian Trade Commission v Goodman Fielder Industries Ltd (approving the statement of principle in Teheran‑Europe Co Ltd v ST Belton (Tractors) Ltd)[274], an agent can make a contract on behalf of its principal in one of three ways, namely:[275]

(a) by creating privity of contract between the third party and his principal without himself becoming a party to the contract;

(b) by creating privity of contract between the third party and his principal, whilst also himself becoming a party to the contract; or

(c) by creating privity of contract between himself and the third party, but no such privity between the third party and his principal.

1. The question in every case is what the parties intended or must be fairly understood to have intended, and, if they have expressed themselves in writing, what is the proper construction of that writing.[276]
2. Usually, if an agent signs without qualification, the agent will be understood to have been contracting personally.[277] However, if the agent's signature to the contract is qualified or the agent is described in the contract by words which indicate that the agent contracts as an agent, then the agent will not be personally liable.[278] More fundamentally, as the Victorian Court of Appeal said in Lederberger v Mediterranean Olives Financial, the identification of the parties to a contract must be made in accordance with the objective theory of contract. That is, the court must discern the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had.[279] The objective theory of contract requires that each loan agreement be construed as a whole, by reference to its text, context and purpose.[280]

1. Apart from one provision that Coonwarra said was material, in all other respects the relevant provisions of the three loan agreements were identical.
2. Relevantly in each case the agreement was made between the 'lender', the 'borrower' and the 'guarantors'. The lender was defined in this way (taking the First Loan Agreement as illustrative):

BERKELEY CAPITAL PARTNERS PTY LTD ACN 078 247 319 of Level 6, 766 Elizabeth Street, Melbourne in the State of VICTORIA 3000 as Agent of the Principals:[281]

Aida Nominees Pty Ltd

ACN 004 941 066 as trustee for the Minc Family Trust ABN 48 110 802 197

1. 'Principal' was also defined by naming the relevant entity.[282]
2. Each agreement contained this clause:

14.1 Berkeley Capital Partners enters into this Agreement and any Security contemplated by this Agreement as Agent for and on behalf of the Principals. Berkeley Capital Partners can only act in accordance with the terms of any agreement under which it is appointed as the Agent of the Principals and is not liable under any circumstances to any party under this Agreement. This limitation of Berkeley Capital Partner's liability applies despite any other provision of this Agreement and extends to all liabilities and obligations of the Lender in any way connected with any representation, warranty, conduct, omission, agreement or transaction relating to this Agreement or any Security contemplated by this Agreement.

14.2 Berkeley Capital Partners is not obliged to do or refrain from doing anything under this Agreement (including, without limitation, incurring any liability) unless Berkeley Capital Partners liability is limited in the same manner as set out in the preceding paragraph.

14.3 No attorney, agent, receiver, or receiver and manager appointed in accordance with this Agreement has authority to act on behalf of Berkeley Capital Partners in a way which exposes Berkeley Capital Partners to any liability.

14.4 Berkeley Capital Partners holds the Transaction Documents including this Agreement for the Principals as set out in Item 2 of the Schedule.

14.5 Berkeley Capital Partners may exercise any power, right or benefit on behalf of the Principals under any Transaction Document as if it were the Principal.

1. BCP signed the agreements under an execution clause that read:

LENDER

EXECUTED BY Berkely Capital Partners Pty Ltd ACN 078 247 319 in accordance with section 127 of the Corporations Act 2001 (Cth).

1. It might be considered relevant that, on the execution page, BCP is identified without reference to BCP's role as agent. However there, the identification of BCP by name falls under the heading, 'LENDER', which is in turn defined in the schedule to the agreement, as, '[BCP] as Agent for the Principals'.
2. Focussing on those provisions, it might be said that there is very little to gainsay the conclusion that BCP entered the agreements only in its capacity as agent.
3. Coonwarra relied upon three features of the agreements.
4. First, Coonwarra submitted that by the words in clause 14.1, 'Berkeley Capital Partners can only act in accordance with the terms of any agreement under which it is appointed as the Agent of the Principals', BCP assumed a personal obligation to Coonwarra to act in accordance with its authority. Coonwarra said that these words establish that BCP's liability is limited when acting within the authority granted by the relevant principal, but where it does not act within that authority BCP is acting in its capacity as principal. It is only in circumstances in which it is acting within the scope of its authority (in accordance with the facility agreements with its principals) that it may escape liability under clause 14. Accordingly, BCP contracted both as an agent and as a principal. Its personal liability in respect of any putative breach of agreement depends upon whether it carried out the relevant act in accordance with the terms of its agency agreement.
5. In my view the words, 'Berkeley Capital Partners can only act in accordance with the terms of any agreement under which it is appointed as the Agent of the Principals_'_ do not indicate an intention by BCP to assume personal liability under the agreements. That clause, and the agreement (in each case), must be read as a whole. The extracted words in clause 14.1 are followed by the words, 'and is not liable under any circumstances to any party under this Agreement', and by the statement, 'this limitation of Berkeley Capital Partners liability applies despite any other provision of this Agreement and extends to all liabilities and obligations of the Lender...'[283] A contractual provision to the effect that a party can only act in accordance with a particular obligation might indicate, when read in the abstract, that if the party acts contrary to that obligation certain consequences may follow. However, in this case, read contextually, the extracted words are words of limitation. Consistently with the whole of clause 14 (including sub‑clause 14.2), their function is to state that BCP is only acting in one capacity - that of agent for its principals, as constituted under the agreement between it and its principals.
6. In any event, as Coonwarra accepted, the factual case that BCP operated outside the terms of its authority was not open to it to make in final submissions.
7. Second, in support of the dual capacity point, Coonwarra relied upon the fact that the mortgage registered in August 2015 nominates BCP as the mortgagee of the fee simple estate of the Land, in its own right. BCP then, receives all of the rights that attach to the mortgage. Also, the documentation fee under each loan agreement is payable to BCP alone. Coonwarra did not elaborate further as to how any such powers or rights of BCP should inform the Court's inquiry into the contractual intent of the parties.
8. Coonwarra's argument concerning the significance of BCP taking the mortgage in its own right does not engage with the provisions of the agreements. In each agreement, 'security' is defined as any listed security and any mortgage encumbrance or charge given by the borrower or any guarantor in favour of the lender to secure the obligations of the borrower under the agreement. A condition precedent to the obligations of the lender to provide the advance under the loan is the lender's receipt of satisfactory evidence that the borrowers and guarantors have validly entered into and become bound by the security. BCP then, took the mortgage as lender under the agreements and the capacity in which it was acting as lender is to be discerned from the agreements as a whole. BCP becoming mortgagee cannot take the matter further than the terms of the agreements themselves. BCP's receipt of a documentation fee does not inform the analysis in any meaningful way.
9. Third, in relation to the First Loan Agreement only, Coonwarra relied on an assignment clause as indicating the subsistence of separate rights in BCP as principal in respect of the agreement. Clause 15.9 of the First Loan Agreement (under the heading, 'Assignment by Lender') states:

(a) The Lender may assign the benefit of any Transaction Document to the Principals at any time.

(b) The Lender may assign or otherwise transfer the benefit of any Transaction Document to an unrelated third party only with the written consent of the Borrower which cannot be unreasonably withheld.

'Transaction Document' was defined as 'this Agreement'.

1. In contrast, in the Second and Third Loan Agreement the assignment clause read:

The Lender may assign or otherwise transfer the benefit of any Transaction Document to an unrelated third party only with the consent of the Borrower, which cannot be unreasonably withheld.

'Transaction Documents' was defined as 'this Agreement, together with the Mortgage, General Security Deed and Guarantee with secure the Borrowers' obligations under this Agreement.'

1. Coonwarra submits that clause 15.9(a) of the First Loan Agreement necessarily implies that BCP is a contracting party to the First Loan Agreement. It would not make sense for there to be a contractual mechanism by which BCP could assign rights under the First Loan Agreement to Aida Nominees, unless BCP was contracting in its own right. Unless BCP is contracting as a principal it has nothing to assign, so the argument went.
2. Coonwarra's submission rests on the need to give effect to clause 15.9(a). Let it be assumed that Coonwarra's logic is correct - that clause 15.9(a) would have work to do if BCP had contracted as a principal (taking the benefit of the agreement) but would be redundant if it did not. It is essential to concentrate on the task at hand - to discern from the agreement as a whole, the intention that the parties are taken to have had in relation to whether BCP contracted only as an agent for disclosed principals or whether it also contracted in its own capacity, concurrently with the principal. In that exercise, the relevant parts of the contract must be read together.
3. A conflict involving apparently inconsistent provisions in the one instrument is to be resolved, if at all possible, on the basis that one provision qualifies the other and hence, both have meaning and effect.[284] However, where there is true inconsistency and one provision cannot be read as qualifying the other, the Court must, having regard to the contract as a whole, give effect to those provisions that will carry the parties' true intention into effect, rejecting the others.[285] Where at all possible, effect should be given to every word in a document and no part should be treated as redundant.[286] However, where it is not possible for the Court to reconcile all provisions of a contract it is permissible to treat some as surplusage.[287]
4. If it is a necessary implication of clause 15.9(a) that Coonwarra is a principal, then that clause is, in my view, inconsistent with clause 14 and the other references to BCP as agent for the lender. Coonwarra did not say how the clause would take effect if (as it submits) the principal in each case is a contracting party and therefore already has the benefit of the contract. Coonwarra's analysis appears to require that BCP contracted personally to the exclusion of its principals, contrary to its case that BCP was a concurrent principal in each case. The issues were explored only in a cursory way in submissions.
5. Coonwarra was probably right to submit that where there is nothing for Coonwarra to assign to the principal (because it has only contracted as agent) clause 15.9(a) has no practical operation. However, the redundancy of that clause is not a sufficient basis on which to overcome the effect of otherwise clear provisions dealing explicitly with BCP's capacity. I regard clause 15.9(a) as surplusage. It is a permissive mechanical provision that deals with the subject of assignment. By contrast, the other provisions that will be given effect deal explicitly and clearly with the subject matter that gives rise to the incompatibility were clause 15.9(a) required to be given practical effect.
6. I accept BCP's submission that construed objectively and as a whole, the loan agreements plainly disclose an intention that BCP contracted with Coonwarra only in its capacity as agent for its disclosed principals and not as a concurrent principal. The terms set out earlier establish that conclusion, and the matters upon which Coonwarra relies do not detract from it.
7. It follows that Coonwarra's claim for breach of contract must fail.
8. The analysis that follows assumes that that conclusion is wrong.

1. The relevant express terms of the loan agreements are set out earlier.
2. Coonwarra alleges terms of each of the loan agreements said to have been partly written and partly implied in order to give business efficacy to the agreements, as follows:

(a) BCP would advance the sums borrowed to Coonwarra, or to other parties at the direction or with the consent of Coonwarra;

(b) BCP would not advance any sums under the December 2014 loan, the August 2015 loan and the further loan to any party except on the instructions, or with the consent of, Coonwarra;

(c) BCP would not advance any sums other than for the purposes of the loan; and

(d) BCP would act in good faith and honestly and do all things necessary as to enable Coonwarra to have the benefit of the loan agreements.

1. Terms implied in fact are implied to give business efficacy to a contract where the parties have failed to provide for a matter that they have not stated but are taken to have agreed would form part of the contract. A term implied in fact purports to give effect to 'the presumed intention of the parties to the contract in respect of a matter that they have not mentioned but on which presumably they would have agreed should be part of the contract'.[288] Five criteria must be satisfied in order to imply a term so as to give business efficacy to a contract. The term must:

(a) be reasonable and equitable;

(b) be capable of clear expression;

(c) not contradict the express terms of the contract;

(d) be necessary to give business efficacy to the contract; and

(e) be so obvious that it goes without saying.[289]

1. These criteria serve to answer the ultimate question: what would have been intended by a reasonable person in the position of the contracting parties?[290]
2. Reasonableness and equity are elastic notions. Their content is assessed from the perspective of a reasonable person in the position of the contracting parties and will vary accordingly.[291] Application of the condition will 'often require consideration of the matrix of facts in which a contract was agreed'.[292] If a term satisfies the other requirements, it is difficult to think it would not also be reasonable and equitable.[293]
3. The requirement that the term be capable of clear expression is not readily separated from the obviousness requirement.
4. As to the criterion that the term not contradict the express terms of the contract, the greater degree of tension that exists between a proposed implied term and an express term, the less likely the court will recognise such an implied term.[294]
5. That which is necessary to give efficacy to a contract must be determined by reference to a spectrum or a range from highly ineffective to highly effective and 'business efficacy' will depend upon the extent to which the contract concerns business.[295] The court must consider whether the term is necessary for the purposes of giving the transaction such efficacy as both parties must have intended it should have, making the agreement work or avoiding an unworkable situation.[296] A term may be commercially necessary in order for the contract to be workable in a business sense, notwithstanding that it can operate without the term.[297] The focus of the inquiry is on whether the contract can operate effectively without the term.[298]
6. The requirement that the term be so obvious as to go without saying requires consideration of whether, at the time the parties were making their bargain, the suggestion of an officious bystander that the term being inserted would have been met with a common, 'oh of course' from the parties.[299] Obviousness is a concept that describes 'a spectrum of possibilities which will be more demanding where the express terms of the contract are thorough and clear'.[300] Business efficacy has been described as commercial or practical coherence, and its ascertainment requires an evaluative exercise.[301]
7. An implication can arise from the construction of the express terms of a contract. Textual implications of that nature are the result of construing the text of the contract as a whole in accordance with ordinary principles of construction.[302] This type of implication is not subject to the five BP Refinery criteria. The line between textual implication (of an express term) and the implication of a term under the BP Refinery principles may be a matter of impression.[303] As Edelman and Steward JJ said in Realestate.com.au Pty Ltd v Hardingham:

As to express terms, since language is imperfect, the meaning of many express terms will include implications, such as explicatures arising from the words expressed and implicatures supplementing the words expressed: "language itself could not function if it did not sit atop a vast infrastructure of tacit knowledge about the world". Nevertheless, the term, as a whole, remains an express term: the implication, from the words in their context, is "included in and part of that which is expressed", is "contained in the express words of the contract", or is a necessary supplement to the words of the term.[304]

1. The first and second alleged implied terms (which I shall describe as the Payment Authority implied terms) are closely related. The first expresses a positive requirement to advance the sums borrowed to Coonwarra or to others at its direction or consent (meaning only at its direction or consent); the second expresses a negative stipulation that BCP not advance the contract sums to any other party except on Coonwarra's instructions or consent. They can be dealt with together. The same terms are alleged in respect of each loan agreement. Each loan agreement otherwise has the same relevant content for the purpose of considering these terms.
2. Coonwarra's submissions were directed to the implied loan purpose term (see below) and not specifically to the existence of the implied Payment Authority terms.
3. BCP submitted that there is very little scope to apply a term in circumstances where the agreement is written and comprehensive.
4. Separately, BCP said that the allegation that it would advance the sums to Coonwarra at its direction or with its consent (or not advance the sums without such direction or consent) is inconsistent with the loan agreements. Under each loan agreement it is the lender's obligation to make the advance to the borrower. The alleged term seeks to impose a concurrent obligation on BCP to do that which the lender is obliged to do. BCP is obliged to act only in accordance with the authority the lender has conferred upon it. I am inclined to the view that this submission mischaracterises Coonwarra's essential contention, which was that BCP contracted both as agent and as principal such that it assumed responsibility for performance of the obligations of the lender, meaning that it would be liable for any breach of the lender's obligations provided that the conduct constituting a breach had occurred outside the scope of BCP's authority. There were difficulties with that submission. I have rejected it as a matter of contractual construction and this part of these Reasons proceeds on the basis that my earlier conclusion is wrong. I also accept that the implications of this concurrent principal‑agent role were not explored in Coonwarra's submissions.
5. I will proceed for the purposes of the analysis on the basis that BCP assumed obligations as the lender in the capacity of principal. If it did, I have little difficulty with the contention that the parties agreed that the lender was to advance the contract sums under agreements to the borrower or to other parties at the direction or with the consent of the borrower (Coonwarra) and that it would not advance sums under the contract to other parties, except on the instructions or with the consent of Coonwarra.
6. The essential obligation that the lender assumes under each agreement was described in these terms:

2.1 Conditions precedent

The lender's obligations to provide the Advance, to or at the direction of, the borrower is subject to and conditional upon [the conditions set out].

Advance means at any time and from time to time the principal amount advanced under the loan facility outstanding at that time.

3.1 Lender to provide Loan Facility

Subject to clause 2 and the balance of the terms and conditions of this Agreement, the lender agrees to provide to the borrower a Loan Facility ...

3.2 Advances

The lender agrees to make advances of the Loan Facility to the borrower according to the timetable detailed in item 8 of the schedule.

Loan Facility means the amount specified in item 5 to be made available under this Agreement by the lender to the borrower.[305]

1. The lender then, agrees to advance the amounts specified to the borrower. Clause 2.1 makes explicit that which, on a reasonable reading, may be taken to be implicit in the other clauses set out, namely that the lender is to provide the advances to or at the direction of the borrower. Those provisions are entirely consistent with the alleged implied term that BCP would advance the sums to Coonwarra or to other parties at its direction or consent and that it would not advance these sums to other parties except on its instruction or with its consent. There are, in my view, no terms that are inconsistent with such an implication, leaving to one side BCP's contention about the respective obligations of principal and agent.
2. That the lender would so act is in my view so obvious that it goes without saying. The fundamental purpose of the agreement is for the lender to advance the contract sums to the borrower, thereby lending it the moneys subject to the objections that the borrower accepts, including an express obligation to repay. Payment to another at the borrower's direction or consent would plainly satisfy the lender's obligation to make the advance. Payment to another, without the borrower's direction or consent, would not. For the same reasons, the parties must have intended that the lender be obliged to pay the contracted sums to the borrower (or to others at its direction or consent) and not to pay them to others without consent or direction, so as to make the agreement workable in a business sense. Were the lender permitted to make advances of the contract sums to others without the borrower's consent or direction and still be regarded as having discharged its obligation to make the advances, with the consequence that the borrower would be liable to repay the advances, the agreement would be commercially unworkable. The parties could not have intended that the lender be permitted to pay anyone of its choosing in discharge of its obligation to advance the loan facility.
3. Having regard to the express terms set out earlier, it might have been contended that the Payment Authority terms arose by implication from the express words, as distinct from those which must be recognised by a process of implication in order to afford business efficacy to the agreement. That submission was not put, however, so I will not consider it further. Nevertheless, the close connection between the alleged implied terms and the express terms, and their compatibility with the express terms, is reason not to reject the implied terms on the grounds that agreement is otherwise comprehensive.

1. Coonwarra also alleged that each loan agreement contained a term that BCP would not advance any sums other than for the stated purpose of the loan (the Implied Lending Purpose term). There is no relevant difference between the agreements for the purposes of considering this term.
2. Coonwarra submitted that the Implied Lending Purpose term arose by factual implication as a necessary incident of clause 8 (by which the borrower undertook to use the loan facility amount for its purpose only) and the stated purposes of the loans which in each case was concerned with meeting the costs of the development of the Mernda Land.
3. BCP said that the asserted implied term was inconsistent with the proper construction of clause 8(a) of each loan agreement, which provides that it is the borrower, not the lender, who has the contractual obligation to apply the loan funds for the purpose stated. Properly construed, the purpose clause binds the borrower only, not the lender. BCP also restated its submissions that the proper construction of the contract would not admit of an obligation on BCP as agent to do that which the lender had agreed to do. That inconsistency was fatal to the implication of such a term. Furthermore, Coonwarra had not demonstrated that the term was so obvious it goes without saying, or necessary to give business efficacy to the agreement. In an agreement that comprehensively set out the parties' rights and obligations in respect of the application of the loan facility, there was no room for the implication of an additional term to the effect alleged.
4. In my view, the proposed 'lending purpose' term does not meet the tests for implication.
5. The schedule to each loan contained (among other things) a clause with the heading, 'purpose'. The clauses read as follows:
6. In the First Loan Agreement:

Bridging facility prior to the establishment of a land and construction facility.

To assist with the following:

Tranche 1 - Fund the fees and costs incurred to date in relation to the planned retail development at 1435 Plenty Road, Mernda; and

Tranche 2 - Fund the fees and costs incurred to date in relation to the planned retail development at 1435 Plenty Road, Mernda and refinance a bridging loan facility provided by Berkeley Capital Partners Pty Ltd dated 23 December 2015 (with a projected payout figure of $1,623,578.03 as at 21 August 2015).

To assist with the following:

Tranche 1 - Fund the fees and costs incurred to date in relation to the planned retail development at 1435 Plenty Road, Mernda (the project); and

Tranche 2 - Fund the fees and costs incurred to date in relation to the planned retail development at 1435 Plenty Road, Mernda and refinance a bridging loan facility provided by Berkeley Capital Partners Pty Ltd dated 23 August 2015 (with a projected payout figure of $1,623,578.03 as at 21 August 2015).

Tranche 3 and Tranche 4 - That fund the commencement of construction of the project and allow the continued negotiation of the sale of the project.

1. The only reference to 'purpose' in the body of each agreement was found in clause 8(a) which read as follows:

8. Borrowers' Undertaking.

For as long as the Principal Sum remains outstanding under this Agreement to the Lender, the Borrower undertakes with the Lender as follows:

(a) (Purpose of Advance) to apply the Loan Facility Amount for the Purpose only.

1. It is necessary to unpack the meaning or effect of a term that BCP would not advance any sums other than for the stated purpose of the loan.
2. By reference to the terms set out earlier, it will be seen that the lender assumes the obligation to provide to the borrower the principal amount advanced under the loan. The lender's obligation is described as providing to the borrower a loan facility (clause 3.1); providing the advance to or at the direction of the borrower (clause 2); making advances of the loan facility to the borrower (clause 3.2 and clause 4). That obligation may be discharged by the provision or advancing of funds to or at the direction of the borrower. An obligation not to advance funds for purposes other than the specified purposes is, on Coonwarra's case, not one which could be satisfied merely by advancing the funds to the borrower or another person on the borrower's consent or instructions (i.e. making the advance to the correct person).
3. What more is required? Advancing the facility only for the stated purpose could not sensibly be understood as an interrogation of some kind of the lender's reason for advancing the funds to the borrower, and nor was it put that way. In understanding whether the parties are to be taken to have agreed upon the lending purpose term it is instructive to pay attention to how the notion of 'purpose' is deployed in the agreement. As noted, the only reference to 'purpose' in the body of each agreement is found in clause 8(a), by which the borrower undertakes to apply the loan facility amount for the 'purpose' only. An obligation that the lender not advance any sums other than for the stated purpose of the loan ought be read, if it is to be contextually sensible, as requiring that the lender not advance any sums under the contract unless satisfied that the funds are not to be applied for purposes other than the stated purpose. The implied term links the stated purpose to the advancing of funds, but it is implicitly and necessarily concerned with the use to which the funds will be put, once advanced. It is concerned with the application of the funds once they are in the hands of the borrower, assessed at the time at which an advance of funds is made.
4. In that way, if the term is to be applied, the contract will be understood as imposing corresponding obligations on the lender and the borrower. The express terms of the agreement place that obligation on the borrower. It is plain then, that the parties have turned their mind to the question of the application of the funds advanced under the agreement. The parties agreed that the borrower would undertake to apply the loan facility for the stated purpose only. In my view, there would be a degree of inconsistency in both parties undertaking obligations concerning the application of the funds in the hands of the borrower. It is not at all clear how both parties would discharge their concurrent obligations.
5. A related point is that the parties have considered the function that the purpose to which the funds are to be applied is to assume in their agreement, and they have agreed that the borrower will undertake to apply the loan facility for the stated purpose. The fact that they considered the issue and did not go further is a textual indication that they are not to be taken to have agreed upon the Implied Lending Purpose term.
6. Separately, I cannot see that the term is so obvious that it goes without saying.
7. As BCP submitted, the lender may discharge its obligation to provide funds to the borrower (or at its direction or consent) without inquiring further about or being involved in the application of those funds. Having provided the funds (advanced or disbursed them to the appropriate person), it is a significant step further to exercise control over how the funds are spent, to intervene in the payment process once the funds are in the hands of the borrower or designated person. One may ask rhetorically, what would the lender do to discharge the obligation in those circumstances? Returning to Coonwarra's formulation of the implied term, its answer would be that the lender would be obliged not to advance the funds for a purpose other than the stated purpose. Once again, the formulation, 'advancing funds for a purpose' obscures the action the subject of the putative obligation. If, as I have said, the implied term is concerned with the application of the funds, the lender would be obliged not to advance funds where it is apparent that the funds are to be applied for a purpose other than the agreed purpose. Such an obligation would require the lender to make inquiries about the proposed application of the funds. That the parties agreed upon such an obligation is not in my view, so obvious that it goes without saying.
8. For similar reasons, I do not consider that such a term is necessary to give business efficacy to the agreement. The provision of funds in the agreed amount by the lender to the borrower can be satisfied without the implication of such a term. The contractual stipulation as to 'purpose' is given contractual effect by the borrower assuming the express obligation to apply the funds advanced under the facility, for the stated purpose. The contention that without such a term the whole point of the lending may be undermined, rather begs the question of the function that the reference to purpose in the schedule to the agreement, is intended to serve. It is tolerably clear that its function is to confine the borrower's application of the funds to the agreed purpose. The difficulties discussed, stand in the way of it being understood as intended to protect the borrower against the use of its funds by third parties for a purpose other than that agreed between the borrower and lender.
9. Coonwarra submitted that in this case BCP was not an arm's length lender and had connections with parties to whom the funds were disbursed, and that it knew that at least in some instances the funds were to be applied to a purpose other than for the Mernda development. That may be correct, but that is not the basis on which to construe the contract for the purposes of deciding whether a term ought to be implied.
10. Coonwarra's essential problem in this case was that it consented to the disbursement of the funds to Trimont and CornoNero.[306] Once in the hands of those acting or purporting to act for Trimont and CornoNero, the funds were applied for purposes other than the purpose for which they were lent to Coonwarra. That does not mean that the application of the funds can be linked to an obligation assumed by BCP. Returning to the loan contracts, in my view, the contracts require the lender to advance the funds to the borrower or to another at its consent or direction, and to do nothing further. The agreement does not impose upon a lender an obligation to ensure that the funds are applied for the relevant purpose once they have been advanced, meaning provided to the borrower.

First Loan Agreement - Breach of the implied Payment Authority term?

1. There was no dispute that the whole of the borrowed amount of $1.5 million was paid to Trimont in two tranches of $1 million on 24 December 2014 and $500,000 on 23 January 2015.
2. As will be apparent from the analysis of the relevant events in Part II of these Reasons, the evidence does not support the conclusion that BCP breached an obligation not to advance funds to parties other than Coonwarra or without its direction or consent. To summarise what appears in Part II:

(a) Coonwarra agreed that $1 million from the First Loan funds be paid to Trimont and be taken as reimbursement for costs spent on the development;

(b) More generally, Coonwarra expected that the loaned funds would be paid to Trimont;

(c) Coonwarra had no expectation that funds would be disbursed to it;

(d) These arrangements were confirmed in the 20 February 2015 letter that Martin sought, through Breckenridge, and BCP prepared. The letter stated that $1 million was drawn on the loan for the credit of Ascenzo Industries (to be read as Trimont) and that a further $500,000 was drawn payable to AI (read, Trimont) for future costs and working capital requirements.

1. Accordingly, Coonwarra consented to the disbursement by BCP of the whole of the funds under the First Loan, to Trimont. As discussed below, it only consented to their use for the purposes of progressing the Mernda development. But for the Reasons discussed, BCP did not have a contractual obligation to disburse funds only 'for the stated purpose'.

Second and Third Loans - Breach of the implied Payment Authority term?

1. BCP disbursed $5.2 million under the Second Loan.
2. The first tranche (paid between 1 and 10 August 2015) was disbursed as follows:

(a) $100,000 was paid to Multifit Projects Pty Ltd;

(b) $100,000 was paid to Renda Air Services Pty Ltd;

(c) $107,847.30 was paid to Marijohn Group Pty Ltd;

(d) $1,907,252.70 was paid to Trimont;

(e) $284,900 was paid to BCP.

1. As to BCP's instructions to disburse those funds:

(a) For the payments at sub‑paragraphs (a), (b) and (c) above, BCP received instructions in the form of an email from Clay to Breckenridge to Hartwig entitled, 'direct transfers for Trimont creditors', and acted on those instructions.

(b) For the payment to Trimont at sub‑paragraph (d) above, Hartwig asked for Ascenzo's authority to include in the disbursement of funds, the payment of various BCP invoices. Ascenzo gave that authority and BCP acted on it. Of the $284,900, an amount of $2,200 was paid in satisfaction of an invoice dated 23 December 2014 from BCP to Coonwarra in respect of the First Loan.[307]

(c) BCP received and acted on instructions in respect of the balance of the moneys from Breckenridge verbally, and by receipt of an email from Trimont's construction manager who forward to BCP an email from Trimont's finance manager setting out Trimont's account details.

1. The second tranche of the Second Loan was drawn down between 21 and 25 August 2015:

(a) $1,625,694.36 was paid to Aida Nominees, in repayment of the First Loan, with Coonwarra's consent;

(b) Amounts of $400,000, $151,523.91 and $274,305.64 were paid to Trimont; and

(c) $248,476.09 was paid to Minc Sallon (Laverton) Pty Ltd.

1. In each case, BCP received verbal instructions from Bill Thurgood and acted on those instructions.
2. The Third Loan was drawn down as follows:

(a) BCP paid a total of $1,608,711.14 to CornoNero on 23 and 24 February 2016 by making three deposits into its bank account.[308]

(b) BCP made a further payment of $31,288.90 to CornoNero on 24 February 2016;

(c) BCP made a payment of $160,000 to Minc Sallon (Laverton) Pty Ltd on 24 February 2016.

1. BCP received an email from Thurgood, forwarded by Breckenridge instructing him to make the deposits in sub‑paragraph (a). He received verbal instructions from Thurgood for the remaining two payments. He acted on those instructions.

1. As set out in Part II, Martin's evidence (given in respect of both the Second and Third Loans) was that he expected BCP would advance the loan moneys to Trimont, and once CornoNero 'came into the picture', to CornoNero. Coonwarra did not expect the funds to be paid to it. Once the funds were paid to Trimont or CornoNero it was a matter for Breckenridge and Ascenzo and those reporting to them, to ensure that the funds were correctly applied.
2. Martin expected that the funds would be applied for the sole purpose of the Mernda development, as was consistent with the stated 'purpose' in the loan agreements. He believed that the funds would be and were being applied in that way. He did not know or believe that they were or would be applied for any other purpose. His understanding was tested in cross‑examination but not in any real sense undermined. Although Ben was not a director of Coonwarra, the same can be said of Ben's evidence. That Martin held that belief was entirely consistent with the explanations given by Breckenridge and Ascenzo about why the loans were required and what was expected to happen in relation to the development at the points in time at which Coonwarra's consent to the Second and Third Loans was sought.
3. For the reasons set out elsewhere, I have rejected the contention that Coonwarra agreed that Trimont or CornoNero could use the funds from the Second or Third Loans for its own purposes.
4. Martin was cross‑examined on the subject of BCP's authority to disburse funds. The substance of his evidence about his understanding was follows:

(a) The loan moneys were to be given to Trimont (or CornoNero as the case may be) and it was Trimont's (or CornoNero's) responsibility to disburse the moneys, in accordance with the stated loan purpose.

(b) Coonwarra did not give instructions about how the funds were to be disbursed. As Martin put it, 'there were no extra instructions given as to how the moneys were to be used, other than what was stated in the loan agreement'.

(c) It was put that Breckenridge and Ascenzo were 'authorised to provide instructions about how the loan moneys were to be used'. Martin's answer was, 'Yes. For the purposes stated in the loan agreement'.

(d) It was put that Martin's expectation was that the loan funds would be paid by BCP on the instructions of Breckenridge and Hartwig or those who reported to them. Martin's answer was, 'No. I expected those funds to be paid to Trimont and then Trimont would deal with those funds. I didn't expect that BCP would hold the funds and then disburse the funds. It was then put that Martin expected that BCP would advance all the funds to Trimont and then CornoNero, to which Martin agreed.

(e) It was put that in respect of the Second and Third Loans, Hartwig was entitled to act on the instructions of 'someone at CornoNero' (or Trimont). Martin's answer was, 'I never gave authority to BCP or Brett to disburse funds. It was Trimont Australia‑CornoNero who were getting the money and it was for them to distribute the money for the purposes of advancing the project'.

(f) It was put that Martin told Hartwig at their December 2014 meeting that 'he should liaise with Trimont's representatives if further finance was required'. Martin said he did not recall saying that, and that he did not instruct 'back then' that 'BCP would be the ones that would provide the loans'.

(g) Martin agreed that whether BCP was dealing with Trimont or CornoNero in relation to the loans, his expectation was that it would be Breckenridge or Ascenzo, or someone on their behalf, who would be dealing with Hartwig.

(a) At a meeting at BCP's offices on 22 December 2014 (at which Hartwig discussed the First Loan with Martin), as they finished the meeting:

Mr [Martin] Van der Burgt... said that if there was anything further required in relation to finance for the loan that I was to deal with the Trimont representatives and he pointed to Peter and Silvio.

(b) He had no dealings with Martin or Ben in relation to the Second and Third Loans; all his dealings were with Breckenridge.

(c) He received instructions about the disbursement of the funds, by email and verbally, as set out above.

1. Hartwig's evidence was also that he was told by Ascenzo at about the time the Second Loan was organised that Ascenzo had reached an agreement with Martin that Ascenzo could access 'certain of those funds' by way of 'profit', which would assist him with his working capital requirements. He did not verify the existence of that arrangement with Coonwarra.
2. BCP alleged by way of its defence that each of BCP and Coonwarra conducted themselves on the assumption that BCP could act on the instructions of a representative of Trimont (or CornoNero) in connection with any loans made by BCP to Coonwarra; that each knew that they were so conducting themselves on the basis of the common assumptions and that if Coonwarra were now permitted to depart from any common assumption BCP would suffer prejudice. Accordingly, Coonwarra is estopped from departing from that assumption. In respect of the common assumption, BCP had alleged that in December 2014 Coonwarra told BCP if further finance was required it should liaise with Trimont's representatives who were authorised to provide instructions to on behalf of Coonwarra to disburse the advances of further loans to be advanced to Coonwarra as directed by Trimont's representatives; that none of the borrowed funds were disbursed to Coonwarra; that Coonwarra did not allege at any time before the commencement of these proceedings that BCP had disbursed the funds in a manner that was inconsistent with Coonwarra's wishes, or advise that BCP could no longer act on the instructions of Trimont's representatives.
3. BCP also alleged that Coonwarra and BCP conducted themselves on the basis of the common assumption that the so‑called 'advance agreement' existed.
4. BCP submitted in relation to the Second and Third Loans that Coonwarra knew that Breckenridge was communicating with BCP on its behalf. It also knew that BCP held funds on behalf of lenders and required instructions to disburse those funds by or on behalf of the borrower. Given Coonwarra knew that it was entering into successive loans and that such loans were being drawn down and it was not Coonwarra who was providing instructions, it follows that Coonwarra cannot escape the conclusion that it consented to others providing instructions to BCP on its behalf as to how the loan funds should be disbursed. On the state of the evidence, Coonwarra proceeded on the basis that such instructions would and could be given by Breckenridge, Ascenzo and those who reported to them.
5. BCP said that in those circumstances, BCP was entitled to assume, by reason of Coonwarra's conduct, that Coonwarra had authorised, consented to or acquiesced to Breckenridge, Ascenzo and those who reported to them to provide instructions as to how to disburse the loan facilities. The evidence supports a finding that there existed a common assumption between BCP and Coonwarra that BCP could act on the instructions of a representative of Trimont (Breckenridge, Ascenzo and those who reported to them) in relation to the disbursement of the loans. BCP submitted that departure from the common assumption would cause detriment to BCP. Had BCP been made aware that those representatives were not authorised to provide instructions to disburse the loans it can be inferred that BCP would not have accepted those instructions and would not have disbursed the loans.

1. To the extent that Coonwarra consented to BCP advancing moneys under the Second and Third Loans to persons other than Coonwarra, BCP committed no breach of the relevant loan agreements (see earlier as to the loan terms). Otherwise, Coonwarra cannot complain of BCP's disbursement of the loan funds to the extent that BCP was acting in accordance with a common assumption in circumstances in which Coonwarra is not permitted to depart from that assumption. An estoppel by convention can arise to preclude a denial of an assumed state of affairs where these elements are satisfied:[309]

(a) the plaintiff (i.e. the party relying on the estoppel) has adopted an assumption as to the terms of its legal relationship with the defendant;

(b) the defendant (i.e. the person said to be estopped) has adopted the same assumption;

(c) both parties have conducted their relationship on the basis of that mutual assumption;

(d) each party knows or intends that the other will act on that basis; and

(e) departure from the assumption will cause detriment to one of them.

1. As Judd J said in Primebroker Securities, an estoppel by convention may arise where parties to a transaction act on an assumption that is shared by them, or made by one and acquiesced in by the other - subject to the relevant conditions being established.[310] An assumption may be proved by inferential reasoning. It must be proved that departure from the assumption would cause detriment and that there is a link between the assumption and some action or inaction by the affected party.[311]
2. The evidence establishes that Coonwarra consented to the payment of the loan advances to Trimont and Coonwarra. To the extent that the moneys were disbursed to Trimont or Coonwarra, BCP was not in breach of the Second or Third Loan Agreements.
3. Otherwise, it is necessary to examine the asserted assumption said to form the conventional basis of the parties' relationship.
4. The circumstances of the relationship were such that Coonwarra and BCP did not deal with each other directly but through intermediaries, Breckenridge and Ascenzo. At the time of the establishment of each of the loans, Coonwarra was told by Breckenridge and Ascenzo that (to summarise) funding for the Mernda development was required, and that loans would be arranged. Loans were arranged and Coonwarra was presented with documents which it executed. It is true that Coonwarra did not provide any written or other instructions for the disbursement of the funds, but nor was it asked for any. Coonwarra understood and expected at all times that the funds advanced would be advanced for the Meranda development and only for that purpose. It did not know that anything different was contemplated. In those circumstances, Coonwarra knew and agreed that Breckenridge would deal with BCP on its behalf. The evidence does not establish that Martin or Ben turned their minds to the need to give BCP instructions. As Martin put it, he had no expectation that BCP would disburse the funds other than to pay them to Trimont or CornoNero. He also did not turn his mind to the need to give 'extra instructions' beyond the statement of 'purpose' in the loan agreements. He understood that Trimont would receive the funds and use them for that purpose.
5. Cross‑examined, Martin accepted that BCP would need to receive instructions from someone to disburse the funds under the loans. He accepted that Breckenridge and Ascenzo had authority to give BCP those instructions but only 'for the purposes stated in the loan agreement'. The evidence does not establish that Coonwarra gave authority to Breckenridge or Ascenzo to instruct BCP to disburse the funds for any and all purposes, in particular, for purposes other than progressing the Mernda development. It does not establish that Coonwarra consented to others providing instructions to BCP on its behalf as to how the loan funds be disbursed or that it gave BCP general authority to act on the instructions of Breckenridge or Ascenzo or those reporting to them, to disburse the loan funds for purposes other than paying the costs of the Mernda development.
6. Assuming that Martin said to Hartwig in December 2014 that he should liaise with Trimont's representatives if there was anything further required in relation to finance for the loan, that statement was too general in content to convey or to evidence that Coonwarra consented to BCP acting on the instructions of Trimont's representatives in disbursing loan funds without limit, or that it adopted that assumption as the basis for its relationship with BCP going forward, including in respect of subsequent loans. The pleaded statement (that went further than the statement about which Hartwig gave evidence) was not made out on the evidence.
7. The evidence does not otherwise establish that Coonwarra conducted its relationship with BCP on that basis, or that it knew or intended that BCP would act on that basis.
8. I accept that Coonwarra did not complain that funds were not paid to it, or seek to give instructions to BCP about the disbursement of the loans. That conduct is rationally explained by the understanding that Coonwarra had as to the state of affairs, as set out above. Coonwarra was unaware that the funds had been disbursed for purposes other than the Mernda development until after the relevant events. As set out in Part II, Ben requested from BCP a statement of the loan drawdowns in March 2016.
9. I accept that BCP did not receive any instructions from Coonwarra, and that BCP assumed that it could deal with Breckenridge, Ascenzo or their appointed staff, in relation to the loans. To the extent that BCP assumed that it could act on instructions to disburse the funds for any and all purposes unconnected with progressing the Mernda development (which BCP knew was the purpose for which Coonwarra was seeking those funds) the evidence establishes that it is likely that that assumption was founded on Hartwig's understanding of a 'deal' between Ascenzo and Coonwarra permitting Ascenzo to access 'profit' from the loan funds. Hartwig was cross‑examined by Coonwarra on the disbursement of the Third Loan. Hartwig's evidence in chief, that he believed that the money that Coonwarra was borrowing was paid to Trimont and CornoNero and was used to pay for development works, was put to him. The following exchange then occurred:
   1. 'I believe that the money was being used to pay for development works'?

A That's what I was advised, yes.

1. But you know that the disbursements to at least three creditors weren't for the development of Mernda, didn't you?

A Yes.

1. 'As for the payments to Minc Sallon (Dandenong) and Minc Sallon (Laverton), Trimont owed money to Minc Sallon (Dandenong) and CornoNero owed moneys to Minc Sallon (Laverton)'?

A Yes.

1. 'I believe that some arrangements had been made with Coonwarra to permit these payments to be made'?

A Correct.

Q What was the arrangement?

1. My understanding of the arrangement between Coonwarra and Trimont was that once the change in strategy for the site had been agreed in that, rather than develop it as joint venture partners that they would sell it on a fund‑through basis. That there was an agreement that Trimont could access certain of what was deemed to be their profit.

Q When did you find out about that?

1. It was on or around the time when the advance was being made in August 2015.

Q Did you ever speak to Mr Van der Burgt?

A No, I didn't.

1. Coonwarra did not act on the assumption that Ascenzo or Trimont could access the borrowed funds in the manner asserted (as set out elsewhere) and nor did it conduct its relationship with BCP on that assumption. BCP did not allege, for example, that when Ascenzo told Hartwig that he was entitled to access loan funds by way of an advance on profit, that his statement was attributable to Coonwarra.
2. In the circumstances, Coonwarra's lack of complaint that the funds had not been disbursed to it, it not having given BCP instructions, and its acquiescence to Breckenridge having dealings on its behalf with BCP, does not amount to acquiescence to BCP having assumed that it was authorised to disburse the loan funds in any way that Breckenridge, Ascenzo or persons acting on their behalf, instructed.
3. The conditions for an estoppel by convention are not made out.
4. It follows that assuming BCP in fact contracted with Coonwarra in its personal capacity (contrary to my conclusion explained earlier), where BCP disbursed the funds the subject of the Second and Third Loans to Trimont or CornoNero or to repay the First Loan, it acted with Coonwarra's consent. Otherwise, it disbursed the remaining funds without the consent, direction or authority of Coonwarra, contrary to the terms of the First and Second Loan Agreements.
5. Given the result I have reached on the primary issue, I need not consider loss.

1. Coonwarra alleged that the loan agreements contained an implied term that BCP would act in good faith and honestly and do all things necessary as to enable Coonwarra to have the benefit of the loan agreements. It is unnecessary to consider whether the term alleged was implied. If it was, there is no basis for concluding that the implication of such a term would lead to any different result. Fidelity to the bargain would not require BCP to do anything different or refrain from doing anything not otherwise required under the implied terms that I have found. The alleged additional term would not of itself impose the 'lending purpose' obligation if it were not otherwise implied in the bargain that the parties struck.

1. Coonwarra alleged that,
   1. Further and in the alternative, BCP in fact did not advance any moneys to Coonwarra under the loan agreements:

(a) as none of the moneys were for the benefit of Coonwarra;

(b) as none of the moneys were for the development of the Mernda property;

(c) as Coonwarra did not:

(i) authorise the disbursement of the moneys;

(ii) consent to the disbursement of the moneys as they were in fact disbursed;

(d) but were disbursed to unauthorised parties for unrelated transactions.

1. As a result, BCP is indebted to Coonwarra in the amount of $7 million.

1. Coonwarra's written submission (a single paragraph) was as follows:

By reason of its breaches of the First, Second and Third Loan Agreements, BCP is indebted to Coonwarra in the amount of $7 million and interest, all of which was ultimately repaid to BCP from the proceeds of the sale of Coonwarra's Mernda Property. The total sum paid to BCP from the proceeds of sale of the Mernda Property was $8,516,035.43.

1. The basis for the claim was that BCP did not advance moneys to Coonwarra but paid the funds the subject of the loan agreements, to others without Coonwarra's consent or direction. It was said that to the extent that that occurred, BCP is liable to pay Coonwarra those amounts.
2. As BCP correctly submitted, the 'debt' claim rises no higher than the contract claim. The amount of any loss cannot rise any higher than the loss flowing from the breaches of agreement if it is assumed that there is a separate basis on which to claim those losses. Moreover, the claim is founded on BCP being obliged to perform the contract. If BCP did not bind itself to a loan agreement and acted merely as agent (as was the case), then the failure to disburse the funds in accordance with the terms of the agreements cannot elevate Coonwarra's claims against BCP to one for breach of contract by BCP.
3. To the extent that the claim should be understood differently, it was not developed by Coonwarra. CornoNero sought in final submissions to refashion the claim (for Coonwarra as it were) as an allegation that BCP failed to properly account for the proceeds arising from the sale of the Mernda Land. Coonwarra did not pursue that claim, and nor did it seek to draw on anything resembling restitution or a constructive trust.

ANNEXURE A - Connections between people and entities

1. Towards the end of 2011, Breckenridge met with the local council in relation to the development proposal for the Mernda site. At this point, the development proposal was based on McDonalds being the anchor tenant. After the meeting, AI Group engaged Tract Consultants to liaise with the Council throughout the planning approval process.
2. On 14 November 2011, Breese Pitt Dixon raised an invoice in the amount of $8,030 for surveying work at the Mernda site.
3. In December 2011, a proposal to the Council was submitted seeking approval for development on the Mernda site. Following the submission, a number of meetings were held between the Council and AI Group (including Tract Consultants on its behalf) in relation to development requirements.
4. On 2 December 2011, GHD raised an invoice in the amount of $2,549.25 for professional services in conducting a preliminary site assessment.
5. On 8 December 2011, Ecology & Heritage Partners raised an invoice in the amount of $7,293 for a flora and fauna assessment.
6. On 20 December 2011, GHD raised a further invoice in the amount of $4,892.25 for professional services in conducting a preliminary site assessment.
7. In early 2012, McCabe Architects were engaged to draw sketch drawings for a supermarket at the Mernda site.
8. On 19 January 2012, Ecology & Heritage Partners raised an invoice in the amount of $7,040 for a 'Desktop Aboriginal & Historic Heritage Assessment'.
9. On 23 January 2012, Ecology & Heritage Partners raised a further invoice in the amount of $1,287 for a flora and fauna assessment. Also on this date, GHD raised another invoice for professional services in conducting a preliminary site assessment in the amount of $21,454.13.
10. On 15 February 2012, Breckenridge emailed Dean Perry of Coles in relation to the architectural drawings. He continued to communicate with the architect in 2012. Also on 15 February 2012, McCabe Architects raised an invoice in the amount of $11,550 for architectural and consultancy services.
11. McCabe Architects raised a further invoice on 1 March 2012 in the amount of $22,869. Also on this date, GHD raised an invoice in the amount of $15,409.63 for professional services in conducting a preliminary site assessment.
12. On 27 March 2012, CPG raised an invoice for $5,500 for services in relation to the Mernda site.
13. On 31 March 2012, Tract Consultants raised an invoice for $8,358.90 for its planning services.
14. On 2 April 2012, McCabe Architects raised an invoice in the amount of $91,476 for architectural and consultancy services.
15. On 30 April 2012, Tract Consultants raised an invoice in the amount of $7,885.75 for its planning services.
16. On 2 May 2012, McCabe Architects raised an invoice in the amount of $22,869 for architectural and consultancy services and a further invoice on 31 May 2012 in the amount of $9,895.
17. On 31 May 2012, Tract Consultants raised an in the amount of $9,895 for planning services.
18. On 26 June 2012, GHD raised an invoice in the amount of $11,046.20 for its professional services relating to 'balance to complete project and variation to re‑establish project'.
19. On 30 June 2012, Tract Consultants raised an invoice for $3,382 for planning services.
20. On 2 July 2012, Breckenridge attended a meeting at the local council to gain support for the application to develop the site.
21. In mid‑2012, Deep End Services were engaged to prepare an economic assessment report. A copy of its report was provided on 9 August 2012.
22. On 15 August 2012, Tract Consultants raised an invoice for $3,382.50 for its planning services.
23. By September 2012, the Council had not yet approved the development. Accordingly, on 21 September 2012, AI Group made an application to VCAT on the basis that a reasonable time had passed for the Council to make its decision.
24. On 30 September 2012, McCabe Architects raised an invoice for $825 for work performed on the Mernda project.
25. On 15 October 2012, Tract Consultants raised an invoice for $5,109.83 for its planning services.
26. On 15 November 2012, Tract Consultants raised an invoice for $9,564.78 for its planning services.
27. In early December 2012, Tract Consultants, along with McCabe Architects, Tm Consulting, Ecology & Heritage Partners and Galbraith & Associates, submitted a report to the Council on the development and by 11 December 2012 the Council had approved the development.
28. On 15 December 2012, Tract Consultants raised an invoice for $7,027.82 for its planning services.
29. On 18 December 2012, Dean Perry requests an update on the planning process. Breckenridge responded on 20 December 2012, advising that the development had been approved and setting out a plan for how to approach the planning permit.
30. On 15 January and 15 February 2013, Tract Consultants raised invoices for $2,064.15 and $8,281.48 respectively for its planning services.
31. In early March 2013, a meeting was held between Coles, AI Group and the Council.
32. On 13 March 2013, Breckenridge emailed a copy of the Deep End Services report dated 9 August 2012 to Coles.
33. On 15 March 2013, Tract Consultants raised an invoice for $16,217.08 for its planning services.
34. On 21 March 2013, Papworth Design raised an invoice for $4,235 for landscape architectural services.
35. The following day, on 22 March 2013, Breckenridge provided an updated report by Deep End Services to Coles. Coles confirmed it was satisfied with the report and that they were very keen to secure the site.
36. On 17 April 2013, Spiire raised an invoice for $2,359.50 for engineering services.
37. On 22 April 2013, Papworth Design raised an invoice in the amount of $2,475 for preparation of a new landscape concept.
38. On 30 April 2013, McCabe Architects raised an invoice in the amount of $14,048.50 for worked performed on the Mernda site.
39. On 13 May 2013, Ecology & Heritage Partners raised an invoice for $2,857.80.
40. On 20 May 2013, AI Group submitted its planning permit for construction of the mixed use development.
41. On 28 June 2013, LandMark White raised an invoice for $3,135 for services in relation to the site.
42. On 15 July 2013, Tract Consultants raised an invoice for $9,812.83 for its planning services.
43. In August 2013, Coles representatives met with the Council to speak about the development project.
44. On 12 September 2013, Breckenridge met with the Minister for Planning to discuss the delay in the Council making its decision and the community benefits of the development.
45. On 30 September 2013, McCabe Architects raised an invoice for $2,392.50 for provisional architectural consultancy services relating to the planning permit.
46. On 30 September 2013, James Hunt forwarded a letter of offer to Coles for the supermarket and Liquorland for the Mernda site. A response from Coles was received on 28 October 2013.
47. On 31 October 2013, McCabe Architects raised an invoice for $4,840 for provisional architectural consultancy services relating to the planning permit.
48. On 11 November 2013, Coles sent a further updated letter of offer. Subsequently, AI Group and Coles negotiated on the proposed letter of offer and on 18 November 2013, an updated letter was exchanged.
49. On 15 November 2013, Tract Consultants raised an invoice for $5,915.25 for its planning services.
50. On 19 November 2013, amendments were made to the letter of offer with Coles. Ascenzo signed a copy of this updated letter of offer.
51. On 29 November 2013, Moray & Agnew raised an invoice for $7,150 for legal services relating to the Mernda site.
52. In early December 2013, Coles, AI Group and Tract Consultants attended a meeting with the Council.
53. On 10 December 2013, determination of the planning permit application was deferred at the council meeting following a recommendation that it be rejected.
54. On 12 December 2013, anticipating that the Council would reject its planning permit application, AI Group lodged a VCAT application for the determination of the planning permit application.
55. On 15 December 2013, Tract Consultants raised an invoice for $7,426.93 for its planning services.
56. In late 2013, AI Group engaged Haystac, a public relation company, to assist in generating community support for the development, and on 20 December 2013 Haystac raised an invoice in the amount of $18,310.05 for its services. Also on 20 December 2013, Moray & Agnew raised an invoice in the amount of $8,978.59 for legal services.
57. In late 2013 to early 2014, AI Group and Coles entered into negotiations for the lease, this included McCabe Architects providing sketch plans.
58. On 15 January 2014, Tract Consultants raised an invoice for $6,192.93 for its planning services.
59. On 24 January 2014, Fabcot Pty Ltd (a property development subsidiary within the Woolworths Group) sought a declaration in the VCAT proceeding that, to the extent that the development included a supermarket, it was not generally in accordance with the Mernda Town Centre Comprehensive Development Plan and that a planning permit could not be issued for the development.
60. On 31 January 2014, Moray & Agnew raised an invoice in the amount of $13,804.11 for legal services.
61. On 4 February 2014, the Council resolved to support the planning application and Coles emailed Hunt a letter of intent confirming Coles' commitment to the development. Coles began preparing an agreement for lease. On 6 February 2014, Coles emailed Hunt in relation to the draft agreement for lease. By mid‑February 2014, the draft agreement for lease had been prepared.
62. On 15 February 2014, Tract Consultants raised an invoice in the amount of $20,036.23 for its planning services.
63. On 28 February 2014, GTA Consulting raised an invoice in the amount of $10,120 in relation to the VCAT application.
64. On 28 February 2014, the following invoices were raised by:

(a) Haystac in the amount of $1,078 for its public affairs consultancy services;

(b) McCabe Architects in the amount of $5,131.50 for provisional architectural consultancy services relating to the planning permit;

(c) Moray & Agnew in the amount of $75,000 for counsel fees; and

(d) Moray & Agnew in the amount of $14,617.55 for legal services.

1. On 15 March 2014, Tract Consultants raised an invoice in the amount of $6,410.15 for its planning services.
2. On 24 and 25 March 2014, the VCAT application was heard. By this time, the Council had withdrawn support for AI Group's planning application and instead supported Fabcot Pty Ltd's application.
3. On 31 March 2014, GTA Consulting and Moray & Agnew raised invoices in the amounts of $4,180 in relation to the VCAT application and $21,092.53 for legal services respectively.
4. On 8 April 2014, a revised version of the agreement for lease was circulated. A further revised version was circulated on 11 April 2014.
5. On 14 April 2014, Ratio Consulting raised an invoice for $19,821.65 for town planning and consulting services.
6. On 15 April 2014, Tract Consultants raised an invoice in the amount of $6,574.26 for its planning services.
7. On 30 April 2014, the following invoices were raised by:

(a) GTA Consulting in the amount of $770 for the VCAT application;

(b) McCabe Architects in the amount of $1,551 for architectural consultancy services relating to the planning permit; and

(c) Moray & Agnew in the amount of $3,168.59 for legal services.

1. On 19 May 2014, James Hunt sent an email to Coles seeking an update as to timing of the return of the lease documents.
2. On 21 May 2014, VCAT made orders that AI Group's proposal could not proceed because it was not in accordance with the Mernda Town Centre Comprehensive Development Plan and so the Council could not issue the planning permit.
3. On 22 May 2014, a further amended agreement for lease was circulated with Coles' amendments and comments.
4. On 30 May 2014, Moray & Agnew raised an invoice in the amount of $3,781.25 for legal services.
5. On 5 June 2014, a meeting was held between AI Group and Coles to finalise negotiations for the agreement for lease.
6. On 11 June 2014, the Minister for Planning wrote to the Council to offer support to the Council should it wish to amend its planning scheme to allow the proposed development agreement to proceed.
7. On 27 June 2014, Moray & Agnew raised an invoice in the amount of $1,641.75 for legal services.
8. On or around 1 July 2014, a further meeting was held between AI Group and Coles to finalise negotiations for the agreement for lease. Coles also sent a letter to the Council which sought its support to take up the Minister's offer to implement a ministerial amendment to the planning scheme.
9. On 13 July 2014, McIntyre & Cross raised an invoice for $3,921.40 for architectural services.
10. On 15 July 2014, Tract Consultants raised an invoice in the amount of $2,917.20 for its planning services.
11. On 21 July 2014, Tract Consultants lodged a request for an amendment to the planning scheme to introduce a site specific planning control as an incorporated document which would allow the supermarket development to proceed on the site.
12. On 5 August 2014, the Council held a meeting and resolved to:

(a) advise the Minister for Planning that the Council supports the request for an amendment to the planning scheme to be made; and

(b) request the Minister for Planning exercise his powers to determine the amendment.

1. On 11 August 2014, the Council wrote to the Minister for Planning confirming that the amendment request was considered by the Council and endorsed, and so requested that the Minister commence the process to determine the amendment in accordance with the Council's resolution. On the same date, Coles sent an updated agreement for lease for consideration.
2. Around this time and into September 2014, Tract Consultants liaised with the Council which in turn was dealing with the Minister for Planning's office to finalise the ministerial amendment.
3. On 15 September 2014, Tract Consultants raised an invoice in the amount of $3,326.13 for its planning services.
4. On 19 September 2014, the Minister for Planning wrote to the Council confirming the amendment had been approved.
5. On 24 September 2014, Trimont provided a marked up version of the agreement for lease and lease for Coles' review.
6. On 2 October 2014, Coles sent updated version of the draft agreement for lease and lease. Further correspondence and a style guide was exchanged in this regard on 7 October 2014.
7. On 13 October 2014, the Department of Transport, Planning and Local Infrastructure confirmed that the Council's planning amendment would be gazetted on 16 October 2014, which occurred.
8. On 20 October 2014, Trimont sent further revised leasing documents to Coles. Coles responded on 28 October 2014 with its own amendments.
9. On 30 November 2014, McCabe Architects raised an invoice in the amount of $5,874 for architectural consultancy services relating to the planning permit.
10. On 12 December 2014, Tract Consultants submitted proposed endorsement plans to the Council.
11. On 15 December 2014, Tract Consultants raised an invoice in the amount of $3,149.58 for its planning services.
12. By 17 December 2014, Trimont had various expressions of interest from retailers such as Hungry Jacks, Jetts Fitness and Nando's.
13. On 22 December 2014, McCabe Architects raised an invoice in the amount of $1,369.50 for architectural consultancy services relating to the planning permit.
14. On 24 December 2014, plans were submitted to VicRoads and Public Transport Victoria seeking a response from those bodies within 28 days. A copy of the same was forwarded to council department members on 30 December 2014 seeking their comments on the development within 14 days.
15. By early to mid‑January 2015, a number of responses had been received from various council department members detailing their comments on the plans submitted on 12 December 2014. On 29 January 2015, the Council detailed a number of areas of non‑compliance with the requirements of planning condition 1. Further revisions were made to the plans between February and May 2015 in order to satisfy the condition.
16. Also on 29 January 2015, Hunt emailed Breckenridge a proposed tenancy schedule. Updated tenancy schedules were provided on 9 February, 17 March and 1 May 2015.
17. On 11 March 2015, Trimont emailed Coles a draft 'Revision C Town Plan Drawings' prepared by McCabe Architects. Hunt continued to communicate with Coles in relation to the architectural drawing plans and the development generally in early 2015. Coles requested a number of variations to the architectural plans throughout this time. On 28 April 2015, Trimont's solicitor sought confirmation from Coles that the relevant plans and accompanying documents that needed to be inserted into particular schedules of the agreement for lease were approved. Breckenridge was forwarded a copy of this correspondence on the same day.
18. On 29 April 2015, Breckenridge received a copy of the 'Mernda End Value Calculation and Funding Values'.
19. On 12 May 2015, Tract Consultants submitted a revised plan to satisfy planning condition 1; a copy of the same was circulated to various council departments, VicRoads and Public Transport Victoria for comment. Comments from these various departments were provided in mid to late May 2015.
20. Further updated versions of the agreement for lease and the lease were made on 19 May 2015 and negotiations continued into July 2015.
21. On 2 June 2015, the Council sent a letter to Tract Consultants noting that there was still a number of areas of non‑compliance with planning condition 1.
22. On 6 July 2015, Coles executed the agreement for lease and the lease. Coonwarra executed a copy of the same around this time.
23. On 9 July 2015, further revised architectural drawings were submitted to the Council. A copy of the same was again circulated to various council departments, VicRoads and Public Transport Victoria for comment. Responses were received from 28 July 2015 to 14 August 2015. Following those responses, the Council sent a letter to Tract Consultants on 25 August 2015 which provided that there were still a number of areas on non‑compliance with planning condition 1.
24. In August 2015, BidCo was undertaking due diligence. Coles had a first right of refusal to purchase the Mernda site under the agreement for lease and lease arrangement, so Coles was kept informed of the BidCo proposal and negotiations. On 25 August 2015, BidCo emailed Hunt with a list of concerns in relation to the Coles lease.
25. On 15 September 2015, minor amendments to the agreement for lease and lease documentation was negotiated between the Trimont and Coles. By 25 September 2015, some but not all of the proposed changes to the agreement for lease and lease documentation were agreed to, and further negotiations continued to October 2015.
26. On 5 November 2015, further plans were submitted to the Council.
27. On 25 November 2015, Hunt sent a letter to Coles seeking its consent to waive its first right of refusal to purchase the centre, and seeking its consent to the sale and transfer of the centre and Coonwarra's rights and obligations under the agreement for lease to the Mernda Junction Shopping Centre Pty Ltd.
28. On 8 December 2015, an introductory design meeting was held with Trimont and Coles and on 11 December 2015, Coles executed the agreement for lease and lease documentation. An executed copy was provided to Ben on 16 December 2015.
29. On 15 December 2015, it was confirmed that various landscaping plans would require resubmission to the Council for review and approval. Also on this date, the Council was still awaiting feedback from VicRoads on the revised set of plans.
30. On 18 December 2015, the Council sent a letter stating that there were a number of areas on non‑compliance with planning conditions 1 and 3.
31. In late 2015 to early 2016, negotiations in relation to various architectural plan designs increased significantly in order to move the development forward. This involved regular communication between the development consultants to finalise design plans for endorsement and the ongoing development, which were in line with Coles' requirements. This included regular design team meetings.
32. On 28 January 2016, Hunt sought confirmation from Ben that the Coles agreement for lease and lease documentation had been signed and sent onto Coles' lawyers. Ben responded stating that the agreement had not been signed yet as when he met with Breckenridge he said that Coonwarra would execute it when all the paperwork was in place (being the development agreement and transfer of land).
33. On 5 February 2016, an updated 'Functional Layout Plan' was submitted to the Council and on 8 February 2016, a 'Green Travel Plan' was submitted to cover planning condition 13.
34. On 10 February 2016, there were proposed further changes to the architectural plans with Coles. Negotiations continued on this issue and a dispute arose as to the costs of the project.
35. On 11 February 2016, it was confirmed that the submission of the development plans for condition 1 and the 'Loading and Delivery Management Plan' had been approved.
36. On 3 March 2016, VicRoads requested amended 'Functional Layout Plans' in accordance with its comments.
37. On 7 March 2016, Hunt asked Ben to confirm whether the Coles lease had been signed. Ben responded the following day, reiterating his 28 January 2016 response that it had not been signed as Breckenridge had told him to wait to execute all documents together.
38. On 11 March 2016, a proposed 'Site Management Plan' was submitted for council approval in accordance with planning condition 12.
39. On 16 March 2016, an amended 'Green Travel Plan' was submitted to the Council. Following a review, the Council responded on 4 July 2016 stating that additional information would be required to receive the Council's endorsement.
40. On 24 March 2016, further landscape plans relating to condition 5.2 were submitted to the Council.
41. On 20 April 2016, the Council confirmed that the 'Functional Layout Plans' were approved, however, notes were provided on the endorsed plans seeking additional changes to be undertaken as part of the submission of civil engineering plans.
42. On 21 April 2016, a copy of the 2 February 'Parking Management Plan' was submitted to the Council. On the same date, Hunt emailed Breckenridge an updated agreement for lease to review, discussions were taking place around this time about the possible need to vary the agreement for lease and an amended lease. The proposed amendments included both technical and commercial amendments. A copy of the same was forwarded by Breckenridge to CornoNero staff the following day to assist with the construction and management of the project. Negotiations on these issues continued into May 2016.
43. On 27 April 2016, the Council provided preliminary comments on the landscape plans.
44. On 17 June 2016, an architectural proposal was provided which estimated a total cost (following completion and the expiration of the defects liability period) as $580,525. The design brief costing issues continued into late July 2016.
45. On 20 June 2016, an update of the deed of variation of agreement for lease and the revised lease document was sent.
46. On 22 July 2016, a request was made for amendment of the 'Functional Layout Plans' due to widths of the existing road reserve. A copy of the revised plans were circulated to the Council and various council department members on 29 July 2016.
47. On 3 August 2016, an updated Vendor's Statement was circulated which could be finalised upon agreement and receipt of the executed Coles agreement for lease. Accordingly, on 5 August 2016, Ben Van der Burgt executed the agreement for lease with Coles for inclusion in the Vendor's Statement.
48. On 9 August 2016, a purchaser's deed document was prepared as an attachment to the contract of sale between Coonwarra, Mernda Junction Shopping Centre Pty Ltd and Bridgehurst Pty Ltd.
49. On 26 August 2016, the contract of sale for the Mernda site settled and Coles executed an agreement for lease variation.

The Financial Position of Trimont Pty Ltd - History

1. Since 1982, Trimont had carried on a concreting and building business as trustee of the Ascenzo Family Trust.[312] Ascenzo was the sole director and shareholder of Trimont. Ascenzo's concreting work was undertaken by his other entity, Trimont Concrete Constructions Pty Ltd. Trimont was part of a group of companies that Ascenzo named the 'AI Group'. The legal and financial relationships between the entities in the group were not exposed in the evidence.
2. In February 2015, Ascenzo, with the help of Hartwig and Breckenridge, approached Geoff Brady to invest in a proposed re‑capitalisation of the business. The essential premise was that the business had a large pipeline of work and was under‑capitalised. The intention was to transition from a 'family‑run' business to a corporatized structure with the assistance and funding of external investors. It was proposed that the change in business would be effected by a sale of Trimont's building projects to a new entity in which Brady would hold a controlling interest. Stannards, accountants for the Brady interests who conducted due diligence for the purposes of GJB's then proposed investment in Trimont's business, advised Brady that the new company that would acquire Trimont's building and construction business would be cashflow restricted.
3. The acquisition of Trimont's building business was structured through the Business Sale Agreement and the Share Sale Agreement, completion of which occurred on 11 September 2015. Incorporated on 1 June 2015, Trimont Australia Pty Ltd (later named CornoNero) acquired certain assets of Trimont (including its interests in the scheduled development projects) under the BSA. By the BSA, Trimont sold its business at an agreed value of $7,500,000 in return for its acquisition of all of the shares in CornoNero. Under the share sale agreements, Trimont then sold the shares it held in CornoNero to GJB, BCD and AI&PB Property. BCD paid the sum of $1,060,000 in consideration for its shares in three separate payments over June and July 2015. GJB gave its $3,600,000 consideration for the acquisition of a 51 percent interest in the new company, by forgiving the indebtedness of a different Ascenzo‑related entity to a different Brady controlled entity, to the same dollar value. AI&PB Property did not pay the purchase price for its shares. Ascenzo's evidence was to the effect that he did not see that had to pay himself for shares in the new company. The total flow of funds into Trimont then, was $1,060,000.
4. On 3 May 2017, Trimont Pty Ltd was placed into administration. Michael Carrafa and Peter Gountzos were appointed joint administrators. On 25 May 2017, the administrators submitted their report to the Supreme Court of Victoria for Trimont. On 31 May 2017, Trimont was placed into liquidation by the Supreme Court and Carrafa and Gountzos became joint liquidators of the company.
5. The following is an account of events that occurred from about 1 July 2014. Because of the manner in which the evidence was presented (predominantly a document chronology and analysis of accounts, but with little narrative) it has been convenient to group the events thematically, and chronologically, as far as practicable.

1. Records produced by Pitcher Partners (Trimont's accountants) reveal that Trimont's aged creditors at financial year ended 30 June 2014 total $9.93 million of which $1.28 million was over 3 months outstanding and $1.18 million was shown as two months' outstanding.
2. Ascenzo gave evidence that Breckenridge would edit and prepare creditor lists in collaboration with Boyko.
3. On 16 July 2014, Sockalingum emailed Breckenridge, with Ascenzo and Clay in copy. Attached to the email was an aged creditors balances report and a document referred to as 'Silvio's hit list'. The hit list noted various creditors with outstanding invoices and the contact person at each company. Ascenzo denied having seen this document under cross‑examination but confirmed that the listed companies were creditors of Trimont at the time. He denied giving information to Clay to create the document. There was nothing to suggest that this list and several others like it in evidence, did not accurately reflect the records held and managed by Trimont's accounts department.
4. On 27 August 2014, Clay sent another list of creditors to Breckenridge and Ascenzo. The subject of his email was 'SILVIO LIST OF PAYMENTS'. The list included payment arrangements in rounded figures. Ascenzo confirmed that the list represented creditors that he would have spoken to.
5. On 10 October 2014, Sockalingum emailed Breckenridge, Ascenzo, Clay and Boyko. Sockalingum reported that 'if all unpresented cheques are banked on Monday, [Trimont] would have a negative bank balance of $150,000'. Sockalingum attached a spreadsheet that showed Trimont had a total amount of $96,144.55 in 'unpresented cheques' for 'Distinctive Wardrobe 40k, Hardie Plumbing $40k, & Complete Traffic 10k'. It was put to Ascenzo in cross‑examination that rounded amounts paid to creditors were not in full payment of a debt but to simply account for amounts owing. Ascenzo denied having any knowledge or involvement in these payments.
6. An internal cashflow spreadsheet dated 28 November 2014 records that Trimont had a total amount of $859,005.557 in unpresented cheques.
7. On 5 February 2015, Sockalingum sent a draft payment list to Clay with Breckenridge, Boyko and Ascenzo in copy. It listed suppliers that had sent legal letters demanding payment totalling $679,009.04. It showed that Trimont was on stop‑credit with seven creditors, due to overdue invoices amounting to $125,332.13. Suppliers had been calling requesting payment for invoices totalling $1,379,903.10. Ascenzo confirmed that this was the case.
8. On 16 February 2015, Sockalingum emailed Clay, copying Breckenridge and Ascenzo, setting out a 'financial score card' for Trimont. It stated that there was $44,415 in available funds as at 16 February 2015. There was $28,176 in unpresented cheques that had already been mailed, and $14,197 in payments on leases, loans and wages due imminently. $1,518 was paid to suppliers that day, leaving Trimont with $524 in its bank account. It was put to Ascenzo in cross‑examination that the bank account in question benefited from an overdraft which had been fully drawn down save for $524. Ascenzo replied that he did not know but conceded that was probably the case.
9. By the end of February 2015, Trimont had accumulated $841,320.88 worth of invoices that were overdue by more than 60 days and were 'approaching stop credit'. A 'Payment List' showed that Trimont had received legal letters from 15 creditors for amounts totalling $700,246.23.
10. In the 26 March 2015 email, Boyko proposed to Breckenridge and Clay to make rounded payments to 'pay the Workcover and a few little ones'. She proposed to make a payment of $30,000 to the Victorian Workcover Authority (VWA) for Workcover premiums and $10,000 for utilities bills.
11. On 30 March 2015, Ascenzo received an email attaching a scanned annotated copy of the company's bank balance position and a list of 'unpresented cheques' and 'cheques on hold'. The document showed that Trimont had a total amount of $340,444.96 in unpresented cheques. Trimont had only $2,403.43 in available funds. Ascenzo was questioned on the meaning of 'cheques on hold'. Ascenzo was unable to answer. He said that he did not know that cheques were sent out. Ascenzo was cross‑examined on Trimont's practice of requesting that creditors not present their cheques. He denied making such requests. His evidence was that Trimont 'hardly gave any cheques' although he conceded that he did not doubt that creditors were paid by cheque. Breckenridge gave conflicting evidence that it was Ascenzo who 'handed [out] a lot of cheques'. However, it is apparent that Trimont had been making such arrangements at least since October 2014. Lists of creditors who had unpresented or 'on hold' cheques appeared across Trimont's payment spreadsheets and correspondence in 2015.
12. On 2 April 2015, Sockalingum sent an email to Clay regarding Trimont's bank balance. Sockalingum noted that Trimont was in excess of its bank facility by $73,945.84 and it was expecting a creditor, Della Precast Pty Ltd, to bank a cheque of $58,190 that day. Ascenzo agreed that it was a recurrent problem for Trimont to not have enough money to pay creditors. He agreed that this problem persisted for a few months, and that the situation only improved once CornoNero was paying Trimont's creditors.
13. By 7 May 2015, Trimont owed $495,526.57 to 19 creditors who had engaged debt collection agencies or solicitors to take further action. Boyko advised in an email to Breckenridge and Ascenzo that Trimont had at least 11 accounts 'on hold'. Attached to the email was a spreadsheet compiled for the purposes of tracking legal letters received by the company.
14. On 27 May 2015, Maurice Sansonetti Constructions (MSC), issued a winding up application after Trimont failed to meet its statutory demand. MSC had issued a statutory demand against Trimont for $38,300 on 4 May 2015. Trimont had not paid invoices dated 21 February 2015 and 21 March 2015. Ascenzo said that he recalled MSC was a plumbing contractor. Breckenridge said that he remembered that 'there was a dispute with Silvio over the work that was completed'. MSC brought a winding up application on the basis of unpaid invoices. Another contractor, Copperform Victoria Pty Ltd, gave notice of its intention to appear at the return date of the application as a supporting creditor. Copperform alleged it was owed $94,922 of which part payment of $57,977 had been made on 11 June 2015. By 24 June 2015, MSC was excused from the proceeding on the basis that its debt had been satisfied. Copperform made an application to be substituted as the plaintiff in the proceeding, but the matter was ultimately discontinued.
15. On 10 June 2015, Boyko sent the master list of Trimont's debts updated as of June (June 2015 Payment Master List). It recorded that Trimont had $401,497.50 in cheques that were on hold and that Trimont had been put on stop‑credit with six creditors and needed to make payments to re‑open their accounts. The outstanding invoices totalled $182,003. $915,120 of Trimont's debt was the subject of legal letters. The spreadsheets listed creditors who had been 'promised' an amount to be paid by a certain date. Some of those promised amounts were rounded. Salient entries are extracted below:

1. At the end of the 2015 financial year, Trimont had about $10.1 million in aged creditor debt, with $4.1 million of that debt outstanding for over three months. The FY2015 Aged Creditors Summary showed that 60 percent of Trimont's debts had been outstanding for more than two months. Ascenzo agreed that the FY2015 Aged Creditors Summary showed that Trimont's financial position had deteriorated over the course of the 2015 financial year. It was put to Ascenzo that the document showed that Trimont owed millions of dollars to creditors and did not have the means to pay them. Ascenzo's answer was that 'they were the final figures but I don't know'.
2. On 30 July 2015, Boyko sent the July Payments Master List to Ascenzo and Breckenridge for their contribution. In her covering email, Boyko said 'these are the commitments for tomorrow - however I have spoken to a lot of suppliers that believe they will be paid tomorrow - but where do I stop!' Later than afternoon, Boyko sent a further copy of the master list with additions from Ascenzo. Ascenzo agreed under cross‑examination that at this point, Boyko was 'completely exasperated' by dealing with creditors. Ascenzo disagreed that Boyko was being told to make promises that they could not meet. He said that they would always discuss the promises with the suppliers and contractors. Ascenzo's response was limited and unpersuasive. What came of those discussions was not addressed.
3. The July Payments Master List listed the due dates for each creditor's invoice. It recorded various 'arrangements' with creditors. It noted where some creditors had threatened or commenced legal action against Trimont. It showed that Trimont had to meet $799,675.87 worth of invoices for over 50 creditors by 31 July 2015. Extracted below are some salient entries from this spreadsheet:

Boyko organised arrangement and ok (send email to confirm)

Verbal Arrangment [sic] to pay $10K by Friday and balance end of month

1. Many of Trimont's debts remained outstanding by the commencement of CornoNero. On 4 August 2015, Boyko sent another payment list document. It listed nine creditors under the heading 'Legal Letters', including Co‑INVEST and DWS. This document was shown to Breckenridge during cross‑examination, he said that he was 'not sure if they actually were legal letters' as he did not recall seeing letters from solicitors.
2. On 12 August 2015, the ATO issued a notice of legal action. By 27 August 2015, $815,875 of debt remained outstanding for creditors who had threatened legal action.
3. On 20 August 2015, Boyko emailed Breckenridge and Ascenzo. In the body of the email, Boyko noted three creditors and corresponding amounts under the heading 'Still Not Presented'.
4. On 1 September 2015, Boyko sent a copy of another internal creditor spreadsheet to Breckenridge and Ascenzo (August Payment Master List). The spreadsheet includes various entries referring to 'arrangements' with creditors and rounded payments as extracted below:

1. Payment lists continued to be sent to Ascenzo even after the sale of Trimont's business to CornoNero. On 30 October 2015, Raneeta Solano, Trimont's payroll manager, sent an email to Ascenzo attaching a creditors aged balances report. The 'Current' column had only small amounts owing compared to the aged balances. Ascenzo agreed under cross‑examination that this was because CornoNero had taken over the pipeline of work by this date. CornoNero had started to pay subcontractors on the projects sold under the BSA from September 2015.
2. Trimont had outstanding accounts with various creditors. I have summarised certain relationships with creditors referred to in the pleadings and submissions.

1. Canon, Trimont's office equipment supplier, had outstanding invoices dating back to February 2014. At 30 June 2015, Trimont owed Canon $6,858.70 in aged debt. Ascenzo accepted under cross‑examination that Trimont was not in a position to pay creditors listed in the FY2015 Aged Creditors Summary, including Canon. At 30 July 2015, Trimont needed to make a payment in the sum of $7,247.53 to Canon. On 6 October 2015, Canon issued a final notice for the total amount of $8,453.36 owing for the period between 7 February 2014 and 14 September 2015.

1. DWS supplied Trimont with wardrobe installation and joinery works. On 6 November 2014, DWS sent a letter of demand for the sum of $96,666.77, and recorded numerous other correspondence demanding payment over the course of the prior months. Ascenzo was questioned on this email, and confirmed that payment had not been made to DWS in the preceding months. At 30 June 2015, Trimont owed DWS $60,366.78 in aged debt. The July Payments Master List recorded that Ascenzo had 'promised' a payment of $58,901.00 to DWS.

1. A debt collector engaged by Arkee sent a letter of demand on 17 November 2014 for the outstanding amount of $14,894. Breckenridge gave evidence that Arkee had been contracted as a designer for the Glen Iris project. He recalled that there was a dispute between the designer and Ascenzo that 'caused there to be a payment issue'. Ascenzo did not give any meaningful evidence in respect of this creditor. He accepted that Trimont had received a letter of demand and had authorised a staff member to forward it onto Breckenridge. At 30 June 2015, Trimont owed Arkee $3,811.50 in aged debt. There is no payment recorded for Arkee on the July Payments Master List.

1. Trimont stopped paying its accountants from December 2014. As at 30 June 2015, Trimont had an outstanding debt of $112,246.64 owed to Pitcher Partners. Pitcher Partners appears as a creditor on the July Payments Master List for the 'Sept 2014 Balance and December 2015'. The spreadsheet stated that Pitcher Partners required payment of $32,863.44 by the following week on 7 August 2015. On 26 October 2015, Rigoni forwarded a legal letter of demand from one of Trimont's creditors to Ascenzo. In that same email, Rigoni asked for payment of his own account. He said as follows:

We also attach our statement of accounts which show $56,137.7 as outstanding the majority of which has been outstanding for greater than 120 days. I urgently need a payment of at least $28,518.90 from you. This amount relates to invoices covering the period from December '14 to April '15. We have been very accommodating to date but I am under increased pressure from fellow partners to collect a sizeable amount from you.

1. A formal demand for payment of $110,913.70 was sent on 4 October 2016, followed by a demand from their solicitors, Soho Lawyers, on 15 December 2016. On 21 December 2016, Pitcher Partners issued a statutory demand to Trimont to account for outstanding invoices dating back to 12 December 2014, totalling $113,663.70. Carrafa recorded that Pitcher Partners was owed a remaining debt $113,663.70 at the date of his June 2017 Report.

1. This supplier was engaged on the Darebin Street Apartments. On 9 February 2015, Stuart Dent issued a 'Notice of Intention to Suspend' due to outstanding payment claims dated 24 November and 18 December 2014. In the covering email, Dent advised that he had left various voicemails with Trimont personnel in relation to the outstanding amount. Ascenzo confirmed that this notice was normal for the company to receive in circumstances where payment had not been made on outstanding invoices. It was put to Ascenzo that Trimont's position had deteriorated to the point that its accounts team were not returning calls. Ascenzo denied that he knew that to be the case.
2. At 30 June 2015, Trimont owed Dent $8,368.22 in aged debt. This debt remained as at 30 July 2015 and appears on the July Payments Master List, noting that an arrangement had been put in place.

1. Martian Demolitions performed demolition work for Trimont at the East Brunswick Hotel. Trimont was invoiced $44,000 for the work on 21 December 2014. At 30 June 2015, Martian Demolitions was still owed a balance of $35,500, and Boyko included the debt on the July Payments Master List for urgent payment by early to mid‑August. By 15 February 2016, the balance of $35,000 remained owing and Trimont was issued with a demand for payment. Boyko acknowledged the debt by email on 24 March 2016 and set up a payment plan with Martian Demolitions. Trimont defaulted on the second payment in April 2016. Following frustrated email exchanges and continued non‑payment, Martian Demolitions issued a statutory demand on 18 July 2016 for the remaining balance of $24,500. Carrafa recorded that Trimont still owed $24,500 at the date of his June 2017 Report.

1. The FY2015 Aged Creditors Summary states that Trimont owed Sublime $63,393.38 at 30 June 2015. In the July Payments Master List, Boyko records that Trimont must pay $10,000 to Sublime by the next day, 31 July 2015. Carrafa recorded that Sublime was owed a remaining debt $22,350.28 at the date of his June 2017 Report.

1. KHQ provided legal services for the preparation of the BSA for Trimont during the period April to October 2015. Trimont did not pay the fees for KHQ's services. As at 30 June 2015, Trimont owed KHQ $185,260.46 in aged debt. The July Payments Master List recorded that as at 30 July 2015, Trimont needed to make a payment of $77,013.00 to the firm. KHQ issued two statutory demands against Trimont in December 2015 for the amounts owing. Trimont and KHQ reached a payment arrangement and signed a deed of release and settlement in February 2016. It had been agreed that Trimont would pay the debt in instalments with the last tranche of $26,719.95 (plus costs and interest) due on 28 June 2016. On 3 June 2016, KHQ issued another statutory demand for the balance of the debt in the sum of $3,648.97.

1. This supplier was not paid for goods delivered to Trimont from 29 May to 25 September 2015. Trimont owed a total sum of $14,300.08 on its credit account. Payment was due in full by the end of the month following delivery of the goods. As at 30 June 2015, Trimont owed Access Hardware $17,628.96 in aged debt. No payment was recorded for this creditor in the July Payments Master List. On 9 March 2016, Access Hardware issued a final notice for $21,600.88 including debt collection fees. Boyko negotiated payment for this amount over four instalments. Following a default, the supplier sent a legal letter demanding payment, and eventually commenced proceedings against Trimont for the debt. Carrafa recorded that Access Hardware was owed a remaining $16,281.99 at the date of his June 2017 Report.

1. This creditor supplied furniture and white goods for the East Brunswick Hotel project. As at 30 June 2015, Trimont owed One68 $149,609.09 in aged debt. One68 is listed for a $90,000 payment in the July Master Payment List. There were 10 unpaid invoices dated between 15 July and 8 December 2015. On 7 December 2016, One68 issued a demand for the outstanding amount of $48,455.40. Carrafa recorded that One68 was owed a remaining debt $60,677.35 at the date of his June 2017 Report.

1. McIntyre & Cross was the architect for multiple Trimont projects. As at 30 June 2015, Trimont owed its architect $104,414.29 in aged debt. By letter dated 4 September 2015, the firm advised that it had been eight months since it had received any payment from Trimont for its services despite 'promise of imminent compensation' on the provision of its architectural services. The letter stated that Trimont owed an amount 'in the order of $200,000'.
2. Breckenridge gave evidence that McIntyre & Cross billed in the nature of a 'consulting‑based practice'. It was put to Breckenridge that the McIntyre & Cross invoices were long overdue by 4 September 2015. He accepted that proposition. Breckenridge said that he recalled the matter of the outstanding debt and he had arranged to meet with Peter McIntyre to discuss it, after receiving his demand.
3. Trimont made a rounded lump sum payment of $100,000 towards the debt on 9 September 2015, but Breckenridge did not recall authorising the payment when making his supplementary written statement. He said that the payment was made to ensure the architect continued to do work on projects. Breckenridge said that he had not seen or reviewed invoice in the sum of $100,000 from McIntyre & Cross, and accepted that no invoice was ever issued for that amount.
4. By 22 March 2016, Trimont had still not settled the remaining debt and McIntyre & Cross sent a letter of demand for $149,95.80 owing on invoices mainly issued between March and November 2015. McIntyre advised that his firm would not provide further services until the debt had been fully or substantially settled.

1. Trimont did not pay an Azzona invoice dated 8 July 2015 within its trading terms. The invoice pertained to work done on the Heidelberg project and was in the amount of $25,047.00. Azzona's solicitors sent a letter of demand on 26 October 2015 to Johnson Partners. The letter was forwarded to Trimont by Claude Saliba. In his covering email, Saliba stated, inter alia:

We are concerned and embarrassed to be receiving such letters when all our claims are up to date. We also do not appreciate being put in an position whereby our reputation is being tarnished by your issues with various contractors which we previously brought to your attention.

1. As at 30 June 2015, Trimont owed Harvey Norman $87,388.46 in aged debt. Harvey Norman was listed for a $54,237 payment in the July Master Payment List, noting 'awaiting payment ‑ Anna spoke to them last week'. On 9 November 2015, Trimont received a debt collection notice issued on behalf of Harvey Norman for a debt outstanding from May to August 2015. The amount owing was $51,473.91. Ascenzo was taken to this debt collection notice in his cross‑examination. He agreed that these were the sort of demands that Trimont was receiving at the time.

1. On 26 June 2015, Mariljohn invoiced Trimont $253 for the delivery of kitchen equipment. Trimont did not pay within trading terms. Mariljohn filed a complaint in the Magistrates Court in March 2016 for the unpaid June invoice and two subsequent invoices issued in September 2015.

The Pines Hardware & Garden Centre Pty Ltd

1. Breckenridge signed a personal guarantee for Trimont's credit account with The Pines on 15 July 2015. There was no evidence of an issued invoice or a date on which the credit account was payable. The Pines, by their solicitors, demanded payment of $25,300.41 owed on 1 December 2015.

1. Trimont received a letter of demand dated 26 November 2014 for the amount of $230,510.24. The letter was addressed to Ascenzo's other entity, TSA Electrical Pty Ltd. Under cross‑examination, Ascenzo admitted that TSA's debts were being paid by Trimont. AWM states in the letter that the overdue amount 'exceeds our credit terms and conditions' and the letter represented a final demand. It appears that this supplier was a creditor of a related entity and therefore not relevant to the consideration at hand. AWM does not appear as a creditor on either the FY2015 Aged Creditors Summary or July Payments Master List.

1. Breckenridge gave evidence that supplier Amis had placed Trimont on stop‑credit. This evidence was given in the course of questions in relation to the alleged impugned transactions, including $80,000 paid to Amis on 9 September 2015. Breckenridge said that the owner of Amis, Miro Stojiljkovic, would contact him in relation to outstanding invoices from March to May 2015. Breckenridge recalled that Stojiljkovic had placed Trimont on stop‑credit until all outstanding invoices were paid. Amis was paid on 9 September 2015.

1. Ascenzo gave evidence about how he would deal with demanding creditors. Cross‑examined, he was taken a list creditors who appeared to have accounts overdue for two to three months as at June 2014. Ascenzo agreed that Trimont would have paid those accounts if it had the money, but it was not in a position to do so. Ascenzo said that Trimont had arrangements with creditors to make payments of 'whatever we could afford'. He said: 'When we got paid, they would get paid'. Boyko kept a list of people to make payment arrangements. Subcontractors would ask Ascenzo about their unpaid accounts when he worked onsite. He said that he would arrange for accounts to be paid in part or arrange for those subcontractors to wait 30 or 60 days. Ascenzo said that he 'never had a problem'. Ascenzo would tell Boyko when accounts had become urgent and ask her to 'put it in the payables list and see what we could do'. Ascenzo's evidence was that 'in the end [creditors] would be my responsibility'. Ascenzo agreed that Trimont was experiencing financial difficulties in mid‑2015. Ascenzo was receiving updated lists of pressing creditors on an almost daily basis from his staff. He acknowledged that Trimont had received legal demands from creditors and had a winding up application made against it. In reference to the June 2015 Payment Master List, Ascenzo accepted that the purpose of these payment lists was to 'try and work out who to pay and who not to pay'. Creditors would ask when they were going to get paid. Ascenzo accepted that those creditors were agitated.

1. On 17 April 2014, Rigoni emailed Clay to advise that the Australia Taxation Office had issued a statutory demand against Trimont for outstanding amounts to be paid by 2 May 2014. Rigoni does not identify the amount payable in this email.
2. In June 2014, an aged creditors summary (FY2014 Aged Creditors Summary) recorded that Trimont owed $436,966 to the ATO. There was an amount of $309,324 that remained overdue from May 2014. Ascenzo gave evidence that Trimont was not in a position at that time to pay the creditors listed in the summary, including the ATO.
3. Beginning July 2014, Trimont was in default of remittance of superannuation deductions from employees' wages to their approved superannuation funds, and had failed to settle the shortfall amounts of superannuation guarantee contributions with the ATO. Ascenzo confirmed that Trimont stopped paying superannuation contributions in July 2014. It was his evidence that Trimont was short on funds and waiting for money to come in. He instructed Anna Boyko or another member of his staff to call superannuation funds and explain that they could not pay their contributions and arrange for a payment agreement to be put in place. Trimont needed the money to instead 'keep projects going'. Ascenzo said that if staff had asked why contributions had not been paid, he would have explained the situation to them.
4. On 16 July 2014, Sockalingum sent an internal creditors list to Breckenridge, recording that Trimont had an outstanding ATO debt totalling $436,996, dating back to May and June 2014.
5. On 7 October 2014, the ATO had issued a statutory demand for $906,123.12. Thurgood scheduled a meeting with Clay, Breckenridge, Rigoni and Ascenzo to discuss how to handle the ATO debt. Breckenridge did not recall the meeting to discuss the ATO debt, but said that it was Clay and Ascenzo who 'managed that part of the business'. Ascenzo did recall the meeting but not the contents of the discussion. Under cross‑examination, Ascenzo accepted that the amount subject of the statutory demand included the $436,996 amount that was outstanding at 16 July 2014.
6. In October and November 2014, Trimont did not remit income tax instalments deducted from its employees' wages to the ATO. These amounts remained outstanding and were the subject of Trimont's third statutory demand of the year, issued 10 February 2015. Trimont owed $215,812.13. It was put to Ascenzo in cross‑examination that the financial position of Trimont at this time was dire. Ascenzo responded: 'It wasn't dreadful. We were waiting on money coming through but yes, it wasn't in a great position but we worked with it'.
7. By April and May 2015, Trimont stopped meeting its PAYG and BAS obligations. On 19 May 2015, the ATO issued a statutory demand for $106,625.31 due under the BAS provisions for GST and PAYG.
8. In the lead up to 30 June 2015, Trimont's federal tax debt had been outstanding for over a year. Trimont had been issued with three statutory demands between April 2014 and February 2015. Trimont did not settle its debt by 30 June 2015. In the annual reconciliation form lodged by Trimont for the 2015 financial year on 21 July 2015, Trimont recorded $571,665 had been deducted from wages for superannuation contributions.
9. There was no substantive change in circumstances by 1 August or 11 September 2015. On 12 August, the ATO issued a Final Notice of Legal Action for the amounts outstanding from April 2015 for $395,562.35. In an email dated 19 August 2015, Boyko said that the notice had been issued for outstanding PAYG and BAS. Breckenridge said that he was 'well aware of that ATO debt' at the time. On 1 September 2015, Boyko sent an email to Breckenridge and Ascenzo. The email stated that a cheque was to be sent to the ATO for the amount of $200,000. The debt was listed in the attached spreadsheet as subject to an 'arrangement' and legal action.
10. The debt was later subject to a garnishee notice issued by the ATO against Trimont's ANZ bank account on 21 September 2015. Rigoni advised Ascenzo by email that the garnishee notice had been issued. Ascenzo agreed under cross‑examination that he knew of the debt. On 23 September 2015, Boyko attempted to negotiate a payment arrangement with the ATO. In an email to Breckenridge and Ascenzo, she advised that the ATO had rejected her instalment proposal. Her email contained a list of questions from the ATO representative, who had queried Trimont's 'sudden' ability to meet its debt. Boyko proposed to advise the ATO that Trimont would be coming into income from its projects, external loans, and by selling assets. On 30 September 2015, Trimont made payment of $46,700.
11. By March 2016, Trimont still owed super guarantee charges (SGCs) from July 2014 onwards.
12. According to the Formal Proof of Debt submitted on behalf of the ATO to the administrators on 11 May 2017 (Debt Form), Trimont had a RBA debt of $107,858.71 at the date of administration. The company owed an additional amount of $906,681.49 in SGCs and recorded a total overdue tax liability of $1,014,540.20.
13. Trimont recorded an outstanding state tax debt from as early June 2014. Trimont owed $71,272 in unpaid payroll tax to the State Revenue Office according to the FY2014 Aged Creditors Summary. This amount includes accumulated debt from three months prior.
14. Under cross‑examination, Ascenzo confirmed that payments were not made from July 2014 onwards. Trimont was not in a position to make payments because it was 'waiting on money'. He gave evidence that Trimont had made contact with the SRO and made payment arrangements.
15. On 23 February 2015, the SRO issued an urgent notice to Trimont for unpaid payroll tax. This notice remained unmet by 7 May 2015, and was recorded for urgent attention in an internal Trimont spreadsheet of outstanding payments.
16. On 15 May 2015, the SRO issued a statutory demand for $28,891.97 in unpaid payroll tax.
17. Trimont went on to owe a total of $279,365.48 over the entire 2015 financial year. In the annual reconciliation form lodged by Trimont for the financial year ended 30 June 2015, Trimont recorded no instalments paid since 1 July 2014. The evidence shows that Trimont was under increasing pressure to settle its outstanding debt with the SRO.
18. In the lead up to the sale of the business, a significant payroll tax debt remained. On 19 August 2015, the SRO assessed that Trimont owed a total of $232,246 in overdue payroll tax.
19. By 21 August 2015, Trimont was on notice that the SRO would seek to enforce the debt. A solicitor for the SRO advised by email that Trimont had three days to settle debts outstanding from the May statutory demand. This did not occur.
20. By 31 August 2015, Trimont owed a total of $369,516.86 in unpaid tax and interest.
21. On 16 September 2015, Boyko sought to pay the outstanding amount in six month instalments, minus interest. The SRO agreed to place Trimont on a payment plan. The first instalment of $46,700 was paid by CornoNero on 30 September 2015.
22. Trimont continued to falter on its payroll tax obligations after the commencement of the BSA and SSA. The payment plan was cancelled on 9 November 2015 following default. The following month, the SRO issued a final notice for the full outstanding amount of $261,129.82, followed by urgent notice that it would take legal action.
23. Over the course of the next year, Trimont stalled the advance of the state agency by negotiating payment arrangements, even following the issue of a winding up application by the SRO in July 2016.
24. On 6 September 2016, Ascenzo swore an affidavit in relation to the SRO's winding up application and it was filed in the Supreme Court of Victoria. Ascenzo deposed that 'after a review of the company's finances in the financial year ended 30 June 2015, it was decided that there would be a restructure of the business... This path is more profitable and allows the company to meet its financial obligations'. This affidavit was put to Ascenzo during cross‑examination. Ascenzo asserted that all of his companies were profitable in the 2015 financial year. He said that money was owed to Trimont and 'if it all came in the way it was supposed to have come in' in then the company was profitable. He agreed that a restructure was necessary so that Trimont could meet its financial obligations in respect of the year ended 30 June 2015.
25. The winding up proceeding was eventually discontinued after Trimont and the SRO reached a payment arrangement in November 2016.

Unpaid employee wages, entitlements and obligations

1. On 10 March 2015, Sockalingum sent an email to Ascenzo stating that Trimont 'will not have enough funds for payroll tomorrow'. Cross‑examined, Ascenzo agreed that this meant that they were also unable to pay tax on the payroll. Ascenzo did not accept that it meant that Trimont was unable to pay its workforce. He said that they would have made an arrangement to ensure payroll went through. Ascenzo speculated: 'We could have gone to the bank and asked for money from the bank or funding or something. We would have got it through'. However, he did accept that Trimont did not have enough money 'on hand' to pay its employees on 10 March. That was the extent of the evidence. No details were given of any source of funding or financial accommodation.
2. Trimont was having difficulty meeting its Workcover payments to the VWA in March 2015. On 26 March 2015, Boyko sent an email to Breckenridge and Clay in relation to unpaid creditors (26 March 2015 email). The email referred to an urgent payment of $30,000 to be paid to the VWA. The relevant parts of the email are extracted below:

Hi Guys

As per my discussion with Jevan, there wasn't any mention of ATO (TSA), and I wanted $50K as per Silvio lovely words - to pay the Workcover and a few little ones - anyway.

Therefore ATO (TSA) ‑ $76,305.00

Silvio: ‑ $25,000.00

W'Cover: ‑ $30,000.00

Utilities: ‑ $10,000.00

Total $141,000.00 - Can I please ask if we can hold someone!!

Please call me.

Therefore we need to hold somewhere.

Ascenzo said that the Workcover premiums needed to be paid at that time. He gave evidence that, earlier that month, the company did not have enough money to meet these payments.

1. On 4 July 2015, the VWA issued its 2015/16 Premiums Notice for that year's premiums, and audit premium adjustments and underestimation penalties for previous financial years. The notice shows that Trimont made its last payment of $15,185.72 to VWA on 30 June 2015. Following this payment, Trimont had a remaining debt of $261.94, for an incorrect remuneration penalty and underestimation penalty adjustments. Trimont owed an undiscounted amount of $126,674 for the 2015/16 premium, and $1,274.39 in audit premium adjustments. After the 30 June payment, it appears that Trimont only had outstanding $261.94 on its Workcover premiums. On 1 October 2015, Trimont's Workcover 2015/16 Premiums Notice became payable. However, Trimont failed to pay its premiums by the notice due date.
2. CoINVEST, an agency responsible for long service leave contributions, issued an invoice on 31 July 2015 for the amount of $17,243.90 for the April/June 2015 period. Trimont did not pay the CoINVEST invoice when it fell due. There was no evidence of the trading terms for the 31 July invoice. Trimont did not pay its long service leave contributions for the July/September 2015 period when they fell due. On 2 November 2015, CoINVEST issued a reminder notice for an invoice issued 30 September.
3. On 27 November 2015, VWA's agent, Gallagher Bassett, sent a letter of demand to Trimont for $100,946.35.
4. Trimont did not pay its LSL contributions for the October/December 2015 period when it fell due, and was served with a final notice for that amount on 5 February 2016.
5. Trimont and CoINVEST came to an arrangement on 2 March 2016 to pay the April/June debt in $2,000 monthly instalments. On 3 March 2016, by a letter from its solicitors, CoINVEST demanded payment of the remaining amount.
6. On 29 March 2016, United Super filed a claim in the County Court for contributions that had been unpaid to its members employed by Trimont since March 2015. The claim was for the total amount of $310,109 for the period March 2015 to March 2016. The amount outstanding for March 2015 to September 2015 was in excess of $190,000. Judgment was later granted in favour of United Super.
7. CoINVEST initiated debt collection for the unpaid amount in January 2016. The agency commenced proceedings in the Magistrates Court on 15 February 2016 for the amounts outstanding since April 2015 plus statutory interest.
8. From April to August 2016, CoINVEST sent demands by its solicitors and debt collector for the outstanding amounts for the July/September and October/December periods. Trimont went on to breach its payment plan with CoINVEST. On 8 June 2016, CoINVEST entered judgment against the company for the April/June contributions. Default judgment was entered in favour of CoINVEST for $48,111 according to an email from the debt collector Probe Group on 18 July 2016. It is not immediately clear whether Probe Group was referring to the previous judgment entered for the April/June amounts.
9. CoINVEST showed interest in the winding up application brought against Trimont by the SRO. On 2 August 2016, CoINVEST, alongside the VWA, filed a notice of intention to appear in the proceeding.
10. On 5 October 2016, Trimont reached another payment arrangement with CoINVEST for the outstanding 2015 quarters. It was agreed that Trimont would pay the contributions in four monthly instalments. Nevertheless, CoINVEST went on to file a Complaint in the Magistrates Court for $14,913 outstanding for the last quarter of 2015 and the first two quarters of 2016. CoINVEST later obtained judgment for that amount.
11. The VWA eventually took legal action and filed a complaint in the Magistrates' Court to recover $102,586 in unpaid premiums on 5 February 2016. Ascenzo's solicitor Tony Zita negotiated a payment arrangement with the VWA. There was no evidence as to how this arrangement fell apart, but VWA entered for default judgment in the Magistrates' Court proceeding on 7 June 2016.

1. As discussed earlier, money borrowed by Coonwarra was used to pay Trimont or Ascenzo‑related creditors and other interests. No positive case was made by Ascenzo or any other defendant that Trimont had available to it external funding that would fundamentally change its ability to meet its creditors' demands, within a particular time period, or at all. The only evidence given by Ascenzo on arrangements with creditors was lacking in specificity and persuasiveness. It was not seriously contended that Trimont had the resources, by means of loans or other arrangements from related entities or third parties, to meet its debts as they fell due.

Trimont's financial position as disclosed in its financial statements

1. Trimont's financial statements for 2013 and 2014 were prepared by its accountants, Pitcher Partners. There was no issue about their reliability.
2. Ascenzo was cross‑examined on a draft set of financial statements for the financial years ended 30 June 2015 and 30 June 2016 (Draft Financial Statements). The reports of Trimont's liquidator Michael Carrafa. referred to and exhibited a different set of financial statements in his 5 June 2017 report to Trimont's creditors, which he said was compiled from Trimont's management accounts (the Management Accounts). There were differences across the two sets of statements for the 2015 financial year. Nevertheless, for 2015, the reported net assets and net profits figures were substantially similar in each set of accounts. Both sets of accounts recorded negative net assets in the range of ($13,184,218) to ($14,010,890) and a negative net profit before tax of ($13,390,925) to ($14,013,872). The figures for 2016 in the Draft Financial Statements and Management Accounts were identical.
3. For the 2015 financial year, Trimont's Draft Financial Statements recorded total assets of $10,362,619 and total liabilities of $24,373,509. Its current assets were $9,142,834 (including a total cash reserve of $21,456) with current liabilities of $23,407,930 (including $18,845,069 in payables, comprised of trade creditors, loans from associates and statutory and tax liabilities). With a recorded income of $26,848,320, Trimont's cost of goods sold was $36,468,766. This resulted in a loss of ($9,620,446) and a negative gross margin of (35.8 percent). Trimont expended a total of $4,405,256 resulting in an operating loss of ($14,025,702) and a net loss before tax of ($14,013,872). Trimont's EBIT was ($13,695,086) and EBITDA ($13,354,060).
4. The 2015 Management Accounts recorded total assets of $5,020,212 and current assets of $3,800,427 (including a cash reserve of $21,456). The difference between the current assets recorded in the Draft Financial Statements and the Management Accounts is explicable, and lies in an omission from what is recorded in the Management Accounts for Trimont's receivables. According to the Management Accounts, Trimont had a total of $1,973,439 for receivables compared to $7,272,769 recorded in the Draft Financial Statement. In the Draft Financial Statement, Trimont has $5,919,330 in loans to associates. That figure is omitted from the Management Accounts, which only accounts for $1,020,962 in trade debt, $949,538 in subcontractor retentions held and $2,939 in fuel tax rebates for its total receivables.
5. The Management Accounts record that Trimont had total liabilities of $18,204,430 compared to the $24,373,509 recorded in the Draft Financial Statement. They record current liabilities of $11,813,589 (including $9,955,085 in payables). Unlike the Draft Financial Statement, the payables figure in the Management Accounts only accounted for trade creditor debt and not for loans from associates or statutory and tax liabilities (a difference of $8,889,984).
6. The Management Accounts and Draft Financial Statements recorded identical figures for total income, gross profit and the gross profit margin in 2015. Trimont expended a total of $3,782,309, resulting in an operating loss of ($13,402,755) and a net loss before tax of ($13,390,925). Trimont recorded EBIT of ($13,390,925) and EBITDA of ($13,390,925).
7. The Draft Financial Statement and Management Accounts for the 2016 financial year contain identical figures. Trimont had total assets of $2,053,681 and total liabilities of $12,604. Its current assets were $1,114,199 (including cash reserves of $21,456) with current liabilities of $4,080,564. Trimont recorded total income of $4,398,901. Its cost of goods sold was $6,218,085, resulting in a gross loss of ($1,819,184) and a gross margin of (41.4 percent). Trimont expended a total of $2,048,929, with an operating loss of ($3,868,113). The accounts showed a net profit before tax of $2,839,750.
8. Ascenzo was cross-examined on Trimont's Draft Financial Statements for the year ended 30 June 2015. The documents appeared on their face to have been prepared by Pitcher Partners and were stamped 'tentative and preliminary draft for discussion purposes only'. Ascenzo said he did not recall discussing the document with Pitcher Partners and that the document did not represent 'the final figures' because he did not sit down with Pitcher Partners or anybody to finish off the accounts. He did not think there was a loss of about $14 million. He said that he had a sense that the figures were wrong and that he did not know 'if it made a profit or if it made a loss'.
9. The contemporaneous documents disclose that Pitcher Partners had prepared the draft accounts on Ascenzo's instructions and with his involvement. On 10 August 2016, Ascenzo forwarded to Breckenridge an email he had received from Rigoni (sent to Trimont's solicitor Zita copied to Ascenzo) attaching the 2015 Draft Financial Statement. Ascenzo's message to Breckenridge with the forwarded email read, 'when do you want to meet?' Rigoni's message to Ascenzo read as follows:

As discussed attached are a copy of the draft 2015 financial statements which are stamped 'tentative and preliminary draft for discussion purposes only'. Ben Lethborg of our office presented and discussed the draft financial statements with Silvio late yesterday afternoon. As I explained earlier today, we are yet to verify a number of balance sheet items to supporting documentation. In particular this comment relates to the various loan to and from associates. However I understand that Silvio yesterday afternoon did not question any of these balances. Nonetheless, they are yet to be verified...

1. Ascenzo said he did not recall meeting with Ben Lethborg. However, he had no reason to think that what was set out in the email was not true. It was put that as at August 2016 Ascenzo knew that Trimont had made trading losses of some $14 million in the year ended 30 June 2015. His answer was, 'no, because they weren't the final figures. There was a draft'. It was put that the draft was one with which he had not taken issue. He agreed. He also agreed that it had been prepared by Pitcher Partners on the basis of information provided by Trimont but added, 'and not finalised by them'. Ascenzo was unwilling to admit the facts set out in the document but could not offer any credible alternative account despite his assertion that he had a sense that the figures were wrong. When the Draft 2015 Financial Statement was put to Breckenridge, he said that he recalled Ascenzo asking him to 'provide resources to reconcile some items' but that he did not remember 'getting overly involved in the actual numbers'.
2. Ascenzo was also cross‑examined on the 2016 Draft Financial Statements. On 22 August 2016, Boyko wrote to Breckenridge and Ascenzo (addressing her email to Breckenridge) asking whether 'as per' Breckenridge's discussion with Zita the previous week, he needed her to organise anything to complete the Trimont 2016 financial statements. She recalled that Zita had said he was 'trying to gather Bill [Thurgood], Jevan [Clay], Dario [Ferella] and I think you mentioned Ben [Lethborg] to complete these financials asap'. Boyko asked Breckenridge to speak with Ascenzo, noting that Rigoni had emailed him regarding payment of the Pitcher Partners' account before completing the 2016 financial statements. Boyko said she would leave that up to Breckenridge noting that they were now completing the financials in‑house. She said that the financial statements needed to be completed as a matter of urgency. Breckenridge recalled that Clay and Thurgood put the accounts together. His evidence was that he had spoken with Ascenzo and it was decided that because Clay and Thurgood had previously assisted Boyko with Trimont's accounts, they could 'put enough information together so the accounts could be finalised'.
3. Dario Ferella was Trimont's former accountant who was assisting Ascenzo with respect to insolvency matters. Ascenzo agreed by reference to Boyko's 22 August 2016 email, that Boyko was proposing the 2016 financial accounts be completed in‑house with access to Trimont's accounting records and assistance from Ferella and Lethborg. Under cross‑examination, Ascenzo accepted that in all likelihood those people were involved in the in‑house preparation of the 2016 financial statements for Trimont.
4. On 5 September 2016, Thurgood emailed Breckenridge and Hartwig attaching draft financials for the Ascenzo Group, 'that Ferella and Zita have'. Thurgood's email stated that there was a lot of missing information so the financial statements were 'pretty basic'. He said that all loans were 'directed to' Katia Ascenzo who then 'lent to Trimont'. Thurgood stated that 'all other entities either owe money to or have lent to Katia'. Financial statements for a number of Ascenzo‑related entities for year ended 30 June 2016 were attached including for the Ascenzo Family Trust. Ascenzo was taken to the 2016 draft statements during cross examination. He did not doubt that they were the documents prepared from Trimont's accounting records at the time.
5. A note to the financial statements under 'payables - non‑current' recorded a loan from CornoNero Pty Ltd in the sum of $2,452,572. Ascenzo agreed that payables were debts owed by Trimont. It was put that CornoNero was owed that money because it had paid debts of Trimont. His answer was, 'it paid debts for Trimont, yes'.
6. Breckenridge said he did not review the 2016 Draft Financial Statement when it was sent by Thurgood. He was unable to explain the various loans from associates that were recorded in Trimont's payables. Breckenridge said: 'I'm not sure of the accuracy of these accounts at all'. He proffered no positive case about the accounts.
7. The 2015 financial statements were in draft, and the accountants who prepared, them told Ascenzo that some items, in particular loans to associates, required verification. Nevertheless, they were prepared by Trimont's own accountants, Pitcher Partners, on the instructions of Ascenzo who was Trimont's sole director, with his involvement. Having weighed this evidence in light of the contemporaneous documentary and witness evidence, I consider that the 2015 Draft Financial Statements can be taken to express Trimont's financial position at that time, as assessed on the basis of Trimont's records, by Trimont's accountants, an assessment with which Trimont's sole director took no issue at the time. They may be regarded as relevantly reliable. Ascenzo's insistence that they were 'not final' does not detract from that conclusion. He pointed to no fact that would have undermined any particular part of the accounts.

1. The liquidators extracted the company's financial position from its financial records and exhibited its profit and loss, balance sheet and working ratios in the Carrafa Report dated 5 June 2017.
2. Set out below are financial figures as analysed by Mr Carrafa, derived from the 2013 and 2014 reports and the 2015 Management Accounts. Added (in bold) are the same items and calculations derived from the Draft Financial Statements.

1. Carrafa analysed and recorded Trimont's profit and loss figures derived from the 2013 and 2014 reports and the 2015 Management Accounts. Those figures are as follows, with figures from the Draft Financial Statements inserted (in bold) beneath.

Ascenzo's evidence about Trimont's financial position

1. Ascenzo's evidence was that as at July 2015, Trimont was receiving debt collection notices and statutory demands from creditors. It was put to Ascenzo in cross‑examination that during the period December 2014 to December 2016 Trimont was not able to pay its debts with its own money when they fell due. Ascenzo's response was: 'Yes, that's right'. Ascenzo agreed that if that was the case, there would have been serious commercial issues confronting Trimont, including delays on Kanyon projects, issues with unions, damage to business relationships and potential litigation risk. Ascenzo acknowledged that he was aware of those potential consequences if Trimont could not find the money to pay its creditors.

1. Although it is unnecessary to make any finding of insolvency for the purposes of this proceeding, it is relevant to record the fact that the evidence establishes that Trimont was under significant financial stress. It was unable to pay its debts as and when they became due and payable, as at 30 June 2015 (and also in August and September 2015).
2. Nothing in the evidence suggested that the difficulties Trimont encountered were instances of mere temporary illiquidity.
3. The evidence can be summarised as follows.

1. Ascenzo was cross‑examined on Trimont's deteriorating financial position. He agreed that the company's financial position had deteriorated over the course of the 2015 financial year. According to its annual financial reports, Trimont recorded a net profit of $664,908 in 2013 and $1,554,221 at 30 June 2014, followed by significant net losses of $13,402,755 at 30 June 2015.
2. It is difficult to determine whether the company continued on a downward trend from June 2015 to September 2015 in the absence of monthly financial information. Nevertheless, it is likely on the balance of probabilities that continued until August and September 2015 on the basis that Trimont had experienced significant loss on a continuing basis up until 30 June 2015, and in view of the continued inability to meet its debts into the August‑September 2015 period.

1. An Applied Working Capital/Current ratio (AWC/C ratio) determines a company's ability to use current assets to pay its liabilities. A Quick Asset ratio (QA ratio) ratio determines a company's ability to use current assets to pay its liabilities without needing to sell its inventory. Trimont's liquidity ratios remained under 1 from 2013 to 2015 (and 2016)[314]. The plaintiffs submitted that this demonstrated that the company was in substantial financial distress during this period. Taken together with the other evidence to which I have referred, I accept that submission.
2. Trimont recorded an AWC/C ratio of 0.94 at 30 June 2013, 0.96 at 30 June 2014, 0.32 at 30 June 2015 (and 0.27 at 30 June 2016[315]). It recorded a QA ratio of 0.25 at 30 June 2013, 0.40 at 30 June 2014, 0.17 at 30 June 2015 (and 0.22 at 30 June 2016[316]).

1. Trimont was failing to make payments to creditors within trading terms as early as the first quarter of the financial year beginning 1 July 2014. Trimont staff were balancing creditor demands on a 'daily basis'.
2. Trimont had not paid creditors within trading terms and had received continued payment demands and legal letters and defended legal proceedings. At 30 June 2015, it was recorded that Trimont had a total creditor debt of $10.1 million, a majority of which had been outstanding for over two months. I am satisfied that Trimont owed significant amounts to various creditors at 30 June 2015.
3. At 30 July 2015, Trimont remained indebted to various creditors. Ascenzo and Boyko had reached payment arrangements with many of them. Various payment lists were created and shared throughout August, recording significant debt figures, payment arrangements, and legal demands. I am satisfied that Trimont owed significant amounts to various creditors at August‑September 2015.

Special arrangements and unpresented cheques

1. The plaintiffs submitted that Trimont had entered special arrangements with select creditors to pay outstanding invoices. Trimont often arranged to pay creditors in instalments. Trimont had also agreed for select creditors to hold or not present cheques. One of the common features of insolvency as noted in Plymin, was the issuing of post‑dated cheques to creditors. In these circumstances, a company would negotiate an arrangement with its creditor which involved the receipt of cheques which were dated to be deposited at a later date. In this case, Trimont arranged for its issued cheques to be placed 'on hold' or not be presented by creditors. It is not apparent that the cheques were physically post‑dated, but Trimont's arrangements were akin to this process.
2. It is clear that as of 30 June 2015, Trimont had numerous arrangements with creditors to pay in instalments or to hold their cheques. There was no substantive change by August‑September 2015. Accordingly, I am satisfied that the evidence gives rise to two Plymin indicia that support a finding that Trimont was insolvent as at 30 June 2015 and August‑September 2015.

1. Over the course of 2015, many of Trimont's supplier relationships had deteriorated to the point that it became the subject of legal action and threats. Trimont personnel recorded these escalated situations in internal documents and correspondence. The plaintiffs rely on that documentation and various legal letters received by Trimont from as early as November 2014.
2. Trimont received solicitors' letters and statutory demands up until 30 June 2015. A winding up application was brought against the company only a month prior the end of the 2015 financial year.
3. Trimont continued to receive legal threats until the business was sold, including a final notice from the ATO. I accept that this indicia was present at August‑September 2015.
4. Trimont received further legal letters, complaints, judgments and warrants after the business sale. I do not consider that correspondence to be relevant for my purposes.

1. It was submitted that Trimont made payments of rounded sums to creditors which were not reconcilable with specific invoices. However, the plaintiffs made no submissions directly to the presence of this Plymin indicia.
2. There is clear existence of rounded payments being made to creditors from at least 30 March 2015. It is difficult to ascertain, for most payments, whether the sum is reconcilable with an actual invoice. However, the payments are referred to, in internal correspondence and documentation, in a manner that suggests Trimont was trying to appease certain creditors with lump sum payments. The June Payment Master List dated 30 June 2023 contained a number of rounded payments.
3. The trend continued up until the finalisation of the business sale, with rounded payments being made in August and September 2015.

1. If a supplier places a company on stop‑credit, or demands payment before resuming supply, this may be an indicator of insolvency. The plaintiffs made no particular submissions in regard to this indicia, nevertheless I have identified instances in which this indicia arises.
2. Trimont personnel recorded creditors who had placed Trimont on stop‑credit in internal spreadsheets and emails. By 30 June 2015, six of Trimont's creditors required payment to re‑open their accounts. By August‑September 2015, Trimont was on stop‑credit with its supplier, Amis.
3. I am satisfied that Trimont was on stop‑credit with numerous suppliers as at 30 June 2015 and August‑September 2015.

1. At the relevant dates, Trimont had accrued federal and state tax debt and had difficulty paying employee wages and entitlements such as superannuation contributions, or meeting its tax or statutory obligations as an employer, such as payroll tax, PAYG deductions or Workcover premiums.
2. Trimont had an outstanding debt to the ATO on a continuous basis from April 2014 to September 2015. By April and May 2015, Trimont stopped meeting its PAYG and BAS obligations. The ATO threatened legal action in April 2015 and Trimont failed to settle its debt by 30 June 2015. It does not appear that Trimont discharged its debt in full at any point during this period, but this is not necessary to establishing insolvency at the relevant dates. It is only necessary to decide whether Trimont had an outstanding federal tax debt at 30 June 2015 and 7 August and 11 September 2015. I am satisfied that this was the case.
3. For the period July 2014 to June 2015, Trimont owed $571,665 in superannuation contributions that had been deducted from wages. According to the Debt Form, there was $906,681.49 outstanding for the period July 2014 to March 2016. It is clear that the Debt Form accounted for unremitted superannuation for the 2015 financial year. I conclude that at 30 June 2015, Trimont had not remitted superannuation contributions nor settled SGCs owed for the period July 2014 to June 2015. I am satisfied based on the Debt Form, that this debt remained by the commencement of the BSA in August‑September 2015.
4. As for Trimont's state tax debt, Trimont had an outstanding debt for a year's worth of payroll tax by 30 June 2015. The debt remained unsettled at August‑September 2015.

Unpaid employee wages, entitlements and obligations

1. As to employee wages, there was no evidence that Trimont's payroll issues persisted beyond March 2015 and into the next financial year. I have, however, concluded that Trimont had an outstanding debt of superannuation guarantee contributions to the ATO as at the relevant dates. This extends to my conclusion in relation to its unremitted contributions to the superannuation funds themselves. United Super had not been paid in the relevant period. I am satisfied that Trimont had not paid superannuation deducted from its employees' wages as at 30 June 2015 and August‑September 2015.
2. As to its obligations to pay long service leave contributions, I am satisfied that as of August‑September 2015, Trimont had an outstanding debt with its long service leave provider CoINVEST. The April/June debt was not payable until 31 July 2015, so it was not outstanding at 30 June 2015.
3. The plaintiffs submitted that Trimont had failed to make its Workcover payments in the relevant period. It was submitted that Trimont stopped paying VWA in March 2015, but it is clear that Trimont made at least one further payment in June 2015. The 2015/16 Premiums Notice shows that a payment was made on 30 June 2015. VWA's solicitors confirmed that a payment was made in June 2015 in their March 2016 email. The plaintiffs made no submissions on how the Court should treat this evidence. By 30 June 2015 and August‑September 2015, Trimont only had an outstanding liability of $261.94. The 2015/16 premiums did not fall due and payable until 1 October 2015.
4. Accordingly, I accept that at 30 June 2015, Trimont had accrued, and had outstanding:

(a) BAS debt and unpaid SGCs due to the ATO;

(b) Payroll tax due to the SRO;

(c) Superannuation contributions to its employees' allocated superannuation funds; and

(d) Workcover premiums.

1. I accept that at August‑September 2015, Trimont had accrued, and had outstanding:

(a) BAS debt and unpaid SGCs due to the ATO;

(b) Payroll tax due to the SRO;

(c) Superannuation contributions to its employees' allocated superannuation funds;

(d) Long service leave contributions due to its long service leave provider; and

(e) Workcover premiums.

• $100,000 to Multifit Projects Pty Ltd
• $100,000 to Renda Air Services Pty Ltd
• $107,847.30 to Marijohn Group Pty Ltd
• $284,900 to BCP
• $1,907,252.70 to Trimont

• $248,476.09 to Minc Sallon (Laverton) Pty Ltd
• $151,523.91 to Trimont

• $274,305.64 to Trimont
• $1,625,694.36 to Aida Nominees

• 24 February 2016
• 23 February 2016
• 23 February 2016

• $70,584.44, with description "Lygon St JV"
• $145,042.70, with description "Queens Pde JV"
• $1,393,084.00, with description "Kanyon PL"

• $160,000.00 to Minc Sallon (Laverton) Pty Ltd
• $31,288.90 to CornoNero

TRIMONT PTY LTD (in Liquidation) (ACN 006 065 701)

BERKELEY CAPITAL DEVELOPMENTS PTY LTD (ACN 116 121 665)

[1] Coonwarra borrowed $1.5 million under the First Loan Agreement in December 2014; $5.2 million under the Second Loan Agreement in August 2015 ($1.5 million of which was used to repay the First Loan) and $1.8 million under the Third Loan Agreement in February 2016 (a total borrowing of $8.5 million, including the repayment of the First Loan in the sum of $1.5 million).

[2] CornoNero Pty Ltd (initially named Trimont Australia) is the first defendant.

[3] Silvio Ascenzo is the fourth defendant.

[4] Peter Breckenridge is the third defendant.

[5] I refer to parties and relevant persons throughout these Reasons by their surnames or by first names as the case requires and mean no disrespect by doing so.

[8] The parties gave evidence in chief by witness statement, with evidence of significant conversation and contested events given orally.

[9] This part sets out the factual findings and conclusions on which the analysis in Part IV proceeds.

[10] Registration of the transfer of land was effected on 12 December 2000.

[11] The relationships between the entities owned or controlled by Ascenzo, were not otherwise exposed in the evidence in this proceeding.

[12] The 'AI Group' was used as a trading name and informal descriptor of a number of entities including Ascenzo Industries Pty Ltd and Ascenzo Investments Pty Ltd.

[13] Breckenridge had, in his defence, denied that he was Trimont's CEO.

[14] Hartwig was the Chief Executive Officer of BCP, a firm that since 1997 had operated a mortgage and finance broking business. Hartwig has worked in the banking and finance industry for about 40 years. He had known Breckenridge since about 2007.

[15] Breckenridge recalled that he and Ascenzo had asked Hartwig to consider some options for funding the development of the Mernda site in late 2013 or early 2014. Hartwig recalled that the issue was first raised when he attended a meeting in March 2014. Nothing turns on whether Hartwig was requested to consider the issue before March 2014. Martin and Ben had met Hartwig for the first time in early 2013 at a Trimont networking function but had not had professional dealing with him. There was some dispute about when the meeting occurred ‑ whether it was in March 2014 as Breckenridge and Martin recalled or earlier in 2014 as Ascenzo and Hartwig recalled - but the issue was not material.

[16] Hartwig was not present for that part of the discussion.

[17] Ascenzo's evidence was that a meeting occurred in early October 2014 at which Breckenridge said they were close to obtaining a permit and should plan to enter into documentation to 'reflect the new arrangement'. He said that, at that meeting, Breckenridge outlined likely costs and projected profits and 'went through the documents on a whiteboard so that we were all on the same page'.

[18] Breckenridge and Ascenzo each submitted that that entry in the document supported the contention that the parties made an agreement about Ascenzo accessing some of the projected profit from the proposed development. That issue is considered further in Part IV.

[19] The notion of annually increasing land value is considered below.

[20] As discussed elsewhere, Coonwarra arranged for its commercial tenants to vacate the land in preparation of the development.

[21] The expressions 'First (or Second or Third) Loan' and 'First (or Second or Third) Loan Agreement' may be read interchangeably in these Reasons, as the context allows.

[22] The amount was within the range of costs estimated in the ADA.

[23] Such documentary evidence as there was in relation to the costs expended on the Mernda development was addressed separately by Breckenridge (see Part III).

[24] A 'turn‑key' or fund‑through development funding model is (as Hartwig explained it in his evidence) one in which the parties agree the 'final price' including for land value, payment for which is made when title is transferred. The parties enter into a development management agreement which usually includes a staged draw‑down process that funds the construction work up until the completion of the development, which is delivered ready‑to operate. The final payment represents the difference between the land payment, the building and development costs and the 'final end value' which represents the developer's profit. It is implicit in this model that the party undertaking the construction and development work will transfer title to the land, to the other party who pays for the work and becomes the ultimate owner of the completed development.

[25] Geoff Brady initially denied that that discussion had occurred but eventually accepted, when cross‑examined, that Breckenridge might have said those things. I accept that Breckenridge did say those things at the July 2015 informal meeting of the putative board members.

[26] The Shareholders Agreement was to take precedence over any inconsistent provisions of the company's constitution, and no party relied on any such provision.

[27] McEniry was not called as a witness. He had died before the trial of these proceedings was heard.

[28] The question of Trimont's financial difficulties is considered separately in Part III.

[29] The only documents produced were in respect of the proposal prepared by Hartwig.

[30] See further below on the question of the use to which the borrowed funds were in fact put.

[31] The so‑called 'advance agreements' are considered further in Part IV.

[32] Trimont's financial position more generally, is addressed in Part III/Annexure B.

[33] Taking into account the effect of the funds drawn under the First Loan.

[34] The evidence of what Breckenridge said to Hartwig was admitted for a non‑hearsay purpose only, pursuant to an order made under s 136 of the Evidence Act 2008 (Vic) (Evidence Act).

[35] The evidence about what Breckenridge said to Hartwig was admitted for non‑hearsay purpose only pursuant to an order made under s 136 of the Evidence Act.

[36] No response was identified in the parties' evidence or submissions.

[37] Hartwig's evidence was that Richard Minc had instructed him to make a payment to Minc Sallon (Laverton) Pty Ltd on account of Aida Nominees as repayment of the First Loan.

[38] As noted below, Breckenridge claims that he had intended that the agreement be made between the BidCo nominee and Trimont. That issue is discussed later.

[39] This evidence is considered further below.

[40] Geoff Brady denied that Mernda was discussed in detail or that Breckenridge told the board those things. However, Brady also said during cross‑examination, that he could not recall the February board meeting at all, and agreed that it was possible that the negotiations with UBS were raised during the meeting. That Breckenridge discussed the accumulation of WIP is broadly consistent with the documentary evidence. I accept that he did so.

[41] The proposition that Trimont was to pay Trimont Australia to undertake work for it under the ADA, is considered below.

[42] The third loan agreement provided for four tranches of loan funds to be made available, namely, tranche 1 - $2.5 million drawn down on 10 August 2015; tranche 2 - $2.7 million drawn down on 25 August 2015; tranche 3 - $1.8 million to be drawn down on 24 February 2016; and tranche 4 - $600,000 to be drawn down on 15 March 2016. The references to tranche 1 and tranche 2 (totalling $5.2 million) were to the loans that had already been drawn down under the August 2015 loan facility. Tranches 3 and 4 were references to further funds that would be made available under the third loan agreement.

[43] The respective roles of Breckenridge and Ascenzo are considered later where relevant to the issues for decision.

[44] As noted earlier, this proceeding was heard together with CornoNero's proceeding against Breckenridge and others. In that proceeding, Breckenridge and other defendants said by way of defence to claims that they had participated in the unauthorised payment of CornoNero's funds to Trimont creditors, that the payments were recorded in a 'loan account' between CornoNero and Trimont, the balance of which fluctuated at times in favour of Trimont and at times in favour of CornoNero. Breckenridge accepted that that 'loan account' became a line of credit extended in Trimont's favour. CornoNero denied that it was an authorised, consensual arrangement and denied that its board was informed of the 'lending' or payment of funds to Trimont.

[45] Geoff Brady denied that the Mernda Development Agreement was disclosed to the board. However, Breckenridge's detailed evidence about what discussed, was broadly consistent with the documentary evidence, including a marked‑up copy of the then‑draft MDA, that Breckenridge said he brought to, and discussed at the board meeting. I accept that he did so.

[46] The Coles Agreement for Lease specified 6 November 2017 as the date for substantial completion and 6 April 2018 for practical completion.

[47] There are questions of interpretation concerning the Development Guarantee which are dealt with in Part IV.

[48] Ben retained the cheque, which was produced in evidence.

[49] No description was assigned to the transfer.

[50] From which evidence I infer that Geoff Brady did not use any like expression, such as 'asset development agreement'.

[51] CornoNero and GJB contended, for the purposes of their own claims in their proceedings, that Trimont was insolvent, including as at 30 June 2015. In the CornoNero/GJB proceeding, I have concluded that Trimont was insolvent as at 30 June 2015, 1 August 2015 and 11 September 2015 (the relevant dates for the purposes of that proceeding).

[52] Breckenridge's role and responsibilities are discussed earlier.

[53] Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd [2017] VSCA 326; (2017) 54 VR 625, 668‑670 [119]‑[127].

[54] John Alexander's Clubs Pty Ltd v White City Tennis Club [2010] HCA 19; (2010) 241 CLR 1 (John Alexander's Clubs), 34 [87].

[55] Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 (Hospital Products), 147.

[56] News Limited v Australian Rugby Football League Limited [1996] FCAFC 870; (1996) 64 FCR 410 (News Limited), 538.

[57] News Limited [1996] FCAFC 870; (1996) 64 FCR 410, 539.

[58] News Limited (1996) 65 FCR 410, 540.

[59] United Dominions Corporation Limited v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 (United Dominions), 11.

[60] Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193, [89]‑[92] and the authorities there cited; Birtchnell v Equity Trustees, Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408.

[61] Coonwarra relied upon the whole of the ADA.

[62] Coonwarra's statement of claim at paragraphs [15], [20] and [24].

[63] Coonwarra also alleged that the loans were 'not commercially suitable' (First Loan) 'disadvantageous in their terms and not commercially viable vis a vis the development (Second Loan, Third Loan). That point was only faintly pursued.

[64] So much was apparent on the face of the terms sheet and cover letter.

[65] Subject to the submissions discussed below, the parties did not address the particular terms that should be found in the ADA, save for the alleged implied terms (good faith and the like).

[66] It was not submitted, and nor would I find, that that reference had the consequence that Trimont's discretion in the respect of the development was limited to pre‑construction steps. That reading would not accord with the whole of the agreement.

[67] Each party was also entitled to 'ongoing income' calculated as 10 percent on their respective contributions (costs and land). The source of the funds to pay that income was not identified. The income entitlement could be compounded by agreement and paid out at the end of the project.

[68] Expressed as it was at a high level, the agreement said only that Trimont's responsibility and discretion included the things set out. It did not thereby exclude from Trimont's responsibility and discretion, any other aspect of the development.

[69] United Dominions [1985] HCA 49; (1985) 157 CLR 1, 10.

[70] John Alexander's Clubs [2010] HCA 19; (2010) 241 CLR 1, 21 [44].

[71] United Dominions [1985] HCA 49; (1985) 157 CLR 1, 10.

[72] CornoNero made limited submissions about the agency point.

[73] The relationship between Trimont and CornoNero for the purposes of conduct under the ADA is considered elsewhere.

[74] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 (Mount Bruce Mining), 116 [47]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640, 656‑7 [35].

[75] See further below under the 'Advance Agreements'.

[76] The submissions were adopted by Ascenzo and Breckenridge.

[77] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 (Barker).

[78] Barker [2014] HCA 32; (2014) 253 CLR 169, 185 [21].

[79] Barker [2014] HCA 32; (2014) 253 CLR 169, 186‑7 [22]‑[23].

[80] Barker [2014] HCA 32; (2014) 253 CLR 169, 187 [24]‑[25].

[81] Barker [2014] HCA 32; (2014) 253 CLR 169, 188 [28].

[82] Breen v Williams (1996) 186 CLR 71, 103, quoting Byrne v Australian Airlines Ltd (1995) 185 CLR 410 (Byrne), 449.

[83] Barker [2014] HCA 32; (2014) 253 CLR 169, 188‑9 [28]‑[29] (citations omitted).

[84] Barker [2014] HCA 32; (2014) 253 CLR 169, 188 [27]‑[28].

[85] Barker [2014] HCA 32; (2014) 253 CLR 169, 189 [29], citing Byrne (1995) 185 CLR 410, 450‑3.

[86] Barker [2014] HCA 32; (2014) 253 CLR 169, 215 [113].

[87] Barker [2014] HCA 32; (2014) 253 CLR 169, 215‑6 [114].

[88] See for example, Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199, 272 [287] and the authorities there discussed.

[89] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228; Specialist Diagnostic Services Pty Ltd (formerly Symbion Pathology Pty Ltd) v Healthscope Ltd [2012] VSCA 175; (2012) 41 VR 1 (Specialist Diagnostic Services); Vakras v Cripps [2015] VSCA 193, [423].

[90] Primary Flooring Pty Ltd v Australian Comfort Group Pty Ltd [2019] VSC 104, [44].

[91] Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201, [106]‑[107] and the authorities there cited.

[92] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2004] VSC 477, [113], citing Breen v Williams (1996) 186 CLR 71, 103 (Gaudron and McHugh JJ). See Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 (Renard), approved in Alcatel Australia Ltd v Scarcella [1998] NSWSC 483; (1998) 44 NSWLR 349 (Alcatel), 369.

[93] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2004] VSC 477, [113], citing Byrne (1995) 185 CLR 410, 450.

[94] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2004] VSC 477, [116], citing Burger King Corporation v Hungry Jacks Pty Ltd [2001] NSWCA 187 and Byrne (1995) 185 CLR 410.

[95] Renard (1992) 26 NSWLR 234, 236.

[96] Far Horizons Pty Ltd v McDonald's Australia Ltd [2000] VSC 310; Bamco Villa Pty Ltd v Montedeen Pty Ltd [2001] VSC 192.

[97] Alcatel [1998] NSWSC 483; (1998) 44 NSWLR 349.

[98] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2004] VSC 477. As is noted below, no such term was found to have been implied in that case.

[99] The scope of the ADA and its relationship with the alleged fiduciary duties were relevant also to Ascenzo and Breckenridge, against whom claims of procurement of breach of fiduciary duty were made. Those issues are addressed elsewhere.

[100] It submitted that the fact that Coonwarra did not allege an agency relationship was not to the point, because the case 'had to be decided on the evidence'.

1. [101] Citing Breen v Williams (1996) 186 CLR 71, 92‑3.

[102] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228.

[103] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [4].

[104] See subsequently, Specialist Diagnostic [2012] VSCA 175; (2012) 41 VR 1, 20‑1, [86]‑[97].

[105] BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 (BP Refinery); Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39; (2022) 406 ALR 678 (Hardingham).

[106] I will return to the question of BCP's reliance on the 'Advance Agreements' in the course of considering the claims against BCP.

[107] That evidence is set out in Part II.

[108] Breckenridge's evidence about his costs estimates is set out in Part II. The evidence about the costs of the Mernda work more generally is addressed in Part III.

[109] Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365 (Olsson), 388 (Windeyer J), quoted in Spencer Constructions Pty Ltd v G & M Aldridge Pty Ltd [1997] FCA 681; (1997) 76 FCR 452, 465 (Northrop, Merkel and Goldberg JJ); ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (NSW) [2012] HCA 6; (2012) 245 CLR 338 (ALH Group), 346 [12], 349 [27] (French CJ, Crennan, Kiefel and Bell JJ).

[110] ALH Group [2012] HCA 6; (2012) 245 CLR 338, 349 [27] (French CJ, Crennan, Kiefel and Bell JJ).

[111] "[R]escission of the existing ... contract [is] essential to its novation": ALH Group [2012] HCA 6; (2012) 245 CLR 338, 349 [27] (French CJ, Crennan, Kiefel and Bell JJ).

[112] Vickery v Woods [1952] HCA 7; (1952) 85 CLR 336, 349-50 (Williams J, Dixon and Kitto JJ agreeing); Olsson [1969] HCA 3; (1969) 120 CLR 365, 388, 389 (Windeyer J); Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; (2006) 149 FCR 395 (Pacific Brands), [32].

[113] Civic Transport Services Pty Ltd v Wacher Pty Ltd [1999] VSC 290, [105] (Hansen J).

[114] ALH Group [2012] HCA 6; (2012) 245 CLR 338, 346 [12].

[115] ALH Group [2012] HCA 6; (2012) 245 CLR 338. See also Cheshire & Fifoot Law of Contract (11th Australian ed, 2017) [8.46]; Vickery v Woods [1952] HCA 7; (1952) 85 CLR 336, 345 (Dixon J, Kitto J agreeing): "Rescission and novation ultimately depend on intention". See also Porter [2021] VSC 572, [322] (Delany J); Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 (Fightvision), 491-2 [86] (Sheller, Stein and Giles JJA); Cook v Chas E Blanks Pty Ltd [1968] 3 NSWR 356, 357.

[116] Pacific Brands [2006] FCAFC 40; (2006) 149 FCR 395, 404 [32].

[117] ALH Group [2012] HCA 6; (2012) 245 CLR 338, 346, 350-1 [12], [32].

[118] McMahon v National Foods Milk Ltd [2009] VSCA 153; (2009) 25 VR 251 (McMahon), 283 [77] (Nettle J); George v Roach [1942] HCA 22; (1942) 67 CLR 253; Vickery v Woods [1952] HCA 7; (1952) 85 CLR 336, 345 (Dixon J); Williams v Frayne [1937] HCA 16; (1937) 58 CLR 710, 740 (McTiernan J); ALH Group [2012] HCA 6; (2012) 245 CLR 338, 346, 350-1 [12], [32] (French CJ, Crennan, Kiefel and Bell JJ). See also Sural SpA v Downer EDI Rail Pty Ltd [2007] NSWSC 1234, [13] (Einstein J).

[119] McMahon [2009] VSCA 153; (2009) 25 VR 251, 283 [77] (Nettle J) (citations omitted). See also Fightvision (1999) 47 NSWLR 473, 491-2 [86] (Sheller, Stein and Giles JJA), quoting Upper Hunter County District Council v Australian Chilling and Freezing Co Pty Ltd [1968] HCA 8; (1969) 118 CLR 429, 437 (Barwick CJ); Porter [2021] VSC 572, [322] (Delany J).

[120] Queensland Phosphate Pty Limited v Korda (in liq) [2017] VSCA 269, [37] and the authorities there cited.

[121] Hardingham [2022] HCA 39; (2022) 406 ALR 678 (Hardingham).

[122] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 688-9 [45], citations omitted. See also Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110, 11,117, cited in Vroon BV v Foster's Brewing Group Ltd [1994] VicRp 53; [1994] 2 VR 32, 82-3.

[123] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 687-8 [43] citations omitted.

[124] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 689 [47].

[125] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 685 [30] (per Kiefel CJ and Gageler J).

[126] Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, 525 [369].

[127] As set out in Part II and discussed further below.

[128] It is a separate question, 'What if any disclosures were made about Coonwarra's entitlement to payment?' which is not necessary to resolve for the purposes of the novation issue.

[129] Coonwarra alleged by its pleading that CornoNero was liable under the letter of 5 August 2016 but by closing submissions, did not press that claim.

[130] Coonwarra referred to Australia New Zealand Banking Group Limited v Frenmast Pty Ltd (2013) 282 CLR 351. In that case, a bank sought to enforce a guarantee purportedly executed by two directors of a company in accordance with s 127(1). While the case refers to the doctrines of ostensible authority and actual authority, it does so in a different context and concerns a different question to the one presently before the Court.

[131] Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, 503.

[132] NCR Australia Pty Ltd v Credit Connection Pty Ltd [2004] NSWSC 1.

[133] Crabtree-Vickers Pty Ltd Australian Direct Mail Advertising and Addressing Pty Ltd [1975] HCA 49; (1975) 133 CLR 72, 78.

[134] Tobin v Broadbent (1947) 75 CLR 378, 400 (Dixon J). See also Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2013] FCAFC 29; (2013) 296 ALR 465, [73] citing NMFM Property Pty Ltd v Citibank Ltd (No 10) [2000] FCA 1558; (2000) 107 FCR 270 (NMFM Property), [522].

[135] Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 157 (Mason CJ); NMFM Property [2000] FCA 1558; (2000) 107 FCR 270, 384 [511] (Lindgren J).

[136] NIML Ltd v Man Financial Australia Ltd (2006) 15 VR 156 (NIML), 162 [19] (Buchanan JA and Bongiorno AJA concurring), citing Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 200 (Dawson J): '[T]he basis of the doctrine of ostensible authority is estoppel'. See also Tobin v Broadbent (1947) 75 CLR 378, 387 (Latham CJ); Devren Pty Ltd v Old Coach Developments Pty Ltd [2015] QSC 53, [117].

[137] NIML (2006) 15 VR 156, 162 [19] (Buchanan JA and Bongiorno AJA concurring).

[138] See Wilh. Wilhelmsen Investments Pty Ltd v SSS Holdings Pty Ltd [2019] NSWCA 32, [76]-[79] and the authorities there cited.

[139] Flexirent Capital Pty Ltd v EBS Consulting Pty Ltd [2007] VSC 158, [203] (citations added).

[140] Tobin v Broadbent (1947) 75 CLR 378, 388-9 (Latham CJ).

[141] See Russo-Chinese Bank v Li Yau Sam [1910] AC 174, 184.

[142] Lysaght Bros & Co Ltd v Falk [1905] HCA 7; (1905) 2 CLR 421, 428.

[143] Overbroke Estates Ltd v Glencombe Properties Ltd [1974] 3 All ER 511, 516.

[144] AMB Generali Holding AG v SEB Trygg LIV Holding AB [2005] EWCA Civ 1237, [32].

[145] Clarey v Permanent Trustee Co Ltd [2005] VSCA 128, [123], citing Commonwealth v Verwayen (1990) 170 CLR 394, 443 and Giumelli v Giumelli (1999) 196 CLR 101, 123 [42].

[146] Thomas v Thomas [1842] EngR 260; (1842) 2 QB 851; Jones v Padavatton [1968] EWCA Civ 4; [1969] 1 WLR 328.

[147] Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, [12], [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40]; Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 (Electricity Generation Corporation); Mount Bruce Mining [2015] HCA 37; (2015) 256 CLR 104.

[148] Electricity Generation Corporation [2014] HCA 7; (2014) 251 CLR 640, 656-7 [35].

[149] Australian Broadcasting Commission v Australasian Performing Rights Association Ltd [1973] HCA 36; (1973) 129 CLR 99, (Australian Broadcasting Commission), 109; Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183 (Bank of Queensland), 19 [70]; Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420 (Guastalegname), 3 [12].

[150] Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 (Andar Transport), 433 [17]; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549 (Ankar v National Westminster Finance), 561; Chan v Cresdon [1989] HCA 63; (1989) 168 CLR 242, 256.

[151] See the discussion in the context of the misleading conduct claims.

[152] Northside Developments Pty Ltd v Register-General [1990] HCA 32; (1990) 170 CLR 146 (Northside Developments), 172.

[153] Meridian Global Funds Management Asia Ltd v Securities Commission [1995] UKPC 5; [1995] 2 AC 500 (Meridian)

[154] Beach Petroleum NL v Johnson (1993) 43 FCR 1, 30-1; Australian Kunquian International Energy Co Pty Ltd v Flash Lighting Company Ltd [2020] VSCA 239 (Kunqian), [148].

[155] See Wilh. Wilhelmsen Investments Pty Ltd v SSS Holdings Pty Ltd [2019] NSWCA 32, [76]-[79] and the authorities there cited.

[156] Lysaght Bros & Co Ltd v Falk [1905] HCA 7; (1905) 2 CLR 421, 428.

[157] Overbroke Estates Ltd v Glencombe Properties Ltd [1974] 3 All ER 511, 516.

[158] AMB Generali Holding AG v SEB Trygg LIV Holding AB [2005] EWCA Civ 1237, [32].

[159] Hoh v Ying Mui Pty Ltd [2019] VSCA 203, [335] and the authorities there cited.

[160] El Ajou v Dollar Holdings Pls [1993] EWCA Civ 4; [1994] 2 ALL ER 685, 695.

[161] See Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 127 ACSR 110 [1658]-[1662].

[162] Chickabo Pty Ltd v Zphere Pty Ltd [2019] VSC 73; (2019) 57 VR 406, 457.

[163] Commonwealth Bank of Australia v Kojic [2016] FCAFC 186, [96].

[164] Commonwealth Bank of Australia v Kojic [2016] FCAFC 186, [96].

[165] Anderson v Canacord Genuity Financial Ltd [2023] NSWCA 294 (Anderson), [246].

[166] Fensford Pty Ltd v Nour Pty Ltd; Vella v Nour Pty Ltd [2006] VSCA 118, [70]; Endresz v Whitehouse (1997) [1998] 3 VR 461, 482; Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) [1999] FCA 1820; [1999] 96 FCR 217, 228-229.

[167] Hoh v Ying Mui Pty Ltd [2019] VSCA 203 [335], [327].

[168] Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 658-659 (Sargent); Beach Petroleum NL v Johnson (1993) 43 FCR 1, 31 [22.34]; NIML Ltd v MAN Financial Australia Ltd (2006) 15 VR 156, 167-8 [38]-[40] (NIML); Kunqian [2020] VSCA 239, [148]; P Watts and FMB Reynolds, Bowstead & Reynold's on Agency (Sweet & Maxwell, 22nd ed, 2021) (Bowstead & Reynolds) [8-208]; G Dal Pont, Law of Agency (Lexis Nexis, 4th ed, 2020) [22.49].

[169] Bowstead and Reynolds [8-209]; Lewski v Commissioner of Taxation (2017) 254 FCAFC 14, 63 [141].

[170] Beach Petroleum NL v Johnson (1993) 43 FCR 1, 31 [22.34].; NIML (2006) 15 VR 156, 167-8 [38]-[40];

[171] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Northside Developments [1990] HCA 32; (1990) 170 CLR 146, 172.

[172] Lysaght Bros & Co Ltd v Falk (1905) 2 CLR 42; Combulk Pty Ltd v TNT Management Pty Ltd [1993] FCA 89; (1993) 41 FCR 59; Bowstead & Reynolds [80-47]; Midas Management v Equator Communications [2008] NSWSC 255, [55]-[59].

[173] Sargent [1974] HCA 40; (1974) 131 CLR 634, 658-659; See also NIML (2006) 15 VR 156, [39]; Left Bank Investments Pty Ltd v Ngunya Jarjum Aboriginal Corporation [2020] NSWCA 144, [101]

[174] Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 127 ACSR 110, [1660] cited in Anderson [2023] NSWCA 294, [235].

[175] Anderson [2023] NSWCA 294, [243]-[243], [247].

[176] Anderson [2023] NSWCA 294, [258]-[259]

[177] Anderson [2023] NSWCA 294, [258]-[259]

[178] Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, [473]-[474] cited in Anderson [2023] NSWCA 294, [258].

[179] Grimaldi v Chameleon Mining NL (No.2) [2012] FCAFC 6; (2012) 287 ALR 22 (Grimaldi), 89-90 [282]-[286]; Beach Petroleum NL v Johnson (1993) 43 FCR 1, 23-32 [22.15]-[22.35]; Kunqian [2020] VSCA 239, [148].

[180] Grimaldi [2012] FCAFC 6; (2012) 287 ALR 22, 89 [284].

[181] Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; [2016] AC 1, [89].

[182] All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Ltd (No 2) [2021] FCA 782; (2021) 154 ACSR 78 (All Class Insurance), 114 [165].

[183] Grimaldi [2012] FCAFC 6; (2012) 287 ALR 22, 89 [284].

[184] Grimaldi [2012] FCAFC 6; (2012) 287 ALR 22, 89 [284]; Kunqian [2020] VSCA 239, [148].

[185] Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, [473]-[474] cited in Anderson [2023] NSWCA 294, [258]; Anderson [2023] NSWCA 294, [252].

[186] Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23; [2016] AC 1, [89]; cited in Anderson [2023] NSWCA 294, [252].

[187] Anderson [2023] NSWCA 294, [253-[255].

[188] Kunqian [2020] VSCA 239, [148]

[189] Kunqian [2020] VSCA 239, [148]-[150] quoting Bilta (UK) Ltd (in liq) v Nazir [No 2] [2015] UKSC 23; [2016] AC 1 73 [208], agreeing with the conclusion of Patten LJ in Bilta (UK) Ltd (in liq) v Nazir [No 2] [2014] 1 Ch 52, 93 [34], [35].

[190] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 362 (Dixon J) (Briginshaw).

[191] Farah Constructions (2007) 230 CLR 89, 162 [170].

[192] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449, 450

[193] GP Holdings Pty Ltd v Voitin (2022) 69 VR 299, 321-2 [87]-[89]

[194] Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 362.

[195] Henderson v Queensland [2014] HCA 52; (2014) 255 CLR 1.

[196] GP Building Holdings Pty Ltd v Voitin (2022) 69 VR 299.

[197] GP Building Holdings Pty Ltd v Voitin (2022) 69 VR 299, 322 [89].

[198] Breen v Williams (1996) 186 CLR 71.

[199] Breen v Williams (1996) 186 CLR 71, 113, 135.

[200] Breen v Williams (1996) 186 CLR 71, 113, 135; Australian Securities Commission v AS Nominees Ltd & Ample Funds Ltd [1995] FCA 1663; (1995) 133 ALR 1, 39; Sutherland v Sutherland [1893] UKLawRpCh 95; [1893] 3 Ch 169.

[201] Chan v Zacharia (1984) CLR 178, 198.

[202] Chan v Zacharia (1984) CLR 178, 199.

[203] Chan v Zacharia (1984) CLR 178, 199.

[204] See the analysis in the context of the claims against BCP.

[205] These were the deposits described in Part II, to which the descriptions, 'Lygon St JV', ' Queens Pde JV' and 'Kanyon' were applied.

[206] GP Building Holding Pty Ltd v Voitin [2022] VSCA 210 (GP Building), [10]; Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 361 [259]. See also Farah Constructions (2007) 230 CLR 89, 140 [112].

[207] GP Building [2022] VSCA 210, [21].

[208] Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 359 [254]. See also Farah Constructions (2007) 230 CLR 89, 140 [113]

[209] Farah Constructions (2007) 230 CLR 89, 140-1 [112]; GP Building [2022] VSCA 210, [10], [21], [94].

[210] GP Building [2022] VSCA 210, [10], [21], [94].

[211] Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; (2007) 63 ACSR 557 (Baloglow), 594 [197]; Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920; (2008) 252 ALR 41 (Imobilari), 50 [27]; Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 363 [268]; Bell Group (No 3) [2012] WASCA 157; (2012) 44 WAR 1, 385 [2128].

[212] See Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 363 [268]-[269].

[213] Baloglow [2007] NSWCA 191; (2007) 63 ACSR 557, 591 [176].

[214] Imobilari [2008] FCA 1920; (2008) 252 ALR 41, 50 [27].

[215] Grimaldi v Chameleon Mining NL [2012] FCAFC 6; (2012) 200 FCR 296, 364 [275].

[216] Farah Constructions (2007) 230 CLR 89, 159 [161].

[217] Farah Constructions (2007) 230 CLR 89, 159 [161].

[218] Pittmore Pty Ltd v Chan [2002] NSWCA 344 (Pittmore), [193].

[219] Pittmore [2002] NSWCA 344, [186]-[195]

[220] Chickabo v Zphere [2019] VSC 73; (2019) 57 VR 406 (Chickabo), 451 [173].

[221] Pittmore [2020] NSWCA 344; (2020) 104 NSWLR 62, 95 [158]-[161].

[222] Pittmore [2020] NSWCA 344; (2020) 104 NSWLR 62, 95 [158]-[161] citing Australian Super Developments Pty Ltd v Marriner [2014] VSC 464, [301] (Sloss J).

[223] Pittmore [2020] NSWCA 344; (2020) 104 NSWLR 62, 95, [152], [176], [179].

[224] Australian Super Developments Pty Ltd v Marriner [2014] VSC 464 (Sloss J), [305] supported in Marriner v Australian Super Developments Pty Ltd [2016] VSCA, [69]-[72].

[225] Pittmore [2020] NSWCA 344, [191].

[226] Pittmore [2020] NSWCA 344, [164]-[169].

[227] Harstedt Pty Ltd v Tomanek [2018] VSCA 84; (2018) 55 VR 158, 175 [70].

[228] Chickabo [2019] VSC 73; (2019) 57 VR 406, 454 [188] (Sifris J); Farah Constructions (2007) 230 CLR 89, 162 [172], 164 [179]; Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609, [57], [106] (Leeming JA, Gleeson JA agreeing) (Hasler). See Zibara [2021] FCAFC 4; (2021) 283 FCR 18, 85 [254] (Derrington J).

[229] Farah Constructions (2007) 230 CLR 89, 162 [170], 163 [174] and 164 [180].

[230] Chickabo [2019] VSC 73; (2019) 57 VR 406, 454-6 [188]-[196]. See also Porter [2021] VSC 572, [583].

[231] Bell Group Ltd (No 3) [2012] WASCA 157; (2012) 44 WAR 1 cited in Chickabo [2019] VSC 73; (2019) 57 VR 406, 455 [192].

[232] Hasler [2014] NSWCA 266; (2014) 87 NSWLR 609, 635-6 [124].

[233] Hasler [2014] NSWCA 266; (2014) 87 NSWLR 609, 635-6 [124].

[234] See Zibara v Ultra Management (Sports) Pty Ltd [2021] FCAFC 4; (2021) 283 FCR 18 (Zibara), 50 [103], citing as examples Babcock and Brown DIF III Global Co-Investment Fund, LP v Babcock and Brown International Pty Limited (No 2) [2017] VSC 556, [45]-[46]; Argyle Building Services Pty Ltd v Franek [2020] VSCA 196, [58]; Re Punters Show Pty Limited [2019] NSWSC 1777; (2019) 141 ACSR 695 at [69]; Re Australian Worldwide Pty Ltd [2019] NSWSC 1475, [87]; AHRKalimpa Pty Ltd v Schmidt (No 3) [2019] VSC 197, [29]; Re Elsmore Resources Ltd [2016] NSWSC 856; (2016) 114 ACSR 297, [122]; Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405, [114]-[115] (Gleeson JA; Beazley P and Barrett JA agreeing); Cornerstone Property and Development Pty Ltd v Suellen Properties Pty Ltd [2014] QSC 6; [2015] 1 Qd R 75, [92]. See also CBRE (C) Pty Ltd v Daniel Thomas [2022] VSC 636, [12]; Elston Private Wealth Pty Ltd v Wilson Advisory and Stockbroking Ltd [2022] ACTSC 237, [457].

[235] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 31-2 [71]-[72] (Foresters).

[236] Zibara [2021] FCAFC 4; (2021) 283 FCR 18, 51 [106]

[237] Harstedt [2018] VSCA 84; (2018) 55 VR 158, [110].

[238] Harstedt [2018] VSCA 84; (2018) 55 VR 158, [116]; See also Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509, [246] (Baden).

[239] Harstedt [2018] VSCA 84; (2018) 55 VR 158, 186-7 [116]-[118] (citations in original).

[240] J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) 265 [13.39]; Thomson Reuters, Ford and Lee: The Law of Trusts (at 1 March 2017) [22.10140]. See also Re Earth Civil Australia Pty Ltd (in liq) [2021] NSWSC 966, [986] (Re Earth).

[241] See, eg, Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 1 WLR 1555; Karak Rubber Co Ltd v Burden (No 2) [1972] 1 WLR 602; Rowlandson v National Westminster Bank Ltd [1978] 1 WLR 798; Baden [1993] 1 WLR 509, [246].

[242] Balfron Trustees Ltd v Peterson [2001] IRLR 758, [21] (Laddie J). See also Re Earth [2021] NSWSC 966, [986]; Thomson Reuters, Ford and Lee: The Law of Trusts (at 1 March 2017) [22.10140].

[243] See, eg, Cochrane v Cochrane (1985) 3 NSWLR 403, 405 (Kearney J); Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269. See also W Gummow, 'Knowing Assistance' (2013) 87 Australian Law Journal 311, 319.

[244] Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 361 [259]. See also Nicholson v Morgan (No 3) (2013) 8 ASTLR 277, 292-4 [61]-[68] (Edelman J); Turner v O'Bryan-Turner [2021] NSWSC 5, [538] (Ward CJ in Eq) (Turner); Harstedt [2018] VSCA 84; (2018) 55 VR 158, [84].

[245] Farah Constructions (2007) 230 CLR 89, 160 [163]; Turner [2021] NSWSC 5, [538] (Ward CJ in Eq).

[246] Farah Constructions (2007) 230 CLR 89, 163 [174]; Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296; Pittmore Pty Ltd v Chan [2020] NSWCA 344; (2020) 104 NSWLR 62, [191].

[247] Baden [1993] 1 WLR 509.

[248] Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, 361 [261]. See also Belmont Finance Ltd v Williams Furniture (No 1) [1979] Ch 250, 267 (Buckley LJ); Turner [2021] NSWSC 5, [553] (Ward CJ in Eq). This passage was more recently cited by the Victorian Court of Appeal with approval in Harstedt [2018] VSCA 84; (2018) 55 VR 158, [86].

[249] [1975] HCA 8; (1975) 132 CLR 373, 398, 412-13 (Consul).

[250] Consul [1975] HCA 8; (1975) 132 CLR 373, 398 (Gibbs J).

[251] Farah Constructions (2007) 230 CLR 89, 163 [177].

[252] Farah Constructions (2007) 230 CLR 89, 163-4 [175]-[178]; Pittmore Pty Ltd v Chan [2020] NSWCA 344; (2020) 104 NSWLR 62, [192]; Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296 [259]-[262]. See also Harstedt [2018] VSCA 84; (2018) 55 VR 158, [87]; Turner [2021] NSWSC 5, [542] (Ward CJ in Eq); Re Earth [2021] NSWSC 966, [987]; Porter [2021] VSC 572, [582]; Consul [1975] HCA 8; (1975) 132 CLR 373, 412 (Stephen J; Barwick CJ agreeing). But see at 398: Gibbs J left open the possibility that constructive notice fitting the description of category (v) would suffice.

[253] See Turner [2021] NSWSC 5, [538], citing Grimaldi [2012] FCAFC 6; (2012) 200 FCR 296, [259]. See also Nicholson v Morgan (No 3) [2013] WASC 110, [61]-[68] (Edelman J); Overdean Developments Pty Ltd v Garslev Holdings Pty Ltd (No 3) [2021] NSWSC 1482, [714]; Foresters [2018] HCA 43; (2018) 265 CLR 1, [73] (Gageler J), cited in Zibara [2021] FCAFC 4; (2021) 283 FCR 18, 81 [240] (Derrington J).

[254] See Turner [2021] NSWSC 5, [538], citing Farah Constructions (2007) 230 CLR 89, 160 [163].

[255] Hasler [2014] NSWCA 266; (2014) 87 NSWLR 609, [131] (Leeming JA); Turner [2021] NSWSC 5, [544].

[256] Harstedt Pty Ltd v Tomanek [2018] VSCA 84; (2018) 55 VR 158.

[257] Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193, [181]-[188] (Kyrou, Hargrave and Emerton JJA) (citations omitted).

[258] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 37 [88].

[259] Michael Wilson & Partners v Nicholls (2011) 244 CLR 427, 457-8 [106].

[260] Competition and Consumer Act 2010 (Cth), sch 2 (Australian Consumer Law).

[261] Ascenzo submitted in closing that the evidence did not support the admission. However, no application was made to withdraw the admission and the parties had proceeded to trial on the basis that the fact was admitted.

[262] See Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, 318-319, [24]-[25].

[263] See for example, Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237 (Sunland Waterfront), [94]-[101].

[264] See for example, Sunland Waterfront [2013] VSCA 237, [94]-[101].

[265] Pancontinental Mining Ltd v Posgold Investments Pty Ltd [1994] FCA 983; (1994) 121 ALR 405, 414.

[266] See for George v Rockett [1990] HCA 26; (1990) 170 CLR 104.

[267] Watson v Foxman [1995] NSWCA 497; (1995) 49 NSWLR 315, 318-9.

[268] Kane's Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381, [125].

[269] The good faith element of Coonwarra's case was not well developed.

[270] Railway Commissioners for New South Wales v Orton [1922] HCA 16; (1922) 30 CLR 422; Universal Steam Navigation Co Ltd v James McKelvie & Co [1923] AC 492.

[271] Queensland Nickel Pty Ltd (in liq) v Queensland Nickel Sales Pty Ltd [2017] QSC 305; [2018] 3 Qd R 133 (Queensland Nickel), 138 [25] citing Montgomerie v United Kingdom Mutual Steamship Association [1891] UKLawRpKQB 7; [1891] 1 QB 370 (Montgomerie), 371.

[272] Stanley Yeung Kai Yung & Anor v Hong Kong and Shanghai Banking Corporation [1980] UKPC 9; [1981] AC 787, 795.

[273] Queensland Nickel [2017] QSC 305; [2018] 3 Qd R 133, 139 [26].

[274] Teheran‑Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 53, 59‑60, affirmed by the Court of Appeal in Teheran‑Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545.

[275] Australian Trade Commission v Goodman Fielder Industries Ltd [1992] FCA 307; (1992) 36 FCR 517, 521, quoted in Queensland Nickel [2017] QSC 305; [2018] 3 Qd R 133, 139 [28].

[276] Queensland Nickel [2017] QSC 305; [2018] 3 Qd R 133, 139 [27], citing Black v Smallwood [1966] HCA 2; (1966) 117 CLR 52, 56.

[277] Public Trustee v Taylor [1978] VicRp 31; [1978] VR 289, 293.

[278] See Cincotta v Russo [2019] NSWSC 272 (Cincotta), [32], and the authorities there cited.

[279] Lederberger v Mediterranean Olives Financial Pty Ltd [2012] VSCA 262, [19], and the authorities there cited.

[280] Mount Bruce Mining [2015] HCA 37; (2015) 256 CLR 104, [46].

[282] For the First Loan Agreement, Aida Nominees Pty Ltd as trustee for the Minc Family Trust; for the Second Loan Agreement, Bailey Gordon Hunter and C&N Hunter Super Pty Ltd as trustee for The Hunter Superannuation Fund; and for the Third Loan Agreement, Bailey Gordon Hunter and C&N Hunter Super Pty Ltd as trustee for The Hunter Superannuation Fund.

[284] Re Media, Entertainment & Arts Alliance; Ex parte Hoyts Corporation Pty Ltd [1993] HCA 40; (1993) 178 CLR 379, 386‑7.

[285] Highpoint Homemaker Centre (Vic) Pty Ltd v Sanstar Pty Ltd [1997] V ConvR 54‑564; Taylor v Dexta Corp Ltd (2006) 14 ANZ Insurance Cases 61‑712, [1], [66], [89].

[286] XL Insurance Co SE v BNY Trust Co of Australia Ltd [2019] NSWCA 215, [72], citing AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd (2010) 15 BPR 28, 199 [13].

[287] Beaufort Developments (NI) Ltd v Gilbert‑Ash NI Ltd [1998] UKHL 19; [1999] 1 AC 266, 273‑274.

[288] Breen v Williams (1996) 186 CLR 71, 102.

[289] BP Refinery (1977) 180 CLR 266, 283; Hardingham [2022] HCA 39; (2022) 406 ALR 678, 683 [18] and 705 [113].

[290] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 705-6 [115], [116] and [119].

[291] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 705 [114].

[292] Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286 (Regreen Asset Holdings), [80].

[293] ASC AWD Shipbuilder Pty Ltd v Ottoway Engineering Pty Ltd (2017) 129 SASR 122 (Ottoway Engineering), [2]‑[11], and the authorities there cited.

[294] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 705 [114].

[295] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 705 [114].

[296] Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190 (Grocon Constructors), [142].

[297] Grocon Constructors [2015] VSCA 190, [142].

[298] Sheehy v Nuix Pty Ltd [2023] FCA 56.

[299] Regreen Asset Holdings [2015] VSCA 286, [82].

[300] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 705[114].

[301] Ottoway Engineering (2017) 129 SASR 122, [5].

[302] Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, [28].

[303] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 702 [105].

[304] Hardingham [2022] HCA 39; (2022) 406 ALR 678, 702 [103]‑[105] (citations omitted).

[307] Accordingly if there was a breach in respect of this payment it may be that that no loss arose. This particular issue was not addressed.

[308] These were the deposits described in Part II, to which the descriptions, 'Lygon St JV', ' Queens Pde JV' and 'Kanyon' were applied.

[309] See for example Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55, [332].

[310] Primebroker Securities Ltd v Fortis Clearing Sydney Pty Ltd [2009] VSC 364, [72].

[311] Bannon v Nauru Phosphate Royalties Trust [2018] VSC 532, [101].

[312] The Trimont business was incorporated as Trimont Paving & Construction Co Pty Ltd. The name later changed to Trimont Pty Ltd.

[313] The figure in the Carrafa Report was 13,402,755. It appears to be in error. The figure in the table above is taken from the Management Accounts.

[314] Noting the reservations set out earlier in respect of the 2016 accounts.

[315] Noting the reservations set out earlier in respect of the 2016 accounts.

[316] Noting the reservations set out earlier in respect of the 2016 accounts.