Coyte & Anor v Norman & Anor; Centre Capital

Background facts

1. I will initially set out the facts that are primarily relevant to the Coyte proceedings. I have been assisted in this respect by a helpful chronology prepared by Mr Priestley and the chronology contained in Mr Afshar's closing submissions. Although some of these facts are disputed, I will not seek to resolve such disputes unless they have relevance to the outcome of the proceedings.
2. Mr Norman and Mr Coyte are both financial planners. In about 2001, Mr Norman was a co-founder of the Piccadilly Financial Group, which provided accounting and financial services to retail clients (Norman 22.10.14 [6]). Mr Coyte, who Mr Norman had known at high school, joined Piccadilly Financial Group as a client service trainee in 2002 or 2003 (Norman 22.10.14 [7]). Mr Coyte ceased employment with the Piccadilly Financial Group in 2004 and moved back to Newcastle (Norman 22.10.14 [8]). CCPL was incorporated in August 2004, as a vehicle through which Mr Coyte provided financial advisory services and was, it appears, the trustee of the Blooms Discretionary Trust (Coyte 10.12.14 [11]). Mr Coyte was CCPL's sole director and a business name "Centre Capital" was then registered. Mr Norman's evidence was that he was involved with establishing CCPL, while he was still engaged with the Piccadilly Financial Group. I do not consider it necessary to reach a finding as to that matter, although I note that Mr Norman did not then hold an interest in CCPL or the trust, and neither party suggested that course was taken to conceal any involvement of Mr Norman with CCPL from Piccadilly Financial Group. Mr Norman also gave evidence of several conversations in 2004 and 2005 (Norman 13.11.15 [7]-[9]). I do not accept his account of these conversations, by reason of the issues concerning the recollection of oral conversations that took place many years ago, and the issues affecting Mr Norman's credit specifically, to which I have referred above. I am also not persuaded by Mr Norman's evidence that there was discussion at this time of a "client base share" or a 2.5 times multiple, still less that any agreement was then formed as to whether Mr Coyte and Mr Norman would need to agree on any client list, as distinct from retaining their own clients as a matter of fact, if they were to separate their businesses in the future.
3. It is common ground that a heads of agreement was entered into by Mr Norman and Mr Coyte in early 2005 (Norman 13.11.15 [9]) although that agreement could not be located and was not in evidence. CCN was incorporated and Mr Coyte was appointed as a director and secretary of it in March 2005 (Norman 22.10.14 [24]-[25]) and the Centre Capital (Newcastle) Unit Trust was established in March 2005, with 200 units initially being held by CCPL, 100 units by United Nominees and 100 units by another adviser working in the business, Mr Clint Christoff. Mr Christoff's units in the Centre Capital (Newcastle) Unit Trust were subsequently redeemed in mid-2008 with the result that CCPL then held 200 units and United Nominees held 100 units in that Trust.
4. Mr Norman was appointed a director of CCPL on 30 May 2005 and on 31 May 2005 the Mutual Fund was established. The 700,000 units in the Mutual Fund were initially issued to a company associated with Mr Norman, Norman Investment Partners Pty Limited ("NIP") and a further 300,000 units in the Mutual Fund were later issued to Blooms (Norman 22.10.14 [15], [17]; Norman 13.11.15 [12]). It is common ground that the allocation of units in the Fund was subsequently changed to 750,000 units held by NIP and 250,000 units held by Blooms (Coyte 10.12.14 [25]). Mr Norman left the Piccadilly Financial Group in late 2005.
5. From late 2005 until 2008 Messrs Norman and Coyte provided financial planning services to their respective clients and received commissions or fees, whether from the clients or from product issuers, on an upfront basis or as trailing commissions referable to a percentage of either the amount of the original investment or the total value of the portfolio. Until early 2008, Messrs Coyte and Norman provided such services under an Australian financial services licence held by an entity known as PIS, and those services were provided under the Australian financial services licence of CCS from early 2008. The Centre Capital entities operated a separate single bank account and occupied office space at Belmont near Newcastle. Mr Christoff worked in the business as a client adviser, and other office staff, including Ms Bloomfield, provided support services. CCS was incorporated in December 2006, initially with Mr Scorer as its director and subsequently with Messrs Norman and Coyte as its directors. CCS held an Australian financial services licence under Chapter 7 of the Corporations Act. Mr Scorer provided broking and underwriting services to clients.
6. A new Heads of Agreement ("2007 HOA") (Ex C5, CB 1278) was signed and dated 1 July 2007 and superseded the 2005 version of that agreement. It is common ground that the primary purpose of the agreement was for the provision of financial advice and services (Coyte SOC [5]-[6]; Defence [5]-[6]). The 2007 HOA provided, inter alia, that it was proposed that each respective individual was to "retain their own business" and specified the process for termination of "this Joint Venture Agreement", namely that six months' notice was to be given to the other party and that "[e]ach person will retain their own clients" and, if one party wanted to sell his clients, then the other party had the first right of refusal. The 2007 HOA also referred to the "[r]ecognition of responsibilities outside normal advising duties", such that Mr Norman would be responsible for marketing, referral sources and lead generation and Mr Coyte would be responsible for office and business administration, although that reference was framed as a statement and not as an obligation. The 2007 HOA also provided that, with the exception of management fees, director fees or any other remuneration method agreed by the parties, the profit of the venture would be distributed "along the joint venture percentages detailed above".
7. The position as to "ownership" of clients reflected in the 2007 HOA is consistent with that stated by Mr Coyte in an email dated 17 December 2007 (Ex C6, CB 1628) to his and Mr Norman's insurance broker, to the effect that Messrs Norman and Coyte: "will also be authorised rep[resentative]s of Centre Capital Securities notwithstanding we are directors and therefore employees. The reason is a tax reason as we need to own our clients individually". Mr Norman appears to have received this email and did not then do anything to take issue with it, although he did not accept in cross-examination that the email was consistent with his understanding of the arrangements (T95-96).
8. Mr Norman accepted in cross-examination that his intention in entering the joint venture in 2005 was to preserve his clients and their revenue and for Mr Coyte to preserve his clients and his revenue and the "taxation position that we had going into it", although he subsequently qualified that position (T60). Mr Norman's evidence was also that his arrangements with Mr Coyte needed to adopt the same approach to clients as the arrangements made when Mr Norman left Piccadilly Financial Group. However, such a requirement would be satisfied by the approach of each adviser retaining his clients that is continued in the 2007 HOA, and did not require that an approach based on "client base share" for which the Norman Parties now contend should be adopted. There was no evidence of a transfer of clients by Mr Norman to any of CCPL, CCS or CCN or either of the trusts, and the balance sheets of those entities in evidence did not record a value for goodwill or other asset value that may have been referable to the clients, consistent with Messrs Norman and Coyte each retaining their own clients.
9. In January 2011, Mr Coyte advised Mr Norman that he intended to terminate the joint venture or at least that the parties should separate their businesses (Coyte 10.12.14 [77]-[78], Coyte 30.3.16 [75]). The parties agreed certain facts as to the termination of the joint venture between them, for the purposes of the proceedings, as follows: "The Coyte Parties contend that Coyte gave notice of termination of the Joint Venture in January 2011 in accordance with the JV Agreement. In the alternative, the Coyte Parties contend that Norman accepted that notice of termination of the Joint Venture was given to him in the period January 2011 to May 2011 and agreed to the termination of the Joint Venture. The Centre Capital Parties do not admit that notice was given but do not contend that any absence of notice affects the Coyte Parties' case concerning termination in any way. The parties' joint position is that notice should be accepted as having been given by Coyte in the period January 2011 to May 2011, but in any event, any late notice was accepted by Norman as having satisfied the notice requirements under the JV Agreement and the common intention was that the Joint Venture would be terminated. The Coyte Parties contend that the Joint Venture was terminated in accordance with the terms of the JV Agreement as at 30 June 2011. The Centre Capital Parties contend that it was terminated only in the respects set out in their written and oral submissions."
10. Notwithstanding the termination of the joint venture with effect from the end of June 2011, Mr Norman and Mr Coyte continued to work together for a further period, as I will note below, until Mr Coyte incorporated Shartru which acquired its own Australian financial services licence and thereafter commenced business in that entity, transferring many of the clients allocated to him at the Centre Capital business to that entity. I will address the circumstances of that transfer below.
11. Mr Coyte began working with a third party, Equiti Private Wealth, in May 2011 (Coyte 10.12.14 [79]) in anticipation of the termination of the joint venture. On 10 May 2011, following a conversation with Mr Norman, Mr Coyte sent an email (EX C5, CB1321) to Mr Satusky, who provided accounting services to CCPL and CCS, advising of a separation of the businesses of Messrs Norman and Coyte as follows: "As of 1st July Michael [Norman] and I are separating our businesses and the joint venture that we established through Centre Capital will be finished. As per our agreement we will both retain our respective clients. I will retain my clients and will continue to service them but in addition to this I will be taking an employed position as a Head of Advice with a growing financial planning company. I will be a representative of their AFSL and no longer operating under Centre Capital's licence. In regards to structure given my current set up with the Blooms discretionary trust which I originally ran the business through do I simply run the business of looking after my existing clients again through that structure? There will be revenue and expenses associated with this business. Also, need to keep in mind that I then distribute income to Blooms Investment Trust which is where I [have] losses due to negative gearing. I am assuming the employed position will have no alternative but to be with me personally. Is it possible to be contracted rather than employed?"
12. Mr Satusky responded on the same day indicating that: "If Blooms Discretionary owns your clients then you can continue using that entity to run your business." (Ex C5, CB 1321)
13. These emails are important contemporaneous records of the then position between the parties, at least as understood by Mr Coyte, and in particular record Mr Coyte's then understanding that the separation would take place on the basis that Messrs Coyte and Norman would each retain their existing clients.
14. On 25 May 2011, Mr Coyte sent a further email (Ex C5, CB 1323) to Mr Satusky and Mr Atra, which stated that: "Warren with my new arrangement;
15. Running my own business … Should we organise a meet with MN, you and I to discuss what needs to be done with Centre Capital?"
16. Mr Coyte's evidence is that he attempted, without success, to meet with Mr Norman in May 2011 (Coyte 10.12.14 [91]) and they met on 14 June 2011 to discuss his exit from the joint venture (Coyte 10.12.14 [92]). Mr Coyte's affidavit exhibits a file note of that meeting (Ex C5, CB 1325-1326) which again appears to be a contemporaneous record of the then arrangements, at least as understood by Mr Coyte, and records: "Transfer of clients. - Six months' notice (done in Jan) - Each person will retain their own clients. - If one party wants to sell the other has first right of refusal."
17. Mr Coyte in turn refers (Coyte 10.12.14 [93]) to a conversation with Mr Satusky, on 16 June 2011, concerning how the arrangement between himself, Mr Norman and Mr Scorer might run for the next six months, which contemplated that three bank accounts for CCS would be established referable to Mr Norman, Mr Coyte and Mr Scorer; CCS would distribute income to corporate vehicles associated with Mr Norman and Mr Coyte and to Mr Scorer's trust; Blooms and United Nominees would contribute to the costs of running the office; and there would be specified arrangements as to CCN and shares in OEG. Mr Coyte's account of that conversation is supported by a file note of that conversation (Ex C5, CB 1329) and is consistent with the fact that separate accounts known as the "R" and "B" accounts were subsequently established and monies deposited into them. Although Mr Satusky's evidence is that he remembers only a discussion concerning OEG shares at this time (Satusky 12.11.15 [11]), I am satisfied that the wider issues referred to in Mr Coyte's evidence and his file note were also discussed.
18. Mr Coyte also gives evidence of a meeting with Mr Norman and a telephone conversation with Mr Scorer to discuss these arrangements on 22 June 2011. Mr Coyte's file note of that meeting (Ex C5, CB 1330) records, in relation to clients, "transferred MN clients to MN from RC" (Ex C5, CB 1336) and contains a diagram that describes the flow of funds from clients to each of the entities, and also refers to the payment of costs by Mr Coyte. The file note records, in respect of Mr Scorer, that: "B[rendan] S[corer] HAS BUILT UP RELATIONSHIPS POTENTIALLY NOT IN RETAIL SPACE B[rendan] S[corer] WAGE $2K P[er] W[eek] (FIRST REVENUE AFTER COSTS) COSTS+ PROFIT SPLIT."
19. Mr Coyte's evidence (Coyte 10.12.14 [96]-[97]) is that the client lists of Messrs Norman and Coyte were discussed and marked up at a further meeting in 22 June 2011 and agreement was reached between Messrs Norman and Coyte as to which clients would go with each of them. Mr Coyte exhibited various client lists, described as "Agreed Client Lists", to his affidavit (for example, Ex C5, CB 1341-1362; Ex C8). Mr Norman generally denied that evidence and Mr Priestley submitted that there is no reliable basis to find that these documents were given to Mr Norman on 22 June 2011, with the possible exception of Exhibit C8, which Mr Norman had conceded in cross-examination might have been given to him (T646). It seems to me that the cross-examination of Mr Coyte confirms that at least some of those documents were not produced or marked at that meeting since they were dated subsequent to that meeting (T518; T521).
20. Mr Priestley also submits that the file notes relating to this meeting do not record any lists being produced or discussed or any agreement being reached as to which clients would go to which adviser. Notwithstanding the vigour with which Mr Coyte was cross-examined as to this meeting, it seems to me that little ultimately turns on whether and to what extent client lists were agreed at this meeting, because the terms of the 2007 HOA provided for Messrs Norman and Coyte to retain their respective clients on termination of the joint venture, and who were clients of each of them is a matter that can be determined objectively rather than by any further agreement between them. No doubt, the practical implementation of the termination of the joint venture would have been facilitated if Messrs Coyte and Norman could agree that question between themselves, but the client retention contemplated by that agreement did not depend upon any agreement by Mr Norman that a person was a client of Mr Coyte, where that was the fact, or vice versa. That is a matter of considerable significance, because the Norman Parties' case is, in substance, that Mr Norman had not agreed that any particular clients were to be transferred to Mr Coyte, and no substantial attempt was made to establish that the clients that were transferred to Mr Coyte and Shartru were not, objectively, Mr Coyte's clients.
21. As Mr Priestley points out, Mr Coyte accepted that it was noted at this meeting that the dollar value of funds under management leaving with him was approximately $13,000 per month, and this broadly correlates with the figure that Mr Norman says was discussed at a further meeting which Mr Norman says occurred on 27 June 2011, to which I will refer below. There may be a question as to whether the two figures include all revenue, but a correlation between them does not, in any event, advance Mr Norman's claim that agreement was reached at this point that Mr Coyte would take a 25% share of client revenue rather than taking his clients and the revenue derived from his clients as the 2007 HOA provided.
22. On 22 June 2011, Mr Coyte sent Mr Satusky an email that was copied to Mr Norman (Ex C5, CB 1363) which stated: "As discussed recently with Michael [Norman] he has come up with the following for the CCN shares and mutual fund units … The value of the CC Mutual fund units get valued from a practical perspective this will include … [Mr Norman] said that I effectively sell my units for the value now which will include a cash value now."
23. Mr Coyte's evidence is that, after either the 14 June 2011 or 22 June 2011 meeting, Messrs Norman and Coyte went to the Belmont Golf Club and Mr Coyte suggested to Mr Norman that Mr Norman "… should look to sell your clients to Clint [Christoff] and myself on some sort of vendor finance arrangement" (Coyte 10.12.14 [109]). Mr Norman did not take up that suggestion.
24. On 27 June 2011, Mr Satusky sent an email to Mr Coyte (Ex C5, CB 1366) which stated that Mr Satusky had: "Spoke[n] to Michael [Norman] and he would still like for CCN to hold [OEG] shares in a nominee arrangement for each trust. We can also look at adjusting unit holding from 1/7/11 to 1/3 each". Despite this email, Mr Norman denied in cross-examination that he had suggested that the OEG shares be held by CCN in trust for each of the parties (T254). I do not accept Mr Norman's evidence in that respect. However, it does not follow from the fact that Mr Norman had made that suggestion that, as the Coyte Parties submit, the parties had agreed that CCN would hold the OEG shares on trust for each of Messrs Coyte, Norman and Scorer, or their nominees. That email also suggested Mr Coyte attend the accountant's offices for a meeting that afternoon.
25. The Norman Parties rely on a meeting held on 27 June 2011 and on the minutes of a board meeting of 27 June 2011 (Ex N3, CB 511) as giving rise to the "Further Agreement" on which CCPL and CCS rely in their Cross-Claim. I will address the evidence as to those matters in dealing with the claim as to the "Further Agreement" below.
26. Separate accounts to record revenue of Mr Coyte's and Mr Norman's clients, the R and B accounts, were established on or about 28 June 2011 (Ex N5, CB 1206, 1213). Mr Norman was aware of that process since he was a signatory to both those accounts.
27. By email dated 29 June 2011 (Ex C5, CB 1387), Mr Coyte advised Mr Morabito, a solicitor who was acting for CCPL and CCS, and Mr Satusky of his understanding of the separation arrangements, referring to a discussion with Mr Satusky and Mr Norman on 27 June 2011. The Coyte Parties rely on that email to support their claims under the pleaded "Termination Agreement" and I will largely address that email in dealing with those claims below. I should note, at this point, that that email also referred to arrangements that would apply between Mr Norman and Mr Coyte until the end of the calendar year, 2011, unless mutually agreed otherwise, which included that: "A separate bank account will be established that will direct [Coyte] revenue to necessary trading vehicle." That email also noted that the parties needed to decide upon arrangements for the continuation of the professional indemnity policy and also referred to arrangements to share expenses. That email does not refer to the basis upon which the clients of Messrs Norman and Coyte would be split, or clients would be transferred out of the Centre Capital business, although that would not be surprising where the 2007 HOA provided for that position.
28. A facsimile to "Macquarie Wrap" dated 29 June 2011 instructed entities associated with Macquarie Group to transfer clients under Mr Norman's adviser codes on the one hand and Mr Coyte's and Mr Christoff's adviser codes on the other to separate dealer codes and pay commissions to separate accounts (Ex C2; CB 1352-1356; Ex C3).
29. Mr Coyte ceased being a director of CCPL on 30 June 2011 (Norman 22.10.14 [44], Norman 13.11.15 [5], Coyte 10.12.14 [108]). At about this time, Ms Bloomfield transferred clients of Mr Norman and Mr Coyte to the relevant advisers (Bloomfield 17.11.14 [19]). Her evidence was that she had received a bundle of client lists from Mr Norman and Mr Coyte and was instructed to effect the changes to allocate clients to each of them in accordance with those lists (Bloomfield [18]-[19]). I have referred to Ms Bloomfield's evidence above and, on balance, I accept her evidence in this respect. This step is a further significant indication of the parties' then understanding of the separation arrangements.
30. On 18 August 2011, Mr Coyte sent an email to Mr Satusky and Mr Morabito following up on the preparation of a proposed separation agreement (Ex C5, CB 1392), which was never prepared.
31. On 20 December 2011, Mr Atra sent an email to Mr Coyte dealing with income and expenses for CCS and the Fund for the September 2011 quarter (Coyte 10.12.14 [150]; Ex C5, CB 1517) which was based on an income split of 75%/25% in favour of Mr Norman and Mr Coyte respectively and an expense split of 50%/50%. It was apparent from Mr Atra's cross-examination that the approach adopted in this email was derived from instructions that he had been given by Mr Norman. The email emphasised the commercial consequence of the agreement which the Norman Parties claim that Mr Coyte had reached with Mr Norman, when the joint venture was terminated, such that he would receive a quarter of the income and bear half of the expenses. As will emerge below, I do not accept that such an agreement had been reached.
32. Mr Coyte's evidence is that he spoke to Mr Atra after he received that email (Coyte 10.12.14 [151]) and he then emailed a response to Mr Atra's email, on the same day, noting that: "Buddy this is so far off the mark it is not funny. I have attached the actual rec[onciliation] which is nearly all but done for your info[rmation]. The income is not divided according to [the] split you have suggested. My income is mine and [Mr Norman's] is his." (Ex C5, CB 1517)
33. Mr Coyte's evidence (Coyte 30.3.16 [58]) is that, after receiving the email from Mr Atra, he also called Mr Norman and said: "my clients were my clients. Buddy is preparing the accounts based on incorrect information …".
34. Mr Coyte's evidence (Coyte 30.3.16 [42]) is also that, on 22 December 2011, he had a further conversation with Mr Norman to the effect that: "the reconciliation that the accountants have sent is incorrect. We have divided the clients along ownership and my clients are my clients and your clients are yours". Mr Coyte subsequently maintained that position in several subsequent communications. Mr Coyte's evidence (Coyte 10.12.14 [152]) is that, on 4 January 2012, he had a conversation with Mr Norman, in which he said that: "My clients are mine. We agreed on how those clients are to be separated. We also agreed how the expenses were to be apportioned". Mr Coyte also refers to a conversation between them on that date in his evidence in reply (Coyte 30.3.16 [43]).
35. I pause to note that, while I have addressed the question of Mr Coyte's credit above, the basis on which clients were to be allocated on termination of the joint venture was established by the 2007 HOA, unless that agreement was varied by a further agreement between Mr Norman and Mr Coyte as the Norman Parties contend. The parties' agreement as to that matter does not depend on either establishing that they later reasserted that position, although subsequent conduct may be relevant to establishing the existence or non-existence of the oral variation for which the Norman Parties contend.
36. By email dated 13 February 2012, Mr Coyte emailed Mr Atra, with copies to Mr Norman, Mr Satusky and Mr Mazzoni (who had by then began to assist Mr Norman), setting out his understanding of the terms on which the current arrangement that had been in place since 1 July 2011 would continue. The Coyte Parties rely on that email for their claim under the "Collaborative", said to be embodied in that email, and I will address that email in dealing with that claim below.
37. There were references in May 2012 and June 2012 to Mr Coyte's intention to commence business in a new entity which would hold its own Australian financial services licence (Ex C6, CB 1765-1766). Mr Coyte gives evidence of a meeting between himself and Messrs Norman, Mazzoni, Satusky and Atra on 30 March 2012 or 10 May 2012 (Coyte 10.12.14 [161]) at which he indicated concerns as to Mr Norman's behaviour and handed over a document recording his "issues" with Mr Norman (Ex C5, CB 1534).
38. On 2 June 2012, Mr Coyte emailed Mr Mazzoni reconciliations for the year ending June 2012 and other documents (Ex C5, CB 1401) and, on 3 July 2012, Mr Coyte sent another email to Messrs Mazzoni, Satusky and Atra attaching worksheets and reconciliations (Ex C5, CB 1405) which claimed an amount of $24,992.38 was payable to Blooms. That claim is pursued in these proceedings.
39. Mr Norman gave evidence, in his affidavit, of a meeting on 5 June 2012 at the office of Messrs Satusky and Atra in Sydney and also relied on minutes of a purported meeting on that date. In cross-examination, Mr Norman varied that evidence to say that he thought the meeting at the accountant's offices took place a week before, and in late May or early June 2012 (T274). Mr Coyte recalls that a meeting took place earlier in June 2012, although there is disagreement as to what took place at that meeting. I am not persuaded that Mr Norman attended the meeting at Messrs Satusky's and Atra's office, where his phone records indicate he was not in Sydney on that date. There is also an issue, which the evidence is not sufficient to resolve, as to the date of creation of those minutes, and as to whether an amount referred to in those minutes was paid by the Centre Capital entities to Mr Coyte as a loan. Although I recognise that Mr Atra's evidence provides some support for the latter proposition, I do not understand the relief sought to address that amount and it is not necessary to determine that issue.
40. On 22 June 2012, Mr Norman removed Mr Coyte as a director of CCS (Coyte 10.12.14 [127]) and he was also removed as signatory of the bank accounts at about this time. Mr Mazzoni wrote to Mr Coyte on that date advising that: "Further to this morning's declined request on behalf of Michael Norman to transfer $32,136 from the Centre Capital Portfolio Account to Centre Capital Mutual Account, Michael Norman as sole shareholder of Centre Capital Securities Pty Ltd feels it has become necessary to give Notice Terminating your Directorship with immediate effect as per the Attached Minutes of meeting of shareholders". (The document attached to that email does not correspond to the manner in which it is described in the email) (Ex N3, CB 707) The explanation of the reason for Mr Coyte's removal as a director of CCS in that email is not consistent with Mr Norman's affidavit evidence of the reasons that he removed Mr Coyte as a director of the companies, namely that he removed Mr Coyte as a director of the companies because of his "poor conduct and management" and because Mr Coyte had made unauthorised payments to Mr Scorer and Mr Coyte and because of other "unprofessional conduct" (Norman 13.11.15 [25]).
41. Also on 22 June 2012, Mr Coyte wrote to Macquarie Bank requesting that it implement a "temporary freeze" on the payment of commissions for his advice account (Ex N3, CB 710). Mr Norman's evidence is that that email was sent without his authority (Norman 13.11.15 [158]). Given the findings that I reach below, there was no requirement for Mr Norman's authority for that email, since it related to commissions in respect of clients that were, in fact, Mr Coyte's clients and were, by the terms of the 2007 HOA, allocated to Mr Coyte on termination of the joint venture.
42. On 5 July 2012, Mr Coyte sent emails to his clients seeking their authority to transfer their accounts with him to Shartru (Ex N4, 865). Mr Coyte informed those clients of his intention to join Shartru and those clients executed authorities for their affairs to be transferred to Shartru (CB 1419-1503). An issue was raised in Mr Coyte's cross-examination as to whether aspects of Mr Coyte's approach to his clients were misleading, and Mr Priestley submitted that the reference to a "change of name" in the title of an earlier email to Mr Coyte's clients was misleading. However, the text of the email made clear that Mr Norman and Mr Coyte were separating their businesses and that Mr Coyte's two administrative staff, Ms Bloomfield and Ms Bunting, were embarking upon a "new venture" under the name Shartru. It may be that the reference to a change should be understood as a change of name of Mr Coyte's business, and not a change of name of Centre Capital's or Mr Norman's business (Ex N4, CB 868ff) and, even if that is not the case, the email made clear what was occurring. A further email dated September 2012 to clients also made clear that the "new name" related to the new entity, Shartru (Ex N4, CB 869).
43. On 26 July 2012, an authority for the transfer of Centre Capital's XPlan user data, recording client information, to Shartru was sent to IRESS Market Technology, purportedly signed by Mr Norman (Ex N3, 735). Mr Norman's evidence is that he did not authorise that transfer (Norman 13.11.15 [174]). However, the evidence as to this issue generally is somewhat unclear, since it appears to have been contemplated that Shartru would provide services to Centre Capital, and the provision of user data to Shartru would have been necessary for it to do so. Correspondence relating to the transfer of client information from the Centre Capital XPlan site to Shartru was also copied by email to Mr Norman, although he denies that he received it, and there is evidence that Mr Norman generally did not respond to email communications. Also on 26 July 2012 and 30 July 2012, client transfer authorities were sent to Macquarie Bank and MLC for the transfer of clients of Mr Coyte to Shartru, signed by Mr Coyte and purportedly signed by Mr Norman; Mr Norman denies that he signed those documents (Ex N3, CB 746; Norman 13.11.15 [182]-[183], [187]).
44. In early July 2012, Mr Coyte instructed administrative staff to prepare a reconciliation of Centre Capital's accounts and expenses for the financial year 2012 and he emailed that reconciliation to Mr Mazzoni, and his evidence is that he provided that reconciliation to both Mr Norman and Mr Mazzoni (Coyte 10.12.14 [121]-[122]; Ex C5, CB 1405-1418).
45. On 20 August 2012, a member of Centre Capital's administrative staff sent an email to Australian Executor Trustees attaching change of adviser information for Mr Coyte; Mr Norman's evidence is that he and Mr Coyte had not agreed on the split of the Centre Capital client base at that time (and, so far as Mr Norman's evidence goes, he appears never to have agreed to the client split) (Norman 13.11.15 [188]; Ex N3, CB 771). Mr Norman's position here again highlights a substantial difficulty inherent in the structure of the Norman Parties' case, so far as that case is that Mr Coyte would never take advantage of the allocation of his clients to him on termination of the joint venture, as contemplated by the 2007 HOA, so long as Mr Norman did not agree who those clients were. I do not accept that proposition, so far as the identity of those clients is a question of objective fact and not a matter that requires agreement by Mr Norman.
46. On 24 August 2012, Mr Coyte sent another reconciliation to Mr Mazzoni (Ex C5, CB 1504) which claimed a payment of $8,202 referable to trading performance for July 2012. Mr Coyte subsequently required payment of several further amounts that were claimed to be outstanding by email dated 10 September 2012 (Ex C5, CB 1505).
47. On 25 September 2012, Mr Satusky sent Mr Coyte an email reflecting Mr Norman's understanding of how the valuation of the client base would be calculated under the Further Agreement for which the Norman Parties contend (Coyte 10.12.14 [163]; Ex C5, CB 1540-1541). That email depended on Mr Norman's instructions as to that agreement and, as will emerge below, I do not accept that such an agreement was established. On 30 September 2012, Mr Coyte sent Messrs Norman and Mazzoni another reconciliation for the quarter ended 30 September 2012 (Ex C5, CB 1506-1515) which claimed an amount of $18,492.35 as owed to Mr Coyte for that quarter.
48. Despite the difficulties that by then existed in their business relationship, it appears that, in the latter part of 2012, Messrs Norman and Coyte entered into a form of cost sharing arrangement, under which the Centre Capital Parties agreed to share back office costs with Shartru. That agreement appears to be reflected in an email dated 4 October 2012 from Mr Mazzoni to Mr Coyte (Ex C5, CB 1516) which stated that: "Michael [Norman] will be available early next week to sort out the Office service agreement. He has asked me to pass onto you that in principle he has no objection to the base plan for a front office service and what we are currently doing is working our way through the various other costs to reduce duplication … eg. XPLan, telephony and internet services".
49. There is a further dispute between the parties as to the manner in which client records were uploaded to XPlan and as to access issues which appear to have affected the Centre Capital parties for a short period. That issue is incapable of affecting the outcome of these proceedings, if (as I have held) Mr Coyte's rights to retain his clients arose from the 2007 HOA, and there is no evidence to support any separate claim for damages in this respect. I therefore do not consider it necessary to determine that dispute.
50. On 22 October 2012 and 20 February 2013, Mr Atra sent Mr Coyte two invoices setting out amounts claimed by the Centre Capital Parties (Atra 12.11.15, [9C]-[11]). Mr Atra accepted in cross-examination (T351, 353) that he prepared those invoices based on reconciliations that he had prepared which were in turn based on figures "roughed out" by Mr Norman. The invoices do not establish the correctness of the approach reflected in them.

Whether the joint venture agreement was terminated and allocation of clients on termination

1. There was some common ground between the parties as to the issues that arise in the proceedings. The parties agreed that the first issue in the Coyte Proceedings was whether the 2007 HOA was terminated by agreement. Mr Coyte contends, and Mr Norman denies (Coyte SOC [9]; Defence [9]) that, on 29 June 2011, the 2007 HOA was terminated by mutual consent of Mr Coyte and Mr Norman and in accordance with its terms. I have referred in paragraph 28 above to the parties' agreement as to aspects of that termination. The parties were in disagreement as to whether a further issue arose as to whether the termination provisions set out in the 2007 HOA governed the termination of the joint venture between Mr Norman and Mr Coyte, in particular, as it related to their clients and their income.
2. It was common ground that, in construing a written contract, the court should look to its objective background, including its genesis and aim, and the common assumptions of the parties: DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429; Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 185 ALR 152 at [11]. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], a unanimous High Court observed that: "This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." [Citations omitted]
3. That approach was confirmed in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 at [35] where French CJ, Hayne, Crennan and Kiefel JJ observed that (citations omitted): "[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'." The High Court also reviewed the principles of construction in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 325 ALR 188 (at [46]-[52], [59]) and I proceed on the basis that construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances.

Whether the pleaded "Termination Agreement" was entered into

1. Paragraph 9 of the Coyte Parties' Statement of Claim pleads that a term of the Termination Agreement was that Mr Coyte would sell his "stake" or unitholding in the Mutual Fund to Mr Norman for a value agreed at $17,369. The parties identified a further issue as to whether a further "Termination Agreement" for which the Coyte Parties contend was entered in the terms pleaded or at all; and whether, if an agreement in accordance with the "Termination Agreement" was reached with respect to the value of Mr Coyte's interest in the Mutual Fund, the dollar value of that interest was agreed and there was an agreement that that interest be sold to Mr Norman (Coyte SOC [9]).
2. This issue largely turns upon whether a separate "Termination Agreement", beyond the provisions for termination of the joint venture in the 2007 HOA, arose from earlier conversations, the outcome of which Mr Coyte summarised in his email dated 29 June 2011 (Ex C5, CB 1387) to which I referred in paragraph 45 above. By that email, Mr Coyte advised Mr Morabito, a solicitor acting for CCPL and CCS, and Mr Satusky of his understanding of the separation arrangements, referring to a discussion with Mr Satusky and Mr Norman on 27 June 2011 and recording that the arrangements would be documented by Mr Morabito as indicated by Mr Norman, although that did not in fact occur. Mr Coyte's evidence is that his email dated 29 June 2011 summarised an agreement reached at a meeting on 22 June 2011 between Messrs Norman, Coyte and Scorer to provide financial advice and services "in concert" until the end of the 2011 calendar year. That email also noted that Mr Coyte would be selling his stake in the Mutual Fund to Mr Norman for the market value of the cash, the value of the holding/loans to CCN or CCS and the value of assets including equipment, and that account would need to be taken for future GST liabilities and a $50,000 fee from OEG shortly to be received by CCN. The email stated that Mr Coyte would resign as a director from CCS and CCN would hold the parties' respective shares in OEG "on behalf of our nominated vehicle" and, after the shares come out of escrow, the individual "can decide what to do with the shares without any detrimental effect to the other parties be it CGT or the like".
3. That email also referred to an "agreement with Mr Scorer" set out in an email dated 24 June 2011 from Mr Scorer to Mr Coyte, which appeared below, although noting that Mr Norman was to discuss the wage component of that agreement with Mr Scorer. Mr Scorer's email dated 24 June 2011 to Mr Coyte in turn set out his understanding of the "[g]o forward" of CCN as at 1 July 2011 which included that: "After expenses, [Mr Scorer] gets $2,000 per week plus GST (ie the first $104,000 p.a. plus GST of income) to be taken by way of submitting a monthly tax invoice with his ABN, (subject to having sufficient funds in the bank account). This is his income not a loan … After all expenses, [Mr Scorer's] $104,000 p.a. (plus GST), [Mr Scorer] (or his nominated entity) [Mr Coyte] (or his nominated entity) and [Mr Norman] (or his nominated entity) share the balance whether it be cash, shares, options etc equally (one-third each)."

Whether the "Collaborative" was entered into

1. The parties also identified a further issue as to whether an agreement to which Mr Coyte refers as the "Collaborative" was entered into in the terms pleaded or at all (Coyte SOC [14]). That agreement is alleged to have, broadly, the effect that the Coyte Parties would be paid a share of client revenue collected by the Centre Capital business although Mr Coyte no longer held a unitholding or shareholding in the Group. The Coyte Parties plead, and the Norman Parties deny, that, by email from Mr Coyte to Mr Norman dated 13 February 2013 (which must refer to an email dated 13 February 2012 (Ex C5, CB 1398)), an arrangement was entered into between them by which they would continue to provide financial advice and services in concert (Coyte SOC [14]; Defence [14]). The Coyte Parties also plead, and the Norman Parties deny, that it was a fundamental term of the Collaborative that payments for trading performances would be made to Mr Coyte on a quarterly basis and that claim is also denied by Mr Norman (Coyte SOC [15]; Defence [15]). The Coyte Parties claim, and the Norman Parties deny, that Mr Coyte is entitled to payment of approximately $24,992 for the financial year ended 2012; of $8,202 for the quarter ended July 2012; of $18,492 for August and September 2012 and of $8,277.99 being commission for One10 finance between May 2012 and December 2012, totalling $59,963.99.
2. As I noted above, by email dated 13 February 2012, Mr Coyte advised Mr Atra, with copies to Mr Norman, Mr Satusky and Mr Mazzoni (who had by then began to assist Mr Norman), of his understanding of the terms on which the arrangement that had been in place since 1 July 2011 would continue, as follows: "We are extending our current arrangement that we have had in place since 1 July for the immediate future. That is as follows: ● My revenue is my revenue. ● [Mr Norman's] is his revenue. ● We are sharing agreed expenses. ● Respective share of profit is then distributed to respective trusts. The old formula [f]or profit sharing arrangement is no longer in place and that ceased on 30 June 2011. That joint venture is finished." [emphasis in original].
3. Mr Coyte attached a spreadsheet which he stated was being used to divide revenue and costs to each person and noted that Mr Norman had mentioned that Mr Norman may collapse the Mutual Fund which was currently being used to pay for expenses and was where Mr Norman's "profit" was paid before he distributed it to his trust (Ex C5, CB 1398). Mr Coyte also noted that he no longer had a shareholding in CCS but had not received any consideration for the cash on balance sheet that would equate to his share. That email was, on its face, sent to Mr Norman (although, as I noted above, there is evidence that Mr Norman prefers not to receive email communications) and also to Messrs Atra, Satusky and Mazzoni, who do communicate by email. There is no contemporaneous record of any objection by Mr Norman, or by Mr Mazzoni on his behalf, to that record of the terms of the arrangement.

The Coyte Parties' unconscionability and misleading conduct claims

1. Paragraph 20 of the Coyte Parties' Statement of Claim makes alternative claims in respect of unconscionable conduct and misleading or deceptive conduct. The Coyte Parties pleaded that the relevant conduct amounted to conduct that was in all the circumstances unconscionable, pursuant to s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth), which prohibits unconscionable conduct in connection with the supply or possible supply of financial services to a person. In my view, the claim for unconscionability is misconceived, since the relevant conduct related to dealings between Mr Coyte and Mr Norman inter se, and did not have any material connection with the supply or possible supply of financial services by either of them or the respective corporate entities: Avoca Consultants Pty Ltd v Millennium3 Financial Services Pty Ltd [2009] FCA 883; (2009) 73 ACSR 307 at [232]. That claim therefore fails.
2. The claim for misleading or deceptive conduct was not addressed by substantive submissions and I assume it is not pressed. If it were pressed, it cannot be fairly determined where it has not been articulated in a manner that would allow the Norman Parties an opportunity to respond to it. The Coyte Parties did not press their claims for breach by Mr Norman of alleged "Marketing Obligation" (Coyte SOC [13]).

Claim in respect of the "Wrongful Payments"

1. The parties were agreed, to a large extent, as to the issues that arose from the Norman Parties' Cross-Claim in the Coyte Proceedings. Mr Priestley identifies seven separate claims brought in that Cross-Claim, a matter which has significantly contributed to the complexity of the proceedings.
2. The first claim brought in the Cross-Claim relates to alleged "wrongful payments". CCPL and CCS relied on the terms of a trust deed dated 31 May 2005 relating to the Mutual Fund which provided for distributions to unitholders to be in proportion to units, and pleaded that the unitholdings in the fund were that NIP held 750,000 units and Blooms held 250,000 units until 30 June 2011. CCPL and CCS plead that, on or about 30 June 2011, all of the units of Blooms in the Mutual Fund were redeemed or otherwise surrendered and that, as Blooms ceased to be a unitholder in the Mutual Fund, it was not entitled to any further distribution from the Mutual Fund and, between July 2011 and June 2012, Blooms or alternatively Mr Coyte was paid various sums to which it or he was not entitled. Those payments are pleaded to be wrongful on the basis that no meeting of the officers of CCPL or CCS (presumably, Mr Norman) resolved to authorise the payments; no duly constituted meeting of the unitholders of the Mutual Fund occurred with respect to the payments; no vote by unitholders of the Mutual Fund occurred with respect to the payments; no meeting of shareholders of CCPL was held with respect to the payments; and the payments were made in error or otherwise wrongfully. The premise of this allegation is that the relevant payments made by CCPL or CCS were an unauthorised distribution from the Mutual Fund and that there was no other justification for the payment.
3. The parties accepted that this claim raised the issue whether the "Wrongful Payments" (as pleaded) were made without authority, in error or otherwise wrongfully (ASOCC [20]). There was a somewhat arid dispute as to whether the converse issue, whether those payments were made with authority, arose. At the least, a finding that the payments were made with authority, as a matter of fact and law, would necessarily defeat the Norman Parties' claim that they were made without authority. It seems to be common ground that those payments were made without regard to the revenue share dictated by the 2007 HOA and the proportionate unit holdings in the Fund and did not reflect an allocation of 25% of the profit from the business to Blooms. Mr Satusky's firm, on Mr Norman's instructions as to the proper basis of the arrangements, calculated that $113,316.50 was paid to Blooms in excess of its entitlement based on an allocation of 25% of the profit from the business (Norman 13.11.15 [162]; Atra 12.11.15 [9]).

Whether the alleged "Further Agreement" was entered into

1. CCPL and CCS plead a claim in respect of an alleged Further Agreement as a further or alternative cause of action with respect to the amount of $113,316.50 claimed under the "Wrongful Payments" claim. Paragraph 25 of the First Cross-Claim pleads the terms of the Further Agreement alleged to have been formed in about June 2011 between Mr Norman on behalf of CCPL and Mr Coyte or alternatively Blooms, as follows: "In about June 2011 Michael Norman, on behalf of [CCPL] and in his capacity as [d]irector, entered into a further agreement ("the further agreement") with Coyte (or alternatively with Blooms) the terms of which provided that: (a) [CCPL] and Coyte would retain their respective client base share; (b) [CCPL] and Coyte would operate separately from each other with respect to the provision of financial services; (c) It was an implied term that Coyte would not transfer, solicit or interfere with the clients of [CCPL] (including the income generated from such clients); (d) It was an implied term that Coyte would act in good faith with respect to the agreement; (e) Coyte would agree to the redemption or otherwise surrender of the units held by Blooms in the Fund; (f) In consideration of the surrender of the units held by Blooms in the Fund Coyte would be entitled to retain his respective client base share; (g) Coyte would be entitled to retain $13,000 (inclusive of GST) of monthly gross fee income. This figure represented the agreed gross monthly income of the respective client base of Coyte's share; (h) That a party would pay to the other an amount equal to 2.5 times annual client revenues in the event of a client being transferred from one party to the other party; (i) Coyte would pay an equal share of the expenses incurred with respect to provision of financial services including but not limited to: (i) Professional indemnity premiums (ii) Rent (iii) Staff (iv) Business Administration (v) Compliance costs (collectively "the expenses") (j) The expenses were to be paid equally up until 30 December 2012 except for professional indemnity insurance premiums which were to continue for up to 7 years or as required as 'run-off' cover; (k) It was an express term of the further agreement that drawings, advances and unpaid expenses to or by Coyte (and/or Blooms) were to be added to the loan account of Coyte (and/or Blooms) which represented a debt to [CCPL] payable at the end of each relevant accounting period; (l) It was an express term of the further agreement that, with respect to paying his share of the expenses, Coyte would either: (i) Leave sufficient funds in the expenses account to enable payment of his share of the expenses; or (ii) Pay them as they fell due; (iii) Pay them within 7 days of a demand for payment by [CCPL]; or (iv) Alternatively it was an implied term of the agreement the he [sic] pay them within a reasonable time. (m) Each of the parties would be entitled to separately retain income from any new business which they respectively received.

Diversion of clients and client income and claim for "breach of the Fund"

1. The parties agreed that there were further issues in the Cross-Claim in the Coyte Proceedings as to whether Blooms and Mr Coyte diverted clients or client income of the Centre Capital Group in breach of the Further Agreement (ASOCC [35]-[36]) and whether diversion of clients or client income of the Centre Capital Group constituted a breach of trust by either Blooms or Mr Coyte or a breach of statutory duties by Mr Coyte. There was a dispute as to whether that claim was limited to a diversion in breach of the Further Agreement (ASOCC [35], [35.1], [59]-[60]).
2. The third claim made in the Cross-Claim relates to a claim under the alleged Further Agreement for diversion of client revenue. By paragraph 35 of the First Cross-Claim, CCPL and CCS plead that, in breach of the Further Agreement, Mr Coyte caused to divert or otherwise transfer clients and income from such clients of CCPL to him or an entity which he effectively controlled or had a financial interest in, to the detriment of CCPL. The claim in that paragraph is not established, because the existence of the Further Agreement is not established for the reasons noted above.
3. Mr Priestley also submits that it was necessary for reasonable business efficacy of the Further Agreement that a term be implied in it that Mr Coyte would not transfer, solicit or interfere with Centre Capital's clients (other than clients he was entitled to so deal with pursuant to the agreement itself) and that the agreement to continue providing services to the clients, sharing revenue and expenses as agreed leading up to a formal written agreement in which the ultimate transfer of clients would be formally provided for would necessarily have been unworkable and ultimately defeated without such an implied term. I do not accept that submission, because I do not accept that the Further Agreement was established and there is therefore no basis to imply a term into it. The term sought to be implied is also inconsistent with the 2007 HOA which, I have held above, governed the parties' relationship on termination of the joint venture.
4. Mr Priestley also submits that the Further Agreement properly had implied in it by law a term that the parties act with respect to the performance of the agreement in good faith. The implication of such a term is controversial in Australian law, and attempts to imply such terms have had limited success since the decision in Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 on which Mr Priestley relied. It is not necessary to address that question further since there is no room to imply that term into the Further Agreement where that agreement has not been established.

Alleged breach of duty as to further payments

1. The parties also identified further issues in the Cross-Claim in the Coyte Proceedings as to whether various payments by the Centre Capital Group made or authorised by Mr Coyte between July 2011 and June 2012 constituted a breach of statutory duties by Mr Coyte and as to the quantum of loss caused by the alleged breaches or other conduct.
2. Paragraphs 39-54 of the First Cross-Claim plead a claim for breach of director's statutory duties relating to payments made to Mr Coyte and interests associated with Mr Coyte from income of the Mutual Fund received by CCS. Although that claim is formulated in general terms, without identifying the origin of the income to which it relates, the evidence establishes that CCS is the Australian financial services licensee that conducts the financial planning business with which Mr Norman and Mr Coyte were involved, and that income was derived from the provision of financial planning services to the clients to which Mr Norman and Mr Coyte provided such services. This claim therefore raises similar legal issues as the further claim for "diversion of funds" pleaded in paragraphs 55-61 of the First Cross-Claim, although the former claim appears to be primarily directed to events prior to June 2012, while Mr Coyte provided services to clients through CCS, and the latter to events from July 2012, by which clients serviced by Mr Coyte were transferred to Shartru.
3. CCPL and CCS plead that the business known as "Centre Capital" trades through CCPL as trustee of the Mutual Fund and, until June 2011, Mr Coyte was a director of CCPL (ASOCC [41]-[42]) and that, until June 2012 Mr Coyte was a director of CCS (ASOCC [43]). CCPL and CCS further plead that the income from the provision of financial services was received into Macquarie Bank accounts operated by the "Centre Capital Business" including accounts in the name of CCS (ASOCC [44]) and that income of the Funds which is received by CCS is treated as income of the Fund and receivable by the Fund (ASOCC [45]).
4. CCPL and CCS plead that, as director, Mr Coyte owed duties to CCS and CCPL under ss 180-182 of the Corporations Act 2001 (Cth) (ASOCC [46]-[48]). The pleaded statutory duties are founded on Mr Coyte's role as a director or "former director" of CCPL and CCS where, as I noted above, it is not pleaded that Mr Coyte was a director of CCPL beyond June 2011 or of CCS beyond June 2012. CCPL and CCS also plead that, between July 2011 and June 2012 various payments were made from the Mutual Fund into accounts in the name of Blooms and Mr and Mrs Coyte and were not duly authorised by CCPL, CCS or Mr Norman and were made in error or "otherwise wrongfully" (ASOCC [49]). CCPL and CCS in turn plead (ASOCC [50]) that: "By virtue of his position as director of [CCS] Coyte and former director of [CCPL], enabled, directed or otherwise facilitated the payments: (a) without proper authority; (b) either knowing or reasonably suspecting that the payments were not properly payable or without proper regard to the circumstances of the payments; (c) without due observation of the requirements of operating the Account; (d) without due observation of his duties as an officer of [CCS] and former officer of [CCPL]; (e) without due observation of the requirements of the operation of the Fund." CCPL and CCS in turn plead that, by reason of these matters, Mr Coyte breached his duties under ss 180-182 of the Corporations Act and CCPL or alternatively CCS have suffered loss or damage (ASOCC [51]-[54]).

Breach of duty claim with respect to diversion of client income

1. The sixth claim made in the Cross-Claim relates to a claim for breach of statutory duty in respect of diversion of client revenue. I have noted above that this claim raises substantially the same issues as the claim pleaded in paragraphs 39-54 of the First Cross-Claim, although in the later time period from July 2012. Mr Priestley accepted in oral submissions that Mr Norman had not put a case that particular persons transferred to Mr Coyte were Mr Norman's clients, other than in respect of the alternative case raised by Mr Mazzoni's third affidavit (T640) which I will address below.
2. Paragraphs 55-61 of the Amended Statement of Cross-Claim plead this claim by reference to a letter dated 26 July 2012 provided to Macquarie Bank. CCPL and CCS plead that that letter was created by and signed by Mr Coyte; that it purports to be signed by Mr Norman (with an electronic signature) but was not in fact signed by him; that Mr Norman did not authorise the letter, including the use of his signature; and that CCPL did not approve the letter. CCPL and CCS also plead that the letter caused funds to be diverted from various Centre Capital accounts to accounts in the name of Shartru and, by virtue of Mr Coyte's position as a "former director" of CCPL and CCS who had previously been authorised to operate its accounts, Mr Coyte wrongfully caused those funds to be diverted to Shartru. Paragraph 60 of the Amended Statement of Cross-Claim pleads a breach of s 182 of the Corporations Act, to which I have referred above, in that respect.
3. Mr Priestley submits that Mr Coyte commenced taking steps to transfer clients to Shartru in the months leading up to the end of June 2012, involving conversations with some clients and the incorporation of Shartru. On 22 June 2012, about the time Mr Norman removed Mr Coyte as a director of CCS, Mr Coyte emailed Macquarie Bank requesting that it implement a "temporary freeze" on the payment of commissions for his adviser account (Ex N3, CB 710; T525) and advised other fund managers, apparently accurately, that the requested change were as a result of a dispute (Ex N3, CB 713). Mr Priestley submits that Mr Coyte then began the process of transferring clients and diverting client income away from CCS, including creating a letter dated 26 July 2012 on Centre Capital letterhead purportedly signed by Mr Coyte and Mr Norman (Ex N3, CB 746) which was sent to Macquarie Bank, MLC and other fund managers (Ex N3, CB 759, 762) which caused the relevant fund managers to divert client income from CCS to Shartru. Mr Priestley submits that Mr Norman did not sign this document or expressly authorise it being sent (Norman 13.11.15 [182]-[183]) and that CCS also did not authorise the document. Ms Bloomfield's evidence was that she had Mr Norman's authority to use his electronic signature, which appeared on the relevant letter, when it was needed presumably for CCS's business purposes (T583), although it should be recognised that this step was hardly taken in the ordinary course of CCS's business.

The alternative calculation based on Mr Mazzoni's evidence

1. The Cross-Claimants alternatively submit that a number of individual clients that were transferred to Shartru and provided client authority forms to authorise that transfer were not the subject of any discussion or agreement as to that transfer between Messrs Norman and Coyte. This claim has the premise that agreement was reached between Messrs Norman and Coyte as to which clients would go with each of them at the meeting in 22 June 2011 to which I referred in paragraph 37 above, and that that agreement is reflected in the "Agreed Client Lists" annexed to Mr Coyte's affidavit (to which I referred above), notwithstanding that Mr Norman denied Mr Coyte's evidence of those matters. The Cross-Claimants rely on a list of the clients falling within that discussion or agreement contained in Tab A to Mr Mazzoni's third affidavit sworn 26 May 2016.
2. There is a fundamental difficulty with this alternative case, such that it cannot succeed. Its essential premise, which I have rejected above, is that Mr Coyte's retention of a client required that Mr Norman have first agreed that the client was Mr Coyte's client, and not only that that was the fact. I have held above that the 2007 HOA provided for Messrs Norman and Coyte to retain their respective clients on termination of the joint venture, and that whether a person was a client of each of them was a matter that could be determined objectively rather than requiring any further agreement between them. The evidence as to the late June 2011 meeting does not establish that the discussion as to the identity of the clients to be transferred amounted to an agreement to vary, narrow or abandon the 2007 HOA, as distinct from a practical attempt to reach consensus as to its implementation. If a client was in fact a client of Mr Coyte, then he was entitled to retain that client under the 2007 HOA even if it was not identified as such in that discussion; conversely, if a client was not a client of Mr Coyte, then he was not entitled to do so even if the client was wrongly identified as such in that discussion. As I have noted above, the Norman Parties did not seek to establish that the relevant clients were not in fact Mr Coyte's clients, and the client records indicate that the relevant clients were Mr Coyte's clients, with the exception of one client as to whom the Norman Parties took no point.

Claim against Shartru

1. The parties also identified a further issue in the Cross-Claim in the Coyte Proceedings as to whether the Third Cross-Defendant, Shartru, received monies with knowledge that they were received as a consequence of the alleged breaches (ASOCC [63]-[64]). The Amended Statement of Cross-Claim pleads a claim against Shartru that CCS lost the benefit of ongoing commission and other financial benefits to which it was or would become entitled in respect of the existing business investments of clients who were transferred to Shartru, or alternatively that CCPL lost the benefit of such commissions and other financial benefits; that Shartru with knowledge of specified matters had received income from clients that were transferred to it from CCS and thereby derived profits; and that CCS and CCPL have suffered loss or damage. CCPL and CCS also plead that a letter of demand was sent by their solicitors to Shartru, which has not accounted to CCPL or CCS in relation to the ongoing commissions and other financial benefits it has received.
2. Mr Priestley submits that the clients and client income in dispute were transferred such that the clients became clients of Shartru and their commission fees are now paid to that entity. Mr Priestley submits that, if the client income has been diverted to Shartru wrongfully, that wrongfulness was at all relevant times known to Mr Coyte and must also have been known to Shartru, where Mr Coyte was a director of that entity and a principal of its business. Mr Priestley submits that this would constitute knowing receipt of property disposed of in breach of the statutory fiduciary duty giving rise to a claim contemplated under the first limb of potential claims discussed in Barnes v Addy (1874) LR 9 Ch App 244; (1874) 43 LJ Ch 513. That result does not follow where the claimed breach by Mr Coyte has not been established.
3. Mr Priestley also submits that, because the Cross-Claimants are not in a position to precisely quantify these monies, the appropriate remedy would be an order that Shartru provide an account of them. I would not have accepted that submission, had the claim against Shartru otherwise been established, where the Cross-Claimants have not brought a claim for account of profits, the Court did not make orders for separate hearings of liability and quantum, and having regard to the matters to which I referred in paragraph 151 above.

The Scorer proceedings

1. The parties were in agreement as to the issues that arose in the Scorer proceedings, namely whether payments made to Mr Scorer as pleaded were made without the proper authority of CCN or CCS (SOC [13]-[21], [26]-[33]); whether United Nominees received monies with knowledge that they were paid without authority (SOC [36.10]); and whether the payments made to Mr Scorer as pleaded constituted a breach of statutory duties by Mr Coyte (SOC [45]).
2. I now turn to set out the pleaded claims and the applicable facts. By their Amended Statement of Claim filed in the Scorer proceedings, CCN and CCS seek orders that, relevantly, Mr Coyte pay them the amount of $112,500 with respect to the First and Second Payments, as defined. CCN and CCS also sought declarations under s 1317E of the Corporations Act that Mr Coyte has contravened ss 180, 181 and 182 of the Corporations Act. It may be that that relief is not pressed, since the corresponding declaration sought in the First Cross-Claim was not pressed; if it is pressed, it cannot be given, since such a declaration is only available in proceedings for a contravention of a civil penalty provision brought by the Australian Securities & Investments Commission. CCN and CCS also seek an order under s 1317H of the Corporations Act that Mr Coyte compensate them for the loss they or one or other of them has suffered in consequence of that contravention. They also seek an order that United Nominees pay CCS an amount equal to the total of all monies received by United Nominees by way of payment for tax invoices payable by third parties to CCS.
3. Before turning to the impugned payments, it is necessary to refer to the nature of Mr Scorer's engagement by CCN and CCS. On 20 May 2008, Mr Norman sent an email to Mr Coyte (Ex N1, CB 99) stating that Mr Scorer's "first 52K is a share of profit not a salary". That approach is not reflected in the Adviser Employment Contract for Mr Scorer which was subsequently signed, although dated January 2008. In oral submissions, Mr Priestley submits that that email is relevant to Mr Coyte's and Mr Norman's understanding and shows Mr Norman's belief that payments to Mr Scorer should not have been made. Mr Priestley also submits that it is unlikely that Mr Norman changed his mind as to that matter, although he recognises the possibility that the terms of the employment agreement may not properly record Mr Norman's views (T645). It seems to me that it is not necessary to determine whether, as Mr Coyte contends and Mr Norman denies, Mr Norman later changed his mind, because Mr Norman's subjective intent as to that matter is not relevant to the proper construction of the terms of the written Adviser Employment Contract with Mr Scorer, absent a claim for rectification of that contract.

Claim as to the impugned payments

1. Turning now to the impugned payments, CCN and CCS plead that the First Payment and the Second Payment (as defined) were made in circumstances that no meeting of officers of CCN resolved to authorise the payments; CCN did not make a decision to make a distribution payment from the Mutual Fund during the relevant accounting period; no meeting or vote of unitholders occurred with respect to the payments; no meeting of shareholders of CCN was held with respect to the payments; and no authority was given to Mr Scorer or Mr Coyte to make the payments. CCN and CCS also plead that no meeting of officers of CCS occurred resolving to authorise the payments; no authority was granted to Mr Scorer or Mr Coyte to authorise the payments; and no meeting of shareholders of CCS was held with respect to the payments.
2. The First Payment is pleaded in paragraphs 12-24 of the Statement of Claim in the Scorer Proceedings and was a payment of $30,000 made from an account of CCS to Mr Scorer on or about 8 September 2011. CCN and CCS plead that the funds in the account were held on trust for CCN in anticipation of being paid to it; that CCN as trustee did not make a distribution payment to any other unitholder during the relevant accounting period and the First Payment was not made in accordance with the provisions of the relevant trust deed or authorised by CCN as trustee and was made "wrongfully". Paragraphs 23 and 24 plead that Mr Scorer was unjustly enriched by that payment, but that claim is not now pursued where Mr Scorer is bankrupt.
3. It is common ground that the First Payment had been discussed between Mr Coyte and Mr Norman before it was made. Mr Scorer's evidence is that, prior to July 2011, he spoke to Mr Coyte about a transaction involving OEG and the payment of $30,000 to Mr Scorer as a bonus was discussed (Scorer 29.3.16 [39]) and that Mr Scorer then spoke to Mr Norman about those matters (Scorer 29.3.16 [37]). Mr Coyte's evidence is that Mr Norman agreed to that payment being made unconditionally, whereas Mr Norman's evidence is that that payment was an "advance" against Mr Scorer's distribution and was conditional upon CCN's expenses first being met (Norman 22.10.14 [70]; T238.) Mr Coyte accepted, in cross-examination, that Mr Norman had told him in about late 2008 that expenses had to be paid before payments could be made to Mr Scorer (T423).

Claim for breach of duties against Mr Coyte

1. Paragraphs 43-50 of the Amended Statement of Claim plead that Mr Coyte owed duties to CCN and CCS under ss 180-182 of the Corporations Act and that, by enabling the First Payment and the Second Payment, Mr Coyte breached those sections of the Corporations Act, and CCN and CCS have suffered loss and damage. CCN and CCS submit that making the payments in those circumstances was a breach of Mr Coyte's duty to exercise his powers with due care and diligence under s 180 of the Corporations Act, in good faith in the best interests of the corporation and for a proper purpose under s 181 of the Corporations Act and was also an improper use of his position to gain an advantage for someone else in breach of s 182 of the Corporations Act. I have addressed the scope of those provisions above.
2. Mr Priestley submits that it was not in the interests of the Centre Capital entities to make such payments if it was not obliged to do so. Mr Priestley also submits that, by this time, Mr Coyte and Mr Scorer had both fallen out with Mr Norman and were colluding with respect to the finances of the Centre Capital entities. Mr Priestley submits that Mr Coyte owed duties both to CCN and CCS to attend to the expenses and other obligations of the companies in an orderly way and not to prefer some creditors at the expense of others, or at the expense of the business itself. Mr Priestley points out that Mr Coyte relied, in cross-examination, on the value of shares in OEG to cover the cost of the payments to Scorer (T454), although their ultimate value to Centre Capital could not be known at that time. Mr Priestley also submits that, if Mr Scorer's email proposal for an increase in entitlements of 24 June 2011 is said to be a basis for making the payments, that is not sustainable because Mr Coyte and Mr Norman did not accept that proposal (Ex C6, CB 1654; T 437).
3. Mr Coyte relies on the fact that Mr Scorer's Adviser Employment Contract (Ex N1, CB 101) provides for remuneration to be paid to Mr Scorer before profit is distributed and I have, in substance, accepted that submission above. Mr Norman refers to conversations dating back to 2008 which he claims amended the terms of Mr Scorer's arrangement (Norman 22.10.14 [56], [60]). I do not accept Mr Norman's evidence in that respect, by reason of the issues as to his credit generally. Mr Coyte submits that the arrangements were further amended in June 2011, with Mr Scorer to be paid more, but as a consultant rather than an employee. The email from Mr Coyte to Mr Norman on 29 June 2011, which in turn attached the email from Mr Scorer to Mr Coyte and was also sent by facsimile to Mr Norman (to which I referred above) refers to the terms of the new arrangements and, as I noted above, there is no contemporaneous evidence of Mr Norman having disputed that statement of the content of the arrangement. Mr Coyte's evidence is that he made payments to Mr Scorer, including payments made to him prior to the payments in 2011, in accordance with the contractual arrangements with Mr Scorer as he understood them (Coyte 30.3.16 [24], [38]).

Claim against United Nominees

1. Paragraphs 36.8-36.10 of the Statement of Claim in the Scorer proceedings in turn plead a claim against United Nominees. Paragraph 36.8 pleads that, between May 2012 and 30 June 2013, CCS earned and became entitled to receive payments from clients of its business and, between May 2012 and 30 July 2013, Mr Scorer without CCS's knowledge or consent directed payment of those amounts to a bank account in the name of United Nominees and caused certain clients of CCS to make payments of sums due to CCS into United Nominees' account. The particularised amounts total $21,450. CCN and CCS plead that United Nominees, on receiving the Diverted Funds (as defined) was aware that it was not entitled to receive payment of those amounts; was aware that Mr Scorer procured payment of those amounts to it in breach of his obligations to CCS and received the Diverted Funds (as defined) as a constructive trustee of those monies.
2. There is evidence of deposits into United Nominees' bank account from 13 February 2012, although the identity of the depositors is unknown (Norman 13.11.15 [33]). There is evidence that Mr Scorer caused broking client income, in particular from IQ Novate ($24,750) and an entity known as M2L ($3,250), to be diverted from CCS to United Nominees (Ex N1, CB 313, 319, 323, 394-403; Ex N4, CB 1148). Mr Priestley submits, and I accept, that Mr Scorer's evidence in cross-examination did not provide any justification for the diversion of amounts due to CCS to United Nominees, to the extent that such amounts were in fact diverted to that entity (T624). I am satisfied that CCN and CCS have established a restitutionary claim, in the nature of a claim for monies had and received, or alternatively a claim for the receipt of trust monies against United Nominees in respect of the amounts noted above shown to have been diverted to United Nominees: compare Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81 at [39]-[41], [45].
3. CCN and CCS also submit that a further $71,000 in fees payable by M2L (Ex N5, CB 1025) was paid to United Nominees rather than CCS. However, the evidence relied on by CCN and CCS in support of that submission does not support it, since the amount of $71,000 was M2L's anticipated costs of a compliance prospectus; including accountants' fees, legal costs and ASIC and Newcastle Stock Exchange fees which would not have been payable to CCS or CCN, and CCN and CCS identify no evidence that the anticipated sponsoring brokers' fees of $15,000 or nominated advisers' fees of $10,000 or any other amount (other than the $3,250 referred to above) in fact fell due by M2L to CCN or CCS or were paid by M2L to United Nominees.

Summary, orders and costs

1. In summary, the Coyte Parties' claims in the Coyte Proceedings in respect of the alleged "Termination Agreement", including the claim for the Stake Value (as defined) of $17,369 and a declaration in respect of the OEG Shares, and their claim in respect of the alleged "Collaborative" fail. The Coyte Parties' claim for unconscionability also fails.
2. The Norman Parties' claim in the Cross-Claim in the Coyte Proceedings in respect of restitution for the "Wrongful Payments" fails, because it has not been established that the payments were unauthorised distributions from the trust, as distinct from payment of client income to Mr Coyte or Blooms that he was entitled to receive by reason that, under the terms of the 2007 HOA, he retained his clients on termination of the joint venture between Messrs Norman and Coyte. I do not accept Mr Norman's evidence as to the conversation that is alleged to support the Further Agreement and, where that agreement is not established, the claims under it are also not established.
3. The claim that Blooms and Mr Coyte diverted clients or client income of the Centre Capital Group in breach of the Further Agreement fails, because that agreement is not established. The pleaded claim for "breach of the Fund" also fails, and the amount of the loss claimed in respect of that alleged breach has also not been established. The claim for breach of director's statutory duties relating to payments made to interests associated with Mr Coyte from income of the Mutual Fund received by CCS prior to June 2012 fails, since the duty owed by Mr Coyte in that respect was narrowed to reflect his "ownership" of his clients on termination of the joint venture, pursuant to the 2007 HOA, and the claim for diversion of funds or clients to Shartru from July 2012 fails for the same reason. The claim against Shartru fails, because the claim against Mr Norman and Blooms of which it is derivative has failed.
4. In respect of the Scorer proceedings, I have held that a contravention of s 180 of the Corporations Act on the part of Mr Coyte is established, by reason of the manner in which two payments were made to Mr Scorer. CCN's and CCS's claims in respect of contraventions of ss 181 and 182 of the Corporations Act have failed. CCN and CCS have not established that they suffered any loss by reason of the contravention they have established or the payments to Mr Scorer. The Cross-Claimants' claim that Mr Coyte should be ordered to reimburse CCN or CCS the amount of the payments or, in the alternative, such proportion of the payments as the Court thinks just in the circumstances pursuant to s 1317H of the Corporations Act fails. CCN and CCS have established their claim against United Nominees in respect of monies diverted to that entity, and should be allowed an opportunity, in preparing short minutes to give effect to this judgment, to confirm the amount claimed.

Amendments 01 December 2016 - Para 2 - line 3 - change "The claim against Ms Scorer" to read "The claim against Mr Scorer" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 December 2016