Craigcare Group Pty Ltd v Superkite Pty Ltd

Introduction 1HIS HONOUR: These proceedings, initially involved a claim by the Plaintiff, Craigcare Group Pty Ltd ("Craigcare") for $100,000 ("the Money"), which it paid to a firm of solicitors acting for the first Defendant, Superkite Pty Ltd ("Superkite") in early August 2011, for certain purposes (which are the subject of dispute). The second Defendant, Alfred John Stammers ("Mr Stammers"), is recorded as being the sole director of Superkite. He is also a solicitor at the firm of solicitors, Holman Webb, which is said to have disbursed the Money out of its trust account otherwise than for the purposes asserted by Craigcare. 2The dispute between the parties relates, principally, to the terms of the agreement reached about the Money; whether a trust was constituted; and, if so, whether it was breached by Superkite. Whether the second Defendant aided and abetted what is said to have been a breach of trust is also an issue. (Although there was also an allegation about a fiduciary duty owed by the Defendants and a breach by each, little time was spent on this issue. I shall, however, refer to it, briefly, later in these reasons.) 3At the commencement of the hearing, senior Counsel informed the Court that Craigcare's claim was reduced to $69,024.50, plus interest and costs, it being accepted that the amount of $30,975.50 was paid out of the Money on behalf of Superkite for the purposes asserted by Craigcare, and that it was necessary to amend the Statement of Claim to claim the lesser amount. (The matter was identified in Craigcare's written Submissions, which were served shortly prior to the hearing.) 4During the course of the hearing, the Defendants sought leave to amend the amended Defence to raise an allegation that amounts in other invoices, not specifically identified in the amended Defence, but which had been adverted to in the evidence, were paid by Superkite, out of other funds, and were reimbursed out of the Money. Coincidentally, the two invoices referred to, were for a total amount of $60,000. 5Despite the amount claimed by Craigcare, the matter was listed for hearing for two days. The Plaintiff retained senior and junior counsel (Mr G A Sirtes SC and Mr D W Robertson) to appear at the hearing, whilst junior counsel (Ms T R Gordon) appeared for the Defendants. The matter was not concluded within that time for reasons to which I shall come. However, it finished on the third day. 6It struck me, during the course of the hearing, that the sum of money involved was symbolic, since there is little doubt that the costs of the proceedings, on each side, would far exceed the amount claimed. It was equally clear that the sum involved was minute compared with what was suggested to be the financial position of each of Craigcare and Superkite and when one considered the amounts involved in the proposed transaction that had prompted the payment of the Money. 7At the completion of the submissions, I indicated that I proposed to cap the recoverable costs of each party of the proceedings and that written submissions should be filed and served on the issue of costs, bearing in mind the amount claimed, within 7 days. (No submissions were received within the prescribed time from the Defendant. They were, however, received a few days later.) I shall refer to the submissions on costs at the completion of these reasons.

A Brief Background 8The following facts, for the most part, are uncontroversial. I have taken them from what are, essentially, agreed facts, or from evidence about which I am satisfied. 9Craigcare and Superkite is each a corporation incorporated under the Corporations Act 2001 (Cth). 10Craigcare was registered as a corporation, in Western Australia, in April 2002, where it continues to have its registered office. Its business is that of "a retirement community and aged care facility provider, principally in Victoria and Western Australia". Mr John Gillett is the sole shareholder and director of Craigcare. 11As at July 2011, Craigcare owned, and operated, six nursing homes and two retirement villages in addition to managing two other retirement villages. Craigcare's assets were valued, then, at approximately $50 million. 12At about that time, Craigcare was seeking to raise up to $500 million by debt and equity financing, so as to increase places to 6,500 in its aged care facilities. 13Superkite was incorporated in New South Wales in March 2011. Its registered office is, and was then, care of Holman Webb, Lawyers, in Sydney. The "Profile" of Superkite, which document forms part of the evidence, identifies Superkite as "a 'cashbox' vehicle for intended investments in Australia, USA, UK and UAE". 14The current Company Extract from the ASIC database shows that its sole director, at all relevant times, was Mr Stammers. It had 1,000,000 issued fully paid shares, the owner of which, legally and beneficially, was shown to be Kirep Pty Ltd, which is described as Mr Stammers' "family trust company". 15Mr Stammers says, and I accept, that Kirep Pty Ltd is not, in fact, the beneficial owner of the shares, but that it holds the shares on trust for a third party, Mr Roland Bleyer (also known as "Roland Husner"). In a document to which I shall later refer, Mr Bleyer confirms that the shares are held upon trust for him. 16Mr Bleyer describes himself as "the Chairman of the Finance Committee of Superkite". His role is said to include "giving instructions to [Mr] Stammers", whom he describes as "the nominee director of Superkite". He states that Mr Stammers "is required to act in accordance with the written instructions of the Finance Committee for Superkite in performing his role as nominee director". However, the only person identified on the Company Extract, to which I have referred, as a director, is Mr Stammers. 17Mr Stammers also says that neither he, nor Kirep Pty Ltd, receives "any financial advantage in return for, or as a result of, holding those shares". He does, however, receive director's fees, from Superkite, for acting as its director. 18Bella Finance is a business owned by Superkite. Although it does not play any role in the proceedings, emails were sent to an email address with its name included, which Mr Stammers understood was one of the email addresses of Mr Bleyer. 19At all relevant times, the firm of solicitors acting for Superkite, in the transaction to which I shall refer in more detail, was Holman Webb. Mr Stammers was, and is, an employed solicitor at that firm and was the solicitor within the firm responsible for the conduct of matters for Superkite. 20Mr Rick Mitry, of Mitry Lawyers, was the solicitor acting for Craigcare in the transaction. He has not played any role in the proceedings, although he had some involvement in the transaction that gives rise to it. 21In July 2011, Mr Mitry made contact with Mr Bleyer (whom he had known previously) and a meeting was arranged, in Sydney, to be held with Mr Gillett. At the meeting, there was a general discussion about funding that Superkite could provide to Craigcare. Mr Bleyer represented that Superkite could arrange funding of up to $500 million, for a joint venture vehicle, subject to Craigcare providing guarantees in respect of the borrowed funds. His suggested method of financing was to form a joint venture vehicle between Craigcare and Superkite. 22At the meeting, Mr Bleyer also mentioned the need for Craigcare to pay the Money into the trust account of Superkite's solicitors to meet the expected legal and due diligence costs incurred by Superkite in arranging the funding. (It is not suggested that what was said at this meeting constituted an agreement between the parties.) 23On 21 July 2011, Mr Mitry sent Mr Bleyer some information concerning the Craigcare business. 24On 4 August 2011, Craigcare paid the Money into the trust account of Holman Webb. The terms and conditions on which Craigcare did so, and whether the amount, or any part of the amount, would be reimbursed to it, were the subjects of the dispute between the parties. 25In or about December 2011, prior to the existence of any "counter-signed definitive agreements" (the reference to which I shall return later in these reasons), the negotiations in relation to the proposed joint venture, ended without any concluded agreement about funding having been reached. 26Following the termination of the negotiations, Craigcare requested the return of the Money. Superkite refused to repay it, or any part of it.

The Pleadings 27Craigcare filed a Statement of Claim on 4 December 2012. It sought a declaration that: (a) the Money was held by Superkite upon trust for it; (b) Superkite "owed [Craigcare] a fiduciary obligation in relation to the Money" that had been paid to Holman Webb; (c) Superkite engaged in a breach of trust and a breach of its fiduciary duty; and (d) Mr Stammers "knowingly assisted and procured" the breach of trust, and aided and abetted the breach of fiduciary duty, by Superkite. 28Craigcare sought orders that: (a) there be an account taken in relation to the Money; (b) Superkite and Mr Stammers repay the Money to Craigcare; (c) Superkite and Mr Stammers pay "equitable damages"; and (d) Superkite and Mr Stammers pay costs. 29Craigcare pleaded that "in consideration of [Craigcare] providing $100,000 of funds to ... Holman Webb, [Superkite] would facilitate the documentation and formalisation of the joint venture project". 30Craigcare then alleged that: "6. The said agreement contained the following terms: (i) the $100,000 sum would be held in trust by Holman Webb; (ii) the funds were paid to Holman Webb for a specific purpose in that they could only be used to pay the reasonable legal costs incurred by Holman Webb and other reasonable expenses incurred by [Superkite] in relation to the proposed joint venture project; (iii) the balance of any funds not expended were to be repaid to the Plaintiff; (iv) that if the First Defendant did not or could not perform as per the conditions of 'counter-signed definitive agreements', the money would be refunded to the Plaintiff." 31(I should mention that, on the afternoon of the first day of the hearing, senior Counsel indicated that Craigcare did not seek to rely upon sub-paragraph 6(iv) of the Statement of Claim. However, as the term "counter-signed definitive agreements" is otherwise referred to, I have included the sub-paragraph as part of the pleading.) 32Craigcare asserted that the agreement was "in facilitation of a prospective joint venture agreement" and that it would provide Superkite with the Money, "as part of its contribution to the future project, such money only to be expended by [Superkite] on reasonable legal and other expenses in relation to the establishment of the joint venture project". 33Craigcare also alleged an implied term of the agreement "that [Superkite] would, within a reasonable time after a request, advise the Plaintiff of any reasonable legal, or other, expenses... incurred in relation to the proposed joint venture". It also alleged that the Money would not become part of the assets, and would not be at the free disposal, of Superkite or Mr Stammers, but would be used exclusively for the purposes identified, and that the Money, or such part of it not properly expended, would be repaid to Craigcare. 34Craigcare relied upon a trust being established "pursuant to the principles set forth in Barclays Bank Ltd v Quistclose Investments Ltd [1968] UKHL 4". 35Craigcare then alleged the termination of the joint venture negotiations and its request for repayment of the Money. It also alleged that Superkite "failed to disclose any expenses incurred by it in relation to the failed joint venture project". 36Craigcare alleged a breach of trust in Superkite failing to account to it for the use of the Money and by instructing Holman Webb to pay the money out of its trust account for other purposes. 37Craigcare also alleged a breach of fiduciary duty in that Superkite favoured its own interests and obtained a profit by "arrogating to itself the Money or such part of it that had not been expended on expenses or reasonably incurred expenses". 38As against Mr Stammers, Craigcare asserted that he had knowledge of the existence of the trust and/or the purposes for which the Money was to be used, and of Superkite's fiduciary duty, and that he aided and abetted the use of the Money for purposes other than those for which the Money had been paid. 39The Defendants filed an Amended Defence on 22 May 2013, in which it, and he, admitted an agreement between Craigcare and Superkite, but said that its terms were: "(a) [Craigcare] was to pay the amount of $100,000 into a [sic] account held by Holman Webb (the Money); (b) the purpose of the payment of the Money was to pay [Superkite's] legal and other costs of facilitating the documentation and formalisation of the joint venture project; and (c) [Superkite] would only return the Money to [Craigcare] if [Superkite] did not or could not perform the terms and conditions of the signed agreement entered into by [Craigcare] and [Superkite] to give effect to the joint venture project." 40The Defendants also asserted "after much work had been done by both Defendants, the costs of which far exceeded the said sum of $100,000, [Craigcare] without any good or sufficient reason, and indeed without any explanation or notice whatsoever, unilaterally withdrew from the joint venture project leaving [Superkite] incurring considerable financial loss". (It is not suggested that Craigcare was in breach in doing so, and no Cross-Claim was filed by Superkite.) 41In the amended Defence that was filed in May 2013, in answer to the allegation of a breach of trust by Superkite, for the first time, the Defendants identified (in Paragraph 10C) by date, number and amount, a number of different Tax Invoices, which had been rendered by Holman Webb that had been paid out of the Money. The total of the amounts claimed in these Tax Invoices was $98,181.04. Nothing was specifically written in the amended Defence about the use of the balance of the Money ($1,818.96). 42Later in the amended Defence (in Paragraph 13), it was said: "In answer to the whole of the Statement of Claim, further and in the alternative to the matters pleaded above, the First Defendant says that the whole of the Money was used to pay the First Defendant's legal and administrative costs with respect to the preparation of the joint venture agreement, the loan agreement, due diligence and incidental costs associated with the initial facilitation of the joint venture project". 43Four Tax Invoices, the total value of which was $29,573.50, and "[a]dministrative costs" (the amount of which was not particularised), were identified. 44As well, in the amended Defence (in Paragraph 14), Superkite alleged that Craigcare had represented that the Money could be used to meet its legal fees and other costs associated with the joint venture project; that it had relied upon that representation; that it did use the Money for the requisite purpose and that Craigcare was estopped from requiring Superkite to repay the Money and precluded from seeking the relief claimed. No particulars of Superkite's "legal fees and other costs associated with the joint venture project" were identified in this Paragraph. 45Needless to say, in the Amended Defence, Mr Stammers denied any conduct that would make him liable to Craigcare. He admitted he "had knowledge of the Money", which from his other evidence to which I shall later refer, meant that he knew that it had been paid into the Holman Webb trust account and also the purposes for which it was to be used.

The Hearing 46As I have previously written, at the commencement of the hearing, senior Counsel sought to amend the Statement of Claim to seek the amount of $69,024.50 (plus interest and costs). This amount was calculated by deducting, from the Money, the amount of $30,975.50, being the total of the amounts stated in the four Tax Invoices specifically identified in Paragraph 13 of the amended Defence referred to above (Tax Invoice No 181465 ($8,673.50), Tax Invoice No 184109 ($16,615.50), Tax Invoice No 184717 ($2,821.50), Tax Invoice No 188179 ($1,463)), together with an amount of $1,402, being a disbursement, which Craigcare accepted was to be paid out of the Money. 47The Defendants did not oppose the amendment to claim the lesser amount. 48During the course of the hearing, particularly following some objections to evidence, it seemed to me (although there was some debate about it) that the Defendants did not seek to establish that all of the amounts stated in the Tax Invoices referred to in Paragraph 10C of the amended Defence as having been paid out of the Money, were properly payable out of the Money. 49When I sought clarification (on the second day of the hearing) of the substance of the Defendants' defence on this issue, Ms Gordon said: "... it is not the defendant's position that any of that money was paid out inappropriately or in breach of its obligations. If I could elaborate, the position is this: that money was used to pay unrelated legal fees owed by Superkite to Holman Webb in circumstances where Superkite had used its own funds to pay invoices relating to the transaction. It then asked Holman Webb to reimburse it for those amounts by directing it to pay these unrelated invoices." 50There was no dispute that "the unrelated legal fees", other than one for $12,114.63, were those identified in the Tax Invoices referred to in Paragraph 10C of the amended Defence which had been disputed by Craigcare. (Ultimately, of the remaining Tax Invoices identified in that Paragraph of the amended Defence as having been so paid, only the Tax Invoice for $12,114.63 (apart from those invoices the Plaintiff admitted) was the subject of dispute, Craigcare submitting that it was not used for any of the purposes agreed upon for which the Money was to be used.) 51Having come to this point, and after a debate about whether leave to amend was required, counsel for the Defendants sought leave to amend the amended Defence by alleging that two other invoices (one from Masud & Company for $50,000 and the other from Mr Andrew Bacik, for $10,000) not identified in the pleadings, for work said to be done on behalf of Superkite, were amounts paid by Superkite, which amounts were notionally reimbursed from the balance of the Money by Holman Webb by paying other Tax Invoices that Superkite was required to pay. (Whilst a copy of the Invoice for $50,000 was in evidence, a copy of the other Invoice was not.) 52In relation to whether there was need for leave to amend, Counsel for Superkite relied upon Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658, in which the Court wrote, at 664: "Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it ...; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial...; and they give a defendant an understanding of the plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings... But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the verdict in a trial has closed ... though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon facts actually established by the evidence...". 53Senior Counsel for Craigcare opposed the amendment upon the basis that it raised a new case, not otherwise pleaded; that the amended case proposed involved more than "just particulars"; and that to allow the amendment may result in an application for an adjournment by Craigcare, to enable its solicitors to investigate the work said to have been done, identified in the two invoices, perhaps, to file a Reply, and also to obtain other documents going to the actual work said to have been done referred to in each of those invoices. 54In reply to Craigcare's submissions, counsel for Superkite submitted that it was not a new case being alleged and that Craigcare was well aware of the invoices (a copy of one of which had been included, without objection, in the documentary evidence). Ms Gordon did not dispute, however, that it might be necessary for Craigcare's solicitors to carry out further investigations, file a Reply, or obtain documents going to the actual work said to have been done referred to in each of those invoices. 55During argument about the amendment, I indicated that I felt reluctant to accept Superkite's submission that leave was not required as all that was being referred to were additional particulars. I expressed this view, tentatively, because it appeared that Superkite was seeking to rely upon two different invoices, alleged to have been issued by, or on behalf of, persons, or entities, who, or in respect of which, were not witnesses in the proceedings, and in respect of which nothing had been written in the amended Defence (although reference had been made to each of the invoices in an affidavit sworn by Mr Bleyer and served in October 2013). 56Furthermore, it seemed that what had been asserted by the Defendants in the amended Defence, until the issue was raised, was that certain identified Tax invoices, which were related to the joint venture project, had been paid out of the Money, whilst what was being asserted, if the amendment were to be permitted, was, in effect, that several of those Tax invoices were unrelated to the joint venture project, but had been paid because the two other invoices sought to be relied upon, were paid by Superkite, out of its own funds, and that Superkite had authorised Holman Webb to reimburse it, out of the balance of the Money, by paying those unrelated Tax Invoices. 57I had in mind when referring to my tentative view, what had been written by Hasluck J in Chandler v Water Corporation [2001] WASC 166, at [41]: "A party to civil litigation is entitled to a statement of the opponent's case in sufficiently clear terms to allow the opposing party the fair opportunity to meet the case being advanced. An action may not be pleaded in general terms and must be pleaded with particularity: Bruce v Odhams Press Ltd [1936] 1 KB 697 at 705. The purpose of pleadings and particulars is to concentrate the issues of fact and to prevent surprise and consequent delay: Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214 at 221." 58However, at the conclusion of the submissions, I indicated that I might be prepared to grant leave to amend, and to allow Craigcare an adjournment to properly prepare its case based upon the amendment, upon the basis that the amount that had been paid out of the Money for unrelated legal fees, and/or not otherwise admitted by Craigcare as having been properly paid, should be paid into Court by Superkite pending the conclusion of the proceedings. 59I adjourned the matter, briefly, to allow the parties to consider what was required to be done if the amendment were allowed to be made and to obtain instructions otherwise. I was informed, subsequently, that Superkite was not prepared to pay any amount into Court if that were a term of the amendment being granted. 60In the circumstances, I indicated that I was not prepared to grant the amendment and that I would provide detailed reasons as part of the reasons for judgment. I do so now. 61The principles in regard to permitting amendments are well known and do not require detailed repetition. They have been stated, recently, by Barrett JA in Kelly v Mina [2014] NSWCA 9, at [47] and [48], which passages I respectfully, and gratefully, adopt: "Particularly in light of the opening words of s 64(2), it is not controversial that the provisions in Part 6 Division 1 of the Civil Procedure Act were binding on the primary judge and that, in accordance with s 58, his Honour was bound to seek to act in accordance with the dictates of justice and, in so doing, to have regard to s 56 concerning the 'overriding purpose' of the Act and rules of court in their application to civil proceedings; also that, in addressing the amendment application in the particular statutory context, his Honour was required to take into account a combination of factors identified by the High Court in Aon Risk Services Pty Ltd v Australian National University [2009] HCA 27: (2009) 239 CLR 175 and usefully summarised by Vickery J in Namberry Craft Pty Ltd v Watson [2011] VSC 136 (at [38]) as follows: '(a) Whether there will be substantial delay caused by the amendment; (b) The extent of wasted costs that will be incurred; (c) Whether there is an irreparable element of unfair prejudice caused by the amendment, arising, for example, by inconvenience and stress caused to individuals or inordinate pressures placed upon corporations, which cannot be adequately compensated for, whatever costs may be awarded; (d) Concerns of case management arising from the stage in the proceeding when the amendment is sought, including the fact that the time of the court is a publicly funded resource, and whether the grant of the amendment will result in inefficiencies arising from the vacation or adjournment of trials; (e) Whether the grant of the amendment will lessen public confidence in the judicial system; and (f) Whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.' As this Court has emphasised more than once, Part 6 Division 1 of the Civil Procedure Act made substantive and important changes to the law so that considerations of promptness and efficiency in the conduct of civil litigation are afforded a new and special importance which may sometimes provoke a sense of injustice in a party who has failed to proceed with despatch: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010] NSWCA 17; Richards v Cornford (No 3) [2010] NSWCA 134." 62Of course, in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, Gummow, Hayne, Crennan, Kiefel and Bell JJ, had observed, at 217: "A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate." 63These principles have again been referred to, by Bergin CJ in Eq (with whom Ward JA and Tobias AJA agreed), in Baffico v YMCA of Great Lakes Inc [2014] NSWCA 61, at [24] - [25]: "As this Court has said previously the days of trial by ambush are gone. The 'cards on the table' approach in litigation is not only to ensure that the real issues in dispute are litigated but it is also to assist in the just, quick and cheap disposal of the proceedings: Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116; Glover v Australian Ultra Concrete Floors Pty Ltd [2003] NSWCA 80. Those epithets are of course to be understood in the context of the particular case. It is imperative that the pursuit of timeliness and cost control in the case management process does not compromise what is at the core of the judicial system - the delivery of outcomes that are just. Particulars control the generality of the pleadings. Their function is to make the opposing party "fully aware of the precise nature of the allegations made" against it: Philliponi v Leithead (1959) 76 WN (NSW) 150, 152; Pilato v Metropolitan Water Sewerage and Drainage Board (1959) 76 WN (NSW) 364. As modern case management has developed, timeframes within which particulars are to be delivered have been imposed under rules of court, practice notes and the general exercise of discretion by judges and registrars with managerial responsibility." 64I have earlier referred to the amount claimed in these proceedings and the way the Defendants had framed their amended Defence. I have also referred to the submission, made on behalf of Craigcare, regarding what steps it might be required to take if an amendment were permitted. Those steps, if taken, would have resulted in the matter having to be adjourned, part heard, until later in the year. Significant costs would be wasted because the matter could not have proceeded on the second day of the hearing, no doubt at some cost to each party. Additional court time, perhaps, another two days, would then be required. On the adjourned hearing, it may have been necessary for Mr Gillett to be available, once again. (He had given his address as one in Western Australia.) Finally, I refer to the position of the Defendants that they were not prepared to pay the disputed amount into Court pending the determination of the proceedings. 65I considered, in accordance with the "dictates of justice", having regard to s 56 of the Civil Procedure Act 2005 (NSW) concerning the "overriding purpose" of the Act and the rules of court in their application to civil proceedings, and taking into account the matters referred to above, that the amendment should not be permitted. 66Regrettably, that was not the end of the matter. During the Defendants' submissions, the issue of the two Invoices that had been referred to arose again. Ms Gordon referred to the following evidence by affidavit, given by Mr Bleyer, that had not been the subject of any objection by Craigcare: "37. On or about 22 September 2011, Superkite paid Mr Bacik $10,000 for fees incurred for reviewing the Craigcare File and preparing the draft LOI. A copy of the money transfer from Superkite to Mr Bacik is exhibited at page 155. I cannot locate a copy of the invoice pursuant to which the money transfer was made. 38. On or about 22 November 2011, Superkite received an invoice from Masud & Company for legal fees incurred advising in relation to the proposed joint venture between Superkite and Craigcare. A copy of the invoice from Masud & Company is exhibited at page 156 and a copy of the money transfer is exhibited at page 157. By providing a copy of this invoice I do not waive privilege in respect of the advice obtained or documents produced in respect of it. 39. On or around 23 December 2011, I provided instructions to Mr Stammers of Holman Webb to use the money deposited by Craigcare into the Holman Webb trust account to pay the legal fees incurred by Holman Webb in respect of the proposed joint venture with Craigcare and to apply the remaining money to other unrelated legal fees owed by Superkite to Holman Webb. I did so in an email. I have not exhibited the email to this affidavit because it contains instructions that are privileged." 67Mr Sirtes SC then objected to the Defendants' reliance upon this evidence. He stated that he had not thought it necessary to object to these paragraphs in the light of the application to amend having been refused, as he believed that the evidence was not relevant to the proceedings and that the Court would simply ignore it as being irrelevant. 68Ms Gordon stated that, for her part, she believed she was entitled to rely upon the evidence because it had not been objected to and because in her written submissions, she had stated: "35. Even if Craigcare's construction of the Agreement is accepted, the evidence clearly establishes that there has been no breach. Superkite used the JV Monies to pay the reasonable costs of facilitating the proposed joint venture, as follows: a. payment of invoices issued by Holman Webb for negotiating and drafting of the joint venture agreements in the amount of $34,893.50; b. payment of an invoice issued by Andrew Bacik for advising on and drafting the draft LOI in the amount of $10,000; and c. payment of an invoice issued by Masud & Company for advising on and drafting the joint venture agreements in the amount of $50,000. 36. The balance of the JV Monies, in the amount of $5,106.50, was retained by Superkite to cover its internal administrative expenses associated with negotiating the proposed joint venture. The evidence demonstrates that the time spent by Superkite attempting to negotiate the joint venture was not insignificant, such that the retention of this amount was not unreasonable. 37. The JV Monies were not directly used to pay the Bacik and Masud invoices. Rather, Superkite paid those invoices out of separately held funds and later instructed Holman Webb to use the JV Monies to pay other, unrelated, accounts. This was not a breach of the Agreement, which did not require Superkite to pay its expenses out of the funds deposited in the Holman Webb trust account. 38. If the Court finds otherwise, Craigcare has suffered no loss or damage from said breach, as the indirect approach that Superkite took to the payment of the Bacik and Masud invoices had no practical effect on Craigcare." 69Ms Gordon submitted that she was entitled to rely upon the evidence of Mr Bleyer on the issue of damages, if any, even if Superkite was not allowed to rely upon that evidence in relation to the amendment that had been refused. In this way, even if Mr Bleyer's evidence had been objected to, it would not have been rejected because of its relevance, or potential relevance, to that issue. (This submission was not made at the time of the application for leave to amend.) 70Mr Sirtes SC then made an application to re-open Craigcare's case to enable him to object to those paragraphs of Mr Bleyer's affidavit. He indicated that, if the Court did not grant leave to re-open, or if it granted leave and did not reject the evidence, he would wish to cross-examine Mr Bleyer, which cross-examination would take no more than one hour. 71Ms Gordon did not cavil with the proposition that Mr Bleyer, in the circumstances, should be made available for cross-examination on this issue. Each party agreed that no other additional evidence would be given, if this course were adopted, although Ms Gordon left open the prospect of making a further application to amend the amended Defence. 72In the circumstances, I formed the view that there had been, or appeared to be, a miscommunication or misunderstanding between, or error by, one or both of the legal representatives, and perhaps, by the Court (since the relevance of the evidence to the damages issue was not raised in the application to amend and the written submissions, identifying the point, had not been referred to during the course of argument), and that, in all the circumstances, despite a short adjournment being required to permit cross-examination, I should proceed in that way. 73Accordingly, the matter was adjourned, part heard, to enable the cross-examination to take place. The matter recommenced two days later for one half day. 74On 27 February 2014, Craigcare sought leave to file a Reply which was in the following terms: "1. It was an implied term of the agreement between [Craigcare] and [Superkite] that the Money would be used only to pay the reasonable legal costs and other expenses reasonably incurred by Superkite in relation to the proposed joint venture project. 2. [Craigcare] denies that Mr Andrew Bacik and Mr Robert Masud provided any services or work in relation to the proposed joint venture project. 3. In the alternative, if Mr Andrew Bacik and Mr Robert Masud did provide any services or work in relation to the proposed joint venture project, the amounts charged for their work and/or services was not reasonable." 75Counsel for the Defendants opposed leave being granted upon the basis that there had previously been no suggestion of the requirement for "reasonableness" and that there had not previously been a denial that Mr Bacik and/or Mr Masud had provided any services or work in relation to the joint venture project. 76Various parts of the Statement of Claim were then identified to counsel, following which Ms Gordon withdrew the part of the submission that related to no reference having been made to "reasonableness". (As the two Invoices had not been referred to in the Defence, or in the amended Defence, it was hardly surprising that the denial had not previously been made.) 77Bearing in mind that filing the Reply and the cross-examination of Mr Bleyer had been two of the matters raised in opposition to the amendment of the amended Defence, and following the grant of leave to Craigcare to file the Reply, the Defendants again sought to amend the amended Defence to raise the two invoices referred to in the Reply. There was, then, no opposition by Craigcare, and I granted leave to the Defendants to amend Paragraph 13 of the amended Defence by adding the following particulars: "(vi) Holman Webb invoice 186872 $3,895 (vii) payment to Bacik $10,000 (viii) payment to Musad & Co $50,000, and, (ix) payment company planners $1,402." 78In this way, it seemed to me that, finally, the real issues in dispute were identified. 79It then became necessary to deal with certain objections made to the affidavit of Mr Bleyer. This resulted in some of his previously rejected evidence being admitted, and the tender of an exhibit to his affidavit of 14 February 2014 (Ex. RB2). 80Subsequently, Mr Sirtes SC cross-examined Mr Bleyer.

The Documentary and other Evidence 81Next I shall review the communications between the parties at about the time the Money was deposited into Holman Webb's trust account and what followed. I shall also refer to the oral evidence of the witnesses. 82I should say that I formed the view that each of Mr Gillett and Mr Stammers was endeavouring to tell the truth and, in my view, nothing turns on the credit of either witness. 83I was less confident about the evidence of Mr Bleyer, not because I considered that he was being untruthful, but because it seemed that aspects of this matter were not of the same priority to him in light of there being many more financially significant transactions with which Superkite, and he, were involved. I shall return to some of his oral evidence later in these reasons to demonstrate why I formed this view. 84On 28 July 2011, Mr Bleyer sent a "DRAFT LOI" (Letter of Intent) to Mr Gillett, with a copy to Mr Stammers and to Mr Mitry. (Mr Stammers did not have anything to do with the preparation of the Letter of Intent.) The email stated: "Please find attached a DRAFT LOI for review by you on behalf of Craigcare and its professional advisors. Thereafter please feel free to place any questions or comments in writing. A conference call inclusive of the head of administration based in the USA, plus Rick Mitry and the Writer, plus any others on the Craigcare side can also take place to clarify any part. Once all is agreed, legal binding arrangements can be prepared for countersigning. After the existence of countersigned agreement(s) between the parties, banks can be approached in Australia to allow for bank to bank procedures to be undertaken and funding to occur." 85Attached to the email was a document, which appeared to be a letter addressed to Mr Gillett, with the word "DRAFT" emblazoned on the front page in large font. It appears to be a pro forma letter, with some details of the proposed joint venture between Craigcare and Superkite included, but in which there were blank spaces and omissions in the information to be completed. It is a reasonably lengthy document. 86The draft Letter of Intent began with the following passage: "This letter of intent ('LOI') summarizes the terms upon which Superkite Pty Limited ('Superkite') intends to proceed towards closing a business transaction with Craigcare Group Pty Ltd ('Craigcare')... The Parties intend to capitalize a jointly owned and controlled company with approximately $400-500 million to fund the expansion of the currently existing portfolio to 3500 to 4000 beds over the next 12 months followed by continued growth over the following four to five years of approximately 400 to 500 beds per annum and become one of the largest private operators in Australia (the 'Project')..." 87Mr Gillett gave evidence that the draft Letter of Intent "gave a broad picture of what we were going to do. There was no commitment to it but an outline, broadly speaking, of what the parties wanted to do but more in particular the purpose of the $100,000 deposit because at the time that is what was crucial." 88What follows in the draft Letter of Intent are separately numbered clauses. Clause 15 of the Draft LOI, entitled "Binding Nature of Letter", stated that it was intended that clauses 1 to 6 were "not intended to create or constitute any legally binding obligation between the Parties", but that clauses 7 to 12 "shall constitute the legally binding and enforceable agreement of the Parties". 89Clause 2 was entitled "Transaction Documents" and states: "The Transaction will be set forth in definitive agreements to be prepared, negotiated and executed by the Parties, including but not limited to a Joint Venture Agreement or any such similar document as may be required and such other documents mutually determined to be necessary by the Parties to carry out the intent of this LOI (collectively, the 'Definitive Agreements'). The Definitive Agreements are subject to approval by each Party's Board of Directors or Managers." 90Clause 9 provided: "Within one (1) banking day of the receipt of an email from Superkite's nominated bank substantially in the form attached hereto and marked Exhibit 2, Craigcare's attorney, or other mutually agreeable escrow agent, will release $100,000 from its escrow and distribute the funds to the below account of Holman Webb, Lawyers to cover Superkite's legal and administrative costs with respect to the preparation of the Joint Venture Agreement and the loan agreement, due diligence and incidental costs associated with the initial processing of the Transaction. Said fees are to be paid by wire transfer into the below trust account: ... [bank account details left blank] Superkite agrees that in the event that Superkite does not or cannot perform as per the terms and conditions of the counter signed Definitive Agreements, the $100,000 to cover legal and other costs will be refunded." 91(It will be necessary to return to the draft Letter of Intent later in these reasons, because it is the document alleged to have been prepared by Mr Bacik, for which he is said to have charged $10,000 that was paid by Superkite.) 92Mr Gillett, in cross-examination, accepted that he had read the draft Letter of Intent more than once and had discussed it with his legal adviser. He understood, and had proceeded upon the basis, that the Money was to be paid "to cover Superkite's legal and administrative costs with respect to the preparation of the Joint Venture Agreement" and the "loan agreement", "due diligence" and "incidental costs" of the Transaction. 93The following passage in cross-examination supports this conclusion: "HIS HONOUR: I think you and Ms Gordon are at cross purposes. Ms Gordon's question to you is not relating to the funds being withdrawn from that account which you seem to be focusing on. The question that is being asked of you is, what was the purpose for which the funds were paid into the account, so could you focus on that question. MS GORDON Q. When you paid the $100,000 into Holcombe [sic] Webb's trust account you knew that it would be used to cover Superkite's legal and administration costs with respect to the preparation of the joint-venture agreement, didn't you? A. Yes. Q. You also knew that it would be used in the preparation of any loan agreement, isn't that right? A. The costs associated with the transaction, yes. Q. In preparation of the loan agreement, isn't that right? A. For this transaction. Q. You also knew that it would be used for Superkite's due diligence costs, didn't you? A. For this transaction. Q. Is that a yes? A. Yes. Q. And you also knew that it would be used to pay Superkite's incidental costs of this transaction, isn't that right? A. Yes. Q. And you say that you relied on it being used for that purpose, don't you, or for those purposes? A. Yes." 94Mr Gillett, however, did dispute the circumstances in which the Money was to be disbursed by Holman Webb and stated that the costs referred to were required to be "reasonable". The following passage appears in the cross-examination: "Q. You would have to agree that there is no reference in paragraph 9 to those costs having to be reasonable, wouldn't you? A. There was in my email. Q. We will come to your email but would you agree that in paragraph 9 there is no reference to costs having to be reasonable, isn't that right? A. There is no reference to reasonable in that paragraph. Q. There is no reference in that paragraph to those costs being subject to Craigcare's approval, is there? A. Correct." 95Mr Bleyer was not asked any questions about this topic in cross-examination. He had, however, referred, in his first affidavit, to the Money being paid into Holman Webb's trust account "to meet the legal fees and other costs of Superkite associated with the joint venture negotiations". 96On 1 August 2011, further discussions between Mr Bleyer, Mr Mitry and Mr Stammers took place. 97On 2 August 2011, Mr Gillett sent an email to Mr Mitry, which email was forwarded to Mr Bleyer on 3 August 2011. In that email, Mr Gillett commented on the proposed terms set out in the draft Letter of Intent and stated that, subject to the resolution of certain matters relating to the terms of the joint venture and the consideration of, and receiving advice upon, certain documents, Craigcare was prepared to proceed with the joint venture negotiations with Superkite. 98Neither party signed the draft Letter of Intent. Similarly, no notice in the form of Exhibit 2 (referred to in Clause 9), or any document similar to Exhibit 2, was ever sent to Craigcare or its lawyers from any bank nominated by Superkite. As well, there never came into existence any "counter-signed Definitive Agreements". 99An email sent on 3 August 2011, from Mr Bleyer to Mr Mitry, with a copy, relevantly, to Mr Gillett and to Mr Stammers, provided: "The Writer is pleased to note that John Gillett has reviewed the DRAFT LOI again and to answer his questions we attach a list of requirements to allow for a proper and complete file to be given to CBA for their review and action. ... We look forward to receiving a reply and action from John Gillett on behalf of Craigcare to allow us the opportunity of completing the legal formalities and present a complete file to CBA in Sydney at the earliest opportunity. Please also find attached the bank co-ordinates for the Trust Account details for Holman Webb Lawyers, Attention A John Stammers for Craigcare to transfer the $100,000 to cover legal and other costs to allow us to proceed for agreement and the companies to be formed such as the SPV JV entity and move towards the banking part promptly. Please also find attached an overview for Superkite P/L and a CV for A John Stammers." 100Attached to the email was a page setting out the details for Holman Webb Lawyers' trust account, as well as a 2-page curriculum vitae for Mr Stammers. 101An email dated 4 August 2011, sent at 6:58 p.m., from Mr Gillett to Mr Stammers headed "Re: Craigcare/Superkite - Advance payment of DD Fees" states: "Your client Superkite Pty Ltd and Craigcare Group Pty Ltd have entered into preliminary discussions regarding a potential Joint Venture and we understand that you will be acting for Superkite. In order to facilitate the preparation of the formal Joint Venture documentation Craigcare has been asked to remit to your trust account and [sic] amount of $100,000 for costs to be incurred in the preparation of that documentation. Please find attached a transaction receipt for that transfer. Would you also please ensure the funds are not released from your trust account without my express consent and approval." 102(Mr Stammers accepted that "DD" in the email referred to "due diligence".) 103In response, Mr Stammers wrote an email dated 4 August 2011, sent at 7:24 p.m., stating: "Thank you. We need to agree on the procedure for the release of funds as the matter proceeds." 104An email dated 5 August 2011, sent at 11:56 a.m., from Mr Bleyer to Mr Stammers, with a copy being sent to Mr Mitry and to Mr Gillett, relevantly stated: "The $100,000 funds received is to cover legal fees and other costs for Superkite Pty Limited for this joint venture via a new and separate SPV-JV company to be formed. I will send the file over to Robert in Boston who has done these types of agreements before to prepare the agreement(s) for your review for Superkite and also for review by Rick Mitry at Mitry Lawyers for Craigcare to evaluate, if fine tuning is required before counter signing, this can be done. Robert will send you an invoice from his law firm for his firms [sic] account after completion and delivery of the said agreements. In the meantime the funds are to remain in your law firms [sic] trust account and only to be utilised to conver [sic] legal fees and other costs for this SPV-JV matter as approved in writing by the Writer." 105(The "Robert" is said to be a reference to Mr Robert Masud and his firm is Masud & Company. It is an Invoice, for $50,000, purportedly sent by his firm, which was the subject of part of the amendment already dealt with.) 106In response, Mr Stammers sent an email, at 3:04 p.m., dated 5 August 2011, to Mr Gillett and Mr Mitry, relevantly stating: "Money has been received! I suggest that I bill you as time has been spent and you approve any transfer from our trust account." 107Mr Stammers, subsequently, sent an email, at 5:02 p.m., to Mr Gillett, with a copy to Mr Mitry, relevantly stating: "Apparently there is an heads of agreement that governs the payment of funds. I think that Rick should instruct me as to the disposition of funds as he is your lawyer..." 108Mr Stammers gave evidence, which I accept, that he did not believe he had read the email from Mr Bleyer sent earlier in the day. He stated that had he done so, his statement in the email sent by him at 5:02 p.m. would not have been written in the terms that it was. 109Mr Gillett responded, by email stating: "Sounds fine to me." 110Mr Gillett accepted that Mr Bleyer thought that only he could provide the instructions for the payment out of the Money and had instructed his solicitors accordingly. He accepted also that he did not dispute what Mr Bleyer had stated in his email. 111There is no evidence of further discussions about the Money until about 21 September 2011. 112An email sent on 21 September 2011, from Mr Bleyer to Mr Stammers, with a copy sent to Mr Mitry and to Mr Gillett, stated: "To fully clarify in writing please note the following: Please prepare the agreement as per the LOI plus the change to profits to be shared 50/50 as per separate email sent to you earlier today in response to the email received from John Gillett recently. Also to make perfectly clear for the record John Gillett had no right nor does he have any right at this material time to instruct you or your firm in regard to the $100,000 paid into your firm's trust account. The said $100,000 was to cover the legal fees and costs of Superkite Pty Limited in the preparation of the legal binding agreement and cover costs between Ghazel Pty Limited, which in turn is 100% owned by Superkite Pty Limited, with Superkite Pty Limited is to be the funds provided as per the terms and conditions precedent in the proposed agreement. The $100,000 paid to Superkite P/L is refundable only if Ghazel Pty Limited together with Superkite Pty Limited cannot or does not comply as per the counter signed agreement otherwise the $100,000 is not refundable. John Gillett and his company have their own legal and professional advisors. You and Holman Webb only act for Superkite Pty Limited in this matter and not for John Gillett nor [sic] his company. The LOI was clear in the above said, John Gillett and his company has selected Rick Mitry and Mitry Lawyers to act for him and his company and all and any communication in regard to this matter should only be to the Writer and copying Rick Mitry at Mitry Lawyers together with a courtesy copy to John Gillett and his company as per his recent emails." 113An email sent on 22 September 2011, from Mr Gillett to Mr Bleyer, with a copy sent to Mr Mitry and Mr Stammers, stated: "Further to our discussions yesterday, we agree there is no conflict and or confusion as to the use of the $100,000 held in the Holman Webb trust account for this transaction. These funds are to be used to meet the legal fees and other costs of Superkite associated with this transaction. Will you kindly instruct Holman Webb to forward the draft Joint Venture agreements to our solicitors (Mitry Lawyers) as a matter of urgency. As you aware we had originally intended that this documentation be finalized by Friday 23rd September, 2011 to enable us to proceed with negotiations to purchase a number of assets." 114The negotiations between the parties as to the terms of the joint venture agreement, continued thereafter. 115On 21 December 2011, Mr Mitry sent an email to Mr Stammers, stating: "We are advised by our client that it will not at this stage be proceeding with the transaction that had been under consideration with your client. Accordingly, he requires immediate repayment of the Money paid into your trust account." 116On 22 December, Mr Stammers sent an email to Mr Gillett and Mr Bleyer (copied to Mr Mitry): "Mr Mitry has indicated that Craigcare wishes to withdraw from this transaction and has requested the return of the monies paid to our trust account in relation to this matter. I refer to the email below which makes it clear that the funds are to be used to cover the legal fees and other costs of Superkite. I will give a reconciliation of these times and a trust account statement shortly." 117On 22 December 2011, Mr Mitry sent another email to Mr Stammers in the following terms: "My client is aware of the email copied by you and is prepared to pay your reasonable costs as agreed or assessed." 118Mr Stammers responded by email dated 22 December 2011, in the following terms: "I will be writing to you in more detail shortly but the monies were to be used to cover all of Superkite's costs and expenses not just this Firm's legal fees." 119Mr Mitry responded a short time later, by email, in the following terms: "My client is aware that Superkite's reasonable costs and expenses are to be paid, however, he has instructed me that no money is to be released without his specific authority after he has considered the costs and expenses submitted through you." 120On 23 December, 2011, Mr John Van de Poll, a partner in Holman Webb wrote a document addressed to "Roland Husner": "I refer to a recent email from Craigcare's solicitors indicating that Craigcare is withdrawing from the transaction. I have sent you details of all accounts that I have rendered in relation to this transaction and which have been deducted from the $100,000 held in trust. The resulting balance of the $100,000 held in our trust account is $69,024.50. ..." 121Attached to the email was a draft letter that Mr Van de Poll suggested should be sent to Craigcare. A copy of the draft letter was not in evidence and no version of it was ever sent to Craigcare. However, the following passage appears in the cross-examination of Mr Stammers: "Q. What the letter was seeking was instructions to put on notice Craigcare and its solicitors of the intention to transfer the funds to Superkite, correct, the balance of the funds? A. Correct. Q. You will see in the final paragraph it says 'As we have other accounts owing by Superkite we propose to apply the balance held in the trust account in relation to the Craigcare matter in payment of those other accounts on 29 December 2011'. Now just pausing there, where it refers to 'other accounts owing by Superkite', these were other accounts concerning a range of different matters not the proposed joint venture with Craigcare, correct? A. Correct. Q. What you were basically saying to Mr Husner - what was basically being said to Mr Husner was that 'we propose to alert Craigcare solicitors and Craigcare to the fact that we intend on paying out the balance of the money to the trust account and we propose to do so on 29 December 2011'? A. Correct. Q. Is that your understanding? A. Correct. Q. And the fact was, was it not, that that $69,000 was notionally paid to Superkite but the money was then used to pay all of Superkite's - or some of Superkite's indebtedness to your firm in relation to other matters? A. Correct. Superkite didn't operate a cheque account and I believe that was the main motive behind the direction to pay. Q. You understood, did you not, that at this stage, 23 December 2011, that the money, the hundred thousand dollars in terms of its use, was not to be used for other matters, for other work that had been done unrelated to the proposed joint venture with Craigcare, correct? A. Correct. Q. You understood that what was being proposed to actually do with the $69,000 was contrary to the purpose for which those funds had been paid to your firm, correct? A. Not correct. Q. Why is what I have said not correct? A. The writer of this letter asked for confirmation that more than the balance in trust had been expended by Superkite under that paragraph 9 of the draft LOI and certain advice, I believe, was given to Superkite which I suspect is privileged as to Superkite's entitlement to those moneys. Q. I want to be clear with you about this, in the last paragraph what is suggested is that the $69,024.50 is going to be used by Holman Webb to pay other accounts of Holman Webb for matters that had nothing to do with the proposed joint venture with Craigcare which I understand is a proposition you have already accepted, is that correct? A. Correct. Q. The second thing I want to raise with you is this, you understood that the purpose for that $100,000 was as reflected in the penultimate paragraph, correct? A. Correct. Q. The purpose in the penultimate paragraph was different to the purpose in the final paragraph, correct? A. It is unrelated, yes." 122Mr Bleyer responded to the email sent by Mr Van de Poll in an email sent on 23 December 2011 to Mr Stammers. I shall refer to his response later in these reasons. 123After 23 December 2011, neither Craigcare nor Mr Mitry received any further communications from Holman Webb (until the Defence, which did not specifically identify how the Money had been expended). Craigcare was never provided with a trust account statement from Holman Webb. Mr Stammers gave evidence that Mr Bleyer specifically instructed him not to provide a copy of the Invoices to Craigcare. His evidence was that "We were instructed to make no contact to [sic] either [Craigcare or Mr Mitry]". 124An issue relates to whether any of the Money would be refundable if it was not used for the purposes identified in the draft Letter of Intent and otherwise. In this regard, I am satisfied that, in early August 2011, there was no specific discussion between the parties about this topic. 125On this topic, counsel for Superkite referred only to two documents, the first being the draft Letter of Intent, Paragraph 9 (the last paragraph). However, she accepted that nowhere in the document, was there anything written about what was to happen in the event that less than $100,000 was incurred for the stated purposes, or whether any surplus would, or would not, be refundable to Craigcare. 126The second document referred to was the email dated 21 September 2011, from Mr Bleyer to which reference was made. However, that post-dated the discussions held in early August 2011. 127Mr Gillett gave the following oral evidence on this topic: "Q. Paragraph 9 also says that Superkite will refund the $100,000 if it does not or cannot perform as per the terms of the counter signed agreements, doesn't it? A. That is correct. Q. Definitive agreement is defined in paragraph 2 of the letter of intent, isn't it? A. Yes. Q. And there is no reference in paragraph 9 or elsewhere in this document to the funds being refunded to Craigcare in any other circumstances, is there? A. No. Q. And you knew that when you paid the $100,000, didn't you? A. I again reiterate my understanding was that point 9 identified the uses which the funds could be put to and my understanding that the funds could only be expended on matters that were reasonable and that I had to consent to it as well. ... Q. You would agree, wouldn't you, that there is no reference in paragraph 9 to the hundred thousand dollars being refunded to Craigcare in any circumstances other than Superkite not being able to or not performing as per the terms and conditions of the countersigned definitive agreement? A. That is correct. Q. And you knew that there was no such reference in the letter of intent when you paid the hundred thousand dollars, isn't that right? A. In the letter of intent, that is correct. Q. When you paid the hundred thousand dollars was it at that point that you decided you needed to clarify who would have are control over the hundred thousand dollars? A. I can't recall when I decided who - at which point, but what I can tell you is on my recollection that the email that I sent across to Mr Bleyer - sorry to Mr Stammers indicated that the funds were to be released with my authority. Q. You didn't feel the need to negotiate that with Mr Bleyer, did you? A. It was non negotiable as far as I was concerned. It was my hundred thousand dollars that was being held in trust, in the solicitor's trust account. Q. That was your opinion, wasn't it? A. That was the facts. Q. You didn't discuss that with Mr Bleyer, did you? A. I didn't need to. They were the facts. ... Q. On 21 September 2011 Mr Bleyer had said to you that 'The hundred thousand dollars is refundable only if Gzell [sic] together with Superkite cannot or does not apply as per the countersigned agreement, otherwise the hundred thousand dollars is non refundable', isn't that right? A. That is what he said, but I strongly disagreed with it. Q. You didn't assert that in your conversation on 21 September? A. I did assert that in my conversation. Q. Did you not assert -- A. And I didn't put it in my email. Q. Mr Gillett, you did not disagree that the hundred thousand dollars was not refundable in your conversation on the 21st? A. I strongly disagreed in my discussion on the 21st and I said 'I will be seeking legal advice'. Q. Where have you used the word 'refundable' in that conversation, Mr Gillett? A. I have said, last paragraph, me, 'I will seek Rick Mitry's advice on his return from overseas as to how I could best protect my interests in respect of the money. In the interim I will forward you an email indicating there is no confusion over the use of the funds'. Q. There is nothing in that conversation that refers to whether or not the money was refundable, is there? A. Correct. Q. And there was nothing in your email on the following day about whether that money was refundable, was there? A. Correct. Q. And that is because you knew the hundred thousand dollars was non refundable? A. Incorrect. The hundred thousand dollars was in the solicitor's trust account and was to stay in the solicitor's trust account until I approved any expenditure. Q. Is it the case that you didn't say anything to Mr Bleyer about your hundred thousand dollars being non refundable because you did not want your disagreement on this issue to interfere with the joint venture negotiations? A. No. Q. You were happy for Mr Bleyer to believe that you agreed with him, weren't you? A. No, I disagreed with him strongly. Q. You never expressed that disagreement in relation to the refundable nature of the hundred thousand dollars, did you? A. There was no discussion about the refundability of it. We were talking about the expenditure of it. There were no discussion - in that discussion there was nothing discussion -- Q. Mr Gillett-- HIS HONOUR: Just a moment. Let him finish his answer. WITNESS: There was no discussion in relation to the refundability if in fact the transaction had finished or concluded. GORDON Q. Mr Bleyer raised that issue in his email on the 21st, didn't he? A. Mr Bleyer raised the issue as to who had the authority to approve the expenditure from the fund. Q. He also raised the issue as to whether or not the hundred thousand dollars was refundable, didn't he? A. He did. Q. And you did not in writing disagree with that? A. Not in writing. I strongly disagreed with his assertion during the discussion. Q. It is your evidence, isn't it, that the hundred thousand dollars was never intended to be a gift to Superkite? A. Absolutely." 128Mr Stammers gave the following oral evidence: "Q. ... Was there anything in the emails in early August that you were involved in that concerned the $100,000 paid into Holman Webb's trust account that imposed a condition concerning the refundability of the money? A. I am not aware, no. Q. The fact is that there was no emails in early August or indeed at any time up until 21 September 2011 that raised the issue of the refundability or non refundability of the hundred thousand dollars, is there? A. Emails between -- Q. Emails involving yourself - there was no reference until this email from Mr Bleyer which raised any issue about the refundability of the money? A. Emails from me to anyone? Q. Emails involving you, ie, cc'd to you, from you or to you? A. Can't find any, no." 129I agree with Craigcare's submission that neither Mr Gillett nor Mr Bleyer did anything that evinced an intention to vary the terms of the earlier agreement between the parties. The last Paragraph of Paragraph 9 to which reference was made, related to the event that "Superkite does not or cannot perform as per the terms and conditions of the counter signed Definitive Agreements", in which circumstance "the Money to cover legal and other costs will be refunded". That Paragraph does not relate to other circumstances in which the Money not used for those purposes would be refunded.

Tax Invoices of Holman Webb 130The first Tax Invoice, from Holman Webb, addressed to Superkite, headed "Craig Care", is dated 29 August 2011, being "Our fee for Services (as per attached Schedule) for $7,885 plus GST ($788.50) making a total claim of $8,673.50". The attached Schedule to the Tax Invoice refers to various attendances for work, including "incorporate new companies and review LOI", "research bonds and approve LOI", "incorporate companies and amend LOI", "reviewing JV agreement", and "dealing with C's lawyer". 131The second Tax Invoice, from Holman Webb, addressed to Superkite, headed "Craig Care", is dated 7 October 2011, being "Our fee for Services (as per attached Schedule) for $15,105 plus GST ($1,510.50) making a total claim of $16,615.50". The attached Schedule to the Tax Invoice refers to various attendances for work, including "prepare Terms Sheet", "profiles and info. to Barclays", "advice [on] structure of JV", "prepare JV agreement and advice", "amend JV agreement", "prepare project funding agt" and "prepare loan agreement". 132The third Tax Invoice, from Holman Webb, addressed to Superkite, headed "Craig Care", is dated 25 October 2011, being "Our fee for Services (as per attached Schedule) for $2,565 plus GST ($256.50) making a total claim of $2,821.50". The attached Schedule to the Tax Invoice refers to various attendances for work, including "prepare facility agreement" and "advice on tructure [sic]". 133The fourth Tax Invoice, from Holman Webb, addressed to Superkite, headed "Craig Care", is dated 21 December 2011, being "Our fee for Services (as per attached Schedule) for $1,330 plus GST ($133) making a total claim of $1,463". The attached Schedule to the Tax Invoice refers to various attendances for work, including "reading new draft documents" and "advice". 134The first Tax Invoice, from Holman Webb, addressed to Superkite, headed "AUSTRALIAN INVESTMENTS", is dated 27 July 2011, being "Our fee for Services" for $5,062.50 plus GST ($506.25) making a total claim of $5,568.75. There is no attached Schedule to the Tax Invoice. 135The second Tax Invoice, from Holman Webb, addressed to Superkite, headed "AUSTRALIAN INVESTMENTS", is dated 29 September 2011, being "Our fee for Services" for $16,957.50 plus GST ($1,695.75) and disbursements plus GST ($104.61) making a total claim of $18,757.86. There is no attached Schedule to the Tax Invoice. 136The third Tax Invoice, from Holman Webb, addressed to Superkite, headed "AUSTRALIAN INVESTMENTS", is dated 29 November 2011, being "Our fee for Services (as per attached Schedule)" for $10,687.50 plus GST ($1,068.75) making a total claim of $12,114.63. The attached Schedule to the Tax Invoice refers to various attendances for work, some of which do not appear to relate specifically to the joint venture. 137The fourth Tax Invoice, from Holman Webb, addressed to Superkite, headed "AUSTRALIAN INVESTMENTS", is dated 21 December 2011, being "Our fee for Services" for $3,095 plus GST ($309.50) and disbursements, plus GST, ($50.15) making a total claim of $3,454.65. There is no attached Schedule to the Tax Invoice. 138The fifth Tax Invoice, from Holman Webb, addressed to Superkite, headed "AUSTRALIAN INVESTMENTS", is dated 30 January 2012, being "Our fee for Services for $2,565 plus GST ($256.50) making a total claim of $2,821.50. There is no attached Schedule to the Tax Invoice. 139The first Tax Invoice, from Holman Webb, addressed to Superkite, headed "Raine Square Perth WA", is dated 29 August 2011, being "Our fee for Services" for $7,790 plus GST ($779) making a total claim of $8,569. There is no attached Schedule to the Tax Invoice. 140The second Tax Invoice, from Holman Webb, addressed to Superkite, headed "Raine Square Perth WA", is dated 29 September 2011, being "Our fee for Services" for $1,235 plus GST ($123.50) making a total claim of $1,358.50. There is no attached Schedule to the Tax Invoice. 141There is a Tax Invoice, from Holman Webb, addressed to Superkite, headed "MTNS/BONDS", dated 21 December 2011, being "Our fee for Services" for $1,900 plus GST ($190) making a total claim of $2,090. There is no attached Schedule to the Tax Invoice.

The Other two Invoices 142Masud & Company sent a "Pro-Forma Invoice" dated 2 November 2011 to Mr Stammers for "Craigcare/Supercare [sic] JV Fees and Costs" in the amount of US$50,000. The work done identified was: "COMMUNICATIONS WITH CLIENT; REVIEW RELEVANT DOCUMENTS; RESEARCH AND REVIEW ISSUES; COMMUNICATIONS WITH CLIENT; REVIEW RELEVANT DOCUMENTS; RESEARCH AND REVIEW ISSUES; ANALYZE AUSTRALIAN LAW RE JOINT VENTURES, HOSPITALS, FINANCINGS, COLLATERAL, GUARANTEES; PREPARE PRELIMINARY DRAFT JV AGREEMENT; REVIEW IMPACT ON LEGAL ISSUES AND CURRENT STATUS OF THE LAW AND EDIT SAME; ATTEND TO COMMUNICATIONS TO/FROM CLIENT; REVISE RE MODIFICATIONS OF JV FACTS, RESPONSIBILITIES AND SCHEDULING IN LIGHT OF NEW FACTS AND DOCUMENTS; ANALYZE CASE LAW RE SUBSTITUTION OF COLLATERAL, AMENDMENT OF GUARANTEES, BREACH OF GUARANTEE AGREEMENTS; REVISE AND EDIT JV AGREEMENT; COMMUNICATIONS TO/FROM CLIENT." 143I have earlier noted that a copy of the Invoice from Mr Bacik is not in evidence.

Documents Prepared and Work Said to have been done 144There is no dispute that Holman Webb prepared a Project Facility Agreement and a Shareholders' Agreement. A copy of each of those documents forms part of the evidence. 145In relation to nearly all of the work Mr Stammers referred to in the relevant Tax Invoices (apart from $3,895), Craigcare has admitted Superkite's entitlement. It is, therefore, unnecessary to say anything more about those Tax Invoices. 146In relation to Tax Invoice 186872, Mr Stammers gave evidence that part of that invoice related to the Craigcare matter. He identified individual narrations on the Invoice that related to legal costs. The total of the charge for that work was $3,895. (It appears to be acknowledged in Craigcare's further submissions, taking into account the criticisms that "a maximum amount of $2,707.50 excluding GST that was time spent by Mr Stammers on the Craigcare-Superkite joint venture and is recorded in invoice no. 186872. Including GST, this amount is $2,978.25".) 147Although there was some criticism made of Mr Stammers' evidence in this regard, there is no reason to disbelieve his evidence on this topic. He admitted that he had no independent recollection and that he had used the Tax Invoice and timesheet. In my view, he had no reason to overestimate the amount of time spent. I am, therefore, prepared to accept that this amount should be added to the total amount of $30,975.50 that Craigcare accepted as payable out of the Money. (Leaving aside the two Invoices (with a total value of $60,000) that remain in dispute, the amount of $5,129.50 may be refundable to Craigcare in any event.) 148Mr Bleyer gave evidence that, on or about 5 August 2011, he instructed Robert Masud, of Masud & Co, of Boston "to advise on the joint venture agreements between Craigcare and Superkite, the international and Australian taxation implications of the JV and the financing arrangements". 149There is vague evidence that the representatives of Craigcare may have been aware that Mr Bleyer intended to do so. The intention is disclosed in an email dated 5 August 2011, a copy of which was, apparently, sent to Mr Mitry. (I have said "may have been aware", because Mr Masud is simply referred to as "Robert in Boston". He is not otherwise identified in the email correspondence passing between the parties.) 150In relation to the "Joint Venture Agreement", it appears that Mr Masud may have been instructed to prepare such a document. Correspondence from him, dated 7 September 2011, to Superkite, reveals, firstly, that there were "some issues with it as it has been created from the ground-up", but that "we know what you need, have been busy at work on it, and will deliver it [to] you by the end of the week". 151Subsequently, on 19 September 2011, Mr Masud appears to have advised Superkite that the Joint Venture Agreement "has been in the hands of international tax counsel for over 10 days now". 152On 27 September 2011, Mr Stammers sent to Mr Mitry, a copy of a draft Shareholders Joint Venture Agreement, which was said to be "very much a work in progress as there are a number of matters which require discussion with your client". It is clear that the document was not a copy of the Joint Venture Agreement to which Mr Masud referred. It was a document that Mr Stammers had caused to be prepared. 153There are no documents evidencing any of the work said to have been done by Masud & Company. In particular, the draft Joint Venture Agreement referred to as having been in the hands of international tax lawyers was not produced. 154I have earlier referred to the draft Letter of Intent said to have been prepared by Mr Bacik. 155Craigcare tendered (Ex. P4) a copy of an email dated 23 December 2011, from John Van De Poll, to Mr Bleyer, which was in the following terms: "I refer to a recent email from Craigcare's solicitor indicating that Craigcare is withdrawing from the transaction. I have sent you details of all accounts that I have rendered in relation to this transaction and which have been deducted from the $100,00.00 held in trust. The resulting balance of the $100,000.00 held in our trust account is $69,024.50. You have indicated that your other costs and expenses in relation to this transaction including advising fees, accountancy fees, legal fees and expenses in relation to opening bank accounts and arranging for the finance for the transaction exceed the account held in trust. Accordingly you have asked us to pay the amount of the balance to Superkite. We attach a draft of a letter to be sent to Craigcare's solicitor notifying them of your request to remit the balance to Superkite. We believe that Craigcare and it's [sic] solicitors should be put on notice of the intention to transfer the funds as in a recent email from Craigcare's solicitor instructed that it is Craigcare's view that no money is to be released from our trust account without Craigcares [sic] specific authority after consideration of Superkites [sic] costs and disbursements. We agree with you that Craigcare's email to you, and us of 22 September 2011 has the effect that the $100,000 is to be used to meet legal fees and other costs of Superkite associated with this transaction without Craigcare having any right of approval. As we have other accounts owing by Superkite we propose to apply the balance held in the trust account in relation to the Craigcare matter in payment of those other accounts on 29 December 2011 and we note your instructions to do that as set out in an earlier email received from you today." 156Craigcare also tendered (Ex. P5) an email dated 23 December 2011 from Mr Bleyer to Mr Stammers headed "RE: Proposed JV with Craigcare". Relevantly, the email stated: "As you are aware, I am and is the ultimate 100% beneficiary of Superkite Pty Ltd and associated or affiliated companies clearly states herein that your firm is instructed not to send any letter as per draft attached to your below e-mail. The sole Director of Superkite Pty Ltd can only act as approved by the Writer. ... At all material time, John Gillett led the Writer to believe that Mr Gillett was serious and genuine in proceeding on the terms and conditions as first placed in writing in the LOI (Letter of intent) which was sent to him on the 28th July, 2011 for and behalf [sic] of Superkite Pty Ltd. Some changes were requested, in particular to increase his side of the profits to 50% as per the e-mail dated 21st September, 2011 in the same e-mail and as per telephone discussion between Mr Gillett and the Writer it was agreed between Mr Gillett and the Writer that we could only continue if Mr Gillett confirmed in writing that the $100,000 paid into the trust account of Holman Webb belongs to Superkite Pty Ltd to cover legal fees and costs of Superkite Pty Ltd. The Writer also requested for Mr Gillett to add that there is no conflict between parties in regard to any matter including in regard to the said $100,000. Furthermore that Mr Gillett by the Writer cannot instruct our lawyer only we can. Mitry Lawyers were allowed to act for Mr Gillett until or unless there exists any dispute. Holman Webb Lawyers received the funds ($100,000) from John Gillett or one of his companies to cover legal fees and costs of Superkite Pty Ltd, please review the e-mail from the Writer on September 21st and the reply e-mail from John Gillett on September 22nd, 2011, they speak in regard to this being the case as well as the LOI you/your firm acts for Superkite Pty Ltd, your firm does not act for Mitry Lawyers or John Gillett or his company or companies. Mr Gillett was able to review the LOI and decide on his own free will to make the $100,000 payment, which was made. Our policy for Superkite Pty Ltd the same policy that other companies in our group in Australia and overseas have had for a decade, which is that fees paid to law firms acting for us to cover legal fees and costs, including due diligence etc. are only refundable if Superkite Pty Ltd in this case (the same for our other companies) if we cannot or not [sic] comply as per any countersigned agreement, otherwise the fees voluntarily paid to Superkite Pty Ltd or any of our other companies are not refundable. The Writer refuses for others to interfere with or try to change our policies. Applicants like John Gillett and or his company were given clear choice to proceed or not after reviewing the LOI which was also copied to Rick Mitry at Mitry Lawyers. Nothing underhanded occurred even the required collateral security for the loan was clearly pointed out in the LOI. ... The Writer has no obligation to operate his business other than as per the policies he decides to conduct his business. No one forces any applicant to accept an LOI and pay whatever funds requested to cover our legal fees and costs. The writer decides what his time is worth and others who prepare the LOI, plus to cover due diligence and incidental costs, this is our policy for others to accept or decline. If we would send a letter as pr [sic] draft provided by you/your firm it could also allow for many clients of any of our companies for the past decade and in the future to try to use the same approach in trying to dictate terms instead of us deciding our policies. We have not and will not waive our rights at law. Please carry out the Writer's instructions today as per my e-mail yesterday...". 157Craigcare also tendered (Ex. P3) a copy of a Memorandum, dated 11 September 2012, from Mr Stammers to Mr Jonathon Casson, one of the partners of Holman Webb. The Memorandum was headed "Re: SUPERKITE AND CRAIGCARE GROUP". It provides a useful summary of the events involving the two companies which it is not necessary to repeat. It concludes: "Our client has confirmed that he incurred considerable expense with lawyers and tax advisers in the US prior to the preparation of the LOI and subsequently. I am not aware of the amount of those costs but the client has confirmed that those costs together with the firm's fees exceeded $100,000." 158In relation to the Masud & Company pro-forma Invoice, Mr Bleyer was unable to identify the person who made the request to Masud & Company to render the invoice, or to whom the request had been made. He said that he could not recall how the document, being the pro forma Invoice, physically came into his possession. He stated: "I am relevantly 99.9 percent confident that Mr Stammers would have received this or Superkite would have received it directly on its email address and would have - and Mr Stammers would have had to have a copy for his file as well as Heather Collins being provided it and I think a copy and some paperwork is in your plaintiff's side, given to the court as there is reference to it I think." 159He was unable to explain why, if Mr Stammers had, in fact, received it, the amount stated in the pro forma Invoice had not been paid out of the Money. He gave the following evidence in answers to some questions from me: "Q. You were also shown in the big folder page 472 which has the pro forma invoice? A. Yes sir. Q. And I think you observed, when it was pointed out to you by Mr Sirtes, that it was an invoice addressed to Holman Webb and Mr Stammers at Holman Webb? A. Yes sir. Q. Looking at paragraph 1 page 1 again of Exhibit RB2? A. Yes sir. Q. It appears subject to what Mr Sirtes put to you that an invoice was sent to Holman Webb lawyers marked for the attention of Mr Stammers? A. Yes sir. Q. Right. The question Mr Sirtes asked you which I didn't think you answered was in the circumstances where one of the purposes of the payment to Holman Webb of the $100,000... A. Yes sir. Q. was it would seem to pay Mr Masud's firm for the work it did as evidenced by page 1 of RB2? A. That's exactly correct. Q. Why was the amount not paid in accordance with that purpose? A. Because there were many other expenses your Honour that Superkite simply paid out of its own funds. We did not take any. No costs administrative, except as your Honour has called it before in the LOI, were requested to be paid for by the other party. We paid. Superkite paid many of these bills from its own funds. Q. But what I am troubled about Mr Bleyer-- A. And then the only thing I was asked to is to prepare - to provide the information to our lawyers just for the legal fees. They didn't want to know about all the other costs and there was information that we did not want the other side to have anyway. Q. I am sorry-- A. It wasn't taken out of that 100,000 directly. Superkite not only paid for this, it paid for the formation of a company in the Cayman Islands specifically for this matter. It had to arrange lines of credit. I had to open-- Q. Mr Bleyer, I am not asking you to focus on other amounts? A. I am saying that's the reason why this wasn't taken out of the trust account specifically. It was paid out of other funds of Superkite's and we simply got reimbursed if you like by - from the funds. Well, what happened actually, I said - I got asked by Holman Webb could they, since I've paid since Superkite has paid, paid the Masud and company invoice, paid all these other costs, could they take the 60 balance therefore since the money they at that stage believed belonged to Superkite for its use for expenses and legal costs and other expenses, it was really a shortcut. On reflection, the 60,000 should have been refunded to Superkite who had - I think I put about seven million dollars at that specific time into my own account so we had plenty of money. We could have simply taken the 60,000 to pay Masud's fees or any other fees we were entitled to claim against the $100,000 and paid for that amount that Holman Webb had told agreed that we were entitled to take and pay them directly. Q. I will try one more time Mr Bleyer-- A. Why wasn't it taken out of the 100,000? Q. That's what I asked you and that is what Mr Sirtes asked you so this is the third time that the question has being asked? A. Yes. Q. Why in accordance with what you appear to have written to Mr Masud and the understanding which seems to be-- A. Yes. Q. --this money was to be paid out of the 100,000 why was it not paid out of the $100,000? A. Good question. Q. It was Mr Sirtes' question Mr Bleyer? A. It is a good question your Honour. I am trying to understand it myself. Why wasn't it paid from those funds instead of Superkite's funds which is ultimately all my money anyway because that's where all the money comes from and why did Superkite have to pay for it and then take the fees in December. I think it was December your Honour that they took the moneys and asked for an authority to take those moneys. I can't recall the correct date. I am talking about the 100,000 in the trust account. Yes, why we did not pay it from the moneys of the trust account, I don't really recall sir accurately but we did pay it." 160I have earlier noted that there is not one document evidencing the actual work referred to that is said to have been done by Masud & Company. For example, the documents referred to as being with the tax advisers, were not produced and no "communications to/from client" (other than those specifically identified) are in evidence. As Ms Gordon conceded, "there is no work product in evidence at all": T 152.10 - 152.11. 161As importantly, there is nothing in the relevant Tax Invoices of Holman Webb, which suggests any communications between Masud & Company and Mr Stammers or with any other solicitor at Holman Webb. As it was Mr Stammers who was involved in the preparation of a number of documents, and did, in fact, prepare some which must be regarded as "relevant documents", one would have expected there to have been some communication, oral or in writing, between him and Masud & Company. 162For example, one would expect the documents prepared by Mr Stammers to have been provided to Masud & Company if it was that Mr Masud was to "review relevant documents". Otherwise, documents prepared by Masud & Company might have been made available to Mr Stammers. There is no evidence about either of these things occurring. 163Of course, Mr Stammers' Memorandum dated 11 September 2012 to Mr Casson, to which I have referred above, suggests that even then, Mr Stammers was not aware of the Masud & Company Invoice or the costs charged to prepare the draft Letter of Intent. 164Furthermore, there is nothing in the pro forma Invoice that identifies the time spent in carrying out the work and the person, or persons, involved in performing the work. There is no evidence of the verification of hours worked or the rate charged for the work alleged to have been done. 165Mr Bleyer's evidence in relation to Mr Bacik was: "Q. Mr Bleyer, is Mr Bacik a business associate of yours? A. No. Q. Is he someone who is involved in any capacity in companies of which you are involved, such as Hayman Private Equity? A. Yes, sir. He is the president of that company. Q. And Hayman Private Equity is a company which you are involved in in some shareholding capacity, is that correct? A. I understand it's ultimately through a trust for me or my family's benefit as part of a group of companies including the trust. Q. Mr Bacik is not a lawyer, is he? A. No, he does things like LOIs and, like, a managing director but they called them president in America. Q. Do you pay him money as in do you employ him? A. He gets a share of profits. Q. Now, do you have any documentation that identifies when the document that has been referred to as the LOI was received by you or by anyone with whom you are associated, such as Mr Stammers? A. Not on me. I'm only carrying my wallet, pen and a phone. ... Q. You asked Mr Stammers to prepare documentation for an anticipated joint venture? A. No not quite. At one material time, yes he was asked to, but at the same time I was concerned that Mr Stammers did not have the experience and this was the very first, and I think it is in writing somewhere, very first time that Holman Webb was going to be involved in a significant transaction involving 500 million dollars for a joint venture company. Because of that concern is why we had Andrew Bacik who since you gave another document here, who acts and still acts as President of Hayman Private Equity asked him to prepare the LOI for Holman Webb and the LOI has been subject to much of this case from what I have heard." 166In relation to the amount claimed for Mr Bacik, the draft Letter of Intent has been produced. But that document does not reveal its authorship. 167I also note that instructions for its preparation appear to have been given by email dated 25 July 2011 and it was returned under cover of email dated 28 July 2011. Otherwise, there is nothing that identifies the work done in the creation of the draft Letter of Intent, the time spent in carrying out the preparation of that document, and the person, or persons, involved in doing so. There is no evidence as to the verification of hours worked in preparing it or the rate charged for the work. As stated previously, no invoice identifying the work done, was produced. 168Nor is there anything, other than the amount and, perhaps, the recipient, which connects the payment of $10,000, sent by International Money Transfer, to the work said to have been done by Mr Bacik. 169Mr Bleyer gave evidence of "books of evidence that we can provide but a lot of it unfortunately is our intellectual property". There was no explanation, given in re-examination, about the "intellectual property" or how that reference could explain the lack of production of available documents. 170Whilst he explained the failure to call Mr Masud with whom he said he had lost contact "for some time", he did not explain the failure to call Mr Bacik. As referred to earlier, Mr Bacik "acts and still acts as President of Hayman Private Equity". Nor did Mr Bleyer or Mr Stammers explain the failure to produce any documents that could assist in establishing the work done by each of Masud & Company and by Mr Bacik. 171In this regard, senior Counsel for Craigcare reminded me of the common sense principle that if a party has available evidence which would assist it in obtaining a finding favourable to it, then that party can be expected to lead that evidence and that the greater the failure of a party bearing the onus of proof to call available witnesses with such evidence to give, or to produce available documents, the harder it is to satisfy that onus. 172Mr Sirtes SC also reminded me that matters relating to the work alleged to have been done were peculiarly within Superkite's knowledge and that it was the party best able to provide the information that was lacking on this topic. 173I remember that in Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345, French CJ, Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ wrote, at [165]: "Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard." 174Because of the nature of Craigcare's submissions on the genuineness of the Masud & Company pro forma Invoice and the work said to have been done by Mr Bacik, Ms Gordon reminded me of s 140 of the Evidence Act 1995 (NSW), which prescribes the standard of proof in a civil proceeding before this Court and which provides: "140 Civil proceedings: standard of proof (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities. (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence; and (b) the nature of the subject-matter of the proceeding; and (c) the gravity of the matters alleged." 175She submitted that, ordinarily, the more serious the consequences of what is contested in litigation, the more a court will have regard to the strength and weakness of evidence before it in coming to a conclusion. As was stated in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449, at 449-450, which was decided before the Evidence Act was enacted: "The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct." 176However, as has recently been reaffirmed by the Court of Appeal in Bibby Financial Services Australia Pty Ltd v Sharma [2014] NSWCA 37 at [205], s 140(2) provides for no new principle but simply reflects the principles stated in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 that there should be clear and cogent proof of serious allegations. The section does not change the standard of proof, but merely reflects the perception that members of the community do not ordinarily engage in serious misconduct. 177The allegations made by Craigcare on this topic are serious. Essentially, at least in relation to the pro forma Invoice from Masud & Company, they amount to dishonesty by Superkite in asserting that work was done or services provided, when, in truth, they were not. In relation to Mr Bacik, they amount to an allegation of gross overcharging, which, of course, also involves dishonesty. 178I also remember the following statement in Rejfek v McElroy [1965] HCA 46; (1965) 112 CLR 517, at 521, per Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ: "Proof of fraud should be clear and cogent such as to induce, on a balance of probabilities, an actual persuasion of the mind as to the existence of the fraud".

Payments out of Trust Account 179The Trust Ledger of Holman Webb headed "Superkite Pty Limited" reveals a credit of $100,000 on 26 August 2011. It then reveals a payment of $1,402 on 29 August 2011, for "Company Planners"; a transfer, from the trust account to the office account of Holman Webb, of $25,289, on 18 October 2011; a transfer of $2,821.50 to Holman Webb in November 2011 as "payment of costs & disb"; a transfer of $2,821 to Superkite in December 2011 as "costs & disb"; and a transfer of $1,463 to Holman Webb in January 2012 as "costs & disb". 180There is no evidence of any authority given by, or on behalf of, Craigcare, to disburse any of the amounts disbursed. It is accepted that no such authority was given but, for the Defendants, it is submitted that it did not have to be. 181Nor is there any evidence that Mr Stammers informed Mr Gillett of the disbursements referred to having been made at any time.

Other Payments 182There is a copy of an International Money Transfer, dated 22 September 2011, for $10,000, from Superkite. 183There is an International Money Transfer, dated 20 January 2012, for $50,000, from Superkite. 184Neither of the payments, of itself, establishes that it was for the work alleged to have been done for the purposes for which the Money had been paid, or that the amount claimed was reasonable. 185As to the balance of the Money retained, whilst it has been submitted that "[t]he balance of the JV Monies ... was retained by Superkite to cover its internal administrative expenses associated with negotiating the proposed joint venture", there is no evidence demonstrating the time that was spent by Superkite attempting to negotiate the joint venture. I simply have no evidentiary basis for concluding "the retention of this amount was not unreasonable".

The Submissions 186In summary, counsel for Craigcare, submitted: "... these are simple proceedings which involve a claim by the Plaintiff for the return of funds which the Defendants have refused to repatriate in circumstances where the purpose for which those funds were provided did not, in large measure, come to pass. ... There will be forensic debate and legal argument, raised mainly by the ornate and technical arguments employed by the Defendants, in relation to the nature of the contract. For the Plaintiff's part, its contention remains a simple one: the money was paid by Craigcare so that it could be utilised in relation to reasonable legal costs and other reasonable expenses incurred in drafting documentation for the proposed joint venture project. The Defendants have confected an argument that the $100,000 was agreed to be treated by the parties as some sort of deposit by Craigcare which would be forfeited to Superkite in the event that Superkite did not or could not perform the terms and conditions of the "signed agreements". On the Defendants' construction of the agreement, if Craigcare, on 5 August 2011 (the day after it paid the money into Holman Webb's Trust Account), decided not to progress the transaction any further then Superkite could take the $100,000 and keep it. This novel argument is defeated by the evidence or, more to the point, the lack thereof. ... No information as to the use of those funds was provided to Craigcare before the institution of these proceedings. Only by utilising the Court's powers to issue a subpoena to Holman Webb and, thereafter, receiving the affidavit evidence of Roland Bleyer, has the Plaintiff been informed of how the $100,000 has been expended. Once the truth emerged the reason for the Defendants' obfuscation became obvious. The vast proportion of the money was used for purposes unrelated to the proposed transaction in breach of the terms upon which the money was provided. ... Expenses associated with the JV project were in the amount of $34,432.75. The Court should note that the Plaintiff accepts that this money was properly expended pursuant to the agreement (the subject of these proceedings). The Plaintiff's claim is for the repayment of the balance." 187In summary, in relation to the contractual claim, counsel for Superkite submitted: (a) There was no agreement as to the manner in which the amount paid was to be held or expended; (b) In the alternative, the parties entered into an agreement on 22 September 2011 on the terms set out in Paragraph 9 of the draft LOI and repeated in the email from Mr Bleyer to Mr Stammers, Mr Gillett and Mr Mitry on 21 September 2011. Those terms are as follows: (i) Craigcare was to pay the JV Monies into an account held by Holman Webb; (ii) The purpose of the payment of the JV Monies was to pay Superkite's legal and other costs of facilitating the documentation and formalisation of the joint venture; and (iii) Superkite would only refund the amount to Craigcare if Superkite did not, or could not, perform the terms and conditions of any signed agreements entered into by the parties to give effect to the proposed joint venture. Superkite maintained that "there was no breach" because it validly used the Money "to pay for expenses it incurred associated with the proposed joint venture". In this way, notwithstanding that the joint venture negotiations eventually failed, the "very limited" conditions for reimbursement outlined in Paragraph 9, were not met. While Superkite accepted that the Money was used, in part, "to pay other, unrelated accounts", it asserted that doing so did not amount to a breach of the agreement. Significantly, Superkite maintained that the Money was not held on trust for Craigcare but, rather, was "to be at Superkite's free disposal" to use with "unfettered discretion". (c) Superkite also submitted that terms regarding the reasonableness of any expenses and/ or the provision of advice to Craigcare as to the expenses that were incurred ought not be implied into the agreement. (d) Finally, in the alternative, Superkite asserted that "Craigcare has suffered no loss or damage from" any breach of agreement that may have occurred. 188Counsel for Superkite also submitted that there was neither a breach of trust nor a breach of fiduciary duty by Superkite. Specifically, it was maintained that "[t]here was no mutual intention that the JV Monies should not become part of the assets of Superkite" and that, because "no such trust arose", "Superkite did not owe a fiduciary duty to Craigcare". 189Alternatively, counsel for Superkite submitted that any breach of trust or fiduciary duty by Superkite was not dishonest or fraudulent. Mr Bleyer held the genuine and reasonable belief that Superkite was only required to refund the Money in the limited circumstances set out in paragraph 9 of the draft LOI. This belief was induced in him by Mr Gillett's own conduct, including but not limited to his email to Mr Bleyer of 22 September 2011, in which he stated that there was "no conflict and or confusion as to the use of the JV Monies". This statement was made following Mr Bleyer's email of 21 September 2011. It follows that it could not be considered dishonest or fraudulent for Mr Bleyer to have directed Holman Webb to disburse the Money in accordance with his instructions rather than return those funds to Craigcare. 190Finally, counsel for Superkite submitted that Craigcare ought be estopped from "asserting breach of contract and breach of trust" because those assertions are "inconsistent with the assumptions [Craigcare] induced in Superkite". 191In respect of the second Defendant, Mr Stammers, counsel for Superkite submitted that Mr Stammers could not be held "liable for assisting Superkite with its breach of trust or fiduciary duty". Even if Superkite were to accept that those breaches had occurred, which it did not, it was maintained that Mr Stammers could not be accessorily liable because: (i) "any breach of trust or fiduciary duty by Superkite was not dishonest or fraudulent"; and (ii) "Mr Stammers did not have sufficient knowledge of the breach of trust to be held liable". Specifically, the conduct of Mr Gillett "reasonably led Mr Stammers to believe that Craigcare had agreed that the JV Monies were non-refundable" such that "Mr Stammers could not and should not have been expected to know, or suspect, any dishonest or fraudulent breach of trust by Superkite." (iii) By the time the alleged breach of trust occurred, Mr Stammers had very little to do with the transaction and since he was not a partner in Holman Webb he had no decision making authority with respect to the application of the Money.

Whether there was a Contract 192This is not a case of a written agreement between the parties. Accordingly, the "essential question" to decide is "whether the parties' conduct, including what was said and not said, and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential terms of a contract". Then, "if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract": Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424, per Allsop J (as his Honour then was), at [369]. 193As Basten JA wrote in Hendriks v McGeoch [2008] NSWCA 53, at [39]: "Whether a contract exists between particular parties is a matter to be inferred from an objective assessment of the circumstances, including the communications between the parties." 194The principles were also summarised by Macfarlan JA, with whom Beazley JA agreed, in Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44: "The decision of the House of Lords in Brogden v Metropolitan Railway Co (1876-77) 2 App Cas 666 establishes that the conduct of parties may give rise to a contract. It was made clear however that the character and circumstances of the conduct must indicate unambiguously that the parties intended to contract. For example the Lord Chancellor said about the conduct in question in that case that "no explanation can be given of it unless it refers to the contract in question" (at 678) and that the conduct was "referable in my mind only to the contract ..." (at 680). Lord Hatherley spoke in similar terms about the conduct: It does establish a course of action on the part of the Plaintiffs of such a character as necessarily to lead to the inference on the part of the Defendants that the agreement had been accepted on the part of the Plaintiffs, and was to be acted upon by them; and they did act upon it accordingly (at 686). Likewise, Lord Selborne said that "it appears to me that every single circumstance points quite unequivocally to this agreement" (at 689). In Empirnall Holdings Pty Ltd v Machon Paull [1988] 14 NSWLR 523, McHugh JA (with whom Samuels JA agreed) said in relation to conduct held to give rise to the contract in question in that case that "it is not an acceptable conclusion that Machon offered to perform the work on some basis other than that contained in the written document" (at 535F-G). He went on to indicate why other explanations of the conduct were not open. In Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Ipp AJA (with whom Mason P agreed) said, citing Lord Hatherley in Brogden, that "for conduct to amount to implied acceptance of an offer, it must be 'of such a character as necessarily to lead to the inference on the part of the Defendants that the agreement had been accepted on the part of the Plaintiffs, and was to be acted upon by them'" (at [162]). Not only must the conduct point to the existence of a contract but it must point to the existence of the contract in the terms alleged in the proceedings. As stated by McHugh JA in Empirnall: The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted (at 535) [5]-[9]." 195Counsel for the Defendants accepted that a binding contract only arises if the parties, by their words or conduct, mutually communicate their respective assent to being legally bound by terms capable of having contractual effect: Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, per McLelland J, at 627F. 196If a binding contract is found to exist, and if it is a commercial contract, "unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result": Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7, at [35]. 197In relation to the implication of the term of reasonableness, I refer to what was written in OneSteel Manufacturing Pty Ltd v United KG Pty Ltd [2006] SASC 119; (2006) 94 SASR 376 (Debelle J), although that case concerned a written building contract. Nevertheless, some of the observations made in that case were made at a level of generality rendering them applicable to the agreement made in this case: "As a matter of general principle and ordinary commercial common sense, it is quite obvious that, in the absence of a clear expression to the contrary, a provision in a building contract which entitles the contractor to be reimbursed for costs incurred will be subject to an implied term that the cost will be reasonably and properly incurred. In the absence of such a provision, the building owner has an entirely open-ended obligation or, looking at the other side of the coin, the contractor has been handed a blank cheque. Such a contract would put a premium on inefficiency and extravagance. There would be no proper accountability for incompetent or unnecessary work. There are, I think, compelling reasons why it is proper to imply a term that Reimbursable Costs should be reasonably and properly incurred." 198I am prepared to imply a term of "reasonableness" in this case. Whilst I accept that the agreement between the parties might very well have required the "legal and administrative costs" and "due diligence and incidental costs" of Superkite, calculated on the indemnity basis, to have been paid, this would not prevent the implication of the term of reasonableness of those costs. Otherwise, the agreement would put a premium on inefficiency, extravagance and non-accountability.

Whether there was a Quistclose Trust 199The label "Quistclose trust" is a shorthand expression, designed to describe a particular method by which a relationship of trustee and beneficiary is created: Zhong v Wang [2006] NZCA 242; (2006) 5 NZ ConvC 194,308, at [64]. It is not a distinct species of trust and must satisfy the ordinary requirements for any private trust. There is no need for particular caution in drawing the inference that a trust was intended: Mario Salvo v New Tel Ltd [2005] NSWCA 281, per Spigelman CJ, at [34]. 200It derives from the decision in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 in which Lord Wilberforce wrote (at 580-582): "There is surely no difficulty in recognising the co-existence in one transaction of legal and equitable rights and remedies: when the money is advanced, the lender acquires an equitable right to see that it is applied for the primary designated purpose (see Re Rogers where both Lindley and Kay LJJ explicitly recognised this): when the purpose has been carried out (ie, the debt paid) the lender has his remedy against the borrower in debt: if the primary purpose cannot be carried out, the question arises if a secondary purpose (ie, repayment to the lender) has been agreed, expressly or by implication: if it has, the remedies of equity may be invoked to give effect to it, if it has not (and the money is intended to fall within the general fund of the debtor's assets) then there is the appropriate remedy for recovery of a loan. I can appreciate no reason why the flexible interplay of law and equity cannot let in these practical arrangements, and other variations if desired: it would be to the discredit of both systems if they could not. In the present case the intention to create a secondary trust for the benefit of the lenders, to arise if the primary trust, to pay the dividend, could not be carried out, is clear and I can find no reason why the law should not give effect to it." 201It is not limited in its application to money paid for the purpose of discharging debts but can apply where the funds are to be applied for other purposes: George v Webb [2011] NSWSC 1608, per Ward J (as her Honour then was) at [199]. 202In Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) [1978] HCA 45; (1978) 141 CLR 335, Gibbs ACJ (Jacobs and Murphy JJ agreeing) held, at 353, that a Quistclose trust would not arise where the intention of the parties was that "the money was to form part of the general assets of the appellant, to be used as it wished". His Honour noted that the decision: "... is authority for the proposition that where money is advanced by A to B, with the mutual intention that it should not become part of the assets of B, but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails the money will be repaid, and the arrangement will give rise to a relationship of a fiduciary character, or trust." 203In Raulfs v Fishy Bite Pty Ltd; Fishy Bite Pty Ltd v Raulfs [2012] NSWCA 135, Campbell JA (Meagher and Barrett JJA agreeing) observed, at [48], that: "[I]t is now clear that in deciding whether there is an intention to create a trust, the court ascertains that intention by inference from the outward manifestations of intention: Byrnes v Kendle [2011] HCA 26 ; (2011) 243 CLR 253 at [53]-[59], [102]-[115]. Thus, the task of ascertaining whether there is an intention to create a trust and, if so, on what terms is a similar one to ascertaining the intention of parties to a contract for the purpose of deciding whether there is an intention to enter contractual relations and the terms of any contract that has been entered." 204In Legal Services Board v Gillespie-Jones [2012] VSCA 68, at [56], the Court wrote: "Critical to the establishment of the trust is an intention that the moneys are advanced for an exclusive and specific purpose and that those funds are not to form part of the assets of the trustee." 205In determining the intention, the court will have regard to the language employed by the parties, the nature of the transaction, and the circumstances surrounding the relationship: Compass Resources Ltd v Sherman [2010] WASC 41; (2010) 42 WAR 1, at [69]. 206P W Young, C Croft and M Smith, in On Equity (2009, Thomson Reuters), at [6.1020], conclude that: "The exact nature of the Quistclose trust is really only of academic interest, but the debate is one that intrigues some academic lawyers. The better view is that there is nothing special in theory about a Quistclose trust; it is merely an illustration of a person paying over money to which an obligation attached, and the purpose failing." 207In Robert Chambers' paper, 'Restriction of the use of Money', in W Swaddling (ed), The Quistclose Trust: Critical Essays (2004, Hart Publishing), at 77, the learned author states: "The essential feature of every Quistclose trust is that money is paid by one person to another with a condition attached to its use. The money may be cash or any form of equivalent value, such as a cheque or bank account. A condition restricting the use of other assets, such as land, goods or intellectual property, will not produce a Quistclose trust; nor will a condition that does not restrict B's use of money received, but merely requires B to pay an equivalent sum of money to someone or for some purpose." 208It is "the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries": Kauter v Hilton [1953] HCA 95; (1953) 90 CLR 86, at 97. But a trust would not be uncertain merely because the actual persons to whom the distribution of the Money would be made cannot be known in advance of the date of distribution. It is sufficient that upon that date those persons can be ascertained with certainty: Kinsela v Caldwell [1975] HCA 10; (1975) 132 CLR 458, at 461. 209The intention of the parties is to be inferred from their language, the nature of the transaction and the relevant circumstances surrounding their relationship: Walker v Corboy (1990) 19 NSWLR 382; Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491, 502-3 per Gummow J; Salvo v New Tel Ltd, at [33]-[34] per Spigelman CJ. 210In On Equity, at [6.1020], the learned authors state, immediately following the passage quoted above, that: "Cases in this area will often depend on a close analysis of the facts, and in particular, whether the person who provided the money annexed a trust or equitable obligation that it was only to be used for the nominated purpose. The mutual intention of the parties and 'the essence' of their bargain will be important. A trust will not necessarily arise just because a lender inquires into the purpose for which a loan is sought and money is paid over for that particular purpose." 211In McManus RE Pty Ltd v Ward [2009] NSWSC 440; (2009) 74 NSWLR 662, Palmer J (at [25]) noted that whether the moneys had been kept separate from other moneys may be relevant. He wrote: "In cases where no express or clearly implicit intention to create a trust is shown, such as where the parties give no actual thought to the matter, whether or not there was an intention that the subject monies be kept separate from the other general monies of the recipient is often decisive of the question whether the recipient is a trustee or merely a debtor: see, for example Henry v Hammond [1913] 2 KB 515, at 531; Walker v Corboy (1990) 19 NSWLR 382, at 397 to 398; Salvo (supra) at [38]; Re Australian Elizabethan Theatre Trust [1991] FCA 344; (1991) 30 FCR 491, at 505 to 506. If the borrower in Quistclose had not set up a special and separate account to receive the loan moneys in order to pay a dividend, and if the lender had paid the moneys into the borrower's overdraft account, it would have been impossible, on the other facts of the case, to deduce a common intention that the moneys were to be held on trust until the purpose of the loan was achieved." 212Finally, it is clear that the onus of proof lies on those who assert that a trust was created: George v Webb, at [214].

Fiduciary Duty 213In Pilmer v The Duke Group Ltd (In Liq) [2001] HCA 31; (2001) 207 CLR 165, at [74], the judgment of the plurality approved what Gaudron and McHugh JJ said in Breen v Williams (1996) 186 CLR 71 at 113 as follows: "In this country, fiduciary obligations arise because a person has come under an obligation to act in another's interests. As a result, equity imposes on the fiduciary proscriptive obligations - not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach. But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed." 214In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, Mason J, at [70], explained the relationship of fiduciary obligations and contractual rights and obligations as follows: "That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations, it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction." 215In Amaltal Corporation Ltd v Maruha Corporation [2007] NZSC 40; [2007] 3 NZLR 192, at [21], the Supreme Court of New Zealand recognised that even in commercial relationships of a generally non-fiduciary kind, there may be aspects of the relationship that engage fiduciary obligations. These will arise because in that particular aspect of the relationship, one party is entitled to rely upon the other for the loyal performance of some function: "... in the nature of that particular aspect of the relationship one party is entitled to rely upon the other, not just for adherence to contractual arrangements between them, but also for loyal performance of some function which the latter has either agreed to perform for the other or for both or has, perhaps less formally, even by conduct assumed." 216On the issue of breach of fiduciary duty, in Ying v Song [2010] NSWSC 1500, Ward J (as her Honour then was), stated at [263]: "In Brand v Monks [2009] NSWSC 1454, I noted (at [348]) that the critical feature of a fiduciary relationship (as recognised in Hospital Products) is the undertaking or agreement to act on behalf of or in the best interests of another person in the exercise of a power or discretion which would affect in a legal or practical sense the interests of the other person. While the existence of a contract does not exclude the co-existence of concurrent fiduciary duties (and it is recognised that the contract may well be their source) (per Lord Browne-Wilkinson in Henderson v Merrett Syndicates Limited [1995] 2 AC 145, at 206) it is also recognised that 'evaluation of contract terms between the parties is still the primary consideration in determining whether a relation is fiduciary. If there is a contract, and the contract allocates rights and duties between its parties, then fiduciary characterisation may be simple' (Glover J, Commercial Equity: Fiduciary Relationships, Butterworths, 1995, at [3.26])." 217Her Honour went on, at [265] - [267]: "A fiduciary relationship exists where a person has undertaken or agreed to act for or on behalf of or in the interests of another in the exercise of a power, and not in his own interests (Hospital Products, Gibbs CJ, at 68-72; Mason J (as his Honour then was), at 96-97, 99, 102-103; Wilson J, at 118; Deane J, at 122-123; Dawson J, at 140-149). The duty often arises where there is a relationship of trust and confidence (Hospital Products, Gibbs CJ, at 69) or where one person undertakes to perform a task or fulfil a duty in the interests of another (Breen v Williams (1986) 186 CLR 710, Brennan CJ, at 820 and Gaudron and McHugh JJ, at 107). In what is described as the well known formulation of the circumstances that give rise to fiduciary obligations (Cordon v Lesdor [2010] NSWSC 1073, McDougall J, at [266]), Mason J (as his Honour then was) in Hospital Products, stated (at 96-97): The critical feature of these [fiduciary] relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. Recently, in Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229, (a decision considering whether a financial adviser owed fiduciary duties) Young JA stated (with whom Hodgson and Macfarlan JJA agreed) (from [62]): Basically, a fiduciary is a person who undertakes or had thrust upon him or her by the law an obligation to act for the benefit of another. This flows from Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; 156 CLR 41, 67. Although, as B H McPherson demonstrates in 'Fiduciaries: Who are They?' (1998) 72 ALJ 288 at 289, that statement is not open to too critical an examination, it is a useful starting point. As McPherson says at 290-1, the law contrasts the position of people who are at arm's length and accordingly can act solely in their own interests with people who have assumed by contract or conduct the burden of acting in another's interests, or to look at the matter from the other person's viewpoint, 'Have I surrendered control of this function to another in whom I have confidence will be acting in my interests?' An early statement in this area was made by Brennan J in Daly v Sydney Stock Exchange [1986] HCA 25; 160 CLR 371, 385, where he said: Whenever a ... person who holds himself out as having expertise in advising on investments is approached for advise on investments and undertakes to give it, in giving that advice, the adviser stands in a fiduciary relationship to the person whom he advises. There is no doubt that at least some investment advisors will owe fiduciary duties. However, it is an error to think that merely because one can put the tag 'investment advisor' on a defendant that he or she will be a fiduciary: Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165, 197. It will depend on the circumstances of the case, ASIC v Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; 160 FCR 35, 75 at [266]. Examples of financial advisers not being fiduciaries are provided by Pavan v Ratnam (1996) 23 ACSR 214 (NSWCA); Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321." 218Relevant to this case, what must be asked is whether the circumstances that resulted in the Money being held by Holman Webb were such that Craigcare was reasonably entitled to, and did, place confidence and trust in Mr Stammers in not disbursing it other than for purposes for which it had been paid.

Accessorial Liability 219Generally, the liability of an accessory for breach of trust or fiduciary duty is divided into at least two broad, and potentially overlapping, classes of case: liability as a result of the receipt of 'trust' property or other property the subject of a trust or fiduciary relationship ('recipient liability' or 'knowing receipt') or as a result of assisting in the breach of trust or fiduciary duty ('knowing assistance'), or: Barnes v Addy (1874) 9 Ch App 244, 251-2. 220For the case involving knowing assistance, liability depends on whether the alleged accessory assisted in the requisite breach by the fiduciary or trustee and whether such conduct constitutes an equitable wrong. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, it was held that the answer turns upon what the alleged accessory knew, or ought to have known, of the breach of trust or fiduciary duty. 221At [160] and [163], it was said: "As conventionally understood in Australia, the second limb makes a defendant liable if that defendant assists a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary. ... ... [T]here is a distinction between rendering liable a defendant participating with knowledge in a dishonest and fraudulent design, and rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design. The decision in Royal Brunei has been referred to in this Court several times but not in terms foreclosing further consideration of the subject in this Court, in particular, further consideration of the apparent necessity to displace the acceptance in Consul Development Pty Ltd v DPC Estates Pty Ltd of the formulation of the second limb of Barnes v Addy were Royal Brunei to be adopted in this country. Until such an occasion arises in this Court, Australian courts should continue to observe the distinction mentioned above and, in particular, apply the formulation in the second limb of Barnes v Addy." 222At [182] - [183], the court wrote: "Say-Dee ... made the submission that in Australian law the 'dishonest and fraudulent design' requirement had been superseded and that it was sufficient to plead and prove any knowing participation in a breach of trust or fiduciary duty, save for 'a de minimis breach'. However, Say-Dee accepted that this qualification had not been stated in Consul. In its final form, the submission put by Say-Dee was that a defendant who had not received a direct financial benefit "but has participated in a significant way in a significant breach of duty/trust with actual knowledge of the essential facts which constituted the reach should be liable to the beneficiary of the duty/trust for the consequence of the breach". This submission should be rejected." 223However, as was also pointed out, at [161], quite apart from Barnes v Addy situations, a person who is an active participant in a breach of trust, as opposed to a mere accessory, is liable for loss caused by the breach. 224In relation to the case of knowing assistance, I am indebted to, and, with respect, adopt, what Ward J, in George v Webb, wrote, at [258] to [263]: "The element of knowledge required to make out a claim for knowing receipt (the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252 was recently considered by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 (at [177]-[178]). The High Court affirmed that the requisite degree of knowledge is that falling within one of the first four categories enumerated in Baden Delvaux and as adopted in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, at 376-377; 398; 412), namely (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable person. That test has been applied in various knowing receipt cases (Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133, at 163-164; Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 166; Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 54 ATR 241; [2003] FCA 1025, at [60]). In the case of accessorial liability for knowing assistance (the second limb of Barnes v Addy), the third party must have assisted in a breach of trust or fiduciary obligation with knowledge of a 'dishonest and fraudulent design' on the part of the trustee or fiduciary (knowledge being required in the sense considered above). Mere knowledge of facts which would have put a reasonable person on inquiry will not attract liability. The requirement that the third party must have participated in a dishonest and fraudulent design, requires conduct which is 'morally reprehensible'. Dishonesty is not used in the sense of criminal conduct or actual fraud in the common law sense. Nevertheless, it seems clear that what is required is more than a mere breach of duty. (Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, 397-8 per Gibbs J as his Honour then was, citing Selangor United Rubber Estates Ltd v Craddock [No 3] [1968] 2 All ER 1073; The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1, at 531 per Owen J.) Mr Kelly notes that expropriating a trust fund is a paradigm example of dishonest design for the purpose of the second limb of Barnes v Addy, referring to Farah v Say-Dee; Consul Development; and El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 at 700. The third party's conduct must have had more than a minimal causative effect on the breach (Bell at 551), though it appears that it is not necessary to determine the exact causal significance of the assistance on the breach to the loss sustained (Grupo TorrasSA vAl-Sabah [No 5] [1999] CLC 1469, 1667. Nor is it necessary that the third party has received trust property or otherwise profited from the transaction in question. Accessorial liability for knowing receipt/assistance renders the third party jointly and severally liable with defaulting trustees and fiduciaries to pay equitable compensation for any loss suffered by the beneficiaries as a result of the breach. In New Cap Reinsurance Corporation Ltd v General Cologne Re Australia Ltd [2004] NSWSC 781 at [34], Young CJ in Eq (as his Honour then was) referred to the observation in Ford and Lee 'that the accessory is jointly and severally liable with the principal malefactor to pay the amount of equitable compensation required to restore the trust fund'. Equitable compensation is calculated by reference to the amount necessary to restore the beneficiaries to the position in which they would have been had the breach had not occurred." 225In relation to the question of accessorial liability and the Quistclose trust, her Honour dealt with the cases on the topic and concluded, at [282]: "I consider that the weight of authority in this jurisdiction is that the Quistclose trust is an express trust. If so, then there seems to be no reason not to apply the accessorial liability principles in Barnes v Addy to such a trust (particularly in a case where, as here, the alleged accessory not only knew of the express purpose trust for which the moneys were to be held by the trustee but was instrumental in putting those arrangements in place and knew the purpose for which the funds were permitted to be used)." 226In BigTinCan Pty Ltd v Ramsay [2013] NSWSC 1248, Ball J, at [83] - [84] wrote: "The claim based on knowing assistance in a dishonest and fraudulent breach of fiduciary duty has three elements: (a) a dishonest and fraudulent breach of duty by Mr Ramsay; (b) knowledge of the dishonest and fraudulent breach on the part of Mr Pollers; (c) assistance in that breach by Mr Pollers: see Farah Constructions Pty Limited v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 at [160]-[163]. There is a question concerning the precise scope of the expression 'dishonest and fraudulent': see, eg, Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 270 FLR 1 at [2112] ff per Drummond AJA. However, it is not necessary to pursue that question in the context of this case. It seems clear that it is sufficient if the conduct can as a matter of ordinary language be described as morally reprehensible: see Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 1 WLR 1555 at 1590-1, referred to with approval by Gibbs J in Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 398." 227Knowledge of a breach of trust or fiduciary duty is a question of fact. That includes that the known facts would have communicated to a reasonable person a general understanding that breach of trust or fiduciary duty had occurred.

Determination 228In the present case, the parties do not dispute that there was an agreement reached between them on or about 4 August 2011, in relation to the payment by Craigcare, and the use by Superkite, of the Money. Considering the evidence overall, it would be impossible to assert otherwise. Then, it becomes necessary, because there is no executed written document, for the Court to determine the terms of that agreement. 229Although the terms as to the use of the Money seemed, at least initially, to be the main focus of debate, I am satisfied, having read the evidence referred to above and heard the oral evidence of Mr Gillett and of Mr Stammers, that each party understood, and intended, that the Money was to be paid by Craigcare, to the account of Holman Webb, "to cover Superkite's legal and administrative costs with respect to the preparation of the Joint Venture Agreement and the loan agreement, due diligence and incidental costs associated with the initial processing of the Transaction". 230The use of the Money may have been described differently in one, or other, of the emails, but the descriptions in those emails should be regarded as no more than a shorthand method of expressing the uses set out above. 231By way of example, in the email of 3 August 2011, from Mr Bleyer to Mr Mitry, there is a reference to a transfer of the Money "to cover legal and other costs to allow us to proceed for agreements and the companies to be formed such as the SPV JV entity". In an email of 4 August 2011, Mr Gillett refers to the Money "for costs to be incurred in the preparation of that documentation". Mr Bleyer, in the email of 5 August 2011, addressed to Mr Stammers, with a copy to Mr Mitry, refers to "funds received ... to cover legal fees and other costs for Superkite for this joint venture". 232This conclusion gains additional support when one notes that the last Paragraph of Clause 9 of the draft Letter of Intent after identifying the Money used the abbreviated phrase "to cover legal and other costs". This is not inconsistent with the statement that "in consideration of [Craigcare] providing $100,000 of funds to ... Holman Webb, [Superkite] would facilitate the documentation and formalisation of the joint venture project". This, in my view, looking at the whole of the evidence meant no more than the Money was to be used for those purposes. As Ms Gordon accepted, "The whole point of the 'purposes' was to identify what the Money could be used for": T102.03 - 102.16. (When asked to identify whether there were any documents that identified other purposes for which the Money could be used, Ms Gordon was unable to do so: T105.01 - 105.05.) 233I am also satisfied that Mr Gillett's and Mr Stammers' evidence, on this topic, supports what is set out above. It is unnecessary to repeat all of their evidence, which, when read with the documents, lead me to reject Superkite's submission that what was written "was descriptive and not binding". 234Craigcare's claims are not made on the basis of any solicitor/client relationship. Clearly Holman Webb did not act for it, but rather, acted for Superkite. The obligations pleaded by Craigcare that are said to exist arise from the circumstances in which the Money was paid to Holman's Webb trust account. 235In relation to the Money, the next question that arises is, if it was not used, or fully used, for the purposes, whether the parties agreed, expressly, or by implication, that the balance would be refunded to Craigcare? 236I do not consider that the last paragraph of Clause 9 of the draft Letter of Intent, even if regarded as being binding on the parties (which it was not), is helpful. That sub-paragraph was intended to apply to something entirely different, namely the refund of all of the Money in the event that Superkite "does not or cannot perform as per the terms and conditions of the counter signed Definitive Agreements". 237In my view, the purposes for which the Money was to be used answers this question. If the Money was not used for those purposes, there was no basis for Superkite to retain the Money. There is no evidence that, at the time of the discussions, either party expected that the Money would become part of the assets of Superkite, or that either intended it to fall within the general fund of Superkite's assets so as to be at its free disposal. As stated, it was not intended by either party that the Money was gifted to Superkite by Craigcare. 238It was clear that Holman Webb was not to part with the Money except for the stated purposes. The Money was paid on terms that required its retention for the limited purposes that both parties had identified. If not so used, it was an identifiable fund capable of being recovered by Craigcare. That is the only way one can reasonably construe the agreement between Craigcare and Superkite. 239A flaw in the Defendants' submission on this topic is demonstrated simply by asking whether the parties could reasonably have intended, had no legal and administrative costs with respect to the preparation of the Joint Venture Agreement and the loan agreement, due diligence and incidental costs associated with the initial processing of the Transaction, been incurred, would Superkite have been entitled to retain all of the Money? A negative answer to that question is the only one available when one considers all of the evidence. (This is also consistent with the acceptance by counsel for the Defendants that the Money was not intended to be a gift from Craigcare to Superkite.) 240I reject the submission that the use of the words "to cover" were descriptive only and that they were not intended to be binding. 241Then, it was for Superkite to establish that the Money was used for the purposes for which it was paid by Craigcare. That involves more than simply asserting that Superkite engaged solicitors to draft joint venture, and loan, documentation, that it obtained tax advice including on the international tax implications of the joint venture, that it undertook due diligence on the transaction and that it negotiated with banks in order to enter into agreements with those entities in relation to the raising of the funds required. 242It also involves more than a non-witness saying in correspondence that things are being done. Evidence must be led to show that those things were done. In relation to the work done by Holman Webb, there are the Tax Invoices, the evidence of Mr Stammers of the work in the Tax Invoices having been done, as well as the production of the documents that were prepared by him. 243As was put by counsel for Craigcare: "What we received was, on the one part, a very considerable degree of information from Mr Stammers as to what he did and what Holman Webb did for what we say is the $30,000 odd that was expended, and we received nothing more than a single page for a considerably greater sum of money in circumstances where Mr Musad appears to be doing exactly the same work by and large that Mr Stammers was doing, and one has to question in circumstances where it was obviously apparent to the defendants in these proceedings that they needed to set forth what it was that had happened with the money, that your Honour receives not one single word of evidence apart from an invoice and, indeed, the biggest question about that invoice is whether that invoice is even legitimate." 244It is unnecessary for me to make any finding of dishonesty in Superkite's reliance upon the Masud & Company pro forma Invoice. I am simply not satisfied, on the balance of probabilities, that the work referred to in that Invoice was done. In this regard, the onus to establish that the work was done, and that it fell within the purposes referred to, is upon the Defendants. They have not discharged the onus in this regard. The documents produced are of limited value in this regard. 245The claimed cost of the draft Letter of Intent is a little more difficult, since that document is in evidence that suggests some work was done. Yet, as stated, there is no invoice for the work done, and nothing, otherwise, to establish, objectively, that the payment of $10,000 was for the preparation of the draft Letter of Intent. In this regard, similarly, the other document relied upon is of limited value. 246Mr Bleyer, on behalf of Superkite, could have obtained the evidence from Mr Bacik. Alternatively, a copy of any such invoice from Mr Bacik, one might think, could have been obtained, or if it was not, then any reasons for not having it available could have been provided. The only evidence is from Mr Bleyer about the cost of the preparation of the draft Letter of Intent. 247Again, I am not satisfied, on the balance of probabilities, that the amount of $10,000 was for work done by Mr Bacik. The Defendants have not discharged the onus in this regard either. 248(Where a Jones v Dunkel inference is available the Court may either infer that that evidence would not have assisted a party who failed to call the witness and/or draw with greater confidence any inference unfavourable to the party who failed to call the witness as long as that inference is available to be drawn on the evidence which has been admitted: State Bank of NSW v Brown [2001] NSWCA 223; (2001) 38 ACSR 715 (at [17] - [18]) per Spigelman CJ; see also Manly Council v Byrne [2004] NSWCA 123 (at [50] - [55]) per Campbell JA (Beazley JA and Pearlman AJA agreeing); Mamo v Surace [2014] NSWCA 58 (at [65], per McColl JA (Ward JA and Tobias AJA agreeing)). 249I then turn to the question of how the Money was to be disbursed. Again, the evidence is reasonably clear. The parties did not expressly agree in early August 2011, how the Money was to be disbursed. They decided that they would discuss that aspect later, but it would appear that they never did. 250However, the impression one gets from the evidence of events prior to 21 September 2011 is that Mr Gillett accepted that it was for Holman Webb to disburse the Money, but that Craigcare would need to be informed that Money was to be disbursed for the identified purposes. Provided the Money was being disbursed for one, or more, of those purposes, Craigcare would not have been able to prevent Holman Webb disbursing the Money. 251Importantly, the email of 5 August 2011 from Mr Bleyer did not suggest anything to the contrary. That email stated that the Money was to be utilised to cover legal fees and other costs for this SPV-JV matter "as approved in writing by the Writer". The approval appears to relate to the utilisation for the purposes identified and the quantum of the legal fees and other costs. It does not appear to respond to obtaining the approval of Craigcare to disburse the quantum of legal fees and other costs that had been approved. 252In this case, it was not suggested that Superkite did not have a duty to apply the Money for the stated purposes. As between Craigcare (the payer of the money) and Superkite (into the trust account of its solicitors the money was paid), it would seem that the relevant intention as evidenced above, as to the basis of the payment and the purposes for which it was to be used, of which Mr Stammers was informed, was a trust or equitable obligation annexed to the Money not used for those purposes. 253I reject the submission that the agreement required only that the Money be paid into the trust account of Holman Webb and that it was not for Craigcare to be informed how it was to be disbursed. It was for Superkite to demonstrate that if it were disbursed, in whole or in part, it was disbursed for one, or more, of the purposes for which Craigcare had paid the Money. In the events that happened, it was accepted that a part of the Money was paid for "unrelated legal fees". 254I am satisfied that Craigcare has established that the Money was imbued with a trust. The clear intention of Craigcare, as the payer, was that the Money, once paid, was to be held in Holman Webb's trust account and used for the particular purposes identified. Craigcare had an interest of its own, separate and distinct from any interest of Superkite, in seeing that the Money was applied for the purposes agreed upon. Superkite and Mr Stammers was each under a positive obligation to apply the Money for those purposes. 255Additionally, payment into the trust account of Holman Webb, maintained by solicitors who are bound by the rules and regulations imposed by the Law Society in relation to the control of such accounts including the separation of such funds) confirms an intention that the Money was be dealt with as trust money. 256Furthermore, in my view, keeping the Money identifiable and separate was to ensure that it was used for the stated purposes and also to ensure its return if the transaction did not go ahead or if all of the Money had not been used for such purposes. 257These matters are important so far as Mr Stammers is concerned. He acknowledged that the payment of funds by Craigcare into Holman Webb's trust account meant that it was to be held subject to the stated purposes. There was no suggestion, in the emails from Holman Webb that followed 21 December 2011, that Mr Stammers believed something else. 258Even accepting Superkite's submissions as to authority to pay out of the trust account at the direction of Mr Bleyer, that does not mean that he, and Mr Stammers, had an unfettered discretion. This is clear because of the purposes for which the Money had been paid. Any direction given by Mr Bleyer to Mr Stammers for the disbursement of the Money, otherwise than for the relevant transaction, would not satisfy the purposes for which the Moneys had been paid into Holman Webb's trust account. Mr Stammers would have known this. 259Properly understood, the claim of Superkite is that the Money, if not used for the stated purposes, or at all, would simply pass to it. There is simply no evidence to satisfy me that the parties' intention was for that to occur. I am far from satisfied that the agreement was one pursuant to which Superkite was at liberty to treat the Money as if it were its own. 260I tested the proposition by asking counsel for the Defendants what would have occurred if either party had decided that it did not wish to proceed the day after the Money had been paid, and in circumstances where no legal and administrative costs with respect to the preparation of the Joint Venture Agreement and the loan agreement, due diligence and incidental costs associated with the initial processing of the Transaction, had been incurred. I do not accept her submission that, even then, Superkite would have been able to retain the Money. In my view, the correct answer is that it would not have been open to Superkite to refuse, then, to return the Money to Craigcare. 261Even if Mr Bleyer was authorised to direct Holman Webb as to the disbursement of the Money and had it been paid out on his direction for legal and administrative costs with respect to the preparation of the Joint Venture Agreement and the loan agreement, due diligence and incidental costs associated with the initial processing of the Transaction, then it might well be that the Defendants would have a basis for asserting that there had been no breach of trust. 262However, it is accepted that the balance of the Money, were disbursed for unrelated transactions involving Superkite. In the circumstances, as to the part of the Money paid out for those unrelated legal fees, there was a breach of Trust. (It is unnecessary to deal further with the reimbursement argument in light of the conclusions stated above.) 263In relation to the accessorial liability of Mr Stammers, it is clear from all of the evidence that he not only knew of the express purpose for which the Money was to be held by Holman Webb, but was instrumental in putting the arrangements in place for the payment of the Money by Craigcare. 264The more difficult question is whether Mr Stammers is liable as an accessory, in that he knowingly assisted in its wrongful expropriation. In this regard, I note that he was not a partner of Holman Webb and there is no evidence that he was able to direct, or for that matter, prevent, the appropriation of the Money from its trust account. Clearly, he does not appear not to have prevented those who were, and who authorised the distribution of the Money for unrelated purposes, to not do so in light of what he knew. 265Despite these matters, I am not satisfied, on the balance of probabilities, that Mr Stammers is liable because it has not been established that he had the requisite knowledge of a dishonest and fraudulent design on the part of Superkite. His evidence appears to be that he did not appreciate that the appropriation of part of the Money for unrelated legal fees, in circumstances where he was informed that Superkite was being "reimbursed" for other legal and associated costs related to the joint venture project, was wrong. Furthermore, there is no evidence that satisfies me that he authorised any transfer of the Money out of Holman Webb's trust account. It is not sufficient that he had knowledge of circumstances that would put an honest and reasonable person on inquiry. It is necessary for Craigcare to establish, at least, that he had knowledge of circumstances indicating the facts (that is, the existence of a dishonest and fraudulent design) to an honest and reasonable person (see Farah Constructions Pty Ltd v Say-Dee Pty Ltd at [176] - [178]). I cannot be satisfied that his conduct was "morally reprehensible". 266Furthermore, whilst I have not forgotten that Mr Stammers was the sole director of Superkite, and that he was paid director's fees for acting in that capacity, I am satisfied that he was not the directing mind and will of Superkite at the relevant time the balance of the Money was paid out of Holman Webb's trust account. It is clear that the instructions came from Mr Bleyer. 267It follows that I am not satisfied that the accessorial liability of Mr Stammers has been established or that he is rendered liable jointly and severally, with Superkite, to pay Craigcare for the loss suffered. 268Accordingly, the Plaintiff's claim against Mr Stammers should be dismissed. (I shall deal with his costs later in these reasons.) 269Craigcare's claim for equitable compensation to restore to it the balance of the Money paid out contrary to the terms of the trust and interest on that balance is sought. There is no reason why Craigcare should not receive the amount that I have found was not used for the purposes agreed upon, namely, $65,129.50 (calculated by deducting $34,870.50 from $100,000), together with interest calculated from, say, one month after 21 December 2011. In my view, an appropriate time, for the commencement of the calculation of interest would be 21 January 2012. 270I am also prepared to make an order that the exhibits are to be dealt with in accordance with the UCPR.

Submissions on Costs 271As previously mentioned, I required the parties, in this case, to file and serve written submissions on the issue of costs. 272In respect of costs, counsel for Craigcare submitted that the Court should "order that costs follow the event". 273It was submitted that, notwithstanding the value of the amount claimed in the proceedings, an order capping costs would be inappropriate. Counsel for Craigcare maintained that "Craigcare did its level best to avoid the step of commencing proceedings" and, in particular, referred to the offer made, in December 2011, by Mr Mitry, "to pay the reasonable costs that had been incurred by Superkite as agreed between the parties or assessed". However, it was submitted that the conduct of the Defendants "forced the commencement of [the] proceedings". 274It was submitted that, in the circumstances, an order capping costs "would reward the Defendants for their conduct in: (a) misappropriating a not inconsiderable sum of money; (b) stonewalling Craigcare, for some time, by not disclosing what happened to the funds; and (c) prolonging the hearing by raising every conceivable argument, including that the money had not been paid by Craigcare for a specific purpose irrespective of the fact that ... [s]uch a submission was never open on the evidence ...". 275By contrast, the Defendants submitted that "[i]t is appropriate for the Court to make an order capping the costs recoverable by the Plaintiff". Significantly, counsel for the Defendants submitted that the manner in which Craigcare had conducted the proceedings, including "brief[ing] two barristers, including Senior Counsel, in a claim valued at $69,025, an amount that is less than the jurisdictional limit of the Local Court of New South Wales", raised significant questions as to whether Craigcare had "complied with its obligations pursuant to s 56 of the Civil Procedure Act 2005, including ensuring that costs were proportionate to the value of the claim." 276In the alternative to an order capping costs, the Defendants cited Chapman v Taylor [2005] NSWCA 95 as authority for the proposition that "orders that the successful party's costs be assessed on the basis of the briefing of one Counsel at fees appropriate to Junior Counsel" might be appropriate in these proceedings. 277Of course, details of any "without prejudice" negotiations have not been disclosed. However, what is more significant, is that neither party submitted that costs may be affected, depending upon the result, on an offer of compromise, or Calderbank offer, having been made. 278It follows that the UCPR and any efforts of the legal advisers have not dissuaded these parties from following a course leading to expending what is likely to be a disproportionate amount on costs over what must be regarded, in the circumstances of this case, as a relatively small amount of money. 279In relation to costs, I consider what Ball J wrote in Baychek v Baychek [2010] NSWSC 987, at [8] - [17] as summarising the relevant principles that apply: "The relevant principles The question of costs in this case raises two broad issues. The first is the scope of the power and discretion of the court in relation to the question of costs. The second is how that power and that discretion should be exercised in this case. The general principle in relation to costs is set out in s 98(1) of the Civil Procedure Act 2005 (CPA). That subsection provides: "(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis." Subsection 98(4) provides: "In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings; or (b) a specified proportion of the assessed costs; or (c) a specified gross sum instead of assessed costs; or (d) such proportion of the assessed costs does not exceed a specified amount." It is clear that subs (4) does not limit the scope of subs (1). Subsection (4) gives particular examples of orders the court may make. It does not purport to circumscribe the general power contained in subs (1). Normally, s 98(4)(c) of the CPA is treated as a provision for the benefit of the costs applicant. It permits a costs applicant to make an application for a gross sum costs order rather than being put to the expense and trouble of an assessment. Courts have made it clear that, when used in that way, the court is not required to proceed as if it were dealing with an assessment. It is entitled to take a broad brush approach provided that that approach is logical, fair and reasonable: Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 at 123; Hadid v Lenfest Communications Inc [2000] FCA 628 at [27]. Implicit in this principle is that the gross sum bear a reasonable relationship to the actual costs of the party making the application, and to the costs that that party might reasonably be expected to recover on assessment. That means, among other things, that there must be a reasonable evidentiary basis for the order the court makes. That evidentiary basis is normally provided by the costs applicant in the form of an affidavit setting out the actual costs incurred and how they were calculated. Often, the evidence also includes evidence of the amount that is likely to be recovered on assessment. In Sherborne Estate (No 2): Vanvalen v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268, Palmer J expressed the view that s 98(4)(c) of the CPA also gave the court power to fix a gross sum in respect of costs on the application of the costs respondent. However, his Honour said (at [42]): "It is conceivable that the Court could exercise the power under s 98(4)(c) on the application of an unsuccessful party in making a final costs order so as to cap a successful party's costs where the Court considers that the successful party's costs are grossly excessive. ... But such a capping order would be very rare: the Court's decision would have to be an informed one, that is, founded on a consideration of the costs actually incurred, the circumstances at the time at which the were incurred, whether they were reasonable in those circumstances, and what would have been a reasonable amount to have incurred." His Honour concluded (at [44]) that the power given by s 98(4)(c) should only be exercised in exceptional cases where the court is satisfied that an application can be dealt with more quickly, cheaply and justly than an assessment under the Legal Profession Act 2004. Applying that principle, his Honour was not prepared to make an order under s 98(4)(c) in the case before him because the applicant for the order (that is, the costs respondent) did not place before his Honour sufficient evidence to enable the court to make a logical, fair and reasonable estimate of what would be an appropriate gross sum to incorporate in a costs order. I will return to this issue below. Reference should also be made to s 60 of the CPA. That section provides: "In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute." Although this section is not itself concerned with the award of costs, it states an important principle which is relevant to the exercise of the court's discretion in relation to costs. UCPR r 42.1 provides: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." Although the application of the rule is expressed to be subject to a condition (that is, that the court make an order as to costs), the rule is regarded as embodying the principle that costs normally follow the event. Exceptions, of course, exist. A number of examples are listed in Ritchie's Uniform Civil Procedure NSW at [42.1.20] - such as where a party's success is attributable only to matters raised in a late amendment, or where a successful party recovers merely nominal damages, or where a successful party has been guilty of some form of misconduct. However, these examples, as the authors of the service acknowledge, are only examples. There is a wide range of circumstances in which it may be appropriate not to make an order for costs in favour of a successful party. UCPR r 42.4 provides: "(1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another. (2) A maximum amount specified in an order under subrule (1) may not include an amount that a party is ordered to pay because the party: (a) has failed to comply with an order or with any of these rules, or (b) has sought leave to amend its pleadings or particulars, or (c) has sought an extension of time for complying with an order or with any of these rules, or (d) has otherwise caused another party to incur costs that were not necessary for the just, quick and cheap: (i) progress of the proceedings to trial or hearing, or (ii) trial or hearing of the proceedings. (3) An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap: (a) progress of the proceedings to trial or hearing, or (b) trial or hearing of the proceedings. (4) If, in the court's opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1)." In Sherborne Estate (No 2) [2005] NSWSC 1003; (2005) 65 NSWLR 268 at [24], Palmer J concluded that r 42.4(1) only permitted an order to be made in advance of a hearing. It did not permit an order capping costs at the end of the hearing. In reaching that conclusion, his Honour pointed out that subrules (2)-(4) only make sense in the latter context. However, the Court of Appeal in Nudd v Mannix [2009] NSWCA 327 held that the court did have power to make an order capping costs at the end of the hearing. Handley AJA (with whom McColl and McFarlane JJA agreed) said that that power was expressly conferred by UCPR r 42.4(1). There is much to be said for the views expressed by Palmer J. However, it does not follow from his Honour's reasoning that UCPR r 42.4 sets out the only circumstances in which the court may cap costs. In my opinion, that rule does not expressly or impliedly operate as a limitation on CPA s 96. Rather, it sets out one set of circumstances in which that power to cap costs may be exercised, and places some limits on that power. The likelihood is that the drafters of the rule thought it was appropriate to do so to make it clear that an order capping costs could be made in advance, and not simply at the end, of the hearing, but that limits should be placed on a power to cap costs in those circumstances. It seems clear that the Court of Appeal was not referred to the decision in Sherborne Estate (No 2) and the reasoning of Palmer J in relation to UCPR r 42.4. Handley JA may well have expressed himself differently had it been. The fact remains, however, that Nudd v Mannix is authority for the proposition that the court does have power to cap costs at the end of the hearing. Whether or not that power should properly be regarded as conferred by UCPR r 42.4 is not important. In my opinion, it is clearly conferred by CPA s 96; and UCPR r 42.4 at least confers a qualified power to cap costs prior to the final hearing." 280As stated, the court may make a costs order either of its own motion, or on the application of a party. In each case, the court will judicially exercise a discretion based upon a proper factual foundation. The discretion will also be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. 281In Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84, Gray J observed (at [17]) that: "The overriding principle that costs are in the discretion of the Court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding." 282As has also been pointed out in Commissioner of Taxation v Moodie [2014] NSWCA 59, per McColl JA, at [62]: "The concept of fairness takes into account the contextual circumstances of the litigation and the conduct of the parties, including their responsibility in incurring the costs: Commonwealth of Australia v Gretton [2008] NSWCA 117 (at [85]) per Beazley JA, (at [121]) per Hodgson JA (Mason P agreeing with both); Kazar (Liquidator) v Kargarian; Re Frontier Architects Pty Ltd (in liq) [2011] FCAFC 136; (2011) 197 FCR 113 (at [9]) per Greenwood and Rares JJ; see also Peters v Peters (1907) 7 SR (NSW) 398 (at 399) per Street J." 283The ability of the court to limit the amount of recoverable costs of its own motion reveals that the purpose of such a costs order is not merely restricted to protecting a party from the consequences of an adverse costs order. The purpose also extends to the court implementing the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings, acting in accordance with the dictates of justice and ensuring that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute: Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources [2009] NSWLEC 165, at [10]. 284In this case, I also considered making a costs order which would have resulted in the successful party (Craigcare) recovering from Superkite, costs up to the maximum amount, identifying that amount by way of a lump sum order. 285Ultimately, having considered the submissions, I have decided not to impose a costs capping order or to make a lump sum order. However, I do not propose to allow Craigcare to recover all of its costs. This is not a case where the subject matter of the dispute was important (from a public perspective), particularly complex, or where a large amount was in issue. (In stating that the amount was not large, I appreciate that $65,000 would be a significant sum for most people. But when one considers Craigcare and Superkite, and the transaction that gave rise to the proceedings, it is miniscule. Each party, apparently, also has access to significant financial resources to fund litigation and they chose to do so.) In addition, for the most part, the matter has been decided upon the facts that really should not have been substantially in dispute. 286I have not omitted from my considerations that each of Craigcare and Superkite has an undoubted sense of grievance in relation to the events that occurred. 287I do not accept the submission of Craigcare that a special costs order limiting what it might recover from Superkite would amount to an unjust order. Craigcare brought the proceedings claiming the Money. It was only in its written submissions, and then at the commencement of the hearing, that it sought to reduce the amount of its claim to about 70 per cent of the Money. Whilst it is true that before the proceedings were commenced, an offer had been made to pay the reasonable costs of Superkite, it was not until the submissions were served, and then at the commencement of the hearing that the court was informed that an allowance of about $30,000 was accepted as reasonable costs. 288Even then, Craigcare has not succeeded in recovering all of the balance. It has been successful in recovering about 65 per cent of the Money. 289Proportionality of costs to the value of the result is central to the just and efficient conduct of civil proceedings: Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources, at [30]. In my view, the Defendants should be ordered to pay 65 per cent of Craigcare's costs, calculated on the ordinary basis. 290In coming to this conclusion, I have taken into account the submissions regarding assessment upon the basis of briefing of one Counsel at fees appropriate to Junior Counsel. However, I do not think that I should limit the assessment of costs by imposing that further limitation. 291In relation to the costs of Mr Stammers, I considered making an order for costs in his favour, but there is no evidence that he incurred any additional costs. There was one firm of solicitors and one counsel acting for both Defendants. He was an important witness in the case and the sole director of Superkite. 292I have also considered his knowledge and his inaction in preventing a part of the Money to be used in the way that it was. Even though he is, and was, not a partner of Holman Webb, the payment of costs to the firm for work done on account of Superkite would have been beneficial. (He was the solicitor who did Superkite's work and it was in respect of that work that the unrelated outstanding costs were paid.) 293In all the circumstances, and as a matter of discretion, I do not propose to make any order as to the costs of the second Defendant. 294I direct the parties to provide to me, within 14 days, orders that reflect the conclusions I have reached as to the amount to be paid, the calculation of interest and the costs. If agreement is reached, I shall make the agreed orders in Chambers. Other wise the matter will be listed for further argument on a date agreed upon at the time of delivering these reasons for judgment.

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: 26 March 2014