CONTRACTS – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH
– where the plaintiffs and the defendants conducted a
business providing
accounting and financial planning services – where the relationship
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH– where the plaintiffs and the defendants conducted abusiness providingaccounting and financial planning services – where the relationshipbetween the parties deteriorated anddisputes ensued – where a deed ofsettlement was executed to resolve the disputes – where the deed ofsettlement providedthat the plaintiffs would receive the accounting practicefrom the defendants – where the deed of settlement provided thatthedefendants would transfer to the plaintiffs client files and intellectualproperty – where the deed of settlement providedfor payments of certainamounts from the defendants to the plaintiffs and that the defendants bycounterclaim would pay $97,500 tothe plaintiff by counterclaim – wherethe plaintiffs allege that the defendants failed to transfer all the requiredclientfiles and intellectual property to the plaintiffs – where the
plaintiffs allege that, to the extent that the defendants did
transfer client
files and intellectual property, these were encumbered by a security interest in
favour of a third party –
where the plaintiffs claim damages for loss and
damage caused by the defendants’ alleged breach, including the purchase
prices
for accounting practices that had been bought – where the
plaintiffs claim damages to be further assessed – where the
defendants
submit that they did not breach the deed of settlement and say any breach did
not cause the plaintiffs’ loss –
where the plaintiff by counterclaim
claims $97,500 by way of counterclaim against the plaintiffs and the defendants
added by counterclaim
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54
(1991) 174
CLR 64, cited
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332,
cited
Stephens v Cannon [2005] EWCA Civ 222, cited
Judgment (103 paragraphs)
[1]
[1] The first plaintiff (Dangar Nominees) is a company controlled by the second plaintiff (Mr Dangar). Mr Danger also controls the three defendants added by counterclaim. Collectively those parties are referred to as the Dangar Entities.
[2] The second defendant (Mr Gunn) controls the companies comprising the first, third and fourth defendants. Prior to it being wound up in insolvency, Mr Gunn also controlled the fifth defendant. Collectively those parties are referred to as the GunnEntities. The third defendant (Mrs Gunn) is the wife of Mr Gunn and was involved in the businesses of the Gunn Entities.
[3] Between 2021 and 2023 Mr Dangar (an accountant) and Mr Gunn (a financial advisor) conducted an accounting and financial advisory business together. Their relationship broke down in 2023 and disputes ensued. The disputes were initially resolved by way of a Deed of Settlement and Release dated 16 March 2023 (Deed). However, subsequently there were disputes about compliance (or alleged non-compliance) with the terms of the Deed, that are the subject of this proceeding.
[4] The plaintiffs allege that the defendants did not comply with their obligations under the Deed and seek damages for breach of the Deed because it is alleged, in summary:
[2]
(a) the defendants failed to transfer all required client files and intellectual property (IP) to the plaintiffs;
(b) to the extent that the defendants did transfer client files and IP to the plaintiffs, those were encumbered by a security interest.
[3]
[5] Specifically, the plaintiffs seek from the defendants damages for breach of contract or equitable compensation (although the basis for equitable compensation has not been made clear) pleaded in the amended statement of claim (CDI 12) as follows ([22]):
[4]
(a) $668,702.03 in fees per year for 567 client files not transferred (the plaintiffs' primary written submissions at [43(a)] restrict the claim to only one year of these fees);
(b) $376,200 in fees per year for 114 SMSF client and client files not transferred (the plaintiffs' primary written submissions at [43(a)] restrict the claim to only one year of these fees);
(c) $200,000 for the purchase price paid for the Maltby practice (the allegation seeming to be that such practice is now worth nothing given alleged breaches by the defendants of the Deed) (this claim is reduced to $196,000 in Mr Dangar's affidavit[1] to account for two unidentified clients of that practice who independently transferred their ongoing business to the plaintiffs);
(d) $340,000 for the purchase price paid for the AMH practice (the allegation seeming to be that such practice is now worth nothing given alleged breaches by the defendants of the Deed) (this claim is reduced to $252,000 in Mr Dangar's affidavit[2] to account for unidentified clients of that practice who independently transferred their ongoing business to the plaintiffs);
(e) damages to be assessed for further breaches of the Deed (clauses 2.1.8 and 2.1.13 generally referred to) concerning:
(i) full access not being provided to all client files by 16 May 2023 (alleged breach of clause 2.1.9.1 of the Deed);
(ii) the Gunn Entities commencing trade in the same locations to those transferred to the plaintiffs;
(iii) Mr Gunn sharing Adobe access with another person, which was part of the client files to be transferred;
(iv) the Gunn Entities failing to transfer any client files.
[5]
[6] The plaintiffs made no attempt during the trial to lead evidence or make submissions as to the way the damages sought to be assessed in [5(e)] above might in fact be assessed.
[7] The defendants deny the plaintiffs' allegations.
[8] The fifth defendant has a counterclaim against the plaintiffs and the defendants added by counterclaim in respect of an outstanding amount payable under the Deed: $97,500. The plaintiffs and defendants added by counterclaim admit liability for that amount save to the extent that the plaintiffs seek to set-off any damages payable to them by the defendants.
[9] The plaintiffs' claims fail. For the most part, the plaintiffs have not proved to the requisite standard (the balance of probabilities) that the defendants in fact breached the Deed. And even if there was any particular breach of the Deed by the defendants, the suffering of loss and damage by the plaintiffs is also not proved to the requisite standard. At the most, nominal damages would be awarded. The plaintiffs' claims are dismissed.
[10] The fifth defendant's otherwise admitted counterclaim is proved and judgment will be entered for it.
[6]
[11] Mr Gunn, a financial advisor, and Mrs Gunn conducted the business operations of the Vault Group, providing accounting and financial planning services to individuals and small-to-medium sized businesses.
[12] In 2020 Mr Dangar, an accountant, became an employee of the fifth defendant, Vault Accountants (Aust) Pty Ltd (now in liquidation, but not at the time) (VAA), one of the entities in the Vault Group that provided accounting services.
[13] In about June 2021 negotiations commenced for Mr Dangar (or a related entity) to purchase a stake in the Vault Group (15%). That in fact occurred with various corporate and trust structures implemented. VAA remained the company in the Vault Group that held client files and serviced and invoiced clients for accounting services (which were substantially managed by Mr Dangar) and financial planning services (which were substantially managed by Mr Gunn).
[14] In April 2022 Mr Dangar caused the third defendant added by counterclaim (Consolitax) to buy an accounting practice referred to as the Maltby practice for $200,000. It operated from offices in Bingara and Moree. After the purchase, the Maltby practice was serviced by VAA pursuant to an informal arrangement between VAA and Consolitax.
[15] In October 2022 Mr Dangar caused Consolitax to buy an accounting practice referred to as the AMH practice for $340,000. It operated from an office in Grafton, which Consolitax then leased. Again, after the purchase, the AMH practice was serviced by VAA pursuant to an informal arrangement between VAA and Consolitax.
[16] In December 2022 Mr Dangar caused Consolitax to buy an accounting practice referred to as the Bryant practice. It operated from an office in Brisbane. Again, after the purchase, the Bryant practice was serviced by VAA pursuant to an informal arrangement between VAA and Consolitax.
[17] In respect of each of the purchased accounting practices, once purchased, efforts were made to convert any hard copy files (at least the current files) into soft copy files. Some non-current hard copy files were destroyed or returned to the relevant clients. The Vault Group mostly conducted business paper-free.
[18] In about January to March 2023 the relationship between the Dangar Entities and the Gunn Entities deteriorated. Disputes ensued between those entities, agreements were purportedly terminated, and various litigation was commenced.
[7]
[20] The Deed relevantly provided by clause 1.1 Definitions:
[8]
Client Files means all of the files and lists relating to the Clients including without limitation - the practices / client lists known as 'Grafton', 'Bingara', 'Moree' and 'Bryant - Brisbane', which were formerly serviced by VAA and/or VFG [the fourth defendant, Vault Financial Group Pty Ltd].
[9]
IP means the software applications Xero Blue/Hubdoc, Ignition, Account Kit, Happy HR, 1300 number (1300 182 858), domain name 'vaultgroup.com.au' Microsoft Teams account, Adobe DC account, the email accounts and domains 'craigdangar.com.au', 'craig@cdrta.com.au', 'craig@cdcommpartners.com.au' and Google listing for Vault Accountants and Bing Places listing for Vault Accountants.
[10]
Proceedings means the Winding Up Proceeding, District Court of Queensland Proceeding QDC 1119/23 commenced by Dangar Nominees against Mr Gunn and Mrs Gunn and Bar2Dot, Queensland Industrial Relations Commissions Proceeding UAC/2023/5 and Magistrates Court of Queensland Proceeding M610/23 commenced by Mr Dangar against VAA and the complaints made by the Dangar Entities to the Australian Financial Complaints Authority, Shartru Pty Ltd and the Tax Practitioner's Board.
[11]
Settlement Sum means the fully inclusive sum of $372,957.65.
[12]
Winding Up Proceeding means Supreme Court of Queensland Proceeding 4889/23 commenced by ZCD [the first defendant added by counterclaim, Zosandcd Pty Ltd] against VFG.
[13]
[21] The Deed relevantly provided by clause 2 Settlement:
[14]
2.1 In full and final settlement of the Dispute, the Parties agree as follows:
[15]
2.1.1 The Recitals and the Annexures shall be read and construed as forming part of this Deed.
[16]
2.1.2 Immediately upon signing this Deed, the Dangar Entities shall cause for the Proceedings to be dismissed or withdrawn with no order as to costs.
[17]
2.1.3 Subject to the Winding Up Proceeding being dismissed, Mr Gunn, Mrs Gunn and VFG will jointly and severally pay to ZCD the Settlement Sum, in cleared funds, care of the NicholasBlack Lawyers Trust Account as follows:
[18]
2.1.3.2 $300,000 on or before 16 June 2023 (Second Payment).
[19]
2.1.5 On and from the signing of this Deed, this Dangar Entitles acknowledge and agree that they have no interest in the business or operations of VFG.
[20]
2.1.6 Within 24 hours of the Second Payment, the Dangar Entities will pay to VAA $97,500 (Dangar Payment).
[21]
2.1.8 The Gunn Entities will transfer all the Assets to the Dangar Entities (as directed by Mr Dangar) as set out in clauses 2.1.9, 2.1.10, 2.1.11 and 2.1.12 below.
[22]
2.1.9 On and from the signing of this Deed, Mr Dangar shall:
[23]
2.1.9.1 be provided by Mr Gunn and VAA full access to all Client Files;
[24]
2.1.9.2 be permitted to contact Access Offshoring to determine availability; and
[25]
2.1.9.3 appoint a 'Change Management Consultant' (at his cost) to work with Mr Gunn and VAA to facilitate the transfer of the Assets.
[26]
2.1.10.1 All invoices and client engagements related to the Assets will be issued from Dr Dangar's chosen entity;
[27]
2.1.10.2 The Gunn Entities shall do all things (and be responsible for all costs, fees and charges) necessary to obtain a transfer of the IP to the Dangar Entities;
[28]
2.1.10.3 The Dangar Entities shall be responsible for all interactions with Clients;
[29]
2.1.12 On and from 9 June 2023, Mr Dangar entity will own 100% of the Assets, be entitled to all revenue and be responsible for payment of all software costs.
[30]
2.1.17 On the date of this Deed, all units in the VFX Unit Trust will be vested and Mr Dangar and Mr Gunn resign as Trustees.
[31]
[22] The Deed relevantly provided by clause 8 Breach of Deed:
[32]
8.1 If any of the Parties breach any of their obligations under the terms of the Deed, the non-defaulting party is indemnified by the defaulting party against any loss, costs, damage or expense (including, but not limited to, legal fees, disbursements and outlays) that it incurs because of the defaulting party's breach.
[33]
[23] The parties agreed a list of matters not in dispute, that was supplemented by agreement on certain facts regarding the QRIDA security.[3]
[24] Evidence-in-chief in the proceeding was primarily given by way of affidavit.
[25] The plaintiffs relied upon an affidavit of lay evidence of Mr Dangar (who was cross-examined). Mr Dangar's response to cross-examination was unnecessarily aggressive and argumentative. He spoke largely in generalisations and advocated his position rather than being neutral in his response to questioning. I did not form a particularly favourable view of Mr Dangar during his cross-examination, but I am careful to keep in mind that whilst this proceeding superficially involves a commercial dispute, it is in truth is a dispute between two people whose livelihoods are inextricably linked to the subject matter of the dispute. It is not surprising then that the main witnesses would be heavily emotionally involved in the trial. However, the often vague and imprecise content of Mr Dangar's affidavit and Mr Dangar's presentation and answers during cross-examination means I am not prepared to accept broad statements made by him at face value as to what was done or not done by the defendants, but will focus on any detailed evidence addressing same. Generally, where Mr Dangar's evidence is contradicted by other evidence, I prefer the other evidence.
[26] The plaintiffs also relied upon the expert evidence of Andrew Perkins, an accountant with a speciality in business valuation, who was cross-examined. That evidence has not proved useful to the resolution of this proceeding.
[27] The defendants relied upon affidavits of evidence of:
[34]
(a) Mr Gunn (who was cross-examined);
(b) Benjamin Chester, a director of Key Technologies Pty Ltd (KeyTech), Keytech was the defendants' technology consultant assisting with the defendants' compliance with certain obligations under the Deed (who was cross-examined);
(c) Debbie McCouat, a former employee of VAA (who was not required for cross-examination).[4]
[35]
[28] I do not have the same level of reservation about Mr Gunn's evidence as I do Mr Dangar's. Mr Gunn's evidence was more detailed and seemed more objectively given. He was prepared to make proper concessions. I generally accept Mr Gunn's evidence as both truthful and reliable.
[29] Detailed evidence addressing what was done or not done by the defendants is more persuasive: evidence from Mr Chester, for example, is more of that nature and I have no hesitation in accepting his evidence. His evidence was plain, direct and objective. It was not seriously challenged or shaken in cross-examination.
[36]
[30] There appears to be no dispute between the parties that the Deed required the defendants to transfer to the plaintiffs all client files (soft copies and any hard copies). Paragraph 12(b) of the amended statement of claim refers to there being "physical files, digital files and/or Xero files".
[31] Insofar as the defendants admittedly did not transfer the client files related to the defendants and the immediate family of Mr Gunn, there is no complaint about that by the plaintiffs. There is also an admission made on behalf of the defendants that on examination of records available there could be ascertained to be six clients or prospective clients who did not appear to have an electronic file, for reasons unknown to the defendants. No specific complaint about those six clients or prospective clients has been made by the plaintiffs.
[32] I note that Mr Dangar's affidavit at times slips into alleging that the defendants were required by the Deed to transfer "clients" to the plaintiffs.[5] There was no such obligation under the Deed. Transfer obligations under the Deed concerned client files and IP only.
[33] Most soft copy client files were held in OneDrive cloud storage in what was referred to as the Microsoft or M365 Tenancy. Some hard copy client files were at least located at the Bingara office (part of the acquired Maltby practice).
[34] The M365 Tenancy, as far as I can ascertain, would have included the data kept by the various Microsoft programs used in the business (like Teams, Word, Excel, Outlook). For example, the evidence of Mr Gunn was that the emails forming part of the client files would have been in Microsoft Outlook which was part of the M365 Tenancy.[6] The same might be concluded in respect of Teams chats/logs. Such data was not necessarily transferred into the client folders which also formed part of the M365 Tenancy, but would be kept in the Microsoft programs within the M365 Tenancy.
[35] The M365 Tenancy did not hold software or data that was not Microsoft related - Mr Gunn gave the examples of BGL, Ignition and Xero[7] used in the business.
[36] Mr Dangar alleges in his affidavit that the defendants failed to transfer 567 client files to the plaintiffs that were required to be transferred. The files are set out in a spreadsheet that identifies the 567 clients, which is exhibited to Mr Dangar's affidavit, commencing on page 390. Mr Dangar refers to another approximate 300 unidentified clients who were not transferred but allegedly had minimal or zero value over the past twelve months and so form no part of the plaintiffs' damages claim.
[37]
[37] The undisputed evidence is that most client files were kept in soft copy form only.
[38] The plaintiffs do not dispute that by 9 June 2023 the plaintiffs had been assigned as the Global Administrators of the M365 Tenancy that contained soft copy files. The M365 Tenancy contained some 2,066 electronic client folders (1,244 "general clients" and 842 "old clients"). Mr Dangar gave evidence that there should have been approximately 3,000 client files[9] but there is no record which supports that assertion. The plaintiffs' reply referred to approximately 5,000 files,[10] which was unsupported by any evidence.
[39] However, the plaintiffs' complaint seems to be:
[38]
(a) "read only" access was provided to 2,066 files, rendering the data useless.[11] In cross-examination a less absolute statement by Mr Dangar was made, that at least some of the documents were accessible in a "read only" format;
(b) "full access" had not been provided;
(c) no access had been given to approximately 934 files.[12]
[39]
[40] Mr Dangar also complains (seemingly a mix of client file and IP complaints) that:
[40]
(a) the Gunn Entities retained a copy of the electronic files provided to the plaintiffs and so did not effect a transfer of the files;
(b) the Gunn Entities and/or Ms Ridley (a former staff member of VAA) retained the Xero Blue subscriptions;
(c) only select Xero subscriptions were transferred to the plaintiffs;
(d) only select Ignition files were transferred to the plaintiffs;
(e) no emails were received by the plaintiffs from the Gunn Entities at all;
(f) no Microsoft Teams logs or chat records were received by the plaintiffs;
(g) data in relation to the cdrta.com.au and cdcommpartners.com.au domains, including emails with those addresses, was required to be transferred as part of the IP, but no such data was received from the Gunn Entities.
[41]
[41] Insofar as the allegation was that certain documents were "read access" only, Mr Dangar described that type of access as being useless. He said it was different access to what he previously had as an employee of the Vault Group. He said that substantial amounts of data were missing or unable to be used. He said that he could open some documents but could not edit any documents.[13]
[42] Broad statements of that nature are unhelpful for the Court to properly understand what could or should have been provided as compared to what was actually provided. It is entirely understandable that a client's tax documents kept electronically might include, for example, a scanned copy of a receipt that might be a "read only" document. That would not make the document useless. On the other hand, a partially completed tax return for a client that is a work in progress would be less useable if it was "read only" - although it still would not be useless if the information contained within it could be used to create a new editable tax return. But the plaintiffs have provided no detail of the allegations of insufficiency. The plaintiffs could have produced the working programs to the Court to demonstrate the complaints, but that was not done.
[43] Mr Dangar maintained in cross-examination that, despite global administrator access to the M365 Tenancy being given to him, the database did not contain emails, or Microsoft Teams logs or chat records. There was a suggestion made that such data may have been deleted.[14]
[44] The Gunn Entities admit that prior to global administrator access to the M365 Tenancy being given to the Dangar Entities, mailboxes (and perhaps other personal files) for both Mr and Mrs Gunn were deleted. But there appears to be no complaint about that by the Dangar Entities.
[45] Mr Chester confirmed that upon the Dangar Entities being given global administrator access to the M365 Tenancy, they had access to all of the mailboxes of the Vault Group (except Mr and Mrs Gunn's) and all data in the M365 Tenancy.[15]
[46] In re-examination Mr Dangar tried to explain further what was missing from the soft-copy files as follows:
[42]
MR COVENEY: Mr Dangar, you were asked by Mr Ferraro earlier about the global administrator access to the Microsoft environment. It was put to you that upon your IT person having been provided global administrator access that you thereafter had the same access as VAA. According to my notes, you responded to that question that you didn't - that, no, you didn't get that. Can you explain to her Honour what you did get?
[43]
MR DANGAR: So in terms of the client files, um, the composition of a client file will generally have permanent files, correspondence files, transaction files. We didn't get work papers; we didn't get correspondence files. So in effect, what we got was part of the information, not the whole information. So in effect, the - the permanent files would be things like settled, um - would be things like comp - company constitution and trust deeds, those sort of things. What we were lacking was that - that further data to actually make the file meaningful.
[44]
MR COVENEY: All right. And of the things you didn't get, why did it matter?
[45]
MR DANGAR: Um, in terms of being able to engage with the client, certainly the correspondence. We didn't know where things were up to, so we couldn't just say to a client, "We need all your emails for the last 12 months about your work." That information was never provided. Any of the team's conversations we didn't have access to, so we couldn't match what we had with what we received. So in terms of even something as simple as the client sending through their work for the year, if that'd - that'd been done by email, we didn't have that data at all. And, um, unfortunately, SharePoint or OneDrive has a lot of limitations. A lot of other platforms will automatically grab data out of emails. You've physically got to put it in to OneDrive.
[46]
[47] He went on at T1-36, LL25-27 to say that the plaintiffs did not receive "any email from any client for a period of time for the entirety of the database, which is about 12 years" and that he was confident such information was there when he was employed by VAA.[16]
[48] The evidence of Mr Chester, which I accept, was that the whole of the M365 Tenancy was available to the plaintiffs upon the plaintiffs being given global administrator access. From comparing a retained copy of the M365 Tenancy taken on 19 May 2023 to what was provided to the plaintiffs on 31 May 2023, he has only been able to identify six missing electronic client files and has not been able to ascertain the reasons for those files not being present. But there is no specific complaint made by the plaintiffs about those six files.
[49] Insofar as the plaintiffs complain that the defendants did not effect a transfer of the files because the Gunn Entities retained a copy of the electronic files provided to the plaintiffs, that complaint is of no merit. The fact that the Gunn Entities retained a copy of the files does not detract from Mr Dangar being provided with access to those files as required by clause 2.1.9.1 of the Deed. There were several practical reasons for the Gunn Entities to retain a copy including:
[47]
(a) requirements of their authorised representative (AR) licensee;
(b) insurance / claims purposes;
(c) because the Gunn Entities post the Deed were to continue to operate the fourth defendant (Vault Financial Group Pty Ltd (VFG)), the financial planning arm of the Vault Group, and many clients were clients of both VAA and VFG and their client files would relate to both.
[48]
[50] I am not satisfied that the defendants breached the Deed in relation to soft copy client files.
[49]
[51] Mr Dangar acknowledges the plaintiffs having received some paper files from the defendants.[17] Which files he actually received is not identified with any precision. Mr Gunn identifies physical files for particular clients that were actually sent by the Gunn Entities to the Dangar Entities.[18] I accept Mr Gunn's evidence.
[52] It appeared accepted by Mr Dangar in cross-examination that there were no material hard copy files at the Bryant practice, and no hard copy files at the Inverell office (a visiting office occupied by staff of VAA).
[53] Mr Dangar said there were three rooms of files at the AMH practice (Grafton office), and he accepted that Vault had the lease initially but it was subsequently taken by Consolitax, and he accepted that the keys to the Grafton office were posted to him. He said he received less than two filing cabinets of files at the Grafton office. Mr Gunn's evidence is whatever hard copy files were at the Grafton office were left at the Grafton office for the Dangar Entities.[19] I accept that evidence of Mr Gunn.
[54] Mr Dangar said there were at least 35 filing cabinets full of files at the Moree office (part of the Maltby practice). Mr Gunn's affidavit evidence was that prior to the Deed, back in November 2022 when the Moree office changed locations, no hard copy files remained in the new location. Files had either been sent to the Bingara office (if current) (part of the Maltby practice), or were for clients who did not transfer over to VAA after the Consolitax purchase of the Maltby practice (so not "client files" of VAA).[20] He does recall three hard copy files from the Moree office prior to the Deed that he directed be returned to the clients as they were one-off jobs. I accept the evidence of Mr Gunn. Even if there were once at least 35 filing cabinets full of files at the original Moree office, there were no hard copy files at the Moree office to be transferred to the Dangar Entities pursuant to the Deed. And if there were any files remaining at the Moree office, the Dangar Entities were invited to collect same.[21]
[55] Mr Dangar said there were at least 4 filing cabinets at the Bingara office (part of the Maltby practice), and he accepted that Consolitax had the lease of that premises. Mr Gunn gave evidence, that I accept, that he never had a key to that office (consistent with Consolitax having the lease of the premises). There is undisputed evidence that Mr Dangar threw out some old files from Bingara office in June 2022.
[50]
[59] There appears to be no dispute between the parties that the Deed required the defendants to transfer to the plaintiffs the files of all self-managed superannuation fund clients.
[60] Mr Dangar alleges in his affidavit that the defendants have failed to transfer 114 self-managed superannuation fund clients and their files to the plaintiffs. The information provided by Mr Dangar in that respect is extremely scant.[26] He says it is something he discovered after the proceeding was initially commenced and it was incorporated into an amended pleading in January 2024. How it was discovered, why it was discovered so late, and where it was discovered, is not disclosed.
[61] The list of relevant fund client files is at pages 436-439 of exhibit CGD-01 of Mr Dangar's affidavit. On my count there are only 102 fund client files contained in that list.
[62] The evidence of Mr Gunn, that is not disputed, is that:
[51]
(a) VAA used an accounting software program called BGL to manage SMSF clients;
(b) BGL would contain certain documents relevant to the SMSF clients. The balance of the documents relevant to such clients would be held in the client folders in the M365 Tenancy.
[52]
[63] Mr Gunn denies the allegation that the SMSF client files were not transferred to the plaintiffs. He says BGL was assigned to the plaintiffs.[27] Mr Gunn says a staff member was directed to perform that assignment. He says that the client folders in the M365 Tenancy were all provided to the plaintiffs and he can verify that each of the clients in the list have a corresponding folder in the copied folder he retains of the M365 Tenancy.
[64] The plaintiffs complain that the staff member who allegedly performed the assignment of the BGL licence to the plaintiffs has not been called to give evidence and so a Jones v Dunkel inference should be drawn against the defendants. I am not prepared to draw any such inference in light of the concessions made by Mr Dangar which I will shortly refer to.
[65] A spot check by me of the clients mentioned in the SMSF list as compared to the client folders in the copied folder (at exhibit BG-21B of Mr Gunn's affidavit) supports the evidence of Mr Gunn regarding the M365 Tenancy.
[66] That then leaves the BGL information. It was put to Mr Dangar in cross-examination, and it appears it was accepted by him, that he did have BGL client data for some 101 SMSFs that he gave to a person named Ms Unis, who he later sued in relation to those SMSF files. He admitted he could access the BGL information about those SMSFs with the appropriate codes. All of those 101 SMSFs are contained on the SMSF list Mr Dangar complains not having received the files for.[28] In re-examination whilst admitting to a bit of "non-knowledge" Mr Dangar admitted his understanding was that he in fact had received most the BGL codes.[29]
[67] I accept the evidence of Mr Gunn. I am not satisfied on the balance of probabilities that the defendants have failed to transfer 114 self-managed superannuation fund clients and their files to the plaintiffs.
[68] I am not satisfied that the defendants breached the Deed in relation to self-managed superannuation fund client files.
[53]
Alleged failure to transfer the client files for the Maltby and AMH practices
[54]
[69] It is not clear at all on the plaintiffs' evidence if these client files are alleged to be different to the missing 567 client files (potentially plus the additional 300 of no or minimal value files) referred to in [36] above or the generally missing hard copy files.
[70] The way the plaintiffs' damages claims are formulated (fees unable to be earned from missing files plus the "wasted" purchase price of the Maltby and AMH practices) it might be thought the client files for the Maltby and AMH practices are different. But in considering the whole of the evidence and how the case was presented, I do not think that is so.
[71] Accordingly the client files (soft copy and hard copy) from the Maltby and AMH practices do not require further consideration here.
[72] I have already concluded that I am not satisfied that the defendants breached the Deed in relation to soft copy or hard copy client files, which include any files from the Maltby and AMH practices.
[55]
[73] The plaintiffs allege at paragraph 13 of the amended statement of claim that:
[56]
In relation to the IP, in breach of clauses 2.1.8, 2.1.10.2 and 2.1.13 of the Deed, the Gunn Entities (the Defendants) failed, refused or neglected to transfer on and from 1 June 2023, or at all:
[57]
(a) Xero Blue subscription;
(b) all Xero subscriptions;
(c) all Ignition files;
(d) Adobe DC Account including signing records, instead rebranding this account to EFX Accountants and Advisors;
(e) all Client emails relating to their Client Files, which were deleted instead;
(f) Microsoft Teams Logs and Chat records, which were deleted instead;
(g) all crdata.com.au and cdcommpartners.com.au data, which were deleted instead,
[58]
[74] I will deal with each of those pieces of alleged IP in turn.
[59]
[75] The plaintiffs' complaint about the non-transfer for the Xero subscriptions I think is properly described as vexatious.
[76] Mr Gunn's evidence, which I accept, is at [144(b)] of his affidavit. It was not challenged.
[77] Mr Dangar's evidence in cross-examination was:[30]
[60]
(a) Mr Gunn attempted to transfer 249 Xero subscriptions to the plaintiffs;
(b) the plaintiffs refused to accept the transfer;
(c) the plaintiffs refused to accept the transfer because there was a cost associated with each Xero subscription and the plaintiffs were unwilling to accept the transfer before they had an engagement with the relevant clients.
[61]
[78] The plaintiffs' reason for refusing acceptance of the transfer of Xero subscriptions might be entirely practical for them, but it is a vexatious proposition to allege failure on behalf of the defendants to transfer when it is the admitted actions of the plaintiffs that has caused the transfer not to occur.
[79] Insofar as certain client Xero subscriptions were owned directly by the client, the defendants had no capacity or obligation to effect transfers to the plaintiffs of those subscriptions.
[62]
[80] Mr Gunn's evidence is that the Ignition account held by VAA was transferred to Mr Dangar on 31 May 2023[31] and nothing was removed from the account.[32]
[81] Mr Dangar's affidavit evidence says, unhelpfully, "Only select Ignition files were transferred to the Plaintiffs".[33] What files precisely were allegedly not transferred is not identified at all.
[82] Mr Dangar's evidence in cross-examination in respect of the Ignition files was that:[34]
[63]
(a) the software was transferred to the plaintiffs from 1 June 2023;
(b) from that day the plaintiffs received the direct debits from clients from the Ignition software;
(c) that income had not been accounted for in the proceeding, although it was alleged that the amount of refunds paid out of the Ignition file was greater than the moneys received (but that was not further explained at all).
[64]
[83] I do not accept Mr Dangar's evidence. I accept Mr Gunn's evidence. I therefore am not persuaded by the plaintiffs to the requisite standard that there has been any breach of the Deed in respect of the Ignition software, data or IP.
[65]
[84] Mr Gunn's evidence about this program was that he made attempts with Adobe's agent Data3 to transfer or licence the program to a new user (the plaintiffs), but that was not permitted to occur.
[85] Insofar as the complaint might relate to client signing data and engagement information, that does not to me seem to naturally form part of the client files or other data that was to be transferred.
[86] I am not satisfied that the defendants breached the Deed in relation to the Adobe DC account including signing records.
[66]
[87] I accept Mr Gunn's evidence that all of the mailboxes for all staff except for Mr and Mrs Gunn were in the M365 Tenancy given to the plaintiffs on 31 May 2023.[35]
[88] I reject the evidence of Mr Dangar that the staff emails were not contained in the M365 Tenancy. The Dangar Entities could have readily put the M365 Tenancy into evidence to demonstrate that the mailboxes did not there exist. Instead, only an assertion from Mr Dangar was relied upon.
[89] The plaintiffs suggested these emails/mailboxes were deleted. When that occurred or who is alleged to have deleted the files is not identified. There is, in fact, no evidence of deletion proffered, except by way of an inference. I reject the plaintiffs' submissions in that respect.
[90] I am not satisfied that the defendants breached the Deed in relation to all client emails relating to their client files.
[67]
[91] Mr Chester gave evidence that the Microsoft Teams logs and chat records would have been in the M365 Tenancy when handed over.[36] Mr Gunn gave evidence that all of the Teams chats and logs, except for Mr and Mrs Gunn's, were in the M365 Tenancy given to Mr Dangar on 31 May 2023.[37] I accept that evidence.
[92] Again the plaintiffs suggested these records were deleted. When that occurred or who is alleged to have deleted the records is not identified. There is in fact no evidence of deletion proffered, except by way of an inference. I reject the plaintiffs' submission in that respect.
[93] I am not satisfied that the defendants breached the Deed in relation to the Microsoft Teams logs and chat records.
[68]
[94] There is a real dispute as to precisely what of this data was the subject of the Deed. These website addresses are domains that, it appears, were originally being hosted for the plaintiffs by the defendants' technology provider, KeyTech. It is not clear to me on the evidence how these domains had anything to do with the Vault Group or the Deed.
[95] Regardless, there appears to be no dispute that Keytech was directed to and did transfer the domains to the plaintiffs. Mr Chester confirmed that the emails and domains would have been in the M365 Tenancy that was handed over. I accept that evidence.
[96] Mr Dangar appears to complain that whilst the domains were transferred, the data was not. It was put to Mr Dangar that the data came with the domains and that KeyTech further supplied to the plaintiffs a backup it had retained of crdata.com.au on 31 May 2023. That was denied by Mr Dangar.[38]
[97] Mr Dangar went on in cross-examination to clarify that he was not complaining about non-receipt of the website and the data comprised in that website, but about a Google Drive said to have something like 10 years of data in it, that was said to be part of the client files.[39] This was otherwise unexplained.
[98] Again there seemed to be a suggestion by the plaintiffs that this data was deleted. When that occurred or who is alleged to have deleted the data is not identified. There is in fact no evidence of deletion proffered, except by way of an inference.
[99] Mr Gunn denies having deleted the domains or the data associated with them.[40] I accept that evidence.
[100] The plaintiffs' claim is not made out, even if it were to be accepted (which is it not) that the Deed required the transfer of crdata.com.au and cdcommpartners.com.au data.
[101] I am not satisfied that the defendants breached the Deed in relation to all crdata.com.au and cdcommpartners.com.au data.
[69]
Alleged failure to transfer the client files and Assets unencumbered by security
[70]
[102] There is no dispute between the parties that:
[71]
(a) in 2020 VAA granted a registered security over all of its present and after-acquired property to the Queensland Rural and Industry Development Authority (QRIDA) (Charge);
(b) the Charge included security over the Assets the subject of the Deed;
(c) as at the date of the Deed, the Charge remained in full force and effect;
(d) the Dangar Entities knew of the Charge (Mr Dangar initially in cross-examination denied knowledge of the existence of the Charge at the time of the Deed,[41] but ultimately accepted that not to be the true position[42]);
(e) VAA did not obtain QRIDA's consent to the transfer of the Assets to the Dangar Entities (whilst the Dangar Entities sought to emphasise this, any failure to obtain the required consent is not a matter that actually directly concerns them).
[72]
[103] The Dangar Entities say the consequence of the above matters is that insofar as the defendants did transfer client files and Assets to the plaintiffs, the defendants still breached the Deed because those items when transferred were not permitted to be encumbered by the Charge. It says that is because, encumbered by the Charge, QRIDA has a claim to those assets and:
[73]
(a) the Dangar Entities did not receive the required transfer as contemplated by clause 2.1.8 of the Deed;
(b) after the transfer, the Dangar Entities did not own 100% of the Assets and were not entitled to all revenue from them, as contemplated by clause 2.1.12 of the Deed;
(c) the defendants did not do all things reasonably necessary to ensure that the Assets were transferred to the Dangar Entities as contemplated by clause 2.1.13 of the Deed.
[74]
[104] Mr Dangar in cross-examination conceded that the existence of the Charge did not cause the loss of any of the 567 clients, did not cause the complete destruction of the value of the Maltby or AMH practices, and did not result in the plaintiffs being unable to service the clients of those practices.[43]
[105] He also conceded that in the Deed one of the reasons why he was only prepared under the Deed to pay $97,500 for the assets of VAA (the amount the subject of the counterclaim unpaid) was because he knew of the Charge.[44] How the plaintiffs could properly maintain any claim for damages even if there was a breach in such circumstances was unexplained.
[106] Regardless, in my opinion there has been no breach of clauses 2.1.8, 2.1.12 or 2.1.13 as a consequence of the Charge because (respectively):
[75]
(a) the Assets were transferred to the Dangar Entities;
(b) the Dangar Entities did own 100% of the Assets and were entitled to all revenue from them;
(c) the defendant did all things reasonably necessary to ensure that the Assets were transferred to the Dangar Entities;
(d) the existence of the Charge had no impact on the above matters.
[76]
[107] The parties, both knowing of the Charge, could have expressly provided for provisions in the Deed requiring the Charge to be removed prior to the contemplated transfers if that was the intention. They did not do so. What was to be transferred was simply the same interest as VAA had - that is, ownership of the Assets subject to the Charge.
[108] I am not satisfied that the defendants breached the Deed in relation to the encumbrances of the assets transferred.
[77]
Other matters concerning client files to record
[78]
[109] First, I note that the Dangar Entities purport to rely upon correspondence from Shartu (authorised representative of VAA) which allegedly confirmed on 15 November 2023 that no client files had been transferred to the Dangar Entities pursuant to the Deed or at all.[45] That assertion by Shartu was hearsay, not supported by admissible evidence, and is rejected by me given the findings I have made.
[110] Second, despite the way that the claim for damages is formulated by the Dangar Entities in relation to the client files, there did appear on the pleadings and evidence to be a complaint about the timing of the transfer of client files to the Dangar Entities, as well as the alleged non-transfer.
[111] There is no proper articulation or evidencing by the Dangar Entities of any damages that might have been suffered merely as a consequence of a timing issue concerning the transfer of the files. But regardless, the complaint has no merit. There was no breach of clauses 2.1.8, 2.1.9, 2.1.10, 2.1.12 and 2.1.13 of the Deed because the Deed did not require the transfer of files to be completed by 16 May 2023, only that the files were to be transferred on and from 16 May 2023 and full access provided by that date. The defendants' submissions at [95] of their primary closing submissions are accepted.
[79]
[112] As set out at [[5](e))] herein, the amended statement of claim makes a claim for damages to be assessed based on certain alleged breaches, which do not otherwise seem to separately feature in the submissions made on behalf of the plaintiffs at trial.
[113] The matters at (i) and (iv) seem to be covered elsewhere by the plaintiffs and do not need to be considered again under this heading.
[114] The matters at (ii) and (iii) are addressed by Mr Gunn in his affidavit from [129] to [143]. I accept that evidence: it was not seriously challenged. There is no breach of the Deed by Energy Financial Pty Ltd having offices in Inverell and Moree until November 2023; it is not established on the evidence that the Gunn Entities (or any one of them) was ostensibly in partnership with Ms Ridley. Nor were submissions advanced on behalf of the plaintiffs to demonstrate how the matters alleged by the plaintiffs (but not proved by the plaintiffs by evidence) actually constituted a breach of the Deed. These claims by the plaintiffs (if they are actually still advanced by the plaintiffs) fail.
[80]
[115] I am not satisfied that the plaintiffs have established the breaches of the Deed sought to be relied upon to justify an award of damages in the plaintiffs' favour. Accordingly, it is not necessary for me to go any further in order to dismiss the plaintiffs' claims.
[116] However, lest I be wrong in my conclusion about breaches, I will say something briefly about causation and damages as it is my view that nothing more than nominal damages could be awarded to the plaintiffs in any event for any breach of the Deed actually established.
[117] The plaintiffs failed to establish to the required standard that any particular breach of the Deed led to the suffering of any particular loss or damage.
[118] Instead the case was presented by the plaintiffs generally as follows. The defendants did not give the plaintiffs the complete client files and other Assets to which they were entitled. That meant the plaintiffs were unable to service particular clients properly and therefore lost revenue that otherwise would have been received from them. The calculation of loss and damage is based on the plaintiffs receiving no revenue in respect of the 567 client files and 114 SMSF files at all for an entire year, plus the whole of the cost of the purchase of the Maltby practice and the AMH practice being wasted (adjusted to account for some clients retained by the plaintiffs).
[119] Yet there is not in the evidence even one example from which it can be seen:
[81]
(a) what actual part of a particular client file was missing or in read only form;
(b) why that missing part of the client file, or why having access more fulsome than read only access, was imperative to properly servicing the client;
(c) what attempts were made to service the client despite the missing part / read only part of the file and why those attempts failed;
(d) evidence from the client explaining why they did not continue to use the services of the plaintiffs (which could also show that there was no other reason for the loss);
(e) any revenue actually received from the client.
[82]
[120] Such evidence should have been able to be adduced by the plaintiff for at least some of the files so the Court could obtain a real insight into causation and the actual loss and damage suffered by the plaintiffs.
[121] I can readily accept that the Court often is required to take a practical approach to causation and quantification of damages based on doing the best it can on the evidence before it,[46] but there must be some proper evidentiary basis presented on which the Court can act. The Court should not engage in something approaching pure speculation. There has not been evidence adduced in this case that would permit anything like an informed estimation of damage caused by the defendants being made.
[122] Properly the plaintiffs' case in this proceeding could have been presented as a loss of opportunity case where, I accept, it would not be practical to present evidence like that mentioned above in relation to over 600 files, but even then there needs to be a proper evidentiary basis upon which the Court could assess the opportunity percentages.[47] When pressed, the plaintiffs in this case did not submit for anything less than 100% loss of opportunity, and that is, on any common sense consideration of this case, frankly fanciful. For example, a 100% loss of opportunity in this case would require it to be concluded that every single one of the clients associated with the "missing" 567 client files and 114 SMSF client files would have actually moved their ongoing accountancy work to the plaintiffs with no attrition - with no evidence available concerning client/work attrition year to year in even a "practice as usual" situation, let alone following a change to the service provider (the new business).
[123] That is also particularly so in circumstances where the defendants submitted that any damage actually suffered by the plaintiffs also had other causes, including:
[83]
(a) the failure of the new business to retain important staff with the client connections from the Vault Group;
(b) the failure of the new business to properly on-board the clients to attempt to retain their business;
(c) the alleged solicitation of clients by others (Ms Ridley and Ms Unis) who the plaintiffs sued (with proceedings settled).
[84]
[124] Such submissions were meritorious and should have been addressed by the plaintiffs with some evidence (see [119](d)] above) so that the court could reasonably conclude that some loss and damage was actually caused by the alleged breaches.
[125] I also mention that the plaintiffs' claims for damages contain elements of double-up that the plaintiffs really did not adequately equip the Court with sufficient knowledge to deal with. For example, Dangar Entities have already sued and settled proceedings with a third party (Ms Ridley and Emerge Advisory) for the same damages alleged to have been suffered as a consequence of non-receipt of the $688,702.03 in fees in respect of the 567 client files alleged in this proceeding not to have been transferred.
[126] There is also another proceeding involving the plaintiffs and a third party (Yunis) but the precise overlap in that settlement with the claims made here is not explained.
[127] In supplementary submissions and in reliance upon a further affidavit filed post trial, the submission seemed to be made by the plaintiffs that any deduction to be made from damages awarded in this proceeding, to take into account settlements of other proceedings involving the same loss, can take into account costs forming part of the settlement amount in the other proceedings. As a general proposition I agree. But as pointed out for the defendants, in considering those other settlement deeds, the settlement amounts are not said to be inclusive of costs.
[128] If I had been required to so decide, doing the best I could with the evidence available and bearing in mind where the onus to prove damages rests, I would have deducted from any damages awarded to the plaintiffs in this proceeding the whole of the settlement amounts identified as receivable by the plaintiffs in the Ridley and the Yunus proceedings.
[129] I should also mention that the defendants made submissions going to whether the plaintiffs were in fact the correct plaintiffs to the proceeding in any event. The point was made that the plaintiffs' new entity Vault Business Advisors Pty Ltd (VBA) was the entity who was to receive the client files, IP, etc, and to trade the accountancy business and receive the revenue from same moving forward. It was not named as a plaintiff. If I had concluded that this was the only matter standing in the way of the plaintiffs' success, I would have invited and entertained a very late application for VBA to be joined to the proceeding as a plaintiff. In the result, that has not been necessary.
[85]
[130] Finally, it is necessary to say something about the plaintiffs' submissions about the burden of proof. The plaintiffs relied in oral submissions on the case of Stephens v Cannon[2005] EWCA Civ 222 for the proposition that the Court must face an exceptional situation before it can despatch a disputed issue by resort to the burden of proof.[48] I do not consider that proposition to be applicable here. Unlike in Stephens v Cannon, where the learned trial judge was unable to decide which view of evidence to prefer, my decision in this case is not made by resort to the burden of proof. I have considered the evidence adduced by both parties in respect of the allegations of breach and relevantly explained which I prefer. I have further considered the claims of loss and damage made by the plaintiffs and found that there is insufficient evidence to substantiate those claims. This is therefore not a case in which the Court seeks to resort to the burden of proof, but rather where the Court has made positive findings that the plaintiffs' burden of proof has not been discharged in various respects.
[86]
[131] The plaintiffs' claims are dismissed. Subject to hearing from the parties as to costs, I would propose that the plaintiffs pay the defendants' costs of the plaintiffs' claims on the standard basis.
[132] Judgment is entered for the plaintiff by counterclaim against the plaintiffs and the defendants added by counterclaim in the amount of $97,500, plus interest from 6 June 2023.[49]
[133] Subject to hearing from the parties as to costs, I would propose that by operation of clause 8.1 of the Deed that the plaintiffs and the defendants added by counterclaim pay the plaintiff by counterclaim's costs of the counterclaim on the indemnity basis.
[87]
[1] Affidavit of Craig Dangar filed 11 June 2024 (CDI 12) (Affidavit of Dangar), [159].
[88]
[4] Paragraphs 6 and 7 of this affidavit were struck out.
[22] Affidavit of Debbie McCouat filed 29 July 2024 (CDI 30) (Affidavit of McCouat), [8]. And more from December 2022 to January 2023, Affidavit of Gunn, [45].
[56] Mr Dangar said that client files were not at the Bingara office when he went there on 3 June 2023. The otherwise undisputed evidence is that the files stored in that office were temporarily removed from that office due to roof repairs being undertaken and were subsequently returned.[23] In the cross-examination of Mr Dangar it was demonstrated that one of the files identified as "missing" by Mr Dangar is photographed at the Bingara premises on 9 June 2023 - and so cannot be missing (namely, the Cupid file).[24] Ms Couat's evidence supports that the hard-copy files in the Bingara office remained in the Bingara office but for the temporary removal. I accept that evidence which was not challenged. There is no reason to conclude that the plaintiffs did not have access to all of the hard copy files located at the Bingara office. No particular missing file has been identified by the plaintiffs.
[57] Even more peculiarly it arose in the cross-examination of Mr Dangar that in January 2025 Mr Dangar couriered to the liquidator of VAA some 300 hard copy files. Mr Dangar conceded that many of those 300 files were client files that the plaintiffs claim int his proceeding that they did not receive.[25] That is irreconcilable and reflects very poorly on Mr Dangar's credibility that he has claimed to have not received hard copy files from the defendants, when his own evidence is that of 300 files delivered to a liquidator many of them were files he claimed he had not received.
[58] I am not satisfied that the defendants breached the Deed in relation to hard copy client files.