Disctronics Ltd v Edmonds [2002] VSC 454

2. There are two sets of proceedings before the Court. In the first and main proceeding (No. 2053/2001) ("the main proceeding"), the plaintiffs, being the Disctronics parties claimed relief arising from alleged breach of fiduciary duties and an alleged constructive trust against the principal defendants, the K.L.C.C. defendants. As a consequence of their allegations, the first plaintiff lodged a caveat over disputed land. In the second proceeding (No. 6221/2001) ("the caveat proceeding"), the K.L.C.C. defendants sought an order for removal of the caveat. For convenience, a reference to a plaintiff or plaintiffs and to a defendant or defendants is a reference to those parties on the record in the main proceeding.

5. The case was one essentially where the plaintiffs claimed they entered into a joint venture with some of the defendants in relation to a property acquisition but that after the joint venture fell apart those defendants went away and secretly acquired the property for themselves and another party by using confidential information acquired from the joint venture. The K.L.C.C. defendants claim that any joint venture between the parties was repudiated by the plaintiffs and that they were entitled, therefore, to acquire the property for themselves.

8. The plaintiff and the K.L.C.C. defendants engaged in a course of extensive communication and negotiation during the period from early April to early August 1999. Most of the communications and negotiations were irrelevant save for two purposes. First, in order to determine the role, if any, of the first plaintiff, Disctronics Limited in the alleged joint venture. Second, in order to provide the commercial context of the relationship between the plaintiffs and the K.L.C.C. defendants. It is necessary, therefore, to canvass those events in some detail.

12. The first plaintiff, Disctronics Limited ("Disctronics"), was a company utilised by the second, third and fourth plaintiffs as a vehicle for investment. Prior to its investment role, Disctronics was formerly a manufacturer of optical discs known as compact discs and digital versatile discs in Europe and the United States. The second, third and fourth plaintiffs are all directors of Disctronics and associated with the firm of solicitors, Oakley Thompson and Co.

15. The second plaintiff, Kevin Patrick Donovan ("Donovan"), is a director of Disctronics and an associated company, Disctronics Holdings Limited ("DHL"), a barrister and solicitor and a consultant to Oakley Thompson and Co. Donovan had a longstanding friendship with the third plaintiff, Stephen Howard ("Howard") who is also a director of Disctronics and DHL, a barrister and solicitor and a consultant to Oakley Thompson and Co. Similarly, the fourth plaintiff, Michael James Quinert ("Quinert") is a director of Disctronics and DHL and a barrister and solicitor. He was and remains a partner of the firm Oakley Thompson and Co.

18. The fifth plaintiff, Richard Bucknall ("Bucknall"), is self-employed as a consultant on golf course based investment projects. The sixth plaintiff, Solette Pty Ltd ("Solette"), was a company also utilised by Donovan and others as a vehicle for property development and investment.

22. Bucknall was an acquaintance of Donovan. From about 1997 onwards Bucknall investigated golf related investment opportunities to refer to Donovan. For this purpose, Solette paid consultancy fees to Bucknall from time to time. In late 1998 and early 1999 Bucknall told Donovan of a particular investment concept for the purchase and financing of a golf course. The core ingredients of the concept involved the purchase of a public golf course, the leasing of the golf course and associated catering rights and the application of the rental stream to underwrite the purchase of the golf course. The concept was described by Bucknall to Donovan in two facsimile transmissions dated 5 October 1998 and 21 January 1999. However, the concept was not Bucknall's own (although he represented as much to Donovan). In fact, the concept was developed in or about September 1998 by another company, Club and Resort Operations International Pty Ltd ("CROI") for one Alan Thomas Maw ("Maw"), who was involved in golf course construction and development consultancy. CROI and Maw were not connected to the plaintiffs in any way. The concept was explained in a document entitled "Dingley Public Golf Facility (Preliminary Consulting Report)" known as the "CROI") report. Bucknall was referred to Maw by some golf course architects in October 1998. The referral led Maw to an exploratory meeting at Oakley Thompson and Co with Bucknall and Howard and one John Lester on 26 October 1998. Maw provided various documents relating to the golf course concept to those attending the meeting and later on provided some other documents to Howard. In this way the CROI report came into the possession of Bucknall. Discussions revolved around the acquisition of a golf course at Dingley. Ultimately, it did not proceed and Maw had no further dealings with Bucknall, Howard or any other person connected with Oakley Thompson and Co.

26. On 5 October 1998 Bucknall urged Donovan towards investment in public golf courses. On 21 January 1999 Bucknall sent a concept document to Donovan setting out a proposal for the acquisition of a public golf course at Keysborough. The document sent by Bucknall to Donovan was virtually identical to the CROI report given by Maw to Bucknall in October 1998. The proposal made mention of an established golf course known as Kingston Links Golf Course. It also floated the possibility of a long term lease of the golf course acquired to an operator known as "Spotless".

29. This led Bucknall in February 1999 to meet one Stuart Rose of Spotless ("Rose"), with a view to Spotless acquiring leasehold rights of any golf course development projects that might eventuate. Bucknall told Rose that he was involved with a "group of investors" and enquired whether Spotless would be interested in leasing and operating a golf course from the investment group. Rose expressed enthusiasm. Afterwards, Bucknall told Howard and Donovan of the interest of Spotless. On 4 March 1999 he sent Donovan and Howard a fax informing them of his activities. Bucknall regarded the concept of an entity operating as an anchor tenant of a leased golf course and the application of rent to underwrite development costs as a novel concept. He regarded the identity of Spotless as the potential tenant as a secret. Bucknall calculated that the amount required by his investment group by way of annual rental of a golf course development was in the order of $900,000. Bucknall met Rose again in early April 1999. Rose indicated that Spotless may pay an annual rent in the range of $900,000 to lease a golf course.

Events of April 1999 - the involvement of Edmonds

33. In April 1999 events took a significant turn. It occurred to Bucknall that the acquisition of an established golf course compared with the development of a greenfields site may be a preferable option. He identified a potential target site being the Kingston Links Golf Course. Bucknall suggested this path to Donovan. He was interested. As a result, Bucknall organised a meeting on 13 April 1999 at a restaurant (known as "Daniel's") between Donovan, Rose and Bucknall. Donovan invited the first defendant, Christopher Edmonds ("Edmonds") to attend. Edmonds was a former bank manager who operated a finance consultancy known as Home Link Mortgage Corporation Limited ("Home Link"). It was the third defendant in the main proceeding. It was de-registered on 10 May 200 and thus the plaintiffs ultimately did not proceed against it. Edmonds had worked for Donovan and his interests before. In fact, Edmonds had an office as a sub-tenant within the offices of the solicitors, Oakley Thompson and Co with whom each of Donovan, Howard and Quinert were connected. Edmonds and his company, Home Link, were also clients of Oakley Thompson. Donovan spoke to Edmonds twice on 9 April 1999 and invited him to the meeting at Daniel's restaurant on 13 April 1999 in order to provide advice on the financing of the project involving the purchase of a golf course, in particular, the possible purchase of the Kingston Links Golf Course.

36. In the first conversation Donovan outlined his intention to buy or establish a privately owned golf course accessible to the public and lease the course to an operator. Edmonds told Donovan that the financial arrangement of such transaction was significant and that there would need to be equity in the property. He said that for this reason a strong tenant was important.

39. In the second conversation on 9 April 1999 Donovan told Edmonds that the prospective tenant for the project was Spotless and that discussions had been held with the latter already. Donovan told Edmonds that he wished to engage him to advise on financing the project and the debt and equity arrangements. Edmonds agreed to provide the service requested. He attended lunch at Daniel's restaurant on 13 April 1999. Donovan told Edmonds the "normal" arrangement fees of one per cent for debt finance and three per cent for equity finance ought apply and that Edmonds should operate on that basis. Edmonds agreed.

42. The meeting at Daniel's restaurant on 13 April 1999 occurred. Donovan, Bucknall, Edmonds and Rose, from Spotless were present. Discussion revolved around golf course projects, both greenfields and established sites. The possibility of acquiring the Kingston Links Golf Course was raised. Rose said Spotless would be interested in the right circumstances. The lunch finished without any decisions, agreements or arrangements being concluded. Immediately after the lunch on 13 April 1999 Donovan, Bucknall and Edmonds continued discussions. Edmonds suggested the retainer of an estate agent to negotiate the acquisition of a site. He proposed the second defendant, Peter Joseph Cahill ("Cahill"). Edmonds described Cahill as an effective, well connected and qualified estate agent. He said Cahill knew the owners of the Kingston Links Golf Course and could ascertain if the site was up for sale. Edmonds said that Cahill could take over the sale negotiations role managed by Bucknall up until that time. Donovan authorised Edmonds to speak to Cahill.

45. Cahill was a qualified estate agent with experience in business. He conducted his business through a company, the fourth defendant, Domain Hill Property Services Pty Ltd ("Domain Hill") and another company. Both companies were later deregistered. Ultimately, therefore, the plaintiffs did not proceed against the fourth defendant. Edmonds spoke to Cahill and told him in general terms of the proposal of the group. Edmonds suggested possible sites such as Kingston Links Golf Course and Keysborough. On 20 April 1999 Cahill met Bucknall. Cahill was informed of the interest of the group in the purchase of a golf course. Cahill and Bucknall discussed a greenfields site at Sunshine. The discussions were quite detailed and directed towards design, earthworks and construction, planning approval and price range. The discussions also included a reference to Kingston Links Golf Course. Ultimately, the suggestion of the Sunshine site by Cahill did not lead anywhere. Cahill told Bucknall that he knew the owners of the Kingston Links Golf Course and said he would ascertain whether the site was up for sale. Cahill told Bucknall that if the Kingston Links Golf Course was up for sale and the investment group proceeded further, he, Cahill, would request payment of a fee and a success fee. The matters they discussed were set out by Bucknall in a fax he sent to Donovan on 21 April 1999 but incorrectly dated 15 April 1999. On 29 April 1999 Cahill met Kevin Wood, the managing director of the owner of the Kingston Links Golf Course in order to ascertain interest.

The Events of May 1999 - the involvement of Cahill

49. On 7 May Cahill wrote to Donovan in his capacity as a director of Solette referring specifically to the acquisition of Kingston Links Golf Course "by your group". The form of the letter was settled after an exchange of drafts between Cahill and Bucknall. Cahill proposed a fee payment structure for his company, Domain Hill to act. The fee arrangement encompassed an hourly rate up to a maximum of $1,000 and a success fee of .75 per cent of the purchase price less hourly fee. Cahill stated in the letter:

" ... In respect of the Kingston Links Golf Course, Domain Hill will act as an intermediary with its role being to finalise the acquisition on the most favourable terms and conditions possible."

53. The Cahill letter of 7 May 1999 was never signed by the plaintiffs. However, the arrangements were never questioned or challenged by the plaintiffs. Nonetheless, Cahill acted himself personally thereafter for the Donovan group.

56. On 19 May 1999 Cahill wrote to Wood as managing director of "the Kingston group of companies". The letter was settled following an exchange of drafts between Bucknall and Cahill. The letter of 19 May 1999 referred to a luncheon discussion between Cahill and Wood and Kingston Links a few days earlier. The letter referred to the interests of a "consortium" in the acquisition of the Kingston Links Golf Course. It identified the involvement of Donovan, Howard and Bucknall and referred to "co-investors" and "partners" without identifying those parties. In particular, Cahill stated in the letter of 19 May 1999 to Wood:

" ................. In respect to the Kingston Links Golf Course specifically, Domain Hill will not form part of the investment consortium but will act as an intermediary and endeavour to conclude a transaction which meets the needs of both parties. Solette Pty Ltd is the investment vehicle currently used by the consortium including partners of Oakley Thompson and Co but in the event that we consummate a transaction with you a special purpose entity will be established to undertake the acquisition. ........................................... "

60. The letter went on to request provision by Wood of information including site and financial details relating to the Kingston Links Golf Course. After dispatch of the letter of 19 May 1999 Cahill followed Wood up on the provision of the information required. It was subsequently provided.

63. On 25 May 1999 Bucknall met Rose and informed him of the possibility of the acquisition of the Kingston Links Golf Course and enquired as to the potential interest of Spotless. Rose expressed very keen interest.

Events of June 1999 - meetings with the Kingston Group and Spotless

67. After Wood provided the information requested by Cahill in his letter of 19 May 1999, Cahill arranged a meeting of Howard and Bucknall at the Kingston Links Golf Course with Wood. As preparation for the meeting, Howard wrote to Edmonds on 7 June 1999 requesting specific financial advice if a project proceeded involving the Kingston Links Golf Course. In his memorandum Howard informed Edmonds of the fact of a likely lessee, unidentified in the document, but described as being "known" to Edmonds. The memorandum suggested that the proposal would produce "a handsome yield". Edmonds responded to Howard in a memorandum dated 8 June 1999 wherein he cautioned as to the difficulty in obtaining finance for golf course projects but advised that a particular lease arrangement could render the project attractive to a financier in that the market value of the asset would be constituted by the capitalised value of the rental income rather than the value of the land itself. Edmonds described this arrangement as similar to the structure of finance for a shopping centre. On the basis of the tenant being regarded as of "blue chip" quality he was supportive of the proposal. Otherwise, in his reply of 8 June 1999 Edmonds provided financial information to Howard as had been requested.

70. On 10 June 1999, Bucknall, Howard, Edmonds and Cahill met Wood at Kingston Links Golf Course for a luncheon meeting. A view of the site occurred. It was made plain to Wood that there was definite interest in purchasing the site. The meeting concluded on the basis that Cahill would contact Wood to obtain necessary information. Meanwhile, Bucknall asked Rose to provide a letter from Spotless declaring its potential interest in Kingston Links.

73. On 22 June 1999 Donovan, Edmonds and Cahill met for lunch at a restaurant, the Red Emperor. There was general discussion about various matters including Donovan's corporate work in England and his involvement with the company, Disctronics. Donovan did not mention to Edmonds or Cahill at that time any intentions he had for Disctronics if a golf course investment eventuated.

76. On 22 June 1999 Donovan, Cahill and Bucknall met Wood at Kingston Links Golf Course and inspected the site. This was the first meeting between Donovan and Cahill and also Wood. Negotiations commenced with Donovan asking Wood as to an acceptable purchase price and Wood responding with the figure of $10,000,000. It was resolved that discussions would continue between Cahill and Wood. On 30 June 1999 Rose provided Donovan of "Solette Pty Ltd" with a letter of indicative interest for leasing Kingston Links Golf Course for a total annual rental of $960,000.

79. By this time, the identity of the specific participants in the venture and the extent of their interests were not known save that there were indications that Donovan, Howard, Quinert and Solette were involved.

83. A significant shift in the role and involvement of Edmonds and Cahill came to light in early July 1999. Edmonds and Cahill came to the view that they wanted to share in the profit of the proposed transaction.

86. On 2 July 1999, Edmonds sent to Donovan a facsimile proposing a framework for the acquisition of the Kingston Links Golf Course. He proposed the distribution of responsibilities as follows:

"Team leader - Donovan Assistant to team leader - Edmonds Arrangement of disbursements and deposit - Donovan and Howard Acquisition of property - Cahill Finance - Edmonds and Cahill Arrangement of lease - Cahill Legal work - Howard Accounting - Edmonds"

90. Initially, Edmonds left Quinert out but a short time later substituted him for Howard in relation to legal work. The framework included an analysis by Edmonds that contemplated equity being provided for the sum of $3,000,000, a debt of $7,600,000 amounting to a total cost of $10,600,000. The figure included fees to Edmonds and Cahill for their services totalling $272,250 and a "development profit" to persons referred to as "consortium members" of $427,750 by way of a 25 per cent share to each of Donovan, Howard, Edmonds and Cahill, that is, $106,437.05 each, those four being contemplated by Edmonds as the "consortium members". Hence, Edmonds and Cahill saw themselves not merely as agents or employees but direct participants in the venture and necessarily sharing in any profit. The whole tenor of the letter of Edmunds of 2 July 1999 was to push Bucknall sideways and to exclude Quinert. Edmonds required Donovan to telephone him to discuss the proposal. Edmonds said that before sending the memorandum of 2 July 1999 to Donovan that he spoke to Donovan by telephone and put the proposal that Edmonds and Cahill share in the profits. Donovan denied the conversation. In any event, Donovan was irritated at the proposed exclusion by Edmonds of Quinert and Bucknall. However, Donovan did not respond to Edmonds at this point although he resolved shortly thereafter with Howard that it would be inappropriate to exclude Bucknall and Quinert. It so happened that on 2 July 1999, Bucknall also wrote to Donovan seeking an opportunity to be included an equity participant. On 5 July 1999 Edmonds sent another fax to Donovan advising that he was ready to progress negotiations for the purchase but stating his belief that it was inappropriate to do so until internal arrangements had been resolved. On 6 July 1999 Donovan telephoned Edmonds and told him he would not alter existing arrangements so as to exclude Bucknall and Quinert. Donovan did not take any steps to exclude or discourage Edmonds and Cahill. Edmonds said he would alter his proposal. Around this time Donovan spoke to Bucknall and told him that if the project was successful he would be compensated appropriately. Edmonds acknowledged that as a result of the conversation he had with Donovan on 6 July, he prepared a revised proposal and sent it to Donovan on the same date. It seemed that the memorandum of 2 July 1999 may have caused Edmonds some embarrassment. Howard said that Edmonds requested the return of the memorandum. Edmonds could not recall whether he had done that or not.

93. On 6 July 1999 Edmonds sent a revised scenario by facsimile to Donovan. Rather than providing for four equity participants (as in the facsimile of 2 July 1999) Edmonds provided for six participants, namely, Donovan, Howard, Quinert, Bucknall, Powell and Edmonds. In the facsimile of 6 July 1999 Edmonds contemplated that each of Donovan, Howard, Quinert, Bucknall, Cahill and Edmonds would receive an equal one-sixth share of a development profit of $427,750, namely, the sum of $71,292 each. This proposal also included an additional fee 0.75 per cent of the purchase price being a charge for property (acquisition and lease) projected at $71,250. Such item had been contemplated in the facsimile of 2 July 1999 but was described there simply as a fee for "property consultation". On receipt of the facsimile on 6 July 1999 Donovan telephoned Edmonds and stated his dissatisfaction at Edmonds and Cahill receiving a profit and also charging fees for services. Edmonds endeavoured to persuade Donovan that Cahill should receive the property fee of $71,250, being one per cent, because it remunerated him for his estate agent services and was an incentive to Cahill to work with the group in the future. At this point, Donovan did not comprehend that Edmonds would receive any part of the property fee. Donovan told Edmonds that if equity in the range of $1,000,000 to $1,500,000 was needed the company Disctronics may provide the necessary equity. Donovan said that if as much as $3,000,000 was needed then such amount was beyond the range and capacity of Disctronics. This was the first time that the involvement of Disctronics was disclosed by Donovan or by any of the plaintiffs to Edmonds but even then only in passing. Donovan asked Edmonds to provide him with some further financial scenarios.

96. On 6 July 1999 Edmonds did so, sending another facsimile to Donovan setting out seven different scenarios contemplating different purchase costs, profit share, property value and initial paper profit to an investor. Each of the scenarios contemplated a uniform item designated "professional fees" in the sum of $272,000 (which were to be payable to Edmonds and Cahill). One of the scenarios, described as "scenario 4A" required equity of $1,440,000 and was therefore within the range that would enable Disctronics to provide the necessary equity. Around 7 July 1999 Donovan telephoned Edmonds and confirmed Disctronics' position. Edmonds said it was unlikely the transaction could be effected with that amount of equity. Donovan said he would discuss the proposal of Edmonds with Howard and Quinert. On 10 July 1999 Edmonds sent Donovan another facsimile setting out an additional scenario. It contemplated a purchase cost of $10,100,000 including professional fees of $306,250 and a development profit of $893,750 and requiring equity of $3,000,000. The professional fees included, as they had done previously, a debt arrangement fee of $76,000 payable to Edmonds and an equity arrangement fee of $90,000 payable by an unidentified "investor". The amount of the development profit was to be split six ways giving each of Donovan, Howard, Quinert, Bucknall, Cahill and Edmonds the sum of $148,958.

99. Donovan was annoyed by this latest scenario for three reasons. First, he realised that Edmonds wanted to be paid both a share of the purchase profit plus a debt arrangement fee of one per cent being $76,000. Secondly, the scenario and the facsimile of 10 July 1999 proposed an equity beyond the capacity of Disctronics. Thirdly, the high equity figure was derived from the allowance of a notional profit to be paid to the consortium by the equity provider. By this time Donovan, Howard and Quinert were all in London. Donovan met with Howard and Quinert. They resolved that Quinert would speak to Edmonds.

102. On 11 July 1999 Edmonds gave a copy of the memorandum of 10 July together with some other papers to Quinert at the offices of Oakley Thompson and Co. Edmonds told Quinert that in his view Disctronics would be best to sell the Kingston Links Golf Course and achieve a quick profit rather than hold on to it. Quinert gave evidence that during the conversation Edmonds was intense. Quinert said Edmonds told him that he, Edmonds, was the best person to run the project and that Donovan was trying to make it available as an investment for Disctronics. Edmonds denied that these matters were discussed between he and Quinert.

105. The next development occurred on 12 or 13 July 1999 when Donovan, Howard and Quinert met to discuss the golf course project. Donovan told the meeting that he wanted the project to be available as an investment opportunity for Disctronics provided that Disctronics had the financial capacity to meet the equity requirement. Donovan told Quinert and Howard that Disctronics could manage equity up to $1,500,000 that could be achieved through the redemption of insurance bonds. The meeting concluded on the basis that Quinert was to speak to Edmonds. Quinert was directed to clarify the position as to fees payable including the payment of an equity arrangement fee of $90,000 specified in the scenarios and to confirm the objectives of Donovan, Howard and Quinert in relation to Disctronics and the project.

108. On 14 July 1999 Quinert telephoned Edmonds from London. Discussions revolved around the fees that Edmonds and Cahill proposed charging and the role of Disctronics. Edmonds complained that Donovan was treating the transaction as one for Disctronics. Quinert told Edmonds that the transaction had always belonged to Donovan and that if Disctronics was the equity provider, no equity fee would be payable and that Donovan, Howard and Quinert would rebate their entitlements, if any, to Disctronics. Edmonds complained that if the transaction went that way Edmonds and Cahill would lose fees. The conversation finished without any resolution.

111. On the next morning, Edmonds phoned Quinert and proposed that Edmonds and Cahill withdraw from the project and take the Kingston Links opportunity with them but that Donovan, Howard, Bucknall and Quinert retain the relationship with Spotless. In cross-examination Edmonds was initially equivocal about whether the intention was Disctronics would provide the equity in the project. When it was directly put to him that it was made plain on that occasion he denied the assertion. In so far as it is necessary and ultimately relevant, I do not accept the evidence of Edmonds in this regard. He asserted that he was told by Quinert that there was "a very slim chance" that Donovan, Howard and Quinert might want to have Disctronics provide the equity. Having had the benefit of observing the witness I do not, as I say, accept his evidence. My view is borne out, further, by the corroboration of Donovan and Howard as to the position communicated to Quinert during their meeting on 12 July and, importantly, that in scenarios drafted by Edmonds thereafter he included options of Disctronics participating by way of providing the equity. Furthermore, it was specifically put to Edmonds in cross-examination that he did not make enquiries or question the prospect of Disctronics being included (or for that matter excluded) from the equity in the project. Edmonds acknowledged that he did not raise the matter. He said the reason for not doing so was because it did not occur to him. At a subsequent opportunity he said he believed the prospects of Disctronics providing the equity was unlikely. Again, having observed the witness and considering his evidence I do not accept the version of events of Edmonds.

114. It transpired that a board meeting of Disctronics was about to be convened. Quinert said he would call Edmonds back later.

117. After the board meeting, Donovan, Howard and Quinert met informally to discuss the position most recently put by Edmonds. It was resolved that a compromise offer be conveyed to Edmonds and Cahill. There were a number of components to the offer: a fixed fee of $140,000 was to be paid to Cahill and Edmonds, to share, and $140,000 was to be paid to Bucknall, Howard, Quinert and Donovan, to share, but that Howard, Quinert and Donovan would pay $70,000 of their amount to Bucknall save that if Disctronics was involved the remaining $70,000 would be rebated by them; external disbursements of $140,000 would be paid before any profit; internal disbursements, projected between $210,000 and $280,000 would be drawn from consortium profits; if an external equity provider was involved the return on equity would be capped at 22 per cent but if Disctronics was the equity provider no such cap would be imposed; finally, if the equity requirement was $1,500,000 or less Disctronics had an option to proceed with the transaction but if the equity was more Edmonds would be entitled to arrange an external equity provider.

120. Quinert prepared a rough note listing these items before he spoke to Edmonds. Edmonds expressed contentment with the proposal as outlined by Quinert but said he would discuss the matter with Cahill. Edmonds responded by facsimile sent on 16 July 1999 (but actually dated 12 July 1999) to Quinert. Edmonds agreed to the proposal put forward by Quinert save for the non-payment of profit share if Disctronics was the equity provider. Edmonds proposed that there should be none. Quinert spoke to Donovan and then called Edmonds. Quinert told Edmonds that his response was acceptable but that a profit may be payable, if possible, if Disctronics proceeded with the transaction. Edmonds told Quinert he was happy with the proposal. At that stage Quinert believed the matter was resolved.

123. Significantly, the memorandum dated 12 July but sent 16 July 1999 referred specifically to Disctronics. The memorandum establishes that by that date at the latest Edmonds had specific notice of the intention of Donovan, Howard, Quinert and Bucknall to include Disctronics in the project, in particular, as the equity provider. The attitude of Edmonds towards the memorandum was disingenuous. Edmonds gave evidence-in-chief that he did not discuss the contents of the memorandum with Quinert after it was sent. It was suggested to Quinert during his cross-examination that Edmonds told him that in sending the memorandum he had made a mistake. Nevertheless, no such evidence was given by Edmonds in-chief. During his cross-examination Edmonds said that he told Quinert that in sending the memorandum on 16 July 1999 he had "stuffed up". Edmonds was vigorously cross-examined as to the memorandum sent on 16 July 1999. I found his evidence to be unacceptable. At one point Edmonds endeavoured to explain his position by relying on the fact that he was ill with influenza at the time of these events. I was satisfied that as demonstrated by the memorandum sent 16 July 1999 Edmonds knew of Disctronics. Nevertheless, as events transpired the knowledge was not all that important.

126. On 19 July 1999 Edmonds sent another facsimile to Quinert containing two further scenarios that were at variance with the arrangement discussed between Edmonds and Quinert on 16 July 1999. The variations related to fees, the splitting and payment of profit and unknown assumptions such as land cost and rental return. On its face the document was also a response to the suggestion of Quinert that a profit share may be available even if Disctronics provided the equity. By the time of this memorandum Disctronics was not referred to specifically in the document at the request of Quinert. Curiously, Donovan, Howard and Quinert appeared to desire that the identity of Disctronics as a participant in the project remain a commercial secret. The 19 July 1999 memorandum proposed a number of scenarios, two of which contemplated Disctronics as the equity provider. Quinert did not respond to the facsimile.

129. Meanwhile, Bucknall was continuing discussions with Rose of Spotless. He met Rose on 13 July 1999. Rose indicated that the lease figure would exceed $1,200,000 per annum and there could be a first term of 15 years under the lease. Bucknall informed Donovan of these matters. On 13 July 1999, also, Cahill sent a memorandum marked "confidential memorandum" to Donovan, Howard, Quinert, Edmonds and Bucknall attaching financial information and a draft letter of offer to Kingston Links. In his memorandum Cahill advised that he believed Wood of the Kingston Links Group had a primary price target of $9,000,000 but suggested an opening offer under $8,000,000. On 19 July 1999 Bucknall introduced Cahill to Rose. There was discussion as to financial matters and the meeting ended on the basis that Rose would prepare a brief to go to the board of Spotless.

133. On 20 July 1999 a meeting by way of telephone conference was convened between Donovan, Quinert, Bucknall, Edmonds and Cahill. Howard was absent. The events and resolutions of the meeting were set out in well revised draft minutes that were finalised at a further telephone meeting on 26 July 1999. Howard was present at the second occasion. The minutes warrant particular consideration.

136. The meeting on 20 July was preceded by a memorandum of Edmonds of 19 July 1999. In that memorandum Edmonds put forward four core proposals to Donovan, as follows:

(1) External disbursements for the acquisition of the golf course were estimated at $140,000 if an external equity provider was involved.

(2) Moneys for internal disbursements of $200,000 were to be split, that is, $140,000 between Donovan, Howard, Quinert and Bucknall, and $140,000 between Edmonds and Cahill.

(3) Approximately 50 per cent of the notional profit of the transaction, excluding disbursements payable to Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill, accrued to the equity provider.

(4) The remaining notional profit would be applied to pay external disbursements, then internal disbursements and the balance called "a profit share" was to be split six ways between Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill equating to the sum of $30,000 each.

142. The minutes of the meeting of 20 July 1999 were drafted by Edmonds and went through two drafting phases including a further meeting on 26 July 1999 when the form of the minutes was finalised. The final minutes fixed the fees of Edmonds and Cahill at $140,000. The minutes reflected that the persons present resolved that the profit share was to be determined at a later time. This was very important as events panned out. The minutes did not disclose that any final decision was made in relation to Disctronics. Indeed, Disctronics was not mentioned in the minutes. This fact, too was important. Generally, the minutes were cast in vague terms. A number of elements of the minutes require attention. First, the minutes referred to a "team structure" that encompassed all of Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill and allocated a role to each individual. Secondly, the minutes described the topic or agenda discussed at the meeting as being "Property venture to acquire Kingston Links Golf Course and arrange Spotless Services Limited to become long term operator/tenant". Thirdly, a broad approach was contemplated encompassing allowance for acquisition costs, disbursements, including the fees of Cahill and Edmonds, and a profit share. To a large extent, the concept of the profit share was left open-ended and undetermined. Fourthly, the minutes revealed it was contemplated that the profit share would be split among the "team" in six equal proportions. Fifthly, it was contemplated that the arrangement of equity funding would be addressed when the purchase price of the property and the details of release were known. In this respect the minutes were particularly vague. Sixthly, the minutes revealed that Cahill had the role of conducting negotiations with the Kingston Group, Edmonds the financial role, whilst Bucknall had the role of negotiating with Spotless. The minutes, as finalised, bear out that on 20 July 1999 the parties resolved to embark on a joint venture involving Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill in quite loose terms so as to acquire the Kingston Links Golf Course. The joint venture did not encompass Disctronics as a member.

145. Commensurate with the general plans of the joint venture, on 21 July 1999 Cahill sent a letter to Wood marked "private and confidential" offering to purchase the Kingston Links Golf Course in the names of Howard, Quinert and Edmonds as nominees for a special purpose entity for the sum of $7,750,000 plus stock at value.

148. On 29 July 1999 Spotless wrote to Donovan in his capacity as a director of Solette conveying an indicative offer to lease the Kingston Links Golf Course for the annual rental of $1,165,000 for a minimum term of ten years with a ten year option. On 2 August 1999 Rose met Quinert, Howard, Bucknall and Cahill at the offices of Oakley Thompson and Co to discuss the terms of a possible lease. Rose advised that Spotless wanted to proceed at a rental in the range of $1,160,000.

152. Hence, by early August four key events had occurred. First, a joint venture had been resolved by 20 July 1999 encompassing Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill. There was, at most, a loose arrangement that an external equity provider would be found but at a later time. Second, on 29 July 1999 Spotless had formally offered to pay rental of $1,165,000 per annum. Third, conditions of a proposed lease had been agreed with Spotless on 2 August 1999.

155. There was a significant fourth element. On 3 August 1999 Cahill and Wood agreed, verbally, that the Kingston Group would sell Kingston Links to the venture for $8,680,000. Cahill telephoned Quinert to inform him. Quinert made a handwritten file note of the conversation on 3 August 1999. It recorded: "Have foot on the land at $8.68M (includes machinery)". Thus by that date the price acceptable to the Kingston Group was known.

159. On 3 August 1999, Edmonds telephoned Quinert and enquired as to the general financial capacity of Quinert, Donovan, Howard and Bucknall to access funds. Edmonds told Quinert he was contemplating another approach so that the individuals could fund the project themselves. Quinert asked Edmonds to reduce his ideas to writing. Edmonds responded with a memorandum on 3 August 1999 to Quinert, Howard and Cahill. It contemplated the restructure of the transaction so that instead of an external equity provider, the profit share would be distributed differently and the equity would be provided by the six participants, namely, Donovan, Howard, Quinert, Bucknall, Cahill and Edmonds. In cross-examination Edmonds acknowledged that it was his understanding that in all likelihood Donovan, Howard and Quinert would want Disctronics to be the equity provider in the transaction. He acknowledged, also, that if the transaction proceeded with Disctronics as the equity provider the profit share to the consortium would be considerably less than if the equity provided was otherwise. Quinert gave evidence that Edmonds agitated for a response to the memorandum of 3 August on both 3 and 4 August 1999. Edmonds was evasive when questioned about his pursuit of an answer but ultimately conceded that he may have made an enquiry of Quinert.

162. Donovan entirely rejected the proposal of Edmonds formulated on 3 August 1999 and directed Quinert to inform Edmonds that Disctronics would be the equity provider. Quinert stalled his response to Edmonds until the afternoon of 4 August 1999 when Quinert gave Edmonds a memorandum.

165. In his memorandum of 4 August 1999 Quinert informed Edmonds that " ... Disctronics intends to exercise its entitlement to take on the acquisition ... ". Quinert rejected the most recent plan of Edmonds of the six equity participants. He proceeded to analyse the proposed structure. The memorandum of Quinert included the following remarks:

"Thanks for your memo dated 3 August 1999. I confirm that based upon the indicative purchase price and rental figures now on the table the public company group ie Disctronics intends to exercise its entitlement to take on the acquisition. Accordingly the alternative put forward by paragraph 2.2 of your memorandum is not possible. In relation to the "External Equity" attachment I think that there are several matters which require clarification. Perhaps it will assist that process to set out for your consideration the following comments:

1. The non Disctronics associated consortium members are to receive the fees you referred to (eg PC [Cahill] and CE [Edmonds] each $140,000). As directors KD, MQ and SH will rebate their entitlements in favour of the purchaser.

2. It was settled that the consortium members would receive a share of the "profit". KD [Donovan] MQ [Quinert] and SH [Howard] will rebate their entitlements.

3. You have put forward your model of what should determine "profit". Irrespective of whether you look at it from Disctronics or from some other outside party's perspective I would respectfully suggest that there are fundamental questions regarding the appropriateness of your methodology.

(a) The capitalisation of yield approach, whilst useful in the context of a financing request for a loan of around 65% to 67% of theoretical value, is only one of many factors which the real market place will take into account. As PC has himself said, at the end of the day it is what the market will pay which determines value and thereby profit; not one or more valuation techniques.

(b) You have used the proposed gross rental figure in the capitalisation equation whereas costs directly associated with holding and preserving the asset as well as developing future golf prospects will be incurred. By getting the gross rent above the figure of $1 million (which we have always worked with) Rick [Bucknall] has provided us with a real opportunity to meet those costs and still retain an effective return of $1 million.

It would be our intention to engage Rick to take care of those objectives by at least using some of the surplus he created. Surely, this is only fair and at the end of the day will be to everyone's benefit. The return in net terms is therefore around $1 million not of 1.165 million.

(c) Not all of the asset is in the land. Indeed I think PC has suggested a $5 million figure for land with the rest tied up in goodwill, plant, names etc. These are business type assets which are not in my experience treated the same as a straight yield based on static bricks

By dealing with Disctronics we are adding $90,000 to the pie (ie no proc fee) and substantially eliminating the delay and frustration we have all experienced in dealing with outside venture capital sharks and their advisers. These are significant benefits to the consortium members. However, just as an outside equity provider would assess the real potential profit rather than a theoretical profit that requirement should also be acknowledged and applied in this case. I do accept that at the end of the day the non associated consortium members want the issue of quantum settled. Certainly with the land secured there should be enough pieces of the jig saw now in place to resolve that issue. Based on my discussions with PC a contract note could be exchanged by as early as next week. At that time KD will be in Australia and therefore all six could meet face to face. Certainly, that is a better forum than the haphazard and confused lines communication (sic) which otherwise tend to develop. For example, I have no idea what PC or RB [Bucknall] think! Presumably you have told PC not to ring me! Certainly, neither RB or myself are having calls returned. In an effort to perhaps allay your fears I assure you that I believe the transaction can procure a real and substantial profit. As such there will be an entitlement to non associated consortium members for a return significantly greater than the agreed professional fees. Given that as I understand it, yours and PC's engagement was originally to be as consultants only this outcome when viewed in that context probably represents the best deal you have ever done. It would be extremely disappointing if you were not happy in those circumstances. To be candid your approach always seems directed towards pushing the other consortium members to a position rather than simply discussing and resolving the matter in an open and co-operative serve (sic) is not my style and, frankly, I am personally not going to participate in such a process with people I consider associates. That is how I feel."

179. Edmonds gave evidence that he regarded the memorandum of 4 August 1999 such that " ... they (being the other consortium members) were reneging on the transaction ... on what had been agreed". He said that he formed this view because he regarded the other consortium members as wanting to negotiate the calculation of profit when that had been agreed upon already. Edmonds refuted that it was always contemplated that the negotiation of profit would occur later on in time.

182. Essentially, Edmonds, and also Cahill, asserted that the imposition by Donovan and the others of Disctronics into the role of equity provider in the transaction had an impact on the agreed profit share. In fact, profit share had been agreed upon to a certain extent at the meeting on 20 July 1999 but only in very loose terms. Nevertheless, it was clear to all parties, including Edmonds and Cahill, from 20 July 1999 that the profit share would be split six ways but that equity funding would be arranged later. The extent and the amount of the profit share remained undetermined. It would depend in part on the extent of the equity required and the identity of the equity provider.

185. There were inconsistencies in the evidence of Edmonds in relation to the Quinert memorandum of 4 August 1999. Initially he acknowledged that negotiation on the calculation of profit would occur at a later time. Such evidence was given initially by Edmonds in the first day of his cross-examination. After an overnight adjournment the cross-examination of Edmonds continued into a second day. At that time the matter of the memorandum of 4 August 1999 was raised with him again. Edmonds shifted his evidence from that given on the preceding day. He rejected the suggestion that there was always going to be a negotiation to calculate profits later in time. When pressed in cross-examination Edmonds conceded that upon receipt of the memorandum of Quinert of 4 August 1999 he realised that once Disctronics was the equity provider the amount of profit available to be shared was less than he desired. In addition, his later evidence contradicted the matters set out in the minutes of the meeting of 20 July as settled and finalised on 26 July 1999. Edmonds was at pains in his cross-examination on the second day to assert that there had been an "agreement" and that the memorandum of 4 August 1999 was inconsistent with such agreement. It was the case of Edmonds and Cahill that the memorandum of 4 August 1999 constituted a repudiation of the joint venture asserted by the Disctronics interests.

188. Cahill acknowledged in his evidence that by end July/early August 1999 it appeared to him that there might be a substantial profit to be made out of the transaction. He said that Edmonds told him he was going to table the idea of a joint venture involving Edmonds and Cahill. Indeed, Cahill acknowledged that during July he was in regular contact with Edmonds about the achievement of an agreement on a share of the profit to be made from the transaction. Cahill said that he regarded the 4 August 1999 memorandum as an attempt by the other parties to cut he and Edmonds out of the joint venture. It was put to Cahill in cross-examination that he believed the memorandum of 4 August 1999 would lead to a negotiation as to the calculation of profit. The rejection was contrary to other evidence given by Cahill to the effect that he prepared an analysis for the advancement of moneys that proposed a payment of $740,000 that he sent to Edmonds. In the course of discussions between Howard, Quinert and Edmonds on 4 August 1999 Edmonds put forward a proposal of a payment to he and Cahill of the sum of $740,000. A reasonable inference can be drawn, therefore, that Cahill knew upon receipt of the memorandum of Quinert of 4 August 1999 that further negotiations were to ensue and for that very reason he proposed the figure that he did in the analysis he provided to Edmonds.

191. Whilst discussions and communications were proceeding, Quinert set matters in train to expedite the transaction. He activated a shelf company known as Corwen Grange Pty Ltd ("Corwen Grange"). Disctronics acquired one ordinary share in Corwen Grange with the intention that it would be the nominee for Disctronics in the project. Howard and Quinert were appointed directors of Corwen Grange. Quinert telephoned Howard and directed that he nominate Corwen Grange in the written offer to be sent to the Kingston Group.

194. On 5 and 6 August 1999 various discussions ensued between Howard, Quinert and Edmonds as to the position of Edmonds and Cahill. By this time relations between Edmonds on the one side and Howard and Quinert on the other had become strained. Edmonds was concerned that Donovan was allowing Disctronics to take over the acquisition whilst he saw an opportunity for the six team members to provide the equity themselves. Donovan, Howard and Quinert on the other hand saw Edmonds as seeking to gain more than he was entitled to and at the expense of Disctronics.

197. A meeting had been arranged on 5 August 1999 involving Edmonds and Howard. Before Edmonds met Howard, he and Cahill took the precaution of obtaining legal advice on the morning of 5 August 1999 from solicitors, Abbott Stillman and Wilson. One of the reasons for so doing was in order that Edmonds could arm or prepare himself for the imminent meeting with Howard later that day. Another purpose was to negotiate a buy-out position for Edmonds and Cahill. By 5 August 1999 Edmonds and Cahill saw an opportunity to make money from the Kingston Links Golf Course without Donovan and the others and that they, Edmonds and Cahill, could effect the transaction themselves. The plaintiffs knew nothing of these intentions or considerations by Edmonds and Cahill. The discussions proceeded and concluded on 6 August 1999 when Howard and Edmonds proposed that Cahill and Edmonds would each be paid the sum of $150,000. Edmonds left the meeting on the basis he would consider the proposal with Cahill. Quinert prepared a document referred to as a "fee agreement" and left it in Edmonds' office at Oakley Thompson and Co on 6 August 1999. It provided:

l. a wholly-owned subsidiary of Disctronics Limited "D.L." or its/their nominee satisfactorily completing the acquisition of the Kingston Links Golf Course ("the Property") for an aggregate price not exceeding $8.688 m. ("the net purchase price") which said net purchase price includes all land, buildings, tradenames, goodwill, plant and equipment, machinery etc at on, upon or appurtenant to the enjoyment and use of the Property; and

2. C.E. and P.C. procuring bank finance ("the finance facility") for D.L. at not more than prevailing commercial rates of interest, fees and charges to a level which requires D.L. to contribute equity of not more than $750,000 to acquire the Property; and

3. the finance facility being provided on a non-recourse basis to the directors of D.L.; and

4. the finance facility being premised upon a net rental available to D.L, of S1.065m., being the gross rental payable by the intending Lessee (being a member of the Spotless Group of Companies who must unconditionally consent to entering into an Agreement for Lease of the Property for a term of not less than 5 x 5 x 5 x 5 years at a gross commencement rental of not less than $1.165 m. per annum plus rates, taxes, and outgoings within one month of D.L. entering into a conditional contract to purchase the Property) less the reasonable cost of engaging R.B. for a term of 1 x 1 x 1 years at a commencement salary package not to exceed $80,000 per annum to supervise the intending lessees use of the Property so as to preserve and enhance its value.

5. D.L. shall pay C.E. and/or nominee on completion of the purchase of the Property $150,000; and

6. D.L. shall pay P.C. and/or nominee on completion of the purchase of the Property $150,000; and

7. D.L. shall pay R.B. and/or nominee on completion of the purchase of the Property S 100,000.

210. Edmonds informed Cahill on 6 August 1999 of the offer of $150,000 each. On Sunday 8 August 1999 Edmonds went to his office (at Oakley Thompson and Co) and found the memorandum from Quinert of 6 August 1999. He also found a facsimile sent to him by Cahill on 6 August consisting of a proposed letter of settlement that Cahill contemplated would be sent to them from Donovan and the others formalising the offer of $150,000 each. Edmonds read both documents. On that Sunday 8 August 1999 Edmonds telephoned Cahill from his office. They discussed the possibility of going ahead with the transaction alone. Edmonds and Cahill believed if they did they could make more money than the $150,000 each then had on offer. They did not purport to assert existing rights, if any, as agreed on 20 July 1999 pursuant to the joint venture. They contemplated a completely different arrangement.

213. Edmonds and Cahill resorted to their solicitors, Abbott Stillman and Wilson for further legal advice. They sent the memorandum of Quinert of 6 August 1999 constituting the offer and conditions to the solicitors. Edmonds and Cahill drafted a letter to send to Donovan and the others purporting to terminate their relationship. Edmonds and Cahill sent the draft to their solicitors to settle. Upon Abbott Stillman and Wilson settling the letter, Edmonds wrote to Quinert on 10 August 1999 in the following terms:

"I acknowledge receipt of your proposal on Friday evening 6 August 1999, which purports to be an agreement. I must emphasise that no such agreement is in place. Confirmation of your revised offer was sought so that I could discuss the matter with Peter Cahill. However, the offer is a dramatic variation from the profit sharing arrangements that were agreed and documented and it is therefore unacceptable. Whilst Peter acknowledges being invited into the consortium initially as a consultant, the deal very clearly and demonstrably evolved into a joint venture between yourself, Kevin Donovan, Stephen Howard, Rick Bucknall, Peter Cahill and myself. From my end, I always considered that my interests, through Home Link Mortgage Corporation Limited, were part of a partnership/joint venture. The basis of the agreement and the formula for equity/profit sharing was documented (and countersigned by Kevin Donovan without objection from any of the participants. Clearly, you believe the joint venture (for which Oakley Thompson & Co is the appointed legal firm) is now at an end because you have excluded Peter, Rick and myself from any involvement as principals and are seeking to appoint us merely as consultants to the transaction so as to maximise your own commercial returns. I am immensely disappointed that you have repudiated the joint venture arrangements, which were very clear cut. The present proposed terms for our on-going involvement is unacceptable. Peter and I are somewhat relieved that we are no longer involved because we believe your integrity and ethics are profoundly lacking."

217. The letter of 10 August 1999 from Edmonds was sent by he and Cahill with the intention of terminating their relationship with Donovan and the others.

220. Quinert replied to Edmonds' letter of 10 August 1999 in sharp terms by letter dated 12 August 1999. He rejected the contentions of Edmonds. Quinert also cautioned Edmonds that any attempt by him to undermine or frustrate the project would constitute a breach of fiduciary duty. The letter from Quinert was sent on the letterhead of the solicitors, Oakley Thompson and Co. Similar exchanges occurred between Quinert and Cahill.

223. On the same day, 12 August 1999, Howard wrote to Edmonds in self-serving terms asserting, among other things, two significant matters. First, that Edmonds and Cahill started out as consultants to Solette but that eventually a joint venture was formed. Secondly, that "at all material times it was agreed" between the joint venturers that if less than $1,500,000 was required to acquire the Kingston Links Golf Course then the "Disctronics Group of Companies" could elect to proceed with the acquisition alone and the joint venture would "cease to exist". Howard told Edmonds further in the letter that on 11 August 1999 he had arranged with Wood of the Kingston Links Group to resume negotiations for the purchase of the golf course.

226. On 13 August 1999 Edmonds responded to Howard refuting his assertion. In particular, Edmonds rejected that there was an agreement such that Disctronics could become the purchaser. Edmonds stated:

" ..... Whilst I understood that the level of equity that Disctronics Limited would be prepared to commit to such a project would not be infinite, this is the first I have been advised of a `$1.5 million' equity threshold. `It is false and quite absurd of you to suggest that it was agreed that the joint venture arrangements would cease if Disctronics Limited became the ultimate purchaser ... `."

230. These matters stated by Edmonds contradicted the discussions between he and Donovan in July 1999 and between Edmonds and Quinert in July also. Meanwhile, on 10 August 1999, the day Edmonds wrote to Quinert upon the letter being settled by Abbott Stillman and Wilson, Cahill wrote to Wood of the Kingston Links Group advising him that the consortium was "dissolved". In the letter, Cahill acknowledged that the Kingston Links Golf Course was "not officially on the market". On 11 August 1999 Wood responded stating that he would be delighted if Cahill considered the acquisition in his own right or with another party. At this stage, Cahill and Edmonds knew that Kingston Links would accept an offer in the range of $8,688,000.

233. There were some curious aspects surrounding the letter by Cahill to Wood dated 10 August 1999. The letter provided:

"I regret to advise that the investor consortium proposing to acquire the above property has been dissolved. I expect one of the other consortium members may contact you either directly or through a consultant, if they wish to pursue the matter. For your information, my last communication on the negotiations was with Michael Quinert and Stephen Howard. I indicated to them that you would consider accepting an offer of $8,688,000 as the total consideration to conclude the transaction. My intention was to attempt to finalise the deal at that figure following your request that the offer be submitted in writing so that you could discuss it in detail with your board. I trust this reflects your understanding of our recent discussions. I wish you all the best with the course and respect your position that the property is not officially on the market. You can be assured that our dealings will remain strictly confidential."

237. The letter noted that a copy was sent to Quinert. Word processing details were endorsed at the foot of the letter bearing the date 10 August 1999 and indicating that date as being the date of creation of the document.

240. An additional letter was obtained by the plaintiffs through non-party discovery. It was accepted by Cahill during cross-examination that it was a draft letter of which he was the author. The document was headed "draft letter" and bore the date "10 August 1999" which date was crossed out. The letter was addressed to Wood and constituted an offer to purchase the Kingston Links Golf Course for the price of $8,700,000. At the foot of the letter the word processing identification details were endorsed bearing the date 5 August 1999. It was suggested to Cahill during cross-examination that the date at the foot of the document indicated the fact that it was created on 5 August 1999, that is, before the letter of Edmonds to Quinert on 10 August 1999. Cahill refuted the suggestion and explained the date at the foot of the draft letter as being erroneous. A reasonable inference can be drawn that the date at the foot of the draft letter was accurate.

243. Nonetheless, Cahill made every effort to hide his intentions from Howard and the others. He said in cross-examination that he was concerned that Donovan and the others might engage in legal tactics to thwart the transaction he contemplated. There was no evidence to support the defendants' alleged fear of the plaintiffs. I am satisfied that at this time Cahill was concerned not to be discovered as to his actions and intentions. Indeed he said as much in his evidence. The behaviour of Cahill was furtive and devious.

247. At this point, the sixth, seventh and eighth defendants in the main proceeding entered the scene. The sixth defendant, Michael Buxton ("Buxton") was a business acquaintance of Cahill. The seventh defendant, Emanbee Nominees Pty Ltd ("Emanbee") was an investment vehicle of Buxton. The eighth defendant, MRB Life Pty Ltd ("MRB") was another Buxton company.

250. Cahill telephoned Buxton on about 10 August 1999, again, the same day as Edmonds wrote to Quinert terminating arrangements, and told him of a possible investment opportunity involving a golf course at Rowville. Little else was said by Cahill at that point. Buxton was interested and asked for information. As a consequence, Cahill sent a facsimile to Buxton on 11 August 1999 as follows:

"I am finalising a major property deal with following elements: * Acquisition cost of around $8,500,000 - conditional contract with vacant possession. * Pre-arranged tenancy commitment from a major public company for 20 years. * Value with tenant in place approximately $12,500,000. * Paper profit day 1 approximately $4,000,000. * No development works or town planning hassles required. * Deal is cash flow positive approximately $500,000 per annum. I have the financial capacity to do this deal myself although the most likely outcome is that very little real equity will be required. However, I am prepared to cut you in on the deal for other reasons - if you're interested. Will need to meet with you ASAP if you want in. I will be using Arnold Bloch Liebler on the acquisition."

254. The facsimile was sent about 10.00 a.m. on 11 August 1999, 24 hours or less after Edmonds wrote to Quinert.

257. After Buxton received the facsimile from Cahill on 11 August 1999 the two men met at Cahill's home shortly afterwards, on the evening of 12 August 1999. In that discussion Cahill explained to Buxton that he had been involved with other persons, that the involvement was over and that Cahill wanted to involve Buxton in the transaction together with Edmonds. By this time Edmonds had passed on to Cahill the letter of Quinert of 12 August 1999 containing the warnings as to the alleged legal ramifications of the actions of Edmonds. In cross-examination Cahill said that it was highly probable that he disclosed to Buxton the contents of the Quinert letter of 12 August 1999. In his evidence, Buxton did not specifically say as much. In fact, the Quinert letter of 12 August was not put to Buxton in cross-examination. Indeed, Buxton said Cahill did not explain to him his dealings with Disctronics and Oakley Thompson and Co, rather, only referred to "other persons". Buxton said he learned of the identity of Donovan and others later in time in September 1999 when correspondence was sent to him through his solicitors from Cahill. Cahill described the events of the meeting with Buxton of 12 August 1999 in his evidence-in-chief (by witness statement) in the following terms:

"On the evening of 12 August 1999 Michael Buxton came to my home. We discussed the fax which I had sent him on 11 August 1999. We had a general discussion about the background to the Kingston Links project. I informed him that the group which had previously agreed to join together to buy the property had disbanded and that I regarded the property as an opportunity worth pursuing. As well as discussing the Kingston Links proposal, at about this time Mr Buxton and I were both involved in discussions regarding another project for which we jointly tendered being a property at Studley Park Kew. The tender process was ultimately was unsuccessful. During the course of my initial discussions with Michael Buxton I explained to him, in general terms, the background to the proposed transaction and the extent of my involvement with Donovan, Quinnert, Howard and Bucknall. Before any commitment was given by Buxton I informed him amongst other things that:

(a) I was initially invited in as a consultant to help some lawyers at Oakley Thompson & Co and a consultant get a golf course development deal off the ground with a view to pre-leasing the course to Spotless Group;

(b) Chris Edmonds and I brought the opportunity of Kingston Links to the table which meant it would be possible to buy an existing operating course and avoid all the development hassles;

(c) The deal evolved into a joint venture which was clearly minuted and agreed by all 6 participants;

(d) As the deal was coming close to being finalised, the lawyers unjustifiably asserted that they had an option to buy the property which excluded us from participating in the profit share;

(e) I felt free after taking legal advice to try to get the deal done on my own or with others;

(f) If we were successful with the purchase, we could expect the lawyers to take umbrage at our success and issue legal proceedings against us even though they would have no proper basis for doing so. I referred to them as `smoke and mirror experts with a penchant for litigation'."

264. This description was not rebutted by Buxton, but, the matters described by Cahill were not specifically put to Buxton in cross-examination.

267. As events transpired, Buxton agreed to participate in a transaction with Cahill and Edmonds.

270. Cahill was concerned to ensure that Donovan and the others did not know of his intentions from 10 August 1999 onwards. He asked Buxton to agree to be nominated as the purchaser and Buxton agreed to do so. Eventually, the relevant transactions were carried out in the name of Emanbee, Buxton's company.

273. On 12 August 1999 Cahill wrote to Rose of Spotless informing him that he, Cahill, was no longer involved with Donovan and the others. He remarked in the letter as to his belief that " ... other prospective purchasers may also be in discussions with the Kingston Group".

276. On 13 and 19 August 1999 Howard spoke by telephone to Cahill. The conversations were recorded by Howard. The conversations were tense but polite and finished on the basis that Howard and Cahill agreed to go their separate ways without any ill feelings. Cahill made no mention of any future intentions of his own or of he and Edmonds together with any other person in relation to the Kingston Links Golf Course.

279. Meanwhile, Quinert ascertained that, contrary to his instructions, Cahill had not forwarded a formal offer on behalf of Corwen Grange to the Kingston Group. On 19 August 1999, Quinert wrote to Wood of the Kingston Group in the following terms enclosing a formal offer to purchase the Kingston Links Golf Course for the sum of $8,688,000:

"As you are aware Mr Peter Cahill of Domain Hill Property Services Pty Ltd was until recently engaged in negotiations with you regarding the proposed acquisition of Kingston Links Golf Course ("the facility"). In conducting those negotiations Mr Cahill was acting as an agent for, and was a member of, a consortium which, was formed to pursue the acquisition on behalf of an equity investor. Pursuant to certain financial parameters agreed to by the consortium members, the equity investor which took up the option to pursue the acquisition was an unlisted public company group which operates pre-dominantly in the United Kingdom and the United States of America. Certain members of the consortium including myself, Mr Stephen Howard and Mr Kevin Donovan are also Directors of the equity investor group. On the 3 August last, Peter advised me that following further discussions, you had informed him that you would be prepared to recommend an offer of $8,688,000.00 for the acquisition of the facility subject only to that offer being put in writing. On the basis of that advice arrangements were made to incorporate a local subsidiary of the equity investor group on behalf of which the formal acquisition offer could then be made. The company so incorporated was Corwen Grange Pty Ltd ACN 088 393 337. Mr Howard and I were appointed as Directors of Corwen Grange Pty Ltd. At that point in proceedings a negotiation was initiated by a member of the consortium regarding advisory fees and other entitlements arising out of the consortium. This individual had originally invited Peter to participate first as an advisor and ultimately as a member of the consortium. Although Peter neither initiated nor participated directly in this kerfuffle (sic), we were not surprised that as a friend and invitee of the chief protagonist, he felt bound to hold the line. We presume this is why when that person withdrew from the consortium so did Peter; despite the fact that he had substantially succeeded in his specific task of securing an agreement to purchase the property. Certainly, we have sought to assure Peter that upon settlement it is our intention to remit his fees and entitlements in recognition of Domain Hill's work. Unfortunately the abovementioned events have delayed the communication of the formal offer you requested from Peter. We regret any inconvenience caused by that delay and hope this explanation at least enables you to appreciate our position. As indicated, the investor group has always and still intends to proceed with the formal offer which was the subject of your discussions with Peter. As such, we enclose herewith the written offer put by Corwen Grange Pty Ltd."

283. On 19 August 1999, also, Quinert wrote to Cahill in a self-serving manner asserting that Edmonds knew of the entitlement of Disctronics to proceed with the proposal in its own right if it chose to do so. The letter suggested that Edmonds was fully aware of the position vis-à-vis Disctronics.

286. On 19 August 1999, also, Cahill wrote to Buxton by way of facsimile proposing that an amount of $300,000 described as a "mezzanine debt" be provided by Buxton. The debt was a reference to an agreement by Buxton to inject funds into the project with Cahill and Edmonds. The facsimile of 19 August 1999 was accompanied by a proposed letter from Cahill to Buxton formalising their intended joint venture with respect to the Kingston Links Golf Course. The draft letter contemplated a joint venture whereby Cahill or his nominee would hold a 55 per cent interest, Buxton and his nominee a 20 per cent interest and Edmonds or his nominee a 25 per cent interest. The letter proposed, further, that a new entity would be established to undertake the acquisition of the golf course by way of nominee for a joint venture and that Buxton was to be the sole director of that entity. The shareholding of the entity was proposed in the same proportions as the joint venture. In addition, the letter proposed a loan by Buxton in the amount of $300,000 by way of "mezzanine debt" at a rate of 12 per cent per annum fixed for five years from the date of settlement. Furthermore, it was contemplated that Buxton would advance funds in the sum of $435,000 by way of deposit that would accrue interest at the rate of six per cent per annum and be re-paid at settlement when the equity and/or mezzanine debt would be contributed; equity was contemplated in the range of $200,000.

289. On 23 August 1999 Buxton responded to Cahill confirming the proposed contribution of $300,000 to the joint venture between them. The letter revealed that Buxton proposed that one of his companies provide the mezzanine finance of $300,000. Furthermore, Buxton proposed in his letter of 23 August 1999 that land be made available at the Kingston Links Golf Course for the erection of a sports club, including gymnasium and swimming pool. The letter contemplated that the owner of the land would provide finance to erect the sports club and grant a lease to an operator for a total term of 18 years consisting of six three year terms. The letter also proposed some variations to the arrangements contemplated by Cahill in his letter of 19 August 1999.

293. On 27 August 1999 Emanbee made a written offer to Wood to purchase the Kingston Links Golf Course for the sum of $8,700,000, being $12,000 more than the Corwen Grange offer. Neither Cahill nor Edmonds told Donovan and the others of the offer by Emanbee or of their involvement.

296. As a result of information obtained by Bucknall, Quinert suspected that Cahill may have put a competing offer to the Kingston Links Group. Quinert sent another letter dated 1 September 1999 on behalf of Howard on the letterhead of Disctronics to Cahill repeating the warning of breach of fiduciary duty, requesting Cahill to withdraw as a competitor, threatening litigation and seeking a response. The response of Cahill came from solicitors Abbott Stillman and Wilson in a letter dated 2 September 1999. The solicitors did not offer any comfort to the plaintiffs.

299. On the morning of 1 September 1999,following a conversation between Bucknall and Wood, the plaintiffs learned for the first time that they were competing against two other offers including one from a consortium involving Cahill. The other offer fell away for various reasons. Wood told Bucknall that the Kingston Group had resolved to accept the offer from the consortium of Cahill being the offer submitted by Emanbee. Quinert wrote almost immediately to Cahill requiring withdrawal and threatening litigation.

302. The plaintiffs learned that Cahill had contacted Rose of Spotless on about 30 August 1999. On 3 September 1999 Howard wrote to Rose complaining about the conduct of Cahill. On 6 September 1999 Wood wrote to Rose advising that the Kingston Group had entered into a sale agreement with Cahill and Buxton in relation to the Kingston Links Golf Course. Very quickly Donovan commenced to look at other options. By letter dated 7 August but sent on 7 September 1999 Bucknall wrote to Donovan suggesting an alternative investment in Queensland but proposing efforts be made to tie up Cahill and the others in litigation by way of revenge. However, nothing came of these suggestions.

305. During early September 1999 correspondence was exchanged between Abbott Stillman and Wilson for Edmonds and Cahill and their companies and Oakley Thompson and Co for the Disctronics and Donovan interests in anticipation of litigation. None was commenced at that stage. There was no explanation as to why the plaintiffs did not take steps at this time in an endeavour to protect their position. During September 1999 Cahill pursued negotiations with Rose of Spotless and eventually secured Spotless as tenant of the Kingston Links Golf Course.

308. Buxton was away overseas during the period 2 September to 2 October 1999. On 8 October 1999 Cahill wrote to Buxton informing him of various matters relating to the purchase, including the provision of notice of anticipated legal proceedings to be instituted by the Disctronics Group and enclosing related correspondence. The facsimile letter enclosed information for Buxton being correspondence from Cahill to Abbott Stillman and Wilson seeking legal advice, the letter of advice of those solicitors and, also, the letter from Oakley Thompson and Co. The facsimile informed Buxton that whilst Cahill and Edmonds believed their position to be "extremely strong" it pointed out that there were "no guarantees when it comes to legal disputes".

312. Edmonds and Cahill with Buxton acquired a company, Kingston Links Country Club P/L, the fifth defendant K.L.C.C., as the purchasing vehicle for the acquisition of the Kingston Links Golf Course. The company was registered on 12 October 1999 and each of Buxton, Edmonds and Cahill became directors. On 29 October 1999 a member of the Kingston group, Kingston Property Constructions Pty Ltd, as vendor executed a contract of sale with K.L.C.C. as purchaser. On 8 December 1999 K.L.C.C. entered into a lease with Spotless. On 14 December 1999 K.L.C.C. was registered on the title as the proprietor of the land subject to a first mortgage to Australia and New Zealand Banking Group Limited ("ANZ"). In May 2000 Kingston Links Country Club, Emanbee, Buxton, Cahill, Edmonds and others entered into a formal joint venture agreement. The other participants were Claudene Investments Pty Ltd and CEP Assets Pty Ltd. They were not parties to the proceedings. The agreement was varied on 15 December 2000 but the nature of the variation is not relevant for present purposes. On 22 December 2000 a caveat was lodged by Disctronics over the title of the land constituting Kingston Links Golf Course claiming that the land was held pursuant to a constructive trust in favour of Disctronics. Thus, the caveat was lodged some 15 months after the plaintiffs ascertained that the defendants had made a successful bid to acquire the Kingston Links Golf Course. There was no explanation as to why the plaintiffs waited so long to take this step. None of the plaintiffs save Disctronics claimed a caveatable interest in the land at that time.

315. There was the matter of the financial contributions made by the Buxton interests to the acquisition of the Kingston Links Golf Course. It was a term of the joint venture agreement involving Buxton and others (the "K.L.C.C. joint venture") that Buxton advanced funds for the mezzanine debt. Emanbee advanced the sum of $300,000 pursuant to that joint venture. At the time of trial, a balance of $180,000 together with interest at the rate of 12 per cent per annum running from 1 September 2000 was due and payable to Emanbee. It was a term, also, that Emanbee advanced moneys for the purposes of construction of the gymnasium and sports centre at the Kingston Links Golf Course. In terms of the moneys spent on the construction of the sports centre and gymnasium, Emanbee advanced the sum of $1,100,000 on an instalment basis: $379,227.13 on 30 April, $291,144.74 on 24 May and $429,628.13 on 12 June 2001. Interest was payable on the latter sum advanced by Emanbee at the rate of 1.5 per cent above the bank bill rate. At the time of trial Emanbee had received interest from time to time, the interest being paid up to 31 January 2002. There had been no reduction of principle in relation to that loan. On 17 November 2000 Joshua Buxton, a director of Equilibrium Health & Fitness Roweville Pty Ltd agreed to enter into a lease for the sports centre and gymnasium at the Kingston Links Golf Course for a term of 18 years consisting of six three year terms and a commencing rental of $130,000 per annum. At trial, Buxton gave unchallenged evidence as to these financial injections and his opinion that the construction of the sports centre and gymnasium added at least $1,100,000 to the value of the land.

318. On 10 May 2001 Emanbee transferred and assigned its interest in the joint venture to the company, 333 Collins Street Pty Ltd. Further, on 10 May 2001, 333 Collins Street Pty Ltd transferred and assigned its interest in the joint venture to the eighth defendant, MRB.

322. On 8 June 2001 K.L.C.C. commenced proceedings for the removal of the caveat lodged by Disctronics. None of Donovan, Howard, Quinert, Bucknall or Solette were parties to that proceeding. The plaintiffs commenced the main proceeding on 26 June 2001. Initially, the Buxton defendants were not parties to that proceeding. After the trial had commenced, following application by the sixth defendant, Buxton, and the seventh defendant, Emanbee, the eighth defendant, MRB, was joined as a defendant to the proceeding.

325. On 16 November 2001 Kingston Links Country Club entered into a contract of sale with Gauntlet Services Pty Ltd to sell Kingston Links Golf Course for the sum of $14,000,000. Settlement of the contract was postponed.

328. On 20 March 2002, following an interlocutory hearing, orders were made joining Buxton and Emanbee as parties to the main proceeding. Upon evidence on affidavit as to fears of the plaintiffs of a pending settlement of the contract of sale to Gauntlet Services, further orders were made that the proceeds of sale of any such settlement be deposited into a trust account controlled by the mutual solicitors and further orders that the caveat by Disctronics and any mortgage by Buxton and Emanbee over the title for the golf course be removed and discharged respectively. Other orders were made to facilitate the settlement of the sale of the golf course to Gauntlet Services. The orders were made on 20 March 2002. After trial the Court was informed that a notice of repudiation was served by Gauntlet Services upon the vendors of the golf course on 8 May 2002. Later again, the Court was notified that the subject property was sold to a party described only as "an alternative purchaser" by contract of sale dated 17 July 2002. The Court was not told anything further about that transaction save that the parties proposed by consent the variation of the interlocutory orders made prior to trial on 20 March 2002.

333. Based on these circumstances the plaintiffs alleged that each of Edmonds and Cahill were retained by Donovan, Howard, Quinert, Bucknall, Solette and Disctronics or one of them. The retainer with respect to Edmonds was for the provision of financial services with respect to the acquisition of the Kingston Links Golf Course. The retainer with respect to Cahill was for the purpose of negotiating the acquisition of the golf course.

336. Further based on these circumstances the plaintiffs alleged that a joint venture agreement was made between Donovan, Howard, Quinert, Bucknall and Solette "and/or" Disctronics in about April 1999. They alleged that it was a term of the joint venture agreement that investigations would be conducted as to the financial viability of a joint venture golf course project. The plaintiffs alleged that the project was to be investigated on two bases, first, that the equity participant to acquire and own the golf course would be a third party to be identified at a later time. Secondly, that Disctronics or one of its related entities would be the equity participant in the project if it chose to do so. The plaintiffs alleged, also, that in accordance with the joint venture agreement the Kingston Links Golf Course was identified as a suitable site for the purposes of the joint venture and that Spotless was identified as a prospective operator of the Kingston Links Golf Course.

340. The plaintiffs alleged that Donovan informed Edmonds and his company, Homelink, of the joint venture concept including the identification of the Kingston Links Golf Course and the role of Spotless. Furthermore, the plaintiffs alleged that Edmonds was informed that Kingston Links Golf Course would be owned by a company to be nominated by and associated with Donovan, Quinert and Howard but that if the removal of equity necessarily exceeded a financial range then an external equity provider would be required. The plaintiffs alleged, also, that the concept or idea of the acquisition of a golf course and the letting of that course to fund the purchase together with the identification of the suitability of Kingston Links Golf Course as a suitable site and Spotless as a potential operator constituted confidential information. In addition, the plaintiffs alleged that an agreement was entered into between the joint venture group consisting of Donovan, Howard, Quinert, Bucknall, Solette "and/or" Disctronics and that the group retained Edmonds and Homelink to provide financial services and advice to the group.

344. The plaintiffs alleged that an agreement was made between the group and Cahill and Domain Property to provide advice and services in connection with the proposed acquisition of the Kingston Links Golf Course and its subsequent leasing to Spotless or another operator.

348. Arising from these agreements the plaintiffs asserted that each of Edmonds and Homelink on the one hand and Cahill and Domain Property on the other were bound by contractual terms to act in the best interests of the joint venture group, not to use their position to gain property or an advantage to the detriment of the group, to act fairly and in good faith, not to use confidential or other information to prejudice the interests of the group and other similar terms. The plaintiffs alleged, also, that Edmonds and Homelink on the one hand and Cahill and Domain Hill on the other owed fiduciary duties to the joint venture group arising from the nature of their retainers.

352. The plaintiffs alleged that arising from the circumstances described that the joint venture agreement was varied in about July 1999 in important respects. First, that Cahill and Edmonds became members of the joint venture group and parties to the joint venture agreement. Secondly, that Edmonds and Homelink on the one hand and Cahill and Domain Property were to continue to provide their services to the joint venture group as previously agreed. Third, the joint venture group would be structured in the manner described in the minutes of the meeting of the joint venture group convened on 20 July 1999. Fourthly, subject to the level of equity required, Disctronics would be the equity participant in the project. Fifthly, if the project proceeded Edmonds and Homelink on the one hand and Cahill and Domain Property on the other hand would each receive $70,000 for their services. Sixthly, the profit derived from the project would be shared amongst the joint venture group in six equal parts between Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill or their nominees with the specific amount to be determined at a later time. The plaintiffs alleged that arising from the joint venture agreement Edmonds and Homelink on the one hand and Cahill and Domain Property on the other hand were subject to the same terms and fiduciary duties as applied under the original joint venture agreement.

356. The plaintiffs alleged that the actions of Edmonds and Homelink and Cahill and Domain Property on 10 and 12 August 1999 respectively whereby they informed the joint venture group that they would no longer be involved in the project or party to the joint venture agreement breached the terms of the joint venture agreement and thereby repudiated that agreement by evincing an intention to no longer be bound by the terms of that agreement. Further, the plaintiffs alleged that each of Edmonds and Homelink and Cahill and Domain Property breached the fiduciary duties owed by them under the joint venture agreement as originally formed and later varied. Furthermore, the plaintiffs alleged that by forming a new consortium in relation to the acquisition of the Kingston Links Golf Course and its subsequent leasing to Spotless and, further, by submitting the offer to the Kingston Links Group, Edmonds and Homelink on the one hand and Cahill and Domain Property on the other breached the terms of the subject agreements and also constituted breaches of the fiduciary duties owed by those parties to the joint venture group.

(g) The allegations against Kingston Links Country Club ("K.L.C.C.")

360. With respect to the fourth defendant, K.L.C.C., the plaintiffs alleged that it had knowledge of the matters alleged against Edmonds and Cahill and that it knowingly participated in the breaches of fiduciary duty. It was alleged, therefore, that K.L.C.C. held the Kingston Links Golf Course pursuant to a constructive trust in favour of Disctronics or its nominee. Further, the plaintiffs alleged that the K.L.C.C. charged to Buxton and/or Emanbee its interest in Kingston Links Golf Course as security for repayment of moneys lent and provided an unregistered second mortgage in favour of Buxton and/or Emanbee. In the circumstances, the plaintiffs asserted that the interest of Disctronics or its nominee in the Kingston Links Golf Course had priority over the interest of Buxton and/or Emanbee as holders of the unregistered second mortgage. Ultimately, the Buxton interests conceded that an interest in the nature of an unregistered second mortgage did not arise and hence the latter allegation and consequential relief was not pursued by the plaintiffs.

364. The plaintiffs asserted, also, and in the alternative, that Edmonds, Cahill and K.L.C.C. received benefits as a result of the acquisition of the Kingston Links Golf Course whereby they were unjustly enriched and that the plaintiffs are thereby entitled to restitution.

368. The plaintiffs sought declaratory relief in the nature of declarations that the defendants breached the fiduciary duties owed by them to the joint venture group, alternatively, arising from the retainers, and that the Kingston Links Country Club holds the Kingston Links Golf Course and any proceeds of sale of that property upon constructive trust for Disctronics, alternatively, the other plaintiffs. The plaintiffs sought declarations, also, that the interest of Disctronics or the other plaintiffs as beneficiaries of the constructive trust had priority over the interest of the Buxton parties. Further, the plaintiffs claimed, also, that arising from the circumstances alleged Edmonds and Cahill have been unjustly enriched. As a consequence, the plaintiffs claimed damages, alternatively, equitable compensation, an account of profits and exemplary damages.

The Defence of the Defendants - Edmonds, Cahill and K.L.C.C.

373. The K.L.C.C. defendants denied the allegations and claims of the Disctronics' interests. They denied the retainer of Edmonds and Cahill. They denied the joint venture agreement as alleged by the plaintiffs. Consequently, the K.L.C.C. defendants denied the alleged breaches of those agreements, the owing of any concomitant fiduciary duty and the breaches of such duty.

(b) Defendants' allegations of an alternative joint venture

377. The K.L.C.C. defendants alleged that on about 20 July 1999 an agreement was entered into between Donovan, Quinert, Howard, Bucknall, Edmonds and Cahill to acquire the Kingston Links Golf Club, to split any profit share derived from such acquisition six equal ways between them and that the manner of funding the acquisition would be determined at a later time.

381. The defendants described this agreement as "the Golf Club Purchase Agreement". The defendants alleged that arising from that agreement each of the participants were in a fiduciary relationship and owed duties to one another. They alleged, also, that there were terms of the golf club purchase agreement that they would act in the interests of the group, act in good faith, not use confidential information imparted to them to the prejudice of the interests of the group and not seek to prefer their interests to the interests of the group and other related terms.

385. The defendants alleged that by virtue of the conduct of Donovan, Howard and Quinert during the period 4 to 9 August 1999 they evinced an intention to no longer be bound by the Golf Club Purchase Agreement or, if there was a joint venture agreement as alleged by the plaintiffs, to no longer be bound by the joint venture agreement. The defendants alleged, further, that on 10 August 1999 Edmonds and Cahill accepted the repudiation by Donovan, Howard and Quinert of the Golf Club Purchase Agreement, alternatively the joint venture agreement.

389. Furthermore, in so far as it was alleged that breaches of the joint venture agreement occurred and breaches of fiduciary duties occurred, the defendants alleged that K.L.C.C. was not incorporated before 12 October 1999 and, therefore, it did not participate in the breaches as alleged. The defendants alleged, further, that arising from the financial contributions made by them, including those made by Buxton and Emanbee they have an entitlement to be paid in accordance with the terms of the joint venture deed upon any sale of Kingston Links. In any event, the defendant denied that the interests of Disctronics had priority over the interests of Buxton and/or Emanbee. Finally, the defendants alleged that if the plaintiffs were entitled to equitable relief such relief must be conditional upon recognition of the contribution made by Edmonds and Cahill and their associated interests to the acquisition and improvement of the Kingston Links Golf Course.

The defence of the defendants - Buxton, Emanbee and MRB

393. The Buxton defendants claimed that if the plaintiffs were entitled to relief against the K.L.C.C. defendants allowance should be made so as to repay amounts owing to Emanbee consisting of the balance of the mezzanine debt together with interest thereon, the finance provided by Emanbee for the instruction of the sports centre and gymnasium in the sum of $1,100,000 together with interest, the loan by Emanbee of the sum of $435,000 to fund the deposit and the balance of settlement moneys paid by Emanbee in the sum of $24,000. Further, with respect to the assignment of the joint venture interest of Emanbee to MRB, the Buxton defendants claimed an entitlement to 20 per cent of the net profit arising from the sale of Kingston Links. Otherwise, the Buxton defendants denied the claim against them by the plaintiffs.

397. The evidence for the Disctronics' interests was given by Donovan, Quinert, Howard and Bucknall. Each of these witnesses gave evidence in support of events as described. They also gave evidence as to discrete events I describe hereafter.

400. The Disctronics' interests also called Rose of Spotless. He largely corroborated the evidence of the other witnesses as to the involvement of Spotless. Additional evidence for the Disctronics' interests was given by one Paul Gregory Campbell. He is a director of Solette. In that capacity he described a property development project he participated in together with Donovan, Quinert and Howard in 1997 whereby Solette was used as a trustee in a unit trust structure. Campbell said that in about 1998 at the request of Donovan he agreed to the use of Solette by Donovan in relation to a golf project. Campbell knew not only Donovan, Howard and Quinert but also Edmonds through prior dealings.

404. The evidence for the Kingston Links Country Club interests was given by Edmonds and Cahill. They both gave evidence in accordance with events as I have described except for particular occurrences that I refer to later in these reasons. K.L.C.C. also called Alan Thomas Maw who gave evidence of the development by him of the concept of the purchase of an established golf course as an investment, his arrangements in 1998 that led to the preparation of the CROI Report and his communication of those matters initially to Bucknall and later to Howard in October 1998.

408. The evidence for the Buxton interests was given by Buxton both on his own behalf and as a director of Emanbee and MRB. His evidence was in accord with events already described. Buxton gave evidence that he recalled Cahill informing him that he had been involved with another consortium. Buxton said he had no recollection of Cahill informing him that the members of the other group were lawyers. However, Buxton said Cahill told him that the other group may take legal action against the consortium Cahill, Edmonds and Buxton.

412. Before turning to the threshold questions as to whether there was a joint venture in relation to the project and, if so, between whom and when was it formed it is necessary to deal to an extent with the allegations of retainer and commensurate duties made against Edmonds and Cahill.

416. The retainer of Edmonds is borne out by the circumstances preceding the luncheon meeting on 13 April 1999. On 9 April 1999 Donovan made it sufficiently clear that Edmonds was retained in the two conversations that day. The fact of the retainer is borne out, further, by the advice given by Edmonds to Donovan on 9 April and the attendance by Edmonds at the lunch on 13 April 1999. The retainer is borne out, also, by the subsequent discussions between Donovan and Bucknall on 13 April 1999 and the inclusion of Edmonds in those discussions. Edmonds was at first instance retained by Donovan as a financial adviser as occurred in events around 9 April 1999. His role was to raise debt finance for the project consisting of the acquisition of a golf course and to raise equity if necessary. Donovan gave evidence to this effect. There was evidence from Donovan, also, that Edmonds' payment for his services was to be an amount of up to one per cent of the debt finance raised for the project together with a further three per cent equity management fee originally expected to be paid to an external equity provider. Again Donovan gave evidence to this effect. Edmonds in his evidence was evasive about this matter as to whether there was an arrangement and as to the basis upon which he was to be paid. I do not accept his evidence. In the circumstances described I do not accept that Edmonds would have provided the services he did from about 9 April 1999 onwards without an expectation of payment of fees for his services. Indeed, he said in his evidence that he was pleased to have the opportunity to work for Donovan. An additional observation can be made. Even if Edmonds provided his services to Donovan and the others at the outset on a gratuitous basis nonetheless as a matter of legal principle he must be construed as acting as an agent for Donovan and the others: see King v Lintrose Nominees Pty Ltd.[1]

419. It was relevant, further, that Edmonds acted as if retained to provide financial advice after the lunch meeting on 13 April 1999 including to the point of proposing the retainer of Cahill to fulfil the role of the sale negotiations and the fact that Donovan authorised Edmonds to speak to Cahill as he did. In the course of cross-examination Edmonds acknowledged that he was retained by Donovan. Indeed, he said that he was glad to have Donovan's business. Arising from these circumstances I conclude that Edmonds agreed to be retained by Donovan and interests associated with him to act as a financial adviser in relation to a possible or proposed golf course purchase.

422. In so far as it was relevant, there was insufficient evidence to establish that Edmonds' company, HomeLink was the entity retained by Donovan and the others. At all times from 9 April 1999 onwards the only party dealing with Donovan and the others with respect to arrangement of finance for the transaction was Edmonds himself.

425. In any event, by 8 June 1999 Edmonds was aware that he was providing advice to Donovan, Howard and Solette. His knowledge was to the effect that the interests associated with Donovan included Howard and Solette. By 8 June 1999, therefore, Edmonds knew he was retained by Donovan, Howard and Solette. So much can be concluded from the memorandum sent by Edmonds to Howard in relation to Solette dated 8 June 1999. Aside from formal matters it provided:

"I refer to your memorandum dated 7th June 1999 file no. reference 99-1007. I confirm that Kevin Donovan and I had initial discussions regarding the `Bucknall' golf course deal in early April 1999. Following these discussions, I provided Kevin with the attached `rough' numbers to promote further discussion on this subject (nb. a potential development site located in the suburb of Keysborough was the target at this time). I subsequently attended a business luncheon on the 10th April 1999 with Messrs. Donovan, Bucknall and Rose (Spotless). Given the indicative financial scenario outlined in the attached paper, I do not propose to comment on the broad numbers you have raised. However, I make the following comments: General: Requests for funding that involving golf courses are normally viewed unfavourably by lenders. Over recent times, many such enterprises have experienced financial difficulties and, as mortgage security, they are often of a specialised nature. Notwithstanding this, I see the potential for the ultimate credit risk to rest with the profile of the lessee. If a lease agreement is in place that binds the lessee to a known rental payment over a sufficient period, the market value of the underlying asset might be deemed to be the capitalised value of the associated rental stream and not the vacant possession value of the land (to use an analogy, the transaction has the potential to be similar to a shopping centre deal). Gearing: The level of gearing that I estimate might be achievable/appropriate is dependent upon the following factors (in no particular order):

1. Maximum funding in excess of 70% of cost/valuation would normally not be considered.

2. The level of surplus income and the period of the rental agreement are key factors. A debt provider would most likely require the loan to amortise, from the time rental income commences (it is usual for interest to capitalise to the loan account throughout a construction phase), at a rate that ensures any residual debt remaining at the completion of the initial lease term is well below the vacant possession value of the land.

3. Consideration needs to be given to whether the funding proposed is of a recourse or non-recourse basis to the owners of the development. Obviously, if the security for the borrowing includes the guarantee/indemnity of the owners who happen to be of substantial wealth then the transaction will be greatly enhanced (several rather than `joint and several' is often appropriate). Non-recourse funding might be achievable if there is a very good reason for this to apply (e.g. numerous passive investors).

4. Investor funds would be normally be required to be applied to the transaction prior to any loan draw-down being processed.

5. Lenders would normally prefer repayment of debt prior to dividends being made.

6. Given the likely low interest times cover that would be evident, a lender may also require some form of interest rate risk management to apply.

7. There are no environmental issues with the subject property.

8. Alternatively uses for the land (i.e. residential subdivision).

*The above has not addressed construction funding requirements.

Strategy: On the basis that the lessee is considered `blue chip' a capitalisation rate below 10% might apply (nb. to my knowledge, an assessment of SSL has not been undertaken) and a substantial construction profit might prevail. If this is the case, due consideration should be given to a `set and divest' strategy (i.e. MAPAFO)."

439. Consideration of this memorandum discloses that Edmonds was conscious that there may be a number of "owners".

442. There is the further matter that in early July 1999 Donovan told Edmonds that he would not alter "existing arrangements" so as to exclude Quinert or Bucknall. It can be readily inferred that those arrangements included Quinert and Bucknall and were known to Edmonds.

445. It is doubtful that Bucknall was ever party to the group that initially retained the services of Edmonds and Cahill. He was on the periphery acting himself as an agent of Donovan, constantly at the behest of Donovan. The inclusion of Bucknall in any transaction was a favour to be bestowed by Donovan if and when he wished. Hence, Bucknall wrote to Donovan on 2 July 1999 and asked to be included in any transaction and that happened. Later, Donovan discussed with Bucknall that he might be included in the share of profits or paid a fee. It was all a matter for Donovan to decide.

448. On the basis of these matters I am satisfied that Edmonds was retained by Donovan and interests associated with him on or about 9 April 1999 and that Edmonds' retainer included acting for Solette by at least 8 June 1999, the date of the memorandum. Indeed, Edmonds admitted in cross-examination that up until 30 June 1999 he was retained as a consultant for fees. The retainer was constituted orally arising from the conversations between Donovan and Edmonds on 9 April and 13 April 1999 and was to be implied from the conversations thereafter involving Edmonds and his conduct as if he was retained to act as financial adviser for Donovan and interests associated with him that included Howard, Quinert and Solette.

451. As events transpired the retainer of Edmonds was not all that important save to set the context of his relationship with Donovan and others. For reasons I address shortly, the retainer of Edmonds was subsumed by another relationship.

455. There was no issue that Edmonds approached Cahill to provide certain services to Donovan and those associated with him, the approach having occurred on about 13 April leading to the meeting between Cahill and Bucknall on 20 April 1999. At that meeting Bucknall told Cahill of the interest of "the group". Cahill said he would contact Wood (and eventually he wrote to Wood on 19 May 1999). At the meeting on 20 April Cahill specified the fee requirements of his retainer. Further, the retainer of Cahill is borne out by his letter dated 7 May 1999 to Donovan in his capacity as a director of Solette. Furthermore, the letter of 7 May 1999 had been the subject of a preliminary draft sent on 3 May 1999 by Cahill to Bucknall. In the first draft Cahill referred to "your group". The fact that Cahill wrote to Donovan as a director of Solette indicates that Cahill knew of Solette and the fact that Donovan was associated with it. An inference can be drawn that Cahill at that stage having spoken to only Edmonds and Bucknall was informed by one of those persons that Solette was a member of "the group".

458. So far as Cahill is concerned, he was retained for the reasons stated. The letter of 7 May 1999 was not signed but I am satisfied that the parties proceeded on the basis thereafter that the terms of the letter generally governed the arrangements between them and all parties, but particularly Cahill, acted as if a retainer was in place.

461. These matters lead me to conclude that Cahill was aware that Donovan was acting on behalf of a group of persons and that he, Cahill, was retained to provide negotiating services to "the group". The fact of the retainer of Cahill is borne out further by the letter dated 19 May 1999 from Cahill to Wood of the Kingston Group where he said:

"Kevin Donovan a consultant to legal firm Oakley Thompson and Co, 500 Collins Street, Melbourne and his co-investors are definitely interested in examining the opportunity of acquiring the golf links and associated facilities from The Kingston Group. ... In the interim, I could possibly arrange a site visit with two of his partners in this exercise, Stephen Howard from Oakley Thompson and Co and Rick Bucknall a private tourism and leisure consultant. In respect to the Kingston Links Golf Course specifically, Domain Hill will not form part of the investment consortium but will act as an intermediary and endeavour to conclude a transaction which meets the needs of both parties. Solette Pty Ltd is the investment vehicle currently used by the consortium including partners of Oakley Thompson and Co but in the event that we consummate a transaction with you a special purpose entity will be established to undertake the acquisition."

465. There are three important features of the letter. First, Cahill wrote to Wood on 19 May 1999 and referred to "a consortium" that included partners of Oakley Thompson and Co. It can be inferred that the expression "partners" was a direct or indirect reference to Donovan, Howard and Quinert. Secondly, the letter specifically identified Donovan, Howard and Solette and referred to "co-investors" and "partners". Thirdly, the letter of 19 May 1999 acknowledged that ultimately a special entity would be used to complete the transaction. Further, during the month of June 1999 there were dealings between Howard and Cahill in relation to the transaction. It must have been obvious to Cahill that Howard was a key player in the transaction. Indeed, Cahill responded to directions and requests by Howard. I am satisfied that at least by 7 May 1999 Cahill was retained to act on behalf of a group headed up by Donovan and including Howard and Solette and that Cahill contemplated that another entity would be utilised if the transaction was finalised. Similar to Edmonds, I am satisfied that the retainer with respect to Cahill was constituted orally arising from the conversations between Bucknall and Cahill on 20 April, the separate meetings between Donovan and Bucknall and Howard and Bucknall at the Kingston Links Golf Course during June 1999 and, in particular, the presence of Cahill when Donovan discussed the purchase price with Wood on 22 June 1999. The retainer is to be implied, also, from the general involvement and conduct of Cahill from 13 April 1999 onwards, his letter of 7 May 1999 and, in particular, his dealings with Wood on behalf of Donovan and the others during the months of April to early August 1999. All these matters indicate that Cahill was retained to act as negotiations adviser for Donovan and interests associated with him that included Howard, Quinert and Solette but, for reasons I address later, not Disctronics.

469. It is essential ingredient of an agency that a third party be in existence or contemplated for the obvious reason that the essence of the position of agent is that of an intermediary: see Re Moline, ex p. Dyster;[2] Wilson v Short[3]. Co-principals may jointly appoint an agent to act for them, in such case the co-principals may jointly sue the agent: see Skinner v Stocks[4]; Cothay v Fennell[5]; Jones v Cuthbertson.[6] However, the agent must know the identity of the principal before the agent is bound to that principal: see Keighley Maxstead & Co v Durant.[7] Edmonds did not know about Disctronics until 6 July 1999 as I set out later in these reasons. In my view it is plain that from 9 April 1999 with respect to Edmonds and from at least 7 May 1999 with respect to Cahill those parties were subject to retainers with Donovan and others and were subject to the relationship of agent and principal. They did not know about Disctronics or its intended involvement if any. On the basis of the authorities, Edmonds and Cahill did not know of the identity of Disctronics as a principal. They were not, therefore, retained by Disctronics.

472. So far as it was relevant, there was insufficient evidence that the entity retained was in fact Domain Hill, Cahill's company rather than Cahill himself. Despite the fact that the company was mentioned in the letter of 7 May at all times it was Cahill himself who purported to represent the interests of Donovan and the others with respect to negotiation of the acquisition of the Kingston Links Golf Course. The involvement and role of Domain Hill was never clarified following dispatch of the letter of 7 May 1999.

475. After the retainers of Edmonds and Cahill were effected and acted upon, events occurred subsequently whereby the retainers were subsumed by a different relationship. I turn now to those events.

Findings as to whether there was a Joint Venture

479. I am satisfied that a joint venture was formed between each of Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill. The joint venture was formed at the meeting on 20 July 1999. So much is apparent from the events preceding 20 July but most importantly the minutes of that date subsequently confirmed on 26 July 1999. There was an additional significant consequence upon the formation of the joint venture on 20 July 1999. It effectively set to one side the pre-existing retainers of Edmonds and Cahill and substituted therefore an agreement as set out in the minutes of the meeting of 20 July 1999. I am satisfied that by 20 July 1999 Donovan, Howard and Quinert and, so far as relevant, Solette, acquiesced to the subsuming of the retainer of Edmonds and Cahill and its commensurate fiduciary duties into the new relationship of a joint venture between the six participants, Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill.

482. I am not satisfied that Disctronics was contemplated as a part of that joint venture or, alternatively, to have an option to take the transaction over if it so desired. Indeed, Disctronics was not mentioned in the minutes of 20 July 1999.

485. There was extensive evidence as to conversations and communications between the plaintiffs and the defendants, particularly between Donovan, Howard and Quinert on the one hand and Edmonds on the other. There were inconsistencies on both sides. Donovan gave evidence as to a number of conversations that he had with Edmonds on 9 and 13 April and 2 and 6 July 1999 where he said he told Edmonds that the transaction for the acquisition of the Kingston Links Golf Course could be for the benefit of Disctronics if it so elected. Edmonds refuted the evidence of Donovan in this respect. Under intensive cross-examination Edmonds was emphatic that he was not told of the involvement of Disctronics until the conversation between he and Quinert on 14 July 1999. Despite some inconsistencies in Edmonds' versions of his conversations with Donovan I accept that he was not told of Disctronics' involvement until 6 July 1999, but even then, not in any detail until 14 July 1999.

488. I reached this view on four bases. First, it was apparent that at all times Donovan was the mastermind behind the transaction. He treated the acquisition of the golf course as his own to effect in whatever manner or form he chose including, if he wished, the involvement of a corporation. However, he kept his intentions to himself. This was all very well for his own commercial purposes but it is necessary to decide when Disctronics was first identified to Edmonds and Cahill for the purposes of that transaction. That date was on 6 July 1999 with respect to Edmonds and probably a short time later with respect to Cahill. Secondly, the plaintiffs were unable to identify any company records or minutes of board meetings of Disctronics that disclosed the making of a resolution that Disctronics would be involved in the transaction. The earliest evidence arose in the oral descriptions by Donovan, Howard and Quinert of the events at the board meeting in London on 13 April 1999 and the directions given at that meeting to Quinert as to what he was to say to Edmonds. It is difficult to accept that a corporation of the type such as Disctronics was did not have records of resolutions of financial decisions. Again it demonstrates that the involvement of Disctronics was a matter within the mind of Donovan to be revealed if and when he wished. The third factor was the notes of Quinert of the conversation with Edmonds of 14 July 1999. Quinert presented himself throughout the history of this matter as a solicitor who kept reasonable notes and records. I observe, also, that the evidence of Howard and Quinert did not contribute to any satisfactory way as to the involvement or even mention of Disctronics to Edmonds or Cahill before 14 July 1999. There is a fourth basis, the conduct in Donovan himself in this proceeding. He, somewhat carelessly given his membership of the legal profession, claimed the concept of the golf course investment was devised by he and Bucknall. In fact, he was forced to concede in cross-examination that the concept was derived from the CROI report. Donovan did not provide a plausible explanation for his falsehood. Unfortunately, it tainted his evidence as to his discussions with Edmonds prior to the formation of the joint venture particularly before 14 July 1999.

491. Once the joint venture was formed, the issue of fiduciary duties of honesty and good faith arose. Furthermore, there was the issue as to whether the duty survived when the joint venture disintegrated.

495. The duties commonly imposed in an employment context are generally similar to those imposed in a joint venture. There is a duty to act honestly and in good faith, to act in the interests of the employer or joint venture and to avoid a conflict of interest and to treat confidential information as confidential and not to disclose it without consent. There is a further duty generally accepted not to cause detriment to the employer or the joint venture as the case may be: see, for example, Chan v Zacharia;[8] Phipps v Boardman[9]; Hospital Products Ltd v United States Surgical Corporation;[10] Colour Control Centre Pty Ltd v Ty.[11] Quite clearly, Edmonds and Cahill caused detriment to the joint venture by stealing the successful bid based upon confidential information obtained during their participation in the joint venture.

498. In the Canadian context it has been held that the more important the responsibility carried by the individual the greater the duty particularly where that individual has access to trade secrets and confidential information: see Canadian Aero Services Limited v O'Malley;[12] see, also, Green and Clara Pty Ltd v Bestobell Industries Pty Ltd.[13] Here, Edmonds and Cahill carried very important responsibilities for the joint venture, that of financial structure and purchase negotiation respectively. Commensurate with these responsibilities they had access to critical confidential information, namely, the price at which the vendor would sell and the identity and rental levels of an anxious prospective tenant.

501. A fiduciary is bound to act in the interests of the principal and not to pursue the individual's own interests: see Chan v Zacharia;[14] also, Hospitals Products.[15] The making of secret arrangements to compete against an entity to which a fiduciary duty is owed after termination of the employment or arrangement at some time in the future is a breach of fiduciary duty: see Blyth Chemicals Limited v Bushnell;[16] also, Capital Investments Corporation Pty Ltd v Classic Trading Pty Ltd.[17] Edmonds and Cahill embarked on secret arrangements in direct competition with their former co-venturers. Furthermore, any person who dishonestly assists, procures or participates in any breach by a fiduciary of the fiduciary's duties is liable in respect of that breach: see Capital Investments Corporation Pty Ltd v Classic Trading Pty Ltd;[18] Colour Control Centre Pty Ltd v Ty.[19] Here, Edmonds and Cahill assisted one another.

The Fiduciary Duties Arising from a Joint Venture

505. A leading Australian authority on joint ventures is the judgment of the High Court in United Dominions Corporation Pty Ltd v Brian Limited[20]. In that case the High Court considered the nature of joint ventures and the duties that flow from such relationships. Mason, Brennan and Deane JJ held that the term "joint venture" is not a technical term but that it is an expression that connotes an association of persons for a variety of purposes including a financial undertaking with a view to mutual profits. Their Honours observed (at 10-11):

" ... One would need a more confined and precise notion of what constitutes a `joint venture' than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one. ... The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken."

509. The next leading Australian authority is the judgment of the High Court in Hospital Products Limited v United States Surgical Corporation[21] where Mason J held (at 96):

"The critical feature of the fiduciary relationships is that their fiduciary undertakes or agrees to act for or on behalf of or in the interests of another in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. In Daly v Sydney Stock Exchange Limited[22] Brennan J indicated that a financial adviser generally owed fiduciary duties to the client. His Honour said (at 385): `Whenever a stockbroker or other person who holds himself out as having expertise in advising on investments is approached for advice on investments and undertakes to give it, in giving that advice the adviser stands in a fiduciary relationship to the person whom he advises'."

513. There can be no doubt that from 20 July 1999 onwards, Edmonds and Cahill were part of a joint venture with Donovan, Howard, Quinert and Bucknall. They were part of a group that agreed to embark upon a financial undertaking.

516. The authorities reveal that a critical indicia of a joint venture is that of trust. Another fundamental element of the joint venture relationship is that the parties act with the utmost good faith towards one another; United Dominions Corporation Limited v Brian Pty Ltd; also, Hospital Products Limited v United States Surgical Corporation; Yunghanns and Ors v Elfic Pty Ltd and Ors.[23] It necessarily followed from the nature of their relationship that Donovan and the others trusted Edmonds and Cahill because they were co-venturers.

519. Professor Finn, writing as he then was, in Fiduciary Obligations[24] categorised the duties of the fiduciary. The learned author articulated two primary or umbrella duties that of honesty and good faith. The duty of honesty encompasses the duty of the fiduciary not to act for his or her own benefit or for the benefit of any third person.[25] The duty of good faith encompasses the duty of confidence.[26]

522. In considering the duty owed by a fiduciary, Finn[27], citing the US authority British American Oil Producing Co v Midway Oil Co [28] addressed the duties this way:

"A fiduciary's liabilities for profits stems not from a conflict between his interests and his beneficiary's interests, but from a conflict between his own interests and the actual undertaking he has made (his duty) to his beneficiary."

"The all-important matter is the undertaking actually given by the fiduciary. Until the scope and ambit of the duties assumed by the fiduciary has been ascertained (Phipps v Boardman) - until the `subject matter over which the fiduciary obligations extends' has been defined (Burchell v Equity Trustees, Executors and Agency Co) - no question of conflict of duty and interest can arise. You must ascertain what the fiduciary has undertaken to do, before you can say he has permitted his interests to conflict with his undertaking. The whole purport of this rule can be expressed neatly in the formula. He who undertakes to act for another in a particular matter undertakes at the same time not to act for himself in the same matter (Whitecote v Lawrence)."

530. In the employment and agency context, Finn described the obligation of a fiduciary, thus.[30]

"By undertaking to act for his beneficiary in a particular matter a fiduciary does not thereby disable himself generally from pursuing gain in his private capacity ... But a fiduciary's undertaking can have the consequence of prohibiting him from privately pursuing gain in the field of endeavour embraced by his undertaking. An agent who agrees to use his best endeavours to procure specific property for his principal cannot proceed to purchase that property for himself (Smith v Mules)."

534. As Finn observed[31] it is incumbent on an employee to give the employer the benefit of advantages procured. Hence, where a person is employed to pursue a property for purchase by the employer, that person cannot privately purchase and develop. By their conduct, principally, terminating the relationship with the intention of taking the acquisition themselves, Edmonds and Cahill breached the two fundamental duties of the fiduciary of honesty and good faith. This analysis is borne out by other judgments of the High Court.

537. Recently the High Court has considered fiduciary duty in Breen v Williams.[32] This case involved the issue of access to medical records. Gaudron and McHugh JJ held:[33]

"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. If there was a general fiduciary duty to act in the best interests of the patient, it would necessarily follow that a doctor has a duty to inform the patient that he or she has breached their contract or has been guilty of negligence in dealings with the patient. That is not the law of this country."

541. In Pilmer v Duke Group Limited (in liq)[34] McHugh, Gummow, Hayne and Callinan JJ, Kirby J dissenting, held no fiduciary duty was owed in the context of that case observed with respect to fiduciary duty generally:[35]

"The trial judge considered a number of authorities, in particular the decisions of this Court in Hospital Products Ltd v United Sates Surgical Corporation, Daly v Sydney Stock Exchange Ltd and Breen v Williams. In particular, the trial judge referred to the passage in the judgment of Mason J in Hospital Products in which, after referring to the well recognised fiduciary relationships of trustee and beneficiary, agent and principal, solicitor and client, director and company, and partners, Mason J observed that the critical feature of those relationships was the undertaking or agreement by the fiduciary to act for or on behalf of or in the interests of another person in the exercise of power or discretion which will affect in a legal or practical sense the interests of that other person. Mason J added: `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 ... It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed'."

545. The judgment of the majority continued: [36]

"In particular, the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is `a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed. That is how the matter was put by Mason J in Hospital Products. Similar reasoning applies where the alleged conflict is between competing duties, for example, where a solicitor acts on both sides of a transaction."

549. Some point was made by the defendants in this proceeding that the retainer or in any event the joint venture as alleged by the plaintiffs was not concluded between the parties. In Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd,[37] Williams J was concerned with a partnership relationship that although negotiated to an advanced stage was never concluded. Even so, Williams J held that a fiduciary relationship existed and that the fiduciary duty owed by the defendant was breached when it took the benefit of a commercial transaction initially contemplated by the plaintiff and the defendant as partners. Williams J held:[38]

"But the existence of a concluded partnership agreement is not essential to the plaintiff's success in this action. The plaintiff contends that a relationship of trust existed between it ... on the one hand and [the defendants] on the other, and that the conduct of the [defendants] in procuring the lease ... and conducting the business to the exclusion of the plaintiff ... constituted a breach of fiduciary duty. The argument is that [the defendants] took advantage of a position which they had only attained through the trust reposed in them ... in order to gain profits for themselves, and that in fact they gained material advantages and made profits through the abuse of that fiduciary position."

553. After considering[39] United Dominions and Chan v Zacharia, Williams J turned to Hospital Products and held:[40]

"Even if the facts of this case did not call into play the principles discussed in U.D.C. v Brian Pty Ltd and Chan v Zacharia I would nevertheless be satisfied that the plaintiff ... on the one hand and the defendants on the other hand were in a fiduciary relationship with one another at all material times and that the conduct ... referred to ... constituted a breach of the duty thus imposed on them. As Gibbs C.J. pointed out in Hospital Products Limited v United State Surgical Corporation the categories of relationships giving rise to fiduciary obligations are not closed, and the answer to the question whether a fiduciary relationship existed cannot be answered conclusively by considering whether or not the parties fall within one of the accepted categories. His Honour's analysis of the authorities in the case indicates that where the facts show the relationship was based on mutual confidence there may arise fiduciary obligations which may be enforced in a court of equity. (cf. Finn, Fiduciary Obligations) Such is the situation here."

557. Commentators, and to some extent the courts, have drawn a demarcation line between breach of confidence and breach of fiduciary duty.[41] In Australia, since Hospital Benefits,[42] the strict categorisation of relationship has not been the focus. Rather, the courts have looked to find a relationship based on mutual confidence.

560. A somewhat similar approach to that in Fraser Edmiston was taken by Ipp J in Biala Pty Ltd and Ors v Mallina Holdings Limited and Ors (No. 4),[43] later largely approved by the Full Court of Western Australia.[44] Ipp J was concerned with two entities who worked together towards a proposed joint project. Effectively, one of the entities and persons associated with it used knowledge and information gained during the work towards the joint project for their own advantage. Ipp J was not concerned nor even distracted by formal concepts of partnership or joint venture. The learned judge observed:[45] "It is not necessary to decide whether they were partners in the strict sense ... or whether they were joint venturers. Whatever the characterisation of their relationship, it was plainly based upon mutual confidence and trust".

563. In some respects, the agreement reached between, Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill on 20 July 1999 was very flexible, even loose. It was reflective of the fluid arrangements that prevailed in the months beforehand. Nonetheless, once the agreement was resolved on 20 July 1999, notwithstanding ongoing uncertainties such as the identity and role of the equity provider, the relationship between the six joint venturers was based on mutual confidence and trust. It was that confidence and trust that Edmonds and Cahill abused by their conduct.

Findings as to the Conduct of Edmonds and Cahill

567. Here, Edmonds and Cahill were clearly subject to a fiduciary duty arising from their respective retainers and that duty was owed to Donovan, Howard, Quinert and Solette, at least. As part of that duty it was not open to them to pursue their own transaction with the Kingston Group in the absence of full disclosure to Donovan, Howard and Quinert. Quite to the contrary, they went about effecting a bid that competed with that of Donovan and the others. However, as observed already the retainers and the obligations arising thereunder were subsumed into the joint venture.

570. I am satisfied that by end June 1999 Cahill and Edmonds, when seized with confidential information, reconsidered their position. The knowledge of the potential purchase price of the Kingston Links Golf Course, namely, an amount less than $9,400,000 together with the fact that Spotless was willing to enter into a long term lease of the property at an annual rental close to or exceeding $1,000,000 per annum constituted confidential information. The information was acquired by Edmonds and Cahill during their retainers. There has been some debate as to whether the breach of fiduciary duty in circumstances such as the present must involve the use of confidential information.[46] However, the issue does not arise here because the information used by the fiduciaries, Edmonds and Cahill, was in fact confidential and acquired by them during the life of the joint venture. Edmonds admitted in his evidence that he was aware of the letter from Spotless constituting its expression of interest dated 30 June 1999. He also acknowledged in his evidence that when the Spotless letter was received the transaction had much higher prospects of success. Further, Edmonds admitted that he had been told by Cahill that the property could be purchased for an amount less than $9,500,000. Howard gave evidence that he gave the Spotless letter to Edmonds on 1 July 1999.

573. I accept that from or about that time onwards Edmonds was aware of the position as to Spotless as a potential lessee. In this regard, once Edmonds learned that a rental figure in excess of $1,000,000 was potentially achievable from Spotless he realised that there was a large profit in the transaction. He admitted as much in his evidence. He admitted, also, that he spoke to Cahill on or about 1 July 1999 about the possibility of obtaining a share in the profit for the Kingston Links transaction. He admitted that by 2 July 1999 he had discussed with Cahill proposals as to the purchase of the Kingston Links Golf Course. Indeed, Edmonds said that it was his idea to obtain a share in the profit of the transaction and that he put the idea to Cahill. Edmonds said that in his view there were two components of the Kingston Links transaction. On the one hand, the Spotless component and on the other hand the Kingston Group component. Edmonds considered that he and Cahill had brought the Kingston Group component into the transaction and on that basis the profits should be split evenly, that is, that Edmonds and Cahill share in the profits equally with the other members of any consortium. However, Edmonds acknowledged that up until that point in time, 2 July 1999, the entire transaction belonged to Donovan who had succeeded also in bringing Spotless into the equation.

576. The bid by Emanbee to which Edmonds and Cahill were party was based upon two critical pieces of confidential information obtained during their participation in the joint venture with Donovan and the others. First, the fact that Spotless would lease the Kingston Links Golf Course for an annual rental of $1,160,000. Second, the fact that an offer of $7,880,000 or more would be successful. Properly, Edmonds and Cahill should have revealed their intentions and dealings in the fullest terms to Donovan and the others prior to the bid made by Emanbee. They did not. All these matters were material in the ordinary course of the business of Donovan and the others in preparing and making their bid to acquire the Kingston Links Golf Course. They were entitled to know of the intentions of Edmonds and Cahill in the fullest terms.

579. There was extensive evidence as to the dealings of the parties during August 1999. The fact remained that Edmonds and Cahill took the confidential information that had been revealed to them initially when they were retained by some of the plaintiffs but later being information that was confidential to the joint venture and applied it for their own purposes.

582. It transpired that Donovan and the others did not learn of the acquisition of Cahill, Edmonds and Buxton of the Kingston Links Golf Course until it was all too late. It is apparent from all these circumstances that Edmonds and Cahill used critical information they had acquired during the period of their respective retainers and the duration of the joint venture with Donovan and others to formulate their successful offer with Buxton through Emanbee. It was the possession of that information that enabled Edmonds and Cahill to perpetrate their ruse against Donovan and the others. Wood made the position clear in his evidence that if the offer had not been on the table from Cahill, Edmonds and Buxton then the offer from Donovan and others for Corwen Grange would have been accepted. Indeed, it was a very curious aspect of the conduct of Cahill and Edmonds that the offer made by them with Buxton to the Kingston Group was for an amount of only $12,000 greater than the amount of $8,688,000 that they knew Donovan and the others would offer. An irresistible inference can be drawn that the offer was crafted by Edmonds and Cahill so that it exceeded the offer they knew Donovan and the others would make.

585. On the authorities, it was a fundamental case of breach of the duties of honesty and good faith owed by Edmonds and Cahill to the former members of the joint venture.

588. It was the case of the K.L.C.C. defendants that duties did not arise under the joint venture agreement because that agreement was repudiated by the conduct of Donovan, Howard, Quinert and Bucknall. The repudiation was said by those defendants to be constituted by the memorandum of Quinert to Edmonds dated 4 August 1999. I do not accept the submission. The conduct of the plaintiffs said to constitute the repudiation of the joint venture agreement was no more than robust commercial conduct. The finding of a repudiation is a serious matter and one not made lightly: see Ross Smyth & Co Ltd v Bailey, Son & Co.[47] Generally the authorities point to conduct that the alleged repudiating party does not intend to honour his or her obligations when they fall due: see Mersey Steel and Iron Co v Naylor Benzon & Co.[48]

591. Almost from the outset of his involvement with Donovan and the others, Edmonds was constantly proposing different options and scenarios to effect the acquisition of the Kingston Links Golf Course. Most of these proposals came at his initiative. Generally, they were not raised at first instance by Donovan or the others. His proposals started out in April 1999 as a straightforward investment, not involving he and Cahill, but including an unknown equity provider. The proposal developed further to the point in early July 1999 when Edmonds sought to include he and Cahill in the profit share as well as being paid a fee for services. Through July 1999 Edmonds continued to pursue other options, each time with a view to increasing the profit opportunity for he and Cahill.

594. Edmonds was prepared to push matters as far as he could to maximise his position and that of Cahill. His efforts culminated in the proposal he put forward on 3 July 1999 that the six joint venturers provide the equity themselves. Edmonds' conduct, supported by Cahill, from April to early August 1999 was commercially aggressive. The prevailing tenor of the relationship between Edmonds and Cahill on the one side and Donovan and the others on the other side up until the resolution of 20 July 1999 was one of constant change and movement. Even when the joint venture was cemented on 20 July 1999, pursuit of change and movement remained the approach of Edmonds. It is clear that by 4 August 1999 Donovan, Howard and Quinert had enough of Edmonds' commercial aggression and decided to adopt that approach themselves towards Edmonds and Cahill. This different attitude was aggravated by their desire to include Disctronics. However, in the context of a fluid and aggressive commercial relationship the desire to include Disctronics was not the cause of the falling out between the parties. The memorandum of offer of Quinert of 4 August 1999 was an attempt to re-negotiate with Edmonds and Cahill, no more. It did not amount to a repudiation of the joint venture. The joint venture was terminated by Edmonds and Cahill by their conduct but in particular by their letter of 10 August 1999. I regard as disingenuous the attempt by Edmonds and Cahill to treat the plaintiffs' conduct, particularly the memorandum of 4 August 1999 repudiatory. I am satisfied that by at least 5 August 1999 Edmonds and Cahill had resolved to leave the joint venture and achieve the transaction themselves. I base my view on four factors. First, my observations of Edmonds and Cahill in giving evidence. Secondly, the speed with which Cahill moved to progress matters with Wood and Buxton, indeed, a matter of only hours after the dispatch of the letter of Edmonds to Quinert on 10 August 1999. Thirdly, the preparation by Cahill on 5 August 1999 of the draft letter to Wood and the dishonest attempt to hide the true date of creation of the document curing the course of his evidence. Fourthly, the secretive and devious way Edmonds and Cahill went about hiding their dealings with Wood, Buxton, Rose and the Kingston Group generally from Donovan and the others.

597. From about 14 July 1999 onwards Edmonds and Cahill were aware of the desire of Donovan for Disctronics to be the equity provider in the transaction. That desire was maintained and openly known when the original joint venture was varied to include Edmonds and Cahill on 20 July and subsequently confirmed on 26 July 1999. The events thereafter until 10 August 1999 constituted no more than negotiations between the parties to change, even improve, their position. It started with the proposal of Edmonds on 3 August 1999 that the six joint venturers provide the equity themselves. That was rejected. It led to the proposal on 4 and 5 August 1999 of Howard and Quinert that Edmonds and Cahill be paid a fee, $150,000 each, and thereby be bought out. Edmonds and Cahill rejected that course. However, up until 10 August 1999 Edmonds and Cahill were members of a joint venture together with Donovan, Howard, Quinert and Bucknall. Mutual duties were owed by Edmonds and Cahill to Donovan and the others and vice versa. Donovan and the others could not exclude Edmonds and Cahill without the agreement of the latter two co-venturers. Nonetheless, Donovan and the others were entitled to attempt to re-negotiate their commercial relationship. There was nothing improper in that. Repudiation is constituted by conduct that is hostile to an existing contractual relationship. The conduct of Donovan and the others was not hostile. It was at most robust, commercially aggressive behaviour between experienced, tough business people.

601. The relationship having been found and the commensurate fiduciary duty being owed, it is necessary to consider the subject of survival of the duty even where the relationship is discontinued. Survival in the present circumstances is relevant to some extent as to the retainer of Edmonds and Cahill, but even more importantly, the joint venture between Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill.

604. It is well established that fiduciary duties will continue beyond the end of the fiduciary relationship.[49] The fiduciary cannot discharge the duties by ending the relationship: see Industrial Development Consultants Limited v Cooley[50]; Spincode Pty Ltd v Look Software Pty Ltd[51]; Green and Clara Pty Ltd v Bestobell Industries Pty Ltd[52]; Colour Control Centre Pty Ltd v Ty;[53] also, Metlej v Cavanagh[54]; United States Surgical Corp v Hospital Products International Pty Ltd, supra; United Dominions Corp Limited v Brian Pty Ltd, supra; Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd[55]; Kelly v Kelly[56]; Natural Extracts Pty Ltd v Stotter[57]; Macks v Emanuele[58]; Addstead Pty Ltd v Liddan Pty Ltd.[59]

607. The survival of the duty owed by a fiduciary has been held to occur particularly where the cessation of the relationship can be construed as having been prompted or influenced by an intention or desire to pursue an opportunity identified before cessation: see Canadian Aero Service Limited v O'Malley;[60] Colour Control Centre Pty Ltd v Ty;[61] Natural Extracts Pty Ltd v Stotter;[62] cf. Plateau Equipment Limited v Marsden.[63]

610. It is particularly instructive to consider the observations of Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd and Ors[64]:

"Professor Finn accepts that some fiduciary obligations have an effect enduring beyond the termination of the fiduciary relationship.[65] In the first of the cases cited by Finn, Laskin, J., delivering the judgment of the Supreme Court of Canada, said, at 607: `An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired'. The second case cited by Finn was one of competition after resignation by a person held to have been a fiduciary. With the decision of the Supreme Court of Canada may be compared that of Roskill, J. in Industrial Development Consultants Ltd. v Cooley, another case of a director who disengaged himself from the company being held liable for breach of fiduciary duty, and that of the: Full Court in Green & Anor v. Bestobell Industries Pty. Ltd., yet another case of a fiduciary's being held accountable despite the termination of the fiduciary relationship. The proposition that fiduciary duties can survive the termination of the fiduciary relationship is supported by decisions dealing with whether a trustee may avoid disqualification as a purchaser of trust property by retiring from his fiduciary office. Lord Eldon thought that a fiduciary could not do this `unless he shakes off the character altogether; putting himself altogether out of the trust; and not then without a little more than merely parting with the character.' A trustee who retires after making arrangements for the impugned transaction cannot escape. Jacobs, J. has given this explanation of equity's approach: `It is my view that the basis of the rule that a trustee cannot retire for the purpose of effecting a transaction between himself and the trust is twofold. First, in the ordinary case, the fact that he retires in order to effect that purpose means that the decision to effect that purpose has been taken during the period of his trusteeship when he was actually performing the duties of a trustee; in other words the decision to deal with the trust is his own. Secondly, the trustee who has been actively managing the trust has all the advantage of the information and knowledge which comes to him as trustee and which he should use in no way for his own benefit, but purely for the benefit of the beneficiaries.' The first of these two bases is independent of the second. At least in a case like the present, where the fiduciary terminates the relationship with a view to acting against the client in the same matter, may it not be said by analogy that, leaving aside altogether the use of any special `information and knowledge' that had come to the fiduciary as such, a fiduciary, who cannot retire in order to escape from the conflict of duty and interest rule, cannot quit his or her position in order to escape the conflict of duty and duty rule? I call to mind again what Lord Eldon said in Cholmondeley v. Clinton and Beer v. Ward. Three other decisions bearing on the survival of the fiduciary duty of loyalty may be mentioned, two from the United States and one from Canada. The first of these is a relatively early decision of the Court of Appeals for the District of Columbia, where this was said: `[P]laintiff s claim for attorneys' fees is void and unenforceable, since it is in conflict with the well-established rule of public policy that where an attorney has acted for a client he cannot thereafter assume a position hostile to the client concerning the same matter, or use against the client knowledge or information obtained from him while the relation existed.' (My emphasis.) The second is a decision of the United States District Court holding that the receipt of confidential information was not a prerequisite to disqualification: `[T]he basis for the rule against representing conflicting interests is broader than the basis for the attorney-client evidentiary privilege. The evidentiary privilege and the ethical duty not to disclose confidences both arise from the need to encourage clients to disclose all possibly pertinent information to their attorneys, and both protect only the confidential information disclosed. The duty not to represent conflicting interests, on the other hand, is an outgrowth of the attorney-client relationship itself, which is confidential, or fiduciary, in a broader sense. Not only do clients at times disclose confidential information to their attorneys; they also repose confidence in them. The privilege is bottomed only on the first of these attributes, the conflicting-interests rule, on both.' The Canadian case, a decision of the Ontario Court of Appeal, was one in which confidential information had undoubtedly been imparted. But the words used by the Court suggest that the fiduciary duty held to survive termination of the retainer was not confined to a duty not to misuse confidential information: `If she lied to him, it in no way relieved him of his fiduciary duty towards her, nor did the fiduciary duty of Mr Lockyer or of Mr Pinkofsky cease when the services had been terminated. ... It was fundamental to her rights that her solicitor respect her confidences and that he exhibit loyalty to her. A client has every right to be confident that the solicitor retained will not subsequently take an adversarial position against the client with respect to the same subject-matter that he was retained on. That fiduciary duty, as I have noted, is not terminated when the services rendered have been completed'."

614. It appears that Brooking JA approached the survival of fiduciary duties from a different perspective to that of the English Court of Appeal in Prince Jefri Bolkiah v KPMG,[66] particularly the statement of principle of Lord Millett (with whom the other members of the court agreed) that the duties attached to a fiduciary relationship end when the relationship is terminated.[67]

617. However, the courts have upheld the continuation of fiduciary duties after the termination of their relationship where the role of the fiduciary is more akin to that of a trustee and the fiduciary departs the relationship intent upon misuse of the office of the fiduciary: see Furs Limited v Tomkies.[68]

620. On the basis of the authorities I am satisfied that the fiduciary duties owed by Edmonds and Cahill under a joint venture survived the dissolution of the relationship. The critical fact was that the joint venture came to an end. The cessation of their relationship did not impact upon the mutual duties of honesty and good faith owed by the six joint venturers to one another. The enduring duties of honesty and good faith in the context of an agency or a joint venture are owed mutually. It is doubtful that one party can act in a way so as to repudiate a relationship or act in breach of good faith and then seek to rely upon the duty of good faith owed by the other party. Each case will depend upon its own facts but for the reasons stated such circumstances did not arise here.

623. The circumstances here are unusual because the relationship changed from one of retainer, involving a particular group of principals, to a joint venture involving a differently constituted group. I have found that the retainers were subsumed by the joint venture. However, to some extent, it might be necessary to reflect on the fiduciary duties that arose under the retainers in so far as those duties were absorbed into the duties of a similar type that arose under the joint venture.

626. It is long established that an agent must not use information obtained by reason of the agency whether the agency has come to an end or not: see Robb v Green;[69] Yovatt v Winyard;[70] Amber Size & Chemical Co Limited v Menzel;[71] Measures Bros v Measures.[72] The relationship of agency is of a fiduciary nature: see Parker v McKenna;[73] Boston Deep Sea Fishing and Ice Co v Ansell.[74] An agent is not permitted to put his or her duty in conflict with his or her interest: see Bank of Upper Canada v Bradhsaw;[75] Parker v McKenna.[76] It has been well established that agents must not use their agency role to acquire confidential information and then use that information to their own advantage without consent: see Phipps v Boardman. An agent employed to purchase land cannot purchase it for himself and if that occurs, the agent will be a constructive trustee for the principal: see Longfield Parish Council v Robson.[77] Phipps v Boardman has been considered and applied extensively in Australia, in particular, in Hospital Products Limited v US Surgical Corporation.[78] Furthermore, an agent must not enter into a transaction likely to produce such result unless the fullest disclosure is made to the principal: see Gwatkin v Campbell;[79] Glasgow Assurance Corp Limited v Symondson and Co;[80]Thornton Hall and Partners v Wembley Electrical Appliances Limited;[81] Boardman v Phipps.[82] An agent does not discharge that duty by making statements that might put the principal on enquiry: see Dunne v English;[83] Swale v Ipswich Tannery Limited[84]. The agent must disclose every material fact which is or ought to be known by him or her if it would be likely to operate on the judgment of the principal: see Dunne v English;[85] Charter v Trevelyan;[86] Savery v King;[87] Demerara Bauxite Co v Hubbard.[88] The test is what a reasonable person would consider material in the ordinary course of business: see Payne v Lewis and Peat.[89]

629. An agent has a duty to employ information obtained by reason of the agency solely for the purposes of the agency: see Lamb v Evans;[90] Merryweather v Moore;[91] Louis v Smellie.[92] An agent must not use information so acquired in any manner inconsistent with good faith such as using them in unfair competition with the principal: see Robb v Green;[93] Yovatt v Winyard;[94] Amber Size & Chemical Co Limited v Menzel;[95] Measures Bros v Measures.[96] The information misused must be confidential or secret: see Nordisk Insulinalabatorium v C.L. Bencard (1934) Ltd.[97] Where such information is used by the agent then he or she must account for profits acquired by reason of the fiduciary position. A claim by the principal can only be defeated by demonstrating knowledge and assent of the principal: see Regal (Hastings) Limited v Gulliver;[98] Phipps v Boardman.[99] It is no defence that the principal lacked capacity or desire to complete the transaction itself or that the agent acted in good faith: see Phipps v Boardman.[100]

632. On the basis of the authorities, the fact that Edmonds and Cahill entered into a joint venture with Donovan and others when the retainers were on foot strictly speaking did not alter in any way the enduring fiduciary duties owed by them to Donovan and the others: see Spincode Pty Ltd v Look Software Pty Ltd; Industrial Development Consultants Limited v Cooley; Green and Clara Pty Ltd v Bestobell Industries Pty Ltd; Colour Control Centre Pty Ltd v Ty; also, Robb v Green; Yovat v Winyard; Ambersize & Chemical Co Limited v Menzel; Measures Bros v Measures. In light of my findings as to the joint venture, the retainers and their consequences fall away. They appear relevant only as to setting the context of the relationship between the parties. However, the retainers and their commensurate duties demonstrate at the very least the gravity of the disloyalty perpetrated by Edmonds and Cahill by their conduct.

635. I am satisfied that Donovan, Howard, Quinert and Bucknall succeed in their claim of breach of fiduciary duty against Edmonds and Cahill. The claim in relation to HomeLink and Domain Hill was not pursued. I consider the position of K.L.C.C. and the claim of Solette and Disctronics and the matter of remedies and relief separately.

639. The plaintiffs claimed that the retainer of Edmonds and Cahill was for and by Disctronics and that the joint venture was for the benefit of Disctronics. It may have been and in all likelihood always was, intended by Donovan to be so. However, there are a number of difficulties as to the status and entitlement of Disctronics to make an election as asserted by the defendants. To some extent these matters have been addressed already. Nevertheless, I restate the position.

642. First, I do not accept that the identity of Disctronics was known by Edmonds and Cahill until about 6 July 1999 for the reasons stated. An agent cannot be retained to act for an unidentified principal. No retainer existed between Edmonds or Cahill on the one hand and Disctronics on the other. Secondly, there was no evidence of any board of directors' resolution, minute or other record of a resolution for Disctronics to proceed with the joint venture as alleged by the plaintiffs. Thirdly, the evidence as to the role and status of Disctronics in the transaction was inconclusive. Its role was very much in the mind of Donovan who treated the transaction throughout as his. I do not consider the evidence was sufficient to make out a claim by Disctronics that it could take the transaction as its own if it wished. It follows that the claim of Disctronics against the defendants fails.

646. As observed already, Solette was initially and quite openly a participant in the transaction. Campbell as a director of Solette agreed, it seems informally, to allow Donovan to use Solette as an investment vehicle if he wished. Ultimately, by July 1999 that role changed. Without any record of the directors of Solette consenting, it just dropped out of view so far as the transaction was concerned. The claim of Solette against the defendants was unsatisfactory. There was insufficient evidence to support a finding that it continued to retain Edmonds or Cahill after the joint venture was formed. Even if it enjoyed the benefit of any enduring duty owed by Edmonds and Cahill, no evidence was led to make out any entitlement on its part by July 1999. Indeed, the role of Solette and its entitlements were a puzzle. Its claim was never made out on the evidence before me. It follows that the claim of Solette against the defendants fails.

650. The is the matter of K.L.C.C. It was not registered until 12 October 1999, that is, after the Emanbee bid was accepted on 9 September 1999 and before the company was registered on title on 14 December 1999. K.L.C.C. was the vehicle used by Edmonds and Cahill to effectuate their acquisition of the property. Its directors included Edmonds and Cahill. Its shareholders included Edmonds and Cahill as beneficiaries. The Buxton interests appeared content to preserve their 20 per cent interest in the land constituting Kingston Links Golf Course and did not assert prejudice to them if relief was granted against K.L.C.C. subject to the preservation of that interest and the payment of moneys owed to them. There was a faint suggestion by the K.L.C.C. defendants that as K.L.C.C. was not registered until after the breaches of fiduciary duty occurred it could not be subject to any order for relief. The argument was not vigorously pursued on any side. However, the corporate mind of K.L.C.C. by the time of its registration encompassed the knowledge of its principals, Edmonds and Cahill. Their knowledge can be attributed to the company: see Tesco Supermarkets Ltd v Nattrass.[101] The courts have rejected the exclusion of companies from relief in these types of cases: see Krakowski v Eurolynx;[102] Macquarie Bank v Sixty Fourth Throne Pty Ltd;[103] Hamilton v Whitehead;[104] Bernard v Elsey Pty Ltd v FCT;[105]and Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) and Ors.[106] I am satisfied that any order for relief can properly include K.L.C.C.

654. Based on the facts as described and the relevant legal principles I draw the following conclusions:

1. A joint venture was formed initially between Donovan, Howard, Quinert and Solette by about early June 1999 and possibly as early as April 1999.

2. The joint venture as originally formed was varied to remove Solette and to consist therefrom of Donovan, Howard, Quinert, Bucknall, Edmonds and Cahill from 20 July 2002.

3. The joint venture was dissolved on 10 August 1999 as a result of actions by Edmonds and Cahill.

4. The two groups, the plaintiffs and the K.L.C.C. defendants, owed each other continuing obligations. The plaintiffs met their obligations by informing Edmonds of their plain intention of proceeding as set out in the separate letters sent by Quinert and Howard to Edmonds on 12 August 1999. The defendants breached their obligations by not making any disclosure of their intentions to the plaintiffs and by using confidential information obtained during the life of the joint venture.

5. No question or issue of repudiation arises because the duties mutually owed to the joint venture were ongoing.

6. The K.L.C.C. defendants breached the fiduciary duty they owed to the other members of the joint venture to act honestly and in good faith by secretly and furtively approaching Wood, Rose and Buxton; by making an offer to Wood that they knew would exceed the offer of the plaintiffs; by not telling the plaintiffs of their intentions especially when the opportunity presented itself.

7. Edmonds and Cahill were retained initially as agents by Donovan, Howard, Quinert and Solette.

8. The joint venture effected on 20 July 1999 did not affect the enduring duties of honest and good faith that lay with Edmonds and Cahill as a result of the retainer but the duties were subsumed into the new relationship of the joint venture.

665. I turn then to the claims of Donovan, Howard, Quinert and Bucknall against the defendants arising from the joint venture and the consequences with respect to Buxton.

669. Buxton gave evidence that he did not know of the disputes between the Donovan camp and the Edmonds camp until he returned from overseas after 2 October 1999. It was at that time, he said, he received the bundle of documents from Cahill. The bundle included documents adverting to the allegation of breach of fiduciary duty. The documents put Buxton squarely on notice as to the dispute and the allegation of breach of fiduciary duties against Edmonds and Cahill. Of course, by that time the contract between K.L.C.C. and the Kingston Group had not been signed. The deposit had not been paid. Buxton was told, on his version, by Cahill on 12 August 1999 that there was a previous joint venture but no more. Buxton was a very experienced businessman with access to legal advice. Indeed, in the ultimate agreement between Buxton, Edmonds and Cahill, Buxton obtained an indemnity from Edmonds and Cahill with respect to any claim made against him by Donovan and the others.

672. The difficulty in this matter lies with the fact that at trial the parties did not really focus upon the consequences of the relief sought by the plaintiffs, if successful, and the ramifications for third parties. In cross-examination the matter of notice was never fully pursued by the plaintiffs against Buxton. The evidence went so far only as for the K.L.C.C. defendants to put that Buxton was told certain matters by Cahill at the meeting on 12 August 1999.

675. The position of the plaintiffs appeared to be an assertion that the acquisition by the Buxton interests to the registration on title of K.L.C.C. on 14 December 1999 amounted to acquisition by the Buxton interests of trust property. This type of circumstance was contemplated by Tadgell JA (with whom Winneke P agreed) in Macquarie Bank Limited v Sixty Fourth Throne Pty Ltd:[107]

"The argument for the respondent appears to assume that the acquisition by a mortgagee, in that capacity, of a proprietary interest following registration of a forged instrument of mortgage in respect of property that is subject to a trust amounts to a receipt by the mortgagee of trust property. If it were so, it might be possible to treat the holder of the registered proprietary interest as a constructive trustee arising from `knowing receipt' of trust property. As it seems to me, however, there is neither room nor the need, in the Torrens system of title, to do so. If registration of the mortgagee's interest is achieved dishonestly then the registration, and with it the interest, are liable to be set aside not because, on registration, the registered holder became a constructive trustee but because s.42(1) recognises that fraud renders the interest defeasible. If, on the other hand, the registration is not achieved by fraud the Act provides, subject to its terms, for an indefeasible interest. Those terms allow, it is true, a claim in personam founded in equity against the holder of a registered interest to be invoked to defeat the interest; and a claim in personam founded in equity may no doubt include a claim to enforce what is called a constructive trust. ... to recognise a claim in personam against the holder of a mortgage registered under the Transfer of Land Act, dubbing the holder a constructive trustee by application of a doctrine akin to `knowing receipt' when registration of the mortgage was honestly achieved, would introduce by the back door a means of undermining the doctrine of indefeasibility which the Torrens system establishes. It is to be distinctly understood that, until a forged instrument of mortgage is registered, the mortgagee receives nothing; before registration the instrument is a nullity. As Street J pointed out in Mayer v Coe at 754, the proprietary rights of a registered mortgagee of Torrens title land derived `from the fact of registration and not from an event antecedent thereto'. In truth, I think it is not possible, consistently with the received principle of indefeasibility as it has been understood since Frazer v Walker and Breskvar v Wall, to treat the holder of a registered mortgage over property that is subject to a trust, registration having been honestly obtained, as having received trust property. The argument that the appellant is liable as a constructive trustee because it had `knowingly received' trust property should in my opinion fail."

679. The difficulty for the plaintiff vis-à-vis the Buxton interests is that the question of knowledge of Buxton and his companies was never properly pursued at trial. There was no suggestion of recklessness, carelessness or wilful blindness: see Macquarie Bank Limited v Sixty Fourth Throne Pty Ltd;[108] also Leggo Australia Pty Ltd v Paraggio.[109]

682. Again, in Macquarie Bank, Tadgell JA gave consideration to the subject of wilful blindness observing:[110]

"Though part of the common law, the process of reasoning that authorises a conclusion to be drawn from a condition of so-called wilful blindness really depends on little more than common sense. In some circumstances it may be legitimate to infer that a person's `wilful shutting of the eyes', or wilfully and recklessly failing to enquire, is evidence that the person had no need to look or to enquire in order to know what would be plainly revealed by the merest glance or the most obvious enquiry. ... The equitable doctrine of constructive notice coincides exactly in result in this respect with the common law concept of inferred knowledge. A person who wilfully shuts his eyes, or wilfully and recklessly fails to make such enquiries as an honest and reasonable man would make, might find himself `disentitled to rely on lack of actual knowledge': Belmont Finance Corporation Limited v Williams Furniture Limited (1979) Ch 250 at 267, per Buckley L.J.; Charles Harpum, `The Stranger as Constructive Trustee' (1986) 102 L.Q.R. 114 at 122-3. There was, in my opinion, no evidence to support a finding of wilful blindness in the sense in which that expression is commonly used in order to indicate a form of cognisance which law and equity alike equate to subjective knowledge from which dishonesty may be inferred. I understand the expression to connote more than a failure to see or look: the adjective is to be given its due value. The compound expression connotes a concealment, deliberately and by pretence, from one's self - a dissembling or dissimulation. In other words wilful blindness connotes a form of designed or calculated ignorance, of which none on the part of the appellant or its agents were proved. That being so, and there being no evidence that the appellant, through any servant or agent, had actual knowledge of the forgery before the mortgage's registration, a finding of fraud cannot be sustained."

686. In my view, exactly the same analysis can be applied to the circumstances described by Buxton. I accept his evidence that until he received the correspondence after 2 October 1999 he did not know of the possible claim by the plaintiffs. In my view, the present circumstances are entirely different from those as arose in Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Limited.[111] I am satisfied that the Buxton interests have fulfilled the onus they bear to establish that they were tantamount to a purchaser for value without notice: see Goff and Jones, Law of Restitution, 5th ed.;[112]also, Re Tilley's Will Trusts.[113]

689. However, the question then arises whether Buxton and his companies having been on notice of the plaintiffs' claims from 2 October 1999 onwards and that K.L.C.C. was not registered on title until 14 December 1999 has consequences.

693. The claims underlying the constructive trust crystallised at the time the Kingston Group accepted the offer of Emanbee on 2 September 1999. A constructive trust arises " ... from the situation in which [the person who has been wronged] is entitled to the remedy of restitution, and it arises as soon as that situation is created".[114] It is then a matter of what has been described as the incidents of the constructive trust.[115]

696. The critical incident here is the impact of the constructive trust upon the Buxton interests. Their interests are the 20 per cent interest in K.L.C.C. (and thereby an equivalent interest in the land) and the moneys contributed to and expended upon the land and the interest owing thereon (the deposit, the mezzanine debt, the loan for the constructive of the sports centre and the increased value of the land arising from the improvements made).

699. The constructive trust and the approach to it has troubled commentators who have postulated questions but sometimes few answers.[116]

702. Buxton, Emanbee and MRB were in effect a purchaser in good faith for value without notice of the irregularities and since registered through the vehicle of K.L.C.C. It would be necessary, therefore, for me to be satisfied as to certain matters before the equitable interest arising from the constructive trust in favour of the plaintiffs, excluding Disctronics, would have priority over that legal interest. I would need to be satisfied as to fraud (see Bahr v Nicolay) (No. 2);[117] the application of the statutory exception (see s.42 of the Transfer of Land Act 1958); or the right of a claim in personam against Buxton and the others (see Frazer v Walker;[118] Breskebar v Wall.[119]

705. On the facts as found none of those factors is made out against the Buxton interests, even allowing for the onus of proof they bear. As for the competing equitable interests between Donovan and the others and the Buxton interests, the interests of Donovan and the others is postponed to that of Buxton, it being a purchaser of an equitable interest for value without notice: see Latec Investments Limited v Hotel Terrigal Pty Ltd.[120]

709. In these types of circumstances commentators have suggested that the remedial characteristic of the constructive trust may enable the Court to make a declaration of a constructive trust so as to accommodate the equity of the equitable charge.[121]

712. In Australia, the genesis for treatment of the constructive trust as a remedy as distinct from an institution seems to be the judgment of Deane J in Mushinski v Dodds.[122] The facts of the case warrant re-visiting. An unmarried couple purchased land intending to renovate a building thereon. The woman, Mushinski, paid the purchase price but agreed to include the man, Dodds, on the title if he renovated the building and paid the associated costs. They were registered as tenants in common in equal shares. The couple later separated without the building work being done.

715. Mushinski claimed the sole beneficial ownership of the land. After concluding that no relief was available to Mushinski on the grounds of breach of express or implied agreement or express or implied trust, Deane J[123] considered the concept of the constructive trust. The learned judge referred to the debate between the commentators,[124] for example, Scott, Goff and Jones, Wade and others. Deane J observed:[125]

" ... Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court, it differs from those other forms of trust, however, in that it arises regardless of intention. For that reason, it was not as well suited to development as a conveyancing device or as an instrument of property law."

" ... Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle. ...... Equity acts consistently and in accordance with principle. The old maxim that equity regards as done that which ought to be done is as applicable to enforce equitable obligations as it is to create them and, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration or order before equity will recognise the prior existence of a constructive trust ... Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governed the content of, its existence inter partes independently of any formal order declaring or enforcing it. In this more limited sense, the constructive trust is also properly seen as both `remedy' and `institution'."

"This is a fortiori in the case of constructive trust where, as has been mentioned, the remedial character remains predominant in that the trust itself either represents, or reflects the availability of, equitable relief in the particular circumstances. Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and interplay of equitable principles in the circumstances of the particular case. In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date. The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles ... ."

"The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other ... Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of the others. ..... Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another ... ".

731. Deane J concluded[129] that equity called for adjustment of the rights of the parties to compensate for their disproportionate contribution. He concluded[130] that a claim based on unconscionable conduct was not made out but that there should be a declaration that the subject property was held by Mushinski and Dodds upon a constructive trust. As to the framing of the order and the date of imposition of the constructive trust, Deane J considered that a declaration should be made such that the constructive trust was delayed to the date of the making of the order so as to protect the legitimate interests of third parties.

734. In Mushinski v and Dodds, Mason J[131] agreed with Deane J. Gibbs CJ agreed with the orders proposed by Deane J[132] but for different reasons. Gibbs CJ did not accept that the law permitted the imputation of an intention to the parties contrary to the evidence. Indeed, Gibbs CJ specifically rejected[133] the arguments as to the declaration of a constructive trust but held that Mushinski was entitled to contribution from Dodds. Brennan J, with whom Dawson J agreed, dissented. Brennan J[134] criticised the argument for the constructive trust as based on a mistaken view as to the arrangements between the parties. Rather, Brennan J analysed[135] the argument as a plea for fairness and which he rejected as not providing a basis for a declaration of a constructive trust.

737. The approach of Deane J in Mushinski v Dodds was applied unanimously by the High Court in Baumgartner v Baumgartner,[136] a case where a defacto couple pooled funds and later purchased property in the sole name of the man. The court declared that the man held his interest in the land on trust for himself and the woman beneficially in specified proportions.

740. In Bathurst City Council v PWC Properties Pty Ltd,[137] the High Court, in the context of a charitable trust, revisited the remedial approach to the constructive trust. The court clarified the application of the constructive trust as a remedy to a last preferred option:[138]

"In any event, before the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy. An equitable remedy which falls short of the imposition of a trust may assist in avoiding a result whereby the plaintiff gains a beneficial proprietary interest which gives an unfair priority over other equally deserving creditors of the defendant. This appears to have been the cause of division between Gibbs CJ on the one hand and Mason J and Deane J on the other hand in Muschinski v Dodds. The Chief Justice saw as an adequate equitable remedy an entitlement of the appellant to a contribution from the respondent to the extent to which she had paid more than one-half of the purchase moneys, coupled with an equitable charge for that amount upon the half interest of the respondent in the land."

744. Mason J discussed the approach to relief where breach of fiduciary duty arises in Hospital Products[139] and observed each case will depend upon its own facts and circumstances. Sometimes, a court will order disgorgement of profits or may be unwilling to apportion the gain where a profit was acquired by a fraudulent fiduciary: see Zobory v FCT.[140] It has long been established that fiduciaries must strictly account for the benefits they wrongfully receive in breach of the duties owed: see Keech v Sandford.[141] Essentially, the usual approach is to require the fiduciary to restore to the other party the value of the assets of which that party was deprived by the fiduciary including all increases in market value: see Re Dawson.[142]

747. It is recognised, also, that there is an entitlement to recoupment of expenditure by the fiduciary including an entitlement to interest and compensation for the value of improvements made on the subject property: see Mansard Developments Pty Ltd v Tilley Consultants Pty Ltd.[143] The Court has a discretion: see Warman International Limited v Dwyer.[144] Indeed, in some cases the courts have taken a very strong view as to any gains achieved by a fiduciary: see Katingal Pty Ltd and Ors v Amor and Ors.[145]

750. I am satisfied that in view of the innocent role of the Buxton interests in the acquisition of the Kingston Links Golf Course it is entitled to maintain the equivalent of a 20 per cent interest in the land and to be repaid the moneys it expended on the acquisition and improvement of the land.

753. I am satisfied that in the circumstances of this case it is appropriate that Edmonds and Cahill be allowed moneys they expended on the acquisition and purchase of the land. I am also satisfied that Edmonds and Cahill should be treated for all intents and purposes as if they were each a one-sixth member of the joint venture as originally agreed. Despite their breaches of fiduciary duties as I have found I do not consider that the conduct of Edmonds and Cahill warrants forfeiture of their interests.

756. Subject to the repayment of the deposit moneys, the mezzanine debt, the sports centre loan all to Emanbee and the costs applied by Emanbee towards settlement of the purchase of the land; and subject, further, to the allowance to the Buxton interests, Edmonds and Cahill and the other parties associated with the K.L.C.C. joint venture of moneys expended on improvement of the land the plaintiffs, except Disctronics are entitled to relief. The question is the form of the relief to effect such outcome.

759. The plaintiffs sought the declaration of a constructive trust as their primary relief. They sought also, and alternatively, equitable compensation and an account of profits. Mindful of the clarification of the relief expressed by the High Court in Bathurst City Council I must consider whether there are other means available to resolve the controversy between the parties. If a constructive trust is imposed it must be capable of being moulded so as to be effective from the date of judgment subject to appropriate orders to protect third parties such as the Buxton interests and any mortgagee including the repayment of moneys owed.

762. However, I could not be satisfied that in doing so the effect of such declaration and order would be devoid of the risk of giving the plaintiffs unfair priority over others such as any mortgagee. Unfortunately, the consequences of a declaration in the circumstances of this case were not the subject of sufficient evidence as to the risks to other parties such that I would be prepared to impose a constructive trust in this matter. I consider that in this case there are clear remedies available capable of resolving the matter without resort to the imposition of a constructive trust. I make one further observation. Most of the cases where the imposition of a constructive trust has been contemplated have generally fallen into two broad categories. First, the domestic property cases. Secondly, the insolvency cases where a party seeks priority over creditors.[146] Here the circumstances do not fall easily into either category. Most recently, in Pilmer v Duke Group Limited (in liq) the High Court observed that compensation by a fiduciary is determined by equitable principles.[147] As the High Court observed in Warman International Limited v Dwyer:[148]

"It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts."

766. Relevantly, in Hospital Products[149] Mason J considered that an equitable obligation to account best matched the wrong to be remedied and not a constructive trust for the wrong there arose from a wrongful achievement of value as distinct from the misappropriation of the title to the themes in specie that constituted the value.

769. There is an additional factor that arises in this case. The plaintiffs did not take any action until well after the defendants gained title on 14 December 1999. There were legal avenues open to them none of which were pursued. This was an important factor that weighed against the imposition of a constructive trust in these circumstances.

772. It seems to me in this case the better way to achieve equity is to order equitable compensation. This type of approach was applied by Ipp, J. in Biala Pty Ltd v Mallina Holdings Ltd (No. 4).[150] The appropriate remedy whether it be equitable compensation or the taking of an account will vary from case to case. Here the trial proceeded on a determination of liability only. The court has the full benefit of hindsight.[151] I am satisfied that it will be necessary for an assessment to be made for an amount of equitable compensation to be paid to the plaintiffs, except Disctronics, by Edmonds, Cahill and K.L.C.C. after the deduction of outstanding debts, including any adjustments to allow for ANZ, in an amount equivalent to four-sixths of the value of the golf course and, after the ascertainment of profits, an amount equivalent to four-sixths of the profit derived from the golf course. This component of the compensation is not the taking of an account in the strict sense, rather, an assessment of the opportunity that the plaintiffs lost. These amounts ought be calculated from the date of formal acceptance of the offer by the Kingston Group on 9 September 1999 to the date of final orders. They ought place the plaintiffs, excluding Disctronics, in the position they would have been save for the breaches of fiduciary duty by Edmonds and Cahill. The compensation should carry the burden of interest to be calculated in the prescribed amount:[152] see also Warman International Limited v Dwyer;[153] also, Kettle Chip Co Pty Ltd v Apand Pty Ltd.[154]

775. Orders will be made, accordingly, in the main proceeding. With respect to the caveat proceeding, the claim by Disctronics has not been made out. It had no caveatable interest in the subject land. Appropriate orders will be made in the caveat proceeding for the removal of the caveat.

779. There is a remaining matter to be addressed. On the fifth day of the trial the first, second and fifth defendants, the K.L.C.C. defendants, applied to amend the particulars of their defence. In summary, the proposed amendment was to the effect that the memorandum from Quinert to Edmonds of 4 August 1999 purported to change the nature of the relationship with respect to Edmonds and Cahill from one of a fee plus profits to one of a fee alone. The purpose of the amendment was to enable senior counsel for the K.L.C.C. defendants to cross-examine Donovan as to new matters, not pleaded, and raised after the plaintiffs' case was well advanced and without the plaintiffs' counsel having the opportunity to obtain appropriate instructions. The application was refused. I indicated to the parties that I would state my reasons in the course of my ultimate reasons for judgment.

782. The next day, the sixth day of trial, another application was made by the K.L.C.C. defendants to amend the particulars of the defence to the effect that the plaintiffs repudiated the joint venture agreement with Edmonds and Cahill by seeking to impose terms that differed from the existing terms of the joint venture. It could be said that the second application overtook the first application on the preceding day. Further submissions were made in support of the second application on the seventh day of the trial. The second application was refused and on that occasion I stated my reasons. In so far as it remained necessary, save for the slight and obvious variations in the recitation of events surrounding the first application I adopt and apply the reasons for refusal of the second application to amend to the refusal of the first application to amend.

[1] [1995] VicRp 35; (1995) 1 VR 574, 580.

[2] (1816) 2 Rose 349.

[3] [1848] EngR 107; (1848) 6 Hare 366.

[4] (1821) 4 B & Ald. 437.

[5] [1830] EngR 540; (1830) 10 B & C 671.

[6] (1873) LR 8 QB 504.

[7] (1901) AC 240, 247, 250.

[8] [1984] HCA 36; (1983-4) 154 CLR 178, 197-198.

[9] [1966] UKHL 2; (1967) 2 AC 46, 123.

[10] [1984] HCA 64; (1984) 156 CLR 41.

[11] Unreported judgment of Santow J, Supreme Court of New South Wales, 24 July 1995.

[12] 40 DLR (3d) 371, 381 per Laskin J.

[13] (1982) WAR 1, 16.

[16] [1933] HCA 8; (1933) 49 CLR 66, 105.

[17] (2001) FCA 1385, para 270.

[20] [1985] HCA 49; (1985) 157 CLR 1.

[21] [1984] HCA 64; (1984) 156 CLR 41 at 96; see, also, J.R.F. Lehane, Fiduciaries in a Commercial Context, in P.D. Finn, Equity and Commercial Relationships, (1987) pp.95-108; John Glover, Commercial Equity: Fiduciary Relationships, (1995) pp.76-80, paras 3.90-3.96; B.H. McPherson, Joint Ventures, in P.D. Finn, Equity and Commercial Relationships, pp.35-6.

[22] [1986] HCA 25; (1986) 160 CLR 371.

[23] [2000] VSC 113; (2000) 1 VR 92, 105.

[24] Finn, P, Fiduciary Obligations (1977).

[28] (1938) 82 P.(2d) 1049 (The Supreme Court of Oklahoma).

[34] [2001] HCA 31; (2002) 207 CLR 165.

[37] (1988) 2 Qd R 1.

[41] See, for example, Glover, J., Is breach of confidence a fiduciary role?, (2001) 21 Leg. Studs. 594; also, LAC Minerals Limited v International Corona Resources Limited (1989) 2 SCR 574, 647.

[43] (1994) 13 WAR 11.

[44] (1994) 13 WAR 124.

[46] See Phipps v Boardman [1966] UKHL 2; (1967) 2 AC 46, 130; also, Goff and Jones, The Law of Restitution, 5th ed., Ch. 36; Meagher, Gummow and Lehane, Equities, Ch. 41; Ford and Lee, Principles of the Law of Trusts, Ch. 22.

[47] (1940) 3 All ER 60, 71.

[48] (1884) 9 App Cas 434.

[49] cf. Prince Jefri Bolkiah v KPMG [1998] UKHL 52; (1999) 2 AC 222, 235; also, Glover, J., Is breach of confidence a fiduciary wrong? (2001) 21 Legal Studies 594, 613 and fn. 122.

[50] (1972) 2 All ER 162.

[54] (1981) 2 NSWLR 339.

[55] (1988) 2 Qd R 1.

[57] [1997] FCA 471; (1997) 24 ACSR 110, 141.

[58] Unreported judgment of Debelle J, Supreme Court of South Australia dated 23 January 1998.

[59] [1997] SASC 6727; (1997) 25 ACSR 175 at 195.

[60] (1973) 40 DLR (3d) 371.

[62] [1997] FCA 471; (1997) 24 ACSR 110, 141.

[63] (1991) 5 NZCLC 67,096.

[64] (2001) VSCA 48, unreported judgment of the Court of Appeal delivered 21 December 2001, at paras 55-56.

[65] The Fiduciary Principle, Equity, Fiduciaries and Trusts, ed. Youdan, p.1, note 14, citing Canadian Aero Services v O'Malley [1974] SCR 592; Hudson's Bay Co v McClocklin )1986) 5 WWR 29.

[68] [1936] HCA 3; (1936) 54 CLR 583, 592; also, Glover, J. ibid, 613-614.

[69] (1895) 2 QB 315, Ca.

[70] [1820] EngR 384; (1820) 1 Jac & W 394.

[71] (1913) 2 Ch. 239.

[72] (1910) 1 Ch. 336.

[73] (1874) 10 Ch. App. 96, 119.

[75] (1867) LR 1 PC 479, 489.

[76] (1874) 10 Ch. App. 96, 118.

[77] (1913) 29 TLR 357

[78] [1985] HCA 32; (1984) 156 CLR 1; see also for example but by no means exhaustively Warman International Limited v Dwyer (1995) 182 CLR 554; Maguire v Makaronis [1997] HCA 23; (1996) 188 CLR 449; Timber Engineering Co Pty Ltd v Anderson (1980) 2 NSWLR 488; Humphris v Jenshol (1997) 25 ACSR 212; Fexuto Pty Ltd v Bosnjak Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688.

[79] (1854) 1 Jur. NS 131.

[80] (1911) 104 LT 254.

[82] [1966] UKHL 2; (1967) 2 AC 46.

[83] (1874) LR 18 Eq. 254.

[84] (1906) 11 Com. Cas. 88, 96.

[87] [1856] EngR 534; (1856) 5 HL Cas 627.

[88] (1923) AC 673, PC.

[90] (1893) 1 Ch. 218, 230 CA.

[91] (1892) 2 Ch. 518, 524.

[92] (1895) 73 LT 226 CA.

[93] (1895) 2 QB 315, CA.

[94] [1820] EngR 384; (1820) 1 Jac & W 394.

[95] (1913) 2 Ch. 239.

[96] (1910) 1 Ch. 336.

[97] (1953) Ch. 430 CA.

[98] [1942] UKHL 1; (1942) 1 All ER 378, H.L.

[99] [1966] UKHL 2; (1967) 2 AC 46.

[101] [1971] UKHL 1; [1972] AC 153; [1971] 2 WLR 1166.

[102] (1995) 183 CLR 563, 583.

[103] (1998) 3 VR 133, 144-5.

[104] [1988] HCA 65; (1988) 166 CLR 121.

[105] (1969) 121 CLR 199.

[106] (1997) 26 ACSR 544, 587.

[107] (1998) 3 VR 133 at 156

[109] (1993) 44 FCR 151, 171.

[111] (1998) 3 VR 16.

[113] (1967) Ch. 1179.

[114] Scott, Law of Trusts, 3rd ed. Vol. 5, para 462.4, cited with approval by Deane J in Mushinski v Dodds, supra, at 614.

[115] Meagher, R.P. and Gummow, W.M.C., Jacobs' Law of Trusts in Australia (6th ed), p.329 para [1331]

[116] ibid, p.331, para [1333]; also, Megarry, R. & Wade W., The Law of Real Property (6th ed), p.544, para 10-017; and Goff & Jones, The Law of Restitution (5th ed), pp.84-89.

[117] [1988] HCA 16; (1988) 164 CLR 604.

[118] (1967) 1 AC 569.

[121] Meagher and Gummow, ibid; also, Ford, H. and Lee, W.A., Principles of the Law of Trusts, (3rd ed), para 22985.

[122] [1985] HCA 78; (1984-85) 160 CLR 583, 610ff.

[136] [1987] HCA 59; (1987) 164 CLR 137.

[137] [1998] HCA 59; (1998) 195 CLR 566.

[140] [1995] FCA 1226; (1995) 129 ALR 484, 489.

[141] (1726) Cas. t. King 61; 25 ER 223.

[142] (1966) 2 NSWLR 211.

[143] (1982) WAR 161.

[144] [1995] HCA 18; (1995) 182 CLR 544, 561-2; see, also, Kearney, Acting for a Fiduciary's Gains in Commercial Context in Finn, P. (ed), Equity and Commercial Relationships, p.195ff.

[145] [1999] FCA 317; (1999) 30 ACSR 545, 549.

[146] See Baumgartner, supra, Re Jonton Pty Ltd (1992) 2 Qd 105; Katingal Pty Ltd and Ors v Amor and Ors [1999] FCA 317; (1999) 30 ACSR 545.

[147] Majority judgment of McHugh, Gummow, Hayne and Callinan JJ at 201.

[148] (1995) 182 CLR 554, 559; see also, Maguire and Anor v Makronis and Anor [1997] HCA 23; (1996) 188 CLR 449, 474-475.

[150] The Full Court of Western Australia on appeal expressed a preference for the taking of an account as the method that best compensated the plaintiff.

[151] See also, the analysis in Boros, E., Equitable Compensation as a Remedy for Diversion of Opportunity, paper delivered at "Key Developments in Corporate Law and Equity", 16 March 2001, University of Melbourne.

[152] See Supreme Court Act 1986 sections 57-60; also, Duke Group Limited (in liq) v Pilmer [1999] SASC 97; (1999) 73 SASR 64, the point not being considered by the High Court.

[154] [1999] FCA 483; (1998) 144 ALR 134; (1999) 162 ALR 505.