Dreamtime Supply Company Pty Ltd v Steadfast ICT Security Pty Ltd

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY COURT OF APPEAL

Case Title: Dreamtime Supply Company Pty Ltd v Steadfast ICT Security Pty Ltd (No 2) Citation: [2022] ACTCA 57 Hearing Date: 18 May 2022 Decision Date: 21 October 2022 Before: Elkaim and Stewart JJ, McWilliam AJ Decision: 1. The appeal be allowed, to the extent set out in orders 2 and 3 by consent, and also to the extent in order 4, but that the appeal be otherwise dismissed. 2. Order 1 of the primary judge, made on 30 August 2021, be set aside and in lieu thereof the following order be made: 1. Order that Dreamtime Supply Company Pty Ltd account to Steadfast ICT Security Pty Ltd for profits in equity in the sum of $1,179,466.15. 3. Order 14 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made: 14. The plaintiff may only recover a total of $1,179,466.15 from all defendants exclusive of any amount recovered in relation to the costs of the proceedings. 4. Order 13 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made: 13. Nenad Stefanovic pay damages to Steadfast in the sum of $50,594.69. 5. The respondent pay 75 per cent of the third appellant’s costs of the appeal. 6. The first, second and fourth appellants, jointly and severally, pay the respondent’s costs of the appeal. 7. If the third appellant or the respondent wishes to contend for a different costs order on the appeal to that in order 5 above or a different costs order to order 3 of the primary judge, made on 1 March 2022: (i) That party file and serve short written submissions in support of their position within 10 days; (ii) The other party file and serve short written submissions in response within a further 7 days; and (iii) The competing contentions be determined on the papers.

Catchwords: APPEAL – APPEAL FROM SUPREME COURT – Whether primary judge erred in his findings regarding the causal relation of the first appellant’s pleaded breaches – whether primary judge erred in holding there was likely a scheme between the second appellant and another person to terminate a contract in favour of the respondent – whether primary judge erred in holding the fourth appellant breached his director’s duties to the respondent – whether primary judge erred in finding the third appellant’s breaches of contract and fiduciary duties caused the respondent’s loss – whether primary judge erred in finding the third appellant liable to pay the respondent under s 1317H of the Corporations Act 2001 (Cth) EQUITY – FIDUCIARY OBLIGATIONS – Where principal would in any event have suffered losses – where profits nonetheless made by reason of breach of fiduciary obligations – whether want of causation in respect of loss relevant to the counterfactual enquiry required for an account of profits STATUTES – INTERPRETATION – Corporations Act 2001 (Cth) ss 182 and 183 – consideration of content of statutory duties – whether proscriptive or prescriptive Legislation Cited: Corporations Act 2001 (Cth) ss 180, 181, 182, 183, 1317H Court Procedures Rules 2006 (ACT) rr 406, 407 Evidence Act 2011 (ACT) s 140 Trade Practices Act 1974 (Cth) s 82 Cases Cited: Adler v ASIC [2013] NSWCA 131; 179 FLR 1 Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; 48 WAR 1 Ancient Order of Foresters in Victoria Friendly Society Ltd v Life Plan Australia Friendly Society Ltd [2018] HCA 43; 265 CLR 1 Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; 226 CLR 507 Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; 191 FCR 1 Breen v Williams [1996] HCA 57; 186 CLR 71 Browne v Dunn (1893) 6 R 67 (HL) Chaplin v Hicks [1911] 2 KB 786 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Doyle v ASIC [2005] HCA 78; 227 CLR 18 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; 188 ALR 566 Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; 129 ACSR 265 Holyoake Industries (Vic) Pty Ltd v V–Flow Pty Ltd [2011] FCA 1154; 213 IR 55 Jenyns v Public Curator (Qld) (1953) 90 CLR 113 R v Byrnes (1995) 183 CLR 501 Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; 101 ACSR 233 Re Earth Civil Australia Pty Ltd (in liq) [2021] NSWSC 966 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Steadfast ICT Security Pty Ltd v Peak (No 2) [2021] ACTSC 319 Steadfast ICT Security Pty Ltd v Peak (No 3) [2022] ACTSC 31 Steadfast ICT Security Pty Ltd v Peak [2021] ACTSC 199 V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC 16; 296 ALR 418 Warman International Ltd v Dwyer (1995) 182 CLR 544 Wilson HTM Investment Group Ltd v Pagliaro [2012] NSWSC 1068; 226 IR 75 Texts Cited: Austin RP and Ramsay IM, Ford, Austin and Ramsay’s Principles of Corporations Law (17th ed, LexisNexis, 2018) Parties: Dreamtime Supply Company Pty Ltd (First Appellant) Gareth Peak (Second Appellant) Nenad Stefanovic (Third Appellant) David Glavonjic (Fourth Appellant) Steadfast ICT Security Pty Ltd (Respondent) Representation: Counsel P Walker SC and B Buckland (Appellants) E Cox SC and A Munro (Respondent) Solicitors Bradley Allen Love Lawyers (Appellants) Mackenzie Workplace Law (Respondent) File Number: ACTCA 45 of 2021 Decision under appeal: Court/Tribunal: ACT Supreme Court Before: Mossop J Date of Decision: 30 August 2021 Case Title: Steadfast ICT Security Pty Ltd v Peak Citation: [2021] ACTSC 199

Court/Tribunal: ACT Supreme Court Before: Mossop J Date of Decision: 17 December 2021 Case Title: Steadfast ICT Security Pty Ltd v Peak (No 2) Citation: [2021] ACTSC 319

Court/Tribunal: ACT Supreme Court Before: Mossop J Date of Decision: 1 March 2022 Case Title: Steadfast ICT Security Pty Ltd v Peak (No 3) Citation: [2022] ACTSC 31

Contents Elkaim J [1] Stewart J [9] Introduction [9] The appeal [24] Grounds 1: The decision to part ways with Dreamtime [26] Introduction [26] The primary judge’s findings and reasoning [28] The appellants’ submissions [48] Consideration [50] Grounds 2: Cause of gain in relation to particular clients [58] Introduction [58] (1) Anomali/Department of Parliamentary Services [60] The primary judge’s findings and reasoning [60] The appellants’ submissions [68] Consideration [72] (2) Department of Agriculture [75] The primary judge’s findings and reasoning [75] The appellants’ submissions [79] Consideration [80] (3) Australian Financial Security Authority (AFSA) [83] The primary judge’s findings and reasoning [83] The appellants’ submissions [90] Consideration [92] (4) Nectar Mortgages [96] Ground 3: GEO Group [97] Introduction [97] The primary judge’s findings and reasoning [98] The appellants’ submissions [110] Consideration [113] Ground 4: Dreamtime as a reseller of AlienVault software [124] Introduction [124] Mr Glavonjic’s submissions [130] Consideration [133] Grounds 5 and 6: Mr Stefanovic’s liability [141] Introduction [141] The primary judge’s findings and reasoning [145] Ground 5: loss of a chance [158] Ground 6: liability for Dreamtime’s profits under s 1317H [164] The parties’ submissions [167] Is failure to inform a breach of ss 182 and 183 of the Corporations Act? [172] Conclusion [192] McWilliam AJ [196]

Elkaim J:

1. I have had the benefit of reading, in draft form, the reasons of Stewart J. I agree with those reasons and with the orders that his Honour proposes.

2. I would like however to add a short comment about appeal ground 6. Stewart J has observed that: Steadfast does not contend, either by a notice of contention or in its submissions, that the award of $202,378.75 can otherwise be supported.

3. On one reading of [329] of the primary judgment (the ‘August’ judgment) it might be suggested that the primary judge’s finding against Mr Stefanovic encompassed both positive acts by Mr Stefanovic as well as his failure to inform on the misdeeds of Mr Peak. This is encapsulated in these words from [329]: In my view, Mr Stefanovic’s active assistance to Mr Peak (and Mr Glavonjic) in preparing for the transfer of Steadfast’s business to Dreamtime was in breach of the obligation to “act honestly” and to “do all in [his] power to promote or develop and extend [Steadfast’s] reputation and business”.

4. This finding however is to be contrasted with this sentence a little later in the same paragraph: Further, in so far as Mr Stefanovic was made aware of Mr Peak and Mr Glavonjic’s plans, he breached those same obligations by failing to make those plans known to the director of the company, Ms Batley

5. More significant, perhaps, is the contrast with the final sentence of [335]: The evidence establishes a close and familiar relationship between Mr Peak and Mr Stefanovic and I draw the inference that, as a result of that relationship, Mr Stefanovic was aware of Mr Peak’s intention and aware of the facts that would render Mr Peak’s conduct a breach of his fiduciary, contractual and statutory duties.

6. Thus even if it be thought that the loss of $151,829.06 could be attributed to both positive actions of Mr Stefanovic and also to his failure to disclose the actions of Mr Peak, the primary judgment does not make any such distinction.

7. Therefore, the consequence of success on ground 6 must topple the whole of the above amount. This conclusion is strengthened by the finding in the ‘December’ judgment of the primary judge, at [60], that Mr Stefanovic’s conduct was not “by itself” the cause of the loss.

8. As Stewart J has said, the damages awarded against Mr Stefanovic, other than to the extent of $50,594.69, cannot “otherwise be supported”.

Stewart J:

Introduction

9. This is an appeal from orders of a judge of the Court which are recorded in three sets of reasons for judgment published as follows: (a) Steadfast ICT Security Pty Ltd v Peak [2021] ACTSC 199 on 30 August 2021 (the August judgment or AJ); (b) Steadfast ICT Security Pty Ltd v Peak (No 2) [2021] ACTSC 319 on 17 December 2021 (the December judgment or DJ); and (c) Steadfast ICT Security Pty Ltd v Peak (No 3) [2022] ACTSC 31 on 1 March 2022 (the costs judgment or CJ).

10. The first appellant is Dreamtime Supply Co Pty Ltd (Dreamtime), the fourth defendant below.

11. The second appellant is Gareth Peak, the first defendant below.

12. The third appellant is Nenad Stefanovic, the third defendant below.

13. The fourth appellant is David Glavonjic, the fifth defendant below.

14. The respondent is Steadfast ICT Security Pty Ltd (Steadfast), the plaintiff below.

15. The second defendant below was Lachlan Watt. No appeal is brought by him.

16. In the proceeding, Steadfast claimed that its former employees (Messrs Peak, Stefanovic and Watt) and its former director (Mr Glavonjic) in late 2018 and early 2019, while still in those positions, arranged to copy confidential information, to transfer commercial arrangements to another business, Dreamtime, to interfere with Steadfast’s records in a manner which impaired its business and, on departing, deleted communications and other material stored on Steadfast’s computers. That conduct was alleged to involve breaches of the employees’ and director’s fiduciary, contractual and statutory obligations. It was said that Dreamtime was knowingly involved in the conduct of the other defendants. (AJ [1].)

17. In the August judgment, the primary judge concluded that Steadfast had established the factual basis for granting relief against Dreamtime. His Honour concluded that the conduct of the employees and former director of Steadfast involved a course of conduct designed to obtain for Dreamtime the benefit of Steadfast’s business and involved breaches of Messrs Peak, Stefanovic and Watt’s obligations to Steadfast. The conduct of Mr Peak, in particular, was thoroughly dishonest and in flagrant breach of his obligations to his employer. As a consequence, Dreamtime obtained the benefit of Steadfast’s business and profited as a result. Because of the involvement of Mr Glavonjic, a director of Dreamtime, in Mr Peak’s plan, Dreamtime was aware of Mr Peak’s breach of duty. On that basis, his Honour found that Steadfast was entitled to relief by way of accounting for profits by Dreamtime in the sum of $1,187,249.64. (AJ [2].)

18. As against Mr Peak, the primary judge found a breach of Mr Peak’s employment contract by reason of the course of conduct engaged in by him while employed by Steadfast to acquire for Dreamtime the benefit of Steadfast’s business (AJ [267]). That course of conduct also involved a breach of his fiduciary obligations to Steadfast (AJ [286]) and his obligations under ss 180, 181, 182 and 183 of the Corporations Act 2001 (Cth) (Corporations Act) (AJ [292]). The course of conduct included failing to keep Steadfast’s confidential information confidential, using it for purposes other than in the course of performing his duties as an employee of Steadfast and providing confidential information to Mr Glavonjic and Dreamtime (AJ [269] and AJ [271]). He also breached restraints in his employment contract (AJ [281]).

The appeal

24. By a second further amended notice of appeal, the appellants identified 10 grounds of appeal. Some of these were not pressed in the hearing. The remaining grounds are conveniently grouped and renumbered as constituting six grounds of appeal. Each is identified separately below. For the reasons that follow, save in one small respect which the respondent conceded, and Mr Stefanovic’s appeal to the extent of approximately $152,000, the appeal falls to be dismissed.

25. It is to be observed that the appeal does not challenge any of the primary judge’s substantive factual findings; it is limited to challenging certain characterisations and conclusions made by the primary judge as a consequence of those findings. The result is that for the most part the grounds of appeal can be considered with reference to the primary judge’s factual findings, which his Honour set out in meticulous detail, with only occasional references to the underlying evidence.

Ground 1: The decision to part ways with Dreamtime

Introduction

26. By appeal ground 1 (original appeal grounds 4(a) and 4(b)), the appellants contend that the primary judge erred in holding that the decision of Steadfast to cease to use Dreamtime to obtain Commonwealth government work was causally related to the pleaded breaches of the appellants, or any of them, and in failing to hold that the decision by Ms Batley to terminate its subcontracting relationship with Dreamtime was unrelated to, and causally separate from, the pleaded breaches of the appellants, or any of them.

27. In order to understand this ground of appeal, it needs to be borne in mind that Ms Batley directed Mr Peak, the general manager of Steadfast at that time, to cease utilising Dreamtime for future procurement of government contracts on 21 December 2018. On 24 December 2018, Ms Batley explained the decision by telling Mr Peak in an email that Steadfast’s “preferred method of procurement with Government is direct”. That is the decision that the appellants by their first ground of appeal contend caused Steadfast’s loss of government work and not any breaches of obligations by the appellants. Steadfast, in contrast, contends that it was the breaches by the appellants of their obligations, in particular as part of Mr Peak’s plan to transfer Steadfast’s work to Dreamtime, that caused the breakdown in relationships that in turn caused Ms Batley to make the impugned decision.

The primary judge’s findings and reasoning

28. Mr Joy and Ms Batley are husband and wife. They had a company, PurpleP Pty Ltd. Mr Joy provided computer security services to the Australian government through a company of his that traded as Njoy Security. In July 2015, Mr Joy engaged Mr Glavonjic, through his company, to provide business advisory services. (AJ [32].)

29. The Australian government’s Indigenous Procurement Policy (IPP) was aimed at encouraging majority Indigenous-owned companies to apply for government contracts. Mr Joy raised with Mr Glavonjic the idea of creating a new company with majority Indigenous ownership to capitalise on the IPP. Mr Glavonjic introduced Mr Goldsmith to Mr Joy pursuant to that proposal. The idea was to insert a majority Indigenous-owned company between non-Indigenous service providers and the Commonwealth, thereby permitting access to Commonwealth contracts through the IPP and allowing the owners of the Indigenous company to benefit even though the services that the company provided were to be sub-contracted to non-Indigenous companies. (AJ [33].)

30. Pursuant to that proposal, Dreamtime was registered in October 2015 with Mr Goldsmith, who is Indigenous, owning more than 50 per cent of the shares. The directors of the company were Mr Glavonjic and Mr Goldsmith. Apart from Mr Goldsmith, the other shareholders were PurpleP (i.e., the Joy and Batley interests), Mr Glavonjic’s company and a company owned by a Mr Bailey. (AJ [34].)

31. Steadfast was incorporated in November 2015. Mr Glavonjic was the sole director. Although 100 per cent of the shares were originally held by PurpleP, in August 2016 the shareholding was changed to PurpleP as to 95 per cent and Mr Peak’s company, Peakiham Pty Ltd, as to 5 per cent. The arrangement between Steadfast and Dreamtime permitted Steadfast to gain access to government work on more favourable terms than if it obtained that work by subcontract from other companies on government panels. (AJ [35].)

32. In addition to performing work obtained by Dreamtime under the IPP and subcontracted to it, Steadfast also had a business providing IT security. It was an authorised re-seller of security software and solutions. In that role, Steadfast purchased a software licence from suppliers and on-sold it to customers, generally for a fixed term. Steadfast was an authorised re-seller of software provided by AlienVault, among others. (AJ [35].)

33. In 2016, Mr Peak was employed as the general manager of Steadfast pursuant to a written employment contract. (AJ [39].)

34. In March 2018, Mr Stefanovic commenced employment with Steadfast as a security consultant pursuant to a written contract. (AJ [47].)

35. In September 2018, there were disagreements and a consequent loss of trust between Ms Batley and Mr Joy, on the one hand, and Messrs Peak and Glavonjic, on the other. One of the sources of the loss of trust was a disagreement between Mr Joy/Ms Batley and Mr Glavonjic about a profit-sharing arrangement with Dreamtime People Pty Ltd. (AJ [50].) It is uncontroversial that Dreamtime People was previously owned by PurpleP, but on Mr Glavonjic’s recommendation its shares were transferred to Dreamtime in April 2017 on the basis that Mr Joy/Ms Batley would share in the profits of Dreamtime People. (Agreed chronology.)

The appellants’ submissions

48. The appellants submit that Ms Batley’s decision and her direction to Mr Peak that Steadfast’s preferred method of procurement with government be direct was the cause of Steadfast’s losses. They submit that Ms Batley did not act because of the appellants’ breaches, but because she was angry with Mr Glavonjic that the profit-split issue with regard to Dreamtime People had not been resolved. They rely, in particular, on Ms Batley having said in cross-examination that she took the decision to not use Dreamtime anymore because she was angry with Mr Glavonjic about the profit split agreement. They submit that as Ms Batley was unaware at that time of the appellants’ breaches of their obligations, she could not have made the critical decision because of those breaches.

49. The appellants submit that the decision to stop using Dreamtime had nothing to do with a lack of work, or with the conduct of the appellants that was the subject of Steadfast’s claim. They say that the profit split issue was neither pursued against Mr Glavonjic, nor linked in any way to the impugned conduct of the other appellants. They submit that the only reason why Ms Batley decided to cut off Dreamtime and sever the relationship was because of her anger about the profit split issue.

Consideration

50. It is common ground that the leading case on the point of causation at issue is Ancient Order of Foresters in Victoria Friendly Society Ltd v Life Plan Australia Friendly Society Ltd [2018] HCA 43; 265 CLR 1 (Foresters). There, it was explained with reference to Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118–119 that whether a benefit can be said to be obtained “as a result of” knowing participation in a breach of fiduciary duty by another contrary to the principles of equity is a question of causation or contribution that depends on “a precise examination of the particular facts” of the case. It was said that the equitable disgorgement principal is a “prophylactic rather than a restitutionary principle” and that it is “sufficient to show that the profit would not have been made but for dishonest wrongdoing”. See the judgment of Kiefel CJ, Keane and Edelman JJ at [9].

51. The concurring judgment of Gageler J at [88] is to the same effect with regard to it being sufficient to establish that the benefit or gain to the knowing participant would not have been obtained “but for” the breach. His Honour explained (at [91]) that the reasoning in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 561–562 makes explicit that where there is shown to exist a causal connection between a fiduciary’s breach of fiduciary obligation and a benefit or gain to the fiduciary or knowing participant, the onus shifts to the defendant to establish that it is inequitable to order that the defendant account for the value of the whole of the identified benefit or gain.

52. The following are the extracts from the cross-examination of Ms Batley on which the appellants rely for their submission that the only reason that she terminated the relationship with Dreamtime was that she was angry about the profit share in Dreamtime People not being resolved: And it was because of this anger with Mr Glavonjic arising from this profit split agreement that you told Mr Peak on 21 December 2018 not to use Dreamtime anymore, isn’t it?---That’s correct. [T132:11] … And it was your decision because you were angry with Mr Glavonjic about this profit split agreement?---That’s correct. [T132:27] … So you’re angry with Mr Glavonjic on the 16th, you tell your staff not to work with him on the 21st for any engagements going forward, you threaten to report him on 31 of December. Correct?---Correct. All of this is because you didn’t want to work with Dreamtime anymore, correct?---That’s right, yes. You wanted to completely sever that relationship?---Yes, that’s correct. And you just wanted your profit from the profit split and then you never wanted to work with David Glavonjic and Dreamtime ever again?---Correct. [T136:31]

53. There are three difficulties with the appellant’s case on this ground of appeal.

54. The first and principal difficulty is that the appellants focus on the loss to Steadfast rather than the gain to Dreamtime. It is on that basis that they submit that Steadfast would in any event have lost the business that it lost because of its severing ties with Dreamtime. That is not the correct counterfactual; the correct counterfactual is whether, but for the dishonest wrongdoing, the profit would have been made. The appellants’ submission ignores the fact that because of Mr Peak and Mr Glavonjic’s dishonest plan, including steps taken long before Ms Batley’s December decision, Dreamtime gained business that it would not otherwise have had. The accounting for profits, or gains, was legitimately focussed on that benefit to Dreamtime as a knowing recipient. It is wholly irrelevant what the loss to Steadfast (if any) was. That is sufficient to dispose of this ground of appeal.

Ground 2: Cause of gain in relation to particular clients

Introduction

58. By appeal ground 2 (original appeal ground 4(c)), the appellants contend that the primary judge erred in holding that the business obtained by Dreamtime from the following entities was causally related to the breaches by the appellants, or any of them: Anomali/Dep of Parliamentary Services, Department of Agriculture, AFSA and Nectar Mortgages.

59. It is convenient to consider each entity in turn.

(1) Anomali/Department of Parliamentary Services

The primary judge’s findings and reasoning

60. The primary judge found that in August 2018, Mr Barclay from Anomali sent an email to Mr Peak seeking to promote the Anomali Threat Platform (software) and a demonstration occurred on 13 August 2018 (AJ [49]). Mr Peak did not advise Ms Batley of that inquiry (AJ [405]).

61. On 13 November 2018, Mr Noble at Anomali sent a proposed reseller agreement for Dreamtime to Mr Glavonjic. Mr Noble indicated in his email that he was not sure whether he should send it to Mr Glavonjic at Dreamtime or to Mr Peak at Steadfast. Mr Glavonjic provided a copy to Mr Peak who sent it on to Mr Stefanovic. Mr Stefanovic sent the completed reseller agreement back to Mr Glavonjic suggesting that he review it and then send it back to Mr Noble. It was completed in such a way as to make Dreamtime the reseller. (AJ [124].)

62. On 19 and 20 November 2018, Mr Stefanovic deleted emails from his Steadfast email account which related to, inter alia, Anomali (AJ [140], [142]).

63. On 12 November 2018, Mr Noble from Anomali emailed Mr Glavonjic about assisting Anomali to bid on a contract at Parliament House. Mr Glavonjic forwarded the email to Mr Stefanovic and Mr Peak (at a private email address), saying “Let’s discuss Friday” (AJ [181]).

64. As Mr Glavonjic’s involvement in the matters concerning Anomali was after 31 October 2018 when he resigned his position as director of Steadfast, there was no breach of duty by him in relation to those matters (AJ [337)-[338]).

65. The primary judge noted that the appellants submitted that the Anomali business was never an opportunity available to Steadfast because Anomali wanted an IPP partner, which Steadfast was not, although “[t]he [appellants] accepted that the intention was that any services would be provided by Steadfast”. It was also noted that the appellants relied on the direction from Ms Batley to Mr Peak to cease using Dreamtime in December 2018 and pointed to the fact that the contract between Dreamtime and the Department of Parliamentary Services was only executed in January 2019. (AJ [407].)

66. The primary judge reasoned that the appellants’ submissions “would be persuasive if it was not for the fact that what actually occurred was during a period of concerted and planned breaches of Mr Peak’s obligations with the intention of shifting the business of Steadfast to Dreamtime”. It was reasoned that Mr Peak’s conduct in relation to Anomali must be assessed in the context of his conspiracy with Mr Glavonjic to take the benefit of Steadfast’s business without paying for it. (At AJ [408].)

67. The primary judge accepted Steadfast’s calculations that showed that the overall profit out of a total invoiced amount of $847,249.86 was $213,311.95 (AJ [409]). The latter was accordingly the amount that was awarded on account of profits.

The appellants’ submissions

68. The appellants submit that Anomali was interested in licensing its software to the Department of Parliamentary Services for which purpose it needed an IPP entity to partner with on favourable terms to obtain access to that Department. They submit that Anomali specifically wanted to use Dreamtime as an IPP partner to provide software to the Department so it was never an opportunity available to Steadfast. They submit that the inquiry from Anomali came to Mr Peak because he was connected to Dreamtime.

69. The appellants point to the terms of the contract between the Department and Dreamtime which record that it was awarded under a “Limited Tender Exemption” to Dreamtime as an “SME with at least 50% Indigenous ownership”. They also point to an email from the Department recording that Dreamtime was on the relevant “supply national panel”.

70. The appellants submit that Mr Peak did not owe a fiduciary duty to refer matters to Steadfast which would be entirely futile, and that on the contrary he had a positive contractual duty to advance the interests of “group members” including Dreamtime. In that regard, the appellants refer to the provisions of Mr Peak’s employment contract with Steadfast which defined “Group” in such a way as to include Dreamtime and provided that Mr Peak must “serve the Company [ie, Steadfast] and the Group faithfully and diligently” and “to use all reasonable efforts to promote the interests of the Group”.

71. Finally, the appellants submit that Dreamtime had no knowledge of some breach of Mr Peak’s fiduciary duties to Steadfast on the basis that Mr Peak, Mr Stefanovic and Mr Glavonjic each knew that Steadfast was not an IPP entity.

Consideration

72. As mentioned, the primary judge recorded that the appellants accepted that the intention was that any services on the Anomali contract would be provided by Steadfast. The appellants have not challenged that. Moreover, Mr Stefanovic in cross-examination accepted that he had understood that the inquiry from Anomali “might lead to a potential contract that would lead to Steadfast doing additional work” (T481:15). Mr Stefanovic also accepted that Steadfast was “the likely subcontractor” on the work (T482:46). So, although the appellants now submit that the contract was only for the provision of software licensing by Anomali and that there was no role for Steadfast as a service provider, that is not consistent with what they apparently accepted at trial or with Mr Stefanovic’s identified evidence.

73. In those circumstances, no error is shown in the primary judge’s finding that the secret (i.e., without reference to Ms Batley) redirection of the inquiry from Anomali to Dreamtime was a lost opportunity for Steadfast. As such, there is also no error in the conclusion that Mr Peak and Mr Stefanovic’s roles in the redirection were breaches of their obligations to Steadfast, and that the knowledge of Mr Glavonjic of those breaches was the knowledge of Dreamtime meaning that Dreamtime was a knowing recipient of the benefit.

74. Appeal ground 2 insofar as it relates to Anomali and the Department of Parliamentary Services must accordingly fail.

(2) Department of Agriculture

The primary judge’s findings and reasoning

75. The primary judge found that in December 2017, Mr Peak prepared a Steadfast quotation for the Department of Agriculture to prepare a security risk management plan. That quotation was accepted and a contract was entered into by Dreamtime with the Department in April 2018 with the work being subcontracted to Steadfast. There were further contracts with Dreamtime using Steadfast as a subcontractor in May and October 2018. In each case, Dreamtime received 10 per cent of the contract price. (AJ [421].)

76. The primary judge found that at the 14 September 2018 board meeting of Steadfast, Mr Peak advised that the Department of Agriculture had been discussing more documentation work. In November 2018, both Mr Stefanovic and Mr Peak did the preparatory work for that project, and in December 2018 they both deleted emails relating to the project. (AJ [422]–[423].)

77. The primary judge found that after both Mr Peak and Mr Stefanovic had departed from Steadfast, a contract for the project was awarded to Dreamtime. Another contract for security assessment services was entered into with Dreamtime on 5 November 2019. His Honour made findings about the value of the project. (AJ [424].)

78. As mentioned in relation to the primary judge’s findings more generally, his Honour found that Mr Peak’s course of conduct amounted to a breach of his fiduciary duties to Steadfast and that the effect of that conduct, carried out in this case with the assistance of Mr Stefanovic, was to transfer the whole of the benefit of Steadfast’s business to Dreamtime (AJ [434]). His Honour rejected the appellants’ submission that the 2019 contracts with the Department of Agriculture should be excluded from any account of profits because, by the decision of Ms Batley to no longer work with Dreamtime, those contracts were not available to Steadfast (AJ [428]).

The appellants’ submissions

79. The appellants submit that the work in respect of which the primary judge ordered an account of profits was won by Dreamtime following a competitive limited tender process, and that there was no evidence that Steadfast participated in the process or that Dreamtime was able to take advantage of it because of anything arising from a breach of fiduciary duty owed to Steadfast. They submit that the “intervening competitive tender process” broke the causal link between any breach of duty and any profit gained by Dreamtime.

Consideration

80. The primary judge’s finding was in effect that but for the secret scheme to transfer Steadfast’s business to Dreamtime, Dreamtime would not have enjoyed the sole benefit of the contract with the Department of Agriculture. That is because, as had been the arrangement with the previous contract, Steadfast would have been the subcontractor for whatever work that Dreamtime secured by the limited tender process. That is an ample and proper basis for an account of profits. The fact that the Dreamtime tender was a competitive tender, or even a limited competitive tender, simply does not address that reality.

81. On the primary judge’s unchallenged findings, the arrangement on the formation of Dreamtime was that Dreamtime would tender for the work under the IPP and that Steadfast would do the work. By Mr Peak’s scheme in breach of his fiduciary obligations, Steadfast was denied that opportunity from late in 2018. That is to say, Steadfast was excluded by the scheme from the benefit of Dreamtime’s successful tenders to the Department of Agriculture in 2019. By reason of that exclusion, Dreamtime secured profits in addition to what it otherwise would have made. There is therefore no error in the primary judge’s conclusion that Dreamtime must account to Steadfast.

82. This ground of appeal accordingly fails.

(3) Australian Financial Security Authority (AFSA)

The primary judge’s findings and reasoning

83. The primary judge found that AFSA had been a significant client of Njoy (Mr Joy’s security company), Steadfast directly and Steadfast as subcontractor to Dreamtime between 2016 and 2018. The contracts included the provision of AlienVault software, hardware and a managed security service. From April 2017, Mr Hampson, an employee of Steadfast, was placed at AFSA as an IT security officer or analyst on a long-term basis. That contract was made with AFSA by Dreamtime but subcontracted to Steadfast. Dreamtime received 10 per cent of the income, the rest being paid to Steadfast. Up until 31 October 2018, invoices totalling $449,664 had been issued by Steadfast to Dreamtime for the subcontracting work on the AFSA contract – indicating that it was a high-value contract. (AJ [45], [48], [347].)

84. The primary judge found that there were discussions between Mr Peak and Mr Hampson in September and October 2018 about Mr Hampson’s possible transfer to the employment of Dreamtime while still placed at AFSA, and in which reference was made to Mr Peak’s plan to take Steadfast’s business for Dreamtime (AJ [58], [80], [87], [92], [105], [131], [134], [136], [258]). Mr Peak also prepared or saved documents showing the plan to take the AFSA contract exclusively for Dreamtime (AJ [97], [98], [163]), and he set a forwarding rule in Steadfast’s email system so that emails to, inter alia, Mr Hampson were forwarded to a Dreamtime email address (AJ [162]). In December 2018, Mr Peak and Mr Stefanovic deleted emails on Steadfast’s email system that related to the AFSA contract and Mr Hampson’s position at AFSA (AJ [192]).

85. The primary judge found that in early November 2018, Mr Peak had, in breach of his obligations to Steadfast, made an arrangement with AFSA to transfer the business previously given to Steadfast via Dreamtime to Dreamtime directly. Among the documents downloaded by Mr Peak in December 2018 from the Steadfast system were documents relating to AFSA. In January 2019, Mr Glavonjic completed the takeover of Steadfast’s business with AFSA by offering to AFSA to have the services provided directly by Dreamtime. AFSA then terminated the contract with Steadfast for the provision of AlienVault consultancy services. (AJ [247], [348].) Mr Hampson also resigned from Steadfast (AJ [238]).

86. The primary judge found that in April 2019, AFSA awarded a contract to Dreamtime for the provision of AlienVault hardware. The contract was extended in October 2019. In 2019 and 2020, AFSA awarded contracts to Dreamtime for IT related services. (AJ [349].) Steadfast was the provider of AlienVault software and a managed security service under licence on a contract due to run to December 2020 (AJ [45]), but as part of Mr Peak’s plan Dreamtime acquired a license to provide the software and the managed security service (AJ [67]–[69], [103], [118], [167], [172], [187], [339]–[340]).

87. Aside from the submission that Ms Batley’s decision to no longer use Dreamtime meant that any contracts after that were not causally connected to the breach of duties, which is dealt with above in appeal ground 1, his Honour identified that the appellants submitted that Steadfast had only one contract with AFSA as at January 2019, and one subcontract with Dreamtime to provide the services of Mr Hampson. They submitted that Ms Batley made no attempt to replace Mr Hampson following his resignation from Steadfast. (AJ [352].) After rejecting the submission in relation to Ms Batley’s decision, his Honour concluded as follows (at AJ [355]): In relation specifically to AFSA, the evidence discloses that from November 2018 Mr Peak and Mr Glavonjic (with the knowledge of Mr Stefanovic) were deliberately intending to interfere with Steadfast’s relationship with AFSA and to transfer the work that had been performed by Steadfast to Dreamtime. The goal of the course of conduct was to not only transfer existing work but also to transfer all future opportunities for additional work from Steadfast (either working directly or as a subcontractor to Dreamtime) to Dreamtime. In that context and given that Mr Hampson was the specified person under the contract and any amendment of it would have required AFSA’s and Dreamtime’s cooperation, I do not accept that there is any significance in the fact that Ms Batley did not seek to find alternative staff to replace Mr Hampson.

The appellants’ submissions

90. The appellants submit that the AlienVault engineers who previously had worked for Steadfast at AFSA were Ms Harvey and Mr Hampson, and that after they were made redundant and resigned, respectively, in January 2019 Steadfast did not replace them. The appellants submit that Steadfast was for that reason not in a position to provide the relevant services to AFSA which was the cause of its losses.

91. The appellants also submit that there was nothing improper in Mr Hampson working for Dreamtime after he left Steadfast, and that there was no pleaded case in reliance on any such impropriety.

Consideration

92. The primary judge’s conclusion that Dreamtime was liable to account for its profits obtained on contracts with AFSA did not depend on the identity of the particular employees, or on Steadfast’s ability to have otherwise performed those contracts. The reasoning was simply that Dreamtime had obtained the exclusive benefit of those contracts because of the execution of Mr Peak’s dishonest scheme; also, but for that scheme, Steadfast would likely have continued to have had the benefit of those contracts. The appellants’ submissions are wrongly directed to the question whether Steadfast mitigated its loss. That, of course, is irrelevant.

93. Understood in that way, it is clear that the fact that by the end of January 2019 Steadfast no longer had the ability to perform those contracts because of the departure of both Ms Harvey and Mr Hampson is irrelevant. The departure of both Ms Harvey and Mr Hampson occurred as a consequence of the breakdown in the Steadfast/Dreamtime relationship which was in turn a product of the dishonest scheme. Dreamtime then acquired the benefit of contracts with AFSA that it would not otherwise have had on an exclusive basis; rather, it would have subcontracted that work to Steadfast in accordance with the original arrangement when Dreamtime was established. That Dreamtime would acquire the exclusive benefit of the contracts with AFSA was the intended consequence of Mr Peak’s scheme.

94. Also, the primary judge’s conclusions did not turn on any claim that Mr Hampson’s employment by Dreamtime per se was improper or in breach of any obligations. The transfer of that employment was merely a small part of the overall scheme that enabled Dreamtime to take the exclusive benefit of the AFSA contract.

95. In the circumstances, there is no error in the primary judge’s conclusions with regard to AFSA.

(4) Nectar Mortgages

96. The primary judge awarded Steadfast an amount of $7,783.49 on account of profits made by Dreamtime from a contract with Nectar Mortgage. The appellants challenge this, and Steadfast concedes it. The appeal in relation to this ground must therefore succeed, and the amount awarded to Steadfast should be reduced by the amount of $7783.49.

Ground 3: GEO Group

Introduction

97. By appeal ground 3 (original appeal ground 4(f)), the appellants contend that the primary judge erred in holding (at AJ [382]) that it was likely that there was a scheme between Mr Peak and a representative of Geo Group (Geo), Mr Allen, to arrange for the termination of Geo’s contract with Steadfast. It is said that that finding was made without evidence, without it being put to Mr Peak, without the appellants being afforded an opportunity to call the relevant witness and without the matter being specifically pleaded. The primary judge’s findings and reasoning

98. The primary judge found that Geo had been a client of Steadfast since August 2017. The original contract was to provide monitoring services using the AlienVault software. (AJ [356].) Mr Allen was Geo’s ICT Program Manager. His position was under that of Mr Mason, and part of his job was to arrange IT services for Geo. (AJ [357].)

99. Mr Mason gave evidence, having been called by the appellants, but Mr Allen did not give evidence. The primary judge explained that in relation to Mr Mason’s evidence, his Honour was left with an uneasy feeling that the Court was not given the full explanation of Geo’s approach to the termination of its relationship with Steadfast and its subsequent engagement with Dreamtime. (AJ [27].)

100. The primary judge made a number of factual findings with regard to it having been part of Mr Peak’s plan to lure Geo away from Steadfast. Those findings included in relation to the deletion of information or documents on Steadfast’s IT system and the downloading and creation of documents. (AJ [359]–[360].) In Mr Peak’s “Transition folder” there was a note made in November 2018 of the need to have a discussion with Mr Mason and Mr Allen. His Honour found that that disclosed plans, at that early stage, to take Geo as a client from Steadfast. (AJ [116]–[117].)

101. The primary judge found that on 3 December 2018, after an exchange of messages between Mr Peak and Mr Stefanovic, Mr Stefanovic sent a quotation document to Mr Allen and then deleted the document and the email from Steadfast’s computer system (AJ [170]). The implication is that his Honour regarded that as being suspicious behaviour indicative of wrongdoing.

102. The primary judge found that on 9 or 10 January 2019, Mr Mason disabled Steadfast’s access to software used to investigate errors disclosed by AlienVault. Because of Mr Mason’s conduct, Steadfast was unable to do in-depth investigation of the details of the alarms that are notified to it which was in turn one of the reasons that Mr Mason subsequently gave for terminating the contract with Steadfast. His Honour found that having regard to the timing of Mr Peak’s departure from Steadfast and Mr Watt knowing of the termination of the contract before Mr Joy and Ms Batley had been advised of it by Mr Allen, it is more likely than not that Geo’s termination of the contract was a step taken by Mr Mason only after Mr Mason and Mr Allen had consulted with Mr Peak. (AJ [228], [232], [362].)

The appellants’ submissions

110. The appellants submit that the primary judge’s finding that there was a scheme between Mr Peak and Mr Allen to bring about the end of Geo’s contract with Steadfast so the contract could be reissued to Dreamtime is a serious finding amounting to a conspiracy of fraud, both on the part of Mr Peak and Mr Allen. They submit that it did not form part of Steadfast’s pleaded case and that it should have been specifically pleaded. In the latter regard, the appellants refer to rr 406(1)(c) and 407(1)(h) of the Court Procedures Rules 2006 (ACT).

111. The appellants submit that because the conspiracy allegation was not pleaded, and Mr Peak was not cross-examined about it, they were denied the opportunity to call Mr Allen. The appellants submit that they were on notice that the termination of the Geo contract would be an issue, and that they therefore called Mr Mason whom they thought was best placed to deal with the reasons for the termination. The appellants submit that the impugned finding of the trial judge was made in breach of procedural fairness.

112. The appellants also submit that the impugned finding was made without any evidence to support it, particularly as it did not arise from any documentary or witness evidence. They submit that the primary judge may have been correct to say that a gap between Mr Peak’s departure from Steadfast and the termination of the contract between Steadfast and Geo “is not a factor which demonstrates that Mr Peak did not take steps prior to his departure to encourage Geo Group to act as it ultimately did”, but it is at least prima facie evidence that there is no connection between the two. They say that his Honour’s approach was to place the onus on the appellants to prove the absence of a breach of obligations. The appellants also refer to s 140(2)(c) of the Evidence Act 2011 (ACT) with regard to the gravity of the matters alleged being a matter to take into account in being satisfied that a case has been proved on the balance of probabilities.

Consideration

113. The relevant pleading against Mr Peak is that he breached his obligations to Steadfast by, amongst other things, “[i]n or about November and December 2018, [he] was engaged in conduct designed to divert contracts appointed to the plaintiff by Geo Group, away from the plaintiff for the benefit of Dreamtime”. The same pleading was made against Mr Stefanovic. The relevant pleading against Dreamtime is that by reason of the pleaded conduct of Mr Peak and Mr Stefanovic, Dreamtime obtained clients and customers from Steadfast and had the use and benefit of Mr Peak and Mr Stefanovic’s services in breach of their contracts of employment with Steadfast to generate income and to benefit Dreamtime.

114. In his affidavit, which was read at trial by the appellants, Mr Mason said that he sought advice from the group head office in the USA with regard to the provision of services following termination of the contract with Steadfast, whereafter in around July or August 2019 he approached Mr Peak and engaged Dreamtime to provide the services. However, in cross-examination he conceded that neither he nor Mr Allen had followed the process of seeking approval from Geo’s head office in the USA, and that it was Mr Allen who approved the appointment of Dreamtime to the same contract that had previously been fulfilled by Steadfast. Mr Mason also said in cross-examination that Mr Allen came to him with the proposal to appoint Dreamtime and that he (Mr Mason) then made the decision to terminate Steadfast and proceed with Dreamtime. It was therefore only at that point that Steadfast was on notice that it was Mr Allen who made the appointment. Of course, the appellants also knew at least from then that Mr Mason’s evidence was that Mr Allen had made the appointment; the documents that were tendered, and indeed their own admitted dealings with Mr Allen, show that they knew from much earlier that Mr Allen had at least a substantial involvement in the appointment.

115. Mr Peak gave evidence after Mr Mason, on the following sitting day and thereafter. It was put to Mr Peak in cross-examination that he suggested to Mr Allen, whilst he (Mr Peak) was still an employee of Steadfast, that Geo should move its business to Dreamtime when he (Mr Peak) went there in early January 2019. It was also put to Mr Peak that he told Mr Watt in January 2019 that Steadfast was about to lose its “biggest client”, i.e., Geo, and that he and Mr Stefanovic were involved in meetings to get the Geo work moved over to Dreamtime. It was put to Mr Peak that he was involved in approaching Geo to get them to move to Dreamtime from his first week at Dreamtime, and that he assisted Mr Stefanovic in that regard. It was put to him that he was trying to underplay his involvement with Geo. Mr Peak either denied those propositions or obfuscated in answering them, but it must be recalled that the primary judge found Mr Peak to be an unreliable witness (AJ [28]).

116. Mr Peak accepted that he was involved in discussions with Mr Allen in relation to quoting for the work between January and March 2019, and that he was involved in the process of negotiating the contract in February 2019.

Ground 4: Dreamtime as a reseller of AlienVault software

Introduction

124. By appeal ground 4 (original appeal ground 4(h)), Mr Glavonjic contends that the primary judge erred in holding that he breached his duties as a director of Steadfast in taking steps to set up Dreamtime as a reseller of AlienVault software in circumstances where: (a) Mr Glavonjic was authorised to receive and pursue opportunities for both Steadfast and Dreamtime simultaneously in his capacity as a director of each company and the conflict which existed between those roles was disclosed by him, and known to and accepted by the shareholders and other director of Steadfast; and (b) The opportunity presented by AlienVault to Mr Glavonjic on 18 October 2018 was presented to Mr Glavonjic in his capacity as director of Dreamtime and was presented to Dreamtime as a consequence of AlienVault seeking an indigenous cooperation partner, and as such did not establish Dreamtime as a competitor to Steadfast but rather only gave Dreamtime better access to government clients which were not, and would not otherwise be, clients of Steadfast.

125. He contends, therefore, that the declaration made by order 11 of the December judgment should be set aside. That declaration is in the following terms: David Glavonjic breached his fiduciary duties owed as a director to Steadfast in that by seeking, on behalf of Dreamtime, to enter an area of business undertaken by Steadfast, he acted in conflict of his duties and failed to disclose that conflict to the other director of Steadfast.

126. This ground of appeal is principally directed at AJ [339] which is in the following terms: Having regard to the relationship between Dreamtime and Steadfast up to the point of his resignation, although not particularised as involving a breach of duty, I accept that at least since 17 October 2018 (when he and Mr Goldsmith had decided to make no offer to Ms Batley for the acquisition of the business), Mr Glavonjic was contemplating means by which he and Mr Peak could take over the business opportunities that had previously been available to Steadfast. In the period from 17 October 2018 until the resignation at 8:27am on 31 October 2018, the only particularised matters are the meeting on 18 October 2018 with Mr Benkendorfer of AlienVault and receipt of an email from Mr Peak attaching a confidentiality agreement relating to a tender to the Tasmanian government. I am satisfied that the enquiries about establishing Dreamtime as a reseller of AlienVault products were undertaken by Mr Glavonjic with a view to taking this business from Steadfast, even if the plan with Mr Peak had not been fully formulated. The relationship between Dreamtime and Steadfast was such that there was clear potential for there to be a conflict of interest if Dreamtime sought to enter an area of business that was undertaken by Steadfast. Having Dreamtime enter the market for AlienVault products and services, in circumstances where that would be in competition with Steadfast, was a manner which gave rise to a conflict between the duties owed to Steadfast and the duties owed to Dreamtime or alternatively Mr Glavonjic’s interest as a director of Dreamtime. That conflict of duty or conflict between duty and interest was not disclosed to the other director of Steadfast, Ms Batley. Having said that, it was only on 1 November 2018, after his resignation as a director of Steadfast, that Mr Glavonjic then followed up with Mr Benkendorfer in relation to Dreamtime becoming a reseller of AlienVault. (Emphasis added.)

Mr Glavonjic’s submissions

130. Mr Glavonjic submits that the primary judge’s relevant finding of breach of duty is in error because it misapprehends the context in which the meeting with Mr Benkendorfer on 18 October 2018 arose. In that respect, he submits that it was AlienVault that initiated the contact with Mr Glavonjic, and not vice versa. When Mr Glavonjic replied, he specifically mentioned his directorship of Steadfast and Steadfast’s existing partnership with AlienVault.

131. Mr Glavonjic submits that the genesis of the discussions between him and AlienVault was not a desire by him to advance Dreamtime at the expense of Steadfast, but rather him making the most of an inquiry by AlienVault to advance the interests of both Steadfast and Dreamtime. He submits that “the main thrust of the meeting was to advance Steadfast’s interests in marketing to and obtaining sales from government clients”. He submits that the meeting “was a step towards advancing the market presence of Dreamtime, Steadfast and AlienVault in providing software and services to government entities”.

132. Mr Glavonjic submits that Mr Benkendorfer’s email record of the meeting on 18 October 2018 shows that he was advancing the interests of both Steadfast and Dreamtime consistently with his directorship of both companies. He says that this is consistent with his initial email response to AlienVault in August 2018 where he sought to further the interests of both companies.

Consideration

133. The primary judge found that in the period from 11 September 2018, there were discussions between Mr Peak and Mr Glavonjic about the possibility of moving the business and staff of Steadfast to Dreamtime or another entity. It was from 17 October 2018, when Mr Glavonjic and Mr Goldsmith decided to reject the offer to purchase Steadfast, that “there were concerted efforts by Mr Peak, in conjunction with Mr Glavonjic, to put in train a process whereby, instead of purchasing the business, they would dishonestly take the benefit of the goodwill and information of the business”. This was described by the primary judge as being a “critical point”. Elements of that plan included Mr Glavonjic, in concert with Mr Peak and/or Mr Stefanovic, seeking to solicit and entice existing Steadfast customers to terminate existing contracts with Steadfast and to instead contract with Dreamtime and arranging to obtain software and hardware to allow the business of Dreamtime to supply products and services that had previously been provided by Steadfast. (AJ [66], [71], [255].) None of those findings is challenged. They form an important backdrop to the more specific finding about Mr Glavonjic and the meeting with AlienVault.

134. Ms Batley’s evidence was that AlienVault had been one of the most profitable sources of revenue for Steadfast. Steadfast had been an authorised reseller of the AlienVault platform since July 2016. She said that Dreamtime did not need to become a partner of AlienVault because the latter’s software was already being supplied through Steadfast which was the only AlienVault reseller with Australian government security vetted staff.

135. It was in that context that Rishi Lohani of AlienVault wrote to Mr Glavonjic on 20 July 2018 seeking information. Although that was addressed to Mr Glavonjic at a Dreamtime email address, it is not apparent that there is any significance attached to that or that AlienVault was specifically seeking to make contact with Dreamtime rather than Steadfast. Mr Glavonjic replied on 7 August 2018, saying that he was very interested in AlienVault. He mentioned another business consultancy operated by him, DK Ventures, and Dreamtime saying that Dreamtime has an indirect interest in AlienVault through its “core partner”, Steadfast. He also mentioned that he was a director of Steadfast. Rishi Lohani replied on 9 August 2018 suggesting a telephone call to “discuss what a successful partnership looks like to you”. Rishi Lohani as “organiser” thereafter arranged for a meeting with Messrs Glavonjic and Peak on 27 August 2018, as appears from an entry in Mr Glavonjic’s e-calendar, although it is not apparent whether the meeting took place.

136. It is not apparent what occurred on this issue between 27 August 2018 and 18 October 2018. On 18 October 2018, there was an in-person meeting between Messrs Benkendorfer and Vlahos of AlienVault and Messrs Glavonjic, Peak and Stefanovic. Mr Benkendorfer sent an email to the other participants after the meeting in which the matters that were discussed were summarised. One of the points was recorded as follows: Setting up Dreamtime as a reseller with us, so we can leverage them for Fed/Local Gov leads. Also review, past/lost/missed leads and opps in this space and to start reaching out.

Grounds 5 and 6: Mr Stefanovic’s liability

Introduction

141. Appeal grounds 5 and 6 (respectively, original appeal grounds 4(i) and 4(j)) concern Mr Stefanovic’s liability: appeal ground 5 is directed to the primary judge’s finding that Mr Stefanovic’s breaches of contract and fiduciary duties caused Steadfast loss assessed at $50,594.69; appeal ground 6 is directed to the primary judge’s award of $202,378.75 under s 1317H of the Corporations Act.

142. Both the finding as to the loss to Steadfast under the general law and the award under s 1317H are referrable to three clients for which Steadfast’s work had been diverted to Dreamtime, namely AFSA, Strategic Data and the University of Canberra (DJ [55]). The primary judge found that the profits made by Dreamtime from those entities amounted to $202,378.75 (AJ [449]). Only 25 per cent of that sum would have been awarded on the breach of contract claim on the basis of the primary judge’s assessment that had Mr Stefanovic not breached his duties and disclosed his knowledge of Mr Peak’s plans to Ms Batley, there was a 25 per cent chance that Steadfast would have been able to make those profits from those clients. After noting that there were no submissions in support of the claim for equitable compensation for Mr Stefanovic’s breach of fiduciary duties, his Honour considered that the same amount would be awarded for equitable compensation (DJ [56]–[57]). However, in relation to compensation under s 1317H, his Honour found that the whole amount of $202,378.75 “resulted from” Mr Stefanovic’s breach of statutory duty under ss 182 and 183 of the Corporations Act. As mentioned above, the higher amount was ultimately awarded as being the most in Steadfast’s favour.

143. By appeal ground 5, Mr Stefanovic asserts that the primary judge erred in finding that Mr Stefanovic’s breaches of contract, fiduciary duties and ss 182 and 183 caused Steadfast any loss in circumstances where the primary judge found only that there was “at least a chance”, assessed at 25 per cent, that the damage to Steadfast would have been less had Mr Stefanovic notified Ms Batley of Mr Peak’s plans. Mr Stefanovic says that that is not a finding on the balance of probabilities that compliance by him with his duties would not have caused loss to Steadfast. He says that his Honour’s statement at DJ [53(c)] that “the actions of Mr Stefanovic would not have caused losses in the absence of Mr Peak’s conduct” is a finding that he (Mr Stefanovic) did not cause any loss to Steadfast.

144. By appeal ground 6, Mr Stefanovic asserts two points of criticism of the primary judge’s conclusion with regard to Mr Stefanovic’s liability to compensate for Dreamtime’s identified profits under s 1317H: (a) First, Mr Stefanovic says that the primary judge erred in holding that he had a positive duty to disclose the breaches of other Steadfast employees to Ms Batley under ss 182 and 183; he says that the duties under those provisions are prescriptive and not proscriptive, i.e., they required him not to engage in any improper conduct to gain an advantage for himself or cause detriment to Steadfast but they did not require him to positively take action to report the conduct of others. (b) Secondly, Mr Stefanovic says that because it was not a breach of ss 182 and 183 for his failure to disclose his and Mr Peak’s breaches to Ms Batley, the causal link between Dreamtime’s profits and his breaches cannot be established; he further says that the primary judge in any event erred in holding that his conduct resulted in the making of profits by Dreamtime in circumstances where it was held that Mr Peak would have been able to carry through his (Mr Peak’s) plans without Mr Stefanovic’s involvement.

The primary judge’s findings and reasoning

145. In the December judgment, the primary judge summarised his findings against Mr Stefanovic. He was found to have engaged in a series of acts between 16 October 2018 and 19 December 2018 which involved a breach of his contractual duty to act honestly and do all in his power to promote or develop and extend Steadfast’s reputation in business. That included failing to make Ms Batley aware of Mr Peak and Mr Glavonjic’s plans. His Honour also held that that conduct amounted to a breach of fiduciary duty. Mr Stefanovic also breached his employment contract by failing to maintain the confidentiality of Steadfast’s confidential information and participating or knowingly assisting in the unauthorised disclosure of its confidential information to, or for the use of, Dreamtime and using the confidential information for the benefit of Dreamtime. (DJ [45].)

146. The matters giving rise to the breaches of Mr Stefanovic’s employment contract were found to also involve breaches of his duties under ss 182 and 183 of the Corporations Act (DJ [46]). Those included conduct on Mr Stefanovic’s part to knowingly support and facilitate Mr Peak and Mr Glavonjic’s plan to shift the Steadfast business to a separate entity. Mr Stefanovic performed the role of sounding board and collaborator. It was found that Mr Stefanovic’s active assistance to Mr Peak and Mr Glavonjic in preparing for the transfer of Steadfast’s business to Dreamtime was in breach of his contractual obligation to “act honestly” and to “do all in [his] power to promote or develop and extend [Steadfast’s] reputation and business”. Further, insofar as Mr Stefanovic was made aware of Mr Peak and Mr Glavonjic’s plans, he breached those same obligations by failing to make those plans known to Ms Batley. (AJ [329].)

147. In relation to the breach of Mr Stefanovic’s contractual obligations of confidence, the conduct of Mr Stefanovic included knowingly assisting in the unauthorised disclosure of Steadfast’s confidential information for the benefit of Dreamtime (AJ [330]).

148. In relation to the breaches of contract, the primary judge concluded as follows with regard to Mr Stefanovic (DJ [53]): (a) he committed a range of breaches of duty which involved assisting and supporting Mr Peak’s breaches of duty; (b) the actions of Mr Stefanovic would not have caused losses in the absence of Mr Peak’s conduct; (c) Mr Stefanovic’s assistance and support facilitated and encouraged Mr Peak’s breaches of contract; and (d) had Mr Stefanovic disclosed to Ms Batley Mr Peak’s conduct and plans, then there is a chance that Steadfast would not have suffered the losses that it did. (Emphasis added.)

149. The primary judge found that it is likely that in the absence of disclosure to Ms Batley, Mr Peak would have been able to largely carry through his plans without Mr Stefanovic’s assistance. However, had Ms Batley been notified then there was “at least a chance” that Mr Peak’s plans would have been interrupted and the damage to Steadfast’s business would have been less. His Honour found that Mr Stefanovic’s conduct “causally contributed to Steadfast’s loss because his failure to disclose his conduct and Mr Peak’s plans allowed those plans to be carried through to fruition.” (DJ [54].) As mentioned, his Honour discounted the losses on the basis of an assessment that there was a 25 per cent chance that Steadfast would have been able to make the profits from the identified clients had Mr Stefanovic spoken up (DJ [55]). His Honour took the same approach with regard to the claim for equitable compensation (DJ [57]).

Ground 5: loss of a chance

158. Appeal ground 5 is essentially directed at whether it is appropriate to award damages for loss of a chance. Mr Stefanovic submits that the primary judge’s findings do not support the making of an award of damages for breaches of contract and fiduciary and statutory duties against him because finding that “there was at least a chance” that Mr Peak’s plans would have been interrupted is not a finding on the balance of probabilities as to causation. He submits that the finding that his actions would not have caused loss, absent the conduct of Mr Peak, on the balance of probabilities as a finding that his conduct did not cause any loss to Steadfast or result in any Dreamtime gain.

159. Properly understood, his Honour awarded damages for Steadfast’s loss of the commercial opportunity to obtain the benefit of the identified contracts diverted from Steadfast to Dreamtime. That is made plain where his Honour says (at DJ [55]) that “there was a 25 per cent chance that Steadfast would have been able to make these profits from those clients and that the damages suffered as a result of his conduct is the value of that loss of chance namely $50,594.69”.

160. As established over a century ago in Chaplin v Hicks [1911] 2 KB 786, loss of a chance is a compensable head of loss. In Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 118–119 (Amann), Deane J said: In many cases, proof of the full extent of the loss or injury sustained will involve establishing an evidentiary foundation for positive and detailed ultimate findings by the court upon the balance of probabilities. There are, however, cases where considerations of justice or the limitations of curial method render ultimate findings, about what would have been or will be, impracticable or inappropriate. In such cases, damages must be assessed on some basis other than findings about what would have ultimately happened if the repudiation or breach had not occurred or about the precise ultimate implications of the situation which exists after the repudiation or breach. In particular, it may be appropriate that damages be assessed by reference to the probabilities or the possibilities of what would have happened or will happen rather than on the basis of speculation that probabilities would have or will come to pass and that possibilities would not have or will not. If, for example, what the plaintiff has lost by reason of the defendant’s repudiation or breach of contract is a less than 50 per cent but nonetheless real and valuable chance of winning some contest or prize, of being the successful tenderer for some commercial undertaking or of deriving some other advantage, in circumstances where a court can decide that a proportionate figure precisely or approximately reflects the chance of success but can do no more than speculate about whether, but for the defendant’s wrongful act, the plaintiff would have actually won the contest, prize or tender or derived the advantage, it would affront justice for the court to hold that the plaintiff was entitled to no compensation at all for the lost chance of competing or striving or for the wasted expenditure which was incurred in obtaining or performing the contract. In such a case, considerations of justice require that the plaintiff be entitled to recover the value of the lost chance itself and that the defendant be not allowed to take advantage of the effects of his own wrongful act to escape liability by pointing to the obvious, namely, that it is theoretically more probable than not that a less than 50 per cent chance of success would have resulted in failure.

Ground 6: liability for Dreamtime’s profits under s 1317H

164. As mentioned, there are two elements to Mr Stefanovic’s challenge to the award of statutory “compensation” under s 1317H of the Corporations Act. The first relates to the content of the duty imposed by ss 182 and 183 and, correlatively, what constitutes a contravention of those sections; the second concerns causation, namely whether Dreamtime’s profit “resulted from” his contraventions.

165. If the argument that Mr Stefanovic’s failure to inform on Mr Peak cannot constitute a breach of ss 182 and 183 of the Act is accepted, appeal ground 6 must succeed. That is because the primary judge made no finding that Dreamtime’s profit resulted from Mr Stefanovic’s conduct which he otherwise accepts as constituting a breach of the Corporations Act, i.e., his participation in Mr Peak’s scheme and his failure to disclose his own conduct. Steadfast does not contend, either by a notice of contention or in its submissions, that the award of $202,378.75 can otherwise be supported. There is therefore no cause to consider whether Mr Stefanovic’s active participation in supporting Mr Peak’s scheme “resulted” in any benefit to Dreamtime within the meaning of s 1317H.

166. If the first element of this appeal ground fails, then there remains to consider whether, nonetheless, Dreamtime’s profit resulted from Mr Stefanovic’s failure to inform on Mr Peak. The parties’ submissions

167. Before considering the parties’ submissions, it should be noted that the resolution of this point has not been without frustration. The appellants’ submissions filed before the hearing of the appeal expressly contended, in accordance with the grounds of appeal, that ss 182 and 183 of the Corporations Act did not impose a positive duty on Mr Stefanovic to inform on Mr Peak. The respondent’s submissions did not address that argument or ground of appeal. As a result, the appellants’ reply submissions stated that they inferred that this ground of appeal was conceded.

168. Then, at the hearing of the appeal, senior counsel for the respondent candidly stated that it was not dealt with in written submissions because “we didn’t understand what the ground of appeal was” and sought to shift blame to the appellants by asserting, wrongly, that the case advanced orally by the appellants was a new one. The respondent was then granted leave to file further submissions addressing this ground to which the appellants were given an opportunity to reply. That is a less than ideal way for the appeal to have been conducted.

169. Mr Stefanovic submits that the only breach of ss 182 and 183 that the primary judge found to have been committed that was also found to have caused a loss was his failure to have informed Ms Batley of Mr Peak’s activities. He contends, however, that there is no open-ended obligation to act imposed by these sections – i.e., that the sections proscribe rather than prescribe conduct. That, so the submission goes, follows from the plain language of the sections: s 182(1) provides that an employee “must not improperly use their position …” and s 183(1) provides that an employee “must not improperly use the information” they have obtained because they are or have been an employee.

Is failure to inform a breach of ss 182 and 183 of Corporations Act?

172. Steadfast submits that ss 182 and 183 are to be construed consistently with fiduciary obligations. In Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; 226 CLR 507 at [55]–[64], Gummow and Hayne JJ considered the legislative history of a predecessor to ss 182 and 183 of the Corporations Act. Their Honours did not entirely accept that the provision in question was merely declaratory of the general law. Their Honours observed (at [62]) that the provision under consideration was designed to encourage good corporate governance by the imposition of deterrents in the form of civil and criminal liability and held that: The standards of dishonesty and impropriety were to be determined by reference to the existing law. By “existing law” was meant the civil law; the joinder of civil and criminal remedies meant that the section could not be described as declaratory of the law as a whole.

173. In Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; 129 ACSR 265, Basten JA (dissenting) observed (at [19]–[20]) that, although the text of the provisions is not based upon the general law distinction between a fiduciary’s duties of no conflict and no profit, there is no doubt that the engagement of the statutory duties “will depend in part on the scope of the general law principles of fiduciary obligations”.

174. Although there are further such differences between the general law and the provisions of the Act (as to which see Austin RP and Ramsay IM, Ford, Austin and Ramsay’s Principles of Corporations Law (17th ed, LexisNexis, 2018) at [9.230.3]), they are at present of no moment. Indeed, in Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; 48 WAR 1 at [452], Edelman J referred to the duties imposed by those sections as “near-identical” to duties in equity (see also Re Earth Civil Australia Pty Ltd (in liq) [2021] NSWSC 966 at [2248] per Ward CJ in Eq). Accordingly, Steadfast’s submission that ss 182 and 183 are to be construed consistently with fiduciary obligations can generally be accepted.

175. In that regard, the submission or suggestion that any such corresponding fiduciary obligation required Mr Stefanovic to inform on Mr Peak is contrary to established principle. Steadfast relies in that respect on Breen v Williams [1996] HCA 57; 186 CLR 71 at 113 and 137–138. At 113, Gaudron and McHugh JJ said (footnotes omitted): 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. (Emphasis added.)

176. And at 137–138, Gummow J said: It would be to stand established principle on its head to reason that because equity considers the defendant to be a fiduciary, therefore the defendant has a legal obligation to act in the interests of the plaintiff so that failure to fulfil that positive obligation represents a breach of fiduciary duty. (Emphasis added.)

Conclusion

192. For the above reasons, save in relation to the small amount that was conceded in relation to Nectar Mortgages and Mr Stefanovic’s appeal to the extent of approximately $152,000, the appeal fails.

193. Mr Stefanovic has been substantially successful on appeal. To reflect that success, he should have 75 per cent of his costs of the appeal. However, as the parties (i.e., Mr Stefanovic and Steadfast) have not made submissions on costs, if they contend for a different costs award they should be given the opportunity to do so by making submissions in writing. They should have a similar opportunity to contend that the costs award below should be different, although, on the face of it, that award should remain undisturbed as it appears to be amply justified by Mr Stefanovic’s substantial loss at trial even taking into account the significant correction made on appeal.

194. Given the de minimis extent of the other appellants’ success, there is no apparent reason why the costs of the appeal should not follow the event. Also, there is no cause to disturb the costs award below that concerns them.

195. There should accordingly be orders as follows: 1. The appeal be allowed, to the extent set out in orders 2 and 3 by consent, and also to the extent in order 4, but that the appeal be otherwise dismissed. 2. Order 1 of the primary judge, made on 30 August 2021, be set aside and in lieu thereof the following order be made: 1. Order that Dreamtime Supply Company Pty Ltd account to Steadfast ICT Security Pty Ltd for profits in equity in the sum of $1,179,466.15. 3. Order 14 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made: 14. The plaintiff may only recover a total of $1,179,466.15 from all defendants exclusive of any amount recovered in relation to the costs of the proceedings. 4. Order 13 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made: 13. Nenad Stefanovic pay damages to Steadfast in the sum of $50,594.69. 5. The respondent pay 75 per cent of the third appellant’s costs of the appeal. 6. The first, second and fourth appellants, jointly and severally, pay the respondent’s costs of the appeal. 7. If the third appellant or the respondent wishes to contend for a different costs order on the appeal to that in order 5 above or a different costs order to order 3 of the primary judge made on 1 March 2022: (i) That party file and serve short written submissions in support of their position within 10 days; (ii) The other party file and serve short written submissions in response within a further 7 days; and (iii) The competing contentions be determined on the papers. McWilliam AJ:

196. I have had the benefit of reading, in draft form, the separate reasons of Elkaim and Stewart JJ. I agree with each of those reasons and with the orders proposed by Stewart J.

I certify that the preceding one hundred and ninety-six [196] paragraphs are a true copy of the Reasons for Judgment of the Court.

Associate:

Date: 21 October 2022