Edmonds & Ors v Donovan & Ors; Disctronics Ltd v Kingston Links Country Club Pty Ltd [2005] VSCA 27

2. I have had the advantage of reading, in draft form, the reasons for judgment of Phillips, J.A. in these appeals. For the reasons which his Honour gives, I agree that - in the main proceeding - the appeals and the cross-appeal should all be dismissed, save as to the appeal commenced by the appellants by notice filed on 20 December 2002, which appeal should be allowed - but only for the purpose of adjusting her Honour's award of compensation so as to make allowance for the deduction of $800,000 for the "Buxton interests" before dividing the profit otherwise determined into "sixths"; and awarding 4/6ths in favour of the respondents (as plaintiffs below).

5. In the "caveat proceeding" (Disctronics Ltd. v. Kingston Links Country Club Pty Ltd) , I agree, again for the reasons given by Phillips, J.A., that the appeal should be allowed; that the orders for compensation should be set aside; and that - in lieu - an order made dismissing the claim under s.118 of the Transfer of Land Act 1958.

10. I have had the considerable advantage of reading the reasons for judgment prepared by Phillips, J.A. in these appeals. I agree with the disposition of the appeals, and the orders proposed in each case, for the reasons given by his Honour.

15. There are four appeals and a cross-appeal before the court. All arise out of one or other of two proceedings which were heard and determined in the Trial Division during 2002. In the first, proceeding No.2053 of 2001 ("the main proceeding"), there were six plaintiffs (referred to below as the Disctronics parties) who claimed relief in consequence of alleged breaches of fiduciary duties by, in particular, the first two defendants, Christopher Edmonds and Peter Cahill in connection with the acquisition and purchase of a certain golf course called Kingston Links. The plaintiffs sought a declaration of the defendants' liability; a declaration

that the golf course, or, as it became, the proceeds of the subsequent sale of the golf course, were subject to a constructive trust for the first plaintiff, Disctronics Pty. Ltd. ("Disctronics"), or the other plaintiffs; damages for unjust enrichment and alternatively an account, equitable compensation or damages. In consequence of the plaintiffs' allegations and, in particular, the claim to a constructive trust, Disctronics lodged a caveat over the golf course before it was sold, and in proceeding No.6221 of 2001 ("the caveat proceeding") the registered proprietor of the land, the fifth defendant Kingston Links Country Club Pty. Ltd. ("KLCC"), sought to have the caveat removed and an order for consequential compensation under s.118 of the Transfer of Land Act 1958.

19. The two proceedings were heard together. The trial judge determined first the questions of liability, delivering comprehensive reasons for judgment (in the course of which she refused to order an account). Her Honour then embarked upon the consequential assessment of compensation, delivering separate reasons for judgment in due course. Four of the plaintiffs, having successfully established breaches of fiduciary duty, recovered against Edmonds, Cahill and KLCC an award of equitable compensation. Disctronics was not successful; its claim to support the caveat was rejected and KLCC obtained an order for compensation under s.118. Edmonds, Cahill and KLCC now appeal against the finding of liability and against the subsequent assessment of compensation, while the successful plaintiffs' cross-appeal against the trial judge's refusal to order an account and appeal against the award of equitable compensation as unduly generous to the unsuccessful defendants. Disctronics appeals against the award of compensation under s.118.

23. In very broad outline, the litigation arose out of an idea being pursued by the plaintiffs, to purchase a golf course, to arrange for a long term lease over it with a sound tenant and then to sell it all to another at a profit. At first, Edmonds, a financial consultant, and Cahill, a real estate agent, were retained to act in the project as agents, but as matters progressed and attention became focussed on Kingston Links and one "Spotless" as the long term tenant, Edmonds and Cahill sought to share in profit over and above their fees for services. In the result they were included on 20 July 1999 in what the trial judge found was a joint venture agreed upon with the four successful plaintiffs and under which all six participants were to share equally in the profit made. Within a matter of weeks, however, disputes arose and the joint venture fell apart.

26. Edmonds and Cahill, claiming that the others had repudiated their agreement for profit sharing, quickly became party, with KLCC, to a further joint venture with what were dubbed "the Buxton interests" and as such they purchased Kingston Links for themselves, installing Spotless as the long term tenant. For their part, the plaintiffs claimed that this was done secretively and behind their backs and, as it made use of information earlier gained in confidence, was in breach of the fiduciary duties owed to them by Edmonds and Cahill in particular, breaches in which the other defendants had knowingly participated: and hence the claims made in the first proceeding. Disctronics, claiming an interest by way of constructive trust, lodged the caveat over Kingston Links on 22 December 2000, which was some 15 months after the plaintiffs first discovered that the defendants had bid successfully for the golf course. That delay was never really explained.[1]

29. On 8 June 2001, KLCC sued to remove the caveat and on 26 June 2001 the plaintiffs commenced the main proceeding, seeking, inter alia, an account, no doubt in view of the fact that the defendants had by then been running the golf course venture for many months quite successfully. On 16 November 2001, KLCC entered into a contract to on-sell the golf course, the contract referring expressly to the caveat and settlement being postponed on that account. On 20 March 2002, interlocutory orders were made, joining the Buxton interests (the sixth, seventh and eighth defendants) and to permit completion of the contract of sale while ensuring that upon settlement the proceeds of sale would be preserved pending trial.[2] Instead, vendor and purchaser agreed to postpone settlement further, on terms.

32. The trial commenced on 9 April 2002 and the hearing on liability concluded on 1 May, when judgment was reserved. As it happened, the proposed purchaser of the golf course, perhaps despairing at the delay in completion, gave notice of rescission on 8 May, the contract was cancelled in June and KLCC sold the golf course to another by contract of sale dated 29 October 2002.[3] Liability was determined in reasons for judgment delivered on 23 October 2002, judgment being given accordingly in the main proceeding on 31 October and, as to costs, on 8 November, when orders were also made in the caveat proceeding. All questions of assessment were then argued on 27 November and determined in reasons for judgment delivered on 3 December 2002. Formal judgment followed in both the main proceeding and the caveat proceeding on 6 December 2002. The four appeals and the cross appeal are directed to the judgments given and orders made on 31 October, 8 November and 6 December.

36. The parties at trial may now be described in more detail. The first plaintiff in the main proceeding, Disctronics, was a company utilised as a vehicle for investment by the second, third and fourth plaintiffs, all of whom were directors and all of whom were associated with the firm of solicitors, Oakley Thompson & Co. The second plaintiff, Kevin Patrick Donovan, was a consultant, as was the third plaintiff, Stephen Howard; the fourth plaintiff, Michael James Quinert, was still a partner. The fifth plaintiff, Richard Bucknall, was a self-employed consultant on golf-course-based investment projects. The remaining plaintiff, Solette Pty. Ltd., was also a company utilised by Donovan and others as a vehicle for property development and investment. Of the plaintiffs, only Donovan, Howard, Quinert and Bucknall (the second, third, fourth and fifth plaintiffs) succeeded in establishing at trial the breach of fiduciary duty alleged by the plaintiffs in the main proceeding and accordingly only they are party to the relevant appeals, as respondents and cross-appellants. Disctronics is the appellant in the caveat proceeding.

39. As for the first two defendants in the main proceeding, against whom the allegations of breach of fiduciary duty were principally made, Edmonds was a former bank manager who operated a finance consultancy known as Home Link Mortgage Corporation Ltd. ("Home Link", the third defendant), while Cahill was a qualified estate agent with experience in business, operating through Domain Hill Property Services Pty. Ltd. ("Domain Hill", the fourth defendant) and another company. (Both Home Link and Domain Hill were later de-registered and the plaintiffs ultimately did not proceed against them.) The fifth defendant, KLCC, became the registered proprietor of Kingston Links upon its purchase through the defendants' joint venture. The sixth defendant, Michael Raymond Buxton, was a business acquaintance of Cahill, the seventh defendant, Emanbee Nominees Pty. Ltd., being his investment vehicle and the eighth defendant, MRB Life Pty. Ltd., another Buxton company. These three ("the Buxton interests") entered the picture only when the joint venture relied upon by the plaintiffs was falling apart, or shortly afterwards. Of the defendants, the first, second and fifth (that is, Edmonds, Cahill and KLCC) are the appellants in the main proceeding and KLCC is the respondent in the appeal launched by Disctronics in the caveat proceeding. In what follows I refer to the parties from time to time as appellants or respondents, depending upon their position as such in the main proceeding.

43. On appeal the appellants submitted that the trial judge had erred in concluding that Edmonds and Cahill were bound by fiduciary duties to the respondents which continued after the joint venture arranged on 20 July 1999 fell apart through disputes. The principal contention of the appellants was that the joint venture had come to an end in consequence of the respondents' repudiation of the agreement of 20 July which, once accepted, had left them (the appellants) free to act as they chose without regard to fiduciary duties that might otherwise have been owing, had the agreement continued. The respondents denied any such repudiation on their part, claiming that the disputes which arose were no more than evidence of hard commercial bargaining, as the trial judge found.

46. Unfortunately, as is to be expected these days with a commercial dispute in which the question of liability alone occupied some 15 sitting days, the material before the appellate court is voluminous. There are 15 appeal books which contain, in addition to the pleadings and 8 early affidavits with 56 exhibits in all, more than 1,000 pages of transcript of oral evidence, some 50 further exhibits (which include witness statements and further affidavits, some with their own exhibits) and a court book, itself consisting of 344 documents - and all this in addition to the reasons for judgment which ran to more than 90 pages on liability alone. Fortunately, the argument on appeal was well focussed and well directed by all counsel and the summary with which we were provided was careful and comprehensive and the outlines on both sides most helpful.

49. In the reasons for judgment dealing with liability, the trial judge carefully set out in detail the dealings between the parties as discovered both from the documents in evidence and the oral evidence before her. Making her findings along the way, her Honour then addressed the principal issues and expressed her conclusions. Most of her Honour's findings are not now under challenge. Nevertheless there was a significant difference in approach on appeal. Mr. Sher invited us to find error below simply by reference to what he called the relevant documents (an appellate court being in as good a position as the trial judge to assess their significance, he said), while Mr. Scerri sought to paint a larger picture in which the credit and demeanour of the witnesses played an important part.

52. Not surprisingly, Mr. Sher built his argument upon the terms in which the joint venture had been agreed upon (according to the trial judge) at a meeting on 20 July 1999.[4] As her Honour pointed out, that meeting was immediately preceded by a memorandum from Edmonds dated 19 July. In that memorandum, Edmonds put forward to Donovan four core proposals, which the judge set out thus in her reasons for judgment[5]:-

"(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 $280,000[6] 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."

The memorandum from Edmonds was accompanied by three scenarios, each of them, like those he had been compiling in past weeks, illustrating a possible outcome in an attempt to calculate, albeit speculatively, the likely profit for the so-called equity provider and the likely profit to be shared amongst the six consortium members.[7]

57. The meeting on 20 July was between these six men, either in person or by telephone, save only for Howard who was not available (but the minutes were corrected and approved by all at a further meeting on 26 July). After identifying the six members of the team (as it was dubbed) and their respective roles in the venture, the minutes dealt with matters under four headings: "Proposed Funding Table", "Provision of Equity", "Acquisition of Subject Property" and "Negotiations with Prospective Tenant". I need mention only the first two. As to the "Proposed Funding Table", subject to the preface that "it is too premature ... to accurately predict final numbers", the minutes declared that "the broad approach is to be as follows" and what followed was pretty much in line with the core elements mentioned above, which in turn derived from the methodology adopted in the scenarios prepared by Edmonds.

60. For instance, in the first of the three scenarios accompanying the memorandum of 19 July, under the heading of "Application of Funds", and over and above the cost attributed to "Land Purchase", an amount was allowed for "Acquisition Costs", for "Disbursements - External" and for "Disbursements - Related", which left a balance that was called "Profit Share". In the Edmonds scenario, each of these items was subject to a note describing what was encompassed and the minutes of 20 July adopted, in substance, the like pattern. Thus in the minutes and under the heading "Disbursements - Internal" (replacing Edmonds' "Disbursements - Related"), outgoings were "to be fixed at $140k for consulting, legal and introduction" (to be shared by Donovan, Howard, Quinert and Bucknall) "and $140k for property, administration and funding" (to be shared by Cahill and Edmonds). As for "Disbursements - External", the minutes declared that these "are to be paid as required" and "are to include cost of funds, disbursements to date, equity arrangement fee (if applicable) and valuation fee".

63. In the settled minutes of 20 July, the term "Profit Share" was explained thus:

"'Profit Share'/'Initial Investor Return' are to be determined as the transaction unfolds. Profit Share to the team is to be split 6 equal ways. It is anticipated that the day-one return on equity to the investor, net of costs, will be approximately 50% of the notional profit after Government duties and imposts (i.e. excluding disbursements to our team) accruing to the equity provider(s), up to a ROE [return on equity] of 22% for an external equity provider. The factors influencing the final approach will be the saleability of the project to an investor (what is the minimum return acceptable), the marketability of the project to the investor (does it appear as an attractive proposal) and whether or not the equity provider(s) form part of our team."

(The words in italics were added by Donovan when the minutes were settled.[8]) Finally, so far as presently relevant, under the heading "Provision of Equity" the minutes added:-

"It was agreed that the matter of sourcing equity funding would be further addressed only after the purchase price of the property and details of the lease arrangements are known".

As the judge said[9], "in this respect the minutes were particularly vague" and "to a large extent, the concept of the profit share was left open ended and undetermined". None the less her Honour was satisfied that the settled minutes bore out that on 20 July 1999 the parties had 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."

73. Thereafter, Cahill continued with his negotiations for the purchase of the golf course (negotiations which he was conducting with one Wood, a director of the owner) and Spotless continued to express interest in a long term lease. By early August, the judge found[10], the joint venture had been agreed upon with "at most, a loose arrangement" for the finding of an equity provider; Spotless had formally offered to pay rental of $1,165,000 per annum and the conditions of a proposed lease had been agreed; and on 3 August Cahill and Wood agreed orally that the golf course would be sold to the venture for $8,680,000[11]. Thus, the likely price at which the golf course was available was now known, together with the amount of rental income stream.

76. On 3 August, Edmonds telephoned Quinert and enquired as to the general financial capacity of the respondents to access funds. Edmonds suggested that the six members of the consortium might fund the project themselves and Quinert asked Edmonds to put his idea in writing. This he did that very day, in a memorandum to Howard and Quinert, with a copy to Cahill. The memorandum read[12]:

"Further to our meeting of this morning and in light of the fact that the `numbers' are firming up, it is timely to consider the equity options. I will leave it to you to liaise with Kevin [Donovan] and Rick [Bucknall] on this subject. 1. STATUS * Peter [Cahill] is in the final negotiations with Kingston and the likely purchase price is $8.688m. For the sake of the following assessments, it is assumed that the value of the plant and equipment is equal to the pay-out figures of the relevant finance leases. * Messrs. Quinert, Howard, Cahill and Bucknall met with Spotless yesterday and it appears that a lease at $1.165m may be achievable. 2. EQUITY OPTIONS 2.1 External Equity: The first option is that an external equity provider is used. The attached page headed `1. External Equity - 50% of Initial Paper Profit to Investor' is provided for information purposes. I make two points: 1. I have been conservative with the market value assessment at $12.22m. If a capitalisation rate of 9% is applied to $1.165m than[13] a market value of $12.94m would be evident. This would have the effect of increasing `profit share' by $360k to c.$1.86m and increase the capital requirement by the same amount to $2.945m. 2. The 70% ROE [return on equity] to the Investor is based [on] this being `Disctronics'. If this was someone else than[14] we would aim to drive this down to 22%. 2.2 Retention by Team As discussed, I would like to put an alternative to you that involves the six team members retaining ownership of the facility. I have illustrated this option in the attached page headed `2. Equity Participation by Each Team Member' using the same assumptions as above. I look forward to receiving your response. In the meantime, please do not hesitate to contact me should you wish."

80. Two scenarios accompanied the memorandum, but unlike the earlier ones which were based upon initial annual rental of about $1 million and an assessed market value of about $11 million, these were based upon initial rental of $1,165,000 per annum and a market value of $12,220,000. The first of the scenarios, headed External Equity - 50% of Initial Paper Profit to Investor, estimated that the external investor would have a profit of $1,810,000 and the six consortium members a profit (over and above fees) of $1,500,000 to be shared among them. In the second, headed Equity Participation by Each Team Member, all profit share among the consortium members was eliminated, together with some of the disbursements, but the "Initial Paper Profit To Team" was put at $3,635,000 - a hefty increase over the $1,500,000 shown in the first scenario.

83. As the trial judge found, Donovan was wholly opposed to the proposal that the six members of the consortium should themselves provide the equity needed for the venture. Donovan instructed Quinert to inform Edmonds that Disctronics would be the equity provider and what followed was Quinert's memorandum to Edmonds dated 4 August[15] which read thus[16]:-

"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 [Donovan], MQ [Quinert] and SH [Howard] will rebate their entitlements in favour of the purchaser. 2. It was settled that the consortium members would receive a share of the `profit'. Once again KD MQ and SH 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 and mortar. By dealing with Disctronics we are adding $90,000 to the pie (ie no proc[uration] 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]. This 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."

87. That was the critical memorandum which, in Mr. Sher's submission, began a course of conduct on the part of the respondents which amounted to repudiation by them of the agreement of 20 July. As the documents to which Mr. Sher took us demonstrated, there were then discussions between some of the consortium members over what was a proper return for Edmonds and Cahill (and I shall mention some of the detail later). On 5 August 1999, Howard wrote out what he said was a "fee agreement" reached and on 6 August that document was typed up, and settled, before being sent that day to Edmonds.[17] In brief, the document stipulated that, provided Disctronics satisfactorily completed the acquisition of the golf course for a price not exceeding $8,688,000 and the gross rent payable by the intended lessee, Spotless, was $1,065,000, Disctronics would pay to Edmonds and to Cahill $150,000 each and to Bucknall the sum of $100,000. Though that document was never signed, Cahill apparently went ahead and prepared a letter on 6 August for signature by Quinert and Howard, confirming the "revised agreement in respect of the professional fees payable" to Edmonds and Cahill and in terms that were consistent with those of the so-called fee agreement.[18] In the event, Cahill's letter of 6 August, though drafted, was never sent.

90. On 10 August 1999, Edmonds wrote to Quinert a letter upon which the respondents relied at trial, for it indicated that the appellants considered that the joint venture was at an end. That letter read as follows[19]:-

"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 [sic] unacceptable. Peter and I are somewhat relieved that we are no longer involved because we believe your integrity and ethics are profoundly lacking."

As argued on appeal, the question was whether (as the appellants contended) this amounted to the acceptance by Edmonds and Cahill of repudiation by the respondents arising out of their insistence that Disctronics be the equity provider; or whether (as the respondents contended) it was the voluntary departure of the appellants themselves, they choosing to walk away from the venture and have nothing more to do with it, instead of negotiating over the amount they were to be paid once Disctronics had emerged as the equity provider.

95. As soon as Quinert had the letter from Edmonds, he wrote to Cahill, asking him to clarify his position and saying, by letter dated 11 August[20]:-

"As I confirmed to you in our telephone conversation of 4th August last the Disctronics Group had then elected to proceed with this acquisition through a wholly owned subsidiary Corwen Grange Pty Ltd. This election was made pursuant to the prior agreement of all concerned, which fact has been acknowledged by Chris Edmonds in the presence of myself and Stephen Howard. As such, you as agent have had a fiduciary obligation to the Disctronics Group to act on its behalf and in its best interests in your discussions with the vendor. Please advise me of what action you have taken as the responsible agent towards securing the acquisition on behalf of Corwen Grange Pty Ltd."

On 12 August, Cahill wrote back on the letterhead of his company, Hillcorp Management, confirming "that my position on the matter accords with the explanation" in Edmonds' letter of 10 August. His understanding was based, he said, on the joint venture "which was clearly documented in the minutes of 20 July 1999 and 26 July 1999 and other written communications". Cahill added, a little later in the letter[21]:-

"In terms of the transaction status, my advice to you and others was that I had reached a stage where Kevin Wood of Kingston Group would accept an offer of $8,688,000. He did say to me that he wanted the offer submitted in writing so he could discuss it with his board. I cannot recall whether or not this specific point was mentioned. At this juncture, our discussions over `the arrangements' started to break down. It was my intention to submit the final offer in writing immediately and I had hoped to obtain written acceptance before going to formal contracts. I telephoned Kevin Wood of Kingston Group at that time and advised him that I had to resolve my position with the group before I could proceed with the final written offer. I told him that I would not jeopardise the transaction in anyway but might need a few days to get it sorted out. In a rather jovial manner over lunch on 5 August 199, I remarked that it might just take a little brinkmanship to resolve it. It became apparent to me soon thereafter that the relationship had completely broken down and this was expressed in Chris Edmonds' letter of 10 August 1999. I then telephoned Kevin Wood as a matter of professional courtesy to advise him that I was no longer involved with your group and sent a letter to him the same day. A further copy of that letter is enclosed for your information, which is self-explanatory, although a copy of this letter was forwarded to you in the mail yesterday."

101. In response to the 10 August letter, Quinert wrote to Edmonds, too, on 12 August, reiterating that his (Quinert's) position was as stated in the memorandum of 4 August and asserting that the document of 6 August, the so-called fee agreement, had been prepared by Howard "to confirm terms of a resolution which had been reached by you and he [sic]", approved of and endorsed (Quinert said) by Donovan, Bucknall and him (Quinert), and as well, "on your representation [by] you and Peter Cahill". The letter went on[22]:-

"The Disctronics Group will be pursuing its right to acquire Kingston Links. This right has been acknowledged by all concerned including yourself. Any attempt on your part to undermine or frustrate that process will constitute a breach of your fiduciary obligations as a former consultant to the project. I will take legal action to prevent or remedy such a breach if required."

105. Howard himself wrote back in answer to Edmonds' letter of 10 August. In a letter of 12 August, Howard referred to Edmonds' "blatant inaccuracies" and the "unwarranted and unjustifiable attack" on Quinert. He continued[23]:-

"To refresh your memory: 1. Indisputably, the chronology of this transaction commenced with you and Peter Cahill acting as consultants to Solette Pty Ltd and subsequently that relationship moved to a joint venture. The venturers were Messrs Bucknall, Cahill, Donovan, Edmonds, Howard and Quinert. At all material times it was agreed between the venturers that if equity of less than $1.5m was required to acquire the Kingston Links Golf Course (`the Course') then the Disctronics Group of Companies could elect to proceed to solely acquire the Course and the joint venture would cease to exist subject always to satisfactory arrangements being made with the non-Disctronics Directors which would reward them for their endeavour and participation; .."

He then recalled that in response to the Edmonds' memorandum of 4 August he had had discussions with Edmonds over what Edmonds and Cahill should be paid, saying[24]:-

"In our first conversation of the afternoon of the 4 August 1999 I was both alarmed and floored when you told me the respective entitlements of both yourself and Peter Cahill was [sic] $370,000.00 ie. in aggregate $740,000.00. Without revisiting the heated conversation that followed later on the 4 August 1999 and again on the 5 August 1999 I ultimately put to you that the Disctronics Group would, should it be successful in acquiring the Course, pay to both you and Peter Cahill $150,000.00 each ie. a total of $300,000.00."

That offer (said Howard in his letter to Edmonds) was accepted by Edmonds on 5 August, shortly before 5 p.m., "for both yourself and Peter".

112. A more conciliatory letter was written by Quinert to Cahill on 19 August, suggesting that perhaps Cahill had not been aware of all that was being said and done by Edmonds. The letter concluded[25]:-

"We have been pleased by what you have achieved and believe that even if the consortium has been dissolved, you are at least entitled to the original success fee, which, subject to settlement, springs back into place with the demise of the consortium. Stephen has informed me that you intend declining any fee in deference to Chris [Edmonds]' position. That decision is your choice to make. However, I hope you make it with a full knowledge of the facts."

117. For the appellants, Mr. Sher submitted that the Quinert memorandum of 4 August plainly amounted to repudiation in that it claimed, falsely he said, that Disctronics had the right to take over the project as its own. No such "right" existed, he contended. Moreover, as the memorandum demonstrated, upon the exercise of that so-called right the agreement for profit-sharing with Edmonds and Cahill was simply put aside. No more were they to receive a share of the profits: they were relegated simply to the receipt of fees for services rendered. What Quinert proposed by the letter of 4 August was (Mr. Sher submitted) no more and no less than an exit fee, the amount of which had yet to be agreed but none the less a fee as distinct from a share of profit.

120. In my opinion the argument fails at both points. First, the introduction of Disctronics into the venture was not the departure that Mr. Sher was at pains to establish. As will be seen, Disctronics had always been in the wings. Disctronics was the vehicle of Donovan and, at least as between the respondents, it was always Donovan's call whether and when Disctronics would come into the venture. The claim that it had the "right to take over the venture" was perhaps misleading, but in a sense it was true. As Mr. Scerri pointed out, the joint venture into which Edmonds and Cahill were taken on 20 July always called for an equity provider and Disctronics now emerged as such. What was always proposed was that the six members of the consortium (once Edmonds and Cahill were admitted) would arrange for the purchase of a suitable golf course, arrange for a long term tenant to be installed and then on-sell the whole to some third party, thereby reaping what was called "the day 1 profit" (although in truth it was the only profit to be reaped by the consortium as such). That profit would be the difference between the price at which the vendor of the golf course could be persuaded to sell and the price which the third party would be willing to pay. It was as if the members of the consortium themselves purchased the golf course, installed the tenant, and then on-sold to the third party.[26] Whether that third party itself kept the golf course and ran it with the tenant installed by the consortium was a matter for the third party: it would be of no direct concern to the consortium. In the various scenarios which were considered, and most of them were prepared by Edmonds, the third party was called "the equity provider" or "the investor"

123. As Mr. Scerri submitted, when the joint venture is properly understood the introduction of Disctronics on the scene was no departure at all. Disctronics was now to be the "equity provider" or "the investor" - the third party which had always been envisaged. In one sense it was true that Disctronics was to "take over the venture", but only in as much as the transfer of the golf course to Disctronics, as to any other third party, would mark the end of the joint venture as such. Importantly, the possibility that Disctronics would in the end be the purchaser had always been in contemplation, at least as one possibility. From the outset, Edmonds had been concerned to prepare what he called scenarios as a means of enabling the consortium to estimate how much an equity provider might be expected to pay for the golf course once the tenant was installed and thus to estimate in turn how much profit might be involved in the venture for the members of the consortium. Such figuring by Edmonds depended in part upon the value which he attributed to the golf course, which he did by capitalising the rental which the long term tenant might be expected to pay, and, as well, upon the debt-to-equity ratio adopted by the equity provider itself. Initially all such figures were speculative, but more certainty was introduced as negotiations progressed and the parties were able to establish the likely price of purchasing the golf course and the likely annual yield from the long term tenant. What is important for present purposes is that in the early scenarios prepared by Edmonds, he made allowance expressly for the possibility that Disctronics would be the equity provider.

126. Both Cahill and Edmonds became involved with the project in April 1999, first Edmonds on the introduction of Donovan and then Cahill at the suggestion of Edmonds. Edmonds was retained to advise on financing and the debt-to-equity arrangements, Cahill to negotiate the acquisition of a site, for a fee.[27] In July, Edmonds and Cahill (the trial judge found[28]), "came to the view that they wanted to share in the profit of the proposed transaction" and on 2 July that is what Edmonds put to Donovan with some detailed figuring, though excluding Bucknall and Quinert from participation. On 6 July, Edmonds sent Donovan a revised scenario, naming the six as members of the consortium, with each to receive one sixth of the profit. Discussion followed, in which Disctronics was mentioned by Donovan as a possible equity provider of up to $1.5 million, but (according to her Honour) mentioned only in passing.[29]

129. None the less, the discussions resulted in some seven further financial scenarios being provided by Edmonds to Donovan on 6 July and yet a further scenario on 10 July. More discussions followed and, on 15 and 19 July, more scenarios from Edmonds. It was in the first of these, the scenarios of 15 July, that Disctronics was actually named. There were three scenarios so dated, the first headed "1. External Equity" and other two, numbered 2a and 2b respectively, each headed "Disctronics Equity". The first had an amount for "Initial Paper Profit to Investor" and an amount for "Profit Share", apparently for the members of the consortium. Correspondingly, the other two scenarios had an amount for "Initial Paper Profit to Disctronics [sic]" and, interestingly, against the other entry "Profit Share", the expression "$ Nil". This was consistent with the following memorandum[30] from Edmonds to Quinert, dated 12 July but sent by facsimile on 16 July[31]:-

"1. `External disbursements' are paid as required. 2. `Internal Disbursements' of approximately $280k are split between KD [Donovan], SH [Howard], MQ [Quinert] & RB [Bucknall] on the one hand and PC [Cahill] & CE [Edmonds] on the other. 3. If an external equity provider is used, the profit is split six ways. 4. If Disctronics decides to participate as the owner (scenarios 2a and 2b), `profit share' does not apply."

133. One can see here the genesis of the so-called core conditions identified on 19 July (the day before the critical meeting on 20 July at which the joint venture was agreed upon). As already mentioned[32]

, these core conditions were communicated by a memorandum from Edmonds to Quinert, dated 19 July, with which three more scenarios were provided. The first was headed "1. External Equity" and the other two, again numbered 2a and 2b, "Related Equity".[33] These were a development of those of 15 July, but this time, not only was there an "Initial Paper Profit" either "to Investor", "to Internal" or "to Disctronics" (of $610,000, $640,000 or $1,210,000), there was also an amount for "Profit Share" for the consortium members (of $180,000, $240,000 or $870,000). Although the memorandum of 19 July sought agreement "to push ahead with obtaining an external equity provider", it simply cannot be said that for the respondents to have introduced Disctronics as the equity provider on 4 August was, in itself, a significant departure from the joint venture agreed upon on 20 July (given especially that the minutes of that date expressly reserved for the future "the matter of sourcing of equity funding"). Mr. Sher sought to rest his case solely on the documents and the documents do not support him.

138. If it matters in view of the way in which the argument was put, the oral evidence too (or, at least, that evidence as reflected in the judge's findings) is against Mr. Sher's submission. For instance, in her reasons for judgment[34]

, her Honour dealt thus with the discussion over the role of Disctronics on 14 and 15 July:-

"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. 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."

The attempt on appeal to establish that the respondents' choice on 4 August of Disctronics as equity provider was in defiance of the agreement of 20 July does not succeed.

145. During the argument, Mr Sher sought to make much of a memorandum put in evidence only after Master Kings overruled a claim to legal professional privilege. The memorandum, dated 12 August 1999, was from Howard to Quinert[35] and it related to a conversation that Howard said he had had with Wood on the preceding day, a Wednesday. The memorandum spoke of Howard's receiving a letter from Edmonds on 11 August "which purported to withdraw he [sic] and Peter Cahill from acting in relation to the mooted acquisition" and of Wood's confirming to Howard that he had received a letter "which was to the effect that the consortium had disbanded". Mr Sher emphasised the next paragraph of the memorandum:-

"I informed Mr Wood that the consortium had effectively ceased to exist in the middle of last week when Disctronics exercised an in-house option to proceed to acquire the golf course for itself and since that event had occurred we had received no communication from Peter Cahill or Chris Edmunds about the status of the negotiations."

In the following paragraph the memorandum spoke of Howard telling Wood that there was no need for concern about becoming "involved in any dispute" because "there was no consortium any longer in existence"; and towards the end of the memorandum, Howard recorded reiterating to Wood "for at least the third time that the consortium ceased to exist at the time of the exercise of the option and any suggestion to the contrary was incorrect".

150. Mr Sher submitted that this memorandum showed that it was not the appellants but the respondents who repudiated the agreement of 20 July but in my opinion that submission should be rejected. Howard's assertion that the consortium "effectively ceased to exist in the middle of last week" put the cessation back to 4 August, the date of Quinert's important memorandum to Edmonds. As Mr Scerri analysed it, and as I have described it above[36]

, the consortium which was set up on 20 July did in a sense "cease to exist" once the equity provider was identified as Disctronics and agreed to acquire the golf course. The consortium was in existence only to bring into relationship the vendor of the golf course and its ultimate purchaser, the consortium existing to act as the go-between and deriving a "day-1 profit" on the day a deal was achieved. In that sense the consortium "ceased to exist" on 4 August with the arrival of Disctronics on the scene as purchaser of the golf course. All else was detail; all else was to be worked out. The memorandum of 12 August from Howard to Quinert does no more than confirm the analysis put forward by Mr Scerri and with which I agree.

155. The second limb of Mr. Sher's argument turned on the offer of what he dubbed an exit fee in lieu of any share of profit. But the contrast between fee and profit was more apparent than real and the figures suggest that the distinction was not significant. Initially, as I have described already, Edmonds and Cahill had been engaged to act for the respondents as financial advisor and real estate agent respectively and the parties had in contemplation the payment to Edmonds and Cahill of fees for their services. Indeed, when Edmonds was preparing his scenarios for the consortium, the sum of $140,000 was allowed, by way of expenses, for the fees payable to both Edmonds and Cahill together (an allowance borne out, too, by the memoranda from Edmonds to Quinert of 15 and 19 July). Now, after the memorandum of 4 August, what was offered was $150,000 each in full satisfaction of all claims and that was surely referable to their entitlement to a share of profit. Contrary to Mr. Sher's submission, the Quinert memorandum did not repudiate their entitlement to profit; the entitlement was expressly acknowledged and the only conclusion reasonably open is that Quinert was offering to pay that entitlement by way of an increase - a significant increase - over and above the $140,000 to which Cahill and Edmonds had hitherto been treated as entitled, for their fees.

158. If there was any change, it was merely a change in approach. The reason is easy to see. If Disctronics became the equity provider - the investor, the third party to take title to the golf course - it would not be simply paying to the consortium the price that an outside third party might be expected to pay. As indicated by Edmonds' scenarios, capitalising the annual rental promised by a long term tenant might yield the value of the golf course to a purchaser, but, as a result of the negotiations that had been had, Disctronics, by its directors (Donovan, Howard and Quinert), knew precisely the asking price of the vendor of the golf course. The profit to be made by the consortium would not then be found in the difference between the purchase price to the consortium and the selling price to the equity provider, but rather in the difference between the purchase price and the value of the golf course to Disctronics. (Perhaps this was the reason for Edmonds' including in his scenarios, among "External Disbursements", the possibility of a valuation fee, something copied into the definition of "Disbursements - External" in the minutes of 20 July.) By the same token, the consortium members had their entitlement to share profit[37]

and any payment to the consortium members for profit would have to be funded, presumably, by Disctronics which otherwise could avoid, at least for the time being, paying more than the vendor's asking price for the golf course, plus expenses. Quinert's memorandum of 4 August acknowledged as much: the directors of Disctronics were to forego their shares of profit while the others, the non-participating members of the consortium, were "entitled to a return significantly greater than the agreed professional fees".

163. The trial judge regarded the memoranda which were exchanged at this time between the parties as no more than evidence of robust commercial negotiation, and so it was. The figure of $150,000 was not plucked out of the blue. On 4 August, Howard sent to Donovan a handwritten fax in these terms[38]:-

"I have offered D L's [Disctronics'] consultants (i.e. PC and CE) $200K (all in) in full and final settlement of all claims for fees, disbursements et al. I am advised in response that the maximum sum of their claims is $370 x 2 ie $740K. I have discounted this as ridiculous and naive. After negotiation, PC and CE's position (subject to PC confirming this) is (or so I currently u/stand) $340K (all in) ..."

Plainly negotiations were on foot, and with both Edmonds and Cahill. The trial judge said this of the next two days[39]:-

"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, whereas 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. 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."

169. The so-called fee agreement was next prepared. (When giving evidence both Edmonds and Cahill denied that any such agreement had been reached, even though Cahill had himself prepared a draft letter to like effect for signature by Quinert and Howard, presumably in case agreement was reached.[40]

) After setting out the fee agreement, the judge continued[41]:-

"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. .. "

According to her Honour, Edmonds and Cahill then drafted a letter to send to the others purporting to terminate their relationship and that was the letter which, once settled by their solicitors, Edmonds wrote to Quinert, dated 10 August, alleging repudiation and acceptance. That letter (her Honour found) "was sent by [Edmonds] and Cahill with the intention of terminating their relationship with Donovan and the others"[42] - and so much is plain beyond argument.

176. To my mind the conclusion is well justified, that the respondents were seeking only to negotiate with the appellants over what the latter should be paid, given the entry of Disctronics into the venture as equity provider. Indeed, Edmonds himself, in his letter to Quinert of 10 August, spoke of "confirmation of your revised offer [being] sought so that I could discuss the matter with Peter Cahill". The offer of $150,000 was just a step, though no doubt the respondents hoped it would be the last step, towards final agreement. As it happened, it was the last step but for a different reason. As already explained, the amount of notional profit to be shared had to be worked out - and to the satisfaction of all - once Disctronics came into the picture; that it was being explored was not per se repudiation, although Edmonds chose to so characterise it in his letter of 10 August, repudiation which he promptly purported to accept. It is at least interesting to recall that the departure by the respondents from the project had been floated by Edmonds with Quinert as long ago as on 15 July (and thus before any agreement to share profit); this time it was put into effect.

179. The obvious reason for the appellants' letter of 10 August lay in the discussions between Cahill and Edmonds of which the respondents were unaware, concerning the opportunity that these two perceived of making more money out of the venture by effecting the transaction themselves. That was when greed overcame judgment, as it was put in argument. Edmonds' evidence was that he and Cahill decided to pursue the deal themselves before sending the letter of 10 August to Quinert[43] and, when Cahill met with Wood that day, he not only handed to Wood a letter about the dissolution of the consortium, he also let him know that he would be interested in pursuing the property himself[44]. To that, Wood responded by letter dated 11 August 1999, saying that he "would be delighted" and on 11 August Cahill invited Buxton to participate in "the deal".[45]

182. In quitting the joint venture as they did, the appellants were certainly not acting precipitately: they had explored, at least in discussion, the possibility of purchasing the golf course, installing the long term tenant and marketing the venture for themselves - and it was to this end that they quickly sought out and obtained the participation of the Buxton interests and ultimately formed their own joint venture with the Buxton interests, interests which under that arrangement also became the equity provider. Cahill of course maintained his contact with Wood and the appellants' own offer to purchase the golf course, for $8.7 million, was made formally on 27 August 1999 through the new corporate vehicle, Emanbee (the seventh defendant at trial). On 1 September that offer was accepted and the deal was done, just three weeks after Edmonds' letter to Quinert, asserting repudiation and acceptance.

185. In light of the foregoing, it seems to me that no error is shown in the trial judge's concluding that on 10 August it was the appellants who walked away from the agreement made on 20 July. Her Honour made her findings and expressed her conclusions on all of the evidence, not just the documents, and counsel's attempt to have us focus solely on the documents is, I think, misdirected, but on this aspect of the case the result is the same. The respondents did not repudiate the agreement, either by seeking to insert Disctronics as the equity provider or by seeking agreement from Edmonds and Cahill on how much they should be paid in consequence. Indeed, it seems to me (as I have little doubt it appeared to the judge) that in all probability it was the appellants who were seeking on 10 August to construct events in such a fashion that they might justify, if challenged, their subsequent course of conduct in establishing a new consortium with the Buxton interests and making an offer for the golf course independently of the respondents and without their knowledge[46].

189. That brings me to Mr. Sher's next submissions: first, that no matter how it had come about, it was common ground - at least by 12 August[47] - that the agreement of 20 July 1999 had indeed come to an end, with the result that any fiduciary duty owed by either side to the other arising out of that agreement had also come to an end and neither could be in breach by reason of subsequent conduct. Alternatively, if the fiduciary duties did survive notwithstanding that termination, both sides must have been subject thereto and if the appellants were guilty of a subsequent breach of fiduciary duty (as the judge concluded), then so were the respondents who accordingly did not come to court as plaintiffs "with clean hands". Here Mr. Sher pointed to the respondents' own offer for the Kingston golf course, made on 19 August; for that was in breach of fiduciary duty, he argued, unless made with the fully informed consent of the others (that is, of Edmonds and Cahill) and such consent could not be demonstrated.

192. I must say that I find the latter submission quite startling. The position of the respondents was altogether different from that of the appellants. The respondents made no secret that they would push ahead with the project[48]

and to all intents and purposes they were doing so with the approval of the appellants; certainly the appellants made no protest. On 19 August the respondents made their formal offer to Wood of $8.688 million, which was in line with what they imagined was Cahill's parting letter to Wood. I refer here to the letter handed by Cahill to Wood on 10 August (a copy of which Cahill sent to Quinert) which read thus[49]:-

"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."

198. I should have thought that this letter alone gave Cahill's blessing to any negotiations that followed between Wood and the respondents (being "the other consortium members" referred to) over the golf course, yet there was more. Cahill, when writing to Quinert on 12 August to state his position, enclosed another copy of his letter to Wood, which he described as "self explanatory"[50]

; and he did the same thing when he wrote to Bucknall too on 12 August[51], regretting (at least in terms) "that the group proposing to acquire the Kingston Links Golf Course has now been dissolved". He concluded his letter to Bucknall thus:-

"I wish you all the best with Kingston Links and other golf course projects."

During telephone conversations with Howard on 13 and 19 August (which Howard clandestinely recorded) Cahill said[52]:-

".. if you guys go and do a deal, you know, good luck to you, you know what I mean",

"And, listen, I was just going to say, you know, just go ahead and do your deals and whatever and no claim or entitlement for me will be forthcoming and if you want me to put that in writing to you, I'm happy to. I think that sort of puts me in the clear with Chris and everyone else, so you go for it."

208. So far as Edmonds was concerned, the respondents' intention to press ahead with the golf course project was plainly declared when Quinert wrote to Edmonds on 12 August, confirming that Disctronics would be "pursuing its right to acquire Kingston Links", asserting that "any attempt on your part to undermine or frustrate that process will constitute a breach of your fiduciary obligations as a former consultant", and threatening "legal action to prevent or remedy such a breach if required".[53]

Howard, when writing to Edmonds on 12 August, declared that arrangements were now in place for him, Howard, to meet Wood "directly upon his return from vacation to resume the negotiation for acquisition of the [golf] Course" and that Bucknall now held "an effective sole mandate from the Spotless Group for sourcing golf course opportunities in Melbourne".[54] The intention of the respondents, as remaining members of the consortium, to pursue the venture to conclusion could not have been made plainer.

213. That is in contrast to the secrecy attending the efforts of the departing members, Edmonds and Cahill. I have mentioned already the discussions between those two on 5 and 8 August about the possibility of their leaving the joint venture and taking the commercial opportunity for themselves. On third party discovery the respondents obtained a draft letter of Cahill's to Wood offering $8.7 million for the golf course on behalf of a purchaser "T.B.A.", with word processor markings indicating the date of preparation as 5 August. In evidence Cahill said that that date was wrong but the judge thought an inference to the contrary was open.[55] In the result the bid made by the consortium formed by Edmonds and Cahill with the Buxton interests was pitched at $8.7 million, some $12,000 above the figure in his letter to Quinert on 10 August. (Although the respondents sought to characterise the $12,000 as no more than a cosmetic difference we were told by counsel that, when making their bid on 19 August, the appellants sought to buy more land than just the golf course for the price that they offered.)

216. As already mentioned, Cahill twice sent Quinert a copy of his letter to Wood of 10 August in which he expressed regret that "the investor consortium .. .. has been dissolved" and suggested that "one of the other consortium members" might be contacting Wood "if they wish to pursue the matter". But he did not tell Quinert that at the same time he was opening the way with Wood for his own further bidding for the golf course. Moreover, in correspondence directed to the solicitors, Arnold Bloch Liebler, on 8 September 1999 Cahill acknowledged that his initial proposal to Buxton that Buxton be sole director of the nominee company to bid for the golf course "was primarily to camouflage my involvement"[56]; while at trial Cahill said that he made a "conscious decision" not to inform the respondents of his intentions with respect to the golf course and that camouflaging his intentions was "an appropriate commercial tactic", given "the proclivity of [the respondents] to litigation".[57] Not surprisingly, her Honour concluded[58]:-

"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."

220. It is in those circumstances that I find startling the submission that if the appellants were guilty of a breach of fiduciary duty, then so were the respondents. Edmonds and Cahill were fully alive to the plans of the respondents, having been active in their formulation since first retained to act as financial advisor and real estate agent respectively. When the joint venture fell apart, the respondents made no secret of their intention to pursue the venture to conclusion, going so far as to warn the others off. The appellants, or at least Cahill, offered the respondents best wishes for their efforts, while at the same time - and unbeknownst to the respondents - they were preparing a new consortium and a rival bid, pitching that bid a little above the bid which they had prepared the respondents to make. The positions were by no means alike.

223. Moreover, it is one thing to say that Edmonds and Cahill, having chosen to walk away from the agreement of 20 July - and probably with a view to seizing for themselves the opportunity to make money out of the venture - were bound to respect both the confidences shared while the joint venture was on foot and the duties owed as result of the shared activity. It is another to say that the respondents who were simply confronted by the appellants' departure - and on the foregoing analysis, their voluntary departure - were similarly bound. The respondents had not repudiated the agreement; indeed they were seeking to honour it (according to the judge) when Edmonds and Cahill walked away. I see no reason to import some duty on the respondents not to use information gained through the efforts of Edmonds and Cahill, who were in the first place engaged to act for the others for a fee. When the agreement of 20 July was made, it replaced the earlier arrangements, but when that came to an end at the option of Edmonds and Cahill there was no basis for their claiming to inhibit the conduct of the respondents. Anyway, that is not what the appellants sought to do.

226. The respondents made an offer to purchase the golf course as always planned; in contrast Edmonds and Cahill made an altogether separate offer, secretively and behind the back of the respondents. Perhaps the appellants did consider themselves free to act as they did and considered the respondents, too, free to act as they did; but, if so, it was only because of what the appellants chose to characterise as the respondents' repudiation of the joint venture agreement of 20 July. In so characterising the respondents' conduct they were wrong and in the result the appellants were not so free to act as they thought. That Edmonds and Cahill elected not to protest about the respondents' making their bid for the golf course (a bid that the two appellants themselves had joined in engineering) cannot now be used to aid an argument that the respondents' conduct was equally a breach of fiduciary duty. Edmonds and Cahill were quite alive to what the respondents were doing; in contrast the former kept their own manoeuvrings to themselves. The argument that the hands of both sides were soiled must be rejected.

229. That leaves for consideration the logically antecedent submission of Mr. Sher, that the fiduciary duties arising out of the joint venture agreement of 20 July did not survive the termination of that relationship, which on any view was over (counsel submitted) "at least by 12 August 1999", however that had come about. Thereupon, Mr. Sher contended, all parties were equally free to act as they would and to make what they could out of the previous negotiations. As I have said, the judge found (and I agree) that Edmonds and Cahill were wrong in asserting that the others had repudiated the agreement of 20 July; it was Edmonds and Cahill who repudiated the earlier agreement and it was Edmonds and Cahill who thus chose to treat that agreement as at an end. But, in so doing, they were not resisted by the others and so, for one reason or another, it is correct to say that the agreement of 20 July to include both Edmonds and Cahill on a profit sharing basis was at an end, and, as counsel said, at an end at least by 12 August.

232. The trial judge saw this as no impediment to her conclusion that Edmonds and Cahill stood in breach of the fiduciary duties which they owed to the others, when the appellants went ahead and negotiated, successfully as it turned out, to purchase the golf course in conjunction with the Buxton interests, to install a long-term tenant and otherwise to proceed with the venture on which they had earlier been engaged with the respondents - and again I agree. Her Honour accepted it as well established that fiduciary duties could continue "beyond the termination of the fiduciary relationship"[59], a phrase used by Brooking, J.A. in Spincode Pty. Ltd. v. Look Software Pty Ltd[60] - although, with respect, it may perhaps be more accurate, strictly speaking, to say that fiduciary duties may survive the termination of the relationship that first called those duties into being. Be that as it may, Canadian Aero Service Ltd v. O'Malley[61] was one of several cases cited by her Honour in support. There, the Supreme Court of Canada was concerned with the position of a director or senior officer of the company who, after resigning from the company, acquired for himself an opportunity that had been actively sought by the company, and with his assistance before his resignation. Laskin, J. (as he then was), speaking for the Court, said[62]:-

"Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer like O'Malley or Zarzycki is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company. 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."

236. In this passage, the contrast is between "a fresh initiative" leading to the opportunity which the prepositus acquires after his resignation and an opportunity to which he is led by his own position with the company; and the obligation of the director or employee to continue observing after resignation a fiduciary duty which arose before resignation will only be the clearer where that resignation may fairly be said to have been prompted or influenced by the desire to obtain the corporate opportunity: Natural Extracts Pty. Ltd. v. Stotter[63]. In the case under appeal, there can be no doubt at all but that Edmonds and Cahill were led by reason of their participation in the venture with the plaintiffs to the opportunity upon which they latched, and latched so immediately after 12 August.

239. Canadian Aero is an oft-cited authority: see, for example, Green and Clara Pty. Ltd. v. Bestobell Industries Pty. Ltd.[64]; Pacifica Shipping Co. Ltd. v. Andersen[65]; Mordecai v. Mordecai[66]; Lord Corporation Pty. Ltd. v. Green[67]; Colour Control Centre Pty. Ltd. v. Ty[68]; Natural Extracts Pty. Ltd. v. Stotter[69]; Addstead Pty. Ltd. v. Liddan Pty. Ltd.[70]; and in Victoria, Spincode Pty. Ltd. v. Look Software Pty. Ltd.[71] Such cases suggest that the most common situations giving rise to the application of the principles enunciated in Canadian Aero involve directors or senior officers of companies, partners and, on occasion, solicitors. Each category has its own problems and it is not possible to generalise from one to the other: indeed it is not wise to attempt to generalise at all in this area for, as is often pointed out, the existence and scope of fiduciary obligations must always be assessed in the particular context in which they are claimed to arise: Colour Control Centre[72] per Santow, J. None the less all the cases just mentioned are instructive, each in its own way, and to these one may add the cases dealing with the acquisition by a former partner of what once was a partnership asset: notably Zachariah v. Ajay Investments Pty. Ltd. in the Full Court of South Australia[73] and in the High Court[74]; compare Metlez v. Kavanagh[75], which must now be read subject to what was said by the High Court in Chan.

242. Most of these cases were cited by the trial judge in her reasons for judgment.[76] It is true that the case under appeal does not involve officers or employees of a company; nor does it involve business carried on by formal partnership. This "joint venture" was no more and no less than a commercial opportunity which several persons joined by agreement in pursuing, but in my opinion it was none the less a venture which was on foot, however informally[77], when Edmonds and Cahill were first retained to act as agents[78]; which continued on foot when they joined in as participants sharing profit as well as taking fees, and which still continued on after Edmonds and Cahill withdrew from participation - and it was a project with which the respondents were and remained involved throughout. As such, and in a practical sense, the central business opportunity was one that belonged to the respondents. As between these parties, the opportunity was first identified by the respondents or by one of them; it was pursued by them, albeit with the assistance of Edmonds and Cahill as agents and then as participants in a profit sharing scheme; and when Cahill and Edmonds withdrew, the respondents were still intent on exploiting the opportunity if they could, as they made plain. Yet Edmonds and Cahill became significant competitors, pitching their bid just beyond that which had earlier been negotiated with Wood.

245. Indeed, it was the very intention of the respondents to pursue the opportunity in question, through the vehicle Disctronics, that caused the rupture between the parties. There can be no doubt but that, had Edmonds and Cahill continued as members of the joint venture, they would have been precluded from seizing for themselves (albeit in conjunction with the Buxton interests) the opportunity that was being explored in respect of the Kingston golf course; and it seems to me absurd to suggest that their conduct in arrogating to themselves the business opportunity in question was justified because they wrongly accused their co-venturers of repudiation which they then purported to "accept". Mr. Sher's argument on this aspect was mainly that Edmonds and Cahill were justified in asserting repudiation by the respondents, and once that claim founders, as I think it does, much of the appellants' case founders too. Although the submission was made[79] that any fiduciary duties arising from the contractual arrangement made on 20 July 1999, such as it was, did not survive the ending of that arrangement by 12 August, the principles were not explored; for instance, the authorities cited by the trial judge on this aspect were not really canvassed in argument.

248. In short, I agree with her Honour's conclusion that in all of the particular circumstances the termination of the arrangement made on 20 July for profit sharing by Edmonds and Cahill did not mean that the latter were thereupon free to seize for themselves, and behind the backs of the respondents, the business opportunity which the parties had been pursuing in conjunction and which the respondents were intent on still pursuing, as they made plain. The appellants' conduct was in breach of the fiduciary duties owed by Edmonds and Cahill as a result of the consensual arrangement made on 20 July and the earlier retainers, and that was so notwithstanding the termination that had occurred by 12 August.

252. Thus, on the primary issue argued on appeal, that of liability, I conclude that no error has been shown in the judgment of the trial judge. It was Edmonds and Cahill who chose to walk away from the joint venture agreed upon on 20 July 1999, and it was they who stood accordingly in breach of fiduciary duty in obtaining for themselves and their new consortium, but without reference to the respondents, all benefit from the project under consideration - the purchase of the Kingston Links golf course and the installation of the long term tenant to the advantage of the owner for the time being. Nor were the respondents by their own conduct, in making what proved to be an unsuccessful bid for the golf course, disentitled to equitable relief for the breach of duty involved.

255. Now, unlike the joint venture proposed by the respondents, under the joint venture constructed by the appellants with the Buxton interests, purchase of the golf course through Emanbee (and then transfer into the name of KLCC) did not mark the end of the interest of the consortium members; for Emanbee was one of them and together the consortium members went on to run the golf course for some time, to their profit. That gave rise to the next questions argued on appeal: i.e., the proper remedy to which the respondents were entitled and, if equitable compensation (as the judge determined), the proper measure of that compensation.

259. Towards the end of the reasons for judgment delivered on 23 October 2002, and after concluding that the appellants were liable for breach of the fiduciary duty owed by Edmonds and Cahill to the respondents, the trial judge considered first the position of the Buxton interests (the sixth, seventh and eighth defendants) in view of the particular claims made by the plaintiffs for relief. Her Honour concluded that the Buxton interests had discharged the onus of establishing that they were in a position tantamount to that of a purchaser for value without notice (their interests being reflected in the subsequent registration on title of KLCC on 14 December 1999)[80] and that "the interests [in the property] of Donovan and the others [were] postponed" accordingly.[81] So much is not now under challenge; nor is the conclusion next following, in which her Honour rejected as inappropriate the remedy of constructive trust.

262. As already mentioned, upon acquiring the golf course, the consortium that the appellants established with the Buxton interests continued, for some time, to run the golf course, with Spotless installed as the long-term tenant. In fact they spent significant sums on improvements, and in particular on constructing a gymnasium. After referring to some of the authorities, the trial judge said[82]:-

"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. 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. 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."

In view of the competing claims of the respective parties, it is not surprising that in all the circumstances the trial judge regarded the constructive trust as an unsuitable remedy. But it was also because of delay on the part of the respondents.

267. Certainly the respondents had not moved swiftly to establish their claims. They made their offer to Wood on 19 August 1999 and on 27 August, Emanbee made its offer to purchase for $8.7 million. On 1 September, Wood told Bucknall that Cahill had made the bid and Bucknall told Howard. Quinert promptly wrote to Cahill asserting that his participation in a consortium bidding in competition with Disctronics was in breach of fiduciary duty, threatening injunctive relief. Howard too sent such a letter to Cahill. But, according to Wood in evidence, it was too late: the deal had been done at a board meeting (of one of the vendors) that morning.[83] A formal contract of sale was entered into between the vendors and KLCC on 29 October 1999 and on 8 December, a lease was signed between KLCC and Spotless as long term tenant.

270. It was in May 2000 that a joint venture deed relating to the golf course was made between KLCC, the Buxton interests and Cahill and Edmonds. Once the gymnasium had been constructed, a lease was signed in respect of that and the joint venture agreement formally varied on 15 December. It was on 22 December 2000 that Disctronics finally lodged its caveat over the land in question, claiming an interest by way of constructive trust. The proceeding to remove the caveat was commenced by KLCC on 8 June 2001 and the main proceeding, brought by the respondents and others against the appellants and others, was commenced on 26 June 2001, only a few months short of the second anniversary of acceptance by the vendors of the offer made by Emanbee.

273. The trial judge identified delay as an "important factor" against granting relief by way of constructive trust. Her Honour said[84]:-

"The plaintiffs did not take action until well after the defendants gained title on 14 December 1999. There were legal avenues open to them none of which were pursued.".

She continued (omitting footnotes other than citations)[85]:-

"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)[86]. 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. 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: see also Warman International Limited v Dwyer[87]; also, Kettle Chip Co Pty Ltd v Apand Pty Ltd[88]. [Emphasis added]

279. This was the framework which the judge laid down in her reasons for judgment on 23 October 2002 for the subsequent assessment of compensation (on which argument was heard in November). The ruling that the respondents should receive four sixths of the value of the property and of the profits made is plainly a reflux of the earlier determination 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", that is, on 20 July 1999, and that is what the respondents now challenge by way of cross appeal in the main proceeding.

282. The respondents contend that the division of profit four sixths and two sixths between respondents and appellants betokens error. The proper remedy, they say, was for an account of all profit made in the venture without deduction for any share at all for the appellants, whether two sixths or otherwise. At first I thought that the respondents were seeking to distinguish between the remedy of account and that of equitable compensation but now I am not sure. An account of profit may mean that all profit must be delivered up (as the respondents were seeking), though with due allowance for such things as the accounting party's further investment, effort or skill (if to do otherwise would be unfair) and due allowance may even include a share of profit. Equity is not to be used as a tool of oppression and the plaintiff in such a case is not to be unjustly enriched. One can see how an order for account may not be very different in result from an order for equitable compensation, if much the same considerations are to be weighed.

285. It is plain that the respondents were not entitled to be rewarded for the success of the venture beyond what was fair, given the fact that the golf course had not merely been purchased by the appellants; the appellants had made significant further investment and invested further effort and skill over a significant period of time. An order for equitable compensation appealed to her Honour as being the more suitable remedy and I am not persuaded that the result would have been very different if an account had been ordered with suitable allowance to the appellants. In the end, however, I do not think that it was the form of the remedy that the respondents criticised, so much as the result whereby the appellants were to be allowed two sixths.

288. For the respondents, Mr. Scerri developed his submission carefully. First, he submitted that when, as found by her Honour, Edmonds and Cahill abandoned the joint venture agreed upon on 20 July 1999, all profit sharing arrangements between them and the other members of the consortium came to an end. That was on 10 August 1999. By abandoning the joint venture, the two appellants had abandoned their earlier rights under the arrangement of 20 July: indeed Cahill told Howard expressly that no claim would be forthcoming from him. Thus, counsel argued, if Cahill and Edmonds had not bought the golf course through their new consortium and if instead the respondents had been successful in arranging the purchase of the golf course with Disctronics as the equity provider, Cahill and Edmonds could surely not have come back, say, some six months later and successfully asserted an entitlement to two-sixths of the profits made by the respondents. In this regard, counsel referred us to two mining cases to demonstrate how absolute the abandonment of a joint enterprise can be: Jorgensen v. Boyce[89], Nicholson v. Gander & McLaughlin[90].

291. Building upon this, Mr. Scerri submitted that the fact that the appellants then wrongfully seized the commercial opportunity for themselves ("stole it", he said) should not put them in any better position. Given the breach of fiduciary duty by Edmonds and Cahill, the appellants ought to have been ordered to account to the respondents for the whole of the profit made in pursuit of the "stolen" venture (subject only to the legitimate interest of the Buxton defendants). To allow the appellants to retain two-sixths of the profit made when pursing the venture for themselves would mean that the appellants were no worse off than they would have been had the agreement of 20 July gone ahead; for two sixths was all that Edmonds and Cahill would then have been entitled to. It cannot be that the latter should be left with two sixths despite their abandoning the original consortium and then "stealing" the venture for themselves - or so the argument ran.

294. It is unnecessary for the purpose of the cross-appeal to pursue the detail of the calculation which the respondents were proposing, for counsel's concern was to secure first and foremost an order for an account in lieu of the compensation ordered at trial. The nature of the complaint will now be apparent. Edmonds and Cahill walked away from the venture agreed upon on 20 July and abandoned its arrangement for profit sharing; they were in breach of fiduciary duty in seizing for themselves the commercial opportunity offered and exploiting it; and therefore they could not be permitted to participate in the success of the venture as if the original agreement of 20 July were still on foot. Mr. Scerri's submission was that the appellants should get nothing at all out of the venture; but, whether or not that was accepted, he submitted that there should first be an account by them of all profit gained and only after the account was taken should there be an assessment of what, if anything, was a proper allowance to make to the appellants for their work and skill in pursuing the commercial opportunity which they had arrogated to themselves.

297. Obviously the judge faced a difficult task in devising an appropriate remedy. On the face of it, the appellants had indeed arrogated to themselves the commercial opportunity which was the subject of the agreement of 20 July 1999 after choosing themselves to walk away from that agreement. None the less it appears to me simplistic to suggest that the appellants were liable to account to the respondents for all profit made from the subsequent exploitation of the venture. Of course allowance had to be made for all proper expenses and the like before arriving at profit made but, even so, to regard that resultant profit as attributable only to the so-called "theft" and therefore to order an account simpliciter would have been to disregard too much of the surrounding circumstances.

300. First, there was the matter of delay; for there was no reason for the respondents to have waited so long before attempting to intervene in the appellants' exploitation of what they now say was "stolen". Such delay smacks of their "waiting to see" and then, when the venture proved profitable, acting opportunistically to grasp the benefit. In short, I consider that too much time had passed to justify a simple accounting: the respondents had waited too long before asserting an overriding interest in the appellants' pursuit of the common enterprise.

303. In Re Jarvis deceased[91], Upjohn, J. discussed the difference between the usurpation of a business in breach of fiduciary duty and the case of a specific asset "such as a renewed lease". In that case, it was significant that -

". . the plaintiff has stood by and has observed her sister running the business, incurring debts and liabilities, paying her mother ten pounds a month, and in 1948 transferring assets and business from [one address] to [another address]".

His Lordship then quoted what had been said by Knight Bruce, L.J. in Clegg v. Edmondson[92]:-

"A mine which a man works is in the nature of a trade carried on by him. It requires his time, care, attention and skill to be bestowed on it, besides the possible expenditure and risk of capital, nor can any degree of science, foresight and examination afford a sure guarantee against sudden losses, disappointments and reverses. In such cases a man having an adverse claim in equity on the ground of constructive trust should pursue it promptly, and not by empty words merely. He should shew himself in good time willing to participate in possible loss as well as profit, not play a game in which he alone risks nothing."

In that case the aggrieved party sought a remedy by way of constructive trust but much the same can be said where the claim is an account of all profit made. Thus, in Warman International Limited v. Dwyer[93] a unanimous High Court said:

"The conduct of the plaintiff may be such as to make it inequitable to order an account. Thus a plaintiff may not stand by and permit the defendant to make profits and then claim entitlement to those profits."

This is obviously how the matter appeared to the trial judge and, with respect, I agree. There was no warrant for allowing the respondents to stand by for nearly two years and then to obtain a remedy which, in effect, exposed them to none of the risks but gave them all of the rewards of the business having been run in the meantime.

312. As the Court said in Warman[94]:-

"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".

Just how flexible such equitable relief can be was demonstrated by Dixon, A.J. in McKenzie v. McDonald[95], and in a manner, as it happens, which is consistent with the approach taken by the trial judge in this case, in the passage set out above.[96]

It may be said, in broad terms, that the remedy of an account looks to the gain made by the party in breach while the remedy of equitable compensation looks rather to the loss suffered by the aggrieved party. If, as I think, an account was inappropriate, this was a case for equitable compensation, the aim of which "is to place the party who suffers following the breach of duty as nearly as possible in a position in which he would have stood had there been no breach": see Hill v. Rose[97], where Tadgell, J. pointed out:-

"The method of calculation of monetary compensation will vary according to the nature of the fiduciary obligation whose breach is to be redressed. It might be appropriate to compensate the plaintiff's loss by reference to the defendant's gain, as in McKenzie v. McDonald. Compensation may be awarded, however, in an appropriate case whether or not the defendant has made any direct pecuniary gain."

In this case, pecuniary gain was made by the appellants and it was not inappropriate to fashion an award of compensation by reference to that gain. That is in accord with what the trial judge did and, with respect, there was no error in that. The real burden of the respondent's case was that the appellants were granted by the trial judge the same share in the joint venture as that to which they would have been entitled had the agreement of 20 July 1999 not been abrogated, and abrogated (as the respondents would have it) at the choice of Edmonds and Cahill. But a number of things can be said about that complaint.

321. First, the award of compensation made below was to operate by reference to the actual results achieved by the appellants over a significant period of time, as distinct from the hypothetical figuring of what might have been achieved had the agreement of 20 July gone ahead. There were significant differences, too, between the one commercial venture and the other. For instance, under the agreement of 20 July the equity provider, once identified, was to acquire the golf course from the consortium and bring to an end the joint venture as such, profit being distributed at that point. Under the joint venture devised by the appellants with the Buxton interests, the funding came not only from the latter but also from Cahill and Edmonds themselves and, after its acquisition, the golf course, with the long term tenant, was to be run by the consortium for so long as they saw fit. KLCC in fact entered into a contract of sale with a purchaser on 16 November 2001 and, after that contract was cancelled in June 2002, a further contract of sale with another on 29 October 2002.[98] Indeed Mr. Sher suggested, at one stage in his submissions, that the award of compensation made in this case served to _over_compensate the respondents, and no doubt that derived, at least in part, from the differences between the one joint venture and the other.

324. Secondly, the concept that the profit should be shared in the proportions directed by the trial judge stemmed directly from the agreement of 20 July 1999. The significance of "an antecedent arrangement for profit sharing" was recognised by the High Court in Warman[99] and the conclusion, as reached by the trial judge, that this was a case in which it was appropriate to "allow [the] fiduciary a proportion of profits" is borne out by this passage from Warman[100]:-

"In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product of consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources. This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful part to play; it is simply to say that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff."

328. Thirdly, if the purpose of equitable compensation in a case like this is to put the complaining party in the position in which it would have been had there been no breach, it cannot be wrong to divide the profits as if the venture had been pursued according to the agreement of 20 July. The respondents referred more than once to the "theft" of the commercial opportunity by the appellants, in particular Edmonds and Cahill. But if it is correct to characterise what happened as the "theft" of the commercial opportunity which was the subject matter of the agreement of 20 July, what Edmonds and Cahill arrogated to themselves was not the whole of the venture, but the four-sixths of it to which the respondents were entitled. Mr. Scerri's argument emphasised that, in walking away from the agreement of 20 July, Edmonds and Cahill forsook, voluntarily, all profit sharing arrangements with the respondents, but it seems to me that in the particular circumstances that was all of a piece with the breach of duty: the one was wrapped up with the other. If it be pressed in answer that, once Edmonds and Cahill forsook the original consortium, the venture, had it gone ahead, would have gone ahead without them so that only the respondents would have been entitled to the profit, the differences can be emphasised, again, between the arrangements made with Edmonds and Cahill on 20 July 1999 and the arrangements which the latter made with the Buxton interests a month or so later.

331. Finally, one can return to the matter of the respondents' delay. It can be said that, by their own delay in asserting what they now claim was their entitlement to the benefits of the commercial opportunity that was so successfully exploited by the appellants, the respondents not merely stood by for nearly two years without attempting to intervene but thereby acquiesced in what was happening, if not indeed to the point of adopting it - and the basis upon which the judge directed that compensation be assessed was consistent with this. In other words the division of profits, two sixths and four sixths, was as if the respondents were content for their part to treat the exploitation of the commercial venture by the appellants as an exploitation not simply for the appellants themselves but also for the respondents. From that standpoint it was indeed, as the trial judge said, a measure of compensation for the opportunity which the respondents lost through the breach by Edmonds and Cahill of their fiduciary duty.

334. Thus, for a number of reasons, it seems to me that the trial judge did not fall into error in the passage quoted above[101]

, when setting out the framework for the subsequent assessment of compensation. It follows that in my opinion the cross-appeal should be dismissed.

340. Once judgment was delivered on 23 October 2002, the parties got together and agreed upon some of the figures. All this is set out in the reasons for judgment subsequently delivered on 3 December 2002, explaining the award actually made. Both sides filed notices of appeal against the assessment, making complaint about different aspects of the determination at trial, but by the time the appeals came to be heard, the dispute focussed only on the entitlement of the Buxton interests to 20% of the profit, that being the proportion in which they contributed to initial funding required by the new consortium. The parties were agreed on appeal that the amount in question was $800,000 and the question was whether that sum should have been deducted from what otherwise was the profit for division between the appellants and the respondents. The judge said not and the appellants contended that that was error. During argument even this point of dispute was resolved; for Mr. Scerri announced that his clients now agreed with the appellants that the sum of $800,000 ought to have been deducted from what otherwise was the found profit of $4,990,562 before calculation of the four-sixths which was due to the respondents.

343. Accordingly, the appellants' appeal commenced by the filing of notice on 20 December 2002 should be allowed, but simply for the purpose of adjusting the award of compensation in line with the agreement since reached. The appeal commenced by the respondents by notice filed on 20 December 2002 can simply be dismissed. That leaves for decision the appeal in the caveat proceeding, the appeal commenced by Disctronics by notice filed on 10 December 2002.

347. It may be recalled that this proceeding commenced in June 2001 when KLCC applied for the removal of the caveat lodged by Disctronics in December 2000 claiming an interest in the land over which the golf course extended. On 8 November 2002 the trial judge upheld the claim for removal of the caveat and on 6 December 2002, it was ordered that Disctronics should pay compensation to KLCC in the sum of $100,000, plus interest. Disctronics appeals against the order for compensation, and that alone. The order was made under s.118 of the Transfer of Land Act 1958 and the question is whether it was justified in the circumstances.

350. As it happens, there was argument over the sum of $100,000 in the course of her Honour's making assessment in the main proceeding. As already described, the parties were agreed about the basic amount in issue: they disagreed only about adjustments to be made to the basic amount before division into sixths and then the payment of four-sixths to the respondents, as plaintiffs. First the respondents contended that there should be added to the basic amount the sum of $100,000 paid by the appellants to the initial purchaser of the golf course, Gauntlet Services Pty. Ltd. For their part, the appellants contended that the basic amount, plus or minus adjustments to be made, was to be divided into sixths and four-sixths paid to the plaintiffs but less the $100,000 payable to Gauntlet. This would, in effect, have recompensed KLCC for the payment made to Gauntlet, but her Honour rejected this submission, saying:-

"... If there is to be any payment in favour of KLCC with respect to the moneys it paid to Gauntlet then such order should be made and dealt with entirely in the context of the caveat proceeding."

Accordingly it was ordered, in the main proceeding, that the payment of $100,000 made by KLCC to Gauntlet be added back to the basic amount before final assessment of what was due by appellants to respondents.

355. The case of KLCC for compensation in the caveat proceeding was relatively straightforward. The caveat was lodged by Disctronics in December 2000; KLCC, as registered proprietor, entered into a contract of sale in November 2001 for the sale of the land, subject to clearing the title of the caveat by 20 December 2001; and when that did not occur, there were successive extensions of time[102]. The second such extension, which was agreed upon in March 2002, was subject to conditions and vendor and purchaser fell into dispute over whether the conditions had been complied with or not. On 8 May 2002 notice of rescission was given by the purchaser, Gauntlet, and as a price of settling the dispute, KLCC agreed to pay $100,000 to Gauntlet on 30 June 2004 or earlier resale. The land was resold on 29 October 2002 and the payment then made. KLCC contended that Disctronics had no reasonable cause for lodging the caveat in the first place and, but for the caveat, it would have been in position to settle with Gauntlet on 20 December 2001. Instead, it was forced into having to settle a dispute with Gauntlet for the sum of $100,000 and hence that was damage suffered by KLCC by reason of the caveat.

358. The claim was made by KLCC under s.118 of the Transfer of Land Act 1958. That section reads:-

**"**Any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as the Court deems just and orders."

Her Honour awarded compensation and must therefore be taken to have concluded that Disctronics had no reasonable cause for lodging the caveat, that the lodging of the caveat caused damage to KLCC, and the measure of that damage was, in the circumstances, the payment of the $100,000 to Gauntlet to resolve the dispute over the latest extension of time. Each of these steps has its own difficulties and, with respect, I think that her Honour erred in awarding the compensation which KLCC recovered.

363. First there is the step that the caveat was lodged without reasonable cause. As to that, her Honour said[103]:-

"The applicable principles in relation to a claim under s.118 of the Transfer of Land Act 1958 were conveniently stated by Hayne, J. in Commonwealth Bank of Australia v. Baranyay. It seems I must be satisfied here that the caveator acted without reasonable cause. It seems, further, that I must be satisfied that Disctronics as the caveator did not hold an honest belief based on reasonable grounds that it had a caveatable interest. In the light of my reasons published on 23 October 2002 I am unable to find that Disctronics held such an honest belief on reasonable grounds. If the caveat had been lodged by Donovan, Howard, Quinert and Bucknall matters might be different. It was not. It was lodged by Disctronics when it was not entitled to; no joint venture or involvement by Disctronics in a joint venture was ever agreed to by the affected party. So much is reflected in my reasons. I am satisfied, therefore, that KLCC is entitled to compensation under s.118 of the Transfer of Land Act from Disctronics."

367. It is true that, to recover compensation for the lodging of a caveat, the aggrieved party must go further than showing simply that the caveator never had a caveatable interest. As Hayne, J. said in Baranyay, more must be demonstrated. His Honour said there[104]:-

"Without in any way seeking to give an exhaustive definition of the circumstances covered by the very general expression `without reasonable cause' it would seem to me to be likely that the foundation for reasonable cause will often be as Wootten, J. said in [Bedford Properties Pty. Ltd. v. Surgo Pty. Ltd. (1981) 1 NSWLR 106 at 108] "not the actual possession of a caveatable interest but an honest belief based on reasonable grounds that the caveator had such an interest". However, as his Honour went on to say, honest belief on reasonable grounds may not always be enough to show reasonable cause for lodging a caveat, e.g. in the case where a caveat is lodged not for protection of the caveator's interest but for an ulterior motive and without regard to the effect on transactions to which the caveator had agreed ..."

In that case, Hayne, J. went on to accept, on the evidence, that the caveator did "honestly believe that he had the interest that he claimed" and further that it had not been shown that he had no reasonable grounds for that belief.

372. Baranyay was decided in 1992. In 1994, the Court of Appeal in New South Wales decided Gustin v. Taajamba Pty. Ltd.[105]. In that case, there was a long history of dispute between the parties in relation to a contract for the sale of land and upon the vendor's purported rescission of the contract for breach by the purchaser, the purchaser lodged a caveat to protect its interest under the contract and sought specific performance. Interlocutory relief was obtained on the usual undertaking as to damages and the court subsequently granted a declaration that the contract had been validly terminated. The question was what damages ought to be paid, either by virtue of the undertaking or because the caveat had been lodged without reasonable cause, if such was the case. As to the latter, Handley, J.A. (with whom the other judges agreed) said[106]:-

"In my opinion the caveator did have reasonable cause to lodge and maintain his caveat while his proceedings were pending in the equity division of this court. He applied and obtained ex parte interlocutory relief on 24 December 1985 and in doing so necessarily persuaded the judge that there was a substantial question to be tried in the proceedings. Thereafter, until the dismissal of the proceedings ... on 13 October 1986, an interlocutory injunction remained in force .... Although the proceedings were dismissed, [the] history [of the proceeding] demonstrates that there was reasonable cause for lodgement of the caveat. Following the appeal to this court ... the plaintiff again moved for interlocutory relief which was granted ... . This remained in force until the appeal was dismissed. ... Once again the grant of such interlocutory relief, either by judicial decision or as a matter of admission by the respondent, demonstrates that there was a substantial question to be determined on the appeal. Apart from the history of the proceedings there was no other evidence to establish that the caveat had been lodged without reasonable cause."

Wanting any other evidence, it was accepted that the plaintiff believed that he had reasonable cause to maintain the proceedings and equally that he had reasonable cause to maintain the caveat. There was no evidence that the plaintiff at any stage thought or was advised that he had no reasonable cause for lodging or maintaining the caveat. This was despite the failure of the plaintiff to give evidence and expose himself to cross-examination.

377. Gustin is important because it demonstrates, more directly than Baranyay, the possibilities that arise when there is a dispute between the parties and one of them lodges a caveat to protect its interest. That is the position here. It seems to me that the caveat was lodged in December 2000 to protect the claims of the respondents that they, with Disctronics, were the victims of a breach of fiduciary duty and that, in the result, the appellants held the land which the new consortium had purchased, on a constructive trust. That position is now shown to have been untenable, but that was only after a fifteen-day trial and more than 100 pages by way of reasons for judgment. On any view, the position was very complex and, given the correspondence in which the parties so feverishly indulged at the critical time in August 1999, very difficult to disentangle. Even now the concept that Disctronics had a "right" to take over the project was a claim that could readily be misunderstood and the position required careful analysis. If the question had been posed whether the respondents had reasonable cause to lodge a caveat to protect their interests, especially against alienation of the property by the new consortium, I should have thought that the answer would clearly have been in the affirmative: and her Honour suggests as much when she said that, had the caveat been lodged by the respondents, "matters might be different"[107]. It was, I think, only the fact that Disctronics was the caveator that led her Honour to conclude that the caveat was lodged without reasonable cause.

380. But should that be so? On any view, Disctronics was in the camp of the respondents. Plainly Disctronics had always been on the sidelines; it was a vehicle commonly used by Donovan and it was intended by Donovan to be used, if appropriate, as the equity provider in the joint venture arranged by agreement on 20 July 1999. The trial judge found that Disctronics was not brought into the picture, so far as Edmonds and Cahill were concerned, until at least 12 July and then had not been included as a member of the consortium when agreement was reached on 20 July. But in early August, the respondents decided that Disctronics would be the equity provider and, of course, that proved to be the catalyst for the disputes that followed. The introduction of Disctronics made it more difficult to calculate the profit to which Edmonds and Cahill were entitled, but, as her Honour concluded, the introduction of Disctronics did not in itself wreck the joint venture. Thus, the respondents were entitled to take the position that, had the joint venture gone ahead, it would have gone ahead with Disctronics as the equity provider and Disctronics would have been the company that took the golf course from the vendor and held it with the long term tenant installed. But, then, did the respondents not have reasonable cause for lodging a caveat, and lodging it in the name of Disctronics which, had the joint venture gone ahead, would have taken title from the vendor?

383. Of course in hindsight the answer lies in the findings made by the judge. First, Disctronics was not a member of the consortium established on 20 July and therefore it was not the beneficiary of those fiduciary duties of which Edmonds and Cahill stood in breach. Those fiduciary duties were owed only as between members of the consortium, and that meant in the circumstances only owed to the respondents. Disctronics therefore was not a proper plaintiff for equitable relief against the appellants: it was still only on the side lines. Moreover, Disctronics had no interest of its own in the property being the golf course because, unless and until the vendor agreed to sell the property to Disctronics (the equity provider), the latter's interest in the property was no more than an expectation: a pretty sound expectation given the attitude of the respondents, but still only an expectation. And so it was on the date when the caveat was lodged. Disctronics had no interest of its own, even in equity, in the property itself and it had no claim as a plaintiff to compensation for breach of fiduciary duties. Hence the decision of the judge that it had no claim to relief and, importantly for present purposes, no caveatable interest.

386. None the less, there is difficulty in finding that the caveat was lodged without reasonable cause. Disctronics could not act otherwise than by its directors. Its directors were Donovan, Howard and Quinert. The history of the proceeding makes it plain that those directors had reasonable grounds for supposing that they were entitled to equitable relief against Edmonds and Cahill and, perhaps, equitable relief by way of constructive trust, depending upon the evidence that was ultimately given and the discretion of the trial judge. Such might have led in the end to a constructive trust being recognised and, perhaps, even a constructive trust in favour of their nominee. Certainly had Disctronics not been named as caveator, it is difficult to suppose that a caveat would not have been lodged by the respondents themselves: one way or the other they were claiming that they, with Disctronics, were beneficially entitled to the golf course which was being run so successfully by Edmonds and Cahill through the new consortium. With great respect, it seems to me somewhat artificial to conclude that the caveat lodged in the name of Disctronics was lodged without reasonable cause when those who lodged it were the directors of Disctronics, the company which would have taken title to the golf course had the joint venture proceeded as planned and without the breaches of fiduciary duty for which the respondents were held entitled to compensation. In short, I think that in December 2000 the matter was sufficiently complex to warrant the caveat for the protection of the respondents' interests and I cannot think it determinative that the caveat named the company as caveator, even if, in the final analysis and in hindsight, the company was held to have no caveatable interest of its own.

389. That is the difficulty I have with her Honour's conclusion that the caveat was lodged without reasonable cause. There is, too, a further difficulty in what her Honour said. Building upon Baranyay, her Honour adopted as the test whether Disctronics "as the caveator" held "an honest belief based on reasonable grounds that it had a caveatable interest". On that basis her Honour said (correctly with respect) that she had to be satisfied that Disctronics did not have such an honest belief. Yet her conclusion was that, in the light of her earlier reasons for judgment, she was "unable to find that Disctronics held such an honest belief on reasonable grounds". Not surprisingly counsel for Disctronics seized on this and contended that her Honour, in expressing her conclusion so, had not gone far enough. It was one thing, counsel said, for the judge to conclude that she could not be satisfied that Disctronics held the honest belief; it was another thing to be satisfied that Disctronics did not hold the honest belief. As expressed, the conclusion fell short of the standard which her Honour herself had set, based on Baranyay. The appellants contended that, in context, the one conclusion amounted to the other, but I doubt it. In the end it does not matter because, in my opinion, it was error to focus on the position of Disctronics only and to conclude that the caveat was lodged without reasonable cause. After all, it was lodged to protect an interest which was claimed in consequence of a serious dispute over fiduciary duties allegedly broken in the course of a commercial enterprise and, as in Gustin, while that dispute was in the course of resolution, there was every reason, I think, for some such caveat being lodged and, to the extent necessary, being maintained.

392. The next question is whether s.118 authorises compensation in circumstances where a caveat, if lodged with reasonable cause, is maintained when the reasonable cause ceases to exist. The example sometimes given is that of the purchaser under a terms contract who lodges a caveat when the contract is entered into and fails to remove it when, say after two years, the purchaser falls in default and the contract is terminated accordingly. So too, I suppose, the holder of the unregistered mortgage who lodges the caveat when the mortgage is given and ceases to withdraw the caveat when the mortgage is paid out. But there is no need to explore that interesting question on his occasion. The question how far the section looks to the maintenance of the caveat, as well as to its lodging, was expressly reserved by Hayne, J. in Baranyay and by Handley, J.A. in Gustin and it should be reserved here too. I mention it only because Mr. Delaney submitted that s.118 was always concerned with the maintenance of the caveat. As he put it, damage flows always from the maintenance of a caveat rather than its lodging; for even if lodged without reasonable cause it is only the insistence of the caveator in refusing to withdraw it that, in the final analysis, can cause damage to the registered proprietor. Whether "lodging" should be read as meaning lodging and maintaining is a point which does not call for decision.

395. In this case the use of the word "lodging" in s.118 wears another aspect too. The caveat was lodged in December 2000. The caveat proceeding was commenced by KLCC early in June 2001 and the main proceeding, which was designed to establish the interests of the respondents and Disctronics (and hence the interests reflected in the caveat) was commenced shortly thereafter, towards the end of June 2001. Everything was then in place for the determination of the dispute over, inter alia, the caveat itself. The relationship of the main proceeding to the caveat proceeding was demonstrated sufficiently by the fact that both proceedings were heard together, and plainly they were inter-related. It was while that litigation was on foot that KLCC entered into the contract of sale which was expressly subject to the removal of the caveat; and it was in the context of the continuing dispute that the extensions of time were granted which ultimately led, by reason of disputes that emerged between vendor and purchaser, to the payment of $100,000. Self-evidently this is a case in which the registered proprietor, allegedly inhibited by the caveat, chose to continue negotiations for the sale of the property and chose to enter into a conditional contract for sale of the property, and then when it apparently had the option of withdrawing from the contract, chose to proceed by way of a consensual extension of time, with complicated conditions over which it was scarcely surprising that some dispute emerged. In the circumstances, there must be a serious question whether the payment of $100,000, which was ultimately made because of the dispute over the conditions attached to the latest extension of time, was in truth a loss suffered by KLCC by reason of the caveat. Certainly there would have been no loss had it not been for the caveat; but equally there would have been no loss had KLCC not entered into the contract of sale and no loss had KLCC, on finding that it could not settle on 20 March 2002, simply elected to walk away from the contract which was conditional. The respondents contended that the caveat was not the cause of the loss of which complaint was made in this instance and I am disposed to agree.

398. There is yet further complication. The agreement for extension, which led to the dispute and in turn to the payment of $100,000 in compromise of the dispute, was made on 20 March 2002. It was on that day that the court itself granted interlocutory relief to enable the sale to Gauntlet to proceed. It ordered that the caveat be removed but that the settlement moneys be paid into an interest bearing account to await the outcome of the proceeding. The orders were made in terms of an earlier offer to like effect by the plaintiffs themselves. Both the earlier offer and the terms dictated by the Court were unsatisfactory to KLCC because, as it saw it, the joint venture into which it had entered for the purchase of the golf course required that upon settlement the Buxton interests should be paid out and neither the earlier offer, nor the terms dictated by the Court, made provision for that payment. Hence it made its own arrangements with the purchaser, Gauntlet, on 20 March for a further extension of time and it was that extension of time which, being granted on conditions, led to dispute and in turn to the payment of the $100,000 by way of compromise. As I apprehend it, the question whether KLCC was in such a position that it had to agree upon a further extension of time was not an issue explored at trial. (The judge said only that it was "not suggested to Cahill in cross-examination that there was any artifice in the calculation of the sum of $100,000 or the settlement itself with Gauntlet", but that deals only with the situation faced by KLCC when dispute erupted over the conditions attached to the latest agreement for extension.)

401. Moreover, not only did KLCC apparently choose to keep the contract on foot when it might have abandoned the contract because the caveat had not been removed, KLCC, when it finally disentangled itself from the contract by paying $100,000 to Gauntlet, was able to re-sell the property for the same price, $14 million, within a few months. On the face of it, then, KLCC would have suffered no loss had it simply walked away from the sale to Gauntlet, abandoning the then current contract. Even a claim for lost interest might have been answered by the receipt of profits in the meantime from the running of the golf course business. There was a question, then, whether payment of the $100,000 was the proper measure of the loss that was said to follow from the maintenance of the caveat.

404. The problems to which I have just referred need not be resolved now. On appeal the matter of the caveat proceeding was canvassed quite shortly towards the end of the argument which, though put succinctly and expeditiously by counsel on both sides, had by then already occupied some two and a half days. Accordingly I do no more than mention some of the difficulties arising because, for the reasons already given, I am not satisfied that KLCC demonstrated that the caveat was lodged in December 2000 without reasonable cause and it follows that the appeal by Disctronics should be allowed.

408. Accordingly, in the caveat proceeding I am of opinion that the appeal should be allowed, the orders made for compensation set aside and in lieu an order made dismissing the claim for compensation under s.118 of the Transfer of Land Act.

411. In the main proceeding, the appeals and the cross appeal should, in my opinion, all be dismissed save one. On the appeal commenced by the appellants by notice filed on 20 December 2002, the appeal should be allowed, but for the purpose only of adjusting the award of compensation to make allowance for the deduction of $800,000 for the Buxton interests before dividing the profit otherwise determined into sixths and awarding four-sixths in favour of the respondents (as plaintiffs below). I would hear counsel on the appropriate form of orders.

[1] Reasons for judgment, 23 October 2002, paragraph [88].

[3] In paragraph [93] there is reference to a contract of resale dated 17 July 2002, but resale in fact occurred by contract dated 29 October 2002: see Cahill's affidavit, 20 November 2002, para.21, AB E1895, Summary (in the caveat proceeding) para.30.

[4] The minutes as settled are at AB E658-659.

[6] In the reasons for judgment, this figure appears by a slip as $200,000. Reference to the original document confirms it as $280,000: see AB E620.

[8] The handwritten alteration appears on AB E669.

[11] Edmonds was to say more precisely that "the likely purchase price is $8.688 m."

[15] As it happened 4 August was the day on which Corwen Grange was incorporated [AB E833], a wholly owned subsidiary of Disctronics with Howard and Quinert as directors.

[17] The document was retyped with some further change on 9 August. The different copies are to be found at AB E846, E852, E859, E863, E865 and E867.

[26] The plan was to use only one transfer in order to minimise stamp duty.

[31] According to her Honour's findings in paragraph [37].

[34] Paragraphs [[],] [[]].

[36] In paragraphs [ and above.

37] Unlike the proposition included by Edmonds in the memorandum dated 12 July and sent on 16 July: see paragraph [ above.

[40] See paragraph [ ]above.

[46] It is true that there was some speculation in the camp of the respondents, especially by Bucknall, that Edmonds and Cahill might be plotting an offer of their own, but nothing was known for certain.

[48] See for example Quinert's letter of 11 August to Cahill (quoted above in paragraph [) and his letter of 12 August to ]Edmonds (quoted in paragraph [).

[52] AB E1340, E1345. See also Cahill's own file note, AB E912.

[56] AB E1635, AB C1056-1059, Respondents' Outline para.35.

[57] AB C993, C1056, Respondents' Outline para.36.

[60] [2001] VSCA 248; (2001) 4 V.R. 501 at 522.

[61] (1973) 40 D.L.R. (3d) 371.

[63] [1997] FCA 471; (1997) 24 A.C.S.R. 110 at 141 per Hill, J.

[64] [1982] W.A.R. 1 (Full Court) at 19 per Kennedy, J.

[65] [1986] 2 N.Z.L.R. 328 (Davison, C.J.) at 334, 337-8.

[66] (1988) 12 N.S.W.L.R. 58 at 65.

[67] (1991) 22 N.S.W.L.R. 532 at 543-4.

[68] (1996) 39 AILR 4,316 (Santow, J.) at 4,319.

[69] [1997] FCA 471; (1997) 24 A.C.S.R. 110 (Hill, J.).

[70] [1997] SASC 6727; (1997) 25 A.C.S.R. 175 (F.C. of S.A.) at 195 per Perry, J.

[71] [2001] VSCA 248; (2001) 4 V.R. 501 (C.A.) at 522-3 per Brooking, J.A.

[73] (1983) 33 S.A.S.R. 395.

[74] Sub. nom. Chan v. Zachariah [1984] HCA 36; (1984) 154 C.L.R. 178 at 186, 197-9 and 206.

[75] (1981) 2 N.S.W.L.R. 339.

[77] Although one must take care in arguing by analogy in this area, it is at least interesting to observe that in Fraser Edmiston Pty. Ltd. v. AGT (Qld) Pty. Ltd. (1988) 2 Qd.R. 1 a formal partnership agreement had been prepared but not concluded, yet those proposing partnership were obliged to honour fiduciary obligations arising out of the trust engendered.

[78] It is of no significance if in retaining Edmonds and Cahill, Donovan was initially acting at the instance of Solette Pty Ltd. That company "soon just dropped out of view" and its role and entitlements in the whole affair were described by the judge, in conclusion, as "a puzzle": see paragraph [181].

[79] Appellants' Outline paras.11(b), 22 to 25.

[86] The intended reference is to Biala (No.2) (1993) 13 W.A.R. 11.

[87] [1995] HCA 18; (1995) 182 C.L.R. 544 at 570.

[88] [1999] FCA 483; (1998) 83 F.C.R. 466, 144 A.L.R. 134; (1999) 88 F.C.R. 568, 162 A.L.R. 505.

[89] (1896) 22 V.L.R. 408.

[90] [1909] HCA 34; (1909) 8 C.L.R. 648.

[91] (1958) 1 W.L.R. 815 at 820-1, {1958] 2 All E.R. 336 at 341.

[92] [1857] EngR 375; (1857) 8 De GM & G 787 at 814.

[93] [1995] HCA 18; (1995) 182 C.L.R. 544 at 559, their Honours citing as authority In re Jarvis (dec.) [1958] 1 W.L.R, 815 at 820-1, Aquaculture Corporation v. N.Z. Green Mussel Co. Ltd. (No.3) (1986) 1 N.Z.I.P.R. 677 at 690 and Colbeam Palmer Ltd. v. Stock Affiliates Pty. Ltd. [1968] HCA 50; (1968) 122 C.L.R. 25 at 33.

[95] [1927] VicLawRp 19; [1927] V.L.R. 134.

97] [1990] VicRp 13; [1990] V.R. 129 at 143-4.

102] The first, for 90 days (to 20 March 2002), was provided for by the contract itself: contract of sale, clause 16.1, AB E1911. Although the words of that clause do not appear clear beyond argument, the parties appear to have treated that first extension as at the option of the purchaser: Summary para.23.

[103] Reasons for judgment, 3 December 2002, paragraph [47].

[104] [1993] VicRp 43; [1993] 1 V.R. 589 at 600.

[107] The trial judge herself granted interlocutory relief designed to preserve the proceeds of sale until the partnership's claim was determined.