It is uncontroversial that on or about 18 November 1994 Mr Bostock informed SEA in writing that the issue of shares to his company, Amona Pty Ltd, would not be taken up by the company or by Mr Bostock.
The terms of the Deed of Settlement ("the deed") referred to in the minutes of the meeting on 11 October 1994 ("the minutes") are important. The deed is expressed to be between Lake Yale and Megamix, Mr Lam and James Lam, and provides :-
"WHEREAS
A. An agreement was entered into on 27 June 1994 between Lake Yale Pty Ltd ('Lake Yale') and Messrs James Lam Sew Hon and Lam Theng Pew ('the Lams') whereby Lake Yale agreed to sell 40% of its shareholding in a seafood company called S.E.A. Food International Pty Ltd ('SEA') to the Lams for the consideration of $700,000.00 plus an advance of $300,000.00 towards working capital of SEA;
B. A dispute has arisen between Lake Yale and the Lams with respect to the said purchase;
C. The parties have met and have reached agreement and desire to record its terms in this Deed.
NOW THIS DEED RECORDS:
1. Lake Yale and the Lams (hereinafter referred to as the 'parties') now agree that the following Agreement is now to take effect on the signing hereof of this Deed :-
(a) The Lams through Megamix Pty Ltd ('Megamix') will purchase 40% of SEA, such purchase to be a direct allocation of new shares from SEA at a consideration of $700,000.00 by purchasing 700 ordinary $1.00 shares at a premium of $999.00 per share.
(b) Lake Yale will purchase an additional 950 ordinary $1.00 shares without premium by way of allocation of new shares from SEA;
(c) The funds referred to in (a) and (b) above are to constitute shareholders equity in the company SEA save that the premium paid by Megamix shall be paid into 'a share premium account' of SEA;
(d) Megamix will advance the sum of $300,000.00 by way of loan towards the working capital of SEA, such loan to be repaid in the following manner :-
(i) $150,000.00 is to be repaid on or before 30 June 1996;
(ii) $150.000.00 is to be repaid on or before 30 June 1997;
Additionally the parties agree that a second charge shall be placed on the plant and equipment of SEA and that all Directors are to ratify such second charge at an extraordinary Directors Meeting to be held immediately after the execution of this Deed.
(e) Mr Lam Theng Pew shall be appointed a Director of SEA and in his absence from Directors Meetings, shall be entitled to appoint an alternate Director at his direction;
(f) In view of the fact that Mr Lam Theng Pew is a non-resident Director, his reasonable travelling and hotel expenses shall be reimbursed to him by SEA, and additionally, he shall be paid an initial Directors Meeting fee of $5,000.00 (AUD), with further meeting fees to be discussed at the first meeting of Directors to take place in the ordinary course of business which will be called at a date pre-determined by the Directors of SEA after 11 October 1994;
(g) Mr Kevin Bostock will also be appointed a Director of SEA;
(h) SEA's accounts shall be subject to a yearly audit with further provision for its Directors to organise further regular audits on a quarterly or half yearly basis;
(i) The parties agree that this agreement shall be effective as from 1 July 1994 and that all funds previously paid by the Lams to Lake Yale and to SEA shall be considered for the purposes of this agreement as monies advanced in anticipation of this Deed by Megamix.
2. The said 40% shareholding referred to in paragraph 1(a) above shall be held in the name of Megamix.
3. Upon the execution of this Agreement by the parties, all previous agreements shall come to an end.
....."
The newly resolved acrimony between Mr Lam and Mr Teh flared again on 12 October 1994. On that day, Mr Lam attended at Tubbs Street expecting to be handed a cheque for $5,000 on account of director's fees for attending the meeting on 11 October 1994 and to be provided with a business class air ticket or reimbursed for the cost of his travel to and from Australia. Mr Teh was of the opinion, which he expressed to Mr Lam, that Mr Lam was not entitled to be paid fees for attending a directors' meeting on 11 October 1994 because the meeting on that day was a shareholders' meeting. Nor, said Mr Teh, was Mr Lam entitled to be reimbursed for the cost of his travel to and from Australia as he had not travelled for a "company [SEA] purpose". There was also an argument between Mr Teh and Mr Lam as to which of SEA or Lake Yale was to pay to Megamix interest due on the advance of $300,000.
On 12 or 13 October 1994, after his meeting with Mr Teh at Tubbs Street, Mr Lam, in company with Mr Bostock, attended the offices of a Mr Anderson (an accountant). Mr Greg Litster, a solicitor, also attended the meeting.
It is appropriate to note at this point that Mr Lam's position in these proceedings, reflected in the pleadings and in his evidence-in-chief, given by statement, was that the agreement reached at the meeting on 11 October 1994 that Huxham would grant to SEA a lease of Thurecht Parade was conditional upon Huxham being provided with the financial records of SEA to 30 June 1994 and being satisfied with same and upon the preparation and execution of a written lease on the terms agreed.
During the course of Mr Lam's evidence in cross-examination, it quickly became apparent that Mr Lam's position as set out above did not accord with what in fact transpired on 11 October 1994. A consideration of that evidence and the evidence of Mr Bostock, as well as the other evidence, including the terms of the purchase contracts signed by Mr Lam, for Huxham, on 10 October 1994, containing, as they did, terms making the contracts conditional upon a "swap" of premises by SEA and SFM, leads to the following conclusions :-
(i) on 11 October 1994, Mr Lam, on behalf of Huxham, agreed to grant a lease of Thurecht Parade to SEA on the terms as recorded in the minutes;
(ii) that agreement was not conditional upon the provision by SEA of financial records nor upon the execution of a lease in writing; but it was contemplated by both parties to the agreement that a written lease would be prepared to reflect what had been agreed and would be executed;
(iii) after the disagreement with Mr Teh on 12 October 1994, Mr Lam decided that he no longer wished to do business with Mr Teh. Mr Lam went to see his solicitor, on 12 or 13 October 1994, with a view to "getting out" of the agreement to lease. It was suggested to Mr Lam that one way of doing so was to demand from SEA financial records, ostensibly so that Mr Lam and the advisers, on behalf of Huxham, could satisfy themselves that SEA could meet the rental obligations under the lease as agreed;
(iv) Mr Lam had been in possession of the 1992 and 1993 financial records of SEA since in or about September 1994 and knew, at least through his accountants in Sydney, that SEA had not been trading profitably. The financial records were requested, with this knowledge, in order that Huxham could refuse to grant the agreed lease on that basis;
(v) at or shortly after the meeting on 12 or 13 October 1994, Mr Lam told Mr Bostock that he did not wish to be involved in any venture with Mr Teh and asked Mr Bostock whether it was possible for he (Mr Lam) and Mr Bostock to proceed with the purchase of SFM and Thurecht Parade without SEA and Mr Teh. Mr Bostock told Mr Lam that it was possible, but that Mr Teh still had all the contacts and was very good with respect to sales in the export markets;
Mr Bostock gave the following evidence about what occurred after the meeting on 12 or 13 October :-
"After the meeting and in the car on the way back Mr Lam said to me that on no account would he enter into any venture with Mr Teh. Mr Lam was aware that I was financially committed to SEA insofar as SEA was financing the refit of my vessel. He said to me 'if it is money you need to break away from Ray Teh, I will finance it'. The matter was not taken any further at that stage."
According to Mr Lam, there was no mention in the conversation referred to of refinancing Mr Bostock's trawler.
Mr Lam gave some evidence in cross-examination which might be thought to support a finding that he resolved, as early as 6 September 1994, to "destroy the business of SEA", to deprive Mr Teh and SEA of the opportunity to conduct business at and develop Thurecht Parade and to entice Mr Bostock to leave SEA and make available skill and knowledge obtained by Mr Bostock for and on behalf of SEA and that he had no intention at any time of granting a lease of Thurecht Parade to SEA and that his apparent agreement to do so on 11 October 1994 was "just a game". I do not accept that to be the case. The weight of the other evidence strongly suggests that whilst Mr Lam had uncharitable intentions towards Mr Teh in early September 1994, he decided on or about 21 September 1994 to give Mr Teh another chance and to proceed, bona fide, with his participation in the expansion of SEA. The evidence shows that Mr Lam took steps in furtherance of that resolution, not least by agreeing to grant SEA a lease of Thurecht Parade. It was not until after the disagreement with Mr Teh on 12 October 1994 that, in the circumstances set out above, Mr Lam's attitude towards Mr Teh reverted to one of hostility.
Robert John Black was at the relevant times the managing director of Plangara Pty Ltd ("Plangara"), the mortgagee in possession of Tubbs Street. In 1993, SEA entered into a lease of Tubbs Street for a period of twelve months. At the expiration of the twelve month period, SEA continued to rent Tubbs Street on a monthly basis. Mr Black's evidence, in respect of which he was not cross-examined, and which I accept, was that Mr Teh knew from the commencement of SEA's tenancy at Tubbs Street, that Mr Black wanted to sell the premises and, in fact, Mr Teh had spoken of purchasing them. Mr Teh contacted Mr Black approximately one month before he left to go overseas (14 October 1994) and told Mr Black of a "possible change of tenant" at Tubbs Street. In the week or fortnight before Mr Teh left Australia, Mr Black had conversations with Mr Bostock and with Mr Bryan of SFM in which the proposal that SEA would move from Tubbs Street to Thurecht Parade and SFM would move from Thurecht Parade to Tubbs Street was discussed. Mr Teh rang Mr Black shortly before he left to go overseas and told him that SEA would be leaving Tubbs Street to go to Thurecht Parade. After speaking to Mr Teh, Mr Black understood that the proposed swap of premises was to take place. He was happy to have SFM as a tenant.
It is also apparent that Mr Teh knew from about 11 October 1994 that Huxham's contracts with respect to Thurecht Parade were conditional upon SFM obtaining a lease of Tubbs Street and that the consent of the lessor of Thurecht Parade (the Port Authority) was required in order to allow Huxham to obtain possession of Thurecht Parade.
On 13 October 1994, Mr Anderson, the accountant, wrote to SEA on behalf of Huxham requesting the financial records of SEA for the previous three financial years to enable a report to be prepared on SEA's financial position "to be considered for the purposes of entering into [the] lease".
Mr Teh left Australia for Singapore, Hong Kong, Taiwan and Japan on 14 October 1997. He remained overseas until 4 November 1994. On or before 17 October 1994, Mr Bostock rang Mr Teh in Hong Kong and told him of the contents of the letter from Mr Anderson of 13 October 1994. Mr Bostock did not tell Mr Teh about the events of 12 or 13 October 1994 involving Mr Lam, apparently because he was "still hoping for a reconciliation [between Mr Teh and Mr Lam] at that time".
I am satisfied that a copy of the letter of 13 October 1994 from Mr Anderson was sent by Mr Bostock to Mr Teh by facsimile transmission on 17 October 1994. Mr Teh gave the following evidence about his reaction to receipt of the letter :-
"MR DOYLE: When you were told by Mr Bostock about the terms of that letter you knew that there was something that needed to be, that you needed to satisfy Mr Lam about, or his accountants needed to satisfy him about before SEA was assured of the lease?---It didn't cross my mind at all because the lease, the agreement was done, and the agreement was to lease the premises of Thurecht Parade to SEA Food International. I did not have a worry. I trusted everybody, in so far as their [sic] was concern. And when I got this letter I look at it and said they must be after the 1994, of which I explained that we had a problem with the computer, of which Mr Lam was aware of as well. And I have already presented the previous three years' accounts two months prior to that. And, you know, the question of the lease did not come up overnight either, you know, on 13 October. You know, they must have been aware of it for probably the week or two weeks before, because I understood that the intention was to purchase the premises to lease it to SEA Food.
.....
And when you were told about the terms of this letter, you knew that his accountants, Clarke and Associates, were to look at the information he had - Mr Lam had - to report upon whether or not your company was financially secure enough to be permitted to take a lease. That is the substance of it?---Yes, if you can take it from there, yes.
And that is what you knew - - -?---But I took it that there was no mention of any financials prior to - not granting us - but prior to the arrangement or the consent of SEA Food accepting the lease.
All right. Well, let us assume you are right about that?---Yes.
When you got this letter on the 13th, you knew that this was something that Mr Lam was imposing - or seeking to impose, anyway - as something as to which he needed to be satisfied before SEA was assured of its lease?---I - I imagine, yes. Okay.
You knew that. All right. Well, that is obvious, really, is it not? Now - you have not answered me, but it is obvious, is not it?---Oh, yes. I did say 'yes'.
Okay. Now, you did not ring up Mr Black and say, 'Look, there might be hiccup about my moving out,' did you, from Singapore or Hong Kong?---Not from Singapore, Hong Kong, according to the chronological order, no.
Okay. Nor did you say that to Mr Bostock. You did not say, 'Look you'd better get on to Mr Black and put a hold on all these things'?---No, not at that time, but later on, I did."
On 17 October 1994, Mr Bostock decided to accept what he described in his evidence to be "Mr Lam's offer". It is apparent that Mr Bostock perceived himself to be, or at least in his evidence-in-chief sought to convey that he had been, the recipient of an offer from Mr Lam to participate in the operation of a seafood processing, export and retail business from Thurecht Parade, independently of SEA and Mr Teh. In cross-examination, it emerged that the offer referred to by Mr Bostock was that said by Mr Bostock to have been made by Mr Lam on 12 or 13 October 1994, after the meeting with the accountant and the solicitor. Mr Bostock's evidence as to the reasons for his acceptance of "Mr Lam's offer" was as follows :-
"On 17 October 1994 I discussed Mr Lam's offer with my wife. I knew that SEA had to leave the Tubbs Street premises but did not have alternative premises if a lease was not to be granted over the Scarborough Fish Markets. Licensed processing premises are very difficult to obtain and there were none available of which I was aware to which SEA could relocate. It would have taken SEA at least 3 - 6 months to locate new premises, fit them out and apply for the appropriate licenses during which time it would not be able to operate. I therefore considered I did not have a choice but to accept Mr Lam's offer."
Mr Bostock wrote to Mr Lam by facsimile transmission on 20 October 1994 :-
"After speaking to several people who are or have been associated with Ray Teh, I and my wife Jan have come to the conclusion that we do not wish to be involved with Ray or S.E.A. Food any longer. I have had preliminary discussions with Lee [Bryan of SFM] at Scarborough and I am quite sure we can come to an arrangement whereas he will move to a different premises instead of Tubbs Street. If you still want to go ahead with Scarborough I think we should talk fairly quickly as there are a lot of preparations to be made.
I will avoid telling Ray for 1 week which will enable me to gather as much information as we will need to carry on the export side of the business by ourselves. I enclose a copy of the plans for Scarborough for your perusal. Let me know by fax or phone of your decision."
It is relevant to note that neither Mr Bostock's communication to Mr Lam nor Mr Lam's response set out below make any reference to an offer by Mr Lam to Mr Bostock in the terms alleged by Mr Bostock or at all.
Mr Lam replied by facsimile transmission on the same day :-
"I have great pleasure to acknowledge receipt of your facsimile of 20.10.94 and I am glad that after you have spoken to several people who are and have been associated with Ray Teh/SEA Food, you and your wife Jan have come to the conclusion that you both do not wish to be involved with Ray or SEA Food, any longer.
With your preliminary discussions with Mr Lee at Scarborough, you are quite sure we can come to an arrangement whereby he can move to a different premises instead of Tubbs Street. Then we can move into Scarborugh [sic] as soon as possible. Yes, we are prepared to go ahead wiyh [sic] Scarborough as you rightly said that there are a lot of preparations to be made.
Please gather as much information as we will need to carry on the export side of the business by ourselves. James Lam's wife, Jean will be of assistance to speak the many dilacts [sic] of Taiwan and Hongkong. I also have friends and connections in Hongkong and Taiwan and check on the credentials of would be purchases [sic] of sea food [sic]. If necessary, when the time is correct, we can also get the assistance of Mr Ray Chui [sic]. He personally know [sic] of the very side of Ray Teh expenditure for diamond rings and expensive gifts for his many young girls in Horbat [sic], Melbourne, Taiwan etc. If only Ray's wife knows [sic] !
As I told you that the decision to pull the pin on Ray rests with you and not on me because of the interest of the Lam Family. We welcome your decision to finally break with Ray Teh/SEA Food.
Boyd Lam and myself have studied the plans to renovate Scarborough, and with your experience with other similar projects, you have my decision and approval to proceed, bearing in mind, first thing comes first. We are confident that you will do your best endeavour with the Scarborough property, the retail business, the ice business, the diesel fuel oil agency income, the local sales and export business to the best joint venture between the Bostock and Lam Families. In my life, my word is my bond.
I have already fax [sic] to Mr Hilton AR Misso to stop the preparation of the sublease of Scarborough Fish Market to Sea Food [sic]. Pleas [sic] now reconfirm with him.
As per telephone conversation with you of yesterday's date, Kindly immediately request Mr Mike McFillin to prepare the necessary papers for my son, Mr James Lam to be a director and shareholder of Huxham Pty Ltd and his wife, Jean Gloria French as his alternate. ..."
On 25 October 1994, Mr Bostock wrote to Mr Teh, who was in Japan, a handwritten letter of resignation :-
"It is with much regret that I resign my position as factory manager and also as a director of S.E.A. Food International. Due to unforeseen circumstances which have arisen in the last 24 hours I feel that I cannot continue in my present role.
There is a fair amount of movement with the trawler so I hope to have a sale fairly soon and if that doesn't happen I will be going back to sea."
The letter was sent to Mr Teh by an employee of SEA on 25 October 1994. After receiving Mr Bostock's letter, Mr Teh telephoned him from Japan in an attempt to dissuade him from resigning. Diary notes made by Mr Teh at the time record that :-
"... It was very apparent that Kevin [Bostock] had been influenced by Lam's solicitor that SEA will not get the lease & be sued. Kevin had legal advice from - his own solicitor this afternoon that as an employee of SEA Food he was not going to be in a conflict of interest re his consulting work for Lam & working for SEA as I would have directed him to keep proceeding working on the project ..."
Mr Teh's diary notes record that he telephoned Mr Lam in the evening (Japan time) before again telephoning Mr Bostock :-
" ... Lam said that he had not instructed his solicitor not to proceed with the lease - (adding) YET!
Lam said the building was going - ahead as planned & then complained of his $5000 [indecipherable] he wasn't paid in Brisbane for attending the shareholders' meeting. I then asked him 'Is SEA Food going to get the lease or not' to which Lam replied 'wait til you get back & see your Acct' and then hung up on me.
I telephoned Kevin back for the 3rd time then & told him that Lam denied Kevin's allegations. Kevin said 'I would not believe that Lam would lie like that'. I then told Kevin to reconsider his resignation from SEA Food as Production Mngr & come back to me on Wed."
On 27 October 1994, Mr Teh left Japan and travelled to Taiwan. Mr Teh's diary notes record the following :-
" ... Lori [an employee of SEA] told me that Steve (Scarborough) came in and asked if everything was ok to move in next Tuesday as Kevin & Ray had a tiff. I called Kevin & asked him what was all this about? (I have had nothing to do with leases or relet of Tubbs St at all). Kevin said settlement would be at least 2 weeks away & will speak to Steve. I told Kevin that if SEA did not have anywhere to move I will transfer our equipt to Pine St & wind down the company. Kevin said that 'Seafood Traders' was available & I said it was no good without him.
Lori spoke to Rob Black (landlord) & then I called Rob who told me that he had advice he needed to give 'SEA Food' 30 days notice anyhow & a lease for Scarborough was in the pipeline. I then asked Rob not to do anything until I got back after the 5th of November & he could get in touch with me via here. Rob gave me an undertaking that he would not proceed with the lease until he first spoke to me ..."
Mr Black's evidence, which I accept, was that Mr Teh contacted him from Taipei in late October 1994 and told him that SEA was having problems with the possible change over to Thurecht Parade and may be left without premises "because of a deterioration in his relationship with his investors." Mr Teh asked Mr Black not to enter into any formal lease with SFM until he returned to Australia. Mr Black told Mr Teh that he had already verbally agreed to lease Tubbs Street to SFM and had entered into a "gentleman's agreement" to that effect, but he gave the undertaking sought.
On 28 October 1994, Mr Lam deposited (or caused to be deposited) $50,000 into Mr Bostock's account. According to Mr Bostock he had told Mr Lam that he needed that sum to complete the refit of his trawler.
Mr Black for Plangara, wrote to SEA a letter dated 31 October 1994 giving SEA notice to vacate Tubbs Street on or before 30 November 1994. Mr Black said that the notice was sent to place Plangara in a position to quickly enter into a lease with SFM if negotiations with SEA were not fruitful. According to Mr Black, the issue of SEA entering into a formal lease of Tubbs Street, after the expiration of the initial twelve month lease, had been the subject of a "friendly personal struggle" between he and Mr Teh, with Mr Teh's position being that SEA was not interested in a formal agreement.
After Mr Teh's return to Australia on 4 November 1994, Mr Teh and Mr Black discussed Tubbs Street. Mr Teh indicated that SEA was prepared to enter into a formal lease of the premises. In the event, Mr Black for Plangara decided to enter into a lease with SFM primarily because "Plangara had already made a gentleman's commitment to leasing the premises to [SFM]" and, to a minor degree, because SEA had not been prepared to sign a lease "until the very last minute". Interestingly, Mr Black also gave evidence that the arrangements between Plangara and SFM "firmed up" in the week and a half to two weeks after Mr Teh's telephone call to Mr Black prior to departing overseas. Mr Black said that had Mr Teh contacted him during that period he "would not have felt so bound to proceed with [SFM]" and had Mr Teh asked for a lease of Tubbs Street in the week or so following that telephone call, Mr Black would have given him a lease.
On 4 November 1994, SEA's solicitors wrote to Trilby Misso, who then acted on behalf of Huxham in relation to Thurecht Parade, asking that the draft lease, in accordance with the agreement reached on 11 October 1994, be forwarded to them. Trilby Misso responded by letter dated 7 November 1994 stating :-
"... Our client is not aware of any agreement reached. In any event, our client advises that it is not proceeding with any lease proposed by you in your letter under reference."
SEA was forced to vacate Tubbs Street and its operations were moved to premises at 6 Pine Street, Clontarf ("Pine Street"), which were, according to Mr Teh, not entirely suitable for SEA's operations. These proceedings were commenced by application and statement of claim filed on 22 December 1994.
Renovations at Thurecht Parade, the nature and extent of which will be discussed later in these reasons, were commenced on or about 13 October 1994 and were completed on 30 November 1994. Mr Bostock was given 100,000 shares in Huxham, a ten percent shareholding, and was made a director. He became the General Manager of Huxham trading as Scarborough Seafoods. He operated the business along the same lines as he was operating SEA, and he said, did everything including the export side of the business and retail to the public. Mr Bostock resigned as an employee and as a director of Huxham on 7 March 1995.
THE APPLICANT'S CLAIM
Introduction
There is no dispute that, at all times relevant to the applicant's claim and the cross-claim, Mr Lam was the "directing mind and will" of Huxham and Megamix and that Mr Teh was similarly so with respect to SEA and Lake Yale (Re Rossfield Group Operations and Morton Holdings (ACT) Pty Limited [1981] Qd R 372 at 377; El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685 at 695 - 696, 705 - 706).
Contract
The first element of SEA's case against Lam, Huxham and Megamix (collectively, the respondents) is a claim for damages against them for breach of the agreement said to have been concluded on 11 October 1994 to grant a lease of Thurecht Parade to SEA on the terms set out in the minutes. I should record that, apart from a prayer for damages against Huxham for breach of contract appearing in paragraph 3 of the application, there is no reference in SEA's pleading to a breach of any contract by Lam, Huxham or Megamix being causative of any loss or damage to SEA. Rather, the amended statement of claim pleads :-
(a) that Huxham and/or Megamix agreed to lease Thurecht Parade to SEA on 11 October 1994 (paragraph 2);
(b) in reliance upon the agreement, SEA terminated its "lease" of Tubbs Street (paragraph 4);
(c) Huxham or Megamix entered into the agreement with the knowledge and intention that SEA would, in consequence, terminate its "lease" of Tubbs Street (paragraph 5);
(d) subsequent to 11 October 1994, Huxham and/or Megamix refused to grant the lease to SEA (paragraph 6);
(e) as a consequence of SEA terminating its lease of Tubbs Street, Plangara has removed SEA from Tubbs Street and re-let the premises (paragraph 7); and
(f) "[i]n the premises [Huxham and/or Megamix] is estopped from denying the existence of a binding lease over [Thurecht Parade] in the terms pleaded in paragraph 3 herein." (paragraph 8).
The amended statement of claim then goes on to plead the other causes of action relied upon without reference to breach of contract. A claim in damages for breach of contract was not opened by Mr Morris QC for SEA, as I understood the opening. However, no point was taken by Mr Doyle SC for the respondents, evidence was adduced going to issues of contract and, indeed, Mr Doyle's written submissions refer to SEA's case as being pleaded on four bases, including breach of contract. The respondents' further amended defence and cross-claim, and the earlier versions of it, purports to respond to a pleaded case of breach of contract. The parties have deliberately chosen a basis "different from that disclosed in the [amended statement of claim] as the basis for the determination of their respective rights and liabilities" and I ought give effect to that deliberate choice (Cummings v Lewis (1993) 41 FCR 559 at 578 - 579).
The respondents advanced three reasons why SEA's case in contract was not sustainable :-
(i) there was no concluded agreement reached on 11 October 1994. The parties intended that the arrangement be reduced to writing and signed before any binding agreement came into effect (ie a case falling within the third category identified in Masters v Cameron (1954) 91 CLR 353 at 360);
(ii) the agreement identified by SEA is unenforceable as not being a concluded bargain as to essential terms or as uncertain; and
(iii) the agreement is unenforceable by operation of s 59 of the Property Law Act 1974 (Qld) ("the PLA").
Masters v Cameron
The Masters v Cameron point may be dealt with shortly. The findings I have made as to what occurred on 11 October 1994, and subsequently, lead inevitably to the conclusion that Huxham and SEA, on 11 October 1994, "[had] reached finality in arranging all the terms of their bargain and intend[ed] to be immediately bound to the performance of those terms, but at the same time propose[d] to have the terms restated in a form which [would] be fuller or more precise but not different in effect." (Masters v Cameron at 360; see also South Coast Oils (Qld and NSW) Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680 at 699).
The matters raised by Mr Doyle for the respondents as pointing to a lack of intention on 11 October 1994 to be bound to a lease in the terms alleged, including that SFM had not yet signed the contracts, that Huxham, in order to obtain a lease of Thurecht Parade, required the consent of the head lessor (which had not been obtained) and that subsequent conduct of the parties negatived any such intention, do not, in my view, require any different conclusion. That Huxham did not have a present entitlement to or a contract for a lease of Thurecht Parade on 11 October 1994 is not something which would prevent it entering into a binding agreement to lease those premises to SEA on that day, albeit one which might require the intervention of equity to enforce (see Riches v Hogben [1986] 1 Qd R 315 at 342 per Williams J) or the implication of further terms (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347). Nor can one, in light of the evidence as to what occurred on 12 or 13 October 1994, look to the subsequent conduct of the parties as providing any evidence of their respective intentions on 11 October 1994.
Incomplete Agreement
The respondents contended (paragraph 6(d) of the further amended defence and cross-claim) that the alleged agreement of 11 October 1994 was "incomplete, uncertain and unenforceable" because no commencement date for the lease was agreed or ascertainable and there was no agreement as to the amount to be spent on improvements and therefore, no means by which the rent payable could be ascertained. It will be recalled that the minutes recorded that the rental was to be "equivalent to 13% per annum on the purchase price of the premises together with any further cost of improvements required by the company as tenant."
It is not in dispute that, for a valid agreement for lease :-
"... it is essential that it should appear, either in express terms or by reference to some writing which would make it certain or by reasonable inference from the language used, on what day the term is to commence."
(Harvey v Pratt [1965] 1 WLR 1025 at 1026 per Lord Denning MR).
Mr Morris for SEA contended that there was a reasonable inference from the language used and from what he called the "matrix of facts in which the parties were negotiating" that the lease was to commence once vacant possession of Thurecht Parade was obtained by Huxham. Mr Morris submitted that the present case was analogous to South Coast Oils v Look.
The minutes are neutral as to when the lease referred to would commence.
Mr Lam was asked about the commencement date of the lease in cross-examination :-
"MR MORRIS QC: Yes. Let us talk about the meeting for the moment. We will come to what happened after the meeting. All right. At the meeting, you have told me you agreed to give a lease, it was going to be for five years plus options, it was going to be for a rent which was 13 per cent of the cost plus the cost of improvements, and it was going to start, was not it, from the time when you became the owner of the Thurecht Street premises?---I can't remember that one.
You cannot remember that one? All right. Well, you knew that there was already someone in the Thurecht Street premises carrying on a business there, did not you?---Yes, sir.
All right. And they were going to move to take over the Tubbs Street premises?---That was all - I left everything in the hands of Kevin Bostock.
But you were aware of that, were not you, that the people who were in Thurecht Street were going to move to Tubbs Street?---From what Kevin have told me.
Yes. All right. Well, from what Kevin told you you were aware of that?---Yes.
All right. And so on the day when you became owner of Thurecht Street you would have an empty shop and an empty business?---Yes.
All right. And when you were discussing these matters with Mr Teh - discussing giving him a lease for five years with extensions and so on - you saw it that the five years would start from the date you became the owner of that building?---As I say, subject to his ability to pay as a tenant."
When the above passage is read in the context of the terms of the contracts signed by Mr Lam for Huxham on 10 October 1994 and the parties' knowledge of those terms, it is inconceivable that it was agreed on 11 October 1994 that the lease would commence on any date earlier than that upon which Huxham obtained vacant possession of Thurecht Parade. I am also prepared to accept that it was intended by the parties and agreed that SEA would move into Thurecht Parade as soon as Huxham obtained vacant possession. Indeed, the terms of the contracts signed by Mr Lam for Huxham, of which, as I have said, all relevant persons were aware on 11 October 1994 compel agreement in those terms unless it was contemplated that SEA would cease to trade or would trade from some other premises while the planned renovations and/or improvements were completed. There is no evidence to that effect. I am satisfied that the inference ought to be drawn that the parties intended and agreed that the lease would commence on the date upon which Huxham obtained vacant possession of Thurecht Parade. I reject the submission made by counsel for the respondents that to draw such an inference, in the absence of direct evidence as to what was said, is to decide the case other than on the pleadings.
The question of the improvements, and therefore the rent, is problematic from SEA's point of view. The resolution of it requires some further reference to the evidence. It is common ground that it was intended that improvements would be carried out at Thurecht Parade and it will be recalled that the rent to be paid by SEA was to be thirteen percent per annum "on the purchase price of the premises together with any further cost of improvements required by the company as tenant." SEA's case was run on that basis. It would not have been possible for SEA to conduct processing operations from Thurecht Parade without improvements or renovations being undertaken. As Mr Bostock conceded in his evidence, the premises at Thurecht Parade at the time of acquisition by Huxham had almost no processing area and were too small for SEA to run its processing business.
However, the nature, extent and likely cost of the improvements had not been determined as at 11 October 1994. The first set of plans, drawn by an architect, for the improvements to Thurecht Parade were not received by Mr Bostock until on or after 25 October 1994. Those plans envisaged a premises similar to those at Morgan's (the next door business, to which I will return in more detail later in these reasons) and were never costed. Mr Bostock estimated that the cost would have been considerably more than $500,000. Mr Bostock himself drew some plans in or around mid-November 1994 which were substantially more modest than those drawn by the architect. Mr Bostock's plans were never costed, but he estimated the cost of implementing them to be about $500,000. The improvements actually carried out at Thurecht Parade, which were more modest again, cost approximately $300,000. I should mention that the plans for Thurecht Parade apparently sent by Mr Bostock to Mr Lam with the facsimile transmission of 20 October 1994 and referred to by Mr Lam in his response, were not directly referred to in the evidence of Mr Lam or Mr Bostock. There is some suggestion, on a close reading of Mr Bostock's evidence in cross-examination and re-examination that the plans forwarded to Mr Lam under cover of the facsimile of 20 October 1994 were earlier or preliminary versions of the plans finally completed by the architect on 25 October 1994. However, the issue was not further pursued in evidence or in argument.
Whilst it may be true to say that the nature and extent of the proposed improvements had been discussed prior to 11 October 1994, and it may even be true that preliminary plans had been done, there were no plans or costings in existence on 11 October 1994 from which it was possible to determine the nature, extent and cost of the improvements with any degree of certainty. The reference in Mr Bostock's evidence to an amount of $600,000 being referred to by Mr Lam on 21 September 1994 and the reference to that amount in Mr Lam's diary note of 21 September 1994 are not sufficient. There is no evidence that Mr Teh was ever aware of the amount of $600,000 being contemplated as the cost of possible improvements to Thurecht Parade. More importantly, SEA did not plead or argue that Huxham was obliged to spend $600,000 on improving the premises at Thurecht Parade. I find that on 11 October 1994 it was not possible to determine with any certainty or at all, the nature, extent and, most importantly, the cost of the proposed improvements to Thurecht Parade by reference to any agreement reached in respect of those matters by the parties or otherwise.
The obligation of Huxham to have improvements carried out at its expense was contained in the minutes. The improvements and their cost were, in accordance with the agreement as recorded in the minutes, to be determined by reference to what was "required by [SEA] as a tenant". The nature and extent of the works to be undertaken by Huxham and at their cost were limited only by the requirements of SEA. An agreement in those terms, leaving as it does an essential term to be determined by one of the parties to it, without reference to some external standard or criteria making it capable of objective determination is not a binding agreement and will not be enforced by the Court. (Godecke v Kirwan (1973) 129 CLR 629 at 646 - 647; Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 359 - 361; Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950 at 50,380 - 50,381).
It was submitted by counsel for SEA that a concluded agreement could be reached and was reached without the extent and cost of the improvements being determined or determinable. Counsel's submission was put on the basis that the extent and cost of the improvements were to be agreed between SEA and Huxham and that, if the parties were unable to reach agreement, there would be a complete and valid agreement with respect to the unimproved premises. The difficulty with counsel's submission is that the agreement as pleaded and as recorded in the minutes left the nature and extent of the improvements to be determined by SEA. The proceedings were not run on the basis, nor was there any evidence to the effect, that the improvements were to be as agreed between Huxham and SEA. Further, and perhaps more importantly, SEA's case with respect to the damages said to flow from the wrongful conduct of the respondents was predicated on SEA being entitled to a lease of improved premises at Thurecht Parade. The evidence advanced by SEA on this issue proceeded on that basis. As I have said, SEA could not have carried on its processing business at Thurecht Parade without improvements of a not insubstantial nature. SEA's case is not advanced by a finding that there was a concluded agreement with respect to unimproved premises. Nor do the pleadings (and the way the case was run) or the evidence permit such a finding. Counsel's submission must be rejected.
The obligation of Huxham to carry out improvements at its cost, in the form in which it was agreed, is important for two reasons. Firstly, in the terms of the agreement, it was not a severable term; it was an essential term because without the improvements to be carried out, SEA could not conduct its processing operations at Thurecht Parade. Further, SEA was relying upon Huxham to pay for the improvements in return for a commensurate increase in rent at thirteen percent per annum of the cost of the improvements. Secondly, without the cost of the improvements being ascertained, no amount for rent can be calculated.
I find, therefore, that the agreement made on 11 October 1994 between SEA and Huxham for a lease of Thurecht Parade was not a concluded bargain and is unenforceable.
Statute of Frauds
Having regard to the finding made above, it is strictly unnecessary to decide the Statute of Frauds issue. However, the issue was fully ventilated by the parties and I will express my view upon it.
The respondents' case was that if an otherwise enforceable agreement was reached on 11 October 1994, it was unenforceable by the operation of s 59 of the PLA, which provides :-
"No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised."
It was submitted by counsel for the respondents, correctly in my view, that s 59 of the PLA applied notwithstanding that Huxham did not have an interest in the relevant land at the time of the agreement (Riches v Hogben at 318 - 319).
Counsel for SEA relied upon the minutes as the relevant "memorandum or note" for the purposes of s 59. The minutes, it was submitted, recorded all the essential terms of the agreement and were prepared with Mr Lam's actual authority. Counsel further submitted that the inclusion of Mr Lam's name in the minutes (as revised) constituted a sufficient "signature" for the purposes of s 59. In this respect, counsel relied upon the so-called "authenticated signature fiction" considered by the High Court in Pirie v Saunders (1960) 104 CLR 149.
The "authenticated signature fiction" does not, in my view, assist SEA in the circumstances of the instant case. The authorities from which the principle is derived, make it clear that the principle will only have an application where it is intended by each party to the contract that the memorandum or note relied upon "should be the final written record of the contract" (Leeman v Stocks [1951] Ch 941 at 949. See also Farrelly v Hircock (No 1) [1971] Qd R 341 at 356 - 357; Sturt v McInnes [1974] 1 NZLR 729 at 732 - 734; Neill v Hewens (1953) 89 CLR 1 at 13 - 14; Pirie v Saunders at 155 - 156).
It is not disputed that Mr Teh for SEA and Mr Lam for Huxham, on 11 October 1994, intended that the agreement reached by them on that day was to be later embodied in a formal document to be signed by each of them on behalf of their respective companies. Mr Lam had engaged solicitors to act on behalf of Huxham with respect to the preparation of a lease of Thurecht Parade and, in his facsimile of 20 October 1994, Mr Lam asked Mr Bostock to instruct those solicitors to stop preparation of the lease to SEA. The letter from SEA's solicitors to Huxham's solicitors on 4 November 1994 requesting that the draft lease, in accordance with the agreement reached on 11 October 1994, be forwarded to them, confirms to my mind what is clear in any event from the undisputed evidence, namely, that the minutes were not intended by the parties to be the final written record of the agreement reached on that day. In those circumstances, I am unable to conclude that the requirements of s 59 of the PLA have been satisfied. The "authenticated signature fiction" has no work to do. The agreement reached between SEA and Huxham on 11 October 1994, if otherwise enforceable, is rendered unenforceable by operation of s 59.
SEA's claim in contract therefore fails. I do not propose to deal with the question of what damages SEA would have been entitled to for breach of contract. SEA, in its claim for equitable compensation, formulated its loss in terms of damages recoverable for breach of the agreement to lease. Consequently, to state here the criticism I have of the damages claim as formulated would be repetitive of the views I express later in these reasons in respect of the claim for equitable compensation.
Promissory estoppel
SEA's alternative claim is based upon promissory estoppel of the nature considered by the High Court in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
The principal attack on SEA's estoppel case focused upon "reliance" and "detriment" as those words are understood in the authorities. As to reliance, it was submitted that Mr Teh, for SEA, acted prematurely in anticipation of the promise of a lease, to bring SEA's tenancy at Tubbs Street to an end when he contacted Mr Black approximately one month before he (Mr Teh) went overseas on 14 October 1994 and told him of a possible change of tenant at Tubbs Street and, it was submitted, Mr Teh acted hastily before the lease had been confirmed in a written agreement when he told Mr Black in the period between 11 and 14 October 1994 that SEA would be leaving Tubbs Street. Finally, as to reliance, it was submitted that SEA had a chance to take steps to remain at Tubbs Street when on or about 17 October 1994, and thereafter, it became or was aware that Huxham did not intend to grant the agreed lease and did not take up that chance with the consequence that the detriment suffered by SEA, it was submitted, was not suffered in reliance upon any conduct of Huxham.
As to detriment, it was submitted that the detriment pleaded (the termination of SEA's tenancy at Tubbs Street) was not a financial detriment having regard to the trading results obtained by SEA in 1994 compared with those obtained by SEA in 1995 and 1996 from Pine Street. The relevant detriment, it was submitted, was not the loss of a chance to carry on business at Thurecht Parade but was the "loss of the insignificant value of a business which has certainty of tenure of only 30 days."
Further, it was submitted by the respondents that no estoppel would arise where the "agreement" relied upon is void for uncertainty.
Counsel for SEA submitted that the essential elements of the plea of equitable estoppel are found in the judgment of Brennan J in Waltons Stores where his Honour said (at 428 - 429) :-
"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."
Argument proceeded before me on that basis.
Of significance in the instant case is the relief to which SEA would be entitled should its plea succeed, and, the relationship between that relief and the detriment suffered in reliance on the assumption or expectation.
In Waltons Stores, Brennan J said (at 423) :-
"The unconscionable conduct which it is the object of equity to prevent is the failure of a party, who has induced the adoption of the assumption or expectation and who knew or intended that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion. The object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting thereon."
In The Commonwealth v Verwayen (1990) 170 CLR 394, Mason CJ said (at 412) :-
"It follows that, as a matter of principle and authority, equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more. In appropriate cases, that will require that the party estopped be held to the assumption created, even if that means the effective enforcement of a voluntary promise."
Mason CJ, in the context of advocating the acceptance of "one overarching doctrine of estoppel", continued (at 413) :-
"... The result is that it should be accepted that there is but one doctrine of estoppel, which provides that a court of common law or equity may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs (including a legal state of affairs), which assumption the party estopped has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness. A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid. It would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption."
In my view, the "minimum equity" concept introduced by Scarman LJ in Crabb v Arun District Council [1976] Ch 179 at 192 - 193, 198 - 199 and adopted by Brennan J and Mason CJ in the passages quoted, is to be accepted as accurately stating the law in this country. That is, the court, in granting relief based on equitable estoppel, will grant such relief as will satisfy the equity raised against the party estopped (or as will avoid the detriment to the party who relied on the relevant assumption or expectation) and no more, the object of the remedy being to prevent unconscionable conduct on the part of the party estopped. A representor will not be held to the assumption or expectation created unless the "minimum equity" requires it (see generally on the "minimum equity" principle: Waltons Stores at 404 - 405 per Mason CJ and Wilson J; 419, 423, 427 per Brennan J; Verwayen at 412 - 413 per Mason CJ; 429 per Brennan J; 441 - 442 per Deane J; 454 per Dawson J; 475 - 476 per Toohey J; 487 per Gaudron J; 500 - 501 per McHugh J).
There can be no doubt on the facts as I have found them and the inferences I have drawn from those facts, that on 11 October 1994 Huxham, by Mr Lam, induced or encouraged in SEA, by Mr Teh, an expectation that Huxham would, as agreed, grant a lease of Thurecht Parade to SEA on the terms as recorded in the minutes. It is clear on the evidence that on 11 October 1994 and for a period thereafter, SEA, by Mr Teh, expected that such a lease would be granted because an agreement for that lease had been reached. A conclusion that that expectation was induced in SEA by Huxham is inescapable in the circumstances.
The difficulty in this case relates to reliance and detriment as those words are to be understood in the context of the equitable estoppel. I should say that, in my view, the evidence supports no other conclusion than that Mr Lam, for Huxham, intended that SEA should rely upon the expectation engendered by the agreement reached on 11 October 1994. Having decided, on 12 or 13 October 1994 not to proceed with the agreement, Mr Lam took no steps until 4 November 1994 to disabuse SEA of the notion that a lease had been agreed and would be granted. Mr Lam did not on 25 October 1994, when Mr Teh asked him directly whether SEA was to be granted the lease, disclose the true situation. Mr Lam's conduct during the period after 11 October 1994 must be viewed in the context of his knowledge that Huxham's contracts with respect to Thurecht Parade were conditional upon SFM obtaining a lease of Tubbs Street and his conduct in causing those contracts to be completed. At the very least, Mr Lam, knowing that reliance by SEA on the 11 October 1994 could cause detriment to SEA, failed to deny to SEA the correctness of the expectation upon which SEA was proceeding (Waltons Stores at 429).
The question then to be determined is whether SEA acted or abstained from acting in reliance on the expectation that the agreed lease would be granted. The respondents' submissions on this issue, as I understand them, direct attention to the time at which it could properly be said that Mr Teh had notice that Huxham was denying the correctness of the expectation that a lease would be granted so that thereafter Mr Teh could not be said to be acting or refraining from taking action in reliance on the expectation. The respondents, in part, place reliance on the position of Mr Bostock as a director of SEA and the knowledge he acquired on 12 or 13 October 1994 as to Mr Lam's intentions.
I reject the submission that Mr Teh's conduct in contacting Mr Black in September 1994 and telling him of a possible change of premises for SEA had any part to play in causing the detriment complained of. The evidence goes no further than that Mr Teh told Mr Black about a "possible" change. There is no evidence that Mr Black acted upon this conversation. Indeed, the evidence is that Mr Black would have granted a lease of Tubbs Street to SEA up until about 21 October 1994. I do not accept that Mr Teh's conduct on this occasion had any part to play in the detriment complained of.
Similarly, I do not accept that SEA should be fixed with the knowledge of Mr Bostock, acquired on 12 or 13 October 1994, that Mr Lam did not intend to cause Huxham to grant the lease to SEA. The evidence strongly suggests that from 12 or 13 October 1994, Mr Bostock had abandoned the interests of SEA and was acting from that time in the interests of Huxham and Mr Lam or at the very least, in his own interests. It is inconceivable that, if he was still acting for SEA on 12 or 13 October 1994, Mr Bostock would not have immediately informed Mr Teh of Mr Lam's position or taken some other step consistent with SEA's interests. Mr Bostock said and did nothing. His explanation in cross-examination that he was still hoping for a "reconciliation" between Mr Lam and Mr Teh at this point is disingenuous.
Mr Bostock's letter of resignation did not make mention of his involvement with Huxham, nor of Mr Lam's position with respect to the lease. Mr Bostock did not tell Mr Teh the true position, it seems, until 25 October 1994. In those circumstances, it is not appropriate to treat Mr Bostock's knowledge on or after 12 or 13 October 1994 as knowledge of SEA. Nor is it appropriate to ascribe to SEA, via Mr Bostock, an opportunity to take steps to secure SEA's position at Tubbs Street and avoid the detriment complained of.
Finally on the issue of reliance, I reject the submission that any detriment suffered by SEA was caused by Mr Teh's failure to take action to preserve SEA's position at Tubbs Street upon becoming aware of the contents of Mr Anderson's letter of 13 October 1994 (ie on 17 October 1994). It will be recalled that Mr Black's evidence, which I accepted, was that he would have given SEA a formal lease of Tubbs Street had Mr Teh asked for one on or prior to 21 October 1994. It was submitted therefore that as Huxham's denial of the correctness of the expectation that a lease would be granted was communicated to Mr Teh on 17 October 1994, Mr Teh's failure to secure SEA's position at Tubbs Street (which he could have done up to 21 October 1994) was not a failure to act in reliance upon an expectation induced in him by Huxham and could not found an equitable estoppel in the terms alleged.
I am not satisfied that Mr Anderson's letter of 13 October 1994 was sufficient to operate as a denial by Huxham of the correctness of the expectation it had induced in Mr Teh that the agreed lease would be granted. The letter was, on its face, and having regard to what had been agreed merely two days earlier, ambiguous. Although Mr Teh on receipt of the letter may have appreciated that Huxham required the 1994 financial records of SEA and to be satisfied as to the contents of them before the formal lease agreement was executed, there was nothing in the letter, or the context in which it was sent, which would have caused, or did cause, Mr Teh to believe other than that, as agreed, a lease would be granted. Mr Teh's diary notes indicate that as late as 25 October 1994, Mr Lam had not told Mr Teh, in terms, that his expectation that a lease would be granted was incorrect. It was not until Mr Teh's conversation with Mr Bostock on 25 October 1994, at the earliest, that Mr Teh realised or should have realised that his expectation was unfounded. By that time, it was too late for Mr Teh to take any action to protect SEA's position at Tubbs Street. Mr Black had already made the "gentleman's" commitment to SFM, which he subsequently felt bound to honour. The detriment complained of could not have been avoided.
For an equity created by estoppel to arise against Huxham, it is necessary for SEA to point to some detriment occasioned to it by its reliance upon the expectation induced in it by Huxham such that the jurisdiction of the Court to frame appropriate relief to avoid that detriment is invoked. The detriment relied upon by SEA was the termination of its tenancy at Tubbs Street which, I have found, was brought about by SEA's reliance on the expectation induced in it by Huxham that a lease as agreed on 11 October 1994 would be granted. The question is whether the termination of SEA's monthly tenancy at Tubbs Street is a relevant or sufficient detriment to create an equitable estoppel.
I have concluded that it is not. I have done so by reference to the evidence that there was little, if any, actual financial detriment occasioned to SEA by its ceasing to operate from Tubbs Street. In 1994 SEA had a trading loss of $297,510 compared with a loss of $299,483 in 1995, the substantial part of which year was spent operating from Pine Street, and a profit of $25,107 for the seven months to 31 January 1996. There is no evidence before me as to what SEA would have achieved had it remained at Tubbs Street. Counsel for SEA conceded that, in relation to SEA's case based on s 52 of the TPA, SEA did not suffer any significant loss calculated by reference to a comparison between SEA's actual position and the position it would have been in had it not lost the opportunity to continue to trade from Tubbs Street. So much is clear in any event from a comparison between SEA's trading results from Tubbs Street and its trading results from Pine Street and Murrarie, where it traded after leaving Tubbs Street. Similarly, there is no evidence that SEA suffered any financial detriment referrable directly to the relocation of its premises to Pine Street. Nor is there any evidence that SEA suffered detriment of a non-financial nature of the kind considered by the High Court in Verwayen by the non-fulfilment of the expectation that a lease would be granted.
There being no detriment suffered by SEA caused by (in the relevant sense) the non-fulfilment of the expectation, there can be no occasion for an equity to arise against Huxham.
If I am wrong in concluding that there was no detriment suffered by SEA, any detriment would, at the most, be the financial detriment occasioned by depriving SEA of the opportunity to continue to operate from Tubbs Street, which has been correctly conceded to be insignificant. It would, bearing in mind the "minimum equity" concept discussed earlier, be wholly inequitable to hold Huxham to the expectation and to award to SEA damages for breach of the agreement of 11 October 1994 (if that course be possible in any event in light of my conclusion that the agreement was uncertain and unenforceable). In the circumstances of this case, the relief required to satisfy the minimum equity would be, assuming detriment to be proved, an award of compensation equal to the amount of the proved detriment.
There is a further reason why SEA's estoppel case fails. SEA submitted in its written submission "that the respondents were estopped from denying an enforceable agreement to grant a lease of the Thurecht Parade property to SEA in accordance with the oral agreement made at the meeting on 11 October 1994." Where the "agreement" in respect of which it is sought to raise the estoppel is illusory because it is unenforceable for want of a vital term, no estoppel will arise because there is no utility flowing from such an estoppel (Austotel Pty Ltd v Franklins Selfservice Pty Ltd (1989) 16 NSWLR 582 at 584, 602). To obtain any relief by the application of the equitable doctrine of estoppel, SEA was required to establish the creation of an equity in its favour for the Court to intervene to make the "agreement" a certain agreement by providing any necessary additional term and to estop Huxham from denying that it was bound by such an agreement (Austotel Pty Ltd v Franklins Self Service Pty Lt at 584 - 585, 615 - 616, 619). SEA did not seek to advance a case whereby an equity was created in its favour such that the extent of the improvements, their cost and their consequences to the calculation of the rent payable were matters to be fixed by the Court to define an agreement certain to which Huxham was estopped from denying it as bound.
SEA's case based on equitable estoppel fails.
Misleading or deceptive conduct
As I have indicated, counsel for SEA conceded that the loss or damage suffered by SEA by reason of the alleged contravention of s 52 of the TPA would not be significant. However, SEA did not abandon its claim under the TPA and it is necessary to deal with it.
The case sought to be made out by SEA was that, on 11 October 1994, Huxham represented to SEA that Huxham would grant to SEA a lease of Thurecht Parade on the terms recorded in the minutes (and particularised in paragraph 3 of the amended statement of claim). The making of that representation, it was said, contravened s 52 of the TPA because at the time of making it, Huxham did not intend to grant a lease of Thurecht Parade to SEA. SEA suffered loss and damage by reason of that contravention and was entitled to an order for damages pursuant to s 82 of the TPA.
Counsel for SEA relied on a passage in the evidence given by Mr Lam in cross-examination to which I have earlier referred. I have found that that evidence ought not be accepted. I have also found that, on 11 October 1994, Mr Lam intended that Huxham would grant and agreed on behalf of Huxham to grant, a lease of Thurecht Parade to SEA but that he changed his mind on 12 or 13 October 1994 after the disagreement with Mr Teh. SEA's case as pleaded and argued, whether relying upon a positive finding of no intention, or upon s 51A, fails at the outset. The representation, at the time it was made, was not misleading or deceptive within the meaning of s 52 of the TPA.
I will note lest it be suggested otherwise, that it was never part of SEA's case, as pleaded and argued, that Huxham contravened s 52 of the TPA by remaining silent after 12 October 1994 when it was resolved by Huxham not to grant the lease to SEA, in circumstances where it was misleading or deceptive or likely to mislead or deceive to do so.
I will also note that the approach adopted by counsel for SEA in relation to the likely damages to which SEA would have been entitled had its TPA claim been made out was not, in my view, the only approach to that question. It was open to SEA to seek to show that the loss and damage suffered by it "by" conduct which contravened s 52 of the TPA, was the loss of an opportunity to operate the proposed business from Thurecht Parade (see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332). The criticisms I have in relation to the formulation of SEA's claim for equitable compensation would apply equally if that was what had been pleaded and argued.
Breach of Fiduciary Duty
It was pleaded that Mr Lam, as a director of SEA, owed fiduciary duties to SEA to act in its best interest and not to use his position as a director to gain an advantage for himself, whether directly or indirectly, or to cause detriment to SEA (amended statement of claim paragraphs 15(a), 15(e)). Breach of those duties was pleaded as follows :-
"16. Subsequent to 11 October 1994 the first respondent procured and conspired with Kevin Bostock for Mr Bostock to cease acting as operation/production manager of the applicant and to act as a manager of the second respondent in competition with the applicant.
.....
18. Further, in refusing to cause the second respondent to enter into a lease of the Scarborough premises in favour of the applicant, the first respondent acted in breach of the duty pleaded in paragraph 15 herein."
The relief sought in consequence of the alleged breaches of fiduciary duty was equitable compensation for the loss of the opportunity to operate a business from Thurecht Parade, relying upon Warman International Ltd v Dwyer (1995) 182 CLR 544, rather than an account of profits. SEA expressly eschewed reliance upon the statutory duties provided for in the Law and the remedies provided for breach thereof.
The alleged breach of duty in Mr Lam enticing Mr Bostock to leave SEA and join Huxham trading in competition with SEA may be dealt with shortly. I am not persuaded that Mr Lam played any real part in Mr Bostock resigning from SEA and taking up with Huxham. That Mr Bostock's decision was motivated by self-interest appears sufficiently from his evidence as to why he accepted "Mr Lam's offer", set out earlier in these reasons. It is also plain that Mr Bostock had long held aspirations to develop Thurecht Parade and to operate a seafood business independently of SEA and Mr Teh. I am satisfied that, when it became apparent to Mr Bostock that it was likely that SEA was not going to be granted a lease of Thurecht Parade and would be forced to vacate Tubbs Street, he decided to join Mr Lam at Huxham who, he knew, had no experience in the seafood business and would require the services of a person with the knowledge and experience of Mr Bostock to operate from Thurecht Parade independently of SEA. I do not accept that anything said by Mr Lam to Mr Bostock played any part in Mr Bostock's decision. There was no procuring or enticing necessary. As Mr Bostock himself said, he considered that he had no choice and he acted accordingly. Mr Bostock's facsimile transmission to Mr Lam of 20 October 1994 makes no reference to any offer and states that the decision to leave SEA and join Mr Lam was taken because Mr Bostock and his wife did not wish to be involved with Mr Teh or SEA any longer.
In reaching that conclusion I have not had regard to the contents of Mr Lam's facsimile transmission to Mr Bostock of 6 September 1994, sent prior to Mr Lam becoming a director of SEA and overtaken in any event by Mr Lam's decision of 21 September to give Mr Teh another chance. I have also not had regard to the passage in the cross-examination of Mr Lam, referred to earlier, in which Mr Lam spoke of his intention to "destroy the business of SEA" and similar sentiments and intentions. I have not done so for the reasons expressed earlier.
Counsel for SEA sought to rely upon Mr Lam's facsimile transmission to Mr Bostock of 20 October 1994 and, in particular, the sentence, "Please gather as much information as we will need to carry on the export side of the business ourselves" as supporting a finding that Mr Lam enticed Mr Bostock to make available to Huxham confidential information of SEA. A case in those terms was not pleaded by SEA, but no objection was taken to this point being raised in submissions. In any event, the sentence in Mr Lam's facsimile transmission is to be read in light of what was contained in Mr Bostock's facsimile transmission under reply, "I will avoid telling Ray for 1 week which will enable me to gather as much information as we will need to carry on the export side of the business ourselves." Further, there was no attempt made to particularise that information which was made available to Huxham by Mr Bostock, nor the circumstances in which that information was or became confidential to SEA. There was no evidence that particular information confidential to SEA was made available to Huxham by Mr Bostock, and was utilised by Huxham to SEA's detriment or at all. There was no evidence apart from vague and general allegations, for example, that any customer of SEA was taken by or followed Mr Bostock to Huxham.
The part of SEA's case on breach of fiduciary duty relating to the enticement of Mr Bostock to leave SEA fails at the outset.
I should add that had I been satisfied that a breach of duty had been made out, I would still have concluded that SEA's case on this point failed. As I have said, there was no evidence of any loss to SEA or profit by Huxham from customers leaving one for the other to follow Mr Bostock. Furthermore, I accept the evidence of Carsten Elkjaer, a former business partner of Mr Teh, that SEA, or for that matter Huxham, could have engaged persons with similar qualifications to Mr Bostock. The importance of Mr Bostock to SEA was, in my view, grossly overstated by Mr Teh in his evidence and in SEA's case on this point. Mr Teh acknowledged in cross-examination that he (SEA) only needed Mr Bostock or "someone similar".
Ultimately, no profit to Huxham, or loss to SEA, has been shown to flow from Mr Bostock leaving SEA and working with Huxham. Indeed, SEA's case on equitable compensation, to which I will come, proceeds on the basis that SEA, without Mr Bostock and relying on Mr Teh, lost the opportunity to operate a business from Thurecht Parade more successfully than did Huxham. Were it otherwise, one would have expected SEA to elect for an account of Mr Lam's, profits.
The main thrust of SEA's case on breach of fiduciary duty was that Mr Lam, owing fiduciary obligations to SEA as a director thereof, preferred his own interests and those of Huxham (which he controlled) to the interests of SEA by reneging on the agreement to grant a lease, and by causing Huxham to carry on business at Thurecht Parade in competition with SEA. As a result of breach of those fiduciary obligations by Mr Lam, it was submitted, SEA lost the opportunity to operate a business from Thurecht Parade (and to do so more successfully than Huxham in fact did) and was entitled to equitable compensation for that lost opportunity, rather than being confined to an account of profits (Warman International Ltd v Dwyer at 559).
Counsel for the respondents submitted that it could not be said to be a breach of any fiduciary duty owed by Mr Lam to SEA not to have caused Huxham to grant to SEA a lease of Thurecht Parade because either Huxham was obliged to grant the lease or it was not. Counsel further submitted that the opportunity to carry on business at Thurecht Parade was not one which Mr Lam and/or Huxham obtained or discovered by reason of Mr Lam being a director of SEA, but was one which arose prior to Mr Lam becoming a director on 11 October 1994.
The resolution of this aspect of SEA's case requires a determination, on the difficult facts of this case, of the dividing line between opportunities which may be taken up by a director personally without occasioning a breach of his or her fiduciary obligations to the company and those which may not. It is a determination which is not, as a matter of principle, an easy one to make. I was referred to no authority by either counsel for SEA or by counsel for the respondents on this issue, or on any of the other issues raised by SEA's case of breach of fiduciary duty, save for a reference by counsel for SEA to Warman International Ltd v Dwyer in support of SEA's right to elect for equitable compensation over an account of profits.
It is not, in my view, impermissible per se for a director of a company to be, at the same time, a director of a competitor, or to personally carry on a competing business (Bell v Lever Brothers Ltd [1932] 1 AC 161 at 195; Re Broadcasting Station 2GB Pty Ltd [1964-5] NSWR 1648 at 1663; Rosetex Company Pty Ltd v Licata (1994) 12 ACSR 779 at 782 - 783). Equally, a director must account to a company of which he or she is a director for any benefit or gain which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his or her fiduciary duty to the company and his or her personal interest in the present or possible receipt of such a benefit or gain, or which was obtained or received by use of or by reason of his or her position or of opportunity or knowledge resulting from it (Chan v Zacharia (1984) 154 CLR 178 at 199 per Deane J).
A director cannot escape liability to account by resigning his or her office to take up the opportunity or to obtain or receive the benefit or gain if, had he or she not resigned, to do so would have amounted to a breach of duty (Industrial Development Consultants v Cooley [1972] 1 WLR 443; Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371 at 391).
What of an opportunity for benefit or gain which arises prior to the commencement of any fiduciary relationship but which is pursued whilst such a relationship subsists? The answer lies, I think, in the principled delineation of the dividing line between those opportunities which may be taken up by a fiduciary (and by a director in particular) without occasioning a breach of duty and those which may not. There are various expressions of the delineation in the authorities in Australia and elsewhere and in the texts and other writings in this area.
In Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Lord Russell of Killowen (at 149) expressed the opinion that the relevant benefit was to be accounted for to the company because it was obtained by the directors "by reason and only by reason of the fact that they were directors [of the company] and in the course of the execution of that office." (see also Peso Silver Mines Ltd (NPL) v Cropper (1966) 58 DLR (2d) 1 at 8; Phipps v Boardman [1967] 2 AC 46 at 105). His Lordship's test has been criticised by learned commentators as too narrow and as permitting of injustice and the opportunity for manipulation (see R P Austin, Fiduciary Accountability for Business Opportunities in Finn (ed); Equity and Commercial Relationships (1987) p 149 - 150; Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (1992), 3rd edition, p 142). Similarly, in Canadian Aero Service v O'Malley, Laskin J, speaking for the Supreme Court of Canada (Martland, Judson, Ritchie, Spence and Laskin JJ), thought the principle as stated by Lord Russell was "too narrowly conceived" (at 387). His Lordship put the following formulation (at 391) :-
"... The general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a director or senior officer must conform, must be tested in each case by many factors which it would be reckless to attempt to enumerate exhaustively. Among them are the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director's or managerial officer's relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge."
That formulation has, in turn, attracted criticism as providing no clear principle to guide courts in futures cases (Meagher, Gummow and Lehane, p 142).
Roskill J in Industrial Development Consultants v Cooley held the managing director of the plaintiff company liable to account because he failed to pass to the company information which came to him while he was managing director "and which was of concern to the plaintiff and which was relevant for the plaintiff to know" (at 457). Roskill J's "relevance" and "concern" formulation is said by Professor Austin to be too broad and onerous to be justly applied to all fiduciaries and is said to provide insufficient guidance to the content of the "full-time commercial" fiduciary's duty (Austin, pp 150 - 151; see also Meagher, Gummow and Lehane, p 142).
Professor Austin propounds the adoption of what he calls an "expanded line of business test", along the lines of that favoured in the United States, whereby a director (or officer) will breach his or her fiduciary duty to a company if he or she takes up an opportunity for profit which is within the "line of business" of the company as carried on or as planned to be carried on. Professor Austin's test is unclear as to the temporal limitation of a director's liability (Austin, pp 180 - 182; see also Meagher, Gummow and Lehane, p 142, where it is stated that Professor Austin's test has much to commend it).
It is not instructive, in my view, to focus close attention upon the language used in the authorities and other writings to which I have referred to seek to draw from them an exact formulation of the relevant test. What is to be drawn from the authorities is that a director will act in breach of his fiduciary obligations to a company (the scope of which will vary in the circumstances of each particular case) if he or she takes up an opportunity for profit where there is a sufficient temporal and causal connection between the obligations and the opportunity. What is a sufficient connection will depend, in any particular case, upon a number of factors, including the circumstances in which the opportunity arises and the nature of it and the nature and extent of the company's operations and anticipated future operations.
Whatever is the precise expression or formulation of the test which will provide reasoned guidance in drawing the line between those opportunities for profit it is permissible for a director (or officer) to take up and those which it is not, it is necessary at the outset to determine the scope of the fiduciary obligations owed by the director to the company in the circumstances of the particular case and to identify the conduct or failure to act, which is said to amount to a failure to discharge those obligations. (Hospital Products Ltd v United States Surgical Corporation (1984) 150 CLR 41 at 73, 102; In re Goldcorp Exchange Ltd [1995] 1 AC 74 at 98; Maguire v Makaronis (1997) 71 ALJR 781 at 788). Having done so, the question becomes whether there is a sufficient temporal and causal connection in the sense variously expressed in the authorities to which I have referred, between the fiduciary obligation or obligations and the opportunity for profit which has been or is sought to be taken up by the director.
In the instant case, neither counsel for SEA, nor counsel for the respondents sought to identify with any precision the scope of Mr Lam's fiduciary obligations to SEA upon his appointment as a director thereof on 11 October 1994 and thereafter, or his conduct, or failure to act, which amounted to a breach of those obligations. Counsel for SEA put the case as follows :-
"[Mr Lam] cannot cause a company which he effectively controls to compete with a company of which he is a director, in the premises which that company was intending to go into, using staff which he has lured away from that company, and attempting, whether successfully or otherwise, to obtain the company's information for the purpose of competing."
Therefore, SEA's case was not put on the basis of the first of the two "themes" said by Deane J in Chan v Zacharia at 198 to be embodied in the "fundamental rule", namely "that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict". It was not SEA's case that Mr Lam was liable to account to it for any benefit or gain obtained or received by him in circumstances where his duty to SEA conflicted, or there was a significant possibility that it would conflict, with his personal interest, through Huxham, in utilising Thurecht Parade (see Consul Developments Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 393; Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461 at 471). Had SEA's case been put on that basis the appropriate remedy would have been an account of the profits made by Mr Lam from the position of conflict, rather than an order, such as is sought here, that the company be compensated for losing the chance to take up an opportunity for profit taken by Mr Lam.
Rather, SEA's case was put on the basis of the second "theme" referred to by Deane J. That is, that Mr Lam was liable to account to SEA because he had diverted to himself and/or to his company the opportunity to operate a seafood processing and retail business from Thurecht Parade in circumstances where the opportunity and/or knowledge to do so arose out of his fiduciary position. It is also important to note that no relief was sought against Huxham arising out of Mr Lam's alleged breach of duty on the basis that Huxham, with Mr Lam as its controlling mind, knowingly took part in Mr Lam's breach of duty (Consul Developments v DPC Estates at 397 per Gibbs J).
I have concluded that the relevant opportunity to profit in this case does not have a sufficient temporal or causal connection with Mr Lam's fiduciary obligations to SEA to hold Mr Lam liable to account to SEA by paying equitable compensation. I have so concluded for the following reasons.
The opportunity to operate from Thurecht Parade taken up by Mr Lam and Huxham did not, on any view of the evidence, arise out of or become available to Mr Lam by reason of his position as a director of SEA. It is uncontestable that the opportunity at Thurecht Parade arose prior to Mr Lam's appointment as a director of SEA on 11 October 1994. Mr Lam, for Huxham, signed purchase contracts relating to Thurecht Parade on 10 October 1994. Importantly, one of those contracts provided for the purchase by Huxham of the business operated from Thurecht Parade by SFM, namely, a seafood processing and retail business. Similarly, it cannot fairly be said that the Thurecht Parade opportunity was one which SEA had been actively pursuing or was one which was maturing in the hands of SEA. Up until Mr Teh's facsimile transmission to Mr Lam of 23 July 1994, SEA's plans were to develop the Redcliffe site in accordance with the company profile, with that development to occur on the grand scale there set out, in eighteen months or two years time. Mr Teh's facsimile transmission does not refer to Thurecht Parade but refers to "some properties ... in the Redcliffe area with the view of moving 'S.E.A. Food' temporarily ...". The evidence was that Mr Teh considered Thurecht Parade was "too dear" and that if the Redcliffe site was developed as planned, SEA would have remained at Tubbs Street until it could have moved to the Redcliffe site. The evidence as to SEA's attitude to Thurecht Parade is not recounted as showing that SEA could not or would not have taken up the opportunity. That is irrelevant to the issue of breach of duty (Industrial Developments v Cooley at 451; Regal (Hastings) v Gulliver). Rather, it is sought to demonstrate that the opportunity was one which did not in any sense "belong" to SEA. It was one which was available to Mr Lam and his company to take up and which was, for all practical purposes, taken up prior to him becoming a director of SEA. Indeed, the contents of Mr Lam's note of 21 September 1994 show, to my satisfaction, that the opportunity arose and was taken up by Mr Lam in his capacity as an investor in or lender to SEA and not in any other capacity.
I am satisfied that at the shareholder's meeting on 11 October 1994 each director of and shareholder in SEA knew that Mr Lam was a director of Huxham and that Huxham had signed the two contracts with respect to Thurecht Parade. At the time that the agreement to lease was made, Mr Lam was, to the knowledge of all present, acting for Huxham. Any obligation to grant the lease was, necessarily, an obligation of Huxham and one which was to be founded in contract (or, subsequently, in equity by estoppel). Mr Lam's appointment as a director of SEA was in pursuance of the deed executed on 11 October 1994. It is nowhere expressed in the evidence, nor can it be reasonably inferred having regard to the foregoing, that it was within the scope of Mr Lam's appointment to secure for SEA the lease of Thurecht Parade on the terms agreed. Interestingly, it is not recorded in the minutes, nor was it explored in the evidence that Mr Lam had any role to play for SEA with respect to the lease.
SEA's case based on breach of fiduciary duty also fails. I should add for completeness, that it was not part of SEA's case that Mr Lam was liable to account to SEA in the circumstances by reason of him being in a position of conflict between his duty to SEA and his duty to Huxham (see Ford v Andrews (1916) 21 CLR 317). Nor was it SEA's case that, prior to his formal appointment as a director of SEA, Mr Lam acted as such and therefore stood in a fiduciary position to SEA or that Mr Lam and/or Huxham were co-venturers with SEA with respect to Thurecht Parade and therefore owed a duty not to take the whole of the benefit of the subject of the co-venture.
Having concluded that Mr Lam did not breach any fiduciary duty owed by him to SEA by causing his company to take up the opportunity at Thurecht Parade, it is unnecessary to consider the relief to which SEA would have been entitled had its case in this respect succeeded. Nor is it necessary to consider the quantum of any equitable compensation to which SEA would have been entitled. Nonetheless, I will, as briefly as possible, express my views on those issues.
Upon making out its case on breach of fiduciary duty, SEA would have been entitled to, at its election, an account of the profits made by Mr Lam, the defaulting fiduciary, or a compensatory remedy against Mr Lam, for the loss suffered by it (Warman International Ltd v Dwyer at 559). SEA elected for a compensatory remedy, an election to which SEA is bound (Kendall v Masters (1860) 2 De GF & J 20; 45 ER 598), and sought to establish the quantum of that compensation by reference to the value of the opportunity lost by SEA to successfully operate a seafood processing and retail business from Thurecht Parade.
In Warman International Ltd v Dwyer, the High Court (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) said (at 557 - 558) :-
"... The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves 'at a level higher than that trodden by the crowd' (Meinhard v Salmon (1928), 164 N.E. 545, at p 546, per Chief Justice Cardozo). The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage (Chan v Zacharia (1984), 154 C.L.R., at pp 198 - 199).
Thus, it is no defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably (Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929), 42 C.L.R. 384, at p 409; Furs Ltd v Tomkies (1936), 54 C.L.R. 583, at p 592; Consul Development (1975), 132 C.L.R., at p 394; Industrial Development Consultants Ltd v Cooley, [1972] 1 W.L.R. 443; [1972] 2 All E.R. 162; Canadian Aero Service Ltd v O'Malley, [1974] S.C.R. 592; (1973) 40 D.L.R. (3d) 371). So, in Regal (Hastings) Ltd v Gulliver [1967] 2 A.C. 134n, although the directors acted in good faith and in the interests of the company of which they were directors in taking up shares in a subsidiary which the company could not afford to take up, they were held accountable for the profit made on the sale of the shares. And, in Phipps v Boardman [1967] 2 A.C. 46, the solicitor was held accountable for the profit he made, notwithstanding that he acted bona fide and in the interests of the trust and that the opportunity would not have been availed of but for his skill and knowledge.
The assessment of the profit will often be extremely difficult in practice; accordingly it has been said that '[w]hat will be required on the inquiry ... will not be mathematical exactness but only a reasonable approximation' My Kinda Town Ltd v Soll, [1982] F.S.R. 147, at p 159, per Slade J. What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty (Hospital Products (1984), 156 C.L.R., at p 110)."
(see also In re Jarvis [1958] 2 All ER 336 at 340; [1958] 1 WLR 815 at 820; Maguire v Makavonis at 790).
However, where an applicant seeks a compensatory remedy, different considerations apply. It is necessary for the applicant to establish a causal connection between the loss claimed and the breach of duty, although it is not necessary for the applicant to prove causation along common law principles by reference to notions of foreseeability and remoteness (Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 at 93; Commonwealth Bank v Smith (1991) 42 FCR 390 at 393 - 394; Wan v McDonald (1992) 33 FCR 491 at 520 - 521). In Target Holdings Ltd v Redferns [1996] 1 AC 421, Lord Browne-Wilkinson, with whom the other members of the House of Lords agreed, said (at 434) :-
"The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries' rights can be protected is to restore to the trust fund what ought to be there. In such a case the basic rule is that a trustee in breach of trust must restore or pay to the trust estate either the assets which have been lost to the estate by reason of the breach or compensation for such loss. Courts of Equity did not award damages but, acting in personam, ordered the defaulting trustee to restore the trust estate: see Nocton v Lord Ashburton [1914] A.C. 932, 952, 958, per Viscount Haldane L.C. If specific restitution of the trust property is not possible, then the liability of the trustee is to pay sufficient compensation to the trust estate to put it back to what it would have been had the breach not been committed: Caffrey v Darby (1801) 6 Ves. 488; Clough v Bond (1838) 3 M & C 490. Even if the immediate cause of the loss is the dishonesty or failure of a third party, the trustee is liable to make good that loss to the trust estate if, but for the breach, such loss would not have occurred: see Underhill and Hayton, Law of Trusts & Trustees 14th ed (1987), pp 734 - 736; In re Dawson, decd; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 N.S.W.R. 211; Bartlett v Barclays Bank Trust Co Ltd (Nos. 1 and 2) [1980] Ch 515. Thus the common law rules of remoteness of damage and causation do not apply. However there does have to be some causal connection between the breach of trust and the loss to the trust estate for which compensation is recoverable, viz the fact that the loss would not have occurred but for the breach: see also In re Miller's Deed Trusts (1978) 75 L.S.G. 454; Nestle v National Westminster Bank Plc [1993] 1 WLR 1260."
That passage from his Lordship's speech was cited with approval by the High Court in Maguire v Makaronis at 790 - 791.
There is no doubt that, if Mr Lam owed a fiduciary duty to SEA to preserve for it the opportunity to carry on business from Thurecht Parade, and if he breached that duty by not doing so, SEA, applying the principles set out above, lost the opportunity to carry on from Thurecht Parade its seafood processing and retail business by reason of that breach of duty.
It was contended for SEA that, but for the breach of fiduciary duty on the part of Mr Lam discussed above, SEA would have entered into the lease and operated a seafood processing and retail business from Thurecht Parade. SEA's claim in damages was framed on the basis of calculation of the present value of the projected profits, over the five year period of the lease, of the "new" enterprise SEA would have conducted from Thurecht Parade had it been given the opportunity. Counsel for the respondents submitted, inter alia, that, as the evidence disclosed that suitable premises other than Thurecht Parade would have been available to SEA within three to six months, any compensation payable to SEA is payable only in respect of loss suffered by SEA in that period.
There is in my view, considerable force in the submission that, on the evidence as to the other opportunities available to SEA within three to six months of the breach of duty complained of, it could not properly be said that any loss suffered by SEA after that period was caused by, in the relevant sense, the breach of duty. The evidence of Mr Bostock and Mr Teh is unequivocal on this issue. Other suitable premises could have been found for SEA but it would have taken between three and six months to locate such premises, complete an appropriate fit out at a cost of $250,000 and to obtain the necessary licenses and permits. In the event, SEA moved its operation to Pine Street and carried on business from that location with no noticeable effect upon trading results, despite those premises not being "entirely suitable". Further, the evidence was that SEA could not have carried on its processing business from Thurecht Parade until substantial improvements had been carried out to those premises. The improvements were to be carried out prior to the commencement of the 1995 mullet season (March or April 1995) and, it will be recalled, were to be funded by Huxham. Absent the improvements, SEA would have been limited to a retail business. There is no evidence as to what SEA would have lost in that respect for the six months or so up to the start of the mullet season. Therefore, if it is correct to limit SEA's losses to the three to six month period, there is no evidence before me going to the quantum of that loss.
I would, had this issue fallen for decision, so limited the recoverability of compensation by SEA to a period of three to six months. To do so is not to import into the realm of equity notions of common law causation, involving concepts of foreseeability, remoteness and mitigation. In Canson Enterprises Ltd v Boughton & Company (1991) 85 DLR (4th) 129, McLachlin J, with whom Lamer CJC and L'Heureux-Dubé J agreed, said (at 163) :-
"... Foreseeability is not a concern in assessing compensation, but it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach. The plaintiff will not be required to mitigate, as the term used in law, but losses resulting from clearly unreasonable behaviour on the part of the plaintiff will be adjudged to flow from that behaviour, and not from the breach."
(see also Permanent Building Society v Wheeler (1994) 11 WAR 187 at 245; Sir Anthony Mason, The Place of Equity and Equitable Remedies in the Contemporary Common Law World (1994) 110 LQR 238 at 244).
Once it became apparent to SEA that it was not to have a lease of Thurecht Parade, it was unreasonable for SEA to take no steps to procure for itself other suitable premises. Any loss which it suffered beyond the period in which it could have secured and prepared alternative premises was not loss which was caused by any breach of duty on the part of Mr Lam. The conclusion may be tested by reference to what would have been the case had SEA expended time, effort and money in setting up such alternative premises. Such expenditure would have rightly been said to have been caused by the relevant breach and would have been compensable, if the election for a compensatory remedy had been persisted in.
There are in my view, insurmountable difficulties with respect to the quantum of compensation claimed by SEA. Reliance was placed on the evidence of an accountant, Gregory Wanchap, to establish the amount of loss said to have been suffered by SEA. The loss was calculated on the basis that what was to be compensated was the opportunity lost by SEA to carry on business from Thurecht Parade. Mr Wanchap, relying predominantly upon what he was told by Mr Teh and Mr Bostock was achievable, purported to calculate the present value of the profits SEA would have made had it carried on business from Thurecht Parade for five years (the principal term of the lease agreed on 11 October 1994). Mr Wanchap, in performing his calculations, did not have regard to what SEA had achieved historically from Tubbs Street. Nor did he have regard to what Huxham in fact achieved carrying on business from Thurecht Parade during the period in which it did so. Mr Wanchap's calculation of lost profits was predicated upon SEA carrying on what was characterised as a "new business" from Thurecht Parade, having regard to the fact that, amongst other things, SEA would be conducting retail operations which it had not previously done, would expand its operations to encompass new product lines, such as the processing of scallops and spanner crabs and would achieve certain economics of scale by reason of the expansion into retail sale of seafood complementing the processing operations. On Mr Wanchap's calculations, the present value of the annualised net profit which SEA would have achieved during the five year period, taking into account what it has achieved and will achieve at its present location, was $4,330,086. SEA's claim for compensation was for that amount, less any discount to be applied on the court's assessment of the likelihood or otherwise of the opportunity being realised. It was accepted by the parties that I should approach the assessment of this aspect of SEA's case in accordance with the principles expressed in Malec v J C Hutton (1990) 169 CLR 638 as to future or hypothetical events. To Malec v Hutton, I would add Sellars v Adelaide Petroleum and The Commonwealth v Aman Aviation Pty Ltd (1991) 174 CLR 64 as directing the approach to be taken.
There is, in my view, a fundamental difficulty with the approach adopted by Mr Wanchap and therefore, with the resultant calculations. There is not, on the evidence, a credible factual foundation for the approach adopted or for the calculations.
Historically, SEA recorded, for the most part, significant trading losses. In the 1991, 1992 and 1994 financial years, SEA recorded trading losses of $39,138, $114, 341 and $297,510 respectively. An operating profit of $85,479 was recorded in the 1993 financial year. Interestingly, SEA's Tasmanian operations, said to have been a significant contributing factor to the losses, were acquired in November 1992, during the 1993 financial year (the Tasmanian operations did record a significant loss in the 1994 year, $327,804, but were profitable in 1995 and 1996). On Mr Wanchap's approach, the historical results were not relevant because SEA was going to carry on an entirely new business from Thurecht Parade. On this basis, and relying upon what he was told by Mr Teh and Mr Bostock, the projections which were prepared in conjunction with the company profile and "[w]here specific market information required collaboration ... information from recognised authorities in the seafood industry", Mr Wanchap purported to project the sales, cost of sales and other expenses of the new business by reference to product line and activity. It is important that I record that I do not accept the projections which were prepared in conjunction with the company profile as in any way relevant to what was planned for or achieved from Thurecht Parade. The projections relate to the proposed development of the Redcliffe site which, as can be seen from the company profile set out at great length at the beginning of these reasons, was prepared for stage one of the development at the Redcliffe site which was eighteen months to two years away. That development, as proposed, was for a business far more extensive than that proposed for Thurecht Parade. There is no evidence that a business on that scale could have been run from Thurecht Parade.
It is instructive to compare Mr Wanchap's projections with the results actually achieved by SEA in the 1994 year, operating from Tubbs Street :-
Mr Wanchap's Projections Actual 1994 Results
Mullet
Sales 2,000,000 1,423,854
Cost of sales 1,300,000 1,095,552
Gross profit 700,000 328,307
Gross margin % 35.00 23.06