ABLE TOURS PTY LTD -v- MANN [2009] WASC 192 (28 July 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ABLE TOURS PTY LTD -v- MANN [2009] WASC 192

Equity - breach of fiduciary duty by top management in a company by use of confidential information to pursue an opportunity which the company was pursuing - Whether operations manager of small manufacturing business was top management - Whether production capacity of business as known to operations manager was confidential information - Whether breach by use of confidential information proved - Whether necessary to prove use of confidential information to establish breach - Liability of company formed by operations manager and another which entered into contracts to take up opportunity after operations manager had left the employ of the business - Whether that company liable under the 'second limb' of Barnes v Addy - Whether breach by operations manager was 'dishonest and fraudulent' - Liability to orders for an account and an inquiry

Barnes v Addy (1874) LR 9 Ch App 244

Canadian Aero Service Ltd v O'Malley [1974] SCR 592

Colour Control Centre Pty Ltd v Ty (1996) 39 AILR 5-058

Consul Developments Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373

Cook v Deeks [1916] AC 554

Del Casale v Artedomus (Aust) Pty Limited [2007] NSWCA 172

Fabre v Arenales (1992) 27 NSWLR 437

Faccenda Chicken Ltd v Fowler [1987] Ch 117

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1

Hanneybel v Uniflex (Australia) Pty Ltd [2002] WASCA 349

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Jones v Lipman [1962] 1 All ER 442

Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1984) 156 CLR 414

Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491

Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317

1 This is the judgment following the trial of an action for breach of fiduciary duties. The plaintiff relies upon fiduciary duties it says arose out of an employment relationship. The plaintiff claims its former employee, the first defendant, breached his duties to the plaintiff in relation to confidential information that the first defendant acquired during the course of his employment at the plaintiff. The plaintiff says the confidential information was highly relevant to discussions it was having with a potential purchaser of the plaintiff's manufactured product, namely buses. The plaintiff says the breaches culminated in the second defendant, a company associated with the first defendant, entering into agreements with that purchaser to manufacture and supply buses of the kind made by the plaintiff. The first defendant became a director and major shareholder of the second defendant at the time of its incorporation, not long before the first defendant resigned from his employment at the plaintiff. The plaintiff says the first defendant acted as agent in causing or procuring the second defendant to enter into those agreements with the purchaser.

2 The plaintiff seeks orders principally for the defendants to account for the benefits of the agreements and for an inquiry as to those benefits.

3 The principal issues in the trial are the nature and scope of the employment relationship between the plaintiff and the first defendant at the times material to the plaintiff's claim; the nature, as confidential information or not, of the information acquired by the first defendant and relevant to the discussions between the plaintiff and the purchaser; and whether there were any of the pleaded breaches of fiduciary duty by the first defendant. As I will indicate, there are also issues as to the liability of the second defendant.

4 I begin by providing a background to those issues, which represents factual matter most of which is not in contest between the parties, and by referring to the witnesses who appeared before me.

5 Then I review the law relevant to the plaintiff's case as pleaded and fought, before returning to consider the issues I have described.

6 The final section of my reasons is my conclusions and call for orders.

7 In about 1995 the plaintiff began as a tour business.

8 In about 1998 Mr Kevin Henk Maria de Bruin designed and then built a passenger bus for use in the adventure tourism business that the plaintiff was then operating. At all material times Mr de Bruin was one of two directors of the plaintiff: the other was his wife, Mrs Sonja de Bruin.

9 Since about 2000, the business of the plaintiff has been limited to the design, construction and sale of passenger buses. The customers for those buses have been tour operators and mine operators. At all material times the plaintiff has carried on business under the name 'Able Bus and Coach'.

10 In the financial year 2006/2007, the plaintiff produced about 25 - 27 buses with prices ranging from $120,000 - $280,000 per vehicle. As at about November 2007, the plaintiff had forward orders for about 26 buses stretching to delivery dates in 2008/2009.

11 In 2007 the production workforce of the plaintiff was about nine persons, including, until 28 September 2007, the first defendant. The first defendant is a fitter and welder by occupation.

12 In about mid-2002 the first defendant commenced work for the plaintiff, initially as a sub-contractor on a part-time basis. The first defendant had previously been a subcontractor and had done marine welding and similar duties for the marine business of a Mr Jerry Thompson. At the time the first defendant joined the plaintiff, there were only the first defendant and Mr de Bruin working in the plaintiff's workshop. There the plaintiff assembled and constructed steel frames for its passenger modules, but contracted out to a number of contractors much of the additional work for completion of the buses.

13 In mid-2003 the first defendant ceased to be a subcontractor to the plaintiff and instead became its employee. The plaintiff employed the first defendant on a full-time basis. There was no written employment agreement between the first defendant and the plaintiff, nor was there ever a written duty statement describing the first defendant's duties to the plaintiff. However, there is evidence of a written statement as to the first defendant's role, in a letter from a business adviser and consultant to the plaintiff, a Mr Andrew McPhail, to which I will return.

14 In 2004 and 2005 the plaintiff's business expanded significantly. This expansion was associated, in about 2004, with the plaintiff moving premises to a workshop and office on Raymond Avenue in Bayswater, and with it taking on additional staff.

15 By the beginning of 2007, the first defendant had acquired the title operations manager of the plaintiff, having previously had the title of production manager. There is a sharp contest between the parties as to the role and responsibilities of the first defendant in 2007, whether as operations manager or otherwise. I return to that contest below, where I set out the reasons for my findings, describing in more detail the processes in the plaintiff's workshop in 2007.

16 I now introduce the purchaser who would potentially have acquired buses from the plaintiff in 2007: TKJ Pty Ltd, trading as Western Xposure.

17 Western Xposure is an adventure tours operator. In 2007 it had about 30 vehicles. Western Xposure is the business resulting from the merger, sometime in or after 2000, of two tour bus operating businesses, Red Back Safaris and Travel About Tours. Red Back Safaris was a business begun by Mr Kevin Cousins. Mr Cousins, Mr Timothy Collins and Ms Jennifer Dale were directors of TKJ in 2007, and, until their shareholdings were acquired in a transaction I will describe shortly, shareholders of TKJ. There is evidence that until February 2007, there was another director of TKJ who was also a shareholder of that company. However, there is no evidence that that other director and shareholder played a role in any of the matters before me.

18 Mr Cousins has known Mr de Bruin since about 1996. Some time after 1996, Red Back Safaris acquired a bus that Mr de Bruin had designed and built and was using in the plaintiff's business. Between 1998 and 2000, Red Back Safaris acquired two further buses from the plaintiff, being buses built by the plaintiff for Red Back Safaris. After the merger of Red Back Safaris and Travel About Tours, Western Xposure acquired a number of second-hand buses that had been built by the plaintiff for various other tour operators.

19 Mr Cousins has known the first defendant since about 2002, as a result of Mr Cousins' visits to the plaintiff's workshop. Mr Cousins formed a high opinion of the first defendant's intelligence and skill as a tradesperson in bus manufacturing and indicated to him that if he ever left the employ of the plaintiff he could come to work for Western Xposure building buses for it. There is also evidence that the first defendant and his wife, Mrs Andrea Mann, had some personal contact with Mr Cousins in 2006 and 2007 in relation to organising a Western Xposure bus for a birthday of the first defendant's daughter, and in relation to prizes supplied by Western Xposure for her school quiz night and for fund raising activities of Mrs Mann.

20 In the latter half of 2006 Mr Cousins had discussions with Mr de Bruin about the possibility of Western Xposure acquiring buses from the plaintiff. At that time, on Mr Cousins' evidence, Western Xposure probably only had sufficient resources to purchase two buses, although Mr Cousins wished to acquire more, up to eight new buses, to upgrade Western Xposure's fleet. At some point in late 2006, Mr de Bruin informed the first defendant about Western Xposure's potential order for buses from the plaintiff.

21 Also in the latter half of 2006, a British company with international interests in tour related enterprises expressed an interest in acquiring the Western Xposure business. This interest culminated, in early 2007, in that company, Trek America Travel Ltd, trading as First Choice, taking over TKJ by buying out the interests of its shareholders. Following that take over, Mr Cousins, Mr Collins and Ms Dale remained directors of Western Xposure.

22 Not long after First Choice took over the business of Western Xposure, Mr de Bruin for the plaintiff sent Mr Cousins, by email to Mr Cousins at his address at Western Xposure, a 'final quote and specifications for construction of a 21 passenger seats Tour Coach with walk-in storage area on 2006 Isuzu FRD 500 2WD', in a document dated 14 March 2007 (exhibit 1.7). This was followed not long afterwards by Mr de Bruin for the plaintiff sending Mr Cousins, on the evidence before me by fax, a 'final quote and specifications for construction of a 20 passenger seats Tour Coach with walk-in storage area on 2006 Isuzu NQR 450 2WD', in a document dated 29 March 2007 (exhibit 1.8).

23 At about the same time as, or not long after, the two quotes of March 2007 were sent to Mr Cousins, the first defendant attended a Fremantle Dockers football game with Mr Andrew Mawer. The first defendant and Mr Mawer ultimately went into business together as AAP Smart Coach Pty Ltd, the second defendant. Mr Mawer had previously been employed by Major Motors, which supplied the plaintiff with Isuzu trucks, and he had come to know Mr de Bruin and the first defendant through that business connection. Subsequently, in 2006, Mr Mawer became Service Manager at Hertz, the rental company, but remained in contact with Mr de Bruin and the first defendant.

24 At the Fremantle Dockers game I am satisfied two matters of significance to the present action were discussed by the first defendant and Mr Mawer.

25 One matter was the first defendant's dissatisfaction with his employment at the plaintiff. In about February 2007 the first defendant became dissatisfied with his pay at the plaintiff. There is evidence from Mr Mawer (exhibit 15, [42]), although not from the first defendant, that the first defendant mentioned his dissatisfaction to Mr Mawer on a number of occasions prior to the Fremantle Dockers game. However, it is not in contest that at the game the first defendant indicated to Mr Mawer that the first defendant was looking to leave the plaintiff.

26 The other matter of significance discussed at the Fremantle Dockers game was the idea that Mr Mawer and the first defendant together might build a motor home or motor homes. Although it was pressed on me for the plaintiff that Mr Mawer and the first defendant never seriously entertained that project, I am satisfied that, at the least, the idea of the two of them together building a motor home or motor homes was raised at the game. I am further satisfied Mr Mawer was the origin of the idea and had, on a number of occasions before the Fremantle Dockers game, raised with Mr de Bruin and the first defendant the prospect of the plaintiff building a motor home or motor homes. Mr Mawer had also previously raised with the first defendant the prospect of him working with Mr Mawer to build a motor home on weekends, using materials bought from the plaintiff. At the Fremantle Dockers game I am satisfied that Mr Mawer and the first defendant discussed the possibility of building motor homes on a commercial basis. Not long after the game the first defendant contacted Mr Mawer to pursue the matter.

27 I am also satisfied that over the period from May - July 2007 Mr Mawer and the first defendant explored the idea of establishing a business that would produce motor homes. I so conclude both because of the evidence of the first defendant and Mr Mawer, evidence of both of whom was evidence which I consider was not successfully challenged in that respect, and because of other evidence which I will reach shortly.

28 Also in mid 2007 the first defendant had discussions with Mr Thompson, to whose marine business I have previously referred, about the possibility of the first defendant doing subcontract work. Mr Thompson referred the first defendant to Mr Frank Vaughan of PKF, a firm of chartered accountants and business advisers, for advice on forming a company to run the first defendant's business.

29 In late July 2007 Mr Vaughan met at least with the first defendant. I accept Mr Vaughan's evidence, which is supported by an email he sent to his personal assistant before the meeting (exhibit 1.10), that the meeting was set up to discuss the establishment of a business to build motor homes, and that the establishment of that business was discussed at the meeting (exhibit 19 [10] and [23]). This is the other evidence I referred to above, on the basis of which I conclude that the first defendant and Mr Mawer explored, at least up to July 2007, the idea of establishing a business that would produce motor homes.

30 Over the period from May - July 2007 and into August 2007 Mr de Bruin for the plaintiff and Mr Cousins for Western Xposure had continuing discussions about the possibility of Western Xposure acquiring buses from the plaintiff. By fax to Mr Cousins, Mr de Bruin sent a 'final quote and specifications for construction of a 21 passenger seats Tour Coach with walk-in storage area on 2006 Isuzu FRD 500 2WD', in a document dated 17 August 2007 (exhibit 1.11). This quote was in identical terms, except as to its date, to the quote dated 14 March 2007 (exhibit 1.7). As will be seen, the 17 August 2007 quotation (exhibit 1.11) assumes considerable significance in this matter.

31 There is evidence from the first defendant that Mr de Bruin did not show him the quotes or otherwise make him aware that Mr de Bruin had provided the quotes to Mr Cousins in 2007. However, in cross-examination the first defendant admitted that Mr Cousins had shown him exhibit 1.11 (the quotation of 17 August 2007). As I will indicate there is also evidence from Mr Mawer that the first defendant, on behalf of the second defendant, used that quotation to prepare a quotation for Western Xposure, which was provided to Mr Cousins in November 2007, over one month after the first defendant had left his employment at the plaintiff. I will consider below the evidence which, it was said for the plaintiff, went to establishing when the first defendant became aware of the 17 August 2007 quote.

32 On the evidence of the first defendant and by virtue of his employment at the plaintiff, I also find that he was aware by August 2007 that the plaintiff was not in a position to provide any buses to Western Xposure before September 2008 due to its existing orders. As will be seen, it was a matter of importance for Western Xposure to obtain the new buses it sought by September 2008.

33 On 21 August 2007 the second defendant was incorporated. Its directors have at all material times been the first defendant and Mr Mawer. Its shareholders at all material times have been, as to one-half of the issued shares, the trustees of the Mann Family Trust, and as to the other half of the issued shares, the trustee of the Mawer Family Trust.

34 In the morning of 3 September 2007 the first defendant gave notice of his resignation from the plaintiff. By the same date, the first defendant and Mr Mawer had already organised a monthly lease of workshop premises for the second defendant, as well as a job for the second defendant to refurbish a drill rig.

35 There is evidence from the first defendant that he considered at that time that, based on his discussions with Mr Thompson, there were opportunities for him to do stainless steel welding work in the marine industry. There is also evidence, from both the first defendant and Mr de Bruin, that when the first defendant gave his notice, he told Mr de Bruin that he intended to set up a business to fabricate and install marine stainless steel.

36 The evidence of the first defendant, that he intended to fabricate and install marine stainless steel, or do sub-contract welding work, was challenged in cross-examination, and he admitted that a person doing business of either sort would not call himself by the name of the second defendant. However, in relation to the first defendant's evidence that the work he intended to do was not to be done through the second defendant (exhibit 9 [130]), evidence which was not challenged, I find that the first defendant did have the intention at least to fabricate and install marine stainless steel. I return below to the question whether or not this statement, of the work the first defendant intended to do after leaving the plaintiff, was at the least misleading.

37 However, the first defendant did admit that he had not told Mr de Bruin of any plan to make motor homes. The evidence of Mr Mawer is indeed that when the first defendant resigned from the plaintiff 'the initial idea of building a motor home went out the window, as Mann had ceased his employment and we were looking at what contracts or jobs were available' (exhibit 15 [100]). While the first defendant's evidence in cross-examination is that at most that was the case only 'in the beginning' (ts 247), and while there is evidence I will reach below that at least so far as the first defendant was concerned the idea remained one the second defendant might pursue, I am satisfied on the evidence that I consider below, in relation to the first defendant's pursuit of the opportunity to supply buses to Western Xposure, that the mobile home idea had receded in significance by about the time the first defendant resigned, while other lines of activity for the second defendant assumed much greater significance.

38 Further, there is evidence that the matter of making motor homes was raised in discussions with Mr Daniel Pitic at a meeting between him, the first defendant and Mr Mawer. That meeting occurred not long after the first defendant had given his notice but before the first defendant had left the plaintiff's employment.

39 Mr Pitic is a mechanical engineer who provides services in the automotive area in relation to compliance plate approval (CPA), which requires vehicles to comply with federal and state Australian Design Rules (ADRs), and in relation to giving 'details of the company to inspectors from [the relevant federal government department] in the event they want to come and inspect and audit the company to see how the work is carried out' (ts 126). Mr Pitic had previously provided his services to the plaintiff in relation to obtaining CPAs and had come to know the first defendant through those interactions. On one occasion at the plaintiff's premises, which I am satisfied was before the first defendant gave his notice on 3 September 2007, the first defendant told Mr Pitic that he was about to leave the plaintiff. In that conversation the first defendant asked Mr Pitic whether he was happy to help the first defendant with 'the CPA submissions' for 'what he was doing' (ts 115). This evidence was not challenged.

40 On 8 September 2007 Mr Pitic met with the first defendant and Mr Mawer. Mr Pitic testified that he was not sure what was discussed at the meeting, but he believed that 'that was the time they mentioned they wanted to start building motor home and just that's all I know' (ts 117; see also ts 131). I found Mr Pitic to be a truthful witness and consider that this testimony goes to show that, to the best of his recollection, that is what was discussed. As I will indicate below, there is, however, evidence that the business of making buses was also discussed at this meeting. I will return to the evidence about this meeting below.

41 On 28 September 2007 the employment of the first defendant at the plaintiff ended. It would appear that Mrs Mann left her employment with the plaintiff at about the same time. She had been employed in its office and her duties included paying the wages of the plaintiff's employees.

42 In October 2007 the first defendant obtained and commenced work constructing a simulator for the Fremantle Port Authority.

43 In the same month, the first defendant had discussions with a representative of Nationwide Hire about the second defendant building passenger modules for mining purposes, although this matter was ultimately not pursued.

44 On 5 November 2007 the first defendant on behalf of the second defendant, ordered by fax (exhibit 12) 25 hoops from Bend-Tech Engineering to be of the dimensions and bent to the specifications shown in a drawing of a 'hoop' (exhibit 6), sent by the first defendant with the order. As I will indicate, the second defendant used the bent hoops to build frames for the passenger modules of its buses. The first defendant acknowledged in cross-examination that exhibit 6 was a drawing of a hoop suitable for the purpose of building buses, and that some of the hoops ordered on 5 November 2007 were in fact used for that purpose. However, his evidence was also that the hoops were ordered solely for motor home purposes and exhibit 6 was a drawing of a hoop for a motor home. Bend-Tech issued to the second defendant an invoice for the hoops dated 16 November 2007 (exhibit 17), which referred to the order as '25 bus frames to bent/rolled as per drawn'.

45 On 19 November 2007 the second defendant received steel to build a bus.

46 By 22 November 2007 the second defendant had begun building a bus for Western Xposure. For that bus, the second defendant had prepared a number of quotations which, on the evidence of Mr Mawer, were sent by email to Mr Cousins' address at Western Xposure. Two of the emails were dated 16 November 2007, but sent at different times on that date (exhibits 1.21 and 1.22), and one was dated 20 November 2007 (exhibit 1.23). The bus described in exhibit 1.21 was the first bus that Western Xposure ordered from the second defendant. Exhibit 1.21 was prepared by Mr Mawer, who, as he admitted in cross-examination, 'largely copied' it from exhibit 1.11, the plaintiff's quote to Western Xposure dated 17 August 2007. The terms of exhibit 1.21 required Western Xposure to pay a deposit, which the second defendant received on or about 21 November 2007.

47 The circumstances under which the second defendant came to build this first bus are in sharp contest, and I return to the evidence in relation to those circumstances below. For present purposes, it is sufficient to note my findings that the most important consideration for Mr Cousins of Western Xposure in placing its orders for new buses was the timetable for delivery of the buses, and that the first defendant had indicated to Mr Cousins that the second defendant could deliver the first bus in six weeks.

48 By 7 November 2008, the second defendant had built and delivered to Western Xposure a total of eight buses, including seven buses built under contracts that I find were entered into after the agreement for the first bus.

49 The second defendant did not build a motor home until towards the end of 2008.

50 The plaintiff called three witnesses, Mr de Bruin, Mr Pitic and Mr Glen Ian Stewart, to whose evidence I will shortly come. Evidence was also given by Mr Cousins and Mr Collins on the return of subpoenas issued by the plaintiff.

51 The defendants called four witnesses, the first defendant, Mr Mawer, Mr Vaughan and Mr Cousins.

52 The gravamen of the plaintiff's pleaded case is in [8], [12], [13] and [19] - [21] of the amended statement of claim, which read as follows:

1. Pursuant to the Employment Contract the first defendant owed the plaintiff fiduciary duties:

8.1 not to use knowledge or information which was acquired by the first defendant as an employee of the plaintiff other than for the benefit of the plaintiff;

8.2 not to permit the first defendant's interests to conflict with his duties to the plaintiff and in the event of a conflict between the interests of the first defendant and the first defendant's duties to the plaintiff, not to give preference to the interests of the first defendant; and

8.3 not, whether during the period of the first defendant's employment by the plaintiff or after the termination of that employment, to divulge or use other than for the benefit of the plaintiff, knowledge or information imparted to the first defendant during the course of the first defendant's employment where that knowledge or information was secret in character.

1. During the period of the first defendant's employment by the plaintiff, de Bruin verbally informed the first defendant, in effect, of the following matters (hereafter collectively the 'Confidential Information'), namely, the proposed:

12.1 order from Western Xposure for the Buses;

12.2 specifications for the Buses;

12.3 prices to be charged by the plaintiff for the Buses; and

12.4 timetable within which the Buses could be designed and built by the plaintiff which was from about September 2008 onwards having regard to the plaintiff's then existing orders.

13.1 imparted to the first defendant as an employee of the plaintiff;

13.2 imparted to the first defendant in confidence for the purposes of the plaintiff's business and not otherwise as the first defendant then well knew;

13.3 secret in character; and

13.4 knowledge or information which the first defendant could not use, during or after the termination of the Employment Contract, other than in accordance with the fiduciary duties pleaded in paragraph 8 above

by reason of the following acts, facts, matters or things:

13.5 the Confidential Information was known only to de Bruin, Cousins and the first defendant;

13.6 the Confidential Information would be valuable to competitors or intending competitors of the plaintiff;

13.7 the effort expended by the plaintiff in developing the Confidential Information;

13.8 the Confidential Information could not readily be replicated by others;

13.9 the Confidential Information was imparted to the first defendant only by reason of the seniority of his employment; and

13.10 the Confidential Information can be readily identified.

1. In breach of the fiduciary duties pleaded in paragraph 8 above the first defendant:

19.1 has used the Confidential Information for a purpose not for the benefit of the plaintiff insofar as the first defendant used that information to exploit the opportunity for the second defendant to build passenger buses for Western Xposure;

19.2 permitted the first defendant's interests as a director and shareholder of the second defendant to conflict with the first defendant's duty to the plaintiff not to seek a benefit from the use of the Confidential Information and preferred the interests of the first defendant as a director and shareholder of the second defendant to the first defendant's duties to the plaintiff not to seek a benefit for himself from use of the Confidential Information; and

19.3 during the period of the first defendant's employment by the plaintiff, alternatively, after the termination of that employment, the first defendant has used the Confidential Information other than for the benefit of the plaintiff.

1. The second defendant had actual knowledge of the first defendant's breaches of fiduciary duties by virtue of the first defendant having been a director of the second defendant since its incorporation.
2. The second defendant has counselled, aided and/or abetted the first defendant's breaches of fiduciary duties.

53 However, the case, as it emerged at trial, was that the Confidential Information was only that defined in [12.4]. The plaintiff placed no reliance on [12.1] - [12.3]. In any event, as I will explain, the plaintiff could not rely on [12.1] - [12.3] as it did not prove that that information was confidential.

54 Further, the plaintiff's case at trial was that the Confidential Information was not imparted by Mr de Bruin, but rather acquired by the first defendant in the course of and as a result of his employment at the plaintiff. The acquisition of confidential information in that manner is, on my reading of the authorities, sufficient for the purposes of this case: see Hanneybel v Uniflex (Australia) Pty Ltd [2002] WASCA 349 [67] (Malcolm CJ), [118] (Steytler J), [119] (Mathews AJ).

55 In my view counsel for the plaintiff, as I understood him in the way he fought the case at trial, including in his closing submissions, put the plaintiff's case in part on the basis that the first defendant used the Confidential Information that was relevant to the plaintiff's potential business with Western Xposure. The 'use' of the Confidential Information was indeed, as I read the pleadings, essential to establishing a breach of fiduciary duty in one of the ways in the amended statement of claim [19.1], [19.2] and [19.3].

56 I should note that it is not clear to me that this basis for the case was necessary, in view of the principle described in the leading authority, on which the plaintiff rested its case throughout the proceedings. On that authority it was not necessary, if the principle described in that case applies here, for the plaintiff to show that the Confidential Information had in fact been used by the first defendant.

57 That authority is Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1. As counsel for both parties made extensive reference to that case, I need to consider that authority in some detail.

58 The facts of Green and the conclusions of the Full Court (Burt CJ, Wickham and Kennedy JJ) are sufficiently set out for my purposes in Hanneybel [68] as follows:

Hasluck J [the trial judge] referred to the decision of this Court in Green ... In that case, the first appellant, Mr Green, while the manager of the respondent's business, acquired a shelf company and submitted a tender for the installation of ceilings in respect of a certain project for which the respondent was also minded to tender. The Court held that while Mr Green was the manager of the respondent's business, a fiduciary relationship existed between him and the respondent, with the result that he was under an obligation not to place himself in a situation where his duty to the respondent and his own interest might possibly conflict. As a consequence, Mr Green was liable to account to the respondent for the benefit of the contract. The Court also held that the obligation to account survived the cessation of the relationship of employer and employee out of which the fiduciary relationship arose. It was irrelevant that the benefits of the relevant contract would not be realised by Mr Green until after he had left the employment of the respondent.

59 From the judgment of Kennedy J in Green, referring to Canadian Aero Service Ltd v O'Malley [1974] SCR 592, among other authorities, I note the following passages (16 - 20) (of which the passages from (16) are quoted with approval in Hanneybel [69]):

... the first question to be answered is whether the relationship between [Mr Green] and the respondent had the requisite fiduciary character. In my opinion, it does. [Mr Green] held a senior managerial post in the respondent, with substantial responsibilities.

...

To paraphrase the words of Laskin J (as he then was) in Canadian Aero Service ... at 605-6, [Mr Green's] responsibilities verified his status as a senior officer. He was 'top management' and not a mere employee, whose duty to his employer, unless enlarged by contract, consists only of respect for trade secrets and the confidentiality of customer lists. His was a larger, more exacting duty which was similar to that owed to a corporate employer by its directors: see also Gower, Principles of Modern Company Law (3rd ed, p 518; State Vacuum Stores of Canada Ltd v Phillips [1954] 3 DLR 621; American Restatement of Restitution 190; Reading v Attorney-General [1951] UKHL 1; [1951] AC 507; [1951] 1 All ER 617, and Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488.

The general rule in relation to a person standing in a fiduciary relationship to another is laid down in Bray v Ford [1896] AC 44 at 51-2, where Lord Herschell said: 'It is an inflexible rule of a Court of Equity that a person in a fiduciary position, such as the respondent's, is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded on principles of morality. I regard it rather as based on the consideration that, human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule. But I am satisfied that it might be departed from in many cases, without any breach of morality, without any wrong being inflicted, and without consciousness of wrong-doing'.

I also note the following, from the judgment of Burt CJ in Green (5 - 6):

The question, however, remains, it being whether it is necessary for a plaintiff claiming an account to prove, that is to say to establish on the balance of probabilities, that the fiduciary did in fact use the knowledge, or the information, or the opportunity which came to him while he stood in that relationship and that he made the profit by such use. In my opinion it is not.

It is enough, I think, to show that the fiduciary gains his knowledge or opportunity within the fiduciary relationship; that it was knowledge or an opportunity which could have been used in the sense that it was relevant to the acquisition of the profit or benefit in fact acquired and that by doing what he did to acquire the profit or benefit the fiduciary placed himself in a position where his duty and interest did conflict or in a position where as a real and sensible possibility they may conflict. If that can be shown, and on the facts of this case the conflict was actual and not merely potential, it is not necessary to go further so as to prove that either the information or the opportunity was in fact used so as to acquire that benefit. (emphasis added).

60 This passage is quoted in the plaintiff's opening submissions. However, it does not seem to me that the plaintiff relied on this passage at opening, or subsequently, to support its contention that it need not prove that the first defendant used the Confidential Information.

61 However, in view of the principle in Green, the parties' resort to that case, and the pleadings, I will consider the plaintiff's case in terms of the principle to which I have referred, as well as whether or not the plaintiff has established that the first defendant used the Confidential Information.

62 I turn then to consider the three principal issues I described at the commencement of these reasons.

The employment relationship between the plaintiff and the first defendant

63 As I have indicated, it is not in contest that the first defendant's relationship with the plaintiff changed from sub-contractor to employee. It is also not in contest that the first defendant's role underwent some changes thereafter. However, there is a dispute about the first defendant's role at the times material to the pleaded breaches of fiduciary duty, which I take to have commenced when Western Xposure approached the plaintiff, in the latter half of 2006, about acquiring new buses for the Western Xposure fleet.

64 To understand that dispute, it is necessary to describe the nature of the plaintiff's manufacturing operation in its workshop and associated office. The first defendant was involved in that manufacturing operation at all material times.

65 The evidence about the manufacturing operation in the workshop on Raymond Avenue, to which the plaintiff moved in about 2004, came principally from Mr de Bruin in his cross-examination and from the first defendant in his evidence-in-chief (exhibit 9) and cross-examination. The evidence of these two witnesses is in my view broadly consistent, although Mr de Bruin's evidence is much more detailed, and some of the detail which is not in the first defendant's evidence is in sharp contest. I will deal with that contest below.

66 I set out the principal part of Mr de Bruin's evidence:

Let's just stay with up to 2007 when Mr Mann was working for you. The workshop itself was separated into three distinct parts?---Yes.

One part was the boilermaking section?---Yes.

One was the sheetmetal section?---Yes.

And one was the fit-out section?---Yes.

For the boilermaking section a gentleman named Marcel Kerring was responsible?---Not - in 2007?

Up to 2007, yes, up until Mr Mann left?---Up until Mann left he was - Phil was responsible for that section. He was underneath Phil in that section, yes.

Mr Kerring was a qualified boilermaker, wasn't he?---No.

He had worked with you as a boilermaker though?---He has - he is Czech Republic but his qualifications - not a qualified boilermaker, no.

All right, but he worked for you as a boilermaker?---As a welder-boilermaker, yes.

He was working in the boilermaking section together with one apprentice?---Yes, to the best of my knowledge; yes.

Mr Peter Scaffidi was working in the sheetmetal section?

---Yes.

Mr Scaffidi had worked previously before he came to you with a - - - ?---Goodwill Industries.

With Goodwill Industries, that's right. He was the manager of their sheetmetal operations, wasn't he?---I'm not sure what his role was there. He worked in sheetmetal but I'm not sure

He worked in sheetmetal, all right. Weren't you aware that he was the manager of their sheetmetal section?---I don't think he was but I'm not sure. That's another company. It's not my company.

Before you moved to your new premises you did not have a sheetmetal section in your own workshop, did you?---No. We set that up.

What you did was you contracted the sheetmetal work out to - - - ?---Goodwill Industries.

Goodwill Industries, that's right, and once you had your own sheetmetal section then Mr Scaffidi came on board?---We started to set up a sheetmetal on a small scale. I heard that Peter was resigning because he was unhappy with the management so, yes, then he came on board.

You are aware that Mr Scaffidi was responsible for safety at Goodwill Industries?---I don't know. It's not my business.

You don't know?---No, I don't know that I can say that.

67 It will be seen that the plaintiff contracted out some parts of the work it needed to do to complete its passenger modules.

68 I should note that the reference to Mr 'Scaffidi' should have been to Mr Scafetta, as Mr de Bruin indicated in his re-examination (ts 101). On Mr de Bruin's evidence, there were '10 or 11' persons in the plaintiff's business, including himself, Mrs Mann, who worked in the office, Mr Scafetta and the first defendant. Of those, 'roughly' '8 or 9' worked in the workshop (ts 51). I did not understand this evidence to be in contest.

69 I further note that it is not in contest that the first defendant's initial work with the plaintiff was as a boilermaker, and that later the first defendant stopped welding and changed his focus to fitting-out the passenger modules and undertaking the client inspection process at the delivery stage.

70 The first defendant gave evidence about his role in the workshop after he had been given the title of Operations Manager, having previously had the title of Production Manager. That evidence included the following from his examination-in-chief:

During the last few years of my employment at Able Tours, I was the most senior person in the workshop and my duties also involved ordering materials and generally organising the workshop and the scheduling of work.

I liaised constantly with de Bruin regarding the scheduling of orders for customers and the scheduling of orders for materials and parts required for the workshop.

During 2007, Able tours employed a staff of eight, four of which were apprentices, and two of which were overseas employees on workers visas.

The Able Tours workshop was divided into three departments:

(a) boiler making section

(b) sheet metal section; and

(c) fit out section

In 2007, I was in charge of the fit out section of the workshop, and I was required to supervise an apprentice.

In view of my previous work experience and in view of the fact that I had worked for Able Tours for a number of years, I was not specifically supervised by de Bruin in relation to the performance of my fit out duties.

In addition to my supervision of the fit out section, there were two other managers who were in charge of their respective sections within the workshop.

There was one employee in charge of the boiler making section (Marcel), who supervised two apprentices.

There was another employee in charge of the Sheet metal section (Peter), who supervised a trade's assistant, and an apprentice.

...

It is my understanding from discussions with de Bruin, that during the last two years of my employment with Able Tours, de Bruin considered that I was the person who was second in charge of the workshop (exhibit 9, [46] - [54], [59]).

71 There is some reason to believe that titles which included the 'Manager' suffix were used in the plaintiff's organisation in ways that did not necessarily indicate 'top management', as that term is used in Green (16) (Kennedy J), referring to Canadian Aero Service (605 - 606) (Laskin J), and explored below. For example, the evidence appears to indicate that Mrs Mann was referred to as Wages Manager, because she was responsible for paying the wages (ts 74, 76).

72 Counsel for the defendant directed me to the following evidence of Mr de Bruin:

Mr Mann worked as a boilermaker with you at the very beginning?---That's correct, yes.

He then became in charge of the boilermaking section?---No. That was quite small in the beginning.

It was basically you and him, wasn't it?---And a few other subcontractors, yes.

All right, and he then basically moved over within the operation to concern himself with fitter and delivering to customers. Correct?---No, that came later in the piece. He was operations manager really; production manager and then operations manager. No roles came with those (ts 61).

73 However, I consider that evidence at most indicates that the managerial positions referred to carried with them no specific role in the three sections of the workshop, and I consider that the witness would have understood the questioner as directing the witness's attention to that matter.

74 I do not consider that the titles the first defendant had, of Production Manager and then Operations Manager, were meaningless. I note the evidence of the first defendant that the change from Production Manager to Operations Manager did not carry any change in his rate of pay, evidence which was not challenged. However, I also note the evidence of the first defendant in his examination-in-chief quoted above, particularly his evidence that his position '[d]uring the last few years of [his] employment at Able Tours' was as 'the most senior person in the workshop' with duties that 'also involved ordering materials and generally organising the workshop and the scheduling of work'.

75 However, there was also evidence from Mr de Bruin that ordering arrangements changed towards the end of the first defendant's time at the plaintiff, so that each section of the workshop began to order its own supplies as needed (ts 64). Mr de Bruin added that this change was part of a move within the plaintiff towards the first defendant 'delegating some of his work so he could take on more - continue to take on more managerial roles', and that the first defendant 'oversaw it all' (ts 64). I take the comment about overseeing it all to refer to the first defendant overseeing the work in the workshop, including work that he had done previously.

76 I return below to evidence about the future role of the first defendant in the plaintiff's operation.

77 I consider it established that the first defendant was responsible for organising the workshop and liaising with Mr de Bruin on such matters as the scheduling of customers and the scheduling of orders. This is confirmed by evidence that the first defendant attended and participated in at least one management meeting, together with his wife, Mr Scafetta, Mr McPhail and Mr de Bruin, which is evidenced by a record of 'Management Meeting 3' dated 16 August 2006 (exhibit 1.6). That record stated alongside the initials 'PM', '[a]ll jobs out on schedule, no major problems. New paint shop should help.'

78 I further consider it established that no other person in the plaintiff's organisation had that role at the material times.

79 Much was made by counsel for the defendants of the plaintiff's failure to discover records of other meetings between August 2006 and September 2007, when the first defendant left the plaintiff. Mr de Bruin testified that the plaintiff probably had those records, showing the first defendant's attendance as well as his 'having a role' in the plaintiff's organisation (ts 58 - 59). It was put to me that the failure to discover those records needed to be considered with certain other failures. Those failures were the failure of the plaintiff to discover the letter from Mr McPhail 'stating what Phil's role was', which in cross-examination Mr de Bruin admitted Mr McPhail had issued (ts 60); the failure to call Mr McPhail as a witness; and the failure to discover 'a plan or graph which shows the corporate structure and the allocation of responsibilities of each person in [the plaintiff's] operation' in 2007, including the first defendant, a plan that Mr de Bruin admitted the plaintiff had produced (ts 60). Counsel for the defendants submitted that these failures considered together justified my drawing an inference against the plaintiff in accordance with the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

80 However, it is not apparent to me that the failure to discover further meeting records was 'unexplained' as the rule requires: see LexisNexis, Cross on Evidence (at 10 June 2009) [1215]. Mr de Bruin's evidence was that he supposed the failure to discover the meeting records was on the basis that they were not relevant. This explanation was not further explored in his cross-examination and would seem to me to be correct, in light of the first defendant's evidence, if all that those meeting records showed were the same as exhibit 1.6.

81 Further, it does not seem to me that I am to infer, from the plaintiff's failures to call Mr McPhail and to discover his letter and the plan or graph, that the plaintiff feared to call that witness or discover that evidence: Fabre v Arenales (1992) 27 NSWLR 437, 449 - 450 (Mahoney JA, Priestley and Sheller JJA concurring). On the evidence of Mr de Bruin, it seems to me that I should rather infer that the additional evidence would show no more than that already referred to: see Mr de Bruin's evidence in cross-examination that the plan or graph would show the first defendant 'as operations manager' (ts 60).

82 Similarly, it seems to me I am not justified in drawing a Jones v Dunkel inference against the plaintiff from the plaintiff's failure to call as witnesses other workers in the plaintiff's workshop, such as Mr Scafetta. It seems to me on the evidence I have mentioned that the inference to be drawn from that failure is that that additional evidence would show no more than the role of the first defendant already described.

83 There is also evidence about further roles the first defendant played at least from time to time in the plaintiff's organisation.

84 Some evidence shows that the first defendant had been 'acting general manager' of the plaintiff while Mr de Bruin was away from work (exhibit 2, [7]; ts 101). I find that this was the case at least when Mr de Bruin was away overseas in late 2006 (exhibit 9, [60], [61]).

85 Mr de Bruin gave evidence that he 'would consult' the first defendant when potential customers inquired about purchasing buses. The first defendant 'would tell me what time he could realistically build them in, and then armed with his approval, I would then go on to the client and give a full quote and delivery time' (ts 61).

86 I consider that this last evidence goes to a role for the first defendant beyond that which I have found up to this point. There is evidence, from the first defendant, that Mr de Bruin ceased to work with him on the workshop floor (exhibit 9, [20], [57]), but would 'regularly inspect the workshop' (exhibit 9, [57]). Mr de Bruin also gave evidence that he was 'present at the factory' on 'most days' (ts 61). Based on this evidence, I find that Mr de Bruin had the means himself to determine the plaintiff's production capability. However, I find that by 2007 the first defendant was the person Mr de Bruin came to rely upon for realistic assessments of the production capability of the plaintiff's operation, which the first defendant oversaw as operations manager.

87 I so find on the basis of Mr de Bruin's evidence as quoted, and on the evidence of both Mr de Bruin and the first defendant about the extent to which Mr de Bruin reposed confidence in the first defendant, in having the first defendant serve as 'acting general manager' in Mr de Bruin's absence overseas in late 2006. I also draw on the first defendant's evidence that Mr de Bruin considered him second in charge of the workshop, and that Mr de Bruin and the first defendant, when he was not doing welding work, wore shirts bearing 'Able Bus and Coach' that distinguished them from all others in the plaintiff's workforce (ts 244). I further rely on the evidence of Mr Cousins in his examination-in-chief that in September 2007, after the first defendant had resigned, Mr de Bruin said to Mr Cousins that Mr de Bruin 'had told Philip [sic] Mann that he was going to make provision for him in his will' (exhibit 23, [67]). I also rely on the evidence, in that regard, of Mr de Bruin in his cross-examination:

You also said to Mr Cousins that you had in fact told Mr Mann that you had made provision for him in your will?

---Yes, if my wife, myself and our son died, he would get the business in our will. That's how much - that's what we thought of him.

That's what you thought of him?---Yes (ts 95).

88 However, I do not consider that the evidence shows Mr de Bruin always relied on the first defendant for realistic assessments of production capacity. Indeed, apart from my finding that Mr de Bruin had the means of knowing the production capability of the plaintiff, there is also Mr de Bruin's evidence that there was a production planner in the plaintiff's office adjoining the workshop, an office in which Mr de Bruin, the first defendant and the first defendant's wife would regularly work. That planner showed the jobs on foot, and, as I understood Mr de Bruin's evidence, a skilled reader of the planner could work out how busy the plaintiff was and would be (ts 90). Further, there is no direct evidence that, during the first defendant's employment at the plaintiff, Mr de Bruin approached him for a realistic assessment of production capacity in relation to a potential order from Western Xposure.

89 There is insufficient evidence, in my view, to establish that the first defendant had any larger role in the plaintiff than that I have described.

90 True it is that, on the evidence of Mr de Bruin, he gave the first defendant cheque writing authority (ts 77); however, Mr de Bruin did not involve the first defendant in decisions about the financing of the business (ts 72). There is also the evidence of Mr de Bruin that he would 'consult' the first defendant on quotes Mr de Bruin proposed to provide to potential customers (ts 80), and that he had done so in the case of at least one of the quotes provided to Western Xposure in 2007 (ts 80). However, Mr de Bruin had never provided the first defendant with any documentation from which the first defendant could work out prices including mark-ups (ts 90). Further, there is the following evidence in Mr de Bruin's cross-examination concerning whether Mr de Bruin consulted the first defendant about pricing in relation to at least one of the quotes to Western Xposure:

All right. You told us before that you in fact consulted with Mr Mann about the prices to be charged to Mr Cousins?

---To Mr Cousins

When we were talking about the quotes to Mr Cousins you said to us that you consulted with Mr Mann and that took a little time too. Remember that?---Yes. He was aware of the quotes, the price that we charged for

Hold on, Mr De Bruin. Was he simply aware or did you consult with him?---I consulted with him. I told him about the quote, I told him about the price and

Did you ask him for his input? Is that what you're saying when you say 'consulting'?---Yes.

And he said something, made comment about the prices you were going to charge?---Not on this particular one. He might have said it was okay. I can't recall a hundred per cent. It wasn't that significant at the time.

Are you saying that you were looking for his input?

---We were. We were evolving him, yes.

Who is 'we'?---The company, sorry (ts 87).

91 I further note the following evidence, in the cross-examination of Mr de Bruin, on how that input was sought:

You had no discussion with Mr Mann at all about what the business was going to charge?---Yes. I told him it was the same price as the APT buses, which was around $200,000 (ts 89).

92 It seems to me, from that evidence, that the consultation on pricing, to which Mr de Bruin referred, was not because of his dependence on the first defendant's advice or because of his vulnerability in matters of pricing or even in relation to the prices quoted to Mr Cousins. Rather, any price consultation was part of a plan to develop the first defendant's involvement in the business by seeking his 'input' in these aspects. I particularly note Mr de Bruin's evidence that when Mr de Bruin told the first defendant about the prices to be quoted to Western Xposure, the first defendant's response 'wasn't that significant at the time' (ts 87).

93 I have noted Mr de Bruin's evidence in cross-examination that the first defendant had authority to provide to any inquirers information about the plaintiff's pricing (ts 70). I further note that, on the evidence of both Mr de Bruin and the first defendant, the first defendant had distributed brochures on the plaintiff's products at least at one trade event for the mining industry (ts 69; exhibit 9, [228], [229]).

94 However, it was the role of Mr de Bruin to deal with quotes and inquiries about new products from customers, while the first defendant's role was largely restricted to the consultations already mentioned. The following evidence of Mr de Bruin in my view goes to establish this conclusion:

And you were the one who dealt with any quotes and inquiries as to a new product from any customer?---Yes, in consulting with Phil. That was my role, yes. In my absence (ts 72).

95 As the last words of his answer may have been intended to indicate, it was also Mr de Bruin's evidence that the first defendant had a larger role whenever Mr de Bruin was absent, a role that included emailing quotes created from prices to which the first defendant had access through the plaintiff's computer system (ts 69, 70). However, it was not suggested that that enlarged role had applied in relation to the quotes provided to Western Xposure. There is no evidence that the first defendant had any contact, as a representative of the plaintiff, with Western Xposure.

96 There was also evidence from Mr de Bruin that, towards the end of the first defendant's employment at the plaintiff, the first defendant had authority to 'hire and fire' (ts 67). However, immediately before giving that evidence in cross-examination, Mr de Bruin made it clear, it seems to me, that this authority did not represent authority in relation to the development of the business, but rather in relation to the running of the workshop:

It is not the position, Mr De Bruin, that Mr Mann was solely responsible for the operation of the workshop, is it?---Not - of the workshop?

Yes?---Yes, but not of the business; not solely responsible for the business but of the workshop (ts 67).

97 This last evidence in my view is consistent with the other evidence I have noted, that the first defendant's role in the plaintiff's business was in relation to the workshop and thus the production capability of the plaintiff, more than any larger role in relation to the management of finances, pricing or business development.

98 However, in a business of the relatively small size and with the manufacturing character of the plaintiff's, that role was one that in my view established the first defendant as a member of 'top management' in the sense in Green (16) (Kennedy J), referring to Canadian Aero Service.

99 I take that sense to be as described in Canadian Aero Service (605 - 606) (Laskin J):

Like Grant, J, the trial Judge, I do not think it matters whether O'Malley and Zarzycki were properly appointed as directors of Canaero or whether they did or did not act as directors. What is not in doubt is that they acted respectively as president and executive vice-president of Canaero for about two years prior to their resignations. To paraphrase the findings of the trial Judge in this respect, they acted in those positions and their remuneration and responsibilities verified their status as senior officers of Canaero. They were 'top management' and not mere employees whose duty to their employer, unless enlarged by contract, consisted only of respect for trade secrets and for confidentiality of customer lists. Theirs was a larger, more exacting duty which, unless modified by statute or by contract (and there is nothing of this sort here), was similar to that owed to a corporate employer by its directors. I adopt what is said on this point by Gower, Principles of Modern Company Law, 3rd ed (1969), at p 518 as follows:

... these duties, except in so far as they depend on statutory provisions expressly limited to directors, are not so restricted but apply equally to any officials of the company who are authorised to act on its behalf, and in particular to those acting in a managerial capacity.

The distinction taken between agents and servants of an employer is apt here, and I am unable to appreciate the basis upon which the Ontario Court of Appeal concluded that O'Malley and Zarzycki were mere employees, that is servants of Canaero rather than agents. Although they were subject to supervision of the officers of the controlling company, their positions as senior officers of a subsidiary, which was a working organization, charged them with initiatives and with responsibilities far removed from the obedient role of servants.

100 Undoubtedly, the first defendant, as I have indicated, did not have a role in the plaintiff with the generality of those of O'Malley and Zarzycki at Canadian Aero Service Ltd, where they were its president and chief executive officer, and its executive vice-president, respectively: Canadian Aero Service (595).

101 Nor was the first defendant authorised to act on behalf of the plaintiff in relation to its potential customers, as Mr Green was, in his position as Victorian Manager of the Contracting Division of Bestobell Industries Pty Ltd: Green (12 - 13) (Kennedy J). Although, on the evidence I have reviewed, the first defendant did have contact with customers in the fit-out process, and on occasion some role in marketing, the evidence does not establish that the first defendant represented the plaintiff to any greater extent in its dealings with its customers.

102 However, on the evidence I have accepted, Mr de Bruin's reliance on the first defendant was manifest in Mr de Bruin appointing the first defendant as production manager and then operations manager, and on occasion as acting general manager; and in Mr de Bruin recurring to the first defendant for his realistic assessments of the production capability of the plaintiff's operation, which the first defendant oversaw as operations manager. In my view, this reliance establishes the first defendant as 'top management' in an organisation of the size and character of the plaintiff.

103 In particular, the plaintiff, in its reliance on the first defendant, was in a position of vulnerability in circumstances where it was pursuing a business opportunity. That position of vulnerability lay in the plaintiff being deprived of the possibility of loyal advice from the first defendant, in the form of his realistic assessment of the production capability of the plaintiff's operation in relation to that opportunity.

104 An employer's position of vulnerability (in relation to a business opportunity that the employer is pursuing), which derives from the position occupied by a senior employee in the employer's organisation, and that employee's relation to the business opportunity are of importance in assessing the scope of the fiduciary duty of that employee in relation to that opportunity: Colour Control Centre Pty Ltd v Ty (1996) 39 AILR 5-058; BC9505089, 16 (Santow J), referring to, among other authorities, Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 142 (Dawson J).

105 Whether there was that vulnerability in relation to the plaintiff's business opportunity with Western Xposure is a matter I will revisit after I have considered the issue of confidential information.

Whether or not there was confidential information provided or available to the first defendant

106 As I have indicated, in relation to the confidential information, the plaintiff's case at trial relied on [12.4] of its amended statement of claim, that is, the 'timetable within which the [buses for Western Xposure] could be designed and built', as known to the first defendant in the course of and as a result of his employment at the plaintiff.

107 In my view that information was confidential information.

108 In determining whether or not there was 'confidential information', I consider that I should derive assistance from the authorities on equity's restraints on the use by employees of confidential information. There appeared to be no contest that I could derive that assistance, and indeed [13] of the amended statement of claim appears to be framed by reference to this law.

109 I consider a useful summary of the authorities is contained in an authority commended to me by counsel for the defendants: Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317, 334 (Kirby P), referring, among other authorities, to Faccenda Chicken Ltd v Fowler [1987] Ch 117, not followed on an aspect of that case not relevant for my purposes:

Determining what is confidential involves a decision on a question of fact in each case where that quality is asserted. Considerations which courts have found to be relevant, in particular cases, in determining this question include:

(a) The fact that skill and effort was expended to acquire the information: see Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 at 117; Wheatley v Bell [1982] 2 NSWLR 544 at 546; cf International Scientific Communications Inc v Pattison [1979] FSR 429 at 434;

(b) The fact that the information is jealously guarded by the employer, is not readily made available to employees and could not, without considerable effort and/or risk, be acquired by others: see Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VicRp 7; [1967] VR 37 at 50; E Worsley & Co Ltd v Cooper [1939] 1 All ER 290 at 307; cf Stephenson Jordan & Harrison Ld v McDonald & Evans (1952) 69 RPC 10 at 16;

(c) The fact that it was plainly made known to the employee that the material was regarded by the employer as confidential: see at 256 and (at 137);

See also the longer list in Del Casale v Artedomus (Aust) Pty Limited [2007] NSWCA 172 [40] (Hodgson JA), [73] (McColl JA).

110 In my view, the first defendant's assessment of the production capability of the plaintiff's operation, which the first defendant oversaw as operations manager, is the relevant information.

111 This is to be distinguished, in my view, from a statement by the plaintiff to Western Xposure about when the plaintiff expected to be able to deliver the buses to Western Xposure. Such a statement, like the plaintiff's quoted price, would not be confidential; indeed, in his cross-examination Mr de Bruin recognised that Western Xposure might use the plaintiff's quote in negotiations with other potential bus suppliers (ts 77 - 78).

112 However, in contrast, a statement of production capability would, it seems to me, rest on a different basis. In particular, where that statement of production capability was based in whole or significant part on the assessment of the first defendant, in his role as the plaintiff's operations manager, in a position of top management in the plaintiff and trusted by Mr de Bruin for the purpose of providing the assessment, that assessment would, it seems to me, be a product and expression of the first defendant's intimate knowledge of the plaintiff's manufacturing operation. That product and expression would, it seems to me, of its nature be confidential information by reference to considerations (a), (b) and (e) in Wright (334) (Kirby P), above.

113 Further, it seems to me that the nature of that information could be said to be 'significant' in the sense referred to in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1984) 156 CLR 414, 438 (Deane J, Gibbs CJ, Mason, Wilson and Dawson JJ concurring), quoted in Del Casale [106] (Campbell JA), that the 'preservation of its confidentiality or secrecy is of substantial concern to the plaintiff'.

114 True it is that I do not have evidence about considerations (c) and (d) in Wright (334). However, it seems clear that information can be confidential, under the law described by Kirby P in Wright, without a plain statement of confidentiality by the employer to the employee (for example, where the nature of the information itself would indicate it was to be treated as confidential); and without evidence of the usages and practices of the industry (for example, where that evidence would be unnecessary to establish confidentiality). It also seems to me that the information in question can be readily isolated from the first defendant's general know-how, whether that know-how was about the operations the first defendant performed in the fit-out part of the workshop floor, or about overseeing the workshop operation: Del Casale [41]. The information was about the production capability of the plaintiff, not how to produce or oversee that production.

Whether there was a breach of fiduciary duty by the first defendant

115 I leave aside for later consideration the matter of any use by the first defendant of the confidential information I have described. As I have indicated, Green does not require proof of any use. My focus at the outset is on whether the first defendant permitted his interests as a director and shareholder of the second defendant to conflict with his duties to the plaintiff.

116 The law that applies to determine conflict of interest and duty is in my view to be drawn from two passages in Canadian Aero Service:

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

An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.

...

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 (606 - 607, 620).

117 The first passage, from Canadian Aero Service (606 - 607), is quoted with approval in Colour Control Centre (16 - 17) (Santow J). The second passage, from Canadian Aero Service (620), is quoted with approval in Green (17) (Kennedy J).

118 I turn to the considerations that these passages indicate are relevant.

119 There is no contest that the opportunity to supply buses to Western Xposure, for which the plaintiff submitted quotes in March and August 2007, was an opportunity the plaintiff was actively pursuing.

120 Further, Mr Cousins gave evidence that, even after he had learnt in October 2007 that the plaintiff could not meet Western Xposure's delivery timetable (exhibit 23, [72], [74] - [76]), Mr Cousins might still have done business with the plaintiff (ts 374). That evidence was in Mr Cousins' cross-examination in relation to the plaintiff's quotation of 17 August 2007 (exhibit 1.11), as follows:

Mr Cousins, really - you put that quote in the business case for fleet replacement, didn't you?---As an example of what we had to do, what we were looking at to buy.

And it was an example because you had no intention of going with Mr De Bruin, did you?---No, I disagree.

Because he had told you by that stage you couldn't get a bus out of his organisation before September 2008?---And maybe - he said if there was a cancellation we may get two and if we couldn't get buses built, well, maybe we would have had to go to Mr De Bruin.

And that's why when you went to the other commercial operators and got a similar story you then arranged with Mr Mann that he was going to build the buses. Isn't that right?---In November, yes (ts 374).

121 There is also evidence that Mr Cousins had difficulties with certain specifications in the plaintiff's quotation, and that those specifications were of significance to him (ts 375, ts 393 - 394). However, Mr Cousins' evidence in the respect I have just quoted leads me to find that those difficulties would not necessarily have prevented him from doing business with the plaintiff.

122 Of course, the fact that the plaintiff might not have been able to secure the business in question is not necessarily fatal to a conclusion that there was a breach: Canadian Aero Services (609 - 610); Green (20) (Kennedy J), referring to, among other authorities, Keech v Sandford (1726) Sel Cas temp King 61. However, as I have indicated, I find on the evidence already mentioned that there was no such inability (as opposed to difficulty) in this case.

123 As to the nature of the opportunity to supply buses to Western Xposure, there would seem to be little reason to doubt that that opportunity was ripe, specific and substantial, at least from 17 August 2007 (the date of the plaintiff's quote (exhibit 1.11) faxed to Mr Cousins).

124 As to ripeness, on the evidence of Mr Cousins, First Choice had given him authorisation to acquire a new fleet for Western Xposure, authorisation which, as far as he could recall, was given to him in June 2007 (exhibit 23 [45]). However, as I will consider in more detail below, there was a further budgetary authorisation stage, involving presentation and acceptance of a business case in or about late September 2007. The plaintiff's August quote (exhibit 1.11) was, as I have indicated, a repetition of its early March quote (exhibit 1.7); was used in the presentation of Mr Cousins' business case (ts 361); and was further 'largely copied' in the second defendant's quote to Western Xposure (ts 335), which, on the evidence of Mr Mawer and Mr Cousins (evidence which was sharply contested), was sent to Mr Cousins in mid-November 2007 and which formed the basis for the first bus supplied to Western Xposure by the second defendant (ts 332).

125 As to the significance of the opportunity, there is no contest that up to eight buses were at stake, at a time when the plaintiff's annual production was between 25 buses (exhibit 9, [33]) and 27 buses (exhibit 2, [9]).

126 However, there is nothing to suggest the opportunity was private. The evidence of Mr de Bruin was that he had not told the first defendant that the opportunity was confidential (ts 86). I have previously referred to Mr de Bruin's evidence about the use that he accepted Mr Cousins might make of the plaintiff's quotes.

127 However, I consider that the fact that the opportunity was not private is not fatal to a finding of breach of duty, but is rather a factor to be weighed. Indeed, the opportunity to tender for the contract in Green was not itself private, as I understand the facts of that case.

128 I turn then to the first defendant's relation to the opportunity. I have already noted the evidence from Mr de Bruin that he 'consulted' with the first defendant about the prices in the plaintiff's quotes or at least some of them (ts 87, 89), but I also note that there is no direct evidence that, during the first defendant's employment at the plaintiff, Mr de Bruin approached him for a realistic assessment of production capacity in relation to the potential order from Western Xposure. However, on my findings as to the first defendant's role in the plaintiff, I conclude that there was the potential for Mr de Bruin to make that approach at any time. Compare the position of Mr Green in Green (19) (Kennedy J).

129 In addition, I find that, beginning at the latest in mid-August 2007, after Mr Cousins had received the plaintiff's quotation dated 17 August 2007, the first defendant and Mr Cousins discussed the matter of the first defendant building buses for Western Xposure. Further, I find that they also discussed the matter of the importance of delivery to Western Xposure by a time earlier than the earliest time at which the first defendant knew the plaintiff could deliver the buses. I so find on the following bases.

130 Of particular significance, in my view, are the terms of the delivery schedule for the buses for Western Xposure, as those terms came to be understood by Mr Cousins. That delivery schedule was 'the most important consideration' for Mr Cousins in relation to his ultimate choice of bus supplier for Western Xposure (exhibit 23, [76]; ts 375 - 376). I consider it unlikely that in his discussions with possible suppliers, Mr Cousins did not make it apparent to them that he sought delivery of the buses by September 2008. Indeed his evidence is that he did indicate his delivery schedule to the suppliers when he approached them in October 2007, before he approached the first defendant (exhibit 23, [74], [80], [82]), and that when he approached the first defendant, Mr Cousins sought an indication whether the first defendant could deliver the first bus by January 2008 (exhibit 23, [96]).

131 Mr Cousins gave evidence that it was his practice in seeking quotations for buses to seek delivery timetable indications from those providing the quotations (ts 359). On Mr Cousins' evidence, he had only sought delivery timetable indications from Mr de Bruin and other potential suppliers in October 2007 (exhibit 23, [72]), and from the first defendant in late October (exhibit 23, [96]), when Mr Cousins began negotiations with the first defendant, negotiations which, on Mr Cousins' evidence, did not conclude until early to mid-November at the earliest (ts 390).

132 However, Mr Cousins' evidence of first seeking delivery timetable indications in October 2007 is hard to square with his receipt of the 17 August 2007 quotation from the plaintiff in the same terms as the earlier of the two March quotations and at a time when Mr Cousins considered he had authorisation to proceed with the purchase of the buses. Further, Mr Cousins' evidence is also hard to square with the importance of the delivery timetable to Mr Cousins, as well as with other evidence. That other evidence also points to the first defendant as the source of the terms of the delivery schedule for the buses, and indicates that the first defendant supplied those terms while he was still employed at the plaintiff.

133 I principally note the terms of the business case, prepared by Mr Collins with input from Mr Cousins, to secure from First Choice the budgetary authorisation to go ahead with the purchase of buses for Western Xposure. The initial form of that business case was prepared no later than 20 September 2007, on the evidence of Mr Collins (ts 226). At that time, of course, the first defendant had given his notice of resignation, but was still employed by the plaintiff.

134 That business case included as Appendix III the 17 August 2007 quote from the plaintiff (ts 225). That business case also included, in Appendix I under the heading 'Timing', language describing the delivery timetable, language which Mr Cousins admitted he had inserted (ts 362). His testimony about that language was principally the following:

When you were in discussions with Mr Mann about buses that AAP Smart Coach was going to build for Western Xposure you wanted to know about the timing of delivery, didn't you?---When the vehicles could be made, yes.

Yes. That was almost the most important thing for you, how quickly you could get these buses?---True.

And he told you that the first bus could be delivered within six weeks of an order being placed, didn't he?---No.

He told us on oath that he did?---Well, when I got to people and ask - I do ask the price and then delivery and when they can and when - that is an important part, if they can deliver the buses. If they can't deliver the buses in time we look elsewhere.

But he told you, when you were in discussions about building a bus, that he could deliver the first one within six weeks of an order being placed, didn't he?---No. I said to Mr Mann that if we go through or he built the first bus we would see how long it takes him to build that bus, because being a very small operator and no-one really else working with him - how long it would take. I said I would need buses to be produced reasonably quick so we could have them for the season.

And he said to you he could do the first one in six weeks from an order being placed, didn't he?---I can't recollect that he said that but I would have said I would've like them between six - and then if we could have tried to get the whole eight done. I said firstly that he just built the one just to see what sort of job that he did on that vehicle. I wouldn't give him authorisation to do eight until he built one.

The position was, and you weren't going to go ahead until you heard his response, that he told you that he could have the first one done within six weeks of an order being placed. Isn't that the case?---I cannot remember him saying that but I would've liked to think

Does that sound right?---Well, between six and 12 weeks, yes.

And the second and subsequent buses, he told you once he had done the first one they could be produced at four weekly intervals?---I would say he would be battling at four weeks but

But isn't that what he told you?---No.

...

So what appears under Timing, 'Within six weeks after first order with each subsequent vehicle available at four-week intervals,' came from you as a result of a discussion with Mr Mann - correct?---No, it came from - that's just what I wanted.

135 I consider Mr Cousins' denials that the language in Appendix I came from the first defendant hard to square with his evidence about the way in which he sought indications as to delivery timetable from suppliers generally, and in this particular case. Those denials also stand poorly in my view with the following evidence from the first defendant:

No, no, that's not what I asked you. He talked to you at some stage during 2007 about how quickly you could build a bus?---No, I can't recall that.

Are you saying there was no discussion between you at any stage during 2007 about how long it would take you to build a bus?---Not that I can recall.

Did you tell him that the first bus could be delivered within about six weeks of receiving an order?---Yes.

Did you tell him that subsequent vehicles could be built at four-weekly intervals?---No, I can't say I said that.

You would agree, wouldn't you, that once you had built one bus, if there were orders for more buses you should be able to build the latter buses quicker than the first one?---Yes.

The first one is always going to take more time?---Yes.

...

I want to draw your attention, Mr Mann - you haven't seen this document and I want to draw your attention to where it says, 'Timing: the first vehicle can be ready within six weeks after the first order with each subsequent vehicle available at four-week intervals.' Do you see that?---I do, yes.

In the case of Able Tours, that was just not possible, was it?---Yes, they could do it in that time.

At October 2007 it could not fill a fresh order from Western Xposure within six weeks, could it?---No.

Right, and as a result it couldn't fill any subsequent order at four-weekly intervals, could it?---No.

You have told us already the earliest they could get a bus out for Western Xposure was September the following year?---Yes.

Are you able to explain where this timing could have come from other than from you?---No. I can't explain that at all (ts 285, 292 - 293).

136 I further note that there was a telephone call at 3.15 pm on 17 August 2007 from the number of the mobile telephone of Mr Cousins to the number of the mobile telephone of the first defendant, whose mobile telephone was supplied by the plaintiff. That call lasted almost 23 minutes (exhibit 1.56, page 497). I also note there was a telephone call at 5.05 pm on 3 September 2007 from the home phone in the name of the first defendant's wife to the number of the mobile telephone of Mr Cousins for a duration of over 10 minutes (exhibit 1.13, page 160). It will be recalled that 3 September 2007 was the date the first defendant gave the plaintiff notice of his resignation. Mr Cousins testified he could not remember what was discussed in either call, or even whether or not the first defendant, rather than his wife, had made the second call. However, Mr Cousins' evidence was that he would not have discussed the plaintiff's quote or the first defendant's resignation in the respective calls (ts 378, 379). Mr Cousins testified that 'most probably' he had discussed the first defendant's daughter in the first call (ts 379) and that in the second call he may have discussed matters to do with parts for Western Xposure buses previously manufactured by the plaintiff or to do with a bus for an event associated with the first defendant's daughter (ts 380).

137 However, I consider it more likely than not that the 17 August 2007 quotation was discussed in the first call, and the resignation in the second. I reach this conclusion on the basis of a body of evidence I now note.

138 I note first the evidence of Mr Cousins that he had 'high regard' for the first defendant 'as a tradesperson and coach builder' (exhibit 23, [85]) and that if the first defendant ever left the plaintiff 'he could come and work for Western Xposure and build buses for the company' [86].

139 I also note evidence to a similar effect, if not the same terms, from Mr Stewart. In August 2007 he was employed by Western Xposure as a workshop supervisor. He testified that in about early August 2007, in the course of a conversation with Mr Cousins on two separate occasions, Mr Cousins said that he had been told by the first defendant that the first defendant could build a bus for Western Xposure for about $30,000 less than the price quoted by the plaintiff (exhibit 4). In cross-examination, Mr Stewart acknowledged he had worked for the plaintiff part-time for about four weeks, after his three week pre-booked vacation when he left Western Xposure in September 2007 and before starting a full-time job with another employer (ts 105). Counsel for the defendants pressed on Mr Stewart that he had mistaken what Mr Cousins had said to him, and that in fact Mr Cousins had said only what I have previously indicated from his examination-in-chief. However, Mr Stewart did not accept that this is what Mr Cousins said.

140 I found Mr Stewart to be a truthful witness, although I am not satisfied that he recalled with complete accuracy all of the detail in the conversations he had with Mr Cousins. I reach this conclusion having regard to the prices quoted by the second defendant in its emails to Western Xposure dated 16 November 2007 (exhibits 1.21 - 1.23). The cheapest of the second defendant's quotations was slightly over $20,000 cheaper than the most expensive quotation given by the plaintiff to Western Xposure (exhibit 1.11, dated 17 August 2007, duplicating the quotation in exhibit 1.7, dated 14 March 2007). Differences of this extent between the plaintiff's and second defendant's quotations in my view offer support for conversations to the effect described by Mr Stewart, even if the final quotation, on which Western Xposure based its order for an initial bus from the second defendant, did not differ significantly in price from the most expensive quotation provided by the plaintiff. In my view, those differences also meet the evidence of Mr Cousins who rejected Mr Stewart's evidence saying that '[no]-one could do that', referring to the price differential stated by Mr Stewart (ts 389).

141 Also relevant in my view is the evidence of the first defendant that by mid-August 2007 he had already formed a view that he was going to leave the plaintiff (ts 249). I also note the evidence of the first defendant about his concern to ensure replacement income for both himself and his wife, as well as to provide income for Mr Mawer. The only work lined up for the second defendant at the time the first defendant left the employ of the plaintiff was work on drill rigs and a simulator, which the first defendant agreed would not provide sufficient income (ts 240). I further note the evidence as to the formation of the second defendant by incorporation on 21 August 2007, and the early activities of the first defendant in relation to the second defendant, evidence that I consider below.

142 I have taken account of the evidence of Mr Cousins, the first defendant and Mr Mawer about Mr Cousins' and the first defendant's initial contact to discuss the opportunity for a business of the first defendant to supply buses to Western Xposure. That contact involved Mr Cousins telephoning the first defendant, on their evidence, in late October 2007 or early November 2007 (exhibit 23, [90], [91]; exhibit 9, [250], [251]; exhibit 15, [122], [125], [126]).

143 However, on Mr Cousins' evidence, he made that contact only after asking Mr Mawer about the first defendant's 'whereabouts' and obtaining from Mr Mawer the first defendant's telephone number (exhibit 23 [89], [90]; see also exhibit 15, [126]). The evidence of Mr Cousins in that respect is very difficult to believe, as Mr Cousins admitted in cross-examination that at that time he already had both mobile and home phone numbers for the first defendant and had used the first defendant's new mobile telephone number (so identified by the first defendant: ts 262), as well as another mobile number for the first defendant (the same number used for the call on 17 August 2007 above) in the first half of October 2007 (ts 385).

144 Further, the evidence that Mr Cousins and the first defendant had their first contact to discuss the opportunity to supply buses to Western Xposure in late October 2007 or early November 2007 does not sit easily with the evidence about the preparation by 5 November 2007 of a statement of projected cash profit and loss for the second defendant and its initial order for hoops on that date, which I reach below.

145 I conclude that I should not give any significant weight to the evidence that Mr Cousins and the first defendant had their first contact to discuss the opportunity to supply buses to Western Xposure in late October 2007 or early November 2007.

146 I not only find that the first defendant and Mr Cousins began discussing the business opportunity in mid-August 2007, after Mr Cousins had received the plaintiff's quotation dated 17 August 2007, I also find that the second defendant was formed for the purpose of manufacturing and supplying buses, and, from the outset, steps were taken for the second defendant to carry that intention into effect, with regard in particular to the Western Xposure opportunity. I so find on the following bases.

147 I begin by noting my finding that it was more likely than not that the plaintiff's quotation of 17 August 2007 (exhibit 1.11) was discussed in the telephone call from Mr Cousin's mobile to that of the first defendant on 17 August 2007. Not long afterwards, on 21 August 2007, the second defendant was incorporated. I particularly note the name chosen for the second defendant, which might be compared with the plaintiff's business name, 'Able Bus and Coach'. Mr Mawer gave evidence that the use of the word 'coach' may have come from a suggestion of his girlfriend, who was 'of the view that a motor home was not a bus and was looking for another term for a "smart" vehicle' (exhibit 15, [93]). However, I consider that in its ordinary meaning 'coach' (Macquarie Dictionary, (as at 2 June 2009); Oxford English Dictionary, (as at 2 June 2009)) in any context is inapt to cover vehicles in the nature of motor homes, but rather denotes (in the present context) passenger buses (Macquarie, 'coach', 3; Oxford English Dictionary, 'coach', 1e).

148 I further note a follow-up by e-mail of the meeting between the first defendant, Mr Mawer and Mr Pitic on 8 September 2007. That email (part of exhibit 5) referenced in its subject line 'ADR59/00'. The evidence of Mr Pitic and the first defendant was that at the time of the meeting they understood 'ADR59/00' to be the compliance standard administered by the Federal Government for roll-over tests for 'omnibuses' (ts 112, 254).

149 The first defendant's testimony was that the purpose of the meeting was to determine whether or not the standard applied to motor homes (ts 254). I have already referred to the evidence of Mr Pitic as to what he could recall of that meeting. I also note his evidence that 'the best vehicle for a motor home is an omnibus', and that 'ADR 59 is required' (ts 117).

150 However, the matter of motor homes, at least as the only topic covered at the meeting of 8 September 2007, is not easily squared with the evidence of Mr Mawer already mentioned, that the matter of motor homes was 'out the window' at that time; while I also note that Mr Pitic testified he could not recall whether the question of buses was discussed at that meeting (ts 117). I also note again the name chosen for the second defendant.

151 I further note other evidence that shows the process of setting up the second defendant to build buses for Western Xposure began significantly earlier than the time indicated by the first defendant and Mr Mawer in their evidence.

152 In that regard, I note the evidence about the preparation of a 'Quality Manual' for the second defendant for the purpose of compliance of its product with Federal Government standards. The Quality Manual was dated '15 October 2006' (which it was admitted should have shown 15 October 2007) and produced by Mr Pitic sometime after he emailed the first defendant on 9 October 2007 to request a meeting with him as 'early as possible' (exhibit 5; ts 119 - 120, 256, 259). The first defendant accepted that the Quality Manual was an 'important' document (ts 257). It stated, among other things, that '[t]he company manufactures omnibuses under the Low Volume Secondary Manufacture Stage Approval' (exhibit 7, page 6). Before 9 October 2007, there were communications between First Choice and Western Xposure indicating budgetary approval on the basis of the business case, which contained (in Appendix 1) the language as to delivery to which I referred earlier, for acquisition of buses (exhibit 21, page 1). Those communications consist of an email of 3 October 2007 from Tisiana Cavarzan of First Choice to Mr Collins; and another on 8 October 2007 from Mr Collins to Ms Cavarzan.

153 I also note the evidence in the form of a 'projected cash profit and loss' document for the second defendant for the months November 2007 to November 2008, both inclusive (exhibit 1.18). Mr Vaughan prepared this document on the basis of instructions from Mr Mawer no later than 5 November 2007 (exhibit 19, [50], [51]; ts 277). This document showed the second defendant's predominant source of income as 'Bus' over the period January 2008 to November 2008, with two other much less significant sources, 'Drill rigs' and 'Simulator', from November 2007 to May 2008. Further, on 5 November 2007, the first defendant on behalf of the second defendant ordered hoops suitable for the purpose of building buses (exhibit 12). Some of those hoops were in fact later used for that purpose. In addition, on 13 November 2007, the first defendant and Mr Mawer, on behalf of the second defendant, entered into finance agreements with Esanda to purchase two vehicles (exhibits 13 and 14; ts 228 - 231). As part of securing that finance, the first defendant and Mr Mawer provided to Esanda the 'projected cash profit and loss' document (ts 277).

154 The matters in the last two paragraphs are in my view very difficult to square with the evidence of the first defendant and Mr Cousins that Mr Cousins first approached the first defendant about the buses on or about 30 October 2007 (ts 239, 385); with the first defendant's evidence that the discussions between the two men had proceeded no further than the exploration of possibilities by the time the 'projected cash profit and loss' was prepared (ts 241 - 242); and with the evidence of the first defendant and Mr Cousins that Western Xposure had not until a date after 16 November 2007 (the date of the second defendant's quote to Western Xposure) entered into a contract for the first bus.

155 On the body of evidence I have relied upon for my findings as to when Mr Cousins approached the first defendant about the buses, and the response of the first defendant with a view to taking advantage of the opportunity thus presented, I would also infer that the resignation of the first defendant was prompted or at least influenced by a wish to acquire for the second defendant the opportunity to supply buses to Western Xposure. See Canadian Aero Service (607) (Laskin J).

156 There may have been other factors at work, most notably the first defendant's dissatisfaction with his remuneration from the plaintiff (exhibit 9, [63], [74], [88] - [90]), and as I have noted the first defendant had already formed a view he was going to leave the plaintiff. However, the possibility of the kind of work Western Xposure offered, to help replace the income that the first defendant and his wife earned at the plaintiff, seems to me more likely than not to have influenced the decision of the first defendant to leave the plaintiff's employ.

157 This last finding in my view leads me to conclude that the first defendant's statement to Mr de Bruin, when giving him the notice of resignation of 3 September 2007, that the first defendant was 'intending to set up a business to fabricate and install marine stainless steel' (exhibit 2, [20]; ts 203), was at best a misleading statement of his intention. While I have found that the first defendant did indeed plan to do the marine stainless steel work, at that same time he had in fact been involved in setting up the second defendant, through which he intended to pursue the opportunity to supply buses to Western Xposure. On my finding and that conclusion, the first defendant must have been aware that his statement to Mr de Bruin was misleading.

158 The findings I have made mean that, on the considerations in Canadian Aero Services (607, 620) (Laskin J) which I quoted earlier, it is not important to a finding of breach of fiduciary duty whether or not the initial contract for the second defendant to supply the first bus to Western Xposure was secured after the first defendant had left the plaintiff's employ. Nor is it important for that purpose that a further contract or contracts to supply further buses was not secured until after the first bus had been delivered, as was the case on the evidence of Mr Cousins (ts 359 - 360). See Colour Control Centre and Green, which both involved employees pursuing an opportunity while still in the employment in question and where the opportunity was secured after leaving that employment.

Whether the confidential information was used by the first defendant

159 As I have indicated the way in which the plaintiff pleaded and fought its case entailed, as I understood it, that it was not sufficient to arrive at the findings in the three previous sections of these reasons. I was also required to find that the first defendant had used the Confidential Information, as I have identified it, and exploited it for his benefit or the benefit of a company in which he had a significant interest. However, that use and exploitation could be, as Colour Control Centre and Green indicate, the pursuit of the opportunity to supply buses to Western Xposure while the first defendant was in the employ of the plaintiff, even if the resultant contracts were not concluded until after the first defendant left the plaintiff's employ.

160 In my view the evidence I have relied upon for the findings in the previous sections of these reasons provides a strong circumstantial case that the first defendant did in fact use and exploit the Confidential Information by pursuing the opportunity to supply buses to Western Xposure.

161 That inference arises from the evidence which I relied upon to find the following: the first defendant's knowledge of the Confidential Information; the nature of that information when coupled with the first defendant's knowledge of Mr Cousins' delivery timetable considerations, as indicating that the plaintiff was not in a position to compete for Western Xposure's business successfully; when the first defendant first had knowledge of the Confidential Information and Mr Cousins' delivery timetable; Mr Cousins' approach to the first defendant in August 2007; and the suggestion Mr Cousins made to the first defendant that if he ever left the plaintiff he could come to work for Western Xposure building buses, which in my view would have indicated to the first defendant the regard in which Mr Cousins held him.

162 In my view these matters are sufficient for me to draw the inference, according to the civil standard of proof, that the first defendant used and exploited the Confidential Information to proceed as he did in setting up the business of the second defendant as I have indicated.

163 True it is, the evidence does not go to establish that the first defendant was aware of the competitive position of other possible bus suppliers to Western Xposure, apart from the plaintiff and a business associated with the first defendant. The first defendant was not questioned about his knowledge of that competitive position; the only evidence on that point is Mr Cousins' evidence that he ascertained that position in October 2007 (exhibit 23 [74], [80], [82]). However, in light of Mr Cousins' approach to the first defendant that I have already found, the lack of evidence of that knowledge does not, in my view, prevent me from drawing the inference that it is more likely than not that the first defendant used and exploited the Confidential Information.

164 Accordingly, I consider the present element of the plaintiff's case made out.

165 I should not leave the matter of my findings without reference to the contest between the parties as to the credibility of the evidence of the first defendant, of Mr Cousins and of Mr de Bruin. I consider that I do not have to make any, more general, credibility determinations than are involved in the findings I have previously made.

166 In arriving at those findings, I have determined that the evidence of the first defendant and Mr Cousins should not be accepted as to the circumstances in which the opportunity to supply buses to Western Exposure first came to the first defendant's attention, and as to the development of that business opportunity between them. That determination was made, as I have endeavoured to explain, on the basis of other evidence which I considered I should accept.

167 With respect to the evidence of Mr de Bruin, I concluded that he had a tendency to exaggerate the role of the first defendant in ways which other evidence did not support, as I have endeavoured to indicate. However, those ways did not in my view affect my assessment (based on all the evidence, not limited to the evidence of Mr de Bruin) of the first defendant's role in the plaintiff's business as a member of its 'top management', in so far as that role is relevant to the determination of liability I have made.

168 With respect to Mr Cousins, however, there is a separate matter I must address.

169 I must note that his response to the subpoena directed to him in this case was a matter of some concern. That response was not completely forthcoming, even after he had in my view had impressed upon him the importance of strict compliance with the subpoena's terms.

170 The shortcoming in his response was in respect of his failure to produce or cause to have produced, at least initially, a copy of the business case (prepared by himself and Mr Mawer) that included an Appendix I and the emails of early October between Ms Cavarzan of First Choice and Mr Collins of Western Xposure (exhibit 21). The documents initially produced by Mr Cousins in relation to the business case did not include the emails or Appendix I, which I have indicated contained language about the delivery of the first bus to Western Xposure, language that Mr Cousins acknowledged he inserted in the document. Both that language and those emails were in my view of considerable significance to the assessment of the evidence of Mr Cousins and the first defendant as to their dealings in relation to the opportunity to supply buses to Western Xposure.

171 However, while I consider Mr Cousins did not respond to the subpoenas as he should, I am not convinced that there were the indications of a wilful or deliberate disobedience to the subpoena's terms which would warrant the court of its own motion having Mr Cousins brought back before it for contempt. I reach this conclusion based on the responses to the subpoenas that Mr Cousins did make; his evidence about the way in which he did business for Western Xposure with minimal documentation (as is evident from the partly written character of the contracts that, on his evidence which I accept in this respect, he concluded for Western Xposure with the second defendant); and his reliance on Mr Collins in matters of documentation (which I also accept).

172 On the basis of the foregoing findings, the first defendant was in breach of his fiduciary duty.

173 There were no submissions directed to me about the liability of the second defendant if the first defendant was in breach of his fiduciary duty. The basis for that liability would, on the pleadings (amended statement of claim [20], [21]) have to lie in my view in the second defendant's knowledge of the first defendant's breach, knowledge it acquired through one of its two directors, namely the first defendant; and in its participation in that breach through its role as the proposed (and then the eventual) counterparty to the contracts for the supply of buses to Western Xposure by which the opportunity, in which the plaintiff was interested and which it had actively pursued, was secured through the agency of the first defendant, one of the second defendant's two directors. See Green (11 - 12) (Wickham J), (19 - 20) (Kennedy J) and the authorities cited in Green (20): Jones v Lipman [1962] 1 All ER 442, Cook v Deeks [1916] AC 554, esp. at 565 and Consul Developments Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373, 395 - 398 (Gibbs J).

174 However, it is necessary I also find that the second defendant's assistance of the first defendant in the way I have described was with knowledge (being the knowledge of the first defendant) of a 'dishonest and fraudulent design' on the part of the first defendant: Barnes v Addy (1874) LR 9 Ch App 244, 252. That knowledge is required in order to establish the second defendant's liability to account, a liability which the pleadings and the case as argued in my view put on the 'second limb' of the rule in Barnes: on the requirement of that knowledge see Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [111], [160], [179] - [185] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

175 I note that there is no pleading of a 'dishonest and fraudulent design' in the amended statement of claim. However, it seems to me, having regard to how the case was fought at trial before me, in the following three respects, the matter is sufficiently before me: see Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, 497 (Mason CJ, Wilson, Brennan and Dawson JJ).

176 Those three respects are whether or not the first defendant had knowledge of the plaintiff's quotation of 17 August 2007 (exhibit 1.11) not long after it was provided to Mr Cousins; whether or not with that knowledge and while he was employed by the plaintiff the first defendant indicated to Mr Cousins that he could on his own account meet a delivery schedule, in relation to that opportunity, which was earlier than the earliest he knew the plaintiff could meet, and where he knew the plaintiff's delivery schedule was outside what Mr Cousins sought; and whether or not the first defendant had participated in the formation of the second defendant because of, and been influenced to resign his position at the plaintiff by the prospect of, securing that opportunity for his benefit through the second defendant, describing to his employer the work he intended to do following his resignation without reference to his intention to pursue that opportunity.

177 I have made findings adverse to the first defendant in all those respects. The issue then becomes whether or not those findings together represent a finding of dishonest and fraudulent design.

178 The matter of fraudulent and dishonest design is in my view to be approached by asking the question whether or not the 'dereliction of duty is insufficient to merit the description "dishonest and fraudulent"': Farah [186].

179 In this case the breach of duty on the findings I have described was that the first defendant, after being approached by Mr Cousins and during his employment at the plaintiff, used what the first defendant knew about the plaintiff's production capacity to pursue the opportunity, in which he knew his employer was interested, and as part of that pursuit he misled his employer about the work he intended to do after leaving its employ.

180 I consider that I should approach the matter of whether or not that breach answered the description of 'dishonest and fraudulent' by referring to what would have been apparent to an 'ordinary man': Consul (398) (Gibbs J); see also Farah [186].

181 Approaching the matter in this way, I consider that an ordinary man would take account of the difficulty arising from the production capacity that the plaintiff faced in successfully pursuing the opportunity to supply buses to Western Xposure, and take account of the competition the plaintiff faced from businesses other than the one associated with the first defendant, and would consider whether the first defendant was aware of those matters.

182 I have found that the first defendant was aware of the difficulty of the plaintiff, at least from early August 2007.

183 In relation to the competition the plaintiff faced from businesses other than the one associated with the first defendant, and in relation to what the first defendant knew of that competition and when, the evidence of Mr Cousins, that he had approached other businesses in relation to that opportunity, was not challenged, except as to timing. However, I have no evidence from Mr Cousins or the first defendant that the first defendant was aware or made aware by Mr Cousins of what, on Mr Cousins' evidence, was the other suppliers' difficulty in taking advantage of that opportunity by reason of their delivery schedule.

184 Of course, the difficulty of the plaintiff I have described is not fatal to a breach of the first defendant's fiduciary duty, as I have previously indicated. However, it seems to me that an ordinary man, upon considering the first defendant with knowledge of that difficulty and without knowledge of the difficulty the plaintiff's competition faced, might not necessarily conclude that the first defendant's breach, as I have described it, was 'dishonest and fraudulent'.

185 However, I consider that an ordinary man would also take account of the first defendant's misleading statement to Mr de Bruin about his work intentions. It seems to me that an ordinary man would take the misleading statement to show that the first defendant was pursuing the opportunity in secret.

186 I have also noted the conclusion in Green that the company, Clara, which Mr Green used, was liable with Mr Green to account to his former employer. Clara's liability was established, as I read the case, on the 'second limb' of Barnes. In that case while the tender for Mr Green's company was the lowest, there was a higher tender between that tender and the tender of his former employer. The possibility of an intermediate tender was one which, on my understanding of Green, it had not been shown Mr Green had any reason to exclude when Clara submitted its tender. Clara's liability was found on a breach of fiduciary duty which in my view is not materially distinguishable from that of the first defendant, and in particular involved pursuing an opportunity in secret: see Green (8) (Wickham J) on Mr Green's answers to questions by his employer about whether he was behind Clara, (15) (Kennedy J).

187 On Green, I therefore conclude that the breach in this case was 'dishonest and fraudulent', and that the second defendant is liable for that breach.

188 It did not appear to be in contest that, if I found the first defendant liable for breach of fiduciary duty and the second defendant liable for that breach, it would follow that I should find both the first defendant and the second defendant liable to orders for an account and an inquiry. This position appears also in my view to be in accordance with Green.

189 However, I will hear from the parties as to the orders I should now make.