Fazio Richards Pty Ltd v Ibis Way Pty Ltd

(a) The present proceedings 6 Before dealing with the substantive questions, it is necessary to outline the procedural background and to explain two issues that arose in the running of the trial. The present proceedings were commenced by Fazio Richards on 26 February 2015. Nelson was joined as the second applicant by an order of Middleton J made on 22 April 2015. Nelson has filed numerous affidavits in support of the applicants' case including on 26 February 2015, 26 March 2015, 16 April 2015, 29 April 2015, 6 May 2015, 1 July 2015, 29 July 2015, 30 July 2015, 9 October 2015, 12 October 2015, 4 November 2015 and 12 November 2015. 7 Prior to the commencement of the trial before me, Middleton J made a number of interlocutory orders concerning the US proceeding (see later description at [58] to [61]) and in particular Nelson's conduct with respect thereto. 8 At an interlocutory hearing on 27 March 2015, Middleton J made interim orders restraining the applicants from communicating with Specialized Bicycle Components Inc (Specialized), from communicating with Niro Haller & Niro (Niro) US patent attorneys with respect to the US proceeding except if requested to provide information, and from interfering with Icon-IP's contractual relationship with Niro. It was also ordered that the respondents provide Nelson with any US settlement proposal and information relevant thereto, including any advice of Niro, prior to any settlement being accepted. 9 At a further interlocutory hearing on 14 April 2015 before Middleton J, Fazio Richards and Nelson gave undertakings that they would not represent that Nelson was a director of Icon-IP or that he was authorised to hold himself out as such. They also undertook not to communicate with any person involved in any patent dispute involving Icon-IP or the patents referred to in the Joint Venture Heads of Agreement (see later description at [53]) save in respect of any communications with Fazio Richards' shareholders. 10 On 22 April 2015, Middleton J made orders that Icon-IP and Strover provide to Nelson prior to the mediation of the US proceedings all information that had been provided to Strover for the purposes of the mediation. Interim orders were also made (replacing the restraints imposed on 27 March 2015) restraining Fazio Richards and Nelson from communicating with Specialized without the consent of Icon-IP, from communicating with Niro except as requested by Niro or with the consent of Icon-IP, from disclosing any confidential information relating to the US proceeding, and from interfering with Icon-IP's contractual relationship with Niro. Fazio Richards was also enjoined from appointing a director to Icon-IP. Ibis Way was ordered not to exercise its controlling share in Icon-IP (the "V" class share) until further order. Further, the order made on 27 March 2015 that Nelson be provided with any US settlement proposal and information relevant thereto was varied to exclude the conduct of any US mediation (the mediation was subject to specific confidentiality protocols). 11 On 29 April 2015, following the signing of terms of settlement between Icon-IP and Specialized in relation to the US proceeding, Middleton J made an interim order that all income received by Icon-IP was to be held by Icon-IP. This included funds, which were treated as income, paid by Specialized to Icon-IP under the settlement. 12 On 13 May 2015, Middleton J listed the trial before me on 9 June 2015 but gave the applicants an opportunity to replead. The trial was fixed for hearing on all issues. I should note that on 8 May 2015, his Honour had raised with the parties the issues to be addressed. In that context, the following exchange occurred: HIS HONOUR: All right. And if I do find that a judge is available and has a date that is available that fits into the three days, I will immediately inform the parties so that they know what the position is and can prepare for the trial. THEN COUNSEL FOR APPLICANTS: Thank you, your Honour. HIS HONOUR: Will there be any expert evidence involved in this? COUNSEL: I've turned my mind to that in a broad sense, and if there was, it would be to the difference between the current result and another result, which may be a US patent expert. I'm not sure yet. I just haven't worked my way through that. HIS HONOUR: I understand. COUNSEL: But that may be for quantum. I'm just not sure. We're all thinking on the run, your Honour. 13 On 20 May 2015, Nelson filed a Further Amended Statement of Claim pursuant to the order of Middleton J made on 13 May 2015. 14 As I say, the proceeding was listed for trial before me on 9 June 2015. However, during a directions hearing on 26 May 2015, Nelson, representing himself and Fazio Richards, made an oral application before me without notice to adjourn the trial in order to procure new legal representation. On 29 May 2015, I granted the applicants' request for an adjournment and the matter was set down for trial on 28 July 2015. Part of the reason for the adjournment was to enable the applicants to obtain further evidence, including presumably on the issue of the reasonableness of the settlement with Specialized if the applicants so desired. 15 At a directions hearing on 24 July 2015, four days before the trial was to begin, Nelson sought leave to file yet a further amended statement of claim to introduce a claim that was unrelated to the US settlement. No draft pleading amendment was provided to me. I gave Nelson until 28 July 2015 to make a proper application. No application on proper material was made. 16 As I have said, the trial was to be on both liability and quantum and including the cross-claims. It was confirmed during the 26 May 2015 hearing, at which Nelson appeared on behalf of the applicants, that the trial was to be on all issues. 17 However, on the first day of the trial, counsel for the applicants requested that I hear and determine all issues of liability including relief, save and except for any quantification of damages. It was conceded by counsel that the applicants had no evidence on and were not able to prove damages. 18 I raised with counsel the difficulties of such a course. First, this was the first occasion on which an application to split the trial had been made, despite the applicants having known about the need to present evidence on quantum. Second, no relevant affidavit material had been provided in support of such an application. The request was made on the basis of assertion only. Counsel for the applicants said that in order to prove damages they proposed to present evidence from "three or four experts" including US patent attorneys as to what would have happened if the US proceeding had gone to trial. I raised with counsel that this may have resulted in the trial on quantum being longer than the present proceeding and that if the split occurred there could be two sets of cross-examination of common witnesses. Moreover, Nelson had indicated on several occasions that he had little in the way of financial resources. There was an air of unreality to the suggestion that he could fund such evidence. 19 I gave the applicants an opportunity to make a proper application to split the trial on liability and quantum. I indicated that such an application would need to set out in detail the prejudice that the applicants would suffer if the application was not granted and the relevant evidence they would obtain and be able to pay for, including the names of the witnesses they would seek to call, how long they would take to prepare reports and what their reports would deal with. 20 On the second day of the hearing, the application to split the trial remained an oral application. But a two page affidavit of Nelson was filed to the effect that the applicants did not need to put on any evidence on quantum because they did not receive the US settlement agreement until 15 May 2015. But the applicants were aware by the start of May 2015 that the settlement figure was US$2.05 million. Further, Nelson said that he had "commenced enquiries" with US patent firms as to obtaining evidence on quantum. No further detail was provided, although counsel said that it would take "at least a couple of months, depending on the scope of work" to obtain such evidence. Further, counsel for the applicants sought to shift responsibility for this issue to the applicants' previous lawyers. 21 The respondents pointed out that, in any event, evidence as to quantum (if it was available) ought to have been adduced on the trial on liability in any event as being relevant to the alleged breach of fiduciary duty. The respondents opposed the application given that the applicants had already had the benefit of legal advice and there was no evidence as to how the applicants would fund any further evidence. The respondents also raised concerns about the delay in having the matter determined, the further costs that would be incurred and the negative effect on Icon-IP's business. Moreover, at this time the proceeding needed to be dealt with expeditiously as there was a freezing order in place as to the funds received by Icon-IP from Specialized from the US settlement. 22 On 30 July 2015, the applicants filed a further affidavit of Nelson to the effect that expert evidence from two US witnesses could be obtained within "42 to 60 days" at a cost of around $60,000. But there was no reference to any written expert reports being provided and no indication that Nelson could even afford to obtain such evidence. Further, no explanation was provided for the delay in gathering such material, nor as to the consideration of the applicants' previous lawyers on this question. 23 I decided to proceed to hear the parties for the moment on their evidence and submissions on all issues including the application to split the trial and reserved my decision on that question and generally. If I found against the applicants on liability, then the issue of quantum of damages would not arise. I will elaborate in more detail on this point later (see at [34] to [40]). 24 On 6 August 2015, following closing submissions, I made an order discharging the order of Middleton J which froze Icon-IP's account holding the Specialized funds. The applicants did not oppose such an order. Having lifted the freezing order at this time, in one sense the urgency for resolving this matter as soon as possible then dissipated. 25 Following the conclusion of the trial, on 7 October 2015 Icon-IP came before me on an urgent ex parte basis seeking orders as to the applicants' conduct with respect to certain Italian litigation (see at [33] and [194] to [221] below). The applicants were notified of the hearing but did not appear. I made interim orders that Nelson, on behalf of Fazio Richards, only communicate instructions to Corrs with respect to the joinder of Fazio Richards in the Italian litigation. Further, Nelson and Fazio Richards were restrained from communicating with the Italian lawyers, Jacobacci, without Icon-IP's consent or without notice having been given to Icon-IP, and from communicating with Selle Royal S.p.a. or its Italian lawyers. I will explain this later. 26 On 9 October 2015, I continued such injunctions until 14 October 2015. On 14 October 2015, I substituted the injunctions made on 9 October 2015 with a different form. I also gave leave to Icon-IP to file an amended cross-claim with respect to the Italian litigation and gave leave to the parties to re-open their cases with respect to the issues raised by the amended cross-claim. I set the matter down for a further hearing of the amended cross-claim on 20 November 2015. 27 On 6 November 2015, the matter came before me on the application of Nelson seeking a variation of the orders made on 14 October 2015. Paragraph [3C] of the orders was amended to allow Nelson, if he was appointed to act for himself and Fazio Richards in the Italian litigation, to contact Selle Royal in writing provided that prior notice was given to Icon-IP of such communication. By email sent to my chambers on 9 November 2015, Nelson sought to make a further variation to the 6 November 2015 order as he asserted that he had been appointed to act for Fazio Richards in the Italian litigation. However, by email from my chambers I indicated that no change was necessary. By email sent to my chambers on 10 November 2015, Nelson requested clarification of the 6 November 2015 order. No further clarification was given. 28 By email sent to my chambers on 16 November 2015, Nelson requested that eight persons be made available for cross-examination on 20 November 2015 including persons who had not given evidence at all in the proceeding or who were not proposed to be called by a party. The request was misconceived. 29 The further hearing of the amended cross-claim occurred on 20 November 2015. Nelson represented himself and Fazio Richards on that occasion. For the respondents, only Icon-IP actively participated in that hearing. 30 On 23 November 2015, by email sent to my chambers, Nelson asserted that there was an absence of evidence available to the Court to determine the amended cross-claim as the applicants had not provided all their evidence on 20 November 2015. By email sent from my chambers, I indicated that all parties had been given the opportunity to adduce such evidence as they thought fit. 31 On 13 January 2016, by email sent to my chambers, Nelson sought leave to issue a subpoena to a Mr Babbage, registered agent for Fazio Richards, in respect of company information concerning Fazio Richards. He also sought to file an affidavit for this purpose. By email sent from my chambers, I refused the leave sought. The request was misconceived at that time.

(b) Two procedural issues 32 At this point it is appropriate to elaborate further on two aspects concerning this proceeding being, first, the application to split liability from quantum and, second, the reopening of the trial to deal with Icon-IP's amended cross-claim. Let me deal with this second issue first. 33 As I have said, the trial proceeded in two stages. Originally it proceeded on all issues in late July and early August 2015 in relation to patent litigation in the US. After I had reserved my decision, Icon-IP applied to amend its cross-claim against Fazio Richards and Nelson and to re-open the trial. What was sought to be pursued by Icon-IP were new allegations for misleading or deceptive conduct in relation to Nelson's communications concerning patent litigation in Italy. The applicants opposed this course. Ibis Way and Strover did not oppose such a course. Unsatisfactory though this situation was, I gave such leave to Icon-IP. The further hearing of the amended claims then proceeded on 20 November 2015. I gave such leave for the following reasons. First, there were clearly overlapping issues concerning the joint venture arrangements dealing with the exploitation of the patents. Second, there were overlapping witnesses, particularly Nelson. If I had not granted leave and handed down judgment after the first stage, I could not have dealt with any separate proceeding as I would have prejudged both overlapping issues and witness credibility questions; a new judge would have had to have dealt with the matter. This would have caused problems of unnecessary expense, delay and the unsatisfactory possibility of inconsistent findings. Third, granting such leave only added three to four months of delay as compared with the much greater delay if separate proceedings had to be prosecuted by Icon-IP. Fourth, there was no question of any issue estoppel or Anshun estoppel that would have arisen against any claims of Icon-IP in any new proceeding if I had refused leave. The new claims arose from facts that only occurred after the first stage trial when my judgment originally stood reserved. Fifth, there was no significant prejudice to the applicants other than the incremental delay of three to four months; as against that was the prejudice flowing to both the applicants and Icon-IP if they had to engage in new proceedings if I had refused leave. Finally, the applicants were given the necessary opportunity to adduce the evidence that they saw fit on the new claims; they availed themselves of that opportunity. The assertion made by the applicants after 20 November 2015 that they had not been given such an opportunity had no substance. 34 As to the first matter dealing with the applicants' application to hive off the quantum of damages on their claims, it is appropriate to observe the following. At the start of the trial, it became apparent that the applicants had not adduced evidence on the question of the adequacy of the settlement of the US proceedings. That is, there was no evidence to suggest that the US settlement was made at an undervalue or for less than it ought to have been. As I say, an application was then made at trial to split liability from quantum so as to enable that evidence to be called at a later stage. There were a number of difficulties with that application. First, there was no detailed supporting material to explain its lateness or the precise material that would be filed. Second, such evidence ought to have been led on the liability case in any event; accordingly, splitting liability from quantum would not have rectified a difficulty in any event. Third, there was an air of unreality in what was being proposed. The suggestion was that US patent experts would be briefed and called by the applicants. But from what I could glean, the applicants had little in the way of resources to engage in that exercise. Further, the delays involved in such a task would have been considerable. Moreover, the respondents would have had to file responding material. Fourth, there was a further air of unreality. The documentary evidence adduced demonstrated that Nelson in fact was content with the US$2.05 million figure achieved for the US settlement, but that the price for his consent to the settlement was a variation to the joint venture arrangements; in other words he was seeking a collateral advantage by the withholding of his consent (I will explain this later). In essence his application was to enable him to have a further opportunity to adduce evidence challenging the settlement figure, the reasonableness of which was not challenged in his own emails. Of course, this was not strictly a bar to his application, but given that I was exercising a discretion, this tension in his position was not helpful to his application. Fifth, if I had granted the applicants' application, the respondents would have been prejudiced. Costs would not have been an adequate cure as the applicants had little in the way of resources to meet such an order. Further, the respondents would have been prejudiced by the delay, particularly given the funds that were then frozen. Sixth, the applicants made a reasonable point that the US proceeding was settled by the start of May 2015 and the trial had commenced on 28 July 2015. Thus there was a short time for the applicants to gather the relevant evidence dealing with the inadequacy of the settlement. So much may be accepted. But there are a number of responses. It was for the applicants to prosecute their case. Further, if there was an issue, it should have been raised earlier as part of appropriate case management, and certainly before the trial commenced. Further, as I have said, the then counsel for the applicants had clearly considered the matter as at 8 May 2015 because the matter was then adverted to before Middleton J. Further, the applicants had been granted an indulgence already by the adjournment on 29 May 2015 to get their act together. 35 There were other fundamental difficulties with the applicants' application. 36 First, there are the counterfactuals. If the US proceeding did not settle in the manner that it did, the counterfactuals would necessarily involve some other kind of settlement before judgment, or judgment. In order to establish the counterfactuals, it would have been necessary for the applicants to demonstrate that on the balance of probabilities one or other of the counterfactuals would have occurred. It is difficult to see how independent expert evidence could establish what the other party in litigation would or would not have done if the matter had not resolved at the time it did. 37 Second, in order to establish the counterfactual that the claim would have succeeded at trial in the US, it would be necessary to conduct in Australia a trial within a trial to determine that issue. That would necessarily occur in circumstances where: (a) all the evidence before the US Court would not necessarily or even probably be before me; (b) the decision making processes would be different; and (c) the legal regime would be different. 38 Third, the next conceptual issue which would confront the applicants is that the question to be determined was not simply whether Icon-IP would have done better at trial, but whether it was a breach of fiduciary duty to settle on the terms which were agreed in the circumstances in which the settlement occurred. It is difficult to see how that could be a matter of significantly probative expert evidence. Such a question is really a matter of commercial judgment taking into account the risks and prospects of the US litigation, the consequences of losing such litigation, and the commercial advantages of settling. 39 Generally, the applicants did not demonstrate by any satisfactory evidence how they would have gone about establishing loss and damage if given the opportunity. 40 In my view, the applicants' case fails on liability. In one sense then, the question of splitting off the quantum of damages becomes hypothetical. But if I had to rule on that application, I would dismiss it for all of the above reasons. I would finally note for completeness that no application was made on 28 July 2015 or thereafter to adjourn off the trial in its entirety. All parties were content to proceed on liability.

(c) The applicants' legal representation 41 Finally, it is appropriate to record the evolution in the applicants' legal representation. 42 It should be noted that Nelson and Fazio Richards have not had consistent legal representation throughout these proceedings. Initially, they were represented by Clemens Haskin Legal. Mr Clemens of that firm appeared on behalf of the applicants on a number of occasions before Middleton J. At a directions hearing on 8 May 2015 before Middleton J, counsel appeared on behalf of the applicants. Counsel also settled the applicants' further amended statement of claim. On 25 May 2015, Clemens Haskin Legal formally ceased to act for the applicants. 43 At the next return date, 26 May 2015, Nelson appeared before me on behalf of himself and Fazio Richards. Nelson conceded that his lawyer had ceased to act for "funding related" reasons. Nevertheless he said that he was intending to engage new lawyers which he estimated would take one to two weeks. As a result, at that point he sought to adjourn the trial date as I have discussed. 44 On 28 May 2015, the applicants filed a notice appointing a Darroll Nelson as their legal representative. At the directions hearing on 29 May 2015, new counsel appeared for the applicants. He indicated that his client was lacking in funds to pay legal costs. On 22 July 2015, Darroll Nelson formally ceased to act for the applicants. 45 At the directions hearing on 24 July 2015, Nelson again represented himself and Fazio Richards and indicated that he did not have legal representation. He said that he was seeking further legal representation and advice on filing submissions and defences. But he reiterated that he was experiencing financial difficulties. 46 On the first day of the trial, 28 July 2015, and until 6 August 2015, the applicants were represented by Mr Alan Hands of counsel who had apparently first been instructed on the afternoon of Saturday 25 July 2015. I should note at this point my appreciation for his assistance given the challenges he faced in running the trial under such circumstances. The applicants filed a notice of acting on 28 July 2015 referring to the appointment of Mr Hone as their solicitor. 47 At the interlocutory hearing on 7 October 2015, Nelson did not appear; apparently he had been unable to arrange for counsel to attend. On 9 and 14 October 2015, Nelson represented himself and Fazio Richards. On the latter occasion, he said that he had filed particular documents himself even though Mr Hone was still his solicitor on record and that both Mr Hone and counsel had been "unavailable" to appear. Nelson said that he expected to continue to have legal representation. 48 However, on 6 and 20 November 2015 Nelson again represented himself and Fazio Richards. On the former occasion, I enquired with Nelson why Mr Hone was still his solicitor on the record and what services Mr Hone was performing. Nelson said that Mr Hone had been "unavailable" for some time because of workload issues. The answer was not satisfactory.

FACTUAL BACKGROUND 49 It is appropriate to now address the salient facts. 50 Nelson was the inventor of various bicycle seat patents. Fazio Richards, formerly Nelson Seating Pty Ltd, was incorporated to own and exploit the bicycle seat patents, although formal assignments by Nelson of the bicycle seat patents to Fazio Richards were not completed until 2011. 51 Prior to 2011, Fazio Richards entered into various commercialisation ventures in respect of the bicycle seat patents. However, such ventures were largely unsuccessful. Moreover, by late 2010, most of the bicycle seat patents had lapsed. Further, Fazio Richards was without funds to engage in significant commercialisation or to defend the patents by infringement proceedings. 52 In early 2011, Nelson invited Strover to enter into arrangements to fund the commercialisation of the bicycle seat patents with Fazio Richards. 53 That invitation resulted in Fazio Richards, Ibis Way (a company owned and controlled by Strover) and Nelson entering into a Heads of Agreement dated 19 September 2011 (the Joint Venture Heads of Agreement) to formalise a joint venture between them. 54 Notwithstanding the assertions of Fazio Richards and Nelson to the contrary, which assertions I will deal with later, the Joint Venture Heads of Agreement has been the sole and governing agreement made by the parties in connection with the commercial exploitation of the bicycle seat patents. However, prior to the entry into of the Joint Venture Heads of Agreement, the Strover interests funded the reinstatement of the lapsed patents. 55 The Joint Venture Heads of Agreement provided that there should be a company to be used as the joint venture vehicle to undertake the venture. The company to be used was Icon-IP. Subject to one matter concerning the issue of a single "V" class share, which I will also discuss later, the shares in Icon-IP were held equally by Fazio Richards and Ibis Way. The directors of Icon-IP have been and are Gary Richards and Tony Fazio, who have also been directors of Fazio Richards. 56 In summary, the Joint Venture Heads of Agreement provided (see [94] to [99] below) that: (a) Ibis Way was to be primarily responsible for the commercialisation activities, whilst Nelson was to be primarily responsible for research and development concerning the patents; (b) Ibis Way would advance a line of credit to Icon-IP for use in the commercialisation of the bicycle seat patents; (c) Ibis Way would also fund on an "as needs" basis the repayment of certain creditors of Fazio Richards, and pay an allowance to Fazio Richards of $2,000 per month; (d) funds received by Icon-IP from the commercialisation of the bicycle seat patents would be applied in a particular order and within specified proportions, generally as follows: (i) first, payment of any contingency fee to a third party; (ii) second, repayment to Ibis Way of advances to Fazio Richards (other than the line of credit); (iii) third, as to 60% of the remainder, retention by Icon-IP as working capital for further commercialisation activities; (iv) fourth, as to 40% of the remainder, to the repayment of line of credit advances made by Ibis Way, then to Fazio Richards in the amount stipulated and then to Ibis Way and Fazio Richards in equal proportions, subject to adjustment; and (e) if there was a deadlock in decision making, the issue would be referred to Stephen Stern, a partner in Corrs Chambers Westgarth, or a third party lawyer nominated by him, whose decision would constitute a "casting vote". 57 From September 2011, Icon-IP undertook commercialisation activities and infringement proceedings concerning the bicycle seat patents in China, Italy and the United States. I will elaborate on the US activities at this point and discuss the Italian litigation in a separate section of these reasons ([194] to [221]) when I discuss Icon-IP's amended cross-claim. 58 There were various third parties engaging in conduct that infringed the bicycle seat patents. In the United States, Icon-IP issued a proceeding in California against Specialized, a large bicycle manufacturer, seeking relief against it for the unauthorised sale by Specialized of products which infringed the bicycle seat patents (US proceeding). For this purpose, on 14 May 2012 Icon-IP retained Niro on a contingency fee arrangement. Icon-IP issued proceedings against Specialized in the United States because it was perceived that a successful result against Specialized would provide a strong foundation for commercial recovery from other infringing entities in the United States and elsewhere. 59 In relation to the US proceeding, Niro requested that one person be appointed to give instructions to Niro on behalf of Icon-IP concerning its conduct. On 2 August 2012, Strover was appointed as the attorney of Icon-IP for, inter alia, the purpose of giving such instructions. Although the relevant instrument was headed "Specific Power of Attorney", its form was a general power of attorney. 60 Icon-IP was successful in two interlocutory hearings in the US proceeding against Specialized. The first was a "Markman" hearing in April 2014 which concerned questions of construction. The concept of a "Markman" hearing derives from the description of the process endorsed by the US Supreme Court in Markman v Westview Instruments Inc 517 US 368 (1996) where questions of construction of the claims of a patent, including terms of art, which underpin both infringement and validity issues are dealt with by a judge alone rather than a jury in accordance with the Seventh Amendment guarantee. The second was an application by Specialized for summary judgment. Icon-IP was successful in both applications, with the result that its infringement proceeding was permitted to go to trial. 61 The US proceeding was listed for trial on 26 May 2015 but was settled subsequent to a mediation which occurred on 25 April 2015 in Maui, Hawaii, before Antonio Piazza, a mediator with substantial expertise and experience in US patent law. Niro and Strover represented Icon-IP at the mediation, the latter in accordance with the power of attorney. There is no question as to the competence and expertise of Niro to act on Icon-IP's behalf at the mediation or the quality of the mediator. I have no reason at all to doubt that the outcome achieved for Icon-IP was reasonable and commercial, indeed the best that could be extracted from Specialized at that time. Moreover, it was supported by both Niro and Mr Stephen Stern, a leading expert in IP litigation with decades of hard fought practical experience in such matters. 62 The present proceeding commenced by Fazio Richards and Nelson has been principally concerned with the conduct of the US proceeding and its settlement. In essence, the applicants contend that the settlement with Specialized was at an undervalue and that in making the settlement, Strover, Ibis Way and Icon-IP breached equitable and other duties said to be owed to Nelson and Fazio Richards. Let me elaborate further on some of the factual matrix at this point. 63 In early 2015, Nelson apparently formed the view that Strover was seeking to arrange a settlement of the US proceeding at what Nelson considered to be an undervalue. At that time, Nelson was not a director of Fazio Richards. Let me say at this point that Nelson in my view always took an overly optimistic view of the value of the bicycle seat patents and what could be realistically recovered from patent infringement proceedings, whether in the US or otherwise. His view no doubt was coloured by the fact that he was the inventor of the patents. It is also relevant to note that he is likely to have puffed up the value and potential recoveries from such infringement proceedings as part of his strategy to entice and wheedle support from third party investors in Fazio Richards. I do not need to elaborate further on that latter dimension. It should also be noted that Nelson had no expertise to opine on what could realistically be recovered in patent infringement litigation in the US or elsewhere. As far as I know he has no legal training, indeed no background in any academic discipline that might give him some authority to opine on such matters. Indeed, his attempt to second guess Niro and Mr Stern demonstrated an inflated view of the value of his own opinions. I will comment on his lack of reliability as a witness in more detail later. 64 In early 2015 an extraordinary general meeting of the shareholders of Fazio Richards was called. It was chaired by Gary Richards. At the EGM, Strover gave an update of the progress of the US proceeding. A resolution was then passed that Nelson be appointed as governing director, a position which under the Constitution of Fazio Richards gave him general authority in relation to the affairs of Fazio Richards. Apparently, as a governing director, he could exercise such authority and control without consultation with the other directors, namely, Gary Richards and Tony Fazio. 65 Shortly after his appointment as governing director, Nelson caused Fazio Richards to issue the present proceedings. 66 Before the commencement of the mediation of the US proceedings, Nelson and Strover apparently reached a joint position to be put at the mediation that settlement of the US proceeding should involve a payment of at least US$7.5 million by Specialized. 67 It is appropriate to set out some of the chronology: (a) On 25 April 2015 Fazio Richards wrote to the respondents and put forward a proposal for the mediation (the "minimum terms" document). It was couched in terms "I put forward the following terms for Peter Strover to be authorized to accept as minimum terms at mediation …". There was reference to a minimum upfront lump sum payment of US$7.5 million to be made by Specialized. (b) It would appear that as at 9.19pm on 25 April 2015 this was the position that the parties agreed would be put at the mediation (see for example Strover's email to Nelson and copied to others at that time). (c) The mediation occurred in Maui on 25 April 2015 (Maui time). Settlement did not occur at this time. At this mediation, in attendance for Icon-IP was Strover and a Niro representative. In the evening of 26 April 2015 (Melbourne time), Mr Stern called Nelson and told him of the then unsuccessful mediation. Later that evening Strover spoke with Nelson and told him that further attempts would be made to settle. (d) At 3.24pm on 27 April 2015, Melbourne time, Strover sent Nelson a draft "term sheet". It did not conform to the "minimum terms" document. It made reference to Specialized paying Icon-IP US$2 million. It provided in accordance with the Joint Venture Heads of Agreement for: (i) US$720,000 to be paid to Niro; (ii) US$1.28 million to be paid to Icon-IP. (e) In response, Nelson forwarded (indirectly) a modified version of the "term sheet" back to Strover. It did not alter the US$2 million figure. One can infer from this that at this time Nelson did not take issue with the proposition that that was an acceptable sum for Specialized to pay. In other words Nelson was prepared to accept the reasonableness of the settlement figure vis-à-vis the third party. But importantly, Nelson's draft had a different proposal for distribution. He provided for: (i) US$700,000 to be paid to Niro; (ii) US$650,000 to be paid to Icon-IP; and (iii) US$650,000 to be paid to Fazio Richards. (f) Nelson's distribution proposal was not in accordance with the Joint Venture Heads of Agreement. There is a further point to be made. Whatever be the position of the "minimum terms" document prior to and at the formal mediation, which initially failed, these later dealings superseded the earlier "agreed" position, which only had force as the stance to be taken by Icon-IP for the mediation. (g) The Nelson proposal was rejected by Strover. This was communicated to Nelson by Mr Stern by email on 28 April 2015 at 2.05pm. Mr Stern said that there was a deadlock that he would resolve. By email at 2.44pm on 28 April 2015 forwarded by Nelson to Mr Stern and Strover, Nelson attempted to revive the "minimum terms" document and to assert that only an agreement could be entered with Specialized on those terms and that if it was to be varied it needed his consent. The attempt was futile if not disingenuous. In a further email at 3.15pm on 28 April 2015 sent to Mr Stern and Strover, Nelson also asserted that there was no deadlock. By yet a further email at 3.52pm on 28 April 2015 Nelson requested further detail of the deadlock; he also made other unsubstantiated assertions. (h) In response to this flurry of emails, Mr Stern forwarded an email at 5.06pm on 28 April 2015 to Nelson and others in the following terms: Hi Paul Thanks for your email. For the reasons below, I believe that there is a deadlock. I am proceeding to act on that basis. You and Peter reached an agreement over the weekend but that agreement is no longer relevant as it was dealing with a hoped-for deal that was never even contemplated by Specialised. There is now the possibility of another deal, albeit considerably worse, on the table. If this deal was offered as a possibility without a trial being due in 3 or so weeks, I would counsel against it. However, you are both facing a trial in 3 weeks where your lawyer has now informed you that he is likely not to be able to represent you at the trial. Secondly, in a patent enforcement program, avoiding a trial is very important, especially early on. Whilst a win at a trial would make a program against third parties easy, a loss in the first action and in the USA would totally kill the program. In addition, the mediator, apparently a respected patent litigator, formed a very negative view of your chances in the case against Specialised. Further, Ray Niro is also concerned about the "story" that Specialised's founder could tell about a local boy made good. That does not mean that your legal case is weak, but as trials in the USA are before juries, this is an important factor. Thus in my view, a trial against Specialised is risking everything. As for timing, informed of a likely deadlock about 6 hours ago. I should add that I do not agree with your statement that: "Accordingly, should Peter wish to vary those Agreed Terms, he may only do so with our consent." This shows that there is a dispute. and deadlock. Peter has informed me that there is a possibility of a deal with Specialised that is similar to the deal that he sent to you yesterday in writing, but the figure to be paid by Specialised would be a final figure with no top up. This sum is likely to be about US$2 million. The deal would include a variation to the Heads of Agreement so that there would be a payment to your company of the first 15% of Icon's receipts after Niro has received its 35%. That amount would, in Peter's proposal, be held by Icon until the threatened and existing litigation commenced by you against Peter has been resolved. Peter would be recouped from further deals. One of the keys to the proposed deal is that Specialised would not be allowed to disclose what payment it made to Icon and Icon would specifically be allowed to inform third parties that Specialised signed a settlement deal and took a licence and paid a fee. This deal is infinitely preferable to risking everything in a trial and gives you a chance to gain momentum with third parties and gives you a chance to gain the top 15% of receipts. On that basis, amongst others, I agree with the modified proposals by Peter. Kind regards Steve (i) The content of Mr Stern's email, as best as I can ascertain, accorded precisely with what had transpired and the characterisation to be given to the relevant events. It also contained expert and, if I may say so, sage advice on the appropriateness of a settlement at around US$2 million. I also note that the risks of litigation were previously advised to Nelson and Strover (see for example the email from Frederick Laney of Niro dated 27 February 2015 at 9.29am). (j) Thereafter, a signed settlement was reached between Icon-IP and Specialized. A term sheet was executed by 1 May 2015 and a more formal settlement agreement executed shortly thereafter. 68 In summary, notwithstanding the parties' prior position and optimistic expectations as to what could be achieved in terms of a negotiated outcome at the mediation on 25 April 2015, it became apparent that such a settlement could not be reached involving a payment by Specialized of US$7.5 million. It simply would not agree to pay such an amount. Niro then devised an alternative proposal to put to Specialized which involved settlement at a lower amount. Strover consulted Nelson in this regard to see if he would agree. Nelson responded by proposing modified terms of settlement with Specialized at about the figures advanced by Niro, but with some modifications. But as part of Nelson's response, he made it a condition of his proposal (not involving Specialized) that the Joint Venture Heads of Agreement be rewritten to change its distribution protocols in favour of Fazio Richards. Strover declined this proposal. Mr Stern then considered that there was a deadlock as to how the negotiations in Maui should continue. He then exercised his role as the deadlock breaker. I should say that Mr Stern was not called as a witness in the trial before me; no useful inference could be drawn against the respondents for their failure to call him. 69 I should say at this point that Nelson's conduct was less than impressive. He sought to use the opportunity of the mediation to obtain a collateral benefit for Fazio Richards (and ultimately himself) in terms of amendments to the distribution protocols of the Joint Venture Heads of Agreement. But what is also significant for present purposes is that he and Fazio Richards were prepared to accept the lower figure that Specialized was prepared to offer subsequent to the mediation, even though they now claim without any evidence or reasoned basis that such a figure was unreasonably low and that the settlement agreement entered into was somehow in breach of fiduciary duty by the respondents. 70 As I say, settlement occurred with Specialized and involved detailed terms. 71 The formal settlement agreement principally provided as follows: (a) Specialized agreed to pay Icon-IP the sum of US$2,050,000, with US$750,000 to be paid to Niro and US$1,300,000 to be paid to Icon-IP (clause 2). (b) Appropriate releases were given by Icon-IP in favour of Specialized and its affiliates and appropriate entities (clause 5.1). During the running of the case, Nelson raised in my view a false issue as to the scope of the release. He asserted that it went well beyond what could have been legitimately sought by releasing non-Specialized entities in relation to infringement activities concerning non-Specialized products outside the US. But his assertion failed to have regard to the last sentence of clause 5.1 and the definitions in clauses 1.5 and 1.6. If the release operated beyond Specialized to other persons, then it only operated in relation to Specialized products. That was an obvious and necessary limitation. Otherwise, Icon-IP could sue a non-Specialized entity for infringement concerning a Specialized product who could then in turn sue Specialized for breach of warranty etc. It was legitimate for Specialized to seek such a release and for Icon-IP to give it. Moreover, and generally, by reason of clause 1.6, the releases did not apply to non-Specialized products. Further, despite the applicants' assertions, Niro clearly had the authority of Icon-IP to negotiate such a release. 72 There were a number of considerations relevant to the settlement of the US proceeding that were the subject of evidence filed by the respondents. Nelson was undoubtedly an important witness in the US proceeding. Between February and March 2015, Niro sought the assistance of Nelson in relation to preparation for the trial of the US proceeding which was listed on 26 May 2015. But Nelson declined to fully co-operate. Moreover, he inappropriately sought to make his co-operation conditional upon the resolution in his favour of certain disputes with Strover (see for example the email chain ending with Nelson's email to Niro of 17 March 2015 at 12:51:29pm (CB482 to 486), the letter of J A Fillmore & Co dated 2 April 2015 to Clemens Haskin and Clemens Haskin's response of 7 April 2015). It is true that in evidence there were some emails from Niro suggesting that at times there had been some level of co-operation by Nelson (see Niro's email to Nelson of 1 April 2015 at 1:27am). But it would appear that the co-operation was not satisfactory (see Niro's email to Strover of 16 April 2015 at 10:12am (CB 705 and 706)). Moreover, it would appear that such emails were couched in language of politeness and expectation in an attempt to encourage further assistance from Nelson. But Niro was clearly concerned. Niro also advised Strover and, on at least one occasion, Nelson, that a failure by Nelson to co-operate in the trial preparation including the preparation of necessary evidence would be a serious risk to the success of the US proceeding if it proceeded to trial. At the mediation, this position was reiterated by Niro. Further, it was also said by the mediator that the patents were not strong. Further, prior to the mediation, Niro advised Icon-IP, which advice was also communicated to Nelson, of the risks of the litigation. 73 In summary, the settlement ultimately reached was for a lesser sum than that considered by Nelson and Strover prior to the mediation, but the amount of the settlement was consistent with the alternative proposal that Nelson had put to Strover (see [67(e)] above).

The principal claims and credit issues 74 As I have indicated, the present litigation concerns: (a) the validity of the issue of the "V" class share in and by Icon-IP in favour of Ibis Way; and (b) whether in the settlement of the US proceeding, Strover, Ibis Way or indeed Icon-IP breached equitable or other obligations to Fazio Richards and Nelson. 75 The applicants have sought orders cancelling the issue of the "V" class share to Ibis Way. The respondents have not conceded any of the causes of action in relation to the "V" class share. They have explained that the circumstances which provoked the issue of the "V" class share was an attempt by Nelson to embroil Niro and therefore the US proceeding in a private dispute between Nelson and Strover, which was causing collateral damage to Icon-IP. At this point I do not need to elaborate further, although I will say something later (see [158] to [163]) on this topic insofar as it affects the main issue litigated by the parties. The respondents do not oppose an order cancelling the "V" class share. I will make such an order. 76 The causes of action advanced by the applicants in relation to the settlement of the US proceeding include: (a) breaches of fiduciary duty by Strover and Ibis Way and liability in terms of both limbs of Barnes v Addy entitling relief against Icon-IP; (b) misrepresentation and misleading or deceptive conduct by Strover in relation to the negotiation of the Joint Venture Heads of Agreement; (c) breach of an alleged oral Strover attorney agreement in relation to the appointment of Strover as attorney of Icon-IP; (d) breaches by Strover of the Corporations Act 2001 (Cth) on the basis that as the attorney of Icon-IP, he had the duties of an officer of Icon-IP and breached them. 77 On the basis of such causes of action, the applicants seek: (a) declarations that Icon-IP holds the bicycle seat patents on a constructive trust for the applicants to the exclusion of Ibis Way and declarations that Icon-IP holds the proceeds of the US proceeding on trust for the applicants to the exclusion of Ibis Way; (b) injunctions restraining Icon-IP from dealing with the bicycle seat patents and from holding out that it has any legal or beneficial interest in the bicycle seat patents and orders for the transfer of the bicycle seat patents to Fazio Richards; (c) declarations that the Joint Venture Heads of Agreement has been rescinded or is voidable at the instance of the applicants; (d) declarations that Icon-IP had no authority to enter into the settlement with Specialized; (e) injunctions restraining Strover from exercising the power of attorney conferred upon him by Icon-IP; (f) damages. 78 The applicants also assert that Strover and Ibis Way breached clause 5(iii) of the Joint Venture Heads of Agreement by not paying out Fazio Richards' institutional creditors in the amount of or up to $142,000. Accordingly, the applicants have asserted that Ibis Way's shareholding in Icon-IP should be proportionately reduced under the Joint Venture Heads of Agreement. This claim was not pleaded. That is sufficient to put it to one side. But in any event there was no adequate evidence demonstrating that Ibis Way had breached any obligation to pay out creditors or that Fazio Richards was entitled to any readjustment of its rights. Strover gave evidence which I accept (T253, 254, 260 and 297 to 299) that he had reached an agreed accommodation with the two creditors that had only been partially paid; I should also say that the cross-examination on this aspect amounted to a credit attack in relation to an error made in one of Strover's affidavits, but I am satisfied that this error was inadvertent. 79 Many of the claims made by the applicants turn on the same substratum of facts concerning communications between Nelson and Strover. Let me say something at this point concerning the reliability of their evidence. 80 I do not consider Nelson to be a reliable witness. I say this for a number of reasons: (a) First, when asked a direct question in cross-examination, on many occasions he gave evasive answers or answers that were plainly calculated to assist his version of events. Further, there is little doubt that he is intuitively quite clever. Many of his answers were couched in language that had a superficial allure of appearing reasonable, but such answers had little content on closer analysis. (b) Second, and in elaboration, there is little doubt that Nelson was motivated to bring this proceeding for personal gain such that the settlement money from the US proceeding would flow to Fazio Richards and ultimately him rather than flow in accordance with the terms of the Joint Venture Heads of Agreement. It is also apparent that he endeavoured to stymie or at least not co-operate with the settlement of the US proceeding as a lever to procure a greater advantage for Fazio Richards and himself. His endeavours to paint himself in a different light when giving evidence were disingenuous. He came across to me as a manipulative individual under the veneer of his quiet and apparently reasonable manner. (c) Third, and relatedly, there is little doubting his arrogance. The circumstances surrounding his appointment as governing director of Fazio Richards demonstrate as much. So too did his attempts to second guess Niro and Mr Stern concerning the appropriateness of the settlement with Specialized. (d) Fourth, his preparedness and his (former) solicitor's preparedness to make unfounded allegations against the respondents, which in the solicitor's case I assume to be on his instructions, hardly spoke well of him. 81 Let me elaborate on this last aspect. 82 There were various assertions made by Benedict Clemens (Clemens) of Clemens Haskin acting for Fazio Richards and Nelson that were misconceived or simply false: (a) The letter dated 16 February 2015 of Clemens to Niro asserted that "no settlement of the Proceedings will be lawful, valid or effective absent prior written approval of both Icon partners". This was erroneous and did not accord with the Joint Venture Heads of Agreement. (b) The letter dated 20 February 2015 of Clemens to Specialized contained a similarly erroneous statement that "prior written approval from both of Icon's shareholders, Fazio Richards Pty Ltd and Ibis Way Pty Ltd is required in order to settle any Proceedings in a legally effective manner". (c) Further, Clemens asserted that Nelson had been appointed a director of Icon-IP. Fazio Richards so purported to appoint Nelson a director of Icon-IP, but that was inefficacious (see the affidavit of Gary Richards sworn 22 July 2015). (d) The letter dated 2 March 2015 of Clemens to Specialized asserted, falsely: Be advised that any settlement of the Proceedings without the express prior written consent of our client will be invalid and ineffective, and may amount to fraud. (e) The letter dated 9 March 2015 of Clemens to Specialized referred to the "default of assignment of the Patents to Icon". This last assertion was an improper attempt to undermine Icon-IP's ability to deal with and settle with Specialized. It was disingenuous and at odds with the obligations of the parties under the Joint Venture Heads of Agreement wherein Icon-IP is or was to be the sole owner of the patents. Moreover and in any event, there was an instrument of assignment dated 20 December 2011 in favour of Icon-IP that had been executed by Nelson and Fazio Richards. (f) Generally, the communications and assertions of Clemens were misinformed, contrary to the contractual arrangements between the parties and used as a means to either prevent Icon-IP from settling without the consent of Nelson or Fazio Richards, which was not their contractual right, or to undermine Icon-IP's authority to deal with Specialized. I note that an ASIC search for Fazio Richards shows a Benedict Sebastian Clemens holding 11,364 shares in Fazio Richards. If one assumes a unity of identity, this partially explains the unsatisfactory nature of this correspondence. 83 Generally, I did not find Nelson's evidence to be reliable, unless confirmed by contemporaneous records. 84 But I should also indicate that I had several difficulties with Strover's evidence. Occasionally he appeared belligerent and some of his answers were non-responsive. But generally I have considered him to be a reliable witness. His demeanour was partly explicable by the dislike he had for Nelson and the sense of being the wronged party who had put up substantial capital through Ibis Way, but only later appreciating that he had entered into a venture with a manipulative character. Nevertheless, it was necessary to separate the atmospherics surrounding his evidence from its content. But having said that, the content of his evidence was consistent with the contemporaneous documents. 85 For completeness, I note that there was cross-examination of Strover suggesting that he might have paid or condoned the paying of bribes in China (T277 to T279, T312 to T314 and exhibit A2). The objective position is murky. But in any event, this line of cross-examination did not directly go to the issues that I need to address and on any view did not substantially affect the reliability of Strover's evidence. Other attacks on his credibility were misconceived (for example T273 and T274). 86 There is one other aspect that I should deal with as it relates to credibility questions. The conduct of Icon-IP and, to the extent that he was involved, Strover in the circumstances surrounding the issue of the "V" class share was less than satisfactory. Nevertheless that conduct and the issue of that share seems to have been provoked by Nelson's meddling and unsatisfactory behaviour with respect to the US litigation. I do not consider that such conduct significantly affected the reliability of Strover's evidence to the extent that he was involved in the issue of that share.

Key questions 87 It is appropriate to now address some of the key questions before directly addressing the alleged causes of action.

(a) Alleged oral agreement between Strover and Nelson in February 2011 88 The applicants assert that in February 2011 they entered into an oral joint venture with Strover to commercialise the bicycle seat patents and split the profits evenly between the applicants and Strover (the alleged JVA). It is said that the parties envisaged that a formal Joint Venture Heads of Agreement would reflect the terms of the alleged JVA. 89 In summary, it is asserted that Nelson and Strover had conversations in which they made an enforceable agreement with the express oral terms set out in [8(a) to (h)] of the Further Amended Statement of Claim (FASOC) and that as part of those conversations, Strover made representations that: (a) he and Ibis Way would act in good faith in relation to the bicycle seat patent venture; (b) he and Nelson would share in the decision making processes; and (c) the assignment of the bicycle seat patents to Icon-IP was to be subject to the ongoing duty of good faith. 90 In my view, the evidence adduced does not establish such an oral joint venture agreement in the terms alleged; but I accept that at this time there was some informal understanding between the parties which gave Strover and Ibis Way at that earlier time some confidence to then commit some level of expenditure. But in any event, any such alleged JVA was superseded by the Joint Venture Heads of Agreement. Further and in any event, the evidence does not establish any breach of such an alleged JVA (if one existed) in terms of the parties acting in good faith towards each other or any actionable misrepresentation. 91 In his various affidavits, Nelson made only one reference to a conversation with Strover regarding the terms of the dealings between them and their interests. That reference appears at [10] of his affidavit dated 1 July 2015. In that paragraph, he made the conclusionary statement that he and Strover agreed to vary the written Joint Venture Heads of Agreement in relation to the distribution of funds. That statement is not probative of any fact relating to the making of the alleged JVA and, relevantly, is inconsistent with the allegation in [8(f)] of the FASOC that an oral agreement as to the distribution of the proceeds of the joint venture was made seven months before the Joint Venture Heads of Agreement. It is also inconsistent with the following matters: (a) First, what was said in the "minimum terms" document that the proceeds of a settlement with Specialized were to be distributed in accordance with the Joint Venture Heads of Agreement unless Strover and Nelson agreed otherwise; (b) Second, with Nelson's attempt to redraft the Joint Venture Heads of Agreement as part of the settlement with Specialized. 92 I gave Nelson the opportunity to deal with this gap in his affidavit material concerning the alleged JVA by giving viva voce evidence in chief. But nothing probative was led. His evidence did not go beyond generalities. Nor did Nelson adduce any relevant documentary evidence in support of his assertions. Contrastingly, Strover gave evidence denying the alleged JVA in the terms pleaded. He adduced evidence of an April draft of the Joint Venture Heads of Agreement which was inconsistent with the allegations of the applicants. Strover was not challenged in cross-examination on the relevant allegations. The cross-examination of him in relation to the February 2011 dealings was in substance directed to the fact that he had put money into paying creditors, reinstating patents and arranging for Icon-IP to be incorporated. Although such actions may have had some bearing on what legal or equitable rights the parties might have had if the joint venture had not gone ahead, they did not establish the alleged JVA. There was no evidence of the conversations alleged or the critical terms and representations such as those alleged at [8(e), (f), (g) and (h)] of the FASOC. 93 To the extent that the applicants' causes of action rely on the alleged JVA (as distinct from the written Joint Venture Heads of Agreement) and the alleged representations, they fail. Further, the assertion that the terms of the alleged JVA trump inconsistent express written terms of the Joint Venture Heads of Agreement also fails. Finally on this aspect and as I have said, even if there was the alleged JVA, it was superseded by the Joint Venture Heads of Agreement. Finally, even if I accept for present purposes that the Joint Venture Heads of Agreement had an implied term of good faith (cf [8(g)] of the FASOC), there is no evidence that any such term was breached in relation to the conduct of the actors concerning the settlement of the US proceeding.

(b) The Joint Venture Heads of Agreement 94 There are various features to note concerning the Joint Venture Heads of Agreement. The background thereto is set out in the Recitals: A. Party A1 or Party A2 are registered as proprietors of certain patents listed in Schedule 1 ("Patents") for inventions relating to bicycle seats ("Inventions"), some of which have lapsed, and may be capable of reinstatement. B. Party A1 is a shareholder and director of Party A2. C. The Parties wish to commercialise the Patents, by way of granting licences to interested third parties, and/or taking enforcement action against infringing third parties. D. For this purpose, the parties have agreed to incorporate a new company ("NewCo"). E. Party A1 and Party A2 each agrees to assign all right title and interest in the Patents to NewCo, and Party B agrees to provide funding to NewCo and A2 (as per Schedule 2) up to total of $1.25m. Party B will invest further funds as required in at least one other territory outside the USA. F. Roles - Party A1 will primarily oversee R&D and Patent matters; Party B - will primarily deal with lawyers and oversee reinstatement, licensing and litigation. G. This document will become legally binding upon its execution being approved by an Extraordinary General Meeting (EGM) of Party A2, and thereafter the Parties will formalize their agreement in a further document, by negotiating any necessary further details in good faith. Party A1 is Nelson, Party A2 is Fazio Richards, Party B is Ibis Way and NewCo is Icon-IP. 95 First, it was intended to be a legally binding document (Recital G), but it was contemplated that it might be replaced by a later document (clause 14). 96 Second, the joint venture vehicle was to be owned as to 50% by Fazio Richards and as to 50% by Ibis Way, with each having the right to appoint a voting director (clause 2). It is apparent that control of the joint venture vehicle, Icon-IP, and the decisions to be made by it did not directly involve Nelson. Nelson's role was to deal with R&D and patent development aspects. But control of the joint venture was through Icon-IP, its directors and its shareholders. Nelson was none of these. Two other matters should be noted at this point. Decisions of Icon-IP were to be made through its directors in the first instance, rather than the shareholders. Further, any deadlock was to be resolved through the mechanism provided in clause 10. 97 Third, clauses 5, 6, 7 and 8(a) dealt with the question of investment by Ibis Way (Party B) and distributions and payments involving Ibis Way, Fazio Richards (Party A2) and Icon-IP (NewCo). Clauses 4, 5, 6, 7 and 8(a) were in the following terms: 4. Reinstatement - Each Party agrees to take such action as is reasonably necessary, and subject to item 8(a), to reinstate such of the Patents as are not in force at the date of these Heads of Agreement. The Parties acknowledge that several of Patents capable of reinstatement have been reinstated at the date of these Heads of Agreement. 5. Investment - In consideration for Party B's interest in New Co, Party B will advance the following loan funds ("Funds"): (i) a line of credit to NewCo of $1,108,000; ("Line of Credit"), of which, the Parties acknowledge, approximately $300,000 has been advanced at the date of these Heads of Agreement to achieve the reinstatement referred to in item 4, and some other relevant costs; (ii) payment to Party A2 of an allowance of $2000 per month ("Allowance") commencing on 15 October 2011 and payable for the period specified in Schedule 2; (iii) a further loan of up to $142,000 to Party A2 to pay out all institutional creditors of Party A2 current at the date of these Heads of Agreement and as per Schedule 2, and Party B acknowledges that this loan could be approximately $240,000, if Party B agrees to pay out further creditors ("Loan"); and Party B will, subject to item 6(d)(ii) below, pay all external legal costs in respect of litigation other than US Litigation (as defined in item 6(d)(i)), where Party B, at its discretion, elects to pursue such litigation. The Line of Credit Funds will be drawn on a needs basis to fund commercialisation activity, and Loan Funds will be drawn on a needs basis to pay Party A2's existing creditors as per attached Schedule 2, but in each case subject to the conditions set out in item 9 below. If further investment is required then the Parties will have interests in NewCo adjusted on a pro-rata basis. 6. Revenue - All revenue received by NewCo will be applied as follows: a) first to pay any amounts due to third parties in respect of any contingency arrangement; b) second to pay any costs incurred by NewCo, then to repay Loan Funds and Allowance Funds (upon the Allowance Funds ceasing to be payable as per schedule 2) each with bank interest at the then current RBA cash rate +2.5% pa; (but not Line of Credit Funds of $1,108,000 - see item 6(c)(ii)); c) NewCo will: i. Retain 60% as operational funding until NewCo accumulates $5m (ie definition of "Self-Funding" is $5m clear in bank of NewCo, or such other definition as may be recorded in the board minutes of NewCo from time to time) then NewCo will distribute the excess equally to the NewCo shareholders, subject to any adjustment applicable under item 6(d) below. ii. The remaining 40% will be applied to firstly repaying to Party B any Line of Credit Funds drawn down, and then applied to paying to Party A2 an amount equal to the amount of any Line of Credit Funds drawn down, and NewCo will distribute any remaining amounts equally to the NewCo shareholders, subject to any adjustment applicable under item 6(d) below. d) The distribution mechanism amongst NewCo shareholders will be subject to the following adjustment:- i. Where NewCo receives revenue (whether in the form of damages or settlement, licensing or other proceeds) in relation to US Litigation (defined as litigation pursued in the US to enforce the Patents against any company whose ultimate parent company is sued in the US) - the share is Party A2 40%; and Party B 60%; ii. Where NewCo receives revenue (whether in the form of damages or settlement, licensing or other proceeds) in relation to litigation other than US litigation (ie has nothing to do with US litigation, and as such is held directly in non US territory) and which is wholly funded by Party B - the share is Party A2 35%; and Party B 65%. But if NewCo funds (and or on contingency basis with law firm) such work then the share is Party A2 40%; and Party B 60%; and iii. If NewCo receives revenue in any country (whether in the form of damages or settlement, licensing or other proceeds) in respect of enforcement of US patent 6,378,938 (or a patent in another country in respect of the Invention described in the 6,378,938 Patent), then the adjustments in the preceding two sub-paragraphs (i) and (ii) above will cease to apply in respect of that revenue and all further such revenue received in any such country, and such revenue will be shared 50/50 in all respects. 7. The sole use of Loan Funds will be to pay Party A2's existing creditors as per attached Schedule 2 and as approved by Party B. The sole function of NewCo and the sole use of the Line of Credit Funds will comprise, unless otherwise agreed by both Parties, commercialisation of the Patents and for no other purpose, with initial focus on:- a) reinstating any lapsed Patents and keeping up with renewals of patents; and b) undertaking commercialisation activity in the USA and other countries (on a contingency basis where possible). 8. Without limiting item 5 above: a) Save as expressly permitted under item 7(a) or as approved by Party B, Line of credit funds must not be used in respect on any patent unless and when NewCo is recorded as sole registered proprietor thereof (note that it is accepted that at the time of EGM there has been approximately $300,000 spent by Party B, mainly towards patents matters, and some for other relevant costs). … 98 Fourth, there was a dispute resolution mechanism in clause 10 that provided the following: Dispute - if there is a deadlock in decision making process then either Party A2 or Party B may request Stephen Stern of Corrs Chambers Westgarth (or a third party lawyer nominated by him) to have casting vote in that situation. Such costs will be borne by NewCo, where the third party lawyer considers the appointment to have been reasonable. 99 It is to be noted that such a mechanism could apply where there was a deadlock at the board level of Icon-IP. Moreover, the dispute resolution mechanism could resolve disputes as between Fazio Richards and Ibis Way. But Nelson was not recognised in that context. The whole structure of these provisions was antithetical to the notion that somehow Nelson had an advantaged position in terms of his consent being required to any dealings by Icon-IP with the US litigation or the bicycle seat patents being assigned to Icon-IP. Indeed, Nelson and Fazio Richards warranted that upon the assignments taking effect, Icon-IP would be the sole owner of the patents and the underlying inventions (clause 12(d)). Moreover, the whole structure of these arrangements was inconsistent with the idea that Fazio Richards had some advantaged position concerning its consent. If its consent was not forthcoming to any matter (assuming that its consent was required), then it could be overridden by the deadlock mechanism. 100 Further, at a more general level, the Joint Venture Heads of Agreement, by its detail and comprehensive provisions left little room for the existence or operation of the implied terms asserted by Fazio Richards and Nelson; but as I say, I am prepared to accept for present purposes an implied term to act in good faith. 101 Further, there is little ambit for any superimposed fiduciary obligations, let alone those inconsistent with the terms of the Joint Venture Heads of Agreement. Perhaps Icon-IP, as the joint venture vehicle, may have had fiduciary obligations to Fazio Richards and Ibis Way to act in good faith and in the interests of the joint venture, but the content of such obligations were co-extensive with the terms of the Joint Venture Heads of Agreement. As for Fazio Richards and Ibis Way, in one sense they each were entitled to protect and act in their own interests concerning the joint venture. But I am prepared to accept that they also stood in a fiduciary relationship, but again with obligations co-extensive with the Joint Venture Heads of Agreement. But the proposition that any of Ibis Way, Strover or Icon-IP owed any fiduciary obligation to Nelson is quite doubtful. 102 Let it be accepted that the relationship between Fazio Richards and Ibis Way or the relationship between Icon-IP and the joint venturers was a fiduciary one (United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 10 and 11 per Mason, Brennan and Deane JJ), nevertheless the content and boundaries of any fiduciary obligations were circumscribed by: (a) the form which the joint venture took; (b) the precise terms of the Joint Venture Heads of Agreement. 103 As Mason J said in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97: That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. 104 Further, it is also to be noted that a person may be "a fiduciary in some activities but not others" (at 98 per Mason J). Further, "a contractual term may be so precise in its regulation of what a party can do that there is no relevant area of discretion remaining and therefore no scope for the creation of a fiduciary duty" (at 98 per Mason J). In other words, labels such as "fiduciary" and "good faith" are not some sort of polytropic fairy dust that can be used to magically transform contractual relationships or their incidents. 105 I will elaborate in more detail on these aspects later when I discuss the causes of action.

(c) The alleged Strover attorney agreement 106 The applicants have asserted the existence of a Strover attorney agreement (see [19] of the FASOC) between Fazio Richards, Nelson, Ibis Way and Strover containing the following terms: (a) Strover would act in good faith as the agent of Fazio Richards and Nelson in the conduct and settlement of the US proceeding; (b) any settlement of the US proceeding would only occur with the informed consent of Fazio Richards and Nelson; (c) Strover would not act contrary to the interests of Fazio Richards and Nelson in circumstances where their interests might conflict with those of Ibis Way and Strover in relation to the joint venture; and (d) Strover would not profit from or make any unauthorised benefit from the joint venture without the informed consent of Fazio Richards and Nelson. 107 These assertions are untenable in fact and in law. Strover was the attorney of Icon-IP, not Fazio Richards or Nelson. The allegations have an air of unreality to them. They are devoid of factual support. At best, Strover as attorney owed relevant fiduciary obligations to Icon-IP to act in good faith and in its interest and, indirectly, the interests of the joint venture. 108 The applicants adduced little evidence of the alleged Strover attorney agreement. The applicants were given leave to adduce viva voce evidence, but no evidence was led to establish the allegations. Mr Nelson said: what was said between us was that it would allow him to be the front man for the business, whilst he was not a director, and he would simply represent the company and it would not change our 50-50 rights in operating the business. 109 I agree with the respondents' submission that this does not amount to evidence of the existence of or the pleaded terms of the alleged Strover attorney agreement. Moreover, even if Nelson's evidence was accepted, it goes no further than what was provided for in the Joint Venture Heads of Agreement. The alleged statement of Nelson is consistent with that agreement, having regard to the composition of the board of Icon-IP as provided for in clause 2. Further, the possibility of deadlock was expressly contemplated and dealt with by clause 10. 110 More significantly, Strover was the attorney for Icon-IP. The alleged oral Strover attorney agreement, in its terms, would conflict with Strover's obligations to Icon-IP as its attorney. As attorney, and therefore agent of Icon-IP, Strover could not consistently therewith be the agent of either Fazio Richards or Nelson, let alone both of them, or accept an obligation to prefer the interests of Fazio Richards as asserted. His obligation as an attorney of Icon-IP was to act in the interests of Icon-IP. 111 Further, Strover's evidence denying the alleged Strover attorney agreement was not seriously challenged. To the extent that any pleaded cause of action relies on the existence and pleaded terms of the alleged Strover attorney agreement, the claim fails.

(d) The allegations of breach 112 It is asserted that Strover and Ibis Way breached their fiduciary duties concerning the settlement of the US proceeding by: (a) acting contrary to the interests of Nelson and Fazio Richards where the respective interests were in conflict; and (b) profiting from or deriving an unauthorised benefit from the joint venture without the fully informed consent of Nelson and Fazio Richards. 113 These allegations are without foundation as I will endeavour to explain in some detail. But several preliminary observations. First, Strover and Ibis Way acted transparently. Second, the settlement of the US proceeding was in the interests of Icon-IP and the joint venture. There was no preferring of one interest over another. The settlement and the process used to achieve it fully conformed to the terms of the Joint Venture Heads of Agreement. 114 The relevant facts said to establish the relevant breaches are set out in [32] of the FASOC. The principal conduct said to be in breach is that identified in paragraph (t) of the particulars to [32]. Most of the remaining particulars seem to relate to the issue of informed consent and a suggestion that there was a binding contract of some kind as to the terms of any settlement. It is convenient to set [32] out at this point. It provides as follows: The settlement of the US Patent proceedings referred to in paragraphs [29] to [31] above, was in [sic] conduct in breach of the several fiduciary duties of Ibis Way, Strover and Icon IP to Fazio Richards and Nelson not to: (a) act contrary to the other's interests in circumstances where their interests might be in conflict with those of the other and the Bicycle Patent Joint Venture; and (b) profit from or make any unauthorised benefit from the Bicycle Patent Joint Venture without the fully informed consent of the other parties. Particulars The Applicants refer to the affidavit of Paul Nelson sworn 29 April 2015 and the following acts, facts and matters: (a) in or about early 2012, Icon IP undertook testing of some of Specialized's products and concluded that Specialized's products infringed the Bicycle Seat Patents, and that they were covered by US Patents 6254180 and US 6378938: see paragraph [12] of the affidavit of Peter Strover sworn 18 March 2015; (b) Specialized's infringement of the Bicycle Seat Patents was not limited to the US but also applied to other jurisdictions where Specialized sold its infringing products; (c) the terms of the US Attorney Agreement between Icon IP and Niro, Haller and Niro relevantly stated: "This Agreement sets forth the terms and conditions under which we have agreed to represent ICON‐IP, Pty Ltd. ("ICON") in connection with the licensing and enforcement of its United States Patent Nos. 6,254,180 and 6,378,938 and any related patents or patent applications for bicycle seat designs (the "ICON Patents"). It is understood, however, that ICON will be independently pursuing enforcement efforts regarding ICON Patent rights outside the United States against non‐U.S. companies that have a large majority of their infringing sales outside the United States, which will not be subject to this agreement.": see page 1 of the US Attorney Agreement; (d) by 18 March 2015, Niro, Haller and Niro had advised Strover and Icon IP that a valuation of the claim in the US Patent proceedings only, would be under USD $3M and that a range of USD $3M to USD $5M would be a good result: see paragraph [21(a)] of the affidavit of Peter Strover sworn 18 March 2015; (e) Strover and Icon IP had not received any advice from Niro, Haller and Niro as to the value of a worldwide settlement between Specialized and Icon IP: see paragraph [23] of the affidavit of Peter Strover sworn 18 March 2015; (f) on or about 18 March 2015, Strover held the belief that it may have been possible to settle with Specialized on a worldwide basis (as opposed to solely in relation to the US Patent proceedings) regarding the Bicycle Seat Patents in the order of USD $10M: see paragraph [21(b)] of the affidavit of Peter Strover sworn 18 March 2015; (g) by the orders made by Justice Middleton on 27 March 2015 in this Honourable Court, as varied on 22 April 2015, ("27 March 2015 court orders") Nelson had to be provided with any settlement proposal in the US Patent proceedings including all information relevant to the settlement of the US Patent proceedings including advice of Niro, Haller and Niro [see paragraph 2 of the orders] and such settlement and information had to be provided to Nelson at least 3 business days prior to the settlement proposal being accepted or finalised by the parties to the US Patent proceedings [see paragraph 3 of the orders]; (h) from on or about 25 April 2015 to 28 April 2015, Strover and Nelson, via oral and email communication between them and their respective solicitors, agreed that Strover and Icon IP could only settle the US Patent proceedings on behalf of the parties if all the parties were informed of the proposed terms of the settlement and all parties agreed on those terms. A copy of the said emails are in the possession of the lawyers for the Applicants and can be inspected upon appointment; (i) further, on 25 April 2015, Fazio Richards, Nelson, Strover and Ibis Way, agreed on terms that had to be included in any settlement terms of the US Patent proceedings, including that the minimum upfront lump sum payment Specialized would need to pay was USD $7.5M and any release to Specialized would include its directors, officers and employees only and exclude all other persons ("minimum terms"); (j) based on the parties having agreed on the minimum terms, on 25 April 2015 Fazio Richards and Nelson provided a letter to Strover and Icon IP stating that the parties had resolved key differences regarding the mediation of the US Patent proceedings and that Strover had the authority to settle. The letter was sent by email from Nelson to Strover and Stephen Stern ("Stern") on 25 April 2015 at 8:01pm. A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (k) on 25 April 2015 at 9.19pm, Strover sent an email to Nelson, Stern and others stating: "Hi Paul, I appreciate the time and effort and true spirit you have put into this negotiation, so to have mutual agreement on tomorrows [sic] Mediation and the Settlement terms. I'm pleased to see that both you and Steve [Stern] have been able to come to this workable resolution for all concerned. I Peter Strover, and [Ibis Way] & [Icon IP] agree to the terms which you have set out … ." A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (l) on 26 April 2015 at 8.35am, Stern sent an email to Nelson and Strover confirming his understanding that the terms in which to settle the US Patents proceedings had been agreed by the parties. A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (m) on 27 April 2015 at 3.24pm, Strover emailed Nelson a draft of the possible term sheet with Specialized that stated, among other things, that the minimum payment would be USD $2M, which was contrary to the minimum terms. A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (n) on 28 April 2015 Nelson informed Strover that Fazio Richards and he rejected the possible term sheet and informed Strover and Stern that the terms in the document did not accord with the minimum terms. Nelson further conveyed this in an email he sent at 3.52pm to Stern and Strover. A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (o) on 28 April 2015 at 2.05pm, Stern sent Nelson and Strover an email asserting that there was a deadlock and that he would move to resolve it. A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (p) in response, on 28 April 2015 at 2.44pm, Nelson emailed Stern and Strover rejecting the assertion that there was a deadlock in need of resolution and informed Strover and Stern that the parties had already agreed on the minimum terms of any settlement of the US Patent proceedings. A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (q) on 28 April 2015 at 5.06pm, Stern emailed Nelson and Strover purporting to resolve the deadlock and stated that he agreed with "the modified proposals of [Strover]". A copy of the email is in the possession of the lawyers for the Applicants and can be inspected upon appointment; (r) in breach of the 27 March 2015 court orders, on 28 April 2015 Strover and Icon IP entered into the Terms Sheet and the Settlement Agreement with Specialized without providing a copy of those documents to Fazio Richards and Nelson and without informing them of all the terms of the Term Sheet and the Settlement Agreement; (s) contrary to the minimum terms, the Settlement Agreement stated that: (i) Icon IP represented, warranted and covenanted to Specialized that it had the "corporate power and authority to enter into this Agreement and to perform its obligations hereunder" (Clause 6.1(B)) and "the execution and delivery of this Agreement and the performance of the transactions contemplated hereunder have been duly authorized by all necessary corporate actions of the Party" (Clause 6.1(C)); and (ii) in Specialized paying the sum of USD $2,050,000, the "Released Specialized Parties" would be released from all suits, claims, actions and the like against them in respect of "any Specialized Product worldwide" (Clause 5.2). (t) the settlement of the US Patent proceedings referred to in paragraphs [29] to [31] above, was in [sic] conduct in breach of the several fiduciary duties of Ibis Way, Strover and Icon IP to Fazio Richards and Nelson in that Strover and Icon IP chose to settle the US Patent proceedings so that Strover and Ibis Way could immediately recoup the sums they had advanced to Icon IP under the Bicycle Seats Patents JVA, where as had they acted in the best interests of the Bicycle Seats Patents Joint Venture they would not have agreed to accept the settlement sum of USD $2,050,000 in light of the breadth of the releases provided to Specialized under the Specialized Terms of Settlement. (u) further, in the circumstances set out in the affidavit of Paul Nelson sworn 29 April 2015 and in further breach of the several fiduciary duties of Ibis Way, Strover and Icon IP to Fazio Richards and Nelson, Strover purported to settle the US proceedings in the form of the Term Sheet and later the Settlement Agreement, without any mandate of Stern acting under the dispute resolution term of the Bicycle Seats Patents JVA: see paragraph [8(h)] above and the email of Stern to parties sent on 28 April 2015 at 5.06pm. (v) the decision of Stern set out in email to parties sent on 28 April 2015 at 5.06pm was not within the power of Stern acting under the dispute resolution term of the Bicycle Seats Patents JVA as it was not a dispute concerning an intellectual property issue or patent infringement but rather which of two competing settlement sums Icon IP should accept, namely the sum stipulated under the minimum terms of USD $7.5M and the sum of about USD $2M proposed by Strover and was made without recourse to the Terms Sheet eventually executed by the parties thereto. (w) further, the execution by Strover and Icon IP of the Term Sheet on 28 April 2015 and the execution of the Settlement Agreement document on or about 5 May 2015 was not within the mandate of Stern acting under the dispute resolution term of the Bicycle Seats Patents JVA: see paragraph [8(h)] above and the email of Stern to parties sent on 28 April 2015 at 5.06pm. (x) alternatively, even if Stern's purported resolution was within his authority under the Joint Venture Heads of Agreement, he only resolved the issue of the amount of the minimum settlement amount and no other terms for the settlement, which had been previously agreed between Nelson and Strover on 25 April 2015 to which Stern confirmed on 26 April 2015. (y) further, Stern did not authorise the execution of the Term Sheet and the Settlement Agreement document in the form they were executed or at all. (z) further, the terms of the Settlement Agreement were in breach of the terms of the US Attorney Agreement between Icon IP and Niro, Haller and Niro in that the Settlement Agreement provided Specialized and the "Released Specialized Parties" from all suits, claims, actions and the like against them in respect of "any Specialized Product worldwide" (Clause 5.2), whereas pursuant to the US Attorney Agreement, Niro, Haller and Niro were only retained to represent Icon IP "in connection with the licensing and enforcement of its United States Patent Nos. 6,254,180 and 6,378,938 and any related patents or patent applications for bicycle seat designs", and not in relation to pursuing enforcement efforts regarding the Bicycle Seat Patents "outside the United States against non‐U.S. companies that have a large majority of their infringing sales outside the United States, which will not be subject to this agreement": see page 1 of the US Attorney Agreement. 115 I have set out these particulars in full as they conveniently represent and describe the core of the applicants' case at its highest on their central complaint in these proceedings. 116 It is appropriate to record, in a summary form but informed by the discussion of the facts that I have set out earlier, my view in respect of each such matter: (a) It is to be noted that particulars (a), (b), (c), (d), (e) and (f) were not disputed by the respondents. (b) Particular (g) is not completely accurate given the variation made on 22 April 2015 which added the words at the beginning of orders 2 and 3 made on 27 March 2015 "Save as to the conduct of any mediation in the US". (c) Particular (h) is not supported by the evidence. The emails tendered do not support such an assertion. (d) Particular (i) is not supported by the evidence. There were "minimum terms" that were an agreed bargaining position to be put by Icon-IP at the mediation, but they were neither binding nor immutable. There was not a binding "take it or leave it" position, let alone a rigid set of parameters. They can be taken to be what Nelson was prepared to consent to as at 25 April 2015. Indeed, Nelson's own conduct subsequently demonstrated that they were not immutable, as he later accepted a settlement figure of US$2 million as being appropriate if the Joint Venture Heads of Agreement were modified. His evidence under cross-examination was evasive in seeking to move away from the proposition that he considered US$2 million was acceptable (with his real concern being how it should be divided between his interests and Strover's interests). (e) Particular (j) is correct as to the fact of a letter being provided. But it is to be considered in the context of what I have just said and the events which overtook it. Similar comments can be made concerning particulars (k) and (l). I should say that the emails speak for themselves, rather than the pleader's take thereon. (f) As to particular (m), it is correct that such a draft of the terms sheet was sent. It was a draft conceptual set of terms that Niro had drafted which was proposed to be given to Specialized. But Nelson on behalf of Fazio Richards put a counterproposal. (g) As to particular (n), such communications were made. However, the context is all important. Nelson put forward an amended terms sheet to Strover. Strover rejected that proposal. Accordingly, there was a deadlock. That deadlock was resolved by Mr Stern under the Joint Venture Heads of Agreement. Nelson was notified of that procedure. On any view, Nelson has run this litigation not accepting that reality. Rather he has sought by his allegations to contrive a position where his consent was a necessary pre-condition to any settlement. (h) Particular (o) is not in dispute. (i) As to particular (p), such an email was sent. But Nelson's assertion in that email ignored the reality. There was a deadlock. Strover had not accepted Nelson's counterproposal. (j) It is not in dispute that Mr Stern sent the email referred to in particular (q). Mr Stern rightly recognised that there was a deadlock. Indeed, there were several dimensions. First, there was a dispute as to whether the "minimum terms" could bind. Second, the parties were in dispute as to which proposal or counterproposal should be put. (k) Contrary to particular (r), there was no breach of any Court order. Further, the fact that the respondents and Mr Stern acted without Nelson's consent did not constitute any breach of any fiduciary obligation, assuming for the moment that one existed. (l) As to particular (s), the settlement agreement contained such terms. Moreover, Icon-IP was the owner of the bicycle seat patents and the relevant party to the US proceeding, with Strover acting as its authorised attorney. The statement "contrary to the minimum terms" with its implication is simply incorrect. (m) As to particular (t), none of these assertions are made out. I have elaborated on various aspects in other parts of these reasons. (n) As to particular (u), this is misconceived. Mr Stern's position and "mandate" was as per clause 10 of the Joint Venture Heads of Agreement. Mr Stern acted in accordance therewith. Likewise, the assertions in particular (v) are misconceived. (o) As to particular (w), it is incorrect. There was a deadlock. Mr Stern resolved it. Icon-IP and Strover acted accordingly and the terms sheet and the settlement agreement were properly executed by Icon-IP. As to particular (x), it is incorrect. Mr Stern did not just resolve the "minimum settlement amount". Mr Stern resolved the matter by agreeing with the modified proposal put forward by Strover. As to particular (y), Mr Stern resolved the matter as indicated. That then enabled execution of the terms sheet and the settlement agreement to proceed, with Strover acting under the power of attorney. (p) The assertion of breach in particular (z) is not made out. 117 In summary, the applicants' core allegations have not been made good and the foundation for the asserted causes of action fails. 118 The central complaints of the applicants were that Strover and Ibis Way settled the US proceeding: (a) on terms which were not in the best interests of the joint venture; and (b) for the purpose of recouping their capital investment. 119 These assertions have no substance. Let me further elaborate on some aspects. 120 First, as I have said, although the applicants complained of the amount of the settlement in opening their case, it was apparent from the counter-proposal put by Nelson in late April 2015 (see [67(e)]) that the actual amount was not the real issue, but that the division of the spoils was. Under cross-examination, Nelson engaged in various attempts to explain away the counter-proposal, but in my view failed to do so satisfactorily. 121 Second, it was asserted that an alleged deficiency of the settlement was that the releases were too broad. There appears to be some suggestion in [(s)(ii)] of the particulars to [32] of the FASOC that the worldwide nature of the release was in issue, but the point was not developed in evidence. Nor was there any suggestion that the contemplated settlement would be other than worldwide in relation to the Specialized products. Further, so far as parties other than Specialized were concerned, the releases were confined to Specialized products as defined, as I have discussed elsewhere. The complaints have no substance. 122 Third, it was asserted that Strover and Ibis Way principally procured the settlement to recoup their capital investment. This assertion was apparently based on the false premise that they would be entitled to keep the balance of the proceeds after the payment of Niro. But that was inconsistent with the Joint Venture Heads of Agreement. At best, Ibis Way would recover 40% of the balance. Given the disparity between this amount and the amount of Ibis Way's investment in the joint venture, it was in Ibis Way's interests (and therefore Strover's interests) to maximise the value of the settlement. 123 The financial arrangements between the parties were set out in clauses 5 and 6 of the Joint Venture Heads of Agreement. It is not in dispute that Ibis Way or Strover had complied with the requirements of clause 5(i) and (ii) and, in part at least, with (iii). The position as at the time of the settlement of the US proceeding was that Ibis Way had advanced $1,861,215.69 for the joint venture, including payment to Fazio Richards of $2,000 per month under clause 5(ii) since the beginning of the venture. 124 The regime for dealing with any proceeds of commercialisation was set out in clause 6. As I have set out earlier, it provided for: (a) payment of any fees due under a contingency arrangement (in this case with Niro); (b) costs incurred by Icon-IP (but there were none as all had been met by Ibis Way); (c) repayment of the payments made by Ibis Way under clauses 5(ii) and 5(iii), together with interest; (d) allocation of 60% of the balance to Icon-IP until Icon-IP had accumulated $5 million; (e) allocation of 40% of the balance to repay Ibis Way for the line of credit funds, that is the funds advanced under clause 5(i). 125 For proceeds of $2 million, the results would be as follows: Total proceeds: $2,000,000 Contingency fee (35%): $700,000 Balance: $1,300,000

126 Let us assume no repayments under clause 5(ii) or 5(iii) because the threshold of 5(ii) was not reached and nothing was due under 5(iii): Icon-IP (60%): $780,000 Ibis Way/Strover (40%): $520,000

127 On Strover's evidence, Ibis Way would be out of pocket by about $1,341,216 ($1,861,215.69 - 520,000). 128 But assume discharge of all institutional creditors by Ibis Way at $142,000 under clause 5(iii), the detail of the calculations would change but the result would be effectively the same. Ibis Way would pay out the institutional creditors but would be reimbursed as a priority. 129 It is true that these calculations produce no net cash flow to Fazio Richards. But two comments. First, Ibis Way/Strover were out of pocket by a substantial sum and had a commercial incentive to maximise commercialisation. Second, this result is what Fazio Richards contracted for. It was not an unauthorised benefit for Ibis Way to receive what it was entitled to under the Joint Venture Heads of Agreement. It was an authorised benefit. 130 More generally, Strover gave evidence as to the considerations which justified the reasonableness of the settlement which evidence I accept. 131 First, the figures in the "minimum terms" document were not achievable. 132 Second, Icon-IP and Strover had the benefit of the advice of the US attorneys with the conduct of the matter, who advanced the proposal from which the final settlement was developed. 133 Third, there were specific and undeniable risks in the litigation. This was the subject of correspondence before the mediation and advice at the mediation. Further, the advice did not simply relate to the risks of the specific proceeding but the overall risks to the joint venture if the proceeding failed, thereby diminishing the prospects of other infringement litigation being successfully pursued or settled in the US and elsewhere. 134 The risks brought into focus before and at the mediation included observations by the mediator and Niro. Further, there were risks flowing from Nelson's behaviour. There were two elements of the Nelson risk. The first was to do with preparation of the trial. He had refused to co-operate and in the words of one of the Niro attorneys had held trial preparation "hostage" in order to achieve an advantage in his dispute with Strover (see the email of Mr F Laney (a Niro attorney) of 16 April 2015 at 10.12am to Strover and others). It was contemplated that the trial would have to go ahead without him. The second was to do with his conduct generally. Nelson engaged in a strategy to not only derail any settlement but to harm the joint venture by seeking to sidestep the role and position of Icon-IP and to intermeddle by communicating directly with third parties that Icon-IP was dealing with in terms of various patent infringement matters. 135 Finally, Strover has given undisputed evidence as to the steps presently underway and in contemplation to continue the commercialisation of the patents, including by leveraging off the settlement of the US proceeding as envisaged in the advices of Niro and the observations of Mr Stern. That was a further advantage of the settlement. 136 Generally, there is no substance to the assertion that Strover or Ibis Way arranged the settlement of the US proceeding principally in order to just recoup their capital investment. Moreover, Strover and Ibis Way had every reason and incentive to maximise the commercial recovery from the settlement that could realistically be achieved.

(e) Alleged requirement of consent by Nelson and Fazio Richards 137 The applicants assert that Strover and Nelson agreed that the approval of, inter alia, Fazio Richards and/or Nelson was required for any settlement involving Icon-IP. 138 The decision making processes in relation to the joint venture are those set out in the Joint Venture Heads of Agreement. Clause 10 provides for a dispute resolution mechanism. Fazio Richards and Nelson had no such unilateral right or power of veto.

(a) Breach of fiduciary duty and accessorial liability 139 The applicants have made a number of assertions and it is convenient to deal with their principal elements at this point, although they overlap with matters already canvassed. 140 First, the applicants assert that Strover misused his power of attorney to negotiate a discounted settlement of the US proceeding. It is asserted that Strover was in a conflict of interest in representing both Icon-IP pursuant to the power of attorney and representing Ibis Way. 141 Second, the applicants also submit that Strover and Nelson had agreed prior to the mediation on minimum terms upon which they would settle the litigation and that neither party had requested Mr Stern to break a deadlock because there was no deadlock. The applicants assert that the settlement of the mediation was on "modest" terms and was "a capitulation". The applicants assert that on 15 April 2015 Niro provided Strover with preliminary advice, which was also provided to Nelson, that the US litigation was worth at least US$5 million and that worldwide it was higher. It is also said that Specialized shareholders and affiliates were released worldwide contrary to the minimum terms. 142 Third, the applicants assert that Strover settled the US litigation in his own interest and not in the joint venturer's interest. 143 Fourth, the applicants assert that neither Stern nor Nelson were kept informed of the mediation process. The applicants also assert that Nelson had not seen any of the expert evidence going to the valuation of the Specialized infringement case and the valuation of damages. 144 Fifth, the applicants assert that Niro had a strong motive to settle. It is said that Niro was assured that they would be paid and were in no position to run a trial because Mr Laney had left the firm. 145 In my view, and for the reasons already canvassed in part, none of these assertions have any substance. 146 First, the terms of the Joint Venture Heads of Agreement provided the content and boundaries for the alleged fiduciary obligations with the addition perhaps of an implied term to act in good faith. Further, clause 10 of the Joint Venture Heads of Agreement contemplated that there would be differences of opinion in relation to the commercialisation activities of the joint venture vehicle, and that where such a difference could not be resolved, it was to be referred to a third party. The scope and nature of disputes in respect of which Mr Stern could act were not limited in the manner alleged by the applicants. 147 It may be accepted that the scope of a fiduciary duty depends on all the facts and circumstances. It may also be accepted that a fiduciary "undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense" (John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [86] and [87]). As previously expressed, a fiduciary is a person who: has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest … [Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [177]] 148 But in the present case, where the deadlock breaking mechanism operates, it cannot be said that a party to the joint venture (or a single decision maker) has a discretion or power of the kind referred to in Alexander. The agreement itself provides for a third party to intervene to resolve a deadlock. When a deadlock arose as to how the negotiations in the mediation should proceed, Strover sought and relied on the intervention of Mr Stern as the deadlock breaker. 149 Second, there was no alleged oral Strover attorney agreement. The appointment of Strover as an attorney of Icon-IP imposed on him a fiduciary duty to Icon-IP not a potentially conflicting duty to anybody else. 150 Third, if Strover or Ibis Way owed a fiduciary duty to Fazio Richards or Nelson, they did not breach that fiduciary duty but discharged it. 151 The applicants assert that Strover breached the alleged fiduciary duty by causing Icon-IP to settle the US proceeding at an undervalue so that Ibis Way could recoup its investment in the venture at the expense of Fazio Richards. As I have earlier indicated, the settlement of the US proceeding was not at an undervalue but was prudent and responsible having regard to the prospects and risks of the US proceeding as advised by Niro before and during the mediation and the consequences to the venture if the US proceeding was unsuccessful. Moreover the applicants did not establish that Specialized would have settled on better terms before trial or final judgment in the US proceeding or that a better result would have been obtained at trial. 152 Moreover, the proposition of the applicants that Strover settled the US proceeding at an undervalue in order to enable Ibis Way to recover its investment in the venture is not supportable for reasons that I have already indicated. 153 Fourth, in the absence of any breach of fiduciary duty by Strover or Ibis Way, no accessorial liability could arise on the part of Icon-IP.

(b) Alleged misrepresentation and misleading or deceptive conduct 154 The pleaded misrepresentations and misleading or deceptive conduct are alleged to be constituted by representations by Strover that he and Ibis Way would act in good faith in relation to the joint venture, Strover and Nelson would share in the decision making processes and that the assignment of the bicycle seat patents to Icon-IP was to be subject to the ongoing duty of good faith. 155 Strover did not make any actionable representations. But in any event, in my view Strover and Ibis Way at all times acted in good faith.

(c) Alleged breaches of the Corporations Act 2001 (Cth) 156 As attorney of Icon-IP, Strover owed duties to Icon-IP, not to Fazio Richards or Nelson. One may query their standing or entitlement to pursue claims based upon such breaches. But in any event, Strover did not breach his duties to Icon-IP but discharged them. No evidence has been led to suggest otherwise. 157 Further, the claim for injunctive relief under this cause of action is incoherent.

(d) "V" class share 158 The applicants assert that somehow Strover and Ibis Way were in breach of their fiduciary duties when the directors of Icon-IP issued Ibis Way with an additional "V" class share in or around March 2014 with the consent of Strover and Ibis Way. The applicants submit that the issue of the share was for the purpose of Ibis Way gaining a controlling voting right in Icon-IP. Whatever be the case, the share was never acted on and nor were its voting entitlements exercised. Moreover, it has no relevance to the applicants' principal claims dealing with the US proceeding and its settlement. 159 The Constitution of Icon-IP provided for the management of its business to be conducted by the directors. It did not provide for the business to be conducted by the members in general meeting. Further, decision making under the Joint Venture Heads of Agreement reflected the proposition that management of the business of Icon-IP vested in the directors. The directors then delegated their power to Strover under the power of attorney. Moreover, any deadlock was to be resolved through Mr Stern as I have already discussed. 160 Further, there is no evidence that any decision relating to the settlement of the US proceeding was ever made by the members of Icon-IP (being Fazio Richards and Ibis Way) in a general meeting. 161 Further, Strover's evidence was that the "V" class share was never "used" and that he never attended a shareholders' meeting as such. It is apparent from his evidence that the issue of the "V" class share was perceived to be a protective measure which was not acted on. 162 Further, the mediation in Maui occurred at a time when the present proceeding was before this Court. The applicants were entitled to and did come to the Court to seek to have their interests protected. By orders made on 22 April 2015, before the mediation, Middleton J ordered that any voting majority held by Ibis Way was not to be exercised. 163 In summary, the issue of the "V" class share had no bearing on the resolution of the US proceeding. But in any event, and as I have said earlier, I will order its cancellation and the share register rectified accordingly.

causes of action against icon-ip 164 The applicants allege various causes of action against Icon-IP, namely: (a) breach of fiduciary duty; (b) claims under both limbs of Barnes v Addy; (c) involvement in a contravention of s 18 of the Australian Consumer Law; (d) involvement in Strover's alleged contravention of ss 181 and 182 of the Corporations Act 2001; (e) the issuing of one "V" class share to Ibis Way in breach of fiduciary duty. 165 Again, the applicants' principal complaint is that Icon-IP entered into the settlement with Specialized at a gross undervalue and in the absence of the alleged required consent of Nelson and Fazio Richards. I have dealt with the "V" class share issue above. 166 I should say that by the close of trial, I gained the impression that counsel for the applicants was not seriously pursuing the claims against Icon-IP, except in relation to the "V" class share. But for completeness, it is appropriate to state the following.

(a) Fiduciary duty 167 The applicants rely on two sources of fiduciary duty owed by Icon-IP to them: (a) an alleged oral agreement made between the applicants on the one part and Strover and Ibis Way on the other; (b) the Joint Venture Heads of Agreement. 168 First, there was no alleged oral joint venture agreement in the terms alleged. The allegations are not supported by the evidence relied on by the applicants either in their affidavits or orally. None of the applicants' affidavits filed in this proceeding refers to the oral terms. Nelson's oral evidence does not refer in detail to the oral terms. 169 Further, the Joint Venture Heads of Agreement superseded any such oral agreement pleaded (if one existed). 170 Further, it may be accepted that the Joint Venture Heads of Agreement did not expressly authorise Icon-IP to exercise a power or discretion to the detriment of a party. Further, both Fazio Richards and Ibis Way could be represented on the board of Icon-IP and could look after their own interests. But where their respective interests conflicted, the deadlock mechanism in clause 10 could be invoked. 171 I accept that Icon-IP stood in a fiduciary relationship with both Ibis Way and Fazio Richards (and possibly Nelson), but this was regulated by the terms of the Joint Venture Heads of Agreement. It was that Agreement that regulated the decision making process and the resolution of any deadlock. I am also prepared to accept that Icon-IP had to act in good faith and in the interests of the joint venture at all times. But in my view it did. The applicants have not demonstrated otherwise.

(b) Alleged breach of fiduciary duty 172 There is no substance to the allegations that the settlement of the US proceeding was in breach of Icon-IP's fiduciary duties because: (a) it acted contrary to Nelson's and Fazio Richard's interests; (b) it or others unlawfully profited from or made an unauthorised benefit from the joint venture, without the fully informed consent of Nelson and Fazio Richards. 173 Further, as I have already said, for the applicants to succeed in their claim for breach of duty, admissible evidence would need to have been led that Icon-IP could have achieved a better result in negotiating further with Specialized or going to trial. No such evidence was led. 174 The applicants' complaints are two-fold: (a) First, that the settlement with Specialized was an unauthorised, discounted settlement; (b) Second, Icon-IP had no authority to settle with Specialized on the terms reached as they did not accord with what Nelson and Strover had agreed to prior to the mediation, and should not have settled in light of the breadth of the releases provided to Specialized. 175 As to the first matter, the evidence in support is non-existent. Reference was made to a letter from Mr Niro to the mediator, Mr Antonio Piazza. But this document is clearly a mediation "Position Paper". The damages Niro assesses on page 10 of the paper is an ambit claim. For Nelson and Fazio Richards to succeed on this point, they would have needed to prove that Specialized would have settled on better terms prior to trial, or Icon-IP would have achieved a better result if it had gone to trial. Nelson and Fazio Richards have failed to discharge such a burden. Furthermore, the evidence points the other way. The advice given to Strover and Nelson by Niro was far less optimistic than what was referred to in the Position Paper (as one might expect) and Nelson's own conduct played a large part in Niro's negative sentiment in proceeding to trial. Further, nothing in the Joint Venture Heads of Agreement required Fazio Richards' or Nelson's consent before a settlement could be concluded. 176 As to the second matter, Strover was the attorney of Icon-IP and had Icon-IP's authority to settle with Specialized as eventuated. 177 Nelson's and Fazio Richards' complaint that Icon-IP had no authority to enter into the settlement is misconceived.

(c) Other matters 178 First, Nelson and Fazio Richards are not entitled to any of the relief claimed as there has been no breach of fiduciary duty by Icon-IP nor indeed any of the other respondents. In particular, the applicants have failed to identify any benefit or gain of Icon-IP in breach of its alleged duty over which constructive trusts could be impressed. Icon-IP has not received trust property nor knowingly assisted Strover in any alleged dishonest and fraudulent design. In so far as there is a claim for a constructive trust over the patents, there is nothing pleaded nor the subject of evidence supporting such a claim. 179 Second, the allegation that Icon-IP was an accessory to the misleading or deceptive conduct of Strover must fail. No such actionable conduct of Strover was engaged in. Accordingly, the accessorial claims must fail. 180 Third, the "actionable conduct" alleged in [55] of the FASOC has not been made out. Consequently, Icon-IP's alleged involvement cannot succeed. 181 Fourth, the issue of the "V" class share to Ibis Way in 2014 had no bearing on the US settlement achieved in May 2015. Ibis Way did not exercise its voting rights to have the settlement approved by the shareholders of Icon-IP. No evidence was led by the applicants that Ibis Way exercised any voting control to achieve settlement. In fact, Strover's evidence was that the "V" class share was never used. Further and as I have said, on 22 April 2015 Middleton J ordered that any voting majority held by Ibis Way not be exercised. 182 In summary, none of the claims made against Icon-IP are made out save that I will order the cancellation of the "V" class share.

CROSS-CLAIM BY IBIS WAY 183 By its cross-claim, Ibis Way has sought declarations and injunctions against both Fazio Richards and Nelson for breach of the express and implied terms of the Joint Venture Heads of Agreement and for misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law, including accessorial liability of Nelson. These claims have been made out. 184 The cross-claim arises from the conduct of Nelson and, at his direction, Fazio Richards, which is established by the evidence, as follows: (a) First, representations were made to Specialized, by Clemens, the agent of Nelson and Fazio Richards, that any settlement of the US proceeding without the prior written consent of Fazio Richards would be invalid and ineffective and may amount to fraud; (b) Second, a notice was lodged with the US Patent and Trademarks Office to the effect that there had been a default of assignment of the patents the subject of the US proceeding together with advice to Specialized that that notice had been lodged (again through Clemens); (c) Third, Fazio Richards purported to appoint Nelson as a director of Icon-IP in circumstances where Fazio Richards and Nelson were conducting proceedings against Icon-IP by which they sought to deprive Icon-IP of its major asset, being the patents and the rights for commercialisation of them. 185 Let me deal with each of these in turn. 186 The making of the assertion by Fazio Richards and Nelson to Specialized that the prior written consent of Fazio Richards was required was conduct in trade or commerce, occurring in the context of the possible settlement of a commercial dispute between Specialized and Icon-IP. The conduct was intended to harm those negotiations. The assertion that the prior written consent of Fazio Richards was required for any settlement was made without qualification and as a statement of the objective position; alternatively it was made as a statement of opinion. The assertion was contradicted by the Joint Venture Heads of Agreement. Moreover, it was made without reasonable grounds. Accordingly, the representation that Fazio Richards had the asserted right was without foundation and the making of the representation was misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law. Nelson was knowingly involved in that contravention. I doubt though whether any relief is now necessary on this aspect given the circumstances which have transpired. 187 The assertion by Nelson and Fazio Richards to Specialized that there was a default in the assignment of the patents to Icon-IP was also conduct in trade or commerce. The assertion was without substance. Moreover, it contradicted the position taken in this proceeding whereby Nelson and Fazio Richards came to the Court to seek a declaration that there was a constructive trust over the patents. Such a remedy is necessarily predicated on Icon-IP being the owner of the patents. Such conduct was also misleading or deceptive. Moreover, such conduct was in contravention of the Joint Venture Heads of Agreement and has been appropriately restrained in the interests of the joint venture while the US proceeding was ongoing. Ibis Way has contended that it is appropriate that the restraints continue. It is said that Nelson's conduct demonstrates an inability to comprehend the legal rights of other parties and recklessness as to the consequences of his conduct. It is said that his conduct also demonstrates a willingness to say whatever he considers will assist him to get his own way, regardless of its accuracy. Although the US proceeding has been resolved, apparently further commercialisation of the patents is contemplated. It is also said that the potential for damage to the interests of the joint venture of such conduct in particular is clear. To protect the members of the joint venture, it is said that Nelson should be restrained from making similar assertions in the future. I will hear the parties further as to whether I should continue the present restraints or grant any further relief on the cross-claim on this aspect. 188 As to the third matter, dealing with Nelson's purported appointment as a director of Icon-IP, as I have said already, that was not efficacious. I do not need to say anything further on that aspect.

Cross-Claim by icon-ip 189 The second respondent seeks various injunctions and other relief against Fazio Richards and Nelson in terms of both the US litigation and Italian litigation for breach of the express and implied terms of the Joint Venture Heads of Agreement, misleading or deceptive conduct and interfering with the contractual relations between Icon-IP and Niro. There is an overlap with what I have said in the previous section. In my view, Icon-IP's claims are made out.

(a) US proceeding 190 As I have already indicated to some extent, the evidence establishes that Fazio Richards and Nelson have a history of improperly communicating with Specialized and Icon-IP's US attorneys, Niro, and interfering with the contractual relations between Icon-IP and Niro to the likely detriment of Icon-IP. This is substantiated by the following: (a) On 18 February 2015, Nelson made contact with Specialized's legal counsel seeking to negotiate a settlement of the US litigation in the absence of the involvement of Niro. (b) On 2 March 2015, Nelson and Fazio Richards informed Specialized of the existence of this proceeding and provided Specialized with copies of: (i) an affidavit of Nelson in support of this proceeding; (ii) the originating proceeding filed in this proceeding; (iii) the statement of claim filed in this proceeding. (c) By letter dated 2 March 2015 from the solicitors for Fazio Richards to Al Mitchell, general counsel of Specialized, Fazio Richards advised Specialized, inter alia, that any settlement of the US litigation without the previous written consent of Fazio Richards would be invalid, ineffective and may amount to fraud. (d) By email dated 5 March 2015 from Nelson to Mr Laney of Niro, Nelson threatened, purportedly on behalf of Icon-IP, to replace Niro as Icon-IP's attorneys with other US attorneys with respect to the US litigation. (e) By letter dated 9 March 2015, Fazio Richards (through its solicitors) advised Icon-IP, Niro and Specialized that it had given notice to the US Patents Office that there had been a default of the assignment of the US patents to Icon-IP. 191 Generally Fazio Richards and Nelson have interfered with the dealings between Specialized and Icon-IP. Such conduct demonstrates their predilection to interfere with the efforts of Icon-IP to commercialise the patents in accordance with the terms of the Joint Venture Heads of Agreement. 192 I do not have much confidence that Fazio Richards and Nelson will not continue with their conduct as referred to above or conduct similar thereto in light of the fact that: (a) they still persist in asserting a constructive trust over the patents; (b) they still have on foot the notice to the US Patents Office that there is a default in the patent assignment; and (c) Nelson still persists in asserting that decisions of Icon-IP require his consent. 193 I will hear the parties further as to what relief, if any, is still appropriate.

(b) Italian litigation 194 I gave leave to Icon-IP to re-open the trial and to amend its cross-claim. I did so in the circumstances referred to earlier. The background facts are not substantially in issue. 195 On 31 May 2013 Icon-IP commenced a patent infringement suit against Selle Royale Spa in court proceedings in Turin, Italy. Jacobacci & Associati (Jacobacci) and Mr Stern of Corrs have been acting as the lawyers for Icon-IP in the Italian litigation. 196 In October 2013, as part of its defence, Selle Royale sought to rely on a settlement agreement allegedly entered into between it and Fazio Richards in relation to the patents and an alleged indemnity provided under that settlement agreement. 197 On 31 March 2014, Nelson emailed the then directors of Fazio Richards and Icon-IP, Tony Fazio and Gary Richards, informing them that Strover had agreed to "and will now" email Mr Fazio and Mr Richards on all litigation and court case related matters "rather than emailing me". 198 In May 2014, Fazio Richards was joined to the Italian litigation at the request of Fazio Richards' then directors, Mr Richards and Mr Fazio. 199 Other than the documents filed on behalf of Fazio Richards joining it as a party to the Italian litigation, Fazio Richards has had very little, if any, involvement in the Italian litigation. 200 At a shareholders' meeting of Fazio Richards held on 14 August 2015, Nelson caused a resolution to be passed removing Mr Fazio and Mr Richards as directors of Fazio Richards and leaving him as the sole director and officer of Fazio Richards. 201 On 31 August 2015, Nelson contacted an Italian lawyer, Cesare Galli, of IP Law Galli in Milan, Italy, who, in turn, and on behalf of Nelson, contacted Jacobacci to enquire of the status of the Italian litigation. 202 Until that time, Nelson has never sought to involve himself in the Italian litigation despite being orally informed of its progress. 203 On 1 September 2015, Nelson, by his solicitor Mr Hone, wrote to Strover making, in my view, unsubstantiated accusations against him of "lack of transparency and evasion of important issues" with respect to Fazio Richards' involvement in the Italian litigation and, pursuant to the letter, revoked any and all authority that Strover may have had to give instructions to Mr Stern and Jacobacci on behalf of Fazio Richards. No mention was made of Nelson contacting Galli nor Galli contacting Jacobacci but Nelson did expressly indicate that he intended to contact Jacobacci direct to give instructions on behalf of Fazio Richards. 204 There was a common interest in Icon-IP and Fazio Richards having the same representatives in Italy and the same point of contact (Mr Stern) in connection with the Italian litigation. Nelson's direct contact with Galli and his intention to sidestep Mr Stern caused Icon-IP significant concern as it suggested a fragmentation of the common interest whereby Jacobacci was to receive instructions from possibly two sets of lawyers and possibly conflicting instructions which could jeopardise Icon-IP's interest in the Italian litigation. Further, it was of concern to Icon-IP that Nelson would proceed to contact Selle Royale direct. In my view, in the light of Nelson's conduct in the US litigation, this was a real and not a fanciful apprehension. 205 One major step in the Italian litigation was for the preparation and filing of a concluding brief on behalf of Icon-IP and Fazio Richards by the end of September 2015. Nelson was specifically informed by Mr Stern that Mr Stern and Jacobacci would proceed with this on behalf of Fazio Richards at no cost to it if Nelson allowed them to run the Italian litigation as they had been doing in the past. Nelson was assured that Mr Stern and Jacobacci would continue to act in the best interest of Fazio Richards. 206 Mr Stern advised Nelson that the preparation and filing of the concluding brief for Fazio Richards could have an impact on Icon-IP in the Italian litigation. 207 Further, Mr Stern advised Nelson to provide instructions to file the concluding brief prepared by Jacobacci on behalf of Fazio Richards. 208 Despite such advice, Nelson failed to provide instructions to Mr Stern or Jacobacci to prepare and file a concluding brief for Fazio Richards. 209 Nelson was warned by Mr Stern that failing to file a concluding brief for Fazio Richards would show Selle Royale that there was a "split between you and Peter [which] can only adversely affect your case and any possibility of a settlement". 210 Under cross-examination Nelson failed to give any justification for failing to follow Mr Stern's advice. Further, he did not advance any justification for not adhering to Mr Stern's warning. Although Nelson referred to the possibility of there being emails from him to Mr Stern taking issue with Mr Stern on his advice and warning, Nelson failed to produce any such evidence. 211 No concluding brief was filed on behalf of Fazio Richards in the Italian litigation in accordance with Nelson's instructions. 212 Nelson has now withdrawn all instructions for Jacobacci to act on behalf of Fazio Richards in the Italian litigation, and any authority for Mr Stern to instruct Jacobacci on behalf of Fazio Richards in the Italian litigation. 213 Currently, Fazio Richards does not have any lawyers acting for it in the Italian litigation. Nelson is now purporting to act for Fazio Richards although he cannot speak Italian and is not a lawyer. 214 Interim and then interlocutory injunctions were made by me on 14 October 2015 and varied on 6 November 2015. In its present form they are the following: 1. Subject to orders 3A, 3B, 3C and 3D, until further order, Paul Nelson, on behalf of Fazio Richards Pty Ltd, shall be responsible for and only communicate instructions to Corrs Chambers Westgarth, lawyers ("CCW") with respect to issues arising from the joinder of Fazio Richards Pty Ltd in the Italian Litigation referred to in paragraph 3 of Peter Strover's affidavit sworn 5 October 2015. 2. Subject to orders 3A, 3B, 3C and 3D, until further order, Paul Nelson and Fazio Richards Pty Ltd, their servants and agents, are restrained from communicating directly in howsoever manner with Italian lawyers Studio Legale Jacobacci and Associati ("Jacobacci") with respect to the Italian Litigation unless: (a) the communication is given with Icon-IP's prior written consent; or (b) the communication is given pursuant to court order; or (c) two business days prior written notice has been given to Icon-IP of their intention to do so and stating the substance of the intended communication. 3. Subject to orders 3A, 3B, 3C and 3D, until further order, Paul Nelson and Fazio Richards Pty Ltd, their servants and agents, are restrained from communicating directly in howsoever manner with Selle Royal S.p.a. or its Italian lawyers Secondo Andrea Feltrinelli, Stefano Faggioni, Silvia Ostuni, Felicetta Oddono and Frederico Gismondi with respect to the Italian Litigation. 3A. Nothing contained in orders 1 and 2 shall prevent Paul Nelson and Fazio Richards Pty Ltd from terminating the services of Jacobacci in the Italian litigation. 3B. Upon the services of Jacobacci being so terminated as referred to in order 3A, orders 1 and 2 shall be discharged. 3C. If Paul Nelson and Fazio Richards Pty Ltd engage new lawyers to act for them in the Italian litigation, or act for themselves, then nothing contained in order 3 shall prevent those new lawyers or themselves, from communicating in writing directly with Selle Royal S.p.a or its lawyers providing 3 business days prior written notice is given to Icon-IP Pty Ltd of the intention to communicate in writing together with a copy of such communication. 3D. Nothing contained in order 3 (as modified by order 3C) shall prevent Paul Nelson and Fazio Richards Pty Ltd from filing and serving any document required to be filed and served under Italian law in the Italian ligation providing 3 business days prior written notice is given to Icon-IP Pty Ltd of the intention to file and serve such a document together with a copy of that document. 215 The applicants assert that they have not interfered in the Italian litigation and that there is no basis for any orders to restrict their communications with respect thereto. The applicants assert that they were disadvantaged in the Italian litigation by a lack of information that ought to have been provided to them by Strover. The applicants claim that they repeatedly requested written updates from Strover on the Italian litigation which were not provided. I do not accept any of these assertions. 216 The applicants also claim that they did not know prior to August 2015 that Fazio Richards had been joined in the Italian litigation. The applicants assert that notwithstanding that Nelson only became governing director of Fazio Richards on 13 February 2015, the "Motion to Intervene" on behalf of Fazio Richards (dated 24 February 2014) was withheld from Nelson until 9 September 2015. It is said that it was only provided to him on the basis that Fazio Richards discovered via Galli that it had been joined in the Italian litigation. I do not accept these assertions. Prior to August 2015, at the least Fazio Richards' directors, Mr Richards and Mr Fazio well knew what had occurred. 217 Moreover, the applicants assert that concerns were raised by Mr Stern's conduct in confirming that Fazio Richards was not joined in the Italian litigation and then confirming that it was joined. Further, the applicants assert that Fazio Richards was disadvantaged in being able to file the concluding brief in the Italian litigation as it was provided with the draft document from Mr Stern who requested that comments be provided within a single day. It is also said that Mr Stern did not provide any written advice to Fazio Richards on the potential adverse effects if the concluding brief was not filed and on the reasons to file the brief. The applicants submit that given such withholding of information, Fazio Richards had an "obligation" to look into the Italian litigation. Again I do not accept any of these assertions, except that Mr Stern may not have provided detailed written advice. 218 The applicants assert that Fazio Richards has the right to engage representation in the Italian litigation and that both shareholders of Icon-IP, namely Fazio Richards and Ibis Way, have an interest in the success of Icon-IP. The applicants also assert that Fazio Richards and Ibis Way have different levels of risk in the Italian litigation. For example, it is said that Selle Royale is only seeking indemnity for costs from Fazio Richards. It is also said that there is a conflict of interest in Corrs and Jacobacci representing both Fazio Richards and Icon-IP. Further, it is said that Icon-IP is not prejudiced by Fazio Richards having its own representation. The applicants submit that in any event if there is a concern as to Fazio Richards making different decisions in the Italian litigation, the representatives for Fazio Richards and Icon-IP can engage in communication. 219 In my view, the conduct of Nelson as referred to above has been irrational and unjustified. He has failed to adduce any cogent evidence warranting the termination of Corrs and Jacobacci in circumstances where such termination and the failure to file a concluding brief may have a negative impact on Icon-IP's interest in the Italian litigation. Moreover, he has not shown that Fazio Richards' interests were not adequately protected. But I do accept that Fazio Richards was entitled to terminate such retainers which it has now done at the behest of Nelson. Whether that was a wise choice is a matter for the shareholders of Fazio Richards. 220 Paragraph 25 of the amended cross-claim pleads as follows: There were implied terms of the Heads of Agreement as follows: (a) that each party would act cooperatively with each other and with Icon in the commercialisation of the Patents ("first implied term"); (b) that each party would act reasonably and in good faith towards each other and Icon to enable the other party and Icon to obtain the benefit of the commercialisation of the Patents ("second implied term"). Particulars The terms are implied as a matter of law alternatively they are implied so as to give business efficacy to the Heads of Agreement, alternatively they are implied by the nature and terms of the Heads of Agreement. 221 In my view: (a) The first and second implied terms as pleaded in [25(a) and (b)] of the amended statement of cross-claim are terms of the Joint Venture Heads of Agreement and bind Nelson and Fazio Richards. In the circumstances of this joint venture where Icon-IP is commercialising (which includes patent infringement litigation) the patents for the benefit of its shareholders Fazio Richards and Ibis Way, the implied terms satisfy the test in BP Refinery; and (b) Nelson and Fazio Richards have breached the implied terms. Nelson's conduct is inimical to that of co-operation with Icon-IP and without proper regard to the interests of Icon-IP. 222 I will hear the parties further as to whether any relief is now necessary and the standing of Icon-IP to pursue a claim for a breach of the Joint Venture Heads of Agreement; this issue can be resolved by a Trident trust device, agency or a notional novation.

Conclusion 223 Apart from the applicants' claim concerning the issue of the "V" class share in Icon-IP, their claims otherwise fail. I will make orders concerning the cancellation of the share and otherwise dismiss their proceeding. 224 As the applicants have substantially failed, they should pay the respondents' costs of the applicants' proceeding including the cross-claims. But I will discount the respondents' entitlement by 20% to reflect the applicants' limited success on the "V" class share question, which took up little time during the running of the trial. 225 On the respondents' cross-claims, I will stand them over to enable the parties to consider their respective positions on the question of relief. I certify that the preceding two hundred and twenty-five (225) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.