HRNG ADELAIDE, 8-17 February 1993 #DATE 29:10:1993 Counsel for plaintiff: Mr M Abbott QC with

Ms K N Thomas and Mr M. Blue Solicitors for plaintiff: Fisher Jeffries Counsel for defendants: Mr B Lander QC with Mr S. Lane Solicitors for defendants: Randle and Taylor

ORDER Plaintiff's claim against the first defendant be dismissed, but the plaintiff to have judgment against Star Corporation for the amount of the call.

JUDGE1 PERRY J The plaintiff ("Gemstone") is a public company listed on the Australian Stock Exchange, carrying on business, inter alia, as a miner, processor and dealer in gemstones. The first defendant ("Mr Grasso") was at all times material to the case a director of Gemstone. The defendant Star Corporation Pty Ltd ("Star Corporation") is a proprietary company which carries on business as a trustee and as an investment company. The shares in Star Corporation are owned by Mr Grasso and members of his family, Mr Grasso and his wife holding the controlling interest in it. 2. On 31 July 1987, Gemstone issued to Star Corporation 500,000 ordinary shares of a face value of 50 cents, paid to one cent only. On 17 July 1990, Gemstone made a call on the partly paid shares for the unpaid balance of 49 cents per share. 3. In the proceedings, Gemstone claims as against Star Corporation $245,000, which is the total amount due with respect to the call. In addition, it claims interest on that amount. 4. It claims the same amount, including interest, from Mr Grasso pursuant to s.229(7) of the Companies Code ("the Code"), as it then was, on the footing that he was in contravention of s.229(1) of the Code, or alternatively s.229(2) or s.229(4). It seeks declarations also that Mr Grasso was in breach of the fiduciary duties which he otherwise owed in equity to Gemstone as a director of the company. 5. Mr Grasso is a retired geologist. After obtaining his qualification as such, he worked as a geologist since 1956, either on his own behalf, for companies with which he was associated, or for others. He has had wide experience in laboratory work, field work and as a consultant. Either on his own or with others, and from time to time, he has promoted mining companies. 6. In 1986, Gemstone was a proprietary limited company using the name Cowell Jade Pty Ltd ("Cowell Jade"). The mainspring of that company was Graham John Robertson ("Mr Robertson"). Cowell Jade had acquired a number of leases and mining rights over a large jade deposit at Cowell on the west coast of South Australia. The evidence suggests that this result was achieved largely through the efforts of Mr Robertson. 7. Mr Grasso had known Mr Robertson for many years. He had worked with Mr Robertson for a company known as Geosurveys, in the 1950s. Later Mr Robertson became a stock broker, and was engaged in that capacity by Mr Grasso. Mr Robertson promoted some ventures of his own, and at one stage, together with Mr Grasso, he formed and promoted an exploration company. 8. When Mr Grasso became involved in mining ventures, he more often than not did so through a family company, R. Grasso Pty Ltd, of which he and his wife are directors, and in which the majority of shares are held by their children. 9. In 1969 or 1970, Mr Grasso became acquainted with an accountant, Mr Dean Hosking ("Mr Hosking"). At that stage, Mr Hosking was associated with the accounting firm then known as Peat Marwick Mitchell. He became Mr Grasso's accountant. Mr Hosking was also active in mining and exploration, and became party to at least one joint venture with Mr Grasso and Mr Robertson. That resulted in the formation of a company, Barkuna Pty Ltd ("Barkuna"). The directors of that company included Mr Grasso, Mr Hosking and Mr Robertson. Barkuna started off as an opal mining company, carrying on business at Coober Pedy. Its operations broadened and it spawned a number of subsidiary companies. Originally, Nartanda Pty Ltd, which later changed its name to Cowell Jade Pty Ltd, was wholly owned by Barkuna. 10. It will be seen from what I have said so far that by 1986 Mr Grasso and Mr Robertson and Mr Hosking had been together associated with a number of mining and exploration ventures. 11. In about mid 1986 or perhaps a little earlier, Mr Robertson began discussing with Mr Grasso the possibility that Cowell Jade might be floated as a public company, so as to raise capital to develop the jade deposits which it owned. Mr Grasso responded favourably. He thought the deposits had great potential. Mr Hosking was also party to the discussions. 12. By July 1986, Mr Grasso agreed to become a director of Cowell Jade, as did Mr Hosking. The three agreed to devote their energies towards a public float of the company. The understanding was that Mr Grasso would be in charge of everything to do with mining, that Mr Hosking would be the accountant and secretary of the company, and Mr Robertson was to be chairman and managing director. 13. The company took up accommodation at premises at Greenhill Road, Wayville. From about September 1986, Mr Grasso, Mr Hosking and Mr Robertson worked more or less full-time from that address on the affairs of the company. 14. In about August 1986, a retired professor of geology, one Allan Fraser Wilson ("Mr Wilson"), a former professor of geology at the University of Queensland, was approached to see if he was interested in becoming part of the venture. He agreed to do so. At a meeting of directors of Cowell Jade held on 18 November 1986, Mrs Robertson and a Mr Coles retired as directors. Their places were taken by the appointment of Mr Hosking and Mr Grasso. It was further resolved to appoint Professor Wilson as an additional director. Mr Hosking was appointed secretary of the company. Mr Robertson was at that stage chairman of directors, but his position was eventually taken over by Professor Wilson, although Mr Robertson remained on the Board. Another director was appointed later, a Mr Lee Hoo Leng, a resident of Sydney, whose alternate on the board was one Ewan Vickery, an Adelaide solicitor. 15. At the directors' meeting of 18 November 1986, it was resolved that various matters be put before the annual general meeting of the members of the company, due to be held in December of that year. Those matters included a proposed resolution that the nominal capital of the company be increased to $100 million, and that this be represented by 200 million shares of 50 cents each. Further, that the company convert to a public company and change its name to Gemstone Corporation of Australia Ltd. 16. Other matters to be put to the shareholders included the following: "2. Authorisation to the Directors to issue to Barkuna Pty Ltd (a) 5,000,000 ordinary 50 cent shares for 50 cents each paid

to 5 cents per share on allotment with the balance payable in calls as determined by the directors from time to time. (b) 1,250,000 options exercisable at 75 cents each by not later than the 31st day of December 1991. Any director holding an interest in Barkuna Pty Ltd will give particulars to the Secretary for disclosure to the members. 3. Authorisation to the Directors to issue to the Directors of the Company a total of 2,000,000 ordinary shares of 50 cents each for 50 cents per share paid to one cent per share on allotment and the balance in calls as made by the directors from time to time in the following proportions. Professor A.F. Wilson 500,000 Mr G.J. Robertson 500,000 Mr D.W. Hosking 500,000 Mr R. Grasso 500,000. 4. Authorisation to the Directors to proceed with the issue of a prospectus for the allotment of twenty million ordinary shares of 50 cents each to the public." 17. As to No 3 of those proposed resolutions, the background was as follows. 18. During the course of discussions between Messrs Grasso, Hosking, Robertson and Wilson during the latter part of 1986 leading down to the time of the directors' meeting on 18 November, it was suggested within the group that there be an issue to them of either partly paid shares or options, in recognition of the efforts which they had put in to preparing the company for its public flotation. Mr Wilson gave evidence at the trial, during the course of which he said that he was against the issue of partly paid shares but in favour of the issue of options. He said that when he was taking part in discussions with the other directors, he had said to them at some stage that "...so far as options are concerned, you can take them or leave them, but if you have the other sort (partly paid shares), if the company is doing well, that's fine, but you've got a liability there that you have to make provision for otherwise". Mr Hosking also gave evidence. He said that he remembered the topic of the possible share issue to the directors being discussed at about three meetings in Mr Vickery's office. He referred to the fact that there had also been discussion amongst the directors of an employees' share scheme, and that so far as the proposed share issue to the directors was concerned, he had prepared a paper setting out some of the tax advantages and disadvantages of the directors taking up shares as opposed to options. The paper which he prepared in that respect was tendered in evidence before me. 19. Mr Hosking's recollection was that most of the discussions on this topic occurred before Professor Wilson was appointed the chairman on 18 November, that is, that they were discussions between the other three. Be that as it may, it must have been the case that by 18 November, despite Professor Wilson's preference for options, the directors had settled on an issue of partly paid shares in the terms which find expression in point 3 of the minutes which I have set out above. It will be seen from that resolution that it speaks in terms of an issue to each of the four named directors individually, 500,000 shares. There is no reference in that resolution to any intermediate company or entity holding the shares on behalf of any of the directors. 20. At the general meeting of members of the company held on 16 December 1986, all of the resolutions proposed by the directors were passed, including the resolutions that the company convert to a public company, that it increase its share capital, that it adopt an employee share scheme, and that it issue the partly paid shares to Barkuna and to the directors. 21. The resolution passed by the members of the company as to the issue of shares to the directors, was in terms of the resolution as set out in the notice of meeting, except that a reference to "nominees" was added. The minutes of the members' meeting record the relevant part of the motion as to the issue of shares to the directors in the following terms: "On the motion of Mr Page, seconded by Mr Oats it was resolved as an ordinary resolution that the directors be and are hereby authorised to issue to the following directors of the company (and their respective nominees or any of them) in the quantities set beside their names, two million (2,000,000) ordinary shares of fifty cents (50 cents) each......" 22. It is not entirely clear from the evidence how it came about that the alternative of issue of the shares to a nominee of the directors arose. Clearly enough, however, there must have been some discussion between the directors as to the matter. Mr Hosking's evidence as to this was that before the annual general meeting, there was some discussion between him and the other directors, including Grasso: "along the lines that some directors may wish to take up shares in a family entity other than their direct names, and we agreed that that should be appropriate." 23. He went on to say that Mr Vickery drafted the notice of the meeting, including the notice of the motions to be considered, in terms which enabled that result to be achieved. Mr Hosking, when giving evidence as to that aspect of the matter, said: "I made a comment that whether they were taken up by a director personally or by a nominee, did not really matter, as long as the directors were standing behind their particular family entity." 24. After the general meeting, the directors set about endeavouring to find an underwriter for the proposed share issue to the public. This took some time. Approaches were made, mainly through Mr Robertson, to a number of possible underwriters, both in South Australia and in other States. The directors were enthused with the prospects of the company, and were convinced that it would be, when launched as a public company, prosperous. Despite their enthusiasm, it is clear that prospective underwriters were cautious. 25. Eventually, by about the middle of 1987, underwriters were found. A meeting of directors on 9 July 1987 recorded advice from Mr Robertson that two companies had agreed to act as underwriters. At that stage, the directors had not proceeded with the arrangements for the issue of the partly paid shares, either to them or to Barkuna. This was because it was thought best that the question of engaging an underwriter for the share float should first be resolved. However, that aspect of the matter having by then been attended to, on 23 July 1987, Mr and Mrs Grasso executed on behalf of the defendant Star Corporation an application for the issue to it of the 500,000 partly paid shares. That application, together with applications received from the other directors, were considered by a further meeting of the directors on 31 July 1987, at which it was resolved that shares be allotted as follows: "A. To Barkuna Pty Ltd 5,000,000 ordinary shares of 50 cents each paid to 5 cents on allotment with the balance of 45 cents per share payable in calls as determined by the directors from time to time. B. To specified directors (as authorised 16th December, 1986) and their respective nominees. Shares as listed below paid to 1 cent on allotment. NO OF ALLOTTEE SHARES AMOUNT Allan Fraser Wilson 100,000 $1,000 Macekey Pty Ltd 400,000 $4,000 Graham John Robertson 200,000 $2,000 Margaret Jean Robertson 100,000 $1,000 Unley Gems and Minerals P/L 200,000 $2,000 Dean Wilfred Hosking 100,000 $1,000 Judith Esme Hosking 200,000 $2,000 Judene Pty Ltd 200,000 $2,000 Star Corporation P/L 500,000 $5,000 Until fully paid, voting and dividend entitlements on partly paid shares shall be in proportion to the amounts paid up. Partly paid shares will rank equally with fully paid shares for the purposes of bonus issues, rights issues and capital distributions. The Secretary was requested to file a return of allotments in respect of the above allotments." 26. Macekey Pty Ltd was a company controlled by Mr Wilson. Unley Gems and Minerals Pty Ltd was a family company controlled by interests associated with Mr Robertson. Judene Pty Ltd was controlled by Mr Hosking. 27. The evidence of both Mr Wilson and Mr Hosking was that at no stage did Mr Grasso say anything about Star Corporation. For that matter, there does not seem to have been any discussion between the directors as to any of the companies which they were nominating to hold the shares. 28. Mr Grasso's evidence was that Mr Hosking had told him to fill in the application for the share allotment, and to bring a cheque (for the $5,000) in with it, and that Mr Grasso responded: "Will it be okay if I bring in a Minoil Services cheque because Star Corporation hasn't got any money." Mr Hosking, however, said specifically in his evidence that he did not remember discussing anything with Mr Grasso as to Star Corporation Ltd, and did not recollect the discussion to which I have just referred. I prefer his evidence as to that. 29. Be that as it may, the partly paid shares were duly issued to the directors or their nominees in accordance with the resolution of 31 July 1987. 30. The directors proceeded with the preparation of the prospectus for the share issue. The prospectus reminded members of the public that the mining leases, in what was described as the Cowell jade province, were "of an intangible nature", and accordingly the investment in Gemstone was to be considered as "speculative". The prospectus contained a reference, in the investigating accountant's report, to the partly paid shares. That reference is in the following terms: "31st July 1987 Shares of $0.50 each paid to 5 cents, issued to Barkuna Pty Ltd, the promoter of the public issue, being an existing shareholder in Gemcorp, and a company in hich three of the Directors of Gemcorp have an interest. 5,000,000 Shares of $0.50 each paid to 1 cent issued to Directors of the Company 2,000,000 The unpaid value of the bove shares will be payable by calls to be determined by Directors from time to time. Total shares issued assuming this Prospectus is fully subscribed 44,990,200" 31. The prospectus was dated 31 August 1987. The company was listed on the Australian Stock Exchange in September. When trading in the shares commenced, they came onto the market at around 70 cents. Unfortunately, trading at that level was short-lived. 20 October 1987 was what was described in the evidence as "black Tuesday". On that day, shares in the plaintiff, which by then had been fully subscribed, together with most other listed stocks in Australia, tumbled disastrously in the financial markets. The price of the plaintiff's fully paid shares fell to a few cents. 32. They were never to recover. The optimism of the directors was never realised. The $10,000,000 raised from the public by the share issue seems to have been dissipated with very little to show for it. Sales revenue for the year ended 30 June 1988, which was forecast in the prospectus at $4,750,000, turned out to be a mere $764,000. The company made a before-tax loss in that year of $1,766,000. 33. Faced with those disappointing results, the board of directors engaged independent accountants to review the operation of the company. The accountants, Allert Heard Management Services Pty Ltd ("Allert Heard"), furnished a written report dated 15 August 1988.7 They observed in the report: "The company's primary objective 'to develop the only known commercial deposit of black jade in the world, and to establish itself as a major buyer, processor and marketer of Australian gemstones' has not been achieved." My perusal of the report suggests that to be an understatement. 34. Allert Heard further observed: "The burden of the company's inability to achieve the stated primary objective falls upon the existing Board of Directors. However, the prime responsibility for the company's lack of progress, internal operational difficulties, poor investments and disastrous financial trading lies with the Managing Director. The Chairman and the Board have failed to control the Managing Director, and have allowed significant departures from the company's original core business." 35. They drew attention to other unsatisfactory features of the company's operation, including an absence of any agendas and board papers, conflicts between the board members and the managing director, and between the managing director and his senior executives, the lack of a firm business strategy, and the failure to develop core businesses, at the expense of the pursuit of other business opportunities. They comment that the company "is grossly overstocked". The staff lacked direction and clear goals. 36. I do not pause to catalogue all of the various ailments which were found to infect the body of the company. Those ailments were deep-seated. Notwithstanding a number of suggestions made by Allert Heard in their report, the company's performance has never improved. 37. Not surprisingly, the stage was reached eventually at which the question arose as to whether or not a call should be made on the partly paid shares, including those which had been issued to the directors. It does seem from the evidence of Mr Hosking that at an earlier stage there had been discussion as to a call being made, but it seems likely that this was before they were issued rather than later. His evidence was: "Once the consideration of partly paid shares was under discussion before issue to employees and directors, but in particular to directors, the range of discussion would have certainly covered the call factor. In fact, the directors discussed at different points of time whether the calls would be one cent, five cents or even ten cents." 38. The evidence as to what was discussed between the directors as to the possibility of a call being made after the shares had been issued is fragmentary. The lack of information as to this is not assisted by the apparent absence of proper minutes of the directors. 39. The only clear evidence is that after the company got into difficulty, the directors took steps to try to avoid any call being made on them. 40. In a document which describes itself as a "Supplementary Notice" with respect to the annual general meeting of members of the company, to be held on 29 November 1988, proposed to the shareholders a resolution: "That the company adopt the deed tabled at the Annual General Meeting, and marked by the chairman for the purpose of identification ..... proposed to be entered into between the company and four of its directors, namely, Allan Fraser Wilson, Graham John Robertson, Dean Wilfred Hosking and Rosario Grasso." 41. That proposed deed would have varied the terms and conditions of the allotment of partly paid shares to the directors by the inclusion of a condition precedent to any call being made in respect of the shares that the price payable on the official list of the Australian Stock Exchange for ordinary fully-paid shares exceeded the par value of the shares, and thereafter that calls should not be made at a greater rate than 5 cents per share during any twelve calendar months, unless the directors agreed otherwise. 42. Not surprisingly, when that proposal was submitted to the Australian Stock Exchange at the time of the notice to the shareholders, the Australian Stock Exchange indicated its resistance to the proposal. 43. The board then considered a separate strategy, namely, converting all the one cent contributing shares to fully paid shares of one cents, and reconstructing this class of share to 50 cents fully paid. That proposal met a similar fate, in the sense that it was not proceeded with after the Stock Exchange had indicated its opposition. 44. The directors who had been responsible for floating the company resigned at various stages. Mr Hosking resigned as secretary on 23 December 1988, Mr Grasso resigned as a director on 6 October 1989, and on 11 July 1990, Mr Wilson resigned as a director. The evidence is not clear as to when it was that Mr Hosking and Mr Robertson resigned as directors, but it seems likely to have been before October 1989, as minutes of a meeting of directors held on 17 October 1989 do not refer to either of them as directors. 45. A Sydney barrister, Mr Warwick Johnson, joined the board on 29 November 1988, and became managing director. 46. The only member of the "old" board who was present at a meeting of directors on 11 July 1990 was Professor Wilson, who, as I have said, resigned on the same day. 47. It was at that meeting, presided over by Mr Johnson, that a call was made for the unpaid balance due on the partly paid shares issued to the directors. The terms of the resolution were: "It was resolved pursuant to Article 16 of the Articles of Association of the Company that a call of 49 cents per share is now and hereby made on the holders of all partly paid shares in the capital of the Company save and except those partly paid shares held pursuant to the Employee Share Plan and that such call be payable on or before Thursday 2nd August, 1990 at the Company Share Registry, being Fennell Allen and Co of 32 South Terrace, Adelaide, South Australia, 5000. It was further resolved that interest not exceeding 15 per cent per annum would become payable on any unpaid portion of the call." 48. The call was notified to Star Corporation by letter from the plaintiff dated 17 July 1990.12 That letter demanded $245,000, being the total amount of the call as applied to 500,000 partly paid shares, to be paid on or before 2 August 1990. The demand was coupled with a statement that "...interest at the rate of 15 per cent per annum becomes payable on the unpaid amount, and shares become liable to forfeiture. However, shareholders remain liable to the company for the amount of capital called pursuant to the Articles of Association." 49. The letter contains further information as to the share market prices which had been commanded by fully paid shares on the Stock Exchange. According to the letter, the latest available market sale price immediately prior to the issue of the notice was 5 cents, and the highest sale price during the preceding three months was 6.5 cents. The lowest sale price during that period was 3 cents. 50. Mr Grasso, in his capacity as chairman of Star Corporation, responded to the call with a letter dated 23 July 1990 in the following terms: "I am very disappointed that your Board decided to make the above call at such time when the Fully Paid shares are trading around the 5 cents mark. Your Board must realise that the 1 cent contributing shares were originally offered to the 4 ex-directors as part consideration for the months of work in preparing the public float of Gemstone Corporation of Australia Ltd. It was always thought that the conversion of the 1 cent shares to fully paid shares would be at the will of the ex-directors and not of the Company. I certainly did not believe that such conversion would be made unless the Fully Paid shares traded at or above the 50 cents par value. Our Company, Star Corporation Pty Ltd, is already in debt. It will not be possible to borrow money to pay for the call that your Board has seen fit to make. On behalf of Star Corporation Pty Ltd I would ask the Board to reconsider the call and if at all possible to cancel it at this time. Perhaps such a call could be made at a time when the Fully Paid shares are at or above the 50 cents par value." 51. The then existing board was not moved by that plea. At a meeting of directors on 22 August 1990, it was resolved that the plaintiff give notice of forfeiture to the "defaulting shareholders", which included Star Corporation, and "that it hold a lien over all shares registered in their names". It does not appear from evidence before me whether anything else of relevance for present purposes occurred between the date of that resolution and the issue of the proceedings on 24 January 1992. 52. I should say something about the position of Star Corporation. Star Corporation was incorporated on 30 March 1987. Mr Grasso personally prepared the Memo and Articles of Association. From the outset, the shareholders were Mr and Mrs Grasso each holding five ordinary 20 cent shares, and their four children each holding two ordinary 20 cent shares. The directors of the company at all material times were Mr and Mrs Grasso. The company has always had a deficiency of liabilities over assets. It borrowed the $5,000 necessary to pay for the partly paid shares in Gemstone Corporation, from another of Mr Grasso's companies, Minoil Services Pty Ltd. It borrowed another amount of $401, presumably its incorporation fees, from another of the family companies, R. Grasso Pty Ltd. It has never had any assets apart from those represented by the Gemstone shares. 53. Mr Grasso's evidence, which I accept, is that the company was formed for the purpose of taking up the shares in Gemstone. His evidence was that he introduced his children into the company as shareholders in order to share what he thought would be a profitable investment. There were other family companies available in which the children were shareholders, but Mr Grasso explained in his evidence that he did not wish to use those companies as he did not have technical control of them, having regard to the shareholding. 54. It is the fact that Star Corporation never had any assets and, for that reason, could never answer any call on the Gemstone shares from its own resources, which is at the heart of the action against Mr Grasso. 55. I should say before proceeding further, that the only witnesses for the plaintiffs were Mr Wilson and Mr Hosking. The only witness for the defendants was Mr Grasso. My findings as to the circumstances leading up to the issue of the partly paid shares, and as to the flotation of Gemstone, and the events thereafter, are based largely on uncontested documentary evidence, and on the oral evidence insofar as it deals with those matters. 56. However, the evidence of both Wilson and Robertson as to what course the directors of Gemstone might have followed if full disclosure had been made, and that of Mr Grasso as to his intentions in putting forward Star Corporation as the recipient of the party paid shares, and as to his intention to stand behind that company, is not evidence which I have been prepared to accept. The extent to which I make findings which depart from that evidence appears when I come to deal with those matters. 57. The critical allegations in the Statement of Claim which advance the claim against Mr Grasso are that he: "(Para 12.2) At all material times failed to make full disclosure to Gemstone of the financial circumstances of Star Corporation: knowing that Star Corporation did not have sufficient financial resources to meet the unpaid $0.49 per share if Gemstone made a call upon the partly paid shares." It is further alleged in the same paragraph: "PARTICULARS

(a) Grasso permitted his personal interests (in securing the benefit of the Partly Paid Shares on more advantageous terms

than would otherwise be available and in particular by paying only $0.01 per share without any effective obligation to pay the balance unpaid on each share) to conflict with the interests of Gemstone (in receiving from the allottee of any allotment of shares in the capital of the company proper consideration or a commercially worthwhile promise to pay any call made on the balance unpaid on any partly paid share). (b) ......" 58. After going on to refer to the circumstances of the making of the call, and the failure by Star Corporation to answer it, the plaintiff claims the amount due on the call, and interest, against Grasso pursuant to s.229(7) of the Code, and: "1(a) Further or in the alternative, an order for indemnity against any shortfall in the payment by Star Corporation of the call, plus interest. 1(b) Further or in the alternative, orders by way of restitution to ensure that Gemstone receives full consideration for the value on allotment of the Partly Paid shares allotted to Star Corporation. 1(c) Further or in the alternative, such equitable or other relief as the Court thinks appropriate." 59. The prayer for relief in the Statement of Claim includes a claim for a declaration that Grasso: "3.1 breached the fiduciary duties he owed to Gemstone as a director of Gemstone; 3.2 failed as a director of Gemstone to act honestly in the exercise of his powers and the discharge of his duties as a director in contravention of Section 229(1) of the Code; 3.3 failed as a director of Gemstone to exercise a reasonable degree of care and diligence in the exercise of his powers and the discharge of his duties as a director in contravention of Section 229(2) of the Code: 3.4 made improper use of his position as a director of Gemstone to gain an advantage for himself and caused detriment to Gemstone in contravention of Section 229(4) of the Code." 60. The gist of the arguments presented on behalf of the plaintiff at the trial was that Mr Grasso had put himself into a position of conflict of interest, and further, had failed to make proper disclosure to Gemstone of the information in his possession material to the willingness of that company to allot shares to Star Corporation. 61. It was argued that the conflict of interest arose by reason of the fact that Mr Grasso had a duty to act in the best interests of the company in connection with the allotment of the shares, but on the other hand, had a personal interest in avoiding, if he could, a responsibility to answer to any call on the shares, the furtherance of which interest, on the plaintiff's case, lay behind the nomination of Mr Grasso of a company which had no assets, to take up the shares. The material non-disclosure relied upon by the plaintiff was a failure on the part of Mr Grasso to inform the other directors of the impecuniosity of Star Corporation, and of its inability to answer to a call, at least from its own resources. The breach of fiduciary duties is said to have been compounded by Mr Grasso's active participation in the decision by the directors to allot the shares to Star Corporation. The case on entitlement to equitable relief was put on the basis that, assuming the breach of a fiduciary duty, there ought to be an order indemnifying the plaintiff against the shortfall in payment of the call by Star, which, given its financial incapacity, would amount to the full amount of the call, plus interest, or, as it was put (I quote from the plaintiff's outline of submissions): "An order for restitution restoring to Gemstone the value of the call, which again comprises the full amount of principal and interest on the call." Or in the further alternative, equitable damages: "Namely, compensation for the loss of the payment of the calls." 62. It was submitted that this alleged loss resulted from Mr Grasso's breach in causing the allotment to be made to Star. 63. Early formulations of the rule as to the nature of the fiduciary duty, described that duty as obliging a person owing such a duty not "to put himself in a position where his interest and duty conflict" (see, for example, Bray v Ford (1896) AC 44 per Lord Herschell at 51). The matter was put by Lord Upjohn in a well known passage in Boardman and Anor v Phipps [1966] UKHL 2; (1967) 2 AC 46 as (at 123): "...the fundamental rule of equity that a person in a fiduciary capacity must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and interest may conflict." 64. But recent pronouncements of the High Court treat those expressions of the scope of the rule as too broad. 65. In Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 Deane J put the matter in this way (198): "There is a wide variety of formulations, of the general principle of equity requiring a person in a fiduciary relationship to account for personal benefit or gain. The doctrine is often expressed in the form that a person 'is not allowed to put himself in a position where his interest and duty conflict' (Bray v Ford ((1896) AC 44 at 51) or 'may conflict' (Phipps v Boardman ((1967) 2 AC 46 at p.123) or that a person is 'not to allow a conflict to arise between duty and interest': New Zealand Netherlands Society "Oranje" Inc v Kuys ((1973) 1 WLR 1126 at p.1129; (1973) 2 All ER 1222 at p.1225). As Sir Frederick Jordan pointed out, however (see Chapters on Equity, 6th ed. (Stephen) (1947), p.115, reproduced in Jordan, Select Legal Papers (1983), p.115), this, read literally, represents 'rather a counsel of prudence than a rule of equity': indeed, even as an unqualified counsel of prudence, it may, in some circumstances, be inappropriate: see, e.g. Hordern v Hordern ((1910) AC 465 at p.475); Smith v Cock ((1911) [1911] UKPCHCA 2; 12 CLR 30 at pp 36-37; (1911) AC 317 at pp 325-326). The equitable principle governing the liability to account is concerned not so much with the mere existence of a conflict between personal interest and fiduciary duty as with the pursuit of personal interest by, for example, actually entering into a transaction or engagement 'in which he has, or can have, a personal interest conflicting ... with the interests of those whom he is bound to protect' (per Lord Cranworth LC, Aberdeen Railway Co v Blaikie Brothers ((1854) 1 Macq 461 at p.471) or the actual receipt of personal benefit or gain in circumstances where such conflict exists or has existed." 66. In Hospital Products Ltd v United States Surgical Corporation and Ors [1984] HCA 64; (1984) 55 ALR 417, Mason J observed (459): "The traditional view that the profit rule is merely a corollary of the conflict rule may be traced back to the speech of Lord Herschell in Bray v Ford (1896) AC 44 at 51. The view has been severely criticised, with some justification - see Shepherd: The Law of Fiduciaries (1981) pp 147-51. And a recognition of its shortcomings induced Sir Frederick Jordan in his Chapters on Equity, op cit, at p 115, to describe the conflict rule as a 'counsel of prudence' rather than a rule of equity. Accordingly, the fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect (Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461 at 471). By linking the obligation not to make a profit or take a benefit to a situation of conflict or possible conflict of interest the proposition, in accordance with the authorities, (a) excludes the relevance of an inquiry into the actual motives of fiduciary; and (b) excludes restitutionary relief when the interest of the fiduciary is remote or insubstantial: see Boulting v Association of Cinematograph, Television and Allied Technicians (1963) 2 QB 606 at 637-8; Phelan v Middle States Oil Corporation [1955] USCA2 324; (1955) 220 F (2d) 593 at 602-3." 67. This case, however, is not a case of obliging a fiduciary to account for a profit or benefit. Rather, the case has been presented throughout as a case of recovery by the plaintiff of an alleged loss. 68. It is clear that by causing Star Corporation to take up the partly paid shares, Mr Grasso put himself in a position where his personal interests and his duty to the plaintiff were in conflict. His own interest (identifying that with Star Corporation) in avoiding a call on the partly paid shares, at least when fully paid shares were trading under par, clearly conflicted with the proper discharge of his duties as a director in determining whether and when it might be in the interests of Gemstone to make a call. That alone, on the earlier formulations of the rule, would put him in breach of the fiduciary duty which he owed as a director of Gemstone. But it is clear from the observations to which I have referred in the Hospital Products case and in Chan v Zacharia that the mere act of putting himself in such a position of conflict, could not, standing alone, amount to a breach of duty. 69. I should say that, in my opinion, all four directors who were party to the decision to allot the partly paid shares, and who then either themselves, or by other related entities, took up the partly paid shares, put themselves in a position of conflict of interest. It is, in my experience, both unusual and undesirable for directors of a public company, other than a no-liability company, to allot to themselves partly paid shares, even with the sanction of a resolution of the members of the company. 70. But in order to found an action in damages, or more accurately, an action in equity for compensation or for account, the fiduciary must either receive a profit or cause a loss. Once either of those events occurs, equity will oblige the fiduciary to make restitution, either by indemnity with respect to the loss, or by accounting for the profit. 71. I am unable in this case to find that the taking up of the partly paid shares by Star Corporation could properly lead to the conclusion that by doing so Mr Grasso derived a profit. Even assuming that it is right to identify Mr Grasso with his company, the shares were paid for at the issue price, which, it is true, for a few days, may have represented a little less than the partly paid shares were at that stage worth, given that fully paid shares traded soon after the listing of the shares on the Stock Exchange, at a figure of 70 cents, or close to that amount. But after those few days, the fully paid shares languished at a market price of only a few cents, and the partly paid shares are clearly not worth what was paid for them. Furthermore, the partly paid shares carry with them the onus of answering to the very call which, in this case, was eventually made. 72. I suppose it might be contended that Mr Grasso derived a benefit in the sense that by taking up the shares in the name of his company, he created a situation in which he might benefit from any appreciation in value, if the fully paid shares traded above par, while, by reason of its impecuniosity, Star Corporation was insulated from having to pay out on any call. Quite apart from determining whether such a "benefit" could be reflected in some sort of award against Mr Grasso, the plaintiff's case has not been presented in that way. Throughout, the plaintiff has contended that what Mr Grasso owes a duty to pay what has been described as the loss, the alleged loss being the amount unpaid by Star Corporation with respect to the call of 49 cents per share. 73. Furthermore, the plaintiff has not contended that the shares (if they have not been forfeited, a question to which I refer below) have any intrinsic value. Clearly, if they have any intrinsic value at all, which is doubtful, it would be overwhelmed by the liability to answer the call. 74. It is true that one of the plaintiff's claims is under s.229(4) of the Code, that is, a claim that Mr Grasso made improper use of his position as a director of Gemstone to gain an advantage for himself (and cause detriment to Gemstone). But no submission has been put by the plaintiff which would provide any basis upon which there could be an assessment of any "advantage". Rather, as I have said, the plaintiff's case has persistently been advanced on the footing of an alleged liability on the part of Mr Grasso to pay the amount of the call, plus interest, or at least, to indemnify the plaintiff against the inability of Star Corporation to do so. 75. Approaching the matter, therefore, on the footing that in substance the plaintiff's claim is a claim for indemnity against loss rather than a claim to account for profit, it seems to me that the plaintiff is in considerable difficulty in establishing on the evidence that there was a relevant loss, or if there was, that the circumstances are such as to impose upon Mr Grasso an obligation to indemnify, or compensate, the plaintiff for the loss. 76. Although I have some considerable hesitation about it, I suppose that it is true that there is a loss in one sense, namely, that the plaintiff is worse off to the extent of the amount of the call, plus interest, having regard to the fact that Star Corporation has not answered the call. But even if one approaches the matter in that way, there is a very real question as to whether or not that circumstance can support the claim against Mr Grasso. 77. I was invited in written submissions put forward by the plaintiff (paragraph 3.27) to find that: "If Professor Wilson and Hosking had known the truth about Star's finances and Grasso's purposes, they would not and should not have allotted shares to Star." 78. Even if the evidence was to support such a finding, and for reasons which I fill come to, I do not think that it does, it seems to me that such a finding would leave the plaintiff out of Court in its claim against Mr Grasso. If the plaintiff had been deflected from issuing the subject shares to Star Corporation by reason of a disclosure to Professor Wilson and Hosking of the position of Star Corporation, and of Mr Grasso's intention not to stand behind it in the event that the shares were trading under par, it does not seem to me that in practical terms there was anyone else they could have issued the shares to. The partly paid shares were a combination of a bonus and an incentive to the directors, in recognition of the work they had done in advancing the flotation of the company. There is nowhere in the evidence any indication that there was anyone else who might have been willing to take 1 cent partly paid shares, or that the company would have been troubled to look for anyone who might have been so disposed. 79. The purpose of the issue of fully paid shares was to raise $10 million capital from the public by the issue of 20 million 50 cent shares. No more shares would have been issued to the public if Mr Grasso, or his company had not taken up the offer of the partly paid shares to the directors. If, as a result of complete disclosure by Mr Grasso as to what he was about, the shares had not been issued to Star Corporation, the company would have been $5,000 worse off, having regard to the amount paid by Star Corporation for the shares, and would not have received anything equivalent to the remaining 49 cents per share from any other source. 80. At one stage, the plaintiff suggested that if Mr Grasso had made a full disclosure to the other directors, they would have insisted on an assurance from him that he would stand behind Star Corporation, or that they might have insisted that he execute an indemnity with respect to its liability on any call. 81. That submission is, of course, inconsistent with the submission to which I have referred that Professor Wilson and Mr Hosking "would not and should not have allotted shares to Star". The presentation of the plaintiff's case seems to have vacillated between the two propositions. But despite the evidence of Mr Wilson and Mr Hosking to the effect that they might have looked to Mr Grasso to assure them that he would in some way "stand behind" Star Corporation with respect to its liability to answer to a call, I am not satisfied that they would have sought any such assurance. The assurance would have had to have been to the effect that if Star Corporation did not answer a call, Mr Grasso would, even if fully paid shares were trading below par. A finding that such an assurance would have been sought would be in head-on conflict with their own conduct when the situation of the company had deteriorated to the point where a call on the partly paid shares was a distinct possibility. 82. Both Mr Wilson and Mr Hosking were, apparently, party to the endeavours which found expression in the resolutions of the directors at that stage to go to the shareholders with various proposals which would extinguish the liability to answer a call on the shares unless and until the fully paid shares were trading above par. 83. Even if it was to be assumed, contrary to the view I hold, that the other directors would have insisted upon some sort of assurance from Mr Grasso that he intended to stand behind Star Corporation, it is, in my opinion, unlikely that Mr Grasso would have given such an assurance. 84. Mr Grasso invested substantially, both in his own name and in the name of other members of the family and companies of which he had control, in fully paid up shares in Gemstone. As at 2 October 1987, there were 316,800 fully paid shares of a nominal value of $158,400 held by him or his family interests. Certainly, the inference may be drawn from that investment that he had a high degree of confidence in the prospects of the company. But it is another thing to assume that he would have been prepared to put himself at risk by taking up partly paid shares which were liable to a call amounting to $245,000. 85. The very fact that he nominated Star Corporation as the recipient of the shares is, in my opinion, and despite his evidence to the contrary, attributable to a desire to insulate himself from the possibility of any such call. I accept the arguments of the plaintiff that that was so, and that that inference should be drawn in preference to his evidence. I find the explanations given by him as to the reasons why he incorporated Star Corporation and offered it as the recipient of the shares to be unconvincing. But acceptance of the plaintiff's contentions as to that aspect of the matter does not assist the plaintiff on its case with respect to what might be loosely described as causation. Finding as I do that his state of mind was to handle the issue of the partly paid shares in such a way as to ensure that he avoided any personal liability with respect to a call should it happen to be made at a time when the shares were trading under par, I think it unlikely that he would have acceded to any pressure to "stand behind" the company, as it was put by the plaintiff, if he had made a full disclosure of the situation of Star Corporation, and the reason why he offered it as the recipient of the shares. Again, that conclusion is fortified by reference to the later conduct of the directors in trying to vary the terms upon which the partly paid shares were held. It is also fortified by the letter which Mr Grasso wrote in response to the call, to which I have already referred, in which he states, inter alia: "I certainly did not believe that such conversion would be made unless the fully paid shares traded at or above the 50 cents par value." 86. The conclusions I reach as to the questions of fact with respect to the issue of causation may be summarised as follows: (a) I do not accept the plaintiff's contention that if Professor Wilson and Hosking had known the truth about Star's finances and Grasso's purposes that they "would not and should not have allotted shares to Star". The later action of the directors in endeavouring to insulate themselves from a call, other than in a situation where the fully paid shares were trading above par, tells strongly against reaching any such conclusion, despite their evidence to the contrary. (b) For similar reasons, I do not accept that if the directors, being acquainted with the true situation of Star Corporation and with Mr Grasso's intentions not to stand behind it if it was inconvenient to do so, would have insisted on any assurance being given in that respect. It seems hardly credible that they would have insisted upon such an assurance and then, when the very situation as to which such an assurance would be directed arose, they endeavoured to avoid it as they did. (c) If, on the other hand, it is proper to approach the matter on the basis of what properly motivated and responsible directors might have done, given full disclosure, rather than what the particular directors might have done, the plaintiff is in no better position. Even if it might be assumed that properly motivated and responsible directors might have insisted upon an assurance from Mr Grasso, for the reasons which I have given, I think it quite unlikely that any such assurance would

have been given. It might be thought that if the question of causation was to be found against the plaintiff on the basis of those findings, what I have otherwise found to be a potential breach of the fiduciary relationship would go unredressed. I say a potential breach, as it seems to me to follow from the remarks to which I have referred, which fell from the High Court in the Hospital Products case and Chan v Zacharia (supra), that there is no breach of fiduciary obligation simply by the fiduciary placing himself in a position of conflict of interest. The breach occurs when he either makes a profit, or causes a loss by reason of that circumstance. 87. The question of "cause" in equity must, of course, be approached in a wider and more flexible fashion than would be the case at common law. With respect to that aspect of the matter I have been much assisted by certain observations which fell from Tadgell J in Hill v Rose and Ors [1990] VicRp 13; (1990) VR 129. 88. In that case, the vendors of a share in a business were held to be in breach of their fiduciary relationship to the purchaser (the relationship being regarded as one in which they were negotiating for a proposed partnership or joint venture) by failing to make disclosures as to the true position of the company conducting the business. An amount of $250,000 was paid by the plaintiff to the defendants for the purchase of a stake in the business, and a share in its control. 89. During the course of his reasons for judgment, Tadgell J observed (143): "Counsel for the plaintiff contended that his client is entitled to receive an award in equity against Mr and Mrs Rose of monetary compensation of $250,000 for his loss resulting from their breach of their fiduciary obligation. In Nocton v Lord Ashburton (1914) AC 932, at pp.952-3, Viscount Haldane LC affirmed that a court of equity has inherent and exclusive jurisdiction to award compensation against a fiduciary in favour of a beneficiary who has suffered loss by reason of a breach of the fiduciary's obligation. In McKenzie v McDonald [1927] VicLawRp 19; (1927) VLR 134, at p.146, Dixon AJ regarded Nocton v Lord Ashburton as showing 'that the jurisdiction to remedy breaches of fiduciary duty extends to decreeing compensation to the person whose confidence has been abused'. The equitable remedy of compensation is illuminatingly considered by Mr I.E. Davidson in an article of that name in (1982) 13 Melbourne University law Review 349. The remedy, like any equitable remedy, is necessarily to be fashioned to meet the needs of the case. The method of calculation of monetary compensation will vary according to the nature of the fiduciary obligation whose breach is to be redressed. It might be appropriate to compensate the plaintiff's loss by reference to the defendant's gain, as in McKenzie v McDonald. Compensation may be awarded, however, in an appropriate case whether or not the defendant has made any direct pecuniary gain. Nocton v Lord Ashburton was (it seems) such a case; and Curwen v Yan Yean Land Co Ltd [1891] VicLawRp 16; (1891) 17 VLR 64 and 745; Holmes v Walton (1961) WAR 96 and Catt v Marac Australia Ltd (1987) 9 NSWLR 639 are examples of others." 90. Tadgell J then goes on to refer to other cases, which - "...illustrate the manner in which equity, whether by an exercise of a concurrent jurisdiction in case of fraud, or of an exclusive jurisdiction in case of a breach of a purely fiduciary obligation, can fashion a remedy appropriate to redress the breach of duty." He goes on to say: "The aim of the equitable remedy evidently is to place the party who suffers following the breach of duty as nearly as possible in the position in which he would have stood had there been no breach. The aim therefore superficially resembles that of the common law award of damages but is achieved, if necessary, not by merely awarding monetary compensation but by way also of granting peculiarly equitable relief such as indemnity and rescission: Robinson v Abbott, at 368. Moreover, equity's approach to providing redress differs from that of the common law in that it depends upon treating the fiduciary's obligation as one of a personal character to make restitution to the beneficiary or to the trust estate. So much appears from the judgment of Street J in Re Dawson (deceased) (1966) 2 NSWR 211, at pp 214-16, cited with approval by Brightman LJ in Bartlett v Barclays Bank Trust Co Ltd (No 2) (1980) Ch 515, at p.543. The obligation imposed by courts of equity upon defaulting trustees and other fiduciaries is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract. It follows that the obligation is not limited or influenced by common law principles governing remoteness of damage, foreseeability or causation. The question for consideration is not whether the loss was caused by or flowed from the breach. Rather, as Street J put it in Dawson's case, at p.215: '...the enquiry in each case would appear to be whether the loss would have happened if there had been no breach'." 91. In Hill v Rose Tadgell J went on to conclude that the defendants were liable in equity to compensate the plaintiff for his loss. The reasoning was that, as His Honour held, if the plaintiff had been told - "...as he should have been, that the company had no beneficial interest in its business and that an acquisition by him of shares in the company would provide no beneficial interest in the business, it is inconceivable that the plaintiff would have advanced his money as he did." 92. I note in passing that, it seems to me, that His Honour's observations as to causation in equity, being clearly confined to the equitable rather than common law remedy, would appear to be unaffected by what fell from the High Court in March v Stramare [1991] HCA 12; (1991) 171 CLR 506, where doubt was cast upon the utility of the "but for" rule in the context of causation at Common Law. 93. Accepting then, as I do, the summary of the relevant principles expressed by Tadgell J in Hill v Rose, it seems to me that, however the matter is approached, the plaintiff has failed to establish that the alleged loss which, throughout the case in the context of each of the variations in the manner in which it has presented its claim, it claims to have suffered, namely, the failure to recover the call of 49 cents per share, was a loss which would not have happened if there had been no breach. 94. It is true that the Court is not limited to the remedies sought in the pleadings, and if an entitlement arises on the evidence to relief of any kind, whether pleaded or not, the Court should grant the appropriate relief (see SCR R 46(4)): "The statement of the specific relief claimed shall not prevent the court from granting general or other relief to such extent as to the court may seem just." 95. Furthermore, as I have already pointed out, the plaintiff claims such other "equitable or other relief as the Court thinks appropriate". 96. There is some difficulty, however, in contemplating an award on a basis not argued at the trial, and not put forward in any shape or form by the plaintiff. Within the meaning of Rule 46(4), what is "just" must take into account the course of the trial. I do not pause to refer to the reformulation of Rule 46 which appears in SCR Amendment No 41, effective from 27 September 1993, which is, for present purposes, to the same effect. 97. Here, from start to finish, the plaintiff did not seek an order that in some way Mr Grasso make restitution to the Gemstone of a benefit representing the value to him of the issue of partly paid shares to Star Corporation. As I have said, their claim has been confined throughout to a plea that he owes a duty to pay an amount representing the call, or to indemnify, Star Corporation with respect to the call. 98. However, even standing back and taking a broad view of the matter, and releasing the plaintiffs from the confines of the manner in which they have presented their case, there is still a difficulty in discerning any basis for an award. 99. As has already been pointed out, breach of the fiduciary relationship may cause a loss to the plaintiff, or a profit or benefit to the fiduciary. In the latter case, the fiduciary must account for the profit. In the former, he may be ordered to pay compensation. There may be cases where there is no gain to the fiduciary, but a loss to the plaintiff, or cases where there is no loss to the plaintiff but a gain to the defendant fiduciary. Equity may choose to award compensation for the loss, or restitution of any gain. As was said by Tadgell J in Hill v Rose and Ors (supra) (143), equitable remedies are fashioned "to meet the needs of the case". 100. Here, perhaps, there was a fleeting benefit while fully paid shares were, for a few days, trading over par. When that is the case, and if there should be a call for the whole of the balance of par value while that is so, it can always be answered by paying the call so that the shares become fully paid, and then sell them at a profit on the market. But that did not happen. No benefit accrued to Mr Grasso by any such circumstance arising. 101. Turning to the question of a "loss", for the reasons which I have already given, the plaintiff's claim based on an alleged "loss" fails, if for no other reason, on the ground of causation. 102. If one looks at the ability in equity to order restitution, I do not think that the plaintiff is any better off. Of course, restitution is not only a remedy ordered by the Court. Restitution may be effected by act of the parties. Here, it was said in the letter from Gemstone of 17 July 1990 in which the call on the partly paid shares was made, that the "shares become liable to forfeiture" in the event that the call was to be unpaid. It is not clear to me whether the shares have in fact been forfeited as opposed to having become liable to forfeiture. If not in fact forfeited, the Court could, no doubt, order their forfeiture, but in order to effect complete restitution, the Court would also have to order reimbursement by Gemstone of the $5,000 paid on the shares. There has been no suggestion that Gemstone wishes the Court to take that course. 103. If one turns aside from questions of the fiduciary duty owed in equity, I do not think that the plaintiffs are any better off if the cause of action is considered within the context of the statutory provisions upon which they have relied. Insofar as the plaintiffs plead a breach of the duty owed pursuant to s.229(1) of the Code, that is, the duty on the part of an officer of a corporation at all times to "act honestly in the exercise of his powers and the discharge of the duties of his office", it does not seem to me that in the circumstances of this case, the scope of the duty is any different from that which is imposed on a fiduciary in equity. It is, therefore, unnecessary to address the interesting question of whether or not in some circumstances the obligation imposed under s.229(1) is less onerous than the fiduciary duty owed in equity, or may be equated with it; (see Australian Growth Resources Corporation Pty Ltd (Receivers and Managers appointed) v Van Reesema and Ors (1988) 6 ACLC 529, and Southern Resources Ltd and Ors v Residues Treatment and Trading Co Ltd and Ors (1991) 56 SASR 455). 104. Even assuming a breach of s.229(1), for the reasons which I have already given as to the difficulties in the path of Gemstone in proving a relevant profit in the hands of Mr Grasso, or a loss, it seems to me that there is no case made out for recovery of compensation under s.229(7). The same applies insofar as the plaintiffs rely on s.229(2), or s.229(4). 105. Before parting with the case, I should say that in the context of an unsuccessful application by the defendants following the conclusion of the case for the plaintiff that there was no case to answer, I heard submissions, and considered certain authorities dealing with the question of where the onus lay to show what was described in the ex tempore reasons I gave at that stage of the case as a "lack of causation". 106. It is true that it is sometimes said that once the existence of a fiduciary duty to provide information is proved, and breach has been established, the onus is on the fiduciary to show that the information not given could not have effected the decision of the beneficiary (see, for example, Walden Properties Ltd v Beaver Properties Pty Ltd and Anor (1973) 2 NSWLR 815). 107. However, it seems to me that at the end of the day this case cannot be decided by reference to any such onus. Having regard to the dicta to which I have referred in Chan v Zacharia and the Hospital Products case (supra), it seems to me that the very proof of a breach of fiduciary duty obliges the plaintiff to prove a relevant loss or benefit. 108. In any event, if there was an onus on Mr Grasso to prove that any loss or benefit was not occasioned by the failure to disclose the true position as to Star Corporation, I would regard that onus as having been discharged in this case for the reasons which I have already given. 109. In particular, it must be regarded as having been discharged by my finding on the whole of the evidence that, on the balance of probabilities, disclosure would not have occasioned the particular directors to decline to issue the shares, and if a notional, more responsible board of directors might be thought to have been under a duty either to refuse to issue the shares, or call on Mr Grasso to in some way "stand behind" Star Corporation, for the reasons which I have given, I do not think that the result would have been any different. 110. In the result then, the plaintiff's claim against the defendant, Mr Grasso, will be dismissed, but the plaintiff will have judgment against Star Corporation for the amount of the call, that is to say, $245,000, plus interest. I will hear counsel as to the calculation of interest before entering judgment against Star Corporation.