Hart Security Australia Pty Ltd v Boucousis & Ors

Introduction 1By its Amended Statement of Claim, the plaintiff, Hart Security Australia Pty Ltd ("HSA"), seeks equitable and statutory compensation from the first defendant, Mr Christian Boucousis, for the loss of a commercial opportunity. It is alleged that Mr Boucousis, who was a director of HSA from its incorporation until 26 February 2009, breached fiduciary and statutory duties owed to HSA, and, as a consequence, HSA lost the opportunity to enter into a contract to provide security services to Northern Territory Airport Pty Limited ("NTA") at the Darwin and Alice Springs airports. 2HSA further alleges that the second to sixty third defendants, who were the partners of a law firm known as HWL Ebsworth Lawyers ("HWL") are also liable to pay compensation for loss of the opportunity. The liability of HWL is said to arise in two ways. First, it is contended that HWL knowingly assisted Mr Boucousis' breaches of fiduciary duty and are thus liable under the so-called second limb of Barnes v Addy. Secondly, it is contended that HWL were persons involved in Mr Boucousis' contraventions of his statutory duties, such that they too are liable to pay statutory compensation. 3The allegedly wrongful conduct took place in the period from about December 2008 to February 2009. In very brief summary, HSA alleges that Mr Boucousis embarked upon a course of conduct aimed at diverting the NTA opportunity away from HSA for the benefit of a competitor, ATMAAC International Pty Ltd ("ATMAAC"), and for his own personal benefit. It is alleged that whilst Mr Boucousis' efforts did not result in ATMAAC obtaining the NTA contract (or in Mr Boucousis securing any personal benefit), his conduct caused HSA to lose the NTA opportunity. 4During the relevant period (December 2008 to February 2009), all of the shares in HSA were held by Christian Thomas Group Pty Ltd ("CTG"). The shares in CTG were in turn held by a company registered in Cyprus, CTG Hart Holdings Limited ("CTG Hart Holdings"). The shares in that company were held by Boucousis Nominees Pty Ltd as trustee of the Christian Boucousis Family Trust, and Hart Security Holdings Pty Ltd, a company registered in Cyprus ("Hart Cyprus"). 5Prior to December 2008, the shareholdings in CTG Hart Holdings were held legally in the proportions 50.1% to Boucousis Nominees Pty Ltd and 49.9% to Hart Cyprus. However, some of the shares owned by Boucousis Nominees Pty Ltd were held beneficially for Hart Cyprus, so that Hart Cyprus effectively owned 62.5% of the company, and Boucousis Nominees Pty Ltd the remaining 37.5%. 6It was agreed in December 2008 to alter the shareholdings so that Mr Boucousis would relinquish his interest in CTG Hart Holdings and acquire 50% of the shares in CTG. 7Hart Cyprus is part of what is referred to as the Hart Group, which, since its establishment in 1999 by Lord Richard Westbury, has operated out of Cyprus and provided security and risk management services in various locations around the world, including Africa, Afghanistan and Iraq. Lord Westbury had a lengthy and distinguished career in the British army before pursuing a career in the security services industry. 8Mr Boucousis was in the RAAF between 1994 and 2005, and became a fighter pilot and Squadron Leader. After he left the RAAF, he pursued business interests through CTG (which he founded with Mr Thomas Naude), CTG Australia Pty Ltd, and a company established in Afghanistan known as CTG Afghanistan Pty Ltd. The businesses included the provision of human resources services in relation to development and humanitarian projects in Afghanistan, and consulting services to the military and defence sector in Australia. 9In about late 2006 and early 2007, agreements were reached between Mr Boucousis and Hart Cyprus which resulted in the incorporation of HSA (originally known as CTG Hart Pty Ltd) and CTG Hart Holdings, and the establishment of the shareholding structure described at [4] and [5] above. 10It appears that Mr Boucousis was at all relevant times the only person formally appointed as a director of HSA. Mr Boucousis was also a director of CTG, along with Lord Westbury and Mr Michael Madden, the Chief Financial Officer of the Hart Group. It seems to have been thought, by at least Mr Madden and Mr Boucousis, that Mr Madden was also a director of HSA. On at least one occasion, Mr Madden purported to execute a document for HSA in that capacity. 11It was common ground that following its establishment, HSA was essentially dependent upon the financial support of the Hart Group. It was also common ground that any decisions for HSA that would involve a substantial financial commitment required the concurrence of the Hart Group. Mr Boucousis deposed that this meant obtaining the concurrence of the directors of CTG Hart Holdings. During the relevant period, these directors were Lord Westbury and Messrs Madden and Boucousis. Mr Sundberg, the Chief Executive Officer of the Hart Group, was an alternate director. However, in cross-examination, Mr Boucousis accepted that the position was as stated by Lord Westbury, namely, that any decisions for HSA that required finance had to be agreed by the board of Hart Cyprus. During the relevant period, the board of Hart Cyprus comprised Lord Westbury, Messrs Sundberg and Madden, and also Mr Takis Klerides and Mr Robert Cobett. 12It is convenient to commence by setting out a reasonably detailed narrative of the relevant events. The narrative which follows is largely taken from what appears from the great volume of written communications that passed between the participants, and from contemporaneous notes of meetings and conversations.

Pursuit of the NTA Contract - November 2007 to November 2008 13By November 2007, HSA had become aware of an opportunity to negotiate a contract with NTA for the supply of security services at the Darwin and Alice Springs airports. The services envisaged included services in relation to the checked baggage systems at those airports. The contract with NTA's existing supplier was due to expire in August 2008. 14Mr Madden came to Australia from Cyprus to attend a meeting held on 8 November 2007 to discuss the opportunity. The meeting was also attended by Mr Boucousis, Ms Sallie Stone who was the General Manager and Company Secretary of HSA, and Mr Seamus Burke, a partner of HWL. 15On 15 November 2007, Mr Boucousis sent an update to Lord Westbury and others in Cyprus concerning NTA. The report referred to the Chief Executive Officer of NTA, Mr Ian Kew, and stated that he was "now very positive about the proposal". At that stage, the proposal appears to have included the incorporation of a new company in which NTA would be offered shares. 16The negotiations continued into 2008. By that time, HSA was also seeking to secure a contract with the Civil Aviation Authority of Papua New Guinea in relation to the provision of security services at Jacksons Airport in Port Moresby. On 4 March 2008, HSA and NTA entered into a Non-Binding Letter of Intent in relation to the provision of security services at the Darwin and Alice Springs airports. By that letter, the parties agreed that during a six month "exclusivity period" they would act in good faith and use their best endeavours to negotiate a contract. In mid-March 2008, Lord Westbury came out to Australia, and during that time met with Mr Kew of NTA. According to Lord Westbury, Mr Kew was very positive about HSA, saying that NTA was "sold" on its proposal. 17The negotiations continued. It is clear that HWL was providing assistance to HSA throughout the negotiations, although a formal costs agreement may not have been entered into until May 2008. By that time, HSA had submitted its financial summary and technical proposal. Amongst the issues being dealt with at that time was an issue concerning the ownership and control of the necessary screening equipment. It appears that Mr Hummel, a partner of HWL, first became involved in the matter in relation to that issue. It seems that it was initially proposed that HSA would acquire the equipment and then lease it back to NTA. Later, it was proposed that HSA would not own the equipment but would instead operate it under a licence. On that basis, Mr Boucousis provided a revised cashflow analysis to Mr Madden on 28 May 2008. 18On 11 September 2008, Mr Boucousis sent an email to Lord Westbury which included the following: "NTAPL - We are in final negotiations with NTAPL now - they are now drafting all contracts and have indicated they will present the final draft on Wednesday next week. They have appointed a project manager to work directly to us and we have been working through the detail. The delay has been a result of NTAPL feeling confident to deal with us given the fact we have no track record in Aviation Security. It is quite a big contract and a pretty complex deal so everything is subject to board approval, further refining of the solution etc. I have pushed the project very hard and slowly we are yielding results. Additionally, we require endorsement by the Major unions and as such have commenced negotiations with them as of two weeks ago to develop the Enterprise bargaining agreement for the staff. As for a definitive timeline - we have been attempting to do this since January 08. Best estimates at this point show PNG approval first week in October and NTAPL end of this month. The delay with PNG could feasibly continue into early next year, although NTAPL requires full business transmission by 01 Dec 08, so they have to rush things on a bit. I appreciate that things seem to be moving slowly however we can only go as fast as our client's governance systems and we will have contracts soon." 19The above email was sent in response to an email sent by Lord Westbury earlier on that day in which he called for a full explanation of why both NTA and PNG were "continually slipping". 20On 25 September 2008, Mr Boucousis received an email from Mr Tom Ganley, the Chief Financial Officer of NTA. The email included the following: "We will need to cover on financial risk as part of our board paper. Accordingly we will need to confirm the financial status of Hart Australia - does it produce its own financials? Also we will need to confirm/ evidence that Hart Australia is guaranteed by Hart Worldwide if the Australian entity suffered difficulty potentially compromising its ongoing operation (in both a financial guarantee and operational support)." 21As will become apparent, the financial substance and backing of HSA remained an issue for NTA throughout. 22By late October 2008, the Hart Group was showing impatience in relation to the progress of the negotiations for the NTA contract. On 20 October 2008, Mr Jim Heycock, the Chief Operations Officer, sent an email to Mr Boucousis in the following terms: "Christian the view from the executive is as I discussed the other day; this keeps being pushed out by 3 months every time you meet with NTA. No company can sustain 18 months of costs/marketing and no result. Please let me have your plans for this week as if there is no result then executive action will be taken, as we cannot go on without revenue on this project - Jim." 23Mr Boucousis, in his reply later that day, stated: "As discussed by phone everything is progressing well with NTAPL. There have been a number of issues and technical details which we have been tying down over the past few months, chiefly our ability to deliver the project including an in-depth knowledge of IR Law and collective union agreements. ... There were issue [sic] with Hart not providing any capital or Bank guarantees as directed by Olle [Sundberg] earlier in the year. As such the leasing component has been subject to great oversight by NTAPL's banks that must provide a release of assets prior to the lease taking effect. This is also tied up with NTAPL re-tendering its entire financial support structure. Due to the size of the contract (>$6 million per annum) it is also subjected to multiple Board Level reviews, the last of which sits on 30 Oct. As an unknown quantity in Australia we have been subjected to excessive Due Diligence, all of which we have passed with flying colours reinforcing our value. ... There will be no definitive result this week. It is unrealistic to expect one as the board needs to sign off on everything next week. A result I am confident we will achieve. Mike [Madden] can reinforce any concerns as he has met the NTAPL team and understands the limitations." 24Mr Boucousis' email was forwarded by Mr Heycock to Lord Westbury, amongst others. Lord Westbury's response to Mr Heycock included the following: "No mention has ever been raised about bank guarantees being an issue or highlighted as a problem and accordingly has never been revisited since my trip there in Feb. MM [Mr Madden] came back with no further on it after his visit so this is just an excuse." 25On 27 October 2008, Mr Heycock sent an email to Mr Boucousis in which he complained about the failure to produce a foreshadowed letter of commitment from NTA. Later on that day, Mr Boucousis sent an email to Mr Madden headed "Resignation as Director of Hart Australia". The email included the following: "I am counting on you as a board member of Hart Australia and CTG Hart Holdings to present the information in this email to the board of CTG Hart Holdings and Hart with a view toward resolution vice scorched earth. [...] To ensure no-one is under any illusion I respond in kind. I have 100% faith in what is happening here, although it has taken some time, and on numerous occasions offered to acquire Hart's interest at an equivalent value to that invested. [...] If you have no faith in what's happening in Australia and you are suggesting that I resign then I am happy to do so with my resignation effective the date of this email and absolution of non-compete clauses. I am happy to waiver the three month clause if you wish. I will finish the NTAPL deal to contract prior to leaving as a sign of good faith. That should provide sufficient evidence to "the board" of progress. [...] If Hart is genuinely concerned with "value for money" and return on investment I will make a formal offer to acquire Hart Security Australia for the balance of capital (excluding any management fee invoices) invested to date + 10% (of total capital NOT annualised). Upon such a sale I would happily divest all my other associated interests/options with Hart and CTG Hart Holdings in toto. [...]" 26On 28 October 2008, a series of emails were exchanged between Mr Heycock and Mr Boucousis. Mr Heycock complained that Mr Boucousis had not been in contact with him to explain what progress had been made, and requested that Mr Boucousis give daily updates. After Mr Boucousis indicated that he had spoken to Mr Madden about the matter, Mr Heycock further expressed his dissatisfaction and again demanded that Mr Boucousis provide him with daily updates. Mr Boucousis evidently took offence, and responded in terms which included the following: "If you treat me respectfully I will do the same. I deal with Mike because he is measured and easy to talk to. He spoke to Ian Kew directly yesterday and had a full positive report back reinforcing 100% every report I have sent back. [...] If you lack faith in my ability to deliver then please document it so we can deal with it and all move on." 27Mr Heycock responded by email on 29 October 2008 in terms which include the following: "Christian I have now spoken with Mike and nothing firm came from yesterday's discussion; [...] I expect from you cooperation in what I am asking you to do; that is not apparent at the moment. You are a senior business manager in the company and as such, you are directly responsible to me for your actions. I am not happy with your performance in discharging your duties. The Board is not confident in the delivery of this contract and as Hart has invested significantly in Australia a return is expected. I will now reiterate what I want: [...] Lastly, the above points are not for discussion; they will be my immediate briefing tools to enable me to inform the Board, who currently are somewhat in the dark. Please respond by return with your briefing. Failure to do so will result in disciplinary action by the Board - Jim." 28On 30 October 2008, Mr Boucousis composed a letter of resignation to be sent to Lord Westbury (as Chairman of Hart Security Limited). The letter included the following: "I would like to inform you that I am resigning from my position as Managing Director of Hart Security Australia effective 01 March 09 in response to ongoing and recent correspondence indicating dissatisfaction with the performance of the Australian business. This will ensure that an effective handover occurs on the NTAPL project and our consultancy commitments are fully met. I have identified an appropriate replacement with sufficient business and aviation experience who will assist Paul [Jordan] and Sallie [Stone] in every way with the implementation of this contract. With projected earnings of $10 million AUD this should see an appropriate return on you[r] investment to date. Whilst I am completely happy with the performance outcomes of the business, despite ongoing client delays, and disagree with Head Office comments, I still thank you for the opportunities that you have provided me during the last two years. I have enjoyed my tenure with the company." 29It seems that the letter of resignation was not sent by email on 30 October 2008. The evidence is not clear as to whether or when it was posted, but it appears that the letter of resignation was attached to an email sent by Mr Boucousis to Cyprus on 5 November 2008. 30Upon receipt of the letter of resignation, Lord Westbury was concerned about how HSA could secure the NTA contract if NTA became aware that Mr Boucousis had resigned or was intending to resign. Lord Westbury understood that Mr Boucousis had been the primary point of contact with NTA and had the carriage of the negotiations with them. In an email to Mr Boucousis sent on 5 November 2008, Lord Westbury referred to his concern and stated that a "mitigation strategy" needed to be determined. He suggested that Mr Boucousis come to Cyprus to discuss the matter, and that until a mutually acceptable way forward was reached, the resignation must remain totally confidential. Arrangements were made for Mr Boucousis to be in Cyprus between about 1 and 4 December 2008. 31In about early November 2008, HSA commenced performing certain consultancy services for NTA. Drafts of a Consultancy Agreement, which would record the terms of the arrangement, were prepared. As it turned out, the Consultancy Agreement was not executed until about 22 December 2008. The agreement was signed for HSA by Messrs Boucousis and Madden.

Mr Boucousis makes contact with ATMAAC 32On 24 November 2008, Mr Boucousis met Mr Brian Kelly from ATMAAC. ATMAAC was a provider of manpower in the security services sector. According to Mr Boucousis, he had made contact with ATMAAC concerning manpower requirements for the NTA contract, and an intermediary (Mr Simm) had arranged a meeting between Mr Boucousis and Mr Kelly, who was the Chief Executive Officer of ATMAAC. 33According to Mr Boucousis, there was discussion at the meeting about ATMAAC assisting with the manpower requirements for the NTA contract, as well as some general discussion about other possible collaboration between the two companies, including the creation of some form of strategic alliance. It is clear that, during the meeting, Mr Kelly was informed by Mr Boucousis that he was going to be involved in negotiations with the Hart Group. In cross-examination, Mr Boucousis conceded that he may have informed Mr Kelly that he was going to offer to acquire the Hart Group's interest in HSA. He also conceded that he may have spoken further to Mr Kelly before 3 December 2008.

Meetings in Cyprus in December 2008 34A series of meetings were held in Cyprus in the early days of December 2008 involving Lord Westbury and Messrs Sundberg, Madden and Boucousis. The discussions included conversation about the possibility of Mr Boucousis finding someone to acquire the Hart Group's interest in the Australian operation. There is a dispute as to whether Mr Boucousis mentioned ATMAAC during any of those conversations. I accept Mr Boucousis' evidence that he made mention of meeting someone from ATMAAC, a company that Investec Bank had recently bought into, and said that Investec might be interested in discussing the making of an investment in HSA. It is likely, however, that insofar as the conversations concerned the identity of the potential investor, the focus was squarely upon Investec rather than ATMAAC. 35On 3 December 2008, in the course of the discussions, Mr Boucousis sent an email to Mr Kelly of ATMAAC which included the following: "We have reached some consensus here and I will be given the opportunity to make an offer on the total acquisition of Hart Australia. I will have a draft offer document tomorrow afternoon your time. Attached is documentation to bring you up to speed on Hart Australia and the opportunity. This includes 1.Signed copy of the workplan indicating adoption of primary contract 2.Consultancy agreement (this should've been signed today, however there is a spelling error. Will be signed by week's end) 3.The final board presentation which was approved 4.10 Year earnings projection based on 9.58% margin on total contract plus six percent margin on manpower. 5.My Resignation Letter Broadly speaking we are looking at the following: Settlement by 15 February I will contribute circa $1 million USD to the deal Any other party needs to contribute $1.7 million for what is equivalent to 50% Yes the whole lot will be amalgamated into ATMAAC, it will work no other way, however for the purpose of valuing my equity position within the group I would like to us[e] the baseline of 50% of Hart Australia's value at time of NTAPL contract. That is broad brush. I will certainly provide more info, however the attached will begin the process of increasing awareness of your team. I also have copies of P&L's for the entities I will be surrendering my equity in so you can all see my "skin in the game" as it were." 36Mr Boucousis conceded in cross-examination that some of the information he provided Mr Kelly was commercially highly sensitive. Mr Boucousis did not accept that ATMAAC was a competitor of HSA, although he did concede that both companies were participants in the security services market. Mr Boucousis maintained that it was not inappropriate to provide the information to Mr Kelly in circumstances where it had been agreed that he could seek to acquire the Hart Group's interest in HSA. Mr Boucousis stated that the information was provided with a view to having Investec invest in HSA. 37Later on 3 December 2008, Mr Boucousis sent a further email to Mr Kelly. This email attached a draft agreement which provided for Mr Boucousis to have the option of acquiring Hart Cyprus' interest in CTG. Mr Boucousis requested that Mr Kelly indicate whether the "timelines" within the draft agreement were achievable. 38On 4 December 2008, two documents were prepared that were later executed by Lord Westbury and Messrs Madden and Boucousis. The first, headed "Agreement", included the following: "Whereas (a) CB [Mr Boucousis] is the owner of 37.5% of Holdings [CTG Hart Holdings] (b) Hart is the owner of 62.5% of Holdings [CTG Hart Holdings] (c) Holdings owns 100% [of] a company called Christian Thomas Group Limited (hereinafter referred to as CTG) which in turn owns 100% of a company called CTG Australia Pty Ltd and 100% of a company called Hart Australia Pty [Ltd] ... (i) effective from the date of this agreement, CB will acquire such shares in CTG to increase his/CB share-holding to 50% under the following terms and conditions: 1. CB has resigned from his employment, effective February 28, 2009, though such resignation will be rescinded and a minimum two year mutually acceptable contract of employment signed, providing the NTAPL man-power services and equipment leasing contract is secured by any of the Hart group companies. 2. CB, Hart and Holdings will keep confidential the fact that CB's resignation is pending. 3. In the event that the NTAPL man-power services and equipment leasing contract is not secured by any of the Hart group companies, Hart will review its' investment strategy with respect to CTG and subsidiaries in order to minimise any potential financial loss as a consequence of the non-award of the NTAPL man-power services and equipment leasing contract. Notwithstanding the above it has further been agreed that 4. CB is granted an option exercisable on or before 1st March 2009, being the effective date, to acquire from Holdings the 50% shareholding in CTG, owned by Holdings under the terms and conditions identified in the option Agreement dated 4th December 2008. Furthermore and also effective on the date of this Agreement: CB will relinquish 37.5% shareholding in Holdings to Hart Security Holdings Limited together with his 1.5% share in Hart. Hart agrees to convert all of the inter-company balances as at the effective date, into share capital. Conditions precedent (a) With the exception of a further USD 50,000 short term loan being made available by Hart for CTG at an interest rate of Libor plus 6%, no further funding will be made available by Hart to CTG or its' subsidiaries unless the terms of such funding are mutually agreed upon. In the event that mutual agreement is obtained and unless otherwise agreed, then funding will be provided in proportion to the Holdings and CB respective share-holdings. (b) CB and Hart will agree the overall funding requirements for CTG and subsidiaries with respect to the fulfilment of mutually agreed objectives in the short to medium term. CB will approach financial investors in order to secure such additional working and investment capital as necessary, which may lead to the pro-rated dilution of both Holdings and CB with respect to their respective share-holdings in CTG. [...]" 39The second document was headed "Agreement (Option)". It included the following: "Whereas Following the execution of the share transfer Agreement under which, CB increased his/CB share-holding in CTG to 50% CB has been given an option to acquire 100% of the issued share capital in CTG Thomas Group Pty Ltd and its subsidiaries on the following terms and conditions: 1. CB is granted an option exercisable on or before 1st March 2009 to acquire from Holdings such shares that will secure up-to 100% of the shareholding in Christian Thomas Group Pty Ltd for the following consideration. For each additional 1% share purchased CB will pay Hart an amount of USD 30,000 (USD thirty thousand) 2. A cash payment to holdings of up to USD 1,500,000 (USD one million, five hundred thousand) on or before 15 March 2009 based on USD 30,000 (USD thirty thousand) for each additional 1% share purchased 3. A further cash payment with respect to interest of Libor plus 3% on intercompany balances totalling USD 1,186,446 as of September 30, 2008 until the date of receipt of above consideration. [...]" 40Both the Agreement and the Agreement (Option) were marked in handwriting "Draft - Provisional" and the handwriting was apparently initialled by Lord Westbury and Messrs Madden and Boucousis. There was evidence that some of the terms of those agreements were later varied. It seems, for example, that the principal amount payable by Mr Boucousis under the Option may have been reduced from USD 1.5 million to USD 1.2 million.

Mr Boucousis' activities - December 2008 to February 2009 41There is little evidence of any activity in December 2008 in relation to the NTA contract, although it appears that Mr Boucousis had a discussion with Mr Burke of HWL on 8 December 2008 concerning industrial relations issues. 42On 19 December 2008, Mr Boucousis sent some draft cash flow spreadsheets to Mr Madden. The spreadsheets were said to have been compiled by Investec, apparently as the basis of a valuation of HSA. On 24 December 2008, Mr Boucousis sent an email to Lord Westbury and others in Cyprus in which he provided some information about his efforts to obtain an investor. The email included the following: "The upshot of these discussions have been that yes they are interested in Hart Australia, however not at $1.5 million (what a surprise). Their justification is as follows: 1 Hart is involved in Iraq [...] 2 They are effectively "backing me" and another Aussie guy who is running the transaction from their side, not the [sic] so much the NTAPL contract, their opinion is that a one contract company carries a lot of risk. As such they have offered me a position in their M&A department for a $500,000 AUD sign-on bonus and equal pay, which to be honest is an attractive proposition as it is not in the security space and spans their emerging markets arms. [...] 4 The Australian business still requires AUD $850,000 in Cashflow funding and $330,000 to acquire a new X-ray machine and 5 x explosive trace detection machines. [...] 5 They own a manpower company with all the requisite agreements for staff and the NT Security licences we are still waiting for. This is the biggest risk to the whole contract and something we do not have yet and to be honest I don't think we'll have in time as NTAPL just had their agreement rejected by the WPA (Workplace Authority) which we were basing ours on. As I stated in Cyp either way with Hart or Investec I am happy. [...] I can only convince them to part with so much cash. I would recommend taking the offer of $1.2 million USD as that is the maximum they are able to get from the credit committee, on top of cash flow and $330,000 for the extra machines." 43Although the evidence on this matter was most unclear, it seems that Mr Boucousis sent a second email at about the same time on 24 December 2008 which attached some form of offer from Investec. That offer does not seem to have found its way into evidence. In any event Mr Madden, in an email to Mr Boucousis on 7 January 2009, indicated that Hart might be interested in an arrangement whereby it received $1.2 million and retained a 10% interest. 44By early January 2009, Mr Jonathan Jackson, who had recently been employed by HSA, was working on the NTA contract matter. On 7 January 2009 he provided a memorandum to Mr Boucousis and Ms Stone concerning a progress meeting that had been held. On 8 January 2009 Mr Boucousis and Ms Stone (and others) attended a conference with Mr Burke of HWL concerning various issues in relation to the NTA contract. 45On about 16 January 2009, a question arose concerning the terms of a Letter of Support which the Hart Group had given in relation to CTG and HSA. Letters of Support had been provided by the Hart Group on 8 September 2008 and 20 November 2008 and it seems that at least one of those letters had been provided by HSA to NTA for due diligence purposes. These letters indicated that Hart Security Holdings Limited would continue to support CTG and HSA "financially and operationally" for a period of at least 12 months from the date of the signing by KPMG of the accounts of CTG and the accounts of each of its controlled entities for the year ended 31 December 2007. Those accounts were in fact signed by KPMG in about late November 2008. On that basis, the letters provide for continuing support until about late November 2009. Notwithstanding the terms of the letters, Mr Boucousis sent an email to Mr Madden on 16 January 2009 requesting him to "update" the Letter of Support for due diligence purposes on the basis that, as it stood, the letter expired on 31 December 2008. In his email response later on that day, Mr Madden himself appears to have been of the view that the letter expired on 31 December 2008. Mr Madden appeared amenable to issuing a revised letter for a new timeframe, and agreed with Mr Boucousis' suggestion that a separate agreement would need to be signed to deal with the terms of the agreements reached in Cyprus in 2008 insofar as they concerned funding. Mr Boucousis, in his email reply later on 16 January 2009, requested that a Letter of Support be issued with a revised date of 31 December 2009, and undertook to draft a letter to deal with the effect of the agreements reached in December 2008. It seems that no further Letter of Support was issued. According to Mr Madden, this was because it was realised that the existing letters had not in fact expired. 46On 16 January 2009, Ms Selina Pollard, the Legal Counsel of NTA, sent an email to Ms Stone and Mr Boucousis concerning a list of issues to be addressed. The first of those issues was described as "form of security". Ms Pollard mentioned "bank guarantee/parent company guarantee/director's guarantee" and stated that she was awaiting instructions on the issue. 47On 23 January 2009, Mr Ainslie of NTA sent an email to Mr Boucousis together with an email sent earlier that day to Mr Ainslie by Ms Pollard. Ms Pollard's email attached a draft of the Security Service Contract. It is apparent from the terms of her email that she was aware that there was some form of relationship between HSA and ATMAAC. Specifically, her email included the following: "I further note that Hart's relationship to ATMAAC may need to be addressed in the contract - once that relationship is known. And that the Equipment Lease will be prepared separately and may attach to the Contract, if considered appropriate." 48Mr Ainslie's email to Mr Boucousis also refers to a relationship between HSA and ATMAAC. Specifically, his email includes the following: "We also discussed your relationship to ATMAAC on 21st Jan which we will need to understand given this is instrumental at this stage in executing a successful contractual arrangement and for us to assess risk to NT Airports. A quick response on this issue would be appreciated." 49Shortly after the receipt of Mr Ainslie's email, Mr Boucousis sent an email to Messrs Sundberg, Madden and Heycock in Cyprus attaching the draft NTA contract. Mr Boucousis' email also included the emails from Mr Ainslie and Ms Pollard which he had received earlier that morning. However, Mr Boucousis had deleted from those emails the parts of them which concerned the relationship between HSA and ATMAAC and its importance to the NTA contract. 50In his cross-examination, Mr Boucousis initially denied that he intentionally withheld information from Hart Cyprus concerning the relationship with ATMAAC, but when confronted with the amended emails, he eventually accepted that he intentionally altered the emails, and did so in order that Hart Cyprus did not see the material concerning the relationship with ATMAAC. This evidence, which was plainly unsatisfactory, was heavily relied upon by HSA in contending that Mr Boucousis was behaving dishonestly. 51The draft contract which was attached to Mr Boucousis' email of 23 January 2009 named HSA as the Service Provider, had a term of 3 years from 1 April 2009 (subject to extension), and provided for guarantees to be provided by Mr Boucousis and Hart Security Holdings Limited, as well as a bank guarantee of an unspecified amount. 52Later on 23 January 2009, Mr Boucousis sent an email to Mr Madden which was in the following terms: "NT have asked us to guarantee the contract up to $5 million and to carry insurance for damage to their business as a result of contract breach up to $50 million. Any ideas what type of insurance this would be??" 53Also on 23 January 2009, Mr Boucousis sent an email to Lord Westbury and Messrs Madden and Sundberg headed "Update on Investec Acquisition". In the body of the email, it was stated that "the situation with Investec/ATMAAC is progressing". Reference was also made to the signing of the NTA contract, and that it was now "slated" to occur on 20 February 2009. Lord Westbury, in his email response on 26 January 2009, asked why the contract signing date was slipping. He also stated that the likelihood was that Hart would say no to Investec. Mr Boucousis sent an email in response later on 26 January 2009. His email included the following: "The delay in signing the contract doesn't affect the implementation of the contract and is an administrative issue only, we have a side contract that covers us in the interim. We will all be up in NTAPL on the 18th in preparation for the signing in order to commence the transition immediately. There are some strange last minute requests we are sorting through, including a $5 million AUD performance bond. [...] The scuttlebutt is given Hart has no track record, this would provide "comfort" to the NTAPL team. I am confident I can sort this out next week." 54On 28 January 2009, Mr Ainslie of NTA sent an email to Mr Boucousis headed "Outstanding Requirements". The email included the following: "I refer to previous correspondence regarding the Hart Group structure and guarantees required to be provided to Northern Territory Airports Pty Ltd ("NTAPL") to give NTAPL comfort that Hart Security Australia Pty Ltd ("Hart") can perform and carry out its obligations under the proposed Security Service Contract. NTAPL has the following concerns - (a) contracting with a relatively new company which has not yet provided aviation security services in Australia; (b) contracting with a company with only $1,000 issued capital and which operated at a loss for the past financial year; (c) contracting with a company which is ultimately held by an overseas company (Hart Security Holdings Limited (Cyprus) (49.9%)) and family trust (Boucousis Family Trust (50.1%)); (d) the contracting party's ability to provide - (1) indemnity up to $50 million [...] (2) insurances [...] Given NTAPL's legislative obligations under the Aviation Transport Security Act and Regulations, and the concerns outlined above - NTAPL requires some level of comfort that the Darwin international airport and Alice Springs airport at all times remain operational and that any risk of termination of security services prior to the expiry of the proposed term of the Security Service Contract are appropriately mitigated. I am advised that NTAPL requires the following from Hart to mitigate such risks - (1) An unconditional and irrevocable bank guarantee from an Australian trading bank in the value of $5 million (five million dollars). (2) The following to execute the Security Service Contract as Executors - Christian Patrick Boucousis and Hart Security Holdings (Cyprus). Can you please advise of your willingness to enter the Security Service Contract with the abovementioned guarantees. [...] As you are aware, it is proposed that the Security Service Contract be presented to the NTAPL Board meeting on 19 February 2009 - Board Papers must be submitted on or before 9 February 2009. As guarantees will be a significant issue on the Board approval process, I request your speedy response to this request." 55The above email was forwarded by Mr Boucousis to Mr Madden, and a number of emails passed between Messrs Boucousis and Madden shortly thereafter. In one such email Mr Madden stated: "The need to supply a $5m bond should have been determined by NTAPL, long before now - given the fact that they have known all about the group, the Australian subs and the lack of Aus experience in aviation, for many months." 56Mr Madden also posed the question whether the request for the guarantee was a polite way for NTAPL saying "thank you but no thank you". In response, Mr Boucousis wrote: "Not sure, it all seems a bit over the top and to be honest they all seem a bit cagey right now. [...] If we don't provide a definitive answer by Friday the existing contract will be extended another six months until the terms are met. Stuart [Ainslie] said very simply that as the oz company has no asset base, the bank guarantee will provide the level of comfort required to demonstrate commitment to the contract." 57On 29 January 2009 arrangements were made between Mr Boucousis and Mr Burke of HWL for a conference call to take place on the following day to go through the draft NTA contract. It was envisaged that Mr Jackson and Ms Stone would also participate in that conference. It appears that by 29 January 2009 Mr Boucousis had become aware that the Hart Group was unwilling to enter into a bank guarantee. He sent an email on that day to Lord Westbury and Mr Madden seeking detailed instructions on the matter. 58On 30 January 2009 Mr Madden sent an email to Mr Boucousis in the following terms: "Having been instrumental - in fact an integral part of all that has occurred with NTAPL - we trust that you as a 50% equity partner in Hart Australia and thereby having to assume 50% of these conditions and obligations, agrees with our/your partners decision on this matter as outlined below: Following the receipt and review of the draft services contract with NTAPL together with your confirmation of the need for an AUD $5 million bank guarantee, we have some concerns with respect to the interpretation and nature of certain clauses and have serious reservations with respect to the need to include the provision of the bank guarantee - for such a quantum, for such a period and with language required that will basically preclude it from being a "bankable transaction". Furthermore given the fact that the contract also stipulates: the need to place wide-ranging and significant upper limits on "cover" within various insurance policies, indemnity clauses that further bind the contractor without any form of reciprocation, a series of Key Performance Indicators, many of which can be construed as subjective and could therefore result in vastly reduced billings and income we have no option than to oppose the inclusion of the bank guarantee clause in its' entirety. Whilst we have had every desire and intention to finalise the contractual arrangement with NTAPL and in recognition of your tireless efforts, we were somewhat shocked and disappointed by the inclusion of such a requirement - given the 15 months relationship with NTAPL, the provision of management services to the client - and the very sudden "unannounced" appearance of such an onerous condition." 59Mr Boucousis forwarded that email to Mr Ainslie on the morning of 30 January 2009 and requested NTA's position "based on this email". Mr Ainslie, in his email in reply, suggested that they could talk on Tuesday morning (3 February 2009) "if we are going to talk through the alternate scenario". 60The teleconference that had been arranged with Mr Burke took place between about 11am and 12:45pm on 30 January 2009. The draft NTA contract was reviewed during the conference. Later that day Mr Boucousis telephoned Mr Burke and, as appears from Mr Burke's note of the conversation, told him, in effect, that HSA's head office had said that the $5 million bank guarantee would not be provided, and that NTA had said that in that case HSA can't have the contract. Mr Boucousis also sent an email to Mr Madden which included the following: "My desire is to proceed as agreed on 04 December, however I must highlight issues that have arisen since that time. I have been advised by our (Hart) lawyers to outline the issues below, all of which were discussed this evening. All information is predicated on the non-award of the NTAPL contract to Hart Security Australia and are statements of fact. I was advised by Stuart Ainslie that the basis of the bank guarantee requirement was as a result of a balance sheet comparison between HSA and the three other aviation security companies, ISS, Chubb and SNP during the due diligence process. Without this contract we will be unable to remain solvent beyond April, as you are aware I have knowledge of this and I have a legal obligation to declare the situation to ASIC (Company's House) in due course (and prior to insolvency). [...] Additionally I have been seeking other options for funding/offers or a reduction in the capital related obligations required of Hart by NTAPL. As discussed we currently have no letter of support from HSL. Stuart Ainslie and Kew confirmed today that in Hart's case as an offshore company that the Bank Guarantee is essential and as such with no bank guarantee there can be no contract. Stuart Ainslie indicated that the bank guarantee would only apply to an offshore entity and probably not an Australian entity (although other guarantees will be required). I have approached ATMAAC and Investec again to commit on the offer of $1.2 million USD and "refunding" the $5 million Bank Guarantee to ensure contract award. Mark Joffa, Investec, advised that without a signed contract it cannot get approval from the credit committee. Investec confirmed its earlier offer of $500,000 AUD or an earn out of $750,000 AUD to acquire the contract and bring the contract to a close, the transaction needs to occur by Friday 7th Feb (NTAPL deadline for the board submission). The fact is that NTAPL requires a strong balance sheet to execute the contract and other investors are baulking at the Bank Guarantee and subsequently will not invest. This is the best I have been able to do (to date) to resolve the situation. [...] My formal recommendation is that Hart Security Australia accept this offer, HSL accept the $500,000 and retains Paul and Sallie and their business (Timor, NHK, IFK, Media etc). Could you please record your position on this issue and how you wish to proceed prior to 01 February 09? [...] Based on our discussions tonight you indicated an intent to discuss the contract with Ian Kew which I will arrange. As this conversation is beyond the current deadline could you please provide a written letter of comfort or support underwriting all liabilities, including outstanding tax, superannuation, leave entitlements and creditors to cover the eventually [sic] that NTAPL doesn't award the contract to any of the abovementioned parties, prior to 2nd Feb. As there is currently no legal instrument in place assuring solvency, I have no option but to execute an agreement with ATMAAC and Investec to guarantee the solvency of the company. Can you please provide this ASAP to ensure we can "buy time"." 61Mr Burke says that he had a further telephone conversation with Mr Boucousis on 30 January 2009, during which Mr Boucousis said that he needed to get advice from an insolvency lawyer about his duties as a director of a company that is near insolvency. By the end of the day, arrangements had been made for Mr Mark Webeck, a partner of HWL, to provide such advice. Mr Hummel sent an email to Mr Webeck which contained some background information, including that Mr Boucousis was the sole director of HSA. Mr Hummel had obtained a company search of HSA which indicated that that was the position. Mr Hummel's email also referred to the refusal to provide the $5 million bank guarantee as well as to an offer from "Admac" to assign the NTA contract to it for $500,000. It was stated that head office had advised rejection of the offer on the grounds that it assisted a competitor. The email further noted that Mr Boucousis "agreed with our suggestion" that, in the absence of the NTA contract, "Hart is in a state of near insolvency". 62On 31 January 2009, Mr Madden responded to Mr Boucousis' email of the previous day. This response was in the following terms: "It is preferable, indeed wise, to have the discussion with Ian Kew before responding to the points outlined below. In the meantime I would draw your attention to the agreement we made on 4th December with respect to undertakings agreed upon. In order to assimilate all the facts and possible options, would you kindly request Investec provide a letter formally outlining their position especially with respect to the NTAPL contract." 63On 2 February 2009, Lord Westbury also sent a response to Mr Boucousis' email of 30 January 2009. Lord Westbury requested a time and a number for a telephone call with Ian Kew. It seems that no telephone number was provided by Mr Boucousis, but in cross-examination he maintained that he made efforts to co-ordinate a telephone conversation between Lord Westbury and Mr Kew. HSA called Mr Kew in its case, but Mr Kew gave no evidence, nor was he asked questions, about this matter. 64Mr Webeck provided a letter of advice to Mr Boucousis in the evening of 2 February 2009. The letter included a description of the duties owed by directors, both at common law and under statute. It was stated that there was a duty to "avoid conflicts of interest, i.e. not enter into any engagements in which a director has a personal interest conflicting, or which may possibly conflict, with the interests of the company". 65There was further discussion around this time concerning the bank guarantee issue. It appears from an email sent by Mr Boucousis to Lord Westbury and Mr Sundberg on 3 February 2009 that NTA had mentioned a figure of $3.8 million but had yet to commit to anything on paper. 66It is apparent that by this time discussions had taken place between Mr Boucousis, Mr Kelly and lawyers retained by ATMAAC (Middletons) about the draft NTA contract. Middletons produced a revised draft of the contract on 4 February 2009. This draft named ATMAAC as the service provider. It provided for a ten year term commencing on 1 April 2009, and further indicated that there would be a bank guarantee for $400,000. It is clear from the email sent by Mr Landis of Middletons to Mr Kelly on 4 February 2009 (which attached the draft and was copied to Mr Boucousis) that Investec had advised that they were prepared to provide a bank guarantee of only $400,000, not $1 million. A draft of the contract circulated by Ms Pollard on 18 February 2009 (in which HSA was reinstated as the service provider and $1 million was reinstated as the amount of the bank guarantee) indicates that at some stage Mr Landis' draft contract was provided to NTA. 67On 4 February 2009, Mr Boucousis sent an email to Mr Madden which attached an offer from ATMAAC for the purchase of all of the shares in CTG. The offer was for $500,000, and was based upon various "key assumptions" including the satisfactory execution of the NTA and Jacksons Airport contracts, and a three year employment contract with Mr Boucousis. His email also stated that NTA had advised "that the bank guarantee requirement stands". 68On 5 February 2009 Mr Madden sent an email to Mr Boucousis headed "NTAPL and ATMAAC" in which he referred to recent telecommunications and emails and stated that it was impossible for Hart to "negotiate" the contract in this manner. Mr Madden gave various reasons including "the substantial U-turn re the quantum and terms attached to the bank guarantee". As for ATMAAC, Mr Madden stated that Hart had no interest in its offer. Mr Boucousis, in his email response of the same day, stated that NTA had made their final position clear on the question of the bank guarantee. He also indicated that there were two deadlines to make decisions, namely, a "soft deadline" of 9 February 2009 for board submissions including "in principle" support of the bank guarantee, and the 19 February 2009 board meeting "whereby details of guarantee and guarantor have firmed up". The email also included the following: "I have sent you a copy of the contract which has been through two sets of lawyers - ours and ATMAAC's. [...] NTAPL has stipulated full transparency on the comings and goings with this transaction, including any offers/ interaction with ATMAAC, acceptance of guarantees etc." 69Mr Boucousis also inserted various comments on the points raised by Mr Madden in his earlier email. In relation to the bank guarantee Mr Boucousis noted that it applied to "any/all parties domestic or international" and that the intent was $1 million AUD "ratcheted down over 5 years." As for ATMAAC, Mr Boucousis attached a word document for Mr Madden "to amend the terms as you desire for a counter offer". 70On the same day Ms Pollard of NTA sent an email to Mr Boucousis concerning the bank guarantee issue. Her email included the following: "NTAPL's concerns outlined in Stuart's email of 28 January remain. However, after further consideration NTAPL advises that it is prepared to reduce the amount of the bank guarantee to be provided by Hart. NTAPL requires the following: 1. An unconditional and irrevocable bank guarantee from an Australian trading bank in the amount of $1 million (one million dollars). 2. The following to execute the Security Service Contract as Executors - Christian Patrick Boucousis and Hart Security Holdings Limited (Cyprus). Can you please advise of your willingness to enter the Security Service Contract with the abovementioned guarantees. [...]" 71Later on 5 February 2009 Mr Madden sent an email to Mr Boucousis which included the following: "Further to the various telecoms and emails, concerning the contract for security services with NTAPL we would consider moving forward on the following basis: The bank guarantee, capped at AUD 1m will be valid for a period of 12 months (only) from commencement of services and is subject to our review and acceptance that terms and conditions are "now" satisfactory. In light of the considerable amount of time, effort, consultancy work (and considerable travel) expended by you and your team during the last 15 month period, wherein you (and your team) have focused almost solely on this project (to the point of being totally "distracted" from many other business opportunities) - and are about to deliver a considerably creative cost - saving solution to NTAPL's security needs - we request an advance payment based on 2 months estimated billings, repayable in 12 equal monthly instalments, by way of deduction from monthly invoices submitted to the client." 72On 6 February 2009 Mr Boucousis responded to Mr Madden in the following terms: "I have had a teleconference with Stuart and Selena today. NTAPL does not agree with these terms. The final position is a $1 million bank guarantee ratcheted down over 5 years. No advance payment will be entertained. Investec has agreed to meet the terms stipulated above, providing full bank guarantees and guarantor over the contract. HSL must be guarantor for the contract. It is important for their meeting Monday morning that Hart agree to guarantor the contract and the bank guarantee as stipulated above. I will be available from 1200GMT to discuss. It is important that we discuss this before Monday." 73Mr Madden sought clarification about who was proposed to be giving guarantees. Mr Boucousis responded saying, in effect, that a guarantor was required for the contract, either HSL or Investec "should you accept ATMAAC offer". 74Later on 6 February 2009, Mr Madden sent a further email to Mr Boucousis which included the following: "Just to clarify where we are: We do not accept NTAPL's stipulations or requirements and have to reiterate that in order to move forward we would need confirmation that NTAPL accept our terms as outlined in yesterday's email - reproduced below. [...] We have no interest in accepting the ATMAAC offer as currently outlined and if we were to find a suitably workable arrangement, it would have to be completed on an immediate basis." 75On 9 February 2009, Mr Boucousis informed Ms Stone that he was going to organise a meeting between Ms Stone and Mr Kelly on 13 February 2009 "to discuss options for moving forward with ATMAAC". 76On 10 February 2009, Mr Boucousis sent an email to Mr Madden attaching a board paper that was said to have been submitted to the NTA board. The email contained the following: "As discussed, this is the board paper as submitted to NTAPL board today. I tried to call you a couple of times yesterday to clarify and resolve this ongoing issue. I am progressing "in the dark" somewhat pending more feedback from HSL. I would like to confirm, based on existing formal correspondence HSL's position it [sic] that is not willing to proceed with the contract. On this basis I need to inform that Hart Security Australia is unable to proceed. I need to know Hart's [HSL] formal position on either: Proceeding as per the board paper Accepting Offer or providing formal feedback on a revised offer for ATMAAC to acquire Hart Australia. The bank guarantee issue has shifted the goalposts on this somewhat. Advising an alternate course of action which can be implemented by Monday 16th February Not executing this contract is not an option on the basis of: Forcing the company into an insolvent position Limited employment opportunities for existing Hart Australia Staff I am back in Australia on Wednesday and NTAPL are expecting some sort of answer as to how we are going to proceed. NTAPL are aware of the HSL position. NTAPL are doing the right thing by me at the moment by allowing us some leeway on timing. I am cashing in a lot of "personal favours" to get this extension and give everyone some breathing space. The deadline for HSL's final position is Monday 16th. If HSL is unwilling to support the contract or things remain "unclear" (no resolution either way) I will have to advise NTAPL, in order for them to withdraw the board paper and proceed in a different path. I look forward to your urgent response." 77The board paper contained a recommendation that the NTA board approve a contract with HSA for a term of five years from 1 April 2009 (with the possibility of a further five years). Under the heading "Risk Mitigation" it was stated: "The main risk identified during the consultation period and in the current economic conditions was the ultimate 49.1% shareholding of Hart held by Hart Security Holdings Limited located in Cyprus. This was exacerbated with Hart's untested service reliability in the Australian marketplace and more particularly the Australian aviation security market. The risk will be mitigated through the provision of: (a) an unconditional and irrevocable bank guarantee from an Australian trading bank in the amount of $1M; and (b) the execution of the security services contract by Christian Patrick Boucousis (Sole Director and ultimate 50.1% shareholder of Hart) and Hart Security Holdings Limited as guarantor." 78The board paper was considered by Lord Westbury and Mr Madden. On 11 February 2009 Mr Boucousis received an email from Mr Madden in which Hart reconfirmed its position as follows: "Thank you for sharing the draft proposal being put forward to the NTAPL board. In light of this we would like to (re)confirm our "position" as per below: With reference to the current terms and conditions proposed by NTAPL with respect to our taking over the security services contract, Hart will not entertain such terms and conditions as outlined and you are therefore unequivocally disallowed from binding Hart Australia Pte [sic] Ltd or any Hart group company. You are therefore not allowed to sign such document and will inform NTAPL management accordingly. As previously stated and to reiterate - "we have no interest in accepting the ATMAAC offer as currently outlined and if we were to find a suitably workable arrangement, it would have to be completed on an immediate basis". In recognition that time is of the essence, acknowledging the timing of the NTAPL board meeting and the fact that your option lapses at the end of this month, we await feedback from you." 79The terms of this email were formulated by Lord Westbury and Messrs Sundberg and Madden. Mr Boucousis gave evidence that he believed, due to the expressed attitude of Hart Cyprus, that the NTA contract was lost "unless it could be done some other way". 80Later on 11 February 2009, Mr Boucousis attended a conference at HWL with Messrs Burke and Hummel. It appears from Mr Burke's notes that there was discussion about the possibility of Mr Boucousis, as the sole director of HSA, issuing shares and appointing a director. The notes reveal that Mr Boucousis appreciated that such a course would be against the express wishes of Hart Cyprus. HWL was requested to advise as to whether the proposed course was permissible, and whether there was a positive duty to disclose it to "an indirect shareholder". 81On the morning of 12 February 2009, Ms Stone sent an email to Mr Heycock upon her return from Darwin working with NTA. She reported that a communications strategy workshop was well received and that everyone seemed very happy about Hart "yet Investec are walking around and ATMAAC are openly talking to NTA staff". Her email concluded with the following: "Any idea what Hart corporate are doing? It'd be such a shame to walk away from this contract. Why can we not grab it and run with it ... with or without Christian." 82In the afternoon of 12 February 2009, Mr Boucousis requested HWL to "hold fire" until 1pm on the following day as he had a meeting with ATMAAC and Investec to go through details. Later on 12 February 2009, Ms Pollard sent an email to Mr Boucousis in which she stated that she was expecting a revised contract from NTA's external lawyers (Cridlands MB) in response to comments from both Hart and ATMAAC lawyers, and that the revised contract would tighten up the assignment/change of ownership clause. Her email included the following: "The proposal we have put up to the Board proposes Hart Security Australia Pty Ltd as the contracting party and we have also addressed our risk assessment re Hart Cyprus ultimate 49.9% shareholding and risk mitigation - $1M bank guarantee and you guaranteeing and signing the contract personally as ultimate 50.1% shareholder. Obviously, if the proposed acquisition (ATMAAC acquisition of the Hart Cyprus shares) takes place after Board Approval but before contract execution - it puts us in a difficult position and perhaps leaves Ian without the appropriate authority to sign the contract for NTAPL. I am not sure how you are travelling with the ATMAAC and Hart Cyprus transaction, please advise: A Whether an offer has been accepted by Hart Cyprus? B Contracts exchanged between ATMAAC and Hart Cyprus? C Anticipated settlement date?" 83It is clear that at about this time Mr Boucousis was involved in further discussions with ATMAAC and Investec. On about 14 February 2009, a representative of Investec, likely to be Mr Peter Ferizis, sent an email to Mr Boucousis referring to a discussion in which indicative key terms had been agreed in principle. These terms were described as: "1 NTAPL contract to be within a 100% subsidiary of ATMAAC International Pty Ltd. PNG contract to be finalised in due course. 2 Initial Shareholding within the Group at 19%, with a ratchet to 25% (+ 6%), subject to achieving performance hurdles within 12 months of settlement (kpi's pertaining to NTAPL contract). As agreed, this level will change in the event the contract is/will be lost within the 12 months. 3 Salary of $313,000 inclusive super. 4 $200k "bonus" payment subject to achieving performance hurdles within 6 months of settlement. 5 You will be offered a Directorship of ATMAAC International and a role of Business Development Manager (title to be confirmed), reporting to the CEO." 84Mr Boucousis forwarded the email to Mr Hummel on the morning of 14 February 2009. 85On the previous afternoon, Mr Boucousis sent an email to Mr Ainslie which included the following: "I thought I would drop you a quick note reassuring you of Hart Security Australia's ability to deliver the contract - despite recent information from Hart Security Limited (Cyprus). I, as the sole director of the company and in line with our company's constitution, will outline to you on Monday exactly how we can execute the contract and provide any/all guarantees as stipulated within the board paper and the latest draft of the contract." 86Mr Ainslie, in his email in reply, stated that he had spoken to Mr Kew who was "comfortable regarding the situation". 87By 16 February 2009, a proposal to the following effect had been formulated. ATMAAC Aviation Pty Ltd ("ATMAAC Aviation") would be incorporated and would be issued a majority shareholding in HSA. HSA would then enter into the contract with NTA. ATMAAC Aviation would be wholly owned by ATMAAC which, in turn, is wholly owned by AMC Security Services Pty Ltd ("AMC"). As part of the proposal, Mr Boucousis would become a director of each of those companies, would be employed within the ATMAAC group, and would also be issued shares in AMC. It does not seem to have been contemplated that Mr Boucousis would be employed by HSA itself. 88It is clear that from at least this time, strenuous efforts were made by Mr Boucousis, and others, to advance this proposal. 89On 16 February 2009, Mr Landis of Middletons made contact with Ms Pollard of NTA in relation to the proposal. She stated that until NTA was comfortable with the ATMAAC structure and acquisition, NTA would be retaining the requirement for the $1 million bank guarantee, as well as the personal guarantee from Mr Boucousis. On the same day, ATMAAC Aviation was incorporated, with Messrs Boucousis and Kelly as directors. 90Late in the evening of 16 February 2009, Mr Hummel sent an email to Mr Boucousis which was evidently intended to clarify HWL's role in the matter. That role, as stated, included giving advice as to whether it was permissible for Mr Bocuousis, as the sole director of HSA, to issue shares and appoint another director, and whether there was a positive duty of disclosure to HSA's shareholder. HWL was also to provide draft board minutes concerning the share issue, and review a draft share subscription agreement once it was prepared by Middletons. Mr Hummel emphasised in his email that HWL was acting for HSA (not for Mr Boucousis personally) and stated that "where your interests are not the same as HSA, we recommend that you seek separate legal advice from another law firm". The email also included the following: "I understand from you that NTAPL has a board meeting on Thursday [19/02/09] and that you will need to show NTAPL sufficient progress in your dealings with Atmaac to win NTAPL's confidence that they should proceed with the agreement with HSA." 91On 17 February 2009, Middletons prepared a draft share subscription agreement which provided for ATMAAC Aviation to subscribe for and be issued an unspecified number of shares in HSA. (Middletons later advised that the subscription would be for 99,000 shares so that ATMAAC Aviation would end up with 99% of the issued shares.) The draft also provided that ATMAAC Aviation was to procure that its financier deliver the bank guarantee to NTA in accordance with the contract NTA was to enter into with HSA. 92On 18 February 2009, Ms Pollard sent an email to Mr Landis of Middletons (copied to Mr Boucousis) concerning the progress of a revised version of the contract being prepared by Cridlands MB. The email stated that it was not necessary that the contract be in final form prior to the NTA board meeting, which was to be held the following day, but that NTA would require some comfort that HSA "has authority to enter the contract and how the share issue to ATMAAC etc would work." 93Ms Pollard provided the further draft of the contract to Mr Landis early in the afternoon of 18 February 2009. As noted earlier, the draft named HSA as the service provider. The term was expressed to be five years from 1 April 2009, with the possibility of a further five years depending upon satisfactory performance. Provision was made for an unconditional and irrevocable bank guarantee of $1 million and for Mr Boucousis to give a guarantee of the performance of HSA. It should be noted, however, that it appears that Mr Boucousis informed Mr Kelly that NTA would be happy to further negotiate the bank guarantee after their board meeting, and that a $500,000 guarantee for a six month period may be possible. 94Work proceeded throughout the day in relation to the proposal. That work included the preparation of board minutes for HSA in relation to the resolutions to be made by Mr Boucousis as the sole director. 95It is clear that NTA and its lawyers were keen to understand exactly what was proposed. It is also clear that they had concerns that the share issue might be subject to challenge by Hart Cyprus. In order to alleviate such concerns, NTA was given various items of information, including a copy of the HSA constitution. A letter was also sent by Mr Kelly (as managing director of ATMAAC) to NTA which contained details of the proposal, including of the proposed corporate structure. Mr Kelly's letter stated that ATMAAC's financier, Investec, was in the process of obtaining credit approval for the bank guarantee. 96In the evening of 18 February 2009, Mr Martel of Cridlands MB sent an email to Mr Landis which included the following: "I have attached the email from Mike Madden (Finance Director of Hart in Cyprus) to Christian of 10 Feb 09. That email and the late notification to our client of the ATMAAC's involvement has caused our client to seek further information about the Service Provider, its shareholders, the proposed restructure of the various entities, etc than it would normally require. Given your acknowledgement that Hart Security Australia Pty Ltd has sought legal advice about whether or not it can issue shares in the manner it proposes to do so, the nature of the proposed services contract and my client's statutory obligations, it is not unreasonable for my client to investigate any relevant matters (including the validity of the proposed share issue) to its satisfaction." 97The reference to Mr Madden's email of 10 February 2009 is evidently a reference to the email received by Mr Boucousis on 11 February 2009. 98Mr Martel spoke to Mr Hummel later on 18 February 2009 and requested that further information be provided, including the text of the resolutions authorising the issue of shares in HSA. Mr Hummel sent an extract from draft HSA board minutes to Mr Martel the following morning. 99Earlier in the evening of 18 February 2009, Mr Hummel sent a draft letter of advice to Mr Boucousis. In brief, Mr Hummel advised, based on the instructions provided by Mr Boucousis, that subject to acting in accordance with his paramount duties as a director of HSA (including a duty to act in the best interests of the company as a whole), Mr Boucousis, as the sole director of HSA, had the power to appoint another director and had the power to issue shares. The advice noted that such powers must be exercised in good faith and for a proper purpose, and that if the director was motivated by self-interest, the exercise of power was liable to be set aside. On the question whether there was a positive duty to disclose those matters to CTG (or Hart Cyprus), Mr Hummel advised Mr Boucousis that there was a risk that he owed a fiduciary duty to CTG and "disclosure may ameliorate this risk to some extent". After midnight Mr Hummel sent an email to Mr Boucousis containing his comments on the share subscription agreement which he had reviewed that night. 100Also on the evening of 18 February 2009, Mr Boucousis received an email from Mr Madden in which the latter asked about any developments in relation to the NTA board meeting and any further feedback from Investec/ATMAAC. Mr Boucousis' email response included the following: "1 NTAPL's position has not changed with respect to the $1 million dollar bank guarantee. It is fundamental to the award of the contract. 2 ATMAAC have made their offer which, as per your email on the 06th Feb, Hart Cyprus deemed as unacceptable providing no other options to pursue the offer. 3 Without the contract we will become insolvent and as the sole director of Hart Security Australia remaining solvent in the long term and keeping staff paid is my primary concern at the moment as per my email on the 30th." 101Mr Madden, in his response, posed a number of questions for Mr Boucousis. As far as the bank guarantee was concerned, Mr Madden asked whether a direct response to Hart's alternative proposal of 5 February 2009 would be forthcoming from NTA, as was said to be anticipated by Mr Madden. As far as ATMAAC was concerned, Mr Madden asked whether there would be a formal response directly from ATMAAC to "our counter proposal". It is not clear what "counter proposal" was there being referred to by Mr Madden. Mr Madden also asked why ATMAAC management had been to NTA "when they are not supposedly interested in responding to us or interested in the NTAPL contract". 102Mr Boucousis responded by email on the following day. His specific responses to the three questions were: "NTAPL's non-acceptance of these terms was advised to you by me via phone on the evening of the 6th. I have requested NTAPL provide a direct response and they have indicated that they will forward a signed record of this conversation, this is being actioned by Selena Pollard. Could you please forward documentation pertaining to the counter-proposal? I did try to help with this by providing a word file to you to make amendments to the offer on the 5th articulating the terms of any counter-offer. All your correspondence has been passed to them over the preceding 6 weeks. No representatives of Investec or ATMAAC have, to my knowledge, been to NTAPL in the last week. Could you advise who and when and I will make some inquiries and revert. No-one was disputing ATMAAC's interest in NTAPL or Hart Australia which had been clearly articulated. In fact, it is clear from recent correspondence between Hart Australia and Hart Cyprus [...] that it is Hart Cyprus who is not interested in the NTAPL contract." 103The NTA board met on the morning of 19 February 2009. The recommendation made by management to the board was that the company approve the contract with HSA and delegate authority to Mr Kew to enter into the associated documents. A presentation was made to the board in respect of the proposed contract. 104However, the board did not accept the recommendation made to it. Rather, the board resolved to consider the matter by circular resolution once six matters had been attended to. One of those matters was described as:- "Preferred contracting entity had been resolved by ADG (Atmac/Hart)". ADG is Airport Development Group Pty Ltd, the parent company of NTA. 105Mr Kew gave evidence that this was the major issue at the time. He stated that there was a lot of confusion and uncertainty surrounding who the counterparty for the security services contract was going to be. He further stated that: "The uncertainty caused by the involvement of ATMAAC caused significant concern for both myself and the board in terms of not knowing the entity NTAPL was dealing with, particularly given that ATMAAC was introduced into the mix at such a late stage." 106On 20 February 2009, Mr Boucousis (and Mr Hummel) were involved in discussions with Mr Kelly and lawyers from Middletons about the position that had been reached. It appears from Mr Hummel's note of a meeting held on that day that Mr Kelly stated, in effect, that NTA might award the contract to ATMAAC. It further appears that during the discussion which followed, mention was made of a possible transaction whereby HSA would assign certain relevant information to ATMAAC in return for a fee. 107Later on 20 February 2009, Mr Ainslie sent a letter to Mr Boucousis, the terms of which confirmed, in effect, that on 6 February 2009 Mr Ainslie and Ms Pollard had told Mr Boucousis in a telephone conversation that the terms advanced by Hart Cyprus for the provision of a bank guarantee were not acceptable to NTA. 108It further appears that on 20 February 2009 Mr Ainslie declined an invitation from Mr Jordan of HSA to arrange a meeting to take place in the following week with representatives of Hart Cyprus. Mr Boucousis was informed of that matter by Mr Ainslie. Mr Boucousis responded by suggesting to Mr Landis, Mr Hummel and others that "we expedite our aspects of the deal to ensure a speedy closure". Mr Hummel, for his part, drafted a Deed of Assignment between HSA and ATMAAC Aviation during the course of the following day. Mr Boucousis suggested some changes to that draft, notably an increase in the assignment fee from $100,000 to $125,000. 109By the end of 20 February 2009, following discussions involving Messrs Kew, Ganley and Ainslie and Ms Pollard, the NTA management had apparently decided to recommend to the board that the contract be entered into directly with ATMAAC Aviation. 110On 23 February 2009, Mr Ainslie sent a further letter to Mr Boucousis. This letter was relevantly in the following terms: "I advise given Hart Cyprus's opposition to the provision of a $1M (AUD) bank guarantee (unless it was provided 2 months advanced billings) and in light of subsequent discussions and correspondence from Hart Cyprus indicating it is opposed to meeting the core terms of the contract, NTAPL is concerned about Hart's ability to provide services under the terms of the contract. On this basis NTAPL does not wish to contract for the provision of security services with Hart Security Australia Pty Ltd and therefore our recommendation to the board has changed." 111This letter appears to have been the subject of some discussion, including between Mr Boucousis and Ms Pollard. Later on 23 February 2009, Ms Pollard sent an email to Mr Boucousis in which she proposed an amendment to Mr Ainslie's letter. Ms Pollard's email contained the following: "The difficulty for NTAPL is that while your business partner, Hart Cyprus, disagreed to meet the contract terms, we were advised by you of the ATMAAC acquisition which would ensure that the contract terms could be met and we could still enter into the contract with Hart Security Australia Pty Ltd. Those arrangements i.e. the share issue and ATMAAC Group of Companies acquisition of Hart Security Australia Pty Ltd (and therefore ATMAAC's financier putting up the $1M Bank Guarantee requested by NTAPL) created another set of risks and NTAPL's approach to mitigate those risks was to contract directly with ATMAAC Aviation Pty Ltd. It is therefore inappropriate to say that NTAPL is not prepared to enter into a contract with Hart Security Australia Pty Ltd without qualifying why - the problem is not with Hart Security Australia Pty Ltd but with the way Hart Security Australia Pty Ltd is to be acquired in order to give it the ability to provide the bank guarantee, which makes the choice of contracting with Hart Security Australia Pty Ltd less desirable. If you were putting up the bank guarantee personally or Hart Security Australia Pty Ltd had some way of providing the bank guarantee in its own right without relying on its shareholders, we would not be sending these emails because the contracting party would be Hart Security Australia Pty Ltd. If either option is not commercially viable - then Hart Security Australia Pty Ltd is not able to enter the contract. It would rule itself out of the race and we would not have recommended contracting with Hart Security Australia Pty Ltd to the Board. Instead, we have been advised Hart can give the bank guarantee but the way it can is not desirable to NTAPL. Therefore contracting with Hart Security Australia Pty Ltd is not desirable. Please see below whether this addition to the letter meets your objectives - Given Hart Cyprus's opposition to the provision of a $1M (AUD) bank guarantee (unless it was provided 2 months advanced billings) and in light of subsequent discussions and correspondence from Hart Cyprus indicating it is opposed to meeting the core terms of the contract, NTAPL is concerned about Hart's ability to provide services under the terms of the contract. On this basis, NTAPL does not wish to contract for the provision of security services with Hart Security Australia Pty Ltd and has therefore changed its recommendation to the Board to reflect this." 112Mr Kew gave evidence that the contents of Ms Pollard's email reflect his general understanding of the position at that time. 113Mr Boucousis continued to promote the assignment transaction between HSA and ATMAAC Aviation. That transaction involved ATMAAC Aviation making an offer of employment to Mr Boucousis. 114Arrangements were made for the Deed of Assignment to be executed by Ms Stone and Mr Boucousis at the offices of HWL on the morning of 25 February 2009. Ms Stone, who was clearly uneasy about the proposed transaction, and who had been requested by Lord Westbury not to sign anything without the agreement of Hart Cyprus, declined to execute the Deed of Assignment. The transaction did not proceed. 115On 26 February 2009, Mr Boucousis resigned as a director of HSA, and Ms Stone and Mr Jordan were appointed as directors of the company. 116NTA ultimately did not proceed to enter into the Security Services Contract with HSA, or ATMAAC Aviation.

The witnesses 117Before dealing with the case against Mr Boucousis the following observations about the witnesses should be recorded. 118In HSA's case, affidavits sworn by Lord Westbury, Mr Madden, Ms Stone, Mr Kew and Ms Deirdre McLeod were read. Ms McLeod is the Finance Manager of HSA who, since late 2007, has worked as a contractor to HSA and was evidently involved in the administration of the company's finances at the relevant time. Save for Ms McLeod, all of those witnesses were cross-examined. 119An affidavit sworn by Mr Boucousis was read in his case, and he was cross-examined. 120Following the rejection of its no case application, with the leave of the Court, HWL read affidavits sworn by Messrs Hummel and Burke. They were both cross-examined. 121Although numerous accounts of conversations are deposed to, and many of those conversations were disputed by other deponents, very few of the conversations were touched upon in cross-examination or were the subject of any submission. Attention was almost exclusively focused upon the content of the written communications that passed between those involved, and testimony given in cross-examination about that content. In those circumstances, I have generally not found it necessary to resolve disputes about conversations. It should also be noted that the submissions of counsel contained very few attacks upon the credit of witnesses. Two notable exceptions were a broad attack upon the credit of Mr Boucousis, and an attack on Lord Westbury's evidence concerning the willingness of the Hart Group to assist HSA in putting up a bank guarantee in support of the NTA contract. 122In my view, Lord Westbury generally attempted to give truthful answers to the best of his ability, although on some occasions his answers were not responsive and appeared to be affected by his adverse views of Mr Boucousis and his conduct. However, for reasons which are later set out, I am unable to accept his evidence to the effect that the Hart Group would have been willing to provide a bank guarantee in the sum of $1 million to assist HSA to secure the NTA contract. 123Mr Madden also tried to give a truthful account of events, although it was clear that, unless he was prompted by documents shown to him, he had a rather limited recollection of the details. 124Ms Stone was an impressive witness, despite being occasionally combative. She appeared to give truthful evidence to the best of her ability and had a reasonably good recollection of events. 125Mr Kew was only in the witness box for a short time. However, he gave his evidence in an impressive and straightforward manner, and there is no reason not to regard his evidence as reliable. 126In keeping with the nature of the case against him, Mr Boucousis was subjected to a searching and at times forceful cross-examination. I have referred earlier to his unsatisfactory evidence concerning the deletion of parts of emails, and there were some other instances where his evidence was unimpressive. By way of example, I found his evidence as to whether there were any discussions with NTA between February 2008 and January 2009 about a bank guarantee, and as to what he reported back to Cyprus about that matter, to be confused and contradictory. These deficiencies caused me to have reservations about the reliability of his evidence. I have treated his evidence with caution, and closely examined his testimony accordingly. 127Nonetheless, my overall impression of Mr Boucousis as a witness was not at all unfavourable. For the most part, he appeared to be doing his best to honestly answer the questions put to him, and his recollection of the detail of events was by and large consistent with the content of the written communications which passed between the parties at the time. Mr Boucousis was not unwilling to make concessions when they were called for and I did not gain the impression that Mr Boucousis, in giving his denials of improper conduct and the pursuit of personal interest at the expense of HSA, was not telling the truth. On the contrary, I gained the impression that Mr Boucousis genuinely believed that his actions were undertaken in the best interests of HSA. His evidence also suggested to me that he may have been a bit out of his depth in dealing with the situation which developed between late 2008 and early 2009. At that time, Mr Boucousis had only limited business experience. 128Mr Hummel was also subjected to a searching cross-examination. I accept that he gave his evidence honestly, although he showed himself to be somewhat defensive at times. It was clear that, aside from when he was aided by reference to documents, his recollection of the events was quite poor. 129I was favourably impressed by the evidence given by Mr Burke. He appeared to give his evidence in a clear and honest manner, and he demonstrated a reasonably good recollection of the relevant events.

The case against Mr Boucousis 130The breach of duty case pleaded against Mr Boucousis is contained in paragraphs 17 to 28 of the Amended Statement of Claim. The alleged wrongful conduct includes the following: (1)that in or about December 2008 Mr Boucousis engaged in negotiations with Mr Kelly with the intention that ATMAAC would enter into the NTA contract in lieu of HSA or that ATMAAC would otherwise have the commercial benefit of that contract; (2)that in an effort to gain a benefit for himself, and an advantage to ATMAAC to the detriment of HSA, Mr Boucousis discussed numerous scenarios with ATMAAC including the acquisition by ATMAAC of Hart Cyprus' interest in HSA, ATMAAC subscribing for shares in HSA, and Mr Boucousis entering into an employment contract with ATMAAC; and (3)that the late notification to NTA of ATMAAC's involvement caused NTA to question the proposed service provider and its structure, and ultimately to cease negotiations with HSA. 131HSA's case was described in various ways in submissions. In substance it was put that from about December 2008, "despite feigning loyalty to the Hart cause", Mr Boucousis began making moves to spirit away the NTA opportunity and deliver it into the hands of ATMAAC, a competitor of HSA's. Moreover, it was submitted, Mr Boucousis' attempts to divert the NTA opportunity away from HSA involved the seeking of personal benefits on his part. HSA's primary case was that Mr Boucousis pursued a strategy from about December 2008 aimed at benefiting ATMAAC and himself at the expense of HSA. It was submitted that in pursuing that strategy Mr Boucousis was acting dishonestly. HSA principally relied on what it described as the clandestine giving of commercially sensitive information to Mr Kelly on 3 December 2008, and the various discussions Mr Boucousis had with Mr Kelly and others in relation to ATMAAC from about that time through to about 23 February 2009 when NTA announced that it would not be awarding the contract to HSA. It was submitted that Mr Boucousis was engaged in a continuing pattern of conduct in which he was not disclosing his activities to the Hart Group executives in Cyprus. The altered emails sent on 23 January 2009, the lack of disclosure in February 2009 about the proposal involving the issue of shares to ATMAAC, and the failure to disclose that NTA might be willing to negotiate the bank guarantee requirement down to a $500,000 guarantee, were cited as particular examples. 132HSA relied upon the same conduct in relation to each of the alleged breaches of duty. It was put that "in their practical application, the statutory and fiduciary duties do not involve material differences in the case against Mr Boucousis." Clearly, HSA's case against Mr Boucousis involved allegations of a very serious kind. 133There was no dispute about the duties Mr Boucousis owed to HSA. Plainly, he owed HSA the duties that are set forth in ss 181(1), 182(1) and 183(1) of the Corporations Act 2001 (Cth). There is also no doubt as to the existence and nature of the fiduciary duties owed by Mr Boucousis to HSA. In particular, it was accepted that Mr Boucousis was under duties not to be in a position of conflict, and not to obtain any unauthorised benefit from the relationship between himself and HSA, the company of which he was a director (see Howard v Federal Commissioner of Taxation [2014] HCA 21 at [31]-[34] and [54]-[61]). As stated in Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at [78]: "In particular, the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is "a conflict or a real or substantial possibility of a conflict" between personal interests of the fiduciary and those to whom the duty is owed." 134There was no suggestion in this case that any of the conduct of Mr Boucousis which was said to constitute a breach of fiduciary duty had taken place with the informed consent of HSA, or that of its sole shareholder CTG. 135I turn now to consider whether Mr Boucousis breached either the fiduciary or statutory duties he owed to HSA. 136By the time Mr Boucousis sent his letter of resignation to Cyprus in early November 2008, the negotiations between HSA and NTA had been in progress for about a year. The progress may have been slow, or at least slower than expected, but the signs were positive. The relationship had at least progressed to the point where HSA had commenced providing certain consultancy services to NTA. The negotiations had been primarily conducted for HSA by Mr Boucousis, and although Mr Boucousis had indicated that he would remain in his position until March 2009 to ensure an effective handover occurred on the NTA project, Lord Westbury was concerned that news of the resignation might jeopardize the obtaining of the contract. 137As recognised by Lord Westbury, the resignation was not simply that of a managing director; Mr Boucousis and the Hart Group also had shareholding interests that needed to be considered and dealt with. It is clear that Mr Boucousis was already considering the making of an offer to buy out the interests of the Hart Group in relation to the Australian companies. Such matters were to be discussed in Cyprus in December 2008. 138Prior to those discussions taking place, Mr Boucousis met with Mr Kelly of ATMAAC. I accept Mr Boucousis' evidence that he had earlier made contact with ATMAAC in connection with manpower requirements for the NTA contract, and that this topic was discussed during his meeting with Mr Kelly. It seems clear that Mr Boucousis also spoke to Mr Kelly about the impending negotiations he was to have in Cyprus, including that he was going to make an offer to buy out the Hart Group's interest in HSA, and that in that context, there was a general discussion about future business collaboration (or "strategic tie-up" as he put it) between HSA and ATMAAC. 139The email Mr Boucousis sent to Mr Kelly from Cyprus on 3 December 2008 indicates that by that time, after having discussions in Cyprus and probably a further discussion in the meantime with Mr Kelly, Mr Boucousis had it firmly in mind to involve ATMAAC in an acquisition of the Hart Group's interests in HSA. Indeed, Mr Boucousis appears to have considered that, in some way, HSA would ultimately be "amalgamated into ATMAAC". 140As mentioned earlier, I accept Mr Boucousis' evidence that during the discussions in Cyprus he made mention of meeting someone from ATMAAC, a company Investec had recently bought into, and further said that Investec might be interested in discussing the making of an investment in HSA. That evidence, given in cross-examination, was consistent with paragraph 100 of his affidavit which, at least in relation to the words attributed to Mr Boucousis, was not challenged by Lord Westbury in his affidavit in reply. Whilst I think it likely that, insofar as the conversations concerned the identity of the proposed investor, the focus was on Investec rather than ATMAAC, I do not accept that Mr Boucousis attempted to conceal the fact that he had met and engaged in discussion with ATMAAC. 141Mr Boucousis was attacked in cross-examination for not telling Lord Westbury or any of the other Hart Cyprus executives that he was going to send (or had sent) the email to Mr Kelly with the commercially sensitive information attached to it. Mr Boucousis may be criticised for acting incautiously in relation to that information. However, I accept that Mr Boucousis considered that his discussions in Cyprus had reached a point where there was agreement that he could seek an investor to acquire the interests of the Hart Group in relation to the Australian companies. I further accept that the information about the NTA contract (which Mr Boucousis referred to as "the opportunity") was provided to Mr Kelly for that purpose. I do not think that, in so acting, Mr Boucousis was attempting to divert the NTA opportunity away from HSA. It seems to me that Mr Boucousis was proceeding on the basis that he would continue to pursue the opportunity on behalf of HSA, and at the same time, would seek an investor to acquire the interests of the Hart Group. 142The agreements reached in Cyprus reflect that position. It was envisaged that Mr Boucousis' resignation, which would not take effect until the end of February 2009, would be rescinded and a new contract of employment signed in the event that the NTA contract was secured; and Mr Boucousis was at the same time given the option to buy out the interests of the Hart Group. 143By remaining in his position as a director of HSA, Mr Boucousis remained, of course, bound by the fiduciary and statutory duties described above. 144The evidence shows that after the Cyprus agreements were made, Mr Boucousis, and others on behalf of HSA, continued to pursue the NTA contract, and Mr Boucousis had discussions with ATMAAC and Investec concerning a possible investment. It is clear that by no later than 21 January 2009, NTA had become aware through Mr Boucousis of some form of relationship between HSA and ATMAAC. NTA made it known to Mr Boucousis that understanding that relationship was of importance to NTA in relation to the proposed contract. It was even said that it was "instrumental" for NTA in assessing risk. Mr Boucousis, in his cross-examination, said that he had told Mr Ainslie on 21 January 2009 that he had been in discussions with ATMAAC about being a sub-contractor or as potentially acquiring a 50% stake in HSA. He did not accept that he told NTA that he was in discussions about ATMAAC having an interest in the NTA contract itself. 145As mentioned earlier, Mr Boucousis ultimately conceded that he intentionally altered two emails from NTA which he then forwarded to Cyprus. He deleted material concerning the relationship between HSA and ATMAAC. He agreed that he did so in order that Hart Cyprus would not see the material. It is difficult to understand on the evidence why Mr Boucousis engaged in that concealment. Mr Boucousis does not seem to have wanted to keep the name ATMAAC a secret. He had mentioned in Cyprus that he had met someone from ATMAAC, a company that Investec had recently bought into. Moreover, in another email sent by Mr Boucousis to Cyprus on 23 January 2009, he made reference to "Investec/ATMAAC". He further referred to ATMAAC and Investec on two occasions in an email he sent to Mr Madden on 30 January 2009. Those references indicate that ATMAAC would be involved if Investec decided to make an investment. 146It may be that, contrary to his denial, Mr Boucousis did not want it known that he had discussed the issue with NTA, or that the issue might have ramifications for the NTA contract. If so, that might suggest a consciousness of guilt on Mr Boucousis' part about his motives in pursuing the relationship with ATMAAC. However, on 5 February 2009 Mr Boucousis sent an email to Mr Madden which referred to the fact that the draft NTA contract had been reviewed by lawyers for ATMAAC as well as HSA's own lawyers, and further stated: "NTAPL has stipulated full transparency on the comings and goings with this transaction, including any offers/interaction with ATMAAC, acceptance of guarantees etc." 147If there had previously been reticence to disclose that ATMAAC's involvement had come to the attention of NTA, it seems to have quickly dissipated. 148Viewing the evidence overall, and taking into account the manner in which Mr Boucousis gave his evidence, I am not persuaded that Mr Boucousis' concealment should be regarded as evidence of a consciousness of guilt, or as part of a plan to divert the NTA opportunity away from HSA. 149The question of "form of security" had been raised by Ms Pollard in mid-January 2009 as something that would need to be addressed. By 28 January 2009, the issue was dealt with in Mr Ainslie's email to Mr Boucousis headed "Outstanding Requirements". It is plain that NTA was concerned to obtain satisfactory guarantees and indemnities from HSA if the proposed contract was going to be entered into. It was not suggested that this concern was not genuine, or that it was contributed to by anything done by Mr Boucousis. The request by NTA for an unconditional and irrevocable bank guarantee of $5 million was undoubtedly something that was introduced late in the piece. Mr Boucousis described it as a strange last minute request. It clearly took the Hart Group by surprise, and the idea was rapidly rejected. Mr Madden's email to Mr Boucousis of 30 January 2009 in which he stated that the inclusion of the bank guarantee clause was opposed "in its' entirety", also expressed dissatisfaction with various aspects of the draft contract, including the insurance requirements, the indemnity clauses, and the key performance indicators which "can be construed as subjective and could therefore result in vastly reduced billings and income". 150Mr Boucousis' email to Mr Madden later on 30 January 2009 reveals that he was concerned that HSA might not obtain the NTA contract. He stated that if that was so, HSA would not remain solvent beyond April 2009. He further stated that he had been seeking other options for funding, and a reduction "in the capital related obligations" required of Hart by NTA. 151Over the course of the next week, NTA reduced the quantum of its bank guarantee requirement to $1 million. On 4 February 2009, Mr Boucousis sent Mr Madden an offer by ATMAAC to acquire all the shares in CTG for $500,000. That offer was based on various assumptions, including a three year employment contract with Mr Boucousis. 152Neither the ATMAAC offer, nor the prospect of an unconditional and irrevocable bank guarantee of $1 million, was attractive to the Hart Group. That was made clear by the various emails Mr Madden sent to Mr Boucousis on 5 and 6 February 2009. In relation to the bank guarantee, it was stated that NTA's requirements were not accepted, and in order for the Hart Group "to move forward", it required confirmation that NTA accept its terms in relation to a $1 million guarantee. Those terms included a duration of only twelve months and receipt of an advance payment based on two months estimated billings, repayable in twelve equal monthly instalments. If that stance was maintained in the face of a requirement for an unconditional and irrevocable bank guarantee of $1 million, HSA, in its current ownership structure, had no practical ability to enter into the NTA contract. 153This situation was clearly recognised by Mr Boucousis. His email to Mr Madden of 10 February 2009 (attaching a board paper for the NTA board, which contained a recommendation in favour of contracting with HSA), called for Hart's formal position on proceeding as per the board paper, or taking some other course. Mr Madden's response on 11 February 2009 included an unequivocal rejection of proceeding as per the board paper. In my view, HSA was thus placed in a parlous situation in relation to the NTA contract. 154Mr Boucousis said that the expressed attitude of Hart Cyprus caused him to believe that the NTA contract was lost, unless it could be done "some other way". I accept that evidence. From about that time, Mr Boucousis' efforts were largely directed towards finding that "other way". That "other way" involved ATMAAC. 155It is true that, well before that time, Mr Boucousis had been involved in discussions with ATMAAC and its lawyers in relation to the NTA contract. Notwithstanding the fact that, in the course of such discussions in the previous week, Middletons produced a draft contract which named ATMAAC as the service provider, I do not think that Mr Boucousis, by engaging in those discussions, was attempting to spirit the NTA contract away from HSA and into the hands of ATMAAC. I accept his evidence that, at least as far as he was concerned, these discussions occurred in the context of the 4 December 2008 agreements. That is to say, the discussions concerned what might occur as part of a transaction in which ATMAAC bought out the Hart Group's interests. It is noteworthy that ATMAAC had just made an offer to purchase all of the shares in CTG when that draft contract was prepared. 156From about 11 February 2009, Mr Boucousis' discussions with ATMAAC and Investec became focused upon a very different transaction. The focus was henceforth upon a transaction in which ATMAAC would take control of HSA through a share issue. 157By 14 February 2009, the discussions had reached the point where agreement in principle had been reached on certain key terms. The key terms included Mr Boucousis becoming: (1)a director of ATMAAC; (2)a 19% (and possibly up to 25%) shareholder in the Group (presumably the group at which ATMAAC was part); and (3)an employee on a salary of $313,000 with a bonus payment of $200,000 subject to clearing performance hurdles. 158Clearly, the proposed transaction involved the provision of substantial personal benefits to Mr Boucousis. The proposed transaction underwent further development and refinement in the coming days, but its essential nature did not change. 159Pursuit of the proposed transaction with ATMAAC was not intrinsically adverse to or in conflict with HSA obtaining the NTA contract. On the contrary, it appears that, at least until the NTA board meeting held on 19 February 2009, it was envisaged by at least Mr Boucousis and NTA that HSA would be the party to the NTA contract. As matters stood from about 11 February 2009, the proposed transaction with ATMAAC could reasonably be seen as an available means of achieving that result. 160I accept that, in circumstances where the Hart Group had shown itself not only unwilling to help HSA meet NTA's requirements for a bank guarantee, but also not interested in ATMAAC's offer to purchase the shares in CTG, Mr Boucousis genuinely saw the new ATMAAC proposal as the best and only option for HSA to secure the NTA contract. 161In pursuing that proposal in the period leading up to the meeting of the NTA board on 19 February 2009, Mr Boucousis made no effort to contact any of the Hart Group executives in Cyprus. Mr Boucousis said in cross-examination that he did not believe that Hart Cyprus was acting in the best interests of HSA in relation to the NTA contract. He further stated that he had been advised by HWL that, as the sole director of HSA, he was not required to discuss the situation with the Hart Group. Mr Boucousis further said that HWL had told him that the Hart Group was commercially frustrating the NTA transaction. According to Mr Boucousis, he was doing his best to secure the NTA contract as soon as possible, as he understood that NTA would soon have to extend the contract of the existing service provider. 162I generally accept Mr Boucousis' evidence as summarised in the paragraph above. I do not think that his failure to communicate with Hart Cyprus about the new ATMAAC proposal was in the circumstances dishonest conduct on his part. 163The Hart Group, for its part, did not seek to contact Mr Boucousis during that period until the evening of 18 February 2009 when Mr Madden sent an email requesting information about developments in relation to the NTA board meeting, and any further feedback from Investec/ATMAAC. In the exchange of emails which followed between Messrs Boucousis and Madden, no indication was given by Mr Madden that the Hart Group might be prepared to alter its position as previously advised to Mr Boucousis. 164It seems that on about 18 February 2009 Mr Boucousis was told by someone from NTA that it might be willing to negotiate on the amount of the bank guarantee, and that a guarantee of $500,000 for a six month period may be possible. Mr Boucousis passed that information on to Mr Kelly on 18 February 2009, but it was not passed on to the Hart Group. Rather, Mr Boucousis confirmed in an email to Mr Madden on 18 February 2009 that NTA's position had not changed with respect to the $1 million bank guarantee. It was submitted that Mr Boucousis dishonestly withheld the information. Mr Boucousis was not cross-examined about the detail of what he had been told by NTA about a willingness to negotiate in relation to the bank guarantee. Moreover, Mr Boucousis was not challenged about his failure to pass on the information to the Hart Group, and it was not put to him that he was behaving dishonestly in that respect. Mr Kew gave no evidence that NTA might have been willing to negotiate about the bank guarantee in any particular circumstances. He stated in cross examination however that "things would have been different" in relation to assessment of risk if the proposed service provider was a local company rather than one "that was based in Cyprus". The likelihood is that any willingness on the part of NTA to negotiate in relation to the bank guarantee was linked to a change in the ownership of HSA. In these circumstances, I do not accept HSA's submission that Mr Boucousis dishonestly withheld the information from Hart Cyprus. 165As noted earlier, it is clear that the new ATMAAC proposal involved the provision of substantial personal benefits to Mr Boucousis. It must be recognised, however, that Mr Boucousis holding the position of managing director of HSA was seen by NTA as very important. This was shown by Mr Kew's evidence, as well as the insertion of the "key position" provisions into the draft contract. 166If HSA was to win the contract, it had to have Mr Boucousis available to fulfil the role of managing director (at least at the commencement date of the contract). The importance of Mr Boucousis to the NTA contract was appreciated throughout. Lord Westbury's reaction in November 2008 to Mr Boucousis' resignation illustrates the point. The December 2008 Agreement which followed provided that if HSA (or other Hart Group company) secured the NTA contract, Mr Boucousis' resignation would be rescinded and a minimum two year mutually acceptable contract of employment signed. The importance of Mr Boucousis was also appreciated by ATMAAC. The ATMAAC offer to purchase all the shares in CTG was itself predicated upon execution of the NTA contract and Mr Boucousis entering into a three year employment contract. In short, the matter of Mr Boucousis' future employment had to be dealt with in relation to the proposed NTA contract, regardless of the ownership structure of HSA. 167That situation obviously carried with it the prospect that a conflict (or a real or substantial possibility of a conflict) could arise between Mr Boucousis' personal interests and the discharge of his duties as a director of the company. That issue is dealt with later in these reasons. Nonetheless, it has not been demonstrated in my view that Mr Boucousis, from about December 2008, embarked upon a course of conduct aimed at benefiting himself. In particular I do not accept that, in pursuing the new ATMAAC proposal from about 11 February 2009, Mr Boucousis was motivated by a desire to gain an advantage for himself. 168In summary, despite the reservations I had concerning the reliability of his evidence, I have come to the conclusion that from about December 2008 to 19 February 2009, Mr Boucousis was genuinely attempting to secure the NTA contract for HSA. It was a project he had been heavily involved in for more than a year, and I think that he wanted to bring it to a successful conclusion for HSA. Mr Boucousis had expressed a willingness to enter into a new contract of employment in that event. His efforts continued throughout that period in a context where the future ownership of the company was unsettled. I am not persuaded that during that period he was pursuing a strategy aimed at benefiting ATMAAC and himself at the expense of HSA. HSA's primary case on breach of duty therefore fails. 169The rejection of that primary case is not the end of the matter. It remains necessary to consider whether Mr Boucousis, admittedly acting genuinely and in the perceived best interests of the company, nonetheless breached his duties to HSA by being in a position of conflict between those duties and his own personal interests. This issue arises in circumstances where, from about 11 February 2009, Mr Boucousis was pursuing a proposed transaction with ATMAAC which entailed the provision to him of substantial personal benefits. The relevant question is whether Mr Boucousis was in a position where there was a conflict, or a real or substantial possibility of a conflict, between his personal interests and his duties as a director of the company. If such a situation of conflict existed, Mr Boucousis, by remaining in his position as a director and pursuing the proposal, would be in breach of his fiduciary duty (see Pilmer v Duke Group Ltd (in liq) (supra) at [78]; Kak Loui Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 at 198 per Deane J; Hospital Products Ltd v United States Surgical Corporation and Others [1984] HCA 64; (1984) 156 CLR 41 at 103 per Mason J). 170The case advanced by HSA on conflict was simply that Mr Boucousis, whilst a director of HSA, took steps to implement a transaction in which he would obtain considerable personal benefits. However, in determining the question whether Mr Boucousis was in a position of conflict, it is necessary to consider in some detail not only the nature of the duties and interests involved, but also the particular circumstances in which Mr Boucousis was operating at the time (see Howard v Federal Commissioner of Taxation (supra) at [60]-[61]). 171The NTA contract was evidently regarded by Mr Boucousis as a suitable and worthwhile opportunity for HSA. Indeed, HSA's case proceeded on the basis that it was a valuable opportunity which Mr Boucousis was duty bound, as a director of the company, to pursue for the company's benefit. However, by 11 February 2009 a situation had developed whereby the company lacked the practical ability to enter into the contract upon the terms stipulated by NTA. HSA depended upon the financial support of the Hart Group, and the Hart Group had on several occasions made it clear that it did not accept NTA's terms, including its requirement for an unconditional and irrevocable bank guarantee for $1 million. Further, the possibility of the Hart Group's interests being bought out by ATMAAC had stalled, with the Hart Group stating that it had no interest in accepting the ATMAAC offer yet not, it seems, formulating any counter proposal. There was thus no immediate prospect that ATMAAC might replace the Hart Group and (through Investec) equip HSA to enter into the NTA contract upon the terms stipulated by NTA. 172The new ATMAAC proposal which was then developed was seen by Mr Boucousis as the best and only option to secure the NTA contract. In my opinion, that was not an unreasonable view to hold in all the circumstances, including that the matter was to be dealt with by the NTA board within about a week. Moreover, nothing occurred in the period leading up to the NTA board meeting on 19 February 2009 to suggest to Mr Boucousis that the Hart Group had changed its position, or even that it may be amenable to doing so. It therefore remained the case that the ATMAAC proposal appeared to be the only realistic means of securing the NTA contract for HSA. 173That proposal undoubtedly entailed significant personal benefits to Mr Boucousis, including a shareholding and an employment contract. As noted earlier, Mr Boucousis' future employment was a matter that had to be dealt with in relation to the proposed NTA contract regardless of the ownership structure of HSA. It seems that the ATMAAC proposal involved Mr Boucousis being employed within the ATMAAC group, but not by HSA itself. It may be inferred that it was contemplated that Mr Boucousis would be made available to fulfil the position of managing director of HSA, as required by the proposed NTA contract. 174The fact that the ATMAAC proposal appeared to be the only realistic means of securing the NTA contract meant that the possibility of conflict between Mr Boucousis' personal interests and his obligation to pursue the HSA contract remained rather theoretical. The existence of his personal interest did not provide any real inducement to not faithfully discharge that duty. 175In addition, in circumstances where the personal benefits to accrue to Mr Boucousis were not to be provided by HSA itself, it is difficult to see any possibility of conflict between Mr Boucousis' personal interests and his duty to obtain the best terms for the company in its dealings. Again, the existence of his personal interest did not provide any real inducement for Mr Boucousis to not faithfully discharge that duty. 176HSA did not suggest any other way in which the existence of Mr Boucousis' personal interest in the ATMAAC proposal might conflict with his duties to the company. 177In my view, in the particular circumstances of the case, Mr Boucousis, in pursuing the ATMAAC proposal, was not relevantly in a position of conflict. That is, there was neither an actual conflict, nor a real or substantial possibility of a conflict, between his personal interests and his duties to HSA. He remained able to discharge his duties to HSA with undivided loyalty (see Maguire and another v Makaronis and another [1997] HCA 23; (1997) 188 CLR 449 at 465). 178As the ATMAAC proposal was not ultimately executed, no questions arose about whether the powers to issue shares and appoint directors had been properly exercised. 179It follows from the above that HSA has failed to establish any breach of fiduciary duty on the part of Mr Boucousis. It has also failed to establish any contraventions of ss 181(1), 182(1) or 183(1) of the Corporations Act. 180As far as s 181(1) is concerned, it has not been shown that Mr Boucousis discharged his duties otherwise than in good faith in the best interests of HSA. He was not engaged in conduct which he believed was contrary to HSA's interests. Furthermore, viewing his conduct objectively (if that is relevant to s 181(1)(a) - see In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [420] per Black J), it was not conduct that ought be considered to be lacking in good faith or contrary to the best interests of the company. 181As far as ss 182(1) and 183(1) are concerned, it has not been established that Mr Boucousis either used his position as a director, or used any information he obtained by virtue of being a director, improperly in order to gain an advantage for himself or for ATMAAC, or in order to cause detriment to HSA (see Chew v The Queen [1992] HCA 18; (1992) 173 CLR 626 at 632-633).

Causation of loss 182It is of course well recognised that minds may differ as to the presence or absence of a real or substantial possibility of a conflict between duty and interest (see Pilmer v Duke Group Ltd (in liq) (supra) at [79]). If, contrary to my conclusion, Mr Boucousis was in a position of conflict when he was pursuing the ATMAAC proposal, it would be necessary to consider whether that breach of fiduciary duty caused any loss to HSA. It is appropriate that I deal with that question in case my conclusion about conflict is not correct. 183On the question of causation of loss, HSA submitted that it was not necessary to establish that the breach was the cause of the loss claimed; it was sufficient to establish that it was a cause of the loss. That may be accepted. It was then submitted that informing NTA on about 16 February 2009 of ATMAAC's involvement in the matter was a cause of the loss of the opportunity to enter into the NTA contract. It was contended that the provision of that information resulted in NTA withdrawing from the negotiations with HSA in relation to the contract. I note that it was not suggested that the approach taken by the Privy Council in Brickenden v London Loan & Savings Co [1934] 3 DLR 465 had any relevance to this case. 184The relevant principles of causation were discussed by Spigelman CJ (with whom Priestley and Meagher JJA agreed) in O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262 at 272-278. The following points from his Honour's judgment should be noted: (1)the object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation; (2)parts of the speech of Lord Browne-Wilkinson in Target Holdings Ltd v Redferns [1996] 1 AC 421 were cited with approval, including his Lordship's ultimate conclusion (at 437) that - "Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests. To make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach."; (3)causation in equity is not susceptible to the formulation of a single test. It is necessary to identify the purpose of the particular rule to determine the appropriate approach to issues of causation (see Environment Agency v Empress Car Co (Abertillery) Ltd [1998] 2 WLR 350 at 356; Barnes v Hay (1998) 12 NSWLR 337 at 353F); (4)adopting the words of the High Court in Maguire v Makaronis (1997) 188 CLR 449 at 473, the Court must identify "the criteria which supply an adequate or sufficient connection between the equitable compensation claimed and the breach of fiduciary duty"; (5)in the case of a trustee dealing with trust property, there is a sufficient connection, irrespective of the identification of a separate and concurrent cause, when the loss would not have occurred if there had been no breach; (6)the strict approach to causation applicable to trustees dealing with trust property is appropriate to apply to company directors who improperly exercise powers to dispose of company property; and (7)it was not necessary to consider the appropriate test for breach by a director of other fiduciary duties. 185In Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, the Court of Appeal was dealing with a case where there was a conflict between duties owed by solicitors. It was stated at [429]-[431]: "[...] The issue here, in our opinion, was one of accountability for breach of fiduciary duty and "an adequate or sufficient connection between the equitable compensation claimed and the breach of fiduciary duty": Maguire v Makaronis (at 473). If Beach's claim was that it suffered loss then it had to show that Abbott Tout's divided loyalty or performance of duty to others led to that loss. In such a case accountability depends upon causation. There is a normative aspect to the determination of issues of causation, especially in a developing area of the law, such as equitable compensation. Should the solicitor bear responsibility for losses arising from a transaction in the specific context of the scope of the obligations assumed by the solicitor and the manner in which these obligations were breached? The rules for the recovery of equitable compensation are less developed than the rules for proprietary remedies in equity. The rigour of the remedy is of comparatively recent vintage. At this stage of the development of the remedy, each case requires a precise focus on both the nature of the obligations and the nature of the breach." 186In my opinion, applying the principles enunciated in the cases cited above to the assumed breach in the present case would lead to the conclusion that the breach did not cause HSA to lose the opportunity to enter into the NTA contract. Even if the stringent test of causation applicable to trustees dealing with trust property was applied, the result would in my view be the same. That is to say, I do not think that the loss of the opportunity would not have occurred if there had been no breach. 187As at 11 February 2009, the stance taken by the Hart Group in the face of NTA's requirement for an unconditional and irrevocable bank guarantee of $1 million meant that HSA had no practical ability to enter into the NTA contract. Neither the documentary evidence (including the board paper submitted to the NTA board), nor the evidence given by Mr Kew, suggests that NTA might have been prepared to relax its bank guarantee requirement. Mr Kew confirmed in his evidence that the requirement for an unconditional and irrevocable bank guarantee was regarded as essential. It follows that unless HSA was willing and able to meet that requirement, the contract would not be awarded to it. In practical terms, if the contract was to be awarded to HSA, the Hart Group would need to alter its stated position in relation to the bank guarantee. 188Lord Westbury, in his affidavit sworn on 24 March 2014, deposed that had Hart been informed by Mr Boucousis of NTA's position (as set out in Ms Pollard's email to Mr Boucousis of 12 February 2009, in which Ms Pollard refers to a "$1m bank guarantee") Hart would have agreed to provide a bank guarantee in that amount. That evidence was challenged in cross-examination. Lord Westbury defended it by stating that Hart had already offered a $1 million guarantee. However, that offer was subject to conditions, including that the guarantee be only of twelve months duration, and that an advance payment based on two months estimated billings would be paid to HSA. Lord Westbury conceded that this latter condition was a quid pro quo. Moreover, NTA's position that it required an unconditional and irrevocable bank guarantee of $1 million was clearly made known to the Hart Group when the board paper was sent to it by Mr Boucousis on 10 February 2009. The Hart Group's response the following day contained no suggestion that such a guarantee might be provided. Hart Group's stated position was that Hart would not entertain the current terms and conditions proposed by NTA, and that Mr Boucousis was not allowed to bind HSA to such terms. 189It was submitted by HSA that this was not an outright refusal to give the guarantee, and should be seen as being part of a negotiation. Parts of the affidavits sworn by Lord Westbury and Mr Madden were referred to (for example paragraphs 76, 77 and 99 of Lord Westbury's affidavit sworn on 19 September 2013, and paragraph 88(c) of Mr Madden's affidavit sworn on 19 September 2013) and it was said that such evidence indicated that there was no in-principle objection to the provision of a bank guarantee for $1 million and that Hart was merely seeking to negotiate an improved position. 190However, on 6 February 2009, after Mr Boucousis informed Mr Madden that NTA did not agree with Hart's suggested basis for moving forward, and would not entertain any advance payment, Mr Madden informed Mr Boucousis that in order to move forward, Hart would require confirmation that NTA accepted its terms as earlier outlined. Still later, Mr Madden informed Mr Boucousis that Hart would not entertain NTA's terms and conditions as contained in the board paper. One such term was the provision of an unconditional and irrevocable bank guarantee for $1 million. At one point in his cross-examination, Lord Westbury seemed to accept that a term requiring an unconditional bank guarantee would not have been an acceptable term to Hart, although in fairness to Lord Westbury, there was some confusion in his evidence about exactly what was meant by an unconditional bank guarantee. He also gave evidence that the expected margins on the contract (he cited a figure of 11%) were small (at least when compared to the margins of about 30% available elsewhere), but he was happy to accept a margin at that level if no guarantee was required, and that a guarantee, depending upon its size, would make the contract financially difficult. Lord Westbury went on to state that there was a world financial crisis at the time "so locking money in a guarantee non-productively was clearly not a clever thing to do within a business." Lord Westbury also said that there was a concern about giving a guarantee by reason of the very onerous key performance indicator provisions in the contract. 191Having considered the totality of the evidence about the giving of a bank guarantee, I am not persuaded that the Hart Group was at any stage prepared to support the giving of a bank guarantee other than on the terms it suggested on 5 February 2009. In particular, I do not accept that the Hart Group may have been prepared to support the giving of an unconditional and irrevocable bank guarantee for $1 million as required by NTA. Had there been any such preparedness it would be expected to be communicated to Mr Boucousis, even if the Hart Group had less than full confidence in him and may have preferred to deal directly with NTA. The fact was that Mr Boucousis remained in his position with HSA with carriage of the negotiations with NTA. At the very least, any such preparedness would be expected to be reflected in some internal communications within the Hart Group. There was no evidence of any communications of that kind. During his cross-examination, Lord Westbury suggested that there were conversations to that effect, but no such conversations were included in any of his or Mr Madden's affidavits. I do not accept that any such conversations occurred. 192In these circumstances, I do not think that HSA has established that the loss of the opportunity to enter into the NTA contract would not have occurred if there had been no breach. 193No different result would be reached were the matter to be looked at in terms of whether an adequate or sufficient connection exists between the breach and the equitable compensation claimed. I do not think it has been shown that the assumed breach (pursuing the ATMAAC proposal when in a position of conflict) relevantly caused the loss of the opportunity. 194Ms Pollard's email of 23 February 2009 (which accords with Mr Kew's understanding at the time) seems to indicate that any issues or concerns in relation to the ATMAAC proposal only arose as a consequence of the Hart Group's earlier objection to NTA's terms, which rendered HSA unable to provide the required bank guarantee. Ms Pollard made it clear that if HSA had some way of providing the bank guarantee in its own right, the present issues would not exist ("we would not be sending these emails"). Using hindsight and applying commonsense, I do not think that the loss of the opportunity ought be seen as caused by the pursuit of the ATMAAC proposal. In early February 2009 the contract was practically there for the taking. The provision of the bank guarantee was really all that was required. Ms Stone, in her email to Mr Heycock on 12 February 2009, encapsulates the position by her posing of the question: "Why can we not grab it and run with it [...]". The opportunity was effectively lost because of the inability of HSA to provide the bank guarantee. It would in my view be artificial to conclude that the loss of the opportunity was actually brought about by the attempts made by Mr Boucousis in that situation to find an alternative means of securing the contract.

The case against HWL 195It follows from the conclusions I have reached in relation to Mr Boucousis, that the case against HWL also fails. Mr Boucousis was not engaged in any breach of fiduciary duty amounting to a dishonest and fraudulent design, so no question arises of accessorial liability under the second limb of Barnes v Addy. Mr Boucousis was not in contravention of any of the duties imposed on him by ss 181(1), 182(1) and 183(1) of the Corporations Act, so no question arises of liability as a person involved in a contravention of any of those sub-sections. 196It is therefore not necessary to go on to consider whether HWL possessed the requisite knowledge of any dishonest or fraudulent design, or any circumstances amounting to a contravention of the Corporations Act. I do not propose to go on to consider those matters. HWL's knowledge of what Mr Boucousis was doing, and the context in which he was acting, can be readily seen from the documents HWL received and the documents (including file notes) HWL created. It should be noted, however, that I generally accept the evidence given by Mr Hummel, including his evidence in relation to his understanding as to whether Mr Boucousis was discharging his duties to HSA. In particular, I accept Mr Hummel's evidence that whilst he became concerned when he read Mr Boucousis' email to him of 14 February 2009 (which showed that Mr Boucousis would receive substantial benefits in connection with the ATMAAC proposal), and thought there was a risk that Mr Boucousis might not be acting in accordance with his duties, he did not at any stage come to the conclusion that a breach had occurred. Mr Hummel said, and I accept, that he gave his advice on 18 February 2009 so as to steer Mr Boucousis away from any breach of his duties. I further accept that Mr Hummel considered that the objective of the proposed share issue in favour of ATMAAC was to enable HSA to enter into the contract with NTA. 197In the course of the trial, I rejected HWL's application, made pursuant to UCPR r 29.10, for summary dismissal. Applying the jury test (see Hunt v Watkins [2000] NSWCA 229; (2000) 49 NSWLR 508 at [10]), I was not satisfied that on the evidence that had then been given, a judgment for HSA against HWL could not be supported. The application was made after all of the witnesses (save for Messrs Hummel and Burke, and an expert accountant, Ms Michelle Jones) had been called. So as not to unduly interrupt the hearing, I indicated at the time that I would give my reasons later. Those reasons are briefly stated in the paragraphs below. 198It seemed to me that, taking the evidence at its highest for HSA, it would have been open to a jury, without error, to conclude on the evidence then given that HWL was liable to pay equitable compensation to HSA. 199I considered that a jury could, without error, have concluded that Mr Boucousis had been acting contrary to his duties to HSA, and engaging in a dishonest and fraudulent design, by pursuing a strategy to divert the benefits of the NTA opportunity into the hands of ATMAAC and obtain personal benefits for himself. Such a conclusion could have been reached if Mr Boucousis' evidence was not accepted. To pursue such a strategy would clearly offend ordinary standards of honest behaviour (cf Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd [2014] NSWCA 266 at [127]). 200I further considered that, notwithstanding the seriousness of the allegation, a jury could, without error, conclude that HWL had knowledge of circumstances which would indicate that position to an honest and reasonable man (see Farah Constructions Pty Ltd and others v Say-Dee Pty Limited [2007] HCA 22; (2007) 230 CLR 89 at [170] and [177]). In my view such a conclusion could have been based, in part, upon documentary evidence which showed that HWL was or became aware: (1)that the ATMAAC proposal involved a share issue that would effectively give ownership of HSA to ATMAAC, and further provided for substantial personal benefits to go to Mr Boucousis, including a shareholding in, and an employment contract with, the ATMAAC group; (2)that the ATMAAC proposal was apparently being pursued against the wishes of Hart Cyprus which was sometimes referred to as "Head Office"; (3)that Hart Cyprus apparently considered ATMAAC to be a competitor of HSA; (4)that there may be an issue about whether Mr Boucousis was truly the sole director of HSA; (5)that Mr Boucousis may have interests that are not the same as HSA's; and (6)that concerns had been expressed, including by lawyers for NTA, about whether the proposed share issue may be open to challenge by Hart Cyprus. 201I also considered that a jury could, without error, conclude that Mr Boucousis' pursuit of his strategy caused HSA to lose the opportunity to enter into the NTA contract. Such a conclusion could have been based, in part, upon an acceptance of the evidence given by Lord Westbury to the effect that the Hart Group would have been willing to provide a bank guarantee of $1 million to assist HSA to secure the NTA contract. 202Finally, I concluded that a jury could, without error, find that such opportunity had a substantial value. There was evidence of the likely terms of the contract (including as to service fees to be earned) which, together with evidence of expected and actual numbers of passengers passing through the two NTA airports, and evidence of expected costs of performance of the NTA contract, could (despite the limitations of that evidence) have been accepted and formed the basis of an assessment of loss.

Assessment of loss 203In case my conclusions concerning breach of duty and causation of loss are incorrect, I will set out my conclusions as to the quantum of the alleged loss, being the loss of the opportunity to enter into the NTA contract. 204HSA initially sought to prove the value of the opportunity through a calculation that was based upon forecasts contained in spreadsheets prepared in May 2008. By the conclusion of the hearing, HSA, whilst not entirely abandoning reliance upon the May 2008 spreadsheets, sought to prove loss in a different fashion. In essence, its approach was to estimate likely profit under the contract by reference to a calculation of revenue based on Schedule 7 to the draft NTA contract (as at 18 February 2009), to which a profit component of 11.1% and a (before tax) discount of 12.2% was applied. HSA then submitted that it would be appropriate to apply a 10% discount to the estimate in respect of the five year term of the contract, and a 20% discount to the estimate in respect of the extended term (of up to five years) provided for in the contract. 205The discount rate of 12.2% was that adopted by Ms Michelle Jones, an expert accountant called by HSA. That discount rate was designed to take into account the time value of money. Ms Jones performed calculations of loss based on the May 2008 spreadsheets, but HSA ultimately indicated that such quantification of loss was only relied upon "to indicate that those amounts are in the ballpark of the amounts calculated in accordance with Schedule 7". HSA further submitted that its approach to quantification was attractive because it was consistent with how the parties intended the contract to operate as a "costs plus contract", and it "obviates the need to consider the cost to HSA of generating the revenue". 206That submission rather highlighted a deficiency in the approach. It is true that the May 2008 spreadsheets indicated a margin of revenue over expenses of 11.02% over a ten year period, and there was some other evidence that HSA wanted to achieve a margin of about 11% on its costs. However, making every permissible allowance in favour of the victim of wrongdoing by a fiduciary, I would expect a more substantive attempt to establish the likely costs of performance of the contract. 207Both Mr Boucousis and HWL submitted that a margin of about 11% could not be supported because, amongst other things, it was clear that once the costs of corporate overheads (including the costs of senior management) were taken into account, the profit was very much smaller. They pointed to the email sent by Mr Boucousis to Mr Madden on 5 February 2009, which attached spreadsheets of financial data said to have been agreed between HSA and NTA. Mr Boucousis stated in his email that if various corporate overheads totalling about $840,000 (including the salaries of himself and Mr Jackson) were taken into account, a gross profit figure of about $880,000 for the first year of the contract became a net profit figure of only $46,000. 208HSA countered that if certain non-recurrent costs were excluded, the stated profit figures would increase by about $128,000. That would increase the gross profit to just over $1m, and the net profit to about $175,000. HSA also submitted, by reference to Mr Madden's affidavit sworn on 18 June 2014, that the costs of Mr Boucousis and Mr Jackson had already been factored in. That affidavit, which essentially contains an explanation of the May 2008 spreadsheets, does not explicitly state how the figures for costs of management had been compiled for those spreadsheets. In cross-examination Mr Madden shed no further light on the matter. I do not think that this evidence shows that the costs of Mr Boucousis and Mr Jackson were included in the spreadsheets prepared in February 2009. 209HSA was on firmer ground in pointing out that the overheads taken into account by Mr Boucousis in his 5 February 2009 email included at least some costs which were not necessarily related to the NTA contract. Mr Boucousis' figure of $46,000 was stated to be "based on the contract supporting the abovementioned overhead". He does not state that those overheads are in fact all attributable to the performance of the contract. If only about half of those overheads, say $420,000, was attributed to performance of the contract, the net profit figure would increase from $175,000 to almost $600,000, implying a profit margin of about 6%. 210The evidence concerning costs is in a less than satisfactory state. Nevertheless, in circumstances where it is clear that the NTA contract was seen by at least Mr Boucousis and ATMAAC as well worth pursuing, I think it would be open to the Court, doing the best it can on the available evidence, to conclude that a reasonable profit margin could be expected. Having regard to the whole of the evidence in relation to costs, including Mr Madden's cross-examination in which he conceded that the costs set out in the May 2008 spreadsheets would need to be revised to take into account higher costs (for example nearly $340,000 extra in insurance premiums) or additional costs (for example the cost of a bank guarantee), I would not be prepared to adopt 11% as an appropriate profit margin to assume. It seems to me likely that the costs of performance of the contract would have been significantly higher than the costs assumed in the May 2008 spreadsheets, and the profit margin would have been significantly less than 11%. In all the circumstances, I would reduce the assumed profit margin to 6%. 211Using HSA's figures from its Schedule of Loss dated 4 November 2014 as the basis of calculation, if a profit margin of 6% rather than 11.1% is applied to the gross annual revenue based on the numbers of departing passengers, and Ms Jones' unchallenged discount rate of 12.2% is then applied, the net present value for the five year term of the contract is about $2,200,000. If departing passengers who are transit or transfer passengers are also included in the calculation of gross annual revenue, the figure becomes about $2,460,000. The evidence was not clear as to whether the transit or transfer passengers should be included. For the purposes of this exercise I would therefore adopt the mean of these figures, being $2,330,000. HSA's figure for the extended term of up to 5 years, which figure is based on the "benchmarked" passenger numbers contained in Schedule 7 to the draft agreement, becomes about $1,480,000 if a profit margin of 6% is applied. 212It would be appropriate to discount those figures further to take into account the various risks of such profits not eventuating. These risks include: (1)the contract not being entered into due, for example, to a failure of HSA and NTA to reach agreement in relation to a bank guarantee, or a failure of HSA and Mr Boucousis to agree upon terms for him to continue in his position as managing director; (2)HSA not adequately performing its obligations, including by failing to meet the key performance indicators, causing revenue to be reduced, the extended term to be reduced or lost, or even the termination of the contract; and (3)general economic conditions and vicissitudes. 213For the purposes of this exercise I will assume, contrary to my earlier conclusion, that the Hart Group may have been prepared to support the giving of an unconditional and irrevocable bank guarantee for $1 million as required by NTA. On that basis, the chance of the contract not coming to fruition for want of agreement about a bank guarantee could be seen as a low to moderate risk. 214The chance of Mr Boucousis and HSA not coming to an agreement about his future employment as managing director of HSA should also be assessed as low to moderate. The parties had agreed in December 2008 that if the NTA contract was secured, Mr Boucousis' resignation would be rescinded and a new employment contract of at least two years duration would be signed. Despite the tensions and difficulties that emerged in the relationship between Mr Boucousis and the Hart Group executives in Cyprus, I think that the clear likelihood is that agreement would have been reached on a new employment agreement. 215I would assess the chance that HSA might not adequately perform its obligations, with a consequential reduction of revenue and possibly reduction or loss of the extended term or loss of the contract itself, as at least a moderate risk in circumstances where HSA proposed to utilise newly developed technology, and the contract required HSA to meet key performance indicators which were regarded by Lord Westbury as "very onerous". As recognised by Mr Madden in his email to Mr Boucousis of 30 January 2009, many of the key performance indicators "can be construed as subjective and could therefore result in vastly reduced billings and income". 216I would add only a small further discount for general economic conditions and vicissitudes. 217When all of the risks are considered, I would think it appropriate to apply a further discount of about 40% in respect of the five year term of the contract, and a further discount of about 60% in respect of the extended term. That would yield net present value figures of almost $1.4 million for the five year term and about $592,000 for the extended term. Accordingly, in all the circumstances, I think that it would be appropriate to assess the value of the lost opportunity to enter into the NTA contract at $2 million.

Conclusion 218The plaintiff's Amended Statement of Claim is dismissed. Costs should follow the event so that the plaintiff pays the defendants' costs of the proceedings, save for the costs of HWL's unsuccessful application under UCPR r. 29.10, which have already been ordered to be paid by HWL.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 November 2014