In the matter of Bailey Roberts Group Pty Ltd (in liq)

Category: Principal judgment

Parties: Proceedings 2021/238607
Financialstrategy.com.au Pty Ltd) formerly known as Bailey Roberts Financial Pty Limited (Plaintiff)
Bailey Roberts Group Pty Limited (First Defendant)
Bailey Roberts Financial Management Pty Limited (Second Defendant)
LAT Wealth Holdings Pty Limited (Third Defendant)
Bailey Wealth Management Pty Ltd (Fourth Defendant)
Fumar Pty Ltd (Fifth Defendant)
Sustain Holdings Pty Ltd (Sixth Defendant)
Proceedings 2023/163417
Financialstrategy.com.au Pty Ltd (Plaintiff)
Ian Roy Bailey (First Defendant)
Leith Anthony Thomas (Second Defendant)

Representation: Counsel:
Proceedings 2021/238607
S Hartford-Davis/B Dziubinski (Plaintiff)
A R Zahra SC/R D Turnbull (Second – Sixth Defendants)
Proceedings 2023/163417
S Hartford-Davis/B Dziubinski (Plaintiff)
E Hyde (First Defendant)
A R Zahra SC/R D Turnbull (Second Defendant)
Solicitors:
Proceedings 2021/238607
HWL Ebsworth (Plaintiff)
Watson Webb (Second – Sixth Defendants)
Proceedings 2023/163417
HWL Ebsworth (Plaintiff)
Addisons (First Defendant)
Watson Webb (Second Defendant)

File Number(s): 2021/238607
2023/163417

Judgment

Nature of the claims

1. In these two proceedings, heard together with evidence in one to be evidence in the other, Financialstrategy Pty Ltd (“FPL”) brings claims of breach of contract and oppression in relation to the affairs of Bailey Roberts Group Pty Ltd (in liq) (“BRG”). The two proceedings address successive time periods. The earlier proceedings (“2021 Proceedings”) are brought by FPL with leave against BRG, which is in liquidation; Bailey Financial Management Ltd (“BFM”); LAT Wealth Holdings Pty Ltd (“LAT”); Bailey Wealth Management Pty Ltd (“BWM”); Fumar Pty Ltd (“Fumar”) and Sustain Holdings Pty Ltd (“SHL”). Claims brought against two individuals, Mr Bailey and Mr Thomas, in the 2021 Proceedings were previously dismissed, although they are now the Defendants to the later proceedings (“2023 Proceedings”) which I address below.

2. Turning now to the parties to the proceedings, it is broadly common ground (Further Amended Points of Claim (“FAPC”) [1]-[2], Amended Defence [1]-[2]), that FPL was formerly known as, inter alia, Ad Astra Pty Ltd and is an incorporated financial adviser; it owns 40% of the ordinary shares issued in BRG, being 400,000 out of 1,000,000 shares; and also owns shares in two companies related to BRG, Super Advisor Pty Limited (“Super Advisor”) and Brite NSW Pty Limited (“Brite NSW”). Mr Michael Roberts is the sole director of FPL and, from 14 March 2001 until 1 October 2020, he was also a director of BRG.

3. It is common ground (FAPC [3], Amended Defence [3]) that the BRG held an Australian financial services licence; I will refer in this judgment to an Australian financial services licence as an “AFSL” and the holder of that licence as an “AFS licensee” or AFSL holder”. BRG was in the business of providing financial services to clients and administrative support to its Authorised Representatives, who were appointed on the terms of Corporate Authorised Representative (“CAR”) agreements that I address below. A voluntary administrator was appointed to BRG on 24 October 2022 and BRG transitioned from voluntary administration to liquidation on 28 November 2022. I will address aspects of BRG’s business further below.

4. It is broadly common ground (FAPC [4], Amended Defence [4]) that, at relevant times, BFM held its own AFSL and provided financial services through authorised representatives; and until 1 February 2022, BFM owned 400,000 out of 1,000,000 issued shares of BRG and also owned shares in Super Advisor and in Brite NSW. Mr Bailey was the sole director and shareholder in BFM. Mr Bailey was also a director of BRG at relevant times and, between about December 2000 and 1 February 2020, the Managing Director of BRG.

5. It is also common ground (FAPC [5], Amended Defence [5]) that, until 16 March 2022, LAT (which is a company controlled by Mr Thomas) owned 200,000 out of 1,000,000 shares in BRG and, until 7 February 2022, also owned shares in Brite NSW; and, since 16 March 2022, Sustain (of which Mr Thomas is also the sole director and shareholder) has owned those BRG shares. Mr Thomas was, since 15 December 2008, a director of BRG and has been its Managing Director since 1 February 2020.

6. It is common ground (FAPC [7A]-[7B], Amended Defence [7A]-[7B]) that, between 1 February 2022 and 8 April 2022, BWM also owned 10,000 of the issues shares in BRG and its also held shares in Brite NSW and in Super Advisor; Mr Bailey and his wife are the only directors and shareholders in BWM; from 16 until 21 March 2022, Mr Bailey owned 390,000 of the issued shares in BRG and (FAPC [7B], Amended Defence [7B]); and, since 21 March 2022, Fumar (of which Mr Bailey is the sole shareholder and director) has owned those shares.

Affidavit and expert evidence

7. I now turn to the affidavit evidence and cross-examination. In addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Varma v Varma [2010] NSWSC 786 at [424]-[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [10]. I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]:

“Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” [emphasis added]

Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”

8. I have here drawn on my summary of the applicable principles in K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603 at [40]ff, Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547 at [49]ff and Re 1derful Pty Ltd [2024] NSWSC 1414 at [7]ff. I have also borne in mind the cautionary observations of Basten JA (Handley JA agreeing) in Sangha v Baxter [2009] NSWCA 78 at [155], applied by Nixon J in Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 at [42], that:

“Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, R v Collins [2007] NSWCA 122 at [44].”

9. Mr Hyde, who appears for Mr Bailey, and Mr Zahra with whom Mr Turnbull appears for the Second – Sixth Defendants submit and I accept, that the allegations made against the Defendants in both proceedings - and particularly the allegations of contravention of directors’ duties, which have civil penalty and criminal consequences, made in the 2023 Proceedings - are such the Court ought to apply the standards set out in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and its equivalent under s 140 of the Evidence Act 1995 (NSW) (“Evidence Act”). I also bear in mind in that respect that Messrs Bailey and Thomas are also subject to conduct and character obligations under Pt 7.6 of the Corporations Act 2001 (Cth) (“Act”), and that adverse findings as to their conduct and character may impact on their continued ability to provide financial services. Where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is sought to be proved. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449 –450; [1992] HCA 66, the plurality observed that:

“The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary ‘where so serious a matter as fraud is to be found’. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.” [citations omitted]

10. Section 140 of the Evidence Act similarly provides that, in a civil proceeding, the Court must find the case of a party proved if it is so satisfied on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject matter of the proceeding and the gravity of the matters alleged. I approach the evidence in FPL’s claim on that basis.

11. FPL read several affidavits of Mr Roberts, who is a certified financial planner and adviser, and he was cross-examined at some length. In his first affidavit dated 4 November 2021 (filed in the 2021 Proceedings), Mr Roberts referred (Roberts 4.11.24 [14]-[15]) to his meeting Mr Bailey in the mid-1980s and to the incorporation of BRG in July 2000 to provide financial advice and insurer portfolio management services. Mr Roberts outlined (Roberts 4.11.24 [22], admitted by consent with a limiting order under s 136 of the Evidence Act 2005 (NSW) as to his understanding) the manner in which BRG operated between 2001 and 2006 and expressed the view that the servicing rights to all clients “belonged” to BRG. He also referred (Roberts 4.11.24 [23]-[24]) to the subsequent incorporation of other entities, including Brite NSW and Super Advisor and to a subsequent change to structure of the “Group” in December 2006 and expressed the view (Roberts 4.11.24 [25]-26], admitted by consent with a limiting order under s 136 of the Evidence Act as to his understanding) that, after the restructure:

“as financial advisers, we provided advice to our own clients and paid the Group for support services. By “our own clients”, I mean the clients of [FPL] and [BFM].”

As the evidence developed, each of Mr Bailey and Mr Thomas also accepted that proposition, with a limited exception for certain retail and insurance clients which were regarded as BRG’s clients rather than an authorised representative’s clients. I return to that matter below.

12. Mr Roberts also referred (Roberts 4.11.24 [27]) to the entry into agreements between BRG and corporate authorised representatives, which he contended (also in evidence admitted with a limiting order under s 136 of the Evidence Act as his understanding) provided financial advice “to (their) own clients”. Mr Roberts also addressed (Roberts 4.11.24 [31]-[34]) the purchase of shares in BRG by LAT in 2008 and noted that Mr Thomas left BRG in about 2014 to set up his own firm dealing with managed discretionary account (“MDA”) clients. Mr Roberts then outlined (Roberts 4.11.24 [35]ff) the operation of BRG’s “Minerva” software which was a workflow management, customer relationship management and document management program and its “Pluto” program which was a proprietary portfolio management platform. Mr Roberts also described (Roberts 4.11.24 [43]ff) the clients of FPL and BRG, which fell into categories of MDA clients and personal superannuation and insurance clients and described differences in the revenue streams generated by those clients.

13. Mr Roberts also addressed (Roberts 4.11.24 [60]ff) negotiations between 2017 and mid-2020 between himself, Mr Thomas and Mr Bailey regarding the purchase and sale of their respective interests in BRG or their respective client books and he referred to communications with, in particular, Mr Thomas concerning that matter during 2020. He addressed the circumstances in which a review was undertaken of his files in August 2020 (Roberts 4.11.24 [64]) and concerns that were raised as to aspects of those files. It is not necessary to determine the dispute as to the validity of those concerns in order to determine these proceedings. Mr Roberts also addressed (Roberts 4.11.24 [73]-[74]) subsequent correspondence between himself and Mr Thomas in which differing views were expressed as to who “owned” retail brokerage clients. Mr Roberts also addressed claims that were then made concerning his preparations to move his clients to third parties, and his affidavit evidence as to those matters omitted any reference to the extent of the steps which he had taken in that regard in a manner that made it, in my view, profoundly misleading and, in substance false. Mr Roberts also referred (Roberts 4.11.24 [77]ff) to the circumstances in which FPL was “shut out of” the Minerva and Pluto systems on 1 September 2020 and referred to the effect of FPL being “locked out” of those systems. He did not there disclose the extent to which he and FPL had, prior to that date, copied information relating to clients that he serviced to a Google Drive and also to third party systems associated another AFSL holder, Advice Evolution, in anticipation of moving those clients with FPL to that entity.

14. Mr Roberts also gave evidence (Roberts 4.11.21 [87]-[88]) that:

“Works [sic] in progress, or WIP, refers to fee-paying jobs that I had been engaged by clients to undertake. The adviser (for example, myself) sets up the job and manages the job until it is completed and invoiced. In addition to WIP, there are also significant follow-up tasks required to service a client, by way of example, arranging meetings with clients, reviewing the client’s [MDA] program and creating a file note as a record, advising clients of change in super rules or change to their product that requires action. Pluto and Minerva are the platforms upon which all of this work is saved and progressed. When I lost access to those systems, I was totally unable to progress this work.

[FPL’s] business was effectively brought to a halt on the evening of 1 September 2020.”

15. That evidence was so misleading as to be, in substance, false where, at that time, although Mr Roberts lost access to the Pluto and Minerva systems, he had copied a significant amount of client information and client contact details and there was no reason that Mr Roberts could not continue to and he did continue to contact his clients using the information which he had copied. Mr Roberts also gave evidence (Roberts 4.11.24 [101]), which I am comfortably satisfied was also false, as to the reason that he had sought access to client information for a Ms Barit, at a time that she was associated with a third party provider of services and also with Advice Evolution.

16. Mr Roberts referred (Roberts 4.11.21 [106]-[107]) to the circumstances in which access to his email account with BRG was cut off and gave evidence that:

“In addition to being unable to service [FPL’s] clients as a result of the Defendants suspending its access to the Pluto and Minerva systems, on an from 6 September 2020 the I [sic] have been unable to correspond with [FPL’s] clients via the email account I have used since 2000. Similarly, [FPL’s] clients were unable to contact me. I had no contingency plans in place to correspond with clients.”

17. That evidence was also misleading and, in substance, false. As I noted above, although Mr Roberts was deprived of access to the Pluto and Minerva systems, he and persons assisting him had by then copied a significant amount of client information prior to that occurring, and he had the ability to, and did, correspond with the many clients whose contact information he had copied, together with significant portions of their records, after his access to the Pluto and Minerva systems was cut off. The proposition that Mr Roberts had no contingency plans “in place to correspond with clients” radically misstated the true position, where he in fact communicated with clients promptly after the relevant events occurred, by use of the information he had copied to Advice Evolution’s systems.

18. Mr Roberts also observed (Roberts 4.11.21 [110]-[111]) that:

“As at the date of swearing this affidavit, I am unaware as to the status of works in progress, and important information relating to client matters. Lack of access to Minerva has prevented me from contacting or providing services to [FPL’s] clients.

[FPL] has no client files and records or advice documents other than the client records sent by [an employee of BRG] to me since I was denied access on 4 September 2020. For example, I have not, and I am still currently unable to view deadlines and current matter statuses because such matters are recorded in the Minerva system. Further, if a client instructs me to withdraw funds, I need to see which accounts have available funds and, if there are insufficient funds, I need to advise the client which of their investments should be sold in order to make the fund available. This can only be done on the Pluto system.”

This evidence was also so misleading as to be false, by its omission of reference to the client information which Mr Roberts had by then copied.

19. Mr Roberts there noted (Roberts 4.11.21 [125]ff) that he (or, I interpolate, FPL) had subsequently become an authorised representative under the AFSL of Waterfall Way Associates (“WWA”) on a “temporary basis” on 5 December 2020 and referred to later difficulties in transitioning from WWA to another AFSL holder. He also referred (Roberts 4.11.21 [143]-[144]) to the conduct which he alleged on the part of BRG and contended that:

“Because of this conduct, [FPL] was completely isolated and shut off from existing clients and has been unable to gain new clients.”

That evidence was also false, by omission, by its failure to disclose Mr Robert’s ability at all times to maintain contact with clients and the fact that he retained a significant number of clients.

20. By a second affidavit dated 9 May 2022, also filed in the 2021 Proceedings, Mr Roberts pointed to aspects of evidence led by Mr Thomas in the 2021 Proceedings. It is largely not necessary to address the dispute there raised as to the extent of Mr Roberts’ involvement in BRG’s business or the manner in which he conducted work, where I will find below that BRG’s conduct was oppressive on other grounds. In response to the disclosure by the Defendants’ evidence of the extent to which he and FPL had accessed (and copied) client files, Mr Roberts there implicitly acknowledged that access and sought to justify it on the basis that it was not uncommon to access client files “for the purposes of undertaking certain administrative tasks for clients on behalf of [FPL]” and that he did not believe that it was unlawful for him and his wife to access “our client data”, regardless of frequency or means of access (Roberts 9.5.22 [26]-[27]). It is not necessary to determine whether it was unlawful for Mr Roberts or his wife to access those client files, given the findings that I have reached on other grounds. It is, however, important to note that that Mr Roberts first acknowledged that access in his second affidavit after it had emerged from the Defendants’ evidence, and then did not fully or fairly disclose the extent of that access or the copying of those files. The extent of that access and copying could not be described, on any view, as undertaken for the purposes of either “undertaking certain administrative tasks for clients” or as for ordinary business purposes, and was plainly directed to preparing for FPL’s and Mr Roberts’ intended exit from BRG. Mr Roberts also there addressed, in a general way, discussions with other AFS licensees that were directed to moving FPL’s business to those licenses, which he had also not disclosed in his first affidavit, and which he also disclosed only after those matters had emerged from the Defendants’ evidence.

21. By a third affidavit dated 24 April 2024, filed in the 2023 Proceedings, Mr Roberts referred to events in 2022, including the voluntary administration and subsequent liquidation of BRG and the entry into a deed of settlement and release between BRG and its liquidator and several of the Defendants, by which BRG compromised its claims against those Defendants in respect of the 2021 Proceedings, which were subsequently dismissed as against Mr Bailey and Mr Thomas. Mr Roberts also there referred to steps which he characterised as the “winding down” of BRG and referred to BRG’s incurring legal costs in the 2021 Proceedings and to subsequent transactions by which BRG sold shares in other entities and, Mr Roberts contended, Sustain Capital Pty Ltd (“Sustain Capital”) (a company associated with Mr Thomas) took up the same (or, I interpolate, a similar) business as had previously been conducted by BRG.

22. By a fourth affidavit dated 26 November 2024, also filed in the 2023 Proceedings, Mr Roberts responded to evidence led by Mr Bailey and Mr Thomas in those proceedings. He addressed the manner in which BRG and its authorised representatives operated MDA services and the establishment and restructure of BRG and responded to criticisms made by Mr Bailey of his conduct. Mr Roberts also addressed, in response to Mr Thomas’ evidence, the extent to which FPL or he personally was subsequently authorised to provide financial services by licensees including AD Advisory and Fiducian Financial Services (“Fiducian”).

23. Mr Zahra advances a lengthy attack on Mr Roberts’ credit in submissions and his submissions identify many occasions on which Mr Roberts is said to have told lies in his evidence. It is not necessary to address all of those matters, where I am comfortably satisfied that Mr Roberts was not an honest witness, and I accept that his evidence should not be accepted unless corroborated by contemporaneous documentary evidence. I accept that, as Mr Zahra points out, Mr Roberts at least gave false evidence in his affidavits and in cross-examination as to why he sought to engage Ms Barit to access client information maintained on BRG’s systems (T182-184), and as to why he did not use BRG’s staff to undertake the suggested work, where that engagement was in fact directed to copying information from Mr Roberts’ Google Drive to Advice Evolution’s Worksorted system. He gave false affidavit evidence as to the effect of the loss of client information and access to BRG’s email system on his ability to contact clients, and his limited admissions in cross-examination as to those matters do not seem to me to have been a full or frank account of the position. He also gave false affidavit evidence and false evidence in cross-examination as to the extent to which he lacked access to client information after 4 September 2020 (T201ff, T209). I accept that Mr Roberts was evasive in cross-examination, particularly in relation to his suggested lack of access to client information and the question of those clients which he continued to service after the cessation of his relationship with BRG.

24. It seems to me that the material omissions in Mr Roberts' first affidavit as to his copying of client record held by BRG relating to clients service by FPL, his false evidence as to the nature of Ms Barit’s role and his false evidence overstating the effect of the suggested loss of access to client records (which he had copied in large part) and email (where he had access to another licensee’s email system) were not incidentally or inadvertently false, but involved a deliberate, calculated and dishonest attempt to deceive the Court. The deliberate character of that deceit undermines Mr Roberts’ credit generally and not only as to that issue and is such that Mr Roberts’ evidence should not be accepted as a whole, unless corroborated by contemporaneous records.

25. Turning now to the Defendants’ lay evidence, Mr Bailey is no longer party to the 2021 Proceedings, in which the claim against him was previously dismissed. Mr Bailey read one affidavit dated 29 October 2024 in the 2023 Proceedings, which overlapped with his affidavit evidence previously filed but not now read in the 2021 Proceedings. Mr Bailey provided a broad account of the manner in which AFS licensees conducted their business and also described the nature of MDAs (Bailey 29.10.24 [19]ff). He referred (Bailey 29.10.24 [25]ff) to the circumstances in which he, Mr Roberts and Mr Roberts’ wife commenced business within BRG; to other companies in which he, Mr Roberts and Mrs Roberts had an interest; to BRG’s business model and information technology systems (Bailey 29.10.24 [41]ff); and to the restructuring of BRG in about 2006 (Bailey 29.10.24 [49]ff). Mr Bailey also addressed (Bailey 29.10.24 [62]ff) the CAR agreement between BRG and FSPL and a similar arrangement between BRG and BFM.

26. Mr Bailey then addressed (Bailey 29.10.24 [75]ff) health issues which he had experienced since 2016 or 2017, which continued at the time of the hearing; discussions with Mr Thomas as to the possibility of sale of BFM’s clients and Mr Bailey’s shares in BRG to Mr Thomas; discussions between Mr Roberts and Mr Thomas concerning a sale of Mr Roberts’ shares in BRG to Mr Thomas, where Mr Roberts would remain with the business, but that arrangement did not proceed; and (Bailey 29.10.24 [83]) discussions with Mr Roberts concerning a sale of his interest in the business to Mr Roberts and the reason that proposal did not proceed. Mr Bailey addressed (Bailey 29.10.24 [84]ff) the circumstances in which Mr Thomas became managing director of BRG and in which Mr Thomas and a former adviser with BRG, Mr Tidswell, set up another entity, Sustained Capital; BRG entered into a CAR agreement with Sustained Capital; and BFM entered into a Business Sale Agreement with Sustained Capital for the sale of all of its rights and revenues arising from clients which it serviced. Mr Bailey also addressed (Bailey 29.10.24 [93]) BRG’s financial position as at July 2020.

27. Mr Bailey also referred (Bailey 29.10.24 [94], admitted with a limiting order under s 136 of the Evidence Act as to his understanding) to BRG’s expectations of client service by its authorised representatives. He addressed (Bailey 29.10.24 [98]ff) concerns which had been raised as to BFM’s client files in the second half of 2020, and he referred to industry rumours from late August 2020 that suggested that Mr Roberts would be leaving BRG and to subsequent correspondence between Mr Bailey, Mr Thomas and Mr Roberts concerning those matters. He also addressed (Bailey 29.10.24 [112]) the circumstances in which concerns were raised as to “suspicious action” on BRG’s Minerva platform and noted his then concern that a third party had obtained access to BRG’s IT system from an outside source such as email. I accept that was a plausible concern and a possible explanation of subsequent events; it is also possible that his concerns related more directly to Mr Roberts’ activities; but it is not necessary to determine which is the case, where it is plain enough that Mr Roberts had then been engaged, with the assistance of third parties, in an extensive exercise of copying client files from BRG’s systems which would have raised legitimate concerns as to the third party access that Mr Roberts had permitted to those systems.

28. Mr Bailey there referred (Bailey 29.10.24 [115]ff) to a purported meeting of BRG’s directors on 4 September 2020, to subsequent developments and to the commencement of correspondence between BRG’s and Mr Roberts’ solicitors at that time. I find below that the meeting between Mr Bailey and Mr Thomas on that date, and subsequent meetings between them of which Mr Roberts was given no notice and from which he was excluded, did not constitute valid or effective directors’ meetings of BRG. Mr Bailey also referred to Mr Roberts’ subsequent resignation as a director of BRG and to the fact that both BRG and FPL each exercised the right to terminate the CAR agreement between BRG and FPL for convenience. Mr Bailey also addressed (Bailey 29.10.24 [133]ff) the subsequent entry by clients which had previously been serviced by FPL into arrangements with BRG or Super Advisor and also addressed to attempts subsequently made by the Defendants to seek to resolve the proceedings with FPL.

29. Mr Bailey’s evidence (Bailey 29.10.24 [138]) was that, at about August 2021, BRG was trading negatively, in that its monthly revenue had fallen behind its monthly expenses, although he did not then believe that BRG was unable to pay its debts and was hopeful that Sustain Capital would grow the business and increase BRG’s revenue. Mr Bailey also referred (Bailey 29.10.24 [139]ff) to commencement of the 2021 Proceedings and to subsequent events in those proceedings. He noted that, by orders made by the Court on 10 November 2021, the 2021 Proceedings were dismissed against Mr Thomas and Mr Bailey, although their respective corporate vehicles, LAT and BFM, remained as Defendants to those proceedings. Mr Bailey addressed subsequent correspondence (Bailey 29.10.24 [146]ff) between the solicitors for the parties as to whether BRG should be paying the legal costs of defending the 2021 Proceedings and the steps which were subsequently taken by BRG, Mr Bailey and Mr Thomas in respect of the corporate structure and assets of BRG and the entities associated with Mr Bailey and Mr Thomas, in evidence which is primarily relevant to the 2023 Proceedings.

30. Mr Hartford-Davis, with whom Mr Dziubinski appears for FPL, submits that Mr Bailey was capable of dishonesty and gives one example of his suggested dishonesty in closing submissions, which does not seem to me to establish that proposition. Mr Hyde responded, in closing submissions, to criticisms of Mr Bailey’s credit. It seemed to me that Mr Bailey was generally an honest witness, often making concessions against interest including as to the parties’ understanding of the “ownership” of clients, although it is possible that he was less than frank as to the meaning of the term “Fumar” which he later used for a company name.

31. The Second–Sixth Defendants read several affidavits of Mr Thomas. By his first affidavit dated 18 December 2021, filed in the 2021 Proceedings, Mr Thomas, like Mr Roberts and Mr Bailey, addressed the nature of BRG’s business (Thomas 18.12.21 [8], [20]ff) and the nature of his, Mr Bailey’s and Mr Roberts’ involvement in BRG. Mr Thomas commented about the quality of financial advice provided by Mr Roberts (Thomas 18.12.21 [40]ff); addressed (Thomas 18.12.21 [64]ff) events in the period from 1 July 2020, after he commenced as managing director of BRG; and referred (Thomas 18.12.21 [93]ff) to a concern that Mr Roberts had given “formulaic advice” to several clients, by raising the possibility of their investing in an unidentified product, which was not an approved product of BRG, in place of existing self-managed fund arrangements. The question whether Mr Roberts’ interaction with clients as to that matter amounted to the giving of “advice” was addressed in cross-examination, but it is not necessary to determine that question or reach any wider assessment of the quality of advice given by FPL or Mr Roberts in order to determine the proceedings. Mr Thomas also addressed an “investigation” concerning Mr Roberts that commenced on 4 September 2020 (Thomas 18.12.21 [97]ff) and referred to a “board meeting” of the directors of BRG held on that date (Thomas 18.12.21 [102]). I will find below that, where notice of that meeting was not given to Mr Roberts, it did not constitute a valid or effective board meeting of BRG.

32. Mr Thomas also addressed the matters which had led him to form the view that Mr Roberts planned to transfer clients that were “owned” by BRG to a third party without his or Mr Bailey’s knowledge (Thomas 18.12.21 [109]ff). I address the question whether those clients can properly be characterised as “owned by BRG”, or indeed by FPL, below. That question turns in part on whether they were MDA clients with an advisory relationship with FPL, which each of Messrs Roberts, Bailey and Thomas now recognise would be expected to move with FPL to a new AFS licensee if FPL ceased to be an authorised representative of BRG; or, possibly, were in a small group of retail and insurance clients which appear to have been regarded as clients of BRG rather than as clients of the CARs. It is plain enough that Mr Roberts had by that time formed, and substantially progressed, a plan to transfer at least the MDA and other clients serviced by FPL to another AFS licensee and had taken substantial steps to copy information from BRG’s computer system to his personal Google Drive and from it to Advice Evolution’s client management system in order to implement that transfer.

33. Mr Thomas also addressed (Thomas 18.12.21 [111]ff) information provided by Mr Roberts to BRG, in seeking access for Mr Barit to BRG’s client management systems. Mr Thomas characterised that information as misleading (I interpolate, at best), where Mr Roberts failed to disclosed Ms Barit’s role with Advice Evolution, to which Mr Roberts was then seeking to transfer the clients serviced by FPL and develops an allegation of breach of client confidentiality in that regard which I address below. Mr Thomas also develops other allegations of misleading conduct against Mr Roberts (Thomas 18.12.21 [145]ff) and refers to events following the termination of the CAR Agreement between FPL and BRG. I recognise that there is no issue as to the efficacy of that termination, where FPL had itself invoked its right to terminate those agreements for convenience, irrespective of the validity of BRG’s termination of those agreements for convenience. Mr Thomas also responded to aspects of Mr Roberts’ earlier affidavit.

34. By a second affidavit dated 22 March 2022, Mr Thomas addressed (by way of assertion) LAT’s lack of revenue or assets, in its own capacity or as trustee of the LAT family trust, and contended it did not then have financial resources to continue to engage legal representation. Notwithstanding that evidence, LAT is in fact represented in the proceedings, although it is not apparent whether Mr Thomas personally, or other companies associated with him, are paying the costs of its legal representation.

35. By a third affidavit dated 22 December 2023, Mr Roberts expanded on the circumstances of his appointment as BRG’s managing director (Thomas 22.12.23 [12]ff) and referred to his communications with Mr Bailey in the period following that appointment (Thomas 22.12.23 [17]ff) and to issues which had arisen in respect of access using Mr Roberts’ wife’s login to BRG’s computer and client management systems and had been identified in early September 2020 (Thomas 21.12.23 [21]ff). Mr Thomas also referred to subsequent events, including the appointment of Mr Roberts or FPL as an authorised representative of WWA from December 2000; the appointment of Super Advisor to those clients which had previously been serviced by FPL and remained with BRG after the termination of the CAR between BRG and FPL, rather than electing to transfer to the new Australian AFS appointed for which Mr Roberts or FPL was an authorised representative; the sale of advice clients by BFM to Sustain Capital; and several events which adversely affected BRG’s continuing business in late 2021 and 2022, including other CARs’ termination of their arrangements with BRG.

36. By a fourth affidavit dated 29 October 2024, filed in the 2023 Proceedings, Mr Thomas again addressed the nature of BRG’s business and identified BRG’s vulnerability to the departure of its authorised representatives; led evidence (Thomas 29.10.24 [65]ff) as to consultancy arrangements between BRG and entities associated with Mr Thomas; and expanded on events from 2021 which had adversely affected BRG’s business. It will not be necessary to address those matters in detail, since they are primarily relevant to the 2023 Proceedings brought by FPL, and FPL cannot obtain the relief that it seeks in those proceedings for the reasons noted below. Mr Thomas also there addresses aspects of his conduct and provides a further response to Mr Roberts’ evidence.

37. Although Mr Hartford-Davis pointed to one aspect of Mr Thomas’ evidence which he had challenged in the course of cross-examination, it seemed to me that Mr Thomas was generally an honest witness, who frankly acknowledged the steps the Defendants had taken, although he did not then or now see a basis for challenge to them.

38. FPL and the Defendants also relied on expert evidence which I will address in dealing with the claims to which it was relevant below.

Chronology relevant to the 2021 Proceedings

39. I now turn to aspects of BRG’s business and the chronology of events, as relevant to the 2021 Proceedings. I have here drawn on the pleadings, the parties’ chronologies and the wider evidence led at the hearing.

40. Before the events that are in issue in these proceedings took place, Messrs Bailey and Roberts had been in business for many years, and they and their families had also socialised together. Mr Thomas had also been involved with BRG for a significant, although lesser, period. FPL pleads (FAPC [7D]-[7F], partly admitted, partly not admitted and partly denied in Amended Defence [7D]-[7F]) the manner in which BRG conducted its business until 2006 and that, in about 2006, BRG changed its client serving and remuneration structure to provide financial advisory services to clients through CARs of BRG and that:

“By providing services through corporate authorised representatives, BRG operated in the following way:

a each corporate authorised representatives provided advice to their clients;

b each corporate authorised representatives paid BRG for support services; and

c the servicing rights to clients belonged to each corporate authorised representatives accordingly.”

41. Here and throughout the proceedings, FPL (and other parties) adopted language (“their clients”, “belonged”) which assumed that BRG or advisers “owned” clients. I understand that proposition to refer to the expectation, at least between BRG and advisers, that one or other of BRG or the adviser had a continued expectation of providing services to those clients. I return to that matter below.

42. It appears to be largely common ground that, at relevant times, BRG provided services to two main categories of client. The first category of clients were MDA clients, including self-managed superannuation fund clients. It appears to be common ground that an MDA was established for a client based on financial advice given by a financial adviser; BRG’s portfolio administration team would then execute a specified strategy for that account; BRG and its CARs earned higher fees from MDA clients than other retail or risk clients; and MDA clients would sign a contract with BRG as the “operator” and the CAR as the “portfolio manager” (Roberts 4.11.21 [44], [48], [51]). The second category of clients were personal superannuation and insurance clients, referred to as “retail” clients or “retail and brokerage clients” or “risk” clients, who acquired third-party insurance products, or “superannuation” clients who acquired third-party superannuation products (Roberts 4.11.21 [47]).

43. It is also common ground (FAPC [9]-[10], Amended Defence [9]-[10]) that the CARs of BRG have included its shareholders, including FPL, BFM and, since about 2008, LAT. The CAR Agreement dated 1 December 2006 between FPL and BRG (FAPC [11], Amended Defence [11]; Ex J1, 73) relevantly provided (cl 2.1) that BRG would be entitled to brokerage payable in relation to all products distributed and services provided to clients, and BRG would remunerate FPL in accordance with a specified commission scale. Clause 3.1 of the CAR Agreement set out BRG’s obligations which included (cl 3.1(b)) that BRG would provide day-to-day practical support to FPL by providing, among other things, access and use of the BRG’s client and investment systems. FPL pleads (FAPC [15]) that, for the purposes of cl 3.1(b) of the CAR Agreement, the client and investment systems of the BRG included the “Minerva”, and “Pluto” systems (to which I referred above) and Mr Roberts’ email account. By cl 3.2 of the CAR Agreement, BRG appointed FPL as its authorised representative subject to the terms of the agreement.

44. Clause 4 of the CAR Agreement set out FPL’s obligations which include that FPL would provide products and services in accordance with, among other things, any limitations or directions imposed by BRG from time to time (cl 4.1); FPL would observe and comply with BRG’s Compliance Manual and all reasonable directions, work practices and policies of BRG (cl 4.3(s)); FPL would maintain files and client records, and permit BRG to audit its books and records as to its activities under the CAR Agreement (cl 4.3(n)); and FPL would deliver any specified client files and records to BRG on demand (cl 4.3(w)), a provision that plainly assumed that FPL rather than BRG would have custody of those files and records.

45. Clause 5 dealt with “intellectual property” and, by cl 5.1, FPL acknowledged and agreed that information disclosed to it by BRG under the CAR Agreement was confidential and was the “property” of BRG. I put aside the question whether information can properly be characterised as “property” and note that that provision did not extend to information provided by clients (as distinct from BRG) to FPL. By cl 7.1, FPL agreed to indemnify BRG and its related bodies corporate and officers and employees against claims and other matters arising out of or in connection with or incidental to any breach of the CAR Agreement, or otherwise resulting from any act, omission, negligence, fraud or wilful default of FPL.

46. Clause 9 of the CAR Agreement dealt with termination and provided (cl 9.1) that BRG or FPL could terminate the CAR Agreement in writing on 90 days’ prior written notice. Clause 9.2 provided that BRG could terminate or suspend the CAR Agreement immediately on specified grounds. Clause 9.3 provided for the consequence of termination under either cll 9.1 or 9.2.

47. By the first sentence in cl 9.6 of the CAR Agreement, BRG acknowledged that, upon termination, it “has no continuing proprietary interest in clients serviced by” FPL. Mr Hartford-Davis submits that:

“The first sentence of cl 9.6 is an acknowledgement that BRG “has no continuing proprietary interest in clients serviced by BRG Authorised Representatives” (cl 9.6, first sentence). Because the termination of the CAR Agreement will not result in the termination of the client agreement, BRG’s “acknowledgement” prevents BRG from relying upon its ongoing contractual relationship with the client to seek to retain that client after termination. Moreover, the first sentence of cl 9.6 operates as a release, waiver, or qualification upon any other duty that the CAR or the individual standing behind it might otherwise owe to BRG in respect of the clients. The clause confirms, for example, that it would not be a breach of fiduciary duty for a director of a CAR of BRG to transfer that CAR’s clients away from BRG - even though this might not be in BRG’s best interests.”

48. It seems to me that the first sentence of cl 9.6 must be read so as to give it practical effect, rather than a statement of the obvious that a corporate entity cannot “own” other persons, whether its own clients or the clients of its representatives. Here, I understand that clause to disclaim any continuing expectation that BRG, as distinct from FPL, would service those clients. While I do not accept that clause operated as a release or waiver, I accept that it was one aspect of the parties’ understanding that narrowed the duties of a director of BRG when his associated CAR was exiting BRG. I return to that matter below. In closing submissions, Mr Zahra contends that cl 9.6 of the CAR Agreement is only concerned with events “upon termination” of the CAR Agreement, after 4 December 2020, and not steps taken to prevent FPL having access to the relevant systems prior to termination of FPL’s engagement with BRG. The first sentence of that clause is directed to an acknowledgement as to the position upon termination. However, as Mr Zahra rightly accepted in oral closing submissions, conduct prior to the date of termination which undermined the position which BRG had acknowledged after termination could breach that clause.

49. This aspect of cl 9.6 of the CAR Agreement overlaps with the wider question whether FPL “own[ed]” the clients its serviced, to which the parties gave significant attention. In closing submissions, Mr Hartford-Davis, submitted that:

“The language used in the CAR Agreement is of ownership or property in clients. Although it is juridically awkward to speak of property or ownership in people, the legal meaning of those terms as they are used in the CAR Agreement is clear. In the circumstances of this case, the expressions “proprietary interest in” or “ownership of” clients are synonymous. They are both metaphors used by the parties to express the notion that each of them had the right (or more accurately collocation of rights), as between themselves and BRG, (a) to provide the relevant financial services to the clients that they introduced to BRG (b) to receive remuneration from the provision of such financial services and (c) to take those clients with them if they left BRG even if so doing might otherwise have been a breach of duty to BRG. …

50. The parties plainly understood that each CAR “owned” its clients, in the sense of having a right, as against BRG, to take them with it on a move to a new AFS licensee and Mr Bailey accepted in cross-examination that CARs “owned” the right to service their clients CARs and could leave BRG and take “their” clients away from BRG at any time, even if the person sub-authorised by the CAR was a director of BRG (T278-279); that FPL and Mr Roberts were free to terminate their CAR Agreement and take the clients serviced by FPL outside BRG, as long as the clients agreed to that course (T279); and that some of the risk and personal superannuation clients of BRG were “owned” by FPL (T282) and that new clients added to FPL’s “client book” after 2012 would be its clients (T286).

51. Mr Hartford-Davis also submitted that FPL’s “ownership” of its clients had the consequence that it had a “right” to sell its client book to third parties, notwithstanding any duties owed by Mr Roberts as a director of BRG. I accept that it is likely that any director’s duties of Mr Roberts were narrowed to permit a “sale” of his client book to a third party, consequential upon the terms of the CAR Agreement and the parties’ common understanding as to “ownership” of the clients: Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 17; Lewis v Estate of Martinez [2025] NSWCA 2 at [23]. However, obviously enough, the fact that a sale of FPL’s client book to a third party was permitted did not have the consequence that FPL or Mr Roberts could disclose information that was confidential to their clients to give effect to that sale, without the clients’ consent; or that FPL or Mr Roberts could cause third parties to access BRG’s client management systems without BRG’s consent to promote that sale; or that FPL or Mr Roberts could provide false or misleading information to BRG in order to seek to procure third party access to those systems. The findings that I have reached above indicate that FPL and Mr Roberts likely breached their duties to their clients by causing a significant amount of the clients’ confidential information to uploaded from his Google Drive to Advice Evolution’s client management software without the clients’ consent; and that he also acted in the second and third ways noted above.

52. Mr Hartford-Davis also contended that FPL “owned” the information concerning the clients that it serviced. I recognise that Mr Bailey appears to have held that view (Ex P6, 58) in respect of client information relating to clients serviced by BFM. It seems to me that that view was incorrect. Putting aside the question whether information is capable of being owned, as distinct from being protected by duties of confidentiality, FPL’s ability to access or use that information was significantly qualified by the client’s right to withdraw consent to use of its confidential information by BRG or FPL. To the extent that cl 9.6 of the CAR Agreement assumed BRG’s ability to make available client files and records to FPL without expressly recognising the need for client consent to the use of the client’s confidential information in that manner, it did not confer any “ownership” of client information on BRG or FPL or displace the need for client consent for the use of their confidential information by BRG, FPL or a third party to which that information was provided.

53. Returning to the CAR Agreement, cl 9.6 of that Agreement further provides that:

“BRG will not as a consequence of termination seek to hinder or prevent those clients being advised by [1] another Authorised Representative of the Business or [2] a Authorised Representative of another [AFS] licensee or [3] another person legally entitled to do so after termination. BRG will make available all files and records to which those clients are entitled to their adviser (excepting the files and records of any client who notifies BRG within 28 days of BRG advising them of its intention to make such files and records available that this should not occur”. [numbers added]

54. Mr Hartford-Davis submits, and I broadly accept that, that:

“As to the obligation imposed by the second sentence of cl 9.6, two matters of construction should be noted. First, the content of the obligation not to “hinder or prevent” the client from being “advised by” extends to any act by BRG which is calculated to, or has the effect of interrupting, retarding or impeding the transition of the CAR’s clients to a new home or keeping that from occurring. That is the ordinary meaning of “hinder” and “prevent”: see Macquarie Dictionary, definitions of “hinder” (items 1 and 2) and “prevent” (items 1 and 2). This sentence should be read together with cl 9.8, which provides that it is the responsibility of the AR “to transfer their clients to their new [AFS] Licensee”, and obliges BRG to “supply letters consenting to this transfer upon request”. Together, these clauses oblige BRG to facilitate the free departure of clients after termination as the A[uthorised] R[epresentative] migrates to a different AFSL …

As to the third sentence of cl 9.6, the process required by that sentence is that BRG is to notify clients that BRG will give the client files to their adviser unless the client objects. That opportunity to object satisfies any privacy requirements. In the absence of objection, BRG must provide the client data to their advisor.”

55. I do not accept Mr Hartford-Davis’ further submission that unless FPL had a “right” to access client information:

“Post-termination [CAR] would be seriously inhibited in transitioning its client book to a new AFS [licensee] because it would need to inconvenience each of its client[s] by having to reobtain all of the information maintained by the CAR and BRG.”

First, any transition of FPL to a new AFS licensee must take place in accordance with the law, including BRG’s and FPL’s obligations of confidentiality owed to clients; and, second it was open to FPL, or a new AFS licensee to which it sought to transfer its clients, to seek client consent to BRG’s transfer of information to that new licensee, without any need to obtain that information again, and the evidence suggests it was common practice for such consent to be sought. It appears that FPL did not take that course here because, first, it wished to transfer its client information to Advice Evolution without first giving notice to BRG or the clients that it was doing so and, second, it wished to effect that transfer before and not after it had terminated its relationship with BRG.

56. I accept that BRG had committed itself to take the course set out in the third sentence of cl 9.6, by contract; however, it was not lawfully open to it to do so, nor would it have been consistent with its “efficiently, honestly and fairly” duty under s 912A of the Act to do so, where that would not recognise the client’s right to confidentiality in client information and would seek to require a client to object to the use of information, as to which its affirmative consent was required. Mr Hartford-Davis also addresses additional issues of construction as to cll 9.6 and 9.7 of the CAR Agreement in closing submissions, but it is largely not necessary to address those questions given the conclusions that I have reached on other grounds.

57. I recognise that cl 9.6 of the CAR Agreement is limited by cl 9.7 which provides that, notwithstanding that clause, in the event of termination under cl 9.2 of the CAR Agreement on specified grounds, FPL acknowledges that BRG reserves the right to provide “the necessary services and advice” to “its clients”. This clause is obscure, both because the concept of “necessary services and advice” is not defined and because the reference to “its clients” is also obscure, and may refer either to persons who were serviced by authorised representatives of BRG or to persons not treated as clients of the authorised representatives. In any event, that qualification has no application here, because BRG did not terminate the CAR Agreement under cl 9.2 of that agreement, and I need not address it further.

58. Clause 9.8 of the CAR in turn provides that:

“Upon termination of this agreement, it is the responsibility of the Authorised Representative to transfer their clients to their new Authorised Financial Services Licensee. BRG will supply letters consenting to this transfer upon request.”

Consistent with the first sentence of cl 9.6, that clause plainly contemplated that, upon termination of the CAR on any basis, clients serviced by an authorised representative would continue to be serviced by that authorised representative, rather than BRG, under an authority granted by a new AFS licensee to that representative.

59. Clause 9.9 in turn dealt with the consequences of suspension under cl 9.2 of the CAR Agreement, namely that:

“If the [CAR Agreement] is suspended the Authorised Representative shall not be entitled to submit any new business on behalf of clients or otherwise as an Authorised Representative of BRG during the period of suspension, but the Authorised Representative shall be entitled to receive brokerage in accordance with the current commission scale provided BRG continues to be entitled to receive brokerage from the Product Provider.”

60. FPL in turn pleads (FAPC [14], denied Amended Defence [14]) that:

“It was an implied term of the [CAR Agreement] (“Implied Term”) that:

(a) [BRG] will do all such things as are necessary on its part to enable [FPL] to have the benefit of the Agreement; and

(b) [BRG] will not:

(i) hinder or prevent the fulfilment of the express promises made under the [CAR Agreement]; or

(ii) act in relation to the [CAR Agreement] in a manner which substantially nullifies the bargained-for benefits.”

The Defendants rely on an entire contract clause in response to that implied term, but that clause does not exclude a term of the kind on which FPL relies, and otherwise deny the paragraph.

61. Mr Hartford-Davis submits that:

“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract: Butt v M’Donald (1896) 7 QLJ 68 at 70-71, Secured Income Real Estate (Aust) Limited v St Martin Investment Pty Ltd (1979) 144 CLR 597 at 607 (Mason J).”

62. Mr Zahra responds that:

“The Defendants accept that, as a matter of law, the implied term in 2021 PoC at [14(a)] and [14(b)(i)] is implied as a matter of law into commercial contracts … See also Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126, [36].

However, [FPL] ha[s] cited no authority to indicate that the implied term pleaded at 2021 PoC [14(b)(ii)] is to be implied as a matter of law. That being so, [FPL] must fall back on the five-fold test articulated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283 [(“BP Refinery”)], namely that the term must be (i) reasonable and equitable, (ii) be necessary to give business efficacy to the contract, (iii) be so obvious that it goes without saying, (iv) be capable of clear expression, and (v) not contradict an express term. The term pleaded in 2021 PoC at [14(b)(ii)] is not necessary to give business efficacy to the contract. The ‘gap’ articulated in PS [59] about the period between a notice of termination being given, and termination taking effect is more perceived that real. The contract sets out the consequences of termination, and provides for the parties’ obligations before termination. There is no need to imply such a term.”

63. I recognise that the High Court has subsequently addressed the implication of terms, in an informal contract, in Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115; [2022] HCA 39, where Kiefel CJ and Gageler J (at [18]) summarised the BP Refinery factors and observed that:

“Apart from being reasonable and equitable, capable of clear expression and non-contradictory of the express terms of the contract, to be implied a term must be necessary to give business efficacy to the contract (which will not be satisfied if the contract is effective without it), and it must be so obvious that ‘it goes without saying’”.

64. Their Honours also noted authority that a term may be implied if it is “necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case” and pointed to a reconciliation of any difference in the two approaches, that a term which fails to meet the obviousness criterion would likely not be necessary for the reasonable or effective operation of the contract. Gordon J took a possibly different approach (at [50]) observing that “there is now little, if any, distinction between the latter case of an “implied” term by reference to the obvious presumed or imputed intention of the parties, and the identification of the “express” terms of an agreement by reference to the objective intention of the parties”, and that the approach taken in earlier cases no longer applied. Edelman and Steward JJ there observed (at [114]-[116]) that the BP Refinery criteria are not applied in an over-rigid way in informal contracts.

65. I am not persuaded that the more specific term for which FPL contends should be implied, where it is not apparent that it would add anything to the express obligation of BRG, under cl 9.6 of the CAR Agreement, not to “hinder” or “prevent” clients serviced by FPL being transitioned to another AFS licensee. There is no relevant “gap” to be filled by an implied term here, where the express term in cl 9.6 of the CAR Agreement is at least capable of being breached by conduct prior to termination which has the prohibited effect after termination, and the second aspect of the implied term is neither necessary to give business efficacy to the CAR Agreement nor so obvious it goes without saying.

66. Returning now to the chronology of events, on 8 December 2008, a share sale agreement was executed between Mr Roberts and Mr Thomas (Ex J1, 89; Bailey 29.10.24 [54]-[58]) and, on 15 December 2008, Mr Thomas became a director of BRG and acquired 100,000 of BRG’s ordinary shares. On 13 October 2009, Australian Financial Freedom Pty Ltd (“AFF”), a company associated with Mr Thomas, became an authorised representative of BRG (Ex J1, 168). On 27 April 2011, BRG entered into a CAR Agreement with Rocco Financial Planners Pty Ltd (“Rocco”) (Ex J1, 124; Bailey 29.10.24 [65]) and, on 3 June 2011, BRG entered into a CAR agreement with AFF, with Mr Thomas as the individual adviser (Ex J1, 146; Bailey 29.10.24 [66]). On 31 October 2011, Mr Thomas exercised an option to acquire an additional 10% of the shares in BRG (Bailey 29.10.24 [59]). Correspondence between the parties in late 2011 recognised that at least some clients were treated as “BRG owned”, apparently including clients previously introduced by Mr and Mrs Roberts that were “part of the merger” (Ex J1, 190, 192).

67. On 19 January 2016, Super Advisor became a CAR of BRG, but it did not then enter into a written CAR agreement with BRG (Bailey 29.10.24 [67]). On 31 March 2016, Rocco terminated its CAR agreement with BRG and took its clients and funds with it (Bailey [68]). On 2 June 2016, AFF obtained an AFS licence which permitted it, inter alia, to deal in MDAs (Ex J1, 4760). On 18 July 2016, BRG entered into a CAR agreement with Greetham & Associates Pty Ltd (“Greetham Associates”), as to which Mr Greetham acted as the individual adviser (Bailey 29.10.24 [69]); the later termination of that agreement contributed to BRG’s subsequent financial decline. In late 2016 or 2017, Mr Bailey started to develop symptoms of a neurological disorder, which was not fully diagnosed until 2020 (Bailey 2910.24 [73]).

68. On 9 and 10 August 2019, Mr Roberts and Mr Thomas, and Mr Roberts and Mr Bailey, exchanged correspondence concerning a possible demerger of the shareholders’ interests in BRG. On 10 August 2019, Mr Bailey advised Mr Roberts (Ex P6, 5) that:

“By the way Michael, your BRG shares ARE WORTH 6 times EBIT, WHICH on current figures is 1.2 mil which your share is $480K. BRG will never sell for your numbers unless all adv[i]ser fees are tipped back in which you rejected a year ago as unacceptable. I think he suggested course of action is equitable.”

Whether or not Mr Bailey’s view of the value of BRG shares was justified at that time, it is plain that subsequent events including FPL’s intent to exit BRG and take some or all of its clients with it, and the loss of revenue associated with FPL’s and later other advisers’ exit from BRG, significantly devalued the shares in BRG.

69. Further discussions as to the sale of Mr Roberts’ shares in BRG took place in early 2020, in which (for example, Ex J1, 1027) Mr Bailey and Mr Roberts both proceeded on the apparent basis that BFM “owns the clients” except certain retail clients, which were implicitly treated as owned by BRG, as follows:

“Michael all my client data belongs to BFM. My last email asked for a proposal. I am not prepared to share any data until I have a proposal, I am not going to spend time and expense until I understand your prop[o]sition. …

BFM current revenues are currently around $440,000.

If your proposal is of interest then I will be happy to supply info, My [sic] decisions will be based on what is good for BRG Staff, Good for BFM Clients, Good for Michael and Alex and good for my family and good for shareholders.”

70. That proposal did not then proceed and Mr Thomas informed Mr Bailey that, for that reason, he would no longer purchase his interest in BRG (Bailey 29.10.24 [78]-[80]).

71. Also by April 2020, Mr Roberts commenced extended discussions with another Australian financial adviser, Beresfords Financial Planning (“Beresfords”), concerning the possibility of his joining that business or, possibly, Beresfords merging with BRG, although there is no suggestion that proposal had been exposed to or was supported by other shareholders in BRG. Mr Roberts had plainly disclosed a significant amount of information to Beresfords which was recorded in a detailed paper provided by Mr Beresford to Mr Roberts on 14 April 2020 (Ex J1, 1035), although it is not necessary to determine whether that information was “confidential” in any strict sense. By an email dated 17 April 2020 Ex J1, 1095), Mr Roberts advised Mr Beresford that he had engaged a third party, Forte Asset Solutions (“Forte”), to undertake a “fair market valuation of BRG so as to identify the risks of the sale of Mr Bailey’s shares and client service revenues, the risks to the business” and “set a benchmark by which we can measure future progress”.

72. In May 2020, Mr Bailey caused Forte to prepare a “fair market valuation” for BRG (Ex J1, 1052). On 6 May 2020, Mr Roberts advised Mr Beresford, under the heading “Update on BR-Exit” (which plainly referred to his proposed exit from BRG) that Mr Bailey had sold “his client servicing rights” to Mr Tidswell but was staying on as 40% shareholder and director of BRG and that Mr Thomas was continuing to act as managing director, on a specified basis; shared the result of the valuation that Mr Roberts had obtained from Forte with Mr Beresford; and observed that he and Mr Greetham “might need to find a new ‘home’” and asked Mr Beresford if he was interested in taking the discussions further (Ex J1, 1095). On 11 May 2020, Mr Roberts provided information as to asset allocations, in respect of clients advised by FPL, to Mr Beresford (Ex J1, 1097); it is again not necessary to determine whether that information was strictly confidential. By 21 May 2020, Mr Roberts was providing (Ex J1, 1101) apparently confidential information to Mr Beresford, by uploading it to a Google Drive that was apparently accessible by Mr Beresford, including a list of MDA clients by funds under management (“FUM”), age and location; an adviser’s statement for MDA fees for April; and market value reports for four clients illustrating their portfolios, which was at least confidential to the clients, whether or not confidential to BRG. Mr Beresford then requested (Ex J1, 1103) further client information, including “portfolios of each of the 4 clients for the past 3 years … to see movement in both the underlying investments and the weightings” and, on 26 May 2020, Mr Roberts uploaded further information apparently referable to those clients to his Google Drive (Ex J, 1105).

73. By 21 May 2020, Mr Roberts had also initiated contact with another AFS licensee, Advice Evolution, concerning becoming an authorised representative of that entity and, on that date, Advice Evolution sent him a “new adviser pack” for his assessment (Ex J1, 1102).

74. By email dated 1 June 2020 (Ex J1, 1112), Mr Roberts updated Mr Beresford as to BRG’s corporate plans, outlining a decision made by BRG’s directors at a board meeting made on that day to limit the scope of BRG’s business and focus on its discretionary asset management activities. On 17 June 2020, Mr Roberts provided Mr Beresford with further information concerning BRG, although he indicated that he had “deleted any information that could be considered sensitive or confidential – mainly the last 3 years’ financials”. The attachment was described as a “profile” of BRG, although it appears to have been drawn in significant part from Forte’s valuation. It disclosed past and forecast financial information for BRG and costs incurred by BRG in respect of particular aspects of its activities, including technology costs, and contained an assessment of the overall strengths and weaknesses of BRG’s business. Again, it is not necessary to determine whether any of that information was strictly confidential, although it was plainly of a commercially sensitive character. On 23 June 2020, Mr Beresford provided an “offer” (Ex J1, 1160) outlining potential terms for Mr Roberts’ engagement with Beresfords, and a document which appears to have been directed to the position if a client of BRG transferred its portfolio to Beresfords. On 24 June 2020, Mr Roberts responded to that “offer” by an email (Ex J1, 1176) indicating his preliminary comments.

75. Mr Roberts continued communications with Advice Evolution as to a potential transition to that licensee, possibly associated with a transition of FPL’s MDA clients to another entity, Wealth O2, into July 2020 (Ex J1, 1298, 1302) and, by about that time, was in discussion with Advice Evolution as to hiring a member of Advice Evolution’s administrative team, ultimately Ms Barit, to assist with the administrative steps “to execute the transfer” (implicitly, of his client information and clients) to Advice Evolution (Ex J1, 1302). Mr Roberts also advised that Advice Evolution would receive a telephone call from Mr Greetham (who was, as I noted above an adviser authorised by BRG) who had expressed an interest in Mr Roberts’ discussions with Advice Evolution. Further correspondence with Advice Evolution (Ex J1, 1304-1305) referred to the engagement of Ms Barit to provide assistance, implicitly with the copying of client information relating to FPL’s clients, and the possibility of dual licensing between Advice Evolution and another entity in respect of MDA clients.

76. On 1 July 2020, BRG entered a Contractor Service Agreement with AFF (Ex J1, 1194) which provided that AFF provide specified services to BRG, largely related to management. It appears that the entry into that Contractor Service Agreement and its terms were not authorised by BRG’s board, and the contract price of $90,000 for services over six months and monthly payments of $15,000 per month plainly exceeded the authority limit of the BRG employee who had executed the contract. On the same date, Sustain Capital entered into a CAR agreement with BRG (Ex J1, 1241); BFM sold all of its rights and revenues from its clients to Sustain Capital under a Business Sale Agreement (Ex J1, 1267); BFM ceased to be an authorised representative of BRG and Mr Bailey commenced as an authorised representative of BRG; Mr Thomas was appointed as Managing Director of BRG; and Mr Bailey retired from full-time work as a financial planning and investment adviser, although he remained as a director of BRG and worked with Sustain Capital for 2 years, performing tasks to maintain client relationships and introduce Sustain Capital and its advisers to his former clients (Bailey 29.10.24 [7], [92]).

77. On 15 July 2020, Mr Roberts advised Ms Barit (Ex J1, 1309) that he was arranging a login for her to BRG’s Minerva client management system as his “marketing assistant” (a description which he placed in inverted commas, implicitly recognising that it was false) “so that you can help with the transfer of client information to Worksorted”, which was the third party client relationship software used by Advice Evolution, and he requested an Advice Evolution email and an account on Advice Evolution’s client relationship software for himself, which was subsequently provided. By that date, BRG’s staff were expressing understandable concerns to providing a Minerva login to Ms Barit, on the basis that it would give her access to all clients on BRG’s client relationship software, all contact notes and personal client information, and would also allow access to information relating to Super Advisor’s clients, which was contained in the same system. BRG then requested further information concerning Ms Barit’s role from Mr Roberts, to which he responded with false or seriously misleading information that Ms Barit was his “executive assistant cum marketing manager”, which again did not disclose her relationship with Advice Evolution (Ex J1, 1312-1316). Correspondence in which Mr Roberts pressed for Ms Barit to have access to BRG’s Minerva system continued over a significant period, with BRG staff expressing continued concerns as to privacy issues in relation to client information, which were justified in those circumstances.

78. On or about 16 July 2020, Mr Thomas told Mr Bailey that Mr Roberts had asked BRG’s office manager, Ms Dimitrievski, to grant access to BRG’s Minerva system to a person (Ms Barit) who Ms Dimitrievski believed was located overseas, and BRG did not permit that access (Bailey 29.10.24 [98]).

79. Mr Roberts’ discussions with Advice Evolution continued into mid-July 2020 (Ex J1, 1325) and, by that time, Advice Evolution sent its individual and corporate representative agreements to Mr Roberts (Ex J1, 1330). By late July 2020, Ms Barit, in her role with Advice Evolution, had taken steps to set up a client relationship management profile for Mr Roberts under Advice Evolution, within that firm’s Worksorted system (Ex J1, 1330A). By that time, Mr Roberts had also uploaded client contact details for BRG’s clients serviced by FPL into a Google Drive folder from which that information could be transferred to Advice Evolution’s Worksorted account. Mr Roberts’ communications with Ms Barit concerning her access to that Google Drive and his access to a Worksorted profile under Advice Evolution continued into mid-July 2020 (Ex J1, 1349).

80. By early August 2020 Mr Roberts had obtained access to Advice Evolution’s Worksorted system (Ex J1, 1352) and had also established an email address not associated with BRG (Ex J1, 1367). By 6 August 2020, Mr Roberts had requested (Ex J1, 1308) BRG to provide access for Ms Barit to BRG’s Minerva system, without disclosing her connection with Advice Evolution to BRG. Mr Roberts continued to press BRG for access for Ms Barit to BRG’s client records and information into mid-August 2020 and continued to provide misleading information to BRG as to the purpose of that access, by non-disclosure of Ms Barit’s relationship with Advice Evolution and the intended use of that access to copy information to Advice Evolution’s client files.

81. In cross-examination Mr Roberts characterised these discussions (T113) as a “Plan B” if something happened and he was forced out of BRG, and appeared to suggest that these those discussions were tentative, preliminary, exploratory or not substantially advanced; he subsequently accepted that discussions with Mr Thomas and Mr Bailey were not going well and, ultimately, also accepted that his ultimate objective was to move to one of the other organisations with which he was in discussion. While I accept that the transfer of clients to another AFS licensee was plainly an alternative to a negotiated separation of the parties’ interests, any suggestion that the discussions with Advice Evolution were anything short of fully advanced is inconsistent with Mr Roberts’ making a substantial amount of client information available to Advice Evolution, albeit without client consent, where he plainly would not have taken that course unless he was well-advanced in a proposed transfer of his business to Advice Evolution.

82. A question as to compliance also arose as to contacts between Mr Thomas and several of his clients in early August 2020 (Bailey 29.10.24 [99]ff; Ex J1, 1376). It is not necessary to determine whether those concerns were well-founded in order to determine the proceedings.

83. Between 13 August 2020 and 4 October 2020 (Ex D3), a third party engaged by Mr Roberts, Ms Cameron, copied voluminous client information from BRG’s Minerva system, by accessing it using Mr Roberts’ wife’s login to that system. Ms Cameron then downloaded that information from the Minerva system to a Google folder controlled by Mr Roberts, who then made it available to Ms Barit to copy it to Advice Evolution’s Worksorted system. That client information which was copied from the Minerva system included detailed information in respect of individual clients (Ex D4-D7).

84. On 21 August 2020, Mr Roberts advised Ms Barit that Ms Cameron had copied information relating to 32 out of his 36 MDA clients ready for Ms Barit’s team to upload to Advice Evolution’s Worksorted files (Ex P6, 3). On 22 August 2020, Mr Roberts referred to new folders which had been created on his Google Drive for personal superannuation clients and personal insurance clients and he subsequently provided a list of 87 personal superannuation clients that needed a Worksorted file on Advice Evolution’s system.

85. By an email dated 24 August 2020 (Ex J1, 1404), Mr Thomas raised the possibility of the separation of his and Mr Roberts’ interest in BRG, stating that:

“I have been thinking about the go-forward options for BRG.

Just conceptual at this stage but would you be interested in exploring a separation of BRG where you ended up the sole owner of the firm, kept the AFS [licence] (incl MDA), brokerage clients/revenue, most staff, Terry’s business etc and [Mr Bailey’s] MDA clients were moved to AFF?. This would mean buying [Mr Bailey] and I out of [BRG] and you keeping the rest. My back of the envelope on this scenario ????? BRG would have very strong EBIT.” …

I have just run this idea past [Mr Bailey] (cc’d in) he was interested in exploring the concept and would be open to a conversation with the three of us if you are. We know if you are open to exploring this and if so, I will put more thought into the detail and could organise a meeting for the three of us to discuss.”

86. Mr Roberts responded, on 25 August 2020 (Ex J1, 1405) that:

“It might be better to reverse your idea – that is, I move out of BRG with my MDA and retail clients and put my shares up for sale. That way, there is least disruption to BRG and you would continue to manage BRG and keep the staff and office arrangements, if you wish.”

87. Mr Thomas replied (Ex J1, 1406) that:

“The problem with that Michael is that the retail/brokerage clients are not yours to take. I have searched and cannot find any evidence to suggest that BRG doesn’t own them.

However, I would support you taking the MDA clients + the retail/brokerage clients if you gave your shares in BRG, [Super Advisor] and Brite to [Mr Bailey] and I.”

88. It appears that the reference here to the status of retail and brokerage clients is directed, at least in part, to the position of those retail and brokerage clients which were “owned” by BRG, although some retail and brokerage clients did not fall within that category. I accept that, by this point, Mr Thomas and Mr Bailey, and indeed Mr Roberts, all had an interest in Mr Roberts’ exit from BRG, or at least the separation of their respective business interests. However, I do not accept FPL’s claim that BRG’s subsequent response to the matters which arose in respect of the copying of BRG client data, the misleading information which had been provided by Mr Roberts to BRG’s staff, and the concealed manner in which that copying had been undertaken, did not reflect a genuine concern with those issues or amounted to a mere artifice to seek to force Mr Roberts out of BRG.

89. FPL pleads (FAPC [16], denied Amended Defence [16]) that, between about August and September 2020, negotiations took place between FPL, BAM and LAT for the separation of their business interests. Those discussions in fact took place between the relevant individuals, although any outcome would no doubt be implemented through those entities.

90. By an email dated 31 August 2020 to Mr Roberts, with a copy to Mr Bailey, (FAPC [17], admitted Amended Defence [17]), Mr Thomas raised a question whether Mr Roberts was moving his clients to another entity, WealthO2. By email dated 1 September 2020 (Ex J1, 1657), Mr Bailey advised Mr Roberts and Mr Thomas that:

“I am concerned about the matters raised in relation to [Mr Roberts’] CAR and the internal investigations revealing compliance issues. As we have not been able to communicate with [Mr] Roberts I suggest that in the interests of the Company’s security and safety to client’s [sic] and shareholders that all access to Minerva and Pluto be shut off immediately pending a board meeting.”

I should note that, even if that approach would otherwise have been legitimate as a temporary measure, pending a board meeting, it was not legitimate where no notice of such a board meeting was then given to Mr Roberts, and Mr Bailey and Mr Thomas conducted a private meeting without notice to Mr Roberts and in his absence.

91. Further correspondence as to a possible discussion of exit arrangements from BRG continued on 1 September 2020, with Mr Roberts expressing a view (Ex J1, 1660) as to the manner in which such discussions should take place. Also on 1 September 2020, Mr Thomas advised Mr Roberts with a copy to Mr Bailey (FAPC [18], admitted Defence [18]; Ex J1, 1662), of his position as to separation of the parties’ interests, observing that:

“Michael, there is clearly no working relationship here and it appears neither of us want to be in business with the other. This needs resolving and I see that there are two ways this is going to play out:

1 A path that results in BRG shares having no value; or

2 A path where you, [Mr Bailey] and I have a discussion and try to determine an amicable separation of our business interests that maximises the value of each of our BRG shares. This is my preferred path. If you prefer this path too, I suggest the three of us have a meeting to discuss where we each put forth suggestions on how to resolve. If you are willing to do this, I will leave it to you and [Mr Bailey] to suggest some times.

I pause to note that FPL seeks to give a sinister construction to the first alternative noted in that email. I do not accept that construction, where that first outcome may have recognised no more than BRG’s vulnerability to the exit of a key adviser and the risks of a contentious exit of a shareholder, both of which are amply demonstrated by subsequent events. Mr Thomas went on to address the issues which had arisen in respect of compliance as to Mr Roberts, which it is not necessary to determine in order to determine these proceedings.

92. Mr Bailey then responded (Ex J1, 1663), sensibly enough, that he supported a meeting as soon as possible and that, as Mr Roberts and he were major shareholders “reduction of my BRG asset to zero isn’t a good outcome”. There is no reason to doubt that Mr Bailey genuinely held that view and it is inconsistent with the involvement in a conspiracy to bring about a forced exit of Mr Roberts from BRG (with a substantial risk that the revenue from Mr Roberts’ clients would be lost to BRG) which Mr Roberts seeks to attribute to Mr Bailey.

93. Mr Roberts in turn responded (Ex J1, 1664) that:

“I agree – the relationship is untenable. I’m happy to have a meeting as soon as one can be arranged and proposals prepared and circulated for preliminary discussion beforehand.”

94. Regrettably, this approach does not seem to have been pursued, partly as a result of the developments which then followed in relation to the denial of Mr Roberts’ access to BRG’s Minerva and email systems. Plainly, there was justification for that course, where Mr Roberts was then permitting a third party, Ms Cameron, to engage in wholesale access to BRG’s records associated with clients serviced by FPL, using his wife’s computer access to the BRG system to do so, and had engaged in a sustained course of non-disclosure and misrepresentation as to the purpose of seeking third party access to that system. However, the denial of that access was not properly authorised, for reasons that I will note below, and did not promote a commercial discussion of exit arrangements between the parties.

95. On the same day, 1 September 2020 (FAPC [19], admitted Amended Defence [19] with reliance on additional matters), Messrs Bailey and/or Thomas caused BRG to suspend Mr Roberts’ and FPL’s access to BRG’s Computer Systems. The Defendants plead several matters that seek to justify that suspension on several grounds, namely that:

“(a) on or around 1 September 2020 BRG, [Mr] Bailey and [Mr] Thomas became aware that in July and August 2020, [FPL] and [Mr] Roberts [i] had sought to transfer the clients serviced by [FPL] away from BRG to Advice Evolution …; and [ii] attempted to provide access to BRG’s Minerva computer system to competitors of BRG and competitors of the CARs;

(b)-(c) [Mr] Roberts and [FPL] provided misleading or deceptive information to the employees of BRG [on 15 July 2020, 6 August 2020,

(d) each of [Mr] Roberts and [FPL] were seeking to plan, negotiate, commit to, and effect a transfer of the clients serviced by [BRG] away from BRG and to a competitor of BRG;

(e) each of [Mr] Roberts and [FPL] disclosed confidential information of BRG and clients of [BRG] to competitors of BRG;

(f) [Mr] Roberts and [FPL] encouraged G&A, to terminate its Authorised Representative Agreement with BRG and to move the clients serviced by G&A to Advice Evolution;

(g) [Mr] Roberts and [FPL] sought to transfer the clients serviced by [FPL] away from BRG to competitors of BRG without the knowledge or prior consent of BRG and the Defendants;

(h) [Mr] Roberts and [FPL] had been providing the same formulaic advice to clients of BRG irrespective of, and without giving any or any proper consideration to, the circumstances and best interest of those clients; and

(i) [Mr] Roberts and [FPL] provided explanations to BRG as to the conduct set out in paragraph 19(h) above that were not truthful, and that were inconsistent with the terms of the File Notes which [Mr] Roberts had created in respect of the advice in question;

(j) by reason of the matters pleaded in this paragraph 19, on or about 1 September 2020, BRG suspended the access of [FPL] and Roberts to BRG’s computer systems (the “Suspension”); and

(k) on 4 September 2020, the directors of BRG resolved to maintain the Suspension as referred to in [FAPC [20]].

96. FPL admitted a large part but not all of this conduct by a Reply filed in the course of the hearing, shortly before Mr Roberts was to be cross-examined.

97. I proceed, as did the parties, on the basis that the first paragraph of the allegation made in the Defence is to be understood as alleging the underling facts and not only Mr Bailey’s and Mr Thomas’ knowledge of them. FPL rightly admits (Reply to Defence to Further Amended Points of Claim (“Reply”) [1]) the first aspect of the first allegation, that FPL and Mr Roberts had sought to transfer the clients serviced by FPL away from BRG to Advice Evolution, although that transfer was not completed, and it appears Mr Bailey and Mr Thomas did become aware of that matter in early September 2020. The transfer of those clients would not itself have been wrongful, with their consent, where the CAR Agreement acknowledged that BRG had no interest in those clients and, as Mr Bailey fairly acknowledged in his cross-examination, the parties’ arrangements contemplated that, as between BRG and an adviser, that adviser could take the clients it serviced with it, if it ceased its association with BRG. However, that proposition does not exclude a conclusion that the manner in which FPL and Mr Roberts undertook that transfer and dealt with client information was wrongful.

98. As to the second aspect of the first allegation, that FPL attempted to provide access to BRG’s Minerva computer system to competitors of BRG and competitors of the CARs, FPL responds (Reply [2]) that it:

a. admits that it attempted to provide access to BRG’s Minerva computer system to Ms Gessamay Barit;

b. admits that Ms Barit was at the time the Chief Operation Officer of Advice Evolution, which was a competitor of BRG;

c. admits that Ms Barit was also a representative of Virtual Business Partners Pty Ltd;

d. says further that he attempted to provide the said access to Ms Barit in her capacity as representative of Virtual Business Partners Pty Ltd, to assist him to effect a transfer of his clients from BRG.

99. FPL also rightly admits (Reply [3]-[4]) the second and third allegations, that Mr Roberts and FPL provided misleading or deceptive information to the employees of BRG on 15 July 2020 and 6 August 2020. I have addressed Mr Roberts’ and FPL’s conduct in that regard above. FPL also rightly admits (Reply [5]) the fourth allegation, that each of Mr Roberts and FPL were seeking to plan, negotiate, commit to, and effect a transfer of the clients serviced by BRG away from BRG and to a competitor of BRG. I have noted above that there was no wrong involved in an adviser seeking to depart BRG and transfer its clients to a third party, and that third party would likely be a competitor of BRG since no-one other than another AFS licensee which was authorised to provide similar services could authorise FPL to provide those services. Again, that proposition does not exclude a conclusion that the manner in which that transfer took place was wrongful.

100. BRG particularises the fifth allegation that “each of [Mr] Roberts and [FPL] disclosed confidential information of BRG and clients of [BRG] to competitors of BRG” as follows:

“A. Confidential information of BRG was disclosed by [FPL] and [Mr] Roberts to at least Advice Evolution, Virtual Business partners, WealthO2 and Beresfords, including:

a. the identity of clients;

b. the content of client portfolios;

c. asset allocation data;

d. product buying and selling reports;

e. performance reports;

f. BRG’s approach to the weighting of international markets for asset allocations;

g. the plans and decisions of BRG including as regards its approach to discretionary asset management versus its risk and superannuation business; and

h. advice files.

B. Emails sent by Roberts between in or around May 2020 to in or around September 2020.”

101. FPL admits this allegation (Reply [6]) and I proceed on that basis. It is therefore not necessary to decide whether BRG, as distinct from the clients to which the information related, had any claim to the confidentiality of much of this information. I have noted above that the CAR Agreement and the parties’ understanding was that the client relationship would continue with FPL, rather than BRG, if FPL ceased to be an authorised representative of BRG and became an authorised representative of another provider; BRG appeared largely to accept that a client could consent to the client’s information being provided to that other provider; and there is no obvious basis on which BRG could assert a claim to confidentiality of information relating to the clients serviced by FPL, rather than to BRG, to prevent the transfer of that client or its information to that provider, if the client consented to that transfer.

102. FPL also rightly admits (Reply [7]) the sixth allegation that Mr Roberts and FPL sought to transfer the clients serviced by FPL away from BRG to competitors of BRG without the knowledge or prior consent of BRG and the Defendants, which overlaps with earlier allegations. As I have noted above, there was no wrong in that attempt, where the CAR Agreement acknowledged that BRG had no interest in those clients; as Mr Bailey fairly acknowledged in his cross-examination, the parties’ arrangements contemplated that, as between BRG and an adviser, that adviser could take the clients it serviced with it if it ceased its association with BRG; had no obligation to disclose its intent to take that course to BRG in advance; and, in any event, BRG did not make any corporate decision to suspend the CAR Agreement with FPL or take other action by reference to this matter. Again, it does not follow from that proposition that the manner in which that transfer was wrongful was not wrongful.

103. FPL denies the seventh and eighth allegations that Mr Roberts and FPL had been providing the same “formulaic advice” to clients of BRG irrespective of, and without giving any or any proper consideration to, the circumstances and best interest of those clients; or that Mr Roberts and FPL provided explanations to BRG as to that conduct that were not truthful, and that were inconsistent with the terms of the relevant file notes. It is not necessary to determine those allegations in order to determine the proceedings.

104. Ninth, BRG pleads and FPL denies that, by reason of these matters, on or about 1 September 2020, BRG suspended FPL’s and Mr Roberts access to BRG’s computer systems (“Suspension”) and, on 4 September 2020, the directors of BRG resolved to maintain the Suspension. I accept that, as a matter of fact, Mr Thomas determined to suspend that access and Mr Bailey acquiesced in that decision. I do not accept that BRG, as a corporate entity, reached any such decision on that date, for the reasons set out below.

105. In closing submissions, Mr Zahra characterises Mr Roberts’ conduct as implementing “a plan by which he would strip information out of BRG – information concerning BRG itself and its clients – in order to move from BRG.” It is plain enough that Mr Roberts set out to copy information held by BRG concerning the clients serviced by FPL, without seeking BRG’s or those clients’ consent to his doing so, prior to his exit from BRG, presumably so that he could immediately commence work with a new AFS licensee rather than being delayed while seeking client consent and BRG’s cooperation in the transfer of information to that new licensee. There would likely have been no wrong in FPL maintaining a copy of that information for itself, with clients’ implicit consent, in order to service those clients, or in FPL copying that information with clients’ consent, and BRG would likely have been obliged to consent to it doing so. However, the fact that that objective could have been obtained lawfully with client consent does not have the consequence that any step taken by FPL to obtain it, without client consent, was lawful.

106. On 3 September 2020, the solicitors for Mr Roberts wrote to BRG, in response to the compliance concerns raised by BRG in respect of Mr Roberts and his inability to access the Minerva and Pluto systems and requested detailed information as to those compliance issues and also asked:

“Please specify what prompted Mr Bailey to conclude that the Company’s security and the clients’ and shareholders’ safety was at risk to warrant the closing of Mr Roberts’ access to Minerva and Pluto.”

At least Mr Roberts must then have already known all of the information that was necessary to respond to that request, including the fact that he had caused Ms Cameron to access BRG’s computer system to download a significant amount of client information to his Google Drive, and then worked with Ms Barit to copy that client information from that Google Drive to Advice Evolution’s client management system, apparently without the consent of the relevant clients.

107. FPL also pleads (FAPC [20], admitted with additional matters in Amended Defence [20]) that, on 4 September 2020, Messrs Bailey and Thomas “purported[ly]” met as BRG’s directors, having excluded Mr Roberts from that meeting, and purportedly resolved (I interpolate, after the event) that Mr Roberts and FPL should be denied access to BRG’s Computer Systems (as defined). The Second-Sixth Defendants respond that a meeting of the directors of BRG was held on 4 September 2020; and contend that:

(b) … [Mr] Roberts was not present at the meeting of the directors of BRG held on 4 September 2020 because of [Mr] Robert’s conflict of interest in the subject matter of that meeting;

(c) … [Mr] Bailey and [Mr] Thomas were present at the meeting of the directors of BRG held on 4 September 2020;

(d) … the directors of BRG present at the meeting of the directors of BRG held on 4 September 2020 validly resolved that [FPL] and [Mr] Roberts be denied access to BRG’s computer systems as a result of the matters pleaded [FAPC [19]] …

For completeness, the Second-Sixth Defendants particularise that conflict of interest as arising “from the fact that the meeting was considering alleged wrongdoing by the [FRP] and [Mr] Roberts, as against BRG, which gave rise to a conflict between [FPL’s] and [Mr] Roberts’ respective personal interests, and [Mr] Roberts’ duties under the [Act] and in equity as a director of BRG.”

108. Turning to the applicable meetings, on 4 September 2020, Mr Bailey and Mr Thomas met, purportedly as the board of BRG, without giving notice to Mr Roberts of that meeting. The minutes of that meeting (Ex D2, 1) recorded that:

“The directors present considered letter of advice from Hall & Wilcox, including their advice relating to meeting participants (conflicted parties). The directors present considered [Mr] Roberts’ conflict of interest in attending this meeting. It was resolved that in this instance the directors present satisfied the necessary quorum. It was concluded that in the best interests of the company and shareholders:

● The directors would have further discussions with Hall & Wilcox;

● That based on information found to date regarding Michael Roberts’ actions:

It was in the best interests of shareholders to continue to deny him access to Minerva and Pluto; and

Further investigations into Michael Roberts’ actions are required immediately and that an email is to go to Michael to notify him of the investigation and to request information.”

109. At a second purported directors’ meeting on 4 September 2020 (Ex J1, 1693), also conducted without notice to Mr Roberts, after referring to advice from solicitors and to their perception that Mr Roberts had a conflict of interest, Mr Bailey and Mr Thomas recorded that:

“The directors present considered the initial findings from the investigation into [Mr Roberts’] actions to date. Findings to date indicate serious misconduct by [Mr Roberts]. Initial findings indicate breaches of:

● His obligations as a director of BRG;

● The CAR Agreement;

● The Shareholders Agreement (which it appears is not in evidence);

His actions include but are not limited to:

● Seeking to give and giving access to client data to third parties including, but not limited to, a foreign business and competitors without BRG or the client’s authority;

● Lying to or misleading BRG when attempting to provide a foreign business and a competitor with access to Minerva;

● Lying to or misleading BRG regarding recent AFS [licence] compliance related queries;

● Seeking to solicit [Mr Greetham] away from the business and undermining BRG’s relationship with [Mr Greetham]; and

● Seeking to steal BRG-owned clients from BRG.

Based on the above, it was concluded that it would be in the best interests of the Company, clients and shareholders if Mr Roberts’ access to Minerva and Pluto remained denied pending further investigation.”

110. In cross-examination, Mr Bailey fairly accepted that Mr Roberts would have wanted to put his position as to the denial of access to the Minerva and Pluto systems at the 4 September 2020 board meeting and that Mr Roberts was not given any notice of that board meeting and was intentionally excluded from it (T343).

111. Mr Zahra submits that:

“In all of the circumstances, it was appropriate for Mr Roberts not to attend and, even if he had been invited, it is uncertain that he would have attended and it would have been of no consequence if he did. Messrs Bailey and Thomas were seeking to meet with or engage with Mr Roberts in the lead-up to 1 September 2020 and thereafter but Mr Roberts made no attempt to do so. … Mr Roberts was given notice of an EGM to address his removal as a director and he chose not to attend the meeting but, instead, to resign. That conduct supports an inference that he would not likely have attended the meetings in early September which addressed his conduct (which he had refused to explain) and the steps to be taken in BRG’s best interests (which company [Mr Roberts/FPL] was actively seeking to leave).”

112. Mr Zahra also relies on cl 43 (J1, 56) of BRG’s constitution which provides:

“The business of the Company shall be managed by the Directors who may pay all expenses incurred in promoting and registering the Company and may exercise all such powers of the Company as are not by the Law or by this Constitution required to be exercised by the Company in general meeting. The general powers given by this clause shall not be limited or restricted by any special authority or power given to the Directors by any other clause.”

That provision plainly does not assist the Defendants in respect of the decisions of board meetings to which Mr Roberts was given no notice. That clause is in common form; it confers powers on the directors of the company; but it does not permit an individual director or two directors to exercise those powers other than as a board; and corresponding provisions would likely have existed in the several cases which have dealt with the invalidity of board meetings where notice was not given to directors.

113. Mr Zahra then points to cl 63 (J1, 58) of BRG’s constitution which provides:

“A resolution in writing, signed by a majority of the Directors for the time being entitled to receive notice of a meeting of the Directors, shall be as valid and effectual as if it had been passed at a meeting of the Directors duly convened and held. Any such resolution may consist of several documents in like form, each signed by one or more Directors.”

I do not understand that clause to dispense with the requirement for notice to all directors of a board meeting, where it merely allows a written resolution to take effect if signed by the majority of those directors. The suggestion that that clause operates to allow a majority of directors to conduct the company’s affairs, by passage of such resolutions without notice to minority director(s) without limitation in time need only be stated in order to be rejected.

114. Mr Zahra also submits that:

“Those resolutions were executed in accordance with clause 63 of the Constitution of BRG, such that they were valid corporate acts by BRG. The common expectation of the directors and shareholders of BRG was that BRG would conduct its affairs in accordance with the Constitution.

No notice of any meeting had to be given to the directors, because clause 63 does not require a meeting of directors to occur to take the decisions recorded in the resolutions of 5 and 9 September 2020.

To the extent that the common law requires notice of a directors’ meeting to be given to directors, such a requirement was varied by clause 63, such that no notice had to be given. An alternative construction is that clause 63 provides for a mechanism for the directors to take a decision wholly outside the context of a directors’ meeting. Therefore, BRG validly terminated the CAR agreement pursuant to clause 9.1.”

115. Mr Zahra then submits that:

“First, had [Mr Roberts] attended the meetings, it would have had no practical consequence, because Mr Thomas and Mr Bailey would have outvoted him.

Secondly, it is not apparent Mr Roberts would have attended. Messrs Bailey and Thomas had sought to meet with him in the lead up to 1 September 2020 to discuss issues relating to the affairs of BRG, and Mr Roberts had failed to attend. There is no indication that he would have changed his position upon being summoned to a board meeting.

Thirdly, Mr Roberts had a plain conflict of interest in relation to decisions taken by the directors, such that he would have been excluded from the making of those decisions by the board.

Fourthly, Mr Roberts never requisitioned a meeting of directors so that he could address the issues arising from his own conduct and BRG’s response to them.

Fifthly, whether or not Mr Roberts attended board meetings, the directors had power to make decisions for BRG under clause 63, such that holding a meeting which Mr Roberts could choose to attend, or not, would have had no practical consequence for the operation of BRG.”

116. I do not accept Mr Zahra’s submissions in this regard, and specifically do not accept that the notice to Mr Roberts of the relevant board meetings could not have affected events, where that wrongly assumes the outcome of an opportunity of which the Defendants’ deprived Mr Roberts to explain his conduct. I also do not accept that Messrs Bailey’s and Thomas’ perception that Mr Bailey would have a conflict avoided the need to give notice of these (and later) meetings, whether or not Mr Roberts could vote at that meeting. The approach which they adopted would have the remarkable and wholly inappropriate consequence that a minority director who was wrongly accused of wrongdoing by majority directors would, without more, neither receive notice of a directors’ meeting to discuss that allegation, nor an opportunity to disclose his or her interest and explain why the allegation was wrong. The case law does not treat a potential or actual conflict of interest as avoiding the need to give notice of a directors meeting to all directors of BRG or have the consequence that a meeting held without giving such notice to Mr Roberts is valid. For completeness, art 41 of BRG’s constitution (Ex J1, 56) also contained a common provision that permitted a director to vote in respect of any arrangement in which he or she was interested and to be counted for the purpose of any resolution regarding that matter in the quorum, notwithstanding his or her interest.

117. Absent notice to Mr Roberts, these (and later) purported boards meeting were invalid: Re Homer District Consolidated Gold Mines; Ex parte Smith (1888) 39 Ch D 546 at 550; Eastern Resources of Aust Ltd v Glass Reinforced Products (GRP) Pty Ltd [1987] 2 Qd R 31; (1986) 10 ACLR 496; Mitropoulos v Greek Orthodox Church and Community of Marrickville and District Ltd (1993) 10 ACSR 134; 11 ACLC 277; Bell v Burton (1993) 12 ACSR 325; 12 ACLC 1037. These (and later) purported board meetings were not validated under s 1322(2) of the Act, where depriving Mr Roberts of notice of that meeting and an opportunity to put an answer to the allegations and, after disclosing his interest, oppose the resolution, caused substantial injustice to Mr Roberts and FPL that could not now be remedied by any order of the Court. I would, to the extent necessary, declare the resolution passed at that meeting (and each other meeting as to which notice was not given to Mr Roberts) to be invalid for the purposes of s 1322(2) of the Act. Where these meetings were not validly held, the steps subsequently undertaken to deny access to BRG’s Minerva and Pluto systems were taken without BRG’s corporate authority.

118. FPL then pleads (FAPC [21], admitted with additional matters in Amended Defence [21]) that, on 5 September 2020, Mr Bailey and/or Mr Thomas caused BRG to suspend Roberts’ access to his BRG email account. The Second-Sixth Defendants respond that there was a meeting of the directors of BRG on 6 September 2020 and again that:

(a) … [Mr] Roberts was not present at the meeting of the directors of BRG held on 6 September 2020 because of [Mr] Roberts’ conflict of interest in the subject matter of that meeting;

(b) … [Mr] Bailey and [Mr] Thomas were present at the meeting of the directors of BRG held on 6 September 2020;

(c) the directors of BRG present at the meeting of the directors of BRG held on 6 September 2020 resolved that [Mr] Roberts be denied access to [Mr] Roberts’ email account with BRG as a result of the matters pleaded in paragraph 19 above;

(d) … following the resolution of the directors of BRG at the meeting of the directors of BRG held on 6 September 2020, BRG took steps to prevent [Mr] Roberts having access to his email account with BRG…

119. At this meeting, Mr Bailey and Mr Thomas, again without notice to Mr Roberts, again referred to solicitors’ advice and their perception of Mr Roberts’ conflict and recorded that:

“The directors present considered the legal advice of [solicitor] from Hall & Wilcox throughout the day and concluded that it could be in the best interests of the Company, clients and shareholders that:

● The Corporate Authorised Representative in place between [BRG] and [FPL] was terminated in accordance with clause 9.1 of the Agreement;

● That [Mr Roberts] was placed on gardening leave; and

● The letter drafted by Hall & Wilcox dated 5 September 2021 was sent to Mr Roberts.”

120. In cross-examination, Mr Bailey fairly accepted that Mr Roberts was also not given notice of any of the meetings of BRG’s board between 5 September 2020 and 1 October 2020, and that this was intentional conduct so as to exclude Mr Roberts from those meetings (T345; T353). This meeting was also invalid for the reasons noted above, where no notice of it was given to Mr Roberts. In any event, Mr Bailey and Mr Thomas did not there pass any resolution to take any corporate action; and, even if their discussion of the matter was treated as constituting such a resolution, it concluded only that it “could be” and not that it was in BRG’s best interests to take the specified actions.

121. At another purported board meeting on 6 September 2020, again without notice to Mr Roberts, Mr Bailey and Mr Thomas again referred to Mr Roberts’ perceived conflict; considered unidentified findings of the investigation into Mr Roberts’ actions to date and expressed the view that those findings “indicate serious misconduct on Mr Roberts’ part” and recorded that:

“It was concluded that it would be in the best interests of the Company, clients and shareholders if Mr Roberts’ access to emails be denied and Minerva and Pluto remained denied pending further investigation.”

122. At a second purported board meeting on 6 September 2020, once more without notice to Mr Roberts, the directors authorised a letter drafted by solicitors, “pending ability for both directors to review the final decision”, to be sent to Mr Roberts.

123. In closing submissions, Mr Zahra submits that the decisions to disable Mr Roberts’ access to Minerva and Pluto and his BRG email and then continue to prevent Mr Roberts and FPL having access to those systems and email on 6 September 2020 were made by Messrs Bailey and Thomas and that there is no allegation that these decisions were unauthorised or invalid. However, FPL did allege that Mr Roberts was wrongly excluded from directors’ meetings at this time and that is sufficient to raise a question of law as to the effect of that exclusion. Mr Zahra also refers to cll 43 and 63 of BRG’s constitution in support of these decisions. For the reasons noted above in respect of the purported directors’ meetings on 4 and 5 September 2020, a potential or actual conflict of interest on the part of Mr Roberts did not avoid the need to give notice of these directors meetings to all directors of BRG or have the consequence that a meeting held without giving such notice to Mr Roberts was valid. These meetings which resolved to prevent Mr Roberts having access to his email account were not valid and the steps subsequently undertaken to deny that access were actions taken without BRG’s corporate authority.

124. By letter dated 5 September 2020, the solicitors acting for BRG provided “particulars” of the conduct alleged against Mr Roberts, including that Mr Roberts and FPL had disclosed confidential information of BRG to third parties including Beresfords and Advice Evolution without the approval of BRG or its clients; that Mr Roberts and FPL had sought to allow Advice Evolution (implicitly through Ms Barit) direct login access to BRG’s computer systems, including its client database, and that Mr Roberts had lied or misled BRG staff in respect of his involvement in these matters. Mr Roberts has now admitted, in substance, and the evidence plainly establishes, that each of these allegations was well-founded. BRG’s solicitors also indicated that Mr Roberts and FPL had sought to transfer clients from BRG while he was a director of BRG and the CAR and a Share Sale Agreement were in place. However, the evidence to which I have referred indicates that it was the parties’ common understanding that, on termination of a relationship between an authorised representative and BRG, the clients serviced by that authorised representative would transfer to a new AFS licensee to which that authorised representative had transferred. By that letter, BRG’s solicitors also advised that BRG “demands” termination of the CAR Agreement in accordance with cl 9.1 on 90 days’ notice; required FPL and Mr Roberts to serve out that 90 day notice period, and directed Mr Roberts not to have contact with clients and staff of BRG in that period and to take specified other steps, including transferring all of the shares in BRG, Brite NSW and Super Advisor for nominal amounts to persons nominated by BRG.

125. At a further purported board meeting on 9 September 2020, again without notice to Mr Roberts, Mr Bailey and Mr Thomas again referred to legal advice and recorded that there was “no imperative to report a breach or likely breach of the AFS licence or the [Act] and regulations to ASIC” and agreed that a notice of termination was “to be provided to the corporate authorised representative”, presumably FPL. The former conclusion is significant, because s 912D of the Act, as it then stood, required an AFS licensee to make a report to ASIC if it breached its obligations under s 912A or 912B of the Act and that breach was “significant” having regard to specified matters. A licensee’s obligations under s 912A of the Act include an obligation to comply with “financial services laws”, as defined to include any Commonwealth, State or Territory legislation covers conduct relating to the provision of financial services. It follows from Mr Bailey’s and Mr Thomas’ decision that BRG should not report the matter to ASIC that, rightly or wrongly, they had not formed the view that the breach of confidentiality owed to clients, arising from Mr Roberts’ provision of client information to third parties and other AFS licensees, gave rise to a significant breach of relevant laws within the scope of that reporting obligation.

126. It is common ground (FAPC [22]-[23] admitted with additional matters in Amended Defence [22]-[23]) that, on 9 September 2020, BRG gave notice to FPL terminating the CAR Agreement in reliance on cl 9.1 of that agreement and, on or about 13 September 2020, BRG “purported” to suspend FPL’s right to act as an Authorised Representative (and in turn Mr Roberts’ right to act as a sub-Authorised Representative) of BRG or any other AFS licensee until further notice (“Suspension Decision”). The Second-Sixth Defendants respond that:

[22(a)] … on 5 September 2020, BRG gave notice to [FPL] that it would terminate the [FPL] ARA;

(b) … on 9 September 2020[FPL] purported to give notice that [it] would terminate the [FPL] ARA; and

(c) [FPL’s] purported termination pleaded in paragraph 22(b) above did not effect a termination of the [FPL] ARA, and, in the alternative, amounted to a repudiatory breach of the [FPL] ARA; and otherwise

(d) deny paragraph 22 of the [FAPC].

[23(a)] … or about 12 September 2020, BRG suspended [FPL’s] right to act as a CAR of BRG until further notice, pending completion of an investigation by BRG into the conduct of [FPL] and [Mr} Roberts;

(b) say that BRG, acting through its directors [Mr] Thomas and [Mr] Bailey, acted as pleaded in paragraph 23(a) by reason of the matters pleaded in paragraph 19 above in discharge of their duties as directors of BRG…

127. Mr Zahra submits that:

“A decision to suspend was able to be made by Messrs Bailey and Thomas pursuant to clause 43 of the Constitution and no challenge is made in the pleadings to the validity of that decision. There was power to make such a decision under clause 9.2 of the CAR agreement, even if a termination had been notified under clause 9.1. Such a construction is reasonable and promotes business efficacy. Plainly the parties intended that, where an authorised representative was found to have engaged in the sort of conduct detailed in clauses 9.2(a)-(c) and that was discovered during the 90-day termination for convenience period, steps could immediately be taken to suspend the agreement until the termination took effect..”

That proposition is by no means plain, where it is not apparent that a suspension power is necessary prior to a termination for convenience where termination for cause was available under the CAR Agreement. However, it is not necessary to decide that question, where Mr Roberts was again not given notice of the purported board meetings authorising these steps. At least for the reasons noted above, these actions were also taken without corporate authority.

128. By letter dated 9 September 2020, FPL, by its solicitors, itself gave BRG written notice terminating the CAR Agreement between FPL and BRG on 90 days’ notice under cl 9.1 of the CAR Agreement (Ex J1, 1769).

129. By letter dated 13 September 2020, the solicitors for BRG provided FPL’s solicitors with detailed further particulars concerning suggested breaches by FPL of the CAR Agreement and a Share Sale Agreement/Shareholders Agreement (Ex J1, 1786).

130. It is common ground that, on 13 September 2020 (FAPC [24]; Defence [24]; Ex J1, 1800), BRG also gave notice of an extraordinary general meeting proposing to remove Roberts as a director of BRG on the basis that “[t]he Company has become aware of misleading or deceptive conduct of Mr Michael Brady Roberts (the director) towards the Company”.

131. By email dated 30 September 2020 (Ex J1, 1802), BRG advised Mr Roberts that:

“As per the attached letter to [FPL’s solicitors] and confirmed in your text message to me at 11.28am on 30/9/20, you are suspended and not to provide financial services during the notice period. As such, we will provide financial services to your clients in an attempt to maintain your clients and BRG shareholder value.”

132. It is also common ground (FAPC [25], admitted Defence [25]; Ex J1, 1804-1805) that, on or about 30 September 2020, Messrs Bailey and Thomas caused BRG to send emails to BRG’s clients which advised those clients that:

“We are writing to inform you that Michael Roberts is no longer authorised to provide financial advice under the Bailey Roberts Group (BRG) licence. As such, Michael will be separating from our business no later than the 4th of December 2020.

Our arrangement with Michael requires that he does not act in the capacity of a financial adviser for BRG with immediate effect.

Rest assured that the high quality and professional advice currently provided by both BRG and Super Advisor will not be affected by this arrangement.

Given your existing relationship with our Authorised Representative Super Advisor, Michelle Oswald (nee Little) has been appointed as your interim Financial Adviser. While you are welcome to contact any team member, you have the option of utilising Michelle as your single contact for all of your needs. Michelle is very responsible and will ensure your matter is promptly and effectively addressed.

We wish to confirm:

● Your portfolio and assets remain intact and secure;

● Our dedicated investment team continue to actively manage your portfolio and provide the services you currently receive from BRG; and

● The entire teams of BRG and Super Advisor remain on hand to continue to provide you with any financial planning, SMSF, accounting or tax matter you may have.”

133. The Second-Sixth Defendants accept that such an email was sent, and Mr Bailey’s evidence, in cross-examination, was that he also instructed Ms Oswald, who had been designated as interim financial adviser to clients previously serviced by FPL, to make contact with FPL’s clients in order to encourage them to remain with BRG (T364).

134. Mr Roberts promptly then sent his own email to clients (Ex J1, 1812) from a new business email address that he had by then established, advising that:

“You may have recently received a notice from Bailey Roberts Group (BRG) informing you that I am separating from BRG. I am leaving BRG but in accordance with an agreement I signed with BRG in 2006, I am unable to commence my new arrangements until 4 December 2020 (unless we both agree to an earlier date).

Essentially, I am on – what is commonly known as – gardening leave. Certainly, after this spell of great spring weather, my garden does need some attention!

In the meantime, rest assured that your investment portfolio and assets remain safe and secure and that BRG’s investment team continue to provide the investment management services you are accustomed to receiving.

Also, if you are a client of Super Advisor, the Super Advisor team will continue to look after your SMSF, accounting or tax matters.

As always, I trust that you and your family are keeping well and safe and I look forward to resuming my services to you from 4 December 2020 (or earlier if BRG agrees)!”

135. It is also common ground (FAPC [26], admitted Amended Defence [26]) that, on 1 October 2020, Mr Roberts resigned as a director of BRG.

136. By letter dated 6 November 2020, the solicitors then acting for FPL and Mr Roberts put a proposal for Mr Roberts’ exit from BRG, on apparently reasonable terms, contemplating that the parties would agree to a smooth transfer of all of the MDA clients where FPL was the portfolio manager and all of the retail clients for which FPL was the nominated adviser in favour of an AFS licensee nominated by FPL, and noted that position was identical to a proposal previously put to Mr Roberts in an email dated 27 August 2020 (Ex J1, 1406). Regrettably, that proposal was not accepted.

137. By 24 November 2020, Mr Roberts had not proceeded with his earlier plan for FPL to become an authorised representative of Advice Evolution and FPL instead became an authorised representative of WWA. He then took steps to retain access to the client information which had been copied from BRG to his Google Drive and then to Advice Evolution. On that date, he advised Advice Evolution (Ex D3) that:

“I would like to continue using VBP [an entity associated with Ms Barit] for admin services and Worksorted as my CRM. I understand that I’ll need to set up new agreements with both, but I’d like to clear this with you first to make sure that you don’t have any issues with me using either VBP or Worksorted. In particular, I need your consent for Worksorted to transfer my account over to their stand alone subscription. Do you have any issues with this?”

Advice Evolution responded that it was “more than happy” for Mr Roberts to continue using Worksorted and “transfer any data to your own account”.

138. By 25 November 2020, FPL or Mr Roberts had made arrangements to be appointed as an authorised representative of WWA and also took steps to have the information that had been copied to Mr Roberts’ Google Drive, and then to Advice Evolution’s system, to a client management system to be maintained by FPL. On that date, Ms Barit advised Mr Roberts (Ex) that:

“I am glad you have found a new AFSL[icense holder] and things are working out well. … I will work with Worksorted to give you a separate licence and keeping the data we have already entered into the system.”

139. On the same date, Ms Barit, in her capacity as Chief Operations Officer of Advice Evolution, requested that Worksorted separate MFL from Advice Evolution’s Worksorted Group and gave “permission for Michael Roberts to keep all the data on his Worksorted profile and move to his own account”.

140. It is also common ground (FAPC [27], Amended Defence [27]) that, on 4 December 2020, BRG terminated the CAR Agreement. To that extent, the parties do not agitate any consequence of the invalidity of the directors’ meetings of BRG that considered the giving of notice of termination of the CAR Agreement. In any case, little turns on whether BRG had effectively terminated the CAR Agreement with FPL, where FPL itself then terminated that agreement.

141. It is common ground (FAPC [28], Amended Defence [28]; Ex J1, 1844) that, also on 4 December 2024, BRG sent a letter to clients previously serviced by FPL which stated that the authorisation of the FPL and Mr Roberts as an adviser with BRG had been terminated and advised of two options. The first option was described in positive terms as “continue with a known team and known service” and contemplated that the client would remain with BRG and Super Advisor; promised a “seamless transition” on that basis; offered a fee reduction; and highlighted “several other benefits” of that approach. Clients were invited to sign an enclosed contract to take that approach. BRG then described a second option, in less expansive and less positive terms, which involved the client transitioning with FPL to another AFS license holder, as follows:

“Option 2: Transition away from BRG and Super Advisor.

While we would obviously be disappointed if you decided to leave, we would respect any decision to do so and we will try to make any transition away from our service as seamless as we can. Our letter will outline our requirements should you wish to take this option.”

In order to take up that second option, clients were required to provide a signed letter confirming their intention to terminate their agreement with BRG, which was not provided to them in draft. That letter also stated that, if a signed contract or further instructions were not received within 4 weeks, BRG would place a trading halt on the client’s portfolio, classify their assets as Client Directed and contact the client for further instructions; and a Portfolio Administration fee of 0.35% would apply until all assets were transferred.

142. FPL pleads (FAPC [28(d)]) that that letter:

“was calculated to and did have the effect of:

(a) asserting a continuing interest in clients serviced by [FPL] following termination of the Agreement;

(b) hindering clients serviced by [FPL] from being advised by [FPL] after termination of the Agreement.

143. In closing submissions, Mr Zahra submits that the letter dated 4 December 2020 and BRG’s conduct was “entirely in accordance with cl 9.6 of the CAR Agreement”; was consistent with BRG’s acknowledgment that it had no continuing proprietary interest in clients serviced by FPL after termination; and did not seek to hinder or prevent clients being advised by the specified persons. I reject that submission, which depends on an entirely unreal reading of that letter, where its practical effect was to deter clients moving their business with FPL and cause them to remain with BRG. Mr Bailey accepted in cross-examination (T367-368) that the fee reduction was at least intended to achieve that result, and also acknowledged that retaining those clients would preserve the value of his shares in BRG (T369). Mr Thomas also, fairly, acknowledged that the letter sought to persuade clients previously serviced by FPL to remain with BRG and that the fee reduction was also directed to that result (T530).

144. By a further email dated 11 December 2020 (Ex J1, 1847), Mr Roberts provided an explanation to clients of his departure from BRG, which he described as resulting from philosophical differences. He there emphasised that there had been “no wrongdoing or illegality by the Directors or employees of [BRG], [FPL] or Super Advisor – or any of the other related companies” and advised clients that:

“My issue is that today BRG only authorises the advisers under its [AFSL] to provide advice in relation to BRG’s MDA and does not approve any other MDAs for recommendation. This effectively means that a BRG advisor is an agent for BRG.

I want to be a financial advisor who is responsible only to my clients and to provide advice that is only in a client’s best interest and free of conflicts of interest. I do not want to be an agent for any company or financial institution. As you can imagine, this is not a decision that has been made lightly. Indeed, it is with a heavy heart and great trepidation that I am parting with a company to which I have devoted my whole focus and energy for the last 20 years.”

That was, perhaps, to frame a departure that had involved a breakdown of relationships between the shareholders and BRG and failed commercial negotiations for a separation of their interests in somewhat elevated terms of principle.

145. On 11 and 23 December 2020, BRG’s then solicitors sent letters to Mr Roberts’ solicitors advising that any client files would be transferred from BRG where the client signed a form consenting to that transfer and proposing a mediation (Bailey 29.10.24 [128]). On 22-23 December 2020, Messrs Bailey, Roberts and Thomas attended a mediation. Mr Bailey’s evidence is that the parties reached an in-principle agreement at the mediation; on the next day, BRG’s then solicitors sent a written settlement agreement to Mr Roberts’ solicitors; but Mr Roberts did not execute the agreement (Bailey 29.10.24 [134]). Until August 2021, Mr Bailey attempted to contact Mr Roberts again on several occasions after the mediation to discuss the dispute, but Roberts did not respond to the attempts to contact him (Bailey 29.10.24 [135]).

146. On 20 August 2021, FPL commenced the 2021 Proceedings, in which the defendants were initially BRG, BFM and LAT (the then shareholders in BRG) and Messrs Bailey and Thomas. I will address subsequent events, which are relevant to the 2023 Proceedings, in dealing with those proceedings below.

147. The parties also agreed facts which are relevant to the 2021 Proceedings, which I have set out below, anonymising client names with the parties’ consent. These agreed facts largely go to the extent to which FPL lost access to client information and clients, or maintained its existing client relationships, after the events in issue:

A. Minerva

1. [FPL] and [Mr] Roberts … had access to the Minerva system and the Pluto system maintained for and in relation to [BRG] continuously from at least 1 January 2020 to 1 September 2020.

2. [Mrs Roberts, Mr Roberts’ wife] had access to the Minerva system maintained for and in relation to [BRG] continuously from at least 1 January 2020 to 2 September 2020.

3. [Ms] Cameron had access to the Minerva system maintained in relation to [BRG] continuously from at least 1 August 2020 to 2 September 2020.

4. The access referred to in paragraphs 1, 2 and 3 allowed [FPL] and Mr Roberts to access and download the following in relation to clients served by [FPL]:

a. Notes of interactions between [FPL], Mr Roberts and the client (“Contact Notes”);

b. Contact details for each client;

c. Information as to the investments and securities held by or on behalf of each client.

5. In the period from May 2020 to 1 September 2020, [FPL] downloaded, or caused to be downloaded the Contact Notes.

6. [FPL] retained the Contact Notes and the information within the Contact Notes was retained by [FPL] after 1 September 2020.

B. Subpoena Documents

7. In 2022 Mr Roberts produced electronically to the Court documents in answer to a subpoena issued by the Court to Mr Roberts on 26 August 2022 (“Subpoena Documents”).

8. The Subpoena Documents amount to 424 individual electronic files.

9. The Subpoena Documents, when printed, run to in excess of 30,000 A4 pages.

10. The Subpoena Documents relate to clients served by [FPL] before and after 1 September 2020

C. Google Drive

11. In the period from at least 1 January 2020 to at least 7 February 2025, [FPL] and Mr Roberts maintained an online drive through Google (“Google Drive”).

12. In the period from at least 1 January 2020 to at least 7 February 2025, the Google Drive had at least the following folders within in it:

a. MDA Clients;

b. Personal Risk Clients;

c. Personal Super Clients; and

d. 1. ACTIVE.

13. As at 6 February 2025, the MDA Clients folder contained 3,400 electronic files.

14. As at 6 February 2025, the electronic files in the MDA Clients, when printed, ran to in excess of 3,200 pages.

15. The MDA Clients folder contains electronic files which contained information in relation to clients of [FPL] and clients of Mr Roberts.

16. As at 6 February 2025, the Personal Super Clients folder contained:

a. 42 files, each for a different client of [FPL];

b. Each of those files was last edited in August 2020 or on 1 September 2020.

17. As at 6 February 2025, the Personal Insurance Clients folder contained:

a. 59 electronic files;

b. Each of those files was last edited in the period 23 August – 1 September 2020

18. As at 6 February 2025, [FPL] and Mr Roberts had access to the files referred to in paragraphs 12 to 17.

D. Financial Planning Services

19. After 1 September 2020, [FPL] provided financial planning services to the following [32] clients who were clients of [FPL] before 1 September 2020: [a] Client A; [b] Client B; [c] Client C; [d] Client D; [e] Client E; [f] Client F; [g] Client G; [h] Client H; [i] Client I; [j] Client J; [k] Client K; [l] Client L; [m] Client M; [n] Client N; [o] Client O; [p] Client P; [q] Client Q; [r] Client R; [s] Client S; [t] Client T; [u] Client U; [v] Client V; [w] Client W; [x] Client X; [y] Client Y; [z] Client Z; [aa] Client AA; [bb] Client BB; [cc] Client CC; [dd] Client DD; [ee] Client EE; and [ff] Client FF.

20. After 1 September 2020, [FPL] and Mr Roberts provided financial planning services to clients who were not clients of [FPL] at any time before 1 September 2020.

E. Access To Email

21. In the period from 1 January 2020 to at least 7 February 2025, [FPL] and Mr Roberts had access to email accounts attached to the following email addresses:

a. michael@brfinancial.com;

b. A.Team@financialstrategy.com.au; and

c. michaelbradyroberts@gmail.com.

F. Clients A, B and C

22. After 1 September 2020, [FPL] provided financial planning services to [a] Client C; [b] Client A; and [c] Client B.

23. On 11 January 2021, [FPL] provided a Statement of Advice to Client C.

24. On 11 January 2021, Client A and Client B and Client C acknowledged receipt of a Statement of Advice from [FPL].

25. On 14 June 2022, Mr Roberts attended an annual review meeting with Client A and Client B.

26. On 10 July 2024 Mr Roberts sent a letter of engagement for financial planning advice to [Client C].

27. On 14 July 2024 Client A and Client B countersigned the letter referred to in paragraph 26 above.

G. Clients D and E

28. Client D was a client of [FPL] as at 31 August 2020.

29. Client E was a client of [FPL] as at 31 August 2020.

30. After 1 September 2020, [FPL] provided financial planning services to [a] Client D; and [b] Client E.

31. On 11 January 2021, [FPL] provided a Statement of Advice to Client E and Client D.

32. On 11 January 2021, Client E acknowledged receipt of a Statement of Advice from [FPL].

33. On 11 June 2022, Client E completed and signed a questionnaire fact find for [FPL].

34. On 14 November 2024, Mr Roberts provided a Statement of Advice to Client E.

35. On 21 August 2022 [FPL] issued a tax invoice to Client E in the sum $440.

36. On 21 August 2022 [FPL] met with Client E via Zoom.

H. Clients F*,* G and H

37. On 21 January 2022, [FPL] provided a retirement income advice proposal to Client G and Client H.

38. On 25 May 2022, [FPL] met with Client G.

39. On 24 June 2022, [FPL] provided a Statement of Advice to Client G and to Client F.

40. In August 2022, Client G and Client H acknowledged receipt of a Statement of Advice from [FPL].

41. On 21 August 2024, Mr Roberts sent a letter of engagement for financial planning advice to Client G and Client H.

I. Clients I, J and K

42. Client I was a client of [FPL] as at 31 August 2020.

43. Client J was a client of [FPL] as at 31 August 2020.

44. Client K was a client of [FPL] as at 31 August 2020.

45. After 1 September 2020, [FPL] provided financial planning services to [a] Client I; [b] Client J; and [c] Client K.

46. On 11 January 2021, [FPL] provided a Statement of Advice to Client I, Client J, and Client K.

47. On 24 February 2021, Client I and Client J acknowledged receipt of a Statement of Advice from [FPL].

48. On 15 September 2022, [FPL] sent an estate planning letter of engagement to Client I and Client J.

J. Clients L and M

49. Client L was a client of [FPL] as at 31 August 2020.

50. Client M was a client of [FPL] as at 31 August 2020.

51. After 1 September 2020, [FPL] provided financial planning services to [a] Client L; and [b] Client M.

52. On 17 August 2018, [FPL] provided a Statement of Advice to Client L and Client M.

53. On 4 January 2021, [FPL] provided a Statement of Advice to Client L and Client M.

54. On 2 September 2024, Mr Roberts provided a letter of engagement for upfront financial planning advice to Client L and Kim Tong Tsing.

55. In September 2024, Mr Roberts attended a review meeting with Client L.

K. Clients LA,. LB and LC

56. After 1 September 2020, [FPL] provided financial planning services to [a] Client LA; [b] Client LB; and [c] Client LC

57. On 23 July 2021, [FPL] provided a Statement of Advice to Clients LA, Client LB, and Client LC.

58. On 12 September 2021, [FPL] issued a tax invoice to Client LA and Client LB in the sum of $2,640.

59. On 15 September 2021, [FPL] issued a tax invoice to Client LC in the sum of $1,650.

60. On 12 December 2022, [FPL] provided an estate planning letter of engagement to Client LA and Client LB.

L. Clients N and O

61. Client N was a client of [FPL] as at 31 August 2020.

62. Client O was a client of [FPL] as at 31 August 2020.

63. After 1 September 2020, [FPL] provided financial planning services to [a] Client N; and [b] Client O.

64. On 11 January 2021, [FPL] provided a Statement of Advice to Client N and Client O.

65. On 27 January 2021, Client N acknowledged receipt of a Statement of Advice from [FPL].

66. On 26 January 2022, [FPL] provided a Statement of Advice to Client N and Client O.

M. Clients P and Q

67. Client P was a client of [FPL] as at 31 August 2020.

68. Client Q was a client of [FPL] as at 31 August 2020.

69. After 1 September 2020, [FPL] provided financial planning services to [a] Client P; and [b] Client Q.

70. On 4 January 2021, [FPL] provided a Statement of Advice to Client P and Client Q.

71. On 13 January 2021, Client P and Client Q authorised [FPL] to proceed with investments in accordance with the Statement of Advice.

72. On 8 June 2022, [FPL] provided Client P and Client Q with a Fee Disclosure Statement setting out the basis on which it would charge them fees into the future for financial advice.

N. Clients R and S

73. Client R was a client of [FPL] as at 31 August 2020.

74. Client S was a client of [FPL] as at 31 August 2020.

75. After 1 September 2020, [FPL] provided financial planning services to [a] Client R; and [b] Client S.

76. On 11 January 2021, [FPL] provided a Statement of Advice to Client R and Client S.

77. On 2 February 2021, Client R acknowledged receipt of a Statement of Advice provided by [FPL].

78. On 31 October 2023, Client R consented to Mr Roberts acting as her financial advisor as an authorised representative of [Fiducian]

79. On 3 July 2024, Mr Roberts sent a letter of engagement for financial planning advice to Client R.

O. Clients T, U, V and W

80. Client T was a client of [FPL] as at 31 August 2020.

81. Client U was a client of [FPL] as at 31 August 2020.

82. Client V was a client of [FPL] as at 31 August 2020.

83. Client W was a client of [FPL] as at 31 August 2020.

84. After 1 September 2020, [FPL] provided financial planning services to [a] Client T; [b] Client U; [c] Client V; and [d] Client W.

85. On 10 February 2021, [FPL] provided Client T, Client U, Client V, and Client W with a Statement of Advice.

86. On 10 February 2021, Client T, Client U, Client V, and Client W acknowledged receipt of a Statement of Advice from [FPL].

87. On 4 November 2023, Client U consented to Mr Roberts acting as her financial advisor as an authorised representative of Fiducian ….

88. On 14 November 2023, Client T consented to Mr Roberts acting as his financial advisor as an authorised representative of [Fiducian].

P. Client X

89. Client X was a client of [FPL] as at 31 August 2020.

90. After 1 September 2020, [FPL] provided financial planning services to Client X.

91. On 1 February 2021, [FPL] provided Client X with a Statement of Advice.

92. On 7 February 2021, Client X acknowledged receipt of Statement of Advice from [FPL].

93. On 27 June 2022, [FPL] sent a fee disclosure statement to Client X.

94. On 15 June 2023, [FPL] sent a fee disclosure statement to Client X.

95. On 28 August 2023, Client X consented to [FPL] charging him fees.

Q. Clients Y*,* Z*,* AA*,* BB and CC

96. Client Y was a client of [FPL] as at 31 August 2020.

97. Client Z was a client of [FPL] as at 31 August 2020.

98. Client AA was a client of [FPL] as at 31 August 2020.

99. Client BB was a client of [FPL] as at 31 August 2020.

100. Client CC was a client of [FPL] as at 31 August 2020.

101. After 1 September 2020, [FPL] provided financial planning services to [a] Client Y; [b] Client Z; [c] Client AA; [d] Client BB; and [e] Client CC.

102. On 5 January 2021 [FPL] provided a Statement of Advice to [the Y Family].

103. In 2021 [FPL] arranged to establish separately managed accounts for the Y Family.

104. In 2021 [FPL] arranged to invest assets on behalf of the Y Family through investment platforms maintained by Praemium and Nucleus Wealth.

105. On 28 July 2022 [a] [FPL] met with Client Y and Client Z for an annual review meeting; and [b] provided them with advice about their investments.

R. Clients DD*,* EE and FF

106. Client DD was a client of [FPL] as at 31 August 2020.

107. Client EE was a client of [FPL] as at 31 August 2020.

108. Client FF was a client of [FPL] as at 31 August 2020.

109. On 15 January 2021, [FPL] provided a Statement of Advice to Client FF.

110. On 27 January 2021, Client DD and Client EE acknowledged receipt of Statement of Advice received from [FPL].

111. On 13 September 2021, [FPL] provided a Statement of Advice to Client DD.

112. On 29 April 2022, Client DD and Client EE approved an investment strategy prepared by [FPL].

113. On 20 August 2024, Mr Roberts attended an annual review meeting with Client DD and Client EE.

S. Client GG

114. Client GG was not a client of [FPL] at any time before 1 September 2020.

115. On 4 December 2024, Mr Roberts sent a letter of engagement for financial planning advice to Client GG.

116. On 19 December 2024, Client GG agreed to Mr Roberts acting as her financial planning advisor.

T. Client HH

117. Client HH was not a client of [FPL] at any time before 1 September 2020.

118. Client II was not a client of [FPL] at any time before 1 September 2020.

119. [JJ] referred Client HH to Mr Roberts for financial advice in 2022.

120. On 15 February 2022, Mr Roberts met with Client HH.

121. On 1 June 2022, [FPL] provided a Statement of Advice to Client HH and Client II.

122. On 6 September 2024, [FPL] sent a letter of engagement for financial planning advice to Client HH and Client II

2021 Proceedings – claim for breach of contract

148. In respect of the claim for breach of contract, FPL pleads (FAPC [30], denied Defence [30]) that:

“Wrongfully and in breach of clause 9.6 of the [CAR Agreement], alternatively the Implied Term, [BRG] has:

(a) suspended FPL’s status as an Authorised Representative without any reasonable basis;

(b) hindered or prevented [FPL] from advising clients serviced by [FPL];

(c) refused to make available to [FPL] files and records relating to clients serviced by [FPL];

(d) asserted a continuing interest in clients serviced by [FPL] following termination;

(e) sought to hinder or prevent clients serviced by [FPL] from being advised by [FPL] after termination;

(f) failed to facilitate [FPL] retaining clients serviced by [FPL] after termination.”

149. Mr Zahra responds, inter alia, that:

“There was no act of hindrance or prevention in relation to clients serviced by [FPL].

First, BRG wrote to those clients on two occasions, giving them an opportunity to remain under the BRG umbrella or transfer their MDA contract to another [AFS] provider, which might have included Advice Evolution. That was a matter for the clients. Whilever the clients retained a contractual relationship with BRG, BRG was obliged to provide them with services under the MDA Contract. To do otherwise would have exposed BRG itself to liability for a breach of that contract.

Secondly, as [FPL] has ceased to be a CAR of [BRG], BRG was obliged to ensure that there was a financial advisor responsible for those clients. It could not leave them without an actual human being who would execute their instructions under the MDA contract. It is for that reason that Ms Oswald was introduced to the clients. The clients remained free at that point—and any other point—to terminate the MDA contract on 30 days’ notice and move elsewhere …”

150. It is not necessary to decide all of the matters that were in dispute between the parties to determine this claim. I accept that the purported suspension of FPL’s status as authorised representative, where not properly authorised by BRG, at least hindered clients serviced by FPL being transitioned to another AFS licensee in breach of cl 9.6 of the CAR Agreement. It is not necessary to decide Mr Hartford-Davis’ further contention that, as a matter of construction, BRG was required to elect between termination for convenience or a suspension under cl 9.2 of the CAR Agreement. Mr Hartford-Davis also submits that BRG’s solicitation of the clients previously serviced by FPL by the letter dated 4 December 2022 breached cl 9.6 of the CAR Agreement (FAPC [30]). I accept that submission, and it is not necessary to determine whether that conduct also breached the Implied Term pleaded in FAPC [14]. It seems to me that the letter dated 4 December 2020 sent by BRG plainly hindered or prevented FPL from advising clients serviced by it (and was calculated to do so) where it presented the two alternative courses in an obviously unbalanced way, provided a document which clients could sign to stay with BRG but not to transfer their business to FPL, and offered an economic incentive for clients to remain with BRG.

151. Mr Hartford-Davis submits that BRG also breached the obligation in the third sentence of cl 9.6, by not notifying clients that BRG would give their client files to FPL unless the client objected. I accept that BRG breached that obligation, so far as it was a contractual obligation as between BRG and FPL, although I have noted above that BRG would not have been entitled to transfer confidential client information to a third party without client consent. To that extent, BRG properly offered, on 11 November 2020, to transfer client information to FPL if FPL provided the client’s written consent to the transfer of that information (Ex J1, 1823). BRG’s solicitors were also likely correct in observing, in a letter dated 23 November 2020 to FPL’s solicitors (Ex J1, 1838) that:

“The public interest in this case is in the preservation of BRG client confidentiality by only transferring client files with their written consent as per [BRG’s] actions, particularly in light of [FPL’s and Mr Roberts’] previous breaches of client confidentiality.”

These matters, however, do not avoid a breach of BRG’s contractual obligation under cl 9.6 of the CAR Agreement, which BRG was likely unable to perform without client consent. No party contended that that obligation was avoided by any principle of frustration or illegality.

152. FPL abandoned a claim for debt in FAPC [32]-[33]; the Defendants nonetheless rely, in response to that claim, on a claim for indemnity against BFM under the CAR Agreement. It is not necessary to determine that claim where that claim was abandoned and, on the findings I have reached, BRG has not otherwise established a claim to substantive damages.

153. FPL also pleads (FAPC [34], partly admitted and partly denied Defence [34]) that, in breach of cl 3.1(b) of the CAR Agreement (to which I referred above), BRG failed and refused to provide the FPL with access to BRG’s Computer Systems (as defined) and Mr Roberts’ BRG email account. I accept that BRG’s failure to provide FPL with access to Pluto, Minerva and Mr Roberts’ BRG email account contravened cl 3.1(b) of the CAR Agreement. Although BRG’s decision to suspend that access seems to me to have been amply justified by FPL’s and Mr Roberts’ conduct prior to the suspension of his access to his computer systems, that is not an answer to the claimed breach of contract. It is not necessary to address the question further where, as I noted above, Mr Roberts’ evidence of the impact of BRG’s denying him and FPL access to those systems was false and FPL has not established any loss arising from this matter.

154. My finding that BRG breached cl 9.6 of the CAR Agreement also does not assist FPL, where FPL has not established its loss that follows from its doing so. FPL pleads (FAPC [31], [35], denied Defence [31], [35]) that, by reason of the breaches of the CAR Agreement, it suffered loss and damage, particularised as follows:

“[FPL] has suffered loss of clients, with at least 29 clients serviced by the [FPL] being engaged by [BRG], representing a value estimated to be approximately $1,118,805 when sold as a “client book”.”

155. The Defendants rightly respond that any claim for breach of contract is only available against BRG, which is now in liquidation, subject to FPL’s attempt to establish liability on the part of third parties which I address below.

156. In closing submissions, Mr Hartford-Davis points to FAPC [31] and [35] as alleging loss and damage suffered by FPL, “namely the loss of its client book”. Mr Hartford-Davis addresses principles of causation, as established by cases including Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 315 and submits that BRG’s conduct was at least “a cause” of “the loss of [FPL’s] clients”. Mr Hartford-Davis also submits that the Court should find that:

“… BRG’s breaches of contract were at least a cause of the loss of clients. It is irrelevant to inquire whether BRG’s default was the dominant, effective or real cause of [FPL]’s loss - if the evidence is suggestive of multiple causation, the inquiry to be made is whether the defendants’ default was a cause … BRG created the opposite environment for [FPL]’s departure by sending:

(a) the letter of 30 September 2020 to [FPL]’s clients … introducing them to Ms Oswald and notifying them that [FPL] had been terminated from providing advice under BRG’s AFSL. The introduction to Ms Oswald at a time when there were some 2 months remaining before the termination took effect, and during a period within which BRG had purported to suspend [FPL]’s authorisation;

(b) the letter of 4 December 2020 to [FPL]’s clients …, which offered them a financial incentive to stay with BRG, and which Mr Thomas agreed was “the opposite of an orderly transition”: T530.27.”

157. I recognise that there was evidence, to which Mr Hartford-Davis refers, that a well-managed client transfer would likely succeed in transferring all or substantially all of an adviser’s clients to a third party AFS licensee, and that result had been achieved by other representatives which had transferred their business from BRG to third party licensees (see, for example, Thomas T511– 513). However, obviously enough, a well-managed transfer of clients would likely not commence with the surreptitious copying of client information to an adviser’s personal Google Drive or the transfer of that client information without client consent to a third party licensee, before the adviser had terminated his relationship with BRG. It seems likely that Mr Thomas had this matter in mind in readily accepting, in cross-examination, that the circumstances of FPL’s departure from BRG, reflecting Mr Roberts’ concealed copying of client information and the false information that he provided to BRG staff, were very different to the other departures of other advisers (T527) and not an orderly transition (T530).

158. Mr Hartford-Davis again repeats in closing submissions (at [158]) that:

“The Court should be comfortably satisfied that the breaches of the CAR Agreement alleged against BRG were at least a cause of FPL’s loss.”

159. He also submits (at [159]) that:

“Much is made by the Second to Sixth Defendants the fact that Mr Roberts and [FPL] retained client names and contact notes following his cut off from BRG. It appears that the Defendants will contend that there was no causation, or that the departure of the clients was an intervening act.”

160. Mr Hartford-Davis also refers to Mr Roberts’ “unchallenged evidence” that he lacked the information that would permit him to provide advice to his clients, despite having client notes (T259-260). Having regard to the findings that I have reached as to the deliberate falsity of important aspects of Mr Roberts’ evidence, I do not accept that evidence. That evidence also seems to me to be inconsistent with the volume of client information that was available to FPL and to him, and to the fact that FPL and Mr Roberts would likely be obliged to undertake new inquiries as to the clients’ current circumstances and needs in order to comply with the best interest obligation under s 963B of the Act, at least in respect of personal advice given to retail clients.

161. In closing submissions, Mr Zahra submits that:

“(a) Even if BRG did breach [FPL’s] CAR agreement as alleged (which is denied), any such breach did not cause [FPL] loss or damage because, inter alia:

(i) The evidence does not establish that BRG in fact hindered or prevented [FPL] from advising clients;

(ii) [FPL] had all of its client contact details and Mr Roberts in fact contacted all of them – on multiple occasions;

(iii) [FPL]/Mr Roberts had downloaded to his Google drive over 30,000 thousand pages of client notes, files and/or information prior to the Minerva and Pluto access being disabled;

(iv) Substantial numbers of [FPL’s] MDA clients continued to be serviced by [FPL]. Mr Roberts himself gave evidence in cross-examination of as many as about 23 to 28 continuing with FPL (being those associated with 2-3 client files given to [FPL] by BRG and another 20-25 that also stayed with [FPL]) …. In fact, the numbers may be substantially higher because Mr Thomas’ unchallenged evidence was that there were 9 client files that were transferred to [FPL] (rather than the two or three as asserted by Mr Roberts in cross-examination);

(v) Those clients were all serviced by [FPL] without access to Minerva or Pluto which leads to the irresistible conclusion that a denial of such access caused no loss or damage;

(vi) There is no evidence which establishes that any particular loss or damage was caused by the alleged conduct of BRG in breach of the terms of the CAR [A]greement;

(b) Finally, there is no cogent or reliable evidence as to the value of the alleged lost client book. [FPL] relies on the evidence of Mr Lane but his evidence was, with respect, misconceived and hopeless and should be afforded no weight and rejected.”

162. Mr Zahra righty points out that:

“Mr Roberts was working towards his planned exit from BRG for months prior to 1 September 2020. He and his team had been busily accessing Minerva and downloading, copying and saving a substantial volume of data to his personal Google drive and prioritising what he needed most in that process. Mr Roberts was working towards his own exit timeline of 1 September 2020 which, coincidentally, ended up being the date that [Mr Robert’s] Minerva/Pluto/email access was cut-off (but not the access of his wife … which continued to be utilised for another day).”

163. Mr Zahra also points to the extent of information that FPL had retained in respect of the clients it serviced before 1 September 2020, which I have addressed elsewhere. He also points to FPL’s continuing to service a substantial number of its MDA clients after 1 September 2020, without access to BRG’s systems, as establishing the lack of necessity of those systems. Mr Zahra submits, and I largely accept that:

“[FPL] was in the business of providing financial advice. It classically did that by providing a Statement of Advice [“SoA”] to a client. In order to prepare a SoA, [FPL] had to collect up to date information about a client; it could not rely on historical information. Myriad matters might arise between client meetings: an increase in income, a change in employment, the birth of a child, the assumption of a new debt. Information about any one of these would need to be collected from the client, assimilated, and digested by [FPL] into an SoA. Therefore, having old client information was not useful; indeed relying on old client information would put [FPL] at risk of failure to discharge the duty to act in the best interests of clients. These matters were obviously well-known to Mr Roberts and that is why he was already meeting with clients in the lead-up to his planned departure and also why he was inviting clients to arrange meetings with him in his 10 December 2020 email to all of [FPL]’s clients.”

164. I have found that BRG in fact hindered FPL from advising clients, at least by its 4 December 2020 communication which was calculated to, and likely did, deter clients from moving with FPL from BRG to another AFS licensee. I accept that FPL and Mr Roberts had client details and contacted clients and had downloaded a substantial amount of client information his Google Drive (and then caused it to be copied to Advice Evolution’s system) but that was not sufficient to avoid the loss of several clients to BRG, although the number of clients lost is unclear. I accept that a substantial number of FPL’s clients did follow FPL to a new AFL licensee, as the evidence to which Mr Zahra refers and the statement of agreed facts makes clear, and that FPL and Mr Roberts were able to provide services to them without access to BRG’s Minerva or Pluto systems and his evidence to the contrary was false. That does not have the result that FPL suffered no loss, although it is plain that it did not, as Mr Roberts originally claimed, suffer the loss of all, or possibly most, of its client base. I address the question of the quantification of FPL’s allegedly lost “client book” (or, more precisely, the uncertain number of clients that it had lost) below.

165. While I accept that BRG’s conduct was likely a cause of the loss of some clients to FPL, neither the evidence nor Mr Hartford-Davis’ submissions fully engage with the question which clients were “lost” or for how long, and I find below FPL has not established any quantifiable loss arising from this claim.

166. In closing submissions, Mr Hartford-Davis addresses FPL’s quantification of loss and submits that:

“[FPL’s] pleaded claim is for the value of the lost client book, namely the (at least) 29 clients that had been serviced by [FPL] but which were afterwards serviced by BRG.”

167. Mr Hartford-Davis in turn refers to Mr Roberts’ evidence in his first affidavit (Roberts 4.11.21 [113]) that FPL had 168 clients as at 1 September 2020, comprising 43 MDA clients and 125 retail and brokerage clients and refers (Roberts 4.11.21 [122]-[124]) to the loss of his clients.

168. I here bear in mind that the case law recognises that damages must be proved with a degree of precision which reflects the proof that is reasonably available to the parties: New South Wales v Moss (2000) 54 NSWLR 536; [2000] NSWCA 133 at [72]; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 at [38]; [2003] HCA 10. In Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 at 319, Pincus J noted that “if the evidence called on behalf of [the plaintiff] fails to provide any rational foundation for a proper estimate of damages, the court should simply decline to make one”. That approach was approved by Brooking J in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 243 and by the Court of Appeal in Troulis v Vamvoukakis [1998] NSWCA 237 where Gleeson CJ observed that, where damages were susceptible of evidentiary proof, but there was an absence of raw material to which good sense may be applied, “[j]ustice does not dictate that … a figure should be plucked out of the air”. In McCrohan v Harith [2010] NSWCA 67 at [128], McColl JA (with whom Campbell JA and Handley AJA agreed) similarly observed that an estimate of damages in the nature of a “guess” should not be made where precise evidence of the damages suffered could have been adduced, but was not; see also Re Hair Industrie Penrith Pty Ltd, Hair Industrie Merrylands Pty Ltd [2015] NSWSC 1578 at [20], on which I have drawn for this summary.

169. FPL relies on the expert report dated 11 May 2022 (Ex P4) of an accountant, Mr Goodyer, to establish its loss or damage in respect of its claim for damages for breach of contract and its claim to recover that loss wholly depends on that report. Mr Zahra advances multiple criticisms of Mr Goodyer’s evidence in closing submissions, and I address some but not all of those criticism below. Regrettably, Mr Goodyer’s expert report was founded on assumptions which have not been established, on which Mr Goodyer relied because FPL did not provide information which might have allowed an accurate assessment of its loss, and adopted a methodology which was not capable of quantifying that loss. FPL also read a supplementary expert report dated 29 July 2022 (Ex P5) of Mr Goodyer, which it will largely not be necessary to address.

170. In his 11 May 2022 report, Mr Goodyer described ([1.2]) the exercise undertaken by that report as calculating the past and future economic loss suffered by FPL as a result of its “loss of the Client Books”, although he did not describe what he meant by “Client Books” with any precision, and his report did not proceed on a clear or consistent basis as to what was comprised by that concept. It appears that concept at least included the 29 clients previously serviced by FPL to which I referred above, who (at least initially) remained with BRG after BRG and FPL both terminated the CAR Agreement between BRG and FPL. I accept that BRG’s breach of the provisions in the CAR Agreement relating to the transfer of clients was likely causative, in the relevant sense, of FPL’s “loss” of the revenue associated with those clients. I note, for completeness, that the evidence to which I have referred above amply establishes that, although FPL lost access to BRG’s systems from about 1 September 2020, it had not lost access to a very substantial portion of its client information relating to those 29 clients or generally from that date, because FPL and Mr Roberts had copied that information prior to that date, but a loss of access to that information is not necessary to FPL’s establishing the loss of the value of the clients which it claims.

171. However, the assumptions on which Mr Goodyer’s report was based, and its methodology, failed adequately to quantify the loss claimed by FPL in numerous and material respects. First, Mr Goodyer calculated ([1.3]) FPL’s past economic loss from 1 September 2020 (a date on which he assumed that FPL had “lost access to its Client Books”, involving the uncertainty noted above) to 6 May 2022, and then its future economic loss from 7 May 2022 to the “cessation of the Client Books due to estimated attrition”. Mr Goodyer’s report was here not limited to calculating a loss of revenue from the 29 clients referred to (but not identified) in FPL’s pleading noted above. Mr Goodyear instead assumed, consistent with the assumptions provided to him, that FPL had lost a total of 170 clients consisting of 43 MDA clients; 50 insurance clients and 75 personal super clients (which adds to 168 not 170 clients) and had also, but inconsistently, assumed that FPL had lost 27 (not 43) MDA clients.

172. Mr Goodyer did not seek to reconcile that inconsistency, which was of little significance for him since he was not provided with any relevant information as to which clients had been lost, or the revenue previously derived by FPL from any particular client. The methodology which Mr Goodyer adopted did not quantify the loss of earnings from identifiable lost clients, and instead attributed any reduction in FPL’s financial performance recorded in its balance sheet to a loss of clients, without making any attempt to distinguish any losses arising from any loss of clients from other causes of deterioration in FPL’s financial performance. Using that methodology, it did not matter to Mr Goodyer how many clients had been lost, because he was, in truth, not quantifying a loss arising from any loss of clients individually or collectively, as distinct from the deterioration in FPL’s financial performance over that period. This approach was, in my view, not capable of providing a proper basis for quantifying FPL’s loss, even on an approximate basis, since the assumption that the decline in FPL’s revenue was linked only with a loss of clients was neither provable not proved.

173. Second, Mr Goodyer’s report fairly acknowledged ([6.23]) that, without a detailed understanding of the tiered fee schedule utilised to calculate MDA fees, he was unable to calculate the income stream from individual MDA clients with any degree of certainty; in fact, as I have noted above, he also was unable to do so because he was provided inconsistent information as to how many MDA clients were lost and no information as to which MDA clients had been lost.

174. Third, Mr Goodyer’s calculation of FPL’s future loss ran for many years into the future, and ignored the fact that FPL was prohibited from providing financial services or advice after 30 September 2023, when it ceased to be an authorised representative of an AFS licensee, although Mr Roberts was then appointed an authorised representative of Fiducian in his personal capacity. This is sufficient, in itself, to have the consequence that Mr Goodyer’s report could not establish the amount of any future economic loss suffered by FPL or provide any basis for the Court to calculate that loss for itself.

175. Fourth, Mr Goodyer was asked to assume [(3.2)] that FPL had no other email accounts it could utilise to contact its customers after it was prevented from accessing FPL’s email account and no other record of the contact details of its clients. Both assumptions were false, although they did not advance the calculation which he had made, given its methodology was not referable to a loss of client revenue for the reasons noted above, other than to add an apparent plausibility to the figures derived from it.

176. Fifth, Mr Goodyer was also asked to assume that FPL would not have lost any other clients, other than clients under the alternative attrition rates he was asked to assume; that assumption was not established by the evidence, even if the two significantly different assumed attrition rates were established by the evidence. In support of Mr Goodyer’s assumption as to attrition rates, Mr Hartford-Davis refers to Mr Roberts’ evidence (Roberts 9.5.22 [52]) that, based upon the review of a client list that he prepared, apparently for the purposes of the litigation, “over the course of 2017 to August 2020, BRF had an attrition rate of 33%, being a rate of 11% per year” and that that “attrition rate” was “anomalous”. That evidence was not probative of the fact because it was admitted only with a limitation under s 136 of the Evidence Act, partly as submission as to the content of that document and partly as Mr Roberts’ understanding of the reasons for attrition. The client list itself did not prove those matters, where it had been prepared by Mr Roberts for the purposes of the proceedings; it is not apparent that the documents from which it was derived are in evidence, to allow its contents to be tested; and Mr Roberts’ lack of credit as to other matters provides no reason to accept this document or his comments on it without further evidentiary support. Mr Goodyer also fairly observed ([7.6]-[7.7]) that he had adopted instructed rates in calculating FPL’s suggested “economic loss” and acknowledged that it was “impossible to determine at which rate the Clients Books diminish” (implicitly, on the incomplete information provided to him) after the conduct attacked by FPL. That was plainly impossible, because the “lost” clients were not identified in the information provided to him nor was he provided with any information as to the duration or stability of the relevant client relationships.

177. Sixth, Mr Goodyer undertook ([7.21]) a calculation of net income derived by FPL from its MDA clients for the 12 months prior to the assumed loss of clients and adopted an average of net MDA fees derived by FPL over a 12 month period from August 2019 to September 2020. As emerged in his cross-examination, that approach would overstate any loss suffered by FPL, because it took no account of the material decrease in the fees earned by FPL, on a month to month basis throughout that period. In the event, little turns on that difficulty, given the more fundamental difficulties with the assumptions that Mr Goodyer was instructed to adopt and the fact that his approach did not in fact quantify loss resulting from lost clients.

178. Seventh, Mr Goodyer’s calculations addressed loss of personal superannuation and insurance clients ([7.69]), but again not by any assessment of which earnings were lost from such clients, based on any identification of the clients which were lost, but by assuming the loss of those clients and then also assuming it was causative of the decline in FPL’s earnings in the relevant period. That approach reflected an assumption that Mr Goodyer was instructed to make that “FPL lost all its personal superannuation and insurance clients as a result of the Defendants’ alleged actions” [emphasis added]. That assumption was plainly not proved and was likely false given the evidence as to the extent of client records that had been maintained by FPL and Mr Roberts and the fact that they retained or regained a number of clients after both parties terminated the CAR Agreement between BRG and FPL.

179. Eighth, as Mr Hartford-Davis acknowledged in closing submissions, Mr Goodyer’s treatment of “risk” clients did not take account of the fact that FPL did not “own” all of the risk clients which were the subject of his calculation, where the parties proceeded on the basis that some of those clients were “own[ed]” by BRG. Mr Hartford-Davis refers to Mr Bailey’s acceptance in cross-examination that the manner in which clients that were “owned” by BRG as at September 2020 could be identified, and he seeks to undertake that task in submissions. I cannot accept that approach, where that analysis is otherwise unsupported by evidence, including any evidence of Mr Roberts, and no question of the Court performing its own re-calculation of this element of FPL’s claim in place of Mr Goodyer’s calculations (as Mr Harford-Davis invites it to do) arises.

180. Although it is likely that some client relationships were lost by FPL as a result of BRG’s conduct, it will be apparent from the matters to which I have referred above that Mr Goodyer’s report neither establishes the value of any client relationships lost by BRL nor provides any rational basis for the Court to determine that value for itself. This is not a case where damages could not be proved by reference to information that was reasonably available to FPL. FPL could have made information available concerning the client accounts which it contended were lost to it, after seeking and obtaining any necessary client consent or obtaining those documents on compulsory process from the clients or BRL; it would have been readily possible to calculate the revenue that was in fact lost from those accounts and to project the future loss in respect of those accounts for the relatively short period until FPL ceased to be an authorised representative of any AFS licensee and could not provide further financial services to those clients or earn revenue by doing so; and it would readily have been possible for FPL to calculate its loss limited to the period in which that loss was in fact suffered. Where FPL could have calculated this loss on a rational basis but has not done so, and has instead adopted an approach that would have radically overstated that loss, FPL has not established the loss or damage which it claims for breach of contract. The parties did not submit that there would be any utility in a award of nominal damages, where BRG is now in liquidation and an award of nominal damages would not advance FPL’s claim in the 2023 Proceedings.

181. FPL also pleads (FAPC [37], denied Defence [37]) that BRG’s liability to it for the alleged breach of contract was caused or procured by BFM (acting by and through Mr Bailey) and/or LAT (acting by and through Mr Thomas). There is no evidence that these corporate entities, as distinct from Mr Bailey and Mr Thomas personally, caused or procured BRG’s breach of contract; the claim for procuring a breach of contract against them fails; the claims against Mr Bailey and Mr Thomas personally were previously dismissed in the 2021 Proceedings; and, in any event, FPL has not established a claim to substantive damages for the reasons noted above.

2021 Proceedings – oppression claim

182. By its Further Amended Originating Process filed on 29 May 2023 in the 2021 Proceedings, FPL seeks an order pursuant to s 233(1) or s 233(1)(d) of the Act for the purchase of its shares in BRG at fair value (calculated prior to the matters addressed in the 2023 Proceedings and BRG’s liquidation) by the Second-Sixth Defendants or any of them. Alternatively, FPL seeks an order pursuant to s 233(1) or s 233(1)(j) of the Act that several Defendants pay them compensation or an order for damages.

183. FPL pleads (FAPC [36]ff, denied Defence [36]ff) that, since September 2020, the affairs of the BRG have been conducted so as to:

(a) deny [FPL’s] and [Mr] Roberts’ access to BRG’s Computer Systems;

(b) deny [Mr] Roberts’ access to his email account;

(c) deny [FPL] and [Mr] Roberts’ access to clients serviced by [FPL];

(d) deny [FPL’s] and [Mr] Roberts’ access to records relating to clients serviced by [FPL];

(e) from 13 September 2020, suspend [FPL] as Authorised Representative of [BRG];

(f) cause [BRG] to breach the [CAR Agreement] in the manner pleaded above; …

(g) exert illegitimate pressure upon [FPL] to surrender its clients and shares to [BRG] for a nominal consideration [;]

(h) unlawfully exclude [Mr] Roberts (being [FPL’s] nominee director) from meetings of the board of directors of [FPL] prior to his resignation as a director, thereby excluding [FPL] and [Mr] Roberts from the management of [BRG];

(i) exert illegitimate pressure on [Mr] Roberts to resign his position as a director of [BRG], thereby excluding [FPL] and [Mr] Roberts from the management of [BRG].

184. In closing submissions Mr Hartford-Davis submits:

“For the following reasons, the Defendants’ conduct in the affairs of BRG was oppressive to, unfairly prejudicial to or unfairly discriminatory against, [FPL] in [its] capacity as a member and in [its] capacity as a contract counterparty, within the meaning of s 232(e).

First, regardless of whether the allegations against [FPL] and Mr Roberts were genuinely believed at the time, the oppressive conduct amounted to an appropriation of [FPL’s] client book, achieved by denying [FPL] access to its own clients and preventing [FPL] from migrating its clients to a different AFS [licensee]. This was a fundamental disruption of the established understanding and expectations between the parties, which was not justified by any of the conduct alleged against [FPL]. A reasonable director, even if they believed the allegations against Mr Roberts, would not have sought to strip [FPL] of the value of [its] client book and [its] shares in BRG.

Second, the conduct cited by Mr Bailey in the email proposing to exclude [FPL] from Minerva and Pluto … would not, on any fair assessment, justify that extreme action.”.

185. I do not accept these submissions. First, Mr Bailey and Mr Thomas plainly had a real concern as to FPL’s and Mr Roberts’ conduct at this time and, so far as they were concerned that Mr Roberts had permitted unauthorised third party access to BRG’s computer systems and had provided false information to BRG staff, those concerns were well-founded. Second, it seems to me that those matters would have warranted denial of access to BRG’s systems, even if that would have impeded FPL’s access to its clients and prevented FPL from migrating its clients to a different AFS license holder (putting aside the fact that Mr Roberts and the third parties had previously copied client information to Mr Roberts’ Google Drive and Advice Evolution’s client management system). The contrary seems to me to be unarguable: why, it might be asked, should FPL’s interest in migrating clients to a third party provider prevail over BRG’s interest in maintaining the integrity of its client information and client management systems against unauthorised third party access, or prevail over the clients’ right to decline consent to access to and the transfer of its information to third parties which were not known to them? I also do not accept that the action taken by BRG was “extreme”, having regard to the nature of FPL’s and Mr Roberts’ conduct, the extent of concealment and the false information provided to BRG staff in the course of that conduct.

186. I have found above that, inter alia, BRG’s denial of access to its computer systems and to Mr Robert’s email account were not properly authorised acts of BRG and were steps initiated by BRG’s majority directors without authority. FPL has not established that BRG or the majority directors denied it access to its clients (although I have found above that BRG hindered their moving with FPL to a new AFS license holder) or denied access to client records, where Mr Roberts had previously copied a significant volume of client information and those records and had established an alternative business email to allow him tom contact those clients. It is common ground that BRG purportedly suspended FPL as an authorised representative, although that step was also initiated by its majority directors without corporate authority; and I have found above that BRG breached the CAR Agreement in taking these steps where it had not validly suspended or terminated that Agreement.

187. I have had regard to, but need not repeat, the several matters to which Mr Hartford-Davis referred in submitting that BRG’s conduct amounted to illegitimate pressure upon FPL to surrender its clients and shares for nominal consideration and that:

“The Court should infer that the decision to exclude [FPL] from Minerva and Pluto was done in an attempt to exert illegitimate pressure on Mr Roberts to separate business interests.”

188. I do not accept that BRG or its majority directors sought to, or did, exert “illegitimate pressure” on FPL to surrender its clients, where it took these steps, although without proper corporate authority, in response to Mr Roberts’ concealed copying of client files without notice to BRG and without clients’ authority and the false information he had provided to BRG in seeking to obtain third party access to BRG’s software. I accept that Mr Robert was unlawfully excluded from several purported board meetings, when he was not given notice of these meetings, and the legal effect of that exclusion was to invalidate any resolution passed (or, here, corporate decision purportedly made without a formal resolution) at those board meetings. There is no evidence of any, or any illegitimate, pressure on him to resign as a director of BRG, although he plainly chose to do so when exposed to the risk of removal at an extraordinary general meeting.

189. FPL rightly abandoned its claim (FAPC [36A]) that, from 20 August 2021, BRG’s affairs have been conducted so as to illegitimately use its funds to defend the claims made by FPL in this proceeding for the benefit of the majority shareholders. That allegation could not be established, in that broad form, where a claim for breach of contract was brought against BRG; BRG was entitled to defend that claim; and, on the findings I have reached above, would have succeeded in rebutting any claim to recover substantive damages by FPL. The lack of apportionment of costs between BRG and its majority shareholders at that time was plainly inappropriate, although mitigated or corrected by Mr Bailey’s and Mr Thomas’ reimbursement of those costs. However, FPL’s claim that BRG should not have incurred any costs in the proceedings is untenable; it did not plead the material facts of a claim put on the basis of a failure to apportion those costs, although it sought to pivot to such a claim in opening; it did not articulate what a proper apportionment of those costs would have been; and it does not adequately address the impact of the reimbursement of a substantial amount of costs by Messrs Bailey and Thomas. This claim would have failed had it not been abandoned.

190. FPL then pleads (FASC [38]-[39], denied Defence [38]-[39]) that:

“In the premises, the affairs of [BRG] have been and are being conducted in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against [FPL] or, alternatively, the Defendants have acted on behalf of [BRG] in a way that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against [FPL].

The oppression to, unfair prejudice to or unfair discrimination against [FPL] has:

(a) unfairly benefited [Mr] Bailey, [Mr] Thomas and [BRG] their related entities (including the Second to Sixth Defendants) at the expense of [FPL];

(b) unfairly benefited [BRG] at the expense of [FPL]; and

(c) caused [FPL] loss.

191. I now turn to the applicable legal principles as to that allegation. I have drawn below upon my summary of those principles in Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914; Re ICB Medical Distributors Pty Ltd [2018] NSWSC 1315 at [65]ff; Re Bicher & Son Pty Ltd (2020) 147 ACSR 108; [2020] NSWSC 711 at [73]ff; Re QB Foods Pty Ltd [2021] NSWSC 1227 at [56]ff; and Re Gunyahweh Pty Ltd [2023] NSWSC 1133 at [129]ff.

192. Section 232 of the Act provides that the Court may make an order under s 233 if:

“(a) the conduct of a company’s affairs; or

(b) an actual or proposed act or omission by or on behalf of a company; or

(c) a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

(d) contrary to the interests of the members as a whole; or

(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.”

193. Section 53 of the Act in turn identifies the “affairs of a body corporate” for several provisions of the Act, including s 232, as including the “promotion, formation, membership, control, business, trading, transactions and … dealings of the body” (s 53(a)) and “the internal management and proceedings of the body” (s 53(c)). The orders which may be made include, relevantly, an order for the purchase of any shares by any member (s 233(1)(d)) and an order that a company be wound up (s 233(1)(a)).

194. Section 232 of the Act and its predecessors extend to conduct involving “commercial unfairness” or where the conduct complained of involves a visible departure from the standards of fair dealing and a violation of the conditions of fair play, or a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair: Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704 (“Morgan v 45 Flers Avenue”); Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68. Conduct may be oppressive even when a defendant believes that he or she is acting for proper purposes: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (“Backoffice”) at [176].

195. The principles applicable to a claim for oppression were summarised by Austin J in Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [39], and the Court of Appeal noted the parties did not challenge that summary of the applicable principles in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310; (2011) 84 ACSR 121; [2011] NSWCA 104 (“Tomanovic (2011 NSWCA)”) at [140]. Austin J there observed that:

“(a) consistent with the principle that the purpose of relief is to terminate the effects of oppression, relief will generally be inappropriate as a matter of discretion if there is no continuing oppression: [Backoffice] at [182];

(b) unfairness is assessed by reference to whether “objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair”: eg, [Backoffice] at [181];

(c) while it is recognised that conduct may be oppressive if inconsistent with the “legitimate expectations” of shareholders, expectations are not immutable. The non-fulfilment of expectations will not establish oppression, if there has been some good reason for the extinguishment of the expectation: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, at [85], [86], [175]; [2001] NSWCA 97; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343, at [96]; [2009] NSWSC 342 per Barrett J;

(d) “it is important when assessing corporate activities to see if there has been oppression that judges do not remain in their ivory tower”: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1988) 28 ACSR 688, Young J at 739; [1998] NSWSC 413;

(e) a particular matter which will be taken in account in assessing the gravity of any allegation of oppression, is the extent to which the minority shareholder has “baited” the majority shareholder to act in an oppressive manner: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1988) 28 ACSR 688, at 741; [1998] NSWSC 413 …”

196. I have also borne in mind the observation in Tomanovic (2011 NSWCA) at [331] that each case has to be considered on its own facts and circumstances, and by reference to the conduct as a whole.

197. Mr Zahra in turn submits that if the minority has ‘baited’ the majority to act oppressively, that will go to the seriousness (or otherwise) of the alleged oppression. He submits that FPL’s conduct is relevant in determining whether there has been oppression, and, if so, what remedy should issue and refers to Re London School of Electronics Ltd [1986] Ch 211 (“London School of Electronics”) at 222, where Nourse J observed, in relation to the English oppression provision, that:

“The conduct of the petitioner may be material in a number of ways, of which the two most obvious are these. First, it may render the conduct of the other side, even if it is prejudicial, not unfair: cf Re R.A. Noble & Sons (Clothing) Ltd [1983] BCLC 273. Secondly, even if the conduct on the other side is both prejudicial and unfair, the petitioner’s conduct may nevertheless affect the relief which the court thinks fit to grant ... In my view there is no independent or overriding requirement that it should be just and equitable to grant relief or that the petitioner should come to the court with clean hands.”

198. The passage in London School of Electronics was cited with approval by Young J in Morgan v 45 Flers Avenue at 706 and by Rees J in Re Anna Bay Resort Pty Ltd [2022] NSWSC 331 at [190]. Mr Hartford-Davis also draws attention to my observations, in respect of the question of “baiting” in Re Ledir Enterprises Pty Ltd (2013) 96 ACSR 1; [2013] NSWSC 1332 at [214]-[215] that:

“In Morgan v 45 Flers Avenue Pty Ltd above at 706, 708, Young J expressed his agreement with the approach adopted in [London School of Electronics] at 482, that conduct of the applicant in an oppression case may either render the conduct by the other party not unfair or may affect the relief which the Court considers should be granted, but also observed there is no overriding requirement in such a case that the plaintiff should come to the Court with clean hands. At first instance in Fexuto v Bosnjak Holdings (1998) 28 ACSR 688 at 741, Young J observed that:

“One particular matter that judges take into consideration in this type of case is that the minority will often bait the majority to act in an apparently oppressive manner. This is done so that the minority can free their capital from a venture in which it is otherwise locked away. When this occurs, and there is a reaction from the majority, the Court both notes what happened and the reason for it happening”.

His Honour also noted that, although there was no now no overriding requirement of “clean hands” in order to obtain relief in the oppression, the court needed to be in mind the principle of proportionality in granting relief in oppression and importantly, that “[t]he majority must respect the rights of the minority no matter how difficult or trying they might consider that to be” and that the question was whether the majority’s conduct “does step over the mark”.

In Tomanovic v Argyle HQ Pty Ltd above at [140], Austin J referred to that decision and observed that:

“a particular matter which will be taken into account in assessing the gravity of any allegation of oppression, is the extent to which the minority shareholder has ‘baited’ the majority shareholder to act in an oppressive manner.”

His Honour's observation, consistent with Fexuto, treats that matter as a factual circumstance relevant to the exercise of the court's discretion.”

199. Subsequently, in Interactive Technology Corporation Limited v Ferster [2016] EWHC 2896 (Ch) at [318], Morgan J similarly observed that:

“wrongdoing on the part of a petitioner seeking relief under section 994 can be relevant in two ways. The first way is that the petitioner’s wrongdoing may make the prejudicial conduct of the respondent not unfair. The second way is that the petitioner’s wrongdoing may justify the court in refusing to grant relief to the petitioner or may influence the choice of any relief which is granted.”

200. In Munstermann v Rayward [2017] NSWSC 133 at [22], Stevenson J summarised the applicable principles as follows (omitting citations):

“(1) The test of oppression is an objective one of unfairness ...

(2) The court must look to determine whether on the balance of probabilities the objective commercial bystander would be satisfied that the affairs of the company were being conducted unfairly …

(3) A director may act oppressively in the sense relevant to the operation of s 232 and yet not breach any fiduciary or other duty owed as a director ...

(4) Conduct of a company’s affairs may be oppressive even though the conduct is otherwise lawful ...

(5) Conduct that has the effect of paralysing a company in the operation of its business is properly characterised as conduct contrary to the interests of the members as a whole …

(6) A shareholder of 50 per cent of the shares in a company can seek relief for oppressive conduct because they do not have control in the form of power to prevent the oppression, particularly where individual strong arm tactics are used …

(7) The court must formulate an opinion about oppression or unfair prejudice as at the date of the institution of proceedings and the issue of relief under s 233 must be determined at the date of the hearing …

(8) The discretion under s 233 is wide as to the appropriate remedy …

(9) The nature of the remedy chosen by the court under s 233 will be dependent upon the conclusions drawn by the court as to the type of oppression with which the court is dealing and the court will choose the remedy which is least intrusive ….

(10) The aim of any order under s 233 must be to put an end to the oppression …

(11) The court should only look to wind up an otherwise solvent company as a “last resort” …

(12) As a remedy for oppression, an oppressor can be ordered to sell their shares to the oppressed party ….

(13) If an order is to be made for the purchase of shares under s 233 the task of the court is to fix a price that represents a fair value in all the circumstances.”

201. This aspect of the case is finely balanced. As I noted above, FPL admits, by its Reply in the 2021 Proceedings, that in July and August 2020, Mr Roberts attempted to provide access to BRG’s Minerva computer system to Ms Barit who was then Chief Operation Officer of Advice Evolution which was a competitor to BRG, although she was also a representative of another firm, so as to effect a transfer of his clients from BRG; FPL admits that Mr Roberts provided misleading or deceptive information to the employees of BRG in this respect, and I should add that that was a very serious matter; FPL also admits that both Mr Roberts and FPL disclosed confidential information of BRG (and, I should add, of clients) to competitors of BRG and that is amply demonstrated by the evidence and also a serious breach of duty. These actions would have warranted a suspension or termination of the CAR Agreement with FPL by reason of Mr Roberts’ concealment and deception in the manner that those steps were taken, rather than because he was seeking to transfer FPL’s clients to a third party on his exit from BRG.

202. I recognise that BRG’s response was largely not properly authorised by its board and reflected an unjustified failure to give notice of board meetings to Mr Roberts. On the other hand, even if FPL’s and Mr Roberts’ conduct could not properly be characterised as “bait[ing]” the majority directors to act in an oppressive manner, in a narrow sense, that conduct exposed BRG to real regulatory risk and prompted the steps that BRG subsequently took, albeit without board authority. It can fairly be said that FPL’s own wrongdoing provoked a large part of the actions of BRG and its directors, which it now contends were oppressive. On balance, although with hesitation, I have found that oppression is here established, because FPL’s conduct did not require, or justify, the steps which BRG took, albeit with only partial success, to retain its clients, contrary to the terms of the CAR Agreement and the understanding of the parties that is now common ground in their evidence.

2021 Proceedings - FPL’s claim for compensation for oppression

203. As I noted above, FPL seeks an order pursuant to s 233(1) or s 233(1)(j) of the Act that the Second-Sixth Defendants pay them compensation or an order for damages. There was a degree of uncertainty in the parties’ closing submissions as to whether this issue still arose in the 2021 Proceedings, or now only in the 2023 Proceedings. As I understand the position, both on FPL’s pleaded case and as a matter of its underlying structure, this claim needs to be addressed in the 2021 Proceedings so far as it underpins FPL’s claim for compensation in the 2023 Proceedings. The possibility of a compensation order is open where I have found above, with considerable hesitation, that oppression is established. However, FPL cannot succeed on this claim, where its quantification of that loss is the same as the loss claimed its contract claim, by reference to the value of its lost “client book” and it has not established either that it lost that “client book” or the amount of the loss that it suffered in respect of those clients that were retained by BRG, at least for a period, and lost to it. I have addressed that issue in dealing with BRG’s claim for breach of contract above.

2021 Proceedings - FPL’s claim for a buy-out order

204. As I noted above, FPL alternatively seeks an order for the purchase of its shares in BRG at fair value (calculated prior to the matters addressed in the 2023 Proceedings and BRG’s liquidation) by the Second – Sixth Defendants or any of them. I recognise that a buy-out order could be made in a proper case on this basis, notwithstanding the subsequent winding up of BRG.

205. In closing submissions, Mr Hartford-Davis submits, by reference to the case law, that:

“The objective of a buyout order is to require the oppressor to buy the oppressed's shares at a fair price … The Court has a broad discretion as to the mode of valuation ... A “fair price” is prima facie the price which the shares would have been worth had it not been for the oppression ...

The authorities support the proposition that a buy-out order is not precluded by the fact that BRG is now in liquidation, especially where the evidence shows that BRG has entered liquidation by reason of the conduct the subject of the 2023 Proceeding – namely, as part of a process by which its assets were diverted to other entities, such that the oppression is continuing. The essential question remains whether the order sought provides an appropriate means to address the oppression about which the plaintiff complains.”

206. In closing submissions, Mr Zahra responds that this relief should not be granted where:

“(i) BRG is in liquidation and, on any view, any alleged oppression ended long ago;

(ii) [FPL]’s own conduct gave rise to the alleged oppression and discretionary considerations weigh against a grant of the relief sought;

(iii) The valuation evidence relied upon by [FPL] (Mr Goodyer) is fundamentally flawed, unreliable and unable to support [FPL]’s case.”

207. The Court can make an order for the purchase of a shareholder’s shares by another shareholder under s 233(1)(d) of the Act. The basis of such an order was identified in one of the earliest oppression cases, Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 at 369, where Lord Denning observed in respect of the corresponding English section that:

“One of the most useful orders mentioned in the section — which will enable the court to do justice to the injured shareholders — is to order the oppressor to buy their shares at a fair price … It is, no doubt, true that an order of this kind gives to the oppressed shareholders what is in effect money compensation for the injury done to them: but I see no objection to this. The section gives a large discretion to the court and it is well exercised in making an oppressor make compensation to those who have suffered at his hands.”

208. In Rankine v Rankine (1995) 18 ACSR 725 at 730-731, Thomas J in turn observed that:

“In granting a remedy in favour of an oppressed shareholder … by ordering the compulsory purchase of the applicant’s shares at a stated price, the court is in effect awarding compensation for the respondents’ breach of duty. The nature of the duty is both subtle and complex, and not capable of exhaustive definition”.

209. Nonetheless, as Mr Zahra points out, the remedy in an oppression case has an objective of ending the oppression and should address the form of oppression that is established, and the Court will be less likely to make a buy out order if any oppression has previously been ended by a company’s administration: Backoffice at [180]; McMillan v Coolah Home Base Pty Ltd (No 4) [2022] NSWSC 584 at [477]ff, where Parker J observed that:

“Historically, the statutory remedy of oppression emerged as an alternative to liquidation. As Powell J said in Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588 at 619-620), its purpose was to provide a remedy for unfair conduct in the management of companies where liquidation might prove to be a cure worse than the original disease. Against this background, there has been debate in the authorities about the extent of the court’s power to grant relief where the oppressive conduct has ceased by the time the proceedings are commenced, or by the time the court comes to make orders.

The issue reached the High Court in [Backoffice]. The case concerned a company (“Healthy Water”) which had previously been wholly owned by the defendant, Mr Campbell. A half share in Healthy Water was bought by a Mr Weeks, through his company Backoffice. The parties rapidly fell out and Mr Campbell excluded Mr Weeks from involvement in Healthy Water’s affairs.

Mr Weeks, through Backoffice, brought proceedings for winding up and other relief against oppression. After the proceedings had been brought, Healthy Water’s financial position declined. Both parties agreed to the appointment of a provisional liquidator who thereupon sold the business. The proceeds went towards paying Healthy Water’s creditors and the liquidator’s fees, leaving it a shell.

It was found at first instance that Mr Campbell had behaved oppressively. An order was made requiring him to buy Backoffice’s share at the value it had when Backoffice acquired it. But the order was set aside by the High Court. Arguably the fact that oppressive conduct had ceased did not necessarily deprive the court of power to make an order to relieve against ongoing consequences of earlier oppression. This did not however need to be decided, because:

“Given that there was no continuing oppression, and given that Healthy Water had no business and no assets, and was but an empty shell, no order for compulsory purchase of Backoffice’s share should have been made.”

210. I am not satisfied that a buy-out order should be made here. First, the matters which tended against a finding of oppression also tend against the making of a buy-out order and support leaving the parties to their claims in the winding up of BRG. I do not accept Mr Hartford-Davis’ submission that that liquidation arose “by reason of the conduct the subject of the 2023 Proceeding”, where it resulted, inter alia, from the loss of FPL and other advisers to BRG, likely prompted by the dispute and subsequent litigation, and I address the allegations in the 2023 Proceedings below. Second, any loss suffered by FGL was in its capacity as a contracting party to the CAR Agreement and not, in substance, as a shareholder in BRG, and it has established a breach of that agreement but failed to establish the amount of any loss suffered as a result of that breach for the reasons noted below; and an order that allowed it the value of its shares in BRG would have no relationship with the amount of the loss that FPL suffered as a result of the impugned conduct, as distinct from the loss that all shareholders suffer on the failure of BRG’s business. Third, I accept that here, as the plurality judgment observed in somewhat similar circumstances in Backoffice at [182], there is now no continuing oppression of FPL in respect of BRG; BRG has no business and no assets, and is now “an empty shell” after the completion of its winding up; and no order for compulsory purchase of FPL’s share in BRG should be made on that basis.

211. I will nonetheless address the applicable valuation principles and the expert evidence led by the parties against the contingency that an appellate court takes the same view that I have reached, that oppression is established (which it might well not, in a finely balanced held case) but takes the view that a buy-out order should have been made. I bear in mind that the Court will have regard to ordinary valuation principles in an oppression case, but has a discretion in fixing a fair price in such cases which is not constrained by such principles and does not require the price to be the market value of the shares: United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWSC 910 at [34]-[38]; Re Global Mortgage Equity Corporation Pty Ltd (2013) 97 ACSR 30; [2013] NSWSC 1586; Shanahan v Jatese Pty Ltd [2019] NSWCA 113 at [47]; Re Scientific Management Associates Pty Ltd (2019) 141 ACSR 115; [2019] NSWSC 1643 at [309], where Rees J observed that the basic requirement in an oppression suit is that “the valuation must be fair on the facts of the particular case”, and will be determined as a “price that is fair in all the circumstances having regard to the value that the shares would have had but for the oppressive conduct”.

212. FPL initially relied on several valuation reports of Mr Lane, although it abandoned reliance on those reports in closing submissions, and Mr Zahra advanced detailed criticisms of those reports.

213. In his “Business Valuation Report” dated 6 May 2022 (Ex P1, 16), Mr Lane sought to value the business of BRG as at 30 September 2022. Mr Lane ([6.2]) there adopted a broadly accurate definition of the concept of “fair market value”, as:

“The price a willing but not anxious buyer, acting at arm’s length, with adequate information, would be prepared to pay to a willing but not anxious seller for the shares or assets in question. … The value of a particular asset or business will vary from time to time and there may be differing values at the same time according to the purpose for which it is necessary to establish value.”

214. Mr Lane also rightly recognised alternative valuation approaches including income and asset-based approaches and recognised capitalisation of earnings and discounted cashflow methods as forms of income-based approaches. However, I will find below that the approach that he adopted did not adequately address the valuation of BRG, having regard to the objective of achieving a fair market value, but disregarded essential features of BRG’s structure and its vulnerability to the loss of advisers and their clients. Mr Lane was provided with, but it is not apparent what reliance he placed upon, affidavit evidence led in the proceedings, including affidavits of Messrs Roberts and Thomas that addressed contentious issues.

215. Mr Lane headed his report as a “Limited Scope Business Valuation Report”, and he described that concept in his report as follows:

“An engagement or Assignment to perform a Valuation and provide a Valuation Report where the scope of work is limited or restricted. The scope of work is limited or restricted where the Member is not free, as the Member would be for the limitation or restriction, to employ the Valuation approaches, Valuation methods and Valuation procedures that are reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the engagement available to the member at that time and it was reasonable to expect that the effect of the limitation of the restriction on the estimate value is material. …”

This qualification is significant, where it recognised that the limitations on Mr Lane’s work, however they arose, had a potentially material impact on his estimate of the value of BRG, undermining the weight that could be provided to that valuation.

216. Mr Lane’s report adopted a capitalisation of profit methodology and valued the business as a going concern as at that date, on the basis of future maintainable earnings of $288,230 and capitalisation rate of 5.84 and derived a business value of $1,683,263, valuing FPL’s 40% shareholding in BRG at $673,305. Mr Lane there noted ([2.6]) that that valuation was made on the basis that the business had continuing operations and was not likely to be sold. He had regard to the historical performance of BRG over the 2018, 2019 and 2020 financial years, although he appears to have given insufficient attention to the fact that BRG’s risk revenue was declining significantly over that period; its personal superannuation revenue had also declined between 2019 and 2020; its asset management revenue had also declined significantly from 2018 to 2019 and then further declined through 2020, and its portfolio administration revenue and planning revenue had also declined in that period. The overall revenue of BRG had declined to a lesser extent, because there was a substantial increase in “other revenue”, the source of which was not identified, and net profit had increased, although it was relatively modest because of a decline in total expenses over the period. Plainly, the decline in revenue of BRG would be of significant concern to an arm’s length purchaser of BRG, quite apart from the more fundamental difficulties with Mr Lane’s valuation that I address below.

217. Mr Lane in turn observed ([3.3]):

“I have not had my usual business valuation interview with the Directors of the business. As such, I have not been able to specifically inquire if the earnings of the business are sustainable. I acknowledge that there will be changes to both income and expense line items due to the business dispute currently underway. As this is a valuation at a point of time, this is the reflection of the business worth at the time the dispute commenced, and not what the business may be worth with the exiting party separated from the business etc.

Given the changes within the financial planning industry I have weighted 100% on the 2020 financial year as this is the most reflective of the ongoing, future maintainable earnings.”

218. It seems to me that approach was not sustainable. As was apparent from Mr Lane’s cross-examination, Mr Lane here excluded the risk of exit of CARs including FPL from BRG’s business; but, at the time the business was to be valued, FPL was well advanced on its plans to exit the business, and both BRG and FPL had given notice of termination of its CAR Agreement; and FPL had asserted, although BRG had not accepted, an entitlement to transfer clients serviced by it to a new AFS license holder, consistent with the understanding now acknowledged by all the lay witnesses and contemplated by the CAR Agreement. I have found that BRG wrongly sought to retain a significant number of those clients, but BRG in fact lost some or many of those clients at that point and over time to FPL. Mr Lane’s approach did not have regard, as he ultimately acknowledged in cross-examination, to the fact that a buyer of the business would discount the amount payable not only for FPL’s exit from the business, and the immediate and mid-term risk of loss of FPL’s clients to BRG, but also for the fact that other advisors could (and ultimately did) exit the business by also asserting their entitlement to take their clients to new AFS licensees. By disregarding that structural feature of the business, Mr Lane radically overstated its value either by adopting the 2020 earnings without adjustment for the inevitable decline in earnings following FPL’s departure, and by adopting a capitalisation rate by reference to industry knowledge generally, without regard to the steps that had then been taken by FPL to exit the business and the risk of exit by other advisers in a similar manner.

219. It seems to me that Mr Lane’s failure to have regard to the structural risks in BRG’s business, the risk of loss of FPL’s clients, and the risk of loss of other advisers and third clients has the consequence that I can give little weight to the value derived by that report. It is plain enough that an arm’s length of the buyer of the business, fully informed of the relevant facts, would not disregard those risks but would significantly reduce its valuation of the business to take account of those risks.

220. For completeness, Mr Lane also prepared a further report (Ex P2) in response to the affidavit of Mr Bailey dated 1 July 2022 in the 2021 proceedings, which was not read. Although that report was admitted, it is not necessary to address its content further.

221. By a third report dated 31 January 2025 (Ex P3), Mr Lane confirmed that he prepared his report dated 6 May 2022 having regard to the Expert Witness Code of Conduct, although he did not address the limited scope of his valuation report (which I have noted above) in doing so. He also addressed the capitalisation rate used in his report, and indicated that:

“I reviewed the Business Capitalisation Rates (multiples) for Financial Services businesses valued in the 12 months surrounding the completion of the valuation for the Bailey Roberts matter. Of the 18 businesses valued, the capitalisation rates were between 5 and 6.15.

The multiple of 5.85 used in my report, dated 6 May 2022, reflects a multiple of an at scale financial services business.”

222. He also referred to other factors that he suggested support that capitalisation rate, including the population of the Wollongong area, the fact that the business involved “multiple, equity owning, advisers” and that the “MDA platform indicates multiple revenue streams for the business”. Mr Lane in turn observed that:

“In my extensive career in Financial Services, both as Head of Mergers and Acquisitions roles, and now as a Financial Planner and valuation expert in Financial Services valuations, it is my experience that whilst there are risks to AFSL such as the possibility of movement among Corporate Authorised Representatives, and clients, material movement is not common.”

223. Mr Lane then explained several factors why he considered that movement of advisers was less likely, and the complexities involved in a movement of managed discretionary accounts. Mr Lane’s explanation of these matters emphasised the extent to which his methodology had failed. In effect, Mr Lane had assumed away the essential risks, as a matter of present fact and future risk, in BRG’s business. Notwithstanding his view that “material movement” among CARs was not common, FPL was in fact well advanced in moving from BRG to a third party AFS licensee at the time BRG was to be valued, and Greetham Associates had also then indicated its interest in doing so and did so immediately after FPL commenced the 2021 Proceedings. Mr Lane disregarded those risks in valuing BRG’s business and it seems to me plain that an arm’s length purchaser of the business would not have done so. I could not have accepted the approach adopted in Mr Lane’s reports or modified that approach to derive any reliable value for BRG, had FPL not abandoned reliance on that report.

224. The Second – Sixth Defendants relied on a valuation report dated 29 October 2024 of Mr Rossetto (Ex D1) who was instructed to value the shares in BRG and FPL’s shares in BRG at dates including 30 September 2020 and later dates which it is not necessary to address in order to determine the proceedings. I recognise that Mr Rossetto had little experience in valuing AFS licensees in particular. Nonetheless, he adopted an orthodox valuation methodology, in a manner which recognised BRG’s then financial difficulties, and took appropriate account of the risks of BRG’s business, which had been disregarded by Mr Lane’s valuation that I have addressed above. As I noted above, FPL now also relies on Mr Rossetto’s report in place of Mr Lane’s reports.

225. Mr Rossetto indicated that he adopted a “market value” valuation, by reference to:

“The price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but anxious buyer and a knowledgeable, willing but not anxious seller acting at arm’s length. Market value is the amount that a prudent investor would be prepared to pay in order to receive the expected future earnings, having regard to the level of risk attributed to the investment.”

226. Mr Rossetto had regard, in identifying the assumptions which he had made, to important matters which were not reflected in Mr Lane’s valuation, including the fact that BRG had given notice to terminate the CAR Agreement with FPL and had taken steps to seek to retain FPL’s clients with BRG; and that FPL had itself given notice to terminate the CAR Agreement with BRG, on 9 September 2020, which would become effective on 8 December 2020. Mr Rossetto also noted that, until FY 2020, BRG had consistently derived profits from its operations but with a trend of both declining revenue and profitability, and that BRG’s net asset position had peaked at 30 June 2020 ($309,067) and declined each year after that time. Importantly, Mr Rossetto recognised ([5.58]):

“Based on my review of the information available, [BRG] has no proprietary rights to the clients of the CARs. There is however a right to commission income from insurance products that will continue, but that income is linked to the client of the CARs and, in my opinion, it cannot be guaranteed that income stream would continue.

BRGs business is that of AFSL holder and for the purposes of my valuation it does not have clients for which it controls.”

227. Mr Rossetto had regard to an earnings-based calculation but concluded that the value of the goodwill associated with the business at that valuation date was nil, given the decline in its revenue and net profit of the business. Mr Rossetto had regard to the multiple applicable for various income streams for different products derived from an industry website, and he also relied on information in that website to assess the value of BRG’s AFSL. Mr Rossetto also observed, rightly in my view, that a valuation as at 30 September 2020 could not rely solely on BRG’s past financial performance, where, by that date, both BRG and FPL had given notice of termination of FPL’s appointment as a CAR of BRG. Mr Rossetto noted that the risk to BRG’s projected future maintainable earnings, due to whether its CARs would remain, was best addressed by risk factors applied to the capitalisation rate. Mr Rossetto adopted the revenue for FY 2020 for BRG as maintainable, but reduced that revenue by 35.44% of BRG revenue contributed by FPL, where FPL’s contribution to BRG’s revenue would cease on or about 30 September 2020, presumably by reference to its suspension and the subsequent termination of its CAR. I recognise that that approach did not have regard to the extent of any success of BRG in retaining earnings from FPL’s clients, to the extent that those clients did not move with FPL to a new AFS licensee. Mr Rossetto also made several, apparently orthodox, adjustments to derive the maintainable earnings of BRG, and he determined a future maintainable earning of BRG as at 30 September 2020 as negative, apparently reflecting the difficulties arising from its continuing costs structure, after FPL’s contribution to the revenue of the business had been lost. Mr Rossetto also noted ([5.97]) the increased risk to BRG’s business where, after the loss of FPL, two main CARs would produce all of its remaining total gross income, and that a loss of one of those representatives would change its ability to operate profitably. He considered that the capitalisation rate that would apply to the future maintainable earnings of BRG would not exceed the value of one times future maintainable earnings on that basis, although he did not adopt that capitalisation rate, where the derived future maintainable earnings of BRG were negative.

228. Mr Rossetto then valued BRG by reference to the underlying net assets of the business, given the conclusions which he had reached as to the earnings of the business, and added an allowance for the value of its AFSL, quantified as $60,000. On that basis, Mr Rossetto valued BRG’s business as at 30 September 2020 at $369,067.

229. In closing submissions, Mr Hartford-Davis abandoned reliance on Mr Lane’s valuation, on the ostensible basis that his report was inconsistent with FPL’s case that it was free to take its clients to a new AFS licensee, and submitted that the Court should adopt Mr Rossetto’s significantly lower valuation of FPL’s shareholding in BRG as at September 2020, resulting in a valuation of $147,627 for FPL’s 40% interest in BRG. Had I been persuaded that oppression was established, and that I should make a buy-out order, I would also have adopted Mr Rossetto’s report, although for different reasons than those advanced by Mr Hartford-Davis.

230. As I have noted above, I am not satisfied that a buy-out order should be made here. Had I considered that such an order could be made, and as is now common ground between the parties, I would have valued the shares in BRG at their net asset backing for the purposes of a buy-out order in accordance with Mr Rossetto’s valuation, and ordered that BFM and LAT buy out FPL’s shares in BRG at a price of $147,627.

The 2023 Proceedings

231. By its Originating Process filed in 22 May 2023 the 2023 Proceedings, FPL now seeks only an order under s 233(1) or s 233(1)(j) of the Act that the Defendants in those proceedings, Mr Roberts and Mr Thomas, or either of them pay compensation to FPL and interest under ss 100 and 101 of the Civil Procedure Act 2005 (NSW). This claim relates to events after the commencement of the 2021 Proceedings.

232. It would be possible to deal briefly with the 2023 Proceedings, because Mr Hartford-Davis fairly accepts, in closing submissions that:

“… the 2023 Proceeding[s] assumes that BRG breached [FPL’s] CAR Agreement in the manner alleged in the 2021 Proceedings … . The 2023 Proceeding[s] assumes that [FPL] suffered loss as a result of those breaches. … The 2023 Proceeding is only viable if the Court finds that BRG breached [FPL’s] CAR Agreement, and that the breach caused loss and damage to [FPL]. [FPL] relies upon its submissions in the 2021 Proceedings in relation to those matters.

233. While I have found above that BRG breached the CAR Agreement with FPL, I have not found that that breach caused substantive loss and damage to FPL and the 2023 Proceedings must therefore fail. I will nonetheless address the issues raised in these proceedings at greater length.

234. By way of background to this claim, in the first half of 2022, Mr Bailey also had communications with Mr Cook of Balance Insolvency, who was later appointed as voluntary administrator and then liquidator of BRG, concerning the possible voluntary administration of BRG (Bailey 29.10.24 [163]). On 19 September 2022, Mr Thomas resigned as a director of BRG, and Mr Bailey was then its sole director (Ex J1, 3903). On 24 October 2022, BRG was placed in voluntary administration (Ex J1, 4029A, 4030) and, on 28 November 2022, BRG transitioned to liquidation. On 14 March 2023, BRG’s liquidator accepted an offer to compromise the claims of BRG against several Defendants. On 22 May 2023, FPL commenced the 2023 proceeding against Messrs Bailey and Thomas. I will otherwise address the events which are relevant to these proceedings in dealing with particular claims below.

235. Turning now to FPL’s pleaded case in the 2023 Proceedings, by its Points of Claim (“2023 POC”) in the 2023 Proceedings, FPL broadly repeats its pleadings in the 2021 Proceedings as to the structure of BRG’s business. It pleads (2023 POC [11]-[15], partly admitted Points of Defence of the First Defendant (“Bailey Defence”) [11]-[13], [15], Points of Defence of the Second Defendant (“Thomas Defence”) [11]-[13], [15]) the directors’ duties owed by Messrs Bailey and Thomas as directors of BRG under ss 180–182 of the Act and in equity and a duty of confidentiality owed by Messrs Bailey and Thomas to BRG. FPL then refers (2023 POC [16]-[17]) to the allegations made in the 2021 Proceedings that, from September 2020, BRG engaged in conduct which breached the CAR Agreement. I have found above that BRG took several steps which were in breach of the CAR Agreement, where no corporate decision to terminate the CAR Agreement had been validly made by BRG and it had not validly suspended or terminated that Agreement, but that FPL has not established any substantive loss arising from that breach. FPL then pleads (2023 POC [18], broadly admitted Bailey Defence [18], and addressed by a prolix pleading and otherwise not admitted in Thomas Defence [18]) the commencement of the 2021 Proceedings.

236. FPL’s first complaint in the 2023 Proceedings (2023 POC [19]-[20], largely denied Bailey Defence [19]-[20], partly not admitted and partly denied Thomas Defence [19]-[20]) is that, as directors of BRG, Messrs Bailey and Thomas did not cause BRG to play a neutral role in the 2021 Proceedings. I did not understand FPL to press the claim that, and I would not find that, BRG was obliged to take a neutral role in the 2021 Proceedings where substantial claims were brought against it in those proceedings. That complaint did not sufficiently recognise that FPL had brought a claim for breach of contract against BRG, which BRG was entitled to defend. There was no basis on which it should be expected to take a neutral role as to that significant part of the proceedings.

237. FPL’s second complaint is that, as directors of BRG, Messrs Bailey and Thomas omitted to take steps to cause the majority shareholders with whom they were associated to pay or contribute to the cost of defending the 2021 Proceedings and caused BRG to incur substantial costs totalling approximately $350,000 in defending the 2021 Proceedings (“Proceedings Costs”). I accept that, as Mr Hartford-Davis contends, the use of company funds to bring or defend a proceeding “that is in essence a fight between competing shareholders” can constitute oppression: Re Skytraders Pty Ltd [2022] VSC 416 at [446]. I have recognised above that the 2021 Proceedings did not have that character, where a substantial contractual claim was brought by FPL against BRG. I accept that, where BRG, on the one hand, and Messrs Bailey and Thomas and their associated companies on the other, also had separate interests in the proceedings, either separate billing or an apportionment of costs was likely an appropriate position as between BRG and other Defendants. FPL contends (2023 POC [20(a)]) there was no basis or no proper basis for Messrs Bailey and Thomas to cause BRG to incur the Proceedings Costs.

238. I now address the relevant evidence. I have referred above to the commencement of the 2021 Proceedings. On 25 October 2021, the Defendants including BRG applied for security for costs in the 2021 Proceedings. By an affidavit dated 25 October 2021 filed in that application, the solicitor acting for the Defendants submitted that they had incurred total costs and disbursements of $49,254.28 to that point in the proceedings, and that his estimate of further costs and disbursements up to including the hearing was $332,070 excluding GST. On 10 November 2021, Rees J granted security to the Defendants in the 2021 Proceedings in the form of a charge over FPL’s shares in BRG; dismissed the 2021 Proceedings as against Messrs Bailey and Thomas and ordered that FPL pay Messrs Bailey’s and Thomas’ costs of the proceedings. As events have developed, a charge over FPL’s shares in a company that is now in liquidation will provide no effective protection for the Defendants as to costs.

239. In early November 2021, FPL’s solicitors raised concerns in correspondence with the Defendants’ then solicitors as to the fact that BRG was paying legal costs in defending the 2021 Proceedings on the basis that it was an oppression suit and a dispute between shareholders. Following further correspondence, the Defendants’ then solicitors apportioned the costs incurred to that date between BRG and the other Defendants, with approximately $80,000 being apportioned to Messrs Bailey and Thomas, who paid approximately $40,000 each to BRG to reimburse those costs (Bailey 29.10.24 [146]-[148]). On 11 March 2002, BFM and LAT ceased to retain the solicitors formerly acting for BRG and them in the 2021 Proceedings and subsequently took no further active role in those proceedings. Those solicitors continued to act for BRG in those proceedings. FPL also joined other defendants to those proceedings which were not represented in them (Bailey 29.10.24 [149]).

240. In closing submissions, Mr Hartford-Davis makes extended submissions as to the amount of costs incurred by BRG in the 2021 Proceedings, and the amount of reimbursement of costs made by Mr Bailey and Mr Thomas. Mr Hartford-Davis appears to submit that it was appropriate for BRG to incur 20% of the legal costs of defending the 2021 Proceedings, although it is not apparent why that figure rather than a higher percentage is correct, and undertakes calculations of costs contributions on that basis.

241. Mr Hyde, for Mr Bailey, responds that.

“The allegations concerning the costs of the 2021 Proceedings must be viewed in light of the fact that [FPL] elected to make a direct claim against the Company (which was and remains asserted by it to be worth in excess of $1 million) in proceedings in which it also made allegations of oppressive conduct against the respective shareholders.”

Mr Hyde also refers to Mr Bailey’s evidence as to cross-examination in that respect and submits that:

“Whilst the evidence of Mr Bailey was to the effect that the claims made in the 2021 Proceedings were spurious and without foundation, there were (and remain) proper grounds on which they ought to be defended.”

242. That submission is reinforced by the fact that, as this judgment indicates, FPL has failed to establish a claim for substantive damages against BRG in those proceedings. The fact that BRG had a proper defence to a substantial claim supports a conclusion that it could properly incur the costs of defending that claim, although it leaves open the question of the extent of the costs referable to that claim rather than claims against the shareholders.

243. Mr Hyde also responds to Mr Hartford-Davis’ calculation of costs, in submissions, as follows:

“Much is made in the PWCS that Mr Bailey and Mr Thomas are said not to have even followed the advice of Hall & Wilcox as to the proportion that ought to be paid by them whilst there was a joint retainer with the Company but rather paid 15% each. The analysis in the written submissions is somewhat mis-directed.

In the period of September 2021 to the end of March 2022, the Company’s accounts show that legal costs of $212,617 were incurred …. Bearing in mind that termination of Hall & Wilcox’s retainer by Mr Bailey and Mr Thomas occurred somewhere in the period between early February and mid-March 2022 …), Mr Bailey and Mr Thomas reimbursed $78,139 … – being 44% of the costs to the end of January, 40% of the costs to the end of February and 37% of the costs to the end of March.”

244. Mr Zahra responds for the Second-Sixth Defendants that:

“the 2021 Proceedings were properly defended and, on proper analysis, the claims in the 2021 Proceedings were almost entirely directed to the breach of contract claim against BRG. In circumstances where BRG had a good defence to those claims and could not pay the exorbitant, unreasonable and unjustifiable amount claimed by [FPL], it was appropriate that the claims be defended and legal expenses incurred in defending the proceedings.”

245. Mr Zahra also submits that:

“First, BRG was and remains a defendant to the 2021 Proceedings. It was being sued for breach of contract. It was entitled to use its own resources to defend that claim. That was especially in circumstances where the particularised value of the alleged claim was $1,118,805, and that well exceeded the net asset value of BRG at 21 August 2021, and at all times thereafter until BRG entered administration.

Second, a fair reading of the allegations in the 2021 proceedings is that the primary focus of that claim was directed to the breach of contract claim against BRG. The secondary oppressive conduct claim even piggy backs and relies on the alleged breach of contract claim against BRG. Indeed, six of the nine particulars of oppression relied upon at [36] of the 2021 PoC repeat the matters alleged in support of the breach of contract claim against BRG. Even the particulars of loss in the oppression claim (2023 PoC at [39]) relies on the same particulars of loss in the breach of contract claim against BRG. In those circumstances, it was appropriate for BRG to fund the bulk of the legal costs – and certainly considerably more than the 50% which Hall & Wilcox conservatively assessed when the issue was raised.

Thirdly, Messrs Bailey and Thomas paid for part of the legal costs incurred in defence of the 202[1] Proceedings. The fact that they paid for part of the fees indicates that they were attentive to the financial needs of BRG as a whole, and the incurring of fees by BRG in its own defence was not oppressive.”

246. I accept that Messrs Bailey and Thomas initially failed to take proper steps to segregate or apportion the costs of defending the proceedings between BRG and their companies. However, they subsequently reimbursed a substantial part of those fees and their companies withdrew instructions to the solicitors in the 2021 Proceedings, as they were entitled to do, leaving BRG to defend only the claims brought against it. It is not possible to quantify the loss arising from that breach, where FPL did not establish the amount that would properly have been attributed to the companies associated with Messrs Bailey and Thomas in such an attribution or address the effect of the monies repaid by Messrs Bailey and Thomas.

247. Mr Hartford-Davis also submits that the Proceeding Costs contributed to FPL’s “ultimate inability” to recover its loss against BRG, for reasons that he sets out at some length. I cannot accept this submission where FPL has not established that it had an entitlement to recover any substantive loss against BRG, for the reasons noted above, and because FPL has not established that, with or without a voluntary administration of BRG at an earlier date, the assets of BRG would have been sufficient, after meeting the costs and disbursements of a voluntary administration and subsequent liquidation, and unsecured creditors’ claims, to meet BRG’s claim in any event. I return to that issue below.

248. FPL’s third complaint is that, as directors of BRG, Messrs Bailey and Thomas caused BRG to incur “material consulting fees” to which reference was made in the report of the voluntary administrator appointed to BRG under s 439A of the Act*,* and (2023 PC [20(b)]) that there was no basis or no proper basis for Messrs Bailey and Thomas to cause BRG to incur the Consulting Fees. The evidence establishes that, from mid-2021 to March 2022, BRG paid Thomas AFF consulting fees pursuant to a Contractor Service Agreement of approximately $7,000 per month (plus GST) and, from April 2022 until about July 2022, BRG paid AFF consulting fees under a Contractor Service Agreement of approximately $3,500 per month (plus GST), and those fees were not charged or paid from July 2022 (Bailey 29.10.24 [150]). Mr Hartford-Davis makes detailed submissions as to the extent of the consulting fees incurred by BRG and submits that there was no corporate authority to incur those consulting fees, either when BRG first entered into a Contractor Service Agreement with AFF on 1 July 2020 or when that agreement was renewed on 1 January 2021 (Ex J1, 1955).

249. In response to this allegation, Mr Hyde rightly points out that:

“[FPL’s] analysis only examines the expense side and does not have any regard to any reduction in revenue (or breach of licence conditions) in the event that the services for which [AFF] was paid consulting fees were not provided to BRG. This is particularly so given the evidence given by Mr Bailey that BRG needed to ensure such services were provided as a condition of its licence (T373…).”

250. Mr Zahra also submits that:

“It is important to focus on what is alleged: merely that BRG incurred Consulting Fees. It is not alleged that the Consulting Fees were out of proportion to the services rendered in return for them, or that they were overcharged, or that it was somehow a wrongful diversion of the financial resources of the Company to a third party. The “main issues” identified in PS [268] do not arise at all. All that is claimed is that the Consulting Fees were incurred and that was oppressive. The allegation therefore boils down to a claim that the Company spent money on acquiring services. That is it. In the absence of any allegation, or evidence, that the Consulting Fees were improperly incurred, this conduct cannot amount to oppression.”

251. I accept that BRG incurred consulting fees payable to AFF and the payment of those fees was not authorised by BRG’s board and was not within the authority limit of the BRG staff member who executed the relevant agreements for BRG. I accept that each of Messrs Bailey and Thomas plainly knew of and permitted the payment of those consulting fees and that their doing so was arguably in breach of at least s 180 of the Act and the corresponding equitable duty of care, and it is not necessary to decide whether it was also in breach of the other pleaded duties. However, it is also not possible to quantify any loss of BRG arising from such a breach, which is not the amount of consulting fees paid, but would need to account for the market value for the asset management services received by BRG and the costs which BRG would have incurred in providing those services for itself, had it not acquired them from AFF. FPL cannot establish such loss if either the value of those services or the costs that BRG would have incurred in itself providing them would have exceeded the consulting fees paid to AFF, and FPL made no attempt to quantify any loss on that basis. Mr Hartford-Davis also submits that the consulting fees contributed to FPL’s “ultimate inability” to recover its loss against BRG. The final step in that reasoning, which is essential to FPL’s claim in this regard, is also not established for the same reason that it is not established in respect of the Proceedings Costs.

252. FPL then pleads (2023 POC [21]-[22], largely not admitted Bailey Defence [21]-[22], not admitted Thomas Defence [21]-[22]) that, as at around 30 September 2020, the business and undertaking of BRG had material value and initially relied on Mr Lane’s expert report (Ex P1). I do not accept Mr Lane’s evidence for the reasons noted above and, consistent with my findings above, would have valued BRG on a net assets basis only at that time. As I noted above, FPL also abandoned reliance on Mr Lane’s valuation.

253. FPL then pleads (2023 POC [24]), largely denied or not admitted Bailey Defence [24]ff, partly admitted Thomas Defence [24]ff) that, on an unknown date after Rees J made security for costs orders on 10 November 2021 which allowed FPL to rely on the value of its shares in BRG, Mr Bailey and Mr Thomas or each of them decided that:

“(a) the affairs of BRG should be wound down;

(b) the business and assets of BRG should be transferred to a new entity with different shareholding;

(c) BRG should be placed into external administration.”

254. This claim has not been established. Throughout this period, Messrs Bailey and Thomas were seeking to settle the proceedings brought by Mr Roberts against BRG and their entities; they were seeking to address the financial strains which the defence costs of the proceedings put on FPL, which I recognise were exacerbated by the fact that BRG was left to bear all of the costs of defending the proceedings; and they were also seeking to address the loss of revenue resulting from FPL’s, and later other advisers, ceasing to be authorised representatives of FPL. While it is plain they recognised the threat to BRG arising from these matters, I am not persuaded that a coordinated plan of this character was developed in response to, or in connection with, the security for costs order (which is the essential premise of the allegation) or that Messrs Bailey or Thomas formed an intention to place BRG in voluntary administration until about the time that a voluntary administrator was appointed.

255. FPL then pleads (2023 POC [25]ff, partly admitted, not admitted or denied Bailey Defence [25]ff, partly admitted Thomas Defence [25]ff) aspects of BRG’s business as at October 2022 and that, after Mr Thomas’ resignation as a director of BRG on 19 September 2022, Mr Bailey, as BRG's sole remaining director resolved that BRG enter external administration, with Mr Cook being appointed as its voluntary administrator. FPL also pleads (2023 POC [29], partly admitted Bailey Defence [29], partly admitted Thomas Defence [29]) Mr Bailey’s account to the voluntary administrator as to the cause of BRG’s failure, namely that:

“The failure was due to a legal system that allows a trust with no assets to Litigate a vexatious claim. The company had no option other than to defend the claim. On application for a defence bond the court applied shares in the company owned by [FPL] as a bond? it became apparent that even though the company was advised the case was favourable, a win by the company would result in a significant financial loss as [FPL] had no financial resources. it was decided that the best use of the remaining financial assets should be applied to staff and creditors.”

256. As events have developed, it would perhaps have been an overstatement to describe FPL’s claim as vexatious, although the evidence led by Mr Roberts at the time it was commenced was misleading and dishonest for the reasons I have noted above, and there was little prospect that the amount of any recovery from the claim would have exceeded the costs of pursuing it. Messrs Bailey and Thomas have not established that they obtained legal advice in the form asserted by Mr Bailey, where they have not chosen to waive legal professional privilege in that advice. It is not apparent what Mr Bailey meant by applying remaining assets to “staff and creditors”, and he may well not have intended to include FPL in that category. Again, as events have developed, he would have been correct in not doing so where FPL has not established a claim for substantive damages against BRG.

257. FPL then pleads (2023 POC [30]-[31], partly denied and partly not admitted Bailey Defence [30]-[31], Thomas Defence [30]-[31]) that it was Mr Bailey’s intention that BRG’s affairs should be wound down and “BRG’s assets and undertaking should be transferred for no consideration to a third party, in order that BRG and/or its majority shareholders might avoid the costs of defending [the 2021 Proceedings]” and that:

“Prior to the appointment of the Administrator, [Mr] Bailey and/or [Mr] Thomas caused BRG to wind down its affairs including by:

(a) terminating its authorised representative agreements;

(b) selling its plant and equipment;

(c) selling its commission rights on or around 20 June 2022;

(d) selling its shares in [Brite NSW];

(e) selling its shares in [CSM] for $1 to [AFF], an entity related to Thomas; and

(f) selling its 11,392 units in the Church St Unit Trust [(“CSUT”)].”

258. Mr Hartford-Davis refers, in closing submissions, to Mr Bailey’s email dated 6 January 2022 (Ex P6, 122) which suggested that:

“1) we set up the [CSUT}, this has been discussed with [Mr Thomas]. [CSUT] with unit holders [B]rite, [BRG] and Super[A]dvisor.

2. Move lease to Newco and all BRG assets sold to Newco at Book, this will require SuperAdvisor and Brite paying their share of the book Value.

3. NewCo/[CSUT] will now charge Brite BRG and [S]uperAdvisor for the management services and their share of rent.

The above means that there will be no threat to other BRG businesses regardless of what happens to BRG.

Getting a list of monthly expenses to me.

List of all BRG retail clients not owned by S.A or Sustain.

Would be good to identify revenues and ages for the clients.

Lat Holdings and BFM have to pay part of the legals, I suggest 15% of the costs pre the last invoice. Check with Leith on this one , I get about $113,000 as the gross amount, I can pay as soon as you invoice.”

259. As Mr Hartford-Davis points out, Mr Thomas also accepted in cross-examination that, by February 2022, he intended that BRG’s plant, property and equipment would be moved into CMUT and that BRG’s services (such as telephone) would be transitioned to CMUT and by February 2022 that process was already underway (T456). In closing submissions, Mr Hartford-Davis otherwise relies on the specific transactions that I address below to support this allegation. I accept that at least Mr Bailey likely planned these several acts, having regard to his 6 January 2022 emails, and they had the intent of placing assets and parts of the operating business in assets other than BRG. FPL does not contend that that would be wrongful, at least unless those assets were not transferred at fair value or adversely affected BRG’s solvency. Mr Hartford-Davis instead submits, in closing submissions, that the transactions, or at least of part of them, was undertaken for no consideration, as follows:

“Despite the initial roadmap set out in Mr Bailey’s 6 January 2022 email above, BRG’s plant, property and equipment was not sold at book value. There was no professional valuation of the plant, property and equipment. The idea was notionally that BRG would be issued units corresponding to the book value but that did not occur. Nor was there any reliable or appropriate fair market valuation conducted. BRG was issued 10,091 units but there is no evidence that it ever received cash consideration when it sold those units. The profit and loss statement at Tab 989, p. 4039 (1 July 2022 to 24 October 2022) records no such receipt, even though BRG’s profit and loss statements otherwise recorded revenues from asset dispositions.”

260. Mr Hyde responds by reference to Mr Bailey’s evidence, which I have addressed above, as to the events following the commencement of the 2021 Proceedings (Bailey 29.10.24 [139]ff, T420-421, 424, 456, 471, 474). He also submits that the evidence does not establish on the balance of probabilities that Mr Bailey had the intention of rendering BRG insolvent so that FPL, if successful in the 2021 Proceedings, would be unable to recover any loss and damage against the Company; and that most of the inferential links and quotes and extracts of documents which are relied upon by FPL are equivocal at best. He also submits that:

“In light of the loss of the CARs during the course of 2021 and 2022, the plight of the Company was in a downward trajectory. Other than broad allegations made in [FPL’s closing submissions] that are variants of the “conduct involved the winding down of the business of BRG” (see, for example, … [284], [285] and [292]), having regard to the way that [BRG] had been structured as a service entity for the CARs, it is difficult to see what steps could have been taken to avoid that which ultimately occurred. It is even harder to contemplate how such matters could be said to be oppressive in circumstances where the Company was not able to prevent Sustain Capital from terminating its CAR and being able to provide materially the same services that were provided by [BRG] prior to the appointment of the Administrator.”

261. The first of FPL’s pleaded allegations is not established, as a matter of fact. As I noted above, FPL commenced the 2021 Proceedings on 21 August 2021. Shortly after those proceedings were commenced, on 24 August 2021, Greetham Associates gave 30 days’ notice of termination of its CAR Agreement to BRG and that termination took effect on 21 September 2021. In September or October 2021, Greetham Associates’ clients which had MDA agreements with BRG also terminated those agreements. The departure of FPL and Greetham and some clients of the former and the clients of the latter had a significant adverse effect on BRG’s revenues. The evidence which I have set out above establishes that, unsurprisingly in the context of the ongoing dispute and the apparent deterioration in BRG’s business and its financial position, several of BRG’s authorised representatives (including third parties as well as, later, Sustain Capital) terminated their CAR agreements, rather than BRG doing so. That has not been shown to be part of any intent to wind down BRG’s business for the alleged purpose or otherwise.

262. The second of FPL’s pleaded allegations is also not established, so far as FPL contends that the sale of plant and equipment took place for no consideration. Mr Hartford-Davis fairly accepts that the allegation made is that this plant and equipment was sold for no consideration and not, for example, at an undervalue. By way of background, in late 2021, the trustee of a trust through which Bailey’s superannuation fund owned BRG’s operating premises sold the premises to an unrelated third party, and the purchaser assumed the lessor’s rights and obligations under the lease of the premises to BRG that was in place at the time of the sale.

263. In January 2022, Messrs Bailey and Thomas caused a new entity, Church St Management Pty Ltd (“CSM”) to be incorporated and a trust called Church Street Unit Trust (“CSUT”) to be established, as to which CSM was the trustee. Mr Bailey’s evidence (Bailey 29.10.24 [155]-[156]) is that CSM and the CSUT were established so that a new entity would own the office equipment and utilities at the premises, which until then were owned by BRG but used by five businesses that operated out of the premises, namely BRG, Brite, Super Advisor, AFF and Sustain Capital, and with the intent that any assets of BRG that went into CSUT would be sold at book value and BRG would receive the sale proceeds and that each entity that operated out of the premises would then pay fees to CSUT for the use of the assets.

264. The contemporaneous documents indicate that, in late July 2022, BRG transferred its plant and equipment to CSUT for its value as at 30 June 2022 (Ex J1, 3316, 3558) in exchange for units in the CSUT, at a market value of $9173.32, subject to GST, on the basis that 10,091 units in CSUT would be issued to BRG. Mr Hartford Davis contended there was no record of the receipt of consideration in BRG’s financial records. This allegation has not been established, where the contemporaneous correspondence record indicates the assets were sold in consideration of the issue of units in the trust. I also recognise that Mr Bailey’s and Mr Thomas’ evidence, in cross-examination, that those units were later sold for cash, the receipt of which was recorded in BRG’s bank records, although the allegation fails irrespective of that evidence.

265. The third of FPL’s pleaded allegations relates to the sale of commission rights on or about 20 June 2022. From early to mid-2022, Mr Thomas sought to find a purchaser for BRG’s book of retail clients, in order to seek to mitigate a continued deterioration in BRG’s financial position (Bailey 29.10.24 [184]). Mr Hartford Davis refers, in closing submissions, to the sale of commission rights on or around 20 June 2022. This allegation was a third party sale and it is not pleaded, or established that it took place at undervalue or was otherwise wrongful. The parties paid little attention to the fourth or fifth of FPL’s pleaded allegations and these matters are not capable, alone or with other matters, of establishing FPL’s oppression claim. The sixth of these allegations, relating to the sale of the shares in CSUT, appeared to be linked with the second allegation and also does not alone, or with other matters, establish FPL’s oppression claim.

266. FPL then pleads (2023 POC [32], denied Bailey Defence [32], denied Thomas Defence [32]) an allegation as to the adequacy of the financial records supporting the relevant transactions, which, if pressed, is not capable of supporting the relief sought by FPL. I do not address that allegation further.

267. FPL also pleads (2023 POC [33]-[34], partly not admitted and partly denied Bailey Defence [33]-[34], partly admitted and partly denied Thomas Defence [33]ff) the circumstances of the alleged transfer of BRG’s business to Sustain Capital and identifies Mr Tidwell’s, Mr Thomas’ and Mr Bailey’s connections with that company. FPL then pleads (2023 POC [35]ff, partly not admitted and partly denied Bailey Defence [35]ff, partly admitted and partly not admitted Thomas Defence [35]ff) that:

[35] Substantially the same customers as were previously serviced under BRG's AFS [licence] are now being provided financial advisory services under the AFS [licence] of Sustain Capital and/or [AFF].

[36] In the premises, Bailey and/or Thomas caused BRG to take steps to procure that Sustain Capital and/or [AFF] are now:

(a) providing substantially the same financial advisory services;

(b) to substantially the same customers;

(c) through some or all of the same employees;

(d) from the same premises; and

(e) through substantially the same financial advisers;

as were provided by BRG prior to the appointment of the Administrator.

[37] In the premises, Bailey and/or Thomas planned to and did:

(a) effect a transfer of the business of clients away from BRG and across to Sustain Capital and/or Australian Financial Freedom; and

(b) as an aspect of this, disclosed or caused others to disclose confidential information of BRG to Sustain Capital and/or Australian Financial Freedom (Confidential Information); and

(c) caused Sustain Capital and/or Australian Financial Freedom to use the Confidential Information, including to contact the customers previously serviced through BRG.

268. By way of chronology, on 10 January 2022, Mr Thomas resigned as a director of Sustain Capital. By letter dated 7 February 2022, (Ex J1, 2944), Mr Bailey gave notice to clients of steps that he was taking toward his retirement, including Sustain Capital’s acquisition of his client portfolio. On 15 February 2022, Mr Tidswell of Sustain Capital advised Mr Bailey of several concerns and indicated that, if those concerns were not resolved, Sustain Capital would “find a more suitable AFS [licensee]” (Bailey 29.10.24 [166]). On 11 May 2022, Sustain Capital gave 30 days’ notice to BRG of the termination of its CAR agreement and that termination was effective from 17 June 2022. On 20 June 2022, Sustain Capital became a CAR of AFF. In July 2022, Sustain Capital wrote (Ex J1, 3491) to clients previously serviced by Mr Bailey advising that Sustain Capital had “taken over looking after you” and that Mr Bailey would become chairman of Sustain Capital’s board of directors, and requesting clients to sign a new Investment Management Agreement which was enclosed. Mr Bailey’s evidence is that none of BRG’s retail clients moved to AFF or Sustain Capital (Bailey 29.10.24 [168], [170]). On 2 August 2022, Super Advisor also terminated its CAR agreement with BRG. On 12 September 2022, Mr Thomas was reappointed as a director of Sustain Capital (Ex J1, 4606).

269. Mr Zahra submits, in response to the allegation that the Defendants caused the transfer of BRG’s clients to Sustain Capital or AFF, that Sustain Capital terminated its CAR agreement, and BRG’s clients were then free to choose to remain with BRG or move to Sustain Capital. Mr Zahra also rightly points out that Sustain Capital, like other CARs, had the ability to terminate its CAR agreement with BRG; it was plainly not the first of the CARs to do so; the fact that it did so, in the context of ongoing litigation which was plainly adversely affecting the business of BRG, is not altogether surprising.

270. I accept that there is likely a degree, and possibly a substantially degree, of overlap in the former clients of BRG and the clients of Sustain Capital or AFF; they plainly provide similar financial services, as do many other financial services licensees; there is a significant overlap in their staff and advisers and they operate from the same premises; and, unsurprisingly, Messrs Tidwell, Bailey and Thomas likely sought, as BRG’s business came under increasing financial pressure from the proceedings and the loss of advisers, to transfer its client relationships to other entities through the transactions noted above. However, any implication of impropriety in their doing so is not established where FPL has not pleaded the material facts supporting such an allegation or established that, those transactions took place at undervalue or in some other way operated to the detriment of BRG’s creditors or, if BRG’s equity had any value, its shareholders.

271. FPL then elaborates the claim for use of confidential information (2023 POC [38], not admitted Bailey Defence [38], denied Thomas Defence [38]), without any identification of the relevant confidential information or the material facts of any use of it. That claim cannot succeed when its factual basis is neither identified nor established.

272. FPL pleads (2023 POC [40]ff, denied Bailey Defence [40]ff, denied Thomas Defence [40]ff) an oppression claim as to these matters. Mr Hartford-Davis submits that, in principle, a diversion of a company’s business to third parties, before the Company is placed in voluntary administration and then passes to liquidation, amounts to oppression: Vadori v AAV Plumbing (2010) 77 ACSR 616; [2010] NSWSC 274 at [161]; Re Imperium Projects Pty Ltd [2017] NSWSC 141 at [31]. Mr Hartford-Davis also refers to Talacko v Talacko (2021) 272 CLR 478; [2021] HCA 15 at [40]ff for the matters that are relevant in a claim for loss of a chance, and points to the approach taken in Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 at [246] to the quantification of the value of a lost chance, where a wrong has made it difficult for the victim to prove its damages. I will assume that these principles are capable of applying here.

273. Mr Hartford-Davis also submits the Court has power, under s 233 of the Act, to make an order that a director compensate a shareholder directly for the shareholder’s loss resulting from oppression, so long as the loss is not reflective of the loss of the company. I accept that there is case law that supports that proposition: LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227; [2013] QSC 225; Re JGS Investment Holdings Pty Ltd [2014] NSWSC 1532 at [19]; Chaudhary v Bandicoot Group Pty Ltd [2017] FCA 517 at [20]; CIP Group Pty Ltd v So (2022) 164 ACSR 566; [2022] FCA 1490 at [76]. It is not necessary to address the question of the extent of that power further, where its existence would not assist FPL in this case for the reasons I explain below. Mr Hartford-Davis also addresses the principle of “reflective loss”, which has been controversial in both English and Australian law: Sevilleja v Marex Financial Ltd [2020] UKSC 31; Central Coast Council v Norcross Pictorial Calendars Pty Ltd (2021) 391 ALR 157; [2001] NSWCA 75 at [103]; Haiye Developments Pty Ltd v Commercial Business Centre Pty Ltd [2022] NSWSC 937 at [442]ff. It is preferable to defer further analysis of that controversy to a case in which it would have an impact on the outcome. It is also not necessary to address defences of res judicata or estoppel raised by Mr Thomas for the same reason.

274. This claim culminates in the allegation (2023 POC [43], denied Bailey Defence [43], Thomas Defence [43]) that the oppressive conduct has caused FPL loss, particularised, first, as:

“The consequence of the Defendant[s’] conduct was to deprive FPL of the chance to recover damages against BRG for breach of the [CAR Agreement].

[FPL] has suffered loss of clients, with at least 29 clients serviced by [FPL] being engaged by [Mr Bailey], representing a value estimated to be approximately $1,118,805 when sold as a “client book”.”

275. FPL particularises this loss on the basis that the alleged oppressive conduct has:

“rendered [FPL] unable to recover its loss against BRG, including by reason of;

i the Proceedings Costs;

ii the Consulting Fees;

iii the dispositions of property described at paragraph 30 above;

iv provision of the Confidential Information to Sustain Capital and/or Australian Financial Freedom;

v diversion of the business and clients of BRG; and

vi dissipation of the assets and other valuable commercial rights and opportunities of BRG.

276. The essential premise of this claim is, obviously enough, that FPL would have recovered loss against BRG, but for the conduct pleaded in the 2023 Proceedings and referred to in these particulars. That premise is not established for the reasons which I now address. FPL did not have a “chance” of any value to recover damages against BRG for breach of the CAR Agreement because it has not established that it suffered substantive loss as a result of any such breach. FPL has also not established that, if it lost the relevant 29 clients that were serviced by it, Mr Bailey acquired them, and the evidence is inconsistent with his doing so. I have explained above why FPL’s quantification of the “value” of those clients is also not established. FPL did not press a claim for expenses incurred as a result of being locked out of BRG’s Computer Systems (as defined).

A first unpleaded counter-factual

277. In closing submissions in the 2023 Proceedings, Mr Hartford-Davis initially sought to develop an unpleaded counter-factual to determine the quantification of any loss established by FPL, as follows:

“… the Defendants’ evidence was that, merely because of the threat of the litigation, Sustain decided to terminate its CAR Agreement and at that point (if not before) BRG’s business would become non-viable. If that evidence be accepted, voluntary administration (but without oppressive conduct dissipating assets) is part of the counter-factual. For [FPL’s] purposes, it is sufficient to assume that BRG went into voluntary administration in October 2022 with the same net asset position, but adding back the outflows from oppressive conduct. The task for the Court is to estimate the significance upon BRG’s net asset position at voluntary administration of Bailey and Thomas’ oppressive conduct, which would not have occurred in the counter-factual.”

278. The first difficulty with this claim is that FPL must plead and establish the material facts on which it relies to establish its claim for damages in the 2023 Proceedings, including any allegation that BRG should have appointed a voluntary administrator in October 2022, and cannot proceed on the basis of an unpleaded and unproved assumption as to that matter. The material facts of this “counter-factual”, and in particular the allegation that BRG should have been placed in voluntary administration in October 2022, were here not pleaded. Mr Hartford-Davis submits that the Defendants do not plead a defence that BRG was never going to pay any amount to FPL, but that does not assist FPL where, in order to establish its claim for loss and damage, FPL must show that there was a real chance that it would recover against BRG but for the conduct that is alleged to constitute oppression in the 2023 Proceedings. FPL has not established that matter on its first counter-factual.

279. The second difficulty with this claim is that, even if this “counter-factual” was available, it is not possible to establish BRG’s loss by assuming a voluntary administration in October 2022 and then simply adding back later expenditures by BRG, where that calculation takes no account of the extent of BRG’s other creditors in October 2022 or the higher ranking costs and disbursements that would be incurred by a voluntary administrator or liquidator in a voluntary administration that commenced in October 2022 and subsequent liquidation. BRG’s assets as at October 2022 would have been first applied in a liquidation to meet those costs and disbursements of the voluntary administrator and liquidator and only then to creditor claims including FPL’s claim as a contingent creditor. The result is that, on FPL’s first counter-factual, the persons who suffered any loss by expenditures out of BRG after October 2022 would be, first, the voluntary administrator and liquidator of BRG; FPL would only have a claim against BRG’s assets with other unsecured creditors after their claims were met; and FPL would have suffered no loss unless its claim would otherwise have been recoverable in whole or in part in a liquidation of BRG. In its first counter-factual, FPL did not establish the likelihood of, still less the amount of, assets that would have been available to meet FPL’s claim on that basis. Whether reflexive in character or not, FPL’s loss cannot exceed the amount that would properly have been distributed to it on a liquidation of BRG, but for the alleged conduct, and that amount was not established on that first counter-factual.

FPL’s application to reopen and FPL’s second unpleaded counter-factual

280. In closing submissions, Mr Hartford-Davis sought to address the difficulties which I have noted above by developing a second counter-factual which addressed the availability of recovery to FPL in a liquidation of BRG. By consent of the parties, I allowed supplementary submissions as to that matter, which the parties agreed were to be no more than three pages in length, and which were to identify any further documents proposed to be relied on in support of those submissions. FPL’s supplementary submissions as to the matter exceeded the length agreed between the parties, and Counsel for FPL subsequently advised that they had forgotten the page limit agreed between the parties and reflected in the Court’s order for supplementary submissions. Counsel for the Defendants took objection to the length of FPL’s submission and Counsel for FPL offered to provide abridged submissions. I did not considered it necessary to require FPL to provide abridged submissions, where the length of FPL’s submissions would ultimately cause no prejudice to the Defendants.

281. FPL contends, by its second counter-factual that, having regard to two Form 5602 Annual Administration Returns lodged with the Australian Securities and Investments Commission on 22 January 2024 and 13 January 2025 (MFI 22) and several other assumptions, a liquidator of BRG would have recovered between $458,182.17 and $604,032.21 in a hypothetical liquidation, by contrast with the liquidator’s estimated actual gross realisations in the actual liquidation of $27,380, and FPL would have received the large part of a consequential distribution to BRG’s creditors.

282. In support of this second counter-factual, FPL seeks to tender those two Form 5602 Annual Administration Returns and seeks leave to reopen to the extent necessary to do so. Mr Hartford-Davis submits that leave to reopen to tender those returns should be granted, because FPL’s previous failure to tender them was a “mistake” where:

“It became apparent during an exchange with the bench [in closing submissions] that the modelling undertaken in [FPL’s] written submissions were mistakenly premised on the wrong scenario (ie an administration and not a liquidation), the latter being the point of recovery for [FPL].”

283. The Defendants objected to the reopening and the tender of those documents and contended that the tender of those documents would give rise to unfair prejudice to them for the purposes of s 135 of the Evidence Act. Mr Hyde submits that the second counter-factual put by FPL involves a significant departure from the case which was opened by FPL, on the basis that BRG should have been placed in administration shortly after the 2021 Proceedings were commenced, and that Mr Bailey would be prejudiced where he has not had the opportunity to cross-examine Mr Roberts as to the assumptions underpinning that second counter-factual. Mr Hyde also submits that there is “substantial prejudice” to Mr Bailey, which could not properly be alleviated unless he was given the opportunity to respond to assumptions that the Court was being asked to make, most likely by way of expert evidence or calling the liquidator to give evidence.

284. Mr Zahra also submits that the second counter-factual put by FPL cannot be proved by reference to evidence put before the Court. He submits that it was not pleaded and arose only in oral submissions when FPL departed from its earlier, also unpleaded, counter-factual that BRG should have been placed in voluntary administration. He also submits that the re-opening “causes the [D]efendants prejudice because they are deprived of a proper opportunity to adduce lay and expert evidence to respond to the evidence sought to be now relied upon by (FPL]”. Mr Zahra also submits that the costs, recoveries, the liquidator’s remuneration and potential outcome of the counter-factual have no evidentiary basis and involve “unsubstantiated and unsafe speculation” and that expert evidence would be required to prove what would have occurred in the relevant circumstances. I accept that there would be real prejudice to the Defendants in permitting FPL to advance this counter-factual, unsupported by any pleading of the material facts upon which it is based, which would have allowed the Defendants notice of, or an opportunity to address those material facts or to lead evidence in response to them.

285. Turning now to the applicable case law, I allowed the parties the opportunity to make additional submissions as to the applicable principles as considered in Hindmarsh Medical Clinic v Hindmarsh Family Practice Pty Ltd (1997) 38 IPR 616 (“Hindmarsh”) and Re SBL Solutions Pty Ltd (2021) NSWSC 1003 (“SBL”). I recognise that, in Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471 at 475-476, Clarke JA observed that, where, a short time after a case was closed, Counsel sought leave to reopen because he or she realised he or she had made a mistake, it is difficult to discern how the interests of justice would be furthered by disallowing an application to reopen to call evidence that was relevant to and may have had a significant impact on the issues in the case. His Honour also there referred to the difference between tactical decisions and inadvertence and emphasised, as I obviously bear in mind, the fact that the rules are directed to the furtherance of the interests of justice. I also bear in mind that the Court must act in accordance with ss 56-58 of the CPA in dealing with a reopening application of this character.

286. In Bailey v Palombo [2020] NSWSC 1209, Hallen J dealt with the scope of reopening under rr 2.1 and 29.5 of the Uniform Civil Procedure Rules 2005 (NSW) and observed (at [28]) that any decision to grant leave to reopen is one that involves the exercise of discretion, and the question whether the interests of justice are better served by allowing or rejecting the application. His Honour also there referred to relevant matters, including prejudice to the other party; the reasons why the evidence was not led in the first place; whether there had been a deliberate or tactical decision made not to call the evidence during the hearing; any delay in making the application; and the importance, relevance and probative value of the proposed new evidence to the issues in the case.

287. In several cases, including Hindmarsh and Spotlight Pty Ltd v NCON Australia [2011] VSCA 267, the Courts have considered whether leave to reopen to lead further evidence should be given after judgment is reserved or where judges have expressed preliminary views. In Hindmarsh, the applicant applied for leave to re-open its case solely to adduce evidence of a particular matter shortly before judgment, and Mansfield J rejected that application, observing that:

“It is plain that it was within my discretion to grant it: Betts v Whittingslowe (No 1) [1944] SASR 163, although it would generally be unwise to do so simply to allow the fortification of evidence by further evidence which might readily have been adduced at trial. See also Home Management Maintenance Pty Ltd v Doyle (1992) 107 FLR 225.”

I also declined to grant leave to reopen in a matter of that character in SBL.

288. Here, I had, in submissions, raised matters that were troubling me as to FPL’s first counter-factual to allow Mr Hartford-Davis the opportunity to make submissions about them, and that appears to have prompted FPL’s change of direction toward its second counter-factual, so as to seek to put their case on a different basis to that which had been put and addressed in the first counter-factual at the hearing. So far as the reasons why the evidence was not led in the first place, I do not accept that was a “mistake” on Mr Hartford-Davis’ part, involving any element of inadvertence, as distinct from an informed decision to put FPL’s case in a particular way, from which FPL now seeks to depart as the difficulties with that case emerge. I accept there has been no significant delay in making the application, after these issues arose, and it was made promptly once FPL's intention to change its position arose. It seems to me that the proposed new evidence in MFI 22 has importance, relevance and probative value, at least in the sense that it provides the starting point for the second counter-factual that FPPL now seeks to develop. However, it also seems to me that here there would be a real prejudice to the Defendants of permitting reopening by FPL to tender MFI 22, where they will be deprived of the opportunity to lead the liquidator’s or expert evidence as to that second counter-factual, unless they accept the costs and delay involved in doing so where the hearing is otherwise complete. FPL does not offer to compensate the Defendants for the costs thrown away in doing so and it is not apparent that it would have the financial capacity to do so. Balancing these matters, I am not satisfied that I should grant leave to FPL to reopen to tender MFI 22.

289. FPL cannot establish the basis of its second counter-factual, without reliance on the Annual Administration Returns in MFI 22, and that is fatal to its claim on this basis. I will, however, now turn to several other difficulties with that second counter-factual.

290. First, aspects of the second counter-factual are obscure. Mr Zahra points out that this second counter-factual does not identify when or how a liquidation would have occurred, whether as a voluntary winding up instead of a voluntary administration, or as a creditor’s winding up or, possibly, a winding up on the just and equitable ground. I recognise that there is here no particular reason to assume that the parties would have cooperated, for example, in respect of a voluntary winding up or a winding up on the just and equitable ground, given the extent to which other issues have been contested between them.

291. Second, FPL’s second counter-factual assumes that that the “impugned” conduct of the Defendants had not occurred and would not have to be investigated by a liquidator for the purpose of that second counter-factual. I recognise that, in principle, a counter-factual can disregard conduct which in fact occurred; however, FPL has not established the basis to assume that the sale of BRG’s plant and equipment or the sale of BRG’s risk business or the transactions in respect of CSUT would not have occurred, where it has not established a breach of duty by the Defendants in respect of those transactions. Where those transactions could have occurred without breach of duty, then a liquidator would likely have investigated them and incurred costs in doing so, although he should then have concluded that they did not warrant any challenge. Mr Zahra also points out and I accept that FPL’s calculation in the counter-factual assumes that consulting fees would not be incurred but does not address how BRG would have acquired the necessary services, a matter which I have addressed above, or the costs of premises to trade if they were not obtained from CSUT.

292. Third, that second counter-factual assumes that the costs of the counter-factual liquidation would correspond to the high end of the voluntary administrator’s estimate of the costs of a voluntary administration, of approximately $50,000 plus GST. I do not consider that assumption is well-founded, where a voluntary administration contemplates a time-limited and lesser level of investigation than a liquidation, and the liquidator appointed in the counter-factual liquidation would have been obliged to conduct a more extensive investigation than a voluntary administrator, likely extending to the conduct of Mr Roberts and FPL as well as the conduct of the Defendants. There is every reason to think that the costs of the hypothetical liquidation would have significantly exceeded those assumed in the second counter-factual.

293. Fourth, FPL’s second counter-factual assumes that the liquidator’s investigations would not extend to the conduct of Mr Roberts or FPL. Mr Hyde responds that FPL’s contention that the costs of the liquidation would have been lower in this counter-factual than were actually incurred ignores the steps that a liquidator may have taken had he or she been aware of Mr Roberts’ dealings with BRG’s information. Mr Zahra points out that it cannot be assumed that there would have been no statutory investigations within the second counter-factual. It seems to me that this assumption cannot be accepted, where Mr Roberts’ conduct which I have addressed above would have warranted a liquidator’s further investigation, although the liquidator might well have ultimately concluded that the costs of further action against Mr Roberts or FPL would likely have been disproportionate to any benefit that was likely to be obtained from it.

294. Fifth, FPL’s second counter-factual assumes that the liquidator would not have had to address a proof of debt lodged by Mr Roberts or FPL, claiming an amount of $60,692.25, because that claim was abandoned at this hearing. Mr Zahra points out that the Court cannot assume that FPL would not have pressed its proof of debt in a liquidation, where it did not abandon it until this hearing in February 2025. It seems to me there is no basis for FPL’s assumption, where the late abandonment of that claim in the course of this hearing does not indicate that it would have been abandoned at any prior point, and tends to indicate the contrary. FPL’s treatment of that second counter-factual makes no allowance for the costs that would be incurred in the liquidator’s dealing with that proof of debt.

295. Sixth, FPL’s second counter-factual excludes a recovery made by the liquidator under a deed of settlement of BRG’s claims against the Defendants and FPL contends that the liquidator would have incurred lower professional costs and legal expenses in the counter-factual in investigating those claims. I have not accepted the latter assumption above. FPL points out that there was no increase in the Company’s assets as a result of the settlement, because that payment was applied to the administrator’s and liquidator’s prior ranking costs rather than the benefit of unsecured creditors, and again contends that those costs would not have been incurred in the counter-factual. I have not accepted the latter assumption above.

296. Seventh, FPL also assumes, in its second counter-factual, that the administrator and the liquidator would have incurred no recoverable legal fees. Mr Hyde contests the proposition that legal expenses would have been less in the second counter-factual and challenges FPL’s implicit assumption in that counter-factual that “Mr Roberts would have simply stood by and let [BRG] be placed into administration and subsequently liquidation.” I accept that Mr Roberts could have been cross-examined as to that matter, had the second counter-factual been raised at an earlier point. In any event, this assumption is also not established, where a voluntary administrator would likely have been required to undertake some investigations and the liquidator would have been required to undertake fuller investigations, including in respect of Mr Roberts’, FPL’s and the Defendants’ conduct and would likely have incurred legal fees in doing so.

297. Eighth, Mr Hyde and Mr Zahra submit, with some force, that there is a double-counting in the counter-factual, because BRG received the full amount of the sale of its risk book, but the counter-factual adds the value of that risk book, resulting in a double-counting.

298. Ninth, FPL’s second counter-factual assumes that the Court accepts Mr Goodyer’s evidence of its loss, so that the value of its claim against BRG was $761,143.28, with the consequence that total creditor claims against BRG in a liquidation would be $844,862 and FPL would represent a large part of BRG’s unsecured debt. Mr Zahra points out that FPL’s counter-factual relies on Mr Goodyer’s evidence, and points to the difficulties with that evidence. I also cannot accept this assumption, which is fundamental to that counter-factual, given the conclusions that I have reached as to Mr Goodyer’s report above.

299. For all of these reasons, quite apart from the fact that the counter-factual depends on the grant of leave to reopen and tender MFI 22, which I have not granted, its basis is not established in any event. This second counter-factual also does not support the loss claimed by FPL in the 2023 Proceedings.

Determination as to 2023 Proceedings

300. For these reasons, BRG’s claim in the 2023 Proceedings also fails.

Orders

301. For these reasons, the 2021 Proceedings and the 2023 Proceedings are each dismissed. I will hear the parties as to costs

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Amendments

17 July 2025

Amendment made to para 24 to change "Bailey's" to "Roberts'" in the first line.