Jameson Global Investments Pty Ltd v Byron Bay Land Development Pty Ltd

Factual background

1. Jameson was introduced to Mr Walsh by the father of Mr Jonathan Webster, one of Jameson's directors. On 8 July 2016, Mr Webster and Mr Jeremy Urbach, one of the two founding directors of Jameson, had an introductory telephone conference call with Mr Walsh. During that call, Mr Walsh told Mr Webster and Mr Urbach that he owned approximately 1,100 acres in Ballina, New South Wales which he had accumulated over a period of 12 years. He said that he and his wife owned the land through six different companies and that he had had a major dispute with the Commonwealth Bank of Australia which saw it write-off $30 million in debt. He said that a syndicate of personal and Irish lenders had been funding him since then. He also said that he wanted to move back to Ireland and would sell a 50 per cent shareholding in the companies for $50 million or $25 million upfront and $25 million deferred, with the initial $25 million to be used to pay back lenders.
2. Following that conference call, there was some correspondence between Mr Webster and Mr Walsh. Mr Webster provided Mr Walsh with more information about Jameson, including a brochure about it. He also sought some additional information about the development, which Mr Walsh supplied.
3. The brochure described the business of Jameson as follows: Jameson Capital is an Australian funds management and advisory business focused on investment across cash, debt and specialist real estate opportunities. Jameson provides specialist assistance to developers, financiers and investors who wish to invest in the Australian real estate market.
4. On 29 July 2016, Mr Walsh attended a meeting at Jameson's Melbourne office. The meeting lasted for approximately one and a half to two hours. Both Mr Webster and Mr Urbach attended the meeting. During the course of the meeting, Mr Walsh said that he needed to pay out creditors soon and that he needed around $20 to $25 million to do so. They had a conversation to the following effect: RW: What kind of fee would you usually charge JW: Between 2 to 5% or 3 to 5% RW: What about 4% of the upfront payment and 3% of any payments thereafter…I want $25m upfront and another $25m in 3 years and $10m in the years thereafter. I will pay 4% on the first $25m and then 3% thereafter.
5. Mr Urbach also gives uncontradicted evidence that during the meeting Mr Walsh said "If you guys are smart, you will put together a fund that you can manage for the investors".
6. On 11 August 2016, Mr Webster emailed Mr Walsh the Engagement Letter. Mr Walsh signed that letter on behalf of the first to fifth defendants and returned it to Mr Webster on 12 August 2016.
7. Paragraph 1 of the letter sets out some relevant background. The last sentence states: Mr Walsh now wishes to sell the opportunity (in whole or in part) to pursue alternative investments and is seeking Jameson's assistance to source a suitable investor.
8. Paragraph 2.1 of the letter provides: The Company requires the services of Jameson from time to time to provide investor engagement, capital sourcing and such other services, as detailed in Item B. of the Schedule to this letter ("Services").
9. The Schedule describes the Services in the following terms: Jameson will provide investor engagement and capital sourcing services until the property is sold or the agreement is terminated. Strategic Advice and Transaction Management • General strategic advice throughout the Assignment, in particular the preferred processes to raise both equity and debt, consideration of value, and the longer term impact of the strategy. • Continuous testing of stakeholders' objectives, both short and medium term • Assist Richard Walsh to assess the various options available (including equity, debt and joint venture arrangements) • Producing and updating a project financial model • Preparation of an equity/corporate Information Memorandum to solicit Expressions of Interest in the Assignment. We would expect to work closely with Richard Walsh and his core advisory team at all stages during the Assignment, and will only accept our appointment on the basis that we are kept fully and progressively informed of all matters having an impact on the Assignment or on our reputation. As discussed, Jameson will rely on advice of Richard Walsh and/or other appropriate professional advisers on matters relating to: • Sourcing, negotiation and execution of the required equity raising • Project design and risk • Credit quality of off takers • Tax and legal structuring issues …
10. Clause 4 of the Engagement Letter provides: Relationship of the parties 4.1 Jameson's relationship with the Company is that of an independent contractor and principal and this letter does not create any other legal relationship other than a contractual one on the terms and conditions of this letter. There is no employment relationship between the Company and Jameson. 4.2 Except to the extent necessary to carry out the Services pursuant to this letter, Jameson agrees that it will not: (a) hold itself out as being an agent of the Company or being in any other way entitled to make any contract on behalf or to bind the Company to the performance, variation, release or discharge of any obligation; or (b) hold itself out as being an employee or agent of the Company.
11. Clause 5.1 sets out the fees to which Jameson was entitled (quoted above). It also provides: This fee applies to both debt and equity sources and is regardless of capital source or purchasing party. The clause then sets out an example of how the fee is to be calculated. Although there was previously a dispute between the parties on how the amounts payable under the Engagement Letter were to be calculated, the Court was informed during the course of the hearing that that dispute had been resolved.
12. Clauses 5.2 and 5.3 of the letter provide: 5.2 Jameson will issue a tax invoice to the Company on conclusion of the sale for the payment of the Services Fee or on such other frequency as is appropriate in the circumstances. 5.3 The Services Fee will become due and payable within 14 days of the date of the issue of the tax invoice.
13. Clause 9 of the Engagement Letter provides: No Offer of Finance/Underwriting/Disclaimer Nothing in this letter constitutes an offer of finance. This Engagement does not constitute an underwriting agreement, a commitment on the part of Jameson to lend or subscribe for securities, or guarantee a fundraising will be successful. The Services will be carried out by Jameson on a best efforts basis and Jameson does not warrant the success of the Company in the Project or that the capital will be raised.
14. Clause 16 of the letter provides: Conflicts In the event of a potential conflict that subsequently arises involving Jameson or its associated entities in connection with the Engagement, Jameson will promptly discuss the matter with the Company to determine a mutually acceptable resolution to or avoidance of the conflict. Jameson is not aware of any existing or potential conflict of interest upon it or any of its associated entities at the date these standard terms and conditions are provided to the Company.
15. Clause 17.1 of the letter provides: Jameson may at its discretion from time to time subcontract the whole or any portion of its rights and obligations under this letter.
16. Following acceptance of the Engagement Letter, Jameson provided Mr Walsh with a detailed information request. Over the following weeks, it obtained the requested information from Mr Walsh and a number of persons who acted for Mr Walsh in relation to the development. Using that information, Jameson created an electronic database that could be accessed by potential investors and an information memorandum (the IM) that could be provided to potential investors.
17. The IM is dated 29 September 2016. The executive summary included the following information: • Jameson Capital seeking A$100 million from investors to purchase 1,066 acres (431 Hectares) of land in Ballina NSW, Australia, known as Cumbalum Ridge. • A$25 million (neg.) will be payable upfront, with the remaining $75m funded by project revenues over project life. Cumbalum Ridge was rezoned in 2012 with a Development Control Plan (DCP) offering a monopoly development in a fast growing region of the Northern Coast of NSW. It presents a compelling coastal subdivision opportunity. … • Jameson Capital will invest in a Joint Venture with an established local partner to complete the staged development of the estate over a 15-20 year timeframe. • Forecast total project revenues of A$1.26 billion & total project costs of A$537 million. • Forecast total project EBITDA of A$729 million amounts to a NPV [Net Present Value] of A$153 million.
18. The IM also contained detailed information in relation to the location of the project, the proposed development concept, information concerning demand (broken down into population, housing growth, employment, tourism, sales rates and residential land prices), a supply analysis, including an analysis of competitors, and information about relevant public and private infrastructure.
19. There is a question whether Mr Walsh was shown a copy of the IM. According to Mr Webster, he met with Mr Walsh and Mr Tony Hart, Mr Walsh's surveyor, at the Ramada Hotel & Suites in Ballina on 28 September 2016. During that meeting he says he presented the IM to Mr Walsh and Mr Hart and that they requested one minor change to the page entitled 'Infrastructure Proximity' in relation to the position of the sewerage easement over a parcel of land. Although Mr Walsh swore an affidavit in the proceedings, he did not give evidence. Mr Hart denies that he was provided with a copy of the IM at the meeting on 29 September 2016. However, I do not accept Mr Hart's evidence on that point. Mr Hart accepted that there was a discussion of the sewerage route during that meeting. It is difficult to see how that discussion could have occurred in the absence of some material showing the location of the easement for sewerage. It would have been natural for Jameson to provide Mr Walsh with a copy of the IM and, in the absence of a denial from Mr Walsh, I accept that he was.
20. On 21 September 2016, Mr Webster and Mr Urbach met with Mr Casey of the Casey Capital Group, his son, Mr James Casey, and Mr Dion Giannarelli, who had introduced Mr Casey to Mr Webster and Mr Urbach. At that meeting, Mr Webster and Mr Urbach presented a copy of the IM to Mr Casey. Mr Casey said words to the effect that he would like to enter into an exclusive dealing period of 30 days, after which time he would come back with a proposal. He said that following that he would require 90 days to carry out a detailed due diligence and a further 90 days to get a fund together. He also said that, if he was successful in purchasing the development, he would be interested in discussing a potential arrangement with Jameson to manage the financial and capital management aspects of the development. Following that meeting, Mr Webster arranged for Mr Casey and his son to have access to the electronic data room. It appears from a log of access that Mr Casey accessed the electronic data room on a substantial number of occasions over the following year or so.
21. On 22 September 2016, Mr Webster spoke to Mr Walsh and told him that Jameson had found a very successful coastal developer from Victoria "who has the skills, expertise and financial fire power to complete a development like this". Mr Webster explained that the developer wanted an exclusive dealing period to undertake initial due diligence. Mr Walsh said that 30 days was not a problem.
22. On 23 September 2016, Mr Webster sent Mr Casey an email attaching a "Letter of Exclusive Dealings". The letter described its purpose in the following terms: Further to our discussion, we wanted to put forward this Letter of Exclusive Dealings (the "LED") to not only confirm our intent to deal with Casey Consulting Services Pty Ltd ("Casey") on an exclusive basis in relation to this Property, but to set out the framework upon which we intend to work together to both secure this opportunity and collectively manage it thereafter.
23. Under the heading "Exclusivity" the letter stated: The parties agree that they will deal with each other on an exclusive basis and will not enter into discussions with any other party to establish a competing offer. Both Jameson and Casey (together the "Parties") agree that from the execution of this binding LED that they will deal with each other on an exclusive basis in pursuing the objectives described in this LED and will not enter into discussions with any other party that may jeopardise those objectives, or work with any other party to establish a competing offer. Exclusivity is intended to expire 6 months from the acceptance of this LED (unless extended by written agreement between the parties) or upon execution of other binding documentation if that occurs earlier.
24. The letter proposed that Mr Casey be paid "Development Management Fees" calculated at the rate of "5% of the total gross revenue on a per stage basis" and that Jameson be paid "Financial Management Fees" calculated as "2% of the total gross revenue on a per stage basis". It also proposed that Jameson be paid "Investment Management Fees" in the event that investors other than Mr Casey or Jameson became investors. Those fees were said to be "currently forecast at 1.75% of the drawn equity, however, will be subject to final negotiation with all investors". The letter explained that that fees would only be payable by external investors. Finally, the letter contemplated that a performance fee would be payable by investors "based on the drawn equity IRR [internal rate of return] received by all investors" which would be "25% above an 20% return hurdle".
25. Under the heading "Conflicts of Interest" the letter stated: Jameson considers the management of all conflicts of interest extremely important, and wish to disclose to Casey that they have been engaged by the land owner to assist them in exiting from the Project via a sale of the Property. Jameson is to be paid a fee to facilitate this objective, however, has disclosed that it intends to enter into this LED to the land owner that it may remain involved in the transaction beyond this initial engagement. The land owner has confirmed that they are comfortable with this relationship and the objectives that Jameson and Casey are seeking to achieve. This will require ongoing management and disclosure to both Casey and the land owner to ensure a successful outcome.
26. The letter concluded: The above terms are proposed to initiate further discussion on how the Parties can work together going forward and we are very excited about both the prospect of working together and undertaking this Project.
27. On the same day, Mr Webster sent a letter to Mr and Mrs Walsh which said: Further to our discussion yesterday, we refer to our engagement by the various landowners to seek investor interest for the acquisition of a share in the investment opportunity at Cumbalum Ridge in Ballina, NSW (the "Property"). Further to this we have identified a private local investor and developer ("the Purchaser") with extensive experience in land subdivision across Australia and the financial capacity and track record to undertake the development of the Property. The party has requested a 30-day exclusivity period in order to shore up their feasibility with the intention of submitting an offer at the expiry of the 30 day period. It is expected that the offer will be subject to a further due diligence period. Following on from our phone call yesterday, and with your permission, we have provided a letter of exclusive dealings ("LED") to the Purchaser setting out the framework for submitting an offer. As noted, Jameson and the Purchaser have discussed the possibility of creating [an] investment vehicle to undertake the development which would involve Jameson acting as investment and financial manager to the vehicle. Whilst there is no certainty that the purchase will be undertaken this way or that Jameson will be involved in the vehicle if it is, we wish to bring to your attention the possibility of Jameson being in a position to generate additional revenue if the Purchaser proceeds with the acquisition. We have disclosed to the Purchaser that Jameson has been engaged by the landowners on a success fee basis. We wish to disclose this potential conflict of interest to you and trust you are satisfied we will continue to work in your best interests to secure the best outcome for the landowners. In order to facilitate the receipt of an offer from the Purchaser we request your approval to grant the Purchaser a 30 day exclusivity period and to cease sourcing investors and marketing the Property until the earlier of the receipt of an offer or the Purchaser advising they no longer wish to proceed.
28. Mr Walsh rang Mr Webster after receiving that letter. They had a conversation to the following effect: RW: What is this 'additional revenue' you will earn from the purchaser? JW: We may have an ongoing role managing an investment vehicle on behalf of multiple investors or performing financial management services on behalf of the developer. It would not be a cost born [sic] by you. The potential role for us is in the event that there is incoming investors and a fund to manage, meaning there are ongoing reporting requirements and financial management that needs to be done. RW: ok
29. On 25 September 2016, Mr Walsh returned the letter dated 23 September 2016 signed by him and his wife.
30. On 29 September 2016, Mr Webster received an email from Mr Casey attaching a signed copy of the Letter of Exclusive Dealings that had been sent to him. In response, Mr Webster emailed Mr Casey confirming that he would receive an invitation to the electronic data room.
31. It appears that shortly after that time, Mr Walsh was informed that the interested investor was Mr Casey. In an affidavit sworn by Mr Bruce Dwyer on 23 July 2018 (which was not read but certain paragraphs of which were tendered by the plaintiff), Mr Dwyer said: I was aware of Jonathan's intention to financially manage the project for Mark Casey. On or about the 23rd September, after he had made contact with Casey, he called me requesting clarification of certain costs contained in my feasibility studies and said words to the effect "I will be financially managing the project for Mark Casey and I need to get a handle on construction costs". Mr Dwyer is the Managing Director of Seachange Pty Ltd, which Mr Dwyer described as "a private equity specialist involved in sourcing and assessing investments including carrying out valuations and formal due diligence". Seachange had provided advice to Mr and Mrs Walsh in relation to the development over a number of years. The likelihood is that Mr Walsh found out at about the same time as Mr Dwyer that Mr Casey was the potential investor. That conclusion is consistent with an exchange of emails on 10 October 2016 between Mr Webster and Mr Walsh referring to a proposed visit by Mr Casey to the development.
32. The 30 day exclusivity period expired on 3 November 2016. Sometime shortly after its expiration, Mr Webster spoke to Mr Walsh for approximately two and a half hours by telephone. During that call, Mr Walsh agreed to give Mr Casey an extension of two weeks to the exclusivity period and said that he had had some interest from other prospective purchasers.
33. On 11 November 2016, Mr Webster and Mr Urbach attended a meeting with Mr Casey, his son and Mr Darren Lee at Casey Capital's offices. Mr Lee was from Sector Advantage, who Mr Webster understood to be the project management consultant acting for Mr Casey. During that meeting, Mr Webster said that the exclusivity period was about to expire and that, without seeing some form of offer, Mr Walsh and Mr Webster would have to start looking at alternatives. Mr Casey said that he wanted to have a look at the Land and get a feel for it and that he may head up mid-week prior to making an offer.
34. On 15 November 2016, Mr Webster met with Mr Casey, his son and Mr Lee in Lennox Head and then drove to the Cumbalum Ridge development site, where they met Mr Walsh. The previous day Mr Walsh had told Mr Webster that he was seeking a larger upfront payment to pay out his debts and to have some money to invest in a renewable diesel venture in Thailand and a wind farm in Ireland. He said that he wanted $35 million upfront and was prepared to accept a lower amount of home sales.
35. There was a further meeting between Mr Webster, Mr Urbach, Mr Casey, Mr Lee and two solicitors from Sladen Legal, who represented Mr Casey, at Sladen's offices. During that meeting, there were further discussions between Jameson and Mr Casey concerning a potential role for Jameson in the Project. Although those discussions continued over a period of time, they ultimately went nowhere.
36. On 23 November 2016, Mr Webster and Mr Urbach met with Mr Casey, his son and Mr Lee at the offices of Casey Capital. Mr Webster asked when they could expect an offer from Mr Casey. Mr Casey replied that Mr Lee was preparing an offer and that "You should have it in a few days".
37. On 29 November 2016, Mr Casey submitted a combined "Exclusivity Agreement and Letter of Offer". That offer proposed $25 million as the upfront payment due on 30 April 2017 and an ongoing payment of $33,000 per lot at the settlement of each stage beyond the initial 1,000 lots for lots within the current land zoned for residential development.
38. Mr Webster forwarded a copy of that offer to Mr Walsh shortly after receiving it. On or about 30 November 2016, they had a telephone conversation in which Mr Walsh described the offer as "full of legal trickery". He also said that he was "back talking to the Chinese".
39. On 9 December 2016, Mr Webster had a telephone conversation with Mr Walsh in which Mr Walsh told Mr Webster that he rejected the offer, that he was under increasing pressure from his creditors and that he identified another purchaser who had put an offer of $95 million to be paid over 18 months (5 per cent upfront, $50 million in 60 days, $25 million in 12 months and $20 million in 18 months).
40. Following that call, Mr Webster passed on Mr Walsh's rejection to Mr Casey.
41. On 12 December 2016, Mr Webster and Mr Urbach met with Mr Casey, his son and Mr Lee. During the course of that meeting, they telephoned Mr Walsh. During that conference call, Mr Walsh said that he wanted more money upfront and that if he could borrow $10 million from Mr Casey that might solve some of his problems.
42. Following that call, Mr Webster sent an email to Mr Casey which said: In summary of today's call, Casey Capital agreed to review some of the terms of their expired offer with a view to potentially submitting a new offer. Key items included: 1. $30m upfront payment with settlement by end of March 2017 2. Mark to arrange a $10m loan in favour of Richard which is secured against later stage development land of Cumbalum Precinct B. a. Principal lender to be secured by way of 1st mortgage against Precinct B property b. Richard to be secured by way of 2nd mortgage. c. Rate TBD but repayment can be made on or before maturity date. 3. Richard to receive a percentage of gross sales revenue (TBD) 4. Jameson Capital to undertake reasonable efforts to sell Richards annuity interest at a future date a. Likely once 500 lots have been sold or a larger DA achieved b. Sale at Richard's discretion
43. Mr Webster then arranged a meeting in Melbourne between Mr Walsh and Mr Casey, which occurred on 15 December 2016.
44. On 16 December 2016, Mr Webster had a telephone discussion with Mr Casey during which Mr Casey told Mr Webster that he and Mr Walsh had shaken hands on a deal for $30 million upfront, a $10 million loan and seven per cent of gross sales. Mr Webster offered to document the deal in a heads of agreement. Mr Casey accepted that offer.
45. On 20 December 2016, Mr Webster and Mr Urbach met with Mr Casey and his son. During that meeting, Mr Casey explained the terms of the agreement and some of his proposals for the Project.
46. Following that meeting, Mr Webster prepared a draft document entitled "Binding Heads of Agreement - Cumbalum Ridge, Ballina NSW". He then had a discussion with Mr Walsh on 22 December 2016 who said that he thought it was unnecessary to sign a heads of agreement and that he expected to have a draft contract of sale by 25 January 2017, which he was looking to sign by 5 February 2017.
47. It appears that at around this time Mr Walsh was also negotiating to sell the development to an entity known as Greater Rewards Wealth Management Group Pty Ltd. In an email dated 4 January 2017 from Mr Dwyer to Ms Irene Ye, Mr Dwyer provided a document comprising an agreement between each of the defendants (as sellers) and Greater Rewards (as buyer) in respect of a $90 million transaction which included a $40 million upfront payment. The document had been executed by Mr and Mrs Walsh. In response to that email, Ms Ye said that she had forwarded the agreement "to my director for signature". It is unclear what happened to that transaction.
48. There were delays in finalising the agreement between Mr Walsh and Mr Casey. Direct negotiations between Mr Walsh and Mr Casey occurred through most of 2017. Eventually, in November 2017 several agreements, described as "Development Agreements" were entered into between a number of the defendants and certain of the Casey Entities in respect of the Project. The combined effect of those agreements was that the entities associated with Mr Walsh would be paid an upfront payment totalling $30 million and seven per cent of the gross proceeds of sale.
49. Between 22 November 2017 and 29 January 2018, Jameson issued tax invoices under the Engagement Letter for fees said to be payable under the agreement evidenced by that letter arising from the Development Agreements.

The defence based on the failure to perform obligations under the Engagement Letter

1. As I have said, the defence that the Engagement Letter was an entire contract and Jameson failed to perform a substantial part of its obligations under it was first specifically raised in the active defendants' written opening submissions. The submissions are somewhat opaque. However, it became apparent from oral submissions that what was asserted was that Jameson undertook to raise debt or equity from an investor or investors in the Project, whereas in fact what it did do was find a buyer for the Land. That was said not to be performance of its obligations under the Engagement Letter.
2. Mr Flynn contended that that issue has been raised on the pleadings because in para 30 of the Commercial List Statement Jameson pleaded that "In accordance with the terms of the [Engagement Letter], [Jameson] provided the Defendants with consultancy services in respect of the Cumbalum Ridge Development" and in para 18 of the Third Amended Commercial List Response, the defendants, after pleading a large number of matters Jameson did do, otherwise denied the allegations in para 30. Plainly that was not an allegation that Jameson had failed to perform the essential services required of it by the Engagement Letter because it did not raise debt or equity finance. If that is what its case was, it would need to be specifically pleaded, otherwise Jameson would be caught by surprise.
3. Mr Flynn submitted that, even accepting that was the case, Jameson suffered no prejudice because the contention simply turned on the proper construction of the Engagement Letter. I did not accept that submission. It may be correct to say that the active defendants' case on this point simply turned on the correct construction of the Engagement Letter. However, that was not necessarily true of Jameson's response to it. If the defence had been pleaded, it would, for example, have been open to Jameson to lead additional evidence and seek further discovery relevant to the question of the extent of Mr Walsh's knowledge of what Jameson was doing, with a view to submitting that the defendants were estopped from asserting that what Jameson did was not in accordance with the Engagement Letter. The defendants had had ample opportunity to raise the defence. They had amended their commercial list response on a number of occasions. The defence was not one Jameson could have anticipated and it was entitled to a reasonable amount of time to consider how it might respond to it. That could only have been achieved by granting an adjournment which, in the circumstances, I was not prepared to do.

The defence based on breach of fiduciary duties

1. This defence raises three issues: 1. Whether Jameson owed the defendants fiduciary duties; 2. If it did, whether it breached those fiduciary duties; 3. If it did, whether that breach disentitled it from recovering its fees under the Engagement Letter.
2. In Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 96-7, Mason J (in dissent, but not on this point) set out in a frequently cited passage the critical features of a fiduciary relationship in these terms: The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.
3. Where the fiduciary duties arise from a contract, their scope depends on the terms of the contract. As Mason J explained in Hospital Products (at 108) in a passage cited with approval by the High Court in John Alexander Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19 at [91]: In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.
4. Consequently, in general no fiduciary duties can arise where the contract excludes them. As Jacobson J said in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; [2007] FCA 963 at [278], after referring to the last sentence of Mason J's judgment in Hospital Products quoted above, and a statement to similar effect by Gummow J in Breen v Williams (1995-96) 186 CLR 71 at 132-3: It follows from these statements of principle that it is open to the parties to a contract to exclude or modify the operation of fiduciary duties. As Jacobson J pointed out (at [279]), that conclusion is consistent with what has been said in a number of other decisions, including Chan v Zacharia (1984) 154 CLR 178 at 196 per Deane J; News Limited v Australia Rugby Football League Ltd (1996) 64 FCR 410 at 539 per Lockhart, von Doussa and Sackville JJ; Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 17 per Bryson J; Woolworths Ltd v Kelly (1991) 22 NSWLR 189 at 225 per Mahoney JA and Kelly v Cooper [1993] AC 205 at 213-214 per Lord Browne-Wilkinson.
5. In my opinion, there is no room for the operation of fiduciary duties in the present case. The relationship between the parties arises from and is governed by the agreement embodied in the Engagement Letter. Jameson's primary obligation was to provide assistance "to source suitable investors" and it agreed to do a number of things to achieve that goal. The parties at least contemplated the possibility that Jameson could be one of those investors. It could not be said that Jameson agreed to act for or on behalf of the defendants in the exercise of a power or discretion to do anything. As I say, it was for Jameson to find suitable investors. If the investors and the terms that they proposed were acceptable to Mr Walsh, he was free to accept them on behalf of the defendants. In the meantime, it was open to Mr Walsh to look for alternative sources of funding, which he did. It is apparent that he had a financial advisor to assist him in that task. It could not be said that the defendants were vulnerable to anything Jameson did or did not do.
6. Moreover, the relationship between the defendants and Jameson was created by the Engagement Letter and that letter states that it "does not create any other legal relationship other than a contractual one". Mr Flynn pointed to the fact that the Engagement Letter did not specifically exclude fiduciary duties and sought to contrast the letter with the agreement considered in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4), which provided that the engagement was "as an independent contractor and not in any other capacity including as a fiduciary". But it is difficult to see why it is necessary to mention fiduciary duties specifically. The exclusion of all other legal relationships other than contractual ones is a clear exclusion of fiduciary relationships (among others).
7. Having regard to the conclusions I have reached, it is strictly speaking unnecessary to deal with the other issues raised by this aspect of the case. However, I should say something about them in the event that I am wrong.
8. The active defendants submit that an essential feature of fiduciary duties is that the fiduciary duty must disclose potential conflicts "fully and frankly". That is a mischaracterisation of the obligation. Stated positively the obligation of a fiduciary, relevantly, is to account "to the person to whom the fiduciary obligation is owed for any benefit or gain … which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain": see Chan v Zacharia (1984) 154 CLR 178 at 199 per Deane J. An exception exists where the person to whom the fiduciary duty is owed has given their fully informed consent to the fiduciary acting in a way giving rise to the actual or potential conflict. Stated proscriptively, the obligation of a fiduciary is not to put himself or herself in a position of actual or potential conflict without the fully informed consent of the person to whom the fiduciary duties are owed.
9. In the present case, however, that duty has been modified by the Engagement Letter. Clause 16 of that letter provides that in the event of a potential conflict Jameson will "promptly discuss the matter with the Company to determine a mutually acceptable resolution to or avoidance of the conflict". A discussion in those terms occurred between Mr Webster and Mr Walsh; and the evidence is that Mr Walsh consented to Jameson continuing to act despite the conflict.
10. The defendants contend that Mr Walsh's consent was not fully informed because he did not know that Jameson itself was considering taking an interest in the vehicle that would invest in or buy the Land and he was not told precisely the fees that Jameson expected to earn from the proposal contained in the Letter of Exclusive Dealings dated 23 September 2016. Nor did Mr Webster tell him that the proposed exclusivity period was six months, not 30 days.
11. A number of points may be made about that submission. First, even though Mr Casey signed the letter, it did not record an agreement between Jameson and Mr Casey. Rather, it recorded proposed terms "to initiate further discussions". Consequently, the conflict arose from the possibility of reaching an agreement with Mr Casey, not from any agreement itself. The evidence suggests that Mr Walsh had already contemplated such a possibility, since he had suggested to Mr Webster and Mr Urbach that Jameson put together a fund that it could manage for investors. That possibility never came to fruition. Second, cl 16 of the Engagement Letter does not require fully informed consent. What it requires is a discussion about the conflict, which occurred. Third, the essential features of the conflict were disclosed in the letter Mr Webster sent Mr Walsh on the same day as he sent the Letter of Exclusive Dealings to Mr Casey. That letter disclosed that it was possible that Jameson would "be involved in the [investment] vehicle" and that "it would generate additional revenue if the Purchaser proceeds with the acquisition". The nature of that additional revenue was discussed by Mr Webster and Mr Walsh. Consequently, Mr Walsh was on notice that Jameson may have its own interest in pursuing an agreement with the investor who had been identified. Despite that, it is apparent that he was happy for Jameson to continue to act. For those reasons, had I concluded that Jameson owed the defendants fiduciary duties, I would have concluded that Jameson had not breached those duties.
12. Nor would I have concluded that Jameson was disentitled to its fees if the defendants had otherwise made out their case. A fiduciary will not be entitled to recover remuneration where the fiduciary has acted dishonestly: Kelly v Cooper [1993] AC 205 at 216. Sometimes, it is also said that a fiduciary will not be able to recover remuneration where the breaches of duty go to the whole contract. For example, in Keppel v Wheeler [1927] 1 KB 577 at 592 Atkin LJ said: Now I am quite clear that if an agent in the course of his employment has been proved to be guilty of some breach of fiduciary duty, in practically every case he would forfeit any right to remuneration at all. That seems to me to be well established. On the other hand, there may well be breaches of duty which do not go to the whole contract, and which would not prevent the agent from recovering his remuneration; and as in this case it is found that the agents acted in good faith, and as the transaction was completed and the appellant has had the benefit of it, he must pay the commission.
13. In the present case, there can be no suggestion that Jameson acted dishonestly. It sought to disclose the conflict, and if there was a breach of fiduciary duty that arose because it did not disclose sufficient information about the proposal it had put to Mr Casey. It was not put to either Mr Webster or to Mr Urbach that the decision not to disclose more was one taken deliberately in order to mislead Mr Walsh. Nor could it be suggested that any breach of fiduciary duty went to the whole of the contract. Mr Walsh did not give evidence that he would have acted any differently if he had been given more information about the negotiations that Jameson had with Mr Casey. Jameson did what it was engaged to do and, as a consequence, Mr Walsh was able to negotiate a transaction that was acceptable to the defendants. Consequently, there is no reason why they should not pay the remuneration they agreed to pay for the services Jameson provided.

The defence based on the PSBA Act

1. Section 9 of the PSBA Act provides: (1) A corporation must not act as or carry on the business of (or advertise, notify or state that the corporation acts as or carries on the business of or is willing to act as or carry on the business of) an agent unless the corporation holds a corporation licence. (2) A corporation is not entitled to bring any proceeding in any court to recover any commission, fee, gain or reward for any service performed by the corporation as an agent unless the corporation was the holder of a corporation licence at the time of performing the service.
2. Under s 3 of the PSBA Act, "agent" is defined to include a "real estate agent" and a "stock and station agent". "Real estate agent" is defined as: … a person (whether or not the person carries on any other business) who, for reward (whether monetary or otherwise), carries on business as an auctioneer of land or as an agent: (a) for a real estate transaction, or (b) for inducing or attempting to induce or negotiating with a view to inducing any person to enter into, or to make or accept an offer to enter into, a real estate transaction or a contract for a real estate transaction, or (c) for the introduction, or arranging for the introduction, of a prospective purchaser, lessee or licensee of land to another licensed agent or to the owner, or the agent of the owner, of land, or (d) collecting rents payable in respect of any lease of land and otherwise providing property management services in respect of the leasing of any land, or (e) for any other activity in connection with land that is prescribed by the regulations for the purposes of this definition, but does not include a person who carries on business as an auctioneer or agent in respect of any parcel of rural land unless the regulations otherwise provide.
3. "Real estate transaction" is defined to mean "the purchase, sale, exchange, lease, assignment or other disposal of land, whether or not an auction is involved".
4. Regulation 4 of the Property, Stock and Business Agents Regulation 2014 (NSW) provides that a real estate agent includes an agent in relation to "rural land" that is up to 20 hectares in area. The parcel of land owned by R M Walsh Landholdings is less than 20 hectares. The other parcels are all greater than 20 hectares.
5. "Stock and station agent" is defined as: … a person (whether or not the person carries on any other business) who, for reward (whether monetary or otherwise), carries on business as an auctioneer of rural land or livestock or as an agent for: (a) doing (where the land concerned consists of rural land) any one or more of the things referred to in paragraphs (a)-(d) of the definition of "real estate agent" , or (b) a livestock transaction, or (c) inducing or attempting to induce or negotiating with a view to inducing any person to enter into, or to make or accept an offer to enter into, a livestock transaction or a contract for a livestock transaction, or (d) providing agistment for livestock or collecting of fees for the agistment of livestock, or (e) any other activity that is prescribed by the regulations for the purposes of this definition.
6. Regulation 46A of the Property, Stock and Business Agents Regulation 2014 (NSW) provides that "a real estate agent is exempt from the operation of all of the Act in respect of any act or omission by the agent when undertaking commercial property agency work on behalf of … an entity that owns (whether or not together with an affiliate of the entity) any property that has … an aggregate market value of $40 million or more …". "Commercial property agency work" is defined in reg 3(1) as "selling, purchasing, exchanging, leasing, managing or otherwise dealing with property that is not residential property or rural land". "Rural land" in the PSBA Act is defined to mean "land that is used or apparently intended to be used for gain or profit for grazing of livestock, dairying, poultry farming, viticulture, orcharding, beekeeping, horticulture, the growing of crops of any kind, vegetable growing or any other purpose declared by the regulations to be a rural purpose".
7. It is common ground that Jameson does not hold a corporation licence.
8. The defence based on the PSBA Act raises two issues: 1. Whether Jameson acted as an "agent" in connection with the sale of the Land; and 2. Whether Jameson's conduct falls within the exemption created by reg 46A.
9. The active defendants' case is that because Jameson introduced Casey Capital Group to the defendants as a potential purchaser of the Land and attempted to induce or negotiated with a view to inducing Casey Capital Group to enter into or make an offer to enter into a contract for the purchase of the Land it acted as an "agent" for the purposes of s 9 of the PSBA Act.
10. I do not accept that submission. Jameson was not retained to act as an agent in respect of a real estate transaction (or similar transaction in respect of rural land). It was retained to raise capital for the Project. Although the Engagement Letter used expressions such as "sale price" and "the property is sold" and similar terms to identify the characteristic or event by reference to which Jameson's rights and obligations were to be determined, it is apparent that what was being referred to was a sale of an interest in the Project or the Project as a whole and that "sale" and its grammatical equivalents were used to include the raising of financing for the Project in any form. One way in which Jameson could have earned the fees provided for in the Engagement Letter was to find a purchaser for the Land. But that was not the only way it could have earned those fees.
11. Jameson went about its task by creating an electronic data room and drafting the IM that was designed to attract investors in the Project and that contemplated that Jameson itself might be an investor. The IM contemplated an acquisition of the Land, and it seems reasonably clear that by the time it was finalised, that was the preferred method of raising the funds sought by Mr Walsh, or the method that Jameson considered would be most likely to attract investors. But it does not follow from that that all other alternatives had been ruled out. Mr Casey was approached as a potential investor in or purchaser of the Project. At the time that he was approached, it was not necessarily contemplated that the Casey Entities would purchase the Land. They could, for example, have made an offer to purchase the companies that owned the Land and other rights in relation to the Project or to invest in a vehicle which itself purchased the shares. Any of those outcomes would have been consistent with the terms on which Jameson was retained.
12. As it turned out, following direct negotiations between Mr Casey and Mr Walsh, the Casey Entities agreed to buy the Land. According to Mr Webster's affidavit evidence, that was the first and only occasion on which Jameson has been involved in a direct land sale transaction and Jameson has no intention of being involved in any direct land sale transactions in the future. Mr Webster was not challenged on that evidence.
13. Having regard to those matters, it could not be said that Jameson acted as an "agent". Even accepting that it acted as an agent for a real estate transaction or similar transaction in relation to rural land in this particular case, that was not something that Jameson contracted specifically to do or something it set about to achieve. At most, the sale of the Land was a possible outcome of Jameson's retainer. On the uncontested evidence of Mr Webster, that was not a usual incidence of Jameson's business and Jameson does not presently intend to act in relation to the sale of other real property. That is not sufficient to amount to a business of acting as agent for a real estate transaction or similar transaction in relation to rural land. It was a one-off transaction that was not an essential element of what Jameson agreed to do.
14. As to the second issue, the question is whether, assuming the work Jameson did in relation to the sale of the Land it did as an "agent", that work was "commercial property agency work" - that is, relevantly the selling of property that was not "land that is used or apparently intended to be used for gain or profit for" what might loosely be described as "agricultural activities".
15. The use or apparently intended use of the Land must be determined at the time the relevant work done by Jameson was carried out. I am satisfied that at that time the Land was not rural property because it was not used or apparently intended to be used at that time for gain or profit from agricultural activities. The Land had been acquired by the defendants for the purposes of redevelopment. Development approval had been obtained for the Project and the defendants were at the stage where they were looking either to sell the Land on the basis that that redevelopment would take place or to find investors who would fund the redevelopment. In the absence of any other evidence, it may be inferred that the Land was no longer being used to generate income or profits from agricultural activities but was vacant waiting redevelopment. It was open to the active defendants to lead evidence to the contrary but they chose not to do so. In particular, as I have said, Mr Walsh who would have known the facts swore an affidavit in the proceedings but chose not to give evidence.
16. The active defendants pointed to some evidence which they submitted was sufficient to demonstrate that the Land was still "rural land" for the purposes of the PSBA Act. That evidence consisted of: 1. evidence that the Land had been classified as rural land for land tax purposes and that the contracts for sale of the 11 properties included a statement that the sale is "GST-free because the sale is subdivided farm land or farm land supplied for farming under Subdivision 38-O of the A New Tax System (Goods and Services Tax) Act 1999"; 2. Statements in a valuation report that the current use of the Land was "Residential dwellings and agricultural activities" and that: The subject valuation land comprises a contiguous holding of 11 existing rural residential parcels of land which together form a major residential englobo development site. 1. The contracts for sale of 7 lots held by three of the defendants (Cromdale Developments Pty Ltd, the second defendant, Brownsford and BBLD) contained special conditions which included references to agistment licensing arrangements in respect of the relevant lots. The total amount of the "rent/fee" shown in those contracts is $9,500 per annum; 2. Photographs of the Land taken by Mr Webster, which showed infrastructure consistent with agricultural uses, such as fences, farming facilities and one or more animals.
17. In my opinion, this evidence is not sufficient to establish that the Land continued to be used for gain or profit from agricultural activities at the time Jameson undertook the work that it did. The classification at some unspecified time of the Land as rural property for the purposes of a land tax exemption is not relevant to its proper classification for the purposes of the PSBA Act at the time Jameson did the work it did. Nor is a claim made by the defendants in the contracts for the sale of the land that the sale is exempt from GST because it involves the sale of subdivided farm land.
18. Similarly, statements in a valuation report describing the Land is not evidence of whether the Land is rural land for the purposes of the PSBA Act. Moreover, those statements must be understood as statements concerning the uses for which the Land was currently suitable, not statements concerning the actual activities carried out on the Land.
19. The fact that some agistment fees continued to be paid in respect of the Land is not sufficient to establish that the Land continued to be used for gain or profit from agricultural activities. There is no evidence concerning when the relevant licences were entered into. However, the fees are so small compared to the size and value of the Land that the only reasonable inference is that, following rezoning, farming activities on the Land had all but ceased and the Land was no longer being used to obtain a gain or profit from those activities. The photographs relied on by the active defendants take the matter no further. They are consistent with the Land once being used for agricultural purposes, which had all but ceased by the time Mr Webster took his photographs.

Conclusion and orders

1. It follows that Jameson is entitled to orders substantially in the form that it seeks. Jameson seeks judgment in the sum of $1,200,000. Consistent with the conclusions I have reached, it is entitled to judgment for that amount. Jameson also seeks declarations, particularly a declaration relating to its rights in relation to future amounts that will be received by Brownsford. Mr Hynes, who appeared for Jameson, provided me with a form of order he sought. However, it is not clear to me that declarations should be made in the precise form Jameson seeks; and, in any event, the defendants should be given an opportunity to make submissions on the form of orders that are made.
2. Accordingly, I direct that: 1. the plaintiff provide a copy of this judgment to the liquidator of the first defendant within three business days of the date of this judgment; 2. within 14 days of the date of this judgment the parties bring in short minutes of order to give effect to these reasons for judgment and to any agreement between the parties in relation to costs; 3. if the parties cannot reach agreement on the form of orders that should be made within 14 days, the matter be relisted at 9.30 am on 9 July 2019, or such other time as is agreed with my Associate, to determine any outstanding issues.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 June 2019