Leon Cycle Pty Ltd v Hi5 Scooters Pty Ltd & Raad [2025] VCC 1914

9.1 provide the Branded Supplies at an agreed minimum and maximum stock level for each Franchise Premises."

1. Pursuant to the abovementioned provision, Leon Cycle and Hi5 Scooters intended to be bound by the Stock Clause, but have agreed for a "fuller or more precise" restatement of terms of what such a minimum and maximum may be, upon subsequent agreement between the parties.[56] Both parties to the proceeding agree that there was "no set or general minimum or maximum stock level" - noting Mr Rigoli's clarification that there existed a cap of "approximately 50 bikes per store", but only for the "more popular models", as per the Rigoli Witness Statement. In such circumstances, given the lack of agreement between the contracting parties as to a minimum stock level, I am unable to find that Leon Cycle was in breach of the Stock Clause.
2. I note that the defendants also suggest that it is a "matter of common sense" that the minimum amount of stock should be more than zero as, "if stock was not supplied, Hi5's ability to ... earn an income ... was curtailed". The thrust of this submission is such that the Court should read the words "so long as the amount of Branded Supplies provided is not zero" at the end of clause 9.1. Such a phrase should not be implied into the Stock Clause as doing so is not "necessary to give business efficacy to the contract" as required by the test established in BP Refinery (Westernport) Pty Ltd v Shire of Hastings.[57]
3. In particular, I refer to the Compensation Clause which reads as follows:

14.10 Licensee will carry the risk in the event that the Company is unable to provide supply of Branded Supplies or other unforeseen circumstance. If such an event occurs that no stock would be available for sale then a mutually agreed compensation will be paid to the Licensee including reimbursed costs of salaries and rent;" ...

1. The phrase the defendants wishes for the Court imply in the Stock Clause is not necessary to give the agreement between the parties business efficacy, as the Compensation Clause continues to operate as a safety net for Hi5 Scooters to receive compensation if "no stock would be available for sale". As such, I am unwilling to imply such terms into clause 9.1.

Did Leon Cycle breach the Compensation Clause?

1. Second, as for the defendants' allegation that Leon Cycle has breached the abovementioned Compensation Clause, the parties submit two varying interpretations of the provision. Leon Cycle supports a stricter construction, limiting compensation to circumstances where they are "unable to provide supply ... [and have] no stock", while the defendants prefer a construction that includes situations where Leon Cycle "elects" not to provide supply to Hi5 Scooters.
2. Regardless of the preferred construction of Compensation Clause, on the evidence before me, I note that no such compensation claim for a "mutually agreed" amount has been made by the parties and/or unreasonably denied by Leon Cycle. In any event, the Court is unable to award compensation as the defendants have not adduced evidence surrounding its loss and damage suffered, arising because "no stock ... [is] available for sale", such as the "costs of salaries and rent". As such, I find that Leon Cycle was not in breach of the Compensation Clause.

Did Leon Cycle breach the Hi5 Commission Payment Clause?

1. Third, as for the Hi5 Commission Payment Clause, it reads as follows:

"11.3 Payments to the Licensee will be made by bank deposit within 3 business days of end of each fortnightly period".

1. I note that the totality of clause 11 provides relevant and necessary context for the aforementioned provision:

"11.1 On a fortnightly basis, the Company will calculate the commission payable to the Licensee based on the ex GST value of all sales of Goods and payments received by the Company and provide a summary of those transactions and calculated commission.

11.2 The Licensee will then review and issue a tax invoice to the Company for the commission of which the Company will make payment to the Licensee."

1. I further note that clause 10.2 explains the method by which Leon Cycle is able to "calculate the commission payable to the Licensee":

"10.2 All sales that the Licensee makes through the Franchise Premises must be recorded in the Company's Software, recording the customer name, address, contact details, SKU of Goods sold, and serial numbers of all Branded Supplies sold."

1. Commission payments are contingent upon the number of bicycles sold by Hi5 Scooters, at an agreed percentage:

"10.1 The Company will pay commission to the Licensee on Goods sold at the following rate:

(ex GST) of the selling price approved by the Company.

Example; if the sale price is $2199 inc GST for a plus model, the price is $1999.09 ex GST. Commission will be calculated 1999.09 x 0.43 = $859.60 ex GST

10.3 If annual financial year (July to June) sales threshold [sic] are met then additional commission would be payable as follow

1. As articulated above, pursuant to the Licensing Agreement, customers were to pay Leon Cycle directly, after which Leon Cycle would remit commission to Hi5 Scooters in accordance with the commission structure in clause 10. Between 7 February and 7 March 2023, Hi5 Scooters issued several invoices to Leon Cycle for payment of commission:

(a) On 7 February 2023, Hi5 Scooters issued #INV-0620 to Leon Cycle for commission from sales in Adelaide, Melbourne, and Sydney, in the sum of $14,279.97. This purported to account for sales made in the period between 29 January and 4 February 2023;

(b) On 21 February 2023, Hi5 Scooters issued #INV-0621 to Leon Cycle for commission from sales in Adelaide, Melbourne, and Sydney, in the sum of $32,645.82. This purported to account for sales made in the period between 5 and 18 February 2023; and

(c) On 7 March 2023, Hi5 Scooters issued #INV-0624 to Leon Cycle for commission from sales in Adelaide, Melbourne, and Sydney, in the sum of $15,833.40. This purported to account for sales made in the period between 19 February and 4 March 2023.

1. Leon Cycle admits that these invoices have not been paid, contrary to clause 11.3, but notes that this was because the Hi5 Commission Payment Clause was "not complied with" by Hi5 Scooters. As previously stated, there is no general proposition under Australian contract law that a breach predicated on a prior breach validates the latter breach. However, as noted by the High Court in Foran v Wight:

"... if an executory contract creates obligations which are mutually dependent and concurrent and, before the time for performance of the obligations arrives, one party, A, gives the other party, B, an intimation that it will be useless for B to tender performance and B abstains from performing his obligation in reliance on A's intimation, B is dispensed from performing his obligation and A's obligation is absolute provided that B had not repudiated the contract and he was ready and willing to perform his obligation up to the time when the intimation was given."[58] (emphasis added)

1. That is to say, if the obligations imposed by clause 11.3 are "mutually dependent [upon] and concurrent" with the obligations imposed by clause 10.2, Leon Cycle "may be excused or absolved from performance of his concurrent obligation by conduct on the part of [Hi5 Scooters] amounting to a waiver or dispensation with performance" of clause 10.2.[59] As affirmed by the New South Wales Court of Appeal in Kay v Playup Australia Pty Ltd,[60] "whether obligations are dependent or independent depends upon the intention of the parties".
2. The present case is similar to the decisions of Kay[61] and Hillam v Iacullo, whereby the Court considered a textual analysis of the relationship between the relevant contractual provisions, prior to arriving at the conclusion as to whether parties evinced an intention for them to operate interdependently.[62]
3. I note that clause 10.2 provides for the comprehensive recordkeeping of Goods sold by Hi5 Scooters on Leon Cycle's software, which is found within clause 10 titled "Commission". I further note that clause 11.1 provides that Leon Cycle is responsible for calculating the commission payable to Hi5 Scooters, based on the aforementioned records referred to in clause 10.2. Under clause 11.2, Hi5 Scooters must subsequently "review and issue a tax invoice" to Leon Cycle for any commission owed - payment of which must be made within three business days at the conclusion of each fortnightly period, as per clause 11.3. Clause 11 is titled "Commission Payment Terms".
4. It is apparent that clauses 10 and 11 must be read as a whole. A natural reading of clause 11.3 is that, for commission to be payable to Hi5 Scooters, Leon Cycle must calculate the commission due as per clause 11.1, allowing Hi5 Scooters to issue a tax invoice in accordance with clause 11.2, which - in turn - depends on all of Hi5 Scooters' sales data being accurately recorded by Leon Cycle under clause 10.2.
5. A clear "commercial link" also emerges.[63] Under the consignment arrangement in the Licensing Agreement, Leon Cycle bears the cost of shipping Goods to Hi5 Scooters and assumes the risk of non-payment, while relying on Hi5 Scooters to ensure that all customer payments are made directly to Leon Cycle. That risk is mitigated by the regime of transparent and accurate recordkeeping between the parties in clause 10.2 which, viewed objectively, forms part of the "genesis" and "aim" of the transaction.[64] On that footing, any suggestion that the parties intended commission payment to be payable under clause 11.3, notwithstanding non-compliance with clause 10.2 is "opposed to [commercial] commonsense".[65]
6. For the reasons provided above, I find that the performance of clauses 11.1, 11.2, and centrally, 11.3, is dependent on clause 10.2, such that if clause 10.2 is breached, Leon Cycle may suspend performance of clause 11.3 until clause 10.2 is properly performed. The question before me, then, is whether clause 10.2 has been breached prior to any purported breach of clause 11.3 by Leon Cycle.
7. I begin by reiterating my findings above, that the defendants committed the Record Breach from 23 February 2023 onwards. However, I note that the defendants submit that Leon Cycle was in breach of the Hi5 Commission Payment Clause as early as "midway through January 2023 and into February 2023", and I further note that Leon Cycle admits that it did not pay "Hi5 [Scooters'] invoices for commission between 7 February 2023 and 7 March 2023".
8. The defendants submit that Leon Cycle did not pay the invoices dated 7 February 2023 (#INV-0620), 21 February 2023 (#INV-0621), nor 7 March 2023 (#INV-0624) as Mr Ding sought a variation to the Licensing Agreement which the defendants declined. This was supported by WhatsApp messages to this effect between Ricky and Mr Raad prior to 8 February 2023, reading that Mr Ding was only allowing payment of commission "once a month". Further, via WhatsApp message on 20 February 2023, Ricky told Mr Raad that Mr Ding still did not allow for the payment of commission. Finally, after this, Ricky informed Mr Raad via WhatsApp message that Mr Ding provided instructions to "temporarily stop paying [Hi5 Scooters] money and also temporarily stop sending products" to be sold. The defendants note that Leon Cycle "adduced no evidence" to demonstrate that Leon Cycle withheld commissions because the defendants had not complied with clause 11.
9. Leon Cycle, as noted above, submits that it withheld commissions because the defendants had not complied with clause 11. Leon Cycle conceded that there were "no contemporaneous documents" adduced, noting that this was explicable in light of the "history of communications between the parties primarily by WhatsApp", the fact that Mr Rigoli was not in an operational role during the relevant period, and that any correspondence which the defendants had would not be in their interest to produce.
10. Moreover, Leon Cycle contends that paragraphs 23 and 24 of the Rigoli Witness Statement suggest that Hi5 Scooters had failed to comply with the recording obligations pursuant to clause 10.2, and Hi5 Scooters had been receiving unrecorded cash payments. Leon Cycle emphasises that this conclusion was based on Leon Cycle's SmartPay and Neto records between 19 January 2023 and 22 February 2023.[66] This was further supported by two Excel spreadsheets tendered by Leon Cycle during trial titled "POS Transactions 7 Feb to 23rd Feb Hi5" and "SmartPay EFTPOS Payments Processed 29 Jan to 23 Feb 2023". Leon Cycle emphasises that the defendants, as the parties asserting breach of the Licensing Agreement, bear the onus of proving that the Hi5 Commission Payment Clause was breached.
11. Recognising the lack of contemporaneous evidence indicative of Leon Cycle's intention in ceasing commission payments to Hi5 Scooters pursuant to clause 11.3, such as WhatsApp messages, I nonetheless accept the evidence of Mr Rigoli - that Hi5 Scooters was, in fact, accepting unrecorded cash payments as early as 19 January 2023, in breach of clause 10.2. In arriving at this finding, I note that the defendants do not contest the veracity of the Excel workbooks adduced by Leon Cycle, nor Mr Rigoli's evidence more broadly.
12. I am also particularly compelled by Leon Cycle's oral closing submissions, that the subjective intention as to why Leon Cycle ceased paying commission is not relevant, so long as the Licensing Agreement was actually breached. In support of this, I refer to the following passage from Dixon J in Shepherd v Felt and Textiles of Australia Ltd:

"'It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not' (per Greer J., Taylor v. Oakes Roncoroni & Co."[67] (emphasis added)

1. Given my finding above, that Hi5 Scooters was in breach of clause 10.2 for making unrecorded cash payments from as early as 19 January 2023, I, therefore, find that Leon Cycle was not compelled to perform its obligations pursuant to clause 11, including calculating the commissions payable and making commission payments to Hi5 Scooters. It follows that Leon Cycle has not breached the Hi5 Commission Payment Clause, as alleged by the defendants.

Did Leon Cycle breach the Dispute Resolution Clauses?

1. Fourth, as for the Dispute Resolution Clauses, they read as follows:

"The following terms apply in the event of a dispute between the parties: > > 38.1 If either party has any complaint then it must report the issue to the other by email message to Philip.rigoli@leoncycle.com

38.3 Both parties agree to resolve the issue themselves within 21 days of the receipt of the report.

If the dispute is not settled as set out above, the parties will agree to attempt to resolve it by engaging in good faith with the other in a process of mediation or arbitration." (emphasis added)

1. The defendants contend that clause 38 "required Leon Cycle to mediate" which it failed to do prior to termination of the Licensing Agreement, and that Leon Cycle also failed to act in good faith by attempting to unilaterally vary the Licensing Agreement, withholding commissions and stock, issuing a Default Notice which was allegedly defective, and terminating the Licensing Agreement while the dispute resolution process was ongoing. I note that it is common ground between the parties that clause 38 does not impose an obligation upon parties to successfully resolve the dispute.
2. With respect to whether mediation was a precondition to the termination of the Licensing Agreement, I refer to the decision of Vickery J in WTE Co-Generation & Anor v RCR Energy Pty Ltd & Anor, stating:

"... the following principles may be stated as to a stay should be granted where a contractual dispute resolution process is expressed to be a pre-condition to litigation, and where the enforceability of such provision is put in issue:

Dispute resolution clauses in contracts should be construed robustly to give them commercial effect. The modern approach to the construction of commercial agreements is generally to endeavour to uphold the bargain by eschewing a narrow or pedantic approach in favour of a commercially sensible construction ..."[68] (emphasis added) (citations omitted)

1. While the focus of the defendants' submissions varies from the relevant issues in WTE Co-Generation, to the extent that they contend that mediation should have occurred prior to the termination of the Licensing Agreement as opposed to the commencement of litigation, applying the same principles, I nonetheless do not accept the defendants' submissions.
2. Clause 38 refers to a scenario whereby "a dispute between the parties ... is not settled", requiring parties to "attempt to resolve it ... in a process of mediation". To give the provision "commercial effect", and in the absence of express wording otherwise, such as the provision of an explicit definition, I find that a "commercially sensible construction" would be to construe the word "dispute" broadly, such that the provision encompasses instances where the parties attend mediation after the Licensing Agreement has been terminated - this construction being predicated on the finding that clause 38 was intended by the parties to "survive termination" in light of a failure to specify by when mediation or arbitration must occur.[69] I note that, as acknowledged in paragraph 53(g) of the defence and counterclaim, an unsuccessful mediation occurred on 9 September 2023, and as such, Leon Cycle is not in breach of the Dispute Resolution Clause.
3. Finally, with respect to clause 38.3, requiring "good faith" engagement, I note that it is exclusive in its application and only imposes a good faith obligation upon Leon Cycle's conduct in their attempts to "resolve [the dispute] by engaging ... with the other in a process of mediation". The defendants do not contend that Leon Cycle did not act with good faith in the course of mediation. Instead, any allegations made by the defendants surrounding a lack of good faith were with respect to Leon Cycle's conduct prior to mediation. This will be addressed further below, with respect to the Good Faith Clause.
4. The Dispute Resolution Clauses impose an obligation on both parties. It provides for an agreement by the parties to attempt to resolve a dispute by engaging in good faith with the other. The parties were engaging in negotiations during the relevant time - however, despite formal mediation ultimately occurring after termination, clause 38 nonetheless does not exclude Leon Cycle from exercising its termination rights under the Licensing Agreement. For the reasons above, I find that Leon Cycle has not breached the Dispute Resolution Clauses, as alleged by the defendants.

1. Fifth, the Good Faith Clause, reads as follows:

"The Licensor agrees to act reasonably and in good faith ..."

1. I note that this clause imposes a broader obligation to act reasonably and in good faith, not confined to conduct in "mediation or arbitration", as per the Dispute Resolution Clauses considered prior. The defendants submit that Leon Cycle breached the Good Faith Clause by attempting to unilaterally vary the Licensing Agreement, withholding commissions and stock, issuing the allegedly defective Default Notice, or terminating the Licensing Agreement whilst the dispute resolution process was ongoing. For the reasons below, I reject the defendants' submission.
2. I begin by noting that the obligations to act "reasonably" and in "good faith" must be read together, as "composite and interrelated".[70] In Paciocco v Australia and New Zealand Banking Group Limited, Allsop CJ described the obligation of good faith as follows:

"The usual content of the obligation of good faith ... is an obligation to act honestly and with a fidelity to the bargain; an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained."[71]

1. First, with respect to any purported unilateral variation of the Licensing Agreement by Leon Cycle, as I have found above, Mr Ding proposed a variation to the Licensing Agreement regarding the frequency of commission payments which the defendants declined. Here, I note the following reference from Cheshire & Fifoot Law of Contract and its associated footnote:

"A contract cannot be varied unilaterally, but only by a further contract."[72]

1. For a contractual variation to be effected, there must be acceptance from both parties. The defendants, during their submissions and oral evidence, have made it abundantly clear that the parties did not agree on any variation proposed by Mr Raad, owing to cashflow issues which may have arisen. I am, therefore, unable to accept that there was a variation of the Licensing Agreement, let alone one of a unilateral nature, such that Leon Cycle's conduct constituted a breach of their good faith obligations.
2. Second, with respect to the defendants' submissions - that Leon Cycle's withholding of commissions and stock constituted a breach in the obligation to act in good faith - while I note that such conduct was not in the "interests" of Hi5 Scooters, I again refer to Allsop CJ in Paciocco:

"None of these [good faith] obligations requires the interests of a contracting party to be subordinated to those of the other. It is good faith or fair dealing between the parties by reference to the bargain and its terms that is called for, be they both commercial parties or business dealing with consumers. As Posner J said in Market Street Associates Limited Partnership v Frey [1991] USCA7 746; 941 F.2d 588 (1991) the contractual notion of good faith varies in what is required for its satisfaction by reference to the nature of the contract. But the notion is rooted in the bargain and requires behaviour to support it, not undermine it, and not to take advantage of oversight, slips and the like in it. To do so is akin to theft, and if permitted by the law led to over-elaborate contracts, and defensive and mistrustful attitudes among contracting parties."[73] (emphasis added)

1. Consistent with my findings in respect of the Hi5 Commission Payment Clause, I am satisfied that Leon Cycle acted "reasonably and with fair dealing" in withholding commission payments. Under the parties' arrangement, the commissions payable to Hi5 Scooters were to be calculated and remitted by reference to Hi5 Scooters' sales records. Once the Record Breach occurred, Leon Cycle no longer had a reliable basis upon which to calculate the commissions payable. In those circumstances, it was reasonable and commercially sensible for Leon Cycle to suspend remitting commissions until compliant records were provided.
2. As for the withholding of stock, I reiterate my findings with respect to the Stock Clause, that its operation depended upon parties agreeing to a minimum and maximum stock level. In consideration of the "broad discretionary powers" conferred upon Leon Cycle under the Stock Clause, I refer to Virk, in which the Federal Court addressed a "discretionary contractual power to fix maximum prices",[74] and held that conduct which is "antithetical to the object of the contractual power" constitutes acting unreasonably and without good faith.[75]
3. Given the broad framing of the Stock Clause, however, I am not satisfied that Leon Cycle exercised the power for a purpose foreign to that which it conferred. Properly construed, the Stock Clause afforded both parties a discretion as to stock levels, to be exercised having regard to surrounding circumstances and the practical needs of the arrangement. For that reason, I do not accept that Leon Cycle breached its obligations of good faith by withholding stock.
4. In any event, even if Leon Cycle's withholding of commissions and/or stock were characterised as a breach of any obligation of good faith, the defendants have not identified any compensable loss said to have been caused by that conduct, nor adduced evidence capable of quantifying it.
5. Third, with respect to the issuance of the allegedly defective Default Notice on 3 March 2023, I note that the defendants have not adduced evidence that Leon Cycle knew that the default notice was defective and acted "dishonestly" in its issuance. Considering the facts before me, I am unable to make a finding in favour of the defendants.
6. Leon Cycle issued the Default Notice on the honest and reasonable belief that Hi5 Scooters had breached the Licensing Agreement. In my response to Issue 8, I further find that the notice is not, as the defendants allege, "defective", but instead valid for the purposes of clause 24. Finally, I emphasise the following paragraph contained in the Default Notice:

"11. The Licensor requires the Licensee, within thirty (30) days after the date of service of this Notice, to remedy the abovementioned breaches by:

a. paying to the Licensor the amount specified in paragraph 10(a) above;

b. deleting the Facebook advertisements and refraining from authorising any further advertisements without the express written permission of the Licensor;

c. refrain from using Leon Cycle as a business or trading name, including on the Website and Facebook account.

12. Pursuant to clause 24 of the Agreement, if the Licensee fails to comply with this notice within the timeframe specified above, the Licensor may (without prejudice to its other rights and powers arising from the Licensee's default), terminate the Agreement."

1. Not only did the Default Notice provide Hi5 Scooters with 30 days to rectify the alleged breaches, but the subsequent Termination Notice was issued more than four months later, affording ample time for rectification. Viewed objectively, Leon Cycle's conduct in issuing the Default Notice cannot be characterised as having been in bad faith.
2. Fourth, with respect to Leon Cycle's termination of the License Agreement, while the dispute resolution process was ongoing - as noted by email correspondence between April and May 2023 - parties were actively engaged in informal discussions surrounding the scheduling of a mediation. Meanwhile, Leon Cycle's Goods were being sold by Hi5 Scooters without the proceeds of sales being remitted to it, constituting the Proceeds Breach as discussed in my response to Issue 1.
3. In the abovementioned circumstances, and as will be clear in my response to Issue 8, Leon Cycle was contractually entitled to terminate under the Licensing Agreement either immediately, due to Hi5 Scooter's "fraudulent" conduct, pursuant to clause 25.6, or with 30-days' notice, pursuant to clauses 24.3 and 24.6. I reiterate Dixon J's finding in Shepherd, that, where a party terminates for breach, they do not need to be aware of another breach in order to rely upon it to justify their conduct.[76] A party purporting to exercise a right of rescission on an incorrect basis, will still succeed in bringing the contract to an end, as long as there was a valid basis for doing so - even if unknown to the party ending the contract - and it does not matter if the reasons stated for discharging a contract are erroneous.
4. By terminating the Licensing Agreement, Leon Cycle was acting in its commercial interests to ensure the protection of its stock and to minimise the risk of further loss and had only terminated after giving ample notice to the defendants. For the abovementioned reasons, I find that Leon Cycle did not breach the Good Faith Clause by terminating the Licensing Agreement prior to mediation occurring on 9 September 2023.
5. In conclusion, I find that for the reasons above, Leon Cycle has not breached the Stock Clause, Compensation Clause, Hi5 Commission Payment Clause, Dispute Resolution Clauses, Good Faith Clause, nor any Supply Guarantee Commission Term.

Issue 8. Did Leon Cycle wrongfully terminate or repudiate the Licensing Agreement?

1. Paragraph 13(b) of the defence and counterclaim asserts that Leon Cycle repudiated the Licensing Agreement, which Hi5 Scooters elected to accept. This issue poses two questions - first, whether Leon Cycle's termination was wrongful, and second, whether Leon Cycle repudiated the Licensing Agreement.

Did Leon Cycle wrongfully terminate the Licensing Agreement?

1. In answering the first question, I begin by providing a brief timeline of relevant events. On 18 February 2023, Leon Cycle sent Mr Raad a dispute notice via WhatsApp, pursuant to clause 38 of the Licensing Agreement, titled "Dispute Resolution". The notice includes three headings, being "Nature of Dispute", "Outcome Franchisee Seeks", and "Proposed Action to Settle Dispute". Further, on 3 March 2023, Leon Cycle sent Mr Raad a Default Notice via WhatsApp. Finally, on 24 July 2023, Leon Cycle issued a Termination Notice and a "Demand to Return Goods".
2. Leon Cycle notes that the Termination Notice relies on clause 25.6, giving rise to Leon Cycle's "immediate right to termination". The relevant provision reads as follows:

"Without prejudice to any other right or remedy it may have, Company shall be entitled to terminate this agreement immediately without notice if Licensee ...

25.6 is fraudulent in connection with operation of the Franchised Business; agrees to termination of the Franchise agreement."

1. The defendants challenge Leon Cycle's "fraud case" pursuant to clause 25.6, contending that it has not been pleaded in their written closing submissions. This is misconceived, and the defendants' alleged fraudulent conduct is referred to at paragraphs 5(n), 15, and 15A of Leon Cycle's further amended statement of claim.
2. In its written closing submissions, Leon Cycle further relies upon clauses 24.3 and 24.6 which grant a right to terminate, after a 30-day notice period. These provisions read as follows:

"The events listed below are 'Default Events'. If the Licensee has not made good the omission or ceased the action, as appropriate, after having received 30 days [sic] notice in writing to do so, then the Company may terminate this agreement. Default Events are:

24.3 failure by the Licensee to make payment to the Company on time.

24.6 repeated failure by the Licensee to comply with one or more requirements of this Franchise agreement, whether or not corrected after notice."

1. The defendants challenge Leon Cycle's submissions that the Default Notice satisfies the "notice in writing" requirement in clause 24, citing that it is defective for three reasons: first, because the notice alleges breaches that Hi5 Scooters have not committed; second, because the notice fails to include an "amount specified" under clause 11(a); and third, because Leon Cycle was itself in breach of the Licensing Agreement when the notice was issued.
2. With respect to the first reason, I note that Leon Cycle's Default Notice alleges that Hi5 Scooters was in breach of clause 24.3, as articulated above. I further note that the notice alleges that Hi5 Scooters was in breach of clauses 14.9, 14.28, and 21.11, resulting from Hi5 Scooters' authorisation of Facebook advertisements without Leon Cycle's prior approval, as well as the unauthorised use of the name "Leon Cycle" on the digital marketing website.
3. Without addressing clauses 14.9, 14.28, and 21.11 in further detail, I note that the defendants' written closing submissions refer to their "failure to remit payments to Leon Cycle" as the "only" potential breach under clause 24.3. The application of clause 24.3 arises as a direct result of the Proceeds Breach, which was established in my response to Issue 7, whereby Hi5 Scooters stopped payments being made to Leon Cycle for Goods sold at their stores. For the reasons articulated in my response to Issue 1, I do not accept defendants' repeated claim that Leon Cycle "caused" clause 24.3 to arise by altering the frequency of commission payments.
4. It may be contended that, on a purely textual construction, clause 24.3 applies only where Hi5 Scooters makes payment directly to Leon Cycle. I would, however, be cautious of accepting such an interpretation, given the commercial context of clause 20.6, as the sole provision by which Leon Cycle was to earn profit on bicycles sold on consignment by Hi5 Scooters. As noted above, the parties' arrangement was that customers would pay Leon Cycle directly, and Leon Cycle would then remit commission to Hi5 Scooters. On that footing, clause 24.3 would, in my view, still be engaged if Hi5 Scooters ceased using SmartPay and instead arranged for customers to pay Hi5 Scooters directly.
5. However, even if that stricter construction were accepted, clause 24.6 - which was also relied upon in the Default Notice - operates as a catch-all in respect of Hi5 Scooters' remaining breaches of the Licensing Agreement. Having regard to the combined operation of clauses 24.3 and 24.6, as invoked in the Default Notice, I am satisfied that Leon Cycle gave the requisite 30 days' notice prior to termination, which only occurred on 24 July 2023.
6. With respect to the second reason, I accept that, although the Default Notice did not specify the "amount specified" referred to in clause 11(a), there is no contractual - or other - basis for treating this omission as rendering the notice defective. Leon Cycles could not specify the amount because that information was exclusively in the possession of the defendants.
7. Finally, with respect to the third reason, I repeat my conclusion under Issue 7 that Leon Cycle was not in breach of the Licensing Agreement. In any event, even if it were, there is, as I have already explained, no general principle of Australian law that a party's own breach deprives it of the right to rely on its counterpart's repudiation.
8. For the reasons noted above, I find that the Default Notice issued by Leon Cycle on 3 March 2023 was validly issued pursuant to clause 24, and Leon Cycle accrued a contractual right to terminate the Licensing Agreement upon the 30-day notice expiring, which it exercised on 24 July 2023.
9. In the alternative, I am also prepared to find that, even if the Default Notice was invalid, Leon Cycle continues to have an immediate right to terminate pursuant to clause 25. The defendants' submissions do not address the "fraud case" in further detail, other than incorrectly noting that it had not been pleaded by Leon Cycle.
10. I rely on the following passage as cited by Garde J in International Assets Pty Ltd v Rubin:

"In Nadinic v Drinkwater, Leeming JA said that at common law, fraud is proved when it is shown that a false representation has been made:

(c) recklessly, carless whether it be true or false."[77] (emphasis added) (citations omitted)

1. I note that Leon Cycle, in paragraphs 1 and 2 of the Termination Notice, refer to the fraudulent conduct as being Hi5 Scooter's failure to record their sales data, in breach of clause 10.2, and Hi5 Scooter's decision to cease providing Leon Cycle the entire proceeds of sale, in breach of 20.6. I find that neither of these meet the definition of a "false representation", as required by the definition of fraud.
2. However, I note that Hi5 Scooters purported to make Netted Payments from 13 March 2023. Leon Cycle, in their submissions, claim that the "certain Netted Payments" made by Hi5 Scooters to Leon Cycle after 13 March 2023 were limited and incomplete. In contrast, Mr Raad represented that these Netted Payments reflected complete amounts owed to Leon Cycle pursuant to the commission arrangement under clause 10 of the Licensing Agreement, which I do not find to be true as will be addressed below in my consideration of Issue 11.
3. I, therefore, find that the defendants' conduct constituted fraudulent conduct - whether Mr Raad made these representations knowingly or recklessly - and conclude that, alternative to its right to terminate under clause 24 as established above, Leon Cycle also held an accrued right to immediate termination of the Licensing Agreement.

Did Leon Cycle repudiate the Licensing Agreement?

1. In answering the second question, as to whether Leon Cycle repudiated the Licensing Agreement, I note that Leon Cycle reiterates it is not in breach of the Licensing Agreement, as alleged by the defendants. In the alternative, however, if the Court were to find Leon Cycle in breach of the alleged provisions, Leon Cycle's closing written submissions cite that any purported breach on the part of Leon Cycle is insufficient to "convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it" - the test for repudiation reaffirmed by the High Court in Koompahtoo.[78]
2. In light of my anterior finding under Issue 7, that Leon Cycle was not in breach of the Licensing Agreement, it is unnecessary for me to determine whether its conduct otherwise constituted repudiation.
3. In conclusion, for the reasons above, I find that Leon Cycle did not wrongfully terminate nor repudiate the Licensing Agreement.

1. In responding to Issue 3, Leon Cycle sought to advance an alternative case that the Licensing Agreement gave rise to fiduciary duties owed by Hi5 Scooters, in the alternative to an express or constructive trust. This is addressed in further detail below.

Does Hi5 Scooters hold the proceeds of sale of Leon Cycle's Goods on express trust for Leon Cycle's benefit?

1. Leon Cycle conceded during oral closing submissions, that any express trust alleged is only in relation to the proceeds of sale of the Goods held by Hi5 Scooters. Leon Cycle's written closing submissions provide a helpful summary of the law surrounding express trusts, and I shall provide a brief outline. For an express trust to arise, parties must demonstrate a certainty of intention, certainty of subject matter, and certainty of object.[79] The intention to create a trust must be considered on an objective basis,[80] and no precise formal or technical words are required to demonstrate such an intention.[81]
2. In determining whether the parties demonstrated an intention for an express trust to arise over the proceeds of sale of the Goods by Hi5 Scooters, I begin by considering the relevant provisions of the Licensing Agreement relating to "Risk and Retention of Title":

"20.1 The Company shall deliver the Goods, delivery paid, to the Licensee's premises.

20.2 In spite of delivery having been made, property in the Goods shall not pass from the Company until:

20.2.1 The Goods are paid in full from a Licensee customer.

20.2.2 no other sums whatever shall be due from the licensee to the Company.

20.3 The Licensee shall hold the Goods on a fiduciary basis as bailee for the Company;

20.4 The Licensee shall store the Goods (at no cost to the Company) separately from all other Goods in its possession and marked in such a way that they are clearly identified as the Company's property.

20.6 Until property in the Goods passes from the Company the entire proceeds of sale of the Goods shall be the property of the Company and shall be paid into the Company's bank account, EFTPOS, or other payment systems;

20.7 Title in those particular Goods will pass on the Licensee customer only after all payments have been completed to the Company for the Goods."

1. I note that Leon Cycle concedes that Associated Alloys is distinguishable to the facts in the current proceeding,[82] as there is no clause in the Licensing Agreement expressly providing that the proceeds of sold Goods are to be held on trust by Hi5 Scooters for Leon Cycle.
2. However, Leon Cycle refers to clause 20.6, contending that it imposes a "clear obligation to keep the monies [for the sale of Goods] separate" - indicative of parties' intention to create an express trust over the proceeds of sale.
3. Clause 20.6 clearly articulates that payments are to be made directly from Hi5 Scooters' customers to Leon Cycle, bypassing any intermediate payments to Hi5 Scooters. I am unconvinced by Leon Cycle's submission, and find that clause 20.6 does not objectively impute an intention that Hi5 Scooters keep proceeds of sale of Leon Cycle's Goods separate to its other monies.
4. I note that Leon Cycle referred to several authorities in their oral closing submissions, to support their contention that an express trust arises if Hi5 Scooters is subject to an obligation to keep the proceeds of sale separate. However, and as articulated in Hertz, where "there is nothing to suggest that [Hi5 Scooters] was required to keep the proceeds separate from its own monies [there is] therefore no basis for inferring the existence of a trust".[83] Further, I do not find that clause 20.4 - which provides for the separate storage of Goods - necessarily gives rise to such an intention with respect to the proceeds of the Goods.
5. For the reasons articulated above, I find that parties did not have the certainty of intention to create an express trust over the proceeds of the sale of Goods, as submitted by Leon Cycle.

Alternatively, does Hi5 Scooters hold the proceeds of sale of Leon Cycle's Goods on constructive trust for Leon Cycle's benefit?

1. I will now consider Leon Cycle's alternative submission, that a constructive trust arises over the Goods provided by Leon Cycle on bailment or the proceeds of the sale of such Goods - either because Hi5 Scooters have breached their fiduciary duties, or pursuant to the principles articulated in Black v Freedman. I refer to the summary of principles relating to constructive trusts as articulated by McMillan J in Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc:

"The term constructive trust is used in various manners to identify a remedy provided by a court of equity. Some variations of constructive trusts create proprietary interests while some merely impose a personal liability. The chief motivation of the courts of equity in imposing a constructive trust over property is to ensure that, 'when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee'.

The imposition of a constructive trust over property is a serious measure. A court will consider whether there is an appropriate equitable remedy that falls short of the imposition of a constructive trust. Although the catalyst for the imposition of a constructive trust may be unconscionability by a party in the assertion of a legal interest free of equitable encumbrance, the construction of such a remedy must be determined by reference to established equitable principles and not a vague notions of fairness or justice. In particular, mere unjust enrichment is not a sufficient basis for the award of a constructive trust.

Constructive trusts may also arise as remedies flowing from the breach of otherwise recognised equitable doctrine. There are many ways in which this could occur. One example is where a fiduciary becomes constructive trustee because he or she is liable to account for a profit or benefit obtained arising from his or her fiduciary duties."[84] (emphasis added) (citations omitted)

1. I refer to Palmer on Bailment, as cited by Leon Cycle in their oral closing submissions:

"Trust and confidence is an element of a fiduciary relationship, the relationship of trustee and beneficiary being a classic example of the fiduciary relationship which exhibits this element. A person who stands in a fiduciary relationship to another owes a fiduciary duty to that party. In essence the fiduciary owes a duty to that party not to use his position as fiduciary for personal advantage, not to obtain a benefit by entering into a transaction in conflict with his fiduciary duty, to make full disclosure and to account for profits. The advantage of holding a bailee to a fiduciary relationship is that once it is established, breach of the bailee's fiduciary duty may lead to a range of equitable remedies, including in appropriate cases to an injunction, specific restitution, rescission, equitable compensation, an account of profits and a constructive trust of property, along with the benefit of tracing.

A fiduciary relationship may arise in a variety of situations where there is no trust because the fiduciary has no title to property. Bailment is not one of the established categories which automatically generate a fiduciary relationship ..."[85] (emphasis added)

1. As stated by Staughton J in Hendy Lennox (Industrial Engines) Ltd v Grahame Pattick Ltd, "[o]ne therefore has to examine the relationship in each individual case to see whether it is of a fiduciary nature".[86] In considering whether a fiduciary relationship arises on the facts, I refer to the dissenting formulation of Mason J in Hospital Products:

"It has been well recognized, at least since the judgment of Jessel MR in Re Hallett's Estate [1880] UKLawRpCh 38; (1880) 13 ChD 696 at 708-9 , that a bailee stands in a fiduciary relationship with his bailor when the bailor entrusts to the bailee Goods to be held or dealt with by him for the benefit of the bailor or for certain limited purposes stipulated by the bailor.

...

The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman [1966] UKHL 2; (1967) 2 AC 46, at p 127), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. 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. The expressions 'for', 'on behalf of' and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.

...

That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them."[87] (emphasis added)

1. Finally, I again refer to Palmer on Bailment, as cited by the High Court recently in Naaman v Jaken Properties Australia Pty Limited,[88] which states that "no fiduciary relationship will arise" in the context of certain relationships such as a "contract of hire, which contemplates that the bailee will use the chattel for his own benefit" or a "gratuitous loan".[89] I do not find that the Licensing Agreement creates such a relationship. This section further states:

"Reflection on these considerations suggests that the bailee's obligation to redeliver the Goods bailed may not be a sufficient obligation in itself to hold the bailee to a fiduciary relationship."

1. I note that clause 20.8 provides for the return of unsold Goods upon request from Leon Cycle. While not determinative of whether a fiduciary relationship exists, I give this due consideration in my findings below, as to whether Hi5 Scooters owes a fiduciary duty to Leon Cycle - and, if so, the nature of this duty.
2. I recognise that in the context of commercial relationships, there has traditionally been "considerable reluctance" in finding a fiduciary relationship exists,[90] prevailing in the majority decision in Hospital Products. However, in light of the distinguishable nature of the current consignment arrangement, I am prepared to find otherwise.
3. Pursuant to Licensing Agreement, Hi5 Scooters, as bailee, received bailed Goods on consignment from Leon Cycle, as bailor. Under clauses 20.2 and 20.6, property in the Goods or proceeds of sale of the Goods remain as property of Leon Cycle until the Goods are paid for in full by Hi5 Scooters' customers. However, and meanwhile, the Goods remain in the possession of Hi5 Scooters, delivered free of charge. This arrangement put Leon Cycle in a position where they were "vulnerable to abuse", in that its receipt of profits was wholly contingent upon the actions of Hi5 Scooters - indicative, though not determinative, of the existence of a fiduciary duty.[91] Unlike the distributor arrangement in Hospital Products, the Licensing Agreement is more akin to an agent-principal arrangement, whereby Hi5 Scooters is selling the Goods on Leon Cycle's behalf and for Leon Cycle's account, and Australian law currently recognises that "all agents are fiduciaries".[92]
4. Here, I note that clause 4.1 of the Licensing Agreement states that "[n]othing in this agreement shall create a partnership or agency" between Hi5 Scooters and Leon Cycle. I further note that clause 20.2 states that Hi5 Scooters holds the Goods "on a fiduciary basis as bailee" for Leon Cycle. While indicative of the parties' intentions in contracting, I affirm that the "parties cannot deem the relationship between themselves to be something which it is not", nor can they deprive a relationship which in substance is fiduciary of that character by labelling it otherwise.[93]
5. In any event, even if an agency relationship does not arise pursuant to the Licensing Agreement, I still find that a fiduciary duty nonetheless exists as Hi5 Scooters acted "for or on behalf" of the interests of Leon Cycle in transacting with customers.[94] This is especially supported by clause 15, restricting Hi5 Scooters' sales to only Leon Cycle's products, as well as clause 20.4, requiring Hi5 Scooters to store Leon Cycle's Goods separate to other Goods it held, and with proper labelling.
6. Read together, I find that the contractual provisions requiring Hi5 Scooters to sell only Leon Cycle's products, to keep those products separate and identifiable, and to return any unsold stock on demand present a coherent picture of the parties' relationship, support the conclusion that it is one which gives rise to a fiduciary obligation on the part of Hi5 Scooters in respect of that stock and its sale.
7. Having found that a fiduciary relationship existed in relation to the consigned Goods and their proceeds, I consider that Hi5 Scooters was obliged to hold and deal with that property solely for the benefit of Leon Cycle, in accordance with the terms of the consignment. In particular, Hi5 Scooters owed the following duties:

(a) to act in Leon Cycle's best interests, and not its own, when exercising control over the Goods and proceeds;

(b) to not appropriate or retain the Goods or their proceeds for its own purposes, save as authorised by the Licensing Agreement or Leon Cycle's fully informed consent; and

(c) to account to Leon Cycle for all Goods sold, and monies received in respect of those Goods, and to remit the proceeds in accordance with that account.

1. Those duties were breached when Hi5 Scooters, in response to the parties' commercial dispute, unilaterally ceased to permit payment of the proceeds to Leon Cycle principal after the Goods had been sold, and retained possession of the Goods notwithstanding a clear demand for their return. In doing so, Hi5 Scooters deliberately used the Leon Cycle's Goods and their proceeds as leverage to advance its own commercial interests, rather than dealing with them for the Leon Cycle's benefit. That conduct was inconsistent with the duty of loyalty, contrary to the obligation to account for the Goods and their proceeds, and amounted to an unauthorised appropriation of Leon Cycle's property.
2. In misapplying the consigned Goods and diverting or withholding the proceeds of their sale, Hi5 Scooters breached its fiduciary obligations to hold and deal with that property for Leon Cycle's benefit and to account for it. To the extent that Hi5 Scooters presently holds identifiable funds representing the proceeds of sale, or assets acquired with those funds, equity treats those funds and assets as held on constructive trust for Hi5 Scooters. This will be addressed in greater detail in my response to Issue 5 set out below.
3. Finally, and alternative to the fiduciary duty analysis above, I note that Leon Cycle submits that pursuant to Black v Freedman, a constructive trust arises over proceeds stolen and in the hands of a thief.[95] This principle extends to money "misappropriated or obtained by fraud",[96] and as such, alternative to a constructive trust arising from the fiduciary duties owed by Hi5 Scooters to Leon Cycle, I find that such a constructive trust arose from 24 July 2023 onwards over the Goods and proceeds either "stolen" or "misappropriated" by Leon Cycle.

Alternatively, is Leon Cycle entitled to an equitable lien over any remaining Goods in Hi5 Scooters' possession or any bank accounts, assets or property of Hi5 Scooters' into which the proceeds of the sale of Goods can be traced?

1. Alternative to Leon Cycle's claim for a constructive trust, Leon Cycle seeks a declaration that they are entitled to an equitable lien over any remaining Goods in Hi5 Scooter's possession, or any bank accounts, assets, or property of Hi5 Scooters into which the proceeds of the sale of the Goods can be traced.
2. As to whether an equitable lien is exercisable on the facts of the current proceeding, I refer to the oft cited passage of Deane J in Hewitt v Court, listing the preconditions indicative, although not determinative, of the existence of an equitable lien:

"... it is difficult, if not impossible, to formulate any satisfactory statement of the necessary or sufficient circumstances for the implication of an equitable lien which is applicable to any relationship at all (e.g. the trustee's lien over trust assets; the solicitor's lien over the proceeds of an action). I do not propose to essay that task here. It is adequate for present purposes that I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship. Those circumstances have, to some extent, been indicated in what has been said above. They are: (i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it (see Middleton v. Magnay (1864) 2 H &M, at p 237 (71 ER, at p 453) ; Whitbread &Co. Ltd. v. Watt [1901] UKLawRpCh 71; (1901) 1 Ch 911 ; Combe v. Lord Swaythling (1947) Ch 625 ); (ii) that that property (or arguably property including that property: see Pollock, loc. cit.) be specifically identified and appropriated to the performance of the contract (see per Lord Hanworth M.R., In re Wait (1927) 1 Ch, at pp 622-625 ); and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged."[97]

1. I begin by noting recent authority emphasises that Deane J's test for an equitable lien is preconditioned upon there being a "contractual relationship", which currently is the case as between Leon Cycle and Hi5 Scooters.[98]
2. Further, in circumstances where possession of Goods sold passed from Hi5 Scooters to their customers, yet Hi5 Scooters held the proceeds of sale, such proceeds are "specifically identified", and it would be unconscientious for Hi5 Scooters to withhold such monies.
3. Finally, I am satisfied that "actual or potential indebtedness" arises. I arrive at this conclusion in the context of my antecedent findings, that Hi5 Scooters breached its fiduciary duties with respect to the proceeds of sale of Goods, giving rise to an indebtedness for the proceeds of sale.
4. For the reasons above, in the alternative to a constructive trust, Leon Cycle is entitled to an equitable lien over Hi5 Scooters' assets, to secure payment of the proceeds of sale of the Goods. With regards to declaratory relief with respect to such an equitable lien, this will be discussed in the conclusion below. I further note that, given Leon Cycle's entitled to an equitable lien, Leon Cycle must elect between either the imposition of a constructive trust or an equitable lien.[99]

Issue 4. Is Mr Raad personally liable to account for profits or for equitable compensation by reason of his wilful procurement or knowing involvement in a breach of trust?

1. In response to Issue 4, the defendants submit that Mr Raad is not personally liable as a trust does not arise - and in the alternative, that Leon Cycle had not pleaded that Mr Raad procured Hi5 Scooters to breach the Licensing Agreement.
2. Consistently with my findings in relation to Issue 3, I conclude that a constructive trust arose over the Goods and their respective proceeds. I further note that, between paragraphs 16 to 18 of the further amended statement of claim, Leon Cycle pleads that Mr Raad "wilfully procured" the aforementioned breach or, in the alternative, was "involved with knowledge in Hi5's wilful breaches". Throughout the proceeding, Mr Raad was the sole director and shareholder of Hi5 Scooters.
3. Several categories of accessorial liability currently exist under Australian law, articulated as follows - of which paragraphs (b), (c), and (d) are of particular relevance:

"(a) The first limb of Barnes v Addy: receipt of trust property with particular types of notice.

(b) The second limb of Barnes v Addy: assisting in (that is, participating, without inducing or procuring) a dishonest and fraudulent design on the part of the fiduciary with particular types of notice.

(c) Procuring or inducing a breach of fiduciary duty (whether that breach be a dishonest or fraudulent design or not) with a particular mental state. An example may be found in the liability of a solicitor who persuades a trustee to apply trust property in a way the trustee honestly believes is permissible but which the solicitor knows to be a breach of trust, a fact which the solicitor deliberately conceals from the trustee. This is the category with which the Privy Council was dealing in Royal Brunei Airlines Sdn Bhd v Tan. The High Court kept the rules of this category distinct from those applying to the second limb of Barnes v Addy in Farah Constructions Pty Ltd v Say-Dee Pty Ltd. English law, following the Privy Council decision in the Royal Brunei Airlines case, treats this category as a remodelling of the second: there is no need for a dishonest and fraudulent design, but the accessory must have behaved dishonestly.

(d) A company which is the 'corporate creature, vehicle, or alter ego' of the fiduciary who uses it to secure the profits of, or to inflict the losses by, the fiduciary's breach of fiduciary duty is fully liable for the profits made from, and the losses inflicted by, the fiduciary's wrong.

(e) A person who presumes to act as a trustee though not so appointed and then commits a breach of trust or makes a profit from the position may be liable as a trustee de son tort."[100] (emphasis added) (citations omitted)

1. First, with respect to Leon Cycle's "wilful procurement" submission - as articulated in paragraph (c) - I refer to the following guidance provided by Nichols J in Coonwarra Pty Ltd v ComoNero Pty Ltd:

"A third party's liability for inducing or procuring a breach of trust or fiduciary duty has two elements. The first is intentional conduct which causes, and is intended to cause, the breach of trust or fiduciary duty. It is sufficient that the inducer or procurer intended to do the thing which is in fact a breach of trust or duty.

The second is that the third party knew that he or she was bringing about a breach of trust or fiduciary duty. What is required is knowledge of the essential matters that go to make up the breach of trust or duty, even if the procurer or inducer does not know that those matters amount to a breach of trust or duty. It is sufficient if the procurer or inducer knew of the facts which, to a reasonable person, would indicate a breach of trust or fiduciary duty."[101] (emphasis added) (citations omitted)

1. It is uncontested that Mr Raad, as the sole director and shareholder of Hi5 Scooters, intentionally caused Hi5 Scooters to unilaterally cease the payment of the proceeds of Goods to Leon Cycle and retain possession of such proceeds and unsold Goods - notwithstanding a clear demand for their return. This is apparent from Mr Raad's evidence, that he had only done so because he had "no choice" and needed to "fund the ongoing operation of ... business costs".
2. Regarding the knowledge requirement, as recognised in Farah Constructions Pty Ltd v Say-Dee Pty Ltd,[102] Mr Raad need not act with "dishonest and fraudulent design" for him to have wilfully procured a breach of trust. I find that the reasonable person in Mr Raad's position would have been of the understanding that withholding the Goods and their proceeds was a breach of trust, given Mr Raad knew that title in the Goods delivered remained with Leon Cycle, as a core condition of the consignment arrangement whereby Hi5 Scooters would receive the benefit of free delivery, and that Hi5 Scooters was not allowed to appropriate the Goods - while title remained with Leon Cycle - without consideration.
3. For the reasons above, I find that Mr Raad acted with the requisite standard of knowledge and wilfully procured the breach of trust as alleged by Leon Cycle.
4. In the alternative, with respect to Leon Cycle's "knowing assistance" submission - as articulated in paragraph (b), being the second limb of Barnes v Addy - I again refer to Nichols J in Coonwarra:

"In Barnes v Addy, Lord Selborne LC held that a third party may be held liability for a breach of trust where they knowingly receive trust property (first limb); or knowingly assist in a dishonest and fraudulent design by the trustee (second limb).

In Harstedt Pty Ltd v Tomanek, the Victorian Court of Appeal identified the following four elements are being necessary to establish liability for knowing assistance:

(a) the existence of a fiduciary duty owed by the fiduciary (as trustee or otherwise);

(b) a "dishonest and fraudulent design" on the part of the fiduciary;

(c) assistance by the third party in that design; and

(d) knowledge on the part of the third party of the circumstances constituting that design.

Having established the existence of a fiduciary duty, the Court must then determine whether the gravity of the fiduciary's conduct is such that it can be characterised as 'dishonest and fraudulent'. Breaches that are well-intentioned, trivial or insignificant do not therefore meet that description.

There is a divergence of opinion amongst the authorities as to the meaning of 'dishonest and fraudulent design' of a fiduciary in the context of a knowing assistance claim, as recently recognised by Sifris J in Chickabo v Zphere..

On one view, it is not necessary to demonstrate conscious awareness of wrongdoing or moral iniquity by the fiduciary in order to establish a 'dishonest and fraudulent design'. It is sufficient if the breach of duty can be characterised as dishonest or fraudulent according to equitable principles. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3), Drummond AJA (Lee AJA agreeing) relevantly said that 'a person may be fraudulent in the eyes of equity, even though he acted with subjective honesty', so long as the breach is too serious to be excusable as a matter of discretionary judgment.

Conversely, other authorities have considered that the concept of 'dishonest and fraudulent design' as expressed in Barnes v Addy requires an element of actual dishonesty, namely, 'a transgression of ordinary standards of honest behaviour'. On this view, 'dishonest and fraudulent design' requires conduct in the nature of common law (as opposed to equitable) fraud. In Hasler v Singtel v Singtel Optus Pty Ltd, Leeming JA criticised the approach of Drummond AJA in Bell Group (No 3), and found that a 'dishonest and fraudulent design' must involve actual dishonesty contrary to the ordinary standards of honest behaviour.

The weight of subsequent authorities favour the approach of Leeming JA regarding the meaning of 'dishonest and fraudulent design' in Hasler. In Ancient Order of Foresters v Lifespan, Gageler J endorsed the formulation of Leeming JA in Hasler, and said that 'the requisite element of dishonesty and fraud on the part of the fiduciary is met where the conduct which constitutes the breach transgresses ordinary standards of honest behaviour'. Leeming JA's approach in Hasler as endorsed by Gageler J in Forester was also recently approved by the Full Federal Court in Zibara v Ultra Management (Sports). On that basis, it is appropriate to adopt the formulation of Leeming JA of the requisite element of dishonesty and fraud, which is met where the conduct constitutes a 'transgression of ordinary standards of honest behaviour'.

The Court must next consider whether a third party's conduct, at the time of the implementation of the dishonest and fraudulent design, constituted 'assistance' in respect of that scheme. In this regard, the Victorian Court of Appeal in Harstedt noted that whether a third party has so assisted is 'plainly' a question of fact, and that the ways in which a third party may provide assistance are 'myriad'. However, the two principles below are apposite:

First, there will be assistance where, but for the action or inaction of the third party, the breach of fiduciary duty would not have occurred. A common example is the role of a bank or other financial intermediary the function of which is essential to effect a transaction that amounts to a breach of trust.

Secondly, there may also be assistance where the third party has facilitated a breach of fiduciary duty that would have occurred in any event. It is difficult to see how, in view of equity's broad concern with prevent unconscionability, a third party in these circumstances could not be liable under the second limb of Barnes v Addy, even if there is evidence to suggest that the commission of the primary breach was a foregone conclusion.

Finally, the third party must have the requisite knowledge of the circumstances constituting the dishonest and fraudulent design in order to attract liability. To establish this element, it must be shown that the third party knew, or had reason to know, of the dishonest and fraudulent design of the fiduciary. Importantly, it is not necessary to show that the third party acted dishonestly.[103] (emphasis added) (citations omitted)

1. As established in the findings on Issue 3 above, the Licensing Agreement gave rise to fiduciary obligations owed by Hi5 Scooters to Leon Cycle in respect of the Goods and their proceeds. Hi5 Scooters' subsequent dealings with those Goods and proceeds amounted to a breach of trust and, in my view, departed from ordinary standards of honest commercial dealing. As the sole director of Hi5 Scooters, Mr Raad was aware of any obligations owed to Leon Cycle - yet still directed and participated in the impugned conduct, thereby knowingly assisting in a breach of trust obligations owed. But for Mr Raad's actions, such a breach would not have occurred.
2. I am, therefore, prepared to find, in the alternative, that Mr Raad is accessorily liable for knowingly assisting Hi5 Scooters in breaching trust obligations owed to Leon Cycle.
3. While no submissions were made by the parties to this effect, I make a conclusory note that - as articulated in paragraph (d) - Grimaldi v Chameleon Mining NL (No 2) stands for the proposition that Mr Raad, as the "alter ego" of Hi5 Scooters, as its sole director and shareholder, nonetheless bears joint and several liability with Hi5 Scooters, the fiduciary:

"... where the advantage of a fiduciary's/trustee's wrongdoing accrues to a third party (whether as a knowing recipient or an assistant) and the third party is the alter ego/'nominee' (usually corporate) of the fiduciary, its liabilities will be joint and several with the fiduciary's ..."[104]

1. For the reasons above, I find that Mr Raad is personally liable as an accessory for Hi5 Scooter's breach of trust - either on grounds of wilful procurement, knowing assistance, or as the alter ego of Hi5 Scooters.

Issue 9. Did the Franchising Code of Conduct apply to the Licencing Agreement?

1. The Licensing Agreement was entered into on 3 June 2021. At the time, and as noted in prior footnotes, Schedule 1 to the Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth) was in force, otherwise referred to as the Code.
2. The Code was established pursuant to s 51AE(1)(a) of the CCA, which allows for the prescription of an "industry code". Largely mirroring the purpose of the Code, articulated in clause 2, the explanatory statement of the Code states:

"The purpose of the Code is to regulate the conduct of participants in franchising towards other participants in franchising, in particular to:

• address the imbalance of power between franchisors and franchisees;

• raise the standards of conduct in the franchising sector without endangering the vitality and growth of franchising;

• reduce the cost of resolving disputes in the sector, and

• reduce risk and generate growth in the sector by increasing the level of certainty for all participants."[105]

1. Clause 4 of the Code notes that it is a "mandatory industry code", as declared under s 51AE(1)(b) of the CCA. The parties are therefore unable to contract out of the application of the Code, should the preconditions exist for the Code to apply.
2. Clause 5 of the Code articulates the definition of a "franchise agreement" as follows:

(a) that takes the form, in whole or part, of any of the following:

(i) a written agreement;

(ii) an oral agreement;

(iii) an implied agreement; and

(b) in which a person (the franchisor) grants to another person (the franchisee) the right to carry on the business of offering, supplying or distributing Goods or services in Australia under a system or marketing plan substantially determined, controlled or suggested by the franchisor or an associate of the franchisor; and

(c) under which the operation of the business will be substantially or materially associated with a trade mark, advertising or a commercial symbol:

(i) owned, used or licensed by the franchisor or an associate of the franchisor; or

(ii) specified by the franchisor or an associate of the franchisor; and

(d) under which, before starting or continuing the business, the franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount including, for example:

(i) an initial capital investment fee; or

(ii) a payment for Goods or services; or

(iii) a fee based on a percentage of gross or net income whether or not called a royalty or franchise service fee; or

(iv) a training fee or training school fee;

but excluding:

(v) payment for Goods and services supplied on a genuine wholesale basis; or

(vi) repayment by the franchisee of a loan from the franchisor or an associate of the franchisor; or

(vii) payment for Goods taken on consignment and supplied on a genuine wholesale basis; or

(viii) payment of market value for purchase or lease of real property, fixtures, equipment or supplies needed to start business or to continue business under the franchise agreement." (emphasis added)

1. Clause 5 is cumulative, in that all the four conditions articulated in subclauses (a), (b), (c), and (d) must be met for an agreement to constitute a "franchise agreement" for the purposes of the Code. Whether the Code applies in the current proceeding depends on whether the Licensing Agreement can be said to be a "franchise agreement" for the purposes of clause 5.
2. Throughout the proceeding, the defendants have contended that the Code does apply, referring to the express inclusion of the words "franchise" and "franchisee" in the Licensing Agreement. The defendants also refers to conversations between Mr Rigoli and Mr Raad, whereby the words "franchise" and "franchisee" were used.
3. In contrast, Leon Cycle denies that the Code applies, by reference to the parties' subjective intentions. Further, Leon Cycle submits that the exceptions under subclauses 5(1)(d)(v) and (vii) of the Code are applicable and exclude the application of the Code in the context of the Licensing Agreement.
4. For the reasons below, the Court finds in favour of Leon Cycle on this issue.
5. Regarding the evidence adduced, because the Code is a "mandatory industry code", the subjective intention of the parties is not determinative in the Court's consideration of whether or not the Code applies.
6. Mr Rigoli gave evidence that in March or April 2021, the parties discussed the possibility of a "further or separate agreement" beyond the original agreement they had entered into, which involved Hi5 Scooters purchasing stock from Leon Cycle on credit and profiting from an increased retail price. Mr Rigoli recalled that, during negotiations of the terms of a revised agreement between Leon Cycle and Hi5 Scooters, the parties agreed to a license agreement due to the costs associated with a franchise agreement. Mr Rigoli noted that this decision was made following a meeting between Franchise Ease Lawyers, Mr Raad, Ms Maglieri, and Mr Rigoli.
7. In contrast, Mr Raad's evidence was affected by the effluxion of time, marked with greatly inconsistencies around the events in the lead-up to the signing of the Licensing Agreement, to fit the narrative he intended to craft.
8. Mr Raad could not recall that his meeting with Franchise Ease Lawyers was also attended by Mr Rigoli. Further, Mr Raad gave inconsistent evidence as to when he first became aware of the Code, and whether that occurred through Franchise Ease Lawyers, upon the dispute arising, or only after the commencement of these proceedings. Finally, Mr Raad was unwilling to concede that the comments on the draft agreement left by an individual with the initials "AM" were made by his wife. Instead, Mr Raad initially claimed that Mr Rigoli had left those comments, before admitting that they may have been left by his wife, but on instructions from their solicitors.
9. I accept Mr Rigoli's account of the events preceding the signing of the Licensing Agreement, given the consistency of his recount and with contemporaneous documentary evidence adduced.
10. Just as the subjective intention of parties is not determinative in the Court's assessment of whether or not the Code applies, so too can be said about the inclusion or exclusion of the words "franchise", "franchisee", "license", or "licensee" in the Licensing Agreement. For that reason, I reject the defendants' submissions, that the Licensing Agreement is a "franchise agreement" for the purposes of the Code because of the inclusion of the words "franchise" and "franchisee", and because Mr Raad and Mr Rigoli refer to it as a "franchise" agreement via text message correspondence.

Did the Licensing Agreement satisfy clause 5(1)(d) of the Franchising Code of Conduct?

1. Relevantly, regarding whether the statutory exceptions under clauses 5(1)(d)(v) and (vii) are applicable to exclude the application of the Code, Leon Cycle submits that three requirements must be satisfied:

(a) first, payments pursuant to clause 5(1)(d) must be made by the franchisee to the franchisor;

(b) second, payments must occur "before starting or continuing the business"; and

(c) third, payments for "Goods and services supplied on a genuine wholesale basis" and "Goods taken on consignment and supplied on a genuine wholesale basis" are exempt from the Code.

1. The defendants respond to point (c) in their written closing submissions by explaining that the Goods were not supplied on a "genuine wholesale basis" because Hi5 Scooters was permitted to sell the stock on Leon Cycle's payment system and receive a commission.
2. First, regarding point (a), I agree with Leon Cycle's submission, that the Code is limited to arrangements where the "franchisee must pay or agree to pay to the franchisor or an associate of the franchisor an amount". I note that the express inclusion of "associate of the franchisor" is indicative that references to the "franchisee" must necessarily be restrictive, such that it must be Hi5 Scooters making payments for the purposes of clause 5 of the Code. This was not the arrangement on the current facts, however.
3. Pursuant to clauses 10 and 11 of the Licensing Agreement, the arrangement the parties entered into was one where Hi5 Scooters would sell electric bicycles, customers would pay Leon Cycle directly via SmartPay as per clauses 20.2 and 20.6 of the License Agreement, and Leon Cycle would subsequently remit an agreed upon commission to Hi5 Scooters on a fortnightly basis, necessarily meaning Hi5 Scooters was not paying nor agreeing to pay Leon Cycle. It was, in fact, the customers paying Leon Cycle. This is distinguishable with the arrangement in Freedom Foods,[106] where Freedom Foods Pty Ltd purchased "almond base" directly from Blue Diamond Growers to produce other beverage products.
4. I note that in W Hoy Pty Ltd v WTH Pty Ltd,[107] while being an application for interlocutory injunctions and, therefore, not a "final judgment", Baker J considers that the word "amount" in clause 5(1)(d) likely requires an element of "profit". Justice Baker found support for the abovementioned view by contrasting examples of amounts pursuant to subclauses 5(1)(d)(i), (ii), (iii), and (iv), with "excluded transactions ... [and] payments" pursuant to subclauses (v), (vi), and (vii),[108] referring to the fact that:

"What may be said to flow from the concept of 'an amount', in all these circumstances, is that the amount paid constitutes some element of profit in the hands of the other party, over and above cost price."[109]

1. In W Hoy v WTH, Baker J ultimately noted that the relevant clauses in the agreements in the proceeding before him, which imposed - for the benefit of Avis Australia and Budget Australia:[110]

(a) an obligation upon W Hoy Pty Ltd to indemnify Avis Australia for losses, penalties, and fines;

(b) an obligation upon W Hoy Pty Ltd to maintain a clean and neat rental counter, at its expense, so as to contribute to the goodwill of Avis Australia and Budget Australia; and

(c) an option for Avis Australia to deduct from any commission payable to W Hoy Pty Ltd, for their failure to comply with its obligations under the agreements -

were likely not to satisfy the definition of clause 5(1)(d) of the Code, as they were "simply intended to enable the prospective respondents to recover the actual expenditure they have incurred (the cost price) without any relevant element of 'profit'".[111]

1. In this current proceeding, while it is true that Leon Cycle stands to earn a profit, the question is who will ultimately bear the cost of that profit. Here, it is the customer, not Hi5 Scooters.
2. Supplementing Baker J's proposed definition and adhering to a strict interpretation of subclause 5(1)(d), I confirm that the "franchise agreement" contemplated by the Code is one in which the franchisor derives a profit - whether immediate or prospective - borne by the purported franchisee. This interpretation aligns with the purpose of the Code as articulated above: where the franchisee bears the financial obligation that generates profit for the franchisor, an inherent "imbalance of power" and corresponding "risk" arises, warranting the Code's application to safeguard the franchisee.
3. I note that Hi5 Scooters' submissions attempt to conflate the "proceeds of sale", paid by the customers, with the "amount" payable pursuant to clause 5(1)(d). This, in effect, may be perceived as an argument of substance over form, which, in my view, should be rejected.
4. The inclusion of the words "under which" in the clause necessarily calls for a strict reading of the provision. In Apple Computer Australia Pty Ltd v Mekrizis, Bergin J affirmed the plaintiff's submissions, that it "must be a term found within the agreement" (emphasis added) that a franchisee make or agree to make a payment pursuant to clause 5(1)(d), for the provision to operate.[112] Such a provision was not included in the Licensing Agreement - instead, the agreement referred to proceeds of sale being paid directly to Leon Cycle by customers, as per clauses 20.2 and 20.6. This is further supplemented by the express inclusion of the words "associate of the franchisor" in the relevant clause, whereas such words are excluded in the context of a "franchisee", meaning it is also not open for the defendants to argue that the customers were "associates" in the relevant sense.
5. In support of this interpretation, I refer to Muir J's finding in Subway Systems Australia Pty Ltd v Thorpe that, for the purposes of the Code, a "franchise" must arise from the terms of a "franchise agreement" as defined under the Code, and that there is no separate or broader concept of "franchise".[113] Finally, while unnecessary to make a finding on the nature of the agreement entered into between Leon Cycle and Hi5 Scooters, I note that it shares elements of an agency agreement as articulated in Franchising Law & Practice:

"The Franchising Code definition of a franchise agreement in cl 5 requires "an amount" to be paid by the franchisee to the franchisor, whereas the typical flow of funds in an agency arrangement is from franchisor to franchisee".[114] (emphasis added)

1. Second, regarding point (b) - that payments must occur "before starting or continuing the business" - I note that this requirement has not been satisfied. As articulated in my response to Issue 6, the agreement entered into between Ignotus and Hi5 Scooters is separate and discrete to the Licensing Agreement between Leon Cycle and Hi5 Scooters.
2. I also emphasise that, on the evidence before me, the existence of the Licensing Agreement was not contingent upon Hi5 Scooters entering into an agreement with Ignotus, and that Mr Raad was not "forced" to do so as the defendants contend. I am, therefore, unable to find that payments were made by Hi5 Scooters to Leon Cycle before starting or continuing their business.
3. Third, in the alternative that payments have been made, Leon Cycle submits that such payments were either made "for Goods and services supplied on a genuine wholesale basis" or "for Goods taken on consignment and supplied on a genuine wholesale basis" as per clauses 5(1)(d)(v) and (vii) of the Code. Pursuant to my findings above, I find that no such payment was made by Hi5 Scooters to Leon Cycle. As such, I will not consider this requirement in further detail.

Did the Licensing Agreement satisfy clause 5(1)(b) of the Franchising Code of Conduct?

1. In their written closing submissions, Leon Cycle further refers to clause 5(1)(b) of the Code, in relation to the requirement that a purported franchisee must be subject to a "marketing plan substantially determined, controlled or suggested by the franchisor". I find that Leon Cycle's submissions in response to this issue are particularly compelling. The following provisions of the Licensing Agreement are particularly relevant in my consideration of whether clause 5(1)(b) has been established:

(a) clause 7.4. requiring that Leon Cycle provide Hi5 Scooters an "advertising and marketing guide with marketing plan";

(b) clause 8.1, requiring Leon Cycle to provide a "minimum of 4 hours training";

(c) clauses 9.2, providing Leon Cycle with a "discretion" to provide advice "to the extent it judges to be reasonably required";

(d) clause 9.3, undertaking that Leon Cycle will "provide whatever marketing assistance and promotional material ... as it considers reasonable and necessary";

(e) clauses 9.4, obliging that Leon Cycle must "develop public relations and promotional campaigns for the benefit of ... all its Franchises";

(f) clause 9.6, noting that Leon Cycle must "provide digital marketing to promote sales"; and

(g) clause 14.9, articulating that Hi5 Scooters is responsible for all "local advertisements and promotions" with "prior approval" from Leon Cycle.

1. I accept that Leon Cycle has retained a level of control over matters relating to marketing, consistent with an interest to protect their brand. However, I also agree with Leon Cycle's written closing submissions, that the joint operation of these clauses does not amount to a "marketing plan substantially determined, controlled or suggested" by Leon Cycle.
2. Read together, Hi5 Scooters still retains broad scope to make marketing decisions - most notably, for all "local advertisements and promotions". Leon Cycle's obligations were limited to providing guidance and training, while retaining a discretion to veto or provide advice on an ad hoc basis where necessary. Clause 9.4, regarding the development of "public relations and promotional campaigns", must be interpreted in the context of promoting of the overall brand - Leon Cycle's obligations pursuant to this clause do not detract from the marketing responsibilities of Hi5 Scooters, which exist concurrently.
3. For the reasons highlighted above, given the Licensing Agreement does not satisfy the requirements under clauses 5(1)(b) and (d) of the Code, I find that the Code does not apply to the Licensing Agreement.

Issue 10. If the Franchising Code of Conduct applied, did Leon Cycle breach it?

1. The defendants allege that Leon Cycle breached the following provisions of the Code:

(a) clause 6;

(b) clauses 36(1)(b), (c), and 41A(5);

(c) clause 27(2)(c); and

(d) clause 27(4).

1. Given my abovementioned findings, that the Code does not apply to the Licensing Agreement, it is unnecessary for me to address whether Leon Cycle was in breach of the provisions above.

Issue 5. Is Leon Cycle entitled to damages, equitable compensation, an account of profits, and/or any outstanding debt, notwithstanding the limitation of liability at clause 35.4 of the Licensing Agreement?

(a) paragraphs F and G of Leon Cycle's prayer for relief, Leon Cycle seeks an order that Hi5 Scooters and Mr Raad account to Leon Cycle for the proceeds of sale of the Goods;

(b) paragraphs H, I, and J of Leon Cycle's prayer for relief, Leon Cycle seeks an order that Hi5 Scooters return all Goods in its possession - or, alternatively, damages or equitable compensation; and

(c) paragraph K of Leon Cycle's prayer for relief and, read together with paragraphs 23 to 25 of the further amended statement of claim, Leon Cycle seeks judgment for Leon Cycle in the sum of $8,185.63, as a debt due and payable.

Is Leon Cycle entitled to an account of profits against Hi5 Scooters and Mr Raad?

1. Leon Cycle claims that Hi5 Scooters and Mr Raad are personally liable to account for profits derived from the sale of Goods, in circumstances where the defendants held the proceeds on behalf of Leon Cycle. I refer to the decision of Mason J in Hospital Products, setting out the applicable law in relation to an account of profits as follows:

"The principle, accepted by the courts below, is that the fiduciary cannot be permitted to retain a profit or benefit which he has obtained by reason of his breach of fiduciary duty (Consul Development, at p.393; Queensland Mines, at p.401). A fiduciary is liable to account for a profit or benefit if it was obtained (1) in circumstances where there was a conflict, or possible conflict of interest and duty or (2) by reason of the fiduciary position or by reason of the fiduciary taking advantage of opportunity or knowledge which he derived in consequence of his occupation of the fiduciary position."[115] (emphasis added)

1. In light of my findings in response to Issues 3 and 4, I note that such a discretionary remedy is available because Leon Cycle has established an equitable claim against Leon Cycle, as a fiduciary, and against Mr Raad personally, by reason of his wilful procurement of, or knowing involvement in, the breach of fiduciary duty that gave rise to a constructive trust. An account of profits is, therefore, appropriate to give effect to Leon Cycle's right to relief under well-established equitable principles.[116]
2. I note that, in written closing submissions, the defendants refer to the "clean hands" doctrine as an equitable defence. In Klein v Mochkin, the Victorian Court of Appeal states as follows:

"... the operation of the doctrine is not triggered by simply any act of wrongful conduct by a defendant. Rather, the wrongful conduct must have an 'immediate and necessary relation to the equity sued for'. As Young J observed in FAI Insurances Ltd v Pioneer Concrete Services Ltd, 'general naughtiness or the desire of the court to censor the plaintiff's conduct' is not a basis to refuse relief."[117] (citations omitted)

3. Given my prior factual findings, and particularly in relation to the defendants' allegation that Leon Cycle breached the Good Faith Clause, I do not consider that Leon Cycle has acted with "unclean hands". Other equitable defences such as "estoppel, laches, acquiescence, and delay",[118] or, "unconscientious" conduct,[119] have not been raised by the defendants - and, in any event, I do not consider that they are applicable in the current proceeding.
4. In conclusion, and for the reasons above, I find that Leon Cycle is entitled to an account of profits against Hi5 Scooters, as per paragraph F of the prayer for relief.
5. I emphasise that such an account of profits also extends to Mr Raad personally, as per paragraph G of the prayer for relief, and as affirmed by the High Court in Ancient Order of Foresters in Victoria Friendly Society Limited v Lifeplan Australia Friendly Society Limited.[120] I also affirm that, as Hi5 Scooters' sole director and shareholder, Mr Raad's actions were directly causative of any breach of fiduciary duties as alleged by Leon Cycle.

1. Leon Cycle seeks an order that Hi5 Scooters return to Leon Cycle all unaccounted Goods in its possession or, in the alternative, damages. This includes unaccounted electric bicycles and bicycle parts held by Hi5 Scooters. In paragraph 3 of Leon Cycle's written closing submissions and during oral closing submissions, Leon Cycle noted that in accordance with the 24 November 2023 orders, Hi5 Scooters purported to deliver all Goods in its possession on 22 January 2024. Therefore, Leon Cycle submits that the only dispute remaining concerns damages, debt, and declarations.
2. Pursuant to my findings below, and adopting the assumption, for the purpose of quantifying loss and damage, that all unaccounted electric bicycles and bicycle parts were sold by Hi5 Scooters - as I explain in greater detail below - I find that expectation damages are an appropriate remedy for the Proceeds Breach, to place Leon Cycle in the position it would have been in had the provision been performed.[121]
3. Damages associated with unaccounted electric bicycles will be considered first, prior to any damages associated with unaccounted bicycle parts.
4. By way of context, Schedule 2 to the Licensing Agreement, titled "Initial Franchise Shop Locations", identifies four stores owned by Hi5 Scooters to which the Licensing Agreement applies:

(a) 560 Swan Street, Richmond, Victoria 3121 - being the Richmond store;

(b) 202 Flinders Street, Adelaide, South Australia 5000 - being the Adelaide store;

(c) Shop 1/418-420 Canterbury Road (Corner Scahill and Canterbury Road), Campsie, New South Wales 2194 - being the Campsie store; and

(d) Shop 1/69-77 King Street, Newtown, New South Wales 2042 - being the Newtown store.

1. Further, I reiterate that pursuant to clause 10.1 of the Licensing Agreement, the commission payable to Hi5 Scooters for the sale of "Plus models" was 43%, while the commission payable for "Basic models" was 37%. These percentages are calculated on the "ex GST" price per electric bicycle, equivalent to the "inc GST" price multiplied by ten-elevenths.
2. Leon Cycle provides three varying formulations of how damages should be assessed in the current proceeding. The three methodologies, calculated by Mr Rigoli, are as follows.
3. First, Method 1 assumes that if a bicycle delivered from Leon Cycle to Hi5 Scooters was not sold prior to 23 February 2023 and was not returned by 22 January 2024, then it was sold in between that period. Leon Cycle would, therefore, be entitled to the sale proceeds of 402 unaccounted bicycles (207 bicycles from the Adelaide store, 86 bicycles from the Richmond store, and 109 bicycles from the Newtown store), as per the Excel workbook titled "41. Final Calculations after Return of Stock (Method 1)" ("the Method 1 Calculation Workbook"), minus the commission owed to Hi5 Scooters.
4. The Method 1 Calculation Workbook contains various spreadsheets, detailing identifying information of bicycles held by Hi5 Scooters in the Adelaide, Richmond, and Newtown stores, including:

(a) their SKUs;

(b) their model names;

(c) the amount of stock held as at 23 February 2023;

(d) the amount of stock held as at 15 September 2023, upon a stocktake facilitated by RGIS Stocktaking;

(e) the amount of stock returned and its respective retail value;

(f) the number of bicycles sold and their total sale proceeds;

(g) the commission Hi5 Scooters is entitled to, for the sale of basic and plus models; and

(h) the value of missing parts on returned bicycles.

1. Effectively, Method 1 relies on the "wholesale price" of the 402 bicycles, as referred to by the parties during oral closing submissions - being the difference of the "recommended retail price" of the bicycles ($813,316.00) and the total commission owed to Hi5 Scooters ($322,787.63), totalling $490,528.37.
2. Second, as for Method 2, the Excel workbook titled "44. Summary of Bikes Shipped and Returned (Method 2)", being the Method 2 Calculation Workbook, begins by accounting for all bicycles shipped to the Richmond, Adelaide, Campsie, and Newtown stores by Leon Cycle - totalling 1,977 and worth $3,942,555.00 - as per the "Exported Raw Data" included in the workbook's spreadsheets.
3. The electric bicycles sold prior to 23 February 2023 - totalling 1,342 and worth $2,571,467.00, as per the Excel workbook titled "44c. Hi5-Franchise Commission Records-Bikes (Method 2).xlsx" ("the Goods Sold Prior to 23 February 2023 Workbook") - were then deducted from the total number of bicycles shipped. On that basis, the unsold stock as at 23 February 2023 was calculated to be 635 electric bicycles, valued at a total of $1,371,088.00.
4. The electric bicycles returned by Hi5 Scooters on 22 January 2024 - totalling 181 and worth $367,520.00, as per the Excel workbook titled "Summary of Returned Bikes and Parts" ("the Bicycles Returned on 22 January 2024 Workbook") - was then deducted from the total unsold stock as at 23 February 2023, leaving 454 unaccounted electric bicycles with a total value of $1,003,568.00. I note that this is inconsistent with Method 1, which proceeds on the basis that there were 402 unaccounted bicycles once the bicycles returned on 22 January 2024 are taken into account.
5. Of these 454 unaccounted bicycles, Hi5 Scooters' discovered sales records, pursuant to "29. Full Summary of Hi5 Sale Records after 23 Feb 23" ("the Hi5 Scooters' Sales after 23 February 2023 Workbook"), note that only 318 electric bicycles were sold between 23 February 2023 and 22 January 2024. The Hi5 Scooters' Sales after 23 February 2023 Workbook contains a combined spreadsheet of sales from the Richmond, Adelaide, and Newtown stores as well as online sales, detailing, amongst other things:

(a) the date of each sale;

(b) the model, size, and colour of each bicycle sold;

(c) the stores each bicycle was sold from; and

(d) the commission owing for each sale.

1. Under Method 2, for these 318 recorded sales totalling $602,766.00, a commission of $243,130.00 is deductible from the recommended retail price, such that the damages owed by the defendants for these bicycles is reduced and equivalent to their wholesale value. This method leaves 136 unaccounted electric bicycles for, in respect of which Leon Cycle contends it is entitled to the full recommended retail price, totalling $400,802.00. On that basis, Leon Cycle calculates that the defendants owe $760,438.00in damages (being $602,766.00 plus $400,802.00 less $243,130.00).
2. Third, as per Method 3, the defendants' claims that 318 sales were made is not accepted, given the lack of supporting evidence such as invoices or order forms. Because only 56 of these 318 sales are partially or wholly "proven" - indicated by the yellow and green rows in the spreadsheet titled "All Sales Records of Hi5" in the Hi5 Scooters' Sales after 23 February 2023 Workbook - and commission is only payable if Hi5 Scooters is able to "prove sale", Method 3 is calculated based on the full recommended retail price for 398 missing bicycles plus the wholesale value of only 56 bicycles.
3. To calculate this amount, the recommended retail price of the 454 unaccounted bicycles is totalled - $602,766.00 plus $400,802.00 (per the Method 2 Calculation Workbook) - and the commissions attributable to the 56 proven sales are then deducted, being $41,923.00 (per the Hi5 Scooters' Sales after 23 February 2023 Workbook). On this method, the defendants owe Leon Cycle $961,645.00 in damages
4. I note that the methodologies depended upon to arrive at these figures are detailed between paragraphs 38 to 47 of the witness statement of the Rigoli Witness Statement. I emphasise that Mr Rigoli's calculations were undertaken against the background of Mr Raad's unreliable recordkeeping. I also recognise that Leon Cycle's calculations do not "double-count" for bicycles returned on 22 January 2024, and only apply to unaccounted bicycles. This was a point of concern for Mr Raad, in response to which counsel for Leon Cycle submitted as follows:

"No ... the bikes that you returned [have not been considered in the calculations], Mr Rigoli is not claiming any money for those, he accepts you've given those back, he's not claiming any extra money."

1. I now provide a summary of the various Excel workbooks depended upon by Mr Rigoli in his calculations, some of which are referred to in the paragraphs above:

(a) the Method 1 Calculation Workbook;

(b) the Method 2 Calculation Workbook, which is also relied upon for the Method 3 calculations;

(c) the Goods Sold Prior to 23 February 2023 Workbook;

(d) the Stock Returned on 22 January 2024 Workbook;

(e) the Hi5 Scooters' Sales after 23 February 2023 Workbook; and

(f) "40. Summary of Methods 1 to 3", containing a brief summary of the final figures used to calculate damages under each of the three methodologies.

1. I note that Leon Cycle bears the onus of proof in proving loss arising from the Proceeds Breach. The recent High Court decision in Cessnock City Council discusses the relevant law relating to the "facilitation [of proof] principle" as follows:

"The legal onus to prove loss arising from a breach of contract falls upon the plaintiff. Whilst this legal onus is not frequently stated, the reason for the infrequency may simply be that 'the rule is beyond doubt'. But although the plaintiff bears that legal onus, in some circumstances the common law facilitates its discharge. For instance, as explained above, a defendant has the burden of establishing that a plaintiff's loss was unreasonable in the sense required by the rules concerning mitigation of loss. So too, in a principle deriving from the law of torts, a plaintiff is assisted in proof by reasonable inferences where a defendant's breach has resulted in difficulties or impossibilities of proof of loss or damage. This principle of assistance in proof, or 'facilitation principle', lies at the heart of this appeal.

The precise description of this principle of facilitation of proof by a plaintiff has varied in the cases, although the substance of the principle is generally the same. In some Australian judgments the principle has been described as giving rise to a defendant's 'evidentiary onus' (although that expression can be used to mean different things). In some Australian judgments the principle has been described as giving rise to a 'prima facie inference' or prima facie case for the plaintiff. In other Australian judgments, including the decisions of the primary judge and the Court of Appeal in this case, the principle has been referred to as a 'presumption'. The reference to 'presumption', which is used in a variety of different senses in law, is best avoided in this context because it has been associated with a different rationale for the facilitation of proof by an assumption of fact, namely that in the ordinary course of commercial dealings a party will expect at least to recoup their expenses. As explained below, that proposed rationale for the principle should not be accepted.

Whatever the description of the principle, its essence is that it facilitates the discharge of the plaintiff's legal onus of proof of loss in circumstances where the defendant's wrongdoing has resulted in uncertainty regarding the quantum of loss. This facilitation principle operates where uncertainty arises from the defendant's breach and is capable of coexisting with other principles concerning facilitation of proof that might assist either the plaintiff or the defendant, such as the principle in Blatch v Archer that 'all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted'."[122] (emphasis added) (citations omitted)

1. As noted above, I find that any recordkeeping and calculations undertaken by Mr Raad in respect of the bicycles held as at 23 February 2023, the bicycles returned on 22 January 2024, and the amount said to be owing to Leon Cycle are unreliable. This is consistent with my findings concerning Hi5 Scooters' Records Breach in response to Issue 1.
2. First, regarding the number of bicycles held at 23 February 2023, during oral closing submissions and referring to Leon Cycle's Method 1 calculations, Mr Raad drew the Court's attention to the statement of facts completed by Mr Raad on 8 August 2025, reading as follows:

"1. In or around February 2023, Hi5 Scooters (Hi5) was in possession of 445 ebikes belonging to Leon Cycles (LC). LC initially recorded the inventory at 402 units - Hi5 corrected this figure to reflect the accurate count of 445 bikes."

1. Mr Raad also made the following statements during oral closing submissions, referring to the number of bicycles held by Hi5 Scooters as at 23 February 2023:

"I will tell you one thing. It's been recorded 402 ... but because I'm honest, I know it wasn't, so it was 445. Okay?

Ah I think it says here [referring to the defendants' statement of facts dated 8 August 2025] that Hi5 corrected this figure - it's 445 bikes. And I would like to stick to it ... Well because I'm here, I want to seek justice.

I have sold - of this 445 bike, I have sold 279 bikes. The rest I gave back.

... because I know I was always honest when I say to this number because I don't wanna end up in the same number and comes up another number again, Mr Lloyd. Ah I know it's a difference, it's quite huge, it's - we're talking about 30, 40,000 and - and - and talk and cost. I would have kept my mouth shut and say, yes, 442 [sic] but it was 445 bikes. I have sold 279. I gave back this back, I returned 162.

... they [Leon Cycle] have demanded me to - to return them [the bicycles] back on my own costs Your Honour, that's 445 bikes. Each bike can cost

$50-$70 [to return]. We're talking about a good amount of money I couldn't bear Your Honour.

... there was 445 bikes left in my - in my possession.

1. Mr Raad remained adamant in his concession, even in spite of counsel for Leon Cycle stating the following:

"Well Mr Raad, if it were 445 bikes the amount would actually be greater because you would owe sales proceeds for another 43 bikes.

... now you're also saying 445 bikes but that might be 445 and then you returned certain bikes and so you say sold 279 bikes."

1. I note that the defendants' submissions, that Hi5 Scooters held 445 bicycles as at 23 February 2023, is not supported by any documentary evidence adduced by the defendants. Leon Cycle refers to the individual spreadsheets contained in the Method 1 Calculation Workbook to reconcile the 445 figure.[123] This explanation, however, is problematic for the following reasons.
2. The Method 1 Calculation Workbook accounts for 402 bicycles,[124] all of which were assumed to be sold between 23 February 2023 and the pick-up date on 22 January 2024. The Method 1 Calculation Workbook also accounts for 181 bicycles,[125] all of which were returned on 22 January 2024. The sum of bicycles sold between 23 February 2024 and 22 January 2024 (402 bicycles) and the bicycles returned on 22 January 2024 (181 bicycles) should equal the number of bicycles submitted to be held by Hi5 Scooters as at 23 February 2023 (445 bicycles). It does not.
3. When pressed about the discrepancy between Leon Cycle's accounts, which recorded that Hi5 Scooters held 402 bicycles, and Mr Raad's admission that 445 bicycles were in fact held as at 23 February 2023, counsel for Leon Cycle submitted as follows:

"The amount of bikes as at 15 September 2023 is what was - is what is used, rather than at 23 February."

1. Leon Cycle here refers to the stocktake completed by RGIS Australia. Again, this is problematic. The total number of bicycles identified to be held by Hi5 Scooters as at 15 September 2023, pursuant to the Method 1 Calculation Workbook, totals 243, which does not support Leon Cycle's submission.[126]
2. Leon Cycle noted, during oral closing submissions, that Mr Rigoli was not cross-examined as to the veracity of the stocktake on 15 September 2023, and - had he been - Leon Cycle would have sought to rely on the affidavit of Mr Baugh dated 27 September 2023. Even if Mr Baugh's affidavit were tendered, I nonetheless note that it recognises that Hi5 Scooters only held 217 bicycles as stock as at 15 September 2023, inconsistent with the 243 bicycles calculated using the Method 1 Calculation Workbook.[127]
3. When pressed further as to discrepancies between the Method 1 Calculation Workbook and Mr Raad's concessions, counsel for Leon Cycle made the following statement:

"Mr Raad, these spreadsheets were given to you at the - a long time ago now.

Your Honour, I can't answer Mr Raad's questions as to why certain things are in and out of the Excel spreadsheet because it's not my evidence, these are Mr Rigoli's spreadsheets

... these spreadsheets were provided along with the Rigoli statement, prior to trial, and ... Mr Raad had the chance in both his submissions and in his evidence and cross-examination, to pick out any flaws in the spreadsheets and to ask why things were the way they were and so, it's now on [the defendants] to convince you that this spreadsheet might be wrong in a certain way. It's not on me to justify ..."

1. Finally, I note that there is an additional inconsistency within the Method 2 Calculation Workbook, which accounts for a total of 454 bicycles held by Hi5 Scooters, as at 23 February 2023.[128]
2. Second, regarding the number of bicycles returned to Leon Cycle on 22 January 2024, Mr Raad repeatedly stated during oral closing submissions that he had sold 279 electric bicycles and returned 162 electric bicycles to Leon Cycle. However, I note that the sum of these two figures is 441, falling short of the purported 445 bicycles Hi5 Scooters held as at 23 February 2023.
3. There is a possibility that Mr Raad's statements may have been made in error, as he later corrects himself and refers to the sale of 283 bicycles. However, I find that the conclusion drawn by Leon Cycle more probable, as articulated in oral closing submissions:

"Just before when we were looking at Mr Rigoli's spreadsheet, the calculations spreadsheet that's referred to in paragraph 41 of his statement, he seemed to accept that there were 445 bikes to begin with and 182 were returned and so there are 263 bikes he said. So the numbers keep changing.

The truth is [Mr Raad, on behalf of Hi5 Scooters] doesn't have his own business records that he's tendered or that he relies on and he's really relying on Leon Cycle's evidence." (emphasis added)

1. Third, regarding the amount payable to Leon Cycle, the defendants apply "wholesale/contract values" of $1,190.00 per electric bicycle, conceding that $198,210.00 remains owing for the "stock sold for which Hi5 did not remit the full proceeds". During oral closing submissions, Mr Raad stated as follows:

"... if you add the average [price per bicycle] it will become less than 1,190 but I put it 1,190 to be fair and square actually.

... the number [of bicycles sold was] 283, [multiplied by] 1,190, that comes to the price of $336,000 [sic] minus the money I have paid in ... March and April, the amount I paid [Leon Cycle] is $111,000, let's keep it down to $225,000."

... of this amount, $225,000, I owed, I have also ... counted that the money I paid for - for Mr Rigoni just should come back to me which is amount of ah $37,000 - around $37,000 and I get 288 (sic)."[129]

1. Leon Cycle submits that Mr Raad "presented no evidence to that value". While not entirely clear, I refer to the defendants' oral closing submissions, where the average "wholesale cost" per bicycle they depended upon - being $1,190, from their calculations - appears to have only been based on the average of two "class models" valued at $1,799.00 and $2,199.00. I note, however, that - as per the Method 2 Calculation Workbook - the price of bicycles sold by Hi5 Scooters varied more widely than the defendants' estimate assumes.[130]
2. Rather than adopting an average, I prefer Mr Rigoli's approach, which involved relying on the actual summed totals of bicycles sold.
3. As demonstrated by the three points above, the Records Breach - and Hi5 Scooter's poor recordkeeping more generally, in the context of Mr Raad's commercial unsophistication and lack of business acumen - has resulted in Leon Cycle's significant challenges quantifying any losses suffered. With reference to the abovementioned passage in Cessnock City Council, I find that Leon Cycle has discharged their legal onus of proof, despite the various discrepancies I have identified above in the Excel workbook evidence adduced.
4. The challenge before me, then, lies in assessing the amount of damages owed by the defendants to Leon Cycle. During oral closing submissions, the defendants submitted that the amount owing was "very clear". While such clarity might be hoped for, the Court does not share the defendants' confidence. Leon Cycle further submitted:

"... on the plaintiff's case, and if method three and method two, or method two instead used, then any confusion about the actual amount of bikes is not relevant."

1. It appears from the Method 1 and Method 2 Calculation Workbooks that Method 1 is distinct from Methods 2 and 3, in that it proceeds on a different number of bicycles held by Hi5 Scooters as at 23 February 2023. I am unable to treat the discrepancies in bicycle sales as immaterial. Those discrepancies go directly to the number of bicycles sold and retained, and, therefore, to the proper calculation of loss.
2. Here, I refer to Cosgrave J in Mortgage Finance Options Pty Ltd v UniQ Finance Australia Pty Ltd:

"... the calculation for damages for breach of contract necessarily involves a degree of hypothesis and pragmatism and the court can take a broad brush approach. As the learned author of Heydon on Contract puts it, 'provided there is evidence that the plaintiff has lost something of value, difficulty in assessing its worth is not a bar to recovery of damages in contract'. Where precise evidence is available, a court can expect to obtain it. Where such evidence is not available, the court must do the best it can. Where the evidence demonstrates a loss which is serious and involves more than merely nominal damage, but is not as complete or satisfactory as it might be, the court might award the plaintiff less than it sought."[131] (emphasis added) (citations omitted)

1. As evidenced above, in light of the contradictory calculations with respect to the number of bicycles held by Hi5 Scooters as at 23 February 2023, returned on 22 January 2024, and the amount owing to Leon Cycle, the Court must adopt a "degree of hypothesis" in arriving at an appropriate measure of damages, based on the raw data provided by the parties.
2. I further refer to the decision of John Dixon J in 5 Boroughs NY Pty Ltd v State of Victoria (No 2),[132] citing Bradshaw v McEwans Pty Ltd:[133]

"Bradshaw concerned the death of a cyclist, apparently in a collision with a van admittedly driven by an employee of the defendant. The evidence before the jury was circumstantial, and the defendant submitted that the accident was unexplained. The court said:

'Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence while the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort where direct proof is not available it is enough in the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty it is not to be regarded as a mere conjecture or surmise.'" (emphasis added) (citations omitted)

1. Besides any discrepancies, in regards to which methodology is most appropriate in this proceeding, the question before me is whether I should consider all unaccounted bicycles as having been sold between 23 February 2023 and 22 January 2024 (as per Method 1), accept Hi5 Scooters' purported 318 sales as true (as per Method 2), or, alternatively, only account for 56 sales with verifiable records - whether partial or full (as per Method 3).
2. The decisions in Mortgage Finance Options and Bradshaw are instructive. In the context of Hi5 Scooters' Record Breach, and as I have already found in relation to Issue 1, evidence is "not available" to verify the authenticity of the purported 318 sales made by Hi5 Scooters. However, that very breach in recordkeeping justifies drawing the "reasonable and definite inference" that all unreturned bicycles were, in fact, sold, but were not documented due to Hi5 Scooters' deficient recordkeeping practices.
3. I arrive at this inference for several reasons.
4. First, I note that - as per paragraph A of the "Other Matters" of the 24 November 2023 orders:

"A. By correspondence dated 23 November 2023, the parties informed this Court that they had reached the following agreement:

a. The Plaintiff will, at their cost, arrange for the collection of stock supplied by them including any bikes, spare parts, bikes, spare parts, demonstration bikes, damaged bikes, bikes under warranty claims and any returned Goods or ancillary materials currently held at the First Defendant's premises. (Relevant Stock);

b. The First Defendant will continue to sell the Relevant Stock until they are collected by the Plaintiff (Collection Date);

c. Within 7 days of the Collection Date, the First Defendant will provide a summary of all Relevant Stock sold by the First Defendant in the period between 24 February 2023 to the Collection Date and include the following foreach item sold:

i. A description;

ii. Model/part number and SKU;

iii. Quantity sold;

iv. The purchase price and method of payment;

v. Supporting documentation (including any relevant tax invoice or point of sale receipt); and

vi. The commission to which the Defendants claim to be entitled pursuant to clause 10.1 of the Licensing Agreement.

d. The First Defendant will take all reasonable steps to facilitate the collection of the Relevant stock as soon as practicable, including entry to premises, provided reasonable notice is given beforehand by the Plaintiff."

1. It is not part of Leon Cycle's pleaded case that Hi5 Scooters breached the abovementioned agreement, which required Hi5 Scooters to return any Goods it held to Leon Cycle, by improperly retaining said Goods. Pursuant to Leon Cycle's further amended statement of claim, Leon Cycle does not plead conversion and detinue and, therefore, are unable to contend that there are unaccounted bicycles that they want the full value of. I refer to the following extract from Court Forms, Precedents & Pleadings Victoria:

"If a bailee fails to deliver the Goods bailed upon demand, they will be liable in detinue for return of the Goods or their value, and damages for their detention, and for damages for conversion."[134]

1. I also refer to the following paragraph from Leon Cycle's further amended statement of claim:

"7A. By reason of clauses 20.2, 30.3, 20.6, 20.7 of the Licensing Agreement, on the sale by Hi5 of any of the Goods, the proceeds of sale:

b. were held by Hi5 on trust for Leon Cycle's benefit.

15A. Alternatively, the retention of funds the property of which resides in Leon Cycle amounts to fraudulent conduct on the party of Hi5 by reason of which Leon Cycle is entitled to an express or constructive trust in respect of the funds." (emphasis added)

1. As Leon Cycle has pleaded its case, any equitable remedy - whether specific performance or delivery up - is confined to the "proceeds of sale" retained by Hi5 Scooters.
2. In addition to this, I draw attention to the fact that Leon Cycle did not put to Mr Raad during cross-examination that 262 of the 318 purported sales were unsupported by evidence. Nor was Mr Raad questioned with respect to any unaccounted bicycles. As noted in Mortgage Finance Operations, given no evidence was called about this issue and without cross-examination occurring, "the court cannot make any findings on this issue".[135]
3. Second, I acknowledge that although Hi5 Scooters has provided evidence of only 318 sales between 23 February 2023 and 22 January 2024, I accept that it is open to infer that additional sales were made but not recorded. That inference is consistent with Hi5 Scooters' poor recordkeeping practices and the evidence of cash transactions, as per Mr Rigoli's claim that Hi5 Scooters made unrecorded cash sales between 7 February and 7 March 2023. These findings are also consistent with Leon Cycle's case that clause 10.2 of the Licensing Agreement was breached. Even in relation to the purported 318 sales, as Leon Cycle emphasised during oral closing submissions, only 56 sales are supported by partial or full proof, with the remainder unsupported by any evidence.
4. Third, I refer to the opening passage in Haines v Bendall:

"The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed ... Cognate with this concept is the rule, described by Lord Reid in Parry v. Cleaver (1970) AC 1, at p 13, as universal, that a plaintiff cannot recover more than he or she has lost."[136] (emphasis added)

1. In my view, adopting Methods 2 and 3 would place Leon Cycle in a better position than it would have been in, had Hi5 Scooters not committed the Proceeds Breach. On the findings set out above, the only reasonable inference is that any unaccounted bicycle were sold between 23 February 2023 and 22 January 2024. It follows that, in calculating Leon Cycle's loss, Hi5 Scooters is entitled to the agreed commission on each of those unaccounted bicycles.
2. In light of the limitations in the evidence provided, the Court must, as the authorities recognise, "do the best it can" with the material before it. What follows is the methodology I adopt to calculate the amount owing to Hi5 Scooters.
3. I begin by noting that an additional challenge in calculating the proceeds owed was because bicycles were shared between the Adelaide, Richmond, Campsie, and Newtown stores.[137] Further, basic and plus models were sold at varying prices, depending on their specific model, size, colour, and store they were sold from.[138] For the reasons above, and for ease of calculation, I treat the bicycles held by Hi5 Scooters as an aggregate, rather than on a store-specific basis.
4. First, I compiled the raw data of all shipments from Leon Cycle to Hi5 Scooters - a total of 1,977 units, valued at $3,942,554.80 (see Annexure I).[139] Annexure I was subsequently divided into basic models (1,242 units, valued at $2,258,139.00) and plus models (735 units, valued at $1,684,415.80), forming Annexure II.
5. Second, the raw data of bicycles sold prior to 23 February 2023 by Hi5 Scooters was compiled - a total of 1,342 units, valued at $2,571,467.92 (see Annexure III).[140] This information was taken directly from Leon Cycle's records.
6. However, I note that Leon Cycle's records contained errors, namely by recording labour-related activities as bicycle sales,[141] and by failing to assign values to certain bicycles.[142]
7. These errors were rectified (see Annexure IV), resulting in an updated total of 1,334 units valued at $2,574,404.92, which has been disaggregated into basic model sales (830 units, valued at $1,453,203.98) and plus model sales (504 units, valued at $1,121,200.94).
8. Third, the raw data for the bicycles returned by Hi5 Scooters to Leon Cycle on 22 January 2024, as recorded in the Stock Returned on 22 January 2024 Workbook, was compiled (see Annexure V). However, that data did not include bicycle names or prices - it recorded only SKUs, serial numbers, brand names, model numbers, sizes, colours, and quantities. To determine the commission owed to Hi5 Scooters, I identified the missing bicycle names and corresponding prices by cross-checking the returned bicycles against the raw data of all bicycles supplied by Leon Cycle to Hi5 Scooters.[143]
9. However, a number of issues arose in cross-checking this data. In some instances, the SKUs for returned bicycles were unidentifiable[144] or did not match,[145] serial numbers were missing,[146] bicycle descriptions did not correspond with the listed SKU and/or serial number,[147] and prices for the same bicycle varied within the same store.[148] This is unusual, as the identifying information for bicycles returned by Hi5 Scooters would be expected to correspond with the identifying information for bicycles initially supplied by Leon Cycle.
10. In order to identify, as accurately as practicable, the names and prices of the returned bicycles, I adopted the following methodology:

(a) first, I cross-checked the bicycle serial numbers recorded in the "Exported Raw Data - Richmond", "Exported Raw Data - Newtown", and "Exported Raw Data - Adelaide" spreadsheets in the Method 2 Calculation Workbook (being the totality of the bicycles delivered to Hi5 Scooters)[149] against the respective spreadsheets titled "Richmond Bike Return", "Newtown Bike Return", and "Adelaide Bike Return" in the Stock Returned on 22 January 2024 Workbook (being the bicycles returned by Hi5 Scooters). This was to preference same-store matching by serial numbers - even where the SKU or description appeared erroneous - because serial numbers uniquely identify each bicycle;

(b) second, I cross-checked serial numbers across all stores, including the Campsie store, as Leon Cycle's records indicated that bicycles were transferred between Hi5 Scooters' stores.;

(c) third, I checked whether the SKUs of returned bicycles matched the SKUs of bicycles delivered to Hi5 Scooters at the respective store. Where a SKU match was identified, I cross-checked the bicycle description (including size and colour) and, where multiple prices existed for the same model with identical specifications, I assigned the most commonly recorded price;

(d) fourth, I cross-checked SKUs across all stores. Where a SKU match was identified, I verified the bicycle description (including size and colour) and, where multiple prices were recorded for the same model with identical specifications, adopted the most commonly recorded price; and

(e) fifth, I cross-checked bicycles within their respective stores by identifying characteristics (brand, model, size, and colour) and adopted the most commonly recorded sale price for bicycles with identical specifications.

1. Upon identifying the names and prices of the returned bicycles, the compiled data indicates that Hi5 Scooters returned 181 bicycles on 22 January 2024, with a total value of $354,461.10 (see Annexure VI). This figure is consistent across both the Method 1[150] and Method 2 Calculation Workbooks.[151] Annexure VI has been disaggregated into basic model returns (114 units, valued at $198,906.00) and plus model returns (67 units, valued at $155,555.10).
2. Fourth, the total number of bicycles sold prior to 23 February 2023 (1,334) and the number returned on 22 January 2024 (181) were deducted from the total number of bicycles shipped by Leon Cycle to Hi5 Scooters (1,977), to determine the number and value of unaccounted bicycles. On that basis, the data indicates 462 unaccounted bicycles with a total value of $1,013,688.78 (see Annexure VII). This total comprises 298 basic models valued at $606,029.02 and 164 plus models valued at $407,659.76.
3. Fifth, consistently with my findings above - that any outstanding bicycles not returned must have been sold by Hi5 Scooters - it is necessary to calculate the commissions payable in respect of the 462 unaccounted bicycles. Under clause 10.1 of the Licensing Agreement, commissions are calculated on the "ex GST" value of bicycles, at 37% for basic models and 43% for plus models:

(a) as basic models with a total value of $606,029.02 are assumed to have been sold, with an ex-GST value of $550,935.47, the commission owing is calculated to be $203,846.12; and

(b) as plus models with a total value of $407,659.76 are assumed to have been sold, with an ex-GST value of $370,599.78, the commission owing is calculated to be $159,357.91.

1. These calculations are set out in Annexure VII.
2. Sixth, and lastly, the commissions payable to Hi5 Scooters ($203,846.12 and $159,357.91), totalling $363,204.03, are deducted from the total recommended retail value of the unaccounted bicycles ($1,013,688.78) to determine the damages payable to Leon Cycle by the defendants in respect of those bicycles - being $650,484.75.
3. As an ancillary point, I note that clause 10.3, which provides for additional commission if specified sales targets are met, has no application in this proceeding, as the relevant threshold of $2m has not been reached.
4. With respect to damages for outstanding spare parts, the Method 1 Calculation Workbook proceeds on the basis that all unreturned spare parts were sold, and calculates their total value as $85,292.85,[152] with a commission of $14,667.59 deducted from that amount.[153]
5. While the defendants do not contest the veracity and methodology of Leon Cycle's calculations, in response to Mr Rigoli's evidence that "no parts" were picked up by Leon Cycle from Hi5 Scooters' Adelaide store on 22 January 2024, Mr Raad submits that he had a "proof video" and "list" of what was returned.
6. I note that Mr Rigoli's oral evidence is consistent with the "Adelaide Parts Return" spreadsheet in the Stock Returned on 22 January 2024 Workbook, which records that only a single spare part was returned, with the following comment provided:

"There is lots of missing parts on this bike. It is essentially a frame with some spare parts making it more costly to fix then what it is worth."[154]

1. In light of the absence of any records adduced by the defendants, and the lack of any meaningful challenge to Leon Cycle's documentary evidence, I accept Leon Cycle's calculations. On the assumption that all unaccounted spare parts were sold by Hi5 Scooters, the amount due is $85,292.85 less $14,667.59, totalling $70,625.26.
2. Finally, in relation to any amounts owing in respect of sales between 29 January and 23 February 2023, Leon Cycle refers to the following spreadsheets:

(a) "24. POS Transactions 7 Feb to 23rd Hi5" ("the Hi5 Scooters' Sales between 29 January and 22 February 2023 Workbook");[155]

(b) "24. SmartPay EFTPOS Payments Processed 29 Jan to 23 Feb 2023" ("the Amounts Remitted to Leon Cycle between 29 January and 22 February 2023 Workbook"); and

(c) "24d. Commission Owed to Hi5 19-22 Feb 2023" ("the Commissions Owed between 19 and 22 February 2023 Workbook").

1. Mr Rigoli explains, between paragraphs 22 and 24 of the Rigoli Witness Statement, that for the period between 29 January to 22 February 2023, the outstanding sales proceeds are calculated by subtracting the sales proceeds remitted to Leon Cycle via SmartPay ($69,712.27)[156] from Hi5 Scooters' total sale proceeds ($152,169.29),[157] totalling $82,457.02.
2. From this figure, Mr Rigoli then subtracts the commission owed to Hi5 Scooters. The commission owed during the relevant period is calculated by summing:

(a) the amount owing pursuant to Invoice #INV-0620, for the period between 29 January and 4 February 2023, totalling $14,279.97;

(b) the amount owing pursuant to Invoice #INV-0621, for the period of between 5 and 18 February 2023, totalling $32,645.82; and

(c) $3,870.58, being the commission owed between 19 and 22 February 2023 as calculated in the Commissions Owed between 19 and 22 February 2023 Workbook[158] -

1. Accordingly, the unaccounted bicycle sales between 29 January and 22 February 2023 ($82,457.02), less commissions payable ($50,796.37), total $31,660.65.
2. In conclusion, and for the reasons above, I find that - as per paragraph I of their prayer for relief - Leon Cycle is entitled to damages in respect of the unaccounted sale of electric bicycles between 29 January and 22 February 2023 ($31,660.65), the unaccounted sale of electric bicycles after 23 February 2023 ($650,484.75), and unaccounted bicycle parts ($70,625.26), totalling $752,770.66. This figure, I emphasise, takes into account any commissions owed to Hi5 Scooters.
3. The total sum owing by Hi5 Scooters to Leon Cycle is therefore $752,770.66, less Netted Payments of $111,225.00 (considered in detail below), being $641,545.66.

Is Leon Cycle entitled to equitable compensation?

1. I note that pursuant to paragraph J of the prayer for relief, Leon Cycle seeks equitable compensation. Leon Cycle is entitled to equitable compensation, arising from the fiduciary relationship between Leon Cycle and Hi5 Scooters, and given Hi5 Scooters have breached their fiduciary duties.
2. Such a remedy is an alternative to an award of damages, as articulated in Youyang Pty Limited v Minter Ellison Morris Fletcher:

"The point appears from the statement by McLachlin J in Canson: > > 'The basis of the fiduciary obligation and the rationale for equitable compensation are distinct from the tort of negligence and contract. In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self‑interest. Consequently the law seeks a balance between enforcing obligations by awarding compensation and preserving optimum freedom for those involved in the relationship in question, communal or otherwise. The essence of a fiduciary relationship, by contrast, is that one party pledges itself to act in the best interest of the other. The fiduciary relationship has trust, not self‑interest, at its core, and when breach occurs, the balance favours the person wronged.'"[159] (emphasis added) (citations omitted)

3. Such a remedy is also an alternative to an account of profits, as articulated in Houghton v Immer (No 155) Pty Ltd:

"Equitable compensation is intended to compensate for loss caused by conduct which equity holds to be fraudulent ... The award should compensate the plaintiff but it is no part of its function to strip profits from the defendants, or to punish them for wrongdoing."[160] (emphasis added)

1. As noted above, the purpose equitable compensation is to "restore to the trust fund what ought to be there".[161] Given Leon Cycle is entitled to equitable compensation, an election must be made as to the form of remedy sought for the defendants' breach of contract and breach of fiduciary duties.

Is Leon Cycle entitled to any outstanding debt?

1. Leon Cycle contends that, aside from the Licensing Agreement, Hi5 Scooters entered into a "credit facility" whereby Hi5 Scooters would purchase specific Goods and accessories from Leon Cycle. This is supported by a "Dealer Credit Account Application" form dated 9 November 2020 and signed by Mr Raad.
2. Leon Cycle alleges that between 23 December 2022 and 24 February 2023, several invoices were issued to Hi5 Scooters "in respect of Goods supplied" for the following amounts:

(a) $1,414.00, as per Invoice "#18INV28658", dated 23 December 2022;

(b) $1,168.00, as per Invoice "#18INV28667", dated 30 December 2022;

(c) $97.63, as per Invoice "#18INV29050", dated 27 January 2023;

(d) $1,225.00, as per Invoice "#18INV29109", dated 17 January 2023;

(e) $1,414.00, as per Invoice "#18INV29345", dated 30 January 2023;

(f) $1,414.00, as per Invoice "#18INV29832", dated 21 February 2023; and

(g) $1,453.00, as per Invoice "#18INV29900", dated 24 February 2023 -

1. Pursuant to paragraph 23 of the defence and counterclaim, the defendants admit that Hi5 Scooters received invoices from Leon Cycle, for the sum of $8,185.63. During cross-examination of Mr Rigoli, Mr Raad conceded that the sum of $8,185.63 was outstanding, stating as follows:

MR RAAD: "When I was a dealer before franchisee or all the dealer, you treat them [bicycles supplied] with wholesale price, correct?"--- > > MR RIGOLI: When you were purchasing early ... [in] 2020, as a dealer ... you would be paying for the Goods ... at the wholesale rate. > > MR RAAD: Good. And I had - and I had a credit account there, as well, correct?--- > > MR RIGOLI: Yes. > > MR RAAD: Correct. And it was left 8,000-something after the dispute, correct?--- > > MR RIGOLI: Yes, there was an amount owing."

2. Mr Raad further claimed that he could have "closed this balance", had he not been required to pay Ignotus commission for services provided. As noted above, Hi5 Scooters' arrangement with Ignotus was separate and distinct from any agreement between Hi5 Scooters and Leon Cycle, and those payments are therefore irrelevant to the determination of any amounts owing to Leon Cycle.
3. Given Mr Raad's admission that the sum of $8,185.63 remains owing by Hi5 Scooters, it is appropriate to enter judgment for Leon Cycle in that amount, together with interest pursuant to statute.

Does the indemnity at clause 35.4 of the Licensing Agreement apply?

1. In paragraph 111 of the defendants' written closing submissions, Mr Raad concedes that he is not entitled to an indemnity under clause 35.4 of the Licensing Agreement. The relevant provisions, titled "Indemnity" read as follows:

"35.1 The Licensee agrees with the Company to indemnify the Company against loss, damage, or liability to the Company resulting from a breach of this agreement by the Licensee including:

35.1.1 any act, neglect or default by the Licensee's agent, employee, licensee or customer;

35.4 Except in the case of death or personal injury caused by the Licensee's negligence, The Licensee's liability under or in connection with this agreement, whether arising in contract, tort, negligence, breach of statutory duty or otherwise howsoever, shall not exceed the sum of $500,000 (five hundred thousand dollars)."

1. As submitted by Leon Cycle, read as a whole, the $500,000.00 liability cap only applies with respect to Hi5 Scooters' obligation to indemnify Leon Cycle from loss, pursuant to clause 35.1. It does not apply with respect to Hi5 Scooters' "separate secondary obligation" to pay damages for loss arising from contractual breaches.
2. For that reason, I do not find that Mr Raad is entitled to any limitation of liability pursuant to clause 35.4.

Issue 11. Did Hi5 suffer loss and damage, or would it be entitled to an indemnity from Leon Cycle?

1. I note that, while the statement of issues for determination refers to an "indemnity" from Leon Cycle, paragraph 54 of the defence and counterclaim and paragraphs 32 to 40 of the Raad 2 October 2023 Affidavit refer instead to any set-off to which Hi5 Scooters is said to be entitled.
2. During examination-in-chief, Mr Rigoli referred to paragraph 33 of the Rigoli Witness Statement and conceded that Leon Cycle had received $111,225.00 in Netted Payments, as opposed to $106,500.00 as initially contended, between 13 March and 21 April 2023. Pursuant to paragraph 27 of the Raad 2 October 2023 Affidavit, Mr Raad deposed to the following Netted Payments being made from Hi5 Scooters to Leon Cycle:

(a) $800.00, dated 13 March 2023;

(b) $1,899.00, dated 13 March 2023;

(c) $239.00, dated 13 March 2023;

(d) $239.00, dated 13 March 2023;

(e) $1,538.00, dated 14 March 2023;

(f) $10.00, dated 23 March 2023;

(g) $2,815.46, dated 30 March 2023;

(h) $6,416.66, dated 30 March 2023;

(i) $16,500.00, dated 31 March 2023;

(j) $15,000.00, dated 31 March 2023;

(k) $10,000.00, dated 31 March 2023;

(l) $5,000.00, dated 31 March 2023;

(m) $40,000.00, dated 20 April 2023; and

(n) $20,000.00, dated 21 April 2023 -

1. Leon Cycle, however, contends that that there is no record of the payments allegedly made on 30 March 2023, totalling $9,232.12. The defendants did not challenge this submission nor adduce documentary evidence to the contrary. In Mr Rigoli's calculations for loss and damage, he adjusts for the Netted Payments received. I am, therefore, prepared to find that Hi5 Scooters is entitled to a set-off of $111,225.00, being the value of the Netted Payments.

1. Hi5 Scooters advances its loss and damage claim as a basis to set-off any amount otherwise owing to Leon Cycles. With respect to the defendants' set-off claim, Hi5 Scooters claims lost sales in the range of $108,128.01 to $123,128.01, and expectation losses of $743,750.00, said to represent the "average weekly profit for the remainder of the [Licensing] Agreement". As I have found in response to Issue 7, Leon Cycle has not breached the Licensing Agreement in the manner alleged by the defendants.
2. For completion, I acknowledge and affirm Leon Cycle's written closing submissions - that, even if Hi5 Scooters was entitled to any set-off, the defendants have not adduced any documentary evidence in relation to the quantification of:

(a) lost commissions from sales to a Boomerang customer, Tony, online sales, and walk-in customers;

(b) expectation loss, such as past profits forming the basis for such a measurement;

(c) marketing expenditure into Leon Cycle's business or website;

(d) compensation pursuant to clause 14.10, regarding rental or salary costs - as addressed in my response to Issue 7; and

(e) legal costs.

1. As emphasised in my response to Issue 6, payments made to Ignotus were pursuant to a separate agreement with Hi5 Scooters and, therefore, cannot be used to set-off the damages owed to Leon Cycle. Further, and as emphasised in my response to Issue 5, any outstanding commissions said to be owing to Hi5 Scooters has already been taken into account in the calculation of loss and damage.

If Hi5 Scooters suffered loss and damage, do the Limitation Clauses apply?

1. Given my findings above, that Hi5 Scooters is not entitled to a set-off for loss and damage, I find that the Limitation Clauses are not applicable in the current proceeding. Nonetheless, and for completion, I shall address the defendants' pleaded case - that the Limitation Clauses are either "unfair terms", pursuant to s 23(1) of the ACL, unenforceable, pursuant to clause 20(3) of the Code, or that Leon Cycle is otherwise estopped from relying upon them.
2. I note that, as per my response to Issue 9, the Licensing Agreement does not fall under the Code. I also accept Leon Cycle's submission that the defendants' estoppel claim is unclear and note that, in any event, I have already found that the Default Notice - which Hi5 Scooters did not comply with - was validly issued. Therefore, the defendants' estoppel claim is not made out.
3. With regards to the "unfair terms" claim, s 23(1) of the ACL reads as follows:

"(1) A term of a consumer contract or small business contract is void if: > > (a) the term is unfair; and > > (b) the contract is a standard form contract." (emphasis added)

4. Section 27(2) of the ACL prescribes the factors the Court must take into account when considering whether the Licensing Agreement is a "standard form contract"

"(a) whether one of the parties has all or most of the bargaining power relating to the transaction;

(b) whether the contract was prepared by one party before any discussion relating to the transaction occurred between the parties;

(c) whether another party was, in effect, required either to accept or reject the terms of the contract (other than the terms referred to in section 26(1)) in the form in which they were presented;

(d) whether another party was given an effective opportunity to negotiate the terms of the contract that were not the terms referred to in section 26(1);

(e) whether the terms of the contract (other than the terms referred to in section 26(1)) take into account the specific characteristics of another party or the particular transaction;

(f) any other matter prescribed by the regulations."

1. As identified by Leon Cycle, the Licensing Agreement was entered into following lengthy negotiations between Leon Cycle and Hi5 Scooters from April to June 2021. Hi5 Scooters was not required to accept or reject the terms of the draft agreement, and the Licensing Agreement was tailored to the parties' intended arrangement. Therefore, it cannot be said that the Licensing Agreement was based on any true "standard form contract" of Leon Cycle.
2. In conclusion, the Limitation Clauses do not apply in the current proceeding - either because Hi5 Scooters is not entitled to a set-off for loss and damage, or because s 23(1) of the ACL does not apply.

Issue 12. Is Mr Raad entitled to an indemnity, pursuant to clause 35.3 of the Licensing Agreement?

1. Pursuant to paragraph 59 of the defence and counterclaim, it is contended that the "[d]efendants ... are entitled to indemnity pursuant to clause 35.3 of the Licensing Agreement". The operation of clause 35 has been discussed prior, in my response to Issue 5. As correctly identified by Leon Cycle in their written closing submissions, there is "no basis" for Mr Raad to be indemnified personally under the provision.
2. Leon Cycle did not agree to indemnify Mr Raad under clause 35.3, as the Licensing Agreement was not entered into by Mr Raad personally, but by Hi5 Scooters instead. In any event, the defendants concede in their written closing submissions that Mr Raad is no longer contends that he is entitled to indemnity under the Licensing Agreement.

Issue 13. Is Mr Raad entitled to any declarations?

1. Pursuant to the defence and counterclaim, the defendants sought declarations that Leon Cycle:

(a) repudiated or wrongfully terminated the Licensing Agreement;

(b) breached the Licensing Agreement; and

(c) breached the Code and/or s 51ACB of the CCA.

1. Given my anterior findings in relation to Issues 6 to 10 above, Mr Raad is not entitled to the declarations sought in his counterclaim. In any event, I again emphasise that none of the alleged breaches were as against Mr Raad personally, and he does not have standing to be granted the relief sought. Finally, in the defendants' written closing submissions, it was conceded that Mr Raad no longer contends that he is entitled to any declarations in his favour.

1. Accordingly, for the foregoing reasons, I am satisfied that Leon Cycle's claim has been made out, and the counterclaim ought to be dismissed.
2. Against Hi5 Scooters, Leon Cycle is entitled to damages in the sum of $641,545.66 (being the amount calculated in respect of the unaccounted bicycles ($752,770.66) less the Netted Payments ($111,225.00)), together with interest at the penalty interest rate. In light of the further or alternative relief sought by Leon Cycles, I observe the following passage as articulated by the High Court in Dart Industries Inc v The Décor Corporation Pty Ltd & Anor:

"Damages and an account of profits are alternative remedies ((6) See Neilson v. Betts [1871] UKLawRpHL 1; (1871) LR 5 HL 1, at p.22; Lever v. Goodwin (1887)

[1872] UKLawRpCh 62; 36 ChD 1, at p.7; Patents Act 1990 (Cth), s.122(1)). An account of profits was a form of relief granted by equity whereas damages were originally a purely common law remedy ((7) cf. Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed. (1992), pp.659-660.)."[162] (emphasis added)

1. In the alternative to damages, Leon Cycle is entitled to equitable compensation, or an order that Hi5 Scooters account for the proceeds of sale. In addition, Leon Cycle is entitled to debt in the sum of $8,185.63, together with interest pursuant to statute.
2. Against Mr Raad, Leon Cycle is entitled to an order that Mr Raad account to Leon Cycle for the proceeds of sale of the Goods.
3. Pursuant to paragraphs B, C, D, and E of Leon Cycle's prayer for relief, Leon Cycle seeks the following declarations:

(a) a declaration that Hi5 Scooters has breached the Licensing Agreement;

(b) a declaration that Hi5 Scooters breached its trust duties owed to Leon Cycle, in respect of the proceeds of sale of the Goods;

(c) a declaration that Mr Raad procured or was knowingly involved in Hi5 Scooter's breaches of trust; and

(d) alternatively to paragraph (b), a declaration that Leon Cycle is entitled to an equitable lien over Hi5 Scooter's assets to secure payment of the proceeds of sale of the Goods.

1. Pursuant to s 49 of the County Court Act 1958 (Vic), the Court has the same power to grant any relief or remedy as the Supreme Court of Victoria. Declaratory relief is discretionary and must be directed towards resolving legal controversies between parties with a real interest in the matter. In accordance with the decision in Lehrmann v Network Ten Pty Limited (Cross-Claims),[163] declaratory relief must be attached to specific facts and not merely hypothetical.
2. The Victorian Court of Appeal has recently provided guidance in relation to the basic principles surrounding the provision of declaratory relief in Cappelleri v Cappelleri:

"First, the power to grant declaratory relief is no longer exclusively equitable. When exercised by a court of law, it is a statutory power.

Secondly, the party applying for declaratory relief need not have a subsisting cause of action or a right to some other relief.

Thirdly, the power to grant declaratory relief is discretionary. While it is not possible or desirable to fetter the manner of its exercise by the application of rules, the power is nonetheless 'confined by the considerations which mark out the boundaries of judicial power'. Accordingly, and relevantly to the present case, the relief must be directed to the determination of a legal controversy, the person seeking it must have a real interest in the relief, and the relief may be refused if it will not produce any foreseeable consequence for the parties."[164]

1. In the present case, the declaratory relief sought by Leon Cycle does not relate to a hypothetical matter, but to a specific claim that a constructive trust arises due to Hi5 Scooters' breach of fiduciary duty, and to Mr Raad's wilful procurement or knowing involvement in breach of trust. It is grounded in concrete facts as found above, and I am, therefore, prepared to make declarations that:

(a) Hi5 Scooters has breached the Licensing Agreement;

(b) Hi5 Scooters breached its trust duties owed to Leon Cycle in respect of the proceed of sale of the Goods; and

(c) Mr Raad procured or was knowingly involved in Hi5 Scooters' breach of trust.

1. Further to the above declarations, and in light of my findings above in response to Issue 3 - that a constructive trust existed, arising from Hi5 Scooters' breach of fiduciary duty - Leon Cycle seeks a declaration that it is entitled to an equitable lien over any remaining Goods in Hi5 Scooters' possession and any bank accounts, assets, or other property of Hi5 Scooters into which the proceeds of sale of the Goods can be traced.
2. I accept Leon Cycle's submission that the utility of the declarations sought lies in the event that Hi5 Scooters is unable to comply with an order of the Court to pay damages, debt, or account for profits. In light of this, I am prepared to make a declaration that Leon Cycle holds an equitable lien over any remaining Goods in Hi5 Scooters' possession and any bank accounts, assets, or other property of Hi5 Scooters into which the proceeds of sale of the Goods can be traced. Leon Cycle has the benefit of the Court's determination that it has a proprietary entitlement in respect of any traceable proceeds by reason of the trust and equitable lien arising.
3. Leon Cycles' prayer for relief in the further amended statement of claim involves a number of overlapping and alternatives prayers at law and in equity. The Court now invites Leon Cycles to propose final orders, having regard to my reasons for judgment, and make an election as to the final relief sought.

I certify that these 230 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 19 December 2025.

[1] Competition and Consumer (Industry Codes - Franchising) Regulations 2014 (Cth) sch 1 ("Code"), made under s 51AE of the Competition and Consumer Act 2010 (Cth). A new Franchising Code of Conduct commenced on 1 April 2025 ("New Code"), but the former Code continues to apply to franchise agreements entered into before that date.

[2] Shop 1 (560 Swan Street, Richmond, VIC 3121); Shop 2 (202 Flinders Street, Adelaide, SA 5000); Shop 3 (Shop 1/418-420 Canterbury Road, Campsie, NSW 2194); Shop 4 (Shop 1/69-77 King Street, Newtown, NSW 2042).

[3] Leon Cycle holds trademarks for "Leon Cycle", "NCM", "ET-Cycle", "Elewave", "Leisger", "Dehawk", "Das-Kit", and "Bionx".

[4] Clause 1 defines "Intellectual Property" as "mean[ing] intellectual property of every sort, whether or not registered or registrable in any country, including intellectual property of all kinds coming into existence after today; and including, among others, patents, trademarks, unregistered marks, designs, copyrights, Software, domain names, discoveries, Know-how, creations and inventions, together with all rights which are derived from those rights".

[5] [2024] VSC 651 at [23]-[24] ("LL Up").

[6] [1910] HCA 58; (1910) 12 CLR 105 ("Black v Freedman").

[7] Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62 at [7] (French CJ) ("Korda").

[8] Irwin v Pamplin & Ors (No 4) [2024] NSWSC 73 at [302], citing Murphy J in Rambaldi v Mullins (No 2) [2016] FCA 977 at [388]-[399].

[9] [2023] FCA 684 at [195]-[206].

[10] [2023] VSC 781 at [860]-[865].

[11] [2025] VSC 454 at [576]-[581].

[12] [1874] UKLawRpCh 20; (1874) LR 9 CH App 244.

[13] [1938] HCA 34; (1938) 60 CLR 336, 361-2.

[14] Koompahtoo at [44] (Gleeson CJ, Gummow, Heydon, and Crennan JJ); Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, 32 (Mason J).

[15] [2021] FCA 172 at [115]-[116] ("Freedom Foods").

[16] For completion, I note that s 41A(5) of the Code is not reflected in the New Code. The provision reads as follows: "The parties must try to resolve the dispute".

[17] [2021] FCAFC 109; (2021) 394 ALR 227 at [194], citing Colvin J in Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Company Arrangement) (No 3) [2019] FCA 72; (2019) 368 ALR 441 at [746], as recently approved in AHG WA (2015) Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd [2025] FCAFC 86 at [238].

[18] [1991] HCA 54; (1991) 174 CLR 64 at 80 (Mason CJ and Dawson J).

[19] (2024) 281 CLR 39 at [127]-[129] ("Cessnock City Council").

[20] [2024] HCA 47; (2024) 421 ALR 1 at [14].

[21] Thomas National Transport (Melbourne) Pty Ltd v May and Baker (Australia) Pty Ltd [1966] HCA 46; (1966) 115 CLR 353 at 377[19] (Windeyer J).

[22] [1959] HCA 8; (1959) 101 CLR 298.

[23] Norman Palmer, Palmer on Bailment (Sweet & Maxwell, 3rd ed, 2009) at [32-002] ("Palmer on Bailment").

[24] As for example, where, in breach of his fiduciary obligations, instead of accounting for money to his principal, he uses the money to buy an asset for himself.

[25] Palmer on Bailment at [32-002].

[26] (2000) 202 CLR 588 at [34] (Gaudron, McHugh, Gummow, and Hayne JJ) ("Associated Alloys"), citing Puma Australia Pty Ltd v Sportsman's Australia Limited (No 2) [1994] 2 Qd R 159 at 162.

[27] [2001] WASC 210; (2001) 25 WAR 187.

[28] (1995) 16 ACSR 765 at 768 ("Hertz").

[29] (1992) 28 NSWLR 338 at 346.

[30] [1994] 2 Qd R 159 at 177-178.

[31] Palmer on Bailment at [32-003].

[32] Palmer on Bailment at [32-004].

[33] [2025] HCA 1; (2025) 421 ALR 227 at [93] (Gordon, Edelman, and Steward JJ).

[34] [1984] HCA 64; (1984) 156 CLR 41 at 101 [81] (Mason J) ("Hospital Products").

[35] [1985] HCA 78; (1985) 160 CLR 583 at 616-7.

[36] (2025) 312 FCR 1 at [164]-[216] (O'Callaghan J), [301]-[323] (O'Bryan J), [353]-[385] (Vandongen J).

[37] See generally the "Exported Raw Data - Richmond" spreadsheet in the Method 2 Calculation Workbook.

[38] The defendants cited clause 7 of the New Code. For accuracy, I have treated the reference as being to clause 5 of the 2014 Code, which contains the definition of "franchising agreement".

[39] Associated Alloys at [34] (Gaudron, McHugh, Gummow, and Hayne JJ).

[40] Hospital Products at [31] (Gibbs CJ).

[41] Hospital Products at [32] (Gibbs CJ).

[42] Hospital Products at [70] (Mason J).

[43] The defendants cited clause 18 of the New Code. For accuracy, I have treated the reference as being to clause 6 of the 2014 Code, which imposes an "obligation to act in good faith".

[44] The defendants cited clause 18 of the New Code. For accuracy, I have treated the reference as being to clause 6 of the 2014 Code, which imposes an "obligation to act in good faith".

[45] During cross-examination, Mr Raad erred in stating that there was changes from the word "licensee" to "franchisee" in the draft agreement. Mr Raad had intended to refer to changes from the word "franchisee" to "licensee", in light of the context of his full response - and in particular, his qualification that such an edit had not occurred on 67 instances.

[46] In the transcript, counsel for the plaintiff mistakenly mentioned that the termination of the Licensing Agreement occurred in 2021. This was a misstatement as the Termination Notice is dated 24 July 2023.

[47] In the transcript, counsel for the plaintiff mistakenly mentioned that the agreement occurred in 23 or 24 November 2021. This was a misstatement, given formal proceedings only commenced on 10 August 2023.

[48] See the Excel workbooks titled "28. 7. Spreadsheet of Sales Data" and "28. 8. Spreadsheet of Sales Data".

[49] LexisNexis, Halsbury's Laws of Australia (online at December 2025) at '(1) Introduction - Bailment' [40-5].

[50] Penfolds Wines Pty Ltd v Elliott [1946] HCA 46; (1946) 74 CLR 204 at 229.

[51] Koompahtoo at [47], citing Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, and [49], citing Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; [1962] 2 QB 26 (Gleeson CJ, Gummow, Heydon, and Crennan JJ).

[52] [2004] HCA 55; (2004) 218 CLR 471 at [35].

[54] Oclee Holdings Pty Limited v Palace Property Pty Limited; Zhao v TJW & Associates Pty Limited [2025] NSWSC 1116 at [53], citing Gleeson J in Loureiro v Mac Aus Unit Pty Ltd (No 2) [2022] NSWSC 226 at [34]-[38].

[55] [2018] NSWSC 372 at [9]-[21].

[56] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360.

[57] (1977) 180 CLR 266 at [40]. See also Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at [9] (Mason J).

[58] [1989] HCA 51; (1989) 88 ALR 413 at 442-3 (Brennan J) ("Foran v Wight").

[59] Foran v Wight at 420 (Mason CJ).

[60] [2020] NSWCA 33 at [62] (Brereton JA) ("Kay"), citing Mahoney JA in Burton v Palmer [1980] 2 NSWLR 878 at 895 [76] ("Burton v Palmer").

[62] [2015] NSWCA 196; (2015) 90 NSWLR 422 at [104]-[106] ("Hillam").

[66] During examination-in-chief, Mr Rigoli corrected paragraph 24 of the Rigoli Witness Statement, which incorrectly referred to the period between 19 and 22 February 2023.

[67] (1931) 45 CLR 359 at 378 ("Shepherd").

[68] [2013] VSC 314 at [4] ("WTE Co-Generation").

[69] Contrast Constructions Pty Ltd v Allen & Anor [2020] QCAT 194 at [16].

[70] Virk Pty Ltd (in liq) v YUM! Restaurants Australia Pty Ltd [2017] FCAFC 190 at [164] ("Virk").

[71] (2015) 236 FCR 199 at [288] (Allsop CJ) ("Paciocco").

[72] N Seddon and R Bigwood, Cheshire & Fifoot Law of Contract (LexisNexis, 12th ed, 2022) at [22.3]. A unilateral variation of a contract may constitute repudiation. See Gibson Motor Sport Merchandise Pty Ltd v Robert James Forbes [2005] FCA 749 at [226] and [248] (Crennan J).

[73] Paciocco at [289] (Allsop CJ).

[77] [2025] VSC 454 at [501].

[81] Rambaldi v Mullins (No 2) [2016] FCA 977 at [388]-[399] (Murphy J), citing Re Armstrong (dec'd) [1960] VicRp 34; [1960] VR 202 at 205 (Herring CJ); JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd [1985] VicRp 88; [1985] VR 891; Registrar, Accident Compensation Tribunal v Commissioner of Taxation (1993) 178 CLR 145 at 165-166.

[82] Associated Alloys at [9] (Gaudron, McHugh, Gummow, and Hayne JJ).

[84] [2018] VSC 413 at [396]-[397] and [407].

[85] Palmer on Bailment at [32-003].

[86] [1984] 2 All ER 152 at 163.

[88] [2025] HCA 1; (2025) 99 ALJR 295 at [93].

[89] Palmer on Bailment at [32-005].

[90] Meagher, Gummow, and Lehane, Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2014) at [5-035] ("Equity: Doctrines and Remedies").

[91] See C-Shirt Pty Ltd v Barnett Marketing and Management Pty Ltd [1996] FCA 1079; (1996) 37 IPR 315 at 335.

[92] Equity: Doctrines and Remedies at [5-215].

[93] Equity: Doctrines and Remedies at [5-010].

[94] Hospital Products at [68] (Mason J).

[96] See, eg, Goo v Sim [2022] NSWSC 420 at [249].

[97] (1983) 149 CLR 639 at [15].

[98] See Calabretta v Huyen VI Buddhist Enlightenment and Charity Association Inc [2023] VSC 405 at [44]-[45] (Matthews J).

[99] See Re Hallett's Estate: Knatchbull v Hallett [1880] UKLawRpCh 38; (1880) 13 Ch D 696 at 709.

[100] JD Heydon, MJ Leeming, and PG Turner, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) at [13-35].

[101] [2023] VSC 781 at [861]-[862] ("Coonwarra").

[102] (2007) 230 CLR 89 at [161].

[104] [2012] FCAFC 6; (2012) 287 ALR 22 at [556].

[105] Explanatory Statement, Trade Practices (Industry Codes - Franchising) Regulations 1998 (Cth) No 162.

[107] [2018] FCA 310 ("W Hoy v WTH").

[112] [2003] NSWSC 126; (2003) 44 ACSR 518 at [300]-[304].

[114] LexisNexis, Franchising Law & Practice (updated June 2024) at 'Chapter 1 The Nature and Commercial Impact of Franchising' [1.0430].

[115] Hospital Products at [95] (Mason J).

[116] See Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 ("Warman International").

[118] Warman International at [28].

[119] Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 at [30].

[120] [2018] HCA 43; (2018) 265 CLR 1 at [76].

[121] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 80 (Mason CJ and Dawson J).

[122] (2024) 281 CLR 39 at [127]-[129] (Edelman, Steward, Gleeson, and Beech-Jones JJ).

[123] Leon Cycle refers to the Method 1 Calculation Workbook, and submits that the sum of:

(a) cell D48 in the "Adelaide Bikes" spreadsheet (236);

(b) cell D53 in the "Richmond Bikes" spreadsheet (75); and

(c) cell D53 in the "Newtown Bikes" spreadsheet (134) -

represents the bicycles held as stock by Hi5 Scooters across the Adelaide, Richmond, and Newtown stores as at 23 February 2023, totalling 445.

[124] See the "Summary" spreadsheet in the Method 1 Calculation Workbook:

(a) cell C4: 207 bicycles were sold from the Adelaide store;

(b) cell C20: 86 bicycles were sold from the Richmond store; and

(c) cell C36: 109 bicycles were sold from the Newtown store.

[125] See the Method 1 Calculation Workbook, and the sum of:

(a) cell F48 in the "Adelaide Bikes" spreadsheet (38);

(b) cell F53 in the "Richmond Bikes" spreadsheet (77); and

(c) cell F53 in the "Newtown Bikes" spreadsheet (66) -

representing the number of bicycles returned to Leon Cycle on 22 January 2024, totalling 181.

[126] See the Method 1 Calculation Workbook, and the sum of:

(a) cell E48 in the "Adelaide Bikes" spreadsheet (56);

(b) cell E53 in the "Richmond Bikes" spreadsheet (106); and

(c) cell E53 in the "Newtown Bikes" spreadsheet (81) -

representing the number of bicycles Hi5 Scooters had in stock as at 15 September 2023, totalling 243.

[127] With reference to the affidavit of Mr Baugh dated 27 September 2023, the sum of:

(a) 98 electric bicycles at the Richmond store (as per [10]);

(b) 47 electric bicycles at the Adelaide store (as per [13]); and

(c) 72 electric bicycles at the Newtown store (as per [15]) -

represents the total number of bicycles Hi5 Scooters had in stock as at 15 September 2023, totalling 217.

[128] See cell M17 of the "Overall Summary" spreadsheet in the Method 2 Calculation Workbook.

[129] It is clear that Mr Raad had meant to say $188,000.00, being the difference between $225,000.00 and $37,000.00. This is further supported by his next statement, that there is "probably [a] $10,000 difference" with respect to the amount he has conceded is owing, being $198,210.00.

[130] See the spreadsheets titled "Exported Raw Data - Richmond", "Exported Raw Data - Newtown", "Exported Raw Data - Campsie", and "Exported Raw Data - Adelaide" in the Method 2 Calculation Workbook, to observe the variance in prices of bicycles sold by Hi5 Scooters.

[131] [2019] VCC 2156 at [150] ("Mortgage Finance Options").

[132] [2022] VSC 494 at [56].

[133] (1951) 217 ALR 1 at 5 ("Bradshaw").

[134] LexisNexis, Court Forms, Precedents & Pleadings Victoria (online as at December 2025) at 'Bailment' [11,020].

[135] Mortgage Finance Operations at [145].

[136] [1991] HCA 15; (1991) 172 CLR 60 at [1] (Mason CJ, Dawson, Toohey, and Gaudron JJ).

[137] Cell O7 of the spreadsheet titled "Overall Summary" in the Method 2 Calculation Workbook reads as follows:

"Many of the bikes were moved without Leon Cycle permission or knowledge from one store to another at various times. This is the explanation why on some stores there was more sales than what was delivered by Leon Cylcle [sic] to that store."

[138] Compare bicycle prices in the spreadsheets titled "Exported Raw Data - Richmond", "Exported Raw Data - Newtown", "Exported Raw Data - Campsie", and "Exported Raw Data - Adelaide" in the Method 2 Calculation Workbook.

[139] The spreadsheets titled "Summary - Richmond", "Summary - Newtown", "Summary - Campsie", and "Summary - Adelaide" in the Method 2 Calculation Workbook were compiled into the All Shipments List, containing bicycles shipped by Leon Cycle to all four Hi5 Scooters stores. The figures calculated were consistent with cells M5 and N5 of the spreadsheet titled "Overall Summary" in the same workbook.

[140] The spreadsheets titled "Adelaide", "Richmond", "Newtown 2", and "Campsie" in the Goods Sold Prior to 23 February 2023 Workbook were compiled.

[141] See, eg, cells F308, F409, F517, F561, F564, F565, F592, and F596 of the "Adelaide" spreadsheet in the Goods Sold Prior to 23 February 2023 Workbook.

[142] See, eg, cells X51 and X73 of the "Campsie" spreadsheet in the Goods Sold Prior to 23 February 2023 Workbook.

[143] Here, I refer to the spreadsheets titled "Exported Raw Data - Richmond", "Exported Raw Data - Newtown", "Exported Raw Data - Campsie", and "Exported Raw Data - Adelaide" in the Method 2 Calculation Workbook.

[144] See, eg, row 54 of the spreadsheet titled "Richmond Bike Return" in the Stock Returned on 22 January 2024 Workbook, which identifies that a Milano Plus Trekking E-Bike (Black, Size 26) with a SKU of 9037200008 and serial number of UK200UI6J0348 was returned from the Richmond store. However, the Method 2 Calculation Workbook records no bicycle with that SKU as having been shipped to Hi5 Scooters.

[145] See, eg, row 23 of the spreadsheet titled "Adelaide Bike Return" in the Stock Returned on 22 January 2024 Workbook, which identifies that a Moscow Plus Electric Mountain Bicycle (Black, Size 29) with a SKU of 9003210048 and a serial number of AU201MI9K000449 was returned from the Adelaide store. A bicycle with the corresponding serial number can be found at row 186 of in the "Exported Raw Data - Adelaide" spreadsheet of the Method 2 Calculation Workbook, but with a different SKU of 9003200010.

[146] See, eg, row 5 of the spreadsheet titled "Adelaide Bike Return" in the Stock Returned on 22 January 2024 Workbook, which identifies that a Milano T3 Step Trekking E-Bike (Black, Size 28) with a SKU of 9003210027 and serial number of AU201UI7K000431 was returned from the Adelaide store. However, the Method 2 Calculation Workbook records no bicycle with that serial number as having been shipped to Hi5 Scooters.

[147] See, eg, row 32 of the spreadsheet titled "Adelaide Bike Return" in the Stock Returned on 22 January 2024 Workbook, which identifies that an Aspen Plus Fat Electric Bicycle (Black, Size 20) was returned from the Adelaide store. However, the Method 2 Calculation Workbook records no size 20 Aspen Plus models as having been shipped to Hi5 Scooters.

[148] See, eg, row 10 of the spreadsheet titled "Adelaide Bike Return" in the Stock Returned on 22 January 2024 Workbook, which identifies that an ET-Cycle F1000 Folding Electric Bicycle (Black, Size 20) was returned from the Adelaide store. However, cells CM19, 35, 46-48, 78, 103-104, 119, 126, 157, 163, 166, 269-270, 379, 387, 404, 439, and 487-488 of the "Exported Raw Data - Adelaide" spreadsheet in the Method 2 Calculation Workbook show that the same model is recorded at three different prices - $2,399.00, $2,609.00, and $2,899.00.

[149] Note that, at this stage, I have not cross-checked the serial numbers in the "Exported Raw Data - Campsie" spreadsheet in the Method 2 Calculation Workbook, because the Stock Returned on 22 January 2024 Workbook contains no return data for the Campsie store.

[150] In the Method 1 Calculation Workbook, the sum of:

(a) cell F48 in the "Adelaide Bikes" spreadsheet (38);

(b) cell F53 in the "Richmond Bikes" spreadsheet (77); and

(c) cell F53 in the "Newtown Bikes" spreadsheet (66) -

represents the number of bicycles Hi5 Scooters returned on 22 January 2024, totalling 181.

[151] See cell M8 of the "Overall Summary" spreadsheet in the Method 2 Calculation Workbook, stating that 181 bicycles were returned by Hi5 Scooters on 22 January 2024 - notwithstanding a different total value of $367,520.00.

[152] In the Method 1 Calculation Workbook, the sum of:

(a) cell J55 in the "Adelaide Parts" spreadsheet ($22,996.16);

(b) cell J63 in the "Richmond Parts" spreadsheet ($21,643.52); and

(c) cell J129 in the "Newtown Parts" spreadsheet ($40,653.17) -

represents the value of all unreturned parts, taking into consideration all parts returned on 22 January 2024 as per the Stock Returned on 22 January 2024 Workbook, totalling $85,293.00.

[153] In the Method 1 Calculation Workbook, the sum of:

(a) cell L55 in the "Adelaide Parts" spreadsheet ($3,909.35);

(b) cell L63 in the "Richmond Parts" spreadsheet ($3,847.21); and

(c) cell L129 in the "Newtown Parts" spreadsheet ($6,911.04) -

represents the commission deduction, in favour of Hi5 Scooters, assuming all unaccounted bicycle parts were sold, totalling $14,667.59.

[154] See cell L2 of the "Adelaide Parts Returned" spreadsheet in the Stock Returned on 22 January 2024 Workbook.

[155] While the original title of the Excel workbook suggests otherwise, Mr Rigoli states in paragraph 24(a) of the Rigoli Witness Statement that the relevant period is between 29 January and 22 February 2023. The workbook has been renamed to reflect this.

[156] See cell H56 of the Hi5 Scooters' Sales between 29 January and 22 February 2023 Workbook.

[157] See cell BC50 of the Amounts Remitted to Leon Cycle between 29 January and 22 February 2023 Workbook.

[158] See cell CK13 of the Commissions Owed between 19 and 22 February 2023 Workbook.

[159] [2003] HCA 15; (2003) 212 CLR 484 at [40].

[160] [1997] NSWSC 608; (1997) 44 NSWLR 46 at 56.

[161] Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] AC 421 at 434 (Lord Browne-Wilkinson).

[162] [1993] HCA 54; (1993) 179 CLR 101 at [5] (Mason CJ, Deane, Dawson, and Toohey JJ).

[163] [2024] FCA 102 at [45]-[46].

[164] [2024] VSCA 173 at [62]-[64].