Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Limited

Background and context 4 Lifeplan, which is a friendly society, through its subsidiary Funeral Plan Management Pty Ltd (FPM), was engaged in the business of funds management and the provision of investment products, relevantly for the proceedings, funeral bonds and pre-paid funeral plan contracts. The precise nature of the investment products need not be recounted, but broadly speaking, payments by customers were managed in a fund (for a fee), the investments were capital guaranteed and certain taxation and social security advantages attached to them. 5 Foresters is and was at all times another friendly society whose business included similar investment products and pre-paid funeral products. 6 The breaches in question commenced in 2010. It is appropriate to identify the business context of what occurred. In the years leading up to 2010, Foresters had experienced business losses - $209,000 in 2007, $200,000 in 2008 and $49,000 in 2009. Also, in 2010, whilst Foresters had funds under management from pre-paid funeral products, Lifeplan had a much larger business in that regard. In his evidence, Mr Woff (who was very experienced in the industry) said that Foresters was "at the smaller end". In 2010, Foresters' annual inflows from such products were around $4 million, whereas Lifeplan's were in the order of $68 million. 7 Until 29 December 2010, when he resigned, Mr Woff was employed by Lifeplan in a senior management position, responsible for the oversight of the marketing and distribution arm of FPM and Lifeplan's funeral director-based funeral product business. Until 25 November 2010, when he resigned, Mr Corby was the National Sales Manager for FPM who reported to Mr Woff. The two men were critical to the running of Lifeplan's funeral product business. 8 The events of 2010 and thereafter are to be understood from a number of perspectives. First, though the appeal did not involve Messrs Woff and Corby directly, the hearing below was concerned with their liability as much as it was with that of Foresters. The focus of the appeal was on the liability of Foresters to account for its knowing participation in the breaches of duty by Messrs Woff and Corby. Nevertheless an understanding of their breaches is necessary, both in an assessment of the position of Foresters on its own account, and for an assessment of the submission of Lifeplan that Foresters can be held liable vicariously for breaches of duty by Messrs Woff and Corby. The central perspectives, however, are (a) the wholesale plundering of the confidential information and business records of Lifeplan by Messrs Woff and Corby, especially by the former, as part of an orchestrated plan to take as many of the clients of Lifeplan after they left as quickly as possible in a new venture with Foresters; (b) the use made by Messrs Woff and Corby of crucial financial information in the preparation of a business plan (called a "Business Concept Plan", to which we will refer as the BCP) to persuade Foresters to enter the venture with them; (c) the later utilisation of that information; and (d) the extent to which Foresters knowingly participated in these breaches. 9 The breaches of duty of Messrs Woff and Corby included the following. First, while employed by Lifeplan, Mr Woff emailed confidential Lifeplan documents containing detailed business and financial intelligence of Lifeplan to his external private email accounts and used some of those documents to prepare the BCP and an oral presentation which he and Mr Corby made to the board of Foresters. Secondly, also while an employee of Lifeplan, Mr Woff and Mr Corby met with representatives of Tobin Brothers (a large and important funeral directors' business) with the object of securing the award of a renewed three-year arrangement in favour of Foresters and themselves, rather than Lifeplan. To that end, Messrs Woff and Corby prepared a written proposal which made false and misleading statements about Lifeplan. Thirdly, also while employees of Lifeplan, Messrs Woff and Corby actively solicited the business of other funeral directors on behalf of themselves and Foresters. Fourthly, Messrs Woff and Corby took and utilised for their new business a database of hundreds of funeral directors' contact details maintained by a company called Melbourne Mailing for Lifeplan. Fifthly, Messrs Woff and Corby made arrangements with Lifeplan's printer of customised pre-paid funeral contracts, Matgraphics, to utilise Lifeplan's templates to produce customised pre-paid funeral contracts branded for Foresters and their new company, thereby overcoming the delay and cost involved in having to ask funeral directors for their Lifeplan contracts so they could be customised. Sixthly, while employed by Lifeplan, Messrs Woff and Corby copied Lifeplan's disclosure documents, contracts, marketing and administrative documents for their new business with Foresters, thereby facilitating what they themselves referred to as a "seamless transition" marketing strategy for funeral directors to move from Lifeplan to Foresters. Seventhly, Messrs Woff and Corby developed the proposed business while employed by Lifeplan. 10 Whilst not found to be a breach (a conclusion in contest on appeal), Mr Woff persuaded Mr Corby, a key Lifeplan employee, to join him at Foresters and lied to Mr Walsh of Lifeplan (to whom Mr Woff reported) as to the reasons for Mr Corby's departure. 11 Foresters was found to have knowingly assisted Messrs Woff and Corby to breach their fiduciary duties to Lifeplan. The breaches of fiduciary duty in which Foresters was knowingly involved concerned the conduct of Messrs Woff and Corby in preparing, and using confidential information in the BCP, soliciting business from funeral directors (other than Tobins) while they were still employed by Lifeplan and preparing disclosure and other documents for Foresters that were to be used in establishing the new business, while they were still employed by Lifeplan.

The Notice of Appeal and the Notice of Contention 12 The Notice of Appeal contained 17 grounds under four subjects: (a) asserted errors dealing with the account of profits; (b) asserted errors in finding that conduct by and knowledge of Foresters was not sufficient to satisfy s 79 of the Corporations Act 2001 (Cth) and that relief by way of an account of profits was not available under s 1317H(2) of the Corporations Act; (c) the asserted error in not fixing Foresters with liability in Equity for certain conduct of Messrs Woff and Corby by reason of principles of vicarious liability; and (d) the asserted error in failing to find that Foresters was knowingly involved in Mr Woff's breach of duty in inducing Mr Corby to leave Lifeplan. 13 The Notice of Contention sought to uphold the dismissal of the claim for monetary relief against Foresters by attacking the finding of the primary judge that Foresters assisted Messrs Woff and Corby in breaching their fiduciary duties and duty of confidence.

The appeal on account of profits 14 Whilst there are nine grounds of appeal directed to the account of profits in the Notice of Appeal, the submissions of the appellants sought to identify four categories of error: first, the failure to take account of the cumulative and ongoing effect of the various breaches of duty and Foresters' ongoing participation in those breaches; secondly, the adoption of what was said to be an overly restrictive approach to causation in Equity; thirdly, the failure to fashion a remedy of account of profits that fitted the nature and circumstances of the case; and fourthly, the failure to address the alternative case of Lifeplan. 15 Before dealing with these submissions, it is necessary to examine the relevant facts.

The development of the BCP and the decision of Foresters 16 On 14 July 2010, Mr Woff met Mr Hughes, the Chief Executive Officer of Foresters to discuss leaving Lifeplan to come to Foresters. They knew each other, and Mr Hughes had in the past sought to encourage Mr Woff to come over to Foresters. Mr Hughes asked Mr Woff to put together a proposal for a business model. He asked him to include details of likely business to be generated and likely profit figures. 17 Mr Woff and Mr Corby put together a proposal by letter dated 23 July 2010. The primary judge dealt with this first proposal at [147]-[148] of the reasons, as follows: [147] Mr Woff and Mr Corby sent a letter to Mr Hughes dated 23 July 2010 wherein they presented their initial proposal outlining "a viable, sustainable and profitable product and distribution option for Foresters Friendly Society". The letter was four pages long and there was an annexure to the letter entitled "2010/2011 Travel, Accom & Entertainment Expense Budget". The annexure is very similar in layout and form to a Lifeplan and FPM document. Mr Woff and Mr Corby recommended to Foresters that it concentrate on the funeral fund market sold via funeral firms and in doing so, give consideration to the engagement of two experienced funeral fund development managers, "Messrs Richard Corby and Noel Woff". Mr Woff and Mr Corby set out their opinion as to why Foresters should concentrate on the funeral fund market. They referred to FPM saying that it had the lion's share of the market writing $55 million in gross inflows in 2009/2010 purely through its distribution network of funeral firms. They also said that FPM's new owners, Australian Unity, had a track record of not supporting funeral funds. They expressed their belief that Australian Unity did not recognise the inherent profitability of the product and that it preferred to focus its energies on securing finely priced wholesale funds. Mr Woff and Mr Corby set out their credentials. They set out their opinion as to the business which could be secured over a five year period. Those opinions were summarised in the following table: Year Annual Inflows Year End Nos of Funeral Firms 1 $10,000,000 40 2 $25,000,000 125 3 $35,000,000 170 4 $40,000,000 220 5 $45,000,000 300

[148] Mr Woff and Mr Corby also set out their opinion as to the estimated first year set-up costs, that is to say, the costs in year one. That figure was $659,000 and some of the costs in the estimate were costs set out in the annexure to which I have already referred. The information presented by Mr Woff and Mr Corby suggested that they believed they should be employed by Foresters, but, in addition, receive a commission of .5% of funds under management paid monthly for a 20 year period. 18 The estimated costs of set up for the first year set out in this initial proposal were $659,000. Mr Fleming, the non-executive chair of the board of Foresters saw this as a major investment. Both Mr Fleming and Mr Hughes saw considerable risk in going ahead with the initial proposal. Both Mr Fleming and Mr Hughes saw the information in the letter as too general and too informal to go to the board. 19 On 5 August 2010, Mr Woff sent an email to Mr Hughes as the primary judge described in [149] of the reasons, as follows: … Mr Woff sent an email with attachments to Mr Hughes in which he said that he was sending the email from his private email address. He referred to a brief conversation with Mr Hughes that morning. He attached to his email a document entitled "Foresters Profit Revenue Model" that he and Mr Corby had put together as well as what seems to be another copy of the "2010/2011 Travel, Accom & Entertainment Expense Budget" document and a document entitled "Projected Stationary [sic] and Promotional Item Costs 2010/2011". The "Foresters Profit Revenue Model" was very similar in layout and form to a "FPM Revenue Model" Mr Woff sent to Mr Walsh on 3 June 2010, and the "Projected Stationary [sic] and Promotional Item Costs 2010/2011" was very similar in layout and form to an FPM document bearing the same title. Mr Woff's email ends with the expression of a hope that the attached information would be of some help to Foresters' accountant. The Foresters Profit Revenue Model is based on the same annual inflows set out in the letter from Mr Woff and Mr Corby to Mr Hughes dated 23 July 2010 and the model contained an estimate of the funds under management throughout a 10 year period. 20 Mr Fleming and Mr Hughes met in August 2010 and discussed the initial proposal and the documents sent on 5 August. 21 On 24 August, Mr Fleming and the board of Foresters were sent an email by Mr Hughes that explained events to date extracted at [151] of the reasons, as follows: After initially making contact with Noel Woff the GM of Funeralplan Management which is Lifeplan's Funeral Bond business arm to ascertain where AU are going with the Funeral Bond business since the takeover of Lifeplan, we have in the past month had preliminary discussions as regards the possibility of Noel joining Foresters and setting up for us a similar arrangement to the original Lifeplan Funeral Bond business plan. Noel has indicated that since AU took control of Lifeplan they have not been putting the resources into the Funeral Bond he feels is required to maintain the business and that it is the opportune time for Foresters to make a concerted push to move into the business. 22 The primary judge further dealt with this email at [152] of the reasons, as follows: Mr Hughes goes on in the email to refer to Mr Woff's preliminary submission which he states he had reviewed with Mr Fleming. He advises the Board that he and Mr Fleming believe that Mr Woff's proposal offered "a tremendous opportunity to move seriously into the Funeral Bond business and fill the position previously occupied by Lifeplan". Mr Hughes advises the Board that Mr Fleming had requested Mr Woff to put together a formal submission which would be presented to the Board of Foresters at the meeting planned for 30 August 2010. 23 Neither the initial proposal of 23 July nor the email of 5 August was circulated to the board. 24 It can be inferred at this point that neither Mr Hughes nor Mr Fleming was prepared to recommend to the board of Foresters the taking of the risk of the investment in the proposal without a detailed business plan. Mr Woff and Mr Corby proceeded to prepare the BCP. It was titled "Funeral Fund Business Concept". 25 On 25 August 2010, Mr Corby gave a copy of the BCP to Mr Hughes on condition that the latter sign a confidentiality deed. It was sent to the board for the 30 August board meeting. 26 The primary judge discussed the BCP at [155]-[167] of the reasons. Given the central importance of the BCP and its use by Messrs Woff and Corby and Foresters, these paragraphs should be set out here: [155] The BCP is a 36 page document and the "Introduction" (section 1) to the paper contains the following statements: This paper has been prepared for the Board Members of the Foresters Friendly Society ("Foresters") by Funeral Planning Australia ("FPA") to discuss the concept of working together to develop a successful funeral fund operation. The funeral industry provides two products: 1. At Need - where the deceased is either buried or cremated 2. Pre-need - when a person organizes his or her funeral in advance Compared to overseas experience the Australian pre-need market is both under developed and under serviced. With the exception of the highly costly life products there are very limited suppliers of funeral fund products in an obviously aging demographic. We believe that a window of opportunity exists to introduce a viable and credible alternative to distribute an accumulation product through funeral directors. In the Australian funeral fund industry a company called Funeral Plan Management ('FPM') is recognised as the largest and most successful operator. FPM's two key employees are Noel Woff and Richard Corby. Through FPM they have established a market lead position based on performance and innovation through product, marketing capability, technical advice and service standards. Richard and Noel have now established their own niche marketing company, FPA, which they present to the Board of Foresters as an opportunity to, in a very short timeframe, replicate the success enjoyed by FPM. [156] The "Executive Summary" (section 2) is in the following terms: Foresters have an internal objective to increase its current level of new business inflows. In order to meet this objective it is recommend [sic] that Foresters give consideration to marketing a funeral fund product Australia wide through a sales channel of established funeral firms. As an adjunct to this it is additionally recommended that consideration be given to engaging the services of FPA, a newly created specialist pre-need funeral marketing firm. FPA is the creation of two experienced funeral fund development managers Messrs Richard Corby and Noel Woff. With this in mind, FPA have identified the following areas for further discussion: • Five Years Sales Budget • Strategies to achieve the sales projections • Projected first year costs • Projected profit • Conclusion and Next Steps [157] The proposal in the BCP is that Foresters enter into a marketing agreement with FPA and that it employ Mr Woff and Mr Corby. [158] Section 4 of the BCP addresses the size of the market and section 4.2 addresses "Funeral Directors" and the funeral director sales channel. The section contains a table of 37 funeral firms which are said to be the largest funeral firms. They are set out in descending order of annual sales and the estimate of annual sales is rounded to the nearest ten thousand dollars. There is also a statement as to the location of the operations of the funeral firm. The table is introduced with the following statement: The following table outlines the main participants in the Australian funeral industry together with their annual sales and current fund managers (non FPM firm's sales figures are estimated). I have emphasised the words in brackets because they formed a basis for the assertion by the applicants that the FPM figures (i.e., where Lifeplan was the fund manager) were actual figures. [159] Section 5 of the BCP contains a statement in tabular form of strengths, weaknesses, opportunities and threats of FPA and Foresters, and states as a strength "Will offer professional marketing collateral", and as a weakness "Admin service levels may be tested due to lack of resources", and as opportunities, "AUI will be slow to react and will be reticent to invest marketing dollars", "AUI have a very poor track record in terms of support and service", "AUI/Lifeplan merger created market uncertainty - FPA staff will capitalise on this". AUI is a reference to Australian Unity. [160] Section 6 entitled "Foresters - Projected New Business" is important. It contains the opinion of Mr Woff and Mr Corby as to annual inflows for the first five years of the new business. It is as follows: 6.1 Five Year Sales Projections The following table summarises the projected new business inflows we can expect to secure over the next 5 years. These figures are supported in Attachment B to this report which itemises at funeral director level the new business planned to be secured over the next five years. Year Annual Inflows Year End Nos of Funeral Firms 1 $10,000,000 40 2 $25,000,000 125 3 $35,000,000 170 4 $40,000,000 220 5 $45,000,000 300

[161] The following points should be noted. The annual inflows outlined in the table are the same as the annual inflows predicted by Mr Woff and Mr Corby in their letter dated 23 July 2010 and in their Foresters Profit Revenue Model attached to the email of 5 August 2010. Appendix B (at p 20) which is said to support the figures is an important document. It is entitled "New Business Acquisition Timeframe" and it sets out an opinion or plan as to the funeral firms who might be persuaded to join the Foresters Funeral Fund and at what point in time over a five year period that might occur. It states to the dollar the value the particular funeral firm's business and the number of contracts which forms the basis of that figure. As I read Appendix B, the estimated business in year 1 in terms of annual inflows is $14,911,776. [162] Section 6.2 of the BCP is in the following terms: 6.2 Historical Sales Performance With any projections for a start up entity there are the obvious questions of accuracy. As a means to give validity to what has been presented we submit our historic sales figures which have been achieved in an environment of more players and intensive competition. Year Annual Sales 2000/1 $21.3M 2001/2 $22.5M 2002/3 $27.7M 2003/4 $28.5M 2004/5 $32.8M 2005/6 $39.3M 2006/7 $41.8M 2007/8 $51.0M 2008/9 $55.0M 2009/10 $55.8M

(Emphasis added). The reference to "our historic sales" is important because it is, I find, a reference to Lifeplan's historic sales figures. [163] Section 6.3 is entitled "Geographical Spread" and it contains an estimate of the annual inflows to be attributed to each State. [164] Section 11 of the BCP is in the following terms: 11. Market Reaction of AUI The reaction of Australian Unity to the loss of its entire funeral fund sales team (the other two members have indicated their intention to resign) is unpredictable. However, all indications suggest that they will do nothing as their eyes seem to be clearly fixed on developing other market segments and so they are more likely to simply sit back and take heart at the short term expense savings they will now enjoy. [165] Appendix C is entitled "Visitation Plan" and seems to be a reproduction of the "2010/2011 Travel, Accom & Entertainment Expense Budget" attached to Mr Woff and Mr Corby's email to Mr Hughes dated 5 August 2010. [166] Appendix D of the BCP is a schedule of returns of various funeral benefit funds. It is entitled "Bonus Rate Comparison ('Untaxed') - Funeral Plan Management ('FPM')". The heading is important because it contains a reference to FPM, not FPA. The schedule sets out for each year from 1996 to 2009 the bonus rate earned on 11 different funds involving, as far as I can see, seven different fund managers. [167] Finally, Appendix E is entitled "Foresters Profit Revenue Model" and is similar in layout and form to the document with the same description sent to Mr Hughes on 5 August 2010. 27 The BCP was based on Lifeplan's confidential information. Mr Woff and Mr Corby described the information in an email as "extremely confidential given it contains figures relating to funeral industry participants". The reasons of the primary judge at [130]-[139] set out in detail the activity of Mr Woff in transferring detailed confidential information of Lifeplan to his private email address from February 2010 to 17 August 2010: market research, sales figures, new business details, sales contributions by different funeral directors, business manuals, claims data, a staff training manual, budget comparisons, business strategy and many other documents. The reasons reveal that Mr Woff continued to transfer documents and information of Lifeplan after the preparation of the BCP and up to his leaving in December: see [116]-[127] and [140]-[142] of the reasons. Whilst the primary judge did not express it thus, given the apparent freedom of Mr Woff and so Mr Corby to access the business information of Lifeplan and their apparently conscious and deliberate taking of information from Lifeplan, one can infer that they took anything and everything from Lifeplan's records that they thought would be useful in order to facilitate the start-up of the business segment with Foresters. 28 The preparation of the BCP by reference to Lifeplan's confidential information was dealt with by the primary judge at [180]-[190] of the reasons. His Honour concluded (at [377]) that most of the information in the BCP was confidential, having given a detailed summary of its contents earlier at [191], referring to Lifeplan documents (that he had referred to at [130]-[139] that Mr Woff had sent to his private email address), as follows: At the risk of some repetition, it is convenient to draw the threads together in the following summary: (1) Some of the phraseology in the document identified in paragraph 138 above (A26, B42), appears in section 3 of the BCP. (2) Information in the document identified in paragraph 130 above (A11, B25) was used in the preparation of section 4.1 of the BCP. (3) Information in the document identified in paragraph 137 above (A25, B41) was used in the preparation of the table in section 4.2 of the BCP. (4) The SWOT analysis in the document identified in paragraph 138 above (A26, B42) and in the document referred to in paragraph 135 above (A18, B33) appear to have been used, in part at least, in the preparation of the SWOT analysis in section 5 of the BCP. (5) The information in the document identified in paragraph 135 above (A17, B32) was used in the preparation of the historical sales figures in section 6.2 of the BCP, and the information in the document identified in paragraph 135 above (A18, B33), was used in the preparation of the geographical spread figures in section 6.3 of the BCP. (6) The information in the documents identified in paragraph 131 above (A34, B58) and in paragraph 135 above (A23, B38) was used in the preparation of Appendix B to the BCP. (7) The information, or at least part of it, in FPM's "2010/2011 Travel, Accom & Entertainment Expense Budget" was used in the preparation of the Visitation Plan, Appendix C of the BCP. (8) The information in the document identified in paragraph 136 above (B39) was used in the preparation of Appendix D to the BCP. (9) The structure and form of the Foresters Profit Revenue Model, Appendix E to the BCP, follows the structure and form of the FPM Revenue Model that Mr Woff sent to Mr Walsh on 3 June 2010. 29 A number of things were evident from the terms of the BCP. The business aim was to "develop a successful funeral fund operation" in a "window of opportunity"; and that Messrs Woff and Corby were presenting "an opportunity to, in a very short time frame, replicate the success of [Lifeplan, as the largest and most successful operator]". Section 6 of the BCP dealt with projected new business, but included detailed historical sales performance (of Lifeplan) from 2000/2001 to 2009/2010. Appendix B listed up-to-date information as to the amount of revenue and the number of contracts with an extensive list of the funeral funds and prioritised the target funeral businesses as to when they should be approached and when their business and income could be expected. This involved a strategic plan to deal with all of Lifeplan's existing clients. Thus, these two current employees of Lifeplan were identifying a business strategy to a competitor of their employer to take, as swiftly as possible, the business of Lifeplan, such strategy being planned by access to the confidential information of Lifeplan. 30 The strategy for securing the new business was set out in section 7. It involved a planned schedule of visits to funeral businesses and a strategic plan to make use of documentation, which was, in fact, taken wholesale from Lifeplan and changed as necessary. 31 The primary judge dealt with Appendix D. It was a Lifeplan table, evident as such, that was incorporated into the BCP with highly valuable information about bonus rates paid in the marketplace. Appendix E was also a valuable commercial document that included the identification of rates of return. 32 The BCP was a comprehensive plan presented by employees of Lifeplan to Lifeplan's actual and prospective competitor, prepared utilising valuable confidential information of their employer (and to a significant degree recognisable as such) that set out a detailed strategy to attack the commercial base of that employer in order to win as many clients as possible from the employer after they left it, and so to take as quickly as possible the business presently enjoyed by Lifeplan and replicate its success for the benefit of the new prospective employer. 33 The BCP was a strategy and planning document designed to persuade the board of Foresters to take advantage of a valuable business opportunity that was presented to develop its business at the expense of Lifeplan, the current employer of the promoters. It was a document based on confidential information taken in dishonest breach of fiduciary obligation. It was a document that enabled the Foresters' board to evaluate the worth of the commercial opportunity against the risk to be undertaken, and to make the commercial decision with the confidence of knowing that it was privy to the detail of Lifeplan's strategies, financial analyses and up-to-date results. 34 The board of Foresters considered the BCP on 30 August 2010. The board had a number of concerns and questions, though it considered the proposal attractive. The board asked Mr Hughes to raise certain questions with Messrs Woff and Corby and to invite them to present their proposal to the board on a later occasion. The board minute was set out by the primary judge in [169] of his reasons: 6.10 Funeral fund proposal: The CEO confirmed he had been in discussions with Noel Woff the General Manager of Funeral Plan Management concerning the possibility of he and his Sales Manager pursuing a Funeral Bond initiative with Foresters. The CEO told the Board that he was suggesting they consider the proposal and if interested get Noel and his associate in to review and discuss matters of interest. After discussions it was agreed that a meeting be convened with Noel Woff and his associate Richard Corby but that the CEO should address the following matters with them: (a) Are there any restrictions in them setting up the proposed structure in opposition to Funeral Plan Management in their current employment contracts; (b) How long they anticipate Foresters continuing to remunerate them; and (c) Is it necessary for the commission payment to be channelled through a separate company. 35 Mr Woff's speaking notes (which one can infer reflected what he said to the board of Foresters on 13 September 2010) included the following: Achievement of Sales Targets Our sales targets are set out on page 10 of our plan. Now if we didn't know the industry and the market as well as we do I'd have to think that you must be delirious if you think any new start up operation could think it could write $45M pa in new business sales after just operating for 5 years. But it will happen. … The thing we cannot over emphasise is that the timing is now. The window is now. From Oct - March next year our competitors will be very vulnerable. Not in 24 months [sic] time but now over the next 12 months. There will be confusion in the market when we set up. There will be firms that follow and fill in stationery order forms simply because they wont [sic] know any better. But there will also be firms that will fill in our documentation and then mistakenly deposit the funds with the wrong entity. We can expect a lot of that to happen. So we need to capitalise on the confusion. Why will firms come to us? 1. Established relationships 2. Respect for our time in the industry 3. The market is disenchanted with current suppliers 4. The market offers little alternatives and is undersupplied … 9. There will be confusion in the market after we leave and lines of demarcation between fund management firms will be blurred (and to be honest we may at times let this happen) 10. We will be proactive in our marketing in our approach to firms and the others wont [sic] 11. We will offer professional marketing collateral … 13. As long as we make it somewhat seemless [sic] a transition the funeral firms will follow us….but lets [sic] be honest not all will and some will but not immediately. And this explains our budget philosophy. … What we are suggesting is a lot hinges on getting: 1. The fund established 2. The disclosure docs & marketing collateral produced 3. The systems analyses 4. Minimising down time and securing traction Turning to the specifics of the sales budgets we have been as transparent as we could be. … Year One - specific targeted firms - 34 generating just under $15M (but we will more likely pick up 100) Year Two - specific target firms - 74 - incls Bledisloe Group generating a further $14M in new business Year Three - 52 firms - for $9M … There is little doubt that our biggest challenge will be securing Tobin Brothers in Year One. Now this ties in with why we have allowed in the order of $250K in marketing rebates. Some of these larger accounts just need a financial inducement to get them over the line. 36 The emphasis in the notes was upon the need for immediate action. This was related to the positions of Messrs Woff and Corby. They were Lifeplan's salesmen who knew the business and knew the customers. It was thus important for Mr Woff to persuade Mr Corby to come with him. Their combined departure would leave Lifeplan without senior executives who knew the business and who knew the clients. The references to a seamless transition, and to the recognition that there may be some confusion, reflected the fact that the documentation was going to be very similar to that of Lifeplan. It was important to get the administrative documentation and systems (taken from Lifeplan's documents over the course of the second half of 2010) in place and working quickly. The notes also stressed the significance of specific prioritised sales targets based on Lifeplan's confidential information and the importance of the use of familiar documentation in order to achieve a seamless transition. 37 The board reviewed the presentation and decided to move ahead with the proposal. Though there were details to be agreed, there was effectively agreement in principle. Mr Hughes wrote to Messrs Woff and Corby on 20 September 2010 in terms extracted by the primary judge at [176] of the reasons. The letter included the statement: In measuring the traction of the product the Board will rely heavily upon your prediction of sales/growth that you provided in [the BCP]. 38 The appellants rely, with some force, upon this letter as revealing the continuing relevance of the BCP to Foresters. The BCP and its evident use of confidential information not only had importance for the decision of the Foresters' board to proceed with the venture; it was not thereafter a matter of mere causal history; rather it took its place as a body of information to be used by the board to measure the success of the venture. Measurement of performance against key indicators is a central aspect of governance of a commercial entity. The BCP, on this evidence, was to play an important role in that process in the implementation of the decision. 39 The primary judge's findings as to the BCP, the breaches of duty by Messrs Woff and Corby in respect thereof and Foresters' knowledge and participation were contained in [377]-[379] of the reasons, as follows: [377] I identified earlier in these reasons (at [191]) the documents of the applicants which were used by Mr Woff and Mr Corby in preparing the BCP and the information disclosed in the BCP. Most of the information was confidential information. The most obvious example is the annual inflows and contract numbers in Appendix B and the annual sales in the table in section 4.2. The use of confidential information involved a breach of the duty of confidence, and to use it for the purpose of advancing a business proposal in their own interests, and contrary to the interests of the applicants, was a breach of the fiduciary duties Mr Woff and Mr Corby owed to the applicants. Some of the information used by Mr Woff and Mr Corby such as the statements about FPA in section 3 and statements about the industry in section 4.1, might be no more than valuable information of the applicants. Nevertheless, the use of valuable information of the applicants for the same purpose was a breach of the fiduciary duties. The conduct of Mr Woff and Mr Corby was also a breach of the contractual duties they owed to the applicants, both at a general level in terms of the obligation of fidelity and good faith, but also of the declarations and agreements identified earlier in these reasons (at [96] and [102]). Mr Woff's conduct was such that he also contravened ss 181, 182 and 183 of the Corporations Act. [378] In terms of whether Foresters had the requisite knowledge for the purposes of the second limb of Barnes v Addy, I do not think that there is any doubt that it did, having regard to the fact that it is sufficient that Foresters knew of circumstances which would indicate the facts to any honest and reasonable person. The annual inflows and contract numbers in Appendix B are sufficient for that conclusion, as are the words and table in section 4.2. One could add to these matters, the table in section 6.2 and the heading to Appendix D. [379] Foresters submitted that even if it had the requisite knowledge for the purpose of the knowing assistance limb, it did not assist Mr Woff and Mr Corby in the breach of their fiduciary duties and the duty of confidence. It submitted that it did nothing to procure, induce or encourage Mr Woff and Mr Corby to provide to it the applicants' confidential information. It is true that Foresters, other than requiring more information than it had previously been given, did not specify the information to be provided by Mr Woff and Mr Corby in their business proposal. However, there are two answers to Foresters' submission. Foresters assisted because it was open to it, through Mr Hughes and Mr Fleming, to require Mr Woff and Mr Corby to remove the applicants' information from the BCP before it was presented to the Board of Foresters. I infer that this is what the management of Tobins did in relation to the first version of the FPA proposal to Tobins. The second answer to Foresters' submission is that in the case of the equitable duties, a broad approach to assistance is appropriate, and considering events from July to September 2010, I think it can be said that Foresters provided assistance. 40 On 27 September, Mr Woff and Mr Corby wrote saying that they were ready to proceed subject to resolution of certain matters. 41 Looking at the contents of the BCP, it discloses detailed information, some of which expressly, and plainly, came from Lifeplan's records. The information throughout the document was of such detailed specificity and commercial importance, including historical financial information, that no honest and reasonable person, not shutting his or her eyes to the obvious, could conclude other than that the document was based on Lifeplan's confidential information brought by current employees of Lifeplan who were seeking to persuade the board of Foresters to make a decision to attack the business of Lifeplan for the joint future benefit of the employees and Foresters. This was not mere knowledge gained in a role of spectator to another's wrong. The members of the board of Foresters, not just its chairman and CEO (Messrs Fleming and Hughes, respectively) knew or should be taken to have known (by the standards of honest and reasonable people) that they were being supplied with confidential business information of a competitor by the competitor's current employees, in order to have them make a decision to enter into a business relationship with the current employees of the competitor to the likely commercial disadvantage of the competitor, and the likely and intended commercial advantage of their company and the employees. This was not mere knowledge; this was active participation in a dishonest breach of fiduciary duty.

Steps to establish a new business 42 Thereafter, steps were taken by Foresters and Messrs Woff and Corby to establish a new business. On 29 September, Mr Hughes sent the Foresters' funeral fund rules for review. This was done by Mr Woff within two weeks in a five page document having undertaken "a fairly extensive review": see [252] of the reasons. 43 In October and November, Mr Woff and Mr Corby were preparing documentation for the new business, including disclosure documents and marketing flyers and communicated with Mr Hughes about these. The preparation of the suite of documents to give to prospective funeral funds was important. The easier and more seamless the task of signing up to the new business was made, the greater the likelihood of attracting business. Mr Hughes was consulted by Mr Woff about this in November. The disclosure documents, stationery request forms, funeral benefit claim forms, marketing flyers and pre-paid funeral contracts were created from Lifeplan's documents. 44 On 11 November 2010, Funeral Planning Australia (FPA), the corporate vehicle of Messrs Woff and Corby, was incorporated. It was to operate as a trustee for a trust of which Messrs Woff and Corby were equal beneficiaries. 45 On 31 December 2010, two days after Mr Woff's employment with Lifeplan ended, Foresters and FPA executed a "Marketing & Service Agreement" to implement the arrangement. 46 The primary judge found (at [317] and [402] of the reasons) that the conduct of Messrs Woff and Corby in reviewing Foresters' rules, and in the preparation of disclosure documents, was in breach of duty (fiduciary and contractual) and that Foresters, through Mr Hughes, played an active role with knowledge that it was in breach of duty.

The approaches to funeral directors other than Tobins 47 From mid-October, Messrs Woff and Corby began approaching other funeral directors. 48 In October 2010 Messrs Woff and Corby attended a New South Wales funeral directors conference in the Hunter Valley. The primary judge recorded Mr Woff's email to Mr Hughes on 20 October at [216] of the reasons: On 20 October 2010, Mr Woff sent an email to Mr Hughes in the following terms: Hi Kerry! How are things going your end? Thought you may like to know that Richard and I spent a very encouraging few days in the Hunter Valley last weekend attending a NSW funeral industry conference. We did take the opportunity to subtly sound out a few potential clients and your Board may be interested to learn that we now have verbal comittment [sic] from 90% of those approached to swing over immediately to FPA. From this relatively small audience we already have in excess of $15M in annual funds ready to roll in. Obviously the sooner we capitalise on this momentum and speak to others in other States the better for all parties concerned. How's the MU merger gone so far? FYI it was mentioned by a few of our clients over the weekend. Look forward to catching up. Kind regards Noel 49 Messrs Woff and Corby attended similar meetings in Victoria in October and November and, it can be inferred, sought to advance the interests of FPA at the expense of Lifeplan. Once again, on 10 December 2010, Mr Hughes was kept up-to-date by email, this time by Mr Corby, as the primary judge set out at [221] of the reasons: Hi Kerry Good trip thus far 2 from 2. About $2.5 M worth which is handy. Could you please forward the below to Bernie as I don't have his email handy. Thanks and have a good weekend. 50 The primary judge concluded (at [326], [387] and [388] of the reasons) that Foresters was aware of these breaches and assisted in them. He succinctly summarised the matter, as follows: [326] Mr Hughes of Foresters knew by 20 October 2010 that Mr Woff, whilst still employed by Lifeplan, was soliciting business from funeral directors for the proposed business and that Mr Woff was likely to continue to do so. Whilst there is no evidence that Mr Hughes encouraged Mr Woff to approach funeral directors at the Hunter Valley conference, there is no evidence that after 20 October 2010 he did anything to discourage Mr Woff from soliciting funeral directors, and I find that he did nothing along those lines. Mr Hughes said that the proposed business arrangement at that stage was only possible. I think that significantly understates the position and that, by late October 2010, it was at least fairly likely that the proposed business would proceed. It is true the employment contracts and the Marketing & Service Agreement were not executed until 31 December 2010, but one only has to look at what the parties were doing in November 2010 to conclude that for some time all parties thought it very likely the proposed business would proceed. The parties were considering changes to the rules of the Foresters Fund, the preparation of disclosure documents and Mr Woff and Mr Corby were looking at securing the business of Tobins. Furthermore, it should not be overlooked that Mr Corby in fact commenced employment with Foresters on 6 December 2010 having given notice of his resignation on 28 October 2010 and that Mr Woff gave notice of his resignation on 1 December 2010. … [387] As I have previously said (at [326]), Mr Hughes knew from 20 October 2010 that whilst employed by Lifeplan, Mr Woff was soliciting business from funeral directors for the purposes of the proposed business, and that he was likely to continue to do so. That is sufficient knowledge for the purposes of the knowing assistance limb of Barnes v Addy. [388] Foresters submitted that even if I reached this conclusion, nevertheless it did not provide any assistance for the purpose of the knowing assistance limb. I reject this submission because again, as with the BCP, I think it involves too narrow a view of assistance in the breach of fiduciary duties. The reality in this case is that both the defaulting fiduciaries (Mr Woff and Mr Corby) and the third party (Foresters) were working towards, not only the execution of agreements which would embody their arrangements, but, confident that the arrangements would be put in place, they were both taking steps to ensure that the business would be ready to start as soon as the employment of the defaulting fiduciaries ceased. Foresters was considering rule changes and the preparation of disclosure and other documents. Foresters' involvement in that process is sufficient assistance for the purposes of the knowing assistance limb. 51 These findings of the primary judge went beyond mere knowledge and doing nothing to discourage Messrs Woff and Corby. Foresters, through its CEO, Mr Hughes, was acting in concert to take such steps as were necessary to get the business plan operational as soon as possible.

The three found breaches of duty of Messrs Woff and Corby with Foresters' knowing assistance 52 There were, thus, three breaches of duty found by the primary judge in respect of which Foresters was knowingly involved for the purposes of equitable principle: (a) preparing and using the BCP (b) soliciting business from funeral directors (other than Tobins) while employed with Lifeplan (c) reviewing Foresters' rules and preparing disclosure documents.

The success of the venture 53 A relevant consideration for relief is the respective diminution and growth of the funds of Lifeplan and Foresters. The primary judge found that from the time Messrs Woff and Corby became employees of Foresters, the Foresters' fund grew very substantially and Lifeplan's funeral fund business diminished ([7] of the reasons); in 2010 Lifeplan had a 70% share of the market ([73] of the reasons); as at 30 June 2010 the balance of the Foresters' Funeral Fund was $13,238,399 and at 30 June 2013 it was $62,940,608 ([89] of the reasons). 54 The primary judge also made findings about the skill and experience of Messrs Woff and Corby and of the resources devoted by Foresters to the venture. At [429] the primary judge said: I think that it can be said that Mr Woff and Mr Corby were well known in the industry, particularly Mr Woff. They had a personal relationship with a number of funeral directors and, by that, I mean a friendship. They were good salesmen and they attacked the market aggressively. I do not think I can make a finding as to how good they were as salesmen, but I do find that they knew the market very well. Many years of experience meant that they had a good understanding of how the market worked and how to generate new business. Mr Woff and Mr Corby had a great deal of general know-how about the funeral bond industry. At about the same time, Lifeplan had a fund which had performed poorly and it was considering various ways of reducing costs. It had lost most of FPM's staff in Melbourne over a relatively short period. On the other hand, Lifeplan had closed the fund and its Tax Minimiser Fund was performing satisfactorily. Furthermore, as at 30 June 2010, FPM's sales had not only met budget, but were a record achievement. Mr Woff put this down to the fact that he and Mr Corby were "holding up the dam walls", but I think that is an exaggeration. In terms of funeral directors, I think that some funeral directors would have been concerned about the poor performance of the Lifeplan Funeral Benefits Fund No 2 and the poor performance would have been an easy theme for Mr Woff and Mr Corby to exploit after they had left Lifeplan. Foresters could and, in fact, did, devote considerable resources to the new venture.

The critical reasoning of the primary judge on account of profits 55 The primary judge dealt with the remedial consequences of the breaches of duty and participation therein at [414]-[448] of the reasons. After noting the effective abandonment by Lifeplan of the claim of a constructive trust over the Foresters Funeral Fund ([416] of the reasons), the primary judge described the cases he saw as being put ([418]-[420] of the reasons). We will deal later with the assertion by the appellants that the primary judge overlooked one of its claims. The primary claim was set out in [418] as "the profits earned and to be earned by the Foresters Funeral Fund from 1 February 2011 to a notional date when the Fund comes to an end". Another way of putting the claim was described in [420] as a calculation of profit by reference to the policies issued or to be issued up to a particular point in time; that is, the value of the Fund on a net present value basis by reference to the number of policies issued by the Fund. 56 The primary judge noted (at [419]) that by way of revenue position the Fund made losses in the financial years ending 30 June 2011, 30 June 2012 and 30 June 2013. 57 The primary judge set out the central question at [442] of the reasons: This is a claim by the applicants against Foresters. I have found that Foresters participated in breaches of duty by Mr Woff and Mr Corby in relation to the BCP and its preparation, the approaches to funeral directors other than Tobins, and aspects of the preparations for the new business. The issue is whether the profits earned and to be earned by Foresters in relation to the Foresters Funeral Fund are attributable to one or more of these breaches. I should add in case it is not clear, that Foresters will only be liable for profits made by it in consequence of the breaches it participated in. 58 The principles by reference to which this question was to be answered were discussed at [422]-[425] and [431]-[440] of the reasons. The relevant cases referred to and discussed were: Warman International Ltd v Dwyer [1995] HCA 18; 182 CLR 544; Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296; Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1968] HCA 50; 122 CLR 25; Dart Industries Inc v Decor Corporation Pty Ltd [1993] HCA 54; 179 CLR 101; and in the Full Court in Decor Corporation Pty Ltd and Another v Dart Industries Inc [1991] FCA 844; 33 FCR 397; Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; 156 CLR 41; Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488; and Howard v Commissioner of Taxation [2014] HCA 21; 253 CLR 83. No expression of principle by the primary judge was said to be erroneous. 59 As can be seen from the analysis of the jurisprudence by the primary judge, the causal relationship between the breach and the profit has been variously expressed: profits made attributable to the breach (Colbeam Palmer 122 CLR at 42-43; approved in Dart v Decor 179 CLR at 120-1); "profits obtained by the infringement" (Dart v Decor 33 FCR at 407, approved in the High Court 179 CLR at 120); "the particular benefits which flowed … in breach of … duty" (Hospital Products 156 CLR at 110 (per Mason J)); "by reason of (the breach)" (Warman 182 CLR at 557); "by reason or by use of (the breach)" (Howard 253 CLR at 107 [62]). 60 The primary judge's reasoning is contained in [443] and [444], as follows: [443] I do not think it can be said that Foresters' participation in the breaches of duty in relation to the BCP and its preparation resulted in the profits earned and to be earned on the Foresters Funeral Fund. The confidential information was not used to generate any of these profits. There is nothing to suggest that the information in Appendix B, the table in section 4.2, the information as to geographical spread or Appendix D were used to generate profits. The use of some of the information in Appendix B by FPA in its Board Reports in early 2011 is not a use that generated profits. The fact that the proposed business would not have gone ahead without the BCP and that the confidential information with respect to which I have found Foresters had knowledge within the relevant legal test, played a part in Foresters' decision to proceed, is not sufficient to conclude that the profits claimed were attributable to those matters. [444] I can deal with the approach to funeral directors other than Tobins and the preparations for the new business together. Neither Mr Woff nor Mr Corby were subject to restrictive covenants and, other than Tobins, funeral directors did not enter into contracts with fund managers to invest in a particular fund for an agreed period. It was open to Mr Woff and Mr Corby after they left the employ of Lifeplan to approach funeral directors and seek their business, to prepare disclosure documents and to advise Foresters as to the rules of the Foresters Funeral Fund. In those circumstances, the breaches in which Foresters participated might have led to FPA and Foresters being able to establish the proposed business earlier than might have been the case had there been no breaches, but they did not lead to the profits earned and to be earned in relation to the Foresters Funeral Fund. As I have said, the applicants have not advanced a case on a headstart basis. There is evidence before the Court of the profits earned and to be earned on policies issued up to a particular date, but that was not advanced as a basis for assessing profits. It is not the traditional way in which profits for a limited period would be assessed as I think counsel for the applicants acknowledged. I am not aware of any authority which would enable me to assess profits on this basis. (Emphasis added.) 61 The refusal to award an account of profits can be seen to flow (at least in [443] above) from the lack of relationship between particular breaches and particular profits generated by activity. Critical to the analysis, however, is the finding that without the BCP (based as it was on dishonest breaches of duty knowingly assisted by Foresters), the proposed business would not have gone ahead. To use the language deployed in argument on appeal, a but-for connection is, it was submitted, not enough; there must, it was submitted, be a link between breach and the generation of particular profits. 62 The correct approach to questions of causal connection in Equity between an equity and a relevant remedy depends upon the nature and character of the relevant rule of responsibility, and of the remedy sought. As the High Court said in Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; 212 CLR 484 at 499 [36] speaking of remedies in Equity, "[g]eneralisations may mislead". 63 The remedial rules concerning breaches of fiduciary duty are structured to enforce, not undermine, the strictness of the duty. The High Court in Warman 182 CLR at 557 made clear that the "stringent rule that the fiduciary cannot profit from his trust [had] two purposes: … [to] account for what has been acquired at the expense of the trust, and … to ensure that fiduciaries generally conduct themselves 'at a level higher than that trodden by the crowd'". This last allusion was to a passage from the enduring judgment of Cardozo CJ in Meinhard v Salmon 249 NY 458 (1928). In discussing trustees and fiduciaries (at 464) Cardozo CJ contrasted the "morals of the market place" (by which, as is clear from the passages in question, he meant "honesty alone") with "the punctilio of an honor the most sensitive", the latter being the relevant standard of behaviour. Chief Judge Cardozo wrote in the same paragraph of the tradition developed that is "unbending and inveterate", and of the "uncompromising rigidity" of the attitude of courts of Equity when faced with exceptions that might be seen to undermine the rule of undivided loyalty. This language accords entirely with the strictness of the rule in Australia: Warman 182 CLR at 557-558. The strictness of the rule of undivided loyalty informs the application of remedy in its factual application, being fashioned to fit the nature of the case and the particular facts: Warman 182 CLR at 559. 64 In Warman, the relevant expression of the causal connection between the breach and the profit was of a profit obtained by reason of the fiduciary position or by reason of taking advantage of opportunity or knowledge derived from the fiduciary position: Warman 182 CLR at 557. There is nothing narrow in this causal connection. There is no call to require a strict, or direct or proximate relationship between each particular transaction from which the profit in a business is derived and some particular breach. There is no call to generalise about the adequacy or not of the so-called but-for test. The facts should be examined to ascertain the causal relationship between the breaches and the profits to assess whether it is sufficient to conform with the policy of the rule to attribute a liability to account for those profits. This enquiry involves an assessment of whether the rule and its policy would be undermined if the causal connection or relationship were to be adjudged inadequate and a liability to account not attributed. 65 In Dart v Decor 179 CLR at 111, Mason CJ, Deane, Dawson, and Toohey JJ adopted the expression of Windeyer J in Colbeam Palmer 122 CLR at 34 that the account of profits retains its equitable characteristics in that a defendant is made to account for, and then is stripped of, profits that it has dishonestly made by the infringement, and which it would be unconscionable for it to retain. The proposition that Windeyer J in Colbeam Palmer and the plurality in Dart v Decor then expressed was that an "account of profits is confined to profits actually made" is not any narrow restriction, but an expression of the purpose of the remedy - not punishment but the prevention of unjust enrichment. Likewise, there is no call to over-emphasise the word "particular" used by Mason J in Hospital Products 156 CLR at 110 (see [59] above). 66 Here, a central, but not comprehensive, feature of what happened was that Mr Woff and Mr Corby, with the full knowledge of Foresters, dishonestly breached their duty by, amongst other things, utilising confidential information to prepare the BCP for the consideration of the board of Foresters. This was for their own financial advancement and advantage. It was done in order to win the approval of the Foresters' board for their proposal to work with Foresters and to develop a segment of business, and was to their knowledge and to the knowledge of Foresters contrary to their fiduciary duty to Lifeplan. Armed with this information, Mr Woff and Mr Corby were able to persuade Foresters, and, in receipt of the information, Foresters was able to decide, with a degree of business confidence, to employ them and to undertake the business strategy proposed by them. Without the dishonest taking advantage of the information and without the breaches, Mr Woff and Mr Corby would not have been employed by Foresters, and Foresters would not have expanded its business in this segment in the hands of Mr Woff and Mr Corby as it did. Put another way, without the breaches of duty in which Foresters was knowingly involved, without Messrs Woff and Corby taking advantage of their positions and of the confidential information taken from their employer, Foresters would not have made the profits it did from the business written in the venture with Messrs Woff and Corby. To conclude that such is a sufficient causal connection to found a liability to account for profits of the business would not be to extend the causal relationship beyond the expressions of profits actually made by reason of the breaches; rather, it would be to fashion the remedy in a way that, in terms of a causal attribution, would conform to and enforce, and not undermine the strictness of the duty by fashioning the remedy to fit the nature of the case and the particular facts. Further, far from being an attenuating consideration, the satisfaction of a but-for test can be seen as a strong foundation for any causal analysis: cf March v Stramare (E&MH) Pty Ltd [1991] HCA 12; 171 CLR 506 at 515-517 (per Mason CJ) and 528-534 (per McHugh J); Resurfice Corp v Hanke 2007 SCC 7; [2007] 1 SCR 333 at 342-343. 67 In the discourse of liability for tort, it has been accepted that a but-for test of causation may lead to both false positives as well as false negatives, but the place of such analysis will always fall to be considered bearing in mind the relevant rule of responsibility, the nature and purpose of the rule, the particular facts and the character of the wrong. Equity here is concerned broadly with the enforcement and support of fidelity, conscience and trust and the stopping of the gain from infidelity, breach of trust and fraud. There is no reason in principle or logic why this concern should not extend to the person participating in the breach of duty. The attribution of liability for those purposes should not deny a remedy that is founded on the proposition that profits are accountable because the business that generated them would not have been undertaken without the decision to engage in the business that was made knowingly utilising information dishonestly gained. The more difficult question is assessing how much of the profits of the business after 1 February 2011 should be accounted for. 68 Though the Court was not referred in argument to the decision, mention should be made of Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908; [2015] QB 499. The appeal concerned the causal test for the liability to account by reason of participation in breaches of fiduciary duty. Different causal tests were identified by the Court of Appeal for the liability of the defaulting fiduciary and for what was referred to as "accessory" liability. In respect of the latter (the position of Foresters here) the Court referred to the need to demonstrate the "real or effective cause" and a "sufficiently direct causal connection". The Court invoked the common law rules of causation, remoteness and measure of damages, by analogy. This was to be contrasted with what the Court saw as the absence of any notion of causation for the liability of the fiduciary. At least three difficulties lie in the way of applying Novoship on the approach displayed in it. First, Foresters' liability is not strictly accessorial. It is a liability, in Equity, imposed directly on the third party, though, of course, it is necessary to show that there has been a breach of fiduciary duty: Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; 244 CLR 427 at 457 [106]. Secondly, the principles and informing policy to hold the dishonest participant to account are no different to the holding of the fiduciary to account. The correct analogy is not a common law wrong; rather it is the enforcement of fidelity and trust. Thirdly, the foundation for the distinction made by the Court of Appeal was the absence of any causal requirement for the liability of the fiduciary to account. That is not the law in Australia. As the authorities to which we have already referred demonstrate, the liability has been expressed in causal terms in Colbeam v Palmer, Dart v Decor and Warman. It is a causal relationship, however, that is governed and applied by reference to the informing policy in the relevant rule of responsibility and all the circumstances. That a causal relationship founds the liability of the defaulting fiduciary can be seen in the orders in Manley v Santori [1927] 1 Ch 157 at 166-167; and see Boardman v Phipps [1967] 2 AC 46 at 105 where Lord Hodson spoke of the profits required by the fiduciary "by reason of" the opportunity or knowledge. In this respect, see the case note on Novoship in (2015) Cambridge Law Journal 74(3) at 405-409 by the Hon William Gummow. 69 The assessment of how much of the profits of the business should be accounted for is assisted by a number of considerations. The first is the continuation of the use of the information. The information in the BCP was utilised by the board of Foresters in gauging the success of the undertaking, at least in the first six months of the operation of the business. As earlier discussed, the use of the BCP and its contents as the benchmark for performance is not an incidental or minor consideration. This was the utilisation of information for the important task of supervision and governance of the business. 70 Before coming to a consideration of the way the matter was presented, we should say something about the Notice of Contention. Foresters contends that it did not assist Messrs Woff and Corby in their breaches of duty. From what we have said earlier it is clear that Foresters did more than observe. They knew the opportunity was coming in breach of duty, that information was coming to them in breach of duty and they examined that information and used it to decide that they would take the opportunity presented to them. They also, for the reasons given by the primary judge, discussed and were complicit in the steps of preparation to which we have referred.

The way the case was run 71 Two matters are not in doubt. First, Lifeplan elected not to seek damages, but an account of profits. Secondly, it did not pursue a "head start" case. No case was run that the business could have been started but the breaches made it profitable earlier. 72 Lifeplan's primary case put was for the full capital value of the whole business. Lifeplan's expert witness, Ms Wright, valued the business by taking into account future income flows. Foresters' expert, Mr Jackson, did not value the business for all future income flows; rather, he calculated the net present value of future profits associated with contracts written in limited periods, but only up to 30 June 2014. 73 Ms Wright filed a further report which did two things. It revised (upwards) the capital value of the whole business. It also undertook a net present value calculation of future profits for yearly periods, as Mr Jackson had done, but took them up to 2025. 74 Thus, although the approach of the net present value of the contracts written up to a particular time originated in the evidence put forward by Foresters, it was developed by Lifeplan. So, there were before the primary judge two alternatives upon which Lifeplan sought an account, both being a form of an account of capital: the value of the whole business or the value of contracts written up to nominated cut-off dates. 75 At [419]-[420] of the reasons, the primary judge said the following: 419 The Fund made a loss for the financial years ended 30 June 2011, 30 June 2012 and 30 June 2013. The applicants did not put a case in the alternative to the effect that they are entitled to profits made on the Fund for a limited period from breach to a date before trial. In other words, they do not claim that the breaches of fiduciary duty or of confidence gave Foresters a headstart or that for other reasons, such as those which appealed to the High Court in Warman International Limited and Another v Dwyer and Others (1995) 182 CLR 544 ("Warman v Dwyer"), the period of the account of profits should be limited. 420 The parties did put forward an analysis which would enable the profits to be calculated by reference to the policies issued or to be issued (i.e., a forecast) up to a particular point in time. For example, there is a calculation of the net present value of the Fund calculated by reference to the number of policies at a particular point in time and the profits earned and to be earned on those policies. That approach is to be distinguished from an account of past profits up to the date of an injunction or trial or for a more limited period before trial. The analysis is set out in a document called "Amended Appendix A" which I discuss in more detail below. Here his Honour can be seen to be contrasting the absence of a head start case in circumstances where revenue losses were made against the analysis of a capital profit on contracts. 76 A little later in the reasons at [444] the primary judge said: In those circumstances, the breaches in which Foresters participated might have led to FPA and Foresters being able to establish the proposed business earlier than might have been the case had there been no breaches, but they did not lead to the profits earned and to be earned in relation to the Foresters Funeral Fund. As I have said, the applicants have not advanced a case on a headstart basis. There is evidence before the Court of the profits earned and to be earned on policies issued up to a particular date, but that was not advanced as a basis for assessing profits. It is not the traditional way in which profits for a limited period would be assessed as I think counsel for the applicants acknowledged. I am not aware of any authority which would enable me to assess profits on this basis. This passage appears to say that Lifeplan did not put an alternative case based on the capital value of contracts written up to a particular date. It did in fact do so. There was the evidence to which we have made reference above. Further, in address, senior counsel for Lifeplan adverted to the alternative case or alternative way of looking at the matter "by reference to the notion of infringing periods". 77 In any event, the primary judge rejected this alternative case as an approach lacking authority: see [444] above. With respect, there is, however, authority for the proposition that an errant fiduciary or knowing assistant can be made to disgorge a capital profit: Warman 182 CLR at 563; Apand Pty Ltd v Kettle Chip Co Pty Ltd (No 2) [1999] FCA 483; 88 FCR 568 at 599 [156]; and V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC 16; 296 ALR 418 at 430 [58].

The proper approach 78 In his reasons at [449]-[481] the primary judge examined the expert evidence in some detail and, after making some conclusions as to the detailed methodologies, said that had it been necessary for him to do so, he would have given the parties the opportunity to rework the calculations in accordance with his findings. 79 The parties did just that for the purposes of the appeal. A joint report was tendered on appeal. It provided a revised calculation of a claim for the total value of the business ($14,838,063) and the value of contracts written up to 30 September 2011, 30 June 2012 and yearly thereafter up to 30 June 2025. 80 The debate before us was as to the most appropriate conclusion as to a proper account if we were of the view (as we are) that some account should be made. 81 The strength of Lifeplan's case is the clear finding at [443] of the reasons that the proposed business would not have gone ahead without the breaches of duty in which Foresters knowingly participated. Lifeplan submitted that this means it is entitled to the value of the whole business, less any just allowances properly proved (of which there was, it submitted, inadequate evidence). 82 The architectural brutalism of that submission contains its flaw. The proper reflection of the account to be made is not such a simple reflex. The fashioning of the accounting is not a matter of logic alone. The liability is not penal, but the remedy is to be fashioned to fit the nature of the case and as accurately as possible account for the true measure of the profit or benefit obtained. Just as the remedy is not penal, it should not be one which unjustly enriches the applicant: Warman 182 CLR at 561. 83 In Warman at 560-561, a distinction was adverted to between cases in which a specific asset is acquired and cases where a business is acquired and operated. At 561 the Court said the following: In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources. That is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful part to play; it is simply to say that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff. 84 The Court went on to say that it was for the defendant to establish that it is inequitable to order an account of the entire profits or that there should be allowances in respect of skill, expertise and the like. 85 The breaches here did not transfer an asset or indeed an extant business; rather they were the participation in the use of confidential information and the abuse of a fiduciary position which gave Foresters the confidence to accept the suggestion of going into business with Messrs Woff and Corby and embarking on the development of that business. The participation by Foresters led to the business being undertaken. It necessarily involved the deployment of capital, skill and expertise, and the undertaking of business risk. Yet the business would not have been available at least in the form of the business run by Messrs Woff and Corby had it not been for the breaches in which Foresters knowingly participated. It would carry to extremes, in these circumstances, the remedy of account to give to Lifeplan the whole value of the business of Foresters. That conclusion is not one that is logically derived or determined. It involves a degree of proportionality of response based on the nature of the business, the character of the breaches and their consequences, the knowledge and skill of Messrs Woff and Corby and the due recognition of the fact that there was no direct generation of profit from the breaches, rather the business would not have been established without them. 86 The alternative case based on the net present value of the contracts up to a particular date has an attraction in that it enables a balancing of the factors to which we have just referred. The giving of the value of all contracts up to a particular time gives recognition to the logical brutalism of the "but for" finding of the primary judge. The termination of the account at a particular time gives recognition to the necessary reality of the contribution of factors unrelated to any breach which generated the profits and the entry into contracts and to the need for a degree of proportionality in assessing the causal link. 87 The choice of the end point against which to make the valuation is not driven by any logical analysis beyond the recognition that it should support and fortify the underlying principles being vindicated: fidelity, trust and honesty. The causal connection is one that vindicates those considerations and one which might be seen to act as an encouragement against being swayed to participate for personal gain in the dishonest breaches of others of their duties of fidelity. 88 The BCP and the considerations in relation to commencing the business contemplated a five-year plan. Terminating the valuation of the contracts at 30 June 2015 would adequately and proportionately account for sufficient capital profits to fulfil the above objectives. They are capital profits that would not have been made had the breaches in which the participation occurred not been committed. But the limitation to that date gives due recognition to the other factors to which we have made mention and which affect an assessment of the proportionate consequences of the breaches and participation therein. The setting of the date at 30 June 2015 sets the account within the framework of the five-year business plan, with a modest deduction of six months. It sets an account for the period of planning for the new business that was the central focus of the behaviour that constituted the breaches and the participation. 89 The consequence of applying this measure of profit to 30 June 2015 with a valuation date of 30 April 2015 was agreed in the supplementary joint report to be $6,558,495. 90 The parties should bring in short minutes and any necessary brief submissions as to a final form of order that includes the effect of interest.

Section 79 of the Corporations Act 91 The case against Foresters was founded not only on Barnes v Addy (1874) LR 9 Ch App 244 participation, but also on provisions of the Corporations Act. The primary claims against Mr Woff was that he had breached ss 180, 181, 182 and 183 of the Corporations Act as an officer of Lifeplan and he was obliged to exercise his powers and discharge his duties with a reasonable degree of care and diligence (s 180), in good faith in the best interests of the corporation and for a proper purpose (s 181), without improperly using his position to gain an advantage or to cause the corporation detriment (s 182), and as an officer who had obtained information he was obliged not to use the information improperly to gain an advantage or to cause the corporation detriment (s 183). 92 Sections 180, 181, 182 and 183 are civil penalty provisions: s 1317E of the Corporations Act. By s 1317H(1) a court may order compensation to be paid for "damage suffered by the corporation" if the person has contravened a civil penalty provision and "damage resulted from the contravention". Section 1317H(2) damage includes "profits made by any person resulting from the contravention". The primary judge found there to be breaches of ss 181, 182 and 183. 93 By s 79 of the Corporations Act a person is involved in a contravention if, and only if, the person was (relevantly here) "in any way, by act or omission, directly or indirectly, knowingly concerned in … the contravention". (italics added.) 94 There is thus a similarity between third party so-called accessorial liability in Equity under Barnes v Addy and statutory accessorial liability. Before returning to the facts and discussion of them by the primary judge, it is useful to identify, as simply as possible, the relevant legal principles. 95 In Farah Constructions Pty Ltd v Say-Dee Pty Limited [2007] HCA 22; 230 CLR 89, the High Court passed conclusively on the knowledge required of the third party participant (162-164 [171]-[178]) and on the phrase "dishonest and fraudulent design" in the expression by Lord Selborne of the second limb of Barnes v Addy (164-165 [179]-[185]). 96 The knowledge required was expressed by reference to the five categories of knowledge put forward by counsel in Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 at 575-576 and the earlier decision of the High Court in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; 132 CLR 373. 97 The five categories of knowledge are: (i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry. 98 The Court made clear that categories (i)-(iv) were sufficient for the knowledge requirement of the second limb of Barnes v Addy. It is to be noted that category (iv) posits knowledge which would indicate the facts to an "honest and reasonable" person. The foundations for the acceptance of category (iv) in Farah were the passages in Consul of Gibbs J (at 398), Stephen J (at 412) with Barwick CJ concurring with Stephen J (at 376-377): see Farah 230 CLR at 163 [176] ftnt 256. 99 In Consul, Gibbs J said at 398: It may be that it is going too far to say that a stranger will be liable if the circumstances would have put an honest and reasonable man on inquiry, when the stranger's failure to inquire has been innocent and he has not wilfully shut his eyes to the obvious. On the other hand, it does not seem to me to be necessary to prove that a stranger who participated in a breach of trust or fiduciary duty with knowledge of all the circumstances did so actually knowing that what he was doing was improper. It would not be just that a person who had full knowledge of all the facts could escape liability because his own moral obtuseness prevented him from recognizing an impropriety that would have been apparent to an ordinary man. 100 In Consul, Stephen J said at 412: If a defendant knows of facts which themselves would, to a reasonable man, tell of fraud or breach of trust the case may well be different, as it clearly will be if the defendant has consciously refrained from enquiry for fear lest he learn of fraud. But to go further is, I think, to disregard equity's concern for the state of conscience of the defendant. 101 In Farah at 163-164 [177], the Court said: The result is that Consul supports the proposition that circumstances falling within any of the first four categories of Baden are sufficient to answer the requirement of knowledge in the second limb of Barnes v Addy, but does not travel fully into the field of constructive notice by accepting the fifth category. In this way, there is accommodated, through acceptance of the fourth category, the proposition that the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons. 102 One can see from these passages that the reference to the honest and reasonable person in category (iv) is the (honest) ordinary person. The expression of the matter thus is to fashion Equity to include in its relief the morally obtuse; it is not to create any species of constructive knowledge. 103 The requirement of being knowingly concerned in a statutory contravention, such as in s 79(c) has been discussed in many cases. Most recently, in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; 235 FCR 181 at 255-258 [397]-[411], White J examined the principles, as did the Full Court on appeal in Gore v Australian Securities and Investments Commission [2017] FCAFC 13. 104 The principal authorities to which reference must be made are Yorke v Lucas [1985] HCA 65; 158 CLR 661; Giorgianni v The Queen [1985] HCA 29; 156 CLR 473; and Pereira v Director of Public Prosecutions [1988] HCA 57; 82 ALR 217. From these cases it can be taken that actual knowledge of the essential facts constituting the contravention is necessary; Yorke v Lucas 158 CLR at 670, Giorgianni 156 CLR at 506-507; and Pereira 82 ALR at 220. 105 Nevertheless, dishonesty itself, for instance, is not to be viewed from the perspective of the morally obtuse. Such is to be gauged (subject to the statutory context) by the standards of ordinary, decent people: Peters v The Queen [1998] HCA 7; 192 CLR 493 at 504 [18]; Macleod v The Queen [2003] HCA 24; 214 CLR 230 at 245 [46]. 106 Whether actual knowledge exists for the purposes of s 79 will be a question of proof and evidence. If circumstances are such as to indicate to an ordinary, decent person that the relevant facts exist, that may be open as an evidential conclusion. 107 Little is to be gained by a comparison between the textual expression of the Barnes v Addy second limb test and the authorities on s 79. 108 The question here is the correctness or not of the primary judge's conclusions. 109 The primary judge was satisfied that Foresters was knowingly concerned in contraventions of the Corporations Act relating to the preparation of disclosure and other documents. But, his Honour was not satisfied that Foresters was otherwise knowingly concerned in the breaches of duty by Mr Woff using confidential information for his own advantage and the detriment of Lifeplan. 110 Yet, the found facts included the following: Mr Fleming and Mr Hughes knew that the BCP contained Lifeplan's confidential information ([303] and cf [322] of the reasons); Mr Fleming and the board had a "good look" at the information ([304] of the reasons); and Mr Hughes was aware by late October that Mr Woff was soliciting business while employed by Lifeplan: [326] and [387] of the reasons. 111 The primary judge found, however, that "more active involvement or conduct by Foresters" was required: [389]. 112 With respect, on the facts here there can be no doubt that the board of Foresters was actually aware, had actual knowledge, of the taking and using in breach of duty of confidential information. The board was not a passive observer of this; it did not prepare it, but it used it in its decision-making process and, after employing FPA, in the governance process of checking performance. Likewise, Mr Hughes knew of the clearly wrongful solicitations of funeral directors as the business venture was being agreed. 113 Given the actual knowledge of the Foresters' board and its participation in the breaches of duty of ss 181, 182 and 183, we would not draw back from a conclusion that Foresters was knowingly concerned in those breaches. Some act or conduct is required for the company to be concerned. Here the utilisation of confidential information by the board in its decision-making process and governance process of monitoring progress is important. Mr Hughes became aware of the wrongful solicitations and was in active co-operation with Messrs Woff and Corby in considering rule changes and in preparation of disclosure and other documents. One should examine this behaviour in its whole. There was ample conduct to form the basis of a conclusion that Foresters was knowingly concerned in the relevant breaches. 114 Thus, we would see the participation in the breaches of equitable duty and the knowing concern in the breaches of statutory duty as running together. 115 Section 1317H deals with compensation for damage; but damage is defined to include profits. 116 Foresters submitted that the word "profits" in s 1317H(2) should be understood by reference to how the word "profits" was understood in relation to the payment of dividends in the then s 201 of the Corporations Law when s 1317H was introduced into the Corporations Law. This meant, it was submitted, either actual trading profits and in appropriate circumstances capital profits. Here, it was submitted, there were anticipated profits, which had not yet accrued. But the capital profit here is an existing capital profit being the net present value of Foresters' competing business. This is conceptually, and in accounting terms, a valuable profit, and one presently existing. 117 Thus, we see no reason why an order for the capital profit up to 30 June 2015 should not also flow from the knowing involvement in the breaches of statutory duty.

The question of inducement of Mr Corby to leave Lifeplan's employment 118 Mr Woff was Mr Corby's superior. If while at Lifeplan he encouraged Mr Corby to leave Lifeplan, at least as part of a scheme where they breached their duties to Lifeplan, as they did, that would be a breach of duty: see Warman 182 CLR at 566. At [392] of the reasons, the primary judge said the following: The difficulty for the applicants with respect to this aspect of their case is that, whilst one employee encouraging another employee to leave his employer's employment and join him in a new venture may be a breach of the first employee's contractual duties of fidelity and good faith and of his fiduciary duties, it is not known on the evidence what role Mr Woff played in Mr Corby's decision to leave Lifeplan. He may have encouraged Mr Corby to decide to leave or the two of them may have reached their decision jointly. If the latter, then there would be no breach of contractual or fiduciary duties by Mr Woff. I do not think that there is sufficient evidence to choose between the two alternatives. In the circumstances, I am not satisfied that Mr Woff committed a breach of his duties to the applicants. Having regard to that conclusion, there is no need to consider the position of Foresters. 119 Yet Mr Woff gave direct evidence that he did encourage Mr Corby to leave. There was evidence that Mr Woff then lied about this to Mr Walsh of Lifeplan. There was, however, no particular evidence that Foresters knew that Mr Corby's participation was a function or result of a further breach of duty by Mr Woff, rather than an independent decision of Mr Corby. 120 We would not interfere with the primary judge's conclusion.

Vicarious liability 121 In the circumstances, the order for an account of profits that we would order provides relief for the fundamental breaches of duty in which Foresters was knowingly concerned. Two particular breaches - the involvement with Matgraphics and the pre-paid funeral contract packs, and Melbourne Mailing and Lifeplan's list of funeral directors - are only remediable by way of application of the principle of vicarious liability. 122 Were we to add such breaches to the list of matters for which Foresters was liable in Equity to account for profits, that would not change or expand the order for the account of the capital profits that we would otherwise make. There is no precision in the formulation of the appropriate order. Thus, even if Foresters were vicariously liable for these additional breaches, they can be seen to be subsumed in the relief that is ordered. 123 In these circumstances, there is no necessity to answer the important question of principle as to whether rules of vicarious liability or attribution can be used as a separate basis of liability for equitable relief for account of profits, if there be no knowing participation for the second limb of Barnes v Addy.

Orders 124 For the above reasons, we would make orders that allow the appeal, set aside order 6 made by the primary judge including the implicit dismissal of the proceedings against Foresters, that provide for an account of profits for contracts written up to 30 June 2015, and that provide for the costs at first instance and on appeal to be paid by Foresters. 125 The appellants should bring in short minutes within 14 days to provide for these matters conformable with the reasons of the Court. If there is to be any debate about orders, each side should file competing proposed orders with written submissions of no more than three pages. I certify that the preceding one hundred and twenty-five (125) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, Justice Middleton and Justice Davies.