Links Golf Tasmania Pty Ltd v Sattler

Dates of hearing: 4-8, 11-14, 18-20, 27, 29 April, 4-5, 9-12, 23-27 May, 23 June, 28 July, 1, 3-4, 29-31 August, 1-2, 5-9, 12-16, 22-23 September 2011

Counsel for the Plaintiff: Mr J Santamaria QC with Mr J Smith

Counsel for the Defendants: Mr G Garde AO RFD QC with Mr M Roberts, Mr K Naish and Mr D Bongiorno

Solicitor for the Defendants: Shields Heritage Lawyers Moray & Agnew as town agents

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 204 of 2010

BETWEEN: LINKS GOLF TASMANIA PTY LTD (ACN 096 711 661)

JUDGE: JESSUP J DATE OF ORDER: 26 JUNE 2012 WHERE MADE: MELBOURNE

1. The proceeding be listed at 10:15 am on 16 July 2012 for the purpose of receiving the parties' submissions on the orders proper to be made to reflect the court's reasons published this day, and as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 204 of 2010

BETWEEN: LINKS GOLF TASMANIA PTY LTD (ACN 096 711 661)

JUDGE: JESSUP J DATE: 26 JUNE 2012 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 The plaintiff in this proceeding, Links Golf Tasmania Pty Ltd ("LGT"), operates a successful links golf course near Bridport in northern Tasmania called "Barnbougle Dunes". The first defendant, Richard Sattler ("Sattler"), owns the land upon which the golf course is situated, and has leased that land to LGT under four successive ten-year leases commencing on 1 January 2003. Between 25 November 2002 and 16 July 2009, Sattler was a director of LGT. Between 10 May 2003 and 13 January 2010, he was chief executive officer ("CEO"). The second defendant, R.G. Sattler Nominees Pty Ltd ("Sattler Nominees"), is the trustee of Sattler's family trust, and is the owner of 56.7% of the share capital in LGT. 2 There are several issues in the proceeding, but they all involve allegations by LGT that, while he was a director and the CEO of LGT, Sattler acted in breach of his fiduciary duty as such, and contravened ss 181, 182 and 183 of the Corporations Act 2001 (Cth). A significant aspect relates to a second links golf course which Sattler built, and which he has operated, on a tract of land owned by him which lies adjacent to the Barnbougle Dunes course. That second course is known as "Lost Farm". It is said by LGT that the opportunity to build and to operate that course belonged in equity to it, and that by taking the benefit of the opportunity for himself while he remained a director and the CEO of LGT, and/or by conducting his own business on that course in competition with the business of LGT, Sattler breached his fiduciary duty, and his duties under the Corporations Act. LGT claims an account of the profits which Sattler has made in the operation of the Lost Farm golf course business. 3 LGT's allegations also relate to three loans which Sattler obtained in 2003, 2004 and 2008 while a director and the CEO of LGT. LGT says that the opportunity to obtain those loans came to Sattler because of his positions as such. Although the other members of, or investors in, LGT were aware of the first two of those loans, it is said that they were not aware of the terms upon which they had been obtained and, in that sense, that LGT's consent to Sattler obtaining the loans was not fully informed. It is claimed that Sattler used the proceeds of those loans to increase his shareholding in LGT to a position in which, by July 2004, he held a majority of the share capital. The remedy which LGT seeks is the cancellation of the shares which were issued to Sattler on the strength of these contributions of capital. The position is different with respect to the third loan which Sattler obtained in 2008, the proceeds of which were used to fund the construction of the second golf course at Lost Farm. LGT claims that the opportunity to secure that loan came to Sattler because he was a director and the CEO of LGT, and, further, that Sattler used LGT's resources and information for the purpose of obtaining this loan. Because the loan moneys were used as indicated, LGT's case in this respect is said to contribute to its claim for an account of profits in relation to the Lost Farm golf course as such. 4 Other aspects of LGT's case against Sattler relate to the diversion of its resources to the Lost Farm business, to the establishment of ancillary businesses at Lost Farm when they ought to have been established at Barnbougle Dunes, to the benefit of a grant from the Commonwealth and the construction of a wellness centre with the grant moneys, and to Sattler having contracted with himself for the payment to LGT of a commission for services provided in connection with accommodation units operated by Sattler on the land leased to LGT. The detail of these and other matters will be described in the course of my reasons below. LGT's case as pleaded and opened also included an allegation that a Tasmanian government infrastructure grant which Sattler had received was sought and obtained in breach of his fiduciary obligation to LGT, but that allegation was dropped in the course of closing submissions. 5 It may seem odd that a company is here suing the person who is effectively its major shareholder and, necessarily, who controls the composition of its Board. The explanation lies in an order made by the court on 19 March 2010 by which individuals associated with minority shareholders, Peter Wood ("Wood") and Justin Hetrel ("Hetrel"), were given leave, pursuant to s 237 of the Corporations Act, to commence this proceeding in the name of LGT. At times which were controversial, Wood and Hetrel were, along with Sattler, directors of LGT. Neither remains a director today. Wood and Hetrel were also amongst the small group of investors who provided equity capital to LGT, thus contributing to the funding of the construction and establishment of the Barnbougle Dunes golf course. I shall refer to the circumstances of that contribution, and to that of Sattler himself, in detail below. 6 My reasons which follow are much longer than would conventionally be either necessary or desirable for the resolution of a civil dispute broadly as outlined above. In part, that reflects the thoroughness and assiduity which characterised the factual and legal cases of both sides. But it reflects also the jurisprudence with which equity has surrounded the performance of the duties of a person in a fiduciary position, especially in a commercial context. In that respect, I am bound by authority to accept that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case. The practical consequence of that mandate has been that virtually every aspect of the transactions, communications and interactions as between Sattler and the others involved in LGT over a period stretching between late 2000 and mid-2009 must be regarded as at least holding the potential to affect, or to contribute to, the outcome of the present case. 7 As there were many people and organisations mentioned in the evidence in this case, for ease of reference I have appended to these reasons a list of the shorthand names by which they are referred to, and an indication of the place in the reasons where each is first the subject of mention.

The facts of the case 8 The narrative must commence well before what is now the Barnbougle Dunes golf course ever existed as such. Sattler had for some time been a successful businessman and investor in Tasmania. His first major investment was the purchase in 1975 of a small country fuel distribution agency in Tasmania. He turned this company into one of the largest of its kind in Tasmania, selling it in 1980. He then invested in hospitality. Over the next 20 years, he bought, developed and sold several hotel businesses and freeholds, and operated the Old Woolstore Apartment Hotel, which is now one of the biggest apartment hotels in Australia. His other line of work was agriculture, in which he maintained an interest. In 1987, he purchased a property of about 11,500 acres in Oatlands. 9 In 1989, Sattler purchased the farming property known as "Barnbougle". This property, of about 13,000 acres, lies generally to the east of Bridport. It has a coastal frontage to Bass Strait, as well as substantial tracts of pastoral land. The coastal portion is divided by Great Forester River, which runs from south to north and discharges into Bass Strait. Locally, the course followed by the river through the Barnbougle property is also referred to as "The Cut". The coastal portion, as I have described it, consists principally of sand dunes on which the main vegetation is marram grass. It seems that this area is not well-suited for productive farming. On the other part of the land purchased by Sattler in 1989, he and his wife Sally ("Mrs Sattler") operate Barnbougle Farm. They run between 4,000 and 5,000 head of cattle, and produce about 5,500 tonnes of potatoes each year. The farm employs 8-10 full-time equivalent employees the year round, in addition to casual staff on a seasonal basis. The Sattlers have constructed irrigation infrastructure to place approximately 3,000 acres of this land under permanent irrigation. Barnbougle Farm is one of the largest farming properties in mainland Tasmania. 10 An important part of Sattler's decision to purchase the Barnbougle property was the potential of the property for commercial development, including in particular that portion with a coastal frontage to Bass Strait. In 1990, a firm of consulting surveyors based in Launceston, Campbell Smith Phelps Pedley Pty Ltd ("Campbell Smith"), was engaged by Sattler, through his solicitors, to do some work relating to the severance of some of the land titles which constituted the Barnbougle property. Then, in October 1992, Sattler contacted Campbell Smith again, informing them that he was planning to review the potential for development of part of the coastal portion of Barnbougle for a canal residential development, a motel and a golf course. In early 1993, Ian Green, Paul Phillips and John Dent of Campbell Smith visited Barnbougle, and Sattler took them to the area to which he referred as "Lost Farm". They stood on a sand dune with a survey map. Sattler pointed out to them the various developments which he had in mind. The surveyors marked up the map accordingly, including the letters "GC" adjacent to the coast and immediately to the east of Great Forester River. Those letters signified "golf course". Mr Green prepared a note of their discussions, an item on which read "Golf Course in 'lost farm' area (an area of consolidated sand dunes - behind word 'Waterhouse' of 'Waterhouse Beach'." Mr Dent subsequently produced a sketch map of Sattler's proposed developments, on which he marked (on the coastal position to the east of the river) the notation: "Golf Course & Motel? Lost Farm. (Road Access?)" This map was dated March 1993. As part of his proposal, Sattler commissioned an investigation of the potential of the coastal portion of the land for canal development. After testing, however, it was determined that this proposal would not be viable, due to the low-lying nature of the land. The commercial viability of such a development was also adversely affected by the 1989/1991 Tasmanian recession. In the result, Sattler thereafter focused upon the Barnbougle farming operation, and upon his other commercial interests in the hospitality industry. 11 And so, presumably, matters would have remained were it not for the entry upon the scene of Greg Ramsay ("Ramsay") in late 2000. Ramsay spent his very early years on a farm near Bridport but, when he was about 6 years old, his family moved to a grazing property at Bothwell, 80 kilometres north of Hobart. They did, however, retain the Bridport property for farming and holidays. The Bothwell property incorporated an old golf course, and it seems that this excited in the young Ramsay an interest in golf, golf tourism and the history of golf. In 1995, then aged 18 years, Ramsay spent a "gap" year in the United Kingdom to learn about golf tourism. He worked at St Andrews in Scotland. He visited many other links courses throughout the United Kingdom, and worked at important events such as the British Open and the opening of the Duke's course. In 1999, Ramsay worked part-time at Tourism Tasmania as a research assistant, during which period he was confirmed in the belief that Tasmania was missing out on golf tourism due to a lack of premium public golf facilities. In that year, he graduated from the University of Tasmania as a Bachelor of Commerce, majoring in marketing and finance. In early 2000, Ramsay travelled to the USA, to further his knowledge of and involvement with golf. He worked for a company called "Golf Solutions" which dealt in computer software for the management of golf courses. He was employed for several months to assist golf course managers in the USA implement and use Golf Solutions software. In mid-2000, he returned to St Andrews, still working for Golf Solutions, and also worked part-time in the Old Court Hotel, and as a caddy at a new links course, King's Barns. 12 By this stage, Ramsay's interest in links golf courses and golf tourism had become something of a passion. He learnt what he thought was required to establish and to run a links golf course. He read books on the design and construction of links golf courses, several of which were written by Tom Doak ("Doak"), an American golf course designer, and by Paul Daley ("Daley"), an Australian golf journalist and author. He was inspired by the idea that Tasmania was the ideal location for an iconic links golf course, and considered that the State needed such a course. He commenced to draw up a business plan to develop Tasmania as a world-class golf destination, by creating one new iconic golf resort, as well as upgrading other golf courses around the state. He called this plan the Pinnacle Golf Tasmania Business Plan. 13 In December 2000, Ramsay returned to Australia. Whilst visiting his family's farm at Bridport, he noticed large sand dunes which ran adjacent to the beach to the east of the town. He noted that these dunes were high, that they extended inland for a considerable distance, and that they were covered with marram grass, a type of grass found on links golf courses in the United Kingdom and Ireland. The tracts of land which Ramsay thus observed were, of course, the coastal portion of Sattler's Barnbougle property. Ramsay found out that the land was owned by Sattler, and decided to contact him to discuss the possibility of using the land for a links golf course. 14 In about late December 2000 (Sattler says just prior to Christmas), Ramsay and Sattler did meet at Barnbougle Farm. According to Sattler, Ramsay said that he was a golfing fanatic, and asked if he could look at some of the dune country of Barnbougle Farm with a view to developing a golf course there. Ramsay recalls that he explained to Sattler the characteristics of a great links course, and the type of land required to build one. He said that the property at Barnbougle looked ideal for the development of such a course. He said that Bandon Dunes and Sand Hills in the USA were examples of courses built and successfully operated on similar land. 15 Sattler took Ramsay for a drive over the property. This encompassed both sections of the property presently of interest - that on the west, and that on the east, of Great Forester River. Sattler told Ramsay that the section to the east of the river was known as the Lost Farm. Ramsay told Sattler that the Lost Farm was a more spectacular site for a links course than the dunes to the west of the river, but that it would be more expensive and difficult to develop due to poor access and the distance to services such as electricity and water. Ramsay identified what he considered to be the ideal location for a future clubhouse in the dunes to the west of the river. Such a site would not occupy any of the prime golfing land required for the course as such. According to an interview which Sattler gave to an American broadcast network on 27 June 2007, on the day of this inspection of the area "it was blowing horizontally off Bass Strait", and Sattler thought to himself, "no, this boy's just not sure what he's on about". Notwithstanding that, Ramsay told Sattler that he would come back with further plans and information, and they agreed to meet a few days later. 16 That meeting, still in late December 2000, took place at Sattler's home and was attended also by Mrs Sattler. Ramsay told them that he wanted to develop a golf course in the dunes to the west of the river. He said that it need not be an imposition on their farming activities, or on their family home. He said that the essence of a links course was that it provided the golfer with a natural experience. Such a course would not require elaborate landscaping or extensive earth-works, but would rely on the natural features of the land. Such a course would require less water and chemicals for maintenance than a conventional golf course, and could be created with minimal disruption to, and low-impact on, the environment. He added that a links course on the Sattlers' land could easily be undone if it were unsuccessful. He told the Sattlers that there was potential for more than one course on their land, and that both the western dunes and the Lost Farm area were ideal for links golf courses. After the meeting, Sattler and Ramsay again drove around the land. During the drive, Ramsay explained to Sattler that while accommodation could be included in the development of a golf course to the west of the river, it would not be crucial. Sattler said that, if the property were developed in the way suggested by Ramsay, he (Sattler) would retain control of the accommodation, as this was his speciality. 17 Although it is not very clear from the evidence in the present case in what order various undocumented events took place in early 2001, it does seem that, after these initial meetings, Sattler accepted Ramsay's proposal, at least to the extent of facilitating the first practical steps that were necessary if the proposal were to become a reality. Consistently with this approach, Sattler introduced Ramsay to the Barnbougle Farm manager, Slim More. Sattler gave Ramsay a key to the farm gate, saying that this was necessary because he (Sattler) was often in Hobart attending to his hotel business. In his affidavit, Ramsay said that the provision of this key "permitted access to the Lost Farm so that I could enter the property and show people around". Responding to this, Sattler said that the provision of the key was so that Ramsay "could familiarise himself with the property" rather than on the basis of any "solid undertaking" regarding Lost Farm. 18 There were three broad lines along which Ramsay's energies were then directed: the actual construction of the golf course which he proposed, the business structure which would support the proposed course, and funding. As to the first, Ramsay's priority was to engage a course designer whose talents and reputation would give the course the quality, and the standing in the golf community generally, that Ramsay considered the setting deserved. Unsurprisingly in the light of his earlier researches, Ramsay's thoughts turned to Doak. He had designed the second links course at Bandon Dunes, a remote golf resort in Oregon which Ramsay considered to be a model for Barnbougle. Ramsay contacted Doak and told him of his passion for links courses. Ramsay said that he had read Doak's books, and that he admired his knowledge and philosophy of links golf design, construction and "playability". He told Doak that he was planning to develop a links golf course in northern Tasmania, that this would be the first of several courses on the site, that it would be modelled on Bandon Dunes, and that he wanted Doak to design the course. After this telephone conversation, Ramsay took a flight in an ultralight aircraft, from which he took aerial photographs of the Barnbougle property. Those photographs included the area to the west of Great Forester River, to which Ramsay's immediate proposal related, as well as Lost Farm. He sent copies of the photographs to Doak. 19 In a subsequent conversation with Ramsay, Doak said that he was interested in the Barnbougle project, but that he had very little time available. If he were to be retained as the course designer, his involvement would be limited to designing the layout of the course, and providing an expert for shaping the greens. He said that he would need an Australian course designer with whom to work, and who could complete various other tasks involved in the design. Ramsay asked Doak for a list of Australian course designers with whom he would be happy to work, and Doak responded that Michael Clayton ("Clayton") had been doing some good design work lately. He subsequently gave Ramsay a list of several Australian golf course designers, including Clayton. The two discussed the people named on the list, and Ramsay decided that Clayton was the most suitable candidate. 20 Ramsay then contacted Clayton, and told him that he wanted him to assist Doak with the design of the course at Barnbougle. Clayton visited the Barnbougle property in February 2001. Although Doak could not attend, it was possible for one of his employees then in Australia, Bruce Hepner ("Hepner"), to do so, and he visited the course at the same time as Clayton. Ramsay, Clayton and Hepner, and Clayton's business partner John Sloan ("Sloan"), drove around the Barnbougle property, not including the Lost Farm area. The visitors all said that the land was a great site for a links course. Immediately after this visit (so I infer), Ramsay sent an email to Sloan dated 23 February 2001. A copy was not, according to the email header, sent to Sattler, but the only version of the email before the court was one which had been produced from Sattler's discovery, and was a very poor copy. It was not the subject of any evidence by Ramsay. It referred to discussions between Ramsay and Sattler, from which there arose a contemplation that Ramsay's proposed company could make use of the Barnbougle farm buildings, of a "spare house" (as an office) and of some other facilities. 21 After the visit of Clayton and others in February 2001, Clayton and Doak told Ramsay that they required an aerial survey of the site of the proposed golf course. Ramsay told Sattler that he intended arranging to have such a survey undertaken, and said that they should survey both the land intended for the course to be designed by Doak and the Lost Farm land, since they were "planning to develop courses on both sites". Sattler agreed that this was a good idea. Ramsay subsequently ascertained that an aerial survey would cost about $6,000. 22 With respect to the business structure for the proposed golf course, Ramsay told Sattler that he intended to incorporate a company to be known as "Links Golf Tasmania Pty Ltd", which would lease part of the coastal portion of the Barnbougle land to the west of Great Forester River, and would be responsible for developing the golf course and for raising the funds to do so. Ramsay also modified his Pinnacle Business Plan, so that it might stand as a business plan for the development of the new golf course on the Barnbougle property. He showed that plan to Sattler, whose observation (in an affidavit sworn in this proceeding) was that Ramsay's vision extended well beyond Barnbougle Dunes, and involved golf courses all around Tasmania. According to Sattler's evidence, "given its highly speculative nature I thought little of it." There were several versions of the business plan placed into evidence, none of which was dated. There was little in the way of hard documentary evidence from which I could infer that a particular version was the one showed to Sattler. If the version showed to Sattler was one of the earlier ones, I would consider that Sattler's reaction to it, mentioned above, was well-justified. 23 Considerations of business structure overlapped, in the thinking of Ramsay and in the documents he prepared, with considerations of funding and finance. One of those documents contained an indicative budget for the business which he proposed. Under a "best case scenario", it anticipated that the business contemplated would require a capitalisation of $2.79m, of which $2.26m would be sourced as follows: First Tasmania Investments 200000 Government Loan 100000 10 x $50 000 Golf Industry Shares 500000 16 x $50 000 Tas Bus. Shares 750000 [sic] Construction Equity 710000

In this budget, the remaining $0.53m would be bank debt. At the time, Ramsay's belief was that the sale of tradeable memberships, similar to the system which he had observed at the National Golf Club at Cape Schanck, was the best method of obtaining funds to develop the golf course with a minimum of additional equity required. Ramsay estimated that the earnings of the business, after interest and taxes, would range from a low of -$150,000 in the first year to a high of nearly $611,000 in the fifth year. An expense taken into account was "lease" set at 7% of profit before tax, and ranging from $0 in the first year to slightly over $68,000 in the fifth year. 24 These financial workings by Ramsay draw attention to what has been a very significant circumstance in the facts of this case: Ramsay was not (save to a very modest degree) an investor. He had access to nothing like the amount of capital that would be required for a business of the kind that he proposed. At this early stage, neither did Sattler have any intention of investing in the business, at least by way of cash contributions. And the need for cash became an issue for Ramsay. I have already mentioned that the aerial survey required by Doak and Clayton would cost $6,000. Another expense would arise in connection with obtaining planning approval for the golf course. Sattler introduced Ramsay to a town planner, Brian Risby ("Risby"), who said that his fee for obtaining planning approval for the construction of a golf course on the Barnbougle property would be in the range of $10,000 to $20,000, and that the total planning application costs would be about double that sum. Thus it was, from the outset, a major challenge for Ramsay to attract funding for the project. As the above workings demonstrated, he envisaged a mixture of direct equity, tradeable memberships, debt and government assistance. 25 However, in February 2001 and thereabouts, the inflow of cash from private investors and potential club members was an aspiration rather than a reality for Ramsay. As mentioned above, he encountered immediate needs to outlay substantial sums on aerial surveys and for planning approval. So he applied for financial assistance from the Tasmanian government. On 11 February 2001, he sent a copy of the "Executive Summary" from his business plan in its then state. The summary was headed "Barnbougle Dunes", from which I infer that the proposed course had then been given the name which it would ultimately carry. It talked up the potential of Tasmania for golfing tourism, stating that the property at Barnbougle "provides the perfect starting point for developing golfing tourism in Tasmania". The summary continued: The author of this plan is Greg Ramsay, the Director of Ramsay Enterprises. He is 24 years old, with an exciting vision. Greg has global experience working in the golf and tourism industries, and has an obvious passion for both. His work has taken him from the linkslands of Ireland and Scotland, to the desert courses of Dubai, and across the United States of America. Tasmania is now poised to become a similarly world class golf destination. Ramsay Enterprises has been able to secure the land for development through a very attractive equity and lease arrangement, at no up-front cost to the developer. Similarly, due to the rare opportunity to work with this type of prime golfing land, a world renowned golf design and construction firm has offered their services at no upfront fee, another considerable saving. This proposal combines investment appeal with a variety of community and environmental benefits. Tasmania's coastal beauty and idyllic lifestyle make it a likely candidate to become a world-renowned golfing destination. Barnbougle Dunes will be the start of establishing this reputation. The summary made no reference to Sattler, or to the prospect of there being a second golf course at Lost Farm. 26 On 7 March 2001, Ramsay wrote a letter to Tim Lucas ("Lucas") on the letterhead of "Ramsay Enterprises", at Bothwell. Lucas was a manager in the Tasmanian Department of State Development ("the DSD"). The letter contained a formal application for funding, in the amount of $40,000. It was apparent from the terms of the letter (and Ramsay so deposed in his affidavit) that he had spoken to Lucas previously. In the letter, Ramsay said that his company, Ramsay Enterprises, had "negotiated a property in Tasmania's north-east to be developed into a world-class golf facility"; that Sattler had committed his land "on a 20-year lease, with a 20-year option"; that the land had "a conservative book value of around $1 million"; and that Sattler had committed his machinery and employees to the construction process "an invaluable cost-saving that we have valued at over $100,000". Ramsay estimated his own contribution, to that stage, at $35,000. 27 The then Barnbougle Dunes Business Plan, with appendices and financial projections prepared by Ramsay, was attached to Ramsay's letter to Lucas. According to Ramsay's affidavit, the business plan indicated that the project was "the creation of Pinnacle Golf Tasmania Pty Ltd …, a partnership between Ramsay Enterprises, and selected investors". It added that "Links Golf Tasmania will lease the land at Barnbougle from Sattler Pty Ltd [sic] in the form of a share of profits". Rather confusingly, three bullet points were placed alongside a marginal note which stated "The Mornington Peninsula has rapidly become one of Australia's most popular and important golf destinations". The financial projections attached to the letter included the capitalisation requirements to which I have referred at para 23 above, and a "worst case scenario" in which slightly different figures were set out. The only reference to the possibility of a second course was on a page headed "Opportunities/Future Developments": one of three bullet points under which stated only "2nd 18 holes". So far as I can make out, this was the earliest written record of Ramsay's aspiration to involve his prospective company in the development of a second golf course on Sattler's land. 28 Although it was some months before Ramsay's application for State government funding was approved (a subject dealt with below), Ramsay caused the aerial survey to go ahead, and that occurred on 28 March 2001. By early May 2001, Ramsay was in possession of a survey map of the Barnbougle Dunes course, generated from the aerial survey. At that stage, although the Lost Farm area had also been surveyed, Ramsay did not have the data converted into a survey map as such. 29 On 7 May 2001, Ramsay caused LGT to be incorporated. He held the only issued share in the company, and he was the only director. The registered office, and the principal place of business, were at Ramsay's residence in Bothwell. In the same month, Ramsay opened a cheque account, upon which he was the only signatory, in the name of LGT. 30 On 22 May 2001, Doak informed Ramsay by email that he had received the aerial survey maps of the area in which the proposed course was being considered. In the email, Doak referred to the topography of the area, and the impact it might have on routing options and clubhouse location. Because of other commitments which Doak had in late 2001 and early 2002, he stated that he could "cut a good deal on the design of your project in Tasmania", but that his time was limited. He proposed three contract options for Ramsay to consider: (1) his report would be limited to design as such, with construction being supervised by an Australian partner, such as Clayton; (2) he would design the course and supervise the construction, under which arrangement he would "defer" some of his own fees, but not those of his associates, such that at least $US250,000 would have to be paid, in addition to the fees that were to be deferred; (3) he would design the course and make paid trips as necessary "during construction to try to help out", under which he would charge $US150,000, and would not allow the use of his name in association with the course unless he approved the final product. There is no evidence of Ramsay having responded to this email from Doak, but I infer that he did at some point and in some way, since Doak's involvement in the design of the course became a reality, as I shall mention further below. 31 In evidence is a document, prepared by Ramsay, which sets out five alternative arrangements for LGT to obtain land, or rights to land, for the purposes of the proposed golf course. Under each alternative, the benefits and weaknesses, for various parties, were noted. Ramsay said that this document was prepared in May 2001, and that he discussed it with Sattler. If it was prepared and discussed in May, it stands as the second documentary record (ie after that referred to in para 27 above) of Ramsay's aspiration as to a second course. 32 The first alternative set out in Ramsay's document of May 2001 was for LGT to purchase the land from Sattler for about $1m. The weaknesses of this included LGT's reluctance to risk its viability by overcapitalisation and Sattler's unwillingness "to lose control of parcels of land". 33 The second alternative was: LGT leases the 2 titles of land for 20 years with a 20 year option. Lease of 7% of operating profit payable from year 3 with a minimum lease as determined by worst case financial projections. Sattler Pastoral has nominee on the board of LGT to protect his interest in the facility (lease revenue), and has power to veto any activities deemed to be negatively impacting on farming operation. The weaknesses of this alternative included the absence from it of provision for LGT to obtain an asset, as noted as follows: Difficult to attract investment b/c even though projections of ROI are good, they are not assured. Asset at the end is assured. Very difficult to borrow against leasehold. As against that suboptimal position for LGT, it was noted that this alternative would yield, for Sattler, "an asset valued at minimum of $10 million at end of 40 years". 34 The third alternative followed the terms of the second but with the following additional provisions: LGT has an option to purchase a 49% share of the land ($490K) in year 10. In the case of a sale, LGT has option to purchase Sattler Pastoral's share. Any partial sale of title must be approved by both parties. LGT has first option to purchase/lease the titles east of the cut for a golf course/ecolodge development. Of the five alternatives, this was the only one which proposed that LGT should have an option to purchase or to lease the Lost Farm section of the Barnbougle property. No weaknesses were noted for the third alternative. 35 The fourth alternative had elements in common with the second and third. It would involve the same leasing arrangements, but without Sattler having a nominee on the Board of LGT. Sattler would pay for the installation of an irrigation system and the construction of a clubhouse "to use the depreciation on these assets as a tax deduction against Sattler Pastoral's farming operation". Sattler would be paid "up front" for the use of his machinery and labour. The same option to purchase a 49% share of the land to the west of The Cut as appeared in the third alternative was provided for, but payment of the $490,000 would be spread over 10 years, the outstanding balance to carry interest. No weaknesses were noted for this alternative. 36 The fifth alternative was very similar to the fourth, but it contemplated that the irrigation system and the clubhouse would be leased by LGT from Sattler. Also, the alternative had in common with the second and the third that Sattler would contribute his machinery and labour as an investment in LGT. No weaknesses were noted for this alternative. One of the benefits was said to be that Sattler would have "a much greater stake (approx 50%) in LGT, without actually much extra cost", but it is not apparent from the document, and it was not explained in evidence, how this would come about. 37 In his evidence in the case, Ramsay referred to a number of conversations which he had with Sattler which, in one way or another, touched upon rights which he or his proposed company would have in relation to the freehold of the land upon which the Barnbougle Dunes course would be constructed and/or in relation to land for a second course. Ramsay tended to locate these conversations, in point of time, with some generality. For example, he said the following as to what transpired in the course of "several more meetings" which he had in "early January 2001" with Sattler: I said that, as a condition of a lease of the western dunes area, the lessee would need to have an option to buy the Lost Farm for $1m so as to develop a second course on that land at a later date. Sattler said that he would grant this option if it would assist to facilitate the investment necessary to develop the first course. He said that, while the western dunes land was not for sale, he would be willing to sell the Lost Farm freehold for $1m to anyone willing to invest in making the first course happen. Without denying any particular aspect of this version of the conversation, Sattler said (in his affidavit) that the two men "did consider" that option, but described it as "part of a preliminary discussion". Under cross-examination, Sattler restated that his position at the time - made known to Ramsay - was that he would "consider" giving an option over Lost Farm to any person who "facilitated" the financing or (as it was put in another answer) the construction of the Barnbougle Dunes course. 38 I think it highly unlikely that, in early January 2001, Ramsay's thinking on the subject of Lost Farm had developed to the point conveyed by the evidence set out above. The use of an option over Lost Farm as an inducement to potential investors was only one of five alternative arrangements contemplated by Ramsay in his document of May 2001. The possibility of a second course was mentioned only in passing, and very much as a thing of the future, in the business plan sent to Lucas on 7 March 2001. A later version of the business plan did contain a more fulsome treatment of the subject, but counsel for LGT invited me to draw no more favourable inference for their client than that this version existed in July 2001. I refer to that version of the business plan at paras 48-55 below. 39 Another matter which Ramsay claims to have discussed with Sattler "in early January 2001" was his proposal that, as a condition of that development, the company should be granted an option to purchase 49% of the freehold of the dunes land to the west of the river for the sum of $500,000. According to Ramsay, Sattler said that that was acceptable. Sattler agrees that this conversation was had, but denies that he said that the 49% option was "agreeable". According to Sattler, he said merely that he would consider the matter. It transpired that when the matter was raised with Mrs Sattler, she was firmly opposed to the sale of this land, or any part of it. Again, I think it highly unlikely that, if Mrs Sattler's attitude had been known at the time, Ramsay would have seriously included this option in his document of May 2001. It is also unlikely, it scarcely needs to be said, that Mrs Sattler would have waited from early January to May 2001 to make her views, apparently strongly-held, known to her husband and thence to Ramsay. 40 I would find on the probabilities, therefore, that it was in the context of his discussions with Sattler over the five-alternative document of May 2001 that Ramsay first, or at least first seriously, raised the land options mentioned in the third alternative. It was then that Sattler responded in the ways indicated. That Ramsay should then have been obliged to come to grips with subjects of this kind is consistent with two other developments which occurred in the weeks following: Ramsay's early attempts to attract investors and the negotiation of a lease for Barnbougle Dunes. The terms of the lease were subsequently negotiated between the parties' solicitors - Ramsay's and Sattler's. I shall return to that aspect. At this stage, I turn to Ramsay's attempts to attract investors. 41 In June 2001, Daley introduced Ramsay to two potential investors, Paul Carter ("Carter") and Jonathan McCleery ("McCleery"). Carter was a businessman with experience in finance and golf course development. McCleery was employed in a major bank, and had been so employed since 1988 "in marketing, credit, risk, project management and various other roles". He had (as he put it) "a keen interest in golf". 42 While in Melbourne over the period 3-10 July 2001, Ramsay and Sattler met with McCleery at a café at the National Gallery. McCleery recalls that he was shown a contour map of the proposed course; that Ramsay said that, apart from selling memberships, he and Sattler were looking for investors to contribute lump sums in return for equity in the development, but would not necessarily proceed both with the sale of memberships and with equity contributions if one source could provide enough money for the development of the course and the infrastructure; that Ramsay said that he and Sattler had been talking to a number of people and were hopeful of getting a syndicate of investors put together; that Ramsay said that they did not intend to borrow any funds for the development; that Ramsay said that Doak had agreed to design the course; that Ramsay said that it was going to cost about $2 million to build the course; and that Ramsay said something to the effect of "we have an amazing expansion opportunity", and spoke about other potential golf courses at the site. In the period which followed this meeting, which McCleery described as "mid-2001", he had further communications with Ramsay. McCleery had it in mind to make an equity investment in LGT, as well as purchasing some memberships which might then be on-sold to persons resident overseas. Although McCleery was not tested on his affidavit evidence that he intended to use his company Golf Dream Developments Pty Ltd ("GDD") as the vehicle for any such investment and/or memberships, I note that GDD was not incorporated until 29 October 2002. 43 Ramsay also met Carter in Melbourne in early July 2001. According to his evidence, Ramsay clearly recalls that, on his way to the meeting with Carter, he telephoned Sattler and asked him "to confirm that I could tell Carter that LGT had an option to purchase the Lost Farm for $1m". Sattler agreed that a communication on that subject occurred in the context of Ramsay then being on his way to meet Carter, but gives a different version of it. He says that he confirmed no more than what he had already told Ramsay, namely, that he would "consider giving an option to the person that facilitated the financing of Barnbougle Dunes". I think that that was the extent of Sattler's intentions about any option at that time, and that any communications between Sattler and Ramsay on the subject always related to the presumed attractiveness of an option over Lost Farm to third parties intending to make a substantial investment in Barnbougle Dunes. Ramsay's meeting with Carter was an example of that, in which Sattler was permitting Ramsay to use the prospect of LGT having some involvement in Lost Farm as an attraction to be held out to Carter. I do not accept that Sattler said anything to Ramsay that would reasonably have been interpreted as conveying to him (Ramsay), as distinct from Carter, a then present, unqualified, intention to give LGT an option over Lost Farm. 44 Even if one were to accept the evidence of Ramsay, however, there is one thing that may confidently be inferred from the circumstance that he asked Sattler for permission to inform Carter that LGT had an option over Lost Farm: that there had not previously been any agreement between Ramsay and Sattler on the subject. That Ramsay would, en route to a meeting with a potentially important investor, have thought it necessary to telephone Sattler to confirm that he could tell the investor that LGT had an option over Lost Farm may be seen as inconsistent with such an option then being the subject of agreement, however informal. It is much more consistent with Ramsay wanting to be armed with Sattler's authority to use, for marketing purposes, a prospect which was at the time a matter of discussion only. 45 As it happens, I would find that Ramsay did not communicate the prospect of any such option when he met with Carter in Melbourne in July 2001. Ramsay explained to Carter that he had a lease over a parcel of land upon which he proposed to build a golf course. He said it was a 20-year lease, with a 20-year option. Carter asked whether Ramsay would himself be putting any money into the proposed venture, and Ramsay replied that he would not be. He said that he did not have many assets, but suggested that his family might be prepared to put money into the venture. He added, however, that his father had not at that time agreed to make any such investment. Carter told Ramsay that, in his experience, there were generally only two proven ways successfully to develop a golf course: by selling memberships or by building the course in conjunction with a residential subdivision. Given that Ramsay was able to offer nothing more than a 40-year lease, Carter said that, in his view, residential subdivision was not economic. He advised Ramsay that the only remaining means of successfully developing the course was by way of the sale of memberships. By way of example, he told Ramsay that, if 300 memberships were sold at $20,000 each, a fund of $6m would be yielded. If development costs were $3.5-$4.5m, there would be a net return in the vicinity of $1.5-$2.5m. 46 In the course of this discussion, Ramsay showed Carter some aerial photographs of the Barnbougle site. Carter was taken by the natural beauty of the site. According to Carter's affidavit, on which he was not cross-examined - Given the large amount of land that the photographs depicted, I asked Ramsay to define the site he was seeking to develop. I did this to ascertain the scope of the overall project envisaged by Ramsay as the prospect of multiple courses would impact on the routing of the course and the central infrastructure requirements. When this was put to Ramsay in cross-examination, he denied that there was any such inquiry by Carter. But, in a context in which Ramsay either accepted Carter's account of other aspects of the conversation or made it clear that he had no actual recollection of them, his denials were unconvincing. They were in the nature of arguments, tending to piece together facts which he did recall to support a conclusion as to what would have been "clear" to Carter. 47 According to Carter's affidavit - I then asked Ramsay about the land adjacent to the land he had defined and what rights he had in respect of that other land and in particular the land upon which Lost Farm is now situated. He responded with words to the effect that "Richard Sattler the potato farmer owns it and there is nothing agreed in respect of it". In response to Ramsay's evidence to which I have referred in para 43 above, Carter said: At no stage in my initial meeting and discussions with Ramsay or subsequently did he ever say to me that he possessed any option in respect of Lost Farm. What he did say was that Richard Sattler owned the property and that nothing had been agreed in respect of any other parcel of land other than that the subject of the lease. Under cross-examination, Ramsay disagreed with Carter on this point. He asserted that he had told Carter, at this meeting, that he held an option to purchase Lost Farm. Here again, I regard Ramsay's evidence as being substantially a matter of reconstruction rather than recollection. He was at pains to emphasise why it should now be regarded as natural that he would have told Carter that he had the option. As mentioned above, he had a strong recollection of obtaining Sattler's consent to pass this information on to Carter, as was, indeed, the thrust of his original evidence in his affidavit. That original evidence, however, contained no statement, in terms, as to what he actually told Carter. As mentioned above, Carter was not cross-examined, and I was not invited by counsel for LGT to reject the evidence which he gave of his meeting with Ramsay in July 2001. I accept that evidence in preference to the evidence of Ramsay. 48 Subsequent to their meeting, Ramsay sent Carter a copy of the business plan and financial projections by reference to which he was then working. Carter exhibited those documents to his affidavit in this case. Counsel for LGT submitted, and I accept, that Carter's evidence might be used to give positive identity to the version of the Business Plan which Ramsay had developed down to July 2001 (thereby, as at that time at least, resolving the uncertainty which had previously existed as to the version of the Business Plan which existed from time to time). It is useful to set out some extracts of the Business Plan, as they reflect Ramsay's thinking in July 2001. 49 In the "Executive Summary" of the Business Plan, the following appeared: The author of this plan is Greg Ramsay. Greg has global experience working in the golf and tourism industries, and has an obvious passion for both. His company, Links Golf Tasmania, has been able to secure the desired land through a very attractive long term lease arrangement, saving the development over $2million in up front costs. Cost savings such as this underpin the project and have resulted in projected returns of 30%pa in the 4th year. And: The intention of the plan is to - • detail the method by which Ramsay Enterprises (through Links Golf Tasmania) will develop Barnbougle Dunes as a golf destination • generate interest among a variety of parties to become involved in Barnbougle Dunes 50 Under the heading "The Proposal" the following appeared: The proposal is the capitalisation of Links Golf Tasmania (LGT), a partnership between Ramsay Enterprises and selected investors. Ramsay Enterprises has negotiated a 20-year lease with a 20-year option on the land at Barnbougle from its current owner Sattler Pastoral. The arrangement stipulates that there will be no lease costs incurred until the facility is operating profitably. LGT will manage the development and ongoing operation of the golf course and facilities. LGT will promote the destination in the marketplace and be responsible for the packaging of the product for sale to local, interstate and international customers. 51 A section of the Business Plan dealt with the feasibility of the Barnbougle project, discussing both "downside risk" and "upside potential". Phase one of the venture was to be "Capital Raising and Planning Approval". Under the heading "Capitalisation", the following appeared: LGT already has the following resources committed or invested: • $1.2million parcel of land with 20-year lease and 20 year option from Sattler Pastoral. • $1million water rights allocated to parcel of land from Sattler Pastoral • $35 000 planning work by Ramsay Enterprises • $300 000-500 000 design fee as equity in venture from Doak & Clayton • $125 000 of construction machinery and labour While planning approval is being sought, LGT is focussing upon raising the required $2.3million required in additional capital to finance the development of Barnbougle Dunes. Ramsay Enterprises has set a goal of raising approximately • $755 000 in bank debt. • $1.2 million in investment and Founders bonds. • $200 000 from financial institutions as equity. • $100 000 in development loan/grant. This amount will be coupled with the equity committed by entities involved in the construction of the golf course. 52 In the section headed "Key Management and Staffing Strategy", it was said that Ramsay would be the full-time project manager throughout the planning approval process. As to Sattler's involvement, the following appeared: It is of great benefit that Barnbougle is owned by Richard Sattler. Richard is an experienced property developer in the Tasmanian tourism industry and has embraced the concept of Barnbougle Dunes Golf Links. The arrangement between LGT and Sattler Pastoral for a 20-year lease and a 20-year option, with no lease payable until the course generates an operating profit, is one of the strengths of this proposal. Once profitable, the lease cost will be 7% of operating profits. The use of Sattler Pastoral's machinery, expertise and labour in exchange for equity in the venture will also be a considerable up-front cost saving to the development. 53 It was said that the course would be designed by Doak, together with his Australian associate Clayton. A section of the Business Plan dealt with the subject of "Marketing Strategy", in which the "Product" was described as "initially … a links golf course with clubhouse and practice facilities". 54 A section of the Business Plan dealt with the subject "Stage Two Developments". The first subheading in that section was "2nd 18 hole golf course", under which the following appeared: There is enough land of a very high quality available at Barnbougle to build at least 2 high quality golf courses. It is seen as highly likely and desirable for Links Golf Tasmania to build a second 18-hole course at Barnbougle Dunes. This will greatly increase Barnbougle Dunes' capacity to attract golfers and their revenue, while decreasing the cost of operating the facility per golfer. The result will be a high return on any investment in a second course. 55 The next subheading in the section on "Stage Two Developments" was "Accommodation", under which it was said that, if a second golf course were built, it would be likely to double the number of golfers coming to Bridport. It would, in such circumstances, be a "natural progression to provide on site accommodation in high class eco-chalets". Regardless of whether a second golf course were built, the provision of some on-site accommodation "will be seriously considered". Under the heading "Tournament Golf" it was said that the course would be built with tournament golf as a consideration and, as the only "true links golf course in Australia" there would be demand to utilise the course for that purpose. That would, it was anticipated, "attract tens of thousands of people" and result in a high demand for accommodation within two hours of Bridport "for at least 10 days before, during and after the tournament". 56 In the budget projections sent by Ramsay to Carter in July 2001, the required "establishment" capitalisation was set at $3.137m. This was made up of "in kind" development equity in the amount of $900,000 and "up front cash costs" in the amount of $2.237m. The sources of the latter figure were $2m in membership bonds and $237,000 in other investments. No provision was made for any development loan or grant from the government, although some government assistance was, it seems, factored into the "in kind" equity of $900,000. 57 It is convenient next to note the progress, and the outcome, of Ramsay's application for funding from the State government. The legislative setting for that application, and for certain other applications which are relevant in this case, was given by the Tasmanian Development Act 1983 (Tas) ("the Development Act"). Under the Development Act, Tasmanian Development and Resources ("TDR") was a Body Corporate with the duties which included (under s 7): … to encourage and promote the balanced economic development of Tasmania, and to ensure that its policies are directed to the greatest advantage of the people of Tasmania and that its powers under this Act or any other Act are exercised in such a manner as, in its opinion, will best contribute to - (a) the stability of business undertakings in Tasmania; (b) the maintenance of maximum employment in Tasmania; and (c) the prosperity and welfare of the people of Tasmania. Under s 9(2) of the Development Act, the powers of TDR included the following: (b) subject to subsections (3) and (4), [to] make a loan of money to any person on such terms and conditions as TDR thinks fit so long as the principal amount of the loan, or, in the case of 2 or more loans to that person, the aggregate of the principal amount of those loans, does not exceed $1,500 000; (c) subject to subsection (5), [to] make a grant of money for such purpose and on such terms and conditions as the Minister may approve to any person in order to - (i) assist in the development, expansion, or retention of a business undertaking in Tasmania; or ... (e) recommend to the Minister that he grant a loan of money as provided by section 35 …. The operation of para (b) of s 9(2) was affected by subss (3) and (4), under which a loan of money was not to be made to a person under subs (2)(b) if the effect of making the loan would be that the total of the amounts borrowed by the borrower exceeded 80% of the value of the total available security, save where TDR was satisfied that there were special reasons for making a loan to the borrower with or without security, and with or without interest, so long as the principal of the loan did not exceed $100,000. 58 Section 35 of the Development Act, mentioned in s 9(2)(e), is also relevant in the facts of the present case, although not at this stage of the narrative. It provided as follows: (1) Where, on an application for a loan under section 9(2)(b), TDR is of opinion that the grant of the loan would not be in accordance with the powers conferred by that section but that the grant of a loan would assist in the development, expansion, or retention of a business undertaking, TDR may recommend to the Minister that he grant a loan of money under this section. (2) On making a recommendation under subsection (1) TDR shall refer the application for the loan to the Minister and shall provide the Minister with such additional information as it thinks fit. (3) Where TDR makes a recommendation under subsection (1) that a loan of money be granted to a person, the Minister may, with the approval of the Treasurer and for the purposes of this Act, make a loan of money to that person, with or without security and on such terms and conditions as the Minister thinks fit. (4) For the purposes of this section - (a) TDR shall provide the Minister with such information as he may request; and (b) the Minister may direct TDR to carry out such investigations, and to make recommendations to him on such questions, as he may determine. (5) TDR shall comply with a direction given to it by the Minister under subsection (4)(b). 59 Returning to the narrative, on 17 July 2001, Peter Young ("Young"), General Manager, Manufacturing and Services within the DSD, forwarded a written proposal to the Chief Executive of the DSD which contained a recommendation that a corporate loan of $20,000 be approved to LGT under s 9(4)(a) of the Development Act. In the section headed "Company Details", the shareholders of LGT were identified as follows: Mr Greg Ramsay 86 667 shares @ $0.75 Richard & Mary Ramsay 13 333 shares @ $0.75 Mr Richard Sattler 13 333 shares @ $0.75

These details, which could only have been provided by Ramsay, were conspicuously wrong. At the time, Ramsay himself was the holder of the only share in LGT. Under the heading "Director's Profile", Ramsay was identified as the director of LGT, and it was said that he had "obtained the support of the landowner Mr Richard Sattler". 60 The proposal continued: The original Business Plan and financial estimates prepared by Mr Ramsay were preliminary in nature and were considered unlikely to stimulate other equity participation or loan funding from a financial institution. In recent discussions with Richard Sattler, it is now intended to fund the development by: • selling Foundation Bonds at $5,000 each; • provision of mechanical equipment for construction by Mr Sattler at no cost; and • the provision of labour for part of the construction by Mr Sattler at no cost. It was noted that Ramsay had "no demonstrated ability or experience in developing golf courses" but that he had "obtained significant support from consultants and other respected tourism operators in Tasmania". Those consultants had "agreed to convert some or all of their fees to equity in the project". The proposal continued: Mr Richard Sattler who owns Barnbougle, has owned and operated successful tourism ventures in Tasmania for a number of years. Mr Sattler has undertaken to lease the land on very reasonable terms and provide other support in terms of machinery hire and water rights with an estimated value $1.0 million. However, Mr Sattler is not prepared to use the land as security for the project. Another member of the team identified in the proposal was Risby, said to be "well respected as a consultant town planner". He had, apparently, written in support of the project. 61 With respect to the design of the golf course, the proposal stated: The golf course designers Renaissance Golf Design (USA company) in conjunction with Michael Clayton Golf Design (Melbourne based) are reputable designers with recognised experience in this type of project. The designers have conditionally agreed to convert their entire fees of approximately $300,000-$500,000 to equity in the project if necessary. This passage, which also presumably came from something said by Ramsay, was also wrong at the time. Doak's company, Renaissance Golf Design Inc ("Renaissance"), had not agreed to convert its fees to equity in the project, and Clayton never did. 62 The proposal noted that a business plan had been provided, but was "now outdated". A later version of the business plan was being compiled, and was to be made available to DSD. 63 Annexed to the proposal was an "interest rate matrix", as follows: Client: Links Golf Tasmania Pty Ltd No: Cost of Borrowing Rate [capped] [Q'tly] [July '01] 5.20% Cap Premium 0.10% Plus: Administrative Cost Margin 2.00% Reference Indicator Rate 7.30% Plus: Security Risk Factor 2.50% Plus: Other Risk Factors 2.75% Commercial Rate 12.55% Less: Concession] -5.25% Applicable Interest rate 7.30%

For reasons referred to in the next paragraph, interest was never paid on this loan. 64 On 14 August 2001, the DSD wrote to Ramsay, advising that LGT's application for a loan had been approved, subject to conditions. The conditions were as follows: Conditions Precedent 1) Documentary evidence to the satisfaction of DSD demonstrating the participation of the following individuals: • Mr Richard Sattler, owner of Barnbougle at Bridport; and, • Renaissance Golf Design and Michael Clayton Golf Design. Special Conditions 1) LGT to complete a survey and mapping of the Golf Links course at the property known as Barnbougle by 31 August 2001 (unless otherwise agreed to in writing by DSD). 2) LGT having received final course plans suitable for lodgement as part of the planning application by 31 August 2001 (unless otherwise agreed to in writing by DSD). 3) LGT completing the Environment Management Plan and Planning application for lodgement with Dorset Council by 15 October 2001 (unless otherwise agreed to in writing by DSD). 4) A development application to be lodged by LGT with the Dorset Council no later than 15 October 2001 (unless agreed to in writing by DSD). 5) LGT signing formal agreements with Mr Richard Sattler for the lease of the land by 15 October 2001 (unless agreed to in writing by DSD), a copy of which is to be provided to DSD. 6) LGT to provide evidence of its best endeavours to secure finance for the construction of the golf links course and provide details of finance secured by 30 November 2001 to DSD (unless otherwise agreed to in writing by DSD). 7) Provided all the above conditions are achieved, that construction commences within six months of gaining planning approval (unless otherwise agreed to in writing by DSD). It was provided that, if the above conditions precedent and special conditions were met, the loan might be converted to an "Assistance to Industry Grant". That was what ultimately happened. 65 I turn next to the negotiations for a lease of the Barnbougle Dunes land to LGT. Ramsay said that he and Sattler "were able to reach an agreement as to the … key terms for a lease". According to Ramsay, those terms included that LGT would lease the dunes to the west of the river for a rental of $50,000 pa plus 7% of the profits of the golf course, subject to a 2-year rent-free period at the outset. Sattler said only that they "spoke about" such matters. I do not need to resolve the difference in emphasis given to the content of these discussions as between the evidence of each of Sattler and Ramsay. Ramsay said that they also agreed that Sattler "would only obtain equity in LGT in accordance with the value of the equipment and labour provided by him to develop the first course". Sattler's response to this (in his evidence) was that he was "prepared to consider taking any contribution I made to the development of the course in equity rather than require that it be repaid". Again, to the extent that there is a difference between the evidence of Sattler and that of Ramsay, it is one of emphasis which does not need to be resolved. Ramsay added that they agreed that Sattler "would run accommodation on the LGT land adjacent to the first course", and Sattler was heard to express no qualification to that evidence. 66 Where the evidence of Ramsay and of Sattler parted company strongly, however, was where it touched the subject of Lost Farm. Ramsay said that they agreed that "Sattler would grant an option to LGT to buy the Lost Farm for $1 million, so as to assist LGT to facilitate interest and further investment in the first course". Sattler did not accept that they agreed on any such thing. He said that his position at the time was that he was "giving consideration to potentially granting a first option to purchase the Lost Farm once the first course was up and running". Under cross-examination, neither Ramsay nor Sattler deviated from his version of these early discussions. But Sattler did accept that the discussions occurred in an environment in which Ramsay was anxious to have an asset which LGT might hold out to potential investors as a benefit of putting their money into the venture, that he (Sattler) was prepared to support Ramsay in any way that was consistent with the preservation of his own interests, and that he (Sattler) was prepared to hold out, as an inducement for such investors, the prospect that the company in which they would be investing had an option over Lost Farm (the details of which were never reduced to anything like the clear terms that would be necessary for such an option to exist at law). 67 Some contemporary documentary evidence as to the scope of the discussions which Ramsay and Sattler were having in this period is to be seen in an email which Ramsay sent to his solicitor on 10 July 2001, seeking assistance with the drawing of a lease. In that email, Ramsay said: Essentially the lease is for 20 years with a 20 year option. We have an option to buy a 50% share of the title between years 10 & 20. The lease payable is 7% of profits, with no lease incurred until profitable up until year 4 when a minimum lease p.a. kicks in based on my worst case projections. Water rights are attached to the lease. Richard has in principle agreed to build into the lease an option to purchase outright 2-3 titles on the other side of the river for later development. We have not yet fixed a price on that option, but it will be around $1mill. The concluding two sentences of this email related, of course, to Lost Farm. Normally, a communication of this kind would be good objective evidence of the matters referred to in it. However, as will appear elsewhere in these reasons, Ramsay appears to have had a tendency to push the boundaries of established facts in communications which he made with third parties otherwise unfamiliar with such facts. I am disposed to approach his statement as to the content of Sattler's then "in principle" agreement with some caution. As will be seen, the lease for Barnbougle Dunes, as later executed, said nothing about any option over the Lost Farm part of Sattler's property. 68 Ramsay conferred with his solicitor on 25 July 2001. In a brief email to the solicitor on the evening of that day, Ramsay said: Title no. 131938/2 (97hectares) is the 1st golf course (and the subject of the lease). The minor incursion is onto title no. 131940/1 (78hectares). My option to purchase is on title no's 130153/1 (173.1ha), 130153/2 (85.29ha) and 244898/1 (85ha). The titles most recently referred to covered the Lost Farm area. I infer that it was some time later that the solicitor sent a draft lease to Ramsay. In evidence are several documents which relate to the process of settling the terms of the lease, but none is dated. Subject to that difficulty, those documents do throw some light on this process. 69 The draft to which I have referred in the previous paragraph was perused by Sattler and he endorsed it with some notes, upon which he was cross-examined. The draft provided that LGT, as lessee, would pay a rent of 7% of gross profits, subject to an initial 3-year rent-free period. There is also what senior counsel for LGT described as a "fragment" of a draft lease in evidence (the provenance and date of which were not stated) in which it was proposed that LGT would pay no rent in the first two years and $5,000 in the third year, with the rent thereafter consistently escalating to $70,000 in the tenth year. It seems that Sattler rejected proposals of this kind, and suggested instead that some relief for LGT from the burden of paying rent in the early years might be achieved by "capitalising" the rent payments into the equity that he would ultimately hold in LGT. Sattler also proposed that base rent should be $50,000 in the first year, rising to $100,000 in the seventh year, and should be adjusted in accordance with movements in the consumer price index thereafter. Sattler's position, or a variant of it, is evidenced by the notes he made both on the draft lease and on the fragment referred to. 70 The draft lease made no reference to LGT holding an option, over either the land on which the course was to be built or the land known as Lost Farm. Tendered by LGT without objection, but explained neither in the evidence nor in submissions, were some undated hand-written notes, apparently made by Ramsay during the period when the lease was being negotiated. The notes were on a single page that was divided in two horizontally. On the upper part, Ramsay had noted "Richard's points re lease". Those points were: • Gross profits • 20 + 20? length of lease • Base Rent → Base Rent capitalised → Base Rent on worst case scenario • Base Rent $50 k + CPI • All connections & costs for water, sewerage, power, & phone as required. • Fence • Water - not a "right" but to make "every reasonable endeavour" "currently estimated at" • Lessor's access to BB beach • Right of first refusal On the lower part, Ramsay had noted "My problems". Those problems were: • Richard never mentioned capitalising lease 1st 3 years • Higher base rent = lower % lease • Always understanding of 40 years golf. • Option to buy 49% • Option to buy neighbouring titles. • Surrounding housing dvlpt. • Richard connecting power? 71 I infer from the content and the context that these notes - and the preceding discussion between Ramsay and Sattler which they implied - formed the basis of a memorandum sent by Ramsay to his solicitor. That memorandum - also explained neither in the evidence nor in the submissions - was tendered by the defendants without objection. In it, Ramsay dealt with the subject of the definition of gross profits, the term of the lease, rental, connection costs for utilities, the definition of the leased land (ie whether by title or by fence), the lessor's covenants as to water rights, Sattler's access to the beach through the leased land, and a right of first refusal in the event that the freehold interest were sold or given away. Conspicuous by their absence from this memorandum were references to a right to buy 49% of the leased land and to an option to buy neighbouring titles, both of which were on Ramsay's list of "problems". 72 The memorandum referred to in the previous paragraph was undated, but the two issues mentioned at the end of that paragraph were on Ramsay's mind in about the middle of August 2001. It was on 14 August 2001 that the relevant municipal authority granted a planning permit for the Barnbougle Dunes golf course. In evidence is an undated handwritten note from Ramsay to Sattler which commences "here is the permit Richard". I would infer, therefore, that the note was sent shortly after 14 August 2001. The note read: Here is the permit Richard. The other point Richard we have to finalise is my option to buy 49% of that title @ $500k - if Sally still says 'no' then how do we work the option on land over cut to assist me. It will be very hard to attract the Bill Hushond's & Paul Carter's & the like without that 49% option as I said that it was part of my lease - as we discussed. Also, we always discussed that you would connect the power - capitalised in LGT? Under cross-examination, Sattler said that Ramsay had been persistent in his request that he, or his company, be granted an option over the Lost Farm land or, as Ramsay put it in this note, the "land over [the] cut". Sattler maintained that his consistent position stated to Ramsay was that he would consider granting an option over that land to any person who provided the investment for the establishment of the Barnbougle Dunes course itself. He viewed this note as an attempt by Ramsay to "reinterpret" his offer; and he accepted the characterisation offered by senior counsel for LGT that he considered the note to be "manipulative" on this point (although otherwise accurate). 73 Notwithstanding what Sattler now says were his reservations about Ramsay's note, the latter persisted on the subject of the option. He asked Sattler if he could arrange to have an option agreement prepared, and Sattler consented to that course. Ramsay then had his solicitors prepare an option deed, to which Sattler and Ramsay would be parties, and which would provide for Ramsay to have a 10-year option to buy the titles which were relevant to Lost Farm for a price of $1m. When this document was given to Sattler, he threw it in the bin. I am unsurprised that he would have done so. Although Sattler cannot now recall the details of the option, so far as I can see it was very asymmetrical in the obligations which it imposed on the parties. Aside from paying the nominal consideration of $10 and using his "best endeavours to raise any capital necessary to pay the purchase price" (ie should the option be exercised), Ramsay would fall under no obligation. Although Ramsay would have the choice to nominate any "other persons or corporations" to complete the contract upon exercise of the option, the option as such was personal to himself. There was no mention of LGT, of the Barnbougle Dunes golf course, or of provision of finance for the establishment of the course. The option was unconditional. 74 It is true that, literally, the draft option prepared on Ramsay's instructions reflected what he now says was the position which existed as between himself and Sattler, ie, that he (Ramsay) would be given an option to buy Lost Farm for $1m. But his reason for wanting the option was to enhance the attractiveness of LGT as an investment (eg for the likes of "the Bill Husband's and Paul Carter's" as he put it in his note to Sattler). Some kind of relationship between the development of Barnbougle Dunes and the existence of an option over Lost Farm seems to have been central to Ramsay's justification for the option as put to Sattler, but the document which Ramsay caused to be prepared made provision for no such relationship. Even if Sattler had it in mind to grant an option to LGT, on no view would that have been unrelated to the development of Barnbougle Dunes, whether as a matter of prospect or after the event. In the circumstances, for Sattler to have given this option - the one prepared on Ramsay's instructions - no serious consideration would have been consistent with, and unsurprising in the light of, the terms of the document presented to him. 75 The lease was not ultimately executed until 30 November 2001. It is an important document to which I shall have to return. First, however, I should deal with Ramsay's attempts to obtain equity finance for the construction of the Barnbougle Dunes golf course. That he should use his best endeavours to do so was one of the special conditions to which the DSD loan was subject. Following the approval of the loan, articles about the project appeared in golfing publications, and it seems that considerable publicity was generated, and that this succeeded in attracting the interest of investors. 76 A group of potential investors - it is convenient to refer to them, even if only informally, as a consortium - who showed interest in Barnbougle Dunes was the business associated with the Australian golf course designer Greg Norman ("Norman"), Great White Shark Enterprises ("GWS") - sometimes referred to as "Greg Norman Design" ("GND") - the international golf course operator Troon Golf Australia Pty Ltd ("Troon") and Medallist Golf Holdings Pty Ltd ("Medallist"), a subsidiary of Macquarie Bank. I infer that contact was made with Ramsay by Bob Harrison ("Harrison") of GWS, since, on 2 September 2001, Ramsay sent Harrison a facsimile in which he described the project at Barnbougle Dunes and the investment opportunities which it presented. Amongst other things, Ramsay said that LGT had a 40-year lease of the land, that it had "an option to purchase an adjoining 650-acre parcel of coastal dunes" and that "an option to purchase a stake in the first golf course's freehold is also negotiable". These three representations were, of course, unjustified at best on the facts then known to Ramsay. 77 In his facsimile of 2 September 2001, Ramsay noted LGT's reluctance to take on debt finance, and said that $1.5m cash finance was being sought through "the sale of 300 transferable Founders Bonds" which would give certain golfing benefits, over the course of the 40-year lease, to those who purchased them. Finalisation of the "legal terms and conditions of Bonds" was then the only thing that was delaying the launch of the bonds, the sale of which was to be "the next major step in the development". The facsimile continued: Links golf Tasmania is looking to attract an equity partner to the venture to contribute capital to ensure construction commences in summer 2002-03 (ensuring opening in December 2002) [sic], and to enable the construction of a clubhouse with 16-20 overnight accommodation 'keys', (a la Barwon Heads GC or Victoria GC clubhouses). Alternatively, the local Bridport Resort is available at a very affordable price (under $1.5mill). Other terms and conditions on this investment are negotiable. Under the heading "Stage II", Ramsay said the "broad vision for Barnbougle Dunes [was] 2 duneland links golf courses and a 5-star Beachside Eco-Lodge". Under the heading "Beyond Barnbougle", Ramsay said: Bridport has an opportunity of becoming a links golf hub with LGT holding a stake in another spectacular ocean frontage property a 10 minute drive away. With 250 acres of dunes, and farmland rising up away from the dunes, this 2500acre property provides an ideal opportunity for a golf course with accommodation/residential development looking over the course and out to sea. 78 On 10 September 2001, Harrison and others from GWS, and representatives from Troon and Medallist, visited Sattler's Barnbougle property. Ramsay showed them over the land in contemplation for the Barnbougle Dunes course, and over the Lost Farm land. It seems clear that he held out to his visitors the prospect of their being able to secure an interest in the latter, since, on 1 October 2001, he received from Troon a draft "exclusivity agreement", the single recital to which was that LGT "has an option … over the property at Barnbougle Dunes …", and the main operative provision of which was that LGT granted to Troon - … the exclusive right to deal with the Property for a period of 120 days commencing on and from the 1st day of October 2001 … for the purpose of ascertaining the viability and feasibility of developing the Property into 2 eighteen hole international standard golf courses with club house, accommodation, pro shop and ancillary facilities … Nothing further came of that proposed exclusivity agreement. 79 In an email to Amy Wheaton ("Wheaton") of the DSD on 2 October 2001, Ramsay referred to the interest which had been shown by the GWS/Troon/Medallist consortium, but said that the money being offered by Troon was "not worth my while even considering". He said that some of these potential investors were to visit Tasmania the following Tuesday (9 October) "to see if they can negotiate a better deal for all three sides (Troon, Norman Design and [LGT])". Failing that, said Ramsay, "hopefully we'll be launching our Founders Bonds soon". 80 Notwithstanding their failure to extract an exclusivity agreement from Ramsay, it seems that the interest of these investors did not then die off. However, nothing further about it appears in the evidence until about the end of May 2002. I shall return to that development in its proper place below. In the meantime, Ramsay did turn his attention to the membership bonds. However, that aspect of the project also hit a snag, as it transpired that sale of the memberships would require a product disclosure statement ("PDS") under Pt 7.9 of the Corporations Act. That requirement was brought to Ramsay's attention by his solicitors. Some of the contemporaneous written evidence in this case seems to imply that LGT set about attempting to secure an "exemption" from the need to provide a PDS from the Australian Securities and Investments Commission ("ASIC"). That this might have been possible was the assumption upon which both sides conducted their cases, rather than the subject of any submission in point of detail. Elsewhere in the case, the appearance was given that LGT was attempting to secure the approval of ASIC for a PDS which it proposed to publish. Either way, the PDS issue, and the requirements of ASIC in connection therewith, was a substantial cause of the delay which Ramsay encountered putting his founders' bonds on to the market. In his affidavit, he said that it was in November 2001 that he began preparing a PDS with the assistance of his solicitors. 81 On 30 November 2001, Sattler and LGT executed a lease for the land on which the Barnbougle Dunes golf course was to be built. The "land" was defined by reference to title certificates, and more particularly by reference to an area which was hatched on a map annexed to the lease. That area extended westward from the western bank of Great Forester River, and covered a narrow strip of coastal dunes upon which the golf course would then, as intended, be built. The lease was for 10 years commencing on 1 January 2002. The lease contained a clause restricting the use of the land as follows: 7. USE OF PREMISES (1) The Lessee must use the Premises as a golf course and clubrooms (which the parties acknowledge does not extend to accommodation) and all uses reasonably connected with the marketing, promotion and use of the Premises as a golf course and club rooms. The Lessee must not use or permit the Premises to be used for any other purpose or activity, without the prior written consent of the Lessor. This clause was of some significance in the defendants' case in this proceeding. 82 The lease provided for LGT to pay both base rent and percentage rent. The base rent was to be $50,000 in the first year, and thereafter increasing by $10,000 each year, to $100,000 in the sixth year. For the seventh and subsequent years, adjustments in accordance with the consumer price index, or by 4% per annum, whichever was the greater, would be made. Notwithstanding those provisions, the lease allowed for the capitalisation of base rent as follows: (6) (a) During the initial 2 years of the Term the Lessor must capitalise the Base Rent pursuant to the terms of the Shareholders' Agreement. The parties agree that the Lessor's obligation to capitalise the Base Rent for the initial 2 Years of the Term means the Lessee will not be required to pay Base Rent for the initial 2 Years of the Term. (b) After the initial 2 years of the Term the Lessor and the Lessee may agree in writing to capitalise all or part of the Base Rent for any Year of the Term. (7) Notwithstanding this clause 4, the Lessee's obligation to pay Base Rent under this Lease or to have Base Rent capitalised in accordance with the Shareholders' Agreement under subclause (6) is deferred until the earlier of: (a) the date on which the Shareholders Agreement is executed by all parties to it; and (b) 1 July 2002. On the earlier of these two dates, the Lessee must commence paying the Base Rent calculated from the Commencement Date and, if the Shareholders' Agreement has been executed by all parties to it, the Lessor must capitalise the Base Rent calculated from the Commencement Date in accordance with subclause (6). In addition to the base rent, LGT was obliged to pay a "percentage rent", which was the amount by which 7% of its gross profits exceeded the base rent payable in the year in question. 83 Under the lease, Sattler granted to LGT a right of first refusal, under which, if he wished to dispose of the land by sale or gift, he was required first to offer to sell the land to LGT, and thereafter was permitted to market the land only on terms not more favourable to the purchaser than any offer which had been made by LGT. As events transpired, this provision was not activated, as Sattler did not move to sell any part of the land which was the subject of this lease. 84 Returning to the chronology of Ramsay's endeavours to obtain the interest of investors for the Barnbougle Dunes project, another potential investor of whom Ramsay made inquiries in this period was Mike Keiser ("Keiser"), an American golf course owner and developer. His interest in golf was focussed upon coastal duneland courses, grassed by fescue and largely devoid of trees. He was known to Ramsay as the developer of the Bandon Dunes Golf Resort in Oregon. Ramsay sought Doak's intervention to arrange an introduction to Keiser, but, according to Ramsay, Doak declined. This led Ramsay to write a letter directly to Keiser. Keiser does not recall that letter. Indeed, he recalls that the first he heard of the Barnbougle Dunes project was while standing at the tenth tee of the Pacific Dunes course with Doak. He said to Doak that he could not imagine a better site for golf in the world than the one on which they were then standing. To Keiser's surprise, Doak replied: "I can. There's a site in Tasmania that is pretty darn good". Doak said that he had been approached by a Tasmanian developer to design a golf course, and described the course as being perfect for golf. As a result, Keiser decided to see the course for himself. Doak gave him Ramsay's contact details and, according to Keiser, he then emailed Ramsay. 85 However it came about, on 22 October 2001 Keiser did send an email to Ramsay in which he said that, in spite of his "best instincts for financial self-preservation", he was thinking of visiting Ramsay's site. Ramsay replied by email dated 1 November 2001, in which he set out a lengthy explanation of the then state of play with respect to the interest which had been shown in the project by GWS, Troon and Medallist. Because, ultimately, nothing came of that interest, I need not set out those details. However, Ramsay's email to Keiser did contain the following passages (in which he referred to GWS as "GN"): So now to answer your questions - Have GN committed real money? Not really, just offered it. Have I hired GN for the 2nd course? Certainly not, but I can see that Tasmania could really do with a GN course, they do build v.good courses and are nice people, and as I only intend building on spectacular sites, they are likely to get one of them (as long as their waived design-fee offer stands). Has anyone committed money? The govt. invested $20k to assist me get planning approval, me and my family has put in $100k. That's all. If we don't sell all the bonds and commence construction this January, then I'll go and get a real job for 6mths of next year and continue to sell the bonds and prepare to start construction next Sept/October for a November 2003 opening. Where might you fit in? Mike my standing offer to anyone is A$1mill will buy 33% of the Doak course (with me owning 1 third and the landowner owning the other third), and this will also give you my option to buy the second site (I have 2 separate agreements, a 40yr lease on the first 280acre Doak site, and an option [to] buy the second site). So if someone wants the 2nd 650acre parcel of dunes with 4km of beach frontage, to develop a separate golf course and hotel without me or the landowner involved (whose background is in hotel dvlpt and mgmt) then they first have to invest in our Doak course and then they can walk away from us do as they please. If however an investor was to work with me and the landowner, they will get a better deal, and better outcomes. I greatly admire what you have done at Oregon, and trust you more than Troon or Medallist. I don't expect you would have a problem with Tom Doak designing the first course. I am confident that once you see the site, your vision for the dvlpt would be closer to mine than Troon's vision was. So to answer your question, I am sure we can negotiate so that you can fit in wherever you like! In characteristically direct terms, Keiser replied on 3 November 2001, saying that he would visit the Tasmanian site on 8 December. 86 Keiser did visit Ramsay on about 8 December 2001, and stayed for three days. He flew in to Launceston and, on each of the first and second nights, stayed with Ramsay at the latter's parents' farm property at Bridport. On the first day, Ramsay showed Keiser around the Barnbougle property, including both the proposed Barnbougle Dunes site and the Lost Farm area. On the second day, they made a further inspection of the proposed Barnbougle Dunes site, together with some plans which had been prepared by Doak. According to Ramsay, Keiser made detailed comments on those plans in relation to the layout and design of the course. On the third day, they drove down the west coast of Tasmania and inspected another property which Ramsay had identified as a potential golf development. They then drove to Hobart, and stayed there overnight. On the fourth day, Ramsay and Keiser had breakfast with Sattler at the Old Wool Store Hotel in Hobart. 87 It transpires from the evidence in this case that Ramsay and Keiser came away with quite different perceptions of what might be their future relationship, if any. In Ramsay's recollection, during the course of Keiser's visit he told Keiser that he wanted him to consider investing in LGT, and that LGT could build the Barnbougle Dunes course with money from memberships and equity from him (Keiser). He also told him that LGT had an option to "develop" Lost Farm, and an option to "purchase" Lost Farm, the latter of which had been "verbally agreed and documented but not yet signed". He told Keiser that, if Keiser was prepared to provide financial support for the Barnbougle Dunes course, he would then take a key stake and a prominent role in the development of the second course. According to Ramsay, Keiser said that he was keen to discuss what forms of support he may be able to provide, but that he was more interested in supporting the development through the purchase of memberships, as he had seen that model work successfully elsewhere. He said that Australia was a foreign country, and he did not know the team behind the project. Accordingly, he did not want to take a stake in the first course. 88 Keiser's evidence was that, when he saw the land at Barnbougle, he was impressed, and excited by the prospect of a golf course being built there. However, he was not impressed or excited by what Ramsay had said to him. While he found Ramsay easy to get on with, he did not think that his business plans were commercially sound. He did not get the sense that Ramsay spoke from a position of knowledge. He considered that the figures used by Ramsay for costs and income projection did not come from "actual experience or direct calculation". He said that he was reluctant to be a part of any company or development run by Ramsay, and that he did not have confidence in Ramsay as a promoter or developer of the proposed Barnbougle Dunes course. 89 On the other hand, during his brief meeting with Sattler, Keiser found him to be reliable and businesslike. He quickly concluded that the Barnbougle Dunes course stood a good chance of succeeding if it were to be managed by Sattler. Keiser also discovered, presumably from Sattler, that Ramsay's statement that he had an option to buy the Lost Farm site was not correct. 90 Notwithstanding his reservations about Ramsay, Keiser was prepared to commit himself to an investment in the Barnbougle Dunes project. When that commitment was put into writing, however, it was heavily conditional and rather complex. By facsimile sent on 7 January 2002, Keiser set out his proposal to Ramsay as follows: My present thoughts are as follows: A) As soon as the exemption has been granted, I buy 10 bonds at 4,000 Australian = 40,000 Australian. B) As soon as 2nd parcel deal is complete, I buy 15 more Bonds at 4,000 Australian = 60,000 Australian. C) Once Greg has sold 225 Bonds (including mine), I'll buy up to 50 more Bonds at 5,000 Australian. Bonds to be fully tradeable, etc., etc. 2nd PARCEL (Approximately 800 acres) 4 Options for Richard to choose from: 1) I buy 800 acres outright for $300,000 U.S. 2) I buy 60% interest in 800 acres for $100,000 U.S. 3) I option to buy 100% for $1,000,000 Australian. Option good for 5 years Cost 50,000 Australian 4) I option to buy 60% interest for 600,000 Australian. Option good for 5 years Cost 30,000 Australian Purchase to include entrance road - 50 meters wide the whole way. 91 Some aspects of Keiser's proposal require explanation. The "exemption" referred to related to the PDS, and to Ramsay's negotiations with ASIC. The "2nd parcel deal" referred to in para B) was the subject of the lower portion of the facsimile, under the heading "2nd PARCEL (Approximately 800 acres)". The "800 acres" was Lost Farm. Although the upper portion, which related to Keiser's potential dealing with LGT, contained three steps to be taken sequentially upon the satisfaction of certain conditions, the lower portion, which involved what was in effect an offer to Sattler, contained four alternatives. The upper portion was concerned with founders' bonds in LGT as proposed by Ramsay, while the lower portion was concerned with real estate. Paragraph B) in the upper portion was conditional upon one of the alternatives in the lower portion being "complete". 92 On 8 January 2002, Ramsay replied to Keiser. He said that he had "elected not to show the options to Richard until we finalise the exact boundaries and road access options to that second 800 acre parcel of dunes". He said that he would pass on to the DSD, with whom he and Sattler had a meeting the following day, the investment proposals made by Keiser. He continued: I have no doubt that Richard is with me in preferring to deal with you over the alternative, but can't help but worry that he is waiting to see what the Norman group offer before accepting either. I think that the Norman offer will involve paying a higher sum for his second site, but less support for the first course. In that case, I really don't know which way Richard will decide. The "Norman Group" was, of course, the GWS/Troon/Medallist consortium to which I have referred. I infer from the terms of Ramsay's communication that the group was still showing interest. 93 Indeed, by this stage it seems that the predominant interest of this consortium was in the development of a course on Lost Farm, rather than in participating directly in an investment in Barnbougle Dunes. Such a course would be designed by Norman, the concept being referred to in some of the documents as "the Norman course", in contrast to Barnbougle Dunes itself, which was, in this context, sometimes referred to as "the Doak course". In a reply to Ramsay dated 9 January 2002, Keiser said that "Norman wants to be paid as architect, not buy" and that "Troon's business is management, not ownership". Keiser asked "who's [got] the money to buy a potato farm in Bridport?" However, he added that Sattler would decide: "he's a smart man". 94 By email dated 4 February 2002 to Ramsay, Keiser inquired whether Sattler was going to choose one of the options which he offered, "or is he waiting for Greg Norman's big bucks?" In reply the following day, Ramsay said that Sattler had been unwell for two weeks with pneumonia, and - So while we were moving on a Heads of Agreement to shore up my option on that second site, we have not yet signed. At Antony's suggestion, I am wary of showing him your offers, as I know that the GN group are willing to pay more, so until I am protected I don't want Richard taking your offer to them and saying 'beat this boys!' as that will leave me out of the loop. It is apparent from this that Ramsay had not shown Sattler Keiser's proposal of 7 January 2002. It is also not inappropriate to observe that Ramsay was here playing something of a game in which the stakes were access to the Lost Farm land and in which, albeit that he was acting as a kind of agent in relevant respects, a significant consideration was the protection and optimisation of his own material position. 95 It was at about the beginning of February 2002 that Ramsay was obliged to make contact again with the DSD. He wrote to Young and Wheaton explaining why construction of the golf course would not be commenced within six months of his having obtained planning approval (which, it will be recalled, had been given on 14 August 2001). Under the funding agreement with the DSD, that had been a condition by reference to which the loan would have been converted into a grant. In his letter, Ramsay explained that LGT was encountering delays in receiving a ruling from ASIC about the PDS for the founders' bonds. Accordingly, the bonds had not been taken to the market. Ramsay said that he was "very busy in continuing discussions with Mike Keiser and Medallist Golf Developments, both of whom are very interested in investing in the development at Barnbougle". At best, that was a considerable oversimplification of the position reflected in Keiser's proposal of 7 January 2002. As to Medallist, Ramsay said, in his letter to the DSD, that he would send "a copy of the draft MOU… in the next few days". No such draft is in evidence, and Ramsay was not asked about it. However, it appears from a letter from the DSD to Ramsay dated 21 February 2002 that Ramsay was in regular contact with officers of the DSD. In that letter, it was noted that Ramsay's aim was to commence construction in Spring 2002, to permit the course to open in Spring 2003. He was asked to advise the DSD immediately should those dates alter. 96 In April 2002, Ramsay secured letters of support from the DSD and from Keiser, apparently with the intention of putting them before ASIC in connection with the Corporations Act requirement for a PDS. In a letter to Ramsay dated 9 April 2002, the DSD confirmed its support for the Barnbougle Dunes project, and expressed its hope for a speedy resolution of the regulatory approvals required in connection with the founders' bonds. By letter dated 11 April 2002 addressed to ASIC, Keiser said that he would be "keenly following the success of Greg Ramsay's project and … looking forward to assessing any investment opportunities that may present themselves". He said that he had discussed with Ramsay and Sattler "a variety of avenues in which I may invest in the project". The first step, however, was for LGT to be able to sell its founders' bonds. He said that such an approach to golf course financing had been very successful in the United States. He said that Ramsay had the "opportunity to develop a wonderful resource for the local community, and for Australia" and that the founders' bonds were a vital component of the vision for that project. He concluded: "I hope that I too might become involved in some way, and look forward to hearing of a positive outcome to this matter so that I might continue my discussions with [LGT]." 97 Save as mentioned above, there is no documentary record of any communications involving Ramsay of the one part and the GWS/Troon/Medallist consortium or Keiser of the other part down to about the end of May 2002. However, on 27 May 2002, Ramsay sent a proposal to Richard Sheppard ("Sheppard") of Macquarie Bank and Harrison of GWS. Characteristically, the proposal was ambitious. It would have involved the formation of a new company, "Tasmanian Dunes Pty Ltd", to develop only the Lost Farm site. The company would be capitalised as follows: Troon - $3m Keiser - $1.5m Medallist and/or Sheppard - $1m Greg Norman Design - $0.5m "in kind" Sattler Pastoral - $0.5m, "in kind" LGT - $0.5m "capitalised equity" How that company would come by the Lost Farm land was explained by Ramsay as follows: The land for the golf development (known as 'The Lost Farm') is valued at $1.5mill. This will be transferred to Tasmanian Dunes Pty Ltd. through a $500 000 cash payment to Sattler Pastoral, a $500 000 loan from Sattler Pastoral to Tasmanian Dunes Pty Ltd (to be paid back via $100 000 in annual payments for 10 years), and $500 000 equity in TasDunes. I do not pretend to understand exactly what Ramsay meant by this aspect of his proposal but, on one possible reading of it, at the point where Sattler would surrender his freehold interest in Lost Farm, no money would change hands. Under the heading "Development and Management", Ramsay's proposal provided as follows: • Greg Norman Designed golf course to be developed first, with 20-room clubhouse & lodge on the land known as "The Lost Farm", over which Greg Ramsay has an option. the facility to be known as "Tasmanian Dunes Golf Links & Lodge". Construction commencing September 2002, full opening December 2003. • A masterplan to be agreed to by all members of the consortium. • Destination Tasmania Pty Ltd. (a JV between Greg Ramsay and Richard Sattler) contracted as project manager for the development of the Greg Norman golf course, clubhouse and accommodation. • Destination Tasmania Pty Ltd. contracted as ongoing manager of the facility. The managers will have to meet certain performance criteria and standards. Keiser was sent a copy of the proposal by Ramsay on 28 May 2002. Sattler was sent a copy on 29 May and, in the margin alongside the above extract, he wrote (with reference to the words "over which Greg Ramsay has an option") "no option" and (with reference to "Destination Tasmania Pty Ltd") "no such company". Although Sattler could recall neither receiving this proposal nor writing those marginal endorsements, under cross-examination he assumed that he had done the latter at about the time when he received the proposal, and I was not invited to reject his evidence in that regard. 98 On 30 May 2002, Harrison sent to Keiser, Troon, Sattler and Ramsay a "discussion note" which he had prepared in consultation with Sheppard. In his covering email, Harrison said that there was "a lot to do, and it looks as if Troon will do the running - at least initially, and probably with Greg Ramsay's help". The note was headed "Barnbougle Dunes - Possible Structures", but it related only to the construction of the Norman course on Lost Farm. Access to the land was the subject of query as follows: "… Sattler to put in land in exchange for equity participation?/or sell land?/or lease land?" The estimated cost of the project ($7.5m) did not include a component for acquisition of the land. GND would charge a design fee of $250,000, and receive a royalty of $10 per round played over a 10-year period, subject to a minimum of $100,000 pa. Troon would manage the property. Medallist would be offered equity participation in return for naming rights on the proposed lodge. Initial equity funding would be provided as follows: Troon - $3m Keiser - $1.5m Medallist - $1m "Private investors" - $2m That anticipation was, however, subject to the following: • Note: Greg Ramsay believes Tasmanian Government would invest funds (equity or soft loans). • Richard Sattler is well-connected to Tasmanian Government and believes A$1-$2 million possible - confidential. • Note: Medallist have at this stage declined to participate but has not excluded a participation. • Richard Sattler be offered equity participation in exchange for land. If land is purchased for cash, additional equity is required. Third alternative is to lease Norman land - perhaps lease arrangement on Doak land could be rearranged? The second entry above would appear to indicate that Sattler was well aware of the consultations which then related to the possible participation of this group of investors in the development of the Lost Farm site. That the matter was treated seriously at least by Harrison and Sheppard may be seen from the following "next steps" which were proposed at the end of the note: • Troon to visit Barnbougle Dunes to review: * Richard Sattler position re land, civil works, building of lodge - costs identified; and * Greg Ramsay's involvement in project development and ongoing operation. • Finalise shareholder participation, agreement and funding. • Revise masterplan and associated infrastructure - including Government involvement with entrance road. • Pursue new approval with Council. 99 The discussion note of 30 May 2002 made no reference to LGT. Moreover, it was premised on the anticipation that the land over which LGT then had a 10-year lease would not be the site for the first golf course on the Barnbougle property. In this respect, the note stated, "Doak course to be concentrated [sic - constructed] at later date". The role that Ramsay himself might play in the proposed first course on Lost Farm was one of the uncertainties identified in the note: "Greg Ramsay role/payment - including initial?" As noted above, Ramsay's involvement was one of the matters that Troon would "review" in what was then to be a forthcoming visit to the site. 100 Ramsay responded to the Harrison/Sheppard discussion note by email sent on 9 June 2002 to Keiser, GWS, Sattler, Sheppard and Troon. He expressed quite firm reservations about the wisdom of branding the course under discussion, or the proposed lodge, with the commercial identity of any of the intending investors. He said that he understood why GND "wish to proceed with their course first", but expressed the wish to speak directly to Dana Garmany ("Garmany"), a senior person associated with Troon, and to do so on-site, to discuss "the background and logistics of this project, the past and current tourism climate in Tasmania, and other commercial realities". He added that no-one had "more at stake under this proposal than Dana himself, and I would expect he would want to look at all the options available before finalising his investment." Amongst other comments made in this email, Ramsay noted that obtaining planning approval for a course at Lost Farm "will certainly not be as simple as 'revising the current approval'." 101 As it happened, Ramsay had sent a copy of his response to the Harrison/Sheppard discussion note to Garmany on 8 June 2002. On 10 June, Garmany responded to Ramsay, saying that he did not yet have "a feel as to the best way to proceed". He added that "the issue of the exact investment on a company versus personal basis still needs fine tuning". On 16 June 2002, Ramsay passed this correspondence on to Sattler. 102 In evidence is an email of 24 June 2002 from Ramsay to Sattler, suggesting that a meeting with the DSD, which would involve both of them, be rescheduled. The email was not the subject of oral evidence by Ramsay, but Sattler accepted that he was, at about this time, assisting Ramsay to secure funding from the government. I should say that there is no evidence of the government having been approached for the funding of the course on Lost Farm proposed by Harrison and Sheppard. Neither is there any suggestion that LGT, Ramsay or Sattler had, in or by June 2002, sought funding for the Barnbougle Dunes course additional to the $20,000 loan which had been approved in August 2001. On the other hand, as mentioned earlier in these reasons, in February 2002 the DSD had indicated an interest in being kept informed as to LGT's progress in meeting the conditions - or "milestones" - to which the conversion of that loan to a grant was subject. I would infer that, if Ramsay and Sattler were to meet officers of the DSD in June 2002, it was probably with a view to discussing this aspect. 103 Doubtless following up on the non-committal correspondence from Garmany of 10 June 2002, on 22 July 2002 Ramsay enquired of his point of contact with Troon, Bruce Glasco ("Glasco"), whether his company had "any news … on your thoughts for Barnbougle's next step?" On 6 August 2002, Glasco replied "We're moving forward but slowly". He had concerns over "doing both courses". If there were to be only one course - … the next question is who will Dana and Mike want to design the course if there is only going to be one course? Based on current design costs it would be Doak hands down, the question I have to then ask to GWS is whether they would do for less (I would push for them to do it at their costs). Please keep in mind that if Mike and Dana want Doak then we will go that way but I need to have more than one option. I think we also have to consider that the government might be more inclined to give us more assistance if Greg were involved. Again, I don't know if this is a worthwhile comment or not but it needs to be answered. In this passage, "Dana" was Garmany and "Mike" was Keiser, the two largest individual investors in the discussion notes prepared by Harrison and Sheppard. Ramsay forwarded Glasco's email to Sattler, Sheppard, Keiser, Doak and Clayton. On 7 August 2002 Keiser responded with some comments about the selection of the designer for any course that would be built by those investors. He could not understand why it would cost more for a Norman-designed course than for a Doak-designed course. While having no strong preference, Keiser said that, if the costs were similar, he would lean towards the Norman option. 104 Ramsay replied to Keiser on 7 August 2002 in a lengthy email which was sent also to Garmany, Sheppard and Glasco. It was not sent to Sattler, and there is no suggestion that Sattler was ever aware of it. Ramsay asked that the email be kept confidential to the addressees, and specifically that it not be communicated to Harrison. Ramsay explained in detail why it would be more expensive to build the Norman course on Lost Farm than to build the Doak course on the land to the west of the cut. A deal of the difference was due to the topography of the two sites and the less complicated access that would be possible to the Doak site. However, much of the difference in cost, as perceived by Ramsay, was due to the different design approaches taken by Norman and Doak. Also, Ramsay frankly had reservations about using GND for the design of any course at Barnbougle, for reasons which he gave in his email. As Ramsay saw it, there were two possible directions which the project might take, the first of which he described as follows: 1) [K]eep construction and operating costs down, operate with a lower break-even, rely on the spectacular site and all the little things that Doak & Clayton would do right to attract enough local and interstate golfers paying a reasonable green fee and for the course to break-even (10000 rounds) & establish itself, start making a little money which would be re-invested, and in year 5 have a world class-internationally recognised-superbly maintained golf course which would be amongst Australia's top 4 course (with RM, KHeath, and NSW GC) and the no.1 public access. I have enough confidence in the site and my own ability and expect that within 7 years we would have built both courses and lodge and be enjoying 20 000 rounds on both courses …. On 8 August 2002, Keiser replied, informing Ramsay that, because of the cost differential, the "Doak-Clayton" option was "the way to proceed". He added that the proposed bond issue had "always been the best financing", and reminded Ramsay that his (Keiser's) "proposed deal to you is still alive and well". That was, of course, a reference to the proposal referred to at para 90 above. This email from Keiser gave every indication of an anticipation on his part that the GWS/Troon/Medallist investment might not proceed. 105 Parallel with these communications, Ramsay was continuing to generate publicity for LGT's founders' bonds, the offer of which to the public had been held up by the slow course of negotiations with ASIC about the need to publish, and if so the terms of, a PDS. On 7 August 2002, he forwarded to Sattler, Clayton, Doak, Keiser and Sheppard a draft media release, which stated that "the Barnbougle Dunes golf development" was "finalising the terms and conditions of its finance", and that the delay in commencing construction was "due to an unexpected, and very technical ruling by [ASIC] that the free golf attached to our membership [was] a financial dividend, which complicated things". The media release continued (with the quoted passages standing as statements by Ramsay): However, there now appears to be light at the end of the tunnel for what promises to be one of Tasmania's exciting new tourism developments. "The good news is the overwhelming response to the Founders Bonds, with over 200 of the available 350 already accounted for." The most interest has come from Melbourne's exclusive Sandbelt golf community, where memberships sell for up to $35000, with annual subscriptions of $2500. "Our starting price of $5400 with no further fees seems great value, particularly if they already visit Tasmania regularly on business or leisure". 106 At about this time, Ramsay had sent the "consortium's discussion notes" (which I infer were those of Harrison and Sheppard prepared on 30 May 2002) to an organisation called "First Tasmanian Investments Ltd", apparently with a view to attracting an investment. The response, dated 6 August 2002, was not encouraging. The organisation said that it would not "commit to the start up phase of your project", but expressed a preference "to consider investing in an expansion of the business once the start up phase has been achieved successfully". 107 On 4 October 2002, Ramsay spoke by telephone to an executive of Tasmanian Perpetual Trustees Ltd ("Tas Perpetual"), and secured that company's consent to act as custodian of moneys paid by subscribers to LGT's founders' bonds. Ramsay had previously discussed that appointment with Sattler. This step appears to have been taken in anticipation of the approval by ASIC of the PDS. In an email to Keiser on 14 October 2002, Ramsay said that he was "currently finalising" the PDS, and that "only Richard Sattler and myself are listed" as directors of LGT. In order to give more credibility and weight to the management team, as he put it, Ramsay sought to enlist Keiser's participation as a non-executive director. In a response on 21 October 2002, Keiser declined. He invited Ramsay to list him as "investor or consultant". 108 October 2002 appears to have been the commencement of the next phase in LGT's history, and development. It then appeared to Ramsay that the approval of the PDS by ASIC was imminent. It appeared also that Sattler would be enlisted as a director of LGT. It was in this month also that Ramsay, this time with the active participation of Sattler, sought further funding from the DSD. There is evidence discovered by Sattler (seemingly from a program on his computer) that an appointment was made for him and Ramsay to meet with the DSD on 11 October 2002, although there was no evidence otherwise that such a meeting took place. On 18 October 2002, Ramsay engaged in an exchange of emails with Clayton, with the object of drafting a letter of support that might be sent by the latter to the Tasmanian Premier. 109 On 28 October 2002, Ramsay prepared the draft of a letter that was to go to Young at the DSD. He emailed a draft of the letter to Sattler. A version of the letter dated 28 October 2002 is in evidence, but it is not clear whether it was the draft seen by Sattler, or the letter as (later) sent. Nothing probably turns on that distinction, it not being suggested by the defendants that the draft which Sattler saw differed materially from the letter as sent. The letter was an important development, and Sattler later had significant reservations about it. However, he accepted that he had been sent a draft, and, in effect, admonished himself for not having perused it more critically. 110 In the letter to Young, which was dispatched on 30 October 2002, Ramsay commenced by referring to "our recent discussions", and to the fact that the Barnbougle Dunes course was "being developed by my company LGT". He referred to the employment benefits of the construction and operation of golfing facilities near Bridport, and said that the Barnbougle Dunes development was "also the first step in LGT's plans for a series of 4-5 world class golf developments around Tasmania's coastline …." Emphasising the number of persons who would be employed, Ramsay identified three "stages of development", namely, 1) the construction and operation of "first golf links" with temporary standard clubhouse; 2) the construction and operation of an extensive clubhouse and accommodation facility for the first golf links; and 3) the construction and operation of "second golf links" and a large scale golf resort "on adjoining land". 111 Ramsay said that LGT had already received $3m of committed capital, made up of $2m from Sattler by way of "land and irrigation water", $500,000 from LGT itself, representing "planning approval and preliminaries", and $500,000 by way of "in-kind construction commitments". In his evidence, Sattler was critical of Ramsay for having used the capital value of land over which LGT had only a leasehold interest in these figures. 112 With the $3m thus committed, Ramsay said that there was a further $1.5m outstanding as "the cash component required to construct stage one of the development". His letter continued: Links Golf Tasmania Pty Ltd. is now preparing its final offer documents to raise the required $1.5million cash through the sale of 350 Foundation Memberships for between $5000 and $10000. Over half of those available have already been reserved by local, interstate and international golfers (please see attached extract from Register). Considering the Foundation Memberships have not yet been launched and LGT has not yet commenced any promotion of the Memberships, these forward reservations are an extremely encouraging sign of demand. As indicated in this passage, attached to the letter was a register of the names of individuals who had, as it was said, reserved foundation memberships. In some cases, an individual might have reserved multiple memberships. Counting those and the single reservations, Ramsay calculated - and stated in his letter - that he had "161 confirmed reservations". In addition, he had 60 "conditional reservations", which were those referred to in paras B) and C) of Keiser's facsimile of 7 January 2002 (see para 90 above) (although, under cross-examination, Ramsay accepted that that number ought to have been 65). The attachment to Ramsay's letter stated that he had "221 reservations of the required 300 foundation memberships sales". However, under cross-examination, Ramsay made it clear that the attachment to his letter listed all those people who had expressed an apparently sincere interest in becoming foundation members. For example, if someone had said to Ramsay, however casually, "put me down for a membership", his or her name would be on the list. Ramsay had secured no commitments from any of them, a circumstance which he explained by the then absence of any formal documentation under which memberships could be sold. 113 As mentioned above, one of the persons whose name appeared on the attachment to Ramsay's letter was Keiser. He was referred to also in the body of the letter, as having offered to invest $350,000 in "stage one of the project", by purchasing the first 25 and the last 50 foundation memberships; and having offered also to purchase "the adjoining land from Sattler Pastoral and finance the development of stage 3". 114 Ramsay's letter then set out the "proposal" which he was putting to government. It was in three parts. The first part was described as follows: • Underwriting Foundation Membership Capital Raising To achieve its first goal of ensuring that the Barnbougle Dunes Golf Links opens by December 2003, the government can underwrite the $1.5million sale of Foundation Memberships and guarantee construction commences on January 1st 2003, and opening in December 2003. Ramsay said that it was not expected that the government would be required to contribute any funds as part of this underwriting. He said that he had "221 reservations for memberships". He said that, if some memberships were outstanding, and the government were required to purchase them, they would be "a very liquid asset, and saleable as construction commenced". Under the heading "Risks", Ramsay said: Without underwriting there is a chance that Membership sales will not raise the required $1.5million by March 2003. The terms and conditions of the Foundation Membership offer stipulate that unless the full $1.5million is raised, all monies must be returned to applicants. In this scenario, even if 280 memberships are sold at $5,000, and the development is only $100,000 short of proceeding, those funds would have to be returned and the development would not go ahead. 115 The second part of the proposal was for the government to invest in "Stage 2". This was intended to be, essentially, a job-creation exercise in which the government would fund the construction of the clubhouse and accommodation facilities. 116 The third part of Ramsay's proposal was headed "Assistance to Stage 3", and contained the following paragraph: After 1-2 years of operation of Barnbougle Dunes it is anticipated that Stages 1 & 2 will show demand for Stage 3. Mike Keiser will finance this development. The construction of this would be on a scale similar to the development of the Launceston Country Club Casino. As well as Mike Keiser, LGT has been approached by several well known international golf development companies who wish to participate in this next stage. These include US firm Troon Golf which manages several hundred premier golf facilities around the world, and Medallist Golf Developments which is an international joint venture between Greg Norman Design and the Macquarie Bank. Stage 3 will involve a total investment of $10-$15million in the construction of the course and accommodation. To assist Stage 3, all levels of government may wish to contribute towards developing the infrastructure required (road access, electricity connection, sewerage facilities, airport upgrade). 117 At the same time as Ramsay forwarded his letter to Young on 30 October 2002, he sent a copy to Sattler. Sattler raised no objection to it at the time, but, in his evidence in this case, he said that he later discovered that Ramsay's representation as to the extent of the foundation membership reservations had been misleading, and that LGT had nothing like the funding commitment that was stated in the letter. Further, in his evidence Sattler expressed a strong objection to Ramsay having given the impression that the opportunity to develop Lost Farm as a golf course belonged to LGT. Sattler was content for the DSD to be given the impression that the Barnbougle site generally was suitable for two golf courses, and that two golf courses were part of the overall plan, but he would not, had he turned his mind to the matter at the time, have given any support to the notion that it would be LGT, rather than himself or some other party, which or who would develop Lost Farm as such. 118 It is not clear what the DSD made of Ramsay's letter, but, very soon thereafter, Sattler took the initiative to forward a copy of the letter directly to the Premier, Jim Bacon ("Bacon"). In a covering letter dated 7 November 2002, Sattler sought the opportunity to give Bacon "a personal briefing by myself" on the subject of the proposed development by LGT. It may not be coincidental that it was at about this time that Ramsay and Sattler decided to regularise the position of the latter in LGT: on 25 November 2002, Sattler was issued one ordinary share in the company (Ramsay also having one) and, on the same day, Sattler was appointed a director of the company (Ramsay being the other director). On 19 December 2002, Sattler executed a written consent to be a director of LGT. 119 Sattler's communication to Bacon on 7 November 2002 led to a meeting between Bacon, the Deputy Premier, Paul Lennon ("Lennon"), Ramsay and Sattler on 3 December 2002. Ramsay showed a PowerPoint presentation which promoted the Barnbougle Dunes project. The "team" was identified as Ramsay, Sattler, Doak and Clayton. The support of Keiser was highlighted. It was said that memberships would be launched "next week", and that, of the 231 memberships needed to be sold, there were "already 161 reservations with no promotions". Under the heading "Benefits to Tasmania", one of the bullet points was "Stage 2 developments (a second golf course and eco-lodge accommodation)". Bacon indicated that any future negotiations should occur with Lennon, as the Minister for Development. 120 While these conversations at the political level were occurring, the DSD, now renamed the Department of Economic Development ("the DED"), was continuing to monitor compliance by LGT with the conditions under which its $20,000 loan might be converted to a grant. By letter dated 22 November 2002, the DED wrote to Ramsay (referring to a letter from him of 2 October 2002 which is not in evidence) with reference to the "final milestone" that construction commence within six months of obtaining planning approval. It was noted that the delay to the commencement of construction was due to "ASIC delaying a formal decision on the issue of Founders' Bonds" and that that matter had now been "rectified". In the letter, the DED said that the milestone had been extended to 30 June 2003. 121 In anticipation of Keiser's return to Bridport on 15 December 2002, on 10 December 2002, Ramsay sent an email to him which dealt first with the subject of attempting to arrange for him to meet Bacon and Lennon. Nothing more needs to be said about that, but, in his email to Keiser, Ramsay also said: As he will tell you, Richard's preference is not to sell that second site outright. He wants to be involved in the mix. I am currently drawing up a proposal that would see the government underwrite the m'ship sales, which would alleviate any need for you to buy bonds, and for you instead to invest in the first course as an equal share equity partner with Richard & I. And then together as a 3way company we will look at all options for the second site, start forming a masterplan, then look at the best way to finance its development when appropriate. Ramsay said that he would send a "proposal" to Keiser the following day. He did so. He proposed that Keiser become the third partner in LGT, and that LGT have "a 5 year Exclusivity Agreement for negotiating terms with the landowner (RS) for the development of the 2nd site". Once the first golf course was constructed and operating smoothly and profitably, "Masterplanning for Stage Two on the second site will commence", in which all three partners would be involved, with specific responsibilities as outlined by Ramsay in the proposal. Once the master plan and construction and operation budgets had been finalised, LGT would be able "to assess the different ways of securing the land, financing the construction, and organising the ongoing operation". 122 On 13 December 2002, before he left the United States, Keiser responded to Ramsay's proposal as follows: Got your proposal. As you know, my interest is simple - and unchanged in a year. I'll invest in the first if I own the second. You propose (again) that I invest in the first and begin a 5 year negotiation to participate in the second. There are too many clean & simple deals in the world to embark on a 5-year negotiation on the other side of the earth. Under cross-examination, Keiser accepted that his references here to "the first" and "the second" were to the proposed Barnbougle Dunes and Lost Farm courses respectively. Ramsay forthwith sent a copy of Keiser's response to Sattler. 123 Keiser came to Bridport on 15 December 2002, and was taken both to the Barnbougle Dunes site and to the Lost Farm site. During that visit, Keiser came up with another way in which he might be financially involved in the Barnbougle project generally. He told Sattler that he believed that the project would not proceed without him (Sattler) taking a lead role, and that he had seen many similar projects flounder because of a lack of financial leadership. Keiser said that he had spoken to Clayton and Doak, in an attempt to find a way to persuade Sattler to become more actively involved in the project, and to assume leadership of the project from Ramsay. Keiser's proposal was that he would lend the necessary funds to Sattler directly, and if the project failed he would not leave Sattler financially vulnerable. The idea was that, if the project failed, Keiser would become a 60% owner of the Lost Farm land, and either wait for a better development opportunity to arise, or give the land to a land conservation trust. In broad terms, Keiser raised this proposal also with Ramsay, while they were visiting Barnbougle in December 2002. 124 After returning to the United States, on 6 January 2003 Keiser sent a facsimile to Sattler in the following terms: In addition to standing by my 1/7/02 letter to Greg (attached), I want to put in writing an alternative for your consideration. I will extend to you a loan of $500,000 (Australian) to be collaterized by 60% partnership in the second parcel (approximately 800 acres, exact boundary to be mutually agreed). The term of the loan shall be eight years. Interest shall be paid or accrued at the rate of 1% year 1, 2% year 2, 3% year 3, etc. until year 8, when the loan is due. At that point, you have the choice of 1) repaying the loan and any accrued interest. 2) not repaying the loan and any accrued interest, at which point I become 60% owner of the second parcel. There will be no prepayment penalty. If I become 60% owner, I promise to do one of three things with the land: 1) Offer to sell it back to you for $500,000 plus the accrued interest. 2) Develop a golf course and, possibly, resort on it. 3) Make a charitable contribution to a land trust, which would keep the land "forever wild". As I see it, Richard, your very worst case is that the $400,000 Australian all goes to develop parcel #1. After opening, results are disappointing/disastrous, we conclude that golf does not work in Bridport. So, I become 60% owner of parcel #2 and either wait for a better development climate or give it to a land trust, so that it stays "forever wild" - which is its current state. Let me know what you'd like to do next. Here, for the first time in writing it seems, Keiser was dealing directly with Sattler, and he did so, as Ramsay put it in his oral evidence, "with my blessing". On 10 January 2003, Sattler replied to Keiser by email, stating that he was "looking into the options" with Mrs Sattler, and suggesting that he was, at that stage, disposed to prefer the more recent offer. 125 By December 2002, preparation of the formal documentation that would give legal definition to the establishment of the Barnbougle Dunes project had reached an advanced stage. In addition to the PDS, which itself had gone through various drafts, Sattler's and Ramsay's solicitors had, it seems, been engaged in the preparation of a lease that would replace that executed on 30 November 2001 and of a shareholders' agreement for the members of LGT. Although this was done in cooperation, and towards a common end, the fact of the engagement of separate solicitors by Ramsay and Sattler, and the terms of some of the correspondence to which I shall refer, bespeaks a situation in which the two men recognised that they had their own particular interests, and were concerned to protect them. 126 On 20 December 2002, Sattler's solicitors wrote to Ramsay's solicitors, referring to an email from the latter dated 13 December 2002. That email is not in evidence. However, it is apparent from the letter of 20 December 2002 that the two firms of solicitors had been engaged in correspondence on the subject of the terms of a new lease and of a shareholders' agreement. It is the shareholders' agreement which became a significant feature in the present litigation. The draft of that agreement by reference to which Sattler's solicitors corresponded on 20 December is not in evidence, but some of the matters dealt with therein may be inferred from the following passage in that correspondence: Shareholder Agreement We are instructed that it is agreed that prior to and at the time the Golf course is opened to the public the Lessee is to be debt free. This is confirmed by the terms of the product disclosure statement. The shareholder agreement is to be amended to provide that prior to this period any capital requirements must be contributed by each shareholder on an equal basis in return for the allotment of shares on a dollar for dollar basis. If a shareholder is not in a position to contribute their share of the required capital within 7 days the other shareholder can elect to contribute the shortfall in return for shares. If the non defaulting shareholder elects not to contribute the capital to make up the shortfall the non defaulting shareholder may elect that the Lessee borrow such funds. …. 1. Clause 16 must be modified to exclude from its operation any business in competition conducted on any part of the balance of Barnbougle. 2. Would you please clarify whether GST may be applicable on membership fees and the taxation implications of the payment of membership fees. 3. The shareholder agreement is to include a warranty and an indemnity from your client that there are no outstanding debts owed by Links Golf Tasmania Pty Ltd. The company is not to be responsible for any costs incurred prior to or after the 19th December relating to legal costs arising out of the Lease product disclosure statement or any other matters relevant to exemption from managed investment provisions under the Corporations Law including should the minimum subscription not be received. 4. Please forward a copy of the Constitution for Links Golf Tasmania Pty Ltd. 5. Please attach a copy of a current balance sheet to the shareholder agreement. 127 Of particular controversy in the present case was the amendment to clause 16 of the draft proposed by Sattler's solicitors. That clause ultimately was, and inferentially was in the draft of 20 December, a non-competition agreement given by the parties. In terms, what Sattler's solicitors were proposing was that the shareholders' agreement should not be such as would preclude Sattler from carrying on any competitive business which was conducted on any part of the balance of his land at Barnbougle. In his first affidavit sworn in this case, Ramsay noted the execution of the shareholders' agreement (on 10 January 2003, a matter to which I shall come) and noted also that he and Sattler were restrained thereby "from competing with LGT, save on that part of the Sattler land not leased to LGT". Ramsay made no further comment about this provision in the shareholders' agreement. In his affidavit, Sattler described the provision as a "key feature" of the agreement. In his affidavit in reply to Sattler, Ramsay said that, when his solicitors showed him the letter from Sattler's solicitors of 20 December 2002, he spoke to Sattler about the terms of the non-competition clause. According to Ramsay, he told Sattler that it was "a very late stage to add new conditions to our agreement". He said that Sattler replied to the effect that "the clause inserted was about accommodation and that he did not want to be restricted from building accommodation on his land." Under cross-examination, it was put to Ramsay that the lease which LGT and Ramsay had executed on 30 November 2001 "precluded" LGT from operating accommodation facilities on the leased land and, therefore, that it was unlikely that Sattler would have had accommodation in mind as a justification for the variation of the non-competition clause which his solicitors proposed on 20 December 2002. In response to that suggestion, Ramsay said: No, it didn't preclude it, sir. You've read the lease; it says that Links Golf Tasmania - if you want to find it I will check the reading - but it doesn't preclude Links Golf Tasmania. If Richard had decided to go in a partnership with Links Golf Tasmania, or had wanted to capitalise the accommodation opportunity through Links Golf Tasmania, it was up to Richard. Richard ultimately controlled that. Or in the absence of Richard, some time in the future, if Richard's family, or whoever he sold the property to, had no interest in accommodation, then Links Golf Tasmania could pursue that opportunity, and I think the wording is, "It must be approved in writing," or words to that effect. So it was certainly not ruled out that Links Golf Tasmania may have an interest in operating accommodation. It was at Richard's discretion. If this was supposed to reflect Sattler's thinking at the time, it was not put to him when he was under cross-examination himself. Ramsay's evidence is also, in my opinion, substantially informed by an appreciation of the contractual possibilities potentially arising under the lease which owes more to his involvement in the present litigation than to the realities of the situation which existed in December 2002. At that time, the clear understanding as between Ramsay and Sattler was that LGT would not establish accommodation units and would not conduct an accommodation business. 128 It was put to Sattler that he had explained to Ramsay that the purpose of the amendment required by his (Sattler's) solicitors was to give him the right to conduct accommodation adjacent to, or close to, the golf course business, to which he responded "not true". Although counsel for LGT had Sattler accept that Ramsay had asked him why it was that he wanted to have the clause amended, and Sattler did accept that, the matter was not taken further at that stage, and was not the subject of re-examination. In the result, although it is accepted by both sides that Ramsay spoke to Sattler about the proposed variation to the non-competition clause, the court is unaware of Sattler's version of the course of that conversation. The court knows only that Sattler denies Ramsay's version. 129 Notwithstanding that reservation, I am not prepared to find, in the face of Sattler's denial, that he told Ramsay that the variation to the non-competition clause had only the purpose of enabling him to conduct an accommodation business on areas of the Barnbougle site that were not leased to LGT. On any view, the clause as varied had the potential to be a significant element in the defendants' case. Ramsay referred to the clause in his first affidavit but made no mention of a conversation with Sattler which might have the potential to limit the scope of the clause. It is clear from the lease executed on 30 November 2001 that it was, from the outset, contemplated that LGT would not provide accommodation on the leased land. By providing accommodation elsewhere, Sattler would not have been competing with LGT. The idea that he should have been concerned to amend the non-competition clause in the draft shareholders' agreement solely for the purpose of enabling him to conduct an accommodation business elsewhere on his land is, in my view, an improbable one. 130 I take into account also the state of Ramsay's correspondence with Keiser immediately before the sending of Sattler's solicitors' letter on 20 December 2002. As noted above, Ramsay was of the view, and expected Sattler to inform Keiser, that Sattler's preference was "not to sell that second course outright". Ramsay had put to Keiser a proposal for a "3 way company" to develop the first site and to "look at all options for the second site". Keiser rejected that proposal, and his rejection was communicated to Sattler. By whom the Lost Farm site would be developed, and its relationship with the Barnbougle Dunes site, were, therefore, subjects of contemporary interest both to Sattler and to Ramsay in December 2002. I would find, on the probabilities, that they were squarely within the range of competitive activities with which Sattler was concerned when he instructed his solicitors to write their letter of 20 December. This consideration too makes it quite unlikely that Sattler would have said anything to Ramsay to the effect that the proposed amendment to the non-competition clause was concerned only with accommodation. 131 It is also relevant that Ramsay and Sattler were, in relation to the drafting of the shareholders' agreement, both using the services of their solicitors. Had it been a matter of consensus between them that the non-competition clause related only to accommodation, it would be surprising, to say the least, that Ramsay's solicitors did not require the clause to be varied to reflect such a limitation, or at least note the limitation in correspondence. So far as the evidence shows, they did neither. Indeed, on 23 December 2002 they sent, amongst other things, the "Shareholders Agreement incorporating the matters raised in your 20 December email" to Sattler's solicitors. The non-competition clause in that version of the agreement incorporated the amendment required by Sattler. It was as follows: 16.1 Subject to clause 16.2, each of the parties covenants for the benefit of the other of them that neither it or any of its associates may in any manner whatsoever compete, or operate or assist others to compete in Australia with the business of the Company so long as it remains a shareholder of the Company, unless unanimously agreed in writing by the shareholders to the contrary. 16.2 Each of the parties may conduct a business or other venture in competition with the business of the Company on any part of the balance land at Barnbougle not leased to the Company. The actual drafting of cl 16.2 was that of Ramsay's solicitors. It is apparent that conscious attention was given to the wording. It was, I infer, no mere oversight that the provision was not limited to accommodation. Within the same correspondence, Ramsay's solicitors sent also the latest draft of the proposed new lease (to which I refer below), in which the lessee (LGT) was to use the premises "as a golf course and clubrooms". That is the most obvious content to be given to the expression "the business of the company" in the shareholders' agreement. This consideration too makes it quite improbable that Ramsay and Sattler shared the notion that cl 16.2 was intended only to give Sattler the freedom he needed to conduct an accommodation business. 132 To complete the record of the matters which I have taken into account on this controversy as between Ramsay and Sattler, I should say something about the impression which I had of these two men in the witness box. In this instance, that is particularly important, since it is only Ramsay's testimony in the case which provides support for the understanding of the exception to the non-competition clause which he proposes. Sattler was a very busy man, Barnbougle Dunes being only one aspect of his business concerns at the time. Unsurprisingly, there were gaps in his ability to recall the minutiae of conversations at this substantial remove in point of time. However, for him to have told Ramsay that the exception to the non-competition clause then under consideration would apply only to accommodation would have been quite obviously against his own interests, and is more likely to have been recalled by him. His denial of having done so was, in my perception, clear, firm, and credible. It was the denial of a man who, while he may not have recalled the positives of the conversation in question, had a sufficient recollection of the events in question to exclude the particular version which is now advanced by Ramsay. On the other hand, the circumstance that that version was not advanced by Ramsay in his primary affidavit tends at least to sow the seeds of doubt as to the reliability of his evidence. My general impression of Ramsay was of a young man with clear goals, and lofty ideals, who tended to view past events and relationships through a prism which would tend to the achievement of those goals and the fulfilment of those ideals. The history of the attempts which he made to finance the construction of Barnbougle Dunes shows Ramsay as a persuasive optimist as to future events, and, at least in some instances (including the one presently under discussion) I am disposed to think that he viewed past events in a light which provided the most convincing justification for the paths which he had followed from time to time. In short, Ramsay's evidence on the subject of his conversation with Sattler about the non-competition exception clause was not, of itself, sufficiently credible to cause me to doubt the conclusion which I would reach by reference to the objective indications to which I have referred. 133 On 6 January 2003, Ramsay and Sattler signed a memorandum of resolutions of the Board of LGT. By those resolutions, the Board adopted "the Barnbougle Dunes Golf Links Business Plan" as a guide for the development of Barnbougle Dunes Golf Links; it authorised the issue of the PDS and took responsibility for the information contained in it; and it dealt with certain other formal matters. In his affidavit, Ramsay described the process as one in which the directors "formally resolved" in the terms indicated. He gave no other evidence on the subject. Neither did Sattler, until he was under cross-examination, and was taken to the memorandum by counsel for LGT. Of the circumstances under which he signed the memorandum, Sattler said: Greg Ramsay arrived at the Old Woolstore with about ten documents that his solicitors had asked that I needed to sign so that he could lodge those in the next process getting the Product Disclosure Statement. Sattler could not recall having read the business plan referred to in the resolutions. He was disposed to think that it did not accompany the memorandum which Ramsay asked him to sign, and which he did sign. However, in his affidavit Ramsay had identified the business plan there referred to, and he was not cross-examined on that. I refer to that business plan in the next paragraph. I find that it was the version which was extant on 6 January 2003 and was, therefore, the one adopted by the Board's memorandum of that date. 134 The business plan approved on 6 January 2003 was based upon that to which I have referred in paras 48-55 above and, indeed, departed from that earlier version in limited respects only. In the first passage set out in para 49 above (from the "Executive Summary"), all words after "desired land" in the third sentence were replaced by "and fundraising approvals". In the passage set out at para 50 above (under the heading "The Proposal"), the third sentence was replaced by the following: The lease is based upon a percentage of profits, with a minimum lease of $100,000 payable from year 3 on. A large percentage of the funds will be raised through the sale of Foundation Memberships, entitling the purchaser to 40 years of free golf. In the third bullet point in the first paragraph of the passage quoted in para 51 above, the $35,000 planning work by Ramsay Enterprises had now become $250,000. The second paragraph in that quoted passage was replaced by the following: LGT is focussing upon raising a minimum of $1.5million required in additional cash capital to finance the development of Barnbougle Dunes. Ramsay Enterprises has set a goal of raising approximately • $1.5-$2.275 million from Foundation Memberships. This amount will be coupled with the equity committed by entities involved in the construction of the golf course. Otherwise, at least in respects presently material, the version of the business plan adopted on 6 January 2003 corresponded with the earlier version to which I have referred. 135 On 10 January 2003, Ramsay and Sattler executed the shareholders' agreement. In the recitals to the agreement it was noted that Ramsay held the only share in LGT, and that he intended to issue one ordinary share to Sattler "to the intent that at the date of issue each party will hold 1 ordinary share in the company". Albeit that the document was prepared by the parties' solicitors, I consider that that was a mistake: as indicated above, Sattler had been issued a share in LGT on 25 November 2002. Both sides conducted their cases on the basis that Sattler was a shareholder in January 2003, and I shall proceed likewise. In the agreement as executed, the non-competition clause was as set out above, save that instead of commencing "Each of the parties", cl 16.2 commenced "A party". Although purely grammatical, this change was consistent with what I have inferred above, namely, that the provision was the subject of conscious attention by the solicitors for Ramsay and Sattler. 136 In the shareholders' agreement, the following clause appeared under the heading "Future Financing, Management and Operation": The future financing, management and operation of the Company and the rights and obligations of the parties in respect to the Company will be in accordance with the following provisions. Under the heading "Capital Contributions", the following was agreed: 4.1 Initial capital (a) It is acknowledged that the contribution to the capital and the beneficial interest in the shares of the Company belong to and will be borne by the parties in the proportion of 50% each; (b) Clause 4.1(a) includes all funds raised by the Product Disclosure Statement dated in December 2002 that will issue Foundation Memberships ("PDS") and released to the Company by the custodian of the Application Monies; and (c) All funds raised under the PDS are required by the Company to be used for the purpose of constructing the Barnbougle Dunes Golf Links golf course, as particularised in the Company's budget that is referred to in the PDS. 4.2 Further Capital Any further capital required by the Company for the purpose of carrying on its business must be contributed by the parties in equal proportions for the issue of ordinary shares in the Company which shall be issued on the basis of one share for each dollar contributed. If a party ("non-contributing party") is not able to make the necessary contribution to the capital of the Company within 7 days of the Company making that decision, the other party ("contributing party") may, at its election, contribute the shortfall in return for the issue of ordinary shares in the company. If the contributing party decides not to contribute funds as capital in return for shares, the contributing party may elect that the Company borrow the balance of the required funds. 4.3 Loan Capital After the date that the construction of the Golf course is completed and open to members of the public the Company may obtain required working capital by means of borrowing by the Company. It was also provided that, in the event of an inconsistency between the provisions of the shareholders' agreement and any provision of the constitution of LGT, the former would prevail. 137 Also on 10 January 2003, Sattler and LGT executed four leases for the land on which the Barnbougle Dunes golf course was to be built. Commencing on 1 January 2003, each lease was for a term of 10 years, such that the fourth lease terminated on 31 December 2042. Each lease contained the restriction on the use of premises to which I have referred in para 81 above, and the right of first refusal to which I have referred in para 83 above. In the lease commencing on 1 January 2003, there was, however, a material variation in the provisions which corresponded to those in the original lease which I have set out at para 82 above. Under the lease of 10 January 2003, LGT was to pay a base rent of $120,000 per annum, subject to increase in the second and subsequent years by 4% per annum, or by the amount of the increase in the consumer price index, whichever was the greater. The new lease did not provide for the capitalisation of base rent in the first two years. Rather, it gave LGT the option to make no payment of the base rent in those years, in which circumstances that rent would be converted into a loan by Sattler, in accordance with the following provisions: (6) (a) During the initial 2 years of the Term the Lessor must, at the Lessee's written request, forego payment of the Base Rent and consider the Base Rent to be converted into a loan of the same dollar value to the Lessee payable on demand and on commercial terms that shall be agreed between the Lessor and the Lessee as soon as practicable after the aforementioned Lessee's written request. The parties agree that if the Lessor is obliged to convert the Base Rent into a loan for the initial 2 Years of the Term, the Lessee will not be required to pay Base Rent for the initial 2 Years of the Term. (b) After the initial 2 years of the Term the Lessor and the Lessee may agree in writing to convert into a loan all or part of the Base Rent for any Year of the Term. (7) Notwithstanding this clause 4, the Lessee's obligation to pay Base Rent under this lease or to have Base Rent converted into a loan in accordance with subclause 4(6) is deferred until 30 April 2003. On this date, the Lessee must commence paying Base Rent calculated from the Commencement Date. The Lessor may be obliged to convert the Base Rent into a loan calculated from the Commencement Date in accordance with subclause 4(6). The lease contained also the same percentage rent provision as that to which I have referred at para 82 above. In other respects, there was no provision of this lease to which it is necessary to refer here. 138 By the middle of January 2003, the PDS had been approved, and on the 14th of that month Ramsay signed a letter which would cover the public offering of foundation memberships for the Barnbougle Dunes golf course. The PDS itself was the documentary expression of that offering. What the proposal contained cannot be better expressed than by setting out verbatim the "summary" contained at the start of the PDS. It was as follows: #1 Information Highlights - a one page summary #1.1 Foundation Membership #1.1.1 Foundation Membership • A Foundation Membership will cost AU$6,500 • Only 400 Foundation Memberships are available to Australian residents. Only 150 of these Foundation Memberships are available to residents of Tasmania. #1.1.2 The benefits of Foundation Membership • No green fees are payable until 31 December 2042 - Foundation Members are exempt from any requirement to pay green fees until 31 December 2042 for playing golf at Barnbougle Dunes Golf Links, a coastal links golf course to be built near Bridport, Tasmania with a targeted completion date of 20 December 2003. • No annual membership fee (with possible exception of Alteration of Situation, see #2.6). • Membership of Barnbougle Golf Society, which will entitle Foundation Members to social and golfing events open exclusively to Foundation Members and their guests. • Exclusivity - Only 400 Foundation Memberships are available to residents of Australia. LGT reserves the right to offer Foundation Memberships to international golfers, but these will be limited to a maximum of 300. #1.1.3 What Foundation Membership does not give you • Foundation Membership is not designed to produce a financial return for Foundation Members. • LGT (Links Golf Tasmania Pty Ltd) will have full control of the ongoing operation of the Barnbougle Dunes Golf Links. LGT is not obliged to grant Foundation Members any role in the ongoing management and operation of Barnbougle Dunes Golf Links. • Foundation Membership does not provide you with any shares or membership rights in LGT. • Foundation Memberships are personal to the Foundation Member. #1.2 The Golf Course - Barnbougle Dunes Golf Links • The golf course will be located on the property Barnbougle, on a leased portion of coastal dunes, totalling 270 acres, with 3 km of beach frontage. The site is 5 kilometres from the seaside town of Bridport in Tasmania. • The golf course will be constructed by LGT in association with Michael Clayton Golf Design and Renaissance Golf Design. • The leasehold and golf course will be owned, operated and managed by LGT. #1.3 The Offer • Offer opens 14 January 2003 and closes on 14 May 2003 (or earlier if fully subscribed). • Funds raised will contribute to the construction of the Barnbougle Dunes golf course and club house. • Offer is subject to a Minimum Amount of $1.5 million being raised (or 231 Foundation Memberships being sold). • Application Monies will be held in trust for the Applicants by Tasmanian Perpetual Trustees Limited pursuant to an Agreement to Provide Custodial Services until the Minimum Amount is raised and will then be released as monthly progress payments for construction of Barnbougle Dunes. • The maximum amount raised under the Offer is $2.6 million (or 400 Foundation Members). Funds raised in addition to the Minimum Amount ($1.5 million) will be used to enhance facilities at Barnbougle Dunes, particularly the clubhouse. Stripped of its elaborations, the basic exchange involved in the purchase of a foundation membership was that, in return for payment of $6,500, the member would, subject to certain conditions and exceptions, be entitled to play golf at Barnbougle Dunes, free of charge, until 31 December 2042. The course itself was not to be a membership course in the conventional sense, but would be a public "pay-as-you-play" golf course. 139 A significant feature of the foundation memberships offer was that it was subject to a minimum of $1.5m being raised by such memberships, and that the offer would close on 14 May 2003. As I shall explain presently, those characteristics of the offer proved to be of some significance in the history of Barnbougle Dunes. 140 On 17 January 2003, Ramsay sent an email to Sheppard, informing him of the availability of foundation memberships, and expressing the hope that a membership would still be of interest to him. He also said that Sattler and he were "still keen to take on a third partner". In a reply dated 22 January 2003, Sheppard said that he would "sit back and wait for the time being" for which position he gave three reasons: first, that a "Norman course" was not planned at that stage; secondly, that it would make more sense for him "to just pay the green fees when I do come down there"; and thirdly, that he had "serious doubts" as to whether Ramsay had provided for enough money "to do the project and operate the course in the initial stages". As to the latter, Sheppard expressed the hope that Ramsay would prove him wrong. In an email to Sheppard on 24 January 2003 (with a copy to Sattler), Ramsay explained, in some detail, how it would be possible to build the Barnbougle Dunes golf course much more cheaply than might have been Sheppard's expectation, based upon the latter's experience elsewhere. 141 The response which Ramsay received from Sheppard appears not to have been atypical of the former's experience generally with the sale of foundation memberships. On 5 February 2003, Ramsay wrote to Keiser (with a copy to Sattler) informing him that, although he (Ramsay) had been busy with the promotion of the memberships, sales had been "slow". Ramsay explained why this had been so, and said that it was - … particularly frustrating as Richard and myself are confident that as long as we can demonstrate steady sales of Memberships that the State Government will underwrite the Membership fundraising to ensure we commence construction ASAP. In his affidavit in this case, Ramsay said that, in the weeks which followed the release of the PDS, only 30 people applied to purchase memberships. It became apparent to him that LGT would have difficulty selling the required memberships before 14 May 2003. This caused him to reassess LGT's strategy for raising capital to fund the construction of Barnbougle Dunes. He formed the view that equity investors needed to be found for this purpose. In this regard, amongst the potential investors whom Ramsay contacted were Wood and McCleery. 142 Wood was an accountant practising in Melbourne. He was a very keen golfer, and had visited Bandon Dunes in Oregon. He first learnt of the Barnbougle Dunes project when he read an article about it in a golf magazine in late 2001 or early 2002. According to his recollection, he telephoned Ramsay, and expressed an interest in the development. Ramsay told him that memberships for the course would be on sale in early 2003. On 17 January 2003, Ramsay sent an email to Wood, to which the PDS was attached, and expressed the hope that a foundation membership would still be of interest to Wood. At a time which Wood estimated as within 2-3 weeks of receiving Ramsay's email, but which, for reasons to which I shall refer, I infer was on 6 February 2003, Wood travelled to Bridport and met Ramsay. They inspected the land on which the Barnbougle Dunes course was to be constructed, and Wood expressed the view that it would be "a spectacular course". Ramsay told Wood that the foundation memberships were not selling as fast as he hoped, and may not be sold within the time period imposed by ASIC (ie by 14 May 2003). Ramsay said that LGT would need to find "some equity investors". Wood said that he would consider "putting in some equity". 143 I infer that Wood first visited Barnbougle Dunes on 6 February 2003, since, by an email sent to Wood late on the evening of that day, Ramsay said that it was "great to talk to you today" and that he was "thrilled" that Wood was interested in "taking a closer look at the equity opportunity". Attached to that email were two documents, one headed "Shareholding in Links Golf Tasmania Pty Ltd", and the other a very broad, high-level, construction budget for the golf course. The former described the nature of LGT's enterprise, and referred to the 40-year lease. Under the heading "The Opportunity", the document stated: The Shareholders Agreement between Greg Ramsay and Richard Sattler has the provision for a third-party equity partner to join the venture, who can own up to 40% of Links Golf Tasmania Pty Ltd. The third party's voting rights and seats on the board will reflect their ownership of common stock. The document stated that Ramsay and Sattler saw it as desirable to have a third party involved as an additional shareholder, but subject to the following, which was described as "Terms and Conditions": The development of Barnbougle Dunes is not reliant on attracting a third party, however both Greg Ramsay and Richard Sattler are aware of the advantages of bringing in a third party, and are looking forward to discussing this opportunity with like-minded business people. The Price and Terms & Conditions of this third-party equity partnership are fully negotiable. Interested parties can request to see the Lease between Links Golf Tasmania Pty Ltd and Richard Sattler, the Shareholders Agreement between Greg Ramsay and Richard Sattler, and other associated documents. Under cross-examination, Wood accepted that he had received this document (as an attachment to the email of 6 February 2003), and that he then became aware that there was a shareholders' agreement. But he cannot recall either asking for a copy of the agreement, or reading it. So far as he recalls, the first time he saw the shareholders' agreement of 10 January 2003 was after the commencement of this proceeding. 144 Wood replied very promptly to Ramsay's email. He said that he was "very keen to take this a stage further", and gave Ramsay the benefit of his ideas for the course. It is apparent from this email from Wood (which, although undated, was almost certainly sent on 7 February 2003) that he had a great passion for the kind of naturally-sited, and naturally-designed, golf course that Ramsay had in mind at Barnbougle Dunes. He said that he was excited at the prospect of being involved in the project "because of the perceived 'quality'." He expressed the hope that it would give a return, but added that his main concern was "that it doesn't wipe me out". There were further emails passing between Ramsay and Wood on 7 February 2003, but it is unnecessary to refer to their contents. 145 In the first half of February 2003, Wood travelled to Hobart and met Sattler. They had a discussion at the Woolstore Hotel which occupied a few hours. Wood said that he was prepared to put some money into LGT, but that he was not prepared to risk his home, his business or his lifestyle. His exposure needed to be limited to the amount of his investment. He said that he wanted to minimise the number of partners in the business, to create a favourable business environment, and that he wanted to achieve a 20% return on his investment. 146 It was at about this time also that Wood considered that he needed a partner with whom to make his proposed investment in the Barnbougle Dunes project. Gary Dixon ("Dixon"), was a golfing professional who had provided lessons to Wood and members of his family, and for whom Wood acted as an accountant. In 2003, Dixon was operator of three public golf courses in Melbourne: Brighton, Elsternwick and Burnley. Given that neither Ramsay, Sattler nor Wood himself had had any experience in running such courses, Wood felt that Dixon's involvement would be beneficial. When Wood contacted him, Dixon said that he might be interested. In evidence is an email from Doak to Dixon dated 14 March 2003, in which the view was expressed that "the Barnbougle property has the chance to be something truly special". He said that there was "certainly nothing like it in Australia today". On 17 March 2003, Dixon forwarded this email to Wood with the comment: "Interesting!!! What are your thoughts at the moment??" From that point, it appears that Dixon did commit himself to joining with Wood in the Barnbougle investment, since the letter to which I next refer was sent by Wood on behalf of both of them. 147 On 17 February 2003, Wood sent a letter of intent to Ramsay, with a copy to Sattler. There were two versions of this letter, the first containing only the substantive terms of Wood's proposal, for consideration by Ramsay and Sattler, and the second being what Wood described as "a more formal version which may suit for referral to government". Wood said that he and Dixon would be equal partners, probably by way of a unit trust which they called "The Bump and Run Unit Trust". He confirmed that they were keen to take up "one third equity in the project at Barnbougle Dunes" but that this was conditional upon the following factors: • that the course does commence construction by May 2003 • that we contribute $500,000 inside the next 18 months on an ongoing basis • that the project commence with no debt over its operations - other than to Richard as discussed • that any unlikely shortfall in operations in the initial 2 years will not require equity partners to contribute further • that we are party to and offered equity in related projects such as that proposed by Mike Keiser as they will have an impact on 'our' project In the "formal" version of the letter, the text alongside the final bullet point above was rendered as "that we are party to and offered equity in any related projects such as the proposed second course". In that version of the letter, that proposal was referred to under a subheading "the opportunity". In that regard, Wood said: I also understand that once Barnbougle Dunes is operative, Mike Keiser - the wealthy American who funded Bandon Dunes - will construct a second course of like standard. The proposed design team of Coore and Crenshaw are generally regarded as the only team who can match Tom Doak in the current era. A combination of these two courses will ensure that Bridport, Tasmania will become a destination for golfers all over the world. Wood's letter reflected a perception on his part, presumably derived from what he had been told by Sattler and/or Ramsay, that Keiser would be the main investor in the development of the second course, if there were to be one. It is also apparent, from this and other passages in the formal version of the letter, that it was drafted with a view to persuading the government to underwrite the membership bonds. For example, in his "closing comments", Wood said: I understand that while interest is very strong and that only 400 memberships are on offer, the timing is critical on converting this interest to sales by March rather than May as in the offer documentation. There is no incentive for prospective bond holders to send a cheque earlier! This is our biggest obstacle. We know that the Foundation Bonds will all sell in due course and that cheques are steadily coming in. But they will not come in quickly enough to ensure the course commences construction by April. We therefore need to find an underwriter or underwriters to cover say 200 of the bonds (minimum). The underwriter will make a nice profit and the bonds will sell themselves once people see the course. To this end I will make contact with possible interested parties, but I urge you to go to the Tasmanian Government to gauge their interest in the matter. For minimal risk the Government will ensure that a project goes ahead that will really put Tassie on the world map. Unfortunately should we not be successful in raising the necessary finance in this short period ahead (so that construction can commence) our equity offer will also lapse. 148 At about this time, Ramsay also renewed his contact with Keiser. On 19 February 2003, he sent a lengthy email to Keiser in which he stated that it was apparent that LGT was not going to sell enough memberships by April, when it was necessary to start construction of the golf course (presumably by reason of the conditions subject to which the $20,000 Tasmanian government loan would be converted to a grant). Ramsay said that it was probable that LGT would not be able to sell enough memberships by the date in May when the offer closed, upon which the funds would have to be returned to contributors. In his email to Keiser, Ramsay put that down to his own inexperience, in being "naïve" to expect that people who had indicated that they would buy a membership "would actually front up with a cheque". At that stage, LGT had only 11 cheques in the bank. 149 As a result of the then apparent failure of the membership bonds to attract sufficient funds, Ramsay told Keiser that he and Sattler were working on their case for the government to underwrite the unsold foundation memberships. Ramsay referred to Wood's interest in becoming an equity partner, and to GDD's interest in securing international membership rights. Ramsay continued: The negotiations with the above parties may or may not lead to something fruitful - I hope at least we will gain a $500k equity partner, and if we can get another $500k, then there is a very good chance the government would make up the difference. What I need to know is whether you are at all prepared to get involved at this stage to ensure the development goes ahead. I don't want to speak for Richard, and I would urge that you both talk soon, but as I see it, of the offers you have made, Richard's preference is to take the loan (as opposed to grant an option) but he has made it clear that he will not use this loan to get the development off the ground, but only to enhance the development once it is underway (clubhouse construction, operating reserves etc.). I am concerned that you believe you have made an offer which will assist in beginning the development, but, while it is certainly a sign of good faith of your interest, it is unfortunately ineffective at this stage. Mike, I am obviously desperate to get this project underway this year. I am so tired of explaining delays and making excuses. If need be, I would very reluctantly walk away from it all together if that is what it took to make this happen this year. I would still gain comfort in the knowledge that such an important development was coming to fruition, some of my debts were cleared (and that people wouldn't think I was a crank anymore!) But before I approach any of the options we have for the provision of 'emergency' funds (Troon, Clubcorp, other private golf developers) and sacrifice my own equity, I would like to know whether there is any scope for your involvement. You have always been my preferred partner on the project, and you are now certainly Richard's preferred partner. I would love to see your vision and approach instilled in the project, to see you and Clayts & Tom discussing the angles of the new 16th green by the beach, before tramping over that second site with Bill Coore and his routing map. I still think it would be a great shame if we had to cut a deal with Troon/GN Design to get the first course up, which secured the second site to Greg Norman Design, sterilising everything with a 'Troon' badge. In his email, Ramsay pleaded with Keiser, asking him "if you would put yourself in the picture a little more than you might wish at this stage". Rather unhelpfully from Ramsay's perspective, on 26 February 2003 Keiser replied as follows: If Barnbougle were in California, or Nova Scotia, we'd be in construction. Since you're in Tasmania, I've always wanted the first course to "test the market" and succeed, so I might do/be involved with the second. I have too many golf projects in the air at Bandon Dunes right now (5!) to change course now. Get the first course done! And I'm there for the second. Ramsay sent both emails to Sattler for information. 150 Another potential investor to whom Ramsay sent a copy of the PDS in early 2003 was McCleery. It seems that, at that stage, McCleery's approach was to buy a number of the foundation memberships that were reserved for international members, so that they might be on-sold at a profit. On 12 February 2003, one of McCleery's colleagues in GDD, Nolan Joson ("Joson"), sent an email to Ramsay (with a copy to McCleery), in which he referred to a telephone conversation between them, and to which he attached a document which he described as GDD's "intentions to enter into negotiations" with LGT. That document, on the letterhead of GDD, was over the hand of McCleery. It was said that GDD was "interested in acquiring a share in the lease". The proposal was that GDD obtain a 40% share in the lease for a payment of $400,000. In return, GDD would have "the full rights to the 300 (or all available) International Bonds and withdraw reference of such from your website and advertising material". It seems that McCleery contemplated that GDD would have to pay for the bonds, as he asked Ramsay to give "an indicative price for our consideration based on sale of 300 bonds". The price of the on-sale of bonds to the market would be set by GDD. Additionally, McCleery required two directorships on LGT for representatives of GDD. McCleery requested a 120-day due diligence period, and required the following information to assist with that process: 1. Copy of Lease Agreement 2. Copy of any other agreements in place 3. Shareholders Agreement of Links Golf Tasmania Pty Ltd (LGT) 4. Details of all entitlements and obligations as an equity partner 5. Details of commitment of Local and State Governments to the project 6. New course information and intention 7. Reciprocal rights intention 8. Expected timeframes 9. Details of potential sub-divisions and opportunity for our involvement 10. Details of projected costs and revenues for the next 7 years 11. Other information that is known which you feel would affect our decision 12. Other information as requested to be provided on an ad-hoc basis McCleery proposed that the $400,000 would be paid in two stages, namely, $100,000 "upon reaching your minimum sales of bonds" and the remaining $300,000 "prior to opening of course in line with your requirements and to coincide with any major works (eg expenditure on clubhouse), and GDD undertake not to withhold funds for any reasonable purpose prior to opening". 151 Taking the view that the proposal by McCleery was a "starting bid", Ramsay proposed to Sattler that LGT should sell all the international memberships to GDD for the sum of $400,000. Sattler did not agree, telling Ramsay that he would not put a price on the overseas memberships at that stage, but would ask McCleery how he and his colleagues would "handle the deal if we gave them the total package of overseas memberships immediately". 152 On 17 February 2003, Ramsay replied to Joson's email of 12 February, sending a copy to McCleery. He attached a copy of the shareholders' agreement. In his evidence, McCleery accepted that he had received that copy, but added that he could not recall reading it. 153 On 23 February 2003, McCleery and his co-investors in GDD visited Barnbougle Dunes. Ramsay and Sattler informed them that their proposal was not completely acceptable, and they indicated that they would revise the proposal. On 26 February 2003 McCleery did forward an amended proposal to Ramsay. He said that GDD remained "most interested in acquiring a share in the lease company". The proposal now was that GDD obtain a 25% share in LGT, together with three Australian and 100 international memberships, for a payment of $400,000. The proposal was subject to a number of conditions, including the following: • Course is guaranteed to commence via a combination of membership sales (including our contribution), additional equity contribution and State government contributions. …. • That you provide us with the full ownership of 100 of the International Memberships and withdraw reference of such from your website and advertising material. • That you provide us with the rights to purchase the remaining 200 International Memberships at a price of $2,500 per membership payable upon sale. These additional international memberships must be sold within 18 months from date of opening of the course, or LGT can renegotiate rights to outstanding memberships at your discretion. McCleery required certain additional information including "copy of any unknown (by us) agreements in place" and "new course information and intention". The sums of $100,000 and $300,000 would be paid by reference to the same stages as previously (see para 150 above). Ramsay sent McCleery's new proposal to Sattler, and they subsequently discussed it. Sattler told Ramsay that they could not formalise an agreement with McCleery regarding the second course as LGT did not yet have an agreement in place for the development of the second course (that is, an agreement with Sattler about that course). 154 On 1 March 2003, Ramsay replied to McCleery's letter of 26 February 2003. By contrast to what McCleery had proposed, Ramsay suggested that GDD take 25% equity in LGT, and 100 international memberships, for the sum of $500,000. He put forward a rather different plan for the pricing and disposition of international memberships from that which had been proposed by McCleery. He dealt with the further information which McCleery had sought. With respect to the "other agreements" of which McCleery was unaware, Ramsay referred to four such agreements, none of which is presently relevant. He referred to no agreement which related to the Lost Farm site. With respect to McCleery's request for information as to "new course information and location", Ramsay said: "There are no agreements in place regarding any future developments outside of this one parcel of land." 155 In his evidence, McCleery recalled a meeting at the Australian Club in Melbourne which he placed in early March 2003. No other witness referred specifically to that meeting, but McCleery said that Wood was present, and that it may have been the first time that he met Wood. At the meeting, Ramsay invited those present to purchase memberships, so that construction could commence. 156 I would infer that McCleery did first meet Wood, and discuss with him the proposal to invest in Barnbougle Dunes, between McCleery's letter of 26 February and 5 March 2003, since it was on the latter date that McCleery sent Ramsay a modified version of his letter of 26 February 2003. In his letter of 5 March, McCleery thanked Ramsay "for the opportunity to meet with the other equity participants on Monday", ie 3 March 2003. McCleery said that he "would like for us all to have equal 25% shares in the venture". The "us all" to whom he referred were, I take it, Sattler, Ramsay, Wood and GDD. However, McCleery added that he was happy for Sattler to have "30% of voting rights … [to] prevent any potential deadlocks". He offered to pay $500,000 for GDD's 25% share in LGT, subject still to various conditions, but those conditions no longer included the earlier requirement that the course was guaranteed to commence under certain funding arrangements. Rather, the letter noted that the GDD bid was "currently reliant on the additional contribution of the Tasmanian Government", a development to which I shall refer below. Importantly, one of the new conditions was that "agreement [be] reached between equity participants and Richard Sattler re terms and conditions of options for ownership of second course". Indeed, McCleery's letter of 5 March 2003 stated: Whilst I cannot speak directly on behalf of the other equity participant, I believe that our views are completely aligned in this regard - both equity parties require a guarantee of future equity involvement in the second course in the area over the river in the other prime land designated for the next golf course/hotel development. Together, we seek an option to obtain a minimum 20% share in the ownership of the land of the golf course (excluding the hotel) at a future date. We believe that this option will enable us to capitalise on all the work that we are doing and the risk that we are taking to promote Bridport as a world class golfing destination. Details of this option will need to be finalised in the near future ahead of payment. The "other equity participant" here referred to was, of course, Wood. 157 In the course of an email exchange (principally concerned with another subject) on 21 March 2003, McCleery forwarded to Ramsay a modified version of his letter of 5 March 2003 and asked whether he (Ramsay) and Sattler were happy with it. In the letter as modified, McCleery added to the earlier statement as to Sattler having 30% of the voting rights a request for clarification "of exactly how that would work". In his email as such, McCleery asked Ramsay to clarify "the other voting rights split with Richard having 30%", noting that he (McCleery) and Wood "had a different interpretation". Replying on the same day (and communicating also to Wood) Ramsay said that Sattler had stated that he was "unwilling to go below 30% equity and 30% voting rights". He said that this "will leave us all with 23.33% equity". Although not stated in terms, that was 23.33% each for Ramsay, Wood and GDD, making a total of 70%. As to Lost Farm, Ramsay said: I am now considering that granting rights in the second stage of the development would be best granted through LGT Pty Ltd, as opposed to individuals. This way we all still have the opportunity, through our ownership of LGT, to participate in the second stage of developments. Replying almost immediately, McCleery inquired whether they could "tie something up with Richard re the second course soon so that we all know our entitlements". As to entitlements in the company, McCleery said that he was happier with the 23.33% than was Wood, who still wanted 25%. As a compromise, McCleery suggested that Wood could keep his 25%, and that he (McCleery) and Ramsay could each have 22.5%. McCleery emphasised, however, that these percentages related to voting rights only, and that "we will all still have 25% equity". Concluding his email, McCleery asked Ramsay to confirm what he had stated. There is no evidence that Ramsay ever did so, or that McCleery ever got the assurance which he sought as to the second course. 158 There is in evidence an email, not otherwise of present importance, from Ramsay to Wood on 24 March 2003, in which a visit by the latter to Barnbougle on 26 March was dealt with. I note that, in that email, Ramsay proposed that he would pick Wood up from the airport "walk the first site in the morning" and, after lunch, "[tour] the second site in the afternoon". Such a visit did take place, and Dixon accompanied Wood. Sattler was not present. Ramsay took Wood and Dixon on an inspection of the proposed site for the Barnbougle Dunes course, and of the Lost Farm site. Dixon's reaction was that the location and potential of the former were "extremely exciting". In his affidavit in this case, he said that he had "never seen a more picturesque piece of land that could be used for a links golf course". He did, however, leave the detail of his involvement in the investment to Wood, as his accountant and financial adviser 159 It is necessary now to return to developments with respect to government funding. I left this subject in para 119 above, in the first week of December 2002. It will be recalled that Ramsay's proposal then was that the government should underwrite the sale of $1.5m of foundation memberships in Barnbougle Dunes. Since then, Wood and McCleery had entered the picture, and the membership proposal had got off to a start which was not encouraging. In what seems to have been about the third week of March 2003, Ramsay prepared a further proposal to be put before the DED. He described it as a "proposal … for a loan secured by equity". He sought a loan of $500,000, "to be secured by equity in the company". He said that it was anticipated that the loan "would be repaid, at the very latest, within 12 months". In the letter covering the proposal, Ramsay said that sales of foundation memberships, although disappointing, were "steady", and referred to two separate offers from Melbourne-based syndicates to invest $500,000 each in the development (being the offers associated with Wood and McCleery). In his evidence in this case, Ramsay accepted that the essence of the proposal being put to the government was that it provide short-term bridging finance to enable construction of the golf course to commence, in the expectation that, within 12 months, LGT would have attracted sufficient investment, by the sale of memberships or otherwise, to enable the loan to be repaid. There was no evidence, and no suggestion by any party, that either Wood or McCleery was sent, or was aware of the details of, this letter to the DED. A draft was, however, sent to Sattler on 21 March 2003. 160 In the proposal to the DED, Ramsay set out what was supposed to be a simplified balance sheet of LGT as at 5 April 2003. It showed cash holdings of $1.12m, but this figure included the anticipated contributions of $500,000 from each of Wood and McCleery. It valued what was described as "land and irrigation water right" at $2m. Under cross-examination, Ramsay accepted that the land was not an asset of LGT. The proposal showed the share capital as $3.62m, held as to 30% by Sattler and as to 23.33% by each of Ramsay, GDD and a company (not then inexistence) called Bump 'n' Run Pty Ltd ("Bump 'n' Run") through which Wood proposed to hold his equity. Together with the advance of $500,000 then being sought from the government, LGT's liabilities would be $4.12m in total. 161 In his proposal to the DED, Ramsay's sales pitch - it could scarcely be described otherwise - was in the following terms: As we have previously discussed, this is a very important development for the North-East region. It has already drawn the golfing spotlight on Bridport. The local community has been tremendously supportive of the venture, recognising it as a much needed icon attraction, and a means of improving employment and economic opportunities in the region without detracting from the town's unspoilt coastal charm. From a policy point of view, this development is in-line with Tourism Tasmania's aim of developing new premium tourist product on established touring routes. Being a links course by the sea, and with many other unique features, we certainly expect to achieve Tourism Tasmania's important goal of offering unforgettable experiences. 162 Sattler added Ramsay's proposal to a series of documents about the Barnbougle Dunes project which had been provided to him by Ramsay, and had the whole bound into a form appropriate for presentation to departmental officials. The other documents consisted of a monthly construction budget to January 2004, of quotations from suppliers of goods and services, of operational cash flow projections from 2004 to 2009, of Wood's "formal" letter of 17 February 2003 mentioned in para 147 above, of McCleery's letter of 21 March mentioned in para 157 above, of community support letters and of the PDS. Sattler took those bound documents to a meeting with representatives of the DED on the morning of 28 March 2003. 163 Although it involves inference to a degree, probably the best evidence of the course of that meeting, and of the content of the material presented to the DED by Sattler, is to be found in a memorandum dated 9 April 2003 from the secretary of the DED to Lennon, as responsible Minister. It was stated that LGT was proposing to develop a links golf course on part of Sattler's property at Barnbougle, and that the site had "the capacity for two distinctive world-class links courses". The foundation membership proposal, and the disappointing response to the PDS, were mentioned. As at 1 April 2003 (and here I infer that information was provided to the DED subsequent to the meeting on 28 March), only 24 paid up memberships had been received, with $139,485 in the bank. It was said that LGT considered that, if potential foundation members were certain that the development would proceed, there would be a faster sale of memberships. It was said that LGT sought financial assistance by way of loan funds of $500,000, the loan to be reduced through the sale of future foundation memberships. The loan would be secured "by the equity in LGT and by Directors' guarantees". It was said that Sattler did not propose to offer the interests of Sattler Pastoral as security. The "in-principle equity participation" of Wood and McCleery were referred to, each said to be intending to take a 23.33% equity position in LGT. Keiser's interest in the development was referred to, but it was noted that Keiser had indicated that "he requires freehold on the sites to justify investment away from America". It was said that Sattler was not "prepared to consider anything beyond leasehold at this point in time", and that the proposed equity partners (ie Wood and McCleery) had "stated a definite interest in proceeding with the development of the second course, at some time in the future." As to that latter aspect, Sattler denied that he made such a statement to the DED, but it was a correct statement, and was well justified by the terms of the letters from Wood and McCleery which were, included in the documentary material presented by Sattler to the officers of the DED. 164 In the DED memorandum of 9 April 2003, it was stated that LGT proposed "that the total project will be undertaken in three development stages", the third of which was "construction and operation of a second golf links and large-scale golf resort on adjoining land". That was undoubtedly a fair resume of that aspect of the material presented to the DED by Sattler on 28 March 2003. That material had, relevantly, been written by Ramsay, but Sattler was well aware of it and, I would find, used the prospect of the development of the second course as a significant aspect in the case for funding which he was putting to the DED. He did not deny that in his evidence in this case, but insisted that nothing which he said would have given the impression that it would be LGT, rather than he himself or some other party, which would undertake that development. So far as the DED was concerned, considerations of this kind were part of the context in which the funding was being sought by LGT, rather than circumstances bearing directly upon whether that funding should be provided. In that latter regard, the memorandum of 9 April 2003 referred to a number of "key issues" one of which was that the directors of LGT should offer sufficient security to cover the proposed loan of $500,000. 165 In an email sent to Wood, McCleery and Sattler on the afternoon of 28 March 2003, Ramsay referred to the meeting between Sattler and the DED, and said that the DED had indicated that "a personal guarantee would probably clinch the deal". Apparently the DED wanted Sattler to give that guarantee, but both he and Ramsay felt that this would have to be "shared by all parties". Ramsay expressed the view that it ought not to be difficult to sell sufficient memberships to erase a debt of $500,000, since memberships to the value of $140,000 had already been sold. Indeed, in his email, Ramsay referred to "the almost certainty of us being able to sell 500k of m'ships". He said that he and Sattler were both happy to give personal guarantees, adding that they would insist on a time period of 3-5 years. In this latter respect, Ramsay's email gave to Wood and McCleery a rather different impression about timing from that conveyed in his most recent letter to the DED. In reply to Ramsay's email, Wood said that he thought that what was proposed would be "an administrative nightmare, and solicitor's dream". Personal guarantees would need to be the subject of individual advice obtained by each participant. Wood said that he had spoken to McCleery, and "while we are all very keen it is clear to me that there is work to be done". 166 On 27 March 2003, Wood suggested to Ramsay that the intending investors in the Barnbougle Dunes project hold a formal meeting, and this was scheduled for 8 April 2003 at Wood's office in Melbourne. On 5 April 2003, Ramsay distributed a draft agenda to the people involved, including McCleery, Wood and Sattler. In an email to Ramsay (not copied to anyone else) on 7 April 2003, Wood said that McCleery had "raised a few issues" and that McCleery was "keen to finalise our respective offers given they have changed so much". Amongst the other points for discussion at the meeting, Wood suggested that attention should be given to what would happen in 40 years' time if a "nice clubhouse" had been built by LGT. He added: "Also as part of the internal arrangements we need some certainty on the second site". 167 The meeting at Wood's office on 8 April 2003 went ahead as planned, with Ramsay, Sattler, McCleery, Dixon, and Wood attending. Also present was Timothy Haddon ("Haddon"), a golfing professional whom Wood and Dixon had by then invited to join their syndicate. In its case in court, LGT sought a finding, on the probabilities, that one of the questions raised at this meeting related to the participation of LGT in the proposed second course. However, I could not make any such finding. Wood said that he could not recall whether the involvement of the investors in the "second site" was discussed at this meeting. He said that it was either at this meeting or some other meeting thereabouts that Sattler said that the involvement of the investors in the second course "wouldn't be a problem", but Wood did not categorically place that statement by Sattler at the meeting on 8 April 2003. McCleery gave no useful evidence on the subject. Ramsay said that he did not "recall the discussions at this meeting in any detail". Haddon, who was called by the defendants, gave evidence that he did not recall any mention of a second course at this meeting. Under cross-examination, he was asked about that evidence, but not so as to suggest that something contrary to his recollection had been said. Dixon gave no evidence about the meeting, and was not cross-examined on the subject. 168 Sattler recalled the meeting as an event, but had no recollection of the course of the discussion at it. He was, however, extensively cross-examined as to whether at a meeting on 8 April 2003 or thereabouts, he had told the other investors, in response to their requests, that their involvement in the second course, if the course were to be built at all, would be "fine", or would "not be a problem". Sattler could not recall having used such terms, or having given that impression and, ultimately, after some persistence on the part of senior counsel for LGT, came to the point of saying: "I wouldn't even say that". Sattler was here being pressed to indicate whether he would deny using words of which he clearly had no recollection. He was well aware, and did recall, that Wood and McCleery had made it a condition of their investment that they were promised an involvement in the second course, if it went ahead. Sattler's emphasis, under cross-examination, was that he had not at that stage (April 2003) made his mind up on the matter, and had not given any undertakings. He accepted that the possibility of a second course was "on the radar", and that he had used that circumstance in his negotiations with the DED. But he was not prevailed upon by counsel for LGT to provide what would have been the only direct evidence of a discussion on that subject at the meeting on 8 April 2003. Notwithstanding Wood's expressed desire to have some certainty with respect to the second course (ie in his email to Ramsay of 7 April 2003), I am not satisfied that the subject was broached at that meeting. 169 Almost immediately after that meeting, McCleery sent an email to Ramsay which must have come as something of a bombshell to the latter. He said that his two other partners in GDD had decided not to make a commitment to the Barnbougle Dunes investment. McCleery said that he would be unable to raise $500,000 himself, and asked Ramsay whether he knew of any other investors who would be prepared to take two-thirds of the equity which had been earmarked for GDD. Indeed, he said that, given the time and effort which he had already put into the venture, he would be "looking for a slightly better deal", and would be seeking a contribution of $350,000 for the two-thirds to which he referred. He said that he was confident that he would be able to find someone himself, but also sought Ramsay's assistance in this regard. By email in reply dated 10 April 2003, Ramsay said that this news was "extremely disappointing". He said that he would forward the news on to Sattler, so that he would not be "misrepresenting your commitments to the government". Ramsay could not think of anyone who would be "likely to commit quickly" with respect to the shortfall in the GDD investment. 170 On 16 and 17 April 2003, McCleery sent similar letters to Ramsay, the second of which was copied to Sattler. In each letter, McCleery confirmed the inability of GDD to make good on its original commitment to invest $500,000 in the Barnbougle Dunes project. He said that he was himself prepared to invest $200,000 in the project, and that he was attempting to put together a new syndicate to raise the full $500,000. As to the latter aspect, he said that he would be prepared to "work with any group to put together a syndicate", and that if there were any other options, he would be pleased to consider them. 171 Also on 17 April 2003, Dixon, writing on behalf of himself, Wood and Haddon, formally expressed a commitment to "a one-quarter equity position", subject to the following conditions: • That we contribute $500,000 on a staged basis, $250,000 of which will be up front the rest to be committed over a period, not longer than 18 months. • That the course does begin construction by May 2003. • That the project commence with no debt over operations. • That we are party to and offered equity in any related projects such as the proposed second course. 172 With respect to the matter dealt with in the last of the bullet points in Dixon's correspondence, McCleery too was concerned that the investors' rights (or perhaps LGT's rights) to participate in the development of a second course be clarified. On 26 April 2003, he sent the draft of an agreement, to be executed between Sattler and LGT, to Wood, Ramsay and Dixon. The agreement recited that Sattler was the owner of the land at Barnbougle, which comprised "identified sites for at least two world-class golf courses." It noted that LGT owned the lease on the site for the first course. It noted that the investors in the first course were concerned that the second course "when built will deflect interest in Barnbougle Dunes and potentially reduce profitability and focus". It noted that the investors in the first course believed that the owners of the second course "will benefit substantially from the input, including extensive marketing and development costs and time, of the investors in the first course". It was the investors in the first course who were "the ones taking the initial risk". It noted that the investors in the first course recognised "the value of the development", and that the "venture includes the second course in their plans". The draft agreement continued: Accordingly, and as a pre condition to investment in the first course, LGT require [sic] the following rights: 1. LGT to have the option to obtain a 20% equity share in the long term lease or purchase of the second course. Such lease shall be of a term of no less than 40 years. If a sale takes place, LGT will have the option to purchase a 20% share in the land at the prevailing market value determined by the price a purchaser is prepared to pay for 80% of the land. 2. The Investors have the option of purchasing a 20% share in the lease for the sum of $200K, irrespective of the sale price of the other 80%. This sum shall be payable at a time to coincide with the payment for the 80% payable by the other third-party. 3. Any sale/transfer or disposal by any means by Richard Sattler or representatives to include these options as part of any agreement. McCleery's draft also noted that, whilst it was "likely that a hotel and other developments may take place, the Investors wish to secure a stake in the second course only." 173 On 27 April 2003, Ramsay replied to McCleery, sending a copy to Wood. He said that he would have thought that McCleery would not want to rule himself out of buying into the "accommodation/property development" which was, according to Ramsay, "where … some BIG money can be made". Ramsay's alternative view was that the investors have an option to buy 20% of any development on the second site for $200,000 plus 20% of construction costs. Alternatively, if there were to be "a lease arrangement", then the investors should be able to buy 20% of the lessee company "simply through 20% construction costs". He had a further option, which he regarded as a "stronger" one, whereby the investors would pay 15% of the construction costs, in return for 20% equity in any such company. In reply, McCleery said that, although he thought that they had agreed "to just be a part of the golf course", if Sattler were happy for them to have an option in the full development, he, McCleery, would be "happy to go for it". He added that they "should be able to split this so that we could go for one or the other or both if circumstances change". McCleery added that he thought that Sattler was "not keen to sell the land", but that, if he were, "then we should cater for that also". He attached a revised draft of his agreement to that email. 174 Still on 27 April 2003, Ramsay replied to McCleery. He said: From my perspective, I think a land sale is simply going to be much easier to structure for Richard. Also i [sic] have not mentioned that a part of the govt's investment is upon the proviso (only verbal, i [sic] don't expect it to become formal) that Richard deals favourably with Mike Keiser. Ramsay said that "something like the following" would occur in what was the "best case" for the investors: We get our 20% option. Richard sells 51% of land to MK for between $600k-$1mill (let's say $700k which values the land at $1.4mill), we buy our full 20% for $200k. Richard still controls 29% = approx. $400k. Everyone capitalises their equity into Lost Farm Golf Pty Ltd. MK = 51% RS = 29% LGT = 20% Lost Farm Golf Pty Ltd. spends $14mill on development ($3.5mill building Crenshaw&Coore golf course & practice facilities and $10.5mill building lodge & villa accommodation & spa etc.). We would all have to contribute our share in this stage of development to maintain our equity (MK=$7mill, RS=$4.2mill, LGT=$2.8mill) MK would be majority shareholder, Richard would operate &/or manage hotel, LGT operate Golf Operations with Ramsay Enterprises having management contract on golf ops. If any of these parties don't contribute their share, then their equity would obviously decrease eg. if LGT opts not to invest further than the 20% landowning, and MK takes up that shareholding, then LGT effectively only has $280k of shares in a %15.4mill development = 2%. Similarly Richard may opt not to invest in development, and just take management option, so Richard would have 3% and MK own 95%. Alternatively, Richard may take up our option, and invest $7mill against MK's $7mill and own 49% with MK owning 51%. Either way, these mechanisations are not what is important to LGT at this stage. What we must do is protect LGT against having to PAY for increasing the value of the second site: which can only be done through an option to buy a percentage of the freehold at today's value ($1mill) that way whether it is leased, sold or strata-titled, we are still part of the action. And we also want to protect our right to invest in and be a part of the lucrative second stage of developments if we wish. 175 In evidence are several versions of the agreement which Ramsay and McCleery were in the course of settling in their exchange of emails at about this time. It is not clear, and neither Ramsay nor McCleery made it clear, in what order these drafts came about, or which of them was the last in point of time. Each draft proposed a form of participation, either by "the investors" or by LGT or by both, in any future development at Lost Farm, and each attempted to grapple with alternatives which depended on whether Sattler sold the freehold, either to LGT or to another party. These draft proposals of Ramsay would have given rights to LGT if Sattler chose to develop not only the Lost Farm land as such, but any land within view of the first course. On 29 April 2003, he sent an email to McCleery, Wood and others noting his intentions in that regard, and saying that they would not present the draft to Sattler "until we have confirmation that all investors [sic] ready to invest their funds." He added that the investors would not have "a position to negotiate from until then", and it was "more pressing that [McCleery] finalises his access to the 200k before we finalise the option." 176 Ramsay's reference, in his email to McCleery and Wood of 29 April 2003, to McCleery's $200,000 related to an email which McCleery had sent to Ramsay, to Sattler and to Wood on 28 April 2003, and to a conversation between McCleery and Ramsay on that day. The thrust of that email was that McCleery had a problem being able to secure the $200,000 which he had promised by 14 May 2003, which was "the due date". Apparently somewhat embarrassed by his circumstances, McCleery went to some lengths to explain to the other investors how his difficulties had arisen. On 30 April 2003, McCleery sent another email to Ramsay (this time without a copy to any other party) confirming his intention to take "the full 25% share in the venture", and stating that he would also require three Australian memberships, all the international memberships and "25% share of 20% share in second course as discussed". McCleery said he was "very confident of putting a syndicate together" within a reasonable time, but added that he was concerned about his own ability to raise funds by the due date. As to that aspect, he said that he did not expect to know "one way or another until the death". 177 On 2 May 2003, Ramsay sent to Wood and McCleery another version of the draft of an agreement to be entered into with Sattler. As he described in his email, the essence of his proposal was as follows: Essentially [I] am breaking it into 2 parts 1) as soon as there is any movement on the development of any site around the first course, or on the second site we have an option to buy into the freehold. Doesn't matter what form the development is: lease, sale, stratatitle etc etc, we can buy into the freehold prior to the development. 2) if we then also choose to invest in the development itself, we can do so at 20% of the cost of the development. Neither Wood nor McCleery appears to have responded to this communication from Ramsay. 178 In his email of 2 May 2003, Ramsay said that the proposal would need "tweaking", but that they needed to get Sattler "to agree to the principle first". He added: "please don't discuss this with [Sattler] until we have all agreed on the document and our combined approach." Under cross-examination, McCleery agreed with counsel for the defendants that the effect of what Ramsay was suggesting was that the proposal was "to be treated as clandestine and not discussed with [Sattler]", and that that was what occurred. McCleery agreed that "all the investors stood mute as far as … Sattler was concerned". McCleery confirmed that, in the events which happened, nothing was put to Sattler. In his evidence, McCleery said: Well, ultimately it wasn't sent to Mr Sattler, I know that much. I can't recall specifically the reasons why it wasn't, but we've probably covered off on a few of those this afternoon in terms of Mr Sattler not liking formal documents, in terms of discussion around the freehold, that I didn't really feel that we had had a discussion with Mr Sattler concerning freehold, and this would have come as a bit of a surprise to him. Perhaps, you know, Mr Wood had his opinions as to why it shouldn't be sent, and ultimately Mr Ramsay was of the same opinion, that, you know, it was probably counterproductive for us to send that to Mr Sattler. In saying that the agreement was not sent to Sattler, McCleery was mistaken, as I shall show below. I accept, however, that, so far as he was aware, the agreement was not sent to Sattler. 179 On 7 May 2003, Ramsay sent to Wood and McCleery what was his final version of the draft agreement. He said that the agreement was designed to give them (ie Ramsay, Wood and McCleery) the options of buying into the freehold of any land within view of Barnbougle Dunes if any development occurred on such land, and of buying into the development as such. Ramsay's draft agreement was as follows: Agreement required between Richard Sattler and Links Golf Tasmania (LGT) Richard Sattler is the owner of the land "Barnbougle" in Bridport, Tasmania. This land comprises identified sites for at least two world-class golf courses. The land west of "the cut" on titles 131938/2 & 131940/1 ("the first course") and east of the cut on titles 130153/1, 130153/2, 244898/1, 242847/1 and 199540/1 ("the Lost Farm") Links Golf Tasmania Pty Ltd (LGT) owns the lease on the site for the first course - Barnbougle Dunes Golf Links. Investors in the first course at Barnbougle Dunes through Links Golf Tasmania Pty Ltd ("the Investors") are concerned that any follow-up development on the Lost Farm, or on the perimeter of the first course or in view of the first course could potentially be to the detriment of the first course. The Investors also believe that the developers of the second course will benefit substantially from the input, including extensive marketing and development costs and time, of the Investors in the first course. They also believe that they are the ones taking the initial risk. Once again, the owners of the second course will benefit from the input of the Investors in the early stages. The Investors recognize the value of the development and have expressed their long-term commitment to the entire venture on the first course site and the Lost Farm. This venture includes the second course, hotel and other developments in their plans. The intention of this agreement is to grant LGT the opportunity to invest in and participate in any property developments at Barnbougle (which have any impact on the golf course) at today's market value of the land. This will ensure that LGT doesn't have to pay extra at a later date for additional value LGT has created. This has also been structured to ensure that the current landowner Richard Sattler maintains full control, management and majority ownership of any further developments. Accordingly, and as a pre condition to investment in the first course, LGT require the following rights: Freehold 1. In the instance of any developments on the Lost Farm, LGT has the option of purchasing a 20% share in the freehold of that land containing the new development for the sum of AUD $200,000. This sum shall be payable within 3 months of formal notification by the landowner of a pending development, or at a time to coincide with the payment for the 80% payable by the other third-party, or at the time that full construction commences, whichever is the latter. 2. In the instance of any sale by Richard Sattler of the Lost Farm, or land in view from the first course, LGT has the option of purchasing a 20% share in the land freehold containing the new development at a 30% discount of independently assessed market value. This sum shall be payable within 3 months of formal notification by the landowner, or at a time to coincide with the payment for the 80% payable by the other party, or at the time that full construction commences, whichever is the latter. 3. In the instance of any developments on land in view from the first course, LGT has the option of purchasing a 20% share in the freehold of that land containing the new development at a 25% discount of the day's assessed agricultural value. This sum shall be payable within 3 months of formal notification by the landowner of a pending development, or at a time to coincide with the payment for the 80% payable by the other third-party, or at the time that full construction commences, whichever is the latter. 4. In the instance of any sale by Richard Sattler of land in view from the first course, LGT has the option of purchasing a 20% share in the land freehold containing the new development at today's agricultural value. This sum shall be payable within 3 months of formal notification by the landowner, or at a time to coincide with the payment for the 80% payable by the other third-party, or at the time that full construction commences, whichever is the latter. If LGT is buying into the land alongside current owner Richard Sattler only, the value of the land as capitalised within the new company which owns the land will be set at $1million. If LGT is buying into the land alongside any entities other than Richard Sattler, the value of the land as capitalized within the company which owns the land will determined by the price paid by the third party. Development 1. In the instance of any developments on the Lost Farm, or on land in view from the first course (including the development of accommodation on the first site), LGT has the option of purchasing a 20% equity share in the development through investment of 20% of development/construction costs. If the investors do not elect to invest in the construction of the facility, then their equity will be decreased by capitalising the initial value of their ownership of the freehold. The person to whom the agreement referred as "the other third party", or "the other party", by whom, apparently, 80% of the price of the land would be paid, was Keiser. 180 On 3 May 2003, Ramsay sent an email to Sattler and the other investors stating that "it appears that we are almost certainly ready to dot the 'i's and cross the 't's and formalise our arrangements". The course design group, including Doak and Clayton, were due to arrive on 8 May 2003 "to finalize the design and the construction planning/timetable/budget". Contrary to Ramsay's apparent confidence in LGT's then position, however, the young company and its investors were about to enter a phase of their history which would prove to be both difficult and decisive. 181 At the centre of relevant events was the loan funding which Ramsay and Sattler had sought from the State government in March 2003. It will be recalled that Ramsay's request for a loan of $500,000 from the DED was based upon the expectation that an equity contribution of $500,000 each would be made by the Wood and McCleery syndicates. This would have provided a total of $1.5m to fund the construction of the golf course. However, since Ramsay's letter to the DED in March, McCleery had announced that he would be good for $200,000 only, and the Wood/Dixon/Haddon proposal, contained in Dixon's communication of 17 April 2003, was to contribute only $250,000 in the short term, with the balance to come later - possibly not for a further 18 months. There was, therefore, an anticipated shortfall of $550,000. This was resolved, at least for the most part, by increasing the sum sought to be borrowed from the government. There is no evidence as to when, or how, LGT's increased need for loan finding was communicated to the DED, but there is in evidence an undated paper prepared by Young for the Tasmania Development and Resources Board ("the TDR Board"), in which that need is noted (although the paper proceeds on the basis that McCleery would be able to contribute $250,000 and the Wood syndicate would be able to contribute $200,000). The recommendation in the paper was that the TDR Board recommend to the relevant Ministers that a loan of $880,000 be approved under s 35 of the Development Act. The loan was to be made to "the shareholders of [LGT] or nominee" on terms and conditions which were set out. 182 Those terms and conditions included the following: • That the term of the loan will not extend beyond 31 December 2004. • That the loan interest rate is to be the TDR commercial rate with interest payable monthly in arrears from the commencement date. Details of the Interest Rate Matrix are provided at Attachment Two. • A loan establishment fee of $1,500 is to apply. • That the loan is to be secured by adequate security to be negotiated by the Chief Executive of TDR and may include Bank Guarantees, Directors Guarantees and/or freehold securities in accordance with the provisions of Section 35 of the Tasmanian Development Act 1983. … • That should $1.5 million not be received for payment of Foundation Memberships and in the Tasmanian Perpetual Trust Account then TDR's loan is to be repaid immediately on the refund of monies from Tasmanian Perpetual Trustees Limited. • That provided the $1.5 million is received as detailed above the loan is to be progressively repaid from sale of shareholder or the shareholders' nominees Foundation Memberships or other sources by no later than 31 December 2004. The interest rate matrix referred to in the second of the points set out above was as follows: Client: Links Golf Tasmania /or Nominee Cost of Borrowing Rate 4.93% (Capped Monthly 4/03) Plus: 0.10% Administrative Cost Margin 1.25% Reference Indicator Rate 5.03% Plus: 2.50% Security Risk Factor Plus: 1.80% Other Risk Factors Commercial Rate 10.58%

The commercial rate of 10.58% was at the top end of the range of interest which was, in the event, indicatively proposed to LGT, as I shall relate below. 183 In evidence also is an undated minute of a TDR Board meeting which dealt with the subject of the paper referred to above. It is recorded that the Board "expressed the firm view that no loan assistance should be provided unless full security was provided by the proponents". The Board made the following determination: That the Board acknowledges the importance of this development to the economy of north-east Tasmania and the potential investment and employment the development will generate. That the Board notes that there is a possibility that this development may expand into further golf courses and infrastructure on the leased property. That the Board recommend to the Minister for Economic Development and the Treasurer that a loan of up to $900,000 be approved under Section 35 of the Tasmanian Development Act 1983 to the shareholders of Links Golf Tasmania Pty Ltd or nominee on the terms and conditions provided at Attachment One, including a requirement that: • The loan is to be fully secured by real estate or such other substantive security as the CEO and Chairman of the TD Board may approve. That the CEO and Chairman are to report back to Directors on details of security offered prior to advancement of any loan funds. That the Board notes that funding for the loan will be sourced from repayments currently received and due on existing TDR Loans outstanding and that as such, repayment of current TDR borrowings will be reduced by the loan amount. 184 On 5 May 2003, Shane Hawkes ("Hawkes") a senior manager within the DED, wrote to LGT (with a copy directly to Ramsay, Sattler, McCleery and Wood) informing it that the TDR Board was prepared to recommend an "assistance package" by way of a loan of $880,000. His letter noted that the loan had to be "fully secured, either by registered freehold security, fully supported guarantees or Bank Guarantees". Because of the limitation in the PDS that LGT was to be debt-free, Hawkes required "details of what legal entity will be established for this purpose". 185 On 6 May 2003, Sattler met with officers of the DED to discuss the conditions under which the loan would be extended to LGT. He was particularly concerned to achieve a loan term of longer than 12 months, given the substantial security which the DED was proposing. He had discussed this aspect with Wood and McCleery, and had told Ramsay that he would ask the DED to agree to 10 years. At his meeting on 6 May, Sattler was disappointed in this regard: the DED agreed only to a term of 18 months. Further, the DED proposed that security should be provided as follows: Sattler $ 123,740 Ramsay $ 82,500 Wood syndicate $ 415,630 McCleery syndicate $ 478,130

The DED also told Sattler that the interest rate on the loan would be in the range 8.6% - 10.6%. That range was based upon TDR's interest rate matrix to which I have referred, the 2% difference representing the consequence of the "security risk factor" being either 2.5% as indicated in the matrix appended to the TDR Board paper - a "high risk" factor - or 0.5% - a "low risk" factor. In this respect it should be realised that, at the time that Sattler was having these discussions with the DED, the actual security that would be offered to the government remained unresolved. 186 The investors in LGT did not react kindly when they learnt of the terms upon which the government was prepared to lend them the $880,000. In an email to Hawkes on 7 May 2003, Wood said that he could not understand how the respective security requirements were calculated. By his own calculation, his syndicate should have been required to provide only $165,630 in security. He added: "I must say, I am starting to have second thoughts about the whole project." In an email to Ramsay with respect to the interest rates, McCleery asked scathingly, "are they a finance company?" 187 On the evening of 7 May 2003, McCleery drafted an email addressed to Hawkes, but he sent it first to Ramsay, Sattler and Wood for their consideration. In the draft, he said that the proposed guarantee presented him with "a large personal liability". With respect to the 18-month term and the interest rate that were proposed by the DED, McCleery asked whether "the Government's interest in the venture is possibly more of a political/financial one, than a desire to contribute to an amazing experience in Tasmania." He said that he had been happy when he perceived the government to be "a partner, rather than a short term profit seeker or facilitator". In an email sent early on 8 May 2003, Sattler told McCleery that he did not think that such a letter to Hawkes "could do any harm", adding: Our bargaining power is restricted by the urgency in timing. At no stage did I say that the Gov't had committed to an interest free loan or did not require security, and I do believe that the facility has no risk for the Gov't. I will attempt to get Shane to come to BB on Saturday as I am sure he is in Launceston. In a reply sent on the evening of 9 May 2003, McCleery said to Sattler: Thankyou for clarifying, this makes more sense out of the Government's response. I think that this view had come across from Greg's comments which I took, from no fault of Greg's, to be more factual than they were in reality. Greg did mention today that he may have misinterpreted this view. I will hold off on sending my email and will talk to Shane tomorrow. In his viva voce evidence, McCleery explained what he meant by "Greg's comments": That Greg had indicated to me that his interpretation was that the term of the loan would be longer and that the interest rate would be lower. So I was saying to Mr Sattler, okay, perhaps Greg didn't quite have it right. 188 Consistently with his discussions with Sattler, and with his correspondence with the investors on 7 May 2003, Hawkes approved a minute which went to Lennon over the hand of the Secretary of the DED. A loan of $900,000 (there being no evidence as to when or why the proposed sum increased from $880,000 to $900,000), to be repaid by 15 December 2004 at the latest, was proposed. The interest rate was to be "the TDR's commercial rate". The loan was to be "progressively repaid from sale of … Foundation Memberships by no later than 31 December 2004." That minute was approved by Lennon on 9 May 2003. However, by then there had been a significant development, the result of which was that the loan was not made in the intended form. 189 On 8 May 2003, Wood spoke to Hawkes by telephone. He told him that he was not prepared to provide the security required by the DED. That conversation led to the sending of the following email by Hawkes to Ramsay, Wood, McCleery and Sattler: [T]his morning I have had discussions with Peter Wood regarding the Barnbougle project, and he informed me that whilst he remains fully committed to the project, (as do the other partners) he has decided, due to commercial reasons, not to commit to his individual security requirements for the Government loan. In receiving this information, it would appear that the loan cannot proceed as proposed. That was effectively the end of the proposal that LGT should obtain a loan from the government. 190 Nonetheless, the interested parties wanted to press ahead if they could. Doak and the other designers were to arrive that very day to commence work. On 9 May 2003, Sattler spoke to Wood, and asked him to consider options for the structure of Barnbougle Dunes. By an email sent to Sattler that night, Wood dealt with the subject of memberships, cash flow, accommodation, real estate and "Lost Farm". Under the latter heading, he said: We have talked about this before. I am absolutely certain that two great courses will pull people from everywhere, and really put us on the map. Accommodation or even real estate on the first site can be integrated into the plans for the second site, hotel etc without causing any conflict, and perhaps even strengthen our position when dealing with Mike Keiser. Under cross-examination, Sattler said that he could not recall receiving that email, but accepted that he had. He did not think that he read it at the time, a circumstance which I do not consider to be unlikely since, by the evening of 9 May 2003, Sattler had an important meeting, to be held the following day, on his mind. Indeed, on the evening of 9 May 2003, Sattler discussed the Barnbougle Dunes question with Mrs Sattler, and they decided than "an alternative proposal" would be put to the other investors the following day. 191 There are two more or less contemporaneous records of what occurred on 10 May 2003, one made by Hawkes and the other made by Wood. In the morning, the investors undertook an inspection of the Barnbouge Dunes site in the company of Doak and Clayton. In the afternoon, there was a meeting of Sattler, Ramsay, McCleery, Wood and Hawkes. According to Hawkes: I informed the group that the intention of the government assistance was originally conceived to fill a gap created as a consequence of not being able to sell all the required foundation memberships. As a consequence of the Government not legally being able to lend direct to the company together with the directors not being able to immediately inject all the required funds into the foundation membership account, the purpose of the government assistance had varied significantly. Also, as a consequence of all directors having to provide securities in accordance with both their respective shareholding and individual loan amounts being borrowed, the project became clearly unworkable in accordance with timeframes required to meet the 14 May 2003 deadline. Then, according to Wood: It was therefore proposed by Richard that we immediately write to all those who had sent in applications advising them that the course was commencing construction, but that no memberships would be made available for sale at this time. Hawkes described this aspect of the meeting as follows: After further discussion it was clearly indicated to me that the golf project would proceed and that the corporate structure of Links Golf Tasmania would vary in accordance with the direct cash or equity injection by respective directors. In addition, it was the objective of the directors to firstly have a completed golf course fully operational without debt funding in the name of Links Golf Tasmania. This could only be achieved by direct cash injection from directors and Richard Sattler indicated that he would be prepared to borrow any shortfalls that were required to complete stage one of the project. It was common ground that the effect of these discussions was that construction of the golf course would proceed by way of "real cash equity" from the investors concerned. 192 It was also an element of what was decided on 10 May 2003 that the equity so contributed would, in the first instance at least, be used only for the construction of the golf course as such. In some notes made by Sattler the previous evening to assist him with the presentation of his revised proposal to the meeting, he had written: Do not consider initially any of the following: Workshop Club House Road & Carpark Power Phone Sewerage I accept that something substantially to that effect was resolved upon at the meeting. In this regard, Hawkes wrote in his notes: In order for this to occur a further decision to exclude the clubhouse from the original concept was agreed to. In addition, extensive car-parking and non-essential infrastructure on the property was also taken out of stage one of the project. 193 At the centre of what was decided on 10 May 2003, and of the prospect that the construction of the course might forthwith (ie while Doak and Clayton were on site) be commenced, was the reality that Sattler himself would contribute sufficient cash to make up the shortfall arising from the failure of the government loan. The idea was that Sattler would approach the government to take out a loan of $880,000 in his own name, having provided his own security. As Sattler intended, the freehold of the land which had been leased to LGT would represent that security. To achieve that, it would be necessary to make some adjustments to title boundaries. The way Wood's notes expressed the discussion of this subject was as follows: Richard indicated that he is separating the title of the dune land so that he could offer that as separate equity to secure the government loan of $880,000 although as the paperwork was still in the pipeline he was unable to offer such equity by 14 May. Richard was of the opinion that he would have no problem securing the government loan on this basis and with the new structure of LGT. According to Hawkes' notes: Peter Wood indicated to the group that the golf course business plan would need to be revised to reflect the new arrangements together with the verbal commitments given by Richard Sattler that he as shareholder of the company would provide freehold land for the project to proceed. 194 Wood's notes make clear what was then intended by way of funding for the construction of the course. His own syndicate and that of McCleery would, it was envisaged, contribute equity of at least $700,000, and possibly up to $1m, combined. The loan which Sattler was about to secure in his own name from the government would bring in $880,000. Additionally, they were counting on Keiser investing about $500,000, in whatever form was convenient to him. Funds of this order would enable them to build a course which, according to Doak (in Wood's words), would be "rated as one of the top 2 or 3 in Australia and probably world famous". 195 Still following Wood's notes, LGT would be capitalised on the basis that, for each of himself and McCleery, $500,000 would represent 25% equity in the company. This theoretically capitalised LGT at $2m. Sattler indicated that he was not inclined to own more than 40%, which point would be reached by the capitalisation of lease payments and water rights. Sattler suggested that Ramsay's input be capitalised at $100,000, notwithstanding that he had put in much less than that sum, on account of his "drive and passion" in getting the project to that point. 196 In a letter which he wrote to Keiser on 16 May 2003, Sattler set out the "revised capital structure" as follows: Greg Ramsay $100,000 Granted shares P. Wood Syndicate $500,000 $250K up front, $250K over 18 months J. McCleery $200,000 With allowance to increase to $500,000 R. Sattler (Balance) $1,400,000 Approximate, depending on the accuracy of Greg's budgets

What does not appear from Wood's notes of the meeting of 10 May 2003, but what does appear clearly from Sattler's letter to Keiser, is Sattler's contemplation that his own investment would be of the order of $1.4m. That would represent an equity share of much more than 40%. 197 Wood's notes did refer to Keiser's potential investment: I wasn't sure if Mike Keiser's contribution through Richard would be eventually capitalised as a share of LGT, and whether Mike or Richard would retain such ownership. That was in the nature of a personal rider by Wood, introduced into the notes after the meeting itself. Under cross-examination, Wood accepted that it was in contemplation that Keiser's contribution might "come through … Sattler". 198 Towards the end of Wood's notes, the following appears under the heading "Future Stages Of The Development": Richard, and indeed all, agreed that our primary concern was to make the golf course as good as it could possibly be. However, once the course was complete we would need to consider a clubhouse, accommodation, the second course and possibly some real estate. Upon questioning Richard stated that he intended that the group of equity holders in LGT be offered the opportunity to participate in the various stages. This pledge by Richard was taken in good faith by all concerned and no attempt was made to broker details - as clearly Richard has good intent, no clear idea of what Mike Keiser will consider and no wish to be restricted in any way at this point of proceedings. Sattler did not dispute that this part of the notes accurately reflected the substance of what had been discussed at the meeting. However, he emphasised that his statement included the indication, as suggested in the notes, that he had "no wish to be restricted in any way" at that stage. The above extract also reflects the reality that any development of Lost Farm would, or at least then appeared as though it would, depend substantially on the conditions which Keiser might attach to any such contribution as he could be prevailed upon to make. 199 Wood's notes concluded by recording that, from that point, Sattler would be the CEO of LGT, Ramsay would be the manager, Wood would be the company secretary and financial controller and McCleery would be promotional director. In his notes, Wood said: Control of the project has now firmly shifted into Richard's hands. We now all feel that the project will go ahead and that Richard will be successful in raising the funds required. 200 Hawkes said that his involvement in the meeting concluded at about 5:00 pm on 10 May 2003, after which he had "informal discussions" with Sattler. He was informed by Sattler that he (Sattler) would meet with the DED to "re-apply for some form of financial assistance package". Hawkes' notes continued: He further indicated to me that he would be looking for further financial concessions than that previously considered by the Department ie interest rates, repayment terms and security arrangements. I indicated to him that I was not in a position to give a commitment on these and this would need to be further discussed with a recommendation placed before the Tasmanian Development Board. Richard also requested a further meeting with the Minister in the immediate future. Sattler accepted the correctness of these notes. 201 In its case in this proceeding, LGT accepted that Wood, McCleery and Ramsay both knew of and welcomed the facts that Sattler proposed to secure, if possible, a loan in his own name from the government for the construction of the golf course, and that he would offer his own land as security for that loan. LGT's case was, however, that nothing conveyed to them by Sattler on 10 May 2003, or thereafter until the commencement of this proceeding, put them on notice of the term, or of the terms, of the loan which was ultimately negotiated. 202 Over the course of the weekend of 10/11 May 2003, the commercial arrangements for the design of the golf course were settled with Doak and Clayton. The total design fee would be $400,000, split 50/50 between them. Clayton required a 10% deposit, and Sattler and Wood each contributed $20,000 to that outgoing. Clayton - or possibly both Clayton and Doak - asked Sattler to sign a formal agreement engaging them, but Sattler declined. He asked them to accept his handshake on the matter, and they did so. In due course, Clayton was paid his $200,000 in full. Doak was not. The ensuing years were characterised by negotiations between LGT and Doak as to how the latter might be remunerated in ways that did not require the former to part with money. To the limited extent that such matters are relevant, I shall refer to them in due course. 203 On 12 May 2003, construction of the golf course at Barnbougle Dunes commenced. 204 On 13 May 2003, Ramsay sent an email to Sattler to which there were two attachments. One was a form of letter to be sent to those who had contributed for membership bonds, informing them that their money would be returned. The other was the final version of the agreement which Ramsay proposed should be made between LGT and Sattler (see para 179 above). A copy of the email was sent to no other person and the probabilities are that Wood and McCleery were unaware of it. The email itself contained no content save the statement that the letter to investors and the draft agreement were attached. There is no evidence of any follow-up about, or consideration of, the draft agreement. Sattler accepted that he received the email, but could not recall the draft agreement attached. By 13 May 2003, the occasion for Wood and McCleery to make their participation in the Barnbougle project conditional upon Sattler's agreement to Ramsay's draft had, of course, passed. Indeed, considering the note on which, according to Wood's notes (see para 199 above), the meeting of 10 May 2003 had ended, Ramsay's agreement must surely have struck Sattler (had he read it) as curiously asynchronous with the new dynamics within LGT. I am disposed to think that the kind of approach to the future of LGT which the draft agreement embodied had, by 13 May 2003, become quite irrelevant. 205 For the sake of the chronological record only, I mention here that, on 14 May 2003, Wood caused Bump 'n' Run to be incorporated. On the same day, Bump 'n' Run was appointed the trustee of the Bump and Run Unit Trust, to which I have referred in para 147 above. Bump 'n' Run was, in due course, the vehicle through which the Wood syndicate held their shares in LGT. But those shares had not been issued in May 2003. Sattler and Ramsay were still the only shareholders. 206 On 16 May 2003, Sattler wrote to Keiser, explaining to him the new arrangements which had emerged from the meeting on 10 May. He said that he had "decided to proceed with the project and carry the risk involved". He asked Keiser if he would "still consider [his] generous offer of involvement", be it by way of "equity, loan funds, future developments, advice, management expertise, friendship or just plain fun". He said that he had asked Doak and Clayton "to proceed at full speed with construction of the finest golf course possible". On 17 May, Keiser sent a brief reply, in which he invited Sattler to "assume some involvement from me to be forthcoming". 207 It will be recalled that, in his meeting with Hawkes on 10 May 2003, Sattler requested "a further meeting with the Minister in the immediate future". The Minister was Lennon, and Sattler met with him on 20 May 2003. Sattler told Lennon that he was trying to keep the project alive, and asked him to support a loan of $900,000 secured on his own personal assets. Lennon advised Sattler to apply for a loan in the usual way through the DED. At the same meeting, Lennon made a personal commitment to Sattler that an infrastructure grant of $250,000 would be available from the Economic and Social Infrastructure Fund. 208 On 27 May 2003, Sattler and LGT executed, by deed, a variation to each of the four leases, and Sattler and Ramsay executed an agreement to amend the shareholders agreement originally made on 10 January 2003. In the recitals to the latter, it was noted that the minimum subscription under the PDS had not been reached. The original agreement was amended by deleting clauses 4.1, 4.2, 4.3 and 7 (see para 136 above). Otherwise, the parties (Ramsay and Sattler) acknowledged and confirmed that the original agreement remained "in full force and effect". The defendants submitted that the variation to the shareholders' agreement, subsequent to the meeting of 10 May 2003 as it was, showed that the existence and terms of the agreement (including cl 16.2) were still of significance, at least as between Sattler and Ramsay. That is an issue to which I shall return. I note at this stage that neither Wood nor McCleery was aware of these amendments. 209 On 28 May 2003, Keiser wrote to Sattler, saying that he would "make good on [his] January 'Loan' offer". That was the offer dated 6 January 2003 to which I have referred in para 124 above. As Keiser noted in his email of 28 May, his proposal would require the property that was to be the collateral under the loan to be identified, mapped and recorded. By a return email of the same day, Sattler addressed those needs, and added that the State government was "very supportive of the project and the possibility of a second course etc." 210 On 3 June 2003, Ramsay sent a lengthy email to Sattler, with a copy to Doak and Keiser, arguing the case for a change to the then intentions of LGT as to the location of the access road from Waterhouse Road into the new golf course. It seems that what was intended would have provided a common point of access for both Barnbougle Dunes and a second course at Lost Farm - in the latter respect requiring a bridge over the river. Ramsay felt that a road in this position would provide too great an opportunity for golfers to observe vehicular traffic, and would be distracting. He said: As you know I have always advocated 2 separate access and 2 separately 'branded' facilities which can be centrally managed and promoted as a destination. On the same day, Sattler emailed Doak, saying: I am interested in your opinion as the government as part of their support asked to allow for site 2 infrastructure where possible in our planning on this course. Under cross-examination, Sattler accepted that this passage fairly reflected the government's wishes, as communicated to him. It will be recalled that, by this stage, Lennon had made a commitment to provide an infrastructure grant for the golf course development. 211 On 6 June 2003, Wood and McCleery were appointed as directors of LGT, and Wood was appointed Secretary. Neither was, at that stage, a shareholder. 212 Since the meeting on 10 May 2003, Wood had been attending to the business end of LGT's requirements. He had opened a bank account and, by 16 June 2003, was in the course of setting up accounting and payroll software. In an email of that date to Sattler, Ramsay and McCleery, Wood said that it was a priority "to amend the shareholding to reflect a capitalisation of $2 million …." He referred to the next meeting of the investors, and to an extensive informal agenda which had been distributed by McCleery for the purposes of that meeting. 213 The TDR Board was required to examine Sattler's application for a $900,000 loan from the State government. Hawkes prepared a paper for the TDR Board meeting on 3 July 2003, in which he recommended that the Board agree to recommend to the Minister (Lennon) that a loan of $900,000 be provided to Sattler on the terms and conditions which he identified. They included: 3. That the Links Golf Tasmania Pty Ltd shareholder funds are to be contributed in total, prior to the drawdown of the Economic Development loan. … 5. That a review of the loan will be undertaken on an annual basis, with a major review after three years to determine the level of capital reductions on the facility and the continuation of concessional interest rates. The term of the loan will not exceed ten years duration from the initial draw-down. 6. That the interest rate payable is in accordance with the department's Interest Rate Determination Policy at Attachment Two: • From the initial draw-down and for the first three years, the interest rate to be charged at the department's cost of funds, inclusive of the Administration Margin. … 9. That monthly management reports are provided to the satisfaction of Economic Development, detailing the progress of the golf course development. … 11. That quarterly financial management reports to the satisfaction of Economic Development, are to be provided by Links Golf Tasmania Pty Ltd. 12. That annual financials at 30 June each year are to be provided to Economic Development by 30 September of that year for Sattler Pastoral and Links Golf Tasmania Pty Ltd. 13. That budget and cash flow projections be provided by 30 June annually for Links Golf Tasmania Pty Ltd. The calculation of the interest rate was as set out in the matrix attached to the paper, as follows: Cost of Borrowing Rate [Capped] [Half-Yearly] [July 03] 4.83% Cap premium 0.10% Plus: Administrative Cost Margin 0.86% Reference Indicator Rate 5.79% Plus: Security Risk Factor 1.75% Plus: Other Risk Factors 1.50% Commercial Rate 9.04% Less: Special Rebate -3.25% Applicable Interest Rate 5.79%

The "security risk factor" of 1.75% was that appropriate to a "medium-high" risk assessment. 214 The "special rebate" referred to in the interest rate matrix set out above was dealt with in Hawkes' paper in the following terms: Initially, Mr Sattler was seeking a long-term concessional interest rate of less than five percent. However, after further discussion and negotiation it was agreed that the loan period should not go beyond 10 years, should not be offered at less than the cost of funds to the department and should be subject to review after three years, regarding continuation of any concessional interest rates. A loan term of ten years without a compulsory principal repayment program has been requested. In seeking this, Mr Sattler has agreed to be part of an annual review of the loan and its conditions with a major review at year three to consider a structured repayment plan if the project is cashflow positive or his other business interests have sufficient reserves to reduce the TDR loan. In requesting the concessions, he is extremely mindful that start up projects of this nature take time to realise positive cashflow. Mr Sattler's endeavours to secure commercial funds have been declined, primarily because of the perceived speculative nature of the development and the restrictive security that is available. The location of the project is also likely to have been a significant factor in commercial evaluation of the project. Without the proposed TDR loan concessions the viability of the development would be in jeopardy and Richard Sattler would withdraw from the project. Mr Sattler is a conservative entrepreneur who displays strong integrity and credibility in the tourism and business sector. To secure the loan he has offered a second mortgage over part of his Barnbougle farm. 215 At its meeting on 3 July 2003, the TDR Board accepted Hawkes' recommendation, and made the following determination: That the Board reaffirms its recognition of the significant long term benefits that the Barnbougle golf project will provide on the North East region of Tasmania. That the Board notes the proposed revised company structure and business plan incorporating a greater proactive role for Mr Richard Sattler. That the Board agrees to recommend to the Minister for Economic Development and also the Treasurer, that a loan of $900,000 be provided to Mr Richard Sattler on terms and conditions provided at Attachment One. On 9 July 2003, Michael Mann ("Mann"), Manager, Corporate Support, of the DED, wrote a letter to Sattler in which he stated that the DED was "prepared to consider" offering him a loan of $900,000 on terms and conditions which broadly corresponded with those set out in Hawkes' paper, subject to ministerial approval. The purpose of the loan was "to enable the completion of stage one of the Barnbougle Dunes Golf Links development". An "indicative interest rate of 5.79% per annum" was fixed, with future interest rates to be determined in accordance with the terms and conditions set out in the letter. The principal of $900,000 was to be repaid prior to 1 October 2013. Details of Sattler's property holdings which were to be provided as security were set out in the letter. The terms and conditions included that the DED was to be provided with an updated copy of the business plan for the Barnbougle Dunes project. Finally, Sattler was required to note "that this financial package is the limit of this department's assistance with respect to the Barnbougle Dunes Golf Links project". 216 The copy of Mann's letter of 9 July 2003 in evidence was sourced from Sattler's discovery. It was heavily endorsed with his hand-written notes. Alongside the passage which required provision of an updated copy of the business plan, Sattler had written "not full of crap - brief to point". Under cross-examination, Sattler said that that endorsement represented what he thought of business plans. He said that, in discussions with the DED subsequent to the date of the letter, he described the business plan "in precise as words as I could", and - There were quite a few laughs over it, yes, and they just said it was a process; they didn't care what I put in it as long as it had the heading Business Plan. So I clearly described what I thought of our current business plan. Despite those reservations, on 10 July 2003, Sattler requested Ramsay to telephone him on the subject of the business plan. That request was contained in an email from Sattler to Ramsay, the text of which was only, "can you please read attached and give me a call." The "attached" document was identified in the header to the email as "Richard Letter - Golf 09 07 03.doc". The subject of the email was "_Bus Plan". The only reference to the email anywhere in the evidence was when Sattler, under cross-examination, agreed with the suggestion of senior counsel for LGT that the email amounted to a request by Sattler for Ramsay to provide the business plan. That Sattler would have needed a copy of the business plan was consistent with the terms of Mann's letter of 9 July 2003. It seems very much within the range of reasonable possibilities that that letter was the attachment to Sattler's email. If so, Ramsay thereby knew both the interest rate and the term which were being offered to Sattler by the DED. However, this interpretation of the email was not put to Ramsay, in which circumstances I can say nothing further about it. 217 The first official meeting of the Board of Directors of LGT was held on 20 and 21 July 2003. In a "brief record" of that meeting made by Wood (who chaired the meeting), under the heading "government grant" it was noted that there had been discussions "on the local and state government grants to assist with the road and infrastructure for the clubhouse, accommodation etc". It was noted that Ramsay was to attempt to gain "federal assistance" for a clubhouse. Under the heading "Mike Keiser Input/Involvement", it was said that Sattler was "unwilling to commit to Mike until he really understands all his options". Under the heading "Second Course & Hotel", the following appeared: "Government very keen - but not an immediate priority." Sattler agreed that this entry referred to a report which he made to the meeting with respect to his discussions with Bacon and Lennon on the subject referred to. 218 One of the matters referred to in the minutes of the Board meeting of 20/21 July 2003 was "mission statement". Under that heading, the minutes stated simply, "refer to business plan". There was no evidence of a discussion about the business plan at this meeting, but, over the months which followed, McCleery and Ramsay were engaged in the process of amending the then existing business plan, originally prepared by Ramsay. There are many drafts in the evidence, but few of them carry a date, and fewer still were the subject of evidence by a witness. However, one version, which Sattler accepted represented that which he produced to the DED for the purpose of obtaining the $900,000 loan, described the site as consisting of "approximately 300 acres of prime dunes land". It said that "the opportunity exists to develop an integrated facility to incorporate the following facilities" after which a list followed which included "international standard 18 hole championship golf course" and "potential for additional golf course". These things, and others listed, were said to be "dependent upon council approval and the desire of the landowner to develop the area". On the 19th page of this 20-page document, as part of a "SWOT analysis", one of the opportunities was identified as "further development of accommodation, conference facilities, 2nd golf course". 219 On 25 July 2003, Lennon approved the loan of $900,000. Because of complications encountered by Sattler in providing security for the loan, it was necessary subsequently to make certain adjustments, in point of detail, to which it is not necessary to refer. On 12 August 2003, Mann sent Sattler a formal letter offering to lend him the sum of $900,000. Relevantly for present purposes, it was in the same terms as his letter of 9 July 2003. Sattler signed the counterpart of the letter on 13 August 2003. He stated that the "revised business plan" for the project was attached, although a marginal endorsement tends to indicate that this was received by the DED on 20 August 2003. 220 Despite what appear to have been the energies, particularly on the part of McCleery, devoted to the settlement of the terms of the business plan in August 2003, the subject was not adverted to at either of the two subsequent Board meetings, held on 18 August and 15 November 2003. Although Sattler was copied with the drafts being exchanged as between McCleery and Ramsay in August 2003, save for the need to obtain a copy for provision to the DED (a requirement which he clearly treated with some cynicism), he apparently took no particular interest in them and, as he said in his evidence in the present case, none of the drafts was ever adopted by the Board. 221 I would add that, in their content, expression and style, the business plans had the appearance of being intended for consumption by outside parties, rather than providing the basis, agreed as between the various investors, for LGT's present and future operations. To the extent that the business plans were ever put to practical use, it was to inform outside parties about the Barnbougle Dunes project. I note, for example, that a copy of the business plan was sent by Ramsay to a Rod Lehpamer of "Toro (Australia)" on 16 October 2003, a fact established by an exhibit tendered on behalf of LGT without objection, but not the subject of evidence by any witness. 222 By email dated 11 August 2003 to Sattler, Ramsay and McCleery, Wood said that he had received an invoice from Clayton in the amount of $22,000. He asked McCleery to let him know when his (McCleery's) funds would be available. Replying, McCleery said that his bank "know I want it asap". By another email, Ramsay asked McCleery how much his bank application was for, and McCleery said that he hoped to be able to get $100,000-$150,000 by the following week. In another email on 13 August 2003, Ramsay said that this was "certainly not a short-term problem" and referred to the contribution which was to be made by the government. Ramsay continued: As you can see in the budget, over half the cost of the golf course, $1million, is due to be paid out over the next 3months. If you can only access a further $150k and, even if the govt's money does come in September, then the well runs dry at the end of September and we have a further $900k due the next 3months after that. 223 I have referred to these emails over the period 11-13 August 2003 to make the point that the availability of capital was a very real worry for LGT in these early days. At the next Board meeting (which was attended also by Haddon and Dixon) on 18 August 2003, Sattler indicated that he was "happy to capitalise first and probably second years lease payments in order to minimise overdue accounts and group debt". The reference to "group debt" was to the debt of individual group members, rather than to that of LGT itself (it then being an article of faith amongst the investors that LGT would remain debt-free). There was also a discussion of Ramsay's position, which was problematic because of his inability to contribute capital to any substantial extent. The Board considered a paper on that subject which had been prepared by Wood, in consultation with McCleery, in which it was recognised that Barnbougle Dunes would not have come to fruition without Ramsay's "vision, energy and drive". It was noted, however, that Ramsay "had no capital and little commercial experience", that he had "no equity to lose if his venture was unsuccessful, other than the risk of a liability of $20,000", that the membership offer had "floundered", that the project was revived "by the direct equity contributed by the current shareholders", and continued as follows: Greg has lived the dream of building this wonderful world class course in his backyard and bringing tourism to Tasmania - for many years. If his original business plan had worked, Greg would have owned half of Links Golf Tasmania and he must have felt he was nearly there! However, in real terms Greg's business plan unfortunately failed. Even had ASIC been more liberal with their date, it is most likely that membership funds would not have come in quickly enough to fund the course. At this point, Richard's commercial reputation and experience saved the project. He was able to convince the architect and government that the project was backed by 'real' money from himself and other investors. Whilst these actions kept Greg's dream alive, his equity in real terms dropped from a possible 50%, to a real 5%, with hopes of increasing this to 10% over time. So, while Greg was able to continue to turn his vision into reality, he was now a minority stakeholder. We all understand how difficult an adjustment of this magnitude would be for anyone, however, this reality is a significantly better position that what would have been presented had the project not commenced as a result of the equity participants. A potential major lease commitment, loans to be repaid to the government, no equity and no reward for the vision. In short, the situation faced by the majority of first time entrepreneurs. After considering various options, Wood and McCleery advanced the following recommendations in their paper presented to the Board: Of the main options considered our preferred choice is that Greg borrows funds to top up his equity to 10%. However, given Greg's reluctance on this matter, we propose that Greg be offered an incentive to personally manage the golfing operations of LGT. Greg will then have the opportunity to either salary sacrifice or provide funds from alternative sources to build his equity to 10%. Accordingly, 5% of LGT will be reserved at a fixed cost of $100,000 (irrespective of value) for the period of three years ending 1 September 2006 to be taken up solely by Greg Ramsay at his option. At the expiry of three years, if Greg does not take up this option, equity will be available to existing shareholders based on existing shareholding percentages at that time. However any potential dividends to shareholders (from memberships) can only be paid on paid up capital. This should provide incentive for all members to cash up! This recommendation was, apparently, greeted with some disappointment by Ramsay at the meeting on 18 August 2003, but, according to the minutes prepared by McCleery, Ramsay "was prepared to abide by the document". 224 As I mentioned above, at about the same time as he was negotiating the $900,000 loan from the DED, Sattler was also seeking an infrastructure grant from the State government in the sum of $250,000. On 8 July 2003, the secretary of the DED signed a minute recommending that Lennon recommend to the Treasurer that a grant of $250,000 from the Economic and Social Infrastructure Fund be provided to Sattler, or his nominee, to be used - … specifically towards the acquisition costs for power, water purification and waste water infrastructure to service the Barnbougle Dunes Links Golf Course with such costs being documented to the satisfaction of the [DED] …. Lennon approved that recommendation and, on the same day (11 July), sent a corresponding minute to the Tasmanian Treasurer. On 25 August 2003, the Treasurer approved this grant. 225 On 11 September 2003, Mann wrote a letter to Sattler informing him that Lennon and the Treasurer were prepared to consider an "assistance to industry development grant" of $250,000, subject to certain terms and conditions. The purpose of the grant was "to assist with costs associated with the provision of power, water purification and waste water disposal for the Barnbougle Golf Links project". The grantees were to be Sattler and his wife. The terms and conditions included that the DED be provided with "specifications of infrastructure, clubhouse and accommodation developments"; that Sattler would use his best endeavours to have 15 cabins ready for occupation by 30 April 2004; that the funds be fully expended by 31 May 2004; that Sattler not withhold access to the "leased golf link area" for five years from the date of completion of the project and that he permit the lessee to have access to the infrastructure, unless (in either such case) LGT was in contravention of the lease. The final version of that letter, not materially departing from what I have said above, was signed by Mann on 7 October 2003, and countersigned by Sattler the following day. A corresponding deed of grant was executed by the parties on 15 October 2003. 226 On 23 October 2003, Wood announced that he had secured the interest of an additional participant in his Bump 'n' Run syndicate - Rod Marshall ("Marshall"). He did so by email to McCleery, Sattler, Ramsay, Dixon and Haddon. Marshall was prepared to contribute $62,500 which, by Wood's calculations, took the equity position of that syndicate to $237,500. 227 The middle of November 2003 was six months after the important meeting on 10 May 2003, and after the commencement of construction of the course at Barnbougle Dunes. Whether or not for that reason, the parties appear to have used the occasion to take stock of their position, both operationally and financially. On 1 November 2003, Ramsay sent a "status report" to Sattler, which dealt with two broad areas: construction of the course and infrastructure and services. As to the former, Ramsay summarised the position as follows: In summary, construction at Barnbougle has a great momentum with the shaping largely done, the irrigation being installed steadily and the seeding crew following up behind and finishing off 3 holes every 2 weeks. As to services, Ramsay noted that discussions were under way with the local council for the extension of town water to the site, that the telephone cable had been designed and approved and that electricity had been connected and would be turned on in the first week of November. 228 It was at the Board meeting on 15 November 2003 that Sattler, Wood, McCleery and Ramsay took stock of the financial position of LGT. They noted that the "current position [was] a concern". LGT had major requirements coming up, but were not expecting any major contributions, save that anticipated from Marshall. To the date of the meeting, LGT had incurred expenses of $1.359m, while the investors had contributed $1.442m. The total "potential contributions" were shown as follows: Wood (ie Bump 'n' Run) $562,500 McCleery $437,500 Sattler $1,250,000 Ramsay $200,000 Total $2,450,000

Sattler's contributions, both actual and potential, included the $900,000 received by way of loan from the State government. The "total revised forecast outflows", not including Doak's remuneration (nominally $200,000, but the subject of ongoing correspondence as to alternative methods of payment) or capitalised expenditure, was $1.961m. 229 At the meeting on 15 November 2003, the parties also considered the capitalisation of the inputs from the various investors. The minutes recorded the following: There was some confusion arising from the issue of capitalisation of payments to date. PW, GR and JM had thought that the capitalisation had been closed off previously and were not aware that there had been agreement to capitalise additional expenditure from RS. However, RS stated that whilst he was previously happy to be a minority shareholder, he has now put in the majority of the funds, plus in kind, and therefore wants a majority shareholding. Capitalisation would include $300K of future costs including lease payments. There as [sic] some confusion, however it was resolved that we are happy to provisionally close off at the moment based on existing input. We will be able to finalise at a future time when we are more certain about actual levels of contribution. Current situation for capitalisation is as follows: Amount % RS 1250 51.020% PW 312.5 22.959% JM 437.5 17.857% GR 200 8.163%

At the time, Wood was the chairman of the Board. He also prepared the above figures and settled the minutes. In his evidence, he accepted that the capitalisation position was "messy", if for no other reason because as at November 2003 there were still only two issued shares in LGT - one each held by Sattler and Ramsay. The table of capital contributions did not reflect the shareholding in LGT. Notwithstanding that, it was accepted that those contributions were truly matters of equity rather than debt. 230 At the same meeting, the Board agreed that Ramsay would create a page on the LGT web site where the directors could have access to the lease, the shareholders' agreement and other "key documents". It seems that this was never done. Wood insisted that, notwithstanding this apparent interest in the shareholders' agreement, he had not seen it at this stage. 231 Keiser returned to Barnbougle Dunes in December 2003. On 12 December, he and Sattler executed an agreement under which Keiser agreed to lend the sum of $500,000 to Sattler. The principal was to be repaid eight years after the day on which the advance was made, or earlier at Sattler's option. However, rather than repaying the principal, Sattler could elect to transfer to Keiser "a 60 per cent share estate and interest" in the Lost Farm land. Included amongst the default provisions in the agreement were Sattler's sale, transfer, disposal, mortgage, charge or encumbrance of the Lost Farm land. The effect of the agreement was that, if Sattler elected, he could admit Keiser to a 60% share of the freehold of Lost Farm as an alternative to repaying the principal of the loan. However, it was stated that the parties' obligations, and their agreements, were neither conditional upon nor subject to the construction and development of a golf course at Lost Farm. The execution of the agreement was witnessed by Wood, but he did not read the agreement. At the time, Sattler told him that the effect of the agreement was to give Keiser "the first right of refusal to be involved in the next course". 232 On 14 January 2004, Sattler confirmed, in an email to Keiser, that the $500,000 had been received. He continued: Dear Mike, The money arrived in the account, thank you again for your faith in the project and the humble potato farmer. The money will definitely be of enormous help to complete the course construction to the standard that will be expected by our customers. As some of the participants do not really understand the problems involved in funding the million dollar overrun on budget I am not planning on telling them about your funds until later in the month - if you are happy with that decision. Two things may here be said about this email. First, under cross-examination, Sattler denied that the funds received under this loan agreement were in fact used on the Barnbougle Dunes project. They were paid into the Sattler Pastoral account. Whether it should be inferred that they were used by Sattler in connection with the golf course is a question to which I shall return. Secondly, also under cross-examination Sattler explained his reluctance to tell his co-investors about the funds in the following terms: … I was having a lot of trouble with shareholders taking for granted the fact that I was a bottomless pit of money, and not facing the reality that it is very hard to put money together for a project like this, and … I wanted them to see that it was hard work borrowing money in your own personal name to put into the project. … I had made that offer right from day 1, but I don't believe I was getting anywhere near the respect for supplying the funds, that I was entitled to by other shareholders. 233 The next Board meeting of LGT was held on 14 December 2003. The directors were at the stage of funding the construction of a clubhouse. They decided to "push" for a grant, in relation to which Ramsay was to distribute a proposal. He did so on 31 December 2003. It was a draft application for a grant under the Commonwealth Regional Partnerships program. The application was made in accordance with a pro forma, one of the sections in which was headed: "Tell us how your project will impact on other businesses or groups in your region". Included in Ramsay's draft under that section was the following: The advent of such an icon golf course in Tasmania has already generated interest in further golf development here. The major shareholder in LGT owns a significant parcel of land adjoining Barnbougle Dunes, and the commercial success of this first stage is expected to ensure a second golf course and associated facilities are developed on that site as well. In the section headed "Tell us how the project and its outcomes will be self-sustaining at the end of Regional Partnerships funding", Ramsay included the following: Similarly, the outcome of economic growth will not just end at the development of this first golf course, clubhouse and accommodation. Majority shareholder Richard Sattler owns the adjoining 900 acres of dunes, with 4 km of beach frontage. This site's environmental values would be similarly enhanced through the development of a golf course and accommodation lodge. It is this second phase of the development where the majority of infrastructure is likely to be based. The developers have been justifiably cautious in the development of Phase 1 of Barnbougle Dunes, but once the appeal and profitability of the facility is proven, Phase 2 is expected to see more extensive investment in the golf course, practice facilities and resort. 234 Ramsay's draft application of 31 December 2003 was changed in various ways over the ensuing weeks. Sattler was involved in those changes. Indeed, under the heading in the original draft "Tell us what your project is about …", Ramsay had opened with the paragraph - The Barnbougle Dunes Golf Links will be a full service golf facility located outside Bridport, on Tasmania's north east coast. It will be Tasmania's first international standard, 18-hole golf facility dedicated to the golfing public. It will have a particular focus on attracting interstate and international golfers. and had gone on to emphasise the fact that Barnbougle Dunes was to provide a golfing tourist destination which Tasmania then lacked. However, according to Ramsay's evidence in the present case - The feedback we got from Canberra was that they didn't want to be funding greenfield start-up projects, so we were best to reframe this application as an extension of existing businesses. As a result, the relevant section of the application form was amended to read: The Barnbougle Dunes project is an expansion of the tourism operations of Sattler Hotel Management Pty Ltd. Owner Richard Sattler has over 25 years experience in the Tasmanian tourism industry, including the development, ownership or operation of 10 of Tasmania's best known accommodation and dining facilities. Richard developed and operates the Old Woolstore in Hobart, Tasmania's largest accommodation venue with 240 rooms and employing 138 staff. Barnbougle Dunes Golf Links will be a national golf attraction on Tasmania's north east coast, attracting visitors to a world-class dining and function centre and accommodation. Richard has brought together investors who bring significant experience in golf development and operation. 235 I infer that the amendment just referred to was made between 25 January and 23 February 2004. At a meeting on 25 January 2004, the Board of LGT noted that the cost of building a clubhouse was expected to be $400,000, and that the Commonwealth funding for which LGT had applied in that regard was "a 50/50 prospect". The directors expected a decision on that application by the end of March. At its next meeting on 23 February 2004, the Board received a report that the prospects of securing a Commonwealth grant for the clubhouse were still "50/50", and that the application had recently been "restructured to reflect [Sattler's] business strength." The restructuring referred to was, I infer, the amendment mentioned in the previous paragraph. 236 In other respects, however, the passages set out in para 234 were retained through into the application as lodged with the Commonwealth on 22 March 2004. Indeed, if anything, the reference to the prospect of there being a second golf course was strengthened, as the application as lodged contained, in the section headed "Tell us how the project and its outcomes will be self-sustaining at the end of the Regional Partnerships funding", the following: THE LOST FARM Commercial success of this first development will enable the 2nd phase of development on the Barnbougle property, involving a second 18-hole championship golf course, large golf lodge (up to 60 rooms) and extensive practice facilities. This will see a $20 million investment, and between 100 and 150 jobs created. In his evidence, Sattler accepted that he was well aware that the application drew upon the prospect of there being a second golf course development at Lost Farm. The following question and answer were part of his cross-examination: Q. And it's fair to say in this proposal to the Commonwealth Government you're clearly integrating the application for funds in relation to the development of the club house on Barnbougle Dunes into a broader project which includes various stages? A. Yes. We tried to show that the potential of the success of the first one, there are lots of other options as the adjoining property, the owner - that [sic] me - does own the other side in my own right, and this was trying to reflect my strength in tourism, supporting Links Golf Tasmania Proprietary Limited. 237 LGT received a response to its application for Commonwealth funding by letter from the Department of Transport and Regional services dated 13 April 2004. Because LGT was a private sector company operating in a commercial environment seeking funding of more than $250,000, the department required information additional to that supplied with the original application. An extensive list of requirements was set out in the letter. The requirements included audited profits and loss statements and balance sheets, a statement of LGT's then current financial position, more details of the business plan, including cash flow projections and the assumptions on which those projections were based, a "list of pecuniary interests relevant to the project" and other matters. 238 For much of the time since work on the construction of the course at Barnbougle Dunes had commenced, one or more of the directors of LGT had been engaged in correspondence with Doak's attorney in the US about various options for Doak's remuneration. Some of them included the possibility of Doak being granted equity in LGT. These negotiations required that the attorney have some understanding of the structure of LGT. In July 2003, Sattler had sent the attorney an email responding to some queries raised by the latter in earlier correspondence. The substance of those queries is not presently material, but one of Sattler's answers is. He said: This stand-alone project (Barnbougle Dunes) has no options on - or connection to - any future developments on adjoining sites, be they golf or commercial in nature. The materiality of the answer lies in the circumstance that Sattler forwarded a copy of his email containing it to Wood on 23 January 2004, for the information of Wood, who was then dealing with the attorney on behalf of LGT. Sattler said (to Wood) that the copy email showed that he had "previously tried to explain the new structure" to the attorney. When it was put to Wood, during cross-examination, that the email demonstrated that he was in no doubt that the Barnbougle Dunes project was quite separate and independent from the development of the second golf course site, Wood responded, "Yes, that's what - that's how you interpret it, yes." 239 In April 2004, Sattler and Wood of the one part and Doak's attorney of the other part were still exchanging correspondence on the subject of Doak's remuneration. On 22 April, the attorney put a proposal that would tie the amount of Doak's remuneration to the critical acclaim which the course received in the golfing community. He was reluctant to tie the remuneration wholly to the profits made by LGT as such, and was, therefore, reluctant for his client to be remunerated wholly by the allocation of equity in LGT. He suggested that one half of the remuneration be "equity/ownership in LGT" and the other half be "royalty with incentive". However, the first half went somewhat further than its short description implied. The attorney proposed: a. Unless otherwise agreed, Tom Doak will receive a 5% interest in LGT when LGT makes its first dividend/distribution to its members. b. If Richard Sattler, individually or through an entity in which he has an ownership interest in, contracts for the design and construction of a second golf course with someone other than Tom Doak/RGD, then Richard Sattler will transfer an amount of shares/interest in LGT to Tom Doak equal to the greater of 15% of LGT or the cost of the design contract equivalent in LGT. c. If Richard Sattler, individually or through an entity in which he has an ownership or interest in, subdivides the land around the Barnbougle Dunes golf course for sale, Tom Doak will receive 1 lot plus 1/20 of all lots in excess of the first 25 lots. d. If Richard Sattler, individually or through an entity in which he has an ownership interest in, contracts for the design and construction of a lodge, cottages or accommodations, then Richard Sattler will transfer an amount of shares/interests in LGT to Tom Doak equal to the greater of 5% of LGT or 25% of the cost of the construction equivalent in LGT. e. Any interest or share received by Tom Doak shall be subject to a voting trust agreement to the benefit of Richard Sattler. Further, an element of the "royalty" proposal was the following: In the event a second golf course is built on the property by a designer other than Tom Doak, then the base number of rounds would increase to 500. If a second course were built the maximum incentive compensation would be 950 rounds. (6.33% of 15,000) The attorney also proposed that Doak should have a right of first refusal "with respect to … Sattler's interest in the project". 240 It seems that Sattler was not impressed with the approach of Doak's attorney, particularly insofar as it merged the interests of LGT with his own. He again sent to Wood a copy of his email to the attorney of July 2003, and said (to Wood, in an email dated 27 April 2004): I think I should clarify a few points following Dewey's email. I don't play nor have any real interest in golf. I underwrote the company for construction of the course to try and give the development the opportunity to happen. I am the biggest shareholder only because I have had to put in the most funds. I have always said firstly to Greg then Mike Keiser and yourself (as shareholder of LGT) that the freehold property is nothing to do with the golf course or LGT - it is a forty year lease - and that was the only way I would be involved in the project. I have not changed this view nor will I in the foreseeable future. I did give an undertaking to Tom that if negotiations failed with LGT as underwriter of the course I would guarantee that he was paid his $200000.00 this was a personal guarantee given to Tom. I am sorry I must write this but facts are facts and I would prefer that my personal assets should not form any part of the negotiations with Dewey. - the only time I have varied from this a little is, as you know, is to allow investors to put a cottage on the leasehold property. Originally I thought this might work for Tom i.e. a 4 bedroom cottage. The simple fact is the cottage would cost approx $200,000 to build and therefore would not help the cash flow position as the intent was to help the construction cash flow. I have no problem with your negotiations with Dewey in relations to extra compensation but my only gauge of success is financial and to commit to extra payments if there is no profit within the company appears to be setting a dangerous precedent. I hope this clarifies your understanding of my position in the company and I sincerely hope that common ground can be found with Tom. 241 At the meeting of the Board of LGT on 25 January 2004, the directors considered the financial state of the company, noting that the construction of the course was over budget by $392,000 and that, taking into account the funds that were available to them, they would fall short of what was required by $275,000. They decided that they needed to find another investor (or investors) able to contribute $200,000 - $400,000 in capital. The Board resolved to capitalise a further $300,000 of Sattler's expenditure, which would bring his total equity contribution to $1.25m. At this meeting, Sattler said that, because of the size of his "current exposure", he was "not prepared to look at accommodation options" at that time. 242 The Board next met on 23 February 2004, and noted that LGT's anticipated financial position as at 30 June 2004 would involve a shortfall of $171,500. This took account of a further contribution of $312,00 from Bump 'n' Run which was expected, and green fees for the months of May and June. The latter reflected a proposal for a "soft opening" of the course in May 2004. 243 In April 2004 Hetrel came upon the scene. He had met Ramsay in mid-2003 while playing golf, and had spoken to him a number of times subsequently. In the course of these conversations, Hetrel became aware of LGT's need for investor capital. In late January or early February 2004, Hetrel had met with Ramsay and Sattler, who had explained Barnbougle Dunes to him and laid out some financial details. They told him of the application for Commonwealth funding for a clubhouse. Hetrel told them that it would be unwise to open the course without a clubhouse, a view which Sattler (but not necessarily Ramsay, according to Hetrel's recollection) shared. 244 These developments led to Ramsay sending Hetrel an email on 22 April 2004. In the email, Ramsay said that LGT was "not chasing funds", but that the information then provided was "for your eyes only as being invited to consider investing". He said that an investment of $200,000 would give Hetrel an 8% shareholding and a seat on the Board. Various other options were also laid out. I infer that this email was written before Hetrel had been to Barnbougle Dunes, since Ramsay concluded it by saying that, although he realised that Hetrel was unlikely to invest in LGT, "if you came up and saw what we have created up here, you might look at it differently". 245 There were eight attachments to Ramsay's email to Hetrel, six of which were pictures. The other two were a "position statement" and a spreadsheet of cash flow projections down to the year 2008/2009. The former stated that LGT had been capitalised at $2.5m "for the construction of the course". It stated that LGT had "4 main shareholders" (although, at the time, there were two only). Sattler was said to be the "major shareholder" with 60%, and the other interests were said to be Bump 'n' Run (23%), McCleery and Ramsay (7% each). The position statement made no reference to a second course, or to Lost Farm. The cash flow projections showed operating profits (in 2004 dollars) of $402,400 in 2004/2005, increasing to $962,800 in 2008/2009. The revenue anticipated was divided into four sections: green fees, food and beverage, corporate day fees and retail (ie sale of golfing merchandise etc). 246 In his affidavit, Hetrel thought that he might first have visited Barnbougle Dunes in March or April 2004. For reasons given above, I think it likely that he made that visit after he received Ramsay's email of 22 April 2004. 247 There was a Board meeting of LGT on 2 May 2004. Sattler, Ramsay and Wood were in attendance. It was determined that, subject to McCleery's assent, Hetrel would be offered a directorship if he invested $330,000 at $1.10 per share. Doak's attorney's email of 22 April 2004 (see para 239 above) was discussed, and it was resolved that Wood would draft a reply. 248 Wood did draft a reply to Doak's attorney. He sent it first to Sattler on 5 May 2004. In the draft, Wood stated that the attorney's proposal failed to distinguish between Sattler and LGT; and that Sattler had "no interest … in relinquishing any control or ownership over his real estate or any of the options that may attach thereto." The draft concluded as follows (under the heading "Other Matters"): Re Option to buy - The existing shareholders in LGT would be most upset if Richard were to provide Tom with first right of refusal on the course purchase over them! Second Course - We can only hope we are successful enough, so that this does eventuate, but anything that does occur will be independent from Barnbougle Dunes, and no options will be provided by Richard or LGT in this regard. This is not to say however that we do not want Tom involved. It was not until 28 June 2004 that Wood did reply to Doak's attorney. His email differed from the draft in a number of ways, but perhaps not in its intent. Wood said: I can again confirm that Richard personally will not be a party to any agreement or contract. Links Golf Tasmania Pty Ltd is the entity which has undertaken this project and Richard Sattler as CEO and major shareholder of Links Golf Tasmania Pty Ltd will only be involved in that context. Further attempts to include Richard personally and in relation to options on land, accommodation, 2nd course etc. are done at the risk of alienating Richard, and he is already very uncomfortable. Richard underwrote the project, and as CEO of Links Golf Tasmania Pty Ltd provided Tom with a guarantee that he would be paid, which he stands by. There is no other 'connection' between the designers and Richard! 249 Wood suggested that the parties should set themselves a deadline of Christmas 2004 to reach agreement on the form of Doak's remuneration, in default of which Doak would be paid the $200,000 originally agreed. However, in an attempt to achieve a "more positive outcome for both parties" Wood suggested that an agreement would involve a number of stated elements, including equity in LGT but not including "options on land, accommodation, 2nd course". Wood also said: As an equity holder in Links Golf Tasmania Pty Ltd Tom would have the same options and rights to be involved in taking further equity in Links Golf Tasmania Pty Ltd, 2nd courses etc. as other shareholders - but not in preference. 250 On 7 May 2004, Hetrel wrote to Sattler, as Managing Director of LGT, confirming his agreement to invest in the company. He would contribute $300,000, plus a premium of $15,000, in return for 10% of the authorised capital of LGT. He would accept a position on the Board. The $300,000 would take the form of a loan for a maximum of 120 days pending the issue of shares. The $15,000 would be paid when all of the other shareholders had invested $1.00 for each of the shares allocated to them. Hetrel's understanding was that the total capitalisation of LGT would be $3m. 251 In an email of 11 May 2004, Ramsay said to Hetrel: "please find files attached. This is the latest electronic version of the lease, as I said the changes to the lease amount (starting at 120% [sic - presumably "120K"] + 4% or CPI - whichever is greater per annum) and to the guarantors (level of guarantee is now by % of ownership)". Attached to the email was a version of each of the lease and of the shareholders' agreement. From this, I would infer that, following his letter of 7 May, Hetrel or, possibly, his solicitor requested Ramsay to send him a copy of those documents. Having received Ramsay's email, Hetrel sent the documents on to his solicitor for comment. Although Hetrel read the lease (at some point thereabouts), he did not read the shareholders' agreement. Ramsay did not send Sattler a copy of his email to Hetrel, but Sattler soon found out about it (I would infer from inquiries made by Hetrel's solicitor), since on 12 May 2004 he sent an email to Ramsay and the other investors. 252 The sending of that, relatively long, email by Sattler was an unusual event in the narrative with which these reasons are here concerned, since Sattler was, generally, much less given to emailing than the other investors. That email, which dealt with a number of subjects, should be set out in full: I write to confirm why I am not [prepared] to play games with Justin and the potential for his investment into LGT Pty Ltd. Currently Jonathan has put in $200,000 of what he promised to be a $5000,000 [sic] syndicate and was held open for a considerable time. Greg has sat on the fence till now before he would put any cash in and then only $30,000. Bump & Run has only had to put in half (with some extra) to date. The only new shareholder we have found in all this time is Robert with $125,000 - a personal friend of other investors. Meantime I have put in $600,000 more than was first planned and we are desperate for money as I am not a bottomless pit. If anyone thinks that it is worth risking playing games then please take over the negotiations but don't stuff them up!! Regardless of Greg's enthusiasm we have still not got Justin over the line. He has many questions about the original lease and shareholders agreement that was sent to him by Greg. I will give him a final lease copy today and tell him of the abandonment of the shareholders lease which has absolutely no relevance as no memberships were sold and Greg did not come up with his 50% of the remaining required capital - it just makes us look desperate and disorganised. Currently Justin is offering to put $300,000 not $200,000 - 50% up on the first meeting. Has agreed to pay a "premium" of 15,000 and if required would consider helping to fund the clubhouse in a separate structure. I suspect prudent investors like Justin are going to expect a lot more from us (legally and financially) before we actually get this investment. Can we cap it at 3,000,000 1. What about Tom's equity 2. what about more cost overruns car park/lighting/council requirements/landscaping 3. what about trading losses in the first 2 years (could be as much as $500,000) how is this going to be funded if the capital is capped I can guarantee a bank will not lend us money if we are losing money and I am not a bottomless pit. If no one else is prepared to put in unsecured loan funds 4. what about clubhouse and facilities? - we have no financial idea on this - no bank is going to lease us a temporary clubhouse ($200,000) without security or alternately loan the funds to build a new one. As you can see it has a long way to go and I am not prepared to complicate negotiations to try and increase our capital by 0.5% - I am interested in all views ASAP 253 What precipitated the sending of that email by Sattler, as he explained in his oral evidence, was the insistence by one of the other investors in LGT - he could not recall who - "that they were not happy unless Mr Hetrel paid a premium, and they wanted to negotiate harder". Sattler strongly disapproved of such a stratagem. In his evidence, he said: Well, it was completely against my original wish, which I was starting to have trouble with. It was a dollar equity for a dollar share. I had said adamantly from day one we had to be debt free, we had to have a real cash equity, a dollar for a dollar. All of a sudden we were well from the end, and we were charging premiums to shareholders, when this certainly wasn't going to be the last capital raising we had to do. We had wandered off from the original intent that I underwrote the company, which quite upset me. I rather gather that the suggestion with which Sattler had a difficulty was not that of Hetrel paying a $15,000 premium, which had, after all, been Hetrel's own suggestion some five days previously. There must have been some other communication to Sattler of the possibility of extracting a greater premium from Hetrel. Sattler's rejection of that is the subject of the opening passage in the email, and later where the $300,000 offer by "Justin" is mentioned. 254 Having been moved to compose an email as he was, Sattler became, as he said in his oral evidence, "wilder and wilder" as he progressed. A subject with which he dealt, and as to which he was clearly somewhat sensitive, was the circumstance that he had, in effect, provided whatever capital was required by LGT over that which the other investors had been prepared to contribute. Twice he said "I am not a bottomless pit". In a reply sent on the same day, Wood pointed out that Bump 'n' Run "should now have contributed $250K, and has already contributed nearly twice that by gaining another member", which was Marshall, and by Wood himself contributing a further $50,000. 255 The other subject of Sattler's email of 12 May 2004 was the one which became most controversial in this case. It was the matter dealt with in the paragraph which commenced "Regardless". It was put most forcefully by counsel for LGT, both to Sattler under cross-examination and in their address, that, when Sattler said that he would tell Hetrel of the "abandonment of the shareholders' lease", he was referring to the shareholders' agreement; and that this bespoke the reality at the time that the shareholders' agreement executed on 10 January 2003, even as varied on 27 May 2003, was considered by all concerned as irrelevant to the new circumstances generated by the arrival of Bump 'n' Run, McCleery and Hetrel as investors, and intending shareholders. I shall deal with Sattler's evidence about these matters next, but I note that neither Sattler nor Hetrel gave evidence that the former did tell the latter of the abandonment of the agreement. The controversy over this passage in Sattler's email related not to what was later done as foreshadowed in it, but to the terms of the email as such, and what they told of Sattler's thinking at the time. 256 In their affidavits, Wood and Ramsay both referred to this aspect of Sattler's email of 12 May 2004, without further comment. In Sattler's affidavit, he said that his words had been "taken out of context" by Wood. He continued: What I was referring to was clause 4 of the shareholders agreement. That required equal contributions from Ramsay and me. As that had not occurred, the clause had to be rewritten. I was not referring to my right to do anything I wished on the remainder of the land that I owned, including Lost Farm. That position had been confirmed by the Supplemental to the shareholders agreement dated 27 May 2003. Under cross-examination, while Sattler's evidence was not notable for its clarity, he did not, as alleged by LGT in its submissions, change his story. He was asked the following question, and gave the answer indicated: Q: So you want his Honour to understand that the reference in your email to a shareholders' lease, which is having absolutely relevance, is not a reference to the shareholders' agreement? A: No, it's the changes to the shareholders' agreement. The original shareholders' agreement, it was my belief that Mr Hetrel didn't understand the documentation or didn't have the correct documentation. The original Product Disclosure Statement had been abandoned, and the lease and the shareholders' agreement on 27 May had been updated to reflect the fact that the shareholding was not then reliant on the Product Disclosure Statement. It was a specific negotiation between Greg Ramsay and myself signed on 27 May, which updated those two documents to match the fact that that Product Disclosure Statement had been abandoned. Sattler took the matter further under re-examination. When asked what was the "general character" of the questions being raised by Hetrel, he (Sattler) responded: "His ability to contribute when there was a restriction to the capital being 50/50." This was, of course, a reference to cl 4.1(a) of the shareholders' agreement as executed on 10 January 2003, which had, by May 2004, been deleted by the deed executed on 27 May 2003. 257 As mentioned above, Hetrel did not read the shareholders' agreement. Indeed, he said that he was unaware of its existence until after the commencement of this proceeding. But it is clear that a version of the agreement was sent by Ramsay to Hetrel, and by Hetrel to his solicitor. It is open to be inferred on the evidence given in the case that the concerns which, according to Sattler, Hetrel entertained about the agreement were in fact those of his solicitor, and that the means by which Sattler came to know of them was by way of the solicitor. Given that it did not call Hetrel's solicitor, LGT is in no position to resist the drawing of this inference. 258 The inference is made the more likely by the circumstance, to which I refer below, that, in the months which followed, Hetrel was pressing for the execution of a new shareholders' agreement. He was being encouraged by his solicitor in that endeavour. That is consistent with a perception on the part of the solicitor that the existing shareholders' agreement was unsatisfactory. It is also consistent with a belief on the part of the solicitor that there was no shareholders' agreement, but I could not draw such an inference in the light of Ramsay's email of 11 May 2004. It might also, I suppose, be regarded as consistent with Sattler having told Hetrel that the shareholders' agreement had been abandoned, but there is no evidence that he did so. Hetrel did not give evidence to that effect, it was not put to Sattler that he did speak to Hetrel in those terms, and Hetrel's solicitor was not called. I could, in the circumstances, make no such finding. 259 As I understood Sattler's position, by sending the wrong version of the agreement to Hetrel, a serious investor who had placed an offer of $315,000 on the table, Ramsay was making the LGT group look "desperate and disorganised". It was not suggested to Sattler that that was not the reality of his concern at the time. Neither is there any ground upon which Sattler's sense of frustration ought now to be regarded as unreasonable. I would find that his concerns about the agreement related only to the fact that the wrong version had been sent, and that there was no intention by Sattler to abandon whatever rights he may have had under cl 16.2. 260 The other investors appear to have fallen into line behind Sattler with respect to the contribution required by Hetrel, since, at a Board meeting on 13 May 2004 which Hetrel attended, it was resolved that his (Hetrel's) offer of 7 May 2004 be accepted. The whole of the $315,000 would be paid into a loan account. Sattler said that he was "not prepared to go under 51%" at that time, but that Hetrel's equity would not affect that. The Board was confident that the capitalisation of LGT could be set at $3m. By email sent to Hetrel on 14 May, Wood informed him that his investment would give him 10% of LGT, subject only to the unresolved situation of Doak's remuneration (one possible outcome of which, at that time, might have been the allocation to Doak of some shareholding in LGT). In his email, Wood said that he intended that all the funds be in by 1 July 2004, at which time shares would be issued. Hetrel deposited $300,000 in the LGT account on 29 June 2004. There was no evidence of him having paid in the additional $15,000, but Sattler mentioned, when giving evidence in court, that the Board may have permitted Hetrel to set that sum off against his legal costs in having a share subscription agreement and a shareholders' agreement prepared. 261 On 1 July 2004, LGT issued 2,999,998 new shares, to take its total issued shares to 3,000,000. Previously, LGT had had only two issued shares, one held by each of Ramsay and Sattler. The new shareholding was as follows: • Sattler 1,722,500 • Bump 'n' Run 612,500 • Hetrel 300,000 • McCleery 200,000 • Ramsay 165,000

262 Sattler's contributions to this point were valued at $1,739,872.89, made up as follows: • Cash injections $ $1,351,523.57 • Cash payments on behalf of LGT (fuel etc) $ 33,026.82 • "In-kind including purchases" $ 215,322.50 • Rent capitalised $ 140,000.00

As mentioned earlier in these reasons, the evidence permits the uncontroversial inference that Sattler's cash injections included the $900,000 which he had received by way of loan from the State government. Such an inference would be more problematic with respect to the $500,000 lent by Keiser, but Sattler was on any view the better able to make those injections by reason of those funds. This is an aspect to which I shall return. 263 The directors of LGT held a Board meeting on the evening of 4 July, and the morning of 5 July, 2004. Nothing of particular significance, for present purposes, passed on 4 July. The continuing controversy as to the form of Doak's remuneration was discussed, the Board resolving that they would press for, in order of preference, royalties, equity and payment in full. Sattler said that the accommodation (which was his responsibility) would initially comprise 30 rooms, and that he had allocated $2m to it. The official opening of the course was fixed for 10 December 2004. 264 On 5 July 2004, the directors discussed the financial situation of LGT. There would be a "significant loss" carried forward into 2004/2005. They discussed shareholders' equity. Capitalisation would not go beyond $3m, with any further funds contributed by Sattler to be allocated to his loan account with the company. As Ramsay was able to make further contributions, his equity would increase, and Sattler's correspondingly decrease, subject to the latter not falling below 51%. 265 At this meeting, the directors spent some time considering a letter dated 24 June 2004 from Hetrel's solicitors to Hetrel setting out the particulars that would have to be covered in a share subscription agreement and a shareholders' agreement, for the execution of which Hetrel was pressing. The minutes are rather spare on the details of these discussions, and the directors' recollections do little to supply the deficiency. With respect to a share subscription agreement, the solicitors had suggested that Hetrel "consider seeking warranties and/or make investigations" in relation to a number of matters, including "any past or current disputes involving the company and circumstances or matters which might give rise to a dispute in the future", as to which the minutes recorded "no disputes". 266 With respect to a shareholders' agreement, the solicitor had provided a kind of pro-forma draft suitable to be modified to fit the purposes of any company. That draft was presented by Hetrel to the meeting on 5 July 2004. The minutes record that it was the Board's plan to have a "draft" ready for the next meeting. In his letter of 24 June, the solicitor had listed the areas in which "the parties need to reach some broad consensus". To the extent presently relevant, I list those matters, and what was recorded by the minutes of the meeting on 5 July 2004, were: The business to be carried on by the company and any restrictions on new business - Restriction on business (owner of land) golf course only and clubhouse. Any side agreements where shareholders have a potential conflict (for example restrictions which are to limit the right of a shareholder to exercise rights under a lease of property by the shareholder to the company) - Conflicts; RS in conflict as landholder and shareholder director; PW chairman and shareholder; GR employee and director; RS accommodation and shareholder. 267 At the next meeting of the Board, held on 22 August 2004, Wood presented the draft shareholders' agreement, "and associated info", for submission to Hetrel's solicitor. The draft, and the information, may have been forwarded to the solicitor, but the next relevant event of which there is documentary evidence is a facsimile from Hetrel to the solicitor on 14 September 2004, in which "information as requested" was supplied. Following the format of the solicitor's letter of 24 June 2004, Hetrel provided information which included the following (here I use the same arrangement as in the previous paragraph): The business to be carried on by the company and any restrictions on new business - The owner of the land has restricted the use of the land to the operation of a golf course and clubhouse Any side agreements where shareholders have a potential conflict (for example restrictions which are to limit the right of a shareholder to exercise rights under a lease of property by the shareholder to the company) - Where conflicts exist for directors decisions need 75% of votes (normally 51%) (eg RS cannot change terms of rent) 268 By letter to Hetrel dated 15 September 2004, his solicitor made extensive comments upon the existing lease (as to which he expressed "a number of fundamental concerns"), noted that a formal share subscription agreement was no longer required and enclosed a draft shareholders' agreement. As to the latter, the letter stated: "It is noted that the Company's existing shareholders agreement is no longer relevant and should be replaced." Hetrel accepted that that implied that there was an existing shareholders' agreement, and that his solicitor had considered it. There was a further meeting of the Board of LGT on 19 September 2004, from the minutes of which there is some basis for supposing that the solicitor's letter of 15 September was under discussion, but Hetrel was not prepared to accept that that was so, and no other witness was asked to consider the point. The minutes made no reference to any discussion about a shareholders' agreement. 269 By letter from the Commonwealth dated 7 July 2004, LGT was informed that funding of $385,000, including GST, had been approved under the "Regional Partnerships" program for the construction of a clubhouse at Barnbougle Dunes (see paras 233-237 above). A formal letter of offer was dated 21 July 2004. The offer was subject to LGT making other cash contributions to the project funded, including $150,000 for the completion and fit-out of the kitchen, $150,000 for the completion of the shell and fit-out of the clubhouse and toilets for golfers, $100,000 for the completion and fit-out of a function centre and $900,000 for the "completion of villas, services connection and associated landscaping". Funding was to be provided in a staged way, conformably with the achievement by LGT of identified "milestones" in the completion of the work. The first payment, $220,000 as a contribution to the construction of the shell of the kitchen and dining facility, was subject to a condition that LGT provide a copy of a formal loan agreement in the amount of $1.207m as between Sattler and his financier, Tas Perpetual. That was a reference to an indicative letter of offer which had been provided by that company to Sattler on 30 June 2004. A formal agreement, consistent with the offer of 21 July, was executed by LGT on 30 July 2004 and by the Commonwealth on 10 August 2004. 270 The need for LGT to make the contributions referred to in the previous paragraph, and other calls on its capital resources at about this time, caused Wood to write to the other directors on 4 August 2004 asking them to consider two alternatives: first, that the previously-agreed cap of $3m on the company's share capital be relaxed, such that shareholders might make further contributions, and be allocated shares, rateably with their existing holdings; or secondly, that cash requirements be raised from shareholders as debt, and allocated to their loan accounts with the company. In an email to Wood on 17 August 2004, Hetrel expressed a concern about "shareholders' equity being further reduced without a mechanism in place for retention of equity/ratio". But he added that Sattler could not "be expected to bankroll any further than he already has, especially in light of the 900k being spent on accommodation". Hetrel's solution was for shareholders "to contribute in proportion of their equity". 271 At the Board meeting on 22 August 2004, Hetrel estimated that a further $400,000 would be required to finish and to furnish the clubhouse. On Sattler's suggestion, it was agreed that all investors be asked to contribute in proportion to their existing holdings by 10 December 2004. Where an investor did not do so, his notional allocation might be taken up by others. 272 At the same meeting, a number of other matters were the subject of report or discussion. It was reported that the clubhouse would be completely finished by mid-November. Sattler indicated that he had drawn up a "basic chain of command", under which Ramsay was given a "marketing and business development role" and Sattler's daughter Elizabeth ("Miss Sattler") was to have a role in food and beverage, and in relation to the accommodation, in the summer holidays. 273 This meeting was an important one with respect to the accommodation which Sattler was to build at Barnbougle Dunes. It is uncontroversial that he would build the accommodation units and, although the distinction does not seem to be have been specifically adverted to, as things occurred it has also become uncontroversial that the accommodation would be operated by Sattler Nominees. On 22 August 2004, that lay in the future. The minutes of the Board meeting on that day record the following: RS advised that 15 cabins will be in use by opening date, built on site in the 'spud' shed. LGT will take bookings for the accommodation in return for a booking commission. RS advised that he will contribute a share of advertising budget because accommodation linked to course. It is the fixing of the booking commission which has become controversial in this case, as to which there was some limited oral evidence, in addition to the rather brief note which is recorded in the minutes. 274 Ramsay recalls that Sattler said that the commission would be fixed "on commercial terms". In his affidavit of 22 February 2011, Sattler did not refer to Ramsay's evidence on this point. Ramsay was not cross-examined on it. McCleery said that he did not recall any agreement as to the commission rate that would be charged, and he too was not cross-examined on that statement (although, to be fair to counsel for the defendants, McCleery did make it clear that his recollection of the Board discussions on accommodation was very general, and extended over more occasions than this meeting on 22 August). Neither Wood, Hetrel nor Sattler himself added to what appears in the minutes. In the circumstances, I must accept that only what appears in the minutes passed between the directors on this occasion, supplemented only by Sattler's comment that the commission would be fixed on commercial terms. 275 In evidence is what appears to be part of an internal DED memorandum dated 17 September 2004, the relevance of which lies in a concession which Sattler made while under cross-examination. The memorandum recorded a request received by Sattler to re-organise the security held by the DED in relation to the $900,000 loan previously made to Sattler. Sattler's purpose in September 2004 was to subordinate the mortgage to that held by Tas Perpetual, as made necessary by the loan of $1.207m made by the latter as a condition of the $385,000 funding received from the Commonwealth. Sattler also had in mind some succession planning in relation to the subject properties. At the same time, Sattler asked that the first interest payment due under the $900,000 loan, due on 1 October 2004, be deferred for a year, for the reason that the commencement of operations of LGT, and therefore cash flow from rent, had been delayed for a number of reasons. 276 The outcome of Sattler's request to the DED is not presently relevant, but the following paragraph in the memorandum of 17 September 2004 is: Sattler has been injecting his own funds into the project in exchange for a proportionate increase in the shareholding, which currently stands at $1.722M or 56%. This shareholding is comprised of the $900,000 loan by the department, $500,000 loan by Kaiser [sic], USA golf professional, plus equipment leases undertaken by Sattler on behalf of LGT. The lease to LGT allows for a payment of $120,000 per annum, indexed at a minimum of 4% of the CPI, whichever is the greater. It is from these funds that Sattler is committed to repay the DED loan. Due to the unforeseen delays, Sattler envisages having to capitalise the first year's rental in exchange for an increased shareholding, hence cash will not be available to enable him to meet the forthcoming October 2004 interest payment. Under cross-examination, Sattler accepted that the first three sentences of paragraph represented a fair reflection of what he had said to Mann of the DED. There is no reason to doubt that the remainder of the paragraph was also, but it was counsel's project at the time to secure from Sattler an acknowledgement that he had told Mann that his shareholding in LGT had in part been funded by the $500,000 loan he had received from Keiser. 277 I mention next the LGT Board meeting held on 19 September 2004. Possibly in consequence of a letter from Hetrel's solicitor's dated 15 September 2004, the subject of the term of the lease was raised. Sattler said that he would not consider an extension of the 40-year term at that time. But there were some aspects of the lease which were to be considered by him and Hetrel. The minutes record that Hetrel was "to work out how to adjust the lease for proposed accommodation and other future needs"; and that "accommodation requires review under new lease structure". It was reported that accommodation rates were expected to be $150 per night, including breakfast, and: "Booking fee to be determined". No witness threw any further light on the latter aspect, but the note in the minutes was clearly a reference to the circumstance that, in the accommodation then being planned by Sattler, LGT would take bookings for a fee, as had been described in the minutes of the meeting on 22 August 2004 as a "booking commission". 278 At its meeting on 1 November 2004 - the last scheduled meeting before the opening of the course on 10 December 2004 - the Board came to grips with the need to inject more capital into LGT. Wood reported that the cash was "nearly exhausted". The next payment from the Commonwealth was contingent on LGT having spent its own money on the construction of the clubhouse. A minimum of $350,000 was required to be injected over the ensuing weeks. It was resolved to call for this sum in proportion to existing shareholdings. Sattler and Hetrel agreed to cover what the others might not be able to contribute. Wood raised a point about the role and identity of directors, which the Board agreed to revisit the following year. Sattler reported on the construction of the accommodation, noting that six cabins were "basically complete", and that another four were "being framed". 279 In order to finance construction of the accommodation at Barnbougle Dunes, Sattler negotiated an extension of his existing facility with Tas Perpetual. On 11 November 2004, the Lending Manager of Tas Perpetual recommended the extension, covered as it was by Sattler's existing security. That recommendation was supported by a lengthy memorandum, which was placed into evidence. It noted that Sattler's contribution to the construction of the golf course had been $1.4m, "secured" by a low interest government loan of $880,000, the loan from Keiser of $500,000 and cash of $20,000. Under cross-examination, Sattler agreed that the government loan had been in the sum of $900,00 (thus effectively incorporating the $20,000 cash component). But he did not accept that Keiser's loan had been used in the construction of the course. He said that the funds had been paid "into the Sattler Pastoral account together with all other funds, and cheques were drawn from that". However that may have been as a matter of mechanics, the fact is that Sattler's application to Tas Perpetual was the second occasion over a period of about two months that Sattler had told a third party that the Keiser loan moneys were used as part of his contribution to the construction of the course. 280 On 10 December 2004, the golf course was opened by Lennon, by then Premier of Tasmania. It appears that the opening ceremony was a great success. On 14 December 2004, Keiser, who attended the opening, sent an email to Sattler in which he extended his congratulations for the production of "a superlative, world class product". He asked Sattler to keep him updated on progress, "especially monthly revenue". He suggested that once Barnbougle Dunes "hit $2 million" was "the time to think second course, and where I might fit in". On 22 December 2004, Wood sent an email to a golfing acquaintance of his, with a copy to Sattler, in which he said that the opening day could not have gone better. He noted that Keiser had predicted that there would be three courses on the site within the next five to ten years. Under cross-examination, Sattler accepted that that reflected the conversations that he had then recently had with Keiser. 281 The Board of LGT next met on 12 December 2004. In order to meet the obligation to make the necessary payment to the builder of the clubhouse, additional equity was to be contributed by Bump 'n' Run ($26,000), Hetrel ($90,000) and Sattler ($30,000). After the opening two days previously, the clubhouse was to be handed back to the builder, with an expectation that it would be finished within a few weeks. The accommodation cabins would also be fully operational within two weeks. 282 The Board of LGT met on 23 January 2005. From the minutes, it is clear that this was a substantial meeting, concerned with many operational matters arising in consequence of the course now being open for business and the accommodation being on the point of opening (according to Sattler, the accommodation commenced to take customers in late January). The minutes record that cash flow was a problem, and that it was decided to apply to a bank for an overdraft. The Board considered that it was necessary to appoint a manager "in the near future". Sattler and Mrs Sattler wanted "to stop managing". 283 The next Board meeting was held on 29 March 2005. It seems that the attempts to secure a conventional overdraft were not successful, as the minutes recorded that LGT needed "a loan facility" and that "Bank of NZ will finance on cash flow", a matter to be further explored by Wood. In the meantime, according to the minutes, "Sattler's loan account [was] continuing to grow". At least a significant cause of that development was that Sattler was not withdrawing the moneys received on the accommodation (ie after allowance for LGT's commission). Rather, he was permitting those moneys to be treated as a loan to LGT, to assist with its cash flow requirements. 284 Again the directors faced the reality that investors might need to be subject to a call to contribute more capital. Sattler suggested that any existing investor who contributed capital at that stage should be issued two shares for each dollar invested. Although the minutes are silent on the matter, it seems that this suggestion may not have been appreciated by those investors who were not in a position to contribute. In his oral evidence, Sattler described this suggestion on his part as a "bluff", made "because I didn't want to be putting all the money in and taking all the risk when everyone else was just sitting back rubbing their hands and already asking for a dividend …." Although Sattler said that he was prepared to wear the financial burden, he wanted to make sure "the others weren't sitting on their hands." 285 It was at the Board meeting on 29 March 2005 that the Board welcomed the new general manager who had by then been appointed - Peter Busch ("Busch"). He was a golfer and a qualified chef with a background both in hospitality and in golf course management. Before appointment at Barnbougle Dunes, he was assistant manager at the Peninsula Country Golf Club in Victoria. Soon after commencing work, he became aware that there would be more golf courses built on Sattler's property if Barnbougle Dunes were successful. Sattler told him that a second course would be built on Lost Farm, and that he also had plans for other courses to be built on the other side of Waterhouse Road. Sattler said to Busch, "Let's see how Barnbougle goes first". 286 Sattler also told Busch that LGT was paid a 10% commission on accommodation receipts. The fixing of this rate had been done by Sattler as a matter of executive action. It had not been the subject of any Board resolution, nor even, at this point, of mention at Board level. In his affidavit, Sattler said that the 10% figure had been "agreed to at Board level". I do not accept that evidence. The figure does not appear anywhere in the Board minutes. At least Hetrel was, as Sattler accepted under cross-examination, resistant to the notion that 10% was fair compensation for LGT. There is no evidence that any of the other Board members agreed with the figure. Subject to a review later undertaken by Busch, to which I shall refer, it seems that they, in effect, took the figure as a fait accompli. 287 In April 2005, the Sattlers' house at Barnbougle burnt down. According to Busch, Sattler then caused to be constructed a house - later referred to as a "villa" - on a dune close to the existing accommodation units. The Sattler family used that on a temporary basis while their house at Barnbougle was being rebuilt, and it later became part of the accommodation stock at Barnbougle Dunes. 288 Throughout this early period, Wood was, if I may so observe without disrespect to his colleagues, tireless in trying to find a solution to LGT's financial problems. No doubt the others expected nothing less from him, because of his professional occupation and the fact that he was responsible for maintaining the books of account of LGT. By email to the others on 7 April 2005, Wood referred to these problems. LGT was using trading income to make payments to the clubhouse builder at $40,000 per month, in addition to which there were other accounts to be paid that would not be covered by operating income. He referred to the fact that, although he was in discussion with the Bank of NZ, "it is a slow process, and realistically is unlikely to come through for us at this early stage of our trade". He continued: At present, LGT is continuing to trade because Richard's money tree is in season and he is covering most requirements. Because he is leaving cottage rent in, not taking lease payments, and covering other outstandings his loan account is growing like topsy. Gary has supplied stock for the proshop without recompense and has a small loan account, and at Christmas I popped in $100k from my personal LOC when Richard was caught short…. As finance was unlikely, and as all the investors had agreed that they did not want to admit more partners at that stage, it was clear to Wood that they would have to provide the required funds themselves. He considered that LGT should pay interest at 10-12% pa to those investors who had made loans to the company, from 10 December 2004. But an interest bill of that order would "wipe out early profit", so it was in everyone's interests that the lenders be given a large incentive to convert their loans to equity - "an offer of 2 or even 3 to one ratio in equity might be sufficient incentive for everyone to convert leaving LGT without borrowings." 289 By email to Ramsay and Hetrel on 11 May 2005, McCleery expressed his opposition to existing shareholders having the opportunity to convert debt into equity "at annualised rates of more than 10% above debt amount". He was not himself a creditor, but suggested that, if the 2 or 3 to 1 subscription formula were in use, he could find another investor to join him in a syndicate and take up shareholdings on that basis. Indeed, in a separate memorandum, undated but probably written at about this time, McCleery expressed his opinion that "the most valuable equity that we put in was the initial equity", when the risk was greatest. Any new shareholders ought to be required to pay a premium in recognition of the work which the initial capital had done in bringing the course to an operational state. 290 McCleery had put his position in writing because he was unable to attend the Board meeting held on 20 May 2005. Wood, Sattler, Ramsay, Hetrel and Dixon did attend. The major topic of discussion was the financial report. Wood advised that LGT had traded well since Christmas, and was "around breakeven" for the previous four months. However, construction costs and the cash required for day to day operations "had required continual support" of Sattler, in the form of unwithdrawn accommodation and rent receipts, and, additionally, the payment of "some outstanding accounts". The result was, according to Wood, "a significant unwanted loan account or equity blowout". Discussing Wood's report, the directors agreed that existing shareholders would be entitled to introduce new "partners" into their syndicates "on the basis that they would have no say in operations and no directorship". 291 The Board then moved to discuss Sattler's previous suggestion of an asymmetrical call, but by now it had progressed to being a 3 for 1 incentive. Ramsay did not support that. Neither (by email) did McCleery, who stated additionally that he would consider withdrawing if a 3 for 1 call went through. After some discussion on this subject, Sattler said that he would "carry" the loans for another month, until 21 June 2005, "to give everyone fair notice". After that date, he would "seek a 3/1 call". Pending that, it was agreed that a call be made on the basis of $1 for every 5 existing shares held. If subscribed, this call would raise $718,437 of new equity. 292 On 20 May 2005, the Board also discussed the proposal, for which Hetrel was pressing, that the lease be renegotiated and that a shareholders' agreement be entered into. Apparently further drafts had been circulated or were tabled at the meeting. All the Board did, however, was to "identify a number of issues", including that shareholders would not be automatic directors, that all directors' positions, and the chairman's position, would be voted, and that "any proposed exit have a set method of valuation". 293 At this meeting the Board also considered the subject of accommodation. It was resolved that "the cleaning and booking fee and GM's [ie Busch's] cost apportionment between LGT and Sattler to be determined end of month on financial data by [Busch]". 294 The Board met again by teleconference on 28 June 2005. This was a special purpose meeting to establish a standard methodology for any future calls on shareholders and to make a call at that time which would be sufficient to clear existing debt and to allow LGT to trade at least until the end of September 2005. Wood suggested that the standard methodology by which a cash flow shortage would be addressed would involve, first, an application for external finance, secondly (and in default of obtaining finance), a call on shareholders on a 1:1 basis, and thirdly, to the extent that some shareholders did not meet the call, a call on other shareholders to make good the deficiency in return for a reward by way of a premium attached to the call. Sattler suggested that, at this third point, the shares should be issued on a 3:1 basis with reference to the call. That suggestion was not popular with all directors, particularly Ramsay who had then recently contributed a further $30,000 and stood to see the value of that diluted by reason only of his not being able to make yet another contribution. 295 Wood presented financial data to the meeting, which showed that LGT needed to raise $920,000, not all of which was required immediately. Wood suggested that the call be $800,000 at that time and a further $120,000 in August. In point of detail, Wood's proposal was as follows: Existing Shareholding Call 1. Sattler $ 2,120,209 $ 542,774 2. Bump'n'Run $ 681,975 $ 174,586 3. Hetrel $ 390,000 $ 99,840 4. Ramsay $ 200,000 $ 51,200 5. McCleery $ 200,000 $ 51,200 $ 919,600

At the meeting, Ramsay inquired as to the appropriateness of bringing in a new investor as a shareholder, but the Board did not favour that course. The view was that a partnership between Ramsay and a new investor would be in breach of previous decisions not to admit new investors. But they would permit Ramsay to hold his shareholdings by way of a trust with silent beneficiaries, or to combine his holding with that of McCleery (whose holding was already by way of a trust). 296 The Board meeting of 28 June 2005 led to some substantial changes in the structure of the Board and the management of LGT. Hetrel was instrumental in bringing about those changes. After the meeting, he spoke to Ramsay and McCleery. They said that they could not meet the call upon which the Board had resolved. Hetrel told them that he would cover their respective shares of the call, in addition to his own. Hetrel then spoke to Sattler. He related his arrangement with Ramsay and McCleery, and sought Sattler's reaction to it. Sattler said that he would agree to that arrangement, provided that Ramsay and McCleery resigned from the Board. He said that Board meetings were running for too long, and that they would work more efficiently with fewer Board members. Hetrel agreed with Sattler in that regard, and said that he would speak again to Ramsay and McCleery, and ask them to resign from the Board. Hetrel and Sattler discussed McCleery's inquiry as to an exit strategy for existing shareholders, and they (Sattler and Hetrel) agreed that this should be dealt with by the proposed shareholders' agreement. 297 In the course of that conversation, Hetrel and Sattler discussed how the accommodation at Barnbougle Dunes was to be run, and agreed that it should be managed by LGT, with a commission or other arrangement to be worked out and agreed. In his affidavit, Hetrel said that he raised with Sattler "on more than one occasion the question of the appropriate rate for the accommodation commission". He said that 10% was not enough for what LGT was doing, and was lower than industry standard. On the "early" occasions that this was raised with Sattler, his response was "we will look at it". 298 Hetrel then spoke again with Ramsay and McCleery. He told them that if they resigned from the Board, it was his belief that Sattler would not press his proposal for a 3:1 call. He told them that the Board was unworkable with so many members. He said that, if they were to resign, the Board would work more efficiently, and that he (Hetrel) would represent them on the Board in future, and ensure that everything was done properly. Each of Ramsay and McCleery informed Hetrel that they would resign from the Board. 299 Hetrel then recounted these conversations to Wood, who formalised matters with a letter to the directors of LGT dated 15 July 2005. He opened that letter by saying that he had spoken to each of the directors on the matter then under consideration, but that it did need to be recorded. After relating the background to the conversation between Sattler and Hetrel, Wood said that those two men had made "some landmark decisions", subject to there being no dissent from other major shareholders. As related by Wood, those decisions were as follows: (1) Effective immediately the Board would be reduced to represent the 3 largest issued shareholders approx. 90% of issued shares. (2) That the operations of LGT be streamlined by a. The accommodation being completely run by LGT rather than as a separate entity, and a monthly payment as agreed being made to Richard & Sally. (3) To this end Peter Busch is to work with myself to come up with a formula that is attractive to LGT (and fair). (4) The Accounts are to be operated out of Barnbougle with Sally's and Faye's roles to be covered by a bookkeeper under Peter Busch's control. (5) Business day to day decision making would continue to be made by RS but with more frequent and close contact between the 3 Board Members on the bigger decisions. (6) The shareholders agreement is to be immediately tidied up with particular emphasis on exit strategies for existing shareholders. RS has suggested that existing shareholders have first right of refusal, and that a fixed price of $1/$1 on exit applies during the developmental stage - 2 years from now - before a more formal valuation process could be adopted. 300 At the first meeting of the reduced Board on 25 July 2005, it was decided not to solve the accumulating shareholder debt problem by making a call. Rather, the directors resolved that the moneys advanced by shareholders "be continued to be considered loan accounts accruing interest on a monthly basis until further notice". The advantage of that would be that those who had advanced those moneys would have first call on the future cash surpluses of LGT, in preference to the payment of dividends. The minutes of this meeting recorded an entry under the heading "shareholders agreements" to the effect that Hetrel would "oversee the amendments as required - particularly shareholders contribution/exit rules." 301 After the Board meeting on 25 July 2005, a shareholders' meeting was held. There was a substantial discussion with respect to capital raising, to which Hetrel, McCleery and Sattler contributed. Sattler said that he did not want 3:1 share calls, but that he had "just wanted to force the issue along". It was decided that, for the next two years, any calls would be 1:1. If a shareholder left the company within that time, he would need to offer his shares to existing shareholders first at their face value, and only if an internal purchaser were not forthcoming might he offer the shares to outsiders. There was also a discussion about the division of the costs of servicing the accommodation as between Sattler and LGT. Sattler said that Busch was "working with the invoices over the next few months to find the percentage split that [was] correct". That was, I would infer, a reference to the same projected inquiry as I have referred to at the end of para 297 above. 302 Busch was, at about this time (as Hetrel put it, "on the back of" the shareholders' meeting on 25 July 2005) asked by Sattler (as Busch put it in his affidavit) "to look at whether the 10% figure was fair from LGT's perspective". Complying with that request, Busch looked at the accounts and made an assessment of what was involved in LGT providing "the booking service alone". It is controversial in this case whether that is all that LGT was doing in relation to the accommodation business of Sattler Nominees, a subject to which I shall return. Subject possibly to that qualification, Busch informed Sattler that LGT was neither making nor losing money out of the 10% arrangement. It is not clear when that happened, but, so far as appears in the evidence, no written report by Busch was ever presented to the Board, and there is no minute recording any oral presentation by Sattler on the subject. 303 On 26 July 2005, Wood sent Sattler and Hetrel some "rough notes" which he had prepared with a view to forming the basis of three working documents, namely, a business plan, a marketing plan and one headed "specific events". Although very brief, as their nature implied, these documents were appropriate as starting points for drafts of plans that would actually guide the future direction of the Board. Unlike the earlier, much more discursive, business plans drawn up by Ramsay and modified by McCleery, these notes were not suitable for outside consumption. The business plan draft made no reference to Lost Farm or to a second course. In what was no more than a series of headings, one of the entries was "Masterplan - RS". Wood said nothing about this in his evidence, but Sattler was taken to that entry during cross-examination. He accepted the suggestion of counsel for LGT that Wood had been told to prepare a business plan and a marketing plan. As to the master plan, he accepted that that was his responsibility. He said that the other directors were asking him, as the landowner, what his master plan was. It was put to him that the Board was interested in knowing whether he intended to proceed with the development "of what was referred to as the three stages, back when you were talking to the Government back a few years previously". Sattler rejected that. He said: No. There was also talk - I was doing a housing - a village down on Bar Marsh, which is adjacent to where you see pictures of the airport. There was - I had quite a few ideas. The matter was not taken any further in cross-examination. 304 The Board next met on 19 August 2005. Save to note that finances remained tight, and that Sattler and Wood had made further advances to LGT ($50,000 and $10,000 respectively), nothing of present relevance arises from the minutes of that meeting. 305 As noted earlier in these reasons, on 1 October 2005 Sattler was to have paid the first instalment of interest under his loan from the DED of $900,000 (deferred from its original date of 1 October 2004). On 29 September 2005, he met with Mann and Hawkes, and sought that $100,000 of that interest be capitalised, bringing the outstanding principal to $1m. From the terms of a memorandum prepared by Hawkes on 23 November 2005, it seems that Sattler referred to the trading losses of LGT, to his deferral of moneys that ought to have paid to him by LGT (rent and payments for plant, machinery and fuel), to the crop failure which his farm had, by reason of bad weather, suffered in 2004 and to the destruction of his house by fire in April 2005. 306 Hawkes recommended that the interest payment should be capitalised as sought, and that was approved in a letter written to Sattler by Mann on 16 December 2005. The approval was subject to the following conditions: (1) The provision by you of a revised cash flow budget for 2005-2006 for Links Golf Tasmania P/L by 10 January 2006. (2) The annual financial statements for the year ended 30 June 2005 of Sattler Pastoral, SHM P/L and Sattler Family trust being provided by 30 January 2006. (3) The department reviewing with you, the trading position of Links Golf Tasmania Pty Ltd by 30 September 2006 in order to consider the ability to pay capital instalments in accordance with the approved terms and conditions of the loan and the impact of the expiry of the existing credit risk interest rebate of 3.25% on 30 September 2006. 307 The Board of LGT met on 18 October 2005. Sattler reported that forward bookings for accommodation were strong, and that he "looked like having a period where he might recover some of his losses". Otherwise, nothing of present relevance arises from the minutes of that meeting. 308 The Board met again on 23 November 2005. Cashflow was sound at that point, and it was resolved that Sattler would be "brought up to date with accommodation, rent and outstanding payments" as from July 2005. The sum was thought to be in the region of $80,000, which was to be paid forthwith. Sattler reported that accommodation was "doing very well" after a very poor winter, and that he intended to build six more villas. The accommodation was being "run directly through" LGT. 309 When the Board met over the period 5-7 January 2006, it was reported that the $80,000 mentioned above had in fact been paid. The cashflow from the course was such now that it was no longer necessary for Sattler to leave the accommodation receipts with LGT, and he stressed the need for these to be paid to him, net of the commission, promptly. The minutes reported: Richard also reported the possible further expansion of accommodation to include another three of the four bedroom villas at the very most. He believes that would be as much as the infrastructure could support in this particular area before a further stage of the project is undertaken. i.e. a second course and housing and hotel and so on. Under cross-examination, Sattler explained what he meant by this last observation of his, as reported in the minutes: The course … would never reach capacity at lots of times, once we got to a certain mass, so it was no use having a lot more accommodation, or we would be not running a satisfactory occupancy, so it's a balancing [act] to, in golfing numbers, accommodation, etcetera. Sattler said that it was a matter of matching the accommodation to the golfing numbers. If there were to be further accommodation, that would have to wait for the next site (ie the second course). 310 On 7 February 2006, Wood submitted a report to ASIC advising it of changes in the shareholdings in LGT. After the changes, the holdings of the respective investors were: • Sattler 2,120,209 shares • Bump 'n' Run 681,975 shares • Hetrel 390,000 shares • McCleery 200,000 shares • Ramsay 200,000 shares

On 10 February 2006, Hetrel transferred his shareholding to his family investment company, Delores Investments Pty Ltd ("Delores"). 311 The Board met again on 6 March 2006. It will be recalled that Wood's notes of 26 July 2005 had allocated to Sattler the responsibility for preparing what he (Wood) called a master plan. The minutes of this meeting on 6 March record the following: Master Plan • Zoning approvals • D.E.D to assist to register as a plan. • Lost Farm - 36 holes. • Hotel - 200 rooms. • Tuckers Creek - 18 in land. • Lake & river, Barmarsh Subdivision - 200 • Etc, etc, etc. The evidence as to the actual course of the meeting at this point was unsatisfactory. In his affidavit, Hetrel said that he did not recall this aspect of the discussion. When it was put to him in cross-examination that the master plan related to what Sattler intended to do with the rest of his property, and had nothing to do with LGT, he said that "we didn't see it that way". But his recollection of what was actually discussed on 6 March was not prompted. Neither Wood nor Busch (who was present at the meeting) said anything about it. Sattler was taken to the minutes in cross-examination, but not in any way that was calculated to refresh his recollection, if he had one, of what was actually said at the meeting. He was cross-examined as follows: Q. And the master plan was something which related to the rest of your property? A. Yes. Q. And it was something which was discussed at board meetings of LGT on a frequent basis? A. Yes, I was asked regularly. Q. It's also fair to say that at no stage, at this period when the master plan was discussed, did you say to the other board members, "You guys have got no business whatsoever discussing this." It's not something you said, is it? A. We had a very open board, I was happy to discuss anything and answer any questions. Q. And you - I suggest - made no suggestion to any of the other board members at about this stage that LGT was to have no part in the project which was the subject of the master plan? A. They did not ask me. Q. And there was no suggestion in any of these meetings that any extension of the project was going to be in competition with the business being conducted by LGT? A. They did not ask me. Although there was no shortage of cat-and-mouse both in the questions and in the answers in these exchanges, it does appear to be accepted by LGT that the master plan - or potential master plan - related to Sattler's activities beyond the scope of LGT's business. By the same token, it does not appear to be contended by Sattler that the Board had no legitimate interest in being informed about such matters. 312 The Board met again on 13/14 April 2006. The second day was occupied "reminiscing", and no minutes were taken. The first day of the meeting was concerned with operational matters, in relation to which Sattler agreed with counsel for LGT that "the course has now turned the corner and is being successful". 313 In an email to Keiser on 10 May 2006, Sattler said that LGT was "releasing the Barnbougle book next week". That was, I infer, what Sattler had described as a "coffee table book" in a letter to the Secretary of the DED, Norm McIlfatrick ("McIlfatrick") in which LGT sought, from the DED, a grant of $20,000 to assist with the production of the book. An officer of the DED drafted that letter, and Sattler signed it. In the letter, an invitation was extended to McIlfatrick to visit Barnbougle Dunes, and Sattler, as nominally the author of the letter, said that he would "welcome the opportunity … to discuss our longer term development aspirations". Under cross-examination, Sattler accepted that those aspirations related to the development of Lost Farm. He said that they were, at nearly every meeting of the LGT Board, the subject of inquiry by other directors. That state of affairs had been mentioned by Sattler in an email to Keiser on 28 February 2006: "Everyone is putting a lot of pressure on trying to find out more on the second course - I am still suffering from the shock of the first. I am certainly not in any hurry at this time." Under cross-examination, Sattler rejected the suggestion that the "shock" to which he referred was the success of the first course. He said it was the shock of "the money it cost me". 314 In his email of 10 May 2006, Sattler also raised with Keiser the position that Doak, was, apparently, then taking with respect to the form of his remuneration for the design of Barnbougle Dunes. Sattler said that he wanted to obtain Keiser's views about Doak's request that his remuneration be based on royalties, "and any possible problems it may cause to a potential number 2 course - he [ie Doak] is clearly very interested in being involved in further development if the opportunity arises". Keiser's response with respect to royalties was that they were "unusual in the golf business". He went on to say that, if he were involved in the second course, he would like to use Bill Coore ("Coore") and Ben Crenshaw ("Crenshaw"). He said that he had already asked Doak for his "OK", and that he was "thinking about it". Under cross-examination, Keiser explained that this last comment related to what he perceived would have been Doak's expectation that, having designed the first course, he would be consulted before a different designer was engaged for the second. At this stage, I infer that Keiser had not yet approached Coore. 315 The minutes of the Board meeting on 13/14 April 2006 record a resolution that the next meeting would be on 10 June 2006, but there are no minutes of any such meeting in evidence. Indeed, the next minutes in evidence are those for a meeting of the Board held on 29 September 2006. They show that the course at Barnbougle Dunes was now successful. Bookings (it is not clear whether accommodation or golf course) for October were 53% higher than for the corresponding period in 2005. Sattler suggested that there may be an extension to the clubhouse, at a cost of $250,000. Otherwise, mainly operational matters were discussed. 316 At the Board meeting on 25 November 2006, it was decided to proceed with the extensions to the clubhouse. At this point, the loans by directors had reached $819,000, and a decision on whether to pay them out (having secured external finance for the purpose) was deferred to the meeting to be held in the following February. On 8 December 2006, Wood wrote to all shareholders, acknowledging that they would by then be looking forward to receiving their first dividend. Wood was non-committal on that subject, contenting himself with saying that "we are travelling rather well at the moment, and … your investment is looking much more attractive than it did a couple of years back." Wood's communication also informed the shareholders that Dixon had accepted a position as operational CEO, reporting directly to the Board. Wood added that that appointment would enable Sattler "to step back, at least a little". 317 In December 2006, Dixon (as he put it in his affidavit) "took over as general manager" of Barnbougle Dunes. According to Busch, Hetrel told him that Dixon would be appointed as "a manager", and that the two of them would "work in a joint role". Although very little was said about this in the evidence, it seems that the intention of the Board was to have Dixon succeed Busch, and that is what occurred in fact. Busch shortly resigned. Dixon remained employed as General Manager of LGT at the time of the trial of this proceeding. 318 By early 2007, Sattler was thinking seriously about the development of Lost Farm. At that stage, his intention was for Keiser to be a substantial equity investor in that project. That was also Keiser's intention. Keiser came to Tasmania at about this time, and put his weight firmly behind the engagement of Coore to design the Lost Farm golf course. The subject was discussed as between Keiser and Sattler, and also at a lunch attended by Keiser, Sattler, Wood and Ramsay. According to Ramsay, "we agreed to leave it to Sattler and Keiser to arrange for Coore to come and view the site". Sattler's response to this evidence was that he and Keiser made that arrangement because, as they told Ramsay at the lunch, "Lost Farm was none of his business". Under cross-examination, Ramsay rejected Sattler's version of this conversation, and neither Keiser nor Wood said anything about it. I do not consider that anything turns on these differences between Sattler and Ramsay. It was not seriously suggested by LGT that Wood and Ramsay - and, for that matter, Hetrel - were not fully aware that Lost Farm was going to be developed by Sattler, most probably with a substantial equity from Keiser. As to the content of the conversation, Keiser subsequently asked Coore if he would assess the potential for a golf course on land adjacent to Barnbougle Dunes. Keiser said that he believed that the site had the potential to yield an extraordinary golf course. Keiser asked Coore to travel to Tasmania as soon as possible, and offered to pay the expenses of himself and his wife. 319 Although Sattler was not prepared to confirm that it occurred on the occasion of his visit by Keiser, he did confirm that he, Keiser and Lennon met at a social function on the Born Free launch on the river Derwent. It was put to Sattler that, on this occasion, the possibility of the government providing financial assistance for the construction of the second course at Lost Farm was discussed. Sattler denied it, pointing out that Keiser was generally ill-disposed towards accepting government money. The matter was not put to Keiser, and Lennon was not cross-examined on his affidavit. Sattler did accept, however, that Lennon was a strong supporter of the further development of Sattler's land at Barnbougle. 320 Andrew Thomson ("Thomson") is a registered building designer and registered builder. He had designed the clubhouse, for which he was paid by Sattler. He had also prepared the development application for the original 16 cabins at Barnbougle Dunes. On 12 March 2007, Sattler authorised Thomson to act on his (Sattler's) behalf and as his agent "in all building matters related to development at Barnbougle Dunes". On the following day, Thomson applied to the local council for a permit for the construction of the extensions to the clubhouse at the course. The application was made in Thomson's name, and named Sattler as the landowner. Subject to certain presently immaterial conditions, that application was approved by letter from the council to Thomson dated 18 April 2007. 321 On 23 March 2007, Mann wrote a memorandum to McIlfatrick with respect to the interest rate payable by Sattler on his loan, originally of $900,000, now of $1m. At the time, the rate was 6.84%, which included the rebate referred to in para 213 above. Without the rebate, the rate would have been 10.09%. The period of the rebate had expired on 1 October 2006, and the purpose of the memorandum, and of Mann's recommendation, was to vary the "interest rate matrix credit risk factors" in light of the success of Barnbougle Dunes and Sattler's financial position generally. Mann recommended that the "security" risk should be varied from "medium high" to "low", and that the "serviceability" risk should be varied from "high" to "low". This would have the result that the new, unrebated, interest rate operative from 1 October 2006 would be 7.59%. On 26 March 2007, McIlfatrick approved the recommendation, and Sattler was informed by letter from Mann dated 12 April 2007. He was also informed in that letter that the interest rate would move in accordance with a cash rate increase announced by the Reserve Bank, such that it would be 8.59% with effect from 1 April 2007. 322 The information which went into Mann's memorandum of 23 March 2007 had, of course, been provided to the DED by Sattler. Under cross-examination, he accepted that the memorandum represented an accurate statement of the matters with which it dealt. One of those matters was recorded as follows: Sattler is in discussion with Mike Kaiser [sic] of the USA with respect to the feasibility of developing another Links Golf Course adjacent to Barnbougle. This course would have a different designer in order to provide a diversity of design and conditions and increase the desirability of 'golf-buffs' to visit the site and undertake the challenges offered by two courses at the same venue. It was also noted in the memorandum that McIlfatrick had recently undertaken a site visit "and discussed the future of this golf course and the planned development of a second golf course". Sattler accepted that it was he with whom McIlfatrick had had those discussions. Finally, the memorandum noted that, if the second golf course proceeded, the DED might be requested to assist with further loan funding or perhaps an interest rate subsidy on commercial borrowings. Sattler accepted that that did represent the state of his discussions with the DED in March 2007. 323 On 30 March 2007, Ramsay sent an email to Chris Stone ("Stone"), the Manager, Photogrammetry, Air Survey and Reprographics Information and Land Services Division of the Tasmanian Department of Primary Industries and Water, who had the electronic contour data captured by the aerial survey which Ramsay had arranged in 2001 (see para 28 above). He asked Stone to give him a price for printed contour maps of the area to the east of the Great Forester River, which had been surveyed, but in respect of which maps had not been produced. Ramsay made that request after having discussed the subject with Sattler, and at Sattler's request. He (Ramsay) was, however, mistaken to suppose (as he did in his affidavit) that the subject had been initially broached at a dinner held on the occasion of Coore's first visit to Barnbougle, since that visit had not occurred by the time the email was sent. Nothing turns on that, but I would infer that Sattler's request to Ramsay arose from a request previously made by Coore of Sattler since, after some further correspondence over the next month or thereabouts the detail of which is not presently material, Sattler sent an email to Ramsay on 30 April 2007 stating that he would speak to Stone direct, after having ascertained the map size that was required by Coore. 324 According to the minutes of the Board meeting on 6 April 2007, it was reported that the "transition" from Busch to Dixon as General Manager had gone well. There was some consideration given to the price at which shares in LGT might be sold, in relation to which it was noted that a valuation of the business was being organised. The interest on the shareholders' loans, which stood at $818,000, was to be credited to equity. At that time, the total equity in LGT was $3.17m. 325 Pursuant to Keiser's request as mentioned in para 318 above, Coore and his wife travelled to Barnbougle in early April 2007, arriving on 6 April. They walked the Barnbougle Dunes course. Coore's initial impression was that the course "deserves all the accolades that it had received". 326 Over the course of the week to 13 April 2007, Coore walked the Lost Farm site on several occasions, to get a "feel" for the piece of land upon which he had been asked to design a golf course. He spent most of this time "walking the site and making notes by [himself] or in the company of [his] wife". At the request of Sattler, on one of those occasions Coore permitted the attendance of someone whom he believed to be a golfing friend of Sattler's, Wood. On 11 April 2007, Coore flagged what he described as "a very preliminary 'foundational' routing for Lost Farm in the field". In this he had the assistance of Danny Brown ("Brown"), then the superintendent at Barnbougle Dunes. It seems that Coore was impressed with what he saw. On 18 April 2007, Keiser sent an email to Sattler in which he said that "Bill Coore loves the site, loves his routing, likes the owners and is ready to go." 327 It is now necessary to turn to an application for funding which Sattler made which, in itself, came to nothing but which became important in another aspect of LGT's case to which I shall turn. In early April 2007, Dixon came upon a general invitation published by the Commonwealth Department of Industry, Tourism and Resources ("AusIndustry") for applicants for funding under a program described as the Scottsdale Industry and Community Development Fund ("the Scottsdale Fund"). Apparently funding was available for local projects which met certain criteria. Dixon suggested that Sattler should apply for that funding for the purposes of the construction of the proposed new course at Lost Farm. Sattler was not enthusiastic, but suggested that one area in which he might encounter difficulties obtaining funds from other sources was for infrastructure. So Dixon prepared the application as one which sought funding for the construction of an access road, of a bridge over Great Forester River and of a water storage facility, and for the provision of power to the site. The funding sought was in the sum of $947,500, within an overall project cost of nearly $14m. The application, which Sattler signed on 16 May 2007 and which was received by AusIndustry on 24 May 2007, was unsuccessful, an outcome of which Dixon was notified by letter from AusIndustry dated 15 August 2007. 328 At the time when Dixon prepared that application, he was the General Manager of LGT. In the present case, LGT says that Dixon was occupying himself on business activities to the benefit of Sattler, and potentially to the detriment of LGT (ie in the sense that Lost Farm would be a competitive business), was doing so in LGT's time, and was deriving assistance from LGT's resources. Subject only to there being several telephone conversations, and one face-to-face meeting, with a representative of AusIndustry, Amanda Castray ("Castray"), during normal working hours, Dixon said that he did all of the work on the Scottsdale Fund application in his own time. Counsel for LGT clearly considered that to be an unlikely proposition, but, under cross-examination, Dixon explained himself as follows: Yes. Well, because at the time when I undertook the - to do the grant application, I was staying in a cottage not much bigger than a caravan. It had a bedroom and a shower and a living room which encompassed a kitchen, and in that there was a television which was about so big. … And at that time, the television didn't work all that well. It had three channels, and depending on the weather conditions at the time would determine whether or not there was a picture or not. And by my very nature, I am a workaholic, and if after I have had something to eat and spoken to my family and so on, if there's nothing to do - I can't watch the television - I will work. And I would work - and it's not uncommon for previous staff of mine to get emails at two or 3 o'clock in the morning, because that's just the way I am. So I guess to explain it properly is that there was not a lot to do after hours for me in that little cottage, so I would generally work. Having observed Dixon being cross-examined on that subject, I accept that evidence. I would find that the task of preparing the application to AusIndustry was done by Dixon in his own time. I would, however, also find that, when he had to communicate with others about the application, he did so during normal working hours. I have already referred to his communications with Castray. Additionally, Dixon sent emails to Sattler on 9 May 2007 at 3:14 pm and on 10 May 2007 at 1:13 pm, in each case to obtain approval for certain sections of the application then in draft. On 16 May 2007, Dixon sent the final form of the application to Sattler for approval (which he obtained) by email at 7:51 am, and sought the contact details of three referees by email at 10:13 am. 329 Dixon did not mention the fact that he was preparing the Scottsdale Fund application to the Board of LGT. Under cross-examination, he justified not having done so in the following terms: The main reason - to be honest, once I had made the decision, I - and it's important that you understand the reasons. For the preceding 12 years, I had been running my own businesses and been responsible for decisions on a daily basis. Now, after I had spoken to Richard about potentially applying for this particular grant money, and I had decided that I would take on that particular role as - well, to actually apply for this grant myself - and after I had spoken to Richard, I took it upon myself by conditioning - and by the "conditioning" I mean I was used to making my own business decisions and being responsible for those business decisions and delivering on those business decisions for the previous 12 years of my employment. It was a new situation for me to be in at the time. I wasn't used to operating under a board of management situation, and I wasn't used to having a boss, I guess, above me. And it was for those reasons I didn't even contemplate talking to Peter or Justin about putting this grant application in, because of my conditioning of running my own businesses. So, in summary, I will say that the reason why I didn't talk to anyone else about it is because I decided myself that I would take it upon myself to do this application and submit it. And by my very nature, I did that on my own accord and I did not even think about talking to anyone else about it. When pressed further by counsel for LGT, Dixon said: "I can honestly say that it didn't enter into my mind at the time". I accept that evidence. Indeed, I do not understand it to have been ultimately put on behalf of LGT that Dixon, or Dixon and Sattler together, were surreptitiously (and, in that sense, consciously) keeping information about the application from the Board of LGT. 330 I would add that, in Dixon's awareness at least, in April 2007 it was "common knowledge" that Sattler was preparing to develop Lost Farm as a golf course in his own right. He was told, at some time thereabouts, by Wood that Wood had been told by Sattler that the involvement of LGT in Lost Farm would not be a problem. Neither Wood nor Sattler gave evidence of any such conversation between them, but, for Dixon, what Wood said was not inconsistent with what he regarded as common knowledge at the time. It is, therefore, fair to infer that Dixon well knew that, when he was preparing the application to AusIndustry, he was working on Sattler's account rather than on LGT's. I would also find, however, that he genuinely saw no antagonism between the two. He explained that his motivation for making the application was to "try to motivate" Sattler to develop Lost Farm; and he answered in the affirmative to this question from counsel for LGT: "So what might transpire at a later time was that if Sattler could get Lost Farm going, there might be an opportunity for some benefit to LGT?" 331 I turn next to the terms of the application for funding from AusIndustry, as signed by Sattler on 16 May 2007. The application was in the name of Sattler, but the "trading name" was given as Sattler Nominees. The "primary contact" was Dixon. For the part of the application form (an AusIndustry pro-forma) which requested an "organisation profile", Dixon provided the following: It was said that Sattler's core businesses were tourism operations and farming. The following details were given: Previous Tourism Experience includes: Owner Operator Mt Nelson Motor Inn Hobart, owner operator Woolmer's Inn Hobart, owner operator Penny Royal Queenstown, owner operator, Penny Royal Motel Apartments and attractions Launceston, owner operator Colonial Motor Inn Launceston, Innkeepers corporation hotel franchise & booking system plus various Hotel & Tourism consultancies over the last twenty years. Current Richard Sattler is the current Operator of Old Woolstore apartment hotel complex, Hobart, major shareholder of Links Golf Tasmania which is the operating entity controlling operations for Barnbougle Dunes Golf Links Resort, Bridport Tasmania. Richard Sattler is the owner operator of the property known as "Barnbougle", Bridport Tasmania, being 13,000 acres of land which Barnbougle Dunes Golf Links is a part off [sic]. The property "Barnbougle" is primarily used for production of Beef and Lamb as well as the growing of a wide range of seasonal vegetable crops. It was said that Sattler's operations were responsible for 160 full time equivalent jobs, of which about 50 were people directly employed in the Scottsdale area as a result of the Barnbougle Dunes golf links development and the Barnbougle Farm operation. 332 In the "Project Details" part of the form, the title of the project was said to be "Stage 2 of Barnbougle Dunes Golf Resort Development". The following "Brief Summary" of the project was given: Richard Sattler is applying for SICDF funding to bring forward the next stage of development of the Barnbougle Dunes Golf Resort. This includes as part of a master plan a second world class 18 hole "Public Access" golf course as well as associated amenities such as fully functional golf club house, and an 80 room Eco lodge. Total estimated cost of "stage 2" is approx $13,000,000 - $15,000,000. Funding is sought for the primary reason to bring forward the "start date" of this project. Sufficient "private funding" is available to progress the second site development in terms of the "major development" (being golf course, club house & accommodation), but not for the infrastructure expenses. It is impossible to source commercial funding for infrastructure expenses hence the need for this funding. The master plan has "stage 2" down for commencement in 2011 but should we receive this funding it would guarantee the progression of this stage to an immediate start and hence bring forward the flow on economic/employment benefits that will come on completion of stage 2. We expect the outcome of this project to be the immediate start of the development of the golf course construction of stage 2. Bill Coore and Ben Crenshaw, arguably the worlds most sort [sic] after golf course designers have been out to inspect the sight [sic] in April this year and are very excited about delivering the 2nd world class golf facility for Barnbougle and for North Eastern Tasmania. This will be a world first as "Coore-Crenshaw" have not designed any other golf facilities anywhere else in the world other than in the U.S.A. We also expect that the employment outcomes of this project will provide for up to 44 short term jobs, 160 medium term jobs, and ultimately up to 87 full time equivalent jobs, (please see C-1 for a more detailed expansion of this employment expectation). These figures are based on our experience with the "stage 1" development of Barnbougle Dunes Golf Links as well as the applicants 30 years of experience in the tourism development industry. With expected revenues for this project on completion to be approx $6,000,000 worth of new business dollars we would be returning approx $1,988,000 back into the community in the form of take home wages as well as approx $1,988,000 of economic benefit through local vendors and businesses. (See C-1 for expansion of these assumptions). Under cross-examination, Dixon said that there never had been a documentary master plan, and that the "master plan" to which he here referred was something which resided in Sattler's head. The concept had been referred to at LGT Board meetings, and included the possible development of a second course on Lost Farm. Dixon confirmed that the fact that funding for infrastructure was not available from private sources was information which had been supplied to him by Sattler. Independently of Sattler, he knew that Coore and Crenshaw had inspected the site in April. The state of Coore's excitement was something that was known to Dixon from his own observation. The number of jobs expected to be generated were Dixon's own estimations, based on his experience of the operation of LGT. 333 A summary budget for the project was next set out, based on "the template that was created for Barnbougle Dunes Golf Links original site 'stage 1'." 334 The next section of the form required the applicant to provide information as to how the project would meet the evaluation criteria for funding. One criterion related to the generation of sustainable employment opportunities. Here Dixon identified six construction "phases", in three of which he made explicit reference to the experience which the proponent had had in the construction of Barnbougle Dunes. He referred, for example, to "our experience in building the original Barnbougle Dunes Golf Links access road", and to "the template formulated for the original golf course development". He identified also a seventh phase - "Commencement of operations of Golf Course" - in which respect he used the experience of Barnbougle Dunes to provide estimates of the number of jobs that would be generated in specific areas, namely, golf course maintenance, golf operations, food and beverage and accommodation. 335 The next criterion related to the "sustainability of the applicant organisation over the longer term without the need for ongoing government support". Here Dixon stated the following: Richard Sattler (the applicant), has been in the catalyst of up to 10 tourism / business developments over the last 31 years, all of which have been self funded with minimal government support. Whilst over those 31 years of business trading and experience there have been successes and failures, Richard Sattler is still trading profitably in all of his current business ventures and is looking to continue this growth well into the Sattler Families [sic] next generation. The most recent development Barnbougle Dunes Golf Links is now complete and is now trading successfully and profitably with out the need for any external funding, currently showing growth of approx. 40% per annum which bears testament to Richard Sattler's ability to underwrite and deliver on a project. Further to this Richard Sattler has strategically chosen some prudent investors to be involved in the next phase of development to guarantee the success of construction. Dixon accepted that the information about LGT's successful trading profitability and growth contained in this passage came directly from LGT. According to evidence given by Sattler under cross-examination, there was only one "prudent investor" potentially involved at this stage - Keiser. 336 The next criterion related to the demonstrated capacity of the applicant successfully to undertake the project, in which regard Dixon's submission commenced with the following: The development of Barnbougle Dunes Golf Links was first raised as an idea to Richard Sattler (land owner & applicant) by a young local resident and avid golfer Greg Ramsay in 2001. The land to which Barnbougle Dunes Golf Links sits now was recognized by Greg as being some of the finest links land in the world after returning from overseas and experiencing all of the great links courses across Europe. To this end, it was agreed that the land could be used and developed as a golf course under a long term lease arrangement through the company structure that Greg Ramsay set up, Links Golf Tasmania P/L. The original financial model that Links Golf Tasmania had set up was proven to be flawred [sic] so Richard Sattler, (Land Owner & Applicant) decided to restructure the financial model to a more conventional business model so that the development could proceed. At this point Richard Sattler decided to underwrite the whole project based on the enthusiasm of many who visited the site on his land and after receiving advice from a knowledgeable team he had composed, he decided to assume the risk himself and push on with the project. Dixon said (in his evidence) that what appears in this extract was "common knowledge". He confirmed that the "knowledgeable team" referred to was the syndicate members of Bump 'n' Run and McCleery. 337 Dixon next set out, in seven "stages", how the development of Barnbougle Dunes had progressed "under the direction of Richard Sattler". He mentioned also eight other businesses in the hospitality industry of which Sattler was or had been in charge. He concluded this part of his submission as follows: In summary Richard Sattler with over thirty years experience as a tourism operator and developer as well as the successful developer of Barnbougle Dunes Golf Links (Stage 1) has demonstrated a level of experience and knowledge equal to that of anyone in this country to deliver this project. 338 The next criterion related to the extent to which the project did not involve the movement of business activity away from elsewhere in Australia. Here Dixon said: Golf Tourism is still a fast growing and high yielding sector of the travel industry. The lack of world class golf facilities solely dedicated to the public & travelling golfer is a major gap in Tasmania's tourism product. Barnbougle Dunes Golf Links coming on line in December 2005 has provided a venue for approx 25% of the 70,000 travelling golfers that come into this state each year to experience. Whilst this is an impressive statistic more needs to be done to cater for the ever growing travelling golfer market hence the need for this development. World class "Pay for Play" courses or dedicated "Public Access" golf courses aimed specifically at the travelling golfer are very few and far between in this country. Most of our world class golf courses are in fact membership based courses giving the "Non member" wishing to play on a truly world class facility very little opportunity to play. If a non member wishes to play on a world class "true links golf course" facility then they have two options, play at Barnbougle Dunes Golf Links in Tasmania or travel to Ireland or Scotland for the experience. It is for this reason that we believe that there will be no movement of business activity away from any other part of Australia due to the fact that this development will extend a niche market that no one else is catering for in this country at the moment and that is the development of "true links public access golf courses". Under cross-examination, Dixon confirmed that he had based his 25% figure, mentioned in this passage, upon "the volume of players that we had transacted at Barnbougle Dunes". 339 The final criterion related to other funding received for "the project", in response to which Dixon referred to the $250,000 State infrastructure grant received by LGT and to the $350,000 Commonwealth regional development grant used to assist in building the clubhouse at Barnbougle Dunes. Dixon said that he was aware of these grants without having to be informed by Sattler. 340 Returning to the narrative, Coore visited Barnbougle Dunes again in the period commencing on 28 July 2007. On this occasion he was accompanied by a design associate of his, and they worked on refinements to the preliminary routing which Coore had previously done for Lost Farm, and discussed the concepts of the course with Sattler. It seems that there was, however, no definite arrangement for Coore to design the new course at that stage. 341 In about mid-2007 Sattler turned his mind to the steps necessary to build a wellness centre - amongst other facilities - at Barnbougle Dunes. There is some dispute as to whose "idea" the wellness centre first was. Hetrel claims that he mentioned to Sattler "in or about 2006" that LGT should develop a spa at Barnbougle Dunes. In his affidavit, Sattler denied that any such conversation took place. No attempt was made by counsel for LGT to resolve that difference by cross-examination of Sattler, and counsel for the defendants went no further than to suggest to Hetrel that the "impetus for the actual spa and wellness centre was in fact" Miss Sattler, which Hetrel denied. If counsel's decision not to spend any more time on this point was based upon a perception that nothing would turn on it, that would be a perception in which I would have no hesitation in joining. 342 What happened in mid-2007, according to Ramsay, was that Dixon contacted him and said that he (Dixon) was preparing an application for a planning permit for the construction of a wellness centre on the LGT land. He asked Ramsay to provide him with the contour maps, with environmental overlays, as, according to Dixon, the centre would be built on one of the higher dunes where there was a significant erosion issue. Ramsay sent the maps as requested. In his affidavit, Dixon wrongly took it that Ramsay's evidence related to a funding application, and denied that he had ever been involved in such an application for a wellness centre. He also denied asking Ramsay to provide contour maps. This difference too remained unresolved after the relevant witnesses had been cross-examined, but, for reasons to which I shall next turn and which were accepted by Dixon, it is clear that he knew about the planning application at the time that it was submitted. 343 On 15 August 2007, Thomson made application for a planning permit for the development of the LGT land by the construction of a new guest laundry, a wellness centre, an extension to the dining room and three accommodation apartments. In an attached memorandum, it was said that these additions would "complete the development of the Barnbougle Dunes Golf Links" and "complete the accommodation demand for the maximum number of golfers that the Golf Course can handle in one day (140 players) and … cater for their dining and ancillary requirements". It is only the wellness centre aspect of the application which is presently controversial. Thomson explained the proposed method of construction, and the siting, of the centre. He said: These units will be transportable and will be constructed off-site. They will be installed onto (removable) pad footings and linked to each other with covered walkways. We are adopting this method to ensure minimal site impact and to allow ourselves the flexibility to re-site the Wellness Centre in the future, should the need arise. We propose to site the Wellness Centre in a saddle, one dune back from the beach, where it is partially protected by a dune to the west which ensures it is not visible from the town of Bridport. We have identified a strong demand from our clients for a relaxation, health and treatment facility. It may also take local bookings. It will be linked back to the clubhouse by a timber walkway that will allow pedestrian and golf cart access only. All services will be carried underneath the boardwalk. 344 On 16 August 2007, Dixon received an email from a reporter on the Launceston Examiner, Rachel Williams, which was apparently intended for Sattler, as it commenced "Attention Richard, story as requested!". What followed was the text of a story that was to appear in the Examiner, the point of the email being for Sattler to "confirm the names of the new designers for me". From their cross-examination of Sattler, it was clear that counsel for LGT accepted that the story was published substantially as set out in the email, and the defendants did not suggest otherwise. The story was as follows: Accommodation among the sand dunes and a wellness centre will be the key features of the latest expansion planned for Barnbougle Dunes Golf Links at Bridport. But a new multi-million dollar, 18-hole course at the site is at least two years away from reality. Course owner Richard Sattler yesterday said that demand was growing for the well-respected course, which has just been named in the latest edition of American Golf Magazine as the 35th best overall and the seventh best public course in the world. Mr Sattler said the latest development proposal, submitted to the Dorset Council yesterday, would include three four-bedroom apartments "dug into the saddles in the dunes, with the sand pushed back up over them and revegetated with marram grass". A wellness centre incorporating steam rooms, treatment rooms and an indoor and outdoor spa would be constructed off site and would be sited in another saddle, one dune from the beach. The dining room at the clubhouse would also be extended. Mr Sattler said the new buildings, situated west of the club house, would have minimal impact on the coastal area. "Everything we do here is low impact and everything we have done has actually been an improvement on what it was like when the cattle were grazing on it," Mr Sattler said. Work on a new conference room, wine cellar and administration centre, which was approved earlier this year, is expected to be finished next week. Meanwhile, US golf course architects ? Coore and Ben Crenshaw are completing designs for a new 18-hole course and clubhouse on 1.15ha of land on the eastern side of Barnbougle. the current course was designed by Tom Doak but Mr Sattler said he wanted to give different designers the opportunity to work on the new course to ensure "a different variety - because each architect has their own flair". Mr Sattler has just returned from a month-long trip to the UK and US looking at comparable courses and resorts to ensure another world-class facility for Bridport. "We're still trying to put it all together because it's a very high-risk business … and the world is littered with failed golf courses," Mr Sattler said. "To double in size is a big risk and we have nothing to use as a comparison because it hasn't been done here before. Tasmania needs a central mass of courses but (Greens Beach, Musselroe Bay and Orford) are not coming on line as quickly as we would have liked so we are thinking of building ours to get that critical mass. If the sums add up it's still two to three years away." I have set out this story at length because it makes clear what was public knowledge by about the third week of August 2007. 345 In the weeks which followed, the local council informed Sattler that the proposed siting of the wellness centre and the accommodation apartments might not be consistent with State government coastal policy. As a result, those aspects of the planning application were withdrawn, pending the carrying out of a coastal study. On 26 September 2007, other aspects of the application were approved, with conditions. 346 Sattler applied for a further loan, secured by mortgage, from Tas Perpetual to contribute to the funding of the construction of the Lost Farm golf course. On 3 September 2007, there was generated within Tas Perpetual a document which, in effect, assessed that application. To the extent that I mention matters from that document below, those matters either were uncontroversial or constitute what Sattler accepted under cross-examination he told Tas Perpetual. The document recorded that Sattler was seeking a new advance in the sum of $6.01m. It was said that the State government was also likely to provide assistance in some form. Three tracts of land, including that upon which the Barnbougle Dunes course was situated (now valued at $5m) were to be offered as security. The document contained a schedule of the loans, including the proposed loan of $6.01m, that would be outstanding in the names of Sattler and his wife. They included the loan of $500,000 from Keiser and the loan (now in the sum of $1m) from the State government in 2003. As to the former, the document said that the loan from Keiser "was used to assist with the development of the first 18 holes of 'Barnbougle Dunes'." Under cross-examination, Sattler insisted that it was the "equivalent" of Keiser's $500,000 that was so used. 347 Consistently with the expectation stated in Mann's memorandum of 23 March 2007 (see para 322 above), Sattler did approach the DED for a further loan, this time to fund the construction of the proposed golf course on Lost Farm. Initially, he sought $3.6m for the construction of the course and the provision of infrastructure. There was no written application for the loan. The first documentary record of what Sattler was doing at this point was an email from Dixon to Young of the DED on 21 August 2007. By that email, Dixon sent an electronic copy of the (then recently) unsuccessful Scottsdale Fund application. He did so on the instruction of Sattler. Sattler justified this aspect of his application for State funds as him just asking Dixon "as a courtesy" to forward that information to Young, rather than Sattler sending a copy from his own computer. 348 The next documentary record of these matters was an email from Young to Sattler on 3 September 2007, asking for his financial statements for 2005/2006, his management accounts for 2006/2007, his "cashflow projections for Barnbougle 1 and estimates for Barnbougle 2" and what was described as "new valuation". On 4 and 11 September, a senior financial analyst in the DED created a file note about Sattler's application. From the latter, it is apparent, and Sattler accepted in his evidence, that balance sheets and profit and loss statements of LGT for 2005/06 and 2006/07 had been provided to Young by Sattler in support of his application. The analyst looked at Sattler's Scottsdale Fund application, and saw that the total estimated cost of the Lost Farm project was slightly less than $6m. He asked (in his file note): "If [the DED] is looking at funding $3.6 million who is providing the other $2.4 million?" 349 There is no documentary record of what happened about this, or of how the analyst's question was answered, but it is clear that Sattler must have been in conversation with officers of the DED. Indeed, in evidence is a letter which Sattler sent to McIlfatrick at about this time. The letter is undated, and it is not clear whether it was sent before or after the events to which I next refer, but nothing turns on that. What is of present interest is that the letter contains a documentary indication of Sattler's approach to the construction of, and to funding for, the proposed golf course at Lost Farm. In the letter, Sattler said that he understood that the TDR Board had "some concerns regarding my application for loan funds to undertake the development of a second course at Barnbougle". He said that his principle financiers, Tas Perpetual, would be happy to provide loan funds for the "built infrastructure of accommodation and clubhouse facilities", but that they were not "particularly interested in funding the infrastructure works for the development of the second course" (in which latter context, Sattler used the word "infrastructure" as a reference to the construction of the course as such). Sattler said that he had chosen not to "hawk" the project around to financiers, because he needed to have "a patient and long-term relationship with a financier, one that understands that in the initial phases there is no income stream to support the significant development costs". He said that that was where there was an important role for the government. He concluded his letter as follows: Without a loan package from the Tasmanian Government I will not proceed with the development of a second course as Tasmanian Perpetual Trustees will not provide the full amount of finance and I am not prepared to completely restructure the finances of the Barnbougle Farm, and the golf courses in an attempt to fund this in the private sector. 350 On 1 October 2007 a paper was prepared for the consideration of the TDR Board, by which time Sattler's application was for a loan of $4.5m. In the "synopsis" section at the start of the paper it was stated as follows: Following on from the international success of the Barnbougle Dunes golf links course on Barnbougle Estate the major shareholder and property owner, Mr Richard Sattler, has decided to proceed with the construction of another world class public golf course adjoining Barnbougle Dunes. Mr Sattler has determined that he will only proceed with the further development if he is able to source the funds in his own name. At this time all likely investors have indicated that they require an exit strategy of less than five years which Mr Sattler deems to be an inappropriate financing arrangement. Initially Mr Sattler sought Australian Government funds through the Scottsdale Industry and Community Development Fund particularly to cover construction costs associated with obtaining road and bridge access to the sand dune block earmarked for this next course. Unfortunately the application was unsuccessful. Subsequent enquiries to his major financier have secured indicative support for funding the clubhouse and accommodation facilities but the financier has indicated it is not in favour of providing funding support for infrastructure such as roads, bridges and golf course construction. As to why the new project was being undertaken by Sattler alone, the paper stated: Given the level of experience within the family, Mr Sattler has decided that Bougle Run will not be undertaken through the LGT vehicle that was used to develop Barnbougle Dunes. Apart from the ability of the LGT partners to raise additional equity, Mr Sattler believes that this new project will require a significant degree of patience through the development phases and he does not wish to have investors involved that may wish to have early exit strategies. This is a critical factor in seeking support from the Tasmanian Development Board, given its strategic and development focus. Should the Tasmanian Development Board not recommend assistance, it [is] highly likely that the project will not proceed in the short to medium term. Under cross-examination, Sattler accepted that these passages were based upon what he had, orally, told the DED. He said that it was a "presumption" on his part that the existing participants in LGT would not be able to supply the equity capital required for the new course. As to the complication of investors who may wish to have early exit strategies, Sattler said that that was primarily a reference to Keiser, who had been keen to provide equity capital on favourable terms, but "he still wanted an option for an early exit strategy to assure him of being able to exit with his money if he required it". I infer that, at some time between 16 May 2007 (when Sattler signed the application under the Scottsdale Fund) and late September 2007 at the latest, Sattler had decided that Keiser would not be an equity participant in the Lost Farm development. 351 The TDR Board paper was of 19 pages, with eight pages of attachments. Section 1 was headed "Project Description", and owed nothing to the Scottsdale application. Section 2 was headed "Background", and drew upon the Scottsdale application to the extent indicated in bold in the following two paragraphs: Sattler expects that the employment outcomes of the Bougle Run project will provide for up to 44 short term jobs, 160 medium term jobs, and ultimately up to 87 full time equivalent jobs. These figures are based on the practical experience with the Barnbougle Dunes golf links, as well as the applicant's 30 years of experience in the tourism development industry. Expected revenues for this project on completion are approximately $6 million worth of new business, based on the revenues from Barnbougle Dunes and the growth projection based on the Bandon model. The project will return approximately $2 million back into the community in the form of wages in addition to approximately $2 million of economic benefit through local vendors and businesses annually. Those paragraphs made up about 15% of the text of that section of the paper. Section 3 was headed "Issues for consideration", the whole content being under a single subheading, "Strategic benefit". It drew upon the Scottsdale application to the extent indicated in bold in the following paragraph, which occupied about 10% of the text: In terms of direct deliverables the Bougle Run project will create approximately 200 short to medium term construction positions and when complete up to more than 80 FTE job opportunities in the north east region. This is in addition to approximately 50 FTE jobs already employed in the Barnbougle Dunes Golf Links development and the Sattler Pastoral Barnbougle Farm operation. The next five sections, headed "Sustainability", "Capability", "Value for Money", "Competitive Neutrality" and "Works Program" respectively, owed nothing to the Scottsdale application. 352 Section 9 of the paper was headed "Infrastructure works", the first subheading under which being "Access, power and water infrastructure". There was one paragraph under that subheading, as follows: Initial engineering estimates and the experience in building the original Barnbougle Dunes golf links infrastructure indicates that these works will cost in the order of $950 000. This infrastructure will provide connection to the Barnbougle Dunes golf links to allow for a more integrated approach for patrons. The works will also see the provision of power and secure water supply, these being essential for the construction and maintenance of the course. These works will create up to 40 jobs for approximately three months. The sum of "in the order of $950,000" and the figure of "up to 40 jobs" were, it seems, taken from the Scottsdale application. Under the subheading "Construction of golf course", the following appeared: Using the template formulated for the Barnbougle Dunes golf course development, approximately 60-80 jobs will be created for the construction phase of the golf course and surrounding infrastructure. Golf courses are quite complex to build needing a wide range of skilled individuals and companies, most of which are available from the surrounding Scottsdale area. Works include design, preparation and shaping the site (overseen by the Coore and Crenshaw team), installation of the irrigation infrastructure and establishing turf in the playing areas and maintenance until opening. Estimated project cost for this element based on the knowledge of the site and the experience from Barnbougle Dunes is in the range of $2.5 - $3.5 million. Again, the text in bold was taken from the Scottsdale application. It might be noted that the estimate of $2.5m - $3.5m differed from the corresponding figure in the Scottsdale application. There were three paragraphs under the next subheading, "Construction of club house and 80 room eco-lodge", the third of which was as follows, (again, the text which drew upon the Scottsdale application is shown in bold): Mr Sattler's extensive experience in hotel and tourism operations means that he has superior knowledge of yield management strategies. The building program suggests that during the development they are estimating that they will need approximately 70-80 building contractors and local suppliers. Under the next subheading, "Commencement of operations of golf course", the following appeared: Once construction has been finalized and the operation phase begins, 60-80 FTE job opportunities will have been created in the following categories: • Golf Course Maintenance Staff: 10-15 FTE jobs (actual numbers based on existing course) • Golf Operations Staff: 5-7 FTE jobs (actual numbers based on existing course) • Food and Beverage: 15-25 FTE jobs (actual numbers based on existing course) • Accommodation staff: 30-40 FTE jobs (estimated numbers based on applicant's 30 years of experience in the accommodation industry and numbers used from existing golf course accommodation complex The whole of that text had been taken from the Scottsdale application. To this point, the text had occupied nearly nine of the 19 pages of the paper. After this, there was no further reliance on the Scottsdale application. 353 Section 10 of the paper was headed "Funding and Financial Issues". Under the sub-heading "Source of Funds", it was stated that the funds would be provided from within the DED's loan portfolio cap. Under the sub-heading "Previous Financial Assistance", it was said that "the Barnbougle Golf Links (re Sattler)" had been provided with a $900,000 loan under the Development Act. Earlier grants to LGT of $250,000 and of $20,000 were noted. Under the sub-heading "State Budget Implications", it was stated that there would be no implications for the State budget. Under the sub-heading "Security", the security which Sattler would provide for the loan was referred to in summary. 354 Section 11 of the paper was headed "Financial Analysis". This section, which extended over more than 4 pages of the paper, dealt with the financial position of the "RG Sattler Group" and of LGT. The relevant entities in the Sattler Group were mentioned, in relation to which financial statements had been presented for the year ended 30 June 2006. Additionally, Sattler had provided management profit and loss statements for the year ended 30 June 2007, which had been consolidated by the DED and included in the paper. The consolidated profit and loss statements for the Sattler Group were considered in some detail. The group had a net operating loss of $55,000 for the year to 30 June 2006, but, after taking into account a capital gain, the group recorded a profit for that year of $681,000. For the same year, the group had a total income of $2.578 million, of which $127,000 represented lease payments by LGT and $230,000 represented income from the accommodation operated by Sattler at Barnbougle Dunes. The paper noted that the group had "a wide spread of income sources", and that, "considering the developing nature of the Links Golf Course", the result for the year was "sound". From the draft management accounts for the year to 30 June 2007, the author of the paper noted that the total income of the group for that year was $2.969m, of which $136,000 and $471,000 represented LGT lease payments and Barnbougle Dunes accommodation income, respectively. From the 2006 balance sheets for the Sattler Group entities, it appeared that the group had a net asset position of $6.6m. It was noted in the paper that, although freehold properties were included in the balance sheet at $9.1m, all had been re-valued and, excluding Lost Farm itself, were now valued at $21.5m. Based on that valuation, the net asset position of the group would be about $19.0m. The author of the paper concluded that the Sattler Group "had adequate working capital taking into consideration the intergroup liabilities and secured finance facilities listed under current liabilities". It was said that the group was in a stable financial position with adequate working capital, but relied upon the substantial income flows which it received from the Old Woolstore Hotel, from LGT and from the farming operations. 355 With respect to LGT, it was said that Sattler was a director, and the majority shareholder, of that company. He was said to have derived "considerable income" from lease payments and from the accommodation at Barnbougle Dunes. Attached to the paper were summaries of the profit and loss statements, and balance sheets, for the years ending 30 June 2006 and 30 June 2007. The paper noted that, as between those two years, LGT's total revenue had increased from $2.5m to $3.5m. The net income of LGT increased over that period from $20,458 to $322,797, which the author of the paper described as "an excellent trend". It was said that LGT was now "a profitable viable enterprise in its own right", and that the future profitability and cash flow for LGT was "very promising". From the balance sheet as at 30 June 2007, it was apparent that LGT had a net asset position of $3.3 million, and a sound working capital position. The ratio of current assets to current liabilities was 172%. Cash of $420,814 was held, being described as "adequate to cover current liabilities including creditors and GST". The paper also noted that there were directors' loans amounting to a total of $818,629, "which could be regarded as quasi equity". It was said that LGT was in a sound financial position with adequate working capital. 356 Still within section 11 of the paper, the next subject dealt with was "New Golf Course Projections". It was said that Sattler proposed to establish the new golf course in his own right, "which is designed to complement the existing Barnbougle Links Course". Stage 1 of the project, consisting of access, power and water, and the construction of the new course as such, were to cost $4.45m. It was said that funding was being sought as a loan through the DED. Sattler was "backing this proposal by making the substantial commitment of offering his total Barnbougle land holdings as security for the proposed loan". Stage 2 was to be the construction of a clubhouse, and the progressive building of an up to 80-room eco lodge at a cost of between $4m and $5m. It was said that Sattler had already received in-principle support from his major financer (which, I note, was Tas Perpetual) to fund those costs. However, that financer would not fund infrastructure costs, such as roads, bridges and the golf course itself, which was the primary reason for Sattler seeking loan assistance from the DED. Finally, the paper noted that Sattler had sought that the loan be for a period of 10 years, with an initial 3-year interest only period, including payment of the first interest component 18 months after initial draw down. 357 Section 12 of the paper was headed "Recommendations". The advice of the author of the paper was that the TDR Board recommend to the Minister for Economic Development and Resources, and to the Treasurer, that financial assistance be provided to Sattler or his nominee under the provisions of s 35 of the Development Act, on certain terms and conditions. That recommendation was not immediately productive of the results which Sattler sought, but, before dealing further with Sattler's loan application, I should return to certain events in October 2007 which featured large in the parties' cases, and with respect to which there exists an important factual controversy. 358 On 5 October 2007, McCleery sent an email to Wood which was not referred to by either in his evidence. It was, however, tendered by the defendants without objection. In the email, McCleery expressed his disappointment with a number of aspects of the operation and management of LGT. The email bespeaks a certain preoccupation with the valuation of shares and, implicitly at least, with the terms upon which McCleery might dispose of his shares. He said: "Valuation does not appear realistic given potential profitability"; "[Sattler's] objective seems to be to build his family's asset value, diminish LGT profitability (in order to keep value down) and promote the Sattler family"; "We all love Barnbougle dearly and would hate to see an exit that left us all with a bad taste in our mouths for all our hard work"; "… there is also a difference of opinion regarding our views on exiting or staying in. I gather that most would be happy to make a reasonable return (around $3+ per share seems to be the mark) and this isn't unreasonable." 359 The Board of LGT met on 13 October 2007 (Hetrel being an apology). It seems that the issue of Doak's remuneration had been resolved: LGT would pay $75,000 before the end of 2007 and $75,000 in 2008, and Doak would be issued 150,000 $1 shares in LGT forthwith. Sattler suggested that directors' loans should be either converted to equity at $1 per share or repaid as cash flow permitted. He suggested that "all concerned" should have 30 days within which to decide which way they would prefer to go. The minutes then recorded the following: [Wood] raised the issue of how and what to communicate to shareholders - Rules on sales of shares - Formula to use for valuation and its use. - Decision was made to distribute the current evaluation to share holders - It was decided that the best course of action to take to answer a lot of the above mentioned points and other non mentioned was to seek independent legal opinion and advice based on what is in the constitution to help formulate a strategy to go forward with regards to responsibilities of the board and the rights of shareholders. [Wood] to report back once process has begun and outcomes. Nothing was said about Lost Farm at this meeting. 360 On the evening of 13 October 2007, a dinner was held, which at least some shareholders (and, in the case of Bump 'n' Run, syndicate members) attended. I should make it clear, however, that there was no comprehensive record of attendance. The evidence is such as justifies the conclusion that Sattler, Wood, McCleery, Ramsay, Dixon, Marshall and Haddon attended. Hetrel also attended, notwithstanding his absence from the earlier Board meeting. For reasons to which I shall come in due course, what was said on this occasion has become important. Regrettably, albeit understandably, the recollections of those who were present display little uniformity on that subject. 361 Hetrel recalls that there was in fact an informal meeting of shareholders before the dinner, and he was cross-examined consistently with that: it was not put to him that there had been a dinner only. According to Hetrel, at the meeting, Sattler was asked a number of questions. They included "what was happening with the development of Lost Farm?". In response to that, Sattler is reported (by Hetrel) as having apologised for not keeping the shareholders "in the loop" as to what was happening with Lost Farm, and as having said that he would "put together a proposal as to how I see LGT's role working". Hetrel denied that Sattler had said, on this occasion or thereabouts, that LGT would not be involved in the construction of the second course. 362 Wood too recalls that there was an informal meeting before the dinner, but he says that it was at the dinner that "a number of people asked Sattler about Lost Farm and LGT's involvement in it". At this point, according to Wood, "discussion became quite heated". He recalls that it was Ramsay who asked whether a course at Lost Farm would be proceeding, and what LGT's role would be in relation to such a course. Wood does recall Sattler providing an answer to the second aspect of this question, but, in his recollection, the timing of Sattler's response is so uncertain that I could not base any finding about what Sattler said on 13 October 2007 on Wood's evidence. Neither do I derive any assistance from an otherwise detailed report sent to shareholders by Wood on 18 October 2007: although apparently initiated by the discussion at the meeting on 13 October, it contained no reference to Lost Farm, or to Sattler's intentions in that regard. 363 In his affidavit, McCleery referred to the gathering on 13 October 2007 as a meeting. He said that Sattler provided a report on the current status of operations, and that he was asked about the second course. According to McCleery, Sattler said that (and here I use McCleery's words) "LGT would be able to run certain services for the second course out of Barnbougle Dunes, and that he would come up with some sort of agreement to facilitate it." McCleery could not remember the detail of Sattler's proposal, but his reaction was pessimistic: "His proposal sounded as if it would not allow LGT to take a meaningful role in the Lost Farm." McCleery was not challenged on this evidence. 364 In his affidavit, Ramsay said that the investors in LGT met "for dinner". He said that this was "the first time Sattler said to the shareholders that he was definitely intending to proceed with the development of Lost Farm. According to Ramsay, Sattler "said that LGT would have a lucrative management contract". He maintained that evidence under cross-examination, but the subject was not explored in any depth. Ramsay denied that Sattler had said that LGT "would have no involvement" in the course at Lost Farm. 365 Although, in his affidavit which formed the basis of his evidence-in-chief, Sattler said that, at the dinner on 13 October 2007, he had stated that "LGT would not be involved" in Lost Farm, it became clear when he was under cross-examination that he had no reliable recollection of what he had said. He said he could recall "sections" of the dinner. While he does recall mentioning that the new course would be constructed by the Sattler family, beyond that, he said to cross-examining counsel, "you're asking from a dinner where there was quite a bit of alcohol consumed for me to give exact details". 366 What does seem clear in otherwise rather murky waters is that something was said by Sattler at the dinner (or meeting) on 13 October 2007 to the effect that the construction and development of the new golf course at Lost Farm would be done by himself, or by his family. At the level of proprietorship, there does not seem to have been any suggestion that LGT would be a participant. I do not accept Ramsay's evidence that Sattler said that LGT would have a "lucrative management contract": that evidence was both too precise and too tendentious to be taken seriously, and found no support in the evidence of the other relevant witnesses called on behalf of LGT. However, I do accept that Sattler said enough on this occasion to convey the notion that he had under consideration a role for LGT in the operation of the proposed new course. The evidence both of Hetrel and of McCleery is consistent with that (as is that of Ramsay, if stripped of its tendentious elaborations). 367 On 18 October 2007, Wood sent his report to shareholders to which I have referred above. The kind of things that were causing concerns for the shareholders, as expressed at the meeting on 13 October, may, in my view, be inferred from the content of Wood's report. Indeed, under cross-examination Wood described the circumstances in which he came to write his report: Basically what I'm trying to do through this and following emails is cope with all of what I call "sniping." There was a lot of discontent amongst the shareholders, and I was the man in the middle. They came to me as they thought they would have a sympathetic ear. At the same time, I still got on well with Richard and I was trying to hold the thing together, so tried to word things in such a way not to upset anybody, to try and keep it together. 368 In his report, Wood said that the Board had recently commissioned an independent valuation of LGT, and attached a copy of that to his report. I shall return to that valuation presently. Wood said that the valuation was "central to any discussion on disposal of shareholdings", and would "largely revolve around the profitability" of LGT. He said: It is my understanding that like all companies Links Golf Tasmania is largely restrained/regulated by the legal documentation set up by Greg and Richard before the rest of us were involved. Under cross-examination, Wood said that he could not actually recall what he meant by these words, but he imagined that he "would have been referring to the constitution, the lease and the shareholders agreement." His report continued: With ongoing development of the larger project - more accommodation, a second course, possibly a health spa etc. - Links Golf Tasmania will increasingly share infrastructure and expenses with these other entities. All being well this should lead eventually to increased profit and the business valuation will rise. "In the meantime", Wood said that he would "like to work with the Board and management to implement a dividend policy". He then mentioned some factors that may have had an impact on the Board's ability to declare dividends: the need to undertake some capital expenditure as a matter of priority, and the prospect that some shareholders might wish to pay out the loans that had been made by others, rather than have them converted into equity. On this subject, Wood said: The Board has now decided to clean up the balance sheet, and it is now proposed to convert those loans to shares at par value. If, however any party should wish to be repaid in part or total, their loan in preference to equity they should so nominate within 30 days of this missive. This could defer dividends for years potentially! Wood then recognised that, since Sattler had become the majority shareholder - a state of affairs which was not originally his intention - there was now a greater risk for the rest of the shareholders, as "the Board could be replaced by [Sattler] at any stage". 369 Under the heading "Communications" in his report, Wood addressed a number of matters that, I infer, had been of concern to some shareholders on 13 October 2007. The main ones were the extensions to the clubhouse, the size of the function room and the employment of Miss Sattler. Dealing first with the latter, Wood said that their manager needed assistance with the marketing opportunities that were before LGT, that Miss Sattler had recently completed "a 15 month stint" with a 5-star London hotel following her being dux at the International College of Hotel Management in Adelaide and that she was being paid only $30,000 pa by LGT. As to the function room, Wood said that research had shown that the conference market was "HUGE", that the majority of conference groups were of 25 persons or fewer, that three groups of 20 per week would bring in additional revenue of $1m pa to LGT and by way of accommodation, and that, in relation to this line of business, LGT would "focus on sales of alcohol more than meals as our margins are significantly better". Wood concluded: Whilst Links Golf Tasmania has provided the funding to build the infrastructure - In this case the extension - and pay Biz - the return is a share of the 10% commission on increased accommodation, as well as significantly increased revenue from the function room. 370 The valuation attached to Wood's report showed that, as at 9 August 2007, the value of the LGT business as a going concern, including the leasehold interest in the real estate, was $5.8m (exclusive of GST). 371 The Board of LGT met on 26 January 2008. At the meeting, Wood said that he had sought legal advice with respect to the rights of minority shareholders, specifically in the context of them wishing "to exit the company". Wood wanted to be informed on such matters, "before it became an issue". Sattler's comment was that his accountant had raised the possibility that the shares held by minority shareholders might be valued "significantly less - even sub-par despite the assets and performance - simply because they are minority shareholdings". Wood "expressed a reluctance to convert outstanding loans to shares until the minority shareholding issues were clarified". 372 I now return to Sattler's application to the State government for a $4.5m loan to fund the construction of the golf course at Lost Farm. It will be recalled that that application was the subject of a paper for the TDR Board, prepared on 1 October 2007. It was not until its December meeting that the Board made a decision on Sattler's application. By then the DED had consulted with the Department of Treasury and Finance, which was opposed to the making of the loan. After taking into account that opposition, and the reasons for it, the TDR Board resolved to recommend that the loan be approved. On 9 January 2008 McIlfatrick signed a recommendation to the then Minister for Economic Development and Resources that a loan of $4.5m be advanced to Sattler to assist him to finance the construction of the new golf course on Lost Farm. Part of the recommendation was that the Minister forward a corresponding minute to the Treasurer, which was also signed by McIlfatrick on 9 January 2008. Both documents drew upon the October paper to which I have referred at paras 350-357 above. On 8 February 2008, the DED sent Sattler a draft letter setting out the conditions, and the details generally, of the proposed loan. A formal letter of offer was sent by the DED to Sattler on 9 April 2008, and signed by Sattler the following day. 373 In that letter, one of the conditions precedent imposed upon Sattler was that he demonstrate, in writing, that he had "thoroughly examined viable equity and joint venture arrangements with respect to the funding of the construction of this second golf links". Particularly in the light of the attitude taken by the Department of Treasury and Finance, the DED's thinking appeared to be that resort should not be had to government funding unless the prospect of securing private sector equity had been exhausted. On 5 May 2008, Sattler wrote a letter to McIlfatrick in which he addressed this condition precedent, and others. As to this one, Sattler said that he had been negotiating equity assistance from Keiser, who was prepared to invest $2m, "but required an exit strategy after 2 years". Sattler continued: I do not wish to place myself into the situation where at the end of year 2, I could be forced to accept any financial assistance available to satisfy Mr Keiser's exit requirement. If Mr Keiser had agreed on a 10 year investment or even a 7 year investment, I would have proceeded on that basis, hence would not have sought government involvement with this project. Further, I am reviewing the succession plan for my businesses and as I have two children already involved, I wish to retain ownership entirely within our family structure. Consequently, I believe that I have thoroughly examined viable equity and joint venture arrangements for this project. It seems that Sattler's letter satisfactorily addressed the conditions precedent required by the DED, and on 6 May 2008 McIlfatrick signed a memorandum directing Mann to "go ahead with the loan docs now". 374 The letter of 9 April 2008 set out the terms and conditions of the government's $4.5m loan to Sattler. The indicative interest rate was 9.60% pa, variable quarterly. The principal was to be repaid over 28 unequal quarterly instalments between 1 July 2011 and 1 April 2018. The security arrangements were complex. They included a second mortgage, two third mortgages and a fourth mortgage over various parcels of land, and a registered debenture mortgage charge from Sattler Nominees in its own right and as trustee for the Sattler family trust "over all the assets and undertakings of that company, subject to any existing charges". There were several special conditions, including: 7. That annual financial statements for all entities in the R G Sattler Group and Links Golf Tasmania Pty Ltd are to be provided to the department by 31 January of the following year for each year during the term of loan. 8. That budget and cash flow projections on all operating entities are to be provided to the department by 31 August for that financial year. …. 10. That you note that this financial package is the limit of this department's assistance with respect to the "Bougle Run" golf course ad infrastructure project, the existing "Barnbougle Dunes" course and any future developments at the Barnbougle Estate at Bridport. …. 14. That you undertake to meet and maintain the proposed minimum of 60 FTE employment positions for this project, once fully operational, ultimately with a total employment in the North East region of 110 FTE's. In this regard, you are required to provide the department with written advice of you FTE employment numbers as at 30 June each year by the 31 July of that year, during the loan term, with the first return to be provided as at the 30 June following the opening of the 80 room Eco Lodge or the equivalent numbers of self-contained cabins. 375 After Thomson's application for a planning permit, to the extent that it related to a wellness centre, had been withdrawn (see para 345 above), he engaged consulting engineers to provide a report on the environmental issues that gave rise to the council's original reservations. That report, although not in evidence, appears to have been completed in, or by, January 2008. In that month, Thomson supplied a copy of the report to Young, who drafted for him (Thomson) a letter which should accompany the report when sent to the council in further support of the application for a permit. These things having been done, on 14 March 2008 the council issued a planning permit for the wellness centre. The letter, dated 17 March 2008, which covered the provision of the permit to Thomson referred to an application having been submitted on 13 February 2008, but no such (supplemental) application is in evidence. In their written submissions, I note that the defendants mistakenly identified an application by Sattler for a planning permit for the Lost Farm golf course, coincidentally also dated 13 February 2008, as relevant to the wellness centre, but that is clearly not the case. 376 The council's letter of 17 March 2008 had enclosed with it a copy of the relevant planner's report, for information. The report opened as follows: This report has been prepared in response to a proposal by A Thomson Architect on behalf of Barnbougle Dunes for further development at the Barnbougle Dunes Golf Links site to provide an additional deluxe accommodation apartment and a Wellness Centre, in relative proximity to the coastal foreshore. The report stated that the "subject site" was situated on land at Barnbougle Dunes, and that it abutted a 30.48 m-wide coastal foreshore Crown reservation. As to the wellness centre as such, the report stated: Wellness Centre • It is proposed to construct a group of rooms for the purpose for client relaxation, health and a treatment facility. • The building is 146m2 in floor area, combination of Colorbond custom-orb, Eco-ply and western red cedar weatherboards, with Colorbond roofs and aluminium windows. • Unit rooms will be transportable and erected onto removable pad footings and linked to each other with covered walkways, to ensure minimal site impact. • Proposed to be situated on one dune back from the beach, to partially protect structure and to avoid visual impacts form [sic] the town of Bridport. • A timber walkway will allow pedestrian access only and all services will be carried underneath the boardwalk. • Internal spaces consist of a steam room, reception, two (2) treatment rooms, separate bathroom, waiting room, separate dual toilet shower room and a sun deck with an external spa attached to the north side of the building. Hours of operation will remain as per existing. The entire development, including the additional apartment and wellness centre, is likely to result in 4-6 additional employees. It was said that the proposed development would amount to "a minor addition to an existing golf course, clubhouse, accommodation facility and two (2) type-2 deluxe apartments …." It was said that it would "enhance the visitor experience …." The recommendation made in the report was that the council approve the proposal. 377 On 19 March 2008, McCleery sent Wood an email which contained the following paragraph: I hear that there is to be a new day spa centre on LGT land. I assume that we wont be involved, but surely if this is the case, we should obtain a good lease income from the sub-lease holders? Given how things are traveling [sic] at present - $50K - $100K would not be unreasonable. And why shouldn't we allow other enterprises to do similarly and charge them equivalent rates? And LGT would have to approve any intrusion on our land surely! If what I hear is correct then I would get the feeling that we are getting screwed in a less than subtle manner at present and this is not acceptable by any measure. In his oral evidence, McCleery said that it was from Hetrel that he had "heard" that there was to be a new day spa centre on LGT land. Hetrel, who gave evidence after McCleery, was not taken to this aspect, but the council's letter to Thomson of 17 March 2008 provides a factual foundation for a rumour that there was to be a wellness centre. That it was to be built "on LGT land", as McCleery understood, is a more problematic proposition, and I shall return to it. 378 On 25 March 2008, McCleery sent another email to Wood, which dealt with matters in addition to the proposed wellness centre. As to the wellness centre as such, McCleery's view was that, as lessee, LGT had the right to withhold approval of the development unless the siting was appropriate ("the location should not be visible from the course") and unless it were paid for by the developer. In other respects, the main focus of the email was on the value which should be attributed to LGT shares. McCleery clearly thought that the shares carried a value of about $3. He said: I think that we are in a stronger position than we might realise. If we can restrict capital works, ensure that everything is above board and fair, distribute all dividends and protect our investment then we will either have a healthy dividend stream for the next 35 years, or else we will have an asset that we can sell for a good sum. The 2nd course should only make things better. We can get a good valuation from a large and reputable company - but we need to know what to do with it subsequently. We Minority Shareholders need to get together and act with a bit more strength than we are at present. I appreciate that [Dixon] might see things a bit differently than the rest of us and that is fair enough given his position, but I suspect that the rest of us including [Marshall] and [Haddon] would be in the same ball-park. McCleery was cross-examined towards accepting that the tenor of his emails of 19 and 25 March 2008 was such as to recognize that the wellness centre was to be a development undertaken by Sattler, in relation to which LGT had the opportunity to extract additional income. I did not understand McCleery to have taken issue with this interpretation of his emails. 379 In April 2008 150,000 LGT shares were issued to Doak's company, Renaissance (see para 359 above). In the same month, Sattler transferred his shares to Sattler Nominees. These transactions brought the shareholding in LGT to the following: Sattler Nominees 2,224,406 Bump 'n' Run 727,706 Delores 420,957 McCleery 200,000 Ramsay 200,000 Renaissance 150,000 Total 3,923,069

380 The LGT Board met again on 18 April 2008. Sattler reported that "no action [was] likely in the short term on [the] proposed Health Spa". He also said that he had "reached agreement" with Keiser and that, "subject to further agreement with Coore Crenshaw, work on Lost Farm could commence within 2 months". The minutes also record that Sattler "had no idea of other issues surrounding the building of Lost Farm at this stage (infrastructure, etc) as he was just concentrating on building the Best course!!!". The subject of the valuation of LGT was raised again, in the context of which it was agreed that "a new valuation be organized after year end." Hetrel was to organize that. Wood raised the subject of the shareholders' loan accounts, and whether shares should be issued "in lieu of interest". Sattler queried whether the loans should be repaid "given the potential sub par valuation of minority shareholdings". The Board agreed that this consideration added to the importance of securing a valuation. In the meantime, it was resolved that interest at 10% would be paid on loan account balances for the year to 30 June 2008. 381 The outstanding matter of an agreement with Coore Crenshaw referred to at the Board meeting on 18 April 2008 had in fact been the subject of a letter to Sattler and Keiser from Coore written the previous day. There is no suggestion that the letter had come to Sattler's attention by the time of the meeting. In the letter, Coore set out the commercial terms upon which his firm would be prepared to design, and to supervise the construction of, the new course at Lost Farm. The total cost would be just under $US1.1m, but Coore asked Sattler to keep that confidential "because we could not offer it to other projects". It is apparent from the terms of the letter that Coore's preparedness to be involved in a golf course in Tasmania, and to do so on the terms stated, was to no small extent the result of Keiser's persuasive representations on behalf of Sattler. 382 It was at about this time that Sattler was (reluctantly, according to his evidence) prevailed upon to put his name forward as nominee for the Ernst and Young "Entrepreneur of the Year". He identified the "development of Barnbougle Dunes" as one of his five major business achievements. The nomination form included an "essay question", which required him to "outline the source of the idea for the original strategy behind the organisation", how the business was "unique and innovative", what challenges were faced "in launching and building the organisation", what successes had been achieved, what significant obstacles had been overcome, and his vision for the business in the next five years. Sattler's answer to that question - written, according to his evidence in court, by Miss Sattler - related entirely to the Barnbougle Dunes development. He said: Madness is perhaps one word that sums up the project of Barnbougle Dunes. Whether referring to the original idea, proposed by a young man, a dreamer with no business experience whatsoever, the fact that any one let alone a leading business and farm owner would listen to his idea or perhaps it's that the business man decides to undertake a multimillion dollar project in an industry he knows absolutely nothing about. With limited knowledge of the golf industry but a passion for business and a personality that could would never back down to a challenge, Richard took a risk on an idea that is now the World Class golf facility of Barnbougle Dunes. He said that he came to the development "clueless about golf, golfers and golf courses". He concluded his "essay" as follows: Within four months of opening Barnbougle had been ranked #49 golf course in the world and #1 public access course in Australia. With word of mouth as the main marketing tool, interstate and international visitors continue to come in droves to experience Barnbougle. The course has since be re-ranked at #35 in the world and remains #1 public access in Australia. As such, plans for a second course are now in the process of being finalised, images of a golfing resort with two courses in the top 100 in the world the ultimate goal. Within the next five years Barnbougle looks to boast not only a second course, also a 60-80 unit ecolodge and a unique wellness centre to rejuvenate fatigued golfers and for use as a retreat to non golfing partners. The Barnbougle complex will include facilities for air transport to and from major airports, locally and interstate as well as a specialty fly fishing experience in the onsite lakes created by utilising irrigation reserves for the two courses. With this in mind, Barnbougle Dunes looks to have more potential than anyone including Richard originally anticipated. The nomination form asked Sattler to indicate which decisions, experiences or actions he would "reconsider" in response to which Sattler said: Would not have taken minority shareholders in the building of Barnbougle. As golf market was unfamiliar territory, taking on these share holders was originally to provide Richard with a support network as well as a consultant base on golf. It proved however the shareholders were more of a hindrance than help as they felt they needed to advise the architect on his design rather than leave him to create a master piece. Richard's naivety to the golf world was actually very helpful during this process as he did not understand the business enough to pass judgements on the designers' plans, but trusted that he would create something iconic. Under cross-examination, Sattler tended to depreciate the importance of these statements in the nomination form, written as they had been by Miss Sattler, whose strengths - if I could paraphrase the effect of Sattler's evidence - lay in the area of promotional hyperbole. However, he accepted that the form was lodged with his knowledge and authority, and that the statements made in it were accurate. 383 The application for a planning permit in respect of the Lost Farm golf course, to which I referred in passing towards the end of para 375 above, was granted on 28 May 2008. Sattler was the applicant, and the person in whose name the permit was issued. On the same day, Miss Sattler sent a media release to journalists who she thought might be interested in the development of the golf course at Lost Farm. It was sent over her name as PR and Marketing Manager of the "Barnbougle Dunes Golf Links". The release commenced by stating that Coore, Lennon and Sattler "today officially announced the immediate commencement of a second course to join the internationally recognised Barnbougle Dunes on Tasmania's north-east coast". According to the release, Sattler "noted that the Barnbougle expansion was the first stage in major developments for the resort that shall take place over the next 2-3 years with investment estimated at a further AUS$10-12 million." 384 Coore was at Barnbougle Dunes at this time, during which visit he and a design consultant whom he had engaged, David Axland ("Axland"), refined the Lost Farm routing and flagged the beginning of the brush and marram clearing required. It was during this visit, and while they were flagging potential locations on the second hole of the proposed Lost Farm course, that Coore and Axland encountered Wood, who had brought his golf clubs to hit a shot from the proposed second tee. Coore remembers this meeting because he and Axland, having the need to design a second, randomly placed, bunker on the hole, asked Wood to hit his ball from the tee, and they placed the bunker where his ball landed. Coore regarded Wood as a knowledgeable golf person, and a friend of Sattler. 385 By mid-2008, the other directors of LGT, and therefore LGT itself, seemed to be under no doubt but that Sattler, or Sattler Nominees, would be the developer of Lost Farm. They had, of course, been told as much on 13 October 2007. In his affidavit, Hetrel sad that, by early 2008, he knew that Sattler was proceeding with the construction of the second course. He added that, at Board meetings in 2007 and 2008, he and Wood asked Sattler what involvement LGT would have in the Lost Farm course. According to Hetrel, on each occasion, Sattler said something to the effect, "I'm still working it out. I'll get back to you." Sattler too acknowledged that, over this period, the other Board members were pressing him for an answer to the question whether LGT would have any, and if so what, involvement in the new course at Lost Farm. I advert to these matters at this stage to indicate that, at the time when the construction of Lost Farm commenced in June 2008, the dynamic of the relationship between Sattler and the other investors in LGT was such that it was uncontroversial that Sattler would be developing Lost Farm in his own right: the controversial aspect was the extent of "involvement" that LGT would be given in it. 386 The next meeting of the Board of LGT, held on 2 July 2008, was marked by controversy with respect to the activities of Phil Hill ("Hill"), who had been appointed superintendent at Barnbougle Dunes in August 2007, in place of Brown. Once construction at Lost Farm commenced, it seems that Hill spent part of his time there assisting the construction crew. In June 2008, Hetrel spoke to Hill about the amount of time that he was spending on work at Lost Farm. Hetrel says that Hill said that he "[guessed] it's a bit of a conflict", and that he was "spending a little bit of time over there". In his evidence in chief, Hill disagreed with that evidence, but acknowledged that the conversation took place. His version of it was that he responded to Hetrel that he was spending "not much time at all" at Lost Farm. I must say that, if there is a difference between these recollections of a conversation which occurred, seemingly quite casually, some two and a half years before the witnesses in question made their affidavits, it is of some subtlety. Wood says that he was not present during that conversation, but refers to another conversation in which Hetrel asked Hill effectively the same question - as to the amount of time that he was spending at Lost Farm - in response to which Hill "gave a figure" which Wood did not recall, but the figure was "significant". It was not put to Hill by counsel for LGT that he had been mistaken about the timing of this conversation, or that there had been a second conversation at which Wood was present, in which circumstances I propose to accept that the conversation occurred substantially as related in the evidence in chief of Hetrel and Hill. 387 Hill's own evidence as to the extent, and timing, of his work at Lost Farm is that he was "not involved to any extent in the new course until about October 2008", after which his "visits were more frequent". Indeed, Hill said that, once construction at Lost Farm had begun, he would "sometimes finish work at Barnbougle Dunes at the usual time of 3pm, and then work at the Lost Farm until 6pm, or even 8pm.". Even before October 2008, it seems that Hill occupied himself somewhat on the Lost Farm site, but he described that as "minimal". 388 Returning to the discussion at the Board meeting on 2 July 2008, with respect to Hill's work at Barnbougle Dunes as such, the minutes record that "all consider Phil to be doing a grand job". However, in the context of a discussion on the apportionment of jointly-used costs as between the Barnbougle Dunes course and the construction of the Lost Farm course, Sattler expressed exception to directors conversing directly with Hill and Dixon. He referred to "conversations with Phil Hill and Gary Dixon wherein a director had questioned who was paying Phil Hill's time whilst on Lost Farm". A debate which, according to the minutes, was "heated" followed, with Sattler "[making] the points that he gave so much of his time and resources to LGT that he felt entitled to some relief from the scrutiny which he felt showed lack of trust in him". Hetrel "outlined a passionate argument that as a significant shareholder and [director] he was entitled to ask questions about matters that impacted or would impact on the financial performance of Links Golf, and that the proper forum for such questions was Board meetings". Wood stated that, in his experience of running businesses with differing ownerships, "these potential allocations be discussed and agreed before implementation in agreement with all affected parties". 389 While on the subject of the outdoor staff of LGT, I should mention two others whose circumstances became controversial in this proceeding. The first was Drew Ponting ("Ponting"), an experienced greenkeeper who was approached by Hill in late 2007 to be involved, in Ponting's words, "in constructing the new golf course that was intended to be built at Lost Farm". Hill asked whether Ponting would be "interested in working with him … initially at Barnbougle Dunes, in order to get used to a links golf course, before moving across to Lost Farm and accepting responsibility for the new course". Ponting accepted Hill's offer, and commenced employment at Barnbougle Dunes in January 2008. In about July 2008, he was appointed Deputy Superintendent. From the beginning of 2009, he worked exclusively at Lost Farm. 390 The other employee was a mechanic by the name of Gary Nichols ("Nichols"). The court knows very little of him. He was mentioned first when Dixon was under cross-examination. Dixon said that Nichols, an employee of LGT, was "the mechanic and looks after machinery for both sides". His use of the present tense limited the utility of this evidence, and cross-examining counsel took the matter no further at that point. However, Dixon was later pressed as to his recollection of the involvement of Hill, Ponting and Nichols at Lost Farm "in this period", which was a very approximate reference to the time when Hetrel had his conversation with Hill in June/July 2008. The one thing which Dixon could recall was that "a machine blew up on one particular day, and Gary Nichols was called there to have a look at it". He was not pressed to put a date on it. 391 Returning to the narrative, it was also on 2 July 2008 that McCleery sent an email to Hetrel and Wood, with a copy to Ramsay (but not to Sattler), in which he stated that Sattler had a "fiduciary responsibility to act in the best interests of the company". He suggested that Sattler's "LGT interests are severely conflicted with the negotiation on the second course". He suggested that "negotiation between LGT and the Lost Farm group regarding any joint operations etc should take place independently of [Sattler]". On 3 July 2008, Wood sent an email to Sattler and Hetrel referring to (but not forwarding) McCleery's email, and asking Sattler, in effect, how he should respond. Although there is no direct evidence of how Sattler dealt with this matter, under cross-examination he accepted that the position which he generally took at that stage was that the investors should simply be told that he was "just building the best possible course". In the result, on 7 July 2008, Wood sent a "shareholders update" to Sattler, Hetrel, McCleery, Dixon, Ramsay, Haddon and Marshall. He referred to the fact that, a few weeks previously, an announcement had been made on Tasmanian television confirming the commencement of construction of the Lost Farm course. Wood continued: I can confirm that the new course will be developed by Richard in partnership with Mike Keiser. Links Golf Tasmania P/L will not be invited to participate. The new venture will result in some costs being shared across both courses, but whilst this has been recognised by all concerned no detailed arrangement can be made until Mike and Richard work through how they will do things…. Certainly Richard has stated that his only priority at this stage is to build the best possible golf course. The statement that the new course would be developed by Sattler in partnership with Keiser appears to be at odds with what Sattler had told the DED, in his application for the $4.5m loan. However, Sattler was not cross-examined on that apparent inconsistency, and I can take the matter no further. 392 McCleery's email of 2 July 2008 appears to have been the catalyst for a lengthy email from Ramsay to McCleery, Wood and Hetrel, sent on 24 July 2008. Ramsay opened by saying that it had been nice speaking to Wood on 21 July, a conversation of which there is no evidence otherwise. In summary, Ramsay's email was a complaint about Sattler's failure to appreciate the conflict of interest in which he was involved as a director of LGT, as LGT's lessor and as the developer of Lost Farm. The drift of the email can best be conveyed by setting out some paragraphs therefrom: You mentioned Peter that at most board meetings you and Justin express your frustrations to Richard r.e. many aspects of the management at Barnbougle Dunes, and your questioning of the apparent bias in decisions where Richard has a conflict of interest. You also mentioned that your own personal affection of Barnbougle Dunes and your role as Chairman has been lessened by ongoing lack of respect by Richard for everyone else's risks and contribution to Barnbougle's success, and our rights as minority shareholders. Peter, I ask you this; are you optimistic that things will improve with the added dynamic of the Lost Farm development, or are you increasingly pessimistic looking ahead? …. Peter, in regards to another issue we discussed: great news! we do have your excellent letter of July '05, detailing the outrageous offer to capitalise loan accounts at 3:1, this is a HUGE plus. Your description Peter, of Richard's tactics as a 'bluff' show what unprofessional, unnerving and self-interested leadership we have had to put up with, and the stress we have been subjected too [sic]. Justin, there are several references throughout the minutes over the years to finalising a Shareholder's Agreement. Can you please bring me up to date with this? I feel that as well as Richard's offer to buy JM's shares as potentially being a trigger for us to finalise a range of loose ends in regards to our rights as Shareholders, that we should also persevere with finalising a Shareholder's Agreement with Richard, and ensure that it is specifically designed to protect our interests in the face of the enormous conflicts of interests that our majority shareholder has. This should take into account the explosive material recently sent through by Jonathan. I have also attached a little doc on the benefits of Shareholder's Agreements. Also Peter, is there a management contract in place r.e. our operation of the Accommodation in return for a commission. The number [I] have heard verbally doesn't sound very commercial to me, please confirm if there is a formal agreement outlining roles/responsibilities & fees. Congratulations of your endeavours with finalising, CapEx projections and Dividend plans, we look forward to seeing them. Peter, in regard to your email of 7/7/08, I can hardly believe that we 'will not be invited' to participate in the Lost Farm???? Surely it is the risks that we have all taken, that have created the opportunity, and proven the likely viability of a second course. As well as everyone's equity contribution, surely the additional funds contributed by yourself and Justin as loans to Barnbougle Dunes (have any of these loans been converted to shares?) must have earned you the right to choose the extent of your involvement in expansions? I have pictures of us all out on the Lost Farm site, it was always going to be the jewel in the crown for us as investors, if we could just pull off the successful development of the first course. On the other hand, it appears to me that while we have not been invited to participate from an ownership point of view, our resources are in fact being dragged very deep into this development, and with no picture ahead of how we will be reimbursed/remunerated for our current or future contributions - I know already that some of our staff and managers are devoting considerable time and effort to the development of the second course. Please advise when you think this grey area will be cleared up Peter? I don't think its acceptable that we have to wait for Richard and Mike Keiser to finalise their agreement, before our interests can be considered and clarified. …. Anyways, fortunately life is full of much cheerier discussions than this one. Sorry to be a bore, but I think its time we started being a little more organised in recording our communications, and attentive of our rights as minor shareholders. We all have too much at stake. Fingers crossed we get a great valuation after this year's books are produced, and we'll be in a position to consider our options then. Referring to certain electronic legal resources which McCleery had mentioned in his email of 2 July 2008, Ramsay expressed the view that Sattler had been in breach of his duties as a director "in the areas of Conflict of Interest, Multiple Directorships, Disclosure and Abuse of a position". Ramsay said that "the validity of [Sattler's] very Directorship is at question because of his inherent conflict in making decisions as Landlord and tenant". 393 Wood responded to Ramsay's email on 25 July 2008. He commenced as follows: "I feel your pain!" He said that he did not enjoy "the conflict that we are now party to", adding that they needed "as much legal help as we [can] get". However, he said he was an optimist, and if they could get "a fair dinkum valuation, and legal advice on the process - those that wish to exit might be able to do so equitably, and those that don't might be able to at least get a fair dividend return on their capital". He said that, in his view, Sattler believed that he was looking after LGT "by growing the business". He concluded his email as follows: In summary, I agree that it is a difficult position we find ourselves in. My immediate priorities as Chairman are to introduce the dividend policy, gain and [sic] independent and fair valuation of shares, gain a definitive exit policy for shareholders with legal assistance where necessary, and perhaps promote more open communication channels from Richard. 394 On 27 July 2008, McCleery also replied to Ramsay, with a copy to Wood and Hetrel. He said that his comments about conflict of interest had not been intended as "me having a go at Richard". Rather, it was up to the rest of the shareholders (ie the shareholders other than Sattler) to ensure that the conflict was not allowed to continue: "If we don't say anything then we are guilty of allowing that conflict to continue." He urged Wood and Hetrel to raise the matter at the next Board meeting. He urged them to present the facts, and to demonstrate "how the facts breached Sattler's rights to negotiate on behalf of LGT." 395 The next relevant correspondence on this subject was an email from Wood to Haddon, Sattler, Ramsay and Dixon on 17 August 2008. He said that he had had "a quiet heart to heart" with Sattler, as he (Wood) was concerned that the gap was widening between the views of Sattler, as majority shareholder, and the views of those in the minority. He continued: Certainly with Lost Farm about to get started there is a view that minority shareholders have taken the most significant risk, effectively as "Seed Capital" and have not been rewarded with any involvement in what is generally regarded as a very exciting project for world golf at Lost Farm. And with Richard now a majority shareholder, no financial returns at all to date, talk of share values being below par despite the obvious success of the project, a constitution that appears to dictate a valuation based sale to existing shareholders, minority shareholders have some cause to worry - especially if they may need to dispose of the shares at some stage soon. On the other hand Richard very clearly stepped up to the plate when the project could have faltered and not only underwrote it financially, but used his business skills to advantage. I have no doubts that Richard was able to control the build at a cost significantly lower that otherwise would have been the case, and in bringing his hospitality model to Barnbougle he has enhanced the experience for all concerned while demanding a financially responsible ongoing operation. There is no doubt at all that he has put & continues to put significant time into overseeing the operations of Barnbougle as CEO, without recompense, and is using his own farm resources to assist the course. Clearly Richard is hurt by the constant criticism, and apparent lack of trust from the investors, and increasingly goes his own way as a consequence. He also wants to point out that Mike Keiser was always going to be involved in the second course…. Wood said that they all "went into this project to make money and have some fun", and that it would "be lovely if we could get back to that premise". He suggested that the investors should "show their ongoing trust and appreciation for the ongoing efforts of the CEO, and treat the funds injected as an investment rather than a business partnership", that investors should be able to receive an ongoing dividend stream to reward their risky investments, and that information should be disseminated more often, and more comprehensively, about the operations of Barnbougle Dunes. Alternatively, Wood said Sattler had offered to buy out any shareholder at a fair valuation, but would not himself pay for the valuation. Sattler had suggested that, if the minority shareholders were interested in securing an independent valuation that would stand up to scrutiny, being a valuation "for the minority shares as opposed to the total asset or leasehold", he, Sattler, would then buy out the interested parties at that valuation. Wood said: "Sounds fair to me". In conclusion, Wood expressed the view that it was "decision time", and that the minority shareholders had a choice: "Get a valuation and exit, or keep on purely as an investor as we seek to build a dividend stream". There is no evidence as to the response of any of the minority shareholders to this email. 396 After receiving Wood's email of 7 July 2008, Hetrel had numerous conversations with Sattler in which he asked him, for example, what infrastructure would service the second course, how "the maintenance regime" would work over the two courses, where the further accommodation was to be built, and how "the food and beverage" would work across both courses. According to Hetrel, Sattler's response "was always to the effect that he did not yet know". Sattler accepts Hetrel's evidence in these respects, but adds that he "was still considering what proposals [he] would put to the Board of LGT as to how the two courses could co-exist in a mutually beneficial way". Hetrel's evidence, which Sattler did not dispute, was also that he had said to Sattler several times during this period that, "as long as the golf traffic was coming through Barnbougle Dunes, [he, Hetrel] would not have a problem with the second course, but [he] needed to understand how it was going to work"; and that, "so long as all of the infrastructure was in … the LGT land, [he] did not have a problem." 397 The next Board meeting of which there are minutes in evidence is that which was held on 15 October 2008, attended by Dixon, Hetrel, Sattler and Wood. In the context of a discussion about impending capital expenditure, Wood asked Sattler about possible changes to the shape of the car park. Sattler responded that "different options would be considered, one of which would be a village centre with the focus on the golf course". He did, however, want to "monitor the economic situation for the next year or two before making such decisions". On the subject of the payment of dividends, Sattler said that this should not be considered until after the arrears of interest on directors' loans had been paid. He referred also to the question whether such loans "should be repaid or converted to shares", his own view being the former. Hetrel agreed. There was a discussion about whether a valuation of shares should be obtained, with Hetrel opining that it should, Sattler opining that it need not and Wood suggesting (without support from Hetrel) that shareholders should be advised that the taking of a valuation had been deferred. It was decided to defer a decision on the payment of dividends until after it was known whether the loans would be converted to shares, to pay the interest which had accrued on the loans down to 30 June 2008, and to obtain a valuation thereafter, and after the completion of the 2008 accounts. 398 Under the heading "developments", the minutes of the meeting on 15 October 2008 record a report by Sattler on the progress of a runway which he was constructing on his land adjacent to the golf course. He also said that "the spa is on hold and Lost Farm is at least two years away". 399 It is established on the pleadings (but not the subject of specific evidence) that the construction of the Lost Farm golf course was commenced "in or about October 2008". How that lines up with the circumstance that Hill was engaged there to some extent in the period leading to 2 July 2008 was not explained. However, the engagement of Hill at Lost Farm became a source of irritation again in October. That was during a visit by Coore, Axland and a colleague, which Coore situates in the period 10-18 October 2008. He and his colleagues made major refinements to the routing in a number of respects. They worked on the ongoing construction concept, as well as flagging work in the field. 400 During the period of Coore's visit, Wood was playing golf at Barnbougle Dunes when he noticed that there had been "a very significant falling-in" of the wall of a bunker on the 12th hole caused, it would seem, by exposure to the elements. Wood had been told by a staff member at Barnbougle Dunes that the bunker had been in that situation for four or five days. He encountered Hill later in that day, working on Lost Farm as it happened, and expressed his concern about the bunker. Coore and Axland happened to be present at the time of this conversation. Coore gave the following evidence about it: As Dave Axland and I were working at the Lost Farm site late one afternoon we meet Peter Wood who had also been walking Lost Farm. As the three of us walked the access road into the site (in front of what is now the 7th green) we meet Phil Hill driving his small truck into Lost Farm. My impression was that Phil was coming from Barnbougle Dunes as he sometimes did after the work day was completed. When Phil stopped to acknowledge our presence, Peter Wood began a conversation regarding a fairway bunker on the 12th hole at Barnbougle Dunes. Apparently, from the conversation a piece of the bunker edge had collapsed into the bunker. Dave and I listened as Peter became extremely agitated about this collapse and I recall him referring to it as a "disaster" and expressed the opinion that this collapse would compromise the quality of the hole and that he either had sent, or intended to send, photographs of the bunker to Tom Doak to get his opinion on what remedial measures should be taken. As the discussion proceeded, Peter basically accused Phil Hill of neglect of duty for allowing this collapse to happen and not having yet repaired it. Axland's evidence was as follows: I was very surprised at the manner in which Peter Wood approached Phil Hill in my and Bill Coore's presence over an issue he had with a bunker on the 12th hole of Barnbougle Dunes. Given the statements that were being made by Peter Wood and the excessive language he was using, I became aware that he was making serious and extreme allegations of neglect on the part of Phil Hill in relation to the upkeep of Barnbougle Dunes. Neither Coore nor Axland was cross-examined. I accept their evidence on this subject. I also accept the following evidence of Hill, upon which he was not cross-examined: I recall that there were constant and fierce windstorms from before Christmas 2008 to about March 2009. Sand was blowing out of the bunker on the 12th Hole and spreading onto the fairway. That bunker is very exposed. I do recall that Peter Wood was very concerned about the state of the bunker and what he said was my failure to attend to it. It was a busy time of the year. Usually, green keeping staff do not have the manpower to perform restoration works until the winter. As I recall, the bunker needed about two truckloads of sand. However, the condition of the turf meant that I was forced to use small Toro four-wheel vehicles to cart sand into the bunker. It took several weeks of overtime work. 401 In November 2008 Miss Sattler, who was then working three days per week only for LGT, asked Dixon to send her a copy of his earlier unsuccessful application for funding for Lost Farm from the Scottsdale Fund. On 11 November, he did so, but Miss Sattler could not open the electronic file which he sent, so she asked him to send it again. At this point, Dixon asked Miss Sattler why she required the application, and she told him that she was preparing "an application for a wellness centre" (Dixon's evidence). Dixon told her that it was something that she would have to do in her own time, to which she replied, according to Dixon, "That's fine. That's what I'm going to do." What Miss Sattler was in fact doing was preparing an application to AusIndustry for funding for the construction of a wellness centre, such funding to come from the North East Tasmania Innovation and Investment Fund ("the NE Tas Fund"). She did that on the instructions, and in the name, of Sattler, and without the knowledge of the LGT Board. Sattler had suggested that funding be obtained for this project, if possible, because it was unlikely to be profitable in its own right. At the time, Miss Sattler was not alive to the distinction between the business of LGT and the nascent business of her father at Lost Farm, and she did not keep a record of the time she spent on the NE Tas Fund application. There is, however, nothing in the evidence which would justify a finding that she did not comply with Dixon's instruction to attend to such matters in her own time. 402 The application to the NE Tas Fund was made by Sattler, and in his name, on 12 December 2008. It described the project to which it related as "development of the council approved Wellness Centre and Deluxe Villa". The application continued: The wellness centre and superior villa have been proposed and designed in response to the increasing demand for health and wellness services at Barnbougle Dunes. The current spa and wellness services offered at Barnbougle are of second rate quality and currently the service must be practised in less than ideal facilities (usually in the suite of the guest). The supply of wellness services is limited in growth due to the inferior facilities, though service demand continues to grow each season and is expected to increase two fold with the introduction of the second course at Barnbougle. With the second course already under construction, it is estimated that business to Barnbougle and the NE of Tasmania will increase up to three fold, which in turn shall directly correlate to an increase in demand for top class wellness facilities. It was said that, in the then current economic climate, "the construction of the second course will take priority in terms of internal funding from RG Sattler Nominees as this is the core business at Barnbougle Dunes". If one half of the required funds were sourced by "Barnbougle", and the other half "by local government", construction of the wellness centre could commence "immediately". Otherwise, "it shall be shelved indefinitely". 403 The application form had a section devoted to the "Evaluation Criteria", namely, the number of sustainable new jobs to be generated through the project, the demonstrated capacity of the organisation successfully to undertake the project, outlining the skills, experience and resources to which it would have access, the level of funding the organisation was committing to the project, and the extent to which the project did not involve the movement of business activity from elsewhere in Australia. A key aspect of the application was that "the organisation" (to use the terminology of the pro forma) would be committing funding to "the project" additional to that which would be obtained from AusIndustry, if the application were successful. The architecture of the application was that $360,000 was sought for the construction of a wellness centre, and would be entirely devoted to that purpose. Additionally, "the organisation" would commit the sum of $490,000 to the construction of the deluxe villa. It was stated that the cost of the villa would "be financed by Barnbougle Dunes". As to whether the project would involve the movement of business activity away from elsewhere in Australia, the following was stated in the application: The organisation has been established for 5 years operating under R G Sattler nominees, a company that has proved financially viable for 30 years. Barnbougle Dunes, the operation that shall be further developed with the assistance of this grant has proven to be financially profitable since business commenced in 2004. It was said that "the key drawcard to Barnbougle Dunes is the Golf Course". It was said that the addition of a wellness centre to the current facility "shall open up doors to the lucrative spa market". A spreadsheet was attached to the application which forecast a net profit, after expenses, of $5,480 for the wellness centre in year one, of $31,000 in year two and of $52,750 in year three. 404 The Board of LGT met again on 7 February 2009. As recorded in the minutes under the heading "Developments", Sattler reported that six holes at Lost Farm had been shaped and were waiting for Coore to arrive "to finish off". Sattler "tabled the idea of running a village type of environment around the existing car park". He "reiterated his intention of developing Lost Farm under Sattler Pastoral structure and tabled the idea of running both facilities under the one structure for simplicity [sic] sake". He "tabled the motion of changing LGT into investment company structure with no operational involvement at all". In his evidence in chief, Sattler said that he had in fact put three alternatives to the Board on 7 February, the content of which appears, if at all, only ambiguously in the minutes. Those alternatives were (1) that Barnbougle Dunes and Lost Farm could be operated completely separately; (2) that "LGT could take a commission" (presumably for golfers playing at Barnbougle Dunes under the control of Sattler); and (3) that LGT would be converted into an investment company with no operational involvement at all. What is clear is that Wood and Hetrel rejected the third alternative, and they did so then and there, and categorically. The minutes record that they were "not keen on idea at all". Under cross-examination, Sattler accepted that they "reacted very strongly" to [this] alternative, that they "were quite thrown by it", and that they were "very much against it". 405 What is less clear is whether Sattler's evidence as to the presentation of these three alternatives on 7 February 2009 should be accepted. Under cross examination, Hetrel said that he did not recall the alternatives in that form. He could recall only that Sattler had proposed a village-style development and what was effectively the third alternative (more or less as recorded in the minutes). I note, however, that, in his affidavit in reply which addressed Sattler's affidavit, in which the three alternatives had been set out, Hetrel said nothing about them. Wood, however, did so in his affidavit in reply. He referred to Sattler's evidence as to the three options, and did not suggest that that evidence was wrong. Rather, he said that Hetrel and he were "opposed to all of the options proposed by Sattler". Under cross-examination, Wood said that "three suggestions were made by Richard and none of them met with our approval." When Sattler was under cross-examination, he referred to the fact that he had presented three options to the meeting on 7 February, and counsel for LGT showed no interested in challenging him on that, or on what he had said in his affidavit. In the circumstances, I am disposed to accept Sattler's evidence on the subject. 406 At the meeting on 7 February 2009, Sattler also mentioned the "spa" (ie the wellness centre). The minutes record that he told the Board that the spa was waiting on the outcome of a grant application, and that, should the application be successful, the spa, and an adjacent villa, would proceed. The minutes do not record, but Hetrel stated in his evidence, that Sattler said that it was Sattler Nominees that had sought the grant, and that the spa "would be nothing to do with LGT". If the spa went ahead, it would be operated "through the Sattler Pastoral company structure". Sattler did not dispute this aspect of Hetrel's evidence. Both Hetrel and Wood recall that the former baulked at this proposal. Wood cannot now recall what Hetrel said, but Hetrel said that his comment to Sattler was: "Hang on, this is something we've discussed doing". Again, Sattler did not dispute that Hetrel made a comment to that effect. 407 The other main subject of discussion at the meeting on 7 February 2009 was the recurring one of the need for a valuation of the business or, as Sattler and Wood considered preferable, an independent valuation of the "share holding values" of LGT as a private company. It was agreed by Sattler, Wood and Hetrel that the cost of a formal valuation of LGT was prohibitive. The subject of loan accounts, and (as stated in the minutes) "Loan Repayments v Dividend policy" was also discussed. 408 On 13 March 2009, Miss Sattler (of Sattler Nominees) was notified by AusIndustry that the application for funding to assist in the development of the wellness centre and the deluxe villa at the Barnbougle Dunes golf links had been approved. 409 On 20 March 2009, Wood sent a "shareholder update" to the shareholders in LGT. On the subject of the valuation of minority shareholdings, he said that the Board had made initial contact with "a large independent valuer", with a view to getting a valuation of the company and the various shareholdings in it, and also to clarifying "exactly what the procedures are should anybody wish to exit, and what each of us can and cannot do". Although, according to Wood, that would be "a slow and frustrating exercise", he said that it was critical "given the impending opening of Lost Farm and possible restructure of operations to accommodate same". He added that "written legal opinion on the rights of minority shareholdings of various sizes will be a priority". 410 In his report of 20 March 2009, Wood said that Coore and his team expected to commence seeding the course at Lost Farm that month, and that the course was "certainly on target for its official opening at the end of 2010". With respect to the wellness centre, Wood said that Sattler had received "a government loan" (by which he meant the NE Tas Fund grant) to build a health spa at Barnbougle. He added: "It is not proposed that LGT have any equity in the project, as it is contingent on other developments [Sattler] is undertaking". Wood also addressed the subject of shareholders' loans, and their relationship with the dividend policy of LGT. He said that the Board had decided "to clear shareholders' loans at the earliest". That is to say, the loans would be repaid, rather than being converted into equity. That meant, according to Wood, that there would be no dividend paid "for the '08 year or '09". 411 On 24 March 2009, Wood happened to be at the Barnbougle Dunes clubhouse. Sattler handed him a single-page typed document which, because of its importance in the present case, should be set out in full: Project - Almost immediately 1. Health Spa - spa, sauna, gym, massage rooms, toilets etc 2. 4 bedroom executive villa - similar to bunker villas 3. 15 cottages similar to cottages 17 - 22 4. Infrastructure a. Designated check in / check out 80 sqm b. Sports bar 100 sqm - evening overflow from existing clubhouse caused by increased numbers from extra accommodation and to stop movement into Bridport Hotel - will include TAB and Keno c. Bottle shop 50 sqm - to attempt to slow down the amount of beverage carted into accommodation purchased from elsewhere d. Pro-shop 100 - 150 sqm - to provide enough space to display stock for both courses and more convenient to carpark / 1st tee e. Fish & Chips / Pizza 85 sqm - to cover non restaurant users and overflow from increased size restaurant and stop drift of people not wanting formal meal or eat in room Project - Later date 5. Maintenance shed with façade of old petrol station and offices / storage 400 sqm Aims - Demand for the expansion is created by the increase of 60% in accommodation (numbers available) providing for the second course - To keep main centre of general development in the current area - Provide overflow for evening use of bar (current) - Supply alternative to migration into Bridport of alternative food supply (cheap options) and gambling - Provide designated check in / out of accommodation and area to pay accounts rather than using pro-shop staff - Large pro-shop to include main area for all retail shopping for both courses. Links Golf benefits Make current course the centre for all major activities (village styled) using current clubhouse as only restaurant / conference venue in this area. I believe Links Golf will be for [sic] better served from being the hub of activity into the future than its current status with the golf and club house. It must also be noted that with the increased accommodation the control of this will go back to being a separated entity and management rather than a commissioned structure as is the case at present. Alternative Relocate new infrastructure and accommodation onto the Lost Farm site. Together with this document, Sattler handed Wood a hand-drawn sketch, the intent of which was to reflect the typed document. 412 The typed document dealt first with the new construction projects which Sattler had in mind for Barnbougle Dunes. They included the wellness centre (described on the document as a "health spa"), the executive villa and 15 additional cottages. The villa and the 15 cottages were, of course, appropriately described as "accommodation" and would, therefore, inevitably be built and operated by Sattler, if they were to exist at all. The sketch which Sattler gave to Wood located the wellness centre closest to the coast of all existing and proposed structures at Barnbougle Dunes, and was described as a "beachside spa". The proposed executive villa was to be slightly inland of the wellness centre. 413 It was Sattler's proposals under item 4 of his document - headed "infrastructure" - which caused the greatest controversy as between him and his fellow directors, and which ultimately led to the collapse of such unity as there had been on the Board of LGT. Those proposals gave effect to Sattler's idea, which had been mentioned a number of times previously, that there should be village-style development around the car park at Barnbougle Dunes. As will be apparent, his proposals had five elements. There was to be a new reception area which would cover, as I understand it, both the accommodation and the golfing aspects. There was to be a sports bar, a bottle shop, a pro-shop and a fish and chips/pizza shop. The notes beside each of these items in Sattler's document explained clearly enough his rationale for the development in question. Sattler's intention was that this village-style development, and the businesses involved, would service the patrons who came to play either or both of the golf courses - Barnbougle Dunes and Lost Farm. It was also his proposal that the construction required would be undertaken by Sattler at his expense, and the resulting businesses would be run by him and for his benefit. There was no suggestion that LGT, as occupier, would receive any rent for the space involved, but neither was the possibility excluded. 414 At the time he handed the typed document and the sketch to Wood on 24 March 2009, Sattler said that he required an indication from LGT whether it would agree to the proposals within two weeks. He said that he would exempt himself from any decision of the Board in that regard, because of his conflict of interest. He said that, if the Board did not agree with the proposals, he would withdraw them, and would undertake the intended developments at Lost Farm. 415 According to Wood's evidence, which was not challenged by Sattler, the two men had a conversation to the following effect: Wood: But we've got a pro shop, are you going to do a pro shop as well? How is this going to work together? Sattler: No, I'm going to build a much bigger pro shop and close down the LGT pro shop. Wood: What about the sports bar? We've already got a bar. Sattler: I'm going to close the clubhouse bar from 6:00 pm so that it is clear for the restaurant. LGT can have the restaurant. Wood: Isn't the restaurant going to be affected by the fish and chip shop and pizza shop? Wood put his head in his hands and said to Sattler, "you just can't do this". Sattler said that he would arrange for the documents to be sent to Hetrel. 416 After this conversation with Sattler, Wood telephoned Hetrel, and passed on the substance of what Sattler had said. The following day, 25 March 2009, Dixon (presumably on the instructions of Sattler) sent a copy of the typed document, and of the sketch, to Hetrel. According to the evidence of Hetrel, he then telephoned Wood who was still at Barnbougle Dunes. This may have been the same telephone conversation as referred to by Wood, and it may have been on the same day as that upon which Wood spoke to Sattler, but nothing of substance turns on these distinctions. According to Hetrel, it was in this conversation that Wood explained to him what Sattler proposed. Hetrel said that he would speak to Sattler. He subsequently received a call from Sattler, and their conversation was to the following effect: Sattler: I met with Peter (Wood) today. He's all distressed, his head's in his hands, it's like it's the end of the world, I don't understand what the problem is. Hetrel: The problem is the proposal that you've put forward (being Sattler's proposal for the development of the Lost Farm). Sattler: Well accept it or I will move all infrastructure to the Lost Farm. You've got 2 weeks. Hetrel: We now have a large problem. 417 On 30 March 2009, Wood sent a copy of Sattler's proposal to the shareholders in LGT, with a copy to Doak and Keiser. He explained that Sattler had in fact received a grant, not a loan, from the government to build the "health spa". He explained that this was contingent upon Sattler undertaking further developments, including the provision of more accommodation to cater for the new course. He stated that Sattler had indicated that he intended to act quickly, and to add further facilities, including a larger pro-shop, a reception area, fish and chips and pizza shops, and a sports bar with betting facilities. In his email, Wood continued as follows: Richard has indicated his first preference would be to place this infrastructure around the existing car park and close to the clubhouse, but our lease precludes him from undertaking such activities (being competitive with our company Links Golf) without our permission. As he has a clear conflict of interest in this matter Richard has indicated he will not vote at Board Level on the decision - however he wants a decision within 2 weeks and if we do not agree he will build elsewhere - either at Lost Farm, or outside the leasehold area. At present Links Golf Tasmania P/L generates revenue via: Green fees, pro shop, bar, restaurant, management of accommodation, and some minor conference income. Richard has indicated he wants no further involvement of LGT in the new developments, and that this is not negotiable. In taking over pro shop, and instituting a sports bar, and also taking away management of accommodation, Richard's proposals will have a major impact on the profitability of LGT going forward. However Richard advises that LGT will be able to expand the restaurant area, and will directly benefit from increased patronage because of the new accommodation he will put in. Alternatively if Justin and myself do not agree with the proposal soon Richard advises he will still proceed, but outside the leased area at Barnbougle, or by moving the infrastructure to Lost Farm…. And moving the infrastructure away also has implications to the future profitability of Links Golf Tasmania P/L. Justin and I need to make decisions on behalf of all shareholders, but particularly the minority shareholders, in what I believe is a watershed period in the Barnbougle Dunes project. If the times at which various emails are recorded as having been sent are to be believed, about 90 minutes after Wood sent the above email, Sattler sent the following email to Wood and Dixon, with a copy to each of Hetrel, Ramsay, McCleery, Haddon, Marshall, Doak and Keiser: Please disregard the attached request and email below. My preliminary discussions have evidently caused much emotion and as I do not believe an understanding of the projects benefits to LGT Pty Ltd will be recognised the proposal has been withdrawn. What Sattler's email described as "the attached request and email below" was a reference to Wood's email to the other shareholders of the same day, 30 March, 2009. By his email of that day, Sattler withdrew the proposals which he had put to Wood on 24 March 2009, and which Dixon had sent to Hetrel on 25 March 2009. 418 On 31 March 2009, Miss Sattler sent an email to Castray at AusIndustry, referring to the funding which Sattler was to receive for the construction of the wellness centre and deluxe villa. She said that Sattler was "looking to relocate" these facilities "to the site of Barnbougle's second course - the Lost Farm". She said that, after discussions with the project architect regarding the new location, it was estimated that Sattler would have "lodged plans and received council feedback" within 60 days. On the following day, 1 April 2009, Castray replied to Miss Sattler, saying that the project manager had approved her request for a change of location to the wellness centre and the deluxe villa, on the basis that the same customers would be able to access the new site, and, in the event that the new site was not approved by the council, these facilities would be constructed on the original agreed site. 419 In his evidence, Hetrel said that it was in March 2009 that he engaged Tasmanian solicitors to act for him personally, and instructed them to make two freedom of information requests: one to the Tasmanian government, to obtain documents relating to the funds advanced to Sattler in respect of the Lost Farm golf course (ie the $4.5m loan), and the other to the Commonwealth government, so as to obtain documents relating to the grant received under the NE Tas Fund. 420 It was also in late March 2009 that Hetrel and Wood contacted the Melbourne solicitors who now represent LGT in this proceeding in order, according to Hetrel - … to seek advice in relation to Sattler's development of the Lost Farm golf course, his proposed development of the Further Facilities, the fact that both the Lost Farm and the Further Facilities would operate in competition with LGT, and the conflict issues raised by these matters given that Sattler was a director and CEO of LGT at the relevant time. This development, and that to which I have referred in the previous paragraph, each made its contribution to the course of the next Board meeting of LGT. 421 That meeting was held on 7 April 2009. Wood, Hetrel and Sattler attended. Hetrel provided the wherewithal to take a transcript of the proceedings in the meeting: according to Sattler's evidence, "the recorder was in the middle of the table". As submitted on behalf of LGT, that circumstance, of itself, speaks volumes of the extent to which the relations between the directors had deteriorated subsequent to Sattler's proposal of 24 March 2009. As suggested by Sattler at the outset of the meeting, uncontroversial and operational matters were dealt with first, and matters relating to Lost Farm, and to Sattler's proposals, were discussed towards the end of the meeting. 422 Referring to his proposal of 24 March, Sattler said: "We're getting too emotional and I was getting very bad vibes about what was being said and once solicitors started to get involved." Sattler was mildly critical of Wood's email of 30 March 2009 for not having characterised his (Sattler's) approach as one in which he had "decided to go back and put everything in as a family company". Sattler continued: Because it was just little things like that. Like I've never brought that out before. A bit like up there carefully, that was in '89 - '90, showing the Los [sic] Farm. Like this issue of whose entitled to be in what and all that sort of thing is far too emotional for me, because these plans are about before Greg Ramsay ever came in. And I've told Greg and I've shown him that actual thing. I said I don't produce that because we decided the marketing story was a young kid came to me, not plans to do even in 2000. It was way before Greg Ramsay every [sic] come on the side [sic]. So this thing, 'Oh we've got a right to be in this, that and the other', I know you mightn't believe on the spa, but the fact is that the spa is part of the future developments. Now when I get cause to say, solicitors are trying to access my private files, then I find it's quite offensive. So if that's to take the emotion out of it, I've decided well I'll withdraw and anything I do will be done on the basis that it doesn't affect Links Golf. …. It's on a separate area. It won't be on the loose ground and I'll just go on. Because I don't need people trying to access my private files through Freedom of Information to find out what I do and how I do it. If that's an issue, the files are there, if anyone wants to have a look at them, wants to ask questions, I'm quite happy with that, but not by trying to get into my files using a bloody government technicality. Not on. Quite offended. And that's some of the reasons why I don't want to go on with Links Golf. It is quite apparent from this that, by the time he sent his email on 30 March 2009, Sattler had become aware at least of Hetrel's freedom of information requests, and that that circumstance was quite significant in his decision to withdraw his proposal of 24 March. 423 Sattler said that "any future developments will be done without needing to consult this Board". Hetrel suggested that "we've got a huge problem haven't we?", to which Sattler replied "no, I haven't a huge problem at all." The proceedings then became more argumentative, at least as between Hetrel and Sattler. Sattler asked, rhetorically, where LGT thought "that its got rights to what I'm doing over there", and Hetrel said that he could answer that question. He said that all of the shareholders had put in start-up capital, and had taken a risk, along with Sattler as the majority shareholder. To this, Sattler responded that, from the outset, it was he who had underwritten the project and produced all the money. He said that, without that underwriting, "… it was dead. It was buried, it was already in default of the lease". Hetrel said that there were others, minority shareholders, without whose cash the project would not have happened, a proposition which Sattler described as "crap". A little later, after some heated discussion, Hetrel said that "no-one's saying" that the project would never have happened without the minority shareholders' contributions, to which Sattler retorted that Hetrel had just said that. 424 For some time, the discussion at the Board meeting related to the extent to which the contributions of the minority shareholders had been necessary for the Barnbougle Dunes project to go ahead. Sattler reiterated his position as follows: Well I'm just making the point in answer to saying, if it hadn't of been that everyone was equal contributor. They weren't. I underwrote the project, other minority shareholders came in, quite happy, never said no, we could have done it without you. There was a big debate whether you were allowed to come in, Ramsay pleaded for it, so we did. So I'm not saying anything more than that. They're facts. Quite happy with that. But that doesn't give the rights to that company to go to the next stage. Because it's the same as like the grant for the sewerage, the water and the power, but that grant was given to me personally, not to Links Golf. So Links Golf doesn't own the power, the water, the sewerage, the telephone or the drinking water, Richard Sattler does personally. Now the government told me to that meeting for them to activate it again, not to bring Greg, otherwise it probably won't happen. So Greg always thought he'd missed out on that meeting. I was told not to bring him. See I don't want to make a fuss about this, but when I get told that I've had bloody solicitors searching my files for information that might incriminate me for doing something wrong, then it's right up my nose, right up my nose, about as far as it can go. 425 A discussion followed with respect to the extent to which Keiser was still involved in the proposed Lost Farm development. In the course of that, it was apparent that Sattler was not impressed that Wood had sent his email of 30 March 2009 to Keiser. The directors discussed, still in a heated and contentious way, whether Sattler was entitled to proceed with Lost Farm without involving LGT, with Hetrel contending that Sattler had no right to "[m]arket off all of our intellectual property that we've created here, even if we are minority shareholders". To this, Sattler said that it was "you blokes" who had had the "free ride". 426 Eventually, Wood said that "we've degenerated to disagree on everything at this stage". He said that there was "clearly a difference in opinion" and that he and Hetrel, as minority shareholders, had taken legal advice. He proposed that solicitors be appointed to act for the company, and Hetrel seconded that proposal. Over Sattler's opposition, the Board so resolved. 427 It was the events to which I have just referred which ultimately led to the commencement of the present proceeding. Before turning to that, however, I shall conclude my broad narrative of the relevant events. 428 On the same day as the Board meeting, 7 April 2009, Sattler sent an email to Keiser, in the following terms: Mike - Unfortunately we had a very heated board meeting for links golf yesterday. It appears they cannot accept that they are not included in the lost farm. Their behaviour only convinced me of the correctness of the decision (purely relates to very large egos) For your info I did confirm that we did have a documented loan agreement on the first course containing info relating to a half million loan you kindly offered to help me take the decision to take over and build the course. With the lost farm I stated that we did have an association and that details of that are between ourselves and not of any relevance to others Keiser replied the following day, saying to Sattler: "Given your projected cashflow, you'll soon pay off the squeaky wheels and have a very, very nice family-owned resort - just like me!" 429 On 21 May 2009, Miss Sattler, acting on the instructions of Sattler, sent an email to AusIndustry inquiring whether a new agreement for the wellness centre grant would be drawn up, and emphasising that the relevant site should be referred to as "the Lost Farm course", and that the relevant developer should be referred as "RG Sattler Nominees - Richard Sattler". She asked that there be no mention of Barnbougle Dunes in the "final legal document". As Sattler accepted in his evidence, this was, of course, done to ensure that the legal documentation executed with AusIndustry corresponded with the recent decisions of Sattler, namely, that the wellness centre would be built on the Lost Farm land, and would have nothing to do with LGT. A final version of the agreement was sent to Sattler on 26 May 2009. The agreement was executed on 17 June 2009. 430 On 3 June 2009, on the instructions of Sattler, Thomson applied for a planning permit for a lodge, clubhouse, restaurant and wellness centre at the new Lost Farm golf course. 431 On 17 June 2009, Sattler gave notice of a general meeting of the members of LGT, to be held on 16 July 2009. The purpose of the meeting was stated to be consideration of the following matters: 1. To remove Richard Geoffrey Sattler, Justin Charles Evan Hetrel and Peter Andrew Wood as Directors of the Company with effect from the election of their successors. 2. To elect three Directors in place of Richard Geoffrey Sattler, Justin Charles Evan Hetrel and Peter Andrew Wood from those persons who lodge nominations. However, before the meeting was held, the events referred to in the next paragraph intervened. 432 On 15 July 2009, the day before the date fixed for the general meeting, LGT commenced a proceeding in this court against Sattler and Sattler Nominees: VID 523/2009. Supported by a Statement of Claim, LGT's Application claimed declarations that Sattler had failed to exercise his powers and to discharge his duties as a director in good faith in the interests of LGT and for a proper purpose, in contravention of s 181 of the Corporations Act; that he had improperly used his position as a director and CEO of LGT to gain an advantage for himself and Sattler Nominees and to cause detriment to LGT, in contravention of s 182 of the Corporations Act; and that he had improperly used information obtained by reason of his position as a director and CEO of LGT to gain an advantage for himself and for Sattler Nominees and to cause detriment to LGT, in contravention of s 183 of the Corporations Act. Orders for compensation were sought. LGT also sought declarations that Sattler, or Sattler Nominees, held the proceeds of the original $900,000 loan from the Tasmanian government as constructive trustee for LGT; held any interest in the business being conducted on the Lost Farm course as constructive trustee for LGT; held any interest in the accommodation constructed on the Lost Farm course as constructive trustee for LGT; held any interest in the wellness centre at Lost Farm as constructive trustee for LGT; held the proceeds of the $4.5m loan from the Tasmanian government as constructive trustee for LGT; and held the proceeds of the NE Tas Fund grant of $360,000 as constructive trustee for LGT. LGT also sought an account of profits in relation to these activities and loans. It sought orders requiring Sattler, or Sattler Nominees, to transfer to LGT the proceeds of these loans, and the interests which were held in the businesses and properties referred to. LGT also sought rectification of the share register by the cancellation of 900,000 ordinary shares registered in the name of Sattler Nominees. 433 The general meeting of LGT was duly held on 16 July 2009, and all members were either present or properly represented. The motion that Sattler, Hetrel and Wood be removed as directors of LGT was carried, by a majority. Motions that Clayton, Dixon and Harvey Gibson ("Gibson") be appointed as directors of LGT were carried, again by a majority in each case. 434 One of the first acts of the new Board of LGT, now under the chairmanship of Gibson, was to instruct LGT's Melbourne's solicitors to discontinue the proceeding which had been commenced on 15 July 2009. A Notice of Discontinuance was filed on 20 July 2009. By letter to shareholders dated 3 August 2009, Gibson informed them that the proceeding had been discontinued, as the result of a resolution of the Board "following independent legal advice". He stated that, although Sattler strenuously denied the substance of the claims in the proceeding, the Board had resolved to request him to provide a written response to the allegations made. He said that, once it had received that response, the Board would take independent legal advice, and determine how LGT should proceed, and whether proceedings should be instituted. 435 On 21 August 2009, Hetrel responded to Gibson's letter of 3 August 2009 accusing him, Dixon and Clayton, in effect, of being too close to Sattler to make a decision which was in the best interests of LGT. He said that, unless Gibson advised the shareholders by 9 September 2009 that LGT proposed to proceed with the proceeding against Sattler and Sattler Nominees which had been withdrawn, or gave adequate reasons for not doing so, he and Wood would make application to the court for leave to bring that proceeding on behalf of the company in order to protect its interests. On 8 September 2009, Gibson responded that the matters raised by Hetrel would be considered at a Board meeting to be held on 10 September 2009. 436 On 11 September 2009, the council granted the application for a planning permit, made by Thomson on behalf of Sattler on 3 June 2009, in relation to the new clubhouse, accommodation, lodge, restaurant and wellness centre at Lost Farm. 437 On 16 September 2009, Gibson wrote to Hetrel, informing him that the Board had considered Sattler's response at its meeting on 10 September 2009, but had resolved to seek additional information, and clarification on a number of matters raised in that response. 438 On 13 November 2009, a memorandum to the shareholders of LGT was written, presumably by or with the authority of Gibson. I say "presumably" because the copy of the memorandum tendered by the defendants without objection is incomplete. In those circumstances, I propose to say no more about it than that it appears to set out a brief summary of Sattler's responses to the allegations made by LGT in the proceeding issued on 15 July 2009, and a statement of the conclusion drawn by the Board in each case. The result of the Board's deliberations was that that proceeding would not be resuscitated. 439 On 15 January 2010, Gibson wrote to the shareholders of LGT, informing them that Sattler had resigned as CEO, effective from 13 January 2010. 440 The present proceeding was commenced on 26 March 2010. 441 In early October 2010, there was what the defendants described as the "soft opening" of Sattler's new golf course at Lost Farm. At about the same time, the restaurant at Lost Farm opened. 442 The official opening of the Lost Farm golf course took place on 10 December 2010. At that time, the wellness centre at that course also opened for business. It was not until April 2011 that the reception area, sports bar and pro-shop opened at Lost Farm.

LGT's CASE 443 In its Further Amended Statement of Claim, LGT alleged that, by reason of being a director and the CEO of LGT, Sattler owed LGT various duties, namely (qua director) a duty of loyalty and fidelity, a duty to avoid conflicts of interest, a duty not to misuse his position, or knowledge or opportunity resulting from it, to his, or a third party's, advantage, a duty not to act adversely to the interests of LGT, a duty not to profit from his position to the detriment of LGT, and a duty to account to LGT for any benefit or gain obtained by him in certain circumstances; and (qua CEO) those same duties, and a duty not to compete with LGT. It was also alleged that Sattler owed LGT duties arising under ss 181, 182 and 183 of the Corporations Act. 444 It was alleged that LGT had the intention of building, developing and operating a second golf course on the land at Barnbougle, and of establishing that course as an extension of its own business, in each case once the first course (Barnbougle Dunes as such), and the clubhouse, pro-shop, accommodation and conference facilities were established and operating profitably. It was alleged that the first course, and those additional facilities, had been built and developed, and were operating profitably, by early 2007. It was alleged that LGT then had the opportunity to build, to develop and to operate the second course, and was entitled to the benefit of it. 445 It was alleged that LGT had various other opportunities and was entitled to the benefit of them, namely, the opportunity - to build, to develop and to operate accommodation facilities on the second course; to build, to develop and to operate a wellness centre; to raise funds from certain named governments and public authorities, including the opportunities involved in the original loan of $900,000 by the State government to Sattler, the later loan of $4.5m by the State government to Sattler and the Commonwealth government grant of $360,000 for construction of the wellness centre; to raise funds from investors, including in particular Keiser; and to build, to develop and to operate ancillary retail businesses on the land which was leased to it and on the second course. It was alleged that each of these was an opportunity which Sattler or Sattler Nominees "learnt of, obtained and/or received by use or by reason of his fiduciary position", and that Sattler had diverted, or proposed to divert and/or to take advantage of, each of those opportunities for himself or Sattler Nominees rather than for LGT. 446 It was next alleged that, in respect of the second course, the wellness centre, the accommodation at the second course, and the ancillary retail businesses referred to, Sattler was carrying on, or was intending to carry on, business in competition with LGT. 447 LGT also alleged that Sattler had used the services of Hill, Ponting, Nichols and Dixon in the establishment of the Lost Farm course; that he had used the services of Dixon in the preparation of the application for funding under the Scottsdale Fund; and that he had used the services of Miss Sattler in the preparation of the application for funding under the NE Tas Fund. 448 In relation to each of the situations in which it was alleged that Sattler had acted in breach of his fiduciary and like duties, it was alleged that he had done so without disclosing to LGT or to his fellow directors the facts, communications etc which were relevant to the opportunities in question. 449 It was next alleged that Sattler or Sattler Nominees had "conducted or proposed to conduct activities in relation to" the opportunities referred to in para 445 above "in circumstances where [such] activities would place Sattler in a position where a conflict or a significant possibility of conflict existed between Sattler's fiduciary duty to LGT and his personal interests in the pursuit or possible receipt of a benefit or gain through those activities". 450 It was alleged that the arrangement under which LGT was paid a 10% commission on accommodation revenue was one which involved LGT in taking all bookings and cancellations, paying for all marketing, checking guests and their luggage to and from rooms, installing and operating software systems for bookings, collecting all revenue, organising and paying for cleaning, providing security, providing a maintenance service and landscaping around the accommodation. It was alleged that this arrangement was neither in accordance with hospitality industry standards nor in the best interests of LGT; and that Sattler implemented that arrangement without proper reference to his fellow directors, despite knowing that it was not in accordance with hospitality industry standards, and despite knowing that it was not in the best interests of LGT. 451 The defendants joined issue at every point of substance in LGT's case. Their positions will be sufficiently disclosed in my reasons which follow. There are only four aspects of the defendants' case that should be mentioned specifically here. The first is a plea of estoppel. Although the Defence as such laid a wide-ranging foundation for such a plea, in their submissions as ultimately made, the defendants confined their estoppel case to LGT's claim for the cancellation of the shares which represented Sattler's capital contributions made possible by the $900,000 loan from the State government and the $500,000 loan from Keiser. In my reasons which follow, I have rejected LGT's substantive cases in relation to these loans, the consequence being that the remedial stage will not be reached. The defence of estoppel, therefore, will not need to be considered. 452 The second aspect relates to laches and delays. It is relevant to LGT's cause of action in equity. In some respects, in the reasons which follow, I have upheld that defence. In relation to the arrangement for a commission on accommodation receipts, it is the basis upon which the defendants will ultimately succeed in equity. In certain other areas, I have addressed the point of laches, notwithstanding that I have rejected LGT's substantive case. I shall leave any further illumination of the way in which the defence is deployed by the defendants to the areas of LGT's case in which it is relevant. 453 The third aspect relates to the statute of limitations. The defendants asserted that the relevant legislation of Tasmania (because the facts of the case occurred there) or of Victoria (because the case was heard there) applied either because LGT's case was based on a trust (the constructive trusts which, in some respects at least, would have stood as the remedy it sought) or because equity would apply the statute of limitations by analogy. In their final submissions, the only (then remaining) part of LGT's case to which the defendants sought to apply the statute were those which related to the $900,000 State government loan and the $500,000 loan from Keiser. As I have decided those aspects of the case in favour of the defendants, I have found it unnecessary to consider the often difficult questions which arise in the application of the statute to circumstances of these kinds. In so proceeding, I believe I am doing no more than following the course of the defendants' own submissions, which concerned themselves, at some considerable length, with the merits of LGT's case in relevant respects. 454 The fourth aspect was a submission that, if Sattler should be found to have been in breach of any duty to LGT, he should be excused under s 1318 of the Corporations Act and, if he should be found to have been in breach of any of ss 181, 182 and 183 of that Act, he should be excused under s 1317S thereof. As will appear from my reasons below, in some respects I have upheld that submission.

The nature and commencement of Sattler's Fiduciary position 455 LGT's pleaded case was that Sattler was in a fiduciary position by reason of being a director and the CEO of LGT. However, during the running of the trial it became clear that the defendants would rely on the circumstance that the prospect of turning Lost Farm to advantage as a golf course was very much part of Sattler's own thinking before he became a director of LGT on 25 November 2002. If so, the defendants might be better able to resist LGT's pleaded case that that opportunity was "learnt of, obtained and/or received by use or by reason" of Sattler's fiduciary position as director. In their final address, counsel for LGT proposed also that Sattler was in a fiduciary position from the very beginning, as a result of him being, it was said, both a joint venturer and a "promoter" of the golf course project. Counsel for the defendants made it clear that they would hold LGT to its pleaded case. They accepted that Sattler was the fiduciary of LGT, but only because of his position as director and CEO. 456 With respect to the "joint venturer" point, I would uphold the position taken on behalf of the defendants. The source, quality and extent of Sattler's fiduciary obligations are matters which lie close to the centre of the present controversy. LGT's pleading is both lengthy and detailed. It contains no allegation that Sattler was ever a joint venturer, either with Ramsay or with LGT. Such an allegation would, I consider, have involved an addition of substance to LGT's pleaded case. No application was made to amend. As a result, the occasion did not arise for the court to consider questions of fairness and prejudice that might have arisen on such an application, or what might have been said on behalf of the defendants in that connection. 457 I would add that any case which LGT might have been permitted to run on the "joint venturer" point would have had doubtful prospects. There was no joint venture agreement, and no conscious consensus of any kind, as between Sattler and Ramsay (or LGT), that they would be joint venturers. Rather, at the outset, it was contemplated that the relationship between Sattler and Ramsay would be that of landlord and tenant. In due course, LGT was incorporated, but it was originally Ramsay's company in which Sattler had no involvement. At that time (ie with respect to the position which obtained before Sattler became a director of LGT on 25 November 2002) it seems to have been a matter of consensus between Sattler and Ramsay that the former's non-cash contributions to the project would ultimately give rise to an equity holding in the business which came into existence. There are several indications in the documentary evidence, and Sattler himself accepted while under cross-examination, that his "in-kind" contributions would in due course stand as his capital in LGT, provided the golf course project was successful. The same could be said of the first two years' rental under the lease executed by Sattler and LGT on 30 November 2001. Had the project not got off the ground at all, there might have been a nice question as to the nature of the obligation, if any, owed by LGT (or by Ramsay, for that matter) to Sattler. That question does not, of course, arise, since the project was successful and Sattler's "in-kind" contributions and LGT's rental obligations were ultimately capitalised and formed part of Sattler's equity in LGT. 458 These distinctions were an aspect of LGT's argument that these early "in-kind" contributions, and capitalised payments of rent, were equity for Sattler, not debts owed by LGT to him. But the notion that Sattler's "in-kind" contributions in 2001 and 2002 would eventually be capitalised goes no further than to imply that Sattler would, in due course, be a shareholder in Ramsay's company (it always being his - Ramsay's - contemplation that a company established by him would be the lessee and operating vehicle for his proposed course at Barnbougle Dunes). The lease of 30 November 2001 contemplated that Sattler would be a shareholder in LGT and that there would be a shareholders' agreement between him and (oddly) LGT itself. None of this would be sufficient to characterise the nature of Ramsay's (and, after incorporation, LGT's) project as a joint venture with Sattler. Sattler made it quite clear, and LGT accepted, that he had no intention of investing cash. Had there been (as there was) a need for capital, Sattler would have been, in my view, under no obligation to make a contribution. 459 The truth of the matter is that Ramsay sought to use a very particular form of capital-raising to fund the construction of the golf course at Barnbougle Dunes. As his early workings show, he would raise funds by way of "memberships", but these would not be memberships in LGT: the obligation of LGT to the "members" would not be in the nature of shares, it would be in the nature of long-term rights to play golf. Funds would otherwise be obtained from government, from Sattler's "in-kind" contributions and lease capitalisations, and from such conventional share capital as Ramsay was able to attract. It was never Ramsay's intention that the project as a whole would be in the nature of a joint venture between himself (or his company) and Sattler. 460 Thus, had LGT conventionally pleaded and run its joint venturer argument, it would most probably have resulted in a finding that Sattler was not a joint venturer in what was, until November 2002 or thereabouts, essentially the project of Ramsay and LGT. Sattler had an interest in that project as lessor, and gave every assistance to Ramsay to cause the project to prosper, but he would not have been found to be a joint venturer as such. 461 With respect to the "promoter" point, LGT's case was concerned not with the quality of the relationship between Sattler and Ramsay/LGT before Sattler became a director with a view to establishing that he was then a fiduciary in a general sense. Rather, the point was deployed in specific response to the defendants' submission that LGT was bound by the shareholders' agreement of 10 January 2003; and then it related to Sattler's position in the context of Bump 'n' Run and McCleery becoming investors in the Barnbougle Dunes project in May 2003 - well after Sattler had become a fiduciary on any view. I propose to deal with this point below in my treatment of the significance of that agreement. The "promoter" point adds nothing, in my view, to LGT's case that Sattler's fiduciary obligations arose before about November 2002. 462 It was in October/November 2002 that Sattler's association with LGT, and with the Barnbougle Dunes project, moved on to a different level. On 25 November, he was appointed a director, from which date, as the defendants admitted in their Defence, he owed the duties of a director to LGT. It was that date which marked the commencement of the term of Sattler's position as the fiduciary of LGT.

The second golf course at Lost Farm 463 At the centre of LGT's case were allegations that Sattler had breached his duty arising both under the rule which prohibits a fiduciary from deriving a profit from his or her position as such and under the rule which requires the fiduciary to avoid any situation in which there is a sensible possibility of a conflict of interest (or of interest and duty) arising. LGT relied specifically upon the judgment of Deane J in Chan v Zacharia (1984) 154 CLR 178, 198-199, where his Honour referred to these rules as "themes": The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one "fundamental rule" embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the "use of fiduciary position" doctrine is but an illustration or part of a wider "conflict of interest and duty" doctrine (see, e.g., Boardman v. Phipps; N.Z. Netherlands Society "Oranje" Inc. v. Kuys), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee: see Keith Henry & Co. Pty. Ltd. v. Stuart Walker & Co. Pty. Ltd. That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed. For a recent discussion of these rules, see Streeter v Western Areas Exploration Pty Ltd (2011) 278 ALR 291, 303-305 per McLure P. 464 In what I perceived to be the primary aspect of LGT's case about the second course at Lost Farm, it was submitted that the opportunity to establish that business came to Sattler as a result of his fiduciary position. In making that submission, LGT invoked the second of Deane J's themes in Chan v Zacharia. In a secondary aspect, it was submitted that the establishment and intended conduct of a competing business at Lost Farm necessarily involved Sattler in a situation where his own interests conflicted with his duty to, or with the interests of, the company of which he was a fiduciary. In making that submission, LGT invoked the first of the themes in Chan v Zacharia. I shall deal with those submissions in turn, commencing with LGT's opportunity case. 465 Here I should commence by noting certain features of that case, as outlined above. First, the present point is not whether LGT had a legal entitlement, an option, or a right of first refusal, with respect to the use of Lost Farm as a golf course. That is not to say that the absence of any such entitlement etc is irrelevant to the determination of the opportunity point, but it is to say that LGT's case as such is concerned with the obligations of Sattler rather than with its own legal entitlements. Secondly, neither is the present point based on any kind of estoppel in favour of LGT and against Sattler. Sattler may well have tolerated an assumption to be made by the other investors that LGT would ultimately be permitted some kind of participation in a second course at Lost Farm, but such a circumstance, if correct (and I shall deal with it), would make no contribution to an answer to the question whether the opportunity to develop such a prospective course, for Sattler, resulted from his fiduciary position (although it may have a bearing on the defence of laches, to which I shall return in due course). Thirdly, the point - at least as such - is not concerned with the question whether Sattler obtained LGT's fully-informed consent to availing himself of an investment opportunity which belonged to the company. Much of LGT's factual case centred on what was said to be the many occasions over the years when Sattler might well have obtained the Board's consent to him developing Lost Farm in his own name. He did not seek that consent. The anterior point, rather, is whether the opportunity to make that development resulted from Sattler's fiduciary position at all: if not, the occasion did not arise for Sattler to seek such consent. Fourthly, if well-founded, the point must be absolute, in the sense of proposing that Sattler would be bound by his fiduciary duty not to conduct a golf course on Lost Farm without LGT's fully-informed consent, regardless of his ongoing association with LGT. I was reminded, for example, of the authority that stands for the proposition that a director who comes by an opportunity as a result of his or her fiduciary position with the company cannot escape the consequences of that circumstance by resigning: see Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371, 386-388; Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110, 141 and CMS Dolphin Ltd v Simonet [2002] BCC 600, 623. Thus it must be LGT's case that, by involving himself in the management of LGT, Sattler was forever deprived of the ability to conduct his own golf course on Lost Farm without LGT's fully-informed consent (or without, of course, being required to account in the sense explained by Deane J in Chan v Zacharia). 466 There are two other related aspects of their client's opportunity case that counsel for LGT stressed. The first is that LGT does not say that the opportunity to use the Lost Farm land belonged to it in equity in some absolute sense. Rather, the allegation (as made clear in the Further Amended Statement of Claim) is that LGT had the opportunity to establish a second course at Lost Farm. That is to say, it was the circumstance that the course at Barnbougle Dunes existed, and that the proposed course at Lost Farm would be a second course, that contributed to LGT's claim to the latter. The second aspect is that the opportunity in question did not arise, at least as a relevantly mature entity recognisable in equity, until the course at Barnbougle Dunes was established and operating profitably. Only then, as it was put by counsel for LGT, was Sattler's conscience burdened with the fiduciary obligation not to take the opportunity for himself. 467 That brings me to the controversy that lies at the core of this proceeding: was the opportunity to establish and to conduct a golf course business on Lost Farm one that came to Sattler as a result of his position as director/CEO of LGT? LGT said yes, in the sense that it was Ramsay who, then LGT itself which, initiated the idea of using the dunes land at Barnbougle for golf; and Ramsay had, from the outset, earmarked Lost Farm as the site for a potential future course. It was LGT's own success at Barnbougle Dunes that made the concept of a second course a viable one. Had Sattler not been the owner of the land at Lost Farm, and had the actual owner contacted him with a proposal to make the land available for golf, such an offer could not be understood otherwise than as being a result of Sattler's fiduciary position. It would have been a clear breach of his fiduciary duty for him to have accepted the offer in his own name rather than offering it to LGT. On the case of LGT, it makes no difference that Sattler was also the landowner at Lost Farm - the opportunity to operate a second course there came to him by reason of his fiduciary position no less because of that circumstance. 468 The defendants proposed that the question set out in the previous paragraph should be answered in the negative. While accepting LGT's general case at the level of principle, they submitted that the particular circumstances of the case did make a difference. They had two main streams of argument in this respect. The first related to Sattler's position as landowner, which preceded, and underlay, the whole Barnbougle Dunes project. The opportunity to use Lost Farm in any way - including as a golf course - belonged to Sattler from the outset. It did not result from his position with LGT. As put by senior counsel in opening: The fact that Mr Sattler consented to become a director of Links Golf Tasmania in late 2002, does not operate, and should not be viewed as operating, as effectively charging the balance of his land, and its developmental capacity, to the company to which he now owes the fiduciary duty. The second stream of argument was that, from the outset, the business of LGT was to develop and to operate a single golf course on the leased land. The terms of the leases and of the shareholders' agreement reflected this basic fact. The defendants stressed that the wherewithal to operate a golf course was land, and the intractable fact of the matter was that LGT had access to a defined piece of land under the leases, and nothing more. They submitted that LGT was, in effect, a single-purpose venture, and that any opportunity that came to Sattler with respect to land which was not encompassed in that purpose was his to take without reference to the company of which he was fiduciary. 469 According to the submissions advanced on behalf of LGT, the defendants' position was factually incorrect and legally unsound. It was submitted that the real dynamic of the relationship between Sattler and LGT was that everyone recognised the potential of Lost Farm as the site for a future golf course. They recognised also that it would be commercially prudent to build Barnbougle Dunes first and see if it prospered. Consistently with this, LGT identified the relevant opportunity as one which arose only once Barnbougle Dunes was operating profitably. It was argued that, even if Sattler originally had the opportunity to develop Lost Farm in any way, even as a golf course, that opportunity was commercially immature, and therefore unattractive, until LGT's own experience, with all the risky entrepreneurial effort that that involved, had demonstrated that the dunes land at Barnbougle would - not could - provide the basis for a successful business. It was argued that, while Sattler might have the land, the resources and the ability (and might even - contrary to LGT's case - have had the "idea") to build a golf course at Lost Farm from a date well before he met Ramsay, the opportunity to derive a "benefit or gain" (per Deane J) from such a development was one that came to Sattler as a result of his fiduciary position. 470 It was also submitted on behalf of LGT that all the investors in LGT other than Sattler wanted LGT to have some kind of participation in any course that was built on Lost Farm. There was never any acceptance by those investors, or by LGT itself, that Sattler could develop Lost Farm without there being such participation. It was, it was submitted, unthinkable that LGT would be unconcerned about the establishment of an adjacent competing business in which it did not have equity. Besides, if Sattler at any stage had the slightest doubt about the matter, he could, and should, have put his intentions squarely on the table in order to obtain LGT's fully-informed consent to the course that he proposed. That was never done. As a fiduciary, Sattler was in no position to place upon the general flow of interactions involved in the history of LGT an interpretation which was favourable to his own interests and adverse to those of LGT: the onus was on him, at the very least, to clarify the situation. 471 The axes of contest as I have identified them make it necessary to commence with the cases that deal with the perimeters and content of the fiduciary relationship and of the duties which it involves. Here I am bound to commence with what was said by the Full Court in Canberra Residential Developments Pty Ltd v Brendas (2010) 188 FCR 140, 147 [36]: But the mere existence of a fiduciary relationship does not define the nature of the duties that arise for three reasons. First, it is wrong to assume that the duty owed by a fiduciary attaches to every aspect of the fiduciary's conduct, however, irrelevant that conduct is to the relationship that is the source of the duty: Re Coomber [1911] 1 Ch 723 at 728-729. Second, the scope of the duty is very much dependent upon the facts of the particular case: Hospital Products at 69, 73 per Gibbs CJ and 102 per Mason J. See also Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206. In most cases the duty will be determined in large part by reference to the nature of the activities of the principal: Birtchnell v Equity Trustees, Executors and Agency Company Ltd (1929) 42 CLR 384 at 407-408, referring to the need to identify the principal's "venture or undertaking". Third, defining the scope of the duty must be approached with commonsense and with an appreciation of the sort of circumstances in which it has been applied in the past. It should only be applied to a state of affairs which discloses a real conflict of duty and interest and not just some theoretical or rhetorical conflict: Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 at 637-638. In identifying how fiduciary relationships, and the duties arising under them, fit into these three categories, it is useful to consider the cases to which their Honours referred. 472 In Re Coomber [1911] 1 Ch 723, a mother, being of advanced years, made a gift to her son of businesses which had been in the family for a considerable period, and of which the son was now the manager. It was argued that the son was, as manager, the fiduciary of his mother, and thus incapable of receiving the gift without obtaining the mother's fully-informed consent - based on market valuations and the like - to the course she proposed to follow (rather than, for example, selling the businesses to third parties). In the absence of any suggestion of undue influence, it was held that there was nothing in the fiduciary relationship which stood in the way of the gift going ahead as the mother intended. Making the distinction between a gift and a sale, Fletcher Moulton LJ said ([1911] 1 Ch at 729): It is possible that there might have been a transaction between the son and the mother, with regard to a purchase of this leasehold property, in which the son would have had to shew that he had given her full information in every possible way as to the value. But in this case the gift was not based on value in any way at all. The mother knew the house, she had lived in it for twenty years, and knew the son was managing it. She meant it to go to the son whatever its value was…. 473 In Hospital Products Ltd v US Surgical Corporation (1984) 156 CLR 41, the question was whether the relationship in question was a fiduciary one at all, the majority holding that it was not. Indeed, Gibbs CJ (a member of the majority) held that there was "no part of the transaction to which a fiduciary obligation might sensibly be limited" (156 CLR at 73). The case as such does not, therefore, stand as authority as to the scope of a fiduciary's duties. Mason J, however, dissented with respect to the existence of such a relationship, and was thus required to consider the consequences of his holding, in which context his Honour said (156 CLR at 102-103): The categories of fiduciary relationships are infinitely varied and the duties of the fiduciary vary with the circumstances which generate the relationship. Fiduciary relationships range from the trustee to the errand boy, the celebrated example given by Fletcher Moulton L.J. in his judgment in In re Coomber, in which, after referring to the danger of trusting to verbal formulae, he pointed out that the nature of the curial intervention which is justifiable will vary from case to case. In accordance with these comments it is now acknowledged generally that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case: Phipps v. Boardman; Kuys; Canadian Aero Service Ltd. v. O'Malley. The often-repeated statement that the rule in Keech v. Sandford applies to fiduciaries generally tends to obscure the variable nature of the duties which they owe. The rigorous standards appropriate to a trustee will not apply to a fiduciary who is permitted by contract to pursue his own interests in some respects. Thus, in the present case the so-called rule that the fiduciary cannot allow a conflict to arise between duty and interest (Kuys) cannot be usefully applied in the absolute terms in which it has been stated. That was the passage to which the Full Court referred in Canberra Residential; and it did so in a way that would make Mason J's dictum - albeit that his Honour was in dissent - binding on me. Indeed, the proposition that "that the scope of the fiduciary duty must be moulded according to the nature of the relationship and the facts of the case" was recently described by Jacobson J, with the assent of Rares and Besanko JJ, as "fundamental": Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd (2011) 285 ALR 63, 89 [206]. 474 Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 was a negligence case, but the negligence had been that of agents with respect to their principals. In the passage referred to by the Full Court in Canberra Residential, Lord Browne-Wilkinson was concerned to make the following point ([1995] 2 AC at 206): [T]he extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract. Although an agent is, in the absence of contractual provision, in breach of his fiduciary duties if he acts for another who is in competition with his principal, if the contract under which he is acting authorises him so to do, the normal fiduciary duties are modified accordingly: see Kelly v. Cooper [1993] A.C. 205, and the cases there cited. The reference to Kelly v Cooper [1993] AC 205 was to an opinion of the Privy Council delivered by his Lordship himself, and the two authorities to which he there referred were New Zealand Netherlands Society "Oranje" Inc v Kuys [1973] 1 WLR 1126, to which I refer below, and the following passage from the judgment of Mason J in Hospital Products (156 CLR at 97): That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. 475 In Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384, a member of a partnership had taken a share of the profit made by a client of the firm on the resale of land arranged by the firm. The arrangement had not been disclosed to the other partners. There was, it seems, a question whether speculation on land was within the scope of the partnership business (the trial Judge having found that it was not). In that context, Dixon J said (42 CLR at 408): The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm. Once the subject-matter of the mutual confidence is so determined, it ought not to be difficult to apply the clear and inflexible doctrines which determine the accountability of fiduciaries for gains obtained in dealings with third parties. 476 Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 was a very particular kind of case. It was claimed that a rule of a trade union which made employees generally in a certain line of work eligible for membership was ultra vires, to the extent that it applied to the joint managing directors of a company, upon the ground that membership of a trade union would place them in positions in which their interests as members would conflict with their duties to their company. The claim was rejected, substantially on the basis that the fiduciary obligation was for the benefit of the principal, and could not be used by the fiduciary to shield himself or herself from some other obligation. In the course of the case there was, according to Upjohn LJ ([1963] 2 QB at 637), "some discussion … as to the ambit of the rule" which defined the fiduciary obligation. His Lordship was of the view that, in cases of doubt such as the standard of hotel accommodation to which a director should be entitled, it would be a matter for the principal either to clarify the matter or to relax the operation of the rule. As pointed out by the Full Court, his Lordship said that the rule ([1963] 2 QB at 638) - … must be applied realistically to a state of affairs which discloses a real conflict of duty and interest, and not to some theoretical or rhetorical conflict. As to the matter of scope, or ambit of the duty, his Lordship said ([1963] 2 QB at 638): [It] would be quite wrong to attempt any definition of the ambit of the rule. It is there, firm and untrammelled, waiting to be applied to the changing times and conditions of the times as circumstances may require, only to be relaxed where those entitled to the benefit of it are of full age, sui juris and have all the requisite knowledge, not only of all the relevant facts but of their rights. 477 I should now return to Hospital Products, and to the passage from the judgment of Mason J which I have set out in para 473 above. The expression "must be moulded according to the nature of the relationship", used by his Honour, was derived from the opinion of the Privy Council in Kuys [1973] 1 WCR at 1129-1130. In the facts of that case, the secretary of the appellant society - which their Lordships considered to be a fiduciary position - commenced a newspaper on his own account in circumstances where the society had a self-evident interest in conducting a similar publication. Their Lordships noted ([1973] 1 WLR at 1130): Another source of finance would be advertising, and there was evidence that the main likely clients, the airlines, were interested in supporting the society. Thus, in these circumstances, if Kuys had proceeded to launch a newspaper, without any special arrangement, there would be at the least a case for saying that to claim or retain the benefit of it for himself would be a breach of fiduciary duty. However, the subject of the future publication of a newspaper or bulletin by or on behalf of the society had been actively discussed at a meeting attended by the respondent Kuys, the president of the society and at least one other committee member. The evidence about that discussion was something on which, in their Lordships' view, the "entire case" depended ([1973] 1 WLR at 1128-1129): … [Kuys] should publish a new newspaper to be called "The Windmill Post" which should be his property; that the society should have the right to publish in it the society's news; that the society would guarantee for six months the purchase of the new paper at 1s. per copy by 2,000 members; finally that at the end of six months these terms, including the question whether the society would continue its support, would be re-negotiated. 478 Their Lordships adopted what had been said by Lord Upjohn (in dissent) in Boardman v Phipps [1967] AC 46, 123: Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case. Speaking of Kuys, their Lordships said ([1973] 1 WLR at 1130): A person in his position may be in a fiduciary position quoad a part of his activities and not quoad other parts: each transaction, or group of transactions, must be looked at. Their Lordships found support for that approach in Tufton v Spern [1952] 2 TLR 516, and in the words of Dixon J in Birtchnell to which I have referred above. After the passage at p 1130 of the report to which I have referred at para 477 above, their Lordships continued ([1973] 1 WLR at 1130-1131): On the other hand, what has already been said as to Kuys' position and responsibilities, left open the way for a special arrangement, and equally, such an arrangement was, on the Judge's findings, made. It was straightforward and, in the circumstances, reasonable. The Bulletin could not be carried on: to produce a newspaper obviously involved the risk of loss. The contract limited the society's commitment to the purchase of 2,000 copies at 1s. each for six months. Kuys was to secure what advertising and other income he could to cover all outgoings and his own remuneration. He was not to come down upon the society for any losses. As one witness said, he was not to cry on its shoulder. The newspaper was to be his for ill and for good. Their Lordships concluded this aspect of their reasoning by holding that there was "established a set of facts which would fully displace any potential fiduciary obligation on Kuys to hold the newspaper in trust for the society" ([1973] 1 WLR at 1131). 479 Additionally to Boardman v Phipps, the other case to which Mason J referred in Hospital Products was Canadian Aero, a judgment of Laskin J in the Supreme Court of Canada which has been so influential in this area of the law. At one level, that judgment informs us of the content of the general rule (40 DLR (3d) at 382): Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer like O'Malley or Zarzycki is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company. An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired. At another level, however, the judgment supplies qualifications to the rule, and it was to these that Mason J referred in Hospital Products. Having referred to Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 381, Laskin J said (40 DLR (3d) at 383): What I would observe is that the principle, or, indeed, principles, as stated, grew out of older cases concerned with fiduciaries other than directors or managing officers of a modern corporation, and I do not therefore regard them as providing a rigid measure whose literal terms must be met in assessing succeeding cases, In my opinion, neither the conflict test, referred to by Viscount Sankey, nor the test of accountability for profits acquired by reason only of being directors and in the course of execution of the office, reflected in the passage quoted from Lord Russell of Killowen, should be considered as the exclusive touchstones of liability. In this, as in other branches of the law, new fact situations may require a reformulation of existing principle to maintain its vigour in the new setting. The other passage in Laskin J's reasons to which Mason J was, I think, referring was the following (40 DLR (3d) at 390): It is a mistake, in my opinion, to seek to encase the principle stated and applied in Peso, by adoption from Regal (Hastings) Ltd v Gulliver, in the straight-jacket of special knowledge acquired while acting as directors or senior officers, let alone limiting it to benefits acquired by reason of and during the holding of those offices, As in other cases in this developing branch of the law, the particular facts may determine the shape of the principle of decision without setting fixed limits to it. 480 The need for the content of the fiduciary duty to be moulded according to the nature of the relationship and the facts of the case is also reflected in something Deane J himself said in Chan v Zacharia (154 CLR at 205): In that regard, one cannot but be conscious of the danger that the over-enthusiastic and unnecessary statement of broad general principles of equity in terms of inflexibility may destroy the vigour which it is intended to promote in that it will exclude the ordinary interplay of the doctrines of equity and the adjustment of general principles to particular facts and changing circumstances and convert equity into an instrument of hardship and injustice in individual cases. I would refer also to what was said by McLure P in Streeter (278 ALR at 304 [70]): Of course, the scope of the rules can be narrowed or excluded by contract or other instrument which defines the duties and powers of the fiduciary…. However, that is not the only means by which the content of fiduciary duties can be affected. The High Court has said that the content of fiduciary duties are moulded to the character of the particular relationship so that even within an established fiduciary relationship, the content of the duties will not be uniform for all cases: United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 11 ; 60 ALR 741 at 746. Further, the subject matter over which fiduciary obligations extend can be ascertained from the course of dealing between the parties or the circumstances of the appointment of the fiduciary: Chan v Zacharia (1984) 154 CLR 178 at 196 and 204 ; 53 ALR 417 at 431. In my view, these authorities provide the principled basis for any narrowing of the fiduciary rules applying to directors. Likewise, in the recent Scottish case Commonwealth Oil and Gas Co Ltd v Baxter [2010] SC 156, in which an otherwise relatively censorious approach (if I may so observe with respect) was taken to the duty of a non-executive director, Lord Hamilton said ([2010] SC at 161 [10]): In the same way, if a director were to draw to the attention of his company a particular commercial opportunity, whether in an embryonic or developed state, and to obtain the company's consent to pursue that opportunity on his own personal behalf, his duty to avoid a possible conflict of interest would not extend to that opportunity. Similarly, it seems to me that if, without the identification of any particular opportunity, the company, expressly or implicitly, were to give its prior consent to a director pursuing possibly competing interests, his duty would not extend to avoiding such conflicts. If, for example, in the present case agreement had been reached between Mr Baxter and COGCL that some opportunities (say, any onshore) would be brought to COGCL but that others (say, offshore) could be exploited by Mr Baxter for his own interest and benefit, the scope of Mr Baxter's duties would have been modified by that arrangement. Even without express agreement, the actings of parties could in some circumstances have given rise to a modification of Mr Baxter's duties. 481 The foregoing survey of the authorities leads me to the view that, at a high level to commence with, there are three questions to be asked: is the relationship a fiduciary one at all; what is the scope of the duty; and what is the content of the duty? At each point, the answer may be influenced by any contract by reference to which the relationship exists, or which impinges on the relationship or the duties which arise under it. The answer may also be influenced by arrangements, understandings or practices which obtain in the circumstances. The scope of the duty and, it seems, the very existence of the relationship, may depend on the line of business in which the putative fiduciary is engaged (assuming, for example, that he or she is the director of a trading company or a member of a trading partnership). As the Privy Council said in Kuys, a person may be in a fiduciary position quoad part only of his or her activities. That case provides an example of one in which, to the clear understanding of the putative principal, the putative fiduciary has his or her own interests parallel to, and separate from, those of the principal, and is allowed to pursue them. 482 Looking only at "the character of the venture or undertaking" in the present case, LGT's argument would reach first base at least by reason of the fact that the activity proposed for Lost Farm was a golf course: the very line of business, and in the very locality, that were the existing concern for LGT. Indeed, it being accepted by all in the present case that, particularly in a relatively remote location, the development of a second golf course on an adjacent site would be of advantage to the operator of the existing course, LGT of all businesses was especially well-placed to derive a benefit from such a development. However, it is clear from the cases - particularly from Mason J's endorsement of Kuys - that these circumstances, as such, need not be conclusive as to the scope of Sattler's fiduciary duty. There may be cases where the beneficiary has permitted the fiduciary to conduct his or her own business - even one of the same character - separate from that in relation to which the fiduciary duty is owed. There may also, in my view, be cases in which the prospect of the fiduciary acting in that way, even if not expressly agreed to, was inescapably an aspect of the parties' relationship. 483 Returning to LGT's opportunity case, the allegation that LGT had the intention of building, developing and operating a second golf course on the land at Barnbougle once the first course and various facilities were established and operating profitably was denied by the defendants, not only as a matter of pleading, but in a submission of length and substance at the conclusion of the trial. That submission critically examined the 26 particulars by reference to which LGT had alleged, in its Further Amended Statement of Claim, that it had the intention referred to. It was said that no one of those particulars provided evidence of the formation of such an intention, either directly or as a matter of inference. Responding to those submissions, it was said on behalf of LGT that the defendants were paying so much attention to the trees that they lost sight of the wood (see Nolan v Nolan [2004] VSCA 109 at [120]) by selectively referring to the evidence which had in fact been led about the matters particularised and of taking things out of context. However that may be, the fact is that, as the defendants pointed out, over many, apparently well-minuted, Board meetings, the directors of LGT never resolved to make an investment, or an offer of a proposal for an investment, in a new golf course at Lost Farm. They knew that Sattler was contemplating such a development either for himself as such or as part of some kind of project involving Keiser. In the meantime the new course was taking shape, under their very noses as it were. As Sattler accepted, they showed a keen interest in the question whether they, or LGT, would be invited to participate. But they did not cause LGT as such to form the intention referred to in its Further Amended Statement of Claim. 484 Notwithstanding the terminology of LGT's pleading, it would be wrong to treat its case as a whole as contingent upon a finding that it had the intention of developing a second course at Lost Farm. The case is concerned not with LGT's intention as such, but with the question whether the development of Lost Farm as a golf course was an opportunity that came to Sattler as a result of his fiduciary position. The case was conducted with that question as its focus. But the circumstances to which the defendants referred, and which I mentioned towards the end of the previous paragraph, are indeed relevant to that question, in the sense that they reflect the defendants' case that the opportunity resulted not from Sattler's fiduciary position but from the inescapable reality, recognised by all concerned from the outset, that Sattler owned the land in question, and could bring it into play - qua landowner, not qua director - as and when he chose. 485 It is convenient here to consider what I have described above as the second stream in the defendant's argument about Lost Farm. Here the defendants first relied upon the terms of the leases: one executed on 30 November 2001, and a group of four in relevantly identical terms executed on 10 January 2003. It was submitted that the scope of Sattler's fiduciary obligation was limited by the scope of the business that LGT was able to carry on, or at least that it was contemplated that it would carry on. It was said that LGT was a single-purpose company, the purpose being to establish and to operate one golf course (and clubhouse) on the leased land at Barnbougle Dunes. It was said that this purpose was to be discerned not in the dreamings of Ramsay or the other investors, but in the objective facts that LGT's only access to the wherewithal to operate a golf course - land - was via the lease with Sattler. Both the first lease of 30 November 2001 and the four leases of 10 January 2003 contained a specification of the use to which the land at Barnbougle Dunes could be put, and this did not include the construction or development of a second course at Lost Farm. 486 While I accept that the terms of the leases were consistent with the defendants' case on scope, I would not accept that those terms, of their own force or as a necessary consequence, produced the result for which the defendants contend. LGT was not constitutionally limited to the operation of a single golf course. The leases were, of their nature, confined to the land of which LGT had been able to secure possession, and the use to which that land could be put, limited in the leases, was self-evidently relevant only to that land. There was nothing in the leases, however, which provided for the kind of limitation for which the defendants contend. LGT was a single purpose company in fact, but that was no more than a reflection of the circumstance that the land at Barnbougle Dunes was the only land of which it had possession. There is no reason why LGT, if properly resourced, might not have expanded its operations, within its established line of business and on an adjacent site, with the economies that that offered, if the opportunity arose. 487 Much of the analysis required in the present case is made the more complex by Sattler's position as landowner and lessor. But the present question can be tested by changing the facts a little. Assume that Sattler was nothing more than landowner and lessor, and held no office or position in LGT. Assume that Dixon, while General Manager of LGT, received (in that capacity) correspondence from Sattler indicating his willingness to make Lost Farm available for long-term lease to an acceptable consortium. For Dixon to have put such a consortium together without first giving LGT the chance to take the lease, or to be part of the consortium, would have been a clear breach of his fiduciary duty. It would have been four-square within the scope of his fiduciary obligation. It would have been no answer to say that LGT was only a single-purpose company which had no concern with expansion opportunities of the kind proposed. 488 The other agreement upon which the defendants relied as confining the scope of Sattler's fiduciary obligation was the shareholders' agreement signed by Sattler and Ramsay on 10 January 2003. It will be recalled that cl 16.2 of that agreement gave Sattler the right to conduct a business in competition with that of LGT on any part of the land at Barnbougle that was not leased to LGT. The defendants submitted that conduct which was permitted by that provision must necessarily lie outside the scope of Sattler's fiduciary obligation. On the defendants' case, "it is the contractual foundation which is all-important because it is the contract that regulates the basic rights and liabilities of the parties": Hospital Products 156 CLR at 97 per Mason J. Literally, this principle, as stated by Mason J, deals with a fiduciary relationship which is itself erected upon contract, but undoubtedly would have equal application to any situation in which a fiduciary and his or her principal entered into a contract which governed their relationship in relevant respects (see Streeter 278 ALR at 304 [70] per McLure P). 489 This submission on the part of the defendants opened up a number of areas of contention which occupied the energies of the parties and the time of the court: whether the shareholders' agreement was binding on LGT, the extent of the knowledge of the agreement on the part of the investors other than Ramsay and Sattler and the relevance of the agreement after the failure of the memberships offering, to name three. I shall return to those matters later when I deal with the position which Sattler occupied when he was no longer a director. In a context in which he remained a director, however, the defendants' point may be dealt with on a more basic level. 490 Clause 16.2 was part of an agreement between shareholders. It operated to qualify a special restriction on competition, provided for in cl 16.1, which went beyond anything arising under the general law. By reason only of his or her position as such, a shareholder is under no duty not to compete with the company of which he or she is a member. By cl 16.1 of the shareholders' agreement of 10 January 2003, however, Ramsay and Sattler subjected themselves to such a duty. But they did so subject to the exception for which cl 16.2 provided. Although Sattler was a director of LGT at the time of the making of the shareholders' agreement, that need not always have been so. The four leases, executed contemporaneously with the shareholders' agreement, provided for a combined term of 40 years. That Sattler would not always be a director of LGT must, therefore, have been a realistic possibility. Absent a provision such as cl 16.2, the restriction provided for in cl 16.1 would apply in an unqualified way even where Sattler was not a director. It would have amounted to an exceptional burden for a landowner who held shares in a company of which he was not a fiduciary. There is every reason to think that, in January 2003, Sattler would not have tolerated the prospect of such an outcome. 491 But it would be another thing altogether to propose that cl 16.2 operated to confine the scope of Sattler's fiduciary obligation as a director of LGT, such that he could compete against LGT while occupying a position central to the management thereof, a position to which fiduciary obligations would conventionally attach. Neither would the restriction in cl 16.1 have made such a reading of cl 16.2 either necessary or natural. Whether the fiduciary nature of a director's position precludes him or her from being involved in a competing business is a question which, of itself, is not free of contention, as I discuss below. On any view, however, a director is in a different position, relevantly, from that of a mere shareholder. Clause 16.1 not being concerned with restrictions on a director, I cannot see why the exception for which cl 16.2 provided should be understood otherwise. 492 Thus I do not accept that the terms of the leases or of the shareholders' agreement put LGT contractually out of court at the outset, in the sense of defining the scope of Sattler's fiduciary duty in a way that necessarily excluded the opportunity to use any land other than that which LGT occupied. But neither do I exclude these documents - especially the leases - from the broad landscape of facts and circumstances by reference to which questions of scope - and, indeed, of the content of the duty itself - are to be addressed. If not conclusive in themselves, the documents are consistent with the defendants' scope case generally. As so much of that case turned on what, in the defendants' submission, I should perceive to have been the reality of the situation as between Sattler and the other investors in LGT, it is convenient to trace the course of their relationship, and their thinking about Lost Farm, chronologically. 493 LGT submitted that the opportunity to build a second course on Lost Farm was first identified by Ramsay. However, subject possibly to a layer of sophistication introduced by the qualifier "second", I could not accept that submission. Sattler had been given a rough plan of a proposed development by Campbell Smith in 1993, in which a golf course on Lost Farm was indicated. Circumstances from which the permanent rejection of the idea of building a golf course on Lost Farm could not be inferred intervened, and nothing had happened by the time of Ramsay's approach in 2000. It was pointed out on behalf of LGT that Sattler never mentioned the events of 1993 at the time of that approach, at the time of accepting Wood and McCleery into LGT in 2003 or at the time of so accepting Hetrel in 2004. That is so. It seems that the old documents of 1993 were amongst a small collection of papers that survived the burning of Sattler's house in 2005, and that he found them only when he was looking through the old filing cabinet in which they were stored, after the fire. Like a number of other dimensions of LGT's case, its submission in this regard had the flavour of an estoppel submission about it, as though the point was whether Sattler had induced his co-investors to proceed by reference to certain assumptions. That, of course, is not LGT's case at all. These old documents bear not upon Sattler's conduct towards LGT or the other investors, but upon the locus and the nature of the opportunities for development which Sattler had. Be it granted that they were not in his mind during the early years of Barnbougle Dunes, it remains the fact that the use of Lost Farm as a golf course was not something that was first introduced to him by Ramsay or by LGT. 494 The impression to be gained from the submissions made on behalf of LGT is that, absent the arrival of Ramsay on the scene in late 2000, it would never have occurred to Sattler to use the Lost Farm land for golf (or, as I understand the submission, so to use any of the dunes land at Barnbougle). Counsel drew attention to publicity material published by LGT with Sattler's endorsement, to Sattler's nomination for "entrepreneur of the year" and to other like material, to the effect that Sattler was a businessman and a potato farmer with no interest in golf who was, the say the least, highly sceptical about Ramsay's ideas in 2001. Clayton was cross-examined about his "understanding" of the nature of Sattler's reaction to Ramsay's suggestion, and said that Sattler thought Ramsay was a "nutter", adding: "He thought there was this crazy guy [who] wants to build this course …." 495 In his evidence, Sattler said that the picture painted of him being a potato farmer with no understanding of golf was wrong, and was done for marketing purposes only. He said that he did know the difference between a links course and a parkland course. He accepted that, from the outset, Ramsay had shown an interest in the possibility of developing a golf course on Lost Farm, but - … [w]hen it was first discussed I was dealing with Greg Ramsay, and Greg Ramsay had no money, and was very keen and very enthusiastic about conquering the world in relation to golf, so I was very reserved in all my approaches to all issues relating to one, two golf courses, or anything else. If Sattler did think that Ramsay was a "nutter", or similar, I am not persuaded that that perception related to the prospect that the dunes land at Barnbougle might be used for golf. Rather, it may have related to the practical reality that he, Ramsay, was young, inexperienced in business and conspicuously under-resourced for the kind of development that he had in mind. 496 In the period to November 2002, when Ramsay was LGT's alter ego, he well appreciated that Lost Farm, and the full range of development opportunities that went with it, were Sattler's to keep or to surrender, and, if the latter, on terms dictated by him. Ramsay pressed Sattler for an option over Lost Farm, and none was given. He sought and secured Sattler's consent to conveying to Carter the prospect of LGT having an option over Lost Farm. He even went to the length of having his solicitor draw up an option, thereby demonstrating that access to Lost Farm for the purpose of golf was a serious matter which warranted black and white terms. Knowing these things, and knowing that no option had been granted, LGT committed itself to a lease of the Barnbougle Dunes land for a period of 10 years from January 2002. On any objective view of things, these events favour the defendants' case that Lost Farm was Sattler's to use or not as he chose and, if the latter, when he chose. 497 The business plans drawn up by Ramsay in these early years do not alter this conclusion. As I have noted above, they were not in fact the plans by reference to which LGT charted its course. The main purpose to which they were put, it seems, was to promote Barnbougle Dunes to potential investors (or "members") and to government. The context in which they were put to actual use was that in which LGT was seeking funding, either from government or under the PDS. The hasty adoption of one of these plans by an ostensible meeting of the Board of LGT on 6 January 2003 was, I consider, an instance of the latter. They were not, in my view, an appropriate basis upon which to found conclusions about the reality of the relationship between Sattler and LGT. 498 Additionally, relevantly to the matter of Lost Farm, these plans were expressed in terms which could be understood to mean almost anything. The opportunity for a second course tended to be expressed by reference to how the available land might in the future be used. More importantly, as counsel for the defendants pointed out, when it came to publishing a firm statement having legal effect with respect to prospective investors, the PDS made no reference to Lost Farm or to the possibility of a second course. Indeed, the PDS is as reliable a guide as any as to the limits of LGT's intended business as at the first few months of 2003. It is as clear as may be that Ramsay had no intention of incorporating the right to play golf on any future second course in the entitlements being offered to those who subscribed for membership bonds. It was, of course, something which he could not then promise. But neither was it something to which these "members" would have been contingently entitled in the event that LGT did come to operate a second course on Lost Farm. 499 LGT also submitted that the opportunity to build a second course on Lost Farm was "the basis of all the communications … with the State". With respect to the period which preceded May 2003, I suppose that the "communications" to which LGT referred were those by which Ramsay secured his initial loan of $20,000, and those involving both Sattler and Ramsay, which occurred in late 2002 and the first five months of 2003. Sattler appears to have had little or nothing to do with the former. The conditions attaching to the loan (see para 64 above) made no reference to any second course. As to the latter, Ramsay's communications with the government were ambiguous at best, as I shall attempt to demonstrate. 500 In Ramsay's letter to the DSD of 30 October 2002, he did identify a second course as constituting the third of three development stages contemplated by LGT. But he said: "Mike Keiser will finance this development". If the DSD was supposed to read this as an indication that Keiser's finance would be by way of investment in LGT, it would have been misleading at best, as is clear from what I have set out in para 90 above. Keiser's communications with Ramsay to that point involved no suggestion that he would invest in LGT. Likewise, if Ramsay's suggestion that LGT had been "approached by several well known international development companies who wish to participate in this next stage" is to be understood as implying that such participation not only was readily available but also would have been channelled through LGT, this would have misrepresented the reality of the situation to a considerable degree. The interest shown by the companies to which Ramsay presumably referred related not to participation in a second course after the first had been built, but to the construction of a course on Lost Farm first as an alternative to Barnbougle Dunes, and would have involved side-lining Doak, with whom Ramsay had made his arrangements. After Ramsay's unenthusiastic responses on 9 June and 7 August 2002, it seems that nothing further had come of the interest shown by these investors by the time of Ramsay's letter to the DSD on 30 October 2002. 501 The real significance of the possibility of there being, at some time in the future, a second course on Lost Farm for the relationship between LGT and the government was that such an outcome would conduce to the economic development of the area around Bridport. That was the card that LGT was playing, and it was played by Sattler and Ramsay at their meeting with Bacon and Lennon on 3 December 2002. That it would be LGT, rather than Sattler, that was possessed of, and would exercise, that opportunity was not, however, a circumstance relevant to the obtaining of government assistance. Rather, it was Sattler's association with LGT in late 2002 and early 2003 that provided the commercial and political gravitas without which I doubt that LGT would have made much progress beyond its original loan of $20,000. The officers of the DSD/DED may well have assumed that LGT would participate in any second course that might be built in the future, but the "basis" of any such assumption would surely have been that Sattler would, as a matter of his own dispensation, have chosen to develop Lost Farm in that way. If this aspect of LGT's submission is intended to imply that government funding would not have been obtained without an understanding on the part of the DED that LGT would participate in the development of Lost Farm, I would have no hesitation in rejecting it. 502 LGT's next submission was that the opportunity to participate in the development of a second course on Lost Farm, if the first course were successful, was "the basis of all the communications with Keiser". I think the contrary is much closer to the truth. Keiser had been told by Ramsay - wrongly as he later discovered - that LGT had an option over Lost Farm. Sattler certainly had no communication with Keiser of which the "basis" was that LGT would have an opportunity to participate. Keiser's first offer, made on 7 January 2002 (some 10 months before Sattler became a director of LGT), contemplated that it would be Sattler, not LGT, who entered into any formalised arrangement with respect to the second course. His second offer, of 6 January 2003, was made directly to Sattler, and did not concern LGT at all. His emphatic statement to Ramsay of 26 February 2003 - that if the first course were built, he would be "there for the second" - must, of course, be seen in the light of the circumstance that these two offers were still on the table: on Sattler's table, not LGT's. Save possibly for the very early period when Sattler was unknown to Keiser, the whole tenor of Keiser's potential involvement was that it would be Sattler with whom he would deal in relation to any funding for, or involvement in, the second course. 503 It was submitted on behalf of LGT that the opportunity to participate in the development of Lost Farm was "a condition of the involvement of all equity participants". So to submit, however, was to overreach the facts of the case, at least as disclosed in the evidence. Undoubtedly Wood and McCleery, in the period leading to 10 May 2003, wanted such an opportunity to be a condition of their involvement, and it now suits LGT's case to view the events of that time as though such a condition existed. But the reality is otherwise. Wood and McCleery wanted a contractual assurance that LGT would be able to participate in any second course at Lost Farm - as, of course, and perhaps most obviously, did Ramsay. All three were quite conscious of the uncertainty which surrounded their investments in the absence of such an assurance. But nothing was put to Sattler either before, or as a condition to, the investors' commitments to LGT. McCleery, who with Ramsay was probably most anxious to secure such an assurance, considered that any demand then made of Sattler would be counterproductive. That is, such a demand might have been met with a rebuff, upon which the three investors would have had to decide whether to withdraw altogether. They may have sensed that there was every prospect that, faced with such a demand, Sattler would have abandoned the Barnbougle Dunes project. The investors committed their moneys well appreciating that they had no contractual assurance about Lost Farm, and that the ability of LGT to participate in any future development at that site was wholly for Sattler to decide. 504 It is well to appreciate what was really happening in the period in early 2003 when Wood and McCleery committed themselves (and, in the case of Wood, his syndicate members) to invest in LGT. The realities were as follows. First, both Ramsay and Sattler had invested considerable personal, reputational and (relatively speaking) financial capital in the proposal under which the golf course would be developed. Neither wanted to withdraw from that proposal. Secondly, particularly considering the involvement of Doak and the support of Keiser, Sattler had come to share the view which Ramsay always had that the Barnbougle property was an outstanding site for a links golf course. If finance could be obtained for the construction of the course, therefore, the prospect of ultimate success was encouraging to say the least. The value to Sattler of turning hitherto unwanted dunes land into the site for a viable business should not be underestimated. Thirdly, Ramsay had neither the resources nor (individually) the backing to make a substantial personal investment in the course. Sattler was not initially prepared to invest money, his contribution at that time being confined to "in kind" resources such as the use of equipment and farm labour. Fourthly, the public offering of foundation memberships was well on the way to being a failure. It was clear that the funds that had been contributed would have to be returned. LGT had nothing to offer by way of security to a commercial lender and, besides, the investors had set their minds on not burdening LGT with conventional debt. This meant that, in very large measure, the construction of the course would have to be financed by way of government loans and third party (ie non-Ramsay and non-Sattler) equity. Fifthly, the Wood and McCleery groups (in the case of the latter, consisting of McCleery alone by May 2003) were very enthusiastic, and manifestly were prepared to hazard their capital in a venture that held the potential for an exciting future in the game that they loved. Although the investment would not be easy for either group, it would have been a great disappointment for them if the project had failed at the outset. 505 This combination of realities had an influence on the dynamics of the interactions between the various players which is unmistakeable, even at this substantial remove in point of time. In negotiations with the DED, both Ramsay and Sattler were anxious to maximise the potential of the Barnbougle Dunes project for employment, and tourism development generally, in the Bridport area. Thus they included the prospective second course in their presentations. As mentioned above, however, the material presented to departmental officers was relatively agnostic about the commercial structuring of any such future development. Wood and McCleery, both of whom were investors of some commercial acumen, could readily perceive the dangers in the kind of uncertain waters in which Ramsay and Sattler were then paddling with respect to Lost Farm. Further, they were the ones - more so at that point even than Sattler - who were about to part with large sums of money by way of an investment in a fairly unusual undertaking. Ramsay - as was his wont whenever the opportunity arose to promote the advantages of the Barnbougle site - had from the outset pointed out to Wood and to McCleery that the potential for golfing development included Lost Farm. Thus it came to pass that both Wood and McCleery, in their correspondence with Ramsay in February, March and April 2003, raised, and eventually stressed, the importance of having some concrete commitment from Sattler that they, or LGT should they invest in it, would be entitled to participate in the development of Lost Farm, should that ever occur. Sattler was aware of their interest in such matters, but, when consulted by Ramsay about McCleery's letter of 26 February 2003, he made it clear that there was no agreement such as would entitle LGT to participate in that development. 506 All parties were aware, of course, that the development of the Barnbougle Dunes course represented the real level of entrepreneurial risk in all of this. If that course succeeded, the development of Lost Farm - although potentially a considerably more expensive undertaking - would have been an obviously attractive investment. Sattler could have developed Lost Farm at the outset, but he first wanted to see if Barnbougle Dunes prospered. That was manifestly Keiser's position - a position which, of itself, carried weight with all the Australian investors. And it was self-evident to Wood and to McCleery. It is understandable that they wanted to have assurances of participation in the development of Lost Farm before they made a commitment to investing in the more risky, more pioneering, course to the west of The Cut. This perspective on things was, I infer, the genesis of McCleery's draft agreement into the settlement of which Ramsay put so much effort. However when Ramsay ultimately put the agreement to Sattler, he did so in a very formalistic way, and without even the knowledge, it seems, of McCleery. As for Wood, he made it clear in his oral evidence that he took very little interest in the draft agreement. 507 To an extent, the complications obvious in Ramsay's elaborations upon McCleery's original draft agreement of 26 April 2003 reflected the reality that any proposal which was to be put to Sattler would have to be both limited and conditional. Neither these investors nor LGT as such were or was in a position to take over Lost Farm, as it were, either as a purchase of the freehold or by way of the development of a new golf course. Rather, their proposal was conditional upon the area being developed by others - either Sattler himself or Keiser, or a combination of the two, as matters appeared at that time. Then the participation of LGT would be limited to 20%, but of what was clearly the subject of changing perceptions in the period which followed McCleery's first draft of the proposed agreement. It will be recalled that Ramsay's view was that an agreement should not be put to Sattler for consideration until the other investors had reached their own common position. It is not clear whether they ever did so, but, given the terms of Ramsay's proposal of 2 May 2003, it is not difficult to see why McCleery would have taken the view that it would be counterproductive for that proposal to be forwarded to Sattler. 508 One may sympathise with Wood and McCleery insofar as they were being asked to invest in a risky proposal which, if it prospered, would provide a platform for a later investment that had surer prospects. One may understand why they wanted an assurance that they would be part of the latter. On the other hand, however, it must be recognised that they were making no suggestion that they should, in May 2003, be bound to invest in the development of Lost Farm. They wanted to keep their options open to do so, or not to do so, depending on how events turned out. And they were not proposing that they should pay a premium of some kind for that commercial advantage, over and above what was their appropriate investment in Barnbougle Dunes as such. It is hard to see why Sattler ought to have regarded himself as under any ethical or moral obligation to consider favourably any such proposal as Wood and McCleery almost put to him in May 2003. In one aspect of LGT's case, what happened at this time was characterised as Sattler securing the money that was invested by Wood and McCleery. That was strictly not so, of course (it was LGT that derived the benefit of those investments), but, even so, I do not share the perception that the investments by these men contributed more to the Barnbougle project generally than was legitimately reflected in the equity in the first course, and that course only, which they thereby obtained. 509 Counsel for LGT made much of the circumstance, as they characterised the events of May 2003 and May 2004, that Sattler had chosen to take the funds provided by Bump 'n' Run, McCleery and Hetrel as equity, thereby spreading the risk, by comparison with a situation in which he (Sattler) obtained loan funding. They submitted: [A]ccepting for the moment Sattler's contention that the second course opportunity was something that he always understood that he had, that does not mean that he preserved that opportunity unburdened by fiduciary obligations to LGT in the meantime. It is frequently the case that businessmen have part of what they need for a successful venture, but not all of it. Frequently, they have exploration and production rights (maybe, even a mine), but not the capital to exploit them; they have an invention but not the capital to develop it; they have production rights but not the capital to exploit them; they have some land but not the capital to develop it. In order to develop their mine or their production rights, or the invention, or their land, they need to bring in joint venture parties. When they do so, their opportunity to exploit what was once theirs alone becomes burdened by their fiduciary obligations to those who have joined the venture with them. Notwithstanding the submission here of what is "frequently" the case, counsel for LGT were unable to refer me to any previously decided case, in any common law jurisdiction, with facts analogous to those of this case, in the sense of the question having arisen whether it would be a breach of a director's fiduciary duty to take advantage of a commercial opportunity which was his or hers before the commencement of his or her association with the company concerned. In the context of the present case, what counsel described as "what was once theirs" should be understood as the land on which the Barnbougle Dunes course was developed. In the case of a mining entrepreneur who commenced, for example, with exploration rights in relation to two parcels of land, for him or her to become a shareholder and director of a company formed to exploit those rights on the first parcel of land would not, as I understand the doctrines of equity, make it a breach of fiduciary duty for him or her to decide to exploit the rights which related to the other parcel save with the consent of the company. 510 That brings me to Sattler's statement of intention at the investors' meeting on 10 May 2003 (see para 198 above), when it was clear for the first time that Sattler himself would have to carry the burden of capitalising LGT. The statement that Sattler intended that "the group of equity holders in LGT be offered the opportunity to participate" formed an important part of LGT's case, not because it was said to be promissory in the contractual sense, nor even as the foundation for an estoppel, but because it closed the door on any argument on behalf of the defendants that Sattler had LGT's implicit consent to develop Lost Farm without first offering the original investors the opportunity to participate. I am here concerned, however, not with the question of consent, but with the anterior question of the source or derivation of the opportunity of which Sattler, on LGT's case, took advantage in 2007 and subsequently. How did the meeting of 10 May 2003 throw light on the reality of the relationship between the parties? 511 It must be recalled that this meeting occurred before the first sod had been turned in the construction of Barnbougle Dunes. Ramsay's membership bond financing proposal had failed. The non-Sattler investors had demonstrated their inability to provide sufficient equity to build the golf course. Sattler had assumed that burden, almost by default. But, apropos the future developments to which the exchanges towards the end of the meeting referred, the elephant in the room, so to speak, was that Sattler was not only the landowner of the area on which a second course might be built, but the only person then known to have the financial strength to contemplate building such a course, or, indeed, constructing the accommodation and developing the real estate to which Wood's note refers. Quite clearly, Sattler was being questioned in his capacity as landowner and source of capital. The assumption being that it would be he, possibly with the involvement of Keiser, who would in due course develop Lost Farm, the question was whether the then investors in LGT would have the opportunity to participate. It would, in my view, be quite at odds with the reality of the situation to understand these exchanges on 10 May 2003 as some kind of forward indication by LGT qua beneficiary that it would not consent to the development of Lost Farm by Sattler qua fiduciary unless it were granted the right to participate to an extent, and on terms, suitable to itself. 512 Although described by Wood, in his notes, as a "pledge", what Sattler said was no such thing. It was a statement of his then intention. It was not suggested by LGT that the statement as made was inaccurate or misleading. It was "taken in good faith by all concerned", but it could only be so taken for what it was. Further, the investors accepted that Keiser might well have an involvement (which might, I would add, have been of such a size and character as to have excluded any other non-Sattler equity participants), and that Sattler had "no wish to be restricted in any way at this point of proceedings". On any view, the general sense of these exchanges was one in which the other investors both understood and accepted that the opportunity to develop Lost Farm was firmly in Sattler's quarter, and that the matter of the involvement of LGT or its investors was for Sattler to decide by reference to circumstances existing when the occasion for such a development arose. 513 The sense of the exchange occurring towards the end of the meeting on 10 May 2003 is to be contrasted with what was in the contemplation of Ramsay, McCleery and (to a lesser extent) Wood in the weeks leading to that meeting, when it was in prospect that they would all be required to provide personal security for what was then intended to be a loan from the State government to a subsidiary of LGT. The circumstances then confronting those investors were ripe for a contractual engagement as between LGT and Sattler. The investors' unstated concerns related to Sattler's position as landowner, not as fiduciary. But, rather than pressing Sattler for a contract to which LGT would be a party, the investors were content to rely on his statement of intention "in good faith". It would, in my view, be most odd if equity so worked as to leave Sattler the landowner in a position for which he might have made, but did not make, a contract: a position which would, absent consensus, deliver to LGT a commercial position more advantageous to itself than any that Sattler would conceivably have agreed to at the time, namely, that he needed LGT's consent to undertake any development, at any time, of a golf course on Lost Farm. 514 Over the next four years or so, to the extent that the parties involved at Barnbougle Dunes turned their minds to the prospect of there being a second course at Lost Farm, the silent - and occasionally explicit - assumption by reference to which they proceeded was that the land in question was Sattler's to do with as he proposed, and that any participation by LGT would be a matter for him to determine, by reference to his own interests. That is to say, it was recognised that Sattler had two very distinct capacities, that of director and that of landowner, and that any decision with respect to the future use of Lost Farm as a golf course, including the extent of participation of LGT or any other investor, would be made by Sattler the landowner, not Sattler the director. 515 Without repeating the factual narrative which is set out earlier in these reasons, I refer in this respect to the expectation, which existed at least until well into 2007, that Keiser would either fund the construction of the second course, or be a significant equity participant, at the option of Sattler alone; to Sattler's email to Wood of 23 January 2004 making it clear, in the context of the structuring of Doak's remuneration, that Barnbougle Dunes had no options "on", or connection to, the adjoining site; to Wood's email to Doak's attorney on the same subject on 28 June 2004; to Hetrel's facsimile to his solicitor on 14 September 2004; to the discussion of Sattler's "master plan" (unsatisfactory though the evidence was) at the Board meeting on 6 March 2006; to the engagement of Coore by Sattler rather than by LGT; and to the publicity which was inferentially given to Sattler's decision to proceed with the second course in August 2007. 516 LGT would, as I read its case, want to be understood as submitting that all these indications were at best equivocal, in the sense that it was only in early 2007 that Sattler set out on the course from which he ultimately, according to LGT, derived a gain which resulted from his fiduciary position. Only then did the opportunity to develop Lost Farm as a second course present itself in a commercially mature form. And it did so, it is said, because of the success of LGT's own enterprise at Barnbougle Dunes. Apart from anything else, it is this circumstance which is said to compel the conclusion that the opportunity resulted from Sattler's position as director of LGT. There can be no doubt about the factual premise upon which this aspect of LGT's case is based. Sattler did wait until the course at Barnbougle Dunes was operating profitably before he committed himself to develop Lost Farm. And he had reached that stage by early 2007, engaging Coore to do the required design work. There does not seem to be any serious suggestion on behalf of the defendants that Sattler would have taken these steps in the absence of the successful example of Barnbougle Dunes. 517 However, it is equally significant that the Board of LGT, having a keen interest in some kind of involvement in the expected second course at Lost Farm, took no concrete step to turn their ambitions into a commercial reality. LGT's own inaction, while relevant to the defence of laches to which I shall turn below, also speaks volumes of the reality of the relationship between itself and Sattler. It is here that the circumstances mentioned in para 483 above become important, and not merely as a matter of pleading. If the development of Lost Farm was truly to be regarded as something which LGT, rather than Sattler, was entitled in equity to undertake, it is odd that no resolutions were passed in that regard and, indeed, that no discussion was held at Board level as to how it would be financed, or done generally. The contrast with Canadian Aero - to take a case which stands as the paradigm instance of the articulation of the principle upon which LGT relies - could scarcely be more stark. 518 There was some debate in the present case as to whether LGT could have funded the development of a golf course at Lost Farm on its own account, or using the resources of its shareholders other than Sattler. This was, with respect, both the wrong time and the wrong place to conduct that debate. It should have been done within LGT in 2007. Had there been any reality in what LGT now claims to have been its entitlement in equity to that development, it would have been conducted there and then. The fact that it was not confirms the impression, which otherwise I derive from the evidence as a whole, that the reality of the relationship as between Sattler and LGT was that the future use of Lost Farm was a question for Sattler to determine, as landowner. The ongoing interest which the other directors, and shareholders, showed in that subject was not that which a principal would show in the activities of his or her fiduciary. It was that of a company with a successful business on one parcel of land in the availability of an adjoining parcel in circumstances where the owner of the latter had his own agenda with respect to it. 519 There is another facet of LGT's approach to the Lost Farm question in, and in the period leading to, 2007 which deserves to be illuminated. Just as Sattler waited until, from the success of Barnbougle Dunes, the opportunity to develop Lost Farm was commercially mature, so too did LGT wait until Sattler had made his own intentions clear before addressing the issue of its own involvement - to the extent that it addressed that matter at all. LGT never confronted what it now asks the court to accept was the reality of its position, namely, that it would, if Sattler observed his fiduciary obligations, build and then operate a golf course at Lost Farm. There was never a suggestion that it would bind itself to such an outcome. The limited nature of the draft agreement being prepared by Ramsay and McCleery in April and May 2003 continued to reflect the reality of LGT's position in 2007, that is, the prospect of LGT taking on the Lost Farm business in its own right was never really in contemplation. What was desired, at best, was some kind of involvement or participation in a business with Sattler and/or Keiser. When the Sattler decided to proceed with Lost Farm, LGT would then measure out the extent and nature of the participation for which it would contend. I appreciate that seeing things in this way is to proceed by way of inference, but it is, in my view, an inference which comes powerfully out of all of the evidence in the case. 520 To propose that the taking up of the opportunity to develop Lost Farm as a golf course was something that fell within the scope of Sattler's fiduciary duty is, in my view, to adopt a position conspicuously asynchronous with the reality of the relationship between the parties as disclosed in the evidence. That relationship was, relevantly to the scope point, one in which Sattler was the landowner, not the fiduciary. And it was in the former capacity only that he determined, ultimately, that he would not admit LGT to any kind of participation in the new business at Lost Farm. The commercial potential of Lost Farm for golf was, at base, an attribute of the land itself. And the land was Sattler's asset. He was drawn into participation in LGT first by the excess of Ramsay's aspirations over his resources and secondly by the failure of Ramsay's chosen means of raising funds. Thus he found himself in a fiduciary position. Inescapably, he had two hats to wear, but the reality of the situation was one in which all concerned appreciated, and participated on the basis, that choices about Lost Farm were Sattler's to make "when his directorial Akubra [was] on the locker-room shelf" (Austin, RP, "Fiduciary Accountability for Business Opportunities", in Finn, PD (ed), Equity and Commercial Relationships, Law Book Co, 1987, p 141 at p 150. 521 For the above reasons, I would hold that the establishment of a second golf course business at Lost Farm fell outside the scope of Sattler's fiduciary duty to LGT. I propose, however, to add some brief remarks with respect to LGT's submission that, albeit that Sattler was the landowner at Lost Farm and developed the land in that capacity, the opportunity to do so, at least in a commercially realistic way, was delivered to him by LGT, and by the example presented by the success of its own enterprise at Barnbougle Dunes. 522 It is broadly correct to say that Sattler's development of Lost Farm resulted from that example, amongst other things. It would, however, be a quite different thing to say that the opportunity to develop Lost Farm came to Sattler as the result of his fiduciary position with LGT. Sattler was a director, and the CEO, of LGT, but the success of Barnbougle Dunes was notorious. Undoubtedly that success enhanced the value of Lost Farm as a site for a golf course - not merely because Barnbougle Dunes provided the example, but also because the advantages of co-location were effectively delivered by LGT - but these circumstances do not, in my view, of themselves provide a basis for any conclusion to the effect that the opportunity to develop Lost Farm came to Sattler because of his fiduciary position as director and CEO of LGT. By the example and location of LGT's own business, that opportunity was available to the owner of the land at Lost Farm, even if he had had no management connection of any kind with LGT. 523 In Streeter, McLure P (with the assent of Buss JA) drew a distinction (278 ALR at 305 [76]) - … between those cases in which the fiduciary was under a positive duty to acquire or seek to acquire a particular benefit or property for the company (Cook v Deeks [1916] 1 AC 554; Chan; Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443; [1972] 2 All ER 162; Keech v Sandford (1726) 25 ER 223) and cases where there is no such positive duty. Having referred to the facts of the case before her, her Honour continued (278 ALR at 305 [77]): The High Court's formulation of the profit rule in [Warman International Ltd v Dwyer (1995) 182 CLR 544] and Chan focuses attention on the conduct of the fiduciary. There must be a causal connection between the fiduciary office and the receipt of the benefit. The "opportunity" referred to in the profit rule is that taken by the fiduciary to obtain the profit. If the opportunity is derived by reason of his fiduciary position, it is irrelevant that the company to whom the duty is owed was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably: Warman at CLR 588; ALR 209; Maguire at CLR 468; ALR 741; Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 (Boardman). 524 In the present case, counsel for LGT made it clear that it was not suggested that Sattler was under any obligation to develop Lost Farm as a golf course at all. He could have used it as a potato farm, as a drive-in cinema, or whatever; he could also have allowed it to remain undeveloped. Sattler was, therefore, under no positive duty to LGT to seek to acquire for it the benefits that were potentially available from the development of Lost Farm as a golf course. The case is, in this respect, quite different from those in the Canadian Aero line of authority. 525 That makes applicable, in my view, the question which McLure P proposed should be asked in situations in which no such positive duty exists: was there "a causal connection between the fiduciary office and the receipt of the benefit"? In the present case, that question must be answered in the negative. The receipt of the benefit arose from the opportunity to build a golf course on Lost Farm, and that opportunity did not depend, in a causal sense, upon Sattler's fiduciary position. Let it be granted that it was a mature, commercially attractive, opportunity substantially because of LGT's experience, but that is, as I have said, a different point. The opportunity did not result from Sattler's position as director and CEO. 526 My conclusion that the development of a business at Lost Farm fell outside the scope of Sattler's fiduciary duty to LGT will be sufficient for the defendants on this part of the case, but they also raised the defence of laches, and it is convenient that I deal with that point at this stage. 527 The equitable defence of laches has recently been the subject of a comprehensive examination by Murphy JA in Streeter (278 ALR at 405-412). On this aspect of the case, his Honour's reasons attracted the assent of McClure P and Buss JA. At the level of general principle, Murphy JA said: (278 ALR at 405-406 [632]-[636]): In Fysh v Page (1956) 96 CLR 233 at 243-4 ; [1956] ALR 474 (Fysh) Dixon CJ, Webb and Kitto JJ said: If a plaintiff establishes prima-facie grounds for relief the question whether he is defeated by delay must itself be governed by the kind of considerations upon which the principles of equity proceed. If the delay means that to grant relief would place the party whose title might otherwise be voidable on equitable grounds in an unreasonable situation, or if, because of change of circumstances, it would give the party claiming relief an unjust advantage or would impose an unfair prejudice on the opposite party, these are matters which may suffice to answer the prima-facie grounds for relief. See Lindsay Petroleum Co v Hurd and the observation in Lord Blackburn's speech in Erlanger v New Sombrero Phosphate Co. In Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221 at 239-40 (Lindsay Petroleum) it was said: Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy. In Orr v Ford (1989) 167 CLR 316 at 341 ; 84 ALR 146 at 160 (Orr) Deane J said: The ultimate test effectively remains that enunciated … in Lindsay Petroleum Co v Hurd, namely, whether the plaintiff has, by his inaction and standing by, placed the defendant or a third party in a situation in which it would be inequitable and unreasonable "to place him if the remedy were afterwards to be asserted": see Erlanger v New Sombrero Phosphate Co, and also, per Rich J, Hourigan. The doctrine of laches comprehends two themes. One is delay implying not just quiescence, but rather acquiescence and assent, and the other is delay involving prejudicial change of circumstances - as to which see Bell Group at [9307] and see generally R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's Equity: Doctrines & Remedies (4th ed, 2002) [36-005]-[36-020]. In Orr (at CLR 343; ALR 161) Deane J referred to the statement in Lindsay Petroleum (at 241) to the effect that in order that the plaintiff's remedy should be lost by laches, it is ordinarily necessary that there should be sufficient knowledge of the facts constituting the title to relief. 528 In the present case, the question is whether, by reason of LGT's own acquiescence when aware of the relevant facts, or of prejudice to Sattler brought about by the passage of time, it would be inequitable to require Sattler to account to LGT for the profits of the business conducted by him at Lost Farm. As I understand the defendants' case, there were two points at which LGT should have acted: after the shareholders' dinner on 13 October 2007, and (ie alternatively) after the dispatch of Wood's shareholders' update on 7 July 2008. At each of these times, it was said by the defendants, it was clear that Sattler proposed to develop Lost Farm on his own account, without equity participation on the part of LGT. 529 I did not understand counsel for LGT to take issue with the basic premise that, if the non-Sattler shareholders in LGT were aware that LGT would be excluded from equity participation in Lost Farm, it ought then to have acted, rather than leaving the matter until mid-2009. However, LGT's case was that, on each of these occasions, Sattler kept it on the hook by temporising with respect to the full extent of his intentions for the development of Lost Farm. Apart from the obvious point that equity would not listen sympathetically to a laches argument advanced on behalf of someone who had acted in this way, LGT submitted that it was not until the other directors knew all the facts which would be relevant to an informed decision whether to challenge Sattler on the course which he proposed that time commenced to run in the sense that LGT's inaction amounted to acquiescence. 530 In the view I take of the evidence (see para 366 above), at least by the shareholders' dinner on 13 October 2007 there was no longer any real doubt about Sattler's intention to develop Lost Farm in his own name. Indeed, I do not understand counsel for LGT to have submitted otherwise. Their point, rather, was that Sattler never made it clear to the other directors and shareholders that LGT was to have no involvement of any kind in the operation of that course. The position taken by LGT is best revealed in the following passage of its counsel's cross-examination of Sattler, which related to the situation as at the dinner on 13 October 2007: Q. And what you said at that dinner was that you were going to go ahead with the second course? A. Yes. Q. And you told the others present that LGT would profit from the establishment of the second course? A. I can't remember the exact detail, no, but I - sorry. Q. You told them that LGT would be able to run services pursuant to an agreement with you in relation to the second course? A. I don't understand your question. Q. Well, you have told them that you're going ahead with the second course? A. Yes. Q. And they are asking you what the involvement of LGT is going to be in the second course? A. Yes. Q. And the one thing you don't say to them is "You boys have got to understand LGT is going to have nothing whatsoever to do with the second course." You don't express yourself like that, do you? A. No, I said that there will be a constructed by the Sattler family. Q. You said it will be constructed by the Sattler family? A. Correct. Q. But you also - they asked you what the involvement of LGT was going to be in the business once it got going? A. I believe they did, yes. Q. Thinking back it's inconceivable that they wouldn't have asked you such questions? A. Yes, but you're asking from a dinner where there was quite a bit of alcohol consumed for me to give exact details. Q. Yes, sure. And when they ask you what was to be the involvement of LGT in the second course, you weren't able to give exact details? A. Correct. Q. Because you hadn't yet worked it out? A. Correct. Q. But you didn't say to them, "You guys have got to understand that this business is going to be built and LGT is going to have no part in its operation whatsoever." You didn't? ­ ­ ­ A. Are you asking me as a question or making a statement? Q. No, it's a question. You didn't express yourself like that at the meeting, did you? A. No. 531 The position was, therefore, that LGT knew that it would not be the, or a, proprietor of the proposed new golf course business at Lost Farm. What was left open was the prospect that it might have some non-proprietorial role. That is consistent with what Hetrel understood to be the gist of Sattler's message at the dinner, and it is consistent with what Hetrel said he told Sattler on several occasions, namely, "that, as long as the golf traffic was coming through Barnbougle Dunes, I would not have a problem with the second course, but I needed to understand how it was going to work". It is also consistent with McCleery's recollection of what was said at the dinner. I would find, therefore, that, in October 2007, LGT acquiesced in Sattler developing the second course on his own account. It had its reasons for doing that, and it may be that Sattler was temporising with respect to the extent of involvement, if any, which LGT would have. But LGT must be taken to have appreciated that its entitlements in that regard were uncertain, and depended on decisions by Sattler which had not yet been made. Against that understanding, LGT took no step to hold Sattler to what it now claims was the consequence of his fiduciary position, namely, that he could avoid sharing the profits of any new business at Lost Farm with LGT only by first obtaining its fully-informed consent to the establishment of such a business. 532 Although the other directors of LGT were unaware of it at the time, Sattler was then well advanced along the road of burdening himself with substantial debt to fund the construction of the new course. That burden included not only the contractual obligations involved, but also the wide-ranging mortgage security which Sattler proposed to give. Sattler bound himself to those arrangements on 10 April 2008. If he were to be required, indefinitely, to share the profits of Lost Farm with LGT, he would undoubtedly have been prejudiced by LGT's inaction between October 2007 and April 2008. Had LGT moved promptly to assert its entitlement in equity to those profits, Sattler might well have decided not to proceed with the construction of Lost Farm at all. LGT's inaction caused Sattler to change his position in a way that would now make it inequitable for him to be required to account to LGT for part of the profits earned in the conduct of the business at Lost Farm. It is no answer for LGT to say, as it did in submissions made on its behalf, that the other directors, and shareholders, knew nothing of Sattler's negotiation of the $4.5m State loan. They ought reasonably to have assumed that Sattler would have obtained funding from somewhere and, by their inaction, they took the risk that Sattler would change his position in ways which might well make it inequitable to hold him to account. 533 If there was any ambiguity in the extent or quality of LGT's understanding as to the way in which Sattler proposed to proceed, it could not have existed beyond the shareholders' update sent by Wood on 7 July 2008. Wood advised the shareholders that the new course would be developed by Sattler in partnership with Keiser, and that LGT would not be invited to participate. Construction of the course commenced in or about October 2008. What stage had been reached by the time that LGT commenced its first proceeding against Sattler on 15 July 2009? That question is not answered with clarity in the evidence, but it may be inferred that construction of the course had advanced to a significant extent. The sharing of employees as between Barnbougle Dunes and Lost Farm had been put on a regular footing, with Mrs Sattler and Dixon keeping accounts of the times involved. Ponting had, since January 2009, been engaged entirely on Lost Farm operations. At the Board meeting on 7 February 2009, Sattler reported that, at Lost Farm, six holes had been shaped and were waiting for Coore to arrive to finish them off. Seeding was expected to begin in the first week of March. That timing was not achieved, it seems, but Wood stated in his report of 20 March 2009 that seeding would commence in that month. These indications justify the inference, which I draw, that, by mid-2009, very substantial construction towards the completion of the Lost Farm golf course had occurred on Sattler's land. Realistically, by then, the die had been cast, not only in terms of financial obligations and burdens, but also in terms of permanent changes to the land itself. If LGT's claim for an account is now successful, it will mean that Sattler was deprived of the opportunity to decide, at the outset, that he would prefer not to establish a new business on Lost Farm at all, rather than being obliged to dedicate his time, energies and resources to the generation of profits to be shared with LGT. 534 It should not be assumed that Sattler's positions as majority shareholder and CEO effectively neutered the capacity of the Board to take such action as it considered in the best interests of LGT, as it did over Sattler's opposition in April 2009. Sattler's vote was originally only one-fifth, and was ultimately only one-third, of the voting power on the Board. It is true that, at any time after 1 July 2004, Sattler might have used his voting power at a general meeting to replace the other members of the Board, but at least such an expedient would have brought the present aggravations of LGT into the forum where, on one view, they properly belonged. However that may be, my present point is that the Board's failure squarely to confront Sattler with what it now says were breaches of fiduciary duty on his part is not to be explained by Sattler's position of dominance on the share register. Neither was this a case in which the deliberations of the Board were a mere formality calculated only to legitimise the steps taken by the individual who controlled the company. This was a real Board which met regularly. Its members were men of commercial substance with an active involvement in the business concerned. They were only too conscious of the Lost Farm question. Had they formed the resolve, at an early date, to confront Sattler with what LGT now says is the reality of the position that he was in - that he could develop Lost Farm as a golf course in his own name only with the consent of LGT - there was nothing in the formal, institutional or practical workings of the Board that would have made it impossible, or even (apart perhaps from the bad blood that might have been involved) difficult for them to have done so. 535 For the above reasons, had I been against the defendants on the substance of LGT's case that Sattler breached his fiduciary duty when he established the new golf course at Lost Farm on his own account, I would have held that July 2009 was too late for LGT to have commenced proceedings asserting its rights in that regard. 536 As I mentioned at the outset, the defendants made an omnibus submission that, if I were against them as to any aspect of Sattler's conduct, he should be relieved from liability under s 1318 of the Corporations Act, which reads: If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit. The section applies to an officer or employee of a corporation, and would clearly apply to Sattler in the circumstances of the present case. 537 In Australian Securities And Investments Commission v MacDonald (No 12) (2009) 259 ALR 116, having considered the authorities on the notion of honesty as used in ss 1317S and 1318 of the Corporations Act, Gzell J said (259 ALR at 122 [22]): In my view a person acts honestly for the purposes of ss 1317S(2) and 1318(1), in the ordinary meaning of that term, if that person's conduct is without moral turpitude in the sense that it is without deceit or conscious impropriety, without intent to gain improper benefit or advantage and without carelessness or imprudence at a level that negates the performance of the duty in question. That conclusion may be drawn from evidence of the person's subjective intent. But a lack of such subjective intent will not lead the court to conclude that a person has acted honestly if a reasonable person in that position would regard the conduct as exhibiting moral turpitude. This understanding of the notion was adopted by Siopis J in Hydrocool Pty Ltd v Hepburn (No 4) (2011) 279 ALR 646, 716-717 [481]. 538 The question arises whether I should, in the alternative as it were, make a finding on the question whether Sattler acted honestly when he kept for himself the opportunity to establish a business at Lost Farm. Having given the matter considerable thought, I have come to the view that it would be inappropriate to proceed in that way. The question would arise only if I were wrong on the breach of duty aspect, and then, almost inevitably, it would be the nature and context of the error, and of the correct conclusion then hypothetically reached, that would provide the context for a finding of honesty, or otherwise, under s 1318. This is not, in my view, a situation in which a conclusion on the matter of honesty, based on some alternative finding on the primary facts, can sensibly be reached. 539 I turn next to so much of LGT's case as relied on the conflict rule to attack Sattler's decision to establish and to carry on a business at Lost Farm which would compete directly with that of LGT at Barnbougle Dunes. Here I should make two things clear at the outset. First, LGT's conflict case depends to no extent upon the soundness of its opportunity case. That is to say, even if the opportunity to develop Lost Farm did not come to Sattler as a result of his fiduciary position, the carrying on of a competing business on Lost Farm necessarily involved a conflict of interest and duty, with the result that Sattler would be required to account for any benefit or gain which he derived from that business. In this compartment of the case, my conclusion above as to scope provides no shield for the defendants, as, on LGT's argument, the very fact of competition would have given rise to a conflict well within the scope of Sattler's fiduciary duty. Indeed, the circumstance that Sattler intended - as I would hold was his entitlement otherwise - to conduct an independent business to compete with that owned by LGT might be viewed as placing a sharper edge upon the questions of conflict which would potentially arise. Secondly, the present point is concerned with the contemporaneous conducting of two arguably competitive businesses, not with Sattler's decision to conduct the Lost Farm business himself rather than offer it to LGT. If the opportunity rule and the conflict rule are to be seen as inhabiting completely separate jurisprudential hemispheres, there is a sense in which the very act of making that decision might be seen as involving Sattler in a conflict. But it would only be so if the opportunity to conduct a golf course on Lost Farm came to Sattler by reason of his fiduciary position (a question with which I have already dealt), or if Sattler were under a positive duty to pursue that opportunity on behalf of LGT (see Streeter, 278 ALR at 303 [68]) which, of course, he was not. 540 The modern Australian formulation of the conflict rule is that provided by Mason J in his dissenting judgment in Hospital Products (156 CLR at 103): Accordingly, the fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect: Aberdeen Railway Co. v. Blaikie Brothers. By linking the obligation not to make a profit or take a benefit to a situation of conflict or possible conflict of interest the proposition, in accordance with the authorities, (a) excludes the relevance of an inquiry into the actual motives of the fiduciary; and (b) excludes restitutionary relief when the interest of the fiduciary is remote or insubstantial: see Boulting v. Association of Cinematograph, Television and Allied Technicians; Phelan v. Middle States Oil Corporation. What Mason J referred to "a real or substantial possibility of a conflict" is the same notion as Lord Upjohn described as "a real sensible possibility of conflict" in Boardman v Phipps [1967] 2 AC 46, 124. Although his Lordship was in dissent, his formula was endorsed by the Privy Council in Queensland Mines Ltd v Hudson (1978) 18 ALR 1, 3 and has been applied both in the NSW Court of Appeal (Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1, 89 [425]) and, twice recently, in the Full Court (Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1 at [99] and Omnilab Media [2011] FCAFC 166 at [174] and [230]). The way the principle was expressed by Mason J in Hospital Products was adopted by McHugh, Gummow, Hayne and Callinan JJ in Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165, 199 [78]. I would refer also, in this context, to what was said by McLure P in Streeter (278 ALR at 303 [67]): Mason J in Hospital Products stated the conflict rule in terms of a conflict between "interest and interest". I understand the analysis to be as follows. A fiduciary has (within the scope of his engagement or undertaking) a duty of undivided loyalty to the person to whom the duty is owed, in this case the company of which he is a director. Thus, ordinarily a director cannot have personal interests that conflict with the interests of the company. Although the conflict rule is usually formulated in terms of the need to avoid a conflict of duty and interest, the Mason J formulation assists in the understanding (and application) of the conflict rule. 541 With respect to the content and application of the conflict rule in the context of the present case, I am confronted with diametrically opposed positions being taken by the parties, at the levels both of legal principle and of fact. As a matter of principle, LGT's submission was that the court should regard it as self-evident that the carrying on of a competitive business would necessarily involve a company director in a conflict of interest, and would always give rise to a breach of fiduciary duty. The defendants submitted that participation by a company director in a competing business would never, as such, amount to a breach of fiduciary duty. As a matter of fact, LGT submitted that the conduct of another golf course on adjacent land would necessarily involve competition for LGT at Barnbougle Dunes; while the defendants submitted Sattler's business at Lost Farm was from the outset complementary to, rather than competitive with, LGT's business at Barnbougle Dunes. I shall turn to these axes of contest presently, but I should first mention two discrete matters that might otherwise complicate the discussion, if for no other reason than to clear the decks. 542 The first involves a submission by the defendants that, whatever might be the situation otherwise, Sattler was permitted to compete with LGT, and it was not a breach of his fiduciary duty to do so, by operating a second golf course on Lost Farm because that prospect was specifically contemplated by cl 16.2 of the shareholders' agreement of 10 January 2003 (see paras 131 and 135 above). For reasons given at paras 490-491 above, I would not uphold that submission. As a shareholder, Sattler was permitted to compete. The agreement, however, was not concerned with any right to compete while Sattler held office as a director. 543 The second discrete matter is in the nature of a preliminary to what follows. In the facts of the case, Sattler did not carry on a business at Lost Farm at all before the commencement of this proceeding - unless undertaking construction activities should be regarded as an aspect of the carrying on of the business then in contemplation. By the time that Lost Farm commenced to trade as a business, Sattler no longer held either of his fiduciary positions with LGT. As I shall demonstrate in due course, that circumstance had a significant impact on LGT's competition case, and I shall turn to it. For the present, however, I shall deal with the uncomplicated questions - one legal and the other factual - of whether it would amount to a breach of duty for Sattler, while the fiduciary of LGT, to carry on a business which competed with LGT's business and of whether the new golf course at Lost Farm was to be regarded as competitive with LGT's business in the relevant sense. 544 As to the legal question, it is well to commence with the classic statement of Lord Cranworth LC in Aberdeen Ry Co v Blaikie Bros (1854) 1 Macq 461, 471: A corporate body can only act by agents, and it is of course the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect. So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into. Aberdeen involved an allegation that a railway company had defaulted on a contract to purchase an agreed number of iron chairs. The chairman of the board of the company was, however, also a member of the firm from which the company had agreed to take the chairs. This was, therefore, an instance of a trader supplying goods to the company of which he was a director. The breach of fiduciary duty involved in that course of action was held to provide a complete defence, and the railway company was assoilzied from the action on the contract. Aberdeen was a supplier case rather than a competitor case, and is of present interest because of the above general statement of principle which has been so influential in this area of the law. 545 With respect to Sattler's right to compete in the present case, the defendants based themselves on the dictum of Lord Blanesburgh in Bell v Lever Brothers, Ltd [1932] AC 161, 195: And this brings me to the position of a director in relation to contracts of the second class, with which we are here alone concerned. The principle will be found in the case usually cited in relation to it, al-though reported only in the Weekly Notes, of London and Mashonaland Exploration Co. v. New Mashonaland Exploration Co.[1891] WN 165, where it was held that, it not appearing from the regulations of the company that a director's services must be rendered to that company and to no other company, he was at liberty to become a director even of a rival company, and it not being established that he was making to the second company any disclosure of information obtained confidentially by him as a director of the first company he could not at the instance of that company be restrained in his rival directorate. What he could do for a rival company, he could, of course, do for himself. The defendants referred to the view expressed in Meagher, Heydon and Leeming, Equity - Doctrines and Remedies that "it seems to be established that a director of a company may at the same time be a director of a competitor or, presumably, personally carry on a competing business" (4th ed, p 185), for which Bell v Lever Bros is given as the main authority. 546 Counsel for LGT submitted that the dictum of Lord Blanesburgh "is not good law in Australia". They referred me to no binding decision, however, in which this had been held. Rather, counsel's submission was more in the nature of an argument as to why the dictum should not be accepted. In this project, they referred me to the comprehensive treatment of the subject by Heenan J in Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265, 287-291, [76]-[90], which, while reversed on appeal, contains a comprehensive discussion on the present question and which, according to counsel for LGT, was not relevantly affected by that reversal. His Honour's conclusion was (234 FLR at 291 [90]) "that the rule recognising that to a limited extent a director may be a director of another company which competes with the business of the first company rests on somewhat fragile grounds". 547 As is apparent from the extract set out above, Lord Blanesburgh's view of the law was based on the short and, it seems, ex tempore judgment of Chitty J in London and Mashonaland Exploration Co, Ltd v New Mashonaland Exploration Co, Ltd [1891] WN 165. In that case, the plaintiff and the defendant were in the same line of work, and were, as stated in the report of the case, "rival companies". Lord Mayo was the chairman of the board of the plaintiff, but had never attended a board meeting. His name then appeared on the defendant's prospectus, "at the head of its list of directors". The plaintiff's motion to restrain the defendant from publishing any statement that Lord Mayo was one of its directors, and to restrain Lord Mayo from so acting, was unsuccessful. Chitty J's judgment was as follows: … [E]ven assuming that Lord Mayo had been duly elected chairman and director of the plaintiff company, there was nothing in the articles which required him to give any part of his time, much less the whole of his time, to the business of the company, or which prohibited him from acting as a director of another company; neither was there any contract express or implied to give his personal services to the plaintiff company and to another company. No case had been made out that Lord Mayo was about to disclose to the defendant company any information that he had obtained confidentially in his character of chairman: the analogy sought to be drawn by the plaintiff company's counsel between the present case and partnerships was incomplete: no sufficient damage had been shewn, and no case had been made for an injunction: the application was wholly unprecedented, and must be dismissed with costs. This judgment has been criticized as having been "firmly rooted in the law of contract", and as giving "no explicit mention" to fiduciary obligations: Christie, "The Director's Fiduciary Duty not to Compete" (1992) 55 MLR 506, 509. Although they referred to the article by Christie, counsel for LGT in the present case did not descend to detail in their submission - if such a submission was indeed to be understood - that Mashonaland Exploration was wrongly decided. 548 Rather, counsel's argument proceeded from the proposition that In re Thomson [1930] 1 Ch 203 was correctly decided and, because it was not referred to by Lord Blanesburgh in Bell v Lever Bros, the dictum of his Lordship in the latter case was the more likely to be doubtful. In Thomson, the defendant, a co-executor under a will, took a lease of premises into the occupation of which a yacht agency business being carried on by the executors as trustees under the will was proposed to be moved. The defendant not only took that lease and excluded the business from the premises, but he proceeded to set up there his own business in competition with that of the estate. By the time the matter came to be heard, the business being conducted by the estate had been transferred to the relevant beneficiary under the testator's will, as a result of which, according to the reasons of Clauson J, "the defendant is, as everybody admits, now free to carry on a competing business" ([1930] 1 Ch at 212). So the point of the debate before his Lordship related only to costs. 549 Clauson J defined the matter which he had to decide as follows ([1930] 1 Ch at 213): A testator carrying on the business of a yacht agent appoints an executor and directs him to carry on the business. The executor accepts the position of executor and in fact carries on the business; is that executor at liberty to sever his connection with the business, though it still remains a portion of the testator's estate, and himself start a competing yacht agent's business? For the purposes of answering this question, Clauson J accepted what was said in the Defence, namely, that owners of yachts for sale commonly placed them on the books of multiple agents, the first to secure an acceptable offer from a prospective purchaser being the one who secured the business and earned the commission. His Lordship thus considered the hypothetical case of a yacht being on the books both of the business being run by the estate and of the defendant's own business. If an intending purchaser made an offer for the yacht, the defendant would have been placed in the position of having to choose between taking the sale for his own business and making it available to the business being conducted by the estate. His Lordship took the view that it would have been a breach of the defendant's fiduciary duty to the estate, as co-executor, to take the former course. Having referred to Aberdeen Railway, Clauson J said ([1930] 1 Ch at 215-216): The rule of universal application is that an executor and trustee having duties to discharge of a fiduciary nature towards the beneficiaries under the will - in this particular case the duty of a fiduciary nature was to carry on the business of the testator to the best advantage of the beneficiaries - he shall not be allowed to enter into any engagement in which he has or can have a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect…. Having regard to the special nature of a yacht agent's business, it appears to me clear that I am bound to answer that question by saying that, by starting such a business and entering into such engagements, Mr. Allen would have been entering into engagements which would conflict, or certainly possibly might conflict with the interest of the beneficiaries under the will, because he would be obtaining for himself chances of earning a commission which, but for such competition, might be obtained for the beneficiaries under the will. Concluding, Clauson J made it clear that his decision related only to the facts of the case before him "and in particular [to] the position of a yacht agent and the nature of the business which a yacht agent carries on" ([1930] 1 Ch at 216). 550 Bell v Lever Bros itself involved undisclosed personal dealings by company directors in a particular commodity trade which lay within the boundaries of their company's normal line of business. Returning to what Lord Blanesburgh there said, as set out in para 545 above, it is necessary to appreciate what his Lordship meant by "contracts of the second class". He had earlier identified two classes of contract ([1932] AC at 194): [T]he liability of a director in respect of profits made by him from a contract in which his company also is concerned is one thing: his liability, if any there be, in respect of his profits from a contract in which the company has no interest at all is quite another. In the first case, unless by the company's regulations the director is permitted, subject to or without conditions, to retain his profit, he must account for it to the company. In the second case, the company has no concern in his profit and cannot make him accountable for it unless it appears - this is the essential qualification - that in earning that profit he has made use either of the property of the company or of some confidential information which has come to him as a director of the company.. His Lordship then referred to a direction which had been given to the jury by the trial judge that no director having a duty to promote the best interests of the company concerned "can be allowed to enter into engagements in which he has or can have a personal interest which conflicts or may possibly conflict with the interests of those whom he is bound to protect. No question is liable on such occasion to be raised as to the fairness or unfairness of the dealing" ([1932] AC at 194). Lord Blanesburgh thought this to be a reference to Lord Cranworth's statement in Aberdeen Railway, and continued ([1932] AC at 195): I can have little doubt that, like Lord Cranworth's statement, the quotation is concerned with a company's contracts in which, on the other side of the table, a director is interested, and with reference to which the company's regulations are silent. The quotation is not addressed to a director's own contracts with outsiders in which the company has no financial interest at all. That Lord Blanesburgh's dictum should be understood as limited to "a director's own contracts with outsiders in which the company has no financial interest at all" was the view of the Court of Session in Baxter ([2010] SC at 178 [77] per Lord Nimmo Smith, Lord Hamilton and Lady Paton concurring). Their Lordships (in Baxter) referred, with apparent approval, to what had been said by Lord Denning in Scottish Co-Operative Wholesale Society Ltd v Meyer [1959] AC 324, 366 (albeit in a slightly different legal context): So long as the interests of all concerned were in harmony, there was no difficulty. The nominee directors could do their duty by both companies without embarrassment. But, so soon as the interests the two companies were in conflict, the nominee directors were placed in an impossible position. 551 Lord Blanesburgh's approach was not that taken by other members of the House of Lords in Bell v Lever Bros. Indeed, the case was not decided by reference to the fiduciary duties of the directors at all: it was a case about mistake, and about a servant's duty to disclose misconduct. A review of the arguments of counsel makes that clear (see [1932] AC at 164-167). Of the other members of the House, only Lord Atkin said anything that even indirectly bore upon the extent of those duties, from which it is tolerably clear that his Lordship would not have shared the view of Lord Blanesburgh if the point had directly arisen: see [1932] AC at 213. 552 A case which did directly involve a director of a company being a principal in a competing firm was Aubanel and Alabaster Ltd v Aubanel (1949) 66 RPC 343, referred to by Hope JA in Mordecai v Mordecai (1988) 12 NSWLR 58, 63-64 (to which I shall come presently). In that case the defendant, while still director of the plaintiff company, commenced business in partnership with another in competition with the plaintiff. On an interlocutory motion, Danckwerts J noted that an employee would not be permitted so to act. His Lordship continued (66 RPC at 346): But a director is not an employee, though he is an officer of the company, and it seems to be accepted that he can engage in a competing business in the absence of an agreement with the company to the contrary. His Lordship noted the statement in the 12th edition of Buckley on Companies, at p 877, that a director was not precluded from "carrying on business in the same field as the company on his own behalf", so long as he or she did not use the company's property or confidential information. Danckwerts J said that this was in accordance with what Lord Blanesburgh had said in Bell v Lever Bros, and continued (66 RPC at 346): It seems to me that the dangers of a director using confidential information (acquired as director) to assist him in the competing business and the difficulties of avoiding such use of any confidential information, are considerable, but I must accept the proposition that such competition is permissible. The case before his Lordship did, however, involve more than mere competition. Solicitation was also involved in the conduct of the defendant, and the plaintiff's motion was successful. 553 Although, in the years which followed, there were a number of judgments in which the fiduciary duties of directors were the subject of treatment, it was not, so far as I have been able to discern, until Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238 that the right to compete was given any consideration of substance. That judgment arose out of an interlocutory application, and the (apparently) ex tempore reasons of McLelland J were expressed with the caution which is customary on such occasions. Noting that the question whether a director could compete with his or her own company "does not have a simple answer" (10 NSWLR at 240-241), his Honour found it sufficient for his then purposes to hold, provisionally, that a director ought not to be regarded as subject to a less onerous obligation than an employee with respect to the use of confidential information in the competing business, in which respect his Honour applied by analogy Faccenda Chicken Ltd v Fowler [1986] ICR 297. Riteway does not, therefore, take the general question of the right of a director to compete - absent some risk of the use of confidential information - any further. 554 The question came tangentially before the NSW Court of Appeal the following year in Mordecai, in which the judgment of Hope JA attracted the assent of Samuels and Priestley JJA. As is clear from his Honour's reasons, the conduct of the directors in that case was quite egregious: it went well beyond competing with their company and involved a concerted project to divert all the business of that company to another company, leaving the first company effectively moribund. His Honour, therefore, found it unnecessary to deal with what he described (12 NSWLR at 63) as "the general position about the right of directors to compete", but he "assume[d] the correctness" (12 NSWLR at 62) of what Lord Blanesburgh had said in Bell v Lever Bros. 555 A case more directly on point was On the Street Pty Ltd v Cott (1990) 3 ACSR 54. The defendant was a director of the plaintiff, and the editor of the magazine which it published. Due to differences with the majority shareholder, the defendant resigned from her position as editor and, taking other members of the staff of the plaintiff with her, commenced a competing business by way of another company which was very promptly incorporated for the purpose. Although the defendant also resigned as director of the plaintiff, there was, it seems, a period of about 11 days before that resignation became effective, during which time Powell J effectively treated her as being a non-executive director. As to the position of such a director, his Honour said (3 ACSR at 61): Despite the development of the law affecting the position and duties of directors of a company, there does not yet seem to have been accepted as a general principle, affecting all directors any prohibition against a director of a company being a director of another company which competes, in a way of business, with the first company; indeed, such dicta as may be found in the cases would suggest that, at least if he not be an executive director, a director may be a director of a rival company, so long as he does not divulge to, or use for the benefit of, the rival company confidential information of the first company (see, for example, London and Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165; Bell v Lever Brothers Limited [1932] AC 161; Berlie Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150, 161; Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238). In the case of an executive director, such as a managing director, it may be that, even in the absence of an express term in any employment contract requiring the director to serve the company exclusively, some such term would be implied (see, for example, Industrial Development Consultants Pty Limited v Cooley [1972] 2 All ER 162; Thomas Marshall (Exporters) Limited v Guinle [1978] 3 WLR 116). Accordingly, Powell J dissolved the injunction which had previously been granted on an interlocutory basis. 556 Unlike the situation in On the Street, the defendant in Rosetex Company Pty Ltd v Licata (1994) 12 ACSR 779 remained a director of his original company at all relevant times. He had been the controlling director of that company, the plaintiff. When it went into receivership, the defendant provided some assistance to, but had no financial interest in, two other companies in the same line of trade as the plaintiff. While recognizing that the proposition for which Mashanoland was taken to be authority had been received with reservation, Young J nonetheless held that there was no rule of law that the fiduciary position of a director precluded him or her from competing with his or her company (12 ACSR at 782-783). 557 Although the facts of R v Byrnes (1995) 183 CLR 501 did not involve the participation of company directors in a competing trading enterprise, Brennan, Deane, Toohey and Gaudron JJ touched upon the general question of a director who becomes a director of another company (where the interests of the companies did not necessarily coincide - 183 CLR at 516) or who went into business for his or her own benefit. Their Honours said (183 CLR at 516-5167): A company is entitled to the unbiased and independent judgment of each of its directors. A director of a company who is also a director of another company may owe conflicting fiduciary duties. Being a fiduciary, the director of the first company must not exercise his or her powers for the benefit or gain of the second company without clearly disclosing the second company's interests to the first company and obtaining the first company's consent. Nor, of course, can the director exercise those powers for the director's own benefit or gain without clearly disclosing his or her interest and obtaining the company's consent. A fiduciary must not exercise an authority or power for the personal benefit or gain of the fiduciary or a third party to whom a fiduciary duty is owed without the beneficiary's consent. The emphasis here, it may be noted, is on the way that competing interests might infect the fiduciary's decision-making or conduct generally in what ought to be the interests of his or her principal or beneficiary. 558 Although the facts of SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 did not as such require application of Bell v Lever Bros, in the course of considering the extent of the fiduciary duty of the respondent in that case Cooper J held (16 ACLC at 553) that it was not "impermissible per se for a director of a company to be, at the same time, a director of a competitor, or to personally carry on a competing business". 559 The right-to-compete question arose again in the English Court of Appeal in Plus Group Ltd v Pyke [2002] EWCA Civ 370. That case did involve a director of a company being involved in a rival company, but this occurred only some six months after he had been excluded from the management of the plaintiff company and, quite clearly in the view of Brooke LJ, with whose reasons Jonathan Parker LJ agreed, treated most shabbily by the board of that company. Because of the very unusual facts, their Lordships did not consider the case an appropriate occasion to revisit the general principle which flowed from Bell v Lever Bros. I note that Sedley LJ, in separate reasons, expressed strong reservations as to the soundness of that principle. 560 Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200 was a case in which a retiring director made some limited arrangements to carry out work for a client of the company of which he was a director after the retirement took effect. Those arrangements, which involved another company which the director caused to be established for the purpose, were made while the director was still holding office as such but after he had been effectively excluded from any role in the management of the company by the majority shareholder. Nothing said by Rix LJ, who delivered what was effectively the judgment of the Court of Appeal, dealt with the Bell v Lever Bros point as such, but it should be noted that the case proceeded on the unstated assumption that, had the director done what he did other than in circumstances of forced imminent retirement, it would have amounted to a breach of his fiduciary duty. A significant factor was that the plaintiff company undertook surveying, and the work which the retiring director proposed to do would have been done for an existing, regular (in fact the major), client of the company. 561 Finally in this context, I refer to Baxter, mentioned briefly at para 480 above. In the facts of that case, a non-executive director of the pursuer, an Anguillan company, became president and CEO of another company, and subsequently signed a memorandum of understanding which, for a period, secured for that other company the opportunity to take up a valuable exploration opportunity which arose in Azerbaijan. While not then involved in explorations of the specific kind (offshore explorations), the pursuer was generally interested in finding opportunities in Azerbaijan. It was held that the signing of the memorandum amounted to a breach of the director's fiduciary obligation to the pursuer. Although more of an opportunity case, there was a dimension of Baxter that made relevant the line of jurisprudence which I am presently considering. Lord Nimmo Smith, whose reasons were effectively those of the Court of Session, expressed quite substantial reservations about Bell v Lever Bros, at least to the extent that Lord Blanesburgh's words might have been construed as permitting a director to be involved in any competing undertaking at all. His Lordship said ([2010] SC at 179 [78]): The key question in every case is whether, in the particular circumstances of that case, there is a real sensible possibility of conflict. It may be that there were circumstances in Mashonaland which do not appear from the brief report of that case and which would justify the conclusion that there was there no conflict. Prima facie, a person who is a director of two companies with competing interests falls foul of Aberdeen Rly v Blaikie Bros: his duty to each conflicts with his interest in the other. This conflict may be avoided by the giving by the first company of informed consent to its director's pursuing his own interest, either as director of the second or on his own account, and informed consent in turn depends on full disclosure …. It may be noted that his Lordship's prima facie proposition related to companies with competing interests, rather than to companies that were in competition with each other in, for example, the product market. The absence of a single, unambiguously defined, concept of competition is a factor (amongst others) which has, in my view, contributed to the uncertainty which attends this area of the law. 562 It is, in my view, a striking feature of the authorities referred to above how rare have been the circumstances in which a court has been called on to deal with the pure case of a director's involvement in a competing business, without any additional or complicating factor. However, as a Judge sitting at first instance, I must accept that, in Australia, Bell v Lever Bros is good law to the extent that it stands for the proposition that merely by acting as a director of a competing company, or carrying on a competitive business on his or her own behalf, a company director will not be regarded as being in breach of his or her fiduciary obligations. I so conclude from the treatment of the subject in On the Street, Rosetex and SEA Food, limited though it was. Stated in its highest form, the proposition for which Bell v Lever Bros stands is, as put by McLure P in Streeter (278 ALR at 303 [69]), "a director is permitted to occupy board positions in competing companies". That is to say, merely by occupying such positions, the director will not be regarded as placing himself or herself in a position of conflict. But, it must be accepted, Lord Blanesburgh's words in Bell v Lever Bros extended also to the permissibility of a director conducting a business on his or her own account in competition with the company on the board of which he or she sat. That would, presumably, involve the performance of active, executive, functions in a competitive business, and would not be analogous to a situation in which the director held non-executive positions on the boards of two companies. But it would seem to be permitted, as for example was the involvement of a non-executive director in an executive role in a competing company in On the Street. As against this, my attention has been drawn to no decision of an Australian court in which Bell v Lever Bros has been rejected. 563 Although nowhere so stated in terms, the principle with which the authorities are consistent is that carrying on business - including doing so by working as an executive director of a company - in competition with the company of which he or she is a non-executive director will not necessarily be regarded as involving a conflict of interest or duty. It cannot be assumed, as a matter of fact, that a situation of this kind will inescapably involve "a real or substantial possibility of a conflict between [the director's] personal interests and those of the persons whom he [or she] is bound to protect" (Hospital Products, per Mason J, 156 CLR at 103). So understood, the principle is a very high-level one that could be used only as the broadest of starting points for the resolution of issues arising in a particular case. 564 Notwithstanding the heavily qualified nature of the legal principle on which LGT relies, to the extent that the defendants' case is to be understood as involving the proposition that Lord Blanesburgh's dictum in Bell v Lever Bros opens up as legitimate any and all kinds of competitive business to the director of a company, that proposition must be rejected. The question whether, in the light of the nature of the competitive business, the director's role in it and other relevant circumstances, the director's conduct would give rise to the sensible possibility of conflict, is not foreclosed by the dictum. At most, the dictum means that the mere fact of being the director of a company will not preclude the director from engaging in a competing business on his or her own account. But it leaves open any issues of actual conflict, or of conflict reasonably perceived to be within the range of sensible possibilities, arising on the facts of a particular case. 565 As it seems to me, when any such issues arise, it would have to be in a context which recognised that the conflict rule is concerned with a director's exercise of powers qua fiduciary in the service of his or her company. In a setting in which those powers are not being exercised, and there is no duty to exercise them, what may in other circumstances be perceived as a conflict-based breach of duty will not be so. A company cannot throw the mantle of conflict over every decision its director makes: it is only in respect of those decisions which involve the exercise of powers or functions in the service of the company (including the omission to do so where a duty exists) that the director can be held to account as fiduciary. 566 In the facts which were presumptively in prospect in the present case, for example, if an internationally-known celebrity based overseas had made clear his or her desire to play a round of golf in Australia, it would have involved Sattler in a conflict if he had to choose whether to pursue that opportunity for publicity on behalf of Barnbougle Dunes or on behalf of Lost Farm. On the other hand, if the celebrity had written a letter to Sattler expressing his or her desire to play golf specifically at Lost Farm, for Sattler to have facilitated such an outcome without first attempting to persuade the celebrity to play at Barnbougle Dunes instead would not have involved him in a conflict. In the latter case, Sattler would not be exercising any power or performing any duty as fiduciary of LGT. This kind of example serves to demonstrate how fact-sensitive the operation of the conflict rule must be when disconnected from the opportunity rule in circumstances where the fiduciary is involved in a business which is competitive to some extent. 567 That brings me to the defendants' alternative case that the golf course at Lost Farm would not be in competition with the golf course at Barnbougle Dunes. In their Defence, the defendants alleged that Sattler's development of Lost Farm was "in the best interests of LGT", to which allegation the subjoined particulars included the following: …. (f) Sattler's construction of a second course at Lost Farm was intended to, and has attracted more golfers and visitors to the Barnbougle area generally to the benefit of the Barnbougle Dunes golf course. (g) Sattler's construction of a second course at Lost Farm will provide more high standard accommodation close to Barnbougle Dunes and encourage more golfers and visitors to the Barnbougle Dunes Golf Course. (h) Sattler's construction of a second course at Lost Farm will encourage golfers and visitors to the Barnbougle area to stay for longer periods, in order to play golf and enjoy the facilities at both courses. (i) Golfers and visitors are more likely to come to Barnbougle Dunes if there are two golf courses. (j) The existence of a second course enhances the number of golfers and visitors likely to patronise the facilities at Barnbougle Dunes especially the restaurant and bar. 568 In their factual case, the defendants relied on the following evidence in chief of Keiser: I envisaged that there would be a considerable benefit to the Barnbougle Dunes course if the second course were to proceed. It is the common experience that two courses placed next to each other will generate three times the income, if the proper infrastructure is in place to support the visitors. This is [the] approach I have taken at Bandon, in Oregon. The reason for this is that the area becomes a destination, rather than a stopover. Golfers are more likely to come out of their way to visit, and the presence of a second course results in players being more likely to stay longer, playing both courses at least once (and often more than once). The effect is increased again with three or four good courses next to each other. What Keiser here referred was sometimes described as the "one plus one equals three" effect. 569 The same tendency was also described, in the evidence of Dean Dransfield ("Dransfield"), the principal of Dransfield & Co Pty Ltd, advisers and managers to the hospitality and tourism industries, as the "destination effect". In his report, which was tendered by the defendants, he said: Accordingly, in my opinion, an adjacent and complementary full service resort with a different standard of offering to Barnbougle Dunes, which includes a golf course, restaurant, lounge, wellness facility, clubhouse and accommodation, provides more choice and activity for players and their travelling party, increasing the attractiveness of a stay at all and the prospect of a longer stay at Barnbougle Dunes and in its vicinity. This is especially significant, given its remote location and limited external amenities, compared with established golfing destinations such as the Gold Coast, Sunshine Coast and Hunter Valley as well as the Murray River area and Mornington Peninsula. On the case of the defendants, although it may seem to a layperson that two adjacent golf courses would self-evidently be in competition with each other, that was not so in the environment of Barnbougle and should not be held to be so on the evidence. 570 Dransfield's report also contained trading figures for the Barnbougle Dunes course, upon which the defendants sought to rely in support of their proposition that the opening of Lost Farm had not been detrimental to LGT. Given the very short period involved where the two courses were operating at the same time, and having regard to the picture conveyed generally by those figures, I am not persuaded of their utility in assisting in the determination of the factual question - to the extent that it arises - whether the two courses are competitive or complementary. Particularly given the circumstance that Barnbougle Dunes itself is still a relatively young course, Dransfield's limited analysis was not, in my view, sufficient to sustain a conclusion about the effect of the opening of Lost Farm on what would have been the ongoing trading experience of LGT, not only now but into the future. 571 In the course of cross-examination, Dransfield made a significant concession, as follows: Q: If someone was going to stay overnight before Lost Farm was established, he would have to play both of his games, wouldn't he, on Barnbougle Dunes, on the first course? If that was their intention, to play two rounds of golf. A: That's right. Q: And if he wants to play two rounds now, he can split his rounds between Barnbougle Dunes and Lost Farm? A: That's correct. Clayton, currently a member of the Board of LGT, said, in relation to the Board's anticipation about the effect of Lost Farm on Barnbougle Dunes: Well, no one knew what effect it would have. You could anticipate it being negative, but no one truly knew what the effect would be. Clayton's experience in golf in Australia is extensive. He clearly took the view that the prospect of Lost Farm having a beneficial, rather than a detrimental, effect on Barnbougle Dunes was by no means self-evident. 572 There is also the circumstance that all (at least so far as I could see) of the evidence about the mutually beneficial effect of adjacent golf courses elsewhere was based upon experiences of golf courses in common ownership. Keiser's evidence as to Bandon Dunes certainly was. There appears to be no directly-applicable precedent for a situation in which two courses are, in effect, part of the same functional complex but not commonly owned. Here I do not regard the situation of a kind of regional cluster of separately-owned courses in a particular town or locality, of which there was also some limited evidence, as sufficiently proximate to the circumstances at Barnbougle to provide a basis for findings of any present utility. 573 As will be apparent, the whole benefit or detriment issue is subject to a number of qualifications and provisos, and is attended by a degree of uncertainty. Although there is some experience upon which to base an intelligent conclusion, inevitably an element of intuition would be involved. What is most striking about the whole question is that it is not one which a court should be required to answer. It is a question for the golf course operators, and for their supporting investors, themselves. It is they, with their capital at stake, who must make the necessary judgment as to whether the opening of an adjacent course would be beneficial or detrimental, and who must live with the consequences of that judgment. Thus it is that a court does not generally attempt to grapple with the question whether a particular engagement, or course of action, by a director will in fact give rise to a conflict of the kind that must be avoided, in the conventional way of making a determination on the balance of probabilities. As I have said, that function lies where it belongs, with the company to whom the duty is owed. Rather, the court is concerned only with the question whether there is a real, sensible or, in the words of Mason J, substantial, possibility of such a conflict arising. If the answer to that question is in the affirmative, the director must (if the problem is addressed prospectively) obtain his or her company's fully-informed consent or (if the problem is addressed after the event) account to his or her company for any benefit or gain obtained from resolving such conflicts as do arise in a way which prefers his or her (ie the director's) own interests over those of the company. In these respects, the position of a company director, although one to which fiduciary duties attach, is, in my view, different from that of fiduciaries in some other situations, such as, possibly, executors of estates where the beneficiaries are not sui juris. 574 The present question is whether a conflict of interest and duty would arise from the ongoing conduct of a business at Lost Farm which was competitive with that of LGT at Barnbougle Dunes. It is with that ultimate question in mind that I must address the purely factual question raised by the Defence, namely, whether the Lost Farm business would be in competition with the Barnbougle Dunes business. Here one starts with the fact that someone playing golf on Lost Farm cannot, at the very same time, also be playing golf on Barnbougle Dunes. That is, of course, perhaps the simplest of starting points, and one must allow for the very real prospect, established on the evidence, that most (I could not say all) of the visitors to the area will choose to play golf on both courses. But this does not mean that the two businesses should not be regarded as being in competition with each other. Co-location of competitive businesses, particularly in the recreation and tourism industries, may well bring benefits to all, but it would be a bold call to assert that this would not leave at least some scope for competition as between such businesses. When the issue is thus identified, the evidence upon which the defendants relied speaks rather differently, and less relevantly. The "destination effect" may indeed produce three times the original business from the establishment of a second course, but how that enhanced level of business would be distributed as between the two entities would remain, surely, a matter of competition. The question which equity requires the fiduciary to ask of himself or herself is not "will my establishment of a second business deliver a benefit to the first?", but "in the conduct of a second business, is it a substantial possibility that I will be required to make decisions, and to conduct myself generally, in circumstances where I will be confronted with a conflict?". The evidence led by the defendants does not assist in resolving the second question. 575 In the nature of things, the prospect that Sattler, operating his own business at Lost Farm, would, from time to time if not regularly, be obliged to make decisions that might work to the relative advantage of Lost Farm over Barnbougle Dunes, or vice versa, could not be dismissed as insubstantial. Nothing in the evidence suggests otherwise. The situations in which Sattler might find himself facing a conflict may be of such subtlety that he himself would not recognise the fact of conflict. Even an attempt at even-handedness may not achieve the result which equity would require, which is that of undivided loyalty to the company of which the fiduciary is a director. I would, therefore, reject the defendants' case that, because of the destination effect and allied considerations, Sattler's new business at Lost Farm could never be regarded as competitive with that of LGT at Barnbougle Dunes and, for that reason, that the conduct of such a business could never present to a conflict of a kind that would give rise to a breach of fiduciary duty on the part of Sattler, considered as a director and the CEO of LGT. 576 That conclusion does not, however, mean that LGT is entitled to succeed on this aspect of its case. Originally, it sought a declaration that Sattler held his interest in the Lost Farm business as constructive trustee of LGT. On the 43rd day of the trial (the fifth day of LGT's closing address), counsel for LGT announced that their client no longer sought such a declaration. From that point, the relief sought by LGT with respect to the Lost Farm business was, and remains, an account of profits, alternatively equitable damages. Down to the point where Sattler resigned as CEO of LGT - 13 January 2010 - there is nothing in the evidence to suggest that the Lost Farm business had any revenue, much less any profits, at all. In January 2010, the Lost Farm golf course was still under construction. The evidence does not permit me to make a finding as to the stage of completion which had by then been reached, but it was not until October 2010 that even a "soft" opening of the course took place. Neither the course itself nor any of the ancillary businesses was or were in operation by January 2010. On the evidence, I would have to find that Lost Farm was not even operating as a business until well after Sattler resigned as CEO of LGT. 577 I must, therefore, reject LGT's case to the extent that it involves a general claim for an account of Lost Farm profits with respect to the period before that date. Whether any such claim would survive Sattler's resignation as CEO (which post-dated his removal as director) is a subject to which I shall turn in the next section of these reasons. 578 That is not to exclude the prospect that, in respect of the period of the construction of the Lost Farm golf course, Sattler may have found himself in a position of conflict in circumstances which would speak in terms of remedial orders in favour of LGT. To the extent that LGT's case involves such circumstances, however, they are dealt with specifically below. So far as I can see in the evidence, once it be accepted (as I have held) that Sattler was not stepping over the line marked out by equity in establishing the Lost Farm golf course, there is nothing in the events preceding 13 January 2010 that would provide the basis for an order that Sattler account to LGT for any part of the profits of the Lost Farm business. 579 For those reasons, to the extent that LGT's case on the second course at Lost Farm is based upon a conflict arising before 13 January 2010, I would reject that case.

The consequences of Sattler's removal/resignation 580 Sattler was removed from his position as a director of LGT on 16 July 2009. Ignoring for the moment the fact that he remained the CEO, the question arises whether that removal left him free to conduct his own business on Lost Farm, presumptively in competition with that of LGT at Barnbougle Dunes. 581 I would hold so, for two reasons, one general, and one particular. During the course of the final address of counsel for LGT, I pressed them to deal with the general question whether, aside from any issue as to the appropriation of an opportunity which arose as the result of a director's fiduciary position, the resignation of the director from his or her fiduciary office would leave him or her free to engage in competing business activities, they being activities in which he or she had commenced to engage whilst still a fiduciary. After what was, according to counsel, a thorough examination of the authorities, counsel were unable to put it any higher than that a director who had resigned would breach his or her fiduciary obligation to his or her former company if he or she made available to his or her later company - or, presumably, used in his or her own business - any information that was confidential to the former company, or if he or she sought to exploit, either for his or her own benefit or for that of the later company, any maturing business opportunity of the former company. Counsel submitted that the exploitation of Lost Farm by Sattler fell into the latter category. Because of the way I have decided earlier parts of this case, I could not accept that characterisation of Sattler's conduct. I must decide the question of post-resignation competition unembarrassed by the notion that the opportunity to develop Lost Farm as a golf course was one which belonged to LGT rather than to Sattler. That being the case, there appears to be no suggestion in the authorities that a director who has, in breach of his or her fiduciary duty, commenced to compete with his or her company, and who, upon realising the mistake, procures his or her own removal from the office of director, cannot thereafter continue his or her involvement in those very activities. Indeed, in Thomson, a judgment of Clauson J upon which LGT strongly relied on the competition point, it was common ground that, once the erstwhile fiduciary was no longer such, he was free to compete with the business formerly conducted by the estate of which he had been an executor (see para 548 above). 582 The particular reason why Sattler should now be regarded as at liberty to compete with LGT arises under cl 16.2 of the shareholders' agreement of 10 January 2003 (see paras 131 and 135 above). I have previously held that that agreement did not avail Sattler where his fiduciary obligations as a director were concerned. However, under that clause, Sattler the shareholder may compete with LGT on any part of the land at Barnbougle not leased to LGT. Once he was no longer a director, why should cl 16.2 not be given its natural effect according to its terms? The answer, according to counsel for LGT, is that LGT, the entity to which Sattler presumptively owed the fiduciary duty, was not a party to the agreement. To that proposition - undoubtedly correct in point of fact - the defendants had two answers. The first was that, although not in terms a party to the agreement, LGT was bound by it in accordance with the principle in In re Duomatic Ltd [1969] 2 Ch 365. The second was that, even if LGT were neither a party to nor bound by the agreement at law, it was effectively bound by the agreement in equity, in the sense that the existence of the agreement stood in the way of any argument by LGT that competing in a way that was permitted by cl 16.2 would be a breach of Sattler's fiduciary duty. 583 In Duomatic, Buckley J was confronted with the question whether payments by a company to its directors, styled remuneration in the accounts, which had not been approved in a general meeting, could be reclaimed by the liquidators. His Lordship held (at 373): I proceed upon the basis that where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be. This principle was accepted, after a comprehensive consideration of the authorities, by Ormiston J in Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279, 314-320; although I note that, in a judgment substantially dismissing an appeal from his Honour's judgment, the Appeal Division found it unnecessary to deal with the point ([1992] 2 VR at 369). In the present case, it was submitted on behalf of the defendants that the shareholders' agreement was executed on 10 January 2003 when Ramsay and Sattler were the only members of LGT, and that its terms were, therefore, binding on LGT itself. 584 It was submitted on behalf of LGT that the principle for which Duomatic stands has no application in the present case. It was first submitted that "the shareholders were not purporting to implement, albeit irregularly, some act of the company". The shareholders' agreement was, both in form and in substance, an agreement between individuals. It was valid and effectual as such. Duomatic was concerned with acts, agreements, etc that might have been done by the company in question, but were not formally or effectively so done. It could not be used to convert into an act of the company the making of an agreement which, of its nature, was intended as an agreement between individuals - an agreement to which, by definition almost, LGT could never have been a party. 585 In support of this submission, LGT relied on Ipex ITG Pty Ltd v Melbourne Water Corporation (No 4) [2008] VSC 497, in which Byrne J said (at [20]): Under [the Duomatic rule] a company is bound by the assent of all of its members having a right to attend and vote on the matter at a general meeting. This rule, which has been applied to validate an agreement irregularly executed on behalf of a company [Brick and Pipe] can have no application here to bind Ipex to the share sale agreement. While it is undoubtedly true that its sole shareholder, Takapana, might have assented to its being a party to that agreement, there is no evidence that it did. This is not a case where Ipex was named as a party to the document but, for some reason, failed to execute it. The fact is that it was never a party to the agreement and there is no evidence that its shareholder, Takapana, assented to its being a party. Although not in terms advanced as support for the same submission, an authority upon which LGT relied for a slightly different point (dealt with next), Herrman v Simon (1990) 4 ASCR 81, is, in my view, of some relevance. Speaking of the principle in Duomatic, Meagher JA said (at 83): What is that principle? That principle is I think this: where it can be shown that all shareholders having a right to attend and vote at a general meeting of a company assent with full knowledge and consent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be. In other words, it is a doctrine dispensing with the consumptive effect of formalities. It is a doctrine that formalities may be disregarded if they have been waived by all shareholders acting in concert who want the same substantial result. 586 It will be seen from these cases that the Duomatic principle is not confined to the validation of agreements to which the company in question would be a party. In Brick and Pipe, Ormiston J dealt with a submission that the principle "was confined to internal disputes" ([1992] VR at 315), but his Honour observed that "[n]othing … stated in the authorities would so confine it …" ([1992] VR at 315). It is clear, however, that the principle does apply to "internal disputes", Herrman v Simon itself being an example of one such dispute. Such disputes generally involve acts of the members as such, rather than, as LGT submitted, acts of the company. The principle applies with reference to something that a general meeting could carry into effect, whether it be an act of the shareholders in the internal workings of the company, or an act of the company itself, such as the making of a contract with a third party. So it cannot be an objection to the application of the principle that the act sought to be validated was not that of the company itself. 587 But there is, in my view, force in the submission advanced on behalf of LGT to the extent that it proposes that Duomatic goes no further than to provide validity to the very thing to which the shareholders assented. The principle does not, in my opinion, provide a justification for giving an operation to the acts of shareholders, even if universally in assent, beyond what they themselves purported and intended to do. In the present case, LGT was not bound by the shareholders' agreement because it was, of its nature, an agreement between shareholders to which it was never intended that LGT be a party. Indeed, a shareholders' agreement might be regarded as the paradigm case of an agreement to which the company in question would never be a party. 588 It was also submitted on behalf of LGT that Duomatic applied only in circumstances where the members assenting to some act or circumstance did so "with full knowledge and consent". This was said to involve the requirement that each assenting member should not only know what was being done but should be, as it were, ad idem with his or her fellows as to the effect of what was being done. Here LGT referred to Herrman v Simon, in which it was sought to rely on Duomatic to have treated as valid amendments to a company's constitution that had not been made in accordance with the requirements of the constitution itself. Meagher JA held that the principle did not apply in a situation in which not all the members of the company shared a single understanding of what they were doing. 589 LGT sought to make Herrman v Simon relevant to what Ramsay and Sattler did on 10 January 2003 by submitting that Ramsay had no appreciation that cl 16.2 of the shareholders' agreement was intended to open the way for Sattler to operate a golf course in competition with LGT. In part, LGT based that submission upon the premise that I would accept Ramsay's evidence that Sattler had indicated to him that the provision was intended only to allow him (Sattler) to conduct an accommodation business on other parts of the land. I have not accepted that evidence. But, as I understood LGT's case, it would still say that there was no common understanding of the intended effect of what was then being done, in the sense required by Herrman v Simon. I would not accept that submission. Unlike Herrman v Simon, and unlike Duomatic itself, the present case is one in which the relevant actors consciously signed a formal agreement. They must be taken to have intended, and to have understood, the matters to which they thereby agreed. What their agreement amounted to, and what was its scope, were, of course, matters to be determined objectively by reference to the terms of the agreement and other relevant circumstances. But LGT cannot now avoid the legal consequences of the agreement, whatever they may be, on the basis that Ramsay did not, subjectively, appreciate the effect of what he signed. 590 In their submissions in reply, the defendants sought to make two further submissions that had not been put in chief, and to which counsel for LGT had had no opportunity to respond. The first was that the shareholders' agreement was the result of detailed consideration by, and negotiation as between, the parties' solicitors, in circumstances where Ramsay's solicitors were also LGT's; and this at the same time as the same solicitors were dealing with the terms of the lease, to which LGT was on any view a party. The sense of the defendants' submission, as I perceived it, was that, because of the commonality of representation, LGT must be fixed with knowledge of what the parties to the shareholders' agreement were agreeing to and, in the absence of any objection, must be taken to have agreed to it also. The second was that the terms of the shareholders' agreement itself were such as could lead to no conclusion other than that LGT was to be bound thereby, and assented to it. Here counsel for the defendants relied particularly on the provision that the agreement would prevail over the LGT constitution in the event of inconsistency between the two. These submissions were not properly put in reply and, although counsel for LGT raised no objection to the court receiving them, the fact is that I have not had the benefit of LGT's response to them. It strikes me as unsatisfactory that, in a case in which the defendants were represented by senior and three junior counsel, the court should be obliged, without the assistance of counsel for LGT, to test the adequacy of these new submissions, and to discern of its own accord what, if anything, might be said against them. The second submission had the potential to raise not uncomplicated questions under s 140 of the Corporations Act, for example. I can think of no reason why these points were not advanced as part of the defendants' main, 322-page, written final submission. In the circumstances, I do not propose to consider these matters further. 591 For reasons given in para 587 above, I take the view that LGT did not become a party to the shareholders' agreement under the Duomatic principle. 592 Turning to the second of the defendants' answers to LGT's case that it was neither party to nor bound by the shareholders' agreement (see para 582 above), subject to the submissions of LGT to which I next refer, it seems to me that that argument must be accepted. Clause 16.2 of the shareholders' agreement turned the present case into a Kuys-type situation, ie one in which the principals in the business being conducted by the beneficiary agreed at the outset that competition would be permissible. We are here concerned with the obligations of the fiduciary, not with the rights of the beneficiary. The principals having agreed to go into business on the express understanding that either of them could compete, it would be wrong, and contrary to principle, to hold that one of them was burdened with the conventional fiduciary obligation to avoid a conflict of interest and duty, to the extent that any such conflict might arise in the course of the conduct of a competing business the subject of that understanding. 593 I did not understand counsel for LGT to take serious issue with the kind of analysis as is proposed in the previous paragraph. However, they would accept that analysis only to the extent that it spoke of the period immediately following the execution of the shareholders' agreement on 10 January 2003, when Sattler and Ramsay were the only shareholders. Once other investors were induced to commit their capital, thereby becoming at least de facto shareholders (de jure from early July 2004), the agreement could not be relied upon by Sattler to qualify what would otherwise be his fiduciary duty to LGT. The argument ran as follows. Until Bump 'n' Run and McCleery made their contributions in mid-2003 (or committed themselves to do so), LGT was a $2 company which was still in the process of being floated, and that Ramsay and Sattler were still, therefore, in the position of promoters. It was submitted that, as against the company, equity would not recognize an agreement into which LGT entered under the hands of its then members unless the later-arriving members, who brought with them real equity, were appraised of what had been done, or approval was given to the agreement by a fully-informed, independent, board. 594 LGT relied on three authorities in this regard. The first was Wheal Ellen Gold Mining Co NL v Read (1908) 7 CLR 34, in which it was held that the promoter and director of a new company who ostensibly sold a mine to the company, but who, unrevealed to the new shareholders whose subscriptions funded the purchase, was acting as an intermediary between the vendors of the mine and the company and made a profit on the transaction, was liable, as fiduciary of the company, to repay to it the amount of that profit. The second was Tracy v Mandalay Pty Ltd (1953) 88 CLR 215, in which a new company had been promoted by the proprietors of an existing company for the purpose of purchasing property from the existing company, on terms which would result in the making of a substantial profit by the latter and the proprietors. The investors who were persuaded to take shares in the new company were ignorant of the profit involved in the purchase. Dixon CJ, Williams and Taylor JJ said (at 240): Promoters may sell their property to the new company but they are under a fiduciary duty to disclose to the new company that they are doing so and under a duty to place it in a proper position to decide whether to accept the offer or not by appointing an independent board and fully disclosing the whole position to that board. Their Honours referred to Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 and continued (88 CLR at 241): … in the absence of approval by an independent board after full disclosure sales by a promoter of his property to the new company are in the same position as any other sales by a trustee of his property to a person towards whom he stands in a fiduciary relation. That is to say they are voidable at the mere option of the purchaser. And the third authority was Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193, in which Gummow J embarked upon a detailed historical examination of the fiduciary position of company promoters. His Honour relied (78 ALR at 233-234) upon what had been said by Bowen J in Whaley Bridge Painting Co v Green and Smith (1879) 5 QBD 109, 111: The relief afforded by equity to companies against promoters, who have sought improperly to make concealed profits out of the promotion, is only an instance of the more general principle upon which equity prevents the abuse of undue influence and of fiduciary relations. The term promoter is a term not of law, but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence. In every case the relief granted must depend on the establishment of such relations between the promoter and the birth, formation and floating of the company, as render it contrary to good faith that the promoter should derive a secret profit from the promotion. A man who carries about an advertising board in one sense promotes a company, but in order to see whether relief is obtainable by the company what is to be looked to is not a word or name, but the acts and the relations of the parties. Gummow J referred also (78 ALR at 233) to what had been said by Lindley LJ in Lydney and Wigpool Iron Ore Co v Bird (1886) 33 Ch D 85, 93-94: It is not correct to say that James Bird was the agent of the company when it did not exist, nor is it much less objectionable to talk of his being in a fiduciary relation to the company before the company had any existence. Moreover, to say that James Bird was a promoter of the company and therefore liable to account to it, is calculated to mislead; for the word "promoter" is ambiguous, and it is necessary to ascertain in each case what the so-called promoter really did before his legal liabilities can be accurately ascertained. In every case it is better to look at the facts and ascertain and describe them as they are. In the present case James Bird procured the company to be formed and to be managed in such a way as to transfer from the moneys of the company to himself the sum of £10,800 without informing the company of that fact. The company were told that they had to pay £100,000 for the property, but they did not know that of that sum £10,800 was to go into the pocket of the man who had got the company up and who had in fact increased the purchase-money in order to get that £10,800. Under these circumstances he cannot retain the sum so got. Although not an agent of the company nor a trustee for it before its formation, the old familiar principles of the law of agency and of trusteeship have been extended, and very properly extended, to meet such cases; and using the word "promoter" to describe a person acting as James Bird did, it is perfectly well settled that a promoter of a company is accountable to it for all moneys secretly obtained by him from it just as if the relationship of principal and agent or of trustee and cestui que trust had really existed between them and the company when the money was so obtained. The actual result in Elders depended very much upon the rather unusual facts of the case, and need not detain us here. 595 Counsel for LGT submitted that, if it were a fact that Sattler and Ramsay had so acted as to cause LGT itself to enter an agreement the effect of which was that Sattler could, whilst a director, compete against it on the balance of his land at Barnbougle, this was a special advantage which he procured during the period of the promotion of LGT as an investment, no less than if he had an agreement with LGT to extract a monetary profit from a purchase being made by the new company pursuant to a contract to which the promoter, or interests associated with him or her, was a party or were parties. It was an advantage which potentially diminished the value of LGT as an investment, and should have been disclosed to the new investors: Bump 'n' Run and McCleery in 2003 and Hetrel in 2004. The agreement, it was said, would not be recognized by equity absent a fully-informed resolution approving it by an independent board. An event of the latter kind never occurred. 596 I could not, however, accept the factual premise by reference to which this aspect of LGT's case implicitly proceeds. Commencing with Bump 'n' Run, the representative of that prospective investor was Wood. As mentioned in para 143 above, he was told by Ramsay on 6 February 2003 that there was a shareholders' agreement and that he could "see" it - ie, I presume, obtain a copy of it - on request. Short of sending the document, it is hard to see what more Ramsay could have done. It is even harder to see how LGT can use Wood's choice not to request a copy as a basis for the submission, which it makes, that Sattler cannot now be heard in equity to rely on the agreement to give content to the scope of the fiduciary duty which he then had, or which he was to have thenceforth. 597 The other new investor to make a commitment in May 2003 was McCleery. In February 2003, considering an investment as he then was, McCleery (through his then intended colleague Joson) sought, and obtained, a copy of the shareholders' agreement. That he may not have read the agreement (if that was the situation) cannot alter the fact that he was directly informed that Sattler and Ramsay, as LGT's then shareholders, had agreed that Sattler should be at liberty to compete with LGT. 598 About a year later, Hetrel was in effectively the same position as McCleery: he was sent a copy of the shareholders' agreement. He too did not read it, but that too was his choice. Indeed, he followed what, on one view, might be considered the more prudent course of sending it to his solicitor for consideration. He is clearly in no stronger a position than Wood and McCleery to contend that he was, in effect, an innocent apropos the terms of he shareholders' agreement which gave Sattler a right to compete with LGT. 599 It will be apparent that the facts of the present case do not have any of the unwholesome features that were so conspicuously apparent in the conduct of the promoters/directors in the first two of the authorities referred to by LGT. By entering into the shareholders' agreement, Sattler was not engaging in a process of extracting from LGT some side benefit or secret advantage. To the contrary, he was putting openly on the table the terms upon which he intended that LGT should carry on business on that part of his land that was leased to it. Ramsay should not expect that he would refrain from competing with LGT if the opportunity arose. And there was no attempt by Sattler to keep that situation from the eyes of the incoming investors. Although LGT submitted that "Sattler does not suggest that he ever drew the attention of Wood or McCleery (or Hetrel) to the existence of the shareholders' agreement…", LGT itself, through Ramsay, had already done so in each case. 600 In dealing with the effect of the shareholders' agreement on Sattler's presumptive duty not to compete, both sides sought to derive an advantage from the variation to that agreement executed by Sattler and Ramsay on 27 May 2003 (see para 208 above). The defendants said that the variation established that the agreement was alive and well, notwithstanding the failure of the memberships offered. They said that it demonstrated that, as between LGT's then shareholders, the agreement was regarded as relevant to the new arrangements which emerged from the meeting on 10 May 2003. For its part, LGT said that Bump'n'Run and McCleery, who were by then (27 May 2003) effectively de facto shareholders, were never told about the variation, much less given the opportunity to assent to the agreement in its varied form. Factually, there is much to be said for each of these positions but, ultimately, I do not think the variation makes any difference to the analysis set out above as to the impact of the agreement on Sattler's fiduciary obligations. 601 The variation to the agreement was unrelated to cl 16. With respect to Sattler and Ramsay, therefore, the variation did not affect the conclusion proper to be reached from the terms of the agreement as executed on 10 January 2003. Neither, for the same reason, did the omission of Sattler and Ramsay to draw the variation to the attention of Wood and McCleery make any difference to the conclusion which equity would reach as to the effect of the agreement on the extent of Sattler's right to compete if he were only a shareholder, and not a director. What was critical to the conclusion were the terms of cl 16, which Wood had had an opportunity to see and to which McCleery had in fact had access. Those terms were not affected by the variation. 602 When he joined LGT in May 2004, Hetrel was, as I have mentioned above, effectively in the same position as McCleery. Indeed, it seems that the version of the shareholders' agreement sent to him by Ramsay may well have been the unamended one. That would have been consistent with the terms of Sattler's email of 12 May 2004. It is sufficient here to say that the conclusion otherwise proper to be reached is not altered by the circumstances under which Hetrel was admitted into the group. 603 For the above reasons, I would answer the question set out in para 580 above in the affirmative. 604 I must, however, return now to the reality of the situation that, although Sattler was removed as a director on 16 July 2009, he did not resign as CEO until 13 January 2010. On LGT's case, Sattler's fiduciary duties as CEO were no less extensive than his like duties as a director. In terms of his liability to account for such benefits or gains as arose, if the clock stopped running at all, on LGT's case, it did not do so until the second of the dates to which I have referred. 605 The position of CEO is not referred to in the constitution of LGT. It may only be a matter of terminology, but, although described as chief executive officer, Sattler's position as such was not that of an officer of the company. Neither was his position as CEO a remunerated one. He was not, therefore, subject to the conventional obligations of a senior executive employee. Does that mean that Sattler's position as CEO was not a fiduciary one? 606 I would hold not. Sattler was more than a shareholder working on a voluntary basis. He was the effective driving force, at the executive level, of LGT. The manger of LGT reported to him, and in this sense Sattler directed the operations of the company in every respect. It was not submitted that the reality of this situation was changed at all by Sattler's removal as a director on 16 July 2009. Indeed, the probabilities are that it made no difference: save for Dixon, who as manager reported to Sattler anyway, the members of the Board were newcomers to the running of Barnbougle Dunes, and might be expected to have placed considerable reliance upon Sattler's familiarity with things even after his removal as director. Although unremunerated, Sattler's position as CEO was one of trust and responsibility, and one which would, I infer, have required him to make decisions and to exercise judgment on behalf of LGT. Subject only to the Board, Sattler was rightly to be viewed as a fiduciary agent at the most senior level within the day-to-day operations of LGT. In my view, Sattler remained in a fiduciary position until he resigned as CEO, effective on 13 January 2010. 607 After that date, however, Sattler was free to compete with LGT.

The first State loan 608 On LGT's case, Sattler was its fiduciary when he negotiated for, and obtained, the loan of $900,000 from the State government in the period subsequent to the investors' meeting on 10 May 2003. LGT accepted that it had consented to Sattler obtaining that loan, and, if it matters, that it also consented to the funds represented thereby being taken into account in the calculation of Sattler's equity for the purposes of quantifying his shareholding in the company. However, according to LGT, the consent which Sattler obtained was not "fully-informed". Sattler had, according to LGT, withheld from the Board, and from the other investors, the terms upon which he had obtained the loan from the State government. As is apparent from para 213 above, those terms were more beneficial to the borrower than had been the terms offered to LGT in the period leading to 10 May 2003. Had LGT been offered the terms ultimately obtained by Sattler, it could well have - on its own case, it probably would have - taken up the opportunity of the loan, with its directors providing such security as was necessary. 609 To the obvious question whether obtaining a loan in return for the provision of security and the payment of interest should be regarded as a "benefit or gain" within the words of Deane J in Chan v Zacharia, LGT's answer was that the accelerated access to funds which was provided by the loan was such a benefit, but that, as the presumptive beneficiary, it would accept the obligation to make such allowances as equity would require as the price of the remedies which it sought. On this view of things, LGT accepted that it would have to compensate Sattler for the interest payments which he had made, and indemnify him with respect to the obligation to repay the capital when the occasion arose. I must say that, on the state of the submissions made to date, I remain to be convinced that there would be any way of doing equity as between Sattler and LGT in the way proposed by the latter, taking into account, of course, the security which the State holds over Sattler's property and the unavailability of that property to provide security for any other commitment that Sattler may wish to take on. However, for reasons which will appear, these complications do not need to be confronted. 610 Subject to all fair allowances, LGT submitted that, in the normal course, it would be entitled to a declaration that Sattler held the loan moneys, and any property obtained in exchange for those moneys, on a constructive trust. For example, had Sattler used the whole of the $900,000 to buy shares in a public company, LGT would obtain a declaration that Sattler held those shares on a constructive trust: see Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22, 69 [183]. As it happens, Sattler used the moneys as an element of his own contribution to the capital of LGT. His shareholding reflected that contribution. Since LGT was itself the presumptive beneficiary, a declaration that Sattler held the shares on a constructive trust would be inappropriate. The appropriate remedy, according to LGT, would be for the shares to be cancelled, and for the share register to be rectified accordingly. 611 This aspect of LGT's case was based on the profit rule (there being no suggestion that what Sattler did in the way of negotiating or obtaining the $900,000 loan involved a conflict of interest). The case commenced with the proposition that the opportunity to obtain the loan came to Sattler as a result of his fiduciary position. The correctness of that basic proposition is, however, by no means self-evident. It was not because he was the director/CEO of LGT that Sattler was lent this money. It was no doubt on the condition that the money would be used in the construction of the golf course at Barnbougle Dunes that the loan was made. The government was not in the business of lending money at large, and would, it seems, advance money on loan only where a proper case could be made out on public interest grounds. In the events which occurred, that condition was satisfied. However, it was as plain as may be that the money was not to be lent to LGT, or to Sattler as agent of LGT in any sense. Further, although Sattler was, with Ramsay, the one who represented LGT in its negotiations with the government in late 2002 and early 2003, counsel for LGT made it clear that their client's case did not involve any proposition that that representation had given Sattler some special insight into the availability of financial assistance from the government, or the like. 612 As accepted by counsel for LGT during the course of final submissions, the opportunity to obtain the government loan came to Sattler as an investor in LGT, not as a director. The context of the negotiations which preceded the meeting on 10 May 2003 was that of a group of investors who were trying to put together the funds for the building of the course at Barnbougle Dunes, and the security for such borrowing as was additionally required. When the attempt to achieve funding directly from the government failed on account of Wood's refusal to provide security, it was as an investor that Sattler approached the government for a loan in his own right. At the time, Sattler's position as director of LGT was a formality, and made no contribution to the derivation of the opportunity to obtain loan funds from the government. 613 Counsel for LGT appeared to accept as much when they conceded that their argument would have been the same if it had been one of the other investors, such as Wood or McCleery, who obtained this loan. But when the question arose whether the argument would have been the same if Wood, say, or even Sattler himself, had obtained a loan from a bank, the answer was in the negative. The difference, according to counsel, was that it was the government, which was understood to be prepared to lend money only at interest rates in the range 8.6%-10.6%, and over a term in the order of 18 months, which became the lender to Sattler as an individual. If those were otherwise the facts, LGT's case would have been the same if it had been Wood, say, rather than Sattler, who secured the loan. 614 On LGT's case, the vice in what Sattler did was to fail to disclose to the other investors, or to the Board (which, at that time, effectively amounted to the same thing), that he had, on his own behalf, negotiated terms which were more favourable to the borrower that had been the government's insistence in its negotiations with LGT itself. But, unless the opportunity to secure the loan came to Sattler as a result of his fiduciary position, no obligation of disclosure arose. If, as I consider to be the case, Sattler was acting at the time - both as objectively viewed and in the perception of the other investors - as investor and not as director, or agent in any sense, of LGT, the terms upon which he negotiated the loan were entirely his own business. Just as would have been the rates which Mr Kuys might have been able to extract from advertisers in his own newspaper in the facts which reached the Privy Council in Kuys. Indeed, the very circumstance that Sattler obtained the loan from the government on terms which had not been available to LGT speaks volumes the absence of any causal link between Sattler's fiduciary position with LGT and the obtaining of the loan. 615 Counsel for LGT made much of the terms and conditions of the loan to Sattler, to the relevant ones of which I have referred at para 213 above. They pointed to items 3, 9, 11, 12 and 13 on the list in that paragraph, and to the note in Mann's letter of 9 July 2003 to the effect that the loan was to be the limit of the DED's assistance with respect to Barnbougle Dunes. In this dimension of their client's case, however, I believe that counsel have confused the reason for the loan, and the conditions to which it was subject, with the opportunity to obtain it. On any view, the reason for the loan was to facilitate the construction of the golf course at Barnbougle Dunes. That the government tied the availability of the public loan funds to the giving of information about the progress of the LGT project was unsurprising and, in my view, not inconsistent with a perception on the part of the government, which the DED clearly had, that it was dealing with Sattler as an investor, rather than with Sattler as officer or agent of LGT. As to the note in the letter of 9 July 2003, counsel's point was, as I understood it, that Sattler was effectively using up what might have otherwise been LGT's expectation of obtaining further loan funds from the government, and doing so for his own benefit. I do not think that there is anything in this point. The note was not contractual: it was no more than a proviso to ensure that expectations would not be encouraged by the making of the loan. There is nothing in the evidence to suggest that LGT then had the slightest intention of seeking a further loan from the State government, and, as events turned out, it never did. I doubt that the other investors ever entertained the notion that, notwithstanding this loan to Sattler (of which they were aware), the DED might be prepared to lend further funds at a later date. 616 The other investors knew that Sattler was obtaining the loan in his own name and would be using the funds to increase his equity in LGT. They knew, or ought reasonably to have assumed, that he obtained the loan from the government (rather than from a financial institution) with a view to the money lent being ploughed into LGT. There was nothing about these circumstances that was in the least controversial at the time. It would be quite at odds with dynamics within LGT at the time, and with the objective circumstances, to hold that the capacity in which Sattler negotiated for and obtained the government loan of $900,000 was a fiduciary one apropos LGT. 617 An alternative argument advanced by the defendants in response to this aspect of LGT's case was that it would be unconscientious for LGT now to assert that Sattler should account for the benefit of the 2003 loan, because LGT did consent to Sattler obtaining the loan, because obtaining the loan was in the best interests of LGT, and because there was no conflict of interest and duty involved. As to the latter, it was put by the defendants, in effect, that Sattler was not faced with an either/or situation. LGT could not have obtained the loan since, at the very meeting in 10 May 2003, it had been decided that LGT would not be burdened by debt. Further, what had been offered to LGT was qualitatively different from what was later taken up by Sattler. The proposal for LGT involved short-term finance, the purpose of which was to cover the limited period (at least as Ramsay saw it, and as he put it to the DED) before the membership contributions came in. I was invited by the defendants to view this as being in the nature of bridging finance, and to regard it as self-evident that it would normally attract a higher interest rate than a conventional loan. 618 I should say at once that, pace McCleery and his protestations, the terms upon which the DED offered the original loan to LGT were conventional ones. I refer here to what I have set out at para 185 above. In short, the term was 18 months because of the specific purpose for which Ramsay had sought this funding, and the interest rate fell within the range 8.6%-10.6% as the result of the application of the DED's own matrix, taking account of the risk and other relevant factors. As to risk, it could hardly be denied that the proposed security which LGT would offer to the government was both complex and unconventional. The terms obtained by Sattler were, with one exception, similarly linked to the DED's standard practice. He obtained a longer term because his was never a short-term proposal. The interest rate too was based on a similar matrix, but the outcome of the application of the matrix was different, because, principally, the DED perceived the risk to be less. In this respect, the security was to consist of mortgages over Tasmanian land. The one exception to which I referred was that Sattler was given an interest rate rebate, but the reasons for this were set out in Hawkes' paper of 3 July 2003. It may be said that the perception of Sattler as "a conservative entrepreneur" of "strong integrity and credibility" both places the Sattler proposal well apart from that previously advanced by LGT and emphasises the circumstance that this loan came to Sattler in his own right, not because of his position as director of LGT. 619 As I perceive it, the defendants' argument as to the unconscientiousness of LGT's claim effectively merges with their other argument that the suggestion that, had the other investors been fully informed in 2003 of the terms upon which Sattler proposed to borrow money from the government, they would have withheld their consent for him to do so was untenable. I consider that there is substance in what the defendants say in this respect. The requirement that LGT be debt-free was, as a matter of form, contained in the PDS, and it lapsed on 14 May 2003. Nonetheless, that LGT should be free of debt was one of the underlying premises upon which the company was capitalised. The loan from the Sate was not to be to LGT itself and would, because of the requirement of the PDS, have had to have been advanced through another entity. But there was no intention to use a different entity as a back-door means of building the golf course by debt financing. The loan from the government was only ever intended to fill the gap before membership subscriptions came in. For LGT to have burdened itself with long-term debt, even on the interest rates made available to Sattler, would have been quite inconsistent with one of the fundamentals of LGT's capitalisation, and with the thinking of all the investors in 2003. No less importantly, from the then perspective of Sattler, he would have had no reason to think that LGT might be anxious to take on a debt obligation of $900,000. 620 The way it was done, the risk was Sattler's. Regardless of whether LGT prospered, he would be obliged to pay interest and, ultimately, capital on the loan. He put the proceeds of the loan into LGT as equity, that is, as risk capital. The other investors also contributed risk capital, but their risks were, to say the least, moderated by Sattler's substantial investment, absent which it is unlikely that the business would have gone ahead at all. LGT, and the minority shareholders who have brought the present case, now say that, had it been given the opportunity in 2003, LGT would have taken loan finance on the same terms as were obtained by Sattler, and, in the case of the investors, would have provided the necessary security. Those are, in my view, highly unlikely propositions, quite at odds with the reality of the situation in 2003, when Doak and Clayton were on site, ready to start work on the strength of agreed remuneration amounting to $400,000. I am bound to say that the propositions are informed more by the advantages of hindsight and the interests of LGT in this litigation than by any objective connection with that reality. 621 It is, in my view, rather too convenient for LGT now to say that it will make the allowances necessary to compensate Sattler for the interest he has paid, and indemnifying him for the repayment of principal, in relation to the loan which he obtained from the government in 2003. The crucial aspect which that position ignores, of course, is that Sattler took the risk. Because Sattler's contribution to LGT was in the form of equity, LGT's own situation was risk-free. If it completely failed, it would not have to repay Sattler. Now that LGT has prospered - largely although not entirely by reason of Sattler's contributions of money, time and general commercial and political nous - it is, in my view, too late for it to say that things ought to have ben otherwise, that it did not want Sattler's risk capital in 2003 and that it would happily have undertaken the burden of owing the government $900,000 instead. 622 Against the considerations to which I have just referred, Sattler's omission to mention to the other investors the terms upon which he obtained the loan from the government pales almost into insignificance. For LGT now to rely on that circumstance has a certain air of opportunism about it. It is true that, technically, the consent to the loan which Sattler on any view obtained from LGT was not "fully-informed" in this respect, but it is, in my view, unconscientious for LGT now to assert that, as a result of that omission, Sattler should lose forever the shareholding in LGT which the loan moneys represented. Equity would not countenance such an inflexible solution to an omission of this order. 623 Unlike the position arising with respect to the opportunity to develop the second course at Lost Farm, in the present compartment of LGT's case I consider that I can, and should, make a finding in the alternative as to honesty under s 1318 of the Corporations Act. That is because of the limited nature of the dereliction alleged by LGT, namely, Sattler's failure (a word I would use here without any pejorative content) to mention the terms of the first State loan to the other investors in LGT. In relevant respects, I would hold that Sattler acted honestly within the meaning of the word as expounded in Macdonald. Had I been of the view that there was a breach of fiduciary duty involved here, I would have exercised my discretion favourably to Sattler and excused him from liability for that breach.

The Keiser loan 624 As noted above, in January 2004, Sattler received $500,000 by way of loan from Keiser. LGT alleges that Sattler's opportunity to obtain those loan moneys resulted from his fiduciary position as director. That being the case, in the normal course, equity would treat the moneys as subject to a constructive trust in favour of LGT. However, since (on LGT's case at least) the moneys were used by Sattler as part of his capital contribution to LGT, which in turn formed the basis for the allocation of shares to him in July 2004, the appropriate remedy was cancellation of the shares issued to Sattler, and rectification of the share register. From the remedial standpoint, LGT's case in this respect was the same as the case which it advanced with respect to the $900,000 loan which Sattler obtained from the State government. 625 In my view, however, LGT's case on this point encounters an insuperable difficulty well before the remedial stage is reached. LGT's basic premise that it had the opportunity to secure loan funds from Keiser seems to involve the assumption that, in the normal course, those funds would have been available to LGT and, had Sattler complied with his fiduciary duty, he would have prevailed upon Keiser to lend the funds to LGT. The assumption also seems to be that Keiser was in the position of a disinterested third-party lender who, subject to appropriate terms and acceptable security, would have lent the funds to LGT just as readily as he would have lent them to Sattler. However, by the time he came to advance these moneys - indeed, by the time he executed the agreement under which he would later do so, in December 2003 - Keiser had come to the view that the management of LGT was, in his word, "dysfunctional". He gave evidence that he had no intention of lending money to LGT, and that evidence was not seriously challenged. He understood that the funds would be used by Sattler to finance the construction of Barnbougle Dunes, but he was in absolutely no doubt that he was dealing with, and lending to, Sattler the individual. And he was given a most idiosyncratic form of security (of his own devising) which LGT could never have given: a 60% share in the ownership of the Lost Farm land as such. 626 What we have, therefore, is the following. First, the original offer from Keiser was that a loan should be made to Sattler. Secondly, the loan was ostensibly made to Sattler. Thirdly, the security provided was Sattler's own. Fourthly, Keiser was under absolutely no misapprehension as to the party with whom he was dealing, and would never have dealt with LGT. Fifthly, the other directors of LGT knew that the loan had been made to Sattler in his own right (although they did not know the terms), and knew, or at least assumed, that the loan enabled Sattler to make cash contributions to LGT which, in part, later formed the basis of his shareholding. All of the objective indications, therefore, point away from LGT's case on this aspect. I would have no hesitation in holding that the loan was exactly what it appeared to be, namely, a transaction between Keiser and Sattler in which LGT had no interest, other than that of a company which would benefit from the injection of additional risk capital by one of its shareholders. 627 Additionally, a number of the points made above (paras 619-621) with respect to the State government loan apply equally here. In particular, it might be said that LGT had the benefit of this injection of this capital with no greater exposure than that carried by a company with respect to its own share capital. It obtained the funds, but had no liability to any outside lender. It was not required to find security. I must say that, when all the circumstances are considered, I am quite at a loss to appreciate how equity would convert this transaction into one in which LGT was to be treated as the beneficial borrower as against Keiser, and would do so many years after the event, when the business which benefitted from this injection of capital is known to have prospered. That would, in my view, be a result of such conspicuous injustice that it would never be contemplated by a court of equity. 628 LGT's case with respect to the loan by Keiser to Sattler must be rejected. 629 I would add to the foregoing a finding that Sattler acted honestly in his obtaining of the loan from Keiser, and in everything to do with it. Had my conclusion with respect to breach of duty been otherwise, I would have excused him from liability under s 1318 of the Corporations Act.

The second State loan 630 It was alleged by LGT that Sattler breached his fiduciary duty as director and CEO when he obtained the loan of $4.5m from the Tasmanian government in May 2008. It will be recalled that these funds were used by Sattler in the construction of the Lost Farm golf course. The way the argument was summarised in LGT's written submissions was as follows: The evidence makes out LGT's claim in relation to the second state loan, namely that: (a) LGT created the opportunity to raise public funds; (b) the opportunity to take out the second state loan was such an opportunity; (c) LGT was entitled to the opportunity; (d) Sattler learnt of/obtained/received the opportunity by reason of his position as a fiduciary; (e) by taking out the second state loan for himself Sattler diverted the opportunity…; (f) Sattler failed to disclose relevant details of the second state loan…; (g) by taking out the second state loan for himself Sattler placed himself in a position of conflict his fiduciary duty and his personal interest… Because of the use to which the funds were put, LGT's claimed relief in respect of this breach of duty was an account of the profits of the Lost Farm course, after having made due allowance for the extent to which those profits arose from Sattler's other contributions and for the interest paid on the loan. It was not suggested that LGT should, in effect, take over the loan and the obligations that came with it. 631 As I perceived it, there was a rather idiosyncratic use of the expression "opportunity to raise public funds" used in LGT's submission, as set out above. In the normal vernacular, raising public funds is raising funds from the public. By contrast, what Sattler did in late 2007 and early 2008 was to apply for and to obtain a specific loan from the government. Unlike the situation when a public company, for example, publishes a prospectus for a share issue, Sattler's transaction with the DED was one-on-one. I would not accept the proposition, seemingly underlying LGT's submissions, that there was, at the general level, an "opportunity" to obtain loan funds from the government which existed in the broad, as it were, and of which either Sattler or LGT might have taken advantage. In this respect, the position with the $4.5m loan was distinctly different from that which obtained under the Scottsdale Fund and the NE Tas Fund, where grants were available to organisations which met certain criteria. 632 It is as clear as may be that LGT did not "create the opportunity" which led to Sattler obtaining the loan of $4.5m from the State government. The opportunity arose from an application which Sattler made in his own name and on his own account. Although that application was not in writing, there was no possibility of misunderstanding on the part of those whose task it was to assess the application: they appreciated unambiguously that this was Sattler's application and related to a new business which he proposed to conduct himself. Indeed, the fact that LGT was not involved in the application was noted. Items (a)-(c) on LGT's summary submissions set out in para 630 above must, therefore, be rejected. So must item (e). And, to the extent at least that it depends upon the opportunity belonging to LGT, so must item (d). At least in relation to the profit rule, item (f) goes no further than to beg the question and, although correct in point of fact, must be rejected as a contributor to the strength of LGT's case for relief in equity with respect to the $4.5m loan. 633 It may be that, in approaching the matter as I have done in the previous paragraph, I have taken LGT's summary submission too much at face value. There is a sense in which that submission, as developed orally, involved the proposition that Sattler ought to have regarded the opportunity to obtain the loan as LGT's entitlement. However, that would be the case only if he was, as director/CEO of LGT, under a duty to pursue the opportunity on behalf of LGT, rather than in his own right: see Streeter, 278 ALR at 305 [76]. But because it amounted to no breach of Sattler's fiduciary duty to develop Lost Farm in his own right and without the involvement of LGT, and because the opportunity to obtain the loan was specifically tied to that development, there was no such duty. Once it be established that Sattler was entitled to develop Lost Farm himself, it must be the case that he was entitled to fund it by whatever lawful means were at his disposal without having to account to LGT for the benefit derived from the receipt of such funds. 634 More difficult is the question - not raised in the itemised summary submission set out above but apparent in the oral submissions made on behalf of LGT - whether it was a breach of Sattler's fiduciary duty for him to have used information and knowledge which came to him as director/CEO of LGT in support of his application for the loan from the State government. What was that information and knowledge? It will be recalled that Sattler then made use of his application under the Scottsdale Fund, in which Dixon had made reference to, or relied on, the experience of LGT in making a number of estimations as to various indicators of the anticipated viability and economic consequences of Sattler's proposed business at Lost Farm. I refer to the number of short, medium and long-terms jobs that would be created in specific operational departments, the expected revenues of the Lost Farm business, the "take-home wages" that would be generated, the sums that would be ploughed back into the community through local vendors and businesses, the budget of the proposed business, the number of golfers that would play at Lost Farm and the growth of the market in which Lost Farm would trade. Although there was nothing obviously confidential in any of this information, access to it in a readily-available form when he applied for the government loan placed Sattler in a position of some advantage compared with that which he would have occupied had he known nothing about LGT's business at Barnbougle Dunes. The only other LGT-derived knowledge of which Sattler made use was, so far as I can see, the balance sheets and profit and loss statements for 2005/2006 and 2006/2007. 635 Under cross-examination, Sattler said that the information which he provided to the DED was "available to everyone". It was submitted on behalf of the defendants that, since Sattler was not challenged on that answer, what he said had to be taken as a fact. While I would not accept that the court is restricted in that way, the fact is that counsel for LGT themselves did not address the question whether the information concerned in fact came to Sattler in the same way as it would have come, or been available, to any shareholder, as distinct from a director, of LGT. I was not addressed, for example, on cl 83 of the LGT constitution or on s 247A of the Corporations Act in this context. The financial statements would, I infer, have been sent (or, in the case of 2006/2007, about to be sent) to shareholders generally under s 314 of the Corporations Act. In the light of that section, the knowledge of what the financial statements contained scarcely came to Sattler - actually or notionally - as a result of his fiduciary position. However, the question remains whether information of the other kinds referred to above did so. 636 The defendants submitted not, because the development of the second course on Lost Farm was outside the scope of Sattler's fiduciary duty. So it was, but the use of management information from LGT in aid of that development was not outside the scope of that duty. Indeed, the very circumstance that Lost Farm was Sattler's own business gives this aspect of LGT's a sharper, not a duller, focus. The concern of equity in relevant respects is with the misuse of the fiduciary position, and here it is not to the point that the non-LGT activity to which the loan funds were to be applied was outside the scope of the duty: see Grimaldi 287 ALR at 114-115 [440]. 637 There can, in my view, be little doubt but that the information set out in Sattler's application under the Scottsdale Fund came to him - or to Dixon on his behalf - because of his position as director and, more realistically in my view, CEO of LGT. The fact that much of the information seems to have been garnered by Dixon from the records of LGT without even the need to consult Sattler at the level of detail strengthens the case for this conclusion. The facts do, therefore, literally fit Deane J's words in Chan v Zacharia. The loan was a benefit (subject, as the defendants pointed out, to the usual burdens, such as the liability to pay interest and the provision of security, but a benefit nonetheless, else Sattler would not have taken it up), and, in order to obtain it, Sattler used the knowledge which came to him in his fiduciary position as to the financial statements and like records of LGT. The DED required that information and, it must be inferred, may not have approved the loan in the absence of it. However, the defendants submitted that this information was "minor" in the overall mix of circumstances that led to Sattler obtaining the loan from the State, and ought not to be regarded as sufficient in equity to impose upon Sattler a duty to account for the benefit which he obtained from the loan as such. I am disposed to accept that submission. 638 The information which Sattler put before the DED was purely factual, was not confidential, might (possibly with some effort) have been created by him from scratch and would surely, even if only by way of a court order under s 247A of the Corporations Act, have been accessible to Sattler as a shareholder in LGT. It was provided to the DED at its request and in good faith. Although it was suggested to Sattler that he ought to have consulted the Board before providing the information to the DED, no basis upon which the Board might have objected to him proceeding as he intended was put to him. Neither was it suggested that, had they known about Sattler's intention to use this information, the other members of the Board might have taken it upon themselves to act, in effect, as spoilers apropos Sattler's attempts to finance the development of Lost Farm. And the information was something in which Sattler had a proper interest which was not adverse to any corresponding legitimate interest of LGT itself (once it be held, as I have, that the opportunity to develop Lost Farm as such did not belong to LGT in equity). 639 There is also the matter of causation. As the defendants submitted, it involves something of a stretch to say that Sattler secured the government loan "by use or by reason" of the knowledge which he had as to the availability and contents of LGT's records. As McLure P said in Streeter, "there must be a causal connection between the profit and the use of the fiduciary office" (278 ALR at 305 [75] & [77]). When the "profit" is the securing of a loan from a third party, what would constitute a sufficient causal connection may be a matter of some complexity. In the present case, some light is thrown on the subject by the TDR Board paper of 1 October 2007, from which it appears that the DED's use of the information in question was only one aspect of a mix of factors that, ultimately (and not, it seems, without some reservations within government as a whole), led to the approval of the loan. On my reading of the evidence, the significance of the information put before the DED by Sattler was either that it provided a background against which the government would make its decision or that it indicated the financial condition of one of Sattler's business ventures. As to the latter, a fair reading of the TDR Board paper makes it tolerably clear that the DED's interest in LGT's financial information arose because LGT represented a significant investment, and therefore a liability, of Sattler. It also represented a source of income. These matters were relevant to Sattler's ability to service payments of interest, and ultimately to repay capital, under the loan that was then proposed. However, it would, in my opinion, be going too far to say that this information was the reason that Sattler obtained the government loan. 640 Related to considerations of causation is the question of the relief which equity would provide in a situation such as the present. As expressed by Deane J in Chan v Zacharia, the profit rule, or theme, is concerned with the benefit or gain for which the errant fiduciary will be required to account. In the present case, LGT says that Sattler should be required to account for the benefit of the loan and, to the extent that the loan moneys were ploughed into the business at Lost Farm, he should be required to account for the profits of that business. It says that due allowance would necessarily be made for Sattler's own contributions, and for the obligations to which he subjected himself in his contract with the lender. In my view, however, long before the stage is reached when allowances of this kind come to be considered, the claim for an account is confronted by insuperable conceptual and practical difficulties constituted by the reality that the claim relates to one aspect only of a complex transaction by which the loan was approved, and the loan moneys funded part only of the physical entity upon and within which the Lost Farm business came to be conducted. If there is an equity legitimately involved in LGT's case on this point, how it would find expression in the benefit which Sattler actually derived by reason of his presumptive breach of duty is a subject which was not explained. 641 As a matter of equity, for the reasons stated above, I would not require Sattler to account for any part of the profits which he derives from his business at Lost Farm on account of him having used, for the purposes of his application for the loan of $4.5m, some information which came to him as director and CEO of LGT. 642 However, ultimately this may be seen as an example of a case in which, to use the words of Deane J himself, the literal application of general principles should not be pushed to the point where it would "convert equity into an instrument of hardship and injustice": Chan v Zacharia, 154 CLR at 205. It is here, in my view, that s 1318 of the Corporations Act is of particular utility. To the extent that there might be thought to have been a breach of duty by Sattler in connection with the second State loan (including his having had access to Dixon's work on the Scottsdale Fund application), for reasons which ought to be clear from what I have written above, I would reach the conclusion that Sattler acted honestly in relevant respects. Indeed, nothing put to him under cross-examination implied otherwise. I doubt that it entered his head that Dixon's Scottsdale Fund application might have contained information that he, Sattler, ought not to use. Neither was it put to Sattler that he knew, or even ought to have known, that the Board of LGT would not want the information used in the way that it was. Having formed the view that Sattler did act honestly, I would exercise my discretion favourably to him under s 1318. In this respect, I need add little to what I have mentioned above. The availability of the information to Sattler can only be regarded as benign for LGT: it was no part of LGT's case to identify any actual, as distinct from theoretical, detriment which it suffered as the result of Sattler's use of the information. In these circumstances, for LGT to obtain a share in the profits of a business to the establishment of which it otherwise made no contribution, merely because Sattler used this information as one part of an application for one element of the funding for the project, would, in my view, deliver to it something in the nature of a windfall. And it would impose upon Sattler a fetter which, save possibly by reference to the very strict approach which equity takes to the duties of fiduciaries, he did nothing to deserve. 643 For the above reasons, I propose to dismiss so much of LGT's case as relates to the $4.5m loan from the State government.

The ancillary businesses at Lost Farm 644 LGT alleges that it was a breach of Sattler's fiduciary duty to establish and to operate at Lost Farm a restaurant, a pro-shop, a bar and accommodation, in each case in competition with corresponding businesses being conducted at Barnbougle Dunes. In the Further Amended Statement of Claim, the allegation is made that the opportunity to establish each of these businesses belonged to LGT, and came to Sattler only as a result of his fiduciary position. This aspect of the case was not, I would have to say, developed in detail in submissions made on behalf of LGT, but the point must be dealt with nonetheless. 645 Commencing with the pro-shop, on any view, such a business must be treated in the same way as the business of the golf course upon which it operates. Consistently with my conclusion above that the opportunity to establish a golf course on the Lost Farm land did not come to Sattler because of his fiduciary position with LGT, I hold that he was entitled to provide that course with a pro-shop in the conventional way, and that the opportunity for him to have done so did not result from that position. 646 Next, with respect to the accommodation, one must start with the fact that LGT's function at Barnbougle Dunes was limited to management, and did not include the ownership of an accommodation business as such. LGT was not permitted to conduct an accommodation business under its leases at Barnbougle Dunes, and it never did so. Neither is there anything in the attempt by LGT to make something of the difference between accommodation as such and management of the accommodation. Accommodation management was something in which LGT engaged by reason of arrangements made with respect to Sattler's accommodation business at Barnbougle Dunes. It was not something in which LGT might ever have engaged as a free-standing business enterprise. In no realistic sense could the opportunity for Sattler to manage his own accommodation at Lost Farm be regarded as based upon the like activity of LGT, on behalf of Sattler Nominees, at Barnbougle Dunes. 647 For the restaurant and bar at Lost Farm there were corresponding businesses at Barnbougle Dunes. Further, while it may be accepted that such businesses - following LGT's own terminology - are appropriately described as "ancillary" to the golf courses to which they are attached, they are not so inherently an aspect of any golf course as necessarily to be covered by my conclusion above with respect to the opportunity to establish the Lost Farm golf course business as such. That does not mean, however, that the opportunity to establish these businesses at Lost Farm came to Sattler as a result of his fiduciary position with LGT. Counsel for LGT accepted that, if I should hold that Sattler was entitled in equity to establish a golf course at Lost Farm, he was entitled to populate it with such businesses as he chose. I consider that that concession was soundly made. There is, in my view, no sense in which it might realistically be said that the opportunity to establish a restaurant and bar at Lost Farm resulted from Sattler's position as director and CEO of LGT. 648 That brings me to the aspect of the present department of LGT's case to which emphasis was given in its submissions, namely, that it was a breach of the conflict rule for Sattler to have established at Lost Farm businesses which were competitive with those of LGT at Barnbougle Dunes. Although not then expressed in those jurisprudential terms, it was this aspect of the case which produced much resentment among the other investors in LGT when Sattler delivered his ultimatum to the Board on 24 March 2009. I agree with what was implicit in LGT's case, namely, that Sattler was then faced with a conflict, but it must be understood what were the two alternatives in the choice between which that conflict presumptively arose: they were the establishment of ancillary businesses around the re-designed car park at Barnbougle Dunes by Sattler and for his own benefit, on the one hand, and some unidentified proposal - possibly even doing nothing at that stage - which would have those or corresponding businesses established by LGT and for its benefit, on the other hand. Recognising that conflict, Sattler intended not to vote on the subject within the Board. I cannot perceive, and LGT did not in its submissions identify, how Sattler might be said to have been misusing his position as director/CEO in the way he then proceeded. As things happened, Sattler's proposal was withdrawn and the possibility that there might have been a conflict in the circumstances postulated thereupon became moot. 649 The question which remains, therefore, is whether the establishment and conduct of these ancillary businesses at Lost Farm involved Sattler in a conflict because those businesses were in competition with like businesses at Barnbougle Dunes. As before, I would treat the pro-shop as integral with the golf course as such, and apply to it the reasoning, and the conclusions, set out in paras 539-607 above. For reasons set out in para 646 above, I would hold that Sattler's accommodation business was not, and could not be, in competition with any business that LGT could have at Barnbougle Dunes. 650 I accept, however, that the restaurant and bar at Lost Farm would have been in competition with LGT's like businesses at Barnbougle Dunes. I say "would have been" because in fact they were not, during any period when Sattler was the fiduciary of LGT. The restaurant did not open until ten months, and the bar did not open until eleven months, after Sattler had resigned as CEO (he having previously been removed as director). Consistently with my conclusion above with respect to the Lost Farm course as such, I hold that Sattler was then entitled to conduct businesses which were competitive with those of LGT. 651 For the above reasons, I reject LGT's case in equity in relation to the restaurant, the bar, the pro-shop and the accommodation. 652 In my treatment of the ancillary business question, I have to date said nothing about the wellness centre, which was originally to be built at Barnbougle Dunes and was, in the events which transpired, in fact built at Lost Farm. Absent the special consideration to which I am about to refer, the wellness centre may have been in the same category as the other ancillary businesses, that is, a business which Sattler intended to conduct on his own account, which might have been placed at Barnbougle Dunes, but which was placed at Lost Farm. There was, however, the singular circumstance that, unlike the other businesses, the construction of the wellness centre was funded by an AusIndustry grant. Sattler was not required to use his own funds - either his own capital resources or borrowed funds. 653 The question is, therefore, whether it was a breach of Sattler's fiduciary duty to LGT for him to have taken for himself the $360,000 of funding provided by AusIndustry under the NE TAS Fund for the construction of the wellness centre. As proposed by Sattler in his application of 12 December 2008 (and the defendants did not lead any evidence that this was not, in the events which transpired, the ultimate reality), the construction of the wellness centre was to be wholly financed by that grant. The application relied entirely upon the experience of LGT at Barnbougle Dunes, and could not have been understood otherwise than as an application for funds which would be deployed for the benefit of LGT. Most importantly, the opportunity to obtain these funds arose in the context of, and thus by reason of, the operation of the golf course at Barnbougle Dunes. Sattler, as CEO, could just as easily have applied for the funds in the name of LGT. He knew that Hetrel, at least, favoured the construction of a wellness centre at Barnbougle Dunes. Indeed, Dixon, who was called by the defendants, said in chief that "[a] spa was considered by LGT management as very desirable in contributing to LGT's facilities and a means of keeping people on the complex." How Sattler could have taken the course of applying for the funds in his own name without thereby breaching both the profit rule and the conflict rule is something which counsel for the defendants never satisfactorily explained. It is no defence to say that the wellness centre was a separate undertaking of Sattler himself. Sattler did not use his own funds to construct the centre. The vice in what he did was not to decide to conduct the business of a wellness centre on his own account. It was to obtain funds for such a business instead of obtaining those same funds for LGT. 654 When Sattler decided to move the wellness centre to Lost Farm, his daughter had no difficulty in prevailing upon AusIndustry to honour its funding agreement under the new arrangements. The tenor of her correspondence with AusIndustry on 31 March 2009 gave the impression that this was a relatively inconsequential recalibration of the way things would be done on the ground. Rather tendentiously, she described Lost Farm as "Barnbougle's second course". Unsurprisingly, AusIndustry had no objection. There was no suggestion made to AusIndustry that the initial grounds for the funds, relying to such an extent as they did upon the experience of LGT, no longer had currency. The result was that Sattler obtained funding which permitted him to build a wellness centre without further expense to himself, to site that wellness centre upon his own golf course rather than that of the company of which he was fiduciary, and, thereby, effectively to exclude that company from the realistic opportunity of improving the experience of its own customers by the provision of a similar establishment. And, of course, since this was to be a fully-funded enterprise, LGT would have been perfectly capable of building its own wellness centre. Indeed, in the regular course of things, and had Sattler attended to his duties as director and CEO of LGT, it would have done so. 655 The conclusion that Sattler obtained the AusIndustry grant as the result of his fiduciary position with LGT is inescapable. The way Sattler proceeded involved, in my view, a very clear breach of the profit rule. The defendants really had only three arguments by way of challenge to that conclusion, and it is to them that I now turn. 656 The first argument was that a wellness centre was a "loss leader", and that LGT would have derived no benefit or gain from the operation of such a centre. That submission was based upon the experience which Miss Sattler brought to the subject of wellness centres in hotels and like establishments. However, the submission, and the evidence upon which it was based, were made and given in the context of adversarial proceedings. Before any such proceedings were contemplated, both Sattler and his daughter represented to AusIndustry that the spa market was "lucrative". They relied upon projected profits which were very much in the black. Further, even if the wellness centre would have made no profits in its own right - and, on one way of looking at it, especially in such a case - it was to have been an attribute of LGT's business at Barnbougle Dunes presumptively attractive to those who would play golf there. Either way, there is no basis upon which the nature or extent of Sattler's fiduciary obligation to LGT should be qualified by reference to some categorical proposition that a wellness centre, of its nature, would necessarily be a "loss leader". 657 The second argument was that the wellness centre was never, even before the move to Lost Farm, going to be constructed on land leased to LGT. In his own evidence, Sattler was somewhat equivocal as to the proposed siting of the centre, and neither the planning application to the local council nor the funding application to AusIndustry contained a precise specification of location. Dixon gave evidence that the original proposal would have had the wellness centre sitting in a very narrow strip of dunes land between the leased land and the coast. The point of the defendants' reliance on that evidence, as I understand it, was to emphasize that the wellness centre was always a Sattler project, quite independent of LGT. Not being on the leased land, the centre could have been built and operated by Sattler without the requirement for LGT's consent as occupier. 658 These submissions on behalf of the defendants miss the point in two respects. First, the question is not whether LGT as lessee of the land might have prevented Sattler from building the wellness centre where he intended to do, or whether Sattler would have required LGT's consent, as presumptive sublessor, in that regard. The question is whether the construction and operation of the wellness centre was an opportunity which came to Sattler by reason of his fiduciary position with LGT. Secondly, whether the wellness centre was, as such, to be located on the leased land was not conclusive, and was perhaps barely relevant, with respect to the question whether it represented an opportunity for LGT before it was appropriated by Sattler. Sattler accepted that, if the centre had been constructed on the narrow coastal strip as originally proposed, access to it could only have been obtained over the leased land, and the customer cohort to whom it would most obviously have been attractive would have been those booked to play golf at Barnbougle Dunes, and their companions. 659 If the wellness centre was always to have been conducted by Sattler on his own account, so to propose would be to go no further than to say that Sattler always intended to appropriate for himself the benefit of the AusIndustry funding. It would fall well short of amounting to a satisfactory answer to LGT's case in this respect. 660 The third argument was that the AusIndustry funding was both sought and obtained subject to a condition that Sattler more than match that funding with his own investment of capital, to be devoted to the construction of a deluxe villa. The proposal was an integrated one made in Sattler's name, and required him to spend his own money. Equity would not carve out the aspect of the proposal that involved a benefit from AusIndustry while leaving Sattler with the burden of the self-funded villa. I do not accept this submission. The defendants made no suggestion that the decision to build the villa was not a conventional one based on sound business practices. Even if sited at Barnbougle Dunes as originally proposed, the villa would have been classed as accommodation, and therefore as part of Sattler's business. The proposal for the villa may indeed have been wired into the NE Tas Fund application to satisfy AusIndustry requirements, but in no sense is LGT's claim in relation to the funding actually received, or the wellness centre which was built with those funds, compromised by Sattler's decision to link his application for that funding with what was a conventional, entirely commercial, investment on his part. 661 The defendants also submitted that, if otherwise the case against Sattler were established, he ought to be excused under s 1318 of the Corporations Act. Here I refer to the judgement of Gzell J in Macdonald (see para 537 above). I would find that, in relevant respects, Sattler acted "without deceit or conscious impropriety". I think that Sattler, most probably, did not realise that there was anything wrong in what he was doing. He did not intend to gain an improper advantage because he assumed, mistakenly as I would hold, that he had every right to obtain funding for the wellness centre in his own name, and to build it wherever he chose, even if not to the benefit of LGT. Notwithstanding the absence of deceit or conscious impropriety, however, I take the view that Sattler's conduct involved a degree of imprudence that negated the performance of his fiduciary duty to LGT. In that sense, I would hold that he did not act honestly within the meaning of s 1318. 662 Even if I had formed the view that Sattler acted honestly with respect to the NE Tas Fund grant and the wellness centre, I would not have taken the view, having regard to all the circumstances of the case, that Sattler ought fairly to be excused for his breach of duty. I would have exercised my discretion under s 1318 adversely to him. My thinking on this aspect is that the funding represented a very concrete, and clearly very beneficial, opportunity for LGT. In broad terms, LGT deserved that funding, and deserved to have the wellness centre which it made possible. As director and CEO, Sattler ought to have paused before he assumed that he was entitled to pursue the funding in his own name, particularly since the subject had been mentioned at Board meetings and it was known to him that the other directors were interested in having a wellness centre at Barnbougle Dunes. This is, in my view, manifestly a case in which an officer who has appropriated for himself an opportunity which belonged in equity to his company should not be excused under s 1318. 663 Because this is an opportunity point, Sattler's removal from the position of director of LGT, and his resignation as CEO, are irrelevant to the remedies to which LGT is otherwise entitled. Theoretically at least, and subject to a proper allowance being made for such resources as Sattler may have invested into the wellness centre, LGT would be entitled to a declaration that he holds the centre on a constructive trust for it. There are, however, complications, including, possibly, the role of the wellness centre as a point of attraction for the Lost Farm course, which make it appropriate not to determine at this stage the precise relief to be granted to LGT. Without wishing to restrict the parties in any way, there may be a view that it would be both more just and more practical simply to require Sattler to account for the grant that he received from AusIndustry. I shall hear from the parties further on these questions.

Diversion of LGT resources 664 LGT alleges that Sattler, or one of the entities associated with him, used LGT's resources for his or its own purposes. This was, it was said, a breach of his fiduciary duty, and of provisions of the Corporations Act to which I shall come. The allegations fall into the following categories: (a) the use of the services of LGT staff in the construction and establishment of the Lost Farm course as a physical entity; (b) the use of the services of Dixon, the general manager of LGT, for the benefit of the Lost Farm business; and (c) the use of the services of Miss Sattler in the preparation of the application for AusIndustry funding for the wellness centre. Additionally, LGT makes the point that, when Miss Sattler prepared that application, and when Dixon prepared the (ultimately unsuccessful) application to the Scottsdale Fund, they made use of LGT's "proprietary information". 665 With respect to category (a) referred to in the previous paragraph, I should commence by laying out the boundaries of the factual dispute which exists about that matter. At all relevant times, Hill and Nichols were employed by LGT. So was Ponting, although that employment ceased in August 2009. The evidence suggests that Hill spent part of his time working with the construction team on Lost Farm, and that Nichols, who did not give evidence, may have done so at least on one occasion, but, in the case of Nichols, not only the extent but also the fact of his involvement with Lost Farm was controversial and, I would have to say, highly ambiguous on the evidence which was given. Subject to that proviso, I did not understand the defendants to contend that Sattler was entitled to deploy to the establishment of Lost Farm staff employed by LGT without proper compensation for the latter. Indeed, commencing on 1 January 2009, a ledger was kept by Mrs Sattler of the extent to which the staff of LGT were used in the business of the defendants, and of the extent to which the staff of the defendants were used in the business of LGT. Adjustments on the running account maintained as between LGT and the defendants (in which respect I include also Sattler Pastoral) were based on this ledger, and were the subject of liaison as between Mrs Sattler and Dixon (on behalf of LGT). 666 LGT's point, however, was that this was not merely a question of numbers, it was a question of authority. Sattler never had the authority of LGT to use its staff in his business. When he did so, he breached his duty to LGT, and must account for the advantage which he thereby obtained, net of any payment or allowance which had already been made in favour of LGT. As I understand LGT's case (which, I would have to say, was rather high on ethics and rather low on practicalities), even after the ledger came into existence on 1 January 2009, such an accounting was still required because it could not be assumed that the advantage derived by Sattler and his entities was no more than the amount which they paid, or allowed, to LGT for the time of the employees in question. In the circumstances, it will be convenient to commence with this aspect of the problem. 667 In her affidavit sworn on 22 February 2011, Mrs Sattler said: The cost allocation between LGT and Sattler Pastoral also extends to employees. Where an employee has performed work for both LGT and Sattler Pastoral, then that employee will complete a separate timesheet for the work completed by him or her for each company. The company that employs the employee will pay him or her for the entire time that he or she has worked for both entities …. Those payments made on behalf of the other organisation are then recorded as a debt due from one company to the other. Mrs Sattler was not cross-examined. From 1 January 2009, therefore, I could not accept any challenge to the reconciliation to which she referred - either as a matter of integrity or with respect to the appropriateness of the rates used for the purpose of calculating the value of the relevant employees' time. 668 That leaves the question whether it is open to LGT to allege, with respect to the period after 1 January 2009, that Sattler or his entities derived a greater advantage from the use of these employees than is represented by what they paid or allowed to LGT. Here the starting assumption, I would have thought, was that the benefit derived by a business which obtains labour on hire from an employer is to be measured by the price paid by the business in that behalf to that employer. That would normally be, or at least approximate, what the business would have had to pay to obtain equivalent labour from other sources. This starting assumption may not, of course, fit the facts of a particular case. There may be instances where, because of the specialised nature of the labour input and the capital intensive nature of the business, the benefit derived from supply of the labour would be much more than the price paid for it. But there was no suggestion that any such, or other, special factors were at work when Sattler made use of the services of LGT employees after 1 January 2009. Neither he nor any other witness called on behalf of the defendants was invited, during cross-examination, to accept the proposition that Sattler derived a greater benefit from the labour supplied by LGT than was appropriately measured by what he paid for it. 669 There may have been a theoretical breach of duty on the part of Sattler by his use of LGT staff in connection with the establishment of Lost Farm after 1 January 2009. But the defendants have conducted their case, in effect, by seeking to justify the way things were done. The evidence which they called in that endeavour was not seriously challenged by LGT. No suggestion of fraud, underhandedness or even of carelessness in the reconciliation process as between the defendants and LGT is made by the latter. Dixon participated in that process, and no such suggestion was made to him. In point of fact, I am not satisfied on the probabilities that the defendants derived a greater benefit than they paid for. LGT would say, doubtless, that, as the entity entitled to the faithful discharge of a fiduciary duty, it should not be required to prove its case beyond establishing a breach of that duty. That is theoretically so, but, as the authorities have repeatedly made clear, in matters of business a practical, realistic, approach is called for. 670 Against no more than a possibility that the defendants derived a greater benefit from the use of LGT staff than was represented by the payments or allowances which they made in that behalf, I am not persuaded that it is necessary, or that it would be just, to require the defendants to account for any such benefit with respect to the period subsequent to 1 January 2009. If it be necessary to say so, I would add that, in equity, the remedy of an account is a discretionary one, and, in the circumstances to which I have referred above, that discretion should not be exercised in favour of LGT on this aspect of the case. 671 It will be apparent that I would in any event hold that Sattler's use of LGT staff at Lost Farm after 1 January 2009 was honest within the meaning of s 1318 of the Corporations Act. Had my finding on breach of duty as such been adverse to Sattler, I would have excused him from liability under that section. 672 That brings me to the period before 1 January 2009, that is, the period of about six months after construction of Lost Farm commenced in mid-2008. I commence with Hill, in which respect I refer to in paras 386 and 387 above. There seems no doubt but that Sattler made use of the services of Hill at Lost Farm, that he did so without the consent of the Board of LGT and that he made neither payment nor allowance for those services. Save to refer to the reconciliation process for the sharing of services as between LGT and the defendants to which I have referred, and to attempt to minimise the extent of Hill's involvement at Lost Farm, the defendants really had no answer to this part of LGT's case. The reconciliation process, of course, either did not exist at all or was not properly vouched until 1 January 2009. The fact that, sometimes, Hill would work at Lost Farm only after "the usual time of 3 pm" does not deflect LGT's case in relevant respects. The question is not whether Hill absented himself from work at Barnbougle Dunes during normal working time: it is whether a director of LGT was entitled, on his own behalf and for his own benefit, and without the consent of the Board, to make use of the services of an employee of LGT, especially an important one such as course superintendent, without proper allowance or compensation. That question must be answered in the negative. 673 Turning to s 1318 of the Corporations Act, I find that Sattler acted honestly in relation to his use of Hill's services before 1 January 2009. There was neither deceit nor conscious impropriety involved here. However, I am not disposed to exercise my discretion favourably to Sattler under s 1318. LGT's own interests as employer were very much involved here. Broadly, it was entitled not to have its own director and CEO make use of the services of a senior staff member without proper, arms-length, arrangements having been put in place. In my view, the defendants must account for the benefit they received from the use of Hill's services before 1 January 2009. 674 I turn next to Ponting, in whose case the point advanced on behalf of LGT presents rather differently. There was no direct evidence - at least satisfactory evidence - that Ponting in fact performed any work at Lost Farm before January 2009. His own evidence was that, having commenced employment with LGT in January 2008, and having been appointed as deputy superintendent (under Hill) in July of that year, it was from the beginning of 2009 that he "worked solely at Lost Farm". No attempt was made on behalf of LGT to contend that this way of putting it implied that Ponting had previously been working at Lost Farm to some extent. Any such contention would have squarely encountered the circumstance that Ponting was not cross-examined. The cross-examination of Dixon dealt with the position of Ponting in general terms - and mostly grouped with Hill and Nichols - such that the question whether, and if so to what extent, Ponting actually worked at Lost Farm before 1 January 2009 was never directly confronted. Hill was taken to that subject, and he denied that Ponting was at Lost Farm "doing preliminary work", or "in that preliminary period". In the circumstances, to the extent that LGT's case is to be understood as involving the proposition that Ponting was, before 1 January 2009, engaged on work at Lost Farm, I would have to reject it. 675 The aspect of LGT's case about Ponting which sets it apart from its case about Hill is that Ponting was originally employed, on the initiative of Hill and without input from Sattler, with a view to eventual employment as superintendent of the new Lost Farm course as such. The idea was that Ponting would work at Barnbougle Dunes for an initial period of training and familiarisation, and then move to Lost Farm. As is apparent from the previous paragraph, I am not satisfied that, for the period to the end of 2008, Ponting was not working exclusively at Barnbougle Dunes. The case now put by LGT is that the employment of Ponting was only ever for the intended benefit of Lost Farm, and that the pre-2009 period at Barnbougle Dunes is to be understood as the dedication of the resources of LGT (principally supervision by Hill) to the training needs of the defendants. 676 Particularly absent any cross-examination of Ponting, I could not accept that characterisation of what happened in his case. That an employee is being trained up with the intention of equipping him or her for a future position elsewhere, or for a promotional position, does not mean that he or she is not working for, and giving value to, the business in which the training occurs. We are, of course, dealing here with "on the job" training, not with time off the job for instruction, for example. No attempt was made on the part of LGT to demonstrate that Ponting's remuneration in 2008 was inappropriate to the position which he then occupied, or to the work which he then did. Sattler was not involved in LGT's decision to engage Ponting. It may, perhaps, be said that Hill's decision in that behalf was made in the interests of Sattler's future business at Lost Farm, but that, in my view, would be a situation some distance short of constituting a breach of fiduciary duty by Sattler. Properly characterised, I take the view that what happened here was a quite benign decision by one business (LGT) to work co-operatively with another future business with which it would have common interests to a significant degree. 677 Had I been against the defendants in relevant respects on the matter of breach of duty as such, I would have found that Sattler acted honestly, within the meaning of s 1318 of the Corporations Act, when he used Ponting's services, to the extent that he did, and would have excused him. 678 I would not, therefore, require Sattler to account for the value of any of the time of Ponting spent in ways that would arguably be of benefit to the emerging business at Lost Farm. 679 The evidentiary position with respect to Nichols is, as I have said, quite unsatisfactory. The only evidence of any contribution made by him to the establishment of the golf course at Lost Farm before 1 January 2009 is that of the occasion when he went there to repair a machine. It is not known whether the machine belonged to Sattler or to a contractor. It is not known, other than very approximately, when that happened. There is no suggestion that Sattler himself had anything to do with, or even knew of, the occurrence. The circumstances generally remained quite unexplored at the end of the trial, perhaps because notice of them fell out of the frank answers given by Dixon while under cross-examination, seemingly unexpected by counsel for LGT. In its final submissions, LGT did not refer to this incident as such, being content to rely on Dixon's much more general evidence about Hill, Ponting and Nichols without discrimination, and with no examination of the question whether the evidence related to events occurring before, or after, 1 January 2009. All things considered, I take the view that the evidentiary foundation for the allegation that the work of Nichols was diverted to Lost Farm is insufficiently established to support any finding of breach of fiduciary duty on the part of Sattler. 680 I turn next to category (b), referred to in para 664 above. There are two broad areas within which it is said on behalf of LGT that Sattler made use of the services of Dixon in the interests of establishing his new business at Lost Farm. The first related to Dixon's work in the preparation of the application for a grant from the Scottsdale Fund, to which I have referred at paras 327-330 above. Nothing came of that application and, if the matter rested there, nothing would come of this part of LGT's case. However, as noted at para 347 above, Dixon later, at the request of Sattler, sent a copy of the unsuccessful Scottsdale Fund application to Young at the DED, and that, in turn, was used in Sattler's otherwise undocumented application for loan funding from the Sate government, which application was successful to the tune of $4.5m. 681 As in the case of Hill, I do not consider it to be an answer to LGT's case that Dixon prepared the Scottsdale Fund application substantially in his own time. He was employed by LGT in a senior management position at the time and, on any view, used his familiarity with LGT's business, and with the general scheme of things at Barnbougle Dunes, to give content to the application to a considerable extent. When Sattler used the result of Dixon's work in support of his application for the government loan, he was effectively deriving a benefit from the time and effort that Dixon had invested into the preparation of the Scottsdale Fund application some time previously. I have held that the circumstances are not such as would require Sattler to account for the loan moneys themselves, but, were it not for the matters dealt with in the following paragraph, I take the view that LGT has made good its case for an account in relation to the benefit of Dixon's time in the preparation of the Scottsdale Fund application. 682 The question then arises whether, in the facts as I have laid them out, it should be held that Sattler acted honestly when he tolerated Dixon preparing the Scottsdale Fund application, and when he later took advantage of Dixon's work in his (Sattler's) application for loan funding from the State government. In relevant respects, Sattler's conduct exhibited neither deceit nor conscious impropriety. Further, I am satisfied that Sattler had no intention of gaining an improper benefit or advantage. Was his conduct careless or imprudent to the extent of negating the performance of the duty presumptively involved? Here I am concerned with Dixon's time. Given Dixon's evidence as to his very unusual pattern of working (he said at one point that he busied himself on the Scottsdale application in the evenings because the television in his modest lodging was not working), I take the view that this project, and Dixon's time spent on it, were not things which, even acting prudently and carefully, Sattler ought to have regarded as of legitimate concern to LGT. Although Sattler did gain an advantage, that advantage was quite benign apropos LGT and, in my view, Sattler need not have regarded it otherwise at the time. I am satisfied that, in the respects discussed in this paragraph, Sattler acted honestly within the meaning of s 1318. I propose to exercise my discretion favourably to him to excuse him from liability for the breach of duty otherwise involved. 683 The second area of complaint which LGT makes with respect to the services of Dixon relates to him having been the point of contact, as between Sattler and third parties, with respect to several dimensions of the establishment of the golf course at Lost Farm. In some respects, Dixon was the point of contact for Thomson. He also appears to have been the point of contact for journalists and the like, in relation to whose interest in the matter Sattler derived a promotional benefit of sorts. Both Dixon and Sattler, in their evidence, characterised this involvement by the former as amounting to little more than the operation of a kind of electronic mailbox, in circumstances where Sattler was notorious (at least amongst those who knew him) for his indifference to email as a means of communication. They resisted any suggestion that Dixon devoted any energies to the matters with which the various communications were concerned. At times, Dixon facilitated the provision of information, but, again, he and Sattler described this as him functioning as no more than a kind of conduit, placed between Sattler and those who would receive the information. 684 Broadly, I would accept the characterisation placed by Dixon and Sattler upon the communications to which I have referred. Nothing in the documentary evidence is inconsistent with that characterisation, and there is much which supports it. In a number of instances, for example, although an email may have been addressed to Dixon, it was Sattler to whom the sender was obviously speaking. That circumstance is not entirely unhelpful to LGT, of course, since it bespeaks a kind of assumption that there was a commonality of operations as between Barnbougle Dunes and the new course under construction at Lost Farm. Any such assumption, in my opinion, would have been both unsurprising and natural, and, significantly for present purposes, quite innocent apropos the concern which equity would have for the misuse of a fiduciary's position. Theoretically, perhaps, Sattler derived a benefit from having Dixon act as a kind of conduit in the way I have described, but the value and extent of that benefit is unlikely to have been such as would give rise to any such concern on the part of equity. In their submissions, counsel for the defendants described matters of this kind as "de minimis", and I am disposed to think that this is very close to the truth. 685 Whether for that reason or as a matter of discretion, for the reasons I have given, I would reject LGT's claim for an account with respect to the time (if there was any time) during which Dixon was occupied in the kind of communication and information-providing activities to which I have most recently referred. I would also hold that Sattler acted honestly in relevant respects, within the meaning of s 1318 of the Corporations Act. My reasons for that conclusion should appear sufficiently from what I have written above. If I had otherwise held that Sattler was here in breach of his fiduciary duty, I would have excused him under that section. 686 Turning to category (c) referred to in para 664 above, the effect of my conclusion, stated in para 655 above, is that the grant received from the NE Tas Fund belonged in equity to LGT. It was, therefore, appropriate for Miss Sattler to have been occupied on the application for that grant, even if, as she denies, she did so in LGT's time. LGT's present complaint with respect to the services of Miss Sattler is, in my view, properly to be seen as wrapped up in the conclusion which I have reached about the grant itself, and nothing further needs to be said here. 687 Finally, the point about the misuse of LGT's proprietary information by Dixon and Miss Sattler may be decided by reference to other points with which I have already dealt. Although the Scottsdale Fund application was unsuccessful, the information in it was used by Sattler in his application for loan funding from the State government. I have already dealt with that aspect of LGT's case. As to Miss Sattler's use of proprietary information, I have held, in effect, that LGT is entitled in equity to the benefit which Sattler derived therefrom. Nothing further needs to be said here.

Accommodation commission 688 The final substantive aspect of LGT's case relates to the adequacy of the remuneration which it derived by way of commission from the services provided to Sattler in relation to the accommodation at Barnbougle Dunes. It will be recalled that, from the outset, the provision of accommodation was excluded from LGT's lease, and it was contemplated, both by Sattler and by LGT, that Sattler himself would construct the accommodation. There was some attempt on the part of counsel for LGT to resist the suggestion that it was agreed that Sattler would "operate" the accommodation, or the suggestion that that is what happened in fact, but any such controversy would be a semantic one only. As things happened, the accommodation at Barnbougle Dunes was a separate business of Sattler Nominees, treated as such both by that company and by LGT itself. 689 However, LGT undoubtedly supplied services in the accommodation business of Sattler Nominees. At the most basic level, LGT provided a booking service. When someone contacted LGT by telephone, for example, the staff of LGT employed in the pro-shop would take the caller's booking for accommodation (if, as was commonly the case, such was needed) as well as his or her booking for rounds of golf as such. There were also other services which the staff of LGT, necessarily, supplied in connection with the accommodation. The court received much evidence as to the extent of the other functions performed by LGT's staff in connection with the accommodation, and as to the extent to which those functions were conveniently so performed as part of the normal working day of the employees concerned, as it were, or required the dedication of additional resources which LGT would not otherwise have had to deploy. In their final written submissions, counsel for LGT identified these services (additionally to taking bookings and cancellations, which was uncontroversial) as corresponding with guests to confirm bookings, collecting guests and their bags from the airstrip, checking guests in, greeting guests upon arrival, allocating rooms, allocating keys to guests, directing guests to their rooms, regularly assisting guests with their bags, assisting guests who arrived by bus, providing an informal concierge service, checking guests out and settling accounts with guests, maintenance, paying accounts related to the accommodation (such as laundry, electricity and consumables), accounting to Sattler Nominees for moneys at the end of each month and upgrading software so as to deal with the demands of running the accommodation. A number of these categories are simply different ways of saying the same thing, while others would not be accepted by the defendants, at least in the terms expressed. However, in their final submissions in reply, the defendants did not engage directly with LGT's catalogue of services. For reasons which will appear, I do not find it necessary to resolve the factual differences which exist between the parties, in point of detail, in relation to the services that were in fact supplied to Sattler Nominees by LGT. It is sufficient to point to the final submissions of LGT as an indication of the kind of services which were said to warrant a commission of more than 10%. 690 It is at this point that it is important to identify the jurisprudential nature of LGT's case with respect to the accommodation commission. This is neither a contract nor a valuation case. That is to say, the question is not whether Sattler's legal obligation to LGT was limited to 10%; and it is not whether a 10% commission was fair, reasonable or appropriate in some absolute sense. Rather, LGT says that, in relevant respects, Sattler or Sattler Nominees was the recipient of the services in question, whilst at the same time it was Sattler, as CEO of LGT, who determined that 10% would be the level of commission to be paid. That was, on any view, according to LGT, an instance of a fiduciary contracting with his own company, and fell squarely within the most uncontroversial principle in this area of the law as adumbrated, most famously, by Lord Cranworth in Aberdeen Railway. The relief to which LGT was entitled, according to submissions made on its behalf, was that Sattler Nominees should account for the whole of the benefit which it received from the services provided by LGT, ascertained on an arms-length basis, subject only to an allowance for the 10% commission which it did in fact pay. It was in this sense that LGT submitted that such a proper value, when calculated, would inevitably have Sattler Nominees paying considerably in excess of the 10% which Sattler unilaterally imposed on the company of which he was a director. 691 The defendants met LGT's case on the merits, seeking to establish that a 10% commission was, by reference to practices in the hospitality industry, well within the bounds of a fair remuneration for services of the kind that LGT provided. Expert evidence was called in this regard. The defendants also submitted that the non-Sattler members of the Board of LGT were well aware of the basis upon which the commission was established and, if it could not be shown that they expressly agreed to the commission being set at 10%, at least they tolerated the situation over many years, as a result of which LGT derived substantial income flows which would have been unavailable to it if it did no more than operate a golf course at Barnbougle Dunes. In this respect, the defendants pointed out that the 10% commission was calculated on gross receipts for the accommodation, and that all expenses (other than those implicit in the functions which LGT actually performed) were borne by Sattler Nominees, such as cleaning expenses, for example. 692 At the level of principle, LGT's case with respect to the accommodation commission must be accepted. Sattler (or his alter ego Sattler Nominees) was here contracting with his own company, which gave rise to the clearest conflict of interest in the setting of the rates for the services provided under that contract. He should have put the matter squarely before the Board, and absented himself from its deliberations in relevant respects. Rather than take that course, Sattler set the accommodation commission by executive action, taken without the authority of the Board. At the level of principle, equity would require Sattler to account to LGT for the benefit, if any, which he derived from proceeding in this way. 693 The much more difficult question, however, is what should now be done about the situation produced by Sattler's breach of fiduciary duty. There can be no suggestion that the other members of the Board of LGT - or, indeed, the other shareholders (the matter having been raised at the shareholders' meeting on 25 July 2005) - were not fully aware of what was happening. They knew that the accommodation was Sattler's business, they knew the range of services that LGT was providing in that regard, and they knew that LGT was being paid a 10% commission for the provision of those services. Although it seems clear that Hetrel raised the appropriateness of the 10% commission with Sattler on a number of occasions, and that it was also raised at the shareholders' meeting to which I have parenthetically referred, the minutes of LGT Board meetings do not disclose any direct challenge to Sattler with respect to the adequacy of the 10%. The early agitations of Hetrel and perhaps others were, it seems, dealt with to an extent by Busch's review of the matter, but, as I have held, there is no evidence that the outcome of that review was ever reported to the Board. On any view, however, by about the end of 2005 at the latest, it must have been apparent to any other Board member who turned his mind to the subject that, so far as Sattler was concerned, the 10% commission was there to stay. 694 When I put it to Wood, in the course of his evidence, that, being concerned that LGT was not getting a sufficient return for the services it was providing for Sattler's accommodation, he and the other directors could, and perhaps should, have done something about it, he replied: Yes, you're right, perhaps we should have done it, but with all things, your Honour, perhaps I'm a bit too conciliatory or whatever, you only - I only put my hand up when it gets to this stage. I'm completely - completely lost as to any alternatives. And if this company was like a football team - you've got lots of different strong characters and you have to learn to live with each other. And you'll see right through my records and my minutes and so on that I've attempted to be very conciliatory and at no stage do I attempt to be inflammatory. And that is the case right through until the very end when we were in a position where I could not see any alternatives. And if I had - accommodation is by far the largest profit margin area in Barnbougle, as it is at Bandon. It returns about a 70 per cent return and it was a vital to Richard and Sally. It's the key to the whole business as far as profit making so my raising this as any great issue was going to be a problem and certainly we tried to dance around it and we didn't take it further and I take responsibility for not taking it further. Wood deserves every credit for the frankness of this response, but I do find it to be consistent with the indications generally in the evidence. I would have to say that a beneficiary who, being aware of a problem of this nature, chooses to dance around it rather than to confront his or her fiduciary with what is claimed to be a breach of duty, would not normally be in a good position to hold the fiduciary to account in court proceedings several years later. 695 Nothing further was done about the matter, and it appears that no further complaint was raised, until the commencement of the first proceeding in this court in July 2009. In the meantime, the arrangement appeared to work satisfactorily for all concerned, the 10% commission was paid, and LGT derived the benefit of that. Had the other Board members moved promptly as soon as it ought to have been apparent to them that Sattler proposed to adhere to the 10% commission, and had a court exercising equitable jurisdiction told Sattler that he ought not to have contracted with his own company, Sattler would have been entitled (perhaps obliged) to place the matter on the agenda of the Board, and to have absented himself from its deliberations. The Board, absent Sattler, would then have been required to confront directly the question whether they would contract with Sattler on a 10% commission, or would withdraw from the provision of the relevant services altogether. For his part, Sattler (contracting now only on behalf of Sattler Nominees) would have had to decide whether to pay more than 10% commission to LGT (that being what the other directors presumptively would have demanded) or to make such alternative arrangements as were, in his view, more advantageous. The whole question of the value of the services to be provided by LGT, or by some other provider, would then be resolved in the normal way of arms-length commercial negotiations. 696 As it happens, effectively because of the inaction of the other directors, LGT's now case must involve the consequence that Sattler is denied the opportunity to have tested the commercial waters, as it were, in the way proposed in the previous paragraph. Rather than call his bluff, the other directors allowed time to pass while their company banked the money which Sattler was prepared to pay at the 10% commission level. Not having had to make a commercial decision on the matter, those other directors - now speaking, derivatively, through the voice of LGT itself - want to keep the money so banked, and to have the present litigation perform a service as a kind of ex post facto assessment of what would be some objectively reasonable standard of fairness or appropriateness in that level of commission. In the result, the defendants would find themselves litigating factual minutiae, generally unsupported by documentary records about the nature, extent and value of the services offered by LGT to Sattler Nominees day by day, week by week and month by month. It is clear from what I have heard in this case is that these matters would be controversial, and, as I have said, would have to be determined largely without the assistance of contemporaneous records. 697 For example, the extent to which pro-shop staff employed by LGT assisted accommodation guests with their luggage appears to have depended largely upon the number of busses that arrived at Barnbougle Dunes. The court was being invited to make discriminations between one witness's notion that such things happened on a regular basis, against another witness's notion that they happened occasionally, and so on. Busch, who was called by LGT, was cross-examined, and responded, as follows: Q. And that sort of circumstance where bags were unloaded from the bus was pretty rare, I suggest to you, over the period that you were the general manager? A. I wouldn't class it as rare, but I wouldn't say it all the time either. It happened quite regularly; it was just all about service. If we could provide a service to the guest it was beneficial for us to make them come back. Q. I would suggest to you that it was an infrequent occurrence that that service came to be provided? A. I can honestly say it didn't happen all the time. I wouldn't use the word infrequent, I wouldn't use the word rare. It happened. Dixon, who was called by the defendants, was cross-examined, and responded, as follows: Q. And part of the Barnbougle experience is greeting guests upon arrival? A. As they come into the golf shop, yes. Q. It's allocating their rooms? A. The rooms are allocated at the time of making the booking. Q. Sure; telling them where their rooms are, and giving them their keys? A. Yes. Q. Occasionally helping them with their bags when they arrive by bus, as opposed by car? A. Very occasionally, yes. Q. Very occasionally. The buses come in how many days a week? A. Well, the buses - I mean, the vast majority of our clients arrive under their own steam, so they take care of themselves, and on the occasion whereby they arrive via a third-party transport provider, take, for example, the bus, the bus would arrive, and generally speaking if their rooms are ready they're sent directly to their rooms, and the bus driver would take them and their luggage to the rooms. On the occasion whereby their rooms weren't ready, then the luggage may be taken off the bus, and placed in an area in front of the clubhouse, so that we can facilitate getting the patrons on to the golf course. And at that time, whilst they're out on the golf course, we would take their luggage and dump it in one central location across at the accommodation. The caretaker at Barnbougle Dunes, Roscoe Banks ("Banks"), who was called by the defendants, was cross-examined, and responded, as follows: Q. And what you've said in particular in relation to baggage and guests and the like, is that: LGT did not transport guests and their luggage to and from rooms, other than on very rare occasions when golfers wanted a late check-out as they were playing an early round of golf, or due to inclement weather. Q. So that's your evidence is it? A. Yes. Q. And you say that it was only on very rare occasions that you were transporting guests and helping them with their luggage? A. 90 per cent of our guests would come through on their own steam. 10 per cent of that would come through via bus. 2 per cent of that - well, that 10 per cent would want to get to that tee. Their main job of coming to - or main reason to coming to Barnbougle Dunes is to play golf. It's not to go and have look at the accommodation first, it's to go and play golf. So we would goWell, I - I Mr ? into our own steps and efforts to go and get them on to the golf course as well. Especially when Q. That's all right, but the question I asked was whether it was very rare, and you've said that 90 per cent of people arrive by car - under their own steam were your words - 10 per cent arrived by buses. So what you're saying is that often it was necessary to help those people who arrived by buses to get their bags up there? A. No, not that - not the whole lot of that 10 per cent. Q. Some of them? A. Some of them. About one or two per cent of that 10 per cent. Q. One or two per cent? A. Yes. Had the defendants known from the outset that factual minutiae of these kinds would be used against them to contend that the 10% commission was inadequate, they would almost certainly have maintained more discriminating records than were necessary under the less formal sharing arrangements that existed as a practical reality over the period concerned. 698 In my view, LGT has stood by too long and allowed the 10% commission arrangements to operate for Sattler now to be held to account at the level of detail which is proposed. Were he still a director, or the CEO, of LGT, I would listen sympathetically to any application by LGT that he should be restrained prospectively from receiving services from LGT pursuant to the contract in which he had a personal interest, but even then, of course, I would have to allow LGT, through a Board decision process in which Sattler did not participate, to adopt that contract. However, since Sattler no longer holds either of those capacities, there is no basis in equity for any such prospective restraint. I would, therefore, reject this aspect of LGT's case. 699 Had my conclusion been otherwise, I would have excused Sattler under s 1318 of the Corporations Act. Manifestly he acted honestly in relation to the fixing of the accommodation commission. This was not a case of him taking some advantage from the presence on site of LGT staff without turning his mind to the appropriate arrangements to be made in that regard. He set what was, I would find, in his assessment a fair payment for the services he received. He knew that there was not universal agreement with the course he adopted, but I have no doubt but that he genuinely believed that the commission level he set was a fair and appropriate one. I would exercise my discretion under s 1318 in favour of Sattler; and, in that department, I would also take into account, adversely to LGT, the considerations referred to in the previous paragraph.

LGT's allegations under the Corporations Act 700 In the way LGT's submissions were organised, issues arising under the Corporations Act were treated, in effect, in a compartment of their own, notwithstanding that they related to the various areas of alleged breach of fiduciary duty which I have canvassed above, and notwithstanding that LGT accepted that the concept of impropriety by reference to which ss 181(1)(b), 182(1) and 183(1) operate marks out, on the authority of the Full Court, no new jurisprudential ground beyond that which is involved in a finding by a court of equitable jurisdiction that a fiduciary has breached his or her duty as such: see Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd (2009) 81 IPR 1, 9-10 [44]-[46]; Blackmagic Design Pty Ltd v Overliese (2010) 84 IPR 505, 534 [86]. I shall follow the same convention. 701 With respect to s 181(1) of the Corporations Act, it was made clear by counsel for LGT from the outset that it was no part of their client's case to allege bad faith on the part of Sattler. The case under that section involved allegations that Sattler had exercised his powers and discharged his duties otherwise than in the best interests of LGT, and otherwise than for a proper purpose. The latter aspect lined up with LGT's allegations of impropriety under ss 182 and 183 (each in its own factual setting). 702 LGT made no specific submission about the application of these provisions of the Corporations Act in the context of its allegation that Sattler developed Lost Farm as a golf course in his own name without allowing LGT any participation or involvement. It is, therefore, for the sake of completeness rather than in response to any such submission that I make the formal findings which follow. When he decided to proceed in the way indicated, Sattler was not exercising any power or discharging any duty as an officer of LGT within the meaning of s 181; he was not using his position as an officer of LGT, and was not acting improperly, within the meaning of s 182; and was not improperly using information which he obtained because he was an officer of LGT within the meaning of s 183. 703 Whether the conduct of a competing business at Lost Farm would have given rise to a breach of the relevant provisions of the Corporations Act is moot. During the period that he occupied positions covered by those provisions, Sattler did not conduct such a competing business. To the extent, therefore, that LGT's case is to be understood as proposing that Sattler's conduct of a competing business involved a breach of s 181, s 182 or s 183, I would reject that case. 704 When he negotiated and secured the loan of $900,000 from the State government in May 2003 and the months following, Sattler was not exercising any power or discharging any duty as an officer of LGT within the meaning of s 181. I also prefer the view that he was not, in that context, using his position as such an officer within the meaning of s 182 (his relevant position at the time being that of shareholder and investor), but, on any view, the findings made earlier in these reasons on this aspect of the case exclude any suggestion that he was improperly doing so. Neither can I discern in the evidence any sense in which Sattler was, for this loan, using information which came to him as such an officer (save, perhaps, in the rather artificial sense that everything that Sattler then knew about LGT's intentions and its inability to secure sufficient capital to fund the construction of its proposed golf course at Barnbougle Dunes should be regarded as information of that kind) but, again, in any event, and for reasons given earlier, such use as he did make of LGT's information could not be regarded as improper. 705 That brings me to s 1317S of the Corporations Act, upon which the defendants relied. Subsection (2) of that section provides as follows: If: (a) eligible proceedings are brought against a person; and (b) in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that: (i) the person has acted honestly; and (ii) having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention; the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention. The present is an eligible proceeding within the meaning of s 1317S. 706 It will be seen that the terminology of s 1317S(2) is relevantly indistinguishable from that of s 1318(1). The norms of conduct the departure from which the putative defendant ought to be excused do not, however, always line up with those extra-statutory norms which, at least on the facts of the present case, arise for consideration under s 1318. However, in relation to the State government loan of $900,000 they do, in my opinion, line up. In that setting, if otherwise there had been a contravention of ss 181, 182 or 183, I would have found that Sattler was acting honestly in relevant respects. I refer here to what I said at para 623 above. Under s 1317S, I would have excused him. 707 The same conclusions (in all respects) apply to Sattler's obtaining of $500,000 in loan funding from Keiser. Indeed, if anything, that transaction was further removed from the realm of ss 181, 182 and 183 than was the loan from the government. The Keiser loan was obtained by Sattler in his personal capacity, as an investor rather than as an officer of LGT, and neither Sattler's position as such an officer nor any information which was available to him in that capacity made any contribution to his obtaining the loan: certainly not, on any view, an improper contribution. Had my conclusion been otherwise, I would have excused Sattler under s 1317S of the Corporations Act, in which respect I refer to para 629 above. 708 Under the sequence in which I have dealt with LGT's allegations of breach of fiduciary duty above, the next matter to consider under the Corporations Act would be Sattler's $4.5m loan from the State government in 2008. However, for reasons which will appear, it is first necessary to consider Sattler's application to AusIndustry under the Scottsdale Fund for infrastructure funding for the then proposed new course at Lost Farm. In the relevant earlier section of these reasons, I have not spent any time on this matter: since the application was unsuccessful, there was nothing for which Sattler would be held to account in equity. However, under s 182 (and presumably also under s 183) of the Corporations Act, it is not necessary that an advantage actually have been gained by the presumptive transgressor: Chew v R (1992) 173 CLR 626, 633. A contravention will be established when the director or officer improperly uses his or her position as such, or improperly uses information obtained because of his or her office, for the purpose of gaining an advantage. For that reason, issues of causation (see para 639 above in relation to the $4.5m loan) are not relevant to the establishment of the primary delict under ss 182 and 83; neither, at least at that primary level, are discretionary considerations by reference to which equity might withhold the remedy of account. 709 Sattler neither initiated nor encouraged Dixon's work on the Scottsdale Fund application. He did, however, steer Dixon in a direction which he, Sattler, considered to hold the greatest prospects of success - that the application should be concerned with funding for infrastructure, where loan funding from elsewhere would be difficult to attract. And he signed the application as such. However, in no sense were these, or any other, things done by Sattler in relation to the application done by him in his capacity as director and CEO of LGT. They did not amount to a use by him of either such position. Dixon well understood that he was dealing with Sattler as the landowner and intending developer of Lost Farm. Sattler's communications with him reflected that. Sattler was, in my view, acting outside his relevant positions in LGT, and such limited involvement as he had in the preparation of the application did not attract the operation of s 182. 710 Sattler did, however, use information which had been obtained by him because of his positions as director and CEO of LGT when he signed the application for funding on 16 May 2007. Here I refer to what I said in para 681 above. Was this use of information improper? In the context of s 183, "[i]mpropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case": R v Byrnes (1995) 183 CLR at 514. By this standard, I would hold that Sattler's use of the information in question, constituted by his adoption of the application pro-forma prepared by Dixon, was not improper. 711 The information in question appears sufficiently from what I have set out at paras 351-357 above. Substantially, that information was high-level, unconfidential and benign by reference to the axis of directorial wrongdoing. It went little beyond a narrative of LGT's experience at Barnbougle Dunes. In Dixon's use of it, the emphasis was on what it showed about Sattler's capacity for business success. Especially given Sattler's position as majority shareholder, I find it inconceivable that any reasonable Board might, had it been consulted, have declined to provide information of this kind. Sattler was acting in good faith and, although he was seeking an advantage for himself, it was not an advantage that would contemporaneously have been denied to LGT. In my opinion, Sattler's recourse to this information was not such as would be regarded, by a reasonable observer with full knowledge, as a breach of the standards that such a person would expect of a director/CEO in Sattler's position. Clearly Dixon, himself a senior employee of LGT and a syndicate member of one of its shareholders, did not so regard it. On the facts I have been discussing, there was no breach of s 183 of the Corporations Act. 712 Had my conclusion with respect to the Scottsdale Fund application been otherwise, I would have held that Sattler acted honestly in relevant respects. My reasons appear sufficiently from what I have already written, both in the previous paragraph and in para 682 above. I would have excused Sattler under s 1317S of the Corporations Act. 713 That brings me to the $4.5m loan itself which Sattler secured from the State government. Under ss 181 and 182, I regard this loan as in the same category as the two previous loans with which I have dealt above. The other aspect is Sattler's use of LGT's records, both operational and financial, in support of his application for this loan. When he directed Dixon to supply a copy of the application to AusIndustry under the Scottsdale Fund, and when he subsequently supplied LGT's accounts, to the DED, Sattler was to an extent using information which he had obtained because he was a director, and the CEO, of LGT. However, I have held that that use was not in breach of his fiduciary duty to LGT, and I have held that the use of LGT's information in the Scottsdale application was not improper within the meaning of s 183. Consistently, I would hold that Sattler's use of the information in his application for the State government loan was not improper within the meaning of that section. I also take the view that Sattler's use of Dixon's work on the Scottsdale fund application, and his use of LGT records and data generally, was honest within the meaning of s 1317S. In part, that view is expressed in the alternative to my conclusion as to the absence of impropriety under ss 182 and 183 as such. Had I been against Sattler under those sections, I would have excused him under s 1317S. 714 The next area to consider is that of the ancillary businesses which Sattler established at Lost Farm. As I have indicated, with the exception of the wellness centre, those businesses were all such as he might legitimately have established on his own golf course, once it be held, as I have, that he was entitled to establish the course itself. In so doing, he was not exercising a power, or discharging a duty, as an officer of LGT within the meaning of s 181; he was not using his position as such an officer within the meaning of s 182; and he did not use any information obtained by him because he was such an officer within the meaning of s 183. Further, there was nothing improper about the way he proceeded. 715 The wellness centre, and the NE Tas Fund grant which funded its construction, are, however, in a different position. Here I refer to what I have held at paras 652-660 above. I am not persuaded that s 181 is activated here, since Sattler was not, when he applied for that grant, exercising a power or discharging a duty which he had as director/CEO of LGT. Neither, in my view, is s 183 brought into play: the kind of "information" which Sattler used in his application to AusIndustry was of the high-level, quite benign, variety to which I have referred above in connection with the Scottsdale Fund. However, I do think that Sattler stepped over the line marked out by s 182. Sattler used his position as director/ CEO of LGT to secure the grant. It is no answer to say that the grant was sought and obtained in Sattler's own name: his very choice to do things that way, when the case for funding advanced to AusIndustry was so clearly rooted in the experience, circumstances and needs of the course at Barnbougle Dunes, could only be described as a use, albeit a misuse, of his position. Involved in that conclusion is the reality that Sattler's decision to apply for the grant in his own name necessarily carried the corollary that the grant would not be sought by LGT; and it was he, Sattler, as CEO, who effectively determined that it would not be. The course followed by Sattler in this respect involved a breach of the standards that a reasonable observer would expect of a person in Sattler's position. It was, in my view, improper within the meaning of s 183. As to s 1317S of the Corporations Act, I am not persuaded that Sattler's taking of the NE Tas Fund grant for himself was honest within the meaning of the section and, in any event, I would not exercise my discretion to excuse him under s 1317S even if honesty were found. I refer here to my reasons in para 662 above. 716 The next area to consider under the Corporations Act is LGT's allegation as to the diversion of its resources to activities involved in the establishment of the new course at Lost Farm. Effectively, for the reasons stated at paras 665-670 above, I am not persuaded that there was anything improper in Sattler's use of LGT labour after 1 January 2009. Indeed, the arrangements put in place after that date, and LGT's omission to challenge either the bona fides of them or the sums involved, justify the finding, which I make, that it was never Sattler's intention to receive more than he paid for. I am not persuaded that he derived an advantage, or that LGT was visited with a detriment. My conclusions on this aspect of the case align with those reached above on the matter of fiduciary obligations as such. 717 I take the view that, when Sattler, as CEO of LGT, permitted or tolerated the engagement of Hill on the construction of Lost Farm before the end of 2008, he was exercising a power and discharging a duty within the meaning of s 181, and was using his position in LGT within the meaning of s 182. That expedient was to his advantage and, while it may not have worked to LGT's detriment, because Sattler did not pay LGT for Hill's services, it was not in the best interests of LGT within the meaning of s 181. Indeed, what was done after 1 January 2009 stands as the example of what should have been done before that date. I also consider that the reasonable observer would have expected Sattler, as CEO of LGT, not to have permitted his course superintendent to be used to the advantage of another business, particularly one of which Sattler himself was the proprietor, save on a proper commercial basis. Thus I would hold that there was, in this instance, a contravention of ss 181 and 182. With respect to Hill's services before 1 January 2009, I find that Sattler acted honestly within the meaning of s 1317S, but I am not disposed to excuse him from liability for the breaches of ss 181 and 182 which I have found above. Here I refer to my reasons at para 673 above. 718 Consistently with what I have held in paras 674-679 above, I am not satisfied that a like case has been made out by LGT with respect to Ponting and Nichols. Further, had my conclusion been otherwise, I would have held that Sattler acted honestly within the meaning of s 1317S of the Corporations Act, and should be excused. 719 With respect to Dixon's time in the preparation of the Scottsdale Fund application, unlike the situation with Hill, in no realistic sense might it be said that Sattler, as CEO of LGT, might have sought compensation from himself as developer of Lost Farm in relation to the time which Dixon spent on the application. The project was genuinely the initiative of Dixon and, while tolerated and, to an extent, facilitated by Sattler, what Dixon did was quite outside the range of responsibilities that he had as manager of LGT. I would hold that, in allowing Dixon to complete this application, Sattler was not exercising a power or discharging a duty as officer of LGT; and he was not using his position as director and CEO of LGT. Further, I do not think that the reasonable observer - blessed with the foresight that it would be held that the development of Lost Farm did not belong in equity to LGT - would regard Sattler's conduct (if that be the right word) as contrary to the standards which he or she would expect, in such a situation, of an officer in Sattler's position. In relation to Dixon's time, there was not, in my view, a breach of any of the relevant provisions of the Corporations Act. I also take the view that Sattler's conduct in relevant respects was honest, and would in any event have been excused under s 1317S of the Corporations Act. 720 I would reach the same conclusion in the case of Miss Sattler's time spent on the NE Tas Fund application, but for slightly different reasons. The first is that, since I would require Sattler to account to LGT in relation to the successful outcome of that application, it is appropriate that the time spent in preparing it be to LGT's account, not to Sattler's. The second (and alternative) reason is that Miss Sattler, unlike Hill and Dixon, was, at the time, genuinely a part-time employee of LGT only. LGT had no right to the exclusive call on her services. Her evidence was that she prepared the application in so much of her working week as was not spent in the employ of LGT and, although she admitted that her timekeeping was not all that it might have been, LGT, as the party with the onus of proof, has not established, contrary to Miss Sattler's denials, that she in fact used her LGT time in doing this work. For either of these reasons, I would reject LGT's case under the Corporations Act in relevant respects. 721 That leaves LGT's allegation that, in contracting with himself for the receipt by LGT of a 10% on accommodation receipts, Sattler acted otherwise than in the best interests of LGT within the meaning of s 181, and improperly used his position to his own advantage, or to the detriment of LGT, within the meaning of s 182. It seems clear that Sattler was, in these respects, both discharging a duty as CEO of LGT and using his position as such, as those concepts are deployed in those sections. I have held that Sattler was in breach of his fiduciary duty in these respects, and it should, consistently with the authorities, likewise be held that Sattler's use of his position was improper. In my view, a reasonable observer would have expected Sattler to act in accordance with the standard which I implicitly invoked in my findings in para 692 above, that is to say, he should have put the matter before the Board, and absented himself from its deliberations on the commission which LGT would charge for the services it provided to Sattler. There was, in my view, a contravention of s 181 and of s 182. 722 As to the fixing of the accommodation commission, I take the view, however, that Sattler acted honestly in relation to the commission: see para 699 above. Albeit that there was a breach of each ss 182 and 183, I would excuse Sattler from liability for those breaches under s 1317S. I do not take into account the delay involved in LGT's bringing Sattler to account for those breaches, since the Corporations Act contains its own limitation provision (s 1317K), and it was not submitted on behalf of the defendants that there is something akin to a broad defence of laches for contraventions of the Act. I do, however, take into account the other matters referred to in paras 697 and 699 above to hold, which I do, that Sattler acted honestly and ought to be excused his past transgressions in relation to the fixing of the commission.

Disposition of the proceeding 723 It follows that, save with respect to the grant from the NE Tas Fund and the wellness centre, and with respect to the services of Hill before January 2009, there must be judgment for the defendants. I shall give the parties the opportunity to address me on the terms of the orders that would be appropriate to reflect the limited success which LGT has achieved, and on costs. I certify that the preceding seven hundred and twenty-three (723) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.

Links Golf Tasmania Pty Ltd v Sattler [2012] FCA 634

APPENDIX The abbreviated references to persons and entities named in the reasons, and the paragraph of the reasons where the first reference appears. Abbreviation Name Para ASIC Australian Securities and Investments Commission 80 AusIndustry Commonwealth Department of Industry, Tourism & Resources 327 Axland Axland, David 384 Bacon Bacon, Jim 118 Banks Banks, Roscoe 697 Brown Brown, Danny 326 Bump 'n' Run Bump 'n' Run Pty Ltd 160 Busch Busch, Peter 285 Campbell Smith Campbell Smith Phelps Pedley Pty Ltd 10 Carter Carter, Paul 41 Castray Castray, Amanda 328 Clayton Clayton, Michael 19 Coore Coore, Bill 314 Crenshaw Crenshaw, Ben 314 Daley Daley, Paul 12 DED Department of Economic Development 120 Delores Delores Investments Pty Ltd 310 Dixon Dixon, Gary 146 Doak Doak, Tom 12 Dransfield Dransfield, Dean 569 DSD Tasmanian Department of State Development 26 Garmany Garmany, Dana 100 GDD Golf Dream Developments Pty Ltd 42 Gibson Gibson, Harvey 433 Glasco Glasco, Bruce 103 GND Greg Norman Design 76 GWS Great White Shark Enterprise 76 Haddon Haddon, Timothy 167 Harrison Harrison, Bob 76 Hawkes Hawkes, Shane 184 Hepner Hepner, Bruce 20 Hetrel Hetrel, Justin 5 Hill Hill, Phil 386 Joson Joson, Nolan 150 Keiser Keiser, Mike 84 Lennon Lennon, Paul 119 LGT Links Golf Tasmania Pty Ltd 1 Lucas Lucas, Tim 26 Mann Mann, Michael 215 Marshall Marshall, Rod 226 McCleery McCleery, Jonathon 41 McIlfatrick McIlfatrick, Norm 313 Medallist Medallist Golf Holdings Pty Ltd 76 NE Tas Fund North East Tasmania Innovation and Investment Fund 401 Nichols Nichols, Gary 390 Norman Norman, Greg 76 Ponting Ponting, Drew 389 Ramsay Ramsay, Greg 11 Renaissance Renaissance Golf Design Inc 61 Risby Risby, Brian 24 Sattler Sattler, Richard 1 Sattler (Miss) Sattler, Elizabeth 272 Sattler (Mrs) Sattler, Sally 9 Sattler Nominees RG Sattler Nominees Pty Ltd 1 Scottsdale Fund Scottsdale Industry and Community Development Fund 327 Sheppard Sheppard, Richard 97 Sloan Sloan, John 20 Stone Stone, Chris 323 Tas Perpetual Tasmanian Perpetual Trustees Ltd 107 TDR Tasmanian Development and Resources 57 TDR Board Tasmania Development and Resources Board 181 Thomson Thomson, Andrew 320 Troon Troon Golf Australia Pty Ltd 76 Wheaton Wheaton, Amy 79 Wood Wood, Peter 5 Young Young, Peter 59