Matter Technology Ltd v Mrakas; Mrakas v Matter Technology Ltd

The nature of Matter's business

1. In December 2008, Mr Barnes, Mr Mrakas and two others assigned to Matter intellectual property that they then owned in a smart energy business model that they had developed. That model was said to involve "a method to optimise the purchase and consumption of energy for small retail energy customers".
2. Matter's business has since been funded by, amongst other things, an investment made by AGL Energy Ltd of $5 million in January 2015. AGL now holds 19.88% of the shares in Matter. Matter's other major shareholders are companies associated with Mr Mrakas and Ms Taylor (together 19.74%), Mr Barnes (10.23%) and two private investors, Mr Greg Martin (11.77%) and Mr Ronald Langley (9.09%). Together these six entities own or control over 70% of the shares in Matter.
3. The creation, protection and exploitation of intellectual property is an essential aspect of Matter's business. Matter required its employees, including Mr Mrakas, to enter into standard form contracts with clear and widely drafted provisions for the assignment of any confidential information or intellectual property to Matter.
4. Matter developed a number of business concepts relating to the installation, metering, billing and payment services for rooftop solar panels.
5. The relevant concepts are "Project Vespa", "Project Uno", "Project Billabong" (which became known as "Project Platipus") and "Project Eagle". Project Platipus is at the heart of the dispute.
6. Matter commenced working on Project Vespa in October 2014. Project Vespa is a service that is proposed to enable owners of solar panels to monetise their solar panel systems. It encourages the installation of new solar panel systems by providing software that will allow third parties to invest or "rent" solar panel systems located across the world.
7. Matter commenced working on Project Uno in 2017. Project Uno is a proposed online trade matching and auction platform for the supply, installation and commissioning of solar panels.
8. Ms Rawlings, who appeared for Mr Mrakas, submits that the "underlying information" to both Project Vespa and Project Uno is "now in the public domain…because of the prior disclosure by Mr Mrakas and the use of similar business concepts by third parties" and had thereby "lost the requisite quality of confidence".
9. However Ms Rawlings accepted that Project Platipus, although containing elements of both Projects Vespa and Uno, was not itself in the public domain.
10. Accordingly, and this is common ground, it matters not so whether or not Projects Vespa and Uno themselves remained confidential to Matter.

The Employment Contracts

1. The employment contracts between Matter and Mr Mrakas are dated 29 June 2010 and 7 January 2015.
2. The 29 June 2010 contract is a services agreement between Matter and Netfusion in which Netfusion agreed to make Mr Mrakas available as a "key person".
3. Clause 13.2(b) of the contract provided that "Inventions" conceived of or developed by Mr Mrakas "in the course of or substantially in the course of [his] engagement with [Matter]" or "as a result of or aided by [his] engagement with [Matter]", were automatically assigned to Matter.
4. The 7 January 2015 employment contract has a provision in substantially the same terms.
5. Under both agreements, Mr Mrakas's employment could be terminated without notice for "serious misconduct".
6. The 29 June 2010 employment contract had an expiry date of 5 July 2014. The 7 January 2015 employment contract had a commencement date of 1 January 2015.
7. In her opening submissions Ms Rawlings suggested that during the lacuna between 5 July 2014 and 31 December 2014 Mr Mrakas owed no duty to Matter "to act in good faith and fidelity". That contention was only faintly maintained in final submissions. There is no substance to it. The evidence is overwhelming that during this period Mr Mrakas continued to act in his role as CEO of Matter in the same manner he had since the commencement of his employment. Mr Mrakas readily accepted during cross-examination that his conduct as CEO did not change as a result of the expiry date of the 29 June 2010 contract. It is also clear that the parties proceeded upon the basis that the assignment clause in the 29 June 2010 agreement continued to operate during the second half of 2010 and, in particular, operated to assign to Matter all rights in relation to Project Vespa.
8. In any event, the point is now moot. That is because the point was only relevant to the question of who owned the intellectual property and confidential information in Project Vespa, which was developed during the lacuna. In his Commercial List Response, Mr Mrakas asserted that he, and not Matter, was the owner of that intellectual property and confidential information. That position was abandoned during the hearing. In closing submissions, Ms Rawlings accepted that Mr Mrakas had "effectively conceded that Matter IP owns Vespa".
9. In October 2017, Mr Barnes and Mr Mrakas agreed to investigate a buyout or trade sale arrangement with an established energy company which would, amongst other things, enable Matter to raise funds to commercialise products it had developed. The project was named "Project Eagle".

Project Platipus

1. Between late November 2017 and 19 December 2017, Mr Mrakas and other Matter employees worked on what became known as Project Platipus.
2. On 30 November 2017 Mr Mrakas sent an email to Mr Barnes and others stating: "We are preparing our cryptocoin play for an [initial coin offering] to be launched in late Jan over a four-week period… I have been working through the finer details of the offering/product… We will brief you in the coming weeks… This project is called Billabong".
3. In that email, Mr Mrakas made reference to an Initial Coin Offering, or ICO.
4. ICOs are a relatively recent development in the cryptocurrency world. A useful summary of the nature of ICOs, which may assist an understanding of what follows, is contained in this extract from D Rountree, E Adams, S Meacher and A Cook, "A security by any other name: initial coin offerings and legal issues around blockchain fund raisings" (2017) 21(6) IHC 126: "What are ICOs and why are people participating? While the very name 'ICO' is deliberately designed to play off the concept of an initial public offering (IPO), ICOs are a substantively different fundraising tool. Unlike an IPO, an ICO does not offer any equity in a business or company. While ICOs or token sales come in many varieties, and are far from homogenous in terms of implementation or operation, an entity will generally: • develop a business case that revolves around a bespoke implementation of a blockchain technology; • release technical documentation and other information, such as a prototype or road map of their technology, usually in the form of a white paper; and • offer a new cryptocurrency coin or token (Token) for sale to participants (investors) at a set price. The funds from these ICOs are (in many cases) subsequently used to develop the technology described in the white paper, and the Token that is issued is often intrinsically tied to the proposed blockchain technology. However, just as the structure of an ICO can (and often does) vary greatly, the same may be said of the Token at the heart of the offering. While Tokens are usually a form of virtuality (like the famous Bitcoin) which are tradeable on cryptocurrency exchanges, they often offer other features as well - for example, providing a right to participate in the particular blockchain activities associated with the Token, including a right of access or accommodating the exchange of data. The incentive for people purchasing these Tokens is normally predicated on the basis that if the technology is implemented and is successful, then market forces will increase the demand (and therefore value) for the Token which is being sold, resulting in a windfall for the investor."
5. On 4 December 2017, Mr Mrakas briefed engineers employed by Matter in Melbourne about Project Billabong.
6. On 7 December 2017, Mr Mrakas flew to Sydney to meet with Mr Barnes, amongst other people, and to present what he described as a "Project Billabong staff workshop".
7. Mr Mrakas claims during this visit, he spoke privately to Mr Barnes and said: "Any work that I do on the Platipus ICO will be my own IP due to the trade sale of Matter [i.e. Project Eagle]." And: "I will take leave from Matter to conduct the Platipus business and will return to Matter after six or seven months." And: "In the meantime you will be acting CEO of Matter."
8. Mr Mrakas says that, during this conversation, Mr Barnes said something to the effect: "We don't need to be concerned about legals on Platipus."
9. Mr Barnes denies that any of these matters were said on 7 December 2017.
10. I think it unlikely they were.
11. The next day, 8 December 2017, Mr Barnes sent a detailed email to Matter's solicitor referring to the proposed ICO and raising a number of concerns that he had as to the legalities of the proposal.
12. For example, Mr Barnes sought advice about the following matters: "Internal governance - The money raised in the ICO is for the purpose of developing the blockchain applications and funding solar systems to seed the network - the money is not for Matter to dip into, its sort of in trust. What governance and controls should be in place within Matter? And what liabilities does this create for Matter and its Directors? Corporate governance - The ICO may also reward employees, advisors, Matter etc. There seems something wrong about using Matter's IP and resources to fund an ICO and potentially partly invest in the blockchain project how should we view this. Even more important, how should we view regarding founder/employees who could walk away with a chunk of coins in a short space of time but Matter's shareholders not benefit?"
13. These enquiries, which were directed to the legalities of the proposed ICO, suggest that it is unlikely that, the previous day, Mr Barnes told Mr Mrakas that there was no need to be "concerned about legals" concerning Project Platipus.
14. Mr Barnes also made no reference to any suggestion by Mr Mrakas that any work he did on the Platipus ICO would be his "own IP". Nor did he refer to Mr Mrakas taking leave from Matter "to conduct the Platipus business". It seems highly unlikely, in light of the other matters for which Mr Barnes sought advice, that he would not have mentioned these matters had they been raised the day before.
15. A further email that Mr Barnes sent Matter's solicitors on 18 December 2017 (see [58] below), confirms the unlikelihood of Mr Mrakas asserting ownership in any work done by him "on the Platipus ICO" on 7 December 2017.

The 18 December 2017 Discussion Paper and White Paper

1. By 18 December 2017 a meeting of the board of Matter had been scheduled to take place at 10am on 19 December 2017.
2. At around 3pm on 18 December 2017 Mr Mrakas sent to Mr Barnes and Ms Taylor a document called "Matter Discussion Paper on Platipus ICO".
3. The document stated: "Board approval is sought for Matter being involved in the foundation of Platipus through an ICO. This discussion paper outlines the material basis of involvement by Matter who will be a significant partner to Platipus".
4. The document continued: "The Platipus concept and ICO is based around the ideas contained in the Platipus Whitepaper by Chris Mrakas a draft issued 18th December 2017".
5. Mr Mrakas sent a copy of the draft White Paper to Mr Barnes and Ms Taylor at around 6.30pm on 18 December 2017. To distinguish this document from a White Paper that Mr Mrakas published on the Platipus website on 9 January 2018, which I will call "the Final White Paper", I will call this document "the Draft White Paper".
6. The Discussion Paper and the Draft White Paper stated that: 1. Mr Mrakas "owns [all of the] rights to the Platipus concept"; 2. Mr Mrakas owned copyright in the Draft White Paper; 3. although Mr Mrakas owned the Platipus Project, Matter might participate in it on terms outlined by Mr Mrakas; 4. that Matter would "back, support and promote the Platipus ICO" as a "significant partner" or "founding member"; 5. Platipus would be "governed" by a company referred to as the "Platipus Foundation" on the board of which Matter would have two permanent seats and Mr Mrakas would have one permanent seat; 6. Platipus would use Matter's "underlying technology" and build on Matter's "breakthrough work" and that Matter had several important technologies that Platipus envisioned as being important to "moneti[s]ation rights"; 7. Platipus would be "owned" by persons who owned tokens in Platipus; 8. in return for its support Matter would receive 12% of the tokens to be issued; 9. as the "creator" or "founder" of Platipus Mr Mrakas would be "granted founder's token [in an unspecified amount] in return for creating the Platipus concept, transferring his rights to [the] said concept" and that his allocation of "founder's tokens will be [based on] time based vesting"; 10. "involvement of Matter in Platipus" would include "funding up to $20,000 of expenses directly related to the development of the ICO"; and 11. if the ICO was successful then Mr Mrakas would take leave from his role as CEO of Matter so that he could "effectively [represent] the Platipus side during its establishment phase", that an interim CEO would run Matter during his "leave of absence" and that if the ICO was not successful then "the Platipus project will be owned by Matter and Chris Mrakas in proportion to their founding allocation percentages".
7. Mr Mrakas also stated that Platipus was "highly confidential" and of "significant importance to the future of Matter and society".
8. Until the commencement of the hearing, Mr Mrakas continued to assert that he owned all the rights to the "Platipus concept". He also asserted ownership over the copyright to the Draft White Paper, the Final White Paper and other associated documents that Mr Mrakas published on the Platipus website on 9 January 2018.
9. Mr Mrakas abandoned both those positions during the hearing. He now accepts that Matter was the owner of all intellectual property and other rights concerning the "Platipus concept" and the owner of the copyright in the relevant documents.
10. There was never any basis for Mr Mrakas to assert that he owned any "rights" or "copyright" concerning the Platipus proposal. The proposal was one that Mr Mrakas, along with other employees of Matter, had developed whilst an employee and the CEO of Matter.
11. Further, by the terms of Mr Mrakas's current employment agreement with Matter (that of 7 January 2015), and in any event as a matter of general law, any rights associated with the Platipus concept belonged to Matter; not to Mr Mrakas.
12. Shortly after he received the Discussion Paper but before he received the Draft White Paper, Mr Barnes sent an email to Matter's solicitors stating: "See the attached ICO discussion paper from Chris [Mrakas] and his employment contract. In para 3 of the discussion paper Chris [Mrakas] asserts that he owns the rights to the [Platipus] concept yet clause 12 of his employment contract would suggest otherwise to me particularly because as the CEO and head of product development for Matter it would be very hard to ring fence a concept that is firmly in Matter's industry. Can you give me a view please?"
13. That email suggests very strongly that Mr Barnes had not, prior to reading the Discussion Paper, heard of any suggestion by Mr Mrakas that Mr Mrakas "owns all rights to the Platipus concept". I see this as a further reason to prefer Mr Barnes's evidence to that of Mr Mrakas concerning the conversation Mr Mrakas claims he had with Mr Barnes on 7 December 2017.

The 19 December 2017 board meeting

1. An issue arises as to whether Mr Mrakas obtained the fully informed consent of the board on 19 December 2017 to proceed with the pre-sale phase of the Platipus ICO, provided that he fund it himself.
2. Ms Rawlings accepted that either Mr Mrakas had such authority or he did not, and that the outcome of this "binary decision" would determine whether Mr Mrakas: 1. had engaged in "serious misconduct" so as to be in breach of his employment obligations; 2. had infringed Matter's copyright on the Final White Paper and other documents that Mr Mrakas published on the Platipus website on 9 January 2018; and 3. was in breach of his duties to Matter under ss 182 and 183 of the Corporations Act 2001 (Cth).
3. Ms Rawlings thus accepted that if the correct conclusion is that Mr Mrakas did not have "authority" from the board (by which I understand Ms Rawlings to refer to the informed consent of the board, and thus of Matter) Matter's case against him was made out.
4. Mr Mrakas's proposal to the board was contained in the Discussion Paper and Draft White Paper circulated the night before the meeting. By the time of the meeting, Mr Barnes and Ms Taylor had read the Discussion Paper but had not read the Draft White Paper which was over 50 pages long and, as Mr Mrakas said in his email of 18 December 2017: "…is wordy, dry and geeky - after all it is a white paper in crypto, not a travel brochure".
5. The board minutes record, relevantly: "Mr Mrakas walked the Board through the 'Platipus ICO discussion paper 18 December 2017', the structure of the project, the potential returns to the Company and additional revenue streams available through the R&D aspects of the project. A discussion was held in relation to the submitted paper. Mr Mrakas requested $20k for marketing costs of the ICO and use of the Company's engineering team in return for the benefits outlined in the paper. The Board did not approve the funding and support request preferring to seek to raise additional capital."
6. There is no dispute that the board did not pass any resolution permitting Mr Mrakas to proceed with the Platipus project.
7. Mr Barnes, Mr Mrakas and Ms Taylor have differing recollections as to what was said at the board meeting, although all agree that both Mr Barnes and Ms Taylor were adamant that Matter could not afford to contribute the $20,000 that Mr Mrakas proposed in the Discussion Paper (see [52(j)] above).
8. Mr Barnes's recollection was that the board meeting concluded with the following exchange: "Ms Taylor: The fact is that Matter doesn't have cash to invest at the moment. [Mr Barnes]: I agree. Mr Mrakas: Well maybe I will do the project on my own and Platipus will buy up all of Matter's assets when Matter fails and has its back against the wall. [Mr Barnes]: Did you just say that in a board meeting Chris [Mrakas]? Anyway let's leave this for now. I will investigate whether Tim Bennett could raise funds for Matter to elongate its runway." (Emphasis added.)
9. In his affidavit, Mr Mrakas said: "The main discussion during the board meeting concerned the amount of revenue and funds that would flow to Matter and the required investment for the Platipus ICO, which I thought was about $20,000. … Words were exchanged to the following effect:- Ms Taylor said: I oppose it because we can't afford $20,000 Mr Barnes said: I oppose it because it will cost $100,000 Ms Taylor said: We don't have the cash to invest A discussion ensued about the ability of Matter to raise $100,000. Mr Barnes said: I have investors lined up to invest in Matter for Platipus [Mr Mrakas] said: I doubt it. [Mr Mrakas] said: Matter needs to continue with Platipus or Matter may fail Ms Taylor said: Chris [Mrakas], you need to fund it yourself. I had not expected that comment. Mr Barnes said nothing against it. We did not vote upon it, but I took that to mean that if I funded the Platipus ICO by myself it could proceed." (Emphasis added.)
10. In her affidavit, Ms Taylor did not say that she had said at the meeting "Chris, you need to fund it yourself" as Mr Mrakas stated. Ms Taylor also said she did not recall Mr Mrakas saying that "[m]aybe I will do the project on my own" (as Mr Barnes stated) but did recall Mr Mrakas saying "if Matter doesn't do this and fails then I can buy its assets".
11. In cross-examination Ms Taylor gave this evidence: "Q. There was no discussion at that board meeting of Mr Mrakas going ahead with the pre-sale aspect of the ICO and there then being a further board meeting to consider the main sale aspect of the ICO, do you agree? A. No, I don't. There was definitely the conversation around Chris going ahead with the initial phase of the ICO if he could find another way to fund that part of the project. And that further discussion would be required to talk about the mainframe or the main sale - your terminology - of the Platipus project. HIS HONOUR Q. Is this Mr Mrakas' statement: 'Well, maybe I will do the project on my own' that you are referring to? A. Yes, exactly."
12. Thus Ms Taylor's recollection of what Mr Mrakas said was to the same effect as Mr Barnes's recollection.
13. Ms Taylor agreed that she was adamant that Matter could not afford to contribute the $20,000 sought by Mr Mrakas for development expenses. She said that Mr Mrakas was angry with her because of the stand she took about that matter.
14. It was in that context that Ms Taylor gave the following further evidence as to what she recalled Mr Mrakas had said at the meeting: "Q. It was a tongue in cheek comment by him at a point in the meeting where he was angry where he said, 'I might go ahead and do it myself and then I buy Matter'? A. Yes, absolutely. Q. And that was the extent of it? A. Absolutely. There was absolutely no intention to do that. It was simply that he was so cross that I had denied him the opportunity for the additional funding that he required that he basically turned around and said, "Right, I will do it myself" and words to the effect you have just mentioned. In my view and experience of working in the business for eight years, it was a typical type of communication between Chris Mrakas and Simon Barnes that I deliberately did not take part in."
15. Mr Barnes's and Ms Taylor's recollection of what Mr Mrakas said does suggest that Mr Mrakas asserted that he might proceed with Project Platipus himself; albeit, as Ms Taylor understood him, rhetorically ("there was absolutely no intention to do that") and in angered frustration that his co-directors would not commit $20,000 of Matter's funds to the project.
16. But Mr Mrakas could not possibly have understood from what was said that he had the informed consent of the board "to do the project on my own".
17. His conduct after the meeting makes clear that he formed no such view.

Events after the board meeting

1. Mr Mrakas had no doubt that the board had not approved the project.
2. Within minutes of the end of the meeting Mr Mrakas sent an email to Mr Sheldon Dyer, the Head of Engineering at Matter: "The Matter Board has not approved Project Billabong. So, I would suggest that you redeploy engineering resources as you see fit. We will not need anyone working over the Xmas break. Nor do we need to find a JavaScript person." (Emphasis added.)
3. Although Mr Mrakas sought in cross-examination to suggest that the only decision made by the board on 19 December 2017 was to refuse his request for $20,000 for marketing costs, his email to Mr Dyer makes clear that he understood that the board had "not approved" the project at all.
4. Thus, in the second paragraph of his email, Mr Mrakas suggested to Mr Dyer that there would be no need for the allocation of engineering resources to the project over the Christmas break. In effect Mr Mrakas told Mr Dyer to "down tools".
5. As I have mentioned, during the board meeting, Ms Taylor was adamant that Matter could not afford to spend the $20,000 that Mr Mrakas had sought for "marketing expenses".
6. Nonetheless during the evening on 19 December 2017 she sent an email to Mr Barnes: "After much thought, I would like us to reconvene our discussion regarding Project Billabong before we submit the minutes for the meeting. If possible, can we organise a conference call tomorrow morning so that we can draw a close to the meeting?"

The events of 20 December 2017

1. On the morning of 20 December 2017, Mr Barnes sent Mr Mrakas and Ms Taylor and email saying that he would not be able to attend a meeting as his wife had been called urgently to hospital.
2. He continued: "In light of this and given that the previous board meeting was closed yesterday the request for a meeting this morning is not the re-opening of an adjourned meeting. Accordingly a new meeting needs to be formally called with reasonable notice given. I received [Ms Taylor's email referred to at [84] above] last night which I opened this morning. That email does not constitute a formal notice of a new meeting in compliance with Matter's Constitution. For the next meeting and in order to properly consider the Platipus proposal, as a board member I will need at a minimum the following information to be available: ● Budget breakdown for the ICO in order to determine whether the funding is sufficient ● Alternative options for proceeding including potentially additional funding from shareholders to ensure a more successful outcome of the ICO ● A negotiated deal shape with any third parties involved in the ICO ● A legal review of Matter's involvement and rights in relation to Platipus ● Consideration of the implications of the ICO for Matter including but not limited to the impact of the ICO on Project Eagle, the trade sale of the business This information is required to assess the viability of the ICO and whether it is in the best interests of Matter as a whole as the documentation provided on Monday evening was not sufficient in order to properly assess the proposal. … In the circumstances, I propose that any board meeting be called no earlier than the 8th January given that I will be on leave from tomorrow evening through to the 7th January. I suggest that the board meeting be scheduled later in that week and any additional material supplied for it. As a general observation I understand the attractiveness of the potential opportunity and that it could be significant for Matter hence why we should not be proceeding without considering it properly." (Emphasis added.)
3. Mr Barnes made himself perfectly clear. The proposal needed to be considered "properly". For that to occur, Mr Barnes, as one of the directors, required the information he specified; especially "a legal review of Matter's involvement and rights in relation to Platipus". Until that information was to hand "we should not be proceeding". Nothing further was to occur concerning Project Platipus until it was further considered by the board; and no earlier than 7 January 2018.
4. Mr Mrakas understood that this was what Mr Barnes was saying.
5. Thus he replied: "…the proposal as explained in the discussion paper in regard to Matter's participation as a member of Platipus was clearly rejected at the board meeting. Sadly, this will be yet another opportunity lost in an ever-growing list of lost opportunities." (Emphasis added.)
6. This email is the best evidence of what Mr Mrakas understood to be the result of the 19 December 2017 meeting. He understood that his proposal had been "clearly rejected" with the result that there was "another opportunity lost" to Matter.
7. Despite these matters, Mr Mrakas then decided to go it alone.
8. In his affidavit he said: "I then reconsidered the matter and decided on 20 December 2017 to proceed with the Platipus ICO and to personally fund it. I did not inform Mr Barnes of this as he had commenced annual leave and was not returning to work until 8 January 2018. In any event, it was clear from the discussion at the board meeting on 19 December 2017 that the Platipus ICO could be undertaken and funded by myself, so there was nothing to discuss. It was also clear to me that Mr Barnes was using the Platipus ICO to play politics." (Emphasis added.)
9. Contrary to this quite extraordinary evidence, it was not "clear" from what had been said at the 19 December 2017 board meeting that Mr Mrakas could, at his own cost, undertake the Platipus ICO. It appears that he asserted, in a rhetorical flourish, that this was something he might do. But he could not possibly have thought that he had board approval.
10. Mr Barnes's 20 December 2017 email makes this quite clear. Contrary to Mr Mrakas's assertion, there was most certainly something "to discuss".
11. Mr Mrakas had no authority to proceed with Project Platipus. Nonetheless, as I discuss below, he purported to do so.
12. As Ms Rawlings's submissions accept, it follows that Mr Mrakas's conduct thereafter was in breach of his contractual and statutory duties to Matter.

Work over the Christmas break

1. Between 20 December 2017 and 9 January 2018 Mr Mrakas used Matter resources, including the time of Mr Dyer and other Matter employees, to develop: 1. the Platipus website; 2. the Final White Paper; 3. a document called "The Platipus ICO Objectives and Ambitions"; and 4. a document called "Platipus Explainer. How does the ICO work?"
2. In the Objectives and Ambitions document Mr Mrakas repeated much of the material that was in the Draft White Paper including: "The Platipus Project focuses on the next level of scale, building on Matter's awesome work, making this happen via the Platipus ICO, Platipus Token, Platipus Foundation, and Platipus Network. It is important to note that Matter could have implemented Platipus and retained 100% ownership in the process, but the creator [i.e. Mr Mrakas] felt that it is vital for Platipus to be owned by the community so it flourishes and no solitary party can influence it unchecked. The foundation of Platipus is built on the ideal that the community is stronger and more valuable than any one corporation. No single party can own because if they did, its scale would be greatly diminished. Matter will have a small stake in Platipus, but a strong involvement through a symbiotic relationship providing its services and technology that will be essential to the success of Platipus for several important reasons… … MATTER'S INVOLVEMENT IN THE ICO Platipus seeks to work with strategic partners who can provide Platipus with access to important technologies. Matter has many contributions it can make to the speed of scaling Platipus. Matter also has several important technologies that Platipus envisions as being important to Moneti[s]ation Rights. Matter Technology Limited and Platipus are in discussions about Matter's involvement in Platipus. The formal relationship with Matter will be declared before the Platipus main sale ICO commences. It is envisioned that Matter will provide many substantial services to Platipus and that it may be a Strategic Partner who may receive tokens from the Strategic Partnership Pool. Note that the creator of Platipus [Mr Mrakas] is also the CEO and Head of Product in matter. Post-ICO Platipus will enter into material contracts with Matter and other suppliers to assist Platipus in delivering on the ideas contained in the whitepaper. All such material supply arrangements will be declared to the community as they are made. … FOUNDERS POOL The creator of Platipus, Chris Mrakas, will be allocated 20% of the tokens issued through the whole ICO process - Pre-Sale and ICO. Chris intends to grant, at his discretion, from his allocation in Founders Pool no more than 10% to key partners or people who will be important to the bootstrapping of Platipus. This will be declared fully prior to the ICO sale in February. Where no declaration is made he will retain 20%." (Emphasis added.)
3. In this document Mr Mrakas asserted that: 1. he was the "creator" of Project Platipus (but in circumstances where he was an employee of Matter and had assigned to matter all intellectual property in whatever he "created"); 2. Platipus and Matter were "in discussions" about Matter's involvement in Platipus (in fact there were no such discussions); 3. although Matter "could have" implemented and maintained ownership of Platipus, Mr Mrakas had decided it should be owned by the "community"; 4. Matter would have a "small stake in Platipus" as a "Strategic Partner" (although Strategic Partners as a whole would have only a 7% stake; and despite Mr Mrakas's statement in his 18 December 2017 Discussion Paper that Matter itself would "receive 12% of the Platipus tokens on issue"); and 5. he would allocate 20% of the tokens to himself through the pre-sale process (and thus secure a 20% interest in the ICO) but might at his discretion allocate half of this to others.

The pre-sale launch

1. On 9 January 2018 Mr Mrakas launched the pre-sale stage of the Platipus ICO which involved him: 1. activating the Platipus website on which members of the public could purchase entitlements to tokens (which might be fulfilled following the "main sale" stage of the Platipus ICO, if sufficient funds were raised in the pre-sale for it to proceed); and 2. publishing on the website the Final White Paper, the Objectives and Ambitions and the Platipus Explainer documents.
2. Each of those documents bears the notice "© 2018 Chris Mrakas".
3. Evidently this was an attempt to invoke the prima facie presumption of copyright ownership in s 126B of the Copyright Act 1968 (Cth).
4. However, before me, Ms Rawlings accepted that Matter, not Mr Mrakas, owned the copyright in each of the documents. In cross-examination Mr Mrakas accepted that it had been a "mistake" on his part to have asserted that he was the copyright owner.
5. Mr Mrakas made no attempt to contact Mr Barnes during that time to let him know what he was proposing to do.
6. Both Mr Mrakas and Ms Taylor, in cross-examination, attempted to justify not informing Mr Barnes of these matters by their professed tenderness for Mr Barnes's privacy while on leave, and their apprehension that Mr Barnes would not have responded to attempts of contact over this period. I do not accept that evidence. Either one of them could have contacted Mr Barnes if they had wished to.
7. In any event Mr Mrakas knew from Mr Barnes's 20 December 2017 email that he was available to attend a further board meeting on 8 January 2018.
8. I am satisfied that Mr Mrakas wished to keep his activities secret from Mr Barnes.
9. On 9 January 2018 Mr Mrakas sent this email to Mr Barnes: "I have launched www.platipus.io as a community project. The door is open to Matter to become a Strategic Partner, if you would like for this to happen I am happy to discuss. I have a pool of tokens available that I need to issue to Strategic partners of Platipus. The www.platipus.io presale will end in 26 days, I will need to firm up who are the strategic partners to the project before that." (Emphasis added.)
10. This is the first Mr Barnes had heard of Mr Mrakas's activities over the Christmas break.
11. Although Mr Mrakas said he had launched the Platipus website "as a community project" he had, in substance, launched it as his own project but on the basis that the door remained "open" to Matter "to become a Strategic Partner" in that venture.
12. By this point, Mr Mrakas had lost his way. He was hopelessly conflicted and oblivious to the contractual and statutory duties he owed to Matter as one of its directors and as its CEO.
13. His email to Mr Barnes makes clear that he thought the Platipus project was his property that he could share with Matter, a company of which he was a director and the CEO, as he saw fit.
14. In cross-examination he gave this evidence: "Q. What I want to understand is why did you possibly think that it was in fact your concept, not Matter's, and that you had all of the intellectual property rights to it? A. As I said, Mr Hutton, it [was] a mistake. But if you're passionate about something and you are authoring a manuscript and you are doing work it is fair to say you can lose perspective. And if you are working on it at home and at work you might feel that that body of work you are doing, you know, is yours."
15. And later: "Q. As at December, when you said that you had all the rights to the Platipus concept, did you have in your mind a legal basis for that? A. I have, I have lost perspective, am, I - I am not sure what the question means. Q. Well, I just want to know, did you even turn your mind to whether you had a legal basis for that claim? A. I think, I have been trying to reconcile why I said it and why I did it and I really can't explain it, Mr Hutton, I really can't. Q. Can you explain why you maintained it all the way up to 30 January 2018 or 31 January 2018 when that solicitor's letter we started with today was sent? A. I can't explain it."
16. Mr Mrakas said that he realised he was mistaken "on re-reading my employment contract", although he was not able to say when that occurred.
17. Mr Mrakas then solicited investment in Platipus (by the purchase of tokens) from all of Matter's major shareholders.
18. In his emails, Mr Mrakas referred to Platipus as "my" project and "my idea" rather than Matter's.
19. For example, he emailed a link to the Platipus website (and thus the Final White Paper) to Mr Martin (an 11.77% shareholder; see [14] above) on 11 January 2018 with the words "happy New Year Greg…see my latest idea…let me know if you want to play".
20. On the same day he sent an email to Mr Langley (a 9.09% shareholder: see [14] above) in which he described, in positive terms, the progress of Project Eagle but then added: "On another front I have kicked off another project on a personal front" (Platipus).
21. In cross-examination, Mr Mrakas said that he always thought that, ultimately, the Platipus ICO would require Matter's board approval.
22. His conduct during January 2018 is hard to reconcile with him genuinely holding that view.
23. On 12 January 2018 Mr Mrakas caused the second defendant, Platipus Foundation Pty Ltd, to be incorporated. Mr Mrakas and Ms Taylor were the only two directors and shareholders of that company. Mr Barnes was not a shareholder or director.
24. This suggests that Mr Mrakas was proposing, at least at that time, to proceed with Platipus without Matter board approval.
25. Mr Mrakas also caused a bank account to be opened at Westpac Banking Corporation in the name of Platipus Foundation Pty Ltd.
26. From about 12 January 2018: 1. about $35,000, being the proceeds of sale of potential entitlements to Platipus tokens as part of the pre-sale stage of the Platipus ICO, was credited to this account. It appears that these sales were to members of the public, to Mr Mrakas's family and friends as well as Mr Mrakas himself. Mr Mrakas said that, ultimately, these funds did not become available because the merchant processing the relevant credit card transactions determined not to release the payments to Platipus Foundation for a period of 90 days (by which time Mr Mrakas's employment with Matter had been terminated); and 2. about $600 worth of the cryptocurrency "Litecoin" was paid into a cryptocurrency virtual wallet to which only he had access.
27. During cross-examination, I asked Mr Mrakas who he thought were the vendors of the tokens offered during the pre-sale phase of the proposed venture. Mr Mrakas suggested the vendor was "the computer" that processed the transactions. However, as the Platipus website directed subscribers for tokens either to pay cash into the Platipus Foundation Westpac account or deposit Litecoin into Mr Mrakas's virtual wallet, it seems clear that the vendors of the tokens were either Platipus Foundation or Mr Mrakas himself.
28. Mr Mrakas says he thought that the funds thus received were held by Platipus Foundation and him "in trust" but appeared to have little, if any, idea of how any such trust had been established or could be administered.
29. In the result, the cash and Litecoin deposited to the Westpac account and Mr Mrakas's virtual wallet were refunded. The pre-sale failed and the ICO did not proceed.

17 January 2018 board meeting

1. On 17 January 2018 a meeting of directors of Matter took place. Only Mr Barnes and Ms Taylor attended. A resolution terminating Mr Mrakas's employment was passed with Mr Barnes voting in favour and Ms Taylor abstaining. There is no suggestion that Ms Taylor played any role in conduct leading to the launch by Mr Mrakas of the Platipus proposal. There is thus no suggestion that Ms Taylor had any interest in the question of Mr Mrakas's continued employment as CEO that would have disqualified her from participating in the 17 January 2018 meeting, had she chosen to do so.
2. At the same meeting, Mr Barnes was appointed CEO of Matter.
3. Ms Rawlings did not suggest in closing submissions that these resolutions were not effective to terminate Mr Mrakas's employment with Matter. Indeed, she submitted that "the employment of Mr Mrakas was terminated by a resolution passed at a board Meeting on 17 January 2018".

The purported 24 January 2018 board meeting

1. On 24 January 2018, Mr Mrakas convened a purported board meeting with Ms Taylor at which resolutions purporting to reinstate him as CEO and terminating Mr Barnes's employment with Matter were purportedly passed.
2. In closing submissions, Ms Rawlings made some attempt to justify these purported resolutions.
3. However, the purported resolutions were clearly retaliatory to the 17 January 2018 decision by Matter's board to dismiss Mr Mrakas as CEO. Mr Mrakas had a material personal interest in the purported resolutions and by reason of Art 26.6 of Matter's Constitution and s 195(1) of the Corporations Act, was not entitled to vote.
4. Accordingly, no valid resolution was passed on 24 January 2019.

Ms Taylor and Mr Mrakas cease to be directors

1. As I have mentioned, on 31 January 2018 Ms Taylor resigned as a director of Matter.
2. Clauses 14.7 and 14.8 of the 7 January 2015 employment agreement between Matter and Mr Mrakas provide: "14.7 On termination of employment for whatever reason, unless [Matter] otherwise agrees, you must within seven days resign from all directorships and other offices that you hold in the Group. 14.8 If you fail to comply with this clause, you hereby authorise and appoint the CEO as your attorney to execute any documents and do all things necessary to effect your obligations under this clause."
3. On 30 January 2018 Mr Barnes was the CEO of Matter. On that date, as Mr Mrakas's attorney, he caused Mr Mrakas to resign as director of Matter.

Mr Mrakas remained unrepentant

1. On 31 January 2018 Mr Mrakas instructed his solicitors to send this email to Matter's solicitors: "1. The Platipus concept was devised by my client. It is his project, not Matter's. Should there be any intellectual property in it, then it is owned by my client; 2. The Platipus concept is a completely different business to the Matter business. It would not be a competitor to Matter; 3. My client sought to involve Matter in Platipus as a shareholder. Matter rejected that proposal; 4. Platipus would generate an income channel for Matter that Matter would not otherwise receive, by having Matter supply its services and technology to Platipus. Matter could have done that as a shareholder, and it can still do it now even though it is not a shareholder. If Matter does not want to do that, they can be sourced from other supplier; 5. My client has not made any unauthorised use of any of Matter's intellectual property or confidential information in the Platipus project; 6. Your correspondence does not provide any examples of my client's unauthorised use of any of Matter's intellectual property or confidential information; 7. The Platipus White Paper is not Matter's intellectual property and it contains no Matter confidential information; 8. Project Vespa and Uno are concepts. They are not intellectual property owned by Matter. They are not confidential information of Matter as their details were released to the public when they were being developed. Other than the mention of them, they have not been 'used' in the Platipus venture; 9. As a result of this dispute the Platipus business has ceased its development and is not trading; 10. Where appropriate, references to Matter have been removed from the Platipus website; 11. My client would like to proceed with the Platipus venture and to involve Matter as a supplier, but if that cannot be agreed upon, another supplier will be involved."
2. Each of the propositions in pars 1, 2, 5, 7, and 8 of that letter was abandoned before me.

Mr Mrakas' breaches of contract and duty

1. In those circumstances, my conclusion is that Mr Mrakas has breached his employment agreement, ss 182 and 183 of the Corporations Act and his equitable duty of confidence.
2. Clause 7.1 of the 7 January 2015 employment contract between Mr Mrakas and Matter required that Mr Mrakas "act honestly and always in the interest of [Matter]" and to "professionally, faithfully and diligently perform the duties and exercise the powers consistent with [being CEO of Matter]" and to "promote the interests of the Group".
3. In any event it was an implied term of Mr Mrakas's employment as a CEO of Matter that he render faithful and loyal service to Matter, and avoid conduct incompatible with the continual relationship of trust and confidence between them: Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359; [1931] HCA 21 at 372; Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66; [1933] HCA 8 at 81-82.
4. Further cll 12.2(a), 12.6, 13.1 and 13.2 of the 7 January 2015 employment contract imposed on Mr Mrakas an obligation not to infringe Matter's "intellectual property rights", to use "confidential information solely for the benefit of and as directed by [Matter]", and not to use confidential information for personal gain.
5. Further, by ss 182 and 183 of the Corporations Act Mr Mrakas was obliged not improperly to use his position as a director or employee to gain an advantage for himself or to cause detriment to Matter, and not improperly to use information obtained from his position as a director or employee to gain advantage for himself or to cause detriment to Matter.
6. Further, Mr Mrakas owed Matter equitable obligations of confidence in respect of the concepts and documents comprising Projects Vespa, Uno and Billabong/Platipus.
7. Further, as Mr Mrakas now accepts, Matter was the owner of the copyright in the Final White Paper, the Objectives and Ambitions document and in the Platipus Explainer document.
8. Adopting, again with gratitude, the summary set out in Mr Hutton's final submissions, and including some details of Mr Mrakas's proposal in the ICO that I have not set out earlier, I find Mr Mrakas has breached each of these obligations by: 1. making, and maintaining until trial, the unjustified assertion that the Platipus concept and the Platipus project were owned by him personally rather than Matter; 2. making, and maintaining until trial, the equally unjustified assertion that he was the owner of the copyright in the Final White Paper, the Objectives and Ambitions document and the Platipus Explainer document; 3. directing employees of Matter to continue to work on the Platipus project over the Christmas break after the board had declined to approve it, in circumstances where Mr Mrakas understood the board to have "clearly rejected" it (see [87] above) and after Mr Barnes raised numerous and well-founded objections to proceeding with it without further consideration and review (see [84] above); 4. concealing from Mr Barnes that he was working on the Project Platipus notwithstanding Mr Barnes's stated objections; 5. on 9 January 2018 launching the pre-sale stage of the Platipus ICO, which involved him: 1. activating the Platipus website; 2. making available to the public on that website the Final White Paper, the Objections and Ambitions document and the Platipus Explainer document; 3. publicly asserting, without proper basis, his ownership of the copyright in those documents; 4. publicly asserting in those documents that: 1. Mr Mrakas, personally, would be allocated 10% to 20% of the Platipus tokens from the "Founders Pool" following the main sale, if it was successful; 2. Matter might become a "Strategic Partner" and thus be allocated a proportion of the 7% of the Platipus tokens in the "Strategic Partners" pool; 3. Matter would be involved in Platipus in various ways; and 4. Platipus and Matter were in discussions about the terms on which Matter would participate in Platipus, when Mr Mrakas knew no such discussions were taking place; 1. in the Final White Paper and Objectives and Ambitions document, changing the arrangement between Matter and Platipus that he proposed to the board in the Discussion Paper by 1. removing Matter's proposed representation on the Platipus Foundation board; and 2. removing Matter's proposed entitlement to 12% of the proceeds of the Platipus ICO; 1. doing (d) and (e) above, which involved conflicts of interest and duty, knowing that he had not obtained Matter's fully informed consent; 2. doing (d) and (e) above as part of a strategy of attempting to pressure Matter, a company of which he was still CEO, into participating in Platipus on Mr Mrakas's proposed terms; 3. also on 9 January 2018, referring Mr Barnes to the Platipus website and informing him that the "door was still open" to Matter being a "Strategic Partner" of Platipus but it would only be open for a limited time; 4. from 9 January 2018 until about 12 January 2018, marketing Platipus to Matter's shareholders; and 5. on 12 January 2018, causing the Platipus Foundation to be incorporated, which was to be the vehicle that administered Platipus and received payments from the general public for tokens; and 6. making himself and Ms Taylor the only directors and shareholders of that company.

Serious misconduct

1. In these circumstances, I am also satisfied that Mr Mrakas has engaged in "serious misconduct" for the purposes of the 7 January 2015 employment contract.
2. In order that conduct be "serious misconduct" it must "be of a serious nature", involve "a repudiation of the essential obligations under the contract" or be "repugnant to the relationship of employee and employer": see Rankin v Marine Power International Pty Ltd [2001] VSC 150 at [250] (Gillard J) and see generally Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37 at [139]-[140].
3. In my opinion, Mr Mrakas's conduct was a repudiation of his obligations to Matter as its CEO and was repugnant to that relationship.

Mr Mrakas's cross-claim

1. By his cross-claim Mr Mrakas asserted that his employment had been wrongly terminated and sought payment in lieu of the three month's written notice required by cl 14.1 of the 7 January 2015 employment contract.
2. I have concluded that Mr Mrakas engaged in serious misconduct. Accordingly Matter was entitled to terminate his employment under cl 14.2 without notice.
3. It follows that Mr Mrakas is not entitled to payment in lieu of notice.
4. Mr Mrakas also claimed some $6,000 being the amount that he claimed he paid in respect of the ICO pre-sale.
5. There are two reasons why Mr Mrakas is not entitled to this sum.
6. First, the amount was expended by Mr Mrakas at a time when he was engaging in serious misconduct under the 7 January 2015 employment contract.
7. Second, there is no evidence that Matter obtained any benefit from the payments. The overwhelming probability is that it did not.

Relief

1. I will now receive submissions as to the relief that should be granted to Matter in light of these reasons, including any relief that should be granted against Platipus Foundation.

Amendments 03 August 2018 - [6] Date in last sentence corrected 03 August 2018 - [6] Date in last sentence corrected 03 August 2018 - [134] Date corrected DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2018