Plaintiff v First Defendant Second Defendant

TRADE PRACTICES - Unconscionable conduct - Plaintiff was not under a special disadvantage or disability - First and second defendants did not engage in unconscionable conduct within the meaning of the unwritten law - First and second defendants engaged in unconscionable conduct by expropriating or retaining the plaintiff's shares for no consideration - Australian Consumer Law ss 20 and 21 - Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 46 ALR 402; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2000] FCA 2; (2000) 169 ALR 324.

RESTITUTION - Transfer of property - Plaintiff transferred shares under a mistake of fact - Total failure of consideration - Retention of shares by second defendant unjust in all of the circumstances.

REMEDIES - Damages - Shares retained by second defendant worthless - Company wound up - Nominal damages awarded.

EQUITY - Breach of fiduciary duty - Plaintiff and first defendant were shareholders and directors in a company - First defendant wound up that company and incorporated a new company - Plaintiff alleged that he had been improperly excluded from new company - Whether first defendant owed fiduciary obligations to plaintiff - Where parties alleged to be in 'quasi-partnership' - First defendant did not assume responsibility for interests of plaintiff - Contractual arrangements and company and trust structures inconsistent with fiduciary obligations - Plaintiff was not vulnerable to and did not rely on first defendant - First defendant did not owe fiduciary obligations to plaintiff - Ebrahimi v Westbourne Galleries Ltd [1973] AC 360; Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 32 ACSR 294.

CONTRACT - Breach of contract - Parties entered into a series of agreements to govern the operation, management and structure of a company's business - Breach of the terms of an earlier agreement alleged - Subsequent agreement superseded the earlier agreements - No breach of contract - Hillam v Iacullo [2015] NSWCA 196.

1 In 2006, the plaintiff, Boris Rozenblit (Rozenblit) and the first defendant, Michael Vainer (Vainer) agreed to work together to commercialise Rozenblit's tyre recycling inventions. Rozenblit alleges that he was wrongfully deprived of his shares in the corporate vehicle created to bring about this objective. He was then, it is alleged, completely excluded from the joint enterprise when Vainer liquidated that vehicle and appropriated its business and technology for himself. Rozenblit alleges that Vainer continues to operate what should be their joint enterprise, for his sole benefit.[1]

2 Rozenblit and Vainer commenced their relationship in about September 2006, when they agreed to the terms upon which they would work together to commercialise Rozenblit's innovative method of processing waste tyres.[2] Their first agreement was oral (Oral Agreement), and was later reduced to written heads of agreement, signed by the parties on 3 October 2006 (Implementation Agreement).

3 The joint enterprise later evolved, and a new company called VR Tek Global Pty Ltd (VRT Global) was established in 2009 to carry out commercial operations. Fifty percent of VRT Global was held by VR Tek Operations Pty Ltd (VRT Operations), a wholly owned subsidiary of VR Tek Pty Ltd (VRT). VRT acted as trustee of the VR Tek Unit Trust (Unit Trust). Until November 2011, Vainer, Rozenblit, David Freeman (also a director) (Freeman) and Vainer's father, Dr Alexander Vainer (Dr Vainer), directly held the remaining 50 per cent of VRT Global's share capital. Rozenblit, Vainer and Dr Vainer each held units in the Unit Trust, and through them, an indirect interest in VRT Global. Shareholders agreements were executed in relation to VRT Global on 30 September 2009 (First Shareholders Agreement) and then on 10 November 2010 (Second Shareholders Agreement) (together, the Shareholders Agreements).

4 In November or December 2011, Rozenblit's shares in VRT Global, as well as those of the other directors, were, it is alleged transferred to Dr Vainer, without compensation or consideration changing hands (the Share Transfer). The only shareholders in VRT Global after the transfer were Dr Vainer and, through VRT Operations, a wholly owned subsidiary of VRT as trustee of the Unit Trust. Each held 50 per cent of VRT Global.[3]

5 In December 2012, the defendants resolved to wind up VRT Global by way of a members voluntary winding up, as well as the other companies in the VRT Group. The units held by Rozenblit became worthless.

6 Within days of the winding up, Vainer registered Polymeric Powders Company Pty Ltd (Polymeric). Rozenblit alleges that VRT Global's liquidation was no more than a device by which Vainer could appropriate VRT Global's technology and knowhow for himself. After VRT Global ceased operations, Polymeric, it is alleged, simply continued on where VRT Global had left off. Polymeric's business objective has been and continues to be, among other things, to commercialise an innovative method of processing shredded waste tyres. It should be noted at this very early stage that even after several years, Polymeric has still not commercialised the technology.

7 It is necessary to set out in detail the terms of the various agreements. These terms are important in determining whether Vainer owed any fiduciary duty to Rozenblit, this being the crux of Rozenblit's case. He also relies on a breach of the Oral Agreement and the Implementation Agreement.

8 On 25 July 2006, Rozenblit as 'User' entered into a Confidentiality Agreement with Worldwide Trade Corporation Pty Ltd (WWTC)[4] as 'Owner' in relation to knowledge that Vainer gained while he was at WWTC. This agreement defined Confidential Knowledge to include the 'tyre recycling technology.'

9 In September 2006, Rozenblit and Vainer entered into the Oral Agreement, pursuant to which they would carry on a business in common with a view of deriving a profit from the further development and commercialisation of the tyre recycling technology. The terms of the Oral Agreement, as alleged, were as follows:

(a) Rozenblit would contribute the tyre recycling technology and his technical expertise to the business;

(b) Vainer would contribute his commercial expertise to the business;

(c) Rozenblit and Vainer's combined ownership of the business would be divided into a 45 per cent interest for Rozenblit and a 55 per cent interest for Vainer; and

(d) all decision making would be by agreement between Rozenblit and Vainer.

10 Shortly thereafter, on 3 October 2006, Rozenblit and Vainer executed the Implementation Agreement in order to implement the Oral Agreement. The relevant terms of the Implementation Agreement were as follows:

(a) Rozenblit and Vainer agreed to enter into a joint venture (Joint Venture) to develop and commercially exploit the tyre recycling technology through entities that they would establish, being VRT acting as trustee for the Unit Trust, and VRT Operations (Recital C).

(b) The units in the Unit Trust and shares of VRT Operations would be owned 45 per cent by Rozenblit, in recognition of the intellectual property, technical expertise and time and effort he would contribute, and 55 per cent by Vainer, in recognition of the commercial expertise and time and effort he would contribute, as well as the financial risk that he would bear under the agreement (cl 1(a)).[5]

(c) Rozenblit and Vainer would each be directors of VRT and VRT Operations (cl 2).

(d) Rozenblit warranted that (cl 3):

...he is the sole legal and beneficial owner of the [technology for the recycling and processing of tyres (Technology)] (and associated intellectual property rights), free from encumbrance and any third party rights, and he will execute a formal deed of assignment of all his present and future right title and interest in the Technology (and associated intellectual property rights) to VRT as trustee for [the Unit Trust]. In consideration for the promises entered into in these heads of agreement, Boris undertakes to assign all future adaptions, extensions or inventions regarding the recycling of tyres to [the Unit Trust] for development and exploitation by the Joint Venture.[6]

(e) All decision-making in relation to the Unit Trust, VRT and VRT Operations, including their entry into contractual arrangements and financial commitments, would be by agreement between Rozenblit and Vainer (cl 4).

(f) The Unit Trust would licence the Technology (and associated intellectual property rights) to VRT Operations for its commercial exploitation in return for licence fees that would be payable by VRT to the Unit Trust (cl 5).

(g) Rozenblit would be the 'Technology Director' and in consultation with Vainer, responsible for the development of the Technology, development of a prototype and the preparation of a patent specification on behalf of the Unit Trust (cl 6).

(h) Vainer would be the 'Commercial Director' and, in consultation with Rozenblit, authorised on behalf of VRT Operations to approach and have discussions with third parties on a confidential basis in relation to the commercialisation of the Technology (cl 7).

(i) Rozenblit and Vainer were obliged not to use or disclose to any third party any confidential information in relation to the Technology (and associated intellectual property rights) or that otherwise belonged to the Unit Trust or VRT Operations except where Rozenblit and Vainer both agreed to the use or disclosure of such confidential information (cl 8).

(j) All intellectual property arising out of the development and commercialisation of the Technology (and associated intellectual property rights) would belong to the Unit Trust. All profits arising out of its development and commercialisation would belong to the Unit Trust and/or VRT Operations (cl 14).

(k) Rozenblit and Vainer were obliged to keep each other fully informed in relation to their activities regarding the Joint Venture and any events or information affecting the Joint Venture (cl 16).

11 On 30 September 2009, and following the incorporation of VRT Global, the parties entered into the First Shareholders Agreement which governed the rights attaching to the A and B Class Shares of the company. The parties to this agreement were VRT Operations, VRT Global, Vinetree Pty Ltd as trustee for the M Vainer Family Trust (Vinetree),[7] Rozenblit as trustee for the B Rozenblit Family Trust and Stennlake Pty Ltd as trustee for the Freeman Family Trust (Stennlake).[8] A corporate constitution was also adopted in respect of VRT Global (First Constitution).[9]

12 Pursuant to the First Shareholders Agreement, each shareholder was entitled to appoint a nominee director (cl 3.2). The nominee directors appointed by VRT Operations were Rozenblit and Vainer. They were defined as 'A Class Directors'. Rozenblit nominated himself in respect of his personal shareholding, and the nominee directors of Vinetree and Stennlake were Vainer and Freeman respectively. They were each 'B Class Directors'.[10]

13 The First Shareholders Agreement and First Constitution effected the following changes to the operation, management and corporate governance of VRT Global:

(a) The directors could appoint a managing director for such period and on such terms as they thought fit (Constitution, cl 109(1)) and confer on that director any of the powers exercisable by them on whatever terms, conditions and with any restrictions as they thought fit (Constitution, cl 111(1)). The managing director of VRT Global (that is, Vainer) was responsible for the day to day management of the company, subject to cl 6.4 as outlined below and the instructions of the board (Shareholders Agreement, cl 10.1). Decisions which were not part of the day to day management of the company were to be made at a meeting of the directors (Shareholders Agreement, cl 10.2).

(b) Each director, including the chairperson, had one vote for each A and B Class Share held by their nominating shareholder (Shareholders Agreement, cl 6.2). All resolutions at meetings of directors would be decided by a simple majority, except for decisions on matters specifically provided for by cl 6.4 (Shareholders Agreement, cl 6.3). Matters the subject of cl 6.4 required the affirmative vote of one A Class Director, and 75 per cent of the B Class Directors (Shareholders Agreement, cl 6.4).[11] The chairman did not have a casting vote (Shareholders Agreement, cl 6.2(b)). A director's resolution without a meeting required the affirmative vote of all directors (Constitution, cl 104).

(c) Except where a director became ineligible to be appointed or continue to act as a director, an A Class Director could only be removed by the A Class Shareholder who appointed them, and a B Class Director could only be removed by the B Class Shareholder who appointed them (Shareholders Agreement, cl 3.3).

(d) Voting in shareholders meetings was conducted by poll, and either by a show of hands or ballot (Constitution, cl 63). A poll conducted by a show of hands was determined by the percentage of voting rights cast in favour or against a resolution, regardless of the number of hands shown. (Constitution, cl 64). A shareholders resolution without a meeting required the affirmative vote of all shareholders (Constitution, cl 78).

(e) VRT Global could not sell, offer, dispose of or issue any A Class Shares without a unanimous resolution of all of its shareholders (Shareholders Agreement, cl 7.1). A liquidator could only be appointed with the prior written approval of every A Class Shareholder and a majority of the B Class Shareholders or the unanimous approval of all the B Class Shareholders (Shareholders Agreement, cl 7.2).

(f) VRT Global and each shareholder we obliged to use all reasonable endeavours to ensure that, before the end of each financial year, the directors adopted an annual budget for the following financial year and a business plan (Shareholders Agreement, cl 8.1 and 8.2). The business plan was required to include information relating to VRT Global's financing requirements for working capital, investment and expansion (Shareholders Agreement, cl 8.2(f)).

14 One month later, on 30 October 2009, a Deed of Accession and Non-Diluting Capital Arrangement was executed. The parties to this agreement were VRT Operations, Vinetree, Rozenblit, Stennlake, VRT Global, and Dr Vainer as 'Investor'. Pursuant to that agreement, Dr Vainer:

(a) agreed to invest in VRT Global on the terms and conditions set out in that deed (Recital B);

(b) covenanted with the parties to observe, perform and be bound by all the terms of the First Shareholders Agreement (cl 2.1);

(c) would be entitled to hold such number of shares as was equivalent to 5 per cent of the total shares of VRT Global on issue (cl 3(a)(i)); and

(d) subscribed for and was issued 40,000 B Class Shares at a price of $5.00 per share (meaning that the total Subscription Amount was $200,000) (cl 4(a) and (b)).

15 On 10 November 2010 the Second Shareholders Agreement was executed by Rozenblit, Vinetree and Stennlake, in relation to the Ordinary Shares of VRT Global.

16 On the same day, the shareholders of VRT Global resolved to adopt a new constitution (Second Constitution) and revoke the voting rights attached to B Class Shares (which were then-held by Dr Vainer). Only A Class Shares (held by VRT Operations) and Ordinary Shares (held by Rozenblit, Vinetree and Stennlake) now carried voting rights.

17 These new arrangements had the following effect on the management, operation and corporate governance of VRT Global:

(a) Each director present at a meeting and competent to vote had one vote. Questions arising at any meeting were to be determined by a majority of votes (Constitution, cl 102(4)). In the event of an equality of votes, the director appointed by the A Class Shareholder (or if they were not present, the chairman) had a casting vote in addition to his deliberative vote (Constitution, cl 102(6)).

(b) Decisions which were not a part of the day to day management of the company were to be made at a meeting of the directors (Shareholders Agreement, Annexure A, cl 3.1). All resolutions at meetings of directors would be decided by a simple majority, except for decisions on matters specifically provided for by cl 109(b) of the Second Constitution (Constitution, cl 109). The specific matters which had previously appeared in cl 6.4 of the First Shareholders Agreement now appeared in cl 109(b) of the Second Constitution.[12] Matters the subject of cl 109(b) required the affirmative vote of at least one A Class Director, and 75 per cent of the remaining directors (Constitution, cl 109). A director's resolution without a meeting required the affirmative vote of all directors (Constitution, cl 110).

(c) A director appointed by the A Class Shareholder could only be removed by a written notice to VRT Global from the A Class Shareholder (Constitution, cl 93).

(d) At shareholders meetings, every resolution was decided, in the first instance, by a show of hands. (Constitution, cl 67). A poll could be demanded by the chairman, or by any member or members present in person or by proxy, representing not less than one-tenth of the total voting rights of all members having the right to vote at the meeting (Constitution, cl 63(1) and (2)).

(e) On a show of hands each A Class or Ordinary Shareholder present in person or by proxy had one vote. On a poll every member present in person or by proxy had one vote for every A Class or Ordinary share held by him. (Constitution, cl 68). In the case of an equality of votes, the chairman had a casting vote (in addition to their votes in their capacity as member). (Constitution, cl 67).

(f) VRT Global could not sell, offer, or issue any A Class Shares without a unanimous resolution of all of its shareholders (Constitution, cl 78). A liquidator could only be appointed to VRT Global with the prior written approval of every A Class Shareholder and a majority of the Ordinary Shareholders (Constitution, cl 79).

(g) Each shareholder was obliged to use their best endeavours to procure that a person nominated by each shareholder remains a director of VRT Global, and that VRT Global would conduct the Business in accordance with the business plans, budget and other matters set out in Annexure A to the Second Shareholders Agreement (Shareholders Agreement, cl 2).

(h) VRT Global and each shareholder was obliged to use all reasonable endeavours to ensure that, before the end of each financial year, the directors adopted an annual budget for the following financial year and a business plan (Shareholders Agreement, Annexure A, cl 1.1 and 1.2) and conducted the business in accordance with the current business plan and budget (Shareholders Agreement, Annexure A, cl 3.2(f)). The business plan was required to include information relating to VRT Global's financing requirements for working capital, investment and expansion (Shareholders Agreement, Annexure A, cl 1.2(f)).

18 The Shareholders Agreements did not make any express provision for the intellectual property rights over the tyre recycling technology, or affect the assignment by Rozenblit and Vainer to VRT of those rights.[13]

19 A number of other clauses are noteworthy. The Shareholders Agreements prescribed the procedure to be followed when VRT Global required additional financial accommodation (First - cl 9.3; Second - Annexure A, cl 2.1):

If the Company requires additional financial accommodation for the operation or expansion of the Company under а current Budget or business plan:

(а) it will seek it first from external sources by way of debt;

(b) and then from external sources by way of equity;

(c) and then from the Shareholders in proportion to their respective shareholders (subject to the terms of issue and rights attaching to each class of Shares).

If the parties cannot agree on the terms of acquiring further capital, the parties must refer the matter as a dispute pursuant to clause 6.[14]

20 Each of the Shareholders Agreements contained an entire agreement clause (First - cl 19.19; Second - cl 9.9):

This agreement supersedes аll previous agreements in respect of its subject matter and embodies the entire agreement between the parties.

21 Each also contained a no partnership or agency clause (First - cl 19.13; Second - cl 9.3):

Neither party is the partner, agent, employee or representative of any other party and neither party has the power to incur any obligations on behalf of, or pledge the credit of, any other party.

22 Initially, Rozenblit and Vainer held 45 per cent and 55 per cent respectively of the shares in VRT Operations, and the same percentage of the units in the Unit Trust.

23 In August 2009, VRT Global was established to replace VRT Operations as the operational company in the group. Half of VRT Global's share capital was held by the Unit Trust, through VRT Operations.

24 As noted, on 30 October 2009, Dr Vainer purchased 40,000 (non-dilutable) B Class Shares in VRT Global. He then held all of the B Class Shares.

25 In November 2010, Dr Vainer purchased a further 40,000 B Class Shares at the same price. He held 10 per cent of VRT Global's shares, having invested $400,000 in the company.

26 Just prior to the Share Transfer, shares in VRT Global were held in the following proportions:

(a) VRT Operations held 50 per cent of total shares, in A Class Shares, being 100 per cent of A Class Shares.

(b) Dr Vainer held 10 per cent of total shares, in B Class Shares, being 100 per cent of B Class Shares.

(c) Vinetree held 21.40 per cent of total shares, in Ordinary Shares, being 53.5 per cent of Ordinary Shares.

(d) Rozenblit held 13.60 per cent of total shares, in Ordinary Shares, being 34 per cent of Ordinary Shares.

(e) Stennlake held 5.0 per cent of total shares, in Ordinary Shares, being 12.5 per cent of Ordinary Shares.

27 Rozenblit's unitholding was unaffected by the share transfer. At the time the companies entered external administration, he owned 960 out of a total of 3000 issued units, equivalent to 32.3 per cent of the Unit Trust, and effectively 16.15 per cent of VRT Global. The voluntary liquidation of VRT Global (and VRT Operations) rendered that interest worthless.

28 Rozenblit is an accomplished inventor. He has registered about 65 patents during his working life in the USSR and has received many awards.

29 The recycling of rubber tyres is a complicated process. When rubber is made into tyres, it is subjected to a hardening process known as vulcanisation. Before tyre rubber can be recycled as a raw material it must be devulcanised.

30 In Australia, Vainer worked with Rozenblit, helping to translate his ideas for the recycling of rubber into English for the purpose of filing patent applications. Ultimately, three patent applications were filed.

(a) A method of segmenting rubber tyres. This invention was intended to break down tyres into segments, for further processing using the second and third patented methods detailed below. An international patent application was filed on 12 November 2007 (PCT/AU2007/001433) and published on 29 May 2008 (WO 2008/061285).[15]

(b) A method, process and device for treating recycled rubber tyres with ozone. An international patent application was filed on 3 May 2010 (PCT/AU2010/000507) and published on 25 November 2010 (WO 2010/132918).[16]

(c) An improved extruder for devulcanizing recycled rubber. This extruder was invented by Rozenblit in conjunction with Russian inventors Dmitry Shtak (Shtak) and Sergey Azarenkov (Azarenkov), who later built and supplied the machine. An international patent application was filed on 15 March 2010 (PCT/AU2010/000284) and published on 25 November 2010 (WO 2011/014902).

(together, the VRT Patent Applications).[17]

31 Rozenblit and Vainer were listed as co-inventors on each of the VRT Patent Applications.

32 On 12 September 2012, Rozenblit applied under s 32 of the Patents Act 1990 (Cth) for the removal of Vainer as inventor from the records of patent applications 2010251745 and 2010281342. The findings of this decision applied equally to patent 2006241342, however no application was made to correct that particular application.[18]

33 On 27 August 2013 the Delegate of the Australian Patent Office handed down his decision. The Delegate was not satisfied that Vainer had qualifications, technical knowledge or expertise in the relevant technology as to support his claims of inventorship or that he made any material contribution to the inventions.[19] Rozenblit established that he alone invented the subject matter of patent applications 2006241342 and 2010251745, and he in combination with Shtak and Azarenkov invented the subject matter of patent application 2010281342.[20] As such, Vainer was removed as inventor from patent applications 2010251745 and 201081342.

34 VRT Global took advantage of funding in excess of $1 million through the Advanced Manufacturing Co-operative Research Centre (AMCRC), to engage CSIRO and, later, Deakin University (Deakin) to develop its technology to the point where it was hoped that it could be commercialised. Among other things, the research institutions were to prove the viability of the technology and commission the recycling plant.

35 The AMCRC contracts with CSIRO and Deakin describe a three phase project, corresponding with the three VRT Patent Applications: tyre segmenting device, extruder, and ozone treatment process. Two variations to the project were later agreed.

36 CSIRO produced the tyre segmenting device. Deakin's research and development, conducted between 2009 and July 2012, focussed on the ozone treatment process and the extruder. The initial ideas for an ozone agitation chamber were developed by Deakin, then refined in conjunction with the Chinese suppliers, who ultimately fabricated the agitation chamber according to a blueprint drawn up or approved by Deakin. An extruder[21] was shipped from Russia, produced by Shtak and Azarenkov's company Aprel in accordance with the patented design they jointly invented with Rozenblit. Deakin took delivery of both machines and determined their optimum operating conditions. During the September quarter of 2011, 20kg of devulcanised rubber was produced. Progress reports of Deakin's research were contained in 11 quarterly reports authored by Deakin's chief researcher, Chris Skourtis. Each was signed off by Vainer on behalf of VRT Global.

37 Rozenblit's patents envisaged tyre pieces first being subjected to ozone, an aggressive gas which breaks down rubber, and the crumbled rubber then fed into the extruder. However, Deakin's later research on behalf of VRT Global showed it was more effective to mechanically shred the tyres and then pulverise them in the extruder before exposing the resultant powder to ozone.

38 Deakin treated the extruded devulcanised rubber with ozone by feeding the rubber into an agitation chamber containing ozone gas. Deakin's research revealed that this process performed two valuable functions. It produced a finer and therefore more valuable polymeric powder, and the corrosive effect of the ozone on the rubber particles gave them a much larger surface area, 'activating' the powder - that is, making it more reactive and therefore better able to bond with other materials for the purpose of creating a composite.

39 Composites are made of different ingredients, which combine to create a new substance with its own properties. Devulcanised rubber can be combined with plastics to create composites. Polyolefins are a type of plastic, typically polyethylene and polypropylene. A common form of polyethylene is HDPE, used for disposable drink bottles. Deakin's research included the assessment of devulcanised rubber/HDPE composites.

40 Rozenblit, it is alleged, only agreed to transfer his direct shareholding in VRT Global to Dr Vainer, in return for Dr Vainer providing collateral security to support a loan to VRT Global in the sum of $400,000 or $600,000. Vainer caused the transfer of Rozenblit's shares to his father, but Dr Vainer provided nothing in return. The remedy sought is the contemporaneous value of the shares that were transferred from Rozenblit to Dr Vainer.

41 Four causes of action are pleaded against each of Vainer and Dr Vainer. In relation to Vainer - it is alleged, in the Second Further Amended Statement of Claim (2FASC) as follows -

(a) The Share Transfer was not authorised and is in breach of the Implementation Agreement (para 25 of the 2FASC);

(b) VRT Global engaged in misleading or deceptive conduct in failing to inform Rozenblit of various matters, and Vainer aided and abetted such conduct (para 31A to 31F of the 2FASC);

(c) VRT Global engaged in unconscionable conduct, essentially in exploiting Rozenblit's special disadvantage and Vainer aided and abetted such conduct (para 41G of the 2FASC); and

(d) The share transfer was arranged by Vainer, in breach of the fiduciary duty he owed to Rozenblit to avoid conflicts of interest (para 50A of 2FASC).

42 In relation to Dr Vainer, it is alleged as follows -

(a) VRT Global engaged in misleading or deceptive conduct in failing to inform Rozenblit of various matters, and Dr Vainer aided and abetted such conduct (para 31G of the 2FASC);

(b) VRT Global engaged in unconscionable conduct, essentially in exploiting Rozenblit's special disadvantage and Dr Vainer aided and abetted such conduct (para 41H of the 2FASC);

(c) Knowing assistance and knowing receipt in relation to the breaches of fiduciary duty by Vainer (para 54 to 57D of 2FASC); and

(d) Unjust enrichment of Dr Vainer at the expense of Rozenblit (para 58 of 2FASC).

43 Other than to admit that the Share Transfer took place, and was fully authorised and agreed to by Rozenblit, the defendants deny each of the allegations against them. In particular, they deny that Dr Vainer was obligated to put up the premises of his medical practice as security as a condition of the Share Transfer. The defendants' position is that all parties had agreed that the consideration provided by Dr Vainer was his willingness to provide collateral. He would receive the shares whether or not he ultimately provided collateral security, it being contended (perhaps as a convenient afterthought) that this was in effect consideration for the overpayment by Dr Vainer of his previous acquisition of 10 per cent of the shares in VRT Global.

44 Rozenblit alleges that VRT Global was liquidated by the Vainers as part of a dishonest and fraudulent plan to remove him (as well as other minor investors), so that Vainer could operate the former joint enterprise through his wholly owned new corporate vehicle, Polymeric. The remedy sought is compensation for destruction of the value of Rozenblit's unit holding in the Unit Trust, whose only asset was (through VRT Operations) its 50 per cent indirect interest in VRT Global.

45 As against Vainer, Rozenblit alleges that he knowingly induced VRT to act in breach of trust by resolving, against the interests of unitholders, to appoint an administrator to implement the suggested dishonest plan (para 69B of the 2FASC). It is also pleaded that this dishonest plan constituted a breach of fiduciary duty.

46 As against Dr Vainer, it is alleged that he knowingly assisted in Vainer's breach of fiduciary duty (para 80 of the 2FASC).

47 The defendants deny any inducement to breach of trust and further deny any breach of fiduciary duty.

48 Vainer was, it is alleged, in a quasi-partnership relationship with Rozenblit arising from their Oral Agreement. Vainer was prohibited from profiting from opportunities that arose within the scope of that relationship. He was prohibited from favouring his personal interest over that of Rozenblit. In establishing and operating Polymeric, he was, it is alleged, acting in breach of his fiduciary duties to Rozenblit. The remedy sought is the value of the benefit, gain or profit which Vainer derived by breaching his fiduciary duties: namely, the current value of his Polymeric shareholding.

49 In establishing Polymeric, in effect as a successor to VRT Global and using its technology, Vainer, it is alleged, not only breached his fiduciary duties to Rozenblit but was also in breach of the Implementation Agreement.

50 The allegations are denied. The Vainers contend that VRT Global had to be wound up and could not continue. It is contended that the VRT Group was effectively insolvent or would soon be insolvent because it was unable to obtain any further funds, whether by way of loans or equity, the Vainers having decided not to invest any further funds and being under no obligation to do so. It was contended, further and in any event, Polymeric was doing something different to VRT Global.

Events leading up to the meeting of 2 November 2011

51 Vainer gave evidence that VRT Global required further funding over the course of 2011. Indeed, Gelberg also gave evidence that he recalls:

...explaining to Boris [Rozenblit], Michael, David and Alex that if Michael and/or Alex didn't continue to fund the companies, then the companies may not be able to remain solvent.

52 Accordingly, in or around August 2011, Vainer approached the Commonwealth Bank of Australia (CBA) in order to obtain further debt finance for VRT Global. Vainer told CBA that Dr Vainer was willing to provide the premises of his medical practice as security for the facility.

53 On 1 November 2011, Vainer sent an email to the directors of the VRT Group to convene a meeting for the following day. The agenda for the meeting included:

Alexander Vainer to be appointed as Director of VR Tek Pty Ltd, VR Tek Operations Pty Ltd and VR Tek Global Pty Ltd.

Alexander Vianer to have increased shareholding of VR Tek Global Pty Ltd.

54 The meetings of 2 November 2011 and 7 December 2011 are critical to the plaintiff's Share Transfer claim. The defendants do not dispute that, at the November meeting of directors, a resolution to transfer Rozenblit's VRT Global shares to Dr Vainer was passed, or that it was confirmed at the December meeting of shareholders and unitholders. As noted, the parties differ on the apparent consideration that was to be provided by Dr Vainer for the shares.

55 The meeting occurred on 2 November 2011. Vainer, Rozenblit (accompanied by Vlad Sirota as his interpreter), Dr Vainer and Freeman attended, Gelberg chaired and Alex Rybalov (Rybalov) was the minute-taker. Three agenda items were put to a vote.

56 As to the first agenda item, the minutes record that Vainer told his fellow directors - Rozenblit and Freeman - that:

We now only have $18,000 and have allocated $10,000 to pay Deakin; leaving only $8,000 to survive

Because of AV financial risk he has put in - he deserves to be a director

...

To survive thus [sic] we need a small facility and we are out of funds.

Our only possibility is to put as security against AV assets and his relationship with the CBA his medical surgery is currently unencumbered. It is worth approximately $550,000

This will mean that AV has put at risk around $1,000,000 and thus it seems fair that he has a say and position as director in the company group. (emphasis added)

57 The directors unanimously resolved to appoint Dr Vainer as a director of VRT, VRT Global and VRT Operations.

58 In relation to agenda item two, the resolution for Dr Vainer to have an increased shareholding in VRT Global, the minutes record:

This company originally set up so that external new investors only can have 50% so they are:

VR Tek Operations 50%

DF 5%

BR 13%

MV 22%

AV 10%

This was sufficient to only rent a facility not to buy premises

The issue is that if another investor is needed then AV share of VR Tek Global will be diluted

Also if AV decides to sell his share he must first offer to other directors first.

Thus propose the shares in VR Tek Global not owned by VR Tek be redistributed so that AV gets a larger share

59 This item was put to a vote and approved unanimously.

60 The third agenda item relating to Vainer's remuneration was also unanimously approved.

61 Rozenblit's evidence was that at the meeting, Vainer said that VRT Global was in a 'a hopeless financial situation' and that Dr Vainer said he would invest $400,000 or $600,000 after which Rozenblit would have to give up half of his shares (his direct interest) in VRT Global. Rozenblit also gave evidence that:

I was not told Alexander had paid money, rather I understood that he intended to make the investment at some future time. I was told that when he made that investment my shareholding would be reduced.

I did not consent for shares to be transferred to Alexander without Alexander investing the amount of $400k or $600k in VRT Global. I was not asked whether I agreed to that happening. If I had been asked, I would not have agreed at all.

At the meeting, Michael said his father wanted to become a shareholder and one of the directors, and would inject a sum of money into the company. Michael said the company had no income or funds at this stage. I recall a large sum was discussed totalling the value of Michael's father's medical practice.

...

I think there was a vote and everyone agreed Alexander Vainer should be given shares if, and only if, he injects the large sum of money into the company.

Boris asked some questions during discussions about the share transfer...He asked questions along the lines of 'why do we need this money?', 'why do we need another director, another investor?' and 'can we get money from somewhere else?' From memory, I think David explained to him that the bank will not give money if someone does not put up collateral as security and I told Boris David's explanation in Russian.

64 The evidence given by Vainer was largely to the effect that the shares were transferred to Dr Vainer as he was 'willing to put up the medical practice as security' and whether or not he actually did so. It was also, it was suggested, in consideration for his past investment of $400,000. However, as the oral and documentary evidence show, these propositions were never explicitly discussed, nor were they put to a vote at the meeting. Further, neither Gelberg nor Dr Vainer confirmed these matters. I reject Vainer's evidence in this regard. He was a most unreliable witness.[22]

65 Further, I note that an issue arose in relation to the minutes of the meeting of 2 November 2011. Two versions of those minutes were adduced in evidence and included in the court book. Only the second version is referred to by Vainer in his witness statement. He asserts that the second version is the correct version.

66 As noted, Rybalov was the minute-taker of that meeting. On 10 November 2011, Rybalov sent an email to Vainer attaching a copy of the minutes. Rybalov sent the first version to Vainer, not the second version. Further, the first version was produced on subpoena by Cor Cordis, the liquidators of VRT Global and VRT Operations. The minutes differ in material respects. The second version of the minutes included the narration next to 'AV' above, that his shares were 'non-dilutable'. This version removed reference to the shares of VRT Global being 'redistributed'. Instead, the following line was inserted:

As AV has now put at risk around $1,000,000 AV to now be assigned the ordinary shares currently held by DF, BR & MV i.e. 40% ordinary shares. (emphasis added).

67 This narration was included, by Vainer presumably, to support the proposition raised that is that the parties had conclusively agreed to transfer the entirety of Rozenblit's direct shareholding to Dr Vainer.

68 Vainer denied that he deliberately altered, or procured another to alter this document to change the record of what took place at the 2 November 2011 meeting. It is not necessary to make a finding to this effect. However to the extent that it may be relevant, I am satisfied that the first version is the accurate version of the minutes of this meeting, and that is the version which I have referred to above.[23]

69 Gelberg gave evidence that in order to formally provide all shareholders and unitholders of the Unit Trust with notice of the resolutions passed by the directors on 2 November 2011, a meeting of shareholders and unitholders of VRT Group was called for 7 December 2011. A number of parties attended by proxy, including Rozenblit.

70 In relation to the share transfer, the minutes record the following:

The 40 percent in total ordinary shares held by Michael Vainer, Boris Rozenblit and David Freeman entities are to be transferred to Alexander Vainer or Nominee.

71 This resolution passed. I note that the only VRT Global shareholder with voting rights present was Vainer. While Dr Vainer was present, he only held B Class Shares, which as I have noted above, did not carry voting rights. Gelberg confirmed this.

72 Following this meeting, Gelberg was asked to prepare the documents necessary to give effect to the resolutions, including share transfer forms, which were made available to each shareholder for signing at the offices of HTS Accountants. Gelberg's evidence was that before Rozenblit signed the share transfer form, they had a long discussion in which the contents of the meeting of 2 November 2011 was discussed.

73 On 16 December 2011 the share register of VRT Global was updated to reflect the transfer in 40 per cent of the company's shares to Dr Vainer.

74 While initial enquiries were made with the CBA in relation to borrowing funds against the identified security,[24] no application was ever presented to CBA.[25] It followed that Dr Vainer never, in fact, made his medical surgery premises available as collateral, and no funds were ever borrowed from the CBA, or, indeed, any other lender. Ultimately, Dr Vainer gifted his interest in the premises to his wife, and it remains unencumbered.

75 Rozenblit gave evidence that he was shocked to discover on 29 January 2012 that despite Dr Vainer never having put up his medical practice as security, his shares had already been transferred to Dr Vainer. By emails dated 1 and 3 February 2012 to Vainer (and Gelberg), Rozenblit requested explanations in writing and in English and Russian.

76 It was not until a director's meeting on 1 February 2012 that Vainer obtained director approval not to proceed with any application for debt finance. However, by this time, the Share Transfer had already been effected and Dr Vainer nevertheless retained Rozenblit's shares.

77 When cross-examined on the reasons given by Vainer for the share transfer, Gelberg did not confirm the evidence given by Vainer or his father that the Share Transfer had been in consideration for Dr Vainer's previous $400,000 investment in VRT Global or that he would retain the shares regardless of whether he put up his medical practice as security. Further, Gelberg said that there had never been a discussion of what precisely would happen with the shares in the event that Dr Vainer never put up his medical practice as security or a loan never obtained.

78 Accordingly the evidence of Rozenblit, Sirota and Gelberg, the minutes of the meeting and the contemporaneous documents, demonstrate that Rozenblit voted in favour of transferring his shares (that is, his direct interest in VRT Global)[26] to Dr Vainer in return for Dr Vainer making his medical practice available as collateral for further borrowings of $400,000 or $600,000. This never happened but Dr Vainer retained the shares.

79 It is tolerably clear that the reason why Rozenblit was prepared to and did transfer his shares in VRT Global to Dr Vainer was because Dr Vainer was prepared to put up or use the premises of his medical practice (valued at about $600,000) as security for a loan of $400,000 or $600,000, which was desperately needed if VRT Global was to continue or survive. As per the minutes this was the 'only possibility'. There is no evidence to suggest that the parties did not proceed on this basis, namely the assumption that loan funds would be generated from the use of that security. After all, that is what they were doing, that is, raising much needed funds.

80 Nobody objected to and indeed all relevant parties agreed that, as requested, Dr Vainer would as consideration require all of the remaining Ordinary Shares in VRT Global. This was the price for raising the much needed funds, which to repeat, were critical for VRT Global to survive.

81 The defendants, in effect, contended that Dr Vainer would be entitled to retain the shares even if he was not ultimately required to put up his medical practice premises as security and even if no loan was in fact applied for, or if it was applied for but rejected. They contend that the risk associated with his 'willingness' to do this - even if no security was called for or proceeded - was effectively the true consideration for the Share Transfer. In other words, he would receive a transfer of all of the Ordinary Shares and be entitled to retain them even if VRT Global subsequently decided not to raise debt finance, or if a loan deed did not proceed for whatever reason (the Condition).

82 Such a proposition, contention or suggested agreement, not only lacks logic and common sense but is entirely unsupported, implausible, unrealistic and quite frankly, given the circumstances, ridiculous. An attempt[27] to refer to and introduce further consideration for the overpayment of the shares acquired by Dr Vainer is what makes it quite frankly absurd.

83 None of the documentary evidence refers to the Condition, whether expressly or implicitly. The most important document is the minutes of the meeting of VRT Global directors held on 2 November 2011. The context in which the raising of funds was discussed and minuted clearly supports the position that there was a relationship or connection between the transfer of shares and the raising of funds in the manner identified. The minutes are clear and this was precisely the state of affairs contemplated and the consideration to be offered. Other than Vainer, whose evidence I reject in this regard,[28] nobody has suggested that the Condition was raised or discussed.

84 Rozenblit denies that the Condition was raised or discussed. Nobody mentioned it to him, and if they had, he would have rejected it. I believe him. It is highly improbable that he would have agreed to transfer his shares with a prospect of no consideration changing hands when a year earlier he had agreed to the issue of 5 per cent of the shares in VRT Global to Dr Vainer for $200,000 and the year before another 5 per cent for $200,000. In fact, he gave evidence that his understanding was that the shares would only be transferred when and to the extent that funds were generated by the use of the identified security. Ultimately whether this belief was justified does not matter.

85 In addition to the strained construction of the minutes relating to this matter, Vainer gave evidence that Gelberg had told him that he (that is, Gelberg) had explained the Condition to Rozenblit at a later time. This was not supported by Gelberg. The opposite is the case. Gelberg gave evidence that he made no such statement to Rozenblit. For his part, Vainer did not give evidence to the effect that the Condition was specifically explained to Rozenblit in Vainer's presence. Rather, he relied on some seemingly assumed position extracted and extrapolated from the wording of the minutes, and in particular, the word 'willing' contained therein. Dr Vainer's evidence was equally of no assistance on this point.

86 Finally, it must be noted that the following appears in both of the minutes of the meeting of 2 November 2011, that 'AV has now put at risk around $1,000,000 and thus it seems fair that he has a say ...'. The premise and unequivocal assumption was that the loan was to proceed and the much needed funds would be received by the use of the security offered by Dr Vainer, as it refers to the sum of his previous investment ($400,000) and the value of his medical practice premises ($600,000). There is no reservation or Condition.

87 It is now necessary to return to the pleaded (and unpleaded) case and the proposed relief.

88 I reject the claim against Vainer comprising the first cause of action, namely the alleged breach of the Implementation Agreement. The agreement is irrelevant. It was superseded by the Shareholders Agreements and remains of historical relevance only. A cause of action relying on the Implementation Agreement cannot be sustained.[29]

89 In my opinion, Vainer personally engaged in misleading or deceptive conduct or conduct likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law. I do not consider that he was merely a person involved in the contravention by VRT Global as pleaded. Rather, he was the primary wrongdoer. He engaged in the relevant misleading or deceptive conduct.[30] Although the conduct related to shares in VRT Global, the relevant contravention was not by VRT Global but by Vainer and perhaps others.

90 Ultimately, whether Vainer engaged in such conduct is a question of fact to be answered in the context and entirety of the evidence and on the balance of probabilities.[31] Intention is not a requirement of the cause of action and it is entirely a matter for the Court.[32]

91 Ultimately the question is whether Vainer engaged in conduct that conveyed a particular meaning that was misleading in the sense that it led Rozenblit into error.[33] Of course, the conduct may include non-disclosure or silence in circumstances where there is a reasonable expectation of disclosure.[34] In this respect, I note the observations of the Full Court of the Federal Court in Fraser v NRMA Holdings Ltd:[35]

Whilst s 52 does not by its terms impose an independent duty of disclosure which would require a corporation or its directors to give any particular information to members asked to consider a motion in general meeting, where information for that purpose is promulgated, unless the information given constitutes a full and fair disclosure of all facts which are material to enable the members to make a properly informed decision, the combination of what is said and what is left unsaid may, depending on the full circumstances, be likely to mislead or deceive the membership. (emphasis added).

92 The relevant conduct includes the various conversations, emails and notices of and minutes of meetings. From this conduct, as referred to above, it is tolerably clear that funds were urgently required if VRT Global was to survive and that the only way this would happen was if Dr Vainer used his medical practice premises as security for desperately needed funding. However, Dr Vainer would only do so if he acquired, for no further consideration, the remaining Ordinary Shares in VRT Global.

93 This conduct engaged in by Vainer reasonably conveyed the meaning that the shares were consideration for much needed funds. The entirely logical corollary of this is that no funds - which to repeat was critical for the survival of VRT Global - no shares. Why and how could it be otherwise? If it was to be otherwise, the result would be a very troubling and potentially catastrophic matter for VRT Global and something would have needed to be said to Rozenblit. It was not. The consideration would, as events transpired, wholly fail and a gift to Dr Vainer could hardly been intended in the circumstances.

94 According to Vainer, Dr Vainer was entitled to retain these shares even if the loan was not made and the security not provided. This was because of his willingness to put up security, and also as some form of 'compensation' or 'consideration' for Dr Vainer's 'overpayment' for the acquisition of his 10 per cent interest. The conduct referred to did not convey this meaning to Rozenblit.

95 This is what makes the conduct misleading and deceptive. Dr Vainer's asserted ability or entitlement to retain the shares (in the event there was no loan or his property was not used as security for any loan) was not conveyed or in any way suggested to Rozenblit by anyone. The entire rationale for the 'transaction' as communicated to Rozenblit was, quite simply, shares for much needed loan funds. The consequence of VRT Global not obtaining a loan was not addressed. If this is what was intended, which Vainer confirmed in his evidence,[36] it should have been disclosed to Rozenblit. I accept Rozenblit's evidence that if it was disclosed he would not have transferred the shares. It follows that Rozenblit was entitled to expect that such disclosure be made. It was entirely necessary in the circumstances.

96 In the final analysis, based on the conduct, Rozenblit proceeded on a certain assumption. He was led into error. If Dr Vainer was entitled to retain the shares whatever the agreed consideration, this assumption, by the conduct referred to, was wrong. The relevant conduct was by Vainer. In other words, Rozenblit was profoundly misled.

97 Finally, the reasons suggested for Dr Vainer retaining the shares in the event that the loan did not proceed are entirely without merit and rejected. They are no more than self-serving statements, made well after the events, to provide some sort of justification for what may be fairly considered to be the expropriation of Rozenblit's shares for no consideration. The behaviour is unconscionable and deceptive.

98 The conduct was undertaken in trade and commerce. The loss is the value of the shares at the time of the transfer. This aspect is discussed below.

99 Given the limited nature of his involvement in relation to the Share Transfer, and although he was a beneficiary thereof, I am not satisfied that Dr Vainer engaged in such conduct or was a person involved in the contravention.

100 Rozenblit has brought claims pursuant to ss 20 and 21 of the Australian Consumer Law. In relation to s 20, it is pleaded that he was in a position of special disability or disadvantage in relation to VRT Global, due his limited English skills, and because of his trust, confidence and reliance on Vainer in relation to the business and documents that he was required to sign. Vainer and Dr Vainer are alleged to be persons involved in the contravention by VRT Global.

101 In my opinion, for the reasons set out below the claim under s 20 is not made out. However, s 21 establishes a broader concept of unconscionability. In my opinion, Vainer personally engaged in unconscionable conduct pursuant to s 21 of the Australian Consumer Law. I do not consider that he was merely involved in the contravention. Rather, he was the primary wrongdoer. He engaged in the relevant conduct that was in all of the circumstances unconscionable. Although the conducted related to shares in VRT Global, the relevant contravention was not by VRT Global.[37] Further, for the reasons set out below, I consider that Dr Vainer also engaged in unconscionable conduct under s 21.

102 Section 20 of the Australian Consumer Law provides:

A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.

103 It is tolerably clear that unconscionability 'within the meaning of the unwritten law' encompasses the knowing exploitation by one party of the special disadvantage of another party. There is also authority to support the proposition that the section is concerned with other forms of unconscionable wrongs in which equity would intervene, such as undue influence, estoppel, relief against forfeiture or unilateral mistake.[38] Putting this to one side, it is clear that s 20 requires conduct to be established that 'supports the grant of relief on the principles set out in specific equitable doctrines.' As the Full Court of the Federal Court has said, '[i]t cannot be applied to unconscionable conduct at large' or simply 'on the basis that it is unfair in the opinion of a judge.'[39]

104 The plaintiff has argued his claim on the basis that he was in a position of special disadvantage and had been taken advantage of. As such, this is how the claim under s 20 must be decided.

105 Generally, conduct that contravenes the equitable doctrine concerned with the prevention of unconscionable dealings will meet the statutory test set out by s 20. Two elements in equity must be met:[40]

(a) the plaintiff must be under some form of special disability or be placed in some special position of disadvantage; and

(b) the defendant must have taken unconscientious advantage of that disability or disadvantage.

106 The disadvantage or disability may be constitutional, stemming from any particular or combination of infirmities or weaknesses suffered by a party, such as 'poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary'.[41] It may otherwise be situational, 'deriving from particular features of a relationship between actors in the transaction such as the emotional dependence of one on the other'.[42] In Commercial Bank of Australia Ltd v Amadio (Amadio),[43] Mason J referred to passages in the judgments of Fullagar J and Kitto J in Blomley v Ryan.[44] His Honour then said:[45]

It is made plain enough, especially by Fullagar J, that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition [or] circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.

107 I do not consider that Rozenblit was under any special disadvantage. It is true that he had a limited grasp of the English language. However, as discussed below in relation to the alleged fiduciary duty, he had numerous individuals (including Sirota, Guissine, Gelberg and others) who would act has his interpreter, whether in meetings of the VRT Group, or in relation to transaction and business documents. As for explanations of transactions and business documents, the evidence is that the Share Transfer was discussed at various meetings where Rozenblit was present (whether in person, or through an independent proxy). Further, the documents necessary to give effect to the Share Transfer were explained to him by Gelberg at the offices of HTS Accountants. Indeed, there may well have been 'some difference in the bargaining power of the parties' given Rozenblit's age, limited English skills and lack of commercial acumen (at least to the degree that Vainer possessed). However, and in any event, the disadvantage was not 'special' in the sense used by Mason J in Amadio. Rozenblit was not disabled or disadvantaged to the point that he was unable to 'make a judgment as to his own best interests.'

108 In my opinion, Rozenblit was not under a special disability or disadvantage. It follows, that Vainer (and Dr Vainer) did not exploit such a disability or act unconscionably within the meaning of the unwritten law for the purposes of s 20.

109 However, different considerations apply to s 21, which provides:[46]

(1) A person must not, in trade or commerce, in connection with:

...

(b) the acquisition or possible acquisition of goods or services from a person;

engage in conduct that is, in all the circumstances, unconscionable.

110 Section 22 provides a (non-exhaustive) number of matters that the Court may have regard to for the purpose of determining whether a person has contravened s 21. These are referred to where relevant. The word 'may' in s 22 is conditional and not permissive. As Gageler J said in Paciocco v Australia and New Zealand Bank, 'where any one or more of those matters existed in respect of particular conduct, each of those extant matters was to form part of the totality of the circumstances mandatorily taken into account.'[47]

111 Section 21(4)(a) states that '[i]t is the intention of the Parliament that this section is not limited by the unwritten law related to unconscionable conduct'.[48] This provision makes clear, that unlike s 20, s 21 is not limited in its operation only to circumstances where equity would otherwise grant relief in accordance with the principles set out in specific equitable doctrines. It is an 'enlarged notion of unconscionability.'[49] The difference between those provisions was explained by French J (as his Honour then was) in relation to a predecessor provision in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd:[50]

[2] The conduct which is proscribed by s51AA [the predecessor to s 20] is limited to the kind of conduct which would be treated as unconscionable under equitable doctrines generated by judge-made case law. In that sense the section is limited in its application. It does not cover as wide a range of conduct as s51AC [the predecessor to s 21] which is not limited in its application by equitable doctrines but which was enacted after the conduct the subject of these proceedings. ...

...

[24] There is no reason to suppose that the unconscionable conduct prohibited by ss 51AB and 51AC is limited by reference to specific equitable doctrines. The factors to which the court may have regard for the purpose of determining whether there has been a contravention of those sections include undue influence and duress and other issues falling outside the equitable doctrines to which reference has been made. And even then, the listed factors in those sections do not limit the matters to which the court may have regard ...

[25] Ultimately, each of s 51AB and s 51AC prescribes a standard rather than a rule. The boundaries of its application are normative rather than logical. ... The categories of unconscionable conduct for the purposes of ss 51AB and 51AC will never be closed albeit the circumstances of the application of the standard prescribed in each of them is confined by the language of each section.

112 It is tolerably clear from the authorities that the conduct must be unfair and irreconcilable with what was right or reasonable. The conduct must offend the conscience and be unethical. In Stubbings v Jams 2 Pty Ltd, Elliott J said in relation to s 21:[51]

[32] The associate judge referred to a number of cases when discussing the relevant principles applicable to unconscionability. Proceeding on the basis that statutory unconscionability would be pleaded in due course, her Honour stated that it was a requirement for a defendant to establish "moral obloquy on the part of the lender" before a successful defence could be raised. Such an observation is consistent with some of the relevant authorities. However, the most recent cases suggest that no such specific requirement of "moral obloquy" exists.

[33] In Director of Consumer Affairs Victoria v Scully, after observing that it was undesirable to attempt a comprehensive definition of the word "unconscionable", the Court of Appeal made a number of general observations with respect to the correct approach to determining whether certain conduct is "unconscionable".

[34] The first of these was that the word "unconscionable" was intended to have its ordinary meaning. Then, having made various observations concerning indicia that may assist in determining whether or not certain conduct is unconscionable, it was stated that a court must explain what it understands by the words and phrases in the relevant statutory provision and to do so it will be necessary to use words different from those contained in the provision. However, such words are strictly to explain the words used in the statutory provision, not to replace them.

[35] With respect to the meaning of the words "moral obloquy" themselves, Court of Appeal explained:

The phrase "moral obloquy" is not itself part of everyday discourse. Most people would have to consult a dictionary to be sure of its meaning. ... The phrase suggests the very things that are suggested by other phrases such as "import(ing) a pejorative moral judgment" or "highly unethical".

[36] After observing that a distinctive quality of unconscionable conduct is that it is unethical and must include "some degree of moral tainting ... of a kind that permits the opprobrium of unconscionability to characterise the [relevant] conduct",[83] the court expressed its conclusion, implicitly rejecting an approach which simply substituted the phrase "moral obloquy" for the word "unconscionable".[84]

[37] More recently, in Paciocco v Australia and New Zealand Banking Group, the approach to be adopted by a court in evaluating whether conduct was unconscionable in accordance with statute was considered by the full court of the Federal Court. As part of this consideration, the following was stated:

The evaluation is not a process of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules. It is an evaluation of business behaviour (conduct in trade or commerce) as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute. The task is not limited to finding "moral obloquy"; such may only divert the normative enquiry from that required by the statute, to another, not tied to the words of the statute.

This circumspection with respect to the use of the term "moral obloquy" in describing the evaluation has been echoed in later cases.

[38] Finally, as her Honour observed, the mere fact that the transaction in question involved asset-based lending was not enough, in itself, to demonstrate the loan was unconscionable. In all cases concerning unconscionability, all the circumstances must be considered.

113 It follows that it is not necessary that Rozenblit was under a special disadvantage or disability. The absence of a special disability is still, however, an important factor to be taken into account.[52] Ultimately whether Vainer engaged in unconscionable conduct is a question of fact to be answered in the context of the entirety of the circumstances and evidence and on the balance of probabilities.[53]

114 Notwithstanding that Rozenblit was not under some special disadvantage or disability, for the reasons given, the conduct of Vainer falls squarely within the relevant principles. The expropriation of another man's property for no consideration and with no disclosure offends the conscience and is unreasonable, unfair and unethical.[54]

115 This unconscionability is exacerbated by the attempt to create and fabricate some form of consideration post-factum.

116 The prohibition on unconscionable conduct contained within the Australian Consumer Law are not, however, concerned with only the conduct carried out prior to the transaction in question. In relation to the equitable doctrine of unconscionable dealing, Deane J said in Amadio:[55]

Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. (emphasis added)

117 In Roxborough v Rothmans of Pall Mall, Gummow J considered (in the context of a claim for restitution) that it was unconscionable for the respondent to enjoy the benefit of certain payments, in circumstances where it was not intended that the party so enjoy them. That is, in circumstances where there had been a failure in the state of affairs contemplated as the basis for the payment.[56] His Honour said:[57]

[100] ... Earlier, in Muschinski v Dodds, Deane J, after referring to Moses v Macferlan, and to "the general equitable notions which find expression in the common law count for money had and received", identified the operation of most of the traditional doctrines of equity as operating upon "legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct". One such instance then identified by his Honour concerned the removal of the substratum of a joint relationship or endeavour:

... without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it.

118 For the reasons given below in relation to the claim for restitution, I am satisfied that Dr Vainer acted unconscionably by retaining the shares, in circumstances where the contemplated basis for his receipt of the shares disappeared. That is, where much needed funds were not received by VRT Global, or where he was not required (and did not ultimately) grant security over his medical practice premises for those funds. I consider that he is a primary wrongdoer, and was not a person involved in a contravention by VRT Global.

119 The loss is the value of the shares at the time of the transfer. This aspect is discussed below.

120 In my opinion, and for reasons discussed below, this claim must fail.[58] It follows, that the claim against Dr Vainer, based on the suggested accessorial liability must also fail.

122 As the authorities referred to below demonstrate, unjust enrichment is not itself a cause of action. Rather, unjust enrichment forms a 'unifying legal concept' as it was described by Deane J in Pavey & Matthews Pty Ltd v Paul.[59] Put another way, it is an 'umbrella' for various causes of action that, if established, entitle a plaintiff to restitutionary relief including in relation to money paid or property transferred under a mistake or in circumstances where there has been a total failure of consideration.[60]

123 In Friend v Booker, French CJ, Gummow, Hayne and Bell JJ said:[61]

[7] The joint reasons in Lumbers contain two relevant propositions. The first is that, in general, the bare fact of the conferral of some benefit upon another does not suffice to establish an obligation to repay the expenditure in providing that benefit. The second proposition is that while the concept of unjust enrichment may provide a link between what otherwise appears to be a variety of distinct categories of liability, and it may assist, by the ordinary processes of legal reasoning, in the development of legal principle, the concept of unjust enrichment itself is not a principle which can be taken as a sufficient premise for direct application in a particular case. (emphasis added)

124 In Equuscorp Pty Ltd v Haxton (Equuscorp), French CJ, Crennan and Kiefel JJ said:[62]

[29] The claim for money had and received was an offshoot of the old form of action of indebitatus assumpsit which, by the 17th century, had superseded the action of debt. The requirement of a promise to fit the claim within the old writs led to the creation of what Lord Atkin described as "fantastic resemblances of contracts ... in order to meet requirements of the law as to forms of action". So the action came to be thought of as resting upon an implied contract. The implied contract theory was rejected in Australia by this Court in Pavey & Matthews Pty Ltd v Paul as "but a reflection of the influence of discarded fictions". It was rejected in England in Westdeutsche Landesbank Girozentrale v Islington London Borough Council. It came to be displaced by the concept of unjust enrichment. Unjust enrichment was described by Deane J in Pavey & Matthews as:

"a unifying legal concept which explains why the law recognizes, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognize such an obligation in a new or developing category of case".

It is not a "definitive legal principle according to its own terms". Nor was it such when first propounded in legal scholarship. It was:

"an ex post facto explanation of decisions that had already been reached, an organisational category separate from contract. The substance of the law still had to be found in its concrete emanations".

[30] In David Securities Pty Ltd v Commonwealth Bank of Australia, this Court explained the part played by unjust enrichment in a claim for money had and received (in that case for recovery of a payment made under mistake of law). That explanation may be expressed, at a fairly high level of abstraction, as an approach to determining such claims. In summary:

• recovery depends upon enrichment of the defendant by reason of one or more recognised classes of "qualifying or vitiating" factors;
• the category of case must involve a qualifying or vitiating factor such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust;
• unjust enrichment so identified gives rise to a prima facie obligation to make restitution;
• the prima facie liability can be displaced by circumstances which the law recognises would make an order for restitution unjust.

Unjust enrichment therefore has a taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another. In that aspect, it does not found or reflect any "all-embracing theory of restitutionary rights and remedies".

125 In Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (Hills), a recent High Court decision dealing with an alleged change of position following a payment made under a mistake of fact - the plurality (Hayne, Crennan, Kiefel, Bell and Keane JJ) said:[63]

[78] The approach argued by AFSL does not involve an enquiry as to whether it would be inequitable to require the recipient to repay. Instead, AFSL's approach focuses upon the extent to which Hills and Bosch have been "disenriched" subsequent to the receipt. This approach seeks to give effect to an understanding of unjust enrichment as a principle of direct application, which operates by measuring the extent of enrichment or, where a defence of change of position is invoked, the extent of disenrichment subsequent to that receipt. Such a "principle" does not govern the resolution of this case because the concept of unjust enrichment is not the basis of restitutionary relief in Australian law. The principle of disenrichment, like that of unjust enrichment, is inconsistent with the law of restitution as it has developed in Australia. Disenrichment operates as a mathematical rule whereas the enquiry undertaken in relation to restitutionary relief in Australia is directed to who should properly bear the loss and why. That enquiry is conducted by reference to equitable principles. (emphasis added)

126 In Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd (No 3), Edelman J (as his Honour then was) dealt with a strike out application in relation to a claim for unjust enrichment. His Honour said:[64]

[45] It is necessary to make some brief remarks about an action for restitution that falls within the category of unjust enrichment. I make these remarks as background to my consideration of the two primary objections by the defendants. It is also necessary to explain why I reject the defendants' submission that for a plea involving unjust enrichment, "the plea of an element relevant to a claim based on monies had and received is irrelevant and confusing, and ought to be deleted". In broad summary, a plea of money had and received is a plea in the "taxonomic category" of unjust enrichment.

[51] Provided that unjust enrichment is not applied as a direct source of liability, in Australia the taxonomic category of unjust enrichment has served a useful function and might continue to do so. Like the category of "torts" the category of unjust enrichment assists in understanding even though it is not a direct source of liability. The category directs attention to a common legal foundation shared by a number of instances of liability formerly concealed within the forms of action or within bills in equity. The common features of actions within the "label", "concept", or "notion" of unjust enrichment has generally been thought to be that, subject to defences, a plaintiff can prove its entitlement to restitution of the value of a benefit derived at the plaintiff's expense, if the Court is satisfied that the plaintiff has succeeded on any issues falling within three broad enquiries:

(i) The defendant must be enriched.

(ii) The enrichment must come at the expense of the plaintiff.

(iii) The enrichment must be unjust.

[52] This three-fold approach to actions in the category of unjust enrichment was described by Kirby J as the "generally accepted analysis". ...

127 The view that unjust enrichment is not itself a cause of action has since been followed recently by Sackar J in Taouk v Assure (NSW) Pty Ltd,[65] Ball J in Rathner v AAPC Management Ltd,[66] and Harrison AsJ in Elbayeh v Bayeh.[67]

128 Recovery in restitution depends upon the existence of a qualifying or vitiating factor falling into some particular category. This vitiating factor is a circumstance, recognised by the law, which imposes a prima facie obligation for the recipient of a benefit to make restitution.[68] Categories that qualify for restitutionary claims, and which are relevant to the present claim include mistake, total failure of consideration and, perhaps, unconscionable conduct.

129 In relation to a transfer of property or payment made under a mistake, in Hills, Gageler J said:[69]

[150] The explanation comes to this. The fact that a payment is caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the recipient to make restitution. That is because causative mistake is a circumstance which the law recognises to be prima facie sufficient to make the recipient's receipt, and retention, of the payment unjust. To displace that prima facie obligation, the recipient must establish some other circumstance which the law recognises would make an order for restitution unjust. The defence of change of position comprehends one of those circumstances. The defence, if established, results in the prima facie obligation of the recipient being in whole or in part displaced at the time an order for restitution is sought. (emphasis added).

130 In relation to total failure of consideration, in Zuecker v Bruggmann (No 3), Bond J said:[70]

[107] If there is no relevant enforceable contract pursuant to which the $750,000 was paid, the plaintiff contends that the $750,000 is recoverable because there has been a total failure of consideration. Traditionally, the cause of action would be regarded as a common money count for money had and received to the use of the plaintiff. In modern parlance, failure of consideration is a "qualifying or vitiating" factor which can operate to render the retention of a benefit by a defendant unjust, which then gives rise, by operation of law, to a "prima facie obligation to make restitution".

131 The position is not as clear with respect to unconscionability. In David Securities Pty Ltd v Commonwealth Bank of Australia, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said 'it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable.'[71] This statement was affirmed by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd.[72] Then, in Equuscorp, French CJ, Crennan and Kiefel JJ said:[73]

[32] As Gummow J pointed out in Roxborough v Rothmans of Pall Mall Australia Ltd, failure of consideration for the purpose of a claim for money had and received is not confined by contractual principles. In that case there had been no failure of performance by Rothmans of any promise it had made. There was no question of repudiation by it of its contractual obligations. The question was whether it was "unconscionable" for Rothmans as the recipient of payments to retain them in circumstances in which it was not specifically intended or especially provided that it should so enjoy them. The question of unconscionability, as his Honour explained, derived from the general equitable notions which found expression in the common law count for money had and received. This Court acknowledged in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation that "contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience" albeit the action itself is not for the enforcement of a trust. The reference to conscionability in this context, however, does not mean that whether enrichment is unjust is to be determined by reference to a subjective evaluation of what is fair or unconscionable. As the Court reiterated in Farah Constructions Pty Ltd v Say-Dee Pty Ltd : "recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category." (Footnotes omitted) (emphasis added)

132 While there are relatively few decisions dealing with the matter, it appears clear that the claim extends to a transfer of property tainted by a vitiating factor, and not just payment of money. In David Securities Pty Ltd v Commonwealth Bank of Australia, Brennan J said:[74]

Enrichment is unjust because the defendant has no right to receive or, as the case may be, to retain the money or property which the plaintiff has paid or transferred to him.

133 I am satisfied that the Share Transfer was vitiated by a mistake on the part of Rozenblit and accompanied by a total failure of consideration.

134 Clearly Rozenblit transferred the shares expecting VRT Global to raise much needed funds to continue in operation and indeed, for its very survival. He did not intend to transfer the shares absolutely and for no consideration or the other 'consideration' as asserted by Vainer. He made a mistake, based entirely on what he was told and more particularly, on what he was not told. Noting that it has not been pleaded or argued that Dr Vainer changed his position, it does not matter whether he had notice of Rozenblit's mistake at the time of the Share Transfer. Rozenblit later demanded the return of the shares, yet Dr Vainer retained them.[75]

135 Further and in the circumstances, there was self-evidently, a total failure of consideration. The loan funds were not procured and security was not provided. In this sense, the 'failure of consideration' refers to the transfer of shares 'for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared.'[76] There is no question about the failure being anything other than 'total'.[77]

136 The conduct of the Vainers, as considered above, makes retention of the benefit by Dr Vainer entirely unconscionable and unjust. Further, I have found that each also engaged in unconscionable conduct under s 21 of the Australian Consumer Law. Vainer's evidence in relation to the Condition was entirely unsatisfactory. Like Gelberg, he did not confirm Vainer's evidence in this regard, and accepted that he received the shares because he was giving his medical practice premises as security for a much needed loan. He did not seek to use his willingness in the same way that Vainer did. As events transpired he was not required to use his medical practice premises as contemplated and agreed to by him. In the circumstances, retention of the benefit (against the expectation and contemplation of the parties) was entirely unfair, unjust and unconscientious.

137 As restitution of the shares is not possible, Rozenblit is entitled to the value of the shares at the time of the transfer. This aspect is discussed below.

138 Before finally stating my conclusion, it is necessary to say something about the evidence given by Vainer.

139 Vainer was a most unreliable witness. He was evasive and perhaps understandably in a case like this - given the allegations against him - defensive and argumentative. However, in a number of respects his evidence was unrealistic, implausible and in my view, untruthful.

140 Vainer's evidence to the effect that the consideration for the Share Transfer was merely Dr Vainer's willingness to provide his medical practice premises as security for a loan, and whether or not such loan proceeded stretches credulity. Vainer said that it was this willingness that created a risk (whether or not the loan went ahead) and was the consideration. He also gave evidence that Gelberg told him that he, that is Gelberg, had explained to Rozenblit that if the loan did not go ahead, Dr Vainer would be entitled to retain the shares. This evidence is self-evidently implausible, illogical and contradicted by the documents and Gelberg. Further, it was not only a one-off answer by Vainer under pressure in the witness box, but was repeated by him several times.

141 The willingness to go through with a transaction that does not ultimately proceed does not create any relevant risk. The risk was not that Dr Vainer was prepared to do something of the kind under consideration (provide security) but actually doing it. Further, the minutes of the meeting - both versions - record Dr Vainer as having contributed $1 million and it was for this reason that he was entitled to become a director. It assumes, presumes and contemplates that he has been instrumental in actually procuring the loan through the use of his medical practice premises as security. It was not his mere willingness that makes up the figure of $1 million but going through with it. Finally, and not surprisingly, Gelberg did not confirm what Vainer said Rozenblit was told by Gelberg.

142 This evidence, in my opinion, represents an attempt to justify Dr Vainer retaining the shares when the loan failed to proceed. Part of this attempt was also a belated focus on Dr Vainer's previous payment of $400,000 for 10 per cent of the shares, a transaction which the Vainers considered to be totally overpriced and unfair. However, this was never mentioned as part of the consideration for the acquisition of Rozenblit's shares.

143 The second major issue that reflected very badly on Vainer's credit is discovery. The lack of documentation and the explanation given by him for obviously missing documents was entirely unpersuasive. Vainer may change his computers every two years, however I do not accept that he does not back up documents and relevant information prior to the change. Further, his explanation that the accountants (Gelberg) had all the documents was untrue and contradicted by Gelberg. In short, there were critical documents that should have been in his possession, and probably were, that were simply not discovered.[78] I also note that there was no plausible, or indeed any, explanation for the altered minutes referred to in his witness statement.

144 In the final analysis the transaction cannot be permitted to stand. There is no point in setting it aside and damages, being the value of the shares at the relevant time, is the proper remedy. Unfortunately, for the reasons that follow I am unable to attribute any value to the shares besides their nominal value.

Meetings leading up to liquidation of the VRT Group of Companies

145 On 1 February 2012 a meeting of the VRT Group took place. The Vainers, Freeman, Rozenblit (with Nathan Guissine as his interpreter) and Gelberg attended. The minutes record the following:

Item 4: The company is in a difficult position because it is still reliant on research. It cannot prove that the Company has the finances that any lending institution requires to ensure the Company can service the loan.

...

All the Directors are in agreement for investor equity finance.[79] Voted in favour unanimously.

David Freeman and Michael Vainer are looking for 5 Million for 20 percent equity in the Company. Company has decided to enlist the services of а capital raising Company (Cormorant Capital) for their work, in exchange they will ask а 3 percent share of the company. It is Michael Vainer's duty as the commercialisation partner to take this offer.

There are no guarantees, but they will endeavour to raise the money. If they do not raise the 5 million they won't get 3 percent.

146 On 23 May 2012 another meeting took place. The Vainers, Freeman and Gelberg attended. Rozenblit did not attend. The minutes record that VRT Global had been surviving on loans from its directors, and it would need further loans for it to continue in future:

Current position in the bank is just under $17,000, however the company by the end of this financial year is going to be in debt by $5,000. The Company is solvent, but has no liquid assets.

...

Company has previously approached Cormorant Capital who were going to introduce us to investors, where they were going to potentially provide millions of dollars for the company. However, at this point there is nothing concrete, as Investors want to see an up and running facility which has the capacity to reproduce in volume the output in tonnes that we say we are going to provide.

...

Michael Vainer's [sic] has been personally putting in cash i.e. Director's loan as well as 50 thousand, and this is how the company has been surviving.

Other directors of the company need to give loans to the company to keep the company going until large investors can be found.

Four directors equally should be contributing loans.

For the company to survive other directors will need to put in loans to survive,

David Freeman can't commit if it an equal loan as he does not have the funds at the moment.

...

Michael Vainer will not be taking a wage up until 30 June 2012 for good of the Company, and he will not expect it to be held as a loan. His salary will equate to $12,500 per month.

The Company needs at least $50,000 per month due to salaries and other commitments.

The Director's [sic] will need to put in loans on a proportional basis to keep operational part of the Company going. The Company will still need to pay tax every quarter.

Directors Resolution:

Vote of the Directors.

The Director's [sic] voted to making the Director's [sic] loans proportional to their ability to keep the Company going.

...

147 The potential resignation of Rozenblit, due to his apparent ill health, was also raised:

Boris Rozenblit has been unwell for some time. Michael Vainer is putting it to the Director's [sic] of the Company that Boris Rozenblit is not capable of remaining in the capacity to be a Director of any of the VR Tek Group of Companies and therefore requests that he resigns.

Due to ill health the Director's meeting was postponed again and unfortunately he was not able to be here again.

...

If Boris Rozenblit resigns he won't make any commitment to the Company, so everything with relation to the expenses. Should he resign Boris Rozenblit will still remain a shareholder in the company and still retain his voting rights. Dividends will still be given to him, however he will not have financial responsibility any more.

The Director's [sic] do not believe that Boris Rozenblit has the capacity to be a Director of a Company.

148 On 14 June 2012, an extraordinary meeting of shareholders of the VRT Group was convened. A motion was proposed for the 'removal of Boris Rozenblit as Director of VR Tek Group of Companies.' The motion passed, with the minutes recording:

[Michael Vainer] put to the shareholders that the reason for this motion is that Boris RozenbIit was unable tо perform his Director duties for the companies in the current calendar year.

...

Dmitry Shtifelman (Boris Rozenblit's lawyer and representative) by proxy for Boris Rozenblit rebutted and said for Boris Rozenblit, that he is in good health and able to direct. It was the opinion of Dmitry Shtifelman that this attempted removal is oppressive conduct.

149 A meeting was next held on 15 August 2012. Vainer confirmed that all of the VRT Group's money was being held by VRT Global. The remaining companies held $10.00 in each of their respective accounts so the bank would not close them.

150 On 31 October 2012, a meeting of the directors of the VRT Group was held. The Vainers, Gelberg Alex Rybalov and Dolores Johnston-Chalmers attended. The minutes record:

1. As of 31 October 2012 VR Tek Global Pty Ltd has $16,882.73 in its respective bank account, and each of the other companies have $10.00 in each of their respective bank accounts, which is just enough to keep them going.
2. The Company's [sic] are currently able to pay debts as they fall due, but going forward they are going to continue to seek more funds for further commercialisation.

1. As at 31 October 2012, the Directors confirm that the Directors of the Company VR Tek Global Pty Ltd have put in monies as loans to the Company. As at [31 October 2012] they were:

David Freeman (Director) $ 8,915.35

Alexander Vainer (Director) $ 62, 918.96

Michael Vainer (Director) Personally $104,936.29

Michael Vainer has also, in his capacity as a Director of Vainer Trading Group Pty Ltd, put in a further $50,000.00.

The Company is hopeful that further commercialisation will inject further funds.

151 Vainer gave evidence, that by this time, each of the directors of the VRT Group was either unwilling or unable to invest or loan more money to the companies:

By 31 October 2012, I had decided that I was not willing to invest or loan any more money to the VR Tek Companies. David has also told me that he was not able or willing to invest or loan any more money to the VR Tek Companies. My father, who had contributed the vast majority of the funds used by the VR Tek Companies, told me that he was no longer willing to invest or loan money to the VR Tek Companies. Boris had always told me that he would not invest or loan money to the VR Tek Companies. As at 31 October 2012, the VR Tek Companies were simply unable to obtain any funding, had no sources of revenue and therefore had no ability to remain solvent.

152 On 20 November 2012 a meeting of the directors of VRT was held. The Vainers attended. The following resolutions were passed:

− In the opinion of the directors of the company voting for such resolution [VRT] is insolvent, or is likely to become insolvent at some future time;

− [A]n administrator of the company should be appointed;

− Joseph Loebenstein ... be appointed by the company as administrator of the company; and

− [T]he company execute the necessary instrument to effect such appointment.

153 On the same day, Joseph Loebenstein (Loebenstein) was appointed administrator of VRT.

154 On 27 November 2012, at a general meeting of members of VRT Global, it was resolved that the company be voluntarily wound up and Messrs Glenn J Spooner and Daniel P Juratowitch (the Liquidators) be appointed joint and several liquidators.

155 On the same date, the members of VRT Operations resolved to voluntarily wind up the company and appoint the Liquidators.

156 On 22 January 2013, VRT was placed into liquidation after a vote by its creditors. Loebenstein was appointed as liquidator.

157 On 26 February 2014 the Liquidators released their report in relation to the liquidation of VRT Global. They reported that:

(a) They did not expect any return to creditors in the liquidation. They noted advice from Loebenstein to the effect that it was also unlikely that there would be a dividend declared in the liquidation of VRT.

(b) Vainer had arranged for Polymeric to purchase the plant and equipment of VRT Global for $30,000 which equated to the approximate auction realisable value of the property. A sale agreement was executed on 21 December 2012.

(c) VRT Global had debtors, comprised of related entity debts totalling $85,115. Given that $58,589 of that was owed by VRT or VRT Operations (which were in liquidation) and the remaining amounts were owed by related entities which never commenced operating, were essentially dormant, or had been deregistered, the liquidators deemed it uncommercial to pursue those debts.

(d) VRT Global had related party creditors in the amount of $229,205 and unrelated creditors in the amount of $15,572.36.

(e) They had not identified any voidable transactions, instances of insolvent trading, or other claims available to the companies which might have been worth pursuing.

158 The Liquidators provided their opinion below as to the solvency:

Funding from related parties

My investigations suggest that the company was reliant оn and was provided with funding from related parties in order to continue to trade. Accordingly, the company was arguably never insolvent as long as funding from related parties continued and no demands were made by related parties for the repayment of the outstanding debts.

I note that the debt owed to unrelated unsecured creditors total $4,180 [in the liquidation of VRT Operations, and $15,572.36 in the liquidation of VRT Global] (being only a small proportion of the total unsecured creditors).

Based on this reasoning, the company may not have been insolvent.

Conclusion

My investigations in respect of insolvency are continuing.

159 A number of key findings can be drawn from the documentary evidence:

(a) First, the only company within the VRT Group that had tangible assets of any significance was VRT Global. The intellectual property was, as at 30 June 2012, reported as an asset of the Unit Trust with a value of $101,971. For the reasons that follow, this value cannot be used to assess the value of VRT Global's shares.

(b) Secondly, the VRT Group was reliant on director's loans to continue its, operation and exploration and commercialisation of the technology. Likewise, the VRT Group was only solvent or able to continue in operation for so long as the companies continued to receive funding from related parties and so long as those related parties did not call upon the loans to the companies. This was clear to the directors as early as 21 May 2012.

(c) Thirdly, and most importantly, the directors were either unable or unwilling to provide further funding to the companies. Rozenblit had always been unwilling to provide further funding to the companies. As at 21 May 2012, Freeman was unable to. By 31 October 2012, Vainer and Dr Vainer each decided that they were not willing to loan any more money to the companies. They also were not obliged to do so.

(d) Fourthly, as at 31 October 2012, the VRT Group was still continuing to explore the prospect of obtaining further external funding. Vainer did not ultimately apply for funding from CBA, instead opting for equity finance. Given the lack of success at obtaining funding through Cormorant Capital, however, the directors were aware that the prospects of obtaining external funding was low.

160 Each of the plaintiff and the defendants called expert evidence in relation to the value of the shares of VRT Global at 2 November 2011, 7 December 2011 and 27 November 2012.

161 Rozenblit called Shane Rose (Rose) and the Vainers called Gary Fettes (Fettes).

162 Rose determined that the market value of VRT Global as at 2 November 2011 was $4,253,226 and as at 7 December 2011 was $4,244,447. He also determined that the market value as at 27 November 2012 was $3,979,717.

163 In paragraph 5.0 of his report dated 3 December 2018 (Rose Report) Rose sets out the various assumptions that he made in the valuations referred to above. Relevantly, he says -

The business financial statements provided are reflective of startup activity of the business and not a reliable information source for the purpose of determining the business enterprise value.

The cash flow projections contained in the 2011 Business Plan provide a 5 year estimate of trading once the business is to commence production including sales.

I have formed my approach on the basis that the projections contained in the 2011 Business Plan, 2015 Business Plan and 2016 Business Plan are accurate, based on reasonable grounds, and achievable. I have also assumed that VRTG had access or would have access to sufficient capital to implement the 2011 Business Plan, and Polymeric had access or would have access to sufficient capital to implement the 2015 Business Plan and the 2016 Business Plan.

164 The entire predicate of the business plan, upon which Rose based his valuation, was first 'sufficient capital to implement the [Business Plan]' and secondly the commencement of 'production including sales'. Neither of these events transpired and were never likely to transpire. Further, the uncertainty, unpredictability and in this case, the unreasonableness supports the view that a future maintainable earnings (FME) basis of valuation is problematic, inappropriate and undesirable.

165 Accordingly, I do not accept Rose's valuation. It is speculative, entirely hypothetical and unreliable. It is based on figures that are at best aspirational and are without any reasonable foundation.

166 The report by Fettes is dated 12 December 2018 (Fettes Report).

167 After consideration of the financial accounts of VRT Global for the years ending 30 June 2011 and 30 June 2012 and the Liquidator's Report dated 26 February 2014, Fettes says:

8.2 A review of the Profit and loss statements reveals:

a) The Company's primary source of revenue was government grants, although it also recorded revenue of $28,000 as lease income in FY 2011;

b) The Company made no commercial sales of recycled rubber products;

c) The Company made losses of over $150,000 in both FY 2011 and 2012; and

d) The largest costs incurred by the Company were Research and Development costs ($147,472 in FY 2011 and $65,958 in FY 2012) and Patent and Trademark Maintenance Fees ($66,453 in FY 2012).

a) The Company had total assets of $3,710,635 in FY 2011 and $3,610,644 in FY 2012;

b) The largest asset owned by the Company was Intangible Assets which had a book value of $3,502,772 in FY 2011 and $3,501,848 in FY 2012. Of the intangible assets trademarks and patents were valued at $3,500,000. It is not clear on what basis the intellectual property (including trademarks and patents) was valued as no intellectual property appears to have been owned by the Company;

c) The Company also owned Property, Plant and Equipment with a book value of $48,370 in FY 2011 and $33,859 in 2012;

d) The remaining assets consisted of cash and receivables;

e) The Company had total liabilities of $27,123 in FY 2011 and $87,893 in FY 2012; and

f) The Company had net assets of $3,683,512 in FY 2011 and $3,522,751 in FY 2012.

8.4 I have not been provided with any supporting documentation to support the valuation of the patents and trademarks at a value of $3,500,000, The Company Liquidator's Report dated 26 February 2014 states that the Company did not own any trademarks or patents.

168 Based on these documents, Fettes concludes as follows:

Valuation at 7 December 2011

8.5 As at 7 December 2011 the Company had a valuation of $Nil on an FME basis and between $Nil and $180,740 on an [Net Asset Value] basis.

169 In relation to the FME basis and not surprisingly, Fettes says:

(a) 'It is not clear that at 7 December 2011 the Company had a marketable product' (paragraph 8.6(e));

(b) The December 2011 business plan stated that 'the Company requires start-up capital of $1.15 million in order to begin commercial operations' (paragraph 8.6(d));

(c) 'The business had no customers for its recycled rubber products' (paragraph 8.6(a)); and

(d) 'The Company made a loss of $175,169 in the year after adjusting for interest.' (paragraph 8.6(b)).

170 In relation to the Net Asset Value (NAV) the (top of the range) figure of $180,740 excludes the intangible assets and assumes that intercompany debtors of $65,653 were collectable and further, that VRT Global could cease operations prior to completion of the CSIRO project carried out in conjunction with Deakin, without incurring any penalties. As events transpired, the intercompany loans 'owing to the Company were written off as uncollectible by the liquidator'. (Fettes Report at paragraph 8.15).

171 Further, under the NAV valuation and at 8.16 and 8.17, Fettes says:

8.16 It appears that at 7 December 2011, the Company did not have:

a) Any registered trademarks or patents;

b) A commercially viable recycling process;

c) Any commercial sales or customers; and

d) Funding of $1.15 million required to start commercial production

8.17 Therefore it appears reasonable to value the trademarks and patents at $Nil.

172 In so far as may be relevant, Fettes is of the opinion that as at 27 November 2012, 'the Company had a value of $Nil on an FME basis and $Nil on an NAV basis'. (Fettes Report at paragraph 8.18).

173 So far as relates to the FME basis, the reasoning is similar to the earlier valuation date. With respect to the NAV basis, Fettes says:

8.27 Based on the Directors RATA at 27 November 2012 (as disclosed in the Liquidator's Report dated 26 February 2014), the NAV Value of the Company was $Nil as follows:

8.28 The valuations of the plant and equipment are based on the results of the independent valuation of the plant and equipment commissioned by the Liquidators.

8.29 I note that the value of the third party creditor debts disclosed in the Liquidator's Report dated 26 February 2014 does not include any amount owing to the Company's accountants and lawyers, these are recorded as unknown.

8.30 After a marketing campaign and five expressions of interest the plant and equipment was sold to a director for $30,600.

8.31 Under both a going concern and liquidation (auction) valuation the Company had a valuation of $Nil based on the information contained in the Liquidator's Report dated 26 February 2014.

8.32 Accordingly I believe that the Company had a NAV Valuation of $Nil at 27 November 2012.

174 On either basis (FME or NAV) and at either date (7 December 211 and 27 November 2012) there was either no or very little value in the company, and as a consequence, the shares. I am not persuaded that anyone would pay anything other than a nominal value for the acquisition of Rozenblit's minor holding as at the end of 2011 or the beginning of 2012.

175 The remaining and perhaps more important question is whether VRT Global was solvent as at the liquidation date, that is, 27 November 2012, when the member's resolution for winding up was proposed and passed.

176 According to Fettes, 'the Company was insolvent at 27 November 2012' (Fettes Report at 8.40). The reasoning is set out in paragraphs 8.37 to 8.39 as follows:

8.37 It appears that the Company would have met the statutory definition of insolvency based on the Company appearing to have in excess of $15,000 of third party debt (which appears to all be current liabilities) and only $3,265 of current assets (cash at bank) to meet them, therefore under the statutory definition of insolvency the Company appeared to be insolvent.

8.38 The Company's plant and equipment appears to have been unencumbered therefore it may have been possible for the Company to secure finance against this equipment. This would likely have been sufficient to pay out the third party creditors, and assuming that the related party creditors would not push for payment this may have allowed the Company to meet its debts as they fell due, however I do not consider that this approach would have been reasonable in the circumstances for the following reasons:

a) The Company did not have a source of income and therefore would have become insolvent when it was unable to repay any loan or interest against the plant and equipment;

b) In taking out a loan against the plant and equipment the directors would have likely been in breach of their fiduciary duty to prevent insolvent trading as they would not have had a reasonable expectation of being able to repay any loan without a source of income; and

c) According to the business plan dated December 2011 the Company would have required investment of $1.15 million in order to generate a source of income. I understand that the directors attempted to raise this investment but were unsuccessful.

8.39 The Company also appears to have been balance sheet insolvent at 27 November 2012, having an excess of liabilities of at least $144,812 under a going concern valuation and $211,512 under an auction valuation.

177 In my opinion, it is clear, as noted above, that if VRT Global was to continue in operation beyond 27 November 2012, the day that it was wound up voluntarily, it would require further funding and probably substantial funding. I am satisfied on the evidence that further funding would not have been forthcoming. None of the stakeholders or directors were prepared to provide further funds whether by equity or loans. In particular Vainer and Dr Vainer had resolved not to provide any further funding. They - and in particular Dr Vainer - had already provided substantial funds. I accept their evidence in this regard. They were under no legal obligation to provide any more funding. Although Vainer and Dr Vainer did not formally demand the repayment of their loans, they probably could have done so. VRT Global did not have the funds to repay the loans. Without the continued support of Vainer and Dr Vainer, the company and indeed, the VRT Group, could not continue in operation.

178 Whether or not VRT Global was insolvent at this time may not strictly matter. Members are entitled to wind up a company by resolution in a variety of circumstances apart from insolvency.[80] The fact is that the company could not meaningfully continue in operation without funding. As funding would not be forthcoming there is little point in continuing. Nobody was obliged to provide further funds. Rather than allow the company to lie dormant and without any prospects, it was decided to wind it up. In any event, and to the extent that it is relevant, the company was, as noted above, insolvent. I accept the evidence of Fettes in this regard.

179 Accordingly, the course taken was, in the circumstances, entirely justifiable and perhaps inevitable. Of course, what happened afterwards, is another matter and is considered next.

180 Accordingly, in the circumstances, none of the causes of action are made out. Vainer did not, in the circumstances, induce VRT to act in breach of trust by resolving to appoint Loebenstein as administrator. This was not against the interests of unitholders and was an entirely logical and unremarkable consequence of the lack of funding which was necessary if VRT, and indeed the VRT Group, was to continue. There was no obligation on the Vainers to continue funding and the evidence is that funding was not available. Further, there was no breach of fiduciary duty for the reasons set out below.[81]

181 Accordingly, to the extent that there was any acquisition plan, as alleged, it is of no relevance given the specific facts and circumstances as referred to.

182 Polymeric was incorporated on 29 November 2012 by Vainer. He is the sole director of the company and holds approximately 93.5 per cent of its ordinary shares.

183 Vainer gave the following evidence as to the development of Polymeric's technology:

The idea I had for Polymeric Powders and the development work it is now doing is very different to the work that was being done by VR Tek Global. VR Tek Global was trying to develop a method of recycling end-of-life tyres by separating the materials to recover the rubber. The idea I had for Polymeric Powders did not involve separation and did not involve creating an end of life rubber product.

The idea was to create a plastic-rubber composite material by processing certain rubber materials in a way that will enable the specific resultant polymerised rubber powder to bond with specific plastic, and, in order to also make it cheaper to produce, incorporate certain rubber crumb from tyre recyclers to save on rubber material input costs.

I went back to my earlier knowledge, particularly focussing on the application of controllable sustained specific heat and using specific gasses to trigger reactions. From my own further research, I identified the type of rubbers that lent themselves to the manufacture of useful composite materials for commercial use. I further identified specific rubbers that when polymerised could theoretically bond in a specific way with specific plastics to form the more useful plastic rubber composite materials for commercial use. I then worked backwards to also determine if any specific tyre recycled rubber can also be utilised for this purpose to save cost on rubber raw material. It is thus that I came up with the idea of processing very specific rubber types in a way to create a polymerised rubber powder material which can then be used to form a plastic-rubber composite material with polyolefin plastics for commercial use.

My work on Polymeric Powders was all new and inventive work. I did not use or rely on any of the research conducted by Deakin University during the research project with VR Tek Global and I deny that there was any intellectual property developed during that research project that was used by me when I developed the ideas necessary to apply for the patents that I subsequently applied for through Polymeric Powders.

184 Vainer identifies two key points of difference between the business of Polymeric and VRT Global:

(a) VRT Global recycled tyres by separating their materials to recover the rubber, while the idea for Polymeric did not involve separation; and

(b) VRT Global created an 'end of life rubber product' while Polymeric created a plastic-rubber composite material.

185 Vainer applied for three patents on behalf of Polymeric. He is listed as the inventor on each. They are detailed below:

(a) On 9 January 2013, an international patent application (PCT/AU2013/000005) was filed for the method and device for polymer pulverization extrusion. This application was published on 17 July 2014 (WO 2014/107758) and granted by IP Australia on 26 June 2014.[82]

(b) On 21 January 2013, an international patent application (PCT/AU2013/000041) was filed for the utilisation of gasses for polymeric materials fragmentation and activation and related device. This application was published on 24 July 2014 (WO 2014/110617) and granted by IP Australia on 10 July 2014.[83]

(c) On 26 February 2015, an international patent application (PCT/AU2015/000104) was filed for the flexible composite material and method of producing same. This application was published on 3 September 2015 (WO 2015/127496).[84]

(together, the Polymeric Patent Applications)

186 The third patent invention relates generally to the formation of new flexible composite materials composed of rubber powders and polyolefins (such as polyethylene). It has, so far, been rejected due to the idea lacking novelty and inventive step. First, by a preliminary report on patentability from the International Bureau of WIPO dated on 30 August 2016 and then by an examination report of IP Australia dated 29 March 2018.

187 As noted above, a Delegate of the Australian Patent Office directed that Vainer be removed as co-inventor from two of the three VRT Patent Applications. The Delegate made no findings in relation to the inventorship of the Polymeric Patent Applications, however, he noted in relation to the first two of these applications, that:

The logic in this decision would also apply to patent applications 2013200687 and 2013200688 should those applications encompass the inventions described in patent applications 2006241342, 2010251745 and 2010281342. (emphasis added)

188 The plaintiff alleges that the inventions described in the first two Polymeric Patent Applications are, in effect, the inventions described in the VRT Patent Applications, as further developed over the course of carrying out the research at Deakin. Rozenblit submits that the two accepted patent applications 'were no more than a snapshot of VRT Global's extruder and ozone agitation chamber equipment, together their associated knowhow, as they stood at November 2011.' Neither party called any expert evidence in relation to the scope of VRT Global's intellectual property, and its apparent overlap with the intellectual property of Polymeric. Ultimately, for the reasons set out below, it is not necessary to resolve this issue.

189 Polymeric is still, after all these years, continuing its research and has yet to determine whether it can create a commercially viable product. The company is currently working with Sustainability Victoria (SV) and an NGO, Tyre Stewardship Australia Limited (TSA), on a research project with this aim and an estimated completion date of 27 September 2019. Vainer gave evidence, that until its completion, he will not know if the technology, the Polymeric Patent Applications, or the processes Polymeric has developed, are of any commercial value.

190 As noted above, after the VRT Group went into liquidation, Vainer arranged for Polymeric to purchase the plant and equipment of VRT Global. The Liquidators accepted an offer made by Vainer in the amount of $30,000. A sale agreement was executed on 21 December 2012.

191 In September 2013, Vainer engaged Australian Engineering Solutions Pty Ltd to commission the equipment and build a production line. That line enabled production of devulcanised activated rubber powder (DARP). The plaintiff submits that the DARP produced by Polymeric is the same as that formerly produced by VRT Global. The defendants submit that the end-product DARP and the processes used to produce it, are different.

192 Funding in the early stages of Polymeric came primarily from Vainer and Dr Vainer. On 24 January 2013, a security interest was registered over all present and after-acquired property of Polymeric, in favour of Dr Vainer's service company, A Vainer Pty Ltd. In his evidence, Dr Vainer confirmed having loaned $100,000 to the company. While unwilling to provide further funding above this in a substantial sum, given his lost investment in the VRT Group, he provided smaller amounts after this initial amount, in the sum of approximately $2,000 to $3,000. The financial report of Polymeric for the year ended 30 June 2013 records non-current liabilities, of trade and other payables, in the amount of $202,417.[85]

193 On 17 March 2014, Polymeric entered into a research agreement with the Royal Melbourne Institute of Technology (RMIT). Pursuant to that agreement, RMIT would conduct various research services for Polymeric. RMIT would receive funding by way of a $50,000 grant from the Victorian Department of State Development, and a fee payable by Polymeric in the amount of $12,500. Intellectual property arising from this agreement would be owned 50 per cent by RMIT, and 50 per cent by Polymeric.

194 As noted above, Polymeric is currently working with SV and TSA. On 6 February 2018, Polymeric entered into a research project funding agreement with TSA. A schedule to that agreement sets out various milestones that Polymeric has or will achieve, as well as the funding or contributions that would be advanced by Polymeric, SV or TSA.

195 Contingent upon Polymeric achieving the specified milestones, TSA would advance funds of $213,000, SV would advance $121,000 and Polymeric would fund itself in the amount of $70,000. The final commissioning of the project, and of all installed equipment, is projected to be achieved by 28 June 2019. A final report on the project is due on 27 June 2019.

196 Vainer gave evidence that if Polymeric can create a product capable of being produced at a commercially sustainable level, the company will require at least $1 million to establish an initial commercial operation. Its ability to establish essential commercial partnerships is dependent on it raising initial funds for a commercial scale production facility for manufacturing the plastic-rubber composite material master-batch pellets. Further, he said that until the research work has been successfully completed, he will not know if Polymeric will be able to raise the funds necessary to produce a commercially viable product.

197 To date, the only revenue Polymeric has brought in has been from the grants referred to above to help pay for further research. As noted, Polymeric does not yet produce a saleable product and is therefore unable to generate sales revenue.

198 According to Polymeric's most recent financial statements, as at 23 December 2018, the company had $5,607.54 in cash and access to an overdraft facility with a limit of $9,500.

199 The company has never generated a profit and has never provided a dividend to its shareholders.

200 The following key findings may be drawn from the foregoing:

(a) Polymeric is effectively, still in the research phase of determining whether its product is commercially viable. It can only determine this after it has produced its final report on the research project, that is, on or around 27 June 2019.

(b) Even if the final report concludes that the product is commercially viable, Polymeric will require substantial funding to create a commercial operation. Vainer suggested that funding of $1 million would be required, and no other figure has been submitted or adduced in evidence.

201 The voluntary winding up of VRT Global - an inevitable and entirely logical consequence of the lack of much needed funding - is not the end of the matter. As previously noted, Rozenblit claims an entitlement to damages consequent upon Polymeric, in essence, continuing the business of VRT Global to his exclusion. He contends that this was part of the acquisition plan. The suggested damages are the value of Vainer's shareholding in Polymeric. The shareholding that should have been held equally. The basis of the claim is breach of fiduciary duty and breach of the Implementation Agreement.

202 For the reasons that follow, the claim fails at every level. First, there was no fiduciary duty as alleged. Second, the Oral Agreement and Implementation Agreement were superseded by the Shareholders Agreements with different rights and obligations arising as a result of the agreed corporate structures. Thirdly, in any event, and in so far as it may be relevant, it has not been demonstrated that Polymeric is relevantly a continuation of VRT Global. Further, and finally, to the extent that it is a continuation of the business and operation of VRT Global, and there are available causes of action, these causes of action can only properly be made by VRT Global.

203 Rozenblit alleges that Vainer owed fiduciary duties to him in three ways:

(a) First, Vainer owed Rozenblit a fiduciary duty arising from the Oral Agreement.

(b) Second, Vainer owed Rozenblit a fiduciary duty arising from the Implementation Agreement.

(c) Third, Vainer owed Rozenblit, in his capacity as shareholder of VRT Global, a fiduciary duty by reason of him (that is, Vainer) being a director of VRT Global.

204 The first two bases for the alleged fiduciary duty may be dealt with together. Rozenblit relies on the Oral Agreement (and later, the Implementation Agreement) to establish that Rozenblit and Vainer, were in effect, partners or quasi-partners.[86] It follows, it was submitted, that fiduciary duties arose either due to their relationship as partners or quasi-partners, or as a result of this status in combination with the trust, confidence and reliance that Rozenblit had reposed in Vainer.

205 Rozenblit's trust and reliance on Vainer was, it was submitted, reflected in the terms of the Oral Agreement and Implementation Agreement. Under these agreements, decision making was to be consensual, even though Vainer held a majority interest (and therefore control) over their joint venture. Further, Rozenblit was vulnerable to abuses of power given his limited English skills and inability to understand commercial documents. It was submitted that he signed documents when Vainer had asked him to, without understanding their contents, on the basis of the trust and confidence that he had in Vainer not to utilise his position of power to his (that is, Rozenblit's) detriment.

206 The defendants submitted that the Oral Agreement was superseded by the Implementation Agreement. The Implementation Agreement was also, it was submitted, superseded by the First and Second Shareholders Agreement. The defendants rely on the complex terms and structure that is evidenced by the Shareholders Agreements, as well as the entire agreement and no partner or agency clauses contained within them.

207 The defendants submitted that the trust and vulnerability said to arise is, in any event, inconsistent with the express terms of the Oral Agreement and Implementation Agreement. Under these agreements, the parties agreed to make decisions jointly and in collaboration. Vainer did not have the power or discretion to unilaterally make decisions on behalf of the joint venture. Doing so would place him in breach of that contract.

208 In response, Rozenblit submitted that the Oral Agreement, and Implementation Agreement 'survived' or otherwise continued in operation alongside or collaterally to the Shareholders Agreements, and that 'the only relevant aspects of the agreements that were varied by mutual consent were the ownership ratio...and the corporate structure' of the business.[87]

209 The plaintiff relies on Ebrahimi v Westbourne Galleries Ltd (Ebrahimi), in support of the alleged 'quasi-partnership' and fiduciary duty which is said to arise. In Ebrahimi, a corporate structure overlaid an earlier partnership agreement between Messrs Nazar and Ebrahimi and introduced a third shareholder (the son of Mr Nazar) to their venture. Following a dispute, Mr Nazar and his son exercised their majority voting rights to remove Mr Ebrahimi from his office as director. Mr Ebrahimi subsequently brought a petition seeking to wind up the company on the just and equitable ground. The petition was opposed by the Nazars on the basis that Mr Ebrahimi's removal was a lawful exercise of the powers conferred on them by the corporate constitution.

210 Mr Ebrahimi submitted, that in a small proprietary company, the members of the company were 'in substance partners, or quasi-partners'.[88] Lord Wilberforce (with whom Viscount Dilhorne and Lords Pearson and Salmon agreed) observed that where underlying obligations of good faith and confidence entitle a party to participate in the management of the business, it is inequitable to allow another party to utilise their legal rights to prejudice them. His Lordship concluded that the principles on which the company would be wound up would be worked out by analogy to partnership cases in which there had been an expulsion from management.[89]

211 His Lordship identified three (non-exhaustive) circumstances in which it may be appropriate to superimpose equitable considerations on the relationship between shareholders, including:[90]

(i) an association formed or continued on the basis of a personal relationship, involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited company;

(ii) an agreement, or understanding, that all, or some (for there may be 'sleeping' members), of the shareholders shall participate in the conduct of the business;

(iii) restriction upon the transfer of the members' interest in the company - so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.

212 While Lord Wilberforce recognised the potential for obligations to be owed by members or directors, outside of their duties to the company, he also warned of the potential for this 'quasi-partnership' description to obscure, rather than clarify, the reality of the parties' relationship. His Lordship said the following:[91]

It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves. To refer, as so many of the cases do, to "quasi-partnerships" or "in substance partnerships" may be convenient but may also be confusing. It may be convenient because it is the law of partnership which has developed the conceptions of probity, good faith and mutual confidence, and the remedies where these are absent, which become relevant once such factors as I have mentioned are found to exist: the words "just and equitable" sum these up in the law of partnership itself. And in many, but not necessarily all, cases there has been a pre-existing partnership the obligations of which it is reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure, or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new obligations. A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in. (emphasis added)

213 Lord Wilberforce's observations were directed to the consideration of equitable principles, common to partnerships, in the context of the 'just and equitable' ground of winding up corporations and not more generally and in the context sought to be asserted by the plaintiff.[92] Ebrahimi was referred to by Handley JA in Brunninghausen v Glavanics ('Glavanics') (a case concerning fact-based fiduciary obligations and discussed in more detail below) as being 'not directly in point.'[93]

214 In any event, an extension of the Ebrahimi principles, in the manner advanced by the plaintiff, is not open to me. In Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd, the appellants argued that a unit trust ought to have been treated as a quasi-partnership, in order to invoke a fiduciary duty arising between the investors inter se, and a consequent injunction restraining the exercise of a power compulsorily to acquire their units. At first instance and on appeal, the appellants relied on the principles of Ebrahimi. This argument was rejected at first instance, and on appeal, where Dodds-Streeton JA said:[94]

[109] The appellants conceded that their argument involved a novel extension of the principles of Ebrahimi.

...

[120] In the present case, if the parties were, in essence, partners who envisaged continuing personal participation in the conduct of the business, mutual fiduciary duties would apply independently of Ebrahimi principles, and indeed, the intended transfer of shares to the minority investors never occurred.

[121] Whether within a corporate structure or not, the underlying relationship, rights and obligations of partnership or quasi-partnership would be recognised. In either case, somewhat ironically perhaps, the remedy of restraining the exercise of a legal power to expel a person is typically granted in the context of his or her application to wind up the association.

[122] As his Honour found, the invocation of Ebrahimi (or the partnership principles which informed it) was inapposite where, as in the present case, the dissolution of the parties' association was not sought. (emphasis added)

215 In Chickabo Pty Ltd v Zphere Pty Ltd (Chickabo), I reviewed the authorities concerning the recognition of fiduciary obligations, between partners, or as a matter of fact on the basis of the relationship of the parties.[95] I emphasised the importance of having regard to not only the contractual arrangements that the parties have put in place to govern their venture, but also to how they have structured their venture, including, if applicable, their decision to adopt an intricate structure incorporating companies and trusts. I said: [96]

[50] However, the High Court has observed that fiduciary duties 'are not infinitely extensible' and further that the scope of the duty must accommodate itself to the particulars of the underlying relationship. The fiduciary duty should be consistent and conform to the scope and limits of that relationship (as may have been agreed between the parties), and should be moulded according to the particular facts of the case. It follows that a fiduciary relationship may be modified by contract. This may extend to excluding the operation of fiduciary duties in their entirety. Partners may therefore decide to make a commercial decision to adopt a corporate structure in which they owe duties to the corporation in their capacity as directors, but not necessarily to one another. (emphasis added) (citations omitted)

216 In Crossman v Taylor (No 3), Besanko J dealt with a claim for the equalisation of contributions, on the basis of oppressive conduct. His Honour said the following:[97]

[301] The parties chose to conduct their venture through a company and discretionary trust and not through another legal structure such as a partnership. Had they conducted the venture through a partnership they would have owed fiduciary duties to each other. In electing to operate through a company they undertook fiduciary duties to the company but not, on the face of it, fiduciary duties to each other.

[302] It is true that the second defendant was a two-person company and that the genesis of the arrangement was very similar to what one would find in the case of a two-person partnership. It is also true that the categories of fiduciary relationships are not closed: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 (Hospital Products). However, those matters having been said, there is nothing by way of an express statement or clear conduct to indicate that the parties intended to create legal obligations over and above the obligations which attended the legal structure they adopted after taking accounting advice.

217 In Friend v Booker, it was alleged that the second respondent had been a 'corporate vehicle' for the conduct of a partnership or joint venture. The High Court rejected an attempt to use the equitable doctrine of contribution to avoid the consequences of the parties' decision to utilise the corporate form, and instead affirmed the significance of that decision, and the effect that it had on their relationship. French CJ, Gummow, Hayne and Bell JJ said:[98]

[86] The appellant also submits that equity does not impose fiduciary duties between the parties to a deliberate commercial decision to adopt a corporate structure in which they would owe duties, but to the corporation and as directors. Why, it is asked, should equity intervene in such a fashion when the company, by which Mr Brooker and Mr Friend carried on the business, failed and, in the result, their personal losses will not be in equal amounts? That submission is to be accepted.

...

[88] The appellant develops that submission by emphasising the significance of the selection by him and Mr Brooker of the corporate structure as the vehicle for their business enterprise. ... That selection brought with it the attendant legal doctrines of corporate personality and limited personal liability.

218 In Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd, the Court of Appeal held that the features of the parties' relationship did not take it outside of an ordinary contractual relationship and that no fiduciary duties existed. It was held further, that any vulnerability on the part of the party alleging the fiduciary duty, was purely as the result of the terms of the contract. The Court of Appeal said:[99]

[127] In cases where the commercial relationship is governed by a contract, 'the ordinary rules of construction of contracts apply' in determining the existence of a fiduciary relationship and the scope of any fiduciary obligations. In Hospital Products, Mason J said:

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.

219 In my opinion, Vainer did not owe fiduciary duties to Rozenblit, as alleged.

220 In Chickabo, I identified the key characteristics and features that underlie a fiduciary relationship, including the 'critical feature', being 'the assumption of responsibility to act for, or on behalf of, the interests of another, in the exercise of any power or discretion affecting the interests of the principal in a legal or practical sense.'[100]

221 In this case, Vainer assumed no such responsibility. Even at the early stage of their relationship, the parties were protecting their own commercial interests. This was evidenced by Rozenblit ensuring that he had his own advisor present, and by Vainer insisting that Rozenblit enter into a confidentiality agreement (on 25 July 2006) as a precursor to discussing any potential business relationship. As the relationship progressed, Vainer consistently communicated to Rozenblit, that it was incumbent on him to ensure that he had a translator present at meetings and on other occasions, and that he obtained legal and accountancy advice when he required it.[101]

222 Although Vainer held a majority interest in the venture during its early stages, he entered into a contract, which effectively limited his voting power to a 50 per cent stake in the company.[102] This clause is relied on by Rozenblit, and in submissions, it was put as high as 'giving rise' to the fiduciary duty. Although, it is true that this restriction would reasonably entitle Rozenblit to expect that Vainer would act in his interests by not exercising his controlling stake in the event that they could not agree on a certain subject, it is no more than an expectation that a party would comply with their contractual obligations. Far from giving rise to a fiduciary duty, it actually achieves the opposite.

223 The existence of this contractual restriction is plainly inconsistent with the alleged trust and confidence that Rozenblit allegedly reposed in Vainer, or the vulnerability that he was supposedly exposed to. Rozenblit did not defer the consideration and determination of his best interests, in the context of the joint venture, to Vainer. Vainer did not have the power or discretion to make decisions by himself on behalf of the joint venture. Rather, the parties agreed to make decisions jointly and in collaboration with one another. The effect of this contractual restriction was to lessen the vulnerability of Rozenblit, provide him with a greater degree of bargaining power, and to treat he and Vainer as equals where each was able to veto any proposed course of action which they deemed to have been adverse to their individual interests. The same can be said for the following clauses in the Implementation Agreement which evidenced the 'level playing field' that each party stood upon:

(a) While Rozenblit was responsible for development of the Technology, as the 'Technology Director' and Vainer was authorised to have discussions with third parties in relation to commercialisation of the Technology as the 'Commercial Director', each was obliged to take steps in pursuance of these aims 'in consultation with' the other party (cls 5 and 6);

(b) both parties were obliged not to use or disclose confidential information 'except where they both agreed to such use or disclosure (cl 8);

(c) both parties were signatories to the bank accounts of the Unit Trust and VRT Operations, and the signature of each was required to make or authorise payments from the accounts (cl 9);

(d) The Unit Trust and VRT Operations would repay loans and pay distributions, unless otherwise agreed by Rozenblit and Vainer (cl 12);

(e) where disputes existed between Rozenblit and Vainer, those disputes could be mediated (cl 17);

(f) the parties each had a right of first refusal for the purchase of any shares in VRT and VRT Operations or for the purchase of units in the Unit Trust (cl 18); and

(g) the parties each acknowledged that they had obtained independent legal and financial advice (cl 19);

224 In any event, I am satisfied that even if there was a fiduciary duty owed by Vainer (which is to be doubted), it was excluded or extinguished once the various companies were incorporated (that is, shortly after the Implementation Agreement was executed), and the First Shareholders Agreement entered into.

225 As noted earlier, the plaintiff submitted that this case was on all fours with Ebrahimi. For the reasons referred to earlier, I do not agree. Further, Lord Wilberforce:[103]

The company ... was formed in 1958 to take over a business founded by the second respondent (Mr. Nazar). It is a fact of cardinal importance that since about 1945 the business had been carried on by the appellant and Mr. Nazar as partners, equally sharing the management and the profits. (emphasis added)

226 In Ebrahimi, The business was carried on for approximately 13 years before it took corporate form. Even after its incorporation, all of the profits of the company were distributed as directors' remuneration, and the company was effectively carried on as a partnership. Lord Wilberforce pointed to a number of situations in which it may be appropriate (in the context of a winding up application) to apply equitable principles, including where a corporate structure overlays a personal relationship (that is, most commonly, a partnership relation):[104]

(i) an association formed or continued on the basis of personal relationship, involving mutual confidence - this element will often be found where a pre-existing relationship has been converted into a limited company

227 In my opinion, there is an insufficient basis to conclude that the parties were carrying on in partnership, or on some other analogous structure involving mutual trust and confidence and giving rise to the alleged duty, for any meaningful purpose or duration. There was, effectively, no commercial relationship for the corporate structure to be 'superimposed' upon. From the very outset, the parties deliberately chose to conduct the venture through a corporate and trust structure, and not some other structure. While the Oral Agreement did not prescribe the precise structure of the venture, and it could well have been a partnership, this structure (and the Oral Agreement itself) was short-lived.[105] On the facts agreed to by all parties, the Implementation Agreement was executed at most, one month, after the Oral Agreement had been entered into. VRT and VRT Operations were established shortly thereafter. No activities of any significance were undertaken to promote or develop the venture prior to the point in time that the parties executed the Implementation Agreement.

228 Under the Implementation Agreement, the parties labelled their relationship a 'Joint Venture', and elected to conduct that joint venture through VRT, VRT Operations and the Unit Trust. It is clear that the terms of the Implementation Agreement restructured the informal relationship (that had been agreed to under the Oral Agreement) between the parties into a structure of corporations and trusts. Under this structure, Rozenblit and Vainer were to be and did in fact become directors of VRT and VRT Operations and unit holders in the Unit Trust. The same can be said for VRT Global once that company was incorporated. Upon their incorporation, any fiduciary duty that existed was owed by the directors to their respective corporate entities, and not personally to one another, if such fiduciary obligations ever existed (which, as noted, is to be doubted).

229 In any event, the plaintiff cannot rely on the terms of the Oral Agreement or Implementation Agreement. It is clear that the terms of the Implementation Agreement, and therefore any duties said to arise under that agreement, were superseded by the parties entering into the First Shareholders Agreement.

230 Where the same parties have entered into two or more agreements concerning the same subject matter, a question arises as to whether the later contract varies, terminates or replaces the earlier contract.[106] That question is answered by discerning the objective intention of the parties as disclosed by the later agreement, judged in accordance with the ordinary rules of contractual construction.[107] In Hillam v Iacullo the New South Wales Court of Appeal observed that:[108]

[51] Once English law accepted that prior contractual obligations could be extinguished by implication, it sufficed to establish that that was the intention to be imputed to the parties. That may be established in a number of ways. However, where a later contract between the same parties deals with the whole of the subject matter of the former in a way that it is inconsistent with the continued existence of the former, then it must necessarily rescind the former by implication even in the absence of express language. ... (emphasis added)

231 In Balanced Securities Ltd v Dumayne Group Pty Ltd the Court of Appeal endorsed Hillam v Iacullo and set out the following guiding principles:[109]

(1) The relevant issue is whether the subsequent agreement amends the earlier agreement or brings it to an end and replaces it ....

(2) The earlier agreement may be brought to an end either expressly or by implication ....

(3) The issue is to be resolved by ascertaining the manifest intention of the parties ....

(4) The manifest intention of the parties is to be ascertained objectively by the construction of the subsequent agreement, having regard to the relevant context of that agreement where it is permissible to do so in accordance with the ordinary principles of contractual construction ....

(5) A potentially critical factor militating in favour of a conclusion that the manifest intention of the parties, objectively ascertained, was to bring the earlier agreement to an end and replace it, is where the terms of the two relevant agreements deal with the same subject matter in different and inconsistent ways .... (citations omitted)

232 The objective intention to effect a termination of the earlier contract can be express or implied.[110] In this case, it is expressly stated in the terms of the First Shareholders Agreement and embodied by the entire agreement clause. That clause is clear and unequivocal, with the effect that the First Shareholders Agreement 'supersedes all previous agreements in respect of [the] subject matter'.

233 Rozenblit submitted that the 'subject matter' of those agreements is merely the ownership ratio and corporate structure of the venture. However, in my opinion, the subject matter of the Shareholders Agreement is much broader than what Rozenblit submits. The First Shareholders Agreement concerned the 'terms of [the parties'] arrangements as to how the [VRT Global] and the Business will be owned, managed and controlled_'_ (Recital E). I have outlined the relevant terms of that agreement above. It effected substantial changes to the management of the business, decision making at shareholder and director level, and the allocation of voting power between each of the directors.[111]

234 Clearly, the subject matter of the Shareholders Agreement was the same as and indeed, more expansive than both, the Oral Agreement and the Implementation Agreement. The express language of the entire agreement clause means that the First Shareholders Agreement supersede those previous agreements, and embodies the entire agreement between the parties. In my opinion, Rozenblit should not be entitled to cherry-pick aspects of the Oral Agreement and Implementation Agreement, which are favourable to him, and discard others contained within the Shareholders Agreements which are not.

235 The no partner or agency clause contained within the Shareholders Agreements further supports the defendants' position. The effect and consequence of the new structural and corporate arrangements was clearly to replace the old obligations with new and more complex and far reaching obligations. The shareholders in the new structure were not to be regarded as partners. This is what they agreed and there is no scope for the pre-existing contractual arrangements or relationships to continue.

Fiduciary duty owed by a director vis-à-vis shareholder

236 Rozenblit relies on Glavanics for the third basis on which the fiduciary duty is said to arise.[112] In that case, Mr Brunninghausen was a director and the majority shareholder of Skima Imports Pty Ltd (Skima). Mr Glavanics was the other director and shareholder. They were brothers-in-law. Skima was formed in 1976 and in 1982 and 1983 the brothers' relationship had become strained. Mr Glavanics retained his shareholding and directorship but he received no information and took no active part in the company's affairs. In 1987, the brothers commenced negotiations for the sale of Mr Glavanics' shares to Mr Brunninghausen. During these negotiations, Mr Brunninghausen received an offer from third parties to buy the assets of Skima. He did not disclose the existence of the third party offer or negotiations to Mr Glavanics. Mr Glavanics ultimately sold his shares to Mr Brunninghausen, however, for a price substantially lower than the price paid by the third parties.

237 At first instance, Bryson J held that Mr Brunninghausen, as a director, owed a fiduciary duty to Mr Glavanics. This finding was affirmed by the New South Wales Court of Appeal.

238 Handley JA (with whom Priestley and Stein JJA agreed) stressed the importance of the following features of the relationship between Mr Brunninghausen and Mr Glavanics, which were said to give rise to that duty:

(a) Mr Glavanics was 'almost totally powerless.' His continuing directorship was an 'empty shell' which could be disregarded. Any insistence on his rights as a director would have led to his removal. He was, therefore, effectively a 'disenfranchised, minority shareholder, locked into the company.' As a shareholder, he had no legal right to inspect the company's books of account, and no effective right to be informed of the negotiations for the sale of the business.[113]

(b) Mr Brunninghausen, as the sole effective director, occupied a position of advantage and could, if he saw fit, disclose information about the pending negotiations, but he could not be compelled to do so. Handley JA said:[114]

[99] ... This gave him the capacity to affect the interests of the plaintiff "in a practical sense", and in the context of the negotiations with him "a special opportunity" to exercise that capacity to the detriment of the plaintiff who was "at the mercy" of the defendant and "vulnerable to abuse" by the defendant "of his position"... (citations omitted)

(c) After the brothers' falling out in 1983, Mr Brunninghausen did not undertake in any factual sense to act in the interests of Mr Glavanics or in their joint interests. However, he continued to occupy an office with the advantages referred to above. The absence of a positive undertaking (or an implied one) by Mr Brunninghausen was not fatal to the recognition of a fiduciary duty. The question was not 'whether there is an expectation in fact, but whether the vulnerable party is "entitled to expect" a particular standard of conduct.'[115] There was a factual basis for this expectation on the part of Mr Glavanics, as their mother-in-law had strongly expressed her wish that the brothers-in-law settle their differences and restore harmony to the family.[116] The family relationship 'created a situation in which the plaintiff was "entitled to expect" that he would not be cheated by non-disclosure of negotiations'.[117]

239 The Court of Appeal confirmed the default position is that a director occupies a fiduciary position vis-à-vis the company, however in certain special circumstances, a director can owe a fiduciary duty to an individual shareholder.[118] Handley JA made clear that any fiduciary duty must arise from the nature of the relationship, and the facts and circumstances that form their course of dealing:

[54] If a fiduciary duty exists here it must arise from the bare facts of the relationship. These include the position of the defendant as the sole effective director, the existence of only one other shareholder, their close family association, the intervention of the mother-in-law to secure a family reconciliation, and the exclusive advantage or opportunity which the defendant's position conferred on him to receive any offers to purchase the company's business from third parties.

240 The authorities and commentary on this topic reinforce, within this context, the importance of the traditional characteristics of trust, confidence, vulnerability, expectation, reliance and the like, which have long been considered the 'hallmarks' of a fiduciary duty. While not exhaustive, this may include the presence of:[119]

(a) dependence or reliance by the shareholder on special knowledge, information and advice known by the director;

(b) the existence of a relationship of trust or confidence, including the existence of a close personal connection;

(c) the significance of a particular transaction to the shareholder, such as a transaction concerning their shares, with the potential to affect their interests in a practical sense;

(d) the nature and extent of any positive acts taken by, or on behalf of, the directors to promote that transaction;

(e) an undertaking, whether express or implied, by the director to act on behalf of another, or the existence of circumstances by virtue of which the shareholder is entitled to expect that the director would act in their interests;

(f) the vulnerability of the shareholder, and the extent to which the director knows of that vulnerability; and

(g) the structure of the shareholdings, including whether the alleged fiduciary holds a controlling interest in the company.

241 In my opinion, and for the reasons that follow, this claim must fail.

242 First, the claim was not adequately articulated. The nature of this duty was elevated to being, in effect, a status-based fiduciary duty, which as noted, is plainly incorrect. The duty was said to arise by virtue of the mere fact that there were very few members or directors, their relationships were close, and as the impugned decisions related to the purchase of the Rozenblit's shares. Counsel for Rozenblit did not point to specific information in the possession of Vainer, or the particular incidents of this shareholder to director relationship that gave rise to the alleged fiduciary duty. Rozenblit confined the basis of this duty to the Share Transfer claim, and as such, the following analysis is also confined.[120] Ultimately, Rozenblit's reliance on Glavanics was, in addition to being confined, too vague and general to be of any assistance.

243 Secondly, the potential for fiduciary duties to be owed by a director to a shareholder should not be permitted to obscure the traditional doctrinal basis for the recognition of such duties. A fiduciary duty is not found by virtue of only the status of the parties without something more.[121] Put another way, I have found that Vainer did not owe a fiduciary duty more generally to Rozenblit, on the basis of the Oral Agreement and Implementation Agreement, as their relationship lacked the key characteristics of trust, confidence, the assumption of responsibility for Rozenblit's interests on the part of Vainer, or an expectation on the part of Rozenblit that Vainer would act in his interests.[122] It cannot be right, that by merely taking into account the fact that they were in the relationship of director and shareholder (and later as director of the corporate trustee to unitholder), that this relationship is elevated to one that is fiduciary in nature. A finding to this effect conflates status-based fiduciary relationships with fact-based fiduciary obligations.

244 Thirdly, while this case bears superficial similarities to Glavanics, the evidence does not go high enough in establishing that Vainer owed a fiduciary duty to Rozenblit. These similarities only go as far as to demonstrate some more vague aspect or quality of vulnerability or reliance on the part of Rozenblit to Vainer, but to a degree not exceeding that of an ordinary minority shareholder to a director.

245 In Glavanics, Mr Glavanic's directorship was regarded 'an empty shell' which could be disregarded. He took no active part in the company's affairs and was entirely reliant on Mr Brunninghausen for information. He was, therefore, effectively a 'disenfranchised, minority shareholder, locked into the company.' As noted, Rozenblit confined this aspect of the claim to the Share Transfer claim. Rozenblit was a director as and when the Share Transfer took place. He was entitled to, and received notice to meetings, and attended either by proxy or with a translator present. He also was entitled to vote on any proposed resolution in relation to VRT Global. At this time, he was not reliant on Vainer for general information in relation to the company's affairs. I note however, and in Rozenblit's favour, that Vainer handled the 'commercial' side of their venture while Rozenblit handled the 'technological' side. He was reliant, although only to the degree that Vainer would circulate such information in meetings or via other correspondence, as is the usual course and expectation between directors in a company.

246 As noted and examined above, however, any fiduciary duty must conform to the scope and limits of the parties' relationship, including the contractual arrangements that they have in place.[123] It is necessary to consider the Shareholders Agreements, and in particular, the rights and powers available to Rozenblit which distinguish him from the relatively 'powerless' minority shareholder in Glavanics, and which lessens his vulnerability to, or reduces his reliance on, Vainer.

(a) under the First Shareholders Agreement, and until 10 November 2010, had the power to veto any director's resolutions raised under cl 6.4.

(b) was entitled to 'all information concerning the Business and the operations of the Company' including, but not limited to, audited and unaudited financial statements (First - cl 12.1; Second - Annexure A, cl 5.1).

(c) was entitled to inspect the company's property, inspect and take copies of any document relating to the Business, including its accounts, and discuss the company's affairs, finances and accounts with its officers and auditor (First, cl 12.3; Second - Annexure A, cl 12.1).

(d) had rights of pre-emption in relation to the sale of each other shareholder's shares (First - cl 14; Second - Annexure A, cl 4).

(e) was entitled to serve a Dispute Notice on Vainer or any other party to the Shareholders Agreements (which he did) and to then move to have the dispute resolved by an expert (First - cl 16; Second - cl 6).

(f) acknowledged that he had received legal advice, or had the opportunity to do so (regardless of whether he, in fact, received that advice) (First - cl 18.7; Second - cl 8.7).

(g) received notices under the agreements (albeit in English) (First - cl 19.1; Second - 9.1); and

(h) otherwise had the rights available to him as a shareholder under the Corporations Act 2001 (Cth), including the ability to call a general meeting or to seek orders for the production of books of the company.

248 Further, in Glavanics, the Court of Appeal stressed that Mr Brunninghausen possessed 'special knowledge', namely the existence of negotiations with third parties that would affect the value of the company's shares. He was the only party privy to this information and actively concealed it. As noted, Rozenblit has not articulated this 'special knowledge' possessed by Vainer. It could be said that this consisted of his intention to effect the transfer of Rozenblit's shares whether or not Dr Vainer ultimately put up the identified collateral, or for the transfer to occur prior to the putting up of security, if that was to be put up. If Vainer saw fit, he could disclose this intention to Rozenblit, but for obvious reasons, he did not. This special knowledge gave Vainer the capacity to affect Rozenblit's interests in a practical sense, that is, financially and in terms of the rights that he had in the affairs and direction of VRT Global.[124]

249 As noted by Handley JA the relevant and critical question is not 'whether there is an expectation in fact, but whether the vulnerable party is "entitled to expect" a particular standard of conduct.'[125] In the ordinary course of business, and in accordance with basic principles of commercial morality, members of the business community do not expect to be deceived by their business partners. However, beyond this general expectation, there is nothing in the circumstances of this case which would justify Rozenblit being entitled to expect that Vainer would act in his interests in arranging the transfer of his shares. In any event, other remedies are available to Rozenblit, as referred to above.

250 The Implementation Agreement was superseded by the Shareholders Agreement for the reasons noted above. Accordingly, any claim based on such agreement must fail.[126]

251 The extent to which Polymeric continued the business of VRT Global was the subject of much evidence, cross-examination and ultimately submissions. Surprisingly, neither party called any expert evidence. Not surprisingly, the parties were diametrically opposed in their suggested answer to the question. Rozenblit submitted that there was a seamless transition and Polymeric simply picked up where VRT Global left off. Needless to say there was some evidence in support of this contention. The Vainers submitted that Polymeric developed its own technology and patents that had nothing whatsoever to do with any VRT Global technology or intellectual property. Needless to say, there was also some evidence in support of this seemingly extravagant contention. The evidence is technical, scientific and substantial. Although Counsel made detailed submission in support of their respective contentions, and in this regard did the best they could, it is a difficult issue for the Court to resolve.

252 Despite the substantial evidence and time spent on this issue during the course of the trial, it is, in my opinion, not necessary to resolve this question.

253 It is common ground that any technology or intellectual property taken over or used by Polymeric was that of VRT Global and not Rozenblit. Neither VRT Global nor the Liquidators have made any such claim. For his part, Rozenblit puts his case on a different footing. He does not argue, as such, that Polymeric appropriated his technology or intellectual property. He recognises that it was developed to a particular point by VRT Global.

254 However, he claims that Polymeric should in effect have included him as a joint venturer or (presumably) equal equity participant because of the Implementation Agreement and Vainer's fiduciary duties.

255 It was submitted that the fiduciary duties owed by Vainer continued throughout the entire period, commencing late 2006 to the establishment of Polymeric. In breach of this duty it is contended that Vainer procured the benefit for himself. It is also contended that Vainer was in breach of the Implementation Agreement. However, as discussed, there was no fiduciary relationship and the Implementation Agreement was superseded and is of no legal relevance.

256 If I am wrong, and there is some basis on which Rozenblit has a claim, I find that in any event, he has not discharged the onus of establishing the necessary elements of the claim. In particular, I am unable to conclude, on the evidence, that Vainer, through Polymeric, simply picked up where he left off under VRT Global.

257 Whatever the technology and whatever plant and equipment or production line Polymeric acquired shortly after the liquidation of VRT Global, and shortly after its establishment, the fact is that more than 6 years after the liquidation of VRT Global, Polymeric has still not produced a commercially viable product, whether from its patents or otherwise. It is still undertaking the necessary research, and even if successful, it would need to raise substantial funds to establish a commercial operation. On the evidence, Polymeric produces no product, derives no income, and is not yet commercially viable.

258 This is of course entirely inconsistent with Rozenblit's contention to the effect that something must have taken place over the past six years? As pointed out, but worth noting again, it does not matter whether Polymeric was developing new technology or using and building on the VRT Global technology.[127]

259 Counsel for Rozenblit submitted (perhaps tellingly) that excessive focus on the technology, products and intellectual property should be avoided and is perhaps unnecessary. The point is, whatever the technology and intellectual property, Rozenblit alleges that he was entitled to be a part of it. Again, as noted, the suggested basis is not made out. There was in my view a complete break and disconnect between 2006 and 2013, and most certainly 2019. The basis of the initial relationship and joint endeavour between Rozenblit and Vainer is of historical relevance only. As it progressed, the relationship changed and mutated. New rights and obligations were incurred. The partnership or 'quasi-partnership', if it existed at all was of a very short duration, and morphed into something completely different and more complex. The company and trust structures undermine any notion of a fiduciary duty for the reasons discussed.

260 In the event that Polymeric simply picked up where VRT Global left off (a finding that I am unable to make on the evidence) and having rejected Rozenblit's claim based on breaches of the Implementation Agreement and fiduciary duty, Global VRT has or had the best possible claim against Polymeric. The liquidators have not made any such claim.

261 In summary, I have found as follows in relation to the Share Transfer claim:

(a) Vainer did not breach the Implementation Agreement. It was superseded by the Shareholders Agreements (from [229] and at [88] and [250]).

(b) Vainer did not owe fiduciary duties to Rozenblit (at [120] and from [203]). The claim against Dr Vainer, on the basis of accessorial liability, also fails (at [120]).

(c) Vainer engaged in misleading or deceptive conduct. He is liable as a primary wrongdoer, pursuant to s 18 of the Australian Consumer Law (from [89]). Dr Vainer was not involved in Vainer's contravention (at [99]).

(d) Vainer engaged in unconscionable conduct. He is liable as a primary wrongdoer, pursuant to s 21 of the Australian Consumer Law (from [100]). Dr Vainer also engaged in unconscionable conduct as a primary wrongdoer pursuant to s 21 (from [116]). Neither Vainer or Dr Vainer are liable pursuant to s 20 of the Australian Consumer Law.

(e) As against Dr Vainer the claim in restitution is made out. It would be unconscionable for Dr Vainer to retain the benefit. He must bear the loss (from [121]).

262 Although Rozenblit succeeds on the Share Transfer claim, he is only entitled to nominal damages. VRT Global was effectively insolvent at the time of the Share Transfer (at [174]).

263 All claims in relation to the liquidation of VRT Global and establishment of Polymeric must fail. Vainer did not owe fiduciary duties to Rozenblit (from [203]). The Implementation Agreement had been superseded (from [229]). Vainer did not induce VRT to act in breach of trust (at [180]). VRT Global was insolvent as at 27 November 2012. The liquidation of VRT Global was an entirely logical and unremarkable consequence of the financial position and performance of the company (from [177]).

264 I will hear from the parties as to the appropriate orders and costs.

[1] This summary of the case is taken directly from the plaintiff's outline of opening submissions.

[2] The evidence establishes that Vainer had some knowledge of the technology before he met Rozenblit. (See paragraph [8] and footnote 4 below).

[3] Initially, Vainer held 55 per cent of the units in the Unit Trust and Rozenblit held 45 per cent.

[4] WWTC was a company formed by Vainer and Salvatore Saker (Saker) for the purpose of facilitating commercial projects with international technology companies. Vainer was responsible for the technical aspects of that business, and Saker was responsible for the commercial side. In 2004, WWTC was involved in a venture with Moscow Tyre Plant in relation to the manufacturing of tyres and The Hatlar Group for the purpose of using plasma technology to produce electricity from end-of-life tyres in Lebanon.

[5] Paragraph 10 obliged Vainer to procure funds to be lent to the Unit Trust and VRT Operations on an interest free basis in the sum of up to $10,000.

[6] Deeds of Assignment, in relation to the VRT Patent Applications were executed on 24 November 2006 (with respect to the Tyre Segmenting Device), 20 May 2009 (with respect to the Polymeric Waste Disposal Device and Method of Reprocessing Polymeric Waste) and 6 August 2019 (with respect to the Extrusion Device and Method of Extruding Materials) with Rozenblit and Vainer as the Assignors and VRT as Assignee. These Deeds of Assignment were set aside pursuant to a Judgment of Associate Justice Efthim of this Court, handed down on 14 June 2013.

[8] Freeman was a director of Stennlake.

[9] It is not entirely clear which version of the company constitution came first. The First Constitution appears at CB 1047 and 1330. This is the same document, appearing in two places. This version was attached to the Deed of Accession and Non-Diluting Capital. It is therefore, clear, that this was the first constitution of VRT Global effective as at 30 November 2009 (being the date of that agreement). The Second Constitution, was 'undated' in the court book and appears at CB 4911. This version includes a reference to the non-diluting capital arrangement in the rights attaching to certain shares. It follows, that this is the Second Constitution, adopted on 10 November 2010.

[10] Dr Vainer was appointed as director at a later time, being 2 November 2011.

[11] Clause 6.4 covered a wide range of matters including, inter alia, capital expenditure, leasing expenditure, goods and services, disposals, or the raising of financial accommodation exceeding certain sums, the provision of financial accommodation and guarantees, the creation of encumbrances, transactions not in the ordinary course of business, with related entities, or not at arm's length, the granting of employee salary packages or superannuation schemes, the appointment or removal of an auditor, the recommendation or declaration of dividends, decisions with respect to litigation, the adoption of budgets and business plans, changes or disposals in the company's business, the acquisition of entities, new issues of securities, changes in the company's place of business, or the acquisition or disposal of real property.

[13] The Shareholders Agreements merely defined Intellectual Property to mean 'the intellectual property developed by the Company or which the Company has a right to use, exploit or develop including without limitation the: tyre segmenting, polymeric waste disposal and reprocessing; and extrusion processes.' VRT Global possessed rights over the intellectual property, through a licence executed on 30 September 2009, between VRT Operations as sub-licensor, and VRT Global as licensee. VRT was the ultimate licensor and owner of the intellectual property. As noted, the Deed of Assignment to VRT was set aside by Associate Justice Efthim on 14 June 2013.

[14] Clause 6 (or Cl 16 of the First Shareholders Agreement) was a dispute resolution clause, whereby a Dispute Notice was issued and negotiation or resolution by an expert followed. Each party was obliged to follow this prior to commencing any legal or other proceedings.

[15] Australian patent application number: 2006241342.

[16] Australian patent application number: 2010251745.

[17] Australian patent application number: 2010281342.

[18] Boris Rozenblit v VR TEK Pty Ltd [2013] APO 49 [4] and [140] (Dr B. Akhurst) (Rozenblit v VRT).

[20] Ibid [132], [138] to [140] (Dr B. Akhurst).

[21] The extruder, further developed and refined by Deakin, contained a motorised rotating screw ground rubber crumb against the extruder barrel, pulverising it and thereby breaking the chemical bonds created by the vulcanisation process.

[22] See paragraphs [138] to [143].

[23] The second version is probably more unhelpful to Vainer. The words 'put at risk' suggest completion or the contemplated completion of the loan using Dr Vainer's premises as security. I do not accept Vainer's explanation that 'put at risk' simply and merely refers to Dr Vainer's willingness to do so.

[24] The last written correspondence with the CBA was on 15 November 2011. A CBA representative said that he 'look[ed] forward to receiving all the information for an application'.

[25] The defendants did not discover any further documents in relation to a CBA loan application, and confirmed on oath that they did not have, and never had, any such documents in their possession. This is further confirmed by the instructions to their expert in this proceeding. That is, he was instructed to assume that the loan application to the CBA did not proceed.

[26] Rozenblit would and did continue to hold an indirect interest in the company through his units in the Unit Trust, which in turn (and through VRT Operations), held A Class Shares in VRT Global.

[27] The attempt was by Vainer. It was not enthusiastically supported by Dr Vainer and Gelberg.

[28] See paragraphs [138] to [143].

[29] See paragraphs [229] to [234].

[30] Although this was not specifically pleaded, I did not invite the parties to make further submissions. The facts constituting Vainer as a person involved (as pleaded) are the same as those that constitute him as a primary wrongdoer. Further, although the claim against Vainer is more properly based on the Australian Consumer Law and Fair Trading Act 2012 (Vic) which incorporates Sch 2 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law), the relevant provisions, are exactly the same.

[31] S & I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd [1999] FCA 316; (1998) 88 FCR 354, 362-3 (Hill, RD Nicholson and Emmett JJ) (S & I Publishing).

[32] RJB Wolfe Pty Ltd v Mornington Peninsula Eye Clinic Pty Ltd [2018] VSC 27 [96] (Sifris J);, Noone, Diretor of Corporate Affairs, Victoria v Operation Smile (Australia) Inc [2012] VSCA 91 [19]-[20] (Warren CJ and Cavanough AJA).

[33] S & I Publishing [1999] FCA 316; (1998) 88 FCR 354, 362-3 (Hill, RD Nicholson and Emmett JJ); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191, 198 [8] (Gibbs CJ).

[34] Demagogue v Ramensky [1992] FCA 557; (1992) 39 FCR 31, 32 and 41 (Gummow J).

[35] (1995) 127 ALR 543, 555 (Black CJ, von Doussa and Cooper JJ).

[36] However, and to repeat, Vainers evidence was not supported by Dr Vainer and Gelberg (see paragraph [85] above).

[37] I refer to fn 30. Although the basis for the unconscionable conduct differs from the pleaded basis, the conduct arises from substantially the same facts and circumstances as the misleading or deceptive conduct claim.

[38] Australian Competition and Consumer Competition v Samton Holdings Pty Ltd (2002) 189 ALR 76, 92 [48] (Gray, French and Stone JJ) (Samton Holdings).

[39] Ibid 90-93 [43]-[50] (Gray, French and Stone JJ); Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 197 ALR 153, 163-4 [38]-[43] (Gummow and Hayne JJ) (Berbatis); Body Bronze International Pty Ltd v Soleil Tanning Oxford Pty Ltd [2007] FCA 371 [18]-[33] (Weinberg J); Optus Networks Ltd v Telstra Corporation Ltd (No 3) [2009] FCA 728 [7]-[10] (Edmonds J) (appeal allowed on other grounds: Optus Networks Pty Ltd (ACN 008 570 330) v Telstra Corporation Ltd (ACN 051 775 556) [2010] FCAFC 21).

[40] Berbatis [2003] HCA 18; (2003) 197 ALR 153, 156 [5] referring to the second reading speech introducing s 51AA of the Trade Practices Act: Australia, House of Representatives, Parliamentary Debates (Hansard), 3 November 1992, 2408.

[41] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 405 (Fullagar J).

[42] Samton Holdings (2002) 189 ALR 76, 92 (Gray, French and Stone JJ) See Berbatis [2003] HCA 18; (2003) 197 ALR 153 at 156-157 [10] where Gleeson J warned against the over sub-categorisation of tests to determine the particular disadvantage. In any event, the categorisation is, for present purposes, a useful reference point.

[43] [1983] HCA 14; (1983) 46 ALR 402, 412-414 (Mason J) (Amadio).

[44] [1956] HCA 81; (1956) 99 CLR 362, 405.

[45] Amadio [1983] HCA 14; (1983) 46 ALR 402, 413-414 (Mason J).

[46] In Norcast S AR L v Bradken Ltd (No 2) [2013] FCA 235; (2013) 302 ALR 486 Gordon J (as her Honour then was) determined (at 542-544 [232]-[241]) that shares fell within the definition of 'services' contained within the Competition and Consumer Act 2010 (Cth). The definition is repeated, in precisely the same terms, within the Australian Consumer Law. It follows that however unusual, shares constitute a 'service' for the purpose of s 21 of the Australian Consumer Law.

[47] (2016) 333 ALR 569, 610 [189] (Gageler J) (Paciocco).

[48] Subsection 21(4) only came into force on 1 January 2012 (being a time after the Share Transfer). However, it is not the case that prior to the introduction of s 21(4)(a), s 21 of the Australian Consumer Law was limited to unconscionable conduct within the meaning of the unwritten law. Section 21(4)(a) did not change in the law but rather, confirmed what was already the broad and unrestricted reach of s 21. See Ipstar Australia Pty Ltd v APS Satellite [2018] NSWCA 15; (2018) 356 ALR 440, 475 [181]-[184] (Bathurst CJ) (Ipstar).

[49] Australian Competition and Consumer Commission (ACCC) v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365; (2000) 104 FCR 253, 264-265 [30]-[31] (Sundberg J) (Simply No-Knead).

[50] [2000] FCA 2; (2000) 169 ALR 324, 335-336 [24]-[26] (French J) (Berbatis). His Honour's comments were obiter but this does not detract from the matter. Section 51AC was introduced before the conduct complained of in that case had taken place. As such, the claim before French J had to be determined under s 51AA. See also Simply No-Knead [2000] FCA 1365; (2000) 104 FCR 253, 264-265 [30]-[31] (Sundberg J); Drilling Australia Pty Ltd v WBH Drilling Pty Ltd [2012] FMCA 739 [32]-[39] (Lindsay FM); CIT Credit Pty Ltd v Keable [2006] NSWCA [24]-[27] (Spiegelman CJ) (CIT Credit); Commonwealth Bank of Australia v Kojic [2016] FCAFC 186; (2016) 341 ALR 572, 591-592 [59]-[60] (Allsop CJ), [84]-[87] (Edelman J); Michalopoulos v Perpetual Trustees Victoria Ltd and Anor [2010] NSWSC 1450 [88] (White J).

[51] (2017) 53 VR 420, 432-433 [32]-[38] (Elliott J). See also criticisms of the requirement to find 'moral obloquy' in Ipstar [2018] NSWCA 15; (2018) 356 ALR 440, 475-478 (Bathurst CJ); Paciocco v Australia and New Zealand Banking Group Limited (2015) 321 ALR 584, 644 [263] (Allsop CJ).

[52] See CIT Credit [2006] NSWCA [82] (Spiegelman CJ).

[53] See Unique International College Pty Ltd v Australian Competition and Consumer Commission (2018) 362 ALR 66, 100 [154]-[155] (Allsop CJ, Middleton and Mortimer JJ).

[54] I further refer and have regard to the factors set out in the Australian Consumer Law at s 22(1)(a), (c), (d), (l), and in particular s 22(i): 'the extent to which the acquirer [Vainer] unreasonably failed to disclose to the supplier [Rozenblit]: any intended conduct of the acquirer that might affect the interests of the supplier; and any risks to the supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier).'

[55] [1983] HCA 14; (1983) 46 ALR 402, 423 (Deane J).

[56] Roxborough v Rothmans of Pall Mall [2001] HCA 68; (2001) 185 ALR 335, 365 [104] (Gummow J) (Roxborough).

[58] See paragraphs [203] to [249].

[59] [1987] HCA 5; (1987) 162 CLR 221, 256-257 (Deane J).

[60] Lionel Wirth, 'Unjust enrichment: unifying concept or cause of action?' (2015) 89(5) Law Institute Journal 34.

[61] [2009] HCA 21; (2009) 255 ALR 601, 604 [7] (French CJ, Gummow, Hayne and Bell JJ) (Friend).

[62] (2012) 286 ALR 12, 23-24 [29] (French CJ, Crennan and Kiefel JJ) (Equuscorp).

[63] [2014] HCA 14; (2014) 307 ALR 512, 537 [78] (Hayne, Crennan, Kiefel, Bell and Keane JJ) (Hills).

[64] [2014] WASC 162 [45]-[52] (Edelman J).

[65] [2017] NSWSC 534 [91]-[92] (Sackar J).

[66] [2019] NSWSC 125 [36]-[37] (Ball J).

[67] [2018] NSWSC 775 [212]-[217] (Harrison AsJ). I note also, the approach taken by Macaulay J in Southage Pty Ltd v Vescovi [2014] VSC 141, prior to the handing down of Hills, in which his Honour addressed unjust enrichment as a standalone cause of action, and the criticisms of that approach in: Lionel Wirth, 'Unjust enrichment: unifying concept or cause of action?' (2015) 89(5) Law Institute Journal 34.

[68] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 236 ALR 209, 256 [150] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ) (Farah).

[69] Hills [2014] HCA 14 [150] (Hayne, Crennan, Kiefel, Bell and Keane JJ).

[70] [2017] QSC 259 [107] (Bond J).

[71] [1992] HCA 48; (1992) 109 ALR 57, 75 (Mason CJ, Deane, Toohey, Gaudron and McHugh JJ).

[72] (2007) 236 ALR 209, 256 [150] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

[73] 25 [32] (French CJ, Crennan and Kiefel JJ).

[74] [1992] HCA 48; (1992) 109 ALR 57, 85 (Brennan J) See also, Brennan J at 89; Australia & New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 78 ALR 157, 161-162 (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ); BBB Constructions Pty Ltd v Aldi Foods Pty ltd [2010] NSWSC 1352 [368] (Cuthbertson J); Emeritus Professor J W Carter, Carter on Contract (July 2012) [44-090].

[75] Hills [2014] HCA 14; (2014) 307 ALR 512, 546-547 (French CJ) referring to Baker v Courage & Co [1910] 1 KB 56, 64-5 (Hamilton J) and Kelly v Solari [1841] EngR 1087; (1841) 9 M & W 54, 58; 52 ER 24, 26 (Parke B).

[76] Roxborough [2001] HCA 68; (2001) 185 ALR 335, 340 [16] referring to Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 619-620; [1985] HCA 78; 62 ALR 429, 454-455 (Deane J); Peter Birks, An Introduction to the Law of Restitution, (1985, Clarendon Press), 223.

[77] See Roxborough [2001] HCA 68; (2001) 185 ALR 335, 365 [105] (Gleeson CJ, Gaudron and Hayne JJ); Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 (Gummow J).

[78] Numerous examples appear in the transcript of Vainer's cross-examination.

[79] Vainer was in discussions with CBA until around February 2012. They did not lead anywhere. Vainer gave evidence that the companies could not secure debt financing as they were unable to demonstrate, with certainty, the revenues or profitability that the bank required. See footnotes 24 and 25.

[80] See Corporations Act 2001 (Cth) ss 491 and 490.

[81] See paragraphs [203] to [249].

[82] Australian Patent Number: 2013200687

[83] Australian Patent Number: 2013200688

[84] Australian Patent Number: 2015222680. Converted on 20 March 2019 to 2015101952.

[85] During cross-examination, Dr Vainer conceded that he had provided funds well in excess of $100,000. He was not very forthcoming in his evidence and said the loans were made to his son.

[86] The plaintiff relies on Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (Ebrahimi), discussed below.

[87] The plaintiff has not pleaded that Rozenblit's entry into the Shareholders Agreements was vitiated by non est factum or some other legal doctrine of similar effect.

[88] Ebrahimi [1973] AC 360, 375 (Lord Wilberforce).

[92] The plaintiff submitted that the House of Lords had held that the fiduciary relationship had not been superseded or replaced by the corporate structure. This submission obscures the facts as well as the decision of Ebrahimi. Rather, the House of Lords held that the personal nature of the parties' relationship, and the legitimate expectation of Mr Ebrahimi that he not be removed from his directorship as he was, were appropriate considerations to be taken into account when considering this petition to wind up the company on the just and equitable ground.

[93] Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 32 ACSR 294, 310 [93] (Handley JA) (Glavanics).

[94] Accurate Financal Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86; (2008) 66 ACSR 325, 339-341 [109]-[123] (Dodds-Streeton JA).

[95] Chickabo Pty Ltd v Zphere Pty Ltd [2019] VSC 73 [42]-[68] (Sifris J) (Chickabo).

[97] Crossman v Taylor (No 3) [2011] FCA 734 [301]-[302].

[98] Friend [2009] HCA 21; (2009) 255 ALR 601, 620-1 [86] and [88] (French CJ, Gummow, Hayne and Bell JJ).

[99] (2017) 54 VR 625, 671 [127] (Santamaria JA with Kaye and Ashley JJA concurring).

[100] Chickabo [2019] VSC 73 [50] (Sifris J) citing Commissioner of State Taxation v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 272 ALR 440, 445 [21] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ); Hospital Products (1984) 156 ALR 417, 454 (Mason J).

[101] See, for example, the email from Vainer to Rozenblit dated 25 January 2012. Vainer said '[y]ou have always been advised to have an English-Russian interpreter present at meetings as well as for translation of documents. ... You are again encouraged to bring an English-Russian interpreter to the Directors Meeting'.

[102] Clause 4 of the Implementation Agreement.

[103] Ebrahimi [1973] AC 360, 360 (Lord Wilberforce).

[105] The Oral Agreement may well have given rise to a partnership. Indeed, the defendants admitted the plaintiff's pleading of the Oral Agreement, which in turn replicated the definition of a partnership contained in s 5 of the Partnership Act 1958 (Vic).

[106] I note that the parties to the Implementation Agreement (Rozenblit and Vainer) are not precisely the same legal entities that had entered into the First Shareholders Agreement (Rozenblit, Vinetree and Stennlake). I do not think this makes a material difference to the application of this principle. The issue is resolved, as below, by ascertaining the 'manifest intention of the parties'. The parties intended to release the individual, Vainer, from obligations under the arrangements, and have those obligations performed by his nominee, Vinetree. In this respect, I do not think that the 'same parties' should be equated with the 'same legal entities'. The introduction of Stennlake (as nominee of Freeman) similarly makes no material difference.

[107] Vickery v Woods [1952] HCA 7; (1952) 85 CLR 336, 345.

[108] Hillam v Iacullo [2015] NSWCA 196 [51] (Leeming, Basten and Ward JJA) (Hillam).

[109] Balanced Securities Ltd v Dumayne Group Pty Ltd [2017] VSCA 61 [78] (Whelan, Ferguson JJA and Cameron AJA).

[110] Hillam [2015] NSWCA 196 [51] (Leeming, Basten and Ward JJA). Further, at [57], the Court said '[t]here is much to be said...for the parties making express provision for the discharge of the earlier agreement.'

[111] The First Shareholders Agreement is also inconsistent with the Oral Agreement and Implementation Agreement, and must by implication terminate those agreements. All decisions under the Oral Agreement and Implementation Agreement were to be consensual. Under the First Shareholders Agreement, different decisions were authorised in different ways. Some required a simple majority, and others, a special majority. Further, the managing director (Vainer) had responsibility and authority for the day to day management of the company, without requiring board resolutions. Plainly, a decision could not require unanimous consent, if at the same time that decision could be authorised without a resolution, or a general or special majority.

[112] (1996) 19 ACSR 204 (Bryson J); [1999] NSWCA 199; (1999) 32 ACSR 294 (Priestly, Handley and Stein JJA).

[113] Glavanics [1999] NSWCA 199; (1999) 32 ACSR 294, 311 [97]-[98] (Handley JA).

[115] Ibid 311-312 [100]-[101] (Handley JA).

[118] In Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 at 668 [102] (Crawley), Young JA (with Macfarlan JA and Allsop P agreeing) said that 'it would not seem that anyone today would dispute' the principle in Glavanics, namely that factual circumstances may give rise to a fiduciary relationship between a director and an individual shareholders.

[119] See Coleman v Myers [1976] NZHC 5; [1977] 2 NZLR 225, 324 (Woodhouse J); Glavanics v Brunninghausen (1996) 19 ACSR 204, 218 (Bryson J); McClymont v Critchley [2011] NSWSC [163]-[164] (Biscoe AJ) (Critchley); Crawly [2009] NSWCA 410; (2009) 262 ALR 654, 672 [122]-[122] (Young JA); Ford, Austin and Ramsay, Principles of Corporate Law at [9.050].

[120] Closing Submissions of the Plaintiffs at [28].

[121] In Fast Financial Solutions Pty Ltd v Crawford & Anor (2012) 88 ACSR 650 at 672 [120] Barrett J referred to Glavanics and said '[a]ny such fiduciary duty arising in the company context could only come from circumstances over and above the director relationship'. In Critchley [2011] NSWSC at [163] Biscoe AJ said 'The bare relationship between a director and shareholder cannot without more give rise to a fiduciary relationship.'

[122] See paragraphs [219] to [223]. In relation to this point, the evidence disclosed that Rozenblit did not rely on Vainer and nor did he trust him. Rozenblit had access to his own translators and advisors, and Vainer insisted that Rozenblit actively seek advice in order to protect his own interests. In this sense, Vainer did not take any steps to act on the behalf or Rozenblit.

[123] See paragraphs [215] and [218] (and the authorities referred to herein) and [223].

[124] See Glavanics [1999] NSWCA 199; (1999) 32 ACSR 294 [99] (Handley JA). Evidence was also adduced of Rozenblit and Vainer's personal connection, including evidence of dinners hosted at Rozenblit's with his family and to which Vainer was invited. That evidence does not go either way in establishing a fiduciary duty. In Glavanics (at [100]-[104]), the close personal connection, and the insistence of the mother-in-law to restore harmony to the family fostered a legitimate expectation on the part of the plaintiff that the defendant would not 'cheat' him with non-disclosure. In this case, the evidence goes no higher than to demonstrate that the parties had a cordial and friendly relationship, quite aside from the affairs of VRT Global.

[125] Glavanics [1999] NSWCA 199; (1999) 32 ACSR 294 [100]-[101] (Handley JA).

[126] See paragraphs [229] to [234].

[127] It was submitted with some justification that there were 2 significant points of difference between the Polymeric technology and IP and that of VRT Global, namely first torque control of the feed screw together with synchronised temperature regulation of the extruder barrel and secondly by Polymeric using a combination of ozone, nitrogen and oxygen in the activation process. Without expert evidence I am unable to take the matter further with the necessary consequence being that of a finding that the plaintiff has not established a part of his case.