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Cited legislation

No linked legislation citations have been extracted yet.

At the commencement of the remedies trial the Mulcahy parties (the first and second defendants) applied for an order that Mr Conheady (the second plaintiff) be required to elect between alternative, inconsistent remedies immediately after opening submissions, in particular between (a) equitable compensation (or, insofar as relevant, common law damages for breach of retainer) and (b) an account of profits (application described at [3]). BFMM (the third defendant) did not seek an order requiring an early election. The plaintiffs opposed the application, submitting that any election should be deferred until after the remedies reasons are delivered and after the accounting experts had given evidence (position stated at [4]).

DELANY J refused the Mulcahy parties' application and ruled that Mr Conheady, and Mr Porter insofar as relevant to equitable relief, need not elect until after the delivery of reasons in the remedies trial ([5], [18]). The judge gave brief ex tempore reasons which address the applicable authorities, the discretionary nature of ordering an election, and the practical considerations that led to refusing the early election order ([6]–[17]).

Why the court decided this way

The decision rests upon well-established principles about election between inconsistent remedies, and the exercise of judicial discretion in ordering procedural steps.

1. The normal rule (Tan Man Sit): DELANY J invoked the 'normal rule' from Tan Man Sit v Capacious Investments Ltd that an election is usually made when judgment is entered or at the conclusion of the remedies hearing; the principle is not rigid and must be applied flexibly in light of fairness and efficiency ([9], [11]). The court emphasised that the doctrine of election is a procedural tool to be used in a way that strikes a fair and reasonable balance between parties' interests and the public interest in finality ([9]).

2. Split election principle (Club of the Clubs): The court accepted the proposition, drawn from Club of the Clubs, that where different equitable remedies are sought against different defendants (for example a principal wrongdoer and an accessory), a plaintiff may make a split election, that is, choose different forms of relief against different defendants ([8]). The Mulcahy parties accepted that proposition but sought an early election only against them; BFMM did not seek an early election.

3. Discretionary application and absence of prejudice to defendants: DELANY J applied these principles to the facts. Three practical reasons weighed strongly against ordering an early election:

   • It made no sense to require an election against the Mulcahy parties where BFMM, a co-defendant against whom the same inconsistent remedies are claimed, was not seeking an early election ([14]).
   • There was no likely time or cost saving from forcing an election now because the valuation of CBB (the target company) was relevant to both forms of relief and would be addressed by expert evidence in any event ([15]–[16]).
   • Forcing an early election risked real prejudice to the plaintiffs because expert witnesses disagreed on key valuation matters (for example, the correct EBITDA multiple), and an early election might force the plaintiff to choose a remedy that turned out not to be advantageous based on later evidence ([16]–[17]).

On balance, applying the flexible Tan Man Sit approach, DELANY J concluded that common sense and equity required deferring any election until after the delivery of reasons in the remedies trial ([13], [18]).

Before and after state of the law

Before: The authorities cited establish two core propositions:

• The 'normal rule' is that election between inconsistent remedies is made at the point of judgment or at the end of the remedies hearing; exceptions are possible where fairness or efficiency requires otherwise (Tan Man Sit) ([9], [11]).
• A plaintiff may make a split election when different remedies are sought against different defendants, including where one defendant is primarily liable and another is an accessory (Club of the Clubs) ([8]).

Acme Office Service Pty Ltd v Ludstrom canvassed the mutual exclusivity of damages and an account of profits and supported a flexible approach to timing of election, citing authorities that both favour early election and those that defer election until closing of evidence or judgment ([10]).

After: DELANY J applied these existing principles to refuse an interlocutory order requiring election before the remedies evidence is heard. The judgment illustrates that where a co-defendant does not press for an early election, and where expert valuation evidence bears on both disputed remedies so that no procedural efficiency would be gained and prejudice to the plaintiff could arise, courts will decline to compel an early election. The ruling is consistent with the pre-existing flexible approach rather than creating a novel rule.

Key passages with plain-English translation

1. Quotation: "Equitable compensation is aimed at restoring the innocent party, as nearly as possible, to the position in which he or she would have been had the breach of fiduciary duty not occurred. This can be contrasted to an account of profits where the errant fiduciary will be ordered to render an account of the profits made within the scope and ambit of his or her duty." ([6])

   Plain-English: Compensation tries to put the plaintiff back to where they would have been without the breach; an account of profits forces the wrongdoer to surrender gains made by the misconduct. They are different remedies serving different purposes.

2. Quotation: "In the ordinary course the decision made when judgment is entered is made once and for all. That is the normal rule. ... The principle, however, is not rigid and unbending." ([9])

   Plain-English: Normally the plaintiff chooses a remedy when judgment is entered, but this is not a fixed rule; the court may adjust timing where fairness and efficiency demand.

3. Quotation: "The plaintiff cannot have both damages for loss and an account of profits for the two forms of relief are mutually exclusive. If one takes an account of profits one condones the breach of fiduciary duty." ([10])

   Plain-English: You cannot recover both compensation and the defendant's profits for the same breach; choosing one can foreclose the other because they are inconsistent remedies.

4. Quotation: "If Mr Conheady is forced to make an election now ... there is a potential for real prejudice to be sustained by him." ([17])

   Plain-English: Forcing the plaintiff to choose too early may cause real unfairness, especially where crucial evidence (valuation experts) is still unresolved.

What fact patterns trigger this precedent

This decision is most directly engaged where:

• Remedies are to be determined after a bifurcated liability trial, and the plaintiff seeks alternative inconsistent equitable remedies (equitable compensation or damages versus an account of profits).
• Co-defendants exist such that the same or similar remedies are sought against more than one defendant and at least one co-defendant does not seek an early election.
• Expert evidence is necessary to quantify remedies and that evidence bears upon both inconsistent remedies (for example, contested valuations affecting both damages and accounts of profits).
• There is a real risk that an early election would prejudice the plaintiff by forcing a tactical choice before evidence crucial to the choice is presented.

If those features are present, the court is likely to apply the flexible approach in Tan Man Sit and refuse an order compelling an early election absent a compelling case of efficiency or prejudice to the defendants.

How later courts have treated it

This ruling is an interlocutory application of well-established principles rather than a landmark change. DELANY J applied authorities including Tan Man Sit, Club of the Clubs and Acme, and cited Schmidt for the characterisation of the remedies ([6], [8], [9], [10]). The decision aligns with prior Victorian and New South Wales authorities that favour a pragmatic, discretionary approach to timing of election, and with decisions that permit split elections where appropriate. Practitioners should expect other trial judges to apply the same balancing exercise, looking to whether any co-defendant seeks an early election, whether early election would save time or costs, and whether prejudice to the plaintiff could be avoided.

Because this is a case-specific exercise, lower courts will continue to make outcomes turn on the particular procedural and evidentiary context. The present ruling will be cited for the practical proposition that the absence of a co-defendant’s request for early election and contested expert valuation evidence are strong reasons to defer election.

Still-open questions

1. What level of prejudice or what degree of inefficiency is sufficient to justify an early election? DELANY J identified "real prejudice" and absence of savings in time or costs as decisive here ([16]–[17]), but further authority may be needed to calibrate thresholds in closer cases.

2. How should courts handle cases where different defendants have materially different exposures to remedies and one defendant seeks early certainty while others do not? The split election principle permits nuanced outcomes, but practical management in multi-defendant cases could lead to complex trial sequencing and interlocutory skirmishes.

3. Where valuation evidence is central to both forms of relief but can be framed differently for damages and account of profits, might courts ever order limited preliminary expert determinations to facilitate an earlier election without full trials? DELANY J declined to order election where experts were in dispute ([16]–[17]); however, procedural innovations (like hot-tubbing or preliminary valuation hearings) could be explored.

4. Remedies sequencing post-election: the judgment defers election until after remedies reasons are delivered. It remains a live question how courts will manage sequencing of quantification hearings, enforcement steps and interplay with any declarations of constructive trust when equitable proprietary remedies are sought against third parties (e.g. BFMM's shares in CBB in this case are the subject of a constructive trust claim) ([7]).

Conclusion: The ruling is a clear application of the flexible, discretionary approach to election between inconsistent equitable remedies. It emphasises practical considerations: presence or absence of co-defendant requests, overlapping valuation issues, contested expert evidence, efficiency and prejudice. Practitioners should prepare to argue these practicalities at interlocutory stages; where a co-defendant does not seek early election and expert evidence is contested, courts are likely to defer election until remedies reasons are delivered.