Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors

EQUITY - Equitable remedies - Equitable compensation - Principles - JAB Nominees (Aust) Pty Ltd v Auswild [2020] VSC 731; Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664, followed - Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193; GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113; Australian Executor Trustees (SA) Limited v Kerr [2021] NSWCA 5; (2021) 151 ACSR 204, applied - Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1, cited.

EQUITY - Equitable remedies - Account of profits - Onus - Quantification - Interest of the wrongdoer in business greater than interest plaintiff would have acquired - Plaintiff entitled to an account of all profits - Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41; Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, applied - Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544; Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, cited.

EQUITY - Equitable remedies - Constructive trust - Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 - Asserted limitation on availability of the remedy - Unnecessary to decide - McNab v Graham [2017] VSCA 352; (2017) 53 VR 311; Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] AC 1189; Chickabo Pty Ltd v Zphere Pty Ltd (No 3) [2020] VSC 464, cited - Other means available to quell the controversy - Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566, applied - Constructive trust refused.

1. These reasons concern the relief to which the first plaintiff ('Mr Porter') and the second plaintiff ('Mr Conheady') are entitled against the first and second defendants on the one hand ('the Mulcahy parties') and against the third defendant ('BFMM') on the other. The entitlement of Mr Porter and Mr Conheady to relief is dictated by the findings made following the conclusion of the liability trial in Porter v Mulcahy & Co Accounting Services Pty Ltd ('the liability reasons').[1]
2. The liability reasons concerned Mr Porter's and Mr Conheady's opportunity to purchase and the actual purchase by BFMM of a controlling interest in Chris Debono Pty Ltd, trading as Chris's Body Builders ('CBB' or 'the CBB Business'), a business established and Crist John Debono ('Chris') and his brother Anthony Debono.
3. In the liability reasons, I found that on 29 June 2017 Mr Porter retained the Mulcahy parties to provide advice concerning the proposed purchase of a controlling interest in the CBB Business ('29 June 2017 Retainer'). I found that on 16 November 2017 Mr Conheady retained the Mulcahy parties to advise him on the planned acquisition of a controlling interest in the CBB Business ('Conheady Retainer'). I found breaches of the Conheady Retainer by the Mulcahy parties when they usurped Mr Conheady's opportunity to acquire a controlling interest in the CBB Business for their own benefit and for the benefit of BFMM. I found breaches of the confidentiality obligations in the 29 June 2017 Retainer. I found that the Mulcahy parties owed fiduciary duties to Mr Conheady, and that they breached those duties. Further, that BFMM knowingly assisted the Mulcahy parties in breach of fiduciary duty.[2]
4. The issues in the relief trial were framed by the plaintiffs' updated statement of relief ('updated statement') and by the responsive statements filed by each of the Mulcahy parties and BFMM. There was some narrowing of the issues in closing submissions.
5. The plaintiffs' updated statement filed at the outset of the relief trial set out the following claims:

Damages

1. The Plaintiffs claim damages for breach of contract by James Mulcahy and Mulcahy & Co Accounting Services Pty Ltd (the Mulcahy Parties). The damages claimed are expectation loss for the benefit that the Plaintiffs could expect to have received had the breach of retainer not occurred: net lost cash flows ($3,749,647$3,136,266), value of shareholding ($22,599,119$22,518,000) less value of debts ($3,957,951$3,447,064) = $22,390,815. $22,207,202 (Scenario 2), alternatively, net lost cash flows (-$1,069,062), value of shareholding ($14,181,017) less value of debts ($3,447,064) = $9,664,591 (Scenario 1)

The Plaintiffs refer to the expert report of Greg Meredith dated 18 July 2022 (Meredith Report) at [3.1.1]-[3.1.2], the supplementary report of Greg Meredith dated 20 February 2023 (Supplementary Meredith Report) at [2.1.1(b)] and the Joint Report of Mr Meredith and Ms Wright dated 17 March 2023 (Joint Report) at paragraph 2.1(a) and (b) and Tables 1 and 2.

1. In addition, the Plaintiffs are entitled to:

(a) 80% of 56%[3] of $1,779,231, being amounts for truck bodies Porter Plant has paid to third parties for bodies that would have been manufactured by Chris Debono Pty Ltd (CBB): ($797,095); and

(b) 80% of 56% of $7,603,778, being costs Porter Plant will incur in building bodies of assets pursuant to its VicRoads contract: ($3,406,492).

Those losses were incurred by Porter and Conheady as they have not obtained their 80% share of the profit that CBB would have obtained on those contracts.

1. Finally, the First Plaintiff (Porter) claims the following costs incurred in pursuit of the opportunity to acquire an interest in CBB which were lost as a result of that opportunity being usurped by the Defendants.

2. $25,027.20 incurred with Fordham Business Advisors Pty Ltd;

3. $27,627.76 incurred with Nevett Ford Lawyers;

4. $8,388.48 incurred with Munday Wilkinson Chartered & Forensic Accountants; and

5. $14,300 incurred with Mitchell Munn Valuations Pty Ltd.

Equitable compensation

1. The Second Plaintiff (Conheady) also claims equitable compensation:

2. from the Mulcahy Parties for breach of fiduciary duties; and

3. from the Third Defendant (BFMM) for having knowingly assisted the Mulcahy Parties to breach those fiduciary duties:

$22,390,815$22,207,202 (Meredith report at [3.1.1] (Scenario 1), alternatively $9,664,891 (Scenario 2), Supplementary Meredith Report at Tables 1 and 2, Joint Report at Tables 1 and 2), and the other sums referred to in paragraph 3(a) and (b) above.

(To preserve his position Porter claims this sum too, as well as the out‑of‑pocket expenses described in paragraph 4 above).

Account of profits

6. Conheady also claims an account of profits:

1. from the Mulcahy Parties for breach of fiduciary duties; and

2. from BFMM for having knowingly assisted the Mulcahy Parties to breach those fiduciary duties.

This reflects an account of profit received by the Mulcahy Parties and BFMM from the date of acquisition by BFMM as well as an assessment of the future income stream brought to present value, being $16,928,703$11,013,138 (Meredith report at [4.1.1], Supplementary Meredith Report at [3.1.1] and Table 8, Joint Report at Table 3).

The plaintiffs say the impact of the legal fees incurred by BFMM of $590,273$849,555 in defence of this proceeding should be excluded from the award of an account of profits, meaning the amount to be accounted for is $17,518,976$11,862,693 (Meredith report at [4.1.4], Supplementary Meredith Report at [3.2.4], Joint Report at paragraph 3.3(b)). This amount will need to be recalculated by reference to all further costs incurred by BFMM in defence of this proceeding following the conclusion of the second trial.

(To preserve his position Porter claims this sum too).

Constructive Trust

1. Conheady claims a declaration that the shares owned by BFMM in CBB are held on a constructive trust for him.

2. The court should order that the Mulcahy parties and/or BFMM take any steps necessary by transfers of shares or other steps so as to give effect to the constructive trust.

(To preserve his position Porter claims the right to this remedy too).

1. The Mulcahy parties' responsive statement includes the following:

B. THE PRECISE CLAIM OF MR PORTER

...

1. The precise breach was a breach of confidence. It concerned information conveyed in a September 2017 offer; together with the circumstance that Mr Porter had, subsequently, not secured funding at the level he desired to fund the offer. The information was found to be misused in January 2018.

2. It is critical to focus on the counterfactual in January 2018 for the purpose of evaluating loss. The counterfactual is that an offer would have been forwarded to purchase the business informed by everything except for the confidential information conveyed by Mr Porter to Mr Mulcahy in September 2017. It is not understood, yet, what loss Mr Porter contends he thereby sustained.

C. THE PRECISE CLAIM OF MR CONHEADY

1. Whether in equity or at common law, the precise claim of Mr Conheady is a foregone opportunity claim.

2. There are six relevant integers.

First integer: what was the likelihood of a "Porter/Conheady vehicle" obtaining a controlling economic interest in the CBB business?

....

1. It cannot at present be precisely countenanced what concessions will be made. With some confidence, however, it can already be submitted that the likelihood of a Porter/Conheady vehicle obtaining an economic interest will, on the balance of probabilities, be found to be less than 100 per cent.

Second integer: in the event that the First integer is found to be satisfied, what economic interest would that Porter/Conheady vehicle have obtained?

1. ... the best evidence (in the hypothetical scenario) of the economic interest is the Westpac proposal in February 2018. On that evidence, the economic interest that would have been obtained was 65 per cent. ...

2. An alternative analysis is that the Porter/Conheady vehicle would have sought, and obtained, an 80 per cent controlling interest. ...

Third integer: what proportion of that economic interest would have been to the benefit of the Second Plaintiff, Mr Conheady?

1. The interest/share Mr Conheady would have held in a Porter / Conheady vehicle will also be the subject of significant cross‑examination.

2. The likely answer at the end of that is as follows: between a very small per cent and 50 per cent.

Fourth integer: what price would have been paid for the controlling economic interest obtained in the CBB business?

1. The best evidence (and indeed a true proxy) is the price that was paid by the successful purchaser in March 2018...

Fifth integer: what was the true value to the Porter / Conheady vehicle of the interest it would have acquired?

1. This is the central conceptual issue.

2. On any realistic analysis, it is likely to comprise the sum of: the price that would have been paid by the Porter/Conheady vehicle, together with any "special value" available to the Porter/Conheady vehicle upon a successful purchase.

...

Sixth integer: any other loss.

1. There is none.

Conclusion

1. The claim available to Mr Conheady can sufficiently be described by the following equation: assuming that the corporate vehicle would have purchased a 65 per cent interest in CBB [Second Integer], the relevant equation is as follows: CBB 65% Value [Fifth Integer] less CBB 65% Price [Fourth Integer] multiplied by (the probability in percentage terms attributed to the likelihood of that opportunity [First Integer]; together with the percentage interest/share in the vehicle that would have been held by Mr Conheady [Third Integer]).
2. If, instead, the Court concludes that the vehicle would have purchased an 80 per cent controlling interest in CBB [Second Integer], the relevant equation is as follows: CBB 80% Value [Fifth Integer] less CBB 80% Price [Fourth Integer] multiplied by (the probability in percentage terms attributed to the likelihood of that opportunity [First Integer]; together with the percentage interest/share in the vehicle that would have been held by Mr Conheady [Third Integer]).

1. So far as the Mulcahy parties sought to rely upon the 'third integer' as defined in their responsive statement, in Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 4)[4] I determined that it was not open to the Mulcahy parties to advance that contention.
2. The BFMM amended responsive statement includes the following:

3. As to the equitable compensation ...:

(a) ...

(b) if the Court is minded to order BFMM to pay equitable compensation to Mr Conheady, the relief ordered should be no more than $294,263 being the loss of profits suffered by Mr Conheady as calculated by Ms Dawna Wright under her "Alternative 1" scenario...

4. As to the account of profits ...:

(a) ...

(b) if the Court is minded to order BFMM account to Mr Conheady, the relief ordered should be no more than $819,044, being the account of profits of a 40% interest in CBB under Alternative 1...

1. As to the claim for constructive trust ... BFMM says that no such order of constructive trust should be ordered...

1. Some of the remedies for which the plaintiffs contend are inconsistent alternatives. As held by Bergin J in Club of the Clubs Pty Ltd v King Network Group Pty Ltd (No 2),[5] where different equitable remedies are sought against different defendants, one of whom is primarily liable and the other an accessory, the plaintiff is not precluded from making a split election and is entitled to choose the most advantageous remedy available to it in all the circumstances.[6]
2. At the start of the relief trial, the Mulcahy parties submitted that the plaintiffs should be put to their election at the conclusion of openings and prior to evidence. On 21 March 2023, in Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 3),[7] I ruled against requiring the plaintiffs to elect prior to the delivery of these reasons.
3. The parties provided written and oral submissions at the outset of the relief trial. Closing submissions were oral only which, with the benefit of hindsight, left some gaps in submissions concerning some of the contested issues.
4. It is critical to consider the position of Mr Porter and Mr Conheady separately and to consider the separate relief claimed by Mr Conheady against the Mulcahy parties and against BFMM.
5. Evidence was given by the plaintiffs, Mr Porter and Mr Conheady, and by Mr Matthews on behalf of BFMM. While some factual issues fell away during the trial, others remained.
6. Competing factual contentions that remained live include whether the plaintiffs have established claim items 3(a) and (b) of their updated statement. For the reasons discussed in section C I do not consider claim items 3(a) or (b) to be made out.
7. The Mulcahy parties contended for a 5‑15% discount in damages otherwise calculated relying on the principles in Sellars v Adelaide Petroleum NL ('Sellars')[8] (a 'Sellars discount'). For the reasons discussed in section F6 I do not consider a Sellars discount is appropriate.
8. Expert accounting evidence was given by Greg Meredith on behalf of the plaintiffs and by Dawna Wright on behalf of the defendants. Both experts undertook their calculations as at 30 June 2022. There are differences of opinion between them that bear on the calculation of loss and on the quantification of an account of profits.
9. Two alternative scenarios were considered by the experts concerning damages for breach of contract and equitable compensation; 'Scenario 1' and 'Scenario 2'. Scenario 1 is the calculation of loss of profits assessed at the date of trial using the actual profit and loss performance of CBB from 2018. Scenario 2 is the calculation of loss of profits by reference to projections prepared by Mr Conheady in 2018.
10. For the reasons discussed in section D2 I do not accept that Scenario 2 provides an appropriate basis for the assessment of damages for breach of contract or for the assessment of equitable compensation.
11. Mr Meredith and Ms Wright prepared a joint expert report dated 17 March 2023 (the 'Joint Report'). The experts gave concurrent evidence concerning the two scenarios, and concerning the appropriate calculation of loss of profits and of an account of profits. The experts gave evidence on a topic‑by‑topic basis in accordance with an agreed agenda.
12. The contested expert opinion issues are dealt with in section E.
13. Mr Porter's entitlement to damages for breach of contract is discussed in section F. Mr Conheady's various claims for relief are discussed in section G.

22 For the reasons discussed in section F, Mr Porter is entitled to expectation damages for breach of contract against the Mulcahy parties in the sum of $4,832,445.50 based on a 40% interest in CBB calculated in accordance with Scenario 1. For the reasons discussed in section E1, I have preferred the opinions expressed by Mr Meredith in relation to each of the contested issues between the experts concerning the calculation of loss of profit.

23 Mr Porter's reliance loss is $47,715.68. However, he is not entitled to recover damages for both expectation and reliance loss. Because Mr Porter's claim for expectation loss is recoverable, his claim for reliance loss is not.

24 For the reasons discussed in section G1, Mr Conheady is entitled to an award of damages for breach of contract against the Mulcahy parties in the sum of $4,832,445.50 based on a 40% interest in CBB calculated in accordance with Scenario 1. For the reasons discussed in section G2, Mr Conheady is entitled to equitable compensation against the Mulcahy parties and against BFMM, also in the sum of $4,832,445.50 based on a 40% interest in CBB calculated in accordance with Scenario 1.

25 Mr Conheady is also entitled to an account of profits against BFMM. For the reasons discussed in section G3, I have rejected BFMM's submission that the account of profits should be limited to a calculation based on a 40% interest only in CBB. For the reasons discussed in section E2, I have preferred the opinions expressed by Mr Meredith in relation to each of the contested issues between the experts concerning the quantification of the account of profits. Mr Conheady is entitled to an account of profits against BFMM in the sum of $11,013,138. In addition, Mr Conheady is entitled to an order for an account for past legal fees, $849,555. Mr Conheady is not entitled to an account for future legal fees.

26 For the reasons discussed in section G4, Mr Conheady is entitled to an account of profits against Mr Mulcahy in the sum of $702,000, representing historical directors' fees of $312,000 together with the present value of future profits in the sum of $390,000.

27 For the reasons discussed in section G5, Mr Conheady is not entitled to a declaration of a constructive trust over BFMM's shares in CBB.

28 Three lay witnesses gave evidence; Mr Conheady, Mr Porter and Mr Matthews.

29 None of the other directors of BFMM; Mr Broadbent, Mr Ford or Mr Mulcahy; each of whom gave evidence at the liability trial, gave evidence in the relief trial. Nor did Chris Debono, who gave evidence in the liability trial, or any other member of the Debono family give evidence in the relief trial.

30 Mr Porter gave evidence concerning the intended conduct of the CBB Business following the acquisition of a controlling interest by the plaintiffs and the work which Porter Plant would have engaged CBB to perform had the acquisition gone ahead.

31 Mr Porter said he regarded CBB as a 'solid fit' with Porter Plant going forward. He had discussed bringing a Porter Plant depot in Melbourne into the CBB area.

32 Mr Porter gave evidence about how the proposed acquisition would have been financed; the proposal from Westpac of a $7 million facility on 8 February 2018, and of cash reserves and assets accessible by him to cover any funding shortfall. I accept that Mr Porter is, and in 2017/2018 was, a person of considerable financial substance who could have funded any shortfall in external funding of the proposed acquisition of the CBB Business by or on behalf of the plaintiffs.

33 Mr Porter sold the totality of his interest in Porter Plant to Kanamoto in October 2020. Following the sale, he remained the managing director of Porter Plant until June 2022.

34 Mr Conheady gave evidence of his agreement with Chris Debono for the purchase of an 80% share in CBB for $9.6 million with each of Chris and Anthony Debono retaining a 10% share. He also gave evidence of the plaintiffs' intention to use CBB as a supplier to Porter Plant.

35 Mr Conheady gave evidence of the plaintiffs' intention to change the management structure of the business; to promote Cornelius Mitchley ('Mitch') to the position of General Manager, enabling Chris Debono to reduce his working hours.

36 Mr Matthews gave evidence in chief directed to four topics:

(a) the payment of $200,000 by CBB in settlement of a claim by the former CEO of CBB who left the business on 28 June 2020;

(b) directors' fees paid by CBB of $78,000 per annum to each of the directors; Chris and Anthony Debono, Mr Mulcahy, Mr Broadbent, Mr Ford and Mr Matthews, the last four of whom are directors of BFMM;

(c) the amount paid pursuant to the Share Sale Agreement between CBB, Chris Debono, BFMM and its directors by way of adjustments relating to work in progress (WIP) and stock; and

(d) loan repayments made by BFMM relating to its $8 million loan obtained to fund the interest which it acquired in the CBB Business. BFMM has no business other than concerning its investment in CBB.

37 There was some exploration in cross‑examination of Mr Matthews of the first issue, the $200,000 payment. That topic concerns the unfair dismissal claim discussed in section E1.4.

38 The second issue, directors' fees paid or payable to the directors of BFMM in their capacity as directors of CBB, was also the subject of cross‑examination. That topic is discussed in section E1.3.

39 Mr Matthews was also questioned about the other two topics to which his evidence in chief was directed, and more broadly in relation to the business.

40 Mr Matthews confirmed that the Debono family is still very much involved in the CBB Business. In June 2020, the son of Chris Debono, Christopher Debono, who has an engineering background, became general manager / CEO. At the time of trial, Anthony Debono, Chris Debono, his son Christopher, and another family member, Benjamin Debono, continued to be employed. Chris Debono remains as managing director with an advisory board comprising the BFMM directors.

41 Mr Matthews was cross‑examined about a February 2019 document titled 'CBB Share Structure & Proposed Share Structure', which showed the holding of shares in CBB by BFMM, with Mr Broadbent, Mr Ford, Mr Mulcahy and Mr Matthews each holding their respective interests in CBB via BFMM. The structure document adopted a value of $16 million net for CBB.

42 Evidence was given of a company called DDBFMM Investments (the letters standing for Debono and Debono, Broadbent, Ford, Mulcahy and Matthews), which owns industrial land in Ballarat. Mr Matthews gave evidence of an intention to develop that land for use by CBB and that rent of approximately $120,000 per year has been paid. As neither party contended for a normalisation adjustment to profit on account of that rent, and no party contended for any other financial adjustment on account of that land, it is unnecessary to say anything further about it.

43 As part of their claims for damages for breach of contract, the plaintiffs claim 80% of 56% of $1,779,231 in relation to Porter Plant truck bodies and 80% of 56% of $7,603,778 concerning Porter Plant's contract with VicRoads. These claims are separate to the claims for damages for breach of retainer considered by the expert accountants. They depend on lay evidence.

44 Mr Porter gave evidence that, since 1 July 2018, Porter Plant has outsourced the fabrication of trailers and truck bodies to third parties as per the spreadsheet relied on by the plaintiffs. As at July 2022, Porter Plant had approximately 65 orders for the future construction of vehicles for VicRoads, work which Mr Porter said could have been placed with CBB if the plaintiffs had purchased a controlling interest in the business. In addition, Porter Plant would have engaged CBB to manufacture forward spreading asphalt units to be supplied to VicRoads. Mr Porter said he knew from his tour of the plant with Chris Debono that CBB had the right mentality in the business to develop new products, such as the forward asphalt spreader.

45 Mr Porter gave evidence that he did not have an expectation that there could be new work for CBB in the way of body building for Porter Plant at the time he and Mr Conheady were seeking to purchase a controlling interest in CBB. The opportunity in relation to body building for Porter Plant was 'going forward'.

46 Mr Conheady gave evidence that, in about August 2021, Porter Plant secured an agreement with Head of Transport for Victoria ('VicRoads') for the supply by hire of certain items of plant and equipment for a seven‑year period, plus options for an additional two years ('the VicRoads Contract'). His evidence was that many of the items to be hired under the VicRoads Contract could and would have been manufactured by CBB if he and Mr Porter had completed their purchase.

47 Schedules 1 and 2 to Mr Conheady's first witness statement are two spreadsheets prepared to support claims 3(a) and (b).

48 Schedule 1 is a spreadsheet titled 'Porter Excavations Pty Ltd - Builds at CBB'. Schedule 1 lists the plant and equipment that Mr Conheady expected Porter Plant would have built at CBB if he and Mr Porter had completed their purchase of a controlling interest in the CBB Business. The spreadsheet shows that Porter Plant spent approximately $5,018,044 acquiring plant and equipment from third parties between July 2018 and June 2022 where the body component could have been fabricated by CBB. Mr Conheady calculated the total cost Porter Plant paid to third party manufacturers to build plant bodies which could have been built by CBB and paid directly to them if he and Mr Porter acquired the CBB Business as $1,779,231.

49 Schedule 2 is a spreadsheet titled 'VicRoads Contract - Builds at CBB'. Schedule 2 lists all plant and equipment Porter Plant is required to supply pursuant to the VicRoads Contract which Mr Conheady expects would have been built at CBB if he and Mr Porter completed their proposed purchase. The spreadsheet shows that Porter Plant will spend $16,003,887 to supply equipment under the VicRoads Contract by engaging third parties to manufacture the assets required, $7,603,778 of which relates to costs incurred in building the bodies of assets which Porter Plant would have used CBB to build.

50 In his evidence in chief, Mr Conheady explained the basis of the calculations in the Schedules 1 and 2. He said that, given that Porter Plant buys a high volume of plant and equipment, including items that were or could be manufactured by CBB, he and Mr Porter had discussed funnelling such work to CBB. Mr Conheady understood that, with some modest upgrades to its machinery and training, CBB would be capable of manufacturing items Porter Plant already purchased from CBB, as well as items Porter Plant purchased from third parties.

51 Claims 3(a) and (b) assume that, had the plaintiffs been successful in acquiring a controlling interest in CBB, the work the subject of the claims would have been directed to CBB. They also assume that, had the work been directed to CBB, the relevant profit margin on the work would have been 56%, being the higher post‑acquisition net profit margin identified by Mr Meredith. The claims depend for their success on a finding that CBB had or could have been provided with the capacity to carry out the work and upon a finding that the costs and margins that would apply to such work are as contended for by the plaintiffs.

52 The Mulcahy parties disputed any entitlement on the part of the plaintiffs to recover claim items 3(a) and (b), or either of them. They submitted that for either of these claims to succeed, the plaintiffs need to prove all the links in the chain of causation and that they failed to do so.[9]

53 The defendants advanced three reasons why the plaintiffs failed to prove claims 3(a) and (b). The first, because CBB did not have the capacity to perform the work and to make the profit as calculated. The second reason, the plaintiffs failed to demonstrate that CBB had the ability to undertake some of the work, including the work to design and manufacture a forward spreading unit. The third reason, the claim period extends from July 2018 through to June 2022. It was submitted that the plaintiffs have not established that any purchases would have been made after Porter Plant was sold in October 2020.

54 I agree, for the first reason identified by the Mulcahy parties, that claim items 3(a) and (b) are not proved. If it were necessary to determine, I do not consider that the second reason is a barrier to the plaintiffs otherwise succeeding on the claims. I also do not consider the evidence relating to the third reason undermines the validity of the claims if otherwise made out, which, because of the first reason, I do not consider to be the case.

55 Turning to the first reason, the relief claimed assumes that CBB had or that arrangements could and would be put in place to ensure that it had the necessary additional capacity to undertake 100% of the additional work.

56 Mr Conheady's evidence was that Porter Plant would not have sought to 'jump the queue' on other orders. Therefore, whether or not the Porter Plant revenue was realisable depended on CBB having or ensuring there was the necessary additional capacity.

57 The Mulcahy parties submitted that Mr Conheady and Mr Porter 'both knew when they were looking at it that the order book was large and that the business was at that time at capacity'. That submission accords with the evidence, including the evidence of Mr Porter given in the relief trial. Mr Porter agreed that, in February 2018, there was a lag of 'many months' in the CBB order book.

58 Mr Matthews gave evidence, which I accept, that the capacity issues have continued since 2018 and remain an issue for the business. As at 2023, there was a 12‑month wait on products.

59 The Mulcahy parties submitted that absent further expense on capital or labour, there was no capacity in the business to do the work the subject of claims 3(a) and (b). Given the continued delays in meeting orders from 2018 to 2023, of which Mr Matthews gave evidence, and the way in which the plaintiffs put this claim, no 'queue jumping', I agree. I am not satisfied that there was capacity in the business for the Porter Plant work the subject of these claims with the existing capital base and labour force arrangements in place.

60 The plaintiffs sought to meet the capacity issue by referring to changes they proposed to implement to the business and to improvements to efficiency.

61 Mr Conheady gave evidence that, over a 12‑24 month period after acquisition, the plaintiffs' intentions for the CBB Business were to:

(a) create an insurance repair division;

(b) improve the utilisation of under‑utilised assets, such as the CBB spray booth and sandblasting operations;

(c) grow and improve CBB's spare parts division;

(d) leverage existing assets by introducing a double shift or changing shift patterns, taking into account CBB's large order book and wait time issues; and

(e) investigate offshore fabrication to generate greater output.

62 It was Mr Conheady's evidence that these plans were based on leveraging CBB's existing infrastructure, people, processes and systems, and customers.

63 In a February 2019 document, the CBB board's desire to specifically focus on growth of 15% (revenue or EBIT) was recorded, with key business considerations and priorities identified including supervision in production review and, specifically, productivity. While Mr Matthews could not recall the target, he accepted that 12 to 15% sounded like the sort of growth figures the directors would normally be wanting. In cross‑examination he agreed that, to increase productivity, assets could be leveraged to make them work better for the business.

64 There was no real dispute that the plaintiffs had the plans for the business of which Mr Conheady gave evidence. The contest was whether or not the plaintiffs' plans would have increased capacity sufficiently for CBB to take on the Porter Plant work and the cost impact of the implementation of those plans.

65 The first measure identified by the plaintiffs to improve output was changes in shift patterns.

66 Mr Porter considered capacity could be increased because the business did not work Saturdays and there was no overtime. He said he was told by Chris Debono:

[D]efinitely ... they didn't work Saturdays, that he was over it and he was - it's an area in the business that could've been ramped up a bit. There was no overtime.

67 Mr Conheady said that he formed the view that more work could be undertaken with the existing staff working longer hours:

I asked Mr Debono about multiple shift patterns and working weekends and the like. Ah, he mentioned that a lot of overtime wasn't worked and weekends were worked historically but they weren't worked anymore. Um, he was aware that he was potentially losing some orders through customers because the time was so long, ah, but, um, you know, given where he was just coming back to work from his health scare, looking to pull back from the business, I think he was accepting of it - the fact that, ah, he'd lost a bit of energy to sort of drive the business forward.

68 While the opportunity to change work patterns was no doubt there, there was no evidence led by the plaintiffs of precisely what changes to shift patterns would be implemented, whether the existing or a new or expanded labour force would be willing to undertake such shift work and, if so, at what cost to the bottom line.

69 Separately, what occurred in fact after BFMM's purchase of the business does not provide support for the ability of the existing CBB Business to undertake the Porter Plant work even with additional shifts.

70 The plaintiffs referred to Mr Matthews' evidence about periods of time in 2021 and 2022 when employees worked on Saturdays to increase productivity and to deliver products in a more timely fashion when the waitlist became too long. They submitted this evidence demonstrates that the increase in shifts and weekend work was an opportunity available to the business which the business took up for a limited time to increase output. That is an accurate submission. However, it fails to recognise that, even with those changes, the delays bedevilling the business in 2018 continue in 2023 even without the extra work the subject of claims 3(a) and (b).

71 Mr Matthews said that, in 2022, the plant had operated on Saturdays for four months and that it had done so for two or three months in 2021 to increase production. He gave evidence that the number of staff of the business had increased during the last two years, but that there has been 'a bit of turnover' and it had been necessary to look offshore for workers such as welders under visas. Evidence was given that the business had invested in a robot, which at the time of trial was being installed, and a new jib crane with the intention to purchase a number of those cranes in the expectation that expenditure on these items would improve productivity. While there was evidence of these steps having been taken or being taken, delays in meeting orders remained an issue for the business as it was being conducted at the time of trial.

72 The second measure Mr Conheady identified that could be used to increase productivity and capacity was offshore manufacturing.

73 Mr Conheady described the use of offshore manufacturing as 'effectively ... leveraging somebody else's manufacturing facility and their people as well'. Mr Conheady, a former management consultant at AT Kearney, gave evidence that he had specific expertise in offshore manufacturing from his time working at Pacific Brands. In cross‑examination, Mr Matthews accepted that offshoring was an available opportunity.

74 I accept that Mr Conheady planned to investigate offshore manufacturing, and that offshore manufacturing was an available opportunity. There is no evidence the business has in fact gone down this path. There was no detailed evidence of how offshore manufacturing would have been undertaken, of comparative costs, of the impacts, if any, on product quality, and of how the use of offshore manufacturing would impact on capacity. There was a lack of evidence about the practical steps that would be required and would be taken to implement the plaintiffs' plans. How realistic was the prospect of offshore manufacturing as the basis for undertaking the additional work or increasing the capacity of the existing business to enable the work to be undertaken?

75 The plaintiffs submitted that the defendants did not call Chris Debono or anyone else involved in the operations of the business to disprove Mr Porter's and Mr Conheady's evidence concerning the capacity issues and the measures proposed. The problem with this submission is that it is for the plaintiffs to prove the business had the capacity to undertake the additional work the subject of the claims for which they contend. It is not a matter for the defendants to disprove.

76 The evidence is insufficient to establish on the balance of probabilities that changes in shift patterns or other changes in the use of domestic labour alone, or in combination with the use of offshore manufacturing, or other initiatives proposed by the plaintiffs would have enabled the capacity issues experienced by the business to have been addressed and would have enabled CBB to undertake the Porter Plant work.

77 As a separate matter, there was no evidence concerning cost impacts that would arise if there were to be additional labour or changes in shifts or additional capital invested in order to increase production to enable this work to be done, or concerning the cost of work to be performed offshore. The Mulcahy parties submitted the onus of establishing the loss required the plaintiffs to have adduced evidence of the impacts if any on the cost base of the measures proposed, which they did not do. I agree.

78 The spreadsheets prepared by Mr Conheady did not assume that there would be overtime required to complete the Porter Plant work. The plaintiffs' case was based on profit margin at the existing facility.

79 Mr Conheady gave evidence that further capital expense would be minimal and he assumed the costs, including labour, were included in the applicable profit margin. The plaintiffs submitted that the evidence in support of the proposition that the margins would have remained the same was Mr Meredith's finding of a net profit margin of 56%. They accepted there was no other evidence directed to the margin issue.

80 Mr Meredith gave evidence that it would be appropriate to quantify this loss by estimating a net profit margin that would have been applied to the sales based on historical net profit margins, which have ranged between 36%‑52% in the years prior to the acquisition of CBB by BFMM and 51%‑56% in the years after the acquisition of CBB by BFMM. In their updated statement, the plaintiffs adopted the higher post‑acquisition net profit margin of 56%. However, the profit margins referred to by Mr Meredith are historical profit margins of CBB. They do not relate to the manufacture of the Porter Plant products. They do not factor in additional capital or labour costs. The 56% margin does not include any element of offshore manufacturing as the business has no history of that activity. While the margins do reflect some overtime, it is not safe to equate that amount of overtime with the unknown and unquantified amount of overtime that would be required in order to perform the work for Porter Plant.

81 I do not consider Mr Meredith's evidence concerning margins to be of assistance concerning items 3(a) and (b).

82 In his first report Mr Meredith declined to make an adjustment to the trading results for potential revenue from Porter Plant. He did so because, primarily, he had not been able to establish:

(a) whether CBB would have had capacity to take on this work without any impact on other sources of revenue

(b) the likely costs associated with this work.

83 Neither of those gaps in the information available to Mr Meredith was satisfactorily addressed at trial. The capacity to carry out the work required by items 3(a) and (b) is not proved. The plaintiffs have not proved what the cost base would have been as a result of the proposed changes. The margin to be applied when calculating the loss sustained from the inability to perform such work, assuming capacity, was not proved. For those reasons, claim items 3(a) and (b) are not made out.

84 The second reason raised in cross‑examination is whether CBB had the ability to undertake some of the work, including manufacturing a forward spreading unit for VicRoads.

85 Mr Conheady accepted that CBB has never produced a forward spreading unit. Although he maintained that it was 'basic engineering' and 'just an extension ... on their current range', he accepted that he did not have any personal experience and his assessment of CBB's ability to produce the products was based only on a tour of CBB's factory.

86 Mr Porter gave evidence that the forward spreading unit which Porter Plant has patented is the only design of its kind in Australia, and that Porter Plant is in a unique position to supply those vehicles. The work that would have been undertaken by the CBB Business was instead contracted out to Flocon Industries Pty Ltd, a third party manufacturer.

[W]hen I first went to do a shed tour with Mr Debono I was shown a, um, a trailer body that he was manufacturing in the back of the, um, the shed. It was in its very early stages of a moving-forward, which is, um, exactly the mentality that we've got in the forward spreading truck. So I knew that, um, they've got that mentality in the business.

What do you mean by mentality?---Being able to develop a new product.

88 I accept Mr Porter's evidence and that he and Mr Conheady would have sought to have CBB build that part of the forward spreading units contracted out to Flocon Industries. No evidence was called by any of the defendants to contradict this evidence or to the effect that the business would not be able to manufacture the required parts of the forward spreading unit for which Porter Plant held the patent or that the business lacked the ability to carry out other aspects of the work.

89 I am satisfied from the fact that Porter Plant held the patent, the evidence concerning the general quality of work performed by CBB given in the liability trial, and the evidence of Mr Porter about his visit to the CBB premises and his observations concerning a 'moving‑forward' unit, that the second reason identified is not a valid reason for refusing this aspect of the plaintiffs' claim. I find that, if there was capacity to do so, the business had the ability to manufacture the elements of the forward spreading unit manufactured by Flocon Industries and to carry out the other work the subject of the item 3(a) and (b) claims.

90 The third issue is that, while the calculation of the item 3(a) and (b) claims extends to 30 June 2022, Porter Plant was sold in October 2020 to a Japanese company, Kanamoto.

91 It was submitted that given that the logic of this aspect of the claim was for Mr Porter to capture the profit margin of the Porter Plant work, the opportunity ceased with the October 2020 sale. Mr Porter did not maintain any equity in the business following the sale, and neither did Mr Conheady (who never held such an interest).

92 Mr Conheady described the rationale underpinning the inclusion in the claims of work undertaken after October 2020:

Well, we took a snapshot from the July 18 to June 22. Porter Plant is an ongoing business even though Tim [Porter] has sold out on that date to a new owner, so Porter Plant still requires plant equipment in its course of business. And this document was prepared around that date, so that drew a line in the sand about how far we can go with the company records at that point in time.

...

Porter Plant the company is an ongoing entity. It requires plant and it continues to trace [sic] with CBB and these were items that would've been put through CBB um post transaction date of October 2020 with the benefits accruing to the shareholders which would've been Tim and myself. So, that's why so that the, the hire company is continuing.

93 Mr Porter remained managing director of Porter Plant until June 2022. Mr Conheady continues to be employed by Porter Plant. In cross‑examination, Mr Porter did not agree that the opportunity to direct the work described in his evidence to CBB ended with the sale to Kanamoto. He regarded the opportunity as ongoing during the period through to June 2022, during which period he remained a consultant to Porter Plant.

94 Mr Conheady could not recall whether Porter Plant business was directed to CBB between July 2018 and October 2020, but said he 'would assume so if we had a body to build'. His evidence was that the way in which Porter Plant directed its business did not materially change after Kanamoto acquired the business.

95 It was not suggested by the Mulcahy parties that the pricing of the products the subject of the two claims factored in a level of pricing that exceeded competitive market pricing. I accept Mr Conheady's evidence that after Kanamoto assumed ownership of Porter Plant in October 2020 'we were just using our suppliers in our normal course of business based on what our requirements were'. It was not suggested that the items of work claimed, and in the volumes identified in Schedules 1 and 2, were other than items required in the ordinary course of the business of Porter Plant.

96 While it would have been necessary for the plaintiffs to have disclosed their conflict of interest to Kamamoto, I accept Mr Porter's evidence that the opportunity was ongoing through to June 2022. I do not regard the October 2020 sale of the business as bringing these claims or either of them to an end, or constituting facts that mean the claims, if otherwise substantiated, are either not proved or must fail.

97 In further response to claims 3(a) and (b), the Mulcahy parties advanced a submission concerning loss. Referring to Johnson v Gore Wood & Co ('Johnson v Gore Wood'),[10] they submitted claims 3(a) and (b) are claims for reflective loss. It was submitted the Court should be cautious about simply allocating this purported loss to the plaintiffs, as their framing of the relief case was that income would go to their new vehicle as trustee of a new unit trust, and from that vehicle to their individual trust structures.

98 In Johnson v Gore Wood, Lord Bingham summarised the applicable principles:[11]

(1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss. So much is clear from Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, particularly at pp 222-223, Heron International, particularly at pp 261-262, George Fischer, particularly at pp 266 and 270-271, Gerber and Stein v Blake, particularly at pp 726-729. (2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding. This is supported by Lee v Sheard [1956] 1 QB 192, 195-196, George Fischer and Gerber. (3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other. I take this to be the effect of Lee v Sheard, at pp 195-196, Heron International, particularly at p 262, R P Howard, particularly at p 123, Gerber and Stein v Blake, particularly at p 726. I do not think the observations of Leggatt LJ in Barings at p 435B and of the Court of Appeal of New Zealand in Christensen v Scott at p 280, lines 25-35, can be reconciled with this statement of principle.

99 The plaintiffs responded by submitting that Johnson v Gore Wood makes the point that when a company sues for loss and a shareholder claims to have suffered a corresponding loss, it is an abuse of process to sue for the same loss. That circumstance has nothing to do with the present case.

100 I agree. This is not a case where both the individuals and their corporate entities are seeking to recover the same loss. The unit trust structure that was proposed was never established. There is no claim by Porter/Conheady related entities. No issue of reflective loss arises.

101 Scenario 2 was advanced by the plaintiffs in their updated statement as the basis upon which relief for breach of contract and/or equitable compensation assessed as at the date of trial should be based.

102 There was some confusion and some moving around by the plaintiffs during the course of the trial and in closing submissions concerning how they relied on Scenario 2. There was also some inconsistency between how Mr Meredith integrated information provided to him into his consideration of Scenario 2 and how the plaintiffs relied on Scenario 2.

103 Scenario 2 is based on projections for the business prepared by Mr Conheady in 2018. The experts considered the projections as one of two alternate scenarios when seeking to assess loss at the date of trial. Neither expert used the 2018 projections to assess loss at the 2018 date of breach.

104 The difficulty about using Scenario 2 to assess damages in 2022 is that there is an inherent conflict between adopting a valuation at the date of trial, which takes into account the effect of events subsequent to the breach, and using projections prepared in 2018, which do not take into account the actual performance of the business subsequent to the breach. In this case that includes using projections that cover extended periods where the business was required to deal with the pressures arising from the COVID‑19 pandemic.

105 There is also a tension between the plaintiffs relying on a 2018 view of future profitability for the assessment of damages for breach of retainer, which as a general rule will be assessed at the date of breach, and relying on the same projections as the basis for an assessment of equitable compensation for which, as the Court of Appeal said in Schmidt v AHRKalimpa Pty Ltd ('Schmidt'),[12] the normal rule is to assess compensation as at the time of the trial, with the 'full benefit of hindsight'.[13]

106 Mr Meredith reported that he presented both Scenarios 1 and 2 in order to allow the Court to decide which scenario is most reasonable considering all the evidence.

107 Scenario 1 is based on the actual trading results of CBB under BFMM majority ownership, including taking into account actual financial results to 30 June 2022.

108 The documents upon which Mr Meredith relied when expressing his opinions concerning Scenario 2 include document reference 725, an Excel document described as '2018_2023 Forecasts_CBB__3 Way_Normalised_Aligned to 1 Jan 2018_5 Year Repayment Option_Quarterly_65% Owned_22.1.18 Version' prepared by Mr Conheady, document reference 723, a working draft of Mr Porter's 2022 witness statement, and document reference 736, a working draft of Mr Conheady's 2022 witness statement.

[T]he financial modelling [in the excel spreadsheet] was based on the historic performance of the organisation and had been relatively stable over the 15, 16, 17 financial years and that provided the basis looking forward we didn't bake any opportunities into the outlook.

110 Scenario 2 assumes that the business would continue to trade at similar levels to prior years. Mr Meredith considered that Scenario 2 was based on reasonable projections, which were generally consistent with historical trading results prior to FY18. It was his evidence that, while he did not undertake a line‑by‑line analysis to satisfy himself that the forecast was properly and correctly prepared, he did form a view as to reasonableness based on revenue, gross profit and EBITDA. Ms Wright opined that, even if the projections were reasonable in 2018, the task for the experts was to undertake a valuation as at 2022.

3.3.22 'Scenario 2' has been prepared based on the projections prepared by Porter and Conheady for the purposes of the Westpac proposal documents.

3.3.23 The projections:

(a) relate to calendar years 2018 to 2022

(b) reflect the structure and financing of the transaction in Scenario 2, consistent with the description of these components set out in paragraphs 3.3.3 to 3.3.13

(c) assumed the business would continue to trade at similar levels to prior years, noting that:

(i) projected revenue was $17.43 million, in comparison to prior year revenues of:

(1) $16.89 million in FY14

(2) $15.58 million in FY15

(3) $18.15 million in FY16

(4) $17.75 million in FY17

(ii) projected EBIT of $5.21 million, in comparison to prior year EBIT figures of:

(1) $5.26 million in FY14

(2) $4.78 million in FY15

(3) $5.58 million in FY16

(4) $6.36 million in FY17.

3.3.24 I have considered adjusting the projections for hindsight, particularly in relation to the market conditions in relation to COVID‑19 and rising material prices, but have not made any adjustments because I am unable to quantify these changes with a reasonable degree of certainty.

113 As Mr Meredith reported, the actual trading results of CBB after BFMM acquired its controlling interest were generally significantly below historical results prior to the acquisition. They were also significantly below the projections for the business prepared by Mr Conheady.

114 It was put to Mr Matthews and raised in closing submissions that, in litigation against CBB, the former CEO had raised questions about the accuracy of the accounts of CBB. It was submitted the allegations in the statement of claim by the former CEO concerned fundamental issues of accounting for income, accounting for expenses and claims that income was understated and expenses artificially inflated. Mr Matthews denied the validity of the allegations, but they raised issues outside his involvement in the business.

115 It is not appropriate to draw an inference that the accounts of the business understate profit in circumstances where the former CEO who made the allegations relied on did not give evidence, where the allegations were untested allegations denied in the defence in the proceeding, and where no request to investigate these matters was made of either of the accounting experts, who were also not questioned about the alleged discrepancies.

116 The extract below from Mr Meredith's first report sets out the position about earnings over time and includes some commentary concerning Scenario 2:

6.3.1 Since the acquisition of CBB in FY19, there has been moderate volatility in CBB's earnings, as shown in Table 10. This volatility was driven by:

(a) the impact of the business changing ownership in FY19

(b) the emergence of COVID‑19, primarily from FY21 onwards (impacting labour costs and availability)

(c) rising material prices, primarily from FY19 onwards (impacting gross margins).

6.3.2 In Scenario 2, it was forecast that CBB would have stable earnings until 2022 of:

(a) revenue of $17.43 million

(b) gross profit of $9.14 million

(c) EBITDA of $5.31 million

(d) EBIT of $5.21 million

(e) profit before tax of $5.21 million.

6.3.3 In my view, the earnings in Scenario 2 (under ownership of Porter and Conheady) may have been more immune to the drivers of volatility as set out in paragraph 6.3.1 because of the significant orders that would have flowed to CBB from Porter Plant (as discussed in paragraphs 3.3.25 to 3.3.28), which may have allowed Porter and Conheady to:

(a) increase revenues to maintain total profits, despite falling margins

(b) protect profits margins by:

(i) directing more profitable work to CBB from Porter Plant

(ii) being less likely to have to undertake low margin work.

117 When discussing factors he considered might assist the Court to determine in favour of adopting Scenario 2, Mr Meredith referred, amongst other things, to the Porter Plant work:

(b) in favour of adopting the 'Scenario 2':

(i) the actual trading results of CBB under BFMM have generally been significantly below historical results before the acquisition and the projections prepared by Porter and Conheady, which indicates that the cause of the difference in trading results may be due to the changes made under BFMM ownership

(ii) Porter and Conheady had intended to increase the profitability of the business by directing orders from Porter Plant to CBB, which increases the likelihood that the projections prepared by Porter and Conheady would have eventuated

(iii) the projections prepared by Porter and Conheady directly reflect their best estimates of the Scenario 2 being modelled, notwithstanding they do not incorporate:

(1) hindsight (which may have the effect of decreasing the cash flows due to the impacts of COVID‑19 and rising material costs)

(2) the ideas for improving CBB as set out in the Porter and Conheady statements (which may have the effect of increasing the cash flows)

118 The problem with this discussion is that, even though the statements with which Mr Meredith was briefed included reference to the Porter Plant proposed purchases, it is no part of the Scenario 2 projections to include or to take into account the impact of the proposed Porter Plant work. In those circumstances it is not open for the Court to find, as was the opinion expressed by Mr Meredith in section 6.3.3 of his first report, that the impact of the proposed Porter Plant work is a reason to conclude that, under Conheady/Porter management, the business might have been more immune to the drivers of volatility than under BFMM management.

119 Mr Meredith referred in his report to Mr Porter and Mr Conheady's ideas for improving the business described in their witness statements in the context of Scenario 2. However, there was some confusion about this issue. Senior counsel for the plaintiffs opened the case on the basis that Scenario 2 was based on the plaintiffs' plans for the business. It was clarified in closing submissions that the projections were based on there being 'no changes to the way the business operated'.

120 Ms Wright held to the view that Scenario 2 is not an appropriate basis to assess loss of profits suffered by the plaintiffs:

(a) I have been provided with the FY22 financial statements recording the 'actual' financial performance of CBB. In my view, it is more accurate and appropriate to adopt actual financial information where it is available, rather than rely on projections which are only estimates made at a point in time;

(b) The Conheady Projections were prepared by the Plaintiffs in 2018 and therefore do not reflect the actual performance or the actual market conditions relevant to operations for the period between 2018 and 2022 (including the effects of COVID‑19);

(c) The Conheady Projections do not appear to take into account any capacity constraints that CBB has faced or may face after 2018. For example:

(i) Board minutes dated 9 October 2018 show that sick leave was having a detrimental effect on the business: "9 staff away Monday 8th. Lack of productivity killing the business output. Need to review policy to pay out unused sick leave? Voucher at end of month if haven't had a sick day?";

(ii) Board minutes dated September 2021 highlight the difficulties faced by CBB in obtaining supplies: "Shipping costs going...Parts hard to get for various reasons"

(d) I have not been provided with information detailing the underlying basis for the Conheady Projections; and

5.4.8. For the reasons discussed above, in my view, it is inappropriate to rely on a forecast prepared in 2018 for the purpose of assessing the cash flows that would have been generated by CBB between 2018 and 2022, when the financial statements recording the 'actual' cash flows are available for that period (from FY18 to FY22).

121 In cross-examination, Mr Conheady accepted that things like wages, the availability of labour and the cost of componentry and materials would affect the cost base. Mr Conheady accepted that there has been 'a fair bit of inflation in durable goods ... over the past ... one to two years'. When asked whether the model that underlies Scenario 2 takes that into account, his evidence was:

No, ... the model was ... performed in constant dollars, so - and that was the assumption I made, so any - any uplift in prices, the assumption would've been there would be an uplift in - in revenue to hold dollar margin constant.

122 Mr Meredith gave evidence that, if valuing in 2022, 'there's always going to be an issue ... [using Scenario 2] because of the effluxion of time'.

123 Scenario 2 was relied on in the updated statement as the primary basis for the calculation of damages for breach of contract and for equitable compensation.

124 The Mulcahy parties opened that equitable compensation should be assessed at the date of trial but in closing said that 2018 was more appropriate. Their opening submission was correct. In accordance with authority including Schmidt, equitable compensation is to be assessed with the full benefit of hindsight. The plaintiffs did not contend to the contrary. That being the case, an assessment of loss of profit based on Scenario 2 which proceeds on the basis of a 2018 projection and which has nothing to do with hindsight is irrelevant to the assessment of equitable compensation.

125 In closing submissions, the plaintiffs contended that, in contract, it is appropriate to value the business as at the date of trial rather than as at the date of breach. It was submitted that Scenario 2 was advanced in answer to the defendants' contentions that the date of breach should be adopted when assessing loss in contract.

126 However, if the correct date to assess damages for breach of contract is the date of breach, while the 2018 projections provide a starting point, there is no expert evidence that builds on that starting point to provide an evidentiary basis to assess loss as at 2018 by reference to Scenario 2.

127 In support of the adoption of Scenario 2 as at the date of trial, in closing submissions the plaintiffs relied on Mr Meredith's evidence that the cause of the difference between the projected and actual results after 2018 may be changes made under BFMM's ownership and that the plaintiffs had intended to increase the profitability of CBB by directing orders to CBB. That submission was made notwithstanding the plaintiffs' submission at paragraph 119 above that the projections were based on there being no changes to the way the business operated.

128 BFMM contended that the plaintiffs did not demonstrate that the actual performance of CBB when compared to the 2018 projections was in any way a result of mismanagement of CBB by the BFMM appointed directors.

129 I agree with BFMM. It was not put to Mr Matthews in cross‑examination that the BFMM appointed directors had acted to stifle growth or business performance or that decisions made by or as a result of the presence of the BFMM appointed directors of CBB had an adverse impact on CBB's performance. In re‑examination, Mr Matthews was asked whether the board had taken any decision deliberately to suppress profits, to which he responded 'No. Absolutely not'.

130 The impact of BFMM's majority ownership on the performance of the CBB Business to which Mr Meredith referred is speculation only. There was no evidence of adverse impacts on the business of decisions taken by the BFMM appointed directors of CBB after BFMM assumed a controlling interest in the business.

131 I do not consider the plaintiffs' reliance on Scenario 2 for an assessment of damages for breach of contract or equitable compensation as at 2022 as contended for in the updated statement to be persuasive. There are a number of reasons why that is the case:

(a) First, Scenario 2 is based on a projection when there is an available alternative, Scenario 1, based on actual performance.

(b) Second, although allegations were made concerning the accounts of CBB after 2018, there is no reason to doubt the genuineness or the accuracy of the actual performance of the business as recorded in the accounts.

(c) Third, one of the factors Mr Meredith identified in his report as weighing in favour of Scenario 2, further work from Porter Plant, is separately claimed as items 3(a) and (b). That work is not included in and does not form part of the basis of the projections that underpin Scenario 2.

(d) Fourth, as Mr Conheady was obliged to concede and as submitted by BFMM, Scenario 2 does not factor in increases in material and labour costs. It is a calculation in constant 2018 dollars. The projections also do not take into account actual capacity constraints encountered by the business as noted by Ms Wright.

(e) Fifth, as Ms Wright observed, Mr Conheady's projections do not reflect the actual market conditions relevant to operations of the business for the period between 2018 and 2022. Mr Conheady could not have foreseen and his projections do not factor in the impact on the business of the COVID‑19 pandemic; impacts on labour costs and availability, on cash flows and on rising material prices to which Mr Meredith referred.

(f) Sixth, Scenario 2 fails to take into account the volatility in earnings to which Mr Meredith referred in section 6.3.1 of his report.

(g) Seventh, a lesser consideration, if Scenario 2 were to be adopted, the modelling undertaken by Mr Meredith would need to be adjusted to take into account the 1% management fee Mr Porter and Mr Conheady proposed to charge. The plaintiffs did not prove Scenario 2 on a basis that incorporated that fee as an expense, even though that is their case.

(h) Eighth, in the case of equitable compensation, the law requires the use of hindsight, which is inconsistent with the use of Scenario 2.

132 Mr Meredith provided two reports. The first dated 18 July 2022, and the second dated 20 February 2023. When preparing his second report, Mr Meredith had available and considered the complete financial records of CBB and BFMM for the 2022 financial year, together with monthly management accounts from July 2022 to December 2022 and management projections for the 2023 financial year. He took into account this additional information in updating the opinions in his first report. His second report also responded to Ms Wright's second report.

133 Ms Wright prepared two reports, the first dated 25 November 2022 and the second dated 6 December 2022. It is unnecessary to refer to Ms Wright's first report as it was superseded by her second report.

134 Both experts worked cooperatively to provide the Joint Report. Both embraced the objective of the Joint Report process, namely, to identify areas of agreement and disagreement. It is important to record that in seeking to do so, the experts needed to grapple with different methodologies which they had adopted in their reports. That is particularly the case concerning their approaches to an account of profits detailed in Table 3 of the Joint Report. Because their methodologies when addressing that topic were quite different, their individual reports are of greater assistance in relation to that topic than the Joint Report which, if taken in isolation from their individual reports, might provide a misleading impression of their opinions.

135 I found both experts to be helpful in identifying and explaining the areas of difference and their reasons for disagreement. The experts and all counsel involved are to be commended for the efficient and helpful manner in which the concurrent evidence was conducted, including cross‑examination on the contested topics.

136 The experts agree that an appropriate methodology to calculate the loss of profit is to calculate the difference between the but‑for scenario and the actual scenario.

137 In his second report Mr Meredith set out the approach, common to both experts when seeking to calculate the loss to Mr Porter and Mr Conheady, described by the experts as loss of profit from breach of retainer. It is helpful to reproduce an extract from that report which includes a convenient identification of differences between Mr Meredith's first report and his second report and differences between his opinions and those expressed by Ms Wright in her report:

1.3.1 The loss to Porter and Conheady "resulting from the breach of retainer":

...

(b) has been revised to between $4,832,446 and $11,131,100 to each of Porter and Conheady (collectively between $9,664,891 and $22,262,201) having since been provided:

(i) the FY22 accounts

(ii) managements FY23 forecast

(iii) monthly management accounts from July 2022 to December 2022

(c) is based on the application of my approach to calculate future lost cash flows beyond 31 March 2022 by:

(i) valuing the market value of the shares in CBB based on two scenarios

(ii) apportioning for the defendants would‑be 80% shareholding

(iii) valuing the would‑be net debts in relation to the acquisition of CBB

(d) should be split evenly between Porter and Conheady in accordance with their equal would‑be shareholdings

(e) is different to that set out in the Wright Report due to:

(i) the future maintainable earnings adopted

(ii) the EBITDA multiple

(iii) the line fee calculation on the bank debt

(f) with respect to Scenario 1 is set out below:

(g) with respect to Scenario 2 is set out below:

138 Because the loss of profit calculations in Tables 1 and 2 are based on an 80% interest in CBB, assuming an individual plaintiff's damages are to be calculated based on a 40% interest, the loss of profits for that plaintiff calculated in accordance with Scenario 1 as per Mr Meredith is $4,832,445.50. As per Ms Wright the corresponding amount is either $294,262.50 as per Alternative 1 or $468,762.50 as per Alternative 2. The total loss of profits calculated by Mr Meredith in accordance with Scenario 2 is $22,262,201. For each plaintiff based on a 40% interest, their individual losses are 50% of $22,262,201; $11,131,100.50.

139 The experts agree that the components of the 'but‑for scenario' are:

(a) net lost cash flows;

(b) value of shareholding in CBB; and

(c) value of debt.

140 They agree in relation to the first component that in Scenario 1 the value of net lost cash flows is ($1,069,062). They agree the value of net lost cash flows in Scenario 2 is $3,136,266.

141 In relation to the second component, the valuation of the shareholding in CBB, as recorded in the Joint Report, the experts agree:

(a) CBB should be valued using the capitalisation of future maintainable earnings method;

(b) the standard of value should be market value; and

(c) the premise of value should be going concern.

142 The experts considered the value of the shareholding in CBB on the basis of Scenario 1 and Scenario 2.

143 In relation to the third component, the value of debt, the experts agreed:

(a) in relation to Scenario 1, surplus cash of $1,828;

(b) in relation to Scenario 2, net debt of $1,574,206; and

(c) in relation to Scenario 2, future maintainable earnings of $5,314,711.

144 The table below, extracted from the Joint Report, identifies areas of agreement and disagreement concerning loss of profit.

E1.1****. Contested Item 1: EBITDA multiple

145 The experts agree the main difference in their assessments of loss is attributable to the difference in the EBITDA multiple being applied to determine the value of the shareholding. The experts disagree in relation to that multiple.

146 Mr Meredith adopted a multiple of 5x by reference to two different valuation methodologies; comparable evidence and a first principles valuation analysis. Ms Wright adopted a multiple of 2.4x based on her analysis of the multiple applied by BFMM when it purchased CBB in July 2018, giving consideration to any required adjustment in the equivalent multiple from 1 July 2018 to the valuation date.

147 Concerning his primary valuation approach Mr Meredith considered three discrete sources of comparable data which in his opinion indicated an EBITDA multiple in the order of 10x:

(a) the acquisitions of Truckzone Group ('Truckzone') by MaxiPARTS Ltd ('MaxiPARTS') in February 2022 with an implied EBITDA multiple of 10.6x, and the acquisition of Truckline Group ('Truckline') by Bapcor Ltd ('Bapcor') in December 2019 with an implied EBITDA multiple of 11.4x;

(b) a report in relation to the US market for 'parts & component suppliers' with respect to the heavy duty and specialty vehicle industry from 2015 to 2019 which set out an average transactional EBITDA multiple of 9.2x; and

(c) trading EBITDA multiples of listed entities in Australia; Engenco Ltd ('Engenco') of 14.0x, MaxiPARTS of 10.3x and Bapcor of 10.2x.

148 Mr Meredith adjusted the indicated multiple of 10x, adopting a multiple of 5x to arrive at his opinion of the value of CBB.

149 Ms Wright did not regard the Australian evidence relied on by Mr Meredith as comparable. She did not agree with Mr Meredith's use of data concerning US companies. She considered the US data concerned a very different market, one which is approximately ten times bigger than the Australian market, with the consequence that the two markets are not comparable.

150 Mr Meredith's second method; applied as a cross check, was a first principles analysis to derive an EBITDA multiple of 6.2x. Components of Mr Meredith's approach included taking into account a small private company risk premium of 6.0% when determining the cost of equity. In his first report, Mr Meredith said that he allowed:

[A] small company risk premium of 6.0%, based on my professional judgement, taking into account:

(i) the size of the business

(ii) the relative lack of marketability indicated by the relatively long period it took to sell the company.

151 Ms Wright did not undertake a first principles analysis. She did not criticise the use of a first principles approach or Mr Meredith's application of it. However, she disagreed with the appropriateness of Mr Meredith's allowance for small private company risk. Ms Wright considered the 6% small private company risk premium was not sufficient to take into account both small company and key person risk.

152 Ms Wright considered the multiple paid in the 2018 transaction involving BFMM, with any necessary adjustment to the valuation date of 30 June 2022, with no adjustment being required in this case due to changes in market conditions, provided the best indication of the multiple a buyer would pay to purchase CBB at the valuation date. That was so in her opinion because:

(a) a multiple is typically derived by reference to comparable transactions and a transaction involving the sale of CBB would be considered 'comparable' in a valuation of CBB; and

(b) when calculating 'market value', the multiple paid represents the view of a purchaser of the business, which Ms Wright considered to be representative of the view of a likely market participant.

153 Mr Meredith disagreed with Ms Wright's reliance on the 2018 transaction involving BFMM. He considered that the multiple of 2.4x did not reflect the market value of the CBB Business. Mr Meredith did not take issue with Ms Wright's adjustment of the 2018 transaction to 2022.

154 Mr Meredith disagreed with Ms Wright because, in his opinion:

(a) the multiple of 2.4x derived from the actual sale of the interest in CBB did not reflect a market transaction as it was subject to litigation and the parties to the transaction were later found to have breached their duties;

(b) the actual sale price compared to the Munday Wilkinson valuation (valuing the business at an EBIT multiple of 3.5‑4) was described in the liability judgment as being 'grossly understated', suggesting that the July 2018 transaction was not at market; and

(c) the EBITDA multiple of 2.4x was too low for a business of this size and historic profitability, noting that Ms Wright's report did not provide further transactional or market evidence to suggest the multiple of 2.4x was appropriate.

155 I prefer the opinion of Mr Meredith in relation to the appropriate EBITDA multiple.

156 I do not consider Ms Wright's starting point, the 2018 sale transaction involving BFMM, to be a reliable starting point. I regard it as significant that the $12 million purchase price was well below the 3 August 2017 Munday Wilkinson valuation with a $19.65 million midpoint. It is also well below $16 million, which the purchasers of the CBB Business adopted as the value of CBB as at February 2019. I accept Mr Meredith's evidence that a multiple of 2.4x is too low for a business of the size and with the profitability of the CBB Business. While adopting a multiple of 5x might fairly be described as 'relatively conservative', a multiple of 2.4x is simply too low.

157 Mr Meredith's adopted multiple of 5x was arrived at and derived support from two different valuation methodologies. While I have reservations in relation to the application of the first methodology due to the degree of adjustment required to the available evidence, I consider the second method, that of a valuation of CBB based on first principles using a capital asset pricing model which resulted in a multiple of 6.2x, to be both reliable and persuasive. The adoption of a multiple of 5x by Mr Meredith which reflects his expert opinion is more conservative than to adopt the multiple of 6.2x produced by the model. I do not accept the validity of the criticisms by Ms Wright of the input of 6% for small private company risk adopted by Mr Meredith.

158 Turning to Mr Meredith's primary valuation methodology, as Ms Wright acknowledged, it can be difficult to obtain comparable information when seeking to value private companies. Mr Meredith said the Truckzone and Truckline transactions were 'the most directly comparable and relevant transactions' that he could identify.

159 Mr Meredith gave two reasons why he considered 5x rather than a multiple of 10x as reflected in those transactions was appropriate. The first reason, because the CBB Business was approximately 50% the size of the companies acquired in those transactions. In his report Mr Meredith said that CBB's revenue was approximately $18 million, whereas Truckzone's revenue was approximately $48 million and Truckline's revenue was approximately $57 million. When he gave oral evidence Mr Meredith erroneously referred to CBB's revenue as $24 million.

160 The second reason for Mr Meredith's 50% adjustment compared to the evidence concerns the relative profitability of the CBB Business compared to the Truckzone and Truckline businesses. Compared to those businesses, CBB was a more profitable business with lower costs in relative terms, providing less room for an acquirer to build profit back into the purchase.

161 In cross‑examination, Mr Meredith acknowledged the size of the target company can have an effect on multiples. As for comparable size, Mr Meredith considered that, whilst there would be a difference in the multiple for a company turning over $24 million compared with $48 million, it would not be a big difference because a business with a turnover of $24 million was still 'a significant bolt on'. Mr Meredith rejected the suggestion that the Truckzone and Truckline acquisitions are not comparable sales, stating that revenue is only one element of comparability.

162 Mr Meredith accepted that acquirers who might be able to incorporate the target into their operations might be willing to pay more and said there are instances where acquirers with a perception of being able to bring synergies tend to pay at the higher end of the market value range. Mr Meredith gave evidence that, if the synergies of the Truckzone and Truckline transactions are taken into account, they would not be such as to double the multiple from 5x to 10x, and that, if synergies accounted for 10% of what a particular purchaser was required to pay, that would be a substantial allowance. However, he pointed out that the international valuation standards say the valuer does not take synergies into account when estimating market value.

163 In re‑examination, Mr Meredith's attention was directed to two of the comparable transactions in the US, being Curt Group with an EBITDA multiple of 9.7x, and Truck Bodies & Equipment International with an EBITDA multiple of 10.7x. Mr Meredith considered that, although in a different jurisdiction, those transactions were very comparable in terms of their business to the CBB Business.

164 Ms Wright gave evidence that while she did not think the Australian businesses referred to by Mr Meredith were comparable, if their trading multiples (a range of 10.2x to 14.0x) were to be used, they must be adjusted by more than 50%.

165 I accept Ms Wright's evidence that MaxiPARTS, Bapcor and Engenco are very different businesses to the CBB Business. Her evidence was that MaxiPARTS operates ten retail stores, it is a truck business, but in a different market. Bapcor distributes automotive aftermarket parts and owns many other businesses, including the Autobarn chain. Ms Wright gave evidence that the Engenco business is not like the CBB Business.

166 Accepting that the US transactions referenced may be regarded as comparable, comparability involves questions of degree. To make a 50% adjustment to evidence of US transactions in a different market and to adopt a multiple of 5x when the report concerning the US market for 'parts and component suppliers' with respect to the heavy duty and speciality vehicle industry sets out an average transactional EBITDA multiple of 9.2x shows that the US transactions and reported data do not constitute evidence of value of a business that is, or businesses that are, directly comparable to CBB. The same is the case concerning the EBITDA multiples of listed Australian companies, 14x, 10.3x and 10.2x to which Mr Meredith referred.

167 To be required to make an adjustment from a multiple of 10x shown by the evidence to an adopted multiple of 5x shows that the evidence relied on by Mr Meredith is not sufficiently comparable to be of assistance.

168 While evidence of comparable transactions generally provides reliable evidence of value, that will not be the case where the available evidence is limited, or is not sufficiently comparable or is not a reliable indicator of market value. The second consideration applies to the evidence considered by Mr Meredith. The third consideration applies to the sale upon which Ms Wright relied.

169 Turning to Ms Wright's approach, Ms Wright adopted the definition of 'market value' as defined by the International Valuation Standards Council:

[T]he estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

170 Consistent with the definition adopted by Ms Wright, it is a key element of market value as defined in Spencer v Commonwealth[14] that the hypothetical vendor and purchaser are not only willing and able, but are fully informed.[15] It is a further characteristic of the parties to a hypothetical market transaction that both are willing but not anxious.[16]

171 I agree with Mr Meredith that the actual sale in 2018 is not an appropriate market data point. It is not a transaction that reflects market value. There are three reasons that is the case. First, because Mr Debono was an 'anxious' vendor. Second, because given the exclusion of the plaintiffs, the sale was not a 'market' sale. Third, because the price did not accord with the market value as advised to the vendor at the time and as independently assessed by Munday Wilkinson and others.

172 Mr Debono was not a willing but not anxious vendor, as that hypothetical person is described in the cases; he was an anxious vendor. Mr Debono gave evidence during the liability trial that he had serious health issues, which was one of the motivating factors for the sale. Having regard to Mr Debono's concerns about his health and his desire to exit the business, including by simply shutting its doors, he fixed on a price that was below what was advised to him at about that time and on a price that did not reflect the market value of the business. The price at which he was both prepared to sell, and did sell, reflects his 'anxiety'.

173 The sale was not a true 'market value' transaction. It was contaminated because one of the potential buyers, the plaintiffs, were not fully informed and were removed from the market, leaving a single buyer and a single seller. As mentioned in the liability reasons, Mr Debono's evidence was that he would 'definitely' have sold to Mr Porter and Mr Conheady.[17] The sale price to BFMM was not a result of competition between two persons, fully informed, both of whom desired to acquire the business and to both of whom the vendor was willing to sell. In a different factual scenario both the plaintiffs and BFMM would have competed, fully informed, on an even playing field, for the CBB Business.

174 Further, the $12 million sale price was below the price assessed and advised to Mr Debono by his own accountant, $16 million, it was below the price assessed and advised to him by Mr Mulcahy, $14 million plus stock and WIP, and it was below the low end of the Munday Wilkinson valuation range, $18.34 million to $20.96 million. These valuation assessments each provide evidence that the price paid by BFMM in 2018 does not reflect market value. It is not a reliable starting point for a 2022 market valuation of the business.

175 In the liability reasons I referred to the disparity between the value upon which Mr Debono was willing to base a sale of the controlling interest in CBB, $12 million plus stock and WIP, and the independent valuation of the business by Munday Wilkinson, with a mid‑point value of $19.65 million, on 3 August 2017.[18] I commented that the disparity between the Munday Wilkinson valuation and the value at which Mr Debono was willing to sell made the purchase a very attractive proposition.[19] I found that the Munday Wilkinson valuation 'at least strongly suggested ... that the value of $12m that Mr Debono had put on the Business as a whole was grossly understated'.[20]

176 Ms Wright referred to the adoption by Munday Wilkinson of earnings multiples of 3.5‑4.0x EBIT (equal to earnings multiples of 3.46‑3.95x EBITDA). In her opinion, the multiples adopted by Munday Wilkinson did not appear to consider the key person risk, a significant risk to the business operations of CBB if the Debono brothers were to exit the business.

177 While there were other criticisms of the Munday Wilkinson valuation beyond the allowance for key person risk, neither of the experts gave evidence that they considered the Munday Wilkinson valuation to be unreliable and not reflective of the market value of CBB as at the date that valuation bears. Even if there should be some adjustment for key person risk in the Munday Wilkinson analysis, there was no suggestion in the evidence that it would bring the August 2017 valuation with a $19.65 million mid‑point down to anywhere near $12 million. That being the case, the disparity between the sale price and the valuation range confirms that the $12 million sale price is not a price that reflects the market value of the business at the date of the 2018 sale. The 2018 sale is not a reliable market value transaction. It is not an appropriate starting point for a 2022 valuation of CBB.

178 For the reasons discussed, I consider Ms Wright's reliance on the 2018 actual sale as a transaction reflecting market value is misplaced.

179 Having regard to the expert evidence, I consider it a safer and more reliable course to arrive at the market value of CBB by the application of first principles.

180 There was no disagreement between the experts about the appropriateness of the use of a first principles valuation or of the component parts of Mr Meredith's calculations, except concerning the input to be adopted for key person and small business risk. Ms Wright considered that a normal adjustment to take into account small company and key person risk in a company this small and with this degree of key person risk would be 10‑12%.

181 Ms Wright accepted that, as at 2018, the restraints in the draft contract of sale and the draft proposed contract conditions that Chris and Anthony Debono must both continue to be employed for at least two years after the sale transaction were relevant to key person risk. She considered those factors were not relevant as at 2022 as they had run their course. I agree. However, there were different circumstances prevailing at that time that mean key person risk was not a significant factor in 2022.

182 What occurred in relation to the involvement of the Debono family in the business following the 2018 sale of a controlling interest is wholly inconsistent with the existence of material key person risk in 2022. At the June 2022 valuation date both Chris and Anthony Debono remained actively involved in the business as both employees and directors of CBB. As at 2022, Christopher Debono, the son of Chris Debono, was now the CEO of the business. Another Debono family member was employed in the business. As at 2022, all of the indicators were of long term inter‑generational family involvement in the business. The two brothers were heavily invested personally in the business and its future.

183 In 2022 the two brothers also remained financially invested in the business. As continuing shareholders, whether directly or via entities controlled by them, it was not in their interests for any key person risk to materialise.

184 Ms Wright's opinion as to key person risk was based on the branding and name of CBB, the fact Chris Debono had been operating the business for 38 years, and the fact that neither BFMM nor the plaintiffs were planning on initially purchasing 100% of the shares in CBB. I consider that the fact the plaintiffs were not purchasing 100% but rather a controlling interest in the business reduces rather than increases the key person risk. In those circumstances the economic interests of the purchaser and the vendors are aligned in desiring the business to succeed into the future.

185 The ongoing involvement of Debono family members in the business does not provide support for the view that the allowance for risk made by Mr Meredith is inadequate or inappropriate.

186 Separately, Ms Wright noted that the business had been on the market since 2016 or as early as April 2015 and that the achievement of a sale in 2018 appeared to be a culmination of an at‑market sale of the interest in CBB.

187 The length of time the business had been on the market was a factor expressly taken into account by Mr Meredith when adopting the 6% small company risk premium. In his first report he referred to 'the relative lack of marketability indicated by the relatively long period it took to sell the company'.

188 I am not persuaded that the adopted allowance of 6% fails appropriately to take into account key person and small business risks.

189 The first principles analysis shows a multiple of 6.2x. The adoption of a multiple of 5x by Mr Meredith reflects a more conservative approach to value than reflected by the analysis. In those circumstances I consider it is appropriate to adopt a multiple of 5x EBITDA.

E1.2****. Contested Item 2: Impact of using forecast 2023 figures in calculation of future maintainable earnings

190 Item 2 concerns Mr Meredith's use in his second report of the FY23 forecast for the purposes of Scenario 1. He determined to take this information into account because it represented the latest annual financial information provided with respect to the operations of the business and because the actual monthly management accounts to December 2022 were tracking in line with forecast revenue.

191 Ms Wright had not been provided with the FY23 forecast when she prepared her report. Her estimate of future maintainable earnings was calculated based on FY22 actuals. Ms Wright gave evidence that, even if forecast information was available, she would not take into account information that is post‑valuation date when valuing as at 30 June 2022.

192 In his first report, Mr Meredith did not have the full FY22 income figures available to him. He used the FY22 residual forecast to calculate future maintainable earnings, but, as events transpired, the actual FY22 result was a significantly lower number than the forecast. In his first report, Mr Meredith arrived at a figure of approximately $5.16 million for future maintainable earnings under Scenario 1 which, in his second report, he reduced to approximately $3.81 million. Mr Meredith's second report sets out the comparison between his Scenario 1 assessment of equity value in his first and second reports, a reduction from $24.6 million to $17.73 million.

193 In the Joint Report, the difference between Mr Meredith using the FY23 forecast and FY22 actuals and Ms Wright having considered the FY22 actuals but not the FY23 forecast, is one of the matters that accounts for a difference of approximately $200,000 between the assessments of future maintainable earnings. The comparable figures are Mr Meredith's figure of $3,814,889 and Ms Wright's figure of $3,612,466. Another area of difference is the treatment of an unfair dismissal claim for which Mr Meredith made an adjustment and Ms Wright did not. There is a further matter of the adjustment for directors' fees (Ms Wright having assessed future maintainable earnings based on two alternatives - no adjustment to directors' fees or an adjustment to allow only one‑third of the directors' fees). The unfair dismissal claim and the adjustment to directors' fees are dealt with elsewhere in these reasons.

194 Mr Meredith gave evidence that the actual management figures available for the six months to December 2022 were broadly consistent with management's forecast. As was his approach in his first report, Mr Meredith considered it preferable to take into account the most recently available financial information when seeking to determine future maintainable earnings.

195 While in cross‑examination Ms Wright accepted that the FY22 actual figures upon which she relied were, by the date of trial, approximately nine months old, as she correctly stated, they were current as at her valuation date of June 2022.

196 Questioned about whether the fact that the management accounts are in line with the FY23 forecast gives her confidence that the forecast is accurate, Ms Wright said that the fact actual performance was in line with forecasts up to December 2022 did not tell her whether actuals will continue to track and achieve the forecast through the next six months. The actual performance of the business for the last quarter of 2022 showed a significant drop in earnings.

197 I prefer the approach adopted by Mr Meredith to this issue. It is one which, while looking to assess future maintainable earnings, takes into account the most recently available information, albeit that information is in the form of a forecast. It seems to me it is important when what is sought to be determined is future 'maintainable' earnings to take the most recently available data into consideration. There is a second reason. The evidence is that the actual performance to December 2022 is consistent with the forecast, giving comfort for the adoption of a figure for future maintainable earnings that takes the FY23 forecast into account. That is the case notwithstanding the concerns about the validity of the FY23 forecast expressed by Ms Wright based on the fact that in the last quarter of FY22, the business performance dropped off. Ms Wright was not aware of the reasons why the performance in the last quarter of FY22 did not follow the anticipated trajectory for the business. There was no evidence from any other witness that explained or dealt with the reasons this occurred and none to suggest the same might occur in the 2023 year.

E1.3****. Contested Item 3: Directors' fee adjustment

198 Before BFMM purchased a controlling interest in the business, directors' fees were paid to the two Debono brothers. After BFMM's purchase, directors' fees were paid by CBB in equal amounts to all six directors.

199 For their work, the six directors, including the Debono brothers, were collectively paid or entitled to be paid fees of $468,000 in the year ended 30 June 2019. In the same year, wages were approximately $2 million for around 55 employees of the business.

200 In his first report, Mr Meredith made a normalisation adjustment for all directors' fees paid by CBB, including those paid to the Debono brothers. In his second report, he revised his approach so as to disallow and therefore to make a normalisation adjustment in respect of directors' fees paid to the CBB directors who are also directors of BFMM (who, for convenience, I shall refer to as the 'BFMM directors'), being $78,000 annually for each of the four directors. Mr Meredith did not make a normalisation adjustment in relation to directors' fees paid to the Debono brothers.

201 In relation to this item Ms Wright was instructed to assume as alternatives that:

(a) no adjustment is made for the directors' fees in CBB's profit and loss statement ('Alternative 1'); and

(b) two thirds of the directors' fees are added back to 'normalise' earnings ('Alternative 2').

202 Mr Meredith gave evidence that it was not appropriate to include the expenses of the BFMM directors' fees when calculating future maintainable earnings. First, because he considered those payments were in the nature of part of the distributions of profit; second, he did not consider the amounts paid were reflective of the work put in by those persons as directors; and third, he did not consider the size of the directors' fees reflected what a hypothetical purchaser would expect to pay after an acquisition. He noted he was advised that Mr Porter and Mr Conheady would not have paid themselves directors' fees had they acquired the business.

203 Mr Meredith further expressed his view that hypothetically looking at the size of the business, the total amount of in excess of $450,000 paid in directors' fees seemed excessive.

204 Mr Meredith said that in making the adjustment in relation to the fees of the BFMM directors, he proceeded on the basis that the directors would attend directors' meetings but would not be involved in operational management activities and would not have executive responsibility for operations. He considered the fees paid to the BFMM directors were not justified.

205 Mr Matthews gave evidence that he was not personally involved in the day‑to‑day operations. He gave evidence about the role performed by the other BFMM directors. Objection was taken to this evidence on the basis of hearsay. It is fair to characterise some parts of his evidence as based on his direct observations, and other parts as hearsay.

206 Mr Matthews was cross‑examined about the work the BFMM directors performed. It was his evidence that the fees paid to directors are not specifically tied to how much work each director performs. He said that approximately 11 directors' meetings were held each year of which approximately 20% or 30% were minuted. In addition, there are less formal meetings by telephone conference or at various locations involving either Chris Debono or Christopher Debono or other people within the business talking with the BFMM directors and seeking guidance or advice.

207 Mr Matthews described the directors' fees as 'fair remuneration' for the time, care, skill and expenses each of the directors put into managing the business, attending meetings, and mentoring and assisting senior staff including Christopher Debono. Mr Matthews gave evidence that payments to the directors were recorded in the accounts as an operating expense but were accrued. At least some of the directors have directors and officers insurance in place.

208 When it was put to Mr Matthews that the directors' fees were very high, he disagreed. He also disagreed that the directors' fees were high in order to bump up the expenses of the business. However he did agree that the directors' fees were a way of 'drawing money out of CBB'.

209 There was cross‑examination of Mr Matthews about some of the entries in the minutes of the directors' meetings. In particular, references to 'continuous no show' from some members, the need to develop a 'director obligation policy' and a reference to Mr Matthews having been given three warnings. I do not place weight on those entries which were explained by Mr Matthews, including the entry 'apologies B Matthews (3rd warning)' at a meeting on 5 February 2021 which Mr Matthews described as 'tongue in cheek'. I do note however that, in the case of Mr Matthews, he had no background in a business involved in trucks and truck bodies, he works full‑time in Mulcahy & Co Legal, that he has other business interests and involvements and the day to day operations of CBB are left to others.

210 Ms Wright gave evidence that, where there are two directors who are not shareholders and who are nonetheless receiving directors' fees, it is not consistent with the directors' fees being treated as a dividend. This aspect of Ms Wright's evidence, which suggests that the Debonos are directors but not shareholders, was based on an incorrect premise. Chris and Anthony Debono, whether directly or through entities associated with them, are both shareholders in CBB. For that reason, I do not place weight on this part of Ms Wright's evidence.

211 Ms Wright said that in assessing whether the total amount paid as directors' fees is reasonable, it would be necessary to also look at what was paid to the CEO and to other management team members. She considered there is a bit of a crossover between the directors assuming some management responsibilities compared to larger companies and the overall cost of management. Ms Wright confirmed that, because she was given instructed assumptions in relation to directors' fees, she had not sought to value their work herself.

212 As to whether $78,000 is the correct amount, Ms Wright's evidence was that one would need to look at what the director is doing, the risk they are taking and the usual fee. The sorts of risk that the directors' fee would reflect include the potential liability that comes with being a director, taking responsibility in respect of regulatory and OH&S issues, and the various regulatory matters that come the way of a director. Given the nature of the business, being a manufacturing business, it was her opinion that the risk concerning OH&S would be high. Ms Wright gave evidence that she did not have an opinion about whether $78,000 was the correct number or not.

213 Ms Wright did not consider the directors' fees of $468,000 to be excessive. She did not consider it appropriate to seek to compare the services provided under the directors' fees to wages. In order to assess whether the directors' fees are high as a proportion of wages, she considered it would be necessary to compare the services, something she was not in a position to do.

214 In cross‑examination, Mr Meredith said that he had a high degree of surety that a hypothetical purchaser would not have six directors at $78,000 for a business the size of CBB. Mr Meredith said that it was not unusual for directors to be 'over‑remunerated' to reflect profit distributions. Mr Meredith acknowledged that he could not precisely say what each of the individuals with their particular skill sets might have contributed by way of valuable services to CBB, but considered that did not take away from the point that the total size of the directors' fees was excessive in relation to the business. It was his opinion that a purchaser would consider payment of fees to two directors of $78,000 a reasonable amount for a company of the type and size of CBB. In cross‑examination, Mr Meredith was unshaken in his view that $468,000 was excessive and that, where he saw a directors' fee he thought was excessive, he would normalise out a portion of those fees. He chose to normalise out all of the fees attributable to the BFMM directors.

215 Concerning the reasonableness of the amount of $78,000 paid to each of the BFMM directors, the BFMM directors are not acting as executive directors, although Mr Matthews' evidence was that the BFMM directors provide some oversight and make some management decisions in respect of operational and management issues.

216 I accept that Mr Mulcahy and/or Mulcahy & Co provided some accounting services. There was no evidence from Mr Mulcahy and no documentary evidence in support of the assertion by Mr Matthews that Mr Mulcahy spends approximately two days each month undertaking this work without charge. I am not prepared to proceed on the basis of an assertion by Mr Matthews to make a finding to that effect. Mr Mulcahy could have given evidence, or there could have been documents in the form of time sheets or similar that substantiated the asserted two days of work without charge per month.

217 I accept that Mr Matthews has provided legal advice without charge from time to time, and that Mr Ford has provided assistance in relation to obtaining finance for the business, including financing for the robot.

218 While I accept there are risks involved with being a director, including those identified by Ms Wright, at least some of the directors whose fees Mr Meredith considered should be adjusted have directors and officers insurance, which, as Ms Wright said would 'somewhat mitigate the risk'.

219 The role of the BFMM directors is to be contrasted with the Debono brothers, who were previously the only directors of CBB and who are executive directors involved in management of the business.

220 Taking a generous view of the evidence, and even accepting that Mr Mulcahy provided two days of work per month without charge, the amount of $78,000 per director to the BFMM directors, including Mr Broadbent who directed business to CBB, is not justified. The payment of $78,000 per BFMM director is consistent with directors' fees being used as a form of remuneration, over‑remuneration to reflect profit distributions in favour of those involved in the ownership of the business. As Mr Matthews mentioned, a way of drawing money out of the business, rather than a genuine fee for the provision of directors services.

221 More importantly, I accept Mr Meredith's evidence that, for a business of this size, $468,000 would be regarded as excessive in the eyes of the hypothetical purchaser and therefore needs adjustment. The expense of $468,000 per annum is abnormal and disproportionate for the business. The fees that were paid to the four BFMM directors were fees paid to non‑executive directors. I consider the fees paid are disproportionate when compared to the wage bill for the business when consideration is given to the evidence of what the BFMM directors actually did. The fees represent a new expense of the business at a time when the business did not experience growth. Previously the business operated with two executive directors.

222 I agree with Mr Meredith that a structure and expenses associated with two executive directors, as had occurred in the past, and at a rate of $78,000 per director, is what would be expected by a hypothetical purchaser of the business. I consider the normalisation adjustment that Mr Meredith has made by reference to this item to be an appropriate one.

E1.4****. Contested Item 4: Unfair dismissal claim

223 Mr Meredith considered an adjustment to future maintainable earnings should be made on account of an unfair dismissal claim made against CBB. Ms Wright was instructed that no adjustment should be made in respect of this item. Ms Wright was instructed the unfair dismissal expense of $100,000 was misdescribed in the accounts and was a bonus payment to the CEO that was payable on an annual basis.

224 As Mr Meredith noted when cross‑examined, it is a question of fact whether a bonus was paid, but if the fact is that the payment related to an unfair dismissal claim, then it would be a non‑recurring item which should be normalised out.

225 Relying on the evidence of Mr Matthews, BFMM submitted the payment was in relation to a bonus which was not paid but which, in the ordinary course, the former CEO would have been entitled to on a year on year basis. Mr Matthews' evidence was that while no bonus was paid to the new CEO Christopher Debono in his first financial year, it was intended to do so in FY22 and into the future, 'at least until we offer him an equity share in the business'.

226 Ms Wright gave evidence, which I accept, that the deciding factor about whether the item should be normalised is whether or not the amount in question is expected to be paid in the future.

227 I do not accept the accuracy of the instructions provided to Ms Wright. The facts do not support them. The evidence shows that the payment was a one‑off payment of $100,000 in each of two years to the former CEO in settlement of a claim for payment which the CEO pursued via litigation and to which CBB said the CEO was not entitled. A one‑off payment in settlement of litigation is something that would not be expected to happen in the future. That being the case, there should be a normalisation adjustment.

228 Further support in favour of a normalisation adjustment is provided by the fact that the $100,000 bonus amount does not appear in the historic financials of the business. The item is not included as an expense in the management accounts from July 2022 to December 2022 and the FY23 forecast.

229 As a separate matter, whatever payments might be made to Christopher Debono in the future, those payments do not equate to the circumstances of the payment to the former CEO in settlement of litigation. If the proposed bonus to Christopher Debono were to be taken into account, it would be necessary to consider the overall expenses of the company, including how his salary relates to the salary paid to the former CEO, and whether, looking at his remuneration package as a whole compared to that of the former CEO, some adjustment should be made. Neither party undertook that analysis, and my attention was not directed to evidence that might show the comparative financial packages paid to the two CEOs. I do not accept that the fact that at some time in the future a bonus might be paid to Christopher Debono is an answer to the proposition that the past payment to the former CEO should be normalised.

230 The fifth contested item concerns the line fee on the value of debt.

231 Mr Meredith explained the difference between he and Ms Wright in relation to this item. He calculated bank debt on the basis that the line fee at 1.5% is struck on a reducing balance. Ms Wright proceeded on the basis that the 1.5% fee is calculated and payable on the facility limit over the life of the facility. That is, 1.5% calculated by reference to the facility limit, regardless of whether or not the amount actually owed on the facility reduces over the five year term.

232 Mr Meredith relied on an email dated 13 February 2018 from Westpac when, in response to a question about the line fee at 1.5%, the bank officer responded: '[t]he line fee is charged quarterly in advance on the facility limit (as its [sic] reduces), applicable for the life of the loan'.

233 Ms Wright said that if the Court were to find the line fee reduces as the loan balance reduces, she would agree with Mr Meredith's calculation.

234 In light of the 13 February 2023 email, the approach taken by Mr Meredith is correct.

235 Neither expert approached the calculation of the account of profits that BFMM may be ordered to disgorge taking BFMM as the starting point.

236 Ms Wright proceeded by reference to the net profits generated by CBB for the 2018‑2022 period and, adopting CBB's reported profits over that period, calculated the portion attributable to BFMM based on its shareholding in CBB. Mr Meredith proceeded by reference to what he described as 'distributions to defendants' in connection with the acquisition of CBB during the period 1 July 2018 to 30 June 2022. Mr Meredith conceded that he used the term 'defendants' loosely. He intended to refer to the distributions from BFMM to unitholders in the unit trust of which BFMM is trustee. The difference in approach accounts for a difference between the experts of approximately $1.2 million.

237 The experts agree that when calculating an account of profits:

(a) the historical expenses of BFMM of $2,092,393 to 30 June 2022 should be included in an assessment of account of profits; and

(b) if the Court finds that the account of profits should be calculated by excluding the impact of the legal fees incurred by BFMM, the account of profits calculation would increase by $849,555.

238 Both experts adopted their calculation of the present value of future profits based on their adopted multipliers, Mr Meredith a multiple of 5x, Ms Wright a multiple of 2.4x. The differences between them on this topic and my findings are discussed in section E1.1.

239 There was a difference in methodology when the experts considered the net value of BFMM's shares in CBB. This issue is discussed in section E2.2 below.

240 Directors' fees are another area of difference between the experts in relation to an account of profits. Mr Meredith included past directors' fees of the four BFMM directors as income of BFMM. Ms Wright considered the position of Mr Mulcahy as a separate matter.

241 The table below, extracted from the Joint Report, identifies areas of agreement and disagreement concerning an account of profits.

E2.1****. Contested Item 6: The basis to calculate historical profits

242 In the Joint Report, Mr Meredith arrived at $9,795,961 for historical profits (revenue) which he described as '[d]istributions received by the defendants in connection with the acquisition of CBB during the period from 1 July 2018 to 30 June 2022'. Ms Wright, on the other hand, arrived at a figure for historical profits (revenue) of $8,537,657, calculated as the 'net profits generated by CBB and derived by BFMM' for the same period.

243 Ms Wright took the net profit of CBB before tax and calculated two‑thirds of the profit representing the 66.67% interest of BFMM in CBB. While the calculations in Tables 18 and 19 of her report were performed using two‑thirds, in her report, and later in her evidence, Ms Wright referred to 67%. Mr Meredith did not perform a comparable calculation because he used a different methodology. In the Joint Report both experts adopted the same rounded reference to 67%. For simplicity and convenience, I will do the same when discussing this issue.

244 Returning to the differences in approach, as Ms Wright explained, the approach adopted by Mr Meredith was to look at the unitholders in the BFMM Unit Trust and to take the actual distributions to those unitholders, whether it was one of the individuals, such as Mr Matthews, or a discretionary trust which holds units on a person's behalf. Ms Wright, on the other hand, looked to the entitlement of BFMM to the distribution of profits via dividends from CBB. She noted that, if the company were to be wound up and everything was being distributed, that would be the value BFMM would be entitled to. Ms Wright considered her approach most accurately calculated the profit derived in each financial year that BFMM is entitled to, irrespective of whether it has or has not yet been distributed.

245 The difference in approach was highlighted by Ms Wright's evidence that she took the profit generated by CBB multiplied by 67%, whereas Mr Meredith assessed the profits generated by BFMM in the form of dividends distributed to unitholders. Ms Wright explained that she had approached the matter that way because BFMM is the defendant, whereas the unitholders are not. She had stopped in her analysis at BFMM, whereas Mr Meredith went the next step to the unitholders.

246 Mr Meredith considered the actual benefit derived from acquiring CBB could be most accurately assessed by calculating BFMM's trust income. That is for the reasons that:

(a) BFMM's trust income is recorded in the financial statements from FY18 to FY22;

(b) BFMM's income is purely from CBB; and

(c) the income distributed from the trust is substantiated by tax returns.

247 In his second report, Mr Meredith said he disagreed with Ms Wright's approach because the net profits of CBB were not distributed to BFMM at a flat rate of 67%. As a result, to approach the matter in that way would not capture the actual benefit BFMM derived from the acquisition. As events transpired, what was in fact received by BFMM during the four year period was more than 67% of the net profits of CBB.

248 In his calculation, Mr Meredith added back the expenses of BFMM of $2,092,393, an item of the calculation which, as appears from Table 3 of the Joint Report, was agreed between he and Ms Wright. As a matter of arithmetic, in the Joint Report, those expenses were added back on the top line of Mr Meredith's calculation and deducted on the fourth line. These steps were built into the Joint Report so that Ms Wright and Mr Meredith, who had used different approaches, could present a table which, as far as practicable, showed an equivalence of numbers.

249 In the course of giving evidence, Mr Meredith noticed that the sum of $8,951,569 referred to in his second report was a different number to the sum of $9,795,961 in the first line of Table 3 of the Joint Report. The discrepancy was because of differences in approach between Mr Meredith's second report and the Joint Report where the experts sought to adopt a common approach to areas of difference to the extent that was possible. So much is confirmed because the total account for profits at $11,013,138 calculated by Mr Meredith is the same in both the Joint Report and in Mr Meredith's second report.

250 In order to calculate the total profits derived by BFMM**,** Mr Meredith began with the trust distributions of $7,703,569, added cash received through directors' fees of $1,248,000 to arrive at a total of $8,951,569. Mr Meredith then sought to calculate the current value of 67% of CBB's shares, which, applying his multiple of 5x, was reflected in a value of $11,817,514 from which debt owed to the NAB by BFMM of $4,666,668 was deducted, as were debts owed to the directors of BFMM or their entities, $5,089,277 to arrive at a current value of BFMM units of $2,061,569. Adding the current value of BFMM units of $2,061,569 to the BFMM trust distributions of $8,951,569, being the figures referred to in Mr Meredith's second report, resulted in total profits of $11,013,138.

251 Cross‑examined about his approach and the premise that he referred to in his report of an account of profits being for the defendant to 'give up his ill‑gotten gains', Mr Meredith said the benefit to BFMM is the distributions it has received, less the costs of the company being 'alive' so as to receive those distributions, so that the result is a net profit number which is what has been distributed to the unitholders in BFMM. Mr Meredith considered it was a pretty safe assumption that, if the trust of which BFMM was trustee received profits, it would have distributed them, because otherwise there would be tax penalties.

252 When Ms Wright was cross‑examined, she said she understood both she and Mr Meredith were taking into account all the profit derived and expenses incurred by BFMM. The debate concerning the reference to the $2,092,393 figure in the Joint Report was, she confirmed, due to different methodologies and agreement between the experts that a presentation which showed that amount was likely to be of assistance to the Court if set out in that manner in the Joint Report.

253 As explained by Ms Wright, if all profits are distributed then, in theory, the different approaches by the two experts should result in the same figure. However, on Mr Meredith's approach, the historical profits (less expenses) are $7,703,569. On Ms Wright's approach, the historical profits (less expenses) are $6,445,264.

254 Ms Wright considered the difference between Mr Meredith's figure of $7,703,569 and her figure of $6,445,264 may have been attributable to timing differences or differences in the manner in which BFMM makes distributions to its unit holders. She considered there were two potential timing differences. First, there was the timing between CBB's profit and BFMM receiving it as a dividend or distribution, and then, based on Mr Meredith's approach, there is the next step of the distribution of BFMM's profit to the unitholders. She expressed the opinion that if all CBB's profit was distributed, and if all of BFMM's profit was distributed to unitholders, then the figures of both experts should be equal.

255 In light of Ms Wright's evidence in the course of the concurrent evidence, the experts were invited to further consider the reasons for the differences, including by discussing the issues between themselves, which they did overnight. Both reported on the results of their further work the next day.

256 Ms Wright reported she had been able to reconcile the dividend received by BFMM with the dividend recorded out of CBB's balance sheet for certain of the financial years. For example, in FY20, CBB's profit and loss statement showed net profit before tax of $4,052,596. That figure aligns with the current year earnings figure for FY20 recorded in CBB's balance sheet. In her report, Ms Wright adopted the net profit before tax of $4,052,596 and calculated 67% as $2,701,731. CBB's balance sheet also records a fully franked dividend of $3,900,000, 67% of which is $2,600,000. BFMM's profit and loss statement showed a fully franked dividend received of $2,600,000. Ms Wright explained she used the equivalent of the dividend, 'acknowledging that there is a slight ... difference between the profit of 4 million and the dividend declared of 3.9', and separately took into account the expenses of BFMM. Mr Meredith, on the other hand, adopted the $2,905,534 shown in the BFMM profit and loss statement as having been distributed to beneficiaries.

257 Ms Wright explained that, by contrast, there was not a close link between the profit and the dividend in FY19. In FY19, current year earnings were $3,653,841. However, the fully franked dividend was $34,867,998, but BFMM only received a dividend of $800,000.

258 Mr Meredith reported he had further analysed the accounts of BFMM and the dividends it received from CBB. The accounts show the pre‑tax profit available for distribution to BFMM in the four year period was $8,537,657. That is to be compared with the dividends and franking credits BFMM received over the same period, which amounted to $9,795,961. Mr Meredith said that, having compared the accounts over the four years on the information he had available, it was not possible to discern how the dividends exceeded the profits. The only conclusion he could come to is that dividends were paid out of retained earnings that were held at the beginning of FY19. Mr Meredith concluded that the retained earnings were used to pay out early dividends, such that the difference between the two numbers is essentially a timing difference.

259 In further evidence, Mr Meredith said he considered there were some accounting irregularities between FY18 and FY19, probably associated with a dividend to the Debonos before the change of ownership, but there was insufficient information to understand the totality of the transactions.

260 While following further investigations by the experts it was not possible to reconcile the difference between them, Mr Meredith held to the view that Ms Wright's calculation was of a theoretical number, whereas his was a calculation of what BFMM actually received, as it happened, a higher number. Mr Meredith clarified that the start of his calculation is what BFMM actually received, he then deducted the expenses of BFMM to arrive at the net profit that BFMM received, which is $7,703,569, being the same amount that was distributed to the beneficiaries of BFMM.

261 The object of an account of profits is to require the defendant to disgorge the profits or gains flowing from the breach. In this case that requires identifying what it is that BFMM received from CBB. In relation to this issue I prefer the approach of Mr Meredith because it proceeds by reference to what was actually received by BFMM as recorded in the financial statements and the tax returns. By taking that approach, all of the profit received by BFMM as a result of its involvement in breach of fiduciary duty is captured. As the evidence establishes, BFMM received more than 67% of the profits of CBB in the years in question. That is because, in addition to the percentage of profits in each of those years, the amounts which Ms Wright took into account, BFMM received additional dividends from CBB, most likely paid out of retained earnings. To fail to take into account the amounts so received would be to understate the profits that BFMM received and for which it must account.

262 In closing submissions BFMM submitted that to take into account profit received from retained earnings was double counting because the distribution from retained earnings represents a distribution out of the asset for which BFMM has already paid. This was explored in cross‑examination with Mr Meredith who accepted that a distribution from retained earnings reduces the equity value of the enterprise. Mr Meredith's evidence was: '[B]ecause you're distributing a dividend, you - typically, you're distributing cash. The reduction of the cash in the balance sheet causes a reduction in the value of the equity to the extent of the cash distributed'.

263 In response the plaintiffs submitted it did not matter when CBB made the profit and distributed it to BFMM.

264 To determine whether BFMM is correct in its submission that to require it to account for all profit actually received, including from retained earnings, represents a double counting requires a consideration of the elements going to make up the total account of profits. That is, to ascertain whether what is said to be double counted is otherwise accounted for in the profits to be disgorged. As it is Mr Meredith who includes the amount submitted to be double counted, it is important to have regard to each of the components he took into account to arrive at his total account of profits of $11,013,138. Those components are summarised in Table 8 from his second report reproduced below:

265 The first item in the table, $7,703,569, includes the retained profits distributed to BFMM. The second item, directors' fees, is not related to the first. There is no overlap.

266 The third item, the value of CBB shares as at 30 June 2022, $11,817,514, is arrived at by capitalising future maintainable earnings. This method of valuation does not depend on whether there are or are not retained earnings, or the level of retained earnings in the business. There is however a separate point.

267 The valuation of CBB is at 30 June 2022. The retained earnings were paid out earlier. As Mr Meredith explained in cross‑examination, the effect of paying a dividend would be a reduction in cash with a corresponding reduction in the value of equity to the extent of the cash distributed. When valuing the business at 30 June 2022 the experts valued a business which no longer included cash earlier paid as a distribution of retained earnings. Even if CBB were to be valued on the basis of its book value by reference to its balance sheet, which is not an approach referred to or adopted by either expert, the 2022 balance sheet reflects a balance sheet at a different date to and after the retained earnings dividend had been paid. The valuation of the shareholding at 30 June 2022 means that any reduction in value by reason of the earlier payment out of retained earnings has been accounted for and is reflected in the valuation as at the later date. No issue of double counting arises.

268 The fourth to sixth items in Table 8 concern an adjustment for debts. Those items are not relevant to the alleged double counting issue. The next item in the table, the current value of the BFMM units, is the product of a calculation using earlier items in the table. As it uses no new inputs, no fresh issues relevant to double counting arise.

269 I do not accept there is double counting as submitted by BFMM. For the reasons earlier discussed I assess the total historical profits derived by BFMM for which it must account to 30 June 2022 at $8,951,569.

E2.2****. Contested Item 7: Net value of BFMM units

270 This topic was described in the agenda for the cross‑examination of experts as 'Purchase price for interest in CBB/Debts owed by BFMM (financial and debt position for BFMM v purchase price paid by BFMM), being the third item in Table 3 of the Joint Report. During cross‑examination of the experts, it became clear the controversy also included the fifth item in Table 3, being the present value of future profits. The experts adopted different approaches to these topics.

271 The primary difference was described by Mr Meredith as one of methodology. His method calculated the net value of BFMM units by deducting the financial and debt position of BFMM as at 30 June 2022, (being the debt owed to the NAB by BFMM Trust of $4,666,668, plus the debts owed to the directors of BFMM or their entities, $5,089,277, a total of $9,755,945) from his assessment of the present value of future profits, $11,817,541, resulting in a net value of $2,061,569.

272 Ms Wright's corresponding net value is approximately ($4.5 million), calculated by deducting the purchase price paid by BFMM, $8,972,603, from her assessment of the present value of future profits, $4,403,000 (under alternative 1).

273 The two main differences between the experts are their competing assessments of the present value of future profits, and whether to deduct the financial and debt position of BFMM as at 30 June 2022 (per Mr Meredith) or the purchase price paid by BFMM (per Ms Wright).

274 Notwithstanding the difference in methodology, the biggest difference between the experts in relation to this issue, as Ms Wright agreed, is the present value of future profits, a component of both calculations. As Ms Wright said, 'we've used two different methodologies, that otherwise, all else being equal, would not have a significant difference, if it weren't for that difference in the future profit ...'. The key difference between the witnesses is the multiplier.

275 If Ms Wright had used a multiple of 5.0x instead of 2.4x, then her value would have been much higher and the net value would have been much closer to that adopted by Mr Meredith. It was put to Ms Wright that if I agreed with Mr Meredith's multiple, the conclusions he advances about the starting point would be accepted and if I agreed with Ms Wright (as to that issue) her starting point would be accepted. Ms Wright responded by saying 'Yes. For that component, the present value'. As I prefer Mr Meredith's adopted multiple of 5.0x, I prefer his opinion on this contested issue.

276 The second issue concerns whether to use the current financial position of BFMM or to adopt the purchase price when calculating the value of BFMM's units. This issue accounts for approximately $800,000 of the difference.

277 Mr Meredith was not cross‑examined about this topic, item 7 on the agenda. Ms Wright was cross‑examined very briefly about this topic. As Mr Meredith explained, he calculated as at 30 June 2022, whereas Ms Wright's methodology used the purchase price at the purchase date. Debt is a deduction in Mr Meredith's methodology, but did not feature in Ms Wright's methodology, which instead requires a deduction of the purchase price. Ms Wright explained she did not consider the debt owed by BFMM to be an element of profit. Interest expense is an element of profit, but debt is not normally such an element.

278 Because the methodologies are not the same, inconsistency by crossing from one approach to another must be avoided unless there is good reason to do so. I propose to adopt Mr Meredith's approach. First, because he was not cross‑examined about the inclusion of debt in his calculation. Second, because while Ms Wright stated the 'normal' position, Mr Meredith and she having adopted different methodologies, Ms Wright did not say Mr Meredith's methodology, which took into account debt, was not an acceptable methodology. Third, because Mr Meredith's approach takes the financial position of BFMM as it now is rather than the historic purchase price.

E2.3****. Contested Item 8: Present value of future distributions

279 This topic concerns whether an account of profits should include the present value of future directors' fees to be received by Mr Mulcahy. There is a further issue which arose during closing submissions; if Mr Mulcahy should be required to account for future directors' fees, what multiplier should be applied to the annual directors' fee of $78,000.

280 These issues were only dealt with in the Joint Report by Ms Wright. The entry by Mr Meredith against this item in Table 3 of the Joint Report is n/a.

281 Although this topic was an agenda item for cross‑examination, the parties agreed the topic is one for the Court, rather than for the experts. While that was agreed, there was only brief mention of this topic in closing submissions.

282 The entry by Ms Wright in the Joint Report includes an express reference to the future value of the directors' fees to be paid to Mr Mulcahy assessed at $187,200. While not specified in the table, as appears from the cross‑referenced material, Ms Wright adopted Mr Mulcahy's annual directors' fee of $78,000 and capitalised it applying her adopted multiple of 2.4x. It is clear from Ms Wright's report that the figure of $187,200 future directors' fees is included in her assessment of an account of profits payable by Mr Mulcahy personally, rather than by BFMM.

283 The quantification of an account of profits payable by Mr Mulcahy personally is dealt with in section G4 of these reasons. For the reasons set out in that section, it is appropriate that Mr Mulcahy account for both past and future directors' fees, and it is appropriate to apply a multiple of 5x in calculating the present value of Mr Mulcahy's future directors' fees.

E2.4****. Contested Item 9: Present value of future expenses

284 The present value of future expenses is an area of difference between the experts because of the different methodologies each chose to adopt and considered appropriate.

285 When valuing future cashflows to calculate the market value of the business, Mr Meredith took the view it was not appropriate to include a capitalised value of future expenses. He did not consider such expenses relevant to his calculation. That is essentially because in his approach he was determining the market value at the current date, notionally arriving at a sale, then paying out the debts to arrive at a net figure, in his assessment, of $2,061,569.

286 Ms Wright on the other hand took into account the future expenses that BFMM will incur, its holding costs. She explained that, in being able to generate a profit, BFMM will continue to incur interest in the future until the debt is paid out.

287 Mr Meredith accepted that, applying Ms Wright's methodology, what she had done may well be appropriate, but did not agree that her methodology was itself appropriate. For her part, Ms Wright disagreed with Mr Meredith's approach, which assumed a notional repayment of the NAB debt and therefore no interest in the future. She explained that the debt is not being repaid, so there will be interest in the future. She continued saying that if the debt was actually repaid at 30 June, there might not be interest in the future, but there might be a break fee or some other cost of paying the debt early.

288 Both experts adopted an appropriate approach to the present value of future expenses driven by and consistent with the methodology each chose to adopt. As I have preferred Mr Meredith's opinions on each of the other matters in dispute concerning an account of profits which reflect the application by him of his chosen methodologies it is appropriate for consistency that I adopt his approach to this issue and I propose to do so.

289 The second item in Table 3 of the Joint Report, directors' fees from FY18 to FY22, although not the subject of cross‑examination or otherwise addressed by the parties, is a significant area of difference between them.

290 Mr Meredith included in his account of profits calculation $1,248,000, representing directors' fees received by the four BFMM directors from FY18 to FY22. Ms Wright included $nil (Alternative 1) or $312,000, representing directors' fees received by Mr Mulchay (Alternative 2). As discussed in section E2.3, Ms Wright's analysis was in the context of a calculation of the account of profits payable by Mr Mulcahy personally rather than in the context of the calculation of an account of profits payable by BFMM. In her report, Ms Wright stated that she disagreed with Mr Meredith's inclusion of the directors' fees in the calculation of BFMM's profits because they were paid to the directors, not to BFMM.

291 It is appropriate that BFMM account for $1,248,000, representing the historical fees received by each of the four BFMM directors. That is so for the following reasons:

(a) first, because the fees themselves are directly referable to the fact that BFMM is a 67% shareholder in CBB. It is because of that shareholding and the fact the individuals are directors of BFMM that the individuals were appointed and are directors of CBB. If it were not for those facts there is no reason to suppose the BFMM directors or any of them would have been appointed directors of CBB or would have received the fees in question or any of them;

(b) second, the fees represent profit distributions. This is an example of a case which Mr Meredith described as 'not unusual'. The BFMM directors are 'over remunerated' to reflect profit distributions. The person entitled to that profit distribution and for which it must account is BFMM; and

(c) third, as is the evidence of Mr Matthews, the directors' fees are a way of 'drawing money out of CBB'. BFMM must account to Mr Conheady for that money.

292 The plaintiffs submitted Mr Porter is entitled to damages for breach of contract by the Mulcahy parties. The damages claimed are expectation loss for the benefit Mr Porter could expect to have received had the breach not occurred, together with reliance loss, being wasted expenditure incurred by Mr Porter in pursuing the opportunity.

293 There is an issue concerning what expectation loss, if any, Mr Porter sustained by reason of the Mulcahy parties' breach of the 29 June 2017 Retainer. There is less of an issue concerning Mr Porter's claim for wasted expenditure. However, there is an issue about whether Mr Porter can recover both categories of loss.

1. BFMM referred to Robinson v Harman ('Robinson'),[21] where Parke B said:[22]

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

1. It submitted a corollary of the principle in Robinson is that a party is not entitled, by the award of damages, to be placed in a superior position to that which it would have been in had the contract been performed. The defendants submitted that would be the result if Mr Porter were to recover both expectation damages and reliance damages.

296 It is convenient to identify some of the established principles governing the recovery of damages for breach of contract, principles to be applied to the claims by Mr Porter and by Mr Conheady for contractual damages.

297 As stated by Mason, Wilson and Dawson JJ in Gates v City Mutual Life Assurance Society Ltd,[23] the primary purpose of contractual damages is to:[24]

[Place] the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss).

1. Concerning expectation loss, in Commonwealth v Amann Aviation Pty Ltd ('Amann Aviation'),[25] Mason CJ and Dawson J observed:[26]

In the ordinary course of commercial dealings, a party supplying goods or rendering services will enter into a contract with a view to securing a profit, that is to say, that party will expect a certain margin of gain to be achieved in addition to the recouping of any expenses reasonably incurred by it in the discharge of its contractual obligations. It is for this reason that expectation damages are often described as damages for loss of profits. Damages recoverable as lost profits are constituted by the combination of expenses justifiably incurred by a plaintiff in the discharge of contractual obligations and any amount by which gross receipts would have exceeded those expenses. This second amount is the net profit.

The expression "damages for loss of profits" should not be understood as carrying with it the implication that no damages are recoverable either in the case of a contract in which no net profit would have been generated or in the case of a contract in which the amount of profit cannot be demonstrated. ...If the performance of a contract would have resulted in a plaintiff, while not making a profit, nevertheless recovering costs incurred in the course of performing contractual obligations, then that plaintiff is entitled to recover damages in an amount equal to those costs in accordance with Robinson v Harman, as those costs would have been recovered had the contract been fully performed.

299 Concerning wasted expenditure, in 123 259 932 Pty Ltd v Cessnock City Council ('Cessnock'),[27] Brereton JA held:[28]

To sum up: a plaintiff who is unable or does not undertake to demonstrate whether or to what extent the performance of a contract would have resulted in a profit may claim its wasted expenditure. In such a case, expenditure incurred by a plaintiff in reliance on a contractual promise made by the defendant and "wasted" because of non‑performance by the defendant is recoverable, except to the extent that the defendant shows that the plaintiff would not have recouped its expenditure had the contract been performed. Relevant expenditure is not confined to expenditure under or required by the contract, but extends (subject to the rule in Hadley v Baxendale) to any detrimental change of position by the promisee in reliance upon the defendant's promise. Such expenditure is regarded as "wasted" if the promise in reliance on which it was made is not performed, except to the extent that it is shown that the plaintiff has received some offsetting benefit, whether under or dehors the contract. The value of the reliance interest is the quantum of the net detriment, after allowing for any offsetting benefit accruing to the plaintiff from the expenditure. It suffices to enliven the presumption that the expenditure has been incurred in reliance on a defendant's contractual promise which the defendant has failed to perform.

300 Damages for breach of contract will only be recoverable if the damage alleged to have been suffered is not too remote. Recently, in Vision Australia Ltd v Elisha ('Vision Australia'),[29] the Victorian Court of Appeal referred to the principles concerning remoteness:[30]

1. The principles governing remoteness of damages for breach of contract are well known and enunciated in the English case of Hadley v Baxendale ('Hadley'). The rule has traditionally been treated as consisting of two limbs: the first limb relates to losses arising 'naturally', or 'according to the usual course of things'; the second limb concerns losses as 'may reasonably have been supposed to have been in the contemplation of both parties, at the time that they made the contract, as the probable result of the breach of it'.
2. However, in European Bank Ltd v Evans ('Evans'), the High Court explained that the two limbs may be treated as a single principle, stating:

The formulation of the rule in Hadley v Baxendale states the entitlement of the plaintiff to recover such damages as arise naturally, that is, according to the usual course of things, from the breach of contract, or such damages as may reasonably be supposed to have been in the contemplation of both parties concerned at the time they made the contract as the probable result of the breach. In The Commonwealth v Amann Aviation Pty Ltd Mason CJ and Dawson J, with reference to the speeches of Lord Reid and Lord Upjohn in Koufos v C Czarnikow Ltd (The Heron II), said that the two limbs of the rule in Hadley v Baxendale represent the statement of a single principle and that the application of that principle may depend on the degree of relevant knowledge possessed by the defendant in the particular case. Lord Reid has used the expression 'on the cards'.

1. Remoteness of damages is one consideration, proof of causation is another. In Alexander v Cambridge Credit Corporation Ltd ('Alexander v Cambridge Credit'),[31] Glass JA set out a number of relevant principles including those concerning causation:[32]
   1. It is irrelevant to inquire whether the defendants' default was the dominant, effective or real cause of the plaintiff's loss. If the evidence is suggestive of multiple causation, the inquiry to be made is whether the defendants' default was a cause of the plaintiff's loss: Fitzgerald v Penn [1954] HCA 74; (1954) 91 CLR 268 at 273.
   2. The test of causation poses the question whether the plaintiff's loss would not have been suffered but for the defendants' default. The question is to be answered by applying that test in a practical commonsense way: Nader v Urban Transit Authority of New South Wales (1985) 2 NSWLR 501 at 530‑531 and cases there cited.
   3. If the defendants' conduct is in this sense a cause of the plaintiff's loss, the existence of another concurrent cause which combines to produce the loss is of no relevance.

302 In this case issues arose concerning the date at which damages for breach of contract are to be assessed. As a general rule, damages for breach of contract are assessed at the date of breach.[33] The general rule is not an absolute rule. As Mason CJ said in Johnson v Perez:[34]

There is a general rule that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arises. But this rule is not universal; it must give way in particular cases to solutions best adapted to giving an injured plaintiff the amount in damages which will most fairly compensate him for the wrong he has suffered...

...

The general rule that damages are assessed as at the date of breach or when the cause of action arose has been applied more uniformly in contract than in tort and for good reason. But even in contract cases courts depart from the general rule whenever it is necessary to do so in the interests of justice.

303 In Cessnock, Brereton JA, with whom Macfarlan and Mitchelmore JJA agreed, expressed his view that:[35]

[T]he "rule" that damages are assessed as at the date of breach is in any event nowadays but a guide, yielding "if, in the particular circumstances, some other date is necessary to provide adequate compensation".

(a) The 29 June 2017 Retainer came to an end on 15 November 2017. It was a retainer to provide advice to Mr Porter concerning the proposed purchase of a controlling interest in the CBB Business.[36]

(b) It was an implied term of the 29 June 2017 Retainer that Mr Mulcahy not improperly use confidential information, not make use of the Mulcahy parties' position as an advisor, and keep confidential information imparted in the course of the retainer.[37]

(c) The obligation not to improperly use confidential information obtained in the course of a client/accountant relationship is expressly addressed by APES 110 Code of Ethics for Professional Accountants ('the Code'). It is an obligation that continues after the end of the accountant/client relationship.[38]

(d) There was a breach of the ongoing confidentiality obligations owed to Mr Porter.[39] The breach occurred after the retainer ended.

(e) The breach involved the use of a letter dated 14 September 2017, being a detailed offer to purchase a controlling interest in CBB sent by Mr Porter to Mr Debono. The letter and the terms of the offer within it was confidential information that was wrongly used to formulate an offer put to Mr Debono on 25 January 2018, which was accepted.[40]

305 The Amended Statement of Claim alleged four categories of confidential information. The first and the fourth categories are relevant to the 29 June 2017 Retainer. During the relief trial, the Mulcahy parties submitted that the price and percentage information in the 14 September 2017 letter fell within the first category of confidential information, but that the other terms of the letter and the letter itself was not pleaded to be confidential. The plaintiffs submitted the 14 September 2017 letter fell within the first category of confidential information, and that the confidential information is broader than the fact that Mr Porter was prepared to pay $12 million for 70%.

306 It is not necessary to determine whether both the letter and its contents fell within the first category of confidential information because, as appears from the liability reasons at paragraph 466 and elsewhere, issues arose and the liability trial was conducted on the basis that the 14 September 2017 letter and its contents was confidential information.

307 In closing submissions at the liability trial, the Mulcahy parties submitted that there was no evidence that Mr Mulcahy saw the 14 September 2017 offer or that Mr Porter retained confidentiality in it after having sent it to Mr Debono. I rejected the proposition that Mr Porter did not retain confidentiality in the 14 September 2017 offer.[41] I found that it was clear that Mr Mulcahy used the 14 September 2017 offer to prepare the 24 January 2018 letter, finalised on 25 January 2018 and sent to Chris Debono:[42]

1. In the case of the 29 June 2017 Retainer I find there was a breach of the ongoing confidentiality obligations, to keep confidential and not to use such information when at the Lake View Hotel on 18 December 2017 Mr Mulcahy put a proposal that reflected the 14 September 2017 Porter offer and then made that offer in formal terms on 25 January 2018 knowing that Mr Porter had been unable to finance an offer in those terms as he had wished.

...

1. ... Knowledge of the earlier Porter offers and the inability to secure funding for those offers on a basis acceptable to Mr Porter and of the Conheady 'deal' to purchase 80% on terms enabled Mr Mulcahy to craft a cash offer matching the 14 September 2017 Porter offer.

308 Referring to March v Stramere[43] and Amann Aviation,[44] the plaintiffs submitted that as a matter of common sense, the wrongful use of the 14 September 2017 offer and its contents led to the transaction by which BFMM obtained a controlling interest in CBB to be entered into, thereby causing loss to Mr Porter.

309 The Mulcahy parties submitted, and I accept, that when evaluating the misuse of confidential information, it is relevant to understand if the party in breach acquired that information elsewhere. In Terrapin Ltd v Builders' Supply Co (Hayes) Ltd,[45] Roxburgh J said:[46]

[W]hen I use the word "information", I mean something that can be traced to a particular source and not something which has become so completely merged in the mind of the person informed that it is impossible to say from what precise quarter he derived the information...

310 The Mulcahy parties submitted that the information that Mr Porter was prepared to buy 70% of the business based on a value of $12 million was known, not only from Mr Porter, but the defendants separately knew from the meeting at the Yacht Club on 16 November 2017 that Mr Conheady was prepared to buy 70% of the business based on a value of $12 million. It was submitted it was also known that Mr Debono would sell 70% of the business based on a $12 million valuation and the fact Mr Debono would accept that amount was not information that was confidential to Mr Porter. It was submitted the consequence of any use of the 14 September 2017 information was unconnected to the price. Everyone bid $12 million, which Mr Debono in effect told people was his price. The misuse of the confidential information produced no consequence because the wrongdoer otherwise knew the information.

311 The difficulty with that submission is that it fails to engage with the finding made at paragraph 549 of the liability reasons reproduced above concerning the use of the detailed letter and its contents to craft the offer that was successful in securing a controlling interest in the business for BFMM. The precise terms of the 14 September 2017 offer, information derived from the letter, were reflected in the 25 January 2018 offer. As I found in the liability reasons:[47]

1. ... It was an express term of the offer that it was confidential. There is no evidence Mr Porter or Mr Conheady provided a copy of that offer to Mr Mulcahy. If Mr Mulcahy did not see or have access to the 14 September 2017 offer, he must have an amazing sixth sense. The contents of the 24 January 2018 letter which he prepared and which when approved by his co‑investors was sent by him to Mr Debono on 25 January 2018 bore an uncanny resemblance to the 14 September 2017 Porter offer.
2. The knowledge of the precise terms of the 14 September 2017 Porter offer was confidential information that a person who knew about it could use to prepare and to make a cash offer to Mr Debono, likely more attractive to him, as was the Porter offer, compared to a terms offer. The 14 September 2017 offer was known to Mr Debono to whom it was made. It must be the case its contents were known to Mr Matthews, the solicitor charged by Mr Debono with preparation of contract documents intended to give effect to it. I infer that it was Mr Matthews who provided a copy of the 14 September 2017 offer to Mr Mulcahy. He may have done so in advance of the meeting with Mr Debono on 18 December 2017 or he may have done so after that meeting. What is clear is that Mr Mulcahy used the 14 September 2017 offer to prepare the 24 January 2017 letter, finalised on 25 January 2018 and sent to Mr Debono.

312 It is important to remember that when it comes to causation it is sufficient for Mr Porter to establish that the breach was a cause of the loss even if there may have been other concurrent causes.[48]

313 I accept the information that Mr Debono was willing to sell based on a valuation of $12 million and that Mr Porter was prepared to buy 70% of the business is information that was available to the Mulcahy parties from other sources. However, that is not the case concerning the 14 September 2017 offer and its terms. The use of the letter and its contents was 'a cause' of Mr Porter's loss.

1. In answer to Mr Porter's claim for expectation loss, the defendants referred to the rule in Hadley v Baxendale.[49] As Mason CJ and Dawson J said in Amann Aviation, what was in contemplation of the parties as discussed in Hadley v Baxendale depends upon a consideration of the terms of the contract in light of the matrix of circumstances in which it was made.[50]
2. In this case the matrix of circumstances includes that Mr Mulcahy is a Certified Practising Accountant ('CPA') and a financial planner who provides clients with accounting services in his capacity as a director and employee of Mulcahy & Co and who is bound by the Code and the obligations imposed by it.[51] The Code imposes obligations not to disclose confidential information or to use confidential information for the personal advantage of the accountant or third parties. The obligation of confidentiality continues after the end of relationship between the accountant and the client. The accountant is required not to allow conflicts of interest to compromise professional or business judgement. Specific examples to which the Code refers in which conflicts of interest may arise include '[a]dvising a client on the acquisition of a business which the Firm is also interested in acquiring'.

316 BFMM accepted during the liability trial that the standards in the Code govern the conduct of a professional accountant and assist in creating an expectation of confidentiality and could be expected to be reflected in an implied term of a contractual retainer.[52]

317 In light of the obligations in the Code and the terms and the purpose of the retainer, the parties to the 29 June 2017 Retainer may reasonably have been supposed to have had in contemplation that, if there was a breach of the obligations concerning confidential information, and if the party in breach used confidential information, in this case the 14 September 2017 letter, to craft an offer for a controlling interest in the same business that Mr Porter wished to acquire, Mr Porter could lose the opportunity to purchase an interest in that business.

318 I do not consider Mr Porter's claim for expectation loss is too remote having regard to the rule in Hadley v Baxendale or that his claim falls outside the single statement of principle by the High Court in European Bank Ltd v Evans[53] quoted in Vision Australia at paragraph 300 above.

319 The Mulcahy parties submitted that if the breach found was a cause of the usurpation of the commercial opportunity, an issue arises about the date at which damages are to be evaluated and if at the date of breach, what use, if any, is to be made of subsequent events. In closing the Mulcahy parties submitted Mr Porter's loss should be assessed as at June 2018, but there may be subsequent events that could inform that assessment. They submitted the safe course is to value the business in June 2018 and that, if subsequent information is to be considered, such information must be evaluated cautiously to ascertain whether or not it alters the position.

320 The plaintiffs advanced their case on the basis that loss should be assessed at the date of trial, based on the most recent financial information.

321 The plaintiffs submitted that if the date of breach was the correct date for the assessment of damages, the Court should proceed by reference to the August 2017 Munday Wilkinson valuation. Senior counsel submitted:

[W]e embrace Mr Solomon's concession that the evidence of value at the breach date was Munday Wilkinson. And if you contra to these submissions, you find in our favour about that, then we know the value is between 18 and 21 million. ... And you can - it doesn't need much to work out what the loss would be then. We said it'd be - the value is higher than that because if you apply Mr Meredith's multiple of 5 ... if you applied Mr Meredith's multiple you'd increase the 18 to 21 million to a commensurate amount... .

322 As discussed in Johnson v Perez and in Cessnock in the passages set out in section F1, while the general rule is that damages for breach of contract are to be assessed at the date of breach, the court will depart from the general rule whenever it is necessary to do so in the interests of justice in order to most fairly compensate the injured plaintiff.

323 Of particular importance in this case in determining fair and adequate compensation is the impact of the COVID‑19 pandemic. The pandemic and its impact on the CBB Business cash flows, material costs and labour costs and availability referred to by Mr Meredith could not have been foreseen at the date of breach. To disregard the impact of the pandemic on the performance of the business would be to disregard known information in favour of speculation and would not be just. To assess damages at the date of breach would result in an award of damages that would put Mr Porter in a superior position than if the contract had been performed.

324 The approach taken by the House of Lords in Golden Strait Corpn v Nippon Yusen Kubishika Kaisha[54] is instructive. The facts were described by Lord Brown:[55]

1. My Lords, the basic facts of this case could hardly be simpler. On 17 December 2001 the appellant owners accepted the respondent charterers' repudiation of a charterparty which nominally still had nearly four years to run - to 6 December 2005. I say "nominally" because by clause 33 of the charterparty the charterers were entitled to cancel it in the event of war or hostilities breaking out between any two or more of a number of countries including the United States of America, the United Kingdom and Iraq. On 20 March 2003, such a war (the Second Gulf War, hereafter "the war") did indeed break out and the arbitrator has found as a fact that the charterers would in any event then have cancelled the charterparty.
2. Indisputably the owners are entitled to damages for having been deprived of the value of this charterparty for the 15 months or so up to the outbreak of the war. Are they, however, entitled, as they claim, to be compensated on the basis that the charterparty would have continued for the whole length of its nominal term?

325 The headnote records the decision of the House:

[T]he principle that damages should be assessed as at the date of breach was not inflexible and the desirability of achieving certainty in commercial contracts was subject to the overriding compensatory principle that the damages awarded should represent no more than the value of the contractual benefits of which the claimant had been deprived; that if at the date of breach there had been a real possibility that an event would happen terminating the contract or otherwise reducing those contractual benefits the quantum of damages might need to be reduced proportionately to reflect the estimated likelihood of that possibility materialising; but that where such an event had already happened by the time damages were assessed the court should have regard to what had actually occurred so that estimation was no longer necessary; and that, since the event entitling the charterers to terminate the charterparty under clause 33 had happened before the damages had been assessed and the owners' right to receive the hire rate and profit share provided for by the charterparty would thereby have been brought to an end, the owners were not entitled to damages in respect of the period thereafter ...

326 Speaking of the appellant's contention that the general rule requires damages for breach of contract to be assessed at the date of breach ignoring subsequent events, Lord Scott said:[56]

That contention, in my opinion, attributes to the assessment of damages at the date of breach rule an inflexibility which is inconsistent both with principle and with the authorities. The underlying principle is that the victim of a breach of contract is entitled to damages representing the value of the contractual benefit to which he was entitled but of which he has been deprived. He is entitled to be put in the same position, so far as money can do it, as if the contract had been performed. The assessment at the date of breach rule can usually achieve that result. But not always. ...

327 In circumstances where the charterparty referred to the prospect of war or hostilities, Lord Brown preferred known facts to a prospective evaluation of contingencies:[57]

My more fundamental conclusion, as I shall shortly explain, is that the breach date rule does not require contingencies - such as the likely effect of a suspensive condition - to be judged prior to the date when damages finally come to be assessed. All I am presently concerned to demonstrate is that, whatever the appropriate date by reference to which the assessment must be made, the taking into account of a contingency is likely to be an altogether more complex exercise than it was in The Mihalis Angelos and that it will not generally be possible, as it was there, simply to decide one way or the other (in that case it mattered not whether at the point of breach or later) whether or not the whole contract was inevitably doomed to fail. The point is sufficiently made if the arbitrator here might have found, say, a 30% or 40% prospect of war as at December 2001. The next question would have been: war when? Could it really be thought in the interests of certainty to address these questions as of some date prior to that on which damages are in fact being assessed? To my mind, not. Must the judge really shut his eyes to the known facts and speculate how matters might have looked at some earlier date? Again, not without compelling reason and none appears to me. ....

328 To assess damages in this case at the date of trial would require me to shut my eyes to known facts concerning the COVID‑19 pandemic and its impact on the CBB Business. Facts known at trial but that could not have been foreseen at the date of breach.

329 This is not an appropriate case for contract damages to be assessed at the date of breach. To ensure fair and adequate compensation, the interests of justice require that damages are assessed at the date of trial.

330 By reference to the approach of the High Court in Sellars, the Mulcahy parties submitted Mr Porter's claim, being a claim for the loss of an opportunity to obtain a commercial advantage, should be discounted by 5% ‑ 15% to reflect the fact that the opportunity pleaded was slightly less than 100% certain. The plaintiffs opposed the application of a discount.

331 In Masters Home Improvement Pty Ltd v North East Solution Pty Ltd ('Masters')[58] the Court of Appeal referred to a three step approach to be applied:[59]

In considering damages for loss of a commercial opportunity, the court asks first whether there was a commercial opportunity of some value (which is more than speculative or negligible); that is, was there a chance? Secondly, the court looks to whether that opportunity has been lost; that is, would the plaintiff have pursued the opportunity? The third step is to consider what amount should be awarded having regard to the prospects of success if the opportunity had been pursued. In taking this third step, the courts' task is to apply a discount which reflects the prospects of success. This is sometimes referred to as a Sellars discount.

332 Applying the three step approach in Masters, I am satisfied that Mr Porter had a commercial opportunity of 'some value'. His commercial opportunity was one of very substantial value, not one where the value of the opportunity was speculative or negligible. I am satisfied the opportunity that would have been pursued was lost. But for the Mulcahy parties' breach of contract, Mr Porter would have pursued the opportunity.

333 While broader issues were canvassed earlier in the trial, in closing the Mulcahy parties urged the application of a Sellars discount on account of the following issues:

(a) vendor finance, including:

(i) payment over two years; and

(ii) security for vendor finance;

(b) the proposed owners' loan; and

(c) the absence of a term sheet and/or a concluded shareholders' agreement.

334 Turning to the first issue, the plaintiffs' proposal depended on vendor finance of $3.6 million. $1.8 million was to be lent on 'day one' following settlement which accounted for 15% of the shares in CBB. A further $1.8 million was to be lent on 'day 366' following settlement, accounting for a further 15%. Under the plaintiffs' proposal, Mr Porter and Mr Conheady would acquire 65% of CBB upon settlement and, following further payments, the combined Conheady/Porter share would increase to 80%.

1. On 20 November 2017 Mr Conheady sent an email to Mr Debono proposing vendor debt of $3.6 million for a three year term. In the liability reasons I found the proposal to split the settlement over two financial years was discussed with Mr Debono.[60] It was his evidence that timing was not an issue for him. In light of that evidence I accept it is highly likely that Mr Debono would have agreed to the splitting of vendor finance**.** No discount is warranted on account of this issue.

336 The next issue concerns security relating to vendor finance. In an email dated 12 December 2017 Mr Conheady said he inserted a clause into the share sale agreement which stated that the vendor may take security for the vendor finance in the form of a general security interest over the assets of the company which may be registered on the PPSR, but such interest shall be subordinate to the security interest required by any bank financier of the purchaser. The issue of security priority was never discussed with Mr Debono. The Mulcahy parties submitted 'there is no reason to think it would be of no moment to Mr Debono, when he was told in negotiation that he was to rank behind the bank'.

1. Whether the security priority proposed by the plaintiffs constituted a risk to the proposed purchase warranting a Sellars discount must be seen in light of the evidence as a whole concerning Mr Debono, his attitude to the sale and his relationship with Mr Porter. As to the sale, there was a real risk that the CBB Business may have been closed by Mr Debono before the negotiations concluded. As to Mr Porter, Mr Debono and Mr Porter had a good relationship. Mr Debono wanted to sell. He was happy to sell to Mr Porter. Rather than close the doors, as was being actively contemplated, given the personal relationship with Mr Porter there is little doubt Mr Debono and his brother would have agreed to a sale to the plaintiffs on terms that included the security priority in favour of the bank. I do not regard the security priority issue as one for which a Sellars discount should be applied.
2. The second issue raised concerns the proposed shareholders' loan. CBB's shareholders were to loan $600,000 to CBB on the day prior to settlement to be used for opening cash reserves. Mr Conheady's share would be $195,000 which he proposed to fund from his own cash reserves and investments. Mr Conheady had received an offer of a $250,000 personal facility from the ANZ to assist with the proposed purchase. There is no issue concerning his required contribution. The same is the case concerning Mr Porter's share. The Debonos' share of the loan would total $210,000.
3. As events transpired, when BFMM purchased a controlling interest Chris and Anthony Debono were required to deposit $228,188 into the bank account of the business at settlement.
4. Although Mr Conheady's supplementary witness statement indicated the shareholders' loan of $600,000 was not agreed, Mr Conheady's evidence in cross‑examination was that the $600,000 proportionate owners' loan was included in the 14 September 2017 proposal by Mr Porter and was accepted by the Debonos.
5. The 'Adjustments' section of the 14 September 2017 letter referred to the vendors contributing 30% for working capital requirements. Acceptance of that proposal reflected an agreement in principle to a shareholders' loan albeit not as to the precise amount of the loan. That agreement, combined with the evidence that in fact the Debonos contributed slightly more than $200,000 when BFMM purchased a controlling interest in the business, establishes there is and would not have been any issues concerning the shareholders' loan proposed by the plaintiffs.

342 As a separate matter the Mulcahy parties submitted it was not agreed that the shareholders' loan could be used for the purchase of WIP and stock, payments for which were due both at settlement and over time. No restriction on the use of the funds for working capital is referred to in the evidence. There is no basis to support a finding or from which to draw an inference that the Debonos would have had concerns about the money being used or applied for that purpose.

343 I do not regard these matters as issues which support the application of a Sellars discount.

344 The third issue is that there was no term sheet and no concluded shareholders' agreement.

345 The plaintiffs submitted the overwhelming probability is that, although there were things to be agreed with Chris Debono, they would have been agreed. Chris Debono's evidence was that, if Mr Porter and Mr Conheady had come up with the money in late December 2017 into 2018, he 'definitely' would have sold to them. Having regard to that evidence and the personal relationship between Mr Debono and Mr Porter I do not consider the absence of a term sheet or of a shareholders' agreement warrant a discount as discussed in Sellars.

346 I have separately considered each of the matters relied on by the Mulcahy parties in support of a Sellars discount. Looked at individually, no discount is justified or should be made. The same is the case when the matters relied on individually are considered collectively.

F7**. What expectation loss did Mr Porter sustain?**

347 Any expectation loss sustained by Mr Porter for breach of the 29 June 2017 Retainer is to be assessed in accordance with Scenario 1. To the extent there were contested issues between the experts, those items are determined in accordance with my reasons in section E1, items E1.1 - E1.5.

348 In the liability reasons I found Mr Porter and Mr Conheady would have purchased an 80% controlling interest in the business, with each to own 40%.[61] If Mr Porter is entitled to expectation damages, he is entitled to damages assessed by reference to Scenario 1 at the date of trial based on a 40% interest in CBB. The damages in question are damages for loss of commercial opportunity.

349 The Mulcahy parties accepted that if loss is to be assessed as at 2018, as they submitted is appropriate being the date of breach, the loss was suffered by the individual plaintiffs. However, if loss is to be assessed at the date of trial, they did not accept that individual loss was proved by Mr Porter. The following submission was made by senior counsel in closing:

I've accepted, as I think reasonably I must, that commercial opportunity loss in 2018 Your Honour reasonably can link to the individuals, except for the wrinkle of there being a vehicle that suffers the same loss and was subject to the same fiduciary breaches. It just wasn't a plaintiff. So if we are valuing the economic interest not obtained in 2018, Your Honour can find that to be an individual loss.

If instead we are adding up profit over four years and we are capitalising it into the future, that's a loss suffered by the Porter BFMM vehicle and then it's suffered as to 100 per cent by the two trust or other vehicles the individuals would have set up. They may be unit trusts or they may be discretionary trusts and they be objects, or they may be unit holders and they may be family members.

When Your Honour makes findings on all of those circumstances and satisfies yourself that it can be looked through in that way you would know who suffers that loss. So I want to make sure I'm clear on this. I'm not saying there's not a 2018 loss able to be proved. I'm saying there's not a Meredith loss suitable to be proved or able to be proved in respect of the individuals.

350 In Mr Meredith's first report, he set out a visual representation of a counterfactual scenario which depicted a unit trust in which the interests of Mr Porter and Mr Conheady were equally represented, with dividends from the unit trust being used to repay loans and vendor financing, and with Mr Porter and Mr Conheady to make distributions. In cross‑examination, Mr Meredith could not recall whether he was instructed to make assumptions concerning the unit trust structure depicted in his report. He was asked whether he formed a view on loss assuming a flow through various entities and trusts or whether that was not a necessary part of his analysis. He responded by saying he was assuming the flow of funds would either be to the individuals or to an entity controlled by them, and that the results of his calculations were interchangeable irrespective of how they were to hold their investments.

351 The plaintiffs responded to the submission made by the Mulcahy parties in closing address:

[I]t wasn't really I think to be fair, properly developed in argument .... He used the term reflective loss. The contention appears to be that Porter and Conheady would have set up a company, would set up a unit trust. The unit trust would have been a vehicle through which they perceived the opportunity and therefore in effect haven't got the right party.

Your Honour, that point first, it wasn't pleaded. Second, is wrong. Porter and Conheady suffered loss. There's no entity in existence. They might in the future have formed a company and set it up. They might in the future have formed a unit trust and set it up, that they might in the future have done so is of no moment.

Even had they done so, there would have been the set down I think you mentioned analogously Mr Meredith had taken the distributions as laid hands into the individual shareholders and you said, well, the money had to first go through BFMM. I think the argument is the same way. So the money would have eventually gone to Porter and Conheady in any event. But the complete answer, Your Honour, is that this is all hypothetical.

It's not been suggested this goes to the lost opportunity, but how could that entity have sued? How could the company have sued? How could the unit trust have sued? It didn't exist. It still doesn't exist.

...

We rather thought the point was fairly faintly argued and in our respectful submission it goes nowhere. The complete answer to it as well is that Porter and Conheady never got to that point.

352 In Sellars, discussing the standard of proof and whether the applicant has sustained loss or damage in a loss of opportunity case such as the present, Mason CJ, Dawson, Toohey and Gaudron JJ said:[62]

[T]he general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities.

353 I do not agree with the Mulcahy parties' submission that, if damages for the loss of opportunity are to be assessed in 2022, the loss is suffered by the trusts or other vehicles Mr Porter and Mr Conheady would have set up and not by the individuals.

354 The Mulcahy parties' submission appears to be a variation on the Johnson v Gore Wood reflective loss submission advanced in response to claims 3(a) and (b). No issue of reflective loss arises. The proposed structures were never established and no other entity has suffered or has an ability to claim the loss suffered by the individuals.

355 The submission seeks to distinguish between Mr Porter's entitlement to recover his loss in 2018, accepted, and Mr Porter's ability to recover loss assessed at trial, denied. There is no basis to distinguish between the position at the two dates. In 2018, the commercial opportunity that was lost belonged to Mr Porter personally. In 2022, it belonged to Mr Porter personally.

356 There was evidence that Mr Conheady and Mr Porter intended to establish a new entity, CBB Holdings Pty Ltd or CBB Investments Pty Ltd, to act as trustee for a new unit trust that would hold the interest in CBB and the Westpac debt. 40 units in the unit trust were to be held by Mr Conheady as trustee of the Conheady Family Trust, and 40 units in the unit trust were to be held by Mr Porter (or a new entity controlled by Mr Porter) as trustee of a new trust that would be set up by Mr Porter.

357 The unit trust structure intended to be established to hold Mr Porter's and Mr Conheady's investment in CBB was never established and the company intended to be established to act as trustee was never incorporated. The actions of the defendants in breach of retainer intervened.

358 At all times it was and remained a matter for Mr Porter to determine the structure through which his opportunity to purchase a controlling interest in CBB would have been taken up. Assuming the unit trust structure intended to be established had been established, it was a matter for Mr Porter to decide whether he held his units personally, or whether he established a discretionary or a fixed trust or to hold those units and, if so, who were to be the beneficiaries of any such trust.

359 The evidence of Mr Meredith referred to above establishes that the quantification by him of the loss of opportunity, while referred to in his report on the basis of a proposed unit trust structure, would have been no different if considered on the basis that Mr Porter would personally have held the investment.

360 The loss agreed by the Mulcahy parties to be Mr Porter's loss in 2018 remains Mr Porter's loss and his alone in 2022. He is entitled to damages calculated by reference to his intended 40% interest in CBB in accordance with Scenario 1 and my findings in section E which adopt the opinions of Mr Meredith.

361 There was no contest in the course of the relief trial that costs were incurred by Mr Porter in relation to the proposed purchase as detailed in paragraphs 4(a), (c), and (d) of the updated statement. The item 4(b) claim (Nevett Ford Lawyers) was abandoned during trial.

362 The Mulcahy parties submitted wasted expenditure will only be recoverable if it falls within one of the two limbs in Hadley v Baxendale and that the claim in item 4 of the updated statement does not meet either criteria. I do not agree.

363 In Cessnock, Brereton JA put the issue as follows:[63]

The question whether expenditure is reasonably incurred turns on whether it was the type of expenditure as might naturally be incurred in preparing for, performing or exploiting the benefit of the contract, or is or ought to have been contemplated by the defendant.

364 In this case the expenditure the subject of item 4 was for the purpose of seeking to purchase a controlling interest in the CBB Business. The expenditure was wasted. It was reasonably incurred by Mr Porter and the Mulcahy parties either knew or ought to have contemplated that expenditure of this type was likely. The items claimed as items 4(a), (c), and (d) are recoverable by Mr Porter as reliance damages in the form of wasted expenditure. The total reliance damages Mr Porter is entitled to recover is $47,715.68.

365 However Mr Porter cannot recover both reliance loss and expectation loss. In order for him to have recovered his expectation loss it would have been necessary for him to have incurred the expenditure rendered wasted as a result of the breach. Because Mr Porter's claim for expectation loss is recoverable, his claim for reliance damages is not.

366 Mr Conheady claims damages for expectation loss for breach of contract against the Mulcahy parties in the same amounts and relying on the same alternative scenarios as Mr Porter. In addition, he claims relief in the alternative against the Mulcahy parties and against BFMM both for equitable compensation and for an account of profits. Against BFMM he also claims a declaration that the shares BFMM holds in CBB are held on constructive trust for him.

367 Before considering the individual claims, it is important to note:

(a) The quantification by Mr Conheady of his claim for expectation loss damages in contract and his claim for equitable compensation is the same. The same evidence is relied on in support of both claims.

(b) Equitable compensation is assessed not as at the date of the breach but as at the time of the trial, with the full benefit of hindsight.[64]

(c) It is conceptually open in the case of relief to which Mr Conheady might be entitled to assess equitable compensation based on 40% of CBB while at the same time determining to order an account of profits based on 100% of the profits obtained by BFMM based on its 67% interest in CBB.

(d) The claim for the imposition of a constructive trust is not a claim that falls to be considered in isolation from the relief otherwise sought by Mr Conheady. In Bathurst City Council v PWC Properties Pty Ltd ('Bathurst'),[65] the High Court set out the approach that is required:[66]

[B]efore the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy. An equitable remedy which falls short of the imposition of a trust may assist in avoiding a result whereby the plaintiff gains a beneficial proprietary interest which gives an unfair priority over other equally deserving creditors of the defendant.

368 Mr Conheady's claim for damages for breach of contract falls to be determined in accordance with the principles discussed in section F1.

369 In the liability reasons I found that the Conheady Retainer included the same terms found in the 29 June 2017 Retainer to which Mr Porter was a party, including an implied term of good faith.[67]

370 The claim for relief in item 2 of the updated statement is made on behalf of both plaintiffs. As a result Mr Conheady's individual contract claim largely falls to be determined in accordance with my findings in sections F2 - F7. It requires consideration of a limited number of additional issues, reflecting the way this aspect of Mr Conheady's claim for relief was approached by the parties during the trial.

371 I found each of the alleged breaches of the Conheady Retainer to be made out.[68] My liability reasons include:

1. The plaintiffs are correct that from at least 14 December 2017 Mr Mulcahy took steps, successful steps, to usurp the opportunity to acquire a controlling interest in the Business for his own benefit and for the benefit of his co‑investors in BFMM. Mr Mulcahy did so using confidential information imparted to him by Mr Conheady in the course of the 29 June 2017 Retainer and in the course of the Conheady Retainer.
2. The actions taken by Mr Mulcahy were in breach of the terms of the Conheady Retainer. Mr Mulcahy breached the Conheady Retainer beginning on 14 December 2017 when he sought out Mr Matthews with a view to progressing 'the next step' in relation to CBB. He was present with Mr Matthews when Mr Broadbent called Mr Ford to invite him to co‑invest in the Business. Those who became the investors in BFMM having discussed the proposed investment, Mr Mulcahy and Mr Matthews met with Mr Debono at the Lake View Hotel. The aim of the 18 December 2017 meeting at the Hotel, initiated by Mr Mulcahy and Mr Matthews, was twofold. It was to take the 'Porter option' 'off the table' to 'white ant' the Mulcahy parties' client, Mr Conheady, in his pursuit of the purchase of a controlling interest in CBB, and it was for Mr Mulcahy to secure a controlling interest in the Business for himself and his co‑investors. Both objectives were achieved at the meeting.
3. ...before the meeting, the plaintiffs were the only potential purchaser. They had completed due diligence, and on 21 November 2017 Mr Debono had agreed to sell 80% of the business to Mr Conheady.
4. What happened at the 18 December 2017 meeting fundamentally changed the position. Mr Mulcahy and Mr Matthews asked Mr Debono about selling a controlling interest in the Business to them for cash, instead of selling to Mr Conheady on terms. The proposal they put was the same as the 14 September 2017 Porter proposal, but with a July 2018 settlement date.
5. The day after the meeting at the Hotel, Mr Mulcahy reported in an email to his co‑investors that Mr Debono had said he was 'keen to progress discussions' to sell a 70% share in the Business to them based on a $12m value with a 1 July 2018 settlement date. ...
6. These actions taken by Mr Mulcahy when he was at the same time acting for Mr Conheady were not disclosed or reported to Mr Conheady. Mr Mulcahy did not tell Mr Conheady about the meeting at the hotel with Mr Debono. He did not tell Mr Conheady that although Mr Conheady believed he had a 'deal' to purchase 80% of the Business on terms, that Mr Debono was instead 'keen to progress' the sale of a 70% interest to Mr Mulcahy and his consortium for cash, with settlement in six months' time.
7. These matters were actively concealed by Mr Mulcahy ...
8. As at 14 December 2017 and continuing, Mr Mulcahy owed contractual duties of good faith, not to make improper use of his position as a trusted adviser, not to improperly use confidential information and not to use his position or the confidential information so as to gain an advantage for himself or to cause detriment to Mr Conheady. By taking the actions that he did from 14 December 2017, Mr Mulcahy and Mulcahy &Co breached those contractual duties.

....

1. The actions taken by Mr Mulcahy to secure the opportunity for himself involved using confidential information. On 18 December 2017 Mr Mulcahy made a cash offer to Mr Debono when he knew there was a 'deal' for Mr Debono to sell on vendor terms to Mr Conheady. He knew about that deal, and that it involved terms because of the further confidential information and the 'price information' shared with him by Mr Conheady. When he put the cash proposal to Mr Debono on 18 December 2017, Mr Mulcahy took advantage of confidential information about his 'competitors' for the opportunity. He knew that Mr Conheady and Mr Porter had not secured funding for the proposal he put to Mr Debono, the proposal Mr Debono was 'keen to progress'. On 19 December 2017 Mr Mulcahy improperly disclosed to third parties, Mr Matthews, Mr Broadbent and Mr Ford, and for his own benefit used confidential information about the Munday Wilkinson $21m valuation.
2. There were implied terms of the Conheady and 29 June 2017 Retainers that Mr Mulcahy not improperly use confidential information, not make use of the Mulcahy parties' position as adviser, and keep confidential information imparted in the course of the retainer. The four categories of confidential information earlier discussed were all required to be kept confidential by the Mulcahy parties. To use such confidential information for the purpose of acquisition of a controlling interest in the Business the Mulcahy parties were also interested in acquiring was to breach of the terms of the Conheady Retainer, the 29 June 2017 Retainer (the obligations of confidentiality under the Code continued after the retainer itself ended) for Mr Mulcahy's purposes, to advance his interests and to damage those of his clients.
3. Mr Mulcahy improperly made use of his position as trusted adviser to Mr Conheady to usurp the opportunity to acquire a controlling interest in the Business for himself and for BFMM, and to cause detriment to Mr Conheady by depriving him of the benefit of that opportunity. The actions taken by Mr Mulcahy were in breach of the Code and of the terms of the Conheady Retainer.

372 The Mulcahy parties submitted the performance of the Conheady Retainer and the observance by the Mulcahy parties of Mr Conheady's rights does not result in Mr Conheady acquiring a controlling interest in the CBB Business in equal shares with Mr Porter. It was submitted the loss and damage properly attributed to the breach is the lost opportunity for Mr Conheady to purchase his portion of a controlling share in CBB.

373 It was submitted that Mr Conheady had two hurdles for loss based relief. The first, to show that, at the date the cause of action crystallised (the date BFMM contracted to buy the business), the value of the business was greater than the price that would have been paid for it. Mr Conheady did not file any expert evidence directed to that topic. The second hurdle, to account for the lost chance. Were the probabilities of his entity being the purchaser 100%; or less than 100%? It was for Mr Conheady to prove what value, if any, is attributable to the lost chance.

374 Concerning the 'first hurdle', it is correct the plaintiffs did not call expert evidence to establish that the value of the business was in excess of the purchase price as at June 2018. There was however other evidence from which it is established that the value at that time was well in excess of the purchase price based on a $12 million valuation.

375 That evidence comprises the $18.34 million to $20.96 million Munday Wilkinson business valuation dated 3 August 2017, together with evidence of the performance of the business in FY18. In FY18, sales were $17.77 million compared with $17.75 million FY17. Based on a comparison of sales figures there was no material change in the performance of the business from mid‑2017 to mid‑2018. Over the same period, profit before tax increased. Profit before tax in FY18 was $7.71 million compared with $6.3 million in FY17 and $5.51 million in FY16. In FY18, as might be expected from the upward trend in profit before tax, the upward trajectory of EBITDA and EBIT that occurred between FY16 and FY17 continued. The evidence to which I have referred is set out in Table 10 of Mr Meredith's first report.

376 The question of the value of CBB has been approached using the capitalisation of future maintainable earnings method, applying either a multiple of EBITDA, as was the approach of the experts accountants, or applying a multiple of EBIT, as was the approach of Munday Wilkinson. No argument was advanced to the effect and there is no evidence to support a finding that the multiple of EBIT used by Munday Wilkinson and therefore the value of CBB would have changed between the 2017 valuation date and the 2018 sale date. By reference to the Munday Wilkinson valuation Mr Conheady comfortably cleared the first hurdle identified by the Mulcahy parties.

377 Concerning the second hurdle, the Mulcahy parties submitted that even if there were only two putative purchasers, this 'does not establish that the Conheady part owned entity would have necessarily succeeded'. I do not agree. As I found in the liability reasons, the defendants' wrongdoing 'usurp[ed] the opportunity to acquire a controlling interest in the Business'[69] at a time when, after a long process of Mr Debono trying to sell, 'the plaintiffs were the only potential purchaser'.[70] As discussed in paragraphs 526 to 544 of the liability reasons, if it had not been for the breaches by the Mulcahy parties of the Conheady Retainer, Mr Conheady would have acquired a controlling interest in CBB.

378 I am satisfied Mr Conheady is entitled to recover his expectation loss so as to put him in the position he would have been in had the Mulcahy parties performed their obligations pursuant to the Conheady Retainer. Applying a practical common sense approach to causation as summarised in Alexander v Cambridge Credit, the breach of the Conheady Retainer by the Mulcahy parties is a cause of Mr Conheady's loss.

379 For the reasons discussed in section F5, damages for breach of the Conheady Retainer are to be assessed at the date of trial.

380 For the reasons discussed in section F6, I am not satisfied that a Sellars discount should be applied to damages for expectation loss otherwise recoverable based on Scenario 1 calculated in accordance with the expert evidence findings in section E.

381 Had it not been for the Mulcahy parties' breach, Mr Conheady would have held a 40% interest in the CBB Business. Mr Conheady is entitled to damages for loss of his commercial opportunity to hold a 40% interest in CBB.

382 In response to the claim that Mr Conheady's damages are to be quantified by reference to the 40% interest in the CBB Business that he would have held, the Mulcahy parties relied on the same arguments about loss in 2022 being suffered by the two trusts or other vehicles that would have been set up rather than by Mr Conheady personally that were relied on in response to Mr Porter's damages claim. For the same reasons those arguments were rejected in section F7 concerning the claim by Mr Porter, they must be rejected concerning the claim by Mr Conheady.

383 The structures on which the submission relies were never established. At the meeting on 4 December 2017, Mr Conheady sought advice directed to protecting his own interests in relation to the structures proposed by Fordhams.[71] Mr Conheady was proposing, on the advice of Mr Mulcahy, that his units in the unit trust structure would be held through his own family trust of which he was the trustee, but that never happened.

384 In the counterfactual to which Mr Meredith referred in his report, if a structure was to be established to hold Mr Conheady's investment, it was a matter for Mr Conheady to determine what that structure was and, if it involved a unit trust in which units were held by the Conheady Family Trust, it was for him to determine who would receive income distributions from that trust of which he was the trustee. However matters never proceeded that far. Both at the date of breach and at the date of trial, Mr Conheady and Mr Conheady alone held his commercial opportunity to acquire a 40% interest in CBB and Mr Conheady and Mr Conheady alone suffered the loss.

385 Mr Conheady is entitled to damages for loss of his commercial opportunity based on him holding a 40% interest in CBB assessed in accordance with Scenario 1 in accordance with my findings in section E.

386 Equitable compensation is available to the victim of a breach of fiduciary duty against the fiduciary and against any other person who knowingly participated in that breach and has thereby become subject to a personal liability as a 'constructive trustee' by application of the principles in Barnes v Addy.[72]

(a) from the Mulcahy parties for breach of fiduciary duties; and

(b) from BFMM for having knowingly assisted the Mulcahy parties to breach their fiduciary duties.

388 It is not in contest that the remedy of equitable compensation is available to Mr Conheady both against the Mulcahy parties and against BFMM.

389 Mr Conheady quantifies his claim for equitable compensation in the same way he quantifies his breach of contract claim. He relies on the same evidence, lay and expert, in support of items 2 and 3 in the updated statement.

390 In GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers,[73] Warren CJ described the measure of equitable compensation as the 'sum which would restore the plaintiff to the position he or she would have been had the breach [of equitable obligation] not occurred'.[74]

391 In Schmidt, the Court of Appeal summarised the principles:[75]

1. 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.
2. As the obligation imposed upon defaulting fiduciaries is more absolute than the common law obligation to pay damages for tort or breach of contract, the obligation is not limited or influenced by common law principles relating to remoteness of damage, foreseeability or causation. In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd, Gageler J stated:

[A] causal connection sufficient for the fiduciary to be liable to the equitable remedy of compensation will exist if a loss to the person to whom the fiduciary obligation is owed would not have been sustained but for the breach.

1. The normal rule is that equitable compensation is assessed not as at the date of the breach but as at the time of the trial, with the full benefit of hindsight. Up until a fiduciary who is in breach of his or her fiduciary duties makes full restitution and pays appropriate compensation, the fiduciary's breaches are presumed to continue.
2. In accordance with the 'cardinal principle' of equity, 'the remedy must be fashioned to fit the nature of the case and the particular facts'. As to the method of assessing equitable compensation, it has been said that this will vary according to the nature of the fiduciary obligation whose breach is to be redressed. Equitable compensation is often calculated by reference to the loss suffered by the innocent party. However, in some cases, it may be appropriate to compensate the claimant by reference to the profits earned or gain made by the person who committed the breach of fiduciary duty.
3. In a claim for equitable compensation, the person to whom the fiduciary duties are owed has the onus of establishing the quantum of his or her claim.
4. Whilst a fiduciary need not act dishonestly or fraudulently in order to be liable for a breach of fiduciary duty, consideration of the severity of the breach of the fiduciary obligation and the extent of the fiduciary's involvement and culpability may be relevant to the assessment of compensation.

392 The Mulcahy parties submitted, and I accept, that in assessing loss for breach of fiduciary duty, it is appropriate to consider whether there is an 'adequate or sufficient [causal] connection between the equitable compensation claimed and the breach of fiduciary duty'.[76] A claim for equitable compensation requires proof of a causal link between the breach and the loss.[77] Once a causal link between the conduct and the claimed loss is established, the onus will shift to the fiduciary.[78]

393 The question of onus was discussed by Riordan J, in JAB Nominees (Aust) Pty Ltd v Auswild:[79]

(a) ... In assessing the measure of equitable compensation, the Court should not speculate against the interests of the plaintiff. As the Court of Appeal said in GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers:

Nevertheless, one must have regard to the principle that the court is entitled not to speculate against the interest of the plaintiff or to make assumptions against the defendant on the issue of causation. This allows the plaintiff to lead only a minimum of evidence to discharge the evidentiary burden of causation. Indeed, in this regard it has been said that '[e]quity must strive to repair the breach of fiduciary duty lest the fiduciary in default could be exonerated too easily ... [and] the courts being seen to wink at wrong‑doing'.

(b) The evidentiary difficulty of determining what would have occurred if the Third Party Directors had not made their conflicted decisions flows from their wrongdoing as defaulting fiduciaries. In these circumstances, the Court adopts a robust approach 'relying on the presumption against wrongdoers, the onus of proof, and resolving doubtful questions against the party whose actions have made an accurate determination so problematic'. The presumption against the wrongdoer is more commonly applied in the law of tort, but it is also available in the assessment of equitable compensation.

394 The statements by Riordan J are consistent with earlier decisions including Premium Real Estate Ltd v Stevens,[80] a decision to which the Mulcahy parties referred in their submissions, where the Supreme Court of New Zealand endorsed what Tipping J said in Bank of New Zealand v New Zealand Guardian Trust Co Ltd ('Bank of New Zealand'):[81]

[O]nce the plaintiff has shown a loss arising out of a transaction to which the breach was material, the plaintiff is entitled to recover unless the defendant fiduciary, upon whom is the onus, shows that the loss or damage would have occurred in any event, ie without any breach on the fiduciary's part.... Policy dictates that fiduciaries be allowed only a narrow escape route from liability based on proof that the loss or damage would have occurred even if there had been no breach.

395 The plaintiffs submitted there is 'clear causation' between the actions of the Mulcahy parties in breach of fiduciary duty and the loss of opportunity. In light of my findings at paragraphs 526 to 538 of the liability reasons reproduced above, causation is established.

396 The Mulcahy parties submitted that Mr Conheady's equitable compensation should be discounted to reflect the fact that there was less than a 100% chance the proposed transaction involving the plaintiffs would have concluded. I do not agree that is the case. So far as the factors relied on by the Mulcahy parties in support of a Sellars discount are relied on in support of that submission, for the reasons set out in section F6, I am not satisfied that any adjustment to equitable compensation based on 100% of the loss assessed to otherwise be compensable should be made.

397 As claim items 3(a) and (b) were not proved, they do not require separate consideration as part of Mr Conheady's claim for equitable compensation.

398 Reference was made in submissions to the authorities concerning just allowances. The question of adjustment to equitable compensation otherwise payable because of the need to recognise the contribution of the wrongdoer by making just allowances was not raised by any party in response to the updated statement. BFMM made reference to just allowances in the course of submissions concerning directors' fees in the context of the quantification of the account of profits. That topic is discussed in section G3. For the same reasons no just allowance adjustment should be made in favour of BFMM on an account of profits, no adjustment or allowance should be made to equitable compensation otherwise payable.

399 Mr Conheady submitted he should be awarded equitable compensation based on him being deprived of an 80% interest in CBB. The defendants contended equitable compensation should be based on Mr Conheady holding a 40% interest only in CBB.[82]

400 While it emerged in cross‑examination that Mr Conheady had an agreement with Mr Porter to share any compensation awarded between them equally, the existence of that agreement was not addressed by either party in closing submissions. I treat the existence of the agreement as irrelevant to the 40%/80% contest and as irrelevant more generally to Mr Conheady's claims for relief.

401 Mr Conheady submitted that, at the time the Munday Wilkinson valuation was provided to Mr Mulcahy (on 16 November 2017), he was proceeding with a transaction on his own and therefore should recover 80% not 40% of the loss. He submitted the fact he later brought Mr Porter back into the transaction does not detract from his entitlement to be compensated based on 80% of the assessed compensation.

402 The Mulcahy parties submitted equitable compensation should be limited to compensation based on 40% of the interest in CBB that it was proposed Mr Conheady acquire. They relied on the rules for the recovery of equitable compensation stated in Beach Petroleum NL v Kennedy ('Beach Petroleum'):[83]

The law in Australia was ... held to be as stated by Lord Browne‑Wilkinson in Target Holdings Ltd v Redferns [1996] 1 Ltd 421 at 439:

"...Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and commonsense can be seen to have been caused by the breach";

and by McLachlin J in Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 163:

"...it is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach."

403 Mr Conheady submitted that to proceed on that basis, even though the defendants have fully profited from the breaches, is contrary to the fact that it is no defence that the plaintiff was unwilling, unlikely or unable to make the profits, citing Warman International Ltd v Dwyer ('Warman').[84] To limit his relief to 40% ignores the fact that the benefit or gain encompasses control of a whole business.[85] The consequence of the defendants' argument that they could take up the opportunity to acquire CBB, but not as to 40% of it, is contrary to the findings of the Court and contrary to principle. Mr Conheady submitted the argument ignores the seriousness of the breach, and whether the fiduciary has acted honestly or dishonestly, being relevant considerations in connection with allowances.[86] If the defendants were allowed to keep all but 40% of the profit they would be unjustly enriched.

404 The object of equitable compensation is to compensate Mr Conheady, to put him in the position he would have been in had there been no breach of fiduciary duty. It is to compensate him for his loss. What the defaulting fiduciary might be left with in terms of profits retained from breach is not relevant to an assessment of equitable compensation to compensate Mr Conheady for his loss.

405 Whether Mr Conheady's loss for which equity will award compensation is to be calculated based on 80% of the business or 40% is a question of fact.

406 Noting that equitable compensation is to be assessed at trial and with the benefit of hindsight, it cannot be ignored that, on 23 November 2017, Mr Porter agreed to join Mr Conheady in the acquisition of an 80% interest with each to own 40%.[87] On 30 November 2017, Mr Conheady called Mr Mulcahy and told him he and Mr Porter were proceeding with the 'deal' with Mr Debono.[88] On 4 December 2017, Mr Conheady told Mr Mulcahy about the 40‑40 split of an interest in the business between he and Mr Porter.[89] The submission that equitable compensation should be assessed based on an 80% interest in the business must be rejected.

407 Even ignoring hindsight, it was never the case that Mr Conheady was himself alone to hold an 80% interest in the business. Immediately following the 16 November 2017 Yacht Club lunch, Mr Conheady proposed the purchase of a 70% interest in CBB by himself, together with other investors.[90] By 23 November 2017, Mr Porter was the single other investor, but Mr Conheady was to be 40% only.[91] He was to hold a 40% interest in the business. It is for the loss of that interest that he is entitled to equitable compensation, and no more.

408 To limit equitable compensation to 40% accords with authority, including the passages from Beach Petroleum set out above.

409 Where a plaintiff seeking equitable damages also has a right to legal damages, it is ordinarily the case at least in the absence of special equitable considerations affecting the balance of justice between the parties that the same measure of damages is applied in equity as at law.[92]

410 Mr Conheady's entitlement to equitable compensation is to be calculated by reference to a 40% interest in CBB, the same amount as the damages he is entitled to recover for breach of the Conheady Retainer.

G2.4 Does Mr Conheady have an entitlement to equitable compensation?

411 While the Mulcahy parties clearly argued that Mr Conheady failed in his claim for damages for breach of contract because of an asserted inability to prove he personally suffered loss, the same cannot be said in relation to his claim for equitable compensation. While the Mulcahy parties submitted the issue requires consideration, no clear statement of position was articulated.

412 In closing submissions senior counsel for the Mulcahy parties accepted there will be a tension between equity looking to compensate those wronged and the concern of the law that loss not be recovered in the wrong place.

413 The approaches of equity and of the common law are not the same. In Youyang Pty Ltd v Minter Ellison Morris Fletcher,[93] the High Court questioned whether the common law rules of causation, remoteness of damage and the measure of damages should be applied by analogy to cases involving equitable compensation for breach of duty.[94] In Pilmer v Duke Group Ltd ('Pilmer'),[95] McHugh, Gummow, Hayne and Callinan JJ said:[96]

[I]n Australia, the measure of compensation in respect of losses sustained by reason of breach of duty by a trustee or other fiduciary is determined by equitable principles and ... these do not necessarily reflect the rules for assessment of damages in tort or contract.

414 In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd ('Ancient Order of Foresters'),[97] Gageler J cautioned about approaching causation in equity through a common law lens:[98]

1. Obviously enough, as with any other question of causation in equity, the causal connection between a fiduciary's breach of fiduciary obligation and a benefit or gain must be judged using common sense and "with the full benefit of hindsight". And as with other questions of causation in equity, the inquiry into causation is not to be constrained by normative limitations imported from the common law. To introduce those limitations would risk confusing distinct legal policies underlying distinct bases of legal liability and limiting equity's capacity to mould equitable relief to the circumstances of the individual case.

415 In Pilmer, the High Court noted the importance of recognising the distinction between the character of the fiduciary obligation that sets it apart from contract and tort.[99]

416 In Australian Executor Trustees (SA) Limited v Kerr ('Australian Executor Trustees'),[100] Gleeson JA, with whom Leeming JA and Emmett AJA agreed, discussed the approach to be adopted to proof of causation and loss in equity:[101]

1. As the primary judge found, a claim for equitable compensation requires a causal link between the breach and the loss: Youyang at [44] (adopting the observations of Mummery LJ in Swindle v Harrison [1997] EWCA Civ 1339; [1997] 4 All ER 705 , at 733-734, that there "is no equitable by‑pass of the need to establish causation" and that "in questions of causation it is important to focus on the relevant equitable duty")...
2. AET accepted on appeal that the appropriate test of causation for breach by a defaulting trustee is the "but for" test...

...

1. The primary judge correctly observed that once the plaintiff's onus to prove loss has been discharged, the onus shifts to the defendant to demonstrate that all or part of the loss would have been suffered even if the defendant had not breached the trust .... The shifting onus in the case of a claim for equitable compensation is explained in Equity Doctrines & Remedies at [23-230] in these terms:

Not only is it open to the defendant to avoid an order to pay equitable compensation in the full sum of the loss prima facie established by the plaintiff's case by showing: (a) that the defendant has satisfied the claimed loss in part, and (b) that the balance of the loss for which the plaintiff claims is loss the plaintiff would have suffered even had the defendant adhered to the defendant's equitable duties: the defendant may deploy both arguments together.

...

1. As McLachlan J said in Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 163, it is essential that losses made good are only those which, "on a common sense view of causation, were caused by the breach" .... Lord Browne‑Wilkinson said in Target Holdings at 439:

Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach.

1. Whilst AET accepted that the Court is entitled, with the full benefit of hindsight, not to speculate against the interest of the plaintiff, referring to G M & A M Pearce & Co Pty Ltd v Australian Tallow Producers at [66], AET submitted that this principle does not permit a court to circumvent the requirement of the plaintiff to show that the alleged losses, on a common sense view of causation, were caused by the breach. I do not read G M & A M Pearce & Co Pty Ltd v Australian Tallow Producers as suggesting otherwise."

417 In GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers ('Pearce'),[102] the Court of Appeal held that equity 'allows the plaintiff to lead only a minimum of evidence to discharge the evidentiary burden of causation'.[103] Where the breach creates difficulties for the proof of loss, the approach to be adopted is as discussed by Gleeson JA in Australian Executor Trustees:[104]

1. It is not in dispute that AET had an evidentiary onus because its breach of duty created difficulties of proof as to what would have occurred but for its breach, which would not exist if the duty had been performed ...
2. In Houghton v Immer equitable compensation was awarded in a case involving equitable fraud (but not breach of fiduciary duty), where the defendants had improved common property without lawful authority. After observing that the failure of the defendants to keep proper accounts of their actual expenditure on the common property made it difficult to assess the compensation due to the plaintiff, Handley JA said at 59 that the Court should assess compensation in a robust manner, relying on the presumption against wrongdoers, the onus of proof, and resolving doubtful questions against the party "whose actions have made an accurate determination so problematic", citing LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508.
3. In Blong Ume Nominees, the South Australian Full Court (Kourakis CJ, Stanley and Lovell JJ) referred with approval to the remarks of Handley JA in Houghton v Immer at 59, when also citing the statement in Equity: Doctrines & Remedies at [23‑275] that where, "a party's actions have made an accurate determination of damage or loss problematic, doubtful questions should be resolved against that party and the [C]ourt should assess damages or compensation in a robust manner".
4. Blong Ume Nominees also referred with approval to Libertarian Investments Ltd v Hall at [138] (Lord Millett NPJ), where the Court of Final Appeal of Hong Kong cited the passage in Houghton v Immer at 59 for the proposition that the evidentiary difficulties faced by the Court in that case form part of the consequences flowing from the defendant's original wrongdoing as a defaulting fiduciary and in such circumstances the Court adopts a robust approach to the assessment of compensation where there are difficulties of proof.

418 In Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9),[105] Black J discussed how equity approaches proof of quantum in cases where equitable compensation is claimed for loss of opportunity:[106]

1. Once causation is established, the fact that a claimed loss involves a degree of speculation does not necessarily exclude recovery for that loss: McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 at 412; Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 643; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64; Sellars v Adelaide Petroleum NL above at 335. The Court may also place a monetary value on a loss of opportunity in assessing equitable compensation, although that loss is incapable of precise measurement, may use subjective "tools" in arriving at that value, such as common sense and general notions of justice and fairness and may determine the amount of equitable compensation by a process of "judicial estimation" on the available indications: O'Halloran v RT Thomas & Family Pty Ltd above; AMP Services Ltd v Manning [2006] FCA 256 at [69]; Spotless Group Ltd v Blanco Catering Pty Ltd above at [69], [126].

419 In accordance with these authorities, as the person who has been wronged, Mr Conheady is entitled to equitable compensation in such amount as required to make good the loss he has suffered. That loss is to be assessed using common sense and with the benefit of hindsight.

420 Contrary to the position adopted by the Mulcahy parties, common sense dictates that it was Mr Conheady, and Mr Conheady alone, the person equity requires be compensated, who suffered the loss. No loss was suffered by persons who were never incorporated, by the trustee of a unit trust structure that was never established or by a family discretionary trust of which Mr Conheady was the trustee that may or may not have held the units in a unit trust.

421 The actions of the defendants have had the consequence that whatever might have happened involving such structures never happened. In this case the breach of duty does not create the difficulties of proof of loss to which Gleeson JA referred in Australian Executor Trustees. It is not necessary to approach the question of loss in a 'robust' manner. The breach of fiduciary duty meant the structures to which the Mulcahy parties referred were never established. That has the consequence of simplifying the identification and proof of loss. Applying hindsight, Mr Conheady is to be compensated for the full amount of the loss he suffered by reason of the breach of duty, the full value of the loss of his opportunity to acquire a 40% interest in CBB. That opportunity was his and his alone at the time of breach and that remained the case at the date of trial.

422 Mr Conheady is entitled to equitable compensation calculated on the basis of a 40% interest in the CBB Business quantified in accordance with my findings in section E concerning the expert evidence based on Scenario 1.

423 In Hospital Products Ltd v United States Surgical Corporation ('Hospital Products'),[107] Mason J confirmed that the fiduciary 'cannot be permitted to retain a profit or benefit which he has obtained by reason of his breach of fiduciary duty'.[108] A person who knowingly participates in a breach of fiduciary duty is liable to account to the person to whom the duty was owed for any benefit received as a result of such participation.[109]

(a) from the Mulcahy parties for breach of fiduciary duties; and

(b) from BFMM for having knowingly assisted the Mulcahy parties to breach their fiduciary duties.

425 The amount claimed in item 6, $11,013,138, represents Mr Meredith's assessment of profit received by the Mulcahy parties and BFMM from the date of acquisition by BFMM of its 67% interest in CBB, together with an assessment of the future income stream brought to present value. In addition, Mr Conheady claims legal fees incurred by BFMM of $849,555 in defence of the proceeding should be included with the result that the amount to be accounted for is $11,862,693. He submitted a recalculation will need to be undertaken by reference to all further costs incurred by BFMM in defence of the proceeding following the conclusion of the relief trial.

426 Separately, Mr Conheady submitted that Mr Mulcahy must account for past directors' fees together with the present value of future directors' fees, a topic discussed in section G4.

427 Mr Conheady submitted quantification of profits is to be dealt with in accordance with the reasons for judgment of Kiefel CJ, Keane and Edelman JJ in Ancient Order of Foresters:[110]

1. Once it has been determined that a benefit or advantage has been caused by the acts of knowing assistance, there remains the question of quantification of the benefit to be disgorged. While it is true that equity will not require an errant fiduciary or a participant in a breach of fiduciary duty to account for an advantage which the breach of fiduciary duty has not caused or to which it has not sufficiently contributed, where causation is sufficiently established the onus is upon the errant fiduciary or participant to show that he or she should not account for the full value of the advantage. That onus is not discharged by mere conjecture or supposition giving the benefit of the doubt to a proven wrongdoer. The requirement of proof conforms with the obligation of a party charged with a breach of fiduciary duty to show why the full value of an advantage obtained in a situation of conflict of duty should not be disgorged.

428 BFMM submitted Ancient Order of Foresters supports the position that the principle an errant fiduciary must disgorge ill‑gotten gains is subject to the principle that equity limits the disgorgement of any gains made in breach of fiduciary duty so as not to unjustly enrich. A critical issue is the extent to which adjustment should be made to any prima facie award; and whether an account of profits should be granted based upon 100% of the profits of BFMM's interest in CBB (being 67%), or 40% of the profits of the overall CBB Business (being so much of the CBB Business that Mr Conheady sought to acquire). BFMM submitted the maximum profit Mr Conheady can require be disgorged is 40% of the total income of CBB, not the full 67% which BFMM in fact received. Mr Conheady submitted that to restrict relief to 40% is contrary to the decision of Mason J in Hospital Products.[111]

429 It is convenient to begin consideration of this topic by referring to some introductory remarks by Dr Peter Devonshire in his 2013 text 'Account of Profits':[112]

3.3.1 Introduction

It has been said that the primary remedy for breach of fiduciary duty is an account of profits flowing from the breach.[113] When a fiduciary makes an unauthorised gain, equity's objective is essentially confiscatory. An account of profits performs the crucial function of stripping the wrongdoer of illicit gains.[114] The liability to account is personal.[115] The precise form of an order for account in a given case expresses the court's perception of the nature of the wrongdoing.

430 In Warman,[116] the High Court put the position as follows:[117]

But a distinction should be drawn between cases in which a specific asset is acquired and cases in which a business is acquired and operated. Such a distinction was drawn by Upjohn J in In re Jarvis (decd) in the context of considering a defence of laches, acquiescence and delay. However, in our view, the distinction is also relevant in the context of the fiduciary's liability to account for profits. In In re Jarvis (decd), Upjohn J said:

"In dealing with [a] business, the principles applying are quite different from those in the case of a specific asset, such as a renewed lease."

...

In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources.

431 Where the defendant contends it would be inequitable to order an account of the entire profits, the onus is on the defendant to establish that is the case.[118] Ancient Order of Foresters, amongst others, is authority for that proposition.[119] There are generally two ways of doing this. Either to establish an allowance for costs incurred and labour and skill employed should be applied or to demonstrate the profit was 'beyond the scope' of the wrongdoing, in that it has no reasonable connection with the wrongdoing, such that it would be inequitable for the defendant to account for it.[120]

432 BFMM submitted in circumstances where it has expended resources and relied upon expertise in developing the CBB Business, it is appropriate for the Court to reduce any profit that might be ordered to be disgorged to Mr Conheady on account of that contribution. It relied on Grimaldi v Chameleon Mining NL (No 2) ('Grimaldi'),[121] where Finn, Stone and Perram JJ said:[122]

Contemporary Australian authority conforms to the above: where a portion of the profits made is "not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources", it would be inequitable to order an account of the "entire profits": Warman, at 561. However, it is for the fiduciary to establish that inequity: ibid.

433 BFMM also referred to Warman, to which reference was made in Grimaldi, where the High Court said:[123]

Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case. However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profit‑sharing but will make allowance for skill, expertise and other expenses.

434 The burden is on BFMM to show how it contributed to increasing or maintaining the value of the business and the profits for which Mr Conheady contends it must account. In Ancient Order of Foresters, Gageler J explained the onus of proof in cases such as the present, including emphasising the persuasive burden which the defaulting fiduciary must discharge in order to establish that the liability to account should be fixed at less than the full advantage obtained:[124]

The reasoning in Warman makes explicit that where there is shown to exist a causal connection between a fiduciary's breach of fiduciary obligation and a benefit or gain to the fiduciary or knowing participant, the onus shifts to the defendant to establish that it is inequitable to order that the defendant account for the value of the whole of the identified benefit or gain. The shifting of onus is explicable in part, but only in part, as putting the burden of proof of contested questions of fact on a party who is a proven wrongdoer. The burden on the defendant is not just evidentiary; more fundamentally, it is persuasive. The obligation of the defendant, imposed as an incident of "the fiduciary relation itself", is to "justify" the "private advantage" that has been obtained.

435 With the exception of the argument that the directors' fees ought not be disgorged, either directly or indirectly, and that they represent a just allowance, this is not a case where the defendants claim 'just allowances' for their contribution to the CBB Business. If it had been such a case, it might have raised issues of whether such allowances should be made having regard to findings in the liability reasons concerning the defendants' conduct.[125] As no such claims are made, the impact of the defendants' conduct on the relief to be granted does not fall for consideration.

436 The claim by BFMM is that because the asset in question is a business, upon which it has expended resources, and to which it contributed expertise, it is not appropriate to require it to disgorge all of the profits.[126]

437 The problem with BFMM's submissions is that BFMM did not lead any evidence and nor did it advance submissions that sought to establish how its expenditure on resources or its expertise, whether via the BFMM directors or otherwise, contributed to the profits of the business. The onus was on BFMM to establish the causal connection. It did not undertake that task. It failed to show that any proportion of profits over the period from 2018 was generated by the 'skill, efforts, property and resources' of the fiduciary.[127] It did not discharge the onus.

438 This is not a case where, as discussed in Ancient Order of Foresters, the profit generated by the business was 'beyond the scope of the liability for which the wrongdoer should account for profits'.[128] The percentage of profits of CBB for which BFMM is being called upon to account does not impinge on the profits derived from the business by the Debono brothers. It is restricted to the percentage derived by the wrongdoers themselves.

439 Mr Conheady and Mr Porter intended to acquire an 80% controlling interest in CBB. In place of that occurring, BFMM acquired a 67% controlling interest. Mr Conheady intended the Debono brothers would continue to be actively involved in the business, and remain as minority shareholders. That is what occurred.

440 BFMM submitted to order an account of 100% of BFMM's profits would result in an award greater than the potential loss (or foregone profits) experienced by Mr Conheady and that this points to such an order being punitive in nature and is contrary to the principle that an order should not be penal.[129] It submitted the 'measure of liability' should be 'related to the plaintiff's own interest' being a 40% interest in the CBB Business[130] and that it would be 'inequitable to order an account of the entire profits' of BFMM's interest.[131]

441 This submission seeks to equate what is required on an account of profits with the loss suffered by Mr Conheady. That is not the task that is required. The task is to assess what part of the profits obtained by the defaulting fiduciary must be accounted for so as to '[strip] the wrongdoer of illicit gains'.[132] The benefits that flowed to BFMM from breach of fiduciary duty were not limited to 40% of the business. The benefits that flowed to BFMM are represented by the 67% interest in the business and the benefits attributable to that interest.

442 I do not accept the submission that to order BFMM to account on the basis of its full 67% interest rather than on the basis of the 40% interest which Mr Conheady would himself have acquired, is to punish BFMM or to cause Mr Conheady to be unjustly enriched. As discussed in Warman, it is for the defendant to show that to order a full account of the profit received would be inequitable.[133] BFMM has not discharged that burden. If there had not been the breach of the fiduciary duty that I have found, BFMM would never have acquired a 67% interest in the CBB Business, it would never have received the profits for which I find it must account.

443 When determining what relief is appropriate, it is important to bear in mind as stated by Gageler J in Ancient Order of Foresters:[134]

1. The principles applicable to the assessment of liability to account for a dishonest and fraudulent breach of fiduciary duty, like many principles of equity, "have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case". Sufficiently for the circumstances of the present case, and consistently with the reasoning in Warman, they can be stated as follows.
2. The "cardinal principle of equity" is "that the remedy must be fashioned to fit the nature of the case and the particular facts". Contrary to approaches which have emerged in some English cases since Warman, identification of a benefit or gain for which a defendant fiduciary or knowing participant is to be ordered to account is the outcome neither of judicial discretion nor of the determination of a mere factual issue of causation. Identification of the benefit or gain is a matter of judgment informed by equitable principle. However contestable the judgment to be made might be on the facts of a particular case, the judgment to be made is one which admits only of a unique outcome which, once made, falls to be appraised on appeal according to a standard of correctness.

444 In this case the circumstances dictate that the remedy that must be fashioned to fit the nature of the case is a remedy that requires BFMM to account for profits based on 67%, the whole of BFMM's interest in CBB, calculated in accordance with the quantification of account of profits as discussed and found in section E2.

445 I do not consider that to order an account of profits based on the actual 67% interest of BFMM is anything other than 'practically just'. Adopting the language of Gageler J, I do not consider that to require BFMM to account for the whole of its gain 'would amount to a windfall to the plaintiff of such a nature or to such a degree that the accounting would fail to vindicate the purposes underlying equity's imposition of the fiduciary obligation that has been breached'.[135]

446 In addition, the amount to be awarded on account of profits is to include the sum of $849,555 incurred by BFMM in defence of the proceeding. Both experts, although they used different methodologies, in some way deducted the legal expenses incurred by BFMM when calculating the profits of BFMM. This was inherent in Mr Meredith's calculation because he looked at the distributions from BFMM to unitholders, and was explicit in Ms Wright's calculation where she deducted expenses incurred by BFMM of $2,092,392 (amended to $2,092,393 in the Joint Report), including legal fees of $849,555. Ms Wright observed in her report that '[t]o the extent these legal costs relate to these proceedings (or are otherwise not attributable to BFMM's interest in CBB), then my opinion of the account of profits derived by BFMM from its interest in CBB would be increased by this amount'. There was no suggestion the sum of $849,555 does not represent legal costs of the proceeding. BFMM must in addition account for those past legal costs.

447 I do not agree with Mr Conheady that there should be a calculation of costs of the proceeding incurred by BFMM since 30 June 2022 and a further accounting by BFMM in relation to that expenditure. No submissions were advanced by Mr Conheady in support of such an order. The account of profits calculation was done as at 30 June 2022. The costs are said to be BFMM's costs, paid by BFMM. If BFMM used profits of CBB distributed to it after 30 June 2022 to pay its legal expenses, that expenditure would be expenditure out of profits for which BFMM is already otherwise required to account.

448 By the updated statement, Mr Conheady claims an account of profits from the Mulcahy parties reflecting 'an account of profit received by the Mulcahy Parties and BFMM from the date of acquisition by BFMM as well as an assessment of the future income stream brought to present value, being $11,013,138'. In closing submissions, the claim for an account of profits from the Mulcahy parties was a much more limited claim, and then against Mr Mulcahy personally only. It was a claim restricted to past directors' fees or directors' fees which would in the future be received by Mr Mulcahy. However, the wider claim in the updated statement was not formally abandoned.

449 The first difficulty with the claim against the Mulcahy parties in the updated statement is that the Mulcahy parties comprise both Mulcahy & Co Accounting Services Pty Ltd and Mr Mulcahy personally. Mulcahy & Co Accounting Services Pty Ltd does not and never has held any interest in CBB or in BFMM. Mr Conheady has no entitlement to an account of profits against the first defendant.

450 The second difficulty is that the sum of $11,013,138 reflects Mr Meredith's assessment of the total profits associated with BFMM's 67% interest in CBB. On no view did Mr Mulcahy or interests associated with him purchase, and nor do he or his interests hold, a 67% interest in the CBB Business. Mr Mulcahy and his interests hold 16.67% of CBB through their 25% interest in BFMM. There is no evidence Mr Mulcahy or his interests received or in the future will receive profit or a share of profit that is not limited to the extent of that interest in BFMM, and through BFMM in CBB. An account of profits against Mr Mulcahy to which Mr Conheady is entitled must be approached on that basis.

451 No attempt was made by Mr Conheady to quantify the claim against Mr Mulcahy by reference to the interest held by or associated with him. In the Joint Report the experts did not seek to quantify the profits for which Mr Mulcahy should be personally ordered to account. The only relevant topic considered was Mr Mulcahy's directors' fees, considered by Ms Wright only.

452 As Ms Wright explained in her report, based on the available information, she was unable to quantify the profits received by or attributable to Mr Mulcahy:

7.3.9. Mr Mulcahy is a shareholder and director of BFMM as trustee for the BFMM Investments Unit Trust (which holds the 80 shares (67%) in CBB). I understand based on an account transaction listing provided that Mr Mulcahy's family trust is a unitholder of the BFMM Unit Trust. Based on the documents provided to me, including the Shareholders Agreement, I have not identified any profit derived by Mr Mulcahy from an investment in CBB. The reasons for my conclusion are that:

(a) Mr Mulcahy is not a shareholder in CBB, and therefore CBB profits are not attributable to Mr Mulcahy;

(b) The trustee does not derive profits from the Unit Trust (nor does Mr Mulcahy as a shareholder of the trustee); and

(c) I do not have any information about the distributions of Mr Mulcahy's family trust and whether any distributions that may have been made to Mr Mulcahy were derived from the Unit Trust that were, in turn, derived from CBB.

7.3.10. To the extent that the profits of the BFMM Unit Trust were distributed to the unitholders, and that such distributions were made to Mr Mulcahy's family trust, and Mr Mulcahy is a beneficiary of that trust, then I would consider that Mr Mulcahy has derived a profit from the acquisition by BFMM of its interest in CBB. I do not have information allowing me to quantify such profit derived by Mr Mulcahy, if any. To the extent Mr Mulcahy has received such profit, then in my view, it is already taken into account in my account of profits derived by BFMM. Accordingly, if such profit were considered to be attributed to Mr Mulcahy, then it would need to be deducted from my account of profits derived by BFMM.

453 Ms Wright was not cross‑examined about these parts of her report. There was no discussion at the trial about gaps in financial documents produced by Mr Mulcahy and no complaint was made about the adequacy of his discovery. I accept Ms Wright's evidence in relation to the claim set out in the updated statement. It is not proved.

454 In closing submissions there was discussion of whether an order should be made requiring Mr Mulcahy to account for past directors' fees in the sum of $312,000, as well as future profit to be derived by him in the form of directors' fees of $78,000 per year in his capacity as a director of BFMM. Although this alternative claim was not set out in the updated statement, the question of directors' fees was a contested issue as part of the relief trial.

455 If it were not for Mr Mulcahy's position as a director of BFMM and his interest or the interest of those associated with him in BFMM, he would not be a director of CBB and he would not have received or be entitled to receive directors' fees for the past. Nor would he have an expectation of receiving directors' fees in the future relating to his directorship of CBB. The fees are a means of distributing profit to those interested in CBB via BFMM. Mr Mulcahy must account to Mr Conheady for his directors' fees.

456 Ms Wright calculated an allowance for future directors' fees of $187,200, calculated as Mr Mulcahy's annual directors' fee of $78,000 multiplied by her adopted multiple of 2.4x.

457 Mr Conheady submitted that Mr Meredith's adopted multiple of 5x should be applied to an annual directors' fee of $78,000 and an order made that Mr Mulcahy account for future profits of $390,000 in addition to the historical directors' fees of $312,000 paid to Mr Mulcahy, a total of $702,000.

458 Consistent with my earlier findings concerning the multiple to be adopted, I consider that a multiple of 5x should be applied to Mr Mulcahy's future directors' fees. Accordingly, the amount to be included in an account of profits against Mr Mulcahy in respect of future directors' fees is $390,000.

459 Mr Conheady is entitled to an order against Mr Mulcahy requiring him to account for past profits in the sum of $312,000 together with future profits in the sum of $390,000, a total of $702,000.

460 Mr Conheady claims a declaration that the shares owned by BFMM in CBB are held on constructive trust for him.

461 There are two issues in relation to this claim. The first, whether the constructive trust remedy is available against a person who has knowingly received trust property or who has assisted in a breach of fiduciary duty under the second limb in Barnes v Addy. The second issue, assuming the remedy to be available, is whether a constructive trust should be imposed in the case.

G5.1 Is there power to make the declaration sought?

462 Concerning the first issue, citing Ancient Order of Foresters and other authorities, Mr Conheady submitted that a knowing accessory is liable to account as a constructive trustee and that to impose a constructive trust is the usual remedy where a third party has misused trust property and been a knowing assistant in breach of trust.[136]

463 Mr Conheady referred to Hospital Products, where Mason J described the principle in relation to a constructive trust arising out of breaches of fiduciary duty:[137]

Any profit or benefit obtained by a fiduciary [in breach of the proscriptions on conflict of duty and interest or on misuse of position] is held by him as a constructive trustee ... Once it is established that the fiduciary is liable to account for a profit or benefit which he has obtained there can be no objection to his being held to account as a constructive trustee of that profit or benefit. It can make no difference that it was not his duty to obtain the profit or benefit for the person to whom the duty was owed. What is important is that the advantage has accrued to him in breach of his fiduciary duty or by his misuse of his fiduciary position. The consequence is that he must account for it and in equity the appropriate remedy is by means of a constructive trust.

464 BFMM submitted that there is no basis in law, or as a matter of discretion, to impose a constructive trust over the shares held in CBB. It submitted the orthodox form of relief against a defendant found to be a knowing accessory of property obtained in breach of fiduciary duty is to restore the value of any property by way of equitable compensation. It submitted a constructive trust is not available as a wholly discretionary remedy to be imposed for the indulgence of 'idiosyncratic notions of fairness and justice'; rather 'proprietary rights fall to be governed by principles of law'.[138]

465 BFMM submitted it is clear that a defendant's liability under Barnes v Addy exposes a defendant to in personam liability as distinct from the creation or recognition of a proprietary interest.[139] It submitted that whilst the term 'constructive trustee' has also been used in the context of accessory or recipient liability arising under Barnes v Addy, this practice has been the source of considerable confusion and should be disregarded. The phrase commonly applied - that a knowing accessory or recipient should be 'liable to account as constructive trustee' - merely means that they are liable to restore the property by equitable compensation. In Williams v Central Bank of Nigeria,[140] Lord Sumption JSC observed that a defendant exposed to liability under Barnes v Addy 'may be required by equity to account as if they were trustees or fiduciaries, although they are not'.[141] In this context, use of the term 'constructive trustee' should be regarded as 'nothing more than a formula for equitable relief'.[142]

466 It was submitted that these remarks were endorsed by the Court of Appeal in McNab v Graham,[143] where Tate JA noted that persons described as 'constructive trustees' with respect to Barnes v Addy 'are not a true trustee'.[144] Whilst '[t]rue trusts are concerned with property and property interests', liability arising under Barnes v Addy 'does not arise by reason of a promise to transfer title to property to which they have a legal right. Their liability is only liability as an accessory to a breach'.[145]

467 BFMM submitted that it is therefore wrong to conclude that a constructive trust is one of a range of available remedies in respect of a claim based on liability under Barnes v Addy. A claim for a constructive trust is a separate and distinct claim which is, in fact, based on a claim to equitable title. A true constructive trust rests on the existence of property rights (which was not found in the liability reasons), and is not purely remedial.

468 The plaintiffs do not accept the limitations on the availability of the remedy for which BFMM contends. They referred to the availability of the relief as stated by Sifris JA in Chickabo Pty Ltd v Zphere Pty Ltd (No 3):[146]

Where a party holds the proceeds (or traceable proceeds) of a breach of fiduciary duty, proprietary relief in the form of constructive trust may be available.

469 It is unnecessary to resolve the controversy between the parties concerning the availability of the constructive trust remedy. That is because the claim by Mr Conheady for a declaration that BFMM's shares are held on constructive trust for him may be disposed of by reference to the second contested issue, on the assumption the remedy is available.

470 BFMM submitted that even if the Court can grant a constructive trust over the CBB shares, it should not do so in this case in the exercise of its discretion. That was submitted to be so given the availability of alternative remedies (i.e. equitable compensation and an account of profits) that are capable of quelling the dispute.

471 BFMM submitted that the constructive trust is a 'second order remedy' and should not be imposed if alternative orders are capable of doing full justice between the parties.[147] The courts have held that an account of profits, rather than a declaration of a constructive trust over part of a business, may be more appropriate to be ordered if the latter would 'thrust the parties into a continuing business relationship where it was clear that there was no confidence or comity between them'.[148] The same applies where a constructive trust might involve an innocent third party being in an unwanted relationship with the plaintiff.[149]

472 BFMM submitted that in circumstances where the ordinary order is sufficient to do justice between the parties and a constructive trust will unfairly prejudice Mr Conheady over other unsecured creditors of BFMM, a constructive trust cannot, and should not, be imposed as an exercise of discretion.

473 BFMM referred to Giumelli v Giumelli ('Giumelli'),[150] where Gleeson CJ, McHugh, Gummow and Callinan JJ emphasised the need to 'avoid injustice to others' in the determination of final orders, as well as avoiding relief that would go 'beyond what was required for conscientious conduct' by the defendants.[151]

474 BFMM referred to Farah Constructions Pty Ltd v Say‑Dee Pty Ltd,[152] where the High Court criticised the Court of Appeal's award of a constructive trust, citing Giumelli for the proposition that '[o]rdinarily relief by way of constructive trust is imposed only if some other remedy is not suitable'.[153]

475 BFMM also referred to John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd ('John Alexander's Clubs'),[154] where the High Court emphasised three points. First, '[a] constructive trust ought not to be imposed if there are other orders capable of doing full justice'.[155] Second, 'care must be taken to avoid granting equitable relief which goes beyond the necessities of the case'.[156] Third, 'third party interests must be borne in mind in deciding whether a constructive trust should be granted'.[157]

476 In closing submissions Mr Conheady submitted that a constructive trust is the usual remedy in circumstances such as the present. Whether an alternative remedy might be available that can do justice to Mr Conheady needs to await the outcome of the relief trial.

G5.3 Findings concerning the constructive trust claim

477 In Bathurst, the High Court made it clear that before a court imposes a constructive trust as a remedy it should first decide whether there are other means available to quell the controversy.[158] In this case there are other means. As against BFMM, Mr Conheady is entitled to equitable compensation and to an account of profits.

478 I agree with BFMM that this is not an appropriate case for a declaration that BFMM holds its shares on constructive trust for Mr Conheady. Adopting the language in John Alexander's Clubs, an account of profits is 'capable of doing full justice' in this case.[159] In those circumstances, a constructive trust ought not be imposed. I will not grant the declaratory relief sought.

479 In relation to the claims for relief by Mr Porter, subject to any submissions from the parties as to arithmetic error:

(a) Mr Porter is entitled to an order that the Mulcahy parties pay damages to him for breach of contract in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(b) otherwise the claims for relief by Mr Porter as set out in the updated statement are refused.

480 In relation to the claims for relief by Mr Conheady, subject to any submissions from the parties as to arithmetic error:

(a) as against the Mulcahy parties, Mr Conheady is entitled to damages for breach of contract in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(b) as against the Mulcahy parties, Mr Conheady is entitled to equitable compensation in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(c) as against Mr Mulcahy, Mr Conheady is entitled to an account of profits in the sum of $702,000 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(d) as against BFMM, Mr Conheady is entitled to equitable compensation in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(e) as against BFMM, Mr Conheady is entitled to an account of profits in the sum of $11,013,138, together with amounts expended on legal fees to 30 June 2022 of $849,555 a total of $11,862,693 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(f) otherwise the claims for relief by Mr Conheady as set out in the updated statement are refused.

481 I direct Mr Conheady to elect between inconsistent remedies by 4:00pm on 16 February 2024 by giving notice of his election to the defendants and providing a copy of that notice to my chambers. I do not consider the timing of the requirement to elect should be deferred until the later determination by the Court of any unresolved issues.

482 The statement of claim claims interest against all defendants. The plaintiffs are directed to inform the defendants of the details of the basis or bases of their claim(s) to interest by 4:00pm on 13 February 2024. The parties are directed to confer with a view to reaching agreement in relation to interest by 4:00pm on 20 February 2024. If there are matters that separate the parties in relation to interest, the parties are directed to exchange and to file submissions of no more than 4 pages dealing with those issues by 12:00pm on 22 February 2024.

483 I direct the parties to confer and to provide draft final orders, marked up to show any areas of disagreement, including in relation to any arithmetic issues by 12:00pm on 22 February 2024.

484 I will list the proceeding for mention on Friday, 23 February 2024.

485 For the avoidance of doubt the time for any appeal will not commence to run until 4:00pm on 23 February 2024 or further order.

MULCAHY & CO ACCOUNTING SERVICES PTY LTD (ACN 105 360 325)

[1] [2021] VSC 572 (First Revision (1 February 2022)) ('Liability reasons').

[3] Being the higher post-acquisition net profit margin referred to at paragraph [3.3.27] of the Meredith report.

[4] (Unreported, Supreme Court of Victoria, 21 March 2023).

[5] [2007] NSWSC 574.

[7] [2023] VSC 135.

[8] [1994] HCA 4; (1994) 179 CLR 332.

[9] Relying on the discussion by Brennan J in Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 358-359.

[12] [2020] VSCA 193.

[13] Ibid [184] (Kyrou, Hargrave and Emerton JJA).

[14] (1907) 5 CLR 415.

[18] Liability reasons, [116], [118].

[21] [1848] EngR 135; (1848) 1 Ex 850.

[23] [1986] HCA 3; (1986) 160 CLR 1.

[25] [1991] HCA 54; (1991) 174 CLR 64.

[27] [2023] NSWCA 21; (2023) 110 NSWLR 464. Note that special leave to appeal was granted by the High Court on 15 September 2023.

[29] [2023] VSCA 265.

[30] Ibid [170]-[171] (McLeish, Kennedy and Macaulay JJA) (citations omitted).

[31] (1987) 9 NSWLR 310.

[33] See e.g. Ng v Filmlock Pty Ltd [2014] NSWCA 389; (2014) 88 NSWLR 146; Liggins v Park Trent Properties Group Pty Ltd (No 2) [2022] NSWSC 176, [22] (Slattery J).

[34] [1988] HCA 64; (1988) 166 CLR 351, 355-356.

[35] 123 259 932 Pty Ltd v Cessnock City Council [2023] NSWCA 21; (2023) 110 NSWLR 464, 510 [138].

[39] Liability reasons, [537], [540], [544].

[42] Liability reasons, [468], [544], [549].

[43] [1991] HCA 12; (1991) 171 CLR 506, 524.

[44] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 175.

[45] [1967] RPC 375.

[47] Liability reasons, [467]-[468] (citations omitted).

[48] Simonius Vischer v Holt & Thompson [1979] 2 NSWLR 322, 346; Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310, 315; Wylie v ANI Corp Ltd [2000] QCA 314; [2002] 1 Qd R 320, 332-333 [27], 339-340 [50].

[49] (1854) 9 Exch 341. TS694:24-25.

[50] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 92.

[53] [2010] HCA 6; (2010) 240 CLR 432, 438 [13] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).

[54] [2007] UKHL 12; [2007] 2 AC 353.

[58] [2017] VSCA 88; (2017) 372 ALR 440.

[59] Ibid 548 [411] (Santamaria, Ferguson and Kaye JJA) (citations omitted). See also Talacko v Talacko [2021] HCA 15; (2021) 272 CLR 478, 495-496 [41]-[42].

[61] Liability reasons, [200], [201] and [457] and the factual findings in relation to the 4 December 2017 meeting and what was recorded on a whiteboard at [211]-[212] and [215]-[216]. See also Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 4) (Unreported, Supreme Court of Victoria, Delany J, 21 March 2023).

[62] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 355 (emphasis in original).

[63] 123 259 932 Pty Ltd v Cessnock City Council [2023] NSWCA 21; (2023) 110 NSWLR 464, 487 [70].

[64] Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193, [184] (Kyrou, Hargrave and Emerton JJA).

[65] [1998] HCA 59; (1998) 195 CLR 566.

[66] Ibid 585 [42] (Gaudron, McHugh, Gummow, Hayne and Callinan JJ) (citations omitted).

[67] Liability reasons, [418]-[421], [434], [611(2)].

[68] With the exception of the obligation to act in the best interests of Mr Conheady: Liability reasons, [543].

[71] Liability reasons, [215]-[216].

[72] Salmon v Albarran [2023] NSWSC 1238, [405] (Nixon J); citing Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143, 153 (McLelland AJA, Priestley and Meagher JJA agreeing).

[73] [2005] VSCA 113.

[75] Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193, [182]-[187] (Kyrou, Hargrave and Emerton JJA) (citations omitted).

[76] Quoting Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 473 (Brennan CJ, Gaudron, McHugh and Gummow JJ).

[77] Break Fast Investments Pty Ltd v Rigby Cooke Lawyers (a firm) [2021] VSC 398, [249] (Macaulay J), citing Swindle v Harrison [1997] EWCA Civ 1339; [1997] 4 All ER 705, 733-734 (Mummery LJ); quoted by the High Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484, 502 [44] (Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ).

[78] Citing Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666; (2021) 69 VR 28; 177 [1728] (J Dixon J).

[79] [2020] VSC 731, [208] (citations omitted).

[80] [2009] NZSC 15; [2009] 2 NZLR 384, [85].

[81] [1999] 1 NZLR 664, 687.

[82] Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193, [182] (Kyrou, Hargrave and Emerton JJA).

[83] [1999] NSWCA 408; (1999) 48 NSWLR 1, 90 [432].

[84] Citing Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 558 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[85] Citing Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 32-33 [75] (Gageler J).

[86] Citing Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 410 [531] (Finn, Stone and Perram JJ); Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 37 [88] (Gageler J).

[88] Liability reasons, [205], [457].

[89] Liability reasons, [215], [437], [457].

[92] Spry, The Principles of Equitable Remedies, 9th Ed, 2014 at p 673 citing Wroth v Tyler [1974] Ch 30, Johnson v Agnew [1980] AC 367 and Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454.

[93] [2003] HCA 15; (2003) 212 CLR 484.

[95] [2001] HCA 31; (2001) 207 CLR 165.

[97] [2018] HCA 43; (2018) 265 CLR 1.

[98] Ibid 37-38 [89] (citations omitted).

[99] Pilmer v Duke Group Ltd [2001] HCA 31; (2001) 207 CLR 165, 196 [71].

[100] [2021] NSWCA 5; (2021) 151 ACSR 204.

[101] Ibid 223 [96]-[97], 223-224 [99], 224-225 [103]-[104].

[102] [2005] VSCA 113.

[104] Australian Executor Trustees (SA) Limited v Kerr [2021] NSWCA 5; (2021) 151 ACSR 204, 228 [128]-[131] (Leeming JA agreeing at 264 [336], Emmett AJA agreeing at 269 [361]).

[105] [2012] NSWSC 984.

[107] [1984] HCA 64; (1984) 156 CLR 41.

[109] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 12 [6]-[7] (Kiefel CJ, Keane and Edelman JJ), 34 [78] (Gageler J); quoted in Chickabo Pty Ltd v Zphere Pty Ltd (No 3) [2020] VSC 464, [51]-[53] (Sifris JA).

[110] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 14 [13] (citations omitted).

[111] Citing Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 107; see also Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 420 [575] (Finn, Stone and Perram JJ).

[112] Peter Devonshire, Account of Profits (Thomson Reuters, 2013), [3.3.1].

[113] Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [53] per Gault J. Alternatively the plaintiff may elect to receive equitable compensation if the defaulting fiduciary did not make a gain, or any gain was exceeded by the plaintiff's loss. It is also open to the court to grant proprietary relief in the form of a constructive trust, or security by way of an equitable lien or charge. See further Foskett v McKeown [2000] UKHL 29; [2001] 1 AC 102 (HL) at 130 for discussion of the plaintiff's election where the trustee's gain takes the form of property acquired with trust funds.

[114] Proprietary relief in the form of a constructive trust may be imposed over the defendant's property but this is usually granted where a personal order fails to achieve the court's remedial objective. See Farah Constructions Pty Ltd v Say‑Dee Pty Ltd [2007] HCA 22, (2007) 230 CLR 89 at [200].

[115] Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 at 395.

[116] [1995] HCA 18; (1995) 182 CLR 544.

[117] Ibid 560-561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) (citations omitted).

[118] Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298, 383-384 [334]-[335] (Heydon JA), applying Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561-562 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[119] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 14 [13] (Kiefel CJ, Keane and Edelman JJ), 38 [91] (Gageler J).

[120] Ibid 14-15 [14]-[16] (Kiefel CJ, Keane and Edelman JJ), 38-39 [92] (Gageler J).

[121] [2012] FCAFC 6; (2012) 200 FCR 296, 406-411 [517]-[535] (Finn, Stone and Perram JJ).

[123] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 562 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) (citations omitted). Similar sentiments were expressed in Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 406-407 [517] (Finn, Stone and Perram JJ).

[124] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 38 [91] (citations omitted).

[125] See Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298 (Spiegelman CJ and Heydon JA), and in particular Mason P in dissent at 331 [165]-[166].

[126] Citing Australian Postal Corporation v Lutak (1991) 21 NSWLR 584, 596 (Bryson J) and Natural Extracts Pty Ltd v Stotter [1997] FCA 471; (1997) 24 ACSR 110, 140 (Hill J).

[127] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ); Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 409 [528] (Finn, Stone and Perram JJ).

[128] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 15 [15] (Kiefel CJ, Keane and Edelman JJ).

[129] Citing Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 39 [94] (Gageler J); Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 406 [514(i)]) (Finn, Stone and Perram JJ).

[130] Quoting Phipps v Boardman [1964] 1 WLR 993, 1017-18 (Wilberforce J).

[131] Quoting Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[132] Peter Devonshire, Account of Profits (Thomson Reuters, 2013), [3.3.1].

[133] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[134] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 35-36 [82]-[83] (citations omitted).

[135] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 38-39 [92].

[136] Citing Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 32 [74] (Gageler J); Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 415-416 [557] (Finn, Stone and Perram JJ); Consul Development Pty Limited v DPC Estates Pty Limited [1975] HCA 8; (1975) 132 CLR 373, 408 (Stephen J).

[137] Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 107-108.

[138] Quoting Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 615-616 (Deane J).

[139] Citing Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 359 [253] (Finn, Stone and Perram JJ).

[140] [2014] UKSC 10; [2014] AC 1189.

[142] Ibid 1198 [10]; quoting Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555, 1582.

[143] [2017] VSCA 352; (2017) 53 VR 311.

[146] [2020] VSC 464, [38] (citations omitted).

[147] Citing Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 172 [200] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

[148] Quoting Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 554 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

[149] Citing Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 404-405 [510] (Finn, Stone and Perram JJ).

[150] [1999] HCA 10; (1999) 196 CLR 101.

[152] [2007] HCA 22; (2007) 230 CLR 89.

[153] Ibid 172 [200] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

[154] [2010] HCA 19; (2010) 241 CLR 1, 45-46 [128]-[129] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).

[158] Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566, 585 [42] (Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

[159] John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1, 45 [128] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).