Scheuer v Bell [2004] VSC 71

5. The first, second and third defendants have a cross-claim against the fourth, fifth and sixth defendants. The plaintiff's claims, and the cross-claim, involve a considerable number of disputed issues of fact and law between the respective parties. I shall set out in summary the facts, summarise the issues, and then determine the issues which are in dispute.

9. The first defendant, Phillip Bell ("Phillip Bell"), is a computer programmer. At all relevant times he has conducted his business through the second defendant, Advance Information Systems Pty Ltd ("AIS"). Phillip Bell is the elder brother of the fourth defendant, Anthony Bell ("Tony Bell ").

12. In 1995 Phillip Bell was approached by Mr Terry Hughes. Mr Hughes had extensive experience in the motor car repair industry, particularly as a loss assessor, and also as a collision repair facility manager and chief assessor of the State Insurance Office. Hughes requested Phillip Bell to write software which would enable participants in the motor vehicle crash industry to communicate with each other. Those parties included insurers, repairers, loss assessors, and parts providers. Hughes and Phillip Bell entered into a joint venture. The project was known as "Multi-Point Data Link". Phillip Bell was to write the software for the project. Hughes was to market it.

15. The development of the project was more prolonged and expensive than the parties had initially expected. By mid-1998 Phillip Bell and Hughes were out of funds. Accordingly Tony Bell was induced to invest $100,000 in the venture. Initially each of the three participants were to have a one third share. Tony Bell was to finance the project, Phillip Bell to continue to develop the software, and Hughes to market it.

18. In August 1999 Hughes left the joint venture. Phillip Bell and Tony Bell disagree as to the terms on which Hughes left. In particular they do not agree what their respective shares were in the joint venture before the plaintiff entered into it in 2000. That disagreement is one of the issues which I must determine in this proceeding. Tony Bell claims that, as a result of agreements between himself and Phillip Bell, and between himself and Hughes, he had an eighty percent interest, and Phillip Bell had a twenty percent interest, in the joint venture. Phillip Bell, on the other hand, claims that Tony Bell and he each had a fifty percent interest in the joint venture.

21. The sixth defendant MPDL Pty Ltd ("MPDL")was incorporated on 3 February 1999. Tony Bell was registered as its only shareholder and director. He was the company secretary.

24. In July 1999 the third defendant, BPR Investments Pty Ltd ("BPR") was incorporated by Phillip Bell to hold his interest in the joint venture. The fifth defendant, Tetley's Company Pty Ltd ("Tetley"), is owned and controlled by Tony Bell and was intended to hold Tony Bell's interest in MPDL.

28. The plaintiff, Mr Steven Scheuer ("Scheuer") is a qualified accountant. He carried on practice between 1980 and 1983. Thereafter Scheuer took over and conducted a family clothing import business known as "R-Jay Pty Ltd". Scheuer has known Tony Bell for over twenty years. They are business colleagues and friends. Tony Bell acted, and still acts, as Scheuer's customs agent.

31. Scheuer had a limited background in and understanding of computer technology. He had an interest in the public company Webjet Ltd, which is an Internet based travel company. Scheuer is a director of that company, but his major involvement in that company concerns matters of finance.

34. Between January 2000 and early March 2000 Scheuer entered into discussions, primarily with Tony Bell, concerning acquiring an interest in the venture. There was an initial discussion in January 2000. Subsequently there was a more detailed discussion when Tony Bell visited Scheuer's premises in Gipps Street, Collingwood in February 2000. On that occasion Tony Bell provided documentation to Scheuer which included an Information Memorandum and a Business Plan. Further discussions ensued between Tony Bell and Scheuer in February 2000. Near the end of February 2000 a verbal agreement or understanding was reached between the parties. Under that agreement Scheuer was to acquire a one third interest in the venture for a price of $1,000,000. Thereafter there were further discussions between Scheuer and Tony Bell. Tony Bell told Scheuer that in fact he would be receiving a thirty-five percent interest. Twenty-five percent of the interest was to come from Phillip Bell and ten percent from Tony Bell. Tony Bell explained to Scheuer that the two brothers were disposing of different proportions because Tony Bell had provided a greater amount of funding to the venture. A further discussion occurred on 10 March 2000 between Scheuer and Phillip Bell at Scheuer's premises at Collingwood. That discussion primarily concerned the terms on which Scheuer was to make payments to Phillip Bell.

37. The plaintiff claims that a number of representations were made to him in the course of the negotiations to which I have referred. Those representations (as pleaded) were that:

(i) MPDL or its predecessors had developed computer software for use in the automotive repair industry known as "Multi-Point Data Link" and MPDL was entitled to exploit the product.

(ii) The product had the capacity to generate substantial revenue.

(iii) The product was already installed at over one hundred sites ready for commercial exploitation.

(iv) The product was installed and ready to be used in approximately one hundred locations.

(v) The product was capable of being marketed to major companies at 1200 locations throughout Australia.

(vi) The product had already reached the stage where it was capable of being commercially exploited in its then state of development.

(vii) Phillip Bell would be actively involved in the day to day operation, management and development of the product.

(viii) Phillip Bell and Tony Bell, or their corporate entities, each respectively owned fifty percent of the shares of MPDL.

43. The plaintiff claims that, in making the representations, Tony Bell acted as agent for and on behalf of Phillip Bell and his interests. He alleges that each of the representations were false.

47. After conclusion of the negotiations, Scheuer instructed his solicitor, Graham Efron and Associates ("Efron"), to prepare agreements to be entered into with Phillip Bell and his companies and with Tony Bell and his company. Efron prepared those agreements. Heads of Agreement were executed on 31 March 2000 between Phillip Bell, AIS, BPR, Scheuer (and/or his nominee) and MPDL. The preamble to that Head of Agreement recited that BPR, as trustee for the P & R Bell Family Trust, agreed to divest part of its equity in MPDL to Scheuer. Separate Heads of Agreement were entered in to with Tony Bell, Tetley, Scheuer (and/or his nominee), and MPDL in early April 2000.

50. Each Head of Agreement provided that Scheuer was to pay the sum of $500,000 by instalments. The Heads of Agreement set out the times at which the instalments would be paid. Under the Heads of Agreement involving Phillip Bell and his companies ("the Phillip Bell Heads of Agreement"), the last instalment of $100,000 was to be paid by Scheuer on 30 June 2001. Under The Heads of Agreement involving Tony Bell and his company ("the Tony Bell Heads of Agreement") the last instalment of $150,000 was to be paid on 30 April 2001. Under the Phillip Bell Heads of Agreement, BPR agreed to sell fifty percent of its shareholding in MPDL, consisting of twenty-five percent of the issued capital of that company, and amounting to 147,500 shares. Under the Tony Bell Heads of Agreement, Tetley agreed to sell twenty percent of its shareholding (consisting of ten percent of the issued capital) in MPDL totalling 59,000 shares. Thus, in total, Scheuer was to receive thirty-five percent of the shares in MPDL for a total payment of $1,000,000.

53. The two Heads of Agreement also provided that working capital was to be contributed by the parties pro-rata to their shareholding, so that forty percent was to be contributed by Tetley, thirty-five percent by Scheuer, and twenty-five percent by BPR. The Phillip Bell Heads of Agreement provided that if BPR did not pay its share of the working capital, Scheuer would make a contribution on its behalf, and that contribution would be deducted from the balance of the purchase price payable by Scheuer under the Phillip Bell Heads of Agreement.

56. Both Heads of Agreement had a number of common provisions. Clause 1 of the Heads of Agreement defined the term "the Four Agreements" to mean: A Sale of Shares Agreement between BPR, Scheuer (and/or nominee) and MPDL; a Sale of Shares Agreement between Tetley, Scheuer (and/or nominee) and MPDL; a Consultancy Agreement between MPDL and AIS; and an Employment Agreement between Phillip Bell and AIS.

59. The schedule to each Head of Agreement provided that the Four Agreements would be executed on or before 30 April 2000. Clause 3 of the Heads of Agreement provided that the parties intended to create legal relations by the execution of the Heads of Agreement and to be bound by the terms and conditions set out in them. Clause 5.2 of both agreements provided that Phillip Bell on behalf of AIS was to execute a Consultancy Agreement with MPDL by which AIS was to provide consultancy services for a period of five years. AIS was to be paid $4,000 per calendar month for those services. Phillip Bell was to be employed by AIS throughout that period.

62. Clause 7 of the Heads of Agreement provided that each of the parties were to deal in good faith with each other party including any dealings in the course of negotiation. Clause 9 of both Heads of Agreement provided as follows:

"9 INTER-RELATEDNESS OF AGREEMENTS 9.1 Right to terminate The parties all warrant and agree that Both Heads of Agreements and the Four Agreements shall be inter-related and in the event the negotiations are frustrated and or cancelled legally or otherwise between any party and any other party, Scheuer shall be entitled to rescind and terminate any arrangements made up to that point. 9.2 Cost of termination 9.2.1 In the event of termination under clause 9.1 all costs and expenses and Liabilities of the Parties pursuant to this Agreement (inclusive of legal costs) are to be born by MPDL; and 9.2.2 In the event of termination under 9.1, MPDL agrees to indemnify Scheuer for all costs (legal or otherwise) already paid by him. 9.3 No waiver Nothing in clause 9.1 shall serve as a waiver of the legal rights of any party to these Heads of Agreement"

67. From late February 2000 Scheuer commenced to participate in the business. He collaborated with Tony Bell to produce a document entitled "Multi-Point Data Link February 2000 Information Memorandum". Scheuer paid the amounts which were due under the two Heads of Agreement. Thus he paid $400,000 to purchase shares under the Phillip Bell Heads of Agreement, and he paid $350,000 to purchase shares under the Tony Bell Heads of Agreement. In addition, in April 2000 Scheuer met his obligations in respect of a call for working capital of $100,000. Scheuer paid $35,000 to MPDL on his own behalf, and $25,000 to MPDL on behalf of BPR.

70. From about April 2000 Scheuer became concerned about a number of matters relating to MPDL. First, he became concerned that, contrary to what he had previously been told, the roll out of the technology had not commenced. Secondly, he became concerned that Phillip Bell did not attend full-time to the business of MPDL. Thirdly, he became concerned whether MPDL was legally entitled to use the software and computer technology involved in the Multi-Point Data Link product.

73. Scheuer discussed those concerns with Tony Bell on 28 June 2000. That discussion occurred after the weekly management meeting between the parties. Subsequently, after a weekly management meeting on 5 July 2000, Scheuer told Tony Bell and Phillip Bell that he was terminating the arrangements between himself and them because he was not happy with the progress of the Multi-Point Data Link project, and because the business was not as it had been represented to him.

76. On 8 July 2000 Scheuer sent a letter to each of Tony Bell (and Tetley) and Phillip Bell (and AIS) in the following terms:

"Further to our meeting on Wednesday 5th July, I formally advise that, under the current circumstances I no longer, in clear conscience, can be involved in the business of MPDL Pty Ltd with its partners as listed above. I have therefore requested that the monies paid to the above parties by me be refunded as soon as possible. Further, at the meeting of 5 July, I asked that by Friday 7 July a formal payment plan be put to me: I have received no response from either party!! I do not wish to drag this matter out over a long period and therefore I demand full repayment be made to me no later than by 24 July 2000 by both Phillip Bell and Tony Bell. As you appreciate, none of us wish to involve ourselves in costly legal arguments, I ultimately trust in your common sense to avoid this. I am disappointed neither of you bothered to come back to me with a plan of action. As you are aware I have signatory rights to the MPDL Bank account: I have put a freeze on this account and the monies, awaiting your formal reply. Needless to say you are aware that wages, bills etc require payment. I therefore urge you to respond to this matter no later than by 5pm today."

80. The plaintiff claims that by his letter of 8 July he terminated and rescinded the two Heads of Agreement under clause 9.1, or alternatively as a result of misrepresentations which he claims were made to him.

84. In late June and early July 2000 Tony Bell and Scheuer entered into discussions, the substance of which concerned the continued involvement by Scheuer in the Multi-Point Data Link project. I shall return to those discussions later. Scheuer states that he told Tony Bell that he would only remain involved if Phillip Bell was not involved, and if his own involvement was in a new entity. Tony Bell and Scheuer consulted B2B Lawyers. In the ensuing month three drafts of an agreement between the two parties were produced. Scheuer annotated amendments to the first two drafts and forwarded them to Tony Bell. The last draft was put to Phillip Bell by Tony Bell as a proposal to buy his interest. Phillip Bell rejected the proposal. However after that time Phillip Bell played no further part in the business.

87. Scheuer remained in the business of MPDL between July 2000 and September 2001. He had become, and remained, a director of the company. Scheuer and Tony Bell attempted to sell the assets and undertaking of the company or alternatively shares in the company on a number of occasions. In July 2001 Tony Bell and Scheuer entered into an arrangement with Mr Kevin Mark and Mr Chris Bishop. Under that arrangement MPDL was to sell the business to a new entity. The shareholding in the new entity was to be sixty percent Tony Bell and Scheuer, and forty percent Mark and Bishop. The arrangement was short lived. Bishop and Mark terminated their involvement in the project by letter dated 24 September 2001. From shortly after that date MPDL has not been operational. The business involving the Multi-Point Data Link technology has not been functional. Scheuer has not recovered any of the monies invested by him.

(i) The consideration for the two Heads of Agreement wholly failed, as a consequence of which the plaintiff is entitled to repayment of all money paid by him under those agreements.

(ii) By his letter dated 8 July 2000 he validly terminated and rescinded the two Heads of Agreement pursuant to clause 9.1 on the grounds that by 5 July 2000 the defendants and the plaintiff had not entered into the four agreements and no shares in MPDL had been transferred to him. Accordingly he is entitled to repayment of moneys paid by him under the two Heads of Agreement.

(iii) The representations made to the plaintiff before he entered into the Heads of Agreement were false, as a consequence of which the plaintiff rescinded the two Heads of Agreement. Accordingly he is entitled to repayment of all money paid.

(iv) The representations were misleading and deceptive in contravention s.52 of the Trade Practices Act 1974 or s.9 of the Fair Trading Act 1999, as a consequence of which the plaintiff has suffered loss and damage. That loss and damage consists of the sums paid by the plaintiff pursuant to the Heads of Agreement and also a sum of $145,638.46 paid by the plaintiff in an attempt to mitigate his loss.

(v) In July 2000 the plaintiff and Tony Bell had conversations concerning the reorganisation and transfer of the business of MPDL to a new entity in which the plaintiff would be allocated fifty percent of the shares. Pending that reorganisation and transfer of business, the plaintiff lent Tony Bell $145,638.46 in order to keep the business of MPDL intact and capable of being transferred to the new entity.

97. The principal defences (as pleaded) of the first, second and third defendants (Phillip Bell, AIS and BPR) may be summarised as follows:

(i) The plaintiff was not entitled to terminate and rescind the Heads of Agreement under clause 9.1. The plaintiff did not request the defendants to execute the four Agreements and the plaintiff waived that requirement. The Heads of Agreement were binding without the need to execute the four Agreements.

(ii) It was an implied term of the Heads of Agreement that the right to terminate the agreements under clause 9.1 be exercised in good faith. The plaintiff did not exercise that right in good faith.

(iii) In respect of the alleged false representations made before entry into the Heads of Agreement -

(a) Tony Bell was not authorised to make those representations on behalf of the first, second and third defendants. He did not make those representations as their agent.

(b) In any event if those representations were made they were not false. In particular MPDL was entitled to exploit the product, the product had not been developed using pirated software, the product was capable of commercial exploitation in its then form, and market research had been carried out and a pricing structure had been developed.

(iv) Although the plaintiff purported to bring the Phillip Bell Heads of Agreement to an end in July 2000, Phillip Bell denied that the plaintiff did in fact rescind or terminate that agreement.

103. Originally the second further amended defence of the first, second and third defendants contained a number of pleas. Many of those defences were abandoned by the completion of the trial. In particular the first, second and third defendants did not pursue the following pleaded defences:

(i) That the plaintiff was estopped from seeking repayment from BPR for the monies paid under the Heads of Agreement;

(ii) That the exercise by the plaintiff of his rights under clause 9.1 of the Heads of Agreement was unconscionable contrary to s.7 of the Fair Trading Act.

(iii) The first, second and third defendants also abandoned their counterclaim against the plaintiff.

109. In summary, the principal defences (as pleaded and as amended at the conclusion of final addresses)of the fourth, fifth and sixth defendants were as follows:

(i) The plaintiff had not validly rescinded the Heads of Agreement.

(ii) The plaintiff was in breach of obligations under the Heads of Agreement, and was thereby disentitled from exercising his right to rescind the agreement under clause 9.1.

(iii) On or about 10 July 2000 the plaintiff and the fourth, fifth and sixth defendants entered into an agreement to vary the Heads of Agreement or alternatively enter into a new agreement. Under that varied or new agreement the plaintiff was to remain involved in the business, was not obliged to make any further payment for his interest in it, and would be allocated a fifty percent shareholding in MPDL. It was a term of the agreement that the plaintiff would not require repayment of monies paid by him under the Tony Bell Heads of Agreement. Pursuant to that varied or new agreement the plaintiff remained involved in the business and contributed to the costs and expenses of it. Accordingly the plaintiff waived any entitlement to require repayment of the money paid under the Heads of Agreement.

(iv) In respect of the plaintiff's claim based on misrepresentation:

(a) In negotiating with the plaintiff Tony Bell was only acting as agent for Tetley.

(b) Tony Bell did not make certain of the representations alleged by the plaintiff concerning the status of the development and rollout of the product.

(c) Tony Bell did not represent to the plaintiff that he and Phillip Bell each had a fifty percent share in MPDL.

(d) The representations which were made by Tony Bell to the plaintiff were true.

(e) The plaintiff did not act in reliance on the representations alleged.

115. The fourth, fifth and sixth defendants also pleaded that the termination by the plaintiff under clause 9.1 of the Tony Bell Heads of Agreement breached an implied term of that agreement that such termination be exercised bona fide and not for any ulterior purpose. That plea was abandoned at trial.

119. The first, second and third defendants brought a cross-claim against the fourth, fifth and sixth defendants. They also had third party proceedings against Heron Tower Pty Ltd ("Heron Tower"), a company owned and controlled by Tony Bell. Those third party proceedings were resolved during the trial. Consent orders were made dismissing them.

122. The legal formulation of the various claims made by Phillip Bell and his companies against their co-defendants was complex. However in essence Phillip Bell and his companies made the following four claims:

(i) Tony Bell was authorised by Phillip Bell to negotiate the Heads of Agreement with the plaintiff. In negotiating those agreements Tony Bell achieved a better deal for himself than for Phillip Bell. In particular, Tony Bell was to receive $500,000 from the plaintiff for twenty percent of Tony Bell's interest in MPDL, whereas Phillip Bell received the same amount for fifty percent of his interest in the company. In negotiating an agreement which gave him a more favourable deal than Phillip Bell, Tony Bell breached fiduciary duties owed by him to Phillip Bell.

(ii) The first, second and third defendants claimed indemnity or contribution against Tony Bell and Tetley should the plaintiff be entitled to relief arising out of the lack of any shareholding by Phillip Bell in MPDL. In that event Phillip Bell alleged that Tony Bell owed Phillip Bell and his companies a duty to ensure that shares in MPDL were issued to the Phillip Bell interests in such a way as to enable the sale to the plaintiff to proceed. If Phillip Bell did not have a fifty percent interest in the shares of MPDL at the time of the sale, that lack of shareholding was due to the breach of duty owed by Tony Bell to Phillip Bell and his companies.

(iii) In respect of the claims by the plaintiff based on misrepresentations made to him before the Heads of Agreement were entered into:

(a) Tony Bell was not authorised by the Phillip Bell interests to make those representations. Accordingly the first, second and third defendants are entitled to be indemnified by Tony Bell in respect to any liability to the plaintiff arising from those representations.

(b) Alternatively the first, second and third defendants are entitled to contribution or indemnity under s.23B of the Wrongs Act 1958 (Victoria) or alternatively in equity in respect of any liability to the plaintiff.

(iv) BPR also claimed declarations against MPDL as to its shareholding in MPDL.

128. 34 In its original form the second further amended notice of claim by the first, second and third defendants against the fourth, fifth and sixth defendants comprised eighty-six paragraphs and was forty-four pages in length. A number of the claims, originally contained in the notice of claim, were abandoned by the conclusion of final submissions. In particular the first, second and third defendants abandoned the claims in paragraphs 18 to 30, 34 to 46, 63 to 64, and 65 to 69 of their cross-claim. They relied on the allegations contained in paragraphs 23 to 30 of the cross-claim to support the claim (in paragraphs 31 to 33) based on the breach of fiduciary duty, but not as a separate claim.

131. Heron Tower made a cross-claim against the first and third defendants. That cross-claim was resolved during the trial and consent orders were made dismissing it.

134. In addition, the fourth, fifth and sixth defendants, by a separate notice of claim, seek contribution against the first, second and third defendants in respect of the claims by the plaintiff.

138. The trial lasted thirty sitting days. The plaintiff was represented by Mr D Meagher QC and Mr R Strong. The first, second and third defendants were represented by Mr P Crennan. The fourth, fifth and sixth defendants and the third party (until the claim against it was dismissed by consent) were represented by Mr J Evans. In addition to the plaintiff, Mr A Crow and Mr C Bishop gave evidence on behalf of the plaintiff. The first defendant was the only witness called on his behalf and on behalf of the second and third defendants. In addition to the fourth defendant, Mr R Romanin gave evidence on behalf of the fourth, fifth and sixth defendants. Each witness, and in particular the plaintiff, the first defendant and the fourth defendant, gave lengthy evidence, and were subjected to lengthy and detailed cross-examination.

142. I shall consider and determine the various claims and issues in the following order:

(i) The plaintiff's claim for money had and received.

(ii) The plaintiff's claim to have terminated and rescinded the Heads of Agreement under clause 9.1.

(iii) The claim of the plaintiff based on representations made to him before he entered into the Heads of Agreement. That claim involves the following issues:

(a) What representations were made by Tony Bell to Scheuer before he entered into the Heads of Agreement?

(b) In making those representations did Tony Bell act as agent for the other defendants?

(c) Were any of those representations false or misleading?

(d) Did Scheuer rely on those representations in entering into the Heads of Agreement?

(iv) The events of July 2000 and thereafter.

(v) The plaintiff's claim against Tony Bell for monies lent after July 2000.

(vi) Relief sought by Scheuer against the defendants:

(a) If the plaintiff is entitled to rescission, what orders is he entitled to?

(b) Damages

(vii) Relief claimed by Phillip Bell against Tony Bell in the cross-claim.

(viii) Issues of contribution between the Phillip Bell parties and the Tony Bell parties.

PLAINTIFF'S FIRST CLAIM: Money had and Received

148. The claim by the plaintiff for money had and received was made on the basis that there was a total failure of consideration for the amount paid by him under the Heads of Agreement. It was made on three grounds:

(i) Under the Heads of Agreement, Scheuer did not receive any interest in the issued shares of MPDL. The Heads of Agreement only constituted an agreement by, respectively, BPR and Tetley, to enter into a further agreement for a sale of shares.

(ii) If the Heads of Agreement themselves constituted an agreement for the sale of shares by BPR and Tetley, neither of those companies held shares in MPDL.

(iii) If BPR and Tetley held shares in MPDL which could be sold to Scheuer, those shares were valueless, because MPDL did not have any interest or property in the Multi-Point Data Link product.

(i) The Heads of Agreement did constitute a contract for the sale of shares, rather than a contract to enter into a further agreement for the sale of shares.

(ii) BPR and Tetley each held an interest in shares in MPDL which were capable of being sold by them to Scheuer.

(iii) The shares in MPDL had a value. Property in the Multi-Point Data Link product had passed to MPDL.

(I) Were the Heads of Agreement an Agreement for the Sale of Shares?

160. The first question is whether the Heads of Agreement contained an agreement by, respectively, BPR and Tetley to sell shares in MPDL to Scheuer. The plaintiff contended that the Heads of Agreement contained no such agreement. The plaintiff referred to a number of specific provisions of the two Heads of Agreement which, it was contended, rendered them no more than agreements to enter into a subsequent contract for the sale of shares.

163. In particular the plaintiff relied on recital F to the Phillip Bell Heads of Agreement (recital E of the Tony Bell Heads of Agreement) which stated that the parties "are to sign Sale of Share and Consultancy Agreements by the anticipated date....". Clause 4.1 and 4.2 contained warranties by the intending vendor that MPDL was to have no outstanding liabilities, and that the shares in MPDL should not be encumbered, "at the date of execution of the formal agreements for the settlement of the shares in MPDL....". It was submitted that the provision of those warranties at the date of execution of the formal agreements, rather than at the date of the Heads of Agreement, was significant. Reference was also made to clause 5.2 of the Heads of Agreement which provided that, at the same time of the signing of the contracts for sale of shares, Phillip Bell on behalf of AIS was to execute a Consultancy Agreement with MPDL.

166. The difficulty with the plaintiff's submission arises from clause 5.4 of the Phillip Bell Heads of Agreement (which, with appropriate changes, is the same as clause 5.3 of the Tony Bell Heads of Agreement). That clause provides:

"BPR agrees to sell and Scheuer agrees to purchase 50% of his holdings in MPDL Pty Ltd being 25% of the issued capital in the company and being 147,500 ordinary shares subject to the terms and conditions set out in this clause 5."

170. By its clear terms, clause 5.4 of the Phillip Bell Heads of Agreement (clause 5.3 of the Tony Bell Heads of Agreement) is expressed as an immediate contract of sale, rather than as an agreement to enter into a subsequent further contract of sale. Mr Meagher QC contended that the form of expression used by the draftsman was inaccurate, and does not detract from the overall intention of the Heads of Agreement. However, I do not consider that I am at liberty to disregard the plain words of clause 5.4 of the Heads of Agreement. They are not ambiguous. Their meaning is clear. The Heads of Agreement were drafted by a solicitor. They use terms which encapsulate legal concepts. The choice of terminology in clause 5.4 was not, in my view, adventitious, but intentional.

173. Two further considerations support my conclusion that clause 5.4 of the Phillip Bell Heads of Agreement (clause 5.3 of the Tony Bell Heads of Agreement) should be given its plain and ordinary meaning. First, as Mr Meagher later contended, the Heads of Agreement contained all the necessary provisions required to constitute a sale of shares. Indeed, in another context, Mr Meagher submitted, correctly, that little more needed to be negotiated for inclusion in the intended formal Sale of Shares Agreements. Accordingly it is not surprising that the Heads of Agreement themselves constituted a contract of sale of shares, in circumstances in which the parties intended "... to have the terms restated in a form which will be fuller or more precise but not different in effect"[1].

176. A second relevant consideration is that, pursuant to the Heads of Agreement, significant payments were to be made by Scheuer before the time fixed by the Heads of Agreement for entry into the formal Sale of Shares Agreement. Under the Phillip Bell Heads of Agreement $140,000 was to be paid before the time fixed for the Sale of Shares Agreement. Under the Tony Bell Heads of Agreement $200,000 was to be paid before that date. The payment of such amounts by Scheuer supports the conclusion that clause 5.4 was intended to take effect as a contract for sale of shares, rather than as a contract to negotiate for a contract for sale of shares.

179. I should also note that if, contrary to the above conclusion, the Heads of Agreement did not constitute a contract for the sale of shares, but rather a contract to enter into a later contract for sale, such a construction would not result in the conclusion that there was a total failure of consideration. The plaintiff did not suggest that the contract was void for uncertainty, as being no more than an agreement to agree[2]. The Heads of Agreement contained an express provision (clause 7) that the contracting parties would act in good faith to each other in bringing into being the formal Sale of Shares Agreement. They also contained (in clause 8) obligations by the contracting parties to do all things necessary to put into effect the objective of the Heads of Agreement. Thus valuable consideration would have been provided, in any event, to Scheuer, even if I were to construe the Heads of Agreement as a contract to enter into a contract for the sale of shares, on the terms already specified in the Heads of Agreement.

(II) Did BPR and Tetley Have an Interest in the Shares in MPDL?

183. The second contention made by the plaintiff, in support of his claim for money had and received, is that Tetley and BPR (as trustee of the P & R Bell Family Trust) did not each own the shares which they agreed to sell to Scheuer under the Heads of Agreement.

186. At this stage it is necessary to consider the history of the Multi-Point Data Link project, and of the subsequent issue of shares in MPDL. I shall refer again later in these reasons to that history in the context of the cross-claim by Phillip Bell against Tony Bell. However, relevant to the plaintiff's claim, the history discloses the following:

(i) The original persons involved in the joint venture were Terry Hughes and Phillip Bell. The joint venture was unincorporated.

(ii) At all times, including at the time at which he entered into the joint venture, Phillip Bell conducted his own business as a software designer as an employee of AIS. In his evidence, which I accept, he stated that he continued his involvement in the joint venture as an employee of AIS.

(iii) Tony Bell joined the joint venture in 1998. The joint venture was still unincorporated. It appears that Heron Tower provided the funding, at least for the capital payment made by Tony Bell in respect to his acquisition of an interest in the joint venture. In evidence, both Phillip Bell and Tony Bell, at least implicitly, considered that Tony Bell, rather than Heron Tower, was a member of the joint venture. Although the matter is not entirely clear on the evidence, I consider it more probable that it was Tony Bell and not Heron Tower which was the relevant member of the venture.

(iv) On 3 February 1999 MPDL was incorporated. One share was issued to Tony Bell. The venture was not transferred or assigned into MPDL. That company remained a shelf-company at least until shortly before the execution of the Heads of Agreement.

(v) Terry Hughes exited the joint venture in August 1999. At that time terms of settlement were executed between Heron Tower, Hughes and Phillip Bell. Although Heron Tower, and not Tony Bell, executed the terms of settlement, nevertheless that document provided that Hughes sold and transferred his interest in the joint venture to Tony Bell and Heron Tower "collectively".

(vi) BPR was incorporated in July 1999. It ended up having two functions. That dual role of BPR has generated substantial debate in the present case. First, Phillip Bell stated in evidence that BPR was incorporated to hold his interest in the joint venture. On 1 July 1999 a trust deed was executed between BPR (as trustee) and Phillip Bell (as the initial unit holder). That trust deed constituted the trust known as the "Bell Investment Trust". At about the same time, in July 1999, Phillip Bell persuaded two ladies who were his secretaries and friends, Anna Sznyta and Joanna Van Exan, to invest $200,000 in the business. An Agreement was signed by Phillip Bell, Sznyta and Van Exan. Clause 1 provided that Phillip Bell had set up the Bell Investment Trust to hold the equity ownership of the investment in what was described as the "MPDL Trust". I interpolate that at that time it had been contemplated that an MPDL trust would be constituted, but that did not come to pass. In any event, the intent of the agreement between Phillip Bell and Sznyta and Van Exan was clear that those two ladies would invest in the Multi-Point Data Link business. Clauses 2 and 3, in combination, provided that Sznyta and Van Exan were to be provided with a thirty percent interest in the Bell Investment Trust. Thus each of those two investors were to gain thirty percent of Phillip Bell's interest in the joint venture.

(vii) The second role of BPR needs to be mentioned at this stage. A trust known as the "P & R Bell Family Trust" was established by a deed dated 23 October 1998. Phillip Bell was the trustee of that trust. By a deed executed by Phillip Bell and BPR dated 1 July 1999, Phillip Bell resigned as trustee, and appointed BPR as the trustee of the trust.

(viii) It might be thought that, as at July 1999, AIS, rather than BPR, should have been the owner of the "Phillip Bell" interest in the joint venture. It seems clear on the evidence however that it was BPR, and not AIS, who was considered to be the owner of the "Phillip Bell" interest as from July 1999. Phillip Bell controlled AIS. If in fact AIS, and not Phillip Bell, had previously owned the relevant share in the joint venture, then the conclusion would be clear that Phillip Bell had acted as the agent of AIS in effecting an arrangement whereby BPR was to hold that interest to its exclusion. Alternatively, as from that date, and particularly as from the date in which Sznyta and Van Exan invested in the Bell Investment Trust, and thereby invested in the "Phillip Bell" interest in the joint venture, AIS would be estopped from asserting its interest in the joint venture to the exclusion of BPR.

(ix) Indeed, in his outline submissions, the plaintiff accepted (correctly) that the conclusion might be drawn that the Bell Investment Trust took up the interest in the joint venture previously held by Phillip Bell, and not AIS.

(x) Thus, as at January 2000, the relevant persons who held an interest in the joint venture were Tony Bell and BPR as trustee of the Bell Investment Trust.

192. In that background, it is necessary to examine whether, at the time of execution of the Heads of Agreement, BPR (as trustee of the P & R Bell Family Trust) and Tetley held shares in MPDL (that is, MPDL Pty Ltd) which were capable of being sold by those two entities to Scheuer pursuant to the terms of the Heads of Agreement. The history of the issue of shares in MPDL both before April 2000, and indeed subsequently, is not easy to unravel. At the very least, there was an imprecision in attention to ordinary procedures and to the usual steps required to issue shares in a private company. Secondly, the question of the relevant shareholding in MPDL became clouded in July 2000. As will be seen later, from that time Tony Bell strove to exclude his brother Phillip from holding any relevant interest in MPDL, so that he could induce Scheuer to continue in MPDL after Scheuer had purported to terminate and rescind the Heads of Agreement. However, the contemporaneous documents, together with some evidence given about them, establishes the following:

(i) On 6 March 1999 Romanin lodged a notification of share issue signed by Tony Bell as director of MPDL with the Australian Securities and Investment Commission (ASIC). The document was numbered OE4415453. It recorded two issues of ordinary shares which were stated to have been issued for cash. One issue was for 295,000 shares at a price of $1 per share; the other issue was for 294,999 shares at $1.53 per share.

(ii) On the same date, and apparently by error, a second notification of issue of shares was lodged with ASIC. That document was number OE4415454. It was in the same form as the document referred to in sub-paragraph (i) above.

(iii) On or about 14 April 2000 the records of ASIC were appropriately amended by deleting document number OE4415453, and leaving document OE4415454.

(iv) Two share certificates were tendered in evidence from the secretarial file of MPDL. Both share certificates bore the common seal of MPDL, and were signed by Tony Bell as sole director and sole secretary. The first share certificate certified that Phillip Bell as trustee for the P & R Bell Family Trust was the registered holder of 295,000 ordinary shares. The second certificate certified that Tetley was the registered holder of 294,999 ordinary shares in MPDL. Both certificates purported to be dated 5 February 1999. However, the evidence of Tony Bell and Romanin was that the certificates were sent to Tony Bell on or about 30 March 2000, and were signed and executed by Tony Bell shortly after that date. I accept that evidence.

(v) Consistently with the above transactions the company extract of MPDL dated 14 July 2000 recorded Tony Bell as holding one issued share, recorded the two notifications of allotments dated 6 April 2000, and recorded that cancellation of the document number OE4415453 on 14 April 2000.

198. From the above evidence I conclude that, shortly after 30 March 2000, MPDL issued 294,999 shares to Tetley, and 295,000 shares to Phillip Bell as trustee of the P & R Bell Family Trust. There was no contention that that share issue was invalid for want of formality, or for want of adherence to appropriate procedures. Based on that evidence I conclude that, at or shortly after the date of execution of the Heads of Agreement, Tetley owned 294,999 shares in MPDL, Tony Bell owned one share, and Phillip Bell, as trustee of the P & R Bell Family Trust, held 295,000 shares issued in MPDL.

201. The plaintiff, in this context and in the context of other claims made by it, places some reliance on documents and transactions which indicate that, at some date after April 2000, steps were taken to cancel the allotment of shares. I shall return to this aspect of the case later. Even if such a cancellation of the shares did occur, it would not nullify the fact that shares had been issued in the manner which I have described above. At no time did Phillip Bell, or BPR, consent to any cancellation of the allotment. Further it has not been established that any such cancellation took place before 5 July 2000.

204. The position, then, is that, either at or shortly after the date of execution of the Heads of Agreement, Tetley owned 294,999, and BPR, as trustee of the P & R Bell Family Trust, held 295,000 shares, in MPDL. Each of those two companies contracted to sell their shares to Scheuer under the two Heads of Agreement. In light of that conclusion, Tetley clearly owned shares, and therefore was able to comply with its obligation to sell shares under the Tony Bell Heads of Agreement. The position relating to BPR is more confused. As I have already noted, before the issue of the shares, BPR as trustee of the Bell Investment Trust, and not as trustee of the P & R Bell Family Trust, owned the relevant interest in the joint venture. Yet BPR, in its capacity as trustee of the P & R Bell Family Trust, held the issued shares, and contracted to sell them to Scheuer.

207. While much was made of this apparent discrepancy, it does not produce the result that BPR, as trustee of the Bell Family Trust, could not sell shares to Scheuer. Certainly, it would be clear that BPR, as trustee of the Bell Family Trust, would receive any consideration paid by Scheuer on trust for the Bell Investment Trust. Likewise, the P & R Bell Family Trust (and its trustee BPR) would hold the issued shares in MPDL on a constructive trust for the Bell Investment Trust. However those considerations, and the complex legal tangle which has ensued, does not alter the simple point that the party which contracted to sell shares to Scheuer was the same party which held the legal interest in the issued shares in MPDL. In so far as the beneficial interest in those shares was, ultimately, owned by the Bell Investment Trust, it is clear that Phillip Bell controlled BPR in his capacity as trustee of both trusts. He was the majority unit holder in the Bell Investment Trust. He gave evidence, which I accept, that he told Van Exan and Sznyta of the sale of part of the interest of the Bell Investment Trust to Scheuer. In those circumstances, I accept the argument of the defendants that the Bell Investment Trust would be estopped by convention from denying the right of BPR to dispose of the legal and equitable interest in the shares pursuant to the Heads of Agreement. I therefore conclude that BPR did have the relevant interest in the shares sold under the Heads of Agreement. There was therefore no failure of consideration based on the second proposition advanced by the plaintiff.

(III) Did MPDL Own the Copyright in the Multi-Point Data Link Product?

211. The third contention of the plaintiff, in support of his claim for money had and received, was that MPDL did not derive any interest in the Multi-Point Data Link software as a result of the Heads of Agreement. Accordingly the plaintiff contends that any shares sold under the Heads of Agreement were valueless.

214. The plaintiff developed that contention at some length. In summary the steps to the submission were:

(i) Originally the copyright in the software was owned by Phillip Bell and Terry Hughes. The copyright remained the property of the joint venture after Tony Bell joined it, and after Terry Hughes left it.

(ii) The joint venture consisted of, on the one hand, Tony Bell or Heron Tower, and, on the other hand, BPR as trustee of the Bell Investment Trust.

(iii) The Heads of Agreement contemplated the execution by Phillip Bell, on behalf of AIS, of a Consultancy Agreement which was to contain a term (inter alia) that MPDL was to have the sole rights to have possession, ownership and control of all intellectual property generated and/or created by Phillip Bell and/or AIS. However that clause was not effective to assign copyright in the software to MDPL, since it was not owned by AIS.

(i) AIS was at all times the legal owner of the copyright in the Multi-Point Data Link software.

(ii) Clause 5.2(d) of the Heads of Agreement operated to assign either the legal or equitable interest in that software to MPDL.

226. I consider the submissions made by the defendants to be correct.

229. Section 35 of the Copyright Act 1968 (Commonwealth) provides that the "author" of a literary, dramatic, musical or artistic work is the owner of any copyright subsisting in the work. Section 10 of the Act defines a "literary work" to include a computer program or compilation of computer programs. Section 35(6) of the Act provides that where a literary work is made by the author in pursuance of his or her employment by another person under a contract of service, that other person (the employer) is the owner of any copyright subsisting in the work. I accept that Phillip Bell was, at all times, the author of the software. The plaintiff argued that Hughes was also an author of it, since he was the originator of the idea for it. However, it is a basic principle of copyright law that copyright does not subsist in an idea, but rather in the expression of that idea in a material form[3]. In any event Hughes released his interest in the copyright under the terms of settlement pursuant to which he departed from the joint venture.

232. At all times Phillip Bell developed the software as an employee of AIS. Accordingly, AIS remained the owner of the copyright in the software until the execution of the Heads of Agreement. No doubt the relevant parties to the joint venture, namely Tony Bell and BPR (as trustee of the Bell Investment Trust), each had interests in equity in the copyright in the software. The question is whether clause 5.2(d) was effective to assign an interest, either legal or equitable, in the software to MPDL. Clause 5.2 did not, of itself, constitute an assignment of the software. Rather, clause 5 provided for the execution of a Consultancy Agreement, a term of which was to include an agreement whereby MPDL was to become the owner of the software. Thus clause 5.2(d) of the Heads of Agreement was not effective to assign the legal interest in the software to MPDL. However, by virtue of that provision, MPDL derived an equitable interest in the software. That conclusion is supported by the decision of the Court of Chancery in Colburn v Duncombe [4]. In that case the plaintiff's bill alleged two agreements by which he claimed to have acquired the copyright in a book relating to the memoirs and times of King George IV. Sir Lancelot Shadwell V-C held that the first agreement was ineffective. His Lordship characterised the second agreement as "nothing more than an agreement to assign the copyright (in the book) when called upon to do so". Accordingly the second agreement did not operate as an assignment at law. However His Lordship held that, under the second agreement, the plaintiff had obtained a good title in equity which supported a claim by him for an injunction to protect that copyright.

235. Accordingly I conclude that, pursuant to the Heads of Agreement, MPDL derived an interest in equity to the software. As I have noted, the members of the joint venture, Tony Bell and BPR (as trustee of the Bell Investment Trust) also had interests in equity in the copyright to the software. Tony Bell was a party to the Tony Bell Heads of Agreement. All the unit holders of the Bell Investment Trust knew of and assented to the agreement to sell part of the interest of the trust, and thus were bound by the transfer of the interest in equity to MPDL. I therefore conclude that the shares in MPDL did have a value, consisting of the underlying value of the software of the Multi-Point Data Link product.

PLAINTIFF'S SECOND CLAIM: Termination of Heads of Agreement pursuant to clause 9.1

239. The second claim of the plaintiff is that, by his letter of 8 July 2000, he validly terminated the two Heads of Agreement pursuant to clause 9.1 of each of those agreements on the grounds that, by 5 July, the defendants and plaintiff had not entered into the Four Agreements and no shares in MPDL had been transferred to the plaintiff.

242. The defendants submitted that the two Heads of Agreement had not been validly terminated by Scheuer pursuant to clause 9.1 for the following three reasons:

(a) There was no basis for Scheuer to exercise the right of termination under clause 9.1;

(b) If there was such a basis for Scheuer to exercise that right, he was only entitled to exercise it before 30 April 2000, and not thereafter;

(c) In any event, the plaintiff himself was in breach of obligations under clauses 7 and 8 of the Heads of Agreement to negotiate the Four Agreements. By reason of that breach, he was disentitled from relying on his right to terminate the Heads of Agreement under clause 9.1.

248. I consider that the first submission of the defendants, outlined above, is correct. Clause 9.1 provided a right of termination to Scheuer in "...in the event the negotiations are frustrated and or cancelled legally or otherwise between any party and any another [sic] party." On the evidence, there was no frustration or cancellation of any negotiations. Accordingly the occasion for Scheuer to exercise a right of termination under clause 9.1 did not arise.

251. Shortly before the Heads of Agreement were executed, Efron prepared a draft Consultancy Agreement, a draft Employment Agreement, and two draft Sale of Shares Agreements, being the Four Agreements contemplated by the two Heads of Agreement. Scheuer stated that he received copies of those draft documents shortly before the Heads of Agreement were executed. However, there is no evidence that copies of those four draft documents were forwarded to or made available to either Tony Bell or Phillip Bell. Scheuer did not discuss those documents with Tony or Phillip Bell. He did not ask Efron what was the status of the draft agreements. The draft Consultancy Agreement was plainly incomplete. In particular the section of the draft agreement entitled "Scope of Works" (to be undertaken by the contractor, AIS) was left blank. In the meantime Scheuer became involved in the affairs of the business. He attended regular weekly management meetings. Tony Bell and he prepared a new Information Memorandum. His accountant, Ms Bee Lim, took over the book-keeping functions of the business. At Scheuer's instigation, Tony Bell and he conferred with a patent attorney. Scheuer and Tony Bell drew business plans and projections. They visited a large insurer (AAMI) and some motor vehicle dealers. It is plain on the evidence that the parties ignored, or did not advert, to the provisions in the Heads of Agreement which provided for the negotiation for, and execution of, the Four Agreements.

254. Mr Efron was not called by the plaintiff to give evidence relating to the provision by him of copies of the four draft agreements to either Phillip Bell or Tony Bell. The plaintiff led no evidence to establish that drafts of any of those documents had been provided to Tony or Phillip Bell. There was no evidence at all that Phillip Bell received them. He denied doing so. In his evidence in chief, Tony Bell also stated that he did not receive any of the four documents. During cross-examination, his attention was drawn to paragraph 50 of the outline of evidence prepared by his solicitors and served before trial. That document attributes to Tony Bell the statement that he did receive "at some stage a draft of the Consultancy Agreement which was proposed between AIS and MPDL."[5]. When that statement was put to Tony Bell in cross-examination he was genuinely surprised. He accepted that he told his solicitors the truth when the statement was being prepared. However I do not consider that his evidence amounts to an adoption by him of the accuracy of paragraph 50 of his outline. Even if it did, technically, amount to such an adoption, that evidence would not be sufficient, on its own, to establish on the balance of probabilities that either Efron or Scheuer provided to Tony Bell the draft of the Consultancy Agreement prepared by Efron. Further, and in any event, there is no evidence that any of the parties, Mr Scheuer, Tony Bell or Phillip Bell, gave any consideration to negotiating the Four Agreements contemplated by the Heads of Agreement. If one thing is clear, it is that the parties, from April 2000, conducted their relations on the underlying assumption that the agreement between them was governed by the Heads of Agreement, and without reference to any contemplated formal agreements to be negotiated between them.

257. Mr Meagher contended that, notwithstanding the matters which I refer to above, there were nevertheless negotiations for the Four Agreements and that those negotiations were frustrated.

260. Mr Meagher first contended that, before execution of the Heads of Agreement, negotiations for the Sale of Shares Agreement, the Employment Agreement, and the Consultancy Agreement had commenced. Mr Meagher submitted that such an inference should be drawn from the amount of detail in the Heads of Agreement concerning the topics which would later be covered by the Four Agreements. Indeed, Mr Meagher pointed out that all the fundamental terms relevant to the Sale of Shares Agreement were already included in the Heads of Agreement, and he contended that little was left to be negotiated.

263. The submission by Mr Meagher ignores the import of clauses 7, 8 and 9 of the Heads of Agreement. Those clauses in the Heads of Agreement envisaged and provided for further negotiations to occur after their execution, to formalise the Four Agreements. It is to those further negotiations which the obligations in clauses 7 and 8 are directed. Clause 9.1 does not apply to any negotiations. By the use of the definite article in the phrase "the negotiations", clause 9.1 was intended to apply to negotiations occurring after the Heads of Agreement. The scheme of the Heads of Agreement was that negotiations were to take place in good faith (clause 7); the parties were to do all things necessary to fulfil the objectives of the Heads of Agreement including the execution of further agreements (clause 8); and if those further negotiations were frustrated or cancelled then Scheuer should be entitled to rescind and terminate the Heads of Agreement (clause 9.1).

266. Mr Meagher then contended that, in any event, little needed to be negotiated in respect of the Sale of Shares Agreement. While that submission may be correct, nevertheless the Sale of Shares Agreement drafted by Efron contained substantially more detail than the Heads of Agreement. Mr Meagher relied heavily on a letter from Tony Bell's accountant, Romanin to Efron dated 14 April 2000. That letter suggested a rearrangement of the sale of shares proposing that Tony Bell would transfer the entire thirty-five percent equity to Scheuer, and would be paid $1,000,000 for it. The letter apparently envisaged that, by a separate arrangement, Tony Bell and Phillip Bell would adjust that purchase price between themselves. The letter stated that Tony Bell and Scheuer had discussed and agreed to the change of circumstances. That statement in the letter was plainly incorrect and not supported by either Tony Bell or Scheuer. The letter stated:

"As the vendor, our client has requested that his solicitor prepare the contract of sale."

270. In that context Mr Meagher contended that the letter constituted negotiations, and cast on Tony Bell the onus of formulating and proffering a Sale of Share Agreement. It was contended that the failure of Tony Bell to proffer such a Sale of Share Agreement constituted a frustration of negotiations between the parties for such an agreement.

273. There is no evidence that the letter of Romanin to Efron dated 14 April 2000 was discussed or negotiated between the parties. As I have already set out, neither Tony Bell nor Scheuer stated that they had discussed the contents of the letter between themselves. Romanin's evidence was that, after he sent the letter, nothing further happened in relation to the proposal contained in it. The plaintiff did not call Efron to give evidence although he was plainly available to do so. In those circumstances I cannot, and do not, infer that any negotiations concerning the contents of that letter occurred either before or after it was sent. The letter was no more than a suggestion by Romanin, no doubt with a view to alleviate or avoid the imposition of capital gains tax. On the evidence the letter was ignored. Indeed, Mr Scheuer kept making payments under the Heads of Agreement to both Phillip Bell and Tony Bell. After the letter, Scheuer made three further payments to BPR. In those circumstances, I do not accept that the letter evidenced any negotiations between the parties for the Sale of Shares Agreement. If, by some stretch of the English language, the letter was to be characterised as a step in negotiations, there is no evidence that any such negotiations were frustrated or cancelled. The fact that a proposition or suggestion is made and not pursued does not constitute a frustration of negotiations, as that term is understood in everyday parlance or as it is understood in a legal context such as the frustration of contracts.

276. The plaintiff then submitted that negotiations for the Consultancy Agreement and Employment Agreement were frustrated. It was pointed out that those agreements would have two aspects, namely, providing for consultancy and employment services by AIS and Phillip Bell, and secondly, providing for the assignment of copyright from the joint venture to MPDL. In that context the proposed Consultancy Agreement and Employment Agreement were to provide for matters which were of substantial significance. Further, Scheuer was not to be a party to the agreements. The agreements were to be between AIS and Phillip Bell on the one hand, and MPDL on the other hand.

279. The topic of Phillip Bell's employment was discussed in about June 2000 when Scheuer (and Tony Bell) became dissatisfied with the apparent lack of involvement by Phillip Bell in the technical side of the business. However those discussions were not negotiations in respect of formal agreements contemplated by the Heads of Agreement. Rather the discussions concerned Scheuer's dissatisfaction with Phillip Bell's lack of input into the business. As a result of Scheuer's concerns, he had stopped making monthly payments of $4,000 to Phillip Bell at the end of May 2000. At a management meeting on 28 June 2000 Lockhart, Scheuer and Tony Bell put to Phillip Bell that, rather than being on a monthly salary, Phillip Bell should tender quotations which would be paid by the business when the work was done. Both Scheuer and Phillip Bell gave evidence, which I accept, that Phillip Bell reluctantly accepted that proposition. In those circumstances, it is plain that no negotiations occurred in respect of a proposed consultancy or Employment Agreement. Further, and in any event, if such negotiations occurred, they resulted in an accord, and were not frustrated or cancelled.

282. Finally, the plaintiff contended that negotiations for the Consultancy Agreement were frustrated because the defendants made a deliberate decision that copyright in the software should not be transferred from the joint venture to MPDL due to the potential impact of capital gains tax as a result of any such transfer.

285. I reject that submission. The sections of the transcript upon which the submission was based do not support the allegation made by the plaintiff. Indeed, as pointed out by Mr Evans in final address, the allegation which is central to that submission was not squarely put, in cross-examination, to Phillip Bell, Tony Bell or Romanin, the three persons alleged to have been parties to that decision. The evidence certainly reveals that in April 2000 Romanin and the solicitors for Tony Bell, Messrs Harwood Andrews, were concerned to explore potential methods by which the transaction might be structured in order to alleviate the imposition of taxation on the transaction. However the evidence does not establish, certainly on the balance of probabilities, that Phillip Bell, Tony Bell and Romanin made a conscious decision not to bring into being a Consultancy Agreement because of the potential impact of taxation resulting from such an agreement. As I have already noted, after the Heads of Agreement were executed, the parties became involved in progressing the business, and were not concerned with the formalities which had been stipulated by the Heads of Agreement. The conduct of all three parties, Scheuer, Tony Bell and Phillip Bell, makes it clear that none of them were concerned with, or paid attention to, the execution of the Four Agreements referred to in the Heads of Agreement. The formulation and execution of those documents was simply ignored by the three parties.

288. Clause 9.1 of each of the Heads of Agreement provides that Scheuer should be entitled to rescind the Heads of Agreement "in the event the negotiations are frustrated and or cancelled legally or otherwise between any party and any another [sic] party". In my view that event did not occur in this case. The simple fact is that the parties did not choose to enter into negotiations at all. There were no negotiations. A fortiori, there were no negotiations which could be frustrated. Likewise there were no negotiations which could be cancelled. Even if there were, somehow, some negotiations, there is no evidence that they were frustrated or cancelled. Accordingly the circumstances for the operation of clause 9.1 did not arise.

291. The conclusion which I have reached in the last paragraph means that the plaintiff must fail in his claim based on an exercise of his rights under clause 9.1. Although it is not necessary for me to do so, I shall deal briefly with the other two submissions made in defence of the plaintiff's claims under clause 9.1 of the Heads of Agreement.

294. The second submission by the defendants was that it was an implied term of the Heads of Agreement that any right under clause 9.1 to rescind or terminate the agreement must be exercised no later than 30 April 2000. Clause 9.1 does not, in express terms, specify when the right to rescind, provided by it, must be exercised. The defendants pointed to the provisions of the Heads of Agreement which contemplated that the Four Agreements were to be executed on or before 30 April 2000. The defendants contended that the right, provided by clause 9.1, was not open-ended in point of time, and that it was implicit in clause 9.1 that that right be exercised no later than the date fixed for execution of the Four Agreements.

297. I do not accept the submission of the defendants that the proper construction of clause 9.1 required the plaintiff to exercise his rights under it by the day contemplated for the execution of the Four Agreements, namely 30 April 2000. No such specific time limit is expressed in clause 9.1. I would be rewriting that provision if I was to incorporate into it, by a process of construction or implication, as a specific time limit fixed for exercise of the rights under that clause, the time fixed for the execution of the Four Agreements.

300. Indeed there is no necessary connection between the time fixed for execution of the Four Agreements and the exercise by the plaintiff of his rights under clause 9.1. The exercise of those rights does not derive from the fact that the Four Agreements have not been executed. Rather, the exercise of rights under clause 9.1 is dependent upon, and derives from, the frustration and/or cancellation of negotiations for the Four Agreements. Such frustration or cancellation may occur either well before, or indeed, after, the date fixed for execution of the Four Agreements.

303. It is of course correct to contend that a contractual right, such as that expressed in clause 9.1, would not be open ended in point of time. However, that proposition does not necessitate, or justify, the implication into clause 9.1 of the time limit fixed for the execution of the Four Agreements. It is a trite principle of construction of contracts that where the contract does not specify a time for performance of a particular obligation or exercise of a particular right, that obligation must be performed, and that right must be exercised, within a reasonable time. What is reasonable is to be assessed in the circumstances surrounding the contract. In their final submissions neither defendant advanced a submission that Scheuer had failed to exercise his right under clause 9.1 within a reasonable time. In his submissions in reply Mr Evans did seek to advance such a contention. However the plaintiff had not had the opportunity to respond to it. Further, such a proposition had not been pleaded by the defendants. Indeed the defendants had not specifically pleaded that the right to rescind the Heads of Agreement under clause 9.1 must be exercised by 30 April 2000. In any event, in light of the conclusions which I have already reached in relation to this aspect of the case, it is not possible for me to express a conclusion whether or not Scheuer purported to exercise his rights under clause 9.1 within a reasonable time. For, the exercise of such rights are dependent upon a finding of frustration or cancellation of negotiations. The exercise of rights under clause 9.1 must occur within a reasonable time after such frustration or cancellation. It is not possible, in a vacuum, to determine what is such a reasonable time. Much would depend upon the nature of the frustration or cancellation of the negotiations, and on the circumstances of the case. Since I have found that there was no frustration or cancellation of negotiations, it is not possible for me to express a view on this issue, even if such an issue were open on the submissions and on the pleadings.

306. The third submission by the defendants was that clauses 7 and 8 of the Heads of Agreement imposed on each of the parties an obligation to negotiate, in good faith, the Four Agreements to be executed by them. It was submitted that by failing to instigate and pursue negotiations for the Four Agreements Scheuer breached that obligation. The defendants relied on the principle that Scheuer was not entitled to take advantage of a circumstance brought about by his own breach in order to terminate the agreement.

309. The legal proposition on which that submission is based is well founded. Where a contract contains a provision providing for termination or avoidance of the contract if a particular circumstance exists, a party is not entitled to avail itself of that right to terminate or avoid the contract, if the existence of that circumstance is brought about by the breach by that party of its obligations under the contract[6].

312. Clause 7 of the Heads of Agreement provides that if negotiations occur, each party must deal in good faith with each other party in the course of those negotiations. However, clause 7 does not either expressly, nor by implication, impose on either party a particular obligation to negotiate the formal agreements, where no negotiations have actually been commenced.

315. Clause 8 of the agreement provides as follows:

"8. Facilitation The parties agree to do every act, matter or thing necessary or desirable to fulfil the objective of, and otherwise give effect to these Heads of Agreement, including and without limitation the execution of further agreements."

319. With one exception, the Heads of Agreement do not, in express terms, provide for the negotiation and execution of the Four Agreements. The one exception is clause 5.2 of the Phillip Bell Heads of Agreement which provides that at the same time as signing contracts of sale of shares Phillip Bell, for and on behalf of AIS, is to execute a Consultancy Agreement with MPDL on terms which include Phillip Bell being an employee of AIS and to that end, agreeing to execute a formal contract of employment. Otherwise the Heads of Agreement do not expressly provide for the formulation and execution of the Four Agreements, other than in recital F. Nevertheless it is clear from a number of clauses of the Heads of Agreement that the parties contemplated the negotiation, formulation and execution of such agreements. In particular clauses 1, 4.3, 5.1(c) and 6.1, together with items 1 and 2 of the schedule to the Heads of Agreement, are all premised on the execution by the parties of the Four Agreements. Accordingly, I accept that clause 8 does contain an obligation on the parties to do every act necessary to bring about the negotiation, formulation and execution of the Four Agreements, in order to give the effect to the Heads of Agreement as required by clause 8. It is clear that none of the parties complied with that obligation. I therefore accept the proposition advanced by the defendants that the plaintiff was in breach of his obligation under clause 8 to initiate and pursue negotiations for the formulation and execution of the Four Agreements contemplated by the Heads of Agreement. If, contrary to my earlier conclusion, the failure of the parties to negotiate the Four Agreements constituted a frustration (or cancellation) of the negotiations, it follows that that frustration (or cancellation) resulted (inter alia) from a breach by the plaintiff of his contractual obligation under clause 7 and 8. As the plaintiff was in breach of the agreement in such a way as to bring about the circumstance on which he relies to exercise a right of termination under clause 9.1, he was, by the force of the authorities to which I have already referred, disentitled from exercising that right under clause 9.1.

322. Accordingly, for the above reasons, I conclude that the plaintiff was not entitled to terminate and rescind the Heads of Agreement under clause 9.1. If, contrary to that conclusion, the plaintiff were entitled to exercise his rights under clause 9.1, the question which would arise concerns what right the plaintiff had to recover payments already made by him pursuant to the provisions of both Heads of Agreement. Mr Evans submitted that clause 9.1 did not give a right to rescind, but only to terminate, the Heads of Agreement. I do not accept that proposition. Clause 9.1 expressly provides for a right of rescission and termination. By the use of that terminology the parties clearly intended to provide a right which would encompass recovery of payments already made under the Heads of Agreement. Such a construction would also accord with the commercial realities of the Heads of Agreement, so that, if the right to clause 9.1 be exercised, the parties would be reinstated to the position they were in before the execution of the Heads of Agreement.

PLAINTIFF'S THIRD CLAIM: Representations made before Agreement

326. The third basis, upon which the plaintiff claims to have rescinded the Heads of Agreement, is on the ground that material misrepresentations were made to him by Tony Bell on his own behalf and as agent for the other defendants, which entitled him to rescind both Heads of Agreement in equity. The plaintiff also relies on those misrepresentations to found a claim for damages based on s.52 of the Trade Practices Act and s.9 of the Fair Trading Act. Those claims involve consideration, at this stage, of four principal issues, namely:

(a) What representations were made by Tony Bell to Scheuer before he entered into the Heads of Agreement?

(b) In making those representations did Tony Bell act as agent for the other defendants?

(c) Were any of those representations false or misleading?

(d) Did Scheuer rely on those representations in entering into the Heads of Agreement?

(I) What representations were made?

332. The representations alleged to have been made by Tony Bell are pleaded in the second further amended statement of claim as follows:

4B "In or about February 2000 the defendants represented to the plaintiff that: (a) The MPDL or its predecessors had developed computer software for use in the automotive repair industry known as Multi-Point Data Link ("the product") and that MPDL was entitled to exploit the product. (b) The product had the capacity to generate substantial revenue. (c) The product was already installed at over 100 sites ready for commercial exploitation. (d) The product was installed and ready to be used in approximately 100 locations. (e) The product was capable of being marketed to major companies at 1200 locations throughout Australia. (f) The product had already reached the stage where it was capable of being commercially exploited in its then state of development. (g) That the first named defendant would be actively involved in the day-to-day operation, management and development of the product ("the representations"). Particulars The representations were oral and were made by the fourth named defendant to the plaintiff in discussions with the plaintiff in or about February 2000 the substance of which was is set out above. 4C Further, in or about February 2000 the fourth named defendant represented to the plaintiff that the first and fourth named defendants or corporate entities associated with them each respectively owned fifty percent of the shares in MPDL ("the further representations"). Particulars The further representations were oral and were made by the fourth named defendant to the plaintiff in discussions with the plaintiff in or about February 2000 the substance of which was as is set out above."

336. Effectively the representations alleged by the plaintiff fall into four broad categories, namely:

(i) Representations as to the state of development of the product and its capability of being commercially exploited in that state of development.

(ii) Representations as to the basis upon which Phillip Bell would be involved in the business.

(iii) Representations as to the ownership by Tony Bell and Phillip Bell (or corporate entities related to them) of MPDL.

(iv) Representations as to the entitlement of MPDL to exploit the product.

(A) Representation as to the State of Development of Product

342. In evidence the plaintiff stated that in 1998 he attended a demonstration at Phillip Bell's premises of a computerised product involving electronic transmission of quotation for repairs to insurance companies.

345. The plaintiff stated that subsequently, in late January 2000, he had a conversation with Tony Bell. In that conversation Tony Bell said that he was involved in a computer business relating to the motor vehicle industry. Tony Bell stated that the product was bigger and broader than the previous version, the product was complete, and it was basically installed and was being rolled out. He said that the project was going to be huge and that the product was unique. Scheuer stated that the project sounded interesting and that they should have a further discussion about it. In cross-examination, Scheuer accepted that Tony Bell might have said the product had "the potential", rather than the "capacity", to generate huge amounts of income. Indeed during cross-examination Scheuer stated that "he (Tony Bell) said that the company had the potential to make a huge amount of money....". In his evidence, Tony Bell stated that he said to Scheuer that he felt "that his was a project with huge potential - earning potential". I accept therefore that Tony Bell stated that the project had the potential, rather than the capacity, to make a huge amount of money.

348. Scheuer stated that he then had a more detailed conversation with Tony Bell in the following week when Tony Bell visited him at his office in Gipps Street, Collingwood. Tony Bell gave to Scheuer copies of a document entitled "Multi-Point Data Link February 2000 Information Memorandum", and other documents including a business plan compiled in February 1997. Scheuer stated that Tony Bell told him that the product was complete and was installed in approximately one hundred sites throughout Victoria. Tony Bell said that some of those sites had been using the product for up to eight months. The product was in a state ready to be rolled out in a major way. Tony Bell stated to Scheuer that there was a major paint company (PPG) which was interested in assisting to roll the product out to about 1200 sites throughout Australia. Tony Bell described his brother as being the person responsible for running the technical side of the business, and as the genius behind the product. Tony Bell told Scheuer that the company was owned fifty percent by him and fifty percent by his brother (Phillip Bell ). Tony Bell further said that he had invested one million dollars in the business. When Scheuer looked at the business plan, Tony Bell said that that was the kind of potential the business had, but that the figures on the business plan had not yet been realised. Tony Bell said that there had been delays in programming completion of the product but the problems had been overcome. He said that the product was complete, the only thing which had not been done was billing the customers, and there was no reason not to commence billing the customers. There were some small aspects of the software relating to the repair phase, which needed completion. Scheuer further stated that, in that conversation, Tony Bell said that Phillip Bell would work on the business "full-time".

351. In his evidence Scheuer further stated that after the meeting in early February 2000, he spoke on a couple more occasions with Tony Bell. During those conversations Tony Bell gave Scheuer a list of sites which he subsequently lost. Scheuer produced a one page document which was similar to the document which he was given, but the document which he was given had two or three pages to it.

354. Tony Bell did not take issue in any significant respects with the evidence which Scheuer gave concerning the representations which Scheuer claimed had been made relating to the development of the product and whether it was ready for and capable of commercial exploitation. There were some minor differences in the evidence. For example Tony Bell stated that, in the list of sites which he sent to Scheuer, he explained to Scheuer that the product had only been installed in sites alongside whose names there appeared a tick on the document. Scheuer disagreed with that evidence. However that point of disagreement is of no moment. First, the list only contained lists of parts suppliers, and not repairers, in whose premises the product had been installed. It was common ground that, in addition to suppliers' premises, the product was also installed at repairers' premises. Further, and more importantly, Tony Bell, in his evidence, stated that he did tell Scheuer that the product had been installed in over one hundred sites.

357. Tony Bell also stated in evidence that although he told Scheuer that there had been some problems with the product which had delayed its development, he disputed Scheuer's evidence that he (Tony Bell ) had told Scheuer that those problems had been overcome. However, the difference in the accounts between the two witnesses, in this respect, is not of any significance. Tony Bell stated, in evidence, that he told Scheuer that the product was essentially complete but there were some bugs in it that had to be fixed up and there were still some ongoing issues with people wanting improvements and adjustments to it. Similarly in his evidence, Scheuer stated that Tony Bell said that, although the problems which had delayed completion of the software had been overcome, there were nevertheless some minor residual problems with the repairer phase of the product.

360. In essence, then, it seems that the evidence of Tony Bell and Scheuer was substantially the same on this topic. I accept that Tony Bell told Scheuer that the development of the product was essentially complete. He did say that there were some minor problems with it. However, the gravamen of the representation made by Tony Bell to Scheuer was that the development of the product was sufficiently complete to justify its marketing and installation to commence on a large scale commercial basis

363. I therefore return to the representations pleaded by the plaintiff. In submissions the defendants accepted that the representations alleged in paragraph 4B (a), (c), (d), and (f) were made to Scheuer. The only dispute in relation to the representation alleged in paragraph 4B (e) was that Tony Bell stated to Scheuer that there was a major company which was interested in assisting to roll the product out to about twelve hundred locations in Australia. In other words, the representation made was as to the capability of the product being rolled out to twelve hundred locations, rather than it being marketed to major companies at those twelve hundred locations. I accept Tony Bell's evidence in this respect. In the context of this case that distinction is not particularly significant.

366. The defendants take greater issue with the representation pleaded in paragraph 4B (b) of the second further amended Statement of Claim. The representation pleaded in that subparagraph is that "the product had the capacity to generate substantial revenue". As I have set out above, it seems clear that Tony Bell represented to Scheuer that the "project" had the "potential" to generate substantial revenue. The fourth defendant sought to make much of the distinction between "the product" and "the project". At an early stage in the proceedings there was some debate as to what was meant by paragraph 4B (b), and the allegation of the falsity of that representation in paragraph 12(b) of the second further amended Statement of Claim. Ultimately that debate was resolved by the provision of particulars in relation to the allegation of falsity. The particulars alleged three elements of falsity, namely: first, the inability of the product to record transaction charges; secondly, the lack of existing agreements binding repairers, insurers and dealers to use the products; and, thirdly, the lack of contracts with spare parts dealers for the use and update of crashbooks. It must be recalled that the factual dispute in the evidence was whether Tony Bell had said that the project had the capacity, or alternatively the potential, to generate substantial revenue. Tony Bell gave express evidence (which I accept) that he said to Scheuer that the project had a huge earning potential. In that context it is clear that paragraph 4B (b) of the second further amended Statement of Claim included, but was not confined to, the technical capacity of the product to generate substantial revenues. In any event, although the point was pursued with some vigour in address, the pleading in paragraph 4B (f) (that the product had already reached the stage where it was capable of being commercially exploited in its then state of development) captures sufficiently the substance of the representation ultimately relied upon by the plaintiff, namely that the product was sufficiently developed that it could be commercially exploited by MPDL and could thereby generate substantial income. In final address, Mr Meagher QC, correctly, encapsulated the representations made on this topic, and which had been established in evidence by the plaintiff, as follows:

"That the MPDL product in its present state of development could be commercially exploited... and could generate substantial income."

(B) Representation as to the Basis on which Phillip Bell was to be involved in the Business

371. In his evidence Scheuer was adamant that Tony Bell told him, in February 2000, that Phillip Bell would be involved in the business on a full-time basis. On the other hand, Tony Bell was equally adamant that he did not make such a representation to Scheuer. Tony Bell stated that he told Scheuer that Phillip Bell would continue to be the technical manager of the development, and that he was the main person involved in the programming. However he stated that he did not tell Scheuer that his brother Phillip would be working full-time.

374. Scheuer was unshaken in his evidence. It is clear on the evidence that Scheuer was, from an early stage, concerned that Phillip Bell would have a significant ongoing involvement in the development and implementation of the product. He understood Phillip Bell to be the "technical genius" behind the product. In cross-examination Tony Bell accepted that, at some stage in the course of negotiations, Scheuer stated that Tony Bell and he would need to secure Phillip's services to make sure that the development of the product continued.

377. In his evidence Tony Bell stated that he did not say that Phillip Bell would work full-time in the business, because he was well aware that Phillip Bell had his own business, and was, indeed, at that time servicing Tony Bell's own business. While this evidence, on the face of it, is persuasive, nevertheless it was discredited in cross-examination. In his answers to interrogatories Tony Bell had sworn that at a meeting with B2B Lawyers in February 2000, in Phillip Bell's presence, Scheuer said he wanted Phillip Bell to work full-time in the company. In cross-examination Tony Bell stated that that was a truthful answer to interrogatory. He stated that, when Scheuer made that remark at the solicitors, he (Tony Bell ) did then not respond that Phillip Bell could not work full-time because of his other commitments.

380. In fact it is questionable whether Tony Bell's answer to the interrogatory is correct. Neither Scheuer nor Phillip Bell gave evidence that, at the meeting at the offices of B2B Lawyers, Scheuer raised the issue of Phillip Bell working full-time in the business. However, that is not the point. What is significant is that, in cross-examination, Tony Bell accepted that, on an occasion when Scheuer stated that Phillip Bell should work full-time in the business, he, Tony Bell, did not respond that Phillip Bell could not do so because of his other commitments. It also supports Scheuer's case that, in discussions which preceded the Heads of Agreement, Scheuer did specify to Tony Bell that Phillip Bell was to work full-time in the business.

383. It is clear that, in commercial dealings concerning his brother Phillip, Tony Bell felt himself at considerable liberty to act without referring to Phillip Bell, and without giving consideration to Phillip Bell's rights or responsibilities. It is therefore quite feasible that Tony Bell would, unilaterally, in discussions with Scheuer, be prepared to commit Phillip Bell to working full-time, notwithstanding that Phillip Bell might not be able to adhere to such a commitment.

386. It is also most significant that, shortly after the negotiations between Scheuer and Tony Bell, Efron sent a letter to Mr Romanin, Tony Bell's accountant, dated 23 February 2000. In that letter Efron stated:

"MPDL will...enter into an agreement to engage PB (Phillip Bell ) on an employment contract for a period of five years on the express condition that PB worked solely and exclusively for MPDL."[7]

That evidence confirms Scheuer's claim that, in negotiations in February, Scheuer and Tony Bell had agreed that Phillip Bell would work full-time. There is no evidence that Romanin or Tony Bell made any response to Efron stating that Phillip Bell would not or could not work full-time. Indeed, as is evident from Efron's letter, it was initially contemplated that Phillip Bell would be an employee of MPDL. Later the arrangement was varied to substitute AIS as a consultant, by whom Phillip Bell would be employed. That alteration was only made because Phillip Bell did not trade on his own behalf, but rather as an employee of AIS.

391. For those reasons, I accept Scheuer's evidence that, in the course of negotiations before he entered into the Heads of Agreement, Tony Bell did represent to him that Phillip Bell would work full-time in the business.

394. The issue of Phillip Bell's involvement in the business was also discussed at a meeting between Scheuer and Phillip Bell at Scheuer's premises in Collingwood on 10 March 2000. On that date Phillip Bell attended Scheuer's premises in order to request an accelerated program of payment of the instalments under the Heads of Agreement to be signed between Phillip Bell and Scheuer. It was common ground that, at that meeting, there was some discussion between the two men as to what work Phillip Bell would do for the business. Scheuer stated that he said to Phillip Bell that it was absolutely essential that he (Phillip Bell ) work full-time on the multi-point business, and that Phillip Bell gave Scheuer his assurance that he would. On the other hand, Phillip Bell, in his evidence, stated that he told Scheuer that the program work was fairly much complete, that he was concerned to keep in touch with it, and that he was proud of his work. He said that he would be looking after the program. However he denied that anything was said about the amount of time which he would commit to the project.

397. There are substantial reasons why Phillip Bell would not have made a representation to Scheuer that he was to be involved in the MPDL project on a full-time basis. First and foremost, Phillip Bell considered that the development of the project was substantially complete. Phillip Bell was not involved in the marketing of the project, nor was he an installer of the product. There would be little sense for Phillip Bell to agree to be involved, during all his working hours, on the project and on nothing else. Secondly, Phillip Bell, through AIS, was involved in other work, including work for his brother Tony. Phillip Bell charged out his hours at the rate of $110 per hour. It was contemplated that he would receive a monthly salary of $4,000 for working for MPDL. It is improbable that Phillip Bell would agree to sacrifice his other earnings, and his other clients, to work full-time for MPDL.

400. It is difficult to resolve the competing versions between Scheuer and Phillip Bell relating to the meeting on 10 March 2000. I regard both witnesses to be basically truthful. However, I found Phillip Bell's evidence to be quite compelling and genuine when he denied that he did, on 10 March, give any assurance to Scheuer that he would work full-time in the business. On the other hand, I suspect that Scheuer spoke to Phillip Bell, at that meeting, on the assumption that Phillip Bell would be working on a full-time basis, but that he did not articulate that to Phillip Bell, because he had already received an assurance from Tony Bell to that effect. In those circumstances, I am not satisfied that at the meeting of 10 March 2000 Phillip Bell told Scheuer that he would work full-time in the business. I also note that the question is, in any event, somewhat peripheral. In his pleadings, Scheuer does not rely on any representation made to him by Phillip Bell on the meeting of 10 March but rather on representations made to him by Tony Bell on Phillip Bell's behalf.

404. A third area of contention relating to the representations made to Scheuer by Tony Bell concerns whether Tony Bell told Scheuer, in February 2000, that Phillip Bell and he each owned fifty percent of MPDL Pty Ltd.

407. In his evidence Scheuer stated that Tony Bell identified the business as a company, MPDL. Scheuer said that Tony Bell stated that the company was owned fifty percent by him and fifty percent by his brother (Phillip).

410. In his own evidence Tony Bell stated that he told Scheuer that the project was a "joint venture between Phillip and myself". Tony Bell did not take issue with the proposition that, in February 2000, it was represented to Scheuer that Phillip and Tony Bell each had a fifty percent interest in the relevant business. Further in a letter to Efron and Associates dated 21 July 2000 Tony Bell acknowledged that he did make representations to Scheuer that MPDL was a company of equal shareholdings between Phillip Bell and himself. For reasons which will appear later in this judgment, it is clear that that letter was contrived, and is not a reliable source of information. However what is significant is that, in cross-examination, Tony Bell did not dispute the truth of the proposition, in the letter, that he had told Scheuer he and Phillip were joint owners.

413. In those circumstances, I accept that it was represented to Scheuer by Tony Bell that Phillip and Tony Bell each had a fifty percent interest in the business, or whatever entity was being sold by the parties to Scheuer. However I do not find that at that time Tony Bell told Scheuer that the relevant legal entity which conducted the business was a company, or MPDL Pty Ltd. It seems clear on the evidence that, at that stage, the parties were not negotiating or thinking in terms of precise legal entities. Indeed there was significant imprecision in the way that the parties approached the transaction from the point of view of its legal structure. Scheuer conceded to Mr Evans in cross-examination that his concern was to obtain a relevant percentage share in the business. Understandably, he considered that it was for his solicitor, and not himself, to be concerned with the question of the legal structure of the intended transaction.

416. In this context both sides placed some reliance on a letter from Efron to Romanin dated 23 February 2000. In that letter Efron proffered a "possible solution to the restructuring problem". Mr Meagher contended that the letter was evidence that Efron had been told by Romanin, falsely, that MPDL had ninety-nine issued shares. I reject that contention. A plain reading of the letter was that Efron, on 23 February, knew that there was only one issued share in MPDL, and hence there was a need for a restructure. Efron was not called to give evidence. He was available. I accordingly do not infer that he had been misled by Romanin as to the share structure of MPDL. On the contrary, I consider that the letter reveals that Efron knew that MPDL was a company with one issued share only. That fact supports the conclusion that, a few days earlier, Tony Bell did not tell Efron's client, Scheuer, that he and Phillip Bell each owned one-half of the issued shares of MPDL.

419. Tony Bell further gave evidence that on 20 February 2000 he and Scheuer negotiated a proposition by which Scheuer would acquire an interest in the business. Tony Bell's account was that he then spoke to Phillip Bell, and later contacted Scheuer to accept that offer. Tony Bell stated that he told Scheuer that Phillip Bell and he would be approaching the transaction "from a fifty-fifty ownership". Scheuer denies that that statement was made to him. I accept the evidence of Scheuer on this aspect of the case and reject Tony Bell's evidence. The evidence of Tony Bell on this aspect is quite contrived. Before that conversation there was no suggestion by Tony Bell to Scheuer that Phillip Bell and Tony Bell were other than equal joint owners of the business. There would be no sense in Tony Bell telling Scheuer, in the telephone conversation, that he and his brother were "approaching it from a fifty-fifty ownership". For reasons which I shall set out later I regard this aspect of Tony Bell's evidence as unsatisfactory, and as an attempt by him to bolster the case he sought to make against his brother, Phillip Bell, that at that point he and Phillip were not equal joint owners of the business.

422. At this point it is appropriate that I briefly deal with submissions by Mr Meagher that there was a deliberate deception practiced by Phillip Bell and Tony Bell on Scheuer and Efron, between February and April 2000, as to the correct ownership of shares in MPDL. I reject that submission. It is not supported by the evidence. I do not propose to deal with that submission at length, because the determination of it against the plaintiff does not affect any of his causes of action.

425. The thrust of the submission made by Mr Meagher against Phillip Bell was that he had deliberately and falsely represented that the shareholder of MPDL was BPR (as trustee of the Bell Investment Trust), rather than BPR (as trustee of the Bell Family Trust). As I have already found, the correct party to the Heads of Agreement, and the correct shareholder in MPDL, should have been BPR (as trustee of the Bell Investment Trust). Phillip Bell stated in evidence that the issue of shares to BPR (as trustee of the Bell Family Trust), and the naming of BPR (as trustee of the Bell Family Trust) as a party to the Heads of Agreement, was an error. I accept that evidence. There was no evidence which would establish the serious allegation made by the plaintiff that Phillip Bell deliberately practiced a deception on him for his own financial means in this respect.

428. The deception alleged against Tony Bell was based on what I consider to be an attempt to read too much into documents which passed between Tony Bell's accountant, Romanin, and Efron leading up to the conclusion and execution of the Heads of Agreement. For example, reliance placed by the plaintiff, in final address, on a balance sheet faxed by Romanin to Efron on 29 March 2000. The balance sheet, inter alia, recorded as an asset software development costs of $631,005 and referred to accumulated losses of $109,799. It was not put to Romanin in cross-examination that that document was a deliberate deception practiced by him on Efron at the instruction of Tony Bell. In my view, it is clear that that document, and other documents, were produced in an attempt to restructure the joint venture into MPDL. Again, it is significant that Efron was not called. He did not give evidence that he drew from the documents sent to him the inference or conclusion upon which the plaintiff now seeks to rely.

(D) Representation as to the entitlement of MPDL to exploit the product.

432. In their final submissions the defendants accepted that, in negotiations which preceded the Heads of Agreement, Tony Bell represented to Scheuer that MPDL or its predecessors had developed the Multi-Point Data Link product and was entitled to exploit the product. That concession was correct, and was based on the evidence.

436. I therefore accept that the following representations, pleaded by the plaintiff, have been established by the evidence:

(i) MPDL or its predecessor had developed computer software for use in the automotive repair industry known as Multi-Point Data Link, and that MPDL and its predecessors were entitled to exploit that product commercially.

(ii) The MPDL product in its present state of development could be commercially exploited by MPDL and could generate a substantial income.

(iii) Phillip Bell and Tony Bell each owned fifty percent of the Multi-Point Data Link business.

(iv) Phillip Bell would be actively involved in the day-to-day operation, management and development the product, in the sense that he would be engaged in it on a full-time basis.

(II) Representations - Agency of Tony Bell

442. The next question is whether, in making the representations, Tony Bell acted as agent on behalf of Phillip Bell and BPR. In its defence, Tetley admitted that Tony Bell acted as its agent.

445. In evidence Phillip Bell stated that in early February 2000 Tony Bell telephoned him and told him that he had a prospective buyer for part of MPDL. Subsequently Phillip Bell attended a meeting in the city which he understood to be at the offices of some lawyers. There Phillip Bell gave a demonstration of the product to those who were in attendance. After that meeting he met with Scheuer and Tony Bell, and Scheuer told him that he was an "interested observer".

448. Phillip Bell stated that shortly after that meeting his brother telephoned him and told him that Scheuer was interested in investing in MPDL, and that he was going to invest $1.5 million. A day later Tony Bell contacted Phillip Bell and told him that the proposal by Scheuer was "a goer", and that both Tony and Phillip Bell would each get $500,000.

451. In cross-examination Phillip Bell stated that, at the beginning of February, he was aware that Tony Bell was negotiating with a prospective buyer, who he subsequently learnt was Scheuer. Phillip Bell stated that he was happy for Tony Bell to negotiate a sale of a portion of MPDL, not only on Tony Bell's own behalf, but also on Phillip Bell's behalf. Phillip Bell did not ask Tony Bell what he was saying to potential purchasers.

454. Tony Bell's evidence concerning his dealings with Phillip Bell at this stage of the transaction was different. I shall return to it in greater detail when considering the cross-claim made by Phillip Bell and his companies against Tony Bell and Tetley. In summary, Tony Bell's evidence was that, after conducting preliminary negotiations with Scheuer in late January and early February 2000, he then visited Scheuer at his home on or about 20 February 2000. According to Tony Bell, Phillip was not present at that meeting. Tony Bell's evidence was that at that meeting, Scheuer offered to pay $1,000,000 for a thirty percent interest in the Multi-Point Data Link venture. Tony Bell responded that that offer sounded good, but that he would check with Phillip. On the next day, according to Tony Bell, he spoke to Phillip Bell about the offer. After speaking to Phillip Bell, he contacted Scheuer, and told Scheuer that Phillip and he had agreed to sell Scheuer a thirty-five percent interest in the venture for $1,000,000.

457. Scheuer's evidence of the negotiations preceding the Heads of Agreement is also different. In fact Scheuer recollected that Phillip Bell attended the meeting at his home on or about 20 February 2000 as well as Tony Bell. At that meeting it was agreed that Scheuer would purchase a one-third interest in the business for $1,000,000. Subsequently Tony Bell telephoned Scheuer and told him that he would get a thirty-five percent interest in the business for $1,000,000, that twenty-five percent would come from Phillip Bell's one half share, and that ten percent would come from Tony Bell's one half share.

460. I shall return later to the differences between the witnesses as to those negotiations. However on the balance of probabilities I find that Phillip Bell was not present at the home of Scheuer at the meeting of 20 February. In this respect I prefer the evidence of Phillip Bell and Tony Bell. During that period it was Tony Bell, and not Phillip Bell, who was conducting the negotiations with Scheuer. It is quite likely that only Tony Bell attended the home of Scheuer in order to discuss the details of the transaction referred to above.

463. In any event, what is common in the evidence is that it was Tony Bell who carried the conduct of the negotiations with Scheuer both on his own behalf and on behalf of Phillip Bell's interest. The content of the discussion between Tony Bell and Phillip Bell, after Tony Bell met Scheuer at his home, was hotly disputed in evidence between Tony Bell and Phillip Bell. However, the common factor in the evidence of both Tony Bell and Phillip Bell is that it was Tony Bell who conducted the initial negotiations with Scheuer, it was Tony Bell who spoke to Scheuer at his home, and it was Tony Bell who, in the course of those negotiations, reported separately to Phillip Bell.

466. The evidence, which I have outlined above, and also the answers to interrogatories of Phillip Bell which were tendered in evidence, makes it plain that, in negotiating with Scheuer in February 2000, Tony Bell was acting as agent on behalf of Phillip Bell, as well as acting on his own behalf. Phillip Bell did not concern himself with, nor was he told, what was being said to Scheuer in respect to those negotiations. Plainly, in order to achieve a sale, Tony Bell was impliedly authorised to inform Scheuer about the product, about its state of development, and about the state of its marketing. He was also, in my view, impliedly authorised to inform Scheuer about the extent to which Phillip Bell would remain involved in the development and roll out of the product.

469. It is well established that where an agent is authorised to conduct negotiations for and on behalf of his principal, the principal is liable for any statements made by the agent, if those statements concern the subject matter of an agreement which the agent is authorised to make on behalf of the principal. The principal remains liable for any misrepresentations made by the agent to a third party, notwithstanding that the principal did not authorise the agent to make false representations on his behalf, provided that the representation made by the agent belongs to the class of representation which the agent was authorised to make. In other words the principal is liable in respect of any false representation made by the agent, provided that the false representation concerns matters which the agent is authorised to discuss in the course of the negotiations with the third party[8].

472. The representations, which I have found to have been made by Tony Bell, belonged to the class of representations which Tony Bell was authorised to make. In other words, Tony Bell was authorised to make representations relating to the nature of the product, its state of development, and its marketing. He was also authorised to make representations concerning Phillip Bell's ongoing commitment to the development of the product. Accordingly, in making the representations, which I have found were made, Tony Bell acted as agent for and on behalf of Phillip Bell. Further, Phillip Bell was the agent of BPR. Accordingly, it follows that BPR is also responsible for the representations made by Tony Bell to Scheuer.

476. The next question is whether the representations, which I have found to have been made by Tony Bell to Scheuer, were false or misleading. For this purpose, it is useful to consider the representations in the four categories I have set out above.

(A) The State of Development of the Multi-Point Data Link system

480. The Multi-Point Data Link system was described as a data communications software package for use in the insurance and motor vehicle collision repair industry. It comprised a method of electronic data exchange through an intranet system. That system used a technique referred to as a "dial-up network." Each customer, that is, the repairers, parts suppliers and insurers, would have a modem box attached to their computer which would interface with a telecommunications network. Thus the customer's computer would communicate with the MPDL computer through a modem box attached to the MPDL computer. Documents sent through that means of communication would be standardised. Those documents were sent to individual mail boxes on the MPDL server. The recipient of the document was required to interrogate the mailbox. In evidence, it was explained that MPDL did not operate as a server, but rather that MPDL passed information between clients in a "pigeon hole" format.

483. By this means it was proposed that the MPDL system could facilitate a variety of communications involving the various participants in the motor vehicle crash repair industry. The Multi-Point Data Link Information Memorandum of February 2000, which was tendered in evidence, set out in detail the intended functions of the system. The repairer aspect of the system was intended (inter alia) to effect the transmission of claim notifications, repair quotes, assessments, invoices, authorisations and images between insurers, assessors and repairers; and to enable repairers to extract data from their computerised quoting system into the Multi-Point Data Link system. The system was also intended to enable repairers to select parts dealership crash lists having access to the latest parts and prices, and to select and order parts electronically from those dealerships. It was intended that the system would enable communication between the parts dealers and repairers by way of requests for information, quotations, and orders. Thus the system was intended to enable parts dealers to have a crash list facility which would be updated, allowing the system to hold crash lists which could be accessed by repairers who were customers.

486. The first question is whether, as represented to Scheuer, the MPDL system in its then state of development could be commercially exploited by MPDL with the potential of thereby generating substantial income.

489. In his evidence Phillip Bell maintained that the development of the system was essentially complete by February 2000. He stated that by February 2000 the software was capable of performing all the functions described in the February 2000 Information Memorandum. He also said that the system could record and count transactions so that they could be billed.

492. The plaintiff called in evidence Mr Adam Crow, a software engineer. Mr Crow had examined a number of documents relating to the system. He had seen the software in operation in 2000. However he did not give evidence concerning any tests which he had conducted on the system and thus was not able to express any view as to whether the system performed the functions for which it was designed. Mr Crow did express the opinion that, subject to a number of conditions, the proposed use by MPDL of dial-up connections for the purposes of electronic communications by users was capable of operating effectively. Those conditions included that enough host equipment was installed with fully functioning data communications access, that dedicated client terminal equipment and telecommunications were carefully supplied and controlled by MPDL, that costs were ignored, that sufficient support was available to clients who were having trouble, and that client data calls should be kept to a short duration.

495. The main thrust of Mr Crow's evidence was that, while the MPDL system was conceptually capable of being operative, nevertheless it had a number of significant disadvantages. Mr Crow's principal, and central, criticism of the MPDL system was that it should have been an internet based system rather than an intranet system. Mr Crow stated that, in fact, the MPDL concept was a very good concept, but it should have been designed for use on the internet. His view was that, in its then state of design, the product was inefficient, particularly from a cost point of view.

498. In response Phillip Bell stated that when the MPDL system was designed and developed the internet was in a relatively rudimentary state. It was for this reason that the system was designed as an intranet rather than internet based concept. Phillip Bell did state that in April 2000 consideration was given to the use of a "DC Box", which would enable clients who used the internet to access the MPDL system. Mr Crow observed that ultimately the designers would have made an effort to start using the internet and that they would probably have migrated to a pure web based solution.

501. Mr Crow had a number of criticisms of the MPDL system, some of which derive from the fact that it was an intranet rather than internet based system. Those criticisms included the following:

(i) Mr Crow did not consider the system to be suitable or efficient, principally from the point of view of cost. First the customer would incur the cost of installing dedicated client terminal equipment. Secondly, and more significantly, Mr Crow considered that there would be considerable communication costs to the client. In this respect Mr Crow estimated that repairers would use the system on average twenty times per day. In cross-examination that estimate was challenged and, in my view, did seem to be somewhat elaborate. Further Mr Bell gave evidence, that, in any event, the system had a "queuing" function, so that repairers could batch a number of messages, and transmit them via one dial-up, rather than by a series of dial-ups. In this manner the additional costs of communication to the repairer could be reduced.

(ii) Mr Crow also expressed some doubt relating to the security of the MPDL system. However, he was rather equivocal in expressing such a doubt. Phillip Bell gave evidence as to the techniques used to avoid hacking or other interference with client information. He was not challenged in that evidence and I accept it.

(iii) Mr Crow was critical of the use in the MPDL system of Windows NT4.0 as the application software. Mr Crow did accept that MPDL software would have run effectively under a Windows NT environment, and indeed MPDL software was written for Windows. However it was not efficient to use Windows. Mr Crow considered that Mr Bell should have used existing mature server code, which would not only have been more efficient but less expensive. Mr Phillip Bell rejected Mr Crow's criticism. First, he stated that a number of customers to whom the system was directed were not on the internet, and the use of mature server codes would have inappropriate for them. Secondly, he considered that web servicing would have been very inefficient and slow for repairers.

(iv) Mr Crow was also critical of the use of Visual Basic 6 as the program language and the use of a standard Microsoft Access database file for file storage. Although Visual Basic 6 worked well with Microsoft Access there were fundamental disadvantages in the use of it, including:

(a) Visual Basic 6 is not generally accepted as a suitable solution for deploying Windows programs to the general public. Rather it is used in environments where the client system is carefully controlled. Phillip Bell rejected that criticism. He stated that Visual Basic, from its inception, grew very rapidly, and was a very user friendly and popular method of writing software.

(b) Mr Crow stated that the principal problem in using a Microsoft Access database file was the risk of data corruption. The MPDL system was designed as a single user concept, and was not appropriate for file sharing. In response Phillip Bell stated that he had in fact designed a "gate keeper" function in the system, consisting of the ability to lock any file while it was in use. That mechanism would avoid the corruption of files in the manner described by Mr Crow. In cross-examination Mr Crow stated that, in designing the MPDL software, Phillip Bell obviously had significant talent, and would be capable of designing a solution of the type described by Phillip Bell.

507. Mr Crow also was critical of the MPDL system because, being a single user system, it could only be used on one computer in each office. Thus, for example, once an individual in a parts supplier's office raised an invoice, it could not be seen on any other computer in the same office. In evidence Phillip Bell stated that in fact the MPDL software had a multi-user version, at least at April 2000. I accept that evidence, as it is corroborated by a memorandum from Phillip Bell to Tony Bell dated 11 April 2000 which referred to a multi-user version of the MPDL system.

510. Mr Christopher Bishop also gave evidence on behalf of the plaintiff. Mr Bishop had been involved in computer based business systems for a number of years. In 2001 he and Mr Kevin Mark were involved in a company called Bodyshop Management Systems ("BMS"). In July 2001 Mr Mark and Mr Bishop became involved in the MPDL business. However they terminated their involvement in September 2001.

513. In evidence, Bishop did not say that the system itself did not work. He stated that the system was capable of creating a quote for repairers and having part numbers and having part prices entered against the quote. In some instances the system was capable of taking an estimate from the computerised estimating packages by the repairer (such as "Autoquote") and downloading that quotation into the MPDL system. However it could not feed back from the MPDL system into the estimating package system. In his evidence Phillip Bell stated that the system was not intended to provide a facility whereby the MPDL quotation could feed back into the estimating package. I accept that evidence. It is clear that the MPDL system was a communications tool. It was designed to derive information from a number of sources, translate that information into MPDL form, and transmit it. It was not the concept of the MPDL system, as I understand it, to provide a method of retranslating MPDL information into other systems.

516. Mr Bishop gave evidence about other disadvantages of the MPDL system, to which I shall return shortly. However Mr Bishop did not state that it was not workable, nor did he state that it was not intrinsically capable of performing the functions for which it was designed.

519. Thus, the evidence does establish that, as at February 2000, the system was technically capable of operation and could perform a number of the functions for which it was designed. The critical question is whether it was then ready for and capable of commercial exploitation as represented by Tony Bell to Scheuer.

522. It is useful to return to the representations which were made by Tony Bell to Mr Scheuer in February 2000, concerning this aspect. Scheuer gave evidence that, when Tony Bell first spoke to him, Tony Bell stated that the product was at a point where "it was basically installed and being rolled out". In his own evidence Tony Bell stated that he did not use the term "rolled out", but I am satisfied that he did. Scheuer further stated that, in that initial discussion, Tony Bell said that the product he was involved with was going to be huge. Subsequently, Tony Bell visited Scheuer in his offices in Gibb Street Collingwood. He provided documents to Scheuer including a business plan which revealed an expectation of making considerable amounts of money in the ensuing years. At the same time Tony Bell stated to Scheuer that the product was complete, it was installed in approximately one hundred sites, and that some of the sites had been using the product for up to six to eight months, and that the product was in a state ready to be rolled out in a major way. Tony Bell stated that there was a major organisation called PPG which was interested in assisting to roll out the product to about 1200 sites throughout Australia.

525. It is in that context, and in that manner that, during the pre-contractual negotiations, Tony Bell represented to Scheuer that the initial phase of the installation of the product was successful, and that the product could, in its then state of development, be commercially exploited. The question then is whether those representations were justified or whether they were false and misleading.

528. It is common ground that, as at February 2000, no billings had been made to customers for use of the product. No binding commitment had been obtained from any potential customer to pay for use of the product. Indeed Tony Bell had told Scheuer that no customers had been billed, but that there was no reason not to commence billing the customers.

531. In his own evidence Phillip Bell was unable to provide any adequate reason why customers had not been billed. His evidence was that the development of the product of the itself was substantially complete by the end of 1999 in the sense that the product would work.

534. In 1998 Tony Bell had introduced his employee, Gil Lockhart, as a manager of the MPDL venture. Tony Bell had become frustrated with the slow progress of the development of the product, and had installed Lockhart as general manager, both to oversee the development of the product, and also to effect the marketing of it. In the ensuing twelve months, Lockhart's relationship with Phillip Bell deteriorated significantly. In evidence Phillip Bell criticised Lockhart for deliberately poisoning his relationship, first, with Tony Bell and subsequently with Scheuer. Tony Bell and Scheuer dispensed with Lockhart's services in 2001 when it was found that Lockhart was involved selling a competing product for another organisation.

537. Phillip Bell stated that when he asked Lockhart why customers were not being billed in late 1999 he could not receive an adequate response. The product had been installed at more than one hundred locations during 1999. Some of those consumers had used the product for a number of months. When it was initially installed, as part of a pilot program, the product had a "sunset" provision, so that the customer could only use it for a defined period of time without being billed. A number of the products so installed were programmed to cease functioning on 31 December 1999. Lockhart prevailed on Tony Bell to have that sunset date overridden (that is extended). Nevertheless, none of those customers had been billed by February 2000.

540. Phillip Bell stated that he raised the issue with Tony Bell on a number of occasions, but, in evidence, could not recall what Tony Bell's response was. When Tony Bell was cross-examined, he could not advance a credible or acceptable reason why, by February 2000, no customers had been billed, and no binding commitment had been sought or obtained from customers, for use of the product.

543. Tony Bell, when cross-examined, stated that he had been told by Gil Lockhart:

"No the time is not right yet, let's fix up some issues with bugs or whatever then start billing."

That answer contains a concession, or at least a suggestion, that the product was not ready for commercial exploitation. As if recognising the difficulty which that answer made for him, Tony Bell then, in cross-examination, recollected there were other issues. He claimed that the lack of billings was because at that time there was a proposal by Toyota for the product to report on the use of original parts by repairers, which would entitle them to a $25 refund per week. It was evident to me that Tony Bell thought of the Toyota proposal as a reason for the lack of billings while under cross-examination. He then also referred to discussions which were occurring with Telstra and Sausage Software, as if they, too, provided an excuse or reason for the lack of billing. My observation of Tony Bell, while under cross-examination on this topic, was that he was conjuring up excuses on the spot, rather than genuinely recalling historical reasons why billing had not occurred. Indeed, at the end of this section of cross-examination, Tony Bell got closer to his original explanation. He stated:

"... Phillip was keen to bill and Gil (Lockhart) was giving the alternative view that it wasn't time to and I was playing it safe by going along with Gil."

When further pressed, Tony Bell acknowledged that, at the time, Lockhart's apparent reasons struck him as "lame".

550. The reasons advanced by Tony Bell, and in particular his reference to potential propositions from Toyota, Telstra and Sausage Software, were, in my view, contrived. As I have stated, when he was cross-examined, his reference to those matters appeared to me to be grasping at straws while under the pressure of cross-examination, rather than genuine recollection. Indeed none of those matters were put to Phillip Bell in cross-examination, or on an application to further cross-examine Phillip Bell. In any event, the matters referred to by Tony Bell (the Telstra, Toyota and Sausage Software propositions) do not provide any sensible or logical reason why, by February 2000, commitments had not been obtained from customers, and billings had not occurred. Rather, the reference by Lockhart to "bugs" in the system, suggests that, as at February 2000, the product was not ready for commercial exploitation.

553. Thus, no satisfactory reason has been advanced by either Phillip Bell or Tony Bell why commitments had not been obtained from customers, and why customers had not been billed, by February 2000. It must be remembered that, by this time, Tony Bell himself had become most impatient with the lack of progress of the project. On a number of occasions during 1999, Tony Bell had sought to renegotiate his arrangement with Phillip Bell because of the slow progress of the project and because it had not yet produced income for him. It is inconceivable that Tony Bell would have accepted any excuse which he thought then was "lame" to defer obtaining commitments from customers.

556. In my view, the above considerations, together with an analysis of the history of the product, both before February 2000, and shortly thereafter, leads to the conclusion that, on the balance of probabilities, the product was not ready for commercial exploitation as at February 2000, contrary to the representations made to Scheuer by Tony Bell.

559. In 1997, Hughes and Phillip Bell had produced a Business Plan. That document contained financial statements prepared by the then accountant for the joint venture, Mr Darren Bourke. Phillip Bell stated that the projections prepared by Bourke concerned a five year plan for the product, based on the commencement of marketing of the product in 1997. However, in 1998, a decision was made by Hughes and Phillip Bell not to proceed to with that plan, but rather to rewrite substantial parts of the software.

562. In March 1999, Tony Bell became dissatisfied with the slow progress of the development of the product. At his behest, Phillip Bell prepared a document entitled "Detailed plan to complete MPDL project". That document contained a program to complete development of the product by 12 May 1999. As it transpired, development of the product was not completed for about six months.

565. Thus there had been two occasions, during the history of the development of the product, when expectations for its completion proved to be ill founded.

568. It is in this context that it is relevant to consider the evidence that, in April 2000, a decision was made by Scheuer, Tony Bell and Lockhart, against the dissenting view of Phillip Bell, that further rewriting of the program was necessary before the product was marketed.

571. When Scheuer and Tony Bell prepared an updated Information Memorandum during February 2000, that memorandum referred to an anticipated launch date of March 2000, and a target date of April 2000 for billings to repair shops and spare parts dealers. By April 2000, the product had not been launched and no billings had occurred. In evidence in chief Tony Bell stated that he and Scheuer had decided that no billing should occur, or agreements made with customers, until they had finished work on pricing. That explanation was not put to Scheuer in cross-examination in circumstances when clearly it should have been. It had all the hallmarks of a recent invention by Tony Bell and I do not accept it. Similarly, Tony Bell then stated that Scheuer and he did not wish any billing to occur because they were talking to potential investors and that billings should not occur in case the investors had their own ideas about contracts which should take place in the market. Once again that explanation was not put to Scheuer, and I reject it. Tony Bell then proffered a further reason which, in my view, came closer to the truth. He stated that in about May 2000 Phillip Bell was very keen that they start billing customers. Tony Bell, in evidence, then stated:

"Steven and I had previously discussed that we weren't so concerned at that stage, we were more concerned about the product being out there and everybody being happy with it....We said `No, lets get the product one hundred percent and then start billing in case - we didn't want to upset customers by billing them and them saying well, you are charging us and, you know, here we've got a problem or something like that......' We were still having issues of people calling-up saying that you know, there's - they had some bug or, you know, some issue with software and so it was case of putting out spot fires here and there.....A very small percentage [of such people were ringing up] but they seemed to be a thorn in the side of in particular Gil."

575. The passage which I have just quoted above contained a further explanation by Tony Bell why billings had not occurred in April to May 2000, apart from the other proffered explanations relating to Scheuer and he reworking the charge rates, and the potential interest of other investors. As Tony Bell was saying, there were still issues with customers being dissatisfied with the product which was then being used by them.

578. In this context it is important to consider the decision in April 2000 to rewrite the software.

581. At a management meeting in April 2000 Lockhart stated that they were having difficulties with programming the repairer version of the software. He recommended that those difficulties needed to be rectified as soon as possible. Lockhart stated that the rollout of the product should be delayed while the problems were fixed. Phillip Bell contended that the problems were basically cosmetic and that the product should be marketed in its current state. Phillip Bell's view was not accepted by Scheuer, Tony Bell and Lockhart who all considered that the changes were necessary before the product was marketed. Phillip Bell's evidence was that, notwithstanding that the changes were basically cosmetic, they would take over six weeks to complete. This evidence supports and illustrates the difference the product being ready for use in a technical sense, and the product being ready for commercial exploitation by MPDL. The product may have been capable of being used by the end of 1999, in the sense that it was capable of performing most of the functions described in the relevant documentation. However, the evidence to which I have referred, including the events of April 2000, all point in support of the conclusion that, by February 2000, the product, in its then state of development, simply was not ready for commercial exploitation.

584. It is in this context that I consider most relevant the evidence and cross-examination of Phillip Bell and Tony Bell, to which I have referred above, relating to the question of why billings had not occurred in respect of the product by February 2000. Certainly Phillip Bell held the view that the product was technically ready. However that is different from the product being ready for commercial exploitation. It is clear that before February 2000 a decision had been made not to market the product commercially. I am of the opinion that the evidence establishes, on the balance of probabilities, that the product was not being commercially marketed, because it was not then ready for commercial exploitation. The events of April 2000 reinforce the view that further developmental work was required to be undertaken in order to render the product ready for commercial exploitation.

587. The conclusion that the product was not ready for commercial exploitation is also supported by the evidence that there were problems in the period between May and June 2000 at a number of sites at which the product had been installed. Those problems were discussed at the weekly management meetings. In evidence Phillip Bell explained that a number of the problems were not attributable to the development of the product. However, in general terms, the number of the problem sites, and the persistence of them, certainly support the conclusion that the product was not ready for commercial exploitation as at February 2000. Various issues with a number of customers, including important potential customers, still had to be resolved.

590. Finally, and for the sake of completeness, I refer to the fact that Lockhart was not called by any party to give evidence. He would have been a material witness to the question why, as of February 2000, no billing had commenced. The evidence was that Lockhart had been hostile to Phillip Bell for some time. Further, the circumstances in which Scheuer and Tony Bell dispensed with Lockhart's services in 2001 at least raise a doubt whether he would have been sufficiently cooperative as a witness in order to assist on the issues. Accordingly I do not draw any inference against any party for the failure to call Lockhart to give evidence[9].

594. The next question is whether the representation by Tony Bell, that Phillip Bell would work full-time on the MPDL business, was a misrepresentation and was false and misleading.

597. The representation was one as to a future matter. In order to establish that the representation consisted of a misrepresentation entitling him to rescind the Heads of Agreement, Scheuer must show that, at the time at which the representation was made, the representor did not have the relevant intention that Phillip Bell would work full-time in the MPDL business. The plaintiff also seeks damages under the Trade Practices Act and the Fair Trading Act for false and misleading conduct. Section 4(2) of the Fair Trading Act and (to the extent to which it is relevant) s.51A of the Trade Practices Act cast on the defendants the burden of establishing that they did have reasonable grounds for making the representation that Phillip Bell would work full-time on the MPDL business.

600. It is clear on the evidence that, at the time at which the representation was made, Tony Bell knew that Phillip Bell would not work full-time in the business. On his own evidence Tony Bell stated that he knew that Phillip Bell had his own business, and would not be able to commit to working full-time on the MPDL business. Similarly, at the time at which Tony Bell made the representation on his behalf, Phillip Bell did not have the intention to work full-time on the MPDL business. I do not find that Phillip Bell knew that Tony Bell had made the representation. Nevertheless for reasons for which I have already expressed, Tony Bell did make that representation as agent of Phillip Bell. At the time at which the representation was made on his behalf, Phillip Bell did not intend to work full-time on the MPDL system. Indeed, from April to early July 2000, he only devoted two days (including evenings) to the business each week. Accordingly at the time at which the representation was made, neither Tony Bell nor Phillip Bell intended that Phillip Bell would work full-time on the MPDL system. It follows that Tony Bell made a misrepresentation to Scheuer in stating that Phillip Bell would work full-time on the system. In doing so Tony Bell, both on his own behalf and on behalf of Phillip Bell, engaged in conduct which was false and misleading and contrary to s.9 of the Fair Trading Act and (if applicable) s.52 of the Trade Practices Act.

(C) Representation that MPDL was Entitled to Exploit the Product

604. I have already found that, in negotiations with Scheuer, Tony Bell represented that he and his brother (or their corporate entities) were entitled to exploit the Multi-Point Data Link system. The plaintiff has claimed that that representation was false and misleading, and was a misrepresentation, because at the relevant time the product had been developed and was run using, inter alia, "pirated software".

607. Subject to one qualification, there is no evidence that the MPDL product was developed or run using software which it was not entitled to exploit. Gil Lockhart had told Scheuer, in about June 2000, that the product had been developed using pirated software. I accept that Scheuer genuinely believed that this was so. However, there is no admissible evidence that in fact Phillip Bell had developed the Multi-Point Data Link product using "pirated" software.

610. Phillip Bell gave evidence - which I accept - that, with one exception, all the software used in the development of the product was obtained legally and was licensed. The software which was used to write the MPDL program was initially Visual Basic 4, and then Visual Basic 5. Licenses had been obtained for that software. Phillip Bell then commenced to use Visual Basic 6 software to solve a problem involving an insurance company which wanted documents produced in a particular format. For that purpose, the programmer, Xin, acquired Visual Basic 6 on a student card, in order to see whether that program could solve the problem. The software solved the problem. However no further steps were taken to acquire a license for the commercial use of Visual Basic 6. The software acquired by Xin on his student card cost $300, for which Phillip Bell had reimbursed him. A full license would have cost $800. In my view, that oversight, without more, would not be sufficient to justify characterising the MPDL system as having being produced using "pirated software". The question is whether it did however mean that MPDL was not entitled to exploit the product.

613. The defendants contended that the use of the unlicensed Visual Basic 6 in the development of the product was immaterial. It was conceded that the use of the unlicensed Visual Basic 6 was a breach of copyright. However it was contended that it was most unlikely that such a breach would have affected the ability of MPDL to exploit the Multi-Point Data Link product on a commercial basis. First, it was argued that the breach was somewhat technical, since a full license would have only cost another $500. Secondly, it was submitted that it was unlikely that an injunction would be granted against MPDL for use of the product, since Visual Basic 6 was not part of the product itself, but rather was one of the "tools" used in the development of the product. Further it was submitted that, if a claim for damages was brought against MPDL for use of the unlicensed Visual Basic 6 in development of the product, the only damages which would be awarded against MPDL would consist of the unpaid license fee[10].

616. Each of the above submissions may well be correct. Nevertheless I consider that the use of unlicensed Visual Basic 6 in the development of the product was a material matter. As the plaintiff pointed out, it is one matter to predict that any suit against MPDL would only result in a small claim for damages. It is another matter for MPDL to be potentially vulnerable to such a claim. Further and in any event the use by MPDL of a product which had been developed using unlicensed software had the potential to tarnish the commercial reputation of MPDL and the product, together with the reputation of Scheuer, in the marketplace. Accordingly I conclude that a material misrepresentation was made to Scheuer concerning the entitlement of MPDL to exploit the product, in so far that the product had been developed using unlicensed Visual Basic 6.

620. I have found that, in the course of negotiations, Tony Bell represented to Scheuer that Phillip Bell and he each owned fifty percent of the business which owned and ran the Multi-Point Data Link system. I did not find that Tony Bell made any representation that he and Phillip each owned fifty percent of the issued shares in MPDL itself. Indeed, had such a representation been made, Scheuer would have known that it was technically incorrect. Scheuer solicitor's letter dated 23 February 2000 to Tony Bell's accountant, Mr Romanin, makes it clear that at that time the solicitor acting for Scheuer understood that there was only one issued one dollar ordinary share in MPDL.

623. For reasons which I will set out at some length later when considering the cross-claim between BPR and Tony Bell, I have come to the conclusion that, as at February 2000, BPR (as trustee of the Bell Investment Trust) and Tony Bell were each equal owners of the MPDL venture. The plaintiff contended that it was a material misrepresentation by Tony Bell to refer to Phillip Bell as the other participant in the venture, rather than referring to BPR (as trustee of the Bell Investment Trust). It was argued that the failure to refer to BPR was relevant, because, from about July 1999, two external parties, namely Ms Sznyta and Ms Van Exan, each owned part of the units in the Bell Investment Trust. Mr Meagher submitted that the plaintiff was, thereby, not informed that, on entering into the transaction, he would be dealing with external parties. I do not accept that proposition. It is evident that, notwithstanding the involvement of Ms Sznyta and Ms Van Exan as investors in BPR, they exercised no say in the joint venture, or in the transaction by which Scheuer entered into the Heads of Agreement. It seems clear that Phillip Bell exercised control over BPR. In those circumstances I do not consider that the failure by Tony Bell during negotiations to refer to BPR was a material misrepresentation made to Scheuer before entering into the Heads of Agreement.

627. Accordingly, I have come to the conclusion that during negotiations which preceded the Heads of Agreement, Tony Bell made three material misrepresentations to Scheuer. Those misrepresentations were:

(i) That the MPDL product in its then state of development could be commercially exploited by MPDL and could generate a substantial income.

(ii) That Phillip Bell would work full-time in the business.

(iii) That MPDL was entitled to exploit the product on a commercial basis.

633. The next question is whether Scheuer relied on those misrepresentations in entering into the Heads of Agreement.

636. In Gould v Vaggelas and Ors[11] Wilson J stated the principles applicable to the question of reliance on misrepresentations as follows:

"1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case. 2. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. 3. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation. 4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract."

640. The misrepresentations in this case were relevant to three issues which were central to the decision of Scheuer to enter into the Heads of Agreement. First, they related to the state of development of the product. Scheuer himself had little familiarity with computer technology. He was heavily reliant on what he was told. In essence he was told that the product was ready to "roll-out" on a substantial commercial scale. That representation went to the core of Scheuer's decision to enter into the transaction. Secondly, Scheuer understood Phillip Bell to be the mind behind the development of the product. It was Phillip Bell who therefore held the relevant knowledge and expertise concerning the technical issues as to the capability and performance of the product. Even on Tony Bell's version of the evidence, Scheuer was concerned to ascertain the level of involvement of Phillip Bell in the transaction. He was concerned to secure the services of Phillip Bell. Those circumstances make it clear that Scheuer was reliant on the assurances he received, as to Phillip Bell's future involvement, in entering into the Heads of Agreement. Thirdly, while I have not found that the product was developed using "pirated" software in the broader sense, there is no evidence that Scheuer had understood that there was any legal impediment or qualification to the entitlement of MPDL to use the product. The legal right of MPDL to use the product was fundamental to the intended transaction between the parties.

643. In this connection, it is significant that on 28 June Scheuer expressed his concerns to Tony Bell in terms of the three matters in respect of which I have found that there were misrepresentations. Scheuer gave evidence, which I accept, that on that date he told Tony Bell that he was unhappy with the business. He stated that there was criminal activity or dishonesty (referring to his understanding that there was pirated software being used); that the business was not working out as it had been discussed in February, because they were nowhere near releasing the product; and that Phillip Bell was not participating as he was supposed to be doing.

646. I do not consider that the reference by Scheuer to each of those matters was other than genuine. That evidence supports the view which I have already arrived at, namely, that Scheuer relied on each of the three misrepresentations in order to enter into the Heads of Agreement.

649. In response the defendants referred to a number of matters which, they contended, demonstrated that Scheuer did not rely on any of the three misrepresentations. I do not consider that those matters preclude my conclusion that Scheuer was reliant on the three misrepresentations. The defendants' contention was that, after Scheuer spoke to Tony Bell, he received other information which "overtook" the representations made by Tony Bell. The defendants did not argue that at the time the Heads of Agreement were executed Scheuer knew that the three misrepresentations were untrue. Nor did the defendants contend that Scheuer either expressly or implicitly disavowed reliance on the three misrepresentations[12]. Rather, the submission was that Scheuer received other information, and he relied on that information, to the exclusion of the three misrepresentations made to him by Tony Bell, to enter into the Heads of Agreement.

652. Before I analyse those contentions in detail, three points should be borne in mind. First, it is important to reiterate the principle, expressed by Wilson J in Gould v Vagellas[13], that, in order to establish reliance, the plaintiff need not establish that the misrepresentation was the sole inducement to enter into the agreement. Indeed, as Wilson J noted, it is sufficient that the representation "plays some part even if only a minor part" in the decision of the representee to enter into the contract. The second matter which should be noted concerns the relationship between Tony Bell and Scheuer. For twenty years Tony Bell had acted as Scheuer's customs agent. The two men were friends. It is understandable in that context that, even if Scheuer received other information, he nevertheless placed trust in, and reliance on, what he was told by Tony Bell. Thirdly, a significant amount of the further information gained by Scheuer did not relate to the three matters on which representations were made.

655. The submission by the defendants was that the investment by Scheuer was made at the peak of the "dot-com boom", and that Scheuer was lured into the investment by the prospect of quick profits, rather than by the three representations. It is correct that Scheuer was readily induced to enter into the transaction. I have no doubt that he expected to make substantial profits because of the then boom in computer software businesses. It is also true that Scheuer knew that the proposition was speculative, and that, in order that the venture succeed, it needed to gain market momentum. However none of those considerations detract from the fact that, underlying Scheuer's decision to invest in MPDL was the knowledge by him that the product was commercially ready for exploitation, that Phillip Bell would be involved in the business on a full-time capacity, and that MPDL was legally entitled to exploit the product. Indeed, I consider that each of those three matters underpinned Scheuer's quick decision to be involved in the enterprise.

658. The defendants also pointed to the fact that Scheuer also received the Information Memorandum and business plans which were provided to him by Tony Bell. Subsequently, in conjunction with Tony Bell, he prepared sales projections, budgets and business plans for the venture. He attended meetings. He gained information, particularly concerning prices and costs, from Tony Bell and from other sources. He formed his own view as to the potential value of the company, and as to the potential profitability of it. However, again, all of that knowledge and information, and all of those prospective views held by Scheuer, were founded on the understanding by him that the product was ready for and capable of commercial exploitation, that Phillip Bell would be involved full-time in the business, and that MPDL could legally exploit the product. Scheuer's views as to the prospects of the success of the business, and the information which he derived concerning costs and potential prices which could be charged for use of the product, were all dependent on those three matters.

661. The defendants also correctly point out that Scheuer, during the period which preceded the execution of the Heads of Agreement, attended some site visits at which he saw the product being used. Lockhart also demonstrated the product to him. Those site visits and demonstrations may have reinforced in Scheuer the understanding that the product was ready for exploitation. However, that is not to say that those visits and demonstrations supplanted, in Scheuer's mind, the representation which had been made to him by Tony Bell concerning the state of development of the product.

664. It was also contended that Tony Bell told Scheuer that he did not have significant computer expertise, and that Scheuer should speak to Phillip Bell who had a full understanding of it. Scheuer conceded that he did not ask Phillip Bell or any other person for the technical details of how the product worked. That evidence does not contradict the proposition that Scheuer relied on Tony Bell's representations concerning the state of development of the product. On the contrary, it shows that Scheuer accepted what he was told by Tony Bell, and did not feel the need to further explore issues relating to state of development of the product.

667. Finally, it was argued that the representation made by Tony Bell concerning Phillip Bell's future involvement was supplanted by what it was alleged Phillip Bell told Scheuer when Phillip Bell visited Scheuer's premises on 10 March 2000. I have already found, as a matter of fact, that I do not accept on the balance of probabilities that, on that date, Phillip Bell represented to Scheuer that he would be involved in the business on a full-time basis. Even if I were to have concluded that factual issue to the contrary, I would not consider that any such statement by Phillip Bell would have precluded some reliance by Scheuer on the representation made to him by Tony Bell. In those circumstances, Scheuer would have had the comfort of a dual representation by both Tony Bell and Phillip Bell, rather than (as in fact was the case) the comfort of the representation made to him by Tony Bell alone. Indeed, as I have already concluded, I consider that the topic was not raised at the meeting of 10 March, because Scheuer, by that time, was comfortable in the knowledge given to him by Tony Bell that Phillip Bell would be involved in the business on a full-time basis.

670. For the above reasons I conclude that Scheuer did rely on the three misrepresentations which I have found to have been made to him in entering into the Heads of Agreement.

674. Accordingly, I have found that, during negotiations which preceded the Heads of Agreement, Tony Bell, on his own behalf and on behalf of Phillip Bell, BPR, AIS and Tetley, made a number of material misrepresentations to Scheuer. Scheuer was induced to enter into the Heads of Agreement by those misrepresentations. Accordingly, in equity, he was entitled to rescind the two Heads of Agreement.

677. By June 2000 Scheuer was clearly dissatisfied with a number of matters relating to the venture. In particular he was concerned that there had been no progress in rolling out the MPDL technology. There was concern that Phillip Bell did not attend full-time to the business of MPDL. Further he was concerned that MPDL might not be legally entitled to use the software and computer technology involved in the Multi-Point Data Link system. Most of those concerns were derived from matters which had been told by Lockhart to Scheuer. Lockhart was not called to give evidence by any party. Further, it was clear that Lockhart and Phillip Bell enjoyed a very poor relationship. Nevertheless I accept Scheuer's evidence that he genuinely believed that Phillip Bell was imperilling the project, and that because of Phillip Bell, the MPDL venture had not progressed satisfactorily.

680. Scheuer's dissatisfaction was such that, on 5 July 2000, after a management meeting, he told Tony and Phillip Bell that he was terminating his arrangement with them and MPDL. On 8 July 2000 he sent the letter to both Tony Bell (and Tetleys) and Phillip Bell (and AIS) which I have set out in paragraph 23 of the these reasons.

683. Subject to specific defences raised by Tony Bell and Phillip Bell, it was accepted that Scheuer's statement to Tony Bell and Phillip Bell on 5 July, and his letter of 8 July, constituted an effective rescission by him of the two Heads of Agreement. In essence, Tony Bell maintains that, at the time of which Scheuer rescinded the Heads of Agreement, he and Scheuer entered into a new agreement, one term of which was that Scheuer would not require repayment to him of monies paid under the Tony Bell Heads of Agreement consequent upon the rescission by him of that agreement. The defence of Phillip Bell is that, in the circumstances, Scheuer's purported rescission of the Heads of Agreement was not a genuine rescission by him of that agreement, but rather a ploy by Tony Bell and Scheuer to exclude Phillip Bell from the Multi-Point Data Link venture.

687. At about the same time as the meeting of 5 July 2000, Tony Bell and Scheuer entered into discussions concerning a proposal that Scheuer would remain involved in the business without the continued involvement of Phillip Bell. Tony Bell maintains that those discussions achieved an agreement between them. In substance the agreement which he alleges was: that Tony Bell would not seek payment by Scheuer of the balance owing to Tony Bell under the Tony Bell Heads of Agreement; that Scheuer would not seek repayment of sums paid by him to Tony Bell under the Tony Bell Heads of Agreement; that both Tony Bell and Scheuer would each be fifty percent shareholders in MPDL Pty Ltd; that if necessary Tony Bell would "take care of" any ownership which Phillip Bell still had in the company; and that Tony Bell and Scheuer would each jointly fund the continued operations of MPDL Pty Ltd by lending sums directly to MPDL Pty Ltd.

690. Tony Bell relied on that agreement to establish a defence of an agreement between Scheuer and himself whereby Scheuer agreed that Tony Bell was not liable to pay to him the money paid to Tetley under the Tony Bell Heads of Agreement. He alternatively claimed that by the agreement Scheuer waived any entitlement to require repayment of those monies. The defence of the fourth and fifth defendants, as finally amended, pleaded the agreement alleged by Tony Bell as a basis of resisting the claim by the plaintiff for repayment of monies paid under the Heads of Agreement to Tetley, should I hold that Scheuer had validly rescinded the Heads of Agreement. In his final submissions Mr Evans confined the defence to that extent, and stated (in my view correctly) that the agreement alleged by Tony Bell did not and could not constitute a release by Scheuer of claims by him for damages under the Trade Practices Act and Fair Trading Act. In his submissions in reply, Mr Evans suggested that the agreement, if established, might constitute a novus actus interveniens, and would thereby be relevant to the issue of damages. However, that argument had not been made in final submission, and was not pleaded. Mr Evans did not address any arguments in relation to it.

693. On the other hand Scheuer maintained that, although Tony Bell and he had discussions concerning the continued involvement of Scheuer in the MPDL concept, he stipulated specific conditions which would need to be satisfied before there was any concluded agreement between Tony Bell and himself for such involvement. Those conditions were, first, Phillip Bell was no longer to be involved in the enterprise (presumably either by way of technical development or as a shareholder); secondly, there would be a new entity established by which the business would be conducted; and thirdly, any monies to be contributed by Scheuer for the ongoing needs of the business would be by way of loan by Scheuer to Tony Bell, rather than by way of loan by Scheuer to the business itself.

696. It is necessary to summarise the evidence given in relation to this aspect of the case. In his evidence, Scheuer stated that after a management meeting on 28 June 2000, he expressed to Tony Bell his concerns about the MPDL project. He said that he was going to terminate his arrangements with MPDL. Scheuer's evidence was that, shortly after that discussion, Tony Bell returned to him on the same day and put a new proposal to him. By that proposal Tony Bell and Scheuer would each be fifty percent partners, and Phillip Bell was no longer to be involved. Scheuer stated to Tony Bell that he was prepared to consider the proposal, provided the venture was conducted through a new entity. Scheuer stated that he was not prepared to put any money into MPDL but that he would reimburse Tony Bell for any funds which he expended on the venture. Scheuer recommended that they see a solicitor, Mr David Lurie of B2B Lawyers.

699. Scheuer then stated that in early July Tony Bell and he saw Mr Lurie and Ms Rhonda Bear at B2B Lawyers. As a result of that conference B2B Lawyers were instructed to prepare a document making an offer to buy out Phillip Bell. There then occurred the management meeting of 5 July 2000. After that meeting, and in the absence of Lockhart, Scheuer told Phillip Bell and Tony Bell that he was terminating arrangements with them and MPDL.

702. After that meeting B2B Lawyers prepared a draft document "Terms of Purchase of Equity and Rights in and Relating to MPDL Pty Ltd". That document was a proposal by which Tony Bell was to purchase Phillip Bell's interest in MPDL Pty Ltd. Scheuer annotated the document and sent it to Tony Bell. Tony Bell made changes to it, then re-engrossed the agreement and sent it back to Scheuer. Scheuer then hand wrote some further suggestions on the document, and sent it back to Tony Bell. Tony Bell incorporated those suggestions in a proposal also entitled "Terms of Purchase of Equity and Rights in and Relating to MPDL Pty Ltd". By that document Tony Bell was to pay Phillip Bell $200,000 to acquire Phillip Bell's interest in MPDL Pty Ltd. That document was provided by Tony Bell to Phillip Bell in circumstances to which I shall refer later. However, Phillip Bell rejected that offer, and countered with a proposal of $500,000. Tony Bell told Scheuer of that offer, and told Scheuer that he (Tony Bell ) was not going to pay it. Scheuer in his evidence stated that Tony Bell said that they could still go ahead with the arrangement which had been proposed, and that it did not matter anyway about Phillip Bell, because Phillip did not have any shares in MPDL.

705. Scheuer stated that after this, the matter was still left open for further discussion and nothing was concluded between Tony Bell and himself. Scheuer continued as a director of MPDL, but played no role in the affairs of that company. The bank account was no longer used. Scheuer contributed monies to Tony Bell as previously discussed in order to reimburse him for funds which he expended on the venture. In the meantime, in circumstances which I shall relate further, Scheuer and Tony Bell prepared a new brochure to sell the business to third parties. A number of attempts were made to sell the venture, or shares in MPDL Pty Ltd to third parties. The software continued to be run, and it appears that even by September 2001, there were still some users of it. However the software did not generate any income. Any attempts to sell the venture did not succeed. Thus Scheuer's case is that, although he had discussions with Tony Bell to continue the business through a new entity, no binding agreement was reached between them. In particular, no new entity was established, and the shareholding situation relating to Phillip Bell was not adequately addressed.

708. Tony Bell's evidence relating to the events of July 2000 and following was to a different effect. Tony Bell stated that after the management meeting of 28 June, Scheuer told him that it was unsatisfactory that Phillip Bell was not putting his full efforts into the MPDL project. However at that stage he did not threaten to withdraw from the project. On 4 July Scheuer said that he had been giving the matter some consideration, and that he was seriously thinking of quitting the venture. On 5 July, after the management meeting, Scheuer announced that he had made a decision to quit the venture. Scheuer left the room. Tony Bell followed him outside. Tony Bell asked Scheuer if he thought it was still a good project. Scheuer said he did but he could not work with Phillip. Tony Bell then proposed to Scheuer that they should buy Phillip out, and become fifty-fifty owners. Scheuer said that that would be a good idea. He suggested that they make an offer to Phillip Bell. It was decided that an offer of $100,000 be made to Phillip Bell.

711. Tony Bell stated that he offered Phillip Bell $100,000 which Phillip rejected. Tony Bell then offered Phillip Bell $200,000, which he accepted. Phillip Bell said that Scheuer was not to have any claims on him. On the next day (6 July) Tony Bell told Scheuer that Phillip Bell had accepted to sell out for $200,000. Accordingly Scheuer and Tony Bell cooperated in formulating the Terms of Purchase, to which I have referred above. In evidence Tony Bell denied attending any meetings with B2B Lawyers regarding the creation of those documents.

714. Tony Bell stated that he then spoke to Scheuer, who raised with him what would happen if Phillip Bell were to renege on the agreement. Tony Bell stated that he would not do so, but that even if Phillip Bell did recant on the agreement, Tony Bell and Scheuer could still remain equal joint partners, and that Tony Bell would "look after" Phillip's share.

717. Tony Bell then stated in evidence that he had two meetings with Scheuer on 10 July. At the first meeting, in a coffee shop, Scheuer raised a question about the amount of money still owing to Phillip Bell, and Tony Bell stated that he did not think it was an issue. Tony Bell stated that he told Scheuer he would forgive Scheuer the money he had to pay Tony Bell under the Heads of Agreement as part of the new agreement, and he (Tony Bell ) would be responsible for Phillip Bell's share. The second meeting occurred with both Scheuer and Dr Ted Fish, a computer technologist. The purpose of the meeting was to induce Fish to replace Phillip Bell as a specialist programmer. Tony Bell stated that subsequently, on either 11 or 12 July, he handed Phillip Bell the proposal, to purchase Phillip's share for $200,000. Phillip Bell said he would come back to him.

720. Tony Bell further stated that in July 2000 he had discussions with Scheuer concerning the bank account. According to Tony Bell, Scheuer said that he did not wish to use the bank account because he wished to disguise the fact that he was still involved in the business. Tony Bell stated in evidence that both he and Scheuer were concerned that if Phillip thought Scheuer would remain in the business, Phillip would seek a greater amount of money to sell out. Tony Bell stated that Scheuer agreed to keep his involvement disguised from Phillip Bell. Tony Bell was to provide the funding into MPDL. Scheuer and Tony Bell would then meet at regular intervals to balance the funding by Scheuer reimbursing Tony Bell.

723. On 14 July 2000 Tony Bell received a facsimile from Mr David Whiting of Stedman Cameron, the solicitors for Phillip Bell. That letter rejected the proposal of $200,000, and stated that Phillip Bell was prepared to dispose of his rights in MPDL for $500,000. In his evidence Tony Bell stated that after receiving that document he telephoned Phillip Bell and arranged to meet him in Glenhuntly Road. He said that at that meeting Tony Bell angrily rebuked his brother for recanting on the previous agreement of $200,000, and for requiring $500,000 to sell out his interest. He claimed in evidence that at that meeting Phillip Bell expressed dissatisfaction with the transaction which Tony Bell alleges occurred in respect to the Heads of Agreement in March 2000 by which Tony Bell was to receive the first $300,000 paid by Scheuer. Tony Bell stated that he retorted to Phillip that he was happy to reverse the $300,000, and that Phillip could go back to being a twenty percent shareholder. Tony Bell then stated that his offer was off, and that he would not talk to Mr Whiting.

726. On 17 July 2000, on the instructions of Scheuer, Efron and Associates wrote a letter to Phillip Bell. That letter contained a number of allegations, including that Phillip Bell did not hold any shares in MPDL. The letter alleged that Phillip Bell had obtained a financial advantage by deception, and demanded repayment of all monies paid under the Heads of Agreement together with "punitive damages of $100,000". The letter threatened that if the funds were not repaid, Phillip Bell would be deemed to have obtained financial advantage by deception "....which constitutes a criminal offence and this will be reported to the authorities." In cross-examination Scheuer denied that the letter was part of a tactic to force Phillip Bell to accept an offer which he did not want to accept for his interests in MPDL.

729. Tony Bell then stated that he informed Scheuer of the conversation which he had had with Phillip Bell in Glenhuntly Road and that he told Scheuer that he would reduce Phillip Bell's interest back to twenty percent. Tony Bell then prepared a letter dated 21 July 2000 to Efron and Associates to which I have already referred. In evidence Tony Bell stated that when he wrote that letter he knew that the contents of it were untrue. The letter alleged that Tony Bell held one hundred percent of the company shares, twenty percent of which were held in trust for Phillip Bell. The letter stated that, when Tony Bell, during negotiations, had represented to Steven Scheuer that Tony and Phillip each owned fifty percent shares in MPDL, he had overlooked transactions in 1999 by which he had acquired eighty percent of the business. Tony Bell stated that that letter was written in order to enable Efron to put pressure on Phillip Bell to forgo his interest in MPDL.

732. On the same day, 21 July, Tony Bell also wrote a letter to Phillip Bell requesting assurances from Phillip Bell and AIS that licenses for the commercial use of the software had been legally obtained and registered in the name of Heron Tower. Tony Bell stated that that letter also was written in furtherance of his tactic to put pressure on his brother Phillip.

735. Although the above evidence relates primarily to the defence raised by Tony Bell against Scheuer's claims arising from recision or termination of the Tony Bell Heads of Agreement, it is appropriate that I refer briefly to Phillip Bell's evidence relating to the events of July 2000. Phillip Bell stated that after the meeting of 5 July 2000 Tony Bell spoke to him, and said that he had worked out a way to solve the problem, and that he would purchase Phillip Bell's shares for $250,000. Subsequently when Phillip Bell met with Tony Bell and was handed the written offer of $200,000, Phillip Bell said that the offer was wrong, and that the price should be $250,000. Phillip Bell then consulted Mr Whiting of Stedman and Cameron who wrote the letter dated 14 July 2000 seeking a price of $500,000. Phillip Bell denied that he met Tony Bell after that letter, but rather that they spoke on the telephone. He said that Tony was angry, and that he would only offer Phillip Bell $150,000. Tony Bell then hung up. Phillip Bell stated that he did not hear anything further from his brother concerning his shares until well into 2001.

738. On 24 July 2001 Tony Bell sent an e-mail to Phillip Bell stating that Phillip had been invited on several occasions to inspect the company records and financial documents, and asking Phillip to make a decision concerning a share transfer form which apparently had been forwarded to his solicitors. In his evidence Phillip Bell stated that, contrary to that e-mail, he had not been invited to inspect company records and financial documents, and had not received a share certificate. Phillip Bell, in cross-examination, stated that he did not want to take any step about those shares without his lawyer knowing, because he did not know what the ramifications were. He suspected that if he were to have accepted the shares, Tony Bell or his company would sue him to recover outgoings paid on behalf of MPDL. Phillip Bell took up the shares, and, as he anticipated, received a writ issued by Heron Tower. In cross-examination, Tony Bell stated that, when he sent the e-mail to his brother, he was hoping that his brother would assess that it was not worth his while to retain the shares and that he would walk away from his shareholding in MPDL. The e-mail was sent in the context of a proposed agreement with Bishop and Mark in July 2001 whereby Bishop and Mark would acquire an interest in the venture.

Conclusion Concerning the Events of July 2000 and Thereafter: Tony Bell's Defence

742. It is clear that, as from either late June, or early July, 2000, Scheuer and Tony Bell had reached an understanding that they wished to continue with the Multi-Point Data Link venture, and that they wished to do so without any involvement in it by Phillip Bell. The critical question is whether that understanding constituted a binding agreement between Tony Bell and Scheuer, or whether it was no more than a proposal which was subject to the three conditions claimed by Scheuer. Those conditions were, first, that Phillip Bell have no involvement in the venture, secondly, that the venture be conducted through a new entity and not MPDL Pty Ltd, and, thirdly, that any funds to be provided by Scheuer in respect of the new venture would consist of loans made by Scheuer to Tony Bell, rather than capital contributions or loans by Scheuer to the venture itself.

745. In considering this question it is important to refer to the terms of the defence pleaded by Tony Bell. That defence was amended at the conclusion of final addresses, and addresses in reply. As amended, it alleged that the agreement on which he relied was an oral agreement made between himself and Scheuer on or about 10 July 2000. The defence pleaded that it was a term of that agreement that the plaintiff would not require Tetley and Tony Bell to repay the money paid by Scheuer under the Tony Bell Heads of Agreement. Alternatively it claimed that as a result of that agreement the plaintiff waived repayment of those monies to him. In answer, Scheuer contended that the discussions between them advanced no further than a proposal, or alternatively a conditional agreement, which was subject to three conditions precedent which I have already described. The case made by Tony Bell, both in cross-examination of Scheuer and in final address, was that the arrangement between Scheuer and himself in July 2000 was not conditional on removal of Phillip Bell as a shareholder from MPDL; rather, it was put, from July 2000 Scheuer and Tony Bell embarked on a "common purpose of removing Phillip Bell as a person with an interest in MPDL".

748. In cross-examination of Scheuer, and in final address, much emphasis was placed on the involvement of Scheuer in the affairs of MPDL after August 2000, and in particular on representations made by or on behalf of Scheuer that, from that date, he had a fifty percent interest in MPDL. Those circumstances were relied upon by Tony Bell as being inconsistent with the contention by Scheuer that, in July 2000, the arrangement between himself and Tony Bell had advanced no further than a conditional proposal. It was not suggested in cross-examination to Scheuer, or argued, or pleaded, that the conduct by Scheuer after July 2000 constituted a waiver by him of the three conditions which he claimed were stipulated by him to Tony Bell in respect of their ongoing arrangement. Nor was it contended that if I were to accept that the proposal was subject to those three conditions, they were later satisfied.

751. The question of which competing account I should accept is not clear cut. The versions advanced by both Tony Bell and Scheuer are both susceptible to some criticism. However, I have reached the conclusion, on the balance of probabilities, that Scheuer and Tony Bell did not make a binding agreement, on or about 10 July 2000, whereby Scheuer agreed to forego his claim against Tony Bell and Tetley for repayment of the monies under the Tony Bell Heads of Agreement.

754. If I were to confine my consideration of this question to the events of July 2000, the probabilities would substantially favour the version of events proffered by Scheuer rather than that proffered by Tony Bell. There are a number of difficulties with Tony Bell's account.

757. Both Tony Bell and Scheuer were concerned that, as from early July 2000, Phillip Bell not remain in the venture as a shareholder or as a party with an interest. Scheuer was involved in the formulation of proposals to be put by Tony Bell to Phillip Bell for the acquisition by Tony Bell of Phillip Bell's interest. His cooperation in the preparation of those proposals reflected his concern that Phillip Bell should no longer have an interest in MPDL.

760. During July 2000, in correspondence to which I shall later refer, there was some debate as to what interest, if any, Phillip Bell had in MPDL. However, it would seem, as a minimum, Tony Bell maintained that his brother had a twenty percent interest in MPDL. In late June, Scheuer's stated dissatisfaction with his involvement in the venture had primarily related to a number of matters pertaining to Phillip Bell. As I have already stated, it is clear that that concern was genuine. I have no doubt that Scheuer had no desire to continue in the enterprise, so long as Phillip Bell remained involved in it.

763. At the time of the discussions with Tony Bell, Scheuer had purported to rescind the Heads of Agreement with Phillip Bell. Although questions had been raised concerning the interest which Phillip Bell held in MPDL under the Heads of Agreement, it was recorded that he had originally had a fifty percent interest. It is most improbable that Scheuer would have agreed, unconditionally, to proceed in the enterprise with Tony Bell as a fifty percent shareholder, in circumstances in which the other shareholder would have been Phillip Bell, if Tony Bell was not able to acquire or otherwise dispose of Phillip Bell's interest in MPDL.

766. In addition to the above considerations, there are other inconsistencies and weaknesses in Tony Bell's account which undermine its credibility. They include the following:

(i) The defences pleaded by Tony Bell, and on which the trial was conducted, were inconsistent with Tony Bell's account in two respects. First, until the conclusion of submissions in reply on the last day of the trial, paragraph 8B (c) of the fourth defendant's amended defence pleaded that there were terms of the agreement, relied on by Tony Bell, that Tony Bell would ensure that Scheuer would be allocated a "thirty-five percent shareholding" in MPDL, regardless of whether Phillip Bell accepted the rescission of the Phillip Bell Heads of Agreement. At the conclusion of addresses that paragraph was amended to delete the reference to thirty-five percent, and substitute "fifty percent". A second and more significant inconsistency was to be found in paragraph 16(e) of the amended defence of the fourth, fifth and sixth defendants. Paragraph 16 of the defence was pleaded in response to Scheuer's claim for monies lent to Tony Bell after July 2000. Paragraph 16(e) contains an admission "...that it was discussed that the plaintiff would be allotted a fifty percent interest in MPDL if the first defendant was bought out"[14]. The words emphasised support Scheuer's evidence, namely, that the proposal discussed between Tony Bell and Scheuer was subject to the precondition that Phillip Bell be bought out.

(ii) On 26 February 2001 Tony Bell sent a draft agreement to Scheuer for execution by him. That document was entitled "Memorandum of Understanding and Agreement between Steven Scheuer and Tony Bell". The first paragraph provided as follows:

"It is hereby agreed between Steven Scheuer and Tony Bell that in the event that Phillip Bell relinquishes all of his interests in MPDL Pty Ltd the ownership of MPDL Pty Ltd will be shared equally between Steven Scheuer and Tony Bell with no additional consideration expected or required from Steven Scheuer for the increased shareholding".[15]

Again, the words contained in that draft, which I have emphasised, support Scheuer's contention that any understanding concerning the joint ownership of MPDL by Tony Bell and himself would be subject to Phillip Bell relinquishing his shares in MPDL.

(iii) In general terms, I do not find that Tony Bell was a reliable witness concerning the events of July 2000. I have already referred to a number of matters, and in particular to his readiness to assert false positions to Scheuer and his solicitor in order to enhance his position against Phillip Bell. For reasons which I shall deal with later, I do not accept Tony Bell's account of the conversation which he claims he had with Phillip Bell after Phillip Bell rejected the offer made to him by Tony Bell, and in which Tony Bell claims that he threatened to reverse the "$300,000 transaction". There are other aspects of the dealings between the parties in July 2000 in respect of which I find Tony Bell to be an unreliable witness. For example, Tony Bell claimed in evidence that Scheuer stated that he did not wish the bank account of MPDL to be used, in order to conceal from Phillip Bell the further involvement of Scheuer in MPDL. Again, for reasons which I shall expand upon later, that account is clearly flawed. Even if the bank account of MPDL was used, that fact would not alert Phillip Bell to the ongoing involvement of Scheuer in MPDL. More significantly, from August 2000 Scheuer was actively involved in MPDL; no effort was made by either Tony Bell or Scheuer to conceal Scheuer's involvement in it.

775. Tony Bell and Phillip Bell both contended that, rather than there being a conditional proposal between Scheuer and Tony Bell in July 2000, there was an agreement between them whereby, in pursuit of a "common purpose" Scheuer and Tony Bell cooperated closely in a joint endeavour to remove Phillip Bell as person who had an interest in MPDL Pty Ltd. That cooperation was manifest from a large body of evidence. Scheuer and Tony Bell cooperated closely in the formulation of offers to be made by Tony Bell to Phillip Bell to purchase Phillip Bell's interest in MPDL Pty Ltd. Scheuer and Efron were involved in the formulation of a letter to be sent by Geilings Romanin to Stedman Cameron in response to a letter from Stedman Cameron to Geilings Romanin dated 27 July 2000 seeking information as to Phillip Bell's shareholding in MPDL Pty Ltd. The cooperation is also evident from the letter by Tony Bell to Efron dated 21 July 2000 to which I have already referred. It is also evident from the letter sent by Efron to Phillip Bell dated 17 July 2000. Scheuer acknowledged that one of the purposes of that letter was to induce Phillip Bell to sell his shares in MPDL Pty Ltd. It is relevant that a copy of that letter was sent to Tony Bell.

778. I do not consider that the cooperation of the type described above supports Tony Bell's claim that there was a binding agreement between Scheuer and himself. Rather, the cooperation was explicable by, and indeed consistent with, Scheuer's then concern that, if he were to proceed further with Tony Bell in the venture, Phillip Bell should not be part of it. The fact that there was close cooperation between Scheuer and Tony Bell to remove Phillip Bell does not support the conclusion that there was then a binding agreement between them which was not subject to the conditions specified by Scheuer. The two men were longstanding friends and business acquaintances. I have no doubt Scheuer was keen to remain involved in MPDL if he could do so.

781. The two main matters, which bring Scheuer's version into some doubt, concern events which occurred subsequent to July 2000. The first circumstance is that, in September 2000, Scheuer wrote on a draft Statement of Claim the words "but I have settled with Tony Bell", and provided that draft Statement of Claim to Tony Bell, before the present proceedings were instituted. Secondly, from August 2000, Scheuer and Tony Bell participated in discussions with potential investors in MPDL. In those discussions Scheuer put himself forward as a fifty percent owner of the shares of MPDL.

784. Before considering those matters, it is important to refer to correspondence which passed between the parties in July 2000. In essence, in that correspondence Tony Bell sought to sustain the proposition that Phillip Bell had either no interest, or a limited interest, in MPDL. I refer to the correspondence, principally because it supports Scheuer's evidence that, from August 2000, he was in a state of some confusion as to what interest, if any, Phillip Bell had in MPDL. That state of confusion and uncertainty does, at least in part, provide an explanation by Scheuer as to the two matters to which I have just referred.

787. After Phillip Bell rejected Tony Bell's offer to acquire his shares, Tony Bell told Scheuer that Phillip Bell had rejected that offer, but that it did not matter, because Phillip Bell did not own any shares in MPDL in any event. Scheuer reported that matter to Efron on 17 July 2000, as was evidenced by a diary note of Efron tendered in evidence. On the same day, Efron wrote the letter to Phillip Bell, to which I have already referred, accusing Phillip Bell of deceit, inter alia, on the basis that Phillip Bell did not own any shares in MPDL. That letter prompted a response from Phillip Bell's solicitors, Messrs Stedman Cameron, who wrote a letter dated 19 July 2000 asserting that BPR Investments did own fifty percent of MPDL. In turn, Tony Bell then wrote the letter of 21 July 2000 to Efron, to which I have already referred. As I have already stated Tony Bell has conceded that that letter was deliberately untrue. However it contained the assertion that, at the time of discussions with Scheuer, Tony Bell held one hundred percent of the company shares, twenty percent of which were held "in trust" for Phillip Bell. Stedman Cameron also wrote a letter to Romanin dated 27 July 2000 seeking advice whether shares had issued in MPDL to BPR. Tony Bell showed a copy of that letter to Scheuer, who noted on it potential replies to be made by Romanin, and sent a copy to his solicitor, Efron. Consequently, Romanin wrote two letters to Efron, dated 28 July 2000 and 31 July 2000. Those letters referred to an allotment of shares in MPDL which was "cancelled". The second letter again contained the contention that Tony Bell had an eighty percent, and Phillip Bell a twenty percent, interest in MPDL. Efron then wrote a letter dated 1 August 2000 to Romanin seeking clarification. Romanin responded on 2 August by a letter again claiming that Phillip Bell's interest was twenty percent.

790. Based on that correspondence I accept Scheuer's evidence that, from that time on, he was confused as to Phillip Bell's shareholding in MPDL. Further, it is significant that while various versions of Phillip Bell's interest in MPDL were propounded by Tony Bell and his accountant, in all of those versions it was accepted that Phillip Bell did have some interest, of sorts, in MPDL. It is in that context that I turn to examine the two matters, which the defendants rely upon as discrediting Scheuer's version of the transactions which occurred in July 2000.

793. In September 2000 Scheuer issued these proceedings against Phillip Bell, Tony Bell and their companies. Before issuing the proceedings he twice sent to Tony Bell copies of drafts of the statement of claim. On one of the drafts Scheuer hand wrote the words "but I have settled with Tony Bell " alongside the paragraph of the draft statement of claim which alleged that, in breach of the terms of the agreement between Scheuer and Phillip Bell and Tony Bell, both Phillip Bell and Tony Bell had not repaid monies which had been paid under the Heads of Agreement. The notation by Scheuer of the words "but I have settled with Tony Bell " on the draft statement of claim is significant, given that he provided that copy of the statement of claim, so notated, to Tony Bell. Indeed, in cross-examination, Scheuer accepted that there was an agreement in existence between himself and Tony Bell, although he asserted that it was still subject to the three conditions which I have set out above.

796. The notation by Scheuer of the draft Statement of Claim is a matter of some moment. In his evidence Scheuer stated that when he wrote the words "but I have settled with Tony Bell", the settlement to which he referred was subject to the three conditions stated by him. I do find it surprising that Scheuer wrote those words, without any qualification, on a draft statement of claim which he gave to Tony Bell, not long before proceedings were issued by him against Tony Bell. However, while this matter calls Scheuer's evidence into question, it does not, in my view, totally discredit it. After some hesitation, I accept Scheuer's explanation of the notation, namely, that it was a shorthand reference by him to the conditional settlement which he had already reached with Tony Bell.

799. The next matter relied upon by the defendants in respect of the July 2000 transaction concerns the fact that, in dealings with potential investors, Scheuer and Tony Bell represented that Scheuer had a fifty percent interest in MPDL.

802. From July 2000 onwards Scheuer took no steps to clarify the position of the shareholding of Phillip Bell in MPDL Pty Ltd. It seems clear that, from the dealings which occurred between Scheuer and Tony Bell in the ensuing twelve months, and from a number of offers which were made by Scheuer and Tony Bell to sell either the shares in MPDL Pty Ltd or its business to third parties, that both Scheuer and Tony Bell paid little heed to the question whether Phillip Bell had any interest in MPDL Pty Ltd. Indeed all of the objective evidence indicates that both Scheuer and Tony Bell treated MPDL Pty Ltd as their own company, in which Phillip Bell had no interest.

805. In August 2000 MPDL Pty Ltd produced an information memorandum entitled "Multi-Point Data Link Company Structure July 2000". On the first page of the text of that document, there is the following:

"On the third of February 1999, the project was incorporated as MPDL Pty Ltd (ACN 086 127 095). The shares are held by Tetley's Pty Ltd a private company associated with Mr Tony Bell, director of the company. Fifty percent of the shares are held in trust for First Quarter Pty Ltd, a company associated with the other director Mr Steven Scheuer."

809. Scheuer read and made amendments to the Information Memorandum before it was finalised. To the knowledge of Scheuer the document was put forward to potential investors in the ensuing months with a view to selling either the shares or the business of MPDL Pty Ltd to those investors. Thus to the knowledge of Scheuer the business or shares of MPDL Pty Ltd was being sold on the representation that he himself had, beneficially, a fifty percent interest in the shares of MPDL Pty Ltd.

812. In January 2001 Scheuer and Tony Bell negotiated with a company called Tomorrow Limited in respect of a proposal to sell either the shares or the business of MPDL Pty Ltd to that company. Scheuer cooperated in the formulation of a letter dated 20 February 2001 to Mr David Cronin, a director of Tomorrow Limited. That letter referred to MPDL Pty Ltd and concluded stating:

"In your letter of offer, you have stated that you will expect Steven and I as Vendors of MPDL Pty Ltd to contribute to the ongoing business as participating executives of the company, but have not made mention of our periodic remuneration. Would you please include this in your response; as this will need to be kept separate from the budgetary considerations of MPDL."

816. In cross-examination Scheuer claimed that the reference to him as a vendor was a reference to his role as a director of MPDL Pty Ltd. I do not accept that evidence. The letter is, on its face, clear. Scheuer had made a number of changes to the draft of the letter indicating that he had given its contents some careful consideration. The letter stated that Tony Bell and Scheuer were each vendors of MPDL Pty Ltd. That representation was consistent with the same representation made in the Information Memorandum to which I have already referred. It is clear that in their dealings with Tomorrow Limited Scheuer put himself forward as a vendor. Indeed in cross-examination by Mr Evans, Scheuer accepted that he did put forward to Tomorrow Limited that he had a fifty percent entitlement in the shares of MPDL Pty Ltd.

819. In July 2001 Scheuer and Tony Bell entered into an arrangement with Mr Bishop and Mr Mark, of which I have already made mention, for the sale of an interest in the MPDL project to Bishop and Mark. That transaction was evidenced in a Letter of Understanding dated 16 July 2001, signed by the four parties. Clause one of the Letter of Understanding provided as follows:

"MPDL Pty Ltd (or its shareholders) agree to sell/transfer the business of MPDL, including transferring existing loan accounts to a new entity. In this new entity the shareholding will be sixty percent Tony/Steven and forty percent Kevin/Chris."

823. It is clear from that letter, and from the cross-examination of Scheuer on it, that in consideration of the sale contemplated by the letter of understanding, Scheuer would receive a thirty percent interest in the new entity. He could only have done so by being a proprietor of an interest in the business or company which was already being sold.

826. The evidence which I have set out above shows that, from August 2000 until at least July 2001, Scheuer and Tony Bell treated MPDL Pty Ltd as their own company. In cross-examination Scheuer admitted that he took no further steps, after July 2000, to clarify the shareholding of Phillip Bell in MPDL Pty Ltd. Further, he took no steps to have the business and undertaking of MPDL Pty Ltd transferred to a new entity. In other words, the conduct of Scheuer from August 2000 onwards is inconsistent with his insistence that there was a separate condition, between himself and Tony Bell, that the business be conducted by a new entity. There was no document proffered in evidence which contained such a condition. While I accept that, in discussions with Tony Bell in July 2000, Scheuer referred to the need for a new entity, I consider he did so in order to ensure that, whatever vehicle was used for the business, it was a vehicle in which Phillip Bell was not involved. In other words, I do not consider that Scheuer stipulated that the business must be conducted through a new entity as a condition separate to the condition which he did specify, namely, that Phillip Bell was no longer to be involved in the business.

829. That conclusion, however, leaves open the question whether the conduct of Scheuer, in representing himself to be a fifty percent shareholder in MPDL subsequent to August 2000, contradicts Scheuer's evidence that, in July 2000, he specified it as a condition of any arrangement between himself and Tony Bell that Phillip Bell no longer be involved in the company. The explanation given by the plaintiff was that he made those representations in the expectation that Phillip Bell would be bought out or would relinquish his interest. That explanation is difficult to accept given that, after August 2000, no steps were taken, to the knowledge of Scheuer, to buy out Phillip Bell's interest. Indeed for the period of almost twelve months after July 2000, Scheuer and Tony Bell treated MPDL as if Phillip Bell had simply abandoned all interest in it. In my view that is the correct explanation of the conduct of Scheuer after August 2000. That explanation is supported by the evidence, to which I have referred, of correspondence in July 2000, which raised doubts as to the strength or validity of Phillip Bell's interest in MPDL. Further, it is relevant that, in the latter part of July 2000 both Tony Bell, and Scheuer, through his solicitor, placed considerable pressure on Phillip Bell to dispose of his interest to Tony Bell. It is in that context then that the parties, subsequent to August 2000, assumed that they could treat MPDL as if Phillip Bell was no longer a part of it.

832. That explanation does not, however, contradict Scheuer's evidence that, in the earlier part of July 2000, he specified it as a condition of any ongoing arrangement between himself and Tony Bell that Phillip Bell no longer have any interest in MPDL. Scheuer's assumption, after August 2000, that Phillip Bell had abandoned his interest, is not inconsistent with the specification by him, in July 2000, of such a condition. It has not been claimed, either in the pleadings or submissions, that Scheuer waived that condition. Accordingly, albeit after some hesitation, I do accept that it was a condition of any arrangement made in July 2000 between Scheuer and Tony Bell that Phillip Bell no longer have any interest in MPDL. That condition was not satisfied. On the facts as I have found them, Phillip Bell had and retained a fifty percent interest in MPDL. Accordingly, I conclude that there was not an agreement made between Scheuer and Tony Bell in July 2000 as alleged in the defence of Tony Bell, by which Scheuer agreed to forgo his claim against Tetley for repayment of the amount of $350,000 paid by Scheuer to Tetley under the Heads of Agreement.

THE EVENTS OF JULY 2000: Phillip Bell's Defence

836. Phillip Bell relied on the events of July 2000 to support two defences, namely:

(i) That the plaintiff did not terminate or rescind the Phillip Bell Heads of Agreement on 5 July 2000 or 8 July 2000, but only purported to do so. It was contended on behalf of Phillip Bell that that rescission was only a purported rescission, and not a genuine rescission, because the plaintiff had already elected to continue with the Phillip Bell Heads of Agreement.

(ii) The plaintiff was bound to act in good faith in exercising his right to rescind or terminate the Heads of Agreement under clause 9.1. In purporting to rescind the Heads of Agreement under clause 9.1 the plaintiff failed to act in good faith. As I have already held that the plaintiff was not entitled to rescind the agreement under clause 9.1, I shall only deal with this defence shortly.

842. The argument by Phillip Bell that the plaintiff did not truly rescind or terminate the Heads of Agreement, but only purported to do so, was based on the proposition that, before 5 July, the plaintiff had elected to continue with the Phillip Bell Heads of Agreement. It was contended that there were three main circumstances which lead to the conclusion, namely:

(i) The written proposals put to Phillip Bell to purchase his shares - entitled "Terms of Purchase of Equity and Rights in and Relating to MPDL Pty Ltd" to which I have already referred - reflect an assumption that the Phillip Bell Heads of Agreement remained on foot and had not been rescinded.

(ii) Scheuer's representations to third party investors, after August 2000, that he held a fifty percent interest in MPDL, was only consistent with the continued existence of the Phillip Bell Heads of Agreement.

(iii) The purported dealing with the copyright in the software by Scheuer and Tony Bell after August 2000 (in the name of MPDL) was only consistent with the continuation of the Phillip Bell Heads of Agreement, since it was by force of those Heads of Agreement that the software was assigned to MPDL.

848. In order to establish a defence based on the proposition that Scheuer had elected to continue with the Phillip Bell Heads of Agreement, Phillip Bell must establish that, before Scheuer purported to exercise his right to terminate the agreement on 5 July, Scheuer had already exercised an election to continue with the Heads of Agreement. In other words it must be shown that the purported exercise of the right on 5 July 2000 was not a genuine exercise of the right by Scheuer.

851. Scheuer's evidence was that, after the management meeting on 28 June 2000, he had discussions with Tony Bell in which they discussed the continued involvement of Scheuer in the business. Although Tony Bell's evidence was that the first such discussion occurred after Scheuer had terminated on 5 July, I prefer the evidence of Scheuer in this regard. Further, it is true that Scheuer, in his evidence, acknowledged that the three conditions, which he claimed such a proposal was subject to, were stipulated at that meeting. However, that discussion between Scheuer and Tony Bell did not, in my view, constitute any election by Scheuer to continue with the Phillip Bell Heads of Agreement. It was clear that by that time Scheuer was disenchanted with Phillip Bell, and had come to the decision that the business could only flourish if Phillip Bell was no longer part of it. Scheuer determined to rescind both Heads of Agreement. However, at the same time he was amenable to a proposition by Tony Bell that he would continue in the business, but only on the condition that Phillip Bell no longer be associated with it. The discussion and formulation of that proposition on 28 June was not inconsistent with the valid termination of the Phillip Bell Heads of Agreement on 5 July.

854. Phillip Bell points to the Terms of Purchase document, to which I have referred, and in particular to the preamble, which recited an acknowledgment by both Phillip Bell and Tony Bell that Scheuer would hold rights to thirty-five percent of MPDL. Scheuer was recorded as being a party to those Terms of Purchase, since, if executed, they would provide releases to him. I do not consider that that document constituted evidence of an election or an election itself. The preamble is ambiguous and, to some extent at least, convoluted. It does not have the unequivocal character necessary for an election binding in law[16].

857. Nor do I consider that the conduct of Scheuer, in holding himself out to investors as holding a fifty percent interest in MPDL, to be evidence of an election made by him before 5 July 2000 to continue with the Phillip Bell Heads of Agreement. First, as I have already found, that conduct was based on an assumption by Scheuer that Tony Bell either had acquired or would acquire Phillip Bell's interest in MPDL. Secondly, the evidence does not, of itself, bespeak an election by Scheuer before 5 July 2000.

860. The third matter upon which Phillip Bell relies is on the assertion by Scheuer and Tony Bell, after August 2000, of MPDL's right to the copyright in the software. As I have found, Phillip Bell is correct in his contention that the copyright was assigned in equity to MPDL by the Phillip Bell Heads of Agreement. However, I doubt that either Scheuer or Tony Bell had conducted a similar analysis of the Copyright Act. Rather, their conduct is consistent with an assumption that Tony Bell had dealt with Phillip Bell's shares, or would deal with them, thereby entitling MPDL to the rights to the copyright in the software. Certainly, from July 2000, neither Phillip Bell nor AIS, nor any other related party, asserted that it had rights to the software.

863. For the above reasons I do not accept the submission made on behalf of Phillip Bell of Scheuer's act of rescinding the Phillip Bell Heads of Agreement on 5 July 2000 (as confirmed by his letter 8 July 2000) was not genuine or efficacious.

866. For similar reasons, if it were necessary for me to do so, I would also reject the submission made on behalf of Phillip Bell that any rescission of the Phillip Bell Heads of Agreement by Scheuer was not made in good faith.

THE PLAINTIFF'S FOURTH CLAIM: Against Tony Bell for money lent after July 2000

870. After July 2000 Scheuer funded the Multi-Point Data Link venture by paying further amounts totalling $145,638.46. In these proceedings Scheuer claimed that those monies were paid by him pursuant to an oral agreement between himself and Tony Bell in early July, by which monies advanced by him for use in the venture would be by loan by him to Tony Bell. On the other hand, Tony Bell alleges that the money paid by Scheuer was lent by Scheuer directly to MPDL pursuant to an oral agreement by which Tony Bell and Scheuer agreed to continue as joint shareholders of MPDL.

873. It is common ground that, after July 2000, Scheuer made payments totalling $145,638.46 in respect of the Multi-Point Data Link business. Four of those payments, totalling $115,500, were paid directly to Tony Bell's company, Heron Tower, between 11 October 2000 and 30 May 2001. Four other payments, totalling $30,138.46, were paid by Scheuer to creditors of MPDL between 26 July 2000 and 27 September 2000. Further, it is common ground that the money so paid by Scheuer would be by way of loan rather than capital contributions. The controversy between the parties is whether those monies were a loan by Scheuer to Tony Bell, or a loan by Scheuer to MPDL.

876. Scheuer's evidence was that, when he discussed with Tony Bell his further involvement in the business in early July 2000, he specified that he was not prepared to continue to make contributions into MPDL. He said that he would only make contributions by way of direct loan to Tony Bell. On the other hand, Tony Bell's evidence was that, as part of the agreement which was reached on or by 10 July 2000, Scheuer and he would continue as equal joint shareholders in MPDL, and on that basis they would each lend monies equally to MPDL.

879. In his letter dated 8 July 2000 to Tony Bell and Phillip Bell, Scheuer stated that he would freeze the bank account of MPDL. In fact he did not do so. However he made it clear to Tony Bell that the bank account was not to be used. From that date no transactions were, apparently, made on the bank account.

882. As I have already found, I do not accept Scheuer's claim that, when he discussed his continued involvement in the business with Tony Bell in July 2000, he stipulated that the business must be conducted through a new entity as a condition separate to the condition which he did specify, namely, that Phillip Bell was no longer to be involved in the business. I have concluded that Scheuer may well have referred to the concept of a new entity with Tony Bell, but that he did so in order to ensure that, whatever structure was used for the business, it be a structure in which Phillip Bell was not involved. In other words I do not accept that Scheuer was necessarily ruling out the future use of MPDL as a vehicle for conducting the business; rather, he wished to have a new corporate structure in the sense that Phillip Bell would not be involved in it.

885. On the other hand I do accept Scheuer's evidence that he did specify that, until that new structure was in place, and until Phillip Bell was no longer involved in the business, all funding by him was to be by way of loan directly to Tony Bell, rather than to MPDL. The specification by Scheuer of such a condition was not only logical, but also consonant with the circumstances which existed in July 2000. Scheuer had clearly indicated that he no longer wished to be involved in the business if Phillip Bell was part of it. It is perfectly understandable that he would not wish to a creditor of the company, while Phillip Bell had an interest in it. Further, Scheuer had already invested a significant sum of $800,000 in MPDL, and had received no return for it. The company had not earned any income. It is understandable that he would prefer that he deal with Tony Bell as his debtor, rather than with a company which had no established business, and whose sole asset consisted of software in respect of whose provenance Scheuer had considerable doubts.

888. The proposition that the funds advanced by Scheuer were by way of loan to Tony Bell (via Heron Tower), and not to MPDL, is also supported by the contemporaneous documents. For example, on 3 March 2001 Tony Bell sent a list of expenses to Romanin in the name of Heron Tower. That list purported to list the expenses for MPDL to that date "... all incurred by Heron Tower after Steven's withdrawal....". Similarly, a draft balance sheet prepared by Romanin at 31 May 2001 recorded a single unsecured liability of MPDL of $458,075 to Heron Tower. The statement did not record any loan to MPDL by Scheuer. In evidence, Romanin stated that the financial statements were prepared in accordance with instructions received from Tony Bell.

891. Finally, the fact that Scheuer did not use the MPDL bank account after July 2000 supports the proposition that he was not lending monies to MPDL, but rather lending the funds Tony Bell. In evidence Tony Bell sought to explain that the bank account was not used in order to disguise from Phillip Bell that Scheuer was still involved in the business. In cross-examination that explanation was discredited. First, Tony Bell was unable to show how the use of the bank account would have brought to the attention of Phillip Bell the continued involvement of Scheuer. Secondly, in any event, Scheuer was openly involved in the business of MPDL after August 2000. He was involved in management issues, in dealings with staff, and in negotiation with potential investors in MPDL.

894. Thus for the above reasons I accept the evidence of Scheuer that the funds provided by him after July 2000 for the business of MPDL were paid pursuant to an agreement between himself and Tony Bell, whereby Tony Bell was the debtor in respect of those advances. Accordingly I uphold Scheuer's claim against Tony Bell for the amount so lent, totalling $145,638.46.

898. I have found that, on 5 July 2000, Scheuer validly rescinded the two Heads of Agreement based upon the misrepresentation to him before he entered into those agreements. The next question which arises concerns what orders should be made in favour of the plaintiff consequent upon that rescission.

901. Under the Phillip Bell Heads of Agreement, Scheuer paid the purchase price for the acquisition of BPR shares to BPR. Under the Tony Bell Heads of Agreement, Scheuer paid the purchase price to Tetley. In accordance with orthodox equitable principles, those two companies are obliged to repay to Scheuer the monies paid them under the Heads of Agreement, consequent upon the rescission by Scheuer of the two Heads of Agreement. That much is uncontroversial.

904. However, the plaintiff sought to contend that, upon the rescission by him of the two Heads of Agreement, he was entitled to more extensive orders against other parties to the Heads of Agreement, in addition to the relief against BPR and Tetley respectively. In particular the plaintiff contended that he was entitled to the following orders:

(i) Orders that each party to each Head of Agreement be liable to repay the instalments of purchase price paid under the Heads of Agreement. Thus under the Phillip Bell Heads of Agreement, the plaintiff claimed to be entitled to repayment, not only from BPR, but also from AIS and Phillip Bell. Under the Tony Bell Heads of Agreement, the plaintiff claimed to be entitled to repayment from Tony Bell as well as Tetley.

(ii) Orders that the parties to each Head of Agreement were also liable to repay monies paid under the other Head of Agreement. In particular the plaintiff contended that Tony Bell was liable to repay instalments of purchase price paid under the Phillip Bell Heads of Agreement, and that Phillip Bell was liable to repay instalments of purchase monies paid under the Tony Bell Heads of Agreement.

910. The factual basis of the plaintiff's submission was that both Phillip Bell and Tony Bell had derived "benefits" from the payments made under both Heads of Agreement. In respect of the first claim - that each party to each Head of Agreement be liable to pay instalments paid under that Head of Agreement - the plaintiff pointed to the fact some of the proceeds paid by Scheuer to BPR under the Phillip Bell Heads of Agreement had been used to pay creditors of AIS. In respect to the Tony Bell Heads of Agreement it was robustly asserted by Mr Meagher that Tony Bell derived a benefit because Tetley was his company.

913. The plaintiff also claimed that each party to a Head of Agreement was obliged to repay instalments paid under both Heads of Agreement because the Heads of Agreement were interconnected. Thus, so it was argued, Phillip Bell derived a benefit from the Tony Bell Heads of Agreement and, likewise, Tony Bell derived a benefit from the Phillip Bell Heads of Agreement.

916. I reject the submission of the plaintiff. It lacks an appropriate foundation either in fact or in law. The factual basis for the submission against Phillip Bell ignores the separate legal identity of Phillip Bell, AIS and BPR. The factual basis for the argument against Tony Bell similarly ignores the separate legal identity of Tetley and Tony Bell. The basis for arguing that a party to one Head of Agreement (for example the Phillip Bell Heads of Agreement) would be liable for instalments made under the other Head of Agreement (for example the Tony Bell Heads of Agreement) lacks a logical basis. The fact that clause 9.1 of each Head of Agreement provided that they were "interrelated" does not entitle the plaintiff to an order for repayment from Phillip Bell in respect of payments made under the Tony Bell Heads of Agreement, or vice versa.

919. Moreover the submission made by the plaintiff is unsupported in law. The effect of rescission of a contract is to annul the contract from its inception. Upon a valid rescission, both parties are to be restored to their positions before the contract. Thus, in Mayfair Trading Co Pty Ltd v Dreyer[17] Dixon CJ adopted the statement of principle of Wigram VC in Hanson v Keating[18]_,_where His Lordship described the equity on rescission as follows:

"The Court will do this so as to remit both parties to their original position."[19]

923. In other words, upon rescission, the party to or in respect of whom a payment was made under a contract is required to repay it; the party by whom that payment was made is entitled to restitution in respect of it. In simple terms, the principle translates in the present case to requiring BPR and Tetley each, as recipients of payments under the two Heads of Agreement, to repay those payments to Scheuer.

926. The plaintiff sought to rely on cases such as Newbigging v Adam[20] and Curwen v Yan Yean Land Co Ltd[21] to support his claim for the broader remedies. In those cases, it was held that the rescinding party was entitled to an indemnity from the other party in respect of liabilities incurred by the rescinding party in the transaction which was rescinded. Those principles are no more than an application of the principles to which I have already referred. In other words, where, under a contract which is rescinded, the innocent party has incurred an expense or liability to or in respect of a party to the contract, the rescinding party is entitled to restitution in respect of that payment or liability; in so far as the rescinding party has incurred the liability, restitution is made by the provision of an indemnity.

929. For the above reasons, I reject the plaintiff's submissions. I hold that under the Phillip Bell Heads of Agreement the plaintiff is entitled, against BPR to repayment of monies paid by him, totalling $425,000, and under the Tony Bell Heads of Agreement, an order for repayment against Tetley for monies paid by him pursuant to that agreement, namely $350,000.

933. The plaintiff also claims that consequent upon the rescission by him of the Heads of Agreement, he is entitled to repayment of the sum of $35,000 paid by him as a capital contribution to MPDL on about 26 April 2000. No argument was advanced on behalf of the sixth defendant that, if Scheuer had validly rescinded the Heads of Agreement, that money is not repayable to MPDL. Accordingly Scheuer is entitled to an order against MPDL for repayment of the sum of $35,000.

937. In addition to his claim for repayment, in equity, of the amounts paid to BPR and Tetley under the Heads of Agreement which have been rescinded, the plaintiff also claims damages against Tony Bell, Phillip Bell, BPR, Tetley and AIS, pursuant to the Fair Trading Act and the Trade Practices Act.

940. I have already found that, in negotiations which preceded the Heads of Agreement, Tony Bell, acting as agent for Phillip Bell, BPR and Tetley, made material misrepresentations to Scheuer, which induced Scheuer to enter into the Heads of Agreement. It is a moot point whether the Trade Practices Act applies to representations made by Tony Bell on behalf of Phillip Bell or BPR. However, that point is academic. The provisions of the Fair Trading Act and the Trade Practices Act, relevant to this issue, were acknowledged by the parties to be the same. The defendants did not press any contention that the Trade Practices Act did not apply to the transaction. I accept that, in making the representations, Tony Bell engaged, in trade or commerce, in conduct which was misleading or deceptive or likely to mislead or deceive, contrary to s.9(1) of the Fair Trading Act (and, if applicable, s.52(1) of the Trade Practices Act). Accordingly Phillip Bell, Tony Bell, BPR and Tetley are liable to pay damages caused to Scheuer as a consequence of that conduct pursuant to s.159 of the Fair Trading Act (and, if applicable, s.82 of the Trade Practices Act).

943. The damages claim by Scheuer consists of the sums paid by him under the Heads of Agreement to acquire the thirty-five percent shareholding in MPDL ($750,000). In addition he claims, by way of damages, the sum of $60,000 paid by him by way of working capital to MPDL. Scheuer also claimed the sum of $145,038.46 paid by him after July 2000. However, he did not press recovery of that sum by way of damages if (as I have found) he is entitled to recover that sum from Tony Bell as money lent.

946. The defendants contended that, as the plaintiff had rescinded the contract in equity, he had not suffered loss and damage recoverable pursuant to s.159 of the Fair Trading Act or s.82 of the Trade Practices Act. Mr Evans who made the argument on behalf of the defendants, expressed the argument in the following terms in his written outline:

"If the plaintiff has rescinded the contract in equity, he cannot have suffered loss and damage which is recoverable under s.82 of the Trade Practices Act, as the claimed loss is the sums paid in performance of a contract which has been rescinded, and where the plaintiff has a right to repayment of those sums, subject to subsequent events removing that right."

950. Mr Evans contended that that submission was based on the authority of the judgment of Hill J in Argy v Blunts and Lane Cove Real Estate Pty Ltd[22]. In that case, the applicants purchased land at auction from the third respondent. The Court held that the applicants had been induced to purchase that land as a consequence of misrepresentations made to them by the first and second respondents which constituted misleading and deceptive conduct contrary to s.52 and s.53A of the Trade Practices Act. The applicants had deliberately maintained a position where their rights to both damages and to rescind the contract remained available to them. They had not made an election to affirm the contract by the time of judgment. Hill J held that if the applicants affirmed the contract, they suffered little, if any, damages, because there was only a small difference between the real value of the property and the consideration payable under the contract of sale. His Honour also held that if the applicants rescinded the contract, their damages would be limited to about $19,000 in respect of costs and disbursements expended by them on the contract of sale and loss of interest on the payment by them of stamp duty. His Honour accordingly deferred pronouncing formal judgment until the applicants elected whether or not to affirm the contract.

953. In the course of his judgment Hill J quoted the well known passage from the judgment of Dixon J in Toteff v Antonas[23]. There Dixon J, in articulating the principles of damages recoverable on an action for deceit, stated:

"In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant. When what he has been induced to do is to make a purchase from the defendant and part with his money to him in payment of the price, then, if the transaction stands and is not disaffirmed or rescinded, what is recoverable is "the difference between the real value of the property, and the sum which the plaintiff was induced to give for it"."

957. Based on that passage Hill J in Argy's case, stated:

"It follows that where proceedings are instituted and proceed to judgment between the time of contract and completion it will be impossible to determine the damages which an applicant has suffered unless before judgment is entered it is known whether "the transaction stands and is not disaffirmed or rescinded"."[24]

961. Mr Evans placed heavy reliance on the passages which I have just quoted above in the judgments of Dixon J and Hill J to support his proposition that, if the plaintiff has rescinded the contract, he cannot claim damages consisting of monies paid in performance of the contract. I reject that submission. Close analysis of the judgment of Hill J in Argy's case does not support the proposition advanced by the defendants.

964. In Argy's case, the applicants had paid a deposit to the estate agent who was required to place the deposit with a building society in an interest bearing account. The contract provided that interest on the deposit be paid to the vendor except in the event of rescission or termination, when the interest was to belong to the party entitled to the deposit. Apart from the deposit, the applicants had paid no other amount to the vendor. Accordingly, in Argy's case, the applicants did not need to claim, nor did they claim, any part of the purchase price (including the deposit) as damages if the contract was avoided by them. The point made by Hill J was a different point to that which is at issue in the present case. In Argy, no election had been made by the applicants whether to affirm or disaffirm the contract. The measure of damages payable in an action for deceit, or in an action under s.52 of the Trade Practices Act, is different, depending on whether the contract is affirmed or disaffirmed. For, if the contract is affirmed, the proper measure of damages is the difference between the value of the property purchased, and the consideration paid for it by the applicant. It is for that reason that Hill J held that, until an election was made, it was not possible for him to determine the damages payable to the applicants.

967. The defendants were not able to refer to any other authority, apart from Argy, to support the contention by them that, if the plaintiff has rescinded the contract in equity, he cannot suffer loss and damage consisting of the amounts paid in performance of the contract. My researches have not revealed any authority to that effect. Indeed, there is limited authority to the contrary[25]. There is no reason in principle why, in a case such as this, the plaintiff should not be entitled to recover, as loss and damage, the amounts claimed by him, notwithstanding that he has rescinded the two Heads of Agreement. The plaintiff's claim against the defendants is that he was induced to enter into the Heads of Agreement by the misrepresentations of the defendants or their agent. As a result he paid monies. He has rescinded the Heads of Agreement. Therefore he has paid money as a result of the misrepresentations and received nothing in return. Notwithstanding his rescission of the Heads of Agreement almost four years ago, the money paid by him to BPR and Tetley has not been repaid. His loss is the money paid by him in respect of contracts which have now been avoided ab initio.

970. The only authority which I have located which is in point is the decision of the High Court in Sibley and Or v Grosvenor and Or[26]. In that case the plaintiffs entered into a contract to purchase land from the second defendant, Loughnan, for the sum of £2060. Under the contract they paid a deposit of £350 to Loughnan, and entered into possession of the property. Subsequently they commenced proceedings in the Supreme Court of Victoria claiming that they had been induced to enter into the contract to purchase the land as a consequence of false representations made to them by Loughnan's agent, Grosvenor. The plaintiffs claimed rescission of the contract against Loughnan and repayment of the deposit of £350. They also claimed damages in deceit against Grosvenor. The plaintiffs failed at first instance because the trial judge held that, although misrepresentations had been made to them by Grosvenor, the misrepresentations were not material. On appeal, the High Court held that the misrepresentations made by Grosvenor to the plaintiffs were material. Accordingly the plaintiffs were entitled to an order rescinding the contract of sale against Loughnan.

973. In the High Court, Grosvenor contended that the remedies of rescission and damages for deceit were alternative, and not cumulative. Accordingly, it was submitted, at most the plaintiffs could only recover damages against Grosvenor to the extent that they were not fully compensated by Loughnan.

976. The High Court rejected the submissions made on behalf of Grosvenor. The Court held that the claim for damages in an action of deceit was entirely independent of and additional to the right of the plaintiffs to rescind against the vendor. Griffith CJ (with whom Barton, Gavan, Duffy and Rich JJ agreed) therefore held that the plaintiffs were entitled as against Loughnan to restitution of the deposit plus interest, after deducting the value of the use and occupation by the plaintiffs until rescission. His Honour then concluded in respect of the claim for damages against Grosvenor:

"As against Grosvenor the plaintiffs are entitled to recover by way of damages for the false representation any monies which they uselessly expended on the faith of its truth. These include the same sums as those payable by Loughnan and any further expenditure which was properly made by the plaintiff in preparation for performance of the contract and was wasted. As to the first there is no reason to doubt that the plaintiffs will obtain complete restitution from Loughnan, and it is not necessary to consider the form in which relief in respect of that branch of the case should be awarded as against Grosvenor. As regards the other damages, they are not recoverable in an action for rescission, but are recoverable in an action of deceit..."[27]

980. Accordingly the High Court made orders (inter alia) for rescission of the contract, and repayment of the deposit. The Court specifically reserved for further consideration the defendant Grosvenor's liability in respect of such balance (of the deposit) in event of non-recovery from the defendant Loughnan.

983. The passage which I have quoted from the judgment of Griffith CJ supports the proposition that in a claim for damages for misrepresentation, a plaintiff is entitled to claim amounts paid by way of purchase price to a vendor, notwithstanding that the plaintiff has rescinded the contract against the vendor. In Sibley v Grosvenor, the High Court, as a matter of practicality, reserved for further consideration the quantum of Grovesnor's liability in the event of non-recovery from Loughnan, rather than framing an order to prevent double recovery. However, the High Court did not embrace the submission that the claim for damages were alternative to the claim for rescission. Nor did the High Court hold that the plaintiffs had failed to prove their claim for damages, on the basis that they had already rescinded the contract against the vendor. For those reasons I consider that the decision of the High Court in Sibley v Grosvenor is contrary to the proposition advanced by the defendants in answer to the plaintiff's claim for damages in this case.

986. Further, the authorities emphasise that while, generally, tortious principles are a useful guide to the calculation of damages payable in claims for damages for contravention of s.52 of the Trade Practices Act, those principles are not slavishly followed. That point was made clear by the High Court in Marks v GIO Australia Holdings Ltd and Ors[28]. In that case McHugh, Hayne and Callinan JJ stated:

"This is not to say that no help can be had from the common law in deciding what damages may allowed under s.82 in cases of conduct contravening s.52. Very often, the amount of the loss or damage caused by a contravention of s.52 will coincide with what would have been allowed in an action for deceit.... But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s.82 are those that would be allowed in an action for deceit. The question presented by s.82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act."[29]

990. For the reasons which I have set out above, I conclude that the damages caused to the plaintiff as a consequence of the conduct which contravened s.9 of the Fair Trading Act consisted of the amounts paid by the plaintiff, in respect of instalments of purchase price and as a contribution to working capital, pursuant to the two agreements which have been validly rescinded ab initio.

993. For the sake of completeness I note that the defendants contended, that if the Heads of Agreement were not in fact rescinded, the plaintiff had failed to prove his damages. In my view, that contention is correct. If the Heads of Agreement were not rescinded, the plaintiff would retain an equitable interest in the shares the subject of the Heads of Agreement. The appropriate measure of loss sustained by the plaintiff would be the amounts paid by him by reason of the misleading representations to acquire the shares, less the value of the shares at the date upon which he entered into the Heads of Agreement[30]. The plaintiff did not adduce any evidence as to the value of the shares, at the date of entering into the Heads of Agreement. Any assessment of the value of those shares at that date would be a matter of mere speculation. Thus if, contrary to the conclusions which I have so far reached, the plaintiff had not validly rescinded the Heads of Agreement, I would accept the submission of the defendants that the plaintiff had failed to establish his loss in respect of any claim by him pursuant to s.9 of the Fair Trading Act and s.52 of the Trade Practices Act[31].

CROSS-CLAIM BY PHILLIP BELL, BPR AND AIS AGAINST TONY BELL AND TETLEY

997. I now turn to the cross-claim by Phillip Bell, AIS and BPR against Tony Bell and Tetley. In its original form that cross-claim was quite voluminous. It contained a large number of claims, many of which were made on different alternative bases. However by the conclusion of final submissions the cross-claim by Phillip Bell and his companies were reduced, essentially, to three in number. They were:

(i) In negotiating the terms of sale of an interest in the venture to Scheuer, Tony Bell owed fiduciary duties to Phillip Bell. Tony Bell breached those fiduciary duties by negotiating an agreement whereby Tetley sold ten percent of its interest in the venture, and BPR sold twenty-five percent of its interest in the venture, each for $500,000.

(ii) Tony Bell breached his fiduciary duty to Phillip Bell and BPR in purporting to cancel the allotment of shares which had previously been made in MPDL to Phillip Bell, and in failing to make a share certificate available to Phillip Bell in July 2000. It is alleged that that conduct was an operative cause of the proceedings being commenced against Phillip Bell and his interests. Accordingly Phillip Bell interests have suffered loss and damage consisting of legal costs in the conduct of the proceeding, and consisting of the amount claimed against them by Scheuer.

(iii) Phillip Bell and BPR also claim against Tony Bell and Tetley, contribution in respect of the plaintiff's claim pursuant to s.23B of the Wrongs Act and also in equity.

1003. BPR had also sought a declaration against MPDL that BPR is the owner of twenty-five percent of the shares in MPDL. At the conclusion of submissions, the fourth to sixth defendants proffered, and Phillip Bell and BPR accepted, an undertaking which was filed with the Court and which was in the following form:

"The fourth to sixth defendants undertake, by their counsel, to be bound by the determination of the Court in the proceeding as to the entitlement of the parties (including in their capacities as trustees) to shareholdings in MPDL Pty Ltd and to take all reasonable steps to ensure that shares are issued or transferred (as the case requires) in MPDL Pty Ltd, if required, so as to reflect that determination."

1008. A significant issue in the trial concerned what proportionate shareholding Phillip Bell and Tony Bell each held in the Multi-Point Data Link venture at the time at which Tony Bell negotiated with Scheuer in February 2000. It is necessary to deal with that issue at this stage as it is important in the determination of the first claim under the cross-claim.

1011. In essence, Phillip Bell maintained that, as at February 2000, both Tony Bell and he each had a fifty percent share in the joint venture. On the other hand, Tony Bell maintained that, as at that date, he had an eighty percent interest in the venture, and Phillip Bell had a twenty percent interest in the venture.

1014. I have already set out how, in 1995, Mr Terry Hughes and Phillip Bell entered into a joint venture for the development and marketing of the Multi-Point Data Link system. There was no formal documentation in relation to their relationship. Clearly they were, in a loose form, a legal partnership, in which each partner had a joint interest.

1017. In early 1998, Phillip Bell and Hughes needed further funding in order to continue with the development of the program. Accordingly Phillip Bell approached his brother, Tony Bell, to introduce him to the project. Tony Bell agreed to become involved. He was to make an initial contribution of $100,000. That contribution was made by Tony Bell by paying two invoices rendered by AIS to Heron Tower Pty Ltd, dated 31 March 1998 and 30 June 1998. Phillip Bell, Tony Bell and Terry Hughes each became one-third owners of the joint venture.

1020. In his evidence, Phillip Bell stated that, in addition to his initial contribution of $100,000, Tony Bell was also to continue to fund the venture, and to look after administrative and legal matters relating to it. Phillip Bell stated that, in the ensuing months, AIS invoiced MPDL at the rate of $45 per hour, which was a reduced rate from AIS's normal charge rate of $110 per hour. Those invoices reflected the work carried out by Phillip Bell on the MPDL project. At the same time Terry Hughes was to continue to market the project. The invoices which were rendered by AIS to MPDL were, in due course, paid by Heron Tower.

1023. In his evidence, Tony Bell denied that it was part of the arrangement that he look after administrative and legal matters. However that difference between the two witnesses, on this aspect of the case, is immaterial. Tony Bell also stated that the arrangement was that, in addition to his initial contribution of $100,000, he would also provide funding, by way of a loan to the venture, of a further $100,000. Phillip Bell did not give any evidence in relation to, nor was he asked about, the $100,000 limit on further funding to be provided by Tony Bell. Nor was Phillip Bell cross-examined as to whether the funding by Tony Bell was by way of loan or further capital contributions. Again, however, the differences are, in the context of the case, relatively immaterial.

1026. The major issue between Phillip Bell and Tony Bell relating to the ultimate ownership of shares in the MPDL venture emanates from discussions, beginning in early 1999, relating to the departure of Hughes from the venture. There were a number of negotiations conducted, propositions proffered, and concepts considered, during 1999 to 2000, concerning the structure and proprietorship of the venture. Tony Bell and Phillip Bell are, significantly, at odds as to the nature of any agreement between them arising from those discussions. The evidence on this aspect of the case was trawled through, in considerable detail, both in evidence in chief and in cross-examination. In analysing the different accounts between the parties, I have found it necessary to bear three considerations in mind. First, I have reservations relating to both Tony Bell's and Phillip Bell's evidence on this part of the case. Secondly, the different accounts between them were coloured by the deep rift which has occurred between them. Thirdly, throughout 1999 a number of different propositions were floated and considered, many of which were either not pursued, not agreed upon, or were left in limbo. Further, it became evident to me during the trial, that, in the course of their dealings, Tony Bell was very much the dominant party in matters of commerce. He was prone to taking positions, and making assumptions, often without the assent of his brother Phillip. The most graphic illustration of this occurred after July 2000 (to which I shall return later in this judgment), when Tony Bell appears to have unilaterally accounted for Phillip Bell's rights and entitlements as a twenty-five percent shareholder in MPDL Pty Ltd, and to have appropriated them to himself.

1029. It is necessary to set out, in some detail, the competing accounts by Phillip Bell and Tony Bell as to their respective interests in the Multi-Point Data Link joint venture. In summary the following emerges from the evidence:

(i) In early 1999 MPDL Pty Ltd was incorporated by Tony Bell. However the joint venture between Terry Hughes, Phillip Bell and himself was not transferred to the company. It remained a shelf company for another twelve months. Tony Bell incorporated the company in early 1999 in order to reserve the company name. Indeed Phillip Bell stated that he did not know, until some time in 2000, that MPDL Pty Ltd had been incorporated.

(ii) In about March or April of 1999 Tony Bell ceased to continue to fund the joint venture. He expressed some dissatisfaction concerning the state of progress of the development of the software, and concerning the arrangements between the parties to fund it. At that time Tony Bell made a proposal to both Phillip Bell and Terry Hughes. By that proposal Tony Bell stated that he would continue the funding by providing $20,000 for the first month, $15,000 for the second month, and $12,000 for the third month, to the joint venture; in return Phillip Bell and Terry Hughes would each transfer to him a thirteen and one-third percent interest in the joint venture. Thus, if accepted, the proposal would result in Tony Bell having a sixty percent interest in the joint venture, and Terry Hughes and Phillip Bell each having a twenty percent interest in it. The proposal was committed to writing and contained in a document on Heron Tower letterhead entitled "Proposal to Phillip Bell and Terry Hughes from Heron Tower Pty Ltd re Multi-Point Data Link" dated 14 March 1999. The document was tendered in evidence, and I shall refer to it as "Exhibit PB28".

(iii) Phillip Bell stated that both Terry Hughes and he rejected the proposal contained in Exhibit PB28. By contrast, Tony Bell stated that, although Terry Hughes rejected the proposal, Phillip Bell accepted it, so that Tony Bell, thereby, acquired a further thirteen and one-third percent interest in the joint venture from Phillip Bell.

(iv) In the meantime, at the request of Tony Bell, Phillip Bell prepared a five page document entitled "Detailed Plan to Complete MPDL Project". That document set out a detailed schedule of work to complete the development of the software. It described six stages of development, and allocated the number of work hours and a completion date for each stage of that process. That document was attached to a document on Multi-Point Data Link letterhead dated 15 March 1999 entitled "Multi-Point Data Link Agreement with Advance Information Systems and Phillip Bell, Time, Work, Performance and Payment Agreement". The agreement was signed by Phillip Bell on his own behalf and on behalf of Advance Information Systems, and by Tony Bell on behalf of Multi-Point Data Link and Heron Tower. It was copied to Mr Terry Hughes and to Mr Lockhart. The agreement was tendered in evidence, together with the attached work schedule, as "Exhibit TB28". Tony Bell claimed that, by signing Exhibit TB28, Phillip Bell signified his acceptance of Exhibit PB28, and thus agreed to transfer to Tony Bell a thirteen and one third percent interest in the joint venture. On the other hand Phillip Bell stated that Exhibit TB28 was nothing more than an agreement by him to implement the program set out in the detailed document which was attached, and an agreement by Tony Bell to provide funding for those works to be carried out. Phillip Bell disputed that, by signing Exhibit TB28, he agreed to the proposal, contained in Exhibit PB28, for a transfer of part of his interest in the joint venture to Tony Bell.

(v) Subsequently Tony Bell paid three cheques of $5,000 each, being part of the first month's payment referred to in the schedule of payments in Exhibit PB28. Thereafter he paid nothing further to the joint venture.

(vi) Phillip Bell continued to work on developing the software. His evidence was that, by October 1999, the essential development of the software was complete and the product was ready for marketing on a large scale. Phillip Bell gave evidence that Tony Bell suggested that he prepare invoices to record the work which he was contributing to the product, and that those invoices would be reconciled once the development was complete and the company structure put in place. Phillip Bell stated that accordingly he produced a large number of invoices which he gave to Lockhart. On the other hand Tony Bell denied that he made any such suggestion to Phillip Bell relating to the preparation of invoices. He also denied that he received any of the invoices from Phillip Bell. Tony Bell stated that, after he ceased to make payments to the venture in about April 1999, he nevertheless continued to pay the salary of Gil Lockhart, totalling $5,300 per month. He stated further that Phillip Bell's contribution was to fund the internal costs of the venture including labour costs relating to the further development of the software program by staff of AIS.

(vii) In the meantime Terry Hughes had ceased to make any contribution to the joint venture. Tony Bell made an alternative proposal that Hughes and Phillip Bell jointly contribute $160,000 to the joint venture in order to achieve an equality of funding between Hughes and Phillip Bell on the one hand, and Tony Bell on the other hand. A draft agreement (Exhibit PB30) was prepared by his solicitors which was the subject of correspondence between Tony Bell's accountant, Mr Romanin, and Phillip Bell's accountant, Mr Allan Mitchell. Tony Bell stated that the draft document was not accepted or agreed upon by either Terry Hughes or Phillip Bell. On the other hand, Phillip Bell stated that, although Tony Bell initially insisted that he pay $80,000 to achieve an equality of funding of the joint venture, he bargained Tony Bell down to accept $50,000. He said that Tony Bell reluctantly accepted that proposal, and that Phillip Bell paid $50,000 in order to square off the funding between them.

(viii) As I have stated Tony Bell's evidence was that the proposal contained in Exhibit PB30 was not agreed between the parties. Tony Bell's evidence was that, at that time, he and Phillip Bell met with Kathleen Ford of Messrs Davis, Ford and Co, solicitors. That meeting occurred in order to discuss making a proposal to Terry Hughes to buy out his share. Tony Bell stated that he advised Ms Ford, in the presence of Phillip Bell, that he had funded the venture without any financial contribution from either Hughes or Phillip Bell; his primary objective was to achieve an equality of funding of the venture; however if that could not be achieved then Hughes should be bought out. In those discussions (according to Tony Bell) Ford told Phillip Bell that, in order to achieve an equality of funding by him, he (Phillip Bell ) should bring his contributions up to date. As a result of that suggestion Phillip Bell agreed to pay $65,000, and not the $50,000 claimed by Phillip Bell, in order to achieve an equality of funding.

(ix) The question whether Tony Bell and Phillip Bell agreed that Phillip Bell should contribute $50,000 or whether he should contribute $65,000, to achieve an equality of funding in the venture, is fundamental to the issue whether Tony Bell, in about September 1999, purchased the whole of Terry Hughes' one-third share in the venture, or whether Tony Bell and Phillip Bell each purchased fifty percent of that one-third interest. At that time Hughes did not have sufficient funds to make any further contribution into the venture. In about August or September 1999 discussions took place relating to the potential purchase of Hughes' share. Ultimately it was agreed that Hughes' share should be purchased for the sum of $23,918. The question is by whom that share was purchased.

(x) Phillip Bell stated that the agreement to acquire Hughes' share was negotiated by Tony Bell with Hughes on behalf of both Phillip Bell and Tony Bell. Phillip Bell's evidence was that Tony Bell suggested that Phillip Bell should remain in the background because Terry Hughes was his friend, and that Tony Bell did not wish to jeopardise good relations which Terry Hughes had established for the MPDL joint venture with repairers and insurance companies by involving Phillip Bell in discussions with Terry Hughes. Terms of settlement were signed between Terry Hughes, Heron Tower and Phillip Bell. By those terms of settlement Tony Bell agreed to pay Terry Hughes the sum of $23,918, in consideration for which Terry Hughes agreed to transfer to Tony Bell all of his one-third interest in the joint venture. In evidence in chief Phillip Bell stated that he did not recall seeing those terms of settlement. However in cross-examination he acknowledged that he had, in fact, signed a copy of them.

(xi) Tony Bell paid the sum of $23,918 to Terry Hughes. He claimed that he paid that sum only on his own account, and thereby received, for himself alone, Terry Hughes' one-third in the joint venture. On the other hand Phillip Bell stated that Tony Bell paid the sum of $23,918 on his own and on Phillip's account, and thereby received Terry Hughes' one-third interest in the joint venture for both Phillip Bell and Tony Bell. Phillip Bell stated that he then paid Tony Bell the sum of $15,000 to reimburse Tony Bell for one half of the cost of the acquisition of Hughes' interest. Phillip Bell stated that he paid more than fifty percent of the $23,918 paid to Hughes, since the balance (to bring the sum up to $15,000) was required to meet legal and other expenses. On the other hand Tony Bell stated that he received the sum of $15,000 from Phillip, not in payment of part of Hughes' share, but rather to complete Phillip Bell's agreement to pay a sum of $65,000 to achieve equality of funding between Phillip and Tony Bell. Indeed he stated that when Phillip first paid $50,000 and not $65,000, he was furious with Phillip Bell, who had departed overseas. He stated that he located his brother overseas, verbally abused him, and ensured that his brother pay to him the balance of $15,000 which was owing to him.

(xii) Thus, Tony Bell claims that, by two processes, he had, by September 1999, achieved an eighty percent interest in the joint venture. By contrast, Phillip Bell claims that his interest remained at fifty percent of the joint venture.

(xiii) In about October 1999 Phillip Bell and Tony Bell met with Tony Bell's accountant, Mr Romanin, to discuss creating a company structure for the joint venture. Phillip Bell gave evidence that it was agreed that Tony and he would each be equal shareholders, a bank account would be established, and that each would, in the future, contribute a sum of $120,000 to continue funding the venture. On the other hand, Tony Bell gave a different account of that meeting. Tony Bell said that prior to the meeting Phillip Bell had approached him and expressed the wish to reacquire his fifty percent interest in the joint venture since the development of the software was nearing completion. Tony Bell's evidence is that he told Phillip Bell that Phillip would need to contribute $120,000 in order to regain his fifty percent interest in the venture. Phillip Bell was not happy, but appeared to accept that he would need to pay $120,000 in order to achieve equality. Subsequent to the meeting with Mr Romanin, Phillip Bell did not make that contribution, and accordingly the proposition to incorporate the joint venture did not proceed.

(xiv) Phillip Bell stated that, at the meeting with Romanin in October 1999, the parties agreed to incorporate the joint venture, and that it was left to Romanin to implement the steps necessary to put that decision into effect. He said that in the ensuing months he asked Tony Bell what was happening about incorporating the joint venture, but that Tony Bell prevaricated. On the other hand Tony Bell stated that no such agreement was made in the meeting with Romanin in October 1999.

Shareholding Issue: Decision

1035. The competing versions of both Tony Bell and Phillip Bell, relating to the events of 1999, were subjected to detailed analysis in cross-examination and final address. The version of each witness leaves open a number of unresolved questions. To some extent this is understandable, given that the events occurred almost five years ago. Further, as I have already remarked, both witnesses viewed the events of that year, and of the ensuing years, through the prism of the bitter rift which has occurred between them.

1038. I have given careful consideration to the question of which of the two competing versions I should accept, whether in whole or in part. I have concluded that the weight of the evidence is such that, on the balance of probabilities, I am satisfied that, as at February 2000, the Phillip Bell interests and the Tony Bell interests each had a fifty percent interest in the Multi-Point Data Link joint venture.

1041. I have significant reservations about accepting the evidence of Tony Bell in relation to the question of the respective interests of his brother Phillip and himself in the joint venture. On his own evidence, Tony Bell has, in the past, deliberately misstated what he himself claims to be the true position of the respective interests of each of them in the joint venture. Two examples of such conduct suffice. First, after Scheuer terminated the Heads of Agreement in July 2000, Tony Bell wrote a letter to Scheuer's solicitors, Efron and Associates, dated 21 July 2000. In that letter Tony Bell asserted that he had made erroneous representations to Scheuer that MPDL Pty Ltd was a company of equal shareholding between himself and Phillip Bell. In the letter Tony Bell stated that he had forgotten the two transactions in 1999 by which he now claims that he acquired an eighty percent interest in the joint venture. In evidence, Tony Bell conceded that the contents of the letter were untrue to his own knowledge when he wrote the letter to Efron and Associates. Tony Bell stated that he deliberately wrote the untrue letter, in order to arm Efron and Associates with the means by which they might correspond with Phillip Bell and put pressure on him either to abandon his interest in MPDL Pty Ltd or make an offer which would be acceptable to Tony Bell by which Tony Bell might acquire Phillip Bell's interest in the company. If the evidence of Tony Bell, relating to this letter, is to be accepted, then on his own admission he was guilty of having deliberately misstated facts relating to the shareholding of Phillip in MPDL Pty Ltd for his (Tony Bell's) own benefit. A second example of such conduct is constituted by a letter written, on the instruction of Tony Bell, by Mr Romanin to Phillip Bell's solicitors, Stedman Cameron, dated 27 July 2001. In that letter a demand was made of Phillip Bell that he contribute funds equal to contributions made by Heron Tower to MPDL Pty Ltd, namely $516,000. In cross-examination, Tony Bell agreed that the letter was incorrect, and that it did not give Phillip Bell "the full picture". Tony Bell acknowledged that the letter was "misleading". He stated that he hoped that Phillip Bell would not accept the letter, and would be intimidated by it into abandoning any interest which he had in MPDL Pty Ltd. Again, if I accept that evidence, it is a clear admission by Tony Bell that he saw himself at liberty to misstate his brother's interest for his own purposes and benefit. That conduct of Tony Bell rendered him, in my view, potentially unreliable as a witness in relation to the events of 1999, particularly in so far as those events concerned negotiations and agreements relating to the respective interests of Tony Bell and Phillip Bell in the joint venture.

1044. In addition, there are a number of aspects of Tony Bell's evidence which lead me to the conclusion that I should not accept his underlying proposition, namely that by the end of 1999 he had acquired and eighty percent interest in the joint venture. Those matters include the following:

(i) Tony Bell maintained that in about March 1999 he acquired from Phillip Bell an additional thirteen and one-third percent interest in the joint venture by promising to pay instalments set out in Exhibit PB28. Yet on his own admission he only paid three of those instalments.

(ii) Between March and September 1999 various documents passed between the parties relating to potential agreements to be entered into by them. A number of those documents were drafted on the premise that Phillip Bell had a one-third interest in the venture. Those documents included the following:

(a) A memorandum of understanding and in principle agreement which Romanin sent to Phillip Bell's solicitor, Mr Mitchell.

(b) The memorandum of agreement (Exhibit PB30) which was the subject of correspondence between the parties' accountants in June 1999, and which Phillip Bell stated was the basis of an agreement ultimately reached between himself and his brother.

(c) The terms of settlement entered into between Heron Tower, Hughes and Phillip Bell recite that Tony Bell had purchased a one-third interest in the joint venture; they make no reference to any further acquisition by Tony Bell of an additional thirteen and one-third percent interest in the joint venture from Phillip.

(iii) Originally Heron Tower Pty Ltd issued proceedings against Phillip Bell. A statement of claim from those proceedings was admitted, without objection, in evidence before me. No point was taken by any party that the assertions contained in the pleadings might not be relied upon[32]. In that statement of claim, Heron Tower alleged that in August 1999 Tony Bell, Phillip Bell and Hughes entered into an agreement by which Tony Bell or his company would purchase Hughes' shares for $23,918, and Phillip Bell (or a company nominated by him) would purchase one half of those shares for the sum of $15,000. In other words the pleading in that proceeding reflected, almost exactly, the agreement which Phillip Bell, in this proceeding, claims was made between the parties in relation to buying out Terry Hughes' interest. In cross-examination Tony Bell stated that that pleading was an error. I do not accept that explanation by Tony Bell.

(iv) Tony Bell acknowledged that after Hughes' share had been purchased, there was an agreement between Tony Bell and Phillip Bell that they would each contribute fifty percent of the ongoing expenses and costs of the venture. Tony Bell stated that his contribution was to consist of paying Lockhart's salary, while Phillip Bell's contribution consisted of looking after the "internal" costs of the venture such as costs of the staff of AIS in developing the program. The concept of both parties each bearing fifty percent of the ongoing costs is at odds with the proposition that Tony Bell, by then, had an eighty percent interest in the venture.

(v) Tony Bell's evidence was vulnerable in relation to the question of the further contribution of $120,000 which Phillip Bell was to make as from October 1999. It will be recalled that Phillip Bell stated that that figure was to be by way of future payments to be made by each party as part of the ongoing costs of the venture. On the other hand Tony Bell maintained that he put to Phillip Bell the proposition that, if Phillip Bell wished to bring his equity back up to fifty percent, he would need to pay $120,000. There are a number of basic weaknesses in Tony Bell's account, so much so that I reject it. Those weaknesses include the following:

(a) Tony Bell's version was not put to Phillip Bell in cross-examination. At an early stage in the trial, and particularly after the conclusion of cross-examination of Scheuer, I made it clear that I regarded the rule in Browne v Dunn[33] as one which must be adhered to. The fact that Tony Bell's version was not put to Phillip Bell in cross-examination leads to the inference that Tony Bell's evidence, relating to this aspect of the case, was afterthought.

(b) More significantly, Tony Bell was unable to state how the sum of $120,000 was made up. The figure did not derive from any of the accounting documents which were proffered. His claim that it also covered matters such as interest was, in my view, grasping at straws.

(c) On Tony Bell's own evidence, when Phillip Bell had paid the sum of $65,000 to him, he had thereby achieved an equality of funding between himself and Tony Bell in the venture. That payment was made in August 1999. That fact is inconsistent with another $120,000 being required to be paid by Phillip Bell in order to achieve an equality of funding.

(vi) The upshot of the matters referred to in (v), leads to the conclusion that Tony Bell's evidence, in relation to the $120,000 contribution, should be rejected. The rejection of that evidence leads to the conclusion that, on Tony Bell's own account, there was no reason why he and Phillip Bell did not have, by October 1999, an equal joint interest in the venture.

(vii) Phillip Bell and Tony Bell attended a meeting at Mr Romanin's offices in October 1999. Mr Romanin's notes of a meeting dated 4 October 1999 were tendered in evidence. Romanin had little recollection of the meeting. The notes, on their face, indicate an ownership structure of fifty percent for both Phillip Bell and Tony Bell. Those notes of themselves, unexplained, may carry limited weight. However two matters give them further weight. First, Romanin wrote a letter to Harwood Andrews dated 25 October 1999 concerning the structure which the parties had been considering by which to run the business. The letter stated that the parties were considering using two entities, which "are to be owned fifty-fifty" between Tetley and BPR. Further, and significantly, at the request of Phillip Bell in March 2000 Mr Romanin wrote a letter to Phillip Bell's bank manager. That letter stated that Phillip Bell held a fifty percent equity in MPDL Pty Ltd.

1058. In addition, if Tony Bell's evidence relating to the interests of Phillip and himself were accepted, the structure of the Heads of Agreement would be most curious. The Phillip Bell Heads of Agreement provide for Phillip Bell to sell fifty percent of his holdings in MPDL Pty Ltd, being twenty-five percent of the issued capital in the company. In exchange Phillip Bell was to receive $500,000. If Tony Bell's version is correct, then, as a result of the entry by Phillip Bell into the Heads of Agreement, he was to end up with an additional five percent interest in MPDL Pty Ltd (that is, an increase from twenty percent to twenty-five percent) plus $500,000. No satisfactory reason was advanced by Tony Bell why the transaction was structured in a manner which, on his version, would have been so generous to his brother Phillip, particularly given the fact that, in the previous year, Tony Bell had certainly dealt with his brother on an arm's length basis in relation to their shareholding in the joint venture.

1061. In the end, I find Tony Bell's evidence relating to the transactions of 1999 to be quite unsatisfactory. By the same token, Phillip Bell was not always a reliable witness. It is clear that his memory, on some matters, could not be relied upon. I consider that that degree of unreliability resulted from two matters, namely, Phillip Bell's health, and also from the fact that Phillip Bell has confused his memory from time to time, by reference to the documents.

1064. During his evidence, it was revealed that Phillip Bell had suffered, for some time, from an ailment which caused him to suffer from chronic, and severe, headaches. It was necessary to allow Phillip Bell to have a number of breaks during his evidence, due to the onset of those headaches. It also became evident to me that Phillip Bell was reluctant to reveal that he was in fact in discomfort, when that was patently the case. Accordingly Phillip Bell gave evidence under a substantial degree of physical discomfort. In cross-examination he conceded that that discomfort did cause difficulties with concentration and thus with his memory. Further, during his cross-examination, it became evident that Phillip Bell has had access to a number of discovered documents, which have, to some extent at least, affected his memory of events.

1067. In this respect it is relevant to refer to two particular instances which shed some light on Phillip Bell's memory. First, in evidence in chief, he stated that he did not see the terms of settlement signed by Hughes until the commencement of these legal proceedings. Later it emerged that Phillip Bell had not only seen the terms of settlement but had indeed signed them. Secondly, Phillip Bell gave evidence that he did not see a draft of the Phillip Bell Heads of Agreement, and that the first time that he saw any Heads of Agreement was when he signed them. That evidence is inconsistent with answers to interrogatories sworn by Phillip Bell. It is also inconsistent with other evidence to which I shall later refer. When examining the cross-claim by Phillip Bell against Tony Bell I shall explain why I do not accept Phillip Bell's evidence on this matter. In cross-examination Phillip Bell conceded that his evidence had changed since he swore the answers to interrogatories based on documents which he had subsequently read. The above matters, and Phillip Bell's physical ailment, have led me to be cautious in evaluating Phillip Bell's evidence, both in relation to the events of 1999, and generally.

1070. Notwithstanding that caution, I have come to the conclusion that I prefer Phillip Bell's evidence to Tony Bell's evidence relating to the events of 1999. Some matters were raised in cross-examination relating to Phillip Bell which do raise a question mark over his evidence. However those matters did not discredit Phillip Bell's evidence. The criticisms which can be made of Phillip Bell's evidence relating to these events are of far less moment than the combination of criticisms, which I have examined above, relating to Tony Bell's evidence. In the end I am persuaded, on the balance of probabilities, that Phillip Bell's version is to be preferred, so that, by February 2000, both Phillip and Tony Bell each had a fifty percent interest in the joint venture.

1073. Mr Evans, who appeared for Tony Bell and Tetley, argued strongly that Phillip Bell had accepted the proposal dated 14 March 1999 (Exhibit PB28). He relied heavily on the signing by Phillip Bell of the agreement of 15 March 1999 (Exhibit TB28). The argument does have some force. However I accept Phillip Bell's evidence that his signature on Exhibit TB28 was an acceptance by him of the payment schedule, and the work schedule, set out in a detailed plan which was appended to the agreement, but did not signify an agreement by him to his alienation of thirteen and one-third percent interest in the venture. Indeed, I would need some persuasion to reach a contrary conclusion. The proposal of 14 March 1999 would commit Heron Tower to providing funding of at least $47,000. Yet Heron Tower only paid $15,000 by way of further contributions after March 1999. No reason was advanced by Tony Bell why he did not continue the funding as he claims was agreed in the proposal of 14 March 1999, if, as he states, that proposal was accepted by his brother Phillip and in exchange for it Tony Bell received a further thirteen and one-third percent interest in the joint venture.

1076. In addition, there are a number of contemporaneous documents which are not consistent with the version of the events given by Tony Bell. For example, Romanin wrote a letter to Mitchell dated 29 March 1999. In that letter Romanin asserted that Tony Bell, Hughes and Phillip Bell had reached an agreement whereby Tony Bell was to have sixty percent of the issued shares in MPDL, and Phillip Bell and Hughes twenty percent each. That letter is inconsistent with Tony Bell's evidence that no agreement was reached with Hughes. Romanin's letter also asserted that agreement was reached as to a rate of funding for Phillip Bell which was inconsistent with Exhibit PB28. Subsequently on 4 May 1999 Lockhart sent by facsimile to Phillip Bell a note which he copied to Tony Bell. That document envisaged a different transaction to the transaction which Tony Bell claims ripened into an agreement in March 1999. Phillip Bell refused to sign Lockhart's note, indicating that negotiations had not been concluded between the parties.

1079. Thus for the above reasons I have come to the conclusion that I am satisfied, on the balance of probabilities, that as at February 2000 Phillip Bell and Tony Bell each had a fifty percent interest in the joint venture. Having made that finding I now consider the three substantive cross claims by Phillip Bell and his companies against Tony Bell and Tetley.

Heads of Agreement: Negotiations between Phillip Bell and Tony Bell

1083. The first claim made in the cross-claim is based on the different proportions of shares sold by the Phillip Bell interests and Tony Bell interests under the Heads of Agreement. By the conclusion of the proceedings Mr Crennan confined the claim to one based on a breach of fiduciary duty. Mr Crennan correctly acknowledged that the claim is, in fact, academic, if, as I have found, Scheuer was entitled to avoid the Heads of Agreement. Nevertheless it is appropriate that I express my conclusions concerning this part of the cross-claim. It occupied a reasonably substantial part of the trial. It is important that I make findings in the event that this matter goes on appeal.

1086. The first question in respect of the claim is whether Tony Bell stood in a fiduciary relationship to Phillip Bell in negotiating the sale of the thirty-five percent interest in the Multi-Point Data Link venture to Scheuer.

1089. I have already found that Tony Bell occupied the position of agent of Phillip Bell and BPR in conducting the negotiations with Scheuer. Certainly, Tony Bell was acting on his own behalf. However, he was also conducting negotiations for and on behalf of Phillip Bell and his interests. He undertook the initial negotiations with Scheuer and introduced him to the concept. Tony Bell then conducted further negotiations in which he gave Scheuer further information in respect of the venture. Tony Bell reported on those negotiations to Phillip Bell. I have already found that Tony Bell attended the meeting at Scheuer's residence on 20 February 2000, and that Phillip Bell was not present. Indeed even if Phillip Bell was present at that meeting it was Tony Bell who led and conducted the negotiations on behalf of the existing joint venture. Later, according to the evidence of both Tony Bell and Phillip Bell, Tony Bell reported to Phillip Bell the proposal which was made by Scheuer. I shall shortly turn to the evidence given concerning that conversation. However, what is not in issue is that Tony Bell was reporting to Phillip Bell and obtaining his instructions. In those circumstances, I conclude that, in conducting negotiations with Scheuer to the point at which Scheuer was ad idem with Phillip Bell and Tony Bell concerning the acquisition by him of a thirty-five percent interest in the venture, Tony Bell acted as agent for and on behalf of Phillip Bell. It therefore follows that, in conducting those negotiations, Tony Bell was in a fiduciary relationship with Phillip Bell.

1092. Indeed, even if, strictly speaking, Tony Bell was not acting as agent to Phillip Bell, I would nevertheless hold that, in the circumstances, Tony Bell owed a fiduciary duty to Phillip Bell. In conducting negotiations on behalf of Phillip Bell, in reporting to Phillip Bell and in obtaining Phillip Bell's assent to Scheuer's proposal, Tony Bell occupied a position of trust and confidence in respect of Phillip Bell. I consider that equity would recognise that that relationship was one which imposed on Tony Bell a fiduciary duty of full disclosure and fair and open dealing[34].

1095. The fiduciary relationship between Tony Bell and Phillip Bell obliged Tony Bell to make full and fair disclosure[35] to Phillip Bell in relation to the transaction which he was negotiating with Scheuer, and to obtain Phillip Bell's fully informed consent, in particular to the aspect of the transaction whereby Tetley sold only ten percent of its interest in the venture for $500,000, whereas BPR was selling twenty-five of its interest in the joint venture for $500,000. Further, as was correctly accepted by Mr Evans, the onus of proof lay on Tony Bell to establish that he had, in the circumstances, made full and frank disclosure to Phillip Bell of the different share proportions being sold to Scheuer for the same price[36]. In other words, in order to avoid liability for breach of fiduciary duty, Tony Bell bore the onus of proof to establish that he obtained the informed consent of Phillip Bell to the transaction which was more profitable for him (or Tetley) and less profitable for Phillip Bell (or BPR). That duty subsisted up to the time when Phillip Bell signed the Heads of Agreement.

1098. It is in that context that I shall next consider the competing versions between Phillip Bell and Tony Bell as to the negotiations between themselves relating to the execution of the Heads of Agreement.

1101. Phillip Bell's evidence was that, in early February 2000, Tony Bell contacted him by telephone. Tony Bell stated that he may have found a prospective buyer for part of the MPDL company. After that conversation Tony Bell and Phillip Bell attended a meeting at the office of some solicitors in Melbourne. Scheuer attended that meeting. Tony Bell spoke about the Multi-Point Data Link system. Phillip Bell gave a demonstration of the system. After the meeting Tony Bell, Scheuer and Phillip Bell met at a coffee shop. Tony Bell and Scheuer discussed how MPDL could be incorporated in a "backdoor float". A couple of days later Tony Bell telephoned Phillip Bell. He said that Scheuer was interested in investing in MPDL. Scheuer was going to invest $1.5 million. Tony and Phillip Bell would each receive $750,000 for their respective shares. They would each sell about twenty percent of their shares. On the next day Tony Bell contacted Phillip again. He stated that the proposal by Scheuer was proceeding. Both Phillip and Tony would each receive $500,000. They would each sell twenty-five percent of their interest in the venture to Scheuer. Phillip Bell stated that Tony Bell said he would look after the accounting and legal matters, which would be attended to by his solicitors, Harwood Andrews.

1104. On 30 March 2000 Efron and Associates sent, by facsimile, a final draft of the Phillip Bell Heads of Agreement to Mr Mitchell for his consideration. Mr Mitchell discussed the document with Phillip Bell. In his evidence Phillip Bell stated that he did not recall seeing the document, and that he recalled that the discussions with Mitchell concerned predominantly the topic of payments which were to be made under the Heads of Agreement. In his evidence in chief Phillip Bell stated that the first time he saw the document was when Scheuer gave him the original document of it for him to execute. Phillip Bell stated that he then took the original document to his accountant's office, where he executed it on 31 March 2000 on his own behalf, and also on behalf of AIS and BPR. Either before or after that date, MPDL had also executed the Heads of Agreement.

1107. Phillip Bell's evidence was that, shortly before executing the original of his Heads of Agreement, he noted from clause 6.1 that the break up of capital was not as he had expected. In particular he noted that while BPR had a twenty-five percent interest in MPDL, Tetley had a forty percent interest. He then telephoned Tony Bell. He asked Tony Bell why he was only selling ten percent of his share. Tony Bell stated that he did not need the money as much as Phillip did. Phillip Bell stated that, either in this conversation or in another conversation, Tony said to him - "Don't worry, we are brothers. We will look after each other."

1110. Phillip Bell then stated in evidence that, because he had not received a copy of the Heads of Agreement signed by him, he telephoned Scheuer, and spoke to Scheuer's accountant Mrs Bee Lim. He asked her to fax the document which he had executed. By error Ms Lim sent Phillip Bell a copy of Tony Bell's agreement. Phillip Bell stated that when he read it he noted that Tony Bell was receiving $500,000 for a sale of a ten percent interest, whereas he (Phillip) was receiving $500,000 for a sale of a twenty-five percent interest. Having read the document, he then spoke to Tony Bell. He asked Tony what was going on. Tony said that the reason for the differential was because Phillip was getting his money straight away, and that Tony would have to wait for his. Tony stated "I am not going to get it for a long time because I have to put it into super (superannuation)". Phillip Bell, in his evidence, said he felt pretty sick at that, and that he said to his brother that "look we will just deal with that later".

1113. Tony Bell's version of the negotiations with his brother relating to the Heads of Agreement was radically different to that of Phillip Bell. Tony Bell stated in evidence that he attended a meeting at Scheuer's home on 20 February. Phillip Bell was not at that meeting. Scheuer offered to pay $1,000,000 for a thirty percent stake in MPDL. On the next day, Tony Bell met with Phillip. He said to Phillip that they had received an offer of $1,000,000 for a thirty percent share in MPDL. Tony Bell, in his evidence, stated that he said to Phillip "before you do anything I want $300,000 that I had put into the venture to be repaid to me before we talk about the balance". Tony Bell said that the $300,000 was an amount which he had contributed to the joint venture. Phillip Bell was reluctant to agree to such a proposition. He stated that he wanted at least $500,000 for the transaction. Tony Bell then struck on a formula which would meet the requirements of both of them. He proposed that, out of the $1,000,0000 purchase price to be paid by Scheuer, he would receive the $300,000, to be applied towards the contributions he had already made to the joint venture. He proposed that rather than selling thirty percent of the venture to Scheuer, thirty-five percent be sold. In that way each one percent interest would be worth $20,000. Thus, Phillip Bell would sell a twenty-five percent interest for $500,000 and Tony Bell a ten percent interest for $200,000. Tony Bell stated that Phillip Bell stated to him that he accepted the proposal. Tony Bell then contacted Scheuer by telephone. He told Scheuer that Phillip would sell twenty-five percent of his shares, and Tony would sell ten percent of his own, for one million dollars.

1116. Having considered the competing versions of the two brothers, which are diametrically opposed to each other, and having observed both witnesses in the witness box, I have come to the conclusion that I do not accept the account of either Tony Bell or Phillip Bell relating to the negotiations which I have summarised above.

1119. It became quite evident during the evidence of Phillip Bell that his memory relating to the negotiations was defective, and had been significantly affected by documents which he had seen in the course of discovery in the proceedings.

1122. In evidence in chief Phillip Bell stated that he did not recall seeing a copy of the draft Heads of Agreement before he ultimately executed the Heads of Agreement. He stated that he discussed the draft Heads of Agreement on the telephone with his accountant, but did not actually see them. Phillip Bell's answers to interrogatories contradicted that evidence. They stated that he did receive the draft Heads of Agreement and that he showed them to his accountant with whom he discussed them. Phillip Bell conceded in evidence that his answers to interrogatories accurately reflected his memory at the time at which he swore them in February 2002, but that his memory had been affected by documents which he had subsequently seen during discovery in the proceedings. Phillip Bell then stated in evidence that on the day on which he executed his own Heads of Agreement, he contacted Ms Bee Lim, and requested a copy of them. He stated that he received those Heads of Agreement by facsimile shortly after making the request. By error Ms Bee Lim faxed to him a copy of Tony Bell's Heads of Agreement. It is evident from the fax header on the relevant document that those Heads of Agreement were not faxed to Phillip Bell until 27 April, almost four weeks later than when he stated he received them. The error in timing is of some significance, since it affects the sequence of telephone conversations which Phillip Bell claimed he had with his brother Tony Bell.

1125. It is clear that Phillip Bell's evidence, relating to this aspect of the case, has been affected by his examination of documents during the discovery process. In his evidence he candidly accepted that he had, in effect, reconstructed his memory because of what he had seen from those documents. The allegations which Phillip Bell makes against his brother Tony in his cross-claim are serious. They go beyond alleging a breach of fiduciary duty by Tony Bell. Phillip Bell alleges that, when he had ascertained, apparently from the draft Heads of Agreement, that Tony Bell was only selling ten percent of his interest whereas he himself was selling twenty-five percent, Tony Bell brazenly lied to him as to the reason for the differential in the amount of shares being sold. That is a serious allegation. I would require cogent proofs in order to be satisfied, on the balance of probabilities, that Tony Bell did wilfully deceive his brother as alleged by Phillip Bell [37]. I am not satisfied that Phillip Bell's memory of the two conversations which he alleges he had with Tony Bell is reliable as to the events which did occur. In particular it has been affected by his sighting of documents in the discovery process. Further, it was clear to me that Phillip Bell's evidence, on this aspect, carried strong emotional overtones, arising from the rift between Tony and himself, and by which he has been emotionally affected. I consider Phillip Bell to be, basically, an honest witness. I do not consider that he deliberately fabricated either of the conversations about which he gave evidence. However I do not feel sufficient satisfaction about his evidence in this respect to be persuaded, on the balance of probabilities, that the two conversations which Phillip Bell stated he had with his brother were to the effect alleged by him.

1128. On the other hand, I am also unpersuaded by the evidence which Tony Bell gave concerning his discussion which he stated he had with Phillip Bell in relation to negotiating the Heads of Agreement. I do not accept that a conversation occurred between Tony Bell and Phillip Bell, in which Phillip Bell agreed with the proposition by Tony that Tony, in effect, be entitled to the first $300,000 of the purchase price paid by Scheuer, and that the balance of $700,000 be apportioned by Tony selling a ten percent interest to Scheuer for $200,000 and Phillip selling a twenty-five percent interest for $500,000. I reject that evidence for the following reasons:

(i) I have already rejected Tony Bell's evidence that, as at February 2000, Tony Bell had an interest in eighty percent of the joint venture, and Phillip Bell only twenty percent. Thus I have already rejected the underlying premise on which the evidence of Tony Bell, in this respect, was based.

(ii) The evidence by Tony Bell as to the venture "owing" him $300,000, as at March 2000, is unsatisfactory. His accounting records do not support that proposition. Tony Bell attempted to bolster this part of his evidence by claiming that, in his initial negotiations with Scheuer, he told Scheuer that he had already invested $300,000 in the joint venture. On the other hand Scheuer gave evidence that, in those negotiations, Tony Bell told him that he had invested $1,000,000 in the joint venture. I regard Scheuer as the more reliable witness in relation to this aspect of the case.

(iii) Tony Bell alleged that after he spoke to Phillip Bell he then told Scheuer that he and Phillip would be "approaching it (the transaction) from a fifty-fifty ownership". Scheuer denied that that conversation occurred. I accept Scheuer's evidence on this. Tony Bell's evidence is quite improbable in this respect. Indeed it makes no sense why he would tell Scheuer, virtually out of the blue, that Phillip and he were "approaching" the transaction on a fifty-fifty basis. If Tony Bell made such a comment to Scheuer, one would expect Scheuer to have asked what Tony Bell meant. Tony Bell did not claim that such a question was asked of him. It was not asked because, I find, Tony Bell did not make that remark to Scheuer. I regard Tony Bell's evidence in this respect as a further attempt by him to bolster his response to the cross-claim against him by Phillip Bell.

(iv) The Heads of Agreement do not contain any reference to the adjustment of the shareholding between Phillip Bell and Tony Bell by reference to the amount of $300,000 which Tony Bell claimed was owing to him. No attempt was made by Tony Bell to document the agreement which he claimed he made with Phillip Bell in February 2000 to readjust their shares in accordance with the claimed debt of $300,000.

(v) Tony Bell's account is not supported by the letter which he wrote to Efron and Associates dated 21 July 2000 to which I have already referred. Tony Bell has already acknowledged that the letter was deliberately untrue. Nevertheless, it would have suited his ends to have referred, in that letter, to the $300,000 transaction, if that transaction had occurred between himself and Phillip Bell. The omission of any reference in that letter to the $300,000 transaction is accordingly significant.

(vi) Romanin wrote a letter to Efron dated 31 July 2000, purporting to support Tony Bell's claim that he had an eighty percent interest in the venture at the beginning of 2000. That letter contained no reference to the $300,000 transaction. Again, it would have been relevant for Romanin to have referred to that transaction had it occurred. Again, I consider the omission of any reference to that transaction to be significant.

(vii) If Tony Bell's evidence is accepted, then, without extracting any further consideration from Scheuer, he increased Scheuer's intended interest in the venture from thirty percent to thirty-five percent. Scheuer stated that, when he negotiated with Tony Bell, he was to receive a one-third interest (thirty-three and one-third percent) which was later increased to thirty-five percent. Such an increase, without the payment of any further consideration, is understandable. What is less understandable is an increase from thirty percent to thirty-five percent without at least asking Scheuer to pay anything further.

1134. For all the above reasons I do not accept Tony Bell's evidence as to the discussion which he says he had with Phillip Bell before accepting Scheuer's offer. I am therefore left in the position of not accepting the evidence of Phillip Bell relating to the conversation he had with Tony Bell, and not accepting Tony Bell's evidence as to the conversations he had with Phillip Bell.

1137. Since I have rejected Tony Bell's account, it follows that Tony Bell has not established that he expressly made full and frank disclosure to Phillip Bell of the different proportions of shares being sold for the same price, and had thereby obtained Phillip Bell's informed consent to that transaction. Mr Evans, on behalf of Tony Bell, contended that, if I should so hold, nevertheless I should find that there was implied or inferred consent by Phillip Bell to the transaction.

1140. In his evidence Phillip Bell did acknowledge that, at the time at which he executed the Heads of Agreement, he knew that BPR was selling a twenty-five percent interest, and Tetley selling a ten percent interest, in MPDL. However, the evidence does not establish that, at that time, Phillip Bell knew that BPR and Tetley were each being paid $500,000 by Scheuer, notwithstanding that they were selling different share proportions in MPDL to Scheuer.

1143. In order to contend that Phillip Bell had that knowledge, Mr Evans relied heavily on an answer given by Phillip Bell during his evidence in chief. Phillip Bell gave evidence of the circumstances in which he first saw the Tony Bell Heads of Agreement. Mr Crennan asked him whether he was expecting to see, in that agreement, that Tetley was receiving $500,000 as purchase price from Scheuer. Phillip Bell answered that question with an affirmative "yes... because .... I thought we were both going to get $500,000". Under prompting from Mr Crennan, Phillip Bell then stated that the $500,000 figure did not surprise him, but that amount of money, based on the number of shares that he sold, did surprise him.

1146. The responses made by Phillip Bell during his evidence in chief, summarised above, do call in question Phillip Bell's evidence that, at the time at which he signed the Heads of Agreement, he did not know that Tetley was receiving $500,000 in exchange for ten percent of its interest in MPDL. However, I do not find that that part of Phillip Bell's evidence discredits his evidence. As I have noted Phillip Bell gave his evidence under significant physical discomfort. The question asked of him by his counsel was, at least arguably, ambiguous. The onus relies on Tony Bell to establish, on the balance of probabilities, that he did either expressly or by implication, obtain Phillip Bell's informed consent to the transaction. I do not consider that that evidence does establish, on the balance of probabilities, that Phillip Bell did give such informed consent to Tony Bell. Accordingly it follows that I find that Tony Bell did breach his fiduciary duties to both Phillip Bell and BPR in negotiating the sale of shares in the venture for and on behalf of Phillip Bell and BPR.

1149. As I have noted, it is a matter of academic interest what relief Phillip Bell and BPR would be granted in respect of that breach of fiduciary duty. I shall deal with it briefly. Phillip Bell and BPR claim that they are entitled to equitable compensation as a consequence of the breach of the fiduciary duty by Tony Bell. That claim is put in the alternative. First it is claimed that Phillip Bell and BPR are entitled to compensation that on the basis that, if all the shares in MPDL had been given an equal value, the consideration payable to BPR under the Phillip Bell Heads of Agreement would have been $714,285.70, instead of $500,000. Alternatively it is put that, on the same basis, Tetley should only have received $285,714.30 for its ten percent share in MPDL, instead of $500,000. On either alternative bases Phillip Bell and BPR claim an entitlement to equitable compensation of $214,285.70.

1152. Although the claim was made both by Phillip Bell and BPR, it seems clear that the appropriate claimant in the cross-claim should be BPR. In my view the alternative method by which its claim for equitable damages is expressed is appropriate and consistent with the principles established in the authorities[38].

1155. It was contended on behalf of Tony Bell and Tetley that BPR should not be entitled to any equitable compensation since it had not established that, if Tony Bell had complied with his fiduciary duty, Tony Bell and Phillip Bell would have concluded an agreement whereby each share in MPDL was given an equal value. Even assuming that that factual premise is made out, I do not consider that the argument made by Tony Bell and Tetley in this respect is sound. In Brickenden v London Loan and Savings Company[39], the Judicial Committee of the Privy Council held that where there is a breach of fiduciary duty of the type under consideration in the present case, the fiduciary could not be heard to maintain that disclosure would not have altered the decision by the principal to proceed with the transaction. Their Lordships stated:

"Once the Court has determined that the non-disclosed facts were material, speculation as to what course the (principal), on disclosure, would have taken is not relevant."[40]

1159. The reasoning in Brickenden has been applied by intermediate Courts of Appeal in Australia. In Maguire v Makaronis[41], the High Court considered the Brickenden principle. The High Court held that on the facts of the case before it, it was not necessary to express any concluded view on the Brickenden principle, but nonetheless express views which were clearly supportive of the reasoning in Brickenden. Mr Evans correctly acknowledged that I was bound by Brickenden, but sought to distinguish it. I do not consider that that authority is distinguishable from the present case. Accordingly it would follow that, if Scheuer had failed in his claim based upon rescission of the Heads of Agreement, Phillip Bell and BPR would be entitled to equitable compensation in the sum of $214,285.70.

1162. Further, I do not accept the factual premise upon which Mr Evan's submission is based. In other words I do not accept that if full disclosure had been made by Tony Bell to Phillip Bell, the transaction would have proceeded in the manner in which it was ultimately structured. The question is quite hypothetical. Nevertheless I am not satisfied that, if full disclosure had been made, Phillip Bell would have accepted the disproportionate purchase price paid to Tetley as evidenced by the two Heads of Agreement.

Failure to Issue Shares to BPR and Phillip Bell

1166. The second claim by the Phillip Bell interests in the cross-claim was based on the proposition that Tony Bell acted as agent for them, not only in respect of the negotiations with Scheuer, but also in undertaking to implement the agreement reached in those negotiations. The Phillip Bell interests, in particular, claimed that Tony Bell was to act as their agent in ensuring that shares were issued in MPDL such that the sale to Scheuer could take place, and in attending to all administrative and procedural matters required to effect the sale to Scheuer. The Phillip Bell interests claimed that the duty was breached by Tony Bell since Tony Bell failed to ensure that MPDL issued a requisite number of shares to BPR, so that BPR could implement its part of the Heads of Agreement. They claimed that as a result of that breach, these proceedings were commenced against Phillip Bell and his interests.

1169. I have come to the conclusion that each step of the second cross-claim advanced by Phillip Bell interests is not made out. First, I have found, on the evidence, that Tony Bell acted as agent for Phillip Bell and BPR in negotiating the agreement with Scheuer. However the evidence does not support the proposition that Tony Bell acted as agent of Phillip Bell in respect of the implementation of steps by MPDL, including the issue of shares, to effectuate the terms of the Heads of Agreement. Certainly, Tony Bell, as director of MPDL, was responsible for ensuring that MPDL took appropriate steps to have those shares issued. However the evidence does not establish that Tony Bell undertook to act, or agreed to act, as agent of Phillip Bell in doing so. Thus the second cross-claim of Phillip Bell fails in limine. It is not claimed, by Phillip Bell, that the duty on which he relies arises from any other relationship than a relationship of principal and agent between Tony Bell and himself.

1172. Further, if such a duty as that alleged arose, it was not breached. As I have already found, MPDL did issue 295,000 shares to BPR (as trustee of the P & R Bell Family Trust) shortly after 30 March 2000. I have found that, accordingly, there was no lack of consideration given by BPR for the Heads of Agreement. It is, of course, true that, subsequently, steps seem to have been taken by or on behalf of Tony Bell in an attempt to cancel that issue of shares unilaterally. However, as I have noted, any such steps would have been ineffective at law. The allotment of shares was made, and BPR never consented to its cancellation or withdrawal.

1175. In July 2000 Tony Bell and his accountant, Romanin, sought to advance a proposition to Scheuer which was at odds with the issue of the shares, namely, that Phillip Bell's interest was either limited to twenty percent of the shareholding in MPDL, and that the issue of the shares had been cancelled. Those propositions were advanced by Tony Bell in an attempt to persuade Scheuer to remain involved in MPDL. The statements made by Tony Bell may have reinforced in Scheuer the view that he had been induced to enter into the Heads of Agreement by misrepresentations made, inter alia, about Phillip Bell's shareholding. Nevertheless he had already rescinded the Heads of Agreement and sought repayment, from Phillip Bell, of the monies paid under the Phillip Bell Heads of Agreement. I therefore do not accept the proposition that, on the evidence, the conduct of Tony Bell, in July 2000, was an operative cause of these proceedings being commenced against Phillip Bell and his interests. In any event it is not that conduct which is complained of in the cross-claim made by Phillip Bell and BPR. Rather, what appears to be the subject of complaint is the alleged failure of Tony Bell to ensure that MPDL issued the appropriate number of shares to BPR. For all those reasons, I accordingly reject the second claim advanced by the Phillip Bell interests in the cross-claim.

1179. The third claim by Phillip Bell, BPR and AIS, in the notice of claim, is for contribution and indemnity in respect of the plaintiff's claims. Similarly, by their notice of claim, Tony Bell, Tetley and MPDL claim contribution and indemnity against Phillip Bell, BPR and AIS.

1182. On the conclusions which I have made in relation to the plaintiff's claims, the claims for contribution and indemnity would only be relevant in respect of the award of damages pursuant to s.159 of Fair Trading Act and s.82 of Trade Practices Act. It was accepted that s.23B of the Wrongs Act (Victoria) applies to claims for contribution in respect of the award of damages under the Fair Trading Act[42]. Similarly, it was accepted that the principles of equitable contribution apply to the claims by Scheuer pursuant to s.52 and s.82 of Trade Practices Act[43]. It was also common ground that the principles applicable to the Wrongs Act contribution and to equitable contribution are, for the purposes of this case, the same, namely, focusing on issues of culpability, and of the extent to which each party's act contributed to the loss and damage claim.

1185. It will be recalled that the plaintiff's award of damages is based upon three principal misrepresentations made to him, namely:

(i) That the Multi-Point Data Link product was ready for and capable of commercial exploitation.

(ii) That Phillip Bell would be involved in the business on a full-time basis.

(iii) That Phillip Bell and Tony Bell (or their corporate entities) were entitled to exploit the Multi-Point Data Link system.

1191. Mr Evans contended that the first matter, the subject of the representations - concerning the capability of the product to be commercially exploited - was based on information which could only have been derived from Phillip Bell. However, as I have found, the product was capable of being used. What was misrepresented to Scheuer was that in its then state of development it was capable of commercial exploitation. Phillip Bell was responsible for the design of the product, and, indeed, from late 1999 was pressing for it to be marketed. On the other hand, as I have found, those responsible for marketing the product elected not to bill customers, or to obtain binding commitments from them, because the product, in its then state of development, was not ready for commercial exploitation. Thus sole culpability for the misrepresentation does not lie at the feet of Phillip Bell, although he does bear substantial responsibility for it.

1194. The second misrepresentation - concerning the basis on which Phillip Bell would be involved in the business - was made by Tony Bell. As I have found, at the time Tony Bell made that misrepresentation he knew that Phillip Bell had other commitments and would not be working full-time. Thus Tony Bell was wholly, or at least substantially, responsible for this misrepresentation.

1197. The third misrepresentation concerned the provenance of the MPDL software. I have found that a misrepresentation was made, because of the use of unlicensed Visual Basic 6 in the development of the product. There is no evidence that Tony Bell knew, or should have known, of this defect. Sole responsibility for this misrepresentation must be borne by Phillip Bell.

1200. It is not possible to postulate which misrepresentation played the greater role in inducing Scheuer to enter into the Heads of Agreement. It might be argued on behalf of Phillip Bell that the third misrepresentation - concerning the unlicensed use of Visual Basic 6 - played a lesser role than the other two misrepresentations. However, on the evidence, it would seem to me that it is not possible to properly apportion the extent to which each misrepresentation contributed to the decision made by Scheuer, They each contributed to that decision, but it is not possible to identify which misrepresentation played the greater role.

1203. In light of the above considerations, I have come to the conclusion that both Phillip Bell and Tony Bell should contribute equally, between themselves, to the award of damages which I propose to make in favour of the plaintiff. I have already found that Phillip Bell was acting as agent for BPR and AIS in respect of the Heads of Agreement. Tetley, in its defence, has admitted that Tony Bell was acting as its agent. In those circumstances it is appropriate to make order apportioning contribution on an equal basis between, on the one hand, Tony Bell and Tetley, and, on the other hand, Phillip Bell, AIS and BPR.

1207. In summary, I have upheld the following claims by the plaintiff:

(a) The claim by the plaintiff based upon rescission, in equity, of the Heads of Agreement. I have concluded that pursuant to that rescission the plaintiff is entitled to orders for repayment:

(i) By BPR of $425,000

(ii) By Tetley of $350,000

(iii) By MPDL of $35,000

(b) The claim by the plaintiff for damages in the sum of $810,000 against Phillip Bell, AIS, BPR, Tony Bell and Tetley.

(c) The claim by the plaintiff against Tony Bell for money lent in the sum of $145,038.46.

1214. On the cross-claim by Phillip Bell, AIS and BPR against Tony Bell and Tetley I have concluded:

(a) That Tony Bell breached his fiduciary duty to Phillip Bell, BPR and AIS. However, since I have found that the plaintiff has validly rescinded the Heads of Agreement, the three cross-claimants have suffered no damages.

(b) BPR (as trustee of the Bell Investment Trust) is entitled to fifty percent of the issued share capital of MPDL. The judgment will record the undertaking proffered by the fourth to sixth defendants, and accepted by the first to third defendants.

(c) Phillip Bell, BPR and AIS are entitled to orders for contribution from Tony Bell and Tetley to the extent of fifty percent in respect of the judgment by the against them for damages.

1220. On the cross-claim by Tony Bell and Tetley against Phillip Bell, BPR and AIS, Tony Bell and Tetley are entitled to orders for contribution to the extent of fifty percent in respect of the judgment by the plaintiff against them for damages.

1223. Accordingly, and subject to hearing from counsel on issues as to interest and costs, there will be judgment as follows:

(a) On the plaintiff's claim for repayment of monies based upon rescission of the Heads of Agreement there shall be:

(i) Judgment for the plaintiff against the third defendant (BPR) in the sum of $425,000.

(ii) Judgment for the plaintiff against the fifth defendant (Tetley) in the sum of $350,000.

(iii) Judgment for the plaintiff against the sixth defendant (MPDL) in the sum of $35,000.

(b) On the plaintiff's claim for damages for breach of the Fair Trading Act and s.52 of the Trade Practices Act there shall be judgment for the plaintiff against the first, second, third, fourth and fifth defendants for damages in the sum of $810,000, such damages to be reduced by and to the extent of any payments made to the plaintiff under clause (a) hereof.

(c) On the plaintiff's claim against the fourth defendant (Tony Bell) for money lent, there shall be judgment for the plaintiff against the fourth defendant in the sum of $145,038.46.

(d) On the cross-claim by the first, second and third defendants against the fourth, fifth and sixth defendants there shall be relief as follows:

(i) An undertaking by the fourth to sixth defendants to be bound by the determination of the Court as to the entitlement of the third defendant BPR Investments Pty Ltd (as trustee of the Bell Investment Trust) to fifty percent of the shareholding in the sixth defendant (MPDL Pty Ltd) and to take all reasonable steps to ensure that shares are issued or transferred in MPDL Pty Ltd, if required, so as to reflect that determination.

(ii) It shall be ordered that the fourth defendant and the fifth defendant make contribution in respect of fifty percent of the judgment against the first defendant, the second defendant, and the third defendant for damages in favour of the plaintiff.

(e) On the cross-claim by the fourth and fifth defendants against the first, second and third defendants it shall be ordered that the first, second and third defendants make contribution to the fourth defendant and the fifth defendant to the extent of fifty percent in respect of the judgment by the plaintiff against the fourth and fifth defendants for damages.

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[1] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360.

[2] Compare for example Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597 at 605 (per Kitto J).

[3] See for example Donoghue v Allied Newspapers Ltd [1938] Ch. 106 at 111.

[4] [1838] EngR 460; (1838) 9 Sim 151; 59 ER 316.

[6] See New Zealand Shipping Company Ltd v Societe des Ateliers et Chantiers de France [1919] AC 1 at 6,9; Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 440, 441_; Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd_ [1981] AC 909 at 987-988; Zieme v Gregory [1963] VicRp 34; [1963] VR 214 at 222-223.

[8] See Australian Brokerage Ltd v Australian and New Zealand Banking Corporation Ltd [1934] HCA 34; (1934) 52 CLR 430 at 450-451 (per Dixon, Evatt and McTiernan JJ); Claude R Ogden and Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1973] NSWLR 7 at 19-20 (per MacFarlan J); Ramsey v Vogler [2000] NSWCA 260 at paras 32-35.; Lloyd v Grace Smith and Co [1912] UKHL 1; [1912] AC 716 at 737 (per Lord MacNaghten); Credit Lyonnais Bank Nederland NV v Export Credit Guarantee Department [1999] UKHL 9; [2000] 1 AC 486 at 494-495 (per Lord Woolf MR).

[9] See J_ones v Dunkel_ [1959] HCA 8; (1959) 101 CLR 298 at 308, 312, 321; Earle v Castlemaine District Community Hospital [1974] VicRp 86; [1974] VR 722; O'Donnell v Reichard [1975] VicRp 89; [1975] VR 916 at 929.

[10] See Microsoft Corporation and Another v Atifo Pty Ltd and Ors (1997) 38 IPR 643.

[11] [1984] HCA 68; (1985) 157 CLR 215 at 236.

[12] Compare Gould v Vaggelas supra at 238-9.

[16] Compare Carr v JA Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327; Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634.

[17] [1958] HCA 55; (1958) 101 CLR 428 at 452.

[18] [1844] EngR 836; (1844) 4 HARE 1 at 5, 6.

[19] See also Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 at 474-5; Vadasz v Pioneeer Concrete (SA) Pty Ltd [1995] HCA 14; (1995) 184 CLR 102 at 111-12; Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216 at 224.

[20] (1886) 34 ChD 582.

[21] [1891] VicLawRp 142; (1891) 17 VLR 745.

[22] [1990] FCA 51; (1990) 26 FCR 112.

[23] [1952] HCA 16; (1952) 87 CLR 647 at 650.

[25] See Sibley and Or v Grosvenor and Or [1916] HCA 14; (1916) 21 CLR 469 especially at 475-6 (per Griffith CJ with whom Gavan Duffy J agreed), and at 479 (per Barton J).

[27] Supra at p. 475-6; emphasis added.

[28] [1998] HCA 69; (1998) 196 CLR 494.

[30] See Toteff v Antonas supra, Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281.

[31] See Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23, especially at 36-37 (per Gibbs CJ); JLW (Vic) Pty Ltd v Tsiloglou [1994] VicRp 16; [1994] 1 VR 237 at 248 (Brooking J), 250 (per Tadgell and JD Phillips JJ).

[32] Compare Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70.

[34] See McKenzie v McDonald [1927] VicLawRp 19; [1927] VLR 134 at 144-5; Breen v Williams (1996) 186 CLR 71 at 92-3 (per Dawson and Toohey JJ), 107 (per Gaudron and McHugh JJ); Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 97 (per Mason J); Pilmer v Duke Group Ltd (in liquidation) [2001] HCA 31; (2001) 207 CLR 165 at 196.

[35] See Erlanger v New Sombrero Phosphate Company (1878) 3 App Cas 1218 at 1236; Hill v Rose [1990] VicRp 13; [1990] VR 129 at 141; Maguire v Makaronis supra at 466; McKenzie v McDonald supra at 144.

[36] See Maguire v Makaronis supra at 466.

[37] See Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 343-4, 354, 362-3;

Rejfek v McElroy ([1965] HCA 46; 1965) 112 CLR 517; Helton v Allen [1940] HCA 20; (1940) 63 CLR 691.

[38] See, in particular, Hill v Rose supra at 143.

[39] [1934] 3 DLR 465.

[42] See Pricom Pty Ltd v Sgarioto (1994) ATPR 41-365.

[43] See Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282.