Singtel Optus v Almad - [2013] NSWSC 1427 - NSWSC 2013 case summary — Zoe

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Singtel Optus v Almad

[2013] NSWSC 1427

Supreme Court of NSW|2013-09-30|Before: McDougall J

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Source facts

Court

Supreme Court of NSW

Decision date

2013-09-30

Before

McDougall J

Source

Original judgment source is linked above.

Judgment (33 paragraphs)

[1]

ndant (Unrepresented) File Number(s): 2011/139541

[2]

Judgment 1HIS HONOUR: Optus (as I shall call the plaintiffs collectively) has provided telecommunications services in Australia for a number of years. The supply of those services requires "logistics" support: the transport and warehousing of goods. The second plaintiff (Optus Administration) employed the third defendant (Mr Curtis) from September 1998 to December 2008, initially as "Logistics Manager" and, from July 2001, as "General Manager - Logistics". In the latter position, Mr Curtis was responsible for, among other things, procuring and managing the supply of transport and warehousing services for Optus' networks business. 2Optus used brokers to source some logistics services. Initially, so far as the evidence goes, it used a company known as Transcoast Express (Transcoast). Later, it used a company known as MTM Transport and Logistics (MTM). Later still, it used the first defendant (Almad). Mr Philip Davey was the common link: he was (either in his own right or through Almad) a commission sales agent for Transcoast and later MTM, and the principal of Almad. It was Mr Davey who had a connection with Optus which enabled him to procure the brokerage of some of its logistic work for, successively, those companies. 3From about March 2004, Mr Curtis caused the second defendant (Sumo), a company whose creation he had brought about, and whose business he effectively controlled (although not formally a director) to provide some warehousing services to Optus. This he did through Almad as broker. Mr Curtis did not reveal to his superiors at Optus, let alone seek their approval for, this activity. It is clear that, in acting as he did, Mr Curtis breached various contractual, fiduciary and statutory duties that he owed to one or other or more of the plaintiffs. 4The third defendant (Mr Hasler) was employed by Optus Administration as Outbound Operations Manager (reporting to Mr Curtis), from May 2001 to March 2005. Mr Hasler assisted, or worked with, Mr Curtis in the creation of Sumo and the establishment of its warehouse business. After Mr Hasler left the employ of Optus, he worked full time for Sumo, effectively managing its day to day operations. 5The fifth defendant (the parties referred to it by its business name, "Electrosales", and I shall do likewise) is a corporate entity controlled entirely by Mr Curtis. He used Electrosales to sell obsolete or surplus stock of Optus to companies in America. The business records created by Mr Curtis in relation to that sale make it clear that the stock that was sold was stock owned by Optus. Mr Curtis says, however, that the stock had been owned by another company known as Megatron, which was in liquidation and which effectively had given the stock to Electrosales to dispose of on its own account and as it saw fit. 6As might be expected, the matters that I have briefly summarised have given rise to claims by Optus against the various defendants. It should be noted, in addition to what I have said, that: (1) Optus says that in all the circumstances, Almad was required to disclose to it, but did not disclose, that Mr Curtis, through Sumo, was on the other end of supply transactions brokered by Almad for Optus, and that Almad's failure to make that disclosure amounts to misleading or deceptive conduct; (2) Sumo has failed to account for, and thus should be taken to have converted, some millions of dollars' worth of Optus stock that it had stored; and (3) there is another claim in conversion against Electrosales, which claim is admitted, in the sum of $15,000.00.

[3]

The real issues in dispute 7The parties agreed on the real issues in dispute that arose from the "pleadings". I set those issues out, with some amendments to delete claims that were dropped, progressively, in the course of the hearing: 1. Whether the third defendant (Mr Curtis) was in breach of: a. his fiduciary duty to the plaintiffs (Optus); b. his statutory duty under either sections 182 or 193 or both of the Corporations Act (2001) (Cth); or c. his employment contract with the third plaintiff (Optus Administration), including by placing himself in a position in which his personal interest were in conflict with the interests of Optus. 2. If so, whether one or more of the second defendant (Sumo), the fourth defendant (Mr Hasler) and the fifth defendant (Electrosales) was knowingly involved or concerned in the said breach of fiduciary or statutory duty by Mr Curtis. 3. Whether Almad was in breach of its contract with the first plaintiff (SingTel Optus) by overcharging in respect of the rates charged per pallet. 4, Whether Almad was liable for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) (TPA) for failing to disclose to Optus the conduct of Mr Curtis, Mr Hasler or Sumo when it would have been reasonable for it do so. 5. If so, whether any one or more of Sumo, Mr Curtis or Mr Hasler is liable pursuant to section 75B of the TPA in relation to the said contravention of the TPA. 6. In relation to the claims for conversion and bailment, whether: a. Sumo is liable in respect of the missing stock referred to at FACLS [37]; b. either Sumo or Electrosales or both are liable in respect of the sale of Optus stock to Telecycling LLC. 7. Whether Optus is entitled to relief and, if so, the appropriate form of relief. 8Sumo is in liquidation. Optus was given leave to proceed against Sumo. Sumo chose not to defend the claims made against it. 9For convenience, when I refer hereafter to the represented defendants (Almad, Mr Curtis, Mr Hasler and Electrosales) together, I shall call them simply "the defendants"; but it should be remembered that this appellation does not include Sumo. 10For reasons that remain unexplained, the defendants' written closing submissions did not address in terms the issues that had been agreed. Nor was that deficiency rectified, except intermittently and, I think, by chance, in oral closing submissions. That is unfortunate. It may well be that, given the way those submissions were structured, I have not appreciated the relationship between a particular submission and a particular issue. 11It is not acceptable for parties to ignore the agreed issues. Agreed issues serve a number of purposes. First, they distil the pleadings, reducing them to the real issues for decision. Secondly, they assist the parties and the court in the conduct of the trial (for example, in relation to questions of admissibility of evidence). Thirdly, they provide a guide, or road map, to resolution of the parties' disputes. To conduct a case without referring in terms to the agreed issues is no more sensible then driving in unknown country without referring to a map. It does not seem to me to be consistent with the obligations that parties and their legal representatives owe to the court under s 56 of the Civil Procedure Act 2005 (NSW) for litigation to be conducted in this way.

[4]

The claims for relief 12In the course of final submissions, Optus prepared a schedule summarising the claims for relief made by the various plaintiffs against the various defendants. I set those out, with some minor changes to reflect obvious and uncontentious errors: Agreed Plaintiff Claim Defendant Relief Issue 1a SingTel Optus Breach of fiduciary duty Mr Curtis Equitable compensation in the amount of $3,147,210 (made up of Almad mark up of $1,879,333 and price increase of $1,267,877) 1b SingTel Optus, Optus Networks and Optus Administration Compensation under s1317H of the Corporations Act (breach of section 182, 183) Mr Curtis Compensation in the amount of $3,147,210 (including any profits not covered by issue 1(a)). 1c Optus Administration as trustee for SingTel Optus and Optus Networks Employment contract Mr Curtis Damages in the amount of $3,147,210 2a SingTel Optus, Optus Networks and Optus Administration Knowingly involved in breach of fiduciary duty Sumo Account of profits in the amount of $4,261,750 (being total profit of $4,173,761 less loss for 1 July 2010 - 31 December 2010 of $110,723 plus $198,712 paid to Harmanis and Zotz family interests) and a declaration that the said sum is held on trust for plaintiffs 2b SingTel Optus, Optus Networks and Optus Administration Compensation under s1317H of the Corporations Act (knowing involvement in breach of sections 182, 183) Sumo Account of profits if not covered by previous order (ie no double recovery) 2c SingTel Optus Knowingly involved in breach of fiduciary duty Mr Hasler Equitable compensation in the amount of $3,147,210 2d SingTel Optus, Optus Networks and Optus Administration Compensation under s1317H of the Corporations Act (knowing involvement in breach of sections 182, 183) Mr Hasler Compensation in the amount of $3,147,210 including profits less any amount covered by previous order 2e SingTel Optus Knowingly involved in breach of fiduciary duty Electrosales Equitable compensation in the amount of $3,147,210 2f SingTel Optus, Optus Networks and Optus Administration Compensation under s1317H of the Corporations Act (knowing involvement in breach of section 182, 183) Electrosales Compensation in the amount of $3,147,210 including profits less any amount covered by previous order 3 SingTel Optus Breach of contract Almad $1,267,877 4 SingTel Optus s. 52 of TPA Almad Damages in the amount of $3,147,210 5 SingTel Optus s. 75B of TPA Sumo Damages in the amount of $3,147,210 5 SingTel Optus s. 75B of TPA Mr Hasler Damages in the amount of $3,147,210 5 SingTel Optus s. 75B of TPA Electrosales Damages in the amount of $3,147,210 6a Optus Networks Bailment/conversion Sumo $5.4 million less 10% which equals $4.86 million 6b SingTel Optus, Optus Networks Conversion/bailment for stock sold to Telecycling Electrosales and Sumo $104,492.87 6c Optus Networks Conversion (admitted) Mr Curtis and Electrosales $15,000

[5]

Assessment of credibility 13Although much of the evidence is documentary, there is, nonetheless, a substantial body of testimonial evidence that requires consideration. Some of that evidence is contentious. It is thus necessary to make an assessment of the credibility of the witnesses whose evidence is contentious, and whose credibility has been called into question. 14I start by observing that, with one exception, there was no attack on the credibility of the witnesses called by Optus; indeed, some of them were not required for cross-examination (and the affidavit of another, which Optus did not read, was tendered without objection, and thus admitted into evidence, by the defendants). It follows that, so far as it goes, and acknowledging the obvious limitations that attend any attempt to recall events that occurred some years ago, I accept the evidence of those "unimpeached" witnesses. The evidence of Mrs Grech 15The exception - the witness of fact called by Optus whose credibility was called into question - is Mrs Brooke Grech. 16Mrs Grech was a director of MTM from January 2002 (when it came into existence) until September 2009 (when it went into liquidation; it has since been deregistered). She was called principally to give evidence of conversations that, she said, she had had with Mr Davey. One of those conversations (set out in para 7 of her affidavit) could only have been relevant to credibility, and (being objected to) was rejected. 17In para 8 of her affidavit, Mrs Grech gave evidence of what, according to her, had been said at one of MTM's "regular monthly management meetings", held in about January 2004. Mrs Grech said that her husband Mr Darren Grech, Mr Andrew Moyle (another principal of MTM), and Mr Moyle's wife, Mrs Sharon Moyle and sister-in-law, Ms Melinda Woollen, attended the meeting. Mr and Mrs Grech and Mr Moyle, were directors of MTM. None of those people was called. 18Mrs Grech gave what purported to be a verbatim account, in direct speech, of a conversation between her and Mr Davey at the meeting. I return to this evidence at [81] and following below. At present, it is sufficient to note that Mrs Grech's evidence was given more than nine years after the conversation is said to have occurred. 19There is no suggestion that Mrs Grech had made, let alone refreshed her memory from, a contemporaneous note of the meeting. So far as the evidence goes, she was relying on unaided recollection. 20Human experience makes it difficult to accept that anyone could give an accurate account of a conversation that had occurred over nine years ago: at least, without relying on some contemporaneous materials to support the recollection. The evidence did not come to light until after the commencement of the hearing. Presumably, it occurred to someone among Optus' legal advisers to contact Mrs Grech and obtain an affidavit from her. There is no reason to think that she had been asked, more recently than late July 2013, to cast her mind back more than nine years to the events recounted in the relevant paragraph of her affidavit. 21Further, as the cross-examination of Mrs Grech demonstrated, MTM and Mr Davey had parted company on acrimonious terms (Mr Davey's services were provided to MTM through Almad, but nothing turns on this). And, just as Mr Davey had brought the business of Optus and others to MTM when he left Transcoast, so, when he left MTM, he took that business with him. As events showed, the volume of that business was of the order of $18 million over the ensuing 6 years. MTM operated as a broker, charging a 20% markup on services that it procured for Optus. Thus, the broker's share of that lost business was one-sixth, or $3 million. 22I have little doubt that it was the loss of the business that departed with Mr Davey that led ultimately to the liquidation of MTM. Further, although Mr and Mrs Grech thereafter set up a "Phoenix" business, seeking to capitalise on the connections that they had formed while working in MTM's business, that business too failed. 23In those circumstances, I think that, although Mrs Grech denied it, she harbours considerable ill will towards Mr Davey, and that this was reflected both in her willingness to give evidence effectively against him and, also, in her asserted ability to recall the detail of the conversation. 24Mr Stoljar of Senior Counsel, who appeared with Mr Mackay of Counsel for Optus, submitted that there was significant corroboration for her evidence in an email that Mr Hasler sent to Mr Curtis on 5 July 2004. Since the significance to be attached to that email was itself contentious, I shall return to this aspect of Mrs Grech's evidence when dealing with that email. (see at [92] and following below). 25For present purposes, it is sufficient to note that I think that there is substance in the challenge directed to Mrs Grech's credibility. I am not prepared to accept, without reservation and at face value, this aspect of her evidence. In reaching this conclusion, I take into account not just the matters already discussed but also what I say at [86] to [90] below. The defendants' evidence 26Not all of the defendants' evidence was contentious. The affidavits of two witnesses, Mr Mark Barber and Mr Kevin Farrington, were read without the deponents being required to attend for cross-examination. It follows that I accept their evidence, so far as it goes. 27To a greater or lesser extent, the evidence of the remaining witnesses was called into question. Those witnesses were Mr Curtis, Mr Hasler, the latter's son Mr Trent Hasler, Mr Michael Tull and Mr Davey. I shall deal with each of those in sequence. Mr Curtis 28Mr Curtis swore a number of affidavits, one of which was of prodigious length. He was cross-examined in detail over a number of days. 29I am not prepared to accept Mr Curtis as, in general, a witness on whose evidence I can place any reliance. I say that for a number of reasons. 30First, in acting as he did to set up Sumo and direct some of Optus' business to it, Mr Curtis acted in a way that, he must have recognised, was in breach of duties to Optus. Further, no doubt in an attempt to rationalise this, Mr Curtis gave an excuse for his actions which I find to be false. He said, in effect, that his superior Mr Ray Badnall had given him a very poor performance and development rating (PDR) - PDR 5 - the lowest possible on the Optus scale. Mr Curtis said, by reference to the fate of another employee who had been similarly rated, that he feared that he would be "managed out" (as I understand it, a euphemism for termination of employment). Mr Curtis said that he set up the Sumo business to provide a source of livelihood in the event that he was "managed out". 31However, Mr Badnall said that he thought that Mr Curtis was "a very capable manager" and could not "recall ever giving him a bad review or a poor PDR rating". Mr Badnall was not cross-examined. 32Optus tendered what it said were, and appeared to be, printouts of screen dumps of the PDRs performed from year to year on Mr Curtis. In none of those was Mr Curtis assigned a PDR 5 rating. On the contrary, his ratings were generally PDR 2 or PDR 3. Mr Curtis, confronted by these records, sought to suggest that there were other records which contained other, poorer, ratings. Quite why Optus would keep two sets of PDR rating records, one apparently favourable to the employee and one unfavourable, was something that Mr Curtis did not seek to explain. Nor was any attempt made to identify, or require the production of, those other records that, according to Mr Curtis, would have shown the true situation. 33As I have said, I think that the explanation that he gave, to justify his actions, was false. So too, in my view, was his attempt to explain away the satisfactory PDRs that were proved. 34In relation to the Electrosales transaction, Mr Curtis created business records, including an invoice from Optus to the purchaser, an American company known as Telecycling, which stated clearly that the stock the subject of the sale was the property of Optus. Mr Curtis admitted to dishonest activity in connection with this sale. That of itself does him no credit, although it may be said that his admission, no doubt when the game was seen to be up, might help to redeem him. But, in relation to the business records showing a sale by Optus of its own stock, Mr Curtis gave an explanation which I find to be false. 35According to Mr Curtis, it was necessary that Telecycling be assured that the stock was the stock of Optus, since otherwise it might not proceed with the purchase. Yet it was clear, from his and other evidence, that representatives of Telecycling had been shown the stock (which was located in the warehouse then operated by Sumo at Smithfield), and had become aware that, as the pallets of stock were plainly branded, it was apparently stock of Megatron. 36I find the admitted and proved conduct of Mr Curtis, in relation to the Telecycling sale, to be inconsistent with any reasonable standard of honesty; and I regard his purported rationalisation of that dishonesty as, itself, false and dishonest. 37In general, I am not prepared to accept the evidence of Mr Curtis on any contentious point unless it is corroborated by other, acceptable, evidence; or unless it accords with the probabilities as, objectively, I see them. Mr Hasler 38For convenience, I shall refer to Mr Hasler Senior as "Mr Hasler" and to his son as "Mr Trent Hasler". 39Mr Rayment of Queens Counsel, who appeared with Mr Johnson and Ms King of Counsel for the defendants, submitted that I should find that Mr Hasler was a credible witness. I am not prepared to do so. 40It appeared to me, in the course of Mr Hasler's cross-examination, that he had very little actual recollection of relevant events. That, in my view, may be seen in his repeated professions of non-recollection. 41There is a further and specific problem with Mr Hasler's evidence. I have referred at [24] to an email that he sent to Mr Curtis on 5 July 2004. That email recorded, among other things, a conversation which Mr Hasler said he had had that very day with Mr Davey. When the substance of the conversation was put to Mr Hasler, he denied it. At first, it was apparent that the denial reflected the fact that he could not recall what was put to him. But it became apparent very shortly that the denial went further. Of course, when the email was then shown to Mr Hasler, he was forced to admit that the conversation had indeed taken place. 42To my mind, that passage of Mr Hasler's cross-examination provides a striking example of what I perceived to be a propensity on his part to answer in a way that he thought might be suitable to his interests, without paying sufficient attention to the veracity of what he said. 43Nonetheless, I do not reject Mr Hasler's evidence entirely. On the contrary, as will become apparent in discussing the issues, there were passages of his evidence that I do regard as essentially truthful. Mr Trent Hasler 44Mr Trent Hasler impressed me as a witness who had a reasonable recollection of events and who sought to give honest and accurate evidence. Acknowledging the fallibility of human memory, nonetheless I regard Mr Trent Hasler as a reliable and truthful witness. Mr Tull 45Mr Tull is another witness who was asked, after the commencement of the proceedings, to cast his mind back some number of years and give evidence of what had happened. He said (and I return to his evidence at [192] and following below) that he had been engaged from about July to December 2005 in moving goods from Sumo's Campbelltown warehouse to its new warehouse premises at Lidcombe. 46Mr Tull acknowledged, candidly and appropriately, the limitations on his memory, and the possibility of error. Nonetheless, particularly bearing in mind some corroborative material to which he referred (and again, I shall return to this), he struck me as a witness who was seeking to give honest and reliable evidence to the best of his ability. 47I accept Mr Tull as a witness of truth, and as someone on whose evidence I can place reliance. Mr Davey 48Mr Davey gave evidence in a straightforward way. In general, he impressed me as a careful and capable businessman, with a good recollection of what he perceived to be the relevant events. 49As I say below, in dealing with the claim against Almad for misleading or deceptive conduct (issue 4), I do not think that Mr Davey was inclined to give close scrutiny to matters of ethical or moral significance in the business practices of those with whom he dealt. But it does not follow that Mr Davey is an unreliable witness, let alone that he is dishonest. 50Mr Davey was cross-examined about the conversation recounted in the email of 5 July 2004. He said that he could not recollect it. That is not surprising; there is no particular reason why he should have recollected it. Thus, I do not find his non-recollection to be suspicious, even when contrasted with what appeared to be his generally good powers of recollection. I think that Mr Davey focused his attention on his business, that his recollection of what, in his view, was relevant to the business is good, and that his recollection of what to him were likely to have been peripheral matters has faded. 51On balance, and bearing in mind that Mr Davey has had an obvious and very significant financial interest in the outcome of the proceedings, I conclude that he is a witness who sought to give truthful evidence, and on whose evidence, in general, I can rely.

[6]

History: the early days 52Before turning to the issues, I shall set out the relevant history. Most of this is non-contentious, although of course the parties were not always of one mind as to the emphasis to be given to, or significance of, particular events. Where there is dispute, I shall deal with it. 53What follows is based substantially on a chronology and summary of facts provided by Mr Stoljar in his final submissions. I have taken that course because, to a large extent, there was no challenge to either the sufficiency or the accuracy of Mr Stoljar's narration of the relevant primary facts. 54Mr Curtis started working for Optus in about September 1998, initially in the position of Logistics Manager. He signed written undertakings on 9 November 1998, and (on 30 November 1998) a written offer of employment. Those documents made it clear that, among other things, although Mr Curtis was employed by Optus Administration, his duties as an employee were owed not only to that company but also to its related bodies corporate. 55The contract of employment stipulated that Mr Curtis would not act in conflict with the best interest of Optus Administration, nor compete with it or its related bodies corporate; and that he would comply with all its policies as in force from time to time. I set out the relevant parts: You [Mr Curtis] must serve the Company faithfully and diligently; act in the best interests of the Company and its Related Bodies Corporate (as defined in the Corporations Law); not act in conflict with the Company's best interests or compete with the Company or its Related Bodies Corporate; and comply with all Company policies and applicable laws in force from time to time. 56Optus proved a "Procurement Ethics Policy" dated 6 June 2000. There is no doubt that this was a "Company policy" of the kind that Mr Curtis undertook to obey. Section 2 of that Procurement Ethics Policy dealt with conflict of interest. It reads as follows: 2. Conflict of Interest It is essential that Optus employees and non payroll staff do nothing that conflicts with the interests of Optus, or anything that could be construed as being in conflict. Contracts and agreements must always be checked to ensure that conflict of interest is not present, and cannot be implied. 2.1 Business Dealings Business dealings which are in conflict with the interests of Optus must be avoided. Business dealings which may result in a conflict of interest include significant ownership of shares in, holding a position or having any interest in or dealings with any of our competitors, suppliers or customers which might, or might appear to, create a conflict of interest, or impair the judgments of an Optus employee. 2.2 Personal Dealings Any personal dealings with third parties outside of the Optus work environment that may possibly affect judgement with regard to work matters, must be reported to the individuals manager. On no account should Optus' business be discussed outside of the work environment. 57To jump ahead for a moment: when Mr Curtis was involved in the evaluation of a request for tender (RFT) OCT-881, he signed "Core Evaluation Team Undertakings". By those undertakings, he agreed among other things that he had read and understood the Procurement Ethics Policy. He also agreed as follows: 2. I have specifically disclosed to Optus (in writing) any conflict of interest I have in the subject matter of the RFT other than as an Optus employee or contractor and any information or circumstances which may affect my ability to evaluate the RFT. If at any time during the evaluation, I come to have any interest of that kind, I undertake to immediately disclose that interest to Optus, in writing. 58Before Mr Curtis started to work for Optus, he had worked for Nestlé Australia and, before that, for Woolworths. It was in the course of his employment by Woolworths that Mr Curtis met Mr Hasler. 59About 8 months before Mr Curtis started to work for Optus, he became a director of Electrosales. Electrosales (more precisely, the company PJC 333 Pty Ltd) was a company that had been set up by Mr Curtis' father-in-law, Mr Peter Curtis, to manage the latter's accountancy practice. When Mr Peter Curtis retired and the company ceased to perform any useful function for him, Mr (Leon) Curtis took it over. 60In late 1999, Mr Curtis became involved in a project known as N559-Insourcing. That project investigated bringing back into the direct control of Optus its warehousing activities (or a substantial part of them). It was contemplated that substantial savings could be effected if this were done. However, in April 2000, Optus decided that the project would not proceed. 61Mr Curtis said that, as a result of this, he was given a bad PDR rating by his manager Mr Badnall. That, according to Mr Curtis, was what led to the decision to establish Sumo. I have referred to this at [30] to [33] above, in dealing with the question of credibility. 62Mr Curtis effectively recruited Mr Hasler to work at Optus. In April 2001, Optus Administration made an offer of employment to Mr Hasler, to be its Outbound Operations Manager. Mr Hasler accepted that offer and commenced work, reporting to Mr Curtis, in May 2001. 63Mr Curtis became General Manager - Logistics on 16 July 2001. He said that this was more a change of title than a change of responsibility. 64Optus submitted that, in this position, Mr Curtis was a "senior employee". Mr Curtis did not accept that characterisation of his importance. Regardless of terminology, it is clear that, as General Manager - Logistics, Mr Curtis had very substantial duties and responsibilities. A "position description" prepared by Mr Curtis in January 2004 said that: The GM Logistics is responsible for the functional control and operation of all materials purchase, planning, storage and movements for SingTel OPTUS network builds and assurance. 65In that position Mr Curtis had five people reporting to him directly and, on average, about 30 people under his direct or indirect control (the number fluctuated, mainly by diminution, over time). 66In September 2001, Transcoast became "the preferred carrier" for Optus. This appears to have been achieved because Mr Davey had moved from Mayne Nickless to Transcoast, and had taken his connections (including for Optus business) with him. 67In November 2001, a company known as Optus Stockco Pty Ltd signed an agreement with Megatron Electronic Industries Pty Ltd under which Megatron agreed to take from Optus Stockco and sell, for their mutual benefit, "obsolete, redundant or surplus electronic products". 68The Megatron agreement (as it is convenient to call it) provided that title would pass to Megatron on collection of the goods and on payment of a notional amount of $1 per item (later, I think, changed to $1 per pallet load). It provided, further, that Optus could buy back all or any part of the equipment at its discretion, paying the like fee. 69In March 2002, Mr Hasler undertook a review of Optus' freight and distribution services. It recommended that MTM be used, in place of Transcoast; and this was done. Again, I think, this happened because Mr Davey moved from Transcoast to MTM, and took his business connections with him. 70In late November 2002, after a tender process, a company known as Computer Logistics Pty Limited started to provide the bulk of Optus' warehousing and freight requirements. Computer logistics was bought out by United Parcel Service (UPS).

[9]

Sumo becomes a supplier to Optus 80Returning to CALM: there were meetings in December 2003 and January 2004 between representatives of Optus and representatives of MTM (Mr Alex Harmanis and Mr Farrington for Optus, and Mr Davey and Mr Moyle for MTM). Concerns were expressed at the "black chalky substance". 81On 28 January 2004, Mr Curtis wrote to MTM, identifying Optus' complaints and requiring that they be addressed. That position was reinforced in a further meeting which took place two days later, on 30 January 2004. The minutes of that meeting show that Mr Davey had until 28 February 2004 to address the problems with CALM. However, as the preceding chronology of events might suggest, by then Mr Curtis had made up his mind to terminate the services of CALM. 82It was at about this time (January 2004) that, according to Mrs Grech, the conversation took place in which she raised, with Mr Davey among others, concerns at the idea that Mr Curtis and Mr Hasler were involved, through their interest in Sumo, with the supply of services to their employer, Optus. Mrs Grech did not suggest that Mr Hasler was present at that meeting. 83In his affidavit sworn on 13 March 2013, Mr Hasler said at para 44 that he and Mr Curtis met "personnel from MTM" at a meeting "in early 2004". According to Mr Hasler, the only issue raised by Mrs Grech was that services provided in replacement for those offered by CALM would have to be at a lower rate than charged by CALM. Further, according to Mr Hasler, either he or Mr Curtis asked whether anyone saw a problem and that the (I interpolate, only) reply, "no", came from Mr Davey. 84Mrs Grech gives an account of a very different conversation: one that did not involve Messrs Curtis and Hasler. In para 8 of her affidavit sworn 1 August 2013, Mrs Grech said that there was a conversation at one of MTM's "regular monthly management meetings", in which Mr Davey said that the supplier of warehouse services to Optus was to change. According to Mrs Grech, the conversation was to the following effect: 8. In approximately January 2004, MTM held one of its regular monthly management meeting. I recall that Mr Davey, my husband, Mr Moyle, his wife Mrs Sharon Moyle and Ms Melinda Woollen, Mr Moyle's sister in law all attended the meeting. It was our usual practice at these regular monthly management meetings to discuss how business was going, existing clients' needs, supplier issues, customer service and any account issues. At this particular meeting, I recall that Mr Davey brought up changing warehouse providers for Optus. I recall we had a conversation in words to he following effect: Davey: At the request of Optus we are going to relocate all the Optus stock from CALM to another warehouse. Me: Why would we do that? Davey: Optus has instructed us to. Me: Who is the new supplier? Davey: Sumo Distribution and Storage. Me: Where is it and who operate it? Davey: Craig Hasler and Leon Curtis will be running it. Me: How can Craig and Leon run a warehouse storing Optus stock while they are still working for Optus? Surely that's a conflict of interest? Davey: That's got nothing to do with us. Me: I am not comfortable with this at all. I don't see how it can be legal and I don't want to get involved. I can't imagine Optus consenting to this arrangement. Davey: This is nothing to do with us. They will invoice us and we will invoice Optus and Optus will pay us the same as before. Me: I don't care. I don't like it and I want to understand more. Davey: Leon Curtis and Craig Hasler have set it up as a partnership and got a warehouse. Our invoices will be paid and approved as normal. Me: There is no way we can do business with them. It's not an acceptable business arrangement and I am worried about the effect this may have on MTM and its reputation. Mr Davey: They will sort it out and make sure that there are no problems. 85Mrs Grech's affidavit did not deal with the conversation said by Mr Hasler to have occurred at about the same time. It might have been expected (because Mrs Grech's affidavit was sworn more than four months after Mr Hasler's affidavit was sworn) that Mrs Grech would have been asked to deal with this aspect of Mr Hasler's evidence. 86However, Mrs Grech was cross-examined on the conversation to which Mr Hasler had deposed. Her cross-examination on this evidence is somewhat lengthy. However, it should be set out in full (T235.41-238.9): Q. Do you recall seeing at the MTM premises in the first half of 2004 Leon Curtis and Craig Hasler? A. I do remember seeing them, yes. Q. I suggest to you what was happening at that meeting was there was an enquiry made by Curtis and Hasler as to whether they set up a new business of warehousing and did it at the same price as CALM had been doing it. First of all, you would put that work to them, do you agree with that? A. No. Q. I suggest to you further that at the meeting you were asked whether not only would you put that work to them but could put other warehousing work to them. Do you agree with that? A. I don't remember that part of the conversation, no. Q. I suggest that you said that if you were to deal with them they would have to do it at $2.30, being less than the CALM price per pallet? A. I would say no because I did not negotiate rates, it was not my role. Q. You had nothing to do with that? A. I did not get involved normally with that. Q. You are certain? A. The only time I would be asked was if it was a cost analysis but I don't remember being the negotiator of the rates. Q. Apart from that general recollection would you deny that you said at that meeting that you would have to do it at $2.30 and you said, "We set the price, not you"? A. I don't remember. Q. You are not sure one way or the other? A. No, I don't remember. Q. I suggest to you that at the meeting the prospect was held out to Curtis and Hasler that your company might provide other warehousing business to them if they set up? A. We weren't doing any warehousing at that stage with anybody else. We weren't involved in warehousing. I don't know what other work we would have given them, if that was the suggestion. Q. Was it said to them that you had some customers who might have warehousing needs and your company would look at providing that business to them if they started up? A. I don't believe I said that in any way. Q. Was it said in your presence? A. I don't remember that being said any way. Q. What I suggest to you is that neither you nor anyone else present at the meeting which we have just been discussing asked any questions about any problems that this might pose for Optus or otherwise? A. Can you repeat that? Q. You did not say at this meeting that you had with Curtis and Hasler that there was any problem that you saw about dealing between MTM and Sumo? A. Yes I did. Q. Did you say that to them? A. I had very clear conversations with our people within our business. Q. No, whether you said it to them? You did not say to Curtis or Hasler, "We have some problem about dealing with you because you are still at Optus"? A. I believe I did, actually. Q. You did? A. I believe that conversation was had in a meeting with them, yes. Q. With them? A. Yes. Q. That is one you have not referred to in your affidavit, that conversation you have not mentioned in your affidavit? A. There was more than one meeting and more than one person at any one meeting. Q. I put it to you that no problem was raised with Curtis or Hasler about dealings between MTM and Sumo? A. That's incorrect. HIS HONOUR Q. Am I to understand that you do remember having a conversation with Mr Curtis and Mr Craig Hasler about the topic of their doing warehousing work for Optus at some time in early 2004? Is that correct? A. Yes, definitely. RAYMENT Q. Do you say that you said to them, "We wouldn't deal with you"? A. I don't remember the exact wording. Q. I am asking you did you say to them, "We wouldn't deal with you"? A. I don't remember the exact wording, I am sorry. Q. Did you say to them, "We will deal with another warehouse but not with you," anything like that? A. No, I said I don't remember the exact wording but I did express concern. Q. About dealing with them? A. Yes. Q. Did you say that you had concerns about dealing with them? A. Yes. Q. And that you wouldn't deal with them? A. I said I had concerns about dealing with them. Q. But you didn't say, "We won't deal with you"? A. I don't remember those words exactly but I did say I have concerns. Q. Did you give them to understand that you would not deal with them? A. I am sorry? Q. Did you say anything to indicate to them that you would not deal with them? You didn't, did you? A. I don't remember the exact wording of the conversation but I did very clearly state that I expressed concerns about dealing with them. Q. That wasn't sufficient to stop you? A. I am not the only decision maker of the business. 87The very strong impression that I get from this passage of Mrs Grech's evidence is that her memory of conversations involving Mr Curtis and Mr Hasler, or involving their business Sumo, is not nearly as clear as the asserted recollection of the particular conversation given in para 8 of her affidavit, on which Optus placed much reliance. The conversation set out in para 8 of the affidavit is not one said to have involved as parties Mr Curtis or Mr Hasler. By contrast, in her cross-examination (in particular from T236.39-237.13), Mrs Grech does assert that there was a conversation with Messrs Curtis and Hasler present, in which she expressed concerned at their being involved, as it were, on both sides of the warehousing transaction. No such conversation had found expression in her affidavit. 88Considering the evidence of Mrs Grech as a whole, and taking into account, to the extent that it is a help, her demeanour and the way she gave her evidence, I have the very strong impression, that she has, unconsciously and without any subjective intent to deceive, conflated various conversations (more accurately, her present recollection of scraps of them) with her thoughts both at the time and since concerning the relevant events, and that she has reconstructed, in what purports to be a record of a single conversation, an amalgam comprising aspects of those scraps and thoughts. I have little doubt that this process of reconstruction has been influenced, whether intentionally or otherwise, by the matters referred to at [21] and [22] above and by the ill will to which I referred at [23] above. 89Whilst I have no doubt that, subjectively, Mrs Grech was seeking to be honest in saying that she remembered the particular conversation set out in para 8 of her affidavit, I am not satisfied that her evidence of that conversation should be accepted. Nor am I satisfied that her evidence, tentative and general as it was, of other conversations (not referred to in her affidavit) in which she claimed to have expressed doubts to Messrs Curtis and Hasler as to the propriety of what they were doing, should be accepted. 90If Mrs Grech had held the view expressed in the conversation to which she deposed at para 8 of her affidavit, one would expect her to have had considerable hesitation in dealing with Sumo. However, as Mr Rayment pointed out, MTM continued to deal with Sumo notwithstanding her alleged reservations (see at [98] to [108] below). It cannot be suggested that this was due purely to Mr Davey's intervention or influence, because some dealings continued well after he left MTM in about February 2005. MTM's apparent willingness to continue to deal with Sumo does not seem to me to be consistent with the reservations that, Mrs Grech said, she both harboured and expressed. 91As I have noted, Mr Stoljar submitted that Mrs Grech's evidence obtained significant support from the email of 5 July 2004 sent by Mr Hasler to Mr Curtis, reporting on a conversation that Mr Hasler had had with Mr Davey. I deal with that email at [92] to [116] below. It is sufficient to say at this point that I do not regard the email as providing any corroboration sufficient to dispose me, contrary to what I have just said, to accept the aspects of Mrs Grech's evidence to which I have just referred.

[10]

The email of 5 July 2004 92On 5 July 2004, at about 9:09 pm, Mr Hasler sent an email to Mr Curtis. Omitting formal parts, that email reads as follows (I use, without further comment, Mr Hasler's distinctive mode of expression; and for convenience, I have added the paragraph numbers that appear below): Leon, (1) Here is the new pallet count with the container pallets in it. (2) I was talking to Phil on the way home tonight, he was confirming the trucks for tomorrow. (3) He asked me if we were taking up the option on the back part of the warehouse for all these pallets coming from UPS, I said no we are taking the two rooms next door. He then said how are you going to charge for that space, I said by the pallet of course, why? He said as long as we do not increase the bulk area, and just charge by the pallet know one will bat an eye lid, but if we start to double dip people (Brook) will start to ask questions. (4) So I said to him and how is Brook these days, he said she has been good and not worrying about us any more as the bills come in on time and nothing looks out of place, I said to him that's the way we want it. (5) So maybe we should not ingress the bulk hard stand, I got the feeling they may just wanting for us to want too much we will get more money for pallets anyway. (6) My be just a pallet up rate will be the better way to go. $2.50 per pallet! (7) What do you think!! Craig.................. 93In July 2004, Mr Hasler was still working full time for Optus, but was spending his evenings (or some of them) at Sumo's Campbelltown warehouse. 94Adopting the paragraph numbering I have inserted, the third and fourth paragraphs seen to recount the conversation to which Mr Hasler referred in the second paragraph. The fifth and sixth paragraphs, I think, reflect Mr Hasler's views following that conversation. The seventh paragraph, clearly enough, seeks Mr Curtis' opinion on the matters that Mr Hasler raised for consideration in the fifth and sixth paragraphs. 95According to Mrs Grech, the meeting at which, she says, she raised with Mr Davey the propriety of what Mr Curtis was doing is said to have occurred in January 2004. Thus, about six months would have elapsed between that supposed conversation (if, contrary to my view, it had occurred) and the email. Over that time, the volume of business done by MTM with Sumo had increased. 96Perhaps not surprisingly, Mr Stoljar submitted that the email showed some consciousness on the part of Mr Hasler that: (1) there was something wrong in Sumo's doing business with Optus, through MTM as an intermediary or broker; and (2) that Mrs Grech had pointed this out back in January 2004 or thereafter. 97Mr Rayment submitted that there was nothing sinister in the email, nor in the conversation to which it referred. 98A series of emails tendered by the defendants shows that Mrs Grech had been dealing with a number of questions in relation to Sumo. Those questions included insurance and rates. Those emails passed between Mrs Grech for MTM and either Mr Curtis or his wife, Mrs Monica Curtis, for Sumo. Going back to what is noted at [90] above, Mrs Grech does not appear to manifest any disquiet whatsoever, in those emails, at having to deal with Mr or Mrs Curtis, or Sumo. 99Mrs Grech also appears to have dealt with Sumo's invoices. For example, on 14 April 2004, Mrs Curtis sent to Mrs Grech Sumo's March invoice for Optus, in both PDF and excel formats (the latter "to enable your rework for customer billing"). Mrs Grech replied: Hi Monica, Thanks for the invoice, I will let you know if we have any questions or further requirements with it. Regards Brooke 100In another email, Mrs Curtis supplied Sumo's Australian Business Number and Tax File Number to Mrs Grech. 101Quite apart from their relevance as noted at [90] above, those emails show, as one would expect, that Mrs Grech was involving herself in ensuring that Sumo, as a new supplier, did what was needed in the way that was needed; and that Sumo sought to accommodate her requirements. 102Mr Rayment placed particular reliance on an exchange of emails between Mr Davey and Mrs Grech on 12 May 2004. 103The first email came from Mr Davey. Leaving out formal parts, it stated: Please find attached revised sheets as discussed in relation to the Optus storage charging & costing for March / April 04 in relation to the exit of CALM. There are two sheets for March 04, the first being "normal" monthly sheet & the second being the March Reconciliation sheet. The first "normal" sheet now reconcils [sic] with what we charged Optus on Inv 3066. ... The second March Reconciliation sheet takes up all the other storage charges & costs. ... 104The last words that I have quoted were followed by some eight dot points. After those dot points, Mr Davey set out what he saw as the "[b]ottom line" as to how the charges should be allocated. 105Mrs Grech replied about two hours later. She said: Just quickly - what about SUMO charges for March you said we had not charged these yet and they were to be added into the additional March invoice that was for storage in advance. (other comments as per your point format) 106The "other comments" were comments that Mrs Grech had inserted against the various dot points in Mr Davey's email. 107In short, it seems that what Mr Davey was seeking to do was reconcile the charges that had been levied by Sumo in the course of goods being transferred from CALM's warehouse to Sumo's warehouse. Mrs Grech appears to have been substantially satisfied as to the reconciliation; she noted that one of the matters referred to in one dot point "was not costed"; and asked for further explanation in relation to another. 108No doubt because of the way in which the evidence developed, Mrs Grech was not cross-examined as to the email exchange of 12 May 2004. Nor was Mr Davey, because the significance of that exchange does not appear to have occurred to the defendants until some time after Mr Davey had completed his evidence. 109In short, Mr Rayment submitted that the email exchange of 12 May 2004 showed that Mrs Grech had been concerned to ensure that the charges rendered by MTM to Optus, to the extent that they covered the change over from CALM to Sumo, were properly reconciled. Mr Rayment submitted that it was this concern with Sumo's charges that underlay the conversation between Mr Davey and Mr Hasler recorded in Mr Hasler's email to Mr Curtis of 5 July 2004. 110The reference to double-dipping does not seem to me to be sinister. One of the complaints that Optus had, concerning the services provided by CALM, related precisely to double-dipping. CALM set aside (or purported to set aside) space for the storage of Optus' stock, and charged Optus for that space on a "per square metre" basis. However, CALM also allowed other customers to store their goods within the space dedicated to (and paid for by) Optus, and charged those other customers accordingly. It was indeed double-dipping. 111From the outset, it was made clear to Sumo that it would have to charge on a "per pallet per week" basis, and not on a "per square metre" basis, for the storage of Optus' stock. (This was varied, in the case of the cable drum storage and cable cutting equipment, but nothing turns on this.) I think it was the concern to avoid any suggestion of double-dipping that led Mr Davey to caution Mr Hasler that, if Sumo did take additional space on lease and did use it to store Optus' stock, Optus should be charged for the stock stored and not for the space taken. 112Mr Stoljar submitted that "[t]he conversation recorded in that email... has a surreptitious air, in the sense that the participants... seem implicitly to recognise that their conduct is underhand" (written closing submissions, para 63). Mr Stoljar sought to support this proposition by reference to the manner in which Mr Hasler denied the conversation when it was put to him. At the point where he was asked whether he said "and how is Brooke these days", Mr Hasler responded negatively; indeed derisively, or in a laughing manner. I do not think that too much can be put on this. Mr Hasler did not impress me as a sophisticated man. I think he was expressing derision, or mirth, at the proposition that he would have been inquiring of Mr Davey after Mrs Grech's health. 113I have no doubt that Mr Hasler (and Mr Curtis and, for that matter, Mr Davey) would want to keep Mrs Grech in a state where she was "not worrying about us anymore". That is because, if the billing arrangements satisfied Mrs Grech and the charges appeared to be proper, she would effectively approve them by passing them on to Optus with MTM's markup. Where the charges appear to be unjustified, or open to question, then, as the email exchange of 12 May 2004 shows, Mrs Grech would question them. This would mean more work for everyone. 114Mr Stoljar submitted that this interpretation, for which Mr Rayment contended, was unlikely because the conversation took place about seven weeks after the email exchange. That overlooks both the subject of the email and its attachment. The former was "[p]allet count" and the second was an excel spreadsheet, "Sumo pallet count June 04.xls". 115In short, Mr Hasler sent Mr Curtis the pallet count for June, so that Sumo's invoices to MTM for that month could be prepared. It is not unlikely, in those circumstances, that the discussion some seven weeks ago, involving reconciliation of the March accounts, was fresh to everyone's mind. 116Thus, whilst I can understand why the email of 5 July 2004 excited some suspicion in the minds of Optus and its legal advisers, I do not think that it has the sinister significance placed upon it, and I do not regard it as corroborative of Mrs Grech's evidence as to the conversation that, she said, took place in January 2004. 117I have no doubt that Mrs Grech would have queried anything and everything in Sumo's accounts for storage of Optus' stock, that looked irregular or out of place. I have no doubt that, in doing so, she would have caused a lot of work for everyone in reconciling and explaining. That is precisely what happened in May 2004. It is apparent from Mr Davey's email and its attachments that he had to do a lot of work to sort out the correct position and explain it to Mrs Grech's satisfaction. 118It follows, in my view, that everyone would have wanted that Mrs Grech had no reason to "worry" about Sumo's invoices. And that, it seems to me, is really all the email says.

[12]

Almad becomes a broker for Optus 124In about February 2005, Mr Davey left MTM. As ever, his business connections left with him. However, Mr Davey did not move to another broker. Instead, he started his own broking business, through Almad. 125After Mr Davey left MTM, the Optus business that had been transacted through that company was transacted through Almad. Mr Curtis appears to have ratified this for Optus: on the basis (he said) that "Phil Davey provided the same broking service to Optus, under a different corporate name" (affidavit sworn 5 March 2013, para 223). Mr Curtis said that he "did not think of the business as moving to Almad, but rather staying with Phil Davey" (para 224). Thus, Mr Curtis said, "Almad began doing exactly what MTM had done for Optus" (para 225). Mr Curtis "did not observe any practical different in the services provided" (para 226) and thus "did not... consider that it was necessary to seek any alternative tender or approval to the change" (para 227). 126Shortly after Almad became an approved supplier, someone created a "Waiver of Competition" (in Optus parlance, "WOC") form for Almad. Once waiver of competition was approved, it meant that work done by Almad pursuant to the waiver did not need to be put out to competitive tender. The WOC was not general or unlimited, but said to be for the supply of about "four thousand customised pallets at a cost of $8,000.00". It appears to be uncontentious that this was the only WOC, and the only approval other than that referred to at [132] below, ever given to Almad over the ensuing years. It is not contentious that, over time, Almad handled (in round figures) $18 million of business from Optus. 127Once Almad became an approved supplier, and once the WOC had been authorised, it issued a price list to Optus. That price list was effectively the price quoted by Sumo to MTM with the customary 20% markup. Mr Curtis (who had prepared the Sumo price list) approved Almad's price list on behalf of Optus (affidavit sworn 5 March 2013, para 236). 128Thereafter, Almad began to invoice Optus for storage services provided by Sumo. The prices charged by Sumo (initially to MTM, before Mr Davey left MTM) had been prepared and authorised, on behalf of Sumo, by Mr Curtis. The same prices, quoted by MTM to Optus with MTM's broker markup of 20%, were approved by Mr Curtis on behalf of Optus. 129Almad issued invoices to Optus from April 2005 until December 2010. It did so separately for various services: cable storage and cutting, EOL storage, and scrapping. The invoices were generally issued monthly, but sometimes fortnightly. The charges were calculated by taking the amount charged by Sumo to Almad and applying the 20% markup. 130As a matter of practice, each time Optus received an invoice from Almad, an employee of Optus would create a purchase order (PO). The PO would quote the WOC number and repeat the amount of the Almad invoice. Another employee would then approve the PO, and in due course Optus would make payment to Almad. The POs were prepared by staff reporting to Mr Curtis, and were approved by other staff reporting to Mr Curtis.

[18]

Optus' stock is moved to Lidcombe 147The defendants say that the increase occurred as, and because, the stock was physically transferred from the Campbelltown warehouse to a new warehouse at Lidcombe. The defendants say that it had become clear to them that the lessor of the Campbelltown premises would require possession (according to Mr Curtis, the lease had always been seen as short term). Thus, there was, the defendants say, a perceived need for new accommodation. It was for that reason, the defendants say, that Sumo located alternative warehouse facilities at Lidcombe. 148The defendants say that the increased storage charge was agreed between Sumo (Mr Curtis or Mr Hasler) and Almad (Mr Davey) and that it was justified because the rent for the Lidcombe premises was substantially higher, on a "per square metre" basis, than the rent for the Campbelltown premises. As a matter of fact, and leaving aside issues such as rent holiday and the like, this is plainly correct. 149The defendants say that stock was moved from Campbelltown to Lidcombe progressively over the period July to December 2005. Optus says that the stock was not moved until about November or December, 2005. 150The defendants rely on the evidence of Mr Curtis, Mr Davey, Mr Hasler, Mr Trent Hasler, and Mr Tull. Optus relies on various contemporaneous documents, including the invoices rendered by Almad to Optus. Those invoices noted that the goods in question were stored at the Campbelltown warehouse, even though the amount charged for storage was $3.60 per pallet per week. 151The factual dispute is of crucial importance to Optus' case against Almad. The only element of the overcharging case pressed by Optus against Almad relates to the charges levied at the rate of $3.60 per pallet per week between July and December 2005, instead of what Optus contends was the correct price, $2.75 per pallet per week. In essence, there is a conflict between the evidence of the various witnesses on whom the defendants rely, and the evidence of contemporaneous documents and events (and inferences to be drawn from them) on which Optus relies. Optus' evidence, and submissions in respect of it 152I start with the matters on which Optus relied. 153First, there are the invoices sent by Sumo to Almad for the months of July to December 2005. So far as the evidence goes, there are two invoices per month for July, August, September and December; but one only for October and November. Where there are two invoices, one appears to deal with the storage of pallets and related services, and the other with other services. However, each invoice describes the "Storage Location" as being the address of the Campbelltown warehouse. 154The invoices dealing with the storage of pallets suggest that some 88 pallets came to be stored in the week ending 9 July, 280 the following week, 362 the week after and 568 for the week ending 30 July. A similar pattern (of increasing numbers) is observable in the invoices for pallet storage for succeeding months. 155The invoices also show "lift from transport" and "lift to transport". As I understand it, those terms describe, respectively, the unloading of pallets delivered for storage and the loading of pallets to be transported elsewhere. At a level of some generality, the numbers of pallets said to be stored from week to week can be reconciled if attention is paid to the figures given for lifts from and to transport. 156I said that the figures increase from week to week. However, it appears that the number of pallets stored stabilised, at a number said to be 5,651, by the beginning of December 2005. 157Such of the Almad invoices to Optus as are available for the period July to December 2005 reflect (with the 20% markup) the amounts charged by Sumo to Almad. Almad's invoices to Optus do not indicate the location of storage, but the underlying Sumo invoices do. 158Mr Stoljar submitted that the Sumo invoices, being business records created contemporaneously with the happening of the events to which they relate, should be treated as accurate. 159Sumo had run into difficulties with the local council (Campbelltown City Council) in relation to the Campbelltown warehouse. The council asserted that use of the warehouse for storage of goods was not authorised under the existing development consent. (It will be recalled that the development consent was a matter that Mr Curtis had asked Mr Hasler to check with the council.) 160On 5 October 2005, the council gave Sumo (more accurately, Mrs Curtis and Mrs Hasler, the lessees of the Campbelltown warehouse) notice that the council intended, subject to any representations that might be made, to order Sumo (or again, more accurately, Mrs Curtis and Mrs Hasler as lessees) to stop using the relevant parts of the warehouse premises "for the storage, warehousing, repair and transport of goods". 161Sumo made representations to the council, which Mr Curtis accepted he had drafted. Those representations were dated (depending on where one looks) 16 September or 18 October 2005. They show that, before the representations were made, Mr Curtis had had a telephone conversation with an officer of the council. 162The written representations noted, among other things, that Sumo was required to vacate the Campbelltown site in any event. It set out what were described as "Sumo Plans". Those plans were described as follows: SUMO have actively engaged a search for alternative sites and have completed the following steps:- 1. Selected two sites and completed 3 proposals for premises in Chullora and Lidcombe. These are being considered by the Landlords at the moment. 2. Informed all customers of pending changes and obtained permissions to move stock. 3. Engaged a transport company for additional shuttle vehicles to minimise stock transfer time. The following steps and expected timeframes for the tasks remaining to enable a full move are 1. Agreeing lease terms with the prospective landlords 2-3 weeks 2. Completion of a DA for one of the sites (DA in place for the Chullora Site) 8-12 weeks. 3. Establish minimum security and OH&S requirements on new site 2 weeks in parallel with DA once confident of approval. 4. Move stock; (a) Secure additional forklifts to cover transition (b) Hire additional fork lift drivers to expedite movement (c) Move stock 3-4 weeks (d) Dismantle racking post move - 1 week All together with parallel running of activities where possible it will take on average 16 weeks to complete this move, meaning that the most likely best efforts move completion date will be Mid January. 163The document set out various undertakings, and made further representations. It is not necessary to deal with them. 164Mr Curtis was cross-examined on this document. He accepted that it could be read as saying that no alternative warehouse premises had been located, and that no goods had been moved from Campbelltown to the new premises, at the time the representations were made. However, Mr Curtis maintained that: the Lidcombe premises had been located; Sumo (in the person of Mr Hasler) had been given the key; those premises had been readied; and pallets were being transported to them. He accepted that, in those circumstances, his letter to council was misleading. He appeared to rely on the doctrine of necessity to justify that conduct. 165In the ordinary way, I would be slow to conclude that a document prepared by a person for an official purpose was misleading, and intentionally so. However, I regret to say that I think that it entirely in character for Mr Curtis, as I have been able to assess him, to act in a deceptive and dishonest way, in his dealings with the council, if he thought it were to his or to Sumo's advantage to do so. To put it another way: on my assessment of Mr Curtis' standards of honesty, business morality and respect for the truth, I do not find it surprising that he would have drafted an intentionally misleading document for submission to the council, in an attempt to gain time for Sumo to move (or complete moving) pallets stored at Campbelltown. 166On 22 October 2005, there was what was described as a meeting of the members of Sumo, held at Mr Curtis' house. Mr and Mrs Curtis were there, as were Mr and Mrs Hasler. Item 4 of the business transacted at that meeting is recorded as follows: 4. It has been agreed to relocate warehouse as soon as possible. We agreed that we can maintain a rental of up to $85 per square metre. We will require temporary labour before and during the move, which is expected to take one month and be complete be [sic] the end of February 2006. Trent had suggested his friend Kieran Hall as a suitable temporary employee and Craig was to offer him $20 per hour gross. 167Mr Stoljar submitted, in reliance on what was stated in Australian Securities and Investments Commissions v Hellicar (2012) 86 ALJR 522 at [7], [72], that the minutes were evidence of the truth of the matters recorded in them. He noted that Mrs Curtis, the author of the minutes, had not been called, and submitted that the court could infer that her evidence would not have assisted the defendants. The same submission was put in respect of Mrs Hasler, who was present at the meeting but was not called. 168I accept, as the Court said in Hellicar at [7], that the minutes of meetings of a company's board should be regarded as "a formal record... of what had happened at the meeting". Their Honours were of course talking of adopted minutes. It is not clear (although see at [176] below) that the minutes of the meeting held on 22 October 2005 had been adopted. Nonetheless, I think, the inference should be drawn that Mrs Curtis sought to record accurately in the draft minutes (as certainly they may be regarded) the business that had been transacted at the meeting. 169Accepting, particularly in the absence of Mrs Curtis and Mrs Hasler, that the minutes should be regarded as substantially accurate, nonetheless, they leave open the question of what is involved in the relocation of the warehouse. The "warehouse" comprised not only the storage space within which stored goods were located, and within which the cable cutting operations were conducted. It comprised also the administrative centre, or office, from which the day to day activities of Sumo's business were run. 170Of course, the minute notes also that Sumo would require additional labour "before and during the move, which is expected to take one month". If the Sumo invoices are to be taken as records of the removal of pallets from Campbelltown to Lidcombe (as Mr Rayment submitted they are), then, by 22 October, almost 4200 pallets had been so moved: that is to say, about three-quarters of the total that had come to reside in the Lidcombe warehouse by December 2005. One would expect the need for "temporary labour" to have manifested itself somewhat earlier in the process. 171I have not overlooked that what was to be moved included not only the pallets and the office or administrative resources at Campbelltown, but also the cable drums and cable cutting equipment. The cable cutting equipment was apparently of a highly specialised nature, and it was necessary for an expert contractor to take it apart, pack it up, supervise the move to Lidcombe and reassemble it at Lidcombe. That was all done over a weekend, at the end of the move, so as not to disrupt those of Optus' activities that required cable to be cut to length. 172I do not think that the need for "temporary labour" arose because of the moving of the cable drums and cable cutting equipment: at least in the case of the latter, that was attended to by outside contractors. 173The signed lease for the Lidcombe premises commenced on 1 December 2005. It does not appear when the lease was actually signed. It was however stamped on 12 January 2006. The consent of the National Australia Bank, as mortgagee, to the registration of the lease was given on 24 February 2006. 174The lease contained provision for, among other things, a "rent holiday": no rent was payable until 1 January 2006. 175I note, in passing, that Mr Rayment submitted that Sumo as lessee was required to pay not only rent but also a proportion of outgoings. That does not appear to be correct. Clause 18.01 of the lease required the lessee to pay "the Lessee's proportion of any Outgoings...". Clause 18.02 stated that the "Lessee's proportion" was as stated in item 7 of the Schedule. Item 7 of the Schedule states "0%". 176It was necessary for Sumo to provide a bank guarantee in respect of its obligations under the lease (see Part 16 of the lease). The amount required was 3 months' rent plus GST (see item 6 of the Schedule): about $175,000.00. A minute of a meeting of the members of Sumo held at the Curtis home on 12 November 2005 records a resolution to open a term deposit with Australia and New Zealand Banking Group Limited (ANZ - Sumo's and Electrosale's banker) "for the full amount required as a bank guarantee for the rental bond" for the Lidcombe premises. I note that, if that were the meeting next after the meeting of 22 October 2005, then one of the items of business at the latter meeting was recorded as a resolution to confirm the minutes of the former meeting. 177The very strong impression created by these aspects of the evidence is that it was not until late October 2005 that Sumo turned its attention to the move, and that the steps necessary to effect the move were put in place shortly thereafter. It could be inferred that the activity which commenced in late October 2005 was prompted by the threat from the council to issue an order preventing use of the Campbelltown premises as a warehouse. However, regardless of the attitude of the council, it was necessary to move, because the property had been sold and it was apparently understood that the new owner would require vacant possession relatively soon after completion (which occurred in August 2005). 178If the Sumo invoices to Almad do record, as they suggest, the number of pallets stored at the Campbelltown premises, then they are very hard to reconcile with the submissions that Mr Stoljar put in respect of the documentary evidence. That is because, taken at face value, the Sumo invoices indicate (as I have said) that by the end of November 2005 (to be accurate, by the week ending 25 November 2005), 5651 pallets were stored at Campbelltown. They indicate, further, that the same number remained stored at Campbelltown throughout December 2005. But that cannot be correct. On any view, even that for which Optus contended, the pallets (if not at all, then at least the very great part of them) had been moved from Campbelltown to Lidcombe by the end of December 2005. 179At one point, I think, it was submitted for Optus that the Sumo invoices for the period July to December 2005 reflected not the physical movement of pallets from one location to another but, rather, a change in the identity of the broker on whose account the pallets were held. But again, if that is correct, it does not explain why 5651 pallets were said to have been held for the last week of November and the whole of December at the Campbelltown warehouse, when on any view, by then, they must have been moved to Lidcombe. 180When one analyses the Sumo invoices, in the light of such other documentary evidence as there is, and bearing in mind the objective fact that the pallets were housed in Lidcombe by the end of December 2005, the invoices cannot be regarded as accurate in every detail of what is stated. Once that is acknowledged, then the probative force of their recording of the pallets as stored at Campbelltown diminishes. 181Another matter on which Mr Stoljar relied was that insurance for the Lidcombe warehouse was not effected until 6 December 2005. On that date, an insurance company issued a certificate of currency in relation to the Lidcombe warehouse, stating a period of insurance commencing on 1 December 2005. 182Mr Stoljar submitted, understandably, that it was inconceivable that Sumo, being on risk for the pallets as a bailee for reward (there were not proved any terms of bailment which limited its liability in that regard), would have left the goods uninsured in the Lidcombe warehouse. One answer to that submission is, I think, that it was Mr Hasler who was responsible for the move; and without being unkind to Mr Hasler, I do not think it entirely surprising that he might have overlooked the matter of insurance. Mr Hasler said (T401.49 - 402.17) that Mr Curtis "was a bit upset with me, that I actually moved them". I have little doubt that Mr Curtis would have been upset had he found out that the pallets were sitting, uninsured and entirely at Sumo's risk, in the Lidcombe warehouse. The defendants' evidence, and submissions in respect of it 183I turn to the evidence on which the defendants relied. 184Mr Hasler dealt with the move in his affidavit sworn 31 July 2013. He noted that, after the term of the lease for Campbelltown ended (in March 2005) and Sumo became a monthly tenant, there were negotiations with "Sam and Dan" relating to the Lidcombe premises. According to Mr Hasler (para 6) the following happened: 6. The negotiations in relation to the lease of the Lidcombe premises were conducted by Leon Curtis. I recollect going to a meeting at the offices of the new landlord, being for the Lidcombe premises, with Leon Curtis and the landlord's representatives who I knew as Sam and Dan in about July 2005 just prior to picking up the keys to the Lidcombe premises. It was soon after this meeting that I was able to get the keys and go to the Lidcombe premises to start cleaning it up. I also at this stage started to move pallets from the Campbelltown premises to the Lidcombe premises. 185Mr Hasler said that, after June 2005, he spent most of his time at Lidcombe cleaning and preparing the premises. He did however go to Campbelltown to assist Mr Trent Hasler in preparing goods to be transported. Mr Hasler said that the process of transporting pallets took some four to five months, "initially in small numbers and thereafter in larger numbers" (para 9). I note that, if the Sumo invoices do refer to pallets moved from Campbelltown to Lidcombe and stored at Lidcombe, then this would appear to be correct. 186Mr Hasler said that he did not complete "run sheets" for pallets that were moved from Campbelltown to Lidcombe, because he regarded it as a matter internal to Sumo. He did however say that he made notes of pallet movements on sheets of paper: he thought "[i]t might have been on the back of the run sheets" (para 7). In fact, run sheets were produced which, when examined, did have figures on the back of them that Mr Hasler identified as being notes made by him of pallets moved from Campbelltown to Lidcombe. 187Run sheets are Sumo records prepared to enable pallet movements in and out of a warehouse, on various accounts, to be recorded. They are known formally as "pallet count sheets". They provide for the recording of movements of pallets on account of Optus and on account of other companies for whom Sumo stored pallets. Run sheets have been produced for the months of August, September, October and November 2005. There are numbers recorded on the back of some of those run sheets (usually, there was more than one run sheet completed for each month). The only explanation for those numbers is that given by Mr Hasler; nothing emerged in the course of cross-examination to suggest that the numbers might refer to something else altogether. 188Mr Davey dealt with the topic in his affidavit sworn 30 January 2013, at para 90. I set out that paragraph (except the last sentence, which was not read): 90. I do not understand the allegation that moving costs were charged for moving equipment (said to be pallets and unspecified other equipment). I do not understand exactly what is being referred to, or what dates or invoices the overcharging is alleged to have taken place on. All equipment moved, whether pallets or otherwise. I cannot understand how Optus could not know this. This move took place over a period of about 5-6 months, from about July to December 2005. I oversaw this equipment being move. I saw the equipment removed from one location and replaced in another location, as requested by Leon Curtis, Alex Harmanis and Allen Tee from Optus. 189Mr Davey said further, at para 91, that "[t]he move of EOL stock and pallets took place over these months, and I saw it happen". 190Mr Trent Hasler worked as a storeman at the Campbelltown warehouse during 2005. He said his duties included "arranging... the safe loading of pallets located at the Campbelltown warehouse for transfer to the new Lidcombe warehouse" (affidavit sworn 30 July 2013, para 6). This was done, he said, under his father's supervision (para 7). 191Mr Trent Hasler said (para 12): Whilst I have no clear recollection of the date when pallets were being transferred, it is to the best of my knowledge and recollection that it took place over a period of three to four months ending in December 2005. The end date was certainly a few weeks before Christmas 2005. 192Mr Tull is (and in 2005 was) a haulage contractor with his own truck. He said, in his affidavit sworn 7 August 2013, that he had had occasion to go to the Campbelltown warehouse to pick up goods for another customer. While he was there, he had a conversation with Mr Hasler, in the course of which Mr Hasler inquired whether Mr Tull could assist with moving pallets "from July for as long as it takes". 193Thereafter, Mr Tull said (paras 5 to 9): 5. I recollect that I commenced moving pallets in various configurations as to width, height and weight at the latest, I believe, in the 2nd week of July 2005 and continued to provide the transport services until just prior to Christmas 2005. I transported the pallets from Campbelltown to a warehouse in Nyrang Street at Lidcombe, next to the brewery. I can say that the move commenced in July as I recollect that it was very cold. I also had trouble opening the curtain on my tautliner trailer as they would freeze up in the morning. 6. At the time I was invoicing for my business and I invoiced EPM for the cost of transport. All of my invoices were paid. 7. Because of a number of house moves that I have had since 2005 all of the invoicing and banking records have been destroyed. 8. Most of the time during the period July to December 2005, I was doing daily trips 5 days per week with an occasional weekend. 9. My truck is able to transport 22 pallets. However, the number of pallets would vary on trips because of size, both width and height and also the weight involved. 194Mr Curtis, too, dealt with the topic of the move, in an affidavit sworn 31 July 2013. Mr Curtis said that it was his practice to make regular visits to the Campbelltown warehouse on at least one day every weekend. He said that, during one of those weekend visits, he became aware that pallets had been moved (para 11): 11. I became aware on one of my weekend visits in early August 2005 that Craig Hasler had commenced to move pallets into the Lidcombe premises. The conversation with him in which I said: "you've got to be joking. We've got no lease and no security. What if the whole thing falls through?" He said: "we don't have any other choice". I said: "why". He said: "we are doing the 3G, lots of stock coming in and we've got no space left." 195Those remarks may have caused Mr Hasler to think, as he said (see at [182] above) that "Leon was a bit upset with me". I should add at this point that, notwithstanding the reservations I have expressed about Mr Hasler's evidence, I do not think it at all plausible that he would have become aware of this paragraph of Mr Curtis' affidavit, and therefore seized on an opportunity, in the course of cross-examination, to put his own spin on it. Any suggestion of that nature (and no such suggestion was put to Mr Hasler) would impute a degree of sophistication that, I must say, I think Mr Hasler entirely lacks. 196There is thus a substantial body of testimonial evidence which, if accepted, would support the proposition that the pallets were moved incrementally from about July until December 2005. There is some contemporaneous documentation (the numbers recorded on the reverse of some of the run sheets from August to November 2005) which could be regarded as providing corroboration for that testimonial evidence. Further, the process thus described is consistent with an interpretation of the Sumo invoices which holds that they do (despite the statement of the storage location) record the ever increasing numbers of pallets being stored, from month to month, at Lidcombe. 197As one might expect, the witnesses were cross-examined closely and at some length (particularly, in the case of Mr Hasler) on their recollections as to the move. It is fair to say that, when pressed, no witness could be precise as to the exact month when particular events happened. In Mr Hasler's case of course, if one were to accept that the numbers recorded on the reverse of some of the run sheets do record transfers from Campbelltown to Lidcombe, then the significance of that uncertainty in the witness box is much diminished. 198It is not surprising that Mr Trent Hasler and Mr Tull do not have a precise memory of exactly when pallets were moved, and in what quantities. In Mr Tull's case, the loss of his business records for that period leaves him without any independent contemporaneous evidence from which his memory might be refreshed. But the striking feature of the evidence is that, although Mr Trent Hasler and Mr Tull in particular could not swear to precise months, each was insistent, and unshaken, that the move took place over a number of months. 199I regard the evidence of Mr Tull as being of particular significance. He is completely independent. He impressed me as someone who sought to give honest and accurate evidence. And there is a particular matter that he recollects: that the covering, or "curtains", of his truck (which he called a "tautliner") were frozen when he arrived at the Campbelltown warehouse early in the morning. 200In 2005, Mr Tull lived at Ingleburn, which is not far from Campbelltown and, on his evidence, enjoys a similar climate. Mr Tull said that the material that comprises the curtains of his tautliner absorbs moisture and that, when the temperature drops down towards freezing, the moisture freezes and makes the curtains very hard to manipulate. That is a striking and credible aspect of Mr Tull's evidence. It adds substantial probative force to his evidence that, give or take a month, he started to move pallets from Campbelltown to Lidcombe in about July or August 2005. It was not put to him that the phenomenon was consistent with the work's having been done in November and December 2005. 201Mr Stoljar appeared to accept that, if accepted, this aspect of Mr Tull's evidence would mean that it was likely that the move had started in mid year. He submitted, correctly, that Mr Tull was uncertain as to dates. But no one suggested that the move occurred in any year other than 2005. And Mr Stoljar did not suggest that Mr Tull's evidence, of helping with the move, was completely false. 202It is apparent from Mr Tull's evidence that he had been to the Campbelltown premises from time to time for other purposes. It is thus, I suppose, possible that his recollection as to the frozen curtains might be a mistaken transposition from one other (earlier or later) occasion to the occasion of the move. 203Nonetheless, considering the whole of Mr Tull's evidence, and taking into account (to the extent that it is a reliable guide) his demeanour and the manner in which his evidence was given, I conclude that it should be accepted, and thus that it provides powerful support for the defendants' proposition that the move of pallets, from Campbelltown to Lidcombe, did commence in about mid 2005. 204I also regard Mr Trent Hasler's evidence as having significant probative force. I accept that he is not as remote from the proceedings, nor as independent, as Mr Tull. Nonetheless, Mr Trent Hasler impressed me as an honest witness who sought to give reliable evidence. I do not think that Mr Trent Hasler is someone who would tell untruths for the sake of his father (or for that matter, for the sake of anyone else). Thus, although Mr Trent Hasler accepted that his memory of precise months was unreliable, nonetheless I find the thrust of his evidence - that the move took place over a number of months, and not just at the end of 2005 - is persuasive. 205Mr Davey, of course, does have a significant interest in this matter. If the move did happen over a period of time, and if the Sumo invoices do show (contrary to their description) charges for pallets stored at Lidcombe, then the remaining part of the overcharge case brought against Almad falls to the ground. But that does not mean that Mr Davey's evidence can be disregarded entirely. 206Mr Stoljar submitted that there were difficulties with this aspect of Mr Davey's evidence: in particular, with his evidence that the move occurred "as requested by Leon Curtis, Alex Harmanis and Allen Tee from Optus" (see the paragraph quoted at [188] above). 207Mr Stoljar submitted, correctly, that the move from Campbelltown to Lidcombe was undertaken by Sumo for its own purposes, and was not something that Optus had requested. The criticism may be accepted. But it does not seem to me to follow that this aspect of Mr Davey's evidence should be rejected. 208Mr Stoljar pointed to what he said were absurdities in the defendants' case. Prime among those was the proposition that a prospective landlord would act as Mr Hasler (and others) said had happened: namely, give Sumo the key to the premises, and permit it to move pallets in, before any lease had been signed, before any deposit or bond had been paid and before (so far as the landlord knew) any insurance had been effected. There is great force in that submission. But it does not appear that the proprietor of the Lidcombe premises was acting through an agent, who might have counselled caution. 209Mr Hasler's evidence is that he and Mr Curtis met with the two individuals who stood behind the landlord, satisfied themselves that the premises were acceptable, and were given the key for the purpose of moving in, well before any lease was signed. While that is clearly unbusinesslike and risky (from the landlord's perspective), it cannot be regarded as so glaringly improbable as to require rejection of this aspect of the evidence. Nor can it be regarded as so glaringly improbable as to require rejection of (for example) Mr Tull's evidence. 210I accept also, as Mr Stoljar submitted, that the contemporaneous documents, on a fair reading (indeed, on their most plausible reading), are consistent with the move's having occurred (or at least commenced) substantially later than mid 2005. That, too, is a consideration that needs to be balanced with all the available evidence and the inferences from it. Those inferences include, of course, the inference properly available from the unexplained failure to call Mrs Curtis and Mrs Hasler, in relation to the meeting of 22 October 2005. 211The gradual increase in the number of pallets stored from July to November 2005, and the apparent stabilisation of that number in December 2005, seem to me to be consistent with the proposition that pallets were being shipped into the Lidcombe warehouse for what was in effect long term storage. That would be consistent with the delivery and storage of EOL material, which was not likely to cycle quickly through the warehouse. One of the witnesses (I think, but it does not matter, Mr Davey) described the pallets of EOL stock as "static": a term used in the warehousing industry to indicate goods that are stored for relatively lengthy periods of time, and that do not require constant handling. 212It is Optus that asserts an overcharge. It is thus Optus that bears the burden of proving, on the balance of probabilities, that there was an overcharge. Certainly, if matters went no further then the documentary evidence on which Optus relies, the conclusion for which Optus contends would be well and truly available. But there are countervailing considerations: (1) what I regard as the honest and substantially (if not in every precise detail) correct evidence given by Mr Tull and by Mr Trent Hasler; (2) the evidence given by Mr Davey; (3) the correlation between the numbers of pallets shown on the Sumo invoices and the proposition that pallets were delivered incrementally, month by month, from Campbelltown to Lidcombe; and (4) the numbers recorded on the reverse of some of the run sheets between August and November 2005. 213Further, I regard this aspect of Mr Hasler's evidence as important. Notwithstanding my general reservations as to his credibility, I think that his evidence on a matter directly within his control, of the kind under consideration, is likely to be reliable. I do not think that Mr Hasler is a person who could sustain a falsehood; without wishing to be unkind, I simply do not think that he has the degree of intellectual sophistication that such an exercise would require. Thus, I regard Mr Hasler's evidence as of some value; and I do consider that it is corroborated, in its essential respects, by the handwritten figures on the reverse of the run sheets, to which I have referred. 214I do not take Mr Curtis' evidence into account, notwithstanding what could be seen as corroboration of a part of it by Mr Hasler in cross-examination. 215Taking all the available evidence into account, I conclude that Optus has not discharged the onus of proving the overcharge relating to pallet numbers. Further, and placing particular weight (as I do) on the evidence of Mr Tull and Mr Trent Hasler, I conclude that it is more likely than not that pallets were moved from Campbelltown to Lidcombe incrementally, from about July 2005 up until November or December 2005.

[24]

First issue: the case against Mr Curtis 233Optus alleges breach of the contractual, fiduciary and statutory duties owed by Mr Curtis. As I have said already, the contract of employment was one made between Optus Administration and Mr Curtis. It is clear that Mr Curtis owed the duties alleged (including under ss 182 and 183 of the Corporations Act) to Optus Administration. It is equally clear that he breached them. 234It is not at all unusual, in the commercial world, for employees of a particular company to perform services not only for that company but also for its related bodies corporate. It is common, where a group of companies carries on business, for one company to be the employer, and for the persons employed by it to provide their services to the operating companies in the group. 235That is exactly what happened in this case. The operating companies appear to have been the first plaintiff and the second plaintiff (Singtel Optus and Singtel Networks). 236All plaintiffs claim the benefit of Mr Curtis' duties. It is not entirely clear whether, as the case was run, Mr Curtis disputed this, so far as the contractual and fiduciary duties are concerned. That lack of clarity flows from the failure of the defendants' submissions to address specifically the agreed statement of issues. 237Going to Mr Curtis' response to the FACLS: the allegation of contractual duties set out in para 10A of the FACLS is admitted. Thus, Mr Curtis admits (as does Electrosales) that, among other things, he was required: (1) to act in the best interests of Optus Administration and its related bodies corporate; (2) not to compete with those bodies; (3) not to disclose confidential information of those bodies; and (4) not to use confidential information to cause injury to those bodies. 238 Mr Curtis' alleged fiduciary obligations are pleaded in FACLS para 11. Those obligations are in substance admitted so far as they concern Optus Administration, but not so far as they concern "the Optus Group". 239I observe, as a matter of curiosity rather than significance, that the fiduciary obligations pleaded include obligations of a prescriptive nature (alleging that Mr Curtis was required to do certain things, or to act in a certain way). That is not consistent with the general nature of fiduciary obligations, which is that they are proscriptive in nature. 240In principle, it seems to me to be correct to analyse the contractual relationship between Optus (that is to say, the three plaintiffs) and Mr Curtis in the following way: (1) the contract of employment was made between Optus Administration as employer and Mr Curtis as employee; (2) the contract included promises made by Mr Curtis for the benefit not just of Optus Administration but also of the other plaintiffs; (3) objectively, Optus Administration and Mr Curtis intended that Optus Administration was to hold the benefit of the contract of employment (that is to say, the benefit of Mr Curtis' promises in the contract of employment) not just on its own behalf but also for the other plaintiffs; (4) in those circumstances, Optus Administration is a trustee of the benefit of the promises for the other plaintiffs; and (5) accordingly, to the extent that Optus Administration itself has suffered damage, it is entitled to enforce the contracts, but it is also entitled to enforce the contracts for the benefit of the other plaintiffs, to the extent that they have suffered damage. 241This analysis (which Mr Stoljar had propounded) was not challenged in the submissions for Mr Curtis. 242As has been noted, the contract of employment required that Mr Curtis should act in the best interests, not just of Optus Administration, but also of the other plaintiffs; and should not act in conflict with the interests of those companies. 243In circumstances where, in effect, Mr Curtis undertook to serve not just Optus Administration but also the other plaintiffs, and where he undertook obligations to act in the best interests of all plaintiffs, it does not seem to me to be at all inconsistent with either principle or commercial practice to conclude that the fiduciary obligations arising from the contract of employment were owed to all three plaintiffs. 244I am comforted in taking that approach by the way in which the written closing submissions for Mr Curtis (and Electrosales) proceeded. They make it clear that the existence of the duties is not in question; nor is the proposition that they are owed not just to Optus Administration but to the plaintiffs generally. Thus, para 2 states (so far as it is relevant): Mr Curtis' evidence is replete with admissions of those parts of the conduct complained of in this case, which involve a conflict of interest. He did not suggest that he obtain [sic] fully informed consent to his involvement in Sumo. 245 Then, in para 3, the submissions continue: The cases are replete with examples of fiduciaries in a conflict of interest situation who have injured the person to whom such fiduciary obligations are owed. Usually, in the case of a large commercial enterprise, competition will lie at the foundation of the action. ... [a]bsent from this case is any suggestion of acts done in competition with Optus. 246As the submissions proceed (and the way in which they were developed orally was not materially different) it is crystal clear that their essential point is that although the fiduciary duties were owed to the plaintiffs generally, the plaintiffs suffered no loss by reason of the admitted facts which show breach of those duties. That is clear from paras 6 and 7 of the written outline, where it is said: What the plaintiffs apparently find unpalatable... is the conflict of interest alleged against Mr Curtis. They have elected to claim equitable damages for the breach of the fiduciary duty. ... Thus ... the claim for relief against Mr Curtis comes down to the question whether the markup paid to Almad Pty Limited was a loss suffered by the plaintiffs (my emphasis). 247Different questions arise in respect of the breaches alleged of the duties imposed by ss 182 and 183 of the Corporations Act. Mr Rayment submitted that those duties could be owed only to Optus Administration, as the employer; that Optus Administration had no entitlement to receive compensation for loss suffered by the other plaintiffs; and that s 1317H, properly understood, confirmed this. 248It is clear, and Mr Stoljar readily accepted, that Optus, however its case is framed, can recover only the one measure of compensation. It is equally clear that the claim (however framed) is for the same asserted loss. Thus, it is not necessary to resolve the disputes concerning the application of ss 182 and 183 and the claim for compensation under s 1317H. And for the same reason, it is not necessary to resolve the dispute as to who are the beneficiaries of Mr Curtis' contractual duties. 249The extant claims are for equitable compensation in respect of Almad's markup and the alleged overcharge. For the reasons that I have given, I conclude that Optus has failed to prove the latter aspect of its case. But in any event, if Optus recovers equitable compensation, that will exhaust its remedies. It would not recover more, or on any different basis, under s 1317H. Nor would it recover more for breach of contract. 250I turn to the remaining aspect of the claim against Mr Curtis. As I have noted, that is a claim for equitable compensation to recover the markup paid to Almad. 251Mr Stoljar submitted: (1) the question was what would have happened "but for" the breaches of fiduciary duty; and (2) the answer is that Optus would have leased a warehouse itself for the storage of EOL stock and the cable cutting operations, would not have needed the Sumo warehouse, and thus would not have needed to pay Almad's markup on Sumo's charges. 252Mr Rayment's submissions did not address in detail what might be called the "counter-factual": what would have happened if, hypothetically, Mr Curtis had made full disclosure, to his superiors, of his involvement; and had not terminated (as Optus submitted he did) the search for a warehouse for Optus to lease. Instead, Mr Rayment's submissions focused on the course of business that had developed between the various brokers and Optus; Mr Davey's integral role in that course of business; and the continuous nature of the services provided by Mr Davey through Almad. 253In Re Dawson (deceased) [1966] 2 NSWR 211, Street J considered the question of causation, in relation to a claim for compensation for breach of trust. His Honour referred to the authorities and said at 215 that one of them: ... is consistent with the proposition that if a breach has been committed then the trustee is liable to place the trust estate in the same position as it would have been in if no breach had been committed. Considerations of causation, foreseeability and remoteness do not readily enter into the matter. 254His Honour reviewed further authorities, which he saw as being consistent with that approach. He then stated (again at 215): The principles embodied in this approach do not appear to involve any inquiry as to whether the loss was caused by or flowed from the breach. Rather the inquiry in each case would appear to be whether the loss would have happened if there had been no such breach. 255Tadgell J considered the question in Hill v Rose [1990] VR 129 at 143 - 144. His Honour observed that the purpose of equitable compensation was "evidently... to place the party who suffers following the breach of duty as nearly as possible in the position in which he would have stood had there been no breach." However, his Honour said, equity's approach differed from that of the common law on the question of causation. His Honour said at 144 that the obligation imposed on trustees and other fiduciaries to make restitution to the beneficiary or the trust estate "is not limited or influenced by common law principles governing remoteness of damage, foreseeability or causation". His Honour stated, with evident approval, the approach that Street J had articulated in re Dawson at 215. 256It is instructive to look at the way in which Tadgell J applied that approach (again at 144). His Honour said that, had the plaintiff been told of the matters that should have been disclosed to him, "it is inconceivable that the plaintiff would have advanced his money as he did". In this case, it seems to me, one asks what Optus would have done had it been told what it should have been told. For the reasons that follow, the answer is clear: it would not have stored its EOL stock through Almad with Sumo, nor paid Almad its 20% markup for such storage. 257If Mr Curtis were to obtain the consent of Optus to what otherwise would have been a clear breach of fiduciary duty (or to obtain exoneration from any past breach of duty), it would have been necessary for him to make full disclosure to Optus of his involvement in Sumo and, thus, on both sides of the transactions in which Sumo participated. To the extent that he was seeking exoneration for past breaches, Mr Curtis would also have been required to disclose the full extent of those breaches, and the benefits received by Sumo. 258It is inconceivable that, if the requisite disclosures had been made, Optus would have consented to Mr Curtis' continuing in business as a supplier to Optus, for as long as he remained an employee of Optus. I take that from Mr Wilkie's evidence. Further, there is significant corroboration of this from the nature of activities undertaken by Mr Curtis. It is clear that he acted covertly, in the way that he did, so as to conceal from his superiors the fact of his involvement in Sumo as a supplier to Optus. 259Thus, if Optus had been asked to consider whether it should lease its own warehouse for the storage of EOL goods, or whether it should continue to pay Sumo (knowing of Mr Curtis' involvement) with a markup to Almad, the answer that would have been given is, I think, clear. Optus would not have continued with the arrangements that in fact Mr Curtis put into place. 260The question is not, as Mr Rayment appeared to suggest, whether generally Optus obtained some benefit from Almad's services. It is whether, but for Mr Curtis' breaches of fiduciary duty, Optus would have stored its EOL stock in the way that was done (with Sumo, and with Almad charging a 20% markup) or whether it would have proceeded with the proposal to lease a warehouse of its own. 261As I have said, the answer is clear: Optus would have chosen the latter course. 262Accordingly, I conclude that Optus has made good in principle its claim for equitable compensation, as to the Almad markup. 263Optus quantifies this aspect of its claim for equitable compensation at an amount of $1,879,333, together with interest. It calculates that amount as follows: (1) the total amount paid to Almad over the relevant period was about $18,399,000; (2) about $7,120,000 was paid for costs other than storage of pallets and related expenses; (3) the balance to which the calculations should be directed is, therefore, about $11,279,000; (4) Almad's markup was 20%; (5) thus, the amount of the markup is one-sixth of the total paid, or about $1,879,333. 264Mr Rayment's submissions did not address the precise quantification of the sum. Mr Stoljar accepted that, if I were to conclude that Optus should have equitable compensation, it should be left to the parties either to work out the sum involved or to put submissions as to its quantification. 265As the schedule referred to at [12] above indicates, the claim for equitable compensation is one made by Singtel Optus, because it is that company's EOL stock that was stored by Sumo. 266Since I have concluded that Optus has not proved its overcharging case, it has no entitlement to equitable compensation for the alleged overcharging.

[25]

Second issue: the knowing involvement of Sumo, Mr Hasler and Electrosales The claim against Sumo 267There can be no doubt that Sumo was knowingly involved in Mr Curtis' breach of fiduciary duty. It was his creature. He effectively controlled its operations. Mr Stoljar submitted that Mr Curtis was a shadow director, and I agree. Mr Curtis' knowledge was Sumo's knowledge. Sumo was the recipient of the benefits procured by Mr Curtis' breaches of fiduciary duty. 268On the evidence, the profits that Sumo made (over the years from 2004 to 2010 when it was profitable) were derived substantially, if not entirely, from the business it did for Optus. Such work as was done for other customers was, at its highest, marginal. 269In principle, therefore, Sumo should be required to account for the total of the profits that it did make for the years that I have identified. And, because those profits were diminished by the corrupt payments made to the Harmanis and Zotz families (which were disguised as payments of wages or salary), the amounts of those payments should be added back. 270Sumo continued to store goods for Optus during the 2011 financial year. That storage ceased in about December 2010 or January 2011, in circumstances to which I shall return. Sumo made a substantial loss for that year, no doubt because of the loss of the Optus business. (This of itself illustrates the proposition that the profits made by Sumo were derived from the business of Optus.) 271Mr Stoljar submitted that Optus was entitled to an account of profits and was not required to absorb the losses. In principle, I think, that is correct. It is often said that a defaulting fiduciary (or a person liable to account for knowing involvement in the defaults of her fiduciary) may be entitled to some allowance for time and skill. I do not think that this is an appropriate case to make such an allowance. But if it were, the fact is that the profits earned by Sumo are profits net of all proper expenses, so that the effect of making just allowances has been achieved in any event. The claim against Electrosales 272I turn next to the position of Electrosales, because that requires some attention to the authorities on which Optus relied. 273At first, one might wonder why Electrosales was involved. But it, too, was no more than a corporate creature embodying Mr Curtis' mind and will. The evidence showed that Mr Curtis used Electrosales for the purpose of storing some of Optus' stock, and that Electrosales rendered invoices to Almad which were in due course passed on to Optus. 274Mr Rayment did not address the question, whether (in the event that I were to conclude, as I have, that Mr Curtis had breached his duties) Electrosales should be made liable as an entity knowingly involved in the breach. In the circumstances, I take it from Mr Rayment's silence on the point that, if the principal question is decided against Mr Curtis, then the secondary question, insofar as it involves Electrosales, should be decided against that company. 275This is not a case where it has been shown that Electrosales obtained some identifiable profit from those of Mr Curtis' breaches of fiduciary duty that were conducted through it, or involving it (compare Warman International v Dwyer (1995) 182 CLR 544 at 560). That, no doubt, is why Optus elected to claim equitable compensation rather than an account of profits. 276Mr Stoljar relied on the decision of the Full Court of the Federal Court of Australia in Grimaldi v Chameleon Mining NL (No.2) (2012) 200 FCR 296. In that case, the Court said at [556] that where the advantage of a fiduciary's wrongdoing accrues to a third party which is the alter ego or nominee of the fiduciary, that third party will be jointly and severally liable with the fiduciary. The remedies claimed may be either an account of profits or compensation to restore the trust property or for loss resulting from the wrongdoing. 277The claim against Electrosales for equitable compensation was made in two distinct ways. First, Singtel Optus claimed equitable compensation, in the full amount claimed against Mr Curtis (that is to say, in respect of both the overcharge case and the Almad markup case). This claim was made on the basis that Electrosales had been knowingly involved in Mr Curtis' breaches of fiduciary duty. 278Secondly, all three plaintiffs claimed compensation under s 1317H of the Corporations Act. That claim was made on the basis that Electrosales was knowingly involved in Mr Curtis' breaches of ss 182 and 183. The amount was quantified in the same way. Optus made it clear that the amount claimed on this basis was "less any amounts covered by" the claim for equitable compensation. 279For the reasons given at [248] and [249] above, in respect of the primary claims against Mr Curtis, it is not necessary to pursue the alternative way in which Optus put its case against Electrosales. 280There is no principle that, where it has been shown that an "assistant" has been knowingly involved in a breach of duty by a fiduciary, the liabilities of the fiduciary and the assistant must necessarily be the same. It is clear, for example, that one may be called upon to make compensation, and the other to account for profits. And it is equally clear that the measure of loss recoverable from each may differ. So much follows from the observations of the plurality (Gummow ACJ, Hayne, Heydon, Crennan and Bell JJ) in Michael Wilson and Partners Limited v Nicholls (2011) 86 ALJR 14 at [106]: [106] As MWP rightly pointed out, this court has held74 that liability to account as a constructive trustee is imposed directly upon a person who knowingly assists in a breach of fiduciary duty. The reference to the liability of a knowing assistant as an "accessorial" liability does no more than recognise that the assistant's liability depends upon establishing, among other things, that there has been a breach of fiduciary duty by another. It follows, as MWP submitted, that the relief that is awarded against a defaulting fiduciary and a knowing assistant will not necessarily coincide in either nature or quantum. So, for example, the claimant may seek compensation from the defaulting fiduciary (who made no profit from the default) and an account of profits from the knowing assistant (who profited from his or her own misconduct). And if an account of profits were to be sought against both the defaulting fiduciary and a knowing assistant, the two accounts would very likely differ.75 It follows that neither the nature nor the extent of any liability of the respondents to MWP for knowingly assisting Mr Emmott in a breach or breaches of his fiduciary obligations depends upon the nature or extent of the relief that MWP obtained in the arbitration against Mr Emmott. 281As I have mentioned already, the Full Court held in Grimaldi at [556] that where the assistant is the alter ego or nominee of the defaulting fiduciary, their liabilities would be joint and several. But the example their Honours gave (based on Gencorp Limited v Dalby (2002) 2 BCLC 734) was of a fiduciary who diverted unlawful commissions "into his own creature company" (para 26). 282The facts in this case are not at all similar. It is clear that, to a very large extent, it was Sumo that was the beneficiary of Mr Curtis' breaches of fiduciary duty. To the extent that Electrosales also benefited, it appears to have done so on a somewhat random basis. 283The submissions for Optus did not seek to demonstrate the extent to which Electrosales had benefited from such storage charges as it had claimed and was paid in respect of Optus' goods. Nor did those submissions seek to demonstrate (for example) the ratio between the volume of "Optus" storage undertaken by Sumo through Almad and the volume of such storage undertaken by Electrosales through Almad. 284So far as the evidence goes, it cannot be suggested that Electrosales was knowingly involved in the whole of Mr Curtis' breaches of fiduciary duty. In those circumstances, I have some difficulty in understanding how it can be held liable to pay compensation, jointly and severally, with Mr Curtis, for the consequences of all those breaches. This uncertainty has not been helped by the failure, remarked upon already, of the defendants' submissions to address this point. 285I accept that the Full Court in Grimaldi raised as a possibility, at [558], that "when wrongdoers ... entangle their affairs, ... the law as a matter of legal policy might wish to make it their responsibility - and not a claimant's - to untangle them for accountability purposes". However, this is not such a case (at least, in so far as the involvement of Electrosales is concerned). Perhaps more importantly, their Honours were raising this as an issue for consideration, not stating it as a concluded principle upon which an assessment of compensation could proceed. 286In all the circumstances, and notwithstanding the failure of the submissions for Electrosales to address the point, I do not consider that Optus has made good a claim for equitable compensation against Electrosales, as an assistant, for the full amount of Mr Curtis' liability, as a defaulting fiduciary. In principle, it seems to me, the measure of compensation should be limited to the measure of the benefit obtained by Electrosales through its knowing involvement in those breaches. 287Since the evidence does not permit a conclusion as to the amount that would be ordered on this basis, I will leave it to the parties either to address further on how this might be done or to seek a reference out, or some other mechanism, for quantification of Electrosales' liability. The claim against Mr Hasler 288The case made against Mr Hasler is that he was knowingly involved in Mr Curtis' breaches of fiduciary duty because, at the very least, Mr Hasler had knowledge of circumstances which would indicate to an honest and reasonable person that Mr Curtis was acting in breach of his fiduciary duties to Optus (see Farah Constructions Pty Limited v Say-Dee Pty Ltd (2007) 230 CLR 89 at [174] to [177]; and see Grimaldi at [268], [269]). 289Optus also claims against Mr Hasler for what it says is his knowing involvement in Mr Curtis' breaches of duties under ss 182 and 183 of the Corporations Act. 290In my view, Optus has shown that Mr Hasler knew of matters or activities (on the part of Mr Curtis) that, to an honest and reasonable person, would speak of breach of duty. Indeed, I think, the conclusion can be expressed more strongly. 291Mr Hasler was deeply and directly involved in the relevant activities, from the setting up of Sumo, through the diversion of Optus business to it, up to the provision of services, the rendering of invoices and the receipt of payment. Once Mr Hasler left the employ of Optus, he managed the warehouse business on a day to day basis. To my mind, Mr Hasler had actual knowledge of all matters that show breach of fiduciary duty on the part of Mr Curtis. And Mr Hasler, by his actions that I have briefly outlined, was directly involved in those breaches. 292The submissions that were put for Mr Hasler addressed the matter principally by reference to the pleaded case against him. In relation to the claim for accessory liability, they are aptly summarised at the conclusion of para 36 of the closing submissions: The principal allegations made against [Mr Hasler] are those under the second limb of Barnes v Addy and he is not shown to have been aware of any dishonest and fraudulent design on the part of Mr Curtis. The plaintiffs' opening at paragraphs 36-50, like its [sic] pleading, conspicuously does not allege any dishonest or fraudulent design on the part of Mr Curtis, let alone any knowledge of such dishonest or fraudulent design on the part of Mr Hasler. The case against him lacks any substance. 293There are a number of points to be noted about this approach. The first is that it focuses on the pleadings, and not in any detail on the evidence that was given without objection. 294The second point is that, to the extent that it suggests that subjective knowledge is an ingredient of accessory liability for breach of fiduciary duty, it is wrong. 295The third point, flowing from the first two, is that whether or not Optus pleaded a dishonest and fraudulent design on the part of Mr Curtis, there is no doubt that it proved facts which could and should be so characterised. 296The fourth point is that on any view, Mr Hasler knew of the essential facts that show breach of fiduciary duty on the part of Mr Curtis. Mr Hasler knew that: (1) Mr Curtis was an employee of Optus Administration, performing his duties for the benefit of the other plaintiffs; (2) Mr Curtis' responsibilities included managing Optus' needs for transport and warehousing of its goods; (3) Mr Curtis had cooperated with Mr Hasler to set up Sumo as a company offering, in particular, warehousing services; (4) Mr Curtis had caused, directly or through employees, Sumo to become a supplier of warehousing services to Optus. 297It may perhaps be (although I doubt it) correct to say, as Mr Rayment submitted, that Mr Hasler did not know that Mr Curtis had not obtained the informed consent of Optus to these activities. (It is certainly correct to say that Mr Hasler did not know that Mr Curtis had obtained such consent.) It may also be, as Mr Rayment submitted, that, subjectively, Mr Hasler saw nothing wrong with these activities. The simple fact is, however, that Mr Hasler knew of the elements of breach of fiduciary duty, and with that knowledge assisted in the execution of the breaches. 298Whether or not, subjectively, Mr Hasler appreciated that what was going on was dishonest or fraudulent is immaterial. The facts which were known to Mr Hasler, regarded objectively, demonstrate breach of fiduciary duty. And the facts as to Mr Hasler's activities show that he assisted in, or facilitated, or furthered, that breach. 299There is a question as to the extent of Mr Hasler's knowledge of the payments made to the Harmanis family and the Zotz family. He says that he did not know before January 2009. I accept that aspect of his evidence. Thus, to the extent that the making of those payments is available for Optus to rely on as showing the requisite dishonest and fraudulent design, it does not apply to Mr Hasler before January 2009. And given his lack of involvement in the making of the payments thereafter, I would conclude that it is not relevant to him thereafter. 300There was a substantial dispute as to whether Optus had pleaded and proved the elements of accessory liability: in particular, the existence of the fraudulent and dishonest design, and the existence of Mr Hasler's knowledge of that design. Mr Rayment submitted that the relevant matters had not been pleaded, and that Optus should be held to the pleaded case. Mr Stoljar did not accept that the case was insufficiently pleaded, but said that, in any event, the court was required to decide the issues on the basis of the way that the parties' cases had been opened, and on the evidence that had been adduced without objection thereafter. 301Mr Stoljar's second, or alternative, submission is plainly correct. As Dawson J said in Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 297, "[s]pecial procedures apart, cases are determined on the evidence, not the pleadings". See, in this regard, Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 at [424] where Ipp JA summarised the position as follows: The following propositions may be extracted from these authorities: (a) The rule that, in general, relief is confined to that available on the pleadings secures a party's right to a basic requirement of procedural fairness. (b) Apart from cases where the parties choose to disregard the pleadings and to fight the case on additional issues chosen at the trial, the relief that may be granted to a party must be founded on the pleadings. (c) It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground an inference that the parties have chosen a different basis to the pleaded issues for the determination of their respective rights and liabilities. (d) Acquiescence giving rise to a departure from the pleadings may arise from a failure to object to evidence that raises fresh issues - it is in this sense that "cases are determined on the evidence, not the pleadings". (e) While cases are to be decided upon a basis that embraces the "real controversy" between the parties, the real controversy has to be determined in accordance with the principles stated. 302The fourth of those five propositions is of particular relevance in this case. 303Having come to that view, it is unnecessary to express a concluded view about the pleading point. I will however indicate that if Optus had been confined to its pleaded case, it would have had considerable difficulty in persuading me that the "knowing involvement" claim against Mr Hasler had been pleaded and particularised with the requisite particularity. 304The claims pressed against Mr Hasler are: (1) by Singtel Optus, for equitable compensation for knowing involvement in Mr Curtis' breaches of fiduciary duty; and (2) by all plaintiffs, for compensation under s 1317H of the Corporations Act, for knowing involvement in Mr Curtis' breaches of ss 182 and 183. 305The compensation sought is the same in each case, and MFI F (see at [12] above) makes it clear that the second claim is pressed only to the extent that full compensation is not awarded under the first. 306As I have said, I think it is clear, at a minimum, that Mr Hasler had actual knowledge of facts that would suggest, to an honest and reasonable person, that Mr Curtis had breached his fiduciary duties to Optus. The evidence shows, further, that Mr Hasler was directly involved in the acts which constituted or effected those breaches of duty. And that is so even if one puts to one side the case based on the corrupt payments made to the Harmanis family and the Zotz family. 307It must follow, in my view, that Mr Hasler is jointly and severally liable with Mr Curtis to make equitable compensation to Optus for the loss that it has proved: namely, the Almad markup.

[27]

Fourth issue: claim against Almad for misleading or deceptive conduct 311Mr Stoljar submitted that Almad, through Mr Davey, was aware during what Optus calls "the Period" (defined in FACLS as 1 April 2005 until December 2010) of the following matters: 1. Curtis while holding a senior position with the Optus Group was preparing and sending Sumo invoices to MTM and, or alternatively, Almad in relation to storage provided to SingTel Optus; 2. Curtis while holding a senior position with the Optus Group was also acting for the benefit of Sumo or persons associated with Sumo; 3. Either Curtis or Hasler or both had, or there was a real risk that they had, used their positions or information acquired by him or them in the course of their employment with the Optus Group for the benefit of Sumo and those associated with it (including Curtis and Hasler) and, or alternatively, otherwise than for the benefit of the Optus Group; 4. during the Period either Curtis or Hasler or both had, or there was a real risk that they had, engaged in conduct by reason of which his or their interests in and, or alternatively, duties to the Optus Group were in conflict with his or their interests in, and or alternatively, duties to Sumo; 5. either Curtis or Hasler or both had, or there was a real risk that they had, failed to obtain the informed consent of the Optus Group to engage in the conduct pleaded in (a) - (d) above; and 6. Almad was overcharging for the rate for pallet storage for EOL Stock ... 312Mr Stoljar submitted that, in all the circumstances, a party in the position of Optus with whom Almad was dealing would reasonably have expected that Almad would disclose those matters. Thus, he submitted, the failure to disclose was misleading or deceptive, or likely to mislead or deceive. He relied on well known statements of principle in Demagogue Pty Limited v Ramensky (1992) 39 FCR 31 and Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53,193 at 53,195. 313Mr Stoljar submitted that Almad (or Mr Davey) was a trusted and long-term supplier of services to Optus, and that (as Mr Davey must have understood) Optus reposed a degree of trust and confidence in Almad. In particular, Mr Stoljar submitted, Mr Davey (it is convenient to pierce the corporate veil) must have understood that Optus relied on him to exercise skill and diligence in relation to services provided through his efforts to Optus. 314Against that background, Mr Stoljar submitted (written closing submissions, para 257): 257. At the same time, however, Almad knew many of the remarkable circumstances arising in this case, including: (1) Mr Davey had been told by Ms Grech in no uncertain terms that Mr Curtis and Mr Hasler operating a warehouse storing Optus stock would involve a conflict a conflict of interest. As Mr Grech deposes in her affidavit of 1 August 2013 at [8]: Me: How can Craig and Leon run a warehouse storing Optus stock while they are still working for Optus? Surely that's a conflict of interest? Davey: That's got nothing to do with us. Me: I am not comfortable with this at all. I don't see how it can be legal and I don't want to get involved. I can't imagine Optus consenting to this arrangement. (2) Mr Davey knew that Mr Curtis was, on the one hand, approving pricelists or setting rates for Sumo and, on the other, approving pricelists or setting rates on behalf of Optus. In other words Davey knew that Mr Curtis was on both sides of the transaction; * (3) there had been no public tender in respect of the services provided by Almad; * (4) the very reason for Almad being or continuing to be involved in the Sumo arrangement, let alone receiving a mark up of 20%, is unclear, other than to disguise the involvement of Sumo. Mr Davey must have realised that if Mr Curtis was working legitimately for Optus there was no reason for him to be retaining Almad, and thereby causing Optus to pay increased fees, locating and arranging services that Curtis was in substance providing himself; * (5) the transfer of stock from MTM to Almad in early 2005 involved an unexplained price increase from $2.30 to $3.00 per pallet per week where they did not seem to have been warranted. 315In those circumstances, Mr Stoljar submitted, "Optus could reasonably have expected that Almad would disclose what it knew, and Almad's failure to do so was misleading and deceptive" (para 259). 316It is convenient to start with the "remarkable circumstances" to which Mr Stoljar referred. Taking them one by one: (1) I do not accept the evidence of Mrs Grech that the conversation on which Mr Stoljar relied occurred. (2) Mr Davey undoubtedly knew "that Mr Curtis was on both sides of the transaction." See his evidence at T282.19-.34: Q. Then you say "So I offered Optus a storage solution using Sumo as a replacement for CALM? A. Correct. Q. Who did you make that offer to? A. Alex and Leon. Q. Mr Harmanis and Mr Curtis? A. Yep. Q. Mr Curtis made a presentation to you about Sumo? A. Correct. Q. And you then offered it back to Mr Curtis? A. Correct. (3) this is undoubtedly correct; but the same appears to have been the case in respect of MTM and Transcoast, for the equivalent services that, eventually, Almad provided to Optus. (4) Mr Davey knew the underlying facts. That is to say, he knew that Mr Curtis, through Sumo, was providing services to Optus through Almad. He knew that Almad was charging a markup on those services. But it does not follow that Mr Davey must have appreciated that this was done "to disguise the involvement of Sumo". So far as Mr Davey knew, Almad was a supplier of services to Optus, just as MTM had been and just as Transcoast had been. What had changed was the identity of the entity by whom those services were provided. But there is no reason to think that Mr Davey knew that Mr Curtis had failed to receive clearance for this in accordance with whatever, to Mr Davey's way of thinking, the relevant procedures of Optus might have required. (5) I have found that Optus has failed to prove "an unexplained price increase from $2.30 to $3.00 per pallet per week". 317In reality, the only significant matter of which Mr Davey was aware was the second: that Mr Curtis was in effect speaking for the parties on each side of the transaction. 318The test, in assessing whether there has been misleading or deceptive conduct by reason of non-disclosure, must be objective: would a reasonable person, in all the circumstances, have expected a disclosure to be made? Thus, to the extent that Mr Davey failed to concern himself with the proprieties of the situation (and I have no doubt that, subjectively, he did not so concern himself), that is no defence. 319In Hardy v Your Tabs Pty Limited [2000] NSWCA 150, Heydon JA referred to misleading or deceptive conduct by silence, which might occur by reason of failure to disclose when there had been occasions when disclosure would have been appropriate. Of course, his Honour was not intending to define in any comprehensive way the circumstances in which silence might amount to misleading or deceptive conduct. (For that matter, I doubt that any such comprehensive definition is possible.) But it is convenient to take that as a starting point, and to ask: when would it have been appropriate for Mr Davey to make disclosure? 320The matters that I have taken from Mr Stoljar's submissions point to two occasions at least on which disclosure might have been appropriate: the suggested conversation with Mrs Grech, and the suggested overcharging. It seems to me that if either of those allegations had been made good (and a fortiori if both had been made good), it would have been appropriate for Mr Davey to reflect a little more, and to take up with Optus (other than through Mr Curtis) the fact that Mr Curtis was, as it was put, on both sides of the transaction. But since I have found that neither the conversation nor the overcharging have been proved, those occasions did not arise. 321On my findings, the case for Optus, on this issue, must depend on the position that awareness of one fact only - that Mr Curtis was on both sides of the transaction - was sufficient to engender in Mr Davey an obligation of disclosure, so that silence (or failure to disclose) amounts to misleading or deceptive conduct. But why should that be so? Why was Mr Davey not entitled to think that whatever internal procedures Optus had in place for regulating conflicts of interest were not satisfied in the present case? 322Mr Davey said that he thought this "was a win, win, win for everyone... because I could help to solve Optus' problems of what they required... we managed to keep the price down... we got it [the storage rate] so cheap" (T282.39 - 283.1). And implicit in this passage of Mr Davey's evidence is that it was a win for Sumo too, because its warehouse at Campbelltown was empty and Sumo needed to derive income: "[t]hey were taking anything they could" (T283.2). 323In my view, the facts that have been proved are not such to engender any reasonable expectation of disclosure. It follows that the conceded non-disclosure cannot amount to misleading or deceptive conduct.

[29]

Sixth issue: the claims for conversion and bailment The claim against Sumo 325Insofar as this issue relates to Sumo, it concerns EOL stock identified on schedules. The relevant evidence was given by Mr Natale. In substance, he gave evidence of two "audits" of "processed disposals": that is to say, of Optus stock that had been written off, through the appropriate disposal form (DF) and sent to Sumo for storage pending disposal. 326The first audit suggested that Optus had disposed of inventory valued at over $10 million, but had located only about $1.2 million worth. That led to the second audit. The second audit was conducted after such Optus stock as Sumo still held was either removed from it or physically counted and verified. The second audit repeated the first audit, but for an earlier period. 327Based on those two audits, Mr Natale concluded that Sumo had failed to account for a very substantial amount of EOL stock, which was listed on a spreadsheet that he prepared. 328Optus called evidence from an expert, Mr Stuart Bettington, who has experience in the telecommunications market including in the disposal of EOL stock. He valued the missing stock (according to Mr Natale's spreadsheet) at $5.4 million. Mr Stoljar accepted (T707.23) that it would be appropriate to discount this by a factor of 10 to 20%, to allow for errors in the audit and for the possibility that some of the missing stock might have been in fact lawfully scrapped. (As to this latter point: Optus carried out a search of its own records and found only two instances of instructions to scrap stock listed on a DF.) 329Sumo accepted the duties of a bailee for reward. At common law, it must therefore show either that it took reasonable care of the goods, or that such failure as there was to take care did not contribute to the loss. Neither of those things has been established. 330In the circumstances, I conclude that Optus has made good its case against Sumo. Damages should be assessed at the lower end of the range ascertained by discounting Mr Bettington's figure. In round figures, he assessed the value of the stock at $5.4 million. 80% of that is $4.3 million. That, in my view, is the amount which should be awarded. The claims against Electrosales 331It is common ground that, as I have noted at [34] and [35] above, Electrosales did sell to Telecycling stock that had come from Optus. It has not been suggested that Optus authorised this sale. The issue was whether the stock was the property of Optus, or of Megatron. 332I prefer the records created by Mr Curtis at the time to his subsequent, and in my view dishonest, evidence seeking to explain them away. Thus, I find that the stock was, at the time of the sale, the property of Optus. 333It follows that Electrosales converted the stock the subject of that sale. It appears to be common ground that the stock should be valued at the sale price, $104,492.87, and that this is the amount of Optus' loss. 334As I have noted already, the second alleged conversion - the sale to Braintree - was admitted and the agreed loss is $15,000.00. 335Optus is entitled to judgment against Electrosales, for conversion, in the sum of $119,492.87, together with interest.

[31]

Almad's cross-claim 339The cross-claim has two components. The first relates to invoices rendered but unpaid. The second refers to "uninvoiced claims": that is to say, claims for payment for services rendered that were not the subject of invoices. The invoiced claims 340The only defence to these claims was a defence by way of set-off. Since I have concluded that all Optus' claims against Almad fail, that goes nowhere. 341It follows that Almad is entitled to judgment for the total of the outstanding invoices, $458,662.84, together with interest. 342I note that, of this amount, five-sixths is due to Sumo for the services provided by it (the subject of its invoices to Almad). One-sixth is due to Almad, as its markup. Although this was not suggested to give rise to any defence, it may be worth noting that Mr Davey said in substance that: (1) Almad had made some payments to Sumo already on account of its share of the total; and (2) if Almad recovered judgment, he would ensure that it accounted to Sumo's liquidator for whatever the balance owing might be. The uninvoiced claims. 343Mr Davey's evidence was to the effect that Sumo had also provided storage services after the date of the last of the invoices that had been rendered (the subject of the claim I have just dealt with). Those invoices covered the period 29 October to 17 December 2010. 344Mr Davey said that, for the following weeks, from 24 December 2010 to 18 February 2011, there were invoices "drafted... but... not... issued". Those draft, or unissued, invoices total $138,117.21. 345Optus submitted that, quite apart from the question of set-off, it had no liability in respect of those invoices. The first reason given was that, as they had never been issued and as the claim was for payment pursuant to a contract (not on some quantum merit basis), there was no proof of any contract for provision of the services in question. 346As what might be a variant of this reason, Optus submitted that Almad's pleaded position (appearing from its commercial list response) was that its contractual obligation was only to arrange for the storage of stock and equipment as requested from time to time. On that basis, Optus submitted, Almad's maximum claim would be its markup, or about $23,000.00. 347The second principal reason advanced by Optus was that, from 22 December 2010, Sumo had asserted a warehouseman's lien, and had refused to allow Optus to collect its stock. Optus submitted that Sumo should not be entitled to storage charges after the time (22 December 2010) when Optus had demanded the return of its stock, but had been prevented from doing so by the asserted lien. Thus, Optus said, Almad should not have its markup. 348The relevant facts fall within a narrow compass. On 17 December 2010, Mr Natale informed Mr Davey that Optus no longer wished to use Almad's services. That was confirmed by email from Ms Kate Reid of Optus to Mr Davey on 20 December 2010. That email stated, further, that Optus proposed "to collect our goods" the following day. 349Sumo asserted a lien over all the goods for unpaid storage charges. 350On 21 December 2010, Optus' lawyers, Minter Ellison, wrote to Almad. The letter recited the history and threatened legal action should Almad continue to refuse access to Optus or its agents to collect Optus' stock. 351The following day, Minter Ellison wrote to Sumo threatening legal action should Sumo not permit Optus to recover its stock. 352On 22 December 2010, Sumo's lawyers at the time, Baker Ryrie Rickards Titmarsh, wrote to Minter Ellison. The letter was tendered without objection, despite its being headed "without prejudice except as to costs". It proposed two alternatives to break the deadlock. One was that Sumo and Almad would release all but about $500,000.00 worth of Optus' goods. The other alternative need not be described. 353Minter Ellison replied stating among other things: ... our client will accept the proposal set out in your letter to collect and remove our client's goods up to, and leaving in the warehouse goods to the value of $500,000.00, on the following conditions: ... (b) our client does not continue to pay ongoing storage charges for the goods so retained; and ... 354Baker Ryrie Richards Titmarsh replied the following day, stating among other things: Our client accepts the variations contained in your [letter] to the proposal previously conveyed by us and has commenced loading this morning. 355In those circumstances, Mr Stoljar submitted, there was an agreement between the parties, made for good consideration, that Optus would have no liability for storage charges beyond 22 December 2010. 356In my view, that submission is correct. There was a position where each party was asserting rights against the other. There was a compromise, in which each party gave up some of its asserted rights. The promise of each party to forgo the full extent of its demands provides consideration for the promise of the other. 357Thus, there was an enforceable agreement between Sumo and Optus containing a term, among other things, that Optus would have no liability for storage charges from 22 December 2010. Almad, as broker, can be in no better position. Specifically, if there were no storage services to manage, and no storage invoices to be vetted and passed on, then Almad can have no claim from 22 December 2010. 358That leaves the brief period between from 17 to 22 December 2010. The paries' submissions did not address this. However, it is uncontentious that, on 17 December 2010, Optus gave Almad notice of termination of the arrangements that were in place between them. It would seem to follow that there could be no contractual claim after that notice had been given. Since no quantum merit or restitutionary claim was pleaded for this short period, I propose to treat it, as apparently the parties did, by giving it no (further) independent consideration. 359The result is that Almad's claim for the uninvoiced charges must fail. Conclusion on the cross-claim 360Almad is entitled to judgment on the first cross-claim in the sum of $458,662.84 together with interest. The parties should agree a calculation of interest, and the resultant judgment sum should be included in the draft orders to be prepared. 361As with Optus' claim, I will hear the parties on costs.

[32]

Conclusion and orders 362I have reached the following conclusions on Optus' claims for relief (by reference to the claims set out at [12] above) and on Almad's cross-claim: (1) Singtel Optus succeeds on its claim against Mr Curtis for equitable compensation for breaches of fiduciary duty, but in the amount of $1,879,333.00 only, together with interest; (2) it is not necessary to express a concluded view on the claims by all three plaintiffs for compensation under s 1317H of the Corporations Act, nor the claim by Optus Administration for damages for breach of the employment contract; (3) the plaintiffs succeed in their claim against Sumo for an account of profits in respect of its knowing involvement in Mr Curtis' breaches of fiduciary duty, with no deduction for Sumo's losses in the 2011 financial year; and those profits should be augmented by adding back the payments made to the Harmanis and Zotz families; (4) it is not necessary to express a concluded view on the claims by all plaintiffs against Sumo for compensation under s 1317H of the Corporations Act; (5) Singtel Optus succeeds in its claim against Mr Hasler for equitable compensation for knowing involvement in Mr Curtis' breaches of fiduciary duty, but in the amount of $1,879,333.00 together with interest; (6) it is not necessary to express a concluded view on the claims by all plaintiffs against Mr Hasler for compensation under s 1317H of the Corporations Act; (7) in principle, Singtel Optus is entitled to succeed in its claim against Electrosales for equitable compensation in respect of that company's knowing involvement in Mr Curtis' breaches of fiduciary duty, but the amount remains to be quantified; (8) it is not necessary to express a concluded view on the claims by all plaintiffs to recover compensation from Electrosales under s 1317H of the Corporations Act; (9) the claims by Singtel Optus against Almad for breach of contract and for misleading or deceptive conduct fail, and thus the claims by Singtel Optus against Sumo, Mr Hasler and Electrosales for knowing involvement in those alleged activities also fail; (10) Optus Networks succeeds in its claim against Sumo in conversion, but in the amount of $4,320,000.00 together with interest; (11) Singtel and Optus Networks succeed in their claims against Electrosales (and, to the extent that it overlaps, against Sumo) in conversion, in respect of the Telecycling sale, in the sum of $104,492.87; (12) Optus Networks succeeds in its (admitted) claim in conversion against Mr Curtis and Electrosales, in respect of the Braintree sale, in the sum of $15,000.00; and (13) Almad succeeds on its first cross-claim against Singtel Optus, but in respect of the invoiced amounts only, $458,662.84 together with interest. 363It is likely (perhaps inevitable) that there will be a dispute as to the orders to be made; certainly so as to costs. The appropriate course is to direct the plaintiffs to bring in draft orders, and then to list the matter for directions so that, if necessary, a date for argument can be fixed, with appropriate directions. 364Accordingly, I make the following orders: (1) direct the plaintiffs to serve on the defendants and to deliver to my Associate, by 14 October 2013, draft orders to give effect to these reasons; (2) list the matter for directions at 9:30am on 16 October 2013 before me; (3) reserve costs; (4) reserve liberty to apply on three days' notice.

Singtel Optus v Almad

At a glance

Court

Decision date

Before

Source

Judgment (33 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (9)

Cited By (3)