Suzanne Marie Ryan and Mary Agnes Briggs as executrices of the estate of the late Patrick Joseph Donoghue & Anor v Prenitha Srimath Wikramanayake & Anor

Supreme Court of NSW|2012-12-07|Before: Slattery J

Judgment 1Between March and October 2005 Mr Patrick Joseph Donoghue and his wife Marie Josephine Donoghue ("the Donoghues") resided in an aged care facility, Lavington Lodge in Warren Street, Lavington, near Albury in New South Wales. 2Mr Donoghue died on 31 October 2009 and Probate of his Will was granted on 23 March 2010. Mrs Donoghue died on 6 January 2012. The plaintiffs, Mrs Suzanne Ryan and Mrs Mary Briggs, are the Donoghues' daughters and the executrices of their estates. 3By their Further Amended Statement of Claim of 24 May 2012, the plaintiffs seek the return of two accommodation bonds that the Donoghues paid under resident agreements between the Donoghues and the operator of the facility, Plus 55 Village Management (Albury) Pty Ltd (ACN 108 976 503) ("Plus 55"), or compensation in lieu of the return of the bonds. 4The first defendant, Mr Prenitha Wikramanayake, and the second defendant, Mrs Margaret Wikramanayake, ("the Wikramanayakes") were at relevant times the two shareholders and two directors of Wagga Road Properties Pty Ltd (ACN 108 886 568) ("Wagga Road"). Wagga Road owned the property at Warren Street, Lavington ("the Warren Street property") on which Lavington Lodge was built, and which it had agreed to lease to Plus 55. Wagga Road, formerly the third defendant, had commercial lease arrangements with Plus 55 which both entitled it to receipt of accommodation bonds, and required it to pay accommodation bonds back to residents on their exit from the facility. Wagga Road was deregistered on 8 November 2011, and the plaintiffs no longer proceed against it. 5The plaintiffs bring their proceedings in constructive trust, and alleging interference with contractual relations, and misleading and deceptive conduct. The Wikramanayakes say that any liability to refund these accommodation bonds lies with Plus 55, not with them. 6Additional context is required to understand these proceedings. The narrative below comprises the Court's findings, on what is mostly uncontested evidence. The findings on areas of more controversial evidence are included later in these reasons, when the plaintiffs' various claims to relief are considered. 7Mr Van Aalst of counsel appeared for the plaintiffs and Mr Bolster of counsel for the defendants.

The Wikramanayakes meet Mr Smith and Mr James 8Combined House Pty Ltd (ACN 089 961 900) ("Combined House") owned the Warren Street property before Wagga Road. From 1999 Combined House retained Mr David Smith and Mr John James as consultants to assist in constructing the aged care facility on the Warren Street property facility that was to become Lavington Lodge. Mr Smith and Mr James had arranged with Combined House to build and then sell the first stage of the project, which comprised some 24 apartments. But in 2002, Combined House ran out of funds and could not complete construction. To meet the funding deficiency, Mr Smith and Mr James, approached the Wikramanayakes with a proposal that they finance Combined House's completion of the facility 9Mr Smith and Mr James' December 2002 proposal was that the Wikramanayakes would lend funds to Combined House for the completion of this first stage of Lavington Lodge. Mr Smith and Mr James would then operate the facility through Combined House. The Wikramanayakes would take security by first mortgage over the Warren Street property, and take a fixed and floating charge over the assets of Combined House. But the proposal ultimately involved the sale of the facility. Mr Smith anticipated the units could be sold in one line for a price of about $85,000 each - so the sale of 24 units was anticipated to generate approximately $2.04 million. 10In March 2003, the Wikramanayakes accepted Mr Smith's and Mr James' proposal. In accordance with a letter of offer dated 14 March 2003 the Wikramanayakes lent Combined House $1,300,000 (clause 1.2(a)) for the purpose of the construction of what was described as an "aged and disabled hostel" (clause 1.3). The loan had a term of 18 months (from 23 December 2002) (clause 1.5) with an interest rate of 10.50% per annum (clause 1.8). 11The parties to the financing arrangement - Combined House, Mr Smith, Mr James and the Wikramanayakes - envisaged in March 2003 that the 24 apartment facility would be completed by the end of June 2004, by which time the Wikramanayakes mortgage would be repaid. 12Messrs Smith and James and the Wikramanayakes did not fully document the arrangements they made in March 2003. Combined House was paid $380,000 to compensate it for its original investment in Lavington Lodge, and the profit from the sale of the 24 units was to be split three ways - one-third to Mr Smith, one-third to Mr James, and one third to the Wikramanayakes. But the Wikramanayakes were nevertheless to control the sale proceeds. 13Combined House began to draw down on the loan in March 2003. Building and construction proceeded towards the anticipated completion date of 30 June 2004.

A New Structure is Proposed - April 2004 14But planned completion did not eventuate. Instead in the first half of 2004 Mr Smith and Mr James proposed a restructure of the parties' obligations. This was apparently necessary because, as Mr Smith explained to the Wikramanayakes, despite his marketing efforts the 24 units of the facility were too small to be sold in one line to an investor. This meant that the facility would have to be made operational so the unit could be sold individually to persons entering an operating facility. So, in February 2004, Messrs Smith and James proposed a further plan: buying the site from Combined House, and for them to operate the completed facility, which could take advantage of Commonwealth funding for its operations, until individual units were sold. 15On 19 April 2004, the Wikramanayakes, Mr Smith and Mr James attended what has been called in the proceedings a "whiteboard meeting". At that meeting Mr Smith and Mr James proposed a tripartite corporate structure for the future operation of Lavington Lodge: one company would purchase the land from Combined House; a second company would operate the facility; and, a third company would employ staff at the facility. The parties agreed in principle to this idea. But disputes later emerged about what was agreed. 16After the April 2004 whiteboard meeting, preparations were made to implement the corporate structure discussed and agreed in principle. Mr Smith and Mr James established Plus 55 which was to function as the Lavington Lodge's operating company. Mr Smith was appointed as Plus 55's sole director and shareholder. 17In June 2004 the Wikramanayakes established the Wagga Road Trust, and appointed Wagga Road as the trustee of that trust, as a preliminary to Wagga Road acquiring the Lavington Lodge land. At the same time, Mr Smith and Mr James secured an amendment to the Development Consent for Lavington Lodge to permit construction of an additional 32 units. 18I accept the Wikramanayakes' evidence that Mr Smith explained to them that under these proposed arrangements Plus 55 would contract with the residents coming into the facility, and would accept their accommodation bonds. I accept that the Wikramanayakes thought that this was a deviation from the spirit of what they thought had originally been agreed: that the Wikramanayakes would control the sale proceeds. 19So, Mr Smith and Mr James agreed that 100% of what they called the "security deposit" paid by the residents to Plus 55 would flow on to Wagga Road and that there would be a formal agreement between Plus 55 and Wagga Road to that effect. This understanding gave considerable comfort to the Wikramanayakes. Wagga Road was buying the land, to rescue Combined House, and had to borrow further money to do so. They thought it only fair that all accommodation bond monies Plus 55 received should be paid on to Wagga Road, so they could apply those funds to reducing their external mortgage obligations. I accept Mr and Mrs Wikramanayakes' evidence about their discussions with Mr Smith and Mr James and about their concern about this issue. But despite their emphasis upon this important issue, this arrangement between Wagga Road and Plus 55 was never documented. 20Combined House defaulted on the Wikramanayakes' loan before 30 June 2004. The default resulted in Wagga Road purchasing the facility from Combined House. On 28 June 2004 Wagga Road completed settlement of the purchase of the Warren Street property on which the almost constructed Lavington Lodge stood by, paying Combined House $407,581.30. 21After Wagga Road purchased, the Warren Street property, a first mortgage to the NAB secured a $700,000 loan to Wagga Road and the Wikramanayakes took a second mortgage to secure their then total investment of $1,201,707.52. Wagga Road remained the registered proprietor of the Warren Street property until 29 October 2010. 22Following completion Plus 55 operated Lavington Lodge, which was officially opened on 23 August 2004. Aged care facilities such as Lavington Lodge may only be operated after accreditation under the Aged Care Act 1997 (Cth). Plus 55 made an application for Aged Care Act accreditation. On 8 March 2005, the Commonwealth Department of Health and Ageing ("DOHA") approved Lavington Lodge as an accredited aged care facility under the Aged Care Act. 23On 15 October 2004 Wagga Road and Plus 55 entered into a written agreement ("the lease agreement") defining their commercial operating relationship. The lease agreement was made in circumstances of some urgency, because the then deadline for the 2004 Commonwealth Aged Care Approval Round ("ACAR") was approaching. The lease agreement contemplated that Wagga Road would grant a lease, described as an "end Lease" to Plus 55 after the facility was completed. Recital B of the lease agreement contemplated that the lease would "allow Plus 55 to enter into loan/licence agreements with residents on the terms and conditions contained in a document entitled Lavender Lodge Serviced Apartments Residential Agreement which document has been acknowledged by both parties". "Lavender Lodge" is an early name for Lavington Lodge. It was not in issue that the "Residential Agreement" referred to in Recital B was the same as the standard form Resident Agreement into which the Donoghues entered on 18 March 2005. 24Under the 15 October 2004 lease agreement, Wagga Road leased Lavington Lodge to Plus 55 for two years, Plus 55 agreed to operate the facility during that period, and Wagga Road was responsible for capital expenditure at the facility. The full terms of the lease agreement were as follows: 1. Wagga will grant and Plus 55 will accept a Lease of stage one (1) ('the lease'). 2. The term of the lease will be for a period of two (2) years or such other period as may be agreed between the parties. 3. Plus 55 will pay to Wagga during the period a rental of Sixteen thousand two hundred dollars ($16,200.00) per annum for each unit for the period on a pro rate basis that is being occupied pursuant to a loan/licence agreement. 4. During the period of the lease Plus 55 will:- (i) Operate and conduct the facility in accordance with the prescribed terms and conditions of the Albury City Council and the laws of New South Wales and the Commonwealth as they relate to the provision of accommodation case and service for Low Care residents. (ii) Maintain the facility in good condition having regard to the maintenance of the fire and safety equipment and the maintenance of all hot water electrical and gas fired/operated equipment. (iii) Maintain all internal lighting and electric circuity. (iv) Provide the general level of cleaning care and maintenance of all painted, treated and polished surfaces. 5. Wagga will:- (i) Provide maintenance and upgrade when required to ensure that the facility complies and continues to comply with the requirements of all appropriate Local State and Commonwealth Governments and their Instrumentalities, Departments, Service or Licensing entities. (ii) Make all loan refunds to residents exiting the facility in accordance with the terms and conditions contained in the Residence Agreement. (iii) Replace all items of capital expenditure plant fixtures and fittings required to conduct the facility. 6. Both parties will share equally the payment of land tax, Council rates, charges and insurances, public risk, professional indemnity in respect to the facility. 25One of Wagga Road's financial obligations under the lease agreement was to make loan refunds to residents exiting the facility "in accordance with the terms and conditions contained in the "Residence Agreement": clause 5(ii). The lease agreement's reference to the "Residence Agreement" is actually a reference to a standard form "The Resident Agreement", which each resident entering Lavington Lodge was required to make with its operator Plus 55. Under the Resident Agreement incoming residents lodged an accommodation bond with Plus 55, which was repayable on resident exit. I infer that the parties to the lease agreement were aware of this obligation in the standard form Resident Agreement. As between Wagga Road and Plus 55, Wagga Road agreed to take on this accommodation bond repayment obligation. 26The relationship between the Wikramanayakes, Mr Smith and Mr James became strained by late 2004. Disputes developed between them about: whether the lease agreement was a preliminary statement of intent, or something more final; about the financing of the proposed second stage of the Lavington Lodge development; and, about responsibility for the repayment of accommodation bond money paid by residents of Lavington Lodge. 27I will return to these disputes later in these reasons. But in the midst the Donoghues became residents of Lavington Lodge.

The Donoghues enter Lavington Lodge 28Mr and Mrs Donoghue each had health issues such that by late 2004 it became necessary for them to investigate, and ultimately to become, residents of an aged care facility. They visited Lavington Lodge just before Christmas 2004. 29During their pre-Christmas 2004 visit the Donoghues together with their daughters Mrs Ryan and Mrs Briggs met the then manager of Lavington Lodge, Mrs Shirley Cornish with a view to taking two units in the facility. I accept Mrs Ryan's evidence that during Mrs Cornish's tour of the facility there was discussion about the need for the Donoghues to pay a bond of about $110,000 each to the facility operator and that Mrs Cornish said that the bond would be refunded after a resident left, as soon as the unit was occupied by another resident. 30Mrs Ryan and Mrs Briggs visited the facility again with their parents on 21 January 2005. On this occasion the visitors further discussed the payment and conditions of repayment of the bonds with Mrs Cornish, and they paid a holding deposit of $4,000 to Plus 55. Mrs Cornish gave them two copies of the Resident Agreement to take away. As their evidence made abundantly clear, this visit was a typical example of the close and affectionate support that Mrs Ryan and Mrs Briggs so obviously gave to their parents in their final years. 31On 18 March 2005, both Mr and Mrs Donoghue separately entered into a Resident Agreement with Plus 55 under which they were each granted a right to occupy a unit in Lavington Lodge. Mr Donoghue occupied unit 16 and Mrs Donoghue occupied unit 17 in Lavington Lodge. 32Before signing, Mr and Mrs Donoghue received legal advice about the proposed Resident Agreement with Plus 55 on 2 February 2005. Mr Ian Geddes of Carter and Blumer gave written legal advice to them on 2 February 2005 . Paragraphs 2, 3, 4, 6, 8 and 9 of Mr Geddes' letter of advice are relevant to the issues that later emerged between the parties: 2. Current resident fees are $242.30 per week, irrespective as to whether or not you obtain a Centrelink benefit or not. 3. The residence fees are calculated upon 85% of Centrelink entitlements for a single person, plus 100% rent assistance for a single person. As these payments go up according to Centrelink rules, then the resident's fee will increase. As advised, it does not matter whether you receive Centrelink payments or not, this is how the fees are calculated. 4. There is accommodation and bond of $110,500.00. The home gets the interest on this bond. There is also the monthly retention rate which is deducted from the bond. ... 6. The retention rate commences after 2 months. If, for some reason a person decides to leave on or after the 2 month period, then $4,134.00 comes off the bond, then a month after that a further $1,381.00. The retention rate for one year is $16,575.00 and for 2 years a maximum of $33,150.00. If there are any late payments paid to the home, interest is calculated at 13.49% being the current interest rate. This of course, will change. The retention rates are calculated on a whole monthly basis. This means that if you are a resident commencing next month and then decide to leave, you pay the whole month even though you May have only been in the premises for one week. ... 8. As far as a refund of the bond, you only receive this once a new resident replaces the resident leaving, and signs an Agreement and pays the new bond. 9. Any amounts owing to the home can be deducted from the bond before it is repaid. 33The Resident Agreement governed all the financial arrangements between residents and Plus 55. Under the Resident Agreement each resident was liable to pay an accommodation bond of $110,500 as well as an ongoing resident fee. At the time the Donoghues' entered at Lavington Lodge, the resident fee was $242.40 per week (cl 10.02), calculated as 85% of the current, maximum, basic, single, aged pension, plus 100% of the current, maximum, rental assistance payable in respect of a single, aged pensioner with no dependent children. 34The Resident Agreement also provides for standards of care and resident conduct. The operator, Plus 55, contracted under the Resident Agreement to provide a level of basic care set out in Part 1 of Schedule A (cl 8.01) as well as any extra care that may be required from time-to-time set out in Part 2 of Schedule B (cl 8.02). But using an extra care service, which was not included as a basic care service, would result in an additional charge (cl 8.10). The resident also agreed to adhere to the Rules of the Care Facility (cl 13.01). The resident could nominate a person to represent them in their dealings with the operator, Plus 55 (cl 18.01). The terms of the Resident Agreement confer rights only upon the resident and Plus 55, and not upon any other person. The Resident Agreement does not refer to Wagga Road's assumption of Plus 55's accommodation bond repayment obligations under the lease agreement. 35The Resident Agreement also provided, in clause D7.01, for the refund of the balance of the accommodation bond. Mr Geddes' letter of advice (paragraph 8) had accurately summarized the effect of clause D7.01, which provided as follows: D7.01 Subject to the provisions of this clause D7, the accommodation bond balance must be refunded by the Organisation:- (a) if You die; or (b) if You cease to be provided with accommodation and care at the Care Facility or at any other residential care service conducted by the Organisation (other than because You are on leave); PROVIDED ALWAYS THAT the Organisation shall have received a new Resident Agreement in respect of your Accommodation duly executed by the new incoming Resident and the Organisation together with the payment of a new accommodation bond to the Organisation by the new incoming Resident." 36The Donoghues entered Lavington Lodge on 18 March 2005. At entry they each became liable to pay to Plus 55 an accommodation bond of $110,500. The Donoghues met their total liability of $221,000 prior to entering Lavington Lodge. As they had already paid a $4,000 deposit in January 2005 to Plus 55 to secure Units 16 and 17, the Donoghues paid the outstanding amount of $217,000 on 18 March 2005.

Trouble at Lavington Lodge - March 2005 37But by March 2005, and unknown to the Donoghues at the time of their entry, the relationship between the Wikramanayakes and Wagga Road and Mr Smith, Mr James and Plus 55 had broken down. Unsatisfactory dealings between the Wikramanayakes and Messrs Smith and James had led the Wikramanayakes refusing to deal with Mr Smith and Mr James other than through lawyers. Their principal disputes were in relation to the management of Lavington Lodge and Messrs Smith and James' dealings with the accommodation bond monies Plus 55 had collected. 38Whilst the Donoghues were considering whether to take up residence, tensions rose dramatically between the Wikramanayakes and Messrs Smith and James. After returning from an overseas vacation in January 2005, the Wikramanayakes completed Wagga Road's accounts. They discovered that Messrs Smith and James had not been remitting received accommodation bonds to Wagga Road. They wrote in demanding and distrustful terms to Mr Smith on 9 February 2009. The letter was intended to reach Mr James as well. It raised a number of other relevant complaints in addition to the problem of the unremitted accommodation bonds. 39The but missing accommodation bonds represented the Wikramanayakes' prime aggravation, as they explained to Mr Smith: Dear David, After we came back to Australia we have become extremely alarmed at your failure to pay back any of the debt due to us despite having the funds, and despite repeated requests from us. We have now had an opportunity to bring the accounts up to date and we find that in the time we were away substantial funds have been collected from resident and dissipated. In fact in excess of $850,000 has been collected from residents and apart from the initial $204,000 you have not made any significant repayments. When we agreed to finance this project it was always on the understanding that our funds would be paid out. Given the remaining number of units, and the funds that will become available (assuming you don't continue to spend these funds) you are not going to be liable to pay the principal due to us nor the interest. We assess the shortfall to be of the order of $500,000. This is unacceptable. When we agreed to finance this project it was always on the understanding that our funds would be paid out. Given the remaining number of units, and the funds that will become available (assuming you don't continue to spend these funds) you are not going to be able to pay the principal due to us nor the interest. We assess the shortfall to be of the order of $50,000. This is unacceptable. You must be aware of this when you spent nearly $400,000 of the funds that have come in, and yet have not chosen to discuss this with us. You have funds and yet you continue to ignore our requests for repayment. This is a breach of our arrangements and we now want the interest due on our loan to be repaid each month at the rate of our costs of capital + 2%. For the month of January this payment will be $8,583.38 (computation attached). 40The Wikramanayakes thought that Messrs Smith and James had pressured them on 15 October 2004 to sign an inappropriately worded lease agreement, and were now dragging their feet on rectifying it. According to the Wikramanayakes the lease agreement was supposed to be a "mirror image" of the Resident Agreement, which it was not: The agreement between Plus 55 Village Management (Albury) PL and Wagga Road Properties was to have been a mirror image of the agreement between Plus 55 and the residents. When David made a submission for government funding he asked us to sign an agreement in order to expedite the application. This agreement was deficient in many respects. It was our understanding that John would attend to this and set in place a proper agreement when he had more time. This is still outstanding and John has agreed to give us the rectified agreement at the next meeting. 41The Wikramanayakes' 9 February 2005 letter also raised concerns about deficient project management and delays to completion of the project, which had already led to litigation. They explained to Mr Smith that both the project management problems and the failure to remit promised moneys to Wagga Road, were putting in jeopardy the expansion of the project to Stage 2, which would require the Wikramanayakes to invest further funds into the purchase of an adjacent property, known as the Donnelley property. It was hoped that the purchase of the Donnelley property would allow the facility to be expanded from 24 to 110 units. Finally the Wikramanayakes complained about the poor marketing of and resident take up of units in Lavington Lodge, saying "we are not prepared to plough on without appraisal of this critical factor". 42They then summarized what they thought needed to be done immediately to rectify the situation between Wagga Road and Plus 55: What do you need to do to rectify the situation 1. Undertake to pay our interest as set out, in addition to servicing the NAB interest and lease payments. 2. Remedy the incorrect agreement with Plus 55 Village Management (Albury) PL and Wagga Road Properties. 3. Consult with us before you spend any more money. 4. We need to see all the bills for litigation on which you spent the $100,000 or so, and we need a proper explanation of these costs. 5. Give us a complete assessment of the situation with the litigation and its impact on this project. Come up with a forecast of how you intend to retire your debt to us. This will include a realistic projection on costs and expected sales. 43Mr Smith met the Wikramanayakes the next day, 10 February. To reduce tension Mr Smith promised to pay $100,000 off Wagga Road's NAB loan. But Mr Smith did not make that payment immediately, nor did he make the payment before the Donoghues went into Lavington Lodge. 44By mid-March 2005 Wagga Road had liabilities of $1,845,396 comprised of a loan from the NAB of $697,000 and a loan from the Wikramanayakes of $1,148,396. Plus 55 had still not accounted to Wagga Road for all the bond monies it had received from residents up to that time. 45But surprisingly Mr Smith and Mr James were still looking at their plans to expand Lavington Lodge by purchasing the adjacent Donnelley property. The Wikramanayakes were unsympathetic to that idea whilst Plus 55 was not accounting to Wagga Road for the funds Plus 55 had received from residents. 46On 18 March 2005, the same day the Donoghues paid the outstanding accommodation bond balance of $217,000 to Plus 55 and entered into the Resident Agreement, Plus 55 was making demands on Wagga Road and the Wikramanayakes to press ahead with Stage 2 of the project. Plus 55's language showed few niceties: Dear Pren, Margaret and John, We must meet today to resolve the issue of purchasing the 482 Wagga Road site from the Donnollys. To facilitate this we must all be in attendance. To support the meeting and to clear any current misunderstandings and to sort out the preferred positions of each respective stake/interest holders in relation to moving the project forward. To assist in achieving these requirements we must have the following information and or documents on the table for the meeting. The Constitution, Share Register and Share Certificates of Wagga Road Properties Pty Ltd, the original 'stamped copy' of the Wagga Road Unit Trust Deed, the Unit Certificates and two blanks. In respect of the current Lease Arrangements, it remains imperative that they remain as they are presently until such time as the negotiations proceeding with the Commonwealth are successfully concluded. This is because we will not under any circumstances prejudice any advantage already gained with out Commonwealth Approval as this in turn is to the detriment of the project going forward in any case. I suggest we meet early this afternoon to allow time for two of us to travel to Bankstown and effect an Exchange of the contract following out meeting. Regards, David [Smith]. 47These 18 March 2005 demands shocked the Wikramanayakes. Of continuing major concern to them was Plus 55 not remitting accommodation bonds it received to Wagga Road. Now Plus 55 was pressuring to the Wikramanayakes to invest more funds. 48So the Wikramanayakes consulted solicitors, Verekers Lawyers ("Verekers"), who wrote to Mr Smith on 21 March 2005. Verekers demanded that Plus 55 honour its arrangements with Wagga Road and remit to Wagga Road the accommodation bonds that Plus 55 already had received. The Verekers' made demand to Plus 55 in the following terms: We have recently been consulted by Wagga Road Properties Pty Limited ('Wagga Road') and Mr & Mrs Wikramanayake regarding a series of arrangements concerning a retirement village known as 'Lavender Lodge' at 484 Wagga Road, Lavington ('the Property'). As you know Wagga Road is the registered proprietor of the Property and we are instructed that pursuant to partly written and partly oral arrangements your company ('Plus 55 Albury') is operating the retirement village business being carried on at the Property. We are instructed that pursuant to those arrangements Plus 55 Albury (as agent for Wagga Road) is engaged in selling rights to occupy residential units to members of the public who are paying $110,500 for a right to occupy a unit. Pursuant to the arrangements between our clients and Plus 55 Albury, Plus 55 Albury is required to account to Wagga Road for the whole of the sum of $110,500 for each right to occupy a unit sold until such time as certain debts associated with the purchase, construction and fitout of the Property are repaid. Those debts are owed by Wagga Road to the National Australia Bank Limited ('NAB')" (which holds the first mortgage over the Property) and Mr & Mrs Wikramanayake. As you know, the costs of the purchase, construction and fitout of the Property totalled approximately $2.2 million. We are instructed that 12 rights of residence have been sold but our clients have received only $324,000 (ie. $224,000 to Mr & Mrs Wikramanayake and $100,000 to the NAB). In addition our clients acknowledge that payments approximately $10,000 per month for the last two months have been paid to the NAB on account of equipment leases and they agreed to $20,000 being paid to each of yourself and John James. Further, we are instructed that a number of payments have been made to subcontractors (to whom our clients were not liable) without our clients' prior consent. We are instructed that three sales were completed on 16 and 18 March 2005 such that Plus 55 Albury ought to have received $331,500 on account of those sales. Our clients hereby demand that that sum be paid to Mr & Mrs Wikramanayake forthwith. Further we require that, by 5pm on 23 March 2005, a full accounting for all sums from sales of residential units be provided. Our clients otherwise reserve their rights and we advise that we are taking further instructions regarding the current and future arrangements concerning operation of the village. 49The Verekers' demand led to a meeting three days later. But before that Plus 55 responded strongly to Verekers' letter, complaining that "despite your being asked to attend a meeting this afternoon you have not chosen to make yourselves available to further discuss the issues relating to the ongoing operation of the Lavington Lodge project". The Plus 55 letter then claimed that "two-thirds of both the [Wagga Road] Share and Unit entitlements in the Project Structure belong to John and/or myself currently being held on trust by yourselves, with the remaining portion, being one-third, to be held by yourselves as part of the agreed structure". The Wikramanayakes were alarmed at Mr Smith and Mr James' claims to entitlement to two-thirds of the Wagga Road Trust, so they agreed to meet, to see what could be discussed. 50On 24 March 2005 the Wikramanayakes and their Verekers solicitor, Mr Robert Tassell, met Mr Smith and Mr James at the offices of Verekers. The Wikramanayakes say, and I accept, that at the time of this 24 March 2005 meeting, they had no knowledge the Donoghues had paid their full accommodation bonds to Plus 55 or had entered into the Resident Agreements. Further, Mr Wikramanayake says that he was not aware that the Donoghues had actually become residents of Lavington Lodge until late April 2005 or early May 2005. 51The parties did not resolve their differences on 24 March 2005. Little common ground could be reached. But I accept the Wikramanayakes' evidence that during this meeting Mr Smith represented that he had an "investor" ready to buy out the Wikramanayakes' interests in Wagga Road and that as a sign of good faith the an investor would immediately pay $200,000 off Wagga Road's mortgage to the NAB. 52But little progress was reached on the important question of Plus 55 accounting to Wagga Road for deposit moneys. So on 24 March a procedural compromise was reached, which would also facilitate the future sale of Lavington Lodge: Mrs Wikramanayake would prepare accounts for the Wagga Road Trust, and Mr Smith would provide relevant bank statements to assist her to prepare the accounts. 53Mr Smith made good on one aspect of his promise at the 24 March meeting. On 29 March he caused Plus 55 to pay $200,000 directly into Wagga Road's NAB mortgage account. 54But there was no investor. The $200,000 was substantially the proceeds of the Donoghues' $217,000 accommodation bond money paid on 18 March 2005. This was money to which Wagga Road was already entitled under the existing Plus 55-Wagga Road arrangements about accommodation bonds. Only a few days had elapsed between the Donoghues paying their $217,000 deposit to Plus 55 on 18 March, and Plus 55's payment to the NAB on 29 March. Immediately before the payment to the NAB on 29 March, Plus 55's bank account had a credit balance of $372,574.20. Between the time of the Donoghues' deposit of $217,000 on 18 March and 29 March there were only minor transactions on Plus 55's account: some further credits of $2,352.80 and further debits of $2,334.33. 55Plus 55's bank accounts about this time indicate that no amount of $200,000, or any figure like it, had been paid into its account by a third party other than a resident of Lavington Lodge. The $200,000 paid to Wagga Road had come from Plus 55's existing resources, supplemented by the Donoghues' bond payments on 18 March. 56Despite the unreliability of some of the information she had been given, Mrs Wikramanayake did prepare accounts for Wagga Road in anticipation of its sale in early May.

The Wikramanayakes take over Lavington Lodge - July 2005 57In anticipation of the further escalation of the dispute with Plus 55 and the increasing likelihood of their taking possession of Lavington Lodge, on 10 June 2005 the Wikramanayakes registered a shelf company Lavington Lodge Retirement Village Pty Ltd (ACN 114 703 749) ("LLRV") and became its two shareholders and directors of LLRV. 58On 8 July 2005 LLRV took possession of the facility. LLRV operated Lavington Lodge from 11 July 2005 to 29 October 2010. In August 2005 Messrs Smith and James and Plus 55 commenced litigation against the Wikramanayakes and Wagga Road in the commercial list of this Court. Messrs Smith and James claimed that the Wikramanayakes had orally agreed to grant each of them a one-third share both in the Wagga Road Unit Trust and in the Trustee, Wagga Road. Plus 55 also sought recovery of monies it alleged it had expended in connection with the facility for the benefit of Wagga Road, which constituted it claimed loan advances from Plus 55 to Wagga Road. 59Not surprisingly, Wagga Road cross-claimed in that litigation for the benefit of the accommodation bonds residents of the facility had paid to Plus 55, for which Plus 55 had not accounted to Wagga Road, and for unpaid rent, and for a declaration that Wagga Road had validly terminated the lease agreement. 60This litigation was decided in February 2007. The litigation meant that Messrs Smith and James and the Wikramanayakes remained in complete standoff. But in the months of July and August 2005 the contest between these parties played out in front of the Lavington Lodge residents. 61On 23 July 2005 Mrs Wikramanayake wrote to the residents of Lavington Lodge informing them of the change in its management. She explained to the residents: that Wagga Road had taken effective possession of Lavington Lodge; that Mr Smith was no longer involved with the operation of Lavington Lodge; and that, because Wagga Road and not Plus 55 was now operating Lavington Lodge, the residents should pay any ongoing residents fees into the trust account of Atkinson Vinden Lawyers, as opposed to the bank account of Plus 55. 62Mrs Wikramanayake's 23 July 2005 letter provoked a public contest with Plus 55 about who was actually running Lavington Lodge. Mr Smith wrote to residents an undated open letter: asserting that Wagga Road was not operating Lavington Lodge. The Donoghues received that letter sometime shortly after 23 July 2005. The residents of Lavington Lodge were becoming the unfortunate bystanders to a developing war. 63But Wagga Road soon brought matters to a head. On 29 July 2005, each of the Donoghues received a letter under the letterhead of Verekers, informing them that due to the failure of Plus 55 to procure Commonwealth Government funding under the Aged Care Act for the operation of Lavington Lodge, Plus 55 had committed a fundamental breach of the Resident Agreement and that Wagga Road had resolved to appoint, and had appointed, LLRV as the operator of Lavington Lodge. In the same letter, Verekers advised the residents that all monies payable to the operator in the future under Resident Agreements should henceforth be paid to LLRV. The Donoghues had already paid their accommodation bonds to Plus 55 under their two Resident Agreements. 64Mrs Wikramanayake began corresponding with residents on behalf of LLRV. On 3 August 2005, she wrote to the first plaintiff Ms Sue Ryan, requesting that she attend a meeting on 11 August 2005 at Lavington Lodge to discuss financial information concerning the operation of the facility and the structure of the Residents Agreements. The Donoghues had appointed their daughter, Mrs Ryan to receive such correspondence and to handle financial aspects of their accommodation. 65On 8 August 2005, Mrs Wikramanayake wrote a letter addressed to "The Residents' Families", outlining what she saw as the then current management situation at Lavington Lodge. She dealt in particular with the dismissal of Ms Shirley Cornish, the former manager of Lavington Lodge. Mrs Wikramanayake's letter clearly conveyed that LLRV was then operating Lavington Lodge. She also reiterated her request to residents to pay ongoing resident fees to LLRV. 66Mr Smith again retaliated. On 8 August 2005, he wrote an open letter to the residents, families, friends and staff of Lavington Lodge. The open letter detailed, from Mr Smith's perspective, the status of the existing Supreme Court litigation between Plus 55 and Wagga Road about the possession of the Warren Street property. 67On 2 September 2005, Mrs Wikramanayake wrote two letters to Mrs Ryan. The first letter requested details of the payment by the Donoghues of any resident fees and any other amounts by way of rent or occupation fees. I infer from this letter that in September 2005 the Wikramanayakes were uncertain as to exactly what accommodation bonds had been paid to Plus 55 by what residents. The second letter informed Mrs Ryan of a new pricing scale for care at Lavington Lodge, which distinguished between the cost of Basic Care and Extra Care. 68On 12 September 2005, Mrs Wikramanayake again wrote to Mrs Ryan requesting payment of the recurrent fees due for the period 8 July 2005 to 12 September 2005. She noted, as was the case in the Commercial List proceedings, that this Court had directed payment of all monies due from residents into an account controlled by the Court. 69On 14 September 2005, Mrs Wikramanayake again wrote to Mrs Ryan requesting payment of Basic Care services from 8 July 2005 to 30 September 2005 as well as of certain Extra Care services.

The Donoghues leave Lavington Lodge 70With the dispute still simmering in October 2005 the Donoghues each had to leave Lavington Lodge for a more intensive care regime. The first to leave was Mr Donoghue. On 6 October 2005, Mrs Ryan wrote to Mr Smith, informing him that Mr Donoghue would cease being a resident of Lavington Lodge as of 7 October 2005. Mr Donoghue vacated Lavington Lodge on 7 October 2005. Despite the correspondence with Verekers, Mrs Ryan sent this correspondence to Mr Smith rather than Mrs Wikramanayake. 71Correspondence between the Wikramanayakes/Wagga Road and the Donoghues continued throughout the period that the Donoghues were preparing to depart Lavington Lodge. On 15 October 2005, Mrs Wikramanayake wrote to Mrs Ryan invoicing her in relation to the Donoghues' accommodation and care. Mrs Wikramanayake included invoices for Mr Donoghue's accommodation services for the period 1 October 2005 to 7 October 2005; and for Mrs Donoghue, for the period 1 October 2005 to 26 October 2005. These invoices reflected the family's plan that Mrs Donoghue would leave the facility about two weeks after her husband, as indeed occurred. 72On 19 October 2005, Mrs Ryan received a further letter from Verekers informing her that any monies owed to the operator of Lavington Lodge, should be paid into a joint account controlled by the Court. 73On 21 October 2005, Mrs Ryan wrote to Mr Smith informing him that Mrs Donoghue would cease being a resident of Lavington Lodge as of 26 October 2005. Mrs Donoghue vacated Lavington Lodge on 26 October 2005. 74In total, Mr Donoghue had resided at Lavington Lodge for just under 7 months and Mrs Donoghue for just over 7 months.

Reclaiming the Accommodation Bonds - 2005 to 2007 75Shortly after the Donoghues had left Lavington Lodge, Mrs Ryan began efforts to recover their respective accommodation bonds. On 24 October 2005, Mr Donoghue's solicitor, Mr Ian Geddes wrote to Plus 55 seeking the return of his accommodation bond. On 3 November 2005, Plus 55 replied, informing Mr Geddes that he should direct his request for return of the accommodation bond to Wagga Road, because Wagga Road had assumed the management of Lavington Lodge on 8 July 2005. When dealing with Plus 55's liabilities, it now seemed quite content to accept that LLRV had taken over operating responsibility for Lavington Lodge, from July 2005. LLRV is not a party to these proceedings. 76On 15 January 2007, Mr Geddes wrote to Verekers, inquiring whether Wagga Road intended to reimburse the accommodation bonds paid by the Donoghues. 77On 28 February 2007 Hammerschlag J delivered judgment in the commercial division proceedings: Smith v Wikramanayake [2007] NSWSC 136. His Honour dismissed Mr Smith and Mr James' claim for a one-third share in the Wagga Road Unit Trust and in the Trustee, and dismissed Plus 55's loan claim. On Wagga's Road cross claim for accommodation bond monies his Honour found: an implied term derived from the lease agreement clause 5(ii), that Plus 55 was to pay accommodation bonds to Wagga Road; and, that there was an express agreement to the same effect at the "whiteboard meeting". His Honour gave judgment for Wagga Road on its cross claim against Plus 55 for $626,833.16, calculated as $814,921 in unaccounted for accommodation bonds received by Plus 55 less amounts Plus 55 had expended on the Lavington Lodge Road facility for Wagga Road's benefit. No appeal was brought from this judgment which represents the final legal position between those parties. In the meantime Mrs Ryan and Mrs Briggs changed solicitors and kept pursuing the return of the accommodation bonds. 78On 29 March 2007, Cater & Blumer wrote (for the executrices) to both Verekers (for Wagga Road) and The Law Company (for Plus 55), demanding reimbursement of the accommodation bond. 79Each of Plus 55 and Wagga Road then told the Donoghues to look to the other for repayment of the accommodation bond. On 30 April 2007, Verekers for Wagga Road, responded to the Cater and Blumer letter of 29 March 2007, stating that Plus 55 is required under the Resident Agreements to refund the accommodation bonds, if and when such refund were to fall due. On 4 April 2007, The Law Company also responded on behalf of Plus 55 stating that Wagga Road and not Plus 55, was responsible for refunding the Donoghues' accommodation bond.

The Statutory Context Aged Care Act 1997 (Cth) 80Lavington Lodge was licensed to operate under the Aged Care Act 1997. Plus 55 was an approved provider under the Aged Care Act for providing a residential care service for care recipients as defined under that Act. Parties did not provide the Court with a detailed analysis how the legislation applied to this facility. But the plaintiffs' submissions assumed and the Wikramanayake's submission did not contest that Aged Care Act Division 57 - "What are the responsibilities relating to accommodation bonds and entry contributions?" applied to accommodation bonds paid to Plus 55 in late 2004 and early 2005 in respect of Lavington Lodge. These reasons therefore start by making that assumption, without further analysis. 81As these reasons show Aged Care Act Division 57 was not the basis of any cause of action pleaded by the plaintiffs. Rather it is pleaded as context to the plaintiffs' other causes of action. 82Aged Care Act Division 57 sets up a complex regime of rules about the receipt, preservation and refund of accommodation bonds. Aged Care Act s 57-2 provides basic rules about what residents may be charged accommodation bonds by approved providers, what information must be provided to residents, the maximum amount of an accommodation bond that may be charged and circumstances in which charging of accommodation bonds is prohibited. 83The Aged Care Act s 57-2 "Basic rules about accommodation bonds" include an obligation under Subdivision 57-B upon an approved provider not to use the accommodation bond for a purpose that is not related to providing aged care to care recipients or that does not comply with certain prudential requirements: 57-3 Compliance with prudential requirements An approved provider complies with the prudential requirements if the approved provider complies with the Prudential Standards made under section 57-4. 57-4 Prudential Standards (1) The User Rights Principles may set out Prudential Standards. Prudential Standards are standards providing for: (a) protection of * accommodation bond balances of care recipients; and (b) protection of * entry contribution balances of care recipients; and (c) sound financial management of approved providers; and (d) provision of information about the financial management of approved providers. (2) The following are examples of matters with which the Prudential Standards may deal: (a) corporate governance requirements for approved providers; (b) financial reporting requirements for approved providers; (c) liquidity requirements for approved providers; (d) capital requirements for approved providers; (e) insurance requirements for approved providers; (f) information retention and provision requirements for approved providers. 84The Aged Care Act sets out "User Rights Principles" which specify many of the matters provided for in Aged Care Act s 57-4. These user rights principles cover the maintenance of accommodation balances of care recipients, the requirement to refund bond balances in a timely way, and detailed matters concerning the maintenance of accommodation bond balances in a liquid and secure form. But the Further Amended Statement of Claim in these proceedings did not plead specific breaches by Plus 55 of these User Rights Principles. Rather it focused on another part of Plus 55's responsibilities in relation to accommodation bonds, namely its obligation to refund bonds when the relevant care recipient ceases to be provided with residential care by the approved provider. The Further Amended Statement of Claim did plead the obligation in Aged Care Act Subdivision 57-G- "Refunds" provided for in Aged Care Act s 57-21. That provision follows: 57 21 Refunding of accommodation bond balance-approved providers (1) The *accommodation bond balance in respect of an *accommodation bond paid by a care recipient for *entry to a residential care service or flexible care service must be refunded by the approved provider conducting the service if: (a) the care recipient dies; or (b) the care recipient ceases to be provided with: (i) residential care by the residential care service (other than because the care recipient is on *leave); or (ii) flexible care provided in a residential setting by the flexible care service; or (c) in respect of an accommodation bond paid for the entry to a residential care service-the residential care service ceases to be *certified. (2) The *accommodation bond balance must be refunded to the care recipient in the way specified in the User Rights Principles. (3) The *accommodation bond balance must be refunded: (aa) if the care recipient dies-within 14 days after the day on which the approved provider is shown the probate of the will of the care recipient or letters of administration of the estate of the care recipient; or (a) if the care recipient is to *enter another service to receive residential care: (i) if the care recipient has notified the approved provider of the move more than 14 days before the day on which the approved provider ceased providing care to the care recipient-on the day on which the approved provider ceased providing that care; or (ii) if the care recipient so notified the approved provider within 14 days before the day on which the approved provider ceased providing that care-within 14 days after the day on which the notice was given; or (iii) if the care recipient did not notify the approved provider before the day on which the approved provider ceased providing that care-within 14 days after the day on which the approved provider ceased providing that care; or (b) in any other case-within 14 days after the day on which the event referred to in paragraph (1)(b) or (c) (whichever is applicable) happened. 85But the obligations under Aged Care Act s 57-21 to provide refunds is one that lies upon "the approved provider conducting the service". In this case that is Plus 55. The real contest in this case is whether the legislation assists the plaintiffs to maintain any of their claims to relief against the Wikramanayakes, as distinct to their having claims to relief against the relevant approved provider, Plus 55. 86I note that more detailed statutory provisions for the management of accommodation bonds for aged care facilities were introduced by the Commonwealth Parliament in the Aged Care (Bond Security) Act 2006, which did not commence until 31 May 2006, after the events relied upon in these proceedings.

The Plaintiffs' claims 87The plaintiffs/executrices claim from the Wikramanayakes the value of Mr and Mrs Donoghues' accommodation bonds. They advance three causes of action, or claims for relief: (1) a constructive trust requiring the Wikramanayakes to restore the funds; (2) an interference with the contractual relations created under the Resident Agreement between Plus 55 and the Donoghues; and (3) misleading and deceptive conduct under Trade Practices Act 1974 (Cth) s 52. Each of these claims is now outlined and analysed. 88These reasons initially seek to paraphrase the terms of the executrices' submissions in these three areas of claimed relief. But in each area the Wikramanayakes' submissions lead to disputes of fact and legal analysis. It is to each of those that these reasons now turn.

(1) Constructive Trust and Fiduciary Obligation 89The executrices submit that upon the payment of the Donoghues' bonds to Plus 55, they were entitled to have the bonds so held on their behalf refunded when they vacated Lavington Lodge. The plaintiffs contend that a trust or fiduciary relationship arose in respect of the Donoghues' accommodation bonds, by reason of the combined operation of the provisions of the Aged Care Act, Ch. 4 and the Resident Agreements the Donoghues made with Plus 55. 90The executrices claim in their submissions that Plus 55, the Wikramanayakes, and their companies "immediately had the benefit (or perceived benefit) which flowed from the payment of the Donoghues' bonds, which [the Wikramanayakes] intended to be applied towards the servicing of the NAB facility secured over the Lavington Lodge property and facility". The executrices' argument proceeds, to quote their submissions, that the benefit so identified, "is a link in the chain" of the private dealings between Plus 55, Mr Smith, and the defendants, whereby upon payment of the Donoghues' bonds on 18 March 2005, the balance refundable to the Donoghues became subject to a constructive trust, whereby those funds could and should only be held for them to be refunded in accordance with the Aged Care Act, the Users Rights principles and the Resident Agreements". 91The executrices' argue that once a constructive trust is established, neither the Wikramanayakes nor Wagga Road could deal with the refundable balance of the accommodation bonds "other than for and on behalf of the Donoghues as required under the Aged Care Act". The executrices argue that the accommodation bonds could only be dealt with for the benefit of the Donoghues, and that any provision such as the proviso to clause D7.01 in the Resident Agreement, which purports to restrict the return of the accommodation bond until a new Resident Agreement had been signed, was unlawful, and did not in fact restrict the Donoghues' rights to the return of the bonds. 92Although this argument was elaborated with some ingenuity by Mr Van Aalst, I do not accept it. Mr Van Aalst was faced with the difficulty of not being able to sue either the deregistered or worthless entities Plus 55 and Wagga Road. So he not unnaturally turned his attention to the Wikramanayakes. But I do not accept that any remedial constructive trust can be established against them in respect of the Donoghues' accommodation bonds. This is so for the following reasons. 93As a preliminary one part of the argument that Mr Van Aalst put on behalf of the executrices can be accepted - that the Wikramanayakes had a personal financial interest in ensuring that Wagga Road had sufficient funds to pay out the NAB. The Wikramanayakes were guarantors of Wagga Road's obligations to the NAB and would be liable if it defaulted to the bank. But all this shows in my view is that the Wikramanayakes were strongly motivated to have Wagga Road enforce its contract with Plus 55 to transfer accommodation bonds received onto Wagga Road. But the correspondence between the parties shows they had this motivation in any event. 94Mr Van Aalst somewhat narrowed this claim for relief in argument at the trial, accepting as he really had to on the facts, that the Wikramanayakes had not themselves actually received any accommodation bonds from the Donoghues. The case principally put was that Plus 55 either owed a fiduciary duty to the Donoghues upon receipt of the accommodation bonds in March 2005 or actually held them on trust for the Donoghues. It was said that Plus 55 breached that fiduciary or trust obligation when responding to Wagga Road's call for the transfer of the accommodation bonds to Wagga Road. It can be accepted for the sake of argument in Mr Van Aalst's favour (although the Wikramanayakes disputed this) that Plus 55 did hold the accommodation bonds on trust for the Donoghues. This claim for relief fails on other grounds. 95The plaintiffs founded their case on Barnes v Addy (1874) LR9 ChApp 244 ("Barnes v Addy") principles. Persons receiving trust property that they know was trust property with knowledge it was being misapplied may be liable in constructive trust on the first limb of Barnes v Addy, and persons assisting with knowledge in a dishonest and fraudulent design on the part of trustees may be liable in constructive trust on the second limb of Barnes v Addy: see Consul Developments Pty Ltd v DPP Estates Pty Ltd (1975) 132 CLR 373 at 397 and United States Surgical Corporation v Hospital Products International Pty Limited [1983] 2 NSWLR 157 and (1984) 156 CLR 41. Here it was accepted that the Wikramanayakes had not received the accommodation bonds, so a constructive trust liability would only arise under the second limb. 96But a second limb Barnes v Addy case was not clearly pleaded against the Wikramanayakes. Mr Bolster on behalf of the defendants took the point that it was not pleaded, and I agree that he is correct. This is a matter on which clear pleading would have been required so that the Wikramanayakes were on notice of the precise dishonest knowledge that was alleged against them, so as to constitute their Barnes v Addy second limb liability. 97The pleading fell short of that. Prayer three of the relief claims sought a declaration that the plaintiffs' accommodation bonds paid to Plus 55 "were held by Plus 55 on a constructive trust for and on behalf of the plaintiffs". There was no claim for relief that sought declarations consistent with the second limb of Barnes v Addy. Moreover, after pleading the background facts the Further and Amended Statement of Claim paragraphs 15 and 16 really pleaded that the Wikramanayakes owed a fiduciary duty themselves directly to the Donoghues to ensure that the accommodation bonds were refunded to the Donoghues. This was not a Barnes v Addy second limb plea. It would be unfair in these circumstances to allow the Barnes v Addy second limb claim for relief to proceed against the defendants. 98But a Barnes v Addy second limb would have failed in any event. The Wikramanayakes did not know of any scheme by Plus 55 to breach its fiduciary duty to the Donoghues by transferring their accommodation bonds. The Wikramanayakes did not believe that they had obtained the Donoghues accommodation bonds, pursuant to Wagga Road's demands on Plus 55. They thought that the money that they received in March 2005 came from an investor, not from the Donoghues. They had no knowledge of any dishonesty on Plus 55's part in relation to the Donoghues' accommodation bonds, because they did not think they were receiving their accommodation bonds. 99The plaintiffs also contend that the Wikramanayakes must have been aware that the transfer of accommodation bonds was in breach of the basic rules set out under Aged Care Act Ch 57 that approved providers must not use accommodation bonds for purposes not related to providing aged care to care recipients, or that do not comply with the prudential requirements. But the fundamental problem with such a case is still that the Wikramanayakes did not know that the $200,000 they were receiving in March 2005 was an accommodation bond. They had no reason to suspect that the receipt of that money was a breach of the Aged Care Act at all. 100Nor did the Wikramanayakes owe the Donoghues' a fiduciary duty directly. The plaintiffs allege that the Wikramanayakes could exercise a power over Plus 55 adversely affecting the plaintiffs' entitlement to the refund of the balance of their accommodation bond. But in my view the critical feature of a fiduciary relationship is absent in this case. There is no evidence that the Wikramanayakes undertook or agreed to act for or on behalf of or in the interests of the Donoghues in the exercise of any commercial power or discretion that they had that could affect the accommodation bonds that the Donoghues had paid to Plus 55: Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 per Mason J at 96-97. Indeed there was no communication between the Wikramanayakes and the Donoghues until well after the Donoghues paid their accommodation bonds and that was communication through their lawyers with the Donoghues making demands for a refund. Moreover the Wikramanayakes had caused Wagga Road to make commercial arrangements with Plus 55 without undertaking additional responsibility to the Donoghues. Nor does Aged Care Act Div 57 put persons such as Wagga Road or the Wikramanayakes dealing with approved care providers in the position of fiduciaries of residents of aged care facilities. 101It is not necessary on these findings for the Court to decide whether Plus 55 itself owed any fiduciary duties to the Donoghues, but in my view it is doubtful that they did. 102For these reasons the plaintiffs' breach of fiduciary duty constructive claims fail.

(2) Interference with contractual relations. 103The executrices next claim that the Wikramanayakes intended to induce or procure the breach of the Resident Agreements between Plus 55 and the Donoghues. In particular it is said that the Wikramanayakes interfered with the Donoghues' contractual rights to have the balance of their accommodation bonds refunded when they vacated Lavington Lodge. 104The executrices contend that the Wikramanayakes interfered with the essential condition in the Resident Agreement, clause D7.01(a), which provided for the Donoghues' entitlement to have the balance of their accommodation bonds refunded, once they vacated Lavington Lodge. The executrices argue that even though the Wikramanayakes were aware of the Donoghues' entitlement to a clause D7.01(a) refund, they allowed themselves to be persuaded by Mr Smith to enter the accommodation bond transfer agreement between Plus 55 and Wagga Road. 105The executrices also contend that by the time the Donoghues paid their bonds in March 2005 the Wikramanayakes were so desperate to have the Donoghues' accommodation bonds and those of the other initial residents transferred to Wagga Road that they caused Wagga Road to demand them on 9 February 2005 (and in subsequent correspondence) "without caring one way or another whether Plus 55 was entitled to transfer those bonds to Wagga Road". Wagga Road wanted to discharge part of its liabilities to the NAB. The executrices say the Court should infer that between February and March 2005 when the Wikramanayakes knew that Mr Smith had misused other resident accommodation bonds to an amount of $500,000, they recklessly closed their eyes to the possible unlawfulness of their (the Wikramanayakes) claims to have Wagga Road use residents' accommodation bonds. The executrices cite the Verekers' letter of demand of 21 March 2005 and contend that Verekers were instructed "that the defendants or their company were entitled to the Donoghues' bonds". The executrices say that this was intentional blindness or recklessness towards the Donoghues' contractual rights under clause D7.01, not mere inadvertence or negligence and constituted the tort of interference with contractual relations. 106The parties were not in contest about the elements of the tort of inducing breach of contract or of the gravamen of the tort. The Full Court of the Federal Court of Australia has concisely summarised these in Daebo Shipping Co Ltd v The Ship Go Start [2012] FCAFC 156 at [88] and [89], per Keane CJ, Rares and Besanko JJ: 88. The tort of inducing a breach of contract consists of the following elements: (1) There must be a contract between the plaintiff (or applicant) and a third party; (2) The defendant (or respondent) must know that such a contract exists; (3) The defendant must know that if the third party does, or fails to do, a particular act, that conduct of the third party would be a breach of the contract; (4) The defendant must intend to induce or procure the third party to breach the contract by doing or failing to do that particular act; (5) The breach must cause loss or damage to the plaintiff. 89. The gravamen of the tort is the defendant's intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiffs' contractual rights: Allstate life Insurance co v Australia and New Zealand Banking Group Ltd [1995] FCA 1368; (1995) 58 FCR 26 at 43A-C per Lindgren J with whom Lockhart and Tamberlin JJ agreed: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at 509-512 [159]-[171] per Sheller, Stein and Giles JJA; LED Technologies Pty Ltd v Roadvision Pty Ltd (2012) 199 FCR 204 at 212-216 [40]-[54] per Besanko J with whom Mansfield and Flick JJ agreed. As Lindgren J explained, the defendant must have "a fairly good idea" that the contract benefits another person in the relevant respect. He said that knowledge of the contract may be sufficient for the purpose of grounding the necessary intention to interfere with contractual rights, even though the defendant does not know the precise term that will be breached. Reckless indifference or wilful blindness can amount to knowledge for this purpose: Allstate 58 FCR at 43C-44F; Fightvision 47 NSWLR at 512 [171]; LED 199 FCR at 216 [54]. 107Putting the plaintiffs' case into the language of Daebo Shipping, to make out this cause of action in tort the plaintiffs have taken on the burden of showing: (1) that there is a contract between the Donoghues (who the plaintiffs represent as executrices) and Plus 55; (2) that the Wikramanayakes know that such a contract exists; (3) the Wikramanayakes must know that if Plus 55 fails to do a particular act - namely repaying the balance of the accommodation bonds to the Donoghues (or the plaintiffs) in accordance with clause D7.01 of the Resident Agreement - that act would be a breach of the Resident Agreement; (4) the Wikramanayakes intended to induce or procure Plus 55 to breach the Resident Agreement by putting it out of Plus 55's capacity to do the act of repaying the accommodation bonds in accordance with clause D7.01; and (5) the breach by Plus 55 must cause loss or damage to the executrices. 108The Wikramanayakes have persuasive answers to the plaintiffs' claim that they have committed the tort of interfering with contractual relations. The main difficulties for the plaintiffs lie in proving elements 4 and 5 109Elements (1), (2) and (3). Element 1 is not in issue: there is a contract between Plus 55 and the residents of Lavington Lodge, the Resident Agreement. Although the Wikramanayakes dispute element 2, I find that it is made out. The Wikramanayakes were well aware that there was a standard Resident Agreement between Plus 55 and each resident. They had more than a "fairly good idea" of its terms. Their correspondence indicated that they wanted those Resident Agreement terms reproduced in Wagga Road's agreement with Plus 55. They knew in general terms from information they had received that the Donoghues were to become residents. It is a short step to infer, as I do, that the Wikramanayakes knew of the terms of the Donoghue's contract with Plus 55. But in my view they only knew of that in March 2005 after receiving information that the Donoghues had paid a deposit. The timing of this knowledge is important when analysing the Wikramanayakes' state of mind in relation to element 4 of the tort. 110The contractual obligation, which Plus 55 might breach so as to constitute the tort, was Resident Agreement clause D7.01 - being Plus 55's obligation to repay the accommodation bonds. In my view the Wikramanayakes did know of this clause in a Resident Agreement that they had reason to believe existed with the Donoghues from March 2005. 111But the content of that clause D7.01 is important. And in relation to its content the plaintiffs have pleaded element 3 of the alleged tort of interference with contractual relations somewhat ambiguously. The alleged acts of the Wikramanayakes' wrongful interference (dealt with below in element 4) are said in Further Amended Statement of Claim paragraph 17 to be acts "causing Plus 55 to breach its obligations to refund the balance of the plaintiffs' accommodation bonds under Schedule D in the Residential Care Agreements in contravention of s 57-21(1)(b)(i) in subdivision 57-G of the [Aged Care] Act". Of course, Plus 55's obligation to refund the plaintiffs' accommodation bonds under the Resident Agreement clause D7.01 is different from its obligation to refund the bonds under Aged Care Act s 57-21(1)(b)(i). Plus 55's obligation under Resident Agreement clause D7.01 is one to pay only when a new resident enters the facility to replace the outgoing resident. Whereas, the statutory obligation under Aged Care Act s 57-21(1)(b)(i) is one to pay the accommodation bond balance back to the former resident merely if "the care recipient ceases to be provided with residential care by the residential care service" conducted by the approved provider. The crucial difference is that the obligation to repay arises: (1) under the Aged Care Act, on departure of the former resident from the facility; (2) and under clause D7.01, only when the new resident enters the facility. 112The Aged Care Act statutory obligation on Plus 55 exists independently of contract. But that seems irrelevant to the plaintiffs' tortious claim for interference with the contractual relations in the Resident Agreement. The plaintiffs' Further Amended Statement of Claim only pleads the tort of interference with contractual relations. The pleading was not structured also to plead a cause of action in damages for contravention of the statute: cf Cutler v Wandsworth Stadium Ltd [1949] AC 398 at 407, Darling Island Stevedoring & Lighterage Co Ltd v Long (1957) 97 CLR 36, and Sovar v Henry Lane Pty Limited (1967) 116 CLR 397, at 405 (per Kitto J). And this was for good reason: such a statutory cause of action would not lie against the Wikramanayakes themselves, but would lie against the "approved provider conducting the service", which in this case was Plus 55. Any cause of action for damages for breach of Aged Care Act s 57-21 against the Wikramanayakes would also need to plead their actual role as accessories to Plus 55's alleged statutory contravention. In my view that is not how the plaintiffs have pleaded their case. Perhaps the pleader thought such a case would be too difficult to maintain against the Wikramanayakes as accessories. That may be right though the Court need not speculate as to this. But in these circumstances, the reference in the plaintiffs' pleading of the tort of interference with contractual relations to Aged Care Act s 57-21, seems to be mere surplusage. The only contractual obligation, which Plus 55 might conceivably have been breached to constitute the tort, was Resident Agreement clause D7.01. That therefore is how the Court will approach analysis of element 4 of the plaintiffs' claim in this tort. 113Element (4). The Further Amended Statement of Claim paragraph 17 identified the alleged acts of wrongful interference with the Donoghues' Resident Agreements as being: (1) Wagga Road entering into its contract with Plus 55 on terms giving it the right to call for the transfer of accommodation bonds that Plus 55 had received; and (2) then actually procuring Plus 55 to transfer the residents' accommodation bonds to Wagga Road. The plaintiffs allege that by both of these acts the Wikramanayakes intended to have Plus 55 breach its obligations to refund the accommodation bonds to the Donoghues. But there are several difficulties in the plaintiffs making out the relevant intent for this tort in relation to either of these allegedly wrongful acts. 114First, it was as early as April 2004 at the whiteboard meeting, or alternatively October 2004 when the lease agreement was signed (and many months before the Donoghues paid over their accommodation bonds and entered into their Resident Agreements in March 2005) that Wagga Road made its contract with Plus 55 to give Wagga Road the right to call for the transfer of accommodation bonds that Plus 55 received. I do not see how acts as early as this, and before the Donoghues' Resident Agreements were made, could show the necessary intent to procure a particular breach of a contract not yet in existence. 115Secondly, Resident Agreement clause D7.01 contemplates (whether not that conformed to the Aged Care Act as it then stood) that the accommodation bonds would only be repayable to the Donoghues once a new resident had entered the facility and signed a new Resident Agreement with Plus 55. Thus looked at purely in contract, clause D7.01 contemplated that there would always be a source of funds to pay out the Donoghues as exiting residents. In these circumstances, I do not see how the conduct of Wagga Road asking for the Donoghues' accommodation bonds would procure Plus 55 to breach its contract with the Donoghues. There would always be a fresh accommodation bond to pay out the Donoghues, from the incoming residents, if not from elsewhere. And it is no answer to this particular deficiency in the plaintiffs' case for them to point to the Aged Care Act. The Aged Care Act does not itself change the contract the parties actually made; and the plaintiffs did not plead breach of statutory duty. 116Thirdly, the Wikramanayakes were told that the $200,000 that Wagga Road received in March 2005 was money coming from an investor. I accept that they thought that is exactly what the funds were. They did not find out until much later that it was the Donoghues' accommodation bond money Wagga Road had received, not an investor's money. They did not ask for this sum of $200,000 as money due to them as having come from the Donoghues. I am not prepared to infer an intention on the Wikramanayakes' part to procure Plus 55 to breach its contract with the Donoghues by just asking for money, when the money they knew they had received they thought was from someone else. 117Fourthly, it is important to focus on the time when the breach that the Wikramanayakes are alleged to be intending to procure is expected to occur. It cannot be said that either in making the Wagga Road-Plus 55 agreement or in demanding the Donoghues' bond that the Wikramanayakes must have known Plus 55 would breach clause D7.01 in the future. The Wikramanayakes would only have the requisite knowledge that such a breach would occur, if it were established that they were aware that Plus 55: (1) would have no other resources at the time of the expected repayment to honour its obligations to a particular resident under clause D7.01; and (2) would have no other way of realistically raising the funds to make the payment to the resident. 118The executrices have not established this kind of knowledge in the Wikramanayakes. Indeed, it is inherently unlikely that the Wikramanayakes would have such knowledge. If a particular resident wanted to leave, such as for example the Donoghues in late 2005, it would be open to Wagga Road at the time to examine Plus 55's finances and to then decide whether or not to enforce the Plus 55-Wagga Road contract. Causing Wagga Road to contract with Plus 55 in October 2004, or asking for the Donoghues' bonds in about March 2005, fall well short of establishing what Wagga Road intended Plus 55 to do in October 2005 or later when, the Donoghues left, a new resident came in and Plus 55's repayment obligation to the Donoghues arose under clause D7.01. Wagga Road (and the Wikramanayakes) could then examine its own and Plus 55's overall resources to see what course would best be taken. Their conduct in asking for accommodation bonds is not obviously intended to preclude Plus 55 from taking available future measures to pay out the Donoghues. 119Element (5). Finally I do not accept that the Wikramanayakes' conduct in contracting to receive or in just asking for accommodation bonds was what actually caused the Donoghues not to be paid. That result seems perfectly explicable on the evidence by the mutual general hostility between Wagga Road and Plus 55, leading as it did to litigation in 2007 and the deterioration in the financial position of both those companies. 120In short, the tort of interference with contractual relations is not made out.

(3) Trade Practices Act misleading and deceptive conduct 121The executrices say that the Wikramanayakes were knowingly involved in Wagga Road's misleading and deceptive conduct. The executrices say that Wagga Road's agreement with Plus 55 was such that Wagga Road and the Wikramanayakes must have expected that when the Donoghues entered their Resident Agreements on 18 March that the Donoghues' accommodation bond would be transferred to Wagga Road and used by Wagga Road to service its NAB facility. 122The executrices say that with this knowledge or expectation, that the Wikramanayakes refrained either from disclosing to the Donoghues or refrained from causing Wagga Road to disclose to the Donoghues that they were in a vulnerable position and may not have their bonds refunded to them in a timely manner in the future. The executrices contend that by failing to disclose to residents of Lavington Lodge the Wagga Road-Plus 55 accommodation bond or transfer arrangement, that Wagga Road contravened Trade Practices Act s 52, and that the Wikramanayakes were well aware of that contravention. 123The executrices' misleading and deceptive conduct case depends on two main circumstances: one, based on Plus 55's conduct up to March 2005; and the other based on what Wagga Road would soon have to do. First, by the time the Donoghues entered into the Resident Agreement on 18 March 2005, that the Wikramanayakes were aware that Plus 55, controlled as it was by Messrs Smith and James, had failed to account to Wagga Road for $500,000 of accommodation bonds. And so, Wagga Road and the Wikramanayakes were said to be conscious that present and future residents of Lavington Lodge were vulnerable to the loss of their accommodation bonds. After all, so the argument goes, if Wagga Road was having trouble getting an explanation from Plus 55 for what had happened to the accommodation bonds, it could be expected without more that present and future residents of Lavington Lodge would have similar problems. 124Secondly, because of Mr Smith's and Mr James' failure to account, the Wikramanayakes were very conscious, as their 9 February 2005 correspondence shows, that Wagga Road must soon act to enforce its rights against Plus 55 to have all accommodation bonds Plus 55 had received, paid over to it, in accordance with the Plus 55-Wagga Road agreement, so that the accommodation bonds could then be used to pay down Wagga Road's loan facility with the NAB. From this demand it is said that the Wikramanayakes must have been very well aware that the accommodation bonds would not be readily available in the future for the residents to call for them. 125These two circumstances are said to give rise to a reasonable expectation that before the Donoghues entered their Resident Agreement on 18 March 2005, the Wikramanayakes should have disclosed to the Donoghues that Wagga Road was asserting a right to have the accommodation bonds transferred from Plus 55, where the residents such as the Donoghues had lodged or were lodging them, over to Wagga Road. The executrices say that this disclosure should have been given to all the residents soon after the Wikramanayakes' 9 February 2005 letter and certainly before 18 March 2005. 126The authorities make clear, and the executrices accepted in argument, that it is inappropriate to speak in terms of a duty of disclosure. Rather the question is "whether having regard to all the relevant circumstances, there had been conduct that is misleading or deceptive or is likely to mislead or deceive: Demagogue v Ramensky (1992) 39 FCR 31 ("Demagogue") at 32 per Black CJ, and see Commonwealth Bank v Mehta (1991) 23 NSWLR 84. The requirement to avoid misleading and deceptive conduct by speaking is expressed in terms of a reasonable expectation that the information in question would be disclosed rather than in terms of a duty of disclosure. In Demagogue, at 41, per Gummow J, expressed the applicable principle when agreeing with a statement of French J (as his Honour then was) in Kimberley NZI Finance Ltd v Torero Pty Limited (1989) ATPR (Digest) 46-054 at 53,195: If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, s 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure. The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the interference that the fact does not exist. 127The Wikramanayake's liability for misleading and deceptive conduct is said to be accessorial: that both, as directors of Wagga Road, were knowingly involved in Wagga Road's misleading and deceptive conduct in failing to provide further information to residents and specifically to the Donoghues. Although it is in dispute that accessorial liability is sufficiently pleaded, the Further Amended Statement of Claim is sufficient to make the nature of the Wikramanayakes' liability clear. 128What should have been disclosed? Reflecting the two elements above identified the executrices' case is that Wagga Road (and the Wikramanayakes) should have disclosed to residents that: Wagga Road was having problems in recovering accommodation bonds from Plus 55 and that Wagga Road's intention was to have all bonds transferred from Plus 55 and then used to satisfy Wagga Road's liabilities. 129The Wikramanayakes' have several persuasive answers to the misleading and deceptive conduct argument. First, the relationship between Wagga Road and the residents of Lavington Lodge and Plus 55 is not obviously one which calls for the disclosure which the plaintiffs have identified. Wagga Road is acting in the role of the lessor to Plus 55 and a financier of Plus 55's operations at Lavington Lodge. Wagga Road had no direct contractual relationship with any of the residents of Lavington Lodge. The evidence does not show that Wagga Road made any commitment directly to any resident about what would happen to accommodation bonds. Even if it be assumed that Wagga Road was aware that Plus 55 was not performing Plus 55's obligations to Wagga Road, that would not of itself raise in Wagga Road any obligation to correct misapprehensions that the residents might have about the way that Plus 55 was conducting its affairs. The residents of Lavington Lodge are Plus 55's customers. A financier or a lessor does not ordinarily have an obligation to tell the customers of the lessee/borrower's financial difficulties. Such a duty to disclose was put to Mr Wikramanayake, who colourfully expressed this idea in his answer, "exactly, your Honour. I mean, my understanding, if two parties are in a commercial arrangement you can't use that knowledge to go out and bag somebody else's visit. Maybe I am looking at it too simplistically." Thus, leaving aside the position of the Wikramanayakes, which is even more remote from the residents of Lavington Lodge than was Wagga Road, I do not see that the relationship of Wagga Road with the residents is one that in itself calls for action to correct a misleading impression being given by Plus 55. 130Secondly, the suggested disclosure was unlikely to assist the residents of Lavington Lodge, if that is its objective. If what was to be disclosed was that Wagga Road was having trouble in ensuring Plus 55 accounted to it for accommodation bonds received, and was now seeking to ensure that bonds were paid over to it, it is certainly not obvious that all residents would want this information disclosed widely, so as to put Plus 55 and Lavington Lodge in a bad public light. It was probably in the financial interest of existing residents for Plus 55 to continue attracting future residents to the facility, so that existing residents could share the benefits of the increased economies of scale and reduced financial risk associated with the receipt of further accommodation bonds. If disclosure to new residents was perceived as "bad news" deterring future residents coming into Lavington Lodge, what should Wagga Road do? Should it risk potential financial harm to existing residents by disclosing this information? Should it risk potential financial harm to prospective residents by not disclosing? 131Thirdly, part of the Wagga Road-Plus 55 arrangements had already been disclosed through the Resident Agreement Clause D7.01, which disclosure had made clear that existing residents would have their accommodation bonds reimbursed to them when bonds were received from future incoming residents. That clause itself signalled a degree of risk to persons becoming residents that should they wish to exit the facility in the future they may not get their accommodation bonds back either quickly or at all. Whilst this clause does not convey the full terms agreed between Wagga Road and Plus 55, it certainly conveys the risk of non-return of the bonds. Given this disclosure of a negative risk, it is questionable how much more disclosure was required. 132Fourthly, the plaintiffs say that Messrs Smith and James may have misapplied the accommodation bonds that Wagga Road was entitled to receive. This is said to be information that should have been disclosed. But there are difficulties with the content of such a disclosure. So far as the Donoghues' bonds are concerned, they were in fact paid to Wagga Road, and were not misapplied, albeit misrepresented on receipt as the funds of an investor. In respect of accommodation bonds paid before the Donoghues came into Lavington Lodge, it is difficult to see why Wagga Road should risk Messrs Smith and James bringing an action for defamation against it on account of its public statements that they had misapplied funds. 133And the case for the other part of what the executrices say should have been disclosed - that the accommodation bonds were soon going to Wagga Road - has even less force. Assuming in the plaintiffs' favour, that it could be clearly established that Messrs Smith and James had misapplied some accommodation bonds to purposes unrelated to Lavington Lodge, then Wagga Road may actually have been a safer destination for the accommodation bonds than was Plus 55. It is difficult to see in those circumstances, why Wagga Road should disclose it was receiving the bonds. Wagga Road by then had substantial assets - it owned Lavington Lodge. And it was proposed to use any accommodation bonds it received to reduce its mortgage liabilities (as it did indeed with the Donoghues' accommodation bonds). 134Fifthly, establishing a misleading and deceptive case against the Wikramanayakes is even more difficult than it is against Wagga Road. Wagga Road is not now sued in these proceedings. The Wikramanayakes are sued under Trade Practices Act 1974 s 75B, as the provision then stood, as accessories to Wagga Road's alleged misleading and deceptive conduct. Liability under the Fair Trading Act 1987 was not pleaded against them. A person will only be regarded as involved in a contravention sufficiently to attract s 75B if the person intentionally participated in the contravention, which requires actual rather than constructive knowledge of the essential matters that make up the contravention, together with a level of involvement, that may lead to a conclusion that a person had sufficient knowledge to be implicated in the contravention sufficiently to attract s 75B: Yorke v Lucas [1985] HCA 65 (1985) 158 CLR 661 and Compaq Computer Australia Pty Ltd v Merry, Payes, Bunnett, Sharp, Bassat, Kras, Horman & Thomson (1998) 157 ALR 1. For the Wikramanayakes to know whether or not Wagga Road has engaged in misleading and deceptive conduct by reason of Wagga Road's failure to provide information to residents, the Wikramanayakes would need to know a great deal about what Plus 55 had or had not said to the residents. The evidence did not clearly establish that Mr and Mrs Wikramanayake had sufficient knowledge of the communication between Plus 55 and the residents of Lavington Lodge for the Wikramanayakes to know or even strongly suspect that a misleading impression had been left with residents. In my view the plaintiffs' case fell well short of establishing the necessary degree of knowledge on the Wikramanayakes' part, to make out a Yorke v Lucas case. 135Sixthly, reliance is a major difficulty for the plaintiffs' case. The plaintiffs must prove that Mr and Mrs Donoghue relied upon misleading and deceptive conduct in order to succeed. The two executrices were not the decision-makers who committed themselves to the Resident Agreement. Their parents would have been the natural sources of such evidence. The proceedings were commenced in 2010, some two years before Mrs Donoghues' death. No explanation is given as to why there is no evidence from her to support the inference of reliance on misleading and deceptive conduct. Mrs Donoghue could be expected to have been a decisive person: Mrs Briggs explained that her mother had business experience, had managed a hotel, and chose where she wanted to live in 2005. The absence of any evidence from the person who is said to have acted on the misleading conduct, at least to explain their decision-making processes, makes the Court cautious about inferring reliance. 136And the inference of reliance in this case is a subtle one. The plaintiffs have to prove that Mr and Mrs Donoghue would not have proceeded had they known that Plus 55 had not accounted to Wagga Road for $500,000 and that Wagga Road wanted to enforce its rights to take the accommodation bonds. Yet, Mr Geddes had pressed advice upon Mr and Mrs Donoghue, recorded in his March 2005 letter of advice, that shows that the Donoghues were warned (paragraph 8) about there being risk that the accommodation bonds may not be repaid unless a new resident could be found to replace them. In the absence of any evidence from either Mrs Donoghue or Mr Geddes that the Donoghues were interested in the subject matter of what is now said not to have been disclosed to them. Mrs Ryan's evidence was that Mr Geddes' advice to her parents did not cover whether Plus 55 could dispose of or deal with the bonds and Mrs Ryan could not say to the best of her recollection that was a matter that concerned her mother. In these circumstances, I decline to draw the inference that either Mr or Mrs Donoghue relied upon misleading and deceptive conduct of the kind alleged. 137Seventhly, looked at objectively with the knowledge that the Wikramanayakes had at the time, the urgency of the need to disclose information to the residents is not as obvious the plaintiffs now contend. In closing submissions Mr Van Aalst tended to suggest that Mr James and Smith had misappropriated $500,000 that had been received in accommodation bonds prior to the Donoghues' money being received. But the evidence does not go so far as to enable the Court to make any such finding. All that can be said is that Mr Smith and Mr James had failed to account to Wagga Road for accommodation bonds received. They had not admitted any misappropriation. Nor were they refusing ever to give an account. And it was certainly not clear to the Wikramanayakes that Messrs Smith and James had caused Plus 55 to pay the accommodation bonds away out of reach. One would have expected the Wikramanayakes' 9 February letter to have been even stronger if they had known such things. The Wikramanayakes were entitled to assume that the monies were still either with or within easy call of Plus 55. In a real sense the Wikramanayakes were therefore entitled to believe that the funds were closer to Plus 55 than they would have been had they actually been paid to Wagga Road. These circumstances somewhat reduce the urgency of Wagga Road or the Wikramanayakes coming to the rescue of the residents by disclosing more information to them. 138Eighthly, it was suggested on behalf of the plaintiffs in final submissions that the Wikramanayakes should have disclosed to Mr and Mrs Donoghue that Plus 55 was in breach of the Aged Care Act by insisting in the proviso to clause D7.01 of the Resident Agreement that accommodation bonds would not be repaid until a new resident came into the facility. But there are two problems with the case so put. One, a breach of the Aged Care Act was not pleaded as part of the alleged non-disclosure. And, in any event, I do not infer that Mr and Mrs Wikramanayake were aware that clause D7.01 of the Resident Agreements was a breach of the Aged Care Act, even assuming that it was such a breach. Mr and Mrs Wikramanayake did not seem to the Court to be the kind of people who would have deliberately left themselves in breach of legislation, if they were aware of the breach. They were both practising accountants and struck the Court as both being fairly conservative and anxious not to jeopardise the value of the licence to conduct an aged care facility. 139Thus the plaintiffs' misleading and deceptive conduct case also fails. Conclusion and Orders 140In the result each of the plaintiffs' causes of action fails. They have not been able to establish against the Wikramanayakes their constructive trust, interference with contractual relations, or misleading and deceptive conduct cases. The result therefore is that the plaintiffs' Further Amended Statement of Claim will be dismissed. 141Ordinarily costs would follow the event under Uniform Civil Procedure Rule r 42.1 "unless it appears to the court that some other order should be made". It may be that one or other party will seek a special costs order. But unless such an application is notified to my Associate by 2.00pm on Friday 23 August 2013, then the orders that the Court will make that day are: (1)Dismiss the Further Amended Statement of Claim; (2)Direct the parties to provide any submission that they are advised in relation to costs to the Court by 12 noon on Friday 23 August 2013; and (3)I note that the Court will make its costs decision in chambers without the need for any further appearance. I certify that this and the preceding pages are a true copy of the reasons for judgment of Justice Slattery delivered on Associate..................................

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 August 2013

Trade Practices Act 1974(Cth)s 52, s, s 52.

Statutory Context Aged Care Act 1997(Cth)

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