The Hamilton Family Trust trading as Hamilton Insurance & Investments Services v Infinity Wealth & Financial Services Pty Ltd

Category: Principal judgment

Parties: Plaintiff:
The Hamilton Family Trust trading as Hamilton Insurance & Investments Services
Defendant:
Infinity Wealth & Financial Services Pty Ltd

Representation: Counsel:
Plaintiff: Mr I Gray (Solicitor for Mr Hamilton)
Defendant: Mr J Braithwaite
Solicitors:
Plaintiff:
Curtis Delaney Gray Lawyers and Conveyancers
Defendant:
SWS Lawyers

File Number(s): 2023/00298289

Publication restriction: Nil

Judgment

The claim before the court

1. Mr Ian Hamilton, as trustee for the Hamilton Family Trust trading as Hamilton Insurance & investments Services (“HIIS”), brings a claim for the sum of $103,162.00 on the basis of an asserted breach of the terms of a Business Sale and Purchase Agreement (“the contract”) for sale by HIIS to the defendant of a financial planning business (“the business”).

2. The contract in question, entered into by the parties on 11 September 2018 and which had a commencement date of 8 October 2018, required the defendant to pay $200,000 on the date of completion and to employ Mr Hamilton as an authorised representative of the defendant, both of which it did.

3. The contract also provided, at clause 3.3, for the defendant to pay two further sums, each capped at $51,581 (called “Earnout Amounts”) on each of two future twelve-month dates, provided that the following two specific pre-conditions (set out at clause 6.5) were satisfied:

(a) Mr Hamilton (described as the “Key Man” in the contract) remained in the business as at the first and second of two designated dates; and (b) No less than 80% of the clients in a “Client List” remained clients of the business on each of these dates.

4. Any disputed matter in relation to the calculation of these Earnout Amounts was to be referred to an “Expert” in accordance with the procedures set out in clause 6.6 of the contract.

5. Mr Hamilton’s services were terminated by the defendant at meetings on 4 and 5 March 2019. The defendant sold the business on or about 30 April 2019, which was well prior to both of the nominated dates in the contract for the two further payments.

6. No calculation dispute was referred to any “expert” referred to in clause 6.6. Mr Hamilton, on behalf of HIIS, commenced these proceedings by statement of claim filed on 19 September 2023 seeking the payment of the whole of the capped sums, namely the maximum capped amounts totalling $103,162.00.

The evidence

7. Mr Hamilton and Mr Masson, the sole director of the defendant, provided affidavits and were cross-examined. An agreed Court Book was tendered. Two witnesses called on behalf of the plaintiff were not required for cross-examination.

The issues for determination

8. I was initially provided with a document headed “Agreed List of Issues” which set out three issues, namely whether there was an implied term to pay the plaintiff $103,162 and, if so, whether he had breached that term and established this amount of pleaded loss.

9. I was then provided with a revised list of issues as follows:

(a) Whether there was a term in the contract, implied or otherwise, restricting the defendant’s ability to terminate Mr Hamilton’s employment. (b) Whether, if there were such a term, what the nature of the restriction was and whether it was reasonable of the defendant to have terminated Mr Hamilton’s services. (c) Causation: whether, but for the asserted breach of contract, Mr Hamilton would have been entitled to the two fully capped sums totalling $103,162.

10. In the course of closing submissions, the plaintiff sought to advance an unpleaded case of loss of opportunity.

The circumstances of Mr Hamilton’s dismissal

11. The circumstances in which Mr Hamilton was investigated and dismissed, and the question of whether there was a breach of any express or implied term of the contract in terms of non-payment, arise from five incidents occurring after the initial payment of 4 October 2018 of $200,000.

12. At first, all went well in terms of the gradual absorption of the plaintiff’s business into the defendant’s corporate structure. There is no evidence of incidents of hostility or ill will, either for the period immediately prior to signing the agreements or subsequently. It was not until late January 2019, when five issues of concern about the plaintiff’s conduct were raised, that there were any concerns about Mr Hamilton’s conduct.

13. The first two incidents, in terms of being discovered, concerned the receipt of small cash sums by Mr Hamilton from persons to whom he had given professional advice. The first of these, in chronological terms, was for consultation work he did for a new client prior to selling the business, although he was paid after the business was sold. The second of these, which related to advice Mr Hamilton gave after the business was sold, was the first to come to the attention of the defendant because Mr Hamilton offered half the cash to Mr Masson after he ran into him in the car park.

14. Mr Hamilton was no ordinary employee. He is described as the “key man” in the contract because he was well known in the community for providing financial advice, and his continued high profile was important for the success of the business. Both of the transactions involving the payment of the cash sums (set out in detail below) came about after members of the community approached him informally (in one case, at a football match and subsequently going to see him without making an appointment) and both were undocumented, in that no files were open and no record of advice made. In both cases, the persons seeking the advice or assistance did so on behalf of a parent of advanced age who had limited financial acumen.

Advice to Mr Marcus Vaughan

15. Mr Marcus Vaughan, whose affidavit evidence was unchallenged, sets out in his affidavit that Mr Hamilton was known to him as a financial planner based in John Street, Singleton and “a local community member” (affidavit sworn 24 July 2024, paragraph 2). Mr Vaughan does not say that either he or his father, Mr Vaughan Senior, had been a client of Mr Hamilton’s prior to his discussion with Mr Hamilton in about August 2018, when he approached Mr Hamilton at a rugby union match to get some advice about taking over an AMP Whole of Life policy held by Mr Vaughan Senior, which he wanted to be transferred to Mr Vaughan and his brother.

16. Mr Vaughan sets out what occurred at the football match as follows. Mr Vaughan Senior, , who was with Mr Vaughan at the football match, saw Mr Hamilton nearby, and suggested to his son that they talk to Mr Hamilton about thepolicy. They went over and Mr Vaughan, according to paragraph 10 of his affidavit, said to Mr Hamilton:

“Can I talk to you some time about dad’s Whole of Life policy for me”, to which Mr Hamilton replied, “Come in and see me at the office and we’ll talk about it.”

17. Mr Vaughan “dropped in to” Mr Hamilton’s office, without an appointment, about a week later. Mr Hamilton told him, “You can either change the policy over, so you are paying into it, or cash it in. I can look after it or you can take it over yourself by contacting AMP.”

18. Mr Vaughan then gave Mr Hamilton some further instructions to act on his own behalf:

“I also said “Ian, I am going to need some financial planning advice about my own insurances and investments.”

19. At this initial meeting, Mr Hamilton told Mr Vaughan that he would charge him $110 for the initial meeting and a fact-finding process, depending on how long it took (T 21, line 38 – 41). Mr Hamilton then told him what documents he needed to gather together and told him to return with these documents for the purpose of giving this advice. Mr Vaughan came back later, on a date he could not remember (and which Mr Hamilton also said was “unannounced”), and provided some documents which Mr Hamilton photocopied. Mr Hamilton said he would need the rest of the documents before he could “do the job for you”. Mr Vaughan never returned with the rest of the documents (T 23), and the result was that none of the “fact-finding” could be done (T 21, line 38 – 41).

20. Mr Vaughan contacted the AMP to take over his father’s policy (which he notes meant that Mr Hamilton “would no longer receive a commission from it” (see CB 32 paragraph 16 of the affidavit of Mr Vaughan dated 25 July 2024). This would not have been included in the $110 fee work. Mr Vaughan senior’s work was separate.

21. Mr Hamilton sent reminders to Mr Vaughan about the documents he had to bring in. Nothing happened, and in mid-December 2018, after the business had been sold, Mr Hamilton rang again. Mr Vaughan said he did not think he could get himself organised to send the documents, and Mr Hamilton said “Do you mind meeting my office costs of $200”. Although he had been quoted $110 and no work had been done, Mr Vaughan agreed, so Mr Hamilton sent his bank details by email.

22. Although Mr Hamilton stated that neither Mr Vaughan nor his father were ever clients of his (and thus not able to be clients of the defendant, he asserted at T 24, line 43 – T 25, line 1 ), some records must have been prepared for Mr Vaughan as a client, because he received an email from the defendant introducing itself and saying they were now operating what Mr Vaughan called “Mr Hamilton’s business” (see CB 33 paragraph 22 of the affidavit of Mr Vaughan dated 25 July 2024). He deleted the email as it had “no relevance to me” (see CB 33 paragraph 22 of the affidavit of Mr Vaughan dated 25 July 2024).

23. However, Mr Vaughan did not pay the $200, so he wrote to Mr Vaughan to remind him. This email was in the following terms:

“79 On 15 January 2019, I followed up Marcus Vaughan as I was tidying up former accounts and matters for my business prior to it being sold to the Defendant. I emailed Marcus asking him to pay me $200 for my expenses when he did not progress with seeking advice” (CB 45)

24. It was put to Mr Hamilton in cross-examination:

“Q. That's not correct, is it, because the business had already been sold in January 2019?

A. It could be worded better, yes.

Q. What did you intend to say?

A. I suppose I thought about him and the fact it was still open ended and this was a prospect that could have eventually done business with Mr Masson's business, Infinity. He had shown enough interest to say that he wanted to go forward. He wanted to get some advice. He then went cold. I was covering my costs for the delay at the time of the football, the couple of appointments that he came in and wasted my time. This was a prospect going forward. He was never a client of mine. His father was never a client of mine, so he could

never be a client of Infinity.”

25. Mr Hamilton agreed that, at that time, he was an employee of the defendant and that he had sent it from his Infinity email address (T 25). Mr Hamilton then sought to argue that this was a gift:

“Q. You accept that the $200 ought to have been, on your version of events, deposited into the account in the name of The Hamilton Family Trust rather than your personal bank account?

A. I disagree, because the Hamilton Insurance & Investments business had been sold. The bank account for that was effectively sitting idle, as was the trust account the trust bank account. There were two different accounts. One was a trading account, one was a trust account, for taxation purposes. This was going nowhere. This was not income. This was inconvenience.

Q. But on your version of events the $200 was income received in connection with services provided by you on behalf of the trust fund. It had nothing

A. It wasn't income, it was a gift. It was a gift for using my time. A gift. It could hardly be recorded as income.

Q. You see in the email you then say after instructing Mr Vaughan to deposit the $200 into your bank account you say, "I will keep this in mind should you require actual written advice documents and product placements". Do you see that?

A. Yes. I -

Q. What does that mean, Mr Hamilton?

A. It means that I was still I was working as an authorised representative for Infinity Financial, and that he could still potentially become a client of Infinity Financial if he got his paperwork together and he was able to give me sufficient information to base my advice on him.

Q. But when you say, "Deposit the $200 into my account, and I will keep this

in mind", you were suggesting, were you, that Infinity Wealth would take into account the fact that you had received $200 in working out the fees that he would pay to Infinity Wealth?

A. I would have been honest about it. I would have been honest. I would have disclosed this is an embarrassing small amount of money for Mr Masson here to miss out on. Please. This is ridiculous. He knows he mucked me around.

Q. You're saying, Mr Hamilton, that you performed the services as a trustee on behalf of the trust, that gave rise to an entitlement to be paid the money but it could go to your personal bank account. But if Mr Vaughan then decided to become a customer of Infinity Wealth you would then disclose the fact that you received the $200 to Infinity Wealth so that they could recoup that money and then take it into account in providing advice to Mr Vaughan. Is that what you're suggesting?

A. It would be disclosed put it that way. The short answer, it would be disclosed, yes. I had no reason to hide $200 from anybody.

Q. All of that would suggest, would it not, that the $200 should have been paid to Infinity Wealth?

A. All the time spent was as Hamilton Insurance. Two phone calls in December and January that's it. An email and two phone calls.

Q. In any event, the position is that you did not notify Infinity Wealth about the $200; that's right?

A. Correct.

Q. You did not remit the $200 to Infinity Wealth?

A. Correct.

Q. Can I ask had that $200 been included in any receivables list under the sale agreement when you sold the business?

A. No.

Q. Do you accept that under the sale agreement you were in fact required to remit that 4200 once it had been received?

A. No.” (T 26, line 24 – T 27, line 37)

26. Mr Hamilton was shown clause 8(3) of the contract, which states:

“8.3 Collection of Receivables

(a) If any amount is paid to the Vendor following Completion which is not on the Receivables list, the Vendor must Immediately notify the Purchaser and remit that amount to the Purchase.

(b) If any amount is paid to the Purchaser following Completion which is on the Receivables List, the Purcahser must immediately notify the Vendor and remit that amount to the Vendor” (CB 72)

27. Mr Hamilton’s response – “I’m not reading 80 pages of that, I’m sorry” (T 27) – is not to his credit. He was asked in fact to read only one paragraph. Having read that paragraph, he then made the following admissions:

“Q. 8.3(a) at the top of page 72.

A. Okay, I'll read that. I can see that, yes.

Q. Do you accept that that required the $200 to be remitted to Infinity Wealth?

A. The way that reads, yeah, yeah.

Q. The payment for Mr Vaughan, this was raised during your meetings with Mr Masson and Ms Gamble on 4 March 2019. You accept that?

A. Yes, it was the first point they said.

Q. During that meeting you initially denied receiving the $200 at all, didn't you?

A. The question I was asked is, "We believe you've been taking money from clients and putting it in your own bank account". I denied that, and that's correct.” (T 28, lines 3 – 17.)

28. In other words, Mr Hamilton had decided, when he chased up Mr Vaughan for $200 (rather than the sum he quoted) that he would keep the $200 and when Mr Vaughan finally paid, he gave instructions, on 15 January 2018, to a staff member to pay this into his personal bank account (Exhibit AM-1, pp 50 – 51).

29. This was a very small sum of money, and there the matter may have remained, had it not been for the 28 January 2018 carpark encounter between Mr Masson and Mr Hamilton about the sum of $400. As a result that staff member became concerned about the $200 transfer and, on 21 February 2019, raised these issues with her superiors.

The 28 January 2019 car park meeting

30. On 28 January 2019 Mr Hamilton and Mr Masson ran into each other in the car park. Mr Hamilton was returning after a meeting he had attended which appears to have been for the sole purpose of seeing an elderly man, Mr Oliver Senior and his son, Stephen Oliver, as set out by Mr Stephen Oliver in his affidavit which is unchallenged.

31. On seeing Mr Masson, he handed him four $50 notes and said “that’s your share” of the fee. Mr Masson says he told Mr Hamilton “we cannot accept cash”, which Mr Hamilton denies. Mr Hamilton’s explanation was that he had helped an elderly man he had known for many years by telling him how to fill out Centrelink forms after he sold his farm, and that he had been given an envelope containing a “gift” of $400. He told the court was an employee of the defendant at the time, so he decided to give half this sum to Mr Masson. He does not suggest that this was as the result of any prior understanding or agreement to this effect between them.

32. Was this advice from a financial adviser? Mr Hamilton said in cross-examination:

“Q. In assisting Mr Oliver at Centrelink and in providing him with this advice after the meeting with Centrelink, you accept, don't you, that you provided services of a nature that may ordinarily be provided by a financial adviser in return for fees?

A. No. It was a it was a it was a good turn to a lovely old man, you know. He didn't trust anyone with money. He'd been ripped off previously. His only asset was his farm. He'd been divorced many years. He was too old to farm. He wanted some guidance with Centrelink. I explained to him what the asset test, factual information. Factual information, nothing more. No advice, just what would happen to his age pension, and that the fact that he could get rent assistance. That's all I told him. So the word "advice" is not applicable. It's factual information.

Q. Information that you provided to him in relation to his personal circumstances though. Do you accept that?

A. Yep.

Q. You accept, don't you, that the services that you provided were of a nature that may ordinarily be provided by a financial adviser in return for fees?

A. Some people would charge for that, yes. I assume they would, yeah. Dennis was a friend, as was Stephen his son. I don't I didn't do I didn't get out of bed every day to take money off people.

Q. Mr Hamilton, Dennis was not your friend, was he?

A. Well.

Q. You had never met Dennis before this meeting

A. That's incorrect.

Q. at Centrelink, had you?

A. I had spoken to Dennis many times over the years.

Q. In any event, you accept, don't you, that the services you provided for Mr Oliver were of a nature that are ordinarily provided by a financial adviser in return for fees. Do you accept that?

A. No, I disagree with that.” (T 30, line 22 – T 31, line 7)

33. Mr Hamilton was shown advice he had given to a Mr and Mrs Langdon and was asked:

“Q. This page can you see it says, "Our ongoing review service"?

A. Yes, I can.

Q. This is a service that was offered for ongoing financial advice; is that right?

A. Yeah, yeah, it's the agreement you sign when you get a new client on, yes.

Q. Can you see about halfway down there is a table.

A. Yep.

Q. That table sets out, does it not, the services that would be provided by you in your capacity as a financial adviser under this agreement?

A. Yep.

Q. Can you see in that table one of the services is Centrelink if applicable, and the detailed description of the services that would be provided included, "assistance with form completion and general assistance".

A. I can see that.

Q. Do you now accept that providing somebody with assistance and guidance in relation to Centrelink is a service that is ordinarily provided by a financial adviser in return for fees?

A. Maybe for fees. Maybe for fees. I agree. I can see that.

Q. Why do you say, "maybe"?

A. Because I didn't charge Mr Oliver anything. I had no intention of charging Mr Oliver for anything.” (T 31, line 31 – T 32 line 6)

34. Mr Hamilton then conceded (T 32) that payment for services of this kind was part of an ongoing package for which fees would be charged.

35. It was put to Mr Hamilton that he had in fact been paid for these services:

“Q. This statement of advice that you prepared in 2016 in relation to an ongoing review service, did include such services for fees. Do you accept that?

A. Well, if they needed Centrelink there would be fees, yes.

Q. And they would pay for those services.

A. It was paid of their package.

Q. And they would pay for that package.

A. It was an ongoing package. That's what they would get.

Q. Would they pay for the package, Mr Hamilton?

A. Yes, they were paying for it.

Q. You were in fact paid for the services that you provided at Centrelink by Mr Oliver, weren't you?

A. I was given an envelope in my top pocket, as per my affidavit.

Q. What was in that envelope, Mr Hamilton?

A. It was $400.

Q. So is the answer to my question yes?

A. I was paid it was gifted. I was gifted.

Q. Another gift, Mr Hamilton.

A. It was. It was a gift.

Q. You offered to give $200 of that money to the defendant, did you not?

A. I actually did give $200 to the defendant.” (T 32, line 33 – T 33, line 11)

36. Mr Hamilton then conceded:

“Q. You say that the $200 was accepted by the defendant, do you?

A. Yes.

Q. I put it to you that you attempted to give the $200 to Mr Masson and he did not accept it.

A. You're incorrect.

Q. But any event, you accept whether it was accepted or not that you did offer to or did give the $200 to Mr Masson?

A. Gave to, yes.

Q. Do you accept that when you provided the services to Mr Oliver at Centrelink, you were acting in your capacity as an employee and authorised representative of Infinity?

A. I assume I could have been. Well, okay, if you say so, yes. Yep, okay.

Q. I'm asking you do you accept that you were?

A. Mr Oliver knew that I was a financial planner. He asked his son could he organise for me to be there. I said, "Yes".

Q. Do you accept that you provided the services in your capacity as an employee and authorised representative of Infinity?

A. Yes.

Q. Doesn't it follow, if that is right, that to the extent you received any money for your services, they ought to have been given in full to Infinity through the proper channels?

A. Mr Masson was fully aware, I clearly told him I was going to Singleton. This is this is this is legitimate.

Q. That's not my question, Mr Hamilton.

A. Okay, what's your question?

Q. Do you need me to repeat the question?

A. Yes, please.

Q. If you accept that you provided the services in your capacity as an employee and authorised representative of Infinity, does it not follow that any money that was paid in return for those services ought to have been provided to Infinity through the proper channels?

A. I disagree.

Q. What did you expect Mr Masson to do with the $200 in cash?

A. What he did do.

Q. I'm asking you what you expected him to do, Mr Hamilton.

A. Put it in his pocket.

Q. If this was money that was received in connection with services provided on behalf of Infinity, that would not have been appropriate conduct, would it?

A. No, no. Correct.

Q. The $400 should have been properly invoiced and receipted and accounted for properly; isn't that right?

A. I'm very pleased you brought that up, counsel.

Q. Please answer my question, Mr Hamilton.

A. Yes, it should have been.

Q. What in fact occurred was you accepted a cash payment while performing services on behalf of Infinity Wealth, and without following any proper procedures decided that you would pocket $200 in your cash and offer the other $200 for Mr Masson to put in his pocket. That's what occurred, isn't it?

A. Correct.

Q. Do you accept that that was improper conduct on your part, Mr Hamilton?

A. I was given a gift for my help to that man's situation.

Q. But this is another

A. There was no contracts implied. There was no information received pre other than that I knew Mr Oliver had $457,000 in his bank account from the sale of a property, he was 83 years old and he was an aged pensioner.

Q. That justifies, does it, Mr Hamilton, accepting cash payments and not having them accounted for properly via your employer?

A. It was a gift.

Q. This is yet another example, is it, of customers providing you gifts rather than fees for the services you provide as a financial adviser?

A. It is one of two.

Q. So the answer to my question is yes.

A. I received a gift.

Q. When this issue was raised with you during the investigation into your conduct on 5 March, you said to Mr Masson, didn't you, "Surely over your 20 years as a financial adviser you have taken a cash payment".

A. I did.

Q. You did say that, didn't you?

A. I did.

Q. Mr Masson said to you, "Not once. Not at all", didn't he?

A. That's correct. That was his answer, yes.” (T 33 LINE 22 – T 35 LINE 13)

Inquiries into the cash payments

37. After the cash in the carpark incident, the defendant’s senior staff commenced an investigation.

38. A defendant’s employee had, shortly after 15 January 2019, about two weeks beforehand, sought advice about the instructions she had received from Mr Hamilton about a cash payment. That employee forwarded an email from Mr Hamilton asking her to deposit a sum of $200 in Mr Hamilton’s bank account.

39. A note referring to the car park incident on 28 January 2019 was added to the running sheet (CB 298). According to this running sheet, the following course was taken:

“AM and LG discussed this and counselled IH in the following way”

- We do not take cash payment from clients

- We invoice for all work where we are charging a fee, and this is managed by the office manager

- We will be issuing a receipt to the client for the payment

- This is not to happen again”

40. Mr Hamilton denied he was ever counselled or told anything about either of these matters.

41. It is not in dispute that the whole of the first transaction relates to advice that Mr Hamilton gave to Mr Oliver Senior for advice given to him at the Singleton Centrelink office at a date after the business had been sold, namely 28 January 2019. There does not appear to be a dispute that this advice was of a financial nature and that after it was given Mr Hamilton was given an envelope with $400 cash.

Mr Hamilton’s explanation of these two incidents

42. It is not in dispute that Mr Hamilton accepted these small amounts of cash from each of these persons to whom he provided advice of a financial nature. They were not sent a bill for these services. Mr Hamilton kept the $200 cash payment for himself but attempted to give $200 of the $400 to another employee of the defendant, Mr Masson, when he ran into him outside the office, in the office car park.

43. As set out above, Mr Hamilton made concessions in cross-examination about what happened on each occasion, but never resiled from his principal argument, namely that he considered quibbles about these tiny cash payments to be so trivial that it was embarrassing. He said, in relation to the first transaction:

“Q. You were requesting a payment from a client but not proposing to send him any kind of invoice for the work?

A. He was paying me for the inconvenience he knows fully well what he mucked me around. This is quite embarrassing. It's $200, please.

Q. Do you accept, Mr Hamilton, that the proper course is to issue customers with invoices and receipts for financial advice related work that they receive?

A. He didn't get financial advice.

Q. But you were charging him for services that you performed in connection with him seeking financial advice. Is that not correct?

A. Collecting paperwork. Agreed.

Q. You tell him to deposit the $200 into your bank account and you provide the bank account details there. Do you see that?

A. Yep.

Q. That's your personal bank account, is it?

A. Yep.

Q. That's not The Hamilton Trust Account

A. No.

Q. is it?

A. No.

Q. Did The Hamilton Business Trust Account still exist?

A. Yes, it does.

Q. Even on your view of affairs, shouldn't the $200 have gone into the trust account not your personal account?

A. It wasn't trading. It had no assets. It wasn't trading.

Q. You were conducting that business as a trustee on behalf of the beneficiaries of the trust, Mr Hamilton. You weren't conducting that business in your personal capacity. You accept that, don't you?

A. I was the trustee.

Q. You were the trustee. Insofar as the business of Hamilton was entitled to this $200, it was the trust that was entitled to it, and the money ought to have gone into the trust account not into your personal account. Do you accept that, Mr Hamilton?” (T 25 line 19 – T 26 line 9)

44. Mr Hamilton did not accept that he was obliged to put money from customers into the trust account if they were small amounts of cash. He repeated that it was “nothing”, “a gift”, “wasn’t income”, or alternatively was “embarrassing” and “ridiculous” because of the smallness of the sums. The first of these claims (namely that these were gifts) was untrue. The following evidence is of particular importance in terms of Mr Hamilton’s credit:

“Q. But on your version of events the $200 was income received in connection with services provided by you on behalf of the trust fund. It had nothing

A. It wasn't income, it was a gift. It was a gift for using my time. A gift. It could hardly be recorded as income.

Q. You see in the email you then say after instructing Mr Vaughan to deposit the $200 into your bank account you say, "I will keep this in mind should you require actual written advice documents and product placements". Do you see that?

A. Yes. I

Q. What does that mean, Mr Hamilton?

A. It means that I was still I was working as an authorised representative for Infinity Financial, and that he could still potentially become a client of Infinity Financial if he got his paperwork together and he was able to give me sufficient information to base my advice on him.

Q. But when you say, "Deposit the $200 into my account, and I will keep this in mind", you were suggesting, were you, that Infinity Wealth would take into account the fact that you had received $200 in working out the fees that he would pay to Infinity Wealth?

A. I would have been honest about it. I would have been honest. I would have disclosed this is an embarrassing small amount of money for Mr Masson here to miss out on. Please. This is ridiculous. He knows he mucked me around.

Q. You're saying, Mr Hamilton, that you performed the services as a trustee on behalf of the trust, that gave rise to an entitlement to be paid the money but it could go to your personal bank account. But if Mr Vaughan then decided to become a customer of Infinity Wealth you would then disclose the fact that you received the $200 to Infinity Wealth so that they could recoup that money and then take it into account in providing advice to Mr Vaughan. Is that what you're suggesting?

A. It would be disclosed put it that way. The short answer, it would be disclosed, yes. I had no reason to hide $200 from anybody.

Q. All of that would suggest, would it not, that the $200 should have been paid to Infinity Wealth?

A. All the time spent was as Hamilton Insurance. Two phone calls in December and January that's it. An email and two phone calls.

Q. In any event, the position is that you did not notify Infinity Wealth about the $200; that's right?

A. Correct” (T 26, line 33 – T 27, line 26)

Further incidents

45. Other matters involving Mr Hamilton were also investigated. In the case of Mr and Mrs Hall and Mr Langdon, they were each elderly persons who had retired and whose affairs were managed for them.

The rebalancing issue

46. Mr Hamilton carried out rebalancing transactions on behalf of clients such as Mr Neil Langdon (CB 296). Consent or some form of authority are necessary before such a transaction is entered into but Mr Hamilton accepted that he had not done so and that any discussions he had with this client did not relate to his rebalancing transactions:

“A. Two days before I did the rebalance we were organised to meet. He worked afternoon shift and travelled for his job. We expected to meet two days before on the Thursday or the Friday of the previous week. Unfortunately he got called into work and we could not do that. I explained to him that we would have to "Top‑up the cash account because your pension payment of $7,500 is going to come out on" whatever date it was, and I said, "You have insufficient funds there". I explained that the top‑up would need to be done and we were unable to get to that meeting together.

Q. That top‑up, that's a reference, is it not, to the replenishing your cash reserve point?

A. Yes.” (T11 lines 37 – 48)

47. Mr Hamilton’s explanation that Mr Langdon had signed a statement of advice in February 2016, which was his initial explanation, was also accepted by him to be wrong:

“Q. What this document is telling Mr Langdon, is it not, is that if required he could seek your services to undertake a half yearly review and any rebalancing if necessary?

A. Correct. That's correct.” (T11 lines 28 – 31)

48. It is not in dispute that Mr Hamilton was required, by the compliance standard, to prepare a new statement of advice before undertaking such rebalancing transactions. He failed to do so:

“Q. In the case of Mr Langdon, you didn't prepare a new statement of advice, did you?

A. No.” (T 15 lines 40 – 42)

49. Even if he were not required to provide a new statement of advice, he still needed to prepare a record of advice, as he acknowledged in cross examination (T 13 – 15). Conduct of this kind could have exposed the defendant to regulatory consequences as well as requiring self-reporting to ASIC (CB 311 – 315). It is not in dispute that Mr Hamilton acknowledged this would be a breach of his employment contract:

“Q. No, I'm not asking whether you were terminated. I'm asking whether you accept that in circumstances where your conduct exposed Infinity to potential regulatory consequences that may affect its goodwill, reputation and business, that your conduct must also have constituted a breach of your employment contract?

A. Yes.” (T 20 lines 17 – 22)

Franking credit application and insurance issue

50. Mr Hamilton assisted to clients, Mr and Mrs Hall, in the completion of an application for a franking credit refund. The Tax Agent Services Act 2009 (Cth) sets out the circumstances in which these services should be provided by a registered tax agent as opposed to a registered tax (financial) adviser. Mr Hamilton was not a registered tax agent and his registration as a tax (financial) adviser did not permit him to prepare returns or statements in the nature of returns such as tax returns for Mr and Mrs Hall.

51. Mr Hamilton initially denied but then conceded that he had provided tax advice and a refund of franking credits:

“Q. Paragraph 121. You see the first sentence there, you say in your affidavit, "I provided advice to the Halls on them not lodging tax returns in the future".

A. Yeah, it's badly worded I'd say. Well, I provided advice that because they weren't hadn't done tax returns for many years, they've both been retired, the advice was relative and effective for that couple as they didn't they weren't lodging tax returns. It wasn't my I was not instigating them to lodge tax returns. The advice was effective and on a change of product for people that weren't doing tax returns.

Q. Have you assisted the Halls to complete a refund of franking credit application?

A. Correct, yes.

Q. You have not exhibited a copy of the kind of form you helped complete to your affidavit, have you?

A. I emailed I emailed one to my legal representative a couple of days

Q. That's okay I don't need to hear about that.

A. It's a standard it's a franking form on the Australian Tax Office's website, if you want to go to there and have a look at it. It's in red ink.

Q. You formed the view at the time in August 2018, did you not, that the Halls had an entitled to franking credits?

A. I knew they did.

Q. Given that you assisted them in completing the form, no doubt you spoke to them about that in 2018, the franking credits, did you not?

A. I did.

Q. You would have no doubt expressed your view that they were entitled to claim the franking credits?

A. Obviously they were very old people. Not financially savvy at all. They wouldn't know what a franking credit was, and then I realised you know I realised that they'd had these shareholdings from given to them AMP and IAG, NRMA if you like. I said, "Look the tax department is holding quite an amount of your money. They're full franking credits. It's no different than if you hadn't filled out your Medicare claim forms. The Tax Office is holding your money", and that's the way I treated it. I said once the fact the advice I gave them was for tax effectiveness and estate planning purposes. I thought I would go the next step and say, "Look I don't mind filling these forms out for you, so you can get your tax credits back". I did it for three years on each tax holding. I didn't go back 33 years like I probably could have, but it went back three years. And I think if your father was in the same position, you'd appreciate someone doing that yourself.

Q. There's no doubt, Mr Hamilton, that receiving financial advice can be of assistance. The question I asked was whether you provided that assistance in the form of advice about their entitlement to franking credits. And as I understand the answer you gave the answer is yes you did.

A. Yes, I did. I was a member of the tax practitioners Board, and that gave us the ability to give factual advice.” (T 35, line 40 – T 36, line 40)

52. In fact, Mr Hamilton conceded he had never been a tax agent (T 37) but he eventually conceded that this was tax agent work for which he did not have a licence (T 37 – 39). He did so reluctantly:

“Q. You accept that it does appear to fall within the scope of applications in relation to your client's entitlements under a taxation

A. Okay, let's go, let's go yes, okay we'll go with I'll agree it's an application.

Q. Given that you've already accepted that you were not a registered tax agent, you accept that you were not permitted to provide those services?

A. From my understanding of TASA, the Act of TASA and me being a tax financial adviser, I believe that was a that was a duty that I could do.

Q. You believed that at the time?

A. I still do.

Q. But, Mr Hamilton, you've accepted that you were not a registered tax agent, and you've accepted that helping to complete a franking credit refund application appears to fall within the scope of tax agent services that you were not permitted to carry out. So in those circumstances you must accept, mustn't you, that you were not permitted to perform those services for the Halls in completing their franking credit refund application?

A. I must be very wrong, but for the sake of the exercise I'll agree with you and we'll move on.” (T 39 lines 20 – 39)

53. It is not in dispute that Mr Hamilton did not have the correct licence.

The defendant’s employees collate their inquiry materials

54. Following collation of material in relation to each of these five incidents, the defendant’s employees and their lawyers and prepared an outline of the information to hand. The notes of this meeting set out the information that the defendant had in its possession and the steps are proposed to take as a result.

The meeting on 4 March 2019

55. The following persons were noted in the running sheet as participating in a meeting between staff for the defendant and the defendant’s lawyers:

“4 March 2019

Meeting with AM, LG, Andrew Windybank (AW) & Susan Moran (SM) (SWS Lawyers).” (CB 96)

56. It is not in dispute that this meeting was conducted without Mr Hamilton. The meeting between Mr Hamilton, Mr Masson and Lisa Gamble is then set out in the running sheet as follows:

“4 March 2019

Meeting between IH, AM and LG.

LG opened the meeting by stating that we have recently had our compliance auditors in and that she routinely reviews files, tasks, interactions for all advisors to ensure we remain compliant.

She indicated that as a result of her reviews a number of things had come to light which needed to be discussed.

1. Receipt of Cash Payments: We discussed the earlier receipt of a cash payment and asked IH to confirm that no other amounts had been received, he did

2. Request to client to pay fees into IH’s personal account:

- When asked about the $200 that IH requested a client pay into his bank account – IH stated he was not paid for this. “He didn’t pay.”

Later in the meeting Andrew asked IH directly “…is it possible you could have received funds into your bank account?” IH then stated “…yes, I did receive the funds.”

Andrew asked IH to clarify – stating that “…earlier in this meeting you said you didn’t receive funds. Now you’re saying you did?” IH responded by saying “…it was a long time ago.”

Andrew reminded IH that it was January (5 weeks ago).

IH confessed “I lied to you.”

3. Tax Returns: LG asked IH whether he had assisted clients in the preparation of tax returns and had he received any payment. IH indicated that no payment had been received but he has assisted with the preparation of ITRs for the refund of franking credits

4. Insurance: We discussed the insurance issue, he indicated that there were no file notes just the form signed by the client

5. Rebalancing: We discussed whether IH had ever transacted on an account without the recording of an RoA, he provided the following explanation:

- Asgard has an auto rebalance function (OK)

- He does go in and rebalance client portfolios when they are out of alignment with their risk profile or when there is excess cash – there is no reference to the client for these transactions (NOT OK)

- He also transfers cash between client’s accounts when they approach their Margin Loan limit, again without reference to the client

LG indicated that these were serious matters and we likely have a reporting obligation to ASIC, particularly in relation to the transacting on client accounts without authority.

AM indicated that we have concerns given that he lied during the meeting.

IH also mentioned his salary level and that it was a base salary – LG indicated that that was not a reason to have clients transfer payment to his account. IH clarified and said this was not the reason he directed the client to pay into his account – it was because the work was conducted prior to the merger, AM noted that the request for payment was made in January, 3 months post acquisition.

It is important to note that Infinity has been diligent in transferring as soon as practicable any amounts owing to IH in relation to service provided prior to the date of acquisition (08/10/2018), we needed to simply to be advised and the funds were transferred. This is raised as it cannot be argued that Infinity had failed to pay in a timely fashion and that due to payment concerns IH circumvented the process. Further at no time was LG ever advised that work was conducted for Marcus Vaughan prior to the date of acquisition.

LG indicated that all these matters put our relationship and the acquisition at risk. AM advised we would conduct an investigation and reconvene tomorrow morning.

Post the meeting IH provided transaction listings for the Asgard accounts in question – there are two accounts detailed above that may give rise to a reportable breach, this is to be clarified with Stewart Chandler and/or Alex Euvrade.” (CB 95 – 96)

The meeting on 5 March 2019: the defendant’s version

57. The meeting on 5 March 2019 was minuted as follows:

“5 March 2019

Meeting with IH, LG, AM and Penelope Taylor.

AM opened the meeting by asking IH to confirm what he would like to get out of the meeting, he indicated that he wanted to understand where things were at and what next steps were.

LG indicated that the relationship between Infinity and Ian had become untenable and that we will be unwinding the transaction, how that happens is dependent on what IH wants.

We discussed the two options:

Option 1

- Ian is immediately suspended with a view to terminating

- Report to ASIC

- Enforce of restraint and all other clauses under the sale contract

Option 2

- Ian is immediately suspended

- Report to ASIC

- Ian has 90 days in which to find a new licensee

- Ian is to make payment of $200,200 within 7 days to be held in trust until such time as the clients can be transferred to the new licensee

IH raised the following concerns:

- This isn’t about compliance or $200 its in relation to a personality clash. Both AM and LG assured IH that it was not – we will not compromise our values or licence for anyone, no matter how much we like them

- This is because we have looked at the book and we no longer want it. Again, we assured IH that this was not the case, in fact YTD figures indicate the former HIIS book is on track to meet its earn out targets

We agreed to adjourn the meeting so that IH and AM could discuss over coffee.

Meeting IH, AM – Section Author ANDREW MASSON

Following a meeting between Lisa Gamble, Penelope Taylor, Ian Hamilton, and myself in my office at 9:45 AM on Tuesday, March 5, 2019, Ian Hamilton and I adjourned for coffee at 9:58 AM. We walked to the café Depot on Darby St, where I had a conversation with Ian about his current situation at Infinity. I explained to Ian that his continued employment at Infinity is now untenable given

• the compliance issues that we have discussed;

• the theft of $200 from Infinity, his employer; and

• his subsequent admission to lying about this

I explained to Ian that we will be working towards unwinding the deal of Infinity’s acquisition of HIIS. I suggested to Ian that we would assist him in finding another AFSL, on the basis that he agrees to buy his book of clients back from Infinity and that we meet our compliance obligation to report to ASIC.

I reminded Ian that following this meeting he would be given the rest of the day off, and be effectively suspended on full pay. I reminded him of his obligations that will be provided to him in writing when we return to the office. And they were:

- that he has been directed not to attend the Infinity workplace at all

- not to communicate with any current or former Infinity staff

- not to access any Infinity systems, remotely or otherwise, and not to contact any current or former Infinity or HIIS clients.

Ian acknowledged this, and agreed that my summary was an accurate description of the issues outlined in our various discussion. I recommended that Ian seek legal advice, and advised him that I expected to meet him sometime tomorrow morning to work towards an outcome. I explained to Ian that I hoped to provide an outcome that was acceptable to all parties, and that it would be in his interest to work with me, under my proposal, rather than allowing Lisa to dictate the terms of his departure.

I suggested to Ian that, in order to accept our proposal he would be required to deposit $200,000 into the trust account of SWS Lawyers. Following this we would transfer his client base to a new AFSL, nominated by Ian.

During the conversation Ian suggested that he felt that it was possible that Infinity had major determination that the value of his book was less than that which we had agreed in the purchase price, and that was one of the reasons we were pursuing this course of action. I explained to him, to Ian, that that was not indeed the case. That, based on the income received, that the value of the HIIS book was as we expected it to be, and in line with the valuation that we concluded from our due diligence prior to the execution of the acquisition.

Ian also suggested that he felt that it was possible that this was a personality clash. I explained to Ian that it was not indeed, that both Lisa and myself liked him as a person; but it was his actions as an employee that led to our course of action.

During our coffee meeting, Ian said to me "Surely, over your 20 years as a financial advisor, you have taken a cash payment."

I replied "not once, not at all."

We concluded our conversation after about 15 minutes at the café, and walked back to the offices of Infinity.

During our walk back, Ian indicated that he intended to spend tomorrow, Wednesday March 6th, in Singleton. I reminded Ian, yet again, that he has been directed not to make contact with any clients or staff, including Penelope Taylor.

As we arrived at the building, Ian indicated that he would go for a stroll, and make another attempt on his mobile phone to make contact with his solicitor.

Ian entered the building at approximately 10:30 AM, at which point Lisa, Ian and I met again to discuss next steps in my office.

POST AM, IH Meeting

IH returned approximately 30 mins later having spoken with AM and attempting to discuss with his solicitor.

AM, LG and IH convened to discuss next steps. IH was

- Provided with a “Performance at Work Letter” advising him of his suspension and obligations 20190305 Performance Letter IH.docx

- Advised that he is suspended on full pay and needs to leave the office for the remainder of the day

- Asked to discuss the letter and next steps with his solicitor

- Advised that he needs to hand his key and security pass in

- Ask to attend a meeting with AM tomorrow morning at 8.30am to discuss next steps (offsite)

- Advised that we will have a Deed of Separation prepared by SWS Lawyers for execution by both parties

Next steps:

1. All IT access for IH to be cancelled or blocked

2. PT provided access to IH’s inbox for client management

3. SWS to draft Deed of Separation

4. IH to consult with his solicitor

5. PT to review trading and confirm that there are no client requests, ROAs or SOAs authorising

the transaction, if so LG to lodge breach notice with ASIC

6. AM and IH to meet at 8.30am, 6/3/19

7. Depending on the outcome of the above meeting we may divert Ian’s mobile to the Infinity” (CB 97 – 99)

58. Mr Masson prepared a separate file note of what occurred on 5 March 2019, the text of which is as follows:

“FILE NOTE – Ian Hamilton - 5 March

Following a meeting between Lisa Gamble, Penelope Taylor, Ian Hamilton, and myself in my office at 9:45 AM on Tuesday, March 5, 2019, Ian Hamilton and I adjourned for coffee at 9:58 AM. We walked to the depot on Darby Street where I had a conversation with Ian about his current situation at Infinity. I explained to Ian that his continued employment at Infinity is now untenable given the compliance issues that we have discussed. The theft of $200 from his employer, and his subsequent admission to lying about this. I explained to Ian that we will be working towards unwinding the deal where Infinity acquired HIIS. I suggested to Ian that we would assist him in finding another AFSL on the basis that he agrees to buy his book of clients back from Infinity.

I reminded Ian that following this meeting he would be given the rest of the day off, and be effectively suspended on full pay. I reminded him of his obligations that were provided to him in writing at our prior meeting. And they were:

- that he has been directed not to attend the Infinity workplace at all

- not to communicate with any current or former Infinity staff

- not to access any Infinity systems, remotely or otherwise, and not to contact any current or former Infinity or HIIS clients.

Ian acknowledged this, and agreed that my summary was an accurate description of the letter that was provided to him in that previous meeting. I recommended that Ian seek legal advice, and advised him that I expected to meet him sometime tomorrow morning to work towards an outcome. I explained to Ian that I hoped to provide an outcome that was acceptable to all parties, and that it would be in his interest to work with me, under my proposal, rather than allowing Lisa to dictate the terms.

I suggested to Ian that he would be in order to accept our proposal he would be required to deposit $200,000 into the trust account of SWS lawyers, and following this we would transfer his client base to a new AFSL, nominated by Ian.

During the conversation Ian suggested that he felt that it was possible that Infinity had major determination that the value of his book was less than that which we had agreed in the purchase price, and that was one of the reasons we were pursuing this course of action. I explained to him, to Ian, that that was not indeed the case. That, based on the income received, that the value of the HIIS book was as we expected it to be, and in line with the valuation that we concluded from our due diligence prior to the execution of the acquisition.

Ian also suggested that he felt that it was possible that this was a personality clash. I explained to Ian that it was not indeed. That both Lisa and myself liked Ian as a person, but it was his actions as an employee that led to this course of action.

We concluded our conversation after about 15 minutes at the café, and walked back to the offices of Infinity, and just prior to entering the building, Ian indicated that he would go for a stroll, and make another attempt on his mobile phone to make contact with his solicitor.

During our walk back, Ian indicated that he intended to spend tomorrow, Wednesday March 6th, in Singleton. I reminded, yet again Ian, that he has been directed not to make contact with any clients or staff, including Penelope Taylor.

During our coffee meeting, Ian said to me "Surely, over your 20 years as a financial advisor, you have taken your cash payment." You don't have to explain "not once, not at all."

Ian entered the building at approximately 10:30 AM, at which point Lisa requested Ian turn over his security code and key, which he did. He then left the building.

End of file note.” (CB 100 – 101)

59. Mr Masson was cross-examined as to his statements about the value of his book, and his assertion that all was well is a matter put before me as a factor suggestive of compliance with the second of the two conditions precedent in paragraph 6.5 for the payment of each of the Earnout Amounts. Whether or not that is the case, this is one of a series of documents which indicate that up until the incident in the car park on 28 January 2019, the parties appeared to be getting on well.

60. Some parts of the documentation and Mr Masson’s evidence are quite compelling. For example, he quotes Mr Hamilton as saying to him: “surely, over your 20 years as a financial adviser, you have taken your cash payment” (T 35, lines 5 – 6). That sounds very much like the evidence Mr Hamilton gave in cross examination about these sums.

61. Although there is a great deal of similarity in the evidence of Mr Hamilton and Mr Masson in relation to the financial transactions, there are some differences between them as to what occurred at the meetings which followed.

Mr Hamilton’s evidence relating to the meeting

62. Mr Hamilton set out a very different version of events. He said he had no idea of there being any problem and that the first he heard of these issues was when he was called to a meeting on 4 March 2019 with Mr Masson and Lisa Gamble. He described the meeting as follows:

“45 Andrew Masson said words to the effect

“Thanks for meeting. We wanted to meet with you because this relationship between us is not untenable”.

I was surprised and said words to the effect:

“What are you talking about?”

Andrew:

“You have breached ASIC Regulations and based on what we have looked at you will probably lose your AR. That is all we are going to do today and I will meet with you to discuss this matter further tomorrow.”

Andrew’s reference an AR was my Authorised Representative Licence to carry out financial planning work.

Me:

I don’t know what you are talking about.

I was indignant and highly shocked.

46 Andrew said to me:

You have bene receiving cash payments from Clients

Me: No I haven’t

Andrew So you haven’t received a payment from Marcus Vaughan

Me: Yes I did receive $200 from Marcus from efforts prior to your business purchase. It was nothing to do with you. He was not a client of infinity.

Andrew said:

You are nothing but a thief.

I denied being a thief.

47. Lisa Gamble said to me words to the effect that I was to provide her with printouts of transaction records for clients Neil Langdon, Sherelle Langdon and Darren Ward.

48. I left the meeting and I was very upset about the way I had been spoken to.

49. In the course of these proceedings I have read a file note produced by the Defendant a copy of which is exhibited at page 41-51 in IH-1. Where I do not respond to a matter in the file notes my lack of response should not be taken to be acquiescence

50 in relation to the entry for 4 March 2019 I dispute the record stated by the Defendant and in particular:

(a) Lisa Gamble, referred to as L, did very little talking in that meeting. Andrew Masson addressed me and the discussion was limited to what I have said above.

(b) I did not say “I lied to you” to Andrew Masson as alleged.

(c) Andrew Masson was the representative of the Defendant that said “this relationship is now untenable”.

(d) Lisa Gamble did not question me on this date if I had assisted clients in preparing tax returns. I deny I said anything to the effect of “IH indicated that no payment had been received but he has assisted with the preparation of IRT’s for the refund of franking credits”. I had not assisted in preparation of tax returns as alleged by the Defendant and I will refer further to the allegation below.

(e) There was no reference by Lisa Gamble or Andrew Masson in the meeting to the reporting of allegations to ASIC.” (CB 40 – 41)

63. He described the Tuesday 5 March 2019 meeting as follows:

“53. In that meeting Lisa Gamble did the majority of the talking. She said to me words to the effect "we have looked further at what we talked about yesterday and there are things that need to be reported to ASIC on your conduct. We will be unwinding the transaction".

I responded "this isn't about me receiving $200 or compliance, you don't like me and don't want the business. I just received confirmation from you (directed at Lisa) that my numbers are good and will meet earnout targets".

At the end of the meeting Andrew Masson, Andrew said to me "lets go and have a coffee and chať'**.

54. Andrew and I walked down to Goldbergs, a coffee shop near by to the Defendant's office. We ordered coffee. Andrew said to me "You should just buy the business back for $200,000, it will be best for you a bit like a footy club, you leave one and then another picks you up ". I already have some ideas on a new licensee for you and we can stay hush hush on the points I raised with you yesterday".

I said "I don't want to buy the business back".

Andrew continued to say to me words to the effect we needed to work things out and by buying the business all my problems would go away.

55. I refer to the file note of Andrew Masson of the conversation between he and I at Goldbergs on 5 March 2019 at pages 49-50 in IH-1. I respond to relevant matters as follows:

(a) The time of the meeting is wrong.

(b) I did not agree or acknowledge that Andrew had provided an accurate description of the issues that occurred in the various discussions between us.

(c) I denied Andrew's allegations that I agreed with Andrew that I had lied to him or Lisa, that I breached compliance obligations other than I might not have recorded a file note on a transaction done.

(d) I did not say I was spending 6 March 2019 in Singleton.

(e) He did not say put $200,000 in the trust account of SWS Lawyers, he just said what I have deposed immediately above on the payment of $200,000. He referred to us working things out under the "Mates Act".” (CB 41 – 42)

64. On 8 March 2019, Mr Hamilton had another meeting where the discussion was as follows:

“61. On Friday 8th March 2019 at about 8.00am I met with Andrew Masson and Lisa Gamble on a coffee shop on City Road, Newcastle.

Andrew Masson (AM), Lisa Gamble (LG) and I had a discussion as follows:

AM: We are going to sell your business to someone, that can be either you or another advice group. The price will be $200,000 as per the money paid to you.

Me: the $200k is one thing but my sale price was $303,000 with two future earnouts to be forwarded, and I don't want to lose those at $51k each

AM: the purchase price to other advisor groups will be $200,000. We will discount it from the $303,000 purchase price to take into account changes coming from the Royal Commission Banking Enquiry.

Me: So you reckon it has gone down to $200,000 from October 2018 to now [March 2019]

Me: the business is producing the required income for the earnouts. Only a few clients have lapsed or not renewed their insurance policies in the last 4 months which given a change of ownership is a good result.

AM: we like you, and you should be proud of what you have done in financial planning but we are going to sell your business, whether to you or other advisor groups.

Me: I sold you the business to get out of the industry.

AM: Well, we are going to report your breaches to ASIC.

Me: There are no breaches, they are made up.

LM: We think there are. They are not systematic or sustainable so I don't think ASIC will do any more.

AM: You have until noon to tell us if you are going to buy your client book back and move away from Infinity.

62. Andrew Masson then handed me a letter terminating my employment a copy of which is at pages 52-54 of IH-1.” (CB 43 – 44)

65. The text of that letter is as follows:

“TERMINATION OF YOUR EMPLOYMENT WITH THE IWFS UNIT TRUST T/AS INFINITY FINANCIAL ADVISORY (INFINITY)

I am writing to you in relation to recently identified conduct in your employment with Infinity. At our meeting on 4 March 2019 we raised with you concerns held in relation to particular conduct we have recently identified in the workplace.

As you are aware, your obligations under your contract of employment include the following:

1. To always act in a manner that will preserve the goodwill and reputation of Infinity and the reputation of its services, products and operations;

2. To use your best endeavours to protect and promote our business;

3. To serve Infinity faithfully, efficiently, and diligently;

4. To not use information or resources provided by us for your personal gain or for the benefit of any other person or business;

5. To comply, without exception, to all applicable legal obligations, including those imposed by Australian Securities and Investment Commission (ASIC), Australian Stock Exchange (ASX) and the Corporations Act; and

6. To not do anything that is reasonably likely to harm us or our reputation.

Failure to Perform Duties and Responsibilities

As discussed at our meeting on 4 March 2019 (the Meeting) we have received information that you have engaged in the following conduct;

1. Received cash payments from client. During the Meeting you have confirmed this is correct

2. Directed clients to make payments and received payments for services direct to your personal bank account. In the Meeting you initially denied this conduct but then indicated that you had not been honest in your initial response and confirmed this allegation was correct.;

3. Transacted on client’s accounts without providing the requisite advice and recording a record of that advice, and without receiving confirmation from the client that they accepted that advice and provided their authority to proceed. During the Meeting you have confirmed you had engaged in this conduct on two instances;

4. Transferred the ownership of an insurance policy of a client without providing advice or without noting that this was client directed. During the Meeting you denied this allegation stating transfer of the ownership of the policy was under the advice of the TAL Business Development Manager;

5. Provided advice in relation to, and assisted in, the preparation of tax returns. During the Meeting you confirmed that you aided in the preparation of Refund of Franking Credits Form.

On 5 March 2019 we directed you in writing to remain away from work on pay whilst we undertook further investigation into the issues identified in relation to your conduct. That written notice directed you not to contact clients or employees of Infinity or HIIS. We have received information that you have acted contrary to our direction and have contacted an Infinity employee.

Misconduct is wilful or deliberate behaviour by you that amounts to a failure to perform your duties and responsibilities as Financial Planner. We have undertaken a workplace investigation in relation to the above conduct and have concluded your conduct particularised above and discussed at the Meeting:

1. Causes serious and imminent risk to the reputation, interests, viability and profitability of Infinity’s business;

2. Is a serious breach of Infinity policies and procedures;

3. Is conduct that amounts to theft in your employment; and

4. Is wilful or deliberate behaviour by you that amounts to a failure to perform your duties and responsibilities as set out in your employment contract.

This conduct amounts to a breach of the terms of your contract of employment between you and Infinity. We consider that this conduct constitutes serious misconduct warranting summary dismissal.

You will be paid:

1. Your accrued statutory leave entitlement; and

2. Your accrued and unpaid salary to date.

These amounts will be subject to tax, and the final amounts will be paid into your bank account on 4 April 2019. Final superannuation payments will also be paid into your superannuation fund.

We require you to immediately deliver up any Infinity property in your possession by delivering the property to Andrew Masson**.**

Confidentiality and Restraints

Infinity reminds you of your ongoing confidentiality and restraint obligations under your contract of employment. Clause 20.2 of your employment contract requires you to maintain the confidentiality of all Confidential Information (as defined with the employment contract) acquired during your employment with Infinity. This obligation continues into the future despite the termination of your employment. We also remind you of your post employment restraint obligations which are set out at clause 21 of your employment contract. Infinity regards these restraints as necessary for the reasonable protection of its business interests. Infinity reserves its rights to take legal action, including to recover damages for breach of contract, should you engage in any conduct in breach of these restraint obligations.

Sincerely

Andrew Masson

Managing Director” (CB 103 – 105)

The parties’ contentions

66. Mr Gray submits that Mr Hamilton’s behaviour in accepting cash payments and making what was at best minor mistakes in his work did not warrant dismissal at all and that the defendant acted unreasonably and unfairly in sacking him. There was an implied term in the contract that the defendant would act reasonably. Mr Gray agrees that “this is not an unfair dismissal case” (Plaintiff’s submissions dated 6 June 2025, paragraph 30) but that an employer must give an employee a right to respond, similar to the requirements in section 387(c) of the Fair Work Act 2009 (Cth) (“the Act”). Without such a procedure being adopted, the dismissal will be harsh, unjust of unreasonable, so the opportunity to respond is the key.

67. The defendant submits that the contract entitled the defendant to terminate Mr Hamilton’s employment immediately for serious misconduct or otherwise by giving four weeks’ notice in writing (ss 117 and 123 of the Act; CB 330). No right to respond was necessary where the facts were not really in dispute. Although the cash sums were small, Mr Hamilton’s attitude during the meetings (including initially lying about receiving one of the sums) were serious in that a pattern of conduct of concern was likely to continue. The rebalancing issue was serious as the defendant was obliged to report itself to ASIC.

Findings of fact

68. If the sums in question had been larger, and if there had been more than one example of the other conduct raised with Mr Hamilton, it would be a straightforward matter to determine that the defendant was entitled to terminate Mr Hamilton’s employment. Any employee accepting cash for work-related activity and asking staff to put it in his personal account, or offering 50% of it to another employee, or failing to get appropriate client authorisation to carry out financial planning changes, would clearly be acting contrary to the interests of the defendant. The question really is whether the sums in question were so trifling in terms of amounts of money and limited in terms of the number of incidents involved as to not warrant terminating Mr Hamilton’s services.

69. Mr Hamilton’s evidence included several references to the trifling nature of the sum in question; on one occasion, he laughed about this. When he met with the other defendant’s employees, one of the questions he was noted to have asked was whether they had not at some stage in their careers taken a small sum of money in similar circumstances. It would have been clear to the defendant’s employees and legal advisers that he did not take these matters seriously.

70. When examining the bona fides of the defendant’s employees, it is clear from the notes prepared by the staff contemporaneously as well as the evidence before me that the defendant considered that there was a pattern of conduct which if unchecked would continue. I am comfortably satisfied from the evidence as a whole that the defendant took the course it did with the intention of nipping the problem in the bud. Mr Hamilton’s insouciant response when the matter was raised and his trivialisation of these events would have confirmed the fears of the defendant’s servants and agents that this was how Mr Hamilton comported himself on a routine basis.

71. The plaintiff claims that the decision to terminate Mr Hamilton’s employment was a sham and made mala fides rather than in the interests of protection of the defendant. No particulars of this are set out in the pleadings and the plaintiff accordingly sees to argue that the dismissal of the plaintiff was unreasonable in that it was in breach of the implied terms in the contract in relation to good faith.

The implied term to act reasonably

72. The plaintiff submits that it was an implied term of the contract for the defendant to act reasonably in relation to the terms and, in particular, to the continuation of Mr Hamilton’s employment.

73. The contents of this obligation were summarised by Bathurst CJ in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [145] as follows:

“[145] The content of the obligation has commonly been held to embrace three related matters:

1 An obligation on the parties to co-operate to achieve the contractual objectives.

2 Compliance with honest standards of conduct.

3 Compliance with standards of conduct that are reasonable having regard to the interests of the parties.

A F Mason “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66 at 69; Alcatel Australia Ltd v Scarcella supra at 367; Burger King Corporation v Hungry Jacks Pty Ltd supra at [171]; Macquarie International Health Clinic Pty Limited v Sydney South West Area Health Service supra at [12]; [146].”

74. In Paciocco v ANZ Banking Group Ltd [2015] FCAFC 50, the contents were defined even more simply, namely acting honestly and with fidelity to the bargain, acting reasonably and with fair dealing so as not to undermine the bargain and acting conformably with the purposes of the contract, objectively ascertained.

75. Where one party to the contract has a discretionary power (such as the right to dismiss) a duty of good faith will be implied, and the decision-make must show that the response to the problem-causing activity does not have a predetermined intent to terminate.

76. Mr Gray’s submissions of 28 May 2025 go on to refer to the conduct as being not only a breach of good faith but also a breach of the prevention principle. Simply stated, this means that where a party has caused or contributed to the other party’s inability to perform, that party cannot take advantage of its own wrong.

77. How these two doctrines interact may be seen in Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87 (“Bundanoon”). In Bundanoon, a show cause termination failed the good-faith test because the principal had decided to terminate the agreement for ulterior commercial reasons. It was not decided on prevention principle elements, but the logic of it overlaps with the good-faith principle.

78. Mr Gray also refers to Peter Turnbull and Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235.

79. In his written submissions of 2 June 2025 at paragraphs 19 – 34, Mr Braithwaite submits that the plaintiff’s case has shifted from that which was pleaded in paragraph 14 of the statement of claim, namely a duty to ensure employment, and had confined its position, as to implied term, as to whether there was an implied term that the plaintiff pay the full sum notwithstanding the termination of his employment. Mr Braithwaite notes that what was now put before the court was the assertion that:

(a) The defendant would act reasonably in relation to the terms and continuation of Mr Hamilton’s employment. (b) The defendant’s retention of the assets of the defendant obliged to pay the full amount. (c) The defendant is benefiting from its own wrongful act or omission by sacking the plaintiff and thereby preventing him from fulfilling his contractual obligations (i.e. the prevention principle).

80. Mr Braithwaite submits that reliance upon the prevention principle and the decision of Peter Turnbull and Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd is misconceived*.*

81. I agree with this submission. The contract did not impose on the plaintiff any performance obligation in relation to Mr Hamilton’s ongoing employment; it offered incentives in the event of a particular percentage of clients remaining with the business and Mr Hamilton’s continued employment. In addition, the prevention principle requires the act or prevention amounting itself to a breach of contract. Peter Turnbull and Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd is a decision about anticipatory breach.

The duty to cooperate

82. The duty to cooperate has been extensively analysed in Commonwealth Bank of Australia v Barker [2014] HCA 32; 253 CLR 169.

83. The defendant accepts that there is an implied term that each party agreed to do what was reasonably necessary to enable the other party to have the benefit of the contract. The contents of that duty are however dependent upon the express terms of the contract as was emphasized in Commonwealth Bank of Australia v Barker at [28] “what the contract actually means”. That implied duty is to preserve the benefit of the contract, and not to ensure that the other party gets the most commercially beneficial result possible by obtaining future gains that are promised on conditions. The duty to cooperate is no more than an obligation to the other party to ensure that the fundamental promises contracted for are achieved and for an obligation not to deprive the other party of that benefit. In Adaz Nominees Pty Ltd v Castleway Pty Ltd [2020] VSCA 201 at [118], the Court set out a useful summary of examples of these principles:

“The relevant duty ‘is a duty to afford the other party the benefit of what he has contracted for; not a duty to act generally in the other party’s best interests’.[79] A term implied by law cannot be used as a basis for imposing on a party something commercially advantageous to the other party but for which the contract does not provide.[80] The implied term is necessarily informed by the express terms of the contract.[81] Thus, this Court has not accepted contentions that a term implied by law can, in effect, turn a contractual non-exclusive licence into an exclusive one;[82] or require a party to act as if an express contractual right did not exist.[83] As the Court of Appeal of the Supreme Court of Western Australia recently observed, the term implied by law, whether expressed positively or as a negative covenant, is not only limited by the criterion of necessity but must relate to bringing about something which the contract requires to happen.[84] Even more recently, the Court of Appeal of the Supreme Court of Queensland has held that the implied duty to co-operate is ‘conditioned’ by the concept of reasonableness.[85]” [Citations omitted]

84. The contract does not require these payments to be made in full, or even in part. It sets out a formula for additional payments to be made if criteria are satisfied, with a referee process in case of a dispute in quantum. Clauses 6.3 and 6.4 do not turn into a penalty clause of some kind if those criteria are not satisfied.

85. The defendant satisfied its duty to cooperate by putting the factual material before Mr Hamilton. The acts and omissions concerned did not involve any unknown third party or even a need to explain.

Conclusions: the defendant acted reasonably and in accordance with all contractual obligations

86. I formally make findings of fact as to the bona fides of the action taken by the defendant to dismiss Mr Hamilton. I am satisfied that his employment was terminated due to genuinely and reasonably held concerns about his conduct, that being the conduct set out in the termination letter and the breach report. I have not accepted him as a witness of credit but even if I had, his admissions in cross-examination mean that his evidence could not be accepted.

87. The implied terms in the contract, individually and severally, do not in any way derogate from those facts. I find:

(a) There is no term, express, implied or otherwise that the defendant was obliged to pay Mr Hamilton the total sum of $103,162, either because it was part of the contract sale or because the defendant retained the defendant assets. The express terms of the contract (clauses 6.3 – 6.6) are to the contrary. The defendant was not required to pay any part of this sum unless the conditions for payment was satisfied and any dispute as to quantum was to be determined by the arbitrator. (b) There is no implied duty requiring the defendant to do whatever is necessary to ensure that Mr Hamilton remained employed simply because there were further payments contingent upon his employment continuing. His continued employment was for the purpose and benefit of the defendant, not the plaintiff. If it was not to the benefit of the defendant, the defendant was entitled to dispense with his services.

88. I am satisfied that there was no breach of any implied term amounting to conduct which could be described as being unreasonable.

89. There is a further problem in relation to the plaintiff’s claim, namely that of causation, in that the plaintiff would not be able to establish any breach would result in the whole of the sum being payable, let alone any part thereof, as the other them which had to be satisfied, namely the percentage of clients under clause 6.5, is simply not made out.

Causation

90. The purchase price as defined in the contract was $200,000 completion payment followed by two earn-out payments in the amounts of $51,581 on each of 1 October 2019 and 1 October 2020 respectively. These two sums are not part of the purchase price but require the performance of certain obligations. Clauses 6.4 and 6.5 require the plaintiff not only to remain employed but for there to be not less than 80% of the business clients transferred to the new business. These are amounts calculated in accordance with schedule 4 to the contract as follows:

(a) “Earn-out Amount 1” is an amount calculated in accordance with Schedule 4, which is payable no earlier than 15 November 2019 in accordance with clause 6.3(a); (b) “Earn-out amount 2” is an amount calculated in accordance with Schedule 4, which is payable no earlier than 16 November 2020 in accordance with clause 6.3(b).

91. However, the defendant’s obligation to pay one or both of these earnout amounts is dependent upon clause 6.5 (headed “Conditions for Payment”) which provides that the defendant is not required to pay any part of these amounts unless two conditions are satisfied. The first of these conditions is that the “Key Man” (Mr Hamilton as defined in clause 1.1) remain employed and the second is that not less than 80% of those persons who were clients of the business on completion as set out in the client list remained clients of the business.

92. It is not in dispute that not only the first of these requirements is not made out, but also the second. No figures are provided to demonstrate that not less than 80% of the clients not only came into the business but remained as at the relevant dates. The “Expert” referred to in the clause 6.6 of the contract was not retained by either party.

93. What must occur is that the Earnout must be calculated, not that the sum of $51,581 be paid. The sum in question may well be any amount from nil to $51,581. In other words, the contract contemplates a process for the determination of the payment, together with a provision that any disputes as to the precise amount were to be referred to the expert identified in clause 6.6.

94. Even if every other aspect of the plaintiff’s claim were able to be proved, and his dismissal were to be shown to be a breach of the contract, the plaintiff would still have to demonstrate that not less than 80% of the clients not only came into the business but remained at the respective dates in 2019 and 2020.

95. The plaintiff is unable to establish causation, even if his dismissal were wrongful.

Loss of opportunity

96. In submissions in reply dated 10 Jun 2025, the plaintiff sought to mount an argument of a loss of opportunity.

97. The short answer to this submission is that any claim for loss of opportunity must be pleaded and particularised. No application was made to amend the statement of claim and raising such a defence in submissions in reply is insufficient: Barnes v Forty Two International Pty Ltd [2014] FCAFC 152; 316 ALR 408 (“Barnes”) at [113] – [118] per Beach J. In Barnes, failure to plead the loss of opportunity was sufficient to be fatal to the appeal, as Flick J noted at [15]:

“Concurrence is expressed with the principal conclusion of Beach J that the “alternative causation and damages case was not pleaded”. That alternative case founded upon a claim for damages by reference to the “loss of opportunity” was neither pleaded nor raised for resolution before the primary Judge during the course of the hearing. It emerged for the first time in closing submissions. Concurrence is also expressed with Beach J’s reasons for so concluding and with his conclusion that the primary Judge should have dismissed the proceeding before his Honour on that basis.”

98. There are other reasons why this argument should be rejected. In addition to the list of challenges to this new claim set out by Mr Braithwaite at paragraphs 5 to 15 of the defendant’s reply submissions dated 11 June 2025 on loss of opportunity (all of which I accept), there is no evidence as to what the value of that opportunity would be. The failure to retain the “Expert” referred to in clause 6.6 of the contract would be a particular difficulty, as the contract clearly envisaged that consulting the expert would be the first port of call in the event of there being a dispute over loss of this kind.

Quantum

99. On the subject of quantum, Mr Gray states that the plaintiff’s claim is “simply put as the failure by the defendant to pay the two earnout sums totalling $103,162 being the balance of the purchase price”, adding that this does no more than put the plaintiff in the classic position of receiving damages in the position so far as money can that they would have been in but for the breach (plaintiff’s submissions dated 6 June 2025, paragraphs 84 and 85).

100. As previously noted, this sum is not simply “the balance of the purchase price” but a sum the calculation of which is dependent upon establishment of the facts set out in clauses 6.3 and 6.4 of the contract. By reason of my findings as to causation, even if the plaintiff had succeeded, no amount would be payable without the second limb of the condition precedent for payment being satisfied, namely the condition relating to the retention of clients.

Orders

101. I make the following orders:

102. Judgment for the defendant.

103. Plaintiff pay defendant’s costs, with liberty to apply.

104. Exhibits retained until further order.

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Amendments

19 December 2025

[37] - Typographical error.