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[2014] VSC 455
Supreme Court of Victoria
2014-09-17
VICKERY J
Original judgment source is linked above.
CONFIDENTIAL INFORMATION- Elements to be proven - Sufficient development and identification of the information - Necessary quality of confidence - Imparted in circumstances of confidence - Unauthorised use - Remedy for breach of confidence.
RESTITUTION - Quantum Meruit - Advisory Services- Principles of action in Quantum Meruit and unjust enrichment considered - Actual or constructive acceptance - Benefit to recipient - Recipient realised provider expected to be paid - Unjust to accept services without payment - Restitution by way of success fee.
**1 This proceeding emerges from the financial distress of a very large fund manager known as the Orchard group, following the onset of the global financial crisis (the 'GFC') in 2008.
2 As at 2011, the Orchard group was a property funds management business specialising in unlisted property funds. It had approximately $1.2 billion in funds under management in Australia and New Zealand. It had 16,600 scheme investors and over 700 shareholders in its principal holding company, Orchard Funds Ltd ('OFL').
3 The Orchard group was hit hard by the GFC. It suffered severe financial distress, and was still labouring under this condition in early 2011. Declining property valuations, together with relatively high debt levels and discontinued investor inflows left the Orchard business with few options but to proceed with asset sales to reduce leverage. At the same time, many of Orchard's fund investors saw their investment value decline significantly leading to a loss in investor confidence and shareholder dissatisfaction.
4 The issues in this case arise from a subsequent successful transaction undertaken by the Defendant, Morgan Stanley Australia Ltd ('Morgan Stanley'), to recapitalise the entire Orchard platform in 2011. Morgan Stanley is the Australian arm of an international investment bank. The Morgan Stanley international investment bank (the 'Morgan Stanley international investment bank') is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. It has over 1200 offices in 36 countries.
5 The recapitalisation project was carried out by Morgan Stanley under the project code name 'Project Citrus'.
6 In 2011, the Plaintiff, Vasco Investment Managers Limited ('Vasco') described itself as a 'multi-boutique real estate investment management firm'. It was a company with no funds of its own. It was an advisory firm providing wholesale and retail investment management services in relation to equity funds, fixed income funds, private equity real estate funds, real estate securities funds, mortgage and real estate debt funds.
7 During the period from April to June 2011, Vasco presented a plan for the recapitalisation of the Orchard group to Morgan Stanley (the 'Plan').
8 Vasco claims that this presentation was made on a confidential basis, and that from the beginning and during subsequent negotiations, the principals of Vasco, Mr Coulter and Mr Kotak, proposed terms on which Vasco would be remunerated by Morgan Stanley if the proposed recapitalisation deal were successfully concluded.
9 During the period from April to June 2011, Vasco claims that Morgan Stanley (through its agents, Mr Kingsley and a Mr Zhou), made numerous requests of Mr Coulter and Mr Kotak for information, assistance, advice, calculations and drafting of documents, including the drafting of an expression of interest letter, the final form of which Morgan Stanley ultimately sent to Orchard.
10 Despite several requests from Vasco during this period for payment terms to be agreed, no concluded agreement as to remuneration was ever reached between Vasco and Morgan Stanley.
11 In June 2011, Morgan Stanley's requests of Vasco ceased and Vasco had no further involvement in the recapitalisation of Orchard.
12 In November 2011, Morgan Stanley successfully concluded a profitable recapitalisation of the Orchard platform. It did not pay Vasco for any of the services it performed during the April to June 2011 period, and denies any liability to pay.
13 Vasco claims an account of the profits of the defendant Morgan Stanley Australia or equitable compensation for misuse of its confidential information leading to the profitable recapitalisation of Orchard by Morgan Stanley.
14 Alternatively, Vasco seeks payment on a quantum meruit basis for its services delivered to Morgan Stanley during the period of April-June 2011.**
**15 OFL was a public company and the sole shareholder in Orchard Capital Investments Ltd ('Orchard Capital'). Orchard Capital was the responsible entity for the management of several unlisted property funds.
16 The largest fund in the Orchard group was the Diversified Property Fund (the 'DPF'). DPF held two classes of assets: direct property assets (buildings); and indirect assets (being interests held in other Orchard funds as well as externally managed funds).
1 The DPF was the cornerstone of OFL's funds management business, holding controlling stakes in the majority of OFL's managed funds.
17 The DPF had been significantly impacted by the GFC resulting in no redemptions or distributions being made to unitholders in the fund; devaluations in both direct and indirect property portfolios; a high level of gearing; and the threat of forced sale of assets in a soft market.
18 Other unlisted property funds under the Orchard umbrella included other funds ('satellite funds'). DPF had an ownership interest in a number of these funds. The other satellite funds relevant to this proceeding, in respect of which Orchard Capital was the responsible entity, included:**
**19 OFL, Orchard Capital and its various Funds are referred to collectively in these reasons as 'Orchard' or the 'Orchard platform'.
20 Each of OFL and each of the DPF and other satellite funds had their own lending arrangements, some with a combination of secured and mezzanine debt.
21 In 2010 and early 2011 the main lender to Orchard was Bank of Scotland International ('BOSI'). BOSI had lent to both OFL and the DPF. However, its security was confined to holdings of DPF's units in other funds. These units were not liquid as there was no market for them. As at March 2011 BOSI's total debt stood at about $126 million. OFL was able to service its debt to BOSI through management fees that it received from the Funds. However, the DPF's debt to BOSI was not being serviced. BOSI's loan-to-value ratio was about 94% and its position was deteriorating rapidly.
22 The bank operated by National Australia Bank Ltd ('NAB') also had significant exposure. NAB had lent over $500 million to the DPF and other Funds. In terms of the DPF alone, the relevant funding as at March 2011 was $122 million secured over direct assets. However, unlike the security position of BOSI, the NAB's lending was secured directly over properties. NAB's loan-to-value ratio was about 71%.
23 The bifurcated security arrangements at that time had the consequence that NAB had the benefit of direct recourse to the income stream of the direct assets and also had the ability to reduce debt against those assets. On the other hand, the indirect assets were not producing income sufficient to service the BOSI debt. For this reason BOSI's exposure to NAB undertaking asset sales or quarantining income on the direct assets portfolio was substantial.
24 Consequently, in the period leading up to 2011, the Orchard funds platform was a high profile target for investors seeking to capitalise on a commercial opportunity because of its distressed financial state.
25 In recognition of this position, in early 2010 the Board of OFL retained KPMG to seek out potential buyers for the Orchard platform.
26 Orchard's position was complicated by reason that, not only were there cross-holdings of units by reason of the DPF's holding units in other Funds, but many of the individual unit-holders held units in more than one of the Funds, and many of the shareholders in OFL were also unit-holders in the Funds.
27 By 2011, Orchard's financial difficulties were publicly known.**
**28 In 2008, Morgan Stanley became involved in a consideration of the acquisition of Orchard's funds management business through a funds management business operated by Investa Property Group Holdings Ltd (Investa). Investa was owned by two other Morgan Stanley managed funds. Morgan Stanley carried out a 'desk top' analysis of Orchard. At that stage the approach being considered was to acquire Orchard's responsible entity and not to recapitalise Orchard's underlying funds. The object of the desk top audit was to consider, from Morgan Stanley's perspective, the strategic benefit of recapitalising Orchard at the responsible entity level. A financial model was constructed by the Morgan Stanley team to facilitate that analysis. Consideration of the opportunity progressed to the due diligence stage. The due diligence exercise revealed that the funds management businesses of Orchard would not be as complementary to Investa as had been anticipated and the proposed transaction did not proceed.
29 In early 2010, arising from its distressed financial position, OFL sought further expressions of interest for potential recapitalisation solutions. The Board of OFL retained KPMG to seek out potential buyers for the Orchard platform.
30 During 2010 a number of bids were made to purchase OFL or parts of the Orchard platform. Prominent amongst these was a bid by Taemas Bridge. That bid failed before the end of 2010.
31 Morgan Stanley became aware of the process being undertaken by KPMG on behalf of Orchard from about March 2010. It followed the progress of that process through press comment, including press coverage of potential interest in Orchard expressed by Cromwell and Rueben Brothers. Morgan Stanley learned of a number of proposals which had been put to Orchard to buy out, recapitalise and take control of the responsible entity.
32 However, during this period, Morgan Stanley pursued other opportunities in the market and did not consider any acquisition of any part of Orchard.
33 A bid was also made by Barwon Investment Partners ('Barwon'). In essence the Barwon bid was directed to a take-over by Barwon acquiring a controlling stake in OFL. The proposal had the following key elements: (a) a placement of $1.5m of ordinary shares and 80 million options (the latter to be exercised at a premium) to Barwon; (b) a 1 for 2 non-renounceable rights issue of up to $4.75m (on the basis that Barwon agreed to subscribe for their $0.75m entitlement, and agreed to underwrite $1.75m); (c) upon completion of the rights issue, OFL was to undertake an equal access scheme to buy back up to 86.8m shares for a consideration of $0.95m; and (d) the appointment of two senior executives connected to Barwon.
34 The proposal, if accepted, would have involved the investment of up to $5.25m into OFL, of which $4m was to come from Barwon. The consequence of the placement, rights issue and buy back would result in Barwon owning between 20-44% of the issued shares of OFL.
35 The crisis for Orchard came to a head by March 2011. Disgruntled shareholders of OFL called an extraordinary general meeting, seeking to spill the Board. The meeting was fixed for 8 April 2011.
36 On 11 March 2011, a meeting of the Board of OFL was held. Among other things, the minutes of the meeting recorded:**
The directors ... noted that it was apparent from the rigorous processes undertaken by the Board to date that there was no viable 'whole of Orchard solution' for the recapitalisation of the corporate and funds, and that the Board has formed a well founded view over many months that the most appropriate first step is to recapitalise and strengthen the responsible entity [OCIL] and then work from that basis to resolve the issues affecting the funds. It was noted that the Board had also formed a well founded view that there was no viable instant 'solution' to the issues facing the DPF that would serve the interests of existing unitholders.
37 From Barwon's perspective, the preferred transaction appeared to be the Barwon recapitalisation proposal. An extraordinary general meeting was scheduled for 20 April 2011 to consider the Barwon bid.
The Plaintiff - Vasco Investment Managers Limited (Vasco)
**38 The principals of Vasco were Mr Chris Coulter and Mr Deep Kotak.
39 Mr Coulter's background was as a fund manager. From 3 October 2005 to 24 October 2009 Mr Coulter was employed by OFL (and its predecessors) as fund manager for its Diversified Property Fund (DPF).
40 Mr Kotak was employed by OFL (and its predecessors) as a project manager from 23 January 2006 to 31 July 2009. Mr Kotak's background was as a fund manager and a product manager. He had been employed as COF Assistant Fund Manager.
41 An element of Vasco's business involved the acquisition of distressed funds in order to recapitalise and rehabilitate those funds to profitability. For this purpose Vasco had launched its own Special Situations Fund that aimed to provide investors with exposure to commercial property. The focus of the Special Situations Fund was on distressed unlisted property funds. Vasco had spent considerable time and effort attempting to raise funds to acquire such assets. Those fundraising activities were conducted on a relatively modest scale.**
The Defendant - Morgan Stanley Australia Limited (Morgan Stanley Australia)
**42 Morgan Stanley Real Estate Investing (MSREI) is the global real estate investment management arm of the Morgan Stanley international investment bank. It is one of the largest real estate investment managers globally. It manages over US $50 billion in real estate assets on behalf of its clients.
43 The defendant, Morgan Stanley, amongst its other commercial activities, conducts in Australia the business of MSREI. In conducting the business of MSREI in Australia, Morgan Stanley formulated and advanced expressions of interest for investments as agent for and on behalf of funds such as Morgan Stanley Real Estate Fund VII Global ('MSREF7'), an international managed property fund. The manager of MSREF7 is a Delaware Company. As at 2011, MSREF7 had in excess of US $4 billion in undrawn equity commitments for the purposes of investment opportunities.
44 The Australian business unit of MSREI was MSREI Australia. MSREI Australia worked on the recapitalization of the Orchard platform, on behalf of MSREF7.**
45 Principal Participants involved in the 'Project Citrus' Orchard recapitalisation proposal on behalf of Morgan Stanley were as follows:
46 In the organisation of the Morgan Stanley international investment bank, Mr Kingsley and Mr Tynan each reported to Mr Hoke Slaughter who was based in Hong Kong. Mr Hoke Slaughter in turn reported to Mr John Klopp and Mr Olivier de Poulpiquet, the joint heads of the MSREI business who were based in New York and London respectively.
47 The Principal Participant involved in the Orchard recapitalisation proposal on behalf of Orchard was Bryce Mitchelson. Together with Mr Goodwin, Mr Mitchelson is currently the joint managing director of Arena Investment Management Limited (formerly Orchard Capital). In late 2010, Mr Mitchelson had assisted Mr Kingsley and his team in progressing another investment proposal called the Centro proposal. After the Orchard board was spilled in April 2011, Mr Mitchelson, was appointed as the Chief Executive Officer of OFL.
**48 Project Citrus was the internal project name which Morgan Stanley gave to the Orchard recapitalisation proposal. The object of the proposal was to provide a comprehensive re-capitalisation and liquidity solution for OFL and some of the funds managed by OCIL (the responsible entity), including the Diversified Property Fund (DPF), Commercial Office Fund (COF) and Chevron Renaissance Property Trust (Chevron).
49 The aim was to provide a holistic solution for all stakeholders in Orchard's platform. The objective of MSREI in acquiring the Orchard platform was to stabilise the funds and allow time for value to recover over the medium term.
50 The recapitalisation of Orchard, which was approved by OFL shareholders at the Orchard Annual General Meeting on 22 December 2011 was a complex scheme. It involved the following key elements:**
**51 The 'Equity Recapitalisation Terms Sheet' evidenced other details relevant to the transaction that was ultimately effected.
52 By means of this strategy the principal interests of the entities within the Orchard group, and its stakeholders, the unit holders and supporting bankers, were largely met, at least as far as the prevailing financial circumstances would permit. The prospect of a significant profitable financial gain by Morgan Stanley, and the entities it acted for within the Morgan Stanley international investment bank, was also achieved.
53 The Project Citrus transaction, containing the elements described above, was settled on 3 January 2012.**
**54 Vasco claims that during the period from 25 March to early June 2011, its representatives Mr Coulter and Mr Kotak presented to Mr Kingsley of Morgan Stanley a plan developed by Vasco for the recapitalisation of the entire Orchard platform.
55 I accept that both Mr Coulter and Mr Kotak during 2010 worked up a plan to recapitalise OFL and all the Orchard Funds, as well as separate plans confined to single Funds being Chevron and the COF.
56 Mr Kotak said in cross-examination, which I accept, that during 2010 they put the strategy together 'for an investor who had the capital' and 'we were still seeking large investors who had the capital and could execute such a deal'.
57 I accept that Mr Coulter, as the former DPF fund manager, which was the largest fund in the Orchard group, was very conversant with this entity and its structure and how to fix it. It will be recalled that Mr Coulter's background was as a fund manager. From 3 October 2005 to 24 October 2009 Mr Coulter was employed by OFL (and its predecessors) as fund manager for its Diversified Property Fund (DPF).
58 Mr Kotak also had considerable in-house knowledge and experience of Orchard. It will be recalled that he was employed by OFL (and its predecessors) as a project manager from 23 January 2006 to 31 July 2009. Mr Kotak's background was as a fund manager and a product manager. He had been employed as COF Assistant Fund Manager.
59 I find that Vasco's 'Plan' for the recapitalisation of OFL and its Funds using the investment funds of a third party such as Morgan Stanley was as follows:**
60 Following recapitalization, Vasco proposed the following strategies to carry its plan forward:
Communications between Vasco and Morgan Stanley in respect of the Vasco Plan
**61 On 25 March 2011 Mr Coulter and Mr Kotak of Vasco telephoned Mr Kingsley of Morgan Stanley. They spoke together for about an hour. Mr Coulter and Mr Kotak were in Melbourne and Mr Kingsley was in Sydney. Mr Coulter and Mr Kotak had been introduced to Mr Kingsley by email through a business acquaintance, Mr Lam.
62 Mr Coulter and Mr Kotak explained their backgrounds and current situation, including that they had launched a Special Situations Fund to exploit the distress in the unlisted market. They further explained that the retail unlisted funds had struggled to recapitalise during the GFC because they did not have access to the capital available to the listed funds and the wholesale funds.
63 Mr Kingsley explained that Morgan Stanley would not invest in a third party managed fund like Vasco's Special Situations Fund because Morgan Stanley itself had a fund which did the same thing.
64 After discussing a possible investment by Morgan Stanley in a relatively small fund, Mr Kingsley asked Mr Coulter and Mr Kotak whether they had anything larger for him to look at.
65 Although Mr Kingsley denied any discussion about Orchard during the tele-conference of 25 March, Mr Kinglsey did express a general interest in meeting to talk about potential opportunities which were under consideration by Vasco.
66 Mr Coulter and Mr Kotak suggested a meeting in Sydney, and it was agreed to make arrangements for that to occur. Mr Kotak also said to Mr Kingsley that he would send to Mr Kingsley a non-disclosure agreement so that they could talk openly when they met.**
**67 On 31 March 2011 Mr Coulter and Mr Kotak met with Mr Kingsley at the offices of Morgan Stanley in Chifley Tower, Sydney.
68 Mr Kingsley acknowledged having received Vasco's non-disclosure agreement (the 'NDA') which Vasco had sent him. He had not read the document in any detail although he had briefly reviewed it. He explained that he had not signed the agreement and could not sign it. His explanation was that an internal Morgan Stanley legal process had to be complied with. He indicated that this would take some time and would be a lengthy process. Mr Kingsley then said that 'Morgan Stanley is a firm of solid reputation' and that 'Morgan Stanley is not in the business of breaching confidentiality agreements' and that 'Morgan Stanley is not in the business of stealing ideas'. Mr Kingsley said this to Mr Coulter and Mr Kotak, because, as he conceded, 'I encouraged them to tell me the opportunity.' To this, Mr Coulter said 'If you can maintain confidentiality, I'm happy to disclose the opportunity to you.' By this Mr Coulter conveyed to Mr Kingsley that not just the target, but the whole of the opportunity would be described and disclosed the Morgan Stanley.
69 Mr Kingsley accepted that the information about the opportunity that Mr Coulter and Mr Kotak were intending to disclose to Mr Kingsley on 31 March was considered by them to be confidential. Mr Kingsley knew that they were not going to disclose that information unless he agreed to maintain confidentiality. Further, Mr Kingsley accepted that he would deal with the information on that basis.
70 Mr Coulter and Mr Kotak then disclosed to Mr Kingsley a series of ideas that were possible for the recapitalisation of the Orchard platform. The discussion between Mr Coulter and Mr Kotak and Mr Kingsley on 31 March included a long and detailed oral explanation about a solution to achieve this end. Throughout the meeting, Mr Kingsley indicated that the concept was potentially of interest to Morgan Stanley as an investment by one of its funds, MSREF7.
71 There was also discussion about how Vasco might be engaged by Morgan Stanley.
72 Mr Kotak then gave an update on Orchard. He explained the background of Orchard, and it funds, and its history, including the number of investors in the DPF, the shareholders in Orchard and the conversion of the note holders to shareholders. Mr Kotak also said that the two key lenders to Orchard, BOSI and the NAB, were applying pressure to the Orchard board to accept the Barwon offer that was on the table. Mr Kotak also said that there were two new offers in existence, one from Landmark White and one from Otway Partners, but that the Barwon offer was a better offer.
73 Mr Coulter explained the position of Orchard in greater detail, including the position of BOSI and the NAB. He advised that BOSI had become critically stressed and that its debt ratio was over 95 per cent. He also mentioned the arrangement held in escrow, pursuant to which, upon BOSI paying a sum of money to the NAB, if Orchard assets were sold, BOSI would be paid to satisfy or reduce its exposure to the Orchard debt. The proposal by Barwon, which was then on the table, was also mentioned.
74 Mr Kingsley shook his head and said how messy and complicated it was.
75 Mr Coulter explained to Mr Kingsley the essence of the Vasco plan. He explained that the key to doing any transaction with Orchard was to remove the BOSI debt, which was the cause of the distress. Mr Coulter then explained Vasco's proposed deal structure, which involved purchasing BOSI's debt at a discount and then converting that debt to equity by taking DPF's interests in the COF, Chevron, Sydney Healthcare Trust and Childcare funds. In this way the new provider of capital would not simply step into the shoes of BOSI as a major creditor and would avoid becoming another lender at high risk. The conversion of the BOSI debt to equity could also be undertaken in a number of ways.
76 Mr Coulter further explained to Mr Kingsley that because BOSI effectively had control of the manager, from his experience at Orchard, given his understanding of the DPF and his discussions, negotiations, and relationship with the NAB, BOSI at that point would force the manager to sell its debt at a discount. In Mr Coulter's view, that was the best way to convert that debt to equity.
77 Mr Kingsley suggested that consideration be given to also purchasing the NAB debt.
78 Mr Coulter then dealt with the external indirect holdings that the DPF had in funds not managed by Orchard, including what he described as indirect holdings including in entities he called 'Reid, Jepara, Centro, and Metro Maddington', which were being liquidated at the time. Mr Coulter explained that the Centro and Metro Maddington entities were going to be sold on the open market, and that Jepara was going to be wound it up. Some of the other entities he explained were more difficult to assess when they would be able to be sold.
79 Mr Coulter also explained a little about the taking of further equity in DPF and explained that it was problematic because in the relevant constitution there was a 10 per cent cap on the rights issue, there would be difficulty in diluting the unitholders further.
80 Mr Coulter also spoke a little about the other funds into which DPF had invested, namely the Office Fund (COF), the Childcare Fund (Childcare) and the Chevron Fund (Chevron) primarily. He also mentioned the Primary Infrastructure Fund, to which Mr Kingsley shook his head, and said that he wasn't interested, when Mr Coulter said it was an investment in farms. On the other hand, Mr Kingsley expressed some interest in the Office Fund, when Mr Coulter explained that these consisted predominantly of investment in B grade office assets in Sydney and Melbourne. However, Mr Kingsley was not convinced about the potential for Morgan Stanley to be interested in the other funds mentioned, namely Childcare and Chevron.
81 Mr Kotak then talked a little about taking extra stakes in the underlying funds, namely COF, Chevron, and Childcare. He spoke about the methods of doing liquidity offers and rights issues.
82 Mr Kingsley repeated a number of times how messy and complicated it was, and that he had looked at it previously.
83 Mr Coulter also mentioned that there was to be an extraordinary general meeting of Orchard shareholders the following Friday, and they had heard that, based on the proxies already received, it looked like the existing board would be ousted. Mr Kingsley expressed interest in this development.
84 Towards the end of the meeting, Mr Kingsley said he needed to see the plan in writing, in order to explain the value proposition to his team. He said that he wanted to see a profit at the level of a '9 or 10 per cent blended cap rate post discount' and a rate of return in excess of 20 per cent. He said that when they did their modelling numbers that he would also like his suggestion of buying the NAB debt included. Mr Kingsley's purpose was to demonstrate to his team the value of the potential investment for Morgan Stanley.
85 Mr Kingsley said he would be in Melbourne the following week and could meet again with Mr Coulter and Mr Kotak there. It was agreed that they would arrange another meeting.**
7 April Vasco Summary of the Proposed Orchard Recapitalisation
86 On 7 April 2011 pursuant to the meeting in Sydney the previous week, Mr Kotak sent by email to Mr Kingsley what he described in the email as 'a high level summary of the proposed Orchard deal'. The attachment to the email was a presentation document entitled: 'Vasco Special Situations Fund Orchard Recapitalisation'. It was dated April 2011 and contained the following notation on the front page: 'private & confidential discussion materials only'. The document included the following:
We have summarised the following:
current structures of both the corporate and funds,
proposed transactions
future strategies for funds and corporate, and
value proposition for Morgan Stanley.
With regard to our role, if you are interested in progressing with the transaction, as discussed with you we would like to be engaged by you as follows:
Due Diligence
Success Fee if the deal proceeds
Ongoing operational role post deal completion
We appreciate that the deal has to move quickly hence why you cannot sign an NDA/CA. We therefore have no issue with providing you with this information in the absence of form documentation. However, would you please confirm you agree in principle to the nature of our engagement. If this is all acceptable and you are prepared to move forward on the basis we have outlined then we can sign a formal engagement letter.
**87 Coulter, Mr Kotak and Mr Kingsley met on 7 April 2011 at the Morgan Stanley office at 101 Collins Street, in Melbourne at some time between 5 - 6 pm.
88 Mr Kingsley had received the email and attachment from Mr Kotak dated 7 April a few hours before the meeting. Although Mr Kingsley had read the email, he had not read the attached presentation. Mr Kingsley understood that the presentation summarised the items referred to in the email.
89 Mr Kotak spoke firstly about a letter that had been released by NAB and BOSI that day. He said that there had been a letter released supporting the Barwon proposal and that the banks were not promising to extend facilities to Orchard after the end of April if the Barwon facility was voted down.
90 There was an extraordinary general meeting of Orchard shareholders scheduled for the next day, 8 April. Mr Kotak told Mr Kingsley that he had heard that the proxies were sufficient to result in the board spill and oust the board. Mr Kingsley expressed satisfaction at this outcome.
91 Mr Coulter and Mr Kotak spoke to a written presentation which they had prepared in relation to the Vasco proposal to re-capitalise Orchard.
92 Mr Coulter briefly explained the structure of the funds with reference to the diagrams in the presentation which described the Orchard structure and the proposed transaction. He went into more detail about the NAB and BOSI debt. He explained the NAB and BOSI debt position to Mr Kingsley. He also dealt with the agreement between BOSI and the NAB which was held in escrow and the ramifications if the agreement came out of escrow, namely that BOSI would then gain security for its debt over physical assets, provided that the NAB debt was paid down to a 40 per cent loan to asset value ratio. In this event BOSI would receive debt servicing from physical assets and would also be placed in a position to recoup loan capital from the sales of those assets.
93 Mr Coulter, by reference to the printed presentation, also went through the structure of the transaction proposed by Vasco and the transaction steps designed to achieve the planned outcome.
94 He commenced with the proposal to acquire the NAB debt at face value at $122 million and not at a discount, because the NAB was not under pressure.
95 The structure explained by Mr Coulter included purchasing the BOSI debt at a discount and then converting the BOSI debt to equity in the relevant funds. The conversion could be effected in a number of different ways.
96 Mr Kingsley said that he didn't want necessarily to buy Orchard Funds Limited, because it was an existing company with liabilities and he wasn't sure what he would be taking on.
97 Mr Coulter emphasised that it was important to better the offer which was on the table from Barwon so the shareholders would be more amenable to any investment by Morgan Stanley. Mr Kingsley appeared to accept this position.
98 Mr Kotak described how the Vasco plan worked for all or the relevant stakeholders in Orchard, by sharing in some of the discounting across the structure. Other elements of the Vasco plan were discussed.
99 Other aspects of the Vasco presentation were discussed.
100 Mr Coulter and Mr Kotak also spoke about the capitalisation rates or yields that Mr Kingsley had asked to be produced by reference to their written presentation. Mr Kingsley asked for the asset level assumptions for the funds represented in the models, given that they described five year asset plans. Mr Coulter and Mr Kotak said that this would be provided.
101 As to fees, Mr Kingsley said that on transactions of this kind Morgan Stanley would usually like to have a partner who could co-invest, but acknowledged that Vasco did not have the necessary capital for this particular project. He then said that in cases like these, Morgan Stanley would prefer to pay fees as a mixture of cash and profit share. Mr Kingsley also asked whether Mr Coulter or Mr Kotak wanted jobs at Orchard. The concept of Morgan Stanley paying success fees was also discussed by Mr Kingsley. This demonstrated that he was receptive to the idea of paying a success fee to Vasco and including that in a remuneration package.
102 Mr Kingsley requested that he provided with the asset level assumptions which had been earlier discussed. He also requested Mr Coulter and Mr Kotak to work up an alternate proposal in the event that the NAB and BOSI transaction came out of escrow. He also requested an update on the progress of the Orchard shareholders meeting that was to take place the following day.
103 In summary, the outcome of the meeting was that Mr Kingsley said that he wanted to review the materials in the Vasco presentation and consider what had been proposed. Mr Kinglsey knew and understood, amongst other things, that Vasco wanted to be engaged by Morgan Stanley on the basis that they would be paid a success fee if the deal proceeded. He also knew that Vasco wanted to be engaged by Morgan Stanley on the basis that they would be remunerated for carrying out due diligence on the transaction, and be engaged by Morgan Stanley in an ongoing operational role post completion. Critically, Mr Kingsley knew from this time that Vasco expected to be paid for the work it was doing on the transaction.
104 Mr Kingsley set three tasks for Vasco during the 7 April meeting. First, to provide the asset values and yields behind the cap rate assumptions in the 7 April presentation; second, to work up an alternate proposal if the NAB/BOSI deal came out of escrow; and third, to explain to Kingsley why Morgan Stanley should invest in the Childcare Fund.
105 Mr Kingsley clearly signalled to Mr Coulter, Mr Kotak and to Vasco that Morgan Stanley was interested in progressing the transaction to recapitalise Orchard.**
**106 On 11 April 2011 Mr Kotak sent to Mr Kingsley an e-mail setting out an alternate proposal in the event that the NAB/BOSI deal came out of escrow. This was in response to Kingsley's request at the 7 April 2011 meeting.
107 In summary, the e-mail proposed that in the event foreshadowed the following steps should be taken:**
108 the prospect of BOSI taking a discount in the short term because the COF and CPF were not fixed-life vehicles and were unlikely to be wound up, such that BOSI would have to seek a buyer for these positions, and because it was highly improbable that BOSI would easily refinance its debt. The e-mail explained that this would give Morgan Stanley:
109 The e-mail attached a copy of a letter dated 5 April 2011 from NAB and BOSI recommending the Barwon deal to shareholders of OFL. It also attached asset growth assumptions for the DPF and Chevron.
**110 As at 11 April 2011, Morgan Stanley, through Mr Kingsley, needed to keep Vasco in place to assist it to advance any transaction to recapitalise Orchard, should it determine to proceed. So much was conceded by Mr Kingsley.
111 Mr Kingsley telephoned Mr Kotak on the evening of 11 April 2011.
112 Mr Kingsley said that he would like to bring Mr James Goodwin into the deal, and asked whether either Mr Kotak or Mr Coulter would have any issue with that.
113 Mr Kotak responded by saying that they wouldn't: 'As long as any payment that's going to us, any fees being paid to us, are not altered in any way', so that Mr Goodwin would be paid separately. Mr Kingsley agreed with this condition.
114 Mr Kingsley asked Mr Kotak to contact Mr Goodwin to arrange for a meeting with Mr Goodwin, himself, Mr Kotak and Mr Coulter.
115 Mr Kingsley also asked to be provided with some of the assumptions in the proposed transaction relating to some of the funds.
116 Mr Kotak also asked Mr Kingsley in that telephone conversation whether he had given further consideration to Vasco's fee structure. Mr Kingsley responded that if it was structured in the manner he suggested, being a profit share in the deal, it could look 'very interesting' for them. Mr Kotak's account of this part of the conversation was not challenged in cross-examination.**
**117 Mr Kotak sent an email to Mr Kingsley on 13 April 2011. This email set out the asset values and yield assumptions for the COF and had been prepared and sent to complete the work that he had requested of Vasco in respect of yields and assets.
118 Also on 13 April, Mr Kingsley telephoned Mr Kotak and said that he had spoken with Mr Goodwin and asked that Mr Kotak follow up to arrange for a meeting between himself, Mr Goodwin, Mr Kotak and Mr Coulter. Mr Kingsley also said that he would like Mr Michelson, who had been appointed as the CEO of Orchard, to be involved in the discussions as well. He said that he would like an 'insider' to be involved to exert some influence on the Orchard board as to the proposal suggested by Vasco.**
**119 On 14 April 2011 Mr Kotak sent an email to Mr Kingsley. It indicated that contact with Mr Mitchelson would not be possible on that day.
120 The email provided strategic advice to Mr Kingsley on two things of importance: first, that the banks were exerting considerable pressure on Mr Mitchelson and the Orchard board to accept the Barwon proposal that was then still on the table; and second, that if the Barwon proposal was not accepted upon the vote of shareholders, the banks had reiterated that the loan facilities for DPF would not be extended after the month. Mr Kotak's email also suggested on behalf of Vasco that 'our offer' to the Orchard board 'outlining our strategy as previously discussed' should be proposed. The following key elements of the proposal were then set out, namely:
• Offer liquidity to OFL shareholders, valuing the corporate at circa $8-10m ( the actual figure will depend on our due diligence outcome)
• Underwrite rights issues of up to %5m into the corporate reducing corporate debt
• Offer liquidity to unit holders in COF & Childcare
• Offer to acquire DPF's units in COF & Childcare at a reasonable discount reducing DPF's BOSI debt
121 Mr Kingsley took no issue with the description in Mr Kotak's email in referring to 'our offer' or 'outlining our strategy ...'.**
**122 On 18 April 2011 Mr Kotak sent Mr Kingsley by e-mail a summary of the CPF including the current portfolio break-up and the forecast growth and income assumptions. The e-mail described features of the childcare sector generally and of the CPF in particular. It suggested a future merger with the Australian Education Trust and the Australia Social Infrastructure Trust and attached the December 2010 financial results for each of these trusts.
123 That evening, Mr Kingsley replied by e-mail, 'Good summary'. Mr Kingsley agreed that Mr Kotak's email gave him useful and timely information. The information was provided in response to Mr Kingsley's request to show why Morgan Stanley should invest in the Childcare Fund.**
124 Mr Coulter then had a telephone conversation with Mr Kingsley on about 19 or 20 April 2011 about presenting a new offer on the part of Morgan Stanley to the new Orchard board which had by then been appointed.
**125 On 20 April 2011 there was an email exchange between Mr Coulter and Mr Kingsley about fees.
126 Mr Coulter sent an email to Mr Kingsley requesting 'a little more certainty on fee structures'. The email included the following:**
We haven't yet heard from Colin [Zhou] but no doubt we will today. As discussed we are happy to do whatever you need in order to get the transaction up and running from your end. However, pursuant to our fee discussions in your office in Melbourne we would like to get a little more certainty on fee structures. Are you able to let us know in more detail what you have in mind.
127 Mr Kingsley in turn sent an email to Mr Coulter which included the following:
Not that I am trying to avoid setting this out (fees), but we are a long way from getting a deal done. Need to focus our energies on that side before I know what fees looks like.
Why don't you lay out what you are thinking as a straw man and we can commence discussions. Does that work?...
**128 Mr Coulter replied by email the same day agreeing to put his mind to what Vasco thought would be an equitable and a reasonable structure and to get back to Kingsley.
129 Late on 20 April 2011, Mr Kingsley emailed Mr Kotak twice, about the vote on the Barwon bid, enquiring whether the Board of OFL would know that night whether the Barwon bid would be voted down. Mr Kotak replied the same day saying that he was hoping to hear something later that day. The Barwon bid was not accepted by Orchard.**
**130 On 27 April 2011 Mr Kotak had two telephone conversations with Mr Kingsley.
131 In the first conversation, Mr Kingsley telephoned Mr Kotak and told him that he had contacted Mr Mitchelson, the CEO of Orchard, and had told him about Vasco's proposal and that he was happy with that proposal, subject to one issue which he noted relating to the value of the interests of the unitholders being diluted, and that this would be an issue for the new board to contend with.
132 Mr Kingsley then asked Mr Kotak to prepare a comparison for him of the Vasco offer and how it compared with another offer which had been made in 2010, the Taemas Bridge offer. Mr Kotak agreed to prepare and provide that information.
133 Mr Kingsley also asked to be provided with information as to the key adviser groups who were advising the unitholders in the Orchard funds and recent media articles on Orchard.
134 Later in the day on 27 April, there was a further telephone conversation between Mr Kingsley and Mr Kotak. Mr Kingsley advised that he had discussed the BOSI / NAB escrow transaction with an advisor to BOSI and had been told that the agreement was likely to come out of escrow in mid-May so that there was an opportunity for a deal to be done before that event.
135 Mr Kingsley and Mr Kotak then discussed the expression of interest letter proposed to be sent from Morgan Stanley to the Orchard board. Mr Kingsley said that Morgan Stanley would struggle to get it done internally so he requested that Mr Coulter and Mr Kotak draft the document. Vasco had already been working on it, so it would have been easier for it to prepare the first draft. Mr Kingsley said that he would send a template based on the Centro deal that Morgan Stanley had looked at in the previous year 2010, and requested that the draft letter prepared by Vasco be in the same format.
136 Discussion also took place about the dilution of the value of the unitholders' interests in the DPF. Mr Kingsley asked Mr Kotak to carry out some dilution calculations for him to illustrate the extent of the dilution for unitholders at the completion of the transaction proposed by Vasco with the conversion of the BOSI debt to equity and after DPF's interests in the other funds had been bought out.
137 Mr Kotak said that he would do the calculations and send them to Mr Kingsley on the following day.
138 Mr Kingsley also said that he wanted control of the Orchard management company and asked Mr Kotak to think about how the shareholders of OFL could participate in that.
139 Mr Kingsley also indicated that he had no interest in the Childcare Fund, and Mr Kotak agreed not to include that in the drafting process.
140 Mr Kotak also asked Mr Kingsley about the email that Mr Coulter had sent him the previous week about Vasco's fees, and whether he had any further thoughts about what the fee structure would look like.
141 Mr Kingsley said that he was content with the 'finder's fee/success fee' concept, and repeated that this would be 'rolled into the deal' so that it would not be paid up-front in cash. Mr Kotak was not sure what that meant, and he asked Mr Kingsley to send him more details on the concept. Mr Kingsley also said that the proposed due diligence fee was acceptable and that Morgan Stanley would pay a fee for due diligence work. As to post transaction work, Mr Kingsley commented that, as Morgan Stanley would control the management company OFL, ongoing fees would be paid out of the Orchard platform.
142 Mr Kingsley also said during the conversation with Mr Kotak' 'Don't take this to Blackstone'. Blackstone was another private equity fund manager which provided very similar funds to the Morgan Stanley funds.
143 To the extent that there is any conflict between the versions of the telephone conversations of 27 April 2011 between Mr Kotak and Mr Kingsley, I prefer that of Mr Kotak. He was not successfully challenged in cross-examination and the documentary evidence tended to support what he said in his oral testimony.**
**144 On 28 April 2011 Mr Kingsley sent an e-mail to Mr Coulter and Mr Kotak, forwarding an e-mail he had sent to Mr Goodwin on 20 April 2011. The e-mail to Goodwin summarised the proposed transaction by reference to five points.
145 Mr Kingsley's 28 April 2011 e-mail to Mr Coulter and Mr Kotak began 'Deal construct as discussed'. It identified a number of features of the proposed deal that Kingsley agreed were elements of the Vasco proposal.
146 Mr Kingsley agreed that these were not all his ideas, that this was just one particular way of structuring a deal that worked for Morgan Stanley. He also said that this was not the form of the proposal that he had most recently been discussed with Vasco.
147 Later on 28 April 2011, Mr Kotak e-mailed Mr Kingsley a sensitivity analysis that he had prepared on a debt to equity conversion in the DPF. This was based on Vasco's wider proposal involving the purchase of DPF's units in both COF and Chevron. It analysed the dilutive effect of that transaction on DPF unitholders. Dilution of the interests of the Orchard unitholders was an element of concern in the proposed transaction.**
**148 On 28 April 2011, Mr Kingsley sent to Vasco a template for the expression of interest letter that he had mentioned in his conversation with Mr Kotak on the previous day. The template was incomplete in terms of detailed information.
149 A telephone conversation between Mr Kingsley and Mr Kotak also took place on 28 April in which the structure of the proposed letter from Morgan Stanley to present to the new Orchard board was discussed. Matters such as the inclusion of the key transaction steps and the capacity of Morgan Stanley to execute a transaction of this size were discussed.
150 The content of the proposed expression of interest (the 'EOI') was also discussed. Mr Kotak told Mr Kingsley that the EOI should demonstrate to the Orchard Board that Morgan Stanley had the financial resources to complete the proposed transaction.
151 Mr Kingsley requested Mr Kotak to organise a telephone conference the next day with himself (Mr Kingsley), Mr Zhou, Mr Goodwin, Mr Kotak and Mr Coulter.**
**152 Pursuant to Mr Kingsley's request, Mr Kotak organised a telephone conference which was conducted on 29 April 2011. Mr Coulter and Mr Kotak, along with Mr James Goodwin and Mr Romano Nenna (a former CEO of Centro who had previously worked with Vasco on another project and been brought by Mr Goodwin), telephoned from the Vasco office at 459 Collins Street Melbourne. They spoke with Mr Kingsley and Mr Colin Zhou who were in the Morgan Stanley office in Sydney.
153 Mr Coulter and Mr Kotak printed out the agenda for the meeting from an email sent on the morning of the meeting by Mr Kingsley. The agenda emanated from Mr Kotak's discussion with Mr Kingsley on the previous day. The items in the agenda were discussed. Some time was spent discussing whether to put in the proposed letter of offer from Morgan Stanley the purchase of the BOSI debt. Mr Coulter and Mr Goodwin were both of a view that this should be done. Mr Kingsley, on the other hand, expressed a view that he did not wish to put a reference to it in the letter. Other aspects of the Orchard funds relating to reducing the gearing of the debt were also discussed.
154 Mr Kingsley also said that he wanted to express in the letter of offer from Morgan Stanley a vision for the future of Orchard focusing on the two principal funds. He also said that he wanted to retain the present Chief Executive Officer of OFL, Mr Bryce Mitchelson, who was appointed after the Orchard board was spilled in April 2011.
155 Mr Goodwin spoke about the importance of corporate governance being expressed in the proposed letter of offer.
156 Once the agenda items had been discussed, Mr Coulter and Mr Kotak said that they would commence drafting the letter of expression of interest and would send through the first draft the following week.
157 At the end of the conference, it was Mr Kotak's evidence that Mr Kingsley thanked the participants, acknowledged that they had done a fair bit of work on spec and said 'You'll all be rewarded for this when the deal is done'.
158 Mr Coulter's recollection was to similar effect. He gave evidence that at the end of the conference, Kingsley said 'I appreciate you are working on spec, you'll be rewarded when the deal's done'.
159 Mr Kingsley gave evidence that he recalled thanking people at the end of the conference. He did not recall acknowledging that participants had worked on spec or saying that 'You'll all be rewarded when the deal is done' but acknowledged that he might have said these things.
160 Mr Goodwin had no memory of the content of the telephone conference.
161 Mr Kingsley had an uncertain recollection of what was said at the end of the 29 April 2011 telephone conference.
162 The clear recollections of Mr Kotak and Mr Coulter as to the inducement in the nature of financial reward offered by Mr Kingsley at the conclusion of the telephone conference of 29 April 2011 are unchallenged and I find that the inducement in fact occurred as described by them.**
**163 In response to Mr Kingsley's request, Mr Coulter and Mr Kotak worked on the draft expression of interest over the following weekend, which they sent to Mr Kingsley on 2 May 2011 by email.
164 Although the draft used the Centro EOI as a template, most of the drafting was undertaken by Vasco, including the proposed deal structure.
165 Mr Kotak's covering e-mail made a number of comments on the draft and suggested outsourcing the responsible entity function to the Trust Company with reasons given for this proposal.**
166 On 2 May 2011 Mr Coulter sent an email to Mr Kingsley in which he set out Vasco's proposals for a fee structure. This responded to the invitation expressed in Mr Kingsley's 20 April 2011 e-mail. In relevant parts, Mr Coulter's email read:
Further to your request please refer below to our proposed fees and terms of engagement for the proposed Orchard transaction.
Engagement consists of:
Deal sourcing
Deal Structuring
Negotiating with stakeholders
Due diligence
Ongoing advisory role on successful conclusion of the deal
We note that we have already used our knowledge and intellectual property to undertake points 1 and 2 above. We believe if the deal is concluded successfully the work we have performed to date would have been crucial in that successful conclusion. In noting this we are fully aware that any payment for this work will only be made if the transaction proceeds.
Given our knowledge of the company, its assets, funds and debt facilities we believe it will be essential for us to be an integral part of the due diligence team if the transaction proceeds to that stage, Due diligence would of course include a thorough review of all relevant documentation, meetings with stakeholders, etc. in order for sufficient comfort to be gained that the strategy as proposed will yield the forecast returns in our modelling. Payment for this part of the engagement would be set upon commencing due diligence and would be subject to a break fee payable by the company so would be an at risk costs of MS.
The ongoing advisory role would be subject to the final structure of the transaction.
Our proposed fees and indicative structure thereof is as follows:
*Deal origination/sourcing - 'finder's fee' that can be rolled into the profit share as part of our 'co-investment' into the transaction.
*Due Diligence - our standard Vasco charge-out rates are $350 per hour subject to a minimum of 50K. Payment to be made as a cash fee.
*Success fee - fee of 65 bps of capital subject to minimum of 500K payable only on successful conclusion of deal. You mentioned before that this is most likely to be paid in shares / units in management company or as profit share upon achieving certain KPIs/hurdles. Could you please explain how you think this will work? As proposed by you previously we are amenable to an incentive subject to meeting ongoing KPIs being applied to this proportion of the fee.
*Ongoing advisory role - TBD subject to confirmation of the scope of the role. This fee however would probably be payable out of Orchards post-transaction.
We acknowledge your previous advice that we are still some way from concluding the transaction and do not wish to distract ourselves with side negotiations on our fees. However we believe some clarity on this matter at this stage would be beneficial as we will get more pressed for time if the transaction proceeds. It would also assist us in our discussions with stakeholders if we had a formal appointment as your representative.
Would you please consider and revert at your earliest convenience.
**167 On 2 May, Mr Kotak also spoke to Mr Kingsley by telephone about the proposal to outsource the responsible entity function to a Trust Company. Mr Kotak gave Mr Kingsley as description of how that could work and the potential benefits for Morgan Stanley of taking that step by appointing an independent responsible entity in place which would free up Morgan Stanley's capacity to vote on resolutions in relation to the funds. Mr Kingsley asked for more information on the proposed Trust Company and how much that would cost.
168 Mr Kingsley acknowledged that when he received this e-mail he understood that Vasco wanted a success fee.
169 Mr Kingsley responded by e-mail that evening saying 'Thanks Chris. Will revert'.**
**170 On 3 May 2011, Mr Kotak e-mailed Mr Kingsley advice about outsourcing the responsible entity function to the Trust Company and attaching a presentation by the Trust Company on how such outsourcing works.
171 On 5 May 2011, Mr Kotak e-mailed Mr Kingsley advising that he had sourced buyers for the healthcare and childcare assets, which he had done at Mr Kingsley's request.
172 Also on 5 May 2011, Mr Kotak e-mailed Mr Kingsley Vasco's detailed Chevron recapitalisation presentation, which Mr Kingsley had also requested him to do.
173 On 11 May 2011 Mr Zhou emailed Mr Kotak requesting information on the Commonwealth Bank security pool in the DPF and maturity and covenant details on the key facilities in the DPF, COF, Chevron and CPF Funds. Mr Kotak replied the same day with most of the information requested to which Zhou responded by email thanking him and saying that this was 'very helpful'.
174 On 14 May 2011, Mr Kingsley sent the draft EOI to Mr Coulter, Mr Kotak and Mr Goodwin under cover of an email that said 'Please keep this highly confidential ... Can you take a look and come back to me with your thoughts/suggested amendments in mark up'.
175 On 15 May 2011, a Sunday, Mr Kotak responded by email to Mr Kingsley setting out a number of comments and attaching the draft EOI with suggested amendments marked.
176 Also on 15 May 2011, Mr Kingsley requested Mr Kotak by email to provide the constitutions for all the Funds, mentioning in particular those of the DPF, COF and Chevron. Mr Kotak replied the same day attaching the Chevron and COF constitutions, and the next day, 16 May 2011, with the DPF constitution.**
**177 On 17 May 2011 Mr Coulter and Mr Kotak telephoned Mr Kingsley. Mr Colin Tynan was also in attendance with Mr Kingsley, as was Mr Zhou.
178 The conference was called to discuss the second draft of the expression of interest. A second draft had been prepared by Morgan Stanley over the weekend.
179 At this meeting the effect of the debt to equity conversion on the unit value or the net tangible asset value of the DPF was discussed. A legal issue arising from the purchase of management rights of the COF, Chevron and Childcare funds was also discussed.
180 Mr Coulter advanced the view that if management rights were to be changed, 50 per cent or more of the unitholders in the fund which is being managed would need to agree. He also said that it was his understanding that in order to issue units at par to convert debt to equity at the same value, there would not need to be a constitutional change, but if there was to be issue at more than 10 per cent, it would require a constitutional change to clause 7 of the DPF constitution which contained a unit pricing formula, but whether a constitutional change was or was not necessary for this purpose, was uncertain. However, if the constitution needed to be amended, it would require a special resolution, passed by at least 75 per cent of unitholders, to approve the change by a vote. Mr Coulter concluded with the observation that that Morgan Stanley would need to obtain legal advice on these matters.
181 There was also discussion about the dilution of the value of the interests of the unitholders in the DPF.**
**182 By e-mail on 17 May 2011, Mr Zhou requested Mr Kotak to review Morgan Stanley's DPF unitholder dilution calculations.
183 On 18 May 2011, Mr Kotak emailed to Mr Zhou Vasco's calculations and explained the difference.
184 Also on 18 May 2011, Mr Zhou e-mailed Mr Kotak, Mr Coulter and Mr Goodwin requesting thoughts on the possibility of avoiding a special resolution of unitholders in the DPF.
185 On 18 May 2011, Mr Kotak replied by email advising how to avoid a special resolution and the risks that a deal on such a basis would raise.
186 Later on 18 May 2011, Mr Tynan e-mailed Mr Kotak and others asking whether there was any restriction on a vote for a greater than one-for-one rights issue, apparently referring to the DPF.
187 Shortly afterwards, Mr Kotak replied that there did not appear to be any such restriction and enquiring whether Morgan Stanley's lawyers had reviewed the DPF constitution.
188 Early in the afternoon on 18 May 2011, Mr Zhou replied to Mr Kotak's email on the DPF dilution calculations expressing agreement with Mr Kotak's analysis and requesting Mr Kotak to fill in gaps in Morgan Stanley's balance sheets for the Funds.
189 Later that afternoon, Mr Coulter replied by e-mail attaching more detailed balance sheet values from the 31 December 2010 audited accounts and a further table deriving net assets for current unit prices and number of units where available.
190 Also during the afternoon of 18 May 2011, Mr Tynan asked Mr Kotak by email for the product disclosure statement for the DPF.
191 Shortly afterwards, Mr Kotak replied by email attaching the product disclosure statements for the platforms and for the COF.
192 The next day, 19 May 2011, Mr Kotak emailed Mr Goodwin the DPF supplemental and consolidated constitutions. The following day, 20 May 2011, Mr Kotak sent by email to Mr Zhou and Mr Kingsley the Chevron product disclosure statement.
193 Late in the afternoon on 18 May 2011, Mr Zhou emailed to Mr Coulter and Mr Kotak an updated draft EOI, requesting their thoughts. This was the third occasion on which Morgan Stanley had asked for Vasco's assistance with the EOI. In the light of this I do not accept that Morgan Stanley viewed Vasco's drafting as being below standard or that Vasco's work on the EOI was of no assistance.
194 On 19 May 2011 Mr Kotak emailed the draft EOI back to Mr Kingsley, Mr Tynan and Mr Zhou with changes and comments marked up.
195 Late on 19 May 2011, Mr Zhou emailed Mr Kotak asking what the discount to net tangible assets was on the last COF raising, and the size of the raise. Mr Zhou said he had tried looking for press releases but did not have any luck.
196 Mr Kotak replied the same evening explaining that the COF raising was at a 40% discount but there would be no press as the raising had not succeeded.
197 Mr Zhou responded by email suggesting that if it hadn't succeeded it couldn't be used as a precedent for a 30% or 35% discount in COF or Chevron.
198 Mr Kotak replied by email the next morning pointing out that the raisings could indeed be used as precedents even though they hadn't been successful because of the fact that OFL took them to market and in the case of Chevron, they raised $3million, which fell short of the minimum target.
199 On 20 May 2011, Mr Zhou emailed Mr Kotak asking about the terms of the BOSI/NAB deal.
200 Mr Kotak replied shortly afterwards by email setting out his understanding of the BOSI/NAB deal with rough numbers leading to an estimate of the amount that BOSI would have to pay to get NAB down to a 40% loan-to-value ratio.
201 Mr Kingsley replied two days later by email stating 'Thanks Deep. This is very interesting'.**
**202 On 23 May 2011, Mr Coulter e-mailed Mr Kingsley asking 'Have you had a chance to review our fee proposal?'.
203 Mr Kingsley replied the next day, 24 May 2011, saying:**
Apologies for the delay in responding. I have all our senior guys in town this week so running ragged. Have not had a chance to review the proposal in detail but I promise I will in time. Need to establish a constructive dialogue with BOSI before I know where I stand on any of this. Appreciate the assistance you guys have provided thus far. Will revert when I come up for air.
204 Mr Coulter replied later that day, 24 May 2011, by e-mail, saying:
We understand your position and acknowledge that our time and contributions are on spec. until the deal goes ahead (dd and then execution). We're confident it will go ahead but we are eternal optimists! Plus, we know the bind BOSI is in. Commonsense however, does not always prevail. Note we're happy that whenever you do get some time to have a quick look just for you to give us an indication our proposal is within the framework you expect.
205 I accept that in Mr Coulter's e-mail of 24 May 2011, where he uses the words 'on spec. until the deal goes ahead', in the context of the overall chain of correspondence and conversations in telephone calls and meetings, that the words meant and were intended to mean that Vasco was speculating on whether the transaction would go ahead or not. In other words, Vasco, recognised that its fee was at risk depending on whether the deal went ahead or not. The words did not mean and were not intended to mean that payment of a fee to Vasco was contingent on whether a particular fee structure had been formally accepted by Morgan Stanley or not.
**206 Mr Coulter and Mr Kotak next met with Mr Kingsley and Mr Tynan at the Vasco office at 459 Collins Street, Melbourne.
207 There was an initial discussion about the management rights of OFL and the legality of acquiring these without a vote of shareholders. There was also discussion about the possibility of shareholders of OFL co-investing in the transaction.
208 Mr Kotak gave evidence that Mr Coutler then asked Mr Kingsley whether the Vasco fee structure and the quantum of that fee was in the ballpark. Mr Kingsley laughed and said, 'Fees? What fees?', to which Mr Coulter repeated the question. Mr Kingsley then said 'Yes'. According to Mr Kotak, Mr Coulter then asked Mr Kingsley whether he would confirm in writing to them the fee structure and the quantum, to which Mr Kingsley responded yes, he would.
209 Mr Coulter gave evidence that after he asked Mr Kingsley, 'Now, our fees, are the quantum and structure in the ballpark?' Mr Kingsley looked away, looked up, giggled and said 'Fees? What fees?' to which Mr Coulter stared at him and repeated 'Our fees, are the quantum and structure in the ballpark'. Mr Coulter's evidence was that Kingsley hesitated and then said 'yes'. Mr Coulter then asked him, 'Will you put that in writing?' to which Kingsley said 'Yes'. Mr Coulter also gave evidence that on the way out, in the corridor, he asked Mr Kingsley 'Will you confirm that by email' to which Mr Kingsley replied 'Yes'.
210 Mr Kingsley's evidence about the fee discussion at this meeting was not far removed from that of Mr Kotak and Mr Coulter. He acknowledged that Mr Coulter had asked him whether he had had an opportunity to review Vasco's fee proposal. Mr Kingsley joked 'What fee proposal?'. He then said that Mr Coulter asked him whether that fee proposal was consistent with their discussions. Mr Kingsley said he said to Mr Coulter that 'Yes, it was consistent with our discussions and the conceptual discussion that we had' but that he needed time to review the proposal in detail.
211 I accept Mr Coulter's account of what was said about Vasco's fees at the 1 June 2011 meeting. I do so because it is consistent with, and indeed necessary to explain, the e-mail that Mr Coulter subsequently sent to Mr Kingsley on 14 June 2011, which is referred to below.**
**212 Mr Kotak telephoned Mr Kingsley on 2 June 2011 to inquire how a dinner meeting the evening before between Mr Kingsley, Mr Michelson (the Orchard CEO) and Mr Kurt Roberts (who was the chairman of Orchard) had gone.
213 Mr Kingsley reported that they were both very receptive to the proposed recapitalisation transaction. Mr Roberts asked that a formal expression of interest be submitted to them.
214 Mr Kingsley then said that he would bring his team in from Sydney the following week and start discussions with the Orchard management and executives. Mr Kotak offered the services of himself and Mr Coulter to participate in these meetings. To this, Mr Kingsley said that he would bring them in as he needed to. Mr Kotak said that he and Mr Coulter were available.**
215 On 14 June 2011 Mr Coulter sent an e-mail to Mr Kingsley which materially read as follows:
Are you sending the offer through to us? Also, further to our discussions last week are you able to confirm by email that our fee proposal is in the ball park if the deal does proceed?
216 Mr Kingsley responded by e-mail the same day attaching a copy of the final EOI, which had been submitted to the Board of OFL on 8 June 2011. His e-mail did not dispute any of the content of Mr Coulter's e-mail dated 14 June 2011. Relevantly, it said:
Have not gone through your proposal just yet. This deal is still a long way from happening. Its on my list, trust me. Let me come back to you when we get traction. Does that work?
217 This exchange is consistent with the discussion that had occurred on 1 June 2011, about whether the Vasco fee proposal was 'in the ballpark'. It suggests that Mr Kingsley indeed accepted that the proposal was within workable parameters for Morgan Stanley but that it had determined to delay any final communication on the issue of fees to Vasco.
**218 Mr Coulter's evidence is that he next spoke with Mr Kingsley when he telephoned Mr Coulter on 21 or 22 June 2011. Mr Kingsley said that Morgan Stanley was considering entering a 'soft stage 1' due diligence process.
219 Mr Coulter offered to undertake this exercise, mentioning in this context that Vasco would do that: 'as we have been and keep working on spec for you.' Mr Kingsley declined the Vasco offer, saying words to the effect that: 'We will get you guys in for hard DD, stage 2 and we will respond in writing to you when we do that, on your fees'.**
**220 Mr Kotak then met with Mr Kingsley and Mr Tynan in Melbourne on 22 June 2011. Mr Coulter did not attend this meeting.
221 Mr Kingsley wanted to give Mr Kotak and update on how Morgan Stanley were progressing with the discussions with Orchard management. He said that everything was tracking well so far, and they (Morgan Stanley) had commenced inspections of some of the assets and examining Orchard's internal financial models and asset models. Mr Tynan also said that they had spoken to Orchard representatives about the discounts that DPF would sell its units in the COF, Chevron and Childcare funds which was part of the Vasco proposal. The discounts discussed were 35 per cent, which was higher than the discounts considered by Vasco. This gave some confidence to Morgan Stanley.
222 Mr Kingsley also said that his team would continue with what he called a 'soft' due diligence exercise, but followed that with words to the effect: 'We will get you in for the hard due diligence'. He said that he would let Mr Coulter and Mr Kotak know when he needed them.
223 Mr Kingsley said that he had worked on a number of transactions of this nature and that he had a good feeling that this transaction would get through. Mr Kotak gave evidence that he then said to Mr Kotak: 'You'll be rewarded out of this.' However, he did not discuss the exact fee structure. Mr Kingsley agreed that he would have said he had a good feeling about this transaction and that it would go through, and agreed this was his state of mind at the time. Although he did not specifically recall saying to Mr Kotak 'You'll get rewarded out of this', he did not deny saying so, and I accept that he in fact said this.
224 Following this meeting on 22 June 2011, Mr Kotak had no further discussions with Mr Kingsley.**
225 On 8 July 2011 Mr Kingsley sent a text message to Mr Coulter in the following terms:
apologies for stating the obvious but really need to stay tight on the confidentiality; reaching a delicate stage. Nonetheless appreciate the help so far. Thanks again, Anthony.
**226 On 10 July 2011, Mr Kingsley was notified by Morgan Stanley that he was being made redundant.
227 On 22 July 2011, Mr Kingsley sent a further text message to Mr Coulter as follows:**
Hey Chris, apologies for the radio silence. Just to let you know, I will be moving on from ms. Will try and call you net week Rgds A.
228 On 24 July 2011, Mr Coulter replied to Mr Kingsley by e-mail. The e-mail contained the following passage:
... In relation to our proposed fees, pursuant to your verbal acknowledgements that the quantum and structure was acceptable and your assurances that you would respond formally upon commencement of due diligence we have not pursued a confirmation in writing. However, given your impending departure we believe it is now opportune and timely to get an acknowledgement in writing from MS. Can you please make the necessary arrangements internally?
229 There was no reply from Morgan Stanley to this e-mail.
Postponed meeting in Early August 2011 and Subsequent Communications
**230 After Mr Kingsley had left Morgan Stanley, Mr Coulter wrote a letter to Mr Tynan to ask about Vasco's fees and the progress of the transaction. Mr Tynan suggested that he meet with Mr Coulter and Mr Kotak at the Morgan Stanley offices in Sydney.
231 Mr Coulter and Mr Kotak flew to Sydney for the meeting. However, Mr Tynan emailed Mr Coulter and Mr Kotak on the morning of their arrival in Sydney, which they read after arriving, to inform them that the meeting had been postponed that day.
232 A further meeting at a later time was also cancelled.
233 Between late August and November, Mr Kotak left telephone messages for Mr Tynan which remained unanswered.
234 Vasco made both formal and informal demands for payment of Morgan Stanley over the following months, but to no avail.**
**235 During 2010 Mr Coulter, Mr Kotak and Vasco worked up a plan to recapitalise OFL and all the Funds, as well as separate plans confined to single Funds being Chevron and the COF.
236 By 2011, the Vasco plan for the recapitalisation of Orchards, although not completely developed in all of its detail, was still sufficiently developed to put the strategy together for a large an investor who had the capital.
237 Between 31 March and 22 July 2011 Mr Coulter, Mr Kotak and Vasco did considerable work on the Orchard recapitalisation transaction for Morgan Stanley, a large body of which was specifically at the request of Mr Kingsley. Included in this body of work was valuable information that Vasco was able to provide to Morgan Stanley that was not known to or available (or readily obtainable) to Morgan Stanley.
238 Morgan Stanley paid no money to either Mr Coulter, Mr Kotak or Vasco for the work they did on the Orchard proposal.
239 Morgan Stanley never provided to Vasco a formal engagement letter as requested by Mr Kotak in his 7 April 2011 email.
240 Never once before 22 July 2011, when Mr Kingsley left Morgan Stanley, did he have any discussion with Mr Coulter of Mr Kotak of Vasco as to whether they were prepared to undertake work for Morgan Stanley on the Orchard recapitalisation project for no remuneration.
241 Mr Kingsley knew that if he had told Mr Coulter, Mr Kotak or Vasco that Morgan Stanley would not remunerate them, they would not have disclosed to him or to Morgan Stanley the details of their proposal to recapitalise Orchard, or done further work on the proposal at the request of Morgan Stanley.
242 Mr Kingsley understood that Mr Coulter, Mr Kotak and Vasco wanted to be paid, amongst other things, a success fee. Both Mr Coulter and Mr Kotak also believed that the work which Vasco had performed up to the date of the email was critical to the conclusion of any successful transaction for the recapitalisation of Orchard undertaken by Morgan Stanley.
243 The presentation by Mr Coulter and Mr Kotak to Mr Kingsley on 31 March 2011 included disclosure of the following key elements of the Vasco Plan:
• the proposal that the BOSI debt could be purchased at a discount;
• The purchase of DPF's interest in the Satellite funds;
• The strategy to convert debt to equity by taking stakes in the COF, Chevron Sydney Healthcare Trust and Childcare
• The availability of discounts being available at two levels; and
• The need to take a controlling interest at the corporate level.
244 The key to doing any transaction to recapitalise Orchard was to remove the BOSI debt, which was the cause of the distress. Accordingly, a critical element in Vasco's proposed deal structure, involved purchasing BOSI's debt at a discount and then converting that debt to equity. The conversion of the BOSI debt to equity could be undertaken in a number of other ways, to provide the outcome that Morgan Stanley, as the new provider of capital, would not simply step into the shoes of BOSI as a major creditor and would avoid becoming another lender at high risk, which was of no interest to it. Rather, it would assume the position of an equity holder, which was of considerable interest to Morgan Stanley.
245 During the presentation by Mr Coulter and Mr Kotak to Mr Kingsley on 31 March 2011 Mr Kingsley also raised the possibility of acquiring the NAB debt at face value.
246 Mr Kingsley wanted the assistance of Mr Coulter, Mr Kotak and Vasco in the project to recapitalise Orchard which they had outlined to him.
247 The opportunity that was disclosed to Mr Kingsley by Mr Coulter, Mr Kotak and Vasco on 31 March 2011 was not simply a general exchange of ideas. It was a strategy presented by Mr Coulter, Mr Kotak and Vasco as to how the recapitalisation of Orchard could be achieved. The strategy presented by Mr Coulter, Mr Kotak and Vasco on 31 March was not something which Morgan Stanley had itself developed for Orchard and was new to it in that respect. The presentation on 31 March was of potential interest to Morgan Stanley as an investment for one of its funds, the MSREF VII Fund.
248 Mr Kingsley knew that Mr Coulter, Mr Kotak and Vasco wanted and expected to be remunerated by a success fee and other fees in return for disclosing their proposal to recapitalise Orchard which they had outlined to him and for progressing the transaction.
249 In the light of this knowledge, Mr Kingsley and his staff made further requests of Vasco for further work to be done on the EOI and other aspects of the proposal, which work was done by Vasco in the expectation of remuneration.
250 The possibility of engaging Vasco as an advisor to do work for Morgan Stanley was discussed at the meeting on 31 March 2011. The discussion included all three types of engagement described in Vasco's email of 7 April 2011, namely: due diligence, success fee and ongoing operational role post completion.
251 At the time Mr Kingsley read the 7 April 2011 email he knew Vasco wanted to be engaged by Morgan Stanley on the basis:
• that it would be paid a success fee if the deal proceeded;
• that there would be an ongoing operational role for Mr Coulter and Mr Kotak post deal completion.
252 Morgan Stanley through Mr Kingsley discussed success fees with Vasco. He said that Morgan Stanley liked to pay such fees, partly 'up-front' in cash and some rolled into the transaction to be paid in due course following a successful outcome.
253 Mr Kingsley demonstrated that he was receptive to success fees being paid by the mechanism he described above.
254 On 30 August 2011 Mr Kotak sent Mr Mitchelson (of Orchard) an email setting out recent real estate funds management acquisitions. Mr Mitchelson was looking for other possible bidders for the Orchard Platform at the time. The email evidences that there was a market and consequently other potentially valuable opportunities lost to Vasco, as a result of Morgan Stanley keeping Vasco occupied with its own bid from 31 March 2011 until June 2011.
255 Despite several requests from Vasco during this period for payment terms to be agreed, no concluded agreement as to remuneration was ever reached between Vasco and Morgan Stanley.
256 In June 2011, Morgan Stanley's requests of Vasco ceased and Vasco had no further involvement in the recapitalisation of OFL.
257 In November 2011, Morgan Stanley successfully concluded the deal to recapitalise OFL. It refused to pay Vasco and denies any liability to pay.**
**258 Vasco's case is that, at Morgan Stanley's request, Vasco presented a transaction structure to Morgan Stanley that Vasco had previously prepared. Vasco did so expressly on the basis that the structure was confidential and it expected to be paid a success fee by Morgan Stanley if Morgan Stanley concluded such a transaction. Morgan Stanley requested considerable further work and information from Vasco, all the while knowing that Vasco expected to be paid and not once telling Vasco that the success fee Vasco expected would not be paid. Vasco carried out the further work and provided the information Morgan Stanley had requested.
259 It was put that the transaction structuring and the work and information provided by Vasco were integral to the success of the transaction. It was submitted that, although the transaction ultimately concluded differed slightly from the plan advanced by Vasco, it did not differ markedly from that originally pitched by Vasco. The plaintiff says that, in any event, the differences were not material to the question of whether Vasco is entitled to the relief sought.
260 Vasco claims what amounts to a success fee, both as compensation for its claim for breach of confidence and its claim in quantum meruit. The claimed success fee is assessed at between 0.5% and 1.0% of the aggregate purchase price of Orchard, being $207,450,000, in other words, a fee of between $1,037,250 and $2,074,500.**
261 Morgan Stanley commences its defence with the self-evident proposition that:
[A]ny successful non-contentious transaction requires there to be a meeting of minds between the putative counterparties. In any non-contentious transaction, each putative counterparty approaches discussion by reference to what it perceives to be in its best interests. In these sorts of transactions, that not only includes whether the party is prepared to engage in discussion with the other at all, but also the terms upon which it is prepared to engage. Self-evidently, for commercial parties, each will have its own idea as to what best suits its own commercial interests. That often includes matters that are private to itself.
**262 Morgan Stanley submits that in this case, there were a number of discrete stakeholders that required to be accommodated on their own terms to achieve the transaction that was ultimately concluded. The principal stakeholders were:
• The Morgan Stanley entity that entered the transaction, MSREF7, needed to consider its own perceptions of asset and business profiles, its willingness to accept risks in execution and exit, and its own return criteria, amongst other considerations.
• BOSI, which was a substantial lender, had debt interests in various entities in the Orchard structure. BOSI had a keen interest in the recovery of its debt on the best terms it could, and needed to consider transactions it could undertake to advance that position.
• The NAB, was also a substantial lender to many of the entities in the Orchard structure. It had an interest in ensuring that it maximised its recovery on the best terms it could achieve.
• The shareholders of OFL, the public company were, also major stakeholders in the fortunes of the Orchard group.
• The unitholders in the underlying funds were likewise major stakeholders. This group were badly affected by the GFC and the consequent exposure to the financial stress of the Funds. Their immediate interest was to reduce the financial stress of the Funds to reinstate returns and unit values.
• Some of the shareholders and unitholders were organised in an influential block controlled by an organisation known as PIS.
• The boards of both OFL and Orchard Capital had statutory and fiduciary obligations to act in the interests of their companies.
263 I accept that there was no evidence put forward by Vasco to indicate that it had close relations with any of these parties.
264 It was submitted on behalf of Morgan Stanley that during the course of 2011 the form of the transaction changed markedly as positions developed and were disclosed. Morgan Stanley pointed to the fact that it took MSAL seven months and considerable work to negotiate the transaction that was ultimately concluded following the last piece of work undertaken by Vasco. It relied on examples where aspects of the transaction changed from time to time to accommodate developing and altered positions adopted by the various stakeholders. Mr Coulter himself described the transaction as having 'many moving parts' as it was being developed.
265 Morgan Stanley submits that critical to Vasco's case on breach of confidential information is the concept of a plan to recapitalise the Orchard platform. It says that the 'Plan' said to have been prepared by Vasco is expressly defined in the statement of claim. It notes that this was a 'plan':**
**266 Morgan Stanley submits that the Vasco 'Plan' to recapitalise the Orchard platform, as it was discussed between Vasco and Morgan Stanley, was prepared at such a high level of abstraction that the necessary quality of confidence was missing. This was reinforced by the fact that there needed to be, and was in fact, substantial input from Morgan Stanley itself in developing, negotiating and ultimately implementing the recapitalisation of Orchard for the transaction to succeed.
267 It says further that Vasco did not express opposition to Morgan Stanley itself dealing with the relevant stakeholders, in particular with the relevant representatives of the board of Orchard at the time that the expression of interest from Morgan Stanley was sent to the board. It submitted that from that point the relevant information (if ever it was capable of protection as confidential information) was no longer capable of protection. Vasco, by its conduct, in effect acquiesced and consented to Morgan Stanley using the information in the way it did. In these circumstances, Morgan Stanley could not be said to have abused its confidence, if it ever arose in the first place.
268 As to Vasco's quantum meruit case, Morgan Stanley placed emphasis on the particular context in which the work done, in this case in a market of investment banking. In this market, it submitted that parties regularly pitch ideas and continue to work up proposals to encourage those with capital to invest so as to realise the concept. They do this until a contract of engagement is entered into between the concept provider and the capital provider. The form of an engagement, when entered into, specifies the work to be performed and the basis of remuneration for that work.
269 Morgan Stanley says that Vasco, in undertaking its work on the recapitalisation scheme of Orchard was no more than a 'risk taker' operating within the usual and expected parameters of the investment banking market. Consistent with usual market practice in this industry, Vasco carried out whatever work it had undertaken on the basis that it was assuming the risk of securing its desired engagement. Morgan Stanley submitted that Vasco took this risk for the purposes of positioning itself to obtain a remunerative engagement. In other words, the work undertaken by Vasco was of a character commonly undertaken in the investment banking industry by advisory firms on a speculative basis whilst trying to position themselves for an income earning role if a transaction proceeds. Having not obtained a contract of engagement from Morgan Stanley, it was submitted that Morgan Stanley was not unjustly enriched by taking any advantage of Vasco's work and in this particular context it was not unjust for Vasco not to be paid for its work. Morgan Stanley submitted that this analysis was supported by the evidence.**
270 In Darvall McCutcheon v H K Frost Holdings Pty Ltd[1] the Court of Appeal considered the subject of an idea in the context of a claim for breach of confidence. Chernov JA, with whom Ormiston and Callaway JJA agreed, noted that there are two, seemingly alternative, bases on which equity grants, in appropriate circumstances, remedies for breach of confidential information where the subject of the confidence is an idea (which is of a confidence and which was communicated in confidence). His Honour said:[2]
One is that equity acts to protect the plaintiff's right to have the confidence respected, more particularly, to have the information kept confidential and not misused - see for example, Boardman v Phipps; Talbot v General Television Corporation Pty Ltd Moorgate Tobacco Co Ltd v Philip Morris Ltd (No.2); Smith Kline & French Laboratories (Aust) Limited & Ors v Secretary, Department of Community Services and Health; F. Gurry 'Breach of Confidence'. The other basis is that equity regards information as akin to property and grants or withholds relief accordingly - see for example, Talbot; Fraser v. Thames Television Ltd. (citations omitted)
271 In Deta Nominees v Viscount Plastic Products Fullagar J suggested that the two versions to which reference has been made were but subdivisions of an equitable cause of action for breach of confidence. Which of the two bases becomes the foundation for the relief claimed will depend on the circumstances of the case. His Honour said:[3]
Here, in equity, there are two sub-divisions, and both are compendiously called cases of confidence or `breach of confidence': (a) Cases where equity will intervene to protect what it regards as the property of a person; (b) Cases where the analogy of property is not available, but where the circumstances are such that the conscience of a recipient or possessor of information is so affected as to make it `unconscionable' on his part to publish or use the information; here equity will intervene on a basis analogous to the truly contractual situation in which the common law intervenes.
**272 In the present case the plaintiff did not advance its case on the basis that relief was sought by it on the basis that the analogy of property was not available. It did not put its case on the basis that the circumstances were such that the conscience of the recipient or possessor of information, namely Morgan Stanley, was so affected as to make it 'unconscionable' on its part to publish or use the information in an unauthorised fashion. Rather, Vasco appeared to proceed on the basis that the commercial plan in question was akin to property and that it was entitled to relief on that basis.
273 The elements of the equitable claim for breach of confidence in this situation, which involves the plaintiff seeking protection for a commercial idea, comprise:[4]**
Sufficient Development of the Commercial Idea and Identification of the Idea
274 In order to attract the protection of equity as confidential information, the idea needs to be 'sufficiently developed'.[9] However, the extent to which this requirement calls for detail, or the extent to which the concept may require further or even extensive development before it becomes a reality, will depend upon the circumstances and the nature of the information and the context in which the information was provided. This is well illustrated in H.K. Frost Holdings v Darvell McCutcheon[10] where Finn J described '[t]his variable requirement of specificity or development'[11] in the following terms:
In breach of confidence cases where protection is sought for an idea, there has been an understandable insistence that the idea itself be 'sufficiently developed.' So in Fraser v Thames Television Ltd [1984] 1 QB 44 in considering an idea for a television programme (which in its pirated form was broadcast as 'Rock Follies'), Hirst J observed (at 65-66):
'I accept that to be capable of protection the idea must be sufficiently developed, so that it would be seen to be a concept which has at least some attractiveness for a television programme and which is capable of being realised as an actuality: see per Harris J in Talbot v General Television Corporation Pty. Ltd [1980] VicRp 26; [1981] RPC 1, 9, lines 20-22. But I do not think this requirement necessitates in every case a full synopsis. In some cases the nature of the idea may require extensive development of this kind in order to meet the criteria. But in others the criteria may be met by a short unelaborated statement of an idea.'
275 In practice, the requirement for sufficient development of the concept, also gives rise to the need for precise identification of the confidential information in question.[12] It is necessary to identify with specificity, and not merely in global terms,[13] that which is said to be the confidential information relied upon to found the action.
277 There is no breach of confidence in using or imparting information which is already common knowledge. However, this must not be taken too far, as observed in Coco v A N Clark (Engineers) Ltd:[16]**
Something that has been constructed solely from materials in the public domain may possess the necessary quality of confidentiality: for something new and confidential may have been brought into being by the application of the skill and ingenuity of the human brain. Novelty depends on the thing itself, and not upon the quality of its constituent parts. ... whether it is described as originality or novelty or ingenuity or otherwise, I think there must be some product of the human brain which suffices to confer a confidential nature upon the information.
**278 The product of work performed using information or things which are publicly available or within the public knowledge, will have the quality of confidence if it is produced by somebody who applies intellectual activity to the material to produce the result.[17]
279 As the Court of Appeal put it in Saltman Engineering Co Ltd v Campbell Engineering Co Ltd:[18]**
The information, to be confidential, must ... apart from contract, have the necessary quality of confidence about it, namely, it must not be something which is public property and public knowledge. On the other hand, it is perfectly possible to have a confidential document, be it a formula, a plan, a sketch, or something of that kind, which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process.
**280 Novelty has sometimes been treated as an element which is necessary to establish the quality of confidence.[19] However, the degree to which an idea produced by the human brain is elevated beyond information or things which are publicly available or within the public knowledge to achieve the quality of novelty need not be on a high scale. Nor does the idea have to be particularly sophisticated. For example, in Darvall McCutcheon v H K Frost Holdings Pty Ltd,[20] confidentiality was held to subsist in the idea of the creation and exhibition of a permanent collection of Australian art and the production of an associated calendar to commemorate the Australia bicentenary as part of a promotional venture by an Australian bank. The idea devised by the plaintiff and later developed during negotiations with the Bank had two component parts - the collection and the calendar - it was a composite idea. However, the concept went beyond the concept of a corporate sponsored art collection to celebrate the Australian bicentenary, in itself a well-known public event. The idea also involved the commissioning of particular categories of Australian artists to produce artwork that highlighted Australian life that would be historically connected with the bicentenary. Further, it was an essential part of the idea that specially designed calendars would be produced for sale to the public. Such calendars had unique features which had been developed by the respondent. The Court of Appeal[21] held that, in the circumstances, it was open to the trial Judge to conclude that, on the evidence before him, the idea in question was sufficiently developed and had sufficient uniqueness about it to be capable of being protected by equity.
281 Ideas which may give rise to commercial transactions may also fall into the category of transactions which are sufficiently novel, in the sense that they are the product of intellectual input applied to a unique commercial structure using commonplace methods or employing arrangements in a unique combination, so as to attract the necessary quality of confidence.[22]
282 The fact that changes to a plaintiff's confidential concept are made at the behest of the defendant does not prevent equity from giving relief where the confidential concept is subsequently misused by the defendant.[23] However, it was noted by Chernov JA in Darvall McCutcheon v H K Frost Holdings Pty Ltd[24] that, unlike the present case, the mere fact that some changes were made to the proposal there in question at the behest of the recipient Bank was not relevant because the idea was capable of being implemented in its original form.
283 Nevertheless, equity's protection of confidential information is not lost where that information becomes mixed or used together with other, non-confidential information.[25]
284 Equity's requirement of confidentiality or secrecy is not strict and a loss of secrecy will not necessarily be fatal to the cause of action. In Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW, Bowen CJ in Eq said that:[26]**
... even though secrecy may be imperfect in relation to communication which is given in confidence, that communication may still be protected by the principles of confidentiality.
285 To like effect, in Franchi v Franchi, Cross J said:[27]
It must be a question of degree depending on the particular case, but if relative secrecy remains, the plaintiff can still succeed.
Circumstances importing an obligation of confidentiality
**286 The cause of action also requires circumstances which import an obligation of confidentiality. This may arise either through agreement or objective appreciation where a reasonable person in the position of the recipient would have recognised that the information was given to him or her in confidence.[28]
287 This element springs from the fact that the cause of action is based ultimately on conscience.[29] Where the information is divulged and the creator does not identify restrictions as to use,[30] the Court will not intervene to assist the creator unless it can be shown that the recipient should have known the limits on use.
288 Megarry J in Coco v A N Clark (Engineers) Ltd said:[31]**
In particular, where information of commercial or industrial value is given on a business-like basis and with some avowed common object in mind ... I would regard the recipient as carrying a heavy burden if he seeks to repel a contention that he was bound by an obligation of confidence.
289 Similarly, in Schering Chemicals Ltd v Falkman Ltd, Shaw LJ held that:[32]
[T]he communication in a commercial context of information which at the time is regarded by the giver and recognised by the recipient as confidential and the nature of which has a material connection with the commercial interests of the party confiding that information, imposes on the recipient a fiduciary obligation to maintain that confidence thereafter unless the giver consents to relax it.
**290 Unauthorised use of confidential information is a further element of the cause of action. This does not necessarily mean that the confider must not use the information except for the confider's limited purpose - the test is whether the confidence has been abused in the sense that unconscientious use has been made of the information[33] or taken unfair advantage of the provision of the confidential information.[34]
292 As Roxburgh J said in Terrapin Ltd v Builders' Supply Co (Hayes) Ltd:[37]**
[A] person who has obtained information in confidence is not allowed to use it as a spring-board for activities detrimental to the person who made the confidential communication, and spring-board it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public.
293 In Seager v Copydex Ltd, Lord Denning MR said:[38]
The law on this subject ... depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent. ... When the information is mixed, being partly public and partly private, then the recipient must take special care to use only the material which is in the public domain. He should go to the public source and get it: or, at any rate, not be in a better position that if he had gone to the public source. He should not get a start over others by using the information which he received in confidence. At any rate, he should not get a start without paying for it.
295 As equitable compensation and an account of profits are inconsistent remedies, a plaintiff cannot enjoy both but must elect between the two.[41]
296 A plaintiff entitled to an election is not usually required to make an election until the moment of judgment.[42]
297 Such a plaintiff is entitled to make an informed election between the remedies. In Island Records Ltd v Tring International, Lightman J said:[43]**
[A] party should in general not be required to elect or be found to have elected between remedies unless and until he is able to make an informed choice. A right of election, if it is to be meaningful and not a mere gamble, must embrace the right to readily available information as to his likely entitlement in case of both the two alternative remedies. It is quite unreasonable to require the plaintiff to speculate totally in the dark as to whether or not the sum recoverable by way of damages will exceed that recoverable under an account of profits.
**298 This principle has since been affirmed in a number of cases.[44]
The end purpose of an award of damages is, though, to put the innocent party in the position it would have been in had the misuse of the confidential information not occurred: see Dowson & Mason Ltd v Potter [1986] 2 All ER 418; and see generally, Dean, The Law of Trade Secrets, 1990, 316 ff; Stuckey-Clarke, 'Damages' for Breaches of Purely Equitable Rights: The Breach of Confidence Example' in Finn (ed), Essays on Damages, 1992. And so, depending on the circumstances, damages may be assessed on the bases, variously, of a loss of profits: cf Dowson & Mason Ltd v Potter, above; of a fair user charge: cf Interfirm Comparison (Australia) Ltd v Law Society of New South Wales, above; of the market value of the information: cf Seagar v Copydex Ltd (No 2) [1969] 2 All ER 415 [718]; of a consultant's fee: Seagar v Copydex Ltd (No 2).
300 Because it is relevant to the way in which Vasco advanced its case on damages for the breach of confidential information based on a consultant's fee for the preparation of the information in question, specific reference is made to Seagar v Copydex Ltd (No 2).[47] Lord Denning MR, with whom Salmon and Winn LJJ agreed, said:
The value of the confidential information depends on the nature of it. If there was nothing very special about it, that is, if it involved no particular inventive step but was the sort of information which could be obtained by employing any competent consultant, then the value of it was the fee which a consultant would charge for it; because in that case the defendant company, by taking the information would only have saved themselves the time and trouble of employing a consultant.
But on the other hand, if the information was something special, as, for instance, if it involved an inventive step or something so unusual that it could not be obtained by just going to a consultant, then the value of it is much higher. It is not merely a consultant's fee, but the price which a willing buyer - desirous of obtaining it- would pay for it. It is the value as between a willing seller and a willing buyer.
**301 Like any equitable remedy, compensation in these circumstances will be fashioned to meet the needs of the case.[48]
302 Alternatively it may be appropriate to compensate the plaintiff's loss by reference to the defendant's gain through the vehicle of an account of profits.[49]
303 Although an account of profits, like other equitable remedies, is said to be discretionary, it is granted or withheld according to settled principles.[50] It may be inappropriate and inequitable to compel the defendant to account for the whole of the profit derived by its breach of equitable duty. Where a significant proportion of the profits have been generated by the defendant's skill, efforts, property, resources and capital, it may be appropriate to allow the defendant a proportion of the profits, depending on the circumstances. Although a defendant's liability to account is not governed by the doctrine of unjust enrichment, the liability of a defendant to account for profits should not be transformed into a vehicle for the unjust enrichment of the plaintiff. But it is for the defendant to establish that it would be inequitable to order an account of the entire profits.[51]**
Identification of the Information and Sufficient Development of the Idea
**304 Vasco has pleaded, opened and run its case on the basis that it sought protection for a plan for the acquisition, recapitalisation and restructure of OFL, the Responsible Entity and some of the Funds (the 'Plan or the 'Vasco Plan').
305 The plaintiff does not contend that everything contained in the discussions of 25 and 31 March 2011 and 7 April 2011 or the documents of 7 April, 11 April 2011, 13 April and 18 April 2011 was the Plan comprising the confidential information warranting protection.
306 The Plan relied upon by the plaintiff comprises those elements that combined to form the complex recapitalisation strategy for Orchard. An A3 chart, produced in evidence, describes the package of elements which, when combined, makes up the Vasco Plan and gives it the commercial value which was, in large part, subsequently exploited by the defendant Morgan Stanley.
307 The Vasco Plan, as it was first introduced to Morgan Stanley, was a sufficiently complete synopsis of the concept to attract the protection of confidentiality. It was attractive to Morgan Stanley as a concept which was capable of being further developed and realised as an actuality.
308 It is accepted that there were discussions around the Vasco Plan, and as it progressed to finality, and that the Plan was refined to include some suggestions which emanated from Morgan Stanley and to include detailed workings and calculations as they were negotiated and finalised. I am also satisfied that some aspects of the transaction changed or were excluded as it moved through negotiation to finality through the various stakeholders.
309 However, as earlier observed, the fact that changes to a plaintiff's confidential concept are made at the behest of the defendant does not prevent equity from giving relief where the confidential concept is subsequently misused by the defendant.[52]
310 This is a case where a unique combination of ideas, which may have given rise to a future commercial transaction, in combination were sufficiently novel, in the sense that they were the product of intellectual input applied to a particular commercial structure using commonplace methods, so as to attract the necessary quality of confidence.[53]
311 As such, I am satisfied that the idea contained in the Vasco Plan was sufficiently developed to warrant protection in equity.**
Whether the Information inherently had the Quality of Confidence
312 I am satisfied that the Vasco Plan was confidential in that it was possessed of the inherent quality of confidence. It was developed by Vasco and was not communicated to anyone else. Further, the inherent confidentiality of the Vasco Plan can be inferred from the following facts:
(a) no other person had developed or advanced a holistic approach for the recapitalisation of the Orchard platform;
(b) Morgan Stanley had previously looked at the Orchard platform but had not applied the elements of the Vasco Plan to its considerations. It was not aware of the Vasco Plan prior to 31 March 2011 meeting; and
(c) Morgan Stanley also considered the Vasco Plan confidential when circulating the second draft of the EOI. It was plainly confidential in the market, as potentially relevant to the target, its bankers, its shareholders and unit holders.
Importation of the Obligation of Confidence by the Circumstances of its Disclosure to Morgan Stanley
**313 The circumstances described by Mr Kingsley make it plain that the Vasco Plan was disclosed to Morgan Stanley in circumstances which imported an obligation of confidence.
314 Mr Kingsley knew when he received the email of 25 March 2011 and the standard Vasco non-disclosure agreement that the opportunities that Vasco was intending to raise were sought to be covered by the non-disclosure agreement. As from 25 March 2011, Mr Kingsley knew that Mr Coulter, Mr Kotak and Vasco considered the project to recapitalise Orchard which they had outlined to him was confidential.
315 In order to learn about the Vasco Plan Mr Kingsley told Mr Coulter and Mr Kotak at the meeting of 31 March 2011 that 'Morgan Stanley is a firm of solid reputation' and that 'Morgan Stanley is not in the business of breaching confidentiality agreements' and that Morgan Stanley was 'not in the business of stealing ideas' and promised that he would maintain confidentiality. Mr Kingsley at the meeting of 31 March 2011 agreed with Mr Coulter Mr Kotak and Vasco that he would maintain confidentiality, not just in relation to the target but the whole of the opportunity.
316 The circumstances are such that a reasonable person in the position of Morgan Stanley, the recipient, would have recognised that the information was imparted to it in confidence. Indeed, the circumstances do not lend themselves to any other conclusion.**
Whether the Defendant Breached the Obligation of Confidence
**317 Unauthorised use of confidential information is just as much a breach of confidence as unauthorised disclosure.
318 I am satisfied that Morgan Stanley had no permission or consent of Vasco to use its Plan without paying Vasco on a basis agreed to by it, which in the circumstances, never eventuated.
319 The A3 chart, which has already been referred to and which was produced in evidence, describes the package of elements which were described in the Vasco presentation to Morgan Stanley of 7 April 2011. In large part, these elements were used by Morgan Stanley as a strategy to negotiate and implement its investment in the Orchard platform.
320 I am satisfied that the principal elements of Vasco's Plan were used by Morgan Stanley as the starting point for the ultimate transaction for the Orchard recapitalisation as it was ultimately consummated as a working transaction. Indeed, most of the elements were contained in the final transaction. The substantial elements of the Vasco Plan which found their way into the final transaction are described above. The Vasco Plan was the catalyst which interested Morgan Stanley in the first place. It was the Plan which motivated Morgan Stanley to actively seek the input of Vasco in building a transaction which was advanced to the target, Orchard, in the form of an expression of interest, which in turn provided the fundamental foundation for the settled transaction.
321 By using the Vasco Plan in this way, without payment to Vasco, Morgan Stanley made unauthorised use of Vasco's confidential information.
322 I am not satisfied that Vasco acquiesced or consented to Morgan Stanley using its confidential information in the way it did without agreeing to a reasonable level of remuneration with Vasco. Mr Coulter and Mr Kotak pressed Morgan Stanley for a fee arrangement to be put in place after the departure of Mr Kingsley in July 2011, but to no avail. The various representations made by Vasco which followed were ignored.
323 Prior to that time, Mr Coulter and Mr Kotak had a legitimate expectation that Vasco would be paid for its information and for its work, and that Morgan Staley would agree to a reasonable level of remuneration. This expectation was generated by the conduct of Morgan Stanley principally through Mr Kingsley.
324 Vasco is not to be deprived of any remedy to which it may otherwise be entitled for misuse of it confidential information, by Morgan Stanley imparting the information to third parties without Vasco's knowledge. Using Vasco's confidential information in this way, without agreeing to reasonable remuneration for it, was in all the circumstances a misuse of that information**
**325 Like any equitable remedy, in a case like the present involving a breach of the obligation of confidence, the remedy will be fashioned to meet the needs of the case.
326 If the Plaintiff elects to seek a remedy on the basis of equitable compensation, I would take into account the nature of the confidential information. In this regard, I am satisfied that the confidential information was something special, in that it involved the application of specialised knowledge to a unique set of commercial circumstances. The creation of the confidential information involved inventive steps and the application of those inventive steps to a commercial enterprise which was unusual and was distressed in unusual circumstances. The confidential information could not be obtained by simply going to a consultant in the ordinary course. Accordingly, the value of the confidential information is much greater that a fee which a consultant, in the usual course of business, could charge for it.
327 I am satisfied that the equitable compensation payable should be assessed, as far as it is possible to do so on the evidence, as the price which a willing buyer, who is desirous of obtaining the information, would pay for it. It is the value established as between a willing seller and a willing buyer.
328 In this case however, if the Plaintiff elects to seek damages in the nature of equitable compensation, the evidence called so far does not support such an award.
329 The Plaintiff called as an expert on the question of quantum Mr Jonathan Buckley. Mr Buckley was a corporate adviser in funds management and securities, with more than 25 years' experience in Australia and overseas. His expertise in the corporate finance sector generally was not challenged.
330 However, Mr Buckley did not assess the value of Vasco's Plan as confidential information. Rather, he confined himself to a quantum meruit assessment of the services as a whole provided by Vasco to Morgan Stanley between 25 March and 22 June 2011, including the work that went into the drafting of the expression of interest. Although this included presentation of Vasco's Plan, Mr Buckley did not provide any opinion as to the value of the confidential information comprised in the Plan itself. Nor did he attempt to separate out the value of the confidential information comprised in the Vasco Plan from the other services it provided to Morgan Stanley. Mr Buckley did not evaluate the value of the Vasco Plan per se. Rather, he regarded the Plan as the foundation for the idea which, with further work, moved through a more detailed structuring and evaluation to ultimately result in the expression of interest.
331 Accordingly, Vasco has not made out an entitlement to equitable compensation for the misuse of the confidential information.
332 However, Vasco seeks two alternative remedies for breach of confidential information, as follows:**
**333 In the present case, on the assumption that a breach of confidential information has been made out, I am not satisfied that Vasco ought to be permitted to make an election as to whether to proceed to claim an account of profits prior to the entry of judgment.
334 The difficulties in establishing the necessary causal link between the misuse of the confidential information and any profits derived by that conduct in my opinion are insurmountable given that the confidential information was so entwined with the extensive development work undertaken by Morgan Stanley itself to consummate the ultimate transaction. No evidence has been called by Vasco which directly addresses this issue.
335 Accordingly, I will not permit Vasco to exercise any election to seek an account of profits because no basis has been demonstrated on the evidence to establish that such a claim is viable.**
336 It is common ground in these proceedings that there was no valid and subsisting contract between Vasco and Morgan Stanley. The claim is made by Vasco on a quantum meruit basis.
338 Vasco's claim under this head is a claim in restitution arising out of services performed.
339 The law may impose an obligation to make restitution on a quantum meruit basis, under what I will call the first class of case, where the plaintiff proves:**
**340 A second class of case falling under the umbrella of a claim in quantum meruit is the long-established and well-recognised category of cases constituted by claims for work and labour done or money paid at the request of another.
341 In both classes of case, the law imposes an obligation independent of contract to pay a fair and reasonable sum for the goods or services, founded on the principles of restitution for unjust enrichment.
342 A third class of case giving rise to a claim described as quantum meruit is where goods or services are provided under an existing and enforceable contract which contains an express or implied term to pay a fair and reasonable sum for them, but such sum is not quantified. The action is directed to determining the fair and reasonable sum payable.
343 The claim in the present case falls into the first class of quantum meruit claims, although given the findings as to work done by Vasco at the request of Morgan Stanley, the claim may equally fall into the second class of case.
344 Under the first (and indeed the second) class of case, there is no requirement that a 'benefit' for the purpose of this rule of restitution in a claim for payment for services must be an economic benefit. Nor is there a requirement that the provider of the services show that any benefit has arisen as a direct consequence of a particular service rendered. In a claim based on restitution for the benefit of services provided, the question of whether the services constitute a benefit must be considered from the perspective of the recipient, and it is the services themselves which fall to be considered, not the end product of those services.
345 The cause of action seeking relief in quantum meruit in the first class of case (cf. the second class of case) does not call for specific proof of the making of an express or implied request by the recipient of the goods or services. Rather, the making of a request, which is a common factual component in these cases, may provide evidence of a benefit conferred on a recipient. It may also provide evidence of the acceptance of the services that were requested. Further, work done in conformity with a request will in most cases sufficiently satisfy the requirement, stemming from principals of unjust enrichment, that a recipient should not unjustly benefit from the services provided without paying reasonable compensation for them.
346 The provider of the services in the first class of case must prove that the services were not provided as a gift, or on the basis that payment should not be made unless a pre-condition has been met and that condition remains unfulfilled.
347 The court is not concerned with the actual state of mind of the parties when considering whether payment ought to have been contemplated in the first class of case. The appropriate enquiry is whether the recipient of the services, as a reasonable person, should have realised that a person in the position of the provider of the services would expect to be paid for them. Where the services are provided pursuant to a request made in a normal commercial relationship with a person whose business it is to provide those services for reward, this requirement will usually be satisfied.
348 The circumstances which may satisfy the element of injustice sufficient to impose an obligation under the first class of case to make fair and just restitution will vary from case to case. In Angelopoulos v Sabatino,[58] Doyle CJ noted nine factors which were held in that case to give the acceptance of the relevant services the necessary character to support the claim. But these are by no means definitive or exhaustive. Some elements or variants thereof may appear in some cases which justify relief, others may not.**
**349 Fundamentally, an action on quantum meruit, such as that brought by Vasco, rests not on any implied contract, but on a claim to restitution based on unjust enrichment. Such a claim arises from the benefits accruing to a defendant as a result of the plaintiff's performance of services which were requested and accepted by the defendant, but not paid for.
The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.
**351 Claims in restitution for unjust enrichment are not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery depends on the existence of a qualifying or vitiating factor falling into some particular category.[62]
**353 Morgan Stanley further submitted that only by establishing the three basic elements of 'benefit', 'at Vasco's expense' and 'injustice' would Vasco establish a 'prima facie' claim to restitution.[65]
354 However, an analysis, framed exclusively as a cause of action in unjust enrichment terms, is misplaced in this case. A claim for quantum meruit is a free standing claim arising in specific circumstances, while unjust enrichment has been identified in Australian law as a legal concept unifying a variety of distinct categories of case.[66] It is not identified as a principle which in itself can provide a sufficient basis for direct application in particular cases, however compelling it may be as a theoretical justification for the law to operate to provide restitution in response to particular indicia.
355 As Deane J said in Pavey,[67] what the recognition of the unifying concept of unjust enrichment does is to assist 'in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case.
356 The factors identified by Morgan Stanley, which describe characteristics of unjust enrichment, may inform a determination to grant or withhold relief by way of restitution under a cause of action based on quantum meruit, but they do not constitute the cause of action. In this case, these matters will be weighed in considering the third limb of the quantum meruit cause of action falling within the first class of case, discussed above.[68]
357 Vasco's claim in quantum meruit presents neither a sufficiently new factual matrix nor falls into a developing category of case requiring the Court to undertake an analysis of the kind proposed by Morgan Stanley.
358 While quantum meruit may derive its underlying theoretical justification from the concept of unjust enrichment, such a claim does not require a plaintiff to identify and prove the specific nature of the benefit and that the recipient has been enriched thereby, or any corresponding dis-benefit to the plaintiff, or to found its claim purely upon an 'unjust factor'. Quantum meruit falls squarely into the categories of claim where the law has recognised an obligation to make payment when certain well-defined circumstances arise. These well-defined circumstances have been set out above.**
Assessment of Restitutionary Sum on quantum meruit
359 When considering a quantum meruit claim, the Court's task is not to assess damages for breach of contract, but to ascertain what is fair and reasonable compensation for the benefit of the services performed, requested and accepted actually or constructively by the recipient.[69] In assessing the appropriate quantum of restitution in a quantum meruit claim, the principles gleaned from the cases are:
**360 By analogy, commercial negotiations towards a contract, which has not been concluded may also provide a piece of evidence (albeit usually of lesser weight than the situation where a contract has actually been entered into), which may show what value the parties attributed - at a particular time - to the work which the claimant was proposing to perform. But once again such evidence would need to be assessed bearing in mind that the price negotiated towards an incomplete contract would be considered prospectively, based on the parties' expectations of the future course of events. A quantum meruit, as has been stated, is assessed with the benefit of hindsight on the basis of the events which transpired.
361 The facts of the Brenner case also illustrate the position that 'where the services are of such [a] kind that it is difficult or impossible to itemise [them] precisely ... the court is entitled to make a global assessment or to reduce or increase the remuneration [that] can be proved with ... certainty in order to reflect fair and reasonable value'.[86] The Court must do the best it can with the evidence, despite in some cases 'the scanty material' which may be available.[87]
First, the task of the court is to make an assessment of fair and reasonable compensation for the benefit of the services performed by a plaintiff and accepted by a defendant.
Secondly, the court is not engaged in a task of compensating for loss thus the actual cost or loss to the plaintiff in providing the subject services is not a primary consideration.
Thirdly, where the subject services were provided in an industry where it is customary to pay for services on a commission basis, the court may consider a reasonable commission and apply it as a measure of restitution subject to any appropriate adjustment.[91]
364 The Andrew Shelton case was one where a fee based upon a percentage of the final contract price for the transaction was considered to be appropriate by the Court, but, it should be noted, in circumstances where the provider of the services was instrumental in facilitating the transaction in question to a successful conclusion.[92]
**365 Given that there was no binding or enforceable contract between Vasco and Morgan Stanley for the provision of its services, the question is whether Morgan Stanley has an obligation, independent of contract, to pay a fair and reasonable sum to Vasco for the services it provided and the documentation it prepared, arising from its claim in quantum meruit. I find on the facts of this case that there is such an obligation.
366 The gist of Vasco's claim made under the first class of case in quantum meruit is that Morgan Stanley actually or constructively accepted the benefit of Vasco's services, when it should have realised that Vasco expected to be paid for them and where it would be unjust for it do so without making restitution to Vasco.**
Actual or Constructive Acceptance of Vasco's Services
**367 A relevant factor in determining whether there was acceptance is whether Morgan Stanley requested Vasco's services. In this case I am satisfied that Morgan Stanley made, as I have found, various requests of Vasco to perform services between 25 March and 22 June 2011. This provides evidentiary support for a finding that Morgan Stanley accepted the services it provided for the purposes of satisfying this element of the first class of case in quantum meruit. It also evidences the making of requests for work to be done for the purposes of the second class of case in quantum meruit.
368 Further, the very fact that requests were made by Morgan Stanley to Vasco for provision of the documentation it prepared, and the services it performed, lends weight to the conclusion that the documentation and the services were of benefit to Morgan Stanley.
369 In the factual context of this case, I find that Morgan Stanley accepted the benefit of the services performed by Vasco.**
**Whether Morgan Stanley should have realised that Vasco Expected to be Paid for its Services
370 In this case I am satisfied that Vasco's services were provided to Morgan Stanley pursuant to requests made in a normal commercial relationship, and that Vasco was a company whose business it is to provide those services for reward.
371 Further, the services were provided by Vasco were pursuant to a requests accompanied by discussions with Morgan Stanley, namely with Mr Kingsley, as to the mode of payment. The discussions included discussion about payment of a success fee to Vasco.
372 In the circumstances, the reasonable expectation of Vasco was that it would be paid by way of success fee in the event that the transaction were to be successfully concluded, and this was communicated to Morgan Stanley. The work done in respect of the requests made by Morgan Stanley was not done gratuitously, and Morgan Stanley should have appreciated that this was the case.
373 In the circumstances, Morgan Stanley should have realised that Vasco expected to be paid for its services on the basis of a success fee when the transaction was completed.**
Unjust for Morgan Stanley to Accept Vasco's Services Without Payment
**374 Plainly, two of the principals of Vasco, Mr Coulter and Mr Kotak, spent considerable time and at their expense, both to prepare the Plan and then in presenting it to Morgan Stanley and responding to Morgan Stanley's various requests for the provision of further information and the preparation and presentation of documentation requested by Morgan Stanley, including the expression of interest to the Orchard board.
375 Morgan Stanley took advantage of these services and was enriched thereby. Much of the Vasco Plan was reflected in the final transaction entered into by Morgan Stanley, which it did in the expectation of achieving profit for itself.
376 It is unjust that Morgan Stanley should have the benefit of Vasco's services provided to it in circumstances where the services were provided in the reasonable expectation of payment by way of success fee in the event that the transaction was to be successfully concluded, without paying for those services.**
**377 The Court's task is to ascertain what is fair and reasonable compensation for the benefit of the services performed by Vasco and requested, and accepted actually or constructively by Morgan Stanley.
378 In the present case, there was no evidence as to the number of hours worked by Vasco, or to itemise the precise work involved. In these circumstances the Court is entitled to make a global assessment in order to reflect a fair and reasonable value.
379 There was evidence that it was customary in industry for the services to be recompensed on a success fee basis calculated on the aggregate purchase price ultimately settled for the transaction. In this event the Court may have regard to what is reasonable success fee and apply it, if appropriate. This exercise may be subject to adjustment where the relationship has been terminated before the service provider has completed the tasks which produced the eventual product of the work.
380 Mr Buckley observed that there are no standard fee scales for the type of work undertaken by Vasco in undertaking its services for Morgan Stanley. He approached his task by making a judgment on what the market would bear and what would be a likely outcome of negotiation between adviser and client for the provision of the services. He opined further that, for the type of services provided by Vasco to Morgan Stanley, in his experience, the fees are typically percentage success fees.
Success fees are payable regardless of the type of commercial transaction that eventually is executed. The aggregate purchase price in a transaction is any investment in the target business or its related entities, equal to the sum of:
**382 Mr Buckley's opinion was that the percentage to be applied to achieve a market success fee and hence market value for the services provided by Vasco is between 0.5% to 1.0% of the aggregate purchase price payable in the transaction.
383 The Orchard recapitalisation transaction was ultimately settled in January 2012.
384 On this analysis, whatever percentage is applied to calculate the success fee, it should be applied to the aggregate purchase price paid by Morgan Stanley, which was admitted by Mr Tynan to be $207.45 million. This was an aggregate purchase price made up as follows:**
(a) Purchase of shares in OCIL: $12.45 million
(b) Purchase of BOSI debt: $150.00 million
(c) Purchase of DPF's units in Funds: $45.00 million
Total: $207.45 million
**385 The Court accepts the evidence of Mr Buckley that in his experience, fees paid in this industry for the nature of the work performed by Vasco for Morgan Stanley are typically percentage success fees.
386 The range assessed by Mr Buckley for the services provided by Vasco was between 0.5% of the aggregate purchase price $207.45 million, being $1,037,250 and 1.0% of the aggregate purchase price, being $2,074,500.
387 However, I heavily discount from the top of Mr Buckley's range to account for the fact that Vasco's services to Morgan Stanley did not continue beyond 22 June 2011.
388 In order to reflect fair and reasonable value for its services the sum I award the lower end of Mr Buckley's range, namely $1,037,250.
389 In so doing, the evidence of the expert called by the Defendant, Mr James Dunphy, is not preferred, and is rejected.
390 Mr Dunphy was an investment banker of 27 years, with a broad range of experience. Mr Dunphy ventured opinions on the common market practices in relation to, and payment for, work of the type undertaken by Vasco in its dealings with Morgan Stanley.
391 However, unlike the present case as I have found it to be, Mr Dunphy said: 'I have encountered very few situations where the firm I was working was able to provide a uniquely innovative or proprietary idea or proposal to a client.'
392 Further, Mr Dunphy described market practice, from his perspective, in the following terms:**
I believe it is common market practice for bankers/advisors to perform potentially large amounts of work on a 'spec' basis as the parties to the dispute refer to it in their affidavits. Market practice is that fee agreements are contained in engagement letters which are signed by the parties as I have described above.
**393 Mr Dunphy was asked by those instructing him to express an opinion in answer to the following central question on quantum: 'If Morgan Stanley is assumed to be liable for the work undertaken by Vasco, what would be the price that a reasonable person in the position of Morgan Stanley have expected to pay for such work?' However, Mr Dunphy confined himself to general observations in his first report in answer to this question. No actual opinion as to any price was ventured by him in this report.
394 Mr Dunphy then said in his supplementary report, which he prepared in response to Mr Buckley's report, that:**
I would answer the question Mr Buckley addresses in paragraphs 47-52 of his statement differently. The question is framed in an interesting way 'As at 2011, what was the market value of the services rendered by Vasco to Morgan Stanley Australia Limited?' This question could sensibly be disaggregated into questions I have identified in the following paragraphs.
The first question could be 'would other firms in the market have been prepared to solicit Morgan Stanley for the mandate in a similar manner to Vasco?' I am very confident that this would have been the case.
The second question could be 'would other firms have been prepared to take the risk on working up to the stage Vasco worked (assistance in relation to the expression of interest letter) with no guaranteed role or defined fee structure?' I am confident that the answer to this question is also yes.
An inevitable consequence of answering both of these questions as I have is that the market value of the services rendered by Vasco was zero.
As I referred to in my first statement, I have direct experience in relation to undertaking a large amount of work on a transaction I believed a client a client was going to proceed with (and did proceed with) where my firm received no fees from the transaction.
The key event that turns work into solicitation or pitching (which has a market value of zero) into a valuable claim is the execution of an engagement letter with specific fee terms. As this did not occur in the Vasco/Morgan Stanley scenario, I believe there is no need to form a view about what a success fee might have been.
**395 I do not accept that the market value of the services provided by Vasco to Morgan Stanley was zero. In arriving at this conclusion, Mr Dunphy confined himself to a quantum meruit assessment of the services provided by Vasco on the assumption that the services were provided in the context of a solicitation or pitch to Morgan Stanley in the course of an exercise towards securing the execution of an engagement letter with specific fee terms. His assessment was not based on the value of the services actually provided at the request of Morgan Stanley. Rather it was founded in a context which was not an accurate reflection of the facts as I have found them to be.
396 Mr Dunphy did not take into account two important elements which set the position of Vasco apart from the situation of a usual pitch for a retainer in this industry which Mr Dunphy described and considered.
397 First, there were the numerous requests made by Morgan Stanley for further work to be done by Vasco to refine its proposal and present the product to Morgan Stanley, not only for its consideration, but also for use by it, including for example, the preparation of the draft expression of interest. A good number of the requests have been described in earlier findings in these reasons.
398 Second, Morgan Stanley, through Mr Kingsley, gave various assurances as to payment to Vasco as it proceeded to do further work at the request of Morgan Stanley. The assurances have also been described in earlier findings. These assurances give rise to the inference that Morgan Stanley itself regarded the services being provided by Vasco as being of value to it, and were not regarded as merely a gratuitous pitch towards a formal contract.**
The Defendant pay to the Plaintiff the sum of $1,037,250.00.
400 On the adjourned return date I will hear the parties on what other orders, including orders as to costs, which should be made.
[2] Darvall McCutcheon v H K Frost Holdings Pty Ltd [2002] VSCA 85; (2002) 4 VR 570 [55]-[56].
[3] [1979] VicRp 17; [1979] VR 167 PINPOINT
[4] See generally Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, 443; Coco v A N Clark (Engineers) Ltd [1969] RPC 41, 47.
[5] H.K. Frost Holdings v Dorval McCutcheon (1999) FCA 570 [65] (Finn J); O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 at 324-8 per Mason J; Pioneer Concrete Services Ltd v Galli [1985] VicRp 68; [1985] VR 675 at 711 (FC); American Cyanamid Co v Alcoa of Australia Ltd [1993] FCA 490; (1993) 27 IPR 16 at 20-21.
[6] H.K. Frost Holdings v Darvall McCutcheon (1999) FCA 570 at [65] per Finn J.
[7] H.K. Frost Holdings v Darvall McCutcheon (1999) FCA 570 at [65] per Finn J.
[8] H.K. Frost Holdings v Darvall McCutcheon (1999) FCA 570 at [65] per Finn J.
[9] H.K. Frost Holdings v Darvall McCutcheon (1999) FCA 570 at [60] per Finn J.
[10] (1999) FCA 570 at [60].
[11] H.K. Frost Holdings v Darvall McCutcheon (1999) FCA 570 at [61] per Finn J.
[12] For example Carindale Country Club Estate Pty Ltd v Astill [1993] FCA 218; (1993) 115 ALR 112, 120-1; Smith Kline & French Laboratories (Aust) Ltd v Department of Community Services & Health [1989] FCA 384; (1990) 22 FCR 73, 87; O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310, 326-8; Pioneer Concrete Services Ltd v Galli [1985] VicRp 68; [1985] VR 675 at 711-712; GlaxoSmithKline Australia Pty Ltd v Ritchie [2008] VSC 164; (2008) 77 IPR 306 [20]; Miles v Genesys Wealth Advisers Ltd [2009] NSWCA 25 [22]-[23]; Streetscape Projects (Aust) Pty Ltd v City of Sydney (No 2) [2013] NSWCA 240 at [17] and [158]. See also Dean, The Law of Trade Secrets and Personal Secrets (2nd ed) [13.290] and Meagher, Gummow and Lehane's Equity, Doctrines and Remedies (4th Ed), [41-055].
[13] A plaintiff must be able to specify and identify, with particularity, what information is the subject of complaint, and how it properly attracts the attributes of confidentiality: Liberty Financial Pty Ltd v Scott (No 3) [2004] VSC 490; (2004) 11 VR 621 [16] (Harper J). See also Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434 at 443; Dart Industries Inc v David Bryar & Associates Pty Ltd [1997] FCA 481; (1997) 38 IPR 389 at 406.
[14] Saltman Engineering Co Ltd v Campbell Engineering Co Ltd [1963] 3 All ER 413n, (1948) 65 RPC 203; Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1984) 156 CLR 414, 438.
[15] H.K. Frost Holdings v Darvall McCutcheon (1999) FCA 570 [65] (Finn J).
[16] [1969] RPC 41 at 47.
[17] Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215; Under Water Welders & Repairers Ltd v Street and Longthorne [1968] RPC 498, 506-507; Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW [1975] 2 NSWLR 104 at 117-118; PCR Ltd v Dow Jones Telerate [1998] FSR 170; Emeco International Pty Ltd v O'Shea (No 2) [2012] WASC 348 at [135].
[18] Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215 per Lord Greene MR, Somervell LJ and Cohen J agreeing.
[19] Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577 [93].
[20] Darvall McCutcheon v H K Frost Holdings Pty Ltd [2002] VSCA 85; (2002) 4 VR 570 [58]-[60].
[21] Darvall McCutcheon v H K Frost Holdings Pty Ltd [2002] VSCA 85; (2002) 4 VR 570 [60] (Chernov JA with whom Ormiston and Callaway JJA agreed).
[22] cf. Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577 at [93].
[23] Darvall McCutcheon v H K Frost Holdings Pty Ltd [2002] VSCA 85; (2002) 4 VR 570 at [59].
[25] Ormonoid Roofing and Asphalts Ltd v Bitumenoids Ltd [1930] NSWStRp 88; (1930) 31 SR (NSW) 347 at 362; Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VicRp 7; [1967] VR 37 at 52; AG Australia Holdings Ltd v Burton [2002] NSWSC 254; (2002) 58 IPR 327 at [30]- [34], [56].
[26] Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW [1975] 2 NSWLR 104 at 117, citing Sir J L Knight-Bruce V-C in Prince Albert v Strange [1849] EngR 255; (1848) 2 De G & Sm 652 at 692; 64 ER 293 310: 'The right is not lost by partial and limited communications not made with a view to general publication, as is shown by several cases, that on Lord Clarendon's History, and others'.
[27] Franchi v Franchi [1967] RPC 149 153; Australian Football League v The Age Company Ltd [2006] VSC 308; (2006) 15 VR 419 [41], [56] (Kellam J).
[28] Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587; Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health [1989] FCA 384; (1990) 22 FCR 73; see also Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] 4 All ER 781 at [22]-[25]. An obligation will be imposed if the recipient should have understood that information divulged was confidential: Interfirm Comparison (Aust) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104; Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1984) 156 CLR 414.
[29] Vestergaard Frandsen A/S v Bestnet Europe Ltd [2013] 4 All ER 781 [22]; Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health [1991] FCA 150; (1991) 28 FCR 291, 304 (citing Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1984) 156 CLR 414 at 438); Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326 [101].
[30] Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health [1991] FCA 150; (1991) 28 FCR 291, 302-303.
[31] Coco v A N Clark (Engineers) Ltd [1969] RPC 41, 48.
[32] Schering Chemicals Ltd v Falkman Ltd [1982] QB 1, 27.
[33] Smith Kline & French Laboratories (Aust) Ltd v Secretary, Department of Community Services and Health [1991] FCA 150; (1991) 28 FCR 291, 304.
[34] Seager v Copydex Ltd [1967] 2 All ER 415, 417F.
[35] Interfirm Comparison (Australia) Pty Ltd v Law Society of NSW [1975] 2 NSWLR 104, 117.
[36] See for example Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, 215.
[37] Terrapin Ltd v Builders' Supply Co (Hayes) Ltd [1967] RPC 375, 391.
[38] Seager v Copydex Ltd [1967] 1 WLR 923, 931-2, 933 (Salmon LJ).
[39] Smith Kline & French Laboratories (Aust) Pty Ltd v Secretary, Department of Community Services & Health [1989] FCA 384; (1990) 22 FCR 73, 83; Ithaca Ice Works Pty Ltd v Queensland Ice Supplies Pty Ltd [2002] QSC 222.
[40] Bluescope Steel Ltd v Kelly [2007] FCA 517; (2007) 72 IPR 289.
[41] Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 521.
[42] United Australia Ltd v Barclays Bank [1941] AC 1 19 (Viscount Simmonds), 30 (Lord Atkin).
[43] Island Records Ltd v Tring International (1996) 1 WLR 1256, 1258-1259.
[44] Tang Man Sit v Capacious Investments Ltd [1996] AC 514 at 521; Stambulich v Ekamper [2001] WASCA 283, [35]; LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 70 FCR 436, 447; GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113 [56] (Warren CJ).
[45] Nocton v Lord Ashburton [1914] AC 932, 952; Hill v Rose [1990] VicRp 13; [1990] VR 129, 143-4.
[46] (1999) FCA 570 , [73].
[48] Hill v Rose [1990] VicRp 13; [1990] VR 129 at 143; Warman v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 559.
[49] See eg McKenzie v McDonald [1927] VicLawRp 19; [1927] VLR 134, 146-147 (Dixon AJ).
[50] Warman v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 559.
[51] Warman v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561.
[52] Darvall McCutcheon v H K Frost Holdings Pty Ltd [2002] VSCA 85; (2002) 4 VR 570 [59].
[53] Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 , 117.
[54] [1987] HCA 5; (1987) 162 CLR 221 ('Pavey').
[55] [1993] VicRp 71; (1993) 2 VR 221 ('Brenner').
[56] [2008] HCA 27; (2008) 232 CLR 635 ('Lumbers v Cook')
[57] Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251; Planche v Colburn [1831] EngR 856; (1831) 8 Bing 14; 131 ER 305; Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880; Horton v Jones [No 1] [1934] NSWStRp 32; (1934) 34 SR (NSW) 359; Graham and Baldwin v Taylor, Son and Davis (1965) 109 SJ 793; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 647; Way v Latilla [1937] 3 All ER 759.
[58] [1995] SASC 5230; (1995) 65 SASR 1, 12-13.
[60] [1987] HCA 5; (1987) 162 CLR 221, 255- 256.
[61] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 255 - 256.
[62] Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [150]; see also Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 256 - 257.
[63] Citing David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353, 379.
[64] Goff & Jones, The Law of Unjust Enrichment 8th ed ( Sweet & Maxwell, 2011) at [1-09]; Banque Financiere de la Cite v Parc (Battersea) Ltd [1998] UKHL 7; [1999] 1 AC 221, 227; Benedetti v Sawiris [2013] UKSC 50, 3 WLR 351 [10] (Lord Clarke, Lords Kerr and Wilson agreeing)
[65] Australian and New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 164 CLR 662, 673.
[66] Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635 [85].
[67] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 257.
[69] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 262, 265 (Byrne J); Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 262 (Deane J).
[70] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 262 (Byrne J).
[71] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 263 (Byrne J), referring to Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, 257.
[72] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 263 (Byrne J).
[73] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 263 (Byrne J), referring to Commonwealth v Amman Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 83.
[74] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 264 (Byrne J), referring to Way v Latilla [1937] 3 All ER 759, 764 (Lord Atkin).
[75] Comprising Maxwell P, Kellam JA and Whelan AJA.
[77] Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510, 517 ([21]).
[78] Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510, 517 ([21]).
[79] Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510, 517 ([21]).
[80] Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510, 518 ([26]).
[81] Renard Constructions v Minister for Public Works (1992) 26 NSWLR 234, 276-278.
[82] Renard Constructions v Minister for Public Works (1992) 26 NSWLR 234, 276-8 (Meagher JA).
[83] Sopov and Anor v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141 at [30]- [31].
[84] Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; (2009) 24 VR 510, 520 ([34]-[37]).
[85] Sopov and Anor v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141at [34-37].
[86] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 263, citing Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 83.
[87] Brenner v First Artists' Management Pty Ltd [1993] VicRp 71; [1993] 2 VR 221, 271 (and, more generally, 267 and 270).
[88] [2002] VSC 248; (2002) 5 VR 577, 608 ('Andrew Shelton')
[89] [1993] VicRp 71; [1993] 2 VR 221, 262-265.
[90] Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577, 608.
[91] Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577, 608.
[92] Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; (2002) 5 VR 577, 608-609.
Vasco Investment Managers Ltd
Morgan Stanley Australia Ltd [2014] VSC 455
(2002) 4 VR 570
(1987) 14 FCR 434
(1982) 150 CLR 310
(1993) 27 IPR 16
(1993) 115 ALR 112
(1990) 22 FCR 73
(2008) 77 IPR 306
(2004) 11 VR 621
(1997) 38 IPR 389
(1984) 156 CLR 414
(2002) 5 VR 577
(2002) 58 IPR 327
(2006) 15 VR 419
(1991) 28 FCR 291
(2007) 73 IPR 326
(2007) 72 IPR 289
(1996) 70 FCR 436
(1995) 182 CLR 544
(1987) 162 CLR 221
(1993) 2 VR 221
(2008) 232 CLR 635
(1990) 20 NSWLR 251
(1991) 174 CLR 647
(1995) 65 SASR 1
(2007) 230 CLR 89
(1992) 175 CLR 353
(1988) 164 CLR 662
(1991) 174 CLR 64
(2009) 24 VR 510
(1992) 26 NSWLR 234