HEARD : 23-27 MARCH, 30-31 MARCH, 1-3, 6-9, 14-16 APRIL 2009

BETWEEN : WESTERN AREAS EXPLORATION PTY LTD (ACN 076 025 066)

Corporations - Directors - Fiduciary duties - Breach - Diversion of corporate opportunities - Directors of plaintiff also directors of another corporation - Other corporation obtaining via the plaintiff and promoting a development for flotation of a mining company for nickel exploration - Remedies - Constructive trust - Scope for directors of competing company to promote their own interests or that of the other company - Mining tenements of plaintiff company sold by directors to the new company in return for allotment of shares to plaintiff and to a company associated with one of the directors - Opportunity to acquire balance of interest in joint venture by the plaintiff in certain mining tenements diverted by director to his private company - Measure of relief - Claims for apportionment of profits and/or just allowances for efforts of errant fiduciaries in successfully promoting new company - Shares and options taken by directors personally or in a private company - Interest or other allowances for money paid on subscriptions for shares taken and options exercised - Value of shares in new company substantially enhanced by subsequent acquisition of very successful nickel mine - Joint and several liability of defaulting fiduciaries

1. Declaration that the third defendant holds 10,675,000 shares in WANL upon constructive trust for the plaintiff subject to a charge upon those shares to secure payment to the third defendant by the plaintiff of $1,590,000 plus interest thereon for the capital advanced by the first and third defendants for the acquisition of those shares.

2. Order that upon satisfaction by the plaintiff by payment of the amount charged upon those shares the third defendant take all necessary steps to transfer 10,675,000 shares in WANL to the plaintiff.

3. Declaration that the second defendant is bound to deliver 400,000 shares in WANL to the plaintiff subject to payment to the second defendant by the plaintiff of $160,000 plus interest thereon for the capital advanced by the second defendant for the acquisition of those shares.

4. Order that upon satisfaction by the plaintiff by payment of $160,000 plus interest the second defendant take all necessary steps to transfer 400,000 shares in WANL to the plaintiff.

5. There be liberty to all parties to apply to determine the amounts of interest payable under pars 1 and 3.

B. Alternatively to 1 to 5 (inclusive) above, but only if the plaintiff so elects:

6. The first, second and third defendants do pay to the plaintiff compensation in an amount equal to the market value on the ASX of 11,075,000 shares in WANL at the date of judgment less the sum of $1,750,000 plus interest thereon for the capital advanced by the defendants for the acquisition of the 11,075,000 shares in WANL which they acquired.

7. There be liberty to all parties to apply to determine the amount of interest payable on the sum of $1,750,000.

8. There be liberty to the defendants to apply to determine in what proportions as between themselves each should contribute to their joint and several liability to the plaintiff.

First Defendant : Mr C L Zelestis QC & Mr M D Howard

Second Defendant : Mr C L Zelestis QC & Mr M D Howard

Third Defendant : Mr C L Zelestis QC & Mr M D Howard

Aas v Benham [1891] 2 Ch 244

ASIC v Rich [2003] NSWSC 85; (2003) 44 ASCR 341

ASIC v Vines [2003] NSWSC 1116; (2003) 48 ACSR 322

Attorney-General (Hong Kong) v Reid [1993] UKPC 2; [1994] 1 AC 324

AWA Ltd v Daniels t/as Deloitte Haskins & Sells (1992) 7 ACSR 759

Bell v Lever Brothers Ltd [1931] UKHL 2; [1932] 1 AC 161

Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66

Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46

Breen v Williams (Medical Records Access Case) (1996) 186 CLR 71

Canadian Aero Service Ltd v O'Malley [1974] SCR 592; (1973) 30 DLR (3d) 371

Chillingworth v Chambers [1896] 1 Ch 685

Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52

Clegg v Edmondson [1857] EngR 295; (1857) 8 De GM & G 747

Commonwealth Oil and Gas Co Ltd v Baxter [2007] Scott CS CHOH 1

Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373

Cook v Deeks [1916] AC 554

Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438

David Securities Pty Ltd v Commonwealth Bank of Australia (Swiss Franc Case) [1992] HCA 48; (1992) 175 CLR 353

Dunn v CTK Engineering Pty Ltd [2002] NSWSC 365

Dwyer v Backpackers R Us Co Pty Ltd [2004] QSC 281; (2004) 50 ACSR 333

Eastland Technology Australia Pty Ltd v Whisson [2005] WASCA 144

Erlanger v The New Sombrero Phosphate Company (1878) 3 App Cas 1218

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 2) [2001] NSWCA 115

Foley v Farrell (1933) 36 WALR 46

Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200

Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1

Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

In Plus Group Ltd v Pyke [2002] EWCA Civ 370

Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162

Jones v Dunkel [1959] HCA 8; [1959] 101 CLR 298

Keech v Sandford (1726) Cas temp King 61; (1726) Eq Cas Abr 741; [1558 - 1774] All ER Rep 230; (1726) 25 ER 223

Liggett v Kensington [1993] 1 NZLR 257

Lingard v Bromley [1812] EngR 497; (1812) 1 V&B 114; 35 ER 45

Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548

London & Mashonaland Exploration Co v New Mashonaland Exploration Co [1891] WN 165

Mark Moncrief Stevens v Premium Real Estate Ltd [2009] NZSC 15

Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428

Mordecai v Mordecai (1988) 12 NSWLR 58

New Zealand Netherlands Society 'Oranje' Inc v Kuys [1973] 2 All ER 1222

Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1

On The Street Pty Ltd v Cott (1990) 101 FLR 234; (1990) 3 ACSR 54

Orr v Ford [1989] HCA 4; (1989) 167 CLR 316

Peso Silver Mines Ltd v Cropper (1966) 58 DLR (2d) 1

Phipps v Boardman [1964] 1 WLR 993

Queensland Mines Ltd v Hudson (1978) 18 ALR 1

Rainskill v Edwards (1885) 31 Ch D 100

Re Broadcasting Station 2GB [1964 - 5] NSWR 1648

Re City Equitable Fire Insurance Co Ltd [1925] Ch 407

Re Jarvis (Dec'd) [1958] 2 All ER 336

Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779

SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552

The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] & Ors [2008] WASC 239

University of Western Australia v Gray [2008] FCA 498; (2008) 246 ALR 603

Victoria University of Technology Inc v Wilson [2006] VSC 186; (2006) 68 IPR 597

Victoria University of Technology v Wilson [2004] VSC 33; (2004) 60 IPR 597

Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544

1 EM HEENAN J: These reasons begin with a broad outline of the events which have generated this litigation and of the principal questions of law which the parties contend arise from their dispute. Inevitably, the facts in issue are complicated and extensive leading to corresponding intricacy in the legal submissions which the parties have advanced. This calls for an initial analysis of the facts and an examination of the legal principles which are said to apply to them before dealing with the evidence on contentious issues in detail. This necessarily involves some repetition but this preliminary outline is drawn from the findings of facts which have been made after the later, more elaborate, consideration of the evidence.

2 The plaintiff is a junior exploration company formed by its promoters with a view to securing interests in various mining tenements, originally for gold and later for nickel, in established mining areas in the central and northern goldfields region. When incorporated the plaintiff was known as Bloodhound Gold NL and, under that name, attempted to secure an interest in mining tenements prospective for gold and to become listed on the Australian Stock Exchange (ASX). Little came of those efforts and by 1997 it had changed its name to Western Areas Exploration NL (WAE) and was instead pursuing the acquisition of various interests in mining tenements for nickel, although it was still alert to the opportunities to acquire areas prospective for gold. It is not uncommon to find gold and nickel mineralisation occurring in close proximity. In need of capital or loan funds, it later attracted the interest of the first defendant, Mr Terrence Ernest James Streeter (Mr Streeter) who also had an ambition to become involved in a successful mineral exploration company and its development. Mr Streeter and his accountant and associate, Mr David Charles Cooper (Mr Cooper) joined the board of the plaintiff and before long had effectively been granted the control of the plaintiff because of Mr Streeter's apparent readiness to invest funds.

3 Another director of the plaintiff at this time, and the one-time chairman of the plaintiff, was Mr Lex Howard John Brailey (Mr Brailey) who, until the events which led to this litigation, appears to have enjoyed a good working relationship and a harmonious association with Messrs Streeter and Cooper. From the time when Mr Streeter first became associated with the plaintiff, in about February 1998, the mutual objective remained the same, namely to list the company on the ASX and to conduct an initial public offer (IPO) to raise sufficient funds to undertake an exploration programme upon mining tenements which the plaintiff had obtained or which it might obtain.

4 In late November and early December 1999 a group of geologists calling themselves Australian Nickel Project Consultants (ANPC) established contact with Mr Brailey, and then with Messrs Streeter and Cooper, with the idea of raising capital to promote the formation or acquisition of a public company listed on the ASX to undertake the testing and, if thought appropriate, the development of a suite of mining tenements for gold and nickel which the ANPC group had themselves assembled.

5 It is the plaintiff's case that the ANPC personnel first approached Mr Brailey who, recognising this as a potentially significant opportunity for the plaintiff, referred them to Mr Streeter. There is no doubt that the ANPC personnel then met with Mr Streeter, and later with Messrs Streeter, Cooper and other financial advisers, leading to Mr Streeter becoming interested in participating in and promoting the exploration opportunity proffered by the ANPC approach. According to the plaintiff, this opportunity came to Mr Streeter and Mr Cooper because of their association and connection with the plaintiff and at the direction of Mr Brailey. The plaintiff characterised this as a WAE opportunity and it is clear that, in the initial stages, serious attention was given by Messrs Streeter and Cooper to using WAE as the vehicle to acquire the ANPC tenements, to become listed on the ASX, and to develop the project.

6 As negotiations proceeded between Messrs Streeter, Cooper and the ANPC personnel and their financial consultants the structure of the project changed. A newly formed company, Western Areas NL (WANL) was incorporated, the ANPC tenements were to be transferred or assigned ('vended into') the new company, seed capital was to be provided by Mr Streeter or his associated private company, Jungle Creek Gold Mines Pty Ltd (Jungle Creek) and there was to be an IPO to raise capital for the planned exploration and development programme. Not until all this was a fait accompli in February 2000 did Messrs Streeter, Cooper or any of their associates disclose to Mr Brailey or to the plaintiff that such a scheme of promotion was afoot. Until late January 2000 Mr Brailey had been under the understanding and expectation that the assessment and implementation of the ANPC proposal was under consideration by Mr Streeter for and on behalf of the plaintiff. When he learned that the opportunity had been taken up by Messrs Streeter, Cooper, the ANPC personnel and others through the formation of a new company (WANL) he became angry, refused to lend assistance to the proposal and resigned as a director of the plaintiff.

7 Mr Streeter was in effective control of the plaintiff from about March 1998 onwards and he continued in control of the plaintiff throughout the critical period when this new project was under investigation and adoption and for years afterwards until August 2006, when he and Mr Cooper were removed as directors of the plaintiff at an extraordinary general meeting (EGM) convened by Mr Brailey and some of his colleagues and supporters.

8 Meanwhile, the IPO for the new company, WANL, had been successfully completed and the company was listed on the ASX on 26 July 2000 with Messrs Streeter and Cooper as directors and with three of the ANPC geologists either co-directors or senior executives.

9 It will be necessary later to examine in detail the capital and other contributions made by Mr Streeter, his company Jungle Creek and by Mr Cooper to the flotation of WANL. For the present, it is sufficient to mention that on the float of WANL Mr Streeter or Jungle Creek was offered the opportunity to acquire 4,500,000 shares in WANL credited as being fully paid at 20 cents but at a discount of two-thirds; that is, at 6.66 cents per share. Mr Streeter also received 400,000 options to acquire fully paid shares in WANL at an exercise price of 40 cents on or before 31 March 2004. Mr Cooper received 400,000 options to acquire fully paid shares at an exercise price of 40 cents per share on or before 31 March 2004.

10 In return for Mr Streeter investing $300,000 in seed capital in WANL, and at his direction, Jungle Creek received a further 5,625,000 options to acquire shares at an exercise price of 20 cents on or before 31 March 2004. Jungle Creek also received 150,000 shares for the transfer of its interests in certain applications for exploration licences over areas near Cue ('the Cue tenements').

11 In due course, Messrs Streeter and Cooper personally or through associated companies each exercised their March 2004 options so acquiring an additional 400,000 shares each in WANL as at February 2004. Similarly, Jungle Creek exercised its options to acquire shares in WANL at 20 cents before March 2004 and thereby acquired an additional 5,625,000 shares.

12 The parts of the present holdings of the defendants or their associated companies in WANL which are derived from these initial allotments of shares and options are:

13 The sale of Jungle Creek's interest in the Cue tenements to WANL, how Jungle Creek came by that interest, and the origin of the Cue tenements must be stated to appreciate the nature of the plaintiff's claim in respect of that share allotment. The deal is somewhat complicated and will be described more fully later. Here a thumbnail sketch will suffice.

14 Before the approaches from the ANPC personnel in November and December 1999 WAE had an interest in three applications for goldmining exploration areas (EAs) near Cue in the north-eastern goldfields. In 1998 the plaintiff was associated in a joint venture with another company, Golden Granite Mining Ltd (Golden Granite) in a 70%-30% joint venture which had applied for those three EAs at Cue. Collectively these formed one of the prospects which the promoters of WAE were advancing in its unsuccessful attempts at listing during 1997 and 1998. Ultimately, only one of the EAs was approved and granted but the interests in all the applications were held in the joint venture between the plaintiff and Golden Granite.

15 In early 2000 Golden Granite was looking to dispose of its 30% interest in this joint venture and had offered it for sale to Mr Streeter for $5,000, but at that stage, until WAE's future direction had been agreed upon and finance secured, Mr Streeter was not willing for the plaintiff to acquire the Golden Granite interest in the Cue tenements. Again, for reasons which can be left until later, the negotiations between Mr Streeter and Mr Cooper with the ANPC personnel led to a proposal that the plaintiff, WAE, would vend into the new company the whole of the available interests in the Cue tenements in return for an allotment of vendor shares to WAE. At that point, however, the plaintiff only had a 70% interest in the Cue tenements but there was this opportunity to acquire the remaining 30% from Golden Granite and so to sell the entirety to WANL as proposed in return for vendor shares. However, that is not what happened.

16 Aware that the Golden Granite interest in the Cue joint venture was available for purchase, Mr Streeter arranged for another one of his companies, Meeka Star Mines Pty Ltd, to purchase the 30% interest in the joint venture from Golden Granite and then to assign that 30% interest to his other company, Jungle Creek. Accordingly, when it came to the implementation of the flotation of the new proposal for WANL, the original plan for WANL to acquire 100% of the Cue tenements was achieved but only 70% was purchased from the plaintiff and the remaining 30% was acquired by WANL from Jungle Creek in return for the allotment of 150,000 vendor shares to Jungle Creek.

17 The plaintiff contends that this process, by which Jungle Creek derived the 30% interest in the Cue tenements and sold them to WANL in return for vendor shares, was another diversion or misuse of a commercial opportunity which effectively belonged to the plaintiff and that by taking up this opportunity while a director of the plaintiff, Mr Streeter acted in breach of fiduciary duties. It is further alleged that Jungle Creek was a knowing participant and recipient of the benefits of that breach of duty.

18 It is in this way that the plaintiff contends that the various acquisitions of shares, options, and the conversions of options to shares by the three defendants, Mr Streeter, Mr Cooper and Jungle Creek are benefits derived from breaches of fiduciary duties owed towards the plaintiff by Messrs Streeter and Cooper and that, as a consequence, all those shares should be declared to be held as the subject of a constructive trust or trusts for the benefit of the plaintiff.

19 There is a further series of developments the significance of which is much in controversy. After the successful flotation of WANL, the seven projects which had been vended into the company at the introduction of the ANPC personnel and the single EA at Cue derived from the plaintiff and from Golden Granite were the subject of investigation and exploration by the new company. Various works were undertaken and money spent in exploring and assessing those prospects but nothing of immediate interest was discovered. Consequently, one by one, four of those seven various prospects were either allowed to lapse or were disposed of to other unrelated parties.

20 During this period, in or about late 2002, one of the original ANPC geologists, Mr Terry Grammer, who is plainly an extremely acute and successful exploration geologist, noticed that certain mining tenements, predominantly for nickel, located at Forrestania (south-west of Southern Cross) were being offered for sale. He was interested in the Bounty mine which had been operated by Viceroy Mining Co in conjunction with a well-known Finnish mining house, Outoukumpo Mining. This was being offered for sale by the administrator. The history was that Outoukumpo and Viceroy had been engaged in successful nickel mining operations at Forrestania for a number of years but Outoukumpo had decided to withdraw from mining operations in Australia. This left it uneconomic for Viceroy to continue. It seems that the views of the Outoukumpo and Viceroy personnel, and for that matter the administrator, were that most of the payable nickel reserves at Forrestania had by then been exhausted. In the result, WANL acquired the interests in the Forrestania tenements originally held by Viceroy and by Outoukumpo in a series of transactions which can be described later. It then set out upon a new programme of exploration and evaluation of the Forrestania tenements and, within a period of less than four years, discovered that those tenements contained some of the richest and highest grade nickel sulphide deposits in Western Australia and were an enormously attractive mining prospect.

21 From then on the success of WANL has been nothing less than spectacular. Over a period of less than four years it went from being a small exploration company with a total capital of approximately $7 million to a major miner producing high grade nickel sulphide concentrate with a market capitalisation of more than $900 million. This progress towards becoming a large scale miner and producer required many subsequent capital raisings, placements and loans, but all that was successfully undertaken and now WANL, with one of the original ANPC geologists, Mr Julian Hanna, as its managing director and with Messrs Streeter and Cooper as board members, is a large successful nickel producer.

22 During the period from July 2000 until April 2009 the values of the shares in WANL have risen from 21 cents, with a low of 14 cents in June 2001, to a peak of $11.65 on 12 May 2008 before the marked decline associated with the global financial crisis which has occurred more recently. In March and April 2009 they were in the region of $3.50 or above during the course of this trial. Since the trial they have appreciated even more. This is despite the fact that the number of shares on issue in WANL has increased dramatically.

23 The defendants contend that these vast appreciations in the value of WANL shares are due almost entirely to the discovery and successful development of the Forrestania project and that, if they are under any liability to the plaintiff, which they deny, there is no occasion for the plaintiff to secure relief which would have the effect of delivering to it such a windfall profit because, were that to occur, the plaintiff would become unjustly enriched at their expense.

1. Were Messrs Streeter and Cooper under fiduciary duties to the plaintiff which precluded them from taking for their private benefit and the benefit of Jungle Creek the allotment of shares and options in WANL in 2000?
2. Was there a wrongful diversion of a corporate opportunity for the acquisition of the 30% interest held by Golden Granite in the Cue tenements by Jungle Creek so as to make Jungle Creek accountable to the plaintiff for the 150,000 shares which it was allotted in consideration of the assignment of its 30% interest in the Cue tenements?
3. Was the ANPC proposal introduced to Messrs Streeter and Cooper by reason of, because of, or in association with, their roles as directors of the plaintiff so as to render it a breach of fiduciary duty for them to take up and exploit that opportunity rather than make it available to the plaintiff?
4. If there has been any such breach of fiduciary duty, is the remedy of a constructive trust available in relation to any or all of the 11,075,000 shares now held by the defendants in WANL and, if so, should some allowance be credited to the defendants for the capital which they expended in acquiring those shares and in exercising the options, with or without interest?
5. Should there be any other or additional allowance for the skill, effort and risk involved in that enterprise? In particular, should any form of relief, for the plaintiff, in the event that it establishes liability by the defendants, be circumscribed because of the vast appreciation in the value of the WANL shares due to the subsequent fortuitous success of the Forrestania project? (At market prices current at the trial the approximate value of those 11.075 million shares in WANL held by the defendants was in the region of $42 million and it has since increased.)

25 When it comes to the question of whether some form of just allowance should be credited to the defendants, and in particular, to Mr Streeter and Jungle Creek, for the roles which they played in the successful development of the Forrestania project for WANL various related issues arise. The plaintiff draws attention to the many additional share issues subsequently offered by WANL to shareholders, including the defendants, sometimes consisting of special placements, and to executive remuneration paid by the company to Messrs Streeter and Cooper, among others, for their roles in managing, guiding and implementing the success of that company. These monetary benefits for Mr Streeter in the years from 2000 to 2008 (including superannuation) are put at $528,000, and additional options to take up a further 1.6 million shares. In Mr Cooper's case over the same period there was total monetary remuneration (including superannuation) of $501,870 and additional options to take up 1.6 million shares.

26 The plaintiff contends that these payments and benefits constitute remuneration for the performance of the very services in respect of which the alleged errant fiduciaries are claiming just allowances. Furthermore, Mr Streeter and Mr Cooper each acquired many additional shares in WANL through the new issues, rights issues and placements already mentioned so that, by June 2008, the latest available annual report of WANL disclosed that Mr Streeter, either alone or in combination with Jungle Creek, held a total of 33 million shares or thereabouts in WANL and Mr Cooper a total of 1.334 million or thereabouts, so that each has independently derived great additional benefit and value from the success of Forrestania.

27 There are several other issues which need to be described before undertaking a detailed review of the evidence. The first is the contention by Mr Streeter, and by Mr Cooper, that the plaintiff, WAE, would never have been able itself to take up the opportunity to promote the opportunity presented by the ANPC personnel in late 1999. They say that this is so for various reasons. These include the assertion that by late 1999 WAE was a 'failed company', in that it had lost all, or most, of its original capital in unsuccessful attempts to become listed and to conduct an IPO in 1997 and again in 1998; that it could not afford to discharge the expenditure obligations for the various mining tenements in which it held interests; that there was no prospect of it securing any underwriting support for an IPO which was then considered essential to achieve an ASX listing; that its principal shareholders were unwilling to inject any further capital; and that it was indeed on 'life support', being entirely dependent upon loans provided by Mr Streeter after his introduction to the company in March 1998.

28 Mr Streeter and Mr Cooper also contend that, with an issued capital of about 9.1 million shares by mid-1998, there was no reasonable opportunity of an IPO or a significant investment by a major capital backer without a major reconstruction of the share capital and a reduction of 10 to 1 or 20 to 1 of the shares on issue because, if that did not occur, any investor would in effect immediately suffer a major dilution of the capital invested to the advantage of the existing shareholders.

29 The defendants also contend that, for these and other good reasons, the ANPC personnel were of the mind, after receiving competent and cogent advice from their corporate advisors, that the promotion of their project would best be undertaken by a new company formed afresh for the purpose so that the ANPC personnel would almost certainly have rejected any proposal which involved WAE being the vehicle for the promotion of their project and the necessary IPO.

30 In response, the plaintiff says that the admitted financial stringencies which were handicapping WAE during 1999 were due entirely to the fact that Mr Streeter had not fulfilled his promise to subscribe $250,000 of capital to the company which he had made in March 1998. Mr Streeter had instead only contributed relatively modest amounts totalling $70,000 or $85,000 which he was treating as loans to the company convertible to shares if and when he chose to make the conversion.

31 The plaintiff contended, and adduced evidence from various of the original shareholders and promoters of WAE, that those shareholders were men of substance who could quite readily have raised and contributed an aggregate of $300,000 or more as additional capital for the plaintiff if requested to do so when presented with a sufficiently attractive plan to proceed to a listing and an IPO. The plaintiff also maintained that, so far as a reconstruction of the company was desirable, legal advice had already been obtained and accepted by WAE as to how such a reconstruction could occur. This included how approval could be obtained from the shareholders for Mr Streeter's shareholding to go beyond the 20% takeover threshold without the need for a full takeover offer to be made so as to render WAE a suitable vehicle to proceed to an IPO and a listing.

32 Despite all that, or perhaps in addition to it, the plaintiff emphasises that a fiduciary will not escape liability for the misuse or breach of fiduciary obligations merely by establishing that his principal could not, for any reason, have availed of the opportunity which was presented to the fiduciary: Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46 and Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373.

Liabilities of fiduciaries for diversion of corporate opportunity

33 In Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1, dismissing the appeal by the errant fiduciary, Burt CJ said:

Many of the 'knowledge' and 'opportunity' cases, including Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46, which is a leading case, would seem to require that the benefit to be accounted for be acquired by the use of both the knowledge or the opportunity or of one or other of them. That is the way in which it is put by Lord Hodson in the extract from his speech which I have already reproduced ([1967] 2 AC 105). It is an idea which runs throughout the cases. The liability to account is said to attach to 'those, who by use of a fiduciary position make a profit'; Lord Russell of Killowen in Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, 144. The liability is said to be to 'account for profits acquired by him by reason of his fiduciary position or by reason of the opportunity and the knowledge, or either, resulting from it': Lord Wright in the Regal case, supra, at 154. Or, as Lord Porter put it in that case (at 158): 'The legal proposition may, I think, be broadly stated by saying that one occupying a position of trust must not make a profit which he can acquire only by use of his fiduciary position, or, if he does, he must account for the profit so made'. And many more statements to the same effect could be extracted from the cases.

The question, however, remains, it being whether it is necessary for a plaintiff claiming an account to prove, that is to say to establish on the balance of probabilities, that the fiduciary did in fact use the knowledge, or the information, or the opportunity which came to him while he stood in that relationship and that he made the profit by such use. In my opinion it is not.

It is enough, I think, to show that the fiduciary gains his knowledge or opportunity within the fiduciary relationship; that it was knowledge or an opportunity which could have been used in the sense that it was relevant to the acquisition of the profit or benefit in fact acquired and that by doing what he did to acquire the profit or benefit the fiduciary placed himself in a position where his duty and interest did conflict or in a position where as a real and sensible possibility they may conflict. If that can be shown, and on the facts of this case the conflict was actual and not merely potential, it is not necessary to go further so as to prove that either the information or the opportunity was in fact used so as to acquire that benefit. The reason for that, I think, rests in policy and it is based, inter alia, on the impossibility of proof. That appears in one of the early cases. In Ex Parte Lacey [1802] EngR 75; (1802) 6 Ves Jun 625 at 627 Lord Eldon is reported to have said: 'I say, whether he makes advantage or not, if the connection does not satisfactorily appear to have been dissolved, it is the choice of the cestui que trusts, whether they will take back the property, or not; if the trustee has made no advantage. It is founded upon this; that though you may say in a particular case that he has not made advantage, it is utterly impossible to examine upon satisfactory evidence and the power of the court, by which I mean, in the power of the parties, in 99 cases out of 100 whether he made advantage or not'. Or, as Lord Eldon expressed it in a later case, Ex Parte James [1803] EngR 536; (1803) 8 Ves 337, 345: 'No court is equal to the examination and ascertainment of the truth in much the greater number of cases'. It is for this reason that the rule that a person in a fiduciary position is not to allow his interest to conflict with his duty is said to be absolute and inflexible. Should he do so then: 'The consequences of such a conflict are not discoverable. Both justice and policy are against their investigation': see Rich, Dixon & Evatt JJ in Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583 at 592. And for the same reason, in my opinion, whether a person so placed has in fact used advantages so acquired - knowledge or opportunity - is likewise 'non-discoverable' and proof that he did so is not required. The law was recently so laid down by Gibbs J, as he then was, in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 at 393. His Honour there said: 'However, the rule that a person in a fiduciary position is not entitled to make a profit without the knowledge and assent of the person to whom the fiduciary duty is owed is not limited to cases where the profit arises from the use of the fiduciary position or the opportunity or knowledge gained from it. The basis of the rule is that a person in a fiduciary position may not place himself in a situation where his duty and interest conflict. In Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461 at 471; Lord Cranworth LC stated the principle so far as it applies to directors in the following words: 'A corporate body can act only by agents, and it is of course the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application, that no-one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect.'

34 Wickham and Kennedy JJ each gave separate reasons for concluding that the appeal should be dismissed but their reasons are consistent with those of Burt CJ.

35 The rule applies in relation to a corporate opportunity which the principal company is specifically interested in pursuing but which a delinquent fiduciary arranges to be exploited by some other entity such as in Cook v Deeks [1916] AC 554 and it also applies to opportunities which do not come directly to a company but which the company could be expected to pursue if it had the opportunity to do so having regard to its existing business activities and its stated aspirations - see per Cooper J in SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 and Dwyer v Backpackers R Us Co Pty Ltd [2004] QSC 281; (2004) 50 ACSR 333.

36 The defendants seek to justify the course of events which they pursued by their pleas that there was no breach of fiduciary obligation involved in any of their activities. Counsel for the defendants places particular stress on the warnings of Fletcher-Moulton LJ in Coomber v Coomber [1911] 1 Ch 723, 728 - 729, and of Kennedy J in Green & Clara v Bestobell 16 - 17 about the dangers of relying upon general principles or trusting to verbal formulae - a point also emphasised by Laskin J in Canadian Aero Service Ltd v O'Malley [1974] SCR 592, 620; (1973) 30 DLR (3d) 371, 620 and by Lord Wilberforce in New Zealand Netherlands Society 'Oranje' Inc v Kuys [1973] 2 All ER 1222 where, speaking of the rule in Boardman v Phipps his Lordship wrote:

It retains its vigour in all jurisdictions where the principles of equity are applied. Naturally it has different applications in different contexts. It applies, in principle, whether the case is one of a trust, express or implied, of partnership, of directorship of a limited company, of principal and agent, or master and servant, but the precise scope of it must be moulded according to the nature of the relationship. As Lord Upjohn said in Boardman v Phipps at 123: 'Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case.' Nevertheless, the rule is not to be restricted and the basis of the rule is that a person in a fiduciary position may not place himself in a situation where his duty and his interest conflict - see per Gibbs J in Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373 at 393. Realising the plenitude of the fiduciaries' duties, the strictness of their application and the inevitability of the fiduciaries' liability in the event of breach still renders it necessary to identify the extent of the fiduciary obligation in any particular case in order to determine whether or not a breach has occurred. It is certainly the case that a plea will not be entertained, nor evidence received, to demonstrate that a breach of the obligation did not cause the profit or loss of which the person entitled to the performance of the duty complains but it still remains necessary to identify the scope of the fiduciary duty to determine whether or not there has been any such breach.

37 The defendants stress that there must be a clear identification of what is the scope of the alleged fiduciary duty having regard to the circumstances of the case. It is not until that duty has been independently identified and defined that it becomes possible to address the question of whether or not there has been any breach of the duty. In this regard, great care should be devoted to ensuring that the question of the identification of the duty and the determination of any breach is not approached in a manner which involves a circularity of reasoning. Unless these concepts are kept separate and independent a principled determination of whether there has been an actual breach of some objective duty will become impossible: Eastland Technology Australia Pty Ltd v Whisson [2005] WASCA 144.

38 No specific defence of change of position has been pleaded by any of the defendants but, nevertheless, the defendants plead a series of events, both before and after the alleged improper diversion of these opportunities to WANL, as constituting reasons why it would be inequitable to grant the plaintiff relief or relief to the extent claimed. These pleas, which have the doubtful advantage of being doctrinally opaque, were thought by the plaintiff to be capable of being claims for general relief on the grounds of change of position. No such potential effect has been disavowed by the defendants.

39 In particular, the plaintiff has submitted that these defences contend that, at some stage after the alleged diversion of the corporate opportunities to WANL, and in particular after the discovery of the rich nickel deposits at Forrestania, there was immense further investment in WANL by them and others with many capital raisings and the introduction of loan and other funds which contributed significantly to its enormous appreciation in value in market capitalisation on the stock exchange. The plaintiff's apprehension is that some or all of these investments, capital raisings and loans, and for that matter further share purchases by the defendants, are being relied upon to assert a change of position which would render it inequitable to impose a constructive trust or to require accounting to the extent claimed by the plaintiff.

40 The status of a change of position defence has not been entirely settled. Its existence and potential was comprehensively analysed by Lord Goff in Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548, 580 and it has also been recognised in David Securities Pty Ltd v Commonwealth Bank of Australia (Swiss Franc Case) [1992] HCA 48; (1992) 175 CLR 353. However, Lord Goff in Lipkin Gorman observed that it is commonly accepted that the defence should not be open to a wrongdoer. That is a view espoused in the academic writing - for example, Edelman, Gain Based Damages 96 - 97, an analysis which appears to have the support of Tipping J of the Supreme Court of New Zealand in Mark Moncrief Stevens v Premium Real Estate Ltd [2009] NZSC 15, [97] - [112]. The same view was taken by Cooke P in Liggett v Kensington [1993] 1 NZLR 257, 275. See also Malcolm Cope, 'Proprietary Claims & Remedies' Federation Press (1997) 123.

Identifying the nature and content of the fiduciary duties owed to the plaintiff by the first two defendants

41 There can be no doubt that it is the role of director which is the foundation of the duty the first and second defendants owed to the company. It is in that capacity that they are obliged to exercise powers and discretions and to make decisions in the interests of the company. But it is necessary to do more than just state the general principle. The content of the duty will depend on the particular factual setting. A good example of the principle and its application is to be found in the decision of the Privy Council in Cook v Deeks. That case concerned the liability of three directors of a company carrying on the business of railway construction contractors. The directors obtained a contract in their own names to the exclusion of the company in circumstances which amounted to a breach of duty by them and resulted in the imposition of a constructive trust of the benefit of the later contract. But Lord Buckmaster LC, speaking for a board including Viscount Haldane, Lord Parker of Waddington and Lord Sumner, said at 561 - 562:

It (the question of whether the company would have been at liberty to claim from the three directors the benefit of the contract which they had obtained from the Canadian Pacific Railway Company) cannot be properly answered by considering the abstract relationship of directors and companies: the real matter for determination is what, in the special circumstances of this case, was the relationship that existed between Messrs Deeks and Hinds and the company that they controlled. Now it appears plain that the entire management of the company, so far as obtaining and executing contracts in the east was concerned, was in their hands, and indeed, it was in part this act which was one of the causes of their disagreement with the plaintiff.

...

In other words, they intentionally concealed all circumstances relating to their negotiations until a point had been reached when the whole arrangement had been concluded in their own favour and there was no longer any real chance that there could be any interference with their plans. This means that while entrusted with the conduct of the affairs of the company they deliberately designed to exclude, and used their influence and position to exclude, the company whose interest it was their first duty to protect.

42 This is very much the complexion placed by the plaintiff upon the activities of Messrs Street and Cooper during the period from December 1999 until February 2002 when the ANPC opportunity was delivered into the hands of WANL together with the Cue tenements and all three defendants had secured a grant of shares or options on concessional terms which were never made available to the plaintiff.

43 Phipps v Boardman is authority for the proposition that a fiduciary may be liable to account for any profit derived notwithstanding that the trustee acted openly or without fraud and even where the principal had no power to exploit the profit-making opportunity for the trust itself without overcoming or satisfying some obstacle or formal requirement. The fact that the company itself was not able then to take up the opportunity which the fiduciary diverted is no defence to a claim by the fiduciary. That is expressed in emphatic terms in Regal Hastings Ltd v Gulliver, in Keech v Sandford (1726) Cas temp King 61; (1726) Eq Cas Abr 741; [1558 - 1774] All ER Rep 230; (1726) 25 ER 223 and in Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 558.

44 Before passing to the task of examining the extent of the duty in the present case, it is convenient to note the sequel to the decision in Green & Clara Pty Ltd v Bestobell which is reported as Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32, a decision of Brinsden J. The question there was whether, upon making an inquiry and taking account of profits made by an errant fiduciary, just allowances should be permitted for the risk and enterprise shown by the errant fiduciary in achieving the profits or benefits which could have enured to his principal. In concluding that while some allowances should be made for the effort taken to achieve the fruition of the venture, his Honour held that no regard should be had for the fact that the fiduciary had embarked upon a risky venture with little capital and few resources. The correct allowance for just salaries was only for a sum equivalent to salaries payable to executives of an established contractor plus something extra for the special work and effort which had been put into the tasks but no more. For a similar recent approach in restricting allowances for work and skill in improving the subject property by a delinquent fiduciary see Lym International Pty Ltd v Chen [2009] NSWSC 167, per Hamilton J, particularly at [9] - [14]. The delinquent fiduciary was refused any allowance for his time and trouble in procuring the completion of the properties which he carried out to increase his own profit. His Honour relied upon the deterrence of others as part of the justification for that course. It will be necessary to return to the topic of just allowances later in these reasons.

The particular circumstances of the plaintiff

45 In the case of the plaintiff, WAE, there was no employed staff. The company did not conduct any trade, nor did it have any income. Its only officers were its directors and a secretary who were all unremunerated. During 1999 and 2000 it was dormant or 'on hold' awaiting an opportunity or an investment which would allow it to pursue the plan of conducting an IPO and becoming listed on the ASX. That almost inevitably required the introduction of further capital and the opportunity to acquire nickel mining tenements which were prospective. It had a number of expenditure obligations in relation to tenements or interests in tenements which it held, including the Cue tenements, but these could only be met from capital or from loan funds. A number of tenements or interests in tenements had to be abandoned, or were abandoned, because of insufficient funds to meet that continuing expenditure.

46 From March 1998 until June 1998 Mr Brailey, Mr Streeter and Mr Cooper were the only directors of the plaintiff. When Mr Brailey resigned in June 1998, Messrs Streeter and Cooper were the only directors, with Mr Cooper as the company secretary.

47 From the time that Messrs Streeter and Cooper joined the board in 1998 the company was, at least in the short term, entirely dependent upon the provision of funds introduced either as capital or as convertible loans by Mr Streeter. He had promised that he would provide up to $250,000 in this way and had provided about $85,000 by mid-1999 but was slower than expected in providing the balance.

48 Where the alleged breach of fiduciary duty entails a director of a company diverting a commercial opportunity to some other vehicle, or placing himself in a situation where there is a conflict between the performance of the director's duties to the primary company and the performance of his duties or the extent of its interest in some other company or enterprise, a question arises as to whether or not the fiduciary is entitled to compete for financial benefit with a company of which he is a director. For there to be a breach of the conflict of duty or conflict of interest rules it is necessary for the given conflict to be 'real and sensible' and more than purely hypothetical: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 103 (Mason J); Chan v Zacharia (1984) 154 CLR 195, 205 (Deane J); Queensland Mines Ltd v Hudson (1978) 18 ALR 1, 3; and Consul Development Pty Ltd v DPC Estates Pty Ltd.

49 The need for a real and sensible conflict to exist is supported by the judgment of Dixon and McTiernan JJ in Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66, 81 - 82 notwithstanding that the question in that case was whether or not an employee was in breach of a fiduciary duty because of conduct alleged to be incompatible, in conflict with, or an impediment to, the fulfilment of his duty to the employer.

50 The core of the plaintiff's claim against the defendants is for disgorgement of alleged improper gains arising from breach of fiduciary duties by the first and second defendants, and for disgorgement of alleged improper gains made by the third defendant as a knowing participant and beneficiary of the breaches of the alleged fiduciary duties. The claim relies upon the established doctrine that a fiduciary must not derive a profit from, or by reason of or through the use of his fiduciary office without fully informed consent of the principal and also upon the rule that a fiduciary must not place himself in a position where there is a conflict of interests between his duty to his principal and his self-interest or an associated third party interest. The plaintiffs say that the defendants wrongly misused an opportunity to engage in the promotion, development and exploitation of the nickel mining and exploration venture. They submit that the duties of the first and second defendants, as directors, required them to promote the interests of the plaintiff with respect to the opportunity or, at least, not to profit personally by wrongful participation in the promotion of the opportunity for the interests of third parties and themselves.

51 In his celebrated essay 'Fiduciary Accountability For Business Opportunities' the then Professor R P Austin (now Austin J) (in Finn's 'Equity And Commercial Relationships') Law Book Company (1994) 141, at 147, posed questions which loom large in this case when he wrote:

Ιn company law cases, for example, we need to know whether there are any profit-making activities which a director is free to pursue for his own benefit. What if one of the directors in, say, the Regal (Hastings) case [1967] 2 AC 134 discovered a supermarket for lease nearby while searching for a cinema on the company's behalf, and took the lease himself? The solution to such a problem, as we shall see, depends more on the profit rule and the business opportunity doctrine than on the conflict rule. But for the minute, consider the problem solely in terms of the conflict rule. The company director's personal interest is clearly at stake but what is the duty with which his interest may come into conflict? There is surely no positive duty to report every business opportunity to the company, however remote it is, from the company's existing and probable future activities.

52 The defendants deny any breach of fiduciary duties. They contend that there was no duty binding upon them to offer to the plaintiff or to promote in the interests of the plaintiff an opportunity which they say came to them independently of their connection with the plaintiff. This contention relies upon the established dichotomy between 'prescriptive' and 'proscriptive' duties which establishes, at least in Australia, that it is only proscriptive duties which apply to the fiduciary office, cf Breen v Williams (Medical Records Access Case) (1996) 186 CLR 71 at 113 (Gaudron & McHugh JJ) and 134 - 135 (Gummow J). See also Chan v Zacharia.

53 Consequently, in the present case, the nature and content of the fiduciary duties to the plaintiff owed by the first and second defendants as directors require close examination. Similarly, essential to the disposition of this case, is a determination of the facts which led to the opportunity which was eventually availed of by the defendants in order to determine whether this was as a result of, or by use of, or through or proximately connected with their offices as fiduciaries for the plaintiff. Then, because of the enormous commercial success of the opportunity which, so the plaintiffs allege, was wrongly diverted, or alternatively wrongfully enjoyed, by the defendants the question of the nature and extent of the relief appropriate to the occasion is especially important because:

The stringent rule requiring a fiduciary to account for profits can be carried to extremes and that, in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.

The position of executive and non-executive directors

54 The defendants stress that they were non-executive directors of the plaintiff at the material times. They submit that this attenuated status, while not absolving them from duties as fiduciaries, is nevertheless relevant to determining the content of their duties in this particular setting. They say it implicitly reduced them and so is then relevant to the question of whether or not there was any breach of duty as alleged.

55 At [9.040] in 'Ford's Principles Of Corporations Law' (13th ed) the learned authors, citing Canadian Aero Services Ltd v O'Malley, argue that the equitable fiduciary principles apply to executive and non-executive company directors, including shadow directors, because of the nature of their office. This appears to be correct in principle. I do not see any basis upon which it can be contended that non-executive directors are outside the scope of these principles although, having regard to the facts of each particular case, the circumstances of their application may result in some difference because of the differences in the extent of knowledge or opportunity available to one or the other.

56 In Eastland McLure JA refers to the possible lack or attenuation of a fiduciary duty not to compete in the case of non-executive directors after having read the 'writings on the subject'. This reference by McLure JA in Eastland is at [2005] WASCA 144, 64 where her Honour remarks:

Austin has suggested ('Fiduciary Accountability For Business Opportunity' in P D Finn (ed) Equity In Commercial Relationships (1987) at 158 ff) that the court should develop a 'line of business' test to the effect that a director or officer may not take up an opportunity for profit if it is within the scope of the business of the company as currently carried on and as planned to be carried on. On my reading, however, this proposed stringent standard is confined to executive directors and officers.'

57 In that article Professor Austin wrote at 150 - 151:

Where the fiduciary occupies an executive office on a full-time basis and his principal is engaged in a commercial undertaking of wide scope, such as a business partnership or corporate business, then it is fair enough to make the fiduciary account whenever the opportunity which he has exploited is of concern and relevance to his principal. But at the other extreme, when the fiduciary is an unremunerated part-timer and the relationship is non-commercial, the 'concern and relevance' test surely takes us too far. For example, an executor of a deceased friend's estate should not be accountable for a profit made out of a personal stock market transaction merely because the will gives him a power as executor to trade in shares. In such cases, the kind of connection which should be required to render the fiduciary accountable is much more like Lord Russell's test than Roskill J. If the information upon the basis of which the executor has traded came to him because of his executorship then it is appropriate to make him account. But the unremunerated part-time executor should be allowed to wear two hats.

Now, there is an obvious way of overcoming this objection to Roskill J's formulation. It is to say that the 'concern and relevance' test is right for a full-time executive commercial fiduciary but it is not to be used in part-time non-commercial context, where Lord Russell's or some other test is more appropriate. This is a plausible move, and is consistent with Roskill J's judgment, but it has a significant implication. It means that we are recognising a special sub-rule for the full-time executive commercial fiduciary, a 'business opportunity' doctrine not dissimilar from the United States doctrine.

58 It is apparent that in these passages Professor Austin was promoting a possible thesis which might take account of various factors bearing upon the extent and content of the fiduciary obligation in dissimilar circumstances but in a way consistent with authoritative principle. This is plainly commendable but it does not amount to an authoritative judicial exigesis of a rule. Nor was such a thesis adopted by McLure JA in Eastland.

59 There are many dangers in dealing with abstractions or formulating duties with regard to some classification or label of office such as 'executive' or 'non-executive'. Some are that dealing in such abstractions will lead to a neglect of the particular facts and circumstances in which the individual fiduciary has been placed, and to attempt to formulate gradations of duty according to inexact and elastic classifications. I consider that a surer approach is to accept the established statements of principle and to apply them to the particular features of the individual case, always bearing in mind that for a breach of fiduciary duty to exist there must be a misuse of, or a disloyalty to, obligations owed by the fiduciary to the principal. The nature and the extent of those obligations are likely to be better discovered and identified by a scrutiny of the particular relationship than by any search for an all-embracing definition.

60 That Messrs Streeter and Cooper were non-executive directors of the plaintiff is relied upon to circumscribe the fiduciary duties which they owed. It is put by the defendants that a non-executive company director has only those powers which are conferred by the constitution of the company and that in the present case the directors together were given powers concerning the management of the company under its articles (exhibit 292 article 14.1) 14 TB 1110 at 12038, which meant that neither the first nor second defendants owed any duty to devote themselves exclusively or actively to the commercial advancement of the plaintiff. Furthermore, the defendants submitted that there was no discrete fiduciary duty imposed on the first or second defendant not to compete with the plaintiff, especially in their case as non-executive directors.

61 The submission that, only being executive directors, Messrs Streeter and Cooper were not in breach of any fiduciary duty cannot be accepted in the present situation. There is no authority which positively endorses that proposition. For the same reasons why there may be a variation in the extent of a common law duty or a statutory duty by a director, when it comes to the performance of reasonable care and due diligence because of the divisions of responsibilities associated with the allocation of duties, as subsequently examined in the authorities dealing with non-directors there may be a variation in the extent of the duty of a fiduciary who is a director according to the divisions of responsibilities and the allocation of duties in the particular position in which he or she is placed. To accept this is to concede no more than that the extent of the duty will, in part, depend upon the nature of the responsibilities allotted to the fiduciary but this does not support any general conclusion that there is some attenuation of the fiduciary duties of a director according to whether or not he is a non-executive or executive director, or of the responsibilities of the first or second defendants in this case.

62 The role of a non-executive director has been addressed in the authorities. In On The Street Pty Ltd v Cott (1990) 101 FLR 234, 242; (1990) 3 ACSR 54, 61 a company unsuccessfully sought an injunction against one of its former executive directors, who had resigned, to prevent her becoming a director of another company which conducted a business in competition with the plaintiff. Interlocutory injunctions were dissolved after the hearing once it became apparent that there was no evidence to establish that the former director, in her new role, was using or misusing confidential information which had been derived from her office of executive director of the plaintiff, nor was there evidence that she would divulge confidential information. Powell J held that there is no general prohibition on a director, who is not an executive director, being director of a rival company provided that information of the first company is not divulged or used for the benefit of the rival company. The basis for this conclusion is to be found where his Honour said:

Despite the development of the law affecting the position and duties of directors of a company, there does not yet seem to have been accepted as a general principle, affecting all directors, any prohibition against a director of a company being a director of another company which competes in a way of business with the first company; indeed, such dicta as may be found in the cases would suggest that, at least if he not be an executive director, a director may be a director of a rival company, so long as he does not divulge to, or use for the benefit of, the rival company confidential information of the first company: see, for example, London v Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165; Bell v Lever Bros Ltd [1931] UKHL 2; [1932] AC 161; Berlei Hestia (NZ) Ltd v Fernyhough (1980) 2 NZLR 150 at 161; Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238. In the case of an executive director such as a managing director it may be that, even in the absence of an express term in any employment contract requiring the director to serve the company exclusively, some such term would be implied: see, for example, Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162; Thomas Marshall (Exports) Ltd v Guinle [1978] 3 WLR 116.

63 The decision in Riteway Express Pty Ltd v Clayton (referred to in On The Street) is another case in which an injunction was sought against a company director, a non-executive director, to prevent him from acting as a director for a rival company. In that case McLelland J said at 240 - 241:

The question of the legal propriety of a non-executive director of a company engaging in a business either on his own account or as a director of another company in competition with that of the first company is one to which, in the present state of development, the law does not have a simple answer: see, eg, 'Ford - Principles of Company Law' 4th ed (1876) par 1529 at 414 - 415

...

It seems to me that much depends in this situation on the degree of likelihood of confidential information being available to the person concerned in his capacity as a director of the first company which would be likely to be exploited in his other capacity, and for this purpose it seems to me that confidential information would embrace information in the first category in the Facenda Chicken case [1986] 3 WLR 288, that is, information which it would be a breach of duty by an employee to disclose during the course of his employment. It seems to me that a director ought not to be under any less onerous obligation than an employee in this regard. It is, of course, possible and, indeed, desirable to distinguish between the position of the executive director, which the first defendant was, but now is not, and a non-executive director, which the first defendant now is; and it would appear that a greater degree of latitude should be permitted to a non-executive director, but the question still comes down to what I have earlier described as the degree of likelihood of confidential information being wrongly used, whether consciously or unconsciously.

64 On The Street and Riteway Express each involved attempts to prevent by injunction an existing or former director from participating in the management of a rival company. The cases concerned whether or not there was a material risk that the director concerned would act in a way which would infringe some legal right of the first company. They did not address a situation where a director was said to have acted inconsistently with his or her duties to the first company giving rise to an obligation to account or to some other entitlement to equitable relief. Therefore, they do not provide any firm basis for concluding that the only way in which a director of one company, while being a director of a rival, might infringe the rights of the first company would be through the disclosure or misuse of confidential information, although that would certainly be one way in which a breach of duty would occur. Neither of the cases examines the consequences of a director of two companies, which are rivals, infringing the conflict of interest duty of a fiduciary or the no profits rule. They do demonstrate an acceptance that it is not a breach of duty, per se, for a person to be simultaneously a director of two companies which are in competition. But that does not mean that while a director of the second competing company, the same person who is also a director of the first, may not in various ways infringe the fiduciary duties which he owes to the first company. This is, as McLelland J acknowledges, a difficult area, but neither of those cases undertake any analysis in this present case.

65 The question of a comparative attenuation of the extent of the duty by non-executive directors in comparison to the duties of an executive director has arisen more commonly in cases of alleged negligence, or in those concerning the scope of the duties of skill and care resting upon non-executive directors. In AWA Ltd v Daniels t/as Deloitte Haskins & Sells (1992) 7 ACSR 759, at 869 - 875, Rogers J examined in close detail the authorities bearing on the question of the liability in damages by directors for a breach of the duty of care and diligence which they owed as non-executive directors to the company. His Honour accepted that both executive and non-executive directors could be liable for damages in negligence for lack of reasonable care and diligence in the management of the company's affairs. In examining the particular facts, his Honour concluded that there was no lack of reasonable care established against the non-executive directors in that case because of the limited information made available to them by other officers of the company. Because of that fact they were entitled to rely, and did rely, upon information and documentation which came to them from executives of the company. Rogers J held that they were justified in trusting the accuracy of the information supplied, notwithstanding that, unknown to them, it was inadequate.

66 Similarly, in ASIC v Rich [2003] NSWSC 85; (2003) 44 ASCR 341 Austin J was concerned with an action commenced by ASIC against three executive directors and a non-executive chairman of directors for alleged breach of their statutory duty of care. At [60] Austin J referred to the remarks of Rogers J in Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438 to the effect that non-executive directors are not required to give continuous attention to the affairs of the company. But this was in a setting where the point at issue concerned the responsibilities of a non-executive chairman of directors in a large trading company listed on the ASX. Rather than attempt to determine the scope of the duty resting upon any particular director, or category of directors, merely by reference to whether or not that individual was an executive or a non-executive director or by some other appellation, Austin J adopted the approach taken by Romer J in Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 where his Lordship said at 427:

In order, therefore, to ascertain the duty that a person appointed to the board of an established company undertakes to perform, it is necessary to consider not only the nature of the company's business, but also the manner in which the work of the company is in fact distributed between the directors and other officials of the company, provided always this distribution is a reasonable one in the circumstances, and is not inconsistent with any express provisions of the articles of association.

67 Later Austin J addressed similar issues in ASIC v Vines [2003] NSWSC 1116; (2003) 48 ACSR 322. This was a dispute about admissibility of expert opinion evidence to demonstrate what a reasonably competent chief financial officer should do. The issue had arisen in the course of an action by ASIC alleging a breach of s 232(4) of the Corporations Law. His Honour referred to a series of authorities which suggested that there was, as Professor Ford put it in 'Principles of Company Law' (4th ed) page 417, no common law standard of a reasonably competent company director analogous to the reasonably competent member of a particular profession or trade such as an architect, solicitor, physician or builder, against whom the conduct of a defendant could be measured when determining whether reasonable care was used. His Honour held that the position of chief financial officer had become a recognised position in large corporations and that there is identifiable, specialised skill attached to that office, so laying the basis for the admissibility of the contested expert evidence.

68 All of these three cases concerned the standard of care required or expected of a director, company chairman, or non-executive director of different companies of a size and complexity which are not comparable with that of the plaintiff in this present litigation. The issues there under examination are akin to the identification of the prescriptive duties applying to the office of a director both at common law and pursuant to the Corporations Law. They are distinct, in my mind, from any consideration of the nature and extent of fiduciary duties applying to a director of a company, and in particular the no conflict or no profit rules which, as counsel for the defendant so assiduously asserted, are proscriptive and not prescriptive. As Owen J has demonstrated in The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] & Ors [2008] WASC 239, the foundation of those proscriptive fiduciary duties is maintenance of the obligation of loyalty and honesty due by the directors to the company. Those duties are concerned with the misuse of the fiduciary office and, in doing so, concentrate on actions, not omissions, by the fiduciary by which there has been a subversion of the undivided loyalty of the fiduciary to the principal.

69 I immediately realise that the phrase 'subversion of an undivided loyalty' involves a number of latent premises. In this present case, it includes, as an aspect of the duty of loyalty, an obligation not to take the particular opportunity or profit for the fiduciary personally or for some third person. Efforts have been made by counsel for the defendants to define that duty as being not to take an opportunity or a profit which 'belongs' to the principal, to utilise a phrase applied by Cooper J in SEA Food International Pty Ltd v Lam at 46 but I do not consider that, in the present case, this is an adequate test. The connotation of 'ownership' which the phrase implies suggests that there will be no liability if the principal did not own the opportunity or could not itself have availed of it. But, as is clear from Phipps v Boardman; Attorney-General for Hong Kong v Reid [1993] UKPC 2; [1994] 1 AC 324 and Warman International v Dwyer, a fiduciary may be in breach of duty and accountable to his principal notwithstanding that the principal did not 'own' the opportunity or could not have taken advantage of it for itself. The false fiduciary who accepts a bribe is accountable to his principal notwithstanding that the principal had no prospect of ever being offered or receiving a bribe; and a fiduciary who takes advantage of an opportunity without the informed consent of the principal will be accountable notwithstanding that the principal itself would not have been offered or, if offered, would not have been able to avail of the opportunity - Cook v Deeks and Consul Development Pty Ltd v DPC Estates Pty Ltd.

70 Counsel were unable to cite any case in which a comprehensive description of the ingredients of these principles had been expounded. A number of the cases, including Eastland, expressly acknowledge that the law in this area is still in a state of development. It is important to appreciate that, however the application of the principles might be formulated, any such formulation must take into account that it would be insufficient to confine the principle to cases in which the opportunity or the chance of profit was one which could have been successfully exercised by the principal. The missing ingredient appears to me to be some adequate description of an activity which derogates from the fiduciary's loyalty to the principal or which imperils, by collateral temptation, that loyalty. The observations of Lord Templeman in AG for Hong Kong v Reid at 331 convey this dimension of the obligation in the clearest of terms.

71 There are so many facets to the scope of the no-conflict duty and the no-profit duty affecting fiduciaries that it is very difficult to devise any form of universal or embracing test or formulation. One must therefore proceed on the footing of a recognition of the principles and an awareness of the dangers and fallacies of circular reasoning. This being so, it seems that there is very little utility in attempting to construct one test for executive directors and another for non-executive directors or to assume that the distinctions between those two varieties of directors are always the same or even similar. The role of a director as a fiduciary must be determined having regard to the position in which the individual person is placed in the corporate architecture in which he resides.

72 In a case like the present it might only ever be possible to identify and apply this ingredient of the principle from a close examination of the facts. But in doing so, one must be constantly alert to the risks of reasoning by tautology by assuming that the existence of a fiduciary duty defines its content. Perhaps one way of putting it is to consider whether, if the opportunity had been presented to WAE it would have been one which that company would have wished to pursue assuming, for these purposes (even if contrary to the fact), that it would have been able to do so. This suggests that actual or potential interest in the opportunity by the principal, had it been disclosed to it, is a factor for consideration in determining the scope of the duty. It seems that that is a justifiable conclusion notwithstanding that it may not apply in every case.

73 Mr Brailey resigned as a director on 2 June 1998 but returned as a director on 2 July 1998 after the resignation of Mr Moeller at the end of June 1998. From then until Mr Brailey's resignation on 8 March 2000 the board of the plaintiff was comprised solely of Mr Brailey, as chairman, Mr Streeter and Mr Cooper (exhibit 170 par 58). From July 1998 the plaintiff's registered office was changed to Mr Cooper's place of business at T A Mairs & Co in Charles Street, South Perth and all the company secretarial and accounting records went to that firm. Its exploration and other operational documents went to Mr Streeter's office at Jet Fresh. Mr Cooper took over as company secretary on 14 July 1998. Accordingly, at the critical time from July 1999 until March 2000 there were only three directors of the plaintiff, each of whom was part-time and unremunerated. The operational documents were in the hands of Mr Streeter and Mr Cooper and they had the authority to operate on the bank account which Mr Streeter had established at the Commonwealth Bank - (Exhibit 170, par 74 and Exhibit 232, par 131).

74 A new director, Mr Mentiplay, was appointed to the board of the plaintiff in March 2000 but there is no evidence, oral or documentary, that he attended board meetings or took any role in the affairs of the plaintiff except for one meeting of directors on 28 March 2000 when his name was recorded as an apology (Exhibit 93 - 9 TB 661). Mr Tom Moeller, the previous managing director of the plaintiff, resigned on 25 June 1998.

75 In these circumstances it is virtually meaningless to attempt to establish, let alone to maintain, a distinction between executive and non-executive directors of the plaintiff over the period from July 1999 until March 2000. There were only three directors. All the work of the company was performed by them or by Mr Cooper in his capacity as company secretary. So far as there was any established division of responsibility or allocation of duties, it occurred only on a de facto basis. Mr Streeter was the source of all funds for the continued operations. He effectively made or approved all the executive decisions of the company and he and Mr Cooper discharged its routine responsibilities. Mr Brailey conferred with them and attended at occasional board meetings. Consequently, there appears to me to be no ability at all to divide the scope and content of the fiduciary duties of the first and second defendants along the executive/non-executive director dichotomy. They were effectively the agents of the company for all purposes and they were directly involved in the conduct of all the company's activities. To the extent that it remained feasible, they were responsible for the pursuit of the company's goals in eventually listing on the ASX, conducting an IPO and, to that end, obtaining suitably attractive mining prospects which could be commended to the market. In a very real sense, they were the company notwithstanding that Mr Brailey also had similar responsibilities. In my view, this situation amplified, rather than circumscribed, the extent of the fiduciary duty owed to the plaintiff by each of the directors, including the first and second defendants.

76 In Equity Restitution & Fraud by Dr John Glover, Butterworths (2004) at 3.25 the learned author observes:

Second, the scope of the conflicts rule applicable to corporate officers is changing. Law in the area is becoming more stringent, particularly in regard to directors: Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779. At the moment, the scope of directors' duties to companies is attenuated by some unlikely rules (see Meagher Gummow & Lehane at [1014]).. Interlocking directorships are permitted. Liability to the conflicts rule for nominee directors representing outside interests can be limited by a company's constitution or the unanimous approval of its shareholders: Russell v Northern Development Corporation Ltd [1992] BCLC 1016 and Ford Company Law 9.420 - 9.460. The principle in London & Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 169 affirmed Bell v Lever Bros Ltd [1931] UKHL 2; [1932] AC 161, considered in Rosetex Co Ltd v Licata (supra) and Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238, still allows a director to simultaneously serve as the director of one or more competing companies. This freedom may soon be curtailed.

77 The defendants rely on the authority of London & Mashonaland Exploration Co v New Mashonaland Exploration Co [1891] WN 165 as evidently approved in Bell v Lever Brothers Ltd [1931] UKHL 2; [1932] 1 AC 161 at 195 for the proposition that it is not impermissible for a company director to be a director of a competing company, or personally to carry on a competing or similar business to that conducted by the principal company. They cite a series of instances in which that doctrine has been apparently endorsed, including On The Street Pty Ltd v Cott; Dunn v CTK Engineering Pty Ltd [2002] NSWSC 365 [66]; Mordecai v Mordecai (1988) 12 NSWLR 58, 66 - 66; Riteway Express Pty Ltd v Clayton; Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200 [76]; In Plus Group Ltd v Pyke [2002] EWCA Civ 370 [71], [77], [79] - [90], Eastland at [69] and Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779, 782. However, upon close examination, none of those cases deals with a situation analogous to the one which has arisen in this present litigation, nor do they contain dicta that a director may utilise connections, advantages or assets associated with his directorship of one company to secure and promote an opportunity by a second company of which he is also a director. Insofar as the dicta in these cases go, they suggest the contrary.

78 The Mashonaland doctrine is rather limited. It does not extend beyond the proposition that merely being a director of one company, which is in competition with another company of which the person is also a director, does not constitute any breach of fiduciary duty at least insofar as no misuse is being made of confidential information or of assets or connections of the other company. This approach is itself based on the assumption that a director in such a dual position might occasionally be faced with a situation where there is a direct conflict of interest between some decision or activity of one of the companies in which he may otherwise be expected to participate and the interests of the other but that in such circumstances the director will recognise the conflict and abstain from participating in the action or in the activity. There was certainly no abstention from participating in the development of the ANPC proposal by WANL, including the acquisition of the 30% interest in the Cue tenements from Golden Granite by either Mr Streeter or by Mr Cooper.

79 Participation in the activities of companies in competition by directors who hold office in each of the two companies may be tolerable to the degree recognised in Mashonaland, but even that proposition has come under increasing question recently. This scrutiny is not merely by courts in Canada which, so the defendants submit, recognise a more extensive role of the fiduciary obligation than has been received in this country (Canadian Aero Services Ltd v O'Malley - the 'Canaero' case). A far more restrictive view of the application of the decision in Mashonaland than advanced for the defendants and consistent with appreciation of the principle, is to be found in a recent decision of the Scottish Court of Session in Commonwealth Oil and Gas Co Ltd v Baxter [2007] Scott CS CHOH 1. There Lord Reed [2007] CSOH 198, in an extensive analysis at [160] - [163], [175] - [180], observed at [175]:

I am unable to accept the submission by counsel for Mr Baxter, based on the decision in London and Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd and on a passage in the speech of Lord Blanesburgh in Bell v Lever Brothers Ltd, that the director's fiduciary obligation, so far as relevant to his dealings with third parties, is merely to forbear from using for his own benefit the property of the company or information which is confidential to the company. The brief report of the decision in the Mashonaland case (seemingly an ex tempore judgment on an interlocutory application for injunctive relief) contains no discussion of fiduciary obligations (other than in relation to confidential information). The passage referred to in Lord Blanesburgh's speech in Bell v Lever Brothers Ltd (at pages 193-195) is not an exhaustive statement of the principles established by the earlier authorities (as Roskill J noted in Industrial Development Consultants v Cooley [1972] 1 WLR 433 at page 448), and cannot have been intended to depart from those authorities.

80 Similarly, in the judgment of the English Court of Appeal in Foster Bryant Surveying Ltd v Bryant, where Rix LJ at [70] noted the reservations expressed about the so-called doctrine in Mashonaland without considering it necessary to resolve the controversy.

81 A criticism of the decision in Mashonaland is found in the article 'The Directors' Fiduciary Duty Not To Compete' by Christie (1992) 55 MLR 506 where, at 516, the author suggests that competitive activities by directors are not permitted following the observations of Gibbs J in Consul Developments v DPC Estates Pty Ltd. notwithstanding the decision in Mordecai v Mordecai. It is also said there that the leading modern Canadian authority is against the toleration of such a form of competition - the Canaero case.

82 The potential for inconsistency in the rule that a director may be a director of another competing company without transgressing the rule, and the general obligations of fiduciaries was noted in an extra curial address by Sir Douglas Menzies, who remarked that 'it would be strange if what is forbidden to an employee independently of an express contractual prohibition is permitted to a director who occupies a fiduciary office'. His Honour observed that:

It would be undesirable here to go further than to say that when the problem whether a director is at liberty to compete with his company either directly or indirectly, arises again, it can be anticipated that it will be approached on the footing that a director does occupy a fiduciary position and that the general principles applicable to a person in such a position will be applied, rather than attention being concentrated exclusively upon the absence of any contractual obligation to devote time to his company's affairs and to refrain from putting himself in a position where his duty to his company would conflict either with his own interest or with the duty he undertakes to someone else. 'Company Directors' (1959) ALJ 156, 159 - 160

83 Certainly, McClelland J in Riteway Express Pty Ltd v Clayton concluded that a non-executive director of a company who engages in a business either on his own account or as a director of another company, in competition with the business of the first company, may be restrained from using confidential information which could be exploited by the second company. The absence of any principle prohibiting a director competing with his company was recognised by Young J in Rosetex Co Pty Ltd v Licata (1994) 12 ACSR 779, although in that case the finding was that there had been no improper use of information made by the director nor any confidences disclosed.

84 The controversy over whether or not Mashonaland retains its status as representing the law also evoked attention in Plus Group Ltd v Pyke, a decision of the Court of Appeal where Brooke and Sedley LJJ appeared to differ over the status of the rule. This lack of resolution of the status of Mashonaland was noted by Professor Ross Grantham in 'Can Directors Compete With A Company?' in (2003) MLR 109 . In Plus Group Ltd Sedley LJ would have rejected the Mashonaland decision after an extended examination of the authorities. But Brooke LJ said at [72]:

There is no completely rigid rule that a director may not be involved in the business of a company which is in competition with another company of which he was a director. A rather startling illustration of this proposition can be seen in the case of London & Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165. Lord Mayo was a director and chairman of the board of directors of the first company which was incorporated for the purpose which its name suggests. He never in fact acted as a director, or attended a board meeting, or agreed, either expressly or in the articles of association, not to become a director of any similar company. Four months later the second company was formed for the same purpose. The first company had had some success with the share prospectus advertising Lord Mayo's name as director and chairman, and it took umbrage when it saw its rival's prospectus with Lord Mayo's name at the head of its list of directors [73]. After summarising the facts, and adding that there was no contract, express or implied, obliging Lord Mayo to give his personal services to the plaintiff company and not to another company, Chitty J dismissed the plaintiffs' application for an injunction. He said that no case had been made out that Lord Mayo was about to disclose to the defendants any information that he had obtained confidentially in his character of chairman, and that an analogy sought to be drawn between the present case and partnership was incomplete.

85 Brooke and Parker LJJ each noted the criticisms which had been made of the Mashonaland doctrine, but did not consider that it was an appropriate case to examine the scope and application of that principle, recognising that there was no completely rigid rule that a director may not be involved in the business of a company which is in competition with another company of which he was a director [72]. In his more extensive examination, Sedley LJ disapproved of the scope suggested for the doctrine at [79] and following, culminating with the observation at [88]:

It may be that Chitty J would still have decided the Mashonaland case as he did on the facts before him, but there has never been any warrant for treating his decision, or therefore its endorsement in the House of Lords, as a licence for directors or other fiduciaries to put themselves or to stay put in situations where their duties and/or interests can come into conflict.

86 The uncertainty accompanying this rule was also recognised by the Court of Appeal in Eastland Technology Australia Pty Ltd v Whisson. McLure JA delivered the principal judgment with which Malcolm CJ and Steytler P agreed. At [69] her Honour observed:

There is uncertainty as to whether a director is prohibited from competing with the company. There is authority in favour of directors being permitted to compete: see London & Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165 approved by Lord Blanesburgh in Bell v Lever Bros Ltd [1931] UKHL 2; [1932] AC 161 at 195. Unease has been expressed by the courts and commentators with that view of the law.

87 However, when dealing with the role of a director as a fiduciary her Honour said at [64]:

The law on misuse of corporate opportunities is in a state of development and a number of tests of differing scope have been formulated. They include: whether the opportunity was obtained 'by reason and in the course of' the office of director (Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 145, 147 per Lord Russell); whether the opportunity received by the director was of 'concern' and 'relevance' to the company (Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 at 451); whether there is a 'sufficient temporal or causal connection' between the fiduciary obligation and the opportunity (SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 at 557); a multiple factors test where regard is had to, inter alia, the 'position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director's or managerial officer's relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private' (Canadian Aero Services Ltd v O'Malley (1973) 40 DLR (3D) 371 at 391). Austin has suggested ('Fiduciary Accountability For Business Opportunities' in PD Finn (Ed) Equity In Commercial Relationships' (1987) at 158 ff) that the courts should develop a 'line of business' test to the effect that a director or officer may not take up an opportunity for profit if it is within the scope of the business of the company as currently carried on and as planned to be carried out. On my reading, however, this proposed stringent standard is confined to executive directors and officers.

88 In SEA Food International Pty Ltd v Lam Cooper J did not consider that it was impermissible per se for a director of a company to be, at the same time, a director of a competitor, or to personally carry on a competing business. He relied on Bell v Lever Brothers Ltd; Re Broadcasting Station 2GB [1964 - 5] NSWR 1648, 1663; Rosetex Co Pty Ltd v Licata. Nevertheless, his Honour recognised that a director must account to a company of which he or she is a director for any benefit or gain which has been obtained or received in circumstances where a conflict or a significant possibility of conflict existed. This is a conflict between his or her fiduciary duty to the company, and his or her personal interest in the present or possible receipt of such a benefit or gain, obtained or received by use of, or by reason of, his or her position or of opportunity or knowledge resulting from it: Chan v Zacharia 199 per Deane J.

89 In SEA Food International Pty Ltd v Lam Cooper J adopted an approach which is helpful in this present case, namely:

It is not instructive, in my view, to focus close attention upon the language used in the authorities and other writings to which I have referred to seek to draw from them an exact formulation of the relevant test. What is to be drawn from the authorities is that a director will act in breach of his fiduciary obligations to a company (the scope of which will vary in the circumstances of each particular case) if he or she takes up an opportunity for profit where there is a sufficient temporal and causal connection between the obligations and the opportunity. What is a sufficient connection will depend, in any particular case, upon a number of factors, including the circumstances in which the opportunity arises and the nature of it and the nature and extent of the company's operations and anticipated operations.

90 It seems, therefore, that the rule recognising that to a limited extent a director may be a director of another company which competes with the business of the first company rests on somewhat fragile grounds. But whether this be so or not, there is no authority to support the proposition that because of this the director in question can take for the benefit of the second company an opportunity of which he became aware while a director of or associated with the first.

91 When dealing with the scope of the fiduciary duty by Messrs Streeter and Cooper to the plaintiff, counsel submitted that contractual provisions may affect the scope of the fiduciary duty and that in cases dealing with an employee's fiduciary duties to the employer, the content of the duty depends as much as anything upon the nature and terms of the employment because the fiduciary relationship must be consistent with, and conform to, the terms of the contract. For this somewhat unexceptionable proposition counsel cited Victoria University of Technology v Wilson [2004] VSC 33; (2004) 60 IPR 597 [145] where Nettle J cited Mason J in the Hospital Products case and also referred to the decision of French J, as his Honour then was, in University of Western Australia v Gray [2008] FCA 498, [1359] - [1360]; [2008] FCA 498; (2008) 246 ALR 603, 629. That submission does not lead anywhere in the present case. The plaintiff does not assert that either Mr Streeter or Mr Cooper was ever its employee. Nor do the first or second defendants refer to any contractual provisions between them and the company as possibly attenuating or circumscribing their fiduciary duties to the company as directors. Furthermore, in Hospital Products, at the passage cited (at page 97) Mason J said:

It must not be forgotten that in a large number of instances the employee's fiduciary duty to his employer, not to compete or not to make a profit at the employer's expense, will be an implied term in the contract arising from the obligation to be just and faithful to the employer and, when that is the situation, will be just as powerful and effective as if it were an express term of the contract of employment.

the fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

93 There may indeed be contracts where the terms, whether express or implied, include provisions to the effect that the employee is free, in a manner specified or authorised, to compete to a certain extent with the employer or to engage in other external activities which may be comparable to the employer's business and which may result in a profit or benefit for the employee.

94 Again Mason J recognises this in Hospital Products at 99 where his Honour said:

But entitlement to act in one's own interests is not an answer to the existence of a fiduciary relationship, if there be an obligation to act in the interests of another. It is that obligation which is the foundation of the fiduciary relationship, even if it be subject to qualifications including the qualification that in some respects the fiduciary is entitled to act by reference to his own interests. The fiduciary duty must then accommodate itself to the relationship between the parties created by their contractual arrangements. And entitlement under the contract to act in a relevant matter solely by reference to one's own interests will constitute an answer to an alleged breach of the fiduciary duty.

95 Mason J expressed approval of the view advanced by Sir Frederick Jordan in his Chapters On Equity, 6th ed (1947) at page 115, and went on to say at 103:

Accordingly, the fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the persons whom he is bound to protect: Aberdeen Railway Co v Blaikie Brothers (1854) 1 Macq 461 at 471. By linking the obligation not to make a profit or take a benefit to a situation of conflict or possible conflict of interest the proposition, in accordance with the authorities, (a) excludes the relevance of an inquiry into the actual motives of the fiduciary; and (b) excludes restitutionary relief where the interests of the fiduciary is remote or insubstantial.

96 A clear approach to the identification of the scope of fiduciary duty can be found in the judgment of Bryson J in Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, where his Honour says, at 15:

It is in no way difficult but is ordinarily to be expected that a person under a fiduciary obligation to another should be under that obligation in relation to a defined area of conduct, and exempt from the obligation in all other respects. Except in the defined area, a person under a fiduciary duty retains his own economic liberty. This appears from a number of expressions in judgments to which I was referred, including the following.

Birtchnell v Equity Trustees Executive and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384 at 408 per Dixon J (speaking of partnership):

'... The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm.'

However, in my opinion it would not be right to impose on the parties fiduciary obligations wider or different to those which in careful terms they imposed on themselves. The parties' agreement is the prime source for discerning the existence of a fiduciary obligation.

98 While no express contractual obligations were imposed on Messrs Streeter or Cooper, as directors of the plaintiff they are obliged to act in good faith and in the interests of the company when dealing with its affairs. The relationship between this obligation and their activities, either privately or as directors of WANL, must be derived from the connection between the opportunity presented by the ANPC project, which came to them on the referral of Mr Brailey, in its implementation utilising the name and other assets of the plaintiff, and in the congruence of commercial purposes between the plaintiff and the new venture. I am satisfied from the evidence that, on each and all of those determinants, there was a real connection between the activities of Messrs Streeter and Cooper in their roles as promoters of the ANPC venture and later as directors of WANL, and their fiduciary obligations as directors of the plaintiff. While they may not have fully realised it, they undoubtedly sensed it sufficiently to disguise the nature and extent of their promotion of the new venture.

99 There is no contractual provision of any kind, whether express or implied, to the effect that notwithstanding their offices as directors of the plaintiff, either Mr Streeter or Mr Cooper was free to act in his own interest or to make or pursue a gain for himself or a related third party, in circumstances where there was a real or substantial possibility of a conflict between those interests and those of the plaintiff. It is also necessary to emphasise that this is not a circular or tautological proposition simply because it refers to a conflict with the interests of the plaintiff. Rather, it is a recognition that the plaintiff's interests must be respected by the defendants and that it will be a breach of fiduciary duty for the defendants to act if there is a real or possible conflict of interests between their own personal interests, or the interests of some third person, and those of the plaintiff unless this is authorised by the terms of their engagement or is the subject of express assent by the plaintiff. This is the preferable sequence for analysis of the obligations rather than by commencing with the inevitably polemical proposition that a director is entitled, in certain circumstances, to be a director or other officer of a second corporation whose business competes with that of the other corporation of which he is also a director. Justification for that proposition, which the authorities demonstrate holds good in certain circumstances but not all, depends upon the nature of the interests of the first company and the extent to which the actions of the director, in advising or acting on behalf of the second corporation competitor, are inconsistent with the duties to the first corporation.

100 The plaintiff submits that the underlying liability of the defendants is to account for the gain made by the misuse of the fiduciary position. It relies upon the following passage in the judgment of Mason J in Hospital Products Ltd (115) where the point is made that whether the advantage gained by the errant fiduciary was as the result of fraudulent or non-fraudulent breach of duty there is no difference in equity for the restitutionary relief which should be given because:

In every case the wrongdoer's underlying liability is to account for the gain that he has made.

101 However, as his Honour went on to illustrate, even in cases where a constructive trust over the entire asset derived by the errant fiduciary is the chosen relief, as it was in Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488, the rationale must be that the subject matter of the constructive trust represented the measure of the profit or benefit which was obtained in breach of fiduciary duty. This is because the imposition of the constructive trust is merely a means of giving effect to the fiduciary's basic liability to account. It is necessary in this case to be satisfied that the value of the subject matter of the constructive trust is directly attributable to the claimant and was not formed in part from resources and benefits provided, or time and effort expended, by the errant fiduciary or others. This approach was adopted by Deane J in Chan v Zacharia and by the entire court in Warman v Dwyer.

102 If, however, the subject matter of the improper benefit derived by the fiduciary should subsequently be converted into another form of asset and in that form appreciates substantially because of market or similar forces, the benefit of the appreciation should inure for the principal and not for the errant fiduciary.

103 In Attorney-General (Hong Kong) v Reid 331 Lord Templeman, speaking for the Board, observed:

When a bribe is offered and accepted in money or in kind, the money or property constituting the bribe belongs in law to the recipient. Money paid to the false fiduciary belongs to him. The legal estate in freehold property conveyed to the false fiduciary by way of bribe vests in him. Equity however which acts in personam insists that it is unconscionable for a fiduciary to obtain and retain a benefit in breach of duty. The provider of a bribe cannot recover it because he committed a criminal offence when he paid the bribe. The false fiduciary who received the bribe in breach of duty must pay and account for the bribe to the person to whom that duty was owed. In the present case, as soon as [the first respondent] received a bribe in breach of the duties he owed to the Government of Hong Kong, he became a debtor in equity to the Crown for the amount of that bribe. So much is admitted. But if the bribe consists of property which increases in value or if a cash bribe is invested advantageously, the false fiduciary will receive a benefit from his breach of duty unless he is accountable not only for the original amount or value of the bribe but also for the increased value of the property representing the bribe. As soon as the bribe was received, whether in cash or in kind, the false fiduciary held the bribe on a constructive trust for the person injured. Two objections have been raised to this analysis. First it is said that if the fiduciary is in equity a debtor to the person injured, he cannot also be a trustee of the bribe. But there is no reason why equity should not provide two remedies, so long as they do not result in double recovery. If the property representing the bribe exceeds the original bribe in value, the fiduciary cannot retain the benefit of the increase in value which he obtained solely as a result of his breach of duty.

104 Such an application of principle is entirely unexceptional in a case of actual dishonesty involving the receipt, and later conversion of the proceeds, of a bribe. But where the subsequent appreciation in the value of property into which the improper benefit has been converted is due to the substantial application of capital, skill or effort of an errant fiduciary who has not been dishonest, an allowance ought be granted for that skill and effort. This is an issue which receives closer attention later in these reasons. Nonetheless, the cases establish that in instances involving the diversion of a business the principles which apply are quite different from those involving the diversion of a specific asset, such as the renewal of a lease. See Upjohn J in Re Jarvis (Dec'd) [1958] 2 All ER 336 and Warman International Ltd v Dwyer 560 - 561. In the present case, further consideration of this issue will require an examination of the manner in which the shares in the new company, WANL, appreciated so substantially in value after the discovery and exploitation of the rich Forrestania nickel deposits. Equally importantly, there is a need to consider the corresponding benefits derived by the defendants from other collateral investments which they had in WANL (to which the plaintiff does not lay claim) and the significant financial emoluments which were paid by WANL to the first and second defendants for the introduction of capital, and the application of skill and judgment associated with the Forrestania project, which they were contractually retained to provide to that company.

105 There is nothing punitive in the remedy of account of profits, or the imposition of a constructive trust, as a means to achieve that end. As observed by Heydon JA (as his Honour then was) in Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298, 370:

The extent of that remedy of account of profits depends on the extent to which the fiduciary is unjustly enriched: Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 107; [1984] HCA 64; 55 ALR 417 at 483. It does not depend on the honesty of the fiduciary...: Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 at 557; [1995] HCA 18; 128 ALR 201 at 208. The mode by which an account of profits is taken can vary...

106 After an extensive examination of the applicable authorities, his Honour concluded at [335] (page 384):

It is for the defendant to establish that it is inequitable to order an account of the entire profits, it follows that the onus on the defendant is to negate dishonesty or other grave forms of misconduct, and hence the position is not so much that an account of the entire profits is a punishment, but rather that an absence of grave misconduct is a passport to an indulgence in favour of the defendant.

107 Referring to Warman International Ltd v Dwyer (561 - 562) Heydon JA continued at [335]:

... since the onus of establishing an entitlement to apportionment of profits is on the defendant, but that the grant of an allowance is normally the substitute for that remedy, the onus of establishing that an allowance is called for is on the defendant.

108 The additional shares in WANL acquired by the defendants were not obtained for nothing. Quite substantial outlays were necessary for their acquisition and for conversion of the options. Over the period from 28 February 2002 until 30 June 2007, that is the period after the discovery of the Forrestania prospects, there were some 17 separate capital raisings by WANL at various prices, resulting in the company raising, by subscribed capital, further sums of $105.5 million (Australian dollars) and $10.1 million (Canadian dollars).

109 The details of these capital raisings are summarised in a table agreed by the parties (exhibit 294).

110 This table contains cross-references to Annexure B to the defendants' closing submissions which is also an agreed summary of the discovery and development of the Forrestania project. However, while they respectively participated in some of these capital raisings, the defendants did not participate in all of them.

111 Details of the acquisitions of shares or options in WANL by Mr Streeter and/or Jungle Creek over the period from 28 July 2000 to 23 October 2006 are to be found in the annexure to exhibit 233, Mr Streeter's second witness statement. This is some minor lack of correspondence between the dates of some of these issues and the details of dates contained in the various prospectuses or WANL; but nothing of significance turns on these. Mr Streeter's details of this are set out in their entirety hereunder:

Issued in return for $300,000 in seed capital. These shares claimed by the plaintiff as the 'Third Defendant Initial shares'

Issued in return for $300,000 in seed capital. These shares claimed by the plaintiff as the 'Third Defendant Options'

Issued in return for 30% of the Cue tenements These shares claimed by the plaintiff as the 'Cue Tenement Shares'

Issued to T Streeter as directors options and taken up by Jungle Creek

Acquired pursuant to WANL Information Memorandum dated 22 May 2002

Issued to T Streeter as director options and taken up by Jungle Creek

Exercise of options by T Streeter and issued to Jungle Creek

Issued to T Streeter exercisable on or before 31.03.05

Options exercised by T Streeter and issued to Jungle Creek

800,000 shares purchased from WANL directors. 1 million shares issued via WANL placement

Exercise of 200,000 director options. Issued to Jungle Creek

2,000,000 shares issued via loan by Jungle Creek to WANL. 49,500 shares issued to Jungle Creek as repayment of interest on the loan.

Placement pursuant to resolution 2 of Annual General Meeting held on 26.08.04

Issued to T Streeter and exercisable on or before 31.03.06

Shares taken up via Canadian IPO. 399,455 shares (at $1.73) and 664,700 shares (at $1.70)

Take up of shares under Non-renounceable rights issues

112 Included in the previous table are the three issues of shares or options on 28 July 2000, which are the subject of the plaintiff's claim (items 1 to 3). In addition, the table sets out other subsequent acquisitions, items 4 to 37, showing the issue price for shares and the exercise price for options, including shares issued in satisfaction of loans made by Mr Streeter, or Jungle Creek, together with additional allotments in lieu of interest.

113 In the case of Mr Cooper, similar, but not identical, detail is to be found in par 297 of his witness statement (exhibit 252) and which is set out hereunder as follows:

114 This last table includes an allocation of 100,000 shares in WANL at 20 cents on the original IPO in 2000 (which are not the subject of the plaintiff's claim). It also includes 400,000 options exercisable at 40 cents granted in February 2000 and later exercised on 3 December 2003, as to 200,00 shares registered in the name of Mr Cooper's company, Fidene Nominees Pty Ltd (Fidene). Not shown in this statement, but explained in the course of oral evidence, is that the remaining 200,000 options, granted in February 2000, were also exercised by Mr Cooper on 3 December 2003. However, instead of resulting in shares granted to him or to his company they were allotted to, or assigned to, his two children equally between them. It follows that of the 1,162,750 fully paid ordinary shares in WANL presently held by Fidene 200,000 of these derive from the exercise of the original 400,000 options, and the balance of the shares deriving from the exercise of those options are held by Mr Cooper's children.

115 The position of the plaintiff, tacitly, is that Mr Cooper should be treated as having the benefit of those additional 200,000 shares (making 400,000 in all), and is accountable for the whole 400,000, notwithstanding that he assigned the benefits of the options, or the shares following the exercise of the options, to Fidene and to his children. The plaintiff's position is that Mr Cooper is holding more than 400,000 shares and that there is nothing to distinguish, in value or in any other material respect, one allotment of shares from another and that accordingly there should be a constructive trust in respect of the whole 400,000 shares. Of course, the evidence is that Mr Cooper is not holding any of these shares personally, but that they are held by his wholly owned company, Fidene, which he has agreed that he controls.

116 Fidene is not a defendant in these proceedings and that is an undoubted obstacle to any form of relief, such as a constructive trust, which would require specific restitution of Fidene's shares to the plaintiff. There is no suggestion by Mr Cooper, or in any of the submissions on his behalf, that he would not be able to deliver or transfer 400,000 shares in WANL, or any smaller number, to the plaintiff if the court decided that should be done. But I cannot, as the proceedings are constituted, make an order that Fidene should do so. What could be done would be to order that Mr Cooper should pay to the plaintiff the current value of 400,000 shares in WANL, which are readily obtainable on the market, or, alternatively, pay compensation in equity in an amount sufficient to allow the plaintiff to purchase 400,000 shares in WANL at current market prices at the date of judgment, or upon some other date which should be chosen.

117 Because Mr Cooper or Fidene paid $160,000 for those 400,000 shares upon the exercise of the options, any such order, whether in the form of a constructive trust, or an order for the payment of money complainant, should be subject to a charge or reduction respectively to recognise the payment of $160,000 together with interest thereon at appropriate rates from the date when the options were exercised and the shares acquired, namely, 3 December 2003. In the event relief along these lines were to be granted, it will be for the plaintiff to consider which form of relief it desires to seek and what date or dates should be chosen for determining the value of the WANL shares in respect of which compensation might be payable and what rates of interest should be applied. An opportunity for Mr Cooper to heard and make submissions on this issue would also need to be provided.

The relief sought by the plaintiff - a constructive trust

118 So far I have referred to the relief being sought by the plaintiff, mainly by reference to its principal claim, that is for a constructive trust, if necessary on terms, for the shares presently held in WANL by each of the three defendants, including shares resulting from the exercise of options. The characteristic feature of the specified shares which are the subject of this claim is that they were all allotted or derived from the exercise of options granted to the defendants in early 2000 prior to the issue of the first prospectus in WANL on 22 May 2000 (exhibit 111, 10 TB 744). The allocations of the shares or options were as follows:

(a) to Mr Streeter 400,000 options to acquire fully paid shares in WANL at an exercise price of 40 cents on or before 31 March 2004;

(b) to Mr Cooper 400,000 options to acquire fully paid shares in WANL at an exercise price of 40 cents on or before 31 March 2004;

(c) in exchange for Mr Cooper paying $300,000 in seed capital to WANL and at his direction, Jungle Creek received 4,500,000 fully paid 20 cent shares in WANL at a discounted price of 6.66 cents a share together with 5,625,000 options to acquire fully paid shares in WANL at an exercise price of 20 cents on or before 31 March 2004;

(d) Jungle Creek received a further 150,000 shares in WANL credited as fully paid up 20 cent shares pursuant to the transfer of its 30% interest in the Cue tenements which had been acquired, via Meeka Mines Pty Ltd from Golden Granite Pty Ltd in the circumstances previously described. As described earlier, the consideration paid by Meeka Mines for the acquisition of the 30% interest in the Cue tenements was a mere $5,000. No evidence was adduced to establish that that was money actually paid or payable by Jungle Creek but the trial has proceeded, tacitly, on the assumption that, one way or another, Jungle Creek gave consideration to the value of $5,000 for that acquisition and I shall therefore approach the claims on that assumption.

(e) on 27 or 29 October 2003 Mr Streeter exercised options and acquired a further 400,000 shares in the company at a cost of $160,000 and, having done so, caused the benefit of the exercise of that option to be assigned to Jungle Creek and those shares allotted to Jungle Creek.

(f) on or about 29 December 2003 Mr Cooper exercised all his options and so acquired a further 400,000 shares in WANL at an total exercise price of $160,000, allocating 200,000 of those shares to Fidene and the remaining 200,000 to his children.

(g) in or about June 2003 Jungle Creek exercised all of its options and so acquired a further 5,625,000 shares in the company at an exercise price of 20 cents, so involving an outlay of $1,125,000.

119 All of the defendants have also acquired further shares in WANL as a result of other subscriptions, share purchases, placements or the exercise of options resulting from other issues. Accordingly, their current holdings of shares in the company are much greater than the shareholdings which are the subject of the plaintiff's claims. This is important for several reasons.

120 First, it reveals how the plaintiff's claims are limited to the first allotment of shares and options in WANL and to shares allotted arising from the exercise of those options. The explanation for this approach by the plaintiff is its submission that it was these shares and options which were issued on concessional terms and derived by the defendants as impermissible profits or benefits deriving from breach of fiduciary duties. No similar allegation is made by the plaintiff in relation to subsequent issues of shares or options at later times.

121 Secondly, the limit to the plaintiff's claims is of significance when it comes to considering the claims for just allowances or apportionment of profits asserted by the defendants in various forms in order to take effect, so they contend, of the very substantial appreciation of the value of the shares in WANL occurring after the discovery and development of the Forrestania project - an appreciation in value for which the defendants submit they are not accountable to the plaintiff in any event, even if otherwise liable.

122 Accordingly, the property over which the plaintiff presently claims a constructive trust comprises:

(b) 400,000 shares in WANL obtained by Mr Cooper (of which 200,000 are held by Fidene and 200,000 of which are held by his children);

(d) a further 5,625,000 shares in WANL held by Jungle Creek;

123 The aggregate of the outlays paid by the defendants for these shares is $1,750,000, paid as follows:

(a) Mr Streeter, $160,000 for the exercise of the options;

(b) Mr Cooper, $160,000 for the exercise of the options;

(d) Jungle Creek, for the exercise of the options, $1,125,000;

Adjusting the constructive trust - equitable charge or lien

124 As an alternative to its claim for a constructive trust over all the shares, without qualification, the plaintiff advances a claim that there should be a constructive trust over all the shares subject to a charge, lien or other suitable obligation for the plaintiff to pay to the defendants, in suitably designated proportions, a total of $1,750,000 representing the actual outlays made by the defendants for the acquisition of the shares either without or with interest at appropriate rates on the amounts outlaid from the various dates when they were outlaid until judgment. This could readily be achieved by making any constructive trust subject to a charge in equity in favour of the defendants for the appropriate amounts or by making the relief conditional upon payment to the defendants of the amounts outlaid with or without interest. As to the imposition of terms to ensure that the equitable remedies are just, see Mayfair Trading Co Pty Ltd v Dreyer [1958] HCA 55; (1958) 101 CLR 428, 452 - 456 per Dixon CJ.

125 As further alternative claims the plaintiff seeks an account of profits or equitable compensation or such other relief as the court may consider just.

126 It is necessary to put these claims in the perspective of the current holdings of the defendants of shares or other securities in WANL. I am satisfied on the evidence that, at the date of trial, the current holdings of shares or other securities in WANL by each of the defendants or their associates was as follows:

400,000 options exercisable at $7.50 (see exhibit 152, page 23, 8 STB 217)

The issues of fact - the evidence generally

127 To deal with all these issues I must turn to the detailed evidence and the facts which it establishes.

128 The plaintiff was incorporated on 8 November 1996 as an unlisted no liability company company then named Bloodhound Gold NL (Bloodhound) (exhibit 4; 7STB 209). Its promoters and original shareholders who subscribed, for 2,200,000 20 cents shares at an issue price of $0.001 raising initial capital of $2,200.00, were Mr Brailey, Mr Bernard Le Clezio, Mr Justin (Dusty) Evans, Mr Ralph Bourne and Mr Mark Maine. Of these Messrs Brailey, Le Clezio and Evans were stockbrokers working in Perth and each had extensive experience in listed mining companies. Messrs Bourne and Maine were, respectively, a geologist and an accountant associated with Mr Brailey. It was the intention of Messrs Brailey, Le Clezio and Evans to incorporate a junior exploration company which could seek out and acquire interests in prospective mining tenements with a view eventually to listing on the ASX. At that time the major focus of interest was on the acquisition of gold mining prospects.

129 The memorandum and articles of association of Bloodhound (exhibit 6) are in conventional terms, and disclose that the company was formed with a view to obtaining mining tenements, exploring for gold and other minerals, and to undertake all the associated activities typical of a junior exploration company. It is hardly specific as to the objectives of the plaintiff but, to the degree that it is relevant, it discloses that the pursuit of an opportunity such as presented by the ANPC personnel was within the contemplated scope of the business of the company from the very outset.

130 Like many other junior exploration companies, Bloodhound's plan was to seek capital, on a small scale, to finance its initial corporate activities and to provide for the cost of an IPO. The costs contemplated were fees for accountants, geologists, geological valuers and legal costs and, depending upon the state of progress, costs for the acquisition of interests in, or rights to acquire interests in, prospective mining tenements. Following incorporation, Bloodhound raised capital by three separate share issues and contracted to acquire interests in various goldmining tenements and one diamond prospect. The capital raisings conducted by Bloodhound during this initial phase were:

131 In January 1997, 2,600,000 20 cent shares issued at 5 cents each, to raise a total of $130,000 (exhibit 11; 1 TB 67).

132 In April 1997, a further 1,200,000 20 cents shares were issued at 10 cents each, raising the amount of $120,000 (exhibit 18; 3 TB 127 and exhibit 155; 4 TB 239).

133 In March 1997, Bloodhound attempted an IPO and issued a prospectus (exhibit 10; 1TB 51) dated 13 March 1997 for the issue of 1,200,000 ordinary fully paid 20 cent shares at 10 cents, together with 1,200,000 attaching options. The issue was designed to raise $120,000 new capital. That prospectus stated that the proceeds of the issue were to be used to provide the company with necessary working capital to allow for further exploration on its tenements, to meet the expenses of the issue, future capital raising and administrative costs of the company. It contained a summary of the company's exploration projects, then comprising 12 separate areas, and it reported on material contracts which Bloodhound had entered into in respect of the acquisition of the respective tenements. This included the statement that:

The proposed exploration program, which will absorb over 50% of the funds raised by the Issue, is focused on evaluating the portfolio of mineral tenements in Western Australia covering prospects for gold and diamonds. These include gold prospects at Nichol Bay, Peake Hill, Lake Raeside, Mount Crawford, Pyke Hollow, Menzies, Pig Well, Reptile Dam and Metzkes Find, and a tenement for diamond exploration near Dalwallinu.

134 This first prospectus resulted in raising capital of $120,000 in March/April 1997.

135 On 27 May 1997, Bloodhound lodged a second prospectus for an IPO for an to issue of up to 15,000,000 ordinary 20 cent shares payable in full, together with 15,000,000 attaching options (exhibit 13; 2 TB 81). It included a statement (page 6) that Bloodhound was a West Australian based mineral exploration company incorporated on 8 November 1996 for the purpose of exploring for gold and other mineral commodities throughout Western Australia, and that since formation, seed capital from private investors had provided funds to secure the properties outlined in the prospectus and to finance associated costs. The discretion of the company's objectives and strategies, as stated in that prospectus, was:

The principal and main objective with the Directors is to establish Bloodhound as a successful, profitable exploration and mining company with the aim of maximising returns to its shareholders. The strategies to achieve this objective are:

• explore mineral tenements using results from previous exploration, modern cost-effective geochemical, geophysical and geological search techniques and advice from geoscience specialists;
• concentrate activities in prime areas on targets which have a high probability of success.

In the Director's view, there remains considerable scope for further major mineral discoveries within Western Australia and it is the Board's current intention to focus and concentrate on the Company's exploration efforts in this particular State.

136 The issue was not underwritten and the float did not succeed. The directors resolved to withdraw the prospectus at a meeting held on 15 July 1997 (exhibit 15; 2 TB 103).

137 It seems that a contributing factor to the failure of the May 1997 issue was a sudden deterioration in the world price of gold triggered by the action of the Reserve Bank of Australia in selling down gold reserves (exhibit 14; 3 TB 101).

138 As at 30 June 1997, Bloodhound had cash on hand of $20,686, total shareholders' equity of $12,686 - a figure dependent upon its ability to realise value from accumulated exploration expenditure of $59,952 which had been carried forward as an asset on the balance sheet (exhibit 18; 3 TB 127 at 854).

139 The failure of the attempted capital raising in May 1997 left Bloodhound with limited cash, a number of creditors, and various interests in several mining tenements. More capital was needed, but for the time being it decided to go into a holding pattern and to wait for a better opportunity to conduct a float in improved market conditions.

140 On 23 October 1997, Bloodhound changed its name to Western Areas Exploration NL (WAE) (exhibit 17; 2 TB 123), and on 17 November 1997 it prepared another prospectus designed to raise $250,000 (exhibit 18; 3 TB 127). That prospectus proposed the issue of up to 5,000,000 ordinary fully paid shares of 20 cents to be issued at a discount of 15 cents per share, payable in full on application, together with 5,000,000 free attaching options exercisable at 20 cents and expiring on 31 May 2001. In that prospectus, the objectives and strategies of WAE were restated as follows:

As discussed in Section 1.5 and 1.10 of this Prospectus, the Company is seeking to raise a minimum of $150,000 to enable it to issue the Subsequent Prospectus in order to raise up to $2,500,000 in working capital and be admitted to the Official List of the ASX. Following the issue of the Subsequent Prospectus, the Directors seek to establish Western Areas Exploration NL as a successful and profitable exploration and mining company with the aim of maximising returns to its shareholders. The strategies to achieve this objective will be to:

• explore the Company's mineral tenements using results from previous exploration, modern cost-effective geochemical, geophysical and geological search techniques and advice from geoscience specialists;
• concentrate activities in prime areas on targets which have a high probability of success.

In the Directors' view, there remains considerable scope for further major mineral discoveries within Western Australia and it is the Board's intention to focus and concentrate the Company's exploration efforts in Western Australia.

141 That prospectus listed the various mineral prospects in which the company then had an interest, being 12 in all, some of which comprised several tenements, together with a geological report giving material technical detail and history. However, Mr Brailey explained (exhibit 170, para 31) that after the lodgement of the September 1997 prospectus he, and Messrs Le Clezio and Evans, decided that the process of distributing the prospectus to potential investors seeking to raise capital should be deferred until the beginning of the new year (1998).

142 Early in 1998, when the capital raising was again discussed, the stockbrokers Messrs Le Clezio and Evans suggested to Mr Brailey that a person with whom they had previously had dealings in relation to a very successful investment in Jubilee Gold, Mr Terry Streeter, might be interested in obtaining a controlling interest in a junior exploration company like WAE. As a result, representatives of WAE arranged to meet Mr Streeter and his accountant, Mr David Cooper, with a view to Mr Streeter or one of his companies subscribing for 5,000,000 shares at 5 cents in WAE. Following these meetings, Mr Streeter visited some of WAE's tenements in the Kaloorlie region, in company with Mr Evans.

143 Mr Streeter expressed an interest in subscribing for the shares, but only on condition that he and Mr Cooper be appointed to the board, that Mr Streeter would become chairman of the company after resignation by Mr Brailey, that Mr Cooper would become company secretary, a new managing director would be chosen and that Mr Brailey would resign as a director. In view of this, WAE decided not to proceed with the distribution of the 1997 prospectus and Mr Streeter indicated that he would subscribe for 5,000,000 shares at 5 cents so contributing $250,000.

Messrs Streeter and Cooper become directors of WAE

144 Mr Streeter consented to act as a director of the plaintiff on 27 February 1998 (exhibit 19; 3 TB 137) and Mr Cooper consented to act as a director on 3 March 1998 (exhibit 20; 3 TB 141). Both attended a meeting of directors of the plaintiff by invitation held on 3 March 1998 (exhibit 21) at which it was resolved to appoint them as directors.

145 On 15 March 1998, Mr Streeter, Mr Cooper and a new managing director, Mr Moeller, were appointed as directors of the plaintiff. Mr Brailey remained as chairman, although he had agreed with Mr Streeter that he would resign and that Mr Streeter would replace him. At a board meeting of the directors of the plaintiff on 16 March 1998 (exhibit 23; 3 TB 145), it was minuted that Mr Streeter would provide $250,000 seed capital within three weeks. Over the next two days, Mr Streeter deposited a total of $70,000 (exhibit 204; 3 TB 150) in the plaintiff's bank account (exhibit 156).

146 Mr Streeter's background explains why he was approached by shareholders of the plaintiff with a view to investing in WAE in early 1998.

147 Mr Streeter emigrated to Australia from Yorkshire when only aged 21, and later came to Western Australia in the mid 1970s. By then he had a history of investing in the resource sector, mainly in established companies, with some success. Since the early 1970s he had been interested in investing in junior exploration companies, and in particular nickel mining companies. During this period of investing in mining stocks in Western Australia he had been a client of the then stockbroker Justin (Dusty) Evans first at RM Black and Associates, Stockbrokers, and later at Montague Stockbrokers. Mr Evans had extensive dealings with Mr Streeter over this period and, in conjunction with another stockbroker, Mr Bernard Le Clezio, Mr Streeter was on the lookout for a suitable mineral exploration venture or a junior mining company in which he hoped to invest about $300,000.

148 At that time, Messrs Evans and Le Clezio had another client, Mr Harmanis, who was associated with the mining company, Jubilee Goldmines NL (Jubilee) who advised them that there were about 6,000,000 shares in Jubilee available for sale, and that the parcel of shares carried an entitlement to a seat on the board of Jubilee (exhibit 192). Messrs Evans and Le Clezio notified Mr Streeter of this opportunity and, with the aid of some financial assistance which they both arranged, Mr Streeter, or one of his companies, purchased the parcel of shares in Jubilee and went onto the board of the company. Jubilee discovered and developed the rich nickel prospect known as Cosmos and this investment proved to be a very great success for Mr Streeter, and to sharpen his interest in nickel mining exploration companies. Incidentally, it was the geologist, Mr Terry Grammer, later to appear as a member of the ANPC syndicate, who was instrumental in making the nickel discovery at Cosmos for Jubilee. As a result of that role both Messrs Streeter and Grammer were known to each other. The discovery at Cosmos for Jubilee by Mr Grammer and some other geologists occurred in August 1997 (Grammer's statement, exhibit 269, para 12).

149 From his association with the Jubilee Cosmos discovery, Mr Streeter had acquired a reputation as a successful major investor in base metal mining prospects in this State, and as a man of considerable financial substance. Accordingly, his interest in investing in WA was of advantage to the plaintiff, not merely for the money which he might bring to the company, but also because of his reputation and connections. They were such that association with him could be expected to be very positive for the plaintiff. Mr Streeter said in evidence that by 1998 he was frequently contacted by various persons offering investment opportunities to him.

150 At the meetings between Mr Evans and Mr Streeter in early 1998, Mr Streeter was given a copy of the November 1997 WAE prospectus by which the company was seeking to raise the $250,000. In the course of the subsequent discussions between Mr Streeter and Mr Brailey, Mr Streeter was told that if he subscribed for the whole of the $250,000 sought to be raised by that prospectus, that Mr Brailey and the other promoters of the plaintiff would transfer to him approximately 600,000 shares in the plaintiff for no further consideration.

151 In view of submissions made by counsel for Mr Streeter to the effect that by the latter part of 1999 and throughout 2000, Mr Streeter was under no obligation to make good his agreement to subscribe $250,000 for shares in the plaintiff, I am satisfied that that was never the understanding of Mr Brailey or the plaintiff. At the meeting of directors of the plaintiff held on 16 March 1998 (exhibit 23; 3 TB 145) at which Messrs Brailey, Streeter and Cooper, the new proposed managing director Mr Moeller, and the then company secretary, Mr Higginson, were present, it was expressly minuted that:

Mr Streeter advised the meeting that the $250,000 in seed capital (at an issue price of 5 cents per share) will be raised within three weeks.

152 It was immediately after that meeting that the two instalments totalling $70,000 were deposited in the company's bank account by Mr Streeter. There is no issue in the present proceedings as to whether or not there was a legally enforceable contract between the plaintiff and Mr Streeter to subscribe $250,000 for shares to be issued in the plaintiff in March 1998, but I am satisfied that it was the unambiguous agreement between the plaintiff, through Mr Brailey, on the one hand, and Mr Streeter, on the other, that that would happen. In the events which followed, Mr Streeter proved to be slow in making further payments of the promised $250,000 and, in fact, only initially paid approximately $85,000. He did, however, later pay further moneys to the plaintiff from time to time, bringing all such advances to about $155,000, but these did not result in the allotment of shares to him.

153 The progressive total of the moneys paid by Mr Streeter to the plaintiff was recorded in the books of the plaintiff as a loan, convertible to equity, and the understanding appears to have been that at a suitable time, probably when there was a further major share issue or an IPO by the plaintiff, that loan would be converted to shares. There was no definition of when that would occur, but all indications were that it would take place as soon as reasonably possible having regard to market conditions for conducting a successful share issue. According to Mr Brailey, it was never contemplated that the money paid to the company by Mr Streeter would be repayable as if it were a loan on demand, or be repayable at some ascertainable time. His view was that the payments were only ever intended to be for shares and that, at some point or other, the loan would be converted to shares. Later in 2006 Mr Streeter asserted a different view. By then he regarded the balance of his convertible loan as being repayable on demand and, in July 2006, took steps to ensure that the balance then recorded was repaid to him.

154 There is, however, evidence which tends strongly to confirm Mr Brailey's version of the nature of these loans. In August 1999, the plaintiff's auditors sought confirmation that certain convertible loans recorded in the books of the plaintiff were accurately recorded. Consequently, Mr Cooper, as a director and secretary of the plaintiff, wrote to the manager of Jungle Creek (Mr Streeter) seeking confirmation that:

The loan balance of $47,388 recorded as being due to Jungle Creek Goldmines Pty Ltd without interest and with no specified date for repayment was a loan to be converted to equity capital upon approval by shareholders

a loan balance of $85,000 outstanding to Jungle Creek Goldmines Pty Ltd with no rate of interest nor any specific repayment date was a loan to be converted to equity capital

(exhibit 48; 6 TB 363). By endorsements on each of those letters and dated 31 August 1999, Mr Streeter, on behalf of Jungle Creek, confirmed the accuracy of the recorded loan details. In the plaintiff's audited accounts for the year ended 30 June 1998 (exhibit 30; 3TB 189, page 5) the plaintiff's balance sheet includes, under the subheading Shareholders' Equity, an amount of $155,269 shown as convertible debt. It was acknowledged during the course of evidence that this represented the moneys paid by, or on behalf of, Mr Streeter towards the $250,000 promised in March 1998, but at that time not converted to shares.

155 Regarding creditors of the plaintiff, in February 1999 Mr Streeter took steps to reach agreement with the company solicitors and accountants to take over the debts due by WAE to them (exhibit 39, 272). This was achieved by Mr Streeter reaching agreement with the creditors for payment and himself taking assignments of the debts due to them by the company. Mr Streeter also deposited sufficient funds to the credit of WAE to allow part payment of the other outstanding creditors and as a result it was agreed that the funds loaned and the value of debts taken over would be converted to equity in Mr Streeter's name in the near future. In cross-examination Mr Streeter accepted that there had never been an agreement between him or Jungle Creek on the one hand and WAE on the other that the Streeter interests would be repaid these loans. Satisfaction of the loans was always to be by way of conversion to shares. However, Mr Streeter's attitude, as emerged in his cross-examination, was that he would only have honoured his commitment to pay the balance of the $250,000 if there had been support and enthusiasm from Mr Brailey and the other shareholders in the form of contribution of more capital to the company. In particular Mr Streeter said that he would have paid the outstanding subscription moneys, had an attractive proposal appeared.

156 It is unnecessary to determine whether or not Mr Streeter was legally obliged to convert the balance of his loan to equity or to make good his promise to subscribe a total of $250,000 for capital in the plaintiff, but I am satisfied that during 1998 and 1999, and during the first months of 2000, the plaintiff, through Mr Brailey, operated on the assumption and expectation that the whole of the $250,000 would be subscribed by Mr Streeter for shares in WAE. In fact that did not happen.

157 On 11 November 1998, the directors of the plaintiff, namely Messrs Brailey, Streeter and Cooper, resolved to make several allotments of shares in the plaintiff, including:

• 1,700,000 ordinary 20 cent fully paid shares to Jungle Creek;
• 100,000 ordinary 20 cent fully paid shares to Fidene Nominees Pty Ltd, Mr Cooper's company.

158 Mr Streeter said that those 1.7 million shares related to a conversion to equity of his loan of $85,000 which had been made up to that point. The evidence has only shown contributions of $80,000 by Mr Streeter, but there is no dispute that a further $5,000 was also paid.

159 With respect to the second loan of $47,388, Mr Streeter has said that that was made during the 1999 financial year and because Jungle Creek then held close to 20% of the issue shares in WAE, further shares could not be issued to it without Jungle Creek becoming obliged to make a takeover bid for the plaintiff, which he was not prepared to do at that point. Of his decision to invest in the plaintiff, Mr Streeter said (exhibit 232, par 41):

Having invested in WAE, my interest was in assisting it to list publicly and to develop its assets. That reflected, and reflects, my interest in the mining sector. I do not look to invest in companies with a view to selling my shares quickly. I look to invest so that projects can be found and developed.

160 This very much coincided with the views of Mr Brailey and the other shareholders of the plaintiff at all times.

161 In April 1998, WAE proposed again to attempt an IPO. It prepared another prospectus in draft (exhibit 158; 14 TB 1084) for an issue of up to 12,500,000 ordinary fully paid 20 cent shares payable in full on application, together with 12,500,000 free attaching options exercisable at 20 cents and expiring on 30 June 2001. By this time, the plaintiff had acquired a 70% interest in a joint venture with Golden Granite in respect of the Cue tenements, or applications for tenements. In the proposed chairman's letter to be issued by Mr Streeter in this draft prospectus there were the following observations:

Prime factors and the likely success of the Company and its achievement of this objective are:

• the Board and management are well focused on their goal of developing the Company into a significant mining house and have the compl[e]mentary skills, expertise and motivation to fulfil this objective,
• the prospectivity of the Company's tenement portfolio, particularly the Menzies, Laverton and Cue projects which are located in the region of several new or major gold deposits. The Board is of the opinion that the Company's tenements offer potential for similar discoveries to these gold deposits.

Members of the Board of the Company have been involved with the discovery of gold and nickel deposits located in Western Australia with other explorers. At least two of these deposits are expected to be developed into mining operations in the near future. The Company's Managing Director was responsible for the acquisition and discovery of the Havana and Suva gold deposits (Golden Cities Project). These deposits are located within granite which, until recently, was not considered to be prospective for gold mineralisation. In addition, in my capacity as director of Jubilee Goldmines NL, I have been involved with the discovery of the high grade Cosmos nickel deposit.

162 However, at a meeting of directors of the plaintiff on 28 May 1998 (exhibit 25; 3 TB 168) the directors were advised that the resource market was then very flat, the appetite for resource stocks was very low, and that the adviser's broking house would only be involved in the issue if it was fully underwritten. When it became apparent that complete sub-underwriting was impractical, the proposed IPO was abandoned.

163 Exhibit 155; 4 TB 239 lists the share registry of WAE as at 30 November 1998. This shows that the total number of shares issued was 9,105,345, of which 1,700,000 had been issued to Jungle Creek and 100,000 to Fidene.

164 Over the period from early 1998 to the end of that calendar year many of the interests which WAE had in the mining tenements which were to have been the basis of the share issues proposed by the May 1997, November 1997 and April 1998 prospectuses (exhibits 13, 18 and 158) lapsed, expired or were not renewed. Also, during 1998 the interest at Barra Barra was surrendered by the plaintiff (exhibit 176; 3 TB 148) and Peak Hill was surrendered in December 1999 (see Brailey ts 825).

165 The decision not to proceed with the interest in the Peak Hill deposit had led to a demand by the vendors, Mr and Mrs Roberts, for payment of fees, exploration expenditure and other moneys which they claimed were payable by WAE. This was the dispute which eventually led Mr and Mrs Roberts to commence proceedings against the plaintiff in the Local Court, claiming some $12,985.20 plus costs. Originally, the directors of the plaintiff, including Messrs Streeter and Cooper, had agreed that the Roberts' account should be paid but Mr Streeter later refused to allow it to be paid. It was that pending action which remained unresolved until 2006, when it was settled in full at the behest of Mr Streeter, that provided the basis for Mr Streeter's repeated statements that WAE could not progress with its contemplated objectives until that litigation was resolved. I must say that I consider that to be a specious and unjustified assertion advanced only as a pretext for inactivity by the plaintiff during those years.

166 Except for the Cue tenements all of the vendor agreements referred to in the April 1998 prospectus had come to an end by December 1998 (Brailey ts 819). That is not to say that they could not have been extended or renewed or reacquired. The circumstances which had led to surrender or abandonment were due to the inability of WAE to pay the exploration fees or other moneys necessary to maintain the tenements or to comply with obligations under option agreements or other arrangements with their vendors. This inability was, in turn, due to the failure of Mr Streeter to honour his promise to subscribe the full $250,000 in share capital which he had promised in March 1998. Had that been done the company would have been in a position to meet those financial obligations.

167 It is not at all clear exactly how or for what purpose Mr Streeter or his companies paid moneys to the plaintiff during 1998 and 1999. The initial two payments totalling $70,000 made in April 1998 have already been recorded. Mr Brailey was always of the view that the further $47,388 paid by Mr Streeter in the 1998-1999 financial year was for shares at 5 cents per fully paid share. Mr Brailey had understood that that $47,388 was actually converted into stock but the accounts show that it was treated as part of the convertible loan. In the 1999-2000 year Mr Streeter paid another $11,700 to WAE on the same basis and, in the next year, the 2002-2003 year, when the plaintiff had ceased all serious activity and had been converted to a proprietary company, Mr Streeter, by his company Meeka Star Mines, contributed a further $15,000.

168 There seems to have been some imprecision or variation of views about when Mr Streeter contributed money to the plaintiff pursuant to his promise in March 1998 to subscribe $250,000 for shares. In a letter to a third person written by Mr Brailey on 20 August 1998 Mr Brailey noted that Mr Streeter was then effectively in control of the plaintiff and to that point had injected $100,000 but I cannot accept that this is entirely accurate as it fails to reconcile with the payments of $70,000, $47,388-odd and $15,000 already described.

169 The share issue of 1,700,000 shares to Jungle Creek in 1999 at 5 cents a share assumes a subscription of $85,000 by or on behalf of Jungle Creek yet, at that point, Mr Streeter or Jungle Creek had only contributed $70,000. Perhaps the explanation is that the further $15,000 introduced by Meeka Star Mines brought the total contribution to $85,000 and it was those combined payments which were the basis for the allotment of the 1.7 million shares. Whatever the true position, it seems that there was some irregularity in the accounts at about this time which, possibly, led to the balance of the convertible loan by the Streeter interests being overstated. However, nothing turns on this in the present proceedings.

170 The point of this short history of the plaintiff's transactions in 1998 is to consider the defendants' submissions that 'the plaintiff had lost all of its capital by the end of 1998' and, by the critical time of December 1999 it was 'a failed company' unsuitable for, unwilling and unacceptable as the promoter or vehicle for the ANPC proposal. Despite the great emphasis laid on those submissions by counsel for the defendants, they were not advanced with anything like that degree of emphasis or significance by Mr Streeter himself. Mr Streeter's own attitude at the time is more aptly described by his own words at par 119 of his witness statement, exhibit 232, where he said:

By December 1998 I knew that WAE was not going to list on the ASX in the near future. It was still not a good time to try and list any start-up company. I thought that if the market moved positively over a period of time then there may be a reassessment of WAE and the listing may then be possible. My thoughts were to get the company into a position where it was tidied up and we could then wait and see what its prospects were if the market moved.

171 A contemporary expression of the outlook for the plaintiff is to be found in its financial report for the year ended 30 June 1999 which was signed by Mr Brailey and Mr Streeter on 29 October 1999 (exhibit 47 5 TB 325). In the chairman's address forming part of the report and signed by Mr Brailey is the passage:

Mr T Streeter has continued to support the company financially and with the exception of an outstanding matter involving a disputed option claim by Mr V Roberts, most creditors have been paid. The claim by Mr Roberts is being vigorously defended.

...

The company continues to pursue opportunities and currently has two proposals before it.

Once the matter with Mr Roberts has been settled and the Cue Tenements granted further efforts to raise capital will be conducted.

172 In the directors' declaration both Mr Brailey and Mr Streeter subscribe to the statement that:

In the opinion of the directors ...

(c) at the date of this statement there is uncertainty regarding the going concern of the company and if funds are contributed by Mr T Streeter the company will be able to pay its debts as and when they fall due.

173 This conditional statement of solvency was, of course, the truth but all the indications were that Mr Streeter intended to continue his support for the company. The intention to acquire interests in other mining prospects and eventually to have a public listing remained. Therefore I reject the submissions made on behalf of the defendants that by December 1999 the plaintiff was moribund, a failed company with no prospects of acquiring further mineral prospects or conducting a listing. Rather, I am satisfied that despite the fact that by then the plaintiff was left only with its interests in the Cue tenements and was dependant on provision of further funds from Mr Streeter, it still was intent upon its original ambition of acquiring interests in mineral tenements, raising further capital via public offers and becoming listed on the ASX. What it needed was a suitable opportunity which would prompt Mr Streeter and its other shareholders to contribute more capital after a necessary restructuring of the existing shareholding. Such a restructure was not regarded as being a contentious problem. What the company was waiting for was an opportunity to acquire, on acceptable terms, a suite of interests in nickel mining prospects sufficiently attractive to support a prospectus for an IPO and which would encourage existing shareholders and Mr Streeter to subscribe further capital. There is little doubt the ANPC proposal was the very kind of proposal which the company was hoping to find.

174 The ANPC proposal did contain a suite of nickel mining prospects sufficiently attractive to encourage further investment by Mr Streeter and others and to support an IPO which, as events proved was successfully completed. It was associated with a group of geologists who had established experience and reputations who were ready, willing and able to undertake extensive exploration work on the prospects. It needed no more than seed capital of $300,000 - $500,000 which Mr Streeter and those associated with the ANPC were willing to provide. In its earliest structural designs the promoters contemplated that WAE would be allotted a million shares in the venture. It was the very kind of opportunity for which the plaintiff had been waiting.

175 I do not think that there can be any doubt that throughout 1998 and 1999 Mr Streeter continued to entertain the belief that the plaintiff had a future and, given the right opportunities, could proceed to a listing and as IPO as always intended.

176 It is not surprising for a junior exploration mining company to be short of capital. The submission by counsel for the defendants that, by the end of 1998, the plaintiff had lost all its capital was something of a flourish. It is true that its balance sheet then showed that its only significant asset was an accumulation of past exploration expenditure and that its liabilities excluded its assets. But those liabilities included the convertible loan, to the Streeter interests, which I am satisfied was never intended to be repaid. The capital which had been acquired and expended was to carry out the very function of an exploration company, namely to acquire interests in tenements and to make preparations for a listing. There was still the uncontributed capital which Mr Streeter had promised to provide, a balance of approximately $118,000 or so, which would have been more than enough to meet existing obligations or anticipated expenditure. The company was really in no different a position than it had been before and it remained a potential platform for the acquisition of interests and an IPO and listing as was always intended.

177 That this was so is evident also from the conduct of Mr Streeter. Although he did not fulfil his promise to subscribe the full $250,000 he did, between March 1998 and 1999, contribute $70,000 plus $15,000 plus $47,388, amounting to $132,388. He maintained the company in a holding position and quite obviously saw it as ripe for development and promotion when the market turned. Indeed, he turned the name and the assets of the plaintiff to this purpose, as far as he was able to do, in his dealings with the ANPC personnel. In a sense, it is correct to say that Mr Streeter, and for that matter Mr Cooper, thought that the implementation of the ANPC proposal through WANL was an advancement, so far as it was possible to achieve, of the interests of WAE because of the sale of the Cue tenements and the issue of WANL vendor shares in return and by the toleration of the use of the name by the new company. There was, therefore, in a true and practical sense, a metamorphosis of the interests of the plaintiff into the interests of WANL by the procedures followed by Mr Streeter and Mr Cooper.

178 On 30 March 1998 (exhibit 176; 3 TB 148) the plaintiff resolved not to exercise rights it had to acquire tenements known as Nichol River (exhibit 176; 3 TB 148). That was a decision taken at a meeting of directors attended by Messrs Brailey, Streeter, Cooper and Moeller. It was that decision that led the vendor of those tenements, Mr and Mrs Roberts to charge the plaintiff $12,985.20 for shire rates, exemption applications, Mines Department rental and a progress extension payment which the board at another meeting on 6 April 1998 agreed should be paid (exhibit 177; 3 TB 152). However, subsequently Mr Streeter refused to authorise the payment and it was not made giving rise to the litigation instituted by the Mr and Mrs Roberts which has been described.

179 The issue of 1,700,000 shares to Jungle Creek in November 1998 resulted in the third defendant holding approximately 18.6% of the shareholding (total share capital 9,105,345 shares). Accordingly, the allotment of further shares to the Streeter interests, whether from conversion of the convertible loans to shares or upon further subscription or for any other reason, could quickly lead to the Streeter interests holding 20% or more of the issued capital and hence being obliged, in the absence of appropriate measures, to make a takeover offer for all the shares in the company. This led to a discussion at a board meeting on 22 March 1999 (exhibit 40; 4 TB 282) about a corporate restructure involving some form of downsizing and Mr Brailey was to seek legal advice as to how this could be achieved.

180 Accordingly, Mr Brailey engaged solicitors, Messrs Huston and Partners, who provided initial advice to Mr Cooper on 14 April 1999 and further advice on 3 May 1999 (exhibits 41 and 43; 4 TB 287 and 4 TB 293). Mr Huston noted that a reduction of capital in the company should be possible and that steps would need to be taken to ensure that the takeover requirements of the Corporations Law were not breached. This was necessary because the company was considering a 1:10 capital reduction and a small capital raising in the vicinity of approximately $50,000. The issue of the new shares for $50,000 would result in Mr Streeter acquiring an interest in WAE representing more than 20% (and possibly more than 50%) of the restructured issued capital. Mr Huston explained that this could all be achieved by:

(a) an ordinary resolution to be passed by the shareholders of the company in general meeting approving a 1:10 consolidation of shares;

(b) the adoption of a new constitution for the company which, while not essential would be desirable;

(c) the passage of a further resolution by the shareholders in a general meeting permitting the Streeter interests to acquire more than 20% of the issued shares of the company which itself would require the preparation of an independent expert's report commenting upon the fairness and reasonableness of the proposed issue of shares all of which would require a minimum of 31 days notice of the meeting to be given.

181 This advice was discussed at a meeting of directors on 7 May 1999 leading to a discussion as to whether or not the reduction of capital should be 10:1 or 5:1 and whether there should be a further potential capital raising of $200,000 to $300,000. At that meeting attended by Messrs Brailey, Streeter and Cooper (exhibit 45; 5 TB 292) it was resolved that, after settlement with Mr and Mrs Roberts, the solicitors would be requested to prepare the relevant notices etc, to call a shareholders meeting to consider a reduction in capital and to raise additional funds. There is no further evidence of steps being taken to undertake a capital reconstruction of the plaintiff or to authorise Mr Streeter to acquire more than 20% of the shareholding without making a takeover offer.

182 Counsel for the defendants submitted that this proposal had faltered and had not proceeded because of lack of agreement as to whether the reduction in capital for existing shareholders was to be 10:1 or 5:1 but I do not accept that submission. There is no evidence to suggest that there was any real obstacle or opposition to the proposed reconstruction or to the approval of Streeter interests acquiring more than 20% of the share capital. Quite the contrary, the implementation of the arrangement for Mr Streeter to complete the contribution of $250,000 and the conversion of all his loans to equity inevitably would take his interests beyond 20% and hence approval in general meeting by the shareholders would have been needed to avoid an obligation to make a takeover offer. There is nothing whatsoever to suggest that such approval could not readily have been obtained or that there was any opposition to it. Furthermore, this submission that the proposal foundered is inconsistent with the approaches taken by Messrs Streeter, Cooper and the ANPC personnel when formulating the structure of the shareholding for the new WANL and, in particular, the extent of the Streeter interests in it. As the various spreadsheets modelling different forms of proposed structure and shareholding all show (exhibit 62) specific attention was given to the extent of equity which the Streeter interests would hold in the new company. This is evident from the calculations in the little rectangular black box at the bottom right hand corner of each of those spreadsheets. Those calculations treated the Streeter interests in WAE as being equivalent to 80% of the shareholding of the plaintiff company.

183 Mr Streeter's cross-examination demonstrated, and an examination of the figures reveals, that the Streeter interests would only ever control 80% of the shareholding in WAE if: there had been a 10:1 or 5:1 restructure of the capital of the other shareholders; if all the Streeter interests loans were converted to shares at the new capitalisation; if Mr Streeter completed the contribution of the $250,000 and received the extra 600,000 shares which had been promised gratis by Mr Brailey in March 1999. That this was the assumption in all these models can only mean that Messrs Streeter and Cooper were satisfied that: the restructuring of the issued capital of WAE could readily be arranged; that the Streeter interests would not be required to make a takeover offer; and that there would be complete conversion of all the Streeter loans to shares in the restructured company. Accordingly, rather than representing any kind of obstacle to further the progress or rationalisation of the Streeter interests in the plaintiff, I am satisfied that the proposed capital reconstruction and the proposed approval of the Streeter interests shareholdings exceeding 20%, were all taken as foregone conclusions by Mr Streeter, by Mr Cooper and by Jungle Creek at all times.

184 The Cue tenements involved interests in three exploration licence applications - ELA 20/427, ELA 20/428 and ELA 20/429. Only the third of these had been granted on or about 5 August 1999. The other two applications for ELs were still pending and remained pending for several years but were never granted. The project was described in the first WANL prospectus of 22 May 2000 (exhibit 111, 8 TB 744 at page 82) as follows:

The Cue Project is located 30 km north-east of Cue Township in the Achaean Mergers and Province of Western Australia. The project consists of one granted Exploration Licence and two Exploration Licence applications covering an aggregate area of approximately 485 km2.

A map depicting the ELs is to be found at page 83 of that exhibit.

185 It is common ground that the interests in each of those ELs was held by WAE and by another company Golden Granite Pty Ltd (Golden Granite) pursuant to a joint venture agreement reached between those two companies some time in 1998 in which WAE had a 70% interest and Golden Granite a 30% interest. The person who controlled Golden Granite at all material times was Mr Richard Stanger. The terms of the joint venture agreement do not appear to have been finally documented in a formal way but there is a draft tenancy agreement (exhibit 103, 3 TB 175) which appears to have formed the basis of negotiations between the parties which, presumably, culminated in some form of consensus. That draft agreement includes provisions (cl 10.1 and cl 10.2) conferring on either party a right to assign its interest in the joint venture to another or others but subject to a right of first refusal by the other party. Whether this right of first refusal was ever accepted as a term of the arrangement between the two venturers does not appear but the draft agreement was among the files of WAE relating to the Cue Project and available to its directors and officers from time to time.

186 For reasons which have been set out elsewhere, the negotiations between Messrs Streeter and Cooper on the one hand, and the ANPC personnel in January 2000, led to an acceptance that the Cue tenements would be sold into the new project in return for vendor shares. The value to be attributed to the Cue tenements for this purpose and the number of shares in WANL to be allotted in consideration became the subject of further negotiations and evolutions before being eventually settled at a notional figure of $100,000 for the tenements and 500,000 vendor shares in WANL to be issued in consideration (see the option agreement for the sale of the WAE tenements of 28 March 2000 - exhibit 96, 9 TB 665).

187 Despite the fact that WAE only had a 70% interest in the joint venture, and therefore in the Cue tenements, Mr Streeter negotiated for the vendor on the footing that WAE was entitled to the entire 100% interest in those tenements. This is evident from a letter from Messrs Smyth and Thomas, solicitors, then acting for both WAE and WANL to Mr Streeter dated 15 February 2000 (exhibit 80, 9 TB 584) enclosing a draft option to purchase those tenements (exhibit 81, 9 TB 586) in which WAE was named as the sole vendor of the entire interest in the tenements (see cl 8.3 of exhibit 81). This seems to have been acceptable to the ANPC personnel because in the various spreadsheet models for the implementation of the new project (Exhibits 57, 58, and 59) the only vendor of the Cue tenements is shown as WAE and all the vendor shares, to be allotted by the new company for those tenements, were to be issued to WAE.

188 Some time during February 2000, Mr Streeter learned that Mr Stanger of Golden Granite was prepared to sell that company's interest in the Cue tenements for $5,000. He did not report on or disclose this to Mr Brailey, nor did he inquire whether or not WAE had a right of first refusal in relation to Golden Granite's proposed sale of its interest in the joint venture. His explanation and justification for that was that he knew that WAE did not then have $5,000 in cash available to make the purchase; he did not believe that any of the other shareholders in WAE were disposed to introduce any more capital to the company; and, although he had still not fulfilled his promise to contribute the full $250,000 in capital which he had agreed to provide in March 1998, he was not himself, disposed to advance or contribute any further money to WAE to acquire the entirety of the interest in the Cue joint venture.

189 What Mr Streeter did do, however, was to arrange for another of his wholly owned companies, Meeka Star Mines Pty Ltd, to pay $5,000 by cheque to another Stanger company (Circle 9 Mining Co Pty Ltd) on or about 28 March 2000 for the purchase of Golden Granite's 30% interest. The cheque for this payment is part of exhibit 90, 9 TB 655 and is dated 28 March 2000. But the 30% interest in the Cue tenements was not transferred to Meeka Star Mines Pty Ltd. Rather, it was treated as being available to Mr Streeter's other company, the third defendant Jungle Creek. Revealingly, Golden Granite as vendor of this 30% interest executed transfers of the Cue tenements in favour of the plaintiff WAE some time in July 2000 (exhibit 121, 11 TB 818). These transfers were never executed by WAE as purchaser, nor were they registered or acted upon. They had been preceded by a set of transfers executed by Golden Granite in respect of the Cue tenements in favour of an unnamed purchaser (exhibit 90, 9 TB 655) which were sent under cover of a letter of 27 March 2000 to WANL care of Mr Streeter's office in Bassendean. Eventually, transfers of Golden Granite's 30% interest in these tenements to Jungle Creek as the named purchaser were executed by Golden Granite sometime in late July 2000 but not, it seems, executed by Jungle Creek (exhibit 124, 12 TB 826).

190 As for the registration of the proprietorship in the Cue tenements, the absence of registration of the transfers to Jungle Creek or, for that matter, to WANL, is confirmed by the searches of the tenements at DOME which are exhibits 203(1), 203(2) and 203(3).

191 The documentation of the formal entitlement by Jungle Creek to the 30% interest in the Cue tenements, which included the option agreement between WANL as purchaser and WAE and Jungle Creek as vendors of interests in the options, is dated 28 March 2000 and is exhibit 96, 9 TB 665. Nevertheless, none of the transfers of the interests of Golden Granite in the Cue tenements to Jungle Creek was ever registered. Instead, Jungle Creek lodged caveats at DOME against those tenements claiming a beneficial interest as purchaser, and it was on that basis that the matter was left.

192 Each of the caveats recorded the holders of EL 20/429 which had been applied for on 8 April 1998 and granted for a five-year term on 6 August 1999 as Golden Granite and WAE in 30% and 70% shares respectively. Neither WANL nor Jungle Creek was ever registered as a holder of any interest in the tenement. However, by a caveat lodged on 28 July 2000 by WANL a claim was made in respect of the 30/100th shares held by Golden Granite. That caveat was the subject of a 14-day notice to the caveator on 28 December 2001 resulting in its lapse on 11 January 2002. A second caveat was lodged by WANL on 8 August 2000 in respect of the 70/100th shares in the tenement registered in the name of WAE. A 14-day notice to that caveator was given after the lodgement of a transfer on 22 May 2001 resulting in the lapse of the caveat on 26 November 2001. The tenement was then surrendered on 14 January 2002. The searches relating to the two other ELs, 20/427 and 20/428, show that applications for the ELs were made but never granted and that there were no caveats lodged in respect of either of those two ELs.

193 This means that the first caveat lodged by WANL in respect of the 30% interest held by Jungle Creek which, as noted, was lodged on 28 July 2000, was lodged well after the conditional sale agreement (exhibit 96, 9 TB 665) under which WANL acquired the right to obtain the entirety of the Cue tenements from WAE and from Jungle Creek (which was never a registered proprietor). This was after Mr Brailey had resigned as a director from WAE in March 2000

194 So it came about that, for the 100% interest in the Cue tenements, WANL allotted 500,000 20 cent shares credited as being fully paid to the vendors. Accordingly, 350,000 of those vendor shares were due to be allotted to WAE and 150,000 shares were to be allotted to Jungle Creek. Jungle Creek received the 150,000 shares which were then held in escrow. These are part of the shareholding which the plaintiff contends was derived by Jungle Creek through knowing participation in breach of fiduciary duty by Mr Streeter and which are, accordingly, part of the subject of the claimed constructive trust.

195 The 350,000 shares due to be allotted to WAE for its 70% interest in the Cue tenements, were not, however, allotted to the plaintiff. They were, instead, allotted to another wholly controlled Streeter company, Candela Pty Ltd, and were held by it on trust for WAE. The plaintiff contends that the allotment of these 350,000 vendor shares to Candela was part of a scheme by Mr Streeter to conceal the nature of the transaction or, alternatively, to facilitate the acquisition of those shares by Mr Streeter or another of his interests if and when WAE was wound up - a possibility which Mr Streeter and Mr Cooper were considering at the time. It is unnecessary to attempt to resolve quite why the WANL vendor shares allotted in consideration of the acquisition of WAE's 70% interest in the Cue tenements were not transferred to the plaintiff immediately. After the escrow period had elapsed, 300,000 of them were eventually transferred to the plaintiff but 50,000 of them were sold by Candela, then still under the control of Mr Streeter. This sale occurred in 2006 immediately after Messrs Brailey and Connell had requisitioned the extraordinary general meeting to remove Mr Streeter and Mr Cooper as directors of WAE and to replace them with Mr Brailey and others with a view to investigating all these transactions and, if so advised, to institute these present proceedings.

196 The plaintiff contends that the minutes of a meeting of directors of WAE held on 28 March 2000 (exhibit 93, 9 TB 661), at which some aspects of the sale of the Cue tenements were recorded, are false in material particulars. The minutes record that Mr Streeter and Mr Cooper were continuing to negotiate with WANL in an endeavour to then vend the Cue tenement licences into the new company at a value of $100,000 represented by 500,000 vendor shares so that WAE would be entitled to a 70% interest or 350,000 shares. An independent indication of value of the licences or applications had assessed them as being worth in the region of $35,000 - $50,000. In fact, a valuation of the tenements was not to hand at the date of that meeting and did not arrive until the following week (exhibit 97, 9 TB 672). Mr Streeter's acquisition by Jungle Creek of the 30% interest in Cue held by Golden Granite was not recorded. And the point of negotiating for the sale of the interest had passed because the option agreement for their sale (exhibit 96, 9 TB 665) had already been drawn, settled and probably executed at or before that meeting. I accept the plaintiff's submissions that these minutes are materially incomplete and misleading in those respects, and I consider that the only inference which can be drawn as a result is that Messrs Streeter and Cooper were attempting to be astute to avoid any record on the WAE documents of the precise details of the transactions which they had negotiated for the advantage of Jungle Creek and WANL. This is one of several clear indications of concealment of material details of the transactions by Mr Streeter and by Mr Cooper.

197 In the original WAE prospectus of 17 November 1997, the Cue tenements had been estimated to have a value of $200,000 which was reported by an independent geologist (see exhibit 18, 3 TB 127). Very little exploration had been conducted on the tenements between 1998 and March 2000. Despite the subsequent estimate of their value as being between $40,000 and $80,000 submitted to WANL, it seems that their true value was rather doubtful. If Mr Stanger, on behalf of Golden Granite, was prepared to sell a 30% interest for $5,000, as he did, that suggests a value for the whole tenements of not more than $17,000. Yet, in the eventual sale of those tenements to WANL they were treated as having a nominal value of $100,000 which is very probably a significant overstatement of their value. During the course of the trial the defendants proposed to adduce expert valuation opinion as to the true value of the Cue tenements in or about March 2000 but I discouraged this proposal on the footing that the evidence did not go to any issue in the case and was, at the most, collateral - see authorities discussed in Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52. Counsel did not press the point. If, however, as seems likely, the true value of the Cue tenements was less than $100,000 at the time then the result has been to the advantage of the plaintiff and of Jungle Creek. No one but WANL could thereby have been prejudiced.

Affirmation by the plaintiff - the Cue tenements transaction

198 By claiming a constructive trust or other relief in respect of the 150,000 shares allotted to Jungle Creek as a result of this transaction, and by retaining the benefit of the remaining 300,000 shares allotted to WAE, the plaintiff is affirming this transaction and, consequently, any issues as to the lack of adequate valuation of the Cue tenements is simply irrelevant in itself. I am satisfied that the truth of the matter appears from the clear fact that the ANPC personnel were disinterested in the Cue tenements and were initially reluctant to have them introduced into the project which became WANL. I am satisfied that it was Mr Streeter who pressed for, indeed insisted upon, the sale of the Cue tenements to the new company and that he did so because he believed that this would, in effect, secure for himself a 20% interest in the whole of the shares to be issued in WANL arising from the proposed IPO which occurred in July 2000.

199 The numbers and mathematics leading to this conclusion are somewhat complicated but were fully explained in the course of the trial and were not, in the end, the subject of contention. Without setting out the actual calculations, the rationale can be readily enough explained. If there were to be a proposed reconstruction of the share capital of WAE which reduced the shareholding of the original shareholders, as has been proposed in the advice from Mr Huston of 14 April 1999, exhibit 41, if Mr Streeter's loans to WAE were all to be converted to shares on the new reconstructed basis; and, if Mr Streeter were to be allotted additional shares as promised, then, on the assumption that WAE would hold a meeting of shareholders which would approve the elevation of the Streeter shareholding beyond 20% without the need to make a take-over offer, or if, alternatively, the company were to be converted to a proprietary limited company, Mr Streeter would, in effect, control 80% of the capital of the plaintiff.

200 This process of assumed conversion and restructuring of WAE resulting in Mr Streeter having 80% of the company was a constant assumption in many of the spreadsheet models prepared by Mr King and/or Mr Cooper during December 1999, January and February 2000. In the bottom right hand corner box (as previously described), the Streeter interest in WAE has consistently been recorded as being 80%. I have no doubt that Mr Streeter and Mr Cooper, and those advising them, believed that the proposed capital restructure and conversion of loans to shares in WAE was distinctly feasible and could readily be implemented and that it was a reasonable postulate to assume that Mr Streeter could, by those means, acquire an 80% shareholding in WAE.

201 On that basis, therefore, shares which were to be allotted to WAE, either in consideration for the transfer of its interest in the Cue tenements, or for other reasons in earlier iterations of the proposed models, could be treated as to 80% as representing the interest of Mr Streeter or his group. Accordingly, the value to be placed on Cue tenements, and the number of shares in WANL to be issued in respect of them, was significant in the modelling when designing a proposal which would, in practical effect, give Mr Streeter interest an initial 20% initial interest in WANL. The many various formulations and differing models of the proposed company contained in exhibits 54, 58, 59, 60 and 61 are, I am satisfied, reflections of an agreed massaging of the values of the Cue tenements to achieve the 20% equity in WANL desired by Mr Streeter.

202 Because of this, it was of little importance what the true value of the Cue tenements were and it is clear that ANPC personnel accepted this as part of the price for Mr Streeter's overall financial support for their project. Accordingly, when the real purpose of the transaction is appreciated, it is not sinister that, in all probability, an excessive value was placed on the Cue tenements because, as already noted, this has inured to the benefit of the plaintiff and there is no complaint about it by WANL.

203 This course of events does reveal, however, that during this period Mr Streeter regarded himself as free to utilise and dispose of assets in WAE in a manner which secured his greatest personal advantage, and that he believed he was justified in doing this because of his assertion that other shareholders in WAE were not prepared to contribute any of the capital which would be needed to achieve the implementation of the project. For reasons described elsewhere, I am satisfied that the other shareholders in WAE certainly had the means and the contacts to raise capital of the order needed for the implementation of this project by WAE or to be used by WAE to become a foundation shareholder in the project. Neither they nor WAE were ever asked to do so. Nor were they given any opportunity to fund WAE for the achievement of a purpose which was within the scope and ambit of the original formation of the company.

204 Once these details of the dealings in the Cue tenements are established it becomes a relatively simple matter to address the plaintiff's allegation that, as a director of WAE, Mr Streeter misused his position to acquire 30% of the Cue tenements joint venture from Golden Granite for Jungle Creek and for Jungle Creek to sell that entitlement to WANL in return for the allotment of 150,000 vendor shares.

205 Between December 1999 and February 2000 the negotiations between Mr Streeter and Mr Cooper on the one hand and the ANPC personnel on the other clearly contemplated the sale of 100% of the Cue tenements by WAE to the new company WANL in return for vendor shares to be allotted to WAE by WANL. This transaction could only be achieved by Mr Streeter exercising executive power, which he held as a director and controlling shareholder in WAE, to sell its interest in Cue to WANL. He plainly committed WAE to that course and the initial legal advice and draft contracts proceeded on the basis that the transaction would be implemented in that way. The directors of WANL, including Mr Streeter and Mr Cooper, were at all times willing to acquire the entirety of the interests in the Cue tenements.

206 Australian Nickel Project Consultants (ANPC) was never more than a loose syndicate or a group of fellow-minded geologists and geoscientists who, faced with the decline in mining and exploration activity during 1998 and 1999, were under-employed. They were looking for general proposals which could be taken up by a new or existing exploration company, with a view to retaining them in various ways to undertake the exploration and the associated geoscientific work. ANPC was not a partnership or formal joint venture. Apart from seeking to acquire suitable mineral tenements to establish a viable project, the members never carried on business together with a view to profit in the form of a partnership, or otherwise.

207 The group comprised Mr Julian Hanna, Mr Terry Grammer, Mr Richard Stewart and also, but it seems to a lesser extent, Mr Gordon Kelly. All were experienced and highly skilled geologists. Messrs Stewart and Kelly were also qualified, respectively, as a geophysicist and a geochemist. In 2000, Messrs Hanna, Grammer and Stewart all became shareholders in WANL and Mr Kelly became an employee of that company. Mr Hanna was, and still is, the managing direction of WANL and Mr Stewart has, at all material times, been one of its senior employees. After an initial engagement by WANL, Mr Grammer left for Asia, where he is currently operating a number of mining companies in Thailand.

208 In early 1999, ore prices for commodities such as nickel were depressed and many geologists and geoscientists had been made redundant by mining and exploration companies in Western Australia, or were underemployed. According to Mr Grammer, a group of such geologists and geoscientists, known to one another, began to meet occasionally to discuss possible employment opportunities and these meetings were led by a Perth geologist, Mr John Williams and by a geology lecturer at TAFE, Mr Tim Koelher.

209 At this time, Mr Hanna was working as a consultant for Rothschild Ltd in Perth, his former employer, Consolidated Gold, having gone into administration. He had extensive experience, particularly in gold exploration. In addition to this part-time work, he did some occasional consulting for Portman Mining and taught various practical skills at TAFE. Mr Terry Grammer then was also a very experienced geologist doing work for Jubilee Gold Mines where he had been instrumental in the discovery of the Cosmos nickel project, as mentioned. His position at Cosmos had disappeared with the downturn in commodity prices and he was then unemployed and looking for work. He and Mr Hanna met first and then they met Mr Richard Stewart at one of the informal geological group meetings in March or April 1999. Hanna knew Stewart because both had worked together at North Limited where Stewart had been a senior geophysicist.

210 From then until some time in May 1999 these three developed the idea of identifying and acquiring interests in possible nickel sulphide projects for more extensive evaluation and development. At the time a new method of treatment, the pressure acid leach method (PAL) was under development in this State by Anaconda Nickel at Murrin Murrin and also at Bulong and Cawse. The three geologists believed that the PAL method was fraught with a variety of technical problems and that more traditional nickel sulphide operations would remain of significance and worth. Hence they agreed to form the informal consulting group named Australian Nickel Project Consultants (ANPC) and they operated from Mr Hanna's home. The arrangement was that each of the three would continue to work as an individual consulting geologist with his own clients but simultaneously would seek opportunities to acquire interests in existing nickel sulphide projects. The idea was that they would attempt to reach agreements with the owners of such projects to sell them into an existing listed company or to be used as an asset base to float a new company on the ASX. (See exhibit 286, pars 26 - 28).

211 With the assistance of a fourth unemployed geologist, Mr Gordon Kelly, the group identified a list of known nickel sulphide and platinum group projects in Western Australia where nickel mineralisation had been established and which the ANPC members considered had good exploration potential. This was done by reviewing available records at DOME, and by consulting contemporary published geological materials on nickel mineralisation deposits within the State. They identified a number of potentially attractive prospects. Messrs Grammer and Hanna would then approach the tenement owners in an attempt to negotiate some kind of agreement which would allow them to make the tenements, or interests in them, available to a listed company in return for an equity interest. This was arguably attractive to tenement owners because such participation would eliminate or reduce their expenditure obligations and they would have the chance to benefit in any discoveries through participatory interests.

212 At the stage of the assembly of potential nickel prospects Mr Hanna was also working at the firm of Messrs Norgard Clohessy, accountants, where he met and established an association with Mr Timothy King, one of the partners.

213 By July of 1999 the ANPC group had progressed to the stage of preparing a web page (exhibit 263, 5 TB 340) which, although only in draft, described the services of the group. These included a range of geological and geoscientific studies ranging from: the provision of information from the database about existing nickel projects; to advising a client on specific projects; negotiating with current holders of selected projects to acquire majority interests through joint ventures expenditure and other arrangements on proposed tenements; advising on drilling targets by the use of modern geoscientific methods; and conducting and supervising exploration activities. By October 1999 they had proceeded to compose a 'nickel company proposal - October 1999' (exhibit 266, 6 TB 394) which included as an object:

To revitalise a currently listed company and raise $4 million by vending six nickel sulphide exploration properties. The proposed fund raising will be by public placement and a rights issue to existing shareholders. The existing company will probably need to be restructured so that the resulting share numbers will be acceptable to the market.

214 The stated purpose was to explore for high grade massive sulphide deposits similar to the Cosmos and Silver Swan operations which could be mined at low cost. The document included a map identifying known nickel prospects within Western Australia, including many well-known operations conducted by others. Those included the Forrestania project where, as described elsewhere, Viceroy and Outokumpu were then operating an established mine. This October 1999 proposal identified six specific projects as follows:

• Bullfinch North project - held by Polaris Metals NL
• Mount Jewell project
• Mount Alexander project
• Koolyanobbing project
• Cundeelee project
• Plum Ridge project

and then went on to describe the function of ANPC as:

Australian Nickel Project Consultants (ANPC) was established in May 1999 to provide a service to mining companies wishing to identify Australian nickel projects available for joint venture or sale. ANPC has built up a comprehensive database of nickel deposits including details of most exploration properties, existing resources and producing mines in Australia.

215 After detailing the specific targets which had been identified the proposal explained that the exploration strategy would be a two-year exploration programme to be managed and carried out by ANPC on a contract basis on behalf of the company at reasonable market rates.

216 I am satisfied that the proposal which the ANPC was seeking to advance was, for all practical purposes, the same as the objective which the directors and shareholders of WAE were looking to pursue. It was not, in any way, esoteric or specialised. The process of collecting sufficient suitable prospective mining prospects together and using them as a base for a new share issue in a small exploration company, or a new company formed for the project, was the very prototype of model used by many similar exploration companies in the history of mining development in this State and elsewhere. That is essentially what Mr Brailey and his colleagues had been attempting to do from 1997 onwards and it was that idea which had attracted Mr Streeter's interest and investment in WAE in 1998.

217 I do not have the least hesitation in concluding that any proposals or suggestions from ANPC along the lines being promoted would have been of interest to WAE. Whether the particular project was of sufficient interest to be taken up and whether agreement on satisfactory terms for the promotion of the venture and the associated capital raising could be reached would no doubt be matters upon which much negotiation and discussion would depend. Nevertheless, this is the form of proposal which would have been of interest to WAE.

218 However, counsel for the defendants submitted that the form of the ANPC proposal eventually resulting in WANL was not one of a kind which would have interested WAE or which could have been pursued by the plaintiff. This, it was submitted, was because by then the ANPC personnel were not interested in vending their interests in tenements and presenting their proposal to an existing company because they wanted a new 'clean' company which would be incorporated specifically to take on and promote the project. That is, indeed, what eventually happened when WANL was incorporated and promoted the project, but in order to consider the submission it is necessary to examine more closely the position and prospects of ANPC in the latter half of 1999.

219 As already described, the nickel mining industry was then depressed and work for experienced geologists was scarce. The four participants in the ANPC group were either not employed or were under-employed and the formation of the group and the proposals being advanced had, as their greatest priority, securing arrangements for the future employment of the geologists and geoscientists. They were certainly interested in taking equity in any company which might promote the venture although the issue of equity was more important as a means of supplying consideration to the vendors of the various interests and tenements. The October 1999 proposal (exhibit 266, 6 TB 394) contemplated the revitalisation of a currently listed company. What the geologists wanted, and needed, was work and, consequently, the decision about whether or not to take up any particular offer was likely to be determined with that objective having a greater importance than the precise structure of the implementation.

220 Nevertheless, in late October 1999 one of Mr Hanna's corporate advisers recommended an alterative means of structuring the ANPC proposal, by incorporating a new exploration mining company and listing that on the ASX after conducting an IPO. The details of this, involving a proposed capital raising of $2.5 million, are set out in the evidence of Mr Hanna and the details are in exhibit 268 (6 TB 406) where the names of possible investors were also suggested. However, the ANPC personnel did not immediately act on that advice because a proposed company model was prepared by Mr Hanna with the assistance of Mr King from Norgard Clohessy and dated 12 November 1999 (exhibit 214, 6 TB 417). This model proposed vending the available projects into a listed vehicle by obtaining seed capital from a major investor, having a public share issue to raise $1.3 million and a placement with a major company to raise another $0.7 million which would produce a net amount of funds raised, after costs of $2.5 million and with shares to the value of $0.5 million to be issued to drilling contractors in lieu of payment for services, of $3 million available for exploration.

221 The ANPC personnel then prepared a second nickel company proposal in November 1999 (exhibit 52, 6 TB 412). This was very similar to the October 1999 proposal (exhibit 266, 6 TB 394) except for two additional nickel sulphide projects available to be included into the listed vehicle and it proposed a two-year exploration budget at a fee of $1.5 million per annum to be undertaken by the ANPC personnel. It was this document which, under circumstances yet to be mentioned, was given by some of the ANPC personnel to Mr Brailey and sent on by him to Mr Streeter.

222 Looking at the position from the perspective of the ANPC personnel in November 1999, it can be seen that they had a definite, feasible proposal which was ready for promotion and development by a corporate vehicle which had, or would be able to raise, about $3 million available for expenditure needed over the first two years of the project. The company which would be chosen to take on the project would also need to issue shares, or other securities, to the vendors of the various projects in consideration for their sales of their projects. It would need to issue further shares to corporate advisers, accountants and exploration drillers in consideration for the services which they would provide. It would need a commitment to contribute a significant amount of seed capital from one or more major investors before conducting an IPO.

223 For all this to be achieved and to be attractive to the investors, including the vendors, securities in the new company would need to be quoted on the ASX, and therefore be marketable (after any escrow period) so listing on the ASX would also be essential. Clearly, the most desirable vehicle would be a public company already listed with sufficient capital to back this project and an existing capital structure suitable or adaptable for the issue of vendor shares and the raising of further capital by an IPO. The trouble was that in 1999 such small listed corporations were in short supply. The evidence disclosed that, during this period, the number of the smaller exploration companies or other corporate shells then listed and available for the implementation of some new enterprise, was rapidly being absorbed by the then current 'dot-com boom' as vehicles for the promotion of technology and telecommunications ventures.

224 One alternative would be to incorporate a new public company especially for the purpose of promoting this venture, to conduct an IPO and then to list the company on the ASX. This would need an initial commitment to provide a significant amount of seed capital (to cover the costs of incorporation, the IPO and the proposed listing) and would take time to achieve together with some risk that the IPO may not be successful and that a listing could therefore not be obtained. That would mean that the prospect of securing unconditional contracts with the vendors of the tenements would be jeopardised because so much would depend on the uncertainty of achieving a listing. Another alternative would be to vend the tenements and promote the proposal through an existing public company, not already listed, but with the support of its retinue of shareholders and, probably, with further seed capital to undertake the IPO and then to list on the ASX.

225 For each of these alternatives there would obviously need to be much negotiation and resolution of the amounts of capital to be subscribed, the number and value of vendor shares to be allotted, the extent of seed capital needed and the terms of any IPO. While from the ANPC perspective it may have been possible, in the abstract, to rank these various alternatives in some order of preference, this was not an occasion for abstractions because the need for employment, and the desire to promote the venture, meant that practical judgments would need to be made having regard to the opportunities available. Despite having approached a number of the major potential investors suggested to Mr Hanna by his corporate advisers in October 1999, ANPC had not, to this point, received any serious expressions of interest and were not in negotiations with other potential corporate participants or backers.

226 The submissions made on behalf of the defendants about alleged lack of correspondence between WAE and the kind of corporation which the ANPC group were seeking to carry and promote their venture was further refined by the submission that the ANPC group were mainly seeking seed capital and that WAE had no seed capital and was not a potential provider of risk capital itself. While it is true to say that WAE did not have a supply of capital available on hand in November 1999 to contribute immediately to the ANPC proposal, if the opportunity had arisen, I do not consider that this submission really reflects the situation or attitude of the ANPC personnel at the time. What they were seeking was acceptance of their November 1999 proposal, or some variation of it, to vend the projects into the chosen company and to raise capital to allow a two-year exploration programme to be conducted which would involve their employment. How this was to be done and how the necessary capital was to be raised was of secondary importance. The provision of so-called seed capital was only an early step along the path to conducting a greater capital raising by the intended IPO. It was not essential that the seed capital come from one individual or entity.

227 If, presented with this opportunity, WAE could have raised funds from its own resources, that is by loans or share allotments to existing shareholders, in sufficient amounts to provide the seed capital and then to conduct an IPO to raise another $2.5 million or so. I cannot accept that there would have been any difficulty about proceeding in that way. I accept, as already canvassed, that for this to occur a restructuring of the capital of WAE along the lines recommended by Mr Huston would have been necessary and that probably Mr Roberts would need to have been satisfied by paying his $12,880 claim but I cannot see that any of that would have been a significant obstacle to achieving promotion of the venture either by, or with substantial investment from, WAE. Mr Streeter has said that he was tidying up the affairs of WAE in order to avail of an appropriate opportunity when the time came. There was still the balance of the $250,000 which he had promised to invest in the company. Other shareholders, including Mr Le Clezio, Mr Vasileff, Mr Connell and Mr Brailey, were able to make investments in the company if there were a sufficiently attractive proposal.

228 I am satisfied that the ANPC proposal was one which the major shareholders of WAE at the time would probably have supported and that they had ready access to funds to subscribe, and the ability to raise the kind of seed capital which was being sought by the ANPC personnel.

Meetings between Brailey and various ANPC personnel

229 At 10.30 am on 29 November 1999 the annual general meeting of WAE was held. Messrs Brailey, Streeter and Cooper attended (exhibit 232 par 212 and exhibit 5, 16 STB 414) but nothing other than formal business was conducted. Had the ANPC proposal been in the wind at that time, I consider that one or other of the directors would have mentioned it at that meeting or informally but there is no evidence that any such discussion took place. Accordingly, I accept the evidence of Mr Brailey that it was later, on or about 29 November 1999, that he and Mr Le Clezio had their chance meeting with Mr Stewart in St Georges Terrace on the footpath just by the premises of the WA Club near Howard Street.

230 Mr Brailey and Mr Le Clezio both described being together talking at that point when Mr Brailey was hailed by a man who turned out to be Mr Richard Stewart the geophysist with whom Brailey had worked at Western Mining Corporation in Kalgoorlie some years before. They both recall that Mr Stewart said that he and several of his friends had formed a business called Australian Nickel Project Consultants, that they had assembled a number of nickel projects and were looking for seed capital and, as Mr Brailey distinctly remembers 'I've been working wearing out shoe leather. I've just been to see Reedy' which Mr Brailey understood to be a reference to the sharebroker, Mr David Reed, of the firm Eyres Reed. Mr Brailey introduced Mr Stewart to Mr Le Clezio and explained to Mr Stewart that he himself was then working for the broking firm Tolhurst and that Mr Le Clezio was working for Montague Stockbrokers. He told Mr Stewart that they were looking for 'company makers'. He also told Mr Stewart that he would be happy to meet him at Tolhurst's offices to discuss his group's activities and Mr Stewart said that that would be a good idea.

231 There is no independent evidence when the Brailey, Le Clezio, Stewart chance meeting in St Georges Terrace occurred but it seems probable that it occurred on 29 November 1999 some time after the short AGM of the plaintiff had been completed in that day. Although the notice of meeting nominated the offices of Mr Cooper in South Perth as the venue for the 1999 AGM for the plaintiff, the meeting in fact took place at the offices of D & D Tolhurst Ltd, where Mr Brailey was employed. These were situated at the 30th floor, 44 St Georges Terrace, Perth. The meeting conveyed at 10.30 am and was attended only by Messrs Brailey, Streeter and Cooper and closed at 10.50 am (exhibit 163, 6 TB 424).

232 Shortly afterwards, the evidence strongly suggests that it was on Wednesday on 30 November 1999 Mr Stewart in company with his colleague Mr Grammer, met with Mr Brailey at the offices of Tolhurst Sharebrokers in St Georges Terrace. Mr Brailey was given a copy of the ANPC November 1999 nickel company proposal (exhibit 52, 6 TB 412) and the nickel company model dated 18 November 1999 (exhibit 54, 6 TB 421).

233 There is a conflict in the evidence about what took place at this meeting, the most significant elements in the conflict being assertions by Mr Grammer that Mr Brailey did not express any interest in the ANPC proposal and made no reference to WAE nor mentioned his association with Mr Streeter or Mr Streeter's involvement in WAE. By contrast, Mr Brailey says that he became very interested in the ANPC proposal during the course of the meeting, was of the view that it could be an excellent opportunity for WAE and said that he would speak to Mr Streeter about getting WAE involved.

234 Prominent features of the proposal which Mr Brailey said sparked his interest included the reference to the Cosmos deposit, with which he was familiar and the fact that Mr Grammer was a co-discoverer of that deposit; that Messrs Stewart and Grammer were obviously were experienced nickel sulphide geologists, therefore making the proposal credible. Nevertheless, he believed that the model which they were presenting (exhibit 54, 6 TB 421) was quite incomplete and unsophisticated. Mr Brailey claims that in the course of this meeting he told the two visitors that he was the chairman of WAE which had previously been called Bloodhound Gold and had since changed its name and that Mr Streeter had become a major shareholder and director of WAE. He recalls Messrs Stewart and Grammer saying that they were experiencing difficulties in generating interest in the ANPC proposal. According to Mr Brailey he told Messrs Stewart and Grammer at this meeting that he would take the ANPC proposal to the WAE board and would arrange some meetings and that he believed that WAE and its major shareholder, Mr Streeter, would be interested in the ANPC proposal.

235 Mr Brailey believes that in all probability he would have spoken with Mr Streeter about this meeting shortly afterwards, probably by telephone; alerted him to the prospect and encouraged him to consider it and that this would have been done on the basis that each were directors of WAE and that the proposal was for consideration by WAE. However, Mr Brailey does not have any contemporary record of any such conversation with Mr Streeter and quite frankly admits that, with the passage of the years, he cannot now recollect any such conversation. To my mind this reinforces my impression of Mr Brailey as a careful, credible and accurate witness who refrained from describing the communication which he believed would probably have occurred because of an honest lack of memory.

236 Mr Streeter, on the other hand, denies that he had any such communication with Mr Brailey and said, at least at first that the ANPC personnel approached him to consider their project without any intervention, introduction or suggestion to that effect by Mr Brailey. I do not accept that evidence, and Mr Streeter did not in the end persist with it. I have no doubt that it was the result of the meeting at Tolhurst between Mr Brailey, Mr Stewart and Mr Grammer, that led the ANPC personnel to Mr Streeter's door a day or so later. This conclusion is not based merely on an appraisal of the credibility of the evidence on the issue by Messrs Brailey, Grammer and Streeter based on demeanour although that does contribute. There are other independent indications in the contemporary records which I am satisfied are by themselves sufficient to compel that conclusion. There is a further factor as well. Mr Stewart, the member of the ANPC quartet who first contacted Mr Brailey and who attended this meeting, and who is and for some time has been a senior employee of WANL, of which Messrs Streeter and Brailey remain board members, was not called as a witness by the defendants although he was available. In view of the assertion that Mr Brailey was disinterested in the ANPC proposal and had made no mention of WAE or Mr Streeter at the first Tolhust, it seems likely that Mr Stewart could have given evidence on that issue had he been called.

237 This was the one and only occasion when Mr Brailey met with Mr Grammer (except for a chance meeting in China in November 2004 - Grammer's witness statement (exhibit 269 par 96) many years later after this dispute had arisen). Whereas Mr Stewart was a previous acquaintance and was on friendly terms with Mr Brailey. Mr Grammer kept a notebook (exhibit 201, 15 TB 1163 - original exhibit 265 at 265A). Although the entries in that notebook do not all bear dates, they were kept, so Mr Grammer explained, in chronological sequence. On a page following an entry for 29 November 1999, there are notations made by Mr Grammer which the plaintiff submits are of information which could only have been obtained from Mr Brailey at the meeting described. Those entries are followed by reference to a meeting on Wednesday 1 December 1999 at Alex Mair's office (where Mr Cooper was located). Mr Grammer noted the words 'Bloodhound Gold' 'Western Areas' - 'Tolhurst consultant Sharif' 'T Streeter' and 'Jungle Creek Goldmines'.

238 In a later entry on the page following the experience referring to Alex Mair's office Wednesday 1st (December 1999) he refers to 'Mr Cooper', 'Western Areas', 'Jungle Creek', 'Norgard' ' → King' and this is followed by notes of a subsequent meeting again making references to Western Area, Mr Streeter, ANPC, Norgard and Jungle Creek. In cross-examination Mr Grammer accepted that this notebook contained a record of the meeting at the office of Tolhurst with Mr Brailey (ts 1591 - 1592), that the reference to the name Sharif was in all probability a reference to a Tolhurst mining analyst Sharif Oussa an associate of Mr Brailey. He agreed that he would have advised Mr Hanna of the results of the meeting afterwards. The subsequent notations in the notebook are significant because they reveal the proportions then being contemplated between the vendor consideration and the capital to be raised by an IPO. The references to Mr Cooper (who Mr Grammer had not then met) Jungle Creek and Norgard and Tolhurst and references to WAE, are all eloquent of a recognised connection between those named and the ANPC proposal.

239 In their defence the plea made by the three defendants concerning this meeting at Tolhurst with Messrs Brailey, Stewart and Grammer is as follows:

1. At that meeting there were discussions between Stewart, Grammer and Brailey, relevantly and in substance to the effect that:

(a) ANPC was seeking to raise seed capital for the purpose pleaded in par 28;

(b) ANPC was interested to hear Brailey's views as to the likelihood of ANPC succeeding and attracting seed capital for that purpose;

(c) Brailey suggested to Stewart and Grammer that the first defendant [Streeter] was an individual who may be prepared to provide seed capital for that purpose;

(d) Brailey suggested to Stewart and Grammer that they (ie Stewart and Grammer) meet with the first defendant and ascertain whether the first defendant was prepared to provide seed capital for that purpose.

1. On or about 3 December 1999, and after the meeting pleaded above, Grammer, Hanna and Timothy King, a corporate advisor to ANPC, met with Brailey because he was a sharebroker and market analyst.
2. At that meeting there were discussions between Hanna, Grammer, King and Brailey, relevantly and in substance to the effect that:

(a) ANPC was seeking support from sharebrokers for a possible public capital raising connected with the Initiative;

(b) neither D & D Tolhurst nor Brailey were interested in providing that support to ANPC;

1. in or about early to mid-December 1999, Grammer, King, Hanna and Stewart met with the first defendant [Streeter] because the first defendant was an investor in the resources sector and had the financial capacity to contribute the seed capital sought by ANPC as part of the Initiative.

240 Mr Streeter was closely cross-examined about the plaintiff's allegation of a connection between the meeting with Mr Brailey at Tolhurst's on 29 November 1999 and the subsequent visits of Messrs Stewart, Grammer and another ANPC person sent to him to advance the ANPC proposal. After some prevarication he accepted that they had been referred to him by Mr Brailey and that they had not come to him independently. I am satisfied that that is what occurred and that the approaches by ANPC to Mr Streeter were directly as a result of Mr Brailey's urgings.

241 This leaves the question of whether or not Mr Brailey did no more than refer the ANPC personnel to Mr Streeter because the latter was a well-known wealthy investor in mining projects and a potential source of seed capital, without in any way contemplating that the ANPC proposal might be considered or developed by WAE. I do not accept that that was the position at all. There was no incentive for Mr Brailey to send the ANPC personnel to Mr Streeter for no better reason than to be of gratuitous assistance to them. Mr Brailey said and I accept that he recognised the ANPC proposal as an attractive one suitable for WAE, that he mentioned this to the ANPC personnel at the Tolhurst meeting and sent them to Mr Streeter expressly for the purposes of having the proposal considered on behalf of WAE. Furthermore, that is what Mr Streeter did. After calling in his accountant and advising Mr Cooper so that he, Mr Streeter, could have a second meeting with the ANPC personnel with Mr Cooper present, Mr Streeter decided to pursue the opportunity and arranged for Mr Cooper to submit a proposal to the ANPC personnel on 8 December 1999 (exhibit 56, 6 TB 440) which was sent to Mr Hanna and termed 'the offer' which expressly proposed the plaintiff (WAE) becoming the vehicle for the proposal and raising the capital needed by further share issues. The details of this proposal specifically contemplated Jungle Creek converting its loan to the plaintiff to shares (subject to shareholder approval), and taking a further 600,000 shares (the offer of those shares having been made by Mr Brailey in 1999.

242 That offer (exhibit 56, 6 TB 440) is quite plainly a development and a rationalisation of manuscript notes made by Mr Cooper which are exhibits 55 and 55A (6 TB 428). There is some dispute about the date of this document because it bears, in almost indecipherable manuscript, a note appearing to say (at 30 November 1999) which Mr Cooper says was not the date of the document but the date for the selection of financial and other information which it contains. Be that as it may, it was plainly made before 8 December 1999. It commences with a figure representing the total issued share capital of the plaintiff, the number of issued shares to Jungle Creek, the loan account (convertible) and the entitlement to transfers of a further 600,000 shares. It then proceeds through the process of reconstructing the capital of the plaintiff (by one as to 20 reduction - before the conversion of Jungle Creek's loans) and calculates the effect on the issued capital of the plaintiff if the mining tenements proposed by the ANPC proposal were purchased and the shares to be issued for drilling and other purposes were allotted. The exact details do not matter because the vital point is that the note is a template for the acceptance and implementation of the ANPC proposal via WAE.

243 There was a second meeting at the offices of Tolhurst between Mr Brailey and ANPC personnel held on 3 December 1999. In his witness statement Mr Brailey says that this was a meeting which he had with Messrs Stewart, Grammer, Hanna and King. But in evidence he acknowledged that he must have been mistaken about Mr Grammer being present and I accept that Mr Grammer did not attend that meeting. This was the first occasion that Mr Brailey had met Mr Tim King who was introduced as ANPC's corporate adviser from Norgard Clohessy. According to Mr Brailey there was a discussion about the preparation of a prospectus for WAE but Mr King observed that Norgard Clohessy wanted to be involved in preparing and producing the prospectus. Mr Brailey was not very happy with that proposal but a choice of who would prepare the prospectus was not then pursued. According to Mr Brailey the result of the meeting was that all were agreed that a meeting should be arranged between the other two WAE board members, Messrs Streeter and Cooper, and ANPC's representatives. According to Mr Brailey he notified either Mr Streeter or Mr Cooper about the results of this meeting and pursued negotiations.

244 It is significant that Mr Cooper's manuscript notes (exhibit 55), the precursor of the WAE offer on behalf of Mr Streeter to ANPC of 8 December 1999 (exhibit 56) contain calculations which could only have been derived from the ANPC proposed model of 12 November 1999 (exhibit 214) which had been given by Messrs Stewart and/or Grammer to Mr Brailey at the first meeting at Tolhurst's which I have concluded was held on about 29 November 1999. This means that that information must have been conveyed to Mr Cooper either before there was any meeting between the ANPC personnel and Mr Streeter or, possibly, as a result of that first meeting between Mr Streeter and the ANPC personnel which, in all probability, occurred on or about 6 December 1999. Either way that information was put into Mr Cooper's hands, and hence into the offer either directly by transmission from Mr Brailey to Mr Streeter (which neither recollects) or indirectly as a result of the referral of the ANPC personnel to Mr Streeter. I am quite satisfied that there is no basis for concluding that the offer made by Mr Cooper on behalf of WAE at the direction of Mr Streeter on 8 December 1999 was made or obtained by Mr Streeter acting privately or independently of his role as a director of WAE.

245 There are two initial meetings between Mr Streeter, either alone or with Mr Cooper, and various of the ANPC personnel which are significant and the dates of which are either in controversy or uncertain. These two meetings, I am satisfied, must have occurred before 8 December 1999 because the offer by the Streeter group, which contemplated WAE as the vehicle for the ANPC proposal dated 8 December 1999 was, unquestionably, the product of prior discussions at these two initial meetings.

246 The first of these meetings occurred at Mr Streeter's business premises known as Jet Fresh in Bassendean where Messrs Grammer, Stewart, Hanna and King met Mr Streeter alone. The second meeting, shortly after the first was held at Mr Streeter's prompting and in the presence of Mr Cooper because Mr Streeter desired Mr Cooper to hear and assess the proposal himself in order to discuss it with him. This meeting occurred at the offices of T A Mairs & Co accountants in South Perth where Mr Cooper was a partner. The probabilities are that it took place on 7 December 1999, but definitely not later than 8 December 1999.

247 In his evidence-in-chief (exhibit 232, par 217) Mr Streeter said that some time in late 1999, either in late November or December, he received a telephone call from Mr Grammer but did not recall exactly when. The substance of the call was that Mr Grammer was one of a group which had a proposal concerning nickel tenements and he inquired whether Mr Streeter would be interested in looking at the proposal. Mr Grammer told Mr Streeter that the group was called the ANPC and they agreed to meet. According to Mr Streeter, Mr Grammer made no mention of Mr Brailey or of WAE in that call but as a result he, Streeter, met with Messrs Grammer, Hanna, Stewart and King at Jet Fresh around about midday shortly afterwards. According to Mr Streeter, Mr Hanna was the principal spokesman at that meeting and provided details of the nickel projects. Mr Streeter was uncertain whether Mr Hanna made any reference to the fact that Mr Streeter was then a director of WAE or made any other reference to WAE. The meeting lasted for about an hour and ended on the footing that Mr Streeter would consider the proposal and get back to the ANPC members later.

248 Mr Grammer refers to this meeting as being attended by himself, Messrs Stewart and Hanna without mentioning Mr King (exhibit 269, [108]) and could not recall whether it was before or after the meeting which he and Mr Stewart had with Mr Brailey. Mr Grammer did not think that he was the one who contacted Mr Streeter about the proposal or to arrange the meeting at Jet Fresh. He thought that the second meeting, the meeting at Mr Cooper's office in South Perth, probably took place on 1 December 1999 because of the reference to that date in his diary (exhibit 265A, 4 STB 127). He did not take a major role in any of the discussions with Mr Streeter and said that most of the further negotiations were conducted by Mr Hanna and Mr King. This is consistent with my impression of Mr Grammer that, while he is an extremely experienced and competent geologist, he was mainly preoccupied with the technical geological prospects and was relatively unsophisticated in commercial and corporate arrangements or structures. However, without being able to remember at what meeting it occurred, Mr Grammer did say that he recalled Mr Streeter mentioning that he was involved with a company which had made a failed attempt at an IPO and that Mr Grammer then heard mention of WAE. Mr Grammer was of the opinion that that might have occurred at the meeting at which reference was made to Bloodhound Gold and WAE as recorded in his notebook (exhibit 265A) but that seems unlikely because the probabilities are that that is a reference to the earlier meeting with Mr Brailey.

249 Mr Hanna, whom I considered to have a more reliable recollection of the sequence of events during this period said (exhibit 286, par 97 - 112) that his first meeting with Mr Streeter was in the presence of Mr Grammer and Mr King at the Jet Fresh office in Bassendean. He could not recollect whether Mr Stewart was also present. He also recalled that his meeting with Mr Brailey (that is the meeting at Tolhursts on 3 December 1999) was before the meeting with Mr Streeter. His recollection was that Mr Grammer had mentioned Mr Streeter as a potential investor and had arranged for the group to meet with Mr Streeter (contrary to the recollection of both Mr Streeter and Mr Grammer). The group presented their ANPC proposal to Mr Streeter and he confirmed that the meeting ended on the footing that Mr Streeter would consider the proposal and contact them again. Mr Hanna confirms that there was a second meeting at Mr Streeter's accountant's office in South Perth where he met Mr Cooper for the first time. He cannot recall the date of this but it must have been after 3 December 1999 - probably at least two days after. It was after that meeting that the Streeter proposal, sent by Mr Cooper on 8 December 1999 (exhibit 56) was dispatched. There was then a later meeting between Mr Hanna, Mr Streeter and Mr King on 10 December 1999 resulting in an arrangement to prepare a revised model with Mr King. There then followed a series of other meetings before final agreement was concluded with the ANPC group on or about 20 December 1999.

250 In cross-examination Mr Hanna indicated that it was unlikely that he met with Messrs Cooper and Streeter on 1 December 1999, as suggested by Mr Grammer arising from the reference to a meeting in his notebook of that date. Rather the probabilities indicate that attempts may have been made to arrange a meeting with Mr Streeter and or Mr Cooper on 1 December 1999 but that they did not materialise.

251 The first meeting between the ANPC personnel and Mr Streeter was at the Jet Fresh offices in Bassendean and that was after the meeting with Messrs Stewart and Grammer with Mr Brailey at Tolhursts on 3 December 1999. In view of the earlier assertions in the evidence of Mr Grammer that the connection with Mr Streeter was established independently of Mr Brailey, and because of paragraphs [31(c)(b)] - [34] in the defendant's defence already mentioned, it remains significant that Mr Stewart was not called as a witness for the defendants, both on the issue of when the various meetings occurred and, more importantly, whether the connection with Mr Streeter occurred independently of any meeting or suggestion by Mr Brailey. On this issue I have already observed that, in the course of his cross-examination Mr Streeter effectively accepted that it was Mr Brailey's advice which led the ANPC personnel to his door and I am quite satisfied that that was in fact the case.

252 According to Mr Cooper his first meeting with the ANPC personnel was at the office of T A Mairs & Co where Messrs Hanna, King and Grammer met with him and Mr Streeter. He realised that there had been an earlier meeting between those gentlemen and Mr Streeter about the proposal. Mr Cooper said, expressly (exhibit 252, par 162) that at this meeting Mr Streeter observed that he had an interest in a mining company, WAE, and maybe something could be done with that and maybe it could be brought into the proposal. Mr Cooper also said that Mr Streeter remarked that WAE had some gold tenements at Cue and maybe they could be brought into the proposal. Mr Cooper was not sure whether it was at this meeting or later but there was definitely some point when the name 'Western Areas' was discussed as a name for the new company. He also recalled that one of the ideas then being considered was putting the WAE shareholders into the new structure. In discussions on this aspect Mr Cooper recalled that Mr King was concerned about the number of shares WAE had on issue and that, in Mr King's opinion, WAE had too many shares on issue which would dilute the vendors' shareholding in the new company. Then attention passed to making use of the WAE shareholders to provide the necessary 'spread' of shareholders for the new company.

253 The 8 December 1999 proposal or 'offer' (exhibit 56) shows that Mr Cooper and Mr Streeter discussed the proposal and that it was sent to Mr Grammer with Mr Streeter's authority (see cross-examination of Mr Cooper at ts 1402). Mr Streeter's credit suffers from his initial position in cross-examination which attempted to disown that proposal (ts 1143). The evidence confirms that following their two meetings with Mr Streeter the ANPC personnel were expecting support from Mr Streeter (see Mr Grammer in cross-examination ts 1604).

254 Accordingly, I am satisfied that the sequence of meetings before 8 December 1999 must have been as follows. First, the chance meeting between Mr Stewart, Mr Brailey and Mr Le Clezio in St Georges Terrace on or about 29 November 1999; second, the meeting at Tolhurst's offices in Perth between Mr Brailey, Mr Stewart and Mr Grammer on or about 30 November 1999; third, the next meeting with Mr Brailey at Tolhursts on about 3 December 1999, with Mr Stewart, Mr Hanna and Mr King; fourth, the meeting with Mr Streeter at his Jet Fresh offices in Bassendean with Messrs Grammer, Hanna, King and probably Mr Stewart on or about 6 December 1999; sixth, the meeting at T A Mairs and Co in South Perth with Messrs Streeter and Cooper, Hanna, King, Grammer and possibly Stewart on or about 7 December 1999. Then after the Streeter/Cooper proposal of 8 December 1999 (exhibit 55) there was another meeting attended by Messrs Streeter, Hanna and King on 10 December 1999. All of these were to consider the ANPC proposal.

255 The meetings between the ANPC personnel and Mr Streeter, and with Mr Cooper followed directly from the introduction by Mr Brailey made for the purpose of referring the proposal to Mr Streeter for consideration by WAE. Up to and including 8 December 1999 the matters were dealt with by Messrs Cooper and Streeter on the basis that WAE would be the vehicle for the proposal. In reaching these conclusions I place major reliance on the contemporary written records and notes then, in relation to the oral evidence upon the reliability of Mr Brailey (who could only speak of the first three meetings) and then upon the evidence of Mr Hanna subject to some qualifications. I expressly reject the versions of events given by Mr Grammer and Mr Streeter that ANPC made contact with Mr Streeter without any prior or other recommendation from Mr Brailey.

256 Mr Hanna's diary (exhibit 279) confirms that there was a meeting on 10 December 1999 between the ANPC personnel and Mr Streeter which resulted in a counteroffer (exhibit 259, 1 STB 35) which did not involve the plaintiff as the vehicle for the proposal but proposed for WAE interests the issue of shares in a new company to the value of $0.1 million totalling 0.6 million 20 cent shares and including the 'Cue gold project' in the proposal (200,000 shares assigned value, $30,000 to WAE's shareholder base and 400,000 shares assigned value $70,000 to WAE for the Cue tenements). This also specified an issue of 400,000 shares to WAE. (See box in exhibit 259.)

257 It was Mr Cooper who accepted that the ANPC proposal was in every respect the opportunity that the plaintiff had been searching for since 1998 (ts 1503).

258 It was probably at the meeting of 10 December 1999, that is after the Streeter/Cooper offer of 8 December 1999 (exhibit 56) that Mr King said on behalf of the ANPC personnel that they did not wish to use the plaintiff as a vehicle but wanted a new company as a 'cleanskin' and, also, when Mr Streeter made his stipulation that he should end up with an interest in the new company as close as possible to 20% (see Mr Hanna's evidence-in-chief, exhibit 286 [125]).

259 I am satisfied that the decision to grant Mr Streeter or his interests effectively 20% in the new company was what led to the plaintiff's interests in the Cue tenements being taken into the new proposal. The ANPC personnel were not initially interested in the Cue tenements, they were intent on pursuing exploration for nickel rather than gold. They did not take any steps to evaluate the Cue tenements not even obtaining details of them until 13 December 1999 (exhibit 166, 6 TB 470). The casual way in which the true value of the Cue tenements was dealt with also demonstrates that the real purpose of their introduction into the proposal was to provide consideration for the allotment of shares to the plaintiff and to Jungle Creek so as to maximise the share allotment to the Streeter interests. An incidental effect on this was that by taking Golden Granite's 30% interest in the Cue tenements Mr Streeter was able to acquire the 150,000 shares that were issued for the Golden Granite interest without diluting his interest in them to 80% as would have been the case had the interest been acquired by the plaintiff and then sold to WANL in return for shares.

260 Mr Cooper was of the opinion that he was under no obligation or responsibility to put the ANPC opportunity at the disposal of the plaintiff because he thought the opportunity had come to Mr Streeter purely and simply in his capacity as an investor (ts 1502). I am satisfied that was not the case. In relation to the sale of the Cue tenements into the project by WAE Mr Cooper considered that this was justified because of his impression that WAE had no funds and that if the applications had been granted there would be no funds to cover the necessary exploration expenditure. He accepted that the sale of the Cue tenements and the use of the WAE name by the new company resulted from Mr Streeter's choice and was part of his price for investing seed capital. He accepted that WAE was just waiting for some kind of opportunity to get a basket of plausible tenements together to justify a float and that this was exactly that kind of opportunity. Mr Cooper also said that the proposed allocation of 200,000 shares to WAE in the 10 December 1999 model (exhibit 259, 1 STB 35) was to compensate WAE for the use of the name Western Areas. It is not quite clear when Mr Streeter and the ANPC personnel agreed upon the selection of the name Western Areas No Liability but it was accomplished by 20 December 1999 (exhibit 63, 60 TB 460).

261 During the interval from 10 - 20 December 1999 there was a series of other models for the new company structure. In effect these were to arrange the capital structure in such a way as to secure a 20% interest for Mr Streeter. On 20 December 1999 agreement was reached upon the structure of the new company and its name. Messrs Hanna, Grammer and Stewart would receive 1,750,000 shares, Mr Streeter agreed to provide seed capital of $250,000 which was later increased to $300,000 (exhibit 5, 10 TB 720 ) and:

• Messrs Streeter and Cooper were appointed to the board of WANL;
• Mr Streeter through Jungle Creek and other interests held 20% of the issued capital;
• WANL was to acquire the Cue tenements.

262 Effectively, in all these negotiations Mr Streeter held the whip hand. That is not to say that his dealings with the ANPC personnel were other than harmonious but it was he and not they who had access to funds and they had little alternative but to accept his wishes. Had the situation arisen that instead of Mr Streeter himself being the source of the seed capital but Mr Streeter suggesting that seed capital could come from investment via the plaintiff, which in turn he and all the other shareholders might fund, I have no doubt that that arrangement would also have been acceptable to the ANPC personnel. It would have been treated, in effect, as a Streeter investment because of his assumed control, or capacity to achieve control, of WAE.

263 The position of Mr Cooper in all these negotiations deserves special mention. I have already recorded how he said that he believed that the opportunity had come directly to Mr Streeter and not via WAE and that WAE was not in a position to finance any such proposal or to invest in it. I am inclined to treat these as afterthoughts because I am satisfied that Mr Cooper saw his role as being no more than an advisor to Mr Streeter and as a representative of Mr Streeter's personal interests at all stages of the discussions and evaluations. His allegiance and his professional judgment were for the use of Mr Streeter and not for the plaintiff. So far as Mr Cooper was an officer and director of the plaintiff I have no doubt that he saw his responsibilities in that role as being primarily to protect the interests of Mr Streeter.

264 It was submitted on behalf of the defendants that the proposal of 18 January 2000 (exhibits 74, 167, 167AA) was shown to Mr Brailey before the meeting of directors of the plaintiff held on 28 January 2000 (exhibit 77, 8 TB 548), and that Mr Brailey agreed to that proposal. I reject that submission and I am satisfied that Mr Brailey did not see this document until much later. All that Mr Brailey was told at this meeting was that a new company (then unidentified) was wishing to set up a mineral exploration operation and to offer the plaintiff 800,000 vendor shares in exchange for the Cue tenements, and that of those 800,000 shares sufficient would go to Jungle Creek to satisfy the plaintiff's debt. That meeting was attended by Messrs Brailey, Streeter and Cooper and the minutes were signed by Mr Cooper. He said that he assumed that Mr Brailey knew the details of the proposal (ts 1463 - 1464), not that he disclosed them to him. Neither Mr Cooper nor Mr Streeter disclosed at that meeting that each was a director of the new company, that the new company was using the name Western Areas NL, or that, through Jungle Creek, Mr Streeter had acquired a 30% interest in the Cue tenements which Jungle Creek was vending into the new company in return for an allotment of vendor shares as well.

265 This was nothing more than the implementation of a plan to secure the approval of the transfer of the plaintiff's interests in the Cue tenements without revealing the true extent of associated transactions. It reveals a deliberate policy of non-disclosure by Messrs Streeter and Cooper which is, in itself, inconsistent with their assertions that they were under no fiduciary duty to the plaintiff in respect of these transactions. It was an attempt to disguise what was being done which was, for a time, successful. The design of this proposal of 18 January 2000 (exhibit 74, 8 TB 529) was associated with advice which Mr Cooper took from the company's solicitor, Mr Thomas, on 18 January 2000 (exhibit 235).

266 Nowhere in the pleadings have the defendants asserted that what was done was done with the knowledge and consent of the plaintiff. I am satisfied that Mr Brailey would have protested strongly had he been told at this meeting of what exactly was involved. He protested for lesser reasons on two subsequent occasions and ultimately resigned.

267 The foregoing events occurred at a time when Messrs Streeter and Cooper had concerns about the use of the name Western Areas NL by the new vehicle. They had thought that this could be authorised or legitimised by a simple resolution of directors of the plaintiff to change the plaintiff's name and/or to authorise the use of the name by the new company. That notion was corrected by advice which they received from the company's solicitor that a change of the name of the company required approval by resolution of shareholders in general meeting which, almost certainly, would have required disclosure of just what was happening. The legal advice that the directors of the plaintiff could not bind its shareholders to an agreement to change its name was given formally by the solicitor (Mr Thomas) to Mr Cooper and copied to Mr Julian Hanna on 21 February 2000 (exhibit 82, 9 TB 589).

268 Rather than call a general meeting of the plaintiff they sought advice from other solicitors, Messrs Freehills, as to the potential liability, if any, of WANL using that name. They received advice that, having regard to the circumstances, it was unlikely that the plaintiff could establish any liability or claim against WANL in respect of the choice and use of its name. The advice sought from Freehills on the ability to use the name Western Areas NL was received on 20 March 2000 (exhibit 88, 9 TB 640) and was given after instructions from Mr David Cooper indicated that WAE would soon be deregistered after it sold the Cue tenements. Those inquiries and activities also reveal the surreptitious nature of the way in which Messrs Streeter and Cooper kept from Mr Brailey and the plaintiff details of exactly what transaction they were implementing and how it affected the plaintiff's interests.

269 Further illustrations of the same approach can be found in exhibit 81 (9 TB 586) which is an initial draft of an agreement by WANL to acquire the Cue tenements from the plaintiff. This draft, which was never actually implemented, was prepared on or about 15 February 2000 and, by cl 2.1, granted to WANL sole exclusive right to purchase the entirety of the Cue tenements (not merely the 70% interest which the plaintiff had in the joint venture with Golden Granite) and for the plaintiff's consent to WANL using the name Western Areas NL and for the plaintiff agreeing to change its name to remove all reference to the words Western Areas as soon as practicable. It involved an assumption that the plaintiff was the sole registered and beneficial holder in all of the Cue tenements (cl 8.3), all three being enumerated in the schedule after cl 15.1.

270 On 29 February 2000, a meeting of directors of the new company WANL was held. Those present included Terry Grammer who, although described as a director, was not then or ever a director of WANL (exhibit 197, 9 TB 604). Under the topic of Western Areas Exploration, the minutes reported that:

Agreement has to be prepared. Richard Stanger (who owns 30% of all tenements of Western Areas Exploration) wants $5,000 for Western Areas NL to acquire his interest.

It was also reported to the board that there could be a problem of Western Areas Exploration (WAE) giving permission for Western Areas NL in having a similar name. No special meeting of the shareholders of WAE has been held to ratify this.

This could lead to a danger of passing off. Terry Grammer and David Cooper will try to get WAE to accede to Western Areas NL having a similar name.

271 The reference to Richard Stanger, of course was a reference to Golden Granite and to the Cue tenements. The reference to a problem with the name must be taken as a reference to Mr Thomas's advice (exhibit 82, 9 TB 589) and the reference to David Cooper trying to get WAE to accede to WANL having a similar name is obviously a reflection of the initiatives proposed by Mr Cooper and under consideration by him from 11 and 18 January 2000. The reference to Mr Grammer being involved in seeking the approval of the plaintiff for this is an obvious mistake.

272 Nevertheless these initiatives prompted Mr Cooper, I am satisfied with Mr Streeter's knowledge and approval, to approach Mr Brailey with a request for him to sign a letter as chairman of the plaintiff to shareholders in support of a notice of an EGM to approve a takeover by WANL of the plaintiff's interest in the Cue license applications and for the plaintiff to change its name in return for 1 million fully paid shares in WANL subject to the successful float of WANL on the ASX.

273 The draft chairman's letter, put to Mr Brailey, states:

Should the attached Special Resolution be passed and the offer be accepted then sufficient of the shares received would be allocated to Mr Streeter's company at their par value to enable the Company to discharge its debt and the remainder held by the Company as an investment asset. Mr Streeter has in the past advanced sufficient funds to finance the Company's day to day operations. These past loans have been converted to equity capital however Mr Streeter's interests now hold the maximum permissible shareholdings without making a full take of the offer for the Company. Because of Mr Streeter's and Mr Cooper's interests in Western Areas NL neither they nor their interests will be able to vote on this resolution so it is imperative that you exercise your voting rights (either in person or by proxy) so that your company can take advantage of this offer.

274 Mr Cooper denies giving this letter directly to Mr Brailey, saying that he believes it was sent by fax, but Mr Brailey said that it was handed to him at a meeting which he had alone with Mr Cooper at Tolhurst's boardroom sometime after the earlier meeting of mid-February 2000 with Mr Streeter and Mr Cooper. Mr Brailey said that Mr Cooper told him that Mr Streeter wanted to resolve all matters in dispute amicably and gave him the chairman's notice (exhibit 168, 8 TB 553) with a request for him to sign it. Mr Brailey terminated the meeting at that point, refusing to sign the document and on 8 March 2000 advised of his resignation as director of the plaintiff.

275 The position is that the earlier board meeting of mid-February 2000 was a meeting of directors of WAE at Tolhurst's office attended by Messrs Brailey, Streeter and Cooper. It was at that point that Mr Cooper handed to Mr Brailey a document 'Proposed Reconstruction of Western Areas Exploration NL as at 18 January 2000' (exhibit 74, 8 TB 529). In doing so, Mr Cooper told Mr Brailey that the ANPC deal was no longer going into WAE, and when asked why he said that the ANPC did not want to deal with WAE. According to Mr Brailey he became angry, the meeting became heated and was brought to an immediate close with Mr Brailey saying that he was extremely angry and disappointed at this revelation. Both Mr Streeter and Mr Cooper have denied that Mr Brailey expressed any anger or disapproval at that meeting or at any other time about the proposal. However, again I do not accept this and I consider that Mr Brailey's version of events is entirely reliable and that on this point neither Mr Streeter nor Mr Cooper should be believed. Both knew, at least from then on, that proposals to secure agreement by WAE to the implementation of the ANPC proposal as designed and agreed by them would very likely face criticism and opposition by Mr Brailey and his colleagues.

276 That proposal was to enable WANL to use its name without threat of liability. It was outlined in the document prepared by Mr Cooper entitled 'Proposed Reconstruction Of Western Areas Exploration NL - At 18/1/2000' (exhibit 167, 8 TB 532) given to Mr Brailey at a meeting of directors of WAE. There were no minutes of this meeting produced but it was described by Mr Brailey in exhibit 170 par 111. The proposal led to the meeting becoming heated and terminating summarily (exhibit 170, par 112). Mr Streeter and Mr Cooper both deny that they were at any meeting with Mr Brailey at which he became angry or expressed disapproval about the course of events, but I do not accept their denials. Rather, I accept the description of events given by Mr Brailey which is, in every respect, consistent with the contemporary documents, and a reaction which one would expect of an independent director such as Mr Brailey in those circumstances. The course of events is also consistent with the draft chairman's notice (exhibit 168, 8 TB 553) which Mr Brailey says he refused to sign when it was presented to him at a meeting at Tolhurst's board room by Mr Cooper some time in mid-February 2000. Mr Cooper denies meeting with Mr Brailey and asking him to sign exhibit 168 and claims that, instead, the document was sent by him to Mr Brailey, possibly by facsimile, with a request for him to sign it. Again, however, in spite of Mr Cooper's denials, I consider that Mr Brailey's evidence is the more reliable in this regard and I am satisfied with the credit of Mr Brailey in this and other respects.

The significance of the draft chairman's letter

277 How the document came into Mr Brailey's hands is not, however, of any great significance because the importance of the document lies in the clear intention which it reveals (having been prepared by Mr Cooper at Mr Streeter's request) of convening an EGM of the plaintiff to take up 1 million fully-paid ordinary shares in WANL on the basis that WANL would take over the plaintiff's interests in the Cue tenements and that the plaintiff would change its name, all subject to the successful float of WANL. Another point of significance in the draft notice is the final paragraph:

Because of Mr Streeter's and Mr Cooper's interests in WANL, neither they nor their interests will be able to vote on this resolution so it is imperative that you exercise your voting rights (either in person or by proxy) so that your company can take advantage of this offer.

278 This, even if only a draft, indicates that at least by February 2000 both Mr Streeter and Mr Cooper realised that there was an actual conflict of interest between themselves and the plaintiff arising out of their interest in WANL and their desire to transfer assets of the plaintiff, both the Cue tenements and its name, to WANL. The notice indicates a desire to obtain the informed consent of the shareholders of the plaintiff to the sale of the Cue tenements and the use of the name by WANL which, of necessity, involved disclosure of the fact that WANL would be promoting the ANPC proposal. The acceptance, by this notice, that neither Mr Streeter nor Mr Cooper, nor their associated companies could vote on the proposed resolution is an express admission of a conflict of interest. The proposed issue of 1 million shares in WANL to the plaintiff is also a recognition that some appropriate form of consideration should be received by the plaintiff for these proposed developments which, at 20 cents a share, amounted to $200,000, which was the figure then being attributed to the value of the entirety of the interests in the Cue tenement. (It was later reduced to $100,000 when the transaction occurred.)

279 I am quite satisfied that when Mr Brailey expressed his displeasure on learning that the ANPC project was to be placed into a company other than the plaintiff and terminated the unrecorded meeting of the three directors, himself, Streeter and Cooper in mid-February 2000, and then later refused to sign the proposed chairman's letter, exhibit 168, both Messrs Streeter and Cooper appreciated that the prospects of securing an agreement from a majority of the shareholders of the plaintiff, if they could not vote their own shares, was hopeless and that they thereupon decided not to proceed with that attempted reconstruction. From then on they ceased to involve the plaintiff in the project in any way.

280 Importantly, this particular sequence of events also demonstrates that Mr Streeter and Mr Cooper realised at the time that the plaintiff and WANL had similar, if not identical, interests in pursuing and developing the proposal to acquire the ANPC plan and to carry that through to a successful IPO and listing on the ASX. The project and the opportunity was essentially what the plaintiff had always been looking for - this was conceded in as many words by Mr Cooper in his evidence. Its implementation by WANL was recognised as requiring the assent of the plaintiff, and a significant consideration being paid to the plaintiff in return for that consent. However, the attempt to secure that assent was not pursued and Messrs Streeter and Cooper proceeded with the implementation of the proposal by WANL and with their participation in it regardless.

281 If the position had been that the opportunity for the promotion of the ANPC proposal had come to Messrs Streeter and Cooper independently of Mr Brailey or of their roles as directors of the plaintiff, it would have been unnecessary for them to have attempted to secure the support of Mr Brailey and of the other shareholders of the plaintiff for the proposal. They could simply have maintained that this was an opportunity which had come to Mr Streeter without in any way entrenching upon his obligations or duties towards the plaintiff and that he was free to develop it through WANL or in any other form which might not involve the plaintiff. No attempt to give any explanation to that effect was made by Mr Cooper or by Mr Streeter to Mr Brailey at the time and there is no suggestion in any of the correspondence or documents that that was the way in which the opportunity had arisen or was being treated. In view of their connections with the plaintiff it might have been expected that efforts would have been made to document the lack of any such causal relationship had the opportunity arisen in the manner in which the defendants now contend. In that case, it might still have been necessary for the promoters of the WANL venture to secure the assent of WAE and its shareholders to the sale of the Cue tenements and of the change of the company name to permit both to be acquired by the new company and, if there were to be motions put to the EGM to that effect, Messrs Cooper and Streeter and related entities such as Jungle Creek would probably have been precluded from voting because of a conflict of interest. But that is not enough to explain exhibit 168 or the course of events which was followed because no attempt was made by Messrs Cooper or Streeter during this period to explain or to assert that they were free to deal with the ANPC opportunity as they saw fit without any duty or obligation towards the plaintiff. The explanation which is now advanced on their behalf for this conduct was not advanced or even articulated at the time of these events and I reject it.

282 In the present case, Mr Streeter agreed to subscribe capital to the plaintiff and/or to make loans to the plaintiff convertible to equity for the very purpose of promoting its generic plan to secure interests in prospective nickel tenements with a view to conducting a successful IPO and listing on the ASX. I do not accept that the plaintiff's interests were limited only to raising the capital as sought by the prospectus of 1998 (which was withdrawn when Mr Streeter agreed to invest). The long-term purpose of the plaintiff remained the same and unaltered, notwithstanding setbacks, namely to secure interests in sufficiently attractive nickel prospects to justify a successful IPO and a public listing. The ANPC proposal was exactly such an opportunity. That is why Mr Brailey referred it to Mr Streeter; why he later inquired at the January 2000 board meeting whether the negotiations were proceeding; why he was mollified by the explanation given by Mr Streeter that it was proceeding and receiving attention, and why he became very disapproving at the February 2000 board meeting when he learned that Mr Streeter was putting it into the hands of another company. It was, without doubt, an opportunity of the very kind in which the plaintiff had always been interested. It had an additional value-enhancing dimension in that it was associated with experienced and reputable geologists such as Mr Terry Grammer, Mr Julian Hanna and Mr Richard Stewart, who were looking for participation in and employment by the corporate vehicle which would conduct the flotation. Their skill, experience and reputation were associated features which made the proposal of interest to the plaintiff and which, in no small measure, later accounted for the great success of WANL in identifying, then acquiring, developing and exploiting the Forrestania operations.

283 I am satisfied that there is really no material difference between the interests and the aspirations of the plaintiff and those of the newly formed company WANL. Each was looking to achieve the same objectives. Each was substantially under the control or influence of Mr Streeter, who chose to put the venture into WANL, rather than into the plaintiff, for a mixture of reasons. These included the fact that:

(a) this is what the ANPC personnel themselves preferred and were demanding with increasing insistence as time passed during the critical days in December 1999;

(b) because the structuring of the project in the hands of WANL could be done in a way which would effectively provide for Mr Streeter, or his associated companies, a 20% interest in the project which was recognised as sufficient for effective control (but only on the basis that the interests of the shares in the project to be allotted to the plaintiff were treated as being, as to 80%, under the control of Mr Streeter or his interests);

(c) promoting the venture through the new company WANL would avoid the risk of dilution of the Streeter interests by the existing shareholders in the plaintiff and could proceed more rapidly because of the absence of any need, first, to secure an acceptable restructuring of the capital and shareholding of the plaintiff to confirm Mr Streeter's intentions to secure an 80% shareholding in the plaintiff.

284 Even then, however, the promotion of the ANPC proposal by WANL did not and could not have progressed without the utilisation of advantages associated with the plaintiff. These were, as already stated, the provision of the plaintiff's interests in the Cue tenements, and the use of the plaintiff's name by the new company as occurred. The use of the Cue tenements, as explained elsewhere in these reasons, was not in any way essential or even desirable for the promotion of the ANPC project but it was necessary to secure the effective 20% shareholding, and ensuing control, by Mr Streeter in the flotation which was his price for his overall financial support. Accordingly, the use of the plaintiff's assets, and the influence which Mr Streeter and Mr Cooper had over them as directors of the plaintiff was an essential and actual part of the implementation of the ANPC proposal and the effective flotation of WANL on the terms which were later implemented.

285 Another reason for Mr Streeter and Mr Cooper to act as they did was their belief, based on flimsy and unsubstantiated impressions, that the plaintiff was not able, for financial reasons, to obtain the capital necessary to avail of the opportunity. It has already been remarked that this incapacity, even if it had objectively existed, would not absolve errant fiduciaries from an obligation to account, but I am satisfied that this was an entirely self-serving explanation put forward by Messrs Streeter and Cooper. The only occasion on which Mr Streeter sounded out shareholders of the plaintiff about the possibility of contributing further capital was at an informal meeting held with some, but not all, of the shareholders. No particular proposal to raise any designated amount of capital, or to seek any loans, was put forward. Nor was any project for the utilisation of the moneys suggested. The inquiry was made at a time when Mr Streeter had already promised to provide a total of $250,000 in capital for the company but had only then contributed about $85,000 and when it was expected, or at least hoped, that he would honour his promise to supply the balance. As the evidence at the trial demonstrated, the major shareholders in the plaintiff at the time were men of substance who could readily have raised $300,000 or more if presented with a specific proposal of attractive character. The real explanation was that Mr Streeter regarded himself as effectively being in control of the plaintiff and free to choose, as he individually preferred, where to place the new opportunity.

286 Nor do I accept as applicable the submission on behalf of the defendants that a fiduciary is not necessarily prevented from using for his or her own benefit knowledge obtained from that position. The submission rests on dicta in Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46 of Viscount Dilhorne at 107 E-G, of Lord Hodson at 110 C-G and of Lord Upjohn at 130 D-F, where approval was given to the observations of Lindley LJ in Aas v Benham [1891] 2 Ch 244. The weakness in the submission is its limited and qualified application because there are certainly many circumstances in which a fiduciary is prevented from using for his or her own benefit knowledge obtained from the fiduciary position and that was the basis for the liability of the appellants in Boardman v Phipps itself: per Lord Cohen at 103 A-E; per Lord Hodson at 107 C-D and 12E. Indeed, Viscount Dilhorne expressly approved an observation of Lindley LJ in Aas v Benham in saying at page 91:

Lindley LJ said that if a partner avails himself of information for any purpose which is within the scope of the partnership business, he must account to the firm for any benefit he may have derived from such information.

thus laying the basis for the view that information within the scope of the enterprise of the partnership requires the observance of the fiduciary principles whereas information outside that scope will not give rise to any similar liability.

287 In this case I am satisfied that Mr Streeter acquired his knowledge of the ANPC proposal and of the opportunity to promote it as a direct and intended result of Mr Brailey's referral of the ANPC personnel to him. I am further satisfied that Mr Brailey referred the ANPC personnel to Mr Streeter with a view to the opportunity being examined, and if thought attractive, being promoted by or on behalf of the plaintiff. I am satisfied that it was never the intention or within the contemplation of Mr Brailey in referring the ANPC personnel to Mr Streeter that the reference was not to Mr Streeter in his role as a director of the plaintiff or that it was simply being passed on to Mr Streeter because he was known to be a wealthy investor with an inclination to invest in mining prospects. Mr Brailey's proprietorial sense and expectations for the ANPC proposal were evident from his subsequent inquiry of Mr Streeter at the January 2000 meeting about whether or not the project was receiving attention. I am satisfied that Mr Streeter also recognised that because of the unconditional affirmation which he gave that it was, in circumstances where the only implication to be drawn from his answer was that this was part of the agenda for potential development by the plaintiff.

288 Further evidence of this veil of concealment is apparent in the minutes of meeting of directors of the plaintiff held at Mr Streeter's premises in Bassendean on 28 March 2000 (exhibit 93, 9 TB 661). The only directors being recorded as present are Messrs Cooper and Streeter, with an apology being recorded from the director Mr Mentiplay. By this point Mr Brailey had resigned. With reference to WANL, the minutes stated:

It was recorded that both Mr Streeter and Mr Cooper had continued to negotiate with the board of Western Areas NL in an endeavour to vend the Cue tenement licenses into the new company. Following their investigations of the license applications it was agreed that a value of $100,000 (500,000 shares be placed on 100% of the project as it now stands). Therefore the 70% interest held by Western Areas Exploration NL would equate to 350,000 fully paid shares that would be subject to escrow upon listing. An independent indication of value placed the value of these applications in their present condition in the region of $35,000 to $50,000.

It was therefore agreed to proceed with these negotiations and accept an allotment of shares in the new company.

289 This was most disingenuous if not actually false. By the time of this meeting, at 4.30 pm on 28 March 2000, an agreement to sell the plaintiff's interest in the Cue EA's to WANL had already been executed. The minutes do not disclose that Mr Streeter, by Jungle Creek and Meeka Star Mines, had acquired Golden Granite's 30% interest in the tenements for $5,000 cash and had sold them on to WANL for 150,000 vendor shares in the new company (150,000 shares at 20 cents = $30,000). The recitation that an independent value of the shares of the Cue tenements placed them in the region of $35,000 - $50,000 had been received was also wrong because the advice from Mr Hanna forwarding the acquisition agreement for the Cue tenements, also dated 28 March (exhibit 97, 9 TB 672), mentioned that there was no sign of the valuation yet (for the Cue tenements) but that it should be available the following Wednesday. Nor was there any explanation of how shares to the nominal value of $70,000 were being allocated in return for tenements worth, on the recited facts, at the most $35,000. I accept submissions made on behalf of the plaintiff to the effect that these minutes conceal more than they disclose.

290 It was at the meeting of directors of WAE on 28 January 2000 that Mr Brailey asked Mr Streeter about progress with negotiations on behalf of WAE with the ANPC personnel. According to Mr Brailey, Mr Streeter told him that those negotiations were on track and indeed Mr Streeter acknowledges that he might have said that to Mr Brailey at that meeting (ts 1220). Mr Cooper also acknowledges that the ANPC negotiations were discussed with Mr Brailey (exhibit 252, [212] - [220]) without disclosure that both Mr Streeter and Mr Cooper were then directors of WANL and that the decision had then been taken for WANL to promote the ANPC proposal. This was positively misleading. It amounted to a reassurance of Mr Brailey's expectation that the discussions occurring with the ANPC personnel were on behalf of WAE. It was on 12 January 2000 that Mr Brailey had sent Mr Streeter a press article about the prospect of increasing world nickel prices (exhibit 70, 8 TB 501), which in the context, could only have been construed as putting forward materials supporting the proposal which had been broached by ANPC. Mr Streeter was distinctly evasive when cross-examined about this document, initially saying that it had nothing whatever to do with WAE. However, when the manuscript note in the margin identifying WAE was shown to him he could no longer maintain that pretence.

291 There is a further significant omission in the WAE board minutes of 28 January 2000 (exhibit 77). Not only do they conceal the name of the new company and the fact that WANL had by then been incorporated, there is no disclosure of the fact that both Messrs Streeter and Cooper were directors of the new company. Accordingly, in proposing and agreeing that WAE should sell its interests in the Cue tenements to the new unidentified company, both Messrs Streeter and Cooper failed to disclose that they were directors and shareholders in the new company. In cross-examination Mr Streeter acknowledged that he was then aware of the obligation to disclose a material personal interest (Corporations Law, s 232, and ts 1217 - 1218), and that his personal involvement was not disclosed. I am satisfied that, in the circumstances, the reason was to keep the full details of the transactions and the role of Messrs Streeter and Cooper in them from Mr Brailey.

292 By this point the acquisition and advancement of the ANPC proposal by WANL was effectively complete and arrangements turned to the IPO. The prospectus for WANL was dated 22 May 2000 and subscriptions commenced on 31 May 2000 (exhibit 111, 10 TB 774). In return for his contribution of seed capital, increased to $300,000, Mr Streeter and Jungle Creek received:

• 4,500,000 20 cent shares at the discounted price of 6.6 cents per share.
• 5,625,000 options exercisable at 20 cents.
• 400,000 options exercisable at 40 cents.

293 In addition, Mr Cooper received 400,000 options exercisable at 40 cents and he, his wife and others subscribed for further shares which are not the subject of this action. The capital raising was successful and WANL shares were listed on the ASX on 26 July 2000. Mr Julian Hanna became the managing director, Mr Grammer was employed as the head of the company's exploration team and Messrs Stewart and Kelly were employed full-time.

294 The plan to put an end to the plaintiff originally conceived by Messrs Streeter and Cooper on 11 January 2000 or earlier (exhibit 69, 8 TB 499) was then taken up by Mr Cooper approaching an experienced liquidator to enquire whether or not WAE could be deregistered (exhibit 118, 11 TB 808). He prepared in draft a report to the shareholders of the plaintiff dated 24 July 2000 (exhibit 125, 12 TB 827) to accompany a notice of general meeting to consider an extraordinary resolution to allow Jungle Creek to take over all the assets and liabilities of the plaintiff in full satisfaction of the loan owing to Jungle Creek and for the board then to arrange for the company to be deregistered. The loan to Jungle Creek was then put at $59,088 and with additional trade creditors of $2,169 that made the total liabilities of $61,257. The only significant assets were the shares in WANL held in escrow which were shown at their attributed acquisition cost of $70,000. However, that report and notice was never distributed and no such EGM was convened. Mr Cooper was unable to recall why that initiative did not proceed, but I am satisfied that the reason was to avoid detailed disclosure to the shareholders of all that had happened. It is by no means insignificant that, the effect of this resolution, had it been passed, would have been that Jungle Creek would have acquired the full ownership of the 350,000 WANL shares at that point issued to the plaintiff of which, even assuming that the reconstruction at capital conversions necessary to permit Mr Streeter's capital in the plaintiff to be enlarged, was at the most held beneficially as to 80% by Jungle Creek and so by Mr Streeter.

295 In May 2001 solicitors advised WAE that savings could be achieved by converting the status of the company from a no liability company to a proprietary limited company in which case audit fees would not be necessary (exhibit 250, 12 TB 882). A meeting to that effect was convened and held on 21 June 2001 (exhibit 126, 12 TB 87), at which only Messrs Streeter and Cooper attended and resolved that the status be changed.

296 Nothing of material significance then occurred until mid-2006 when Mr Cooper again renewed initiatives to lead to a winding up of the plaintiff by first resolving the long pending litigation with Mr Roberts. Shortly afterwards Messrs Brailey and Connell took steps to challenge Messrs Streeter and Cooper's control of the company as described below.

297 As noted the incorporation of WANL occurred in December 1999, the investment of seed capital in it by Mr Streeter and the allotment of shares and options to Mr Streeter, Mr Cooper, to Jungle Creek and to the ANPC personnel and others agreed in February 2000 was followed by an initial public offer of shares in the company by a prospectus dated 22 May 2000 (exhibit 111, 10 TB 744). That prospectus offered 25 million shares for subscription at 20 cents each in order to raise $5 million with a minimum subscription of 18 million shares to raise $3.6 million. Following the issue, the shares in WANL were listed on the ASX on 26 July 2000. The minimum application was for 10,000 shares and thereafter in multiples of 5,000 shares. It was open from 31 May until 16 June 2000. This prospectus showed (at page 113) that the interests of the directors and their related entities in shares and options with the company at the date of the prospectus were:

Partners of Norgard Clohessy (Timothy King as a partner of Norgard Clohessy

The terms relating to the options were that the option holder would exercise the option on or before 31 March 2004 at the relevant exercise price.

298 Then at page 135 of the prospectus in the disclosures relating to material contracts and the provision of seed capital by Mr Streeter is the following passage:

Pursuant to a letter agreement dated 1 May 2000 between the company, Terry Streeter, Timothy King, Ross Norgard, Norgard Clohessy, Julian Hanna, Terrence Grammer and Richard Stewart, Mr Streeter agreed to provide $300,000 of seed capital to the company. In consideration for the provision of seed capital, the company issued to Mr Streeter or his nominee:

1. 4,500,000 ordinary fully paid shares and
2. 5,625,000 unlisted options (exercisable at any time prior to 31 March 2004 at an exercise price of 20 cents).

299 That 'letter agreement' of 1 May 2000 outlining the details of the issue of shares and options to Mr Streeter is exhibit 5 (10 TB 720).

300 As already described those 4.5 million shares at 6.66 cents per share and the 5,625,000 options so allotted were directed by Mr Streeter to be taken up by the third defendant Jungle Creek.

301 The results of that IPO are described in the annual report of WANL for the year 2000 (exhibit 144, 7 TB 473), which states (page 6) that:

1. the company issued 18,520,000 ordinary fully paid shares as a result of its Initial Public Offer and raised $3,403,704 net of expenses;
2. the company's options to acquire the tenements detailed in this schedule of mining tenements in the annual report were exercised for consideration of $300,000 in cash and the issue of 9,850,000 fully paid ordinary shares and 1,000,000 options exercisable at 20 cents on or before 31 March 2004.

302 At page 7 the report disclosed the particulars of directors' interests in the securities of WANL at the date of the report and, so far as concerns the defendant's the position was:

D Cooper 100,000 ordinary shares - 400,000 40 cent options

T Streeter 7,250,000 shares 5,625,000 20 cent options and 400,000 40 cent options.

303 The defendants emphasise that in about November 2000 the shareholders of the plaintiff were provided with the plaintiff's annual report for the 1999/2000 financial year which included the Chairman's address disclosing the sale of the plaintiff's interest in the Cue Tenements to the new company named WANL (exhibit 117, 11 TB 770). That of course was published and distributed well after the arrangements between Mr Streeter and the ANPC's personnel had been completed in January and February of 2000 and also after the completion of the capital raising by WANL's IPO. The relevant passage in the chairman's address signed by Mr Streeter is as follows:

1. The Company's exploration licence application at Cue was sold to a new company entitled Western Areas NL for 350,000 fully paid 20 cent shares in the new company subject to the new company being listed on the ASX. This has since taken place. Because of escrow restrictions the share are currently being held in trust for the shareholders of Western Areas Exploration NL.

At the time of writing and sale there was only one of three licences actually granted and the other two were pending. An independent valuation of this project in May 2000 established the value of the whole Cue Tenements as being $40,000 of which Western Areas Exploration NL held 70%. Therefore the board deemed it prudent to accept the offer of $70,000 of scrip in the new company even though these shares would be held in escrow for 2 years.

1. It was during these negotiations that Mr L H Brailey resigned as a director and Mr M I Mentiplay was appointed in his place to enable the company to continue with the negotiations.

1. My own investment company, Jungle Creek Mine Pty Ltd has again loaned sufficient funds to enable Western Areas Exploration NL to continue to operate, albeit in a holding pattern only.

1. The company currently has only the assets as shown in the balance sheet at the 30th June 2000 and until the dispute with Mr V Roberts is settled no progress can be made by the company in pursuing further opportunities. Since the 30th June 1999 no actual progress has been made in resolving this matter as each time the matter comes to Court it has been deferred at Mr Roberts request.

304 I am satisfied that this report is disingenuous in a number of material respects namely:

• It fails to mention that there was an opportunity to acquire the 30% interest in the Cue tenements held by Golden Granite for the payment of $5,000 and that this opportunity was taken up by Mr Streeter to acquire that interest via Jungle Creek, or further that Jungle Creek then sold that interest into WANL in return for 150,000 shares in the company.
• No explanation was given of why the vendor shares to be issued to WAE in return for its 70% interest in the Cue tenements were held in trust by the unnamed company Candela or that Candela was controlled by Mr Streeter.
• The explanation that it was prudent to accept an offer of shares to the value of $70,000 for an interest in the Cue tenements worth only 70% of $40,000, entirely withholds the detail that the tenements had originally been valued at $200,000 and that the latest valuation (arrived at after the agreement for sale had been executed) put the value at between $70,000 - $100,000 or that under the terms of the sale a minimum consideration of $100,000 had been agreed upon essentially to ensure that Mr Streeter's interests secured a sufficient number of shares in the new company WANL to achieve control.
• It does not disclose that Messrs Streeter and Cooper, or their associated entities were allotted 5,625,000 and 400,000 options in the new company respectively or that Mr Streeter was allocated 4,000,000 shares at a concessional price of 6.66 cents per share for investing seed capital of $300,000.
• It does not disclose that there had been a stage in the negotiations with the promoters of the new company when WAE might be offered a chance to subscribe to a million shares in the new company.
• It makes no mention of the fact that Mr Brailey's resignation from the board of WAE had been because of his disapproval of the transfer of the opportunity to WANL.
• It stated that the pending litigation with Mr Roberts was the obstacle to further progress by the plaintiff in 'pursuing further opportunities' when the Roberts original claim, the subject of the court proceedings, was only for the comparatively small amount of $12,985.20 (see exhibit 27, 3 TB 181 Local Court summons). It did not disclose that on 6 April 1998 the board of the plaintiff had resolved to pay this sum (exhibit 177, 3 TB 152) at a time when Messrs Streeter and Cooper were members of the board and present at the meeting (exhibit 177, 3 TB 152).
• It did not disclose that Messrs Streeter and Cooper had by then already formulated a plan to put WAE into liquidation but had not implemented it and had no intention of the plaintiff 'pursuing further opportunities'.

305 Rather than informing all the shareholders of the plaintiff of material developments in relation to the formation of the new company and the sale of the plaintiff's interests in the Cue tenements I am satisfied that this statement constituted a failure to disclose relevant information to the shareholders and of the benefits derived by Messrs Streeter and Cooper. Accordingly, it was misleading in its implication that a satisfactory arms length sale of the interests in the Cue tenements had been secured. It is true that, by this time the prospectus for WANL had been issued and the IPO successfully concluded and that, accordingly, the information in that the prospectus was available in the public arena and, therefore presumably accessible to the shareholders and the plaintiff. However, I do not regard this as diminishing the effect of the chairman's address to the shareholders of the plaintiff in exhibit 117 (11 TB 770) because the shareholders were entitled to expect that Mr Streeter was providing a full and fair report of material activities of the company to that date. He did not do so.

306 The defendants nevertheless submit that none of the shareholders in the plaintiff other than Mr Streeter and Mr Cooper, were interested in subscribing for shares in WANL. They point to the fact that, as director and secretary of the plaintiff Mr Cooper wrote to each of the shareholders of the plaintiff by letters dated 30 May 2000 enclosing a prospectus for the IPO for WANL (exhibits 114(1) - (30) - 11 TB 757 and following). As well as enclosing the prospectus this letter said:

Enclosed herewith please find a prospectus for a new nickel exploration company, Western Areas NL, for your investment consideration.

PLEASE NOTE: This company has no relationship to Western Areas Exploration NL, the company in which you have a prior investment as a seed capitalist. The only common factor between the two companies is that both D C Cooper and T E Streeter are directors of both companies.

Should you wish to invest in Western Areas NL please complete and return the application form in the prospectus.

Yours faithfully

Western Areas Exploration NL

DC Cooper - Director/Secretary

307 The defendants also submit that none of the principal shareholders in the plaintiff who were called to give evidence for the plaintiff and who were cross-examined invested. (Mr Evans at ts 992, Mr G Le Clezio at ts 998 - 999, Mr Clatworthy at ts 1006, Mr Vassileff at ts 1015.) From this they submit that it cannot be concluded that the plaintiff's shareholders would have supported the ANPC proposal either if WAE had been the vehicle for its implementation, or if WAE had had an opportunity to take a substantial shareholding by being an initial seed capitalist similar to Mr Cooper. Either eventuality would have required the plaintiff to raise further capital and the defendants submit that the disinterest showed by the shareholders in the WANL prospectus should lead to an inference that they would not have supported any proposal to raise capital to allow the plaintiff to avail of or invest in the opportunity.

308 I do not accept these submissions because I am satisfied that each of the major shareholders in the plaintiff named, that is Messrs Brailey, Connell, B Le Clezio, G Le Clezio, P Vassileff, J Evans and G Clatworthy were men of substance who, in some cases individually and otherwise collectively could readily have raised $300,000 or more if presented with an attractive opportunity which was commended to them by Mr Brailey or by Mr Streeter. As it was Mr Vassileff said that he would have invested had Mr Streeter invested in the project; Mr Connell said that he would have invested if Mr Brailey had recommended the investment; Mr Brailey said that he would not have recommended the proposal without Mr Streeter making an investment but, having regard to Mr Streeter's actions it seems probable that he would have done that; Mr B Le Clezio said that he would possibly have invested depending upon Mr Streeter investing and Mr Evans said that he would have invested if offered the opportunity to take up shares at the concessional rate of 6.66 cents each. Mr Clatworthy said that his attitude towards the investment would have depended upon the assessment of the market at the time. Only Mr G Le Clezio said that he would not have been interested.

309 My conclusion from this, and from the evidence given by each of those shareholders, is that the probabilities are very high that had the full nature of the ANPC proposal been made available to the plaintiff or, alternatively if the plaintiff had had an opportunity of becoming a major contributing seed capitalist to any corporation that floated the ANPC proposal, the shareholders of WAE would have raised the capital to do so, at the very least to the extent of matching the contribution of $300,000 which was being sought from Mr Streeter at the time. The letters of offer of 30 May 2000 and the prospectus in WANL came to the shareholders without disclosure of the manner in which the Cue tenements had been acquired by WANL and without disclosure of the concessional issue of shares to Mr Streeter or the issue of shares and options to Mr Streeter and Mr Cooper.

310 Furthermore, the contention by the defendants that at the time they did not believe that WAE or its shareholders would subscribe for shares in WANL is inconsistent with their conduct on 8 February 2000 in notifying the board of WANL that the plaintiff would probably be a shareholder and in putting aside a provisional reserve placement of $200,000 worth of shares in the WANL issue (exhibit 105, 10 TB 714). At that point WANL was seeking to establish substantial reserve placements in order to ensure that the issue would reach its minimum subscription without underwriting (exhibit 246, 9 TB 570) minutes of the directors of WANL of 8 February 2000 and (exhibit 105, 10 TB 714) printout showing provisional reserve placements with shares in WANL in April 2000). From that provisional allocation of reserve placements in the share issue for WANL it follows that, at the time, Messrs Streeter and Cooper were of the view that WANL was an attractive investment opportunity for WAE, and by extension, for its shareholders.

311 There is an added piquancy in that the reserve placements gave rise to an entitlement to a 4% discount on the subscription price of the shares (exhibit 219, 9 TB, 647 page 4), which represented an additional incentive for any person or entity who had the benefit of a provisional placement to take up the shares. There was some controversy over whether or not individual shareholders in WAE would qualify for such a discount if they subscribed for shares in their own name rather than by WAE doing so. It is unnecessary to pursue that issue because the point of the evidence is to refute, as I am satisfied it does, the assertion by Messrs Streeter and Cooper that the shareholders of WAE could not have been expected to support the project. It simultaneously reveals that there would have been financial advantages for WAE in subscribing for shares at a discount had it been given the opportunity to do so.

312 However, these allegations by the defendants raising issues about whether or not WAE or its shareholders would have raised money either to allow WAE to provide capital for the project or for them to be initial contributors of seed capital are beside the point. The liability of the defendants to account does not depend upon whether or not, if the opportunity had been available to the plaintiff it would or could have availed of it. Rather, as the authorities previously examined establish the incapacity or unwillingness of the plaintiff to avail of the opportunity does not in anyway alleviate the obligation of a fiduciary to account for the benefit or profit derived as a result of his fiduciary office and in breach of duty.

313 In the present case I am satisfied that there is no real distinction between the nature of the business or the aspirations of the directors of the plaintiff, WAE, and the company into which the defendants placed the nickel opportunity, namely WANL. Both were fledgling mining exploration companies with an interest in exploration for, and development of, nickel prospects in Western Australia. Neither had any operating mine nor source of revenue. Operations, exploration and promotion were dependent, in each case, on the ability to raise capital by the issue of an IPO, share placements or obtaining loans from potential investors. The ability to raise capital, expand operations and indulge in the desired activity was dependent upon having, or having access to, a suite of sufficiently promising mineral tenements which would justify speculative investment in the nickel prospects and so allow more extensive exploration and, if warranted, development of those prospects. WAE had initially been formed to pursue similar activity but in relation to gold mining prospects. It was unsuccessful in that regard and changed its name to Western Areas Exploration NL in 1997 with a focus on nickel but still with some interest in gold prospects.

314 The first and second defendants were directors of the plaintiff, and effectively in control of the plaintiff, from about May 1997 until they were removed in 2006. The plaintiff maintains that the opportunity for these particular mineral prospects came to the attention of the plaintiff in November/December 1999 and that Mr Streeter was thereupon informed and expressed interest. It appears to be clearly the case that in December 1999 and January 2000 consideration was given to promoting these prospects via the plaintiff, then under the control of the first defendant, but that, for various reasons, this was considered to be inexpedient, whereupon the first and second defendants took the decision to incorporate WANL, float it and place the nickel tenements with it. They were original promoters and directors of WANL at the very time that they were directors of the plaintiff.

315 This case is far removed from the actual decision in Mashonaland and from any of the other examples in which that doctrine has been recognised. There can be no doubt that Messrs Streeter and Cooper were aware that the ANPC proposal had come to them at the direction of Mr Brailey in his capacity as a director of WAE and in the expectation that it would be appraised and, if thought appropriate, developed by Mr Streeter in his capacity as a director of the plaintiff. In addition, they utilised their roles as directors of the plaintiff to permit or tolerate the use of the name of the plaintiff by WANL and to facilitate the transfer of the Golden Granite 30% interest in the Cue tenements to WANL, taking the profit via Jungle Creek in the process. They realised that some form of remuneration or participation in the ANPC project by WAE was due and necessary, but, in discussions with the ANPC personnel during the evolution of the structure for the new project, they accepted the dilution of that participation while simultaneously negotiating for a controlling interest to be taken in the project by Mr Streeter. Effectively, they took an opportunity which they knew was of the kind being sought by the plaintiff through WANL in a manner which secured for themselves major collateral benefits and, thereafter, abandoned any thought of pursuing the same or similar projects by the plaintiff.

316 I am satisfied that Mr Brailey did refer the nickel investors to Mr Streeter who called in Mr Cooper. When considering what if any support would be given to the promotion of those ventures the first and second defendants, as directors of WAE, were in a position of the clearest conflict between WAE's interest, their self interests and then, shortly afterwards, their duties to the newly formed company, WANL. There can be no doubt that Mr Brailey expected and desired that the nickel prospects would be made available to the plaintiff and that, with the continued support of Mr Streeter, that would constitute a 'company making deal'.

317 Much evidence has been devoted to whether or not the plaintiff had sufficient financial resources to conduct an IPO which would involve the acquisition of these nickel prospects with a view to their exploitation. It was suggested that the company already lacked resources, and that the large existing shareholding with the depleted capital rendered it most unattractive for new subscribers to invest capital in the company, unless there was a major capital restructure. It was urged for the defendants that it would be cleaner, faster, more efficient and entirely more promising if the new venture could be placed into a new, clean company, as in fact it was. There are, indeed, substantial commercial reasons to suggest that this course would have been preferable but that does not mean that the plaintiff was without rights, or that the first and second defendants were without obligations to the plaintiff. So much could have been achieved if the informed assent of the plaintiff had been sought and obtained. The plaintiff could have become a major shareholder in the new company or, if its consent had been obtained, its existing shareholders could have become foundation shareholders in the new company on equal terms with the first and second defendants. But that was not done.

318 The strategy of putting the nickel prospects into the new company WANL, the formation of the new company and the role of the first and second defendants as its directors was kept, I am satisfied deliberately kept, from Mr Brailey as the other director of the plaintiff, and from the plaintiff's shareholders until it was accomplished. Only then was the diversion of the opportunity revealed and on terms when Mr Brailey was asked to sign a memorandum explaining and promoting this event to the shareholders of the plaintiff. All the plaintiff got out of this was vendor shares under escrow in WANL issued in consideration of the transfer of the Cue tenements into WANL for a nominal value of 70% of $100,000. Not surprisingly, Mr Brailey refused to endorse this initiative, refused to sign the memorandum and expressed his displeasure to Messrs Streeter and Cooper.

319 The defendants cannot escape liability by pointing to the absence of any actual fraud, dishonesty or bad faith. Fully informed consent will avoid liability but there is no plea that the plaintiff consented to what was done in this case or that its consent was sought. The duty of the fiduciary is to place the opportunity before the principal and not to derive any benefit from the opportunity itself without the informed consent of the principal.

320 The third defendant, Jungle Creek Mines Pty Ltd, was not of course a fiduciary of the plaintiff but it was a holding company for the interests of Mr Streeter, and was at all times controlled by him. It was to Jungle Creek that Mr Streeter gave the opportunities to subscribe for shares in WANL and the third defendant took them up. It is clear that, at all material times, Mr Streeter was the alter ego of Jungle Creek and that the third defendant was therefore a knowing participant in the diversion of corporate opportunity from the plaintiff. I am satisfied that this renders the third defendant liable to the same extent as the first and second defendants and the question therefore becomes what is the extent of the liability.

321 Reliance is placed by counsel for the defendant on some observations by Deane J in Chan v Zacharia (204 - 205), already mentioned, but in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 2) [2001] NSWCA 115 Spigelman CJ treated such considerations as being relevant to no more than what, if any, just allowances might be granted to the errant fiduciary. There are indeed examples of where a fiduciary has obtained, without liability, an opportunity which was offered to the company of which he was a director but which was rejected because of lack of funds by the company but which was later exploited by the director through the formation of a different company and by purchase on terms which had been offered to the first company. One such case is Peso Silver Mines Ltd v Cropper (1966) 58 DLR (2d) 1 but the result there depended very much on the fact that the opportunity had been offered to the company and rejected after full disclosure and without any wrongdoing by the fiduciary. Later, when the opportunity was offered to the director in a different guise, there was no misuse of confidential information or of fiduciary position in taking up the opportunity which the company had deliberately discarded.

322 That is not the case here because the opportunity to take up the ANPC nickel prospects or to float a new company which the defendants desired to pursue was not offered to WAE and the defendants secured the exploitation of that opportunity through the formation and flotation of WANL without disclosure to the plaintiff, without its consent and in circumstances where, as the evidence of Mr Brailey and other principal shareholders showed was that had such an attractive opportunity been forthcoming the plaintiff could have raised the moneys needed to secure a flotation for WAE. They could, incidentally, have also secured a capital reconstruction which would have adjusted the interests of existing shareholders and new investors and avoided the need for a takeover by Mr Streeter had he wished to invest further in the company. The details of this are contained in the advice from Huston & Partners sent to the plaintiff during 1999 and contained in exhibits 41 and 43 - see also Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162.

Just allowances or apportionment of profits

323 Apart from a constructive trust as earlier examined or an order for the payment of equitable compensation designed to allow the plaintiff to acquire at current market prices the number of shares sought, the plaintiff does, as already noted, advance alternative claims for an account of profits or for compensation in equity. In the event that there is to be any remedy, whether a constructive trust, an account of profits or compensation in equity, the defendants each contend that there should either be an apportionment of profits or due allowances made to reflect the fact that the value of the shares appreciated, to their greatest extent, because of the influence of Forrestania and because of the fact that the defendants invested large amounts of time, effort, skill, judgment and subscribed funds in the subsequent promotion of the company after the discovery of Forrestania.

324 In Mr Streeter's case, it is the fact that during this development period he made two cash loans to the company, the first of $1 million and the second of $2 million to allow it to meet obligations at critical points and that later these loans were converted to shares. Initially, it was submitted that each of these two loans totalling $3 million was advanced without any entitlement to interest, but an examination of the loan documents (exhibits 105 and 110) shows that this is not correct and that interest was payable on the convertible loans. When the loans were ultimately converted to shares, additional shares were allotted to reflect the value of interest accruing at agreed rates on the loans over the period they had been outstanding.

325 Also, as apparent, Mr Cooper and Mr Streeter have been directors of WANL since its flotation and continue as current members of this now very large and successful corporation. In their role as directors, they have spent much time, effort and have applied considerable skill and judgment in participating in the management, direction and success of the company and, in particular, the Forrestania project. Their activities in this regard are relied upon by them as additional reasons for the court to make an apportionment of the profits or a larger allowance for skill and care.

326 However, in relation to their roles as directors of WANL, the plaintiff submits that they have received significant remuneration or other emoluments from the company for these efforts which must be treated as the agreed reward for the time and effort, skill, risk and judgment which they have each applied in their capacity as directors and that, having been rewarded for those services, there is no justification for any further or additional reward in the form of an allowance or apportionment of profits. Again, the details of this remuneration or the other emoluments paid by WANL to Messrs Streeter and Cooper as directors have been agreed. They are to be found in the tables following par 281 in the plaintiff's filed written submissions which, in turn, are drawn from exhibits 144 to 152, being the WANL annual reports for the years ended 2000 to 2008 and exhibit 196 showing the WANL share price over the lifetime of the company. The tables are:

Streeter Remuneration and Options from 2000 to 2008

Value of Streeter Options Granted to 30 June 2008

*Exhibit 196: WANL Share Price at 12 May 2008 was $11.65. Value assumes sale at this price less the cost of exercising the options. Value of 2008 options assumed to be nil.

327 These show that, over the period from 2000 to 30 June 2008, Mr Streeter received a total base salary of $422,960, additional non-monetary remuneration of $10,331, other benefits including superannuation of $69,684, plus allowances in the 2008 year of $25,910, making an aggregate of $528,835 for all forms of remuneration. In addition, but excluding the original 400,000 options granted to him in February 2000, he was granted, on five subsequent occasions, a total of 1,600,000 additional options excisable at various prices ranging from 40 cents to $7.50. Excluding the original 400,000 options and the $7.50 options which are presently 'out of the money', the plaintiff submits that the current value of those options, if exercised and converted to shares, would be calculable having regard to the ruling market price. The calculation submitted which puts the figure at $7,430,000 is calculated on the peak share price of $11.65, which was reached on 12 May 2008, but I do not consider that that should be adopted for present purposes. The point of the current exercise is not to arrive at a precise current value for the unexercised options presently held by Mr Cooper or Jungle Creek, but to note their potential value and to recognise that they were granted in return for his efforts, activities and services to the company as a director over those periods.

328 Similarly, the figures show that Mr Cooper, over the period from February 2000 and 30 June 2008, received in aggregate a base salary of $422,960, further non-monetary benefits totalling $9,226 and additional benefits including superannuation contributions of $69,684, an all-up total of $501,870. Excluding the 400,000 40 cent options granted to Mr Cooper in February 2000, he was subsequently granted an additional 1,600,000 options at varying exercise prices ranging from 40 cents to $7.50. Again, the plaintiff has attempted to place a current value on the options presently held, but not exercised, disregarding the last allocation of options at an exercise price of $7.50, coming up with a figure, as in the case of Mr Streeter, of $7,430,000, but, once again, based on the peak share price of $11.65, reached on 12 May 2008. For the same reasons, I consider that it is not appropriate to attempt to reach a precise value of the current worth of those unexercised options and that any effort to approximate that value should take into account the much lower current share prices prevailing. Nevertheless, as in Mr Streeter's case, a relevant purpose of this evidence is to show that Mr Cooper received substantial payments of money, superannuation and in options for his services as a director of the company from the year 2000 until 30 June 2008.

329 It is also necessary to note the tremendous growth in the overall market capitalisation of WANL from the initial flotation in 2000 to 30 June 2008, the latest date at which such a market capitalisation is given in any of the annual reports (exhibit 152, page 23 - 8 STB 217).

330 Exhibit 111 (10 TB 744), the first prospectus for WANL issued on 22 May 2000, placed a value of $7.38 million on the interests in the various tenements to be acquired by the company on the float (page 107) and in the accountant's report forming part of the prospectus, there is an unaudited pro forma statement of assets and liabilities showing that the total net equity in the company was estimated at being between $5.013 million and $6.733 million in a prospectus by which it was hoped to raise $5 million by the issue of 25 million shares at 20 cents with a minimum raising of $3.6 million. Over the years since then, in progressions which are noted in each of the succeeding annual reports, the capitalisation of the company has grown from less than $10 million to almost $1,700 million ($1.7 billion) and, as the graph at page 23 of exhibit 152 demonstrates, this exponential growth has mostly occurred in the last four years, since the discovery of Forrestania. As at 30 June 2004, the market capitalisation of the company was only a little in excess of $100 million, so that the recent growth has been spectacular. This is the context in which the claims for relief and the countervailing claims for an apportionment of profits or for just allowances must be considered.

331 The collection of mining tenements which had been assembled by the ANPC personnel and which they sought to sell into the company to be procured for that purpose numbered six in all. As a result of negotiations between the ANPC personnel and Messrs Streeter and Cooper it was decided that the plaintiff's interest in the Cue tenements would also be 'vended' into the new company, so making a total of seven tenements or groups of tenements which would be the subject of the capital raising for the new company. Just how the Cue tenements came to be introduced into the project and how 30% of the joint venture was acquired by Jungle Creek and then introduced into the project is another issue in this case which is dealt with separately.

332 The defendants point out that the original proposal, and the opportunity presented to Messrs Streeter and Cooper, did not include any interest in tenements at or near Forrestania. The defendants' submission is that the mining interests originally offered by the ANPC personnel and taken into WANL on its floatation together with the Cue tenements proved to be of little commercial significance, resulted in the expenditure of substantial amounts of funds by WANL for investigation and have, at least to date, produced no commercial mineralisation. The point of the submission is to suggest that the current value of the shares in WANL generally, including those in respect of which the plaintiff claims the constructive trust, is due predominantly, if not entirely, to the value of the Forrestania project and the subsequent expenditure on behalf of WANL which has led to them being proved up, and developed to the point of a major producing nickel mine. On this basis, the defendants submit that very little, if any, of the value of the WANL shares has been caused by or is the result of any alleged breach of fiduciary duty by the defendants and if, against all their other submissions, there should be any form of accounting it should be done on a basis which recognises that most of the current value of the shares has been caused by the discovery and development of Forrestania and that this is not due, in any causal way, to breaches of fiduciary duty.

333 Consequently, they submit that on any account or the imposition of a constructive trust either remedy should be fashioned by taking into account only the value of the WANL shares prior to the discovery of Forrestania or that if a different approach is to be taken there should be an apportionment of the value of the shares or, alternatively, a major allowance for skill, effort and investment associated with the Forrestania project because otherwise the plaintiff would be unjustly enriched because of the influence of the success of the Forrestania project which was not in any way related to the opportunity which was alleged to have been diverted away from the plaintiff in 1999-2000. These contentions involve a number of discrete quesions including:

(a) whether or not the Forrestania project was in any material sense within the ambit of the enterprise presented by ANPC personnel in late 1999 or was a natural and direct evolution of that enterprise;

(b) whether the diversion of an opportunity to take up shares in WANL had the consequence that subsequent material enhancement in the value of those shares, even if resulting from fortuitous discoveries, should nevertheless be to the credit of the person or persons entitled to the beneficial interest in those shares;

(c) whether the fact that the development of the Forrestania project involved many further share issues in WANL which substantially expanded its capital (and diluted the original share and option issues) has meant that the benefit of the Forrestania discoveries and the associated enhancement in the values of the WANL shares has been rateably distributed among all the shareholders, including new shareholders, of the company so that there has been no unjust enrichment;

(d) whether, in fact, no material commercial value has been derived by WANL, or by the three defendants as shareholders in WANL, from the acquisition by WANL of the original six ANPC tenements and the Cue tenements.

History of the ANPC tenements and the Cue tenements after July 2000

334 These seven sets of tenements can be described as comprising:

335 It is unnecessary to set out the detailed particulars of the several mining tenements or how they were held or derived. That information is to be found in the original prospectus for WANL of July 2001 (exhibit 111, 10 TB 744) and it has all been assembled in an agreed set of summaries of these projects which form annexures C and D of the defendants' final submissions, which I accept to be an accurate and comprehensive summary of all those details.

336 With regard to the defendants' submissions that: no material commercial value has been derived from any of those seven projects to date; that large amounts of money have been expended in their exploration or investigation; and that several of them have been surrendered by WANL; it is necessary to record the actual position.

337 The expenditure outlaid by WANL on these various projects from mid-2000 until June 2008 is:

338 Despite some signs at some of the projects of potential or actual nickel mineralisation there has not, to date of trial, been any mine established nor nickel bearing ores mined from any of the seven tenements. Three of the seven areas have been surrendered by WANL.

339 In early 2004 WANL surrendered the Cundeelee project on the basis that it was a high cost exploration programme in a remote area and the company decided to relinquish it in order to focus on other core projects.

340 After participating in farm-in agreements with Placer Dome Asia Pacific in March 2002, then with Yilgarn Mining Ltd in March 2004 from both of which the participants withdrew, WANL surrendered all its tenements in the Plumridge project in January and February of 2007. The reason for the surrender was because no significant results from drilling had been obtained and the project was considered to be disadvantageous for economic mining.

341 Only minor sums were ever spent on expenditure on the Cue tenements because these were of little interest due to the exploration success and focus on the Forrestania nickel project acquired later. The only exploration licence ever actually granted in respect of the Cue tenements (ELA20/429) was surrendered by WANL in January 2002.

342 However, WANL retains interests in or interests derived from the remaining four of these original projects.

343 Some encouraging exploration results on the Bullfinch North project were reported in calendar year 2001, in conjunction with a joint venture with Polaris Metals, leading to WANL earning a 51% interest in the project. However, progressively from then on WANL reduced its interest in the Bullfinch North project by sale to Polaris Metals in return for cash and shares and, in 2007, by exchanging its remaining interests in the Bullfinch North project for shares in Southern Cross Goldfields Ltd. The position at present is that WANL is one of the three largest shareholders in Southern Cross Goldfields Ltd, an ASX listed company. In addition, because of the sale of its interests in the Bullfinch North project to what became Southern Cross Goldfields Ltd, WANL has obtained a right to buy back up to 55% of any nickel sulphide discoveries at the Bullfinch North project. As yet there has been no report to the market by Southern Cross Goldfields Ltd of any ore having been mined from, nor any mine established in, the Bullfinch North project but there clearly remains potential for this to eventuate. This is recognised in the latest annual report of WANL, the 2008 report (exhibit 152, 8 STB 217 at page 12) where it is recorded that:

Western Areas transferred its interest in the Bullfinch North JV to Polaris Metals NL related company, Southern Cross Goldfields Ltd (SXG) for one million shares and five million 20 cent options. In addition, Western Areas purchased five million shares in Southern Cross through the IPO listing and is currently the second largest shareholder in that company after Polaris. Southern Cross listed on the ASX on 20 March 2008.

Southern Cross has extensive tenement holdings in the central part of the Central Yilgarn Nickel Province over Greenstone Belts which Western Areas considers prospective for nickel. Southern Cross Goldfields has commenced an extensive field programme and we look forward to results being reported.

344 WANL's interest in SXG does not appear to be separately listed in an identifiable form in the balance sheet of WANL for the year ended 30 June 2008 but, at page 46 of exhibit 152, there is reference to other financial assets comprising investments in listed companies at fair value totalling $7.034 million which, presumably, includes the interest in SXG derived from the Bullfinch North project.

345 The expenditure on the Mount Jewell project from June 2008 has already been listed. In June 2006, WANL entered into a heads of agreement with Magma Metals Ltd by which it could earn a 60% interest in the Mount Jewell project by undertaking an exploration programme. At the time of this trial, exploration has occurred without discovering a potentially economic nickel deposit but the Magma joint venture is still in effect.

346 According to the 2008 annual report (exhibit 152), the company's interest in the Mount Alexander project had a carrying value of $103,000 (page 60) and at page 61 it was stated that:

BHP Billiton is the operator of the Mount Alexander joint venture and Western Areas holds at 25% free carried interest in the project to a decision to mine.

and at page 12 in the statement discussion and analysis of WANL's various projects this was described as:

Mount Alexander Joint Venture (BHP Billiton 75%, WSA (WANL) 25%)

Assay results from BHP Billiton's first two drill holes at the Cathedrals Prospect have confirmed that it is a high grade nickel/copper/PGE discovery with significant exploration upside.

Both intersections are considered significant as they consist of fresh massive sulphide at shallow depth which are open along strike and down dip. The high grade nickel is associated with high copper and PGE values (up to 6.7 g/t palladium, 0.9 g/t Platinum, 1.0 g/t Rhodium) and the geological setting shows similarities to the Flying Fox Mine, 350 km to the south.

347 It would seem to follow that this is regarded as an asset of potential significance for the future. However, the agreed statement is that information publicly reported has not indicated that there is any deposit which it would be economically viable to exploit at the project. This may be slightly at odds with the content of the annual report in which the project is still treated as an asset by the company.

348 Nickel sulphide intersections had been reported from two drill holes on the Koolyanobbing project in 2007 and 2008. WANL is in a joint venture agreement with Portland Mining in relation to this project. In the agreed statement of position it is recorded that the Koolyanobbing project is not presently considered by WANL to be a high priority but, in exhibit 152 page 12, it was reported that the two drill intersections were considered significant because of the high nickel grades and continuity of the mineralisation and that potential exists for a significant deposit at depth and the carrying value for three joint ventures at Koolyanobbing was reported at $1.118 million (page 60). Descriptions of the royalty arrangements and other agreements report on mining are to be found at note 27(I) page 60 of exhibit 152, so again WANL is carrying that interest as an asset with potential in its latest balance sheet.

349 Clearly enough, the significance of these four remaining projects deriving from the ANPC introduction and the 2000 float is very minor in comparison with the enormous capitalisation of the Forrestania projects. However, four of those original projects are still under investigation with prospects of some future potential. To this extent, they still contribute to the current net value of WANL and, therefore, to the value of the shares in that company.

Progress and development of the Forrestania project by WANL

350 The details of how WANL came to derive an interest in the various tenements at Forrestania, eventually securing the ownership of the entirety of them, has already been canvassed. So too, in broad outline, have been listed the substantial capital raisings by WANL since 2000, utilised principally for the development of the Forrestania project. However, in view of the defendants' argument that the appreciation of the WANL share price associated with the success of the Forrestania project should not be included in any relief granted to the plaintiff it is necessary to consider the history in more detail.

351 Mr Grammer first saw an advertisement by the administrator of Viceroy Pty Ltd in the press in October or November 2001 calling for an expression interest in the Bounty gold mine (exhibit 271, 2 STB 80 being an example of such an advertisement but not the one originally seen). Messrs Hanna and Grammer attended at the office of the administrator of Viceroy and reviewed all available technical information aware, as was general knowledge at the time, that the Forrestania area was a source of nickel ore production. The information memorandum from the administrator revealed that in addition to the exploration assets of Viceroy, including the Bounty gold mine, there was a right to own a 75% interest in base metals, and exploration rights on adjoining tenements owned by Outokumpu - exhibit 272, 2 STB 79, pages 17,550 and 17,606. This included available rights to tenements for both gold and nickel mineralisation. Hanna and Grammer learned that the administrator was also offering for sale Viceroy's interest in a joint venture with Outokumpu, including Viceroy's nickel rights in the various Forrestania tenements (exhibit 273, par 30 and exhibit 288, par 25). Both Messrs Hanna and Grammer visited Forrestania together to investigate the prospects.

352 Initially, they focused on the deposit at the New Morning mine. Initial appraisal of the material did not reveal the potential of Forrestania which was later discovered. According to Mr Hanna, the value of the shares in WANL was low at this time and the New Morning prospect may have generated some interest in the company but not to a great extent - exhibit 286 [434].

353 On 20 December 2001 WANL decided to negotiate with the administrator of Viceroy and at that stage its share price was in the range of 14 cents to 19 cents. On 24 January 2002 WANL announced that it was negotiating to acquire an unnamed project which in fact was the Forrestania project (exhibit 28, 6 TB 188). The administrator was only willing to sell all the Forrestania tenements and not the New Morning tenement alone so on about 28 February 2002, WANL raised $670,000 by the issue of 3,526,380 fully paid ordinary shares at 19 cents for the purpose of proceeding with the purchase of the Forrestania project (exhibit 224, exhibit 222). Neither Mr Streeter nor Jungle Creek participated in that share placement.

354 On about 17 April 2002 WANL contracted with the administrator of Viceroy, Outokumpu Mining Australia Pty Ltd and Sons of Gwalia Ltd to the effect that it acquired the right to obtain 75% of the nickel rights in the Forrestania project (exhibit 223, 12 TB 923). The remaining 25% of the nickel rights remained with Outokumpu. Under this April 2002 agreement Sons of Gwalia acquired all of Viceroy's interest in its joint venture with Outokumpu and then assigned those rights to WANL insofar as they included non-auriferous mining rights, that is, the rights to mine for nickel were assigned. Under that agreement of 17 April 2002 (exhibit 223, 12 TB 923) WANL:

• was obliged to pay $100,000 to Viceroy for an option to acquire a greater interest exercisable on or before 30 June;
• obtained a right to extend the option to 31 December 2005 on payment of a second option fee of $400,000 by 30 June 2002;
• became obliged to spend $500,000 on exploration or development of the nickel interests, or to pay that amount direct to Outokumpu, or some combination of those two on or before 31 December 2002;
• on making the three conditional payments already described, became entitled to exercise the option to acquire the interest in the tenements by payment of a further $200,000 to Viceroy on or before 31 December 2002;
• then became obliged to pay a further $600,000 by 30 June 2003 and to agree to a net smelter royalty as contained in cl 5.3 of the agreement.

355 To raise this capital WANL approved the issue of up to 11,800,000 fully paid ordinary shares at 17 cents per share in June 2002. The information memorandum relating to that proposal (exhibit 224, 2 STB 86) described one of the purposes of the capital raising as being to raise sufficient funds to meet some of the company's commitments under the Viceroy agreement. As a result, WANL raised $2 million by a placement of 7,906,250 fully paid ordinary shares at 17 cents. Jungle Creek subscribed $549,309.78 for shares in that capital raising and was allotted 3,231,234 shares.

356 From 30 June 2002 the Forrestania project became the main focus of WANL's activities. In its annual report to 30 June 2002 WANL stated that it had raised $2,626,000 by the issue of 15,326,316 shares for this purpose (exhibit 146, 7 TB 473 at page 20). All this activity with regard to Forrestania involved expenditure by WANL of $983,461.

• it had successfully completed the first stage of a three-stage feasibility study at Forrestania;
• early results from the study were indicative of an economic mining operation and further work was required before estimates of nickel production could be announced;
• particular results of drilling and metallurgical tests were published;
• the company was aiming to produce a bankable feasibility study by 31 December 2002 (see ASX activities report, exhibit 286, 8 TB 474).

358 In October 2002 the Daybreak nickel sulphide deposit was discovered close to the New Morning resource. At a meeting of directors of WANL on 28 October 2002 Mr Streeter and Mr King offered to lend $3 million to WANL to assist in the progress of the Forrestania project (exhibit 153, 3 STB 91 and exhibit 232 at [332]) but the company decided that it did not then require those funds and did not take up the loan offer.

359 By December 2002 WANL had raised a further $2.2 million by a share placement of 12,277,777 shares at an issue price of 18 cents each in order to obtain working capital to finance the acquisition of the Forrestania project and to conduct exploration and feasibility work. Jungle Creek subscribed for 3,226,000 shares at 18 cents for a total investment of $580,680 in this share issue.

360 On 31 January 2003 WANL reported publicly upon exploration work at Forrestania and stated that the New Morning feasibility study had been expanded to include the Daybreak deposit. It also announced that the majority of its funds were being directed towards the exploration, drilling and feasibility programmes at Forrestania and that the company was then well on its way to achieve its goal of commencing nickel production and generating cash flow.

361 Further capital totalling $1,550,000 was raised by WANL in a share placement of 5 million ordinary fully paid shares at 31 cents issued to 'sophisticated investors'. See Mr Hanna's statement exhibit 286 at pars 265 and 487. That capital was required for more funds for the Forrestania project exploration and working capital but neither Mr Streeter nor Jungle Creek participated in that share issue.

362 On 16 May 2003 WANL entered into a further agreement entitling it to acquire from Outokumpu the remaining 25% interest in the nickel rights of Forrestania (exhibit 225, 13 TB 950). By that time the interest in the auriferous metals at the Forrestania project held by the Sons of Gwalia had reverted to Outokumpu and therefore passed to WANL (see Mr Streeter's statement, exhibit 232 at [334]). Under that agreement WANL became obliged to pay to Outokumpu:

• a deposit of $100,000;
• a final payment of $900,000 by 31 October 2003 at the latest; and
• a 2% net smelter royalty to Outokumpu from future nickel production at Forrestania.

363 On 11 June 2003 the third defendant, Jungle Creek, exercised the 20 cent options which it had been granted in May 2000 and took up 5,625,000 shares in the company at 20 cents at an outlay of $1,125,000.

364 On 30 June 2003 WANL made an encouraging report to the ASX to the effect that there had been significant progress with the acquisition of the Forrestania nickel project representing a turning point in the development of the company and emphasising the importance and potential of the Daybreak and Daybreak Deeps deposits.

365 During the financial year ended 30 June 2003 WANL had spent $4,987,202 at Forrestania.

366 Importantly, in September 2003 WANL discovered the Flying Fox deposit at Forrestania (see statement by Mr J Hanna, exhibit 286 at [439]).

367 In the 2003 annual report (exhibit 147, 7 TB 473, page 13) WANL reported that its total shareholders' equity at the end of that financial year was $10,774,520 compared with $6,834,355 for the preceding financial year. In the quarterly report for the period ending 30 September 2003 WANL revealed that the scoping study for Stage 1 production at Forrestania had been completed and a bankable feasibility study was being made and was expected to be finalised by April 2004. During September 2003 the share price for WANL reached $1 or above for the first time.

368 In about November 2003 Jungle Creek lent $1 million to WANL (exhibit 154, 3 STB 97). The loan was to carry interest at 8% and was convertible to shares at the same issue price as the next capital raising, subject to shareholder approval and in the absence of such approval would be repayable (exhibit 154, 3 STB 97). Jungle Creek later converted that loan to shares by taking an issue of 1 million shares at $1 per share in about December 2003, thus repaying that loan without interest. However, a supplementary issue of shares was also made to Jungle Creek at about the same time to the value of $49,000 for the interest accrued on that loan.

369 In late October 2003 Jungle Creek exercised 800,000 options to take up shares in WANL at 40 cents each at a total outlay of $320,000. That exercise related, in part, to the original 400,000 options which had been granted to Mr Streeter in May 2000 which, with his assent, resulted in the issue of 400,000 shares to Jungle Creek. So it came about that, as alleged by the plaintiff in par 21.6 of the statement of claim, Mr Streeter exercised all of his 400,000 options on behalf of Jungle Creek which was allotted the 400,000 shares so acquired.

370 WANL raised a further $6 million in December 2003 by placements at $1 per share. One million shares of that placement resulted in the allotment of shares to Jungle Creek in redemption of its loan as described.

371 In its quarterly report for the period ending 31 March 2004 WANL publicly stated that there had been a significant increase in the indicated mineral resources at Flying Fox and that the full bankable feasibility study was expected to be available in July 2004, which would see the commencement of mine development at Flying Fox at that time followed by further mine development at two other sites in late 2004 and early 2005.

372 A second loan was made by Jungle Creek to WANL in April 2004. This was for $2 million (see Mr Streeter's statement exhibit 232, pars 346 - 347, and exhibit 119, 13 TB 980). That loan was also convertible to shares. It was discharged on 10 April 2004 by the allotment of 2,049,500 shares issued at $1 each by WANL to Jungle Creek. The additional 49,500 shares represented interest on the loan (see WANL report for 2005, exhibit 149, 7 STB, page 33).

373 On 24 June 2004 Jungle Creek exercised a further 200,000 options at an exercise price of 75 cents and so acquired a further 200,000 shares in WANL for an outlay of $150,000.

374 For the quarter ended 30 June 2004 WANL reported that it had reached a 'milestone agreement' with Lion Ore Australia (Nickel) Ltd to treat high grade nickel ore from Flying Fox at the treatment plant 90 km from Forrestania and that Lion Ore would provide a funding facility of up to $20 million to assist with early mine development and, otherwise, that encouraging progress had been made on site infrastructure at Forrestania. For the whole of the financial year ended 30 June 2004 WANL had spent $12,160,393 on the Forrestania project.

375 On 29 June 2004 WANL completed another $5 million capital raising by the placement of 5 million shares at $1 each. This meant that for the financial year ended 2004 the company had raised $10 million by the placement of 10 million new shares (not including the conversion of options).

376 In July 2004 WANL made a 1 for 20 rights issue at 95 cents, so raising $4,962,110 (see annual report for 2005, exhibit 149, 7TB 473 at 33). Mr Streeter subscribed for 1,162,062 shares in this rights issue at 95 cents for a total outlay of $1,103,958.90 and was allotted those shares. By this time the options which had been issued to Messrs Streeter and Cooper and to Jungle Creek, which are the subject to the plaintiff's claim, had all been converted to shares. However, the plaintiff does not make any claim in respect of this 1 for 20 rights issue or in respect of the shares acquired by Messrs Streeter, Cooper or Jungle Creek as a result of that rights issue.

377 In the 2004 annual report of WANL (exhibit 148, 7TB 473) the chairman stated to the shareholders that:

The company is on the threshold of developing its first nickel mine at its 100% owned Forrestania project in Western Australia and is on track to become a substantial nickel producer in mid-2006.

...

The success evidenced by the Flying Fox discoveries and the rapid advance of the Forrestania mining project has been reflected in the enhanced price of the Company's shares and the inclusion of the Company's shares in the ASX 300 List as a result of the significant increase in market capitalisation.

...

Further interest in growth opportunities are anticipated in the coming year as the Company moves into the initial mining phase at Forrestania and at the same time maintains a strong exploration programme.

378 Also, in the 2004 annual report it was disclosed that the total shareholders' equity of the company had increased to $23,678,000 compared with $10,774,000 for the preceding financial year.

379 More capital was raised by WANL in another share placement in October 2004. 5,365,000 shares were placed at $1.53 each, raising $8,208,450 (exhibit 149, 7 TB 473 at 33). Neither Mr Streeter nor Jungle Creek participated in that placement. However, on 24 December 2004 Jungle Creek exercised another 200,000 options at $2.30 acquiring 200,000 shares for an outlay of $460,000.

380 Another share placement was made by WANL in February-March 2005 resulting in the issue of 4 million shares at $1.62 to 'sophisticated investors', thus raising $6,480,000 in new capital, but neither Mr Streeter nor Jungle Creek participated in that placement.

381 The expenditure on the Forrestania project for the year ended 30 June 2005 was $24,190,668 and during that financial year the company had raised $21,700,060 by the issue of 16,637,826 new shares (not including the exercise of options).

382 A further placement of 4,200,000 shares at $1.68 per share was made in August 2005, raising $7,056,000 (exhibit 150, 7 TB 473 at 55). The company's annual report for the year ended 30 June 2005 (exhibit 149, 7 TB 473) concentrated on the Forrestania project and reported that in a relatively short period the company had been fortunate enough to move from grass roots nickel exploration to the development of one of the highest grade nickel deposits in the country and that the ongoing exploration at Forrestania and development at Flying Fox had led to a 28% increase in the share price during 2005 and a 50% increase in market capitalisation. Furthermore, the total shareholders' equity for the year ended 30 June 2005 was $41 million compared with $23,597,000 for the preceding financial year.

383 The next share issue was in December 2005 when WANL issued 5,985,300 shares at $1.70, raising $10,175,010. It also issued 6,300,545 shares on the Toronto Stock Exchange at $C1.47 per share, raising $C9,261,801. Neither Mr Streeter nor Jungle Creek participated in those issues.

384 In March 2006 WANL issued 664,700 shares at $1.70 each to Jungle Creek for an outlay of $1,129,990 and at the same time it placed 574,455 shares on the Toronto Stock Exchange at $C1.47 per share, raising $C844,449 in return. Jungle Creek subscribed for 399,455 shares in the Canadian issue at the equivalent value of AUD$1.73 for a total outlay of $691,057. According to Mr Hanna, in December 2005 and March 2006 share placements raised approximately $26.5 million by the allotment of 13,525,000 shares, mainly to institutions in Canada and in the UK. The funds raised were for the partial funding of Stage 1 of the Flying Fox mine, completion of a feasibility study for an expansion of Stage 2 at the Flying Fox mine and other drilling work at Forrestania.

385 Developments from this point on deserve additional significance in view of the fact that it was in July 2006 that Messrs Brailey and Connell announced their intention to requisition a general meeting of the plaintiff with a view to securing the removal of Messrs Streeter and Cooper as directors.

386 In March 2006, the closing share price for WANL on the ASX was in the region of $2.06 to $2.14 (exhibit 196). By a report to the ASX dated 28 April 2006, WANL announced its decision to proceed with the Flying Fox mine expansion and to construct a nickel processing plant at Cosmic Boy (see Mr Hanna's statement exhibit 286 at [467]).

387 During the financial year ended 30 June 2006, WANL had spent $35,116,933 on the Forrestania project and in the chairman's letter in that report, exhibit 150 7 TB 743, emphasis was given to the Flying Fox nickel mine at a time of record nickel prices asserting that the mine was one of the highest grade nickel mines in Australia. The chairman reported that it was expected that the first ore would be produced within a few months during the December quarter.

388 By this time, the special general meeting of the plaintiff had been held on 15 August 2006 and Messrs Brailey and Connell had successfully replaced Messrs Streeter and Cooper as the directors of the plaintiff, and it was in September 2006 that Messrs Streeter and Cooper, together with Jungle Creek, proposed a further meeting of the shareholders of the plaintiff to restore Messrs Streeter and Cooper as directors and for Jungle Creek and to purchase all the issued shares in the plaintiff. As described elsewhere, that move was unsuccessful and neither the attempt to remove the new directors nor the offer to purchase shares in the plaintiff by Jungle Creek proceeded.

The Board are pleased to report that the ongoing exploration success at Forrestania and the ongoing development at Flying Fox has led to a 53% increase in share price during 2006 and a 79% increase in market capitalisation. Since the end of the financial year both share price and market capitalisation have continued to grow [exhibit 150, 7 TB 473 at page 15].

Also, as at 30 June 2006, the total shareholders' equity had reached $53,146,000, compared with $43,585,000 for the previous financial year.

390 A second rights issue was announced by WANL in October 2006. This was an offer of one share for eight shares held at an issue price of $2.60, but was non-renounceable. 17,550,834 shares were issued, raising $45,632,168 (exhibit 151, 7 TB 474 at 52). Mr Streeter subscribed for 3,642,477 shares at $2.60 in that rights issue for a total outlay of $9,470,440 (exhibit 233 item 37 in the table). This rights issue applied, in part, to the shares originally allotted to Jungle Creek and to shares acquired by the exercise of options by Mr Streeter, Mr Cooper and by Jungle Creek obtained in the May 2000 issue of shares and options. However, the plaintiff does not make any claim in respect of the shares obtained by the defendants resulting from that second rights issue, or in relation to that rights issue.

391 On 26 October 2006 the first ore was produced by the Flying Fox mine. The mine was coming into production at a time of record world nickel prices. This was reported by WANL in its activities report of 30 October 2006.

392 During the financial year ended 30 June 2007, WANL spent $45,066,638 on the Forrestania project. In the annual report for the financial year ended 30 June 2007 (exhibit 151, 7 TB 474), the chairman reported:

The Forrestania Project is a wonderful asset for Western Areas. Key to the Company's growth is the Flying Fox nickel mine which is heading towards full production from the T1 Ore Body starting in the December quarter. Flying Fox is one of the highest grade nickel mines in the world with a 10 year plus mine life and potential to increase ore reserves well above the current levels ...

The Forrestania Nickel Project also hosts what is expected to the Company's second mine at Digger South where a decision to mine is due by the end of December 2007 . There are excellent opportunities for further exploration success at Forrestania which has a rich endowment of nickel.

393 In the same report under the heading 'Shareholder Returns' it was stated that:

The Board are pleased to report that the ongoing exploration success at Forrestania and the ongoing development at Flying Fox led to a 238% increase in share price during 2007 and a 285% increase in market capitalisation. As at 30 June 2007 the total shareholders' equity of the Company was $109,007,000 compared with $53,098,000 for the financial year ended 30 June 2006.

394 The foregoing provides the history of the very large increase in the market capitalisation of WANL between 17 April 2002 when it first entered into the agreement with the administrator of Viceroy Pty Ltd, and with Outokumpu Mining Australia Pty Ltd and Sons of Gwalia (exhibit 223) and 30 June 2007. This great increase in market capitalisation was due to a combination of the many large increases in the issued capital of the company by new share issues, share placements, conversion of loans to equity and the two rights issues. None of that would have been possible without the successful exploration discoveries and the development activities being carried out at Forrestania and, in particular, at Flying Fox. The exploration discoveries and the increasing capitalisation of the company by new share issues were mutually interdependent and in combination they revealed an extremely valuable nickel resource being successfully brought to development. This realisation, in turn, contributed to the steady, indeed rapid, increase in the market value of shares in WANL which, in turn, enhanced the ability of the company to raise capital and issue new shares. As can be seen, this process was self-financing.

395 Apart from the $20 million development facility provided by Lion Ore in 2004 and the two short-term convertible loans advances by Mr Streeter of $1 million and $2 million (a total of $3 million), it seems that most of the company's working capital was raised by the issue of equity, rather than by resorting to large loans, but no point about this was made in the course of the evidence. WANL seems to have been very professionally and successfully managed and directed during this period and, as is set out elsewhere, the directors and officers were remunerated on commercial terms and, in addition, were repeatedly the recipients of further options to take up shares in the company. Exhibit 196 - the record of the market prices for shares in WANL on the ASX shows the shares reaching a peak of above $10.00 in mid-2008 and then declining very rapidly to less than $4.00 in the next six months. I think I can take judicial notice of the fact that this decline coincided with the present global financial crisis and that a similar phenomenon, to a greater or lesser extent, has been experienced by many major mining houses and other leading corporations nationally and internationally. There has been no suggestion or submission that these dramatic reductions in quoted share values in recent times should have any effect upon the relief sought or granted in these proceedings.

396 The most recent annual report for WANL, that is for the year ended 30 June 2008, continues to paint an optimistic picture of success and further growth in the company's operations, although it is probable that it was published before the harshest effects of the current global financial crisis. That report described the recent discovery in October 2007 of another major nickel deposit at Forrestania known as Spotted Quoll. The managing director, Mr Hanna, reported that progress at Spotted Quoll was very rapid and that it would become Western Areas second nickel mine with first production expected in mid 2009 and saying:

At the preliminary mineral resource 200m depth contains 34,5000 tonnes nickel at an average grade of 6.3% nickel. The initial scoping study has concluded that a four year open pit mine could produce up to 8,000 tonnes nickel pa in concentrate at an estimated cash cost of around US$1.50/lb nickel. At these estimated cash costs, Spotted Quoll has the potential to be one of the lowest cost nickel mines in Australia.

397 Therefore, although, as with all mining operations, the future must be uncertain and vulnerable to financial and market changes, the available information suggests that those charged with the responsibility for the management of WANL have in view a long-term successful operation of its mining projects. What effect this has on the market price for shares in WANL remains to be seen, but, by pursuing a claim for constructive trusts over the shares which are the subject of this litigation, the plaintiff has indicated that it is willing to accept the risks of market fluctuations, rather than seeking an account of profits in dollar terms or as compensation. In doing so, it reveals itself willing to take the same risks and receive the same benefits of all other shareholders in WANL.

398 No explanation has been given, nor did any issue arise, about the plaintiff not making any claim in respect of the rights issues to take up further shares in WANL which were made in July 2004 (a one for 20 rights issue at 95 cents per share) and the second rights issue in September/October 2006 (a one for eight rights issue at $2.60 per share). The effect of those rights issues, as indeed the effects of all subsequent share issues, placements and conversions of options to shares, has been to dilute the proportion of the shareholding of the shares which are the subject of this action to all the issued shares in WANL on issue from time to time. The paradox that, nevertheless the individual value of those shares, as indicated by the ASX market price from time to time, has steadily increased (subject to the 2008 major fall in share price) while the target shareholding as a percentage of the total capital has been ever progressively diluted should not conceal the fact that all of the original and early shareholders of WANL have stood to benefit substantially by the increasing capitalisation and market value and the ever increasing number of shares on issue. All of those who have invested subsequently, including new shareholders and institutions taking up share issues, rights or placements are entitled to benefit from the appreciation in the market value of the shares. The fact that the capital which they have progressively contributed is, in part, responsible for the increase in market value of the shares does not mean that they, and they only, are entitled to the fruits of that appreciation. All shareholders rank equally and an original early shareholder, who contributed no further capital or took up no rights, is, nevertheless, entitled to enjoy, and it if chooses to realise, the current value of its shares at prevailing market value. No contribution of capital or loans by others diminishes that entitlement.

Contest for the control of the plaintiff - the removal of Messrs Streeter and Cooper from the board - 2006

399 The dormancy of the plaintiff from May 2000 until mid-2006 has already been noted. The vendor shares in WANL which had been held on its behalf on trust by Candela had become free of escrow after the expiration of two years from their issue, that is in May 2002. But there had been no sales of those shares until 2006. Over this period the value of the shares in WANL held on trust for the plaintiff slowly appreciated and, therefore, this shareholding constituted a valuable asset of the plaintiff and indeed its only significant asset.

400 During the course of the trial there was some cross-examination of Mr Streeter and of Mr Cooper as to why the plaintiff's shares were held on trust by Candela rather than being held by the plaintiff. Initially Mr Streeter suggested that this was because they were subject to escrow but, of course, they still could have been held by the plaintiff subject on escrow and if that had been the reason it had disappeared by May 2002. From early 2000 onwards the intention of Mr Streeter was to take steps to have WAE deregistered and wound up and Mr Cooper was instructed to make some preparations in this regard and he did indeed propose resolutions to be passed at a general meeting of the plaintiff to that effect. However, the meeting was never called, notice was never given to the shareholders and the proposal to wind up the plaintiff was not pursued. The possibility that the plaintiff might be wound up, however, may perhaps provide a reason why the shares in WANL allotted for its share in the Cue tenements were held by Candela as trustee but it is not obvious why this should be so. Nothing turns on this aspect of the case and it is unnecessary for me to pursue it further.

401 The financial statements for the plaintiff for the year ended 30 June 2005 are exhibit 129 (13 TB 1026). These show the company as having no income and only minor expenses for accounting fees, bank fees and the like. Its only asset was the shareholding in WANL which was recorded at $70,000 being the acquisition value and not the then current market value of $1.36 per share (exhibit 196). Accordingly, at the then current market value the parcel of 350,000 shares would have fetched $476,000. The principal liabilities were unsecured loans to Jungle Creek and to Meeka Star totalling $81,113. and the 2005 balance sheet showed the net equity as being a negative figure of $11,517. Yet despite the lack of income and the excess of liabilities over assets, at the holding figures quoted, the directors Messrs Streeter and Cooper declared that there were then reasonable grounds to believe that the company would be able to pay its debts as and when they became due.

402 In July 2006 the long running dispute between the plaintiff and Mr Roberts which had led to Mr and Mrs Roberts commencing proceedings against the plaintiff in the Local Court at Perth in 1998 was settled. The terms of the settlement are contained in a deed of settlement and release, exhibit 131 (13 TB 1048) and they were implemented by making payment to the Roberts in the sum of $14,200 and upon payment the Roberts action in the Local Court was dismissed. The amount of the payment made effectively represented the entirety of the Roberts' claim plus some costs and fees. This had been the claim which the board of the plaintiff had agreed should be paid, before Mr Streeter joined the board, but upon Mr Streeter becoming director he refused to authorise payment and the dispute lingered.

403 The pendency of that litigation was said by Mr Streeter to be one of the reasons why WAE was an unsuitable vehicle to carry the ANPC project, but it seems that liability was never seriously in dispute and that the quantum of the claim was always modest. Why it came to be eventually settled and paid in July 2006 has not been fully explained. Mr Streeter's explanation (exhibit 232, [367] - [382]) was that during 2006 he and Mr Cooper looked into ways of resolving the plaintiff's dispute with WAE so that the plaintiff could be wound up and the shareholders paid. He said that he wished to settle the Roberts' dispute so that WAE could then pay out the loans it owed to the Streeter companies and eventually be wound up.

404 In July 2006 Messrs Streeter and Cooper, with their then accountant Mr White, met by arrangement at the accountant's offices with Messrs Brailey, Connell and their solicitor. The solicitor did not take part in the meeting but Messrs Brailey and Connell informed Mr Cooper that they desired to requisition a general meeting of the plaintiff and to be appointed as directors and for Messrs Streeter and Cooper to be removed as directors. That meeting was held on 6 July 2006 and was followed by a decision by Messrs Streeter and Cooper, on behalf of the plaintiff to sell 50,000 of its shares in WANL there still held by Candela (see exhibit 140, 6 STB 199 at page 4).

405 Mr Streeter gave instructions for the general meeting to be called and it was called and held on 15 August 2006. The papers relating to the meeting including the notice of meeting and correspondence to shareholders from the board of directors are comprised in exhibit 132 (6 STB 193). They included a letter from the board of directors to shareholders with the following observations:

This meeting has been convened at the request of Mr Lex Brailey and Mr Garry Connell for the purpose of changing the existing Board of the Company.

As you would be aware, the Company has been dormant for many years as the Board has been attempting to settle an outstanding litigation claim over some old prospecting leases. Settlement is now being effected and the existing Board has utilised this meeting to include a resolution seeking Shareholder approval to wind up the Company and distribute excess proceeds back to shareholders, after payment of outstanding debts, liquidation and taxation costs.

At the time of the appointment of the existing Board, the Company was in financial difficulties and it has been financially supported to maintain it in a solvent position and allow its investment to appreciate to its present level.

It is the intention of the current Board, to proceed to promptly realise the assets of the Company, pay out creditors and distribute the net assets of the Company to the shareholders after allowing for the cost of winding up the Company. Mr Brailey and Mr Connell were asked what their intentions for the Company were if they were appointed but they declined to give any indication in that regard.

Accordingly, it is important that you utilise your voting power by either attending the meeting, either in person at the meeting or by utilising the attached proxy.

406 The notice of meeting advised of two sets each of four proposed resolutions to be put to the shareholders. The first four resolutions were proposed by Messrs Streeter and Cooper and were to the effect that:

1. the company be wound up under the provisions applicable on a member's voluntary liquidation;
2. that Mr G D Trinick be appointed liquidator and be able to distribute assets in specie at his discretion;
3. that the liquidator and his staff be remunerated at certain prescribed rates;
4. that the liquidator be authorised to destroy all records of the company and of the liquidation at the expiration of 12 months from the date set for the final meeting of the company.

407 The second set of resolutions were proposed by Messrs Connell and Brailey and were to the effect that:

1. that Mr Garry Patrick Connell be appointed as a director;
2. that Mr Lex Howard John Brailey be appointed as a director;
3. that Mr David Charles Cooper be removed as a director;
4. that Mr Terrence Ernest James Streeter be removed as a director.

408 The minutes of the 15 August 2006 meeting comprise exhibit 133 (6 STB 196). They show that the proposed resolution for the voluntary winding up of the plaintiff was defeated and the subsequent associated three resolutions were then withdrawn. They also show that resolutions were passed appointing Messrs Connell and Brailey as directors together with further resolutions removing Messrs Cooper and Streeter as directors. Efforts had been made to lobby the shareholders to support the Streeter/Cooper resolutions (exhibit 134, 13 TB 1053) but they were obviously unsuccessful.

409 During the period between 25 July - 15 August 2006 when the general meeting of the plaintiff had been requisitioned but not yet held, Mr Streeter met with his accountant in order to ascertain what moneys were owing to him or to associated companies by the plaintiff and to make arrangements for these to be satisfied. Although he did not compose or distribute the documents, Mr Streeter acknowledged that he was aware of and had given instructions to make the payments referred to in exhibit 138 (6 STB 195 - a fax from his accountant Mr Rod White to the Commonwealth Bank. These instructions were prefaced by the sale of 50,000 WANL shares which were part of the shares held on trust for the plaintiff by Candela. That sale produced net funds of approximately $114,500. From those moneys the following payments were to be made:

Mr and Mrs Roberts under the terms of the agreed settlement

Velsburry Pty Ltd as trustee for the Streeter Family Trust in repayment of a loan

Smyth & Thomas - legal fees in connection with the Roberts dispute

410 The $67,087.42 paid to Jungle Creek, and recorded as a loan in the plaintiff's books, was the balance of the convertible loan for moneys advanced by Mr Streeter to the plaintiff over the years to finance its operations. This was part of the intended contribution of $250,000 which was never fully paid. Mr Brailey's position is that it was never intended that that loan or any part of it would be repaid to Mr Streeter and that it was advanced purely for the purposes of being converted to capital but, as events transpired that was never done. No point is raised by the plaintiff about this payment in these present proceedings but his instructions do illustrate the abandonment of any idea by Mr Streeter fully to subscribe that $250,000 or to convert the moneys advanced to shares.

411 Once Messrs Brailey and Connell were duly appointed as directors of the plaintiff and, after some delay had secured the plaintiff's records from the previous officers of the company they quickly took steps to have the remaining shares held by Candela in WANL transferred to the plaintiff. After the sale of the 50,000 shares at the direction of Mr Streeter to finance the repayment of liabilities there were 300,000 shares in WANL remaining. These were transferred by Candela to the plaintiff via a transfer bearing the dates of execution by Candela as 31 August 2006 and execution by the plaintiff on 20 September (exhibit 137, 13 TB 1065). At about that time the quoted market price for shares in WANL ranged between $2.64 - $3.00 in late September 2006 (exhibit 196) so the value of the shareholding was in the order of $800,000 or more. This provided the plaintiff with the capital needed to embark on the investigations and the instructions resulting in this present litigation.

412 During this trial both Mr Cooper and Mr Streeter were cross-examined to the effect that by including in the resolutions for the liquidation of the plaintiff at the meeting of 15 August 2006 the specific proposal authorising the liquidator, if appointed, to destroy all records after one year, they were attempting a strategy to conceal the nature of their dealing with the plaintiff and to frustrate any attempts which might be made by the new controllers of the plaintiff to bring claims against them. Both deny this and maintain that the drafting of the resolutions had been carried out by the proposed liquidator whom they had selected, Mr Trinick, as a matter of routine. Mr Trinick was called on behalf of the defendants and gave evidence in the form of a witness statement (exhibit 262). He confirmed that he drafted the proposed resolutions to be put to the general meeting on behalf of Messrs Streeter and Cooper (but he did not draft the director's letter to shareholders) and he said that it was on his own initiative that he proposed a resolution authorising the liquidator to destroy records after 12 months because that was the standard resolution which his firm adopted and which he had learned to use from predecessors because of the desirability and convenience of avoiding the obligation to store materials for longer. I accept the evidence from Mr Trinick and Messrs Streeter and Cooper in these respects and I therefore reject the submission put by the plaintiff that there was a deliberate attempt to destroy records in order to cover tracks.

413 Despite their defeat at the general meeting of the plaintiff on 15 August 2006 Mr Streeter and Mr Cooper made a further effort to regain control of the company. On 5 September 2006, Messrs Smyth & Thomas, solicitors, acting on behalf of Jungle Creek sent a letter to shareholders of WAE enclosing an offer to purchase all shares in the company at eight cents per share, a requisition for a general meeting of the plaintiff and consents by Messrs Streeter and Cooper to act as directors (exhibit 135(1), 13 TB 1060). That letter included the passage:

At the time of writing, the Offer is intended to be generous having regard to the assets and liabilities of Western Areas Exploration Pty Ltd as understood by Jungle Creek and the latest price at which Western Areas NL shares have traded on the ASX (namely $3) - the valuation attributed to Western Areas Exploration Pty Ltd shares in the Offer assumes that Western Areas NL shares sold for the sum of $3.05. As Jungle Creek sees it, an investment in Western Areas Exploration Pty Ltd is merely an indirect investment in Western Areas NL. Accordingly, any shareholders accepting the Offer can, if they wish to maintain an investment in Western Areas NL, purchase shares on the market in that entity and then be complete masters of the destiny of their investment.

Accordingly, Jungle Creek strongly urges the board of Western Areas Exploration Pty Ltd to recommend the Offer to shareholders. Jungle Creek recommends that if you are uncertain as to your statutory, common law and fiduciary obligations, arising consequent upon service of the enclosed documentation that you take urgent legal advice on the point.

414 The formal offer by Jungle Creek to acquire the shares in the plaintiff is dated 5 September 2006 (exhibit 136, 13 TB 1063). The offer was highly conditional (see [4.1] at pages 7 - 9 (inclusive)) and was also conditional upon the shareholders granting to Jungle Creek, in advance of the proposed meeting of 3 November 2006 to remove Messrs Connell and Brailey as directors of the plaintiff and to appoint in their stead Messrs Streeter and Cooper, the shareholders' proxies in favour of Jungle Creek to vote at that meeting. One of the conditions upon which the takeover offer was dependant was at 4.1.3:

Jungle Creek, without in any way limiting or discharging you or the directors of the Target incumbent at the Offer Date from any obligation or liability whether arising in the terms of the Offer under the Corporations Act, at law, in equity or otherwise, being satisfied that the state of affairs for the Target is as contemplated by the offer (including) without limitation, the Estimated Valuation Assessment.

415 It is unnecessary here to unravel the complicated details of how the acceptance of that offer by some shareholders or the grant of proxy to Jungle Creek might have played out. Both Mr Streeter and Mr Cooper accepted that the terms of the offer were such as to encourage shareholders to give proxies to Jungle Creek, which would enable the resolutions removing Messrs Connell and Brailey as directors and reappointing Messrs Streeter and Cooper to be passed but then leaving ample leeway for Jungle Creek to decide not to proceed with the offer and to decline to purchase the shares. In cross-examination Mr Cooper frankly accepted that this offer by its terms was a device designed to enhance the prospects of himself and Mr Streeter regaining control of the plaintiff.

416 The general meeting demanded by Jungle Creek was called by the board of the plaintiff and the meeting was fixed for 3 November 2006 (exhibit 139, 6 STB 198). An explanatory memorandum prepared by Messrs Brailey and Connell was dispatched to shareholders strongly recommending against acceptance of the offer or the removal of the new board (exhibit 140, 6 STB 199). The explanatory memorandum sets out in brief terms the concerns entertained by them on behalf of the plaintiff about the alleged diversion of the corporate opportunity to WANL in 1999 and 2000 and recorded that the new directors had contemplated legal action and were seeking Queen's Counsel opinion upon whether or not the company had a good cause of action arising from the circumstances. The memorandum concluded with a paragraph:

We strongly recommend that shareholders reject the offer. We need additional time to get all our Company's papers together so we can ascertain whether our Company has a case against any party. If we get legal advice that our Company has a good case then our Company's shares could be worth much more than 8 cents per share. If we get advice that proceeding with litigation against any party is likely to fail we will sell our Company's shareholding in WSA and distribute the proceeds pro-rata to shareholders.

417 Before 3 November 2006 Jungle Creek and Mr Cooper's associated company, Fidene, withdrew their request for the resolutions to be put and Messrs Streeter and Cooper withdrew their consents to act as directors. Consequently, there was no longer a challenge to the newly appointed board which continued in office from 3 November 2006 onwards. The offer by Jungle Creek lapsed. The plaintiff issued the writ to commence these present proceedings on 18 October 2006.

418 These events reveal that the new board of the plaintiff under Messrs Brailey and Connell, were not secure in their office until early November 2006 because of the efforts by Messrs Streeter and Cooper and Jungle Creek, first to oppose their appointment and secondly to remove them and have themselves reappointed after 15 August 2006 meeting. This is of some relevance to the defendants' plea of laches which is more fully addressed later in these reasons.

419 No explanation was given why Messrs Brailey and Connell decided only in July 2006 to seek the removal of Messrs Streeter and Cooper from the board of the plaintiff. Mr Connell said (exhibit 190 [20]) that he had been approached by Mr Brailey who had expressed concerns about the running of the plaintiff by Mr Streeter and on the basis that Mr Brailey would be responsible for the day to day running of the company if appointed he was prepared to join the board. It was, of course, in July 2006 that Mr Cooper on Mr Streeter's behalf was renewing attempts to settle the Roberts litigation which did lead to the negotiated settlement. All that was prelude to the then current plan by Mr Streeter to put the plaintiff into liquidation but Mr Brailey did not suggest that he had somehow heard of or anticipated such an initiative which led him and Mr Connell to make their move for control of the plaintiff. As exhibit 196 shows the share price of WANL had been steadily rising from late 2003 began to rise more sharply in mid and late 2006.

420 The resolution by the plaintiff passed by Messrs Streeter and Cooper for the sale of 50,000 shares in WANL held by Candela is dated 6 July 2006 and is exhibit 141 (13 TB 1065). It was also the case that in the second and third quarters of calendar year 2006 WANL was embarked on developing its Flying Fox nickel mine at Forrestania and had announced the results of a very promising feasibility study for that project on 15 March 2006. During the period from 15 March - 31 August 2006 the international price of nickel had more than doubled, and, accordingly, there was understandable interest in the progress of WANL during early and mid-2006 (see WANL 2006 report exhibit 150, 7 TB page 3 - 6). It would only be natural, therefore, for Mr Brailey to be looking at the progress of WANL and the position of WAE with renewed scrutiny and intense interest in view of these developments. This no doubt accounts for the second aspect of the defendants' reliance on the doctrine of laches which alleges that the plaintiff knowingly stood by while the defendants bore the brunt of the risk and responsibility for a risky mining venture before deciding to go to court and seek equitable remedies. This allegation also receives detailed attention later.

421 The findings so far recorded reflect, but only in part, my impressions about the credibility of material witnesses derived from observation. However, by far the most influential factors leading to the particular findings are the contemporary documents and the natural and probable inferences which can be drawn from the unfolding events.

422 It is important to record that I am satisfied that Mr Brailey was a credible, accurate and honest witness who was extremely scrupulous in only asserting or confirming matters of which he had a positive recollection or for which there was contemporary documentation. There were many instances in which he indicated that he thought that he would have had certain conversations or communications with Mr Streeter but he did not in any way pretend to assert positively that those events had occurred. On occasions when it would have been easy for him to provide subjective detail to support the plaintiff's case he quite conspicuously refrained from doing so.

423 There was a minor attack on the credibility of the evidence of Mr Bernard Le Clezio concerning certain alleged approaches to Mr Streeter for money. However, none of those relates to any issue which is material to this case nor, I am satisfied, to Mr Le Clezio's credibility generally. I found him to be a credible and reliable witness and I regarded those allegations as simply unsuccessful attempts to asperse him.

424 There was no challenge to the credit or reliability of any of the plaintiff's other witnesses except, possibly on the issue of whether or not they would have invested in the plaintiff or subscribed for more shares had some opportunity, such as the ANPC proposal, being presented to them. I have canvassed that evidence and I am satisfied that those gentlemen did have the means to invest in an attractive proposal and that their very purpose of investing in the plaintiff originally was to take advantage of a suitable opportunity if and when it arose.

425 In the main, I consider that Mr Streeter has given accurate evidence except on issues where it was suggested that he acted in his own interests rather than in the interests of the plaintiff. His main response to that allegation was to contend that the plaintiff did not have the means to take any available opportunity, that its shareholders were not willing to contribute further funds and that he was free to act in his own interests. I do not accept those explanations and I consider that Mr Streeter took advantage of his position. Shortage of funds by the plaintiff was principally due to Mr Streeter's failure to honour his promise to subscribe the full $250,000 as capital. His treatment of the so-called convertible loans as being loans repayable on demand was inconsistent with the original arrangement and was an effective means of exerting influence and control of the plaintiff. On a number of occasions, in cross-examination, he prevaricated only acknowledging the real purpose of documents when it would have been positively embarrassing not to do so. He initially equivocated about how the ANPC personnel came to see him before acknowledging that they were sent by Mr Bailey and that Mr Grammer had told him that (ts 161).

426 Mr Cooper was less prone to evasion or equivocation than Mr Streeter but the whole of his evidence, and indeed the whole of his actions as director of WAE and WANL, made it apparent that he saw his role as protecting and advancing the interests of his long term client and colleague Mr Streeter. Accordingly, on occasions where there is a conflict between the evidence of Mr Streeter and/or Mr Cooper and that of Mr Brailey or the contemporary documents I have reached the conclusion that it is Mr Brailey and the written materials which provide a more reliable account of events.

427 Mr Timothy King, the financial advisor to the ANPC group and a member of the firm of Norgard Clohessy obviously took a major role in the design and construction of the company vehicle for the new venture. Unfortunately, Mr King died before the trial of this action without giving evidence and accordingly, no inferences of any kind can be drawn from the absence of any account of events from him.

428 In relation to the ANPC personnel I have already noted that Mr Stewart was not called although apparently available when he could have been expected to be in a position to give evidence about the alleged enthusiasm or lack or shown enthusiasm by Mr Brailey for the ANPC proposal and how the ANPC personnel came to approach Mr Streeter. I have been invited to draw a Jones v Dunkel [1959] HCA 8; [1959] 101 CLR 298 inference in the light of the defendants' failure to call Mr Stewart and I am satisfied that the events are such that an inference can be drawn. However, such inferences and presumptions are often of uncertain and inestimable significance so I do not put great weight on this factor but it is one which leads me to the view that I can rely on the account given by Mr Brailey with some greater degree of confidence.

429 In relation to Mr Grammer, I found his approach and oral evidence revealed that he was more concerned with the geological and scientific importance of the discoveries and the projects without having a great appreciation of, or sympathy with, the commercial arrangements. While his evidence in chief tended to support the defendants' position, that was largely undone by the cross-examination which, in combination with his written diaries, demonstrated convincingly that he had learned about Mr Brailey's association with WAE, WAE's interest in nickel projects and its association with Mr Streeter at the first meeting with Mr Brailey and Mr Stewart at Tolhurst's offices.

430 I found Mr Hanna to be a very careful and scrupulous witness but his recall of detail was, not unnaturally, rather limited and in some cases unreliable. Not very much turns on this because most of Mr Hanna's dealings were with Messrs Streeter and Cooper over the implementation of the ANPC proposal. I accept that Mr Hanna, along with his ANPC colleagues, after advice, were reluctant to put the ANPC proposal into the hands of WAE and, for respectable reasons of their own, preferred the formation of a new company, as did eventuate. However, I do not consider that there was any opposition by Mr Hanna or antipathy towards WAE taking a large stake in the new company and indeed that had actually been propounded. The dilution of that proposal was largely the result of further discussions and negotiations with Messrs Streeter and Cooper, all as part of the arrangements designed to deliver an effective 20% shareholding to the Streeter interests.

431 The defendants invoked the principles discussed in Meagher, Gummow and Lehane, Equity Doctrines and Remedies [36020] dealing with the defence of laches which would lead to a claim being defeated because of delay in its institution and pursuit and the effect, not merely on the parties, but potentially on others of such a delay before the transaction was challenged. The passage [36020] is as follows:

A third situation arises where the transaction which the plaintiff seeks to impugn is at all hazardous or speculative, if equity permits a plaintiff to rescind or to affirm a transaction, he will not be allowed to let time run by so that actual knowledge of the profitability or otherwise of the transaction determines his choice. There are many decisions illustrating this where plaintiffs seeking to set aside mining transactions have been denied relief for this reason: Clegg v Edmondson [1857] EngR 375; (1857) 8 De GM & G 788; 44 ER 593; Rowe v Oades [1905] HCA 42; (1905) 3 CLR 73 at 80 Barton J; at 81 - 82 per O'Connor J; Clarke v Hart [1858] EngR 475; 6 HL Cas 633 At 656 and Fowley v Farrell (1933) 36 WALR 46 being instances cited by the defendants.

432 Immediately the observation must be made that the relief sought by the plaintiff is not to set aside any transaction. No claim for rescission is being advanced. Constructive trusts of the type sought would not disturb the affairs of WANL although they would certainly deplete the assets of the defendants. The question is whether the defendants have any better entitlement to the retention of those assets now, some nine years after the events in question and three years after the commencement of proceedings, than they would have had had the plaintiff's claim been brought earlier, perhaps before the discovery of Forrestania. I do not think that they do but it is necessary to examine the authorities and the principles underlying the defence of laches.

433 The defendants rely on two relevant aspects of the doctrine of laches. The first is the application of the doctrine in cases where delay has so changed the condition of the thing obtained or the state of affairs that a just result cannot be achieved by the imposition of a constructive trust even with allowances or compensation. They submit that this is 'particularly applicable to property of a mining character': Erlanger v The New Sombrero Phosphate Company (1878) 3 App Cas 1218, 1231 and per Owen J in the Bell case at [9304]. The second aspect of the doctrine relied upon arises where the extent of the delay implies acquiescence on the part of a plaintiff who, being aware of the state of affairs and the available remedy, stands back and allows a continuation of the conduct which is later challenged by the action brought.

434 The defendants place great emphasis on judicial observations about the applicability of this doctrine in situations where there is delay by a plaintiff in taking steps to complain about a situation where some risky venture is being pursued and who does not seek to commence action or complain until the risks have been overcome and success of the venture is apparent or assured. Not surprisingly, the analogy with risky mining operations and the present case is submitted to be compelling and, hence there is also reliance upon the observations of Knight-Bruce LJ in Clegg v Edmondson [1857] EngR 295; (1857) 8 De GM & G 747, 814 [1857] EngR 375; (44 ER 593 at 604):

A mine which a man works is in the nature of a trade carried on by him. It requires his time, care, attention and skill to be bestowed on it, besides the possible expenditure and risk of capital, nor can any degree of science, foresight and examination afford a sure guarantee against sudden losses, disappointments and reverses. In such a case a man having an adverse claim in equity on a ground of constructive trust should pursue it promptly, and not by empty words merely. He should shew himself in good time willing to participate in possible loss as well as profit, not play a game in which he alone risks nothing.

435 Observations to like effect are found in Erlanger v The New Sombrero Phosphate Company [1230] - [1233], [1240] - [1242], [1251] - [1254], [1259], [1263] - [1264], [1278] - [1283] and [1285] - [1286]. In Erlanger's case the invocation of the defence of laches was unsuccessful. At [1232] Lord Penzance made the point that even had Mr Stevenson and those who acted with him been guilty of laches, it was unlikely that their laches was the laches of the company or of the major bulk of the shareholders. Furthermore, the point at issue in Erlanger's case was whether or not a contract for the sale of an island said to contain phosphate deposits by promoters to the company at an inflated price and without adequate disclosure of the promoters' role in securing their interest in the island should be set aside. The observations about standing back until the commercial value of the contract could be realised, without first making a challenge, in such a setting is rather different than the present case of claiming a constructive case over property which continues in existence, such as these shares. Lord Blackburn at [1238] - [1279] emphasised the breadth and flexibility of remedies of equity to adjust for the impossibility of absolute restitution where restitution was a countervailing entitlement to the relief being sought and where accounts and allowances could be made for change in the circumstances or in the value of the property to achieve substantial restitution. His Lordship was of the opinion that these were relevant factors in deciding whether or not delay impairing absolute or exact restitution could be availed of and was satisfied that in the particular case the delay did not defeat the claim. Lord Gordon was also of the view that there was no occasion to refuse the remedy of setting aside the contract because of laches.

436 Foley v Farrell (1933) 36 WALR 46 is a case where the dispute was over a prospecting area obtained by the defendant in a goldmining area near Mount Magnet which had been repegged over a former prospecting area held by the defendant and the plaintiff and another in partnership . Upon the expiration of the first prospecting area the defendant repegged and mined the new tenement but Dwyer J held that a delay of more than a year after the defendant had been working the new mine precluded the plaintiff from obtaining equitable relief, citing from Lindley On Partnership (9th ed) including the following:

The doctrine now under discussion is especially applicable to mining and other partnerships of a highly speculative character. Mining operations are so extremely doubtful as to their ultimate success, that it is of the highest importance that those engaged in them should know on whom they can confidently rely for aid; if, therefore, a person engages in a mining venture in partnership with others, and disputes arise between them, and he is denied a partner's rights, he should be careful to assert his claims whilst the dispute is fresh; for if he lies by until the mine has been rendered prosperous by his co-partners and he then comes forward insisting on his rights as a partner, and seeks equitable as distinguished from legal relief, he will be refused it; on the ground that he has applied for it too late.

437 There can be no doubt that this doctrine still continues to apply and will be given effect in appropriate circumstances. However, the present situation is very different to a small mining tenement operated by a single owner or by a partnership of three in 1933. First of all, the present plaintiff does not claim the entirety or any fraction of the Forrestania project nor any of the tenements comprised by it or otherwise held by WANL. Its claim, as already identified and analysed, is only for shares or the benefit of options issued in WANL which are still in existence and which have not altered in character since 2002 although their value has significantly appreciated. The status of shareholder has not been one for which any additional contribution of capital or the application of any time or effort has ever been required of the shareholder which, having been withheld, might in other circumstances render it inequitable to give relief after delay. The situation with the options is rather different because there, of course, the application of additional capital at a time when the enterprise was still perhaps somewhat speculative means that some risk was taken by the parties exercising the options and converting them to shares, and it seems to me that a somewhat greater recognition of that risk borne successfully by the defendants when exercising the options is needed. But that can be achieved by determining a greater rate of interest on the money outlaid to exercise the options than on the money or value outlaid for the acquisition of the shares at the original time of allotment.

438 The capacity of the doctrine of laches to accommodate the various forms of acquiescence, itself a word of varying meaning, and also waiver or election or estoppel, was comprehensively examined by Deane J in Orr v Ford [1989] HCA 4; (1989) 167 CLR 316, 337 - 341 where his Honour observed that the availability of a defence of laches and what will suffice to make it good depends upon the nature of the claim. It is perhaps significant that in Orr v Ford both Mason CJ and Deane J were in the minority in considering that the claim should be refused because of laches whereas Wilson, Toohey and Gaudron JJ considered that the defence of laches was not made out and that there had been no material prejudice suffered by the defendants in not being able to obtain evidence to resist the claim, observing, at 331:

On the view least favourable to the appellant the most that can be said was that he was content to stand by and let matters take their course in the expectation that they could be resolved within the family after the death of Dr Stone. This falls far short of release, abandonment, discharge or of conduct in inducing an assumption as to such matters by Dr Stone. The question of the loss of evidence as to such matters is entirely suppositional and is thus not a matter which can properly be said to amount to prejudice of a character which might defeat the appellant's claim.

439 There is no suggestion in the present case of any loss of evidence due to the time which has elapsed before the claim was brought. It is true that one of the financial advisers to the ANPC personnel, Mr Timothy King, unfortunately passed away before these proceedings were brought. He may have been able to give evidence in more detail of some of the negotiations leading to the implementation of the ANPC proposal and its eventual evolution through the vehicle of WANL. But the other witnesses who did give evidence were, between them, fully versed in the details of all those developments and no one suggested that there were any matters which would only have been known by Mr King or that the defendants were in any way prejudiced by his inability to give evidence due to untimely death.

440 Another recent examination of the laches doctrine was undertaken by Owen J in the Bell case at [9303] - [9314]. In doing so, his Honour said:

Thus laches provides a bar to the grant of relief where there has been an unreasonable delay in the commencement or prosecution of proceedings and where the delay renders it unjust in all the circumstances to grant the relief sought.

Mere delay is insufficient to involve a laches defence, even in cases of 'spectacular delays'. For example, in Burroughs v Abott [1922] 1 Ch 86, the court granted rectification of an instrument after a delay of 12 years. A mortgagor's redemption suit was held not time-barred in Weld v Petrie [1929] 1 Ch 33 despite a delay of twenty-six years. Finally, in Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420, the High Court granted specific performance twenty-six years after the cause of action arose.

The point of time from which the reasonableness of the delay is assessed is, prima facie, the time when the plaintiff became aware of the facts that gave rise to the availability of equitable relief. In Meagher, Gummow & Lehane at [36-085], the authors commented that where a plaintiff has knowledge of the relevant facts, he or she is presumed to have knowledge of his or her rights to a cause of action. They go on to say that the 'availability of the means of knowledge is as good as knowledge'. These propositions were confirmed in: Savage v Lunn [1998] NSWCA 204, 5 - 6; Savage v Lunn [1998] NSWCA 203, 59 - 60 (per Handley and Sheller JJA and Sheppard AJA).

Unreasonable delay alone will not be sufficient to attract a laches defence. The delay must render it unjust in all the circumstances of the case for relief to be granted (Spry, Equitable Remedies (6th ed, 2001) at 43). The doctrine can be relied upon where a plaintiff, in delaying to take or pursue and action has:

(a) acquiesced to the defendant's conduct; or

(b) caused the defendant or a third party to alter their position in reasonable reliance on the plaintiff's acceptance of the status quo or otherwise permitted a situation to arise that would be unjust to disturb.

The question is whether the balance of justice favours granting the remedy or withholding it. In Lindsay Petroleum Co v Hurd (1894) LR 5 PC 221 the Privy Council looked at, among other things, the nature of the claim, the nature of the property to which the claim relates, the identity of the party against whom the defence is raised, the length of the delay, the extent to which the delay has prejudiced the defendant and the acts of each party during the delay [9304] - [9308].

441 His Honour went on to analyse separately the submissions in that case dealing with delay, acquiescence and delay with prejudice and ultimately rejecting submissions that the doctrine of laches should have disentitled the claimant to relief or the type of relief sought.

442 In this present case Mr Brailey became aware that the ANPC proposal was not going to be developed through WAE but by another company in February 2000. He was not aware of the details of the new company WANL or of the shareholding taken in it by the defendants until later. He resigned as a director of WAE in March 2000, although he gave no explicit reasons for doing so, it must have been obvious to Messrs Streeter and Cooper that he did so in protest. In their evidence they maintained that they were never told, never learned why Mr Brailey resigned from the board of WAE. While that might be true in a strictly literal sense, I am satisfied it is not the whole truth and that they were well aware of his disapproval of their conduct in implementing the ANPC proposal through WANL. It was not until much later still that he learned of how Jungle Creek had acquired its 30% interest in the Cue tenements from Golden Granite and had in turn sold that to WANL for 150,000 vendor shares in the new company.

443 Nevertheless, Mr Streeter and Mr Cooper effectively controlled WAE and maintained that control until they were removed as directors in the circumstances described in mid-2006. They had possession of all the company's records and control of its bank account. While that situation remained there was not the slightest realistic possibility that the company would have taken action to challenge the conduct of the present defendants or assert a claim such as is advanced in these proceedings.

444 In Erlanger v The New Sombrero Phosphate Company Lord Selborne observed that in the circumstances there under examination the period in which the original board remained in control should not be counted in any period of delay. Mr Brailey alone or with some of the other shareholders might have sought to commence a derivative action on behalf of the company but that would have been very difficult and perilous without having access to all the books and records of the company and without being able to carry out a sufficiently comprehensive examination which would be prudent before the commencement of litigation of this significance and magnitude. Furthermore, any delay by Mr Brailey in commencing proceedings before the change of control of the company in August 2006 should not, in my view, be attributed to the company as a whole. Nothing in the evidence of this case supports any conclusion that there was acquiescence by or waiver by the plaintiff itself. In fact, WAE did nothing in relation to this new venture while it remained under the control of Mr Streeter and Mr Cooper.

445 In every realistic sense WAE was dormant from February 2000 until the change of control in August 2006. There is no evidence of any further business being conducted by the company nor of any other mining tenements being sought or acquired. The only tenements in which it had an interest, those being the Cue tenements, had of course been transferred to WANL.

446 WAE was beneficially entitled to the vendor shares in WANL which had been issued in return but they had issued to Candela Pty Ltd and were held on trust by that company under the control of Mr Streeter. Initially, they were subject to escrow but, as the years passed and they came out of escrow, they could have been sold but not without the consent of Mr Streeter, so long as they were held by Candela, or without persuading or obliging Mr Streeter to transfer them to WAE. Although it was not a matter which was examined in the evidence, I consider I am justified in inferring that a demand for the shares to be transferred from Candela to the plaintiff or for any of them to be sold could not, and would not, have occurred so long as Messrs Streeter and Cooper remained in control of the plaintiff. Accordingly, WAE was virtually in limbo from March 2000 onwards until August 2006. Its original objective of acquiring interests in mineral tenements, undertaking an IPO and achieving a listing on the ASX had been, for all practical purposes, abandoned. The plaintiff was nothing more than a component in the Streeter group of companies which advantaged Mr Streeter because of his control of the beneficial interest in the vendor shares held by Candela.

447 The only delay in the commencement of the present proceedings after the change in control of the plaintiff at the general meeting of the plaintiff on 15 August 2006 is the passage of two months from then until 18 October 2006 before the writ in the present action was issued. It was during that two-month period that Mr Brailey and others who had obtained control of the plaintiff gathered evidence and gave instructions for the institution of these proceedings. It seems to me, with respect, that they acted very expeditiously in this regard and that there can be no question of any delay amounting to laches from August 2006 onwards.

448 The plaintiff's address the second application of the doctrine of laches, namely the alleged development through delay of a situation where there had been a detrimental or irreversible change of position by the defendants, a component of the doctrine acknowledged by Owen J in the Bell case.

449 It is the fact that in April 2000 Mr Brailey and his co-shareholder, Mr B Le Clezio, sought legal advice from solicitors as to what remedies could be sought in relation to their concerns (exhibit 170 par 117). They were advised that they could institute proceedings seeking an injunction to prevent Messrs Streeter and Cooper or WANL from implementing the venture in the manner in which they then proposed but were told, quite rightly, that they would need to provide an undertaking as to damages for any injunction being sought and that the proceedings could be expected to be expensive. They did not have control of the company and were not in a position to finance such litigation or provide such an undertaking. I do not consider that their inactivity or prudence in this respect should be regarded as constituting any form of laches either by themselves or by the plaintiff.

450 In May of 2000 the first WANL prospectus was published and circulated to shareholders of WAE. By this means the course of events came to the knowledge of Mr Cole, Mr Evans and other shareholders of the plaintiff. The defendants submit that if action had been taken against them or against WANL at this point, that is before they were issued shares or options in WANL in July 2000, they would have had the chance of acting differently and not acquiring the options and shares which are now being claimed by the plaintiff. But, with all due deference to the submission, it seems to miss the point that if they had not derived these benefits or profits from acting in breach of fiduciary duty they would not be liable at all. If the submission is intended to imply that the defendants may have been able to structure their affairs in some other way which would have permitted shares, options or other benefits to be taken through different vehicles, in a different form or by some indirect means, that would provide no answer to the claim because it would constitute a different form of breach of fiduciary duty with a potentially different set of consequences in the manner of accounting.

451 There is nothing in the evidence to suggest in any way that the delay in the commencement of these proceedings until October 2006 caused the defendants to act in any way to their prejudice or that they had acted in good faith to their prejudice or in reliance on an expectation that their conduct would never be challenged or called into question. Rather, the indications are that the conduct of the defendants from December 1999 onwards concealed, to a substantial extent, until the issue of the prospectus in WANL in May 2000, the manner in which the ANPC venture was being developed. From May 2000 onwards Mr Streeter and Mr Cooper still retained control of WAE. They made no report to the shareholders disclosing the details of how WANL had come by the 30% interest in the Cue tenements from Golden Granite or that there had been any opportunity for WAE to acquire that interest. There was, in my view, a degree of concealment about the true nature of the transaction and a refusal to acknowledge, which continued during the course of this trial, that there had been any breach of duty on their part.

452 Accordingly, I am satisfied that there was actual misconduct by Messrs Streeter and Cooper in the breaches of fiduciary duty which I have found. This was deliberately pursued for their own self-interest at a time when they had well-founded apprehensions that, if the full situation had been disclosed, there would be opposition and the risk of legal proceedings at the suit of other shareholders in WAE.

453 More particularly, there is no basis for contending that the defendants have suffered any prejudice by the time which has elapsed. Jungle Creek simply remained as a shareholder the original 4,500,000 shares allotted in return for the $300,000 seed capital introduced by Mr Streeter. The same applies to the 150,000 shares which Jungle Creek was allotted in return for its sale of its interest in the Cue tenements. It was obliged to hold those shares during the escrow period and, once they came out of escrow, they were fully marketable and could have been sold at any time. Jungle Creek chose not to sell them, no doubt due to its hopes and expectations about an increase in market price, which in fact occurred. It continued to hold the shares after the rapid decline in prices due to the global financial crisis from mid-2008 on. Since then it seems that steps had been taken to ensure that the shares had not been disposed of as a result of demands by the plaintiff in this litigation. Whichever way one looks at the position, there is no suggestion of prejudice by Jungle Creek due to the fact that it continued to hold these shares.

454 In relation to the options granted in February 2000 to Mr Streeter, Mr Cooper and to Jungle Creek, the situation is very similar. Each of those continued to hold the options, without any cost or obligation, until they were exercised and, at various dates, all at the option price. There is no suggestion that any prejudice has come to the defendants because of the exercise of the options or by holding the shares derived from those options. Of course, the defendants had to outlay the capital for the conversion of the options to shares but that outlay has been quantified and, with interest, must be paid by the plaintiff as a condition of obtaining the relief sought. But, so long as that money and interest is paid or credited to the defendants, no loss will come to any of them through the exercise of the options. This demonstrates that the real apparent complaint by the defendants is that, if relief along the lines sought by the plaintiff is granted, they will have to part with the shares which they acquired for no more than their cost plus interest and so lose the benefit of the large appreciation in the value of the shares which has occurred on the market. This is no more than a claim for retention of the benefit of the profit from the breach of the fiduciary duty and therefore is quite unsustainable.

455 The plaintiff submits that a fiduciary may not retain any benefit or increase in the value of an asset obtained in breach of his fiduciary duty and that subsequent appreciations in the value of such an asset are to the account of the principal: Attorney-General (Hong Kong) v Reid. While recognising that Warman International Ltd v Dwyer is authority for the proposition that the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff, the plaintiff submits that it would only be unjustly enriched if it were to obtain profits which were caused by the capital, skill or effort of the defendants citing in support the following passage from the judgment of Heydon JA in Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; [2003] 56 NSWLR 298, 370 [309]:

Further, though in Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 at 557, Mason CJ, Brennan, Deane, Dawson, and Gaudron JJ said, after noting that the purpose of an account of profits being ordered against a patent infringer is not to punish the defendant but to prevent the unjust enrichment of the defendant, that 'the liability of a fiduciary to account differs from that of an infringer in an intellectual property case', they did not suggest that one of the differences lay in punishment. Indeed they suggested the contrary (at 561) in saying: 'the stringent rule requiring a fiduciary to account for profits can be carried to extremes and ... in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.'

456 The plaintiff submits that there are several factors which refute the defendants' claim that they should be entitled to special allowances, an apportionment of profits or some other accommodation because of the increase in the value of the shares caused by the acquisition of Forrestania. They submit that:

• The acquisition of Forrestania was not caused by the capital, skill or effort of the defendants or any of them.
• Insofar as Forrestania was identified as a target and secured, it occurred by reasons of good fortune, the fact that WANL was a listed company and thereby had the capacity to raise capital quickly and because WANL possessed the advantage of having the skill, knowledge, expertise, experience and industry connections associated with the geologists who came to it with the ANPC venture, namely Messrs Julian Hannah, Terry Grammer and Richard Stuart who were, in a very real sense, important instruments in the discovery of Forrestania.
• That if the ANPC proposal had been promoted through the vehicle of the plaintiff there would have been every reason to anticipate that it would have enjoyed a similar opportunity and would have had the same connections with those geologists.

457 As to these contentions, it is quite apparent that discovery, development and success of Forrestania was due to WANL and was achieved through the efforts of WANL's own officers servants agents and consultants who were all employed or retained to provide services which led to that impressive result. Insofar as Messrs Streeter or Cooper provided help and assistance which contributed to the success of Forrestania, they did so as officers, shareholders, investors or creditors of WANL all on commercial terms and for which, as has been tabulated, not insignificant remuneration and other rewards were received.

458 As to the submission that had the plaintiff been the vehicle chosen for the ANPC proposal, the probabilities are that it would have had equal or comparable success I have considerable reservations. For reasons previously canvassed, had WAE been proposed as the vehicle for the ANPC proposal and its shareholders had been forthcoming with the necessary financial support, as I think it reasonable to infer they would have been, I still think it is unlikely that the ANPC personnel would have agreed to that occurring. There were substantial commercial and practical reasons which made it inadvisable, from their viewpoint, to have their proposal implemented by the plaintiff which had a history of unsuccessful attempts in capital-raising. I have concluded that it is unlikely, had the plaintiff through Mr Brailey being fully informed of this potentiality and being ready, willing and able to participate in it, that it would have been successful. However, I am satisfied that if it had known of the proposal and been interested, ready, willing and able to participate, it would probably have obtained the opportunity to make a substantial initial contribution to the capital of the new company and to take founder's shares in WANL in return. Counsel for the defendant submitted that this would still not have happened because Mr Streeter would have wanted to invest and would have taken a larger share in the new company for himself. To an extent that begs the question whether doing that, without the approval of the plaintiff, would have been another similar breach of fiduciary duties, but putting that to one side, it does not matter. The fact that Messrs Streeter, Cooper and Jungle Creek derived a benefit from the breach of their fiduciary duty, is sufficient to render them accountable regardless of whether the plaintiff would have been able to achieve the same or a similar result itself.

459 With respect to the claim for a just allowance, the plaintiff submits that the onus for establishing an entitlement to a just allowance rests upon the errant fiduciary; that a just allowance is intended to remunerate the fiduciary to the extent that the fiduciary's time, energy, skill and financial contribution have added to the value or the profit claimed: Victoria University of Technology Inc v Wilson [2006] VSC 186; (2006) 68 IPR 597, 608, 609 (per Harper J quoting Nettle J in Victoria University of Technology Inc v Wilson [2004] VSC 33; (2004) 60 IPR 392 [198] - [199]); and that the court will grant an allowance where it would be inequitable for the party to whom a fiduciary duty is owed to step in and take the benefit without paying for the skill and labour which has produced it: Phipps v Boardman [1964] 1 WLR 993, 1018 (Lord Wilberforce); and Warman International Ltd v Dwyer. The plaintiff further submits that if there is a basis for the grant of a just allowance, the nature and dimension of the allowance must be such that the errant fiduciary does not profit from his position.

460 The defendants submit that, in the event of relief being granted, this is an area of law where much care should be given to ensure that the remedy is fashioned to fit the nature of the case and the particular facts and is not morally the product of a broad application of general principle: Coomber v Coomber; Chan v Zacharia, 205 and Warman International Ltd v Dwyer (supra) at 559 - 562 where, in a passage much relied upon by the defendants their Honours said:

Ordinarily a fiduciary will be ordered to render an account of the profits made within the scope and ambit of his duty: Phipps v Boardman [1967] 2 AC at 127 per Lord Upjohn. Of course, if the loss suffered by the plaintiff exceeds the profits made by the fiduciary, the plaintiff may elect to have a compensatory remedy against the fiduciary. That election will bind the plaintiff: Kendall v Marsters [(1860)[1860] EngR 964; , 2 De GF & J 200; 45 ER 598. Although an account of profits, like other equitable remedies, is said to be discretionary, it is granted or withheld according to settled principles. It will be defeated by equitable defences such as estoppel, laches, acquiescence and delay. And, notwithstanding what was decided in Regal (Hastings) Ltd v Gulliver and Phipps v Boardman, (supra) it may be that [as said in Chan v Zacharia (supra) 204 - 205)] [36]:

'[T]he liability to account for a personal benefit or gain obtained or received by use or by reason of fiduciary position, opportunity or knowledge will not arise in circumstances where it would be unconscientious to assert it or in which, for example, there is no possible conflict between personal interest and fiduciary duty and it is plainly in the interests of the person to whom the fiduciary duty is owed that the fiduciary obtain for himself rights or benefits.'

The conduct of the plaintiff may be such as to make it inequitable to order an account. Thus a plaintiff may not stand by and permit the defendant to make profits and then claim entitlement to those profits: In Re Jarvis (deceased) [1958] 1 WLR at pp 820 - 821 (and other footnotes here omitted).

It is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts. As Fletcher Moulton LJ observed in Re Coomber; Coomber v Coomber (supra):

'Fiduciary relations are of many different types ... and the Courts have again and again, in cases where there has been a fiduciary relation, interfered and set aside acts which, between persons in a wholly independent position, would have been perfectly valid. Thereupon in some minds there arises the idea that if there is any fiduciary relation whatever any of these types of interference is warranted by it. They conclude that every kind of fiduciary relation justifies every kind of interference. Of course that is absurd. The nature of the fiduciary relation must be such that it justifies the interference. There is no class of case in which one ought more carefully to bear in mind the facts of the case ... than cases which relate to fiduciary and confidential relations and the action of the Court with regard to them.'

But the basic principle remains that a principal who so elects is entitled to an account of profits, subject to considerations of the kind already mentioned. In the present case, not only was Dwyer actively dishonest, but also Warman commenced proceedings in the Supreme Court of Queensland in October 1988, shortly after Dwyer's departure, so that Dwyer had an opportunity to consider his position and take appropriate action such as the proper purchase of the goodwill of the agency business from Warman. And when the fiduciary is actively dishonest and obtains an identifiable profit from that dishonesty, it is more difficult still to conceive of circumstances in which no account at all should be ordered.

The outcome in cases of this kind will depend upon a number of factors. They include the nature of the property, the relevant powers and obligations of the fiduciary and the relationship between the profit made and the powers and obligations of the fiduciary. Thus, according to the rule in Keech v Sanford (1726) Sel Cas t King 61 [1726] EngR 961; [25 ER 226], a trustee of a tenancy who obtains for himself the renewal of a lease holds the new lease as a constructive trustee, even though the landlord is unwilling to grant it to the trust. But the rule 'depends partly on the nature of leasehold property' and partly on the position which the trustee occupies (footnotes omitted). A similar approach will be adopted in a case in which a fiduciary acquires for himself a specific asset which falls within the scope and ambit of his fiduciary responsibilities, even if the asset is acquired by means of the skill and expertise of the fiduciary and would not otherwise have been available to the person to whom the fiduciary duty is owed.

But a distinction should be drawn between cases in which a specific asset is acquired and cases in which a business is acquired and operated. Such a distinction was drawn by Upjohn J in Re Jarvis (decd) (supra) in the context of considering a defence of laches, acquiescence and delay. However, in our view, the distinction is also relevant in the context of the fiduciary's liability to account for profits...

...

In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources. This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful part to play; it is simply to say that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.

It is for the defendant to establish that it is inequitable to order an account of the entire profits. If the defendant does not establish that that would be so, then the defendant must bear the consequences of mingling the profits attributable to those earned by the defendant's efforts and investment (footnotes omitted) in the same way that a trustee of a mixed fund bears the onus of distinguishing what is his own.

Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case (footnotes omitted). However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profit-sharing but will make allowance for skill, expertise and other expenses.

461 In making their claim for an allowance or for an apportionment of profits under these principles, the defendants rely on a suggested analogy between their role in the affairs of WANL and that of a partner or an agent who wrongly applies an interest in, or diverts to himself and others, the benefit of the principal's business. Cases directly analogous in this respect are in Re Jarvis (supra) and Warman itself.

462 The defendants also seek to finesse the reservations plainly acknowledged in Warman (supra) that where the breach of a fiduciary duty results in the acquisition of a specific asset, the principles relating to an imposition of a constructive trust in respect of that asset, do not require the application of a just allowance, at least in those cases where the asset in question retains its identity even if it appreciates sharply in value because of subsequent events or appreciation in the market - as in the case of the proceeds of the bribes invested in land in New Zealand in Attorney-General (Hong Kong) v Reid. The plaintiff's position is that the diverted opportunity in this case was the opportunity to take shares in WANL at an advantageous time and at a concessional price, and that those shares, including shares derived from the exercise of options granted simultaneously, have continued in existence and have maintained their identity unchanged since 2000. The fact that they have appreciated in value remarkably since then is entirely consistent with the purpose of investment in shares namely, to acquire a form of property which will benefit from the prosperity of the enterprise of the corporation.

463 In this respect, it is clear that the subsequent growth and development of WANL were in large parts achieved by subsequent share issues and greater investment by the public, the defendants and the ANPC personnel which led to it growing into a much bigger company with many more shares on issue and with a much increased share capital deriving from all these processes. True it was that the discovery of the Forrestania project and its successful development to a highly valuable nickel producing mine, meant that there was cause for this appreciation in the value of the shares, and associated attraction for capital investment from many outside sources. But that is exactly what would be expected to happen in the event of any exploration mining company being fortunate enough to make a rich discovery leading to progress towards economic mining and production. The initial shareholders investing in such a project contemplate, even if only in hope, that their enterprise will be successful and that the value of their investment will grow. They realise or hope that such an eventuality is probable, that many others will invest and that the size and number of shareholders in the company will increase to an almost unrecognisable degree. That does not detract from the individuality of their original investment or its capacity to share, pro rata, with all the additional shares which may be issued to dilute their shareholding, in the growth and profits of the operation. Secondly, these defendants did not themselves provide the capital or the skill which led to the acquisition and success of the Forrestania mine. They did purchase further shares in WANL. Mr Streeter did make loans on commercial terms. Both he and Mr Cooper acted as directors but all that was done as investors and/or officers of WANL. It was WANL which raised the capital, engaged the contractors, spent money on exploration, mining and development and purchased, with its own money, the services of skilled geologists, engineers, financiers and others whose efforts, advice and wisdom led to the success of the operation.

464 As already described, for their services as lenders and directors, Mr Streeter, Mr Cooper and Jungle Creek have received substantial payments at commercially agreed rates. For Mr Streeter's role as a lender, of a convertible loan, he has received shares to the value of the principal of his loan and additional shares equivalent to an agreed rate of interest upon the money advanced, to the date of conversion. As shareholders of other shares acquired, (in addition to those in February 2000 or from the conversion of options granted in February 2000 in breach of a fiduciary duty), all of the defendants, like other shareholders in the company, have derived substantial benefits in the form of appreciation in the value of their shares. How can it be said, therefore, that the appreciation in the value of the 11,075,000 shares now held by the defendants deriving from the allocation of shares and options in February 2000 in breach of fiduciary duty, has been due to their individual skill, care, effort or assumption of risk from 2002 onwards following the discovery of Forrestania?

465 Certainly the discovery of Forrestania led to the appreciation in value of all the shares in the company but, had the plaintiff's claim been brought and the relief claimed in the form of constructive trust been granted in 2002, before the discovery of Forrestania, it could hardly have been said that the plaintiff would not have had a strong claim for a constructive trust over what then would have been 4,650,000 shares and 6,425,000 options, subject only to submitting to conditions to pay with interest the $300,000 advanced by Mr Streeter as capital for the shares and options obtained by himself and by Jungle Creek and a further $5,000 plus interest to Jungle Creek for the consideration it gave for the transfer of 30% of the Cue tenements in return for 150,000 shares.

466 If that be so then, as beneficiaries of the shares and options under such a constructive trust, the plaintiff would have been entitled to retain those shares, convert the options to shares before the expiry date and to hold the investments indefinitely. Had it done so, then they would have enjoyed the benefit, along with all other shareholders, of the subsequent appreciation in value due to the successful discovery and development of the Forrestania project. I appreciate that this gives rise to a question of whether or not it is equitable for the plaintiff to seek to obtain such a remedy after further time has passed and the success of the Forrestania venture and its consequences have become assured.

467 It is not to the point to examine, as the defendants' submissions seek to have examined, what would have occurred had there been no breach of fiduciary duty and the plaintiff had taken shares or options in WANL from February 2000 onwards especially in a situation where Mr Streeter claims that he and/or the third defendant would have made a matching or larger investment in their own interests.

468 The purpose of relief in the form of an account of profits, or by one of its variations the constructive trust, is not to put the principal in a position in which it might have been had there been no breach of a fiduciary duty but, rather, to strip the errant fiduciary of the profit or benefit obtained as a result of his breach of fiduciary duty, notwithstanding that the principal may not have achieved such a profit for itself, and, where necessary, to adjust the remedy by granting just allowances.

469 Accordingly, I do no see any basis upon which the defendants are entitled to an apportionment of profits or an accounting based on some value of the claimed shares in WANL less than current market value other than the imposition of conditions secured by a charge over the shares that the plaintiff pay to the defendants the capital outlaid by them for the acquisition of the shares and the conversion of the options to shares plus interest at ruling rates from the date when those moneys were paid. I consider that the defendants are properly entitled to an adjustment of their liability having regard to the money which they actually contributed to the acquisition of these shares and the exercise of the options with interest but no more.

470 It is strictly unnecessary for me to consider the basis upon which just allowances might be calculated as if such allowances had been part of the remedies ordered. There are, of course, differing bases of severity upon which the accounting or the grant of allowances could be conducted having regard to the gravity of the conduct constituting the breach of a fiduciary duty. More liberal allowances and a more liberal approach to accounting will be adopted in cases of honest breaches and almost no allowances will be made in cases of breaches of fiduciary duty of a grievous nature or committed with actual dishonesty or concealment. I am satisfied that Mr Streeter wrongly believed that his effective control of the plaintiff meant that, because the ANPC personnel would not agree for WAE to be the vehicle, he was justified in embarking upon the course which he followed. However I do not consider that he was open or frank in this regard and, as I have observed in relation to examination of the events between early December 1999 and the end of February 2000, I am satisfied that both he and Mr Cooper concealed the true nature of the promotion of the ANPC venture through WANL, the role which they were playing in it, the method by which the Cue tenements were acquired and transferred and the concessional prices at which Mr Streeter had obtained the allotment of shares and options in WANL for himself and Jungle Creek. I am also satisfied that Mr Cooper was very much aware of all these matters and participated in the surreptitious concealment of the true facts from Mr Brailey.

Allowances based on the amount of capital introduced - the multiplier effect

471 Alternatively, the defendants advance their case for an increased allowance for the moneys paid for the acquisition of the shares or the exercise of the options. They contend that a multiplier should be applied to the amount of capital introduced in order to reflect the risk and uncertainty borne by them in outlaying that capital to secure those investments. In their written submissions they contend that a multiplier of 1 should be applied although, in oral submissions, when the mathematics was questioned, it became apparent that the plaintiffs were claiming a multiplier of 1.8 to 2 for the various investments, that is an increase of 80% on the initial capital and 100% on the moneys outlaid for the options. The defendants submitted that:

In addition the third defendant should receive an allowance by way of a multiple of the principal sum it invested to exercise the 5,625,000 options, in order to reflect the risk that was undertaken

'at the time those options were exercised (June 2003), the Flying Fox deposit had not been discovered and the investment remained high risk. In respect of that sum of $1,125,000 an appropriate multiple would be 1 (ie, an additional sum of $1,125,000).

In addition each of the second and third defendants should receive an allowance by way of a principal sum of $160,000 which it invested to exercise the 400,000 option, together with a multiple of that sum to reflect the risk.

472 It is necessary to recall that any just allowance granted to an errant fiduciary for his role in contributing to or enhancing the profits from the fund, enterprise or item of property for which he is accountable is to reflect the value of the efforts, capital or enterprise displayed by the errant fiduciary and not to award him a share in the profit derived. The allowance may be for the value of capital expended by the fiduciary in obtaining or improving the property acquired in breach of fiduciary duty, and/or for the value of skill, labour and time invested to improve the value of the property or to maintain the business which produces the profits, as in the case of in Re Jarvis. The quantum of any such due allowance will be arrived at after examining what was done or contributed by the errant fiduciary.

473 What is not a part of a due allowance is an apportionment of the profit derived, at least not in the absence of any agreement with the principal to share such profits. To award a share in the profits in excess of the value of the contribution to their acquisition or increase in value would be to allow the delinquent fiduciary to retain the benefit of his breach of duty.

474 This principle stands in the way of the defendants claim for a multiplier of the value of the shares or options acquired or capital introduced whether that multiplier be 1.8 or 2 or any other figure. Such an approach is akin to offering the defendants a commission for their breach of duty and no authority was cited on behalf of the defendants to support such an approach. The plaintiff submits that, stripped of its fundamentals, the multiplier being claimed is no more than a demand for the profit that a person engaging in a high risk investment expects; that it does not represent capital invested by the fiduciary nor capital risked by him, and that it is a claim to participate in the profit.

475 The defendants also seek, in their second formulation for allowances, a multiplier to be attributed to the amount of capital invested and then interest on the sum (increased by the multiplier) from the time the money was outlaid until judgment at 8% per annum. In the third formulation of relief the defendants seek a multiplier of 2 in relation to the moneys outlaid for the exercise of the options, namely $1,125,000 which so multiplied would become $2,250,000, together with other, but smaller, multipliers in relation to the moneys spent for the exercise of the other options.

476 The plaintiff submits that these formulations for allowances seek to claim interest not on the amounts invested but on those amounts inflated by the multiplier which, in effect, amounts to a mechanism for claiming a much higher rate of interest on the actual sum invested. Again no authority is cited by the defendants in support of such a claim or its formulation. No other or indirect benefits were derived by any of the defendants from holding the shares or options. In his evidence Mr Hanna explained that WANL has not, to the date of the trial, paid any dividends nor did anyone suggest, nor do the annual reports reveal, that there has been any return of capital to shareholders.

477 For reasons already canvassed, I have concluded that the only allowances which are proper for these defendants are allowances for the actual capital outlaid or value given for the shares acquired and for the options exercised together with interest over the period or periods which have elapsed since the money was paid. I consider that the interest should be simple interest, no claim or basis having been laid for any compound interest. It should be at a rate designed to reflect the commercial rate of interest and, in the absence of any evidence in this regard, I consider that the interest rates should be those prevailing from time to time as prescribed by the court under s 32 of the Supreme Court Act 1935 (WA).

478 The extent of the plaintiff's claim in this action is quite specific, namely, a claim for constructive trusts of the shares obtained by the defendants in WANL in February/May 2000 and further shares obtained by the conversion of options granted in February/May 2000 less allowance for the capital outlaid for the acquisition of those shares and the conversion of the options plus interest.

479 The imposition of any constructive trust in such circumstances is but one method of requiring a defaulting in fiduciary to account for profits improperly made as a result of his or her breach of duty. That the appreciation in the value of these shares, and the shares into which the options were converted, beyond their acquisition costs in the present case constitutes profits for the defendants cannot be doubted and no submission was made to the contrary.

480 This case was contested on the issues of: whether or not there was any fiduciary duty of the character alleged by the plaintiff; whether there was any breach of duty; and, if so, whether the full measure of appreciation of the shares in WANL should be awarded by way of remedy of account or constructive trust.

481 This focus on the actual shares acquired by the defendants in breach of their fiduciary duties, as found, has a number of practical benefits and conveniences for the plaintiff. It avoids the notorious difficulties of conducting accounts in cases where a business opportunity has been diverted and the full extent of the benefit diverted less appropriate allowances is the topic of the accounting, as was the case in Re Henry Jarvis and in Warman. The difficulties in those cases is to identify and to make appropriate allowance for the contribution through skill and effort to the operation of the entire business by the defaulting fiduciaries, when it is obvious that much of the success of the subsequent enterprise is due to their contributions in capital, skill and supervision. Difficulties of that kind would no doubt have presented themselves had the plaintiff sought to contend that the whole of the benefit derived from the ANPC proposal should be the subject of an account rather than claiming specific shares which gave entitlement to participate, proportionately and equally with other shareholders, in the fate of the new company.

482 Similarly, as earlier described there were two subsequent rights issues for existing shareholders to take up additional shares in WANL in 2004 and 2006, entitlements which the defendants exercised in respect of the shares which are the subject of the claims for a constructive trust. Yet the plaintiff does not make any claim for an accounting, or for a constructive trust, or for allowances, in respect of the shares acquired by the defendants pursuant to those rights entitlements although, possibly, on one view it might have had an arguable claim to do so.

483 It follows from this that in the present case there has not been any occasion to enquire into or to determine the full extent of the potential liability of the defendants to account had the claim been advanced on a different basis. This is no implied suggestion that the plaintiff's claim has in any way been miscast or inadequately formulated because I consider that the associated difficulties of claiming an account on a different basis, or of a more extensive kind, would have given rise to problems, and no doubt lengthy delays, and a need to conduct such a difficult account, which, from a realistic view point would probably be a very doubtful, advantage and even possibly a disadvantage. However, this means that the present case is not the occasion to explore the fullest extent of the liability to account of defaulting fiduciaries in a case such as the present to account. Nor is it necessary to address how allowances should be awarded if the accounting were conducted on a different basis. The claim is of a more precise and defined nature which, commendably, avoids those problems.

484 Accordingly, as the alleged breaches of fiduciary duty have been made out the issue for determination in identifying and quantifying the relief to which the plaintiff is entitled, turns directly to the question of the time at which the shares should be valued or if they are to become the subject of the constructive trust what allowances should be granted to the defendants for their role in producing or preserving the current value of those securities.

485 For these reasons I am satisfied that Mr Streeter and Mr Cooper as directors of the plaintiff have acted in breach of their fiduciary duties in diverting and using to their own advantage the opportunity to avail of, or participate in, the ANPC proposal from the plaintiff to the new company formed for the purpose, WANL, in the manner described.

486 I am satisfied also that the plaintiff has established that Jungle Creek, acting by its director, Mr Streeter, was knowingly involved in Mr Streeter's breach of duty and participated in wrongly obtaining the advantages of those breaches, namely the rights to acquire shares and options in WANL. Several of the breaches of duty by Mr Streeter have resulted in Jungle Creek taking or acquiring the opportunity which was originally, or could originally have been, wrongfully derived by Mr Streeter. So, for example, when Mr Streeter supplied the seed capital of $300,000 in May 2000 it was Jungle Creek, rather than Mr Streeter which was allotted the 4,500,000 shares for that subscription of capital together with the associated 5,625,000 options. Similarly, the breach of duty by Mr Streeter in causing the 30% interest in the Cue tenements to be purchased at the concessional price of $5,000 by Jungle Creek is another example of the benefits of Mr Streeter's breach of duty being derived by Jungle Creek. A third example of this same process is provided by the exercise of Mr Streeter in October 2003 of his 400,000 options to acquire shares in WANL issued to him in May 2000 and the allotment of the corresponding 400,000 shares to Jungle Creek rather than to Mr Streeter himself.

487 So it is apparent that in relation to all the transactions and shares or options in which the plaintiff has succeeded in showing a breach of fiduciary duty by Mr Streeter, the ensuing shares have either originally, or later through the exercise of options, been acquired by Jungle Creek.

488 As the plaintiff is seeking a constructive trust over these shares and other appropriate relief the question arises as to whether or not the relief should be ordered solely against Jungle Creek or also, and if so to what extent, against Mr Streeter who is not, at least at present, recorded as the owner of the particular shares in question, although, as the evidence has established he holds directly or indirectly many other shares in WANL.

489 The answer is provided by the rule that where a breach of trust is committed the trustees are jointly and severally liable to the beneficiaries for any loss caused by the breach of trust. The liability of the defaulting trustees is a coordinate liability in respect of which an order for contribution by one defaulting trustee, which has remedied the default, may be obtained against another: Lingard v Bromley [1812] EngR 497; (1812) 1 V&B 114; 35 ER 45; Chillingworth v Chambers [1896] 1 Ch 685 at 698 and 707. So, as written by the learned authors of Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (4th ed) at [10-005] and by the authors of Jacob's Law of Trusts in Australia (7th ed) at [2117] obvious examples of persons between whom contribution could be ordered in equity, because of the coordinate nature of their liabilities, were company directors: Rainskill v Edwards (1885) 31 Ch D 100.

490 In this particular case neither Mr Streeter nor Mr Cooper was an express trustee but I am satisfied that their breaches of fiduciary duties, as found, can and should result in the imposition of constructive trusts over the opportunities wrongfully diverted and the shares held so as to make them jointly and severally liable for all losses occurred as well as being constructive trustees of the property remaining in their individual hands. Although no authority has been cited on the issue the learned authors of Jacob's Law of Trusts in Australia (supra) conclude that the principle of coordinate liability 'applies between third parties who participate in breaches of trust so as to make them accountable as constructive trustees, but it is submitted that they do apply, with the qualifications that qualify the general principles' - [2117].

491 It follows from this that I consider that Mr Streeter and Jungle Creek are jointly and severally liable to the plaintiff for the shares now held by Jungle Creek in WANL, subject to the charges for the capital advanced with interest already mentioned. This means that Jungle Creek should be ordered to transfer to the plaintiff all of those shares, subject to the charges mentioned or, alternatively, to pay compensation to the plaintiff for the value of those shares at the date of judgment at the election of the plaintiff.

492 It also means that Mr Streeter should be adjudged liable to pay compensation to the plaintiff for the value current at the date of judgment of all those shares presently held by Jungle Creek, less the amount of the charges mentioned. If the plaintiff elects in favour of an order for the transfer to it of the shares, subject to the charges, by Jungle Creek, and that judgment is satisfied, then that transfer would discharge the concurrent liabilities of both Mr Streeter and Jungle Creek to that extent. If, however, for any reason, the judgment against Jungle Creek, whether for the transfer of shares or for compensation, is not fully satisfied, the plaintiff would remain able to enforce the unsatisfied balance of the judgment against Mr Streeter. The same would apply if the judgment sought to be enforced were that against Mr Streeter and there were to be incomplete satisfaction by Jungle Creek.

493 There is every reason to treat Mr Streeter as jointly and severally liable for the breaches of duty found to have been committed by Mr Cooper and for the liability of Jungle Creek because there can be no doubt that all three defendants were acting in concert and with full knowledge of each other's roles, in the diversion of these opportunities and in taking the benefits for themselves from December 1999 onwards. Similarly, Mr Cooper and Jungle Creek are jointly and severally liable for the breaches of duty of Mr Streeter and for the liability of each other.

494 None of the submissions addressed the point of concurrent liability by the several defendants although the prayer for relief in the statement of claim encompasses this. Subject to what I consider to be the proper allowances for the capital outlaid together with interest upon it, I consider that the court should declare and order that the 4.5 million shares in WANL acquired by Mr Streeter for Jungle Creek and the 400,000 shares obtained by Mr Streeter from the exercise in October 2003 of the 400,000 options granted to him in May 2000 and taken by Jungle Creek are held on constructive trust for the benefit of the plaintiff.

495 Similarly I consider that the court should order and declare that the 150,000 shares in WANL held by Jungle Creek arising from the sale of its interest in the Cue tenements, and the further 5.625 million shares, held by Jungle Creek as a result of the exercise of the 20 cent options, are also held on a constructive trust by the third defendant for the benefit of the plaintiff.

496 The allowances which should be made to the first and third defendants in relation to these shares are:

• $300,000 being the capital introduced by Mr Streeter to WANL in May 2000;
• $5,000 being the sum paid indirectly on behalf of Jungle Creek for the acquisition of the Cue tenements before they were sold on or assigned to WANL;
• $1,125,000 being the sum paid by Jungle Creek for the exercise of the options in June 2003; and
• $160,000 being the sum paid by Mr Cooper for the exercise of the 400,000 options in October 2003.

497 In addition, those sums should carry interest from time to time at the rates allowable on judgment in this court being the interest rate applied by analogy under s 32 of the Supreme Court Act. Counsel will be invited to submit an agreed minute or, failing agreement, submissions as to the calculation of the interest on these up until the date of judgment. The shares which are the subject of the constructive trust which I have found shall be charged with a payment of the amount of these allowances and interest. Subject to the satisfaction of those charges, the third defendant will be ordered to deliver to the plaintiff registrable transfers of shares held in WANL in those numbers.

498 In relation to the second defendant, I am satisfied that the plaintiff has established the breaches of fiduciary duty as alleged so as to render Mr Cooper accountable for the 400,000 shares acquired by him or his interests in WANL by the exercise of the options in that company which he was granted in May 2000. Again, subject to a proper allowance for the capital of $160,000 outlaid to convert those options to shares together with interest on that sum from the date of payment until judgment calculated in the same manner and at the same rates as the interest accruing on such outlays by the first and third defendants.

499 However, the evidence is to the effect that the conversion of Mr Cooper's shares to options resulted in the shares being taken up by his company Fidene which is not a party to this litigation. Nevertheless, Mr Cooper holds other shares in WANL and, of greater importance, WANL shares are publicly listed on the stock exchange and available for acquisition in the market. Therefore, while it may not be possible to identify shares presently held by Mr Cooper which were acquired by reason of and as a result of his breach of fiduciary duty, it is nevertheless obvious that Mr Cooper can be compelled to provide to the plaintiff, subject to the allowances mentioned, 400,000 shares in WANL either by providing such a shareholding from other parcels of WANL's shares which he is holding or by purchasing that number of shares on the market and delivering them to the plaintiff subject to the charge.

500 I will allow the parties to make further submissions with regard to the form of orders which should be made to give effect to this decision. However, the substantial effect of the orders should, subject to those submissions, be that:

1. If the plaintiff so elects:
   1. It be declared that the third defendant holds 10,675,000 shares in WANL upon constructive trust for the plaintiff subject to a charge upon those shares to secure payment to the third defendants by the plaintiff of $1,590,000 plus interest thereon for the capital advanced by the first and third defendants for the acquisition of those shares.
   2. Order that upon satisfaction by the plaintiff by payment of the amount charged upon those shares the third defendant take all necessary steps to transfer 10,675,000 in WANL to the plaintiff.
   3. It be declared that the second defendant is bound to deliver 400,000 shares in WANL to the plaintiff subject to payment to the second defendant by the plaintiff of $160,000 plus interest thereon for the capital advanced by the second defendant for the acquisition of those shares.
   4. Order that upon satisfaction by the plaintiff by payment of $160,000 plus interest the second defendant take all necessary steps to transfer 400,000 shares in WANL to the plaintiff.
   5. There be liberty to all parties to apply to determine the amounts of interest payable under pars 1 and 3.
2. Alternatively to 1 to 4 (inclusive) above, but only if the plaintiff so elects:
   1. The first, second and third defendants do pay to the plaintiff compensation in an amount equal to the market value on the ASX of 11,075,000 shares in WANL at the date of judgment less the sum of $1,750,000 plus interest thereon for the capital advanced by the defendants for the acquisition of the 11,075,000 shares in WANL which they acquired.
   2. There be liberty to all parties to apply to determine the amount of interest payable on the sum of $1,750,000.
   3. There be liberty to the defendants to apply to determine in what proportions as between themselves each should contribute to their joint and several liability to the plaintiff.