Adaz Nominees Pty Ltd v Castleway Pty Ltd

[2020] VSCA 201

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2019 0014

S APCI 2019 0024

ADAZ NOMINEES PTY LTD (ACN 006 228 119) as trustee for the RADO NO 2 TRUST and others according to the attached schedule	Applicants / Cross-respondents
and
CASTLEWAY PTY LTD (ACN 131 870 481) as trustee for the CASTLEWAY TRUST and another according to the attached schedule	Respondents / Cross-applicants

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JUDGES:	WHELAN and McLEISH JJA and RIORDAN AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	26–27 March and 8 April 2020
DATE OF JUDGMENT:	7 August 2020
MEDIUM NEUTRAL CITATION:	[2020] VSCA 201
JUDGMENTS APPEALED FROM:	[2017] VSC 578; [2017] VSC 755; [2018] VSC 624; [2019] VSC 14 (Robson J)

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CONTRACT – Principles of construction of commercial contracts – Remuneration under services agreement calculated as a percentage of taxable income – Whether express terms only permitted expenses related to normal business activities to be taken into account in the calculation of the remuneration – Whether a term implied as a matter of fact whereby only expenses related to normal business activities taken into account in the calculation of the remuneration – Term alleged to be implied as a matter of fact inconsistent with express terms – Whether certain expenses should not be taken into account in calculation of remuneration.

CONTRACT – Principles in relation to terms implied by law – Terms implied as a matter of law whereby each party obliged to do all things necessary to enable the other party to have the benefit of the contract and not hinder or prevent the fulfilment of the purpose of the express promises – Whether a substantial charitable donation a breach of the implied term – Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, Commonwealth Bank of Australia v Barker (2014) 253 CLR 169, Byrne v Australian Airlines (1995) 185 CLR 410, considered.

CONTRACT – Commission payable under the contract on ‘Introduced Projects’ – Whether projects were ‘Introduced Projects’ within the meaning of the contract.

TORT – Conspiracy and breach of directors’ duties – Whether applicants conspired to injure respondents by unlawful means or acted with the predominant purpose of injuring them, and whether applicants breached directors’ duties – Trial judge accepted directors’ evidence as to purpose – Trial judge’s findings not ‘glaringly improbable’ or inconsistent with ‘incontrovertible’ evidence.

INTEREST – Whether undisputed invoices were payable under the terms of the agreement prior to resolution of disputes.

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APPEARANCES:	Counsel	Solicitors
For the Applicants / Cross-respondents	Mr R Garratt QC with Ms F Cameron	Maddocks
For the Respondents / Cross-applicants	Mr G Golvan QC with Mr B Mason	Kyriacou Lawyers

TABLE OF CONTENTS

REASONS OF WHELAN JA AND RIORDAN AJA.........................................	1
The Property Development Services Agreement..................................................	4
Factual background..................................................................................................	6
Relevant procedural history....................................................................................	10
Judgments of Robson J.............................................................................................	13
The application for leave to appeal, the notice of contention, and the application for leave to cross-appeal – the proposed grounds and the issues raised...........................................................................................................................	19
Construction of the PDSA and the term implied under BP Refinery v Hastings (Proposed appeal grounds 1 to 6, 7, and contentions 1 and 2)..........	20
The TPC Group’s submissions..................................................................	20
Castleway and Mr Keeghan’s submissions............................................	21
Legal principles in relation to construction of commercial agreements and the implication of terms (other than terms implied by law)............................................................................................................	22
Analysis and conclusions...........................................................................	25
Terms implied by law (Proposed appeal grounds 4 and 8, and contention 3).	32
Castleway and Mr Keeghan’s submissions............................................	32
The TPC Group’s submissions..................................................................	32
Legal principles in relation to terms implied by law............................	33
Evidence of other philanthropic activities..............................................	37
Was the claim based upon terms implied by law pleaded and advanced below?..........................................................................................	39
Analysis and conclusions...........................................................................	44
Conspiracy and breach of duty (Proposed cross-appeal ground 7 and 8)........	47
Trial judge’s findings..................................................................................	47
Castleway and Mr Keeghan’s submissions............................................	48
Analysis and conclusions...........................................................................	49
Expenses related to the Foundation (Proposed appeal ground 9).....................	52
Trial judge’s findings..................................................................................	52
The TPC Group’s submissions..................................................................	52
Castleway and Mr Keeghan’s submissions............................................	52
Conclusion.....................................................................................................	53
Introduced Projects (Proposed appeal ground 10, and cross-appeal grounds 1 to 6)...........................................................................................................................	53
Construction issues......................................................................................	53
The TPC Group’s submissions on the construction issues.............................	54
Castleway and Mr Keeghan’s submissions on the construction issues...........	55
Analysis and conclusions on the construction issues......................................	55
The Kawana Waters project.......................................................................	58
Castleway and Mr Keeghan’s submissions on Kawana Waters......................	59
The TPC Group’s submissions on Kawana Waters.........................................	60
Analysis and conclusions on Kawana Waters.................................................	60
The IBIS retirement home investment....................................................	61
Submissions on the IBIS retirement home investment....................................	61
Analysis and conclusions on the IBIS retirement home investment...............	62
Further issues re Introduced Projects.......................................................	64
The TPC Group’s submissions on the further issues.......................................	64
Castleway and Mr Keeghan’s submissions on the further issues....................	64
Analysis and conclusions on the further issues...............................................	65
Overall conclusions on the Introduced Projects....................................	68
Interest (Cross-appeal proposed grounds 9 to 13)...............................................	68
Relevant facts and trial judge’s conclusions...........................................	68
Castleway and Mr Keeghan’s submissions............................................	70
The TPC Group’s submissions..................................................................	71
Analysis and conclusions...........................................................................	71
Conclusions................................................................................................................	75
REASONS OF McLEISH JA..................................................................................	77
ANNEXURE A..........................................................................................................	90
ANNEXURE B...........................................................................................................	94
ANNEXURE C..........................................................................................................	100
SCHEDULE OF PARTIES......................................................................................	104

WHELAN JA

RIORDAN AJA:

1. The applicants are ten related companies associated with the Rado family.  We will refer to them as the ‘TPC Group’.  Seven of the ten companies are trustees.  Of particular relevance to these applications is the Rado No 2 Trust, of which the first applicant, Adaz Nominees Pty Ltd (‘Adaz Nominees’), is the trustee.

1. The TPC Group (and one additional company, which is not a party to the proceedings) entered into a written agreement with the two respondents, Castleway Pty Ltd (‘Castleway’) and Gerard Keeghan, entitled ‘Property Development and Services Agreement’, dated 7 December 2010 (‘PDSA’).  The agreement was expressed to have effect on and from 1 July 2007.

1. The PDSA appointed Castleway as the ‘Manager’ to provide property development services to the TPC Group.  Castleway was to be remunerated by a ‘Service Fee’, being a scaled percentage of the ‘TPC Group Profit’ calculated as set out in a schedule to the agreement.  Provision was made for the termination of the PDSA and Castleway had an entitlement to further payment, called  ‘Commission’, after termination in relation to what the PDSA defined as ‘Introduced Projects’.  There was a related agreement entitled ‘Executive Services Agreement’ under which Mr Keeghan was appointed as chief executive officer of the TPC Group’s central operating company.

1. The PDSA terminated on 29 June 2017.  Prior to that termination disputes had arisen between the TPC Group on the one hand and Castleway and Mr Keeghan on the other.

1. The TPC Group commenced this proceeding in 2015.  The issues between the parties have changed over time.  For present purposes the significant issues now in dispute are:

1.Immediately prior to the termination of the PDSA, Adaz Nominees, as trustee of the Rado No 2 Trust, made a donation of $20 million to a charitable foundation which had been recently established by the Rado family.  Upon the TPC Group’s construction of the PDSA this had the effect of significantly reducing the Service Fee to which Castleway would be entitled in relation to the 2016/2017 financial year.  Castleway and Mr Keeghan contest that construction and contend (among other things) that the making of the donation was pursuant to a conspiracy to injure Castleway, and was a breach of duty by the Adaz Nominees’ majority directors.

2.There are disputes as to which expenses are properly to be taken into account in calculating the TPC Group Profit under the PDSA.

3.There is a dispute as to which projects, if any, are Introduced Projects under the PDSA.

4.There is a dispute as to when the Service Fee is payable under the PDSA.  This particularly affects the question of interest.

1. In a series of judgments between October 2017 and January 2019 Robson J decided these, and a number of other issues then in dispute between the parties.

1. In brief summary, the trial judge determined that:

1.The PDSA was properly to be construed as limiting the expenses to be taken into account in calculating the TPC Group Profit under the PDSA to expenses relating to the TPC Group’s normal business activities.  Alternatively, a term was to be implied to the same effect.

2.By reason of this construction, or implied term, the donation of $20 million was not to be treated as an expense of the TPC Group when calculating the TPC Group Profit for the purpose of calculating the Service Fee under the PDSA.

3.The other disputed expenses should be referred to a Special Referee, to report on the question of whether those expenses related to the TPC Group’s normal business activities.  He later rejected some of the Special Referee’s conclusions as to these expenses.

4.Fourteen of the 16 TPC Group assets which Castleway and Mr Keeghan contended to be Introduced Projects were Introduced Projects under the PDSA.

5.Under the PDSA the Service Fee was not payable until disputes between the parties had been resolved and he accordingly rejected claims by Castleway for interest.

1. By an application for leave to appeal dated 18 February 2019, the TPC Group seek leave to appeal from declarations and orders made by Robson J on 31 January 2019 consequent upon these determinations.

1. In summary, the TPC Group submit that the trial judge:

(a)        misapplied the principles for the interpretation of commercial agreements;

(b)       misapplied the principles for the implication of a term into commercial agreements;  and

(c)        departed from the principles applicable to the adoption of a report of a special referee.

1. By a notice of contention dated 19 March 2019, the respondents, Castleway and Mr Keeghan, contend that the finding of the trial judge that only expenses incurred in the normal course of the TPC Group’s business may be taken into account when calculating the Service Fee payable to Castleway should have also been made on the additional bases that:

(d)       the contrary interpretation would give rise to uncommercial and unreasonable results;

(e)        it was supported by the evidence of a profit sharing arrangement recorded in the minutes of a meeting of directors dated 17 June 2008;  and

(f)        there was a term implied by law requiring the TPC Group to do all things necessary to enable Castleway to have the benefit of the PDSA and to act reasonably and in good faith so as not to frustrate or prevent fulfilment of the PDSA’s commercial purpose.

1. By a cross-application for leave to appeal dated 19 March 2019, Castleway and Mr Keeghan also seek leave to appeal from the declarations and orders made by the trial judge on 31 January 2019.  In summary, they submit that the trial judge erred in:

(g)       his construction of the term ‘Introduced Project’ in the PDSA;

(h)       determining that two particular assets, referred to as the Kawana Waters project and the IBIS retirement home investment, were not Introduced Projects;

(i)         rejecting the claims of conspiracy and breach of duty in relation to the

$20 million donation;

(j)         dismissing Castleway’s claims for interest;  and

(k)       ordering that each party pay their own costs.

The Property Development Services Agreement

1. The recitals and clauses 2 and 3 of the PDSA are set out in full in Annexure A to these reasons.

1. The recitals state that Castleway and Mr Keeghan had been providing ‘property development services’ to the TPC Group for some time, that in a meeting on 17 June 2008 a proposal for continued provision of those services had been discussed, that the TPC Group wished to ‘formalise the arrangements for the provision of services’ and had requested Castleway to provide property development services on the terms set out in the agreement, and that Castleway had agreed to do so.

1. Clause 2.1 appointed Castleway as the ‘Manager’ to provide ‘property development services’ to the TPC Group.  Castleway agreed to provide those services, and in particular agreed in cl 2.5 to ‘identify and investigate … property development opportunities’, to assist in the ‘planning, structuring and negotiation of’ land acquisitions and property development, and to ‘manage existing properties owned by the TPC Group to a profitable development outcome’.

1. Clause 3 provided for the calculation and payment of what the heading to the clause described as a ‘Property Procurement and Development Fee’ and what the provisions themselves referred to as the ‘Service Fee’.  It will be necessary to refer to some of these provisions in detail below.  For present purposes, it suffices to say that the Service Fee was calculated as a percentage of the ‘TPC Group Profit’, which is a defined term.  Relevantly, cl 1.1 defined that term as ‘the net profit…of the TPC Group calculated in accordance with Schedule 2 …’.  Schedule 2 is set out in full in Annexure B to these reasons.  The critical feature of the calculation it provided for, in the current context, is the calculation of TPC Group Profit in item 2 which begins with the words ‘Total Taxable Income … as per income tax returns’ for the relevant specified TPC Group entities.  Item 1 of Schedule 2 sets out the percentages of TPC Group Profit to which Castleway was entitled.  The percentages were on a sliding scale from 15 per cent below $500,000 to 40 per cent above $5 million.

1. Clause 3 and Schedule 2 are central to the most significant current disputes between the parties.  The TPC Group maintains that all tax deductible expenses must be taken into account when calculating the TPC Group Profit, and that the trial judge erred by failing to give effect to what had been expressly provided for in the PDSA in cl 3 and in Schedule 2.

1. It is accepted that the $20 million donation was tax deductible.

1. Castleway seeks to uphold the trial judge’s conclusion that only expenses incurred in the course of the TPC Group’s normal business activities are to be taken into account on the grounds relied upon by the trial judge, being that that is the correct construction of the express terms of the PDSA, or, alternatively, because a term to that effect is to be implied under the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings.[1]  By way of contention, Castleway also says that the judge’s conclusion should be upheld on the basis of terms implied by law.

   [1](1977) 180 CLR 266 (‘BP Refinery v Hastings’).

1. The parties realised very early that there had been an ‘oversight’ in relation to  the Schedule 2 calculation.  The calculation required the Service Fee itself to be deducted from the TPC Group Profit, as it was a tax deductible expense.  The relevant board minutes of 21 March 2011 described the ‘oversight’ as being that the calculation ‘did not add back any fee paid pursuant to the PDSA’.  The minutes record that an amendment was tabled and signed by the parties at that meeting rectifying this ‘oversight’.

1. Clause 4 provided that the term of the PDSA was on and from 1 July 2007 until 30 June 2017 (cl 4.1), subject to the parties’ agreement to extend (cl 4.2), the TPC Group’s right to terminate for cause (cl 4.4), and Castleway’s right to terminate on six months’ written notice (cl 4.6).  This clause also provided that the TPC Group would pay Castleway a Commission after termination in relation to Introduced Projects

   (cl 4.5).  The term ‘Introduced Project’ was defined in cl 1.1 to mean:

[A] project that the TPC Group was made aware of by the Manager or the Executive Director (as the case may be) before the termination of this Agreement for the purposes of acquisition, development or management.

1. With respect to the nature of the relationship between the parties, cl 5 provided as follows:

5.1The TPC Group is not bound to follow or accept any advice or recommendation by the Manager. The management, policies and operations of each TPC Entity shall be the sole responsibility of that TPC Entity.

5.2Notwithstanding anything to the contrary in this Agreement, the Manager is at all times an independent contractor to the TPC Group. Nothing in this Agreement shall be construed to create a joint venture, partnership, agency or an employment relationship between the Manager and the TPC Group.

Factual background

1. In the 1970s, Mr Rinaldo ‘Ron’ Rado established the Standard Roads Group, which was in the business of asphalting, road construction and quarrying.

1. In about 1982, Mr Keeghan was employed by the Standard Roads Group after he became engaged to Ms Tania Rado, one of Mr Ron Rado’s daughters.

1. In 1994, Mr Keeghan was employed as chief executive officer of the Standard Roads Group.

1. After the death of Mr Ron Rado on 25 April 2001, Mr Lee, then a partner of William Buck accountants, later Grant Thornton, was appointed as a director of companies within the Standard Roads Group.

1. In 2002, the road construction, quarrying and asphalting parts of the business were sold.  The continuing Rado companies were eventually ‘rebranded’ as the TPC Group and predominately engaged in real estate investment and development.

1. In about late 2007, Mr Keeghan separated from Ms Tania Rado.

1. Mrs Agnes ‘Nancy’ Rado, the wife of Mr Ron Rado, became the ultimate shareholder of the TPC Group on her husband’s death.  Minutes of a meeting of directors of TPC Group Pty Ltd dated 17 June 2008 record that Mr Keeghan and Mrs Nancy Rado attended.  It is a matter of controversy as to what was agreed at that meeting, but the minutes record the following:

Profit Distribution:  It was agreed that commencing from the financial year ended 30 June 2008, a 50% share of the gross profit before tax of the financial performance of TPC Group Pty Ltd would be paid to Gerard Keeghan or as directed by him, subject to the following:

1.    Gross Profit calculated before distributions received/paid.

2.        After the year-end accounts have been audited/prepared by the external Accountants.

3.        Payable subject to the availability of funds held.

4.        If there is a loss generated in TPC Group Pty Ltd for any period commencing from the financial year ended 2008, that this loss must be deducted against future gross profit before any profit share is payable.

5.        From the financial year ended 2008, in the event no profit is generated in RG Group and TPC (i.e. loss), no profit share is payable until those collective losses are absorbed by future profits in future years.

1. As noted above, on 7 December 2010, the TPC Group, Castleway and Mr Keeghan entered into the PDSA.  The recital to the PDSA which referred to a discussion on 17 June 2008 of ‘a proposal for the continued provision of property development services to the TPC Group’ was a reference to the meeting that day between Mrs Nancy Rado and Mr Keeghan.

1. Also on 7 December 2010, Mr Keeghan and SR Consolidated Pty Ltd

   (‘SR Consolidated’), the central operating company for the TPC Group, entered into the Executive Services Agreement whereby Mr Keeghan accepted an offer of continued employment as chief executive officer of the TPC Group.  Under that agreement, Mr Keeghan was entitled to indexed remuneration starting at $300,000 per annum and reimbursement of certain expenses.

1. In 2012, Mrs Rado decided to realise the assets of the TPC Group so that the proceeds could be distributed to her children during her lifetime.  In December 2012, Mr Keeghan was informed of Mrs Rado’s decision.  He objected on the basis that a realisation without fully developing the projects to realise their maximum potential profit was a breach of the PDSA.  A particular focus of this dispute was an uncompleted development project known as Kawana Waters.  The issue of whether Mrs Rado’s decision to procure a realisation of the TPC Group assets was a breach of the PDSA was one of the issues before the trial judge.  The trial judge determined that issue in favour of Mrs Rado and the TPC Group.  That determination is not the subject of any application for leave to cross-appeal.

1. From 2014, other disputes arose between the TPC Group on the one hand and Castleway and Mr Keeghan on the other.  In particular:

(l)         Castleway disputed the Service Fees for the 2014, 2015 and 2016 financial years as calculated by Grant Thornton, principally on the basis that certain expenses should have been excluded from the calculation of the TPC Group Profit.

(m)      The issue of Introduced Projects became a matter of controversy.  In a letter dated 5 May 2015 to the TPC Group, Castleway attached a list of current projects/assets/properties held at 1 July 2014 which it contended were Introduced Projects for the purposes of the PDSA.  The TPC Group asserted that there were no Introduced Projects within the meaning of the PDSA.

1. On 29 June 2016, SR Consolidated gave a notice under the Executive Services Agreement terminating Mr Keeghan’s employment on 30 June 2017.

1. On 28 December 2016, Castleway gave notice of its intention to terminate the PDSA under cl 4.6, with effect from 29 June 2017.

1. On 18 January 2017, Rado Family Foundation Pty Ltd, which was the trustee of the Rado Family Foundation (‘the Foundation’) was incorporated, and on 7 February 2017 the Foundation was registered with the Australian Charities and Not-For-Profits Commission.

1. By an email of 15 June 2017 to the other directors of Adaz Nominees, Mr Keeghan, Mr Lee and Mr Stephen Rado (Mrs Rado’s son), Mrs Rado gave notice of a directors’ meeting of Adaz Nominees scheduled for 23 June 2017 to consider a resolution that Adaz Nominees pay $20 million as a tax deductible charitable donation from the trust fund of the Rado No 2 Trust to the Foundation.

1. On 29 June 2017, the directors of Adaz Nominees resolved, by a majority of Mr Lee, Mrs Rado and Mr Stephen Rado, to donate the sum of $20 million to the Foundation.  The donation was made that day.

1. On 29 June 2017, the PDSA was terminated pursuant to the notice given by Castleway on 28 December 2016.  Thus, the final financial year in relation to which Castleway was entitled to a Service Fee was the year ended 30 June 2017, and the tax deductible donation of $20 million was made in that year.

1. The effect of the donation on the TPC Group Profit and Service Fee calculations was very significant.  It had the effect of reducing what would otherwise have been the TPC Group Profit for the final financial year by approximately half (from approximately $40 million to approximately $20 million).  As the TPC Group Profit (however calculated) in the year ended 30 June 2017 was well above $5 million (the level at which the maximum percentage under item 1 of Schedule 2 became applicable), the consequent reduction in the Service Fee calculation (an $8 million reduction, being 40 per cent of $20 million) was more than half.

Relevant procedural history

1. The litigation between the parties began before the PDSA was terminated.

1. This proceeding was commenced by the TPC Group by an originating process filed 30 October 2015.  The TPC Group sought the following declarations:

(n)       None of the projects listed in the attachment to the 5 May 2015 letter is an Introduced Project within the meaning of the PDSA.

(o)        On the proper construction of the PDSA, the eighth applicant, Tynong Pastoral Co Pty Ltd, may dispose of the Kawana Waters land without the respondents’ consent, notwithstanding any advice or recommendation from Castleway or Mr Keeghan to the contrary, without breaching the PDSA.

(p)       On the proper construction of the PDSA, the Service Fee payable to Castleway was to be calculated by reference to a computation of the TPC Group Profit, as referred to in Schedule 2 to the PDSA, which takes into account on a consolidated basis all expenses of the TPC Group and their associated entities, which are set out in Annexure A to the PDSA, that are properly deductible for income tax purposes.

1. Pleadings were ordered, and they were amended from time to time.  In their statements of claim the TPC Group sought the declarations referred to above, and an additional declaration on an issue which is not relevant to the applications now before the Court.  Castleway and Mr Keeghan counterclaimed seeking declarations, injunctive relief and damages alleging (amongst other things) that:

(q)       An Introduced Project on the proper interpretation of the PDSA is a project:

(i)         concerning real property or any other asset (including equities, hybrids, joint venture interests, cash holdings, business operations or properties held for philanthropic or charitable purposes) to be acquired, developed or managed by the TPC Group and includes the TPC Group Projects listed in Annexure B to the PDSA;

(ii)       in respect of which the respondents made the TPC Group aware before the commencement of the PDSA or during its term;  and

(iii)      which is to be completed after termination of the PDSA.

(r)        The TPC Group was in breach of the PDSA by directing Castleway and Mr Keeghan to assist them in achieving the realisation of an Introduced Project prior to that project achieving an optimum profitable development outcome.

(s)        Only expenses incurred in the TPC Group’s normal business activities, and not the expenses of the beneficiaries of any TPC Entities or Rado family members, or the expenses incurred by any Excluded Entity, or extraordinary expenses not incurred in the normal business activities of the TPC Group, may be taken into account when calculating TPC Group Profit for the purposes of calculating the Service Fee payable to Castleway.

(t)        The following expenses (defined as the ‘Disputed Expenses’) were not properly deductible in calculating TPC Group Profit for the purposes of calculating the Service Fee payable to Castleway:

(i) the costs of high net worth tax audits conducted by the Australian Taxation Office with respect to various TPC Entities and Rado Group entities to ascertain whether any issues arose in relation to Division 7A of the Income Tax Assessment Act 1936 (Cth);

(ii)       the costs of preparing financial statements and income tax returns and providing other accountancy or tax advisory services related to some ‘Excluded Entities’ listed in item 5 of Schedule 2 to the PDSA and to Mrs Rado and other Rado family members;

(iii)      legal and accounting costs associated with Mrs Rado’s decision to realise assets held by the TPC Group;

(iv)      legal costs incurred in connection with a dispute between the TPC Group and minority shareholders in SR Consolidated who were claiming oppression, which resulted in a share buyback;

(v)       Mr Lee’s director’s fees insofar as they related to Mrs Rado’s decision to realise assets held by the TPC Group;

(vi)      legal and accounting costs incurred in connection with negotiating and preparing proposed variations to the PDSA;

(vii)     costs for a tree planting memorial for the late Mr Ron Rado;

(viii)   personal expenses of Mrs Rado and Rado family members;

(ix)      costs incurred in ‘taking action’ against Castleway and Mr Keeghan;

(x)        costs of bi-monthly meetings to implement the asset realisation plan;  and

(xi)      costs of winding up or closing down the TPC Group and its projects, including future redundancy fees and office closure costs.

1. By a further proceeding (S CI 2017 2344) filed 19 June 2017, Castleway and Mr Keeghan sought orders restraining the directors of Adaz Nominees from voting in favour of the $20 million donation and restraining Adaz Nominees from making the $20 million donation. On 22 June 2017, interim orders were made by Vickery J and, after a further hearing before Hargrave J on 27 and 28 June 2017, the proceeding was dismissed, undertakings having been given by the TPC Group.

1. Castleway and Mr Keeghan then introduced allegations concerning the $20 million donation into this proceeding.  By a second further amended defence and counterclaim filed 19 July 2017, Castleway and Mr Keeghan made additional allegations including the following:

(u)       There were implied terms of the PDSA that only expenses incurred in the TPC Group’s ‘normal business activities’ were to be allowed in calculating the Service Fee payable to Castleway.

(v)       Castleway was entitled to payment of the undisputed parts of the Service Fee for the 2014, 2015 and 2016 financial years prior to resolution of the disputed parts.

(w) By voting in favour of the resolution to make the $20 million donation the directors had breached the duties they owed to Adaz Nominees under ss 181 and 182 of the Corporations Act 2001 (Cth), and had unlawfully or wrongfully conspired among themselves to breach the PDSA with the intention of preventing Castleway from receiving the Service Fee which it would otherwise be entitled to receive.

1. The trial of the proceeding was heard before Robson J over 12 days from

   21 August 2017 to 7 September 2017.

Judgments of Robson J

1. Robson J delivered a judgment on the substantive issues on 5 October 2017.[2]

   [2]Re Adaz Nominees Pty Ltd (No 2) [2017] VSC 578 (‘October 2017 Reasons’).

1. Robson J rejected the breach of duty and conspiracy claims concerning the

   $20 million donation because he accepted the evidence given on the issue by

   Mrs Nancy Rado, Mr Stephen Rado, and Mr Lee.[3]

   [3]Ibid [43]–[47].

1. On the issue of expenses to be taken into account in calculating the Service Fee, Robson J accepted a contention by Castleway that the term ‘net profit’ in the definition of ‘TPC Group Profit’ in cl 1.1 would be understood by reasonable business people to be profit calculated by deducting from the income of the business the expenses incurred in earning that income, and he found that there was an ambiguity or contradiction between that definition and the formula in Schedule 2.[4]  He held that this ambiguity or contradiction was resolved by reference to the other terms of the PDSA which reveal it to be a profit sharing agreement, and that, construed in that light, the proper construction of Schedule 2 was that ‘only expenses relevant to the calculation of the profit … in the sense understood by reasonable business persons should be taken into account in calculating the TPC Group Profit’.[5]

   [4]Ibid [66]–[72].

   [5]Ibid [73].

1. On the issue of implied terms, Robson J expressly referred to Castleway and Mr Keeghan’s reliance on a term implied by law said to require a party to do all things necessary on its part to enable the other party to have the benefit of the contract, and to act reasonably and in good faith so as not to frustrate or prevent the contract’s purpose being fulfilled.[6]  He then addressed their contention that a term was to be implied under the principles in BP Refinery v Hastings.  He accepted Castleway and Mr Keeghan’s submission that, as an alternative to his conclusion as to the proper construction of the PDSA, a term should be implied which would preclude expenses not incurred in connection with the TPC Group’s normal business activities from operating to reduce the Service Fee.[7]

   [6]Ibid [74].

   [7]Ibid [76]–[78].

1. It is clear that Robson J reached the conclusion which he did concerning the expenses based upon his construction of the PDSA, and, alternatively, based upon a term implied under the principles in BP Refinery v Hastings.[8]It is not clear whether that conclusion was also based upon the term implied by law upon which Castleway had also relied, and which it is clear that the judge did not reject.  His specific conclusion on the relevant issue seems to confine itself to construction and the

   BP Refinery v Hastings term,[9] but very shortly prior to that conclusion he had said that to permit expenses to be deducted which were not incurred in the normal course of business would be ‘contrary to and would defeat the purpose of the PDSA.’[10]

   [8]Ibid [85].

   [9]Ibid.

   [10]Ibid [82].

1. In their written submissions the TPC Group interpreted Robson J’s reasons as containing a finding that there was ‘an implied term requiring the TPC Group to do all things necessary to enable Castleway to have the benefit of the PDSA’ and addressed the trial judge’s relevant conclusions as to the expenses in that context.[11]  This was clearly a reference to the term implied by law.  That position is also reflected in their proposed ground of appeal 4 (‘… implying (as a matter of law or fact) a term…’).  Counsel for the TPC Group resiled from this position in the course of oral submissions.

   [11]Written Case of the Cross-Respondents in Opposition to the Cross-Application for Leave to Appeal and of the Applicants in Response to the Notice of Contention dated 16 April 2019, [26].  The submission footnotes the October 2017 Reasons at [74], [77]–[78] as containing what are said to be erroneous conclusions reached based upon the term implied by law.

1. Next, the TPC Group had relied upon a provision in Schedule 2 which said that in the event of a dispute regarding the calculation of TPC Group Profit, the parties were agreed that the calculation should be undertaken in accordance with the ‘principles and standards reflected’ in a calculation for the 2008 financial year which was annexed to the PDSA as Annexure C.  Robson J was not persuaded that the annexure demonstrated any ‘principles and standards’ relevant to determining how expenses not incurred in the normal course of business were to be treated.[12]

   [12]October 2017 Reasons [81].

1. Robson J rejected Castleway and Mr Keeghan’s contention that Mrs Nancy Rado was precluded from realising the assets of the TPC Group, and that the TPC Group was bound under the provisions of the PDSA to complete their projects in such a way as to achieve their optimum profitable development outcome.[13]  As noted earlier, no issue concerning this conclusion is raised by the applications now before the Court.

   [13]Ibid [88]–[92].

1. Robson J addressed the disputes concerning the Introduced Projects at length.[14]  At paragraph 100 of the October 2017 Reasons he tabulated the 16 assets which were in contention, and the reason why the TPC Group maintained each of them did not fall within the relevant definition.  He accepted the TPC Group’s contentions in relation to two of them, being the Kawana Waters project and the IBIS retirement home investment.

   [14]Ibid [93]–[149].

1. The final conclusion reached by Robson J in the October 2017 Reasons, which is relevant to the issues now before this Court, concerns Castleway’s entitlement to payment or part payment of the Service Fee. Robson J accepted the TPC Group’s construction of cl 3.3 of the PDSA. On this construction, Castleway was not entitled to issue an invoice for an undisputed part of a Service Fee,[15] and was not entitled to any part payment, until any outstanding dispute had been resolved.[16]

   [15]Ibid [160].

   [16]Ibid [189].

1. Robson J adjourned the further hearing of the proceeding without making any final orders to enable the parties to have the opportunity to resolve the outstanding issues in the light of the findings and conclusions in the October 2017 Reasons.

1. After a hearing on 7 December 2017, Robson J delivered a further judgment,[17] and made an order referring questions to Mr Greg Meredith, a chartered accountant, (‘the Special Referee’) for him to give his opinion and provide a written report with reasons. Relevantly for present purposes, one of the questions referred was whether 12 categories of Disputed Expenses were expenses ‘relating to the TPC Group’s normal business activities.

   [17]Re Adaz Nominees Pty Ltd (No 4) [2017] VSC 755 (‘December 2017 Reasons’).

1. The Special Referee’s report was issued on 27 April 2018.

1. On 26 July, 27 July and 28 August 2018, Robson J heard argument on adoption of the Special Referee’s report.  Robson J did not adopt all of the Special Referee’s report.  He delivered his reasons on 22 October 2018.[18]

   [18]Re Adaz Nominees Pty Ltd (No 5) [2018] VSC 624 (‘October 2018 Reasons’).

1. After a further hearing on 11 December 2018, Robson J delivered his reasons on the issues of interest and costs on 31 January 2019,[19] and he made final declarations and orders.

   [19]Re Adaz Nominees Pty Ltd (No 6) [2019] VSC 14 (‘January 2019 Reasons’).

1. On 31 January 2019 Robson J made declarations as to the amount of the Service Fee for each of the 2014, 2015, and 2016 financial years.  The effect of these declarations was to increase the Service Fees from the amounts previously calculated by the TPC Group’s nominated accountant under cl 3.2 of the PDSA.  The increases were a result of disallowing certain expenses thereby increasing the TPC Group Profit.

1. In relation to the 2016-2017 financial year, and in relation to the Introduced Projects, Robson J made the following declarations:

4.The Court declares that only expenses incurred in earning the income of the TPC Group’s business or, in other words, in the normal course of business, are entitled to be treated as expenses of the TPC Group when calculating:

(a)       the Service Fee payable under the PDSA in respect of the

2016-2017 financial year;

(b)the Commission on Introduced Projects completed after the termination of the PDSA under cl 4.5 of the PDSA;  or

(c)       the Termination Adjustment under Item 4 of Schedule 2 to the PDSA.

5.The Court declares that the charitable donation of $20 million paid by the First Defendant by Counterclaim, Adaz Nominees Pty Ltd to Rado Family Foundation Pty Ltd, as trustee for the Rado Family Foundation, in the 2016-2017 financial year is not entitled to be treated as an expense of the TPC Group when calculating the Service Fee payable under the PDSA for the 2016-2017 financial year.

6.The Court declares that the TPC Group’s accounting and legal fees incurred in connection with the carriage and conduct of this proceeding, or in connection with the carriage and conduct of the Related Proceeding, are not entitled to be included as an expense of the TPC Group when calculating:

(a)       the Service Fee payable under the PDSA in respect of the

2016-2017 financial year;

(b)the Commission on Introduced Projects completed after the termination of the PDSA under cl 4.5 of the PDSA;  or

(c)       the Termination Adjustment under Item 4 of Schedule 2 to the PDSA.

7.The Court declares that the expenses of the ‘Excluded Entities’ listed in Item 5 of Schedule 2 to the PDSA are not entitled to be included as an expense of the TPC Group when calculating:

(a)       the Service Fee payable under the PDSA in respect of the

2016-2017 financial year;

(b)the Commission on Introduced Projects completed after the termination of the PDSA under cl 4.5 of the PDSA;  or

(c)       the Termination Adjustment under Item 4 of Schedule 2 to the PDSA.

8.The Court declares that all accounting, directors’ and legal fees or other fees and expenses incurred in relation to:

(a)       the establishment and continued operation of the Rado Family Foundation and Rado Family Foundation Pty Ltd, and the making of the $20 million charitable donation by Adaz Nominees to Rado Family Foundation Pty Ltd as trustee for the Rado Family Foundation;  or

(b)any work done in a personal capacity for any members of the Rado family or their entities,

are not entitled to be included as an expense of the TPC Group when calculating:

(c)       the Service Fee payable under the PDSA in respect of the

2016-2017 financial year;

(d)the Commission on Introduced Projects completed after the termination of the PDSA under cl 4.5 of the PDSA;  or

(e)       the Termination Adjustment under Item 4 of Schedule 2 to the PDSA.

9.The Court declares that each of the projects listed in paragraph 100 of the October Reasons is an ‘Introduced Project’ for the purposes of that term’s definition in the PDSA, save for:

(a)       the IBIS Care Retirement Home investment;  and

(b)       the Kawana Waters project.

10.The Court declares that when calculating the Commission on Introduced Projects completed after the termination of the PDSA under cl 4.5 of the PDSA, any Termination Adjustment under Item 4 of Schedule 2 to the PDSA that Castleway has already received in relation to the Introduced Projects will be taken into account.

1. Robson J dismissed Castleway’s claim for damages by way of interest and ordered each party to pay their own costs of the proceeding.

The application for leave to appeal, the notice of contention, and the application for leave to cross-appeal — the proposed grounds and the issues raised

1. The proposed grounds of appeal, the matters raised in the notice of contention and the proposed grounds of cross-appeal (other than in relation to costs) are set out in full in Annexure C to these reasons.

1. The principal issues raised are as follows:

1.What is the proper construction of the PDSA in relation to the expenses to be taken into account in the calculation of the TPC Group Profit?  Is a term to be implied under the principles in BP Refinery v Hastings which precludes expenses not incurred in the normal course of business from being taken into account?  (Proposed appeal grounds 1 to 6, and, depending on the conclusion reached, proposed appeal ground 7;[20]  and contentions 1 and 2).

2.Was a term implied by law breached by the $20 million donation or any of the other Disputed Expenses? (Proposed appeal grounds 4 (in part) and 8;  and contention 3).

3.Should the conspiracy and breach of duty claims relating to the $20 million donation have been upheld? (Proposed cross-appeal grounds 7 and 8).

4.Which of the 16 relevant assets are Introduced Projects? (Proposed appeal ground 10;  and proposed cross-appeal grounds 1 to 6).

5.Is Castleway entitled to interest? (Proposed cross-appeal grounds 9 to 13).

[20]Proposed appeal ground 7 concerns the trial judge’s decision not to adopt parts of the Special Referee’s report.  For the most part, but not entirely, that decision flowed from his construction of the provisions for calculation of the TPC Group Profit.

1. The application for leave to cross-appeal also contains proposed grounds contesting the costs orders made below (proposed cross-appeal grounds 14 to 16).  That issue cannot be addressed until the substantive issues are determined.

1. There are some further discrete issues to be addressed.  These are: 

(x)        whether the claim for breach of the term implied by law as now put was an issue properly raised before the trial judge (a TPC Group submission made orally on these applications); 

(y)       whether the TPC Group had impermissibly re-opened its case on the Introduced Projects (contention 4); 

(z)        whether certain of the Disputed Expenses were precluded by specific provisions of the PDSA concerning ‘Excluded Entities’ and concerning costs, and whether an order made by the trial judge on 31 January 2019 (order 8(a)) concerning expenses related to the $20 million donation ought to have been made (proposed appeal grounds 6, 7 and 9). 

We will address these issues in the course of dealing with the principal issues.

Construction of the PDSA and the term implied under BP Refinery v Hastings (Proposed appeal grounds 1 to 6, 7, and contentions 1 and 2)

The TPC Group’s submissions

1. On behalf of the TPC Group, it was submitted that the trial judge had erred in finding that:

(aa)      the PDSA was ambiguous or contradictory;

(bb)     the PDSA was a profit sharing agreement;  and

(cc)      a term should be implied to give business efficacy to the agreement;

for the following reasons:

(i)         The expression ‘TPC Group Profit’ was not ambiguous because it was expressly defined to mean an amount ‘calculated in accordance with Schedule 2’.  Item 2 of Schedule 2 tabulated the calculation starting with ‘Total Taxable Income … as per income tax returns for the

TPC Group Entities …’.  The parties at trial had each contended that the PDSA was not ambiguous or contradictory.

(ii)       The PDSA was not a profit sharing agreement or a joint venture.  The PDSA expressly stated in cl 5.2 that it did not create a joint venture, partnership, agency or an employment relationship between Castleway and the TPC Group.  In oral submissions counsel for the TPC Group said the arrangement was correctly characterised as one under which the fee was calculated ‘by reference to’ the defined ‘TPC Group Profit’.

(iii)      The clear language of the PDSA did not permit the implication of a term which would preclude expenses not incurred in connection with the TPC Group’s normal business activities from operating to reduce the Service Fee.  Schedule 2 expressly provided that the starting point was taxable income as per the tax returns so that all tax deductible expenses had to be taken into account.

(iv)      The trial judge had failed to give effect to the agreement of the parties expressed in Schedule 2 that the principles and standards reflected in the calculation of TPC Group Profit for the 2008 financial year should apply.

Castleway and Mr Keeghan’s submissions

1. Castleway and Mr Keeghan submitted as follows:

(dd)     The PDSA was, as the trial judge found, a profit sharing agreement.  Reference to the full terms of the PDSA showed that it envisaged a long term relationship during which the TPC Group would combine their resources and Mr Keeghan’s expertise to generate profits from property development opportunities, which would then be shared between the parties.

(ee)      The trial judge correctly found that the meaning of ‘TPC Group Profit’ was ambiguous as a result of the conflict between the definition of ‘TPC Group Profit’ in cl 1.1 and the tabulated formula in item 2 of Schedule 2.

(ff)       The TPC Group’s construction of the PDSA would produce an absurd and uncommercial result because the TPC Group could have the benefit of profits derived from Castleway’s provision of property development services but could unilaterally reduce the amount of those profits by having the TPC Group incur expenses unconnected with the property development services.

(gg)     The words ‘as per income tax returns’ in item 2 of Schedule 2 are not clear or intractable.  The words can mean ‘consistently with’ or ‘having regard to’ the tax returns, and do not mandate a conclusion that the TPC Group Profit must include every expense included in each relevant TPC entity’s tax return.

(hh)     Although both parties had contended at trial that the relevant terms of the PDSA were not ambiguous, they had each contended for different and inconsistent meanings.  As a result, it was not surprising that the trial judge identified ambiguity and contradiction.

(ii)       Clause 5 of the PDSA did not preclude the trial judge from finding that the PDSA was a profit sharing agreement. The term ‘joint venture’ does not have a settled common law meaning and a contractual arrangement to profit share does not necessarily characterise a relationship as a joint venture.

(jj)        The term which the trial judge found to be implied into the PDSA, being that only expenses incurred in earning the income of the business or in the normal course of business should be included in calculating the Service Fee, satisfied all the necessary requirements for implying a term as set out in BP Refinery v Hastings.

(kk)     Annexure C provided no assistance in resolving the PDSA construction issues because nothing in the Annexure indicated that the figures in the ‘taxable income’ column for each entity included expenses that were not incurred in the normal course of business of the TPC Group.

Legal principles in relation to construction of commercial agreements and the implication of terms (other than terms implied by law)

1. To construe the terms of a commercial contract, the Court asks ‘what a reasonable businessperson would have understood those terms to mean’.[21] To answer that question, ‘the reasonable businessperson [is] placed in the position of the parties’,[22] and the Court applies the following principles:

   [21]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656–7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ) (‘Woodside’);  Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [47] (French CJ, Nettle and Gordon JJ) (‘Mount Bruce’).

   [22]Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551 [16] (Kiefel, Bell and Gordon JJ) (‘Ecosse’).

(ll)       The terms are construed objectively, and the subjective intentions of the parties are irrelevant.[23]

[23]Ibid.

(mm)     The objective approach requires reference to the text and its ordinary meaning, together with:

(i)         the context, being the entire text of the contract including matters referred to in the text;  and

(ii)       the purpose.

These matters will ordinarily be identified by reference to the contract alone,[24] but evidence of mutually known objective background circumstances relevant to the purpose is admissible ‘no matter how clear the “ordinary meaning” of the words’.[25]  Identification of purpose may allow admission of evidence of the genesis of the transaction, the background, the context and the market in which the parties are operating.[26]

[24]Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95, [45]–[47] (Santamaria, Ferguson and McLeish JJA); Mount Bruce (2015) 256 CLR 104, 116 [46]-[48] (French CJ, Nettle and Gordon JJ); Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd (2012) 45 WAR 29, 50 [76] (McLure P, with whom Newnes JA and Le Miere J agreed) (‘Hancock’).

[25]Lopes v Taranto [2018] VSCA 288, [66]–[72] (Kyrou, McLeish and Hargrave JJA), quoted with approval in Canale v G W & R Mould Pty Ltd [2018] VSCA 346, [45] (Whelan and McLeish JJA with whom Tate JA agreed).

[26]Mount Bruce (2015) 256 CLR 104, 116–7 [46], [49] (French CJ, Nettle and Gordon JJ).

(nn)     Unless a contrary intention appears in the contract, the court is entitled to approach the task of interpretation on the assumption that the parties intended to produce a commercial result, and should construe it so as to avoid a commercial nonsense.[27]  However, the court does not weigh the commerciality of the agreement, and business common sense is a topic on which reasonable minds may differ.[28]

[27]Woodside (2014) 251 CLR 640, 656–7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ).

[28]Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181, 198 [43] (Gleeson CJ, Gummow and Hayne JJ) (‘Maggbury’).

(oo)     If, after completion of this process, the language used in the contract ‘is ambiguous or susceptible of more than one meaning’, then evidence of surrounding circumstances external to the contract is admissible to assist with interpretation of the language in question.[29]

(pp)     However, ‘evidence of the parties’ statements and actions reflecting their actual intentions and expectations’ is inadmissible.[30]   Although evidence of prior negotiations is admissible to establish objective background facts known to both parties and the subject matter of the contract, evidence of negotiations reflective of actual intentions and expectations is not receivable.[31] 

(qq)     Post-contractual conduct is inadmissible to construe the terms of the contract.[32]  However, the parties’ subsequent communications may be relevant to determine whether the parties intended to enter into a binding contract.[33]

[29]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J) (‘Codelfa’).  See, Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45, 62-3 [39] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ); Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604, 605 [2]–[5] (Gummow, Heydon and Bell JJ); Mount Bruce (2015) 256 CLR 104, 116–7 [46]–[49], [52] (French CJ, Nettle and Gordon JJ).

[30]Ibid.

[31]Codelfa (1982) 149 CLR 337, 352 (Mason J); Golf Australia Holdings Ltd v Buxton Construction Pty Ltd [2007] VSCA 200, [28] (Nettle and Redlich JJA, with whom Neave JA agreed). As Gordon J said in Construction Forestry Mining Energy Union v Bovis Land Lease Pty Ltd [2008] FCA 1669, [15]: ‘the back-and-forth of the parties in concluding the transaction’ is not considered in construing the document.

[32]          FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, 350.

[33]          Queensland Phosphate Pty Ltd v Korda [2017] VSCA 269, [37] (Tate, Beach JJA and Sifris AJA).

1. In relation to the implication of terms (other than terms implied by law), it is well established that five criteria must be satisfied before a term will be implied to give business efficacy to a contract.  These are that the implied term:

(rr)       must be reasonable and equitable;

(ss)      must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(tt)       must be so obvious that ‘it goes without saying’;

(uu)     must be capable of clear expression;  and

(vv)     must not contradict any express term of the contract.[34]

[34]BP Refinery v Hastings (1977) 180 CLR 266, 283 (Lord Simon, Viscount Dilhorne and Lord Keith) adopted in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 605–6 (Mason J).

Analysis and conclusions

1. The trial judge’s analysis of the PDSA is careful and considered.  His observations as to the usual meaning of the term ‘net profit’ are unassailable.  The commercial rationale for his conclusions as to the construction of the PDSA, and as to the implied term under the principles in BP Refinery v Hastings, is clear, particularly in the context of the extraordinary (using that word in its non-pejorative sense) $20 million donation.

1. Nevertheless, with considerable reluctance, we are compelled to a different conclusion to that his Honour reached on the issue of construction, and our conclusion on that issue also means we cannot accept the implied term under the principles in BP Refinery v Hastings upon which the judge relied in the alternative.  The term implied by law gives rise to different considerations which we address separately below.

1. It seems to us that on this issue the TPC Group’s construction of the PDSA is the correct one.  In calculating the TPC Group Profit all tax deductible expenses have to be taken into account.

1. The starting point is clause 3.  Clause 3.2 provides that the Service Fee shall be calculated in the manner set out in Schedule 2.  Item 1 of Schedule 2 sets out the percentages to be applied to the TPC Group Profit so as to calculate the Service Fee.  Item 2 sets out the calculation of the TPC Group Profit.  The starting figure in that calculation is expressly provided in item 2 of Schedule 2 to be the ‘Total Taxable Income … as per income tax returns’.  There is no ambiguity or contradiction in these provisions.  The source of the ambiguity and contradiction found by the trial judge is in the definition of ‘TPC Group Profit’ in cl 1.1, and, in particular, the reference to ‘net profit’.

1. We understand and accept the accuracy of what the trial judge said about how the term ‘net profit’ is ordinarily to be understood.  But we are unable to accept the ambiguity and contradiction which the trial judge found by reference to the definition in cl 1.1.  The reference to ‘net profit’ in cl 1.1 does not appear in isolation.  The full relevant wording is: ‘net profit … of the TPC Group calculated in accordance with Schedule 2’.  We do not consider that the reference to ‘net profit’, appearing as part of an expression which expressly incorporates Schedule 2, creates any relevant ambiguity or contradiction with respect to the calculation provided for in Schedule 2.  That calculation is founded on taxable profit as per the tax returns.  Tax deductible expenses cannot be removed consistently with the express terms of Schedule 2.

1. We do not accept the respondents’ submission that the words ‘as per income tax returns’ in item 2 of Schedule 2 are ambiguous.  The full context for the use of those words is important.  The expression used is ‘Total Taxable Income (loss) as per income tax returns’.  This refers to a specific figure in income tax returns, not any other amount that, despite being a different figure, might somehow be ‘consistent with’ the figure in the return in question, or which merely ‘has regard to’ the latter figure.

1. Nor does reference to the minutes of the 17 June 2008 meeting assist, as Castleway and Mr Keeghan contend in the notice of contention.  Even assuming that recourse to that document were to be permitted for the purposes of construction because the PDSA makes express reference to the meeting, the PDSA itself treats the meeting as only having involved discussion of a proposal.  The proposal discussed before the PDSA was entered into does not assist in identifying the method of calculation under the PDSA.  The PDSA makes it clear that it is the repository of the final agreement, notwithstanding what had been discussed previously.

1. As indicated, our conclusion on the construction issue means we also cannot accept the implied term under the principles in BP Refinery v Hastings upon which the judge relied in the alternative.  This is because the implied term found by the trial judge is inconsistent with our construction of the express terms of the PDSA.  We consider that the express terms of the PDSA provide that all tax deductible expenses must be taken into account.  The implied term found by the trial judge under the principles in BP Refinery v Hastings would contradict those express terms by excluding some tax deductible expenses.

1. These conclusions mean we reach a different conclusion to that His Honour reached in relation to the $20 million donation, insofar as His Honour determined, on the basis of his construction of the PDSA and, alternatively, a term implied under  the principles in BP Refinery v Hastings, that that donation was not to be treated as an expense when calculating the Service Fee.

1. They also mean we reach a different conclusion to His Honour in relation to the Disputed Expenses.  Whereas his Honour, and the Special Referee acting as instructed, assessed the expenses by reference to whether they were normal business expenses, we consider that for the purposes of the Schedule 2 calculation the relevant issue is whether they were tax deductible.

1. Accordingly, the trial judge’s findings disallowing:

a.accounting and legal expenses incurred in connection with this proceeding;[35]  and

b.        increases in directors’ fees paid to Mr Lee; [36]

which were based on the trial judge’s construction of PDSA, must be set aside.  It was not pleaded or contended that the incurring of such expenses was a breach of any term implied by law.

[35]Appeal Grounds 6(b) and (d).

[36]Appeal Ground 6(e).

1. At this point we turn to address one of the discrete matters to which we referred earlier, being the effect of specific provisions of the PDSA dealing with ‘Excluded Entities’.

1. Item 5 of Schedule 2 to the PDSA provided that 11 nominated ‘Excluded Entities’ were not part of the TPC Group:

The parties acknowledge and agree that the following entities are not part of the TPC Group and will not be included for the purpose of calculating TPC Group Profit:  [a list of 11 companies].

1. The Special Referee opined that the accounting expenses of the Excluded Entities constituted normal business expenses.  The trial judge did not accept the Special Referee’s opinion because he found that expenses of Excluded Entities were specifically excluded from the TPC Group Profit calculation by item 5 of Schedule 2 to the PDSA.[37]

   [37]October 2018 Reasons [94], [101]–[102].

1. The TPC Group submitted that the relevant expenses were accountancy expenses paid by SR Consolidated relating to meetings and the preparation of documents in respect of distributions to be made through the Excluded Entities, but ultimately benefiting the group.  As they were tax deductible for SR Consolidated, they were properly taken into account in calculating the TPC Group Profit.

1. Castleway and Mr Keeghan submitted that the trial judge was entitled to find that the relevant expenses fell within item 5 of Schedule 2 to the PDSA.  They relied on the expert evidence of Mr Campbell Jackson of Ernst Young who had concluded that $68,321 of Grant Thornton’s fees related to professional services it provided for Excluded Entities.

1. By a report dated 26 February 2018, Mr Jackson undertook ‘key word searches over the [relevant data] to identify [n]arrations that may relate to activities, persons, entities or tasks per [his] [i]nstructions’.  He identified Grant Thornton fees of $68,321 for the 2014, 2015 and 2016 financial years that ‘may relate’ to Excluded Entities.

1. The trial judge found that item 5 of Schedule 2 to the PDSA expressly excluded the expenses of Excluded Entities in the calculation of the TPC Group Profit and therefore decided that these fees should be excluded.  This conclusion assumed that the fees were properly the expenses of Excluded Entities.

1. The Special Referee noted that ‘this item relates to accounting fees, expensed and paid for by SR Consolidated which impact the TPC Group Profit calculation’ and concluded as follows:

In my view, the accounting expenses incurred in respect of the profit recipient companies and funding trusts Excluded Entity types above are Normal Business Expenses as they appear to:

(a)       be a result of the corporate and funding structure of the TPC Group;

(b)have been established for the purpose of tax planning activities, profit sharing and funding;  and

(c)       not carry on a separate and distinct business to the TPC Group.

I accept the Plaintiffs’ assertion that ‘[a]ny outcomes generated in relation to Excluded Entities ultimately benefited the TPC Group entities’, due to the benefit of their existence from a tax and funding perspective.

1. In our opinion, the Excluded Entities’ accounting expenses were properly included in the calculation of the TPC Group Profit, for the following reasons:

(ww)   The relevant expenses were expensed and paid for by SR Consolidated and therefore were an expense in the tax returns of the TPC Group Entities, as referred to in item 2 of Schedule 2 to the PDSA.

(xx)      The opinion of the Special Referee was, in substance, that the fees were properly recorded as expensed and paid for by SR Consolidated and were for the benefit of the TPC Group Entities.

(yy)     The evidence that the fees ‘may relate’ to Excluded Entities does not justify the conclusion that they were expenses of the Excluded Entities and not of the TPC Group Entities.

1. These conclusions mean leave to appeal should be granted and the appeal allowed on proposed grounds 1, 2, and 6.

1. Proposed ground 3 concerns the judge’s characterisation of the PDSA as a profit sharing agreement in the October 2017 Reasons.  We are unpersuaded that there is any real significance in the label placed upon the arrangement, but to the extent that there is any significance in it, we consider that the judge was correct to characterise it in that way.  It is an arrangement where the manager’s remuneration is a percentage of taxable profit as per the tax returns with specified adjustments.  In our view, that may be properly characterised as a profit sharing arrangement.  We are also unpersuaded of the validity or relevance of the complaint made in proposed ground 3 about the judge’s reference to joint venturers in the October 2018 Reasons, but the issue does not arise given our conclusion on the construction issue.  We would refuse leave to appeal on proposed ground 3.

1. Proposed ground 4 concerns a term which it is said the judge implied ‘as a matter of law or fact’.  Putting to one side for the moment the issue of a term implied by law, our conclusion on the issue of construction of the PDSA necessarily means we must differ from the trial judge on the issue of a term implied under the principles in BP Refinery v Hastings.  Leave to appeal should be granted and the appeal allowed on proposed ground 4 insofar as it concerns what it characterises as the term implied as a matter of fact.

1. As to proposed ground 5, we consider that the judge was correct when he found that the annexed 2008 calculation did not reveal any principles or standards which assist in determining the relevant controversy.  The annexed 2008 calculation adds nothing of relevance to what is set out in item 2 of Schedule 2.  Leave to appeal should be refused on this proposed ground.

1. Our conclusions on the construction issue, and the term implied under the principles in BP Refinery v Hastings, mean that the Special Referee was asked an irrelevant question.  Proposed ground 7 has been rendered largely otiose by these conclusions.  However, that ground also raised one of the discrete issues that requires separate consideration.

1. The judge held that cl 10.1 of the PDSA, which required the parties to bear their own costs of negotiating ‘this Agreement’, precluded the Special Referee from taking into account, in the calculation of the TPC Group Profit, costs of the TPC Group in relation to proposed variations to the PDSA.[38]  No such variation was ultimately made.  The definition of ‘Agreement’ in the PDSA is ‘this agreement and any variations made to it’.

   [38]Ibid [47]-[51].

1. In our opinion, these expenses were not precluded by cl 10.1.

1. First, cl 10.1 only addresses the costs of negotiating the ‘Agreement’.  The definition of ‘Agreement’ does not extend to proposed variations which do not come into effect.  Second, and more fundamentally, the fact that a party cannot claim reimbursement of its costs from any other party says nothing as to whether it can claim those costs as a tax deduction.  If such costs feed into the definition of TPC Group Profit, that does not constitute a reimbursement of costs by any other party.  To this extent, leave should be granted in respect of proposed grounds 6(c) and 7 and the appeal allowed.

1. Leave to appeal on proposed ground 7 should be otherwise refused.

Term implied by law (Proposed appeal grounds 4 and 8, and contention 3)

Castleway and Mr Keeghan’s submissions

1. The trial judge recorded Castleway and Mr Keeghan as having submitted that there was a term implied into the PDSA by operation of law requiring a contracting party to do all things necessary on its part to enable the other to have the benefit of their contract, and to act reasonably and in good faith so as not to frustrate or prevent their contract’s commercial purpose being fulfilled.[39]

   [39]October 2017 Reasons [74].

1. Before this Court counsel for Castleway and Mr Keeghan adopted that as their position on this issue.  They submitted that by resolving to make, and by making, the donation, intending it to be taken into account in calculating the Service Fee, the TPC Group breached this implied term.  Thus, they submitted the breach occurred on 29 June 2017 and that damage was suffered as a result because it was then ‘inevitable’ the Service Fee would be reduced by $8 million.

The TPC Group’s submissions

1. The TPC Group submitted that before a term implied by law ‘can have work to do’ it is necessary to determine what was the agreed benefit under the PDSA and what was its commercial purpose.  These were issues of construction.  It was submitted in this context that it was not permissible to construe the PDSA from an a priori position as a profit sharing agreement as, it was submitted, the trial judge had done.

1. The TPC Group submitted that Castleway and Mr Keeghan had not pleaded, or advanced before the trial judge, a claim based upon a term implied by law in the manner in which it was put on these applications.  In particular, it was submitted that no damages claim for breach of a term implied by law had been advanced and that the TPC Group would have contended that no damage had been suffered.

1. At the outset of the hearing before this Court, the first matter addressed by counsel for the TPC Group was evidence of other charitable activities of the TPC Group.  The relevance of this evidence was never entirely clear.  It seemed to be directed at altering or qualifying the perception that the $20 million donation was an extraordinary transaction, divorced from the normal activities of the TPC Group.   In the context of the implied terms generally, the TPC Group submitted that the implications sought were ‘contradicted’ by the philanthropic activities and the ‘family’ character of the TPC Group’s business.

Legal principles in relation to terms implied by law

1. In Mackay v Dick, Lord Blackburn said that there is a general rule that where parties have contracted for a thing to be done each agrees to do all that is necessary on its part for the carrying out of that thing though there may be no express words to that effect.[40]  In Butt v McDonald, Griffith CJ said there is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary to enable the other party to have the benefit of the contract.[41]  In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd, the High Court quoted and adopted these statements of general principle.[42]

   [40](1881) LR 6 App Cas 251, 263.

   [41](1896) 7 QLJ 68, 70–71.

   [42](1979) 144 CLR 596, 607 (Mason J, with whom Gibbs, Stephen and Aickin JJ agreed; Barwick CJ determining the appeal on a narrower basis without disagreeing) (‘Secured Income’).

1. The High Court has also recognised the existence of a negative covenant implied by law.  In Peters (WA) Ltd v Petersville Ltd, Gleeson CJ, Gummow, Kirby and Hayne JJ said this covenant required a party ‘not to hinder or prevent the fulfilment of the purpose of the express promises made’ in the contract.[43]  In that respect they cited a passage from Dixon J’s judgment in Shepherd v Felt and Textiles of Australia Ltd where he said, in describing the obligations of a sales agent:

The express promise of the appellant to use his best endeavours to obtain orders for the respondent and to influence business on its behalf necessarily includes an obligation not to hinder or prevent the fulfilment of its purpose. Moreover, the contract established a relation between the parties intended to subsist for a period, and it involved some degree of mutual confidence and required a continual co-operation.  Its object was the increase of the sale of the respondent's manufactures, and to that end the extension of the respondent's business connection.  Such an agreement inevitably imported a tacit condition that the appellant should perform the services faithfully which he contracted to give the respondent, and should not endeavour to impede or defeat the respondent in the sale of its manufactures at the prices it might think proper to ask.[44]

[43](2001) 205 CLR 126, 142 [36] (Gleeson CJ, Gummow, Kirby and Hayne JJ).

[44](1931) 45 CLR 359, 378.

1. In this context, the express reference by Dixon J, and by Gleeson CJ, Gummow, Kirby and Hayne JJ, to hindering or preventing fulfilment of the ‘purpose’ of the express promises is important.

1. It has not always been clear whether these principles apply as a matter of construction or as implied terms.  The current most authoritative exposition of the principles appears to us to be found in the plurality judgment of the High Court in Commonwealth Bank of Australia v Barker.[45]

   [45](2014) 253 CLR 169 (‘Commonwealth Bank v Barker’)

1. Commonwealth Bank v Barker concerned a dispute between an employer (the bank) and an employee (Barker) over the circumstances of his redundancy.  He contended that his employment contract contained an implied term requiring mutual trust and confidence, and he also contended for a breach of the Mackay v Dick duty to cooperate.  The postulated obligation of mutual trust and confidence was a new implied term which the High Court was urged to adopt relying upon authorities in the United Kingdom.

1. In that context French CJ, Bell and Keane JJ addressed the issue of implied terms generally.[46]  They referred to terms implied under the principles in BP Refinery v Hastings as terms implied ‘in fact or ad hoc’.  A separate category of implied terms was terms implied ‘in law in all classes of contract’.

   [46]Ibid 185–9 [21]–[29].

1. The plurality observed that it has been argued that some terms said to be implied by law are in fact rules of construction and that all such terms of universal application fall into that category.[47]  They observed that the principle enunciated by Lord Blackburn in Mackay v Dick had been characterised in that way by Mason J in Secured Income, although he had also referred to the rule as an implied ‘duty to cooperate’.[48]

   [47]Ibid 187 [24].

   [48]Ibid 187–8 [25].

1. The plurality endorsed an academic observation that in practice the two kinds of implied terms, in fact and by law, tend to ‘merge imperceptibly’ into each other.[49]

   [49]Ibid 189 [28].

1. In the specific context of the term implied by law they emphasised the criterion of ‘necessity’, and, in that context, they quoted and adopted the analysis of McHugh and Gummow JJ in Byrne v Australian Airlines,[50] an earlier High Court appeal concerning an employment contract.  The plurality said:

In Byrne v Australian Airlines Ltd, McHugh and Gummow JJ emphasised that the ‘necessity’ which will support an implied term in law is demonstrated where, absent the implication, ‘the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined’ or the contract would be ‘deprived of its substance, seriously undermined or drastically devalued’.[51]

Later, the plurality returned to this issue saying that the relevant ‘necessity’ was not satisfied by demonstrating ‘reasonableness’, but may be demonstrated by the ‘futility’ of the transaction absent the implication.[52]

[50](1995) 185 CLR 410.

[51]Commonwealth Bank v Barker (2014) 253 CLR 169, 189 [29].

[52]Ibid 194 [36].

1. As to the other judges, Keifel J also quoted and adopted what McHugh and Gummow JJ had said in Byrne v Australian Airlines about ‘necessity’ in this context.[53]  Gageler J, in referring to the ‘requisite inquiry’ before a new term implied by law might be found, said that it had been described as the application of a ‘test’ of ‘necessity’ and cited the relevant passage from Byrne v Australian Airlines which the other judges had quoted and adopted.[54]

   [53]Ibid 201 [60]–[61].

   [54]Ibid 215 [114].

1. Thus, it seems that the relevant principles are best analysed as terms implied by law.  ‘Necessity’ is the rationale for their existence and the circumstance which must be ‘demonstrated’ for them to be operative.  The requisite necessity is so demonstrated where, absent the implication, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, seriously undermined;  or the contract would be deprived of its substance, seriously undermined or drastically devalued.

1. On this basis, the law will imply, in appropriate circumstances, a positive obligation to take action (to co-operate and to do all such things as are necessary to enable the other party to have the benefit of the contract), and a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract.

1. The relevant duty ‘is a duty to afford the other party the benefit of what he has contracted for; not a duty to act generally in the other party’s best interests’.[55]  A term implied by law cannot be used as a basis for imposing on a party something commercially advantageous to the other party but for which the contract does not provide.[56]  The implied term is necessarily informed by the express terms of the contract.[57]  Thus, this Court has not accepted contentions that a term implied by law can, in effect, turn a contractual non-exclusive licence into an exclusive one;[58]  or require a party to act as if an express contractual right did not exist.[59]  As the Court of Appeal of the Supreme Court of Western Australia recently observed, the term implied by law, whether expressed positively or as a negative covenant, is not only limited by the criterion of necessity but must relate to bringing about something which the contract requires to happen.[60]  Even more recently, the Court of Appeal of the Supreme Court of Queensland has held that the implied duty to co-operate is ‘conditioned’ by the concept of reasonableness.[61]

   [55]Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1, 13 [54] (Nettle JA) (‘Beerens’).

   [56]McMahon v National Foods Milk Ltd (2009) 25 VR 251, 265 [13] (Nettle JA) (‘McMahon’).

   [57]Beerens (2012) 39 VR 1, 13 [54].

   [58]McMahon (2009) 25 VR 251, 265 [13].

   [59]Beerens (2012) 39 VR 1, 13 [54].

   [60]Bell Group NV (in liq) v Insurance Commissioner of Western Australia [2017] WASCA 229, [113].

   [61]Wellington and others v Huaxin Energy (Aust) Pty Ltd [2020] QCA 114, [78].

1. Accordingly, in my opinion the making of the $20 million payment was not in breach of the PDSA.  I would uphold appeal grounds 4 and 8 and reject ground 3 of the notice of contention.

1. However, I agree that the Court should hear from the parties as to the orders that should be made disposing of this aspect of the appeal in accordance with the conclusion of Whelan JA and Riordan AJA, as well as in relation to the questions of interest and costs.

- - -

ANNEXURE A

PDSA

RECITALS and CLAUSES 2 and 3

Recitals

A.Entities associated with the Executive Director [Mr Keeghan] and the Manager [Castleway] have provided property development services to the TPC Group from time to time.

B.ln a meeting held on 17 June 2008 the Executive Director and a director of the TPC Group Entities discussed a proposal for the continued provision of property development services to the TPC Group.

C.The TPC Group wishes to formalise the arrangements for the provision of services and has requested that the Manager provides property development services to the TPC Group on the terms set out in this Agreement.

D.The Manager has agreed to provide those services to the TPC Group on the terms set out in this Agreement.

E.The Executive Director is executive director and controller of the Manager.

Engagement

2.1The TPC Group appoints the Manager to provide property development services to the TPC Group during the Term.

2.2The Manager must, from time to time during the Term and to the extent reasonably requested by the TPC Group, provide the Services (as listed in clause 2.5 below) to the TPC Group.

2.3The Manager accepts the engagement and agrees to make itself available from time to time to consult with the TPC Group in connection with the Services and to procure the active and continued involvement of the Executive Director in the provision of the Services.

2.4The Manager may, at its own cost, arrange for, hire and coordinate the services of other professionals including experts and consultants in addition to the services of its own personnel, if required to perform the Services.

2.5The Manager agrees to use its reasonable endeavours to provide the following services to the TPC Group:

(a)identify and investigate and, where appropriate, prepare a business case for property development opportunities for:

(i)land held by any TPC Entity at the date of this Agreement;

(ii)land to be acquired by any TPC Entity after the date of this Agreement; and

(iii)      land held by third parties to be made available (by any means) to the TPC Group for development;

(b)assist the TPC Group in the planning, structuring and negotiation of any:

(i)potential acquisition of any land or land holding entities;

(ii)       property development;  or

(iii)      disposal of any asset held by any TPC Entity;

(c)assist the TPC Group to identify, assess and secure financing sources, and co-developers, partners or joint venturers in connection with any property acquisition or development conducted by any TPC Entity;  and

(d)manage existing properties owned by the TPC Group to a profitable development outcome.

2.6The Manager shall be responsible for supplying all necessary plant, equipment and tools of trade required by it to perform the Services.

2.7The TPC Group agrees to provide to the Manager all information necessary to enable the Manager to fully perform the Services in accordance with this Agreement.

2.8The Manager must fully and fairly disclose to the TPC Group, in such detail as the TPC Group may reasonably require, details of all property acquisition or development opportunities that arise during the Term.

2.9Subject to clause 2.10, the Manager must not, and must procure that the Executive Director does not, undertake any property development during the Term, in any capacity other than in accordance with this Agreement unless:

(a)the opportunity to conduct the property development has first been disclosed to the TPC Group in accordance with clause 2.8; and

(b)the TPC Group gives written notice to the Manager within 60 days of the opportunity being disclosed to it electing not to undertake the property development. For the avoidance of doubt, if the TPC Group does not provide written notice to the Manager within this period, then the TPC Group is deemed to have rejected the opportunity to undertake the property development.

2.10Nothing in this agreement restricts the Executive Director or Manager, in his personal capacity, entering into a joint venture with a third party to undertake property development or undertaking any property development opportunity rejected by the TPC Group in accordance with clause 2.9.

Property Procurement and Development Fee

3.1The TPC Group must pay the Manager a property procurement and development fee (Service Fee) in respect of each Financial Year ending during the Term.

3.2The parties agree that the Service Fee shall be calculated by the TPC Group's nominated accountant based on TPC Group Profit in each Financial Year during the Term in the manner set out in Schedule 2.

3.3The Service Fee shall be paid annually in arrears on the following basis:

(a)the TPC Group shall use reasonable endeavours to procure that financial statements and tax returns for each TPC Entity for a Financial Year are finalised on or before 31 December in the Financial Year following the year to which they relate, and shall procure in any event that such financial statements and tax returns are finalised by no later than 31 March in the Financial  Year following the year  to which they relate;

(b)the TPC Group shall procure that the nominated accountant acting for the TPC Group calculates the TPC Group Profit in the manner set out in Schedule 2 and reports to the TPC Group and the Manager on the Service Fee payable in respect of a Financial Year within thirty (30) days of finalisation of the TPC Group tax returns for that Financial Year;

(c)after the Service Fee is reported to the TPC Group and the Manager, either party has ten (10) days to give to the other party a Dispute Notice in accordance with clause 9. If no Dispute Notice is given then the Service Fee is deemed to be agreed by the parties;

(d)the Manager shall submit a Tax Invoice to the TPC Representative for the Service Fee, within fourteen (14) days after the accountant provides the report containing details of the Service Fee payable or, if there is a Dispute over the Service Fee, within fourteen (14) days after the Dispute is resolved in accordance with clause 9.  The invoice must be a compliant Tax Invoice, and the invoiced amount must equal the amount of Service Fee as set out in the report (including any GST payable).  Any failure or delay in submitting a Tax Invoice shall not be construed as a waiver of the Manager's right to submit the Tax Invoice;

(e)subject to clause 3.3(g), the TPC Group will pay all correctly rendered invoices within thirty (30) days after receipt of the invoice.

(f)the TPC Group may dispute an invoice if the amount is not equal to the amount of Service Fee as set out in the applicable report from the accountant.

If either party disputes an invoice:

(i)the TPC Group will pay the non-disputed component (if any) of the invoiced amount in accordance with clause 3.3(e); and

(ii)the TPC Group may withhold the disputed component until the dispute is resolved in accordance with clause 9, in part or in whole, in favour of the Manager and, subject to clause 3.3(g), shall pay any amount so resolved in favour of the Manager to the Manager within thirty (30) days of resolution of the dispute.

(g)if in the opinion of the TPC Representative the cash flow position of the TPC Group does not prudently allow for payment of the Service Fee within the time specified in clause 3.3(e) or clause 3.3(f)(ii) (as the case requires), the TPC Group shall request and the Manager shall agree to an extension of the date for payment of the Service Fee of up to one hundred and fifty (150) days.

3.4The TPC Group and the Manager agree to provide to the accountant all information necessary to calculate the Service Fee (if any) payable under clause 3.1.

3.5The TPC Group shall maintain, for a period of seven (7) years after the Financial Year to which they relate, accurate records and accounts to determine the Service Fee payable in respect of the relevant Financial Year. The TPC Group will permit an accountant or auditor of the Manager from time to time during ordinary business hours to inspect and verify all or any records required to be maintained by the TPC Group under this clause 3.5, provided that prior to inspecting such records and accounts, the accountant or auditor enters into a confidentiality agreement in favour of the TPC Group in a form approved by the TPC Group (acting reasonably).

3.6Notwithstanding anything in clause 3.3, the parties agree that the FY2008 Service Fee and the FY2009 Service Fee are agreed and will be paid to the Manager on or before the day that is 45 days after the date of this Agreement.

3.7If the TPC Group defaults in payment of any monies due under this clause 3 the TPC Group shall, upon demand by the Manager, pay interest at the rate of 2% higher than the current ANZ 90 day Bank Bill Swap Bid Rate (BBSY) on the amount in default from the time it fell due until that amount has been paid in full.

ANNEXURE B

PDSA

SCHEDULE 2

Property Procurement & Development Fee

1.Calculation of Service Property Procurement & Development Fee (Service Fee)

The Service Fee for each Financial Year during the Term shall be determined based on TPC Group Profit for that Financial Year and calculated in accordance with the following table.

If TPC Group Profit falls within Band 1 to Band 7 (both inclusive) the Manager shall be entitled to a Service Fee calculated in accordance with column 5 ‘Aggregate Amount payable to Manager’. If the calculation of TPC Group Profit results in a loss (TPC Group Loss) then no Service Fee will be payable.

TPC Group Profit Band			% of band payable to Manager	Aggregate Amount payable to Manager ($)
Low	High
1	0	500,000	15	15% of TPC Group Profit
2	Above 500,000	1,000,000	20	$75,000 plus 20% of TPC Group Profit above $500,000
3	Above 1,000,000	2,000,000	25	$175,000 plus 25% of TPC Group Profit above $1 million
4	Above 2,000,000	3,000,000	25	$425,000 plus 25% of TPC Group Profit above $2 million
5	Above 3,000,000	4,000,000	30	$675,000 plus 30% of TPC Group Profit above $3 million
6	Above 4,000,000	5,000,000	30	$975,000 plus 30% of TPC Group Profit above $4 million
7	Above 5,000,000		40	$1,275,000 plus 40% of TPC Group Profit above $5 million

*All figures rounded to nearest dollar.

2.Calculation of TPC Group Profit

For the purposes of this Agreement TPC Group Profit means the TPC Group’s share of adjusted taxable profit before income tax on a consolidated basis calculated as follows:

Total Taxable Income (loss) as per income tax returns for the TPC Group Entities and associated entities set out in Annexure A to this Agreement
Less	Inter-entity current year taxable dividends or taxable trust distributions declared
Less	Non inter-entity current year franking credits
Add	Non assessable component of CGT capital gains
Add (Less)	Notional non assessable gain (loss) on pre-CGT assets (See Note 1 below)
Less	Current year post CGT capital losses not otherwise offset in taxable income (loss)
Add	Carried forward capital losses offset against current year capital gains
Add	Any post 1 July 2007 dividend paid from profits for shares in any TPC Entity sold or disposed of to external parties
Add	Carried forward income losses offset against current year taxable income (loss)
Less	Percentage share owned by external parties of non-wholly owned TPC Entities (See Note 3 below)
Less	Any carried forward TPC Group Loss (See Note 2 below)
TOTAL	TPC GROUP PROFIT / TPC GROUP LOSS

The parties acknowledge that the calculation of TPC Group Profit for the Financial Year ending 30 June 2008 is attached as Annexure C to this Agreement.  The parties agree that if there is any dispute regarding calculation of TPC Group Profit in any subsequent Financial Year the calculation shall (where practicable) be undertaken in accordance with the principles and standards reflected in the calculation of TPC Group Profit for the 2008 Financial Year.

Note 1:  Notional non assessable gain (loss) on pre-CGT assets

‘Notional non assessable gain (loss) on pre-CGT assets’ is the difference between the net sale proceeds on sale of the Land & Properties or Shares listed below and the notional market value for the relevant Land & Properties or Shares as agreed by the parties and (in the case of Land & Properties) set out below or (in the case of Shares) calculated as set out below.

A surplus amount is a gain (to be added to the calculation of TPC Group Profit) a deficit amount is a (loss) (to be subtracted from the calculation of TPC Group Profit).

Land & Properties

The ‘notional market value’ for pre-CGT land and properties is the value as per the council or land tax unimproved values as at 1 July 2007 for the following ‘listed assets’.

Reference	Property	Notional Market Value	TPC Entity
004760109	Princes Highway Officer	$2,734,000	Adaz Nominees Pty Ltd ATF The Rado No 2 Trust
026036827	99 Hallam South Road Hallam	$1,232,000	Asphalt Roads Pty Ltd
006715516	Lot 16 Barkers Road Garfield	$339,000	Gumbuya Park Pty Ltd
4126900300	Brew Road Tynong North (‘7.183 Ha’)	$309,000	Gumbuya Park Pty Ltd
4701114001	2505 Princes Highway Tynong North (‘Farm’)	$1,860,000	Tynong Pastoral Co Pty Ltd ATF Tynong Pastoral Unit Trust
4701114100	2625 Princes Highway Tynong North (‘Swayn’)	$592,000	Tynong Pastoral Co Pty Ltd ATF Tynong Pastoral Unit Trust
4126900200	125 Brew Road Tynong (‘Still Water’)	$683,000	Tynong Pastoral Co Pty Ltd ATF Tynong Pastoral Unit Trust
445422	50% interest in 179 Currumburra Road Ashmore QLD	$950,000	Teakglen Pty Ltd

Shares

The ‘notional market value’ for shares is the recorded net assets as at 1 July 2007 adjusted for any increase (decrease) in land and property values as at 1 July 2007 for the following ‘listed assets’:

Company	Notional Market Value of Shares
SR Consolidated Pty Ltd	$ 23,103,757
Gumbuya Park Pty Ltd	($ 3,005,441)
Cortek Developments Pty Ltd	$ 5,509,980
Teakglen Pty Ltd	$ 1,008,778
Asphalt Roads Pty Ltd	$ 1,102,632

Note 2:  Carried forward TPC Group Loss

If the calculation of TPC Group Profit results in a loss (TPC Group Loss) in any Financial Year (commencing with the Financial Year ended 30 June 2008), the amount of the TPC Group Loss shall be carried forward and offset against the adjusted taxable income for the TPC Group for the following Financial Year.

Whilst a TPC Group Loss shall be carried forward and set-off in the calculation of TPC Group Profit in the next Financial Year, the Manager shall not be required to make any payment to the TPC Group in respect of any TPC Group Loss (other than as expressly set out in the Agreement).

Note 3:  Wholly Owned Entities and Partly Held Interests

The parties agree that the TPC Group Profit shall include only the TPC Group’s proportionate share of profit attributable to any entity, trust, partnership or joint venture for which the TPC Group does not hold a 100% ownership interest.

The parties acknowledge and agree that, as at the date of this Agreement, columns 1 and 2 of the table in Annexure A are entities comprising a 100% TPC Group ownership interest.  The companies, trusts, partnerships and joint ventures in which the TPC Group has a part interest only are set out in columns 3, 4 and 5 of Annexure A.

3.        Adjustments

Amended Income Tax Assessments

If for any Financial Year ending during the Term there is an amended income tax assessment for any TPC Entity the amount of the adjustment shall be offset (added or subtracted as the case requires) against the calculation of TPC Group Profit for the Financial Year in which the amended assessment is finalised.

Prior Year Errors

If an audit conducted under clause 3.5 of the Agreement reveals an underpayment or overpayment of the Service Fee for any Financial Year or the TPC Group and the Manager otherwise determine that there has been an overpayment or underpayment due to an error, omission or incorrect calculation of the Service Fee the amount of the underpayment or overpayment shall be adjusted (added or subtracted as the case requires) against the calculation of TPC Group Profit for the Financial Year in which the underpayment or overpayment was detected.

No Interest on Adjustments

The parties agree that any adjustment shall not be subject to default interest under clause 3.7 of this Agreement.

4.        Termination Adjustment and Final Service Fee

The TPC Group Profit for the final Financial Year (or part Financial Year) of the Term shall be adjusted as follows:

(a)TPC Group Profit shall be reduced by an amount equal to the unrealised capital losses as at the date of termination or expiry of the Agreement;

(b)TPC Group Profit shall be increased by an amount equal to unrealised capital gains as at the dated [sic] of termination or expiry of the Agreement.

The parties agree that if the Term ends on a date other than at the end of a Financial Year, the Service Fee shall be reduced on a pro rata basis for the period between the date of termination and the end of the relevant Financial Year.

5.        Excluded Entities

The parties acknowledge and agree that the following entities are not part of the TPC Group and will not be included for the purpose of calculating TPC Group Profit:

(a)       Corilla Pty Ltd ATF Corilla Unit Trust

(b)Dana Investments Pty Ltd ATF Dana Investments Joint Venture

(c)       Trabeel Pty Ltd ATF Collins Street Joint Venture

(d)      Racmon Pty Ltd ATF Rado Investment Trust

(e)       Kashalight Pty Ltd

(f)       TPC Group Pty Ltd

(g)       The Promenade Berwick Pty Ltd

(h)      Tinapher Pty Ltd

(i)        Rado Management ATF Rado Management Trust

(j)        Roading Management ATF Roading Management Trust

(k)       Eden Valley Escape Pty Ltd

6.        New TPC Group Entities

The parties agree that for the purpose of calculating TPC Group Profit, the TPC Entities will include any entity established by the one or more TPC Group Entities after the date of this Agreement for which the Manager provides property development services under this Agreement.

7.        TPC Group Projects

The parties agree that the property development projects being undertaken by the TPC Group (or any of them) as at 1 July 2007 are listed in Annexure B to this Agreement (TPC Group Projects).

8.        Variation of Calculation Mechanism for TPC Group Profit

The parties agree that the calculation mechanism in this Schedule 2 may be varied from time to time by unanimous agreement of the Executive Director and each of the directors of the TPC Entities.

ANNEXURE C

PROPOSED GROUNDS AND CONTENTIONS

APPLICATION FOR LEAVE TO APPEAL

1.

The primary judge erred in not construing the agreement between the parties (the PDSA) according to its terms, namely as an agreement providing for payment of an annual service fee to the First Respondent as remuneration for services, calculated by reference to ‘TPC Group Profit’, being ‘the TPC Group’s share of adjusted taxable profit before income tax on a consolidated basis’ following the steps prescribed in Schedule 2 to the PDSA.

2.

The primary judge erred at paragraph [72] of the October 2017 Reasons in treating the PDSA as ambiguous or contradictory, contrary to the agreement of the parties noted at paragraphs [48] and [54] of the October 2017 Reasons that the PDSA was not ambiguous.

3.

The primary judge further erred at paragraph [77] of the October 2017 Reasons in construing the PDSA as a profit sharing agreement, and at paragraphs [33] and [34] of the October 2018 Reasons in construing the PDSA as a joint venture, when it was not, and was expressly stated in clause 5.2 not to create a joint venture, partnership, agency or an employment relationship between the First Respondent and the Applicants.

4.

The primary judge further erred at paragraph [77] of the October 2017 Reasons in implying (as a matter of law or fact) a term into the PDSA ‘which would preclude expenses not incurred in connection with the TPC Group’s normal business activities from operating to reduce the service fee’ when the circumstances, including the clear language of the PDSA, did not permit any such implication.

5.

The primary judge further erred at paragraph [81] of the October 2017 Reasons in not giving effect to the agreement of the parties expressed in Schedule 2 to the PDSA that ‘any dispute regarding calculation of TPC Group Profit in any subsequent year … (where practicable) be undertaken in accordance with the principles and standards reflected in the calculation of TPC Group Profit for the 2008 Financial Year’, which were inconsistent with treating the PDSA as a profit sharing agreement or as requiring the adding back of expenditure properly deductible for income tax purposes when calculating the service fee payable under the PDSA.

6.

Accordingly, the primary judge erred in the October 2018 Reasons in increasing the adjusted taxable profit of the TPC Group before income tax for the purposes of the service fee calculation for the financial years ending 30 June 2014, 30 June 2015 and 30 June 2016 by disallowing expenditure deductible for income tax purposes in those years, namely:

(a)       Accountancy expenses in respect of the Excluded Entities (at [101]–[102] of the October 2018 Reasons);

(b)      Accountancy expenses in connection with the proceeding (at [35] of the October 2018 Reasons);      

(c)       Legal fees incurred in connection with negotiating variations to the PDSA which did not eventuate (at [51] of the October 2018 Reasons);

(d)      Legal fees relating to the commencement and conduct of the proceeding (at [35] of the October 2018 Reasons);  and

(e)       Mr Lee’s director’s fees (at [85]-[87] of the October 2018 Reasons).

7.

Further or alternatively, the primary judge erred in the October 2018 Reasons in not adopting pro tanto the report of the special referee dated 27 April 2018 contrary to the principles laid down in Wenco Industrial Pty Ltd v W Industries Pty Ltd (2009) 25 VR 119, having by Order of 11 December 2017 referred to Mr Greg Meredith of Ferrier Hodgson as special referee the question of determining the quantum of expenses of the TPC Group which were:

(a)       deductible for income tax purposes in the calculation of TPC Group Profit in the financial years ending 30 June 2014, 30 June 2015 and 30 June 2016;  but

(b)      nevertheless on the Court’s interpretation of the PDSA to be disallowed            in the calculation of the particular years’ service fee.

8.

The primary judge further erred at paragraph [85] of the October 2017 Reasons in finding that the $20 million tax‑deductible charitable donation made by the First Applicant during the financial year ended 30 June 2017 was not to be taken into account in calculating the service fee for that financial year.

9.

The primary judge further erred in making order 8(a) of the 31 January 2019 Orders, as it was unsupported by any evidence or finding, and not based upon the issues pleaded or heard at trial.

10.

The primary judge further erred at paragraph [113] of the October 2018 Reasons in finding that 14 of the 16 assets listed at [100] of the October 2017 Reasons were 'Introduced Projects' within the meaning of the PDSA.

NOTICE OF CONTENTIONS

1.	In addition to the reasons provided at [62] to [73] of the October 2017 Reasons, the primary judge should have found that only expenses incurred in the ordinary course of the TPC Group’s business may operate to reduce the Service Fee payable to Castleway under the PDSA (Permitted Expenses Finding) on the basis that the contrary interpretation would give rise to uncommercial and unreasonable results.
2.	Upon finding an ambiguity or contradiction in the application of the formula set out in Schedule 2 of the PDSA for calculating Castleway’s Service Fee at [72] of the October 2017 Reasons, the primary judge should have reached the Permitted Expenses Finding having regard to the evidence of the profit sharing arrangement recorded in the minutes dated 17 June 2008, as representing the intention of the parties in entering the PDSA.
3.	In the alternative to the findings at [77] and [85] of the October 2017 Reasons, the primary judge should have reached the Permitted Expenses Finding by reason of terms implied by law requiring the TPC Group to do all things necessary on its part to enable Castleway to have the benefit of the PDSA, and to act reasonably and in good faith, so as not to frustrate or prevent the PDSA’s commercial purpose being fulfilled.
4.	In addition to the reasons provided at [111] to [114] of the October 2018 Reasons, the primary judge should have found that Castleway was entitled to declarations as to which projects constitute ‘Introduced Projects’ for the purposes of the PDSA on the basis that the TPC Group was seeking to re-open its case and had not established the necessary exceptional circumstances which might otherwise entitle it to do so.

CROSS-APPLICATION FOR LEAVE TO APPEAL

1.

The primary judge erred in concluding in the October 2017 Reasons [118]

that the definition of ‘Introduced Project’ at clause 1.1 of the PDSA required that Castleway (through Mr Keeghan) ‘would need to make the TPC Group aware of ‘development opportunities of the project’ (clause 2.5(a)) in relation to land; and the means by which the TPC Group might undertake the development opportunities’;

2.

On a proper construction of clause 1.1 of the PDSA, the primary judge should have concluded that Castleway (by Mr Keeghan) made the TPC Group ‘aware’ that a project was an Introduced Project by giving notice to the TPC Group  before the termination of the PDSA that a project had been acquired by the TPC Group for the purposes of acquisition, development and/or management;

3.

The primary judge should have concluded, on the evidence, that Castleway (by Mr Keeghan) made the TPC Group ‘aware’ in relation to the Kawana Waters project, before the termination of the PDSA, by letters dated 5 May 2015 and 22 June 2015 and was in error in the October 2017 Reasons [142] in finding that the Kawana Waters project was not an Introduced Project because Castleway or r Keegan had not made the board of the TPC Group ‘aware’ of the project;

4.

In any event, the finding by the primary judge that the Kawana Waters project was introduced to the TPC Group by Partners In Property Qld Pty Ltd in the October 2017 Reasons [141], was erroneous and against the evidence and the weight of the evidence. The primary judge should have concluded on the evidence that the development opportunities relating to the Kawana Waters project were in fact introduced to the TPC Group by Castleway (through Mr Keeghan);

5.

The primary judge was in error, on a proper construction of the term Introduced Project in the PDSA, in concluding by the October 2017 Reasons [127] that the IBIS Care Retirement Home property, as a business providing aged care services acquired and managed by the TPC Group, did not constitute an Introduced Project under the PDSA and that the project would have to have some property element to fall within a possible project;

6.

The primary judge should have concluded contrary to October 2017 Reasons [127] that:

(a)       it was not was not a requirement of the PDSA that an Introduced Project was required to have a ‘property element’;  or

(b)      in the alternative, the IBIS Care Retirement Home business did have a ‘property element’ within the meaning of the PDSA;

7.

The primary judge was in error, on the evidence, to find in the October 2017 Reasons [47] that the establishment of the Rado Family Foundation and making of the $20 million donation to that Foundation was not made for any improper purpose or part of a conspiracy by breach of duty of the directors of the donor company, Adaz Nominees Pty Ltd;

8.

The primary judge should have concluded as a proper matter of reasonable inference, on the evidence and the weight of the evidence, that Mrs Rado, Mr Lee and Mr Stephen Rado as the majority of the directors of Adaz Nominees breached their duties as directors under s.181 of the Corporations Act 2001 and committed the civil tort of conspiracy when combining to arrange, conceal from Mr Keeghan, and implement the making of the $20 million charitable donation from Adaz Nominees to the Rado Family Foundation, with the objective of causing harm to Castleway, by preventing it from receiving its proper Service Fee entitlement for the 2016-2017 financial year and reducing Castleway’s Service Fee by $8 million;

9.

The primary judge erred in concluding in October 2017 Reasons [189] that the first cross-applicant was not entitled to the payment of its invoices nos. 1701, 1702 and 1703 (Invoices), which were equal to the amount of the undisputed Service Fees reported in the 2013/14, 2014/15 and 2015/16 financial years by the nominated accountant, and that it was not entitled to the payment of the undisputed components of the Service Fees until all disputes the subject of dispute notices were determined;

10.

Accordingly, interest should have accrued on the non-disputed Service Fees set out in October 2017 Reasons [181] pursuant to s.58(1) of the SCA, on the amounts in the Invoices, from 30 days of service of the Invoices on the TPC Group to 28 November 2018, being the date of payment of the Service Fees found to be due, which exceeded the Invoices, were ultimately paid;

11.

The primary judge erred in law in January 2019 Reasons [12] in dismissing the cross-applicants’ claim for interest under s 60(1) of the SCA.  The primary judge should have ordered that interest be paid upon the sums totalling $15,098,815.06 (inclusive of GST) that the TPC Group was found by the Court to be payable to Castleway;

12.

The primary judge should have concluded on a proper construction of s 60(1) of the SCA that the counterclaim by the first cross-applicant for recovery of outstanding Service Fees:

(a)       was a proceeding for the recovery of a debt or damages within meaning of s 60(1) of the SCA;

(b)      that Castleway was obliged to take proceeding to recover the money sums due to it as the Service Fees were outstanding, and in the meantime Castleway had been kept out of moneys which it could otherwise have used, or upon which it could otherwise have earned interest;

(c)       that the provision of s.60(1) was intended to apply to justify an award of interest upon the sums found to be recoverable by Castleway, from the date of the filing of Castleway’s second further amended defence and counterclaim on 19 July 2017, to the date of payment being 28 November 2018;

13.

The primary judge was in error in January 2019 Reasons [33] in concluding that because the amounts found payable to Castleway under the PDSA did not become due and owing until an invoice was raised for an undisputed amount, and was then payable within 30 days of the presentation of the invoice, this precluded Castleway from claiming interest on the sums found due and payable as outstanding Service Fees under s.60(1) of the SCA.

SCHEDULE OF PARTIES

S APCI 2019 0014

ADAZ NOMINEES PTY LTD (ACN 006 228 119) (AS TRUSTEE FOR THE RADO NO 2 TRUST)	First Applicant
CORTEK DEVELOPMENTS PTY LTD (ACN 004 997 773)	Second Applicant
ASPHALT ROADS PTY LTD (ACN 005 374 247)	Third Applicant
ROADING GROUP PTY LTD (ACN 097 993 292) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 2)	Fourth Applicant
ROADING INVESTMENTS PTY LTD (ACN 104 325 797) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 3)	Fifth Applicant
LOOILLA PTY LTD (ACN 092 067 322) (AS TRUSTEE FOR LOOILLA TRUST)	Sixth Applicant
BELLONIC PTY LTD (ACN 092 015 828) (AS TRUSTEE FOR BELLONIC TRUST)	Seventh Applicant
TYNONG PASTORAL CO PTY LTD (ACN 060 828 364) (AS TRUSTEE FOR TYNONG PASTORAL UNIT TRUST)	Eight Applicant
PARTNERS IN PROPERTY PTY LTD (ACN 120 760 125)	Ninth Applicant
TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) (AS TRUSTEE FOR AMARCO SERVICES TRUST)	Tenth Applicant
TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) (AS TRUSTEE FOR AMARCO SERVICES TRUST)	Eleventh Applicant
and
CASTLEWAY PTY LTD (ACN 131 870 481) (AS TRUSTEE FOR THE CASTLEWAY TRUST)	First Respondent
GERARD DAMIAN KEEGHAN	Second Respondent

S APCI 2019 0024

CASTLEWAY PTY LTD (ACN 131 870 481) (AS TRUSTEE FOR THE CASTLEWAY TRUST)	First Cross-applicant
GERARD DAMIAN KEEGHAN	Second Cross-applicant
and
ADAZ NOMINEES PTY LTD (ACN 006 228 119) (AS TRUSTEE FOR THE RADO NO 2 TRUST)	First Cross-respondent
CORTEK DEVELOPMENTS PTY LTD (ACN 004 997 773)	Second Cross-respondent
ASPHALT ROADS PTY LTD (ACN 005 374 247)	Third Cross-respondent
ROADING GROUP PTY LTD (ACN 097 993 292) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 2)	Fourth Cross-respondent
ROADING INVESTMENTS PTY LTD (ACN 104 325 797) (AS TRUSTEE FOR THE RADO INVESTMENT TRUST NO 3)	Fifth Cross-respondent
LOOILLA PTY LTD (ACN 092 067 322) (AS TRUSTEE FOR LOOILLA TRUST)	Sixth Cross-respondent
BELLONIC PTY LTD (ACN 092 015 828) (AS TRUSTEE FOR BELLONIC TRUST)	Seventh Cross-respondent
TYNONG PASTORAL CO PTY LTD (ACN 060 828 364) (AS TRUSTEE FOR TYNONG PASTORAL UNIT TRUST)	Eight Cross-respondent
PARTNERS IN PROPERTY PTY LTD (ACN 120 760 125)	Ninth Cross-respondent
TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) (AS TRUSTEE FOR AMARCO SERVICES TRUST)	Tenth Cross-respondent
AGNES CRAWFORD  RADO	Eleventh Cross-respondent
IAN ARTHUR LEE	Twelfth Cross-respondent
STEPHEN RADO	Thirteenth Cross-respondent