Advanced Fuels Technology Pty Ltd v Blythe

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST

S CI 2015 05119

ADVANCED FUELS TECHNOLOGY PTY LTD

(ACN 079 473 699)

Plaintiff

SEAN DARRELL BLYTHE & ORS
(According to the attached schedule)

Defendants

---

JUDGE:	Macaulay J
WHERE HELD:	Melbourne
DATE OF HEARING:	24, 26- 28 April 2017 &, 1- 4 & 9- 11 May 2017
DATE OF JUDGMENT:	30 May 2018
CASE MAY BE CITED AS:	Advanced Fuels Technology v Blythe & Ors
MEDIUM NEUTRAL CITATION:	[2018] VSC 286

---

EQUITY – Fiduciary duty – Whether a former company director misused his position by usurping maturing business opportunities for himself and related entities – Effect and circumstances of resignation – Scope of fiduciary obligations that survive termination of fiduciary office – Factors to be considered – Chan v Zacharia (1984) 154 CLR 178, applied – Canadian Aero Service Limited v O’Malley [1974] RCS 592, applied – Courtney Polymers v Deang [2005] VSC 318, applied – No breach of fiduciary duty – No dishonest and fraudulent design.

CORPORATIONS – Statutory duties of directors, other officers and employees – Whether an employee sending to himself a mixed list of business and personal contacts constitutes a misuse of confidential information - Whether a mixed list of personal and business contacts developed by an employee in the course of his employment possessed the necessary quality of confidence – Del Casale & Ors v Artedomus (Aust) Pty Ltd [2007] NSWCA 172, applied – No contravention – Whether an employee retaining company documents and later using them in an unrelated business venture contravened any statutory obligation – Contravention established – Corporations Act 2001 (Cth), ss 181, 182 and 183.

EVIDENCE – Inferences – Where defendants elected not to lead any evidence at trial – Distinction between an inference that may help to reach a finding that is open on the evidence and one that is sought to be used to resolve pure conjecture – Jones v Dunkel (1959) 101 CLR 298, applied.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr I Percy	McKean Park
For the First, Third, Fourth and Fifth Defendants	Mr C Northrop	Harwood Andrews
For the Second Defendant	Mr A Schlicht	Metaxas & Hager

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Issues.................................................................................................................................................... 4

Mr Blythe........................................................................................................................................ 4
Mr Wilson....................................................................................................................................... 5
Dishonest or fraudulent design.................................................................................................. 5
Damages or other relief................................................................................................................ 6
Core principles.............................................................................................................................. 6

Background......................................................................................................................................... 9

Incorporation of AFT and its shareholders............................................................................... 9
General nature of AFT’s business............................................................................................. 10
February 2011 meeting............................................................................................................... 12
Tension develops over the Altona station.............................................................................. 22
Mr Blythe’s offer to buy Mrs Thompson’s shares.................................................................. 28
Negotiations through solicitors................................................................................................ 31
Two final meetings and Mr Blythe’s resignation................................................................... 38
Mr Wilson..................................................................................................................................... 43

Nature of employment and duties owed (Blythe and Wilson)................................................ 44

Retention or misuse of confidential information (Blythe and Wilson)................................. 45

Computers.................................................................................................................................... 46
SkyDrive....................................................................................................................................... 54
Contact details............................................................................................................................. 58

The eight businesses....................................................................................................................... 62

ATCO Structures......................................................................................................................... 63
Tas Gas.......................................................................................................................................... 69
Coca-Cola Amatil........................................................................................................................ 76
Brookfield Cogen (Energy for the Regions)............................................................................ 81
Brookfield (other)........................................................................................................................ 91
Gouge Linen................................................................................................................................ 93
AGL Energy................................................................................................................................. 95
Clean Air Power.......................................................................................................................... 99

Dishonest and fraudulent design............................................................................................... 102

Conclusions with respect to the eight businesses.................................................................... 108

Knowing assistance claims........................................................................................................... 116

Loss, damages and relief............................................................................................................... 116

Conclusion....................................................................................................................................... 117

HIS HONOUR:

Introduction

Did Sean Blythe and Timothy Wilson, and others associated with them, lawfully obtain business that might otherwise have been acquired by or remain with Advanced Fuels Technology Pty Ltd (AFT), the company with which each had worked? Or, as AFT claims, in doing so did they breach duties owed to AFT or contravene provisions of the Corporations Act 2001 (Cth) (the CA). These are the essential issues in this proceeding.

Upon the untimely death of Robert Bruce Thompson (known as Bruce) on 17 February 2011, the productive six year business partnership between he and Mr Blythe (the first defendant) in the compressed natural gas industry came to an end. Their business was conducted through AFT (the plaintiff). Each was a director of AFT and, through their separate corporate entities, each held equal numbers of voting shares.

For exactly two years following Bruce Thompson’s death Mr Blythe continued as a director and Chief Executive Officer of AFT; but on 18 February 2013 he abruptly resigned. This case concerns the circumstances of Mr Blythe’s resignation and whether his continuing participation in the compressed natural gas industry thereafter gives rise to any liability to pay damages or equitable compensation to AFT, or to account to AFT for profits he has since made.

Very soon after Mr Blythe left AFT he took up a consultancy role with Clean Air Power Pty Ltd (CAP), a client of AFT. Further, within weeks of Mr Blythe resigning, Mr Wilson (the second defendant), a valued employee of AFT with technical expertise, gave one month’s notice of his intention to resign from AFT and, on 6 May 2013, became an employee of NGV Group Pty Ltd (NGV) (the fourth defendant).

NGV was incorporated on 26 April 2013. A company associated with Mr Blythe, Envirotrans Pty Ltd (Envirotrans) (the fifth defendant) was NGV’s largest shareholder owning 70 per cent of the issued shares in the company. A company owned by Mr Wilson’s father became a 10 per cent shareholder in NGV and the remaining 20 per cent shareholding was held by a company associated with Timothy O’Leary (the third defendant). Mr O’Leary was the sole director and secretary of NGV. He had no previous interest or involvement in AFT but it appears he was a friend or associate of Mr Blythe.

AFT allege that, over time, NGV and Envirotrans entered commercial arrangements with a series of companies who were or had been customers or business prospects of AFT: ATCO Structures (ATCO), Tas Gas, Coca-Cola Amatil (CCA), Brookfield Cogen (in relation to the Victorian Government’s ‘Energy for Regions’ program, ‘EfR’), other Brookfield entities, Gouge Linen (Gouge), AGL Energy (AGL) and CAP (‘the eight businesses’).[1] AFT alleges that NGV and Envirotrans were aided in obtaining those commercial arrangements by using information (some allegedly confidential) which Mr Blythe and Mr Wilson obtained while working at AFT. Additionally, AFT alleges its ability to conduct its own business was hampered by the wrongful failure of Mr Blythe and Mr Wilson to return vital company records and information to it upon their respective resignations.
[1]There was a degree of uncertainty surrounding the identification of some of the business prospects, particularly insofar as they lay with Brookfield related entities.

Neither Mr Blythe nor Mr Wilson were subject to any contractual restraint of trade provisions in the terms of their employment or engagement with AFT. But AFT alleges they each breached or contravened a raft of duties owed to AFT by retaining or misusing AFT information, planning their departures from AFT and by taking up business opportunities with AFT customers following their departures. Broadly stated, AFT alleges breaches of various contractual and fiduciary duties (the existence of which the defendants dispute) and contraventions of provisions of the CA, in particular, ss 180 – 183.

To bring claims against NGV and Envirotrans, and to establish a means of seeking equitable compensation or an account of profits from them, AFT alleges that Mr Blythe, Mr Wilson and Mr O’Leary made and acted upon an agreement they reached in late 2012 or early 2013 that amounted to a dishonest and fraudulent design. The alleged elements of the agreement were that Mr Blythe and Mr Wilson would resign from AFT, set up NGV with Mr O’Leary, and use information wrongfully obtained from AFT to enable NGV to take up AFT’s business opportunities. AFT claims that NGV and Envirotrans knowingly received benefits from that dishonest and fraudulent design. AFT also alleges that NGV, Envirotrans and Mr O’Leary knowingly assisted Mr Blythe and Mr Wilson in breaching their contractual and fiduciary duties and in contravening the CA.

Mr Blythe admits having been a director of AFT, and to being subject to the fiduciary and statutory duties applicable to that role, but denies AFT’s allegation that he was an employee; rather, he maintains that he was a consultant. Mr Wilson admits he was an employee of AFT but denies he owed AFT the fiduciary duties of a person in senior management or that he was subject to the statutory obligations of an ‘officer’ (each of which AFT allege). Each denies that they breached the duties alleged, contravened any statutory obligations, engaged in any dishonest and fraudulent design or wrongfully retained or used AFT property or information. In substance, Mr Blythe and Mr Wilson say that they (and, through them, NGV and Envirotrans) simply engaged in lawful competition with AFT using know-how they each possessed and were free to employ.

All parties highlighted a tension—and, ultimately, a deadlock—that emerged within AFT after Bruce Thompson’s death as being relevant to understanding and interpreting the events of which AFT now complains. Bruce Thompson’s shares in AFT had passed to his widow, Lorraine Thompson. Although holding some non-voting shares of her own, there being no other shareholders in AFT Mrs Thompson’s acquisition of her husband’s shares meant that she and Mr Blythe had equal control over the company. Throughout 2011, 2012 and into early 2013, important differences emerged between Mr Blythe and Mrs Thompson in their approach to the management and direction of the company. Those differences led to Mr Blythe offering to purchase Mrs Thompson’s shares in late 2012 but, at that time, Mrs Thompson was neither interested in selling her shares or in buying Mr Blythe’s. Further negotiations in January and February 2013, then through the agency of solicitors representing their respective interests, failed to reach a resolution. As stated, Mr Blythe resigned from AFT on 18 February 2013.

At trial, Mr Blythe, Mr O’Leary, NGV and Envirotrans were represented by the same firm of solicitors and counsel. Mr Wilson was separately represented.

Mrs Thompson and her late husband Bruce had two sons, Malcom and Stewart, each of whom played some role in AFT, especially after the resignations of Mr Blythe and Mr Wilson. To avoid confusion between the three Thompson men, I will refer to them each by their full names rather than call any of them ‘Mr Thompson’.

Issues

The questions arising for resolution are set out below.[2] They are arranged by reference, first, to the allegations against Mr Blythe and Mr Wilson, secondly to the allegations against the other defendants by reason of their involvement in the alleged dishonest and fraudulent design, and finally in relation to the relief AFT claims.
[2]The issues are designed to collect as succinctly as possible the numerous, inter-related allegations made in the Third Amended Statement of Claim (3ASOC).

Mr Blythe

The questions concerning Mr Blythe are:

(a) What were the terms of the agreement pursuant to which he provided his services to AFT, and did any survive his resignation on 18 February 2013?[3]

(b) After leaving the company, did he retain any confidential information he had obtained as an officer or employee of AFT and, if so, did he breach any contractual or fiduciary duties he owed to AFT or contravene the CA?[4]

(c) In respect of any existing or potential opportunities available to AFT to do business (as pleaded) with the eight businesses, did he at any time breach any contractual or fiduciary duties he owed to AFT or contravene or involve himself in Mr Wilson’s contravention of the CA?[5]

[3]3ASOC [9], [10], [11].

[4]Ibid [14], [15], [44], [45].

[5]Ibid [26], [29A], [32A], [36B], [39B], [40M], [43A], [43C], [43D], [43N], [44], [45], [51], [51A].

Mr Wilson

The questions concerning Mr Wilson are:

(a) Did he owe AFT any and if so which of the fiduciary and CA duties alleged by AFT[6] and did any survive his resignation from AFT on 29 April 2013?

(b) After leaving the company, did he retain any confidential information he had obtained as an officer or employee of AFT and, if so, did he breach any contractual or fiduciary duties he owed to AFT or contravene the CA?[7]

(c) In respect of any existing or potential opportunities available to AFT to do business (as pleaded) with the eight businesses, did he at any time breach any contractual or fiduciary duties he owed to AFT or contravene or involve himself in Mr Blythe’s contravention of the CA?[8]

[6]Ibid [17], [18].

[7]Ibid [21], [22], [47], [48].

[8]Ibid [26], [29A], [36B], [39B], [40M], [43A], [43D], [47], [48].

Dishonest or fraudulent design

Did Mr Blythe, Mr Wilson and/or Mr O’Leary engage in the dishonest or fraudulent design AFT alleges,[9] or alternatively, did any of them knowingly assist in the dishonest and fraudulent design of the others or either of them?
[9]Ibid [43OG].

Did Mr O’Leary,[10] Envirotrans,[11] or NGV[12] knowingly assist Mr Blythe and Mr Wilson (or either of them) in breaching any of the contractual or fiduciary duties they owed to AFT; or become involved in Mr Blythe and Mr Wilson (or either of them) contravening the CA; or knowingly receive benefits as a result of them having done so?[13]
[10]Ibid [52], [52A].
[11]Ibid [52B], [52C].
[12]Ibid [53].
[13]Ibid [52], [52A], [52B], [52C], [53], [54], [54A].

Damages or other relief

If Mr Blythe[14] or Mr Wilson[15] breached any of the contractual or fiduciary duties they owed to AFT what (if any) loss or damage was caused to AFT[16] and are they liable to account to AFT for any and if so which benefits they received as a result?[17]
[14]Ibid [45].
[15]Ibid [49].
[16]Ibid [36C], [40K], [40N], [43AB], [43DA], [43O], [46], [49].
[17]Ibid [43OJ].

If Mr Wilson, Mr Blythe, Mr O’Leary, Envirotrans or NGV knowingly assisted another’s breach of duty or was involved in their statutory contravention, what (if any) loss or damage was caused to AFT[18] and are they liable to account to AFT for any and if so which benefits they received as a result?
[18]Ibid [55].

Core principles

More will need to be said in detail about relevant legal principles later. But, before making findings of the relevant facts and addressing the issues, it is convenient to refer to some of the core principles of fiduciary duty, albeit at a high level, as well as set out the relevant statutory duties that will need to be applied.

In Chan v Zacharia,[19] Deane J considered various formulations of the principle governing a fiduciary’s liability to account for personal benefit or gain. His Honour observed that what is conveniently regarded as the one fundamental rule in fact embodies two themes which, while overlapping, are distinct.[20] The two themes are commonly described as concerning conflicts of duty and interest, on the one hand, and use (or misuse) of fiduciary position, on the other. In that order, Deane J formulated them as follows:

Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain; or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it.[21]

[19](1984) 154 CLR 178.

[20]Ibid 198–199.

[21]Ibid.

In this case, AFT substantially focuses on a particular type of benefit it alleges that Mr Blythe and Mr Wilson wrongly appropriated: namely, ‘maturing business opportunities’ available to AFT from some, if not all, of the eight businesses. In this context, the notion of a maturing business opportunity is usually associated with the judgment of Laskin J in Canadian Aero Service Limited v O’Malley.[22] There, Laskin J formulated an aspect of the fiduciary duty a director or senior officer of a company owes to his or her employer in the following terms:

In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.[23]

[22]Canadian Aero Service Limited v O’Malley [1974] RCS 592 (‘Canadian Aero’).

[23]Ibid 607.

In Edmonds v Donovan,[24] the Victorian Court of Appeal, after referring to Canadian Aero, cautioned against any ‘attempt to generalise at all in this area for, as is often pointed out, the existence and scope of fiduciary obligations must always be assessed in the particular context in which they are claimed to arise’.[25] Indeed, Laskin J said much the same in Canadian Aero:

As in other cases in this developing branch of the law, the particular facts may determine the shape of the principle of decision without setting fixed limits to it.
…
The general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a director or senior officer must conform, must be tested in each case by many factors which it would be reckless to attempt to enumerate exhaustively. Among them are the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director’s or managerial officer’s relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge.[26]

[24](2005) 12 VR 513 (‘Edmonds’).

[25]Ibid 537 [58].

[26]Ibid 619–620.

Moving from fiduciary to statutory duties, AFT alleges that Mr Blythe and Mr Wilson breached ss 181, 182 and 183 of the CA. Those sections provide:

181Good faith—civil obligations

Good faith—directors and other officers
(1)A director or other officer of a corporation must exercise their powers and discharge their duties:
(a)in good faith in the best interests of the corporation; and
(b)for a proper purpose.

(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.

182 Use of position—civil obligations
Use of position—directors, other officers and employees
(1)A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.

(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.

183 Use of information—civil obligations
Use of information—directors, other officers and employees
(1)A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.

(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.

I intend to address the questions I have listed under the issue-topics set out below:

(a) Nature of employment and duties owed (Blythe and Wilson);

(b) Retention or misuse of confidential information (Blythe and Wilson);

(c) Alleged breaches with respect to the eight businesses;

(d) Dishonest and fraudulent design;

(e) Knowing assistance claims; and

(f) Loss, damages and relief.

Before turning to the first of those topics I will set out in some detail the relevant factual context in which the disputed questions arise.

Background

At trial, evidence was only given by witnesses called by AFT; Mrs Thompson, her sons Stewart and Malcom, John Hartley who worked as a consultant to AFT after Mr Blythe left, the company’s external accountant Raj Bansal, a computer technician Mouhamed Mourad, and two expert witnesses. None of the defendants gave or called any evidence as they closed their cases at the conclusion of the plaintiff’s case. The following account of the facts comes from admitted facts, tendered documents and the evidence of AFT’s witnesses.

Incorporation of AFT and its shareholders

AFT was incorporated in July 1997 with Bruce Thompson as its sole director and, in effect, sole shareholder.[27] Bruce Thompson held his shares in AFT through a family company, Global Beat Pty Ltd (Global Beat). In January 2005, AFT engaged Mr Blythe as its Chief Executive Office and he became a director of the company in July the same year. On 16 May 2005 Envirotrans was incorporated with Mr Blythe as its director, secretary and sole shareholder.[28] At that time, further ordinary shares were issued in AFT resulting in Global Beat and Envirotrans holding nine shares each. Thereafter, Bruce Thompson and Mr Blythe operated AFT as though they were partners.
[27]AFT.405.005.0001. Note: Labels of this kind are Document IDs within the electronic court book.
[28]AFT.405.007.0006.

Also in 2005, AFT issued Mrs Thompson non-voting shares entitling her to receive dividends. After Bruce Thompson’s death in 2011 ownership and control of Global Beat passed to Mrs Thompson and, on 31 August 2011, Mrs Thompson was appointed the second director of AFT along with Mr Blythe. By those means she and Mr Blythe became equal controllers of AFT, with Mrs Thompson directly or indirectly holding a small majority of the issued shares in the company.

Since his departure from AFT in February 2013 Mr Blythe ceased to be a director of the company but, through Envirotrans, continued to hold half the voting shares in AFT.

General nature of AFT’s business

After Mr Blythe joined AFT and before Bruce Thompson’s death, AFT operated as a small business consisting of a handful of employees. Apart from Mr Blythe and Malcom Thompson, there were two employees in Western Australia (one of whom was Mr Wilson) and a couple of employees in Melbourne. Mrs Thompson’s involvement in AFT’s operations at that time was limited to some bookkeeping and office tasks.

Bruce Thompson had first commenced in the transport fuel business in the early 1990s, performing conversion of motor vehicles to run on liquefied petroleum gas (LPG). Later on, he turned his attention to modifying vehicles to take natural gas in liquid (LNG) and compressed (CNG) form. While Bruce Thompson’s background was in LPG, he saw the future in developing the business orientated towards the supply of natural gas to vehicles. Mr Blythe’s background and experience was in the CNG industry. According to Mr Bansal, who performed accounting work for AFT before and after Bruce Thompson’s death, first as an employee at Jonathan Partners before May 2009 and thereafter in his own practice, the skill sets of Bruce Thompson and Mr Blythe were complementary. Bruce Thompson brought technical expertise, especially in vehicle conversions, and Mr Blythe brought industry contacts and sales and marketing skills.[29]
[29]T605–606.

In short, the partnership was focused on developing the natural gas business, although AFT continued to undertake some LPG conversions.

Within a couple of years of Mr Blythe joining AFT, the business consisted in the following activities:[30]

·converting vehicles to run on LNG and CNG (with some LPG);
·providing storage and refuelling infrastructure for businesses needing to refuel their vehicles with LNG and CNG;
·supplying certificates of compliance with industry regulations;
·supplying equipment (e.g. cylinders, spare parts et cetera) associated with the natural gas fuel supply and use; and
·providing specialist engineering advice to and conducting training for organisations using LNG and CNG systems.

[30]AFT.301.001.2999.

AFT had also developed relationships, locally and overseas, with ‘upstream’ suppliers of equipment which it then sold and supplied to its ‘downstream’ customers.

From 2006 onwards AFT operated from rented premises at 15 Garden Drive, Tullamarine (Garden Street premises). In addition to the AFT business, the Thompson family had involvements in other businesses. One was a business dealing in batteries, and the other was a continuation of Bruce Thompson’s former LPG business (that is, a wholesale business dealing in the supply of LPG equipment). Both of those businesses operated from rented premises at 5-7 Freight Road, Tullamarine (Freight Road premises). Malcom Thompson worked in the family battery business whilst his brother Stewart Thompson worked in the LPG business. Both worked out of the Freight Road premises. Mrs Thompson also had an office at the Freight Road premises.

February 2011 meeting

As has already been stated, Bruce Thompson died on 17 February 2011. Almost immediately there were some indications of potential friction between Mr Blythe and Mrs Thompson. Mrs Thompson gave evidence that her son, Stewart, reported that at the funeral Mr Blythe had said he wanted to buy her shareholding. She had thought to herself, ‘it’s started’.[31]
[31]T129.24.

Mrs Thompson and Mr Blythe met together on 28 February 2011 (February 2011 meeting).[32] Mrs Thompson gave evidence about this meeting and a typed note of it prepared by Mr Blythe was also tendered. Mrs Thompson said she substantially agreed with what was contained in Mr Blythe’s note.
[32]Mrs Thompson’s evidence was that it occurred on Friday 25 February but Mr Blythe’s notes record it being 28 February. Nothing turns on the date.

From Mrs Thompson’s evidence of the meeting, there were several matters raised that foreshadowed ongoing themes of tension between her and Mr Blythe:

·the nature and extent of her role in the business;
·the involvement of her sons in the business;
·proposals for a third party to either buy the business outright or purchase some of its assets; and
·Mr Blythe’s ongoing use of his company, Envirotrans, within the energy and fuel sector.

Mrs Thompson later accused Mr Blythe of having surreptitiously recorded the February 2011 meeting using an upturned mobile phone placed in the middle of the table. Mr Blythe denied having done so. Wherever the truth lies is of little relevance other than to highlight the wary attitude by one toward the other from an early stage.

Because there was agreement that Mr Blythe’s note of the meeting accurately recorded the substance of their conversation, and because the note helpfully identified issues that became ongoing concerns, I will set out the note in full. I will then explain some of the key themes emerging from it. The note recorded the meeting as having taken place on 28 February 2011 in the AFT Training Room, commencing at approximately 9:45 am. The text is as follows:

Lorraine opened by stating that she wanted an open and honest relationship and Sean agreed. Sean stated that he looked forward to managing and growing AFT into the future and that he hoped he could provide a good return for the shareholders.
Lorraine raised the issue of the 10% of AFT that Bruce and Sean transferred to her (5% each) in 2005/6 and re-affirmed that it was entirely her initiative and Bruce was unaware. Sean accepted this and went on to explain that from his perspective he was in no position to negotiate at the time and accepted the outcome being that his dividend & shareholding would be reduced. Sean stated that he had not thought about this for many years and he had ‘put it to bed’.
Lorraine spoke about Bruce’s vision & legacy in regard to AFT and Sean also recognized the important role/input that Bruce had. Sean stated that he had viewed Bruce as his business partner and they came together in 2005 as they shared a common vision of what AFT could become.
Lorraine spoke about the roles that she would like to see Malcolm (Admin & Management) and Stewart (Operations) taking in due course. Lorraine also discussed the role and input that she would like to have in AFT- primarily finance (primarily budgets and BAS etc). Sean responded by explaining the many discussions that Bruce and he had in regard to the stand-alone nature of AFT and that in those discussions Bruce had never considered Stewart or Malcolm entering the business. Sean noted that over the past 6 months they had been actively negotiating with potential companies to purchase AFT and the likely outcome would be that Bruce would retire and sell down his shareholding. Sean would also sell down his shareholding but he would most likely maintain a management/minority shareholding in the company. Lorraine agreed that Bruce had discussed such issues with her but was not certain about the details. Lorraine mentioned that if AFT was acquired that she would like, if possible, to maintain a small shareholding - Sean said it could be possible but would be ultimately up to the purchaser.
Sean stated that Malcolm and Stewart maybe successful in their Battery & LPG business but their skills sets are not what is required in AFT and he did not see them having any involvement in the business. Lorraine and Sean agreed that this could not be resolved today and agreed to move on to the next issue.
Lorraine mentioned that perhaps we should get Paul Harrison back and Sean agreed that Paul has the skills/experience required and that perhaps in a couple of years he will return. Lorraine mentioned that she had spoken to Paul at the funeral and suggested that he should return to AFT. Lorraine suggested that she would call him within the next two weeks to see if he would return and Sean suggested that if she does and Paul agrees to meet, we will need to meet him together as he believed one of the reasons Paul departed was confusion about management & roles etc.
Sean then noted that Daryl Gladman had the requisite skills AFT needs quite urgently and was available to come back to AFT on a contract basis to support us. Lorraine stated that she could not accept Daryl returning as he was disrespectful to Bruce. Sean disagreed and Sean & Lorraine agreed to disagree and moved on to the next issue.
Lorraine suggested that in recognition of Bruce’s contribution she should continue to receive Directors payments (salary) as and when Sean does at least for the time being. Sean did not think this was reasonable and suggested that AFT is not a superannuation fund and that Bruce’s share holding will ensure that his beneficiary will receive a return via dividends and potential sale of the shareholding in the future. Sean & Lorraine agreed to disagree and moved on to the next issue.
Lorraine raised the issue of what Envirotrans Pty Ltd was and how it related to AFT - Sean explained that Envirotrans was his personal company and it holds his shares in AFT Pty Ltd. In addition it focuses on renewable energy & biogas (but not CNG or LNG projects as they are for AFT). Sean explained that Bruce was fully aware of what he was doing with Envirotrans which included consulting in regard to energy strategy, fuels and development of renewable energy projects). If a consultancy resulted in actual CNG or LNG projects than this would go entirely to AFT, one such example is Tas Gas where Sean was paid for 2 days of consulting to help develop/crystalise their NGV strategy. As soon as it became evident that Tas Gas were going to embark on the CNG project, Sean transferred the relationship to AFT and AFT now receives $2000 per month retainer payment for Sean to support Tas Gas in their Business Development activities in regard to CNG. Lorraine seemed comfortable and understood the differentiation.
Lorraine and Sean had a general discussion about the business and projects and even-though we have a good reputation and positioned well for opportunities a lot of work is required to realize the projects.
Sean raised the issue that AFT would be better situated in Altona/Laverton due to the majority of its customers/partners being based in the area. Lorraine recalled driving around with Bruce looking for sites in the past Sean suggested that not immediately but AFT should look to move as it makes good business sense.
Lorraine and Sean agreed they wanted to see AFT succeed end grow. Sean stated that he accepted that Lorraine will be a major shareholder and as the Director of the company he is committed to leading, managing & growing the business and act in the best interest of the shareholders at all times.
Meeting closed on good terms and the plan was to meet the following Monday 7^th March but due to Sean being in Tassie this is scheduled for 1 pm on Wednesday 9^th March.[33]

[33]NGV.001.001.7202.

First, it can be seen that whilst Mrs Thompson wanted her sons to take up roles in the business, Mr Blythe did not believe their skill sets were what AFT required. He and Mrs Thompson agreed to disagree on that issue for the time being. It can also be seen that Mrs Thompson was keen to have Paul Harrison back in the business, with which Mr Blythe agreed, but there was disagreement about another possible employee, Daryl Gladman. One thing is apparent; with the passing of Bruce Thompson, both Mr Blythe and Mrs Thompson saw the need to introduce personnel with appropriate skills to assist in the conduct of the business. The adequacy or otherwise of the skills within AFT to conduct its business after Mr Blythe and Mr Wilson left is a question of some importance to which I must return later.

Another important matter to note is the reference to negotiations over the previous six months for the sale of AFT , or some part of it. According to the note, Mrs Thompson agreed that her husband had discussed those negotiations with her, although apparently she had not been certain about the details. This is a topic on which Mrs Thompson did not entirely agree with the note. She only recalled a discussion about a possible arrangement with APA Group (APA), a large energy enterprise, which, according to her, Mr Blythe said wanted to buy AFT for between $5 - $6 million. As far as any documentary evidence is concerned,[34] by the time of the February 2011 meeting discussions had reached the point of an email proposing the possible sale by AFT to APA of a refuelling station that AFT planned to build and operate on leased land belonging to United Petroleum Pty Ltd in Altona North (Altona station). Indeed, the email covered a wider arrangement whereby, for any future refuelling stations which AFT proposed to operate, APA would own and hold the assets whilst AFT would operate the refuelling business.
[34]AFT.001.001.0106.

Whether it was the more limited APA proposal, or broader negotiations for the sale of AFT, it will later be seen that the Altona station sale concept became a particularly thorny issue between Mr Blythe and Mrs Thompson.

Another matter of some tension concerned the question of directors’ remuneration. In part, this was linked to the future role of Mrs Thompson within the business. Mrs Thompson evidently saw it as appropriate that she continue to receive a director’s payment ‘in recognition of Bruce’s contribution’, whereas Mr Blythe disagreed saying that AFT was not a ‘superannuation fund’. Clearly, Mr Blythe was of the view that directors’ remuneration should be tied to the director’s work contribution, rather than taking on the nature of a dividend.

Finally, it can be seen that Mrs Thompson was concerned about the possibility that Envirotrans, Mr Blythe’s company, might compete with AFT in the CNG or LNG industry. Mr Blythe’s note records that he reassured Mrs Thompson that any business in the CNG or LNG field was referred to AFT, giving the example of some business from Tas Gas. This suspicion, of course, goes to the very heart of the issues that arose later. But, importantly, the note evidences that Mrs Thompson agreed to Mr Blythe engaging in consultancy work within the energy and fuel sector confined to the provision of strategic advice, presumably because in doing so he would not be encroaching on AFT’s business.

Mr Blythe and Mrs Thompson met again on 9 March 2011. Mrs Thompson’s evidence about that meeting indicates that it was an emotional one. First, Mrs Thompson accused Mr Blythe of taping the February 2011 meeting (apparently because of the level of detail in Mr Blythe’s note of it, which he had shared). Mr Blythe became quite emotional about the death of Bruce Thompson. According to Mrs Thompson, the two of them embraced and consoled one another. The meeting finished on a more positive note.

Reflecting on the meeting in an email sent the following day,[35] Mr Blythe said he appreciated the ‘fresh start’ approach at the meeting commenting that beforehand they had both come from ‘positions of fear’. Among other things discussed at the meeting, Mrs Thompson and Mr Blythe discussed the possibility of transferring their company accounts from the Australian and New Zealand Banking Corporation (ANZ) to the Westpac Banking Corporation (Westpac). This, in fact, presaged another issue that was to become a problem later: that is, the fact that AFT had an overdraft from ANZ secured only against Thompson family assets, and not any of Mr Blythe’s.
[35]AFT.001.001.0091.

The fresh start soon faltered. Whether before or after their meeting, Mr Blythe prepared a draft of a shareholders’ agreement, dated 9 March 2011, that he wanted Mrs Thompson to sign. Mr Blythe sent it to Mrs Thompson the following day. Mrs Thompson was not prepared to sign it.

The draft agreement recorded the following proposed outcomes:[36]

·Mr Blythe would agree to Mrs Thompson becoming a director;
·Mr Blythe would be appointed managing director (and chairman of directors), receiving $12,000 per calendar month in recognition of his day-to-day executive leadership;
·Mrs Thompson would be a non-executive director, but would work in a strategic capacity in collaboration with Mr Blythe and be involved in financial administration, in recognition of which she would receive $2,000 per calendar month; and
·neither Stewart Thompson nor Malcolm Thompson would have a management role, but Stewart and Malcom could support Lorraine in her role as non-executive director and Malcolm could also provide administration support one day per week.

[36]AFT.109.001.0001.

Contrary to her apparent agreement that Mr Blythe be permitted to engage in private consultancy work providing strategic advice as recorded in Mr Blythe’s note of the February 2011 meeting, the provision which Mrs Thompson said (in her evidence to the court) that she particularly objected to was the last one, namely:

It is agreed that Sean can continue to consult in and conduct/develop operating businesses (excluding CNG or LNG related business) via Envirotrans Pty Ltd. Sean commits to full disclosure with Lorraine where there is any potential for a conflict of interest.

Mr Blythe then produced a second draft agreement dated 16 March 2011,[37] which was a shorter version of the first. It contained much the same elements, including the same provisions with respect to the involvement of Mrs Thompson’s sons in the business, but omitted any reference to Envirotrans.
[37]AFT.109.001.0011.

As did the first draft, the second d raft described Mr Blythe as being both managing director and chairman of directors. According to Mrs Thompson, she objected to the second draft because of the reference to ‘chairman of directors’, saying she was not comfortable with Mr Blythe having a casting vote. But she said in evidence that she did not believe she ever conveyed that objection to Mr Blythe, saying she ‘just sort of saw it and probably kept that to myself’.[38] In any event, Mrs Thompson was not prepared to sign the second draft either.
[38]T143.6.

Thereafter, there was no further discussion about a formal shareholder agreement, and the proposal was left in abeyance. Despite the absence of any formal agreement, Mr Blythe and Mrs Thompson proceeded to work together according to an arrangement that reflected the principal elements set out in the drafts, other than in respect of Mrs Thompson’s level of remuneration as I will come to shortly.

Around this time there was a rather revealing exchange of emails involving Mr Wilson, who was working in Western Australia, Mr Blythe and Malcom Thompson. It is worth recording because it contributes to an assessment of Malcom Thompson, his general business acumen and approach, and likely explanations as to why, after Mr Blythe and Mr Wilson later left AFT, AFT was not always successful in obtaining or maintaining business.

On 7 June 2011, Mr Wilson wrote an email to Malcom Thompson requesting information to reconcile his claims for payments for travel allowance and reimbursements for expenses against details in his bank account. The email, copied also to Mr Blythe, and two other employees who I infer had an interest in receiving similar information for themselves, commenced and concluded as follows (the bold was in the original):

Due to the amount of traveling I have been doing this year and the lack of payslips received from you, I have found it hard to reconcile my pays going into my bank account against travel allowance and reimbursements (eg: taxi fares). The last payslip I received was for March.
…
I would like these sometime this week, the earlier the better. I want to make sure I have all the correct info to do my tax return this year. I know the tax return problem I had for 2009 was my fault, not the companies, so I want to make sure I have everything properly documented for this years return.

In between these paragraphs were details of specific information Mr Wilson sought, including information about his staff leave entitlements. In my view, the email was direct in terms of the information sought, and why it was sought, and demonstrated a degree of frustration at the delay in receiving information. But there was nothing overtly disrespectful in its tone.

Malcom Thompson took offence at this email, forwarding it to Mr Blythe with a covering email that was also copied to Mr Wilson, to the two other employees, Robert Clarke and Paul Donatucci, and to Mrs Thompson. He wrote as follows:

Sean,
I would like to ask this little piss ant who the f*ck he thinks he is!! If it wasn’t for the Thompson family AFT just wouldn’t exist – that’s the bottom line. Time for some respect around here!!! As for the bold text, I know where I would like to jam it. Maybe better for you to handle this before I do this is my unique style. Also, I’m guessing that if he spent more time working, and less time talking and sticking his hand out, then the job may have been done before the weekend. I only work one day a week. Pay slips not available on email.
Also, don’t appreciate the general broadcast!!! Although you might want to inform Tim that if a general broadcast is warranted, then he might want to include the most important person, Lorraine as the major shareholder of AFT!!!

His reply was a totally unwarranted and abusive reaction to an employee seeking information about his entitlements. What made it worse was that it was sent to Mr Wilson’s co-workers. In cross-examination Malcom Thompson accepted that this email was abusive. He claimed he just hit the ‘reply all’ button without consciously thinking where it was going. Had that been the case, his email would have been addressed, first, to Mr Wilson. But it was addressed primarily to Mr Blythe and only copied to Mr Wilson along with the others. So, his explanation did nothing to elevate my view of his credit. He said he had apologised to Mr Wilson, claiming that he was under pressure because of his father’s death and coming to terms with it. I find that an unpersuasive explanation for this outburst.

As for his reference to his own ‘unique style’, he said his style was ‘[p]robably at that particular time, very much along those lines’.[39] However, in conjunction with other evidence of his dealings with AFT customers at a later time, I am not convinced it was a style isolated to this period of time. The tone of the email illustrates a particular view of the pre-eminence of the Thompson family within AFT which, if shared by Mrs Thompson, might explain some of Mr Blythe’s difficulties within AFT after Bruce Thompson died.
[39]T444.

Returning to the narrative, Mrs Thompson commenced in her role in administration at AFT, working with the part-time bookkeeper and generally assisting in answering any questions which the company accountant, Mr Bansal, might ask. Consistently with their arrangement, on 16 June 2011, Mr Blythe sent an email to other staff of AFT (five recipients) announcing that Mrs Thompson would be joining AFT two days per week in an ‘administration management role’ and would be the primary person responsible for all administration issues — that is, accounts payable and receivable, BAS and payroll.[40]
[40]NGV.001.001.7208.

Their arrangement was further refined in a discussion in early August, confirmed in an email from Mr Blythe to Mrs Thompson on 8 August 2011[41] in which their respective monthly director’s fees were agreed, as were their respective duties. Mr Blythe was to focus on ‘growing and managing the business’ and Mrs Thompson was to work three days per week in an administrative capacity. Mr Blythe was to receive $13,000 per month for his role as Chief Executive Officer and Mrs Thompson $10,000 per month ‘in recognition of Bruce’ and for her part-time administrative duties. Mr Blythe’s agreement to these fees for Mrs Thompson amounted to a surrender of his earlier view as noted above, however, the remuneration was to be reviewed after 12 months having regard to market pay rates and the roles being performed. The topic of their relative levels of director’s remuneration was to re-emerge later as a festering issue.
[41]AFT.107.001.0127.

Mrs Thompson was formally appointed a director on 31 August 2011. From about then onwards, she and Mr Blythe had weekly meetings and also communicated via email.

According to Mrs Thompson’s evidence, AFT’s business during the second half of 2011 consisted in:

·continuing with the operation of refuelling passenger vehicles, in conjunction with Tas Gas, at two refuelling stations in Tasmania (at Moonah and South Point, completed early in 2011);
·completing construction and commencing the operation of the Altona station to be used to refuel Toll vehicles; and
·carrying out forklift conversions (for example, for Toyota and AdaptaLift).[42]

[42]T152.22–153.4.

Mr Blythe was driving the initiatives such as Altona and Mrs Thompson gave evidence that she had no personal involvement in those activities (except for preparing monthly invoices).[43]
[43]T152.11-13.

Apart from Mr Blythe and Mrs Thompson herself, AFT’s Victorian employees at that time were Malcom Thompson (one day per week in administration), Mr Donatucci, Alex Courtney (a part-time book-keeper) and Gary Anderson.[44] In addition there was a branch in Western Australia with Mr Wilson and Robert Clarke.
[44]T152.15.

Tension develops over the Altona station

On 19 January 2012 there was a full-day meeting between Mr Blythe and Mrs Thompson, for AFT, and representatives of Brookfield and Tas Gas.[45] Brookfield (Brookfield) is a large international infrastructure business involved broadly in gas and electricity utilities, ports and railway lines, and timber plantations across North & South America, Europe and Australasia.[46] Brookfield had many subsidiaries as its vehicles for involvement in particular sectors or projects. Where necessary to do so I will refer to the particular manifestation of Brookfield particular to a specific project, otherwise ‘Brookfield’ is simply a generic reference to the infrastructure business. Tas Gas was a subsidiary of Brookfield specifically engaged in retail natural gas assets and supply in Tasmania. The events of 19 January 2012 entailed meetings, visits to particular AFT business plants and operations, and a dinner. Mrs Thompson did not attend all the activities but was at least present at the primary meeting.
[45]AFT.107.001.0199.
[46]Description given in AFT.107.001.0259.

On this particular occasion the representatives of Brookfield/Tas Gas included Richard Sheather and Simon Himson from Tas Gas and Michael Cummings from Brookfield. As already mentioned, AFT had in place a business arrangement with Tas Gas operating two refuelling stations for passenger vehicles. Tas Gas also paid AFT a monthly fee for the consultancy services of Mr Blythe. It is evident that Mr Blythe had been working on a new and wider collaboration with Brookfield and it was that new venture that was the subject of the January meeting.

Mr Blythe had prepared a proposal titled ‘The Australian NGV Infrastructure Opportunity’ and emailed it to Mrs Thompson.[47] It was a relatively sophisticated presentation of 54 slides constituting, in effect, an argument for Brookfield and AFT to join forces in the CNG and LNG vehicle refuelling market. The presentation ranged broadly over many vehicle sectors, identifying target markets in forklifts, refuse trucks, concrete trucks, depot distribution trucks, buses, articulated trucks, car and light commercial vehicles, and fleet vehicles. The proposal appeared to contemplate Brookfield investing its capital in the infrastructure and AFT supplying its technical and operational know-how and experience in the natural gas vehicle refuelling market. Joining forces with a company the size of Brookfield would, for a relatively small business like AFT, seem to offer a very valuable opportunity.
[47]AFT.107.001.0201. ‘NGV’ is an acronym for ‘Natural Gas Vehicles’.

In her evidence, Mrs Thompson acknowledged that one potential method for AFT to conduct its business was to do so in conjunction with partners who would own the refuelling assets. She understood that it was that model that was being presented to Brookfield.[48] An issue over this type of model was about to arise between herself and Mr Blythe in relation to the Altona station.
[48]T288–289.

Soon after, in early February 2012, Mr Blythe and Mr Sheather exchanged emails. Mr Sheather reported that the presentation had been well received at Brookfield and suggested they move to drafting broad terms of a possible ‘Relationship Agreement’ between Brookfield and AFT.[49] This was occurring in the context of AFT moving ahead with its own Altona station for the refuelling of vehicles owned by Toll. The contemplation was that the Altona station would be the first step in the broader AFT/Brookfield venture drawing in other fleet operators, including extending the business with Toll to other sites. Mrs Thompson was copied on these exchanges.
[49]AFT.102.001.3930.

A confidentiality agreement was executed between AFT and Tas Gas in February 2012 to enable the exchange of sensitive information.[50] Bullet points for a relationship agreement were prepared,[51] and then a more formal document (to be made between AFT and Tas Gas as a member of the Brookfield Infrastructure Group) was drafted by a firm of solicitors.[52] Mrs Thompson saw the confidentiality agreement which was provided to her probably around the same time as the more formal draft relationship agreement. In emails in May 2012 she asked Mr Blythe what progress had been made saying she wanted to discuss it with him before he had further discussions with Tas Gas.[53] It is not clear what happened in relation to the proposed relationship agreement with Tas Gas before July when a disagreement arose between Mr Blythe and Mrs Thompson about the structure in which the Altona station was to be held.
[50]AFT.405.009.0001_2.
[51]AFT.102.001.0241.
[52]AFT.001.001.0132.
[53]AFT.102.001.3940.

Meanwhile, in April 2012 Mr Blythe had informed Mrs Thompson of a response prepared on behalf of AFT to an early study conducted on behalf of the Victorian Government for the EfR project.[54] This project ultimately became a significant potential opportunity for AFT and, as mentioned earlier, is the subject of one of AFT’s claims against the defendants.
[54]AFT.107.001.0044.

Issues arose in July 2012 which revealed the emerging strain in the relationship between Mrs Thompson and Mr Blythe on the eve of Mr Blythe taking a month’s leave to travel overseas between 5 August and early September.

Two meetings occurred in relation to the structure in which the Altona station was to be held and operated. The first meeting occurred on Monday 16 July between Mrs Thompson and Mr Blythe and was followed by an email exchange between them agreeing to a further meeting on 20 July which was to include Mr Bansal. At that first meeting Mr Blythe apparently spoke of his intention that the Altona station be sold to Brookfield/Tas Gas (consistently with the wider scheme discussed earlier in the year). In her email the next day (17 July) Mrs Thompson began expressing reservations, raising doubts about the financial merit of that structure. Mr Blythe responded by email agreeing to prepare a costing model for discussion with Mr Bansal, stressing that the ‘sale of the asset to Brookfield is about the relationship/national strategy, freeing up cash and establishing a way forward for future deals’.[55]
[55]Email chain, AFT.107.001.0132.

The day before they met on Friday 20 July, Mr Blythe sent Mrs Thompson and Mr Bansal a series of spreadsheets he had prepared concerning the sale of the Altona station, his costings and projections.[56] The summary worksheet contained a comparison of projected earnings on the two scenarios of AFT keeping the station, on the one hand, and selling it to Brookfield, on the other. It also identified other positives and negatives associated with each scenario. Two key positives from the sale advanced by Mr Blythe were the immediate cash injection for AFT and the development of the ‘Brookfield model’ for expansion.
[56]AFT.107.001.0034, AFT.107.001.0035.

Mr Bansal said in his evidence that the meeting on 20 July ended in disagreement over the merit of selling the Altona station to Brookfield or Tas Gas. He thought that Mr Blythe was ‘adamant’ about selling to Brookfield and did not like the fact that neither he nor Mrs Thompson appeared to agree with him. Some of the grounds of disagreement were identified in evidence.[57] One objection raised by Mrs Thompson was, possibly, the lack of any written agreement with Brookfield formalising their business relationship.[58] Over the following weekend Mr Blythe wrote to Mrs Thompson stating that in view of her concerns they should delay any sale until they were in agreement, proposing a means of putting off further discussions with Brookfield/Tas Gas about the Altona station for a few months. However he wished to ‘focus on developing the new sites and agreements’ with Tas Gas on his upcoming visit to Tasmania.[59]
[57]T172.
[58]This was the version given by Mrs Thompson in evidence at T172.18. It was challenged in cross-examination. Mr Bansal recalls her querying whether there was yet any agreement in place for the sale: T590.7.
[59]AFT.107.001.0177.

Mrs Thompson’s reply would not have given him any cause for comfort. She proposed going one step further and delaying discussions with Tas Gas about ‘all the refuelling sites…until we have something in writing from Brookfield/[Tas Gas]’ together with assurances about AFT’s entitlements to being able to maintain and service the refuelling stations.[60] She questioned whether profit margins justified returns from refuelling sites generally and raised an alternative strategy of pursuing ownership of smaller refuelling stations in their entirety. Such a strategy, she wrote, would mean AFT was not ‘completely reliant’ on Brookfield/Tas Gas.
[60]Ibid.

In short, Mrs Thompson’s email strongly questioned the entire approach Mr Blythe appears to have been working on for a considerable time, going right back to the 2009 concept with APA and then advanced more substantially with Brookfield.

Alongside this conversation, another issue was looming. AFT had enjoyed an overdraft with a limit of $100,000 with its banker, ANZ. The bank manager, Mr Orrell, had advised that the facility was to be withdrawn at the end of July 2012 (whether due to natural expiry or something else was not clear). Until then, the overdraft facility had been secured by guarantees and a mortgage over real property belonging to the Thompsons. To put in place any new facility, whether for the same amount or something less, numerous things were required. In addition to updated financial information of past and present performance, ANZ wanted profit forecasts. It also wanted to know what guarantees and other security was being offered.

Mrs Thompson conveyed much of this information to Mr Blythe in an email dated 24 July 2012.[61] Mr Blythe saw Mr Orrell the same day and reported to Mrs Thompson that he was hopeful ANZ would provide a temporary facility for $50,000 for 2 months pending their provision of the requested financial information.[62] For the provision of the temporary overdraft Mr Blythe listed a number of financial and security documents that would need to gathered within a few days. He requested Mr Bansal to prepare balance sheet and profit/loss statements for FY2011 and drafts for FY2012, while Mr Blythe would attend to a projected cash flow for FY2013. He said he had already given a personal guarantee and was open to giving further security if needed. He requested that Mrs Thompson provide a personal guarantee as well.
[61]AFT.107.001.0135.
[62]AFT.301.001.4352.

For a number of reasons, AFT’s financial accounts for the previous few years had not been finalised. Mr Bansal was working on them. By the beginning of August 2012 AFT was experiencing cash flow problems and was chasing debtors.[63] Mr Blythe was due to leave for overseas, was still seeing clients interstate and had arranged a meeting with Mrs Thompson on Tuesday 7 August to work through issues. Ahead of that meeting Mrs Thompson provided him with a list of concerns. She said she was not being adequately informed about the outcome of his interstate trips; challenged his view about obtaining an independent business valuation for the bank; expressed surprise that an asset register had not already been completed; and queried whether all expenses had been appropriately represented in the accounts.[64]
[63]AFT.301.001.4348.
[64]AFT.107.001.0140.

Just how that final meeting went, assuming it occurred, was not the subject of any detailed evidence at the trial. In any event, Mr Blythe left for overseas very shortly after it was scheduled to occur. There is no evidence of any further communication between him and Mrs Thompson until he returned in the first week of September.

But, clearly, Mr Blythe left for his holiday with much to think about. Only 18 months earlier he had been in a partnership with a person who had complementary skills in the business and with whom, it would appear, he shared similar a business vision. Perhaps, when Bruce Thompson died, Mr Blythe thought he could seize an opportunity to take the business in a different direction to any that Bruce Thompson might have approved. Perhaps Mr Blythe was accustomed to being entrusted by Bruce Thompson with significant independence in AFT’s contractual negotiations and decisions that assumed that situation would continue. Perhaps Mrs Thompson simply had different ideas to those of her husband. I cannot say and make no such findings.

Whether or not any of those speculations might supply an explanation, on numerous fronts Mr Blythe’s and Mrs Thompson’s approach diverged. Whereas Mr Blythe entertained grand ideas of expanding the business, leveraging off the scale and financial strength of Brookfield, Mrs Thompson doubted that approach and seemed to prefer that AFT maintain greater control over its own destiny. Whereas Mr Blythe seemed to assume he could confine Mrs Thompson to managing the administration while he made the significant business decisions, he was finding that Mrs Thompson had a very different view about the level of detail at which she wished to participate. Further, whereas Mr Blythe considered that ‘drawings’ from the business paid to directors should reflect the relative differences he saw between his technical and operational contribution and the contribution Mrs Thompson could make, Mrs Thompson had a quite different view. In FY2012, the directors’ payments increased from the previous year’s level of $116,000 to $316,000.[65]
[65]AFT.112.001.0035, at 0038.

With their strategic vision and personal styles being so divergent but their voting rights within the company being equal, Mr Blythe must have wondered what the future held. It is therefore not surprising that when Mr Blythe returned from overseas in early September, he immediately raised the prospect of one of them buying out the other. But his suggestion took Mrs Thompson greatly by surprise. The fact that it did, and her determined resistance to even consider it over the ensuing five and a half months, reveals, in my view, a certain lack of commercial reality. For a proper understanding of Mr Blythe’s resignation decision, which is an important consideration when assessing the character of his conduct against principles of fiduciary duty, it is necessary to track the story in some detail.

Mr Blythe’s offer to buy Mrs Thompson’s shares

On 6 September 2012 Mrs Thompson, Mr Blythe and Mr Bansal met to discuss the company’s financial accounts. It was their first meeting after Mr Blythe’s return from overseas. It lasted some two hours. The FY2010 accounts still had not been prepared due to what Mr Bansal explained as a need to redo figures prepared by Jonathan Partners. He warned that AFT was likely to have a large GST liability to pay. Toward the end of the meeting, Mr Blythe announced to Mrs Thompson that he wanted to buy her shareholding. Mrs Thompson expressed surprise. After some discussion she said she did not want to sell. Mrs Thompson said that, after seeing her evident surprise, Mr Blythe lent across the table to her and reassured her, telling her not to worry and saying ‘it will be fine’.[66]
[66]T182.24.

Mr Bansal said that Mrs Thompson told him after the meeting (or had said in the meeting) that she did not want to sell because of her attachment to her late husband and what the company had meant to him.[67] Indeed, Mrs Thompson’s evidence was to the same effect.[68] Even recalling and giving evidence about it in 2017 caused her to become distressed.
[67]T604.13, T608.2–10.
[68]T182.28–T183.3.

In an endeavour to help the parties, Mr Bansal sent them both an email following the meeting.[69] He recommended a five point process to help them reach an ‘amicable resolution’. He produced those points in response to Mr Blythe asking at the meeting how the company might be valued in the context of his wish to buy Mrs Thompson’s shares. Those five points recommended that specific financial information be compiled. Mr Blythe used those points to produce a valuation on 1 October.
[69]AFT.107.001.0085.

Leading to 1 October, Mr Blythe told Mrs Thompson he was working on the valuation and waiting on figures from Mr Bansal. He suggested dates on which they should meet to discuss his proposal. Mrs Thompson preferred to focus on the company’s ongoing business such as progress on talks with Brookfield/Tas Gas;[70] progress on the overdraft application to ANZ;[71] ongoing cash flow problems and, as one measure to assist, the postponement of further directors’ payments.[72]
[70]AFT.102.001.3943, AFT.102.001.3944.
[71]AFT.107.001.0165.
[72]AFT.107.001.0134.

On 1 October 2012 Mr Blythe sent Mrs Thompson and Mr Bansal a spreadsheet containing his valuation of AFT. He accompanied the document with an email in which he admitted he was no expert in valuation, said he thought that an independent valuation could value the company more conservatively because AFT lacked written contracts with its customers, its business being largely ‘relationship-based’, and asked for a meeting the following week.[73] He said he wished to have a resolution by the end of October, foreshadowing a possible need for an independent valuation or mediation.
[73]AFT.107.l001.0016, AFT.107.001.0019.

By reference to the five points suggested by Mr Bansal, Mr Blythe arrived at a valuation of $539,738 giving a value for Mrs Thompson’s 55% shareholding (including her 5% non-voting shares) at $296,855. The valuation comprised a summary worksheet and 14 supporting schedules dealing with AFT’s various business operations. On its face, considerable time and effort appears to have been devoted to producing it.

Mrs Thompson said in evidence that when she received Mr Blythe’s valuation she felt ‘relieved’ because it was, in her view, too low and so she would not need to make any decision about selling.[74] I took that to mean that she did not think she needed to take it seriously. When Mr Blythe pressed for a date and time to discuss it, Mrs Thompson avoided committing to any such meeting although she was willing to meet to discuss ongoing operational concerns. In her evidence Mrs Thompson maintained that one reason she and Mr Blythe did not meet to discuss his offer was that they could not coordinate availability.[75] In one email she said she could not attend on a proposed date because she had ‘a few appointments …[to] attend to one being a dental check-up’.[76]
[74]T184.17.
[75]T186.
[76]AFT.102.001.4306; NGV.001.001.7228, NGV.001.001.7227.

However, a week after she received the valuation, she wrote to Mr Blythe asking that he not ‘continue pressuring and intimidating [her] with regard to the sale of [her] shareholding’. She said she needed more time to consider and had not yet read his draft valuation ‘in detail’. She finished saying, ‘If you insist on an answer now, then the answer is “No, I am not selling”’.[77]
[77]NGV.001.001.7226.

Mr Bansal had a conversation with Mr Blythe about a week after he received the valuation. Mr Blythe said that if Mrs Thompson was not willing to sell her shares then he was expecting her to make an offer to buy his instead. Mr Bansal then spoke to Mrs Thompson who said she was not willing to sell or doing anything about it because ‘the passing of Bruce was very raw to her’.[78] Mrs Thompson said a similar thing at another point in her evidence.[79]
[78]T596.
[79]T186.16.

Negotiations through solicitors

Evidently, the failure of negotiations led Mr Blythe to resort to instructing solicitors to press the matter on his behalf. He consulted Harwood Andrews. That firm wrote to Mrs Thompson on 16 November 2012.[80] The letter set out Mr Blythe’s formal offer to purchase the shares held by Mrs Thompson and her company, Global Beat. The offer was now a little different. Mr Blythe offered to pay $350,000 plus a percentage of the earnings of the company made in FY2013 and FY2014 when those earnings were determined. Some other terms were suggested, with a proposed completion date to be 1 January 2013.
[80]AFT.403.002.001.

Additionally, Mr Blythe’s solicitors said he was prepared to attend a ‘round table’ conference to discuss the terms if that was desired. The offer was predicated on the view that the company could not continue as it was and that Mr Blythe considered it necessary for one shareholder to be bought out. Mr Blythe’s solicitors wrote that while there were reasons for that view, for the present purpose it was not necessary to go into them. Mrs Thompson passed the letter to her own solicitors, McKean Park, who thereafter took up further exchanges on her behalf.

The response from McKean Park dated 20 November[81] would not have encouraged Mr Blythe. It set out a list of criticisms about the contents of the Harwood Andrew’s letter, the basis of the valuation and Mr Blythe’s conduct generally. The offer was rejected. No counter offer was made but advice was offered as to how Mr Blythe should support any further offer he intended to make. In the letter, a concern was expressed that Mr Blythe had been having (unidentified) discussions with other companies to restructure the business, kept secret from Mrs Thompson, which would result in a substantial increase in AFT’s value after she was bought out. Mrs Thompson’s solicitors pointedly reminded Mr Blythe he was under ongoing duties to act in the best interests of AFT.
[81]AFT.403.002.0014.

However, the letter advised that, in any event, Mrs Thompson would not be considering any offer to purchase her shareholding prior to 1 February 2013. Apart from dealing with the sale of shares, McKean Park raised separate issues of concern, namely: Mr Blythe receiving 50% of directors’ ‘fees’ (when his shareholding was only 45%); Mr Blythe not paying proper attention to the company’s ongoing business; and Mr Blythe keeping company records at his home. The letter finished stating that any further communication on ‘this matter’ must be conducted through solicitors only.

Harwood Andrew’s response for Mr Blythe on 3 December 2012 was short.[82] Unsurprisingly, they made the point that McKean Park’s letter only served to underscore the ‘complete breakdown in the relationship of the parties’. A round table conference was proposed within seven days on the basis that postponing further discussion about the relationship breakdown was likely to have a detrimental impact on the ongoing conduct of the company. When Harwood Andrews later sought a response to that letter McKean Park informed them on 17 December that Mrs Thompson was not prepared to enter any discussions until February 2013, saw the relationship as workable and did not see any existing impediment to the conduct of the business. Accordingly, there were no further discussions on the topic at that time.
[82]AFT.403.001.0022.

In theory, of course, there need not have been any impediment to the conduct of the business of AFT. But that assumed its directors were jointly content with the company operating without any significant change to its direction and both willing to support its operations on that basis, with personal guarantees and other securities if necessary, satisfied that in doing so their ‘investment’ in effort and resources was consistent with – or, at least not detrimental to – their respective long term interests. That may have been Mrs Thompson’s position; but it was not Mr Blythe’s. Mrs Thompson could afford to stay still; Mr Blythe did not see that as an option. Mrs Thompson manifestly failed to appreciate that difference, as events to follow proved.

Meanwhile, other issues continued to intervene: the EfR opportunity developed some momentum and required a response from AFT; financial pressures continued to mount and the overdraft issue became more acute; and, in the midst of this, a decision was required about whether to maintain the Western Australian operation where Mr Wilson was employed.

Around mid-November 2012 the Victorian Government issued an invitation for expressions of interest to participate in the EfR.[83] The EfR project was described as:

The development and operation of a delivered natural gas capacity for regional Victoria utilising alternative solutions including CNG and/or LNG infrastructure; delivery of natural gas to town boundaries; development and operation of local in-town reticulation networks; sourcing of wholesale gas supply and provision of gas retail services.

[83]AFT.109.001.0206.

Fourteen regional towns were listed as the priority towns to receive delivery of natural gas. Brookfield lodged a response stating its interest in submitting a formal submission to any future bid process, in conjunction with AFT.[84] Indeed, it may be that Mr Blythe was responsible for drafting or at least modifying Brookfield’s submission. More detail will be given below in these reasons when I come to consider the eight business opportunities relied upon by AFT in its claim. For now, it is sufficient to note that Mr Blythe kept Mrs Thompson informed of developments concerning this opportunity. On 6 December he sent to Mr Sheather, copied to Mrs Thompson, the various documents to be submitted to the government, requesting Mr Sheather’s modifications.[85] As with Mr Blythe’s earlier company valuation and offer to buy Mrs Thompson’s shares, Mrs Thompson forwarded the EfR documentation to her son, Malcom.
[84]AFT.107.001.0259.
[85]AFT.109.001.0131.

Just prior to the Christmas break Mr Blythe and Mrs Thompson corresponded about financial matters, with Mr Blythe producing and sending a summary of AFT’s orders for the first three months of 2013 and a cash flow forecast.[86] That document was the subject of a meeting early in the new year.
[86]AFT.107.001.0002, AFT.107.001.0003.

On 8 January, while Mr Blythe was still on leave, Mrs Thompson emailed him to say she was transferring $8,000 of her own money into AFT to cover staff wages, as the company’s bank account did not have sufficient funds to meet payments.[87] For the purpose of producing up to date financial information for discussion, Mr Blythe asked for the removal of seven itemised receivables appearing in a list that had been prepared by Mr Bansal, explaining why each of them was either no longer owing or required adjustment.[88]
[87]NGV.001.001.7154.
[88]AFT.107.001.0009.

On 15 January 2013, Harwood Andrews attempted on Mr Blythe’s behalf to advance the issue of the purchase of Mrs Thompson’s interests in AFT.[89] I set out the letter in full (Mr Brett was a solicitor at McKean Park and Mr Anderson was a solicitor at Harwood Andrews):
[89]AFT.403.002.0005.

Further to David Brett's discussion with Richard Anderson on 18 December 2012 we summarise the position of Mrs Thompson as follows:
1. Our client's 16 November 2012 offer to acquire the interest in AFT held by Mrs Thompson and Global Beat Pty Ltd has been rejected. No counter offer has been made.
2. Mrs Thompson apparently has some concern that our client may have had some negotiations with, or tentative arrangement in place, to dispose of AFT after acquiring Mrs Thompson’s interest for a higher price to an unspecified third party (an assertion which our client categorically denies).
3. Mrs Thompson objects to the current payment of directors fees, presumably as the current arrangement purportedly gives our client a greater entitlement to participate in the profits of AFT than would otherwise be the case if profits were allocated in accordance with the rights attaching to the various shares held by our respective clients.
4. Notwithstanding the existence of tensions between our respective clients, they have continued to conduct themselves in a civil manner in relation to the operation of AFT and have sought to avoid argument.

Without wishing to debate the merits of our respective client's positions, there appears to us to be certain issues about which there should be no dispute:
a) Regardless of the reasons (a point made in our initial letter to Mrs Thompson of 16 November 2013), the fact is the relationship has broken down between the parties. If nothing else this is demonstrated by Mrs Thompson's concern that our client may be, in effect, in breach of his duties as a director by holding discussions with third parties to the detriment of AFT.
b) The fact that our clients continue to behave in a civil manner towards each other merely reflects their professionalism and reflects well on both of them. Civility between our respective clients does not mean our clients can continue to work with each other in the business of AFT. For our client's part, he has instructed us in relation to a number of issues of concern but he sees little point in inflaming the situation by articulating them. Doubtless Mrs Thompson has provided you with similar instructions and at least some of those issues are referred to in your 30 November 2012 email.

It is said that from the combination of these facts it can be inferred that Mr Blythe, Mr Wilson and Mr O’Leary engaged in a dishonest and fraudulent design through the establishment of NGV and advanced their alternative interests and those of NGV over the interests of AFT.

Additionally, as evidence of the alleged arrangement made between Mr Blythe, Mr Wilson and Mr O’Leary in late 2012 or early 2013, AFT relies upon admitted telephone communications between Mr Blythe and others over the 14 month period between March 2012 and May 2013.[195] Those admitted telephone communications reveal a number of things:

·Mr Blythe regularly communicated (by phone or text) with Mr Donatucci, Mr Wilson, Mr O’Leary and Mr Himson over the entire period (except not beyond February 2013 with Mr Donatucci);
·Mr Blythe communicated most (by a long way) with Mr Donatucci over that period, possibly because Mr Donatucci was AFT’s next most senior Melbourne employee;
·there was a noticeable spike in communications between Mr Blythe and Mr Donatucci in September 2012, and between Mr Blythe and Messrs Wilson, O’Leary, Himson and Sheather in October 2012, and thereafter solid communications with Messrs Wilson, Himson and Sheather in November 2012; and
·communications in December 2012 and January to February 2013 between Mr Wilson and those people dropped off and settled to more modest figures, except that there were more calls consistently to Mr Sheather over that period than there had been previously, building to a high number in about April 2013.

[195]Amended Schedules 7 and 8 to the plaintiff’s Notice to Admit: CRT.020.002.0001.

Between September 2012 and 18 February 2013 Mr Blythe was in the midst of his attempts to buy out Mrs Thompson’s interests in AFT. His endeavours were most actively pursued in November, December, January and February when both he and Mrs Thompson engaged solicitors to press and respond to the buy-out issue.

In my view, it is most unlikely that any spike in communications in October and November 2012 between Mr Blythe and the various people I have mentioned was for the purpose of Mr Blythe planning his departure from AFT when, as is evident, he was pressing so hard to purchase and retain the company. My view of the evidence is that Mr Blythe made serious offers to buy the business, was very keen to do so, deployed resources and expenditure to try and achieve that goal, and had plausible grounds for believing that he would do so. He was informed that Mrs Thompson would consider sale in the new year, and he persisted then with his attempts. It was only when it became apparent that those attempts were likely to be consistently rebuffed, that he chose to take a different course.

So, between September and November 2012, Mr Blythe may well have been seeking advice from others about the various elements to include in a valuation of a company, and also more generally about how to undertake company valuation. He may even have been sounding out potential business partners in the AFT business. But I see no reason to infer that he was seeking to set up his departure from the very company he was pestering Mrs Thompson to buy, or to divert business from that company. Further, I do not interpret his actions as some sort of ruse to throw people off the scent as to his true ambitions.

It would not, of course, come as a surprise if Mr Blythe entertained thoughts of a ‘plan B’ should Mrs Thompson ultimately not agree to sell her shares to him, particularly once the point was reached in January when Mr Blythe invited her to also consider making an offer to buy his shares. That ‘plan B’ might have involved the notion of establishing a business with others or simply taking up a consultancy or series of consultancies. Such thoughts and considerations must have been almost inevitable. But acknowledging those as ideas that probably occurred to Mr Blythe, within a range of possibilities, does not cause me to alter my views about the improbability of there having been a dishonest design.

It is clear that, subsequently, Mr Blythe joined in business with Mr O’Leary through NGV. At some stage, Mr O’Leary’s interest in participating with Mr Blythe in the CNG and LPG industry must have emerged and come to fruition. However, Mr Blythe’s communications with Mr O’Leary had been steady all the way through the period for which the telephone communications have been tracked, with a spike around the time that Mr Blythe was looking to purchase AFT from Mrs Thompson. There is no reason to suppose that their communications between March and September 2012 had anything to do with joining in business together. In those circumstances, given Mr Blythe’s desire to purchase AFT and Mr O’Leary’s ultimate involvement in the industry with Mr Blythe through NGV, the more intense communications between Mr Blythe and Mr O’Leary in October and November are more likely to be explicable, for instance, because Mr Blythe was looking to Mr O’Leary as a potential partner if he purchased AFT, or perhaps merely for general business advice and support.

On the other hand, it is likely, in my view, that the explanation for Mr Blythe’s communications in October and November of 2012 with Mr Sheather and Mr Himson in particular, and perhaps also Mr Wilson, was in connection with the preparation of the EfR request for information which was finalised in early December. There were also a number of other business opportunities coming to light at that time (discussed above) which plausibly explain the intensity of many of the communications

There is no unambiguous evidence of communications between Mr Blythe, Mr Wilson, Mr O’Leary, Mr Himson or Mr Sheather that signifies any untoward or dishonest preparation to establish a competing entity whilst Mr Blythe and Mr Wilson were still employees of AFT. Rather, all of the communications in evidence, and the pattern of communications between Mr Blythe and others, are readily explicable by the timing of Mr Blythe’s attempts to purchase all of the shares in AFT and/or communications necessary to further the ordinary business of AFT. In short, there is no cogent reason to infer that dishonest and fraudulent preparations were being discussed when there are plentiful plausible and innocent explanations available.

That conclusion is not altered by having regard to the so-called misrepresentations alleged to have been made by Mr Blythe to Mrs Thompson about the status of business opportunities or the value of the company. I take into account the fact that Mr Bansal thought that Mr Blythe was presenting an unusually dim outlook for AFT in early 2013. But, I am not convinced that Mr Blythe was necessarily wrong about that picture. The company was struggling with its cash flow and had been for some time by early 2013. Mr Blythe had the best knowledge of what jobs were available and presented spreadsheets that attempted to represent the existing business and forecast income and expenditure.

Whether that picture was truly on the pessimistic side is difficult to assess. But if it was so obviously wrong, neither Mrs Thompson or Mr Bansal produced a competing set of figures which demonstrated a significantly different outlook, although Mrs Thompson was critical of some things that were left in or left out. In any event, all of this was occurring at a time when the parties were engaged in a process of potential sale: each had their motives for inflating or deflating the value within reasonable parameters. If Mr Blythe was putting forward a valuation on the low side, it only reinforces the conclusion that he was genuinely wanting to purchase the company and hopeful of succeeding. Mr Blythe consistently offered the option of obtaining an independent valuation or for Mrs Thompson to offer her own valuation. His offer was not taken up, but his behaviour was not consistent with a person anxious to shield Mrs Thompson from some supposedly more realistic picture.

In the result, I am not persuaded that Mr Blythe or Mr Wilson or Mr O’Leary, or any combination of them, engaged in discussions or came to some arrangement, prior to 18 February 2013, to establish a new enterprise and to divert business from AFT to that enterprise, or to ‘run dead’ on business opportunities for AFT in preparation for doing so. Accordingly, I reject the allegation that they engaged in a dishonest and fraudulent design.

Conclusions with respect to the eight businesses

Having now made findings of fact pertinent to:

·the nature of Mr Blythe’s and Mr Wilson’s employment with AFT and the duties owed to it;
·the circumstances of Mr Blythe’s departure from AFT;
·the alleged improper use of confidential information;
·Mr Blythe’s and Mr Wilson’s involvements in the eight businesses the subject of AFT’s claims; and
·their alleged arrangement with Mr O’Leary before they resigned from AFT to set up NGV and divert AFT’s business to it,

it is now possible to draw final conclusions with respect to the breaches of fiduciary duty and statutory contraventions alleged in connection with each of the eight businesses.

I have previously outlined, at a relatively high level, the core equitable principles and the CA provisions relied upon.

Having rejected AFT’s allegation of dishonest and fraudulent design based upon supposed conduct of Mr Blythe and Mr Wilson whilst still in employment with AFT, the remaining allegations of fiduciary breach and statutory contraventions essentially concern their conduct after they each resigned. In the case of Mr Wilson, the only applicable duty operating after his resignation was the prohibition found in s 183 of the CA against improperly using information.[196] Like Mr Wilson, Mr Blythe also remained subject to the s 183 prohibition.
[196]Unlike ss 181 and 182, s 183 sets out a duty that continues after a person stops being an officer or employee of the corporation.

But, in Mr Blythe’s case, the potential for liability for breach of fiduciary duty for post-resignation conduct remained, although it is somewhat narrowed. For example, the scope for establishing a breach of the ‘conflict rule’ is narrowed because, in principle, that rule is attracted by actual or potential conflict between personal interest and the duty of fiduciary office, yet the office ceases when the fiduciary resigns.[197] Despite such narrowing, Mr Blythe was nonetheless restrained by his fiduciary duty, for a time, from diverting and then converting for himself or a company with which he was related, specific business opportunities for AFT that had matured to the requisite degree before he resigned. The time period over which that restraint operated; the required specificity of those opportunities; and the required degree of maturity of the opportunities, are all ingredients which combine to determine the effective scope or shape of the fiduciary duty applicable in the factual context of this particular relationship. I will state my views on those ingredients shortly.
[197]Southern Real Estate Pty Ltd v Valerie Dellow & Wayne Arnold [2003] SASC 318, [35] (‘Southern Real Estate’).

I have concluded that Mr Wilson held no fiduciary office with AFT nor was he subject to the statutory duty of good faith (not being an ‘officer’ of the company). It follows that the residual scope for any liability as fiduciary essentially turns on the allegations that Mr Blythe impermissibly pursued business opportunities that had been maturing for AFT while he was still in employment.

In Courtenay Polymers v Deang,[198] Whelan J summarised the relevant principles emerging from the South Australian Full Court decision of Southern Real Estate on the subject of former directors or employees of a corporation usurping an opportunity, ripe for that corporation, after their resignation:

The principles which emerge from that decision, and which I adopt, are the following:
1. Obligations of loyalty owed by an employee are subsumed in the more onerous fiduciary duties owed as a director.
2. The statutory and fiduciary duties of directors exist side by side. There is both a statutory and a fiduciary duty on directors to act in the best interests of the company and not to promote their own interests or the private interests of others.
3. Taking steps which are against the company’s interests with a view to resignation and subsequent involvement in a competing business will be, in the absence of full disclosure or other extraordinary circumstances, a breach of both statutory and fiduciary duty, even if those steps involve no misuse of confidential information.
4. The statutory and fiduciary duties of directors do not simply end at the point of resignation, but there is uncertainty as to when a former director might properly begin to compete with the company. Where a former director covertly puts everything in place so as to be in a position to compete with the company immediately upon resignation, and does in fact enter into competition immediately following resignation, there is no need to determine at what point the director might properly have commenced a competing business.[199]

[198]Courtenay Polymers v Deang [2005] VSC 318.

[199]Ibid [90].

Regarding the ‘uncertainty’ as to when a former director might properly begin to compete with the company, in Southern Real Estate Debelle J (with whom Nyland and Lander JJ agreed) remarked on the ‘obvious tension’ between the length of any period during which a former director remains subject to his or her fiduciary duties not to compete, on the one hand, and the freedom of competition on the other.[200]
[200]Southern Real Estate [2003] SASC 318, [36].

Importantly, the authorities emphasise the need to assess the ‘scope’[201] or ‘shape’[202] of the fiduciary obligation by reference to the particular factual context in which it arises for decision. In Canadian Aero, Laskin J suggested a number of non-exhaustive factors which might helpfully bear upon fixing the scope or shape of the determinative principle in any given situation.[203] I have taken those factors into account.
[201]Edmonds (2005) 12 VR 513; See [23] above.
[202]Canadian Aero [1974] RCS 592; See [23] above.
[203]Canadian Aero [1974] RCS 592.

From the preceding narrative of the history relations between Mr Blythe, Mr Wilson and AFT and the circumstances leading to their departures, I regard the following contextual factors as influential in determining the standard of loyalty, good faith and avoidance of conflict of duty and self-interest that should survive Mr Blythe’s resignation:

(a) the AFT enterprise was, before Bruce Thompson’s death, akin to a partnership in which two ‘partners’ contributed complementary experience and skills to form a productive whole;

(b) Mr Blythe’s primary contribution to that enterprise, making him a good complement to Bruce Thompson, was his wide CNG and LNG industry relationships and his marketing skills;

(c) a feature of their partnership appeared to be a common direction for AFT in which Mr Blythe enjoyed the prospect that his time, energy, skills and industry experience would be used to advantage through positioning AFT to join with and leverage off larger-scale enterprises;

(d) the demise of Bruce Thompson and his replacement by Mrs Thompson (and her sons) did not reproduce the productive team that once was;

(e) Mr Blythe and Mrs Thompson had fundamentally different aspirations for AFT, producing a deadlock in decision-making and putting at risk their respective investments of capital, skill and expertise;

(f) Mr Blythe sought a rational solution to solve the deadlock by attempting to purchase Mrs Thompson’s interest or selling his to her, but Mrs Thompson did not recognise the gravity of the situation and refused to entertain the idea of selling or buying, possibly due to an emotional attachment to the company moved by a sense of loyalty to her deceased husband;

(g) the business undertaken by AFT and opportunities available to it throughout 2011 and 2012 were, in the main, those that were fostered and developed through relationships between Mr Blythe and AFT’s suppliers and customers;

(h) following a genuine, respectful and sustained effort on his part to try and work out a solution with Mrs Thompson, Mr Blythe resigned quite suddenly to preserve and exploit his own skills, vision and expertise within the CNG and LNG industry through the relationships he had built up with other participants in it;

(i) there is no evidence that Mr Blythe (or Mr Wilson) sought to prepare their departures from AFT, establish any new business to take over AFT’s opportunities or to divert AFT businesses to themselves—in the case of Mr Blythe, his decision appears to have been made very close to 18 February after it finally became obvious to him that his efforts to persuade Mrs Thompson to negotiate had failed; and

(j) in those circumstances, Mr Blythe’s resignation should not be construed as part of any planned scheme of disloyalty, bad faith or preference of self-interest over duty to AFT—rather, it was a forced choice to employ his business skills in a new way that would not be restrained by a business partner who refused to negotiate to resolve a deadlock.

Taking all of those matters into account, as I do, in my view, the scope of any restraint to be justly imposed upon Mr Blythe from competing with AFT after his resignation should be relatively limited. Such a restraint should operate to prohibit Mr Blythe, in the relatively short term, from using information obtained while at AFT to compete for clearly established customers of AFT’s or for very specific opportunities so well developed that they were imminently close to being secured by AFT as its own.

None of the eight businesses fall into that category. I will briefly summarise why.

In relation to ATCO, about four and a half months after Mr Blythe left AFT, NGV quoted for and won a job for which AFT also quoted. In a ‘starting from scratch’ competition to re-quote for a job for which AFT had previously quoted when Mr Blythe and Mr Wilson were working for it, NGV succeeded. There was no proof of any improper use of information obtained because of Mr Blythe’s or Mr Wilson’s employment at AFT. The likely reason for AFT failing to win the job was that it sought some additional margin on its costing, no longer had a presence in Western Australia and was competing against the established, personal reputations of Mr Blythe and Mr Wilson.

In my view, Mr Blythe did not breach any fiduciary duty to AFT by competing for that work.

In relation to Tas Gas, about a month after he left AFT, Mr Blythe secured a consultancy with Tas Gas, one of AFT’s clients with whom he had worked closely whilst employed at AFT. He made no secret of the fact, when he left AFT, that he intended to pursue various consultancies. The consultancy he obtained with Tas Gas was larger in nature and scope than the one that AFT had previously undertaken for that company, which had terminated before Mr Blythe left. The projects within the scope of Mr Blythe’s new consultancy included those which he wanted AFT to pursue with Tas Gas or Brookfield but nothing had come of it in part because Mrs Thompson was not so enthusiastic about it. After Mr Blythe left, AFT continued to work for Tas Gas in a limited capacity operating a refuelling station but it did not itself show any interest in re-enlivening the consultancy it once held with Tas Gas or pursuing one of the kind which Mr Blyth obtained.

In my view, Mr Blythe did not breach any fiduciary duty to AFT by seeking and obtaining his consultancy with Tas Gas.

In relation to CCA, there was no evidence that NGV obtained any contract with CCA after Mr Blythe left AFT. There was evidence only that AFT failed to secure the renewal of a contract with CCA about a year after Mr Blythe left, in a competitive tender, after it shut down equipment at CCA’s premises and probably caused disaffection from its former client.

In my view, Mr Blythe did not breach any fiduciary duty to AFT in relation to CCA.

In relation to the EfR program, 19 months after Mr Blythe left AFT a company within the Brookfield group, Brookfield Infrastructure, obtained a contact with the Victorian Government for the third stage of the EfR program. There was evidence that Mr Blythe assisted Brookfield Cogen, possibly as a project within his Tas Gas consultancy, to work towards obtaining that contract. There was also evidence that by 2016 NGV had supplied some equipment sourced from a former AFT supplier for the project. Although AFT had sought involvement with Brookfield Cogen in the EfR project as at late 2012, the ultimate contract obtained by Brookfield Infrastructure was too far removed in time, too much distinguished by additional processes, investigations and variations, and probably insufficiently similar to be considered as the consummation of the same opportunity presented to AFT in November 2012. There was no evidence of any improper use of any information by Mr Blythe acquired because of his employment with AFT.

In my view, Mr Blythe did not breach any fiduciary duty to AFT by his, or through him NGV’s, involvement in this project.

In relation to other Brookfield opportunities, as with those already discussed there were no other opportunities for AFT shown to be ripe for it to secure with Brookfield. Further, there was no identified pursuit by Mr Blythe of such an opportunity

In my view, Mr Blythe did not breach any fiduciary duty to AFT in connection with any other Brookfield opportunity.

In relation to Gouge, AFT had held a five year agreement with Gouge to operate and maintain a refuelling station at Shepparton. It was due to end in 2013 and it engaged in a competitive tender to upgrade the station. It lost to an unidentified party whose quote was cheaper and who offered new rather than reconditioned compressors. There was no evidence of Mr Blythe’s or NGV’s involvement in obtaining the new agreement and, despite allegations, there was no evidence of Mr Blythe misusing information obtained by him whilst working at AFT.

In my view, Mr Blythe did not breach any fiduciary duty to AFT by any involvement with Gouge.

In relation to AGL, AFT’s claim involved only an allegation that Mr Blythe prevented AFT securing an opportunity to do business with AGL, not that Mr Blythe or NGV pursued one. But the so-called business opportunity that AFT claimed it lost was most likely not a realistic opportunity at all. There was also some confusion between the limited single refuelling station opportunity which AFT claimed Mr Blythe concealed from it in late 2012, and a different, more expansive opportunity in relation to AGL refuelling stations along the eastern seaboard of New South Wales. AFT sought to involve itself in the latter in mid-2013 through a Canadian company, but failed. There is no causal connection between its loss of that opportunity and the alleged failure by Mr Blythe to bring to its attention the so-called opportunity for the single refuelling station in late 2012.

In my view, Mr Blythe did not breach any fiduciary duty to AFT in connection with AGL’s single refuelling station proposal.

In relation to CAP, soon after leaving AFT Mr Blythe obtained a 12 month consultancy with this client of AFT. AFT had performed some vehicle conversion services for CAP in Western Australia and acted as distributor for some CAP parts, but there was little further evidence of what that relationship involved. After Mr Blythe resigned, AFT lost its service agreement with CAP when it closed its Western Australian office. Mr Blythe’s consultancy with CAP was different in nature to the servicing agreement AFT had enjoyed; that is, his role was to represent CAP in its dealings with other parties, including with AFT itself. It was not comparable to any previous AFT arrangement or any potential deal on offer to AFT. Neither was there any improper use of information obtained because of employment with AFT.

In my view, Mr Blythe did not breach any fiduciary duty to AFT by obtaining a consultancy with CAP.

It follows from the foregoing that AFT has failed to establish any breach of fiduciary duty on the part of Mr Blythe in respect of him either obtaining or pursuing, or preventing AFT from obtaining, opportunities to do business with any of the eight companies.

The analysis thus far only leaves outstanding a conclusion about the established use of various pieces of information obtained by Mr Wilson during and because of his employment with AFT. I have rejected the argument that the contact data Mr Wilson emailed to himself was information that was confidential to AFT. Nor was its use after his resignation, if it was used, an improper use of information obtained because of his employment with AFT. But, the use of the plant registration certificate and the NGV compliance statement is in a different category. I find that the uploading of those documents to the SkyDrive to enable them to be inspected by a party (AGL) with whom NGV was contemplating doing business was an improper use of information obtained because of Mr Wilson’s employment with AFT. By doing so, Mr Wilson breached s 183(1) of the CA.

But, other than proving the bare use of those documents by uploading them to the SkyDrive, nothing was shown to have come of that use. That is, no loss or damage was shown to have been caused to AFT from its use; neither was any gain established as flowing to either Mr Wilson, NGV or any other defendant. Accordingly, despite a breach of the CA having been proven no entitlement to relief arises from that contravention.

Knowing assistance claims

Because I have not found that any defendant engaged in a dishonest and fraudulent design or breached fiduciary duties owed to AFT, there is no need to consider allegations that other defendants knowingly assisted such design or breach.

Loss, damages and relief

Other than the improper use of the two documents I have just identified, which of itself led to no relevant loss or gain, the plaintiff has failed to establish any of its claims. Accordingly, it has failed to establish any entitlement to loss, damage or other relief.

Conclusion

From all of the foregoing, AFT’s claims must be dismissed.

[2018] VSC 286

30 May 2018