Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9)

[2012] NSWSC 984

Supreme Court

New South Wales

Medium Neutral Citation:	Barescape Pty Limited as trustee for The V's Family Trust & Anor v Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust & Anor (No 9) [2012] NSWSC 984
Hearing dates:	9-12, 15-18 August, 6-9, 12-16 September, 12 October 2011, 9 March, 2-5,10-13 April, 19-20 June 2012
Decision date:	27 August 2012
Jurisdiction:	Equity Division
Before:	Black J
Decision:	Mechanism for valuation of First Plaintiff/First Cross-Defendant's interest in partnership failed. First Plaintiff/First Cross-Defendant's interest to be valued on basis of Second Joint Report of accounting experts, adjusted for 40% discount for goodwill. First Plaintiff/First Cross-Defendant and Second Plaintiff/Second Cross-Defendant breached fiduciary duties owed to First Defendant/Cross-Claimant. Defences of informed consent, waiver or ratification not established. First Defendant/Cross-Claimant entitled to equitable compensation and damages. Parties to be heard as to form of orders and costs.
Catchwords:	CONTRACT - Written agreement - Interpretation - Manner in which commercial contracts should be interpreted - Expert valuation clause - Whether valuation mechanism failed - Whether expert valuations binding on parties. CONTRACT - Damages - Quantification of damages - Mitigation of loss. PARTNERSHIP - Breach of partnership agreement - Conduct of partner of referring function inquiries to alternative business - Whether default. EQUITY - Fiduciary duties - Breach of duty - Obligations of partners in fiduciary relationship - No profit rule - No conflict rule - Scope of duties - Whether duties extended to function business of restaurant - Breach of no profit rule - Whether defences of informed consent, waiver or ratification established. EQUITY - Fiduciary duties - Knowing assistance. REMEDIES - Equitable compensation - Account of profits - Entitlement to election between remedies after judgment.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) s 100 - Partnership Act 1892 (NSW) ss 30(1), 44 - Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	- Aas v Benham [1891] 2 Ch 244 - AMP Services Ltd v Manning [2006] FCA 256 - Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 - Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 - Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291; 278 ALR 618 - Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 - Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 6) [2012] NSWSC 257 - Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 8) [2012] NSWSC 512 - Barnes v Addy (1874) LR 9 Ch App 244 - Beevers v Port Phillip Sea Pilots Pty Ltd [2007] VSC 556 - Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 - Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1; 276 ALR 646 - Boardman v Phipps [1967] 2 AC 46; [1966] 3 WLR 1009 - BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 - Briginshaw v Bringinshaw [1938] HCA 34; 60 CLR 336 - Bristol & West Building Society v Mothew [1998] Ch 1 - Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 - Cameron v Cuddy [1914] AC 651 - Canberra Residential Developments Pty Ltd v Brendas [2010] FCAFC 125; (2010) 188 FCR 140 - Candoora No 19 Pty Ltd v Freixenet Australasia Pty Ltd & Anor (No 2) [2008] VSC 478 - Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; (1991) 85 DLR (4th) 129 - Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 - City of Sydney v Streetscape Projects (Australia) Pty Ltd [2011] NSWSC 1214 - Clarke v Newland [1991] 1 All ER 397 - Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 - Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1968] HCA 50; (1968) 122 CLR 25 - Colour Control Centre Pty Ltd v Ty [1995] NSWSC 96 - Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 - Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 - Commonwealth Bank of Australia v Smith (1991) 42 FCR 390; 102 ALR 453 - Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 - Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312 - Cypjayne Pty Ltd v Babcock & Brown International Pty Ltd [2011] NSWCA 173; (2011) 282 ALR 152 - Dart Industries Inc v Decor Corporation Pty Ltd [1993] HCA 54; (1993) 179 CLR 101 - Digital Pulse Pty Ltd v Harris [2002] NSWSC 33; (2002) 40 ACSR 487 - Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450; 57 ALR 167 - Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 - Federal Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 150 CLR 355 - Fitzgerald v Masters (1956) 95 CLR 420 - Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 - Gibson v Tyree (1900) 20 NZLR 278 - Glassington v Thwaites (1822) 1 Sim & St 124; 57 ER 50 - GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers Pty Ltd [2005] VSCA 113 - Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121 - Hill v Rose [1990] VR 129 - Hivac Ltd v Park Royal Scientific Instruments Ltd [1946] Ch 169 - Holt v Cox (1994) 15 ACSR 313 - Holt v Cox (1997) 23 ACSR 590 - Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd [2011] FCA 1154; (2011) 86 ACSR 393 - Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 - House v The King [1936] HCA 40; (1936) 55 CLR 499 - Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 - J C Houghton & Co Pty Ltd v Nothard, Lowe & Wills Ltd [1928] AC 1 - Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137 - John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1; 266 ALR 462 - Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 - Kanivah Holdings Pty Ltd v Holdsworth Properties Pty Ltd [2001] NSWSC 405 - Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 - Labelmakers Group Pty Ltd v LL Force Pty Ltd [2012] FCA 512 - Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 - Links Golf Tasmania Pty Ltd v Sattler [2012] FCA 634 - Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 - Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 - Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46 - McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 - McGrath v McGrath [2012] NSWSC 578 - McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 - Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 - New Zealand Netherlands Society 'Oranje' Inc v Kuys [1973] 2 NZLR 163; 1 WLR 1126; 2 All ER 1222 - Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation, Bhd [1989] HCA 32; (1989) 167 CLR 219 - Nocton v Lord Ashburton [1914] AC 932 - Nottingham University v Fishel [2000] ICR 1462 - O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262; 29 ACSR 148 - Old v McInnes [2011] NSWCA 410 - Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd [2011] FCAFC 166; (2011) 285 ALR 63 - Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 - Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514 - Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 - Queensland Mines Ltd v Hudson (1978) 18 ALR 1 - Re Contact 121 Pty Ltd [2011] NSWSC 519 - Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211; (1966) 84 WN (Pt 1) (NSW) 399 - Re McGrath & Anor (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 78 ACSR 405 - Re Pauling's Settlement Trusts [1962] 1 WLR 86 - Regal (Hastings) Ltd v Gulliver [1967] 2 AC 137 - Rigg v Sheridan [2008] NSWCA 79 - Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 - Ryder v Frohlich [2004] NSWCA 472 - Ryder v Frohlich [2004] NSWSC 418 - Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 - Short v Crawley (No 30) [2007] NSWSC 132 - Spellson v George [1992] NSWCA 254; (1992) 26 NSWLR 666 - Spotless Group Ltd v Blanco Catering Pty Ltd [2011] FCA 979; (2011) 93 IPR 235 - Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291; 82 ACSR 1 - Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 - Target Holdings Ltd v Redferns [1996] 1 AC 421 - Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248; (2008) 75 NSWLR 1 - Tawfik v Bill [2010] NSWSC 1034 - Tesco Supermarkets Ltd v Nattrass [1972] AC 153 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 - TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 - Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 - Victoria University of Technology v Wilson [2004] VSC 33 - Visnic v Sywak [2009] NSWCA 173; (2009) 257 ALR 517 - Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 - Watson v Phipps (1985) 60 ALJR 1 - Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272 - Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604 - White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd [2008] NSWSC 1225 - Winthrop Investments Ltd v Winns Ltd (No 2) (1975) 1 ACLR 222 - Woolworths Ltd v Olson [2004] NSWSC 849
Texts Cited:	- K L Fletcher, The Law of Partnership in Australia, 9th ed, Lawbook Co, 2007 - P D Finn, Equity and Commercial Relationships, Lawbook Co, 1987 - P D Finn, Fiduciary Obligations, Lawbook Co, 1977 - R P Austin, "Fiduciary Accountability for Business Opportunities" in P D Finn, Equity and Commercial Relationships, Lawbook Co, 1987 - R P Meagher, J D Heydon and M J Leeming, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, 4th ed, LexisNexis Butterworths, 2002
Category:	Principal judgment
Parties:	Barescape Pty Limited as trustee for The V's Family Trust (First Plaintiff/First Cross-Defendant) Anthony Ventura (Second Plaintiff/Second Cross-Defendant) Midfielder Pty Limited (Third Cross-Defendant) Bacchus Holdings Pty Limited as trustee for The Bacchus Holdings Trust (First Defendant/Cross-Claimant) Matthew Gordon Higgins (Second Defendant)
Representation:	R.J. Burbidge QC (9-11 August, 6-9, 12-13 September 2011), C.D. Wood (Plaintiffs/Cross-Defendants) J.C. Kelly SC (9-12, 15-18 August, 6-7, 9, 13-16 September 2011), A.A. Henskens SC, N.E. Furlan (Defendants/Cross-Claimant) Hicksons (9 August 2011-9 March 2012), Anthony Ventura (9 March-20 June 2012) (Plaintiffs/Cross-Defendants) Bilbie Dan (Defendants/Cross-Claimant)
File Number(s):	09/291437

Judgment

Background

1. The basic facts of this case are straightforward. Bacchus Restaurant was founded by the Second Plaintiff ("Mr Ventura") in about 2006 and is a fine dining restaurant that also caters for weddings and events and has a "small plates" or tapas menu.

1. On 1 July 2008, the First Plaintiff, Barescape Pty Limited as trustee for the V's Family Trust ("Barescape") sold 75% of its interest in Bacchus Restaurant to the First Defendant and Cross-Claimant, Bacchus Holdings Pty Limited as trustee for the Bacchus Holdings Trust ("Bacchus") for $1 million pursuant to a Sale of Business Agreement ("Sale Agreement"). The Sale Agreement relevantly provided that Bacchus and Barescape would form a partnership ("Bacchus Partnership") for the conduct of the Bacchus Restaurant business under the terms of a partnership deed between Barescape and Bacchus as partners and Mr Ventura and the Second Defendant ("Mr Higgins") as guarantors ("Partnership Deed") (Ex Ventura 26.10.09 Ex AV (Ex P6) Tab C; Higgins 28.5.10 Annexure "B") which was annexed to the Sale Agreement (Ventura 26.10.09 Ex AV (Ex P6) Tab B, Special Conditions, cl 3) and that Mr Ventura would be employed as the General Manager of the business (Ventura 26.10.09 Ex AV (Ex P6), Tab B, Special Conditions, cl 9). The sale of that business was completed on the same day. Bacchus Restaurant was subsequently owned and operated by the Bacchus Partnership and Mr Ventura was employed by the Bacchus Partnership as General Manager of the Bacchus Restaurant.

1. In late 2008, Mr Ventura and his wife became associated (to use a neutral term) with a proposal to purchase other premises in Newcastle, the Longworth Institute (subsequently renamed Longworth House) ("Longworth House"), in relatively close proximity to Bacchus Restaurant. A function centre was subsequently operated from those premises by a partnership between the Third Defendant, Midfielder Pty Limited ("Midfielder") as trustee for the Ace's Family Trust, an entity associated with Mr Ventura, and Samnite Pty Limited ("Samnite") as trustee for the EM Family Trust, an entity associated with Mr Michael Pelosi ("Mr Pelosi"). Samnite and Mr Pelosi are not party to the proceedings.

1. The issues raised by the Plaintiffs' claim and the Defence include the manner in which the Bacchus Partnership was brought to an end; whether a discount is to be applied to goodwill on the acquisition by Bacchus of Barescape's interest in the Bacchus Partnership, on the proper construction of the Partnership Deed; whether a valuation of the business prepared by the accountants for the Bacchus Partnership, SiDCOR Chartered Accountants ("SiDCOR") under the Partnership Deed is binding on the parties; and whether the appointment of another accountant, Mr Carpenter of Cutcher & Neale, by Barescape and Mr Ventura to prepare an alternative valuation complied with the Partnership Deed and whether the Cutcher & Neale valuation is binding on the parties. A further issue arises as to whether the Court has jurisdiction to determine the proper valuation of Barescape's interest in the Bacchus Partnership if each of the SiDCOR and Cutcher & Neale valuations are not binding on the parties under the Partnership Deed.

1. The issues raised by the Amended Cross-Claim and the Defence to it include the extent, nature and duration of any fiduciary duties owed by Barescape and Mr Ventura to Bacchus; the nature of the alleged breaches of those duties; the extent and impact of any consent by Bacchus or Mr Higgins to Mr Ventura's association with Longworth House; whether a restraint of trade under the Partnership Deed has been validly invoked and whether that restraint has been (or would have been) breached by the relevant conduct; and a claim for knowing assistance against Midfielder. Bacchus and Mr Higgins approached their written submissions on the basis that both had brought cross-claims against Barescape, Mr Ventura and Midfielder. However, it was accepted in oral submissions that only Bacchus had brought such a cross-claim.

1. A matter that has troubled me, and which I raised with Counsel on several occasions during the proceedings, was the possibility that the range and complexity of issues raised in the proceedings was disproportionate to the amount of the likely recovery by either party to the proceedings. The parties provided voluminous written submissions which addressed a wide range of issues, including some issues which were not pleaded and other issues that ultimately did not need to be determined in order to decide the proceedings. I have had close regard to those submissions and to the parties' oral submissions.

The witnesses

1. I should make some general observations as to my assessment of key witnesses.

1. Mr Ventura was cross-examined at some length. Mr Ventura had previously practiced as a barrister, was alert to the issues in the case and, in my view, generally aware of the implications of matters that were being put to him. Mr Ventura approached giving evidence in a manner that suggested that he was very conscious of the structure of Barescape's and his case. He made concessions where they were unavoidable, but I formed the view that he would not have made concessions against Barescape's or his interests if he could avoid doing so. There were also inconsistencies in Mr Ventura's evidence where he was prepared to concede matters at one point and later reject them - an example concerned the question whether he had told Mr Higgins that Longworth House would hold larger functions and would not compete with Bacchus Restaurant. There was also a dispute between Mr Ventura and Mr Vella, the expert accountant retained by Barescape, as to whether Mr Ventura had informed Mr Vella of the sale of a one third interest in the Longworth House business to a third party in June 2011 (Ex D13; Ventura T1847; Vella T1953). There is no reason that Mr Vella would be mistaken as to this matter and I do not accept Mr Ventura's evidence in that regard. I have reservations as to Mr Ventura's evidence of disputed conversations which should be approached with caution.

1. Mr Pelosi, who has an interest in and manages the Longworth House business, gave evidence. Mr Pelosi was also a lawyer by training and has been a friend of Mr Ventura for a considerable period. It did not appear that Mr Pelosi had spent a substantial amount of time in preparing to give evidence and I did not form any impression that his evidence was affected by his friendship and business relationship with Mr Ventura. I found Mr Pelosi to be straightforward in giving evidence and to have given a generally honest account of his recollection of events and I generally accept his evidence. Bacchus vigorously criticised the process which was adopted to prepare Mr Pelosi's affidavit which involved Mr Pelosi preparing what he described as a "bare bones" document and then meeting with Barescape's then solicitor to expand that document into an affidavit. I see nothing inappropriate with that process.

1. Mr Higgins, the principal of Bacchus, plainly felt strongly as to the merits of Bacchus' claims. The weight of his evidence was weakened by the fact that his affidavit evidence was slanted to advance Bacchus' case, a feature which it shared with affidavit evidence of other witnesses in Bacchus' case. That evidence contained significant inaccuracies in some areas, including Mr Higgins' evidence as to the Nicholas Trust Ball and the position as to payments to suppliers when Mr Ventura was dismissed. For example, Mr Higgins gave evidence that, after the accountant to the Bacchus Partnership, Mr Paul Siderovski ("Mr Siderovski"), had told him that the Nicholas Trust Ball had been held at Longworth House, Mr Higgins had said that he was sure that that function was traditionally "a function which is held at Bacchus" (Higgins 28.5.10 [37]); he gave evidence, by reference to his "knowledge of the functions held previously at Bacchus", that the "particular function" (the Nicholas Trust Ball) "had most definitely been held the year before"; and he elaborated on the advantages which the function had delivered to Bacchus Restaurant (Higgins 28.5.10 [38]). The Nicholas Trust Ball had in fact been held at Newcastle Town Hall in the previous year (Ventura 22.7.10 [89], Chen 21.7.10 [3]), had never been held at Bacchus Restaurant and was too large a function to be held at the Bacchus Restaurant. While I accept that Mr Higgins was genuinely mistaken as to the question whether the Nicholas Trust Ball had been held at Bacchus Restaurant in the previous year, his evidence is undermined by his elaboration of the advantages that that function had delivered in circumstances in which it had never been held at Bacchus Restaurant.

1. Mr Higgins also gave evidence as to the process by which the valuation of Barescape's interest in the Bacchus Partnership business had been prepared by the Partnership Accountants, SiDCOR, but omitted significant matters relating to his business relationship with SiDCOR's principal, Mr Siderovski, that were relevant to the issues before the Court. Mr Higgins also gave evidence about handing over a cheque at the meeting at which Mr Ventura was given the SiDCOR valuation (Higgins 28.5.10 [55]) and of having said the words "I provide you with this cheque". When a record of that cheque could not be produced when called for, Mr Higgins significantly qualified his earlier evidence, suggesting that, rather than having provided Mr Ventura with a cheque, he had been reaching for his cheque book when Mr Ventura left the meeting (T1007-T1009).

1. In my view, Mr Higgins' evidence needs to be treated with caution because of the errors as to significant matters in his affidavit evidence, each of which involved the shaping of evidence to advance Bacchus' case, and I also consider that his recollection of events has been influenced by his belief in the rightness of his cause and his evidence needs to be approached with that in mind. For these reasons, I also have reservations as to Mr Higgins' evidence of disputed conversations which should also be approached with caution.

1. Several restaurant staff gave evidence in Bacchus' case. There were also difficulties with the affidavit evidence of those witnesses which tended to overstate their evidence. For example, Ms Moore, who was previously the Events Co-ordinator and is now the Restaurant Manager of Bacchus Restaurant, gave evidence in her affidavit, in direct speech, of Dr Joseph, the organiser of the Nicholas Trust Ball, advising that he "would again like to hold our annual function at Bacchus". That evidence was consistent with the case put by Bacchus, namely that the Nicholas Trust Ball had been held at the Bacchus Restaurant in the previous year and diverted to Longworth House. However, as I noted above, the Nicholas Trust Ball was in fact not held at Bacchus Restaurant in the previous year. It is highly unlikely that Dr Joseph, the organiser of the function, could have been mistaken as to that matter and it follows that Ms Moore's account of the conversation was significantly incorrect. Ms Moore conceded in cross-examination that all that had been held at Bacchus was a small daytime gathering of potential sponsors and accepted that the position had been misrepresented in her affidavit (T579; T583-T584). That error raised a significant issue as to the reliability of Ms Moore's affidavit evidence, even if it arose from overstatement in the drafting of her affidavit which she failed to correct.

1. Barescape and Mr Ventura contend that the Court should be slow to accept the affidavit evidence of several restaurant staff since they had been offered a share in the restaurant profits at about the time their evidence was being taken. The evidence indicates that offer was made in the context of promoting staff commitment and that it was a possibility depending on profits that have largely not yet been realised and I do not consider that it impugns the evidence of those staff. Barescape and Mr Ventura also contend that a Jones v Dunkel [[1959] HCA 8; (1959) 101 CLR 298] inference should be drawn against the Defendants in respect of their failure to call several former restaurant employees, Mr Bradshaw, Ms Johnson and Mr Simms. Bacchus responds that none of those persons are still employed by Bacchus. I would not draw that inference both for that reason and in circumstances that these proceedings were already lengthy, and of a length already likely to be disproportionate to the amounts in issue, and all parties could and should have made assessments as to the witnesses who needed to be called to make good their claims.

1. The expert accounting evidence led in these proceedings was complex and has been through several iterations. Mr Jugmans, the accounting expert retained by Bacchus, prepared a first report dated 6 July 2011 (Ex D83). Mr Jugmans prepared a second report dated 5 August 2011 (Ex D84) and also prepared an affidavit dated 8 August 2011 that dealt with various matters, including MYOB data that had been provided to him in respect of Bacchus Restaurant. Mr Jugmans also prepared a supplementary report dated 5 January 2012 (Ex D85).

1. Mr Vella, the expert accountant retained by Barescape and Mr Ventura, prepared a first report dated 5 July 2011 (Ex P65). Barescape and Mr Ventura tendered parts of that report relating to specific issues, namely the status of MYOB records, interest paid on a loan made by the Commonwealth Bank of Australia to the Higgins Family Trust to acquire its interest in the Bacchus Restaurant, capital reinvestment in respect of improvements up to 15 September 2009 and stock levels maintained at the Bacchus Restaurant. Bacchus tendered the balance of that report. In particular, Bacchus relied on a summary of takings at Bacchus Restaurant for Friday and Saturday nights from 1 July 2008 to date prepared by Mr Vella which in turn relied on a summary of daily takings shown in the point of sale ("POS") Journal Report of the restaurant for the period 17 November 2009 to 26 June 2010 for which POS records were available.

1. Barescape and Mr Ventura tendered Mr Vella's 14 July and 31 July 2011 reports identifying issues as to the reliability of financial data concerning the Bacchus Restaurants. Those issues have been addressed at length in evidence and cross-examination. In my view, the issues is respect of that data have been addressed by the further evidence given in respect of the manner in which the various records were prepared and Mr Jugmans' analysis of the differences between them. Barescape and Mr Ventura also tendered Mr Vella's report dated 15 August 2011 in full (Ex P66).

1. A joint report dated 15 August 2011 of Messrs Jugmans and Vella ("Second Joint Report") was also tendered in the proceedings (Ex D87A).

Chronology of events

1. I should now turn to the evidence of, and my findings as to, critical events. I deal here with the circumstances in which Barescape, Mr Ventura and/or Midfielder acquired an "interest" (using that term broadly) in Longworth House and the nature of that interest and the extent of disclosure of that interest to Bacchus and Mr Higgins.

1. Mr and Mrs Ventura inspected the Longworth House building on 3 September 2008 and made a verbal offer to purchase the property for $1 million to the selling agent on 5 September 2008 which was not accepted by the building's owner (T156-T157). It was put to Mr Ventura in cross-examination that he told the agent he was looking to conduct a similar business as the Bacchus Restaurant at that site; he did not recall that statement but indicated he would have told the agent that he was interested in the potential for the site to accommodate the Bacchus Restaurant at some stage or be developed in some other way (T157).

1. In late October or early November 2008, Mr Pelosi separately inspected the Longworth House building and subsequently discussed the property with Mr Ventura including that it was suitable for a function centre (T311-T312). Mr Pelosi subsequently advised Mr Ventura that he would be interested in opening a function centre at the Longworth House building if Mr Ventura was interested in buying the building and Mr Ventura advised that he was still interested in doing so (T314). Mr Pelosi rejected the suggestion that he was engaged in these dealings with the intention that he and Mr Ventura would jointly operate the Longworth House function centre and his evidence was that he sought to operate that function centre himself (T316). Mr Pelosi's explanation was that the intent was that Mr Ventura's interests would purchase the building, Mr Pelosi would sign a lease for the building and that Mr Ventura would provide assistance to Mr Pelosi to set up the function centre, on the basis that Mr Pelosi would operate the function centre (T326). Mr Pelosi also rejected any suggestion that it was contemplated that the lease over the property would be a lease on behalf of a partnership between his family trust and Mr Ventura's family trust and his evidence was that the lease was entered into by his company, Samnite (T328). I accept Mr Pelosi's evidence in respect of these matters.

1. Samnite was incorporated on 9 December 2008 (Ex D27). On 17 December 2008, Samnite entered a lease with Scotts Road Pty Limited, the vendor of the Longworth House property, for six months commencing 17 December 2008 (Ex D15). The primary purpose of that lease was to establish that the property was occupied by a business operating as a going concern at the time that Mrs Ventura acquired it.

1. Midfielder was incorporated on Mr Ventura's instructions on 19 December 2008 (Ex D30). Mr Ventura is the sole director and secretary of Midfielder. Midfielder has issued one ordinary share which is owned by Mrs Ventura and Barescape owns one "I" Class Share which confers limited rights. Midfielder is the trustee of the Ace's Family Trust, which is a discretionary trust established by a trust deed dated 16 December 2008 (Ex D29). The potential beneficiaries of the trust include Mr Ventura, Mrs Ventura and Barescape.

1. Mrs Ventura purchased the Longworth House property from the vendor, Scotts Road Pty Ltd, for $1.2 million by contract dated 23 December 2008 (Ex D57; T160). Mrs Ventura had previously used her married name in some property acquisitions (Ex D55) and used her married name in dealing with the Australian Taxation Office ("ATO") in relation to the matter (Ex D11) and dealings with the Australian Securities and Investments Commission ("ASIC") in relation to Barescape in 2008 and in relation to the matter (Ex D53). On the other hand, it appears that Mrs Ventura used her maiden name on her drivers licence and her passport (T487). Bacchus contended that the Longworth Institute building was purchased in the maiden name of Mrs Ventura to disguise her interest in the venture. The purchase of the property in Mrs Ventura's maiden name may have allowed Mr Ventura greater control over when, or whether, he disclosed that purchase to Mr Higgins. However, Bacchus had no basis for objecting to Mrs Ventura acquiring an interest in the property and Mr Ventura in fact disclosed his involvement in the operation of the function centre to Mr Higgins. I will address issues as to the adequacy of that disclosure below.

1. I pause here to address the question of the structure of the arrangements between Midfielder, Samnite, Mr Ventura and Mr Pelosi as at late December 2008. Bacchus contended that that structure and the parties' intentions were fully formed at that time and I will refer below to the evidence on which it relied for that contention. In my view, although some work had been done, at least by Mr Ventura, to develop such a structure, that work was at a preliminary stage and consensus had not yet been reached between Mr Ventura and Mr Pelosi as to that structure.

1. Bacchus relies on documents prepared in December 2008 to seek to establish that a partnership between Samnite (as trustee for the EM Family Trust) and Midfielder (as trustee for the Ace's Family Trust) was established to operate a function centre at Longworth House at that time. A structure diagram prepared about December 2008 (Ex D9) appears to have contemplated that that partnership would operate the Longworth House business and that Samnite and Midfielder as trustees for the relevant trusts would be investors in it. That partnership was registered for tax purposes at about that time as a function centre which would withhold PAYG tax and have five employees and was described as a partnership operating in the accommodation and food services industry as a function centre (Ex D12, Ex D26). An application form to register the business name of Longworth House was also prepared on behalf of that partnership (Ex D6, Ex D6A). The EM Family Trust was also registered for tax purposes as receiving partnership distributions rather than as an operating company (Ex D14; Ex D66).

1. An email dated 19 December 2008 from Mr Ventura to his accountants, Cutcher & Neale, suggested that a partnership agreement between the Ace's Family Trust and the EM Family Trust was or would shortly be in existence and would be provided to Cutcher & Neale on 19 December 2008 (Ex D16). Mr Pelosi's evidence was that he had no involvement in the provision of the relevant information to Cutcher & Neale (Pelosi T328). I do not consider that I should draw the inference for which Bacchus contends, namely that this document had existed and was subsequently destroyed. I accept Mr Pelosi's evidence that that document did not, to his knowledge, exist at that time (Pelosi T344). Although that evidence does not prove that Mr Ventura had not prepared the document, it does establish that consensus had not then been formed between Mr Pelosi and Mr Ventura as to its terms.

1. Mr Ventura's evidence was that the intent at this time was that Mr Pelosi would lease the Longworth House building to conduct a function business, Midfielder would contribute to the redevelopment of the building to facilitate a tenancy for Mrs Ventura and the business for Mr Pelosi, and Midfielder would obtain some interest appropriate to its contribution to the development (T160). Mr Ventura's evidence was that the intent at that time was to develop Longworth House as a building that could be used for a function centre (T172) and that Midfielder and Samnite would prepare the building to facilitate Mr Pelosi's operation of a function centre (T217). Mr Ventura accepted in cross-examination that, in December 2008, it was agreed that Ace's Family Trust and the EM Family Trust would incur expenses and conduct a partnership for the development of the property (T175).

1. Under cross-examination, Mr Pelosi denied that, as at 19 December 2008, there was agreement that his and Mr Ventura's family trust would jointly operate the function centre (T344). Mr Pelosi's evidence was that at that time it was contemplated that he would be operating the function business, that Mr and Mrs Ventura would be the landlord and that Mr Ventura would help him [Mr Pelosi] to establish the venture because Mr Ventura wanted a business in the building (T344) and would obtain an interest reflecting funding which Mr Ventura provided to the extent that he [Mr Pelosi] did not have adequate funds to set up the business (T348). Mr Pelosi's evidence was that he wished to hold a significantly higher interest than 50% in the business but Mr Ventura would retain a percentage of the business to cover the money that he had put in if Mr Pelosi could not fund those costs (T436).

1. In my view, Bacchus has not established its contention that, from December 2008, a partnership existed between Mr Ventura's interests and Mr Pelosi's interests for the operation of Longworth House. The evidence does not establish that the position had developed to that point at that time. First, Barescape had not then acquired any interest in the property from which Longworth House conducted its business, although Mrs Ventura acquired and later disposed of such an interest. Second, I accept Mr Pelosi's evidence that he was still seeking to operate the function centre himself at this time, although it is clear that he recognised that it was possible or likely that Mr Ventura would take up an interest in the venture reflecting the costs of the renovation work to the extent that Mr Pelosi could not fund those costs. Although Mr Ventura arranged for Cutcher & Neale to prepare documents on a basis which assumed that both Mr Pelosi and interests associated with Mr Ventura would have an interest in the Longworth House business, that appears to have been a possible or likely outcome rather than an agreed position between Mr Pelosi and Mr Ventura at that time. In my view, Midfielder and Samnite and Messrs Ventura and Pelosi were in December 2008 working together in anticipation of a partnership or joint venture (in the commercial sense) being established between them but that venture and their interests in it were still inchoate.

1. Mr Higgins' evidence is that he was informed by the accountant to the Bacchus Partnership, Mr Siderovski, on 21 December 2008 that Mr Ventura had decided to turn Longworth House into a "tapas wine bar and function centre". Mr Higgins responded to Mr Siderovski that "that is a worry I need to find out more about that. I'll ask him" (Higgins 28.5.10 [23]).

1. Samnite, the company associated with Mr Pelosi, registered the business name "Longworth House" from early January 2009. The Longworth House property was transferred by the vendor, Scotts Road Pty Ltd, to Mrs Ventura on 3 February 2009 (Ex D50). Mr Ventura subsequently had a significant involvement in steps in preparing for the opening of Longworth House, including the purchase of decorations, placement of yellow pages advertising and the printing of artwork advertising materials for Longworth House (Ex D17; T213; T226) and the renovation work on the property. The Statement of Environmental Effects for Proposed Re-Development of Longworth Institute Building (February 2009) (Ex D18) referred to a proposed "wedding and function centre".

1. Ms Moore's evidence is that a conversation took place between her and Mr Ventura in the first week of February 2009 where he told her of the Longworth House project but asked her not to disclose it to Mr Higgins so that he would not "get jealous" (Moore 28.5.10 [5]-[6]). Mr Ventura denies that conversation (Ventura 22.7.10 [111]). I accept Ms Moore's evidence in this regard.

1. Mr Higgins' evidence (Higgins 28.5.10 [24]) was that he raised the question of Longworth House with Mr Ventura in February 2009 and, during a tour of Longworth House provided by Mr Ventura, he put to Mr Ventura that Longworth House was going to operate a tapas wine bar and function centre in the style of Bacchus Restaurant, and that Mr Ventura responded:

"Not really Matthew. I own the building from which a consortium of investors from Sydney intends operating catering for functions".

I will address a further reference to the "consortium" below. Mr Higgins' evidence was that he observed that a significant amount of renovation work had been done during his tour of the building. Mr Ventura denied that this occurred in February 2009 (T186). This inspection plainly took place and little turns on whether it occurred in February 2009 as Mr Higgins contends or mid-March 2009 as Mr Ventura contends.

1. Mr Ventura's evidence was that the first occasion he said anything to Mr Higgins about Longworth House was in about mid-March 2009 when he showed Mr Higgins around the Longworth House building and said:

"The two ballrooms and the boardroom are perfectly suited for events and conferencing, and the small space at the front of the building is to operate as a tapas and wine bar" (Ventura 22.7.10 [5]).

On cross-examination, Mr Ventura said that he disclosed to Mr Higgins that Longworth House would be operated as a function centre at this time (T186) and told Mr Higgins that Longworth House would be a function centre and wine bar (T190). Mr Higgins accepts that he was shown Longworth House (Higgins 28.5.10 [24]) but his evidence is that he was not told by Mr Ventura about the tapas bar (Higgins 28.5.10 [28]; Higgins 6.4.11 [5(c)]). Nonetheless, on Mr Higgins' evidence, Mr Siderovski had previously told him of that matter and he had previously questioned Mr Ventura about it. On either Mr Higgins' or Mr Ventura's account of the conversations to this point, at least the operation of Longworth House as a function centre and wine bar and its service of tapas had been raised by this time.

1. The extent of expenditures by interests associated with Mr Ventura in respect of developing the Longworth House business in the first half of 2009 made it increasingly likely over time that those expenditures would have had to be recognised by his taking up an interest in the Longworth House business together with Mr Pelosi (Ex D36; T358). Mr Pelosi conceded in cross-examination that there was a "sort of informal partnership", without defined interests, where it was recognised that Mr Ventura would assist Mr Pelosi in operating the function centre (T348). Mr Pelosi's evidence was that, when it became clear that there was no chance of his funding a buy out of Mr Ventura completely, Mr Ventura acknowledged that he would have to take a percentage and at that stage indicated that he would need to offer Mr Higgins the opportunity to also acquire an interest in Longworth House, and suggested preparation of a business plan which could be shown to Mr Higgins (T436). Mr Ventura's evidence is that he talked to Mr Pelosi about the possibility of inviting Mr Higgins to invest in Longworth House in late March 2009 (Ventura 22.7.10 [6]), although Mr Pelosi's evidence put that conversation at an earlier date.

1. Mr Higgins gave evidence of two conversations with Mr Ventura in April 2009, when Mr Ventura told him that the "consortium" of Sydney investors to which he had previously referred had "fallen over" and there was an opportunity "for us" in respect of Longworth House. Mr Ventura denies referring to a "consortium" in that conversation. There is no other evidence to corroborate either version of the conversation and I do not consider that I am in a position to find affirmatively either that the "consortium" was referred to or that it was not where I have indicated reservations as to both Mr Ventura's and Mr Higgins' evidence of disputed conversations. I do not consider it is ultimately necessary to reach a finding as to this matter given the other findings that I have reached.

1. In mid-May 2009 Mr Ventura provided Mr Higgins with a business plan for Longworth House (Higgins 28.5.10 [28] Annexure "G") that had been prepared by Mr Pelosi. The Longworth House business plan refers to events of a "preferred size" of 100-150 persons per room and Mr Higgins maintains that he was told by Mr Ventura that Longworth House would hold large functions of a size that Bacchus could not hold (Higgins 28.5.11 [26]). However, that business plan contains other indications that Longworth House would conduct smaller functions including references to "weddings, christenings and birthdays and other parties ... corporate launches, conferencing and promotional events". I do not consider that a reader of the business plan would assume that all of these functions would have been larger functions than Bacchus Restaurant could have held. A financial analysis contained in the business plan refers to an estimate of 100 persons on average per function. Mr Higgins contended under cross-examination that he had understood this to refer to 100 persons per room, consistent with the representation he contended Mr Ventura had made that Longworth House would only hold functions of 200 persons or more (T1031-1032). I do not accept that a businessman of Mr Higgins' obvious intelligence and commercial sophistication, even one who was a recent entrant into the restaurant business, would have read the document in that manner and I cannot accept that evidence. Bacchus also criticises the business plan for failing to treat Bacchus Restaurant as a competitor of Longworth House. The business plan identifies other competing function centres that are businesses with a particular focus on functions rather than fine dining restaurants that also cater for functions.

1. Mr Ventura sent a series of emails on 20 and 21 May 2009 to Mr Higgins about Longworth House (Ventura 22.7.10 Ex AV 2 (Ex P7) Tab A). The email dated 20 May 2009 stated:

"Hi Matthew

I have talked to Michael Pelosi further about becoming a joint venture partner in the function centre at Longworth House. He acknowledges that there could be synergies that would benefit both businesses.

I think his business plan is sound, as Newcastle certainly needs a specialist wedding/corporate event venue of superior quality.

Based on his rapidly escalating development costs, Michael wants a 50%-50% partnership share arrangement. Are you interested in being involved? If so, to what extent?"

That disclosure was at best incomplete and, more likely, misleading where Mr Ventura had a significant input into the business plan and Mr Ventura and his interests had borne the bulk of the costs of renovating the Longworth House building at this point.

1. A meeting (or possibly two meetings) to discuss Longworth House took place between Mr Ventura, Mr Pelosi and Mr Higgins, although there is a dispute as to whether one or two meetings occurred and as to whether it or they occurred in mid-May (on Mr Higgins' account) or mid-June (on Mr Ventura's and Mr Pelosi's account) (Higgins 28.5.10 [28]; Ventura 22.7.10 [7]-[8]; Pelosi 28.7.10 [20]-[27]). Mr Higgins' evidence is that Mr Ventura said to him that:

"Matthew it [Longworth House] will do larger functions than those we do at Bacchus and will provide scope to do bigger and better functions. It will not compete with Bacchus." (Higgins 28.5.10 [26]).

Mr Higgins' evidence is that Mr Ventura also said "It will cost approximately $800,000.00 to finalise the Longworth Institute", Mr Pelosi had indicated that he wanted "to retain" a 40% equity interest and Mr Ventura proposed that he and Mr Higgins "go 50/50 and take a 30% interest each" for $240,000 each (Higgins 28.5.10 [27]). Mr Higgins' evidence is that the meeting ended with his saying:

"Ok Anthony, if it's not competing with Bacchus and will only add an extra dimension to what we are doing, I will consider it". (Higgins 28.5.10 [27]).

Mr Higgins' evidence is that Mr Ventura also said:

"There will be great synergies between the two businesses - they won't compete - they will compl[e]ment each other. Longworth will be different to Bacchus and will only do large functions that Bacchus cannot do." (Higgins 28.5.10 [28]).

1. Mr Ventura's evidence was that he referred to the global financial crisis and said he could "see real benefits to Bacchus by having an association with a second venue" and that Mr Higgins asked him to "Tell me more about what is proposed" and that he said

"Basically, Longworth House is to be run as a function centre. I think events such as weddings, corporate events, private parties, product launches, and the like, will be the bulk of the business".

The reference to weddings and corporate functions here is consistent with the similar disclosure in the Longworth House business plan. Mr Ventura's evidence is that he disclosed the wine bar to be operated at Longworth House although he claims to have said "I imagine that [it] will be peripheral to the core business". Mr Higgins denies a reference to the wine bar at that meeting (Higgins 6.4.11 [5(i)], [9]).

1. Mr Ventura initially accepted in cross-examination that, in May 2009, he indicated to Mr Higgins that the functions that could be catered for at Longworth House would be much larger than those at Bacchus Restaurant and that the operation at Longworth House would not compete with Bacchus (T192). On the other hand, Mr Ventura denied that he told Mr Higgins at the meeting with Mr Pelosi in mid or late May 2009 that Bacchus and Longworth House would not compete and would complement each other and that Longworth House would only do large functions that Bacchus could not do (T241). Bacchus criticises the matters raised by Mr Ventura at this meeting as saying nothing about past breaches of fiduciary duty or consent for the purpose of obviating future breaches. I will deal with the question of the adequacy of disclosure and consent below.

1. Mr Ventura's evidence on cross-examination was that the first time he mentioned the partnership between Ace's Family Trust and EM Family Trust to Mr Higgins was in May 2009 "because that was when I was first contemplating getting involved in the operation of Longworth House, that is beyond development of the site" (T178). I do not accept this explanation of why this matter was raised at this point, since Mr Ventura was contemplating involvement in the operation of the Longworth House business from at least December 2008 when he had taken steps toward documenting a partnership, although I have held above that agreement had not been reached as to the interests in the partnership or final structure between Mr Pelosi and Mr Ventura at that time.

1. Mr Pelosi also gave evidence of a meeting with Mr Higgins in late May or early June 2009 and referred to a conversation referring to the potential for "synergies" between the two restaurants including giving staff more shifts between the two businesses; Bacchus Restaurant referring functions to Longworth House; Longworth House referring small groups and restaurant trade to Bacchus Restaurant; and greater bargaining power with suppliers, especially wine suppliers (Pelosi 28.7.10 [22]). His evidence was that Mr Ventura said, during the course of the discussion:

"With the bar opening upstairs soon, we can't do exclusive use functions so those can be referred to Longworth which keeps the clients happy and maintains the relationships built with those clients.

Similarly Longworth can refer the small groups and restaurant trade to Bacchus."

Mr Pelosi gave much the same evidence under cross-examination (T437). Mr Higgins denied that Mr Ventura said the words set out in paragraph [22] of Mr Pelosi's affidavit so far as they were inconsistent with Mr Higgins' first affidavit and denied that there was any reference to or agreement with Bacchus Restaurant referring functions to Longworth House (Higgins 6.4.11 [10]). I prefer Mr Pelosi's evidence in this regard, having regard to my comments as to his evidence above and to the difficulties with aspects of Mr Higgins' evidence to which I referred above.

1. A further email dated 26 May 2009 from Mr Ventura to Mr Higgins indicated that Mr Pelosi would be the operator of the business but would "expect/encourage considerable input" from Mr Ventura.

1. By late May 2009, Mr Ventura was offering 10% discounts on wedding packages to be held at Longworth House when it opened later in the year (Ex D25). Deposits were being taken by Longworth House from June 2009 with respect to functions to be held up to a year later (Ventura 22.7.10 [11]; T363-T364, Ex D38; Ex D39).

1. Mr Ventura sent a further email dated 17 June 2009 to Mr Higgins which included a reference to a change in taxation arrangements being very good timing for Longworth (Ventura 22.7.10 Ex AV 2 (Ex P7) Tab B). Mr Ventura sent a further email to Mr Higgins comparing the Longworth House function business and the Bacchus Restaurant business on 25 June 2009 (Ventura 22.7.10 Ex AV 2 (Ex P7) Tab C). That email sought to encourage Mr Higgins to buy into Longworth House and indicated that Mr Ventura proposed to get involved with Longworth House by reason of the "great business model which should prove to be very profitable" and because synergies could be generated to improve the profitability of both businesses. Mr Ventura proposed partnership arrangements of 40% for Mr Pelosi and either 40% for Mr Ventura and 20% for Mr Higgins or 30% each for Mr Higgins and Mr Ventura. Bacchus contended that the reference in this email to the price of $240,000 that Mr Higgins was being asked to pay for a 30% interest in Longworth House was misleading. It appears that price significantly exceeded 30% of the third party costs incurred to develop the business, since the MYOB balance sheet for the Longworth House business shows expenditures of $195,480 on buildings and improvements and fixtures and fittings made by 9 September 2009 by the Ace's Family Trust and the EM Family Trust (Exs D35-D36). However, there is a difficulty with this comparison, since there is evidence that Mr Ventura and Mr Pelosi each did substantial work themselves on the Longworth House premises and the record of third party costs incurred does not reflect the value of that work.

1. On 9 July 2009, Mr Ventura again wrote to Mr Higgins about taking an interest in Longworth House (Ventura 22.7.10 Ex AV 2 (Ex P7) Tab C). That email read as follows:

"LONGWORTH

I have had lengthy discussions with Michael [Pelosi], and the result is as follows:

He would prefer a 50% - 50% partnership with me (or me and you).

He seems to want a partner so he is not carrying as much debt.

Assuming you are not interested in the business, I will proceed with a 50% share. If you do however want in, I am happy to split my share with you.

The rent agreed will be $1980 per week.

Once the restoration and fit-out of the building is complete I will be seeking expressions of interest to sell it, subject to the lease to the new business. The asking price will be around $2.4m. ..."

By email dated 9 July, Mr Higgins responded to that email stating that "That's fine, I would not want to lose any more equity than necessary."

1. Mr Higgins rejected the offer to be involved in Longworth House in late July 2009 although there is a contest in the evidence as to the circumstances in which this occurred (Higgins 28.5.10 [25], [30]; Higgins 6.4.11 [5(j)], [11]; Ventura 22.7.10 [10]; Pelosi 28.7.10 [28]). Mr Ventura's evidence is that, in late July 2009, Mr Higgins told him "I see the advantages, you should go for it" (Ventura 22.7.10 [11]; T251; T260; T264). That conversation is denied by Mr Higgins (Higgins 6.4.11 [5(k)]). Mr Pelosi gave evidence of a subsequent telephone call from Mr Ventura, who advised him that Mr Higgins had said he was not interested in being part of the business and that Mr Ventura had told him he "will be going in anyway and [Mr Higgins] said go for it" (Pelosi 28.7.10 [28]; T437-441). Mr Pelosi's account of his conversation with Mr Ventura supports Mr Ventura's evidence as to this matter. I think it likely that Mr Higgins did at this point take the position that is attributed to him by Mr Ventura and Mr Pelosi, although his evidence is to the contrary. His taking that position would be consistent with his then interest in opening a mezzanine bar at Bacchus Restaurant which would have constrained its ability to hold functions, which was the subject of evidence from several witnesses (Moore T540; Clydsdale T612, T620; Alder T658-T659, T665; Montgomery T753-T754).

1. On the other hand, Mr Higgins gave evidence of a second meeting with Mr Ventura and Mr Pelosi where Mr Pelosi had said he did not need further money for the venture and Mr Higgins had said he was not interested in getting involved in Longworth House if Mr Pelosi did not need the money. Mr Pelosi recalled only one meeting with Mr Higgins and Mr Ventura and took issue with Mr Higgins' claim to have advised Mr Pelosi to that effect and his evidence was that Mr Ventura had conveyed that information to him some weeks later (Pelosi T440). I prefer Mr Pelosi's evidence as to this matter.

1. In July 2009, the Newcastle Herald published an article (with Mr Ventura's cooperation) which referred to the restoration of Longworth House by Mr and Mrs Ventura; noted that a "casual bar" was planned for downstairs at the building; that it was "fitted out in the same plush fabrics and ornate, generous furniture that had made Bacchus so welcoming"; that another large function room would be available upstairs and that there was a maze of rooms of "various sizes for private meetings or small gatherings"; and that one of the first functions would be a fundraiser for the Nicholas Trust. That article is annexed to Mr Higgins' affidavit dated 28 May 2010, although Mr Higgins does not say whether he read it when it was published. In my view, the publication of that article tends to corroborate Mr Ventura's evidence that he had by that time received Mr Higgins' consent to his involvement in Longworth House, and casts doubt on Mr Higgins' evidence to the contrary. It would, in my view, be very unlikely that Mr Ventura would have publicised his involvement in Longworth House in this expansive manner had he understood that his involvement was then unresolved between himself and Mr Higgins.

1. Mr Ventura's evidence was that, by July or August 2009 (or possibly September 2009), it had been agreed between Mr Pelosi and himself that Midfielder would take a 50% share of the Longworth House business (Ventura T233). In the period after Mr Pelosi's arrival in Newcastle in August, Mr Ventura and Mr Pelosi devoted substantial time to the work to prepare Longworth House for opening (Pelosi T360). In September 2009, Mr Pelosi and Mr Ventura together applied for commercial credit from suppliers for the Longworth House business (Ex D24). Longworth House commenced regular trading on 9 September 2009, about a week after the Nicholas Trust Ball had been held there (Ventura 22.7.10 [11]; Pelosi 28.7.10 [36]).

1. On 15 September 2009, Bacchus served notice of termination of Mr Ventura's appointment as General Manager of the Bacchus Partnership business under clause 21.11 of the Partnership Deed (Ventura 26.10.09 Ex AV (Ex P6) Tab E). That notice constituted a binding offer to purchase Barescape's share of the Bacchus Partnership and stated that:

"Further, we note that we are now pursuant to clause 21.1(b) of the Partnership Deed deemed to have irrevocably agreed to purchase at Market Value the whole of the share owned by Barescape ... as trustee for the Vs Family Trust, in the partnership."

There is a typographical error in that notice which refers to clause 21.1(b); that should be a reference to clause 21.11(b) of the Partnership Deed.

1. On 15 September 2009, Bacchus also served Mr Ventura with a Notice of Dissolution of Partnership pursuant to clause 13.2 of the Partnership Deed that provided for dissolution of the Bacchus Partnership as at 17 October 2009 and asserted that compensation would be given in accordance with clause 16.3(b) of the Partnership Deed (Ventura 26.10.09 Ex AV (Ex P6) Tab E). Mr Ventura and Barescape responded on 15 September 2009 disputing any entitlement of Bacchus to rely on clause 13.2 of the Partnership Deed or invoke clause 16.3(b) of the Partnership Deed.

1. An Interim Occupation Certificate was issued for Longworth House on 14 October 2009 (Ex D34). The partnership agreement between the EM Family Trust and the Ace's Family Trust in respect of Longworth House was formalised on 20 October 2009, after Mr Ventura's engagement as General Manager of Bacchus Restaurant had been terminated and, on my findings below, after the Bacchus Partnership had already been terminated. That partnership agreement refers to the conduct of the business of a "function centre and tapas lounge".

1. Samnite subsequently entered a lease of the Longworth House property from Mrs Ventura for a term of 10 years with an option to renew for a further term of 5 years by lease commencing 1 May 2010 (Ex D51). Mr Pelosi acknowledged that it then did so as representative of the partnership between the EM Family Trust and the Ace's Family Trust (Pelosi T428). On 9 June 2011, Samnite and Midfielder each reduced their interest in the Longworth House business, following a sale of a one-third interest in that business to Spirow Pty Ltd as trustee for the Envision Trust, which is an entity associated with the event coordinator at Longworth House (Ex D13).

Barescape's claims in respect of the termination of the Bacchus Partnership

1. Barescape and Mr Ventura seek declarations that the termination of Mr Ventura's engagement as General Manager of the Bacchus Partnership business in 15 September 2009 constituted a dissolution of the Bacchus Partnership under clause 21.11(b) of the Partnership Deed and rendered Bacchus liable to pay the market value of the whole of Barescape's share of the Bacchus Partnership to Barescape under that clause. Bacchus contends that clause was not applicable in the circumstances. Alternatively, Barescape and Mr Ventura seek a declaration that the service of a notice of dissolution of the Bacchus Partnership by Bacchus on 15 September 2009 rendered Bacchus liable to pay to Barescape the market value of the whole of their share of the Bacchus Partnership business, subject to any applicable deduction pursuant to clause 16.3 of the Partnership Deed.

1. On the other hand, by its Amended Cross-Claim, Bacchus seeks declarations that the notice of dissolution of the Bacchus Partnership of 15 September 2009 brought about the dissolution of the Bacchus Partnership with effect on and from 17 October 2009; that the Bacchus Partnership lawfully terminated Mr Ventura's employment summarily for serious misconduct on 15 September 2009; that Barescape was only entitled to compensation in accordance with clause 16.3(b) of the Partnership Deed; and that Barescape was entitled to be paid a total of $39,530 pursuant to clause 16.3(b) of the Partnership Deed, subject to a right of set-off of damages claimed against Barescape and Mr Ventura.

1. The relevant provisions of the Partnership Deed are as follows. Clause 12 provided a mechanism for a partner who wishes to sell part or all of their interest in the Bacchus Partnership. Clause 13.1(a) relevantly provided that no partner would during the Bacchus Partnership without the written consent of the other carry on or be concerned or be interested directly nor engage in or undertake any other trade or business except those which did not affect the conduct of the Bacchus Partnership's business. Clause 13.2 provided that:

"Should a Partner commit a breach of any of the terms or conditions of subclause .1 [sic], the other Partner may dissolve the Partnership on giving one calendar month's notice in writing by leaving that notice for the defaulting Partner at that party's usual or last known place of residence and unless otherwise agreed, the dissolution will be deemed to have become effective on the last day of the month's notice. The defaulting Partner will be compensated only in accordance with clause 16.3(c)."

1. Clause 15.1 provided that:

"In any situation whereby a continuing Partner has the right to remain in the business of the Partnership and purchase the share of an outgoing Partner (other than where the continuing Partner has by clause 12 the right of first refusal to purchase), the continuing Partner must exercise that right by giving the outgoing Partner or its proper officer one month's notice in writing of the intention to purchase at any time within one month of becoming aware of the event or act resulting in termination or dissolution."

Clause 15.2 provided that such a purchase would take effect as and from the date of the relevant dissolution or termination.

1. Clause 16, under the heading, "Valuation and Payment" provided that:

"16.1 The following provisions apply unless otherwise expressly provided herein or otherwise agreed by the Partners in writing.

16.2 The sum to be paid for the purchase of the share of an outgoing Partner ("Share") will be the value of that Partner's interest in the net assets inclusive of goodwill of the Partnership at the time of termination, to be ascertained from the account to be taken under the provisions of clause 10.

16.3 For the purpose of ascertaining the payment to an outgoing Partner, the Share value will be adjusted as follows:

(a) goodwill will not be included unless expressly so provided for in the clause relating to the purposes of that Partner's exit,

(b) the Share of a Partner in breach pursuant of clause 13 of this deed will be discounted by 40% of the goodwill,

(c) the Share of a Partner who is an "incapable Partner" under the provisions of clause 14 of this deed will be discounted by 20% of the goodwill value.

16.4 Payment by a continuing Partner to an outgoing Partner must be made by bank cheque within 14 days of the valuation of the outgoing Partner's interest becoming known by virtue of the advices of the Accountants."

1. Clause 21 sets out the terms of Mr Ventura's employment as General Manager and provides for his dismissal as follows:

"21.11 The General Manager may be dismissed by written notice by a majority of shareholders at any time without cause or otherwise, on the following conditions:

(a) Ventura will be entitled to 4 weeks' notice of dismissal or 4 weeks' remuneration in lieu of notice.

(b) The shareholder/s voting for the dismissal will be deemed to be an "offeree Partner" which has the right of first refusal to purchase under clause 12 of this deed and which has irrevocably agreed to purchase at market value the whole of the share of the Partner of which Ventura is a director (or otherwise has a common interest).

(c) The provisions of clause 12 of this deed will apply so far as possible to the subsequent purchase.

(d) The offeree Partner will inform the Accountants of its action within one business day of service of the dismissal notice and will inform Ventura promptly on doing so.

(e) The offeree Partner will bear the cost of the Accountants determining the market value and will use its best endeavours to have that value determined expeditiously and forwarded forthwith to both the offeree Partner and Ventura.

(f) Both the offeree Partner and Ventura will do all things reasonably possible to enable the Accountant's Valuation to be undertaken and completed at the earliest practicable date.

(g) If either party regards the Accountant's Valuation as being in error they may seek a valuation from another accountant nominated by the President of the professional association of which the Accountants are members, in which case the offeree Partner will do all things necessary to enable the further valuation to take place without undue difficulty or delay and with the benefit of all of the accounting records available to the Partnership Accountants.

(h) If a second accountant is appointed pursuant to subclause (g), his fees and disbursements will be borne by:

(i) the offeree Partner, if the second valuation demonstrates that the market valuation carried out by the Partnership's Accountant understates the market value by at least 5% or

(ii) Ventura, if the second accountant's market valuation is at least 5% less than the Partnership Accountant's notified amount, or

(iii) the parties equally if the second accountant's valuation is within 5% of the Partnership Accountant's notified amount.

(i) If Ventura is not paid any part of the market valuation by the expiry of 42 days from receipt of his dismissal notice, the valuation of his interest in the Partnership will bear interest at the rate which is the greater of 12% per annum or 4% above the average of the reference rates known as the 'indicator' or 'base' commercial lending rates published by the four major Australian banks. Payment of such interest on completion of the purchase is an essential term of this deed."

1. The manner in which commercial contracts should be interpreted is well-established by the case law. The contract must be read in a way that will result in a sensible and businesslike meaning: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109. Attention must be given to the language used by the parties and the commercial circumstances which the document addresses and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 589 [22]. The meaning of a particular term is to be determined by what the reasonable person in the position of the parties would have understood it to mean: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540. In Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22] the High Court noted that:

"The construction of commercial contracts is to be determined by what a reasonable person in the position of [the contracting party] would have understood them to mean (Gissing v Gissing [1971] AC 886 at 906; Christopher Hill Ltd v Ashington Piggeries Ltd [1972] AC 441 at 502; ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540). That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to the parties, and the purpose and object of the transaction (Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; [1998] 1 All ER 98.) In Codelfa Construction Pty Ltd v State Rail Authority of NSW ((1982) 149 CLR 337 at 350. See further Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436 at 445 [39]; 186 ALR 289 at 301) ..."

1. The first issue that is in dispute between the parties is the basis on which the amount payable by Bacchus to Barescape on termination of the Bacchus Partnership is to be calculated. As I noted above, clause 16.3(d) of the Partnership Deed relevantly provides that:

"For the purpose of ascertaining the payment to an outgoing Partner, the Share value will be adjusted as follows: ...

(b) The Share of a Partner in breach pursuant of [sic] clause 13 of this deed will be discounted by 40% of the goodwill, ..."

Bacchus contends that the discount to goodwill under this clause applies not only in circumstances where there is a dissolution of the partnership under clause 16 of the Partnership Deed but also where a partner is in breach of clause 13.1 of the Partnership Deed and a dissolution of the partnership takes place under clause 21.11 of the Partnership Deed. On balance, I would accept that construction of clause 16.3, since the reference to the adjustment of share value in that clause applies "[f]or the purpose of ascertaining the payment to an outgoing Partner" and the amount of that payment needs to be ascertained whether there is a dissolution of the partnership under clause 13.2 of the Partnership Deed or by reason of a deemed offer to purchase the share of the outgoing partner under clause 21.11 of the Partnership Deed, arising from the dismissal of Mr Ventura as General Manager. It follows that, if a breach of clause 13 of the Partnership Deed is established (as I will hold, below, is the case), then the 40% discount for goodwill is applicable in determining the value of Barescape's share in the partnership.

1. The amount of the discount to goodwill under this clause would arguably need to be treated as an offset against any damages which would be recoverable by Bacchus from breach of that clause, since the benefit of that discount to goodwill would not have been obtained by Bacchus without the corresponding breach of that clause. The parties should have the opportunity to make further submissions as to that issue prior to the making of orders to give effect to this judgment.

1. Alternatively, Bacchus contended that, on service of the notice of dissolution of the Bacchus Partnership under clause 13.1(a) of the Partnership Deed on 15 September 2009, clause 13.2 of the Partnership Deed operated to determine the entitlements of the parties to the exclusion of the mechanism created by clauses 12 and 21.11 of the Partnership Deed. I do not consider that clause 13.2 operated in that manner. In my view, the notice given by Bacchus on 15 September 2009 under clause 21.11 of the Partnership Deed gave rise to an agreement by Bacchus to purchase Barescape's interest at market value, which had immediate effect, whereas the second notice given by Bacchus under clause 13.1(a) would not bring about a dissolution of the Bacchus Partnership until a month later. On the proper construction of the Partnership Deed, clauses 13.2 and 21.11 are alternative mechanisms for a sale of a partner's interest and, once Bacchus invoked the mechanism under clause 21.11 which had immediate effect, it was bound by its terms.

1. The mechanism provided by clause 21.11 had the important benefits for Bacchus that it was immediately effective and did not require it to establish cause for termination of the General Manager or dissolution of the Bacchus Partnership and that such a termination would be effective even if such cause was not ultimately established. Bacchus took full advantage of the immediate effect of that notice by changing the locks to the restaurant on the afternoon the notice had been given, which it would not have been entitled to do had it relied only on the alternative mechanism under clauses 13.1 and 13.2 which would not bring about a termination of the Bacchus Partnership for another month.

1. There is also a dispute in the evidence of Mr Higgins and Mr Ventura as to the order in which the notice of dissolution of the Bacchus Partnership and notice of termination of Mr Ventura's employment as General Manager were provided by Mr Higgins to Mr Ventura. I do not consider it is necessary to resolve that dispute having regard to the conclusions that I have reached above. Whichever of the notice of dissolution of the Bacchus Partnership or notice of termination of Mr Ventura's employment as General Manager was given first, the notice of termination of Mr Ventura's employment as General Manager had immediate effect to bring about the termination of the Bacchus Partnership and there was no room for any later operation of the notice of dissolution of the Bacchus Partnership.

1. Bacchus points to various occasions on which, it contends, Mr Ventura contended that the Bacchus Partnership continued beyond 15 September 2009. No estoppel as to this matter was pleaded, nor is it likely that such an estoppel could be established in circumstances where Bacchus had itself asserted two alternative bases for termination of the Partnership Deed and there is no suggestion that Bacchus relied to its detriment on any assertion made by Mr Ventura in that regard.

1. Bacchus also contends that the reference to clause 16.3(c) in clause 13.2 of the Partnership Deed ought to be read as a reference to clause 16.3(b) and a 40% not 20% discount to goodwill therefore applies on dissolution of the partnership in accordance with this clause. This issue does not arise having regard to the conclusions that I have reached above. However, I should record my view that the reference to clause 16.3(c) in clause 13.2 of the Partnership Deed is an obvious error and was intended to refer to clause 16.3(b). As Bacchus points out, this is clear from clause 16.3(b) itself which itself makes reference to clause 13, whereas clause 16.3(c) refers to clause 14. The Court may, as a matter of construction, read the reference in clause 13.2 to clause 16.3(c) as a reference to clause 16.3(b) without rectification of that clause: Fitzgerald v Masters (1956) 95 CLR 420; Watson v Phipps (1985) 60 ALJR 1; Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46 at [92] per McLure J.

1. It follows that, on termination of Mr Ventura's employment as General Manager of the Bacchus Partnership in circumstances where Barescape was in breach of clause 13.1 of the Partnership Deed, Bacchus was required to buy out Barescape's interest in the Bacchus Partnership in accordance with clauses 12 and 21.11 of the Partnership Deed. In that situation, the value of Barescape's 25% share of the Bacchus Partnership was nonetheless to be discounted in the manner provided in clause 16.3 of the Partnership Deed.

The dispute as to the SiDCOR valuation

1. I have referred above to the mechanism for valuation of a partner's interest in the Bacchus Partnership under clause 16 of the Partnership Deed. Bacchus contends that the amount payable to Barescape in respect of its interest in the Bacchus Partnership is determined by a valuation made by the accountants for the Bacchus Partnership, SiDCOR ("SiDCOR valuation") (Ventura 26.10.09 Ex AV (Ex P6) Tab 5; Higgins 28.5.10 [54] Annexure "M"; Amended Cross-Claim [24]). The SiDCOR valuation was provided to Mr Ventura at a meeting with Mr Higgins and Mr Higgins' solicitor on 22 October 2009 (Higgins 28.5.10 [55]). Barescape contends that the SiDCOR valuation is not binding on it, either because Barescape has validly invoked a right to a second valuation under the Partnership Deed or under the principles in Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314. I will deal with these contentions in turn.

1. First, Barescape contends that it is not bound by the SiDCOR valuation because it has validly invoked a right to a second valuation under the Partnership Deed. There is also a dispute between the parties as to what is required to invoke that right.

1. I have concluded above that the sale of Barescape's interest in the Bacchus Partnership to Bacchus was governed by clause 21.11 of the Partnership Deed following Bacchus' service of a notice invoking that clause. The right to a second valuation under clause 21.11(g) of the Partnership Deed was triggered if Barescape gave notice that it regarded the SiDCOR valuation as in error. Clause 21.11 of the Partnership Deed also applied the mechanism under clause 12 of the Partnership Deed so far as possible to the valuation process where Bacchus was required to buy out Barescape's interest following the termination of Mr Ventura's employment as General Manager. Clause 12.3 provided an alternative basis for Barescape to challenge the SiDCOR valuation, if it could show within 21 days of receipt of the valuation that it was "substantially in error".

1. Bacchus contends that the requirement to show an error within 21 days in accordance with clause 12.3 of the Partnership Deed applies to the exclusion of clause 21.11(g) and that, to give business efficacy to the Partnership Deed, the "potential conflict" between clauses 12 and 21.11 should be resolved by recognising that clause 12 applies where there is a termination "with cause" and clause 21.11 applies where there is a termination "without cause". I do not consider that there is a "potential conflict" between the clauses where they are capable of having parallel operation. The manner in which a valuation proceeds depends upon which clause is invoked, and in this case, each clause was invoked and clause 21.11 had immediate effect. In my view, where clause 21.11 applied by reason of the termination of Mr Ventura's employment as General Manager, it provided an additional basis for objection to the accountant's report, which could be invoked without showing an error in that valuation, in addition to the basis for objection to that valuation permitted under clause 12. This is not a surprising outcome, where a compulsory acquisition of a partner's share under clause 21 of the Partnership Deed at a valuation which was in error would be more damaging to that partner than an error in the valuation under clause 12 which permitted but did not oblige a partner to sell its interest at a particular price.

1. By letter dated 22 October 2009 to the solicitors for Bacchus and Mr Higgins (Ventura 26.10.09 Ex AV (Ex P6) Tab T), Mr Ventura contended that the SiDCOR valuation was in error and stated that Mr Ventura would contact the President of the professional association of which SiDCOR was a member asking them to nominate another accountant to undertake a valuation. By letter dated 23 October 2009 (Ventura 26.10.09 Ex AV (Ex P6) Tab Y), the solicitors for Bacchus and Mr Higgins noted Barescape's contention that the valuation was in error but contended that the SiDCOR valuation was applicable. In my view, the letter dated 22 October 2009 was sufficient notice that Barescape and Mr Ventura regarded the SiDCOR valuation as in error to invoke the right to a second valuation under clause 21.11(g) of the Partnership Deed.

1. Since I have found that Barescape was entitled to obtain a second valuation under clause 21.11(g) of the Partnership Deed on giving notice, as it did, that it regarded the SiDCOR valuation as in error, it is not strictly necessary for me to decide whether Barescape validly invoked the alternate basis for a second valuation under clause 12.3 of the Partnership Deed by "showing" the SiDCOR valuation to be substantially in error within the specified 21 day period. However, I will record my views as to that matter in case an appellate court takes a different view as to the application of clause 21.11(g) of the Partnership Deed.

1. On 28 October 2009, Mr Ventura wrote to the solicitors for Barescape and Mr Higgins enclosing an affidavit dated 26 October 2009 setting out detailed criticisms of the SiDCOR valuation as follows:

"i. The earnings figures relied upon by the accountant do not include the direct deposits to the partnership bank account, and so understate earnings for the period from 1 July 2008 to 31 August 2009 by $81,455.90 (see paragraph 19 above).

ii. The amount recorded by the accountant for "cash on hand" as at 15 September 2009 is incorrect. The amount recorded by the accountant in the balance sheet is $24,294.61. The actual "cash on hand" recorded in the bank statement as at 15 September 2009 is $30,973.84 (see paragraph 16 above). The accountant has understated the cash on hand by $6,679.23.

iii. It was expressly contemplated in the Partnership Deed that, in addition to management of the business, I would progress the development of the second (upper) level of the business premises (clause 21.2 of the Partnership Deed.) Between 1 July 2008 and 15 September 2009, substantial building and development work was undertaken by me and under my supervision to that end. That included, building of an upstairs bar area, the "rough-in" of plumbing and electrical services to the upstairs bar, building of a bar front and bar top, installation of ducted air conditioning, painting of the upstairs bar, and acquisition of the required furniture. These substantial expenses were paid for out of the profits of the business, as a capital re-investment. The accountant has treated some of these amounts of capital re-investment as ordinary expenses of the business, thus inflating the expenses, both actual and forecast.

1. Mr Jugmans calculated the gross profit lost on those functions as $35,240.93, after adjusting for the Bacchus Restaurant gross profit margin of 68% (as agreed by the accounting experts in the Second Joint Report (Ex D87A) [12]) and for variable expenses (as agreed by the accounting experts in the Second Joint Report (Ex D87A [12]). Mr Jugmans sets out the basis of adopting a gross profit margin of 68% for Bacchus Restaurant in Ex D84 [5.7]-[5.14], by reference to his analysis of the gross profit margin for Bacchus Restaurant for the period 1 July 2008-15 September 2009. Mr Jugmans noted that the average gross profit margin of the Bacchus Restaurant decreased from 68% in the period from 1 July 2008-15 September 2009 to 55% for the period from 16 September 2009-30 June 2011. He noted that his analysis of data relating to Longworth House suggested that it was achieving a gross margin of more than 71% over the whole period. Mr Jugmans adopted a gross margin of 68% for the profit which could have been derived by Bacchus Restaurant had the business not been diverted. Barescape advances detailed criticisms of the 68% profit margin of Bacchus Restaurant agreed between the accounting experts and I have given careful consideration to those criticisms. I am also conscious that, as Bacchus concedes, the profitability of a la carte dining at Bacchus declined over this period, but the evidence indicates that function business was likely to be more profitable than a la carte dining and the experts for both parties agreed that a gross profit margin in that order was reasonable (Second Joint Report (Ex D87A) [12]-[13(a)]). That estimate of Bacchus gross profit and variable expenses seems to me to be a reasonable one given the available evidence.

1. Barescape and Bacchus each advanced numerous criticisms of the other's conduct in respect of discovery and of the adequacy of the documents produced by each other. There were inadequacies in each party's production of documents and issues in respect of both parties' discovery have been addressed in several interlocutory judgments in the course of the proceedings. In the case of Bacchus, those inadequacies include failures to produce some documents (such as emails held on the Bacchus Restaurant laptop) and financial records held in a filing cabinet at Bacchus Restaurant, which would have been avoided by more careful attention to its discovery obligations. In the case of Barescape and Mr Ventura, notwithstanding the discovery order and the fact that Bacchus served subpoenas on Mr Pelosi and Midfielder, there are significant deficiencies in the production of invoices and other records which might have established the earnings from several of the relevant functions at Longworth House. The extent to which final documentation was not available in respect of functions held at Longworth House is well illustrated by a table indicating where receipts, deposit invoices and final invoices were not available in respect of such functions tendered by Bacchus (Ex D94) and I accept Bacchus' submission that it has gone to substantial lengths to seek to obtain production of such documentation, both on discovery and by the issue of subpoenas. It is not necessary to determine whether this position involved any fault on behalf of Barescape and Mr Ventura and some of the deficiencies may be explicable by haphazard record-keeping at the time that Longworth House was being prepared for opening and after it first opened.

1. The Court may more readily draw inferences in favour of Bacchus and adverse to Barescape and Mr Ventura where Barescape and Mr Ventura did not produce receipts and invoices for a significant number of functions held at Longworth House on discovery: Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388. The assumptions that Mr Jugmans has been required to make, because of the absence of final invoices for some functions in respect of Longworth House, include an assumption that deposits paid in respect of functions were 25%. There is evidence that the deposits paid, against the actual costs of functions, were in the range of 17-31%; that variation is not surprising because the actual costs of functions may differ from the estimated costs. I consider this was a reasonable assumption in the circumstances.

Deduction for a la carte trade

1. In my view, the loss claimed by Bacchus in respect of the Longworth Redirects would need to be further adjusted by deducting the a la carte or other function revenue earned by Bacchus on the relevant evenings, as determined by an average of those earnings over the period. I noted above that equitable compensation will not be awarded in a manner which would put the party in a better position than it would have been in had the breach not occurred: Old v McInnes above at [97]; Digital Pulse Pty Ltd v Harris above at [312]. Equitable compensation could only be awarded in respect of loss which had actually been suffered by Bacchus and could not be established if, for example, Bacchus had greater profits from the conduct of a la carte dining on a particular evening than it could have earned from the conduct of a function on that evening. In the present case, Bacchus would also be placed in a better position than it would have been, absent the breach, if it recovered the full profit from a redirected function without deduction for the profit from a la carte or other function trade on the same night, subject to any adjustment necessary for the fact that some of that trade might have been able to be accommodated on a different night.

1. The parties advanced detailed submissions as to which of them bore the onus of leading evidence to deal with these matters. That issue was ultimately of lesser significance, since Bacchus in fact tendered an expert report of the accounting expert retained by Barescape, Mr Vella, that addressed this issue. I have referred above to the nature of equitable compensation; damages for breach of contract are also directed to putting the wronged party in the same situation, as far as money can do it, as if the contract had been performed and establishing contractual damages will normally require the plaintiff to establish the difference between those positions: Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248; (2008) 75 NSWLR 1 at [70].

1. The question of mitigation of loss generally arises only after the plaintiff has proved the amount of its loss. The relevant principles were summarised by Hodgson JA in TycoAustralia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 at [264]:

"... although the plaintiff has the general onus of proof of damages, there can be legal or at least evidentiary onuses cast on the defendant. If a defendant wishes to say that the plaintiff incurred loss or expenses that it could have avoided by taking reasonable steps in mitigation, the onus of proof is on the defendant: Roper v Johnson (1873) LR 8 CP 167. If a defendant wishes to say that some part of the loss would have occurred in any event, there may be an onus on the defendant to "disentangle the causes": Watts v Rake (1960) 108 CLR 158 at 159; Purkess v Crittenden (1965) 114 CLR 164 at 168; Shorey v PT Ltd (2003) 77 ALJR 1104 at [46]-[47]. If a defendant wishes to say a benefit received by the plaintiff was caused by the defendant's conduct or by expenditure caused by that conduct, it appears that the defendant bears an onus: Monroe Schneider. The onus or at least standard of proof may also be affected by considerations of who has the capacity to offer proof (Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969) and, where events have prejudiced the provision of proof, who is responsible for those events (Murphy v Overton Investments Pty Ltd (2004) 78 ALJR 324 at [74])."

1. The Court of Appeal's decision in Tasman Capital Pty Ltd v Sinclair also recognised that, in some circumstances, "avoided loss" can be treated as a compensating advantage, as to which it is appropriate to place the onus of proof on the other party. However, the onus which there fell upon an employer was in relation to the financial benefit received by an employee referable to the use of her earning capacity, in a manner which reduced her loss, in circumstances that the quantum of that loss was prima facie the amount of her lost salary and contractual benefits from employment. Giles JA noted that treating the question of mitigation as after the plaintiff's proof of values "may be appropriate where ordinarily there is a market for the goods" but distinguished the market for personal services. Young CJ in Eq observed at [91]-[92]:

"Indeed, what authorities there are on this point do seem to take the distinction between the compensation for pecuniary loss naturally flowing from the breach (that which the plaintiff must prove) and offsetting advantages which have flowed or should have flowed to the plaintiff which offsets must be proved by the defendant.

Thus, as Sir Alfred Cripps KC put to the House of Lords in The British Western House Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 at 679 (an argument which seems to have been accepted by the House at 679) that in these sort of cases, it is first necessary to work out whether the original loss is X or X minus A) (see also the judgment at p 689). The plaintiff must establish this original loss: thereafter the onus is on the defendant."

1. Bacchus contends that the onus is on Barescape to establish intervening factors which resulted in Bacchus avoiding or mitigating its loss. I accept that proposition. However, I do not accept that Bacchus Restaurant's opening for business for other functions or for a la carte trade in accordance with the ordinary course of its business can properly be characterised as amounting to taking steps to mitigate its loss by reason of the diversion of functions. Rather, Bacchus Restaurant conducted its business in the ordinary course and earned income from functions and a la carte trading in the ordinary course in substitution for the functions which were diverted. In this case, the loss which Bacchus Restaurant suffered is the difference between the profit which it would have earned, had it conducted the functions which were diverted, and the profit which it earned by continuing to trade in the ordinary course of its business where such a function had been diverted. The onus is, in my view, on Bacchus to establish that loss. The position is different from that considered by, for example, the Court of Appeal in Tasman Capital Pty Ltd v Sinclair above, where the income earned by an employee during a contractual notice period resulted from his or her active step in seeking other employment during that notice period, as distinct from his or her continuing to conduct an existing business in the ordinary course.

1. In any event, the facts of Bacchus Restaurant's earnings from a la carte meals and functions on the nights on which functions were alleged to have been diverted to Longworth House are peculiarly within Bacchus' knowledge and, in that case, slight evidence from Barescape will throw the evidentiary onus on Bacchus: Tyco Australia Pty Ltd v Optus Networks Pty Ltd above at [121]. Even if the onus were on Barescape to establish that Bacchus opened for business and earned substantial revenues on Friday and Saturday nights, the evidence establishes that Bacchus Restaurant opened on Friday and Saturday nights in the ordinary course and had substantial earnings on such nights (Ex D101). Mr Vella's 5 July report (Vella 5.7.11 Report (Ex P65)) demonstrates that Bacchus Restaurant's average a la carte revenue on Friday and Saturday nights (excluding certain nights on which the restaurant was closed) was approximately $5,846 per night.

1. Bacchus contends that:

"It would not be appropriate to assume that all of the a la carte revenue on the night of a function would be "lost" to Bacchus justifying a discount of the full value of the revenue. It ought to be assumed that most of the a la carte trade on the night of a function would be transferred to a booking on the other six Friday and Saturday nights in each month kept free from functions for that very purpose."

Bacchus contends that, had Bacchus held a function on a particular night, there was a probability or possibility that the a la carte trade which could not be held on that night would be absorbed by the excess capacity on other nights, because a guest who was unable to dine at Bacchus Restaurant on a particular night might choose to dine at the restaurant on a different night. Bacchus also raises the possibility that a person wishing to hold a function at Bacchus, but unable to do so on a particular night, would have rescheduled the function for another night.

1. There is at some evidence, albeit in general terms, that such rescheduling occurs from time to time (Moore T531). That proposition was also put to Mr Vella, the accounting expert retained by Barescape, in cross-examination and accepted by him, but I do not consider that his expertise gives particular weight to his evidence as to that question. I do not accept Bacchus' wider submission that it is a matter of "common sense about the unique venue of Bacchus" that parties would necessarily or typically shift their wedding or other plans to accommodate the restaurant's availability or that customers "will change the night a day or so either side to be able to go to the special venue for the celebration". No evidence of the historical experience of the Bacchus Restaurant in particular or the fine dining segment of the restaurant industry generally was led in that regard. The issue of rescheduling functions would also be complicated by the fact that, if a customer wished to hold his or her wedding on a Friday or Saturday, there would be limited flexibility to do so within Bacchus' Functions Policy which generally contemplated only two such functions a month.

1. In the alternative to its submission as to mitigation, Bacchus contends that the Court would assess that only 20%, or $1,169, of the average $5,846 a la carte revenue earned on the night of a lost function would be an offset to its claim for damages rather than being shifted to another night, and that the loss of function revenue should only be reduced by the amount of $1,169 per night. I do not consider that I can accept this submission. Doing the best I can on the basis of the limited evidence before me, I would assess a 20% prospect that such revenue could be shifted in that way, so that the amount of $4,677 per night should be set off against the amount of function revenue lost to Bacchus Restaurant on a particular night.

1. It will be necessary for the parties to recalculate the quantification of compensation and damages having regard to the findings that I have reached above in respect of the particular functions as to which Bacchus has established its claim and the offset for revenue from a la carte trade.

Non-Longworth Redirects

1. As I noted above, Barescape and Mr Ventura accepted in closing submissions that they had conducted the case on the basis that the Non-Longworth Redirects were within the scope of the pleaded case brought by Bacchus. The claim in respect of the Non-Longworth Redirects was of a somewhat different character than the claim in respect of the Longworth Redirects. The latter claim, which I have addressed above, related to functions that were known to have taken place at Longworth House. The former claim related to function inquiries, where the relevant functions had not taken place at Longworth House and it was not established whether they had taken place elsewhere or at all.

1. Mr Jugmans quantified the revenue referable to the Non-Longworth Redirects as $261,900. In the Second Joint Report (Ex D87A), Mr Jugmans acknowledged that his estimate of the revenue that the Bacchus Restaurant may have generated from diverted functions assumed that the event was certain to happen; there was no venue other than Bacchus Restaurant which the prospective client would have chosen had the inquiry not been referred; Bacchus Restaurant would have been available to accommodate the function, in that it was not otherwise booked or the customer would have selected an alternative date for the function if it was booked; and all of the functions were capable of being serviced at Bacchus Restaurant. These were ambitious assumptions. This calculation also depended upon assumptions as to the nature, size and cost of the relevant functions, given the limited information as to those functions to which I will refer below.

1. Bacchus submits that there was a "high probability" that the functions falling within this category (or, more accurately, any functions resulting from inquiries falling within this category) would have occurred at Bacchus Restaurant, although acknowledging that the Court "is left to speculate as to why the functions were not held at Longworth". Bacchus submits that:

"The Court should assess this component of [Bacchus'] loss by ascribing a dollar value to each of the non-Longworth redirects. This should be done individually, and function by function. The Court would first assess the probability of a function having been held at Bacchus if [Barescape and Mr Ventura] had not breached their duties. This probability would then be applied to the value of that individual function (as quantified by Mr Jugmans). This exercise would be performed for each of the non-Longworth redirects and the results added together. The total will be the measure of this component of [Bacchus'] loss.

I do not consider that the available evidence concerning these functions, to which I refer below, would permit that approach. In my view, this head of the claim needs to be assessed as the loss of a wider opportunity to convert function inquiries made to Bacchus Restaurant to functions held at Bacchus Restaurant.

1. It is necessary to refer to the question of causation before turning to quantification in respect of this aspect of Bacchus' claim. In Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; (1991) 85 DLR (4th) 129 at 163, McLachlin J stated that equitable compensation could be ordered for losses which, "on a common sense view of causation, were caused by the breach". In Target Holdings Ltd v Redferns above, Lord Browne-Wilkinson (with whom Lord Keith of Kinkel, Lord Ackner, Lord Jauncey of Tullichettle and Lord Lloyd of Berwick agreed) observed that:

"Equitable compensation for breach of trust is designed to achieve exactly what the word compensation suggests: to make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach".

These principles were also accepted in O'Halloran v RT Thomas & Family Pty Ltd above at 273 and GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers above at [65], where it was also noted at [71] that:

"Nevertheless, one must have regard to the principle that the court is entitled not to speculate against the interest of the plaintiff or to make assumptions against the defendant on the issue of causation. This allows the plaintiff to lead only a minimum of evidence to discharge the evidentiary burden of causation."

1. The claim is put as a loss of opportunity claim and a claimant must establish that loss and damage was caused by the alleged breach even where a claim is put as a loss of opportunity claim. In Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450; 57 ALR 167, the Full Court of the Federal Court observed that:

"The principle is clear. If the court finds damage has occurred it must do its best to quantify the loss even if a degree of speculation and guess work is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages. We should add that we can see no reason why this principle should not apply in cases under the Trade Practices Act as well as in cases at common law. We emphasize, however, that the principle applies only when the court finds that loss or damage has occurred. It is not enough for a plaintiff merely to show wrongful conduct by the defendant."

That passage was approved by Brennan J in Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 364 where his Honour observed that:

"... a causal relationship between the loss of such an opportunity and the defendant's contravening or tortious conduct must be proved before any issue of assessment of the amount of the loss arises."

1. Once causation is established, the fact that a claimed loss involves a degree of speculation does not necessarily exclude recovery for that loss: McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 at 412; Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 643; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64; Sellars v Adelaide Petroleum NL above at 335. The Court may also place a monetary value on a loss of opportunity in assessing equitable compensation, although that loss is incapable of precise measurement, may use subjective "tools" in arriving at that value, such as common sense and general notions of justice and fairness and may determine the amount of equitable compensation by a process of "judicial estimation" on the available indications: O'Halloran v RT Thomas & Family Pty Ltd above; AMP Services Ltd v Manning [2006] FCA 256 at [69]; Spotless Group Ltd v Blanco Catering Pty Ltd above at [69], [126].

1. The evidence in respect of many of the functions within this category of Bacchus' claim was sparse. For most of these functions, the evidence goes no further than that an inquiry was made to Bacchus Restaurant, that the inquiry was referred to Longworth House and a resulting function did not take place at Longworth House. For example:

• An inquiry was made to Bacchus Restaurant on 20 August 2009, in respect of the Bidmead function, for a "function room" for a 21st birthday for Saturday 10 October 2009 (CB 8/304). Bacchus did not have a separate function room (Ex P73) and it was unclear whether the function would have satisfied the minimum spend requirement for exclusive use of the restaurant. The function did not proceed at Longworth House and it is not known whether it proceeded elsewhere.

• An inquiry may have initially been made to Longworth House rather than Bacchus Restaurant in respect of a function in the name of Bird since it is referred to in the "Follow up on Longworth inquiries" document (Clydsdale 30.4.10 Annexure "C" p282). That function did not proceed there and it is not known whether it proceeded elsewhere.

• It appears an inquiry in respect of a function in the name of Clancy was referred to Longworth House by an email sent on 25 July 2009 but did not proceed there. It is not known whether the function proceeded elsewhere.

• An inquiry in respect of a function for Ms Collin was referred to Longworth House on 7 August 2009 (Clydsdale 30.4.10 Annexure "B" p268) but there is no evidence as to the nature of that function or whether it proceeded.

• Ms Evans was sent a Longworth House events package by Bacchus' Restaurant Services Manager, Mr Bradshaw (CB12 (Ex D74) p106) but her function did not proceed at Longworth House and it is not known whether the function proceeded elsewhere

• Mr Ventura's evidence is that the first contact as to a function for Ms Grace was with Bacchus Restaurant in May 2009 and related to a request to hold a "murder mystery party" for about 10 people at Bacchus Restaurant which would involve customers acting out characters in a murder mystery (Ex P59/173; T1815-T1816). A Longworth House function package was forwarded to Ms Grace from the Bacchus Restaurant email address on 18 August 2009. There is no evidence as to whether inquiries were made elsewhere or whether the function went ahead. I note that Bacchus contended that there were two separate Grace inquiries, but the evidence is inconclusive in that regard.

• A Longworth House information package was forwarded to Ms Geissler from the Bacchus Restaurant email address on 6 August 2009 (Clydsdale 30.4.10 Annexure "B" p270) but the function did not proceed at Longworth House and it is not known whether the function proceeded elsewhere.

• An inquiry was made on 1 September 2009 through the Bacchus Restaurant website with respect to a function in the name of Handley for about 100 guests, which was referred to Longworth House by an email of 1 September 2009 but did not proceed there. It is not known whether the function proceeded elsewhere.

• Information about Bacchus Restaurant and Longworth House was provided to a Ms Hunt by Ms Clydsdale on 28 July 2009 (CB12 (Ex D74) p56) but the function did not proceed at either venue and it is not known whether the function proceeded elsewhere.

• An inquiry was made by Ms Lawler through the Bacchus website on 14 September 2009 with respect to a wedding function to be held two years in the future, for about 50-65 guests, and she was provided with a brochure for Longworth House. The function did not proceed at Longworth House and it is not known whether the function proceeded elsewhere.

• An inquiry was made to Bacchus Restaurant on 27 July 2009 for a "private dining room" for the Moffatt parties for approximately 17 people for 30 August 2009 (Clydsdale 30.4.10 Annexure "B" p277). Bacchus Restaurant did not have such a dining room (Ex P73). A Longworth House function information package was sent from the Bacchus Restaurant email address on 28 July 2009. It may be unlikely that the function could have been at Bacchus Restaurant on an exclusive use basis given its minimum spend for exclusive use. The function did not proceed at Longworth House and it is unknown whether the function proceeded elsewhere.

• A function package for Longworth House was sent to Ms Ocean by Ms Clydsdale on 25 July 2009 (CB12 (Ex D74) p93). The function did not proceed at Longworth House and it is unknown whether the function proceeded elsewhere.

• An inquiry was made to Bacchus Restaurant on 14 September 2009 in respect of a function in the name of Parry and a copy of the Longworth House function package was provided on 15 September 2009. The function did not proceed at Longworth House and it is unknown whether the function proceeded elsewhere.

• An inquiry under the name of Roser related to a university student function which would require a "special" rate (DB12 (Ex D74) p122) and it is questionable whether the function could have been at Bacchus Restaurant on an exclusive use basis given the requirements of its minimum spend policy. The function was also not held at Longworth House and it is unknown whether the function proceeded elsewhere.

• An inquiry was made through the Bacchus Restaurant website on 9 September 2009 for a corporate business function for between 100-150 persons in the name of Salisbury and was referred to Longworth House but not held there. It is again not known whether the function proceeded elsewhere.

• Information as to Longworth House was also sent to several other persons whose surnames are unknown. Their functions did not proceed at Longworth House and whether they proceeded elsewhere is also unknown.

1. Bacchus invites the Court to infer that the reason that functions within this category (or, more accurately, any functions resulting from inquiries within this category) were not held at Bacchus Restaurant or Longworth House, after being referred to Longworth House, was that:

"(1) Bacchus and not Longworth was where the potential customer first chose to hold the function;

(2) The redirect constituted a rejection of the customer's preferred first choice (which was to hold the function at Bacchus);

(3) Longworth was an untested venue;

(4) Longworth was not physically completed at the time of most of the redirections; and

(5) The functions were mostly weddings where the prospective brides (who had inquired of a top of the market one hat venue) were unlikely to take a risk on such a special day with an untried and new venue like Longworth."

I do not consider that I can draw this inference. First, it appears to depend on an assumption that inquirers had only made an inquiry of Bacchus Restaurant rather than of several function centres, which is not an assumption that has been established or accords with common sense, and that assumption in turn underpins the speculations that Bacchus Restaurant was the inquirer's first choice, as distinct from one of several potential choices, and that the inquirer was seeking a "top of the market one hat venue" as distinct from making inquiries of available function venues in the Newcastle area or more widely. Second, it appears to depend on an assumption that the reason that the function did not proceed at either Bacchus Restaurant or Longworth House was not related to, for example, the inquirer seeking a less up-market or cheaper function venue or a different style of function or not proceeding with the function at all.

1. It is not known how often initial function inquiries to Bacchus Restaurant converted to functions, as a matter of historical experience and absent any referral of the inquiry to Longworth House, because Bacchus led no evidence of that matter from any of the restaurant staff who gave evidence. I consider that I must draw the inference that such evidence would not have assisted Bacchus' case in this regard: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389; Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361. I accept Bacchus' submission that Mr Ventura's failure to give evidence in respect of these functions means that I should also draw the inference that any evidence he could have given would not have assisted Barescape's case in that regard.

1. Having regard to these matters, I accept that there is a possibility that the referral of a function inquiry to Longworth House could have resulted in the loss of a function to Bacchus Restaurant, and that possibility is more than very low or speculative, although I do not consider that it has been established that possibility is by any means substantial. Bacchus contends that a discount of 10% should be made for vicissitudes to arrive at the value of the lost opportunity to host any functions resulting from function inquiries falling within this category. Doing the best I can to assess that possibility in the absence of evidence as to the rate at which initial inquiries to Bacchus Restaurant had historically converted to functions, I consider that the discount for vicissitudes to arrive at the value of the lost opportunity to host any functions resulting from function inquiries falling within this category should be 80%, to take account of the risks that inquirers would have made inquiries to multiple venues or would not proceed with functions at either Bacchus Restaurant or Longworth House because they were not seeking a high end function centre in a historic building and preferred a cheaper venue or a different style of venue and that some functions which were the subject of initial inquiries would not proceed at all.

1. For completeness, I note that Bacchus did not press its claim in respect of the Croxson function, which was in fact held at Bacchus Restaurant. An inquiry by Ryan (Hunter Business Review) was not a function inquiry, but related to a reporter's request for information for publication (T1814), which culminated in the article appearing in Newcastle press about the redevelopment of Longworth House (Higgins 28.5.10 Annexure "F"). Bacchus also did not press that claim.

1. I should add that I do not accept Barescape's further contention that Bacchus has not established that the functions within this category were not in fact held at Bacchus Restaurant. Several functions that had in fact been held at Bacchus Restaurant were treated in Mr Jugmans' first report as diverted to Longworth House. There were also gaps in Bacchus' discovery over the period, including in the POS records produced. However, Bacchus points out that Barescape and Mr Ventura were provided with a 218 page reservation report of Bacchus Restaurant for the dates from 15 September 2009 to 12 May 2011 (Ex P13) and have not identified any functions held at Bacchus other than for the three functions incorrectly included in Mr Jugmans' first report. On balance, I consider that the tender of the reservation report provides sufficient evidence that the redirected functions were not held at Bacchus Restaurant.

1. Bacchus ultimately quantified its claim for the Non-Longworth Redirects as lost revenue of $44,900 (including GST) in respect of six functions, based on the numbers of persons attending a function where that was known and an estimated average expenditure per person, and lost revenue of $169,092 (including GST) for fourteen (reduced from eighteen) functions where the number of persons attending the function was not known, calculated by reference to the average revenue for functions at Bacchus Restaurant. In respect of those functions, Mr Jugmans derived an average function revenue of $12,078 per function (inclusive of GST) relying on a schedule titled "Bacchus Function Payments 2009/2010/2011" (Jugmans 5.1.12 Report (Ex D86) Tab A41) that recorded deposits and final payments during the period from 14 November 2009 to 6 May 2011. His evidence was that he had checked a sample of the payments listed in the schedule to the supporting documentation and that the figures set out in that schedule were accurate. In their Second Joint Report (Ex D87A), Messrs Jugmans and Vella agreed that that figure was appropriately treated as the value of any diverted function which Bacchus Restaurant had lost, in the absence of any other information about numbers of guests or spending per guest for functions not held at Longworth House, although that conclusion is subject to qualifications, including that Mr Vella was unable to check whether that figure was based on all functions held at Bacchus Restaurant and so represents a true average revenue.

1. Mr Jugmans and Mr Vella also agreed that the best available estimate was a gross profit margin percentage of 68% and variable expense percentage of 45.64% (Second Joint Report (Ex D87A) [12]; T1959-T1966). I accept these calculations on the basis that they are the best available in dealing with functions which, by definition, did not occur at either Bacchus Restaurant or Longworth House. The calculation of loss of profit made in this way will need to be further adjusted for earnings from a la carte or other function trade in the manner I noted above and for the higher discount for contingencies that I have held should be applied.

1. I have therefore held that Bacchus' claim in respect of the Longworth Redirects is established in part and Bacchus' loss of opportunity claim in respect of the Non-Longworth Redirects is established, subject to a substantial discount for contingencies. The parties will need to be given an opportunity make further submissions as to quantification to reflect these findings.

Account of profits

1. An account of profits allow recovery of the net gain which the defendant received in breach of duty owed to the plaintiff: Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1968] HCA 50; (1970) 122 CLR 25 at 34. The purpose of an account of profits has been described as preventing the unjust enrichment of the defendant by breach of its duty: Hospital Products Ltd v United States Surgical Corporation above at 107 per Mason J; Chan v Zacharia above at 199 per Deane J; Dart Industries Inc v Decor Corporation Pty Ltd [1993] HCA 54; (1993) 179 CLR 101 at 114-115; Warman International Ltd v Dwyer above at 557. An account of profits is available even if the principal has not suffered loss by reason of the breach of duty because it would not have been in a position to take advantage of the opportunity: Birtchnell v Equity Trustees, Executors and Agency Co Ltd above at 407-409; Regal (Hastings) Ltd v Gulliver above; Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443.

1. On the findings that I have reached above, Bacchus would be entitled to an account of any profits which Barescape obtained in respect of the functions which I have found have been diverted to Longworth House from Bacchus Restaurant. Bacchus would also be entitled to an account of any profits which Mr Ventura had made, from the functions diverted to Longworth House in breach of duty, subject to any adjustment necessary to avoid a double accounting. An account of profits would be available even if Bacchus could not of itself have earned those profits in respect of both conduct of the restaurant business and the function on the same evening.

1. Bacchus contends that it is entitled to an election between equitable compensation and an account of profits, and is not required to make that election until after judgment. That position is consistent with the authorities: Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514 at 521; Warman International Ltd v Dwyer at 569-570; Visnic v Sywak [2009] NSWCA 173; (2009) 257 ALR 517 at [4]-[5]. I do not consider that Bacchus' conduct in leading evidence to establish the amount of equitable compensation constitutes an election to claim that compensation, as distinct from an account of profits, particularly where it made clear throughout the proceedings that it reserved its right to make an election after judgment.

Interest

1. Bacchus contends, and I accept, that the amount recoverable in damages would be subject to pre-judgment interest under the Uniform Civil Procedure Rules 2005 (NSW) and that is a matter which can be addressed in drafting orders giving effect to this judgment.

Summary

1. In summary, I have held that:

• On termination of Mr Ventura's employment as General Manager of the Bacchus Restaurant, Bacchus was required to buy out Barescape's interest in the Bacchus Partnership in accordance with clauses 12 and 21.11 of the Partnership Deed at a value adjusted for a 40% discount for goodwill in the manner provided in clause 16.3 of the Partnership Deed.

• Neither the SiDCOR valuation nor the Carpenter valuation are binding on the parties under the Partnership Deed and the mechanism for valuation of Barescape's interest in the Bacchus Partnership under the Partnership Deed has failed. The Court has jurisdiction to determine the value of Barescape's interest in the Bacchus Partnership by reference to the expert accounting evidence led in the proceedings concerning that issue, where the valuations undertaken under the Partnership Deed have not determined that matter. Barescape's interest in the Bacchus Partnership should be valued on the basis of the valuation of that partnership in the Second Joint Report at $160,818, adjusted for a discount of 40% of goodwill.

• Barescape's involvement as a shareholder in Midfielder and a beneficiary of the Ace's Family Trust and Mr Ventura's involvement with Longworth House were in breach of fiduciary duty owed to Bacchus and a defence of informed consent, waiver or ratification was not established.

• Bacchus is entitled to recover equitable compensation and damages for functions falling within the category of Longworth Redirects and, subject to a substantial discount for contingencies, for the opportunity to convert function inquiries falling within the category of Non-Longworth Redirects.

1. I will hear the parties as to the form of orders necessary to give effect to this judgment and as to costs.

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Decision last updated: 29 August 2012