Benson v Lloyds Auctioneers and Valuers Pty Limited
[2025] FedCFamC2G 1401
•27 August 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Benson v Lloyds Auctioneers and Valuers Pty Limited [2025] FedCFamC2G 1401
File number: SYG 1399 of 2023 Judgment of: JUDGE D HUMPHREYS Date of judgment: 27 August 2025 Catchwords: INDUSTRIAL LAW- Whether there was a breach of the Heads of Agreement - Whether the bonus term contained in the Heads of Agreement was void for uncertainty – Determination of the amount of profit derived under the bonus term - Whether the applicant was an officer of the company for the purposes of the CorporationsAct2001 - Whether a breach of the employment contracts occurred- Whether there was a breach of fiduciary obligations - Breach of ss 90(2) and section 44 of the Fair Work Act 2009 - Failure to pay accrued annual leave – Claim successful in relation to the Respondent’s failure to pay the Applicants in accordance with the bonus term – Cross-claim successful in relation to the loss of sales commission Legislation: Corporations Act 2001 (Cth) ss 9, 181, 182, 183, 1317H
Fair Work Act 2009 (Cth) ss 44, 90(2), 539(1), 546(1), 546(2)(b), 546(3)(c)
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 131, 134
Cases cited: ASIC v Maxwell [2006] NSWSC 1052
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary Smith (2008) 165 FCR 560
Browne v Dunn (1893) 6 R 67
Canturi v Sita Coaches Pty Ltd [2002] FCA 349
Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy [2020] FCAFC 5
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR
Fair Work Ombudsman v NoBrace Centre Pty Ltd (In Liquidation) (ACN 121 556 447) & Ors (No.2) [2019] FCCA 2970
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301
Hammond v Vam Ltd [1972] 2 NSWLR 16, 18
Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609
Jones v Dunkel (1959) 101 CLR 298
Lloyds Auctioneers and Valuers Pty Ltd v Benson [2025] FCA 324.
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal Plumbing and Allied Services Union of Australia (CEPU) [2001] FCA 672
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Division: Division 2 General Federal Law Number of paragraphs: 230 Date of last submission/s: 2 June 2025 Date of hearing: 31 March, 1-2 April, 11 June 2025 Place: Parramatta Counsel for the Applicants/ Cross-Respondents: Mr J.Darams SC and Mr J.Pen Solicitor for the Applicants/ Cross-Respondents: Mr B. Austin, Carter Newell Counsel for the Respondent/ Cross-Claimant: Mr G.Sirtes SC and Mr R.O’Donnell ( 31 March - 2 April) Solicitor for the Respondent/ Cross-Claimant: Ms C.Xia, Clyde & Co ORDERS
SYG 1399 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: SHANE BENSON
First Applicant/First Cross-Respondent
AMANDA BENSON
Second Applicant/ Second Cross-Respondent
ART INVEST PTY LTD
Third Cross-Respondent
AND: LLOYDS AUCTIONEERS & VALUERS PTY LIMITED (ACN 109 191 095)
Respondent/Cross-Claimant
ORDER MADE BY:
JUDGE D HUMPHREYS
DATE OF ORDER:
27 AUGUST 2025
THE COURT ORDERS THAT:
1.Pursuant to s 131 and/or 134 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), the Respondent pay to the First and Second Applicants $1,380,251.00 for loss and damages suffered as a consequence of the Respondent’s failure to pay the Applicants in accordance with the Bonus Term, plus interest.
2.Pursuant to ss 546(1) and 546(3)(c) of the Fair Work Act 2009 (Cth) (the FW Act), the Respondent, pay to the First and Second Applicant, a pecuniary penalty of $23,475.00 in relation to its failure to comply with s 90(2) of the FW Act in contravention of s 44 of the FWAct.
3.The cross-claims against Ms and Mr Benson and Art Invest are dismissed, save for the cross-claim in relation to Ms Benson and Art Invest, on a joint basis, for the loss of sales commission.
4.The parties are to confirm and agree, if possible, on the amount of interest payable under Order 1 and the loss of sales commission under Order 3.
5.Liberty to apply on one days notice.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE D HUMPHREYS
INTRODUCTION
The applicants are husband and wife. Prior to their engagement with Lloyds (the respondent), the Bensons ran a business that sourced, bought, restored and sold fine art, antiques, jewellery and luxury items, through the third cross respondent, Art Invest Pty Ltd (Art Invest).
In about March 2017, Mr Steve Strelitz, then a partner and business development manager with the respondent, approached the Bensons to recruit them to work for the respondent and establish a Fine Arts and Luxury Goods Division (FAL) of the respondent.
Following discussions, a Heads of Agreement (HOA) was signed between the Bensons and the respondent on 30 June 2017. The Heads of Agreement is attached to this judgement as Annexure 1.
Relevantly, that HOA provided (CB 348):
•Amanda Benson & Shane Benson to become salaried staff of Lloyds from 1 July 2017 at $100,000 each per annum, plus a bonus scheme, detailed as follows: The first $200,000 of profit to be retained by Lloyds (profits for this purpose calculated without head office (QLD) charges)
Bonus to be calculated at 20% profit thereafter.
Advertising to excluded form profit calculation for the first 12 months (1/7/17 – 30/6/18).
Over the following six years, the Bensons established and ran the FAL division of the respondent.
On about 19 January 2023, the respondent increased the Bensons’ salaries to $150,000.00 per annum.
On 5 May 2023, Mr Lee Hames, the Chief Operating Officer (COO) of the respondent, sent emails to the Bensons, attached to which were a proposed new written employment contract (CB 532 – 557).
On 6 May 2023, Ms Benson sent an email to Mr Hames, on behalf of herself and her husband, advising that the proposed new contracts had 'omitted' the bonus scheme agreed to in 2017 (CB 559 – 560).
On 9 May 2023, Ms Benson sent an email to Mr Hames, again on behalf of herself and her husband, advising that the Bensons (CB 618 – 619):
·[would be] ‘ready, willing and able to continue our employment on the existing terms of our employment contract’; and
·‘don’t agree to the new employment contract’ as it would be a ‘departure from our existing employment contract that we are not willing to accept’
Over the course of the next few weeks, discussions ensued between the Bensons and officers of the respondent about proposed new contracts.
On 16 June 2023, Ms Benson sent an email to Mr Hames, on behalf of herself and her husband, advising that they had decided to resign from their employment with the respondent (CB 639 – 640). Their resignation was to take effect on 30 June 2023.
On 22 June 2023, Mr Hames sent an email to the Bensons, attaching a letter that advised that their resignation was accepted, and that any further notice period was not necessary (CB 645-648). They were relieved of any requirement to perform duties or attend their place of employment from that date.
Summary of the Claims before the Court
The Bensons commenced proceedings in this Court on 31 August 2023, seeking the following relief:
(a)That the respondent breached its contracts of employment with them individually by failing to pay bonuses owed to each of them; and
(b)The respondent failed to pay each of the Bensons their accrued, but unused, annual leave, in breach of ss 44(1) and 90(2) of the Fair Work Act 2009 (Cth) (the FW Act).
In respect of the Bensons' contract claim, the respondent alleges that:
(a)it was absolved from its obligations under the parties’ contract whilst the contract was on foot; and
(b)the parties, by (at least) 2 July 2020 had abandoned any contractual obligation for Lloyds to make a payment of bonus to the Bensons, such that by 2 July 2020 there existed no future entitlement to any bonus.
Additionally, the respondent pleads three cross claims against the Bensons and Art Invest based on:
(a)alleged breaches by the Bensons of their employment contracts and Art Invest of the HOA;
(b)alleged breaches of fiduciary obligations said to be owed by the Bensons to the respondent; and
(c)alleged breaches of ss 181 – 183 of the Corporations Act 2001 (Cth) (Corporations Act) by the Bensons.
The Evidence Before the Court
Evidence was called on behalf of the plaintiffs from Ms Benson. She was extensively cross-examined. An Affidavit from Mr Benson was read, however, he was not required for cross-examination.
Additionally, the plaintiffs called expert evidence from Mr Hugo Loneragan, a forensic accountant. He provided two reports, the first dated 6 December 2024 (Exhibit 3), and a supplemental report dated 29 March 2025 (Exhibit 4), after he was provided with additional information. Based on his assessment, the Bensons were owed an amount ranging from $1,380,251.00 under a low scenario to $2,775,364.00 under a high scenario under the bonus clause. The difference in the amounts was based upon potential adjustments to the 'profit' of the FAL division in relation to certain costs that might be properly allocated to the FAL division.
The respondents did not call any lay evidence. Their case relied solely upon evidence provided by Mr Mario Rosetto, a forensic accountant. In his opinion, no amounts were payable to the Bensons under the bonus scheme. Based on his calculations, there was only one year, being 2020, in which there was sufficient profit for a payment to be made under the bonus scheme, ranging from $0.00 under a low scenario and up to $49,875.20 under a high scenario, depending upon what cost drivers were used to calculate profit.
The Court was provided by the parties with an agreed tender bundle of exhibits.
Preliminary Ruling
On 23 August 2024, I made orders setting down the matter for hearing over 3 days, commencing on Monday, 31 March 2025. Orders were also made for the filing of Affidavits. On 25 October 2024, I made orders for the filing and service of submissions, chronologies and other pre-trial matters.
On 14 March 2025, the respondent made an oral application at a pre-trial case management hearing for:
(a)An extension of time to file evidence of at least 3 identified lay witnesses;
(b)Leave to amend their pleadings;
(c)Discovery from the applicants;
(d)A suppression order; and
(e)An extension of the duration of the hearing from 3 days to 7 – 8 days.
No interlocutory application was filed for the relief sought. An Affidavit was filed from the instructing solicitor of the respondents the day before the directions hearing, which the Court had the opportunity to read (Affidavit of Jehan-Philippe Wood affirmed on 13 March 2025). It is fair to say the Court was taken by surprise by the oral application. Senior Counsel for the applicant accepted that the consequence of the orders being sought would result in the hearing dates set of 31 March – 2 April 2025, being vacated and cause for fresh hearing dates to be allocated. The reason for the application was that fresh solicitors took over carriage of the matter in mid-January 2025. Difficulties arose in the preparation of the matter, including engaging an expert forensic accountant.
In an ex-tempore judgement delivered after argument from both parties, I refused the application and confirmed the hearing dates previously set.
The respondent sought leave to appeal that interlocutory judgment in the Federal Court of Australia. The application was heard before Burley J on 27 March 2024. The application for leave to appeal was dismissed with costs: Lloyds Auctioneers and Valuers Pty Ltd v Benson [2025] FCA 324.
THE APPLICANT’S EVIDENCE
The Evidence of Ms Benson
Ms Benson's evidence is set out in her Affidavit, affirmed on 6 December 2025.
Prior to her employment with the respondent, the applicant and her husband, Shane, were the directors and shareholders of the company known as Art Invest Pty Limited. Art Invest was a large-scale fine art, antique and designer goods online auction wholesale supplier in Australia and provided auction management services to auction houses.
Stock would be purchased from a variety of sources and sold primarily through online auctions. In 2006, Ms Benson spent six months as a contractor to Grays Online, another sizeable auction company. Subsequently, Art Invest was predominantly an active vendor to Grays Online, including supplying their own stock for sale, and assisting other vendors with selling via auction by taking consignments. Other activities included authenticating items for sale and preparing them for sale.
In early March 2017, Ms Benson received a telephone call from Mr Steve Strelitz, a partner and business development manager at Lloyds, regarding an opportunity to partner with Lloyds. Subsequent meetings took place in which it was agreed that the applicants would be employed by the respondent to establish a fine arts and luxury goods (FAL) division of the respondent, commencing on 1 July 2017.
The parties signed a HOA whereby the applicants were employed at a salary of $100,000.00 per annum each, together with a 20% bonus of the "profits". This was to be calculated on the basis that the first $200,000.00 of profit was to be retained by Lloyds (profit for this purpose to be calculated without Head office (Qld) charges), and advertising was to be excluded from profit calculation for the first 12 months (1/7/17 – 30/06/18).
Ms Benson claims that the only information she received about staff bidding at auctions was a Memorandum, received from Ms Kristi Johnson, an Auction Administrator with the respondent, in May 2017. That memorandum is attached to Ms Benson's Affidavit (Attachment AB-05; CB 397 – 399).
That Memorandum states that staff are allowed to bid on items at auction, subject to a formal request being made prior to the auction to the COO. Any bidding was to be by way of a single maximum bid placement only.
Ms Benson denies at any time receiving a document entitled "Auction Bidding and Selling by Lloyds Team member Policy'. Ms Benson deposes that she only became aware of that document (Attached as Attachment AB-09 to Ms Benson's Affidavit) after it was provided to her legal representatives as part of the proceedings. She notes that in the properties section of the document, it indicates the document was first created on 17 August 2023, after the proceedings commenced.
Ms Benson deposes that in relation to requests to bid on items on the Lloyds online auction platform, these were sent to Mr Hames out of courtesy and from a desire to do the right thing. She was never advised by Mr Hames that she was not to bid on an item. She denies ever receiving any communication from Lloyds to comply with the Employee Auction Policy.
Contained within the Joint Tender Bundle at Tab 3 (pg. 21) is a copy of an email from Ms Benson, dated 7 August 2017, addressed to 'Mark Fitz' seeking permission to bid on two auctions being conducted by Lawson's Fine Arts and Bargain Hunt.
Also contained within the Joint Tender Bundle at Tab 4 (pg. 22 – 23) is an email setting out the relevant staff selling policy for Lloyds as at May 2018. Selling is not prohibited, subject to permission being granted by the COO. Other documents within the Joint Tender Bundle show Ms Benson regularly seeking permission from the COO to bid on items up to and including 2023.
Ms Benson deposes that she had the authority to change the vendor's commission and buyer's premium in order to win business from other auction houses.
Ms Benson deposes that she rarely raised the bonus term with either Mr Hames or Mr Fitzpatrick. She states that she rarely raised the bonus term as she was concerned she would be classed as a 'non-believer' and would be subject to adverse action as a result.
Attached at Attachment AB-11 (CB 413 – 415) are documents that explain this 'non-believer' management practice. The first aspect of being a 'believer' relates to 'execution'. Requests or orders made by a superior are to be followed without fault. If this does not occur, then a meeting with the relevant staff member is to be held and notes taken.
The second aspect of the practice relates to 'belief'. This embodies that a team member must follow the system and rules blindly. “No Negativity Sideways or Down” is allowed, as a believer must remain positive even if they do not agree with instructions. Saying something negative in front of another staff member is considered a serious offence.
A person subject to a third execution or belief issue is to have their employment terminated. Curious notes are provided to a manager as to how a discussion with a person identified as a 'non-believer' is to take place, and the words to be used in the discussion.
Around February 2021, the Lloyds Legacy Trust was established. This was said to be a reward program for staff to share profits. Ms Benson deposes that Mr Fitzpatrick told staff, at a meeting in November 2020, that 'none of your employment conditions or existing bonus schemes will be jeopardised if you agree to become unit holders in the Lloyds Legacy Trust’. Ms Benson deposes that at no time did she receive any financial benefit from the Lloyds Legacy Trust.
As head of the FAL Division, Ms Benson was provided with monthly financial updates from the Chief Financial Officer, Mr Lord. The May 2020 financial update indicated the FAL Division had achieved a $1,070,928.00 net operating profit, double the budgeted operating profit of $498,963.00.
During April to July 2021, the FAL Division moved from West Gosford, being premises previously occupied by Art Invest and leased by Lloyds, to Somersby. During the move, a large amount of stock owned by Art Invest was discovered. Further, there was also surplus operating equipment that Lloyds had rented from Art Invest and was no longer required at the Somersby premises.
During that period, arrangements were made for the stock and surplus equipment to be sold via Lloyds, in accordance with the HOA, which stated:
Art Invest Pty Ltd is to be shelved and trade in any form unless agreed in writing by both parties for the term of this agreement.
The HOA also stated:
Projected estimated value of Art Invest SOH [stock on hand] on 1 July 2017 is $80,000. This can be sold exclusively through Lloyds auctions until sold out.
In January 2023, following a staff dinner held at the Langham Hotel on the Gold Coast, Ms Benson deposes that she was approached by Mr Fitzpatrick, Mr Hames and Mr Sarkis. Mr Fitzpatrick said (Ms Benson's Affidavit [87]; CB 377):
We would like to offer you (Mr and Ms Benson) both pay rises of $50,000 each, bringing your salary $150,000, and give you an additional 100,000 shares in the Lloyds Legacy Trust. These additional shares are because of an administrative error in the original allocation. You are meant to get 100,000 shares each, not 100,000 altogether. The fact that you did not bring it to our attention is a testament to the kind of people you are.
Ms Benson deposes that her salary was increased $150,000.00 in the first pay period of 19 January – 21 February 2023. Ms Benson claims that at no other stage during the discussions was the bonus term raised or otherwise spoken about.
Ms Benson deposes that on 28 April 2023, she purchased a non-fungible token (NFT) at a Lloyds auction. This token was a Third Edition Digicars Art Ford Falcon XB GT 351. Included with the purchase was a “Boot Full of Benefits" which included a two-year, 75% discount of buyer's premium or commission at Lloyds auctions on any products purchased personally, or by a company you are an owner of. Ms Benson states she purchased this NFT because of the benefit that came with it regarding vendor’s commission and because she also occasionally sold products via Lloyds in her personal capacity.
Following this purchase, on 28 April 2023, she deposes that she updated her personal vendor's commission rate, reducing it from 11% to 2.75%, being a reduction of 75%. She deposes that this reduction was not an unauthorised reduction but was consistent with the "Boot Full of Benefits” that came with the NFT.
On 2 May 2023, Ms Benson deposes that she received an email from Mr Hames, advising that she should expect a new proposed employment contract to review within 24 hours. After reading the contract, she determined she could not sign it, as it was too different from the HOA that was in existence between herself and Lloyds. On 6 May 2023, Ms Benson deposes that she emailed Mr Hames, advising that she and her husband were prepared to continue their employment on the existing terms of the HOA and that they did not agree to a new employment contract.
On 11 May 2023, Ms Benson deposes that she had a Microsoft Teams discussion with Mr Fitzpatrick. Mr Fitzpatrick stated that "we can re-sign the original Heads of Agreement under the new entity, Lloyds Stars", further Mr Fitzpatrick stated that "we would like to offer you the positions of Chief Executive Officer (CEO) (referring to Ms Benson) and COO (referring to Mr Benson) of Lloyds International. Ms Benson deposes that this is the first time she had heard of "Lloyds International".
On 28 May 2023, Ms Benson deposes that she and her husband left for Europe on a 22-day holiday, not returning to Australia until 19 June 2023.
Following discussions, on 16 June 2023, Ms Benson deposes that she and her husband resigned from their employment with Lloyds. Following their return to Australia, on 22 June 2023, Ms Benson deposes that she received an email from Mr Hames, advising that Lloyds had accepted their resignation and they were not required to serve out the remaining portion of their notice period.
Ms Benson deposes that she and her husband received their regular salaries that night, but not any vendor or other payments that they claim they were owed. On 6 July 2023, the Bensons received their final payslips from Lloyds. These payslips indicated that the Bensons had been underpaid 106.4 hours of unused annual leave.
Ms Benson was extensively cross-examined. She disagreed with the proposition that the work undertaken by the FAL division was relatively labour-intensive. When asked about shipping, she stated she wanted to make sure that the cost of shipping an item was not too high compared to the value of the item. Otherwise, there were a lot of people who ended up not paying for items.
Ms Benson was asked about an email she sent on 17 August 2022, which was addressed to a significant number of people. She was then asked whether or not many of those people actually worked within the FAL division.
In relation to a document sent by Mr Lord, on 12 May 2020, Ms Benson stated that the profit and loss calculation was amended so that indirect costs were not deducted. Ms Benson stated that she was measured, in accordance with the HOA, by net operating profit, which did not include overhead costs.
She agreed she had never sent an email stating that she was entitled to a bonus. The only time the issue of any bonus being owed was mentioned was in the Bensons’ joint resignation letter of June 2023.
It was put to Ms Benson that the list of employees she set out in paragraph [128] of her Affidavit was, in fact, completely wrong. She stated she did the best she could relying on her memory and from her telephone conversations.
Ms Benson was taken to a number of Profit and Loss Statements. The August 2021 statement indicated the FAL Division had a net loss of $128,000.00. Ms Benson replied that figure was not what she was measured on. Her performance was measured on net operating profit, which for the same period was $275,000.00.
Ms Benson was asked questions about the purchase of the NFT. It was put to her that she did not have permission to bid on the NFT. She replied that 'the bidding account gives permission to bid on the item'.
It was put to Ms Benson that in the following two months, Art Invest sold goods worth approximately $200,000.00 through Lloyds. Ms Benson claimed that she was unaware of a staff bidding and selling policy, and the only policy she was aware of was the one sent to her in 2017.
Mr Benson’s Evidence
Mr Benson's evidence is set out in his Affidavit, affirmed 6 December 2024.
He deposes that he was never given a document entitled 'Auction bidding and selling by a Lloyd's team member', nor was any such policy discussed with him at any time.
He confirms that in 2019, he and Ms Benson received 100,000 shares in the Lloyds Legacy Trust, but he has never received a distribution from the Trust. He deposes that he and Ms Benson had the authority to set the vendor's commission and buyer's premium on lots sold, in order to drive sales.
Between April and July 2021, the FAL Division moved from West Gosford to Somersby. During the move, items that had not been sold (or previously sold in 2017 but not paid for and delivered) were discovered and then sold through Lloyds, pursuant to the HOA. The vendor agreement was changed from Art Invest to Ms Benson personally, and approved by Lloyds.
Mr Benson confirms the conversation in January 2023, between the Bensons and Mr Fitzpatrick, and two others, where their salary was increased to $150,000 per annum and their shares in the Lloyds Legacy Trust were increased to 200,000.
Mr Benson otherwise confirms the evidence of Ms Benson in relation to the circumstances leading up to and subsequent to the resignation from Lloyds.
Surprisingly, Mr Benson was not cross-examined after his Affidavit was read.
Mr Loneragan’s evidence
Mr Hugo Loneragan is a Forensic Accountant retained by the Bensons. He prepared two reports, one dated 6 December 2024, together with a supplemental report dated 29 March 2025.
The second report was as a result of him being provided with additional material, including the report of Mr Mario Rosetto of 11 February 2025, and other information, including Consolidated Profit and Loss statements, departmental income statements for the financial years 2020-23, payroll costs by location and department for the same period and lots sold by department.
In determining what the word 'profit' meant within the HOA, Mr Loneragan's evidence is that he understood it to be profit relating to the FAL division.
At 3.5 of his first report, Mr Loneragan noted that there are several alternative measures of profit, including gross profit, being the difference between revenue and the cost of goods sold.
Operating profit is calculated by subtracting operating expenses from gross profit. Operating expenses are those incurred by a business to generate revenue.
Net Profit, also known as Net Income or Net Earnings, is the profit of a business after all expenses are deducted from total revenue, plus income from other activities such as net interest received.
Mr Loneragan noted that the HOA referred to profit for the purpose of the bonus calculation to be profit without 'Head Office (Qld) charges'.
At 3.7 of the first report, Mr Loneragan states that in his experience, Head Office charges are typically considered to be indirect costs as opposed to direct costs. Direct costs are those costs that can be directly attributed to a particular activity, such as materials and labour. Indirect costs are not directly attributable to a particular activity and may include rent, utilities and administrative salaries.
Mr Loneragan noted that Lloyds had a separate division for indirect costs.
The preparation of divisional income statements involves identifying those direct costs attributable to a division and then identifying shared costs and allocating them to a division using a cost driver. Different cost drivers result in different outcomes. Examples of cost drivers can include salary costs, revenue for each division and non-financial metrics such as staff numbers or machine hours.
At 1.6 – 1.7 of the first report, Mr Loneragan estimates that the amount due to the Bensons under the bonus scheme ranges from $2,072,695.00 under a low scenario to $3,103,276.00 under a high scenario. The difference is based on the assumptions used to allocate costs to the FAL division.
At 1.10 – 1.12, Mr Loneragan notes he was not provided with income statements for the FAL division for the entire period. He was required to quantify any bonus that may be due. Further, while the respondents provided revenue data for the FAL division, with the exception of financial year 2018, he was not provided with cost data. Instead, he was provided with a schedule in which the costs of the FAL division were calculated using Buyer's Premium and Commission (BPC) as the cost driver. However, the FAL division’s share of costs incurred by Lloyds is calculated on the basis of the FAL division's pro rata share of revenue.
This methodology was inconsistent with income statements provided by the respondent, which indicate that BPC was not used as the sole cost driver and was inconsistent with contemporaneous accounting documents, which had been provided. Mr Loneragan did not find this document, being the cost document, to be a reliable basis upon which to assess the amounts due under the bonus scheme. Mr Loneragan therefore used other available documentation to estimate costs for the FAL division for the period.
At Section 5 of his first report, titled ‘My Approach to the Assessment of Profit for the FAL Division’, Mr Loneragan sets out the basis for the assumptions he used in his approach to calculate net profit, being the operating profit of the FAL Division. The majority of income was BPC revenue. Other revenue sources included freight cost recharges and credit card fee recharges.
Cost of sales expenses were derived from amounts provided in a document provided by the respondents. Salary and wage expenses in the income statement provided by the respondents were higher than those recorded in the payroll records. The low scenario consists of an extrapolation of salary and wages expenses recorded in the income statements for the FY 21 to FY 23. The high scenario only includes costs limited to certain employees, for defined periods, which were derived from payroll records he was provided with.
Travel and entertainment expenses were based on amounts recorded in Mr Benson's corporate credit card records.
Head Office costs were identified by Lloyds, together with depreciation and amortisation, however, this was not allocated to revenue-generating divisions, such as the FAL division. Accordingly, the low scenario consists of the FAL division's other expenses allocated using BPC revenue as the cost driver, whereas the high scenario uses payroll costs as the cost driver.
At 5.13, Mr Loneragan notes that BPC revenue was not used as the sole cost driver by Lloyds for allocating indirect costs between the different divisions. Further, the FAL division's costs (primarily staff costs) do not appear to be highly correlated with revenue. It appears that the FAL division was able to increase its revenue without a proportionate increase in expenses.
Mr Loneragan provided a supplemental and updated report dated 29 March 2025. In that report, he noted he had been provided with additional material, which concluded consolidated profit and loss statements for FY20 – FY23 and a document indicating lotted and sold items by department for the same period. Significantly, Mr Loneragan had access to Mr Rossetto's report.
This additional information allowed Mr Loneragan to make further adjustments to his initial report, based on additional material relating to the Gosford branch, travel and entertainment expenses and other overheads, which had not been previously factored into the net profit reported for the FAL division. This resulted in an overall reduction of the net operating profit, with a consequent reduction in any bonus that was due. This resulted in a high scenario, noting there were still inherent difficulties in calculating some costs, of $2,775,364.00, and a low scenario of $1,380,251.00.
If pre-judgement interest were taken into account, this would bring the high scenario to $3,353,755.00 and the low scenario to $1,674,584.00.
Mr Loneragan qualified his report on the basis that he had still not been provided with documentation for FY 18 – FY 19, and there was still a lack of evidence and data relating to the basis for the allocation of indirect costs of their FAL division, including a definition of "Head Office (Qld) charges".
Mr Loneragan was cross-examined for a full day by Counsel for the respondents. He agreed he was not provided with a definition by his instructing solicitors as to what "Head Office (Qld) charges" were. He agreed his calculations were based solely on the FAL Division and not Lloyds as an overall company.
He agreed that Document 3A, provided by the respondents, has used revenue generated by the FAL Division as a proportion of total revenue and then taken that proportion and applied it against costs. He agreed that he had concluded in his report that Document 3A was not reliable for the purpose of assessing the bonus amounts due to the Bensons, on the basis that it was inconsistent with contemporaneous accounting documents as a measure for allocating indirect costs. Document 3A was unreliable, as Mr Loneragan stated he had no idea where those figures were derived. He later explained that when he was provided with additional information, he did not use Document 3A as a basis for any calculations in his supplemental report.
In relation to salary costs, the difference between the low and high scenarios is that the low scenario applies salary costs as recorded in the Profit & Loss statements, whereas the high scenario only records the salary costs of 20 named individuals.
Mr Loneragan agreed there was nothing in the HOA that provided a definition as to what 'Head Office charges' were. In relation to costs other than payroll, Mr Loneragan agreed he used two different cost drivers, one for the low scenario and another for the high scenario, to create a range of possible profit outcomes within those two parameters. These cost drivers were payroll and BPC.
Mr Loneragan conceded that he was unable to identify a measure of net operating profit or net profit for the FAL division, due to the incomplete information he was provided with. He further agreed that, based on the COO report for September 2021, it did not suggest a relationship between revenue and the amount of costs incurred. That is, income was not the sole cost driver used to determine divisional profit. Mr Loneragan was unable to determine what cost drivers were used, as it was unclear from the documents he was provided with.
Mr Loneragan conceded that activity-based costing could be used as a cost driver, however, he stated that it was typically used in manufacturing. He stated that he did not have the data to show that there was a proportionate relationship between activity, being the number of items sold, and the Head Office costs incurred by Lloyds. He also conceded that the amount of costs incurred by the FAL division was greater, proportionally, than other divisions when creating revenue.
It was put to Mr Loneragan that he should have used an activity-based approach as the best cost driver to determine 'profit'. He responded that he requested plenty of information about the Lloyds business, but received very little. He said the cost driver he used was the best, on the basis that he did not have more reliable information to base his calculations on.
THE RESPONDENT’S EVIDENCE
No lay evidence was called on the part of the respondents. This included any evidence from any of the senior managers of Lloyds. The respondent's case relied solely upon the evidence of a forensic accountant, Mr Mariano Rossetto.
Evidence of Mr Rossetto
Mr Rossetto prepared a report that was filed with the Court on 11 February 2025. In a summary of opinion at CB 905, Mr Rossetto sets out his calculation of “profit” using two alternatives, the first being an allocation of operating expenses by reference to the lots sold by the FAL as a percentage of the total lots sold by all of Lloyds’ operating divisions.
The second is an allocation of operating expenses by reference to FAL income as a percentage of the total income of Lloyds income divisions. Income for this purpose is restricted to buyer’s premium and commission income.
A further two bases have been used for each alternative. The first includes labour costs identified as being corporate. The second excludes labour costs identified as being corporate.
The first alternative, including corporate labour costs, identifies that the FAL division recorded a deficit each year from 2020 to 2023, ranging from a low of $2,749,832.81 in 2020 to a high of $4,496,753.91 in 2023. Using this alternative, the FAL division incurred losses totalling $14,532,648.25 over the four years.
The first alternative, excluding corporate labour costs, also shows losses each year, ranging from a low of $2,132,194.28 in 2021 to a high of $4,622,607.05 in 2022. Using this alternative, the FAL division incurred losses totalling $13,677,343.49 over the four years.
The second alternative, including corporate labour costs, records a profit in 2021 of $117,005.62 and losses in each of the other three years, ranging up to $2,616,867.96 in 2023. Using this method, the FAL division recoded an overall loss of $6,034,685.79 over the four years.
The second alternative, excluding corporate labour costs, shows a profit of $249,376.00 in 2021, with losses in each of the other three years, the largest being in 2023 of $2,505,050.43. Using this method, the FAL division recorded an overall loss of $5,379,381.03 over the four years. Using this method, a bonus of $49,875.20 would have been payable in 2021.
Mr Rossetto notes that he was instructed that Lloyds did not prepare financial statements or management reports to calculate profit by a specific division or a specific operation. Thus, there is no one report that can determine the 'profit' of the FAL division, and any exercise to calculate such a figure requires an element of judgement as to what should or should not be included as expenses.
Mr Rossetto notes that, in order to properly allocate income and expenses, it is essential to have a good understanding of Lloyds business operations and processes. In preparing his report, Mr Rossetto states he has relied upon his instructions as to what operating expenses should be included in any assessment of the profit of the FAL division.
Mr Rossetto was extensively cross-examined. He agreed that he had made assumptions based on his instructions and assumed those instructions were correct, unless he came up with his own approach. This approach included allocating cost based on the number of lots sold as a percentage, but not greater than that. He was unable to critically review that data himself. This applied to his instructions at paragraphs 6.9 – 6.24 (CB 915 – 919) as they relate to the recitation of his instructions.
He agreed that he undertook his analysis within a short period of time.
Mr Rossetto agreed he had come up with his own definition and approach to ‘profit’, which he set out at paragraph 7.4 of his report (CB 920). He agreed that there was no proper divisional reporting undertaken by Lloyds in the preparation of their financial statements.
Mr Rossetto agreed he was not instructed to identify areas he agreed or disagreed with in relation to Mr Loneragan's report, even though he was provided with a copy of Mr Loneragan's report prior to preparing his own report.
At 10.5 of his report (CB, 925), Mr Rossetto noted that, at the time of preparing his report, due to time constraints, he was unable to undertake a full investigation of each operating expense to determine whether the allocation of that operating expense was reasonable or not. It was on this basis that he came up with two possible cost drivers. He agreed that there might be other appropriate cost drivers depending upon what information was available.
He agreed that he had added some income to the FAL division and then added additional expenses in order to arrive at a 'profit' calculation. He agreed that in 2023, he allocated an additional $188,000.00 income and $396,000.00 additional costs. He later agreed he did not know if the additional income allocated to the FAL division was properly attributable to the FAL division, as he did not undertake any investigation.
Mr Rosetto agreed he simply relied upon the salary amounts he was given by Lloyds. He did no analysis of whether the costs associated with overheads were attributable to the FAL division. He simply allocated overhead costs based on an activity model of lots sold. This resulted in up to 49% of all Lloyds overhead costs being allocated to the FAL division.
CONSIDERATION
Is the Bonus Term Void for Uncertainty?
By paragraph [7](c)(i) of its Proposed Further Amended Defence (PFAD) filed 1 April 2025, Lloyds contend that the bonus term contained within the HOA is void for uncertainty.
I accept the submission by the applicants that the task of the Court is to ascertain the intention of the parties and then apply it to the facts found. For a contractual term to be void for uncertainty, the term must be “so obscure and so incapable of meaning that the Court is unable to attribute to the parties any particular contractual meaning”: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, 437.
Further, uncertainty will not be found lightly, “the courts are always loath to hold a clause invalid for uncertainty if a reasonable meaning can be given to it”: Hammond v Vam Ltd [1972] 2 NSWLR 16, 18.
Both Mr Loneragan and Mr Rossetto have been able to assign a meaning to the expressions of 'profit' and 'Head Office (Qld) charges', although they differ in what approach should be adopted and thus what the outcome is. As noted by the applicant, neither Mr Loneragan nor Mr Rossetto suggested that the expressions were so obscure as to be devoid of meaning. The Court accepts that a commercial meaning can be given to the bonus term.
Accordingly, it will be a matter for the Court to determine which approach and cost driver is correct, and then to apply that approach in relation to corporate overhead charges in order to determine 'profit' for the purposes of the bonus clause and calculation.
The fact that the HOA was inexpertly written should not allow Lloyds to escape any payment which might be found by the Court to be owing. I do not accept the assertion by Lloyds that the Bensons seek a rectification of the contract term, rather, they seek the Court to apply a proper interpretation. Nor is the Court being asked to rewrite a bad bargain. All the Court will do is seek to apply the terms of the contract as written. In these circumstances, the reliance by Lloyds on Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR at 352 per Mason J is misplaced. This Court does not seek to rewrite the contract, but rather merely interpret it and then give effect to it as interpreted. This does not involve any notion of fairness or what is reasonable.
Further, for the reasons I set out below, I do not accept that the bonus term referred to the profit of Lloyds Auctioneers and Valuers as compared to the Lloyds FAL division. I am satisfied that the term referred to the FAL Division, and it is in fact Lloyds who seek to rewrite the contract in their favour.
Was the Bonus Term Abandoned?
By paragraph [7] (c) (ii) and (iii) of its PFAD, Lloyds contend the parties abandoned the bonus term. I do not accept this assertion.
The clear evidence is that the Bensons and Lloyds remained bound by the contract, evidenced by the fact that the Bensons continued to receive their annual salary, initially $100,000.00 per annum each, which later increased to $150,000.00 per annum. Further, I accept the submission that the contract was not terminated until 22 June 2023, when Mr Hames sent an email to the Bensons stating that their contracts were terminated 'effective immediately'.
As noted by the Bensons, the doctrine of abandonment is concerned with an inferred discharge of a contract: Clifton (Liquidator) v Kerry J Investment Pty Ltd trading as Clenergy [2020] FCAFC 5 at [324] – [326]. Given the lack of any lay evidence from Lloyds, there is simply no evidence that the Bensons and Lloyds had mutually agreed or intended for the bonus term to be abandoned. It was not put to the Bensons that their entry into a unit sale and purchase agreement in the Lloyd's Legacy Trust in February 2021, and the increase in their salary in January 2023 was a manifestation of their intention to abandon the bonus term.
I accept that the proposed new contract of employment, which was to replace the HOA, did not mention the bonus term. Indeed, it was the lack of such a reference that seems to have been a significant motivator for the Bensons to resign.
What is the proper construction of the Contract?
Having determined that the bonus term is not void for uncertainty, the first task for the Court is to determine the proper construction of the contract of employment, or HOA, between the Bensons and Lloyds. I accept that there is no real dispute that the HOA dated 30 June 2017 included a bonus term, in addition to the payment of an initial salary of $100,000.00 each to Mr and Ms Benson, in the following terms:
…Plus a bonus scheme, detailed as follows: The first $200,000 of profit to be retained by Lloyds (profits for this purpose calculated without head office (Qld) charges). Bonus to be calculated as 20% of profit thereafter. Advertising excluded from profit calculation for the first 12 months (1/7/17 – 30/06/18)
I accept the following general principles apply in relation to the proper construction of the Contract as set out by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, which are relevantly summarised as the following:
a.the rights and liabilities of the parties under a provision of the contract are determined objectively, by reference to its text, context and purpose: 116 [46]. Evidence of the parties’ statements and actions reflecting their actual intentions and expectations is inadmissible: 117 [50].
b.in determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable business person would have understood those terms to mean: 116 [47]. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning: 116 [48];
c.unless the contract indicates otherwise, the Court is entitled to approach the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result. The contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience: 117 [51].
First, the Court must consider the text of the HOA. What is clear is that Lloyds were to retain the first $200,000.00 of profit from the FAL division. This supports the view that there was a clear division in the HOA of Lloyds as a total business and the FAL Division. These words would not make any commercial sense otherwise.
I accept the Bensons submission that, based on context, the exclusion of ‘Head Office (Qld) charges' supports the interpretation that what was being referred to in the HOA for the purposes of 'profit' was the FAL division, and not Lloyds as a corporate entity.
Third, I am satisfied that the purpose for which the Bensons were recruited by Lloyds was to establish and run a Fine Arts and Luxury division of Lloyds. This is set out in the preamble of the HOA. Previously, the Bensons had been operating their own company. The HOA made it clear that existing vendors from the Bensons’ company, Art Invest Pty Ltd, would be transferred to Lloyds.
This also supports the view that any profit for the purposes of any bonus payable to the Bensons would relate to the FAL division and not Lloyds as an entity.
I do not accept the submission of the respondent that any profit for the purposes of any bonus payable was referable to Lloyds as an entity, including all other divisions. The Bensons were employees of Lloyds and responsible for a particular division only, not the whole entity. They exercised no managerial control over the entity as a whole and were not shareholders in Lloyds. For the bonus term to achieve a commercial result, it must be referable to the division over which they exercised control. The more profitable the FAL division was, the more they earned by way of a bonus from the Bensons. This makes commercial sense.
Further, a reading of the whole of the HOA enables the Court to be satisfied that the term 'profit' has a similar meaning whenever used and is not referable to the profit of Lloyds as an entity. The words are all contained within the first dot point of the HOA. I do not accept that there is any change or variation in the meaning of the term within the dot point. For that to occur, there would need to be plain language that it was the case.
The use of the word 'retained' must also refer to the profit of the FAL division, not Lloyds as an entity, otherwise, why would it be specified that a portion was to be 'retained' when it was already the property of Lloyds. The use of the word retained can only make sense on the basis that the construction urged by the Bensons is accepted, that being, the first $200,000.00 of profit generated by the FAL division was excluded from the bonus provision. The Court notes that the amount of $200,000.00 is the same amount as the salary the Bensons were to be paid, of $100,000.00 each to Mr and Ms Benson. Read in this context, it supports the construction put forward by the Bensons.
Having determined that the word 'profit' in the HOA is referable to the profit of the FAL division, the next task is to determine what the word 'profit' means.
I accept that the term 'profit' is not defined within the HOA. However, both Mr Loneragan and Mr Rosetto opine on how the expression 'profit' and 'Head Office (Qld) Charges' can be construed. I accept the submission of the applicant that the terms were not so obscure or 'incapable of meaning' such that Mr Rosetto or Mr Lonergan could provide the Court with evidence as to the amount of 'profit' generated under the bonus clause. The issue is then what is the proper amount of profit for the bonus term?
What is the quantum of profit for the FAL Division for the purposes of the Bonus term and the Bonus payable?
This issue requires a consideration as to the reliability and credibility of the differing opinions given by Mr Loneragan on the one hand, and Mr Rosetto on the other. In so doing, I find both Mr Loneragan and Mr Rosetto have provided evidence which has been based on their best attempts, in circumstances where the documentation provided by Lloyds as to the relevant profit and loss of the FAL division is inadequate. This then has required various assumptions to be made in order to come up with a measure of profit and thus any bonus payable.
I am satisfied that the appropriate measure for the term ‘profit’ as used in the bonus term was intended to refer to net profit. That being "the profit of the business after all expenses have been deducted from the total revenue and other operating income". This is the definition used by Mr Loneragan in his first report at 3.5(c). I am also satisfied that the expression "Head Office (Qld) charges" does not require detailed elaboration in circumstances where Lloyds has produced financial documents purporting to record the divisional profits of Lloyds FAL division.
Taking a helicopter view of the reports of both Mr Rosetto and Mr Loneragan, the Court finds it difficult to accept that if the FAL division was incurring the losses calculated by Mr Rosetto, of $14,532,648.25 over the financial years 2020-23 in Alternative A-Basis 1, being the worst-case basis, to a loss of $5,379,381.03 on a best case basis in Alternative B Basis 2, that Lloyds would have continued to operate the FAL division. It would simply not make commercial sense to continue to sustain ongoing losses of the magnitude set out in Mr Rosetto's report.
Further, were the FAL division making the losses attributed to it by Mr Rosetto, it would seem inexplicable that Lloyds would have increased the salaries of Mr and Ms Benson from $100,000.00 per year to $150,000.00 per year. It would be inexplicable that they would grant them initially 100,000 shares and then a further 100,000 shares in the Lloyds Legacy Trust, as set out in the unchallenged conversation outlined by Ms Benson that took place in February 2023. Such an offer and conversation support an inference that the FAL division was profitable.
The Court has also taken account of the fact that no detailed evidence has been called by Lloyds from a relevant Chief Financial Officer or a person with similar detailed knowledge of the financial position of Lloyds to explain the basis upon which costs were allocated to each of the divisions within Lloyds and how profit and loss was determined on a companywide basis. No credible explanation has been given as to the lack of relevant financial documentation by Lloyds in the financial years 2018 and 2019.
The difference between Mr Rosetto and Mr Loneragan lies in the basis upon which the cost driver is used to allocate expenses. Mr Loneragan used cost drivers based on BPC revenue or payroll costs. The Court finds that these are legitimate alternatives in cost allocation as compared to the basis advanced by Mr Rosetto, which is premised on an activity basis, being lots auctioned.
The Court is reasonably satisfied that the use of the activity basis as a cost driver resulted from the instructions given to Mr Rosetto by Lloyds. No evidence has been provided that these instructions are correct as a matter of fact, or who gave these instructions, and the capacity to qualify the instructions given. The Court is not satisfied that the primary facts in support of the instructions provided to Mr Rosetto have been established by Lloyds.
The Court considers that the opinion set out by Mr Loneragan in his first report, and then subsequently modified in his second report in the light of further information provided to him by Lloyds, and his review of Mr Rosetto's report, should be preferred to that of Mr Rosetto. That is, the Court accepts the opinion of Mr Loneragan as set out in his second report.
Mr Loneragan was extensively cross-examined, but I am satisfied that his opinions and evidence were unshaken and that he was able to provide a credible and logical basis for the opinions that he proffered.
At item four of his supplemental report ‘Amounts due under the bonus Scheme’, Mr Loneragan offers the alternative scenarios relevant to the calculation of profit. There is a high scenario which takes account of some costs which provides a high scenario. The low scenario takes account of three potential adjustments, relating to
(1)The Gosford and Somersby rent;
(2)Travel and entertainment expenses; and
(3)Other overheads being non-payroll related costs.
The Court is presented with three options in relation to the determination of profit, and therefore any bonus payable. The first is to accept the high scenario, which results in a bonus being payable of $2,775,364.00, or to accept a low scenario with a bonus payable of $1,380,251.00. The third alternative would be for the Court to find an amount of bonus payable somewhere in between the high and the low scenario.
The low scenario applies additional costs, with the most significant being additional overheads of $1,241,917.00.
The Court is not equipped to undertake its own forensic assessment of the profit of the FAL division in order to ascertain any bonus payable. Given the relative uncertainty due to the lack of documentation provided and the relative assumptions necessary by Mr Loneragan in order to arrive at both the low and high scenarios, the Court prefers to adopt a conservative approach and to accept the low scenario. The Court considers this to be the best estimate of the financial loss suffered by the Bensons as a consequence of Lloyds breach of the bonus term.
In coming to the conclusion of the HOA, the Court has been mindful of the fact that it was entirely within Lloyds capacity to provide documentation which might have provided a greater degree of certainty to Mr Loneragan and assist him in his calculations. However, the Court is also mindful that it is for the Bensons to prove their loss.
Accordingly, the Court finds in favour of the Bensons in the amount of $1,380,251.00 (plus interest) as the bonus amount due but not paid under the HOA.
THE CROSS CLAIM
The respondent pleads three cross claims against the Bensons and Art Invest as stated at [15] above and reproduced herein:
(a)alleged breaches by the Bensons of their employment contracts and Art Invest of the HOA;
(b)alleged breaches of fiduciary obligations said to be owed by the Bensons to the respondent; and
(c)alleged breaches of ss 181 – 183 of the Corporations Act by the Bensons.
Orders are sought for the payment of damages to Lloyds for breach of contract, together with equitable compensation under s 1317H of the Corporations Act.
Further orders are sought against Art Invest for damages for breach of contract, together with an order that an account be taken of the profits earned by Art Invest resulting from the Bensons’ breach of fiduciary duty.
Lloyd’s Submissions
On behalf of Lloyds, it was submitted that the Bensons received, on 23 May 2017, a document which contained the "Lloyds’ staff bidding and purchasing policy". This document indicated that Lloyds’ staff were permitted to bid on goods at Lloyds’ auctions, provided, amongst other things, they sought and received approval of the COO. Ms Benson accepts that she received this email.
A further email was sent out on 17 May 2018, which updated the staff selling policy, which included inter alia the requirement that a formal request must be made to the COO prior to the delivery of goods to Lloyds for sale (Supplementary CB 22).
A further message was sent by Microsoft Teams, on 20 May 2021 (Supplementary CB 32), which attached a word document titled “Auction bidding and selling policy by Lloy…”. This policy included that prior to bidding on an auction item, an employee must email the COO to let them know the auction and the lot number upon which they intend to bid. Further, bidding was not to take place via the Podium software system. All private bidding was to be done when logged on via an employee’s private account login details.
It was further set out in the policy that as a Lloyds team member, you will receive a discounted rate for selling your items via Lloyds Auctions at 11% including GST or the current rental commission for your type of item, inclusive of GST, whichever is lower.
Again, interactions with the auction system were to be done via a private account when logged in via private account login details. It is submitted that despite the above, in her oral evidence, Ms Benson, in answer to a question that she did not obtain permission to bid on the NFT, she claimed, "I wasn't aware there was an active staff bidding and selling policy" (T.78:29-31).
In her Affidavit, Ms Benson states that on occasion she did seek permission to bid on items, she did so to "do the right thing". Documentary evidence indicates that Ms Benson sought permission to bid on Lloyds or external auctions on some 17 occasions, during the period of 7 August 2017 to 19 April 2023.
It was submitted that there was no evidence of Ms Benson seeking permission in relation to the NFT, either on her own behalf or on behalf of Art Invest.
On 28 April 2023, Mr Benson received an email advising that he had won an NFT, Lot 31, in an Auction titled ‘UNRESERVED DIGICARS NFT COLLECTABLES (A849)’. Ms Benson claims in her Affidavit that she purchased the NFT. It was submitted that Art Invest was the bidder and ultimately the purchaser of the NFT. An important benefit of the NFT is that the owner is entitled to reduce their buyer's premium or seller’s commission in auctions with Lloyds by 75%.
When it was put to Ms Benson that she had not sought permission from Lloyds to bid on the NFT she answered, "No. I had a bidding account and the bidding account - well, the bidding account gives permission to bid on the item" (T.77:36-39). She also claimed that she was not aware that Art Invest sold approximately $200,000.00 worth of goods in the successive two months after the purchase of the NFT.
Subsequently, Art Invest sold stock via Lloyds, using the customer number for Art Invest, taking advantage of a 75% reduced seller's commission.
It was further submitted that in respect of the bidding for the NFT, Mr Benson also bid on the NFT, but for some reason, this bid was later modified to include Art Invest’s customer details.
From 13 April 2023, until 30 June 2023, Art Invest sold approximately $242,030.00 worth of items through Lloyds at a reduced commission of 2.75% as compared to 11%. Ms Benson claimed she was unaware of that fact (T.78:23-24).
It is further alleged that two Rolex watches were sold on 13 April 2023, but no commission was paid by Art Invest, and there was a further sale on 16 April 23 when zero commission was paid. It was submitted that the sales that took place after the purchase of the NFT were not personal in nature, but were commercial-scale sales. Ms Benson did not seek and was not granted approval to sell those items, especially not at a reduced seller’s commission rate of 2.75%.
It was submitted that the Bensons had a fiduciary relationship with their employer, Lloyds. The stock sold from 2023 was plainly not "Art Invest SOH [Stock on Hand]". As at 1 July 2017, this was valued at $80,000.00. Similarly, by using her access to change the bid for the NFT to Art Invest, Ms Benson obtained a benefit or advantage from the exercise of powers or functions arising from the scope of the employment relationship with Lloyds.
It is further submitted that the Bensons were both employees and "officers" of Lloyds for the purposes of s 9 of the Corporations Act.
Section 181 of the Corporations Act provides that a director or officer of a corporation must exercise their powers and discharge their duties in good faith for the best interests of the corporation and for a proper purpose.
This duty includes acting in the interests of the company, not misusing or abusing their power, avoiding a conflict of interest between personal interests and those of the company, not taking advantage of the position to make secret profits and not misappropriating company assets for themselves: ASIC v Maxwell [2006] NSWSC 1052 at [106].
It was submitted that Ms Benson misused her power by wrongfully reducing the amount of seller’s commission that Art Invest was required to pay when selling through Lloyds Auctions. She did not have the authority to decide the seller's commission or the buyer’s premium in relation to her own selling. She was required to seek permission from the COO. She took advantage of her position to reduce the commission rate and make secret profits.
It was further submitted that Ms Benson breached s 182 of the Corporations Act. Section 182 (1) provides that the Director, Secretary or other officer or employee of a corporation must not improperly use their position to gain an advantage for themselves or someone else or cause detriment to the corporation.
As an employee or officer, Ms Benson improperly used her access to Lloyds Auction systems to obtain the NFT by cancelling Mr Benson's bid. This was prohibited by the Lloyd’s staff bidding policy.
She also used her position to cause detriment to Lloyds by way of an unauthorised reduction to the seller’s commission. It was submitted that Lloyds is entitled to compensation under s 1317H of the Corporations Act in the amount of $242,030.00, pursuant to s 1317H(1) and (2).
Finally, it was submitted that Art Invest knowingly assisted in the breaches of fiduciary obligations in that it had knowledge of Ms Benson's dishonest and fraudulent design, which was a transgression of the ordinary standards of honest behaviour: Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609 at [124]. As Art Invest obtained a profit by selling items it was not permitted to sell through Lloyds, it should be required to account to Lloyds for any profits gained.
The Bensons’ Submissions.
Firstly, it was submitted that although Lloyds have not formally withdrawn the cross claim against Mr Benson, it is apparent from the respondent's closing submissions that no claims are now pressed against him.
Common to all of the cross claims by Lloyds, it is the factual case that the case against Ms Benson (and, by extension, Art Invest) rests problematically on inferences to be drawn from documents that were not:
(a)put properly to Ms Benson in contravention of the rule in Browne v Dunn (1893) 6 R 67 (HL) (Browne v Dunn);
(b)put at all to Mr Benson; or
(c)provided to the Court by Lloyds with the necessary context to rely upon them for the purpose of supporting the serious allegations now put against Ms Benson. For example, it is unknown to the Court if responses were provided to Ms Benson's email request to bid on certain items, or how those requests were otherwise handled by Lloyds.
Noting that Lloyds bear the burden of proof in respect of the factual and legal elements of its cross-claims, the Court would not be reasonably satisfied that Ms Benson is engaged in the factual conduct alleged against her, particularly as the only evidence in support of Lloyds’ contentions arises from:
(a)inexact proofs - namely, Lloyds’ selective documentary evidence;
(b)indefinite testimony - namely the partial cross-examination of Ms Benson (and the lack of any cross-examination of Mr Benson); and
(c)indirect inferences - being those that Lloyds seek to draw from the above.
Further, it would be appropriate for the Court to draw a Jones v Dunkel (1959) 101 CLR 298 (Jones v Dunkel) inference against Lloyds, on the basis that no senior management or employees have given evidence and therefore did not have evidence which would have assisted its cross-claims.
In respect of claims based on breach of contract and fiduciary obligations, these appear to be based on alleged breaches of the terms contained in the HOA. It does not appear to be contended, for example, that any of Lloyds’ policies had contractual force.
Notwithstanding a lengthy exposition of Lloyds’ "staff bidding and purchasing policy", there was no attempt by Lloyds to suggest that the policy was incorporated into their contracts or otherwise had some basis to independently contractually bind the parties. It is unclear if it is alleged that Ms Benson or Art Invest breached the contract. It is also unclear whether the sales made by Art Invest are alleged to have been facilitated by Mr Benson or Ms Benson.
In any event, both Ms Benson and Mr Benson gave evidence that sales made by Art Invest during the currency of their employment with Lloyds were permitted under the HOA. Neither were cross-examined on the evidence on this point. Further, if such a breach were found, there is no good evidence of any losses by Lloyds or profits by the Bensons from which equity would fashion a remedy.
In terms of the claims based on the Corporations Act, it is submitted that neither of the Bensons were officers of Lloyds within the meaning of ss 9AD(b)(i) or 9(b)(ii) of the Corporations Act.
The evidence is insufficient to support a finding that Ms Benson either made or participated in the making of decisions that affect the whole or substantial part of Lloyds, or had the capacity to significantly affect Lloyds’ financial standing.
Lastly, there is no causal connection between the compensation of $242,030.00 claimed by Lloyds in the contravening conduct alleged against Ms Benson. That is, there is no relationship that would connect the Bensons’ reduction of seller commission to the sales by Art Invest through Lloyds.
The same must apply to the claim against Art Invest.
CONSIDERATION: CROSS-CLAIM
First, the Court finds that as a result of the closing submissions by the respondent, and that no assertions have been made against Mr Benson, these claims appear to have been abandoned.
Second, consideration needs to occur as to whether or not Ms Benson was an 'officer' of Lloyds for the purposes of the Corporation Act. This is defined in s 9AD(b)(i) as follows:
(1)An officer of a corporation (other than a CCIV) is:
(a)a director or secretary of the corporation; or
(b)a person:
(i)who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii)who has the capacity to affect significantly the corporation's financial standing; or
(iii)in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation);
Section 9(b)(i) reads as follows:
"officer" has the meaning given by section 9AD.
Lloyds’ total income in the financial year 2023 was $47,531,278.28. Total expenses amounted to $33,004,457.00. The FAL division was but one of a number of divisions within the Lloyds group. Based on the evidence that is before the Court, including the lack of evidence from any of Lloyds senior executives, the Court cannot be satisfied that Ms Benson was an officer of Lloyds for the purposes of the Corporations Act. I am not satisfied that the FAL division, alone, meets the definition of a "substantial part" of Lloyds.
Nor am I satisfied that Ms Benson had the capacity to significantly affect Lloyds financial standing. In these circumstances, the cross-claim in relation to any breaches of the Corporations Act cannot be sustained.
The next issue is whether or not Ms Benson breached the terms of her employment contract contained within the HOA agreement with Lloyds and/or her fiduciary obligations owed to Lloyds.
First, I am not satisfied that the allegations of these breaches were properly put to Ms Benson in accordance with the rule in Browne v Dunn. The Court notes, however, that some questions were put to her regarding the purchase of the NFT.
Further, the Court accepts that it is open for it to draw a Jones v Dunkel inference, based on the lack of any evidence from any senior officer or executive of Lloyds.
The HOA made it clear that it was open to Art Invest to sell any stock on hand as at the signing of the HOA through Lloyds. Evidence has been given by both Mr and Ms Benson that upon the change of location from Gosford to Somersby, a significant amount of stock that was either unsold, or had been sold but not paid for, was discovered. It was this stock that was sold through Lloyds, in accordance with the HOA. If the Court accepts this evidence, it can be determined that no contractual breach occurred. No cross-examination of Ms Benson took place which clearly put to her that either some or all of the items that were sold could not have been explained by the fact of the stock that was discovered during the move. I am not satisfied that there was any breach of the HOA through the sales as described.
What is clear is that there was a staff policy in place and that permission was needed to bid on items being sold by Lloyds. I do not accept that Ms Benson was unaware of the need to seek permission to bid on items. However, in the absence of evidence to the contrary, I am satisfied that she had authority to vary the level of commission applied to sellers.
Whilst there is no evidence before me, by way of documentary evidence, that Ms Benson sought permission to bid on the NFT, on the basis of the totality of the evidence, including the lack of evidence from any officer of Lloyds, I am not satisfied to the requisite standard that Ms Lloyd breached her fiduciary duty or the terms of her contract of employment by bidding on the NFT.
Ms Benson had secured through the purchase of the NFT, a right to a significantly reduced seller’s commission. While I am satisfied Art Invest had the right to sell items through Lloyds, on the basis that I cannot be satisfied that all of the items sold were stock on hand, as at the date of the HOA was signed, that had either not been sold or not paid for after being sold, I am satisfied that without express permission, the use of the NFT to reduce the sellers commission by 75% to 2.75% of the price sold, was a breach of the contract of employment.
In coming to this conclusion, I have been mindful of the amount of stock sold in the last two months of the employment contract, and the unconvincing evidence of Ms Benson in relation to her knowledge of the policy in relation to either bidding or selling of items by employees of Lloyds.
Having come to this conclusion, the issue then relates to what loss has been sustained by Lloyds. This loss needs to be the subject of further evidence on the basis of the difference in any commission that would have been received by Lloyds on the basis of an 11% sellers commission, and the 2.75% actually paid.
The parties should consult in this regard to ascertain a precise figure, if necessary, by reference to the expert forensic accountants retained by each side.
I find there is no causal connection between the compensation $242,030.00 claimed by Lloyds and the alleged contravening conduct by Ms Benson. The basis upon which that amount has been calculated is entirely opaque to the Court and cannot be sustained.
In these circumstances, all of the cross-claims against both Ms and Mr Benson are dismissed, save for the cross-claim in relation to both Ms Benson and Art Invest, on a joint basis, for the loss of sales commission as outlined above.
The Breach of Section 90(2) and Section 44 of the Fair Work Act 2009 (Cth)
It is common ground between the parties that on 6 July 2023, the respondent paid Ms Benson the sum of $27,768.01 and Mr Benson $26,857.08 in respect of accrued, but unused, annual leave. There was a shortfall of $4,038.46 that was not initially paid, but was ultimately paid on 16 August 2023.
It is not disputed by the respondent that, as a result, there was a breach of ss 90(2) and 44 of the FW Act. Section 90(2) requires an employer to pay untaken annual leave when employment ceases.
The applicants submit that although there were two breaches of the FW Act, one in relation to Ms Benson and the other in relation to Mr Benson, they should be treated as a single contravention for the purposes of any penalty. I accept that submission.
At the time of the contravention, the value of a penalty unit was $313.00. Thus, the maximum amount that can be imposed for each contravention is $93,900.00, pursuant to the operation of ss 539(1) and 546(2)(b).
The amounts outstanding to the Bensons were only paid after the applicants had made repeated demands, through their legal representatives, to the respondent for payment of their unpaid leave, including by letter dated 4 July 2023 (Supplementary CB 164 –166), letter dated 11 July 2023 (Supplementary CB 167) and 11 August 2023, which included a draft statement of claim (Supplementary CB 170 – 176).
The applicants submit that an appropriate penalty in all the circumstances is $30,000.00.
No evidence was called by the respondent in relation to the contravention. Thus, the Court is left to ascertain the facts from the documents provided by the parties.
The respondent submits that to achieve the object of deterrence, the pecuniary penalty is not required, or if a penalty is to be imposed, it should be nominal.
In support of this proposition, it is submitted that the shortfall in payment was an administrative oversight. Further, the respondents rely on an email from Mr Wayne Taylor-Girdler, who stated that “total annual leave deducted incorrectly has now been back paid on the adjusted pay run processed on 16/08/23”. The basis for the error is not further explained.
It was submitted that the contravention did not arise out of the conduct of senior management, but rather the payroll team. Further, the respondent paid the amounts outstanding within three weeks of the amount being due. The amounts were relatively small. Finally, the amount sought was in the context of further allegations being made by the applicants against the respondent. It was submitted that it could be inferred that the respondent would need to carefully review the matters that the applicants were alleging in order to provide an accurate and fulsome response to the various allegations.
The Court has a broad discretion as to penalty. In Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [71], the High Court held that the Court should fix a penalty 'it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act'. Further at [10] and [12], the High Court stated that the penalty must not exceed what is “reasonably necessary to achieve the purpose of section 546: the deterrence of future contraventions of a like kind by the contravener and by others”.
In Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301, Bromwich J summarised how the discretion is to be approached at [36], as follows:
(1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
The purpose of a civil penalty is primarily, if not wholly, promoting the public interest in compliance with the laws that have been contravened, and it does not engage principles of retribution or rehabilitation: see Fair Work Ombudsman v NoBrace Centre Pty Ltd (In Liquidation) (ACN 121 556 447) & Ors (No.2) [2019] FCCA 2970 (NoBrace) per Kelly J at [65]. As these principles of retribution or rehabilitation are not involved in the determination of a civil penalty, this intensifies the focus of a civil penalty determination on issues of specific and general deterrence: see NoBrace at [66].
The FW Act does not set out any mandatory criteria, inclusive or exclusive, that the Court must consider when determining whether to impose a penalty or the amount of any penalty: Canturi v Sita Coaches Pty Ltd [2002] FCA 349 at [88]. The choice of penalty must be guided by the "individual circumstances of a case, not by a line by line comparison with another case": Australian Ophthalmic Supplies Pty Ltd v McAlary Smith (2008) 165 FCR 560 at [12]. The process is an intuitive one by the Court and not an application of a scientific process: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [60] – [63].
In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, Mowbray FM set out what is now a well-accepted set of factors relevant in assessing a pecuniary penalty. They are as follows:
(a)the nature and extent of the conduct which led to the breaches;
(b)the circumstances in which the conduct took place;
(c)the nature and extent of any loss sustained as a result of the breaches;
(d)whether there has been similar previous conduct by the Respondents;
(e)whether the breaches were properly distinct or arose out of one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breaches were deliberate;
(h)whether senior management was involved in the breaches;
(i)whether the party committing the breach had exhibited contrition;
(j)whether the party committing the breach had taken corrective action;
(k)whether the party committing the breach had cooperated with enforcement authorities;
(l)the need to ensure compliance with minimum standards by provision of an effective means for the investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
Merkel J in Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal Plumbing and Allied Services Union of Australia (CEPU) [2001] FCA 672 set out some guiding considerations for the Court at [4]:
matters to be taken into account in determining the appropriate penalty include the cost of the contravention, deterrence, the flagrancy and deliberateness of the breach, the offender's past record of behaviour and any contrition displayed by the offender.
In terms of the approach set out by Bromwich J referred to above, I am satisfied there were two contraventions, one each in respect of Mr Benson and Ms Benson. It is appropriate that they be dealt with as a single contravention. No further aggregation is necessary.
In terms of the factors identified by Mowbray FM (as he was then), I am satisfied that the contraventions occurred as a result of an administrative oversight in the payroll team when calculating the applicant's accrued holiday leave. Significant payments were made, however, there was an amount that was agreed to be underpaid of some $4,038.46. This amount was paid on 16 August 2023, noting that the applicant's employment ceased with the respondent on 30 June 2023.
No evidence has been put to me of any similar previous conduct by the respondent. Accordingly, it should be treated as a first offence and given an appropriate mitigation in any penalty as a result.
I am satisfied that the respondent is a medium-sized enterprise and should have had proper records and accounting procedures in order to ensure that accrued annual leave was fully paid out upon cessation of employment by an employee. I am not satisfied that the breaches were deliberate, or that they involved senior management, although I note the considerable time and correspondence from the applicant's solicitors in order for the monies to be paid out.
I am satisfied that the respondent has taken corrective action by paying the additional amounts that were unpaid. However, I have some difficulty in finding that there has been an expression of remorse or contrition on behalf of the respondent. No apology has been provided to either the applicant or the Court on behalf of the respondent. No evidence has been called from any representative of the respondent that expresses any remorse or contrition.
In my view, it is incumbent upon employers to ensure that they have proper systems in place to ensure that employees’ entitlements are fully paid when employment ceases. I do not accept that there is no need for general deterrence or specific deterrence in relation to the respondent.
Not to impose any penalty would detract from the legitimate public interest in ensuring that both the respondent and others do not engage in similar behaviour.
Taking all the relevant matters into account, but in particular, the fact that the contravention has been admitted, corrective action has been taken, and there is no evidence before me of previous contraventions, any penalty should be at the lower end of the scale, noting however that the maximum penalty is $93,900.00. The appropriate penalty should be set at 25% of the maximum, which amounts to $23,475.00.
This amount should be paid to the applicants in accordance with s 546(3)(c) of the FW Act within 14 days of the date of these orders.
I certify that the preceding two hundred and thirty (230) numbered paragraphs are a true copy of the Reasons for Judgment of Judge D Humphreys. Associate:
Dated: 27 August 2025
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