Coyte v Norman; Centre Capital (Newcastle) Pty Ltd v B Scorer

[2016] NSWSC 1242

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Coyte & Anor v Norman & Anor; Centre Capital (Newcastle) Pty Ltd & Anor v B Scorer & Ors [2016] NSWSC 1242

Hearing dates:

24 – 27, 31 May, 1, 3, 7– 8, 14 and 24 June 2016

Decision date:

07 September 2016

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to bring in agreed short minutes of order to give effect to this judgment within 14 days or, if there is no agreement between them, their respective draft short minutes of order and submissions as to differences between them. Parties to be heard as to costs.

Catchwords:

CONTRACTS — Existence of contract — where parties had entered into a joint venture under a “Heads of Agreement” for the purpose of conducting a financial planning business – where plaintiffs made various contractual claims against the defendants – whether contracts relied on by the plaintiffs fail for lack of sufficient certainty and intention to enter into contractual relations – where plaintiffs claimed first defendant engaged in unconscionable conduct under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) – whether relevant conduct had a material connection with the supply or possible supply of financial services sufficient to support claim – where cross-claimants/defendants made various claims against the cross-defendants/plaintiffs under an alleged “Further Agreement” – whether existence of Further Agreement pleaded by cross-claimants established – whether cross-defendant was entitled to retain his clients and associated income upon termination of the joint venture under the Heads of Agreement – whether the cross-defendant was in breach of trust in diverting client income away from a trust.
CORPORATIONS — Management and administration — duties and liabilities of officers of corporation – where parties had entered into a joint venture under a “Heads of Agreement” for the purpose of conducting a financial planning business – where Heads of Agreement provided each party would retain their own clients upon termination of joint venture – where cross-defendant/plaintiff was director of certain companies and caused payments to his associated interests and diverted client income upon termination of joint venture – where cross-claimant/defendant claimed cross-defendant’s conduct was in breach of director’s statutory duties – whether director’s duties were narrowed by the contractual terms and relationship between relevant parties – where cross-claimant claimed that the entity that received funds as a result of the cross-defendant’s alleged breaches of statutory fiduciary duties was liable as constructive trustee – whether claim under the first limb of Barnes v Addy established.
CORPORATIONS — Management and administration — duties and liabilities of officers of corporation – where in the second proceedings the plaintiffs claimed breach of director’s statutory duties by the second defendant in facilitating payments to a third party without proper authority – where defendant contended payments were agreed between relevant parties or expressly contemplated by the terms of an employment agreement – whether breach of director’s duties established – whether plaintiffs have established the quantum of their loss in relation to the purported breach of director’s duties.
EQUITY — constructive trustee — where in the second proceedings it was claimed that the first defendant diverted payments away from company to an associated entity in breach of the defendant’s obligations to the company – whether the associated entity is liable as constructive trustee in circumstances it was aware the funds were procured in breach of obligations to the company – whether restitutionary claim against associated entity established.

Legislation Cited:

- Australian Securities and Investments Commission Act 2001 (Cth), s 12CB
- Civil Procedure Act 2005 (NSW), s 56
- Companies (SA) Code, s 229
- Corporations Act 2001 (Cth), ss 180, 181, 182, 1317E, 1317H, Ch 7
- Evidence Act 1995 (NSW), s 140

Cases Cited:

- Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507
- 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 Financial Services & Leasing Pty Limited v Hills Industries Limited [2014] HCA 14; (2014) 253 CLR 560
- Australian Securities and Investments Commission (ASIC) v Rich (2009) 236 FLR 1; (2009) 75 ACSR 1
- Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373
- Avoca Consultants Pty Ltd v Millenium3 Financial Services Pty Ltd [2009] FCA 883; (2009) 73 ACSR 307
- Barnes v Addy (1874) LR 9 Ch App 244; (1874) 43 LJ Ch 513
- Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384
- Bofinger v Kingsway Group Ltd (2009) 239 CLR 269
- Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
- Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558
- Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178
- Chew v R (1991) 4 WAR 21 at 49; 5 ACSR 473
- County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
- David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 353; (1992) 175 CLR 353
- DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423
- Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599
- Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25
- Equuscorp Pty Limited v Haxton [2012] HCA 7; (2012) 246 CLR 498
- Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81
- Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
- Grimaldi v Chameleon Mining NL (No 2) [2012] - FCAFC 6; (2012) 200 FCR 296
- Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd [2011] FCA 1154; (2011) 86 ACSR 393
- Howard v Commissioner of Taxation [2014] HCA 21; (2014) 309 ALR 1
- JR Consulting & Drafting Pty Limited v Cummings [2016] FCAFC 20; (2016) 329 ALR 625
- Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/a Uncle Ben’s of Australia) (Federal Court of Australia, 29 June 1995, unrep)
- Maguire v Makaronis (1997) 188 CLR 449 at 466
- Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 185 ALR 152
- Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
- Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 325 ALR 188
- Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110
- Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449
- Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd [2011] FCAFC 166; (2011) 285 ALR 63
- Pavlovic v Universal Music Australia Pty Ltd [2015] NSWCA 313; (2015) 90 NSWLR 605
- Pennimpede v Gerard Pennimpede [2009] NSWSC 85
- Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233
- Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547
- Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
- Spellson v George [1992] NSWCA 254; (1992) 26 NSWLR 666
- Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291
- Target Holdings Ltd v Redferns (a firm) [1995] 3 All ER 785; (1995) 17 ACSR 582
- Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
- Watson v Foxman (1995) 49 NSWLR 315
- Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484

Category:

Principal judgment

Parties:

2013/43716
Robert Edward Coyte (First Plaintiff/Second Cross-Defendant)
Blooms Investment Nominees Pty Ltd (Second Plaintiff/First Cross-Defendant)
Michael Norman (First Defendant)
Centre Capital (Newcastle) Pty Ltd (Second Defendant)
Centre Capital Pty Ltd (First Cross-Claimant)
Centre Capital Securities Pty Ltd (Second Cross-Claimant)
Shartru Wealth Management Pty Ltd (Third Cross-Defendant)

  2013/252885
Centre Capital (Newcastle) Pty Ltd (First Plaintiff)
Centre Capital Securities Pty Ltd (Second Plaintiff)
Brendan Scorer (First Defendant)
Robert Edward Coyte (Second Defendant)
United Nominees Pty Ltd (Third Defendant)
Angela Scorer (Fourth Defendant)

Representation:

Counsel:
2013/43716
P Afshar (Plaintiffs/Cross-Defendants)
D A Priestley SC (Defendants/Cross-Claimants)

 

2013/252885
D.A. Priestley SC (Plaintiffs)
P Afshar (Second Defendant)

 

Solicitors:
2013/43716
Denis Edwards & Associates (Plaintiffs/Cross-Defendants)
Mayweathers (Defendants/Cross-Claimants)

  2013/252885
Mayweathers (Plaintiffs)
Denis Edwards & Associates (Second Defendant)

File Number(s):

2013/43716; 2013/252885

Judgment

1. Two proceedings were heard together in this case. In proceedings 2013/43716 (“Coyte proceedings”), Mr Robert Coyte and a company associated with him, Blooms Investment Nominees Pty Limited (“Blooms”) brought proceedings against Mr Michael Norman and Centre Capital (Newcastle) Pty Ltd (“CCN”). Mr Coyte and Blooms claim several money amounts from Mr Norman and CCN as due on termination of a joint venture arrangement between the parties. Mr Coyte and Blooms also seek a declaration that shares in Orpheus Energy Limited (“OEG”) are held in escrow on behalf of Blooms. By a First Cross-Claim Further Amended Statement of Cross-Claim (“ASOCC”) filed in the Coyte Proceedings, Centre Capital Pty Limited (“CCPL”) and Centre Capital Securities Pty Ltd (“CCS”) in turn brought claims against Blooms, Mr Coyte and Shartru Wealth Management Pty Ltd (“Shartru”).

2. In proceedings number 2013/252885 (“Scorer proceedings”), CCN and CCS initially brought claims against Mr Brendan Scorer, United Nominees Pty Ltd (“United Nominees”), Ms Angela Scorer and Mr Coyte. The claim against Mr Scorer was not pursued where he had been made bankrupt and the claim against Ms Scorer was discontinued. CCN and CCS pursued the claims against United Nominees and Mr Coyte.

3. The Coyte Proceedings and the Scorer Proceedings were commenced in the District Court at Newcastle and were transferred to this Court on the application of the interests associated with Mr Norman (“Norman Parties”). The proceedings were heard in this Court over 11 hearing days. The complexity of the proceedings and their length was arguably disproportionate to the amounts claimed in them.

Affidavit evidence and witnesses

4. Before turning to the affidavit evidence, I should recognise well-established principles applicable in cases where, as here, significant parts of the parties’ claims, and particularly the Norman Parties’ claims, turned on oral evidence of conversations that occurred some time ago. I have been conscious of the principle that it is important to have regard to the fallibility of human memory, which increases with the passage of time, particularly where litigation intervenes, and I have had regard to the value of contemporaneous documents, and an assessment of motive and the overall probabilities, in reaching assessments as to credit.

5. In Watson v Foxman (1995) 49 NSWLR 315 at 318, McLelland CJ in Eq observed that, where a party seeks to establish conduct comprising:

“the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene; and the processes of memory are overlaid; often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

6. In Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 at [15], the High Court similarly approved an observation of Tamberlin J at first instance in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (t/a Uncle Ben’s of Australia) (Federal Court of Australia, 29 June 1995, unrep) at 122–3, that:

“[Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time.”

7. In Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 129, Gleeson CJ, Gummow and Kirby JJ observed that:

“Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical.”

8. In Pennimpede v Gerard Pennimpede [2009] NSWSC 85 at [29], Bryson AJ referred to these observations and noted that:

“Considerations of these kinds pose serious difficulties of proof for a party relying upon spoken words as a foundation of a cause of action in the absence of some reliable contemporaneous record or other satisfactory corroboration. In this case there is no contemporaneous document which supports the claim that the true arrangement was only a loan on mortgage, not a purchase, and there is no satisfactory corroboration. McLelland CJ in Eq’s observations apply with only slight changes to the present case. A great deal of what I was told related to conversations which were alleged to have occurred well over 10 years before I heard the evidence. Most of what I was told about the conversations seemed to me to be little more than impressions, accompanied by plausible details which were very unlikely to be based and were not based on actual memory. These impressions came to me through a filter (perhaps an osmotic barrier) of years of conflict, argument and strong feeling.”

9. I in turn summarised the relevant principles in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233 at [10], where I noted, with reference to authority, that the credibility of a witness and his or her veracity may be tested by reference to the objective facts proved independently of the testimony given, in particular by reference to the documents in the case, by paying particular regard to the witness’s motives and the overall probabilities.

10. The Norman Parties rely on Mr Norman’s affidavit dated 13 November 2015 in the Coyte Proceedings and on Mr Norman’s affidavits dated 22 October 2014 and 13 November 2015 filed in the Scorer proceedings. In closing submissions, Mr Afshar, who appears for the Coyte Parties, emphasised the application of the principles to which I have referred above to Mr Norman’s evidence and also attacked Mr Norman’s evidence as:

“… peppered with self-serving reconstructions of alleged conversations from long ago recounted in unbelievably intricate detail, the contents of which are inconsistent with contemporary documents. Norman’s account should be, unless consistent with contemporaneous documents, wholly rejected and be given no weight.”

Mr Afshar submits that Mr Norman was evasive, argumentative and displayed an unwillingness to engage with questions being asked of him and to answer them directly, fairly and openly. Mr Afshar also submits that Mr Norman sought to re-interpret clear words in documents to which he was referred and did not accept clear propositions arising from them. On the other hand, Mr Priestley, who appears for the Norman Parties, submitted that Mr Norman was a forthright, honest and reliable witness who “[g]enerally speaking” was prepared to answer questions directly without prevarication and make appropriate concessions, despite lengthy cross-examination about matters that happened many years ago. I regret to say that I formed the contrary view.

11. I will refer here to several of the matters which lead me to place little weight on Mr Norman’s evidence and will deal further with a number of those matters in the narrative of events below. Mr Norman’s affidavit evidence is replete with lengthy conversations set out in direct speech, in which he sets out lengthy statements he claims to have made as to the nature of arrangements which Mr Coyte is said to have accepted, and those conversations are universally favourable to the Norman Parties’ cause. These include, for example, a two page conversation which Mr Norman cannot date more precisely than it occurred sometime prior to setting up the Centre Capital Mutual Unit Trust (“Mutual Fund”) (Norman 13.11.15 [9d]). Mr Norman also sets out a further lengthy conversation, which he is also unable to date other than that it occurred in early 2012, during which he claims to have precisely explained the earlier arrangement in the terms for which he now contends, although he does not record Mr Coyte’s response to his observations (Norman 13.11.15 [67]).

12. As Mr Afshar points out, Mr Norman claimed in cross-examination that he remembered specific phrases in conversations many years ago (T58) although he often said that he could not recall more recent events or the dates of more recent meetings or who attended those meetings. For example, Mr Norman indicated he wished to have reference to a diary to assist him in recalling whether a critical meeting took place on 27 June 2011, at which he claims the “Further Agreement” on which CCPL and CCS rely in their Cross-Claim came into existence (T144). Mr Afshar also rightly points out that, in cross-examination, Mr Norman repeatedly referred to additional conversations that were not recorded in his affidavit evidence or contemporaneous documents and which invariably would also, if they had occurred, have advanced the Norman Parties’ case. I have formed the view that, to the substantial extent that Mr Norman’s evidence is inconsistent with the contemporaneous documentary evidence or evidence given by other witnesses to which I refer below, it should not be accepted.

13. The Norman Parties also rely on Mr Mazzoni’s affidavits dated 13 November 2015 and 26 May 2016 filed in the Coyte Proceedings which contain a range of complaints as to Mr Coyte’s conduct, not all of which appear to be relevant to any relief sought in the proceedings. The Norman Parties also rely on Mr Mazzoni’s affidavit dated 13 November 2015 filed in the Scorer proceedings where Mr Mazzoni refers, inter alia, to acknowledgements by Mr Scorer, at a meeting on 15 March 2013, that expenses had to be taken into account before Mr Scorer was paid (Mazzoni 13.11.15 [6]) and, at a meeting on 25 June 2013, that Mr Scorer owed Mr Norman an amount of $82,500 that had been paid by CCN (Mazzoni 13.11.15 [9]). Mr Mazzoni’s evidence is also that Mr Norman also claimed, at that meeting, that Mr Scorer’s adviser agreement had been varied to remove the provision for him to be paid $1,000 per week, and that Mr Norman had never approved payment of the amount of $82,500 to him. The Norman Parties also relied on a further affidavit of Mr Mazzoni dated 26 May 2016 which supported an alternative calculation of damages claimed by the Norman Parties to which I will refer below.

11. Mr Afshar submits, and I accept, that Mr Mazzoni generally had no direct knowledge of any of the arrangements between Mr Norman and Mr Coyte or Mr Scorer. Mr Afshar also submits that Mr Mazzoni’s evidence should be approached with caution. Conversely, Mr Priestley submitted that Mr Mazzoni was an impressive witness and that the Court would have no hesitation in accepting him as honest and reliable. It does not seem to me necessary to form any general view as to Mr Mazzoni’s credit.

12. The Norman Parties rely on an affidavit of Mr Satusky dated 12 November 2015 filed in the Coyte Proceedings, an affidavit of Mr Atra dated 12 November 2015 filed in the Coyte Proceedings and an affidavit of Mr Atra dated 12 November 2015 filed in the Scorer proceedings. Mr Atra gives evidence, inter alia, of a meeting in early June 2012 attended by Messrs Norman, Coyte, Satusky, Mazzoni and Atra at which reference was made to a loan by the company to Mr Coyte to cover personal expenses (Atra 12.11.15 [8]). The existence of that loan is disputed although that issue does not appear to be raised by the relief sought in the proceedings. Mr Atra subsequently prepared reconciliations of income and expenses in respect of the relevant companies, on the basis of a methodology set by Mr Norman, to which I will refer below. Mr Priestley submitted that Messrs Satusky and Atra were forthright witnesses and that it was not put to either witness that they had any reason to be other than fully frank and honest in their evidence and there is no basis for such a finding. Mr Afshar accepted in oral submissions that Mr Atra’s evidence should be accepted, subject to his acknowledgement as to limitations to his memory of events (T664). I generally accept that Messrs Satusky and Atra did their best to give accurate evidence, with the qualifications that they had limited direct knowledge of the arrangements in issue, much of their understanding of those arrangements was derived from what they were told by Mr Norman, and their recollections were inevitably affected by the passage of time and the disputes that have now developed between the parties, in which they are aligned with the Norman Parties.

13. The Coyte Parties relied on Mr Coyte’s affidavits dated 10 December 2014 and 30 March 2016 filed in the Coyte Proceedings. Mr Afshar submits that the Court should accept Mr Coyte as a witness of truth and should prefer his evidence over Mr Norman’s wherever their evidence is in conflict. Mr Priestley submitted that Mr Coyte was a defensive witness, who made concessions about a number of matters that he did not perceive to be important, but his insistence that he believed that Mr Norman had “authorised” the transfer of the relevant clients and client revenues in July and August 2012 did him no credit. Mr Coyte’s evidence generally seemed to me to be more consistent with the documentary evidence and the objective probabilities than Mr Norman’s evidence, and Mr Coyte generally did not seek to advance his case by self-serving evidence of lengthy conversations in the manner adopted by Mr Norman. Nonetheless, it seems to me that Mr Coyte’s evidence, particularly when under vigorous cross-examination, was also affected by the fact that he has real personal interests at stake in the proceedings. Little ultimately turns on Mr Coyte’s credit, given the extent to which the Norman Parties’ case turns on Mr Norman’s oral evidence of conversations, the fundamental difficulties with Mr Norman’s credit, and the extent of contemporaneous correspondence which is largely consistent with the arrangements for which Mr Coyte contends.

14. The Coyte Parties also relied on Ms Bloomfield’s affidavit affirmed 17 November 2014. Mr Afshar submits that Ms Bloomfield’s evidence, especially relating to instructions from Messrs Coyte and Norman to separate the clients, should be accepted. Mr Priestley submitted that Ms Bloomfield was a sufficiently disinterested witness, although her memory of matters beyond the words of her affidavit was not good, and her insistence that she considered she had proper authority to use Mr Norman’s signature on documents effecting transfer of clients was unimpressive. I am conscious that Ms Bloomfield has both business and family connections with Mr Coyte. I generally accept that she did her best to give accurate evidence, with the qualifications that she also had limited direct knowledge of the arrangements in issue, and her recollection was also inevitably affected by the passage of time and the disputes that have now developed between the parties. I generally accept her evidence as to the identification of Mr Norman’s and Mr Coyte’s clients, and I do not consider that Mr Priestley’s criticism of her use of electronic signatures was well-founded, where that practice had plainly previously been authorised at least by Mr Norman for his convenience.

15. The Coyte Parties also relied on the affidavit of Mr Scorer sworn 29 March 2016 in the Scorer Proceedings. Mr Afshar submits that Mr Scorer’s evidence should be accepted and preferred over Mr Norman’s and Mr Mazzoni’s evidence. Mr Priestley submitted that Mr Scorer was a particularly defensive witness, and submits that his justification in cross-examination for diverting broking client income from CCS to United Nominees did nothing to deflect the proposition that the conduct was wrongful. There are difficulties with Mr Scorer’s evidence, arising in part from his willingness to divert monies due to the Centre Capital Entities to United Nominees, and I approach his evidence with caution.

16. The Coyte Parties also relied on the affidavit of Mr Meakin sworn 30 March 2016 filed in the Coyte Proceedings. Mr Meakin was not cross-examined and no issue arises in respect of his credit.

Background facts

20. I will initially set out the facts that are primarily relevant to the Coyte proceedings. I have been assisted in this respect by a helpful chronology prepared by Mr Priestley and the chronology contained in Mr Afshar’s closing submissions. Although some of these facts are disputed, I will not seek to resolve such disputes unless they have relevance to the outcome of the proceedings.

21. Mr Norman and Mr Coyte are both financial planners. In about 2001, Mr Norman was a co-founder of the Piccadilly Financial Group, which provided accounting and financial services to retail clients (Norman 22.10.14 [6]). Mr Coyte, who Mr Norman had known at high school, joined Piccadilly Financial Group as a client service trainee in 2002 or 2003 (Norman 22.10.14 [7]). Mr Coyte ceased employment with the Piccadilly Financial Group in 2004 and moved back to Newcastle (Norman 22.10.14 [8]). CCPL was incorporated in August 2004, as a vehicle through which Mr Coyte provided financial advisory services and was, it appears, the trustee of the Blooms Discretionary Trust (Coyte 10.12.14 [11]). Mr Coyte was CCPL’s sole director and a business name “Centre Capital” was then registered. Mr Norman’s evidence was that he was involved with establishing CCPL, while he was still engaged with the Piccadilly Financial Group. I do not consider it necessary to reach a finding as to that matter, although I note that Mr Norman did not then hold an interest in CCPL or the trust, and neither party suggested that course was taken to conceal any involvement of Mr Norman with CCPL from Piccadilly Financial Group. Mr Norman also gave evidence of several conversations in 2004 and 2005 (Norman 13.11.15 [7]–[9]). I do not accept his account of these conversations, by reason of the issues concerning the recollection of oral conversations that took place many years ago, and the issues affecting Mr Norman’s credit specifically, to which I have referred above. I am also not persuaded by Mr Norman’s evidence that there was discussion at this time of a “client base share” or a 2.5 times multiple, still less that any agreement was then formed as to whether Mr Coyte and Mr Norman would need to agree on any client list, as distinct from retaining their own clients as a matter of fact, if they were to separate their businesses in the future.

22. It is common ground that a heads of agreement was entered into by Mr Norman and Mr Coyte in early 2005 (Norman 13.11.15 [9]) although that agreement could not be located and was not in evidence. CCN was incorporated and Mr Coyte was appointed as a director and secretary of it in March 2005 (Norman 22.10.14 [24]–[25]) and the Centre Capital (Newcastle) Unit Trust was established in March 2005, with 200 units initially being held by CCPL, 100 units by United Nominees and 100 units by another adviser working in the business, Mr Clint Christoff. Mr Christoff’s units in the Centre Capital (Newcastle) Unit Trust were subsequently redeemed in mid-2008 with the result that CCPL then held 200 units and United Nominees held 100 units in that Trust.

23. Mr Norman was appointed a director of CCPL on 30 May 2005 and on 31 May 2005 the Mutual Fund was established. The 700,000 units in the Mutual Fund were initially issued to a company associated with Mr Norman, Norman Investment Partners Pty Limited (“NIP”) and a further 300,000 units in the Mutual Fund were later issued to Blooms (Norman 22.10.14 [15], [17]; Norman 13.11.15 [12]). It is common ground that the allocation of units in the Fund was subsequently changed to 750,000 units held by NIP and 250,000 units held by Blooms (Coyte 10.12.14 [25]). Mr Norman left the Piccadilly Financial Group in late 2005.

24. From late 2005 until 2008 Messrs Norman and Coyte provided financial planning services to their respective clients and received commissions or fees, whether from the clients or from product issuers, on an upfront basis or as trailing commissions referable to a percentage of either the amount of the original investment or the total value of the portfolio. Until early 2008, Messrs Coyte and Norman provided such services under an Australian financial services licence held by an entity known as PIS, and those services were provided under the Australian financial services licence of CCS from early 2008. The Centre Capital entities operated a separate single bank account and occupied office space at Belmont near Newcastle. Mr Christoff worked in the business as a client adviser, and other office staff, including Ms Bloomfield, provided support services. CCS was incorporated in December 2006, initially with Mr Scorer as its director and subsequently with Messrs Norman and Coyte as its directors. CCS held an Australian financial services licence under Chapter 7 of the Corporations Act. Mr Scorer provided broking and underwriting services to clients.

25. A new Heads of Agreement (“2007 HOA”) (Ex C5, CB 1278) was signed and dated 1 July 2007 and superseded the 2005 version of that agreement. It is common ground that the primary purpose of the agreement was for the provision of financial advice and services (Coyte SOC [5]–[6]; Defence [5]–[6]). The 2007 HOA provided, inter alia, that it was proposed that each respective individual was to “retain their own business” and specified the process for termination of “this Joint Venture Agreement”, namely that six months’ notice was to be given to the other party and that “[e]ach person will retain their own clients” and, if one party wanted to sell his clients, then the other party had the first right of refusal. The 2007 HOA also referred to the “[r]ecognition of responsibilities outside normal advising duties”, such that Mr Norman would be responsible for marketing, referral sources and lead generation and Mr Coyte would be responsible for office and business administration, although that reference was framed as a statement and not as an obligation. The 2007 HOA also provided that, with the exception of management fees, director fees or any other remuneration method agreed by the parties, the profit of the venture would be distributed “along the joint venture percentages detailed above”.

26. The position as to “ownership” of clients reflected in the 2007 HOA is consistent with that stated by Mr Coyte in an email dated 17 December 2007 (Ex C6, CB 1628) to his and Mr Norman’s insurance broker, to the effect that Messrs Norman and Coyte:

“will also be authorised rep[resentative]s of Centre Capital Securities notwithstanding we are directors and therefore employees. The reason is a tax reason as we need to own our clients individually”.

Mr Norman appears to have received this email and did not then do anything to take issue with it, although he did not accept in cross-examination that the email was consistent with his understanding of the arrangements (T95–96).

27. Mr Norman accepted in cross-examination that his intention in entering the joint venture in 2005 was to preserve his clients and their revenue and for Mr Coyte to preserve his clients and his revenue and the “taxation position that we had going into it”, although he subsequently qualified that position (T60). Mr Norman’s evidence was also that his arrangements with Mr Coyte needed to adopt the same approach to clients as the arrangements made when Mr Norman left Piccadilly Financial Group. However, such a requirement would be satisfied by the approach of each adviser retaining his clients that is continued in the 2007 HOA, and did not require that an approach based on “client base share” for which the Norman Parties now contend should be adopted. There was no evidence of a transfer of clients by Mr Norman to any of CCPL, CCS or CCN or either of the trusts, and the balance sheets of those entities in evidence did not record a value for goodwill or other asset value that may have been referable to the clients, consistent with Messrs Norman and Coyte each retaining their own clients.

28. In January 2011, Mr Coyte advised Mr Norman that he intended to terminate the joint venture or at least that the parties should separate their businesses (Coyte 10.12.14 [77]–[78], Coyte 30.3.16 [75]). The parties agreed certain facts as to the termination of the joint venture between them, for the purposes of the proceedings, as follows:

“The Coyte Parties contend that Coyte gave notice of termination of the Joint Venture in January 2011 in accordance with the JV Agreement.  In the alternative, the Coyte Parties contend that Norman accepted that notice of termination of the Joint Venture was given to him in the period January 2011 to May 2011 and agreed to the termination of the Joint Venture. The Centre Capital Parties do not admit that notice was given but do not contend that any absence of notice affects the Coyte Parties’ case concerning termination in any way. The parties’ joint position is that notice should be accepted as having been given by Coyte in the period January 2011 to May 2011, but in any event, any late notice was accepted by Norman as having satisfied the notice requirements under the JV Agreement and the common intention was that the Joint Venture would be terminated. The Coyte Parties contend that the Joint Venture was terminated in accordance with the terms of the JV Agreement as at 30 June 2011.  The Centre Capital Parties contend that it was terminated only in the respects set out in their written and oral submissions.”

29. Notwithstanding the termination of the joint venture with effect from the end of June 2011, Mr Norman and Mr Coyte continued to work together for a further period, as I will note below, until Mr Coyte incorporated Shartru which acquired its own Australian financial services licence and thereafter commenced business in that entity, transferring many of the clients allocated to him at the Centre Capital business to that entity. I will address the circumstances of that transfer below.

30. Mr Coyte began working with a third party, Equiti Private Wealth, in May 2011 (Coyte 10.12.14 [79]) in anticipation of the termination of the joint venture. On 10 May 2011, following a conversation with Mr Norman, Mr Coyte sent an email (EX C5, CB1321) to Mr Satusky, who provided accounting services to CCPL and CCS, advising of a separation of the businesses of Messrs Norman and Coyte as follows:

“As of 1st July Michael [Norman] and I are separating our businesses and the joint venture that we established through Centre Capital will be finished. As per our agreement we will both retain our respective clients.

I will retain my clients and will continue to service them but in addition to this I will be taking an employed position as a Head of Advice with a growing financial planning company. I will be a representative of their AFSL and no longer operating under Centre Capital’s licence.

In regards to structure given my current set up with the Blooms discretionary trust which I originally ran the business through do I simply run the business of looking after my existing clients again through that structure? There will be revenue and expenses associated with this business. Also, need to keep in mind that I then distribute income to Blooms Investment Trust which is where I [have] losses due to negative gearing.

I am assuming the employed position will have no alternative but to be with me personally. Is it possible to be contracted rather than employed?”

31. Mr Satusky responded on the same day indicating that:

“If Blooms Discretionary owns your clients then you can continue using that entity to run your business.” (Ex C5, CB 1321)

32. These emails are important contemporaneous records of the then position between the parties, at least as understood by Mr Coyte, and in particular record Mr Coyte’s then understanding that the separation would take place on the basis that Messrs Coyte and Norman would each retain their existing clients.

33. On 25 May 2011, Mr Coyte sent a further email (Ex C5, CB 1323) to Mr Satusky and Mr Atra, which stated that:

“Warren with my new arrangement;

1.    Running my own business …

Should we organise a meet with MN, you and I to discuss what needs to be done with Centre Capital?”

34. Mr Coyte’s evidence is that he attempted, without success, to meet with Mr Norman in May 2011 (Coyte 10.12.14 [91]) and they met on 14 June 2011 to discuss his exit from the joint venture (Coyte 10.12.14 [92]). Mr Coyte’s affidavit exhibits a file note of that meeting (Ex C5, CB 1325–1326) which again appears to be a contemporaneous record of the then arrangements, at least as understood by Mr Coyte, and records:

“Transfer of clients.

-   Six months’ notice (done in Jan)

-   Each person will retain their own clients.

-   If one party wants to sell the other has first right of refusal.”

35. Mr Coyte in turn refers (Coyte 10.12.14 [93]) to a conversation with Mr Satusky, on 16 June 2011, concerning how the arrangement between himself, Mr Norman and Mr Scorer might run for the next six months, which contemplated that three bank accounts for CCS would be established referable to Mr Norman, Mr Coyte and Mr Scorer; CCS would distribute income to corporate vehicles associated with Mr Norman and Mr Coyte and to Mr Scorer’s trust; Blooms and United Nominees would contribute to the costs of running the office; and there would be specified arrangements as to CCN and shares in OEG. Mr Coyte’s account of that conversation is supported by a file note of that conversation (Ex C5, CB 1329) and is consistent with the fact that separate accounts known as the “R” and “B” accounts were subsequently established and monies deposited into them. Although Mr Satusky’s evidence is that he remembers only a discussion concerning OEG shares at this time (Satusky 12.11.15 [11]), I am satisfied that the wider issues referred to in Mr Coyte’s evidence and his file note were also discussed.

36. Mr Coyte also gives evidence of a meeting with Mr Norman and a telephone conversation with Mr Scorer to discuss these arrangements on 22 June 2011. Mr Coyte’s file note of that meeting (Ex C5, CB 1330) records, in relation to clients, “transferred MN clients to MN from RC” (Ex C5, CB 1336) and contains a diagram that describes the flow of funds from clients to each of the entities, and also refers to the payment of costs by Mr Coyte. The file note records, in respect of Mr Scorer, that:

“B[rendan] S[corer] HAS BUILT UP RELATIONSHIPS

POTENTIALLY NOT IN RETAIL SPACE

B[rendan] S[corer] WAGE $2K P[er] W[eek] (FIRST REVENUE AFTER COSTS)

COSTS+

PROFIT SPLIT.”

37. Mr Coyte’s evidence (Coyte 10.12.14 [96]–[97]) is that the client lists of Messrs Norman and Coyte were discussed and marked up at a further meeting in 22 June 2011 and agreement was reached between Messrs Norman and Coyte as to which clients would go with each of them. Mr Coyte exhibited various client lists, described as “Agreed Client Lists”, to his affidavit (for example, Ex C5, CB 1341–1362; Ex C8). Mr Norman generally denied that evidence and Mr Priestley submitted that there is no reliable basis to find that these documents were given to Mr Norman on 22 June 2011, with the possible exception of Exhibit C8, which Mr Norman had conceded in cross-examination might have been given to him (T646). It seems to me that the cross-examination of Mr Coyte confirms that at least some of those documents were not produced or marked at that meeting since they were dated subsequent to that meeting (T518; T521).

38. Mr Priestley also submits that the file notes relating to this meeting do not record any lists being produced or discussed or any agreement being reached as to which clients would go to which adviser. Notwithstanding the vigour with which Mr Coyte was cross-examined as to this meeting, it seems to me that little ultimately turns on whether and to what extent client lists were agreed at this meeting, because the terms of the 2007 HOA provided for Messrs Norman and Coyte to retain their respective clients on termination of the joint venture, and who were clients of each of them is a matter that can be determined objectively rather than by any further agreement between them. No doubt, the practical implementation of the termination of the joint venture would have been facilitated if Messrs Coyte and Norman could agree that question between themselves, but the client retention contemplated by that agreement did not depend upon any agreement by Mr Norman that a person was a client of Mr Coyte, where that was the fact, or vice versa. That is a matter of considerable significance, because the Norman Parties’ case is, in substance, that Mr Norman had not agreed that any particular clients were to be transferred to Mr Coyte, and no substantial attempt was made to establish that the clients that were transferred to Mr Coyte and Shartru were not, objectively, Mr Coyte’s clients.

39. As Mr Priestley points out, Mr Coyte accepted that it was noted at this meeting that the dollar value of funds under management leaving with him was approximately $13,000 per month, and this broadly correlates with the figure that Mr Norman says was discussed at a further meeting which Mr Norman says occurred on 27 June 2011, to which I will refer below. There may be a question as to whether the two figures include all revenue, but a correlation between them does not, in any event, advance Mr Norman’s claim that agreement was reached at this point that Mr Coyte would take a 25% share of client revenue rather than taking his clients and the revenue derived from his clients as the 2007 HOA provided.

40. On 22 June 2011, Mr Coyte sent Mr Satusky an email that was copied to Mr Norman (Ex C5, CB 1363) which stated:

“As discussed recently with Michael [Norman] he has come up with the following for the CCN shares and mutual fund units … The value of the CC Mutual fund units get valued from a practical perspective this will include …

[Mr Norman] said that I effectively sell my units for the value now which will include a cash value now.”

41. Mr Coyte’s evidence is that, after either the 14 June 2011 or 22 June 2011 meeting, Messrs Norman and Coyte went to the Belmont Golf Club and Mr Coyte suggested to Mr Norman that Mr Norman “… should look to sell your clients to Clint [Christoff] and myself on some sort of vendor finance arrangement” (Coyte 10.12.14 [109]). Mr Norman did not take up that suggestion.

42. On 27 June 2011, Mr Satusky sent an email to Mr Coyte (Ex C5, CB 1366) which stated that Mr Satusky had:

“Spoke[n] to Michael [Norman] and he would still like for CCN to hold [OEG] shares in a nominee arrangement for each trust. We can also look at adjusting unit holding from 1/7/11 to 1/3 each”.

Despite this email, Mr Norman denied in cross-examination that he had suggested that the OEG shares be held by CCN in trust for each of the parties (T254). I do not accept Mr Norman’s evidence in that respect. However, it does not follow from the fact that Mr Norman had made that suggestion that, as the Coyte Parties submit, the parties had agreed that CCN would hold the OEG shares on trust for each of Messrs Coyte, Norman and Scorer, or their nominees. That email also suggested Mr Coyte attend the accountant’s offices for a meeting that afternoon.

43. The Norman Parties rely on a meeting held on 27 June 2011 and on the minutes of a board meeting of 27 June 2011 (Ex N3, CB 511) as giving rise to the “Further Agreement” on which CCPL and CCS rely in their Cross-Claim. I will address the evidence as to those matters in dealing with the claim as to the “Further Agreement” below.

44. Separate accounts to record revenue of Mr Coyte’s and Mr Norman’s clients, the R and B accounts, were established on or about 28 June 2011 (Ex N5, CB 1206, 1213). Mr Norman was aware of that process since he was a signatory to both those accounts.

45. By email dated 29 June 2011 (Ex C5, CB 1387), Mr Coyte advised Mr Morabito, a solicitor who was acting for CCPL and CCS, and Mr Satusky of his understanding of the separation arrangements, referring to a discussion with Mr Satusky and Mr Norman on 27 June 2011. The Coyte Parties rely on that email to support their claims under the pleaded “Termination Agreement” and I will largely address that email in dealing with those claims below. I should note, at this point, that that email also referred to arrangements that would apply between Mr Norman and Mr Coyte until the end of the calendar year, 2011, unless mutually agreed otherwise, which included that:

“A separate bank account will be established that will direct [Coyte] revenue to necessary trading vehicle.”

That email also noted that the parties needed to decide upon arrangements for the continuation of the professional indemnity policy and also referred to arrangements to share expenses. That email does not refer to the basis upon which the clients of Messrs Norman and Coyte would be split, or clients would be transferred out of the Centre Capital business, although that would not be surprising where the 2007 HOA provided for that position.

46. A facsimile to “Macquarie Wrap” dated 29 June 2011 instructed entities associated with Macquarie Group to transfer clients under Mr Norman’s adviser codes on the one hand and Mr Coyte’s and Mr Christoff’s adviser codes on the other to separate dealer codes and pay commissions to separate accounts (Ex C2; CB 1352–1356; Ex C3).

47. Mr Coyte ceased being a director of CCPL on 30 June 2011 (Norman 22.10.14 [44], Norman 13.11.15 [5], Coyte 10.12.14 [108]). At about this time, Ms Bloomfield transferred clients of Mr Norman and Mr Coyte to the relevant advisers (Bloomfield 17.11.14 [19]). Her evidence was that she had received a bundle of client lists from Mr Norman and Mr Coyte and was instructed to effect the changes to allocate clients to each of them in accordance with those lists (Bloomfield [18]–[19]). I have referred to Ms Bloomfield’s evidence above and, on balance, I accept her evidence in this respect. This step is a further significant indication of the parties’ then understanding of the separation arrangements.

48. On 18 August 2011, Mr Coyte sent an email to Mr Satusky and Mr Morabito following up on the preparation of a proposed separation agreement (Ex C5, CB 1392), which was never prepared.

49. On 20 December 2011, Mr Atra sent an email to Mr Coyte dealing with income and expenses for CCS and the Fund for the September 2011 quarter (Coyte 10.12.14 [150]; Ex C5, CB 1517) which was based on an income split of 75%/25% in favour of Mr Norman and Mr Coyte respectively and an expense split of 50%/50%. It was apparent from Mr Atra’s cross-examination that the approach adopted in this email was derived from instructions that he had been given by Mr Norman. The email emphasised the commercial consequence of the agreement which the Norman Parties claim that Mr Coyte had reached with Mr Norman, when the joint venture was terminated, such that he would receive a quarter of the income and bear half of the expenses. As will emerge below, I do not accept that such an agreement had been reached.

50. Mr Coyte’s evidence is that he spoke to Mr Atra after he received that email (Coyte 10.12.14 [151]) and he then emailed a response to Mr Atra’s email, on the same day, noting that:

“Buddy this is so far off the mark it is not funny. I have attached the actual rec[onciliation] which is nearly all but done for your info[rmation].

The income is not divided according to [the] split you have suggested. My income is mine and [Mr Norman’s] is his.” (Ex C5, CB 1517)

51. Mr Coyte’s evidence (Coyte 30.3.16 [58]) is that, after receiving the email from Mr Atra, he also called Mr Norman and said:

“my clients were my clients. Buddy is preparing the accounts based on incorrect information …”.

52. Mr Coyte’s evidence (Coyte 30.3.16 [42]) is also that, on 22 December 2011, he had a further conversation with Mr Norman to the effect that:

“the reconciliation that the accountants have sent is incorrect. We have divided the clients along ownership and my clients are my clients and your clients are yours”.

Mr Coyte subsequently maintained that position in several subsequent communications. Mr Coyte’s evidence (Coyte 10.12.14 [152]) is that, on 4 January 2012, he had a conversation with Mr Norman, in which he said that:

“My clients are mine. We agreed on how those clients are to be separated. We also agreed how the expenses were to be apportioned”.

Mr Coyte also refers to a conversation between them on that date in his evidence in reply (Coyte 30.3.16 [43]).

53. I pause to note that, while I have addressed the question of Mr Coyte’s credit above, the basis on which clients were to be allocated on termination of the joint venture was established by the 2007 HOA, unless that agreement was varied by a further agreement between Mr Norman and Mr Coyte as the Norman Parties contend. The parties’ agreement as to that matter does not depend on either establishing that they later reasserted that position, although subsequent conduct may be relevant to establishing the existence or non-existence of the oral variation for which the Norman Parties contend.

54. By email dated 13 February 2012, Mr Coyte emailed Mr Atra, with copies to Mr Norman, Mr Satusky and Mr Mazzoni (who had by then began to assist Mr Norman), setting out his understanding of the terms on which the current arrangement that had been in place since 1 July 2011 would continue. The Coyte Parties rely on that email for their claim under the “Collaborative”, said to be embodied in that email, and I will address that email in dealing with that claim below.

55. There were references in May 2012 and June 2012 to Mr Coyte’s intention to commence business in a new entity which would hold its own Australian financial services licence (Ex C6, CB 1765–1766). Mr Coyte gives evidence of a meeting between himself and Messrs Norman, Mazzoni, Satusky and Atra on 30 March 2012 or 10 May 2012 (Coyte 10.12.14 [161]) at which he indicated concerns as to Mr Norman’s behaviour and handed over a document recording his “issues” with Mr Norman (Ex C5, CB 1534).

56. On 2 June 2012, Mr Coyte emailed Mr Mazzoni reconciliations for the year ending June 2012 and other documents (Ex C5, CB 1401) and, on 3 July 2012, Mr Coyte sent another email to Messrs Mazzoni, Satusky and Atra attaching worksheets and reconciliations (Ex C5, CB 1405) which claimed an amount of $24,992.38 was payable to Blooms. That claim is pursued in these proceedings.

57. Mr Norman gave evidence, in his affidavit, of a meeting on 5 June 2012 at the office of Messrs Satusky and Atra in Sydney and also relied on minutes of a purported meeting on that date. In cross-examination, Mr Norman varied that evidence to say that he thought the meeting at the accountant’s offices took place a week before, and in late May or early June 2012 (T274). Mr Coyte recalls that a meeting took place earlier in June 2012, although there is disagreement as to what took place at that meeting. I am not persuaded that Mr Norman attended the meeting at Messrs Satusky’s and Atra’s office, where his phone records indicate he was not in Sydney on that date. There is also an issue, which the evidence is not sufficient to resolve, as to the date of creation of those minutes, and as to whether an amount referred to in those minutes was paid by the Centre Capital entities to Mr Coyte as a loan. Although I recognise that Mr Atra’s evidence provides some support for the latter proposition, I do not understand the relief sought to address that amount and it is not necessary to determine that issue.

58. On 22 June 2012, Mr Norman removed Mr Coyte as a director of CCS (Coyte 10.12.14 [127]) and he was also removed as signatory of the bank accounts at about this time. Mr Mazzoni wrote to Mr Coyte on that date advising that:

“Further to this morning’s declined request on behalf of Michael Norman to transfer $32,136 from the Centre Capital Portfolio Account to Centre Capital Mutual Account,

Michael Norman as sole shareholder of Centre Capital Securities Pty Ltd feels it has become necessary to give Notice Terminating your Directorship with immediate effect as per the Attached Minutes of meeting of shareholders”. (The document attached to that email does not correspond to the manner in which it is described in the email) (Ex N3, CB 707)

The explanation of the reason for Mr Coyte’s removal as a director of CCS in that email is not consistent with Mr Norman’s affidavit evidence of the reasons that he removed Mr Coyte as a director of the companies, namely that he removed Mr Coyte as a director of the companies because of his “poor conduct and management” and because Mr Coyte had made unauthorised payments to Mr Scorer and Mr Coyte and because of other “unprofessional conduct” (Norman 13.11.15 [25]).

59. Also on 22 June 2012, Mr Coyte wrote to Macquarie Bank requesting that it implement a “temporary freeze” on the payment of commissions for his advice account (Ex N3, CB 710). Mr Norman’s evidence is that that email was sent without his authority (Norman 13.11.15 [158]). Given the findings that I reach below, there was no requirement for Mr Norman’s authority for that email, since it related to commissions in respect of clients that were, in fact, Mr Coyte’s clients and were, by the terms of the 2007 HOA, allocated to Mr Coyte on termination of the joint venture.

60. On 5 July 2012, Mr Coyte sent emails to his clients seeking their authority to transfer their accounts with him to Shartru (Ex N4, 865). Mr Coyte informed those clients of his intention to join Shartru and those clients executed authorities for their affairs to be transferred to Shartru (CB 1419–1503). An issue was raised in Mr Coyte’s cross-examination as to whether aspects of Mr Coyte’s approach to his clients were misleading, and Mr Priestley submitted that the reference to a “change of name” in the title of an earlier email to Mr Coyte’s clients was misleading. However, the text of the email made clear that Mr Norman and Mr Coyte were separating their businesses and that Mr Coyte’s two administrative staff, Ms Bloomfield and Ms Bunting, were embarking upon a “new venture” under the name Shartru. It may be that the reference to a change should be understood as a change of name of Mr Coyte’s business, and not a change of name of Centre Capital’s or Mr Norman’s business (Ex N4, CB 868ff) and, even if that is not the case, the email made clear what was occurring. A further email dated September 2012 to clients also made clear that the “new name” related to the new entity, Shartru (Ex N4, CB 869).

61. On 26 July 2012, an authority for the transfer of Centre Capital’s XPlan user data, recording client information, to Shartru was sent to IRESS Market Technology, purportedly signed by Mr Norman (Ex N3, 735). Mr Norman’s evidence is that he did not authorise that transfer (Norman 13.11.15 [174]). However, the evidence as to this issue generally is somewhat unclear, since it appears to have been contemplated that Shartru would provide services to Centre Capital, and the provision of user data to Shartru would have been necessary for it to do so. Correspondence relating to the transfer of client information from the Centre Capital XPlan site to Shartru was also copied by email to Mr Norman, although he denies that he received it, and there is evidence that Mr Norman generally did not respond to email communications. Also on 26 July 2012 and 30 July 2012, client transfer authorities were sent to Macquarie Bank and MLC for the transfer of clients of Mr Coyte to Shartru, signed by Mr Coyte and purportedly signed by Mr Norman; Mr Norman denies that he signed those documents (Ex N3, CB 746; Norman 13.11.15 [182]–[183], [187]).

62. In early July 2012, Mr Coyte instructed administrative staff to prepare a reconciliation of Centre Capital’s accounts and expenses for the financial year 2012 and he emailed that reconciliation to Mr Mazzoni, and his evidence is that he provided that reconciliation to both Mr Norman and Mr Mazzoni (Coyte 10.12.14 [121]–[122]; Ex C5, CB 1405–1418).

63. On 20 August 2012, a member of Centre Capital’s administrative staff sent an email to Australian Executor Trustees attaching change of adviser information for Mr Coyte; Mr Norman’s evidence is that he and Mr Coyte had not agreed on the split of the Centre Capital client base at that time (and, so far as Mr Norman’s evidence goes, he appears never to have agreed to the client split) (Norman 13.11.15 [188]; Ex N3, CB 771). Mr Norman’s position here again highlights a substantial difficulty inherent in the structure of the Norman Parties’ case, so far as that case is that Mr Coyte would never take advantage of the allocation of his clients to him on termination of the joint venture, as contemplated by the 2007 HOA, so long as Mr Norman did not agree who those clients were. I do not accept that proposition, so far as the identity of those clients is a question of objective fact and not a matter that requires agreement by Mr Norman.

64. On 24 August 2012, Mr Coyte sent another reconciliation to Mr Mazzoni (Ex C5, CB 1504) which claimed a payment of $8,202 referable to trading performance for July 2012. Mr Coyte subsequently required payment of several further amounts that were claimed to be outstanding by email dated 10 September 2012 (Ex C5, CB 1505).

65. On 25 September 2012, Mr Satusky sent Mr Coyte an email reflecting Mr Norman’s understanding of how the valuation of the client base would be calculated under the Further Agreement for which the Norman Parties contend (Coyte 10.12.14 [163]; Ex C5, CB 1540–1541). That email depended on Mr Norman’s instructions as to that agreement and, as will emerge below, I do not accept that such an agreement was established. On 30 September 2012, Mr Coyte sent Messrs Norman and Mazzoni another reconciliation for the quarter ended 30 September 2012 (Ex C5, CB 1506–1515) which claimed an amount of $18,492.35 as owed to Mr Coyte for that quarter.

66. Despite the difficulties that by then existed in their business relationship, it appears that, in the latter part of 2012, Messrs Norman and Coyte entered into a form of cost sharing arrangement, under which the Centre Capital Parties agreed to share back office costs with Shartru. That agreement appears to be reflected in an email dated 4 October 2012 from Mr Mazzoni to Mr Coyte (Ex C5, CB 1516) which stated that:

“Michael [Norman] will be available early next week to sort out the Office service agreement.

He has asked me to pass onto you that in principle he has no objection to the base plan for a front office service and what we are currently doing is working our way through the various other costs to reduce duplication … eg. XPLan, telephony and internet services”.

67. There is a further dispute between the parties as to the manner in which client records were uploaded to XPlan and as to access issues which appear to have affected the Centre Capital parties for a short period. That issue is incapable of affecting the outcome of these proceedings, if (as I have held) Mr Coyte’s rights to retain his clients arose from the 2007 HOA, and there is no evidence to support any separate claim for damages in this respect. I therefore do not consider it necessary to determine that dispute.

68. On 22 October 2012 and 20 February 2013, Mr Atra sent Mr Coyte two invoices setting out amounts claimed by the Centre Capital Parties (Atra 12.11.15, [9C]–[11]). Mr Atra accepted in cross-examination (T351, 353) that he prepared those invoices based on reconciliations that he had prepared which were in turn based on figures “roughed out” by Mr Norman. The invoices do not establish the correctness of the approach reflected in them.

Whether the joint venture agreement was terminated and allocation of clients on termination

69. There was some common ground between the parties as to the issues that arise in the proceedings. The parties agreed that the first issue in the Coyte Proceedings was whether the 2007 HOA was terminated by agreement. Mr Coyte contends, and Mr Norman denies (Coyte SOC [9]; Defence [9]) that, on 29 June 2011, the 2007 HOA was terminated by mutual consent of Mr Coyte and Mr Norman and in accordance with its terms. I have referred in paragraph 28 above to the parties’ agreement as to aspects of that termination. The parties were in disagreement as to whether a further issue arose as to whether the termination provisions set out in the 2007 HOA governed the termination of the joint venture between Mr Norman and Mr Coyte, in particular, as it related to their clients and their income.

70. It was common ground that, in construing a written contract, the court should look to its objective background, including its genesis and aim, and the common assumptions of the parties: DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429; Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 185 ALR 152 at [11]. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40], a unanimous High Court observed that:

“This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.” [Citations omitted]

71. That approach was confirmed in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 at [35] where French CJ, Hayne, Crennan and Kiefel JJ observed that (citations omitted):

"[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'.”

The High Court also reviewed the principles of construction in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 325 ALR 188 (at [46]–[52], [59]) and I proceed on the basis that construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances.

72. I have referred to the terms of the 2007 HOA (Ex C5, CB 1278) in paragraph 25 above. That agreement provided, inter alia, that:

“Centre Capital is a vehicle designed to facilitate the joint venture between Michael Norman and Robert Coyte. The centre Capital Mutual Fund will be the vehicle in which the joint venture will be facilitated.

The Australian Financial Services Licence will be held by Centre capital Securities Pty Ltd which in turn is fully owned by the Centre Capital Mutual Fund.

It is proposed that each respective individual is to retain their own business. …

The Centre Capital Mutual Fund will be a fixed unit trust of which Centre Capital Pty Ltd will be the trustee company. Initially, the unit trust will issue 1,000,000 units of which [NIP] ATF Norman Investment Partners Trust will hold 750,000 and [Blooms] ATF Blooms Discretionary Trust 250,000. More units may be issue if both parties agree.

In the event of Death or Total and Permanent Disablement the non affected party has the option to:

●   Purchase the other’s goodwill at 2.5 times which would be payable over 5 years (50% of the attributed revenue over a 5 year period).

…

To terminate this joint venture agreement the following process is to be followed:

●   Six months notice needs to be given to the other party.

●   Each person will retain their own clients.

●   If one party wants to sell their clients then the other party has a right of first refusal. …

The purpose of this agreement is to provide a ‘All In’ vehicle in which all parties have an equity participation as per the above percentages. With the exception of management fees, director fees or any other remuneration method agreed by the parties the profit of the venture will be distributed along the joint venture percentages detailed above.” [emphasis added]

73. Mr Norman was cross-examined as to the fact that a Separation Deed which he executed when he left the Piccadilly Financial Group (Ex C1) recorded that he would retain his own clients (T188–189). Mr Priestley submits, and I accept with a qualification, that an earlier agreement between Mr Norman and a different party could only be of limited use in interpreting the 2007 HOA. The qualification is that the arrangement between Mr Norman and Piccadilly Financial Group emphasises that Mr Norman was familiar with an approach by which a financial adviser brings clients to a business, and takes those clients with him or her if he later leaves that business, and presumably understood the advantage of that approach to an adviser with a strong client base. Mr Priestley also points out that a deed that governed the transfer of clients from PIS (Ex N7), signed by Mr Coyte, referred to the transfer of clients of PIS to CCS. However, that seems to me to reflect the fact that, as Mr Priestley recognised in submissions, clients of Messrs Norman and Coyte could be characterised as clients of the adviser, or of the business, depending on the context.

74. Mr Afshar submits that the Court should find that, under the 2007 HOA, the parties’ respective unit holdings were to apply only to the distribution of profit and not to clients, and that that is the effect of the words, “… the profit of the venture will be distributed along the joint venture percentages detailed above”. Mr Afshar submits that clients were to be distributed in accordance with the termination provision set out in the JV Agreement, namely that, “each person will retain their own clients”. Mr Afshar also submits that the reference to the purchase of goodwill at a 2.5 times multiple of client income referred to in the 2007 HOA applies only in the event of “Death or Total and Permanent Disablement” of one of the parties; there is no basis for reading the words “2.5 multiple” or the concept of a “client base share” into the 2007 HOA; and the words “equity participation” do not assist the Norman Parties where a multiple could have been included if it was intended to apply. Mr Afshar also submits that the 2007 HOA covers all clients, not only the clients the parties had prior to 1 July 2007, absent limiting words. Mr Afshar submits that the consequence of these matters is that each of Messrs Norman and Coyte were to retain their clients on termination of the joint venture established under the 2007 HOA.

75. Mr Priestley submits that commissions and fees were (at least in the first instance) paid to CCS and pooled, and that expenses were then paid, and the parties subsequently received distributions in accordance with their unit holdings (at least prior to the termination of the 2007 HOA) to submit that the clients were not treated as belonging to any adviser for the purpose of the income and expenses of the business. Assuming the correctness of that proposition, it seems to me to take the question of the allocation of the clients on termination of the 2007 HOA no further. There is no inconsistency between the existence of such arrangements, for administrative purposes, and the agreement recorded in the 2007 HOA that each adviser was to retain his own clients on termination of the 2007 HOA.

76. Mr Priestley submits that the parties had not provided for any means of identifying new clients of the business as belonging to one adviser or another in any meaningful way, either in the 2007 HOA or otherwise, and submits that Mr Coyte accepted this in cross-examination (T399) although he did not accept that this meant that clients could not be allocated (T511). However, as Mr Afshar pointed out in closing oral submissions, the Norman Parties’ case that the parties had agreed on a revenue figure of $13,000, as reflecting Mr Coyte’s clients at the point of termination of the joint venture, itself implies that Mr Coyte’s clients had then been identified, at least to the extent necessary for such a calculation (T676). The business also maintained records that would allow an attribution of clients to each of Messrs Norman and Coyte and “Confidential Client Data Forms” exhibited to Mr Mazzoni’s affidavit dated 26 May 2016 record the adviser for each of the relevant clients. With one exception (as to which the parties took no issue), all of the clients whose forms and details appear in that exhibit were Mr Coyte’s or Mr Christoff’s and not Mr Norman’s clients. The evidence indicates that there would largely be no difficulty in the allocation of clients to Mr Norman or Mr Coyte, where that allocation was recorded in client records and also in product issuer records. To the extent that any issue might arise as to the allocation of clients who were previously serviced by Mr Christoff, that does not seem to me to prevent the 2007 HOA having effect in accordance with its terms. If agreement could not be reached between the parties as to that allocation, then any dispute could be determined in an appropriate forum.

77. Mr Priestley submits that the parties should not be found to have agreed that upon dissolution either party could necessarily take clients simply by reference to which adviser had been nominated on client data forms or statements of advice, and that the statement in the 2007 HOA that each person will retain their own clients must be interpreted consistently with this, and with the final paragraph that expresses the purpose of an "all in" vehicle that fixes equity participation. It seems to me that the statement that each of Messrs Norman and Coyte will retain their own clients is clear in its terms, although the matters relevant to the allocation of clients on termination are not necessarily limited to those identified by Mr Priestley, and there is no inconsistency between an “all in” vehicle while the arrangement continues and an allocation of clients to the respective adviser when it terminates. Mr Priestley also submits, but I do not accept, that to allow either party to take a greater share of revenue with them on termination than their equity share would be inconsistent with a sensible commercial construction of the written agreement: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109. That submission seems to involve an impermissible substitution of what the parties might have agreed for what they did agree in the terms of the 2007 HOA.

78. For these reasons, I find that the 2007 HOA was terminated with effect from the end of June 2011, and that, on termination of the 2007 HOA, Mr Coyte was entitled to retain his own clients, as identified objectively, and without the need for Mr Norman’s agreement as to their identity. That finding overlaps with the determination of further issues that I will address below.

Whether the pleaded “Termination Agreement” was entered into

79. Paragraph 9 of the Coyte Parties’ Statement of Claim pleads that a term of the Termination Agreement was that Mr Coyte would sell his “stake” or unitholding in the Mutual Fund to Mr Norman for a value agreed at $17,369. The parties identified a further issue as to whether a further “Termination Agreement” for which the Coyte Parties contend was entered in the terms pleaded or at all; and whether, if an agreement in accordance with the “Termination Agreement” was reached with respect to the value of Mr Coyte’s interest in the Mutual Fund, the dollar value of that interest was agreed and there was an agreement that that interest be sold to Mr Norman (Coyte SOC [9]).

80. This issue largely turns upon whether a separate “Termination Agreement”, beyond the provisions for termination of the joint venture in the 2007 HOA, arose from earlier conversations, the outcome of which Mr Coyte summarised in his email dated 29 June 2011 (Ex C5, CB 1387) to which I referred in paragraph 45 above. By that email, Mr Coyte advised Mr Morabito, a solicitor acting for CCPL and CCS, and Mr Satusky of his understanding of the separation arrangements, referring to a discussion with Mr Satusky and Mr Norman on 27 June 2011 and recording that the arrangements would be documented by Mr Morabito as indicated by Mr Norman, although that did not in fact occur. Mr Coyte’s evidence is that his email dated 29 June 2011 summarised an agreement reached at a meeting on 22 June 2011 between Messrs Norman, Coyte and Scorer to provide financial advice and services “in concert” until the end of the 2011 calendar year. That email also noted that Mr Coyte would be selling his stake in the Mutual Fund to Mr Norman for the market value of the cash, the value of the holding/loans to CCN or CCS and the value of assets including equipment, and that account would need to be taken for future GST liabilities and a $50,000 fee from OEG shortly to be received by CCN. The email stated that Mr Coyte would resign as a director from CCS and CCN would hold the parties’ respective shares in OEG “on behalf of our nominated vehicle” and, after the shares come out of escrow, the individual “can decide what to do with the shares without any detrimental effect to the other parties be it CGT or the like”.

81. That email also referred to an “agreement with Mr Scorer” set out in an email dated 24 June 2011 from Mr Scorer to Mr Coyte, which appeared below, although noting that Mr Norman was to discuss the wage component of that agreement with Mr Scorer. Mr Scorer’s email dated 24 June 2011 to Mr Coyte in turn set out his understanding of the “[g]o forward” of CCN as at 1 July 2011 which included that:

“After expenses, [Mr Scorer] gets $2,000 per week plus GST (ie the first $104,000 p.a. plus GST of income) to be taken by way of submitting a monthly tax invoice with his ABN, (subject to having sufficient funds in the bank account). This is his income not a loan …

After all expenses, [Mr Scorer’s] $104,000 p.a. (plus GST), [Mr Scorer] (or his nominated entity) [Mr Coyte] (or his nominated entity) and [Mr Norman] (or his nominated entity) share the balance whether it be cash, shares, options etc equally (one-third each).”

82. Mr Norman’s evidence was that he did not respond or agree to the email because he needed more advice from solicitors and accountants (Norman 22.10.14 [62]). That evidence does not sit comfortably with Mr Norman’s claim that the “Further Agreement” on which he relies had already been formed at this time and does not explain the continuing absence of any response, as distinct from a delay in a response while such advice was sought. Mr Priestley also submits that, so far as Mr Coyte relies on Mr Norman’s failure to respond to or contradict emails, Mr Norman rarely used emails and did not wish to receive email communications (T647). However, that was not Mr Norman’s explanation for his failure to respond to this email, which turned on the need for further advice as I noted above. I should also note that, while Mr Norman generally did not respond directly to emails, he appears in the latter part of the period to have communicated his views to others, particularly Mr Mazzoni, who in turn communicated those views to Mr Coyte.

83. In opening submissions, Mr Priestley submit that no agreement was reached between the parties at that time, so as to support Mr Coyte’s claim under a further “Termination Agreement”; that any agreement that may have been reached did not terminate the 2007 HOA; that there was no agreement as to the sale of the 25% stake in the Mutual Fund, although there was discussion as to the fact that the Coyte Parties would transfer their equity in the business in the near future; that no sum reflecting the shares in the Mutual Fund was agreed; and that there is no basis to conclude that Mr Norman personally agreed to acquire any share in the Mutual Fund from the relevant owner; although it was accepted, in later reconciliations as part of the separation process, that the amount of $17,369 should be included as compensation for relinquishing Mr Coyte’s share in the Fund in reconciling indebtedness. Mr Priestley also submits that the oral conversations alleged to have occurred about these matters did not constitute a final agreement and, to the extent that the alleged “Termination Agreement” was embodied in the email of 29 June 2011, the matters set out by Mr Coyte in that email do not establish a concluded agreement. Mr Priestley also submits that the price to be paid had not been determined or agreed and was still subject to valuation, and points out that the email expressly refers to Mr Coyte’s “understanding” of the arrangement and that the words “will be selling my stake” contemplate a future event, and the mechanism (for example, sale or redemption) and identity of the purchaser in a sale of the units had not been determined.

84. The Coyte Parties also allege, and the Norman Parties deny, that the “Termination Agreement” provided that CCN would acquire and hold in escrow a proportion of the shares in OEG on behalf of Mr Coyte or his nominee. The Coyte Parties seek a declaration that a holding of shares in OEG is held in escrow on behalf of Blooms. The Norman Parties deny that such an agreement was reached, on the basis that the discussions as to this matter also did not reach the point of agreement. Mr Priestley submits that the email of 29 June 2011 (Ex C5, CB 1388) refers to a “nominee agreement” to be established in the future and that no firm agreement had yet been reached. There is also evidence that Mr Coyte was not satisfied as to the treatment of the OEG shares in separation discussions at that time (Ex C6, CB 1657; T497). Mr Coyte also, fairly, accepted in cross-examination that he expected that the treatment of the OEG shares would have been the subject of a final separation deed (T496) which was ultimately not prepared.

152. The Norman Parties fairly conceded, in submissions, that diversion of income from the Centre Capital Group or corporate opportunities for the Group may have been permissible, and not in breach of statutory duty, had Mr Coyte made the companies fully aware of his intended actions and obtained authority from the companies. The Norman Parties also accepted that Mr Coyte would have a defence to the claim for breach of duty in diverting client income to the extent, but only to the extent, that it had been sanctioned, and contend that was limited to an income amount of $13,000 per month, although they then seek to retreat from that concession by suggesting that defence would be “questionable” absent the formal written separation agreement that had been discussed between the parties but not executed. That submission properly recognises that, as I have held above, the statutory duties apply within the scope of the relevant arrangement, which can be narrowed between the parties. Mr Priestley also submits that Mr Coyte has no defence to the claim for breach of duty in diverting income or corporate opportunities from entities within the Group over and above the amount of $13,000 per month. Mr Priestley recognises that Mr Coyte’s evidence in cross-examination was that he considered he had authority to transfer “his clients” (T567), and I have held above that Mr Coyte was correct in that view. Mr Priestley also submits that, by Mr Coyte’s evidence, he sought authority to transfer clients by reference to a particular list or lists (T566). As I have noted above, that was a practically sensible course but did not confine the authority that arose from the 2007 HOA.

153. Mr Priestley also submits that, although Mr Coyte maintained in cross-examination that he believed that Mr Norman had agreed to a transfer of clients by adviser allocation, not by reference to unit holding proportions, Mr Mazzoni had advised Mr Coyte to the contrary (presumably on Mr Norman’s instructions) on 1 May 2012, shortly before the transfer process began (Ex C6, CB 1764). Mr Mazzoni had no independent knowledge of that matter and his communication of Mr Norman’s position does not establish that it was correct. I have held above that the authority arising from the 2007 HOA did not depend on agreement between Mr Coyte and Mr Norman as to the identity of particular clients, where that was a matter of fact that was capable of objective determination.

154. I have reviewed the relevant legal principles in dealing with the claim for breach of, inter alia, s 182 of the Corporations Act in respect of Mr Coyte’s dealings with income derived from clients in the period prior to July 2012. This claim fails for the same reasons that that claim failed, primarily that the relevant duty was narrowed by the terms of the 2007 HOA. I should also note, for completeness, that Mr Priestley accepts that the conduct alleged against Mr Coyte in the period from July 2012 occurred after Mr Coyte had ceased to be a director of either CCPL or CCS. The Cross-Claimants seek to extend the duties owed by Mr Coyte beyond that point by contending that the preliminary steps toward the process of transfer of the relevant clients were taken while Mr Coyte was still a director, at least of CCS, although the factual basis of that proposition is not identified. The Cross-Claimants also seek to rely on an unpleaded case that Mr Coyte had access to client information as a responsible manager with CCS. The Cross-Claimants submit that a director’s duties as to conflicting opportunities may, in some circumstances, persist beyond his or her ceasing to be a director or officer of the relevant company. It is not necessary to address these matters, since I have held that the scope of Mr Coyte’s duties were narrowed such that they were not breached in any event.

155. The Cross-Claimants submit that the appropriate remedy in respect of this claim would be equitable compensation, quantified either by reference to the $157,000 per annum figure and again applying a multiplier of 2.5 or, in the alternative, by reference to the monthly commission fee found at the foot of the commission column in the table in Tab A to Mr Mazzoni’s affidavit. I have held above that the evidentiary basis for the $157,000 “estimate” and the 2.5 times multiplier have each not been established. I will address Mr Mazzoni’s alternative calculation below. This claim has not been established.

The alternative calculation based on Mr Mazzoni’s evidence

163. The Cross-Claimants alternatively submit that a number of individual clients that were transferred to Shartru and provided client authority forms to authorise that transfer were not the subject of any discussion or agreement as to that transfer between Messrs Norman and Coyte. This claim has the premise that agreement was reached between Messrs Norman and Coyte as to which clients would go with each of them at the meeting in 22 June 2011 to which I referred in paragraph 37 above, and that that agreement is reflected in the “Agreed Client Lists” annexed to Mr Coyte’s affidavit (to which I referred above), notwithstanding that Mr Norman denied Mr Coyte’s evidence of those matters. The Cross-Claimants rely on a list of the clients falling within that discussion or agreement contained in Tab A to Mr Mazzoni’s third affidavit sworn 26 May 2016.

164. There is a fundamental difficulty with this alternative case, such that it cannot succeed. Its essential premise, which I have rejected above, is that Mr Coyte’s retention of a client required that Mr Norman have first agreed that the client was Mr Coyte’s client, and not only that that was the fact. I have held above that the 2007 HOA provided for Messrs Norman and Coyte to retain their respective clients on termination of the joint venture, and that whether a person was a client of each of them was a matter that could be determined objectively rather than requiring any further agreement between them. The evidence as to the late June 2011 meeting does not establish that the discussion as to the identity of the clients to be transferred amounted to an agreement to vary, narrow or abandon the 2007 HOA, as distinct from a practical attempt to reach consensus as to its implementation. If a client was in fact a client of Mr Coyte, then he was entitled to retain that client under the 2007 HOA even if it was not identified as such in that discussion; conversely, if a client was not a client of Mr Coyte, then he was not entitled to do so even if the client was wrongly identified as such in that discussion. As I have noted above, the Norman Parties did not seek to establish that the relevant clients were not in fact Mr Coyte’s clients, and the client records indicate that the relevant clients were Mr Coyte’s clients, with the exception of one client as to whom the Norman Parties took no point.

165. Mr Coyte also pointed, in cross-examination, to a second difficulty with this alternative case, that it appears that Mr Mazzoni had not matched the names of clients’ superannuation funds to the names of clients (T568) and that clients might also have been “new business” engaged after the discussions of June 2011 (T569). Mr Mazzoni’s evidence in cross-examination was that he had checked whether a client’s superannuation fund was contained in the list attached to his affidavit (T315), but he appears to have proceeded on the basis that authority to transfer the superannuation fund associated with a client did not also constitute authority to transfer the client’s account. In my view, that approach is unduly technical, at least in the context of an informal discussion as to the identity of clients to be transferred, partly directed to individual clients and their closely held self-managed superannuation funds. It is scarcely conceivable that Messrs Norman and Coyte, still less the relevant client, would have contemplated a result that a client and his or her closely held self-managed superannuation fund would be managed by different advisers in different firms. A third difficulty with this alternative case is that it depends on the “Agreed Client Lists” annexed to Mr Coyte’s affidavit, where all parties now accept that some of those lists postdate the discussions of June 2011, and which do not provide a reliable basis for that case.

Claim against Shartru

166. The parties also identified a further issue in the Cross-Claim in the Coyte Proceedings as to whether the Third Cross-Defendant, Shartru, received monies with knowledge that they were received as a consequence of the alleged breaches (ASOCC [63]–[64]). The Amended Statement of Cross-Claim pleads a claim against Shartru that CCS lost the benefit of ongoing commission and other financial benefits to which it was or would become entitled in respect of the existing business investments of clients who were transferred to Shartru, or alternatively that CCPL lost the benefit of such commissions and other financial benefits; that Shartru with knowledge of specified matters had received income from clients that were transferred to it from CCS and thereby derived profits; and that CCS and CCPL have suffered loss or damage. CCPL and CCS also plead that a letter of demand was sent by their solicitors to Shartru, which has not accounted to CCPL or CCS in relation to the ongoing commissions and other financial benefits it has received.

167. Mr Priestley submits that the clients and client income in dispute were transferred such that the clients became clients of Shartru and their commission fees are now paid to that entity. Mr Priestley submits that, if the client income has been diverted to Shartru wrongfully, that wrongfulness was at all relevant times known to Mr Coyte and must also have been known to Shartru, where Mr Coyte was a director of that entity and a principal of its business. Mr Priestley submits that this would constitute knowing receipt of property disposed of in breach of the statutory fiduciary duty giving rise to a claim contemplated under the first limb of potential claims discussed in Barnes v Addy (1874) LR 9 Ch App 244; (1874) 43 LJ Ch 513. That result does not follow where the claimed breach by Mr Coyte has not been established.

168. Mr Priestley also submits that, because the Cross-Claimants are not in a position to precisely quantify these monies, the appropriate remedy would be an order that Shartru provide an account of them. I would not have accepted that submission, had the claim against Shartru otherwise been established, where the Cross-Claimants have not brought a claim for account of profits, the Court did not make orders for separate hearings of liability and quantum, and having regard to the matters to which I referred in paragraph 151 above.

The Scorer proceedings

169. The parties were in agreement as to the issues that arose in the Scorer proceedings, namely whether payments made to Mr Scorer as pleaded were made without the proper authority of CCN or CCS (SOC [13]–[21], [26]–[33]); whether United Nominees received monies with knowledge that they were paid without authority (SOC [36.10]); and whether the payments made to Mr Scorer as pleaded constituted a breach of statutory duties by Mr Coyte (SOC [45]).

170. I now turn to set out the pleaded claims and the applicable facts. By their Amended Statement of Claim filed in the Scorer proceedings, CCN and CCS seek orders that, relevantly, Mr Coyte pay them the amount of $112,500 with respect to the First and Second Payments, as defined. CCN and CCS also sought declarations under s 1317E of the Corporations Act that Mr Coyte has contravened ss 180, 181 and 182 of the Corporations Act. It may be that that relief is not pressed, since the corresponding declaration sought in the First Cross-Claim was not pressed; if it is pressed, it cannot be given, since such a declaration is only available in proceedings for a contravention of a civil penalty provision brought by the Australian Securities & Investments Commission. CCN and CCS also seek an order under s 1317H of the Corporations Act that Mr Coyte compensate them for the loss they or one or other of them has suffered in consequence of that contravention. They also seek an order that United Nominees pay CCS an amount equal to the total of all monies received by United Nominees by way of payment for tax invoices payable by third parties to CCS.

171. Before turning to the impugned payments, it is necessary to refer to the nature of Mr Scorer’s engagement by CCN and CCS. On 20 May 2008, Mr Norman sent an email to Mr Coyte (Ex N1, CB 99) stating that Mr Scorer’s “first 52K is a share of profit not a salary”. That approach is not reflected in the Adviser Employment Contract for Mr Scorer which was subsequently signed, although dated January 2008. In oral submissions, Mr Priestley submits that that email is relevant to Mr Coyte’s and Mr Norman’s understanding and shows Mr Norman’s belief that payments to Mr Scorer should not have been made. Mr Priestley also submits that it is unlikely that Mr Norman changed his mind as to that matter, although he recognises the possibility that the terms of the employment agreement may not properly record Mr Norman’s views (T645). It seems to me that it is not necessary to determine whether, as Mr Coyte contends and Mr Norman denies, Mr Norman later changed his mind, because Mr Norman’s subjective intent as to that matter is not relevant to the proper construction of the terms of the written Adviser Employment Contract with Mr Scorer, absent a claim for rectification of that contract.

172. Later in 2008, CCN, CCS and Mr Scorer signed an Adviser Employment Contract (Ex N1, CB 101) (although, as I noted above, it was dated January 2008) and Mr Scorer was appointed as authorised representative of CCS and was responsible for performing broking services for CCN (Norman 22.10.14 [54]; Norman 13.11.15 [35]; Coyte 30.3.16 [24]; Scorer 29.3.16 [19]). The Schedule to that agreement entitled Mr Scorer to the “first $52,000” per year “inclusive of superannuation (after expenses)”. Clause 2 of the Schedule to Mr Scorer’s Adviser Employment Contract in turn deals with specified expenses at paragraphs (a) to (d) which would be paid by the companies in the ordinary course of business. The text below the section dealing with costs states that:

“Common costs incurred with other entities of the Centre Capital group will be apportioned along the same percentages as revenue. These adjustments will be made at the end of the financial year before 30 June based on reasonable basis”. (Ex N1, CB 113)

Mr Norman’s evidence in cross-examination was that he attributed one third of the costs associated with CCS’s Australian financial services licence to CCN (T234). An issue arose, which it is not necessary or possible to determine on the evidence, whether such an allocation was properly founded.

173. Mr Scorer’s evidence was that the reference to “expenses” in brackets, in the paragraph that dealt with his salary, was a reference to out of pocket expenses such as “cost of cab fares, hotels…”. (T597). That question must, of course, be determined objectively and not as a matter of Mr Scorer’s (or Messrs Norman’s or Coyte’s) subjective understanding of the clause. In oral submissions, Mr Afshar also submits that the reference to “expenses” in the paragraph of the Adviser Employment Contract dealing with Mr Scorer’s salary is to out of pocket expenses, rather than to all business expenses of CCN (T677–678). I accept that submission, since it seems to me that the subsequent provision in that agreement for calculation of profit contemplates that general business expenses will be taken into account at that point, rather than prior to the payment of Mr Scorer’s salary; and a deduction of general business expenses prior to the initial payment would also be inconsistent with the concept of a salary in general usage, on which superannuation was to be paid, as distinct from a share in the net profit of a business as calculated after its ordinary business expenses. It is not necessary to determine the further question as to the extent of monies available to CCN, after deducting its general business expenses, on that construction of the Adviser Employment Contract.

174. On 24 June 2011, Mr Scorer sent an email to Mr Coyte which referred to a meeting on 23 June 2011 and listed the matters that Mr Scorer understood to have been agreed “on the ‘Go forward’ of Centre Capital Newcastle as at 1st July, 2011”. That email (Ex C5, CB 1388) records that:

“After expenses, Brendan gets $2,000 per week plus GST (ie. the first $104,000 pa plus GST of income) to be taken by way of submitting a monthly Tax invoice with his ABN (subject to having sufficient funds in the bank account) …”.

175. This email was sent by email and also by facsimile to Mr Norman on 29 June 2011 (Ex C6, CB 1654) (in a communication which I have addressed above) and there is no evidence of his then expressing disagreement with Mr Scorer’s summary of the position. As I noted above, Mr Priestley submits, so far as Mr Coyte relies on Mr Norman’s failure to respond to or contradict emails, that Mr Norman hardly ever used emails and did not wish to receive email communications (T647) and points to Mr Norman’s affidavit evidence of a face-to-face discussion with Mr Scorer of the matters. However, this communication was sent by facsimile in addition to email, and Mr Priestley accepted that this communication appears to postdate the earlier meeting with Mr Scorer (T648).

Claim as to the impugned payments

176. Turning now to the impugned payments, CCN and CCS plead that the First Payment and the Second Payment (as defined) were made in circumstances that no meeting of officers of CCN resolved to authorise the payments; CCN did not make a decision to make a distribution payment from the Mutual Fund during the relevant accounting period; no meeting or vote of unitholders occurred with respect to the payments; no meeting of shareholders of CCN was held with respect to the payments; and no authority was given to Mr Scorer or Mr Coyte to make the payments. CCN and CCS also plead that no meeting of officers of CCS occurred resolving to authorise the payments; no authority was granted to Mr Scorer or Mr Coyte to authorise the payments; and no meeting of shareholders of CCS was held with respect to the payments.

177. The First Payment is pleaded in paragraphs 12–24 of the Statement of Claim in the Scorer Proceedings and was a payment of $30,000 made from an account of CCS to Mr Scorer on or about 8 September 2011. CCN and CCS plead that the funds in the account were held on trust for CCN in anticipation of being paid to it; that CCN as trustee did not make a distribution payment to any other unitholder during the relevant accounting period and the First Payment was not made in accordance with the provisions of the relevant trust deed or authorised by CCN as trustee and was made “wrongfully”. Paragraphs 23 and 24 plead that Mr Scorer was unjustly enriched by that payment, but that claim is not now pursued where Mr Scorer is bankrupt.

178. It is common ground that the First Payment had been discussed between Mr Coyte and Mr Norman before it was made. Mr Scorer’s evidence is that, prior to July 2011, he spoke to Mr Coyte about a transaction involving OEG and the payment of $30,000 to Mr Scorer as a bonus was discussed (Scorer 29.3.16 [39]) and that Mr Scorer then spoke to Mr Norman about those matters (Scorer 29.3.16 [37]). Mr Coyte’s evidence is that Mr Norman agreed to that payment being made unconditionally, whereas Mr Norman’s evidence is that that payment was an “advance” against Mr Scorer’s distribution and was conditional upon CCN’s expenses first being met (Norman 22.10.14 [70]; T238.) Mr Coyte accepted, in cross-examination, that Mr Norman had told him in about late 2008 that expenses had to be paid before payments could be made to Mr Scorer (T423).

179. CCN then received a payment of $55,000 (or possibly $50,000) from OEG (Ex C6, CB 1812; T338, 359, 441) and Mr Coyte caused that payment of $30,000 to be made to Mr Scorer on 8 September 2011, out of the funds received from OEG (Coyte 30.3.16 [35]). Mr Scorer issued an invoice purportedly dated 10 September 2011 to CCPL in the amount of $30,000 (Scorer 29.3.16 [44], CB 1586). Mr Priestley submits that the invoice issued by Mr Scorer was addressed to the wrong entity in the Centre Capital Group and postdated the payment to Mr Scorer by two days and submits that that invoice was not a proper basis for Mr Coyte to have made the payment. Mr Coyte advised the accountants, Messrs Atra and Satusky, of the payment to Mr Scorer, and other payments including staff superannuation, a bonus and leave payment to another adviser on his resignation, and a payment to the Australian Taxation Office by email dated 13 October 2011 (CB 1662).

176. The Second Payment is pleaded in paragraphs 25–36 of the Statement of Claim in the Scorer proceedings, and was a payment in the amount of $82,500 made from an account in the name of CCS to Mr Scorer on or about 21 December 2011. CCN and CCS plead that those monies were properly receivable by the trust and were held by CCS on trust for CCN and that CCN as trustee did not make a distribution payment to any other unitholder, did not authorise the Second Payment and the Second Payment was made wrongfully. Again, claims in unjust enrichment are pleaded against Mr Scorer, but not pursued where he is now in bankruptcy.

177. On 12 December 2011, Mr Scorer sent Mr Coyte a copy of a tax invoice which was to be issued to IQ Novate Ltd in the amount of $82,980 plus GST. His covering email (Ex N1, CB 221) anticipated that the invoice should be approved for payment shortly and stated that:

“As soon as it hits the account we need to get our expenses and payment ASAP before other eyes want to dispute previous agreements.”

The reference to “other eyes” is plainly to Mr Norman, and Mr Coyte and Mr Scorer were each cross-examined on the basis that they were seeking to conceal the second payment to Mr Scorer from Mr Norman, at least until after it was made. It must be recognised, however, that that email proceeds on the basis that there were previous agreements as to the relevant matter, and anticipates a risk that Mr Norman would seek to resile from those agreements (Ex N1, 221). Mr Priestley fairly accepted, in oral submissions, that that email would not alter the position if the payment made to Mr Scorer was otherwise properly made, and also made clear that it was not submitted that the conduct of Mr Coyte or Mr Scorer was fraudulent, but rather that they, or at least the writer of the email, was concerned that Mr Norman would take issue with the payment if he was consulted at the time (T651).

182. By a further email dated 19 December 2011, Mr Scorer sent Mr Coyte an undated tax invoice claiming an amount of $75,000 referable to “consultancy as per agreement” and GST (Ex N1, CB 225) and, on 21 December 2011, the amount of $82,500 was transferred to Mr Scorer’s personal account (Norman 22.10.14 [77]). Mr Norman denies that he was aware of, or involved in, any discussion of this payment. His evidence was that, at the time of the payments, the Newcastle Trust was in deficit as a result of accumulated expenses in previous years (Norman 22.10.14 [72]–[74], [77]) and there is reference to that position in an email from the accountants to Mr Scorer dated 27 November 2012 (Atra 12.11.15, CB 841) and in a trial balance for CCN that postdates that email (CB 845).

Claim for breach of duties against Mr Coyte

183. Paragraphs 43–50 of the Amended Statement of Claim plead that Mr Coyte owed duties to CCN and CCS under ss 180–182 of the Corporations Act and that, by enabling the First Payment and the Second Payment, Mr Coyte breached those sections of the Corporations Act, and CCN and CCS have suffered loss and damage. CCN and CCS submit that making the payments in those circumstances was a breach of Mr Coyte’s duty to exercise his powers with due care and diligence under s 180 of the Corporations Act, in good faith in the best interests of the corporation and for a proper purpose under s 181 of the Corporations Act and was also an improper use of his position to gain an advantage for someone else in breach of s 182 of the Corporations Act. I have addressed the scope of those provisions above.

184. Mr Priestley submits that it was not in the interests of the Centre Capital entities to make such payments if it was not obliged to do so. Mr Priestley also submits that, by this time, Mr Coyte and Mr Scorer had both fallen out with Mr Norman and were colluding with respect to the finances of the Centre Capital entities. Mr Priestley submits that Mr Coyte owed duties both to CCN and CCS to attend to the expenses and other obligations of the companies in an orderly way and not to prefer some creditors at the expense of others, or at the expense of the business itself. Mr Priestley points out that Mr Coyte relied, in cross-examination, on the value of shares in OEG to cover the cost of the payments to Scorer (T454), although their ultimate value to Centre Capital could not be known at that time. Mr Priestley also submits that, if Mr Scorer's email proposal for an increase in entitlements of 24 June 2011 is said to be a basis for making the payments, that is not sustainable because Mr Coyte and Mr Norman did not accept that proposal (Ex C6, CB 1654; T 437).

185. Mr Coyte relies on the fact that Mr Scorer’s Adviser Employment Contract (Ex N1, CB 101) provides for remuneration to be paid to Mr Scorer before profit is distributed and I have, in substance, accepted that submission above. Mr Norman refers to conversations dating back to 2008 which he claims amended the terms of Mr Scorer’s arrangement (Norman 22.10.14 [56], [60]). I do not accept Mr Norman’s evidence in that respect, by reason of the issues as to his credit generally. Mr Coyte submits that the arrangements were further amended in June 2011, with Mr Scorer to be paid more, but as a consultant rather than an employee. The email from Mr Coyte to Mr Norman on 29 June 2011, which in turn attached the email from Mr Scorer to Mr Coyte and was also sent by facsimile to Mr Norman (to which I referred above) refers to the terms of the new arrangements and, as I noted above, there is no contemporaneous evidence of Mr Norman having disputed that statement of the content of the arrangement. Mr Coyte’s evidence is that he made payments to Mr Scorer, including payments made to him prior to the payments in 2011, in accordance with the contractual arrangements with Mr Scorer as he understood them (Coyte 30.3.16 [24], [38]).

186. Mr Afshar submits that the Schedule to the Adviser Employment Contract with Mr Scorer, to which I have referred above, provides that he was entitled to the first “52K” after his out of pocket expenses and that, thereafter, any “profit” (calculated by reference to the costs set out at 2(a) to (d)) would be distributed to Messrs Scorer, Coyte and Norman. I have accepted that submission as to the terms of the Adviser Employment Agreement above. Mr Afshar also submits that similar effect should be given to the terms set out in Mr Scorer’s email dated 24 June 2011 and that Mr Scorer was always entitled to payments once funds were received. Mr Afshar asks, rhetorically, if Mr Coyte acted in accordance with those arrangements, to which Mr Norman was a party, how could he be liable or in breach of his director’s duties?

187. The allegations made by CCN and CCS involve allegations of impropriety on the part of Mr Coyte constituting a contravention of civil penalty provisions. In determining those allegations, I must apply the standard of proof as set out in s 140 of the Evidence Act 1995 (NSW), which is consistent with that recognised in the general law in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449. Section 140 of the Evidence Act provides that, in a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities and that, without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action, the nature of the subject-matter of the proceeding and the gravity of the matters alleged.

188. On balance, it seems to me that the manner in which the payments were made amounted to a breach of Mr Coyte’s duty of care and diligence under s 180 of the Corporations Act, at least in the sense that relatively large payments were made without bringing the matter before the board of CCN or CCS for a decision or at least reaching an informal consensus among the directors as to the payments; in the case of the First Payment, contrary to Mr Norman’s expressed position that accrued business expenses of CCN should be reimbursed prior to such a payment; and, in the case of the Second Payment, in a manner that would prevent Mr Norman from seeking to object to it, even if his doing would have involved his resiling from a previously agreed position.

189. I am not satisfied that CCN and CCS have established to the requisite standard that the payments were not made in good faith in the best interests of CCN and CCS or for a proper purpose, so as to establish the contravention of s 181 of the Corporations Act alleged against Mr Coyte. I am also not satisfied that CCN and CCS have established to the requisite standard that there was an element of impropriety in the payments, so as to establish the contravention of s 182 of the Corporations Act alleged against Mr Coyte. It does not seem to me those matters are established to the requisite standard, since Mr Scorer had substantial entitlements under the Adviser Employment Contract which were, on balance, increased by the arrangement reached in June 2011; it is plain that CCN and CCS had not satisfied those entitlements, a matter to which I will return below; and Mr Scorer had brought in significant benefits to CCN and CCS in respect of the OEG and IQ Novate transactions for which he had at least an expectation of being remunerated. It does not seem to me that a payment made to an employee or consultant in those circumstances can be said, on the balance of probabilities and in the relevant circumstances, to be not made in good faith in the best interests of CCN and CCS, or not made for a proper purpose, or made improperly.

190. Although I have held that a contravention of s 180 of the Corporations Act is established, CCN and CCS have not established that they suffered any loss by reason of that contravention or the payments to Mr Scorer. I have accepted the Coyte Parties’ submissions that, on the proper construction of the Adviser Employment Contract, Mr Scorer was entitled to receive payment of salary, after deduction only of out of pocket expenses and not of CCN’s business expenses generally. On balance, the amount of Mr Scorer’s entitlements was increased by the arrangements made in June 2011. CCN and CCS had not made salary payments to Mr Scorer in accordance with the Adviser Employment Contract, possibly because Mr Norman took a different view of Mr Scorer’s entitlements, although there is evidence that some (unquantifed) payments had previously been made by Mr Coyte to him. CCN and CCS made no attempt to quantify the amount that they, or either of them, owed to Mr Scorer, on the proper construction of the Adviser Employment Agreement and the June 2011 arrangements, but quantified their claim against Mr Coyte as the total of the amounts paid to Mr Scorer. It does not seem to me that CCN’s and CCS’s loss in making the payments to Mr Scorer can be quantified in that manner, and without regard to the amounts to which Mr Scorer was entitled to be paid. The evidence does not permit any alternative quantification, or any finding that it would be just in the circumstances to order that Mr Coyte pay any proportion of an amount that is not properly quantified to CCN or CCS. I do not consider that it would be consistent with the just, quick and cheap resolution of the real issues in dispute in the proceedings, as required by s 56 of the Civil Procedure Act 2005 (NSW), to afford CCN and CCS an opportunity to lead further evidence as to that matter, given the length of the hearing in this matter and the costs that will already have been incurred by the parties in that respect.

191. CCN’s and CCS’s claim that Mr Coyte should be ordered to reimburse CCN the amount of the payments or, in the alternative, such proportion of the payments as the Court thinks just in the circumstances pursuant to s 1317H of the Corporations Act therefore fails.

Claim against United Nominees

192. Paragraphs 36.8–36.10 of the Statement of Claim in the Scorer proceedings in turn plead a claim against United Nominees. Paragraph 36.8 pleads that, between May 2012 and 30 June 2013, CCS earned and became entitled to receive payments from clients of its business and, between May 2012 and 30 July 2013, Mr Scorer without CCS’s knowledge or consent directed payment of those amounts to a bank account in the name of United Nominees and caused certain clients of CCS to make payments of sums due to CCS into United Nominees’ account. The particularised amounts total $21,450. CCN and CCS plead that United Nominees, on receiving the Diverted Funds (as defined) was aware that it was not entitled to receive payment of those amounts; was aware that Mr Scorer procured payment of those amounts to it in breach of his obligations to CCS and received the Diverted Funds (as defined) as a constructive trustee of those monies.

193. There is evidence of deposits into United Nominees’ bank account from 13 February 2012, although the identity of the depositors is unknown (Norman 13.11.15 [33]). There is evidence that Mr Scorer caused broking client income, in particular from IQ Novate ($24,750) and an entity known as M2L ($3,250), to be diverted from CCS to United Nominees (Ex N1, CB 313, 319, 323, 394–403; Ex N4, CB 1148). Mr Priestley submits, and I accept, that Mr Scorer’s evidence in cross-examination did not provide any justification for the diversion of amounts due to CCS to United Nominees, to the extent that such amounts were in fact diverted to that entity (T624). I am satisfied that CCN and CCS have established a restitutionary claim, in the nature of a claim for monies had and received, or alternatively a claim for the receipt of trust monies against United Nominees in respect of the amounts noted above shown to have been diverted to United Nominees: compare Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81 at [39]–[41], [45].

194. CCN and CCS also submit that a further $71,000 in fees payable by M2L (Ex N5, CB 1025) was paid to United Nominees rather than CCS. However, the evidence relied on by CCN and CCS in support of that submission does not support it, since the amount of $71,000 was M2L’s anticipated costs of a compliance prospectus; including accountants’ fees, legal costs and ASIC and Newcastle Stock Exchange fees which would not have been payable to CCS or CCN, and CCN and CCS identify no evidence that the anticipated sponsoring brokers’ fees of $15,000 or nominated advisers’ fees of $10,000 or any other amount (other than the $3,250 referred to above) in fact fell due by M2L to CCN or CCS or were paid by M2L to United Nominees.

195. CNN and CCS claim compensation in the amount of $13,500 against United Nominees on the basis that it knowingly received monies improperly obtained or that United Nominees should account for these receipts. I will make the former order, subject to any brief further submission that CCN and CCS seek to make as to the quantum of the compensation claimed, which appears to be less than the amount that may be supported by the evidence referred to above. There should be no order for an accounting where such a claim was not pleaded and this hearing was set down to deal with all issues of liability and quantification.

Summary, orders and costs

196. In summary, the Coyte Parties’ claims in the Coyte Proceedings in respect of the alleged “Termination Agreement”, including the claim for the Stake Value (as defined) of $17,369 and a declaration in respect of the OEG Shares, and their claim in respect of the alleged “Collaborative” fail. The Coyte Parties’ claim for unconscionability also fails.

197. The Norman Parties’ claim in the Cross-Claim in the Coyte Proceedings in respect of restitution for the “Wrongful Payments” fails, because it has not been established that the payments were unauthorised distributions from the trust, as distinct from payment of client income to Mr Coyte or Blooms that he was entitled to receive by reason that, under the terms of the 2007 HOA, he retained his clients on termination of the joint venture between Messrs Norman and Coyte. I do not accept Mr Norman’s evidence as to the conversation that is alleged to support the Further Agreement and, where that agreement is not established, the claims under it are also not established.

198. The claim that Blooms and Mr Coyte diverted clients or client income of the Centre Capital Group in breach of the Further Agreement fails, because that agreement is not established. The pleaded claim for “breach of the Fund” also fails, and the amount of the loss claimed in respect of that alleged breach has also not been established. The claim for breach of director’s statutory duties relating to payments made to interests associated with Mr Coyte from income of the Mutual Fund received by CCS prior to June 2012 fails, since the duty owed by Mr Coyte in that respect was narrowed to reflect his “ownership” of his clients on termination of the joint venture, pursuant to the 2007 HOA, and the claim for diversion of funds or clients to Shartru from July 2012 fails for the same reason. The claim against Shartru fails, because the claim against Mr Norman and Blooms of which it is derivative has failed.

199. In respect of the Scorer proceedings, I have held that a contravention of s 180 of the Corporations Act on the part of Mr Coyte is established, by reason of the manner in which two payments were made to Mr Scorer. CCN’s and CCS’s claims in respect of contraventions of ss 181 and 182 of the Corporations Act have failed. CCN and CCS have not established that they suffered any loss by reason of the contravention they have established or the payments to Mr Scorer. The Cross-Claimants’ claim that Mr Coyte should be ordered to reimburse CCN or CCS the amount of the payments or, in the alternative, such proportion of the payments as the Court thinks just in the circumstances pursuant to s 1317H of the Corporations Act fails. CCN and CCS have established their claim against United Nominees in respect of monies diverted to that entity, and should be allowed an opportunity, in preparing short minutes to give effect to this judgment, to confirm the amount claimed.

200. The parties should bring in agreed short minutes of order to give effect to this judgment within 14 days or, if there is no agreement between them, their respective draft short minutes of order and short submissions as to the differences between them. I will hear the parties as to costs.

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Amendments

01 December 2016 - Para 2 - line 3 - change "The claim against Ms Scorer" to read "The claim against Mr Scorer"

Decision last updated: 01 December 2016