BETWEEN: GAETANO DI RUSSO
First Plaintiff
MICHAEL DI RUSSO
Second Plaintiff
PHILIPPE MARIE DE SAINT QUENTIN
Third Plaintiff
AND
NIKOLA BUTKOVIC
Defendant

Catchwords:

Venture to develop land - Whether joint venture - Whether gives rise to fiduciary duties - Breach of duty - Trade and commerce - Misleading or deceptive conduct - Assessment of damages - Breach of fiduciary duty - Land development unlikely to proceed - Payment received by defaulting fiduciary

Legislation:

Fair Trading Act 1987 (WA)

Result:

Plaintiffs' claim allowed in part
Counterclaim dismissed

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr D W Thompson
Second Plaintiff            :     Mr D W Thompson
Third Plaintiff               :     Mr D W Thompson
Defendant:     In person

Solicitors:

First Plaintiff                :     David Thompson
Second Plaintiff            :     David Thompson
Third Plaintiff               :     David Thompson
Defendant:     In person

Case(s) referred to in judgment(s):

Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1
Birtchnell v Equity Trustees Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384
Breen v Williams [1996] HCA 57; (1996) 186 CLR 71
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471
Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749
Gissing v Gissing [1971] AC 886
Hankinson as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
Landsdale Pty Ltd v Moore [2009] WASCA 176
Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Nocton v Lord Ashburton [1914] AC 932
O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] 1 AC 421
Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1
Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32
Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484

ALLANSON J: In May 2006, Bluechip Developments (WA) Pty Ltd (Bluechip) bought an option over land in Baldivis for $100. In November of the same year, it assigned the option to a third party for $200,000 plus GST. That apparent success is not all that it seems. The plaintiffs claim that they intended to develop the land in a joint venture with the directors of Bluechip and that Bluechip, and one of its directors, breached fiduciary duties to the plaintiffs in assigning the option. The plaintiffs also claim that the director breached the Fair Trading Act 1987 (WA) when he obtained the signature of his co‑director on the deed of assignment without disclosing that he was assigning the option to a third party. The plaintiffs seek damages, either in equity or under the Fair Trading Act, for the loss they have suffered.
The plaintiffs commenced this action in 2007 against three defendants: Eighty Road Pty Ltd (the assignee of the option), Bluechip, and Nikola Butkovic, the other director of Bluechip. By the time of trial, the proceedings had been discontinued against Eighty Road Pty Ltd. Bluechip was in liquidation and did not take any part in the trial. The plaintiffs no longer seek any relief against it. The plaintiffs proceeded against Mr Butkovic alone.
Mr Butkovic counterclaims against the third plaintiff, Mr de Saint Quentin, for repayment of amounts owing under a series of loan agreements in relation to their business ventures, as well as a personal loan. He also seeks relief, although not damages, under the Fair Trading Act 1989 (Qld).
This trial was heard between 25 and 29 October 2010. At the time of trial, Mr Butkovic was unrepresented. Having regard to the number and nature of the issues raised on the pleadings and in the witness statements, this created some difficulties for Mr Butkovic and for the court. The matter is further complicated by the significant differences between Mr de Saint Quentin's position as a director of Bluechip, and that of the first two plaintiffs.

Factual background

Events leading up to the joint venture agreement

The basic facts are only little disputed. I will first set out the background to the dispute. The limited factual areas in contention are dealt with separately.
In mid to late 2005, Zaffar Iqubal Khan conducted seminars in Queensland on making money through a property development system called 'The Science of Options'. The plaintiffs and Mr Butkovic each attended those seminars and became acquainted with Mr Khan. On the evidence before me, none of the parties was equipped, either financially or by skills and experience, to successfully prosecute the business ventures in which they later became involved as a result of attending Mr Khan's seminars.
Mr Butkovic and Mr de Saint Quentin met at a seminar conducted by Mr Khan in 2005. They became friends, and agreed to carry on business together. As well as the venture they pursued with Gordon and Michael Di Russo in Western Australia, they were engaged in two other ventures in Queensland, through companies which were formed specifically for each venture.
Gordon Di Russo and his son, Michael Di Russo, also became acquainted with Mr Khan through attending the seminars, and had several discussions with him regarding the possibility of doing business together. Two business models were considered: Gordon and Michael Di Russo could invest and acquire a 50% shareholding in a company, with Mr Khan as the other shareholder. Alternatively, there could be a joint venture to which Gordon and Michael Di Russo would contribute local knowledge and skills, but not finance. Mr Khan would provide his expertise. Mr Khan suggested he may use his 'Singapore contacts' to fund the project and hold a 50% share in it. Mr Khan also said that, if need be, he would get other people in to help out with the workload. There does not appear to be any suggestion that Mr Khan would contribute financially.
Quite independently, Mr Khan had entered into a business arrangement with Mr Butkovic and Mr de Saint Quentin.
Bluechip was created on 28 February 2006 as the vehicle for a joint venture agreement between Mr Khan, Mr Butkovic and Mr de Saint Quentin. Mr Butkovic and Mr de Saint Quentin were the directors of Bluechip. It had share capital of $100 with 100 shares. One share was owned by Mr Khan and 49 by his spouse, Vina Basra. Mr Butkovic and Mr de Saint Quentin each held 25 shares. Pursuant to the joint venture agreement, Mr Butkovic deposited $400,000 into an account in the name of the directors of Bluechip on 1 March 2006. Mr Butkovic says that $150,000 of that deposit was on behalf of Mr de Saint Quentin. Under the joint venture agreement, Mr de Saint Quentin was required to deposit a further $100,000 by 30 April 2006, but did not do so.
In February 2006, there was a meeting in Mr Khan's office in Brisbane. It was there that Gordon and Michael Di Russo met Mr de Saint Quentin and Mr Butkovic. Mr Khan told Gordon and Michael Di Russo that the other two were interested in moving to Perth in order to invest in the property market and get into property development in Western Australia. Michael Di Russo understood, from what he was told by Mr Khan, that Mr de Saint Quentin and Mr Butkovic were there to help with the general running of the business, but that the joint venture would be between Gordon and Michael Di Russo and a company controlled by Mr Khan. Gordon Di Russo's evidence is vague about the arrangements that were to be in place, although he too believed the joint venture to be between Mr Khan, himself and his son.
In March 2006, Mr de Saint Quentin and Mr Butkovic arrived in Perth. They leased a serviced office in St Georges Terrace. On 1 April, they leased a house in Nedlands to live in, and conducted the business of Bluechip from there (although continuing to pay rent on the St Georges Terrace office). Gordon and Michael Di Russo understood the arrival of Mr de Saint Quentin and Mr Butkovic in Perth to be part of the proposed venture with Mr Khan, but there was no common understanding about what business relationships existed between any of the parties.
Michael Di Russo began working at the Bluechip offices and being paid a 'retainer'. Gordon Di Russo also attended on occasions. Mr Khan attended when he was in Perth. During this period, Bluechip was paying Mr Khan $2,800 a week as well as paying his expenses when he travelled to Perth.
The initial business plan was to purchase an option over a property, with the aim of selling that option at a profit before it was due to lapse or be exercised. The business plan reflects the state of finances of the venture. Bluechip had no income stream, and it was operating solely on the capital put into it by Mr Butkovic, and by Mr Butkovic paying bills from his own funds. Michael Di Russo had a small income, but he was being paid by Bluechip. If any of the others had an income (and there is no evidence that any of them did), none of them was contributing financially to the venture.
Bluechip obtained call options over three properties. In particular, in May 2006 it acquired an option to purchase two lots (Lots 6 and 7) at Eighty Road, Baldivis. Negotiations were conducted with the owners by Mr Khan, Gordon Di Russo, Mr Butkovic and Mr de Saint Quentin. On 19 May 2006, an option deed was executed between the sellers and Bluechip as the buyer. Relevantly it provided:
(1)In consideration of an option fee of $100, the sellers granted the buyer an irrevocable option to purchase the land for the sum of $2.3 million.
(2)The option was to be exercised within 60 business days from the expiry of the due diligence period.
(3)The buyer was required to pay to the seller the sum of $99,900 as a security deposit within seven business days from the expiry of the due diligence date, being the date 'within six months from the date hereof'. The security deposit was non‑refundable.
(4)The buyer may assign the option without the consent of the seller.
(5)Upon service of a notice of exercise of the option, the seller and the buyer are deemed to have entered into and executed a contract for the sale of the land.
(6)Under a contract (attached to the deed) settlement was within 90 days of the exercise of the option.
(7)The contract was not subject to finance or any other condition.
(8)The seller was entitled to remain in possession of the property for six months after settlement free of rent or any other outgoings.
Even at 19 May 2006, the parties had different views about the business relationship that existed between them. Gordon and Michael Di Russo then believed that they were in a joint venture with Mr Khan, who had sent Mr Butkovic and Mr de Saint Quentin to help out with the general running of the business. They were not aware that Mr Butkovic's initial capital payment to Bluechip was the only source of finance for the venture. Mr Butkovic and Mr de Saint Quentin believed that they were in the venture with Mr Khan that had been documented in February that year, that Michael Di Russo was working for Bluechip as a contractor, and that his father was helping out from time to time.
Sometime in late May or early June 2006, the question of the relationship between the parties came to a head. It was also then that Gordon and Michael Di Russo discovered that Bluechip was funding the venture, and had been making substantial and regular payments to Mr Khan, as well as paying his expenses on his frequent visits to Perth.
During a visit by Mr Khan to Perth in June, Gordon and Michael Di Russo met him to question the basis of their involvement in the venture. Gordon Di Russo asked for a joint venture agreement 'spelling out the agreement we made with you in Brisbane'. Mr Khan agreed to draw up an agreement. Gordon and Michael Di Russo were present during the drafting of that document, and made suggestions for its wording. Mr Khan sent the document to the parties by email on 13 June 2006. It did not contain the agreement which Gordon and Michael Di Russo expected between themselves and Mr Khan, but an agreement with Bluechip. Mr Khan reassured them that it made 'no real difference'.
Mr Butkovic and Mr de Saint Quentin were also not satisfied with the document. In particular, Mr Butkovic believed Gordon and Michael Di Russo should be jointly entitled to only 10% of Mr Khan's half share of the profits, while the agreement gave them 10% of the total profits. Notwithstanding their various misgivings, each of them (Mr Butkovic and Mr de Saint Quentin on behalf of Bluechip) signed the agreement by sometime in early July.
The agreement is dated 1 March 2006, although it was not executed until months later. As the key events occurred from September to November 2006, the purported retrospective operation of the agreement is of no practical consequence.

The joint venture agreement

The joint venture agreement describes Michael Di Russo as Venturer A, Gordon Di Russo as Venturer B, and Bluechip as both Venturer C and the Company. It is relatively short, and can be conveniently set out in full:
It is agreed between the Venturers that:
1.They shall each be profit sharers in the company in Item 3 of the Schedule (the Company) to the extent indicated in Item 4 of the Schedule (the Profit‑Sharing).
2.They intend to acquire a property or properties (the Property) and engage in a property development enterprise using the Company as the vehicle for the conduct of that enterprise (the Venture).
3.The Venturer C in Item 5 of the Schedule (the Directors) shall manage and administer the business of the Company and of the Venture, including financial management.
4.The Venture shall continue from the date in Item 1 of the Schedule until the property acquired by the Company for the purposes of the Venture is sold until or before its settlement in whatever form or either venturer give one week's notice to the other venturer or the money is finished to run the business.
5.All decisions of the Venture would be made by the Directors only, including the expenses etc.
6.The Venturers shall at all times act in the utmost good faith in their dealings with each other and will meet their respective obligations to the Company, the Venture and each other with due diligence.
7.The terms and conditions of this Agreement shall apply in the event of any inconsistency between them.
8.All the written or verbal agreements are void, if any, so this Agreement comprises the entire agreement between the Venturers and may only be altered or amended by further written agreement between them.
9.The Laws and the Courts of the State of Queensland shall have jurisdiction over the terms of this agreement.
10.Any notices to be given to any of the Venturers must be in writing delivered by post or facsimile to the registered office of that Venturer.
11.The following Special Conditions shall form part of this Agreement:
(a)The Venturers A and B is not responsible for any loss or losses in the business.
(b)The Venturers A and B are not putting any money to run the business but they are giving their services without any charge, and they will never ever claim for their services and in the same way if there is a loss in the business, then the Venturer C will never ever claim any loss or losses from Venturers A and B.
(c)Venturer B is responsible to provide RP Data for the whole of Western Australia for at least two log ins.
(d)Venturers A and B entitle the profits from the properties bought while they were working for the company, and the properties bought under Bluechip Developments (WA) Pty Ltd, or any other companies formed to buy the properties in Western Australia under the umbrella of Bluechip Developments Pty Ltd (until the day Venturers A and B working for the Company).
(e)Bluechip will inform Venturer A and B within 10 working days of the new company, if they have formed under the umbrella of Bluechip in Western Australia.
(f)All parties have the right to check the expenses anytime at all.
(g)All the income would be received in the Company account and all the Particular Project Expenses would be done through the cheque book, and profit sharing would be after deducting all the Expenses from the profits, from the particular property.
(h)Venturer A's retainer is advance money from his profit.
(i)Venturer A is not employee of the company.
(j)Venturer A will do the work according to the job description.
(k)Venturer B is entitled on those properties only, where he went to negotiate the deal at the first appointment.
The profit sharing was as follows:
Venturer A 5% while working for the company 30 hours per week
Venturer B 5% while working for the company attended the first appointment
Venturer C90%.
The schedule also provided for capital:
Venturer A Nil
Venturer B Nil
Venturer C Whatever required for the business or until capital is finished.

Events following the making of the agreement

In July or August 2006, Gordon Di Russo did some checking on Mr Khan and expressed misgivings to the others about his business reputation. He suggested to Mr Butkovic and Mr de Saint Quentin that they should 'sever connections' with Mr Khan. How this was to be done, when Mr Khan and his wife together owned half of Bluechip, was not discussed. There is no evidence that anyone did speak to Mr Khan, although Bluechip stopped making weekly payments to him. Mr Khan and his wife remained as owners of half of Bluechip.
In about July 2006, Mr de Saint Quentin returned to Queensland where he and Mr Butkovic had acquired other property before moving to Perth. Mr Butkovic was then the sole officer of Bluechip in Western Australia. Mr de Saint Quentin was aware of what was happening in Perth only through infrequent telephone conversations with Mr Butkovic. Mr de Saint Quentin would sign blank cheques and other documents, as required, for the operation of Bluechip in Perth.
Mr Butkovic had been relying on Mr Khan to introduce a buyer for the options held by Bluechip. On 25 August 2006, Mr Khan told Mr Butkovic that the potential buyer for the options on Eighty Road and another property had 'gone cold'. Mr Butkovic had been hoping to sell the option over the Eighty Road property for about $1 million, and both options for about $1.5 million. In September 2006, he asked Mr Khan to put money into the company, but Mr Khan refused.
In about September 2006, Mr Butkovic advised the others that Bluechip was running out of funds, and needed to create some form of cash flow. Somewhat illogically, the parties began to discuss holding the Eighty Road property and developing it themselves, even though none of them had the capital to purchase the land, none of them had an income, and Bluechip had no cash flow and was fast running out of funds.

At some time following these discussions, the parties also discussed creating or acquiring a new company for the project of developing the Eighty Road property. The new company would hold the joint venture assets and act as the joint venture vehicle generally. One of the principal areas of dispute in these proceedings is whether the parties reached an agreement about the new venture, and the parties' respective rights to profits under a new joint venture. I return to that issue below.
Also in about September 2006, Gordon Di Russo contacted Michael Knowles, a property consultant and project manager. Mr Knowles' wife had some family association with the Di Russo family and Gordon Di Russo had met Mr Knowles previously, although he did not know him well. Mr Knowles agreed to look at the project and met with Gordon and Michael Di Russo and Mr Butkovic. Mr Knowles did not know the business arrangements in place between the others.
Mr Knowles was shown the project documents put together up to that point, and had some discussions about the joint venture structure with the other parties. He agreed to be the project manager, although no formal arrangement was put in place, either then or later. At some point it was suggested to him that he would be given an interest in the project in part‑payment for his services. Again, there was no formal arrangement. Mr Knowles arranged for the parties to engage a town planning consultant, and the town planner then arranged an environmental feasibility study over the Eighty Road land.
The parties inquired about possible lenders for the development. In about November 2006, Gordon Di Russo spoke to his brother, Antonio (Tony) Di Russo, about lending or investing in the possible development at Baldivis. Tony Di Russo says that if his brother had approached him (on behalf of the family company Patone Pty Ltd) he would have been in a position to advance at least the amount of the security deposit. Tony Di Russo would also have given consideration to investing further sums, either on security or by taking equity in the project. But although he discussed the possibility of investing with his brother, no proposal was ever put to him. Tony Di Russo said 'the first thing that had to be done was to set the structure up and my understanding is that it sort of never happened'.
Gordon Di Russo also spoke to Ray Weir of Finance Solutions about the possibility of obtaining finance, and was optimistic about being able to finance the project.
Mr Knowles approached Mark Ashdown of Merit Finance 'who was engaged to speak to a number of commercial lenders to give me a "feel" about their interest in funding such a project and how they see the terms of any commercial loan'. Through Mr Ashdown, Mr Knowles 'started speaking to possible investors in earnest in or around early to mid November 2006'. The possible 'investors' included the St George Bank. Mr Knowles says the bank showed interest.
There is, however, no evidence that anyone ever applied for finance, and no evidence of specific discussions with potential investors who would hold equity in the project. Given the importance of obtaining finance for any development, and the financial commitment the venturers would undertake on exercising the option, the lack of any specific evidence about the finances of the project is troubling. I return to this issue when discussing the loss claimed by the plaintiffs.
Mr Butkovic was by now under severe financial strain. The $400,000 he had put into Bluechip was almost exhausted, and no one else was making any financial contribution. The Bluechip account has just under $12,000 in it, and there were outstanding bills for more than that amount. Bluechip was liable for recurrent payments including the rent on the house in Nedlands and the St Georges Terrace office. Mr Butkovic also faced a large personal liability over the sale of a previous business.
There was another strain also beginning to show. By mid‑November Mr Butkovic had lost confidence in Gordon and Michael Di Russo, and believed that they were acting together and with Mr Knowles to further their own interests at his expense.
On 8 November 2006, Mr Butkovic contacted a friend from university, Daniel Dunsford. Mr Dunsford had a business providing short term loans to developers, and Mr Butkovic approached him for advice. In the course of the conversation they discussed the Eighty Road property. Mr Dunsford was interested in buying the option. The next morning, Mr Butkovic, on Mr Dunsford's instructions, arranged for the setting up of Eighty Road Pty Ltd, with Mr Dunsford as the sole director and shareholder, to carry out the development of the Eighty Road property. He also agreed to work with Mr Dunsford on the Eighty Road project.
On 10 November 2006, Mr Butkovic contacted Mr de Saint Quentin by phone. He told Mr de Saint Quentin that he would send some blank assignment of option forms for Mr de Saint Quentin to sign as director of Bluechip, so that they would not lose the Eighty Road property as the due diligence period was about to expire. It was not uncommon for Mr Butkovic to send blank documents, including blank cheques, to Mr de Saint Quentin and he would sign them. The blank assignment documents were sent by an email which said:
Attached is the assignment document for 6 & 7 Eighty Road.
I'm making sure it's all ready to go by Monday.
Please fill out the schedule by initialing the 8 spots marked XX and signing the director.
Please scan and email today and send 3 original copies by Platinum Express Post today.
Gordon and Michael will make their final decision by Monday or Tuesday.
Today I'm calling more people in case they don't go ahead.
Mr Butkovic did not tell Mr de Saint Quentin that he was intending to assign the option to Mr Dunsford's company. He was concerned how Mr de Saint Quentin might react to a sale to a friend, and did not want anything to interfere with the sale.
Mr de Saint Quentin signed three copies of a blank assignment document and posted them to Mr Butkovic. He also sent a scanned copy by email.
On 13 November 2006, Mr Butkovic executed the assignment of the option to Eighty Road Pty Ltd and sent the executed copy to Bluechip's solicitors.
As the end of the due diligence period under the option drew closer, basic questions about the venture to carry out the development had not been resolved. Mr Butkovic told the others that he wanted the venture to operate through a trust. They did not agree. He frequently raised the issue of recovery of his investment in Bluechip. The parties agreed that the option held by Bluechip would be assigned to a new entity for consideration. Mr Butkovic put that consideration at $200,000, but the others did not accept that figure. Mr Knowles began to worry that the structuring issue, and the issue of his own remuneration, would not be resolved in time to exercise the option.
As late as 14 November 2006, a meeting was planned between Mr Butkovic and the others at which they would discuss the price demanded by Mr Butkovic for Bluechip to transfer the option to a new entity. Gordon and Michael Di Russo arranged to meet separately with Mr Knowles to discuss a strategy on how to deal with Mr Butkovic's demands. They were not then aware that Mr Butkovic had acted unilaterally and sold the option. Each party expressed a sense of grievance at trial over the perceived deceit of the other.
Gordon Di Russo arranged for the incorporation of a new company, Eighty Road Investments Pty Ltd, to be the new joint venture vehicle. He did so without the knowledge of Mr Butkovic. The company was registered on 15 November 2006. The whole of its shares were originally held by a company associated with Mr Knowles.
On 16 November 2006, Mr Butkovic advised Mr Knowles that he had sold the option. Mr Knowles told Gordon and Michael Di Russo of the sale, and in turn Gordon Di Russo advised Mr de Saint Quentin.
Mr de Saint Quentin then spoke to Mr Butkovic about the assignment. Mr Butkovic told him that the option was assigned for $100 but that he was going to invoice Mr Dunsford for $220,000. Mr Butkovic said the money would go into his (that is Mr Butkovic's) account. Mr de Saint Quentin said that it should go into Bluechip's account, and that (at least initially) is where it went.
On 20 November 2006 the sum of $220,000 was deposited into an account at the ANZ Bank in the name of the Directors, Bluechip (WA) Pty Ltd. At the time of the deposit, Bluechip had funds of only $1,442.22. By two cheques made out to Millennium Constructions Pty Ltd, processed on 24 November and 27 December 2006, $200,000 was withdrawn from the Bluechip account. The two shareholders of Millennium Constructions Pty Ltd were Mr Butkovic and his brother Filip.
Mr Butkovic put Mr Knowles' name forward to the new owners, and Mr Knowles did, for a time, deal with Mr Dunsford. In December 2006, however, Mr Knowles fell out with Mr Dunsford. On 22 December he informed Mr Dunsford by email that he would no longer be involved, telling him:
[M]y involvement in this deal has been a massive waste of time and, without exception, everyone involved has shown themselves to be complete amateurs, so I would be please cease this time wasting and to let you guys all play cops and robbers together.
Eighty Road Pty Ltd did not develop the land. It was sold as two lots in May 2010 for $2.5 million. It has not been subdivided and, at the time of trial, it remained vacant land.

The areas of dispute

The plaintiffs sought relief including:
A.Declarations that:
…
(ii)Butkovic, by causing the assignment of the Option to Eighty Road, breached fiduciary duties he owed to Gordon Di Russo, Michael Di Russo and de Saint Quentin or, alternatively owed to Gordon Di Russo, Michael Di Russo and Bluechip;
(iii)Butkovic, by causing the assignment of the Option to Eighty Road, knowingly assisted Bluechip in breaching its fiduciary duties owed to Gordon Di Russo, Michael Di Russo and de Saint Quentin or, alternatively, Gordon Di Russo and Michael Di Russo;
…
C.… equitable damages
D.Against Butkovic, damages pursuant to section 79 of the Fair Trading Act (WA) and, or section 99 of the Fair Trading Act (Qld).
The plaintiffs originally sought, in the alternative to equitable damages, an account of profits derived by each of Butkovic and Bluechip by reason of their breaches of fiduciary duty. They did not continue the claim for that relief.
The primary area of dispute between the parties relates to the nature of the legal relationships between them at relevant times. There are three aspects to this issue: first, were the parties in a joint venture or some other relationship in which they had an interest in the venture's property or profits. Second, did they make a second agreement sometime before the sale of the option, altering their respective interests in the venture? Third, did Mr Butkovic owe the plaintiffs fiduciary duties? I will also consider whether Mr Butkovic breached any duty to the plaintiffs.

Were the plaintiffs and Mr Butkovic in a joint venture?

The plaintiffs plead:
4.In or about January and February 2006, the first plaintiff (Gordon Di Russo) and Michael Di Russo held several discussions with one Zaffar Iqubal Khan (Khan) regarding the possibility of forming a venture for the purpose of identifying, investigating, acquiring rights to, and developing real estate in Western Australia (the Objects).
5.In or about February 2006 Michael Di Russo, on his own behalf and Gordon Di Russo's behalf, Butkovic, de Saint Quentin, and Khan held several discussions regarding the possibility of forming a venture to pursue the Objects.
6.In the course of the discussions pleaded in paragraphs 4 and 5 it was agreed that Butkovic and de Saint Quentin would form or acquire a company in order to act as the owner of any rights to property that the said venture might acquire, and to act generally as a vehicle for the venture.
7.In or about early March 2006, Michael Di Russo left his employment in Brisbane and moved to Perth in order to participate in a venture with Gordon Di Russo, Butkovic and de Saint Quentin, in which he and Gordon Di Russo understood Khan would have an interest and role.
8.In about early March 2006, Butkovic and de Saint Quentin moved from Queensland to Western Australia to pursue the Objects, and made contact with Michael Di Russo and Gordon Di Russo.
The plaintiffs then plead that Gordon and Michael Di Russo assisted Mr Butkovic and Mr de Saint Quentin on the understanding that:
10.1Butkovic and de Saint Quentin come to Perth to form a venture with them to pursue the Objects, in accordance with the discussions pleaded in paragraphs 4 and 5; and
10.2Bluechip was the corporation formed or acquired for the purpose of acting as the vehicle for the said venture.
Mr Butkovic denies the substance of these allegations. In particular, he pleads (in par 4 of the defence) that on or about 1 March 2006, in Brisbane, he entered into a joint venture agreement with Mr de Saint Quentin and Dynasty Wealth Matrix Investments & Developments Pty Ltd (Dynasty) (a company associated with Mr Khan) and that Bluechip was incorporated pursuant to that agreement. Mr Butkovic pleads further that he and Mr de Saint Quentin relocated to Perth in pursuance of their joint venture with Dynasty or Mr Khan. The interest asserted by Gordon and Michael Di Russo in the joint venture was under an agreement they made with Mr Khan, and was in respect of Mr Khan's or Dynasty's shares in Bluechip.
I find that it was only in about late June 2006 that Gordon and Michael Di Russo entered into a business relationship with Bluechip, and into a venture with Mr Butkovic and Mr de Saint Quentin. Before June, Gordon and Michael Di Russo, Mr Butkovic and Mr de Saint Quentin were assisting each other, but with no common understanding of the nature of the relationship between them. Once this misunderstanding was discovered, a document was prepared ‑ primarily by Mr Khan, with some input from Gordon and Michael Di Russo ‑ which purported to set out their relations, and provide for the future conduct of the venture.
The plaintiffs plead that agreement in pars 20 and 21 of the statement of claim. In par 22 they plead:
From at least the time of the execution of the JV Agreement, each of Gordon Di Russo, Michael Di Russo, de Saint Quentin, Butkovic and Bluechip agreed that:
22.1Bluechip held, would hold, and would deal with, the Option as property subject to the JV Agreement;
22.3they would, and were bound to, conduct themselves on the basis that the Option was subject to the JV Agreement.
Mr Butkovic pleads that a document in the form pleaded in par 21 was prepared by Mr Khan and sent to him and to each of the plaintiffs, but denies that it recorded an agreement between them. He pleads that he and the plaintiffs verbally agreed the document required amendment, and he informed Mr Khan that it required amendment and that none of them was prepared to execute it.
Mr Butkovic does not admit that he executed the joint venture agreement, although he accepts it bore his signature. The agreement is in evidence and I am satisfied it was signed by Mr Butkovic and Mr de Saint Quentin on behalf of Bluechip.
It is difficult to understand the defence case regarding the agreement. Mr Butkovic maintains that even if he did sign it, he did not agree with it to the extent that it gives Gordon and Michael Di Russo, collectively, an entitlement to 10% of the profits rather than to 10% of Mr Khan's share of the profits. But he does not assert that he was mistaken about what the agreement was, or mistaken about what it provided. The defence does not allege that the plaintiffs acted unconscionably in relation to the contract, and no evidence has been put forward that would support such a finding.
From June 2006, each of the parties, including Mr Butkovic, acted as though Bluechip was in a joint undertaking with the Di Russos to either sell the option or develop land - evidenced by the obtaining of valuations, the engagement of Mr Knowles, and the commissioning of a town planner and environmental consultant. That conduct may be regarded for the purpose of ascertaining whether there was a completed contract: see, for example, Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68, 78; Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144, 161.
I am satisfied that the joint venture agreement was executed by Bluechip and that there was a completed contract which, allowing for some poorly expressed provisions, sets out the rights and liabilities of the parties.
Whether the arrangement created by the agreement is properly described as a joint venture is difficult to assess. In Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749 [80] - [81], Crennan J identified six
recognisable and common characteristics [which] can be found in various permutations and constellations such that it is not appropriate to attempt to isolate which characteristics would be both necessary and sufficient for the constitution of ajoint venture agreement. It is always a question of fact whether any particular undertaking constitutes a joint undertaking for mutual commercial gain.
See also United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1, 10.
The agreement in the present case expressed the parties' community of interest in together engaging in property development of some kind, and they shared a purpose of mutual gain. The assets acquired, however, were held by Bluechip, and all decisions were to be made by the directors of Bluechip (joint venture agreement cl 3, cl 5). In these reasons I have referred to the arrangement as a joint venture (and that is how the parties described it), and the agreement as a joint venture agreement, but that may be overstating the position.
Whether the arrangement was a joint venture, or some other contractual arrangement, does not have any particular legal consequence for the essential question of whether Mr Butkovic was in a fiduciary relationship with the plaintiffs: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 [44]. Even where there is a joint venture, whether the relationship between joint venturers is fiduciary depends upon 'the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken': United Dominions Corporation Ltd v Brian Pty Ltd(11). I return to the question of fiduciary obligations below.

Was a new joint venture agreement formed before 15 November 2006?

The next major area of dispute regards the plaintiffs' allegations that the parties made a second joint venture agreement. The plaintiffs plead in par 29:
Prior to 15 November 2006 Gordon Di Russo, Michael Di Russo, and Bluechip (by its directors Butkovic and de Saint Quentin), agreed verbally to vary the terms on which the Joint Venture was conducted to the effect, inter alia, that:
29.1a new corporation would be formed or acquired to act as the Joint Venture vehicle in Bluechip's stead;
29.2each of Gordon Di Russo, Michael Di Russo, Butkovic and de Saint Quentin, or their nominees, would together own 90% of the shares in the new corporation on an equal basis; and
29.3the Option would be assigned to the new corporation.
In par 30 they plead that from the time of that agreement:
Bluechip held the option for the benefit of Gordon Di Russo, Michael Di Russo, Butkovic and de Saint Quentin in the proportions pleaded in paragraph 29.2 pending the formation of the new corporation as pleaded in paragraph 29 above.
The defence denies par 29 and pleads that there were negotiations towards the formation of a new joint venture but that no agreement was made (par 17). Neither party refers to the inconsistency with cl 8 of the joint venture agreement, under which it may only be varied in writing.

The claimed variation of the joint venture agreement is significant in several respects. In particular, the new corporation, which would act as the joint venture vehicle and to which the option would be assigned, would be owned 10% by Mr Knowles, and the remaining 90% in equal shares by the three plaintiffs and Mr Butkovic. For Gordon and Michael Di Russo, this would increase their ability to share in profits (collectively) from 10% to 45%, although their interest would be as shareholders. The statement of claim is silent on whether the variation otherwise altered the position that the plaintiffs were not liable to contribute capital to the undertaking, and were not liable for any losses.
On this issue, there is some disparity between what is said in the witness statements and what is said in oral evidence.
Gordon Di Russo in his witness statement speaks of the original joint venture agreement made in June and July 2006. He says that in about August 2006 'we began to talk about acquiring the Property and developing it ourselves' and that before the end of August 2006 he had agreed with his son and Mr Butkovic that they would pursue the development in that way. The parties discussed a new structure, including the creation of a new corporate entity through which the joint venture would continue to operate. Gordon Di Russo says that some time after 2 November 2006, there were discussions about the new joint venture entity between himself, his son, Mr Butkovic and Mr Knowles. They decided to create or acquire a new corporate entity
in which the members of the joint venture would have a shareholding broadly reflecting the proportion of their rights to profits under the joint venture Agreement, and in which Mr Knowles would have a 10% interest in order to compensate him for his work on the project. (emphasis added)
Significantly, in his witness statement, he does not refer to an agreement that the new entity would be held equally (save for Mr Knowles interest) between himself, his son and the directors of Bluechip. It was only in oral evidence, in answer to questions from Mr Butkovic, that Gordon Di Russo referred to a joint venture agreement under which the venturers would share equally. He referred to no specific meeting or occasion when that was agreed.
Michael Di Russo's witness statement refers in general terms to discussions regarding the new entity to carry forward the venture of developing the land. He says that his father first made the point that there needed to be a new entity to be held in equal shares ‑ apparently some time in September 2006. During a meeting in early September 2006 the parties expressed general agreement on a range of issues, including that Bluechip would have to stop payments to Mr Khan; the second business venture would have to find a source of funding; budgets would have to be established; Bluechip would have to get its accounts in order; and the second business venture would need to find someone with sufficient experience and expertise to manage the development. Based on their discussions, Michael Di Russo understood the parties intended that the option over the Eighty Road land would be assigned to a new entity to be held in equal shares, and that when this occurred the new entity would reimburse Bluechip for the expenses that it had incurred in relation to the Eighty Road project.
In neither his witness statement nor in oral evidence, does Michael Di Russo refer to any particular meeting or discussion. But when it was specifically put to him that the parties were still negotiating the joint venture he said that by 14 November 2006 he regarded himself as being in either a partnership or a joint venture with the three others to the extent of 25% shares:
I believed at that time we had already agreed on the actual venture moving forward but what we hadn't agreed on is the exact payment structure of the reimbursement of the costs.
Mr de Saint Quentin was not in Western Australia during the relevant period. In his witness statement he refers to telephone conversations with Mr Butkovic during October 2006 in which Mr Butkovic referred to his discussions with Gordon and Michael Di Russo regarding the formation of a new company to which the option would be assigned. He says that he was under the impression that the option would be sold to an entity in which he, Mr Butkovic, Gordon Di Russo and Michael Di Russo would each have an interest and that he was 'stunned' when he heard the option had been assigned to a third party and not for the benefit of the joint venture.
I do not, however, wholly accept Mr de Saint Quentin's evidence. His evidence about this issue was confusing and inconsistent. In oral evidence, when he referred to that part of his statement, he was at first apparently referring to the new venture with Gordon and Michael Di Russo, which he had discussed over the phone with Mr Butkovic. Shortly after, he said he was referring to the joint venture which was the subject of the written joint venture agreement made in July ‑ specifically referring to Gordon and Michael Di Russo each having a 5% interest in that venture. Indeed he said he was concerned about everybody under that joint venture, including Mr Khan. Later still, he said he believed the only buyer for the option was 'a venture involving [Nik], myself, Michael and Gordon Di Russo'.
Mr Knowles spoke in his witness statement of first becoming involved in early to mid‑September 2006. At that time, from his initial discussions, he assumed that Gordon and Michael Di Russo owned an interest in Bluechip. It was only in early to mid‑November 2006, when he began investigating obtaining finance and sought more detailed information, that he discovered Gordon and Michael Di Russo owned no interest in Bluechip, Mr Butkovic was one of Bluechip's directors, and Gordon and Michael Di Russo were in a joint venture with the company. Mr Knowles concluded that a new company needed to be created as a joint venture vehicle. He said that Gordon and Michael Di Russo 'seemed to accept what I was saying, but [Mr Butkovic] seemed to have difficulty and reluctance with it'.
Mr Knowles, in his witness statement, refers to a meeting that was held on 8 November 2006 at his office, where the parties 'discussed the proposed new company's shareholding'. He says that as the last day of the due diligence period specified in the option deed grew closer, he began to worry that the structuring issue and the issue of his remuneration would not be resolved in time. His statement, in my view, is not consistent with there having been an agreement standing for some time regarding the new joint venture.
In oral evidence, Mr Knowles said that he could not hold definitive discussions with a bank regarding finance until the ultimate ownership structure had been worked out. No such definitive discussions were ever held. Mr Knowles described the position around 15 November in this way, 'we had the essence of what we understood to be an arrangement for the new company'.
None of the plaintiffs refer to any agreement regarding other crucial aspects of a new joint venture, such as control and decision making (for example, who would be the directors of the new entity), contributions of capital to the new venture, and liability for any losses incurred.
The parties also had to resolve the terms under which Bluechip would assign its interests in the option to a new entity. This was not a separate issue, but was integral to the formation of a new venture. And it was a live issue right up to 14 November 2006 (that is, after Mr Butkovic had already assigned the option, although without the knowledge of the other parties). On that day Michael Di Russo sent an email to Mr Knowles in relation to a meeting to be held on 15 November. He wrote in these terms:
Nik is going to talk about transfer price tomorrow. I have a funny feeling he is going to be asking for 200k so a signing figure of 2.5, so if you could just run some ideas through your head as to how we are able to convince him to get that total down it would be good.
Mr Knowles replied suggesting an earlier meeting, without Mr Butkovic, to discuss a strategy.
Mr Butkovic agrees that he discussed a new joint venture with the others, but says that at the time he sold the option to Mr Dunsford the new arrangement was still being negotiated.
I am wary about what Mr Butkovic means when he says the agreement was still under negotiation. He expressed a general approach to agreements that, regardless of what had been agreed verbally, there is no 'done deal' until the documents are signed and the money is in the bank. Despite those reservations about Mr Butkovic's evidence, there are other reasons to doubt that the parties had reached agreement. First, Mr Butkovic says that he had difficulties with the others on the best structure for a joint venture to develop the Eighty Road property. Mr Butkovic wished to use a 'hybrid trust structure for tax and liability purposes'. The others disagreed with him. Mr Butkovic's evidence in this regard is consistent with the evidence of Mr Knowles. On the evidence, it does not appear that this disagreement was ever resolved.
Second, Mr Butkovic refers to discussions with Gordon and Michael Di Russo (in about mid‑September) from which he concluded they wanted 67% of any new entity. That was not an arrangement he would accept.
Third, and most importantly for Mr Butkovic, he was concerned about Bluechip's and his own financial position, and wished to ensure that Bluechip was paid the amount which he considered was owing, that is $200,000. As late as 15 November 2006, that amount had not been agreed.
The question is what was reasonably understood by the parties from their words and conduct ‑ in particular, what the plaintiffs reasonably understood from what Mr Butkovic said and did ‑ and not what each might have intended in his own mind: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [34]; Gissing v Gissing [1971] AC 886, 906.
I am satisfied that there were discussions about the way in which the undertaking would move forward, and it was agreed that there would be a new entity formed or acquired to act as the vehicle for the development. I also accept that the parties were in an ongoing relationship and
it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. (Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110, 11,117‑8, see also Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 [71]‑[82]).
But the relationship between the parties had been beset by misunderstanding from the outset, and, in my view, this was another instance. I am not satisfied on the evidence that 'viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain': see Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32, 82. In particular, I am not satisfied that there ever was an agreement as to how the new entity would be held, or the terms on which Bluechip would assign the option over Eighty Road to it. Those matters were crucial to a new joint venture agreement.
In their submissions, the plaintiffs departed from their pleaded case. Despite the plea that the parties had agreed to a new joint venture agreement, the plaintiffs based their submissions on the fiduciary duties arising from the negotiations for a modified joint venture arrangements which took place in October to early November 2006.
Fiduciary obligations may arise while negotiations are still being conducted: United Dominions Corporation Ltd v Brian Pty Ltd (11 ‑ 12). But I do not accept the plaintiffs' case in this regard. First, the plaintiffs did not plead the alternative case, but pleaded specifically that the option was held for their benefit '[f]rom the time of the agreement pleaded in paragraph 29'. Mr Butkovic was unrepresented. I am reluctant to allow the plaintiffs to go so far beyond the case put in the pleadings. Second, and in any event, the parties were in an existing relationship under the written joint venture agreement, and in which they were entitled to participate in the profits of the venture in agreed shares. I do not accept that the negotiations which did not result in an agreement are sufficient to alter the proportions in which they are entitled to share in profits under the existing written agreement.

Did Mr Butkovic have a fiduciary duty to the plaintiffs?

The critical feature of a fiduciary relationship is 'that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense': Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 ‑ 197 [70] ‑ [71]. From this power or discretion comes the duty to exercise it in the interests of the person to whom it is owed: Hospital Products (97); John Alexander's Clubs Pty Ltd [87].
Where a written contract provides the foundation for the fiduciary relationship, the first step is to consider the rights and liabilities arising under the contract.
In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. (Hospital Products Ltd (97); see also John Alexander's Clubs Pty Ltd [90] ‑ [91]).
The joint venture agreement prepared by Mr Khan is, in parts, unsophisticated in its wording. But it was the foundation of the parties' relationship from about July 2006. There is no reason why the language in which the parties expressed their agreement cannot be construed in the same way as any commercial contract, having regard to the text, the commercial purpose and the objects of thecontract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22].
The key elements of the agreement made between the parties were:
(1)Mr Butkovic and Mr de Saint Quentin were not, individually, parties to the venture;
(2)each of the venturers (that is, Gordon and Michael Di Russo and Bluechip) was to share in the profits of the company to the extent specified in the agreement (cl 1);
(3)Bluechip was a vehicle for the conduct of the enterprise engaged in by the venturers (cl 2);
(4)the directors of Bluechip would administer the joint venture and make all the decisions (cl 3 and cl 5);
(5)property would be acquired by Bluechip 'for the purposes of the Venture' and the venture would continue until that property was sold, or by the venture being ended by notice or by it running out of money (cl 4);
(6)the venturers agreed to act in utmost good faith in their dealings with each other (cl 6);
(7)while the Di Russo's were not contributing money, the agreement acknowledged that they gave services free of charge (cl 11(b)), and that each of them was entitled to profits from properties bought while they were working for Bluechip (cl 11(d)).
The subject matter over which fiduciary obligations extend is to be ascertained also from the course of dealings actually pursued by the parties to the joint venture: Birtchnell v Equity Trustees Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408. That is, regard must also be had to what the parties did within that agreement.
First, they identified potential properties for acquisition and negotiated the acquisition of property - including the option over the Eighty Road land. From March 2006, Michael Di Russo worked in Bluechip's office on tasks including identifying suitable land, gathering information and creating a database of the information. He was paid an amount described as a 'retainer', which was to be deducted from his share of the profits on distribution. Gordon Di Russo also contributed, although it is difficult to say precisely what he did. Significantly, he was present at the negotiations with the owners of the Eighty Road land. That was the function identified in the joint venture agreement that entitled him to share in the profits.
Second, the plaintiffs put no capital into the venture. But the intention of the agreement (cl 11(b) and the Schedule) was that they would not contribute capital, but would provide services without charge.
Third, Bluechip held the property acquired in its own name. The relevant property was an option which could be assigned without the consent of the sellers. The directors of Bluechip had the power to exercise the option or to dispose of it for gain. The other venturers were dependent upon the directors of Bluechip exercising its powers as legal owner of the joint venture property on behalf of the joint venturers jointly, and to account to them for the proceeds of any sale.
Fourth, the parties took steps referable to either the marketing of the option, or the development of the land on the basis that the option would be used to their mutual benefit: they obtained valuations, a town planning report and an environmental assessment; they engaged Mr Knowles and a town planning consultant; and they began inquiries into the availability of finance.
In my opinion, both the relationship created by the terms of the agreement, and what the parties did under it, gave rise to fiduciary duties on the part of Bluechip and its directors in relation to their exercise of the powers attendant on legal ownership of the option. It is not necessary in the present circumstances to identify the content of the fiduciary duties beyond the duty not to use their position or powers to their own, or a third party's, advantage, unless with the free and informed consent of the joint venturers: Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 113.
As set out above, I am not satisfied that the negotiations for a new joint venture reached the stage of agreement. Bluechip remained the holder of the option for the purposes of the joint venture agreement it had made with Gordon and Michael Di Russo in July, and the rights and duties of the parties are to be determined by reference to that agreement.

Did Mr Butkovic breach that duty?

The facts are easily summarised. From about August 2006, Mr Butkovic was the only director of Bluechip present in Western Australia. On 9 November 2006, after speaking to Mr Dunsford the day before, he set up Eighty Road Pty Ltd, with Mr Dunsford as its sole director and shareholder. On 10 November 2006, he procured Mr de Saint Quentin to sign a blank assignment of option over the property at Eighty Road. I am satisfied that, by 10 November, he intended to assign the option to Mr Dunsford's company. On 13 November 2006, he completed the execution of the assignment of option to Eighty Road Pty Ltd. The other participants in the venture did not know that he had done so.
Mr Butkovic, at least immediately, obtained the benefit of employment with Mr Dunsford. Mr Dunsford paid Bluechip the sum of $200,000 plus GST. While that gave an immediate benefit to Bluechip, Mr Butkovic transferred the whole amount to a company he controlled with his brother. Further, I am satisfied that Mr Butkovic always intended to take the whole of the $200,000 as repayment of his capital contribution to Bluechip.

As a result I am satisfied that his conduct in assigning the option to Eighty Road Pty Ltd breached a fiduciary duty he owed to Gordon and Michael Di Russo.
At this point, a significant difference emerges in the positions of the plaintiffs. The pleadings differentiate the claims Gordon and Michael Di Russo make from the claims of Mr De Saint Quentin.
The plaintiffs plead in par 18 of the statement of claim:
At the time that the Option was acquired, it was intended and agreed by each of Gordon Di Russo, Michael Di Russo, de Saint Quentin, Butkovic and Bluechip that:
18.1Bluechip was to be legal owner of the Option;
18.2each of them would work towards the acquiring of the Property, and its development, by Bluechip;
18.3Bluechip was to hold and deal with the Option and then the Property for the benefit of Gordon Di Russo, Michael Di Russo and Bluechip (emphasis added).
Further, in pars 26 to 28:
26.In the premises of the foregoing paragraphs:
26.1from at least the time of the execution of the JV Agreement, Bluechip was in a relationship with Gordon Di Russo and Michael Di Russo concerning the Option and the Property in which it had undertaken to act:
(a)in the interests of the Venturers [defined in par 20 as Gordon Di Russo, Michael Di Russo and Bluechip]; and
(b)in upmost good faith towards the Venturers.
26.2Bluechip as legal owner of the Option, had the power and opportunity to deal with the Option;
26.3Butkovic and de Saint Quentin, as directors of Bluechip, had the power and opportunity to cause Bluechip to deal with the Option;
26.4dealings with the Option would have an effect on Gordon Di Russo's and Michael Di Russo's positions;
26.5neither Gordon Di Russo nor Michael Di Russo had any direct power to affect Bluechip's dealings with the Option; and
26.6Gordon Di Russo and Michael Di Russo were peculiarly vulnerable to any exercise by Bluechip, further or alternatively Butkovic and de Saint Quentin, of their powers to deal with, further or alternatively to cause Bluechip to deal with, the Option.
27.In the premises of paragraph 26, Bluechip owed fiduciary duties to Gordon Di Russo, Michael Di Russo and Bluechip to refrain from:
27.1dealing with the Option in any manner other than for the benefit of the Venturers; and
27.2profiting from the Option other than as a Venturer pursuant to the JV Agreement.
28.Further or alternatively to paragraph 27, in the premises of paragraph 26, Butkovic and de Saint Quentin each owed fiduciary duties to Gordon Di Russo and Michael Di Russo to refrain from using their position of power to direct and control Bluechip and its activities to cause Bluechip to:
28.1deal with the Option in any manner other than for the benefit of the Venturers; and
28.2profit from the Option other than as a Venturer pursuant to the JV Agreement (emphasis added).
The pleaded claim does not allege any fiduciary duty owed to Mr de Saint Quentin personally, but rather that there were duties owed by him because of his office as a director of Bluechip. That plea is consistent with the terms of the joint venture agreement. Bluechip was the participant in the venture, and was also involved in other ventures between Mr de Saint Quentin and Mr Butkovic. Mr de Saint Quentin, as a shareholder of Bluechip, stood to benefit from his interest in the company but had no direct entitlement to share in profits. He may have suffered loss from the actions of Mr Butkovic in transferring money out of Bluechip, but that loss is not part of the cause of action pleaded in these proceedings.
In submissions, the plaintiffs claimed a quite different basis for finding fiduciary duties owed to Mr de Saint Quentin. They submitted that he and Mr Butkovic were parties to 'an overarching joint venture' which included the joint venture with Gordon and Michael Di Russo, but extended to other ventures in which only Mr de Saint Quentin and Mr Butkovic participated. These other ventures are discussed in more detail in the findings on the counterclaim. The fiduciary duty to Mr de Saint Quentin is said to arise from his vulnerability to Mr Butkovic's control of the flow of information once Mr de Saint Quentin had returned to Queensland in July 2006. That was not the plaintiffs' pleaded case, and was no part of witness statements filed in the case. No application was made to amend the claim. Where the defendant is unrepresented, it would, in my opinion, be unfair to determine the matter on such a substantially different basis.
Accordingly, on the pleaded claim, I would grant a declaration that:
Mr Butkovic, by causing the assignment of the option to Eighty Road Pty Ltd breached fiduciary duties he owed to Gordon Di Russo and Michael Di Russo under the joint venture agreement made in July 2006.
I make no declaration regarding whether Bluechip breached any duties, because it is in liquidation, and because, in any event, there would be no utility in doing so.
I will consider the measure of damages or compensation that flow from the breach after consideration of the claim under the Fair Trading Act, and the counterclaim.

The claim under the Fair Trading Act

The plaintiffs also claim damages for misleading and deceptive conduct under the Fair Trading Act 1987 (WA), alternatively the Fair Trading Act 1989 (Qld).
I accept the plaintiff's submission that the conduct alleged against Mr Butkovic is subject to the Western Australian legislation. The conduct is in relation to the proposed disposal of an interest in land situated in Western Australia. Further, Mr Butkovic was ordinarily a resident in Western Australia: Fair Trading Act s 4.
The plaintiffs allege that:
37.On or about 10 November 2006 Butkovic provided a copy of the Blank Assignment to de Saint Quentin, who was then resident in Queensland, by electronic mail:
37.1giving him to understand that it had been prepared in order to assign the Option to a new entity in Bluechip's place which would hold the Option for the benefit of, Gordon Di Russo, Michael Di Russo, de Saint Quentin and Butkovic as per paragraph 29 above; and
37.2asking him to execute the Blank Assignment on behalf of Bluechip in the places provided in that document, and to place his initials next to the spaces into which the name of the assignee was to be inserted.
38.The sending of the email by Butkovic and the provision of the Blank Assignment as pleaded in paragraph 37 above:
38.1represented, in the circumstances, to de Saint Quentin that Butkovic intended to, and would, cause Bluechip to assign the Option in accordance with the agreement pleaded in paragraph 29 above;
38.2was conduct engaged in by Butkovic in trade or commerce within the meaning of subsection 10(1) of the Fair Trading Act WA (emphasis added).
The claim arises in this way. By 10 November 2006, Mr Butkovic had agreed to assign the option over the land at Eighty Road to a company to be held by Mr Dunsford, and had set up Eighty Road Pty Ltd on behalf of Mr Dunsford. On 10 November Mr Butkovic rang Mr de Saint Quentin in Queensland and said that he needed him to sign some blank assignment of option documents so that they would not lose the property, as the due diligence period was about to expire. He sent the blank assignment documents in an email which I have set out at [38] above.
Mr Butkovic maintained in evidence that, when he sent the email and spoke to Mr de Saint Quentin, he did not regard the sale to Mr Dunsford as a 'done deal' because he had not signed the assignment of option and the money was not in the bank. I cannot accept that evidence. Mr Dunsford was an old friend. Mr Butkovic had not only agreed with him, but had registered the new company which was to own the option and carry out the development. Further, he was relying on the cash from Mr Dunsford to meet his own pressing liabilities.
Mr Butkovic did not mention Mr Dunsford because he did not want Mr de Saint Quentin to know the identity of the proposed assignee of the option. Mr Butkovic said in evidence:
I was concerned about how he might react to a sale to a friend of mine and I did not want anything to interfere with the sale.
I accept, however, that Mr Butkovic told Mr de Saint Quentin that he was calling more people in case the sale to Gordon and Michael Di Russo did not go ahead, and would sell it to anyone who had the money. That, in my view, is consistent with the email.
Further, I do not accept Mr de Saint Quentin's evidence that he was under the impression that the option would be sold to an entity in which he, Mr Butkovic, Gordon Di Russo and Michael Di Russo would each have an equal interest: see [76] above.
On the findings of fact I have made, the allegations in pars 37.1 and 38.1 of the statement of claim have not been made out. By 10 November 2006, the parties had not made the agreement pleaded in par 29. Further, Mr Butkovic did not represent that the assignment had been prepared in order to assign the option to a new joint venture entity, but told Mr de Saint Quentin that he may sell the option to a third party. Mr Butkovic did not disclose that he had already agreed to assign the option to a company associated with Mr Dunsford. In that respect, the phone call and email were likely to mislead. But that is not the plaintiffs' case.
If, contrary to my view, the plaintiffs have made out a claim under the Fair Trading Act, then in my view the losses flowing from the breach are the same (and subject to the same difficulties) as those for breach of fiduciary duty.

The counterclaim

Mr Butkovic counterclaims against Mr de Saint Quentin on five bases.
First, that he and Mr de Saint Quentin made a verbal agreement in about November 2005 that Mr Butkovic would pay Mr de Saint Quentin's portion of their joint living costs from time to time (they were then living in Mr de Saint Quentin's house) and that those payments were a loan to Mr de Saint Quentin. Mr Butkovic itemises many payments in two schedules to the defence and counterclaim, ranging from $2.30 for Nandos to nine payments totalling about $3,500 for body building supplements.
Second, Mr Butkovic claims repayment of loans to Mr de Saint Quentin for the purpose of joint business activities. In about November 2005, Mr Butkovic and Mr de Saint Quentin agreed to form a venture to seek out properties in Queensland over which they might secure options (similar to the Bluechip venture in Western Australia). In furtherance of this venture, Mr Butkovic and Mr de Saint Quentin arranged for the incorporation of Wynn Development Group Ltd (Wynn). They each held 50% of the shares in Wynn. Despite the equal ownership, Mr Butkovic paid all expenses. He says he paid Mr de Saint Quentin's share as a loan to be repaid on demand.
Third, when Mr Butkovic and Mr de Saint Quentin formed their joint venture with Mr Khan or Dynasty in 2005, Mr Butkovic made a capital contribution of $400,000. He paid $250,000 on his own behalf and $150,000 on behalf of Mr de Saint Quentin. He claims that $150,000 was a loan to be repaid on demand (the Bluechip loan).
Fourth, Mr Butkovic claims that leading up to the formation of the joint venture with Mr Khan and Mr de Saint Quentin, Mr de Saint Quentin represented:
(a)that he would be able to pay $100,000 towards the capital of Bluechip by 30 April 2006; and
(b)that he would be able to repay the Bluechip loan by 30 April 2006.
Mr Butkovic pleads that these representations were made in trade and commerce and, in reliance on them, he entered into the joint venture agreement and paid the $400,000 capital contribution to Bluechip, including $150,000 on behalf of Mr de Saint Quentin.
Finally, in about March 2006, Mr de Saint Quentin and Mr Butkovic made a further agreement to incorporate yet another company, Western Australia Wide Investments Pty Ltd. This company, despite its name, was formed for the purpose of purchasing a property at Crestmead in Queensland. The purchase price of $500,000 was paid by $150,000 from Bluechip's bank account, and a loan for the balance secured by a registered mortgage and by personal guarantees of both Mr de Saint Quentin and Mr Butkovic. Mr Butkovic claims he contributed the money paid by Bluechip, and made payments in respect of the property from time to time. He claims that Mr de Saint Quentin was to pay one half of the payments.
On these five causes of action Mr Butkovic claims:
(1)a declaration that the joint venture agreement made in Queensland with Mr de Saint Quentin and Mr Khan's company Dynasty terminated on 1 November 2006;
(2)payments under the personal loan agreement ($13,817.49) and the Wynn agreement ($24,067.85);
(3)payment of the $150,000 Bluechip loan, alternatively a declaration that Mr de Saint Quentin holds his shares in Bluechip on trust for Mr Butkovic, with an order that Mr de Saint Quentin transfer these shares to Mr Butkovic and resign as a director of Bluechip;
(4)payment of $111,302.50 under the Western Australia Wide Investment agreement, alternatively that Mr de Saint Quentin holds his shares in Western Australia Wide Investments on trust for Mr Butkovic and an order that he transfer those shares to Mr Butkovic.
In the defence to counterclaim, Mr de Saint Quentin:
(1)denies the personal loan agreement was made and denies the payments said to have been made on his behalf;
(2)admits to the agreement to undertake a business venture using Wynn as the venture vehicle. He denies however, that Mr Butkovic lent him funds. He says that the agreement was that Mr Butkovic would provide the funds for carrying on the venture, and be entitled to the repayment of his contribution in priority to Mr de Saint Quentin being entitled to any share of the profits;
(3)admits that there was an agreement between himself and Mr Butkovic under which Mr Butkovic would contribute $400,000 to Bluechip, of which $150,000 was on behalf of Mr de Saint Quentin. He says, however, that in about September 2006 he and Mr Butkovic agreed that if Mr de Saint Quentin would continue his endeavours to realise a profit in the Western Australia Wide Investments venture in Queensland, Mr Butkovic would agree to recover his contributions to Bluechip from the funds or profits of Bluechip, prior to Mr de Saint Quentin taking any share to which he might otherwise have been entitled. Mr de Saint Quentin pleads that the payments out of Bluechip (the two cheques of $100,000 each in November and December 2006) were payment of his contribution to Bluechip's capital;
(4)denies the Fair Trading Act claims. He admits that he said he would be able to pay $100,000 towards the capital of Bluechip by 30 April 2006 (the first representation pleaded). He also agrees that he and Mr Butkovic agreed among themselves that they would each contribute $250,000 to the working capital of Bluechip. He denies, however, that the representations were made in trade or commerce and that they were misleading or deceptive;
(5)finally, Mr de Saint Quentin pleads that the arrangements regarding the property purchased by Western Australia Wide Investments were that any payment (after the deposit) would be paid out of Bluechip's account by direct debit. He denies Mr Butkovic was to make any payments and denies that he was liable to repay Mr Butkovic one half of those payments.
I will deal with each of the five pleaded causes of action in turn. The parties concentrated on the plaintiffs' claim in the evidence, and there was little evidence directed specifically to the counterclaim.

The personal loans

I am satisfied that Mr Butkovic paid personal expenses incurred jointly with Mr de Saint Quentin and also some personal expenses incurred solely by Mr de Saint Quentin. But on the evidence I am not satisfied there was an agreement that those payments were a personal loan repayable on demand. In particular, Mr Butkovic's own evidence is that he offered to pay Mr de Saint Quentin's living expenses and that Mr de Saint Quentin would pay him back 'as soon as we started on‑selling the call options'. There is no evidence that, save for the option over Eighty Road, any call options were on sold.
As the trial progressed, Mr Butkovic had difficulty in establishing each of the many individual amounts by evidence, and effectively abandoned the claim.

Wynn Development Group

Mr Butkovic's evidence relating to the Wynn Development Group is at odds with his pleaded claim. He pleads that he made contributions from time to time to the joint business venture, one half of which was on behalf of Mr de Saint Quentin and repayable on demand. In his affidavit, however, he says that when he and Mr de Saint Quentin first started to do business together:
I soon realised that Phillipe had no money to contribute and that I was paying for most of our business expenses. As I liked Phillipe and I was staying at his house rent free I had no difficulty with that. We verbally agreed that all my expenses would be repaid from our first transaction and then we would share the profit equally.
On that evidence, the loan was not repayable on demand. There is no evidence that the verbal agreement was superseded. The claim in debt is not made out.

The Bluechip loan

The claim for the Bluechip loan is based on a verbal agreement that Mr Butkovic would contribute $400,000 to the capital of Bluechip, $150,000 of which was on behalf of, and as a loan to, Mr de Saint Quentin.
There is a difficulty in this claim arising out of the terms of the joint venture agreement between Mr Butkovic, Mr de Saint Quentin and Mr Khan (or Dynasty) made in Brisbane on 27 February 2006. That agreement is similar in several respects to the joint venture agreement made in Perth in July. Under cl 7 each venturer was to contribute capital as provided in item 6 of the schedule to the agreement. Under that item and cl 8 of the agreement Mr Khan and Dynasty were not required to contribute. Mr Butkovic was required to contribute $400,000 within seven days, and Mr de Saint Quentin $100,000 by 30 April 2006.
By cl 12:
All the written or verbal agreements are void, if any, so this Agreement comprises the entire agreement between the Venturers and may only be altered or amended by further written agreement between them.
On 10 May 2006 Mr Butkovic, Mr de Saint Quentin and Mr Khan met and resolved, among other things, that Mr de Saint Quentin would pay the $100,000 contribution by the end of June that year. Those minutes show that Bluechip may have been involved in other ventures (for example, the A and B Development Sites Pty Ltd).
Mr Butkovic and Mr de Saint Quentin worked together in pursuit of their ventures, including the joint venture with Gordon and Michael Di Russo, but also including their ventures in Queensland, until Mr de Saint Quentin returned to Queensland in about July 2006.
Mr de Saint Quentin agreed that $400,000 was paid by Mr Butkovic, including $150,000 on his behalf. Further, he agreed that he was meant to make a contribution of $250,000 (including the $150,000 paid by Mr Butkovic) in April. He further agreed that he made no contribution to Bluechip. He denied however, that any of the $400,000 contributed to Bluechip by Mr Butkovic was contributed on his behalf. Mr de Saint Quentin says that the ventures with Mr Butkovic were carried out in accordance with the terms of the written agreements.
He further said (and Mr Butkovic agreed) that after he had returned to Queensland, he spoke to Mr Butkovic by phone about the financial position of Bluechip. He told Mr Butkovic that he could not pay him but Mr Butkovic said:
Let's keep on going and let's make something out of these deals and I'll take it from the profits.
The evidence is, overall, not satisfactory. There is no doubt that Mr Butkovic contributed $400,000 to the joint venture. And, at least initially, there was an agreement between Mr Butkovic and Mr de Saint Quentin that $150,000 was to be injected on behalf of Mr de Saint Quentin. That agreement is not, on its face, consistent with the written joint venture agreement, which was expressed to comprise the entire agreement between them.

In any event, Mr Butkovic did not dispute that on the return of Mr de Saint Quentin to Queensland, in return for Mr de Saint Quentin looking after their interests in Queensland, he agreed to take his repayment from the profits of the ventures in which the two were engaged.
Accordingly, I find that Mr Butkovic is not entitled to recover the $150,000 as a loan repayable on demand. Mr Butkovic was, however, entitled (as against Mr de Saint Quentin) to recover the contributions he made to Bluechip from the profits of their business ventures before Mr de Saint Quentin was entitled to a share.

The Fair Trading Act claim

Mr Butkovic says that in February 2006 he contacted Mr Khan for advice regarding 'negotiation strategies'. He and Mr de Saint Quentin both met with Mr Khan, and during that meeting Mr Khan suggested the formation of a joint venture to do business in Perth. Mr Butkovic and Mr de Saint Quentin agreed. Mr Butkovic says:
We were excited about a joint venture with Zaffar because we thought he would be a great mentor. After about a week of discussions as to how the joint venture would work we agreed to sign a document to record the terms of our joint venture.
On 27 February, they had another meeting with Mr Khan and agreed on the name Bluechip as the name for the joint venture vehicle, and that company was formed on 28 February.
In his affidavit, Mr Butkovic refers to the agreement that Mr de Saint Quentin was to pay his share of the $400,000 start up capital by 30 April 2006, but does not refer to the representations, or to any reliance on them in entering into the joint venture agreement. His oral evidence was similarly limited.
Mr de Saint Quentin gave evidence consistent with that of Mr Butkovic, that the joint venture agreement with Mr Khan was instigated by Mr Khan inviting them to his office and proposing the move to Perth in order to carry on a venture in Western Australia.
In the circumstances, I am satisfied that it was Mr Khan's undoubted skills of persuasion, and not any representation by Mr de Saint Quentin, that led Mr Butkovic to enter into the joint venture.
In any event, the relief sought by Mr Butkovic is limited to orders declaring that Mr de Saint Quentin holds his shares in Bluechip on trust for Mr Butkovic, and that he transfer those shares and resign as a director of Bluechip. With the winding up of Bluechip, there is no utility in that relief.

Western Australia Wide Investments

There was little evidence before the court about the agreement on which Mr Butkovic makes this claim. It was common ground, however, that Western Australia Wide Investments owned one property, for which it paid $500,000. The purchase price was paid by $150,000 from Bluechip's bank account, and a loan for the balance. Mr Butkovic claims he contributed the money to Bluechip which was used to make the initial payment, and that he (or the company he owned with his brother, Millennium Constructions) made payments in respect of the property from time to time.
It appears to have been common ground, however, that it was Bluechip that was liable to make those payments. I am not satisfied that there was any agreement between Mr Butkovic and Mr de Saint Quentin under which Mr de Saint Quentin was liable to repay Mr Butkovic for payments he had made.

The measure of damages

I return now to the plaintiffs' claim. The plaintiffs plead that they suffered loss and damage by reason of Mr Butkovic's misleading and deceptive conduct, and by his breach of his fiduciary obligations. They do not plead particulars of the loss claimed.
In the weeks leading up to trial, the plaintiffs brought an application to split the trial of liability and remedy. They frankly told the court that they were not then able to produce all of the evidence that they would like to put forward on the assessment of damages. On 14 October 2010, I heard and refused the application. I was not satisfied that the separation of issues would produce any benefit in efficiency or any saving in time, inconvenience or expense: see, for example, Landsdale Pty Ltd v Moore [2009] WASCA 176. I was also concerned about the practical effect of splitting the trial when Mr Butkovic was then committed to the District Court of Western Australia on serious criminal charges, and any resumption of the hearing would need to accommodate the course of those proceedings. The plaintiffs did not apply to adjourn the trial, but proceeded on the evidence they had available.
The plaintiffs originally sought an order that Mr Butkovic and Bluechip account to Gordon and Michael Di Russo for any profit made by reason of their breaches of fiduciary duty. They abandoned the claim for an account, and relied on the alternative claim for equitable damages.
The remedy sought has important implications to the approach of the court. Where a fiduciary is liable to account for a profit made in breach of fiduciary duty, 'it is ordinarily immaterial to the fiduciary's liability to account that the person to whom the fiduciary obligation is owed could not have earned the profit or gain': Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 562 ‑ 563.
Different considerations, however, apply where the remedy sought is a personal remedy such as compensation for loss caused by the fiduciary acting in breach of duty. In those cases, 'there directly arises a need to specify criteria for a sufficient connection (or 'causation') between breach of duty and the profit derived, the loss sustained, or the asset held': Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 468. Equitable compensation is designed to 'make good a loss in fact suffered by the beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach': Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] 1 AC 421, 439; O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272 - 273; Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 [432]. Mr Butkovic is not liable to compensate the plaintiffs for an amount that exceeds the loss and damage they have actually suffered. In assessing that loss, I am entitled to use the full benefit of hindsight: Target Holdings Ltd (432 ‑ 437); Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 [35], [50].
In the circumstances of this case, whether the plaintiffs could have themselves profited from the exercise of the option, and suffered loss as a result of its assignment, is crucial.
In submissions, the plaintiffs point to what they describe as four reference points that will assist the court in placing a figure on their loss:
(1)the amount Mr Butkovic in fact realised by assigning the option to Eighty Road ($220,000, including GST);
(2)the difference between the price that Bluechip or its successor joint venture vehicle would have been obliged to pay for the property at settlement ($2.3 million, including the security deposit due in November 2006) and the unimproved market value indicated in the valuations obtained;
(3)the difference between the price that Bluechip or its successor would have been obliged to pay for the property at settlement and the improved market value indicated in the valuations obtained;
(4)the profits that would have been realised had Bluechip successfully completed the subdivision and development itself and sold the resulting lots, as forecast in the cash flow figures prepared by Michael Knowles.
The plaintiffs' reference points are a convenient way to consider the question of loss. I will leave the amount in fact realised by assigning the option to last.
I will consider first the loss caused to the joint venture as a result of the breach of duty. I will then consider what loss has been suffered by the individual plaintiffs who were entitled to share in the joint venture's profits.

The value of the land

The first reference point to consider is the value of the land. The plaintiffs assert that it was worth considerably more than the price they were obliged to pay under the option. To prove the value of the land, they appended to the witness statements of various of their lay witnesses:
(1)a valuation report of the Eighty Road land prepared by Herron Todd White, Valuers, dated 7 August 2006; and
(2)a two page letter, said to be a valuation report, by Preston Rowe Patterson, dated 26 June 2006.
The same reports were attached to an affidavit of Mr Butkovic (prepared earlier in the proceedings while he was legally represented); that affidavit stood as his witness statement at trial although not prepared for that purpose. Because both parties had attached the reports, I allowed them into evidence. In particular, in my opinion, by appending the reports Mr Butkovic admitted the information in the documents: Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134, 143.
This was not a satisfactory way for either party to introduce expert evidence relating to value. There was no application under O 36A of the Rules of the Supreme Court 1971 (WA). The procedure for disclosure and production of expert evidence should not be circumvented in this manner.
Further, neither party led evidence of the facts necessary to provide a proper foundation for the opinions expressed. The foundation for an expert's opinion must be adequately proved. '[S]o far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way': Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, 743 ‑ 744 [85]. This can give rise to problems in valuation evidence, where available market evidence is limited. But to the extent the expert must then rely on judgment and experience, the reasoning process should still be revealed. In Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295, McLure J said at [72]:
[As] a matter of principle a valuer using the conventional approach should explain the steps in his reasoning and analysis from his basket of sales evidence to his opinion as to value. The correct principle is, in my view, that the valuer must reveal as far as possible the process of reasoning actually employed so as to enable the Court to evaluate the evidence and the expert's conclusions: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 729‑745. (original emphasis)
The failure of the parties to call the valuers, and to prove the factual foundation for the opinion on value, leaves some uncertainty about the proper use of the evidence: see generally, Heydon J D, Cross on Evidence (8th Aust ed, 2010) [1645] ‑ [1680]. In the end, neither party objecting to the evidence, I consider that each has waived the rules relating to admissibility. Admitting the evidence left the question of how it may be used. The evidence is relevant, and there are no considerations of public policy that require its rejection: see Hankinson as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279 [44] (EM Heenan J). But I can give it very limited weight.
First, to the extent the plaintiffs rely on an admission by Mr Butkovic as to the reports of the valuers, the probative force of the evidence once admitted must be determined by the circumstances in which the admission was made, and may depend upon the party's source of knowledge: Lustre Hosiery v York (143). There is no evidence that Mr Butkovic had either training or experience to enable him to make a fair assessment of value. His evidence is that he told the valuer how much he wanted to sell the option for, and accordingly how much the valuation needed to be, and the report came in according to his requirements. I do not need to make a finding on that assertion. It is, however, indicative of his lack of understanding of the valuation process.
Second, there has been no opportunity for the evidence to be tested, or importantly in this case, for it to be explained.
The Herron Todd White valuation is said have been carried out by the 'direct comparison method' based on seven comparable sales. Those sales varied from $6.5 million for a 10.88 ha property to $730,000 for a 2.04 ha property (the Eighty Road property, two lots combined, is about 9.2 ha). The rate per hectare varies from $110,000 to $600,000. The author concluded:
Due to the fact it is considered likely that the subject property will be rezoned and subdivision of this site be made possible, I have applied a rate to the middle of this value range at $350,000/ha to the subject property.
The seven compared properties sales are very briefly described, but the report does not explain how they are comparable, let alone directly comparable to the subject land. Three of them are said to lack development potential. Indeed, given the range of values, I struggle to see any basis for describing them as comparable.
There is also no evidence regarding these seven sales other than the statement that the valuer 'examined market activity within the locality and also searched the records of the Department of Land Information for details of comparable sales.' That is, the facts upon which the opinions expressed in the report are based have not been proved and I have no way of evaluating the evidence.
Finally, there is no explanation of why the valuer chose and applied a rate per hectare in the middle of the rates for the properties he described as comparable. The fact that the subject property is likely to be rezoned and may be subdivided does not explain the choice.
The second report, by Preston Rowe Patterson, was made in June 2006. It has similar problems. The author refers to a request for 'indicated values for a 2000 m² and 5000 m² subdivided allotment in the Baldivis residential district'. After a very brief description of the property and its location (the whole report is two pages long), the author suggests land values in the range of $350,000 ‑ $380,000 for 2,000 m²lots and $420,000 ‑ $450,000 for larger lots. I assume that the values given are improved values ‑ that is, following subdivision with connection to services. The only support for the suggested value range is recent sales information for four lots, only one of which is described as similar to the subject property.
As in the Herron Todd White report, the underlying facts regarding the comparable sales are not proved.
I am not satisfied that this evidence enables the court to make a finding as to the value of the Eighty Road land, either unimproved or improved.
The court has before it evidence of the amount paid by the joint venture in 2006, and also that the land sold in May 2010 as two lots for a total of $2.5 million. On the evidence before me, I am not satisfied that the land was worth the amount set out in either valuation report, or indeed that it was worth any more than the joint venture was required to pay for it on exercising the option.

The profits that would have been realised

The parties believed the security deposit ($99,900) had to be paid by 19 November 2006. On my reading of the option, it had to be exercised within seven business days of 19 November 2006. The extra week makes little difference. At that time the joint venturers were required to pay $99,900 as a non‑refundable deposit. They would also have been required to pay, or make arrangements to pay, up to $200,000 ‑ the amount Mr Butkovic sought as reimbursement of Bluechip's expenses.
The money had to come from external sources. Bluechip had only a few thousand dollars in its bank account. There is no evidence that any of the venturers had either capital or income. Tony Di Russo had the capacity to lend the money for the deposit and may have decided to take equity in the project, but no proposal had been put to him, even as late as 16 November 2006.
Even if the parties could borrow the deposit, and make a satisfactory arrangement with Bluechip, to exercise the option, the joint venture participants were required to pay the balance of $2.2 million on settlement 90 days after giving notice under the option. Development costs were estimated to be more than $1 million. But (subject to the evidence discussed below) the plaintiffs produced no evidence from any broker, or bank, or other institution regarding the availability of finance; no evidence regarding their own financial positions and ability to service borrowings; and no evidence about the availability of equity finance.
The plaintiffs relied on the following evidence. First, Mr Knowles prepared a cash flow forecast shortly after the meeting on 14 September 2006. This document was based on the costs and estimates provided to him at the meeting, and prepared by Mr Butkovic and Michael Di Russo. Total costs of the development (not including any interest on borrowings) were approximately $3.9 million. That amount would be met by a mix of debt and equity. Mr Knowles forecast subdivision approval between December 2006 and April 2007, marketing to commence in June 2007, and construction in October, with issue of title in February 2008 and settlement on all lots by March 2008. Based on those times, the project would carry the burden of servicing borrowings and meeting outgoings for a comparatively short period. The plaintiffs rely on this forecast to show both their capacity to finance the development, and the likely profits to be realised.
Second, the plaintiffs produced a letter from Ray Weir of Finance Solutions (WA) Pty Ltd, dated 26 October 2006, and addressed to Gordon Di Russo. Mr Weir was not called.
I admitted the letter on a limited basis - it shows that the venturers were taking steps consistent with developing the land, rather than selling the option. The letter was, in that way, relevant to showing the new venture contemplated by the parties. It was not evidence that finance was in fact available. It would be probative of the availability of finance only to the extent that its hearsay content would be admitted. The letter was not admissible as a business record. In any event, the letter indicated only that two possible lenders were willing to consider an application, subject to various conditions including a sworn valuation. No sworn valuation was obtained.
Finally, Mr Knowles gave evidence of his dealings with Mark Ashdown of Merit Finance, whom he engaged to speak to commercial lenders so as to get a 'feel' about their interest in funding the project. There was no evidence, however, that an application for finance was ever made.
There is no evidence that any equity investors other than Tony Di Russo were identified or approached.
I also do not accept that Mr Knowles' forecast is an accurate representation of likely cash flows in the development if it had proceeded. To be fair to Mr Knowles, he described his cash flow as preliminary, and acknowledged that the planning time frame was short. It was based on the time frames given to him by Mr Butkovic and Michael Di Russo ‑ not a time proposed by him. He did not prepare an alternative forecast, allowing for contingencies.
Even on the material available in October to November 2006, including the valuation report by Herron Todd White and the preliminary planning report by Taylor Burrell Barnett, the parties had been advised that rezoning of the land to permit its redevelopment and conditional subdivision approval would take about two and a half years. Subsequent events show even that estimate may have been optimistic.
In August 2007 the City of Rockingham advised the then developers that the Water Corporation was objecting to rezoning applications in the relevant area as current infrastructure was at capacity and a new plant was required. The land was not developed at the time of trial. The forecast on which the plaintiffs base their claim is hopelessly unrealistic.

If development approval were delayed, the developers would have to carry interest on any debt finance, and outgoings on the land for several years before the project produced income. The plaintiffs had allowed for no delays.
The object of an award of compensation in this case is to restore the plaintiffs to the position they would have been in had Mr Butkovic not breached his duty by assigning the option: Nocton v Lord Ashburton [1914] AC 932, 952; O'Halloran v R T Thomas & Family Pty Ltd(272). There was no adequate evidence about the availability of either debt or equity finance for such a project. The plaintiffs' expectations, having regard to their lack of experience in development, is no substitute for evidence.
I am not satisfied that the plaintiffs lost an opportunity to profit from the development of the land, and their losses are not measurable by that lost opportunity.

The amount paid

In the circumstances, the amount actually paid to Mr Butkovic by Mr Dunsford is the best measure available of the loss to the joint venture.
The price paid by Mr Dunsford may not show the true value of the option. At the time of the sale, a prospective purchaser would have to commit $99,900 for the security deposit within a very short time. The purchaser would need to rely on the due diligence carried out by Bluechip, as there would be very limited opportunity to carry out its own. Had Mr Dunsford not bought the option, it would be an exercise in guessing to put any value on it.
At least to Mr Dunsford, however, the option had a value of $200,000 plus GST. That money was paid to Bluechip and, to the extent it was profit of the joint venture, should have been distributed. The breach of fiduciary duty in selling the option without the knowledge of Mr Butkovic's co‑venturers has caused loss measurable in this way.
None of the plaintiffs made any financial contribution to the joint venture. There is nothing that, in my opinion, calls for assessment of loss and compensation other than in accordance with the written joint venture agreement. Even this comparatively simple route, however, raises further questions.
First, the joint venture agreement provides for profit sharing 'after deducting all the Expenses from the profits, from the particular property': cl 11(g). It is necessary to identify the expenses for the Eighty Road land. Bluechip had expended significant sums since its incorporation in February 2005, but not all of it relates to the Eighty Road land. There is little evidence about other deals pursued by the joint venture, but the parties held at least one other option.
Some payments can confidently be identified as attributable to the Eighty Road land:
(1)$1,200, payment to Herron Todd White, valuers;
(2) $2,500 to Whelans, town planners;
(3) $3,078, payments to Taylor Burrell Barnett, town planners.
There are several other small invoice amounts in evidence. Some of Bluechip's general overheads (such as rent) may also properly be apportioned to the Eighty Road land. Bluechip was paying $385 per month for the office in St Georges Terrace, and $580 per week for a house in Nedlands which was used as its office (as well as the residence of Mr Butkovic and Mr de Saint Quentin) from about April 2006. On the evidence available, it is impossible to make a precise calculation. Overall, (and being conservative) I allow an amount of $10,000 inclusive for expenses for the Eighty Road property.
Second, Gordon and Michael Di Russo were each entitled to 5% of the profit so calculated and Bluechip to the balance. Michael Di Russo, however, received a retainer that was an advance on profits. He received $350 a week for four weeks from 10 March to 7 April 2006, and then $450 a week until payments stopped on 26 October 2006 (for 28 weeks). The payments total $14,000. None of the others received any payment for their efforts on behalf of the joint venture. It is appropriate that the amount received as retainer be set off as provided in the agreement. Michael Di Russo has only suffered a loss if his share of profits would have been more than $14,000.
Finally, Mr de Saint Quentin was not entitled to directly share in profits under the joint venture agreement. Bluechip was entitled to a 90% share of any profits, and he owned 25% of Bluechip. Mr de Saint Quentin and Mr Butkovic had agreed that Mr Butkovic would recover his initial cash contribution to Bluechip before the profits of Bluechip's business ventures were distributed between them. Mr de Saint Quentin pleads that agreement in response to the counterclaim. If I am wrong in my finding that there was no breach of duty to Mr de Saint Quentin, he has suffered no loss.
I am not satisfied that any of the plaintiffs is entitled to damages under the Fair Trading Act. If I am wrong in that conclusion, then in my opinion the loss suffered by conduct of Mr Butkovic in contravention of the Act should be measured in the same way.
Having regard to each of those matters, I find as follows:
•Gordon Di Russo would have been entitled to 5% of the profit on the sale of the option by Bluechip to Eighty Road Pty Ltd and his loss was $9,500.
•Michael Di Russo would also have been entitled to 5%, but less amounts already received by way of retainer. Those amounts exceed his share of the profits, and he suffered no loss.
•Mr de Saint Quentin suffered no loss.

Conclusion

There should be judgment for the plaintiffs to the extent that:
(1)the first two plaintiffs are entitled to a declaration that the second defendant, by causing the assignment of the option to Eighty Road Pty Ltd, breached fiduciary duties he owed to each of them under the joint venture agreement made in July 2006.
(2)the first plaintiff is entitled to equitable compensation in the sum of $9,500.
The plaintiffs' claim is otherwise dismissed.
The counterclaim against the third plaintiff is dismissed.

Details

AGLC: Di Russo v Butkovic [2011] WASC 156
Case: [2011] WASC 156
Decision Date: 17 JUNE 2011

CaseChat Overview and Summary

Di Russo v Butkovic was a case that involved a dispute over a venture to develop land. The parties involved were Gordon and Michael Di Russo and Butkovic. The dispute centred around whether there was a joint venture between the parties and whether it gave rise to fiduciary duties. The case was heard in the Supreme Court of New South Wales.

The primary legal issue the court had to decide was whether there was a joint venture between the parties and, if so, what the nature of the relationship was. The court also had to determine whether the relationship gave rise to fiduciary duties and whether there was a breach of those duties. Additionally, the court had to consider whether there was misleading or deceptive conduct in trade or commerce and how to assess the damages.

The court found that there was a joint venture between the parties and that it gave rise to fiduciary duties. The critical feature of a fiduciary relationship, according to the court, was that the fiduciary undertakes or agrees to act for or on behalf of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The court emphasised that the contractual foundation was all important and that the fiduciary relationship must accommodate itself to the terms of the contract. The court held that there was a breach of fiduciary duties and that the payment received by the defaulting fiduciary should be returned.

The court ordered that the payment received by the defaulting fiduciary be returned to the other party. The court also noted that the assessment of damages would be made on the basis of the loss suffered by the party who was owed the duty.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The critical feature of a fiduciary relationship is 'that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense': Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 ‑ 197 [70] ‑ [71]. From this power or discretion comes the duty to exercise it in the interests of the person to whom it is owed: Hospital Products (97); John Alexander's Clubs Pty Ltd [87]. Where a written contract provides the foundation for the fiduciary relationship, the first step is to consider the rights and liabilities arising under the contract.In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction. (Hospital Products Ltd (97); see also John Alexander's Clubs Pty Ltd [90] ‑ [91]). The joint venture agreement prepared by Mr Khan is, in parts, unsophisticated in its wording. But it was the foundation of the parties' relationship from about July 2006. There is no reason why the language in which the parties expressed their agreement cannot be construed in the same way as any commercial contract, having regard to the text, the commercial purpose and the objects of thecontract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]. The key elements of the agreement made between the parties were: (1)Mr Butkovic and Mr de Saint Quentin were not, individually, parties to the venture; (2)each of the venturers (that is, Gordon and Michael Di Russo and Bluechip) was to share in the profits of the company to the extent specified in the agreement (cl 1);(3)Bluechip was a vehicle for the conduct of the enterprise engaged in by the venturers (cl 2); (4)the directors of Bluechip would administer the joint venture and make all the decisions (cl 3 and cl 5); (5)property would be acquired by Bluechip 'for the purposes of the Venture' and the venture would continue until that property was sold, or by the venture being ended by notice or by it running out of money (cl 4); (6)the venturers agreed to act in utmost good faith in their dealings with each other (cl 6);(7)while the Di Russo's were not contributing money, the agreement acknowledged that they gave services free of charge (cl 11(b)), and that each of them was entitled to profits from properties bought while they were working for Bluechip (cl 11(d)).

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Citations

Di Russo v Butkovic [2011] WASC 156

Cases Citing This Decision

Cases Cited

Statutory Material Cited

John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19
Citation 1 (Para 13)

…tial question of whether Mr Butkovic was in a fiduciary relationship with the plaintiffs: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 [44]. Even where there is a joint venture, whether the relationship between joint venturers is fiduciary depends upon 'the form whi…
Landsdale Pty Ltd v Moore [2009] WASCA 176
Citation 2 (Para 2)

…ration of issues would produce any benefit in efficiency or any saving in time, inconvenience or expense: see, for example, Landsdale Pty Ltd v Moore [2009] WASCA 176. I was also concerned about the practical effect of splitting the trial when Mr Butkovic was then committed to the District Court of Western Australi…
Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749
Citation 3 (Para 11)

…angement created by the agreement is properly described as a joint venture is difficult to assess. In Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749 [80] - [81], Crennan J identified six recognisable and common characteristics [which] can be found in various permutations and constellations such th…
Hankinson as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279
Citation 4 (Para 5)

…siderations of public policy that require its rejection: see Hankinson as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279 [44] (EM Heenan J). But I can give it very limited weight.…
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55
Citation 5 (Para 19)

…od from what Mr Butkovic said and did ‑ and not what each might have intended in his own mind: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [34]; Gissing v Gissing [1971] AC 886, 906.…
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52
Citation 6 (Para 3)

…s any commercial contract, having regard to the text, the commercial purpose and the objects of thecontract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22].…
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35
Citation 7 (Para 3)

…e and the objects of thecontract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22].…
Duke Group Limited (in Liq) & Anor v Pilmer & Ors (No.6) No. Scciv-92-1874 [2004] SASC 147
Citation 8 (Para 1)

…al Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 ‑ 197 [70] ‑ [71]. From this power or discretion comes the duty to exercise it in the interests of the person to whom it is owed: Hospital Product…
Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295
Citation 9 (Para 4)

…y on judgment and experience, the reasoning process should still be revealed. In Western Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295, McLure J said at [72]: [As] a matter of principle a valuer using the conventional approach should explain the steps in his reasoning and analysis from…
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15
Citation 10 (Para 5)

…ng that loss, I am entitled to use the full benefit of hindsight: Target Holdings Ltd (432 ‑ 437); Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 [35], [50].…
Pilmer v Duke Group Ltd (In Liq) [2001] HCA 31
Citation 11 (Para 1)

…sense': Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 ‑ 197 [70] ‑ [71]. From this power or discretion comes the duty to exercise it in the interests of the person to whom it is ow…
Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 1670
Citation 12 (Para 20)

…m the point of view of reasonable persons on both sides, the dealings show a concluded bargain': see Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32, 82. In particular, I am not satisfied that there ever was an agreement as to how the new entity would be held, or the terms on which Bluechip would assi…
Beach Petroleum NL v Kennedy [1999] NSWCA 408
Citation 13 (Para 5)

…KHL 10; [1996] 1 AC 421, 439; O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272 - 273; Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 [432]. Mr Butkovic is not liable to compensate the plaintiffs for an amount that exceeds the loss and damage they have actually su…
Maguire v Makaronis [1997] HCA 23
Citation 14 (Para 5)

…r a sufficient connection (or 'causation') between breach of duty and the profit derived, the loss sustained, or the asset held': Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 468. Equitable compensation is designed to 'make good a loss in fact suffered by the beneficiaries and which, using hindsight an…
Breen v Williams [1996] HCA 57
Citation 15 (Para 10)

…ir position or powers to their own, or a third party's, advantage, unless with the free and informed consent of the joint venturers: Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 113.…
Warman International Ltd v Dwyer [1995] HCA 18
Citation 16 (Para 4)

…ility to account that the person to whom the fiduciary obligation is owed could not have earned the profit or gain': Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 562 ‑ 563.…
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd [1992] NSWCA 168
Citation 17 (Para 20)

…lar time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. ( Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110, 11,117‑8, see also Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 [71]‑[82]). But the relationship between the parti…
Johnson v Perez [1988] HCA 64
Citation 18 (Para 20)

…become sufficiently specific to give rise to legal rights and duties. ( Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110, 11,117‑8, see also Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 [71]‑[82]). But the relationship between the parties had be…
United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49
Citation 19 (Para 11)

…ther any particular undertaking constitutes a joint undertaking for mutual commercial gain. See also United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1, 10.…
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64
Citation 20 (Para 1)

…etion which will affect the interests of that other person in a legal or practical sense': Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97; Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 ‑ 197 [70] ‑ [71]. From this power or discre…
Lustre Hosiery Ltd v York [1935] HCA 71
Citation 21 (Para 2)

…nto evidence. In particular, in my opinion, by appending the reports Mr Butkovic admitted the information in the documents: Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134, 143.…
Birtchnell v Equity Trustees, Executors and Agency Co Ltd [1929] HCA 24
Citation 22 (Para 5)

…rtained also from the course of dealings actually pursued by the parties to the joint venture: Birtchnell v Equity Trustees Executors & Agency Co Ltd [1929] HCA 24; (1929) 42 CLR 384, 408. That is, regard must also be had to what the parties did within that agreement.…
Howard Smith & Co Ltd v Varawa [1907] HCA 38
Citation 23 (Para 9)

…That conduct may be regarded for the purpose of ascertaining whether there was a completed contract: see, for example, Howard Smith & Co Ltd v Varawa [1907] HCA 38; (1907) 5 CLR 68, 78; Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144, 161.…
Youyang Pty Ltd v Minter Ellison [2003] HCATrans 745
Citation 24 (Para 5)

…am entitled to use the full benefit of hindsight: Target Holdings Ltd (432 ‑ 437); Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484 [35], [50].…
O'Halloran v R.T. Thomas & Family Pty Ltd [1999] HCATrans 232
Citation 25 (Para 5)

…the breach': Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] 1 AC 421, 439; O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272 - 273; Beach Petroleum NL v Kennedy [1999] NSWCA 408; (1999) 48 NSWLR 1 [432]. Mr Butkovic is not liable to compensate the plaintiffs for an amo…
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305
Citation 26 (Para 4)

…s the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way': Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, 743 ‑ 744 [85]. This can give rise to problems in valuation evidence, where available market evidence is limited. But to the ex…
Bartel and Schneider (No. 2) [2012] FamCA 890
Citation 27 (Para 4)

…ased on "assumed" or "accepted" facts, they must be identified and proved in some other way': Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, 743 ‑ 744 [85]. This can give rise to problems in valuation evidence, where available market evidence is limited. But to the extent the expert must…
Target Holdings v Redfern [1995] UKHL 10
Citation 28 (Para 5)

…he beneficiaries and which, using hindsight and common sense, can be seen to have been caused by the breach': Target Holdings Ltd v Redferns (a firm) [1995] UKHL 10; [1996] 1 AC 421, 439; O'Halloran v R T Thomas & Family Pty Ltd [1998] NSWSC 596; (1998) 45 NSWLR 262, 272 - 273; Beach Petroleum NL v Kennedy [1999]…

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