Dreamtime Supply Company Pty Ltd v Steadfast ICT Security; Pty Ltd (No 2)

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

COURT OF APPEAL

Case Title:	Dreamtime Supply Company Pty Ltd v Steadfast ICT Security Pty Ltd (No 2)
Citation:	[2022] ACTCA 57
Hearing Date:	18 May 2022
Decision Date:	21 October 2022
Before:	Elkaim and Stewart JJ, McWilliam AJ

Decision:	1.	The appeal be allowed, to the extent set out in orders 2 and 3 by consent, and also to the extent in order 4, but that the appeal be otherwise dismissed.
2.	Order 1 of the primary judge, made on 30 August 2021, be set aside and in lieu thereof the following order be made:

1. Order that Dreamtime Supply Company Pty Ltd account to Steadfast ICT Security Pty Ltd for profits in equity in the sum of $1,179,466.15.
3. Order 14 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made:
14. The plaintiff may only recover a total of $1,179,466.15 from all defendants exclusive of any amount recovered in relation to the costs of the proceedings.

4. Order 13 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made:
13. Nenad Stefanovic pay damages to Steadfast in the sum
of $50,594.69.

5.   The respondent pay 75 per cent of the third appellant’s
costs of the appeal.
6.   The first, second and fourth appellants, jointly and
severally, pay the respondent’s costs of the appeal.
7.    If the third appellant or the respondent wishes to contend for a different costs order on the appeal to that in order 5 above or a different costs order to order 3 of the primary judge, made on 1 March 2022:
(i)      That party file and serve short written submissions in support of their position within 10 days;
(ii)      The other party file and serve short written submissions in response within a further 7 days; and
(iii)      The competing contentions be determined on the papers.

Catchwords:

APPEAL – APPEAL FROM SUPREME COURT – Whether

primary judge erred in his findings regarding the causal relation of

the first appellant’s pleaded breaches – whether primary judge

erred in holding there was likely a scheme between the second appellant and another person to terminate a contract in favour of

the respondent – whether primary judge erred in holding the fourth appellant breached his director’s duties to the respondent – whether primary judge erred in finding the third appellant’s

breaches of contract and fiduciary duties caused the respondent’s loss – whether primary judge erred in finding the third appellant

liable to pay the respondent under s 1317H of the Corporations
Act 2001 (Cth)

EQUITY – FIDUCIARY OBLIGATIONS – Where principal would in any event have suffered losses – where profits nonetheless made by reason of breach of fiduciary obligations – whether want

of causation in respect of loss relevant to the counterfactual
enquiry required for an account of profits

STATUTES – INTERPRETATION – Corporations Act 2001 (Cth) ss 182 and 183 – consideration of content of statutory duties –

whether proscriptive or prescriptive

Legislation Cited:

Corporations Act 2001 (Cth) ss 180, 181, 182, 183, 1317H
Court Procedures Rules 2006 (ACT) rr 406, 407
Evidence Act 2011 (ACT) s 140
Trade Practices Act 1974 (Cth) s 82

Cases Cited:

Adler v ASIC [2013] NSWCA 131; 179 FLR 1
Agricultural Land Management Ltd v Jackson (No 2) [2014]
WASC 102; 48 WAR 1

Ancient Order of Foresters in Victoria Friendly Society Ltd v Life

Plan Australia Friendly Society Ltd [2018] HCA 43; 265 CLR 1
Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23;
226 CLR 507
Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; 191
FCR 1
Breen v Williams [1996] HCA 57; 186 CLR 71
Browne v Dunn (1893) 6 R 67 (HL)
Chaplin v Hicks [1911] 2 KB 786
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Doyle v ASIC [2005] HCA 78; 227 CLR 18
Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628;
188 ALR 566
Gunasegaram v Blue Visions Management Pty Ltd [2018]
NSWCA 179; 129 ACSR 265

Holyoake Industries (Vic) Pty Ltd v V–Flow Pty Ltd [2011] FCA

1154; 213 IR 55
Jenyns v Public Curator (Qld) (1953) 90 CLR 113

R v Byrnes (1995) 183 CLR 501

Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789;
101 ACSR 233
Re Earth Civil Australia Pty Ltd (in liq) [2021] NSWSC 966
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Steadfast ICT Security Pty Ltd v Peak (No 2) [2021] ACTSC 319
Steadfast ICT Security Pty Ltd v Peak (No 3) [2022] ACTSC 31
Steadfast ICT Security Pty Ltd v Peak [2021] ACTSC 199
V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013] FCAFC
16; 296 ALR 418
Warman International Ltd v Dwyer (1995) 182 CLR 544
Wilson HTM Investment Group Ltd v Pagliaro [2012] NSWSC
1068; 226 IR 75

Texts Cited:

Austin RP and Ramsay IM, Ford, Austin and Ramsay’s Principles

of Corporations Law (17th ed, LexisNexis, 2018)

Parties:

Dreamtime Supply Company Pty Ltd (First Appellant)

Gareth Peak (Second Appellant)
Nenad Stefanovic (Third Appellant)
David Glavonjic (Fourth Appellant)

Steadfast ICT Security Pty Ltd (Respondent)

Representation:

Counsel

P Walker SC and B Buckland (Appellants)
E Cox SC and A Munro (Respondent)

Solicitors

Bradley Allen Love Lawyers (Appellants) Mackenzie Workplace Law (Respondent)

File Number:

ACTCA 45 of 2021

Decision under appeal:

Court/Tribunal:	ACT Supreme Court
Before:	Mossop J
Date of Decision:	30 August 2021
Case Title:	Steadfast ICT Security Pty Ltd v Peak
Citation:	[2021] ACTSC 199
Court/Tribunal:	ACT Supreme Court
Before:	Mossop J
Date of Decision:	17 December 2021
Case Title:	Steadfast ICT Security Pty Ltd v Peak (No 2)
Citation:	[2021] ACTSC 319
Court/Tribunal:	ACT Supreme Court
Before:	Mossop J
Date of Decision:	1 March 2022
Case Title:	Steadfast ICT Security Pty Ltd v Peak (No 3)
Citation:	[2022] ACTSC 31

Contents

Elkaim J	[1]
Stewart J	[9]
Introduction	[9]
The appeal	[24]
Grounds 1: The decision to part ways with Dreamtime	[26]
Introduction	[26]
The primary judge’s findings and reasoning	[28]
The appellants’ submissions	[48]
Consideration	[50]
Grounds 2: Cause of gain in relation to particular clients	[58]
Introduction	[58]
(1) Anomali/Department of Parliamentary Services	[60]
The primary judge’s findings and reasoning	[60]
The appellants’ submissions	[68]
Consideration	[72]
(2) Department of Agriculture	[75]
The primary judge’s findings and reasoning	[75]
The appellants’ submissions	[79]
Consideration	[80]
(3) Australian Financial Security Authority (AFSA)	[83]
The primary judge’s findings and reasoning	[83]
The appellants’ submissions	[90]
Consideration	[92]
(4) Nectar Mortgages	[96]
Ground 3: GEO Group	[97]
Introduction	[97]
The primary judge’s findings and reasoning	[98]
The appellants’ submissions	[110]
Consideration	[113]
Ground 4: Dreamtime as a reseller of AlienVault software	[124]
Introduction	[124]
Mr Glavonjic’s submissions	[130]
Consideration	[133]
Grounds 5 and 6: Mr Stefanovic’s liability	[141]
Introduction	[141]
The primary judge’s findings and reasoning	[145]
Ground 5: loss of a chance	[158]
Ground 6: liability for Dreamtime’s profits under s 1317H	[164]
The parties’ submissions	[167]
Is failure to inform a breach of ss 182 and 183 of the Corporations Act?	[172]
Conclusion	[192]
McWilliam AJ	[196]
Elkaim J:

1. I have had the benefit of reading, in draft form, the reasons of Stewart J. I agree with
those reasons and with the orders that his Honour proposes.
2. I would like however to add a short comment about appeal ground 6. Stewart J has
observed that:
Steadfast does not contend, either by a notice of contention or in its submissions, that the
award of $202,378.75 can otherwise be supported.

On one reading of [329] of the primary judgment (the ‘August’ judgment) it might be
suggested that the primary judge’s finding against Mr Stefanovic encompassed both
positive acts by Mr Stefanovic as well as his failure to inform on the misdeeds of Mr
Peak. This is encapsulated in these words from [329]:
In my view, Mr Stefanovic’s active assistance to Mr Peak (and Mr Glavonjic) in preparing for
the transfer of Steadfast’s business to Dreamtime was in breach of the obligation to “act
honestly” and to “do all in [his] power to promote or develop and extend [Steadfast’s]
reputation and business”.

4.       This finding however is to be contrasted with this sentence a little later in the same
paragraph:
Further, in so far as Mr Stefanovic was made aware of Mr Peak and Mr Glavonjic’s plans, he
breached those same obligations by failing to make those plans known to the director of the
company, Ms Batley
5.       More significant, perhaps, is the contrast with the final sentence of [335]:
The evidence establishes a close and familiar relationship between Mr Peak and Mr
Stefanovic and I draw the inference that, as a result of that relationship, Mr Stefanovic was
aware of Mr Peak’s intention and aware of the facts that would render Mr Peak’s conduct a
breach of his fiduciary, contractual and statutory duties.
6.       Thus even if it be thought that the loss of $151,829.06 could be attributed to both
positive actions of Mr Stefanovic and also to his failure to disclose the actions of Mr
Peak, the primary judgment does not make any such distinction.
7.       Therefore, the consequence of success on ground 6 must topple the whole of the above
amount. This conclusion is strengthened by the finding in the ‘December’ judgment of
the primary judge, at [60], that Mr Stefanovic’s conduct was not “by itself” the cause of
the loss.
8.       As Stewart J has said, the damages awarded against Mr Stefanovic, other than to the
extent of $50,594.69, cannot “otherwise be supported”.

Stewart J:

Introduction

9. This is an appeal from orders of a judge of the Court which are recorded in three sets
of reasons for judgment published as follows:

(a) Steadfast ICT Security Pty Ltd v Peak [2021] ACTSC 199 on 30 August 2021
(the August judgment or AJ);

(b) Steadfast ICT Security Pty Ltd v Peak (No 2) [2021] ACTSC 319 on 17
December 2021 (the December judgment or DJ); and

(c) Steadfast ICT Security Pty Ltd v Peak (No 3) [2022] ACTSC 31 on 1 March
2022 (the costs judgment or CJ).

10.     The first appellant is Dreamtime Supply Co Pty Ltd (Dreamtime), the fourth defendant
below.
11.     The second appellant is Gareth Peak, the first defendant below.
12.     The third appellant is Nenad Stefanovic, the third defendant below.
13.     The fourth appellant is David Glavonjic, the fifth defendant below.
14.     The respondent is Steadfast ICT Security Pty Ltd (Steadfast), the plaintiff below.
15.     The second defendant below was Lachlan Watt. No appeal is brought by him.
16.    In the proceeding, Steadfast claimed that its former employees (Messrs Peak,
Stefanovic and Watt) and its former director (Mr Glavonjic) in late 2018 and early 2019, while still in those positions, arranged to copy confidential information, to transfer
commercial arrangements to another business, Dreamtime, to interfere with
Steadfast’s records in a manner which impaired its business and, on departing, deleted
communications and other material stored on Steadfast’s computers. That conduct was
alleged to involve breaches of the employees’ and director’s fiduciary, contractual and
statutory obligations. It was said that Dreamtime was knowingly involved in the conduct
of the other defendants. (AJ [1].)
17.     In the August judgment, the primary judge concluded that Steadfast had established
the factual basis for granting relief against Dreamtime. His Honour concluded that the
conduct of the employees and former director of Steadfast involved a course of conduct
designed to obtain for Dreamtime the benefit of Steadfast’s business and involved
breaches of Messrs Peak, Stefanovic and Watt’s obligations to Steadfast. The conduct
of Mr Peak, in particular, was thoroughly dishonest and in flagrant breach of his
obligations to his employer. As a consequence, Dreamtime obtained the benefit of
Steadfast’s business and profited as a result. Because of the involvement of Mr
Glavonjic, a director of Dreamtime, in Mr Peak’s plan, Dreamtime was aware of Mr
Peak’s breach of duty. On that basis, his Honour found that Steadfast was entitled to
relief by way of accounting for profits by Dreamtime in the sum of $1,187,249.64. (AJ
[2].)

As against Mr Peak, the primary judge found a breach of Mr Peak’s employment
contract by reason of the course of conduct engaged in by him while employed by
Steadfast to acquire for Dreamtime the benefit of Steadfast’s business (AJ [267]). That
course of conduct also involved a breach of his fiduciary obligations to Steadfast (AJ
[286]) and his obligations under ss 180, 181, 182 and 183 of the Corporations Act 2001
(Cth) (Corporations Act) (AJ [292]). The course of conduct included failing to keep
Steadfast’s confidential information confidential, using it for purposes other than in the
course of performing his duties as an employee of Steadfast and providing confidential
information to Mr Glavonjic and Dreamtime (AJ [269] and AJ [271]). He also breached
restraints in his employment contract (AJ [281]).

19.     His Honour concluded that Steadfast is entitled to equitable compensation from Mr
Peak for breach of fiduciary duty in the sum of $593,624.82 (DJ [23]). Also, his Honour
was satisfied that pursuant to s 1317H of the Corporations Act, Mr Peak must
compensate Steadfast for damage suffered by Steadfast in the same sum as that
awarded against Dreamtime, namely $1,187,249.64 (DJ [30]). As the latter amount was
most favourable to Steadfast, in addition to declaratory relief there was an order for
compensation in the latter sum (DJ [31]).
20.     As against Mr Stefanovic, it was found that he had breached his contractual duty to act
honestly and to do all in his power to promote and develop and extend Steadfast’s
reputation in business (AJ [329]). That included failing to make a director of Steadfast,
Ms Batley, aware of Messrs Peak and Glavonjic’s plans. Those matters also amounted
to a breach of fiduciary duty (AJ [333]). Mr Stefanovic also breached his employment
contract by failing to maintain the confidentiality of Steadfast’s confidential information
and participating or knowingly assisting in the unauthorised disclosure of Steadfast’s
confidential information to, or for the use of, Dreamtime and using the confidential
information for the benefit of Dreamtime (AJ [330]). The matters giving rise to breaches
of his employment contract were found to also involve breaches of his duties under
ss 182 and 183 of the Corporations Act (DJ [46]).
21.    The primary judge found that Steadfast was entitled to an award of equitable
compensation for breach of fiduciary duty against Mr Stefanovic in the sum of
$50,594.69 (DJ [57]). Having regard to the profits made by Dreamtime in relation to
three particular clients, his Honour found it appropriate to make an order pursuant to
s 1317H requiring Stefanovic to compensate Steadfast for an amount assessed by
reference to the profits made by Dreamtime in relation to those clients, namely
$202,378.75 (DJ [60]). As the latter was the greater sum, there was an order for
compensation in that amount (DJ [61]).

As against Mr Glavonjic, the only breach that was established involved Mr Glavonjic’s
participation in a meeting with Mr Benkendorfer of AlienVault in which Mr Glavonjic
sought to take the business of AlienVault from Steadfast, “even if the plan with Mr Peak
had not been fully formulated” (AJ [339]). As no relief for equitable compensation had
been sought against Mr Glavonjic, only a declaration was made against him (DJ [67]-
[75]).

23. In the costs judgment, the primary judge ordered costs against all the defendants on a
party/party basis, save that on account of the rejection by the defendants on 15 April
2021 of an offer of settlement that offered to accept from Mr Peak and Dreamtime less
than what they were ultimately ordered to pay, those two defendants were ordered to
pay costs after that date on a solicitor/client basis.

The appeal

24. By a second further amended notice of appeal, the appellants identified 10 grounds of
appeal. Some of these were not pressed in the hearing. The remaining grounds are
conveniently grouped and renumbered as constituting six grounds of appeal. Each is
identified separately below. For the reasons that follow, save in one small respect which
the respondent conceded, and Mr Stefanovic’s appeal to the extent of approximately
$152,000, the appeal falls to be dismissed.

It is to be observed that the appeal does not challenge any of the primary judge’s
substantive factual findings; it is limited to challenging certain characterisations and
conclusions made by the primary judge as a consequence of those findings. The result
is that for the most part the grounds of appeal can be considered with reference to the
primary judge’s factual findings, which his Honour set out in meticulous detail, with only
occasional references to the underlying evidence.

Ground 1: The decision to part ways with Dreamtime

Introduction

26. By appeal ground 1 (original appeal grounds 4(a) and 4(b)), the appellants contend that
the primary judge erred in holding that the decision of Steadfast to cease to use
Dreamtime to obtain Commonwealth government work was causally related to the
pleaded breaches of the appellants, or any of them, and in failing to hold that the
decision by Ms Batley to terminate its subcontracting relationship with Dreamtime was
unrelated to, and causally separate from, the pleaded breaches of the appellants, or
any of them.
27. In order to understand this ground of appeal, it needs to be borne in mind that Ms Batley
directed Mr Peak, the general manager of Steadfast at that time, to cease utilising
Dreamtime for future procurement of government contracts on 21 December 2018. On
24 December 2018, Ms Batley explained the decision by telling Mr Peak in an email
that Steadfast’s “preferred method of procurement with Government is direct”. That is
the decision that the appellants by their first ground of appeal contend caused
Steadfast’s loss of government work and not any breaches of obligations by the
appellants. Steadfast, in contrast, contends that it was the breaches by the appellants
of their obligations, in particular as part of Mr Peak’s plan to transfer Steadfast’s work
to Dreamtime, that caused the breakdown in relationships that in turn caused Ms Batley
to make the impugned decision.

The primary judge’s findings and reasoning

28. Mr Joy and Ms Batley are husband and wife. They had a company, PurpleP Pty Ltd.
Mr Joy provided computer security services to the Australian government through a
company of his that traded as Njoy Security. In July 2015, Mr Joy engaged Mr
Glavonjic, through his company, to provide business advisory services. (AJ [32].)
29. The Australian government’s Indigenous Procurement Policy (IPP) was aimed at
encouraging majority Indigenous-owned companies to apply for government contracts.
Mr Joy raised with Mr Glavonjic the idea of creating a new company with majority

Indigenous ownership to capitalise on the IPP. Mr Glavonjic introduced Mr Goldsmith
to Mr Joy pursuant to that proposal. The idea was to insert a majority Indigenous-owned
company between non-Indigenous service providers and the Commonwealth, thereby
permitting access to Commonwealth contracts through the IPP and allowing the owners
of the Indigenous company to benefit even though the services that the company
provided were to be sub-contracted to non-Indigenous companies. (AJ [33].)
30.    Pursuant to that proposal, Dreamtime was registered in October 2015 with Mr
Goldsmith, who is Indigenous, owning more than 50 per cent of the shares. The
directors of the company were Mr Glavonjic and Mr Goldsmith. Apart from Mr
Goldsmith, the other shareholders were PurpleP (i.e., the Joy and Batley interests), Mr
Glavonjic’s company and a company owned by a Mr Bailey. (AJ [34].)
31.     Steadfast was incorporated in November 2015. Mr Glavonjic was the sole director.
Although 100 per cent of the shares were originally held by PurpleP, in August 2016
the shareholding was changed to PurpleP as to 95 per cent and Mr Peak’s company,
Peakiham Pty Ltd, as to 5 per cent. The arrangement between Steadfast and
Dreamtime permitted Steadfast to gain access to government work on more favourable
terms than if it obtained that work by subcontract from other companies on government
panels. (AJ [35].)
32.     In addition to performing work obtained by Dreamtime under the IPP and subcontracted
to it, Steadfast also had a business providing IT security. It was an authorised re-seller
of security software and solutions. In that role, Steadfast purchased a software licence
from suppliers and on-sold it to customers, generally for a fixed term. Steadfast was an
authorised re-seller of software provided by AlienVault, among others. (AJ [35].)
33.     In 2016, Mr Peak was employed as the general manager of Steadfast pursuant to a
written employment contract. (AJ [39].)
34.     In March 2018, Mr Stefanovic commenced employment with Steadfast as a security
consultant pursuant to a written contract. (AJ [47].)
35.     In September 2018, there were disagreements and a consequent loss of trust between
Ms Batley and Mr Joy, on the one hand, and Messrs Peak and Glavonjic, on the other.
One of the sources of the loss of trust was a disagreement between Mr Joy/Ms Batley
and Mr Glavonjic about a profit-sharing arrangement with Dreamtime People Pty Ltd.
(AJ [50].) It is uncontroversial that Dreamtime People was previously owned by
PurpleP, but on Mr Glavonjic’s recommendation its shares were transferred to
Dreamtime in April 2017 on the basis that Mr Joy/Ms Batley would share in the profits
of Dreamtime People. (Agreed chronology.)
36.     The primary judge concluded that in the period after 11 September 2018 there were
discussions between Mr Peak and Mr Glavonjic about the possibility of moving the
business and staff of Steadfast to Dreamtime or another entity. From October 2018,
there were concerted efforts by Mr Peak, in conjunction with Mr Glavonjic, to put in train
a process whereby they would dishonestly take the benefit of the goodwill and
information of the business. (AJ [255].)
37.    Early in October 2018, Ms Batley emailed Mr Glavonjic referring to a previously
expressed interest by him in purchasing her and Mr Joy’s share of the ownership of
Steadfast. She gave an indication of her and Mr Joy’s expectations of a price. (AJ [60].)
However, on 17 October 2018, Mr Glavonjic and Mr Goldsmith decided that they would
not pursue the acquisition of Steadfast, which decision was communicated to Ms Batley
the next day. (AJ [66], [70].) The primary judge found this to be a “critical point” – given
that Mr Glavonjic was not going to purchase the business, the activities of Mr Peak to
acquire the benefit of it without payment dramatically increased. (AJ [71].)
38.     Mr Peak communicated a list of actions in order to establish a new business and then
set up a “Transition” project document into which confidential Steadfast information
useful to achieve the transition was placed. Messrs Peak and Glavonjic were the drivers
of the plan, with Mr Peak taking responsibility for its execution. Mr Stefanovic was also
aware of the plan and participated in preparing the action list. (AJ [257].)

Preparation for the transfer of Steadfast’s business to Dreamtime included Dreamtime
making specific proposals for work to Steadfast’s non-government customers (AJ [76],
[102]) and preparing to transfer contracts when they fell for renewal. (AJ [93].)

40.     On 31 October 2018, Mr Glavonjic resigned from Steadfast. From that point, Mr Peak,
in conjunction with Mr Glavonjic, stepped up their efforts to acquire the benefit of
Steadfast’s business for Dreamtime. (AJ [85]-[86].)
41.     Those efforts included secretly redirecting emails from Steadfast to Dreamtime. (AJ
[104], [107]–[108] and [152].) The takeover plan was found to be “comprehensive”,
involving taking over Steadfast staff, taking a copy of the Steadfast website, and taking
clients from Steadfast. (AJ [117], [255].)
42.     By 2 November 2018, Mr Peak and Mr Glavonjic had agreed that the business would
be moved into Dreamtime rather than a new company. (AJ [259].)
43.     In December 2018, Mr Peak diverted possible business from the University of Canberra
to Dreamtime. Mr Stefanovic reported to Ms Batley an absence of incoming work to
Steadfast. (AJ [175]–[176], [260].) Ms Batley then spoke with Peak about current
contracts, who stated that it was quiet over Christmas, and there was not much he
could do to improve the situation (AJ [17]). The primary judge found that as a result of,
inter alia, those conversations with Mr Stefanovic and Mr Peak, Ms Batley terminated
Mr Stefanovic’s employment by Steadfast on 19 December 2018 and she set in train
the process for making Mr Peak redundant. Further, the decision to make him
redundant was causally related to his own conduct in failing to act in the interests of
the company since at least 20 October 2018. (AJ [260].)
44.     It was in that context that Ms Batley wrote to Mr Peak on 21 December 2018 by email
in which she said the following:
Just letting you know that I have been seeking payment for the agreed profit split over the
last six months from David Glavonjic and have not yet received any response. The reluctance
for Dreamtime to meet commitments is a significant issue for Steadfast, and we must not
utilise Dreamtime for any further engagements due to the risk of them not meeting their
obligations.
45.     In relation to the liability of Dreamtime, the primary judge concluded in the August
judgment as follows:
344. As the claim was put at trial, the emphasis was on Dreamtime being a knowing recipient
of the benefit of the breaches of fiduciary duty by the defendants and hence a suitable
target for an order that it account for the profits that it made as a result of the other
defendants’ conduct. Mr Glavonjic, the director of Dreamtime was at all times aware of
Mr Peak’s plans. He was also aware of the relationship between Mr Peak and Steadfast
that meant that Mr Peak’s conduct involved breaches of his fiduciary obligations to the
company. Because of Mr Glavonjic’s knowledge, Dreamtime also knew those matters.
In knowingly receiving the benefit of Mr Peak’s and Mr Glavonjic’s scheme to move the
benefit of Steadfast’s business to Dreamtime, Dreamtime was a knowing participant in
Mr Peak’s breaches of fiduciary duty.
345. The language used by the plurality in [Ancient Order of Foresters in Victoria Friendly
Society Ltd v Life Plan Australia Friendly Society Ltd [2018] HCA 43; 265 CLR 1] at [10]
may readily be adapted to the position of Dreamtime in relation to the scheme of Mr
Peak and Mr Glavonjic: “[Dreamtime’s] participation was not merely that of passive
recipient of the benefits of the success of [Mr Peak and Mr Glavonjic’s strategy].
[Dreamtime] provided the commercial vehicle which would acquire and exploit the
business connections to be appropriated” [from Steadfast]. That vehicle was necessary
to enable [Mr Peak and Mr Glavonjic] to implement the strategy of despoilation they had
devised”.

46. Critically, on the point in issue on appeal ground 1, his Honour reasoned as follows:
354. I do not accept the general submissions made by the defendants about the position of
Steadfast and Ms Batley’s intentions in relation to the pursuit of Commonwealth
government work. The evidence given by Ms Batley was given in the context of her
recognition that there was no pipeline of work flowing through. She was aware of that
because of her discussions with Mr Stefanovic and Mr Peak. It cannot reasonably be
suggested that the absence of any pipeline of future work was unrelated to the conduct
of Mr Stefanovic and Mr Peak. Mr Peak had, by his conduct, generated a situation in
which Ms Batley had no alternative except to downsize the operation because of the
absence of work and hence the risk of insolvency. It must also have been clear to her
that, following Mr Glavonjic’s departure, Mr Peak and other staff were not adequately
fulfilling their duties, even if she had, at that stage, a limited understanding of the extent
of Mr Peak’s perfidy. I therefore do not accept the submission that there was, in effect,
a decision on Ms Batley’s part to cease to pursue the work that Steadfast had previously
pursued that was unrelated to the conduct of the defendants.

In his Honour’s discussion on the approach to relief, the following was reasoned
specifically in relation to the role of the 21 December 2018 instruction to cease working
with Dreamtime:
433. … Even though Ms Batley had not yet discovered the full scope of the defendants’
perfidy, any decision occurred in a context where the effects of the defendants’ conduct
were being fully felt by the company. Given the absence of work in the pipeline, itself a
result of the defendants’ conduct, Ms Batley had already terminated Mr Stefanovic and
was carrying out the necessary steps in order to be able to make Mr Peak redundant.
In my view, it is not open to the defendants to rely upon actions of Steadfast that were
themselves a response to the defendants’ own breach of contract in order to reduce
their liability for the consequences of those breaches or breaches of their fiduciary
duties.

The appellants’ submissions

The appellants submit that Ms Batley’s decision and her direction to Mr Peak that
Steadfast’s preferred method of procurement with government be direct was the cause
of Steadfast’s losses. They submit that Ms Batley did not act because of the appellants’
breaches, but because she was angry with Mr Glavonjic that the profit-split issue with
regard to Dreamtime People had not been resolved. They rely, in particular, on Ms
Batley having said in cross-examination that she took the decision to not use
Dreamtime anymore because she was angry with Mr Glavonjic about the profit split
agreement. They submit that as Ms Batley was unaware at that time of the appellants’
breaches of their obligations, she could not have made the critical decision because of
those breaches.

49. The appellants submit that the decision to stop using Dreamtime had nothing to do with
a lack of work, or with the conduct of the appellants that was the subject of Steadfast’s
claim. They say that the profit split issue was neither pursued against Mr Glavonjic, nor
linked in any way to the impugned conduct of the other appellants. They submit that
the only reason why Ms Batley decided to cut off Dreamtime and sever the relationship
was because of her anger about the profit split issue.

Consideration

50.     It is common ground that the leading case on the point of causation at issue is Ancient
Order of Foresters in Victoria Friendly Society Ltd v Life Plan Australia Friendly Society
Ltd [2018] HCA 43; 265 CLR 1 (Foresters). There, it was explained with reference to
Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 118–119 that whether a benefit
can be said to be obtained “as a result of” knowing participation in a breach of fiduciary
duty by another contrary to the principles of equity is a question of causation or
contribution that depends on “a precise examination of the particular facts” of the case.
It was said that the equitable disgorgement principal is a “prophylactic rather than a
restitutionary principle” and that it is “sufficient to show that the profit would not have
been made but for dishonest wrongdoing”. See the judgment of Kiefel CJ, Keane and
Edelman JJ at [9].
51.     The concurring judgment of Gageler J at [88] is to the same effect with regard to it being
sufficient to establish that the benefit or gain to the knowing participant would not have
been obtained “but for” the breach. His Honour explained (at [91]) that the reasoning in
Warman International Ltd v Dwyer (1995) 182 CLR 544 at 561–562 makes explicit that
where there is shown to exist a causal connection between a fiduciary’s breach of
fiduciary obligation and a benefit or gain to the fiduciary or knowing participant, the
onus shifts to the defendant to establish that it is inequitable to order that the defendant
account for the value of the whole of the identified benefit or gain.
52.     The following are the extracts from the cross-examination of Ms Batley on which the
appellants rely for their submission that the only reason that she terminated the
relationship with Dreamtime was that she was angry about the profit share in
Dreamtime People not being resolved:
And it was because of this anger with Mr Glavonjic arising from this profit split agreement
that you told Mr Peak on 21 December 2018 not to use Dreamtime anymore, isn’t it?---That’s
correct. [T132:11]
…
And it was your decision because you were angry with Mr Glavonjic about this profit split
agreement?---That’s correct. [T132:27]
…
So you’re angry with Mr Glavonjic on the 16th, you tell your staff not to work with him on the
21st for any engagements going forward, you threaten to report him on 31 of December.
Correct?---Correct.
All of this is because you didn’t want to work with Dreamtime anymore, correct?---That’s
right, yes.
You wanted to completely sever that relationship?---Yes, that’s correct.
And you just wanted your profit from the profit split and then you never wanted to work with
David Glavonjic and Dreamtime ever again?---Correct. [T136:31]
53.     There are three difficulties with the appellant’s case on this ground of appeal.
54.     The first and principal difficulty is that the appellants focus on the loss to Steadfast
rather than the gain to Dreamtime. It is on that basis that they submit that Steadfast
would in any event have lost the business that it lost because of its severing ties with
Dreamtime. That is not the correct counterfactual; the correct counterfactual is whether,
but for the dishonest wrongdoing, the profit would have been made. The appellants’
submission ignores the fact that because of Mr Peak and Mr Glavonjic’s dishonest plan,
including steps taken long before Ms Batley’s December decision, Dreamtime gained
business that it would not otherwise have had. The accounting for profits, or gains, was
legitimately focussed on that benefit to Dreamtime as a knowing recipient. It is wholly
irrelevant what the loss to Steadfast (if any) was. That is sufficient to dispose of this
ground of appeal.
55.     The second is that it was not established, and it cannot be said, that the dispute about
the profit split was unrelated to the dishonest plan to take the business of Steadfast
and transfer it to Dreamtime. Indeed, in the light of the primary judge’s unchallenged
findings about Mr Peak’s plan, Mr Glavonjic’s involvement in it, when it started, how it
intensified as the conflict about the profit split dragged on, and how by the time Ms
Batley made the decision to sever ties with Dreamtime there was almost no more work
coming to Steadfast from Dreamtime because of Mr Peak’s plan, it is quite apparent
that the dispute about the profit share and the dishonest activity pursuant to the plan
cannot be separated out from one another. That is to say, it is established that
Dreamtime’s profit or gain would not have occurred but for the dishonest plan. That is
both because much of the profit or gain was as a consequence of steps in the plan
before Ms Batley’s December decision and because the inference is readily available
that but for the dishonest plan the profit share dispute would likely have taken a very
different course and not necessarily ended with the severing of ties.
56.     The third is that it was not put to Ms Batley that the only reason she took the decision
was because of the profit-sharing dispute. Her decision was likely also influenced by
the general breakdown in the relationship and the fact that Steadfast was receiving no
more benefit from the relationship with Dreamtime – which, unknown to Ms Batley, was
caused by the steps being taken in the implementation of Mr Peak’s plan. Even
assuming, in the appellants’ favour, that the break in causation for which they contend
has the effect of reducing Dreamtime’s liability to account, the onus was on the
appellants to establish the break in causation which they rely on. In the absence of Ms
Batley saying that the only reason she took the December decision was because of the
profit share dispute, that break is not established.

For those reasons, there is no error in the primary judge’s decision on the point in issue.
Appeal ground 1 must fail.

Ground 2: Cause of gain in relation to particular clients

Introduction

58. By appeal ground 2 (original appeal ground 4(c)), the appellants contend that the
primary judge erred in holding that the business obtained by Dreamtime from the
following entities was causally related to the breaches by the appellants, or any of them:
Anomali/Dep of Parliamentary Services, Department of Agriculture, AFSA and Nectar
Mortgages.
59. It is convenient to consider each entity in turn.

(1) Anomali/Department of Parliamentary Services

The primary judge’s findings and reasoning

60.     The primary judge found that in August 2018, Mr Barclay from Anomali sent an email
to Mr Peak seeking to promote the Anomali Threat Platform (software) and a
demonstration occurred on 13 August 2018 (AJ [49]). Mr Peak did not advise Ms Batley
of that inquiry (AJ [405]).
61.     On 13 November 2018, Mr Noble at Anomali sent a proposed reseller agreement for
Dreamtime to Mr Glavonjic. Mr Noble indicated in his email that he was not sure
whether he should send it to Mr Glavonjic at Dreamtime or to Mr Peak at Steadfast. Mr Glavonjic provided a copy to Mr Peak who sent it on to Mr Stefanovic. Mr Stefanovic
sent the completed reseller agreement back to Mr Glavonjic suggesting that he review
it and then send it back to Mr Noble. It was completed in such a way as to make
Dreamtime the reseller. (AJ [124].)
62.     On 19 and 20 November 2018, Mr Stefanovic deleted emails from his Steadfast email
account which related to, inter alia, Anomali (AJ [140], [142]).
63.     On 12 November 2018, Mr Noble from Anomali emailed Mr Glavonjic about assisting
Anomali to bid on a contract at Parliament House. Mr Glavonjic forwarded the email to
Mr Stefanovic and Mr Peak (at a private email address), saying “Let’s discuss Friday”
(AJ [181]).

As Mr Glavonjic’s involvement in the matters concerning Anomali was after 31 October
2018 when he resigned his position as director of Steadfast, there was no breach of
duty by him in relation to those matters (AJ [337)-[338]).

65. The primary judge noted that the appellants submitted that the Anomali business was
never an opportunity available to Steadfast because Anomali wanted an IPP partner,
which Steadfast was not, although “[t]he [appellants] accepted that the intention was
that any services would be provided by Steadfast”. It was also noted that the appellants
relied on the direction from Ms Batley to Mr Peak to cease using Dreamtime in
December 2018 and pointed to the fact that the contract between Dreamtime and the
Department of Parliamentary Services was only executed in January 2019. (AJ [407].)
66. The primary judge reasoned that the appellants’ submissions “would be persuasive if it
was not for the fact that what actually occurred was during a period of concerted and
planned breaches of Mr Peak’s obligations with the intention of shifting the business of
Steadfast to Dreamtime”. It was reasoned that Mr Peak’s conduct in relation to Anomali
must be assessed in the context of his conspiracy with Mr Glavonjic to take the benefit
of Steadfast’s business without paying for it. (At AJ [408].)

The primary judge accepted Steadfast’s calculations that showed that the overall profit
out of a total invoiced amount of $847,249.86 was $213,311.95 (AJ [409]). The latter
was accordingly the amount that was awarded on account of profits.

The appellants’ submissions

68.     The appellants submit that Anomali was interested in licensing its software to the
Department of Parliamentary Services for which purpose it needed an IPP entity to
partner with on favourable terms to obtain access to that Department. They submit that
Anomali specifically wanted to use Dreamtime as an IPP partner to provide software to the Department so it was never an opportunity available to Steadfast. They submit that
the inquiry from Anomali came to Mr Peak because he was connected to Dreamtime.
69.    The appellants point to the terms of the contract between the Department and
Dreamtime which record that it was awarded under a “Limited Tender Exemption” to
Dreamtime as an “SME with at least 50% Indigenous ownership”. They also point to an
email from the Department recording that Dreamtime was on the relevant “supply
national panel”.
70.     The appellants submit that Mr Peak did not owe a fiduciary duty to refer matters to
Steadfast which would be entirely futile, and that on the contrary he had a positive
contractual duty to advance the interests of “group members” including Dreamtime. In
that regard, the appellants refer to the provisions of Mr Peak’s employment contract
with Steadfast which defined “Group” in such a way as to include Dreamtime and
provided that Mr Peak must “serve the Company [ie, Steadfast] and the Group faithfully
and diligently” and “to use all reasonable efforts to promote the interests of the Group”.
71.     Finally, the appellants submit that Dreamtime had no knowledge of some breach of Mr
Peak’s fiduciary duties to Steadfast on the basis that Mr Peak, Mr Stefanovic and Mr
Glavonjic each knew that Steadfast was not an IPP entity.

Consideration

72. As mentioned, the primary judge recorded that the appellants accepted that the
intention was that any services on the Anomali contract would be provided by
Steadfast. The appellants have not challenged that. Moreover, Mr Stefanovic in cross-
examination accepted that he had understood that the inquiry from Anomali “might lead
to a potential contract that would lead to Steadfast doing additional work” (T481:15).
Mr Stefanovic also accepted that Steadfast was “the likely subcontractor” on the work
(T482:46). So, although the appellants now submit that the contract was only for the
provision of software licensing by Anomali and that there was no role for Steadfast as
a service provider, that is not consistent with what they apparently accepted at trial or
with Mr Stefanovic’s identified evidence.

In those circumstances, no error is shown in the primary judge’s finding that the secret
(i.e., without reference to Ms Batley) redirection of the inquiry from Anomali to
Dreamtime was a lost opportunity for Steadfast. As such, there is also no error in the
conclusion that Mr Peak and Mr Stefanovic’s roles in the redirection were breaches of
their obligations to Steadfast, and that the knowledge of Mr Glavonjic of those breaches
was the knowledge of Dreamtime meaning that Dreamtime was a knowing recipient of
the benefit.

74. Appeal ground 2 insofar as it relates to Anomali and the Department of Parliamentary
Services must accordingly fail.

(2) Department of Agriculture

The primary judge’s findings and reasoning

75.    The primary judge found that in December 2017, Mr Peak prepared a Steadfast
quotation for the Department of Agriculture to prepare a security risk management plan.
That quotation was accepted and a contract was entered into by Dreamtime with the
Department in April 2018 with the work being subcontracted to Steadfast. There were
further contracts with Dreamtime using Steadfast as a subcontractor in May and
October 2018. In each case, Dreamtime received 10 per cent of the contract price. (AJ
[421].)
76.     The primary judge found that at the 14 September 2018 board meeting of Steadfast,
Mr Peak advised that the Department of Agriculture had been discussing more
documentation work. In November 2018, both Mr Stefanovic and Mr Peak did the
preparatory work for that project, and in December 2018 they both deleted emails
relating to the project. (AJ [422]–[423].)
77.     The primary judge found that after both Mr Peak and Mr Stefanovic had departed from
Steadfast, a contract for the project was awarded to Dreamtime. Another contract for
security assessment services was entered into with Dreamtime on 5 November 2019.
His Honour made findings about the value of the project. (AJ [424].)

As mentioned in relation to the primary judge’s findings more generally, his Honour
found that Mr Peak’s course of conduct amounted to a breach of his fiduciary duties to
Steadfast and that the effect of that conduct, carried out in this case with the assistance
of Mr Stefanovic, was to transfer the whole of the benefit of Steadfast’s business to
Dreamtime (AJ [434]). His Honour rejected the appellants’ submission that the 2019
contracts with the Department of Agriculture should be excluded from any account of
profits because, by the decision of Ms Batley to no longer work with Dreamtime, those
contracts were not available to Steadfast (AJ [428]).

The appellants’ submissions

79. The appellants submit that the work in respect of which the primary judge ordered an
account of profits was won by Dreamtime following a competitive limited tender
process, and that there was no evidence that Steadfast participated in the process or
that Dreamtime was able to take advantage of it because of anything arising from a
breach of fiduciary duty owed to Steadfast. They submit that the “intervening competitive tender process” broke the causal link between any breach of duty and any
profit gained by Dreamtime.

Consideration

The primary judge’s finding was in effect that but for the secret scheme to transfer
Steadfast’s business to Dreamtime, Dreamtime would not have enjoyed the sole
benefit of the contract with the Department of Agriculture. That is because, as had been
the arrangement with the previous contract, Steadfast would have been the
subcontractor for whatever work that Dreamtime secured by the limited tender process.
That is an ample and proper basis for an account of profits. The fact that the Dreamtime
tender was a competitive tender, or even a limited competitive tender, simply does not
address that reality.
On the primary judge’s unchallenged findings, the arrangement on the formation of
Dreamtime was that Dreamtime would tender for the work under the IPP and that
Steadfast would do the work. By Mr Peak’s scheme in breach of his fiduciary
obligations, Steadfast was denied that opportunity from late in 2018. That is to say,
Steadfast was excluded by the scheme from the benefit of Dreamtime’s successful
tenders to the Department of Agriculture in 2019. By reason of that exclusion,
Dreamtime secured profits in addition to what it otherwise would have made. There is
therefore no error in the primary judge’s conclusion that Dreamtime must account to
Steadfast.

82. This ground of appeal accordingly fails.

(3) Australian Financial Security Authority (AFSA)

The primary judge’s findings and reasoning

The primary judge found that AFSA had been a significant client of Njoy (Mr Joy’s
security company), Steadfast directly and Steadfast as subcontractor to Dreamtime
between 2016 and 2018. The contracts included the provision of AlienVault software,
hardware and a managed security service. From April 2017, Mr Hampson, an employee
of Steadfast, was placed at AFSA as an IT security officer or analyst on a long-term
basis. That contract was made with AFSA by Dreamtime but subcontracted to
Steadfast. Dreamtime received 10 per cent of the income, the rest being paid to
Steadfast. Up until 31 October 2018, invoices totalling $449,664 had been issued by
Steadfast to Dreamtime for the subcontracting work on the AFSA contract – indicating
that it was a high-value contract. (AJ [45], [48], [347].)

84.    The primary judge found that there were discussions between Mr Peak and Mr
Hampson in September and October 2018 about Mr Hampson’s possible transfer to
the employment of Dreamtime while still placed at AFSA, and in which reference was
made to Mr Peak’s plan to take Steadfast’s business for Dreamtime (AJ [58], [80], [87],
[92], [105], [131], [134], [136], [258]). Mr Peak also prepared or saved documents
showing the plan to take the AFSA contract exclusively for Dreamtime (AJ [97], [98],
[163]), and he set a forwarding rule in Steadfast’s email system so that emails to, inter
alia, Mr Hampson were forwarded to a Dreamtime email address (AJ [162]). In
December 2018, Mr Peak and Mr Stefanovic deleted emails on Steadfast’s email
system that related to the AFSA contract and Mr Hampson’s position at AFSA (AJ
[192]).
85.     The primary judge found that in early November 2018, Mr Peak had, in breach of his
obligations to Steadfast, made an arrangement with AFSA to transfer the business
previously given to Steadfast via Dreamtime to Dreamtime directly. Among the
documents downloaded by Mr Peak in December 2018 from the Steadfast system were
documents relating to AFSA. In January 2019, Mr Glavonjic completed the takeover of
Steadfast’s business with AFSA by offering to AFSA to have the services provided
directly by Dreamtime. AFSA then terminated the contract with Steadfast for the
provision of AlienVault consultancy services. (AJ [247], [348].) Mr Hampson also
resigned from Steadfast (AJ [238]).
86.     The primary judge found that in April 2019, AFSA awarded a contract to Dreamtime for
the provision of AlienVault hardware. The contract was extended in October 2019. In
2019 and 2020, AFSA awarded contracts to Dreamtime for IT related services. (AJ
[349].) Steadfast was the provider of AlienVault software and a managed security
service under licence on a contract due to run to December 2020 (AJ [45]), but as part
of Mr Peak’s plan Dreamtime acquired a license to provide the software and the
managed security service (AJ [67]–[69], [103], [118], [167], [172], [187], [339]–[340]).

Aside from the submission that Ms Batley’s decision to no longer use Dreamtime meant
that any contracts after that were not causally connected to the breach of duties, which
is dealt with above in appeal ground 1, his Honour identified that the appellants
submitted that Steadfast had only one contract with AFSA as at January 2019, and one
subcontract with Dreamtime to provide the services of Mr Hampson. They submitted
that Ms Batley made no attempt to replace Mr Hampson following his resignation from
Steadfast. (AJ [352].) After rejecting the submission in relation to Ms Batley’s decision,
his Honour concluded as follows (at AJ [355]):
In relation specifically to AFSA, the evidence discloses that from November 2018 Mr Peak
and Mr Glavonjic (with the knowledge of Mr Stefanovic) were deliberately intending to
interfere with Steadfast’s relationship with AFSA and to transfer the work that had been
performed by Steadfast to Dreamtime. The goal of the course of conduct was to not only
transfer existing work but also to transfer all future opportunities for additional work from
Steadfast (either working directly or as a subcontractor to Dreamtime) to Dreamtime. In that
context and given that Mr Hampson was the specified person under the contract and any
amendment of it would have required AFSA’s and Dreamtime’s cooperation, I do not accept
that there is any significance in the fact that Ms Batley did not seek to find alternative staff to
replace Mr Hampson.

88. The primary judge awarded Steadfast an account of profits in the sum of $92,300
arising from the provision to AFSA by Dreamtime of AlienVault software and hardware
and an AlienVault engineer under contracts in 2019 and 2020. That was said to be
work previously done by Steadfast that was directed to Dreamtime. (AJ [449].)
89. The primary judge awarded Steadfast on account of profits in the additional sum of
$243,936.41 in respect of work done for AFSA in the 24-month period following Mr
Peak’s departure from Steadfast (AJ [449]). That work was described as “ICT
Professional Services”.

The appellants’ submissions

90. The appellants submit that the AlienVault engineers who previously had worked for
Steadfast at AFSA were Ms Harvey and Mr Hampson, and that after they were made
redundant and resigned, respectively, in January 2019 Steadfast did not replace them.
The appellants submit that Steadfast was for that reason not in a position to provide
the relevant services to AFSA which was the cause of its losses.
91. The appellants also submit that there was nothing improper in Mr Hampson working for
Dreamtime after he left Steadfast, and that there was no pleaded case in reliance on
any such impropriety.

Consideration

The primary judge’s conclusion that Dreamtime was liable to account for its profits
obtained on contracts with AFSA did not depend on the identity of the particular
employees, or on Steadfast’s ability to have otherwise performed those contracts. The
reasoning was simply that Dreamtime had obtained the exclusive benefit of those
contracts because of the execution of Mr Peak’s dishonest scheme; also, but for that
scheme, Steadfast would likely have continued to have had the benefit of those
contracts. The appellants’ submissions are wrongly directed to the question whether
Steadfast mitigated its loss. That, of course, is irrelevant.

93. Understood in that way, it is clear that the fact that by the end of January 2019 Steadfast
no longer had the ability to perform those contracts because of the departure of both
Ms Harvey and Mr Hampson is irrelevant. The departure of both Ms Harvey and Mr
Hampson occurred as a consequence of the breakdown in the Steadfast/Dreamtime
relationship which was in turn a product of the dishonest scheme. Dreamtime then
acquired the benefit of contracts with AFSA that it would not otherwise have had on an
exclusive basis; rather, it would have subcontracted that work to Steadfast in
accordance with the original arrangement when Dreamtime was established. That
Dreamtime would acquire the exclusive benefit of the contracts with AFSA was the
intended consequence of Mr Peak’s scheme.

Also, the primary judge’s conclusions did not turn on any claim that Mr Hampson’s
employment by Dreamtime per se was improper or in breach of any obligations. The
transfer of that employment was merely a small part of the overall scheme that enabled
Dreamtime to take the exclusive benefit of the AFSA contract.
In the circumstances, there is no error in the primary judge’s conclusions with regard
to AFSA.

(4) Nectar Mortgages

96. The primary judge awarded Steadfast an amount of $7,783.49 on account of profits
made by Dreamtime from a contract with Nectar Mortgage. The appellants challenge
this, and Steadfast concedes it. The appeal in relation to this ground must therefore
succeed, and the amount awarded to Steadfast should be reduced by the amount of
$7783.49.

Ground 3: GEO Group

Introduction

97. By appeal ground 3 (original appeal ground 4(f)), the appellants contend that the
primary judge erred in holding (at AJ [382]) that it was likely that there was a scheme
between Mr Peak and a representative of Geo Group (Geo), Mr Allen, to arrange for
the termination of Geo’s contract with Steadfast. It is said that that finding was made
without evidence, without it being put to Mr Peak, without the appellants being afforded
an opportunity to call the relevant witness and without the matter being specifically
pleaded.

The primary judge’s findings and reasoning

98.     The primary judge found that Geo had been a client of Steadfast since August 2017.
The original contract was to provide monitoring services using the AlienVault software.
(AJ [356].) Mr Allen was Geo’s ICT Program Manager. His position was under that of
Mr Mason, and part of his job was to arrange IT services for Geo. (AJ [357].)
99.     Mr Mason gave evidence, having been called by the appellants, but Mr Allen did not
give evidence. The primary judge explained that in relation to Mr Mason’s evidence,
his Honour was left with an uneasy feeling that the Court was not given the full
explanation of Geo’s approach to the termination of its relationship with Steadfast and
its subsequent engagement with Dreamtime. (AJ [27].)
100.  The primary judge made a number of factual findings with regard to it having been part
of Mr Peak’s plan to lure Geo away from Steadfast. Those findings included in relation
to the deletion of information or documents on Steadfast’s IT system and the
downloading and creation of documents. (AJ [359]–[360].) In Mr Peak’s “Transition
folder” there was a note made in November 2018 of the need to have a discussion with
Mr Mason and Mr Allen. His Honour found that that disclosed plans, at that early stage,
to take Geo as a client from Steadfast. (AJ [116]–[117].)
101.  The primary judge found that on 3 December 2018, after an exchange of messages
between Mr Peak and Mr Stefanovic, Mr Stefanovic sent a quotation document to Mr
Allen and then deleted the document and the email from Steadfast’s computer system
(AJ [170]). The implication is that his Honour regarded that as being suspicious
behaviour indicative of wrongdoing.
102.  The primary judge found that on 9 or 10 January 2019, Mr Mason disabled Steadfast’s
access to software used to investigate errors disclosed by AlienVault. Because of Mr
Mason’s conduct, Steadfast was unable to do in-depth investigation of the details of
the alarms that are notified to it which was in turn one of the reasons that Mr Mason
subsequently gave for terminating the contract with Steadfast. His Honour found that
having regard to the timing of Mr Peak’s departure from Steadfast and Mr Watt knowing
of the termination of the contract before Mr Joy and Ms Batley had been advised of it
by Mr Allen, it is more likely than not that Geo’s termination of the contract was a step
taken by Mr Mason only after Mr Mason and Mr Allen had consulted with Mr Peak. (AJ
[228], [232], [362].)
103.  In the period January to April 2019, there were communications between Mr Peak and
Mr Stefanovic at Dreamtime and Mr Allen at Geo with regard to the provision of IT

services to Geo. There was also, in January, a letter from Ms Batley on behalf of
Steadfast to Geo outlining Steadfast’s new arrangements for servicing Geo. Although
Mr Mason delegated to Mr Allen the responsibility of responding to Ms Batley, no
response was given. (AJ [363]–[368].)
104.  On 9 April 2019, Mr Mason by letter dated 5 April 2019 terminated Geo’s contract with
Steadfast. The stated basis for doing so was that the services required under the
contract were not being delivered as expected. His Honour found that having regard to
the fact that Mr Mason had denied Steadfast access to Geo’s IT system for several
months without having told Steadfast, and that there was never a response to Ms
Batley’s letter, it is likely that Mr Mason’s termination letter does not disclose the real
reason for termination of the contract. (AJ [369].)
105.  On 11 April 2019, Mr Allen sent an email to Mr Peak asking for Dreamtime’s proposals
for providing certain IT services to Geo (AJ [370]). His Honour found that having regard
to the brevity of the email, it is clear that the issue had previously been discussed
between Mr Allen and Mr Peak. Also, it was no surprise to Mr Mason that Mr Allen was
seeking a proposal from Dreamtime, it being likely that it had been discussed with him
prior to the request being sent (AJ [371]).
106.  His Honour noted that on 9 April 2019, two days prior to the email request from Geo
being made, Mr Stefanovic had drawn up a draft proposal for Geo and sent it to Mr
Glavonjic for review. The proposal was sent to Geo in response to its 11 April request,
and Geo ultimately accepted the proposal on 14 May 2019 in a telephone discussion
with Mr Peak. (AJ [372]–[373].) Another proposal that had been developed in
consultation with Mr Allen in late March 2019, was accepted by Geo on 27 May 2019
(AJ [374]).
107.  His Honour found that Dreamtime relied on Steadfast’s AlienVault licenses and
subscription up to August 2019 for the provision of services to Geo, even though
Dreamtime was not a licensed user (AJ [375]).
108.  His Honour concluded on the balance of probabilities that the course of conduct
engaged in by Geo was a course of conduct that had been discussed with Mr Peak and
which was intended by at least Mr Peak and Mr Allen to achieve the overall goal of
transferring Steadfast’s work to Dreamtime (AJ [378]–[381]).

109. The primary judge concluded his reasoning in relation to Geo as follows (AJ [382]):

There was no evidence that Mr Allen was unable to be called in the defendants’ case. Having
regard to the defendants’ contentions that the departure of Geo Group as a client was
unrelated to the defendants’ conduct and arose because of a failure on Steadfast part to
perform its contractual duties, Mr Allen, who had principal responsibility for dealing with Steadfast, was a person who the defendants would be expected to call to give evidence. He
is identified by Mr Peak as a person with whom he had social contact. The absence of
evidence from Mr Allen makes it easier to draw an inference adverse to the defendants that
the actions taken by Geo Group and the failure to respond to Ms Batley involved a course of
conduct intended to provide a plausible basis for the termination of the Steadfast contract
and the subsequent offering of the same work to Dreamtime. Having regard to the course of
conduct engaged in by Mr Peak and Mr Peak’s knowledge (communicated to Mr Watt) that
the Geo Group contract would be terminated, it is likely that Mr Peak encouraged Mr Allen
to adopt the approach that he did and expected, as a result of those discussions, that he
would terminate the contract. The fact that there was a gap between Mr Peak’s departure
and the termination of the contract by Geo Group is not a factor which demonstrates that Mr
Peak did not take steps prior to his departure to encourage Geo Group to act as it ultimately
did. The evidence discloses that Mr Peak had some awareness of the potential for his legal
obligations to Steadfast to cause complications for him if the connection between his conduct
and the loss of clients on the part of Steadfast was too obvious. It is for that reason that he
attempted to cover his electronic tracks within the Steadfast IT system. It is likely that in
conjunction with Mr Allen he agreed on a scheme by which Geo Group would terminate the
contract and only then offer a proposal to Dreamtime in order to provide superficial cover for
the overall implementation of Mr Peak’s scheme.

The appellants’ submissions

110.  The appellants submit that the primary judge’s finding that there was a scheme
between Mr Peak and Mr Allen to bring about the end of Geo’s contract with Steadfast
so the contract could be reissued to Dreamtime is a serious finding amounting to a
conspiracy of fraud, both on the part of Mr Peak and Mr Allen. They submit that it did
not form part of Steadfast’s pleaded case and that it should have been specifically
pleaded. In the latter regard, the appellants refer to rr 406(1)(c) and 407(1)(h) of the
Court Procedures Rules 2006 (ACT).
111.   The appellants submit that because the conspiracy allegation was not pleaded, and Mr
Peak was not cross-examined about it, they were denied the opportunity to call Mr
Allen. The appellants submit that they were on notice that the termination of the Geo
contract would be an issue, and that they therefore called Mr Mason whom they thought
was best placed to deal with the reasons for the termination. The appellants submit that
the impugned finding of the trial judge was made in breach of procedural fairness.
112.  The appellants also submit that the impugned finding was made without any evidence
to support it, particularly as it did not arise from any documentary or witness evidence.
They submit that the primary judge may have been correct to say that a gap between
Mr Peak’s departure from Steadfast and the termination of the contract between Steadfast and Geo “is not a factor which demonstrates that Mr Peak did not take steps
prior to his departure to encourage Geo Group to act as it ultimately did”, but it is at
least prima facie evidence that there is no connection between the two. They say that
his Honour’s approach was to place the onus on the appellants to prove the absence
of a breach of obligations. The appellants also refer to s 140(2)(c) of the Evidence Act
2011 (ACT) with regard to the gravity of the matters alleged being a matter to take into
account in being satisfied that a case has been proved on the balance of probabilities.

Consideration

113.  The relevant pleading against Mr Peak is that he breached his obligations to Steadfast
by, amongst other things, “[i]n or about November and December 2018, [he] was
engaged in conduct designed to divert contracts appointed to the plaintiff by Geo
Group, away from the plaintiff for the benefit of Dreamtime”. The same pleading was
made against Mr Stefanovic. The relevant pleading against Dreamtime is that by
reason of the pleaded conduct of Mr Peak and Mr Stefanovic, Dreamtime obtained
clients and customers from Steadfast and had the use and benefit of Mr Peak and Mr
Stefanovic’s services in breach of their contracts of employment with Steadfast to
generate income and to benefit Dreamtime.
114.  In his affidavit, which was read at trial by the appellants, Mr Mason said that he sought
advice from the group head office in the USA with regard to the provision of services
following termination of the contract with Steadfast, whereafter in around July or August
2019 he approached Mr Peak and engaged Dreamtime to provide the services.
However, in cross-examination he conceded that neither he nor Mr Allen had followed
the process of seeking approval from Geo’s head office in the USA, and that it was Mr
Allen who approved the appointment of Dreamtime to the same contract that had
previously been fulfilled by Steadfast. Mr Mason also said in cross-examination that Mr
Allen came to him with the proposal to appoint Dreamtime and that he (Mr Mason) then
made the decision to terminate Steadfast and proceed with Dreamtime. It was therefore
only at that point that Steadfast was on notice that it was Mr Allen who made the
appointment. Of course, the appellants also knew at least from then that Mr Mason’s
evidence was that Mr Allen had made the appointment; the documents that were
tendered, and indeed their own admitted dealings with Mr Allen, show that they knew
from much earlier that Mr Allen had at least a substantial involvement in the
appointment.
115.  Mr Peak gave evidence after Mr Mason, on the following sitting day and thereafter. It
was put to Mr Peak in cross-examination that he suggested to Mr Allen, whilst he (Mr
Peak) was still an employee of Steadfast, that Geo should move its business to Dreamtime when he (Mr Peak) went there in early January 2019. It was also put to Mr
Peak that he told Mr Watt in January 2019 that Steadfast was about to lose its “biggest
client”, i.e., Geo, and that he and Mr Stefanovic were involved in meetings to get the
Geo work moved over to Dreamtime. It was put to Mr Peak that he was involved in
approaching Geo to get them to move to Dreamtime from his first week at Dreamtime,
and that he assisted Mr Stefanovic in that regard. It was put to him that he was trying
to underplay his involvement with Geo. Mr Peak either denied those propositions or
obfuscated in answering them, but it must be recalled that the primary judge found Mr
Peak to be an unreliable witness (AJ [28]).
116.  Mr Peak accepted that he was involved in discussions with Mr Allen in relation to
quoting for the work between January and March 2019, and that he was involved in the
process of negotiating the contract in February 2019.
117.   With regard to the pleading, there can be no doubt that the allegations pleaded against
Mr Peak were serious; he was on adequate notice that it was Steadfast’s case that he
had been involved in a dishonest scheme to take Steadfast’s clients from it to
Dreamtime, including Geo. The appellants’ pleading complaint is really limited to two
matters, namely, first, that it was not particularised that Mr Allen was involved in the
scheme insofar as Geo was concerned and, secondly, that the period that was
particularised was “in or about November and December 2018” whereas later events
were also relied on.
118.  Dealing first with the question of Mr Allen, there was no need to specifically identify Mr
Allen. Mr Allen’s extensive involvement in the relevant events was well known to the
appellants, in particular Mr Peak and Mr Stefanovic who were involved in dealing with
Mr Allen. It may be that they did not know that it was Mr Allen who made the decision
to appoint Dreamtime, but neither did Steadfast. It was the appellants’ own evidence,
in the form of Mr Mason’s affidavit, that spelt out that it was Mr Mason that made the
relevant appointment. Further involvement of Mr Allen only emerged during the cross-
examination of Mr Mason who gave oral evidence contradicting his affidavit evidence.
There is no reason why Steadfast should have been expected to know that in advance.
119.   Of course, had Mr Allen been a party to the proceeding, or if any claim had been made
against him as a consequence of the conduct that he was alleged to have been involved
in, it would have been necessary to give him notice of the allegations with regard to
that involvement. But as a non-party, there was no obligation to give him any notice.
The appellants’ complaint can only be with regard to absence or inadequacy of notice
to them. However, as explained, insofar as the involvement of Mr Allen is concerned, they had adequate notice. They cannot complain of a lack of procedural fairness in that
respect.
120.  The same applies with regard to the complaint that Mr Allen’s involvement was not
adequately put to Mr Peak in cross-examination. As mentioned, it was put to Mr Peak
that he had suggested to Mr Allen that Geo should move its business to Dreamtime
after Mr Peak left Steadfast. The many other propositions put to Mr Peak which are
recorded above, adequately put him on notice as to his impugned conduct with regard
to Geo, and in particular with regard to his involvement with Mr Allen. The appellants’
complaint that there was some unfairness to Mr Peak on account of any failure to
observe the rule in Browne v Dunn (1893) 6 R 67 (HL) must accordingly fail.
121.  Insofar as the appellants complain that there was insufficient evidence on which the
primary judge could draw the conclusion as to a conspiracy between Mr Peak and Mr
Allen, there was ample evidence to support the primary judge’s more general findings
with regard to Mr Peak’s plan to take the business of Steadfast and transfer it to
Dreamtime, and that that included the custom of Geo. The gravamen of the complaint
is really with regard to the involvement of Mr Allen.
122.  As detailed in the summary of his Honour’s reasons given above, there was ample
evidence of the involvement of Mr Allen in the events leading to the termination of the
contracts with Steadfast and the conclusion of new contracts with Dreamtime, and of
Mr Peak and Mr Stefanovic’s involvement with Mr Allen. In the absence of Mr Allen,
and hence any explanation from him, it was open to the primary judge to draw the
inference that he did and, on that basis, reach the conclusion that he did with regard to
Mr Allen’s knowing involvement in the dishonest scheme to transfer Geo’s custom to
Dreamtime.

123. In the circumstances, appeal ground 3 must fail.

Ground 4: Dreamtime as a reseller of AlienVault software

Introduction

124. By appeal ground 4 (original appeal ground 4(h)), Mr Glavonjic contends that the
primary judge erred in holding that he breached his duties as a director of Steadfast in
taking steps to set up Dreamtime as a reseller of AlienVault software in circumstances
where:

(a) Mr Glavonjic was authorised to receive and pursue opportunities for both
Steadfast and Dreamtime simultaneously in his capacity as a director of each
company and the conflict which existed between those roles was disclosed by him, and known to and accepted by the shareholders and other director of
Steadfast; and

(b) The opportunity presented by AlienVault to Mr Glavonjic on 18 October 2018
was presented to Mr Glavonjic in his capacity as director of Dreamtime and was
presented to Dreamtime as a consequence of AlienVault seeking an indigenous
cooperation partner, and as such did not establish Dreamtime as a competitor
to Steadfast but rather only gave Dreamtime better access to government
clients which were not, and would not otherwise be, clients of Steadfast.

125. He contends, therefore, that the declaration made by order 11 of the December
judgment should be set aside. That declaration is in the following terms:
David Glavonjic breached his fiduciary duties owed as a director to Steadfast in that by
seeking, on behalf of Dreamtime, to enter an area of business undertaken by Steadfast, he
acted in conflict of his duties and failed to disclose that conflict to the other director of
Steadfast.

126. This ground of appeal is principally directed at AJ [339] which is in the following terms:

Having regard to the relationship between Dreamtime and Steadfast up to the point of his
resignation, although not particularised as involving a breach of duty, I accept that at least
since 17 October 2018 (when he and Mr Goldsmith had decided to make no offer to Ms
Batley for the acquisition of the business), Mr Glavonjic was contemplating means by which
he and Mr Peak could take over the business opportunities that had previously been
available to Steadfast. In the period from 17 October 2018 until the resignation at 8:27am on
31 October 2018, the only particularised matters are the meeting on 18 October 2018 with
Mr Benkendorfer of AlienVault and receipt of an email from Mr Peak attaching a
confidentiality agreement relating to a tender to the Tasmanian government. I am satisfied
that the enquiries about establishing Dreamtime as a reseller of AlienVault products
were undertaken by Mr Glavonjic with a view to taking this business from Steadfast,
even if the plan with Mr Peak had not been fully formulated. The relationship between
Dreamtime and Steadfast was such that there was clear potential for there to be a conflict of
interest if Dreamtime sought to enter an area of business that was undertaken by Steadfast.
Having Dreamtime enter the market for AlienVault products and services, in circumstances
where that would be in competition with Steadfast, was a manner which gave rise to a conflict
between the duties owed to Steadfast and the duties owed to Dreamtime or alternatively Mr
Glavonjic’s interest as a director of Dreamtime. That conflict of duty or conflict between duty
and interest was not disclosed to the other director of Steadfast, Ms Batley. Having said that,
it was only on 1 November 2018, after his resignation as a director of Steadfast, that Mr
Glavonjic then followed up with Mr Benkendorfer in relation to Dreamtime becoming a
reseller of AlienVault.
(Emphasis added.)
127.  His Honour went on (at AJ [340]) to hold that Mr Glavonjic breached his fiduciary duty
to Steadfast in failing to disclose the conflict of interest or duty associated with seeking
to establish Dreamtime as an AlienVault reseller in the period prior to his resignation.
128.  In the December judgment, the primary judge rejected submissions on behalf of Mr
Glavonjic along the lines of the submissions made on this ground of appeal on the basis
that they were in conflict with what his Honour had found in the August judgment (DJ
[64]–[65]).
129.   It will be recalled that by appeal ground 4, Mr Glavonjic contends that he did not breach
his duties to Steadfast because he was authorised to receive and pursue opportunities
for both Steadfast and Dreamtime simultaneously in his capacity as a director of both
companies, and the conflict which existed between those roles was disclosed by him
and known to and accepted by the shareholders and other director of Steadfast. Also,
he contends that the opportunity presented by AlienVault to him on 18 October 2018
was presented to him in his capacity as director of Dreamtime and it was not an
opportunity that was otherwise available to Steadfast.

Mr Glavonjic’s submissions

130. Mr Glavonjic submits that the primary judge’s relevant finding of breach of duty is in
error because it misapprehends the context in which the meeting with Mr Benkendorfer
on 18 October 2018 arose. In that respect, he submits that it was AlienVault that
initiated the contact with Mr Glavonjic, and not vice versa. When Mr Glavonjic replied,
he specifically mentioned his directorship of Steadfast and Steadfast’s existing
partnership with AlienVault.
131. Mr Glavonjic submits that the genesis of the discussions between him and AlienVault
was not a desire by him to advance Dreamtime at the expense of Steadfast, but rather
him making the most of an inquiry by AlienVault to advance the interests of both
Steadfast and Dreamtime. He submits that “the main thrust of the meeting was to
advance Steadfast’s interests in marketing to and obtaining sales from government
clients”. He submits that the meeting “was a step towards advancing the market
presence of Dreamtime, Steadfast and AlienVault in providing software and services to
government entities”.

Mr Glavonjic submits that Mr Benkendorfer’s email record of the meeting on 18 October
2018 shows that he was advancing the interests of both Steadfast and Dreamtime
consistently with his directorship of both companies. He says that this is consistent with his initial email response to AlienVault in August 2018 where he sought to further the
interests of both companies.

Peak’s plans would have been interrupted is not a finding on the balance of probabilities
as to causation. He submits that the finding that his actions would not have caused
loss, absent the conduct of Mr Peak, on the balance of probabilities as a finding that
his conduct did not cause any loss to Steadfast or result in any Dreamtime gain.
159.  Properly understood, his Honour awarded damages for Steadfast’s loss of the
commercial opportunity to obtain the benefit of the identified contracts diverted from
Steadfast to Dreamtime. That is made plain where his Honour says (at DJ [55]) that
“there was a 25 per cent chance that Steadfast would have been able to make these
profits from those clients and that the damages suffered as a result of his conduct is
the value of that loss of chance namely $50,594.69”.
160.   As established over a century ago in Chaplin v Hicks [1911] 2 KB 786, loss of a chance
is a compensable head of loss. In Commonwealth v Amann Aviation Pty Ltd (1991) 174
CLR 64 at 118–119 (Amann), Deane J said:
In many cases, proof of the full extent of the loss or injury sustained will involve establishing
an evidentiary foundation for positive and detailed ultimate findings by the court upon the
balance of probabilities. There are, however, cases where considerations of justice or the
limitations of curial method render ultimate findings, about what would have been or will be,
impracticable or inappropriate. In such cases, damages must be assessed on some basis
other than findings about what would have ultimately happened if the repudiation or breach
had not occurred or about the precise ultimate implications of the situation which exists after
the repudiation or breach. In particular, it may be appropriate that damages be assessed by
reference to the probabilities or the possibilities of what would have happened or will happen
rather than on the basis of speculation that probabilities would have or will come to pass and
that possibilities would not have or will not. If, for example, what the plaintiff has lost by
reason of the defendant’s repudiation or breach of contract is a less than 50 per cent but
nonetheless real and valuable chance of winning some contest or prize, of being the
successful tenderer for some commercial undertaking or of deriving some other advantage,
in circumstances where a court can decide that a proportionate figure precisely or
approximately reflects the chance of success but can do no more than speculate about
whether, but for the defendant’s wrongful act, the plaintiff would have actually won the
contest, prize or tender or derived the advantage, it would affront justice for the court to hold
that the plaintiff was entitled to no compensation at all for the lost chance of competing or
striving or for the wasted expenditure which was incurred in obtaining or performing the
contract. In such a case, considerations of justice require that the plaintiff be entitled to
recover the value of the lost chance itself and that the defendant be not allowed to take
advantage of the effects of his own wrongful act to escape liability by pointing to the obvious,
namely, that it is theoretically more probable than not that a less than 50 per cent chance of
success would have resulted in failure.
161. In Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 (Sellars), the High Court
unanimously dismissed an appeal contending that damages for loss of a chance of a
commercial opportunity was not a compensable loss under s 82 of the then Trade
Practices Act 1974 (Cth). The plurality (Mason CJ, Dawson, Toohey and Gaudron JJ)
identified (at 350–351) that the issue was whether the approach in Amann is to be
adopted in circumstances other than those where the lost opportunity for which
damages is sought is the subject of a contractual promise – i.e., where loss or damage
is the gist of the action such as one based on a contravention of s 52. At 335, their
Honours said:
[W]e consider that acceptance of the principle enunciated in Malec [v J C Hutton Pty Ltd
[1990] HCA 20; 169 CLR 638] requires that damages for deprivation of a commercial
opportunity, whether the deprivation occurred by reason of breach of contract, tort or
contravention of s 52(1), should be ascertained by reference to the court’s assessment of
the prospects of success of that opportunity had it been pursued. The principle recognized
in Malec was based on a consideration of the peculiar difficulties associated with the proof
and evaluation of future possibilities and past hypothetical fact situations, as contrasted with
proof of historical facts. Once that is accepted, there is no secure foundation for confining
the principle to cases of any particular kind.
On the other hand, the general standard of proof in civil actions will ordinarily govern the
issue of causation and the issue whether the applicant has sustained loss or damage. Hence
the applicant must prove on the balance of probabilities that he or she has sustained some
loss or damage. However, in a case such as the present, the applicant shows some loss or
damage was sustained by demonstrating that the contravening conduct caused the loss of
a commercial opportunity which had some value (not being a negligible value), the value
being ascertained by reference to the degree of probabilities or possibilities. It is no answer
to that way of viewing an applicant’s case to say that the commercial opportunity was
valueless on the balance of probabilities because to say that is to value the commercial
opportunity by reference to a standard of proof which is inapplicable.
162.  In the present case, there is no appeal from his Honour’s conclusion that Mr
Stefanovic’s contractual duties required him to inform Ms Batley of Mr Peak’s activities.
That conclusion being undisturbed, there can be no doubt that if Mr Stefanovic had
acted in accordance with his contractual duties – i.e., if Mr Stefanovic had acted in
accordance with the contractual duties of which the primary judge found him to be in
breach, namely by notifying Ms Batley of Mr Peak’s plans – Steadfast would have had
the real and valuable opportunity to pursue contracts with the identified clients wrongly
diverted to Dreamtime. His Honour assessed the possibility that that opportunity would
succeed and thereby secure profits for Dreamtime at 25 per cent. As the authorities on
liability for loss of a chance make clear, it is no answer to say that because there was
only a 25 per cent chance of that opportunity succeeding and because, on the balance
of probabilities, Mr Peak would in any event likely have succeeded in his plans, the
opportunity was worth nought. That would be to apply a standard of proof which, as
was held in Sellars, is inapplicable.

163. In the circumstances, appeal ground 5 fails.

Ground 6: liability for Dreamtime’s profits under s 1317H

164.  As mentioned, there are two elements to Mr Stefanovic’s challenge to the award of
statutory “compensation” under s 1317H of the Corporations Act. The first relates to
the content of the duty imposed by ss 182 and 183 and, correlatively, what constitutes
a contravention of those sections; the second concerns causation, namely whether
Dreamtime’s profit “resulted from” his contraventions.
165.  If the argument that Mr Stefanovic’s failure to inform on Mr Peak cannot constitute a
breach of ss 182 and 183 of the Act is accepted, appeal ground 6 must succeed. That
is because the primary judge made no finding that Dreamtime’s profit resulted from Mr
Stefanovic’s conduct which he otherwise accepts as constituting a breach of the
Corporations Act, i.e., his participation in Mr Peak’s scheme and his failure to disclose
his own conduct. Steadfast does not contend, either by a notice of contention or in its
submissions, that the award of $202,378.75 can otherwise be supported. There is
therefore no cause to consider whether Mr Stefanovic’s active participation in
supporting Mr Peak’s scheme “resulted” in any benefit to Dreamtime within the meaning
of s 1317H.
166.  If the first element of this appeal ground fails, then there remains to consider whether,
nonetheless, Dreamtime’s profit resulted from Mr Stefanovic’s failure to inform on Mr
Peak.

The parties’ submissions

167.  Before considering the parties’ submissions, it should be noted that the resolution of
this point has not been without frustration. The appellants’ submissions filed before the
hearing of the appeal expressly contended, in accordance with the grounds of appeal,
that ss 182 and 183 of the Corporations Act did not impose a positive duty on Mr
Stefanovic to inform on Mr Peak. The respondent’s submissions did not address that
argument or ground of appeal. As a result, the appellants’ reply submissions stated that
they inferred that this ground of appeal was conceded.
168.  Then, at the hearing of the appeal, senior counsel for the respondent candidly stated
that it was not dealt with in written submissions because “we didn’t understand what
the ground of appeal was” and sought to shift blame to the appellants by asserting,
wrongly, that the case advanced orally by the appellants was a new one. The
respondent was then granted leave to file further submissions addressing this ground
to which the appellants were given an opportunity to reply. That is a less than ideal way
for the appeal to have been conducted.
169. Mr Stefanovic submits that the only breach of ss 182 and 183 that the primary judge
found to have been committed that was also found to have caused a loss was his failure
to have informed Ms Batley of Mr Peak’s activities. He contends, however, that there
is no open-ended obligation to act imposed by these sections – i.e., that the sections
proscribe rather than prescribe conduct. That, so the submission goes, follows from the
plain language of the sections: s 182(1) provides that an employee “must not improperly
use their position …” and s 183(1) provides that an employee “must not improperly use
the information” they have obtained because they are or have been an employee.
170.  Thus, Mr Stefanovic contends that the primary judge was required to be satisfied that
the loss to Steadfast was caused by some positive step taken by him in breach of
ss 182 or 183. He submits that the primary judge made no positive finding that he had
undertaken positive action which caused Dreamtime’s profit. The short point therefore
is that the primary judge erred, so Mr Stefanovic submits, in holding that Mr Stefanovic’s
failure to inform on Mr Peak was a breach of ss 182 and 183 of the Corporations Act
because a failure to act cannot constitute a use of his position or information.
171.  The respondent contends that Mr Stefanovic’s failure to inform on Mr Peak is itself a
breach of ss 182 and 183 of the Act. It submits that there is no authority to support the
narrow construction of the word “use” advocated by Mr Stefanovic and that the
authorities construe those sections of the Act consistently with the corresponding
fiduciary obligations. The respondent cites a number of cases that are said to support the conclusion that an omission such as the failure to inform in the present case can
constitute a breach of ss 182 and 183. It will be necessary to refer to them in due
course.

Is failure to inform a breach of ss 182 and 183 of Corporations Act?

172. Steadfast submits that ss 182 and 183 are to be construed consistently with fiduciary
obligations. In Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; 226
CLR 507 at [55]–[64], Gummow and Hayne JJ considered the legislative history of a
predecessor to ss 182 and 183 of the Corporations Act. Their Honours did not entirely
accept that the provision in question was merely declaratory of the general law. Their
Honours observed (at [62]) that the provision under consideration was designed to
encourage good corporate governance by the imposition of deterrents in the form of
civil and criminal liability and held that:
The standards of dishonesty and impropriety were to be determined by reference to the
existing law. By “existing law” was meant the civil law; the joinder of civil and criminal
remedies meant that the section could not be described as declaratory of the law as a whole.
173. In Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; 129 ACSR
265, Basten JA (dissenting) observed (at [19]–[20]) that, although the text of the
provisions is not based upon the general law distinction between a fiduciary’s duties of
no conflict and no profit, there is no doubt that the engagement of the statutory duties
“will depend in part on the scope of the general law principles of fiduciary obligations”.
174. Although there are further such differences between the general law and the provisions
of the Act (as to which see Austin RP and Ramsay IM, Ford, Austin and Ramsay’s
Principles of Corporations Law (17th ed, LexisNexis, 2018) at [9.230.3]), they are at
present of no moment. Indeed, in Agricultural Land Management Ltd v Jackson (No 2)
[2014] WASC 102; 48 WAR 1 at [452], Edelman J referred to the duties imposed by
those sections as “near-identical” to duties in equity (see also Re Earth Civil Australia
Pty Ltd (in liq) [2021] NSWSC 966 at [2248] per Ward CJ in Eq). Accordingly,
Steadfast’s submission that ss 182 and 183 are to be construed consistently with
fiduciary obligations can generally be accepted.
175. In that regard, the submission or suggestion that any such corresponding fiduciary
obligation required Mr Stefanovic to inform on Mr Peak is contrary to established
principle. Steadfast relies in that respect on Breen v Williams [1996] HCA 57; 186 CLR
71 at 113 and 137–138. At 113, Gaudron and McHugh JJ said (footnotes omitted):
In this country, fiduciary obligations arise because a person has come under an obligation to
act in another's interests. As a result, equity imposes on the fiduciary proscriptive
obligations – not to obtain any unauthorised benefit from the relationship and not to be in a
position of conflict. If these obligations are breached, the fiduciary must account for any
profits and make good any losses arising from the breach. But the law of this country does
not otherwise impose positive legal duties on the fiduciary to act in the interests of
the person to whom the duty is owed.
(Emphasis added.)

176. And at 137–138, Gummow J said:

It would be to stand established principle on its head to reason that because equity
considers the defendant to be a fiduciary, therefore the defendant has a legal obligation to
act in the interests of the plaintiff so that failure to fulfil that positive obligation represents a
breach of fiduciary duty.
(Emphasis added.)

177. Those remarks do not assist Steadfast but instead assist Mr Stefanovic.

178.  Steadfast also relies on Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA
1628; 188 ALR 566 at [32]–[33] per Finkelstein J as establishing that there are positive
duties to disclose arising from fiduciary obligations. That case concerned whether the
promoter of an investment scheme was under a duty to disclose the nature and extent
of certain fees that were payable to the manager of the trust. After referring (at [28]–
[31]) to a number of cases concerning prospectuses which hold that a promoter has a
duty of “utmost candour and honesty” to disclose, his Honour said:
32     The conclusion that equity will impose a positive duty requiring a fiduciary to act in the
interests of another person by disclosing information to that other person, appears to
be at odds with principle. It is widely accepted that fiduciary obligations are only
proscriptive: Breen v Williams (1996) 186 CLR 71; Pilmer v The Duke Group Ltd (in liq)
(2001) 75 ALJR 1067. So, that which is often regarded as a fiduciary obligation of
disclosure should not be seen as a positive duty resting on a fiduciary, but a
means by which the fiduciary obtains the release or forgiveness of a negative
duty; such as the duty to avoid a conflict of interest, or the duty not to make a secret
profit: R Nolan “A Fiduciary Duty to Disclose” (1997) 113 Law Quarterly Review 220,
224.
33     I do not propose to recast the nature of the fiduciary obligation here under consideration
from a prescriptive obligation to disclose to, say, a proscriptive duty of loyalty or to avoid
conflicts of interest. I accept that it might sometimes be necessary to be precise in the
description of a fiduciary’s obligation. But the equitable obligation that is presently being
discussed has been spoken of as a positive duty for well over 100 years: for example,
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1229. The law will
not be seriously injured if I continue to adopt the same language.

(Emphasis added.)
179.  This case also does not assist Steadfast. What his Honour was saying is that although
he accepted, as is orthodox, that fiduciary obligations are only proscriptive, the
“obligation of disclosure”, as it were, with which he was concerned had been referred
to in such positive terms for over 100 years and that, accordingly, he did not consider
that the law would be injured if he also adopted those terms. His Honour was clearly
well aware that using the language of “obligation of disclosure” or synonymous such
phrases is infelicitous. Thus, as Besanko J observed in Blackmagic Design Pty Ltd v
Overliese [2011] FCAFC 24; 191 FCR 1 at [105]–[108], “when judges refer to a duty to
disclose in this context it is no more than a shorthand way of referring to the defence
of fully informed consent by the principal”.
180.  It follows that reliance on the scope of corresponding fiduciary duties does not assist
the respondent. Further, insofar as the content of the statutory duties correspond to
those imposed upon a fiduciary by the general law, the authorities are against the
respondent.
181.  Turning now to the cases cited by Steadfast concerning the statutory provisions
themselves, the respondent cites Re Colorado Products Pty Ltd (in prov liq) [2014]
NSWSC 789; 101 ACSR 233 (Colorado Products) at [432]–[433] per Black J, Wilson
HTM Investment Group Ltd v Pagliaro [2012] NSWSC 1068; 226 IR 75 (Wilson HTM)
at [101] per Bergin CJ in Eq and Holyoake Industries (Vic) Pty Ltd v V–Flow Pty Ltd
[2011] FCA 1154; 213 IR 55 (Holyoake) at [164] per Tracey J.
182.  The passage cited from Colorado Products identifies principles as to when the use of
one’s position is improper. As mentioned, the argument advanced by Mr Stefanovic is
that his failure to inform on Mr Peak did not constitute use of his position as such or
information gained in his position.
183. A delineation of the elements of a predecessor to s 182 was adopted as a useful tool
of analysis by the High Court in Doyle v ASIC [2005] HCA 78; 227 CLR 18 at [32],
which is equally useful in the present case, is as follows:
[I]n order to breach [a predecessor to s 182] the following elements have to be established:
(1) the defendant was at the relevant time an officer or employee of a corporation; (2) he
used his position as such officer or employee; (3) his use of his position was improper; (4)
he made that improper use for the purpose of gaining, directly or indirectly, an advantage,
alternatively he made that improper use for the purpose of causing detriment; (5) the
advantage was either for himself or for another person, alternatively, the detriment was to
the corporation.
184.  The passage from Colorado Products goes to element (3) whereas this leg of Mr

Stefanovic’s appeal ground goes to element (2). It is therefore not to the point. Indeed,
as pointed out by Mr Stefanovic, one of the alleged breaches of s 182 in Colorado
Products itself concerned the failure of a minority shareholder and director to provide
funding. That allegation failed because there was no authority cited for the proposition
that a minority shareholder or director is obliged to fund a company.
185.  The next case cited is Wilson HTM. The paragraph relied on by Steadfast merely
summarises the text of the legislation and draws no conclusions, let alone makes any
observations, in respect of the statute.
186.  The next case is Holyoake. Steadfast evidently seizes upon the following sentence at
[164] of Tracey J’s judgment:
In failing to alert Holyoake Victoria to the business opportunity posed by the placing of
Variflow on the market and in acting to ensure that this knowledge did not come to the
Holyoake interests, Messrs Brown, Aloe and Matkovic also acted improperly in pursuit of
their own interests and to the detriment of Holyoake Victoria.
187.  There are a number of issues with Steadfast’s reliance on this sentence. First,
Tracey J’s finding at [165] that Messrs Brown, Aloe and Matkovic each contravened s
182 of the Act was not based solely on their failures to disclose; it relied also on other
conduct: see [22]–[30] of V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [2013]
FCAFC 16; 296 ALR 418. Secondly, what Tracey J was concerned with was the want
of disclosure of one’s own conduct. It is well established, and consistent with the
general law, that a failure to disclose one’s own conduct may make that conduct
“improper” thereby making that conduct a contravention of the provisions: see, eg, R v
Byrnes (1995) 183 CLR 501 at 517 per Brennan, Deane, Toohey and Gaudron JJ
concerning a predecessor to s 182. The present ground however concerns the failure
of Mr Stefanovic to disclose Mr Peak’s conduct. Thirdly, the question whether a want
of disclosure can constitute the use of one’s position was not decided by Tracey J nor
the Full Court.
188.  Accordingly, each of the cases cited by Steadfast in support of its argument does not
assist.
189.  Returning to the provisions themselves, they provide that a director, secretary, other
officer or employee “must not improperly use” their position or information they obtained
because they are, or have been, in one of those positions. Contrary to Steadfast’s
submission that a construction of “use” is limited to positive actions rather than being
extended to omissions is “narrow”, the natural meaning of “must not … use” is a
proscription of conduct. That the provisions do not prescribe conduct is not at all
surprising given that they are born out of the duties imposed by the general law. As the
authorities cited by Steadfast in purported support of its argument make plain, there is
no such positive duty to disclose imposed by the general law upon fiduciaries. That
fortifies the conclusion that the statutory provisions only proscribe conduct.
190.  As mentioned, the primary judge held that Mr Stefanovic’s own conduct was not by
itself a cause of the loss. His Honour held that it was the fact of Mr Stefanovic’s failure
to inform on Mr Peak, in conjunction with his other improper conduct, that led to
Dreamtime gaining the benefit of the contracts with the identified clients and thereby
profit. As ss 182 and 183 did not require Mr Stefanovic to inform on Mr Peak, and as
Steadfast does not contend that Dreamtime’s profit of $202,378.75 otherwise resulted
from Mr Stefanovic’s contravention of those provisions, appeal ground 6 must be
upheld. It is therefore unnecessary to consider the second leg of ground 6, namely the
question of causation.
191.  The result is that Mr Stefanovic’s appeal succeeds to the extent of reducing the award
against him from $202,378.75 to $50,594,69.

Conclusion

192.  For the above reasons, save in relation to the small amount that was conceded in
relation to Nectar Mortgages and Mr Stefanovic’s appeal to the extent of approximately
$152,000, the appeal fails.
193.  Mr Stefanovic has been substantially successful on appeal. To reflect that success, he
should have 75 per cent of his costs of the appeal. However, as the parties (i.e., Mr
Stefanovic and Steadfast) have not made submissions on costs, if they contend for a
different costs award they should be given the opportunity to do so by making
submissions in writing. They should have a similar opportunity to contend that the costs
award below should be different, although, on the face of it, that award should remain
undisturbed as it appears to be amply justified by Mr Stefanovic’s substantial loss at
trial even taking into account the significant correction made on appeal.
194.  Given the de minimis extent of the other appellants’ success, there is no apparent
reason why the costs of the appeal should not follow the event. Also, there is no cause
to disturb the costs award below that concerns them.
195.  There should accordingly be orders as follows:

1.

The appeal be allowed, to the extent set out in orders 2 and 3 by consent, and also to the extent in order 4, but that the appeal be otherwise dismissed.

2.

Order 1 of the primary judge, made on 30 August 2021, be set aside and in lieu thereof the following order be made:
1. Order that Dreamtime Supply Company Pty Ltd account to Steadfast ICT Security Pty
Ltd for profits in equity in the sum of $1,179,466.15.
3.    Order 14 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made:

14. The plaintiff may only recover a total of $1,179,466.15 from all defendants exclusive of
any amount recovered in relation to the costs of the proceedings.
4.    Order 13 of the primary judge, made on 17 December 2021, be set aside and in lieu thereof the following order be made:
13. Nenad Stefanovic pay damages to Steadfast in the sum of $50,594.69.
5.    The respondent pay 75 per cent of the third appellant’s costs of the appeal.
6.    The first, second and fourth appellants, jointly and severally, pay the respondent’s
costs of the appeal.
7.    If the third appellant or the respondent wishes to contend for a different costs order on the appeal to that in order 5 above or a different costs order to order 3 of the primary judge made on 1 March 2022:
(i)       That party file and serve short written submissions in support of their position within 10 days;
(ii)      The other party file and serve short written submissions in response within a further 7 days; and
(iii)     The competing contentions be determined on the papers.

McWilliam AJ:

196. I have had the benefit of reading, in draft form, the separate reasons of Elkaim and
Stewart JJ. I agree with each of those reasons and with the orders proposed by
Stewart J.
I certify that the preceding one hundred and ninety-six
[196] paragraphs are a true copy of the Reasons for
Judgment of the Court.
Associate:
Date: 21 October 2022

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Citations

Dreamtime Supply Company Pty Ltd v Steadfast ICT Security; Pty Ltd (No 2) [2022] ACTCA 57

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[2022] ACTCA 57

18 May 2022

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