EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) - [2013] WASC 183

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: EC DAWSON INVESTMENTS PTY LTD -v- CRYSTAL FINANCE PTY LTD [No 3] [2013] WASC 183

CORAM: BEECH J

HEARD: 1825, 27 FEBRUARY & 512 MARCH 2013

DELIVERED : 17 MAY 2013

FILE NO/S: CIV 1176 of 2008

BETWEEN: EC DAWSON INVESTMENTS PTY LTD (ACN 121 204 448)
Plaintiff
AND
CRYSTAL FINANCE PTY LTD (ACN 104 866 631)
First Defendant
ROBERT FREDERICK COOMBS
Second Defendant

Catchwords:

Equity - Fiduciary duties - Duties of company director - Scope of duties - Significance of facts and circumstances to content of duty

Corporations - Liquidator - Whether liquidator can assign company's claim for breach of fiduciary duty

Legislation:

Corporations Act 2001 (Cth), s 477
Finance Brokers Control Act 1975 (WA)

Result:

Preliminary issues on liability determined

Category: A

Representation:

Counsel:

Plaintiff:     Mr L A Tsaknis & Mr P Redding
First Defendant             :     Mr D E J Ryan SC & Mr G M Abbott
Second Defendant         :     Mr D E J Ryan SC & Mr G M Abbott

Solicitors:

Plaintiff:     Redding & Associates
First Defendant             :     Carol Bahemia
Second Defendant         :     Carol Bahemia

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

Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507
Baden v Societe General [1993] 1 WLR 509
Bank of Melbourne Ltd v HPM Pty Ltd (in liq) (1997) 26 ACSR 110
Barnes v Addy (1874) LR 9 Ch App 244
Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384
Breen v Williams [1996] HCA 57; (1996) 186 CLR 71
Briginshaw v Briginshaw (1938) 60 CLR 336
Camp v King (1887) 14 VLR 22
Carob Industries Pty Ltd (in liq) v Simto Pty Ltd [2000] WASCA 362; (2000) 23 WAR 515
Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178
Citicorp Australia Ltd v Official Trustee in Bankruptcy (1996) 71 FCR 550
Cook v Deeks [1916] 1 AC 554
Coombs v Finance Relationship Consultants Pty Ltd [2006] WASC 15
Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238
Dawson v Great Northern & City Railway Co [1905] 1 KB 260
Defries v Milne [1913] 1 Ch 98
Diamond Hill Mining Pty Ltd v Huang Jin Mining Pty Ltd [2011] VSC 288
Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228
Equuscorp Pty Ltd v Haxton [2012] HCA 7
Faccenda Chicken Ltd v Fowler [1987] 1 Ch 117
Farah Constructions Pty Ltd v Say‑Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Flanders v Beatty (1995) 16 ASCR 324
Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297
Green v Bestobell Industries Pty Ltd [1982] WAR 1
Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Independent Corporate Services Ltd v Stevens [2002] WASC 280
Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443
International Leasing Corporation (Vic) Ltd v Aiken [1967] 2 NSWR 427
Jack v Smail (1905) 2 CLR 684
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
JT International SA v Commonwealth [2012] HCA 43; (2012) 86 ALJR 1297
Kalls Enterprises Pty Ltd (in liq) v Baloglow [2007] NSWCA 191; (2007) 63 ACSR 557
Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216
Krishell Pty Ltd v Nilant [2006] WASCA 223; (2006) 32 WAR 540
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Manildra Laboratories Pty Ltd v Campbell [2009] NSWSC 987
MG Corrosion Consultants Pty Ltd v Gilmour [2012] FCA 383; (2012) 88 ACSR 170
Mordecai v Mordecai (1988) 12 NSWLR 58
News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410
Nicholson v Morgan (No 3) [2013] WASC 110
Norglen Ltd (in liq) v Reeds Rains Prudential Ltd [1999] 2 AC 1
O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262
Phipps v Boardman [1967] 2 AC 46
Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165
Poulton v The Commonwealth (1953) 89 CLR 540
Price v Powers [2006] WASCA 262
Project 28 Pty Ltd v Barr [2005] NSWCA 240
Re Cheal Industries Pty Ltd; Fitzpatrick v Cheal [2012] NSWSC 261
Re Daniel Efrat Consulting Services Pty Ltd (in liq) (1999) 91 FCR 154
Re Movitor Pty Ltd (in liq) (1996) 64 FCR 380
Re New Tel (in liq); Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176
Re Park Gate Waggon Works Company (1881) 17 Ch D 234
Re William Felton & Co Pty Ltd (1998) 145 FLR 211
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267
Seear v Lawson (1880) 15 Ch D 426
Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1
Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17
Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Tiao v Lai (No 2) [2010] WASCA 189
Trendtex Trading Corp v Credit Suisse [1982] AC 679
TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151; (2007) 158 FCR 444
UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457
UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd [1997] 1 VR 667
Van Lynn Developments Pty Ltd v Pelias Construction Co Ltd [1969] 1 QB 607
Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544
Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157

BEECH J:

Introduction

In 2004, Financial Relationship Consultants Pty Ltd (FRC) conducted a successful and profitable finance broking business. It was a two man company. Its two directors and equal shareholders were Mr Emile Dawson and Mr Robert Coombs.
In the first half of 2005, relations between them broke down.
For several months from mid‑2005 to October 2005, Mr Coombs and Mr Dawson discussed various proposals for the ending of FRC's finance broking business, and for that business to be split between two new separate companies to be associated with each of the director shareholders.
In October 2005, Mr Dawson announced that he no longer wished to leave FRC or end its business.
By then, a condition had been imposed on FRC's business certificate requiring it to cease its finance broking business by 31 December 2005.
Also by then, Mr Coombs had acquired a new company, Crystal Finance Pty Ltd (Crystal), the first defendant in this action. For the rest of 2005, he continued preparations to leave FRC at the end of 2005, and for Crystal to commence a new finance broking business at the beginning of January 2006. On 3 January 2006, Crystal commenced its finance broking business.
In December 2005, Mr Coombs filed an application for the appointment of a provisional liquidator to FRC. On 16 January 2006, the court ordered that a provisional liquidator be appointed to FRC. In May 2006, a liquidator was appointed.
In December 2006, the liquidator sold assets of FRC to the plaintiff, EC Dawson Investments Pty Ltd, a company associated with Mr Dawson. Among the assets sold were FRC's causes of action against Crystal and Mr Coombs.
In this action, the plaintiff sues as FRC's assignee, claiming FRC had causes of action against Mr Coombs and Crystal. There are issues about what causes of action were assigned and were capable of being assigned.
In broad summary, the plaintiff claims that Mr Coombs breached his fiduciary and contractual duties to FRC in that he:
(a)arranged for conditions to be imposed on FRC's business certificate to ensure that the business certificate terminated on 31 December 2005;
(b)established and commenced the business of Crystal in competition with FRC, and obtained a licence for Crystal to act as a finance broker on the basis that Mr Coombs would be the licensed finance broker in control of Crystal;
(c)solicited employees of FRC to leave FRC and commence work for Crystal;
(d)diverted FRC's telephone and facsimile numbers to Crystal;
(e)occupied FRC's Victorian office in place of FRC, and used its property there;
(f)removed FRC's property, including client files and the client database, from its WA office to the premises of Crystal and used that property for the benefit of the defendants;
(g)arranged loans for people on or associated with those on the FRC database, or those referred to FRC from a loan aggregator known as The Investors Club; and
(h)used FRC's staff, goodwill and the other matters referred to in (d) to (f) above, to secure Crystal's accreditation with and referrals from The Investors Club and other aggregators.
In late January 2006, the provisional liquidator made an agreement with the defendants to do work on behalf of FRC and to remit commission earned to the provisional liquidator. The plaintiff also claims that the defendants have acted in breach of their duties under this agreement, including by failing to account in respect of relevant commissions received by Crystal.
The parties agreed that there should be a trial of preliminary issues in respect of the defendants' liability in relation to some selected finance broking transactions entered into by Crystal in 2006.
These reasons are organised as follows:
(2)Findings of fact [14] ‑ [368];
(3)The plaintiff's claims [369] ‑ [394];
(4)The preliminary issues [395] ‑ [405];
(5)Legal principles [406] ‑ [439];
(6)Did Mr Coombs breach his fiduciary or other duties? [440] ‑ [637];
(7)Crystal's liability [638] ‑ [662];
(8)The transactions [663] ‑ [861];
(9)Assignment issues [862] ‑ [921]; and
(10)Conclusion [922] ‑ [924].

Findings of fact

2.1 General observations on the evidence

The parties adduced a substantial volume of documentary evidence: more than 500 exhibits were tendered. Nevertheless, some significant elements of the plaintiff's case were founded on the evidence of Mr Dawson, who was the only witness for the plaintiff. Mr Dawson's evidence painted a picture of surreptitious and disloyal conduct by Mr Coombs in the course of the second half of 2005. As will be seen, my findings of fact differ markedly from the version of events advanced in Mr Dawson's evidence.
Mr Coombs gave evidence. The defendants also called some other employees of Crystal who were, up to the end of 2005, employees of FRC: Mr Brad Blaxill, Mr Brett Sheppeard and Ms Denise Maginn. Unless I say otherwise, when I set out evidence from Mr Coombs, I accept that evidence. Generally, and with very few exceptions, where the evidence of Mr Dawson conflicts with the evidence of one of the defendants' witnesses, I prefer the evidence of the defendants' witness.
By way of general observation, to my mind Mr Dawson:
(a)very often in the course of cross‑examination gave evidence that was not responsive to the question asked;
(b)seemed to me to often seek to advance his case rather than answer the question asked;
(c)was prepared, in his witness statement and oral evidence, to make insupportable categorical statements about past events in order to support his case;
(d)at times gave evidence that was inherently lacking in credibility;
(e)gave evidence that, in a number of respects, was internally inconsistent;
(f)was unwilling to concede points which should plainly have been accepted by him; and
(g)in a number of instances, did, said and wrote things in the course of 2005 and 2006 which were, at best, misleading, and which reflect adversely on his credit.
A number of examples of these will emerge in the course of my findings of fact. Further, I will give some more examples of the third and last of these points at the end of section 2 of my reasons.

2.2 Background: the establishment and commencement of FRC

Prior to 1999, Mr Dawson and Mr Coombs knew each other. They met in a business context. Mr Coombs was the relationship manager, for the Commonwealth Bank, managing Mr Dawson's business loan requirements.
In late 1998, Mr Coombs went on long service leave from the Commonwealth Bank. While on long service leave, he and Mr Dawson had discussions about starting a finance broking business together. They agreed to do so, through a company which changed its name to FRC.
The parties agreed that they would be equals in the business, being equal shareholders and co‑directors (exhibit 1A [24] ‑ [27]; ts 990).
The business commenced in an office at 76 Canning Highway, Victoria Park in February 2009.
Mr Coombs understood that he needed a finance broking licence.
Mr Coombs prepared a business plan for FRC in mid‑1999 (exhibit A2). Under that plan, one of Mr Coombs' responsibilities was to secure the necessary finance broking licences. Mr Coombs and Mr Dawson agreed that that would be part of Mr Coombs' responsibilities (ts 992 ‑ 993).
Mr Dawson started working in the FRC office in about the middle of 1999. Mr Coombs did the finance broking work. Mr Dawson did not do finance broking work. He dealt with inquiries from potential clients and attempted to find new clients to generate further work.
Later, in 2003, Mr Dawson was designated the business development manager for FRC.
Mr Coombs obtained a finance broking licence in 2000 (exhibit A3; exhibit 1A [64]).

2.3 Background: finance broking business and aggregators

A finance broker earns commissions from brokering loans between prospective borrowers and lenders. The broker arranges and then manages the loan.
Brokers receive an upfront commission, and a trail commission. The commission is paid by the tender.
An aggregator pools loan applications to generate a large volume of loans. In that way, the aggregator is able to obtain a higher commission rate from a bank than could be achieved by a single broker.
Each finance broker has an agreement with the aggregator, known as an accreditation agreement.
The bank or other lender pays commissions to the aggregator, not to the individual finance broker.

2.4 Background: PLAN

From about 2001, FRC entered into an accreditation agreement with an aggregator called Professional Lenders Association Network of Australia Pty Ltd (PLAN). PLAN assigned a unique identifying number to each PLAN member. FRC would nominate individual finance brokers and finance managers, each of whom would be separately accredited. Each of those individuals was assigned his or her own individual PLAN ID number. PLAN only provides such numbers to licensed finance brokers or individuals employed by licensed finance brokers.
Mr Coombs was accredited with PLAN.
Following that, he was also accredited with many of PLAN's panel lenders, including a number of major banks.
When a person is accredited with a particular lender, they are given a unique identifying number from that lender, known as a broker code. The broker code must be included on each loan application lodged with that lender.
The broker code enables the lender to identify to whom the commission is payable. The lender could identify, from the broker code, that FRC was the finance broker and that FRC aggregated with PLAN so that the commission was to be paid to PLAN.
The PLAN ID number also needed to be used in the course of the loan application process. That number is entered on the PLAN website when details of the loan application were lodged on the PLAN database. The PLAN ID allows PLAN to apportion the commission to the relevant broker.
PLAN would retain 10% of the upfront commission and pay the balance to FRC.
PLAN would periodically (monthly or weekly) prepare a recipient created tax invoice (RCTI). The RCTI would set out a summary of commissions for the period for each individual accredited finance manager, broken down by upfront, trail and clawback commissions. It is necessary that RCTIs be checked. It was agreed between Mr Dawson and Mr Coombs that Mr Coombs would check the RCTIs.
Clawbacks would occur if the client refinanced the loan through another lender, or in various other circumstances.
'Orphan' commissions had been retained by PLAN where it could not identify the PLAN member who should be paid the commission. It was necessary to check FRC's internal records to see whether an anticipated commission had not been received. If it had not been received, then it would be chased up through the 'orphans'.

2.5 Background: The Investors Club

The Investors Club refers individuals who wish to invest in the residential market to, among other things, finance brokers. The finance broker, such as FRC, would pay a percentage of the commissions it earned from those references to The Investors Club.
The Investors Club was a very large part of FRC's business.
The Investors Club operated through Club Loans Pty Ltd. Club Loans would accredit finance brokers throughout Australia. It had branches in all Australian states.
A potential investor was not shown The Investors Club's list of possible investment properties until they became a member of the club. In order to become a member of the club, there needed to be an assessment of the borrowing capacity of the potential investor. That assessment was done by one of the club's accredited finance brokers.
Other units at 76 Canning Highway, Victoria Park, where FRC had its offices, were occupied by businesses that were branches of The Investors Club in WA.
After doing some individual matters, FRC was approved by the CEO of The Investors Club as an accredited broker for The Investors Club.
Over time, the brokers in FRC developed strong relationships with the branch managers and support staff of the branches of The Investors Club.
As a first step, a person who attended a seminar or workshop would complete a document called a Finance Enquiry Form (FEF). The FEF was given to The Investors Club support member who would forward it to a finance broker to calculate the borrowing capacity of that individual.
Mr Coombs would assess the FEF when received. After that, a business development manager from FRC would discuss the results with the client.
Once a client saw an investment property that they were interested in, they would complete an Expression of Interest Form (EOI) for the purchase of that property. Generally, that would be sent to the broker who had considered the FEF. The business development manager of FRC would contact the member to discuss a loan strategy. Then the transaction would be referred to one of the finance managers to begin the loan application process.
FRC data was entered on the receipt of an FEF and on receipt of an EOI.
On receipt of an FEF, the receptionist or administrative clerk would enter the name and details into the client database.
The Finance Capacity Form (FCF) subsequently replaced the FEF.
If an EOI was received, the details would be entered on the application register and allocated to a business development manager.
Finance managers would also update The Investors Club website as a particular job progressed.
Commission was payable once the loan settled. It was paid to the aggregator. When FRC received commission it would calculate the commission payable to The Investors Club. Mr Coombs would complete this task each month and provide an RCTI to The Investors Club.
The Investors Club obtained 50% of upfront commissions and, initially, 20% of the trail commissions. By the agreement of 1 July 2005, after 12 months The Investors Club would also obtain 50% of the trail commissions (see exhibit A32).

2.6 Background: FRC's business certificate

In September 2001, Mr Coombs received a letter from the Finance Brokers Supervisory Board (the Board) advising that the Board was of the view that FRC should make arrangements to obtain a finance broking licence and business certificate (exhibit A6). In October 2001, Mr Coombs wrote to the Board informing it that FRC intended to apply for a business certificate (exhibit A7). In June 2002, FRC applied for a finance broking licence (exhibit A9). The application stated that Mr Coombs would be the person in bona fide control of FRC.
The Finance Brokers Control Act 1975 (WA) (FBC Act) regulated the conduct of the business of finance broking. Under s 29 of the FBC Act, as it then stood, in order for a company to obtain a business certificate, one director had to be a licensed finance broker and the person who was bona fide in control of the body of the company's business as a finance broker had to be a licensed finance broker.

In the course of 2001, Mr Coombs became aware of these requirements. In particular, he became aware that one of the directors of FRC, relevantly himself, had to hold a finance broking licence in order for FRC to hold a business certificate (ts 994 ‑ 996).
In about August 2002, FRC was granted a finance broking licence and a business certificate (exhibit A12, A13). It was a condition of the licence that Mr Coombs remain one of two directors of FRC, be the person in bona fide control of the business, and notify the Board immediately of any changes to FRC and any of those details.

2.7 Background: the growth of FRC's business

From 2001 to 2005, the business of FRC grew very substantially. Much of that was through work generated through The Investors Club. The Investors Club provided FRC with the vast majority of its work (ts 1006). As a result of the work generated through The Investors Club, by 2002, FRC had become a highly profitable business (ts 999).
During this period, the business grew. By 2005, FRC employed more than 10 people. Mr Coombs remained the person in bona fide control of the business. He agreed that he was responsible for the general management of the office, saying that he was 'responsible for just about everything' (ts 1000).

2.8 Other background

By mid‑2001, Mr Coombs created an applications register, setting out the name of the client, the date the application was received, the purchase price, the date of submission to the bank, the date of approval and other matters. This was done on a whiteboard and on an Excel spreadsheet. The application register was developed in more detail subsequently.
In 2001, Mr Coombs' son, Mark, did some work helping update the application register. Mr Dawson complained about this. It was then agreed that family members would not be employed (apart from existing arrangements with wives).
Mr Dawson was not initially accredited with banks to lodge loans but gradually gained accreditation with various lenders.
FRC's major lenders were the Commonwealth Bank, Westpac, ANZ, Macquarie and RAMS.
FRC also dealt with Interstar. Interstar had customers who could not source funds from traditional lenders. Interstar was not a broker aggregator and did not use a broker aggregator. Thus, a broker dealing with Interstar needed a direct lending agreement with them.

2.9 Melbourne office

Mr Dawson suggested in 2003 that FRC should open an office in Melbourne. Brett Sheppeard was trained in Perth during 2003. He started work in Melbourne in the middle of 2003. He worked from home. Most of his work was on referral from The Investors Club. As the work grew, FRC opened an office in Melbourne, away from Mr Sheppeard's home, in October 2005.

2.10 Mr Dawson's son's involvement

In late 2003, Mr Dawson told Mr Coombs that Mr Dawson's son, Galvin, would start working in the business. Mr Coombs objected, pointing out that there had been earlier problems with Mr Coombs' son and that it had been agreed that family members would not work in the business.
Nevertheless, Galvin starting working at the business. That led to issues between Mr Coombs and Mr Dawson

2.11 Early 2005: issues relating to Mrs Coombs

Mr Coombs' wife, Robyn, did bookkeeping for FRC from about 2000. She did that from home. Mr Dawson wanted access to the books so they were brought into the office. Thus, Robyn came into FRC to work on the books two or three times a week.
Mr Coombs and Mr Dawson discussed their shared desire for some more time away from the office. In that context, Mr Coombs suggested to Mr Dawson that there should be an administration manager.
Mr Coombs appointed Robyn to do the books and accounts and to help him in the administration role. Mr Dawson agreed to this.
Mr Coombs gave Robyn the title Manager Accounts/Human Resources. That was not discussed with Mr Dawson.
By email of 30 March 2005, Robyn requested the mileage on Mr Coombs' and Mr Dawson's cars to be provided by the end of the month. In Mr Dawson's email response of 31 March 2005 (exhibit A28), he instructed her not to give instructions to employees or to refer to herself as Manager Accounts/Human Resources. The email also made a complaint in respect of bonus payments being made to staff.
Mr Dawson and Mr Coombs had a heated argument about this. Mr Coombs said that he needed help with the administration. Mr Dawson said he did not want Robyn working in the office but she could work from home. Mr Coombs said they should get Robyn to join the discussion. Mr Dawson repeated that he did not want Robyn in the office.
After Robyn left the office, Mr Coombs asked Mr Dawson whether he was sacking Robyn, to which he said 'yes'. Mr Coombs said 'That's it. I can't work with you any longer' (exhibit 1A [268]). Mr Dawson said he wanted to stay with FRC. Mr Coombs said he wanted Mr Dawson to buy him out.
A few days later, Mr Dawson said that he had got a quote from accountants to do the bookkeeping work and that it would cost $12,000 and that he proposed they could do the job. Mr Coombs said that he was not interested in that option because it would add to his workload and said that he was serious when he said 'You should buy me out'.
In his witness statement, Mr Dawson says that the heated exchange about Robyn occurred prior to the emails of 30 March 2005. According to Mr Dawson, Mr Coombs said that 'If Robyn couldn't be the accounts manager then he didn't want to work with me any more', to which Mr Dawson responded: 'If you want to move on, that's up to you. I don't want to end the business. I want to stay with FRC': (exhibit C1 [51] ‑ [52]). Nothing turns on the difference between these two versions.
This issue about Mrs Coombs marked the beginning of the end of the relationship between Mr Dawson and Mr Coombs.

2.12 June ‑ July 2005: offers to purchase

A little later Mr Dawson said he would buy Mr Coombs' interest in FRC to which Mr Coombs said that a valuation should be done. Mr Dawson arranged for a valuer (exhibit 1A [274] ‑ [275]).
By memorandum dated 9 June 2005 (exhibit A32A), Mr Dymock, of the Department of Consumer and Employment Protection (DOCEP), set out a complaint that had been made against Mr Dawson.
By letter of 14 June 2005 (exhibit A30), Mr Dawson offered to purchase Mr Coombs' 50% interest in FRC for about $566,000. The letter stated that he sought to have the sale completed by 30 June 2005. The letter did not include a copy of the valuation. The letter stated that his lawyer was currently drafting a restrictive covenant.
Mr Coombs asked for a copy of the valuation and said to Mr Dawson that if he was going to buy Mr Coombs out he would need his own finance brokers licence. Mr Dawson said that that was under control. Mr Dawson gave a copy of the valuation.
Shortly after this Mr Coombs spoke to Mr Dawson and said that he did not want to sell his interest with a restrictive covenant because finance broking was all he knew. He also said that he did not like the price, to which Mr Dawson said that he would not negotiate on price.
Mr Coombs said that he would buy Mr Dawson's interest in FRC for the same amount, but without the restrictive covenant. Mr Dawson rejected this offer.
By letter of 30 June 2005 (exhibit A31A), Mr Coombs put an offer to this effect. The letter also included an alternative offer to the effect that:
(a)FRC remain in place to collect its trail commissions; and
(b)both the parties have the client list and, in effect, compete for their work.
On or about 28 June 2005, Mr Dawson applied for a finance brokers licence (exhibit A30A).
The application was advertised on 27 June 2005 in the newspaper.
The enclosed police certificate identified a conviction for stealing on 19 September 1996 for which a penalty of $200 was imposed. The application included a letter from Mr Dawson which sought to explain the conviction. The letter stated that while buying 10 items he inadvertently forgot to pay for two of them. The security officer at the end of the till challenged him. He explained it was a genuine oversight. Although the officer agreed, she said it was company policy to report the matter. The letter then states (without explanation) that he pleaded guilty in court.
The application also contained a number of references.
I do not think that the timing of this application, in the course of discussions and correspondence about the two directors parting company, is a coincidence. The expectation that they would be separating was the catalyst for the application.
In late June 2005, Kevin Young of Club Loans met with Mr Coombs and Mr Dawson, wanting to renegotiate commission rates on FRC's agency agreement with Club Loans. A new agency agreement was signed on or about 1 July 2005 (exhibit A32).
Mr Coombs was asked by various staff, some clients, some Investors Club support members, and some PLAN employees, about whether Mr Dawson was buying Mr Coombs out of FRC. He asked how they knew about that and they said that Mr Dawson had told them that was the case.
There were further discussions between Mr Coombs and Mr Dawson. Mr Coombs reiterated that he did not want to be in business with Mr Dawson any longer. Mr Dawson responded with words to the effect that he accepted they could no longer be in business and that they wanted to work in their own businesses, and that they would split from each other but the details of how that was to be done needed to be worked out (exhibit 1A [293] ‑ [294]).
Mr Coombs suggested to Mr Dawson that one way of approaching it would be to split FRC's assets between the two of them and that they each go about building their own businesses. Mr Dawson said that he was receptive to that idea and wanted to see a written proposal (exhibit 1A [295]).
Mr Dawson pressed him for the proposal.
On 18 July 2005, Mr Coombs wrote to Mr Dawson (exhibit A33). The letter commences by stating that Mr Dawson had asked for an outline of how Mr Coombs sees the way they can both be free to go their own separate ways, and build their separate businesses as they think best, and keep the benefits of FRC. Notwithstanding Mr Dawson's denials (ts 561 ‑ 562), I find that Mr Dawson had asked Mr Coombs to put a proposal in writing. I accept Mr Coombs' evidence on this. The letter states that the goals just referred to are achievable, and he deals with the issues of the FRC database of clients, the assets of the business and the premises, the Melbourne office, and the staff issues and admin support.
The letter proposed that FRC keep going with a skeleton staff to split the net income between Mr Coombs and Mr Dawson equally, and the Melbourne office continue with Mr Sheppeard remaining with FRC. It also proposed that staff would be free to choose where to work.
After Mr Coombs gave Mr Dawson his letter of 18 July 2005, they had a long discussion that evening. Mr Dawson was receptive to the idea of splitting the assets, asking a few questions and discussing likely splits of staff (exhibit 1A [302] ‑ [305]).
Mr Coombs sent an email to his solicitor setting out the upshot of the discussion (exhibit A33A). That email said that their talk had gone 'surprisingly well' and that Mr Dawson was 'obviously receptive to the whole idea'.
Mr Dawson could not recall whether he talked to Mr Coombs that evening or, if he did, what was said (ts 561; exhibit C1 [56]). I accept Mr Coombs' evidence on this.
A short time later, the two discussed the timetable, suggesting that three months was a realistic time to complete the split. Mr Dawson agreed to work towards 1 December 2005 (exhibit 1A [308]). Mr Coombs suggested, and Mr Dawson agreed, that they should together tell the staff about their agreement (exhibit 1A [309]; ts 1026). Mr Dawson's evidence was to the same effect (exhibit C2 [38.13]; ts 566 ‑ 568).

2.13 August 2005: the staff meeting

On 3 August 2005, Mr Coombs submitted an application on behalf of FRC for the renewal of FRC's business certificate, which was due to expire on 22 August 2005 (exhibit 1A [310] ‑ [311]).
By late July or early August 2005, Mr Coombs was proceeding on the basis that Mr Coombs and Mr Dawson had agreed that FRC would be split, and that that would accordingly occur (ts 1024 ‑ 1025).
From August 2005, Mr Coombs began to take steps so that he could be in business for himself after the split (exhibit 1A [312]).
In August 2005, he was appointed sole director of Crystal (exhibit A301).
Exhibit A34A is notes of a meeting of the licensing panel of the Board on 22 July 2005. (The notes were approved by the Board on 16 August 2005.) The notes state that the licensing panel noted that there was a current investigation concerning a company of which Mr Dawson was a director and that the complaint specifically concerned Mr Dawson's actions. The licensing panel recommended that Mr Dawson's licence application be deferred given the ongoing investigation of the complaint concerning Mr Dawson and FRC.
A handwritten note on the exhibit states that, on 17 August 2005, an officer telephoned Mr Dawson and informed him that the application was pending the outcome of the complaint and that his business partner, Mr Coombs, was meeting with a senior compliance officer on 23 August 2005.
Mr Dawson accepted part of this, but not that he had been told that Mr Coombs was meeting with a compliance officer (saying that he could not recall that) (ts 569). I find that Mr Dawson was told this. I accept the accuracy of the handwritten note.
Also on 17 August 2005, Mr Coombs was contacted by Mr Lane of DOCEP. Mr Lane said there had been a complaint about Mr Dawson arising from an East Perth development. He also said that Mr Dawson had an application pending for a finance brokers licence. That day, 17 August 2005, Mr Lane sent Mr Coombs an email (exhibit A39) confirming a meeting about these two issues.
Mr Coombs spoke to Mr Dawson. Mr Dawson said that it was an old complaint and it was nothing to worry about (exhibit 1A [326] ‑ [329]).
The meeting occurred on 23 August 2005. Before Mr Coombs went to the meeting he did not expect it to relate to FRC's licence (ts 1030). Given the contents of the email and what he had been told, that was understandable.
In the course of the discussions, Mr Coombs told the officers of DOCEP that Mr Dawson and he had agreed to go their separate ways after 1 December 2005 and that he would be applying for a business certificate in the name of Crystal (exhibit 1A [338]; ts 1032).
When he returned to the office, Mr Coombs told Mr Dawson that he had the impression that the DOCEP officers had doubts about whether he was a fit and proper person, and that he told the DOCEP officers that Mr Dawson and Mr Coombs were splitting on 1 December 2005. Mr Dawson did not really respond (exhibit 1A [341] ‑ [342]). Mr Dawson denies this (exhibit C2 [45]). I accept Mr Coombs' evidence.
By this time, as I have said, Mr Coombs and Mr Dawson had agreed that they should have a meeting with staff to tell them of their plans. That meeting was held in late August 2005.
Mr Coombs' evidence about the meeting is to the following effect.
At a meeting of staff on 25 August 2005, Mr Dawson and Mr Coombs gathered the staff. Mr Dawson said that the directors had news for staff and that Mr Coombs and Mr Dawson were going to go their separate ways. Mr Coombs said that the business would be split between them, each would set up their own business and staff would have their employment with FRC terminated, and that this would happen by 1 December 2005. Mr Coombs said that Mr Dawson and he would be talking to staff individually to see their preferences for subsequent employment and that they were free to go with whoever they wished (exhibit 1A [344] ‑ [348]).
That evidence is also consistent with the evidence of others who attended the meeting: Mr Blaxill (exhibit 5 [8] ‑ [11]; ts 1162), although Mr Blaxill is mistaken about the timing of the meeting; and Ms Maginn (exhibit 4 [13] ‑ [16]). In his responsive statement, Mr Dawson denies parts of these witnesses' evidence, but in his response to Mr Coombs' witness statement he specifically refrains from responding to the evidence about what was said at the meeting (see exhibit C2 [3], [16], [45] ‑ [46]; ts 568).
I accept Mr Coombs' evidence of what was said at the meeting.
It should be noticed, that at the meeting, Mr Dawson and Mr Coombs did not say to staff that they were planning to go their separate ways and set up their own businesses, subject to coming to an agreement on questions such as how the business of FRC would be split. Rather, they said, in an unqualified way, that by 1 December 2005 staff would not be employed by FRC, and each of the directors would be conducting his own separate business.
I accept Mr Dawson's evidence that on 28 August 2005, he and Mr Coombs went to an Investors Club meeting in Albany and that they travelled and stayed together without any discussion of a split (exhibit C2 [26]). The absence of discussion on the topic of FRC's future does not seem to me to bear on the probabilities of the competing versions of events given by Mr Coombs and Mr Dawson.
On 31 August 2005, Mr Dymock of DOCEP provided a memorandum to the licensing panel of the Finance Brokers Supervisory Board regarding Mr Dawson's application for a finance brokers licence. The memorandum set out Mr Dawson's conduct and other events in relation to a development in East Perth. The memorandum also set out a number of objections to the issue of a finance brokers licence arising from what was said to be Mr Dawson's conduct.
The memorandum concluded by saying there was a body of evidence which suggested that Mr Dawson was not a fit and proper person to hold a finance brokers licence; further investigations would take place and, in the interim, it was recommended that Mr Dawson not be granted a finance brokers licence (see exhibit A42A).
On 31 August 2005, the panel recommended that the Board defer Mr Dawson's application pending the completion of the investigation (exhibit A42B).
By letter of 31 August 2005 (exhibit A42), a solicitor wrote on behalf of Mr Coombs to Mr Dawson. The letter stated that the solicitor was instructed that relations between them had broken down irretrievably, and that they had agreed to a separation mechanism that will maintain the significant trail commissions that FRC would generate in the future. The letter stated that Mr Coombs was adamant the process must be completed by the end of November 2005 and that on 1 December 2005 he would be operating his own business. The letter stated that Mr Coombs would deliver a timetable of steps to be taken, sought a reply by 16 September 2005, and proposed that third parties be appointed to carry out the necessary tasks to ensure the deadline was met.
This letter spells out to Mr Dawson that Mr Coombs intended to commence operating his own business by December 2005. By necessary implication, preparation would occur in the meantime. Nothing in Mr Dawson's solicitors' letters of 13 September 2005 or 30 September 2005 said anything to challenge that intention (exhibits A46 and A50).
There is no evidence that Mr Coombs and Mr Dawson discussed this letter.
From this time on, nothing Mr Coombs said or did changed or qualified his statement in this letter that he intended to leave FRC and then conduct his own business. To the contrary, he continued to state that intention for the rest of 2005. Thus, this is not a case where a director or employee secretly prepares to leave a company and set up in competition.

2.14 September 2005

Some time soon after the staff meeting, probably within about two weeks, Mr Dawson came to see Mr Blaxill in his office. Mr Dawson invited Mr Blaxill to lunch at Burswood. Mr Dawson told Mr Blaxill about his plans for his new business, saying that he intended to move into a East Perth unit, get closer to The Investors Club and grow the business. Mr Dawson talked to Mr Blaxill about how Mr Blaxill would fit into the new business (exhibit 5 [14]).

Although in his responsive statement Mr Dawson denied parts of this evidence by Mr Blaxill (see exhibit C2 [4]), Mr Blaxill's evidence on this point was not challenged in cross‑examination, and I accept it.
Thus, in late August or early September 2005, Mr Dawson intended to establish a new business, was planning accordingly and talking to prospective employees about it.
In the period from late August to mid‑October 2005, Mr Dawson also spoke to Mr Sheppeard, asking whether he would be interested in working with Mr Dawson if Mr Dawson and Mr Coombs went their separate ways (exhibit 3 [54] ‑ [56]).
Further, Mr Dawson asked Mr Sheppeard if he had any suggestions for a name for Mr Dawson's new business. Mr Sheppeard emailed Mr Dawson a few suggestions, but Mr Dawson later told Mr Sheppeard that he had decided to use a name that Galvin, his son, had put forward, namely Finance Edge (exhibit 3 [60]).
Again, some of this evidence of Mr Sheppeard was denied by Mr Dawson in his responsive witness statement (exhibit C2 [8] ‑ [10]). However, none of it was challenged in cross‑examination and I accept it.
On or about 7 September 2005, Mr Coombs gave Mr Dawson a Gantt chart setting out the tasks and timelines for completion of the process (exhibit A44; exhibit 1A [357]).
In early September 2005, Mr Coombs received a phone call from one of the DOCEP officers asking for confirmation of what had been said at the meeting about the future of FRC (exhibit 1A [359]). At that stage, as far as Mr Coombs was concerned, he was dealing with DOCEP regarding FRC not Crystal (ts 1033). Objectively, that was the position, given that FRC then had a pending application and Crystal did not.
Mr Coombs sent an email dated 9 September 2005 to Mr Allen of DOCEP (exhibit A45). The email 'confirmed' that Mr Dawson and Mr Coombs had agreed to separate and wind up FRC, that legal and consulting advice had been engaged and that the timetable expected to achieve this by 1 December 2005 after which FRC would no longer trade. The email stated that Mr Coombs intended to continue to operate as an independent finance broker in his own right, that he had formed a new company and would be applying for a new business certificate.
The email also stated that the decision to split is firm and irrevocable.
I will say more about this email, and Mr Coombs' intentions in sending it, in section 6.1 when I deal with the alleged breaches by Mr Coombs relating to the finance broking licences and business certificates of FRC, Crystal and himself.
On 9 September 2005, an officer of DOCEP telephoned Mr Dawson and advised him of the Board's decision to defer the application pending completion of the investigation and that the matter may be considered further at the Board meeting of 14 September 2005. On 14 September 2005, Mr Dawson telephoned DOCEP. The officer advised him that the Board still intended to defer the application pending the completion of the investigation, which may be in four to six weeks (exhibit A42B).
A note on DOCEP's application checklist for FRC states that on 5 September 2005, the relevant officer spoke to Mr Dymock who, having interviewed Mr Coombs, would not be seeking disciplinary action against FRC and considered it was 'okay' to renew FRC's licence (exhibit A43A).
On 12 September 2005, the registrar of the Board prepared an agenda paper for the Finance Brokers Supervisory Board (exhibit A46A). The paper recommended that the Board consider the application for renewal of the business certificate for FRC. It referred to the Board's recent resolution to defer Mr Dawson's application. The paper stated that Mr Coombs was not a person of interest to the investigation. It also stated that Mr Coombs and Mr Dawson 'have parted company and according to [Mr Coombs' email of 9 September 2005] this process has commenced but may take several months'.
Mr Dawson engaged solicitors in September 2005. By letter of 13 September 2005, Mr Dawson's solicitors wrote to Mr Coombs' solicitors, referring to the letter of 31 August 2005 (exhibit A46). Mr Dawson's solicitors' letter:
(a)stated that they would take instructions, but that because Mr Dawson was away they would not be in a position to respond by 16 September 2005; and
(b)stated that Mr Dawson wishes to effect settlement of this matter as soon as possible and that this should take place as amicably as possible.
On 14 September 2005, the Board resolved that the business certificate for FRC be renewed subject to conditions (see exhibit A48).
By email of 29 September 2005, Mr Allen of DOCEP wrote to Mr Coombs (exhibit A48). The email stated that:
(a)at its meeting of 14 September 2005 the Finance Brokers Supervisory Board had considered the application for renewal of certificate and resolved that it be renewed subject to standard conditions, and also a condition that the certificate become invalid and expire on 31 December 2005 should the company not have been wound up and ceased to trade by that date;
(b)that last condition was imposed in light of concerns raised by an ongoing investigation of a complaint concerning Mr Dawson and the comments in Mr Coombs' email [of 9 September 2005]; and
(c)application could be made to the Board or the Commissioner for Fair Trading for the special condition to be removed or amended.
See also the business certificate of 30 September 2005 (exhibit A49).
Mr Coombs did not expect this condition, but was not concerned or disappointed about it (ts 1041 ‑ 1042), given the intention for FRC to cease trading at the end of November. He told Mr Dawson about the email. Mr Dawson did not respond (exhibit 1A [375]; ts 1045 ‑ 1046). Mr Dawson denies this (exhibit C1 [41] ‑ [42]; exhibit C2 [27], [52], [53]). He says that had he known of the condition, he would have approached the Board to have it removed or asked Mr Coombs to do so. Given that, at that stage, Mr Dawson intended the split to occur, this seems improbable. I will explain why I prefer Mr Coombs' evidence on this point later in these reasons.
On 29 September 2005, Mr Dawson gave a document to Mr Coombs, saying that it was 'regarding the split' (exhibit 1A [364]). The document is the document attached to Mr Dawson's solicitors' letter of 30 September 2005 (exhibit A50).
Although it was not challenged in cross‑examination, I do not accept Mr Coombs' evidence that Mr Coombs' Gantt chart was an attachment to the document Mr Dawson gave him on 29 September 2005. Given the contents of Mr Dawson's document, explained immediately below, it would have made little sense for Mr Coombs' Gantt chart to be attached to Mr Dawson's document.
Mr Dawson's document was entitled 'FRC Settlement Process'. It was drafted as if FRC was a partnership. It outlined steps and matters to be dealt with in the 'FRC Settlement Process'. It stated that the settlement process cannot be finalised until a finance brokers licence is granted to Mr Dawson or to Galvin (his son) (condition 11). Condition 12 identified the need to calculate how the loan/trail book was to be split, to determine if either party would rewrite the business and if so, to calculate the payment to be made in relation to the trail, and to confirm specifics of the proposed announcement in relation to the Melbourne office. The document also identifies, as one of the steps to be taken, the registration of a new company in the names of Emile Dawson and Galvin Dawson (condition 15).
Towards the end of September 2005, Mr Coombs interviewed two consultants, Karen Twort and Dianne Ryman. Mr Coombs had provided to Mr Dawson a document relating to those two persons who Mr Coombs thought might be appropriate to engage to analyse the database to assist with the split. After the interview in late September 2005, Mr Coombs wanted them to meet Mr Dawson. Mr Dawson said he did not want to see them (exhibit 1A [376] ‑ [379]).
By letter of 30 September 2005 (exhibit A50), Mr Dawson's solicitors wrote to Mr Coombs' solicitors. The letter:
(a)stated that Mr Dawson had given Mr Coombs a document entitled FRC Settlement Process and enclosing a copy;
(b)stated that the intention is for Mr Coombs and Mr Dawson to liaise in order to appoint a suitable administrator, as proposed in Mr Dawson's settlement process document;
(c)expressed concern about the meeting between Mr Coombs and two possible consultants, and that he was being excluded and that they would not be impartial;
(d)stated that it is premature to have the company database split prior to a meeting between Mr Coombs and Mr Dawson to discuss the basis on which the database will be split; and
(e)stated that an independent administrator must be agreed.
There is no suggestion in this letter that the split would not or might not occur. Moreover, the thrust of the letter is about the process by which it would occur.
After receiving the letter, Mr Coombs did not make any further appointment with these consultants (exhibit 1A [383]).

2.15 October 2005

Soon after 30 September 2005, Mr Coombs received FRC's renewed business certificate, with the conditions that had been foreshadowed (exhibit A49). Mr Coombs' evidence is that he showed Mr Dawson the business certificate and pointed out the conditions, and that Mr Dawson did not really make any response to this (exhibit 1A [386]; ts 1049 ‑ 1052). That is denied by Mr Dawson (exhibit C2 [27], [53]). Mr Dawson says that he asked Mr Coombs to display the business certificate but that never happened.
I accept Mr Coombs' evidence on this point. Mr Dawson accepted that, had Mr Coombs kept the conditions on the business certificate a secret, and Mr Dawson become aware of it, Mr Dawson would have complained to Mr Coombs (ts 582). As Mr Dawson accepted, Mr Dawson never made any such complaint (ts 582). In Mr Dawson's solicitors' letter of 25 October 2005 there is a complaint that Mr Coombs' representations to the Board led to the conditions being made without consultation with Mr Dawson (exhibit A64). But that letter makes no complaint that the condition on the certificate had been kept secret from Mr Dawson after it was imposed. Moreover, there was no complaint or reference to this in the solicitors' letter to DOCEP of 13 December 2005 (exhibit A81). The subject matter and purpose of that letter is such that had the fact of the condition been concealed from Mr Dawson for a period, that point is very likely to have been made in the letter.
Further, Mr Dawson's version of events may be thought to be somewhat improbable. On that version, at substantially the same time, Mr Coombs was falsely denying that he had the business certificate, in order to hide the fact of the condition, while Mr Coombs' solicitor wrote on 10 October 2005 (exhibit A51 referred to below), specifically referring to the 31 December 2005 condition.
Mr Coombs was cross‑examined on the fact that his solicitors' letter of 21 November 2005 (exhibit A74) did not say that Mr Coombs had already told Mr Dawson about this condition (ts 1049 ‑ 1052). In my view, that is understandable, given that Mr Dawson's solicitors' letter of 25 October 2005 had made no complaint that Mr Dawson had not been told of the condition (after it was imposed). Rather, as I have said, the complaint had been that there had been no consultation before steps were taken with the Board.
By letter of 10 October 2005, Mr Coombs' solicitors responded to Mr Dawson's solicitors' letter of 30 September 2005 (exhibit A51). Mr Coombs' solicitors' letter of 10 October 2005:
(a)stated that Mr Dawson had not responded to the Gantt chart schedule of activity;
(b)stated that Mr Coombs was seeking to progress this by speaking to potential administrators;
(c)stated that the task of the administrators would be to extract information from the database to inform the directors' decisions about splitting the assets;
(d)stated that it appeared that the action and timetable for the division of FRC assets between the two directors is largely agreed to by Mr Dawson;
(e)stated that it did not appear to be the intention of the parties to wind up FRC, and sought confirmation that that was Mr Dawson's position;
(f)stated that Mr Coombs' understanding of the agreement reached was that FRC would remain as an entity and collect trail commissions on existing loans, seeking confirmation that that was the understanding of Mr Dawson;
(g)stated that the key issue to be determined, from Mr Coombs' perspective, was the equitable balancing of the directors' loan accounts;
(h)said Mr Coombs objected to the proposal by Mr Dawson to postpone the settlement process until a finance brokers licence had been granted to either him or Galvin Dawson, stating that the division of assets must be completed by 1 December 2005 and that was imperative in light of the expiring of FRC's business certificate on 31 December 2005; and
(i)stated that Mr Coombs was happy to discuss the issues set out at pars 12 to 15 of Mr Dawson's document.
On 7 October 2005, Mr Coombs signed, on behalf of FRC, a residential tenancy agreement for the Melbourne offices (exhibit A52).
Mr Coombs, on behalf of Crystal, took various steps to be ready to start business immediately after the split, including arranging a post office box, professional indemnity insurance, computer equipment and accounting software. See, for example, exhibits A53 and A63.
Mr Dawson's solicitor wrote to Mr Coombs' solicitor by letter of 18 October 2005 (exhibit A55). The letter:
(a)confirmed a meeting between lawyers and clients on 20 October 2005;
(b)referred to 'the fact that the parties are in dispute as to their future business relationship', stating that it was important for Mr Coombs to comply with his obligation as a director of the company to act in the best interests of the company;
(c)stated that they were confident that the 'matters in dispute are capable of resolution'; and
(d)asserted that it was appropriate for all cheques to be signed by both directors.
Mr Coombs says that this letter took him aback because it was the first time he learned that Mr Dawson thought there was a 'dispute as to a future business relationship' (exhibit 1A [397]). In cross‑examination, Mr Dawson accepted that this was the first time he or his solicitor had suggested there was a dispute with Mr Coombs about their future business relationship (ts 594).
By letter of 19 October 2005 (exhibit A56), Mr Coombs' solicitor:
(a)confirmed the meeting for 20 October 2005;
(b)expressed surprise at the statement that Mr Coombs and Mr Dawson were in dispute as to their future business relationship, saying that upon her instructions, and as set out in her letter of 31 August 2005 and confirmed in the letter of 30 September 2005, they had agreed to go their separate ways and divide the FRC assets between them, adding that Mr Dawson had verbally agreed this would be completed by 1 December 2005;
(c)said that while there were many decisions to be made, it should not be seen as a dispute between Mr Coombs and Mr Dawson, asking what it is that Mr Dawson says is the dispute he has with Mr Coombs as to their future business relationship;
(d)requested to be informed as to what it was about engaging administrators as referred in the letter of 10 October 2005 that Mr Dawson found objectionable; and
(e)asserted that it would be impractical for both directors to have to sign all cheques.
There was a meeting between the parties and their solicitors on 20 October 2005. Mr Dawson's solicitor said that Mr Dawson wanted to continue with FRC. Mr Coombs' solicitor said that that was completely unacceptable. Mr Coombs says that he was very angry at this. Mr Coombs' solicitor told Mr Dawson and his solicitor in effect that the split had to occur, it was not negotiable and that Mr Coombs would be leaving FRC on 1 December. They left the meeting (exhibit 1A [401] ‑ [407]).
After that meeting, Mr Coombs says that he and Mr Dawson did not speak to each other for the next two weeks or so (exhibit 1A [408]).

2.16 Conclusion: a shared communicated understanding from July to mid‑October 2005

In my view, the evidence overwhelmingly establishes that, from about late July 2005 until mid‑October 2005, there was a shared communicated understanding between Mr Dawson and Mr Coombs that, by December 2005, FRC would cease to conduct business on its own account, and its business would be 'split', that is conducted through two separate companies to be run by its two directors.
A number of aspects of the evidence sustain that conclusion.
First, I refer to the discussions between Mr Dawson and Mr Coombs following Mr Coombs' letter of 18 July 2005.
Secondly, at the meeting with staff in late August 2005, both Mr Coombs and Mr Dawson spoke. In essence they told staff, in an unqualified way, that they were going to go their separate ways and set up their own businesses, and that staff's employment with FRC would be terminated. They said that Mr Coombs and Mr Dawson would talk to staff individually about their preferences for subsequent employment.
Thirdly, the correspondence between the parties and their solicitors in the period until mid‑October 2005 supports the conclusion that I have stated. Mr Coombs' solicitors' letter of 31 August 2005 stated that the two had agreed to a separation mechanism, and that the process by which each would be operating their own business needed to be completed by the end of November 2005. Nothing in Mr Dawson's solicitors' letters in response, of 13 September 2005 and 30 September 2005, challenged the assertion that there had been an agreement of a separation mechanism. Further, neither letter suggested that FRC would not be split, or that either Mr Dawson or Mr Coombs would continue to conduct business through FRC. To the contrary, Mr Dawson's solicitors' letter of 30 September 2005 was about the process of splitting FRC. By that letter, what was proposed by Mr Dawson was that each director would set up his own company, and the business of FRC would be split between those companies. FRC would not continue to conduct finance broking business, although it would continue to exist to collect trail commissions.
When the incongruity between his solicitors' letter of 30 September 2005 and his evidence that he 'constantly' told Mr Coombs that he would not agree to split FRC was put to him, Mr Dawson said 'it depends when I told him' (ts 577).
Further, as Mr Dawson accepted, his solicitors' letter of 18 October 2005 was the first time that he or his solicitors had suggested there was a dispute about any future business relationship between Mr Dawson and Mr Coombs (ts 594).
Fourthly, during this period both parties were acting in accordance with their joint plan for each to have a separate business by the end of the year. Mr Dawson spoke to both Mr Blaxill and Mr Sheppeard about the possibility of each of them working for Mr Dawson's separate business. Further, Mr Dawson was pursuing the setting up and naming of a company as the vehicle for his new business. That was foreshadowed in his solicitors' letter of 30 September 2005. He discussed possible names for the new company with Mr Sheppeard.
Fifthly, although, as I will explain, Mr Dawson's evidence was in this respect often inconsistent, much of his evidence supports or is consistent with the conclusion I have reached. For example, in exhibit C2 [49], Mr Dawson says from about mid‑October 2005 he 'was no longer prepared to agree to a split' (emphasis added). Similarly, in oral evidence he said that 'from that point in time [meaning mid‑October 2005] I was resolute' (ts 583). Further, in some parts of Mr Dawson's responsive statement he accepted that at a staff meeting a statement had been made that he would be agreeable to splitting the files with Mr Coombs and that the files would be split between them (exhibit C2 [3.6]).

In some parts of his evidence, Mr Dawson said that through all of 2005 he always wanted FRC to continue and 'constantly' told Mr Coombs that he wanted FRC to continue. See, for example, exhibit C2 [3.2], [38.4]; ts 554, 579, 584, 627.
I reject this evidence of Mr Dawson. It is inconsistent with other parts of his evidence, with what he did at the time, and with other evidence which I accept. To my mind, this evidence of Mr Dawson is an example of his preparedness to make a categorical statement which has no proper foundation. I am satisfied that Mr Dawson did this in a misguided attempt to advance his case by an emphatic statement which he thought would assist his cause.
It was put to Mr Dawson that in the second half of 2005 he had many discussions with Mr Coombs about the mechanics of splitting the business. Mr Dawson's answer was:
No, I didn't. It was Mr Coombs who drew up and was trying to force a process upon me which I rejected every time because I was not prepared to make any changes to FRC when we had a successful business (ts 557).
His evidence that he did not have many discussions with Mr Coombs about splitting the business is contrary to other evidence of his (see ts 562). His evidence that he was 'not prepared to make any changes to FRC' is patently false, as the history I have outlined demonstrates. Apart from anything else, his solicitors' letter of 30 September 2005 outlined a process for the splitting of the business of FRC between two companies, to be set up by the two directors and run separately. I accept the defendants' submission that Mr Dawson's refusal to qualify his written evidence that in July 2005 and thereafter he constantly told Mr Coombs he wanted FRC to continue demonstrates the lengths Mr Dawson was prepared to go in order to advance the plaintiff's case as he saw it.
I find that the reason for Mr Dawson's change of mind in mid‑October was his concern about obtaining a finance broking licence.
I do not accept Mr Dawson's evidence (exhibit C2 [47] ‑ [48]; ts 555, 587), that the reason for the change was a conversation between him and Mr Coombs in which Mr Coombs said words along the lines of 'are you scared of losing clients to me'. That conversation took place, according to Mr Dawson, in about September 2005. Mr Coombs accepted there was a conversation to similar effect but thought it was in July 2005 (ts 1059). Even on Mr Dawson's version, it was not until about mid‑October 2005 that he was 'no longer prepared' to agree to a split. In my view, on all the evidence, the probabilities distinctly favour the conclusion that the reason for Mr Dawson's change of mind was a growing concern on his part about being able to obtain a finance broking licence. By early October 2005, attempts that he had made on several occasions in September and early October 2005 to expedite the process had been met with no success.
Moreover, at one stage in his evidence, Mr Dawson appeared to accept that his concerns about his licence were the reason for his change of mind. He said that, he thought to himself 'I cannot leave FRC because I have no licence' (ts 583). He accepted that the fact that he did not have his licence was heavily influential in his decision that he was no longer prepared to agree to a split (ts 583).
The plaintiff submits that Mr Coombs did not believe, in August to October 2005, that there was a legally binding agreement and that he took no step to enforce the arrangement as such (PCS [35] ‑ [36]). That may be accepted. However, Mr Coombs believed that both he and Mr Dawson were committed, in a non‑legal sense, to ending FRC's finance broking business, and splitting that business between the two of them.
The plaintiff emphasises, as is the fact, that the two men had not reached agreement on how the business would be split. Nevertheless, in my view, both were proceeding on the confident expectation that that would occur. Further, in the circumstances as I have outlined them, I find that it was reasonable for Mr Coombs to proceed on that basis.

2.17 22 October 2005 ‑ 31 October 2005

On 22 October 2005, Mr Coombs arranged for Crystal to buy the full range of office equipment needed to run its business. See exhibits A58 and A59.
On or about 23 October 2005, Mr Coombs submitted an application by Crystal for a business certificate from the Finance Brokers Supervisory Board. See exhibits A60, A61 and A62. Mr Coombs' letter to the Board stated that the business certificate for Crystal was intended to take effect from the expiry of FRC's business certificate, namely 1 January 2006, to enable the appropriate accreditations to be sought in anticipation of 'the change over' (exhibit A60). The letter concluded by saying that should it be necessary to seek an earlier 'transition date' the Board would be notified accordingly.
The terms of this letter received considerable attention in cross‑examination of Mr Coombs and in the plaintiff's closing submissions. I will say more about it when I deal with the alleged breaches in section 6.1.
By letter of 25 October 2005, Mr Dawson's solicitor wrote to Mr Coombs' solicitor (exhibit A64). The letter:
(a)stated that Mr Dawson wishes the company to continue operating;
(b)requested access to FRC's accounts;
(c)stated that the representations made by Mr Coombs to the Board were done without consultation with Mr Dawson;
(d)asserted that the business certificate is an asset in respect of which Mr Coombs was obliged to consult with his fellow director and consider the interests of all shareholders;
(e)requested that Mr Coombs cooperate with Mr Dawson to make an immediate application to extend the business certificate; and
(f)expressed concern about the effect of Mr Coombs' conduct, and the cancellation of the business certificate, on contracts due to settle between then and the middle of 2006.
There was very little discussion between Mr Coombs and Mr Dawson in the period late October 2005 to mid‑November 2005 (exhibit 1A [417] ‑ [419]).

2.18 November 2005

On 4 November 2005, Mr Coombs lodged with DOCEP an application for a finance brokers licence for Crystal (exhibits A66 ‑ A68). The need for this further application was brought about by a change in the regulations on 30 October 2005.
On 17 November 2005, Crystal's application for a finance brokers licence was advertised in The West Australian newspaper (exhibit A72).
Mr Coombs decided to use an office in Canning Vale for Crystal when its business started. He engaged Ms Ryman and Ms Twort to work there to prepare Crystal to be ready to start on 1 January 2006 (exhibit 1A [425]).
Sometime before 21 November 2005, Mr Coombs wrote to the Commissioner (exhibit A69) (wrongly dated 4 November 2005). The letter:
(a)enclosed the advertisement of his application; and
(b)said that, as 'I need the licence to secure other accreditations before takeover date of 1 January 2006', requested processing as soon as possible.
I will say more about this letter in dealing with the alleged licence breaches in section 6.1.1.
By letter of 21 November 2005 (exhibit A74), Mr Coombs' solicitor wrote to Mr Dawson's solicitor, referring to the meeting of 20 October 2005. The letter:
(a)stated that the meeting had been convened to allow the parties to agree the steps to be taken to split the FRC assets as referred to in the letters of 31 August 2005, 19 October 2005 and Mr Dawson's solicitors' letter of 30 September 2005;
(b)asserted that the statement that Mr Dawson no longer wished to proceed with the split took Mr Coombs and his solicitor by surprise, and that it was not an option acceptable to Mr Coombs;
(c)asserted that there was a complete breakdown in the relationship between Mr Coombs and Mr Dawson;
(d)stated that Mr Dawson had made a number of unilateral decisions and taken a number of unilateral actions in relation to FRC including a staff meeting, reallocating staff, obtaining finance broker accreditations for Mr Dawson's son, and other matters;
(e)stated that the unilateral actions by Mr Dawson illustrate the reasons for Mr Coombs' decision that he is not prepared to continue to be in business with Mr Dawson;
(f)stated that if the split cannot take place cooperatively then Mr Coombs would have no option but to apply for the appointment of a provisional liquidator;
(g)stated that there should be no misapprehension that after 31 December 2005 the FRC business certificate would expire, Mr Coombs would not be the person in bona fide control of FRC, FRC could not operate as a finance broking firm, and thereafter Mr Coombs would commence his own separate business;
(h)set out what is said to be Mr Coombs' involvement with the Board in relation to the condition imposed on the FRC business certificate, stating that the Ministry of Fair Trading had received a complaint against Mr Dawson, Mr Coombs had been summoned because he was the person in control of the business, and in the course of answering questions Mr Coombs had mentioned that the two had agreed to go their separate ways; and
(i)concluded by stating that she had instructions to make immediate application for the appointment of a provisional liquidator of FRC, requesting advice as to whether Mr Dawson's solicitor had instructions to accept service.
Again, like the letter of 31 August 2005, this letter makes it plain that Mr Coombs intended to commence his own finance broking business.
The plaintiff emphasises that this letter was not written immediately, rather it took four weeks. Further, the plaintiff points out that the letter does not assert that the split had been agreed or that any agreement was legally binding.
On 29 November 2005, Mr Allen of DOCEP wrote, by email, to Mr Dawson (exhibit A76). The email said that, as discussed, there was a condition on the licence that if the company had not been wound up by 31 December 2005, the certificate will become invalid.
Crystal bought more office furniture and a photocopier in late November 2005 (exhibits A78, A79).

2.19 December 2005

In early December 2005, Mr Dawson came to Mr Coombs' office and asked him to delay the liquidation. Mr Coombs said that it was too late and that the process was underway. Further, Mr Coombs said that the FRC licence was going to be cancelled irrespective of what he did (exhibit 1A [436]). Mr Coombs said that he would definitely be leaving FRC on 31 December 2005 to start his own finance broking business (exhibit 1A [437]).
On 9 December 2005, Mr Coombs' solicitor wrote again to Mr Dawson's solicitor (exhibit A80). The letter:
(a)stated that there had been no response to the letter of 21 November 2005;
(b)complained that Mr Dawson had caused FRC to enter into a lease agreement in respect of a unit which Mr Dawson had recently purchased;
(c)asserted that the lease agreement was voidable at the option of FRC; and
(d)asserted that the papers for the application for the appointment of a provisional liquidator had been drawn and that service would be affected shortly.
On 13 December 2005, Mr Dawson's solicitors wrote to DOCEP (exhibit A81). The letter:
(a)said that Mr Dawson and Mr Coombs were involved in discussions aimed at terminating their business relationship, including as to the future of FRC;
(b)stated that Mr Dawson would prefer operating FRC under his own licence;
(c)stated that Mr Dawson did not agree for FRC to terminate its business on 31 December 2005;
(d)expressed concerned that Mr Dawson had not been granted a finance brokers licence following his application for one, referring to potential prejudice to FRC's existing clients;
(e)requested that his application for a licence be expedited to ensure that FRC is able to continue after 31 December 2005, or that the existing licence held by Mr Coombs be extended beyond 2005 to allow FRC to continue operating; and
(f)requested information regarding the termination of FRC's licence, stating that Mr Dawson believed that Mr Coombs may have provided incorrect information to DOCEP.
On 12 December 2005, there was an advertisement in The West Australian giving notice that Finance Edge Australia Pty Ltd was applying for a finance brokers licence. A copy of the advertisement is part of exhibit A90A.
In mid‑December 2005, Mr Coombs issued termination letters to all FRC staff. Copies of three of the letters, which are in substantially identical form, are exhibits A82, A83 and A83A. The letters state that the business certificate will expire and the services of the employee will no longer be required from 31 December 2005.
On 13 December 2005, Mr Dawson's solicitor wrote to Mr Coombs' solicitor (exhibit A84). The letter:
(a)referred to without prejudice discussions on 8 December 2005;
(b)asserted that Mr Coombs had acted unilaterally in his own best interests and disregarded the interests of the company, its shareholders, and the clients of the business;
(c)stated that Mr Coombs had applied for and obtained a separate licence under a new entity, asserting that if he commenced operations under the new entity he would need to resign as a director of FRC to avoid a conflict of interest;
(d)stated that Mr Coombs should not attempt to solicit FRC's clients because they are assets of FRC, and any such approach would result in legal action;
(e)stated that Mr Dawson did not agree to the appointment of a provisional liquidator; and
(f)asserted that Mr Dawson never agreed to a termination date of 31 December 2005.
On 14 December 2005, Mr Dawson's solicitor forwarded a reference to DOCEP in connection with Mr Dawson's application for a finance brokers licence (exhibit A85).
On 16 December 2005, Mr Coombs received an email from DOCEP advising that Crystal's finance brokers licence had been granted (exhibit A86).
On 20 December 2005, Mr Coombs' solicitor wrote to Mr Dawson's solicitor (exhibit A87). The letter:
(a)asserted that the decision to grant FRC a business licence to 31 December 2005 was made by the Finance Brokers Supervisory Board, not by Mr Coombs;
(b)asserted that FRC would not be licensed as a finance broker from 1 January 2006;
(c)restated that Mr Coombs did not wish to be in business with Mr Dawson and that it was Mr Dawson who had reneged on the agreement to manage the split in an orderly fashion;
(d)denied that there will be any conflict of interest, given that FRC is not in a position to operate as a finance broker, and its only interest will be in the orderly winding up of its affairs; and
(e)stated that Mr Coombs had offered to enter into an arrangement by which FRC could continue to operate until Mr Dawson obtained his licence but there had been no response.
On or about 20 December 2005, Mr Coombs on behalf of Crystal sent offers of employment to Mr Blaxill, Ms Hutchings, Mr Sheppeard, Ms Paull and Ms Eddy (exhibits A86A ‑ A86E).
On or about 21 December 2005, Mr Coombs sent a document about Crystal to The Investors Club (exhibit A88). In effect, it was an application for accreditation. I find that the document was sent on 21 December 2005 notwithstanding that Mr Coombs agreed in cross‑examination that it was sent on 16 December 2005 (ts 1068 ‑ 1069). The effect of the solicitors' letter that was part of exhibit A88 was that the defendants admitted the document was sent on 21 December 2005. I formed the impression that, in agreeing with the date of 16 December 2005, Mr Coombs was mistakenly assuming that that was the date identified in his solicitors' letter. At other times in his cross‑examination Mr Coombs displayed an inclination to accept whatever was suggested about what date was revealed by a document, without looking at the document.
The document Mr Coombs sent:
(a)referred to staff continuity and the absence of disruption, saying that Crystal would provide a 'more professional and efficient service to clients';
(b)stated that The Investors Club can be assured that current commission structures, payments and performance standards will remain consistent;
(c)stated that Crystal is a company that has had the opportunity to take the best of the old and incorporate the new;
(d)stated that Crystal will manage the business of FRC when its licence expires on 31 December 2005;
(e)included a heading 'FRC transition arrangements';
(f)stated that Crystal recognised that under FRC there were areas that required upgrading and modernising;
(g)stated that FRC, although not licensed to process new business, will remain as a company and will continue to receive trail income. FRC will continue to make payments to Club Loans under current arrangements and timeframes. Crystal is able to take up all submissions in progress and new business under the standard payment structure to the Club of 50% upfront and trail commissions received by Crystal;
(h)stated that the team has 'designed an information strategy to inform the existing member network of the impending changes, complete with new contact details';
(i)stated that FRC phones will be diverted to Crystal as of 31 December 2005; and
(j)stated that PLAN accreditation is approved and a finance brokers licence has been issued so that Crystal is geared to start business on 3 January 2006.
I will say more about this document, and what if anything, it reveals about Mr Coombs' intentions in section 6.
By letter mistakenly dated 21 November 2005, but intended to be 21 December 2005, and sent by facsimile on 22 December 2005, Mr Coombs' solicitor wrote to Mr Dawson's solicitor enclosing what was described as suggested management of the separation process (exhibit A73). The letter stated that the application to appoint a provisional liquidator had been filed and the return date was 11 January 2006. Attached was a two page 'without prejudice' heads of agreement.
On 22 December 2005, West Coast Mortgage Services Pty Ltd provided a letter, addressed 'To whom it may concern' (exhibit A89). It stated that it understood the current position placed on Mr Dawson and the impost on the maintenance of proper care and attention to FRC's clients. The letter stated that West Coast Mortgage was in a position to deal with the customer base of FRC.
Crystal's licence under the FBC Act was issued on 23 December 2005, licensing Crystal to carry on business from 1 January 2006 to 31 December 2008, with Mr Coombs as the person in bona fide control (exhibit A93).
On 23 December 2005, Mr Dawson's solicitor wrote to Mr Coombs' solicitor, headed 'without prejudice save as to costs' (exhibit A94). In this letter, Mr Dawson:
(a)proposed that Mr Coombs continue to run FRC with Mr Dawson taking extended leave until he obtains a licence, with Mr Coombs not making any significant decisions without Mr Dawson's consent;
(b)proposed that staff continue working at FRC;
(c)proposed that Mr Coombs formally request an extension of the FRC licence from DOCEP to allow FRC to continue operating;
(d)alternatively, proposed that Mr Coombs undertake to DOCEP that he collocate Crystal and FRC while issues between the directors are resolved;
(e)reiterated Mr Dawson's concern about FRC's clients with 'deals in the pipeline';
(f)reiterated Mr Dawson's concern that the matter is resolved in a way that the company, the clients and the shareholders' interests are respected; and
(g)reiterated that Mr Dawson did not agree to the appointment of a provisional liquidator.
On 28 December 2005, Mr Dawson wrote to Mr Sheppeard and Mr Blaxill, saying that he did not agree that their employment with FRC had been terminated (exhibits A94A, A94B).
On 30 December 2005, Mr Dymock of DOCEP wrote to Mr Dawson's solicitor (exhibit A97). The letter:
(a)stated that Mr Dawson's application for a licence was unlikely to be determined in the next six weeks; and
(b)stated that Mr Coombs' application did not provide detail about how he could manage two businesses and consequently he could not be licensed to manage both FRC and Crystal.

8.21 Pomeroy: transaction 54 and Triptree: transaction 55

Both these transactions raise the same issues as the previous transaction. In each case, the defendants have agreed to pay, and accept that the transactions should have been on the FRC WIP list. In each case, the applications were, as at 31 December 2005, active loan applications at FRC.
For the reasons already given, Crystal would be liable to the liquidator under the Liquidator's Agreements in respect of these transactions.

8.22 Bradshaw: transaction 56

In essence, the plaintiff's claim is that Crystal unjustifiably clawed back commission from FRC, and so is liable to FRC. In summary, it is common ground that Mr Coombs caused Crystal to claw back commission from FRC in circumstances where that was not appropriate. Mr Coombs says that he discovered that inappropriate clawback in 2008 following a reconciliation, and made a payment to the liquidator that took account of that. The plaintiff submits that Mr Coombs' reconciliation has not been explained. I do not agree. I accept Mr Coombs' evidence about this.
Mr Coombs gave evidence in relation to this transaction in his transactions witness statement (exhibit 1B [294] ‑ [300]), and as to the reconciliation process, in his primary witness statement (exhibit 1A [709] ‑ [717]). He also gave oral evidence (ts 983 ‑ 988 and 1125 ‑ 1131). I accept all of Mr Coombs' evidence on this topic.
The facts, in summary, are as follows.
The client, Bradshaw, had a loan of $260,000 which was a WIP file. Commission in respect of that loan was paid to FRC.
Crystal arranged for a new loan of $288,000 for Bradshaw. The commission for that loan was not paid to FRC (and the plaintiff makes no complaint about this).
PLAN paid the upfront commission on the FRC WIP file to Crystal. When Mr Coombs became aware of this, he paid the upfront commission and some accrued trail commissions to FRC and reflected it on the RCTI that he gave to the liquidator (exhibit B874).
PLAN clawed back the upfront commission that it had incorrectly paid to Crystal, together with some trail commission. PLAN paid it to the liquidator.
Thus, FRC had received the upfront commission and trail commissions twice, once from Crystal Finance and once from PLAN.
Crystal clawed back the commission from FRC in the RCTI of 30 June 2006 (exhibit B876).
By mistake, Crystal clawed back the commission again in the RCTI dated 31 August 2006 (exhibit B878).
In April 2008, Mr Coombs performed a reconciliation of all of the commission that had been paid to FRC. In the course of doing that, he discovered the error in relation to this transaction. The error was rectified in the reconciliation which he then performed, and the payment that he made to the liquidator based upon his reconciliation (see exhibit A300B).
For these reasons, I reject the plaintiff's claim in relation to this transaction.

8.23 Davis: transaction 57

FRC brokered a loan of $347,200 with Macquarie (exhibit B885). FRC received commission for doing so. The loan settled on 28 February 2006 (exhibit B893C).
By early 2007, the borrowers proposed to obtain further credit. They sought a loan of $434,600 (exhibit B886). Crystal brokered a new loan in that amount from a different lender, namely Westpac. That loan settled in February 2007 (exhibit B887).
The plaintiff claims that by brokering the new loan, Crystal caused the loss to FRC of the commissions that were clawed back. So far as I am aware, the plaintiff has not articulated the basis on which Crystal is liable for 'causing' such a loss. The plaintiff did not plead or argue for any duty or implied term of the Liquidator's Agreements that Crystal or Mr Coombs could not provide further broking services that might lead to a clawback. I am not satisfied that any such duty or implied term existed.
Further, and in any event, if there had been such a duty, Crystal's breach would not have caused any loss. That is because, if Crystal had a duty not to engage in further broking, the inference is that the borrowers would have gone to another broker and the same outcome would have occurred.
If contrary to all of these conclusions, there was some liability on the part of Crystal or Mr Coombs, such a liability did not exist in 2006, at the time of the assignment by the liquidator of FRC's causes of actions against Mr Coombs and Crystal. Consequently, it is, to say the least, difficult to see how the plaintiff could sue in respect of this transaction.

8.24 Webber: transaction 61

The defendants have agreed to pay to the plaintiff the commission the subject of this transaction, but deny their liability to do so. For the reasons given in relation to transactions 47, 54 and 55, I find that the defendants are liable.
Two loans were managed to settlement by the defendants. The defendants paid commission on one of the loans to the liquidator, but not the other. The defendants admit that both loans should have been on the application register and should have been accounted for. For the reasons already given, on my construction of the Liquidator's Agreements, and on the admitted facts, the loan on which commission was not paid was an active loan application of FRC as at 31 December 2005 and, consequently, Crystal would have been liable to the liquidator to pay commission on the transaction.

8.25 McKenzie: transaction 63

On 28 December 2005, FRC lodged a loan application in respect of Unit 12/10 Great Eastern Highway, Kalgoorlie. On 6 January 2006, the bank approved the loan application for $135,600.
On 31 January 2006, the acquisition and the loan transaction settled.
It is not in dispute that on 30 March 2006, PLAN paid upfront commission on this loan to Crystal. However, Crystal denies that it claimed that commission from PLAN, and says that it is not liable to FRC or the plaintiff for the error made by PLAN.
Mr Coombs says that Crystal had a file relating to Unit 8/10 Great Eastern Highway, Kalgoorlie for a purchase price of $134,000 (exhibit 1B [325]).
I am satisfied that Crystal claimed the commission from PLAN in respect of both transactions. See exhibits B932A and B932C. Exhibit B932A identifies an amount of $135,600 which mirrors the loan amount for the transaction the subject of this claim. Exhibit B932C relates to the other transaction.
In my view, under the Liquidator's Agreements, Crystal was liable to account to the liquidator in respect of the commission earned on this transaction.

8.26 McRae: transaction 67

The central foundation for the plaintiff's claim in relation to this transaction is that these clients were on the WIP list and, in January 2006, the clients contacted Crystal in respect of a new transaction, which Crystal brokered and for which Crystal received commission.
In my view, for reasons I gave in section 6, Mr Coombs and Crystal had no contractual or fiduciary duty to refrain from doing finance broking work in respect of a new transaction commenced after 1 January 2006 for a client who had been on the FRC WIP list. The plaintiff did not plead or argue for an implied term of the Liquidator's Agreements to this effect.
For these reasons, I reject the plaintiff's claim in relation to McRae, transaction 67.
If, contrary to my findings in section 6.1.5, the FRC Contact Details Claim were accepted, in my view that claim would make Mr Coombs liable for any profit he made from this transaction. I am satisfied that, on the balance of probabilities, the contact made by the client on 6 January 2006 was likely to have been via the familiar telephone number of FRC.

8.27 Summary of conclusions on the Transactions

I have found that Crystal would have been liable to the liquidator or FRC under the Liquidator's Agreements in respect of the six transactions which, the defendants agree, should have been on the WIP list and commission on which should have been accounted for to the liquidator: M Little (26), Button (38), DA and LN Little (47), Pomeroy (54), Triptree (55) and Webber (61).
I have also found that Crystal would have been liable to the liquidator or FRC under the Liquidator's Agreements in respect of Bertinat (5), Ashley (13), Aiton/Morrissey (25) and McKenzie (63).
I have also found that Crystal was liable to account to FRC for the commission it received on transaction 43, Walker. Mr Coombs is also liable to account for any profit he made on that transaction. That is on the basis that by email of 13 January 2006 Crystal obtained authority from the client on the footing that it would be doing the work as agent for FRC.
In none of these transactions is Crystal's liability based on Barnes v Addy. It is primary liability under the Liquidator's Agreements or, in the case of transaction 43, arising from Crystal's conduct.
Otherwise, I have found that the defendants have and had no liability to FRC in respect of the other Transactions.
Whether the plaintiff is entitled to relief arising from these conclusions depends upon the issues relating to the assignment by the liquidator of FRC's causes of actions against Mr Coombs and Crystal. I turn to those issues.

Assignment issues

I begin by outlining the relevant provisions of the sale agreement by which the assignment was effected.

9.1 The sale agreement

By the sale agreement, the liquidator on behalf of FRC sold to the plaintiff and to Finance Edge, a number of FRC's assets (exhibit A274). The parties later varied the agreement (exhibit A291). The references to clauses are to the number of the clause in the agreement as varied.
Under the agreement, different assets were purchased by different purchasers. Some assets were purchased by the plaintiff, some by Finance Edge. Condition 4 provided that the company's remaining pending work in progress files as at 31 December 2005, as set out in annexure A to the offer, together with all commission generated from such files (termed WIP files) and FRC's rights to receive trail commissions in the net proceeds of trail commissions otherwise to be received by FRC (referred to as Trail Commission) be sold to Finance Edge, as to the WIP files, and to the plaintiff as to Trail Commissions.
Clause 31 provided that the trail commission is FRC's rights as and from 1 September 2006 to receive trail commissions from various named aggregators, specifically excluding any rights to receive trail commissions arising before 1 September 2006.
By condition 7, FRC's causes of action (if any) against Mr Coombs and Crystal were sold to the plaintiff. By cl 46, causes of action were defined to mean FRC's rights, remedies and causes of action (if any) against Mr Coombs and Crystal, other than in respect of loan accounts with FRC.
Given my findings in section 8, the defendants' submissions on assignment give rise to the following questions:
(1)Are claims for breach of the Liquidator's Agreements within the ambit of what was assigned by the sale agreement, namely FRC's causes of action against Mr Coombs and Crystal?
(2)Is the failure to join Finance Edge fatal to the plaintiff's claim?
(3)Are claims for breach of fiduciary duty capable of being assigned by the Liquidator?
(4)Are there other formal or technical defects in relation to the assignment?
I will deal with these questions in turn.

9.2 Are claims for breaches of the liquidator's agreement part of what was assigned?

The sale agreement assigned FRC's causes of action against Mr Coombs and Crystal. The defendants submit, correctly, that the sale agreement assigned FRC's causes of actions, not causes of action of the liquidator personally. The defendants submit that the liquidator entered the Liquidator's Agreements in his personal capacity, not as agent for the company and consequently any claim for breach of the agreements is a personal right of the liquidator, not a cause of action of the company. For the reasons that follow, I do not accept that submission.
As the defendants acknowledge, the general position at least is that a liquidator acts as agent of the company in the exercise of his or her powers. See McPherson B, The Law of Company Liquidation (4th ed, 1999) 332 and the authorities referred to in footnotes 9 ‑ 15.
In my view, the terms of the Liquidator's Agreements support the conclusion that the liquidator entered those agreements as agent for FRC. By the Liquidator's Agreement in its original form in January 2006, Crystal was obliged to pay commissions to FRC. There was also an express term that Crystal would not render any charges to FRC or the provisional liquidator.
In February 2006, the terms of the Liquidator's Agreement were varied to provide that Crystal was paid $5,000 per week for its services. The terms of that agreement were that FRC would pay Crystal that sum. Clause 1 of the offer made by Crystal of 14 February 2006 (exhibit A172) provided for FRC to pay Crystal $7,000. The counter offers then exchanged varied that amount, but not that provision. See exhibits A174, A175, A177.
That position was restated when the agreement was further varied in March 2006 (exhibits A187, A188). The defendants' solicitors' letter of 3 March 2006 proposed a new agreement on terms that FRC would pay Crystal the sum of $5,500 per week.
Contrary to the defendants' submissions (DCS [127] ‑ [144]), I do not think that the terms of the order of 16 January 2006, the correspondence of the provisional liquidator with DOCEP, or what was said by the liquidator in the information memorandum, shed any significant light on the question.
For these reasons, I find that the provisional liquidator (later liquidator) entered into the Liquidator's Agreements as agent for FRC, not in his personal capacity.
Consequently, in my view, any claim for breach of the Liquidator's Agreements that had arisen by September 2006 is a cause of action of FRC within the meaning of condition 7 of the sale agreement.
I turn to the next issue.

9.3 Is Finance Edge a necessary and proper party?

The defendants contend that because the sale agreement was between the liquidator, the plaintiff and Finance Edge, Finance Edge is a necessary party in an action to enforce the rights conferred by that agreement.
The plaintiff submits that the rights the subject of this action, relied on by the plaintiff, are those under condition 7. By condition 7, FRC's causes of action against Mr Coombs and Crystal are sold to the plaintiff alone. Thus Finance Edge has no relevant rights in relation to those causes of action and, consequently, need not be a party.
For the reasons that follow, I accept the plaintiff's submission.
The rights on which the plaintiff sues are not held jointly with Finance Edge. The sale agreement gave Finance Edge no rights in relation to FRC's causes of action. Consequently, the need under O 18 r 4(2) of the Rules of the Supreme Court 1971 (WA) for a plaintiff to join any party jointly entitled with the plaintiff to the relief claimed does not arise.
A person ought to be joined as a party if any order which might be made in the proceedings would directly affect that person's rights against, or liabilities to, a party in the action: News Ltd v Australian Rugby Football League Ltd (524); Tiao v Lai (No 2) [2010] WASCA 189, [109] ‑ [111], [131].
The defendants' submissions did not identify any potential effect of any issue or order in this action upon Finance Edge's rights. I am unable to identify any. Finance Edge has no rights in relation to FRC's causes of action against Mr Coombs and Crystal, because the sale agreement does not give Finance Edge any such rights.
For these reasons, I reject the defendants' contention that the absence of Finance Edge as a party is fatal to the action.

9.4 Are claims for breach of fiduciary duty capable of being assigned by the liquidator?

Given my findings in section 8, this question arises only in relation to the single transaction in respect of which I found a breach of fiduciary duty. Nevertheless, it must be resolved.
The defendants submit that a claim for breach of fiduciary duty is a personal right to litigate, and a personal right to litigate cannot be assigned at law or in equity, relying on Poulton v The Commonwealth (1953) 89 CLR 540, 571, 602; and TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 3) [2007] FCA 151; (2007) 158 FCR 444 [79].
In Poulton (602), the plurality stated that a right to sue in tort was incapable of assignment at law or in equity and referred to two cases. Those cases base that proposition on the policy of the law against permitting maintenance of an action: see Dawson v Great Northern & City Railway Co [1905] 1 KB 260, 270 ‑ 271; Defries v Milne [1913] 1 Ch 98, 110 ‑ 111. The rule was not stated or explained in terms that a right to sue in tort lacks any sufficient proprietary character and so is, for that reason, inherently incapable of assignment.
Similarly, in Starke J, Assignments of Choses in Action in Australia (1972) pages 62 ‑ 64, the non‑assignability of a bare right of litigation is explained on grounds of public policy, related to the doctrine of maintenance and champerty. I will return to this point.
The rule that bare or personal rights to litigate cannot be assigned is subject to some well established exceptions. One exception is where the assignee has an interest in the suit. A genuine and substantial commercial interest on the part of the assignee is sufficient: Trendtex Trading Corp v Credit Suisse [1982] AC 679, 703; Equuscorp Pty Ltd v Haxton [2012] HCA 7 [79]. The interest must exist independently of the assignment: Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267 [59] ‑ [61] (cited with approval in Equuscorp [79]); see also Project 28 Pty Ltd v Barr [2005] NSWCA 240 [41].
A second exception is that a bare right of action, otherwise incapable of assignment, can be assigned if it is annexed to or ancillary to a property right: Krishell Pty Ltd v Nilant [2006] WASCA 223; (2006) 32 WAR 540 [77]; Trendtex (703).
A third exception arises in the exercise of a liquidator's or trustee in bankruptcy's power to sell the property of the company (or bankrupt). This third exception is relevant to the present case.
By s 477(2)(c) of the Corporations Act, the liquidator of a company may 'sell or otherwise dispose of, in any manner, all or any part of the property of the company'. By s 9, 'property' is defined to mean 'any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action'.
'Thing in action' is the equivalent of a chose in action: Carob Industries Pty Ltd (in liq) v Simto Pty Ltd [2000] WASCA 362; (2000) 23 WAR 515 [13]; Krishell [73], [100].
The power to 'otherwise dispose of in any manner' property of the company includes a disposition of a cause of action by way of an assignment: Carob Industries [40]; Krishell [75], [101].
There is a substantial body of authority establishing that a liquidator may assign to a third party a cause of action to which the company is entitled, even though such an assignment would otherwise be void for champerty or some other form of maintenance, or because it purported to assign a bare right of action, so long as what is assigned is within the definition of property. See UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd [1997] 1 VR 667, 681 ‑ 682, 685; UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457, 463 ‑ 464; Re Movitor Pty Ltd (in liq) (1996) 64 FCR 380, 390 ‑ 391; Bank of Melbourne Ltd v HPM Pty Ltd (in liq) (1997) 26 ACSR 110, 112; Re Daniel Efrat Consulting Services Pty Ltd (in liq) (1999) 91 FCR 154 [25] ‑ [32]; Re William Felton & Co Pty Ltd (1998) 145 FLR 211, 214 ‑ 219; Krishell [101].
The policy reasons for this approach were explained by Hayne JA in UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 as follows:
In my view there is no warrant for reading down the general words of the law. The reference to sale or disposal 'in any manner' makes plain that it is the intention of the legislature that the powers of the liquidator are to be ample. If a liquidator is to realise the assets of the company in liquidation to the best advantage, it would be surprising indeed if the liquidator were able to sell a particular form of the company's assets (its rights of action) to only a limited class of persons - those who are already interested in the outcome of the action concerned. Especially is this so when it is to be assumed that the provisions about realisation of the company's assets are to be read in light of the long established rule in relation to bankruptcy which permits the trustee in bankruptcy to sell the bankrupt's rights of action to a third party: see Seear v Lawson (1880) 15 Ch D 426; Guy v Churchill (1889) 40 Ch D 481; Ramsay v Hartley [1977] 2 All ER 673; 1 WLR 686; Stone v Angus [1994] 2 NZLR 202; Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238. In my view nothing turns on the different treatment of property of the bankrupt and a company in liquidation in the bankruptcy and companies legislation. In the former case, the property vests in the trustee but in the latter does not, without special order, vest in the liquidator.
I do not accept that s 477 is to be read, as counsel for the appellant contended, as doing no more than identifying the circumstances in which a liquidator can exercise powers which otherwise would rest in the company. Such a construction wholly ignores that the liquidator is to wind up the affairs of the company and distribute its property: cf s 477(2)(m). The liquidator is not appointed simply as a particular agent or controller of the company who is set about carrying on the business and affairs of the company as if winding up had not intervened. The liquidator is there to wind up the company's affairs (463 ‑ 464).

In a passage cited with approval as applicable to liquidators by Lord Hoffmann in Norglen Ltd (in liq) v Reeds Rains Prudential Ltd [1999] 2 AC 1, 11 ‑ 12, Sir George Jessel MR said in Seear v Lawson (1880) 15 Ch D 426:
If the trustee gets a right of action, why is he not to realise it? The proper office of the trustee is to realise the property for the sake of distributing the proceeds among the creditors. Why should we hold as a matter of policy that it is necessary for him to sue in his own name? He may have no funds, or he may be disinclined to run the risk of having to pay costs, or he may consider it undesirable to delay the winding up of the bankruptcy until the end of the litigation (433).
That leaves the question of whether a claim by the company for a breach of fiduciary duty is, for the purposes of s 477(2)(c), within the definition of property of the company in section 9. The process of construction is not to be approached by construing the definition in isolation, but by inserting the definition into s 477: Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 [84], [103]; Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue [2011] WASCA 228 [62], [150], [218].
In UTSA, the company's claims included claims of breach of fiduciary duty (see VR 671). It was held that these claims of the company were within the definition of property (685). That was upheld on appeal (ACSR 464).
In Bank of Melbourne v HPM, the claims included claims by the company of breach of fiduciary duty (111). Lee J held that all of the rights claimed in the action were within the scope of the liquidator's powers under s 477(2)(c).
In Re Park Gate Waggon Works Company (1881) 17 Ch D 234, 239, a claim by a company for breach of fiduciary duty by its directors was held to be a chose in action of the company assignable by its liquidator under the applicable companies legislation. That legislation empowered the liquidator to sell the company's 'real and personal … property … and things in action …' The decision has been applied or cited with apparent approval in a number of cases: see for example, Re Movitor (390); UTSA (VR 682, 684 ‑ 685); Bank of Melbourne v HPM (112); and Carob Industries [46].
Consistently with these cases, in Flanders v Beatty (1995) 16 ASCR 324, the company had transferred by deed to its administrator all causes of action held by the company including against the director for breach of fiduciary duty. No issue was raised as to the assignability of those causes of action, although it seems that no contention was raised in that regard by the parties. Similarly, in Re New Tel (in liq); Evans v Wainter Pty Ltd [2005] FCAFC 114; (2005) 145 FCR 176, Landers J referred to the assignment of choses in action for breach of fiduciary duty in Flanders v Beatty without raising a question as to the validity of that assignment.
In Cotterill v Bank of Singapore (Australia) Ltd (1995) 37 NSWLR 238, 252 ‑ 254, Bainton J held that property of the bankrupt which, by s 134(1)(a) of the Bankruptcy Act 1966 (Cth), the trustee in bankruptcy was empowered to sell, includes a bare right of action such as a claim under s 52 (and s 82) of the Trade Practices Act 1974 (Cth). That decision, and his Honour's exposition of the history of bankruptcy legislation, was approved by Hayne JA in UTSA in relation to sale by a liquidator (ACSR 463).
Thus, there is substantial support in the authorities for the view that a claim by a company for breach of fiduciary duty is part of the property capable of being sold or assigned by its liquidator under s 477(2)(c).
A narrow approach to the construction of s 9 in the context of s 477(2)(c) appears to have been taken by McLure JA and Wheeler JA in Krishell. McLure JA said [73] ‑ [75] as follows:
(a)'thing in action' in s 9 means chose in action;
(b)chose in action is a personal right of property which can only be claimed or enforced by action, as distinct from taking physical possession;
(c)an essential criterion of the chose in action is that the right be of a proprietary character, so that a purely personal right is not a chose in action because it is not property (referring to Starke, page 3);
(d)some bare rights to litigate, including a right to litigate in tort, are not capable of being assigned under the general law (referring to Poulton);
(e)'it would seem to follow' that such bare rights to litigate are not property and thus not choses in action;
(f)however, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002) [6‑480] suggests that all rights to litigate are choses in action, regardless of whether they are property;
(g)some bare rights to litigate, such as the right of action under a contract, are capable of being assigned, are property and are a chose in action; and
(h)the rules of maintenance and champerty do not alter the character of bare rights to litigate as property, and those rules do not apply to the exercise of a liquidator's power under s 477(2)(c).
As I will explain, I respectfully disagree with (tentatively expressed) proposition (e). I do not think that because some bare rights to litigate are incapable of assignment (at common law) such rights are therefore not property and not choses in action.
Wheeler JA appeared to adopt a similar approach to McLure JA. Her Honour said that a right of litigation can be considered property if, and by implication, only if, it can be characterised as a chose in action. That will be so only if the rights are a proprietary nature (referring to Starke, page 2). A right to sue may be incapable of assignment because it is not a chose in action and thus not property capable of assignment, or because of the rules of maintenance, or for other reasons [39].
In MG Corrosion Consultants Pty Ltd v Gilmour [2012] FCA 383; (2012) 88 ACSR 170 [11] ‑ [13], Barker J referred to the approach of Wheeler and McLure JJA in Krishell. In MG Corrosion, the question was whether a derivative action on behalf of a company against one of its directors, including a claim for breach of fiduciary duty, was a claim 'in relation to any of [the company's] property' within the meaning of s 440D(1) of the Corporations Act. Barker J held that it was not. His Honour expressed some doubt as to whether the causes of action were property capable of assignment [17]. However, his Honour decided the case on the basis that the proceeding was not 'in relation to' the thing in action; rather it was the means of seeking to pursue the thing in action [19] ‑ [23].
What was said by Wheeler and McLure JJA appears to suggest that s 477(2)(c) empowers a liquidator to assign a right of action if and only if the right of action is 'proprietary' in nature, and that s 477(2)(c) does not extend the nature of rights of action that are capable of being assigned at general law. If that is what their Honours meant, I would respectfully suggest that authority and principle support a contrary view.
I do not take what was said by McLure JA or Wheeler JA, summarised above, as purporting to be definitive statements of the position, or as the real grounds of their decision. Krishell was an application for leave to appeal. McLure JA decided that the assignment in that case was within s 477(2)(c) because the right of appeal assigned was closely connected with the judgment debt which existed or would come into existence if the appeal was successful. Consequently, the right of appeal was property capable of being assigned, together with the judgment debt, by the liquidator [79]. Further, her Honour expressed the position in somewhat tentative terms, observing that 'it would seem to follow …' [75].
In the passage from Starke, Assignment of Choses in Action in Australia (pages 2 ‑ 3) referred to by Wheeler and McLure JJA, the learned author states that an essential criterion of a chose in action is that the right concerned is one of a proprietary character; a purely personal right is not a chose in action as it is not property, referring to Jack v Smail (1905) 2 CLR 684, 705. That case was not concerned with a right of action, but with a statutory licence to conduct a grocer's business. In my respectful view, Starke does not support the proposition that only rights of action of a 'proprietary' character are choses in action. In the same chapter (pages 8 ‑ 9), the learned author lists a number of things that have been held to be choses in action, including debts, shares, various intellectual property rights, shares in a partnership, and rights enforceable by action, including a claim of a company against directors for breach of fiduciary duty (citing Re Park Gate Waggon Works).
As I have said [887] ‑ [888], in Starke (pages 62 ‑ 64), and in the cases relied on in Poulton (602), the non‑assignability of a bare right of litigation is based on public policy relating to maintenance and champerty, not on its 'non‑proprietary' nature.
In Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297, 311, Brennan J held (311) that although a claim in negligence for personal injuries is not assignable, it is a chose in action and is 'property' of the plaintiff for the purposes of s 51(xxxi) of the Constitution (see also 305). His Honour said that it is not by reason of the nature of such a claim that it is not assignable, it is for reasons of public policy that the courts have held such a claim is not assignable (311). In Tolhurst G, The Assignment of Contractual Rights (2006) [6.06], the same approach is taken in relation to an action for damages in contract:
… the law does not deny the character of a chose in action to a right to bring an action for damages for breach of contract, but recognises that the assignability of that chose in action is subject to overriding public policy considerations.
In JT International SA v Commonwealth [2012] HCA 43; (2012) 86 ALJR 1297 [174], Hayne and Bell JJ said, with reference to Georgiadis, that a right of action was a property right. Of course, it must not be overlooked that that was said in the very different context of the proper construction of s 51(xxxi) of the Constitution. Nevertheless, it demonstrates that 'property' is, in some contexts, capable of including rights of action that are not assignable at common law.
I respectfully adopt the view of Brennan J in Georgiadis as to the non‑assignability of a bare right of action. That non‑assignability is not based on its 'non‑proprietary' character; rather, it is based on public policy related to maintenance and champerty. That public policy consideration does not apply to an assignment by a liquidator (or trustee in bankruptcy). Once that consideration is removed, there is no impediment to the assignment of a right of action such as a claim for breach of fiduciary duty. In my view, the breadth of the language of the definition of property and the evident object of s 477(2)(c) (as explained by Hayne JA in UTSA) support the view that a claim for breach of fiduciary duty is part of the property capable of being sold or assigned by a liquidator under s 477(2)(c). There is substantial authority supporting that construction of s 477(2)(c). See [899] ‑ [903]. I propose to follow that authority.
For these reasons, I find that the assignment by the liquidator of causes of action for breach of fiduciary duty by Mr Coombs as a director of FRC was valid and authorised by s 477(2)(c) of the Corporations Act.

9.5 Formal or technical defects in the assignment?

The defendants claim that the purported assignment is ineffective because s 20 of the Property Law Act 1969 (WA) was not complied with.
Section 20 of the Property Law Act requires that express notice in writing be given to the debtor.
On 18 January 2008, the plaintiff's solicitors wrote to the defendants' solicitors (exhibit A298). The letter enclosed a copy of the sale agreement, and stated that in providing a copy of the sale agreement, the plaintiff contends that it constitutes express notice of the assignment of the causes of action held by FRC to the plaintiff.
I am satisfied that the provision of that letter and its enclosure constitutes notice under s 20. Provision of a copy of the instrument effecting the assignment has been held to be sufficient, on the grounds that the section requires 'notice' and not 'a notice': Van Lynn Developments Pty Ltd v Pelias Construction Co Ltd [1969] 1 QB 607, 615. See also Camp v King (1887) 14 VLR 22; International Leasing Corporation (Vic) Ltd v Aiken [1967] 2 NSWR 427, 438. In this case, the sale agreement was accompanied by a letter that said that it was giving notice of the assignment.
The defendants also contend that the assignment is invalid on the ground that the subject matter of the assignment is not sufficiently certain. I do not accept that submission. The conditions of the sale agreement provided that FRC's causes of action (if any) against Mr Coombs and Crystal were sold to the plaintiff. The defendants submit that there is nothing in the sale agreement which indicates what chose or choses in action were contemplated as existing. I do not think that that is fatal to the validity of the assignment of the choses in action. In my opinion, on a proper construction, by the sale agreement, the liquidator assigned all of whatever causes of action FRC had or might have had against Mr Coombs and Crystal. That is not too uncertain to be valid. See, by analogy, Citicorp Australia Ltd v Official Trustee in Bankruptcy (1996) 71 FCR 550, 565.

Conclusion

I would summarise my major conclusions as follows:
(1)The imposition of the 31 December condition on FRC's licence was not caused by any breach of duty by Mr Coombs. In his dealings with DOCEP, Mr Coombs did not breach any fiduciary or equitable duty (section 6.1.1).
(2)Mr Coombs' duties to FRC did not require him to continue to work for FRC after 31 December 2005. He was free to leave (section 6.1.1).
(3)As at December 2005, there was no reasonable contemplation that FRC and Crystal would be in competition, since there was no reasonable contemplation that FRC would have a licence after 31 December 2005 (section 6.1.2).
(4)In setting up Crystal and preparing for the commencement of business on 1 January 2006, Mr Coombs did not breach any duty to FRC (section 6.1.2).
(5)Accreditation with The Investors Club was not an opportunity that belonged to FRC (section 6.1.4).
(6)In his application to The Investors Club for accreditation, Mr Coombs made use of his position as director of FRC, and property of FRC. However, he and Crystal did not profit by that use, because without it, the result would have been the same. Crystal would have been accredited (section 6.1.4).
(7)In taking FRC's client files, telephone and facsimile numbers and some email addresses, Mr Coombs acted in circumstances of necessity, to protect the interests of clients with active loan applications, and to discharge his (and FRC's) obligations under the Code of Conduct. That conduct was not in breach of Mr Coombs' fiduciary or other duties (section 6.1.5).
(8)No fiduciary or other duty of Mr Coombs prevented him, in January 2006 and thereafter, from seeking or doing work through Crystal for persons who had previously been clients of FRC, so long as he did not use FRC information and files in so doing (sections 6.1.6, 6.2).
(9)Crystal would have been liable to FRC under the Liquidator's Agreements in respect of transactions 26, 38, 47, 54, 55 and 61 on the ground that those transactions should have been on the WIP list as active finance applications (section 8).
(10)Crystal would also have been liable to FRC under the Liquidator's Agreements in respect of transactions 5, 13, 25 and 63 (section 8).
(11)Crystal is liable to account to FRC for the commission it received on transaction 43. Mr Coombs is also liable to account to FRC for any profit that he made on that transaction (section 8).
(12)Otherwise, Mr Coombs and Crystal have no liability in relation to the other Transactions (section 8).
(13)Crystal's liability under the Liquidator's Agreement was to FRC, and was part of what was assigned by the liquidator to the plaintiff under the sale agreement (section 9.2).
(14)FRC's claim for breach of fiduciary duty was capable of being assigned by the liquidator, and was part of what was assigned by the liquidator under the sale agreement (section 9.4).
On the face of it, the orders that would flow from these conclusions would appear to be:
1.An order that Crystal pay to the plaintiff an amount equal to the total of the commissions on the 11 transactions in respect of which I have found it liable to the plaintiff. The upfront commissions total $20,670.33. Any trail commissions would need to be added to that sum.
2.An order that there be an inquiry into any profit made by Mr Coombs on transaction 43.
3.An order that the plaintiff's claims in relation to the Transactions be otherwise dismissed.
Whether there is any utility in an order to the effect in (2) is a matter for consideration by the plaintiff. In any event, I will hear further from the parties as to what orders should be made in light of these reasons, and as to costs.