Flageul v WeDrive Pty Ltd - [2020] FCA 1666

FEDERAL COURT OF AUSTRALIA
Flageul v WeDrive Pty Ltd [2020] FCA 1666

File number: VID 653 of 2018

Judgment of: STEWARD J

Date of judgment: 18 November 2020

Catchwords:
INDUSTRIAL LAW – termination of employment – where applicant through his company developed ride sharing app – where that company assigned associated intellectual property to newly incorporated first respondent after due diligence conducted by third respondent – where applicant appointed as C.E.O. of first respondent – where minority of shares in first respondent issued to applicant – where majority of shares in first respondent issued to second and third respondents – where first respondent’s financial performance following assignment of intellectual property fell below expectations of second and third respondents – where functionality of app fell below expectations of second and third respondents – where second and third respondents discovered that applicant’s company did not own all intellectual property associated with app before assignment – where applicant subsequently dismissed as C.E.O. – where applicant and second and third respondents each agreed to step down as directors of first respondent and to sell all shares for $1 – where applicant made series of alleged complaints or inquiries to second and third respondents prior to dismissal as C.E.O. – where applicant allegedly worked pursuant to consultancy agreement following dismissal as C.E.O. and end of associated notice period – whether applicant exercised workplace rights – whether applicant made “complaints” or “inquiries” for purposes of s. 341(c)(ii) of Fair Work Act 2009 (Cth.) – whether complaints or inquiries “in relation to” applicant’s employment as C.E.O. for purposes of s. 341(c)(ii) – whether applicant “able” to make complaints or inquiries for purposes of s. 341(c)(ii) – whether adverse action taken “because” of applicant exercising workplace rights – whether s. 358 breached because applicant dismissed in order to be engaged as independent contractor to perform same or substantially same work under contract for services

CORPORATIONS – oppression – whether conduct of respondents oppressive to unfairly prejudicial to or unfairly discriminatory against applicant as member of first respondent whether in that capacity or any other capacity for purposes of s. 232 of Corporations Act 2001 (Cth.)

EQUITY – unconscionable conduct – where applicant allegedly subject to special disadvantages including mental health issues – where applicant alleged respondents aware of mental health issues and other special disadvantages – whether conduct of respondents towards applicant unconscionable within meaning of unwritten law for purposes of s. 20 of Australian Consumer Law

COSTS – whether power to award costs under s. 570 of Fair Work Act 2009 (Cth.) should be exercised as against applicant

Legislation:
Competition and Consumer Act 2010 (Cth.) Sch. 2, s. 20

Corporations Act 2001 (Cth.) ss. 9, 202B, 232, 233, 290, 1317AA

Fair Work Act 2009 (Cth.) ss. 340, 341, 342, 358, 360, 361, 570

Crimes (Mental Impairment and Unfitness to be Tried) Act 1997 (Vic.) s. 20

Occupational Health and Safety Act 2004 (Vic.) ss. 21, 25

Cases cited:
Australian and Consumer Commission v. Quantum Housing Group Pty Ltd(No 2) [2020] FCA 802

Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v. Visy Packaging Pty Ltd (No 3) (2013) 216 F.C.R. 70

Browne v. Dunn (1894) 6 R. 67

Hill v. Compass Ten Pty Ltd (2012) 205 F.C.R. 94

Joint v. Stephens [2008] VSCA 210

Lamont v. University of Queensland (No 2) [2020] FCA 720

Maric v. Ericsson Australia Pty Ltd [2020] FCA 452; (2020) 293 I.R. 442

McKerlie v. Western Australia (No 2) [2006] WASCA 274

Melbourne Stadiums Ltd v. Sautner (2015) 229 F.C.R. 221

MWJ v. The Queen [2005] HCA 74; (2005) 80 A.L.J.R. 329

PIA Mortgage Services Pty Ltd v. King (2020) 274 F.C.R. 225

R v. Kucma (2005) 11 V.R. 472

Republic of Nauru v. WET040 (No 2) [2018] HCA 60; (2018) 93 A.L.J.R. 102

Sanders v. Glev Franchises Pty Ltd [2002] FCA 1332

Shea v. TRUenergy Services Pty Ltd (No 6) [2014] FCA 271; (2014) 314 A.L.R. 346

The Environmental Group Ltd v. Bowd [2019] FCA 951; (2019) 288 I.R. 396

The Environmental Group Ltd v. Bowd (No 2) [2019] FCA 1227

Thorne v. Kennedy (2017) 263 C.L.R. 85

Wayde v. New South Wales Rugby League Ltd (1985) 180 C.L.R. 459

Division: Fair Work Division

Registry: Victoria

National Practice Area: Employment and Industrial Relations

Number of paragraphs: 345

Date of last submission/s: 10 July 2020

Date of hearing: 22-26 June 2020

Counsel for the Applicant: Mr. D.G. Robertson, Q.C. with Ms. J. Zhou

Solicitor for the Applicant: AJH Lawyers

Counsel for the Respondents: Mr. A. Meagher

Solicitor for the Respondents: Clyde & Co

ORDERS

VID 653 of 2018

BETWEEN:
YAN FRANCK FLAGEUL

Applicant

AND:
WEDRIVE PTY LTD T/A WEDRIVE (ABN 47 621 317 324)

First Respondent

STEVEN MACE

Second Respondent

GREGG TAYLOR

Third Respondent

ORDER MADE BY:

STEWARD J

DATE OF ORDER:

18 NOVEMBER 2020

THE COURT ORDERS THAT:
1.The proceeding be dismissed.
2.There be no order as to costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
STEWARD J.:

Once again, a chief executive officer (“C.E.O.”) has had a tragic falling out with his fellow board members. The applicant (“Mr. Flageul”) was C.E.O. of the first respondent, WeDrive Pty Ltd (“WeDrive”), a company incorporated on 25 August 2017. Mr. Flageul (as trustee of the We Drive Melbourne Trust) was also a shareholder in, and a director of, WeDrive. On 21 December 2017, the second respondent (“Mr. Mace”), a non-executive director of WeDrive (and, through a company owned or controlled by him, its majority shareholder), terminated Mr. Flageul’s employment as C.E.O. Subsequently, Mr. Flageul resigned as a director of WeDrive and sold his shares in that company for $1. Mr. Flageul has sued WeDrive, Mr. Mace, and another director of WeDrive, who is the third respondent (“Mr. Taylor”). Mr. Taylor also owned shares in WeDrive through a company he either owned or controlled, and was the executive chairman of WeDrive. Mr. Flageul seeks the payment of pecuniary penalties under the Fair Work Act 2009 (Cth.) (the “F.W. Act”), damages pursuant to that Act, the Corporations Act 2001 (Cth.) (the “Corporations Act”) and the Australian Consumer Law (“A.C.L.”) as set out in Sch. 2 to the Competition and Consumer Act 2010 (Cth.), as well as certain declarations. His causes of action comprise claims of adverse action, breach of s. 358 of the F.W. Act, and claims of oppression and unconscionable conduct on the part of the respondents. An additional claim alleging misleading and deceptive conduct was not pursued before me.
The trial took place over five long days and was confined to the issue of the liability of the respondents. It was heard using Microsoft Teams because of the prevailing COVID-19 pandemic. The Court is grateful to Counsel and their respective instructing solicitors for their co-operation and courtesy in ensuring the successful completion of such a large and complex matter in very trying conditions.
For the reasons which follow, and with very great respect, I reject each of Mr. Flageul’s claims.
Overview of the Case
It is useful to give an overview of Mr. Flageul’s claims against the respondents. For many years Mr. Flageul sought to develop an application or “app” called “WeDrive.” The app was intended to permit a member of the public who had driven to an event, but did not want to drive home (or could not drive home), to be allocated a driver who would arrive at the event and drive the member of the public home in their car; that driver would then be collected by another driver (a co-driver). By early 2017, considerable work had been completed in the development of this app, which was owned by Mr. Flageul’s company, WeDrive Australia Pty Ltd (“WeDrive Australia”).
Mr. Mace was, and remains, a majority shareholder, director and executive chairman of Multi Services Solutions Group Pty Ltd (“M.S.S. Group”). Mr. Christopher Russell was at the time the C.E.O. of this company. It owned six subsidiaries which carried on, as I understood it, distinct businesses. One of these was called M.S.S. Transport Services Pty Ltd (“M.S.S. Transport”). M.S.S. Transport carried on a business of outsourced car detailing for hire car companies. This included, for this purpose, the provision of staff to collect hire vehicles. Mr. Matthew Barker was, and remains, the managing director of M.S.S. Transport. Mr. Taylor was the non-executive chairman of M.S.S. Group. He was also a director of other unrelated companies.
In 2017, Mr. Barker told Mr. Mace that M.S.S. Transport needed to acquire certain technology to enable it to develop that company’s business. Mr. Barker was of the view that it would be more expensive and more difficult for M.S.S. Transport to develop that technology itself from inception. Mr. Barker told Mr. Mace that Mr. Flageul, who he had met earlier, had developed technology that might suit the needs of M.S.S. Transport. In May 2017, Messrs. Mace and Barker met with Mr. Flageul. He gave them a presentation in which he demonstrated how the WeDrive app worked. Mr. Flageul told Messrs. Mace and Barker that his business was breaking even and that he needed assistance to expand it. Mr. Mace decided to investigate the WeDrive business with a view to investing in it.
What followed was a period of due diligence. This due diligence was conducted largely by Mr. Taylor. Amongst other things, Mr. Flageul answered a due diligence questionnaire. Questions were asked about ownership of the core assets of his business. At the time, Mr. Flageul failed to disclose that WeDrive Australia did not own all of the intellectual property required for the app. He conceded before me that this had been a “mistake.”
In August 2017, when WeDrive was incorporated, WeDrive Australia assigned its intellectual property rights to this company. Mr. Flageul (as trustee of the We Drive Melbourne Trust) was issued 20% of WeDrive’s shares. Mr. Taylor’s company was issued 19% of WeDrive’s shares. Mr. Mace’s company was issued 51% of WeDrive’s shares in consideration of the payment of $400,000 by his company to WeDrive. That payment was subsequently made in two tranches of $200,000.
Thereafter, work commenced on the further development of the app. The cost of doing this was much more expensive than anticipated. Mr. Flageul contends that from August to December 2017 he made a series of complaints or inquiries to, amongst others, Messrs. Mace and Taylor. He alleges that each of these constituted the exercise of a workplace right. Eventually, Mr. Flageul was dismissed. He contends that he was dismissed because of the complaints and/or inquiries he made.
He also contends that he was mentally unwell at the time of his dismissal. Notwithstanding this, he claims that he was coerced into selling his shares in WeDrive for $1 to M.S.S. Group and into resigning as a director of WeDrive. He submitted that his dismissal, the sale of his shares and his resignation as a director was the product of oppressive conduct by Messrs. Mace and Taylor. He also submits that Messrs. Mace and Taylor took unconscionable advantage of, amongst other things, his allegedly poor mental state.
The respondents disagree. They submit that the reason for Mr. Flageul’s dismissal was principally his failure to disclose WeDrive’s lack of ownership of the intellectual property associated with the app. Until resolved, this left WeDrive without the legal ability to exploit its technology fully. Whilst that issue was subsequently cured, Messrs. Mace and Taylor felt that they could no longer trust Mr. Flageul. They considered that they had been misled. The business was also costing more than expected, and was generating much less revenue than anticipated. In December 2017, the WeDrive business was in losses. It was expected to be insolvent by January 2018. Mr. Mace had effectively lost all of the money he had invested. Both he and Mr. Taylor also sold their shares to the M.S.S. Group for $1. They had offered to sell those shares to Mr. Flageul for that price. He declined that offer. Messrs. Taylor and Mace also resigned as directors of WeDrive.
Finally, Mr. Flageul contends that he was subsequently engaged as an independent contractor to perform the same or substantially the same work he had previously undertaken as a C.E.O. over January 2018. The respondents deny this. They contend that Mr. Flageul had never been offered any ongoing employment following his termination in December 2017.
Applicable Legislation
Mr. Flageul’s claims under the F.W. Act are governed by the general protections provisions in Pt. 3-1. Section 340 of the F.W. Act relevantly provides:
Protection
(1)      A person must not take adverse action against another person:
(a)       because the other person:
(i)        has a workplace right; or
(ii)       has, or has not, exercised a workplace right; or
(iii)proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or
(b)       to prevent the exercise of a workplace right by the other person.
Section 341(1) defines the term “workplace right” as follows:
Meaning of workplace right
Meaning of workplace right
A person has a workplace right if the person:
(a)is entitled to the benefit of, or has a role or responsibility under, a workplace law, workplace instrument or order made by an industrial body; or
(b)is able to initiate, or participate in, a process or proceedings under a workplace law or workplace instrument; or
(c) is able to make a complaint or inquiry:
(i)to a person or body having the capacity under a workplace law to seek compliance with that law or a workplace instrument; or
(ii)if the person is an employee—in relation to his or her employment.
Section 342 defines the term “adverse action.” It relevantly includes the dismissal of an employee by her or his employer.
Relevant to the alleged breach of s. 340 is s. 360, which addresses situations where there are multiple reasons for taking action. It provides:
Multiple reasons for action
For the purposes of this Part, a person takes action for a particular reason if the reasons for the action include that reason.
Also relevant to the alleged breach of s. 340 is s. 361(1), which prescribes a presumption that relevantly adjusts the onus of proof. It is in these terms:
Reason for action to be presumed unless proved otherwise
(1) If:
(a)in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and
(b)taking that action for that reason or with that intent would constitute a contravention of this Part;
it is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.
Section 358 relevantly provides:
Dismissing to engage as independent contractor
An employer must not dismiss, or threaten to dismiss, an individual who:
(a) is an employee of the employer; and
(b) performs particular work for the employer;
in order to engage the individual as an independent contractor to perform the same, or substantially the same, work under a contract for services.
Section 570 is part of a miscellaneous set of provisions and deals with costs. It relevantly provides:
Costs only if proceedings instituted vexatiously etc.
(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
(2)      The party may be ordered to pay the costs only if:
(a)the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b)the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c)       the court is satisfied of both of the following:
(i)the party unreasonably refused to participate in a matter before the FWC;
(ii)       the matter arose from the same facts as the proceedings.
As to the claims about oppression, s. 232 of the Corporations Act relevantly provides:
Grounds for Court order
The Court may make an order under section 233 if:
(a) the conduct of a company’s affairs; or
(b)an actual or proposed act or omission by or on behalf of a company; or
(c)a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d) contrary to the interests of the members as a whole; or
(e)oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.
Section 233(1) provides:
Orders the Court can make
(1)The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a)       that the company be wound up;
(b)       that the company’s existing constitution be modified or repealed;
(c)       regulating the conduct of the company’s affairs in the future;
(d)for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e)for the purchase of shares with an appropriate reduction of the company’s share capital;
(f)for the company to institute, prosecute, defend or discontinue specified proceedings;
(g)authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h)appointing a receiver or a receiver and manager of any or all of the company’s property;
(i)restraining a person from engaging in specified conduct or from doing a specified act;
(j)        requiring a person to do a specified act.
As to the claims about unconscionable conduct, s. 20(1) of the A.C.L. relevantly provides:
Unconscionable conduct within the meaning of the unwritten law
(1)A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.
The Witnesses
Much of the case turns upon the Court making findings of fact about what was, or was not, said at various meetings and during various telephone conversations. Mr. Flageul’s evidence about what was said was relevantly contradicted, in whole or in part, by all of the other witnesses called to give evidence (save for Mr. Flageul’s partner). The Court was thus required to decide whose evidence, about what was said and what was done, should be preferred. In that respect, I have principally relied upon the contemporaneous evidence before me, at least as a starting point, in fact finding. Where appropriate I have drawn inferences from the contemporaneous documents if such inferences accord “with the probabilities of ordinary human experience”: Republic of Nauru v. WET040 (No 2) [2018] HCA 60; (2018) 93 A.L.J.R. 102 at 109 [35]; see also Sanders v. Glev Franchises Pty Ltd [2002] FCA 1332 at [53].
Mr. Flageul gave evidence-in-chief by affirming five affidavits. His life partner, Ms. Joanne O’Donovan, who was also employed at WeDrive, affirmed two affidavits. Mr. Mace swore two affidavits. Mr. Taylor swore one affidavit, as did Mr. Russell. Mr. Barker swore two affidavits. All of these affidavits, together with their accompanying exhibits, were admitted into evidence. Both sides had intended to make a series of objections to the admissibility of parts of these affidavits. But in the circumstances (which included the holding of a virtual hearing), it was thought more efficient to have the Court receive all of this evidence, leaving the parties to make submissions about weight, which they did. No party objected to this course of action.

I was not entirely impressed with the evidence given by Mr. Flageul. He had a great interest in the outcome of this case, and so I have treated his evidence with considerable caution. My general impression of him is that he at times exaggerated his evidence. That is not to say that he was dishonest; I think he tried to give his evidence truthfully. But he seemed overeager to explain his story, which when combined with a degree of exuberance, led him to embellish his account of what occurred. At times he introduced new parts of his story which had not appeared in the very many affidavits he had affirmed and which had been read into evidence. He often became argumentative. He was sometimes evasive. The language used in his affidavits did not help. His recollection of key events, in which he alleged he had exercised a workplace right, was often expressed in highly conclusionary language. For example, the following appears in his first affidavit:
On 29 September 2017 and 5 October 2017, I verbally complained and/or enquired with Gregg Taylor, the Third Respondent as to the payments made by the First Respondent to Dave Nicholson that in the absence of a consultancy agreement between the First Respondent and Dave Nicholson (associate of the Second Respondent and Third Respondent), or being held liable to any Key Performance Indicators, that I be provided by reasons [sic] as to any payment made by the First Respondent to Dave Nicholson or other alleged contractors.
…
On 10 November 2017, I verbally complained and/or enquired to Steven Mace, the Second Respondent as to the payments made by the First Respondent to Dave Nicholson on the basis that any payment to Dave Nicholson was unreasonable as there was no consultancy agreement between the First Respondent and Dave Nicholson.
…
On 24 November 2017, I emailed Christopher Russell, the Third Respondent, Gregg Taylor and Matthew Barker and complained and/or enquired about when the marketing campaign would commence for the First Respondent, since Dave Nicholson and the Third Respondent did not initiate or organise any marketing campaign in Sydney, which was within the responsibility of the Third Respondent and Dave Nicholson.
(My emphasis.)
All of the alleged exercises of workplace rights were described in this way in Mr. Flageul’s first affidavit. Expressed in such conclusionary terms, it is difficult to give extensive weight to this type of evidence. That is especially because, on many occasions, it was never effectively corroborated.
Another difficulty I had with Mr. Flageul’s evidence is that he sometimes added to his account of what had occurred with each successive affidavit. In the first, he appeared to give a comprehensive account of his version of what had occurred. The second contained some corrections to the first. But in the third, fourth and fifth affidavits, sometimes perhaps as an understandable reaction to the evidence filed and served on behalf of the respondents, he introduced new details with no real explanation as to why those details had not appeared in his first affidavit. Unless otherwise corroborated, it was hard to give a great deal of weight to these additions, which were sometimes no more than a denial of the truth of the evidence contained in the respondents’ affidavits. Mr. Flageul added further details in the virtual witness box. For example, he claimed for the first time to have received an offer from, and to have reached agreement with, Mr. Mace to become an independent contractor on 23 January 2018. In finding facts, I have accordingly focused upon Mr. Flageul’s first affidavit, and the transcript of his cross-examination, unless what had been affirmed in the further affidavits was material in some way.
I have also treated the evidence of Ms. O’Donovan with similar caution. It was led in an attempt to corroborate Mr. Flageul’s evidence about the exercise by him of workplace rights. Because Ms. O’Donovan was and is Mr. Flageul’s life partner, she shares a similar interest in the outcome of this matter. But there were other difficulties with her evidence. For example, she gave hearsay evidence of conversations she overheard whilst Mr. Flageul was on the telephone with, for example, Messrs. Mace or Taylor. She tried to corroborate Mr. Flageul’s recollection of the day he was terminated by giving hearsay evidence of Mr. Flageul ringing her to give his account of what occurred. I have decided that none of this evidence can be given any real weight. That was so for a number of reasons. First, the language used in her affidavits was often conclusionary in nature, argumentative and speculative. As an example of this, the following appeared in her second affidavit:
I refer to paragraphs 50 and 51 of the affidavit of Steven Mace and say that it is strange to me that Steven Mace first tried to use the WeDrive Mobile Application on 11 September 2017, after he invested in WeDrive business. [sic]
What Ms. O’Donovan thought was “strange” is not evidence. Secondly, in her second affidavit, she added statements to describe an important conversation between Messrs. Flageul and Mace which did not appear in her first affidavit. No sufficient explanation was given for this discrepancy. In cross-examination, she said that her first affidavit had been prepared using notes she had made at the time of this conversation. These notes were never produced because they had not been kept. No adequate explanation was given about their loss. Thirdly, I also find that in cross-examination, Ms. O’Donovan tried too hard to align her testimony with that of Mr. Flageul, especially in relation to the issue concerning how automated the app was in the second half of 2017. Thus, for example, the following exchange took place:
Yes. And it’s correct, isn’t it, then on that explanation that you would have expected them to think that this technology, provided you had drivers available, was capable of dispatching drivers automatically?---Yes. It was.
Yes. Well, would it surprise you to hear, Ms O’Donovan, or change your mind – would it change your mind if you heard that Mr Flageul had a different view of what the technology could do?---Yes.
Later on, the following exchange took place:
Mr Flageul accepted yesterday, in cross-examination, when I asked him if it provided for the automatic dispatching of drivers, and this is at page 50 of the transcript, line 15, your Honour.
HIS HONOUR: Thank you.
MR MEAGHER: I asked him the question:
Well, do you say it could be done in September when Mr Mace complained to you.
And Mr Flageul said:
No.
But do you now accept that it couldn’t automatically dispatch drivers in September 2017?---Yes, if he answered that I will accept it.
And isn’t it the case then that whatever Yan says on this issue, you will accept as being correct?---Well, I wouldn’t say whatever he says, but yes, I would – I would – I would defer to his greater knowledge of the technology than mine.
And I suggest to you, Ms O’Donovan, that you’ve deferred to Mr Flageul’s explanation of events more generally in respect of the matters in issue of this case; do you agree with that?---No.
(My bolded emphasis; italicised emphasis in transcript.)
I adopted a similar level of caution when assessing the credit of Messrs. Mace and Taylor. As respondents they also had a direct interest in the outcome of the case. However, my impression of them both is that they were less committed to winning the case than Mr. Flageul and Ms. O’Donovan. Generally speaking, they gave evidence that was less argumentative. They did not seem to embellish or exaggerate matters as much as Mr. Flageul. If anything, they both appeared to be “sick of” dealing with Mr. Flageul and just wanted to be rid of him. The clear impression I had of Mr. Mace is that he felt betrayed by Mr. Flageul and blamed him for losing the money he had invested in WeDrive. The equally clear impression I have of Mr. Taylor is that he struggled to deal with Mr. Flageul.
Neither Mr. Barker nor Mr. Russell had any direct interest in the outcome of this matter. However, both were and remain business associates of Mr. Mace. I therefore applied some measure of caution in assessing their respective creditworthiness. Having said that, they both impressed me as witnesses and I formed the view that they gave accurate answers in cross‑examination to the extent of their recollection of events. Mr. Barker had never thought that the WeDrive business would ever work. He only became involved with WeDrive as a “favour” to Mr. Mace. Mr. Russell also did not think much of the WeDrive app. He also only became involved towards the end of 2017 to see whether the WeDrive business could in some way be saved. He hoped that he would never see or hear of Mr. Flageul ever again.
Mr. Flageul filed with the Court a table setting out the weight he contended I should give to certain parts of the affidavits filed by the respondents. In what follows, I have given this table due consideration.
Both sides called witnesses to give expert evidence concerning Mr. Flageul’s mental state in 2017. Mr. Flageul relied upon a report of Mr. David Horne (I note that he is a Doctor of Philosophy), a clinical psychologist, whilst the respondents relied upon a report of Professor Peter Doherty, a psychiatrist. Each was cross-examined. For reasons which are set out below, I found neither report to be probative of Mr. Flageul’s mental state in 2017. However, both experts properly discharged their duty to the Court and gave their evidence in an entirely honest and professional way. The Court is grateful to them for what assistance they could give.
Agreed Statement of Facts
The parties agreed on certain facts. They documented that agreement as follows (I have removed applicable headings):
1.On 8 December 2014, WeDrive Australia Pty Ltd (ACN 603 262 675) (“WeDrive Australia”) was incorporated for the purpose of conducting the “WeDrive” business (“Business”).
2.        The Applicant (“Flageul”) was:
(a)a director of WeDrive Australia from 8 to 24 December 2014, and from 10 March 2015 to 22 February 2018; and
(b)       a shareholder in WeDrive Australia at various times.
3.On or about 16 May 2017, a meeting occurred between Flageul, Matthew Barker (a director of MSS Transport Services Pty Ltd (ACN 611 381 607) (“MSST”)) and the Second Respondent (“Mace”) (Executive Chairman and a director of Multi Services Solutions Group Pty Ltd (ACN 602 539 873)) at which Flageul gave a presentation about the Business to Barker and Mace.
4.On 25 August 2017, the First Respondent (“WeDrive”) was incorporated, for the purpose of purchasing WeDrive Australia’s assets (including the Application) and its business (as those terms are defined in the document referred to in subparagraph 5(a) below).
5.On 31 August 2017, WeDrive acquired WeDrive Australia’s business and assets (as those terms are defined in the document referred to in subparagraph 5(a) below). A suite of documents was executed giving effect to that transaction, including:
(a)       a “Business and Asset Purchase Agreement “;
(b)       a “Subscription and Shareholders’ Deed “; and
(c)       an “Executive Services Agreement” in regard to Flageul.
6.        As at 1 September 2017, WeDrive’s:
(a)       shareholders were:
(i)Mace Group Pty Ltd, ACN 103 666 235 as trustee of the WeDrive Management Trust:   100 shares (10 per cent);
(“Mace Group”)
(ii)R E Taylor Pty Ltd, ACN 614 465 717 as trustee of the TF Trust: 190 shares (19 per cent);
(“R E Taylor”)
(iii)Flageul as trustee of the WeDrive Melbourne Trust: 200 shares (20 per cent);
(iv)Mace Group as trustee of the Mace Family Trust: 510 shares (51 per cent);
(b)directors were:
(i)        Flageul;
(ii)       Mace; and
(iii)      Taylor.
7.        Mace Group was, at all times material to this proceeding, controlled by Mace.
8.        R E Taylor was, at all times material to this proceeding, controlled by Taylor.
9.Flageul was employed by WeDrive from around 1 September 2017 to around 22 January 2018, on a full-time basis:
(a)       in the role of “Chief Executive Officer “; and
(b)with a remuneration of $150,000.00 per annum, inclusive of superannuation.
10.On 10 November 2017, there was a board meeting of WeDrive at which a proposal for a merger between WeDrive and MSST was presented, with a PowerPoint presentation entitled “MSST_WeDrive Merger Discussion” (“Merger Proposal”), and the board of WeDrive unanimously voted in favour of the merger.
11.On 21 December 2017, Flageul was dismissed as an employee of WeDrive with effect from 22 January 2018.
12.On 22 December 2017, Flageul signed a document entitled, “Heads of Agreement: Sale of entire issued capital in WeDrive Pty Ltd.”
13.      On 3 January 2018, Flageul ceased being a director of WeDrive.
14.      On or about 22 January 2018, Flageul ceased employment with WeDrive.
(Footnotes omitted.)
The Court is grateful to the parties for their co-operation.
The Facts
Due Diligence
Mr. Barker gave evidence that he wanted to streamline the M.S.S. Transport business with an app that would enable rental car clients to be able to request movements of rental vehicles electronically. He raised this idea with Mr. Mace. He suggested that Mr. Barker should conduct some research and report back to him. That research led Mr. Barker to discover a business then conducted by Mr. Flageul through WeDrive Australia. That business appeared to Mr. Barker to offer a chauffeur “you drink, we drive” style service. He emailed WeDrive Australia. Mr. Flageul then rang Mr. Barker.
There was some dispute before me about the initial objectives of the M.S.S. Group. Mr. Flageul recalled that Mr. Mace wanted to invest in his business and that this was not confined to the use of his app. In cross-examination, however, Mr. Flageul accepted that the focus of the M.S.S. Group was on acquiring an ability to use the app to improve the business of M.S.S. Transport. As Mr. Barker said in his first affidavit:
I explained the MSS Transport business to Mr Flageul, and identified some potential synergies with WeDrive Australia such as using its technology to assist MSS Transport to automate the allocation of drivers and minimise manual labour.
Mr. Barker’s memory is supported by the contemporaneous documents. In, for example, an email sent by Mr. Flageul to Mr. Barker on 30 May 2017, Mr. Flageul said that WeDrive Australia’s “strategic objectives” included:
To develop a technology to enhance WeDrive and MSS Transport productivity.
To roll the technology out to all other MSS subsidiaries and consider white-labelling external licensing.
I find that Mr. Mace, and the M.S.S. Group, were interested in using the intellectual property developed by Mr. Flageul to enhance the businesses of that group, and in particular, the business of M.S.S. Transport. That intellectual property primarily constituted the WeDrive app. As at May 2017, neither WeDrive Australia nor Mr. Flageul owned all of that intellectual property. Nor was the app at that stage fully functional. It was not, for example, yet fully automatic. In an email sent by Mr. Barker to Messrs. Taylor and Mace in early June 2017, Mr. Barker outlined some of the features of the app which he thought it needed to achieve. He wrote as follows:
The app would need to be able automatically add CPI to the rate annually with a Y/N indicator in the back end dependent on the agreement
The app would need to be able to create jobs for either single movements or upload mass movements of cars.
The app would need to be able to have different approval levels depending on the needs of the client. This is especially important as different clients will have very different needs here.
For example at AVIS a fleet controller has high discretionary spend whereas at Hertz location management cannot even approve the purchase of a stapler without the need for escalation and approval.
It would need to send push notifications to the agreed sign off person in real time for approval before we move the vehicle. We would need a pre-approved signal so we can get ready but not get the notification to execute until the final client approver has hit go.
We would then need to decide if the alert goes to the subby or we coordinate manually. Initially I suspect the latter for a few weeks but we would need the capability for the “order” to go straight through to the driver with the subby boss getting a notification. I would not want them to be able to refuse the Job if it has been approved by us and I would want us to have the control.
The degree to which the app was automated by the time WeDrive had acquired it was the subject of considerable dispute. In an email sent by Mr. Flageul to Mr. Mace on 31 May 2017, he said that he needed $150,000 for the development of the “system” as it then was, but that this was only a “bulkpart [sic] figure”. Importantly for Mr. Flageul’s case, the email set out the development that needed to occur. This included the following:
- Stage 1 will cater for the needs of WeDrive and MSS transport (relocating, geo‑locating/tracking, semiautomated** scheduling and dispatching)
…
**Semi-automated means all dispatch processes will be automated as much as possible with the ability given to operators to manually dispatch and or overwrite automation when if required.
There was some conflict and ambiguity concerning the evidence given by Mr. Flageul and Ms. O’Donovan about this issue. Mr. Flageul said that the app was only automatic when drivers were available, but not when they were not; in that case a manual system of ringing for a driver needed to take place. It is not clear to me whether this aspect of the app was ever fixed or whether the app was always going to be dependent upon a pool of drivers being available. In contrast Ms. O’Donovan said, as between WeDrive and a customer, the app was automated (assuming there were available drivers), or became automated at some point later in 2017, but another app, used by the co-driver (i.e. the driver that would collect the driver used by the customer) was not yet automated. Compounding the issue was Ms. O’Donovan’s deference to the views of Mr. Flageul which I have described above.
In contrast, Messrs. Mace and Taylor were firmly of the view that Mr. Flageul had told them that the app was fully automated. Mr. Mace recalls being shown by Mr. Flageul in May 2017 how the app worked and it appeared to him to work perfectly well and automatically. He subsequently tested it himself, with mixed results (see below). Mr. Barker had tested the app in May 2017 and it did not work then (see below). In my view, I find that the app was not fully automated in May and June 2017, and remained in that state throughout 2017. I further find that Messrs. Mace and Taylor nonetheless believed that the app was fully automated before making their investment in WeDrive. Whether that was because they were misled by Mr. Flageul, or had misunderstood what he had said (for example in the email set out above), I need not decide. Neither, in that respect, had any expertise in the field of information technology.
On 16 May 2017 WeDrive Australia entered into a contract with Contact Point IT Services Pty Ltd (“Contact Point”, sometimes referred to in contemporaneous documents as “Contactpoint”) for the maintenance and enhancement of the app. It was Mr. Flageul’s uncontradicted evidence that Contact Point enhanced the app using a combination of pre‑existing codes created by developers who had worked for WeDrive Australia, as well as codes created by Contact Point. Critically, the terms of this contract provided for Contact Point to retain ownership of the intellectual property developed by it in association with the app. Clauses 33 and 34 thus provided:
WeDrive hereby acknowledges that Contactpoint retains full ownership of the Intellectual Property in any UI/UX design and programming developed in association with the App.
Upon go live of changes to the App and payment in full for the services provided as part of each project, Contactpoint shall assign a perpetual and transferable license to use within the App such Intellectual Property to WeDrive. This license will allow WeDrive or their agents to make changes to any aspect of the App, except for the purpose of creating derivative works based on the code. This licence does not allow the distribution of the code to any other party or publishing of the code into a public domain.

These clauses fettered WeDrive Australia’s ownership of the intellectual property needed to exploit and develop the app fully. They lie at the heart of this dispute. That is because Mr. Flageul never disclosed their existence to Mr. Mace and the M.S.S. Group until December 2017. Indeed, he never disclosed the existence of this contract at all during the M.S.S. Group’s due diligence of WeDrive Australia which took place in June 2017. He nonetheless conceded in cross-examination that he knew by August 2017 that Messrs. Mace and Taylor, as potential investors, were “particularly concerned” that WeDrive Australia was the owner of all of the relevant intellectual property to be assigned to WeDrive.
On 29 May 2017, Mr. Mace met with Mr. Flageul, Ms. O’Donovan and others. In the course of that meeting, Mr. Mace gave evidence that the following took place:
(a)Mr Flageul provided a copy of WeDrive Australia’s financials which I recall demonstrated initial monthly losses of about $22,000, gradually improving to losses of about $1,000 per month, as at May 2017;
(b)I recall asking Mr Flageul what had transpired to significantly reduce WeDrive’s losses. He said WeDrive Australia now had more clients on the back of corporate offerings and was better at controlling its costs. He said in the worst case, an injection of $8,000 per month would cover all losses and the wages for himself and Ms [O’Donovan].
(c)Mr Taylor suggested it appeared from what Mr Flageul had told us about WeDrive Australia’s current trading performance and new strategy in relation to acquiring corporate clients, an investment of $300,000 would allow the business to continue to grow for about 12 months, until it was self-sustainable;
(d)Mr Flageul said that WeDrive Australia had about $30,000 of outstanding invoices to clear for corporate development expenses. It was then discussed between us that an investment of $400,000 would cover the business until WeDrive Australia could become profitable, based on a 12 month projection;
(e)I said we would be interested in acquiring the trading assets of WeDrive Australia, rather than the corporate entity, and that we would set up a new corporation for that purpose;
(f)We agreed that the ownership structure of the new entity would be 75% MSS Transport and 25% Mr Flageul, and discussed the roles that Mr Flageul, Mr Taylor, Mr Barker and I would take:
i.As Mr Flageul had built the business, it was agreed that he would have the title of CEO. His role and responsibilities were agreed to be focussing on expanding the business and developing the technology to suit corporate clients, and modifying it for use by MSS Transport. Mr Flageul would also be appointed as a director;
ii.Mr Barker or Mr Taylor would be appointed as a director and tasked with mentoring Mr Flageul, controlling financial management and assisting with marketing. In addition, Mr Barker would have operational responsibility for liaising with Mr Flageul to supply labour from MSS Transport for [sic]; and
iii.I would observe the Board of Directors, so I could keep an eye on the progress of the business.
Mr. Flageul denied most of the foregoing. Neither he nor Mr. Mace were materially cross‑examined about their divergent recollections. Mr. Taylor corroborated Mr. Mace’s testimony, but only to an extent. I otherwise accept that Mr. Mace’s recollection as set out above, is what he “took away” from his meeting. In particular, I accept that Mr. Mace believed that the business had only about $30,000 of outstanding invoices to pay. Whether that recollection was mistaken, as Mr. Flageul asserted, I need not decide. I further accept Mr. Mace’s understanding of WeDrive Australia’s financials as representative of his appreciation of the state of the WeDrive business. It formed the basis for Mr. Mace’s ultimate investment of $400,000. In that respect, it was a strong theme in Mr. Mace’s evidence that the business ended up needing far more financial assistance than that outlined by Mr. Flageul at this meeting. In particular, he discovered that the business needed far more than $8,000 per month to make good its ongoing losses. Thus in cross-examination, Mr. Mace said:
Were you concerned that the expenses were too high at the end of September 2017 of WeDrive Proprietary Limited?---I was concerned – from referring it back to the Sydney – original Sydney meeting when $8000 a month would have covered – they had gone from losing 22,000 a month – got it back to close to a thousand give or take towards break even. And a thousand – $8000 a month was going to cover the ongoing trading, and we were incurring significant financial results and expenses. Yes. I was concerned about.
The M.S.S. Group due diligence was undertaken largely by Mr. Taylor. It culminated in the completion by Mr. Flageul of a due diligence questionnaire in which he gave the following answers to the following questions (the reference to the “Company” is to WeDrive Australia):
6. Does the Company have clear title to its core assets? Have any claims been made against core assets? Are there any encumbrances against core assets?
a. NO
…
16. Are there any other matters that Mace should be aware of in relation to the Offer?
a. NO
These answers were wrong or at least not accurate. WeDrive Australia did not have “clear title” to its core assets, and Mr. Mace should have been told about the contract with Contact Point. Nonetheless, in one of his affidavits, Mr. Flageul sought to brush aside the significance of his answers. He said that there was nothing in the contract “of any concern” to him and that at the time of due diligence he was “primarily concerned with the handover process.” He repeatedly said that neither Mr. Mace nor Mr. Taylor had ever asked for a copy of the Contact Point contract (unsurprisingly, in my view, because they were unaware of it) and that its existence would not have mattered but for M.S.S. Transport’s attempt to “improperly” acquire the intellectual property in December 2017. These explanations are illustrative of the argumentative nature of some of Mr. Flageul’s evidence-in-chief. In any event, in cross-examination, Mr. Flageul accepted that he had made a “mistake”. Whilst he claimed that it had never occurred to him at the time to tell the M.S.S. Group parties about the contract with Contact Point, he now candidly acknowledged that this was “madness”. Thus in cross-examination he said:
And did it not strike you, Mr Flageul, that you needed to check and disclose any other parties’ interest in the code that is part of the application prior to agreeing to this agreement?---Okay. So if we were talking about now and I’m a different businessperson now, I would say that it was madness that I did not think about it at the time, but I’m a different person now. At the time, I was a small business owner. And what I’m pointing here is section 25. The seller has not intentionally withheld or concealed. And the answer is yeah, I agree with you that I should have, but I didn’t. But by no means was that intentional. It just did not strike. I will bring you to a matter. You can interrupt me if you think it’s irrelevant. But I remember, on 21 December, Mr Mace questioned me on that, and he said, “Did you actually commit a lawyer to read over that agreement that you signed with Contact point?” And I said, “No” And I remember him shaking his head, probably thinking, “What an idiot”, and I would have agreed with that, because I should have. That probably would have saved me a lot of that trouble.
He ultimately accepted that “in retrospective [sic] and hindsight”, he should have disclosed the Contact Point contract to the M.S.S. Group as part of the due diligence process.
I observe that in cross-examination, Mr. Taylor said that he had, at the time, asked Mr. Flageul about his answer to the first question in the questionnaire set out above. In response, Mr. Flageul did not disclose the existence of the Contact Point contract, but rather, the existence of a dispute concerning the ownership of some other intellectual property referable to the app. Steps were taken to resolve that dispute before WeDrive was set up by having certain third parties assign the necessary intellectual property to WeDrive Australia.
I find Mr. Flageul’s general attitude to the issue of the ownership of WeDrive Australia’s intellectual property to have been cavalier. When he was cross-examined about the Contact Point contract the following exchange took place which is illustrative of this finding:
So you did think about the IP, but you didn’t stop to think about who actually owned all the different parts of the IP?---I thought – I thought I owned the IP. I thought I owned the IP, and I would still maintain that I owned the vast majority, apart from maybe a couple of traits, of course. But the vast majority of the IP was still owned. And I never – yeah, I agree. I probably didn’t read carefully every single paragraph, but in my mind, I owned the IP.
On 14 August 2017, WeDrive Australia and a company which appeared to be owned by Mr. Mace (called Investment Vehicle Pty Ltd) entered into a “Memorandum of Understanding.” An earlier version of this had been distributed by Mr. Mace on 31 May 2017. It included the following breakdown as to how Mr. Mace’s $400,000 was to be used by WeDrive:
Mace will contribute the following for 75% in WeDrive:
1.$250,000 for working capital to be deposited in 12 month instalments; and
2.$150,000 for a capital works to the ITC of the business. The funds to be approved by the Board prior to commitment and available as required over the next 12 months; and
3.Services Agreement between WeDrive to MSS Transport Pty Ltd for drivers (*); and
4. Access to Mace corporate network for retail and corporate clients.
(*) To be negotiated direct with MSS Transport Pty Ltd but a contract allowing MSS Transport Pty Ltd first right of refusal to supply labour as per agreed terms and conditions.
The executed Memorandum of Understanding, dated 14 August 2017, did not include the foregoing clause. It anticipated the incorporation of a new entity which would acquire 80% of the shares in WeDrive Australia and for “Mace” to contribute $400,000 as working capital. It also provided for the appointment of Mr. Flageul as the “CEO”, with an annual salary of $150,000. Before me, Mr. Flageul asserted that part of the “deal” included Mr. Taylor bringing in $400,000 of revenue. But this was not a term of the Memorandum of Understanding. It was not a term of any agreement. It was not referred to in any contemporaneous records, contrary to what Mr. Flageul had said in his third affidavit (the one email cited by Mr. Flageul did not refer to this alleged promise). And Mr. Taylor denied that he had given such a promise. In these circumstances, I am not persuaded that it was ever made.
The Memorandum of Understanding listed the strategic priorities of the parties as follows:
It is agreed the Strategic Priorities of WeDrive is essential to the short success of the business. It is equally important to the Investment criteria for Mace. The following priority has been agreed by the Parties;
1.        WeDrive current strategy and growth to profitability
-         Focus on retail client growth in Sydney and Melbourne
-         Focus on corporate client and venue growth in these markets
-Trading performance to trade profitability in its own right which is estimated at~100 jobs/day (currently~7jobs/day)
2.Technology to support the above strategy in a reliable and professional manner.
The Memorandum of Understanding records that the value of WeDrive had been “set” at $1,600,000 for “the purpose of this Investment opportunity.”
Consistently with a focus on ownership of the necessary intellectual property, and given the pre-existing dispute over part of that property, in late August 2017 Mr. Flageul executed two “IP Assignment Agreements.” The first was entered into by WeDrive Australia (as trustee of the We Drive Melbourne Trust) and certain third parties who retained intellectual property associated with the app. It provided for the assignment of that intellectual property to WeDrive Australia in consideration of the payment of $1 to each assignor. The second was entered into by WeDrive Australia and Mr. Flageul and it provided for the assignment to WeDrive Australia (as trustee of the We Drive Melbourne Trust) of any intellectual property owned by Mr. Flageul as a result of his employment (or other relationship) with that company.
The Agreements
Ultimately, the business structure foreshadowed in the executed Memorandum of Understanding was not adopted by the parties. Instead, WeDrive was incorporated and shares were issued by it to Mr. Flageul (as trustee of the We Drive Melbourne Trust) and to companies associated with Messrs. Mace and Taylor in the proportions set out above. Again, it was critical for this new entity to acquire from WeDrive Australia all of the assets, including intellectual property, associated with development of the app. A “Business and Asset Purchase Agreement” was entered into by WeDrive and WeDrive Australia (as trustee of the We Drive Melbourne Trust) which provided for the sale by WeDrive Australia of its “Business” and “Sale Assets” to WeDrive in consideration for the issue of 200 shares in the capital of WeDrive to WeDrive Australia or its nominee. I infer that WeDrive Australia nominated Mr. Flageul in his capacity as trustee. The term “Sale Assets” was defined to mean “all of the assets used in the conduct of the Business being the assets set out in Schedule 1.” The assets listed included the “Business IP”. This term was defined in the following way:
Business IP means the intellectual property owned and used by the Seller in the conduct of the Business, including the Domain Name, the App, the Code and the social media accounts used in the Business.
(My emphasis.)
The “Business IP” thus included all of the intellectual property used by WeDrive Australia in carrying on its business, whether owned by WeDrive Australia or not.
The term “Business” was defined as the business “known as “WeDrive” undertaken by” WeDrive Australia. The term “App” was defined as being the “WeDrive ride sharing application owned by” WeDrive Australia. That company also gave a series of warranties relating to the intellectual property being sold. They were as follows:
9The Seller has an enforceable right to use the Business IP, and it has not entered into any contract, arrangement or understanding to dispose of such right of use, other than in implementing the transactions contemplated by this document.
10The use by the Seller of the Business IP, and the conduct of the Business by the Seller does not breach or infringe any Intellectual Property Right of any other person in any way which may give rise to a claim against the Buyer.
11 No person is Infringing or has infringed any Business IP.
12No person other than the Seller has any right to use the Business IP and there has been no unauthorised use by any person of the Business IP.
13Nothing has been omitted to be done by the Seller and as far as the Seller is aware no other circumstances exists that may affect the validity or ownership of the Business IP.
14Each contractor engaged by the Seller for the purpose of undertaking any activity that has given rise to or may give rise to the creation of Intellectual Property Rights used In connection with the Business has executed an assignment of that Intellectual Property Right to the Seller.
Because of the terms of its contract with Contact Point, it appears that WeDrive Australia did not sell all of the intellectual property “used” by it in its business to WeDrive. That was probably a breach of the terms of sale, and probably also constituted a breach of the warranties set out above. However, neither Mr. Mace nor Mr. Taylor have sought to sue WeDrive Australia for these possible breaches and these issues were not the subject of any argument before me.
WeDrive, Mr. Flageul (as trustee of the We Drive Melbourne Trust) and entities associated with Messrs. Mace and Taylor also entered into a “Subscription and Shareholders’ Deed.” It contained terms concerning the composition of WeDrive’s board, the proceeding of board meetings and shareholder meetings, and the possible future sale of shares in WeDrive. Certain identified matters required the approval of “Mace”. These related to fundamental aspects of WeDrive’s business, such as the approval of each budget and business plan, the alteration of the constitution of the company, the payment of dividends, and so on. Mr. Flageul in his written submissions relied upon the following clauses of this deed:
(a)Clause 4.7 “Fees and expenses of Directors”, which provides that the Company will pay certain costs of travel and insurance, and “such other director fees (if any) to each Director as agreed by the Board from time to time”;
(b)Clause 6.2 “Authorised expenditure”, which provides that the Company must not and must not allow any officer or employee to commit any resources of the company other than in accordance with an Approved Budget and Business Plan or the policies and procedures of the company determined by the Board; and
(c)Clause 7.3 “Management Reports”, which provides that the Company must provide to each director sufficient management and financial information and reports to allow them to monitor the efficient conduct of the business from time to time.
By cl. 2.1, Mr. Mace’s company was obliged to subscribe for 510 shares in WeDrive by paying a total of $400,000. As noted further below, there was some dispute about whether this took place and whether some part of what was paid was subsequently re-characterised as a loan to WeDrive which was then written off. For the purposes of this proceeding, these issues do not matter. I readily accept that Mr. Mace invested substantial funds into WeDrive, probably in the aggregate of $400,000, and that, at least in an economic sense, he has lost these funds. He derived no profit from his investment. He was paid no dividends, and, as described below, he sold his 510 shares for less than $1.
Mr. Flageul also entered into an “Executive Services Agreement” with WeDrive. This was Mr. Flageul’s employment contract. It appointed him to be the C.E.O. of WeDrive with an annual salary of $150,000. It provided for a six month period of probation. During this time, WeDrive was entitled to terminate Mr. Flageul’s employment if it determined that he was “unsuitable for the role” “for any reason” upon one month’s written notice. As it happens, Mr. Flageul’s employment was terminated within this period.
This agreement prescribed Mr. Flageul’s duties in cls. 8.1 and 8.2 as follows:
General duties
The Executive will:
(a)devote the whole of the Executive’s time, attention and skill during normal business hours, and at other times as reasonably necessary, to the duties of office in a proper and efficient manner;
(b)diligently and faithfully perform the duties assigned to the Executive from time to time and comply with all lawful directions given to the Executive by the Company and any person duly authorised by the Company;
(c)use best endeavours to promote and enhance the interests, welfare, Business, profitability, growth and reputation of the Company;
(d) not intentionally do anything which is or may be harmful to the Company;
(e) perform his/her duties and responsibilities in a proper and efficient manner;
(f)conduct himself in accordance with the commercial and ethical standards commensurate with the Position;
(g)promptly report to the Company or such person as the Company may from time to time determine, all information and explanations as it may require in connection with matters relating to the Employment or the Business; and
(h)not act, or be seen to be acting, in conflict with the best interests of the Company.
Specific duties
The specific duties of the Executive are set out in Item 5 of the Schedule.
Item 5 of the Schedule to this agreement said that Mr. Flageul’s specific duties were to be “[a]s directed by the Board from time to time”.

This agreement also imposed on Mr. Flageul both a general duty to report to the board and a more specific obligation to provide “full information” about the conduct of WeDrive’s business, including “management reports, sales reports, [and] evaluation reports” and any other information reasonably required by the board. It also prescribed that Mr. Flageul might be required to act as a director of WeDrive. As it happens, this did take place. Finally, in addition to its rights applicable during Mr. Flageul’s probationary period, WeDrive had a general right to terminate his employment with one month’s written notice.
Mr. Flageul’s life partner (Ms. O’Donovan) also entered into a contract of employment with WeDrive. She was appointed the “Operations and Corporate/Venues Account Management” officer with an annual salary of $100,000.
Certain other agreements were executed by the parties but it is unnecessary for me to describe them.
The Course of WeDrive’s Business
Before turning to consider the particular complaints or inquiries Mr. Flageul claims he made whilst C.E.O. of WeDrive, I should give an account of what took place from the commencement of WeDrive’s business in September 2017 until Mr. Flageul left in January 2018.
The parties did not agree upon Mr. Flageul’s actual role and responsibilities at WeDrive. The respondents were of the view that whilst he had been appointed C.E.O., his real focus was on the commercial development of the app and on sales. Mr. Flageul disagreed. He was of the view, concordantly with the terms of his contract, that his role was much broader and that, as such, he was entitled to access at all times the financial records of the company. How else, he asked, was he to fulfil his reporting obligations?
There is a contemporaneous document which appears to support the position of the respondents. At the time of executing the agreements described above, 31 August 2017, Mr. Mace held a meeting with Mr. Flageul, Ms. O’Donovan, Mr. Taylor and another person to discuss the roles and responsibilities of WeDrive’s executives and senior staff. Notes were made on a whiteboard and photographs of those notes were in evidence before me. One page bears the heading “How Do We Do It? Roles and Responsibilities.” One role was labelled “Technology/App”. The notes show that “Yan”, which is Mr. Flageul’s Christian name, was given this responsibility. Another role was labelled “Financials/Accounts”. This responsibility was given to “GT”, which I infer is a reference to Mr. Taylor. Another role is given both to Mr. Flageul and Ms. O’Donovan, namely “Administration/Rostering”. Roles were also allocated to Mr. David Nicholson, who had been engaged by WeDrive to grow the Sydney market. That market included sales for New South Wales. Other aspects of this document are too faint to make out. In any event, Mr. Mace’s evidence was that at this meeting it was decided that Mr. Flageul was to oversee (and expand) existing operations in Victoria, and to target new corporate business in both the states of Victoria and New South Wales, in addition to dealing with obtaining contractors for the WeDrive business. One of Mr. Flageul’s key responsibilities, according to Mr. Mace, was to develop WeDrive’s technology for application to new corporate clients. I have no reason to doubt Mr. Mace’s recollection. It is corroborated by the C.E.O. report prepared by Mr. Flageul himself for WeDrive’s first board meeting (described below). In it he described his roles as being “Business development – Innovation”, “Technology – ICT”, and “Sales – Venues – corporates Melbourne.” In contrast, Mr. Taylor’s role was described by Mr. Flageul as being “Finance – Corporate Governance.” He was, in a sense, WeDrive’s chief financial officer (“C.F.O.”) and worked, it would appear, on a part-time basis. Mr. Flageul contended that because Mr. Taylor was not a full-time executive, it should be implied that Mr. Flageul had greater operational responsibility for WeDrive’s business. I decline to make that implication. WeDrive’s business was not large, and it was not shown that it needed a full‑time C.F.O.
WeDrive had three directors. They were Mr. Flageul, and Messrs. Mace and Taylor. The impression I formed was that Mr. Mace, as a non-executive director, did not intend to perform any substantial executive work for WeDrive. He was content for the company to be run by Mr. Flageul and Mr. Taylor.
WeDrive commenced its business undertaking at the start of September 2017. Between that time and 21 December 2017, its earnings were unexpectedly low. Mr. Mace’s money was poured into developing the app and in paying salaries and other fees. A snapshot of its financial position can be discerned from a profit and loss statement drawn up for the month ended 30 November 2017, which included details of WeDrive’s financial performance in the preceding months. The statement showed that WeDrive incurred a net loss of $94,502 in the month of September, a net loss of $83,540 in the month of October, and a net loss of $120,687 in the month of November. The year to date aggregate net loss was $298,728 (which appears to reflect a rounding error of $1). Year to date income was $70,135 (which appeared to incorporate a refund of $70), including $29,880 of income for November. Mr. Russell recalled sales of $29,000 for November which was said to have been far less than a budgeted figure of $80,000. I find that the income was much lower than expected. I also note that WeDrive had year to date paid $45,045 in directors fees and $101,677 in “IT Expenses.”
From inception, Mr. Mace’s investment in WeDrive was not supported by his business partners. From May 2017, Mr. Barker was sceptical. He had tried to use the app to book a driver during that month. It did not work. Instead, someone called him to allocate a driver manually. He asked that driver whether the app usually worked to allocate drivers. He was told that everything was done manually. When he raised his experience with Mr. Flageul his concerns were brushed aside. He said he was told that only small technical improvements needed to be made. Mr. Barker warned Messrs. Mace and Taylor about his concerns. He did not want to be involved with WeDrive, but did agree to supply drivers from M.S.S. Transport if they were needed. Mr. Russell was also sceptical. He was concerned about the amount of money needed to develop the app in order to make it usable for M.S.S. Transport.
On 11 September 2017, Mr. Mace attempted to use the app as a test. When he went to log a job request, he persistently received a message stating that all of the drivers were busy and to call a phone number to make a booking. He then sent the following email to Messrs. Flageul and Nicholson, with a copy to Mr. Taylor:
Hi Gents,
Just tried to use the service and got this. What is this?
Surely the drivers are available and the system auto logs the jobs?
Mr. Flageul replied by explaining that full automation for “ASAP bookings” would be implemented in “stage 2”, with completion before mid-October. Mr. Mace responded with the following:
I thought this was part of the system ‘working’ before settlement…
Later in September 2017, Mr. Mace tested the app again. This time it appeared to work. But Mr. Mace subsequently found out from Mr. Flageul that on that occasion, once again, some form of manual intervention had taken place to get a driver to him. Mr. Mace became significantly concerned.
By early October 2017, tensions between Messrs. Flageul and Taylor began to appear. A very heated telephone call took place between them on 2 October 2017 which I describe below. In particular, Mr. Flageul was of the view that the business was not doing as well in Sydney but that this was not his fault. On 4 October 2017, Mr. Taylor sent Mr. Flageul an email about this issue in which he referred to Mr. Flageul using the “wrong tone and in which he asked him to be “more professional and balanced.” Mr. Taylor wrote:
Your qualitative feedback is also the wrong tone speaking with an US versus THEM approach with Sydney and Melbourne.
Yes a CEO monthly report is required though please try to make it more professional and balanced.
Mr. Flageul responded by saying that he was “disappointed” with the suggestion of a lack of professionalism. He wrote:
I am disappointed to read your reference to lack of professionalism.
It is simply a Sydney and Melbourne division that is essential to correlate with the performance based scheme you and Steve initiated and WeDrive’s strategic plans.
WE (as all of US) are yet to see any result from Sydney hence the obligation I have to highlight this with maximum clarity.
Mr. Taylor responded by observing that this was yet another disappointing email and that he did not want to get into a “slanging match.” He wrote:
Yan
Another disappointing email. I STRONGLY suggest you stop sending these emails and we organise a discussion because you are only making things worse for yourself.
I am not getting into a slanging match. Though your one sided comments below further highlights [sic] my point. There are many issues that need to be addressed and they are not only Sydney related.
Enough
These emails are illustrative of the growing tension between Messrs. Taylor and Flageul.
In October 2017, Mr. Taylor raised a possible investment in or partnership with a business known as Ugo Transfers. Mr. Mace asked Messrs. Barker and Russell to look into it. Within days, however, the focus turned to a possible merger between M.S.S. Transport and WeDrive. Mr. Mace said in cross-examination that drastic changes were by now needed because “the financial performance of the business had fallen off a cliff within one month of taking over.” He listed some of his objectives in an email sent to Messrs. Taylor, Barker and Russell using Mr. Mace’s M.S.S. Group email address. Mr. Flageul was not copied in on this email because Mr. Mace said that his thoughts were just possibilities that he wanted to raise first with the M.S.S. Group executives before consulting with Mr. Flageul. Those objectives included the following:
1.Ensuring MSS Group as a minimum retain their 75% benefits from MSST and now WeDrive (given they will be absorbing the running and the losses of WeDrive); and
2.        The revised restructure includes hard, but necessary in my view, changes; and
*        [Ms. O’Donovan] replaced as sales resource in VIC; and
*        [Mr. Nicholson] replaced as sales resource in NSW; and
*        No requirement for WeDrive board of directors (& associated fees)
3.        Existing MSST budgets will not be impacted negatively by any transaction
The email then stated:
I understand there are some blunt statements/changes but I think we all agree time is of the essence and we need to move forward with haste and in the best interest of the best interest of the business. [sic]
Subsequently, a slideshow outlining a proposal for a merger between WeDrive and M.S.S. Transport was prepared at the end of October 2017. Under a heading entitled “Proposed Operational Structure”, one slide identified Mr. Flageul as the “Client Solutions Manager” of the merged business, with Mr. Barker identified as its managing director. In another slide the future directors of WeDrive, shown as a subsidiary of M.S.S. Transport, are listed; they do not include Mr. Flageul, although there appears to be provision for an additional director to be appointed. In cross-examination, Mr. Mace emphasised that the slides were prepared for the purposes of discussion only. He said at that time it was possible that, if the merger had proceeded to completion, Mr. Flageul might have been appointed as the additional director.
In another slide there appears two estimated valuations of WeDrive. The first, labelled “Post capital raising valuation”, records that WeDrive was worth $1,600,000 (being the figure used in the Memorandum of Understanding). In another, labelled “Using Tech multiple”, it was recorded that WeDrive was worth $1,338,000, based on a chosen multiple. At the bottom of the slide the following notation appears:
NB: It should be noted that the business would need to prove to the market this is a technology led business as opposed to a services business…
Another slide sought to record the “Current EV”, or enterprise value, of the shares held by, amongst others, Mr. Flageul in WeDrive. That value was recorded as being $320,000. The slide then lists a series of conditions or qualifications. One of these was as follows:
Valuations are not warranted and should be reviewed in detail and satisfied by each individual.
Mr. Flageul sought to rely upon these estimated valuations as proof of the value of the WeDrive business and his stake in it. In cross-examination, Mr. Mace said that the figure of $1,600,000 did not reflect the actual value of WeDrive and that the figures generally came from Mr. Taylor. Mr. Mace said the figure of $1,600,000 had originally been deployed as a measure to divide up the proposed shares of each investor in the newly merged business. He said that the figures disclosed in the slide show were based upon a lot of “ifs.” In cross-examination Mr. Taylor said the figure of $1,600,000, as used in the Memorandum of Understanding, was “derivative of what the required capital was and what the required percentage holding of the respective parties would be.” Mr. Russell was also asked about these numbers. He said that the multiple used was “laughable and not really worthy of discussion.” Mr. Barker did not regard the estimated values as being realistic “in any way, shape or form”. He was unconvinced by them. That was because he did not think that the WeDrive product worked. In my view, the estimated values set out in the slides are not evidence of the actual value of WeDrive as at the end of October 2017 (or indeed as at the date of Mr. Flageul’s dismissal). Rather, the disclosed values were no more than rough estimates deployed for the purposes of facilitating initial discussions for a possible merger between WeDrive and M.S.S. Transport, and no more.
On 10 November 2017, the board of WeDrive held its first meeting. The board unanimously approved the pursuit of a merger with M.S.S. Transport. Mr. Flageul’s evidence was that from this point onwards the merger was definitely going to proceed. Whilst he accepted that there were certain formalities that would need to be observed to complete the merger, in his mind the concept of a merger was, to use his language, a “done deal.” Messrs. Mace and Taylor did not agree with this evidence. They both were of the view that a merger with M.S.S. Transport was far from being a foregone conclusion. The minutes of the meeting of the board perhaps give the most accurate record of what the board agreed. They record the following:
[Mr Mace] presented the Merger Proposal between WeDrive and MSS, documented attached. The Board unanimously voted in favour of the Proposal and agreed to move to documentation and implementation stage.
Mr. Flageul asserts that he was assured at this meeting that he was going to be the C.E.O. and a director of the merged business. He states that if this had not been so, he would have voted against the merger. Mr. Mace denied that this assurance was given.
For the purpose of this board meeting, Mr. Flageul circulated by email his first C.E.O. Operations Report. It set out what WeDrive was currently “delivering” as follows:
-Designated driving services to both individuals and corporations
-Valet parking services at sporting events
-Technology for venues to place booking on behalf of their clients
-Technology for Lexus to place booking on behalf of their clients
-Technology for corporations to self-manage corporate accounts and respective corporate users.
The report noted that in Melbourne there had been a very slow start but that sales had since increased significantly. Sales had not, however, improved in Sydney. The report also described the difficulty of finding suitable drivers. Driver recruitment was low and problematic.
On 10 November 2017, a boxing match was held at the Cronulla Sutherland Leagues Club. One of the boxers, a Mr. Paul Gallen, was apparently well known in Sydney. Through the intervention of Mr. Mace he had secured an agreement between WeDrive and the Cronulla‑Sutherland Sharks (which I understand to be a club committed to the sport of Rugby League), for the “Sharks” to use WeDrive’s services. In the period leading up to the match, Mr. Gallen had been promoting the use of the app. It was expected that the app would be used at the boxing match. This was thus an important moment for WeDrive’s business in the Sydney market. Mr. Mace had understood from either Mr. Taylor or Mr. Nicholson that Mr. Flageul had arranged for “countless drivers” to be available. However, the app failed to work or said that there were no drivers available. Accordingly, WeDrive apparently failed to conduct a single job on the night. Mr. Mace, in the weeks following, received constant criticism about WeDrive. Mr. Flageul said that no-one told him about the complaints. He said WeDrive did not have enough drivers, and that when a driver was not available, the app was designed to refuse the booking request. He said that the deal between the “Sharks” and WeDrive was impossible to deliver and he asserted that “[a]ll parties were aware of this concern.” However, there is no contemporaneous evidence which supports this contention.
On 13 November 2017, Mr. Mace sent an email to Mr. Flageul (copied to “all parties”) to pass on a complaint that he had received from a customer in Victoria. Mr. Mace also complained that he had understood that the business needed only an investment of around $25,000 to $30,000 to stabilise the app. Instead, over $100,000 had been spent and the app still did not seem to work. He wanted the following feedback:
1) how come we’ve spend more than 3 times the represented amount; and
2) still have stability issues; and
3) estimate (cost & time) of future investment to achieve system stability
Mr. Flageul replied by saying about $68,000 had been spent on other projects approved by Mr. Taylor. On that basis he considered that “[w]e are therefore roughly within projected …budget.” He said that the customer complaint was not about the stability of the app but concerned “user experience (UI/UX) – feel and flow”. This led Mr. Taylor to send the following stinging email back to Mr. Flageul:
Yan your reply below is disappointing and quite simply misleading.
Let me start with a definition of accountability…
Mr. Taylor rejected the proposition that the customer complaint was not about the stability of the app. He wrote that it was “a reflection of how the app has been designed and delivered since inception even after an additional $100k of spend, in which you driven and had your recommendations and priorities approved [sic].” He said that the app was a “business loser”. He thus wrote:
[Q]uite simply, the current WeDrive app should never have been in the state that it is considered a “business loser” especially in the context of how it has been consistently portrayed since our initial discussions that involved [Mr. Mace] and I and even [Mr. Barker] in the early days.
We now have [Mr. Mullins] on board to provide a balanced view on the technology, which will be useful to all stakeholders.
Mr. Mullins was an information technology contractor used by the M.S.S. Group.
Subsequently, on 15 November 2017, Mr. Mace again emailed Mr. Flageul about the budget blowout. He wrote:
We can go through in more detail tomorrow. I appreciate I am ITC illiterate but I just want to understand;
1) where the actual $30k represented blew out to $100k; and
2) why we still have stability issues; and
3) cost to ensure stability; and
4) list of desired enhancements, estimates and ROI
See you in the morning.

I accept that Mr. Flageul and Ms. O’Donovan were each paid a salary by WeDrive. Inferentially, this was funded largely by the funds Mr. Mace had contributed to WeDrive. In Mr. Flageul’s case he was to be paid $150,000 per annum. In this sense, I accept that he profited to an extent from WeDrive. I also accept that it was wrong for Mr. Flageul not to have disclosed Contact Point’s ownership of the intellectual property associated with the app. But for Mr. Mullins’ determination, this issue may never have been discovered. Mr. Flageul agreed that it was “madness” on his part to have failed to make this disclosure. I find that Messrs. Mace and Taylor formed the view that Mr. Flageul had misled them about this issue. I also find that Mr. Mace made a number of very genuine attempts to save WeDrive. He pushed for several different types of merger with M.S.S. Transport in a bona fide attempt to salvage WeDrive’s business, and thus to look after Mr. Flageul’s interests.
For the foregoing reasons and on the facts as I have found them, reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors here, and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision would impose on a member on the other hand, would not have decided that the treatment of Mr. Flageul in 2017 and 2018 by WeDrive and its other directors was unfair for the purposes of s. 232 of the Corporations Act.
Unconscionability
Mr. Flageul in general terms submitted that he suffered in 2017 from a number of special disadvantages and that Messrs. Mace and Taylor had taken advantage of these in terminating his employment, and by having Mr. Flageul sell his shares in WeDrive for $1.
In the course of exchanging their closing submissions, the parties agreed that the applicable law for the purposes of applying s. 20 of the A.C.L. was contained in the following summary of Colvin J. in Australian and Consumer Commission v. Quantum Housing Group Pty Ltd (No 2) [2020] FCA 802 at [19]‑[23] and [28]-[29]:
In Australian Securities and Investments Commission v Kobelt [2019] HCA 18, the High Court considered whether the conduct in that case contravened the statutory prohibition against unconscionable conduct expressed in s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth). It is a provision of the same character and has the same origins as that contained within s 21 of the ACL. In Kobelt it was claimed that a system of commercial dealing by which people who were socially and economically vulnerable were allowed to book-up credit mostly to fund the supply of second-hand motor vehicles (but also for the supply of groceries and fuel) was unconscionable. The Court was split as to the principles to be applied and the outcome.
Kiefel CJ and Bell J at [14] stated that the term unconscionable is to be understood as bearing its ordinary meaning and proscribes conduct ‘that objectively answers the description of being against conscience’. Their Honours then cited the following values as informing the standard of conscience fixed by the statute (quoted from the reasons of Allsop CJ in Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199 at [296]):
... certainty in commercial transactions, honesty, the absence of trickery or sharp practice, fairness when dealing with customers, the faithful performance of bargains and promises freely made, and:
‘the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage’.
Their Honours then referred to unconscionable conduct as requiring ‘not only that the innocent party be subject to special disadvantage, but that the other party must also unconscientiously take advantage of that special disadvantage’ and observing that this ‘has variously been described as requiring victimisation, unconscientious conduct or exploitation’: at [15]. Therefore, in the view of their Honours an essential part of the provision was the protection of the vulnerable and the conduct had to involve taking advantage of that vulnerability in a manner that might be characterised as predatory or exploitative.
Gageler J described the statute as operating to prescribe a normative standard of conduct to be administered in the totality of circumstances: at [87]. His Honour emphasised ‘the gravity of the conduct necessary to be found by a court in order to be satisfied of a breach of that standard’: at [88]. The ‘conduct proscribed by the section as unconscionable is conduct that is so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience’: at [92]. Further, ‘[f]or a court to pronounce conduct unconscionable is for the court to denounce that conduct as offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society’: at [93]. Of significance is his Honour’s description of unconscionable conduct as being worthy of condemnation because of its gravity in the sense that it was far outside what was acceptable.
Keane J required a scrutiny of the exact relations established between the parties: at [115]. His Honour found that in the particular case, it had not been established that the book-up system conducted by Mr Kobelt ‘exploited his customers’ socio‑economic vulnerability in order to extract financial advantage from them’. His Honour declined to find that Mr Kobelt actually took advantage of any increased vulnerability of his customers or acted with predatory intent with a view to do so: at [116]. His Honour found that unconscionable conduct required an element of exploitation, variously described as exploitation, victimisation, unconscientious conduct or a predatory state of mind: at [118]. This was said to follow from the choice of the legislature to use the ‘morally freighted’ term of unconscionability: at [119].
…
The members of the Court who were in the minority in finding that the conduct of Mr Kobelt was unconscionable (Nettle, Gordon and Edelman JJ), did not favour an interpretation of the standard that required a high degree of moral disapprobation. Kiefel CJ, Bell and Keane JJ emphasised the need for victimisation, exploitation or a predatory state of mind. Kiefel CJ and Bell J referred, with apparent approval, to the view of the Full Court of this Court that moral obloquy had a role to play but was not a substitute for the statutory words: at [60]. Keane J found that the statute ‘imports the “high level of moral obloquy” associated with the victimisation of the vulnerable’: at [118]. Gageler J recanted the use of the term moral obloquy for the reason that it ‘has the potential to be misleading to the extent that it might be taken to suggest a requirement for conscious wrongdoing’: at [91]. However, as noted above, his Honour expressed the view that for conduct to be unconscionable it must be so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience.
Therefore, the majority view supports the adoption of a standard that requires exploitation of disadvantage by a party in a stronger position by conduct that is well outside the bounds of what is generally seen to be moral, right or acceptable commercial behaviour. It is not every instance where a person in a stronger commercial position gains an advantage by reason of that position over a person in a weaker or disadvantaged position that is unconscionable. It is not enough that the dealing might be described as unfair or unreasonable. Rather, unconscionable conduct involves dealing with those who are vulnerable in a manner that exploits that vulnerability by engaging in conduct that may be plainly or obviously criticised when viewed through the lens of an understanding of proper commercial behaviour according to prevailing norms and standards.
The foregoing concerns s. 21 of the A.C.L. and not s. 20. However, given the parties’ agreement, I am content to rely upon the foregoing in considering the application of s. 20 in the circumstances of this case.
Because knowledge of the alleged disadvantages of Mr. Flageul was in issue before me, I refer also to Thorne v. Kennedy (2017) 263 C.L.R. 85, where Kiefel C.J., Bell, Gageler, Keane and Edelman JJ. said at 102-103 [37]-[38]:
There was no controversy on this appeal concerning the principles of unconscionable conduct in equity. Those principles were recently restated by this Court in Kakavas v Crown Melbourne Ltd.
A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.
(Footnotes omitted and emphasis added.)
It follows that Mr. Flageul needed to demonstrate that either Messrs. Mace or Taylor had actual knowledge of his alleged disadvantages or ought to have known of their existence. As will be seen, I was not satisfied that some of the alleged disadvantages existed.
Mr. Flageul contended that he was suffering from a number of disadvantages in the second half of 2017. They were as follows:
(a)Mr. Flageul’s depression and anxiety. I have found that Mr. Flageul may have been depressed in 2017 and that he was certainly at risk of depression during his time at WeDrive. However, the text messages sent between him and Mr. Barker from 21 December 2017 show no signs of this. Prior to this, Mr. Mace has said that Mr. Flageul could be “erratic.” But there is nothing in the emails Mr. Flageul sent, or from his course of conduct, that would have put a reasonable person on notice that he was suffering from anxiety and depression. There is no evidence that any of Messrs. Mace, Taylor, Russell or Barker sent emails or texts to Mr. Flageul to express concern about his mental state. I have already found that these individuals had no actual knowledge of Mr. Flageul’s mental illness; I have also found that there was no basis for the contention that they ought to have known about his mental illness. It follows that neither Messrs. Mace nor Taylor could have taken unconscientious advantage of this disadvantage, assuming that it existed in 2017.
(b)Mr. Flageul’s relatively weak financial position. With respect, that was not shown to be the case. The reference in Mr. Flageul’s written closing submissions to a transcript reference reveals only an unsubstantiated assertion.
(c)Mr. Flageul’s weak bargaining position as a minority shareholder. This was never proven and I would not infer it simply from the fact that Mr. Flageul owned only 20% of WeDrive. A shareholder is not in a position of vulnerability of the kind that would merit equitable intervention merely because they do not own a majority of the issued shares of a company.
(d)Mr. Flageul’s relative ignorance of business and finance as compared to the much greater business experience of Mr. Taylor and Mr. Mace. I am prepared to infer that Messrs. Taylor and Mace were more experienced businessmen than Mr. Flageul. But that inference does not support a conclusion that Mr. Flageul was therefore in a position of special disadvantage. Again, equity does not intervene merely because some parties are more experienced than others. In any event, Mr. Flageul was dismissed because of his own conduct in failing to disclose Contact Point’s ownership of the intellectual property associated with the app and for the other reasons set out above. None of these reasons betrayed an exploitation of Mr. Flageul’s relative lack of business experience. I make the same conclusion about the sale of the shares for $1. It is well to recall that it is not just Mr. Flageul who sold his shares; Messrs. Taylor and Mace (through their investment companies) also sold their shares (although I accept that Mr. Mace nonetheless retains a diluted indirect economic interest in WeDrive from the shares he holds in M.S.S. Group). It has not otherwise been shown that WeDrive’s business at this time was worth more than $1.
(e)Mr. Flageul’s sole source of income was his position as C.E.O. of WeDrive. With respect, that was not shown to be the case. The reference in Mr. Flageul’s written closing submissions to a transcript reference does not, when examined, refer to this issue.
(f)Mr. Flageul’s “marginalisation” from his role as C.E.O. and his treatment as being, in effect, “some sort of technology and customer relations/solutions manager.” Again, and with respect for the reasons already given, this was not shown to be the case. To the extent that Mr. Barker assumed a leadership role in WeDrive, this was something Mr. Flageul wanted.
(g)The lack of notice given to Mr. Flageul that he was to be dismissed. With respect, absent other factors, such as knowledge of Mr. Flageul’s depression and anxiety, I cannot see how surprise in and of itself created for Mr. Flageul a special disadvantage that was exploited. Giving Mr. Flageul notice would have made no difference to the outcome of his dismissal, and none was suggested by Mr. Flageul.
(h)Telling Mr. Flageul on 21 December 2017 that there was no longer going to be a merger between WeDrive and M.S.S. Transport. With great respect, I do not understand how the receipt of this information led to Mr. Flageul suffering from a special disadvantage that was exploited. The merger proposal approved by WeDrive’s board on 10 November 2017 had long been discarded.
(i)The failure to include Mr. Flageul in the email sent by Mr. Mace to Mr. Russell and Mr. Taylor on 20 December 2017 about the future of WeDrive. This was described as an act of excluding Mr. Flageul “from management.” With respect, I disagree. The email was sent by Mr. Mace in his capacity as an M.S.S. Group executive to other M.S.S. Group executives. It was thus an internal M.S.S. Group email, setting out its proposals for WeDrive. Mr. Flageul, not being an M.S.S. Group executive, was not thereby wrongly excluded “from management.”
(j)The threat to sue Mr. Flageul unless he transferred his shares in WeDrive. While I have found that Mr. Mace may have told Mr. Flageul on 21 December 2017 that he was going to sue him in a general sense, Mr. Flageul did not establish the making of this specific threat.
(k)Giving Mr. Flageul “only 10 minutes” to consider whether to sell his shares in WeDrive. I do not think that this period of time was ever established. However, Mr. Mace recalled that Mr. Taylor said. ‘[w]hy don’t you take a break.” I find that Mr. Flageul took this break. But, if anything, this is hardly evidence of the exploitation of a special disadvantage. That is especially so when one recalls that Mr. Flageul received an offer to buy the shares of Messrs. Mace and Taylor for $1. It was also entirely open to Mr. Flageul to have declined to sell his shares, or to have asked for additional time to consider his options. He did not do this and that was his choice. I infer that his decision to sell his WeDrive shares, including the decisions made also by Messrs. Mace and Taylor to sell their shares, took place in what might be described as “pressure cooker” conditions. I also accept that Mr. Flageul was no doubt feeling deflated and shocked about his dismissal. But, as the texts sent that day and following to Mr. Barker reveal, he had not lost his wits.
Mr. Flageul submitted that Messrs. Mace and Taylor knew, or ought to have known, about the foregoing special disadvantages. In particular, he alleged that Mr. Mace’s treatment of him was “highhanded.” I accept that Messrs. Mace and Taylor probably knew that they were more experienced businessmen than Mr. Flageul. I also accept that they knew about the following matters: that Mr. Flageul was given no prior notice of his dismissal; that Mr. Flageul had not been included in the 20 December 2017 email; that Mr. Flageul had been told that the merger was no longer going to proceed; and that Mr. Flageul had taken a break at the meeting on 21 December 2017. I also accept that Messrs. Taylor and Mace must have known that the dismissal of Mr. Flageul would necessarily affect him financially. This follows from most dismissals from employment.
I otherwise reject the contention made by Mr. Flageul that Messrs. Mace and Taylor knew that the value of $1 was “grossly inadequate consideration for the value” of the WeDrive shares. For the reasons I have already given, it was never established that this was grossly inadequate consideration. In his written closing submissions, Mr. Flageul sought to rely on the setting of WeDrive’s value at $1,600,000 in the Memorandum of Understanding as well as in the M.S.S. Transport and WeDrive Merger Discussion document considered by the WeDrive board on 10 November 2017. In that respect, he also relied upon the statement in that Discussion document that referred to the value of his shares in WeDrive as being $320,000. For the reasons I gave earlier, I do not consider those figures to be evidence of the value of WeDrive as at 21 December 2017. They were used for discussion purposes. They cannot supplant the figures disclosed in WeDrive’s actual accounts for the period September to November 2017.
Mr. Flageul also sought to prop up the asserted value of his shares in WeDrive as at 21 December 2017 by referring to cl. 14 of the Subscription and Shareholders’ Deed. This clause dealt with certain defined circumstances which required a shareholder in WeDrive to sell his or her shares. Clause 14.3 addressed the determination of a sale price for the shares which depended upon the circumstances dictating sale. Clause 14.3(b)(ii) was relevantly in the following terms:
[W]here Flageul is the Defaulting Shareholder and is a Good Leaver, the greater of:
(A) $400,000; or
(B) the price agreed in writing by the Defaulting Shareholder and the Board;
The term “Good Leaver” was defined in the deed to refer to a “Management Shareholder” (who I take to include Mr. Flageul) who ceases to be, relevantly a director, more than 12 months after acquiring shares in WeDrive because of a series of defined reasons, such as death, retirement or dismissal “without cause.” Plainly, cl. 14.3 could not have been invoked by Mr. Flageul on the facts here. I do not otherwise consider that this clause can be relied upon as a surrogate for expert valuation evidence. It was not put to any witness and cannot be used to contradict the state of WeDrive’s financial performance as disclosed in its accounts for the period September to November 2017, and which I have described earlier in my reasons.
It follows that for the foregoing reasons, the factual substratum of Mr. Flageul’s case concerning unconscionable conduct has not been made out. I otherwise find, based upon my earlier findings, that neither Messrs. Mace nor Taylor, nor anyone else, exploited a special disadvantage to which Mr. Flageul was subject by “conduct that is well outside the bounds of what is generally seen to be moral, right or acceptable commercial behaviour”, to use the language of Colvin J. in Quantum Housing Group. Indeed, I find that Mr. Flageul was not exploited. To the contrary, he was dismissed for good reasons and it has not been demonstrated that he had sold his shares for an unfair price.
Disposition

For the foregoing reasons, each of Mr. Flageul’s claims in adverse action, under s. 358 of the F.W. Act, in oppression and under s. 20 of the A.C.L. are hereby dismissed.
Costs
Mr. Flageul’s multiple causes of action were all contained in one proceeding commenced in this Court. This raises an issue as to whether the Court has the power to award costs in respect of the claims made concerning oppression and unconscionability notwithstanding the operation of s. 570 of the F.W. Act, which I have set out above. This was an issue I addressed in The Environmental Group Ltd v. Bowd (No 2) [2019] FCA 1227. In that case the applicant had brought an adverse action claim as well as a claim under the “whistleblower” provisions in Pt. 9.4AAA of the Corporations Act. I decided I was bound by the decision of the Full Court of this Court in Melbourne Stadiums Ltd v. Sautner (2015) 229 F.C.R. 221 which concerned the application of s. 570. In that case, claims had been made under the F.W. Act and under the common law. Justices Tracey, Gilmour, Jagot and Beach said at 253‑254 [155]-[157]:
Section 570, in its present form, came into force on 1 January 2013. Unlike s 824 which applied “to a proceeding ... in a matter arising under this Act” it applied “to a proceeding ‘in relation to’ a matter arising under this Act ...”. (emphasis added).
The word “proceeding” is not defined in the Fair Work Act. In the context of s 570 it bears a different meaning from the word “matter”. “Matters”, in the sense of claims or causes of action or their underlying controversies, are raised in the “proceeding” or “proceedings” which is or are prosecuted in the Court: cf Shea v Energy Australia Services Pty Ltd (No 7) [2014] FCA 1091 at [22] (Jessup J). As Gray J said in Geneff v Peterson (1986) 19 IR 40 at 90, in dealing with the construction of s 197A of the Conciliation and Arbitration Act 1904 (Cth) (a predecessor of s 570):
[T]he section operates in relation to a ‘proceeding’. There is only one proceeding before the Court, although that proceeding involves a number of separate claims, each of which might have been the subject of a separate proceeding. ... In my view, it is impossible to split the claims within a proceeding for the purpose of the application of s 197A.
See also Qantas Airways Limited v Transport Workers Union of Australia (No 2) (2011) 211 IR 119 at 182 (Moore J); Grout v Gunnedah Shire Council (No 3) (1995) 59 IR 248 at 260-261 (Moore J); Goldman Sachs JBWere Services Pty Ltd v Nikolich (2007) 163 FCR 62 at 65 and 69.
There was a single proceeding which was commenced and prosecuted to judgment in the County Court. Mr Sautner made claims under the Fair Work Act and at common law. The claims under the Fair Work Act were “matters” within the meaning of s 570(1) of the Fair Work Act. The proceeding was, as a result, a proceeding in relation to a matter arising under that Act. Section 570(1) operated to preclude the Court from ordering MSL (“another party to the proceedings”) to pay any costs incurred by Mr Sautner in prosecuting his claims unless he could satisfy the Court that one of the exceptions, provided for in s 570(2), applied.
In Bowd (No 2) I decided, following Sautner, that what was critical was the identification of what proceeding was before the Court. One then asks whether the proceeding was in relation to a “matter” arising the F.W. Act. If the proceeding is of that kind, s. 570 of the F.W. Act is engaged.
The same conclusion applies here. As already mentioned there was only one proceeding before the Court. In my view, this proceeding, which raised adverse action claims, was necessarily one “in relation to a matter arising under” the F.W. Act. It follows that there should be no order for costs, unless an exception in s. 570(2) is made out. Nothing was said about their operation by the respondents. However, as it happens, I am not satisfied that the proceeding was vexatious or without reasonable cause. It was a hard fought case. Nor am I satisfied that Mr. Flageul committed an unreasonable act or omission that caused the respondents to incur costs. None was suggested. Nor is there any suggestion that Mr. Flageul unreasonably refused to participate in a matter before the Fair Work Commission.
Section 570 does not prevent a Court from ordering the payment of costs incurred by a non‑party. Here, I note that on 6 May 2020 Registrar Ryan ordered the payment of $13,152 on account of loss and expense in complying with subpoenas issued to M.S.S. Transport and Messrs. Russell and Barker. Mr. Flageul has not complied with this order. It has been brought to my attention that Mr. Flageul is of the view that he should not have been ordered to pay these costs. He also appears to be of the view that this Court needs to make a further order for him to be liable to pay them. Yet nothing was said about this in argument before me, and there already exists an order of this Court requiring payment. Mr. Flageul must comply with that order forthwith.
The proceeding is otherwise dismissed with no order as to costs.

I certify that the preceding three hundred and forty-five (345) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Steward.
Associate:
Dated: 18 November 2020

File number:	VID 653 of 2018
Judgment of:	STEWARD J
Date of judgment:	18 November 2020
Catchwords:	INDUSTRIAL LAW – termination of employment – where applicant through his company developed ride sharing app – where that company assigned associated intellectual property to newly incorporated first respondent after due diligence conducted by third respondent – where applicant appointed as C.E.O. of first respondent – where minority of shares in first respondent issued to applicant – where majority of shares in first respondent issued to second and third respondents – where first respondent’s financial performance following assignment of intellectual property fell below expectations of second and third respondents – where functionality of app fell below expectations of second and third respondents – where second and third respondents discovered that applicant’s company did not own all intellectual property associated with app before assignment – where applicant subsequently dismissed as C.E.O. – where applicant and second and third respondents each agreed to step down as directors of first respondent and to sell all shares for $1 – where applicant made series of alleged complaints or inquiries to second and third respondents prior to dismissal as C.E.O. – where applicant allegedly worked pursuant to consultancy agreement following dismissal as C.E.O. and end of associated notice period – whether applicant exercised workplace rights – whether applicant made “complaints” or “inquiries” for purposes of s. 341(c)(ii) of Fair Work Act 2009 (Cth.) – whether complaints or inquiries “in relation to” applicant’s employment as C.E.O. for purposes of s. 341(c)(ii) – whether applicant “able” to make complaints or inquiries for purposes of s. 341(c)(ii) – whether adverse action taken “because” of applicant exercising workplace rights – whether s. 358 breached because applicant dismissed in order to be engaged as independent contractor to perform same or substantially same work under contract for services CORPORATIONS – oppression – whether conduct of respondents oppressive to unfairly prejudicial to or unfairly discriminatory against applicant as member of first respondent whether in that capacity or any other capacity for purposes of s. 232 of Corporations Act 2001 (Cth.) EQUITY – unconscionable conduct – where applicant allegedly subject to special disadvantages including mental health issues – where applicant alleged respondents aware of mental health issues and other special disadvantages – whether conduct of respondents towards applicant unconscionable within meaning of unwritten law for purposes of s. 20 of Australian Consumer Law COSTS – whether power to award costs under s. 570 of Fair Work Act 2009 (Cth.) should be exercised as against applicant
Legislation:	Competition and Consumer Act 2010 (Cth.) Sch. 2, s. 20 Corporations Act 2001 (Cth.) ss. 9, 202B, 232, 233, 290, 1317AA Fair Work Act 2009 (Cth.) ss. 340, 341, 342, 358, 360, 361, 570 Crimes (Mental Impairment and Unfitness to be Tried) Act 1997 (Vic.) s. 20 Occupational Health and Safety Act 2004 (Vic.) ss. 21, 25
Cases cited:	Australian and Consumer Commission v. Quantum Housing Group Pty Ltd(No 2) [2020] FCA 802 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v. Visy Packaging Pty Ltd (No 3) (2013) 216 F.C.R. 70 Browne v. Dunn (1894) 6 R. 67 Hill v. Compass Ten Pty Ltd (2012) 205 F.C.R. 94 Joint v. Stephens [2008] VSCA 210 Lamont v. University of Queensland (No 2) [2020] FCA 720 Maric v. Ericsson Australia Pty Ltd [2020] FCA 452; (2020) 293 I.R. 442 McKerlie v. Western Australia (No 2) [2006] WASCA 274 Melbourne Stadiums Ltd v. Sautner (2015) 229 F.C.R. 221 MWJ v. The Queen [2005] HCA 74; (2005) 80 A.L.J.R. 329 PIA Mortgage Services Pty Ltd v. King (2020) 274 F.C.R. 225 R v. Kucma (2005) 11 V.R. 472 Republic of Nauru v. WET040 (No 2) [2018] HCA 60; (2018) 93 A.L.J.R. 102 Sanders v. Glev Franchises Pty Ltd [2002] FCA 1332 Shea v. TRUenergy Services Pty Ltd (No 6) [2014] FCA 271; (2014) 314 A.L.R. 346 The Environmental Group Ltd v. Bowd [2019] FCA 951; (2019) 288 I.R. 396 The Environmental Group Ltd v. Bowd (No 2) [2019] FCA 1227 Thorne v. Kennedy (2017) 263 C.L.R. 85 Wayde v. New South Wales Rugby League Ltd (1985) 180 C.L.R. 459
Division:	Fair Work Division
Registry:	Victoria
National Practice Area:	Employment and Industrial Relations
Number of paragraphs:	345
Date of last submission/s:	10 July 2020
Date of hearing:	22-26 June 2020
Counsel for the Applicant:	Mr. D.G. Robertson, Q.C. with Ms. J. Zhou
Solicitor for the Applicant:	AJH Lawyers
Counsel for the Respondents:	Mr. A. Meagher
Solicitor for the Respondents:	Clyde & Co

ORDER MADE BY:	STEWARD J
DATE OF ORDER:	18 NOVEMBER 2020