Fortescue Metal Group Ltd v Espach
[2017] WADC 149
•21 NOVEMBER 2017
FORTESCUE METAL GROUP LTD -v- ESPACH [2017] WADC 149
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2017] WADC 149 | |
| Case No: | CIV:4221/2015 | 2 MAY 2017 | |
| Coram: | PRINCIPAL REGISTRAR MELVILLE | 21/11/17 | |
| PERTH | |||
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Damages are assessed in the amount of $608,690.00 | ||
| PDF Version |
| Parties: | FORTESCUE METAL GROUP LTD JOHANNES HENDRIK ESPACH PROPLAN LEGAL PTY LTD |
Catchwords: | Breach of fiduciary duty Election for equitable compensation or account of profits Assessment of damages Admissibility of affidavits |
Legislation: | Oaths, Affidavits and Statutory Declarations Act 2005 Rules of the Supreme Court 1971 O 37 r 14 |
Case References: | Hankison as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279 Maguire & Tansey v Makaronis [1997] HCA 23 Paric v John Holland Constructions (1985) 62 ALR 85 Potts v Miller (1940) 64 CLR 282 R v Abadon [1983] 1 WLR 364 Re Montecatini's Patent (1973) 47 ALJR 161 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
JOHANNES HENDRIK ESPACH
First Defendant
PROPLAN LEGAL PTY LTD
Second Defendant
Catchwords:
Breach of fiduciary duty - Election for equitable compensation or account of profits - Assessment of damages - Admissibility of affidavits
Legislation:
Oaths, Affidavits and Statutory Declarations Act 2005
Rules of the Supreme Court 1971 O 37 r 14
Result:
Damages are assessed in the amount of $608,690.00
Representation:
Counsel:
Plaintiff : Mr D J Branford
First Defendant : In person
Second Defendant : No appearance
Solicitors:
Plaintiff : Allen & Overy
First Defendant : Not applicable
Second Defendant : Not applicable
Case(s) referred to in judgment(s):
Hankison as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279
Maguire & Tansey v Makaronis [1997] HCA 23
Paric v John Holland Constructions Pty Ltd (1985) 62 ALR 85
Potts v Miller (1940) 64 CLR 282
R v Abadom [1983] 1 All ER 364
Re Montecatini's Patent (1973) 47 ALJR 161
1 PRINCIPAL REGISTRAR MELVILLE: The plaintiff issued a writ seeking damages, equitable compensation and/or an account of profits for breach of contract, breach of fiduciary duties, and misleading and deceptive conduct in breach of s 18 of the Australian Consumer Law (sch 2 of the Compensation and Consumer Act2010) (the ACL). The general endorsement on the writ relates these breaches to a period of employment of the first defendant by the plaintiff as contractor in the period 2011 to 2013.
2 The plaintiff obtained judgment in default of appearance against the first defendant on 9 February 2016. The proceedings cannot progress against the second defendant due to it being in liquidation. The default judgment constitutes a judgment that the first defendant is liable to the plaintiff for breach of contract, breach of fiduciary duty and for misleading and unconscionable conduct contrary to s 18 of the ACL. While that judgment remains undisturbed it is not open to the first defendant to challenge its correctness other than by way of an application to set it aside. The first defendant did apply to set aside the default judgment but on 20 July 2016 his application was dismissed. The plaintiff has elected to obtain judgment for equitable compensation or damages for losses occasioned by these breaches to be assessed rather than to seek an account of the profits alleged to have been made by the first and second defendants.
The procedural history of the assessment
3 On 30 August 2016 the plaintiff was order to file and serve its affidavit evidence in support of the assessment of damages by 30 September 2016, the first defendant was ordered to file his affidavit and evidence by 14 October 2016 and the plaintiff was given until 28 October 2016 to file any responsive evidence. It was ordered the damages payable under the judgment be assessed by registrar in chambers on 11 November 2016.
4 The plaintiff complied with the order regarding the filing of its affidavits. However, the first defendant did not comply. What he did do is by facsimile transmission dated 25 October 2016 file a document that purported to be an affidavit and made 14 October 2016. This document also had the date 25 October 2016 handwritten on the front page underneath someone's signature. The document did not comply with the provisions of the Oaths, Affidavits and Statutory Declarations Act 2005, in that it consisted of a front cover and one page of content, apparently missing the first page of content and missing the last page where the jurat and the details of the authorised person before whom the affidavit was sworn and the date on which it was sworn might also have been found. Then on 11 November 2016 he sought to hand up a copy of a document that purported to be an affidavit and, according to its front cover, made 14 October 2016. This document also did not comply with the provisions of the Oaths, Affidavits and Statutory Declarations Act, was not witnessed by anybody, did not contain the jurat, and did not indicate when it was sworn, all of which suggests it was not sworn. As a result of these deficiencies and the first defendant's state of unreadiness the assessment was adjourned to 6 February 2017 and it was further ordered:
1. The first defendant file and serve the original affidavit dated 14 October 2016 (being the one filed by facsimile transmission) by 16 November 2016.
2. The plaintiff file and serve any further affidavit in response by 9 December 2016.
3. The parties file any notice of objection to the affidavit or part thereof and of any requirement to cross-examine the deponent of any affidavit or part thereof by 20 December 2016.
5 Further to a minute of consent orders dated 8 December 2016 the assessment of damages was further adjourned to 2 May 2017 with the timetable for filing affidavit evidence, giving notice of objections and giving notice of the requirement for any deponent to attend for cross-examination being adjusted, the plaintiff being given an extension of time to file any further affidavits by 10 March 2017 and both parties being given until 28 March 2017 to file and serve any notice of objection to the affidavit material and of any requirement to cross-examine the deponent of any affidavit.
6 The plaintiff then filed a further affidavit of Mr Werner Meiring and a notice of objection to the first defendant's affidavit dated 25 October 2015 within the time prescribed.
7 Contrary to my order that it would be filed and served by 16 November 2016, on 1 May 2017, the day before the assessment, the first defendant filed an original affidavit that purports to have been sworn 14 October 2016 (the third affidavit). The signatures on the third affidavit are different to those on the document that purports to be the affidavit faxed to the court on 25 October 2016 and the document that purports to be an affidavit handed up to the court on 11 November 2016.
8 The day before the hearing of the special appointment the first defendant filed yet another affidavit, this one sworn 1 May 2017.
The plaintiff's case
9 The plaintiff's case is that the first defendant was engaged by it in early 2011 as a contractor in various managerial positions via the agency of Platinum Matrix People Pty Ltd (PMP) through to about March 2013. In occupying those positions, the first defendant is alleged to have owed the plaintiff fiduciary duties. These fiduciary duties include the avoidance of any conflict of interests between the first defendant's personal interests, and the interests of the plaintiff. The plaintiff says that the first defendant used his position to arrange for the engagement of 13 other employees through various labour hire companies resulting in a profit to Proplan Legal Pty Ltd, the second defendant, of which the first defendant was a director, secretary and shareholder. The plaintiff also includes in its evidence calculations as to the profits made by PMP, CXC Global Consulting Pty Ltd (CXC) and Contractor Workforce Solutions (CXS) who are also labour hire companies.
10 By way of evidence the plaintiff relies on two affidavits of Mr Werner Meiring sworn 30 September 2016 and 14 March 2017. The first defendant sought to rely on the two affidavits sworn by himself, being the third affidavit and the one sworn 1 May 2017.
Objections taken to affidavits
The affidavits of the first defendant
11 By way of filing and serving a notice of objection dated 28 March 2017 the plaintiff took objection to the affidavit of the first defendant sworn 14 October 2016. The plaintiff also took objection to the first defendant relying on his affidavit sworn 1 May 2017.
12 The notice of objection dated 28 March 2017 had been drafted in response to the purported affidavits previously filed by the first defendant. The first ground of objection was that the document did not comply with the Oaths, Affidavits and Statutory Declarations Act. However, with the first defendant belatedly filing the third affidavit that was said to replicate the information that was said to be same as the contents of the purported affidavits, I ruled that I would take the third affidavit into account notwithstanding its lateness.
13 The plaintiff then objected to pars 3, 4, 6, 7, 8, 11.5, 11.6, 11.7 and 12. The general tenure of the objections was that those paragraphs, or parts thereof, were a mixture of comment, argument or contention that were irrelevant or prejudicial.
14 In particular, the affidavit contained a number of statements from the first defendant that he had been denied access to documents that would enable him to test or challenge the evidence of Mr Meiring and which would indicate the plaintiff's approval of the engagement of these employees. It is far too late to raise these contentions. Further, the information sought to be adduced by the first defendant would appear to bear on the question of liability, that is, whether or not the first defendant breached the fiduciary duty he owed the plaintiff or was in breach of contract or in breach of s 18 of the ACL. Those issues had been resolved in favour of the plaintiff by reason of the interlocutory judgment in default of appearance.
15 For example, in par 6 of the affidavit the first defendant says he was refused access to the SAP data and purchase orders, which documents would indicate the plaintiff's approval of the engagement of these employees. In par 7 he says that the plaintiff was aware of the process of engaging the Proplan employees but that the plaintiff had not allowed him access to emails and correspondence. At par 8 the first defendant says he had been refused access to emails which would demonstrate the evidence of Mr Meiring at par 16 of Mr Meiring's affidavit was wrong.
16 In par 10, the first defendant again complains about the denial of access to emails, copies of purchase orders and other financial data necessary to reconcile or comment on the plaintiff's calculations and figures and again alleges that the plaintiff was at all times aware the employees of Proplan Legal were employees.
17 Paragraphs 11.5, 11.6 and 11.7 were to the effect that default judgment had been improperly entered, his application to set aside default judgment had been dismissed due to his inability to attend the hearing due to illness, and that he had now formally applied for the decision of the registrar not to overturn the default judgment to be revoked. These last paragraphs are irrelevant. Further, there is nothing on the court record demonstrating an application was being made to revoke the decision of the registrar not to overturn his default judgment and nowhere in his affidavit is there evidence to demonstrate the court record is not accurate. The plaintiff's objections in respect of the first defendant's affidavit dated 14 October 2016 filed 1 May 2017 were upheld.
18 The first defendant's affidavit of 1 May 2017 was rejected in its entirety as it was not filed within the time ordered, namely 10 March 2017. The Rules of the Supreme Court 1971 O 37 r 14 provide that where a special time is limited for filing affidavits, an affidavit filed after that time should not be used accept by leave of the court. Leave to use the affidavit was refused for the following reasons.
19 Firstly no adequate explanation was provided by the first defendant for the filing of this affidavit one day before the hearing and contrary to orders that were made in this regard.
20 Further, this affidavit, like the affidavit dated 14 October 2016, once again sought to put into contention the question of the first defendant's liability to the plaintiff. For example, at par 4 the first defendant stated 'The First Defendant has been denying these allegations since the outset'. At par 5 he said 'The First Defendant made a full and frank disclosure from the outset of the engagement with the plaintiff … the plaintiff knew of the First and Second Defendants relationship … the First Defendant informed the Plaintiff that he is the owner and director of Proplan Legal Pty Ltd ...'. At par 7 he said 'The First Defendant does not owe the plaintiff any amount of money or net profit in the form of an account of profits as the Plaintiff consented to the First Defendants actions'.
21 In the context of an assessment of damages the question of whether the first defendant is in breach of contract, or fiduciary duty, or engaged in false and misleading conduct has previously been established against the first defendant and accordingly these comments are irrelevant.
22 From par 8 onwards the contents can broadly be described as comment on the contents of the affidavit of Mr Warner Meiring and complaints that he had been denied access to information. It is too late to take that point and had the first defendant required access that information in order to defend himself on the assessment of damages he should have taken steps to apply for orders seeking access to that information.
23 The affidavit contained little in the way of relevant facts and can be described as a compilation of complaints, objections, arguments, comments and submissions in response to the affidavit of Mr Meiring. In the circumstances it was considered inappropriate to grant leave the use of the affidavit but that the document should best be treated as constituting the first defendant's written submissions. Accordingly the prejudice to the first defendant in refusing leave to use the affidavit was minimal.
Objections to the affidavit of Mr Meiring dated the 30 September 2016
24 Save insofar as objections can be said to be found in his affidavit of 1 May 2017 the first defendant did not file any notice of any objection to the affidavit material or part thereof, and any notice of requirement to cross-examine the deponent within the time ordered. Accordingly the two affidavits of Mr Meiring had been received into evidence. To have allowed the first defendant to raise objections at this late stage would have likely resulted in yet another adjournment of the assessment of damages as a result of yet another failure by the first defendant to do what he had been ordered to do.
25 Whilst the first defendant is correct in taking the view that this was opinion evidence, the affidavit has been tendered on behalf of the plaintiff on that very basis, namely that it is an admissible opinion, and that it had been made by an appropriately qualified expert. Although the first defendant's criticisms are disregarded for the purpose of determining the admissibility of Mr Meiring's opinions, they are relevant when it comes to considering the persuasive effect of the opinion and whether it is sufficiently persuasive to cause me to be satisfied on the balance of probabilities that the plaintiff's claim has been established.
26 The essence of his objection firstly is that the facts upon which Mr Meiring expressed his opinion were not proven in evidence. In this regard he referred to Paric v John Holland Constructions Pty Ltd (1985) 62 ALR 85, 87 – 88. The second point of his objection is that Mr Meiring relied upon hearsay in forming his opinion. In this regard he referred to R v Abadom [1983] 1 All ER 364.
27 It is the case that much of the evidence contained within the affidavit of Mr Meiring made 30 September 2016 refers to information obtained by other people and documents that have not been produced in evidence. In response, the plaintiff relied on two cases, being Re Montecatini's Patent (1973) 47 ALJR 161, 169 and Hankison as Executrix of the Estate of Gary William Same v Brookview Holdings Pty Ltd [2004] WASCA 279 [11] – [16].
28 In Re Montecatini's Patent, Gibbs J was dealing with a similar situation in which Montecatini had presented material prepared by a chartered accountant Mr Gidley-Kitchen who was accepted as an expert in his field, in the nature of a summary of the receipts, expenses and overall profit that had been made by Montecatini. The accountant's conclusion had been reached as a result of information he had obtained from officials of Montecatini, an official of Max Planck Institut Für Kohlenforschung (MPI) and from further inquiries he and his staff had made. Like the submission made by the first defendant, it was submitted that the financial information supplied to the chartered accountant and on which he based his conclusions was not verified, the books and statements to which he referred were not tendered and no attempt had been made to prove the truth of their contents. His Honour observed:
The submission advanced by the opponents might have been more formidable if an objection had been taken when Mr Gidley-Kitchin's affidavit was first read, but it seems to me that the opponents by failing to make early objection to the evidence must be taken not to have insisted upon any requirement that the records be tendered or that their contents be proved in some other way.
29 Gibbs J went on to say that the manner in which the financial operations of a company might be proved had been discussed in Potts v Miller (1940) 64 CLR 282, 292, 301 - 305. He concluded two rules were established, being:
1. The books of account kept according to an established system in organised business are receivable in evidence as proof of the financial progress or of the result of business operations conducted on a large scale.
2. When the books are produced, or their production is not insisted on, an accountant who has examined them may state their general effect.
30 Gibbs J observed:
To produce all the records examined by Mr Gidley-Kitchin and his staff might well have caused enormous expense and inconvenience. It was very proper that the opponents should not have insisted upon their production. Having failed to insist upon it, however, they cannot now assert that the evidence is inadmissible because of the absence of the records or because of the failure strictly to verify them. Of course, it is still open to the opponents to submit that the evidence, though admissible, does not suffice to establish the petitioner's case.
31 This issue was also considered by the Western Australian Court of Appeal in Hankinson's case. In my opinion, the essence of the Court of Appeal's decision can be distilled to the statement that in the absence of an objection raised by the other party to an opinion expressed by an expert who has examined relevant records but has not produced the records or the records have not otherwise been proven, the opinion is admissible.
The affidavits of Werner Meiring
32 In his affidavit of 30 September 2016, Mr Meiring gave evidence that he was a forensic investigator who was currently employed by Deloitte Risk Advisory Pty Ltd but between August 2014 and July 2016 employed as such with Price Waterhouse Coopers. On or about 28 February 2013 PWC was engaged by the plaintiff to conduct an investigation in relation to a perceived inappropriate relationship or conflict of interests involving the first and second defendants.
33 He gave evidence that in 2011 the plaintiff commenced expansion of its existing railway structure in the Pilbara region of Western Australia to transport product from its iron ore mines to Port Hedland port. The project was resourced by the plaintiff with its own employees and the services of individual contractors through labour hire companies Platinum Matrix People Pty Ltd (PMP) CXC Global Consulting Pty (CXC) and Contractor Workforce Solutions (CWS).
34 The first defendant had been engaged as a contractor through PMP during the period 2011 and 2013 to work in the roles of
• contacts manager – projects,
• contracts manager – port and rail and
• project manager – services.
35 The scope of Mr Meiring's enquiry was wide-ranging and involved him conducting company business record searches, conducting a forensic examination of computers used by the defendant and his personal assistant Leanne Fletcher, reviewing documents provided by the second defendant including information and invoices of the plaintiff in relation to 13 individuals employed by the second defendant, (these 13 individuals being described in the affidavit a par 11(i) as the 'Proplan employees'), obtaining and reviewing the plaintiff's Systems Applications and Product Data (SAP data) detailing purchase orders raised and invoices paid for each of the Proplan employees, reviewing the first defendant's emails, the first and second defendant's payroll advice, group certificates, invoices and spreadsheets detailing payments made to various Proplan employees, and reviewing the summary quantification table complied by the second defendant from the second defendants records outlining the subsequent profit margin made by the second defendant.
36 At annexure WM-1, is found the company extract that shows the first defendant was the director of the second defendant from 8 December 2006 to 8 February 2016. For part of this period up to 9 September 2011 there was a co-director. Accordingly the first defendant was a director of the company at all material times and the sole director of the company between the 9 September 2011 and 8 February 2016. Similarly he was the secretary.
37 The report dated 30 September 2016 shows the share structure of Proplan as constituted by 100 ordinary shares issued to a value of $100, all of which as at the 30 September 2016 were held by the first defendant. I am unable to ascertain whether he was the sole shareholder at the time in question, there being two previous shareholders constituted by Proplan Holdings Pty Ltd who held 49 shares and Mr Dion Rudy Visagie who held 90 shares.
38 Whilst Mr Meiring said he was able to ascertain that the first defendant was the sole shareholder of the second defendant from the 2 September 2011, he does not explain how he arrived at this observation or conclusion other than to say it was from 'the documentation and information obtained by PWC'. However, the question of whether the first defendant was a shareholder is irrelevant as it does not bear on either the question of liability or on the assessment of damages. Damages are awarded for the losses a plaintiff suffers for the breach of fiduciary duty, breach of contract or breach of s 18 of the ACL, which damages might exceed the loss of profit. The question of whether the first defendant was the sole shareholder of the second defendant might have been of relevance if the plaintiff had elected to pursue a claim for an account of profits made by the first defendant rather than having elected compensation for losses.
39 Mr Meiring states he determined that the first defendant by the issue of purchase orders from the plaintiff to the second defendant, facilitated the engagement of Proplan employees on the project directly and by arranging for Proplan employees to be supplied to the plaintiff through PMP, CXC and CWS and invoicing the plaintiff with an additional profit margin on top of that charge by PMP, CXC and CWS.
40 At par 22 of his affidavit Mr Meiring says that he established through his investigation that the first defendant and the second defendant obtained:
(a) a financial benefit from the direct placement of the Proplan employees on the project, in that the second defendant was paid for the services of the Proplan employees placed on the project which payment included a profit margin charge by the second defendant to the plaintiff;
(b) an additional profit margin paid by the plaintiff in respect of these Proplan employees the second defendant indirectly placed on the project through PMP, CXC and CWS.
41 The evidence provided by Mr Meiring in his affidavit of 30 September 2016 permits of three approaches to be taken to the assessment of the equitable compensation or damages suffered by the plaintiff.
42 The first approach is by reference to a table set out in par 25 of his affidavit that is described as a 'summary quantifications table' compiled by the first defendant and second defendant from the second defendant's records. This shows a profit margin of $176,554.12. Mr Meiring had some criticisms of the table which are set out in par 26 of his affidavit which included the inability to completely reconcile start and finish dates in the table with group certificates, inconsistencies between the number of hours for leave allowance and compassionate leave allowance calculated in the table compared to Proplan employees' payslips, the moving of the Proplan employees between various labour service providers PMP, CXC, CWS and the second defendant during their employment, the inability to ascertain whether the invoice amount related to the plaintiff or to a principal contractor, profit margins having been charged on the invoiced amount rather than the pay rate and allowances noted in respect of one Gary Watkin, all of which was inconsistent with Mr Meiring's analysis of the information.
43 The second approach that can be taken to the assessment of damages involved Mr Meiring dividing the 13 Proplan employees into two categories, being those engaged by the plaintiff directly from the second defendant and, secondly, those engaged by the plaintiff indirectly from the second defendant via the auspices of the other labour hire companies. Taking this approach, Mr Meiring found that the plaintiff paid, in respect of the Proplan employees, the sum of $3,865,158. The figure was ascertained having regard to the plaintiff's own data, invoicing information and profit margin disclosures applied by PMP, email correspondence and profit margin disclosures between the first defendant and CXC and information sourced from the first defendant's email archived at the plaintiff's premises and then retained by Price Waterhouse Coopers. Mr Meiring had regard to this information because, although complete records from the Proplan employees had been requested from the first and second defendants, they were not provided.
44 Having arrived at a total payment by the plaintiff of $3,865,158, Mr Meiring then deducted the total labour costs by adding the labour costs for both categories of Proplan employees, which he calculated at $2,791,761. Deducting those labour costs from the amount paid by the plaintiff left a balance of $1,073,397.
45 From that figure, Mr Meiring then deducted 11% in respect of those Proplan employees engaged by the plaintiff directly from the second defendant, constituted by 5.5% for administration and overhead costs and 5.5% payroll tax.
46 He then, in respect of those Proplan employees engaged indirectly from the second defendant via the other labour hire companies, made a deduction of 16% constituted by the 11% for labour costs (the 5.5% administration and overhead costs and 5.5% payroll tax) plus a further 5%, being an industry standard profit margin charged on the cost base for the labour hire.
47 With these deductions in place, it was Mr Meiring's opinion that the figure of $1,073,397 was further reduced to $703,420 representing the profit made by the second defendant.
48 The third approach taken by Mr Meiring was to make a 16% deduction for all of the Proplan employees, rather than to deduct 11% for those directly employed from the second defendant and 16% for those indirectly employed, so reducing the $1,073,397 to $608,690.
Conclusion
49 As stated at the outset of these reasons, in so far as the claim arising out of the breach of fiduciary duty is concerned the plaintiff has elected to seek equitable compensation rather than an account of profits. And in its claim the plaintiff also seeks damages at common law for breach of contract and for breach of s 18 of the ACL. In the context of this case the different bases upon which the claim for damages are brought constitute a difference without a distinction.
50 In Maguire & Tansey v Makaronis [1997] HCA 23 the High Court said:
The reason why equity may maintain a strict rule in relation to the events which follow a breach of fiduciary duty, whereas the common law developed principles of causation, remoteness and foreseeability to avoid unjust results, was explained by Cooke P in Day v Mead [123]. The passage from his Honour's reasons was approved by the majority of the Supreme Court of Canada in Canson Enterprises Ltd v Boughton & Co [124]. Cooke P said [125]:
'A further, practical, reason for adhering to the rule of "strictness" in Brickenden (breach of fiduciary duty being shown) is that it remains open to a court, in fashioning the remedies which it is apt for equity to provide, to consider most, if not all, of the matters which would otherwise be urged as a reason for excluding relief altogether on the ground of the alleged absence of a causal connection between the breach and the loss. The reason why equity may maintain a strict rule in relation to the events which follow a breach of fiduciary duty, whereas the common law developed principles of causation, remoteness and foreseeability to avoid unjust results, was explained by Cooke P in Day v Mead [123]. The passage from his Honour's reasons was approved by the majority of the Supreme Court of Canada in Canson Enterprises Ltd v Boughton & Co [124]. Cooke P said [125]:
"Compensation or damages in equity were traditionally said to aim at restoration or restitution, whereas common law tort damages are intended to compensate for harm done; but in many cases, the present being one, that is a difference without a distinction. There is, however, the more significant historical difference that Courts of equity were regarded as having wider discretions than common law Courts. Equitable relief was said to be always discretionary. Its grant or refusal was influenced by ideas expressed in sundry maxims. He who seeks equity must do equity. He who seeks equity must come with clean hands. Delay defeats equity. These are merely examples. Further, relief could be granted on terms or conditions".'
The wide variety of remedies available to a court of equity following proof of a breach of fiduciary duty permit the court to exercise very large powers to fashion orders apt to a full consideration of all the facts, as they are found. These include an order of rescission; the finding of a constructive trust [126]; the application of tracing principles; the imposition of an account for profits; the award of equitable compensation, particularly where rescission is impossible [127]; injunctive relief and so on. Controversially, it has been suggested that a way to avoid burdening the fiduciary in default with the consequences of the beneficiary's own unreasonable conduct is the application of an equitable principle of apportionment [128]. The importation of notions resting on the statutory principles of contributory negligence has been criticised strongly and repeatedly [129]. I shall say no more of it for it was not argued in this case.
51 Of the three approaches available, it is the third approach I adopt in trying to assess the equitable compensation and damages suffered by the plaintiff.
52 As evidence pointing to the loss suffered by the plaintiff, Mr Meiring has presented calculations of the profit the second defendant made over and above the allowance of 5% profit provided for as the industry standard profit margin (par 47 of Mr Meiring's affidavit). The evidence supports the conclusion that by reason of the first defendant's various breaches the plaintiff has paid more for the hire of labour than it would have paid had the transactions been negotiated at arm's length. In other words had the labour been hired without the involvement of the second defendant, of which the first defendant was sole director and secretary, the plaintiff would have paid the amounts calculated by the third approach taken by Mr Meiring, which amounts included 5% profit to the labour hire firm. In fact the plaintiff paid more than that and the difference as calculated by Mr Meiring represents the plaintiff's loss.
53 To take the second approach seems to me to provide the plaintiff with a windfall of 5% in that had the plaintiff hired the labour from the second defendant in the absence of the first defendant's involvement it would still have had to pay the industry standard profit margin of at least 5%.
54 I do not favour the first approach which would require me to adopt the first and second defendant's unsworn assertions and calculations of the profits made on the labour hire. The reason is that their calculations were the subject of criticisms as to their accuracy by Mr Meiring, which criticisms I accept. Further, the first and second defendants had no reason to overstate their profit and every reason to understate it. Their calculations were based on total invoices to the plaintiff of $3,190,088.27. On the other hand I can see no self-interest in Mr Meiring's calculations which demonstrate total invoices of $3,865,158.00, evidence to which no objection is made and in respect of which no notice of the requirement to make Mr Meiring available for cross-examination was given, and I prefer and accept his calculations in this regard.
55 Accordingly I assess damages at $608,690.00.
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