H.C. Loneragan & Company Pty Limited as trust for the Loneragan Family Trust trading as Quantum Forensic Solutions v Locke

[2024] NSWDC 525

District Court

New South Wales

Medium Neutral Citation:

H.C. Loneragan & Company Pty Limited as trust for the Loneragan Family Trust trading as Quantum Forensic Solutions v Locke [2024] NSWDC 525

Hearing dates:

6 – 7 March 2024
20 March 2024 (Closing Submissions)

Date of orders:

8 November 2024

Decision date:

08 November 2024

Jurisdiction:

Civil

Before:

Waugh SC DCJ

Decision:

1. Judgment for the plaintiff against the defendant in the sum of $255,776.07

2. Defendant pay the plaintiff’s cost of the proceedings

Catchwords:

CONTRACTS - Formation - offer and acceptance - parties - identifying parties to contract 

RESTITUTION - quantum meruit - provision of forensic accounting services

Legislation Cited:

Civil Procedure Act 2005

Uniform Civil Procedure Rules 2005

Cases Cited:

Air Tahiti Nui Pty Ltd v McKenzie (2009) 77 NSWLR 299

Amaca Pty Limited (Under NSW Administered Winding Up) v Roseanne Cleary as the Legal Personal Representative of the Estate of the Late Fortunato (aka Frank) Gatt [2022] NSWCA 151

BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367

Chief Constable of the Greater Manchester Police v Wigan Athletic AFC Ltd [2009] 1 WLR 1580

Francis Gregory Hannigan v Inghams Enterprises Pty Ltd [2019] NSWSC 321

Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232

Hadden v Inline Partners Pty Ltd [2024] NSWCA 42

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110

Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27, (2008) 232 CLR 635

Mann v Patterson Constructions Pty Ltd [2019] HCA 32, (2019) 267 CLR 560

Mills v Walsh [2022] NSWCA 255

Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221

Redland City Council v Kozik [2024] HCA 7

Roude v Helwani [2020] NSWCA 310

South Australian Harbors Board v South Australian Gas Co (1934) 51 CLR

Texts Cited:

Cheshire and Fifoot Law of Contract, 12th Australian edition (2023, LexisNexis)

Heydon on Contract (2019, Thomson Reuters)

Mason & Carter’s Restitution Law in Australia (4th ed, 2021, LexisNexis Australia

Practice Note DC (Civil) No. 15 – Pre-judgment Interest Rates.

Category:

Principal judgment

Parties:

H.C. Loneragan & Company Pty Limited as trust for the Loneragan Family Trust trading as Quantum Forensic Solutions (Plaintiff)
Brian Joseph Locke (Defendant)

Representation:

Counsel:
Mr M Bennett (Plaintiff)
Ms T Fishburn (Defendant)

Solicitors:
Bartier Perry (Plaintiff)
Stacks Law Firm (Defendant)

File Number(s):

2023/343424

Publication restriction:

Nil

Judgment

1. The plaintiff is a forensic accountant.

2. It sues the defendant (Mr Locke) for the unpaid balance of 6 invoices for work it says it did between 4 December 2017 and the end of June 2018.

3. The plaintiff rendered the invoices to Mr Locke between 6 February 2018 and 19 July 2018. Each invoice was accompanied by a schedule setting out in some detail the work said to have been done, by whom and at what cost. The total of the 6 invoices is $219,454.89. Mr Locke has paid $30,000. Mr Locke says that this is in fact more than the amount that was agreed to be paid.

4. The plaintiff claims the sum of $189,454.89, being the balance of the unpaid invoices. It also claims pre-judgment interest on that amount.

5. Mr Locke denies that he is obliged to pay the plaintiff anything more.

6. The plaintiff asserts that it is entitled to be paid by reason of having a contract with Mr Locke obliging him to pay, or alternatively by way of a claim in restitution as upon a quantum meruit.

7. The plaintiff has pleaded that it entered into a contract with Mr Locke on or about a specific date (28 November 2017) and on specific terms set out in writing.

8. Mr Locke accepts that a contract was entered into at about this time (in or about November 2017), but he says that the plaintiff’s contract was with a third party (Gold and Copper Resources Pty Ltd, or GCR) - a company which is not a party to these proceedings - and that the contract was on very different terms.

9. If the plaintiff succeeds in establishing the existence of the contract it has pleaded, it has no need to rely upon principles of restitution and little, if anything, stands in the way of an entitlement to judgment in the full amount claimed.

10. On the other hand, if it does not succeed in establishing the existence of the contract it has pleaded, it must prove its entitlement to be paid in restitution as upon a quantum meruit.

11. I will address the plaintiff’s claim in contract first.

12. The person behind the plaintiff is Mr Hugo Charles Loneragan. He was and is its sole director and shareholder. Mr Loneragan is a forensic accountant and was referred to in many of the emails in evidence simply as Hugo.

THE CLAIM IN CONTRACT

A. What is the contract pleaded by each party?

13. The relevant pleadings are the plaintiff’s Amended Statement of Claim filed 10 November 2023 and Mr Locke’s Amended Defence filed 27 February 2024.

14. The plaintiff asserts that:

14.1 On or about 28 November 2017 it entered into an agreement with Mr Locke pursuant to which it would provide forensic accounting services to Mr Locke in relation to GCR, in consideration of which Mr Locke would pay fees to the plaintiff calculated on a time cost basis. Particulars of the agreement are given as “Proposal to deliver Forensic Accounting services” dated 28 November 2017, and (b) an email from Mr Loneragan to Mr Locke of the same date.

14.2 Between on or about 28 November 2017 until on or about 19 July 2018 Mr Locke requested the plaintiff, and continued to request the plaintiff, to provide services under the agreement.

14.3 Between those same dates the plaintiff provided the forensic accounting services “to and for the benefit of” Mr Locke.

14.4 Between 6 February 2018 and 19 July 2018 plaintiff issued 6 invoices totalling $219,454.89 to Mr Locke for the provision of the forensic accounting services.

14.5 Mr Locke has paid a total of $30,000: $10,000 on 15 December 2017 and $20,000 on 9 April 2018.

14.6 The unpaid balance of the invoices ($189,454.89) is due as a debt, together with interest.

14.7 It is entitled to interest on the debt at the rate of 1% per month pursuant to a term of the agreement; or alternatively at Court rates pursuant to s.100 of the Civil Procedure Act 2005.

15. In response:

15.1 Mr Locke denies that he entered into the agreement pleaded by the plaintiff.

15.2 Mr Locke alleges that the plaintiff entered into an agreement with GCR in or about November 2017. He says that agreement was partly in writing and partly oral: the written part being in an email from Mr Loneragan to Mr Locke dated 15 November 2017 and the oral part in conversations between them in or around November and December 2017.

15.3 Mr Locke alleges that the terms of the agreement between the plaintiff and GCR included the following:

1. The plaintiff would provide the following services. It would attend the Orange based office of GCR to review certain documents of GCR as provided by Mr Locke, and “provide a brief report (either written or oral) delivered to GCR and/or Mr Locke on behalf of GCR following the review of the documents”.

2. Those services would not cost more than $20,000 plus GST and were estimated to cost between $15,000 to $20,000 plus GST, of which $12,000 plus GST was estimated for attending Orange to review the documents.

3. No fees would be charged for travel time to and from Orange.

4. The services “would be conducted by” one or both of Mr Loneragan and Ms Carol Lam.

5. Any additional services were to be the subject of agreement between the parties and the provision of a quote by the plaintiff to GCR which was required to be approved by GCR.

15.3 Mr Locke denies that he requested the services referred to by the plaintiff or that the services were provided to and for his benefit.

B. What are the issues to be determined on the contract claim?

16. The main issues raised on the claim in contract are:

16.1 Who were the contracting parties?

1. The plaintiff says it contracted with Mr Locke.

2. Mr Locke says the plaintiff contracted with GCR.

16.2 What were the terms of the contract?

3. The plaintiff says they were set out in its “Proposal to deliver Forensic Accounting services” and an email from Mr Loneragan to Mr Locke both dated 28 November 2017.

4. Mr Locke says they were set out in Mr Loneragan’s email to Mr Locke dated 15 November 2017 and arose from conversations between Mr Loneragan and Mr Locke in or around November and December 2017.

B. What are the relevant legal principles to be applied to the claim in contract?

17. The dispute between the parties requires the court to determine both who entered into the contract and upon what terms.

18. The normal, conventional or traditional method of determining whether parties have entered into a contract and on what terms is to analyse their dealings with one another by reference to principles of offer and acceptance: JD Heydon, Heydon on Contract (2019, Thomson Reuters) at [2.10] p.27; Seddon and Bigwood, Cheshire and Fifoot Law of Contract, 12^th Australian edition (2023, LexisNexis) at 3.2 p.99. In general it is a necessary condition of a valid contract that an offer (or counter-offer) made by one of the parties be accepted by the other: Heydon at [2.10] p.27. Offer and acceptance analysis works without artificiality in relation to explicit conversations or in written correspondence where “successive communications other than the first are in reply to each other”: Heydon at [2.100] p.36 quoting Lord Diplock in Gibson v Manchester City Council [1979] 1 WLR 294 at 297. But offer and acceptance analysis is not a universal mode of analysis: Heydon at [2.100].

19. Heydon describes the acceptance of an offer as “conduct which, to a reasonable person in the position of the offeror, is a final and unqualified expression of assent to the terms of the offer (or counter-offer)”: Heydon at [2.300] p.51. Seddon and Bigwood also refer to an “unqualified assent to … the terms of the offer”: at 3.26 p.123.

20. In determining whether an offer has been made and accepted the court looks to what the parties’ words or conduct would reasonably be understood to convey, not their actual beliefs and intentions: Heydon at [2.30] p.28.

21. The same applies to determining who are the parties to a contract. In Mills v Walsh [2022] NSWCA 255 in a case where there was no written contract, Brereton JA said (Bell CJ and White JA agreeing on this issue) at [73] omitting citations:

“The parties to a contract are identified according to the objective theory of contract, which involves ascertaining the intention of the parties from their communications and the circumstances in their mutual knowledge, including their evident commercial aims and expectations; their subjective beliefs and intentions are irrelevant, save insofar as they are manifest and shared. However, the post-contractual conduct of the parties may more readily be resorted to for this purpose than for the purpose of construing contractual terms.”

22. In Hadden v Inline Partners Pty Ltd [2024] NSWCA 42, in another case where there was no written contract, Gleeson JA (White and Stern JJA agreeing) confirmed (at [41]-[42]) that the principles stated in Air Tahiti Nui Pty Ltd v McKenzie (2009) 77 NSWLR 299 about how the court identifies the parties to a contract also apply where no written documents exist. In Air Tahiti, Allsop P and Handley AJA (Hodgson JA agreeing) said at [28] omitting citations:

“The identity of the contracting party is to be determined looking at the matter objectively, examining and construing any relevant documents in the factual matrix in which they were created and ascertaining between whom the parties objectively intended to contract. This is, to a point, a process of construction similar to the task of identifying whether a clearly contractual document (such as a bill of lading) is made with one party or another (such as a shipowner or time charterer): ... Where the documents are silent or ambiguous, but there is undoubtedly a contract, the identity of the parties must be determined objectively from the surrounding circumstances: ...”

23. The principles stated in Air Tahiti are not limited to cases involving written documents but apply also where no written documents exist: Hadden v Inline Partners Pty Ltd [2024] NSWCA 42 at [41]-[42] per Gleeson JA (White and Stern JJA agreeing).

24. The use that can be made of evidence of post-contractual conduct for the purpose of determining the parties to a contract was discussed in detail by Leeming JA sitting at first instance in BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367. His Honour concluded that where a contract is wholly in writing, as it was in that case, post-contractual conduct must be disregarded, except insofar as it bears upon some relevant aspect of the pre-contractual purpose or context. The position is different if the contract is not in writing or is partly written and partly oral. In those cases, post-contractual conduct may be used for the purpose of identifying the parties to the contract.

25. In Hadden, the appellant’s conduct in failing to respond to a demand for payment post-contract amounted to an admission against interest and was a strong objective circumstance which supported the factual finding that the appellant was the contracting party (at [28]). This was an application of the principle explained in Roude v Helwani [2020] NSWCA 310 at [33] that “a failure to respond to a demand for payment may amount to an admission if there are circumstances which render it more reasonably probable that a person who denied liability for the claim would answer the claim than that he would not”.

26. The relevance of post-contractual conduct generally was also addressed in Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232, a case on contract about the existence and construction of a solicitor client retainer. Stern JA said at [35] (Kirk JA and Basten AJA agreeing on this part of Stern JA’s judgment):

“As to the identification of the terms of a contract that is partly oral and partly written, a court can take into account post-contractual conduct as a basis for inferring what was agreed when the contract was made, or as establishing a later variation: see eg Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213 at 1229 (Brown LJ) applied in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [27]-[28] & [45] (Spigelman CJ). Post-contractual conduct may also be relevant on the question of whether there is a contract: see eg J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [4.170]. To be relevant as to construction such conduct must be known to both parties, or reveal a common assumption as to the existence and terms of an agreement: Johnston v Brightstar Holding Company Pty Ltd [2014] NSWCA 150 at [120]-[124] (Basten JA, Gleeson JA agreeing) recently relied on in Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2023] NSWCA 280 at [92] (Leeming JA, Kirk JA agreeing at [96]).

D. What are the facts?

27. Evidence of the facts was given by Mr Loneragan and Mr Locke. Both swore affidavits which were read and both were cross-examined. There were no other witnesses.

28. A selection of contemporaneous documents and records were also annexed or exhibited to Mr Lonergan’s and Mr Locke’s affidavits or tendered into evidence separately. I say “a selection” because it was clear from a number of the documents that other documents existed that were not introduced into evidence.

29. Overall there were few, if any, (punctuation) contests between the parties about the underlying facts, as opposed to the proper inferences to be drawn from those facts.

30. Most of the underlying facts emerge from the contemporaneous documents.

31. There was some common ground about some matters and both Mr Loneragan and Mr Locke made some concessions in their affidavit and oral evidence.

32. To the extent it is relevant, I formed the view that both Mr Loneragan and Mr Locke had a keen awareness of what they thought the main issues were in the case – principally they both appeared to be very sensitive to the question of whether the plaintiff’s contract was with Mr Locke personally or with GCR. To the extent that either one of them sought to qualify or explain away statements recorded in the contemporaneous documents, I prefer to rely upon the contemporaneous documents themselves.

33. I will start therefore by identifying the facts established by the contemporaneous documents. The contemporaneous documents identify the factual matrix or background facts known to both parties, as well as the direct communications between them, leading to formation of a contract. The contemporaneous documents also reveal ongoing communications between the parties relevant to the plaintiff’s quantum meruit claim.

Facts established by contemporaneous documents

34. To place matters in context, the first item of work the plaintiff claims payment for is an attendance by Mr Loneragan and Ms Lam at Mr Locke’s office in Orange on 4 December 2017. By then, both sides say that a contract had been entered into. The last item of work the plaintiff claims payment for is said to have been undertaken on either 22 or 29 June 2018.

35. At the start of October 2017, Mr Locke was a director of GCR. An ASIC search confirms that he had been a director since 31 May 2007. Mr Locke founded the company and was its managing director and chief executive officer from 31 May 2007 to 11 September 2017. He was also a major shareholder.

36. On 14 October 2017, Mr Locke received an email from Mr Ken Lowe, the then chairman of GCR. The subject of the email was stated to be “Request for explanation of expenditure” and was copied to other directors of GCR, one of whom was Mr Peter Coates. Mr Lowe told Mr Locke that there were 2 attachments with the email: “a summary of what the board considers spending discrepancies”, and “a detailed summary of documents supporting the discrepancies”. Whilst the attachments were not in evidence, it is common ground that the expenditure in issue totalled about $3.1M. Mr Lowe said that they looked forward to receiving Mr Locke’s explanation to the board when it meets at 2 PM on 23 October.

37. On 2 November 2017, Axiom Forensics Pty Ltd wrote a letter to Mr Locke on the instructions of Horton Rhodes Lawyers asking Mr Locke to provide certain information around the allegations being made against him. The letter was not in evidence, but was described by Mr Locke in his email to Mr Coates of 12 November. Axiom Forensics Pty Ltd were forensic accountants and had been appointed by GCR. Michael Potter was a director of Axiom Forensics.

38. In early November 2017, Mr Locke and Mr Loneragan had a conversation, the detail of which I set out below when I refer to the testimonial evidence.

39. On Sunday, 12 November 2017 Mr Locke sent Mr Coates an email in his capacity as a director of GCR and as chairman of a recently formed sub-committee of the GCR’s board to investigate the allegations being made against Mr Locke. Shortly afterwards, Mr Locke forwarded a copy of the email to Mr Loneragan, to Mr Robert Mangioni and to Mr Andrew Ponnambalam, the latter 2 of whom were solicitors at Watson Mangioni Lawyers. In his email to Mr Coates, Mr Locke said (amongst other things):

• “Given the seriousness of the allegations being made, you will also not be surprised to learn that I have now retained a legal adviser (Robert Mangioni of Watson Mangioni) and a forensic accountant (Hugo Loneragan of Quantum Forensics).”

• “I have been asked to provide documents and explanations for transactions which, in some cases, go back to 2009.”

• “…, I propose to respond to the request for information that has been made by working with Quantum Forensics to have them produce a report in response to all relevant matters. Given the number of years to address, and the detail required to address each matter, I anticipate that will take at least a number of weeks. Once available, I’ll provide that report to you. You can assess what matters you then wish to take further, and how. I have nothing to hide in this period if the process that follows is fair one, I will cooperate fully.”

• “As a matter of due process, if not professional courtesy, you should await that detailed response before taking further steps, based on unverified allegations. Failing to allow me a full and fair opportunity to respond would otherwise fundamentally undermine the validity of the process that you have embarked upon.”

40. On Monday 13 November 2017 Mr Peter Coates forwarded to the other directors of GCR (including Mr Locke) a copy of Mr Locke’s email of the previous day. This led to one of the directors (Mr Jean-Dominque Huynh) responding to Mr Locke. Mr Locke provided copies of those 2 emails to Mr Mangioni who responded to Mr Locke later that day, copying in Mr Loneragan and Mr Ponnambalam. Amongst other things, Mr Mangioni said to Mr Locke:

“Assume that we’re proceeding as per our plan (as set out in your email to Peter) until someone convinces us otherwise. Please instruct Hugo so that he can get going asap.”

41. On 15 November 2017, Mr Loneragan sent Mr Locke an email with the subject heading “Fee estimate – preliminary review”. This is the written part of the agreement Mr Locke says the plaintiff entered into with GCR. The email said:

“Dear Brian,

As requested, I have prepared a basic fee estimate for coming to Orange and spending three days in your office conducting a preliminary review of the books and records of GCR in connection with the matters in question.

I propose that one member of my team accompanies me to complete the work.

The applicable hourly rates are as follows:

Hugo Loneragan: $450 per hour plus GST

Carol Lam: $250 per hour plus GST.

Based on 5.0 hours per day for me and 7.0 hours per day for Carol, I estimate $12,000 plus GST for this exercise. We would not charge for travel time.

Upon completion of this preliminary review, we could then prepare a brief report or oral presentation for you, as required. Prior to commencing any work, we would prepare a letter of engagement and also request a retainer on account of 50% of the fee estimate. Based on our discussion, the work would not begin until 27 November at the earliest.

I look forward to hearing from you to discuss how you wish to proceed.

Regards,

Hugo”

42. On Friday 17 November 2017, Mr Locke sent Mr Mangioni an email, with a copy to Mr Loneragan and Mr Ponnambalam, saying:

“As per our conversation, I’d like you on Monday to write to the other side and say that you are now the contact point for any future negotiations, etc, etc.

I look forward to seeing your draft letter on Monday.”

43. On 23 November 2017, Mr Michael Potter, a director of Axiom Forensics wrote a letter to Mr Mangioni in which he referred to Mr Mangioni’s letter dated 20 November 2017 received via email. Mr Mangioni’s letter of 20 November 2017 was not in evidence.

44. On 24 November 2017, Mr Mangioni and Mr Ponnambalam sent a letter to Mr Michael Potter of Axiom Forensics, which Mr Mangioni then sent to Mr Locke by email, saying:

“Please see attached letters exchanged with Axiom yesterday/today.

I assume that you’ve got Hugo on track?”

45. On 28 November 2017, Mr Loneragan sent Mr Locke an email with the subject heading “Letter of engagement – Brian Locke and GCR”. This email and the attached document are said to contain the terms of the agreement the plaintiff pleads and sues upon. Copies of the email were addressed to Mr Mangioni and Mr Ponnambalam (both of Watson Mangioni, solicitors) and to Carol Lam (of the plaintiff). The email said:

“Dear Brian,

Please find attached our letter of engagement for your review and completion.

Please note that we have requested a retainer be paid on account prior to us commencing work. I will telephone you today to discuss the expected timetable and to plan our visit to Orange next week.

I also confirm receipt of the USB of the GCR MYOB files from Mark Edwards of Camphin Boston. Once I have accessed these records I will prepare an inventory of them.

Please feel free to call me should you wish to discuss.

Regards,

Hugo”

46. In the email, the reference to Camphin Boston is to Camphin Boston Chartered Accountants, who were GCR’s usual accountants.

47. Attached to the email of 28 November 2017 from Mr Loneragan to Mr Locke was a 12 page document. The attached document is broken down into sections; in order there are: a cover page, a table of contents, 5 typed pages set out under various headings, a page with the heading “Acceptance”, 4 typed pages of numbered paragraphs set out under the heading “Standard Terms & Conditions of Contract”, and one page with the heading “Contact Information”.

47.1 The title page says:

“CONFIDENTIAL

Proposal to deliver Forensic Accounting services

Brian Locke and Gold and Copper Resources Pty Ltd

28 November 2017

For the attention of:

Mr Brian Locke

via email only:

…”

47.2 Under the heading “1. Executive Summary”, the document states:

“Quantum Forensic (Quantum Forensic) has been asked by Mr Brian Locke to prepare a fee proposal for a forensic accounting service relating to Gold and Copper Resources Pty Limited (the Company).

We understand that Mr Locke is the founder, a director and a major shareholder of the Company, and that Mr Locke was previously the CEO of the Company. We understand that allegations have been made against Mr Locke by another director or directors in respect of certain transactions involving Company funds and the accounting for those transactions.

We are instructed that Horton Rhodes Lawyers acts for the Company and Watson Mangioni Lawyers acts for Mr Locke. We understand that a letter of instruction may be provided to us in due course.

We confirm that we are not aware of any relationship with any of the parties disclosed to us that could present a conflict of interest and would prevent us from accepting this engagement.

Quantum Forensic is pleased to accept the engagement and we set out our understanding of the assignment in this letter.”

47.3 Under the heading “2. The services”, the document states:

“We understand that we are to be retained as a forensic accounting expert to examine the books and records of Gold and Copper Resources Pty Limited (the Company), and documents held by Mr Locke, in respect of certain transactions and the accounting treatment of those transactions. In particular, we understand that our analysis will include:

company expenses incurred in a private credit card;

management fees charged by a company associated with Mr Locke;

accounting fees paid to the Company’s accountants, Camphin Boston Chartered Accountants; and

the accounting for loans provided to the Company by related parties.

We understand that our analysis will cover several years commencing with the year ended 30 June 2010.

The services provided pursuant to my engagement on this matter constitute a Forensic Accounting Service as defined by APES 215 – Forensic Accounting Services. Should an Expert Witness Service engagement as defined APES 215 be required, we will require a letter of instruction and a new letter of engagement.

During the course of this assignment, we expect to deliver verbal observations, analyses and summaries to communicate the progress of our work, as requested.”

47.4 Under the heading “What we will deliver”, the document states:

“Pursuant to instructions from Mr Locke and/or Watson Mangioni Lawyers, we will examine financial records, credit card statements, bank statements and other financial and commercial documents to assess the nature and substance of certain financial transactions, the accounting for those transactions and their presentation in the financial accounts of the Company.

The scope of the assignment and the deliverable are to be agreed, as discussed below. From the general background provided, I propose that the assignment be broken down into phases:

Phase 1:

(a) attendance at the Company’s or Mr Locke’s office to conduct an inspection of the books and records and related documentation. We may also visit the offices of Camphin Boston and obtain copies of documentation and records, as required; and

(b) prepare a summary of our analysis and observations in respect of the items reviewed.

Phase 2:

(a) Prepare a report presenting the results of Phase 1 and our recommendations for further investigation.

Phase 3:

(a) further analysis and investigation to be agreed.”

47.5 Under the heading “3. Personnel”, the document states:

“Hugo Loneragan will utilise one team member at Manager level to assist in the review of documentation and the preparation of the expert report.”.

47.6 Under the heading “4. Fees & Terms”, the document states:

“Fees

Fees for provision of services are computed on the basis of time spent on the matter by Quantum Forensic staff. Differential rates recognise the experience and specialist knowledge of the personnel involved. Our our hourly rates (GST exclusive) for this assignment are as follows:

Principal AUD    $450 per hour

Manager AUD $250 per hour

Analyst AUD    $150 per hour

In assignments of this nature it is not possible to estimate at the outset the time required to complete an investigation, analysis and report. This is because the scope cannot be precisely defined, the desired format and standard of the records is not known and the required degree of analysis and enquiry cannot be pre-supposed. In our experience, the time required also varies depending on the arrangement of systems and records, access to personnel, the availability of data, and the complexity of the matter.

I would expect the fees for Phase 1 to be in the range $15,000 to $20,000 plus GST. This is based on an estimate of a minimum of 40 hours at an average rate of $375 per hour. A further fee estimate can be provided for Phase 2 once the assignment scope has been precisely defined.

In addition to our professional fees we would seek reimbursement of any out of pocket expenses necessarily incurred in undertaking the assignment. Naturally, we will not incur any significant out of pocket expenses without obtaining your prior approval.

Billing arrangement & credit terms

It is our usual practice to request a retainer on account, to be applied against the first invoice. Prior to us commencing work, please deposit the retainer of $10,000.00 into our NAB trust account as follows:

Account name: Quantum Forensic Solutions

BSB: 082xxx

Account number: 3949xxxx

Invoices are due net within fourteen (14) days of receipt. Please note that it is your responsibility to pay our fees in accordance with the credit terms. We reserve the right to charge interest at 1% per month on any balance not paid within 14 days from the issue date.

In the event that work required under this engagement is terminated for any reason, we would require reimbursement for our time costs and expenses to the date of termination.”

47.7 Under the heading “Acceptance”, the document states “Once you have considered the contents of this letter, we request that you please sign and return a signed copy to indicate that it is in accordance with your understanding of the scope of our work and your agreement to the terms specified.”. The document then provides space for a person to sign, date and print their name and position under the words “Proposal for Quantum Forensic to deliver Forensic Accounting Services accepted by:”. It is common ground that Mr Locke never signed the acceptance.

48. Sometime after 28 November 2017 and before 4 December 2017, Mr Loneragan and Mr Locke had a critical conversation, the details of which I set out below when addressing the testimonial evidence.

49. On 4, 5 and 6 December 2017, Mr Loneragan and Ms Carol Lam went to Orange where they met with Mr Locke in his office and inspected documents.

50. On 8 December 2017, Mr Lowe (the chairman of GCR) informed Mr Locke by email that he had been removed as a director of GCR. Within 20 minutes of receiving the email, Mr Locke sent a copy of it to Mr Mangioni, Mr Ponnambalam and Mr Loneragan.

51. On 11 December 2017, Mr Loneragan had a meeting with Mr Locke (: Schedule of time cost detail at CB41).

52. On 12 December 2017, Mr Loneragan had a meeting with Camphin Boston (: Schedule of time cost detail at CB41). Camphin Boston were GCR’s accountants.

53. On 14 December 2017, Mr Locke met with Ms Lam and (I infer) Mr Loneragan before all three attended a meeting at the offices of Axiom Forensics with Mr Michael Potter (of Axiom Forensics), Mr Coates (director of GCR) and Mr Jean-Dominique Huynh (director of GCR) “to discuss the allegations made against Mr Locke and procedure for investigations” (: Schedule of time cost detail at CB41).

54. On 15 December 2017, Mr Locke paid the plaintiff $10,000. The plaintiff’s bank statement shows that it was paid by cheque.

55. On 8 January 2018, Mr Mangioni sent Mr Locke an email which he also sent to Mr Loneragan. Mr Mangioni said that Mr Locke knew at this stage that Mr Loneragan was planning to meet with Mr Michael Potter of Axiom Forensic on 24 January. Mr Mangioni told Mr Locke that he was concerned that despite several reminders Mr Locke still had not paid the requested $10,000 retainer to Watson Mangioni nor paid its November invoice for $19,429.28. Mr Mangioni told Mr Locke “Just so we have no misunderstandings, we have strict terms of payment here and, in the absence of prompt payment now, I'll unfortunately have little option but to suspend further work on your matter, until full payment is made.”.

56. On 12 January 2018, Mr Mangioni sent another email to Mr Locke about the failure to pay Mr Mangioni’s fees, again copying his email to Mr Loneragan. Mr Mangioni told Mr Locke:

“Brian

I haven't heard from you for over a month, and specifically I haven't heard from you since my email below. Nor have we received payment from you of either of the requested amounts. Accordingly, as foreshadowed in my email below, we are suspending all work on your matter, effective immediately.

We are, of course, content to resume acting for you, if and when you pay us.

However, please be advised that, if payment of the two amounts requested below has not been received by 5.00 pm on Monday, 22 January, we will formally cease to act for you at that time , and we will inform GCR's advisers of that development, so that further correspondence is not sent to us.

Regards

Robert Mangioni”

57. On 15 January 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB42).

58. On 19 January 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB42).

59. On 22 January 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB42).

60. On 23 January 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB42).

61. On 24 January 2018, Mr Locke had a meeting with Mr Loneragan and Ms Lam “in regards to status of the matter and next steps” (: Schedule of time cost detail at CB42).

62. On 30 January 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB43).

63. On 5 February 2018, Mr Loneragan and Ms Lam attended a meeting with Mr Locke and Ms Liz Ramsay at A R Connolly solicitors (: Schedule of time cost detail at CB45).

64. On 6 February 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB45).

65. On 6 February 2018, the plaintiff issued its first invoice to Mr Locke. The invoice was addressed to Mr Locke personally. It was stated to be “Re: Forensic accounting assistance in respect of certain financial and accounting transactions of Gold and Copper Resources Pty Limited, pursuant to our letter of engagement dated 28 November 2017”. It was said to be for professional fees for the period 28 November 2017 to 31 January 2018. The invoice was for $82,125.39 inclusive of GST for a total of 484.3 hours work. A “schedule of time cost detail” running to 3 pages was provided with the invoice. In the heading to the schedule the “client” was stated to be “Brian Locke” and in the column headed “Client name”, the name “Locke” is listed against each entry. The invoice stated that payment was due on 20 February 2018.

66. On 12 February 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB45).

67. On 13 February 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB45).

68. On 16 February 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB45).

69. On 20 February 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB45).

70. On 26 February 2018, Mr Locke had a meeting with Mr Loneragan and Ms Lam (: Schedule of time cost detail at CB45-46).

71. On the same date (26 February 2018), Mr Loneragan sent an email to Mr Locke with the subject heading “GCR – questions for Mark Edwards”, copying his email to Ms Lam. Mark Edwards was an accountant at Camphin Boston, GCR’s accountants. Mr Loneragan said to Mr Locke:

“Brian,

Please ask Mark Edwards the following:

1. The administrator password for the GCR MYOB files provided to us for FY2010 to FY2017; and

2. Precisely when Camphin Boston changed procedure for recording payments made against the Visa card to company expense accounts. (We understand that up to FY2016 Camphin Boston relied upon monthly schedules of categorised transactions prepared by GCR as the basis for the journal entries to record expenses against company expense accounts. We understand that sometime in FY2016, GCR ceased to provide the categorised schedules and Camphin Boston had to allocate expenses to company expense accounts based on historical patterns of expenditure.)

Hugo Loneragan”

72. On Tuesday, 27 February 2018, Mr Locke sent the following email to Mr Peter Coates, which he subsequently forwarded to Mr Loneragan on 1 March 2018. Mr Locke’s email to Mr Coates said:

“Subject: additional information requested by Quantum from Camphin Boston or GCR

Dear Peter,

It was good to talk with you the other day. As discussed, the forensic accountants from Quantum have been very busy working on their report which should be complete in the very near future. They have completed the majority of the job already (about 70%), and have been instructed by my lawyers to finalise it as quickly as possible.

To facilitate Quantum's finalisation of the report, Hugo Loneragan from Quantum have asked for the following information from Mark Edwards at Camphin Boston.”

(Mr Locke then set out the 2 numbered paragraphs from Mr Loneragan’s email of 26^th February I have already referred to and continued:)

“Once Quantum have this information, it will allow them to finalise the report significantly sooner. Your help in getting GCR or Camphin Boston to provide this information would be greatly appreciated.

Kind regards,

Brian”

73. On 6 March 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB48).

74. On 7 March 2018, Mr Loneragan sent an email to Mr Locke with a second invoice from the plaintiff. This invoice was for $32,939.50 inclusive of GST and a total of 277.6 hours work. It took the same form as the first invoice. It too was addressed to Mr Locke personally. It too was stated to be “Re: Forensic accounting assistance in respect of certain financial and accounting transactions of Gold and Copper Resources Pty Limited, pursuant to our letter of engagement dated 28 November 2017”. It was said to be for professional fees for the period 1 February 2018 to 28 February 2018. It too was accompanied by a “Schedule of time cost detail”. As before, in the heading to the schedule the “client” was stated to be “Brian Locke” and in the column headed “Client name”, the name “Locke” is listed against each entry. In his email Mr Loneragan said:

“Dear Brian,

Please find attached our invoice# 13702 dated 7 March 2018 for professional fees in respect of the forensic accounting assistance assignment relating to Gold and Copper Resources Pty Limited .

This invoice covers the period 1 February 2018 to 28 February 2018, inclusive.

Our standard terms are Net 14 days from invoice date. Accordingly, this invoice is due for payment by 21 March 2018.

We note that our first invoice (invoice# 13701 dated 6 February 2018) remains outstanding. We understand from previous discussions we have had with you that you are actively seeking to make funds available to pay our fees as soon as possible. I would appreciate being kept informed of your progress in this regard and when we can expect our fees to be paid.

Please feel free to contact me to discuss this invoice and when we can expect your remittance.

Yours faithfully,

Hugo Loneragan”

75. On 9 March 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB48).

76. On the same date (9 March 2018), Mr Loneragan sent Mr Locke an email with some draft work papers. In his email, Mr Loneragan said to Mr Locke:

“Dear Brian,

As requested, please find attached draft work papers for the Visa card as follows:

1. Schedule of payment from GCR bank account to Visa card ; and

2. List of months for which we have the monthly Visa expenditure summaries and where we do not appear to have it.

Please note that these are extracts from our files and are provided to you for discussion purposes only.

Regards,
Hugo”

77. On 19 March 2018, Mr Locke had a meeting with Mr Loneragan (: Schedule of time cost detail at CB48).

78. On 21 March 2018, Mr Loneragan had a telephone conference with Mr Locke (: Schedule of time cost detail at CB48).

79. On the same date (21 March 2018), Mr Loneragan forwarded Mr Locke an email he had received from Ms Lam with a summary of an “Analysis of Visa payments made as per Camphin Boston Summary of Accounts Paid v GCR bank statements” for the period July 2010 to February 2011. Ms Lam had told Mr Loneragan, which he passed on to Mr Locke, that “Most of the months reconciled with the exception of two payments that were left out. One was for September 2010 and the other for October 2010”.

80. On 5 April 2018, Mr Loneragan sent an email to Mr Locke with a third invoice from the plaintiff. This invoice was for $20,130 inclusive of GST and a total of 198.7 hours work. It took the same form as the first and second invoices. It too was addressed to Mr Locke personally. It too was stated to be “Re: Forensic accounting assistance in respect of certain financial and accounting transactions of Gold and Copper Resources Pty Limited, pursuant to our letter of engagement dated 28 November 2017”. It was said to be for professional fees for the period 1 March 2018 to 31 March 2018. It too was accompanied by a “Schedule of time cost detail”. As before, in the heading to the schedule the “client” was stated to be “Brian Locke” and in the column headed “Client name”, the name “Locke” is listed against each entry. In his email, Mr Loneragan said:

Dear Brian,

Please find attached our invoice# 13703 dated 5 April 2018.

This invoice covers the period 1 March 2018 to 31 March 2018, inclusive.

Our standard terms are Net 14 days from invoice date. Accordingly, this invoice is due for payment by 19 April 2018.

I understand that you have agreed to make an immediate payment of $20,000 against outstanding invoices. May I please ask when I can expect to receive this payment?

Yours faithfully,
Hugo Loneragan

81. On 9 April 2018, Mr Locke paid the plaintiff $20,000. The plaintiff’s bank statement shows that it was paid by direct deposit.

82. On 11 April 2018, Mr Locke had a meeting with Mr Loneragan and Ms Lam (: Schedule of time cost detail at CB51).

83. On 13 April 2018, Mr Locke had a meeting with Mr Loneragan, Ms Lam and Ms Liz Ramsay of A R Connolly solicitors (: Schedule of time cost detail at CB51).

84. On 16 April 2018, Mr Loneragan and Ms Lam had a meeting with Mr Mark Edwards of Camphin Boston (: Schedule of time cost detail at CB51).

85. On 18 April 2018, Mr Locke had a meeting with Mr Loneragan, Ms Lam and Mr Coates, chairman of GCR’s sub-committee set up to investigate the allegations being made against Mr Locke (: Schedule of time cost detail at CB52). I do not accept Mr Loneragan’s oral evidence that Mr Locke did not attend this meeting. When he was asked about this in cross-examination his attention was not drawn to the entry in the Schedule of time cost detail which records that Mr Locke was present. In my view, as a contemporaneous record, the Schedule provides the more reliable evidence. For the same reason, I do not accept Mr Locke’s affidavit evidence that he was not in attendance. If I am wrong about that, little turns on whether Mr Locke actually attended the meeting in any event because Mr Loneragan give him a full report about it the following day.

86. On 19 April 2018, Mr Loneragan sent Mr Locke an email about their “Meeting with Peter Coates 18 April 2018”, forwarding a copy of the email to Ms Lam. Mr Loneragan commenced the email by saying:

“Brian,

The meeting yesterday with Peter Coates accomplished a significant step forward in resolving the investigation of the Visa card transactions.

Peter and JD agreed that I should meet with Michael Potter and share with him the Visa statements and the work we have done on the accounting entries, monthly payment summaries (i.e. expense claims) and other relevant documents. This is essentially what we proposed at the meeting on 15 December, from which the company subsequently resiled. …”

I infer that the reference to “JD” in this email is a reference to Mr Jean-Dominique Huynh, a director of GCR who attended a meeting with Mr Locke, Ms Lam, Mr Loneragan, Mr Potter and Mr Coates on 14 December 2017. Mr Michael Potter was a director of Axiom Forensics, the forensic accountants appointed by GCR in November 2017.

In the email, Mr Lonergan then described to Mr Locke his understanding of the process he was to undertake with Mr Potter.

The email then went on:

“Peter Coates called me to confirm what was agreed. I told him the above (in less detail) . He said he is receiving pushback on Potter and I starting without the Visa statements being provided to the company first. I replied that I didn't;t think it sensible for the company to perform an examination of the Visa statements in parallel with the independent exercise being undertaken by Potter and me. My recommendation is that I provide the document story Potter for he and I to work together, and the company receives the statements with our report.

Peter said he would come back to me today.”

87. On 19 April 2018, Ms Lam had a telephone conference with Mr Locke (: Schedule of time cost detail at CB52).

88. On 20 April 2018, Ms Lam had a telephone conference with Mr Locke (: Schedule of time cost detail at CB52).

89. On the same day (20 April 2018), Mr Loneragan sent an email to Mr Coates and Mr Huynh at the request of Mr Locke. He sent a copy to Mr Locke. In the email, Mr Loneragan said:

“Dear Peter and JD,

Brian has asked me to forward to you both a copy of the email I sent to him following our meeting on Wednesday 18 April 2018.

The last sentence contains a typo, and should read: "My recommendation is that I provide the documents to Potter for he and I to work together, and the company receives the statements with our report."

Peter, I did not receive a call back from you yesterday as expected. May I ask if the company agrees that I should proceed to meet with Potter, in accordance with the approach agreed at the meeting.

Please advise.

Regards,
Hugo”

90. As Mr Loneragan records in his email of 20 April, Mr Coates had not come back to him as he expected following their telephone conversation of 19 April and Mr Loneragan was asking Mr Coates for GCR’s response. The response came in the form of an email from Mr Ken Lowe, the Chairman of GCR, on 15 May 2018, rather than from Mr Coates. I will to refer that email in a moment, in its chronological sequence. Counsel for Mr Locke submitted that Mr Lowe’s email of 15 May was not connected to the emails of 19 and 20 April. I do not accept that submission. Mr Lonergan’s emails make it clear that he was seeking a response from the company. Mr Lowe’s email of 15 May, addressed to Mr Loneragan, commences by stating that “Peter Coates has forwarded your correspondence to the board”. Mr Lowe’s email then includes a direct quote from Mr Loneragan’s email of 19 April. Mr Lowe was obviously responding to that email.

91. On 23 April 2018, Ms Lam had a telephone conference with Mr Locke (: Schedule of time cost detail at CB52).

92. On 9 May 2018, the plaintiff issued its fourth invoice to Mr Locke. The invoice was addressed to Mr Locke personally, took the same form as previous invoices and was accompanied by a Schedule of time cost detail. This invoice was for $25,657.50 inclusive of GST and a total of 176.1 hours work.

93. On 14 May 2018, Mr Loneragan had a telephone conference with Mr Coates (: Schedule of time cost detail at CB54).

94. On 15 May 2018, Mr Locke had a 2 hour meeting with Mr Loneragan and Ms Lam “to discuss Visa transaction analysis” (: Schedule of time cost detail at CB54). On the same day, at 9.26 am Mr Lowe, the Chairman of GCR, sent Mr Loneragan an email in response to Mr Loneragan’s emails to Mr Coates of 19 and 20 April. Mr Lowe said:

“Dear Hugo,

Peter Coates has forwarded your correspondence to the board.

There seems to be a misunderstanding regarding what is required here. In October 2017, Mr Locke was presented with a detailed report from the board itemising a number of serious apparent discrepancies that had occurred while he was the company' s Managing Director. Mr Locke was given the opportunity to explain these discrepancies. Rather than provide an explanation, Mr Locke requested the appointment of a forensic accountant to review the discrepancies. Mr Locke subsequently refused to provide various requested records (including credit card statements) to the forensic accountant appointed by the company and appointed his own forensic accountant. From your email it would appear that although Mr Locke has appointed you in name, no concrete work on any of these discrepancies has actually been performed.

In these circumstances the company continues to believe that, prima facie, there are serious issues to be addressed by Mr Locke. Mr Locke can of course attempt to change the company's view by providing a report from you and naturally the company would consider such a report carefully. However, the company does (and in fact must) reserve the right to perform its own analysis.

Your email mentioned the preparation of "a spreadsheet of these " potentially personal expenses”, grouped by expense type (e .g. travel , meals, clothing)". You have the ability to create this now, Mr Locke can instruct you with the credit card statements and provide you with appropriate guidance and you can come up with Mr Locke's presentation of "potentially personal expenses ". The company will consider such a report.

The company therefore does not see the need to involve its own personnel or forensic accountant directly in your work. Rather, the company re-iterates that Mr Locke should immediately and unconditionally release the credit card statements and other financial records previously requested to the company.

Regards,

Ken Lowe

Chairman

Gold and Copper Resources Pty. Ltd.”

95. On 21 May 2018, Mr Locke sent Mr Loneragan a long email with 6 PDF files. In his email Mr Locke said, amongst other things:

“Thank you Hugo and Carol for going through the transactions of the visa card for the year ending 2012. As I was going through the transactions, I was thinking why did I not have a different procedure regarding the credit card.”

“I can understand Peter Coates and other directors in 2018 retrospectively going through the credit card transaction of 2011-12-13-14 would think things should of been done differently. I think it's important that you and Peter understand the environment I was working in(2011-12-13 - 14) and the way I used the credit to pay the accounts would seem very sensible in this period, …”

“ … when I sit in your office now going through the line by line statements, …”

“The use of the credit card needs to be put in contexts of what was going on within the company. To understand why the staff was innocently using the credit card to pay for the companies expenses. The use of the credit card by myself and the staff appeared perfectly normal at the time.”

96. On 23 May 2018, Ms Lam had a telephone conference with Mr Locke (: Schedule of time cost detail at CB54).

97. On 24 May 2018, Ms Lam had a telephone conference with Mr Locke (: Schedule of time cost detail at CB55). On the same day, Mr Loneragan undertook “preparations for meeting with P Coates” (:Schedule of time cost detail at CB54).

98. On 25 May 2018, Ms Lam had a telephone conference with Mr Locke (: Schedule of time cost detail at CB54). On the same day, Mr Loneragan spent 5 hours on “Review draft analysis; prep for meeting with P Coates to discuss Visa transaction analysis”.

99. On 28 May 2018, Mr Loneragan and Ms Lam had a long meeting with Mr Coates “to discuss Visa transaction analysis” (: Schedule of time cost detail at CB55).

100. On 14 June 2018, Mr Loneragan had a telephone conference with Mr Coates (: Schedule of time cost detail at CB58).

101. On 25 June 2018, the plaintiff issued its fifth invoice to Mr Locke. The invoice was addressed to Mr Locke personally, took the same form as previous invoices and was accompanied by a Schedule of time cost detail. This invoice was for $42,762.50 inclusive of GST and a total of 341.6 hours work.

102. On 26 June 2018, Mr Locke attended Camphin Boston and spoke to Mark Edwards.

103. On 27 June 2018, Mark Edwards of Camphin Boston sent Mr Locke the following email with the subject heading “Accounting Records”:

“Hi Brian

Further to our conversation yesterday when you came to our office I advise that we cannot release any detail relating to Gold and Copper Resources Pty Limited (GCR) unless it has been approved by the company's Board of Directors.

It would be seem helpful to resolving the outstanding matters if information requested by your forensic accountant could be obtained to finalise your report to the Board.

Unfortunately, you will need to approach the Board of Directors of GCR to obtain the consent for Camphin Boston to prepare that information.

Kind Regards

Mark Edwards

Partner

Camphin Boston”

104. On the same day, Lia, on behalf of Mr Locke, forwarded a copy of Mr Edward’s email to Mr Loneragan, telling him:

“This email was sent this morning from Mark Edwards.

Brian will speak with you about it later.”

105. On 28 June 2018, Mr Loneragan sent a long email to Mr Locke.

106. On 19 July 2018, the plaintiff issued its sixth and final invoice to Mr Locke. The invoice was addressed to Mr Locke personally, took the same form as previous invoices and was accompanied by a Schedule of time cost detail. This invoice was for $15,840 inclusive of GST and a total of 179.6 hours work.

A conversation between Mr Loneragan and Mr Locke in early November 2017

107. Both Mr Locke and Mr Loneragan gave evidence of a conversation they agree that they had in early November 2017. Mr Locke says that the conversation took place on 10 November 2017. His evidence is that he said to Mr Loneragan “I want you to do the report for GCR. I have limited cash flow. All my money is tied up with GCR”. Mr Loneragan conceded that Mr Locke said to him “I have limited cash flow”, but denies that Mr Loneragan said “I want you to do the report for GCR” or “I want you to do the report for the company”. Neither Mr Locke nor Mr Loneragan provided any contemporaneous notes of this conversation. In the face of Mr Loneragan’s denial that Mr Locke told him “I want you to do the report for GCR (or the company)” and in the absence of any contemporaneous note of the meeting, I have difficulty accepting Mr Locke’s evidence on this. My difficulty is compounded by the fact that in all of the contemporaneous documents, most of which I have referred to already, there was no contemporaneous suggestion by or protest from Mr Locke to Mr Loneragan or to the plaintiff that Mr Loneragan was being asked to undertake the work for GCR and report to GCR and render his or his company’s bill to GCR, rather than to Mr Locke. For those reasons I find that at this meeting Mr Locke told Mr Loneragan “I have limited cash flow”. I do not accept the other evidence of Mr Locke I have referred to about what was said at this meeting.

A second, this time critical conversation between Mr Loneragan and Mr Locke shortly before Mr Loneragan went to Orange

108. In his affidavit of 22 February 2024, Mr Locke gave evidence of a discussion he says he had with Mr Loneragan in or around November or December 2017 after receiving Mr Loneragan’s email of 15 November 2017. It was put to Mr Loneragan in cross-examination, and he accepted, that the conversation occurred in late November or early December after Mr Loneragan had provided 2 estimates of his fees for his and Ms Lam’s attendance in Orange. Those 2 estimates were the estimates provided in Mr Loneragan’s emails of 15 and 28 November 2017. I have already set out the details of those estimates.

109. In cross-examination, Mr Loneragan said that the substance of their discussion was about the work to be done in Orange. He accepted that in the conversation Mr Locke confirmed that he wanted to go ahead with the work which had been discussed. He agreed that Mr Locke said that the estimate of $12,000 (which he had emailed to him) to come up to Orange “is okay, as long as it’s not more than $20,000 all up”. Mr Loneragan agreed that he said to Mr Locke “It won’t be more than $20,000 plus GST to review and to put together a short report, whether that’s written or verbal” to which Mr Locke said “okay” and Mr Loneragan then said “If more work’s required down the track, I’ll prepare an estimate before any work is done”.

110. The version of the conversation put to Mr Loneragan in cross-examination and accepted by him, which I have just set out, accords in substance with the version of the conversation set out in Mr Locke’s affidavit. I therefore find that Mr Loneragan and Mr Locke had a conversation in the terms I have just set out after Mr Loneragan had sent his emails of 15 and 28 November 2017 and shortly before Mr Loneragan and Ms Lam attended Orange on 4 December.

E. My analysis and conclusions about the parties to and terms of the contract

111. Bearing in mind that the plaintiff has pleaded that it entered into a contract with Mr Locke on or about a specific date (28 November 2017) and on specific terms set out in writing, and both parties rely on explicit conversations or written correspondence, it is appropriate to adopt the conventional method of determining whether parties have entered into a contract and on what terms by analysing their dealings with one another by reference to principles of offer and acceptance and by applying the legal principles I set out earlier.

112. The plaintiff pleads that it entered into a contract with Mr Locke on or about 28 November 2017 and in particulars refers to Mr Loneragan’s email to Mr Locke of that date attaching a “letter of engagement for your review and completion”. The attached letter of engagement, or “Proposal to deliver Forensic Accounting services” stated (as I have earlier recorded) “once you have considered the contents of this letter, we request that you please sign and return a signed copy to indicate that it is in accordance with your understanding of the scope of our work and your agreement to the terms specified”.

113. It is common ground that the letter of engagement dated 28 November 2017 was never completed by Mr Locke and that he never signed and returned it to Mr Loneragan or the plaintiff. It follows that the offer set out in the email and the attached letter of engagement was not accepted by Mr Locke in the manner contemplated by the plaintiff. Further, the plaintiff has not suggested that on or about 28 November 2017 Mr Locke otherwise expressly accepted the offer either in writing or orally.

114. What did happen after Mr Loneragan sent Mr Locke his email on 28 November 2017 is that Mr Loneragan and Mr Locke had a conversation shortly before Mr Loneragan and Ms Lam attended Orange on 4 December. This conversation occurred, of course, in the context of the emails Mr Loneragan had sent Mr Locke on 15 and 28 November. I have already made findings about what was said in that conversation. The substance of their discussion was about the work to be done in Orange, as was Mr Loneragan’s email of 15 November. This is to be contrasted with the proposal of 28 November which addressed not only the work to be done in Orange (as part of Phase 1) but also additional work (the balance of Phase 1, Phase 2 and Phase 3). Further the proposal of 28 November indicated that the “assignment scope” for Phase 2 had not been “precisely defined” and that Phase 3 was “to be agreed”. In the email of 15 November and proposal of 28 November, Mr Loneragan had provided 2 estimates for 2 slightly differently described pieces of work concerning the initial trip to Orange: in the email 15 November the estimate was $12,000 plus GST for “coming to Orange and spending three days in your office conducting a preliminary review of the books and records of GCR”; in the proposal of 28 November it was in the range $15,000 to $20,000 plus GST for Phase 1, described as “(a) attendance at the Company’s or Mr Locke’s office to conduct an inspection of the books and records and related documentation. We may also visit the offices of Camphin Boston and obtain copies of documentation and records, as required; and (b) prepare a summary of our analysis and observations in respect of the items reviewed.”. Both estimates identified the same hourly rates for Mr Loneragan and Ms Lam, $450 and $250 per hour exclusive of GST respectively. In both the email of 15 November and the proposal of 28 November, the plaintiff suggested that the payment of a retainer would be required prior to commencing any work.

161.23 The fact that after the plaintiff issued its 4^th invoice to Mr Locke on 9 May 2018, for a further $25,657.50 inclusive of GST, Mr Locke continued to provide instructions to Mr Loneragan and Ms Lam. I infer that from the fact that the time cost details show that Mr Locke had a 2 hour meeting with Mr Loneragan and Ms Lam on 15 May 2018 “to discuss Visa transaction analysis". That conclusion is reinforced by Mr Locke’s own email to Mr Loneragan on 21 May 2018 in which he thanked Mr Loneragan and Ms Lam “for going through the transactions of the Visa card for the year ending 2012”. In that same email Mr Locke referred to sitting in the plaintiff’s office “now going through the line by line statements” and told Mr Loneragan that it was important that he and Mr Coates “understand the environment (he) was working in… and the way (he) used the credit card to pay the accounts”. This was in the context that the schedule of time cost detail shows that on 14 May 2018 Mr Loneragan had a telephone conference with Mr Coates about a planned meeting and that the meeting took place on 28 May 2018. The inference is that Mr Locke was aware of the planned meeting between Mr Loneragan and Mr Coates and was actively engaged in assisting Mr Loneragan in his preparation for that meeting. That conclusion is reinforced by the fact that on 24 May 2018 Ms Lam had a telephone conference with Mr Locke and on the same day Mr Loneragan undertook preparations for his meeting with Mr Coates; then on 25 May 2018 Ms Lam spoke to Mr Locke again and on the same day Mr Loneragan undertook intensive preparation (5 hours) for his meeting with Mr Coates.

161.24 The fact that on 25 June 2018 plaintiff issued its 5^th invoice to Mr Locke, for $42,762.50 inclusive of GST. As before, there is no evidence that Mr Locke made any protest when presented with this invoice. The clear inference is that he was fully aware of the work that was being done, who was doing it, how much the plaintiff was expecting to be paid and it was his responsibility to pay for the work.

161.25 Still at this time, Mr Locke was actively seeking information from GCR’s accountant so that the plaintiff could use it in finalising its report. That is demonstrated clearly by the email Mr Edwards of Campion Boston sent to Mr Locke on 27 June 2018 – the details of which I have set out earlier.

161.26 The account of events Mr Loneragan laid out in his detailed email to Mr Locke the next day (on 27 June 2018), after Mr Locke had passed on Mr Edwards’ email to him. This account gave a broad overview of the work the plaintiff had done and the obstacles which had been placed in its way by the lack of co-operation Mr Loneragan had received from GCR’s board in obtaining access to relevant information and records. Counsel for Mr Locke submitted that this email was proof that Mr Coates had been providing instructions to Mr Loneragan. I do not accept that submission. In my view the terms of the email itself do not establish that, and still less when it is read in context with all of the other facts I have just outlined.

162. The foregoing survey provides overwhelming contemporaneous and objective support for the oral evidence of Mr Loneragan. I therefore accept his evidence.

163. It also undermines considerably the notion that Mr Loneragan or the plaintiff was receiving instructions or requests to undertake work from Mr Coates or anyone else at GCR. The final nail is put into the coffin of that notion by a reading of Mr Lowe’s email to Mr Loneragan of 15 May 2018 – I have quoted it in full earlier in these reasons.

164. For those reasons, I find that the plaintiff did the further work after 8 December 2017 described in the schedules of time detail supplied with each invoice at the request of Mr Locke.

165. For the same reasons, I also find that Mr Locke freely accepted the further work.

Did the plaintiff perform the further work for the benefit of Mr Locke?

166. Mr Locke contended that the plaintiff did not undertake any of the further work for his benefit, but instead for the benefit of GCR.

167. In my view, asking the question whether the plaintiff performed the work for the benefit of Mr Locke raises a false issue in circumstances where I have found the plaintiff performed the work at his request. That is because, according to the legal principles I set out earlier, it is enough that a plaintiff establish that it did the work at the defendant’s request. The same applies where the work is freely accepted.

168. However, in case I am wrong about that, I am comfortably satisfied and I find as a matter of fact that the plaintiff carried out the work for the benefit of Mr Locke, over and above doing the work at his request or with his free acceptance. One need only go back to Mr Locke’s own email to Mr Coates on 12 November 2017. In that email Mr Locke adverted to “the seriousness of the allegations” being made against him. In cross-examination he agreed that the allegation was that “$3 million odd was said to be taken from the company and you said, no, this was a proper use of the funds”. In his email he referred to “allegations of long standing fraud”. He suggested that if it turned into a “bitter public fight” it would make “front page news” and “adversely impact everyone”. A moment’s thought would have revealed that if the allegations were true Mr Locke would be asked to pay the money back and may well be facing criminal charges. In his email he gave notice that he retained his own forensic accountant, Mr Loneragan of the plaintiff, “to produce a report in response to all relevant matters”. He was still pursuing that course in June 2018.

I. Quantum

What is the fair value of the further work? Or what is a reasonable or fair price for the work?

169. The hourly rates claimed for the work done by Mr Loneragan and Ms Lam are the same as those provided for under the contract Mr Locke entered into with the plaintiff before Mr Loneragan and Ms Lam went to Orange. Those rates are $450 per hour plus GST for Mr Loneragan and $250 per hour plus GST for Ms Lam. The Court may have regard to those agreed rates. In the absence of any other evidence of charges commonly made by others for like services, and in circumstances where the use of those rates was not challenged at the hearing, in my view it is appropriate to adopt those rates as representing reasonable or fair hourly rates for the work Mr Loneragan and Ms Lam did, as disclosed in the schedules of time cost detail.

170. The hourly rates claimed for the work done by the 2 analysts, $75 per hour plus GST, were not part of the contract. Under the contract, the work was to be done by Mr Loneragan and Ms Lam. I have already accepted Mr Loneragan’s evidence that during the course of doing the work he informed Mr Locke that the work Mr Locke wanted him to do required the work of more people and that Mr Loneragan could offer him a heavily discounted rate of $75 an hour for that work to be done by the plaintiff’s analysts, and Mr Locke accepted this offer. In my view I can have regard to that agreed rate. There is no evidence of charges commonly made by forensic accountants for work undertaken by analysts. Whilst Mr Locke took issue with the extent and nature of the work performed by the analysts, as I understand it, he did not challenge the use of a rate of $75 per hour plus GST for their work. In all the circumstances I consider that $75 per hour plus GST is a reasonable and fair rate for the work of the analysts.

171. Counsel for Mr Locke submitted that the Court ought to be cautious in accepting on face value the recorded time for the analysts because there was no evidence of what the analysts did or how their time was allocated; there was no evidence of who the analysts were or what the qualifications were; and some entries appeared to be irregular, for example some amounts appeared to be excessive in that there were some months where the time recording suggested that full-time work was being performed.

172. I do not accept that there was no evidence of what the analysts did or how their time was allocated. The schedule of time cost detail which accompanied each invoice gave a general description of the work undertaken by the analysts. For example in the schedule with first invoice the general description was given “Data extraction, tracing and analysis relating to MYOB data, bank statements, Visa card statements, supporting documentation and financial statements”. More specific entries obviously related to work being undertaken by the analysts: for example the entry for 9 January 2018 records that Ms Lam drafting a “detailed email to staff to create contents pages for scanned Visa file setting out very detailed process and word expected”. There are many other entries in the first schedule of time cost detail of Ms Lam drafting emails to staff to do various things. I infer that when Ms Lam uses the word “draft” she meant “write” or “send”. The pattern is repeated in subsequent schedules.

173. I accept that there was no evidence of what the qualifications of the analysts were. However the schedules of time cost detail show, by reason of the type of entries I have just referred to, that the work undertaken by the analysts was supervised by Ms Lam and largely undertaken at her direction.

174. I have already made findings about the work the plaintiff did at the request of Mr Locke which included the need to review thousands and thousands of transactions. Mr Loneragan agreed that broadly the work was in relation to reviewing the Visa statements and the company records for a 6 or 7 year period. He explained that those records included the Visa statements, the invoices and receipts associated with those transactions, and the books and records of the company, including the general ledgers, where those transactions were accounted for by the company. It would be surprising in the extreme if a great deal of that work was not undertaken by analysts at more reasonable rates of charge than by the principal of the firm or an accountant.

175. I have also already made findings that as each invoice was presented to Mr Locke he was aware of the work that had been done, how much the plaintiff expected to be paid for it, that some of the work had been undertaken by analysts, that he made no protest, and in light of all that he asked the plaintiff to undertake more work.

176. Because they were not called to give evidence, counsel for Mr Locke submitted that the court ought to draw Jones v Dunkel inferences in respect of Ms Lam and the 2 analysts to the effect that any evidence they could have given would not have assisted the plaintiff’s case. The Court of Appeal discussed Jones v Dunkel inferences in Amaca Pty Limited (Under NSW Administered Winding Up) v Roseanne Cleary as the Legal Personal Representative of the Estate of the Late Fortunato (aka Frank) Gatt [2022] NSWCA 151, Beech-Jones JA (Brereton & Mitchelmore JJA agreeing) at [46]-[48]. His Honour explained that Jones v Dunkel (1959) 101 CLR 298; [1989] HCA 8 is authority for the proposition that two possible consequences may follow from a party’s failure to call a witness whom they might be expected to call. The first is that the Court may infer that the evidence of the witness who was not called would not have assisted that party’s case (a “Jones v Dunkel inference”). The other consequence is that the Court may have greater confidence in drawing an inference unfavourable to that party. His Honour said that a Jones v Dunkel inference has relatively weak evidentiary value. It does not enable the trier of fact to infer that the absent evidence would have been positively adverse to the party, and it does not enable a court to discount or diminish the value of the evidence that a party adduced. Finally, there is no obligation on a jury or a judge to draw any such inference.

177. The failure to call Ms Lam or the analysts does not discount or diminish the evidence of Mr Loneragan that I have accepted. Nor does it enable me to infer that any evidence they may have given would have been positively adverse to the plaintiff.

178. In all the circumstances, I am satisfied and I find that the fair value, or reasonable or fair price, of the work the plaintiff did after 8 December 2017 is as claimed by the plaintiff as set out in the schedules of time cost detail provided with each invoice.

179. However some adjustment needs to be made to the plaintiffs’ claim to be paid the total of all of the invoices in full for the fact that the work the plaintiff did up to and including 8 December 2017 was performed under the terms of the contract entered into before Mr Loneragan and Ms Lam went to Orange.

180. It was a term of the contract that the total fees for undertaking the contracted work would not exceed $20,000 plus GST. The schedule of time cost detail provided with the first invoice sets out details of work done and claimed up to and including 8 December which adds up to $19,525 before adding GST, together with expenses adding up to $1,351.60 before adding GST. Adding those 2 figures together gives a total of $20,876.60 before adding GST for work and expenses claimed for the period up to 8 December 2017. This exceeds the agreed cap of $20,000 by $876.60. That amount should be deducted from the first invoice before then adding GST. The adjustment is made by deducting that sum from the sub- total of $74,659.45 stated on the first invoice – being invoice number 13701 dated 6 February 2018. The new figure is $73,782.85 to which one then adds GST of 10%, giving an adjusted total for the invoice of $81,161.13 instead of $82,125.39.

181. It follows from the findings that I have made that the plaintiff is entitled to be paid the adjusted total of the first invoice together with the full amount claimed in the subsequent invoices, less the $30,000 Mr Locke has already paid.

182. The figures are as follows:

Invoice date	Number	Amount
6 February 2018	13701	(Adjusted) $81,161.13
7 March 2018	13702	32,939.50
5 April 2018	13703	20,130.00
9 May 2018	13704	25,657.50
25 June 2018	13705	42,762.50
19 July 2018	13706	15,840.00
Sub-total	218,490.63
Less payments	(15 Dec. 2017 $10,000 and 9 April 2018 $20,000)	30,000.00
Total to be paid	$188,490.63

Pre-judgment interest

183. The plaintiff claims and is entitled to be paid pre-judgment interest on that amount pursuant to section 100 of the Civil Procedure Act 2005 and Practice Note DC (Civil) No. 15 – Pre-judgment Interest Rates.

184. For ease of calculation, in my view it is appropriate to calculate interest on that amount from the date of the last invoice (19 July 2018) to the date of judgment (8 November 2024).

185. The calculations are as follows:

Dates	Days	Rate	Interest (on $188,490.63)
19 Jul – 31 Dec 18	166	5.50	$4,714.84
1 Jan – 30 Jun 19	181	5.50	5,140.88
1 Jul – 31 Dec 19	184	5.25	4,988.54
1 Jan – 30 Jun 20	182	4.75	4,452.18
1 Jul – 31 Dec 20	184	4.25	4,027.31
1 Jan – 30 Jun 21	181	4.10	3,832.29
1 Jul – 31 Dec 21	184	4.10	3,895.81
1 Jan – 30 Jun 22	181	4.10	3,832.29
1 Jul – 31 Dec 22	184	4.85	4,608.46
1 Jan – 30 Jun 23	181	7.10	6,636.41
1 Jul – 31 Dec 23	184	8.10	7,696.61
1 Jan – 30 Jun 24	182	8.35	7,826.48
1 Jul – 8 Nov 24	131	8.35	5,633.34
Total Interest	$67,285.44

186. The total pre-judgment interest is $67,285.44.

187. The plaintiff is therefore entitled to judgment against Mr Locke in the sum of $255,776.07, being the total of the invoices and pre-judgment interest.

188. Costs should follow the event.

J. Orders

189. I therefore make the following orders:

1. Judgment for the plaintiff against the defendant in the sum of $255,776.07.

2. Defendant to pay the plaintiff’s costs of the proceedings.

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Decision last updated: 08 November 2024