In the matter of 1derful Pty Limited

[2024] NSWSC 1414

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of 1derful Pty Limited [2024] NSWSC 1414

Hearing dates:

24-25 September, 1, 2, 8, 10-11, 15 October 2024

Date of orders:

8 November 2024

Decision date:

08 November 2024

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to submit Short Minutes of Order to give effect to this judgment and as to costs or, if there is no agreement between them, their respective Short Minutes of Order and submissions.

Catchwords:

EQUITY – Fiduciary duties, statutory unconscionability and conspiracy – whether contraventions established – quantification of loss.

Legislation Cited:

- Australian Securities & Investments Commission Act 2001 (Cth), ss 12BAB, 12CA-12CC, 12GD, 12GF, 12GM

- Australian Consumer Law, ss 21-22, 232, 236, 243

- Conveyancing Act 1919 (NSW), s 37A

- Corporations Act 2001 (Cth), ss 420A, 423

- Evidence Act 1995 (NSW), s 140

Cases Cited:

- ABN Amro Bank NV v Bathurst Regional Council & Others (2014) 309 ALR 445; [2014] FCAFC 65

- Aequitas Ltd v Sparad No 100 Ltd (formerly Australian European Finance Corp Ltd) (2001) 19 ACLC 1006; [2001] NSWSC 14

- Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43

- Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151; [2023] NSWCA 294

- Armagas Ltd v Mundogas SA [1985] 1 Ll R 1

- Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16

- Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; (2021) 151 ACSR 98; [2021] FCAFC 40

- Australian Securities & Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; 62 ACSR 427; [2007] FCA 963

- Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; (2019) 368 ALR 1; [2019] HCA 18

- Australian Securities and Investments Commission v National Australia Bank Ltd (2022) 164 ACSR 358; [2022] FCA 1324

- Australian Securities and Investments Commission v Westpac Banking Corp (Omnibus) (2022) 159 ACSR 381; [2022] FCA 515

- Barnes v Addy (1874) LR 9 Ch App 244

- Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59

- Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200

- Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; (2010) 273 ALR 664; [2010] FCAFC 133

- Boz One Pty Ltd v McLellan (2015) 105 ACSR 325; [2015] VSCA 68

- Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

- Bristol & West Building Society v Mothew [1998] Ch 1

- Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54

- DIF III – Global Co-Investment Fund LP v Babcock & Brown International Pty Limited [2019] NSWSC 527

- ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24

- Fatimi Pty Ltd v Bryant (2004) 59 NSWLR 678; [2004] NSWCA 140

- Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293

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

- Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

- Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6

- Haiye Developments Pty Ltd v Commercial Business Centre Pty Ltd [2022] NSWSC 937

- Hall v Poolman (2007) 215 FLR 243; [2007] NSWSC 1330

- HBK Master Fund LP v Pivotal Software Inc, Delaware Court of Chancery, 14 August 2023

- Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64

- John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19

- JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; [2016] FCAFC 20

- K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603

- Karzi v Toll Pty Ltd [2024] NSWCA 120

- Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582; [1995] HCA 68

- Mackinnon as Plaintiff representative of 153 Plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as “STC Sports Trading Club” (No 8) [2019] NSWSC 1658

- Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3

- McCrohan v Harith [2010] NSWCA 67

- MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451

- Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; [1992] HCA 66

- News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870

- OBG v Allan [2008] 1 AC 1

- Pascoe v Voukidis Holdings Pty Ltd [2024] FCA 915

- Patel v Lal [2011] NSWSC 603

- Porter v Mulcahy & Co Accounting Services Pty Ltd [2021] VSC 572

- Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547

- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

- Re Sirrah Pty Ltd (In Prov Liq) (2021) 152 ACSR 212; [2021] NSWSC 413

- Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd (2024) 302 FCR 375; [2024] FCAFC 17

- Sangha v Baxter [2009] NSWCA 78

- Spencer v Commonwealth of Australia (1907) 5 CLR 418; [1907] HCA 82

- Talacko v Talacko (2021) 272 CLR 478; [2021] HCA 15

- Troulis v Vamvoukakis [1998] NSWCA 237

- Vanguard Financial Planners Pty Ltd v Ale (2018) 354 ALR 711; [2018] NSWSC 314

- Varma v Varma [2010] NSWSC 786

- Watson v Foxman (1995) 49 NSWLR 315

- Wingecarribee Shire Council v Lehman Bros Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028

- Zreika v Royal (2019) 271 FCR 65; [2019] FCAFC 82

Texts Cited:

- W Bratton, “Fair Value as Process: A Retrospective Reconsideration of Delaware Appraisal” (2023) Del J Corp L 497

- A Damoradan, “Valuing Young, Start-up and Growth Companies: Estimation Issues and Valuation Challenges” (June 12, 2009; SSRN: E Dubiansky, “An Analysis for the Valuation of Venture Capital-Funded Startup Firm Patents” (2006) 12 BU J Sci and Tech L 170

- P D Finn, “The Fiduciary Principle” in T G Youdan (ed) Equity, Fiduciaries and Trusts (1989)

- BK Krumm, “Fostering Innovation and Entrepreneurship: Shark Tank shouldn’t be a Model (2017) 70 Ark L Rev 553

- A Lynch, “Believing in Unicorns: How to Value Unicorn Companies and Intellectual Property while Encouraging Continuing Innovations and Public Disclosure” (2021) 72 Case Wes L Rev 421

- AF Tuch, “Fairness Opinions and SPAC Reform” (2023) 100 Wash UL Rev 1793

- E Mantell & E Shea, “Development and Application of Business Valuation Methods by the Delaware Courts” (2021) 17 Hastings Business LJ 335

- C Sappideen & Ors, Fleming’s The Law of Torts, 11th ed, Lawbook Co 2024

Category:

Principal judgment

Parties:

Luke Bunbury (First Plaintiff)
St. Jean CF Pty Ltd (Second Plaintiff)
1derful Pty Ltd (receiver appointed) (Third Plaintiff)
The 1derful Group Pty Ltd (receiver appointed) (Fourth Plaintiff)
Fletch Capital Pty Ltd (First Defendant)
Craig Seymour (Second Defendant)
Michael Birch (Third Defendant)
Mitchell Warren Ball (Fourth Defendant)

Representation:

Counsel:
B DeBuse (Plaintiff)
E A Walker/A H Schatz (First and Second Defendants)
A P Cheshire SC (Third Defendant)

Solicitors:
Vobis Law (Plaintiff)
Teneo Commercial Lawyers (First and Second Defendants)
SM Law (Third Defendant)

File Number(s):

2023/353008

Judgment

Nature of the proceedings and background

1. By Originating Process filed on 7 November 2023 (“OP”), the Plaintiffs, Mr Bunbury and others, seek a wide range of relief against the Defendants, Fletch Capital Pty Ltd (“Fletch”), Mr Craig Seymour and Mr Michael Birch.

2. The First Plaintiff, Mr Bunbury, is a director of each of the Third Plaintiff (“1derful”) and Fourth Plaintiff (“1derful Group”) (together, “Companies”) since 15 June 2021 and owns, with his wife, 17,500 shares each in 1derful Group. He also claims (Statement of Claim (“SOC”) [4]) that the Companies are indebted to him for, inter alia, deferred wages in an amount not less than $437,500.05 (gross) and other loaned monies. He brings these proceedings, by leave, as a derivative action. The Second Plaintiff (“St Jean”) owns 10,000,000 of the 13,130,540 shares issued in 1derful Group, representing approximately 76.16% of its total shares.

3. The Plaintiffs allege (SOC [9]) and I find that business operated by the Companies involved proprietary technology and a licensing arrangement with Mastercard and other partners which, subject to regulatory approval, would permit the provision of branded debit and credit products for particular businesses that allowed clients to use branded debit and credit cards to provide instalment and hybrid payment options. Importantly, an agreement dated 25 January 2023 with Mastercard (“Mastercard Agreement”) provided for the payment of performance-based incentives by Mastercard to 1derful, although I will recognise the suspension of that agreement and its significance for the value of the Companies’ business below. A wholly-owned subsidiary of 1derful, 1derful Lending Pty Ltd (“1derful Lending) held an Australian credit licence from the Australian Securities and Investments Commission (“ASIC”) (SOC [10]). The Defendants claim not to know what business the Companies operated and do not admit these paragraphs; those pleadings are plainly improper, where the Defendants had detailed knowledge of the Companies’ business by reason of the conduct to which I refer below and procured the transfer of that credit licence to an entity associated with Fletch.

4. The Second Defendant, Mr Seymour, is the sole director of Fletch and a director of Jigsaw Works Pty Ltd (“Jigsaw Works”) which is a shareholder in Fletch. The Third Defendant, Mr Birch, is a director of Midialel Pty Ltd (“Midialel”) which is also a shareholder in Fletch. The Fourth Defendant, Mr Ball, was at one point purportedly appointed as receiver to the assets of the Companies. The Plaintiffs do not press a claim for relief against Mr Ball who was excused from attendance at the hearing.

5. I will set out the Plaintiffs’ claims, which involve allegations of impropriety against the Defendants, below. In determining these claims, I have regard to the approach identified in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (“Briginshaw”) and its equivalent under s 140 of the Evidence Act 1995 (NSW) (“Evidence Act”). Where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is sought to be proved. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450; [1992] HCA 66, the plurality observed that:

“The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary ‘where so serious a matter as fraud is to be found’. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.” [citations omitted]

6. Section 140 of the Evidence Act similarly provides that, in a civil proceeding, the Court must find the case of a party proved if it is so satisfied on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject matter of the proceeding and the gravity of the matters alleged. I approach the evidence in the Plaintiffs’ claim on that basis.

Affidavit evidence

7. I now turn to the affidavit evidence and cross-examination. In addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Varma v Varma [2010] NSWSC 786 at [424]-[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (“Colorado”) at [10].

8. I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]:

“Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” [emphasis added]

Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”

9. I have here drawn on my summary of the applicable principles in K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603 at [40]ff and Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547 at [49]ff. I will reach findings as to several of the events addressed in the affidavit evidence in the chronology set out below.

10. While I have also addressed issues of credit of witnesses below, both generally and in respect of particular issues, I have borne in mind the cautionary observations of Basten JA (Handley JA agreeing) in Sangha v Baxter [2009] NSWCA 78 at [155], applied by Nixon J in Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 at [42] (“Firmtech”), that:

“Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, R v Collins [2007] NSWCA 122 at [44].”

11. By his affidavit dated 6 November 2023, initially read in respect of an application for leave to bring derivative proceedings, Mr Bunbury refers to his and his wife’s shareholdings in St Jean and his claim to be a creditor of the Companies in respect of unpaid wages and other monies and to his being a shareholder in the Companies. His evidence, led without objection, was that the Companies conducted a financial technology business in which valuable technology and relationships with credit card service provider Mastercard and other business partners and service providers were developed (Bunbury 6.11.23 [6(a)]). He refers to the Companies’ need for further capital and the risk of default in relation to existing debtor finance and, in evidence admitted with a limiting order under s 136 of the Evidence Act as submission and as his understanding, to the engagement of Messrs Seymour and Birch to assist the Companies in relation to resolving demands made on them and locate further equity or debt finance. Mr Bunbury there outlined (Bunbury [6]) the steps, now apparent from the documentary evidence, by which Fletch took an assignment of the debt owed by the Companies to PI Lorica Pty Ltd (“PIL”), demanded payment of that debt by the Companies and, on the same day, purported to take possession of the Companies’ business and then purported to sell the Companies’ business to itself.

12. Mr Bunbury then provides a more detailed outline of 1derful’s business (Bunbury 6.11.23 [18]ff), in evidence led without objection, and of Messrs Seymour’s and Birch’s role, in evidence that was partly admitted with a limiting order under s 136 of the Evidence Act as submission or in respect of his understanding. Again, little turns upon Mr Bunbury’s account of those matters where they are established by the documentary evidence which I address below. I will address Mr Bunbury’s evidence of several dealings with Mr Seymour below. Mr Bunbury also there addressed steps taken by Fletch and a receiver that it purportedly appointed, after it had acquired PIL’s debt and purportedly sold 1derful’s business to itself.

13. By a second affidavit dated 4 December 2023, Mr Bunbury led evidence as to the Company’s creditors and previous capital raisings and, in evidence admitted with a limitation under s 136 of the Evidence Act, as to the valuations which were implied by those previous capital raisings in substantial amounts. That affidavit exhibited the investor slide decks that formed part of the discussions with investors in respect of those capital raisings. Mr Bunbury also there referred to the appointment of a third party, Bayleaf Capital Pty Ltd (“Bayleaf Capital”), to assist in raising debt and equity for the 1derful Group and, in evidence partly admitted with a limiting order under s 136 of the Evidence Act as submission and partly as Mr Bunbury’s understanding, to valuation work undertaken by Bayleaf Capital in respect of the capital raisings. Mr Bunbury also referred to other funding and revenue of the Companies, including a convertible note arrangement with a third party and the receipt of research and development tax incentive rebates from the Australian Government, and revenues from business “partners” including implementation fees, interchange fees, debt interest margin fees, and incentive payments which were payable by Mastercard under the arrangement between 1derful and Mastercard.

11. By a third affidavit dated 16 February 2024, substantial parts of which were admitted with limiting orders under s 136 of the Evidence Act as submission or Mr Bunbury’s understanding, Mr Bunbury addressed additional emails which he contended demonstrated Mr Seymour’s involvement in 1derful’s work in assisting the Companies in refinancing the PIL debt and in raising equity and debt, including the financing of secured debt. Little turns on Mr Bunbury’s understanding of those matters, where the course of events is evident in emails and text messages which I address below. Mr Bunbury also there addressed the Companies’ creditors, in evidence largely admitted by way of submission or his understanding, broadly directed to establishing creditors’ continued support for the Companies. He also addressed, in evidence also largely admitted as evidence of his understanding or as submission, matters on which he relied to contend that 1derful’s business was likely to succeed, although there was plainly substantial uncertainty as to that question given its financial position in 2023, the suspension of its relationship with Mastercard and its inability to pay a large amount due to Mastercard, which I will address below, and the early stage of its business.

12. By his further affidavit dated 21 June 2024 Mr Bunbury takes issue with significant aspects of Mr Seymour’s evidence. By a further affidavit dated 18 September 2024, Mr Bunbury addressed aspects of the first expert report of Mr Kompos on which the Defendants rely. His evidence, admitted with a limiting order as submission under s 136 of the Evidence Act, was that Mr Kompos had misunderstood various sources of the Companies’ revenue and their nature and classification. His evidence was that the revenue that the Companies received from Mastercard was a marketing incentive paid by Mastercard, not a proportion of transaction values associated with throughputs on cards, and that Mr Kompos had incorrectly assumed that Douugh Australia Pty Ltd (“Douugh”) was the only customer of 1derful by August 2023.

13. Mr Bunbury also there addressed the circumstances in which Mastercard had suspended its licence agreement with 1derful and the steps which had to be taken before Mastercard would exercise a discretion whether to renew that licence agreement which included, critically, the repayment of a substantial amount to Mastercard, as well as other steps relating to matters such as the provision of corporate structure and other information to Mastercard, implementing an automatic direct debt facility from the Companies’ bank account in Mastercard’s favour (which would presumably only have had utility if the Companies had sufficient funds to make the relevant payments), the provision of financial information and a detailed sales pipeline and addressing other matters. Mr Bunbury also set out the steps that he contended the Companies had taken to complete the requests from Mastercard and identified several other steps that he claimed the Companies were in the process of finalising. He was cross-examined at length as to those matters; limited documentation was produced in respect of them; and Mr Bunbury conceded that the relevant information had not been submitted to or accepted by Mastercard at the point at which Fletch acquired the Companies’ business in the manner that I set out below. As Mr Bunbury fairly recognised, those issues were of lesser significance where, without additional funding, the Companies plainly could not repay the amount due to Mastercard, which Mr Bunbury acknowledged was a significant matter for Mastercard. Mr Bunbury also there led further evidence as to the revenue received by the Companies by way of R&D tax rebates.

14. Mr Bunbury was cross-examined briefly by Mr Walker, with whom Mr Schatz appears for Mr Seymour and Fletch, largely in relation to the dealings between Mr Bunbury and Mr Dahan concerning a winding up application that were brought against 1derful and then dismissed when a company associated with Mr Dahan, Hennesey Capital Partners Pty Ltd (“HCP”), acquired the debt owed to those creditors; HCP’s engagement of Green Jigsaw Pty Ltd (“Green Jigsaw”), a company associated with Mr Seymour; the Companies’ payment of the invoice rendered by Green Jigsaw; and the terms in which Mr Seymour had informed Mr Bunbury that CK Advisory Group Pty Ltd trading as Fifo Capital Northern Beaches (“FIFO Capital”) had engaged Mr Seymour or an associated company.

15. Mr Bunbury was also cross-examined, at greater length, by Mr Cheshire who appears for Mr Birch in respect of matters largely related to the value of its business and, in particular, the state of its relationship with Mastercard. Mr Bunbury acknowledged (T114) the significance of Mastercard to the Companies’ business and acknowledged (T120) the receipt of a breach notice from Mastercard in May 2023 and a suspension notice on 1 July 2023. He also acknowledged the risk that the Companies’ access to Mastercard facilities would be lost by reason of these matters (T122). Mr Bunbury also acknowledged (T123) that 1derful had not addressed all of the matters that Mastercard required it to address by 3 October 2023, when Fletch acquired the Companies’ business. It was plain that Mr Bunbury’s evidence in chief, and to a lesser extent his evidence in cross-examination, significantly overstated the extent of the Companies’ progress in addressing those issues. It was also plain, as Mr Bunbury ultimately recognised in cross-examination (T134) that the issues between the Companies and Mastercard had existed long before the appointment of a receiver by Fletch to the Companies’ business. Mr Bunbury did not accept the significance of the matters raised in the correspondence from Mastercard for the value of the Companies’ business (T141); it seems to me that those matters would plainly be relevant to a valuation of that business, although any purchaser of the business would likely purchase it only if it had sufficient confidence it could resolve those matters commencing with payment of the amount due to Mastercard, which was the approach taken by Fletch when it acquired that business. Mr Bunbury rightly acknowledged that any failure to reinstate the Mastercard Agreement would have a significant impact upon the Companies’ business (T141).

16. Mr Cheshire also cross-examined Mr Bunbury as to the preparation of documents which were produced to the Court on 1 October 2024 (Ex P5), which purported to record progress in addressing the issues between the Companies and Mastercard; it is not necessary to address the position in respect of those documents, where it is plain enough that the issues with Mastercard were not close to resolution when the Companies lost control of their business, not least because the Companies did not then have access to the funds necessary to repay the amount then due to Mastercard. Mr Bunbury claimed to have addressed matters with Mastercard in oral discussions, but the optimistic account he gave of those discussions was not consistent with correspondence between the Companies and Mastercard in the relevant period and I approach Mr Bunbury’s evidence in that respect with caution. Mr Bunbury fairly accepted (T164) that “the most critical factor” for Mastercard was funding, and that Mastercard required the repayment of the balance owing to them and was concerned as to the Companies’ ability to “forward fund obligations”. I accept that evidence and there is no suggestion that the Companies then had the capacity to address their funding difficulties, other than by the efforts that were then purportedly being made by Mr Seymour and Mr Birch. Mr Bunbury was also cross-examined as to the fact that several staff had left the Companies prior to October 2023 (T173ff); I accept that that is a significant matter, although I bear in mind that a purchaser of the Companies’ business would likely either already have qualified staff who could work in such a business or would employ such staff.

17. Mr Cheshire cross-examined Mr Bunbury further as to his dealings with Mr Birch and as to steps taken to seek to address the application to wind up 1derful brought by Think Grow Pty Ltd (“Think Grow”), in which Quadiq Pty Ltd (“Quadiq”) joined as supporting creditor, and a threatened winding up application by Techwondoe Limited (“Techwondoe”). Mr Bunbury did not accept that the issues with Techwondoe were unresolved (T102) and it is not necessary to resolve that question in order to determine these proceedings. Mr Cheshire also cross-examined Mr Bunbury as to the arrangements with PIL, and I accept his evidence that he understood that Mr Birch and Mr Seymour were working to refinance the PIL facility on the basis that a new financier would acquire PIL’s debt (T205); that is, importantly, an entirely different proposition to an acquisition of PIL’s debt for the purpose of immediately relying on an existing default, exercising the security, and selling the Companies’ assets to the securityholder, which were the steps taken by Fletch which I address below.

18. I recognise that Mr Bunbury has an obvious economic interest in the outcome of the proceedings and his evidence is likely affected, consciously or unconsciously, by that interest. I generally accept his evidence, so far as it goes to the question whether Messrs Seymour and Birch had led him and the Companies to believe that they were working to advance the Companies’ interests, where that evidence is consistent with the position as it emerges from the contemporaneous documents. Mr Bunbury either did not himself recognise, or was not frank about, the extent of the difficulties facing the Companies in their relationship with Mastercard or the depth of the Companies’ and his own financial difficulties at the relevant time. At the same time, I recognise that companies that are financially vulnerable or on the brink of failure are no less entitled to honest assistance from those who claim to be working in their interests than companies which are in a strong position and have less need for such assistance.

19. Mr Seymour and Fletch read Mr Seymour’s affidavit dated 10 April 2024. Mr Seymour’s evidence is that he is a director and shareholder of Jigsaw Works which owns shares in a number of businesses including Green Jigsaw and Fletch. Mr Seymour denies that he was engaged by Mr Bunbury or any of the companies associated with Mr Bunbury including the Companies (Seymour 10.4.24 [16]). He contends that Green Jigsaw was engaged by HCP from 20 June 2023 to assist in dealing with the winding up application brought against 1derful in order to give HCP and Murray Darling Capital (“MDC”) “control of the process” and avoid a winding up of 1derful. He also contends that Jigsaw Works was engaged by FIFO Capital from around 18 July 2023 until September 2023 to provide advice to FIFO Capital in respect of FIFO Capital’s position as a secured creditor of the Companies (Seymour 10.4.24 [18]). The existence of those arrangements would not, of course, necessarily exclude the existence of an undertaking given by Mr Seymour to act in the interests of the Companies and/or Mr Bunbury in the relevant circumstances, nor does a fiduciary duty owed by Mr Seymour depend upon the existence of a contractual engagement by Mr Seymour by the Companies. Mr Seymour addresses further steps taken by him and others in respect of the winding up application and his dealings with Mr Bunbury in respect of that winding up application, although the detail of those steps are not material to any matter that I decide.

20. Mr Seymour’s evidence, first given in cross-examination, was also that Mr Dahan (through HCP) had sought to acquire the Companies’ debt at least “in part” for the purpose of subsequently acquiring the Companies’ business. His evidence in cross-examination, apparently in respect of HCP’s purpose, was that:

“It was put to me that Mr Bunbury was an outstanding salesman, the thing was insolvent, it was in trouble, they were going to restructure it, recapitalise it, and put it into a new entity, and that’s how the capital was going to be done. That’s how it was put to me.” (T264)

That answer, and many of the answers given by Mr Seymour in cross-examination, did not adequately distinguish between a “refinancing” of a company’s debt, which allows the company to retain its assets with a new lender in place, and the acquisition of debt and security by a party which then exercises its security to acquire the company’s assets for itself.

24. Mr Seymour also claimed in cross-examination (T265) that the “term sheets” for refinancings issued by Mr Bunbury and his solicitor had the same effect as the transaction later executed by Fletch. That proposition was plainly not correct, where those term sheets were directed to a refinancing of the Companies by which they retained their assets, and not the forced sale of those assets by the securityholder to itself. Mr Seymour, in cross-examination, also sought to rebut criticism of the acquisition of the Companies’ assets on the basis that the Business Sale Agreement (“BSA”) executed by Fletch as controller of the Companies and Fletch as purchaser contemplated a valuation of the business to be completed after its transfer to Fletch (T266); however, that proposition had the obvious difficulties that Fletch would control how and whether that valuation took place and, in the event, Fletch did not complete that valuation. It is no answer to those difficulties that Fletch chose not to do so because Mr Bunbury had asserted a lien over critical assets to prevent its acquisition of those assets, where it had not in fact paid their fair value. It also appears from Mr Seymour’s cross-examination (T267) that this is not the first occasion on which steps of this kind have been taken, since he referred to HCP having taken the same approach with his assistance in respect of a third party “a couple of years ago.”

25. I recognise that Mr Seymour pointed in cross-examination to a likely explanation for the concealment of aspects of the transaction from the Companies and Mr Bunbury, namely a concern that Mr Bunbury would remove assets from the Companies (T324), and I recognise that Mr Bunbury later asserted a lien over the Companies’ assets to avoid providing them to the receiver appointed by Fletch. Mr Seymour acknowledged in cross-examination that he took the view that it would be possible to lift the suspension of the Companies’ Mastercard privileges and rebuild the relationship with Mastercard using Fletch, although he claimed that it would cost “millions of dollars” to do so (T331). His evidence (T331-332) was also that Fletch later did not obtain a valuation of the Companies business, as contemplated by the BSA, because it had not acquired the assets or necessary passwords and could not obtain a specialist report to assess the technology; he understood that Mr Bunbury trusted him and continued to trust him into September 2023, in the context that he was working on the overall engagement from HCP; he understood that Mr Bunbury had involved him in the Company’s finances and Mr Bunbury’s personal finances and given him information about those finances, in the context of that engagement; he acknowledged that he had not disclosed Mr Birch’s intention to acquire the assets of the Companies through Fletch to Mr Bunbury; he denied that he intended to acquire the Companies’ assets at less than true value or anticipated that such an acquisition would not later be challenged because Mr Bunbury would by then be bankrupt and the Companies in liquidation; and he denied that he intended those assets be acquired in a manner that would damage the Companies or their creditors.

26. I should also record that, at the conclusion of Mr Seymour’s cross-examination, I raised several matters with Mr Seymour, including the possibility that the Court may refer the matter to ASIC for it to consider whether to make a banning order against him, and I afforded him the opportunity to respond to that possibility. He responded as follows (T335):

“Your Honour throughout this process I was initially engaged to keep 1derful alive, and have the winding up proceeds dealt with, and I did that. The secondary part of that engagement was to assist in recovering creditors’ money. I am very familiar with the insolvency provisions of the Corporations Act, and the requirements or [sic] the situation that a director of an insolvent company’s first obligation is to creditors and not to shareholders.

My actions throughout this whole process were absolutely directed at assisting creditors to recover as much as possible. I took advice and ensured that processes were put in place that I would run if I was running this as an insolvency file. I had significant concerns about what would happen to the assets of the company if I made disclosures to Mr Bunbury that in hindsight perhaps I should have made. But I believed that my actions were going to maximise the outcome for the creditors of the company at every step, and that was the basis on which I took the action.”

27. I should make two observations as to that answer. The first is that, even if Mr Seymour’s concerns that Mr Bunbury would take or secure the Companies’ assets if he had been made aware of Fletch’s plans were well-founded, that provides no justification for non-disclosure to the Companies or Mr Bunbury in the relevant circumstances. Disclosure which is required by law or commercial morality is often practically disadvantageous to a party who complies with that obligation. Second, this was, at best, a belated acknowledgment of the substantial issues arising from non-disclosure in this matter.

28. Mr DeBuse, who appears for the Plaintiffs, submitted that:

“Mr Seymour should not be believed, nor should his narrative even in documents of which he is the author because he showed himself incapable of giving an account which did not include new allegations evasions or disclaimers of responsibility that is in addition to his many denials of matters self-evident on the face of documents. Eventually and perhaps most importantly, was the secrecy involved in the performance of the scheme which at first he denied although admitting he never sent the road map but confronted with his own account from documents produced by him he admitted critically that Mr Bunbury was unaware of the fact that the charge was to be acquired through the assignment of the debt and that assets were to be transferred in accordance with the “road map”.”

29. Mr Seymour was generally accurate in respect of the chronology of events and his affidavit evidence had plainly been prepared with close attention to the contemporaneous documents. He was otherwise an unsatisfactory witness. His evidence was replete with non-responsive answers and attacks on the Companies and Mr Bunbury, which he plainly perceived would advance his interest in showing that, because they were not forthcoming as to the extent of their financial difficulties or were likely to fail in any event, there was no difficulty with the course he had adopted. He sought to maintain that his associated company was in reality working for FIFO Capital from mid-July 2023, where I will find below that he had engineered such a retainer in order to promote his own and Mr Birch’s interests to the disadvantage of FIFO Capital and the Companies. Mr Seymour, in cross-examination, also did not frankly acknowledge the extent to which, from at least mid-July 2023, he was working to advance his own interests to the potential (and ultimately actual) detriment of the Companies and FIFO Capital, with the exception of the concessions that he made at T331-332 and T335. I largely accept his evidence his identification of the chronology of events but I largely do not accept his evidence as to the content of conversations or the purpose or commercial substance of steps that he and Mr Birch took unless it is corroborated by contemporaneous documents. I will refer to several events addressed by Mr Seymour’s evidence in the chronology below.

29. Mr Seymour and Fletch also read the affidavit dated 10 April 2024 of Mr Dahan, who is the sole director of HCP. Mr Dahan refers to the circumstances in which Mr Birch introduced him to Mr Bunbury, initially in connection with Mr Bunbury’s seeking finance to purchase a property personally, and to the extension of Mr Dahan’s involvement to raising funds for the Companies. Mr Dahan’s evidence is that he raised $2 million in capital for the Companies from several investors in about June 2020. His evidence is that he became aware of a winding up application in respect of 1derful brought by Think Grow in May 2023 and Mr Bunbury then requested his assistance to raise funds to resolve that winding up application.

30. Mr Dahan’s evidence was initially that he had numerous conversations with Mr Bunbury in relation to the winding up application in early June 2023, in which he proposed that HCP would acquire 1derful’s debts to Think Grow and Quadiq in order to resolve the winding up application. Mr Dahan accepted in cross-examination that those conversations did not occur until later, after he had engaged Mr Seymour and his associated company in relation to the winding up application, and Mr Seymour had developed that proposition. Mr Dahan then set out a conversation with Mr Birch and Mr Seymour on 20 June 2023, although his evidence in cross-examination was that he had several conversations with Mr Seymour prior to that date, a proposition that Mr Seymour denied. It was plain from Mr Dahan’s evidence on cross-examination that he had little real recollection of events and I give little weight to his account of that or other conversations. Mr Dahan also addressed steps which were taken to refinance a personal asset of Mr Bunbury, an expensive motor vehicle, and the way in which the resulting funds were disbursed, although it was not apparent that that matter has any significance for any issue that I have to determine in the proceedings. Mr Bunbury denies aspects of Mr Dahan’s affidavit as to the dealings between the Companies and HCP, but it is not necessary to resolve any of the disputed matters in order to determine these proceedings.

31. Mr Dahan was cross-examined at some length. He accepted in cross-examination that the purpose expressed by Mr Birch or Mr Seymour for the meeting held on 16 August 2023 (which I address below) was, among other things, to discuss plans to acquire the Companies’ assets (T137). That proposition is significant so far as events had then moved beyond a refinancing of the Companies’ debt, which would have involved the acquisition of the debt and the security, to the additional steps which would be involved in enforcing that security so as to acquire those assets. After Fletch had acquired the Companies’ assets, Mr Dahan suggested to Mr Bunbury that the latter’s having an interest in what remained would be better than nothing (T237); little turns on that, where the Companies had by that point lost their business to Fletch in the manner I set out below. Mr Dahan accepted that, although he became aware of Mr Birch’s and Mr Seymour’s discussions about acquiring the Companies’ assets at an earlier time, he first disclosed that matter to Mr Bunbury in December 2023, after Fletch’s forced acquisition of those assets was complete (T240).

32. Mr DeBuse submitted that:

“Mr Dahan’s account of the events so far as his evidence was relevant should not be accepted. Mr Dahan’s evidence was a rambling amalgamated recollection of unparticularised events, of which he provided an opaque review in respect of the only relevant conversation which occurred on 20 June 2023. His failure as a historian and as a witness is best illustrated by an event he described in cross-examination in which he shook the Second Defendant’s hand agreeing to be responsible for the fees to be incurred in relation to events the next day, the principal problem with such account being that up to that moment, and in all other accounts, including by him, the relevant conversation took place on the telephone. It is notable that rather than Mr Dahan and Mr Seymour talking because they were both in Melbourne, Mr Seymour’s evidence was that Mr Seymour would not take Mr Dahan’s calls because he was owed money.

The only evidence which Mr Dahan gave that should be accepted is that [a] Mr Seymour introduced the proposal to acquire the debts of Think Grow as a means to control the winding up application; and [b] That Mr Dahan introduced Mr Seymour to 1derful on 20 June 2024 as someone who could assist it dealing with the winding up application; and [c] That he and Mr Birch agreed to be personally responsible for the costs of $20,000.”

34. I accept that Mr Dahan’s lack of recollection was such that he was able to give little useful evidence in his affidavit or cross-examination. Neither his affidavit nor his cross-examination significantly advanced any issue in the proceedings.

35. Mr Birch relied on his affidavit dated 10 April 2024. His evidence is that he has worked in the financial services industry since his graduation, and that he became a partner of MDC in about October 2019. His evidence is that he also owns a stake in Trilogy, which has been working with The Agency Group Australia Pty Ltd (“The Agency”) to acquire and manage residential real estate agencies in New South Wales and Queensland (Birch [9]). He also established Handy Payments Pty Ltd (“Handy Payments”) in January 2020 to provide loans for landlords to fund maintenance, renovations and other landlord expenses (Birch [10]). Mr Birch had known Mr Bunbury for about 10 years and his children had attended the same kindergarten and the same school. I will refer to Mr Birch’s evidence as to the events in issue in setting out the chronology of events below.

36. Mr Birch, in cross-examination, sought to characterise his role as working for Gibraltar Capital Pty Ltd (“Gibraltar Capital”) in its capacity as a trustee which was preparing a fund in which lenders introduced by Mr Bunbury would invest (T369). I do not accept that characterisation, where Gibraltar Capital’s role was plainly not, in practice, limited to passively awaiting the arrival of investors introduced by Mr Bunbury and Mr Birch was engaged on an ongoing basis with potential investors. Mr Birch’s evidence (T376) was also that he had advised 1derful he was not trying to locate or identify funding for 1derful. I also do not accept that evidence given Gibraltar Capital’s description of its role in the contemporaneous correspondence with PIL and Mastercard, which I address below.

37. Mr Birch, in cross-examination, also gave evidence that he had not read (or at least did not recall reading) much of the correspondence directed to him in respect of the latter part of the transaction, including the detailed road maps in respect of the relevant transactions and letters which he had forwarded to third parties which identified him as the contact point. I will address those matters in the chronology below. I also cannot accept Mr Birch’s evidence in this regard. It seems to me highly implausible that, for example, Mr Birch would forward letters to third parties that identified him as the contact point, without informing himself as to their content so as to deal with any contact that those third parties then made with him. I also address Mr Birch’s claim to have had no substantive involvement in the matter after 25 August 2023 below. Mr Birch did not accept in cross-examination (T404) that it would be commercially unethical if the transaction was intended to bring about Fletch’s acquisition of the Companies’ assets for itself, or without informing Mr Bunbury or the Companies of that intention, but did accept that it would be commercially unethical if it was undertaken for the purpose of acquiring those assets at less than true value.

38. I recognise that, as I have noted above, it is possible that a witness may be in error in aspects of his or her evidence or to give false evidence in aspects of his or her evidence and nonetheless to give truthful evidence in other aspects of his or her evidence, but there seems to me to be little room for Mr Birch to have been innocently mistaken as to his recollection whether he read correspondence as to critical matters and as to his knowledge of critical aspects of the transaction in the period prior to its implementation; and the unreliability of his evidence as to these matters undermines the reliability of his evidence generally. I largely cannot accept Mr Birch’s evidence as to contested matters unless it is corroborated by contemporaneous documents.

39. The Plaintiffs read, in reply, an affidavit dated 18 September 2024 of Mr Kopp, who is a director of FIFO Capital. Mr Kopp was not cross-examined to contest the truth of his evidence which is supported by notes of conversations with Mr Seymour which were unchallenged. I refer to his evidence in the chronology which appears below. Mr Kopp’s uncontested evidence, led in response to paragraphs 97-98 of Mr Seymour’s affidavit, was also that Mr Seymour had also made several statements to him prior to October 2023 that 1derful was worth at least $2 million and that FIFO Capital would be repaid in respect of the transaction, which has not occurred.

Expert and other valuation evidence

40. I now turn to the expert valuation evidence led by the parties and other valuation evidence, which is relevant both to the Plaintiffs’ causes of action and to their claim for damages or compensation. The Plaintiffs read an affidavit dated 17 March 2024 of Mr Davies and relied on his report dated 17 March 2024. Mr Davies had used revenue per customer figures and identified the number of customers falling within particular cohorts, based upon a third party’s contemporaneous projection, to derive an implied enterprise valuation by reference to the Companies’ H1 2024 projected revenues. He reached an unadjusted enterprise value of in excess of $33.7 million by that method, which he then increased by applying a control premium of 27.5% and discounted for a lack of marketability by 19.1%, and applied a further discount factor to take account of, inter alia, the risks attached to the Companies’ business to achieve present value of the adjusted enterprise value of the Companies of in excess of $29.7 million. Mr Davies alternatively assessed the current value of the Companies, on the basis the revenues were not evident and the relationship with Mastercard had “stalled”, as nil.

41. By a second affidavit dated 23 September 2024, Mr Davies expanded on his qualifications and experience and provided a limited explanation of the basis on which the comparable companies to which he had referred were selected, referring to their “similar profit margin expectations”. An immediate difficulty with that approach is that any profit margin expectations of the Companies depended, critically, on their ability to survive their significant financial difficulties By a third affidavit dated 26 September 2024 and a further report attached to that affidavit, Mr Davies expanded on the process which had derived the H1 2024 revenues used in his report, by a method described as “cohort modelling”. It is not necessary to address that method at any length, where the assumptions which underlay it were plainly not established for the reasons noted below. Mr Davies also explained the approach to growth adopted in that report, but the basis of that approach was also not established, where it assumed the Companies’ ability to acquire further customers which also depended on their capacity to fund their ongoing business. Mr Davies also explained the approach which he had adopted to a control premium and to a discount for lack of marketability, at least to some extent, and the role of a chartered accountant, Mr Tan, who had assisted him with the financial modelling undertaken for the purposes of his report.

42. Mr Cheshire cross-examined Mr Davies as to, inter alia, his failure to adjust the projected revenue of the Companies for the year ended 30 June 2023 by reference to their actual revenue for that period, which would have been known by the valuation date adopted for Mr Davies’ report and by the date that report was prepared; and as to the identification of comparable companies from which he derived the revenue multiple which he applied. Both issues undermined Mr Davis approach; as to the latter, companies that were of greater financial strength than the Companies was not appropriate comparators, even if they were in the same line of business as the Companies. Mr Cheshire also cross-examined Mr Davies in respect of the discount rate and the discount for lack of marketability that he had adopted, but it is not necessary to address those matters where the fundamental difficulty with Mr Davies’ report is that the Plaintiffs have not established the assumptions upon which it depends.

43. In closing submissions, Mr Cheshire also challenged Mr Davies’ expertise. It seemed to me that he had strong expertise as to the particular complexities involved in the valuation of start-up technology companies, although I recognise he is not an accountant and typically values start up technology companies in a commercial context and with the assistance of valuers or chartered financial analysts, as he had done in his report in this matter. I accept that Mr Davies had sufficient expertise to express a view as to the value of the Companies’ business. Mr Cheshire also submits that Mr Davies evidence was “partisan and unsatisfactory”. I do not share that view and it seemed to me that Mr Davies gave generally reasonable, thoughtful and constructive evidence in cross-examination, within the limits of the assumptions he had been given and the difficulty of the valuation task, in response to a vigorous cross-examination by Mr Cheshire.

44. However, there were fundamental difficulties with the assumptions Mr Davies had made in valuing 1derful’s business. First, as I noted above, Mr Davies applies a multiple to a contemporaneous projection made by a third party of 1derful’s future sales and revenue for H1 2024 to derive his valuation; however, there is no evidence that supports the correctness of that projection and no evidence of any substantive review or testing of it by the Companies’ management. The revenue involves implied assumptions as to the Companies’ future customer numbers and revenue per customer, and the same difficulties arise with those assumptions. Second, although Mr Davies was not entirely consistent in his evidence in this respect, he appears to have assumed that the Companies would be able to reinstate their agreement with Mastercard for the purposes of the valuation and the evidence also does not establish a reasonable basis for that assumption, although a third party acquiring the business might well have been able to do so. I recognise that, as I noted above, Mr Cheshire cross-examined Mr Bunbury at length as to the issues in the Mastercard relationship and his closing submissions advance detailed criticisms of Mr Bunbury’s evidence and deal, at length, with Mastercard’s then unsatisfied requirements before it would exercise any discretion to reinstate that relationship. It is not necessary to address those issues or those submissions at length where, even apart from them, the evidence does not provide a sufficient basis to find that relationship would be reinstated while the Companies retained the business, and were in real financial difficulty, rather than after a sufficiently funded third party had purchased that business. Third, Mr Davies’ valuation assumed the continuance of the Companies’ business in circumstances that their substantial financial difficulties suggested a probability that it would fail in the short to middle term. Fourth, there is no basis to think that his discount figure was sufficient to adjust for the substantial risk that then existed in the Companies’ business. These matters are sufficient, without more, to have the result that I could not accept Mr Davies estimated fair enterprise value of the Companies as at 31 August 2023 in the amount of $29.7 million, or any figure of that magnitude, and I could not adjust that figure in any way that would allow it any reasonable basis.

45. The Defendants read the affidavit dated 3 June 2024 of Mr Kompos and relied on his report of the same date. Mr Kompos set out his background in his report, which indicated that he has insolvency experience and performed a contract role at a financial services provider between 2017 and 2018 and has subsequently undertaken forensic accounting work. Mr Kompos’ first report dated 3 June 2024 was relatively short and indicated that his valuation was directed to:

“The value of the 1derful Companies’ business that was acquired by [Fletch] pursuant to the [BSA] between [Fletch] as controller of the 1derful Companies and [Fletch] (“1derful Business”) at 31 August 2023 and 3 October 2023.”

46. Mr Kompos indicated, in paragraph 13 of his report, that he had adopted “market value” as the basis for the valuation; that, however, is inconsistent with the statement in Appendix 3 of his report that the report had been prepared in accordance with business valuation standard APES 225 and adopted a “liquidation value” of the relevant assets. That approach likely reflected an assumption that he was asked to make, that the Companies were insolvent. However, that assumption was not proved, although the Companies were at least in significant financial difficulty. Mr Kompos plainly adopted a liquidation value in his report, since he applied an 80% discount to the value of the Companies’ assets for insolvency, although the Companies’ insolvency had not been proved; the Companies were not in liquidation at the date of the valuation at 31 August 2023 and are not now in liquidation; Fletch as the purchaser of the assets was also not then or now in liquidation; and, contrary to the view asserted by Mr Kompos without any substantial reasoning, it was not apparent that the value of the assets to a potential purchaser would have been affected by a liquidation of the Companies as vendor, still less in a way that warranted an 80% discount. Mr Walker rightly did not seek to defend that important aspect of Mr Walker’s report in closing submissions.

47. Mr Kompos defined the concept of market value as follows:

“Market value is defined as the price at which a business or equity would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell, and both having reasonable knowledge of relevant facts.

Market value, as defined above, is a concept of value which may or may not equal the sale price that could be obtained if the business or equity was sold to a special purchaser in an actual transaction in the open market. Special purchasers may be willing to pay higher prices to gain control or obtain the capacity to reduce or eliminate competition, ensure a source of revenue, or obtain costs savings arising from business competitions following acquisitions or other synergies which could be enjoyed by the purchaser.”

I note that Mr Kompos’ definition of “special purchaser” was there so wide as to extend to many or all purchasers of a business such as the Companies, where it is difficult to imagine a purchaser that would acquire a business other than to reduce or eliminate competition, obtain revenue from it or obtain costs savings or other synergies from it.

48. Mr Kompos’ report also referred to an additional instruction that other key personnel had departed 1derful at the valuation dates; I assume that instruction was of some significance for his report, but he did not address its relevance to his reasoning process; or how he had adjusted for the likelihood that a purchaser of the Companies’ business would have or employ staff who would provide expertise. In his first report, Mr Kompos made a further assumption, which proved to be incorrect, as to the nature of Mastercard revenue appearing in the Companies’ management accounts for the period ended 31 May 2023. He also made a second assumption, which was not established, that Douugh was 1derful’s only customer by August 2023.

48. Mr Kompos outlined his valuation methodology, in a broadly orthodox way, although largely without addressing complexities in respect of the valuation of startup businesses which have been recognised in the academic literature that I note below. He fairly recognised that:

“A multiple of revenue may be an appropriate approach as a proxy for future earnings in industries where EBITDA is volatile (positive and negative) due to temporary industry or economic factors, the businesses are in early years of operation and have yet to reach the point where they generate positive EBITDA or have not reached full profitability (eg start-ups).”

50. Mr Kompos observed (at [2.2.19]) that he had utilised a multiple of revenue methodology as:

“(a)   Businesses were in the early years of operation and had yet to reach the point where it generated positive EBITDA.

(b)   The multi-year future cashflows prepared appear unrealistic based on the performance of 1derful’s business, the operational issues being experienced, and the number of 2B customers acquired at the valuation dates.

(c)   I am not aware of any industry specific methodologies for this type of business.”

51. That approach points to the difficulty of relying on historical revenue or forecasting future revenue in respect of a startup business, prior to the point at which that business has achieved a stable revenue stream, when much of the value of its business is likely to be in the prospect of future increased revenue.

52. Mr Kompos then noted (at [3.1.1]) that he had applied a capitalisation revenue approach by assessing 1derful’s recurring revenue at the valuation dates in applying an “appropriate multiple” from comparable company data. It seems to me that methodology did not here adequately take account of future increases in revenue, whereas a willing vendor and willing purchaser would likely have had regard to the prospect of increased future revenues in negotiating a purchase price for a start-up business. The multiples adopted by Mr Kompos did not adequately address this issue, where they appear to have been drawn from companies with more established businesses than the Companies, as Mr Kompos recognised (at [3.3.4] of his report). Mr Kompos also identified (at [3.3.13]) further matters which he contended made it inappropriate to value the Companies’ business as a “going concern” and expressed the view, by reference to unidentified experience in insolvency administrations, that a purchaser would likely pay in the order of 20% of the value of the assets to acquire them. On that basis, Mr Kompos valued the Companies’ business at $343,126, but discounted its market value to $69,000. As I noted above, Mr Walker did not seek to support that discount in closing submissions. I would have given little weight to these aspects of Mr Kompos’ first report, where his approach in determining the going concern valuation of the Companies’ business seems to me to have had insufficient regard to its prospective character and the insolvency discount to the value of the Companies’ business that he adopted did not have any substantial basis.

53. Mr Kompos also advanced several criticisms of Mr Davies’ report. He accepted that Mr Davies’ use of a “guideline public company methodology” was comparable with Mr Kompos’ multiple of revenue methodology, although they seem to have differed in their approach to future earnings, and he accepted that two companies identified by Mr Davies were comparable companies. Mr Kompos criticised Mr Davies’ determination of a value based on a 75% percentile of comparable companies and expressed the view that the revenue multiple applied by Mr Davies was too high; expressed the view that the revenue multiples adopted by Mr Davies could not be applied to the projected revenues used in Mr Davies’ report; and noted that Mr Davies had not adequately tested whether the Companies’ revenue projections were reasonable. These criticisms have considerable force, but the more fundamental difficulty with Mr Davies report is, as I have noted above, that the growth assumptions adopted in Mr Davies’ report were not established.

54. The Defendants also relied on a second affidavit of Mr Kompos dated 30 September 2024 and his further report, responding to Mr Bunbury’s affidavit dated 18 September 2024 which challenged the factual basis of the assumptions made in his earlier report, and responding to Mr Davies’ further reports dated 23 and 26 September 2024. In that further report, Mr Kompos accepted that, having regard to Mr Bunbury’s evidence and the terms of the Mastercard Agreement, the assumptions on which he had relied in his earlier report (at [1.3.1]) as to the nature of revenue received by the Companies from Mastercard was incorrect. Mr Kompos expressed the view that that would reduce his assessment of recurrent revenue in the Companies’ business and result in a minor reduction in the valuation of the business to $64,000.

55. In his second report, Mr Kompos acknowledged that assumptions which he had been provided and adopted in his first report as to the number of customers of 1derful by August 2023 and its earnings from credit and debit card transactions appeared to be incorrect and indicated that he no longer relied on them, and abandoned the analysis in paragraph 3.2.2 and part of paragraph 3.2.3 in his first report. On that basis, Mr Kompos indicated that he would revise the going concern valuation of the Companies’ business upward to $533,072, which he again discounted by 80% on a liquidation basis, to reach a value of $107,000. He conditioned that revision on 1derful’s receiving payment of the invoices it had issued, but did not explain why a revenue-based approach would depend on the fact of payment, particularly in the complex factual circumstances of this case, rather than on the Companies’ entitlement to payment of those invoices. While Mr Kompos’ revised valuation on a going concern basis is somewhat more realistic than his earlier valuations, it still seems to me to have had insufficient regard to the prospective character of the business and the insolvency discount to the value of the Companies’ business that he adopted still did not have any substantial basis.

56. In his second report, Mr Kompos also responds to Mr Davies’ assessment of comparable companies and to Mr Davies’ treatment of revenue and expresses the view that the revenue projections adopted by Mr Davies in his report were unrealistic. I have concluded above that the basis for those revenue projections has not been established. Mr Kompos also addresses the control premium, discount for marketability and use of comparable companies’ data in Mr Davies’ further evidence. It is not necessary to address his further evidence in that respect, other than to note that I do not accept his evidence that it is not appropriate to take account of synergistic benefits which is, first, a bare assertion; second, implausible, where a willing vendor and willing purchaser would likely negotiate the treatment of those benefits; and, third and for completeness, inconsistent with the view has been expressed by a sophisticated academic commentator in W Bratton, “Fair Value as Process: A Retrospective Reconsideration of Delaware Appraisal” (2023) Del J Corp L 497 at 521-522.

57. Mr Kompos’ assessment of the value of the Companies’ business was significantly less than Mr Seymour’s contemporaneous assessment of its value as not less than $2 million, to which I refer below, and also significantly less than the amount that Fletch and its (then) parent company, Axiom, an apparently informed purchaser which was assisted by Messrs Seymour and Birch who were plainly sophisticated market participants, was prepared to pay PIL to secure the opportunity to acquire the business by the exercise of security. That difference likely reflects the fact that Mr Seymour and Fletch both rightly recognised that the value of the Companies’ business to a purchaser was largely a matter of its potential and its technology rather than its then revenue and Mr Kompos’ valuation, as I noted above, had not adequately accounted for that potential. Mr Kompos was cross-examined at some length. It emerged, in the course of that cross-examination, that he had a past professional association with Mr Seymour, although I recognise that that association was not recent. I have concluded that Mr Kompos’ reports provide little assistance in valuing the Companies’ business and are likely a less realistic valuation of that business than Mr Seymour’s contemporaneous assessment of the value of the business before the transaction was implemented.

58. For completeness, I should also note that the expert witnesses and the parties paid limited attention to the complexities of the valuation of startup technology companies, which have been recognised in academic literature. Mr DeBuse drew attention in closing submissions to the detailed analysis of these issues in one paper, [1] and to academic commentary and Delaware case law concerning valuation principles generally. [2] The parties did not address other legal commentary as to these matters [3] and I should not do so where the parties have not done so.

    1. A Damoradan, “Valuing Young, Start-up and Growth Companies: Estimation Issues and Valuation Challenges” (June 12, 2009; SSRN:

    2. E Mantell & E Shea, “Development and Application of Business Valuation Methods by the Delaware Courts” (2021) 17 Hastings Business LJ 335; HBK Master Fund LP v Pivotal Software Inc, Delaware Court of Chancery, 14 August 2023.

    3. For example, E Dubiansky, “An Analysis for the Valuation of Venture Capital-Funded Startup Firm Patents” (2006) 12 BU J Sci and Tech L 170; BK Krumm, “Fostering Innovation and Entrepreneurship: Shark Tank shouldn’t be a Model (2017) 70 Ark L Rev 553 at 573; A Lynch, “Believing in Unicorns: How to Value Unicorn Companies and Intellectual Property while Encouraging Continuing Innovations and Public Disclosure” (2021) 72 Case Wes L Rev 421 at 430-431; AF Tuch, “Fairness Opinions and SPAC Reform” (2023) 100 Wash UL Rev 1793 at 1817-1819 and note the valuation commentary cited at footnote 92.

59. I have considered whether, notwithstanding that I cannot accept either of the parties’ expert evidence, I can proceed by reference to the value of the Companies’ business that was recognised by Mr Seymour, when he repeatedly told FIFO Capital that the value of that business was not less than or in excess of $2 million. I should here summarise the evidence as to that matter, which I have addressed in the chronology above. On 28 August 2023, and after a meeting with Mastercard to discuss the proposed acquisition of the Companies’ business and potential reinstatement of the Mastercard Agreement, Mr Seymour had advised Mr Kopp of FIFO Capital that, if the valuation of the Companies “comes back at $2 million, then there would be enough money to pay FIFO Capital” and that “[i]f or when Mastercard turns the agreement back on, then the value of the assets is still significantly higher” (emphasis added) (Kopp [11(f)]). Although that observation contemplated a future valuation made under the BSA, which Fletch did not later complete, it was plainly directed to the value of that business before the suspension of the Mastercard Agreement was lifted, likely taking into account the prospect that it would be lifted, which would be increased if and when that Agreement was reinstated. On the same day, Mr Seymour again advised Mr Kopp and another director of FIFO Capital of his assessment that the Companies’ assets “are worth at least $2 million every day of the week” and that he could not see the assets “being worth less than $2 million”, comprising value for the customers, the strategy, the credit licence, the agreements and the code (Kopp [11(f)]). Mr Kopp’s unchallenged evidence (Kopp [14]) is also that Mr Seymour made several statements to him during the months prior to October 2023 that “1derful was worth at least $2 million” and, in an email dated 6 October 2023 (Ex D1/2, CB 2318), Mr Kopp reminded Mr Seymour that he had several times expressed that view and Mr Seymour did not deny doing so in his email in response.

60. This assessment of the value of the Companies’ business may be admissible as an admission against Mr Seymour and Fletch; Mr Cheshire rightly points out that it is not admissible as an admission against Mr Birch; in any event, I treat it as evidence of the value of the minimum value of that business, as assessed by a sophisticated participant in the transaction who had a real incentive to reach an accurate commercial valuation; was conscious of the uncertainty arising from the need to reinstate the Mastercard Agreement and of the prospects of its renewal; and must have known that this matter was of real importance to FIFO Capital as a second-ranking creditor whose prospects of recovery depended on the value of that business. I am satisfied that the $2 million figure likely reflected an implicit assessment of the prospect that the renewal of the MasterCard Agreement could be achieved, and recognised that value would be increased (as the conversation with Mr Kopp indicated) when and if that was achieved.

Chronology

61. I now set out the chronology of events, for which I have drawn upon the pleadings, the parties chronologies, the affidavit evidence and cross-examination and documents tendered. This chronology incorporates my findings as to contested matters as necessary.

62. The Companies were both incorporated on 3 October 2019 (Ex P1, CB 109-130) and, on 15 June 2021, Mr Bunbury was appointed as the director of each of the Companies. The Companies received both client revenue and refundable R&D tax offset payments over the relevant period. In the financial year ending 30 June 2020, 1derful received a refundable R&D tax offset in the sum of $307,032.57 (Ex P2, CB 640, 646). In the financial year ending 30 June 2021, 1derful received a refundable R&D tax offset in the sum of $977,584.64 (Ex P2, CB 642-643, 646). In the financial year ending 30 June 2022, 1derful received a refundable R&D tax offset in the sum of $1,515,132.41 (Ex P2, CB 645). In the financial year ending 30 June 2023, a Research and Development Tax Incentive Schedule was prepared, estimating the sum of 1derful’s ‘Refundable R&D tax offset’ to be $573,586.22 (Ex P2, CB 647-649).

63. Mr Birch’s evidence (Birch [12]) is that he had a conversation with Mr Bunbury in early February 2020 in which Mr Bunbury requested “help with finding short term capital for my new business 1derful”, which he described as a “new fintech business”, and Mr Bunbury then outlined the services which 1derful was to provide. Mr Bunbury denies (Bunbury 21.6.24 [34]) aspects of that paragraph of Mr Birch’s affidavit. Mr Birch’s evidence is that he then introduced Mr Bunbury to several of his contacts, including Mr Dahan from HCP and that Mr Dahan helped Mr Bunbury raise capital for 1derful and also for Mr Bunbury’s personal purposes. His evidence (Birch [16]) is that, from 2020 to mid-2022, he introduced Mr Bunbury to business contacts, but he was not involved in discussions between Mr Bunbury and those other contacts and that (Birch [17]):

“At no time did Mr Bunbury keep me informed as to where his discussions were at with regard to any potential members or investors.”

64. In December 2020, Mr Birch and Mr Bunbury had an inconsequential exchange as to the form of Mr Bunbury’s business card which referenced other entities, including a company associated with Mr Birch, Handy Payments (Ex P4, CB 1035) and they then had subsequent dealings in respect of Handy Payments (Ex P4, CB 1037, 1115).

65. On 14 October 2021, Mr Birch sent an email to Mr Bunbury enclosing an Engagement Letter from MDC in relation to “Capital Advisory Services”, in his capacity as a partner in that firm, and the covering email referred to client opportunities including one with The Agency (Ex P4, CB 1138). The Engagement Letter recorded the services to be provided as:

“Advisory services to secure capital for 1derful, by way of debt, equity, and other finance facilities. The Services include but are not limited to:

(a)   Advising 1derful and its founder Luke Bunbury to source a USD$250,000 loan for 1derful to hold as a deposit against a facility offered to 1derful by its partner Mastercard; and

(b)   Advising 1derful to secure a warehouse funding facility or other credit lines to fund the growth of its business.

Any fees payable to MDC for the Services will initially be limited to Road Night Capital and its related entities or introduction.

Any additional introductions made by MDC to 1derful outside of Road Night Capital and its related entities or introductions has to be agreed by both parties in writing for and Fees to be payable to MDC.”

That engagement letter also required 1derful to provide MDC the information that MDC reasonably requested in connection with its services under the engagement, and MDC undertook to maintain confidentiality in respect of the information provided to it by 1derful. Mr Cheshire submits that Mr Bunbury and the Companies on the one hand and Mr Birch on the other did not then enter into any formal agreement, retainer or engagement. It is not necessary to determine that question in order to determine the proceedings.

66. On 20 January 2022, Mr Birch sent a text message to Mr Bunbury saying “… saw funding came in, glad you got it away” and requesting payment of his fees (Ex P4, CB 1039) and then sent several texts pressing Mr Bunbury for payment of his fees, presumably relating to the earlier engagement (Ex P4, CB 1040). On 13 February 2022, Mr Birch sent Mr Bunbury an invoice (issued in the name of his company, Midialel) for “consulting services” provided between 16 and 19 January 2022 in the sum of $11,000 (Ex P4, CB 1143, 1147) and, in March 2022, he reissued that invoice including an additional late payment fee (Ex P4, CB 1147). Mr Birch then refers in his affidavit evidence (Birch [18]-[19]) to an email dated 2 April 2022 to Mr Bunbury, which he characterises as expressing his “dismay” at Mr Bunbury’s “complete disregard for the contacts that I introduced him to”, and says that, after that email, he “parted ways” with Mr Bunbury. Mr Birch subsequently sent Mr Bunbury further text messages pressing for payment of fees in April 2022 (Ex P4, CB 1043) and, on 2 May 2022, Mr Birch issued a further invoice to Mr Bunbury for “consulting services provided in August 2021 to secure urgent short term funding for Mastercard facility” in the amount of $4,231.54, also including late payment fees (Ex P4, CB 1148).

67. In July 2022, Mr Birch again pressed Mr Bunbury for payment of fees and there was a suggestion that he would approach lenders in 1derful’s refinancing process if he was not paid, by a text message dated 7 July 2022 (Ex P4, CB 1045) as follows:

“Mate, please pay my 10K today. I don’t want to be a Thorn in your side. It’s a small amount, you owe it and having me speak to lenders while you complete your refinance is counter-productive.

You have had enough time now, I need it paid today.

Thanks Luke. Appreciate your position. I will eject myself from the process once I get confirmation.” [emphasis added]

Mr Bunbury then responded that:

“The best help you can give me at this stage is to stay clear of it all – please.

I have a structure now that we are putting in place that will erase most of the financiers with only one or two left in (at their choosing) and total debts will be substantially reduced.

This is a delicate balance and having chatter going from various parties is unhelpful.

Happy to discuss.”

Mr Birch then responded expressing scepticism as to 1derful’s capacity to refinance and asserted that he was “genuinely trying to help.” It appears that Mr Birch was, at least by this time, dissatisfied that Mr Bunbury was not paying the amounts that he had billed to the Companies and the dealings between Mr Birch and Mr Bunbury then ceased for a period. These matters are, at best, background to the events that followed.

307. I note that, in Mackinnon as Plaintiff representative of 153 Plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as “STC Sports Trading Club” (No 8) [2019] NSWSC 1658 at [45], Stevenson J observed that the tort of conspiracy may take two forms, the second of which was:

“an agreement or combination between two or more persons to commit an unlawful act with an intention to injure a plaintiff, and the act is carried out and the intention achieved: Williams v Hursey (1959) 103 CLR 30; [1959] HCA 51 (Fullagar J at 78 with Dixon CJ and Kitto J agreeing, Taylor J at 108-109, Menzies J at 125).”

310. As I noted above, Counsel also drew attention to Kunc J’s helpful review of the applicable principles in Haiye which I adopt with gratitude. His Honour there noted (at [408]-[410]) that:

“In Ward v Lewis [1955] 1 WLR 9 (“Ward v Lewis”), the Court of Appeal heard an appeal from a decision granting leave to amend a statement of claim alleging slander and conspiracy to commit slander. In allowing the appeal and striking out the paragraphs that pertained to the alleged conspiracy, Lord Denning (with whom Lord Morris agreed) relevantly said (at 11):

“It is important to remember … that when a tort has been committed by two or more persons an allegation of a prior conspiracy to commit the tort adds nothing. The prior agreement merges in the tort. A party is not allowed to gain an added advantage by charging conspiracy when the agreement has become merged in the tort. It is sometimes sought, by charging conspiracy, to get an added advantage, for instance in proceedings for discovery, or by getting in evidence which would not be admissible in a straight action in tort, or to overcome substantive rules of law, such as here, the rules about republication of slanders. When the court sees attempts of that kind being made, it will discourage them by striking out the allegation of conspiracy, on the simple ground that the conspiracy adds nothing when the tort has in fact been committed.”

A similar conclusion was reached by Adam J in Rubenstein v Truth & Sportsman Ltd [1960] VR 473 where, in an action predominately alleging libel yet also alleging conspiracy to commit libel, his Honour struck out paragraphs of a statement of claim alleging conspiracy to commit libel. See also Sorrell v Smith [1925] AC 700 at 716 per Lord Dunedin; Cabasi v Vila (1940) 64 CLR \130 at 142-143; [1940] HCA 41 per McTiernan J, 151 per Williams J; O’Brien v Dawson (1942) 66 CLR 18 at 27; [1942] HCA 8 per Starke J.

In Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570 (“Allied Mills”), Sheppard J also reached a similar conclusion. …”

311. Kunc J also there observed (at [417]), in respect of the statutory liability for conspiracy under the Trade Practices Act 1974 (Cth) or the ACL that:

“Where two parties conspire (i.e. agree) to effect a contravention of s 18(1) of the ACL, and only one party in fact contravenes s 18(1) of the ACL, only the former party will be liable for conspiring to effect a contravention. The action for conspiracy against the latter party will merge with the principal contravention. I would reach the same conclusion, and apply the same rationale, to s 45(2) of the TPA, albeit I accept that it is far more difficult conceptually to distinguish between an agreement to contravene s 45(2) and the contravention itself given the nature of the prohibited conduct.”

312. His Honour returned to these issues (at [503]ff) and observed that:

“The second submission advanced by Counsel for the Active Defendants rests on what I have canvassed in [407]-[417] above, although Counsel also drew the Court’s attention the following additional passage from Weinberg J’s judgment in McKellar v Container Terminal Management Services Limited [1999] FCA 1101; (1999) 165 ALR 409 at 445-6 (“McKellar”):

‘It is not open to a party to plead as an alternative to a substantive cause of action already pleaded the tort of conspiracy to commit that substantive wrong: Galland v Mineral Underwriters Ltd [1977] WAR 116 at 119–20 per Burt CJ (with whom Wallace J agreed):

“But the question, as it seems to me, which arises upon this appeal is whether a conspiracy to commit a tort when carried into effect is actionable both as an independent tort, that is, the tort of conspiracy, as well as being actionable simply as a tort committed by a number of people acting together to that common end. In the instant case, if it be the fact that the appellant and the other defendants or some of them entered into an agreement to convert the respondent's money, and if it be the fact that the respondent's money was converted in the performance of that agreement and in the manner pleaded, has the appellant committed two actionable torts — conversion and conspiracy — or only one, and if one, which one?

I know of no authority which directly supports my opinion, but it seems to me that the answer to that question should be that on those assumptions the appellant has committed one tort and that is the tort of conversion.”’”

313. His Honour also helpfully summarised the elements of a claim for an unlawful means conspiracy as follows:

“(1) Two or more persons have entered into an agreement or combination to perform unlawful acts: see Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173 at 188 per Lord Diplock (“Lonrho (No 2)”); McKernan v Fraser (1931) 46 CLR 343 at 362; [1931] HCA 54 per Dixon J (with whom Rich and McTeirnan JJ agreed), 378 per Evatt J; Dresna Pty Ltd v Misu Nominees Pty Ltd [2003] FCA 1537 at [99]-[104] per Weinberg J (“Dresna FCA”); Uber at [31]. It is not necessary that the agreement be contractual (see Fatimi at [104(1)]), nor that there be evidence of an express agreement. As Hely J said in Australian Wool Innovation at [62] (see also Uber at [55]):

“A court is entitled to have regard to the overt acts pleaded, and to infer from those acts that there was an express agreement to further the common object of the combination.”

(2) By the agreement or combination, the defendants intended to injure the plaintiff: Dresna FCAFC at [7]. It has, at least since Lonrho Ltd v Shell Petroleum Co Ltd [1981] 1 QB 358; Com LR 74 (“Lonrho”), been accepted that the intention to injure need not be the sole or predominant motive. As his Lordship said in Lonrho (at 75):

“I would suggest that a conspiracy to do an unlawful act — when there is no intent to injure the plaintiff and it is not aimed or directed at him — is not actionable ... But if there is an intent to injure him then it is actionable. The intent to injure may not be the predominant motive. It may be mixed with other motives ... It is sufficient if the conspiracy is aimed or directed at the plaintiff, and it can reasonably be foreseen that it may injure him, and does in fact injure him.”

His Lordship’s observations have since been endorsed in this country on several occasions including by the Victorian Court of Appeal in Uber, where the Court said (at [42]):

“…to establish an unlawful means conspiracy, a plaintiff is required to establish that the purpose of the defendants in combining to engage in or to be complicit in the unlawful conduct included an intention to injure the plaintiff, and that the plaintiff in fact suffered injury by reason of the unlawful conduct. The defendants’ intention to injure the plaintiff need not be the predominant motive for engaging in the unlawful conduct, but may be mixed with other purposes or motives — such as the pursuit of gain for the defendant or others — which may be the predominant motive.”

(3) Quite unlike its criminal law counterpart, the agreement or combination to injure ought to have been executed in whole or in part: see Lonrho (No 2) at 188 per Lord Diplock.

(4) By their execution of the agreement or combination, the defendants have caused loss or damage to the plaintiff: see Fatimi at [104(3)], quoting Marrinan v Vibart [1963] 1 QB 234 at 238 per Salmon J.”

314. His Honour then held (at [511]) that:

“The Plaintiffs do not have an actionable claim for conspiracy to commit the tort of deceit in circumstances where they rely upon that substantive wrong as a separate, individual cause of action. I have already canvassed the legal principles applicable to this reasoning and will not repeat them here (see [407]-[417] above).”

315. I will reach the same result below in respect of the claims for conspiracy against Mr Seymour and Birch, against whom the Plaintiffs had actionable claims for contraventions of s 12CB of the ASIC Act (or the corresponding provision in s 21 of the ACL) but not in respect of Fletch, where no such claim was available for the reasons noted above.

316. I bear in mind the serious character of this allegation and the application of the Briginshaw standard and s 140 of the Evidence Act in determining it. I also recognise the fact that an intention to injure the Plaintiffs, or some of them, is an essential element of the claim. I have not found that a contravention of s 37A of the Conveyancing Act is established here. I have found that a contravention of the statutory prohibition on unconscionable conduct, under s 12CB of the ASIC Act or s 21 of the ACL is established on the part of Messrs Seymour and Birch. The claim for conspiracy goes no further than the matters alleged to give rise to statutory unconscionability on their part and does not support a finding of conspiracy against them that is coincident with their substantive wrong.

317. However, I have held above that Fletch did not contravene s 12CB of the ASIC Act (or the corresponding provision in s 21 of the ACL) because it did not provide financial services or services to the Companies and those sections did not apply to it, and that leaves open the possibility that the Companies can succeed in their claim for conspiracy against Fletch. I am satisfied that Fletch knew, from the date of its incorporation on 22 September 2023 with Mr Seymour as its sole director and company secretary, the matters then known to Mr Seymour which I have set out above, both in the chronology and in dealing with the claim for statutory unconscionability against him. I have also reached findings as to Fletch’s conduct in the chronology set out above, and I find that it joined with Mr Seymour and Mr Birch in the plan that it take an assignment of PIL’s rights in the loan and the security and then in exercising its rights as secured creditor in a manner that was calculated to ensure that the Companies lost any opportunity to repay the loan and allow it to appropriate the Companies’ assets; at the time of the acquisition or subsequently, in its capacity as controller, it did not cause Fletch to assess or pay the fair value of the assets rather than acquiring them at the price that it was prepared to pay; and it knew through Mr Seymour, that these matters were being concealed by Mr Seymour from the Companies.

318. I am satisfied that the entry by Fletch into a combination with at least Mr Seymour to perform unlawful acts, by way of contraventions of the statutory prohibition on unconscionable conduct, under s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL, is established. I am satisfied that Fletch’s intention, through Mr Seymour, to injure the Plaintiffs by that combination is established, where that was the necessary and obvious consequence of concealing its and Mr Seymour’s intentions and implementing a forced acquisition of the Companies’ business by surprise and at undervalue. It is plain that the agreement or combination was executed in whole or in large part, and largely in accordance with the plans which had been made by Mr Seymour to implement it. I am satisfied that by their execution of that combination, Fletch and at least Mr Seymour have caused loss or damage to the Companies, being at least the loss of a business which then had a value of at least $2 million (in Mr Seymour's own assessment) and the loss of any prospect that the Companies could have raised further funding, restored their relationship with Mastercard and then increased the value of that business. I am therefore satisfied that the claim in conspiracy is established against Fletch. I will return to the Plaintiffs' claim for exemplary damages arising from this claim below.

Claim for invalidity of appointment of receiver to 1derful

319. The Plaintiffs also sought (OP [13], SOC [13]) an order that the appointment of Mr Ball as receiver is void or voidable and invalid. The Plaintiffs plead (SOC [43], denied D1/2 Defence [43], D3 Defence [43]) that the power to appoint a receiver contained in the general security documents purportedly assigned by PIL to Fletch was to be used in good faith and for a proper purpose and, in appointing Mr Ball as receiver, Fletch did not act in good faith or for a proper purpose. The appointment of Mr Ball as receiver was part of the course of conduct that I have found contravened s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL. My preliminary view is that that appointment should be set aside to give effective relief against that conduct, but I should allow Mr Ball a further opportunity to be heard prior to making that order, where he has not actively participated in this hearing.

The Plaintiffs’ claim for damages

320. The Plaintiffs claim (OP [14]-[16], SOC [14]-[16]) damages against each of the Defendants, including for trespass and exemplary damages; compensation pursuant to s 1317H of the Corporations Act and equitable compensation, or alternatively, an account of profits. The Plaintiffs plead (SOC [39]-[40], denied D1/2 Defence [39]-[40], D3 Defence [39]-[40]) that, by reason of the Scheme, the alleged breach of fiduciary obligations or the unlawful conspiracy, they have suffered loss and damage and they are entitled to damages or account or equitable compensation from the Defendants. I assume this claim extends to a claim for damages arising from the alleged breach of s 12CB of the ASIC Act (and, by extension, the corresponding provision in s 21 of the ACL) by way of statutory unconscionability. The Plaintiffs also plead (SOC [41], denied D1/2 Defence [41], D3 Defence [41]) that there should be an inquiry as to such amount as is due as damages or equitable compensation following the reconveyance of the business from Fletch to the Companies. The parties ultimately accepted that there would be no need for a separate inquiry as to loss so long as the loss following from a sale of the business at undervalue could be readily calculated.

321. Mr DeBuse draws attention to the observations of Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at [83]; [1991] HCA 54 that:

“The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v Fink (1946) 74 CLR 127, at p 143; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, at pp 411–412; Chaplin v Hicks (1911) 2 KB 786 , at p 792. Indeed, in Jones v Schiffmann (1971) 124 CLR 303, Menzies J. went so far as to say that the assessment of damages … does sometimes, of necessity involve what is guess work rather than estimation”: at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co Ltd v Permanite Ltd (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357–359.”

322. I accept that this is not a case where an assessment of the amount of damages recoverable by the Companies has no rational basis or would be a mere guess, although that assessment will be made on incomplete or imperfect evidence where, for the reasons noted above, I do not accept the valuations of the Companies’ business made by Mr Davies or Mr Kompos and prefer Mr Seymour’s contemporaneous assessment of its value as not less than $2 million: contrast the position where no rational basis for an assessment of damages is available, recognised in Troulis v Vamvoukakis [1998] NSWCA 237 and McCrohan v Harith [2010] NSWCA 67 at [128].

323. I consider that I can properly take a robust approach as to damages where the Defendants’ conduct took the business out of the Companies hands and had the result that its future performance in the Companies’ hands, which would have underpinned its then value, cannot now be known with certainty. I have not neglected Mr Cheshire’s submission that Mr Davies (whose evidence I addressed above) did not identify any difficulty in “working out damages” by identifying “records that ought to have been available but were not.” That submission does give sufficient weight to the real difficulty that, obviously enough, a start up company could never have records of, or know as a fact, the future growth in the revenue of a business that it was prevented from conducting. For these reasons, I accept that Mr Seymour’s contemporaneous assessment of the value of the business as at least $2 million as sufficiently reliable evidence of its then value and I adopt that figure in preference to the much higher value derived by Mr Davies and the lower values derived by Mr Kompos. I am left with a lingering unease that I should have been more robust and adopted a higher value to reflect the potential of that business, notwithstanding the then suspension of the Mastercard Agreement and the Companies’ critical financial difficulties. An appellate court may have the opportunity to address that question, and possibly the wider difficulties in the valuation of start-up technology companies, if an appeal is brought from this judgment.

324. For the reasons set out above, I would make the order sought by the Plaintiffs (depending on their election) that would bring about the return of the Companies business to the Companies, albeit in a degraded state where that business currently likely has no value and where the development of that business will likely be significantly delayed or may now be impossible. Fletch would then be reinstated as a lender to the Companies, where the transfer of the business to it was set aside, but the amount of damages (including any exemplary damages, to which I return below) awarded against it may well exceed the amount of that loan. That order would not be inconsistent with an order for damages or compensation in favour of the Companies calculated by reference to the loss suffered by the Companies on the transfer of business at an undervalue, where that loss is not reduced by the return of the business after its value is lost.

325. On that basis, the amount recoverable by the Plaintiffs in addition to an order setting aside the BSA and providing for the return of the business, whether as equitable compensation for breach of fiduciary duty and knowing assistance against Mr Seymour and Fletch, or damages for contravention of s 12CB of the ASIC Act (or s 21 of the ACL) against Mr Seymour and Mr Birch, or as compensatory damages for conspiracy against Fletch, would be in each case $2 million derived from Mr Seymour’s contemporaneous assessment of the value of the business. The Plaintiffs cannot recover damages for trespass since they did not bring or establish a claim for trespass. They have also not established a basis for damages under s 1317H of the Corporations Act, either by way of compensatory damages or any loss of profits.

326. The Plaintiffs could notionally have also sought to quantify their loss arising from a delay in developing that business, which would have involved the complex exercise of modelling the value or profit of the business but for the wrongful conduct to a date in the middle term; modelling any lesser value or profit of the business to that date, where the wrongful conduct has occurred; and then calculating the loss to that date and discounting it to its present value. There would likely have been real practical difficulties in the Plaintiffs establishing loss on that basis here, given the level of speculation that would be involved in doing so where the Companies’ then start-up business, and they did not do so.

Exemplary damages, set-off and other matters

327. The Plaintiffs have established their claim for conspiracy against Fletch and exemplary damages may be ordered against Fletch on that basis, as sought by the Plaintiffs. However, I should allow submissions as an award of exemplary damages and its quantum, prior to making orders, where that issue was not sufficiently addressed by the parties in closing submissions.

328. The Plaintiffs also plead (SOC [42], denied D1/2 Defence [42], D3 Defence [42]) a set-off of such damages or equitable compensation as are due from Fletch in equity against any amount that may be found by this Court to be due in respect of the debt assigned to Fletch by PIL. No submission was put that set-off would not be available and the amount of damages awarded to the Companies substantially exceed the amount of that loan.

329. Mr Bunbury also claims (SOC [44], not admitted D1/2 Defence [44], D3 Defence [44]) a lien on all of the information and knowledge he has acquired by reason of his employment with the Companies, as against Mr Ball as receiver who it is alleged continues to seek such information, where Mr Bunbury has not been paid his deferred wages and other loaned monies and the disclosure of further information to the receiver will assist in the Scheme. It is not necessary to determine this claim, at least if Mr Ball’s appointment as receiver will be set aside in any event.

Whether the matter should be referred to ASIC

330. It appears that Messrs Seymour and Birch are active participants in the Australian financial services or Australian credit industries. I raised with each of them, at the close of their cross-examination, the possibility that findings might be made, inter alia, that they had not acted honestly or in accordance with their moral obligations. Findings of that kind would be relevant to the question whether a banning order could or should be made by ASIC in respect of either of them. I have considered the question whether this judgment should be referred to ASIC and allowed the parties an opportunity to be heard in that regard. I have ultimately concluded that it is not necessary to do where the judgment, the affidavits that were read and the evidence that was tendered are now all matters of public record. It is open to the Plaintiffs to draw this judgment to ASIC’s attention if they wish to do so and then open to ASIC to take such steps as it considers appropriate in respect of the matters addressed in this judgment. There is no need for the Court to take any further steps in that regard.

Orders

331. The Companies will need to elect between potentially inconsistent remedies, for example, a constructive trust or an injunction requiring return of the business and compensation for the loss of value of the business while it has been in Fletch’s hands, or an account arising from a breach of s 420A of the Corporations Act as quantified above. I understand it to be common ground that, where the Companies recover their loss, it will not be necessary to determine Mr Bunbury’s claims since he would have no recoverable loss other than that deriving from the Companies’ loss.

332. I direct the parties to submit to my Associate agreed short minutes of order to give effect to this judgment (including as to any election between remedies, any consequential steps and exemplary damages) and as to costs or, if there is no agreement between them, their respective short minutes of order and submissions not exceeding 15 pages (in Arial font 12, one and a half spacing) by 4pm on 22 November 2024, and their respective submissions in reply not exceeding 8 pages (in Arial font 12, one and a half spacing) by 4pm on 29 November 2024.

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Endnotes

Decision last updated: 12 November 2024