In the matter of Carbon Copies Composites Pty Ltd

[2023] NSWSC 911

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Carbon Copies Composites Pty Ltd [2023] NSWSC 911

Hearing dates:

11-12, 14, 18-19, 21 July 2023

Date of orders:

3 August 2023

Decision date:

03 August 2023

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to bring in agreed minutes of order to give effect to this judgment.

Catchwords:

EMPLOYMENT AND INDUSTRIAL LAW – Employee or contractor – Where director and shareholder remunerated for the purposes of designing and building an experimental aircraft – Whether implied term that intellectual property developed in the course of employment is held on trust for the employer

CORPORATIONS – Directors and officers – Where director asserts ownership of intellectual property in aircraft design although company funded development of aircraft – Whether breach of statutory duty to act in good faith and for a proper purpose – Whether breach of fiduciary duties under the “no conflict” rule

CONSUMER LAW – Misleading or deceptive conduct – Where several representations as to future matters and omissions are alleged – Whether reasonable grounds for making the alleged representations as to future matters – Whether reasonable expectation of disclosure of alleged omissions – Whether conduct was in “trade or commerce”

Legislation Cited:

- Competition and Consumer Act 2010 (Cth) – Schedule 2, ss 4, 18, 232, 236, 237

- Conveyancing Act 1919 (NSW), s 66G

- Copyright Act 1968 (Cth), ss 35, 202

- Corporations Act 2001 (Cth), ss 181, 182, 183, 237, 1317H

- Evidence Act 1995 (Cth), s 136

- Trade Practices Act 1974 (Cth), s 51AC

Cases Cited:

- Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215

- ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532

- Addstead Pty Ltd (in liq) v Liddan Pty Ltd (1997) 70 SASR 21; 25 ACSR 175

- Australian Air Express v Langford (2005) 147 IR 240

- Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162

- S Changizi v H Rizaie [2021] NSWSC 613

- Cleary vAustralian Co-Operative Foods (No 2) (1999) 32 ACSR 701; [1999] NSWSC 1062

- Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; 92 ALR 193; [1990] HCA 17

- Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55

- Construction, Forestry, Maritime, Mining and Energy Union v Personal Contracting (2022) 398 ALR 404; [2022] HCA 1

- Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37

- Crossman v Taylor [2011] FCA 734

- Digi-tech (Australia) Ltd v Brand (2004) 62 IPR 184; [2004] NSWCA 58

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

- Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21

- Gardex Ltd v Sorata Ltd [1986] RPC 623

- Geltch v MacDonald & Ors [2007] NSWSC 1000

- Gould v Vaggelas (1985) 157 CLR 215

- Gram Engineering Pty Ltd v BlueScope Steel Ltd [2013] FCA 508

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

- Hamilton v Whitehead (1988) 166 CLR 121

- Hollis v Vabu (2001) 207 CLR 21; [2001] HCA 44

- JR Consulting & Drafting Pty Limited v Cummings [2014] NSWSC 1252

- JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; (2016) 116 IPR 440; [2016] FCAFC 20

- Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343

- Lee v Lee's Air Farming Ltd [1960] AC 12

- Lin v Zheng [2023] NSWSCA 174

- Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274; (1988) 84 ALR 700

- New Cap Reinsurance Corporation Ltd v Daya (2008) 66 ACSR 95; [2008] NSWSC 64

- Nicholls & Ors v Michael Wilson & Partners Ltd [2012] NSWCA 383

- No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345

- NRMA Ltd v Yates (2000) 18 ACLC 45; [1999] NSWSC 859

- Oates vConsolidated Capital Services Ltd [2009] NSWCA 183

- OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120

- Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd [1924] 1 KB 762

- Queensland Stations v Federal Commissioner of Taxation (1945) 70 CLR 539

- Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705

- Re Australian International Yacht Club Pty Ltd (2021) 152 ACSR 492; [2021] NSWSC 586

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

- Re Orix Australia Corporation Ltd [2020] NSWSC 1770

- Realestate.com.au Pty Ltd v Hardingham (2022) 406 ALR 678; [2022] HCA 39

- Schmidt v AHRKalimpa Pty Ltd (recs apptd) [2020] VSCA 193

- SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26

- Stav Investments Pty Ltd v Taylor [2022] NSWSC 208

- Stevens v Brodribb Sawmilling (1986) 160 CLR 16; [1986] HCA 1

- Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233

- Taxa Australia Pty Limited v Wang [2018] NSWSC 1412

- Tobiassen v Reilly (2009) 178 IR 213; [2009] WASCA 26

- University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498

- University of Western Australia v Gray (2009) 259 ALR 224; [2009] FCAFC 116

- Vanguard Financial Planners Pty Ltd v Ale (2018) 125 ACSR 1; [2018] NSWSC 314

- Victoria University of Technology v Wilson (2004) 60 IPR 392; [2004] VSC 33

- Watson v Foxman (1995) 49 NSWLR 315

- Varma v Varma [2010] NSWSC 786

- Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963

- Yates v Whitlam (1999) 32 ACSR 595; [1999] NSWSC 976

- Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561; [1955] HCA 73

Texts Cited:

- Stewart’s Guide to Employment Law (Federation Press, 7th ed, 2021)

- C Sappideen et al, Macken’s Law of Employment (Thomson Reuters, 9th ed, 2022)

Category:

Principal judgment

Parties:

Vaughan Stanley Wellington (in his capacity as director of Carbon Copies Composites Pty Ltd (recs and mgrs apptd)) (First Plaintiff)
Vaughan Stanley Wellington (Second Plaintiff)
Darren John Vardy (in his capacity as receiver and manager of Carbon Copies Composites Pty Ltd (First Defendant)
Colin James Hutchison (Second Defendant)

Representation:

Counsel:
A J Bulley (First and Second Plaintiffs)
S Bell (direct brief) (Second Defendant)

Solicitors:
Access Law Group (First and Second Plaintiffs)

File Number(s):

2022/327499

Judgment

Nature of the application

1. By Originating Process filed on 2 November 2022 and Amended Statement of Claim (“ASOC”) filed by leave on 18 July 2023, Mr Vaughan Wellington seeks a range of relief in derivative proceedings bought with leave granted to him under s 237 of the Corporations Act 2001 (Cth) (“Act”), in his capacity as a director of Carbon Copies Composites Pty Ltd (recs and mgrs apptd) (“Company”), and in his personal capacity. The Company was incorporated to develop, and then sell commercially, an all-electric carbon fibre aircraft known as the E75 Electron (“Aircraft”). Mr Wellington and the Second Defendant, Mr Hutchison, were directors of the Company since its incorporation, and each holds (in Mr Wellington’s case, through an associated entity) 49.25% of the shares in the Company. Mr Wellington provided funds to the Company between 2018 and 2021 in order to develop the Aircraft, and claims that he did so in reliance upon representations made by Mr Hutchison as to the expected progress of the project and when a flying prototype of the Aircraft would be completed and its cost to that stage. The First Defendant, Mr Darren Vardy in his capacity as receiver and manager appointed to the Company’s assets, has advised the Court that he is unfunded in the receivership and has not taken an active role in the proceedings.

Chronology of events

2. I first set out a chronology of events, drawn from matters admitted in the pleadings, the documents in evidence and partly from the affidavit evidence and cross-examination. This chronology sets out the findings that I have reached, to the extent that it addresses disputed matters. I will address the affidavit evidence and cross-examination further below.

3. Mr Wellington and Mr Hutchison met in 2018 while the former was having work done on a property and the latter was working as a handyman with a small building company in Bowral. In late 2018, discussions took place between Mr Wellington and Mr Hutchison in relation to Mr Hutchison’s interest in developing the Aircraft (Wellington 27.10.22 [7]-[8], [10]; Hutchison 20.3.23 [3]-[5]). On 9 November 2018, Mr Hutchinson texted Mr Wellington suggesting dinner at the Mittagong RSL and said that “I wanted to pick your brain on how I would go about getting funding for an electric plane project” (Hutchison 6.7.23, Annexure E). It appears the discussion at that dinner was not particularly formal or structured.

4. In late October or early November 2018, and likely after the dinner on 9 November, Mr Wellington and Mr Hutchison discussed the possibility of Mr Wellington funding the Aircraft’s development at least to the point of showing a model of the Aircraft at the Avalon air show in Victoria and then at a later air show in Oshkosh, Michigan in the United States of America. In his affidavit evidence, Mr Wellington claims (Wellington 27.10.22 [12]) that Mr Hutchison said:

“I believe I can build an aircraft within 12 months, and I believe it will cost around $500,000. I need to get additional funding for the model for it to be ready for the Avalon Air Show and then for the aircraft, as I can’t quit my job and settle my divorce at the same time. The Air Show is in late February. It is the biggest Air Show in Australia. Depending on the public interest, we can then go to Oshkosh in Michigan, United States, which is the biggest air show in the world.”

Mr Hutchison initially took issue in his affidavit evidence only with the suggested reference to loans to the Company in that conversation, although he did recall Mr Wellington mentioning financing (Hutchison 20.3.23 [6]). The matters discussed at about this time included whether the proposed Aircraft should be a single seater aircraft as Mr Hutchison initially planned, or whether it should be a two-seater aircraft as Mr Wellington preferred (T196-197). Mr Hutchison’s evidence in cross-examination is that he told Mr Wellington that he could build models for the air shows and the Aircraft but would need Mr Wellington to fund the design and construction (T198).

5. On 27 November 2018, Mr Hutchison sent an email to Mr Wellington (Wellington 27.10.22 [15]; Hutchison 20.3.23 [8]; Ex P1, CB 66) which set out a “breakdown” of costs from then to the Avalon air show and the Oshkosh air show. Mr Hutchison there observes that:

“Overall, there is still a lot of planning and work to go into this. We also need to look at getting some help some time in the future (I would think some time around February/March [2019]).”

The budget showed a total cost for the Avalon air show of $44,350 and a total cost for the Oshkosh air show of $120,150, including salary costs for both and workshop lease costs in the budget for the Oshkosh air show. I address Mr Wellington’s claim relating to the email, in respect of the “First Representations”, below.

6. Mr Wellington’s evidence is that, in late November 2018, he decided to invest in the development of the Aircraft (Wellington 27.10.22 [18]). He is likely mistaken as to that timing since he had advised Mr Hutchison, by email dated 30 November 2018 (Ex P1, CB 68) that “[t]here really are too many competitors and planes with what appears to be a fairly limited market”, suggesting that he was then not convinced of the merit of the project. Nonetheless, it appears Mr Wellington committed to the proposal by mid-December 2018 and the Company was incorporated on 17 December 2018 (Wellington 27.10.22 [25]-[26]). In cross-examination, Mr Wellington explained his change of mind between 30 November 2018 and mid-December 2018 as to whether to participate in the project, at least partly, by referring to other discussions which had taken place between him and Mr Hutchison about investing in the Company, getting a bank account and drawing up a model for the Avalon air show to determine public interest in the Aircraft (T58). Mr Wellington denied that he changed his mind between those dates because (as Mr Hutchison contends) he was shown a foam model of the Aircraft and a drawing on a mobile phone of the Aircraft. Mr Wellington’s evidence is that he provided his first $50,000 funding to the Company without being shown drawings or models of what the Company was to produce (T59-60). I address the dispute as to that matter below.

7. Between November 2018 and the incorporation of the Company in mid-December 2018, Mr Hutchison prepared several design files in relation to the Aircraft which, he says, related to the two-seater version preferred by Mr Wellington (Hutchison 6.7.2023 [23], [27]). I accept that these files were created in this period, where that finding is supported by “date modified” dates which appear in respect of corresponding files in a listing of the files that were provided by Mr Hutchison to Mr Vardy as receiver of the Company’s assets in December 2022 (Ex P1, 779). On balance, I think it likely that Mr Hutchison also made a simple miniature foam model of the proposed Aircraft at about that time, which he says was made using a computer numerical control (“CNC”) machine to cut the foam from one of these designs (Hutchison 6.7.23 [24]). I have no doubt that Mr Hutchison prepared these design files and the model for the purpose of their being used by the Company to develop the Aircraft, with funding that he anticipated would be provided by Mr Wellington, and I address the significance of that matter below.

8. As I noted above, there is a dispute as to whether Mr Hutchison showed drawings or a model or picture of the proposed Aircraft that he had put on his mobile phone to Mr Wellington between November 2018 and Mr Wellington’s decision to invest in the project and the incorporation of the Company in mid-December 2018. Mr Wellington’s evidence was that Mr Hutchison did not provide any drawings or plans of the model, or the concept, to him at that time (Wellington 27.10.22 [13]). By a second affidavit dated 2 February 2023, Mr Wellington again referred to his earlier evidence that Mr Hutchison had not provided him with drawings or plans of the model or concept for the Aircraft in November or December 2018 and said that Mr Hutchison did not show him a design of the Aircraft before 14 December 2018 (Wellington 2.2.23 [3]-[5]. By his affidavit dated 20 March 2023, Mr Hutchison responded that he had shown Mr Wellington drawings of the Aircraft and the CNC foam model of it, implicitly by that time (Hutchison 20.3.23 [7]) and he expanded on that evidence by a late affidavit dated 6 July 2023, which I address below. On 2 December 2018, Mr Hutchison emailed a picture he had created of the proposed Aircraft to himself (Hutchison 6.7.23, Annexure D) and his evidence is that he then showed that picture to Mr Wellington on his phone (Wellington 6.7.23) [29]).

9. It is not necessary to decide whether Mr Wellington’s or Mr Hutchison’s evidence should be preferred in that respect, although I generally prefer Mr Wellington’s evidence to Mr Hutchison’s evidence for the reasons noted below. I recognise that Mr Hutchison had good reason to show such design drawings and the model and picture on his phone to Mr Wellington, to seek to persuade him to go forward with funding the development of the Aircraft, and that something occurred in this period to lead Mr Wellington to develop a greater enthusiasm for the project. On the other hand, it seems to me that Mr Hutchison was and is protective of the design of the Aircraft and it may be unlikely that he would have disclosed its design to Mr Wellington, even without providing him with an electronic copy of it, before Mr Wellington was committed to funding the Company. It is not necessary to decide the dispute as to this matter, given the findings that I reach on other grounds below.

10. By an exchange of emails on 26 December 2018, Mr Wellington and Mr Hutchison again discussed the nature of the proposed Aircraft, with Mr Wellington recognising that Mr Hutchison wanted to produce a high performance light weight aerobatic aircraft under 600kg but expressing the view that that was a limited market in Australia, and raising the possibility of a crop duster, and Mr Hutchison responding identifying the features of an aircraft within the light sport aircraft category (Wellington 27.10.22 [23]; Hutchison 20.3.23 [12]; Ex P1, CB 84). In late December 2018 or on 1 January 2019, Mr Wellington made a first transfer of $50,000 from his personal bank account to the Company’s bank account (ASOC [17], [61]; Wellington 27.10.22 [29]). I refer below to Mr Wellington’s claim that events between 27 November 2018 and 17 December 2018 gave rise to the “Agreement Representations”.

11. From early January 2019, the Company made weekly payments of $1,750 to Mr Hutchison and there is a dispute as to whether that payment was a salary paid to him as an employee of the Company (Wellington 27.10.22 [30]; Hutchison 20.3.23 [13]).

12. On 31 January 2019, Mr Hutchison emailed Mr Wellington indicating the name “E75 Electron” for the Aircraft and that he was working on the logo, marketing material, business cards and website (Wellington 27.10.22 [32]) and, on 5 February 2019, Mr Hutchison registered the domain name “electron.aero” in the name of the Company (Wellington 27.10.22 [33]). On 12 February 2019, Mr Hutchison sent an email to Mr Wellington dealing with the website for the Company and the Aircraft (Wellington 27.10.22 [34]; Hutchison 20.3.23 [14]).

13. In late February and early March 2019, Mr Wellington and Mr Hutchison attended the Avalon air show in Victoria. Mr Wellington claims that Mr Hutchison informed interested parties at the air show that the Aircraft would be air ready and flying within the next 12 months, probably by February 2020 (Wellington 27.10.22 [35]-[36]; Hutchison 20.3.23 [16]-[17]). I refer below to Mr Wellington’s claim for the “First Flying Representation” arising out of this matter. I think it likely that interested parties would have understood that the production of the Aircraft was likely to be an engineering challenge and would have understood that statement, if it was made, as an optimistic projection.

14. On 5 or 6 March 2019, Mr Hutchison forwarded Mr Wellington an email with a further budget for the Oshkosh air show (Wellington 27.10.22 [40]; Ex P1, CB 118). That email described the attached budget as a “pretty rough Oshkosh budget” and noted that “[m]ost things have a fair bit of fluff in them just for safety”. Neither observation suggested that the budget provided a firm basis for future costs to be incurred in the development of models for the air shows or the Aircraft. That budget allowed 22 weeks of work for Mr Hutchison and another person, as well as several categories of work, prior to the Oshkosh air show. It is apparent that, by the time of the proposed budget of 5 March 2019, there had been a substantial increase, by about $50,000, in the earlier estimated costs for the costs of attending the Oshkosh air show from the earlier estimate of late November 2018. The uncertainties in the budgeting process must have been apparent to Mr Wellington by that date and he acknowledged in cross-examination that he did not question the increase in the budget and recognised that budgets tended to change (T72).

15. In his second affidavit dated 20 March 2023, Mr Hutchison took issue with aspects of Mr Wellington’s evidence as to discussions concerning the Oshkosh air show and he gave evidence of his preparation of a budget for that air show. His evidence was that he was aiming to produce a kit for the Aircraft for the Oshkosh air show in 2020; that he said words to that effect; and he “hope[d]” to have Aircraft flying in February 2020, prior to the Oshkosh air show in 2020 (Hutchison 20.3.23 [19]. I do not accept that these discussions were directed to the question of Mr Hutchison’s “hope[s]” as to the development of the Aircraft, in the sense of a mere aspiration, since there would be no utility in Mr Hutchison discussing mere aspirations with Mr Wellington and potential customers, as distinct from what he realistically expected could be achieved. I address Mr Hutchison’s cross-examination as to this matter and Mr Wellington’s claim for the “Oshkosh Budget Representation” arising from this matter below.

6. On 15 March 2019,   Mr Wellington contributed a further $150,000 to funding the Company (ASOC [61], Wellington 27.10.22 [42]). By email dated 16 March 2020 (Ex P1, CB 245), Mr Wellington advised that he would provide funding for the Company in the form of a loan where he observed that:

“As [Mr Hutchison] is not able to meet the joint arrangement the amounts provided need to be established in the books as a loan. [Mr Hutchison] and I will need to draw up a loan agreement.”

Mr Hutchison responded to that email on 18 March 2020. On 17 and 18 March 2019, Mr Wellington and Mr Hutchison also exchanged emails concerning the progress of the Aircraft in the lead up to the Oshkosh air show (Wellington 27.10.22 [43]-[44]).

17. By an email dated 28 June 2019, (Hutchison 6.7.23, Annexure L), Mr Hutchison advised Mr Wellington that:

“We are not going to make it with the full size [model of the plane for the Oshkosh air show]. Johns been off for the last two weeks so I’ve just been trying to get the scale model and new wings sorted. Sorry, this is definitely not what I wanted.”

18. In late July and early August 2019, Mr Wellington and Mr Hutchison attended the Oshkosh air show. Mr Wellington’s evidence is that Mr Hutchison told him and others that he was “confident” that there would be a flying version of the Aircraft in the next 12 months and, on other occasions, saying that the aircraft would be flying by February 2020 (Wellington 27.10.22 [46]-[47], denied Hutchison 20.3.23 [19]). I refer below to Mr Wellington’s claim for the “Second Flying Representation” arising from this matter. Again, it seems to me that Mr Wellington and others would then have recognised that the production of the Aircraft was likely to be an engineering challenge and would have understood such a statement as an optimistic projection.

19. On 8 August 2019 (Wellington 27.10.22 [53]; Hutchison 20.3.23 [22]; Ex P1, CB 209), Mr Hutchison sent Mr Wellington a budget breakdown for a flying prototype, estimating completion by February 2020 under cover of an email that read:

“Please see attached budget breakdown for the flying prototype. This would take us to Feb[ruary 2020] with a flying aircraft. I have also included the cost of the two air shows as additional costs.

I have also broken down the cost to build an aircraft. This is the complete cost of the kits that we would be supplying.

What are your suggestions for funds going forward? We need to sort this out fairly quickly. Ray [Tolhurst] is keen to start work and I’d like to make sure we have him onboard.”

The attached budget referred to the date 28 February 2020 beside a reference to “flying prototype budget” and also identified the number of weeks to “Feb flying” and the “Oshkosh air show.” I refer below to Mr Wellington’s claim as to the “Flying Prototype Representations” arising from this matter.

20. On 9 August 2019, Mr Wellington responded to Mr Hutchison’s email concerning the new budget as follows (Ex P1, CB 217):

“As I see it at this stage of the process, there are no other finance alternatives besides us. Maybe if we have a flying model the bank attitude might change as will the grants etc. Then we could start to ask around.

In summary at this point, I have put in so far $A200K to date and it looks like we need say another $250K over the next six months. Are you in a position to put in or pledge assets as we are joint owners?

Meantime my questions are:

(a)   What do you think the timing for the cash required is over the next six month? ie how much when?

(b)   What will we then have by Feb[ruary] 2020? Would you agree that it could be …

- a flying model,

- all the moulds for production on site,

- a concise picture of the kit cost and

- a clear view of order and production objectives.”

21. Mr Hutchison then advised Mr Wellington, also on 9 August 2019 (Ex P1, CB 219) that he did not then have assets to contribute to the project, and, in response to Mr Wellington’s questions, answered:

“(a)   I think it will be a more ongoing cost rather than all at once (i.e. salaries more than materials). We could just do $50,000 at a time as required and I keep you up to date as to what has been spent and when/where, and let you know in advance when new funds would be needed. This way we can stay on top of things as we go.

(b)   Yes, the plan is to have a fully flying aircraft by Feb[ruary 2020]. This would include all of the moulds and CNC toolpaths etc to make parts for the kits. Except for the wings. The wings are a major aerodynamic component of the aircraft and I wanted to make a single set of wings to test with the aircraft. Once we are happy with the wings we can make moulds for them. We would definitely have a better idea of exact costs associated with the aircraft and also build time for the components. The first one is always going to be the hardest and most time consuming to make, but we will have all of the moulds and engineering work done by the time we fly. So this will dramatically reduce the time to manufacture the first kit we sell. Ray [Tolhurst] is definitely onboard with minimising the final manufacturing costs and times by doing the engineering correct the first time and keeping part counts to a minimum and keeping the [A]ircraft as simple as possible.”

22. On 13 August 2019,    Mr Wellington deposited a further amount of $43,973.20 into the Company’s bank account (ASOC [61], Wellington 27.10.22 [57]).

23. On 14 October 2019, Mr Wellington deposited a further $50,000 into the Company’s bank account (ASOC [61], Wellington 27.10.22 [58]).

24. By 28 October 2019, Mr Wellington was seeking to accelerate the development of the Aircraft, emailing Mr Hutchison (EX P1, 226) (in capitals) that “WE REALLY NEED TO GET OUR SKATE’S [sic] ON” and referring to two other reports relating to electric aircraft components. Mr Hutchison responded as to the two other reports and advised that:

““Can we fly in January?? [sic] That depends. At the moment no. If there was a bunch more money and another 2 to 3 guys that know what they are doing then yes, maybe. But at this point I don’t see that happening.”

This is a significant communication because Mr Hutchison here qualified any previously unqualified representation that the Aircraft would be flying by February 2020 and made clear that that result depended on funding, which Mr Wellington continued to provide, and additional qualified labour which was not obtained, and that result had the uncertainty conveyed by “maybe”, and Mr Hutchison did not “see it happening” as matters then stood. Mr Hutchison also then informed Mr Wellington that he was looking to trademark the logo for the Aircraft (Wellington 27.10.22 [61]; Hutchison 20.3.23 [24]).

25. On 8 November 2019, the Company registered the “Electron” trademark, comprised of a sketch of the Aircraft and the word “Electron” with a stylised propellor, in the Company’s name (Wellington 27.10.22 [62]; Ex P1, CB 228).

26. On 10 November 2019, Mr Wellington advised Mr Hutchison, with a copy to Ms Joelle Maxfield who was assisting with administrative work in the Company, as follows (Ex P1, CB 230):

“This is to you both as both of you are very busy and may not realise just how important this issue of a time line is.

One way is to start by going back to a kit plane. A[s] you know there will be a component list, wings, body, canopy etc. Right now we don[‘]t have this for either outside purchases or manufacture.

However it is very important that you do this please before the trainees arrive. Can you both please let me have this ASAP and also apply a time line for the items that we will manufacture and or buy in. I really need this to be done right now as it looks to me that you [Mr Hutchison] are not going to have the plane flying in February [2020]. Also I am away at the end of February.

Secondly I do need a budget outline forward until say end April [2020]. I need this before the next money requirement for the trustees.”

27. By email dated 18 November 2019 (Ex P1, CB 231) Mr Hutchison advised Mr Wellington that the cost of production of the Aircraft had been revised down by $11,000 which would increase profit per aircraft sale, noting that “[w]e are a bit low on cash flow at the moment so the next payment would be very much appreciated” and observed that:

“We have Jordan (intern) starting next week. Still looking into more people and trying to get things moving a bit faster now. Most of the moulding is complete and we will be making parts shortly.”

An updated budget attached to that document referred to a “flying prototype budget” for 28 February 2020 with a note “to get us to Feb[ruary 2020] with a flying aircraft” and referred to the number of weeks from 18 November 2019 to 28 February 2020 beside a reference to “Feb flying”. On the same day, Mr Wellington made a further deposit of $50,000 into the Company’s bank account (ASOC [61], Wellington 27.10.22 [64]). I refer below to Mr Wellington’s claim for the “Second Flying Prototype Representations” arising out of this matter.

28. Mr Wellington pleads (ASOC [61]) that, on 20 January 2020, he advanced a further $50,000 to the Company.

29. By an email dated 20 February 2020 to Mr Hutchison (Ex P1, CB 235), Mr Wellington referred to his then discontent with the then state of the Company’s accounts and observed that:

“… we do not have it flying. So when really. Please give me the steps.

Point is [Mr Hutchison] I have had many businesses and this is not going well at all. It must change.

Secondly I am not a bottomless pit. All through last year you were assuring me it would be fine and will fly in Feb. Now it is Oshkosh. That is only 4 months away – and you have still not started key components.”

30. Mr Wellington pleads (ASOC [61]) that, on 6 March 2020, he advanced a further $50,000 to the Company.

31. On 2 April 2020 (Ex P1, CB 247) Mr Hutchison raised the possibility of appointing a general manager to the Company with Mr Wellington; Mr Wellington responded that he doubted the need for a general manager but indicated that he was “listening”; and Mr Wellington also inquired as to progress as follows:

“… besides knowing who you have with you I do need info on the accounts, get the books (right and correct), the overall Budget now (and the forward look and profitability as you see it), the wings (have you started?), the fit out (where is it at and when,) [sic] when is the next money required, and particularly the date for flying.”

32. On 19 April 2020, Mr Hutchison registered “Electron Aero” as a business name in the Company’s name (Wellington 27.10.22 [71]; Ex P1, CB 250).

33. By emails dated 6 May and 28 May 2020, Mr Hutchison requested Mr Wellington to provide further funds to the Company (Wellington 27.10.22 [74], [77]). Mr Wellington pleads (ASOC [61]) that, on 29 May 2020, he advanced a further $25,000 to the Company.

34. Between 26 June and 20 July 2020, Mr Wellington and Mr Hutchison exchanged emails as to the execution of further documents in relation to the Company (Wellington 27.10.22 [78]). Mr Wellington pleads (ASOC [61]) that, on 28 July 2020, he advanced a further $25,000 to the Company.

35. On 18 August 2020, Mr Hutchison emailed Mr Wellington requesting further funds for the Company (Wellington 27.10.22 [80]). Mr Wellington pleads (ASOC [61]) that, on 25 August 2020, he advanced a further $25,000 to the Company.

36. On 28 August 2020, a resolution was passed at a board meeting of the Company attended by Mr Wellington and Mr Hutchison to execute a Loan Agreement and General Security Deed concerning amounts advanced by Mr Wellington to the Company (Wellington 27.10.22 [81]) and, on 1 September 2020, Mr Wellington executed a Loan Agreement and General Security Deed with the Company (Wellington 27.10.22 [82], Ex P1, CB 338, 351). Mr Wellington pleads (ASOC [61]) that, on 7 September 2020, he advanced a further $25,000 to the Company.

37. On 18 September 2020, Mr Hutchison advised Mr Wellington that he had been able to obtain a registration for the proposed Aircraft (which was not then complete) with the Civil Aviation Safety Authority using the letters “VH-CCC” (Wellington 27.10.22 [85]; Ex P1, CB 422). It appears Mr Hutchison secured that registration in his own name rather than in the Company’s name (Ex P6) but I am inclined to accept his evidence that he did that because it was easier to obtain an aircraft registration in a personal name than a company name and that such registration numbers were quickly taken up when they became available.

38. On 31 October 2020, Mr Hutchison emailed Mr Wellington requesting that more funds be loaned to the Company (Wellington 27.10.22 [86]; Ex P1, CB 424)

39. By email dated 17 November 2020, Mr Wellington introduced Mr Elkins to assist Mr Hutchison to complete a flying version of the Aircraft (Wellington 27.10.22 [87]; Ex P1, CB 425) and, on 20 November 2020, Mr Wellington sent Mr Hutchison an email attaching a project spreadsheet from Mr Elkins (Wellington [89]; Ex P1, CB 429).

40. In early December 2020, Mr Elkins spent a week with Mr Hutchison in the Company’s workshop. Mr Elkins’ evidence is that he and Mr Hutchison worked together on the development of a project timeline and a budget (Elkins 27.10.22 [4]). A report prepared by Mr Elkins dated 11 December 2020 (Ex P2, 2) noted that there were approximately 300 components in the Aircraft and that the time required by Mr Hutchison to complete work on those items (as at December 2020) was approximately 1,200 hours and approximately 1,800 hours of other resources would be required. Mr Elkins also divided the components of the Aircraft into 24 wider categories, comprising items such as the horizontal tail plan, tail cone, elevators, vertical tail, rudder, fuselage, cowling and wings. That report also annexed a record prepared by Mr Hutchison or those working with him as to individual components which, as Mr Hutchison explained in cross-examination, identified details concerning the moulding process for many components. Mr Elkins also indicated a further breakdown of sub-components within the various categories, and an assessment of the extent to which they were complete based on discussions with Mr Hutchison and others. The listing of components and sub-components in Mr Elkins’ report records incomplete design work as at December 2020, which included design work on the elevators, the trim tab servos for the rudder, aspects of the fuselage firewall, the rudder pedal mechanism, tie down points for the wings and tail, the canopy hinge, aspects of the undercarriage, the footstep and control stick torque tube bracket, and matters relating to the motor, propellor and spinner, batteries, joystick handgrips and several aspects of the avionics (Ex P2, 16ff). I address Mr Hutchison’s cross-examination as to aspects of this report below.

41. By a letter dated 4 March 2021 (Hutchinson 6.7.23, Annexure H1), KPMG Law (“KPMG Law”) set out the terms under which it would be engaged to provide certain services to the Company and Mr Wellington accepted those terms on behalf of the Company. The scope of the engagement related to the preparation of a terms sheet to document material terms of a founders agreement, the preparation of a founders agreement (which was never executed by Mr Hutchison) and an intellectual property (sometimes abbreviated as “IP”) review having the following elements:

●   “work    with the Company to identify the core confidential information / trade secrets material to the Company’s business and review how these are protected;

●   undertake a high level review of current access rights and security protocols; and

●   identify gaps and provide recommendations for improvements to manage trade secret disclosure risk.”

42. Mr Wellington pleads (ASOC [61]) that, on 29 March 2021, he advanced a further $200,000 to the Company. It is notable that he did so after the delays to which I had referred above had occurred and after Mr Elkin’s assessment of the extent to which the Aircraft was complete and the work that remained to be done. Where Mr Wellington by then knew of the delays and risks attached to the development of the Aircraft, It is plainly possible that that amount was then advanced because Mr Wellington was exposed to the loss of his existing investment if he did not continue to provide funding to the Company. As will emerge below, that is not Mr Wellington’s evidence or the way in which he puts his case.

43. The Company, or at least Mr Wellington or Mr Elkins, appears to have understood that the Company owned intellectual property relating to the Aircraft, prior to a dispute that later arose as to that matter. A document prepared by KPMG in April 2021, headed “Business Design Workshop Report” (Ex P2, 57) recorded information provided to KPMG that:

“We [KPMG] are advised that [the Company] owns various items of Intellectual Property (IP) which we understand can be separately identified, licenced and protected. …

44. Also in April 2021, KPMG Law provided a review to the Company which dealt, inter alia, with intellectual property rights in respect of the Aircraft (Ex P2, 115). That document noted that it was likely that intellectual property rights (in the form of copyright works) subsist in key documents and other materials which had been created in connection with the design and production of the Company’s core products including plans, design drawings, documented production methods and assemblage instructions and noted that the Company had not registered any designs in respect of the Aircraft. KPMG Law observed (Ex P2, 117) that:

“We understand that [Mr Hutchison] has been primarily involved in the design and development of the core product and related production processes and that he has been engaged to date as a contractor and not an employee. Unless expressly agreed otherwise, independent contractors own any intellectual property created in the course of their engagement.

We understand that no agreement is in place which expressly assigns ownership of any intellectual property to [the Company]. This creates chain of title issues with [the Company] relying on an implied licence to use any intellectual property owned by [Mr Hutchison] in connection with its business needs. The scope of implied licences are, by their nature, uncertain and may limit [the Company’s] use of the relevant intellectual property in the future (ie [the Company] may not be able to sub-licence the relevant IP as part of a future transaction).”

45. KPMG Law in turn recommended:

“[The Company] to execute an assignment deed with [Mr Hutchison] that includes robust provision assigning all existing intellectual property created by Colin H[utchison] to [the Company]. Note – a draft assignment deed with [the Company] for review.”

That document also referred to a similar issue in respect of other current and former contractors who worked with the Company, noted the possibility of seeking other assignments and noted that the Company “will otherwise need to rely on an implied licence (noting the scope of any such licence would always be difficult to define).”

46. By email dated 11 April 2021 (Ex P1, CB 436), Mr Hutchison sent Mr Wellington a copy of a non-disclosure agreement with a third party working with the Company, Electro.Aero Pty Ltd. Clause 1.1 of that agreement (Ex P1, CB 439) assumes that the Company owned intellectual property relating to the Aircraft, providing as follows:

“The Company possesses certain commercial information in relation to the development, proving, certification, funding and manufacture of the proposed products and services, which is confidential to the Company. All of which Confidential Information together with the Companies [sic] participation in discussion with Electro.Aero will remain confidential under the terms of this agreement.”

47. Also in April 2021, the Company was negotiating an agreement with another third party, Orbx, for the development of a package which could be used for simulator software and a draft agreement recorded (Ex P1, CB 452) that:

“[The Company] has already built various elements of the aircraft kit and has numerous photographs to provide to Orbx for reference. CAD files are also available to aid the production of the 3D model.”

That draft agreement contemplated that the Company would provide computer aided design (“CAD”) data to Orbx and licence intellectual property to Orbx as follows:

“[The Company] will grant an aircraft manufacturers licence to Orbx for the development of the [flight simulator] add-on and [intellectual property rights] of the add-on will sit with Orbx which allows for the sale of the module to consumers.”

48. Mr Wellington had also clearly recognised at least one of the matters that was delaying development of the Aircraft by early 2021, when he advised representatives of KPMG on 17 April 2021 (Ex P1, CB 466) that:

“As you may have determined from all our discussions with KPMG to date [the Company] is suffering from the lack of capable labour while building the prototype single electric engine plane in Mittagong. …

Our real problem to date has been finding good reliable workers in and or around Mittagong right now. We have met NSW and Federal funding groups but we still have difficulty even with heaps of employment Groups, finding the right people both for the short term, high aeronautical skills, and for the longer term, those keen to learn. With the latter we are also keen to find, train and then have them return, to manufacture the components in Fiji.”

KPMG responded with suggestions as to how suitable workers might be identified.

49. By May 2021, the Company had requested KPMG to assist in seeking government grants and external funding for the project and, on 25 May 2021, Mr Wellington forwarded an email chain to Mr Hutchison dealing with matters including intellectual property protection (Wellington 27.10.22 [98]-[99]; Ex P1, CB464).

50. On 20 June 2021, Mr Wellington emailed Mr Hutchison and Mr Elkins a draft “business plan” (Ex P1, 473) which referred to both his and Mr Hutchison’s qualifications as follows:

“Vaughan Wellington has owned, operated and sold many businesses successfully thru [sic] his career. These businesses have included shipping, trading, chemicals trading, bulk minerals, printing machinery and graphics supply. Subsequently primary production facilities. He brings to the company experience in finance, customs and trade, grants and Government relations.

Colin Hutchison is a successful aeronautical engineer. He has been involved in research and development of drones and aircraft components and assemblies. He has operated [the Company] since its inception.”

That business plan identified the date of the first flight of the Aircraft as November 2021, long after the February 2020 date on which Mr Wellington relies in his representational claims (Ex P1, CB 486). I recognise that Mr Wellington had made all but one of his financial contributions to the Company prior to the date of that draft business plan.

51. On 21 June 2021, Mr Wellington emailed Mr Hutchison noting that the batteries for the Aircraft had arrived and dealing with the completion of a draft information memorandum prepared by KPMG (Wellington 27.10.22 [101]; Ex P1, CB 469). Correspondence then followed concerning the draft business plan (Wellington 27.10.22 [102])

52. In early August 2021, Mr Wellington and Mr Hutchison again exchanged emails in relation to the estimated date for the Aircraft to be flying (Wellington 27.10.22 [108]; Ex P1, CB 514). Mr Wellington pleads (ASOC [61]) that, on 12 August 2021, he made his last advance of $25,000 to the Company.

53. On 5 September 2021, Mr Wellington emailed Mr Hutchison concerning a meeting with KPMG as to business plans as well as fundraising for the Company (Wellington 27.10.22 [109]; Ex P1, CB 518).

54. On 19 September 2021, there was further correspondence between Mr Wellington and Mr Hutchison as to the date for a flying Aircraft (Wellington 27.10.22 [110]; Ex P1, CB 521). On 29 September 2021, Mr Wellington sent Mr Hutchison an email concerning the progress of the project and KPMG’s requirements to raise finance for the Company (Wellington 27.10.22 [111]; Ex P1, CB 522).

55. On 1 October 2021,   Mr Elkins was appointed a director of the Company and Mr Wellington and Mr Hutchison each transferred him a parcel of shares in the Company (Wellington 27.10.22 [112]; Elkins 27.10.22 [1]).

56. On 6 December 2021, Mr Wellington sent Mr Hutchison an email in relation to progress of the Aircraft and introduced two further parties to assist the Company in raising funds (Wellington 27.10.22 [113]; Ex P1, CB 523).

57. On 7 December 2021, Mr Elkins sent Mr Hutchison an email (Hutchison 6.7.23, Annexure I) requesting that he execute a Deed of Assignment of intellectual property attached to that email. That deed (which Mr Hutchison did not execute) recited that the assignor, implicitly Mr Hutchison, owned the “Assigned Intellectual Property” and that term was defined as:

“All Material relating to the business of the [Company] or created by the Assignor during the provision of any services to, or any collaboration with, or at the instruction of the [Company].”

Even apart from the fact that Mr Hutchison did not execute that draft deed, it seems to me it says little as to who owned any particular intellectual property, since it would have provided only that any intellectual property which was in fact and law owned by Mr Hutchison, so as to fall within that definition, would be assigned to the Company. The practical reasons for such an assignment, to avoid uncertainty, were obvious, as recognised in the advice provided by KPMG Law in April 2021, which was provided to Mr Hutchison no later than December 2021 (Hutchison 17.2.23, Annexure A).

58. Mr Hutchison may have misunderstood the effect of that draft deed, since he replied “I’m sorry, why are we giving away IP?” (Wellington 27.10.22 [114], Hutchison 20.3.23 [29]; Ex P1, CB 532). By a further email dated 7 December 2021 (Hutchison 6.7.23, Annexure J), Mr Elkins responded that the proposed assignment was, “not giving away – securing your personal IP on the plane to [the Company] so that [the Company] owns it”. That email indicated that at least Mr Elkins believed or assumed that Mr Hutchison owned intellectual property that he had developed in relation to the Aircraft, and may have prompted Mr Hutchison to take the same view and seek to leave open the possibility of exploiting that intellectual property for himself, whether by licensing it to the Company for a further fee or using it himself. I will address the correctness or otherwise of that belief or assumption below. There was further discussion of documents at a meeting on that date although what was said is disputed (Wellington, 27.10.22 [115]; Hutchison 20.3.23 [30]).

59. On 12 December 2021, Mr Wellington emailed Mr Hutchison advising that, in order to secure the fundraising, there needed to be a document which confirmed the ownership of the intellectual property in the Aircraft (Wellington 27.10.22 [117]; Ex P1, CB 540).

60. The topic of intellectual property in the Aircraft was then discussed at a board meeting on 17 December 2021 attended by Mr Wellington, Mr Hutchison and Mr Elkins. The minutes of that directors meeting (Ex P1, CB 542) record discussions as to progress with the Aircraft, fund raising plans and the assignment of intellectual property. Mr Hutchison begins by stating that “he is not sure of content meaning for the IP assignment deed”, and Mr Elkins is recorded as advising of the “need to assign the IP in the [Aircraft] to [the Company]”, and stating that “[c]urrently, as the designer [Mr Hutchison] holds this IP personally but needs to confirm that it is ‘owned’ by [the Company]”. The minutes recorded that:

“[Mr Hutchison] advised the IP, in his view was already owned by [the Company] and that an additional deed was not required. [Mr Elkins] advised this was not the view of the other Board members and if in doubt [Mr Hutchison] should get his own legal advice to confirm as he does not believe what [the Company] counsel has advised.”

Mr Hutchison then abruptly left that meeting.

61. Similar evidence as to that meeting is led in each of Mr Wellington’s and Mr Elkins’ affidavits (Wellington 27.10.22 [118]-[119], Elkins 27.10.22 [16]-[19]). In his second affidavit dated 20 March 2023, Mr Hutchison addressed (Hutchison 20.3.23 [31]) events at that board meeting. He took issue with the minutes of that board meeting and denied that he had said the words recorded in them that “In my view, the Company already owns the IP. I’m not signing”. I do not accept Mr Hutchison’s evidence in that regard. By contrast with the positions put at that meeting, Mr Wellington now contends that the intellectual property, where developed by Mr Hutchison as a director of the Company, is the Company’s property and Mr Hutchison denies that proposition.

62. By an email dated 19 December 2021 (Hutchison 17.2.23, Annexure A), Mr Elkins sent Mr Hutchison the review of, inter alia, intellectual property rights provided by KPMG Law in April 2021, to which I referred above.

63. In early March 2022, there was discussion as to possible commercial terms in respect of a resolution of the differences that had by then arisen between the Company’s shareholders (Wellington 27.10.22 [123]). On 11 March 2022, Mr Wellington, Mr Hutchison and Mr Elkins executed a Heads of Agreement (Wellington 27.10.22 [125]) which did not resolve disputes as to ownership of intellectual property, which were again raised at a meeting on 12 April 2022 between Mr Wellington and Mr Hutchison (Wellington 27.10.22 [130]-[133])

64. On 18 May 2022, Mr Wellington’s solicitors wrote to Mr Hutchison concerning termination of the Heads of Agreement and a suggested default under the Loan Agreement and a demand for a repayment of Mr Wellington’s loan (Wellington [138], CB 576)

65. On 23 May 2022, Mr Hutchison incorporated a new company, Dasoru Pty Limited (“Dasoru”), of which he was sole director, secretary and shareholder (Wellington 27.10.22 [160]; Ex P1, CB 658). I address Mr Hutchison’s evidence concerning that company and the Plaintiffs’ claim concerning that company below.

66. By email dated 5 June 2022 (Wellington [140]; Ex P1, CB 581), Mr Hutchison contended that the Company did not own the intellectual property for the Aircraft, in the context of a debate about funding of the Company, and observed in that email that:

“I will also remind you that the company does not own the IP which I have generated. As a result of this, if the company goes into liquidation then the value of the company will come down to the consumables that are currently in the building, which is very little.”

67. By a further email dated 7 June 2022, Mr Hutchison again claimed that he had the right to the intellectual property of the Aircraft (Wellington 27.10.22 [141]) and observed that:

“I will not be putting one more cent into the company and I will not be signing any IP agreements (even though you have tried to blackmail me to sign agreements in the past). I will make it clear here and now, I own the IP for this project. The IP on the moulds and parts belong to me. So as it stands the moulds and parts are worthless. If required I can clearly show evidence that I own the IP for this project before the company was even started.”

68. On 13 June 2022, Mr Wellington appointed Mr Vardy as receiver and manager of the Company’s assets pursuant to the General Security Deed and Loan Agreement (Wellington 27.10.22 [142]; Ex P1, CB 585).

69. As at October 2022, Mr Hutchison appeared to have been in possession of at least some intellectual property that was relevant to the development of the Aircraft. By an email dated 5 October 2022 (Elkins 27.10.22, Annexure C), Mr Elkins advised Mr Hutchison that:

“Surely you can see that the IP that we developed really belongs to the Company.

We wanted to make a final request for you to agree to do the right thing – formally assign the IP to the Company. This will enable us to commercialise the plane. If you agree, please then deliver all of the IP and company equipment to the Company. This includes everything to do with the project – for example, drawings, designs, parts, tools, coding/software, the drop box documents, the formulas, the moulds, the domain name, website etc…you need to stop using them yourself for your own purposes also.

You must know that [the Company] can’t let you walk away with the IP. [Mr Wellington] has invested more than $800,000 in the business.

Please think carefully about this and let me know by 17 October if you agree.”

70. Mr Hutchison responded by an email dated 6 October 2022 (Elkins 27.10.22, Annexure C), asking:

“On the basis that I deliver the IP to the Company as requested, what do you [Mr Wellington] and yourself suggest is the path forward?”

Affidavit evidence

71. I have addressed aspects of the affidavit evidence in setting out the chronology of events above. I now turn to the parties’ wider affidavit evidence. I have applied well-established principles in assessing that evidence and the witnesses’ evidence in cross-examination. 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: Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (“Colorado Products”) at [10].

72. I have applied the principles applicable to assessing claims for representations in oral form as helpfully summarised by Slattery J in Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [87] as follows:

“The principal conduct of the defendants that [the plaintiff] alleges was misleading or deceptive was the speaking of words in the course of a series of conversations. Special considerations apply when assessing alleged misleading and deceptive conduct in such a context. It is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in proved circumstances: Watson v Foxman (1995) 49 NSWLR 315 at 318 per McLelland CJ in Eq. In assessing whether spoken words were misleading the Court may have to examine relatively subtle nuances flowing from the use of one word, a phrase or a grammatical construction rather than another or the presence or absence of some qualifying word, phrase or condition: Watson v Foxman (1995) 49 NSWLR 315 at 31. The fallibility of human memory and the overlaying of memory with perceptions of self interest leading to subconscious reconstruction are all hazards of ordinary human experience to which a Court must be alert in assessing whether particular spoken words are misleading or deceptive: Watson v Foxman (1995) 49 NSWLR 315 at 319. Ultimately each element of the cause of action must be proved to the reasonable satisfaction of the Court which means that the Court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not obtained or established independently of the nature and consequences of the fact or facts to be proved”, including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.”

73. 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]-[29]:

“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.”

74. I have here also drawn on my summary of the applicable principles in Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705 at [5] and No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345 at [53]ff.

75. Mr Wellington reads his first affidavit dated 27 October 2022, which outlines the circumstances in which he met Mr Hutchison and became involved with a project to develop the Aircraft, investing as a shareholder in the Company and lending money to the Company in connection with that project. I have largely addressed his evidence as to those matters in setting out the chronology of events above. Mr Wellington also refers to subsequent steps taken to progress the development of the Aircraft and to attendance at air shows where models of the Aircraft were displayed. Mr Wellington refers to his introduction of Mr Elkins, who also gave affidavit evidence and was cross-examined, to the project with a view to assisting its completion, and to the circumstances in which KPMG was engaged to assist with capital raising efforts.

76. Mr Wellington also addresses the circumstances in which the relationship between the shareholders and directors broke down, as between Mr Wellington and Mr Elkins on the one hand and Mr Hutchison on the other. As I have noted above, that occurred in the context that Mr Wellington and Mr Elkins were seeking to have Mr Hutchison, as well as other consultants to the Company, execute deeds of assignment of intellectual property rights that would clarify, confirm, or possibly establish the Company’s ownership of intellectual property that was used to develop the Aircraft. That dispute appears to have crystallised at the time of the board meeting on 17 December 2021 to which I referred above, although attempts to clarify the position in respect of intellectual property had occurred prior to that meeting and continued into the early part of 2022.

77. Mr Wellington also refers to the execution of a Heads of Agreement between the shareholders in March 2022, which does not appear to have resolved the disputes between them. His evidence is that he had seen the Aircraft in a 75–80% finished state in April 2022 (Wellington 27.10.22 [130]), although it has apparently since been disassembled. There is a dispute between the parties, which I need not resolve, as to whether that was done for the purpose of painting the Aircraft, but there appears to be no dispute that the Aircraft has not since been reassembled. Mr Wellington’s evidence is that Mr Hutchison did not execute or return documents contemplated by the Heads of Agreement by May 2022, and Mr Wellington subsequently terminated the Heads of Agreement and a loan agreement between him and the Company and demanded repayment of his loan to the Company. As I noted above, following further disputes, Mr Wellington then appointed Mr Vardy as receiver and manager of the Company’s assets, exercising his rights as a secured lender to the Company.

74. By a second affidavit dated 2 February 2023, Mr Wellington responded to Mr Hutchison’s account of events and I have addressed aspects of his evidence in the chronology that appears above. Mr Wellington also there gave evidence to seek to establish his reliance on the representations he claims were made by Mr Hutchison. His evidence was that, had he known that Mr Hutchison had already designed the Aircraft by 14 December 2018, he would not have become a shareholder of the Company or loaned money to the Company (Wellington 2.2.23 [7a]). That question does not arise, because I do not find that Mr Hutchison had completely or substantially designed the Aircraft (if that is understood to include the numerous components needed for its production) by 14 December 2018, although he had done several design drawings, prepared a foam model and a picture of it by that time. I also think it unlikely that Mr Wellington would then have recognised any possible adverse implications of that matter for the Company’s ownership of intellectual property in the Aircraft, where he had not taken legal advice at that time and it seems to me that he would have likely have treated that matter as a positive rather than a negative in his investment decision-making.

75. Mr Wellington’s evidence was also that, had he known that Mr Hutchison would, or intended to, retain ownership of the design for the Aircraft or its parts or its components, he would not have loaned money to the Company (Wellington 2.2.23 [7b]). I accept that he would likely have taken that view, but I find below that Mr Hutchison did not form such an intention until the issue of ownership of intellectual property was later highlighted in discussions as to the assignment of intellectual property rights to the Company. Mr Wellington’s evidence is also that, had he known at the Avalon air show in February 2019 that the Aircraft would not be flying within 12 months, he would have not lent money to the Company, and had he known of the increased cost of developing the Aircraft and that it would not be flying by February 2020, he would have not lent money to the Company. There is a significant degree of artificiality in that evidence, which emerged in Mr Wellington’s cross-examination. I accept that Mr Wellington would not have lent money to the Company had it been plain, at the outset, that the development of the Aircraft would be long delayed and significantly more costly than originally anticipated. However, Mr Wellington also plainly recognised the risks attached to the development of a prototype of an electric aircraft and continued to lend money to the Company as those risks began to emerge. This evidence also does not recognise or address the obvious difficulty that, once Mr Wellington had invested a significant amount in the development of the Aircraft, his ceasing to fund its future development would have put his existing investment at risk, and that omission significantly reduced the cogency of that evidence.

76. By a further affidavit dated 26 April 2023, Mr Wellington took issue with aspects of Mr Hutchison’s earlier evidence in the proceedings. It is largely not necessary to resolve disputed details of the early conversations between Mr Hutchison and Mr Wellington. Mr Wellington also addressed a dispute between the parties as to the difficulties of retaining adequately skilled employees and workers for the project. Little turned on that matter, where the question whether Mr Hutchison had reasonable grounds for the alleged representations is to be assessed at the time they were made and not by reference to these later difficulties. Mr Wellington also referred to matters raised in Mr Hutchison’s affidavit evidence as to the circumstances in which the loan agreement between Mr Hutchison and the Company was provided to Mr Hutchison and signed, but nothing turns on that matter where no challenge to that loan agreement is raised in these proceedings.

77. By a fourth affidavit dated 11 July 2023, Mr Wellington responded to Mr Hutchison’s late affidavit dated 6 July 2023. He again denied that he was shown a model aircraft by Mr Hutchison or a picture of the aircraft in December 2018, and I have addressed that question above. He maintained he relied on budgets provided by Mr Hutchison in deciding to loan funds to the Company, without acknowledging his recognition of the risks attached to the development of the Aircraft, which he fairly acknowledged in parts of his cross-examination, or the fact that decisions to invest later funds must have been made in the context of the amount of funds that he already had at risk if the project was abandoned. He also referred to matters relating to the falling out between the parties, particularly in mid-December 2021, but those matters are of little relevance to the relief sought in these proceedings.

78. Mr Wellington was cross-examined at substantial length. He was a largely credible, although occasionally somewhat defensive or argumentative, witness; he readily acknowledged his lack of recollection of some matters; and he made significant admissions which were adverse to his representational claims. There were occasions, in Mr Wellington’s cross-examination, where he did not accept the implications of matters that he had accepted or later retreated from matters that he had previously acknowledged. Nonetheless, I am satisfied that Mr Wellington was doing his best to tell the truth and that he was a largely reliable witness.

79. Mr Wellington fairly acknowledged in cross-examination that he knew the budget for the Aircraft could change where “[w]e are building a prototype” (T73-74); that the construction of the Aircraft required “[q]uite a deal of skill” and that there were a lot of unknowns in building that prototype (T74). Mr Wellington’s evidence in cross-examination was also that Mr Tolhurst, who was working part-time with Mr Hutchison on building the plane, mentioned to Mr Wellington that there were faults in the plane (T87-88) and that would plainly be another significant indicator to Mr Wellington of the risks involved in the development process. Mr Wellington’s evidence was, oddly, that he had not told Mr Hutchison of those faults, although he sought to explain that on the basis that he understood that Mr Tolhurst had already told Mr Hutchison of them (T89). Mr Wellington fairly accepted that extra time would be involved in rebuilding parts that had a fault, and his evidence was that quite a number of parts were rebuilt, and he would expect that to happen in a prototype plane, although he then somewhat retreated from that evidence (T90). While he did not accept that he would have expected the plane to take longer to build than first estimated (T90), he again acknowledged that there were a lot of unknowns in building the plane when it was first proposed, because it was a prototype; and that estimates of how long things would take and how much they would cost could change over time (T91). That evidence was, however, inconsistent with his further evidence that he “expected that we would be on time” (T91). Mr Wellington initially gave evidence that his conversation with Mr Tolhurst, identifying the faults with the aircraft, was in mid-June or early June 2019, before the Oshkosh air show, although further cross-examination as to the time at which Mr Tolhurst ceased work with the Company raised a question whether he was wrong as to the timing of that conversation (T92-93). On the second day of his cross-examination, Mr Wellington acknowledged that he was confused about when Mr Tolhurst was employed by the Company, but again said that he had a discussion with Mr Tolhurst concerning potential design flaws in the Aircraft just before Mr Tolhurst left the Company (T149). That evidence is consistent with Mr Elkins’ evidence that Mr Tolhurst had also told him of such flaws.

80. Mr Wellington’s evidence in cross-examination was that he was not definitive as to the amount that he was prepared to invest in the development of the Aircraft, and the amount that he would invest depended upon the level of public interest in the Aircraft at the Avalon and Oshkosh air shows. He accepted that he would have been prepared to invest up to one million dollars in the Aircraft if the “future indicated that that was a worthwhile investment” (T150). I understood his evidence to indicate that, understandably, he would assess the position as to further funding of the Company on an ongoing basis. There is no reason to think that Mr Wellington had made an early decision to put the entirety of the funds that he was potentially prepared to invest at risk, irrespective of the progress of the development of the Aircraft or the level of public interest in it.

81. Mr Wellington accepted that he was willing to provide further funds for the development of the Aircraft after February 2020, when it was apparent that it had not yet reached a flying state (T150). He also maintained, and I accept, that the timeline of development of the Aircraft was a factor in his decision whether to invest further funds (T151). His evidence was that he relied on estimates of the completion date of the Aircraft in determining whether to invest further funds into the Company and denied that he had already decided to invest further funds into the Company prior to those estimates (T152). I accept that evidence, with the qualification that he was plainly aware of the risk that these estimates would not be met. In cross-examination, Mr Wellington repeated his affidavit evidence that, at the Oshkosh air show, Mr Hutchison was assuring customers that the Aircraft would be flying “very soon” (T154) and then retreated, to some extent, from his earlier recognition of the risks involved in development of the Aircraft, which undermined any firm date for its completion (T154).

82. Mr Wellington was also cross-examined as to whether Mr Hutchison had undertaken work in the garage at his home, before the Company rented premises, and as to Mr Hutchison’s use of his own computers and cutting and model-making machines prior to March 2019 (T157). I address the relevance of this matter to whether Mr Hutchison was employed by the Company and whether intellectual property relating to the Aircraft that was developed by him was owned by the Company below.

83. Mr Wellington accepted that, when Mr Hutchison declined to sign assignment agreements relating to intellectual property, Mr Wellington became concerned about the Company’s future, because of issues as to the Company’s ability to raise funds “without a clear perspective” (T159). I understand that evidence to refer to the Company’s need to be able to demonstrate to future investors that it owned the intellectual property relating to the Aircraft, which was emphasised by KPMG since April 2021.

84. Mr Wellington also read an affidavit dated 27 October 2022 of Mr Elkins. Mr Elkins became a director of the Company on 1 October 2021, holds a relatively small number of shares in the Company and was also appointed the chair of the Company. He had experience in project management and business development, and, as I noted in dealing with the chronology of events above, he spent a week with Mr Hutchison at the Company’s workshop in December 2020, working on a project timeline and budget. Mr Elkins gave evidence (admitted with a limiting order under s 136 of the Evidence Act 1995 (Cth) (“Evidence Act”) as his understanding) of reasons why he understood the Aircraft and intellectual property relating to it was the Company’s property. He referred to steps taken by the Company, including by Mr Hutchison, to seek to protect intellectual property in the Aircraft, including obtaining non-disclosure agreements from Mr Tolhurst and from third parties with which the Company was dealing in relation to electric propulsion systems and a flight simulator. Mr Elkins was also required to execute a non-disclosure agreement in his role with the Company. He also referred to work with marketing advisors, including KPMG, and fundraising plans for the Company and expressed the view that intellectual property needed to be assigned to the Company to allow fundraising.

85. Mr Elkins addressed the engagement of KPMG to assist with external funding from January 2021 and referred to KPMG’s advice that ownership of the Aircraft and the intellectual property needed to be formalised to allow potential investors to be comfortable in investing funds in the Company, where the Company had engaged employees, contractors and Mr Hutchison in developing the Aircraft and the intellectual property. Mr Elkins’ evidence is that he raised that matter with Mr Hutchison after KPMG had raised it and that Mr Hutchison responded that it was “not a priority” and his priority was to “get the plane flying” (Elkins 27.10.22 [8]). His evidence is that he raised the assignment deed in respect of intellectual property with Mr Hutchison on several subsequent occasions and Mr Hutchison responded in the same way on those occasions (Elkins 27.10.22 [9]). Mr Elkins’ evidence was that Mr Hutchison never said to him that Mr Hutchison owned the Aircraft or the intellectual property or that the intellectual property was not the Company’s property (Elkins 27.10.22 [11]). That is consistent with my finding below that Mr Hutchison likely did not take that position until the issue of the assignment of intellectual property was pressed in late 2021. Mr Elkins’ evidence is that he gave a copy of the proposed assignment deed to Mr Hutchison in mid-November 2021 (Elkins 27.10.22 [14]) and Mr Hutchison again responded that it was “not a priority” but said he would “get to it". I accept Mr Elkins’ evidence in preference to Mr Hutchison’s evidence in that respect. Mr Elkins also addressed events at the Company’s board meeting on 17 December 2021 (Elkins 27.10.22 [19]).

86. By a second affidavit dated 13 July 2023, in response to Mr Hutchison’s 6 July affidavit, Mr Elkins identified several people who had worked with the Company and explained the content of a report that he had prepared after meeting with Mr Hutchison and Mr Wellington in December 2020 (Ex P2, 1), in evidence that was largely admitted with a limiting order under s 136 of the Evidence Act as directed to his understanding. He again expressed the view, admitted as evidence of his understanding, that he then believed the intellectual property in the Aircraft belonged to the Company. Mr Elkins expressed the view that the Aircraft was approximately 75% complete by early 2021 (Elkins 13.7.23 [11]). He referred to the need for additional capital to move from the development stage to the production stage for the Aircraft and to KPMG’s retainer to provide assistance in obtaining external funding and business development. His evidence is that he kept Mr Hutchison informed of those matters, although his emails were no longer available after receivers were appointed to the Company’s assets. His evidence is also that he believed that he sent the intellectual property review report prepared by KPMG in April 2021 to Mr Hutchison, consistent with his usual practice, and I think it is likely that occurred where there was no reason for him not to have done so given the parties’ then commercial relationship.

87. Mr Elkins took issue with Mr Hutchison’s view that the Company never had the “right resources” to complete the Aircraft and he identified employees and third parties who were engaged to assist the Company with these matters (Elkins 13.7.23 [12]). As I have noted above, little turns upon that given the way in which the Plaintiff puts its representational case. Mr Elkins also referred to a discussion with Mr Tolhurst in April 2022, where Mr Tolhurst had referred to “design flaws” in the Aircraft, but says that he does not know whether those design flaws were big or small or what they were (Elkins 13.7.23 [14]). Mr Elkins also expressed the view, in evidence admitted with a limiting order as his understanding, that Mr Hutchison had greater skill with spreadsheets and budgeting than Mr Hutchison now acknowledges (Elkins 13.7.23 [15]).

88. Mr Elkins was also cross-examined. He was a careful and precise witness and I generally accept his evidence. He was at time cautious in relation to the documents which were shown to him, where he no longer had access to his email to verify the form in which they had previously been sent to him. I do not think that caution was unreasonable, or that it involved any lack of constructiveness on his part, although there does not appear to be any issue as to the authenticity of those documents.

89. Mr Elkins reiterated, in cross-examination, that his practice was to send documents to the directors including Mr Hutchison as he received them although he acknowledged that there may be cases in which he had not done so (T167). He took issue with the correctness of the reference in KPMG’s intellectual property report to Mr Hutchison’s status as a contractor, and his evidence in cross-examination was that Mr Hutchison was in a different category from the various contractors used by the Company, as he was a director and shareholder in the Company (T178-179). I accept Mr Elkins’ evidence in cross-examination that there was no particular reason for him to seek to correct that reference at the time, where he was generally in agreement with KPMG’s recommendations as to what should be done to clarify the status of the intellectual property concerning the Aircraft.

90. Mr Elkins was cross-examined at some length as to his understanding of whether Mr Hutchison owned the intellectual property relating to the Aircraft so far as he was a contractor to the Company and he held to his belief that the Company owned that intellectual property, although it would be desirable to confirm that by the proposed assignment deed. Little turns on the cross-examination of Mr Elkins or other witnesses as to that matter, where ownership of that intellectual property will be determined, first, by the mixed question of fact and law of whether Mr Hutchison was an employee of the Company; second, whether his development of intellectual property in that capacity had the consequence that it was the Company’s property; and, third, whether his statutory and fiduciary duties as a director of the Company prevent him asserting a right to ownership to that property in a manner that would advance his own interests over the Company’s interests. I address these issues below. Mr Elkins was also cross-examined as to Mr Wellington’s conduct, and particularly his consideration of locking Mr Hutchison out of the premises, when the relationship between the parties deteriorated. That cross-examination did not recognise that Mr Wellington’s position was directed to the position of a breakdown in the parties’ relationship, and little turns on it, in any event, for the issues that I have to decide.

91. Mr Hutchison read a brief affidavit dated 17 February 2023 which related to documents held on a USB drive that he provided to the receivers of the Company, and I will address the contents of that USB drive below.

92. By a second affidavit dated 20 March 2023, Mr Hutchison took issue with aspects of Mr Wellington’s evidence of the initial conversations between him and Mr Wellington. As I noted above in dealing with the chronology of events, his evidence was that Mr Wellington had not initially said that the funding Mr Wellington provided to the Company would be treated as a loan, although it is not apparent that it could have been treated in any other way without substantially diluting Mr Hutchison’s equity interest in the Company. As I also noted above, Mr Hutchison’s evidence was that he had shown Mr Wellington drawings and a foam model of the Aircraft, implicitly in November or early December 2018, and he took issue with Mr Wellington’s evidence to the contrary. Mr Hutchison did not then produce the drawings or the model to which he referred, which he first produced with his late affidavit dated 6 July 2023. Mr Hutchison also contested the characterisation of the remuneration paid to him as salary and implicitly contested the Plaintiffs’ claim that he was an employee of the Company and that intellectual property that he developed was the Company’s property. His evidence was that no PAYE tax was taken out of his remuneration, workers compensation insurance was not paid, no holiday leave was recorded and the Company did not make superannuation contributions for him. His evidence was that he registered a domain name using the words “Carbon Copies” in 2006 and a business name using the words “Carbon Copies Composites” in 2004 and indicated that he was then happy for the Company to use his business name and his website but that he did not transfer ownership of the business name or website to the Company. I have addressed Mr Hutchison’s evidence in this affidavit as to the budget for the Oshkosh air show in dealing with the chronology of events above. Mr Hutchison’s evidence was also that the Company was ultimately not able to engage suitably qualified and skilled workers to build the Aircraft. I have also addressed Mr Hutchison’s evidence concerning the 17 December 2021 board meeting in dealing with the chronology of events above.

His Honour went on to address the position of inventions made outside the scope of the work that an employee was engaged to do, but that question does not arise here.

218. The observations of Nettle J in Wilson were cited with approval by the Court of Appeal (Campbell JA, Spigelman CJ and Allsop P agreeing) in Oates v Consolidated Capital Services Ltd [2009] NSWCA 183 at [142], [154] and by the Full Court of the Federal Court in University of Western Australia v Gray (2009) 259 ALR 224; [2009] FCAFC 116 at [150].

219. In a detailed review of the relevant principles in University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498 (“Gray”), which was subsequently upheld by the Full Court, French J observed (at [130]) that the character of a contract as a contract of employment does not of itself require the implication of a term that would prevent an employee from taking the benefit of an invention made by the employee during the term of service even if made in part in the employer’s time and using some of the employer’s human and material resources. However, his Honour went on to observe that:

“Where an employee has been employed for the purpose of solving a technical problem or improving the employer’s technology or to make inventions, then there will be an implied term in the contract that the inventions made by the employee in the discharge of such contractual duties belong to the employer.

The preceding implication may be supported by an implied term that the employee will act in good faith in the interests of the employer in discharging his or her duties under the contract of employment.

Where the employee has a position with the employer of such seniority that it carries with it an associated duty to advance the interests of the employer generally, then there may be an implied duty of good faith and an implied term that an invention made by the employee relevant to the employer’s business will belong to the employer even if made outside working hours.

Where an employer is entitled to the benefit of an employee’s invention by express provision or by implication, the employee will hold the invention in trust for the employer.”

220. In Gram Engineering at [391]-[407], to which Mr Bulley also refers, Jacobson J applied Gardex in holding that a company was entitled to be registered as the owner of a design where a director was paid a salary in regular weekly or monthly instalments, although not employed under a written contract of employment.

221. I also noted several of the relevant cases in JR Consulting at [79]-[80] as follows:

“The Defendants also contend that Tanmari obtained at least an equitable interest in the copyright, so far as the programs were written by Mr Cummings in his capacity as a director of Tanmari and for the purposes of its business: Antocks Lairn Ltd v I Bloohn Ltd [1971] FSR 490 ; [1972] RPC 219; Gram Engineering Pty Ltd v Bluescope Steel Ltd [2013] FCA 508; (2003) 106 IPR 1 at [391]–[407] per Jacobson J. On the other hand, the Plaintiffs respond that, in Antocks Larin Ltd v I Bloohn Ltd above, the court held that a company did not automatically own copyright works created by the managing director of a company, and the company did not there established that it owned the copyright pursuant to a contract of service because it was not established that there was a contract of service between the managing director and the company requiring the managing director to do the work. The Defendants refer to two cases where a work created by a company’s director was owned by the company. In [Gardex], Falconer J held that a company owned a design, where a company’s managing director was also an employee under a contract of service. No such contract is in evidence in this case. In Gram Engineering v Bluescope Steel above at [400]–[403], Jacobson J applied [Gardex] in holding that a company was entitled to be registered as the owner of a design, where a director was paid a salary in regular weekly or monthly instalments, although not employed under a written contract of employment. … The Plaintiffs also point out that, whereas a person may be entitled to be registered as the owner of the design if the design is made by a person in the course of the person’s employment, under ss 19(2) and (3) Designs Act 1906 (Cth) (applied in Gram Engineering v Bluescope Steel above) and s 13(1)(b) of the Designs Act 2003, the Copyright Act requires that the work must be made “in pursuance of the terms of [a person’s] employment by another person under a contract of service” under s 35(6) of the Copyright Act ...

The Defendants also submit that a director who creates copyright works holds the copyright on trust for company, and there is authority that a copyright owner may own the copyright on trust for others: Bulun v R & T Textiles Pty Ltd (1998) 86 FCR 244 ; 157 ALR 193. I accept that is at least a possibility, since it seems to me that it would a breach of Mr Cummings’ equitable duties to Tanmari to contend that he had ownership of the copyright to the exclusion of Tanmari, which might well be met by the imposition of a constructive trust. However, as the Plaintiffs point out, that proposition does not divest Mr Cummings of his legal ownership of the copyright.”

222. That decision was largely affirmed on appeal in JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; (2016) 116 IPR 440; [2016] FCAFC 20. As I noted in JR Consulting, these principles may be modified under s 35 of the Copyright Act 1968 (Cth) in relation to a literary, dramatic or artistic works in an appropriate case. However, the parties did not suggest that section applied here and I need not address it further.

223. Here, Mr Hutchison was employed in the Company for the purpose of developing the Aircraft, and that supports the implied term to which French J referred in Gray, within the undocumented Agreement that both parties accept existed. Mr Hutchison, as a director of the Company with the responsibility for the design of the Aircraft, was in a senior role, albeit in a small company, and that carried the implied duty of good faith to which French J referred in Gray. The consequence is that the intellectual and other property developed by Mr Hutchison relating to the Aircraft, at least from the point of the Company’s incorporation, was subject to the trust to which French J referred. I will address the position as to property developed in the period before the Company’s incorporation, between November and mid-December 2018, below.

Claim for breach of directors’ statutory and fiduciary duties

Scope of the pleaded duties

224. Mr Wellington pleads (ASOC [63], admitted Defence [45]) that Mr Hutchison owed the Company a statutory duty to act in good faith and for a proper purpose, relying on s 181 of the Act; that (ASOC [64], admitted Defence [45]) Mr Hutchison owed the Company a statutory duty not to improperly use his position to gain an advantage for himself or cause a detriment to the Company, relying on s 182 of the Act; and that (ASOC [65], admitted Defence [45]) Mr Hutchison owed the Company a statutory duty not to improperly use information to gain an advantage for himself, or cause a detriment to the Company, relying on s 183 of the Act.

225. It is sufficient that I briefly identify the content of these duties and I have drawn on my decisions in Colorado Products and Re Australian International Yacht Club Pty Ltd (2021) 152 ACSR 492; [2021] NSWSC 586 in this regard. Section 181 of the Act requires a director or officer of a corporation to exercise his or her powers and discharge his or her duties in good faith in the best interests of the corporation and for a proper purpose. I summarised the relevant principles in respect of that section in Colorado Products (at [419]-[421]) as follows:

“In Chew v R (1991) 4 WAR 21; 5 ACSR 473 at 499, Malcolm CJ summarised the requirements of that duty as being that directors (1) must exercise their powers in the interests of the company, and must not misuse or abuse their power; (2) must avoid conflict between their personal interests and those of the company; (3) must not take advantage of their position to make secret profits; and (4) must not misappropriate the company’s assets for themselves.

The case law is divided as to whether a contravention of s 181(1)(a) of the Corporations Act requires that it be established that a director engaged deliberately in conduct which he or she knew was not in the company’s best interests: for example, Forge v Australian Securities and Investments Commission [2004] NSWCA 448; (2004) 213 ALR 574 at [245] per McColl JA (with whom Handley and Santow JJA agreed); Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd [[2011] FCA 1154; (2011) 86 ACSR 393] at [150], varied on appeal on another point in V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd [[2013] FCAFC 16; (2013) 93 ACSR 76]. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1, the Court of Appeal of the Supreme Court of Western Australia unanimously held that the corresponding general law duty to act in good faith in the company's best interests was subjective and would be complied with if directors honestly believed they acted in the company's best interests (at [923] per Lee AJA, at [1988] per Drummond AJA, [2027], at [2772], [2795] per Carr AJA). The alternative view is that a contravention of that limb of s 181 can be established if the law objectively considers that what the director did was improper, even if the director subjectively believed that he or she was acting in the company’s best interests: see, for example, Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261 at 270–271; 6 ACLC 529 per King CJ; Mernda Developments Pty Ltd (in liq) v Alamanda Property Investments No 2 Pty Ltd [2011] VSCA 392; (2011) 86 ACSR 277 at [32]–[33]. The difference in those approaches does not seem to me to be material for the purposes of this case. The section may be contravened if a director promotes his or her personal interest in a situation where there is a conflict or real or substantial possibility of a conflict between those interests and the company's interests: Australian Securities and Investments Commission v Adler [[2002] NSWSC 171; (2002) 168 FLR 253] at [735]; Parker [v Tucker [2010] FCA 263; (2010) 77 ACSR 525] at [72].

A contravention of s 181(1)(b) may also be established if a director does not exercise his or her powers for the purpose for which they were conferred or exercised them for an improper purpose, and the bulk of authority indicates that question is to be determined objectively: Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109 at 137 per Ipp J (with whom Malcolm CJ and Seaman J agreed); Australian Securities and Investments Commission v Adler above at [738]–[739]; Parker above at [73]. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) above, the majority held that whether a director acts for an improper purpose, for the purposes of the corresponding general law duty, is determined objectively involving an assessment by the Court of what was reasonable in the circumstances (at [933] per Lee AJA, at [1988], [2027], [2073] per Drummond AJA). By contrast, Carr AJA held that the test whether directors had acted for an improper purpose was primarily subjective, although a decision would be voidable if directors acted in good faith for a purpose that was beyond their powers or for a collateral purpose (at [2923]).”

226. Section 182 of the Act prohibits a director, secretary, officer or employee of a corporation from improperly using his or her position to gain an advantage for himself or herself or someone else, or cause detriment to the corporation. I summarised the applicable principles in Colorado Products (at [432]–[433]) as follows:

“An objective standard is to be applied in determining what amounts to an “improper” use of position, and impropriety is established by “a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case”: R v Byrnes [(1995) 183 CLR 501] at 514-515 per Brennan, Deane, Toohey and Gaudron JJ; R v Towey (1996) 132 FLR 434; 21 ACSR 46 at 57 per Gleeson CJ (with whom Allen and James JJ agreed). In Doyle v Australian Securities and Investments Commission [2005] HCA 78; (2005) 227 CLR 18, the High Court observed (at [35]) that the relevant conduct would be improper if it amounted to:

“a breach of the standards of conduct that would be expected of a person in [the director’s] position by reasonable persons with knowledge of the duties, powers and authority of his position as director, and the circumstances of the case, including the commercial context.”

It is not necessary that the relevant director gain an advantage for himself or herself or cause a detriment to the company in order to establish a contravention of the section: Chew v R [1992] HCA 18; (1992) 173 CLR 626 at 633 per Mason CJ, Brennan, Gaudron and McHugh JJ. An objective test was also applied to determine whether this section was contravened in Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd above and, in Hydrocool Pty Ltd v Hepburn (No 4) [2011] FCA 495; (2011) 279 ALR 646, Siopsis J followed R v Byrnes, above, in holding that impropriety for the purposes of this section was objective and did not require subjective knowledge of impropriety and followed Chew v R, above, in holding that a contravention could be established although the desired object was not achieved. In Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507 at [32], Gleeson CJ and Heydon JJ noted that, although shareholders cannot release directors from the statutory duties imposed by, relevantly, s 229 (4) of the Companies (SA) Code (which was a predecessor to s 182 of the Corporations Act), their acquiescence in a course of conduct might affect the practical content of those duties and be relevant to a question of impropriety.”

227. Mr Wellington pleads (ASOC [66], denied Defence [46]) that, by Mr Hutchison, as a director of the Company, asserting that the legal and equitable interest in the intellectual property of the Aircraft is his, Mr Hutchison breached ss 181, 182 and 183 of the Act. I accept that Mr Hutchison plainly made that claim, at least from the point at which a dispute as to the request that he assign any intellectual property rights he held in the Company arose, and he continued to do so at the hearing, with the qualification in his evidence as to a limited licence to which I referred above. The question whether that claim is a breach of duty raises the questions whether Mr Hutchison owned the intellectual property in the Aircraft, as a matter of law and fact, and whether any licence agreement existed which authorised the Company to use that intellectual property and qualified any rights that would otherwise arise from his ownership of the intellectual property.

228. Where the Company owned the intellectual property created by Mr Hutchison relating to the Aircraft from the commencement of his employment with the Company in December 2018, Mr Wellington must succeed in his claim brought for the Company that Mr Hutchison, as a director of the Company, in asserting that the legal and equitable interest in the intellectual property of the Aircraft is his, at least without recognising the Company’s right to use that intellectual property to develop the Aircraft to the exclusion of his doing so for his own rather than the Company’s benefit, breached s 181 of the Act, which requires that directors avoid conflict between their personal interests and those of the company. It is not necessary to decide whether he also breached ss 182 and 183 of the Act in that regard, although I recognise that it is not apparent that he has either used the Company’s property or its information in a manner that is inconsistent with those sections.

229. Mr Wellington also pleads (ASOC [67], denied Defence [46]) that Mr Hutchison has breached sections 181, 182 and 183 of the Act by, on 23 May 2022, incorporating Dasoru; maintaining control of a St George Bank account in the name of “Carbon Copies Composites”; and maintaining control of the domain name “ I do not accept that those matters, without more, establish that breach, where it is not shown that Mr Hutchison has used the new company, the bank account or the website in a manner that is inconsistent with the conduct of the Company’s business.

230. Mr Wellington then pleads (ASOC [68], admitted Defence [47]) that Mr Hutchison, as a director of the Company owed fiduciary duties to the Company including a duty not to allow any conflict between his duties as a director and his personal interests and a duty not to profit (implicitly, without the Company’s consent) by reason of his position as a director. It is again sufficient to address the content of these duties briefly. A director of a company is a recognised category of fiduciary and the “no conflict” rule applies to a director as a status-based fiduciary. The “no conflict” rule has a strict application when it applies in the sense that, if a transaction has occurred in conflict of interest, a company director cannot avoid a breach of that rule by asserting the fairness of the transaction or that it was in the company’s best interests or that the director was not acting with subjective dishonesty. I observed (by reference to authority) in Colorado Products at [351]:

“Broadly, the no conflict rule prohibits conduct where a fiduciary has a personal interest or duty owed to a third party which gives rise to a real and sensible possibility of a conflict. That rule and the no profit rule, which provides that a fiduciary cannot obtain a profit from its fiduciary position without the principal’s consent, may overlap.”

231. In Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37, Payne JA (with whom Gleeson and Leeming JJA agreed) summarised the no conflict and no profit rules as follows (at [105]):

“A fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is a conflict, or a real or substantial possibility of a conflict, between the personal interest of the fiduciary and those to whom the duty is owed…A conflict arises if there is a real and sensible possibility that the personal interests of the fiduciary divide the loyalty of the fiduciary with the result that he or she could not properly discharge their duties to the beneficiary…” [citations omitted]

232. The case law has also long held that, at least in respect of the general law, a director’s resignation to pursue a conflict of interest does not discharge him or her from the rule against conflict of interest: Addstead Pty Ltd (in liq) v Liddan Pty Ltd (1997) 70 SASR 21; 25 ACSR 175; Nicholls & Ors v Michael Wilson & Partners Ltd [2012] NSWCA 383 at [177]-[178]; Schmidt v AHRKalimpa Pty Ltd (recs apptd) [2020] VSCA 193 at [93]ff.

233. Mr Wellington then pleads (ASOC [69], denied Defence [48]) that the matters pleaded in ASOC [66]-[67] also amount to a breach of fiduciary duties. For the reasons noted above in respect of the breach of the statutory duties, I find that Mr Hutchison’s reliance on his ownership of intellectual property relating to the Aircraft to assert a right to use it for his own and not the Company’s purposes, without recognising the Company’s right to use that intellectual property to develop the Aircraft to the exclusion of his doing so for his own rather than the Company’s benefit, also breached the conflict of interest rule.

234. I would also reach that conclusion on an alternative basis, even if Mr Hutchison was a contractor to and not an employee of the Company, and in respect of intellectual property relating to the Aircraft that may have been brought into existence by Mr Hutchison in the period before the Company was incorporated. A somewhat similar issue was considered by the High Court in Parramatta Design. In that case, Parramatta Design & Developments Pty Ltd (“PDD”) provided architectural services; its sole director and shareholder, Mr Fares, who was an architect, and a solicitor, Mr Barrak, established a property development company (“Landmark”) and entered into a joint venture agreement with another company (“Toyama”) to develop land. PDD provided architectural services for the joint venture, including, for a fee, preparing plans for the proposed development, and then further plans with no charge. The relationship between the joint venturers then deteriorated; trustees for the sale of the site were appointed under s 66G of the Conveyancing Act 1919 (NSW); and PDD notified the trustees that it was the owner of the copyright in the plans embodied in the development consent and that it refused to grant a licence to any prospective purchaser of the site. The purchaser of the site, Concrete Pty Ltd (“Concrete”) brought proceedings claiming that it had an implied licence to use the plans and that PDD’s assertions to the contrary amounted to unjustifiable threats in contravention of s 202 of the Copyright Act 1968 (Cth).

232. On appeal to the High Court, Gummow ACJ held (at [12]-[17]) that the joint venture between PDD, Landmark and Toyama possessed fiduciary characteristics, and to allow PDD to assert copyright in the plans and drawings so as to deny Concrete its consent to use the plans and drawings would be to allow PDD to pursue its own interests in conflict with the purposes of the joint venture. His Honour observed (at [15]) that:

“For Parramatta to deny consent to the use by Concrete of the plans and drawings as consequent upon the acquisition of the development site would be to pursue its interests in conflict with the purposes of the joint venture as earlier identified.”

236. Kirby and Crennan JJ reached the same result by reference to the architect’s role in the venture and also held (at [95]) (with Gummow ACJ agreeing at [16]) that, in the absence of any reservation of copyright in the plans and drawings or the withdrawal of the development application prior to its determination, the implied licence to use the plans and drawings in favour of the purchasers was irrevocable (at [16], [95]). Hayne J similarly held (at [122]-[124]) that PDD, Landmark and Toyama were engaged in a common business enterprise; a relationship of mutual trust and confidence arose between the participants; and following the breakdown of the relationship:

“The obligations of each of the participants, when the relations between them broke down, extended not only to realising, to the advantage of each of the participants, all of the assets that had been committed to the venture, but also to not impeding that realisation whether by pursuing the individual interests of one participant in conflict with the interests of others, or in some other way. As Gummow ACJ points out, for Parramatta to deny consent to the use by Concrete of the plans and drawings would be to pursue its interests in conflict with the interests of other participants.”

237. In Geltch v MacDonald & Ors [2007] NSWSC 1000 (“Geltch”) at [49], Brereton J noted the application of these principles in a partnership context, although holding they were there narrowed by the terms of a lease.

238. I recognise that Parramatta Design was concerned with a fiduciary relationship arising from a joint venture and Geltch was concerned with a partnership. I do not accept Mr Bulley’s submission that the arrangements between Mr Wellington and Mr Hutchison gave rise to a joint venture of that character. Here, Mr Hutchison owed statutory and fiduciary duties to the Company, likely to the exclusion of any fiduciary duties owed by him to other directors or shareholders in the Company: Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21; Crossman v Taylor (No 3) [2012] FCA 734 at [300]ff. However, it seems to me that, adopting the language of Gummow ACJ in Parramatta Design, to allow Mr Hutchison to assert ownership of intellectual property relating to the Aircraft, or copyright or design rights in the plans and drawings for it, so as to deny the Company the right to use the plans and drawings would be to allow him to pursue his own interests in conflict with the Company’s interests and his duties to it.

239. As I noted above, Mr Hutchison conceded that he thought a limited licence existed in his affidavit dated 6 July 2023, although I have not accepted that evidence, which is likely a late invention where he had either assumed that the Company owned the intellectual property or given no thought to that question until the Company sought an assignment to confirm the position. I have found above that Mr Hutchison prepared the design files and the model that he created in November and December 2018 for the purpose of their being used by the Company to develop the Aircraft, with funding that he anticipated would be provided by Mr Wellington, and I am satisfied that there was no identified alternative that would have allowed the development of the Aircraft in that way. This was not a case that Mr Hutchison had prepared those files and models with any intent or capacity to fund the development of the Aircraft himself. I have found above that subsequent steps in the development of the Aircraft, including the creation of numerous additional design files dealing with particular components, were undertaken by Mr Hutchison as an employee of the Company and funded by the Company.

240. It seems to me that, even if (contrary to my findings) Mr Hutchison was a contractor rather than an employee of the Company, and to the extent that he had developed designs for the Aircraft prior to the Company’s incorporation and “owned” those designs, he could not rely on that ownership to deny the Company an exclusive and irrevocable entitlement to use that intellectual property to develop the Aircraft, where he was also a director of the Company. Consistent with the result reached in Parramatta Design, and with the “no conflict” element of his fiduciary duties owed to the Company, he cannot deny that the Company has an irrevocable licence to use the intellectual property relating to the Aircraft to his exclusion, whether or not part of that property is owned by him. The same result may well arise as an implied term of the parties’ arrangement, in the manner noted by the High Court in Realestate.com.au Pty Ltd v Hardingham (2022) 406 ALR 678; [2022] HCA 39. It seems to me that the parties and a reasonable bystander would recognise that it was inconceivable that Mr Hutchison could be paid by the Company for several years, with funding provided by Mr Wellington; develop a design for the Aircraft at the Company’s cost; then announce that he had resigned as a director and disposed of his shares in the Company and would use, licence or monetise the intellectual property relating to the Aircraft for himself and to the Company’s exclusion. The result is a fortiori where, here, Mr Hutchison continues to be a director of the Company.

Determination as to the relief claimed

241. Mr Wellington, on his own behalf and on behalf of the Company, seeks numerous orders by way of relief. First, he seeks an order (ASOC [70], Relief [1]) that Mr Hutchison be permanently restrained from accessing, downloading, transferring, interfering with, disclosing, disseminating, altering, removing, deleting, copying, using, or commercially exploiting the Property other than in his role as a director and for the purposes of the Company. The term “Property” is there defined, in relation to the Aircraft, as:

“(a)    all designs, plans, drawings, specifications, codes, programs, software, or hardware (whether in hard copy or in electronic form) for the Aircraft;

(b)    all designs, plans, drawings, specifications, codes, programs, software, or hardware (whether in hard copy or in electronic form) for any component or part of the Aircraft;

(c)    all designs, plans, drawings, specifications, codes, programs, software, or hardware (whether in hard copy or in electronic form) that relate to or concern the Aircraft;

(d)    all components, either fully or partially completed, for the Aircraft;

(e)    all moulds or parts of moulds used in the manufacture of the Aircraft or any component of the Aircraft;

(f)    all batteries or other technology for the Aircraft;

(g)    all engines or motors for the Aircraft;

(h)    all computer programmes (whether by way of CAD files or otherwise) used in the design and/or manufacture of the Aircraft and/or any component of the Aircraft.”

242. Mr Bulley submits and I accept that the property that falls within this definition (subject to the Company establishing its right to it) has been identified in the course of the evidence as including aircraft parts (T233, T235, T270-272); material mixtures and production methods (T235); software that would be integrated with the Aircraft, as distinct from third party software for design programs that were owned by Mr Hutchison and were of general application, rather than developed for the Aircraft (T265-268); patterns or “plugs” used in creating moulds for construction of parts of the Aircraft and those moulds (T267-268) any aircraft assembly instructions (T269-T270); the files and the contents of the USB delivered to Mr Vardy as receiver on 12 December 2022 (T270); further files and contents of the USB delivered to Mr Vardy on 23 June 2022 (Hutchison 6.7.2023, [21]–[22]) and any printed form of these files, including those appearing in Mr Hutchison’s affidavit dated 6 July 2023 (Hutchison 6.7.23, Annexures B,C,D); and structural configurations and calculations (T300-3017).

243. I am satisfied that I should make this first order, on the basis of my findings that design drawings and the model were prepared by Mr Hutchison in anticipation of the Company’s development of the Aircraft in late November or early December 2018; Mr Hutchison’s status as an employee of the Company after its incorporation and the Company’s ownership of property created after its incorporation; and my findings as to breach of fiduciary duty, where Mr Hutchison asserts a continued right to use the intellectual property relating to the Aircraft for his own and not the Company’s benefit.

244. Second, Mr Wellington seeks a declaration (ASOC [71], Relief [2]) that the Property was and is the Company’s Property and, third, he seeks an order (ASOC [72], Relief [3]) that Mr Hutchison transfer the Property to the Company. The basis for this relief is established in respect of intellectual property relating to the Aircraft created after Mr Hutchison commenced employment with the Company from its incorporation. On balance, I am persuaded that that declaration should be limited to the Company’s entitlement to an irrevocable licence to use the Property relating to the Aircraft created prior to its incorporation (and, I have found above, in anticipation of its incorporation) to the exclusion of Mr Hutchison, whether or not that property is “owned” by Mr Hutchison. It seems to me that the case law which I have referred above does not support the imposition of a trust over that Property, where it was created prior to the incorporation of the Company.

245. Fourth, Mr Wellington initially sought an order (ASOC [73], Relief [4]) requiring Mr Hutchison to restore the Property to the condition that it was in as at 12 April 2022. That relief was rightly not pressed in closing submissions. I can see no basis on which I could make a mandatory order in that form, not least because the condition of the Property as at that date is not adequately identified.

246. Fifth, Mr Wellington seeks a declaration (ASOC [74], Relief [5]) that Mr Hutchison used the Company’s Property, without any authorisation, improperly and contrary to the obligations binding on Mr Hutchison as a director to the detriment of the Company. I cannot make that declaration where it is not established that Mr Hutchison has in fact used that Property to the Company’s detriment, where interlocutory orders were previously made by the Court that placed that Property in the receiver’s custody, although he has asserted a right to do so.

247. Next, Mr Wellington seeks declarations (ASOC [75]-[78], Relief [6]-[9]) that Mr Hutchison breached his fiduciary duties owed to the Company; breached s 181 of the Act because he did not discharge his duties in the Company's best interests and for a proper purpose; breached s 182 of the Act because he improperly used his position with the Company to gain advantage for himself and caused detriment to the Company; and breached s 183 of the Act because he improperly used the Company’s Property to gain advantage for himself and caused detriment to the Company. There is no utility in bare declarations in that form, where I have reached the necessary findings above.

248. Tenth, Mr Wellington initially sought an order (ASOC [79], Relief [10]) that an account for profits be taken to determine the profits made by Mr Hutchison arising from the breaches referred to in the declarations sought above, and, eleventh, he sought an order (ASOC [80], Relief [11]) that Mr Hutchison pay to the Company the amount of profits assessed pursuant to the account ordered to be taken. That relief was rightly not pressed in closing submissions, where there is no evidence that Mr Hutchison has used the Property to make such a profit, and interlocutory orders were previously made by the Court that placed that Property in the receiver’s custody.

249. Twelfth, Mr Wellington initially sought an order (ASOC [81], Relief [12]) that Mr Hutchison pay (unquantified) compensation to the Company under s 1317H of the Act for the contraventions referred to in the declarations sought above. That order was rightly not pressed where there is no evidence that Mr Hutchison made a profit and no evidence is led by Mr Wellington to allow the quantification of any loss suffered by the Company. Thirteenth, Mr Wellington initially sought an order (ASOC [82], Relief [13]) that Mr Hutchison pay the Company (unquantified) equitable compensation or equitable damages and, fourteenth, an order (ASOC [83], Relief [14]) that Mr Hutchison pay (unquantified) damages to the Company. Those orders are rightly also not pressed where no evidence is led by Mr Wellington to allow quantification of any loss suffered by the Company.

250. Fourteenth, Mr Wellington seeks a declaration (ASOC [83A], Relief [14A]) that, by virtue of the employment relationship between the Company and Mr Hutchison, any property that is or relates to the Aircraft that he designed or developed during his period of employment is the Company’s property and an order that he deliver that Property to the Company. That relief overlaps with the relief sought in ASOC [71]-[72], Relief [2]-[3] and I am satisfied that it should properly be ordered.

251. Next, Mr Wellington, in his personal capacity, seeks declarations (ASOC [84]-[85], Relief [15]-[16]) that the Company engaged in misleading and deceptive conduct within the meaning of the ACL and that Mr Hutchison engaged in misleading and deceptive conduct within the meaning of the ACL and was involved in the Company’s contravention of the ACL. I will not make those declarations in respect of the Company and Mr Hutchison’s accessorial liability where their basis is not established and they would be anterior to a claim for compensation that is not established. I will not make a declaration that Mr Hutchison engaged in (rather than was accessory to) such conduct where, as I noted above, it is unclear whether Mr Wellington brought such a case and otherwise for the same reasons.

252. Seventeenth, Mr Wellington seeks, under s 232 of the ACL, an order (ASOC [86(a)], Relief [17(a)]) that Mr Hutchison be permanently restrained from accessing, downloading, transferring, interfering with, disclosing, disseminating, altering, removing, deleting, copying, using, or commercially exploiting the Property other than in his role as a director and for the purposes of the Company. While I have made a corresponding order above, no basis for making it arises from these claims. Mr Wellington also seeks orders (ASOC [86(b)-(c)], Relief [17(b)-(c)]) that Mr Hutchison transfer the Property to the Company and requiring him to restore the Property to the condition that it was in as at 12 April 2022. No basis for making those two orders arises from the misleading and deceptive conduct claims and the latter of them was rightly not pressed in closing submissions.

253. Eighteenth, Mr Wellington seeks, pursuant to s 236 of the ACL, an order (ASOC [87], Relief [18]) that Mr Hutchison pay damages to him and nineteenth, he seeks an order (ASOC [88], Relief [19]) under s 237 of the ACL that Mr Hutchison pay damages to him and the receivers of the Company. No basis has been established for ordering that Mr Hutchison repay the amounts lent by Mr Wellington to the Company or the costs of appointment of the receiver that he claims and the evidence led by Mr Wellington does not establish any other basis on which damages could be quantified.

254. Mr Wellington also seeks (ASOC [89], Relief [20]) costs, including costs on an indemnity basis. Plainly, the proceedings have led to a mixed result, and I will hear the parties in this regard, if they cannot reach agreement as to costs.

255. Mr Wellington has not established his claim for interest (ASOC [90]; Relief [21]) where he has not established a claim for a monetary recovery to which interest could apply.

Orders

256. I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days, or otherwise their respective short minutes of order and submissions not exceeding 10 pages in Arial font 12, one and a half spacing, as to the differences between them.

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Decision last updated: 03 August 2023