Lake v GBST Holdings Limited - [2019] QSC 253

SUPREME COURT OF QUEENSLAND

CITATION:

Lake v GBST Holdings Limited [2019] QSC 253

PARTIES:

STEPHEN MAURICE LINTON LAKE

(plaintiff)

v
GBST HOLDINGS LIMITED

(defendant)

FILE NO/S:

SC No 2004 of 2016

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

11 October 2019

DELIVERED AT:

Brisbane

HEARING DATES:

12 – 16, 19 – 23 and 26 November and 7 December 2019; further written submissions on 21, 24 and 29 January 2019.

JUDGE:

Douglas J

ORDER:

1.    Judgment for the plaintiff for damages totalling $2,225,205.04 plus interest subject to any variances for changes in exchange rates since the trial.

2.    Dismiss the defendant’s counterclaim.

3.    Further submissions about costs shall be heard

CATCHWORDS:

EMPLOYMENT LAW – TERMINATION AND BREACH OF CONTRACT – TERMINATION OR BREACH – GENERALLY – where the plaintiff had been chief executive officer of the defendant company, GBST Holdings Limited, since 2001 – where the board of directors decided not to renew the plaintiff as CEO at a board meeting – where the decision not to renew the plaintiff as CEO was communicated to the plaintiff – where the plaintiff subsequently sold shares in the defendant and caused one of its subsidiary companies to enter into a lease to his advantage for a residential dwelling – where the plaintiff was purportedly dismissed for alleged breaches of the terms of his employment contract – whether the plaintiff was in breach of the terms of his employment in selling his shares at a time when he was possessed of price sensitive information that was not available to the general market – whether the plaintiff was in breach of the terms of his employment in causing the defendant’s subsidiary to enter into the lease for the apartment in which he and his family were to continue to live up to and beyond the termination of his employment – whether dismissal was wrongful

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – GENERAL PRINCIPLES – where the plaintiff had been chief executive officer of the defendant company, GBST Holdings Limited, since 2001 – where the board of directors decided not to renew the plaintiff as CEO at a board meeting – where discussions as to the plaintiff’s separation package occurred – where the package as discussed included an entitlement to a salary and rent for a set period as well as performance rights under a long-term incentive scheme in circumstances where performance and service conditions were satisfied on a vesting date – where the plaintiff allegedly orally accepted an offer in respect of the separation package – where the plaintiff was subsequently dismissed prior to the vesting date for alleged breaches of the terms of his employment contract – where the dismissal was allegedly wrongful – whether the alleged wrongful dismissal of the plaintiff amounted to a repudiation by the defendant – whether the plaintiff was entitled to the separation package discussed prior to his dismissal

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING AND DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – PARTICULAR CASES – CONTRACTS GENERALLY – where communications were made by directors of the defendant company, GBST Holdings Limited, relating to share sales for the purpose of the plaintiff obtaining approval to sell shares and with respect to a proposal for entry into a lease for the benefit of the plaintiff – where the plaintiff subsequently sold shares in the defendant company and caused a subsidiary of the defendant company to enter into a lease for an apartment in which he and his family were to live – where as a result of the plaintiff’s entry into these transactions, the defendant company alleged that he had engaged in fundamental and serious breaches of his employment contract giving it the right to summarily terminate that contract – whether the communications occurred in the course of trade or commerce – whether the communications were misleading – whether the plaintiff relied on the communications – whether the plaintiff would not have proceeded with entering into the transactions if the alleged misleading or deceptive conduct had not occurred

Australian Consumer Law (sch 2 of the Competition and Consumer Act 2010 (Cth))
Civil Proceedings Act 2011 (Qld)
Competition and Consumer Act 2010 (Cth)
Corporations Act 2001 (Cth)

Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183, considered
Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30, considered
Concut Pty Ltd v Worrell Pty Ltd [2000] HCA 64; (2000) 75 ALJR 312, considered
Downer EDI Limited v Gillies [2012] NSWCA 333, considered
Heugh v Central Petroleum (No 5) [2014] WASC 311, considered
Hodgson v Amcor Ltd [2012] VSC 94, considered
Johnson v American Home Assurance Company [1998] HCA 14; (1998) 192 CLR 266, considered
Mair v Rhodes & Beckett Pty Ltd [2018] VSC 132, considered
Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20, considered
Rankin v Marine Power International Pty Ltd [2001] VSC 150, considered
Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, considered
Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357, considered
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, considered
Vision Eye Institute Ltd v Kitchen [2014] QSC 260, considered
Visscher v The Honourable President Justice Giudice [2009] HCA 34; (2009) 239 CLR 361, considered

COUNSEL:

D G Clothier QC with K M Riedel for the plaintiff

M Trim for the defendant

SOLICITORS:

King & Wood Mallesons for the plaintiff

McCullough Robertson for the defendant

Table of Contents

Nature of the dispute

GBST

GBST’s business, its revenue and its products

Aegon and its significance to GBST

Constitution of the Board

Roles of different employees of GBST

Mr Lake’s role as CEO of GBST

History

Termination discussions commencing 10 May 2015

Company’s leases of premises for Mr Lake to inhabit in Hong Kong

Further termination discussions

Securities Trading Policies

Development of the 2016 financial year budget from about 19 April 2015

Discussions in Hong Kong in April 2015

Discussions at executive meeting in May 2015 and afterwards

Discussions at Sydney executive meeting 23-25 June 2015 and afterwards

Presentation of budget to the Board in August 2015

Acceptance of the budget by the Board

Events leading to the London meeting on 15-17 September 2015 and the announcement of Mr Lake’s departure

Work on the budget forecasts by the executive from the London meeting until 30 September 2015

Trading in the defendant’s shares by Mr Lake on 25 September 2015

Forecast dated 30 September 2015

Dismissal of Mr Lake

Events leading up to the Board meeting of 15 October 2015

The Board meeting of 15 October 2015, announcement to the ASX and subsequent correspondence

Board meeting of 21 October 2015

Board meeting of 30 October 2015

Dismissal letter of 6 November 2015

Evidence as to GBST’s alleged damages

Factual findings

Issues of credit

Entry into the lease

Insider trading

Legal issues and conclusions

Wrongful purported termination of Mr Lake’s employment

Mr Lake’s loss arising out of his wrongful termination

The performance rights contract

Accrued entitlements

Misleading or deceptive conduct

Insider trading

Conclusion

Nature of the dispute

The plaintiff Mr Lake’s principal claim against his former employer, the defendant GBST Holdings Limited (GBST), is for damages for the wrongful purported termination of his employment in November 2015. He had been its chief executive officer since 2001. GBST purported to terminate his employment for breach of its share trading policy for its employees and also because he caused one of its subsidiary companies, GBST Hong Kong Limited, to enter into a lease to his advantage without authority and without obtaining prior approval for that transaction from the Board.
Mr Lake sought damages for breach of contract, or alternatively, pursuant to s 236 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) comprising:
(a)Twelve months’ salary of $643,100, or alternatively, six months’ salary of $321,550;
(b)The value of 365,177 ordinary shares in GBST as at 9 November 2015, totalling $1,460,708, or alternatively, the value of those shares at the date of trial plus dividends;
(c)Interest pursuant to section 58 of the Civil Proceedings Act 2011 (Qld); and
(d)Costs.
Mr Lake also claimed monies owed to him in relation to entitlements which he had accrued, but was not paid, on the cessation of his employment with GBST. The claim equated to a total of AU$121,397.04.
Mr Lake no longer pursues a claim for specific performance of the 2012 performance rights contract[1] and instead elects to claim damages, being the value of 365,177 ordinary shares in GBST as at 9 November 2015.
[1] SML.009.
In response to Mr Lake’s claim, GBST filed a counterclaim seeking compensation in the sum of $3,088,793.15, or alternatively a sum between $2,606,180 and $3,088,793.15, from Mr Lake pursuant to ss 1043L and 1317H of the Corporations Act 2001 (Cth) (Corporations Act) in recompense for alleged insider trading in the company’s shares by Mr Lake and for causing a subsidiary of the defendant to enter into a lease for an apartment in Hong Kong in circumstances where the lease should have been one for Mr Lake personally.
GBST
GBST’s business, its revenue and its products
GBST is a business that was floated on the Australian Stock Exchange in 2005 which provides software and support to the financial services sector. It was and is a global business with overseas offices in London, Hong Kong and Singapore which required Mr Lake as its chief executive officer to travel internationally.
GBST had two main divisions in its business at all relevant times: namely Wealth Management and Capital Markets. Capital Markets had two divisions, Capital Markets Australia and Capital Markets International, and Wealth Management was broken up into Wealth Management Australia and Wealth Management United Kingdom.
At the relevant times GBST had three main computer software products called SYN~, Shares and Composer. The SYN~ and Shares products were used by the Capital Markets division. Composer was the primary product used by the Wealth Management division throughout 2015. By 2015 Composer administered approximately $500 billion of funds under management across various clients. The Composer product offered an end to end funds administration registry and management software product which was designed to consolidate and manage the books and records of various investments. It allowed advisors and investors to manage their current financial position irrespective of the complexity of their affairs.
In 2015 GBST’s revenue was broken up into two broad categories or streams: being licence revenue and services or sponsored revenue. Licence revenue was more long-term and represented a licence fee payable to GBST by clients. The licence fee was usually payable pursuant to the terms of a licence agreement for the use of GBST software.
Services or sponsored work involved enhancing software that had already been provided to clients. It was building something different, better or additional to what the client had access to under the licence agreement. The services or sponsored work was ordinarily contracted by use of a “statement of work” document. Mr Lake, GBST submitted, was not generally familiar with the contents of those statements of work, but the executives were. When considering possible services work, it was typical for GBST to undertake a scoping exercise of what client’s requirements might be and that could take some time.
GBST acquired a company called Infocomp in or about August 2007. That was a company of which Mr Rob DeDominicis was the CEO. That company was the developer of the Composer product that was subsequently operated by GBST in 2015. Infocomp effectively became the wealth management division within GBST after it was acquired. By 2015 Composer had become GBST’s biggest product by revenue.
Aegon and its significance to GBST
One of GBST’s biggest clients in 2015 was Aegon in the United Kingdom. Aegon UK was the name used by a subsidiary of a large multinational life insurance pension and investment company, Aegon NV, based in the Netherlands. In or about 2010 Aegon wanted to make some changes to its relationship with GBST, including using the Composer product as the single biggest strategic platform for its new business. Aegon advised GBST that its desire to expand was driven by legislative reforms to the UK’s retail financial advice sector. In or about 2010 GBST and Aegon agreed to new contractual terms. The effect of the contract that had commenced in 2011 between Aegon and GBST was to increase the licence payments to GBST from about £600,000 per year to about £3.2 million per year.
Part of the work done by GBST for Aegon was performed by a “ring fenced” team of GBST people for which Aegon paid daily fixed rates. In early 2015, it was expected that the ring fenced team’s services work would come to an end in the second half of 2015. Mr Lake knew of that in early 2015. The effect of the reduction of the services work for Aegon led to the belief among some employees of GBST early in 2015 that the services revenue was likely to decline significantly in the second half of 2015.
Constitution of the Board
Mr John Puttick was the chairman of GBST’s board during the times relevant to this action. He had been involved with it since the company’s formation in 1983. Other directors included Mr Allan Brackin who chaired the board by the time of the trial, Ms Christine Bartlett who joined in 2015 and is now the deputy chair, Mr David Adams and Mr Kim Sundell, All those directors with the exception of Mr Sundell gave evidence in the proceedings.
Roles of different employees of GBST
Mr Robert DeDominicis replaced Mr Lake as CEO of GBST, having first been named as interim CEO after the termination of Mr Lake’s employment.
Mr Patrick Salis trained as a chartered accountant and was at GBST from September 2007 as chief financial officer then chief operating officer by 2015. He was based in the Sydney office.
Ms Isabel Sanchez was the chief technology officer of the defendant based in Wollongong and was responsible for maintenance of the software products.
Mr Andrew Ritter had trained as a chartered accountant but worked in GBST as its company secretary and chief financial officer although he reported to Mr Salis on the finance side. He worked on governance and compliance in particular.
Mr Denis Orrick was, in 2015, head of the capital market side of the defendant’s business. He was involved in the budget process.
Mr Lake’s role as CEO of GBST
History
Mr Lake was engaged pursuant to a deed of executive service.[2] He moved to Hong Kong for three years from 1 February 2012 pursuant to a secondment agreement.[3] That secondment was extended for 12 months from 1 February 2015 as agreed at a board meeting of 29 January 2015 evidenced in an email of 11 February 2015.[4]
[2]     SML.003.
[3]     SML.006.
[4]     SML.015.
Pursuant to his employment contract, he was entitled to a total salary of A$643,100 including a base salary of A$590,000 and superannuation of A$53,100 per annum.[5] He might also be provided “Non-Salary Benefits”, a term defined to include non-cash components, which could be added or removed during the term of the contract.[6] He was entitled to five weeks paid annual leave for each 12-month period of service, which was to accrue on a pro rata basis. He was also entitled to long service leave of 13 weeks after completing 10 years of service, plus an additional 1.3 weeks per year for each subsequent year of service.[7]
[5]     SML.003, cl 4.1, Schedule.
[6]     SML.003, cll 1.1, 4.2, 4.3.
[7]    SML.003, cll 7.1, 7.4.
Pursuant to the secondment agreement he was also entitled to a housing allowance of HK$120,000 per month, totalling HK$1,440,000 per annum.[8] He was entitled to 25 days annual leave, plus a further 5 days additional leave (having completed 10 years employment) per annum.[9]
[8] SML.006, cl 7, Remuneration Schedule.
[9] SML.006, cl 6.1.
He had been invited to apply for performance rights under a long-term incentive scheme in the defendant’s performance rights and option plan to which he agreed on 8 November 2012.[10] Those performance rights were to vest on the later of three years from the grant date or the date of release of the defendant’s financial results for the 2015 financial year. The plaintiff’s case was that they were due to vest, therefore, on 8 November 2015, the financial results for that year having been released on 11 August 2015. His evidence was that he did not receive those performance rights. If he had received them, he would have sold them a month or two after he ceased his employment with the defendant.
[10] SML.009.
The plaintiff’s written submission about the performance rights was as follows:
“18. The Performance Rights Contract entitled Mr Lake to receive 365,177 performance rights (Performance Rights)[11] if performance and service conditions were satisfied on the vesting date.[12] It is not disputed that the vesting date was 8 November 2015.[13] On that day, provided the vesting conditions were met, the Performance Rights would be automatically exercised,[14] the effect being that 365,177 GBST ordinary shares would be acquired and held on Mr Lake’s behalf[15] until withdrawn by him.[16]
[11]    SML.009. GBT.004. Clause 1.1 of GBT.004 defined performance rights as ‘an entitlement of a Participant granted under this Plan to be allocated a Share subject to the satisfaction of any Vesting Conditions, to be held on trust by the Trustee [GBST ESOP Pty Limited] for a Participant pursuant to these Rules. For the avoidance of doubt, a Performance Right has a Nil exercise price’. Share was also defined in cl 1.1 of the Rules to mean a ‘fully paid share in the capital of the Company’.
[12]    SML.009. GBT.004.
[13]    SML.009. GBT.004. Statement of claim, [18]. Defence, [15]. Defendant’s opening outline, [18].
[14]    Clause 6.1 of GBT.004 indicated that the terms and conditions of the performance rights offered or granted would be set out in the invitation letter (SML.009) which was provided to Mr Lake on 30 October 2012. Clause 7.1(b) of GBT.004 stated that a vested Performance Right would be automatically exercised within the period specified by the board in the Invitation Letter.
[15]    Pursuant to cl 7.3(b) of GBT.004, the shares were to be held by GBST ESOP Pty Limited (Trustee) as trustee on behalf of Mr Lake.
[16]    Clause 1.1 of GBT.004 indicated that Mr Lake’s beneficial interests in the shares would be held by the Trustee until he issued the company with a withdrawal notice.
19.The performance condition related to the financial performance of GBST in the 2013, 2014 and 2015 financial years. There is no dispute that the performance condition was satisfied. Mr Lake was notified of that fact on 7 October 2015.[17]
[17]    SML.052.
20. The service condition was expressed as continuous employment with GBST from the grant date to the vesting date. The GBST Performance Rights and Option Plan Rules (the Rules),[18] and the invitation Mr Lake received on 30 October 2012 (Invitation Letter)[19] addressed the situation in which he ceased employment with GBST before the vesting of the Performance Rights.
[18]    GBT.004.
[19]    SML.009.
21. The Invitation Letter stated:
Cessation of employment: If you cease employment with GBST and hold Performance Rights, your ability to retain those Performance Rights will depend on the circumstances in which your employment ceases.
The Plan Rules define Other Leavers and Good Leavers.
If you are an Other Leaver, your Performance Rights will be automatically forfeited, unless the Board determines otherwise.
If you are a Good Leaver, the GBST Board will consider the circumstances of you ceasing your employment and may exercise its discretion to allow some or all of your Performance Rights to vest (and be exercised).
22. The Rules defined ‘Good Leaver’ and ‘Other Leaver’ in clause 1.1 as follows:
Good Leaver means a Participant who is not an Other Leaver, and includes where a Participant ceases employment or office due to Redundancy, Retirement, Permanent Incapacity or death.
Other Leaver means a Participant who ceases to be an employee or officer of the Group in any of the following circumstances:
The employment of the Participant is terminated, or the Participant is dismissed from office (as the case may be), due to serious or wilful misconduct, wilful disobedience, negligence or incompetence, insubordination, behaviour which damages or is likely to damage the business or reputation of the Group or any of its clients, or any other conduct justifying termination of employment or office without notice at common law;
The Participant resigns or ceases their employment or office with the Group (as the case may be) and commences employment, or holds the office of director, or directly or indirectly holds more than 5% of the issued capital with a Competitor in breach of any post-termination restrictions in their contract of employment or associated documentation; or
The Participant is ineligible to hold their office for the purposes of Part 2D.6 of the Corporations Act or as a result of any relevant corporations or securities law.
23. Clause 6.3(b) of the Rules stipulated:
6.3 Conditions for vesting
…
(b)      Performance Rights or Options will only vest and be exercisable if the applicable Vesting Conditions have been satisfied, waived by the Board, or are deemed to have been satisfied under these Rules.
24. The Rules also stated in clause 7:
7. Exercise
7.1 Method of exercise – Performance Rights
At the sole and absolute discretion of the Board as set out in the Invitation Letter, a vested Performance Right:
Will be exercisable by a Participant by delivery to the registered office of the Company a signed Notice of Exercise; or
Will be automatically exercised with in the period specified by the Board in the Invitation Letter.
…
25. The Rules also stated in clause 8:
8. Leavers
8.1 Good Leaver
Where a Participant who holds Performance Rights or Options becomes a Good Leaver, all unvested Performance Rights or Options will automatically lapse, unless the Board determines in its sole and absolute discretion:
To allow some or all of the unvested Performance Rights to vest, in which case those Performance Rights will be automatically exercised; and/or
…
8.2 Other Leaver
Where a Participant who holds Performance Rights becomes an Other Leaver, all unvested Performance Rights or Options will automatically lapse unless the Board in its sole and absolute discretion, determines otherwise.
26. On 18 October 2015, Mr Lake completed the requisite form to facilitate transfer, to himself, of the shares resulting from the vesting of the Performance Rights,[20] and he caused his secretary to submit that form to GBST’s company secretary and chief financial officer (CFO), Andrew Ritter,[21] on 19 October 2015.[22]
27. By reason of its purported termination of Mr Lake’s employment on 6 November 2015, GBST has treated the Performance Rights as not having vested for Mr Lake because of non-satisfaction of the service condition. Mr Lake’s unchallenged evidence was that if they had vested, he would have sold the shares that he acquired within a ‘month or two’ of them vesting.[23]”
[20]    T2-10/45; SML.052.
[21]    T2-14/25.
[22]    T3-13/5-30; SML.171.
[23]    T2-10/40.
Termination discussions commencing 10 May 2015

On 10 May 2015, Mr Lake had a discussion with Mr Puttick, then chairman of the defendant, in Brisbane at the Stamford Heritage Hotel. Mr Puttick told him that the defendant was not going to renew his contract as they were searching for a new chief executive officer. The decision not to renew Mr Lake as CEO had been made at a board meeting in Hong Kong in April 2015.
His deed of executive service which was described by the parties as his employment contract provided for the termination of his employment in these relevant terms:
“8.      TERMINATION
8.1      GBST may summarily terminate your position immediately if at any time:-
a) you commit any fundamental and serious breach of your responsibilities as Chief Executive Officer as determined by the Board;
b) you commit persistent breaches of material provisions of this Agreement;
c) you are convicted of an indictable offence;
d) you commit any act of serious dishonesty or fraud on GBST.
…
8.4      Either party may terminate your employment without cause by giving to the other not less than 6 months notice of the cessation of employment provided that the date of cessation is on or after the conclusion of the Term.
8.5      If GBST wishes, it may pay a sum to you for the notice period in lieu of your service during that time. The amount of the sum shall be calculated on the Remuneration Package as at the date of termination and shall provide for a cash payment for the Non-Salary Benefits in lieu of the provision of the Non-Salary Benefits during the notice period.”
By 2 April 2015 Mr Puttick knew that Mr Lake was looking for a new two year tenancy for an apartment in Hong Kong because his current lease had, in effect, become a month to month tenancy.[24] After the decision that he should retire had been taken, Mr Puttick agreed that it was not then relevant to reach any different conclusion about where Mr Lake might live. There was no point in him leaving Hong Kong.
[24] JFP.010.
Mr Puttick wanted Mr Lake to assist him in the search for a new CEO as he believed at that stage that nobody then employed internally by the defendant was suitable. The company was to engage a recruitment agency to establish a long list of potential candidates which Mr Puttick estimated would take about three months.
He wished to advise the stock market about Mr Lake’s pending retirement in about August 2015 by which time he expected to have a short list. He expected it would then take about three to six months for the person selected from the short list to give notice to his or her current employer and to resign and a further three months for a handover of the position from Mr Lake to the new appointee. Mr Puttick told him that he would receive six months' notice from February 2016 which would include six months' rent of his apartment.
Company’s leases of premises for Mr Lake to inhabit in Hong Kong
Mr Lake told Mr Puttick that he and his wife were then looking for another apartment than the one they had been living in and had found one that they liked. He said that Mr Puttick said to him words to the effect of “Well, you have to live somewhere. That’s okay”.[25] The minimum tenancy agreement he could enter into was for 12 months and he emailed a draft agreement to Mr Ritter, one of the administrative officers of the defendant, and to the defendant’s internal counsel on 19 May 2015.[26] Mr Ritter then made arrangements for the termination of his old lease and entry into the new one.[27] He had asked Mr Ritter to speak to Mr Puttick to find out if the proposed new lease was appropriate and was later told by Mr Ritter that it was. He said that if Mr Puttick had objected to his entry into the lease he would not have entered into it.
[25]    T2-16/12-13; T5-70/23.
[26]    GBT.277.
[27]    GBT.277; GBT.288.
Mr Ritter’s evidence was that Mr Lake had a housing allowance paid directly by GBST to the landlord. He agreed that, if he were asked by Mr Lake to seek Mr Puttick’s approval for a lease, he would do that and report back. He would also help set up payment for the lease and deal with the landlord.[28] He obtained a final signed lease in respect of the new apartment as company secretary of GBST Hong Kong Limited, a GBST subsidiary, and arranged for that company to make payments to the landlord.[29]
[28] GBT.277.
[29] SML.020; SML.025.
The new lease was actually for a two year term from 20 July 2015 to 19 July 2017 but cl 9 enabled the parties to elect to terminate the lease early.[30] It provided that:
“… after the expiration of the first twelve months of the tenancy hereby created, either party shall have an option for early termination of the tenancy hereby created and be released from the obligation of the terms of this Agreement upon giving not less than two (2) months' prior written notice or by paying the sum equivalent to the two (2) month's rent in lieu of such notice to the other party.”
[30] GBT.008.
Mr Lake was familiar with his ability to break the lease at an earlier stage but not necessarily with the precise terms of cl 9. He believed, in spite of the fifth schedule prescribing that the premises could only be used for him and his family, that the defendant could substitute another tenant for them.
In cross-examination Mr Lake agreed that he knew at the 10 May 2015 meeting at the Stamford Heritage Hotel that the board had lost confidence in him and that cl 8 of his employment agreement included provision for termination.[31] It was suggested to him that he had no written agreement requiring his employment after 1 February 2016 with which he agreed and he also agreed that his secondment agreement as extended finished on 1 February 2016.[32] He believed, however, that the notice period he would be entitled to took him out to August 2016 under the employment contract and that the lease he had entered into was appropriate within that timeframe. He had spoken about it with Mr Puttick whom he believed represented the board in their discussions. Mr Puttick’s evidence was that he had hoped to have appointed a new CEO by Christmas 2015 but no hard and fast date had been set.
[31] GBT.001.
[32] GBT.007.
Mr Lake explained his failure to write to Mr Puttick in an email about the lease by saying that it was different from share trading. He did not believe the lease was a serious matter. Nor did he send an email about the lease to other members of the board. That had not been his practice in the past, to take leases of apartments rented by him to the board for approval.
He accepted that Mr Ritter and Ms Smith did not have the authority to permit him to enter into the lease on behalf of the defendant. Mr Ritter organised the payment of the rent by the company. He believed from the discussions he had had with Mr Puttick that Mr Puttick had given authority for him to enter into the lease and he asked Mr Ritter to speak with Mr Puttick about that.
After 10 May 2015 Mr Puttick had had no discussion with Mr Lake concerning the lease but knew by 17 September 2015 that it was a company lease extending beyond February 2017. He also knew, by 7 September 2015,[33] that the earlier lease had been month to month and was due to finish by September 2015. He also knew that the company lease would be on foot until at least 30 June 2016 and therefore knew that it bound the defendant or its subsidiary to pay rent at least until that time.[34] He said that he had no problem with it and no board member had told him that they had a problem with it. He assumed that Mr Ritter in his role as company secretary had arranged the lease.
[33] GBT.071.
[34] JFP.039.
Further termination discussions
An announcement of Mr Lake’s retirement as Managing Director of the defendant was made to the Australian Stock Exchange dated 17 September 2015. It is useful to set out the events leading up to that announcement. Mr Puttick had been on leave after his and Mr Lake’s conversation on 10 May 2015 and they spoke when he returned from leave in late June or early July. They, together, planned to issue a press release when the defendant’s results were released in order to advise the stock market first of his departure.
There were discussions between Mr Puttick and Mr Lake about the form of the announcement to be made.[35] They also discussed his separation terms and the identity of his replacement. By about 24 or 25 August 2015 they had narrowed the list of potential candidates to six. Mr Robert DeDominicis was the eventually successful candidate. He had, in fact, been an internal rather than an external candidate.
[35] GBT.303; GBT.060.
In Mr Lake’s discussions with Mr Puttick about the terms of his leaving the defendant, Mr Puttick told him by telephone that he would get six months’ rent, six months’ salary and his performance rights. He told Mr Puttick that 12 months’ salary was more usual for a CEO of 14 years. Mr Puttick agreed with him about that.[36] In his oral evidence Mr Puttick discussed telling Mr Lake how a “good leaver” should be treated. Mr Lake favoured a 12 month payout notice period which Mr Puttick regarded as the upper limit but said that that period would be reasonable given his long service as a “good leaver”. He believed that the 12 month period would commence from the date of separation from the company.
[36] GBT.059.
Then, by an email of 4 September 2015, Mr Puttick suggested that his termination payment recommendation should be determined by reference to his salary for 12 months and should include an indemnity for his liability particularly in respect of an action brought against him on behalf of the company by a Mr Murdoch.[37] Mr Lake explained the reference to the indemnity in respect of the litigation brought by Mr Murdoch by relating a history of proceedings for alleged oppression brought by Mr Murdoch against him and Mr Sundell that had settled in about October 2004.
[37] GBT.068.
About six months later a further claim was made by Mr Murdoch. He alleged that a secret agreement existed between Mr Lake, Mr Puttick and Mr Sundell, pursuant to which Mr Lake was to purchase shares in GBST from Mr Sundell. Mr Murdoch claimed that the existence of the secret agreement rendered settlement of the oppression claim null and void.[38] Mr Lake’s defence of that further claim was funded by the defendant and had been discussed at a board meeting on 29 January 2015.[39] While it was understood that joinder of Mr Sundell, Mr Puttick and GBST was possible, such a course was decided against because it would result in four sets of legal fees instead of one. Accordingly, it was considered more effective for Mr Lake to deal solely with the case.[40]
[38]    T2-21/3045, T2-23/5-10.
[39]    SML.071.
[40]    T2-23/5-10.
Mr Lake had concerns that the amount to be paid to him on termination may exceed the maximum permitted pursuant to the Corporations Act and Mr Puttick suggested to him that he may be able to continue as a consultant for the 12 months following his termination. A later version of the proposed payout to him also referred to a pre-committal of 12 months for the company rent in respect of the apartment he was leasing.[41] By 9 September 2015, a draft settlement and release deed was supplied to Mr Lake for his consideration, prepared by the defendant’s solicitors. He had engaged solicitors himself to advise him. He wanted to have a deed agreed before the announcement about his departure was released to the market.[42]
[41] GBT.071.
[42] GBT.072 includes the draft settlement and release deed.
In mid-September 2015, Mr Lake attended a management meeting in London at the Savoy Hotel. It began on 15 September and he flew in the night before or that morning. The announcement to the stock exchange of his departure was released on the morning of 16 September London time which was the evening of 16 September in Australia. Effectively, therefore, it was released through the Australian Securities Exchange (ASX) on 17 September early in the morning.
Mr Lake attended the management meeting on 15 September and told people there that he was leaving. Mr Puttick arrived after lunch and he spoke to the executives of the defendant for about half an hour. Then Mr Puttick and Mr Lake met at about 4.00 pm to discuss the process to go through on 16 September. Mr Lake told Mr Puttick that he still had nothing in writing and Mr Puttick said that he would have to trust him.
They then went to a pub next door to the Savoy Hotel in London. Mr Lake then told Mr Puttick that he would sell shares in the defendant. Mr Puttick told Mr Lake that he would wait until June 2016 before standing down as Chairman. Mr Lake told Mr Puttick that he would sell nearly half of his shares when he stepped down as CEO as that was a good time to do so.
The defendant had engaged a media company to handle the public relations side of the announcement of Mr Lake’s retirement. He and Mr Puttick briefed journalists at 7.00 am on 16 September and then released the ASX announcement to the defendant’s staff as well as to the ASX. Mr Lake said that he relied on Mr Puttick saying that he had to trust him as indicating that he and the company had an agreement in place as justifying the making of the announcement to the ASX. He said that he wanted to do the right thing by the company at that time.
By 22 September 2015, Mr Puttick and Mr Lake were still discussing Mr Lake’s draft departure terms.[43] Mr Lake had provided him with a response to the draft deed which included quite a number of changes.[44] This document appears to have been sent on 25 September 2015 at 3.23 pm around the time of Mr Lake’s share transfers. It also reflects his concerns about the indemnity for the Murdoch litigation.
[43] GBT.337.
[44] GBT.340.
Mr Lake sold shares in the defendant on 25 September 2015 as did his wife.[45] He first contacted his stock broker, Mark Pittman of a firm called Taylor Collinson in Adelaide, on about 18 September from London and then on about 21 or 22 September from Hong Kong when he discussed how a sale of his and his wife’s shares might be arranged. They discussed the fact that he was the CEO of the defendant and Mr Pittman and he spoke of what they called a “reverse book build” as a means of selling the shares.
[45] SML.042; SML.043.
Mr Lake flew to Adelaide on 24 and 25 September and spoke to Mr Pittman in the afternoon of 25 September from about midday. Mr Pittman told him that there was interest in his shares, but he was not sure he would do a deal that day. He had an initial offer for the shares of $4.60 per share when the market price was then $4.95. Mr Lake thought that was too much of a discount and gave Mr Pittman a price of $4.75.
He had just seen a notice that a co-director, Allan Brackin, had sold some of his shares and informed Mr Puttick of his intentions “… to sell some as well over today and the next week …” by email at 2.59 pm that Friday, 25 September.[46] Mr Brackin had sold his shares on 19 September.[47] Mr Brackin’s sale was consequential on a separation from his wife and the need to create a balanced portfolio for her share of their matrimonial property.
[46] GBT.094.
[47] GBT.087.
Mr Lake received a reply from Mr Puttick to his notice of his intention to sell with the word “acknowledged” which he took to mean that Mr Puttick did not object to him selling shares.[48] That was not surprising considering he had told Mr Puttick earlier in August that he intended to sell some of his shares. Other directors, including Mr Puttick, had also spoken of selling shares, some of them proposing to do so after the announcement of Mr Lake’s departure was made. His email had also indicated to Mr Puttick that he proposed to sell at least some of his shares that day. When he sent the email the stock exchange had only about an hour of trading left. He then spoke to Mr Pittman and informed him of the email he had received from Mr Puttick. His evidence was that if he had not received that email, he would not have sold the shares on 25 September.
[48] GBT.095.
He had been discussing selling shares with his wife for some time previously and had told her that he could not do that until the market was informed about his prospective retirement. He believed, by reference to a number of emails from his and his wife’s iPad and MacBook computer, that he confirmed the instructions to trade the shares around 4.00 pm on that day.[49] A confirmatory note was sent to him at 4.10 pm Adelaide time. He had to notify the ASX of the changes in his shareholding and Mr Ritter drafted a form which Mr Ritter lodged notifying the ASX of a change in a substantial shareholding in the company. Mr Lake’s shareholding then was about 7.5% of the company which was reduced to less than 5% by this transaction.
[49] SML.040; GBT.097; GBT.098.
He read and approved the defendant’s securities trading policy.[50] His practice in the past had been to deal with Mr Puttick and obtain his approval to trade in the shares. He would also deal with him about employment issues, usually by sending him an email.
[50] SML.146.
When asked about cl 6 of the company’s securities trading policy which required “written clearance from the Chairman of the GBST Board of Directors prior to any trading in GBST Securities at any time during a Closed or Prohibited Period”, he said that he did not submit a request to the company secretary as he understood that he would be notifying himself.[51] Presumably this was because the company secretary would have to refer it on to Mr Lake. Nor did he use the form attached to that policy because it was for a “closed or prohibited” period and this was not one of those.
[51] T2-38/38.
Mr Ritter was the company secretary and his evidence was that the share trading policy was meant to be an accountability measure for staff members to be responsible for their trading rather than placing the responsibility particularly on Mr Lake. Before the 2015 policy was implemented there had been a debate about whether there should be an open or closed policy. An open policy was one where staff and directors had periods where trading was permissible rather than designated blackout periods.[52]
[52] GBT.291.
He agreed that the 2015 policy was an enhancement of the 2013 policy but also a self-contained existing document. It was not circulated with the 2013 document.
GBT.170 was one of the first drafts of the new 2015 policy and included appendices A and B. Appendix B dealt with disclosure during a closed or prohibited period while appendix A dealt with disclosure during an open period. That was what was sent to Mr Lake by Mr Ritter on 28 September 2015. Appendix A had, however, been removed from the 2015 policy (with Appendix B renamed as Appendix A in the policy’s final version). That appeared to have been a deliberate move.[53]
[53] See GBT.169; GBT.170; GBT.171 at p 5 of 7.
Securities Trading Policies
In that context it becomes important to describe in more detail the defendant’s staff securities trading policies that were in force at the relevant times. The first relevant policy was one dated 25 July 2013 that provided among other things that: “Directors and Employees must gain approval prior to any trading of GBST Securities (buying or selling)... The CEO must not for his/her own personal transactions trade unless otherwise advised by the Board.”[54]
[54] SML.126; GBT.167 at cl 3.
Subsequently, on 3 September 2015, GBST adopted a new securities trading policy, the 2015 securities trading policy.[55] The board had reviewed the previous policy from around December 2014.
[55] SML.146.
The 2015 policy was lodged with the ASX and was therefore accessible to all members of the public. It was provided to all of the directors, officers and employees of GBST with no reference to the need to consult the 2013 policy for information about its meaning or operation. The 2015 policy was obviously intended to apply to persons who became directors, officers and employees of GBST after it came into effect. It was a new, self-contained document; an update, the plaintiff submitted, rather than a supplement to the previous policy.

The defendant submitted, however, that the 2015 policy was designed to be a continuation of the previous policy because it referred to its existence. A contemporaneous email from Mr Puttick to other senior employees including Mr Lake also mentions that it is a continuation of the previous policy.[56] A note about the history of the policies does appear in the 2015 policy which mentions that there were earlier versions in 2005, 2010 and 2013 but nothing in the 2015 policy expresses on its face that any of those policies continued to be effective. It said that the 2015 policy had been revised in light of the latest ASX listing rules.
[56] GBT.315 at p 2.
It seems to me to be appropriate, therefore, to consider the applicability of the 2015 policy independently from the 2013 policy. There were submissions, however, from the defendant that the 2013 policy could throw light on any ambiguities in the 2015 policy.
Its relevant terms included:
“3.      Restrictions on trading
At any time, all Staff of GBST are prohibited from trading in GBST Securities whilst in possession of unpublished price sensitive (or inside) information. Please refer to section 4 for more details on what constitutes inside information.
In addition to this overarching prohibition of insider trading, all Staff of GBST are not permitted to trade under the following circumstances:
•      During Closed Periods or Prohibited Periods (refer to section 5);
…
4.        Insider Trading and Inside information
Insider trading is prohibited at all times under this policy and is illegal under the Corporations Act. Insider trading includes trading in all GBST Securities by a person who possesses non-public 'price- sensitive' information (or inside information) concerning the Company's affairs.
If a person possesses inside information, and ought reasonably to know that it is inside information, they must not:
•      apply for or acquire or dispose of GBST Securities, or enter into an agreement to do so (‘Dealing offence’);
•      procure another person to do so (‘Procuring offence’); or
•      directly or indirectly communicate the information, or cause the information to be communicated the insider knows or ought reasonably to know that a person would deal with (‘Tipping offence’).
Inside information is information relating to GBST which is not generally available and if the information were known, would likely [sic] to:
•      a reasonable person would expect it to have a material effect on the price or value of GBST Securities; or
•      influence persons who commonly invest in securities in deciding whether or not to buy, sell or deal in GBST Securities.
It does not matter how or in what capacity you became aware of the inside information, and it does not have to be obtained from within GBST to constitute inside information. Practical examples of inside information include:
•      Financial performance against budget or forecast;
•      Change in strategic direction of the Company;
•      Possible acquisition or disposal of significant assets;
•      Possible change in capital structure (including capital raisings or borrowings);
•      Proposed changes to dividends or dividend policy;
•      Entry into or termination of important agreements;
•      An unexpected liability; or
•      Changes to GBST's Board of Directors or the KMP of GBST.
Potential consequences of breaching the insider trading laws may expose you (and/or members of your family and/or any other person you pass inside information onto) to criminal and/or civil liabilities under the Corporations Act.
5.        Closed (or black-out) Periods and Prohibited Periods
It is assumed for the purpose of this policy that GBST Staff are likely to be in possession of inside information by virtue of their position. This is considered likely to occur on a periodic basis during the period prior to the release of the company's half year and full year results. For that reason, GBST Staff are not permitted to trade in GBST Securities as follows (each a ‘Closed Period’):
•      The period from (and including) the 15th of December to the end of the first business day following the release of the Company’s half-year results (reviewed by the Company's auditor) to the ASX; and
•      The period from (and including) the 15th of June to the end of the first business day following the release of the Company's audited full year results to the ASX.
In addition, each of the Closed Periods referred to in this section and the period during which an ASX release is being considered up to the release to ASX are ‘Prohibited Periods’. Section 7 provides specific permission due to exceptional circumstances in accordance with this policy.
Furthermore, a black-out period may be imposed by the Company at any time without explanation. Irrespective of whether trading occurs in accordance with this policy, no trading can occur if it involves the use of inside information.
6.        Approval for Trading
To assist in protecting the interests of all shareholders of GBST, all GBST Staff may only trade in an Open Period.
For all trades during an Open Period, you must first obtain approval from your Manager and the relevant details must be submitted to the Company Secretary prior to a trade in GBST Securities being initated [sic], who will register the request on the basis that the requested trade does not contravene any provision under this policy or any law, and will forward the declaration to the Group CEO.
Exceptional circumstances must exist before a member of GBST Staff may be given permission to trade during Closed or Prohibited Periods.
Written clearance procedure during a Closed or Prohibited Period - GBST Staff (excluding Directors):
You must must [sic] first gain approval from your Manager, and then the attached GBST Securities Trading Application (Closed or Prohibited Period) form (Appendix A) request shall be submitted to the Company Secretary, who will then register the request and then submit to the Group Chief Executive Officer & Managing Director (‘Group CEO’) for approval. The same written clearance procedure applies for KMP and any other GBST Staff who report directly to the Group CEO. The Board delegates its responsibility to the Group CEO to make such approvals, and in the absence of the Group CEO approval must be obtained from the Chairman or another Non-Executive Director (in the absence of the Chairman).
Written clearance procedure during a Closed or Prohibited Period - Directors of GBST:
The following persons must receive written clearance from the Chairman of the GBST Board of Directors prior to any trading in GBST Securities at any time during a Closed or Prohibited Period:
•      The Group CEO;
•      A Non-Executive Director other than the Chairman.
If the Chairman wishes to trade in GBST Securities during a Closed or Prohibited Period, written clearance must be obtained from the Deputy Chairman or another Non-Executive Director prior to trading.”
Ms Bartlett recalled some discussion, probably at the 6 August board meeting, about how directors would get approval, especially in the case of Mr Puttick. He was supposed to check with Mr Brackin and Mr Lake. She could not remember any particular discussion about what the CEO should do when trading, nor the meaning of “manager” but said that the effect was that one should go to the person one worked for. Nor could she recall any discussion about the reference to CEO trading in the 2013 policy at p 3.[57] She described the 2015 policy, however, as an update of the 2013 policy.
[57] GBT.167.
To consider the arguments about the share sales, whether they were authorised or in breach of the policy or constituted insider trading, it is necessary to consider what information about the defendant’s activities Mr Lake possessed leading up to the sales. This requires an examination in some greater detail of the events that occurred during the period leading up to Mr Lake’s termination.
Development of the 2016 financial year budget from about 19 April 2015
Mr DeDominicis gave evidence about the development of the 2016 financial year budget commencing with the outlook paper of 19 April 2015.[58] The budget, from his point of view, was significantly affected by his expectation that work from Aegon UK was decreasing. It had formed a very significant part of the company’s work. It was their largest platform in the United Kingdom and in Australia. They had a “ring-fenced” team working solely for that client under what was called the “Blue Planet” program. He lived and worked in the United Kingdom for the company and had constant contact with Aegon there through Mr Grace, Mr Chong and Mr Denning in particular. He spoke regularly both informally and formally with them. Their formal meetings occurred on a monthly basis.
[58] GBT.009.
By early 2015, he knew that Aegon’s work with the company was ramping down as GBST had fully built out its system. He discussed that likelihood with Mr Lake by early 2015 by telephone. He believed that the revenue would go down as shown in the first outlook paper.[59] Mr Salis had drafted the text in that outlook paper and discussed it with him. The revenue was also predictable because it was provided through the ring-fenced team.
[59] GBT.009.
Mr Salis said he imported high level assumptions from the executive team into his draft. He spoke to all of that team and some of the topics of concern were that the Aegon run was coming to an end and that the capital markets business had problems because a contract it had with Pershing, another global financial solutions provider, was likely to be terminated and the cost base of the New York team had increased significantly. There was further discussion at the executive meeting in Hong Kong from 20 April 2015. That was the meeting for which he prepared that first budget outlook paper, GBT.009.
Mr Salis said that Mr Lake described that document on Monday, 20 April 2015 in a quite agitated fashion as “rubbish”. In cross-examination, he agreed that the outlook documents were more preliminary than the budget documents. Mr Salis said that he was trying to say that it was worthwhile talking about what they had there, but Mr Lake then left to prepare for dinner. He told them “you guys need to work through this”. The budget was also discussed perhaps on Wednesday, 22 April for an hour or so where Mr DeDominicis repeated observations he had previously made about the Aegon pipeline decreasing and spoke about income from North American expansion and research and development work. Mr Lake was present during that meeting and more conciliatory and they decided to consider those issues further at their next meeting.
Mr Lake’s evidence about the defendant’s budget preparation was that it would commence on an annual basis that would extend from May to mid-July with a first preparatory paper prepared in 2015 in mid-April. It was approved in mid-August. He described the budgetary process as building a model for expectations for the coming financial year where one would commence with a high level overview and then descend down to more subtle levels of detail.
One example he gave had to do with the resources the company should put into North America. He believed it was necessary to put more resources into that area while anticipating a greater short-term loss. Mr Salis was opposed to that view but Mr Lake believed that he, Mr Lake, had always been aggressive in pursuing growth for the company. It had secured a second customer in that area and he wished to continue to expand there.
He said preparing a budget involved questions of judgment. He wanted to stretch managers but not too far by giving them more challenging targets. He described Mr Salis, for example, as more pessimistic and conservative than he was. He described the budget as a working document which would be updated and varied at least quarterly. There would be the opportunity to change its settings and bring forward revenue or cut costs. Revenue could be brought forward, for example, by encouraging a client to bring a project forward earlier than it might have planned.
Mr Lake gave evidence of expectations he had during 2015 about the development of relations with particular clients of the defendant. One was the company Aegon where he was involved in discussions with its chief executive officer, Adrian Grace, to expand with Aegon the use of the Composer wealth management platform produced by the defendant. That was significant, in his view, as the projections for income from Aegon were as low as £3 million. He believed there was a significant chance that the actual income would be much higher than that. By 6 August 2015, for example, he received an email from a Mr Richard Denning from Aegon expressing real excitement about what that company might be able to do “going forward” with the defendant.[60] That led Mr Lake to conclude that there was the prospect of a significantly greater income from the defendant’s dealings with Aegon in the next financial year. He also spoke about the positive relationship that the company had with that client.[61]
[60] GBT.381.
[61] T3-18/29-35.
There was also the prospect of an acquisition of a competitor company called Bravura[62] which would have reduced costs but would also have had the potential to increase revenue.
[62] Perhaps Bravura Solutions Ltd.
When cross-examined about the budgetary process, Mr Lake agreed that his executive team included Mr DeDominicis, Mr Salis, Ms Sanchez and others. They met roughly every month when they discussed revenue and profitability. He agreed that it was suggested during such meetings that the Aegon revenue was decreasing.[63] He agreed that Aegon was a significant source of revenue for the defendant. He could not recall Mr DeDominicis saying to him in about April 2015 that there was nothing left in the pipeline for Aegon. He was aware, however, that there was going to be a drop in work from it.
[63] SML.147 and its reference to revenue concentration with Aegon continuing.
Discussions in Hong Kong in April 2015
Mr DeDominicis had weekly discussions with Mr Lake in the first half of 2015 in which he discussed the Aegon outlook in particular and expense reduction also. A number of outlook papers were developed. One was discussed at a meeting in Hong Kong on 20 April 2015.[64] Mr DeDominicis was comfortable with the financial projections shown on p 5 of GBT.009 and with the words describing the significant issues on p 6. He said that document was discussed by the executive team in the Hong Kong meeting in April 2015. Mr Salis explained the paper and the outlook. The document, at p 11, also referred to an increase in operating expenses of $5 million. Mr Lake did not take that explanation well and left the meeting shortly after it was discussed, having become a bit emotional and unhappy, and having used the word “rubbish” a couple of times. Mr DeDominicis told Mr Lake that the forecast was reasonable and correct. He could not recall the outlook paper having been discussed again during that three day meeting and said that the discussion would have taken about one hour.
[64] GBT.009.
Mr Lake was cross-examined about the series of “outlook papers” beginning from GBT.009 dated 19 April 2015 suggesting that the work from Aegon would drop.[65] He described that as the starting point of the budgetary process and accepted that Mr Salis, who helped prepare that document, said he had consulted others on the executive team. He agreed that there was a robust discussion with Mr DeDominicis at the meeting on 20 April 2015 in Hong Kong concerning the outlook paper. Mr Lake had described it as rubbish. Mr Salis was concerned about expansion in the United States and may have said that there were challenges ahead. Mr Salis repeated his concerns about the United States at a further meeting on 23 April 2015.
[65] GBT.009.
Ms Sanchez said that the entire executive team discussed the outlook paper dated 19 April 2015 a little on 20 April but more on the last day, 23 April. She could not recall specific statements by Mr Lake but said that there was a discussion about the reduction in work available. One matter affecting the Aegon projections related to a potential acquisition by it of a company called Cofunds which may have led to significant increases in the work for Aegon by GBST. The projections indicated that there may be higher fixed price work from September which arose from discussions Mr DeDominicis held with Mr Denning of Aegon which were conveyed to Mr Lake.[66]
[66] GBT.014 at p 7; T7-31/1 to T7-32/20.
Discussions at executive meeting in May 2015 and afterwards
A second draft of the outlook paper was prepared on 14 May 2015.[67] Mr DeDominicis said it was discussed by the executive in a meeting which he attended by video conference. He recalls discussing changes to forecasts in it and said that Mr Salis talked through the paper and summarised it.
[67] GBT.014.
Mr Salis’ evidence was that he had drafted it also based on the same sources of information as before. He discussed it with Mr Lake in preparation for the meeting in May echoing the sentiments he had expressed earlier. Mr Lake told him it was his opinion and it was up to them to get others’ views and form a consensus view. That meeting occurred on 14 May 2015. Mr Salis said that Mr DeDominicis spoke again about Aegon and the timing of new revenue which he said was likely to be “back ended”[68] to the second half of the year. Mr Lake put forward his view that there was more upside than had been accounted for. He also spoke about the expansion of the capital markets’ business into North America and Asia.
[68] T8-86/1.
It was suggested to Mr Lake in cross-examination that the document reflected a decrease in Aegon revenue and a reduction in the “ring-fenced team” doing the work for it in the United Kingdom. He said, however, that his expectation then was that they would receive new work from Aegon and that it was wrong to say that there was no new project on foot.[69] He was discussing possibilities with Aegon then, as was Mr DeDominicis with Mr Denning from Aegon. He agreed that that document showed a forecast decrease of more than $4 million in earnings between the 2015 financial year and the 2016 financial year and said that that was what the executive team was discussing.[70] Mr Salis was still concerned about investment in the United States. Mr Lake said that the company’s investment in the United States started slowing down around that time.
[69] GBT.014 at p 7.
[70] GBT.014 at p 23.
By 1 June 2015, Mr Salis had prepared a new outlook paper.[71] He did not recall speaking with Mr Lake about that version of it and drafted it from the same sources of information he had used previously. He said it was not much different from the second version. The next version produced was dated 18 June 2015.[72] He discussed it with Mr Lake over the telephone when Mr Lake was in Hong Kong. He gave feedback and Mr Salis incorporated changes into the document for a planning session held in Sydney between 23 and 25 June 2015.[73]
[71]    GBT.017.
[72]    GBT.019.
[73]    GBT.021.
GBT.017 again referred to a decrease in Aegon revenue. Mr Lake’s evidence was that the information from Aegon was not consistent with that document. When it was suggested to him that there was a fixed price project showing revenue from Aegon of $1.9 million per month included in the assumptions he said that there was no allowance for discussions that GBST was having with Aegon at that time.
Discussions at Sydney executive meeting 23-25 June 2015 and afterwards
Mr DeDominicis’ views about prospects remained consistent throughout a number of other documents that were put into evidence.[74] He discussed the budget at a management planning session between 23 and 25 June 2015 but could not recall particular comments from the session dealing with it during that meeting. Nor was he aware of any new customers in North America apart from their existing client, Raymond James.[75]
[74] GBT.021; GBT.017; GBT.019.
[75] GBT.203.

Mr Orrick also attended the Sydney planning session between 23 and 25 June 2015. During it Mr Salis said that the performance forecasts were going backwards. Mr Orrick said Mr Lake was present. Mr Orrick was involved in discussions about the possible acquisition of Bravura and described the numbers as not realistic. That was something said by Mr DeDominicis.
Ms Sanchez also attended the planning session from 23 to 25 June 2015 in Sydney and said that the budget papers were discussed.[76] There was discussion of the amount of revenue and what were called “stretch targets”. There was also discussion about the need to reduce costs in the capital management area. Revenue was said to be at risk from ANZ and Aegon with the Aegon statement of work being discussed. It guaranteed work only until September.
[76] GBT.172.
Around this time there was discussion about the acquisition of Bravura and Mr Lake asked Mr DeDominicis to consider what changes the defendant would make if it acquired that company. One possibility was a decrease in expenditure in respect of the PowerBuilder to Java project. That was a proposal to rewrite their Composer program to use the Java coding language instead of the existing PowerBuilder code. There was also the potential revenue from Aegon because of the possibility that it would replace its web portal. A further possibility was of an increase of revenue from the UK business because of a change in the foreign exchange rate between the pound and the Australian dollar.[77]
[77] GBT.530.
Mr DeDominicis produced a budget in mid-July to model the impact of a possible purchase of Bravura.[78] If that occurred, for example, the defendant might not need the PowerBuilder project immediately. There was also the prospect of income of £5 million for developing Aegon’s new web portal. The previous budgets had not been based on the possibility of acquiring Bravura nor were the subsequent ones. The Bravura budget showed $28.7 million EBITDA.[79]
[78] GBT.025.
[79] GBT.499.
Mr Salis was also involved with the production of the budget based on the assumption that GBST acquired Bravura.[80] His evidence was that Mr Lake had asked Mr DeDominicis and himself to prepare an alternative budget if GBST had merged with Bravura. One of those documents was GBT.024 and another may have been GBT.529 of 16 July 2015 which dealt with the “levers” they could use from acquiring Bravura. Further changes were made in GBT.530 to do with the foreign exchange rate while GBT.532 of 17 July 2015 incorporated further changes, including the foreign exchange figures. That led to an EBITDA of $25.1 million. Mr Salis discussed it with Mr Lake who said that it was to be used in any negotiation with Bravura which he described as having had a very rosy forecast and expressed the view that GBST should provide something similar to Bravura.
[80] GBT.529.
GBT.037 issued on 21 July 2015 was the financial year 2016 budget showing EBITDA of $21.6 million. Mr Salis described it as a business as usual budget based on previous sources and showing the unaudited actual figures for the financial year ended 30 June 2015. Mr Lake told Mr Salis that it was short of his expectations but that he should submit it to the board.
Mr DeDominicis was concerned about the highly speculative nature of the possible future Aegon work. Nor were there any new clients in the United Kingdom that he was aware of which might produce a further revenue item of $5 million discussed in that proposed budget.[81] He agreed that the earlier budgets prepared set the baseline for the assumed changes were Bravura to be acquired. He believed that the numbers shown for revenue were, however, not realistic.[82] He was away for much of August on holiday returning towards the end of that month. On his return he saw a revised budget to which he responded by expressing concern about the overly optimistic revenue figures for the wealth management division of the company.[83]
[81]    GBT.532 at p 6.
[82]    GBT.029.
[83]    GBT.062.
His responses shown in GBT.066 had been influenced by a conversation or conversations he had with Mr Denning leading him to believe that the numbers were highly optimistic about the acquisition of Cofunds and because of the delays with Aegon’s other possible work.
Mr Lake agreed that the budget was updated from time to time depending on discussions among the executive and at board level.[84] He was not aware, however, that, at the management planning session of the executive minuted on 23-25 June 2015, the estimates were called a “stretch target”. Other documents he was taken to he described as consistent with other discussions he had with Mr DeDominicis and Mr Salis.[85] He agreed that the ring-fenced team in London had begun to wind down and said that it was wrong to assert that the EBITDA had been adjusted to take into account the process of negotiating to take over Bravura.[86]
[84]    GBT.019; GBT.169; GBT.172.
[85]    GBT.529; GBT.530; GBT.532.
[86]    GBT.532 at p 6.
He agreed that the work for Aegon that he thought was likely to start from September 2015 possibly could be delayed. He also said that Mr DeDominicis may have said that some of the figures proposed, for example in GBT.532, may have not been realistic.
He was taken in detail through a number of draft budgets that went to the board which showed an estimate for EBITDA in 2016 of $25.1 million.[87] He said that there was another $28 million budget in existence, but it was the $25.1 million budget that went to the board. He agreed that Mr DeDominicis thought that the $25.1 million budget was too optimistic. He described various expenses that could be reduced, for example, by reducing the amount of work put into the “PowerBuilder to Java” project.[88]
[87] GBT.036; GBT.027.
[88] GBT.027 at p 7.
He also gave some detail of other expenses that could be removed from the budget and further income that was likely to be available from new clients and changes in the foreign exchange treatment in respect of the defendant’s income.
He described the budget of $25.1 million as too optimistic in an email to Mr Puttick of 20 July 2015.[89] Another budget shown to him showed EBITDA at $21.6 million.[90]
[89] GBT.033.
[90] GBT.037.
Presentation of budget to the Board in August 2015
There was one occasion when there were two versions of a budget presented at a board meeting on 6 August 2015. Ms Bartlett remembered that the discussion about the budget at the meeting, her first, was confusing because directors had different versions of the proposed budget. Mr Brackin challenged Mr Lake about the assumptions in the forecast in the budget and Mr Lake was quite dismissive of Mr Brackin’s points telling him “you don’t understand”. She said the exchange was heated and that because the discussion was chaotic in respect of the budget it was agreed that further work should be done on it. That became the budget approved at the meeting of 11 August 2015.[91]
[91] GBT.043; GBT.178.
Mr Lake explained the fact that there was more than one budget at that board meeting in cross-examination. He said it was because the company was exploring its opportunities with Bravura at the time. One of the budgets proposed was the one based on the assumption that Bravura was acquired. It included EBIDTA of $28.7 million.[92] Other cost cutting proposals included the figures associated with the rewriting of the PowerBuilder software.[93] The defendant was still continuing to cut costs by 7 August 2015.[94] One budget had to be withdrawn and the executive team submitted a new budget to the board reflecting the cost cutting.[95]
[92]    SML.078.
[93]    GBT.025.
[94]    GBT.040.
[95]    GBT.301; GBT.042; GBT.217; GBT.302; GBT.086.
Mr Lake could not recall Mr Brackin having a heated disagreement with him at the meeting of 6 August nor recall any congratulations from Mr Puttick or criticism from Mr Salis at that meeting. Mr Salis had the view that the profits from the Aegon relationship were going into the capital markets division internationally.[96]
[96] GBT.176 at pp 2-3; GBT.175 at p 21 of 201, cl 3.1.2.
The agenda mentioned that the Aegon ring-fenced team had closed down and Mr Puttick agreed that he had approved the 2016 financial year budget knowing that fact. He pointed out that the work for Aegon was decreasing in the first quarter but that the budget was for the whole of the financial year and reflected the capacity to generate revenue. He agreed that budgets were occasionally “re-cut” but said that was not done often. If it were done it would normally be between half yearly results. He agreed that delays on some projects might impact on the first quarter earnings for the 2016 year.
Mr Lake then asked Mr Salis to prepare a new budget.[97] Mr Salis spoke to Mr Lake after the board meeting of 6 August 2015. Mr Lake told him that the board expressed consternation about the alternatives and that there was tension arising from the need for the board to finalise the budget. After the meeting, Mr Lake told Mr Salis that the budget showing $21.6 million was not adequate as the defendant needed to match its actual results in 2015 so that if there was no more revenue there should be $3 million cut from the expenses. Mr Salis then produced GBT.042 on 10 August 2015 showing the changes necessary to produce a $24.7 million EBITDA. That was approved by the board. It was not built on the same assumptions as the previous budgets and also had the foreign exchange effect added.[98] It also took into account a reduction in revenue from Aegon and did not factor in the most recent opportunities discussed with Aegon. He agreed in cross-examination that the assumptions shown in the final version of the budget submitted to the board and approved by it in GBT.042 were accurate when submitted.
[97] GBT.042.
[98] GBT.042 at pp 2, 11 and 16.
Mr Puttick said that Mr Lake made a presentation to a meeting on 10 August referring to the opportunities as well as the delays facing the company and raised concerns that it would be a difficult transition period. Some of these issues were discussed by him in an email exchange with Mr Lake.[99] The budget was approved at the director’s meeting of 11 August 2015.[100]
[99] GBT.302.
[100] GBT.178.
Mr Lake’s report to the board for the meeting proposed for 11 August 2015 covered a number of areas of developing business with significant companies including the stock broking arm of SoftBank Japan, Citic, the largest investment bank in China, and Haitong, the second-largest stockbroker in China as well as Deutsche Japan and other significant financial concerns in America. One of them was a firm called Raymond James which he described as their second client in the United States with whom he was discussing a third phase of their involvement. Those prospects encouraged him to believe that the outlook for the defendant for 2016 included the potential for a very significant upside in revenue.
In cross-examination Mr Lake did not recall Mr DeDominicis being concerned about the 2016 budget by August or September 2015. Mr DeDominicis was on holidays from early to late August. He had been involved in the budget process up until late July.
Mr DeDominicis’ evidence was that he discussed his concerns with Mr Lake that the revenue numbers were too high. He said they spoke at least once a week and he expressed his concern about the revenue numbers for the wealth management business based on what he had been told by Mr Denning that Aegon was not likely to produce the fees it had in the past. His expectations for income over the next six months from early September 2015 were that the ring-fenced team’s work would be winding down and the porting of the Composer software to Java would be starting to complete so that the rate of fees would be nowhere near the previous 12 months. Nor were there any large new clients to fill the void and he could not recall that changing during September 2015.
Acceptance of the budget by the Board
There was then another board meeting on 11 August 2015 at which the budget for the financial year ending 30 June 2016 was approved. Mr Lake believed that he made a presentation to the board about the prospects for the company based on his experience in attending such meetings. The company’s results were then released to the market and he and others did a “road show” to present the results to the major institutional investors. The company also received reports from analysts who followed it.
Events leading to the London meeting on 15-17 September 2015 and the announcement of Mr Lake’s departure
Mr Salis spoke to Mr DeDominicis in late August after his return from holidays. Mr DeDominicis was worried about the revenue projections from Aegon and the timing of the new client work expected from the United Kingdom. He told Mr Salis that that timing was likely to be pushed out and that the Aegon numbers were optimistic.[101] This email was not sent to Mr Lake. From GBT.066 of 3 September 2015 the assertion appears that Mr DeDominicis did tell Mr Lake that the current outlook was well short of the budget. Mr Salis recalled discussing that issue with Mr Lake on 3 September and telling him that the budget was unlikely to meet the outlook for the second half of the financial year. In cross-examination Mr Salis limited his recollection of his conversation with Mr Lake then to the statements in GBT.066 that he had mentioned to Mr Lake that day “that the current outlook for FY16 looks like it will be well short of the budget.” He also accepted that they agreed to discuss the topic at the London meeting.[102]
[101] GBT.063.
[102] T9-56/36-37.
Mr Lake asked him where he got his information from and he told him that it came from Mr DeDominicis and the company records and reflected his concern about the capacity of the company to generate revenue.
Mr DeDominicis also said he had spoken to Mr Salis at the end of August/beginning of September after his return from holidays about his comments saying that the forecast for revenue was unlikely.[103] In his oral evidence Mr DeDominicis described it as “incredibly unlikely”.[104]
[103] GBT.066.
[104] T7-56/5.
During September Mr Lake was moving between Hong Kong and Australia a lot. He was focussing on the communication plan for his departure from the company but still had a heavy interest in the business development plan. In early September of that year, he had discussions with Mr Salis in Sydney about cost savings in the company. They also discussed the accounting treatment of expenditure compared to ongoing income. In early September Mr DeDominicis said he relayed comments made by Mr Denning of Aegon to Mr Lake about Aegon’s plans.[105] He mentioned that the current outlook for the financial year 2015-2016 looked like it would be well short of the budget. There was robust discussion around his views about the likelihood of the defendant achieving equivalent revenue to the previous year.
[105] GBT.066.
By the time of the “flash” results on 9 September 2015,[106] Mr Orrick also said the company was not travelling to plan. There was a poor performance in the international capital markets division and they were below budget in wealth management. He was not aware of new projects in the United Kingdom and Mr Salis was expressing his concern. He and Mr Salis spoke daily while they were in Sydney.
[106] GBT.073 at p 2.
Mr Lake disagreed when cross-examined that the discussions between 6 and 9 September 2015 he had with Mr Puttick about his leaving were preliminary. He knew, however, that an offer had to be approved by the board. He also said that he told Mr Puttick he would sell his Hong Kong shares in the defendant but did not believe that they spoke then about when he would sell them.
When the ASX announcement of his departure on 17 September 2015 was to be made Mr Lake wished it to indicate that he was to “retire”. Mr Puttick believed that a smooth transition would be good for the company.[107] The first draft of a deed for the separation of Mr Lake from the company was prepared by 9 September 2015.[108]
[107] SML.037.
[108] GBT.072.
Mr Puttick agreed that Mr Lake did not want an announcement to be made to the ASX without an assurance in respect of his departure from the company. Mr Puttick agreed that they had spoken about him having 12 months’ remuneration, 12 months’ rent and his 2012 long-term incentive payments as well as a further short-term incentive payment of $250,000. He was not sure about all of the elements being present at that time. Nor was he sure whether the issue of the indemnity sought by Mr Lake in respect of the Murdoch litigation was discussed at that stage.
Mr Puttick was asked about cl 2.2 of that draft deed.[109] It referred to the long-term incentives as being represented by 365,177 shares while cl 4 and cl 7.4 indicated that the indemnity would continue in respect of the Murdoch litigation. The deed spoke of a trigger date which appeared to be likely to be one month from the commencement of the new CEO’s appointment.[110]
[109] GBT.072.
[110] GBT.068.
There were later discussions about the structure of Mr Lake’s termination payments with respect to the maximum amounts allowed under the Corporations Act. Therefore, Mr Puttick agreed that the terms of payment had been agreed by then but said the structure had not. There were exchanges between him and Mr Lake consistent with such payment terms having been agreed.[111] Mr Puttick said that the defendant’s remuneration committee was in agreement with him about these proposed terms and none of them had significant objections to them. He was aware of the existence of the lease at that stage and that it had a minimum term up until 30 June 2016 and believed that it required three months' notice to terminate.
[111] JFP.039 of 4 September 2015 and GBT.071 of 7 September 2015.
By 7 September 2015, he had all but one of the defendant’s board of directors supporting the payment he had discussed with Mr Lake.[112] That negotiation reflected Mr Lake’s requirement for assurance in respect of his future before the announcement went out to the ASX. He agreed that, in London, he and Mr Lake went out one evening and discussed the release of the announcement. Mr Lake expressed his apprehension that the announcement would go out without a termination package having been agreed and Mr Puttick said that Mr Lake would just have to trust him. They then shook hands.
[112] JFP.033.
Mr Lake was asked about an email from Mr Ritter of 9 September 2015, GBT.073, which revealed a variance from the budget for August 2015 of net EBITDA for the GBST Group of $271,000.[113] The budget anticipated a net amount of earnings of $387,000 but the “flash” or early assessment of a variance was that there would be a loss of $271,000 which would lead to a positive variation of $274,000 for the year to date from July 2015. He said that it was quite usual for such monthly variations to occur. He was not concerned about those results at the time. He believed he probably read that document about the time it was sent.
[113] GBT.073 at p 2.
Page 2 of that document shows a chart and figures showing that the performance for August was slightly behind the budget and well short of the previous year. Mr Salis was not aware of any significant new projects at that time and recalled telling Mr Lake in a conversation on 9 September that momentum had slowed. The cost base in the United Kingdom had also increased and was tracking well short of the previous year. Mr Lake told him that unless he could pull a rabbit out of his hat, they were going to have to do something. That was followed by the executive team meeting in London.[114]
[114] GBT.081.
Mr Lake then spoke about a company meeting in London which was to have occurred from 15 to 17 September 2015. Mr Puttick said that he attended the management meeting at the Savoy Hotel on Wednesday, 16 September 2015, during the afternoon and spoke of Mr Lake’s departure. He may have been mistaken about that, however, as he agreed, having been shown ex GBT.328, that he arrived on Tuesday, 15 September 2015 and attended a management meeting that afternoon and also the management meeting on 16 September. He and Mr Lake had roles to perform on 16 September in respect of the communications plan dealing with Mr Lake’s departure.[115]
[115] GBT.332.

As I have said, on my factual findings, Mr Lake’s behaviour was not such as to breach the terms of his employment contract or sufficiently serious to allow summary termination. Accordingly, even if the alternative possibility of termination at common law existed, the occasion for its use did not. Consequently, the occasion to discuss whether the approach in Shepherd v Felt and Textiles of Australia Ltd[236] applied did not arise. Namely, there was no other ground valid at the time of termination not relied on at the time justifying the termination of the contract.[237]
[236] (1931) 45 CLR 359.
[237] See the discussion of the applicability of the Shepherd v Felt and Textiles approach in Hodgson v Amcor Ltd [2012] VSC 94 at [1612], Downer EDI Limited v Gillies [2012] NSWCA 333 at [133]-[135], Mason CJ in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, 262 and Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20 at [104]-[109].
Nor could the provision in cl 8.1(a) of the employment contract permitting GBST to summarily terminate Mr Lake’s position immediately if he committed any fundamental and serious breach of his responsibilities as CEO as determined by the board, permit that determination to be other than one based objectively on information obtained not only by the employers’ investigations, but also on the whole of the evidence before the court.[238]
[238] Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30 at [36] and [49].
Nor was there substance in the defendant’s argument that Mr Lake was required to obtain approval in respect of the share trading from GBST’s board. There was no part of the policy in force at the time that required him to do that. He did in fact, on my view of the evidence, seek and obtain approval from Mr Puttick on 25 September, something which Mr Puttick did not tell the board as he did not show the board the email he had received from Mr Lake on 25 September or his response of the same day. Mr Brackin’s evidence was that that email exchange may have been discussed but neither Mr Adams nor Mr Puttick had any such recall of a discussion of that nature at the meeting.
Nor was there any requirement that Mr Lake complete a form in respect of the transaction at the time and submit it to the company secretary. Nobody had reviewed the 2015 trading policy which only required its Appendix A to be completed when seeking approval to trade during a closed or prohibited period. The date of the trade, 25 September 2015, was not within such a period. Even if he had been required to fill in a form, there was no substantive effect on his fulfilment of his obligations. He provided the relevant details to Mr Ritter on 28 September 2015 and the forms required to be lodged with the ASX were provided to it without incident.
There had never been a practice of directors seeking approval from the board. The practice was to seek approval, in Mr Lake’s case, from Mr Puttick, something that he did and which Mr Puttick failed to convey to the board.
The plaintiff also submitted that the defendant had not relied on insider trading allegations as a ground of termination in the letter of dismissal of 6 November and could not rely on them at this stage either but, as I have said, I am not satisfied that he did engage in insider trading and do not need to deal with that legal issue.
The second ground of termination relied on by the defendant was Mr Lake’s entry into the lease. Again, on my factual findings, it is my view that that was not a breach by him of his employment contract and certainly not one permitting the defendant to terminate his employment summarily. It was something done with the consent of Mr Puttick who again did not tell the board fully what had occurred between him and Mr Lake.
It was not raised as a basis for terminating Mr Lake’s employment until the board meeting on 21 or 30 October 2015 where he was not present. The evidence of Mr Adams, Mr Brackin and Ms Bartlett was that they had no recollection of Mr Puttick telling the board about any dealings that he may have had with Mr Lake or Mr Ritter about Mr Lake’s entry into the lease. Nor was the lease discussed at the board meeting on 15 October 2015 which was attended by Mr Lake so he was not given the opportunity to explain his position at the time. That constituted a failure to act reasonably by the defendant.[239]
[239] Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30 at [53]-[54].
It was also submitted for Mr Lake that, even after the board meeting of 15 October 2015, the defendant continued to offer him a separation package, including six months’ rent, such that it was precluded from relying on this ground of termination to summarily dismiss Mr Lake because by 6 November 2015 it had clearly and unequivocally elected not to rely on any such breach as a ground of summary dismissal.
The submission was that, by early September 2015 at the latest, all of GBST’s directors knew that there were dealings about Mr Lake’s separation package which included approval of payment of 12 months’ rent on the lease and that he would seek and rely on assurances about his separation package before permitting an announcement about his retirement to be made. The argument was that he was given those assurances, including in the form of a draft settlement deed providing, among other things, for the payment of 12 months’ rent, with an announcement that he would leave at some unidentified time in 2016 under a cooperative arrangement. The submission was that, having secured Mr Lake’s cooperation in relation to that announcement, on the basis of knowledge of the lease and an assurance about the payment of rent under it, GBST could not subsequently complain about the circumstances of it.[240]
[240] Rankin v Marine Power International Pty Ltd [2001] VSC 150 at [352].
Again, there seems to me to be merit in those submissions, but based on my primary factual findings, I am satisfied that Mr Lake did not breach the terms of his employment by entry into that lease.
Mr Lake’s loss arising out of his wrongful termination
Mr Lake accepted the repudiation of the defendant’s obligations under the employment contract conveyed by its termination letter of 6 November 2015 in his response of 19 November 2015.[241]
[241] SML.063.
The damages he claims for the repudiation of his entitlements under the contract include $643,100 as 12 months’ salary, including superannuation entitlements. GBST had expressed its willingness to pay him a separation package, including 12 months’ salary as late as 8 October 2015.[242]
[242] SML.053; GBT.188; T6-58/10-35.
As was submitted for Mr Lake, but for the purported termination, it was likely that he would have received a separation package consisting of that amount. The alternative to that claim was one for six months’ salary but, in my view, the plaintiff has established his entitlement to 12 months’ salary based on previous negotiations and on the reasonableness, to my mind, of a period of notice of that length. His entitlement under cl 8.4 of the employment contract was to not less than six months’ notice provided that the date of cessation was on or after the conclusion of the term of the contract. The previous negotiations can be looked at, in my view, to ascertain the probable result had the purported termination not intervened.
The performance rights contract
The performance rights contract entitled Mr Lake to receive 365,177 performance rights if the service and performance conditions were satisfied on the vesting date, 8 November 2015. The value of those shares at that time was $1,460,708.[243]
[243] SML.163.
His case was that because the employment contract was not terminated until he accepted GBST’s repudiation on 19 November 2015, he was entitled to receive those rights. My conclusions on the facts and about the invalid nature of the attempt to terminate his employment on 6 November 2015 support that conclusion. His argument was that, despite the purported termination of his employment contract on 6 November 2015, he remained in continuous employment with GBST until he accepted its repudiation. He submitted that it would be absurd to construe the reference to continuous employment to permit GBST to bring an end to his entitlement to the performance rights by its own wrongful repudiation.[244]
[244] See Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183 at [38], [70]-[71] and Johnson v American Home Assurance Company [1998] HCA 14; (1998) 192 CLR 266.
The conclusion, therefore, seems appropriate to me that, until Mr Lake accepted GBST’s repudiation, the employment contract continued and Mr Lake remained in continuous service with it.[245]
[245] See Visscher v The Honourable President Justice Giudice [2009] HCA 34; (2009) 239 CLR 361.
The further submission was that, if the performance rights did not vest on 8 November 2015, the board still had a discretion to determine whether or not they would vest generally under cll 1.1, 6.3(b), 7 and 8.[246] The submission was that the board could still allow those rights to vest even if he did not satisfy the service condition by not being employed on 8 November 2015.
[246] SML.009.
Mr Lake, therefore, relied on an alleged implied term that any discretion which GBST exercised would be for a proper purpose and in good faith and not exercised arbitrarily, capriciously or unreasonably.[247] The submission proceeded, therefore, on the basis that, since GBST’s purported termination of Mr Lake’s employment was wrongful and he was in fact a “good leaver”, then GBST failed to direct itself to the correct question in determining whether the performance rights should vest.
[247] Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357 at [5]-[6].
It had been prepared to allow them to vest until 22 October 2015 in proffering a draft settlement agreement to him on 9 September 2015, including their vesting. It also made an offer on 15 October 2015 to the effect that they would vest in circumstances where Mr Lake had accepted the offer made on 15 October 2015. The argument was that, therefore, the board procured Mr Lake’s agreement on 15 October 2015 to a form of departure in GBST’s interests to announce on the basis of the unconditional vesting of the performance rights. After that, the submission went, GBST changed its position on 22 October 2015 but did not notify Mr Lake of that fact until 2 November 2015 when it provided him with a deed of agreement tying his separation package and the vesting of the performance rights in him by terminating the indemnity in respect of the Murdoch litigation. That appeared to have been motivated by a wish by the board to retain the money previously offered to Mr Lake in the form of six months’ salary, rent and the vesting of the performance rights in order to provide a “small war chest” to help offset the costs of the Murdoch litigation and also in the hope of a full and final settlement with Mr Lake.
The submission was that the board’s motivation for seeking the termination of the indemnity was unrelated to any of the issues detailed in the termination letter and in circumstances where it was well known that Mr Sundell had a potential interest in the Murdoch litigation and appears to have participated in the decision.
In the circumstances, those submissions appear to me to be persuasive, particularly given the fact that Mr Lake remained employed by GBST until two days before the performance rights would have automatically vested on 8 November 2015 and in circumstances where his purported termination on 6 November 2015 was invalid. Because of GBST’s breach of that argued implied term, he suffered loss in that the performance rights did not vest and he did not acquire their value which equated, at 9 November 2015, to $1,460,708.
Accrued entitlements
Mr Lake claimed accrued entitlements while he worked in Hong Kong pursuant to the terms of his employment contract and the secondment agreement amounting to $63,874.33 at 10 November 2015 based on the AUD:HKD exchange rate at that date.[248] He also claimed a further $57,522.71 as entitlements accrued during his work for GBST in Australia.[249] The argument was that he had been underpaid annual leave, long service leave and “Toil”/longevity leave of a total of 190.12 hours. The total underpayment was calculated by reference to his pay rate of $302.56 per hour during Mr Lake’s work in Australia.
[248] SML.159; GBT.562.
[249] See paras 164-169 of the plaintiff’s closing submissions.
These claims were not challenged by the defendant factually at the trial. The relevant documents on which the plaintiff relied had been admitted by consent as category “A” documents admissible as to the truth of their contents. There was no cross-examination of Mr Lake about them.
Mr Trim for GBST had submitted, in his written trial submissions, that none of those entitlements were recoverable without clearly articulating why. He submitted that if I accepted that GBST was not entitled to terminate Mr Lake’s contract of employment summarily then “the only relief that the Court ought to award is the payment of six months of Mr Lake’s wages or, alternatively, the payment of six months wages plus the value of any shares in GBST as at the date of trial”.[250] Subsequently, in a further written submission, GBST submitted that the provisions of the employment agreement and the secondment agreement and the evidence relied on by Mr Lake did not establish his entitlements.
[250] See para 333 of the defendant’s closing submissions.
The plaintiff submitted, however, that the claims had been pleaded in the amended statement of claim and the second further amended statement of claim and were agreed in its written opening and the oral opening. Those claims covered both entitlements accrued in Australia and in Hong Kong. The closing submissions, as I have indicated, also spelt out the amounts of the claims.
The plaintiff therefore submitted that there was no procedural unfairness to GBST to refuse to entertain the further submissions given that it was aware of the case that Mr Lake intended to run in relation to the unpaid entitlements,. For that reason it opposed any grant of leave to make further submissions. It seems to me, however, that it is more convenient to consider the submissions that were made.
Mr Lake also submits, in any event, if leave is granted to make the supplementary submissions, that they arise out of cll 7.1 and 7.4 of the employment contract and cl 6.1 of the secondment agreement. Clause 7.1 entitled him to five weeks’ paid annual leave for each 12 month period of service while cl 7.4 entitled him to long service leave. The calculations were buttressed by reference to GBT.559, GBT.561, GBT.562 and SML.159 together with other documents admitted by the parties as category “A” documents as well.
GBST did not offer any alternative unpaid leave calculations and no alternative documents or oral evidence was adduced by it to disprove the contents of the documents relied on by Mr Lake. It was also submitted that Mr Lake’s claim for unpaid entitlements was drawn from GBST’s own documents admitted as true and as establishing his underpayment.
In the circumstances, it seems to me that Mr Lake has identified his claimed legal entitlement and, in the absence of evidence clearly identifying problems in the documents relied on for the calculations, I am, having regard to the conduct of the litigation, of the view that the claim should be allowed. Accordingly, I shall allow that claim in the sum of $121,397.04 subject to any recalculation of it arising out of changes in exchange rates since the trial.
Misleading or deceptive conduct
Mr Lake pursued parallel proceedings pursuant to s 236 of the Australian Consumer Law (sch 2 of the Competition and Consumer Act 2010 (Cth)) for contravention of s 18 by GBST. The allegations were that the conduct of Mr Puttick and Mr Ritter was conduct in trade and commerce within the scope of their respective actual or apparent authority as officers, employees or agents of GBST or, in the case of Mr Puttick, as chairman of its board.
The behaviour of Mr Puttick in saying, in effect, to Mr Lake on 10 May 2015 that “he had to live somewhere” in respect of the proposal for entry into the lease and the silence of Mr Ritter when provided with a copy of the draft tenancy agreement on 19 May 2015 and coupled with the statement made by Mr Ritter to Mr Lake in early July 2015 that the lease was “okay”, was conduct with a trading or commercial quality.
Similarly, Mr Puttick’s silence when told by Mr Lake words to the effect that he was going to sell about half of his Hong Kong shares, being the shares in GBST he had acquired in Hong Kong, and his response in his email of 25 September 2015 saying “acknowledged” in response to Mr Lake’s email notifying that he would “look to sell some [shares] as well over today and next week” also amounted to conduct in trade and commerce as communications about share sales for the purpose of obtaining approval to sell shares. The process of obtaining an approval had been implemented to protect the defendant as a publicly listed company and ensure that it complied with the relevant trading policy requirements issued by the ASX.
For the reasons I have already discussed, it seems clear that Mr Puttick’s failure to provide the board with the information he possessed about the entry into the lease as well as about the proposed share sales and Mr Ritter’s silence about the validity of the lease, caused Mr Lake to believe that his entry into the lease was acceptable as was his proposal to sell shares, against the background of the other information he provided about his intention to do that, including during the board meeting on 6 August 2015. Mr Puttick’s failure to inform him that the share sales were impermissible had the consequence that Mr Lake proceeded with transactions he otherwise would not have.[251] Consequently, it was submitted, Mr Puttick’s conduct was misleading or deceptive as it led Mr Lake into error.
[251] T2-34/5-10.
The consequence alleged was that, but for this misleading or deceptive conduct, the situation would not have arisen that he entered into the lease or made the share sales relied on by GBST to allege that he had engaged in fundamental and serious breaches of his employment contract giving it the right to summarily terminate that contract. Therefore, but for the misleading and deceptive conduct such a situation would not have arisen, Mr Lake would have continued in his employment with GBST on the terms of the employment contract and secondment agreement until at least the vesting date so that he would have received the value of the 365,177 ordinary shares in the defendant worth on 9 November 2015, $1,460,708. He would also have entered into an agreement containing the core terms of the draft settlement agreement as to his separation package, namely $643,100 as 12 months’ salary, given that GBST continued to confirm its willingness to pay him that amount as late as 8 October 2015.[252]
[252] GBT.188; T6-58/10-15.
That conclusion is one that appears persuasive to me and, were it necessary, I would have assessed damages for misleading and deceptive conduct under the Act on that basis also.
Insider trading
My factual findings preclude the defendant from succeeding in its argument that GBST is entitled to the payment of compensation by Mr Lake to it resulting from the alleged contravention of s 1043A(1) of the Corporations Act.
There was a preliminary issue as to whether that section of the Corporations Act was sufficient to entitle GBST to compensation for damage suffered by it as the issuer of a financial product. The argument for Mr Lake was that GBST could only recover compensation for damages pursuant to s 1043L by way of an action under s 1317HA of the Corporations Act. No such action had been commenced in this proceeding. Section 1317HA is the primary liability provision relating to compensation orders where financial services civil penalty provisions have been contravened. It allows a court to order compensation where there is a contravention of s 1043A. The argument was that, in circumstances where GBST’s claim fails to identify any basis upon which an award of compensation can be made, the claim advanced pursuant to ss 1043L and 1317H must fail.

There are few decisions relating to the operation of these sections, but it is not necessary for me to discuss them based on the factual findings I have made. Actual knowledge of the information is required and the matters relied on in GBST’s pleading were not established to my satisfaction as showing such knowledge held by Mr Lake at the time he sold his shares.
As was argued for Mr Lake, at the trial, there was no evidence led to the effect that, as at 25 September 2015, the executive staff were concerned that GBST would not meet its profit forecast and that the shortfall would be significant and likely to be in the region of over $5 million or around 20% of the reforecast EBITDA of $24.7 million. The evidence was that those figures were the product of investigations and work done, at least substantially, after the share sales had occurred. Nor was any evidence led to the effect that a quantified concern had been communicated to Mr Lake at any relevant time.
The concerns relied on were those of Mr Salis and Mr DeDominicis in circumstances where other people in GBST’s executive staff did not necessarily share their concerns, including Mr Lake and Mr Puttick. Similar problems associated with the evidence are discussed in the plaintiff’s written submissions.[253]
[253] See paras 216-247.
It seems notable to me, in particular, that none of the underlying data on which the forecast circulated by Mr Salis on 30 September 2015[254] was based was available or disclosed in evidence. The submission was that no connection could be drawn between the reasons for that reforecast and the profit downgrade on 13 October 2015 so that GBST could not prove that the information led to that result.
[254] GBT.111.
It was not until 21 September 2015 that Mr Salis circulated draft preliminary budget documents to Mr Orrock and Mr DeDominicis for the purpose of commencing the reforecast process.[255] Mr Lake had been excluded from those communications about the budget after the London planning session. There was still ongoing debate by 28 September 2015 about the likely financial results for the next financial year.[256] A number of the high level assumptions adopted by Mr Salis in his draft forecast were challenged by Mr Orrock on 29 September 2015.[257]
[255] GBT.231.
[256] GBT.104.
[257] GBT.247; T9-67/5-25.
It was also submitted for Mr Lake that he was genuinely shocked by the 30 September reforecast as demonstrated by his various handwritten notes.[258] He was expecting Aegon revenues to be brought forward and that accounting standards allowed licence fees to be brought forward and that significant work could be expected from HSBC from January 2016. His knowledge of those matters all changed after the share sales. Consequently, I am not satisfied that he acted in breach of the insider trading provisions of the Corporations Act.[259]
[258] SML.048; SML.049; SML.050; SML.087.
[259] See also paras 298-300 of the plaintiff’s written submission
The plaintiff also argued that the relevant information was generally available because of information circulated in various brokers’ newsletters and market announcements between February 2015 and 24 September 2015 dealing with GBST’s dependency on a limited number of customers for the majority of its revenue, key risks to its revenue from project delays, including long leave times associated with lumpy contract wins and client loss, particular constraints on earnings growth during the 2016 financial year and that it was facing an ongoing revenue drop of $4 million to $5 million.[260] There were other examples of information about possible effects on its revenue or earnings during the 2016 financial year which had been available for a reasonable period.
[260] GBT.399.
Mr Lake conceded, however, that the information pleaded against him was not generally known outside of GBST and that it might have a material effect on the share price.[261] That was put to him on the basis that there was a growing concern that the shortfall was going to be significant and likely to be in the region of over $5 million and around 20% of the forecast EBITDA figure of $24.7 million. That was a figure which, on my analysis of the evidence, however, was not known to Mr Lake when he sold the shares. I am not satisfied, therefore, that he knew or was reckless as to whether any information would have a material effect on price or value if publicly known at the time he sold the shares.
[261] T4-55/5-20.
There were also disagreements between him, Mr DeDominicis and Mr Salis about their respective approaches to the budgeting process. Mr Puttick’s approval of Mr Brackin’s share sale was relied on as indicating that there was nothing in the August results to give Mr Lake knowledge or make him reckless as to whether what was said was price sensitive. Accordingly, I agree with the plaintiff’s submissions that Mr Lake could not be found to have known or to have been reckless as to whether the information he did have was price sensitive.
Consequently, I am not satisfied that he has acted in breach of those provisions of the Corporations Act. The attempt to quantify the relevant compensation in Mr Lonergan’s evidence was criticised on behalf of Mr Lake but, given my factual findings, the occasion to make a compensation order has not arisen.
Conclusion
Accordingly, I have concluded that Mr Lake’s claim for damages for breach of contract should succeed as should his claim for damages for misleading and deceptive conduct. In assessing the damages, it seems appropriate to me to focus on the claim for damages for breach of contract. On the findings I have made, he is entitled to the following heads of damage:
·damages for breach of contract for wrongful termination of his employment: $643,100 as 12 months’ salary, including superannuation entitlements;
·the value of the 365,177 ordinary shares in GBST as at 9 November 2015, namely $1,460,708 as damages for breach of contract; and
·underpayment of entitlements: $121,397.04.
He would also be entitled, of course, to interest on those damages.
The damages claimed for misleading and deceptive conduct consisted of his likely separation package had that conduct not occurred, namely payment of $643,100 as 12 months’ salary. He would also have been entitled to receive the value of the 365,177 ordinary shares in the defendant which as at 9 November 2015 equated to $1,460,708.
Accordingly, I would give judgment for the plaintiff for the total of $643,100, $1,460,708 and $121,397.04, namely $2,225,205.04 plus interest subject to any variances for changes in exchange rates since the trial. I would also dismiss the defendant’s counterclaim.
I shall hear the parties further as to costs.

CITATION:	Lake v GBST Holdings Limited [2019] QSC 253
PARTIES:	STEPHEN MAURICE LINTON LAKE (plaintiff) v GBST HOLDINGS LIMITED (defendant)
FILE NO/S:	SC No 2004 of 2016
DIVISION:	Trial Division
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	11 October 2019
DELIVERED AT:	Brisbane
HEARING DATES:	12 – 16, 19 – 23 and 26 November and 7 December 2019; further written submissions on 21, 24 and 29 January 2019.
JUDGE:	Douglas J
ORDER:	1. Judgment for the plaintiff for damages totalling $2,225,205.04 plus interest subject to any variances for changes in exchange rates since the trial. 2. Dismiss the defendant’s counterclaim. 3. Further submissions about costs shall be heard
CATCHWORDS:	EMPLOYMENT LAW – TERMINATION AND BREACH OF CONTRACT – TERMINATION OR BREACH – GENERALLY – where the plaintiff had been chief executive officer of the defendant company, GBST Holdings Limited, since 2001 – where the board of directors decided not to renew the plaintiff as CEO at a board meeting – where the decision not to renew the plaintiff as CEO was communicated to the plaintiff – where the plaintiff subsequently sold shares in the defendant and caused one of its subsidiary companies to enter into a lease to his advantage for a residential dwelling – where the plaintiff was purportedly dismissed for alleged breaches of the terms of his employment contract – whether the plaintiff was in breach of the terms of his employment in selling his shares at a time when he was possessed of price sensitive information that was not available to the general market – whether the plaintiff was in breach of the terms of his employment in causing the defendant’s subsidiary to enter into the lease for the apartment in which he and his family were to continue to live up to and beyond the termination of his employment – whether dismissal was wrongful CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – GENERAL PRINCIPLES – where the plaintiff had been chief executive officer of the defendant company, GBST Holdings Limited, since 2001 – where the board of directors decided not to renew the plaintiff as CEO at a board meeting – where discussions as to the plaintiff’s separation package occurred – where the package as discussed included an entitlement to a salary and rent for a set period as well as performance rights under a long-term incentive scheme in circumstances where performance and service conditions were satisfied on a vesting date – where the plaintiff allegedly orally accepted an offer in respect of the separation package – where the plaintiff was subsequently dismissed prior to the vesting date for alleged breaches of the terms of his employment contract – where the dismissal was allegedly wrongful – whether the alleged wrongful dismissal of the plaintiff amounted to a repudiation by the defendant – whether the plaintiff was entitled to the separation package discussed prior to his dismissal TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING AND DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – PARTICULAR CASES – CONTRACTS GENERALLY – where communications were made by directors of the defendant company, GBST Holdings Limited, relating to share sales for the purpose of the plaintiff obtaining approval to sell shares and with respect to a proposal for entry into a lease for the benefit of the plaintiff – where the plaintiff subsequently sold shares in the defendant company and caused a subsidiary of the defendant company to enter into a lease for an apartment in which he and his family were to live – where as a result of the plaintiff’s entry into these transactions, the defendant company alleged that he had engaged in fundamental and serious breaches of his employment contract giving it the right to summarily terminate that contract – whether the communications occurred in the course of trade or commerce – whether the communications were misleading – whether the plaintiff relied on the communications – whether the plaintiff would not have proceeded with entering into the transactions if the alleged misleading or deceptive conduct had not occurred Australian Consumer Law (sch 2 of the Competition and Consumer Act 2010 (Cth)) Civil Proceedings Act 2011 (Qld) Competition and Consumer Act 2010 (Cth) Corporations Act 2001 (Cth) Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183, considered Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30, considered Concut Pty Ltd v Worrell Pty Ltd [2000] HCA 64; (2000) 75 ALJR 312, considered Downer EDI Limited v Gillies [2012] NSWCA 333, considered Heugh v Central Petroleum (No 5) [2014] WASC 311, considered Hodgson v Amcor Ltd [2012] VSC 94, considered Johnson v American Home Assurance Company [1998] HCA 14; (1998) 192 CLR 266, considered Mair v Rhodes & Beckett Pty Ltd [2018] VSC 132, considered Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20, considered Rankin v Marine Power International Pty Ltd [2001] VSC 150, considered Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, considered Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357, considered Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, considered Vision Eye Institute Ltd v Kitchen [2014] QSC 260, considered Visscher v The Honourable President Justice Giudice [2009] HCA 34; (2009) 239 CLR 361, considered
COUNSEL:	D G Clothier QC with K M Riedel for the plaintiff M Trim for the defendant
SOLICITORS:	King & Wood Mallesons for the plaintiff McCullough Robertson for the defendant