Lambourne v Baker

[2021] NSWCA 229

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Lambourne v Baker [2021] NSWCA 229

Hearing dates:

23, 24 June 2021

Date of orders:

24 September 2021

Decision date:

24 September 2021

Before:

Basten and Gleeson JJA at [1];
Emmett AJA at [33]

Decision:

Order that:

1. Judgment be entered in favour of the Third Appellant against the First Respondent in the sum of $210,249.

2. The appeal be otherwise dismissed.

3. The appellants further amended notice of motion filed on 23 June 2021 be dismissed.

3. There be no order as to costs in respect of the appeal and the proceedings below.

4. The parties may seek to reopen Order 3 by a notice of motion filed within 14 days in the ordinary course.

5. The record be altered to show that the name of the Third Respondent has been changed to “Betmakers Technology Group Limited”.

Catchwords:

CIVIL PROCEDURE — pleadings — implied abandonment — certain pleadings not expressly raised during trial — supporting evidence admitted — forensic decision by respondent to leave evidence unopposed — pleading unaddressed by primary judge — self-represented litigant — whether pleadings abandoned or merely overlooked in course of proceedings — remedy sought on appeal

EQUITY — equitable remedies — equitable compensation — availability — misappropriation of company funds by director — moneys applied for personal uses — recovery of moneys by company

EQUITY — fiduciary duties — breach — rule in Barnes v Addy — whether evidence of breach by primary wrongdoer established

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 18, 236

Corporations Act 2001 (Cth), ss 79, 180, 181, 182, 183, 1317H

Cases Cited:

Atkins v National Australia Bank (1994) 34 NSWLR 155

Barnes v Addy (1874) LR 9 Ch App 244

Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWCA 199

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Marc Alan Lambourne (First Appellant)
Glenn Craig Pollett (Second Appellant)
The Punters Show Pty Limited ACN 147 950 016 (Third Appellant)
Dallas Matthew Baker (First Respondent)
Todd Cameron Buckingham (Second Respondent)
Betmakers Technology Group Limited ACN 164 521 395 (formerly TopBetta Holdings Limited) (Third Respondent)
12Follow Pty Limited ACN 136 345 536 (Fourth Respondent)
Operis Momentus Pty Limited ACN 153 419 115 (Fifth Respondent)

Representation:

Counsel:
First Appellant (self-represented and with leave of the Court, on behalf of the Second and Third Appellants)
P Silver (Respondents)

Solicitors:
Cockburn & Co (Respondents)

File Number(s):

2019/407870

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity

Citation:

[2019] NSWSC 1777

Date of Decision:

13 December 2019

Before:

Rees J

File Number(s):

2016/344608

Judgment

1. BASTEN and GLEESON JJA: The appellants challenge orders made by Rees J in the Equity Division (Corporations List) dismissing proceedings brought by them against the respondents.1 The first two appellants, Marc Lambourne and Glenn Pollett, established an on-line business giving tips on horse-racing called the Punters Show. With the first respondent, Dallas Baker, they established a company, Punters Show Pty Ltd, which was the third appellant. At the material time, Mr Baker was the sole director of the company. The appellants’ primary claims were that Mr Baker, in breach of his fiduciary duties to the company and to them personally, disposed of the assets of the company to the second respondent, Todd Buckingham, and a company associated with him, then known as TopBetta Holdings Ltd, the third respondent. Mr Lambourne also had a personal claim against Mr Buckingham for an outstanding debt of $30,000.

2. On 16 August 2021, after the hearing of the appeal, the solicitors for the respondents notified the Court that Mr Lambourne’s personal claim against Mr Buckingham had been resolved.

3. There remained two outstanding issues. The first involved a claim for recoupment of certain “improper withdrawals” made by Mr Baker, the then director of Punters Show Pty Ltd, from the company’s accounts. The amount of that claim included cash withdrawals of $187,791 and Items relating to such matters as “brothels”, “chiropractor”, “liquor purchases” and “parking/speeding fines” of $22,458, giving a total of $210,249. The claim was one which the company, now under the control of Messrs Lambourne and Pollett, was entitled to make. The respondents resisted the claim for recoupment of improper withdrawals on the basis that it had not been pursued at trial.

4. The second issue involved a claim for equitable compensation based on either the destruction of the value of Punters Show Pty Ltd through a strategic partnership with TopBetta, or as the value obtained by TopBetta through its association with Punters Show Pty Ltd when TopBetta listed on the ASX.

Improper withdrawals claim

5. The respondents gave no evidence in resistance to this claim. However it was not dealt with by the trial judge. The only issue on appeal was whether it had been abandoned at trial. That requires consideration of the course taken by the appellants at the trial.

6. That course has been recounted by Emmett AJA below and may be dealt with succinctly for present purposes. The starting point is the pleading in the amended statement of claim filed on 31 May 2018. Other than claims for costs and interest, the relief claimed was identified in eight paragraphs. Each was carefully formulated with respect to particular parties. Relevantly for present purposes par 3 read as follows:

“3.   The third plaintiff [Punters Show Pty Ltd] claims against the first defendant [Dallas Baker], damages and/or equitable compensation in regard to the causes of action pleaded below.”

7. Paragraphs 1-15 were introductory. The first cause of action was addressed under the heading “Breaches of duty – improper withdrawals” and comprised pars 16-20. Relevantly, these provided:

“16.   Between at least August 2012 or earlier and August 2016 Baker withdrew $833,000.00 from the accounts of the Company, including $187,791.00 in cash from ATM’s, the majority of which money was withdrawn by Baker in breach of his duties to Lambourne and Pollett, and in breach of his duties to the Company, and caused loss and damage.

…

18.   A substantial portion of the moneys withdrawn by Baker for his own personal purposes as described in paragraph 16 above, constituted revenue of the Company in regard to which Baker was bound to account to the Company ….

19.   In withdrawing those sums described in paragraph 16 above, that portion of the said sum that should have been accounted for to the Company in accordance with the matters pleaded paragraphs 17 and 18 above, Baker breached his general fiduciary obligations to the Company, and his statutory obligations to the Company.

…”

In his defence, Mr Baker denied each of these paragraphs.

8. In an affidavit sworn on 28 May 2018, Mr Lambourne stated:

“86   Soon after the proceedings commenced in November 2016, the First Defendant was ordered to provide me with copy of the Company’s bank statements. My analysis of the bank statements (up until 14 September 2016) showed the Company had received $2,426,047 in revenue into the bank account. Dallas [Baker] had paid himself $813,497, Glenn Pollett $380,100 and me $216,413 … I observed substantial sums not business related. At [Blue Book, pp 254-258] are copies of schedules I prepared denoting non-business-related expenses with accompanying investigations.”

The amounts identified in the evidence included $187,791 identified as “cash withdrawals” and the smaller sums totalling $22,458. As to the three amounts paid to each of Mr Baker, Mr Pollett and Mr Lambourne, there was no clear demonstration of impropriety.

9. At the beginning of the hearing on 26 February 2019 Mr Lambourne, who appeared in person and was given leave to appear for Mr Pollett and the company (as he was in this Court), opened the plaintiffs’ case by referring to the amended statement of claim and his own affidavit, together with the exhibit to his affidavit, ML1, which contained the summary of the alleged misappropriations and supporting documentation. The judge then asked him for a general overview of the case. [1] Mr Lambourne explained the main elements of the plaintiffs’ complaints.

   1. In the matter of Punters Show Pty Limited [2019] NSWSC 1777.

10. Counsel for Mr Baker (Mr Silver) noted that at or before an earlier directions hearing Mr Lambourne had identified “the basis of the claim as a Barnes v Addy type claim and that’s repeated in the submissions.” [2] Mr Silver continued:

“So while it is a very different claim we say to the claim made out in the amended statement of claim in the sense that the claim there was articulated to be the loss of the value of the company, we now understand that the plaintiff's claim is made on two fronts: (a) the $30,000 … and a claim for equitable damages or compensation, the quantum of which is based on the increased value of the company or the shares. And those being the sum total of the claims against the parties, we will approach the objections in a way which is a bit more directed.”

Mr Silver then withdrew objections to other material and noted that two witnesses were not to be cross-examined, before seeking a short adjournment to consider his position with respect to Mr Lambourne. The judge responded: [3]

“HER HONOUR: I just have a slight hesitation in that I do note that the plaintiff's written submissions are on Barnes v Addy, and I do note that the amended statement of claim is more wide-reaching. Given that the plaintiffs are self-represented, I just have in mind that things may change and move as the hearing goes on, and so you take the course that you think is appropriate but if the plaintiffs take a different view as the case unfolds, I'm not going to stop them from pursuing a pleaded part of their claim [if] it's not referred to in their written submissions. …

SILVER: Yes. Your Honour, may I say this: I accept what your Honour says, of course, but the plaintiffs have been represented virtually the whole time in these proceedings by solicitors and/or junior counsel.

HER HONOUR: But they're not represented now ….”

2. Tcpt, 26/02/19, pp 3(35)-4(1).

3. Tcpt, p 25(20).

11. During further exchanges, Mr Silver reiterated his understanding that the claim now made was basically one reliant on Barnes v Addy. The point taken was a little curious; the claim against Mr Baker did not turn upon him being privy to a breach of trust committed by others (as in Barnes v Addy), but on him being the party who breached his fiduciary obligations. Counsel for the other defendants (Mr Buckingham and companies associated with him) took no part in the discussion with the trial judge, although the claims against them involved participation in Mr Baker’s breaches of fiduciary duty, which might properly have been described as Barnes v Addy claims.

12. In any event, the trial judge made it clear that however the matter had been opened up to that point, there was, in effect, no abandonment of causes of action set out in the amended statement of claim. She concluded: [4]

“That doesn't seem to me to exclude them from relying on a pleaded [cause] of action. It doesn't seem to me to lock that out. So at the moment, it seems to me – it's a matter for you but you can proceed on the basis of what Mr Lambourne has outlined. If Mr Lambourne changes his mind and wants to go further or wider, then we'll just have to revisit the extent to which you might want to take other objection to other affidavits or change your course accordingly.”

4. Tcpt, p 26(15).

13. Mr Silver then indicated his understanding of the process, took no objection to Mr Lambourne’s affidavit and did not require Mr Lambourne for cross-examination. Mr Lambourne then read his affidavit and the exhibit ML1 was admitted without objection. [5]

    5. Tcpt, p 27(40)-(45).

14. Once the plaintiff’s case was closed, the defendants indicated that they did not read their affidavits and tendered no evidence. Mr Lambourne was clearly taken by surprise. Discussion followed as to whether he could read one of Mr Buckingham’s affidavits or otherwise rely upon the verified defences, no doubt for the purpose of cross-examining the deponents. However, no such course was ultimately pursued. The matter proceeded to final submissions.

15. In his final submissions, Mr Silver adverted to the claim of misappropriation in the following terms: [6]

“So, the next aspect is to consider the lengthy argument about the revenue that was taken supposedly from the company. Well, that's never been the articulated case, that they want that money back. There's just no case on that. The company has not suffered that loss in accordance with the way that this case is pleaded; and Mr Baker has certainly not been responsible for misappropriating those funds. He certainly hasn't had any benefit. He's never been a shareholder of any of the second to fifth defendants. He's never been a director. He was an employee, and then after the May agreement, things fell apart … and the whole relationship unravelled.”

6. Tcpt, p 28.

16. The statement that there had been no case pleaded that the company had suffered loss because of revenue taken from the company was factually erroneous, as has been demonstrated above. The case was expressly pleaded.

17. Oral submissions concluded with written submissions by Mr Silver which included the following propositions:

“1   The plaintiffs have outlined two claims in their opening submissions.

2   The first is a claim for $30,000 against defendants other than the first defendant (Baker). It will not be addressed further.

3   The second is a claim against Barnes v Addy against all the defendants.

4   That claim cannot succeed against Baker for the following reasons.

5   A case based on Addy was not pleaded against Baker.

6   The first leg of Barnes v Addy involves knowing receipt of property acquired through a breach of fiduciary duty ….

7   There is no allegation in the ASOC that Baker received any property. On the contrary the plaintiffs say the transfer was to TopBetta. …. Leaving aside the pleading, there is no evidence that Baker received any property belonging to any of the plaintiffs.

8   The claim should be dismissed for this reason alone.”

18. The remainder of the submissions were addressed to the allegation that TopBetta had benefited from the transfer of the benefits of the Punters Show business to it, the benefit flowing from the public listing.

19. The written submissions in reply for the plaintiffs dated 1 March 2019 immediately took issue with par 5 of Mr Baker’s submissions that no Barnes v Addy case had been pleaded against him. That was stated to be false by reference to various paragraphs in the background part of the amended statement of claim; the submission concluded by referring to “breaches of such duties as set out at paragraphs 16 to 19 – except for the allegation at the end of paragraph 19; and his statutory obligations to the company; and 20.”

20. In this Court, counsel for Mr Baker asserted that the claim against his client for improper withdrawals from the company bank account had only been made in submissions in reply in the trial court. That was not correct: what was pointed out in the reply was that the claim had been fully pleaded. The problem lay elsewhere. The problem was that the pleaded claim against Mr Baker with respect to improper withdrawals was not a Barnes v Addy claim at all: Mr Baker was not a person who received property as the result of a breach by a fiduciary, nor was he knowingly involved in a breach of a fiduciary; Mr Baker was the miscreant fiduciary. The company brought a claim against Mr Baker for equitable compensation. Although Mr Silver said that Mr Lambourne had referred to a “Barnes v Addy claim at a directions hearing”, and had filed an outline of submissions prior to the commencement of the trial described as submissions “as to compensation under the Barnes v Addy type claim”, at no stage did Mr Silver articulate what he understood that phrase to mean. When it was relied upon for Mr Baker before the trial judge, no explanation was given as to what was referred to by that phrase although it seems that the trial judge was conscious of the fact that there was a pleading of direct (not derivative) liability on the part of the company. (That pleading, correctly, did not refer to Barnes v Addy.)

21. It is necessary then to turn to the manner in which the claim was dealt with by the primary judge. At the outset of her judgment, she adopted the analysis of counsel for Mr Baker, stating at [4]:

“Although the Amended Statement of Claim contained a number of causes of action, the plaintiffs pressed two claims at the hearing:

(a)   Mr Lambourne sought $30,000 plus GST from Mr Buckingham and TopBetta, together with interest; and

(b)   the plaintiffs sought equitable compensation from the defendants in a Barnes v Addy claim.”

(There is no need to deal with the judge’s reasoning in relation to the $30,000 claim, which has been settled.) She observed that there was “no evidentiary basis to support the asserted loss and thus the Barnes v Addy claim failed for that reason alone.”

22. In dealing with a claim for equitable compensation, the judge correctly noted that the rule in Barnes v Addy [7] “extends liability for breach of trust to third parties in certain circumstances”,[8] those being cases of “knowing receipt” and “knowing assistance” in a breach of fiduciary duty. [9] In dealing with the pleaded case, the primary judge outlined the claims by Mr Lambourne and Mr Pollett that Mr Baker owed them fiduciary duties which had been breached. There was no reference to the company’s claim against Mr Baker. The conclusion reached was expressed as follows:

“[83]   Thus, the claim for equitable compensation by Mr Lambourne and Mr Pollett against Mr Baker fails by reason of an absence of any fiduciary duties being owed to them, or evidence that any such duty was breached. …

[84]   As a director of Punters Show, it may be accepted that Mr Baker owed fiduciary duties to the company. The question is whether Mr Baker breached his fiduciary duties by revealing the whole of the company’s financial and confidential information about its business to Mr Buckingham and TopBetta without any compensation or caused Punters Show to enter into the May 2015 agreement and be stripped of all of its assets for no compensation. As already outlined … these propositions have not been established by the plaintiffs on the balance of probabilities.”

7. Tcpt, 28/02/19, p 91(5)-(15).

8. (1874) LR 9 Ch App 244.

9. Judgment at [65].

23. Two factors emerge from this consideration. The first is that at no point did the primary judge suggest that the claim pleaded in paragraphs 16-19 of the amended statement of claim had been abandoned. It was simply not addressed. Secondly, the omission was understandable, given the emphasis placed by Mr Lambourne on the claim, which he valued in the millions of dollars, based on the use of the Punters Show business to boost the listing price and valuation of TopBetta.

24. Nevertheless, the fact remains that the claim was overlooked. That it was pleaded, and supported by evidence to which no objection was taken, demonstrates that it should have been addressed. In this Court, counsel for Mr Baker did not submit that it was not raised in submissions, but only that it was referred to in “reply submissions made after the end of the hearing”. [10]

    10. Judgment at [66].

25. Counsel did not submit that the matter was not raised by the submission in reply; nor did he suggest that he had had no opportunity to deal with it. No doubt it would have required leave to file a further submission, but that could have been sought had he been taken by surprise, or believed that his client was prejudiced by the reply submission.

23. In these circumstances, the judge was in error in not dealing with the claim for the “improper withdrawals”. It was expressly raised, supported by evidence and referred to in the submissions in reply. Given the basis on which the matter had proceeded at trial, it is clear that the way was left open to the defendants to reconsider their forensic strategy if the plaintiffs’ position changed in relation to the pleaded claims. They were entitled to raise the issue if they perceived that the written submissions in reply involved a change in position. At least, Mr Baker was entitled to, as it was not suggested that any of the other defendants was affected by any change in position. Mr Baker took no step.

24. In these circumstances, the claim should have been upheld and judgment may now be given in this Court. The claim was effectively limited to the amount of $210,249. The liability was not to the individual shareholders, but to the company which they now control.

Claim for lost value of Punters Show

28. The far larger claim for equitable compensation based on the misuse of the reputation and assets of Punters Show Pty Ltd must be rejected for the reasons given by Emmett AJA.

Notice of motion to call further evidence

29. By a further amended notice of motion efiled on 23 June 2021, Mr Lambourne sought a number of orders, most of which were unnecessary or fell away in the course of the hearing. However, in part the orders sought to rely on further evidence. That application was rejected and the motion dismissed. Emmett AJA has explained the reasons for that order.

Costs

30. Mr Lambourne’s individual claim against Mr Buckingham having been settled, that issue has been dealt with by way of a consent judgment. However so much of the hearing as was concerned with that claim should not be the subject of any separate order for costs.

31. The claim for the improper withdrawals properly arose between the company, Punters Show Pty Ltd, and Mr Baker. In this Court, Mr Silver appeared for all five respondents and Mr Lambourne appeared in person on behalf of himself, Mr Pollett and the company, pursuant to leave. There is, therefore, some awkwardness in dividing up the costs of the proceedings.

32. Rather than attempt such a division, the Court should order that there should be no order as to the costs in this Court. The costs of the trial may be dealt with on the same basis. The parties can seek to reopen those order by a notice of motion filed within 14 days, in the ordinary course.

33. EMMETT AJA:

Introduction

This appeal arises out of arrangements entered into in late 2010 by the first and second appellants, Mr Marc Lambourne and Mr Glenn Pollett respectively, and the first respondent, Mr Dallas Baker (together, the Participants), to engage in a joint venture. The object of the so-called joint venture was for the Participants to form and conduct a business that was to engage in producing and broadcasting, on internet television, a regular programme connected with thoroughbred horseracing to be called “the Punters Show”. The intention was that products of one or more of the Participants would be promoted, marketed and sold from a website associated with the Punters Show, together with products of third-party providers, who would pay a commission to the proposed business. Mr Lambourne explained that “product” consisted of information, advice and predictions for thoroughbred racing, greyhound racing and trotting and pacing racing and that a “provider” was someone who sold such “product” on the Internet.

34. In pursuance of the so-called joint venture, Mr Baker, who was then a bankrupt, caused the third appellant, The Punters Show Pty Limited (the Company), to be incorporated on 20 December 2010 and caused 25 shares in the capital of the Company to be issued to each of the Participants. Following his discharge from bankruptcy, Mr Baker became the only director of the Company on 24 August 2012.

35. Mr Lambourne, Mr Pollett and the Company (together, the Claimants) claim that, in consequence of the arrangements briefly described above, Mr Baker owed Messrs Lambourne and Pollett certain fiduciary duties. They also claim that Mr Baker owed fiduciary duties to the Company in consequence of his being a director of the Company. The Claimants assert that Mr Baker has acted in breach of those fiduciary duties and claim equitable compensation in respect of the loss they allege that they have suffered as a consequence of such breaches of duty.

36. The principal breach of fiduciary duty on the part of Mr Baker was said by the Claimants to derive from an agreement made in May 2015 whereby the second, third, fourth and fifth respondents, Mr Todd Buckingham, Betmakers Technology Group Limited, formerly known as TopBetta Holdings Limited (TopBetta), 12Follow Pty Limited (12Follow) and Operis Momentus Pty Limited (Operis) respectively, would enter into a “strategic partnership” with the Company. The Claimants assert that Mr Baker urged and encouraged Messrs Lambourne and Pollett to agree to the proposed strategic partnership and that they did so because of misrepresentations alleged to have been made by Mr Baker in circumstances where Mr Baker’s own interests were in conflict with his fiduciary duties to Messrs Lambourne and Pollett and to the Company. The Claimants also claim that Mr Buckingham, TopBetta, 12Follow Pty and Operis (together, the Buckingham Interests) were knowingly involved in Mr Baker’s breaches of fiduciary duty and are therefore liable to pay equitable compensation to them.

37. In addition, Mr Lambourne claimed that Mr Buckingham agreed to pay to him or to cause to be paid to him the sum of $30,000 as consideration for his agreeing to begin promotional work for TopBetta and its associated companies. Mr Lambourne asserted that Mr Buckingham promised that, if the Buckingham Interests entered into the proposed strategic partnership, Mr Buckingham would ensure the immediate payment to Mr Lambourne of the sum of $30,000. However, after the hearing of the appeal, the parties informed the Court that the $30,000 claim by Mr Lambourne against TopBetta has been settled and that it is no longer pursued by Mr Lambourne. Accordingly, it is not necessary to say anything further on that question, although it may be relevant to the question of costs.

38. By originating process filed on behalf of the Claimants in the Corporations List of the Equity Division on 17 November 2016, the Claimants commenced proceedings against Mr Baker and the Buckingham Interests. I have set out in Appendix 1 to these reasons a summary of the relief claimed and the allegations made by the Claimants in their amended statement of claim filed on 31 May 2018 (the Amended Statement of Claim). The allegations are relevant to a contention advanced in the appeal on behalf of Mr Baker that it is not now open to the Company to seek recovery from him of amounts that were alleged in the Amended Statement of Claim to be “improper withdrawals” by him from the Company.

39. On 13 December 2019, for reasons published on that day, a judge of the Equity Division sitting in the Corporations List (the primary judge) ordered that the originating process be dismissed and ordered that the Claimants pay the costs of Mr Baker and the Buckingham Interests. The Claimants now appeal to this Court from the orders made by the primary judge.

40. Although the Claimants had legal assistance in connection with the formulation of the Amended Statement of Claim, they were not legally represented at the hearing before the primary judge or on the hearing of the appeal. Leave was given both at the hearing before the primary judge and on the hearing of the appeal for Mr Lambourne to address the Court on his own behalf and on behalf of Mr Pollett and the Company. Although Mr Lambourne completed law studies, he has not practised. At the hearing before the primary judge, Mr Baker, on the one hand, and the Buckingham Interests, on the other, were separately represented. However, all five respondents were represented by the same counsel and solicitors on the hearing of the appeal.

Application to Adduce Further Evidence

41. A considerable part of the first day of the hearing of the appeal was taken up with an application by the Claimants for leave to adduce further evidence in pursuance of a further amended notice of motion dated 23 June 2021. After considering written submissions and hearing oral argument, the Court indicated to Mr Lambourne that the application to adduce further evidence would be refused on the basis that special grounds had not been established. The Court indicated that it would give reasons for dismissing the application when disposing of the appeal. Those reasons follow.

42. The further evidence sought to be adduced consists of the following:

• Affidavit sworn by Mr Buckingham on 21 September 2018;

• Affidavit sworn by Mr Baker on 21 September 2018; and

• Email sent by Mr Buckingham to numerous addressees on 12 June 2016.

43. The hearing before the primary judge took an unusual course. Directions had been given for the parties to file affidavit evidence on which they wished to rely and several affidavits were filed on behalf of the Claimants, including affidavits by Mr Lambourne and Mr Pollett as well as affidavits by Mr William Saunders and Mr Paul Daily. The affidavit by Mr Baker of 21 September 2018 was filed on his behalf and the affidavit by Mr Buckingham of 21 September 2018 was filed on behalf of the Buckingham Interests.

44. Prior to the commencement of the hearing, significant parts of the affidavits filed on behalf of the Claimants were objected to on behalf of Mr Baker and the Buckingham Interests. As I have indicated, the Claimants were represented by Mr Lambourne. However, after Mr Lambourne finished his opening address to the primary judge, counsel for Mr Baker indicated that all objections to the affidavits filed on behalf of the Claimants were withdrawn and none of the deponents was required for cross-examination. Counsel for the Buckingham Interests adopted a similar position. Further, counsel for Mr Baker and for the Buckingham Interests also indicated that none of the affidavits filed on their behalf would be read at the hearing.

45. The primary judge expressly drew Mr Lambourne’s attention to the fact that none of the defendants’ affidavits was to be read. When Mr Lambourne said that he was “somewhat confused by what’s going on”, her Honour drew Mr Lambourne’s attention to the fact that although affidavits sworn by Mr Baker and Mr Buckingham had been served, the defendants did not propose to call any evidence and were not reading those affidavits or calling those witnesses to give evidence. Her Honour pointed out that the documents that were exhibited to or were attached to those affidavits, as matters then presently stood, were not part of the evidence before her Honour and drew Mr Lambourne’s attention to that fact in case it may be that he might wish to rely on some of the documents. Her Honour pointed out that, if there were documents upon which Mr Lambourne wished to rely, he could tender them in circumstances where the defendants’ affidavits were not read. Mr Lambourne said that he understood. He then asked for an adjournment so that he could consider which of the documents annexed to the defendants’ affidavits he needed for his case.

46. The primary judge indicated that Mr Lambourne should be given an opportunity to think about whether he needed any of the documents annexed to or exhibited to the defendants’ affidavits and whether he wished to tender them if he needed them. Her Honour then suggested that an adjournment of half an hour would afford Mr Lambourne the opportunity of considering the material and Mr Lambourne responded that that would be convenient. After the adjournment, Mr Lambourne indicated that he was able to ascertain the annexures that he wanted to tender.

47. Mr Lambourne then said that he had not had sufficient time to consider the defendants’ affidavits. The primary judge responded:

“Well you can’t ordinarily read the other side’s affidavits, well you can, but it’s a bit complicated. We will start with the documents shall we.”

Mr Lambourne then tendered a number of documents that had been annexed to or exhibited to Mr Baker’s affidavit or Mr Buckingham’s affidavit.

48. The primary judge then asked Mr Lambourne whether he wished to begin his closing argument or closing submissions that afternoon. Mr Lambourne responded that he had no anticipation of needing to be ready to submit final submissions or closing remarks. Her Honour acknowledged that things had moved “quite differently from what you might have expected” and then said:

“There is another point that you did raise which was whether you wanted to read some of the defendants’ affidavits. That is technically possible, but it might be a bit more of a problem. My job is not to give you legal advice as to how to put your case, but unless I hear from you further on that, I’ll just assume that your case is closed, finished and you’re all in, all done.”

Mr Lambourne responded that there was a particular example that struck him when he read one of Mr Buckingham’s affidavits and referred to an email from an auditing firm. Her Honour responded that that email was in evidence.

49. Mr Lambourne then said that he was curious as to whether he needed the affidavit regarding the annexures to address any issue that might arise from the email. He said that what concerned him about the email was “the use of an auditor to sign off on something that perhaps needs re-investigation”. The primary judge then said:

“Well, I’m not sure I quite follow that, but at the moment what is in evidence is the email chain, which I will read, and no doubt you and [counsel for the defendants] will tell me what I should or shouldn’t glean from it, but that’s the state of the evidence at the moment on that email.”

Mr Lambourne responded that he understood what the primary judge was saying about the affidavits.

50. Mr Lambourne then asked about “the sworn defences”, saying that there were substantial statements in the sworn defences. Her Honour responded that it was not necessary to tender Court pleadings, which formed part of the Court file. Her Honour said that they were verified by the parties who filed them so that Mr Lambourne could take her Honour, in due course, to admissions that had been made or statements that had been made in the defences. Her Honour confirmed that the defences formed part of the Court record and then said:

“They are the articulation of the parties’ contentions as to what they say in the defendants’ [sic, defence], which parts of your claim they admit, which parts they don’t and any particular reasons why they say you shouldn’t be given the relief you seek in accordance with the Uniform Civil Procedure Rules. They’re not affidavits.”

51. The following exchange then occurred:

“Mr Lambourne:   So you wouldn’t normally cross-examine anyone on the basis of any statement they made in the defence.

Her Honour:   Well, you’ve got no witness to cross-examine because they’re not calling any.

Mr Lambourne:   Right. Sorry, for me to ask questions of the defendants who have sworn that defence.

Her Honour:   You can’t because they’re not calling them.”

52. The primary judge then indicated that she proposed to adjourn the hearing until the following day. When asked whether he had a sense of how much time he would need for closing submissions, Mr Lambourne responded:

“I am quite confused about the way the case has gone, and I am really struggling with my expectations and my obligations in this matter.”

Her Honour invited Mr Lambourne to take the time he needed, saying that, if he needed additional time, the matter could be stood down until later on the following day.

53. When the hearing resumed on the following day, the primary judge inquired of Mr Lambourne as to whether he had any rough sense of timing as to how long he might take with closing submissions. Mr Lambourne responded by thanking her Honour for adjourning on the previous day and that he was sure he would take at least until lunchtime.

54. Counsel for Mr Baker then referred to a communication on the previous day that the Claimants were going to reopen their case to apply for exemplary damages. Mr Lambourne indicated that he was “not planning to do anything at the moment” but that he reserved his rights. The primary judge indicated to Mr Lambourne that the point had been reached where “the territory is now very defined” and that, if Mr Lambourne wished to “change the territory”, he would need to do that immediately. Mr Lambourne confirmed that he did not “plan to do anything along those lines”. No mention of material in the defendants’ affidavits was made at that time.

55. The email of 12 June 2016 was referred to in Mr Lambourne’s affidavit, which was read at the hearing before the primary judge. It was clearly available to the Claimants at that time. Further, it is unlikely that the email would have any effect on the ultimate result. The thrust of the arguments advanced on behalf of the Claimants is that the email was relevant to whether Mr Buckingham participated in a fraudulent and dishonest design with Mr Baker to remove Messrs Lambourne and Pollett from the business of the Punters Show. Adding the whole of the contents of the email would not advance the Claimants’ case that there was a dishonest and fraudulent design between Messrs Buckingham and Baker.

56. Clearly enough, the Claimants had the opportunity to make use of the affidavits of Messrs Buckingham and Baker. It was open to them to tender the affidavits as admissions by Mr Baker or Mr Buckingham as the case may be. Questions may have arisen as to whether Mr Buckingham’s affidavit would have constituted admissions as against Mr Baker and whether Mr Baker’s affidavit would have constituted admissions as against the Buckingham Interests. Nevertheless, the Claimants had ample opportunity following adjournments to consider the question of tendering the affidavits as admissions and, if need be, to obtain legal advice on that question.

57. It is relevant, of course, that the Claimants were not represented by lawyers at the hearing. However, the primary judge intimated that some use could be made of the affidavits if the Claimants sought to do so. Her Honour properly observed that it was not for her to give legal advice. Of course, if the affidavits had been tendered, Mr Baker or the Buckingham Interests may well have chosen to go into evidence by way of response. If they were now admitted on a basis that has not been made entirely clear to this Court, there would be a very real prospect of the need for a new trial. In any event, it is not apparent, even if the affidavits were admitted as admissions, how the admissions would have any effect on the ultimate outcome.

58. The hearing of an appeal in the present circumstances is by way of rehearing on the basis of the evidence before the trial judge. However, the Court may receive further evidence but must not do so except on special grounds. As a general rule, three conditions would need to be met before further evidence would be received. [11] First, it is necessary to show that the evidence could not have been obtained with reasonable diligence for use at the trial. Secondly, it must be shown that the evidence is such that there would be a high degree of probability that there would be a different result if the further evidence were admitted. Thirdly, the evidence must be credible. All of the further evidence sought to be adduced was available to the Claimants at the hearing before the primary judge. Accordingly, they failed to satisfy the first condition. In those circumstances, the Court considered that no basis had been established from the grant of leave to adduce the proposed further evidence.

    11. CA tcpt, 24/06/21, pp 45(40)-46(10).

The Claimants’ Uncontested Evidence

59. The evidence of the Claimants consisted of affidavits by Mr Lambourne, Mr Pollett, Mr George Saunders and Mr Thomas Daily, which were read without objection, and none of those deponents was required for cross-examination. In addition, Mr Lambourne tendered some documents, including documents that were annexed to the affidavit of Mr Baker or the affidavit of Mr Buckingham. What follows is taken from those unchallenged affidavits and documents.

The Participants and the Joint Venture

60. Immediately after finishing high school, Mr Lambourne worked from time to time with bookmakers. From a young age, he accumulated form guides from “The Australian” newspaper and reviewed them from time to time in search of “winning patterns or systems”. In the 1980s, Mr Lambourne visited racecourses and stayed at the course for more than an hour after the last race watching replays of the races. While completing law studies at the University of New South Wales, Mr Lambourne worked for numerous bookmakers, including Mr Peter Todd, whom Mr Lambourne described as “one of Sydney’s leading bookmakers”. Mr Lambourne assisted Mr Todd with the work of “setting the market” for each race in Sydney.

61. Mr Lambourne held a licence as a bookmakers’ clerk from 1983 until 2017. Between 1990 and 1999, he also held a bookmakers’ licence. Mr Lambourne has worked for at least 15 Sydney bookmakers and often stood in for bookmakers who could not attend a particular race meeting and ran their bookmakers’ stands for them. By about 2009, Mr Lambourne was recognised within the thoroughbred racing industry as an expert form analyst, “market setter” and media commentator. Many bookmakers, jockeys and professional punters retained his services.

62. Mr Pollett has also had substantial expertise in the thoroughbred racing industry. He and Mr Lambourne have been personal friends for about 25 years. By about 2009, Mr Pollett had built up a 25-year reputation in horse racing circles as “a colourful and cavalier bookmaker, punter and professional poker player”. Mr Pollett’s particular skill was to predict winners from looking at horses in the mounting yard before each race.

63. By 2009, Mr Baker was known as an entrepreneur in the thoroughbred racing industry. He worked as a writer and producer on a digital platform known as “Racenet”, which at that time was the leading online data repository for the thoroughbred racing industry. Mr Lambourne first met Mr Baker when Mr Lambourne appeared on a radio show produced by Mr Baker. Mr Lambourne considered that Mr Baker was “brimming with good ideas and sold his ideas well”.

64. In 2009, Mr Baker invited Mr Lambourne and Mr Pollett to appear on the “Racenet” programme to talk about thoroughbred racing. After a few more on-air talks, they developed a show that was streamed weekly on “Racenet”. The streamed videos became known as “the Punters Show”. Mr Lambourne and Mr Pollett were not paid for appearing on “Racenet” and relied on Mr Baker’s representations that the demands for their services and products would increase from exposure on “Racenet”.

65. In 2009, Mr Lambourne was selling “products” such as:

• Marc’s Comprehensive Set; and

• Lambourne Provincial Pearlers.

Mr Lambourne explained the term “set” as being comparable to a “stock review or assessment” provided by a stockbroker. In relation to each horse in a particular race, Mr Lambourne provided a form summary and a range of odds and predicted the running positions that each horse might take during the race. That assists a punter to assess the odds being offered by taking into account actual weather and track conditions at the time of the relevant race.

66. Mr Lambourne characterised the Punters Show as being “unique and ground breaking” and as being “controversial” because it competed with form guides and thoroughbred racing commentary published by newspaper groups and popular radio stations. Mr Lambourne said that those publishers were controlled by the “TAB” and that he, Mr Pollett and Mr Baker shared “the anti-TAB” anti-establishment philosophy and campaigned for “the rights of the average punter”.

67. After the popularity of the Punters Show increased, Mr Baker said to Mr Lambourne and Mr Pollett words to the following effect:

“We are on a good thing here, but the idiots who run this place do not understand. They treat me like the office boy. Why don’t we make some proper money out of this? I can give you even more exposure and your product sales will shoot through the roof. We make a good team and feed well off each other. We should all be making money from this!”

Towards the end of 2010, Mr Baker said to Mr Lambourne and Mr Pollett words the following effect:

“I told you your ‘products’ would take off!! [sic] Let's start making real money for ourselves as a team. I can create our own website through which I can promote you and your products. We can also create a digital shop front from which we can help other ‘providers’ like Marc and bookmakers, to sell their services online. Our show will be the ‘magnet’ to attract buyers and advertisers to our shopfront. We'll share the profits from selling products from the other providers and other services like advertising. You won't be charged any commission when we sell your own products. What have you got to lose?”

68. At the time of the conversation just referred to, Mr Baker did not have any “products”. Mr Lambourne considered that he had nothing to lose in joining with Mr Baker in the proposed business since he very much enjoyed presenting the Punters Show with Mr Baker and Mr Pollett. Mr Lambourne, Mr Pollett and Mr Baker agreed that:

• Mr Baker would set up a company with a website, shopfront and merchant facilities;

• the Participants would continue to provide their “quirky videos” twice weekly to attract punters and advertisers to their website;

• Mr Baker would handle all management, technical, production and digital broadcasting issues;

• the Participants would devise new products to sell on the digital shopfront and share profits equally among themselves for any such new products; and

• the Participants would share equally all other profits from advertising and sale of other providers products.

69. As I have said, Mr Baker subsequently caused the Company to be incorporated and each of the Participants was allotted 25 of the 75 issued shares in the capital of the Company. At the time of incorporation of the Company, Mr Baker said words to the following effect:

“I cannot be a company director for a while because of a bankruptcy issue, but I can still do all the work as if I was the sole director and secretary. This will make no difference. Let’s stick to our game plan and I’ll manage everything. We’ll all come out winners and Racenet will get nothing.”

Accordingly, Mr Pollett and Mr Lambourne were named as the first directors of the Company. However, neither of them had previously acted as a director of the Company. Mr Lambourne understood that Mr Baker was assuming sole responsibility for all management tasks, including dealing with the financial affairs of the Company as well as the regular distribution of anticipated profits among the Participants as and when the Company’s cash flow would allow.

70. Mr Pollett resigned as a director of the Company on 14 January 2011. Mr Lambourne resigned as a director on 24 August 2012 following Mr Baker’s discharge from bankruptcy. Mr Baker was appointed as the only director from that time and at all times until 17 October 2017, Mr Baker was, in practical terms, the Company’s sole director and secretary. Notwithstanding the incorporation of the Company, between the date of incorporation and 1 August 2016, the Company never held a directors’ meeting, or a members’ meeting, had never declared dividends and never raised any capital.

71. The Punters Show continued to be presented on “Racenet” until 11 April 2011. By that time, Mr Baker had organised for “shopfront, merchant facilities and website” for the Punters Show to “go live”. The Participants then began producing the Punters Show exclusively for the Company’s website, in support of the Company’s “digital shopfront”.

72. Messrs Lambourne and Pollett understood that all revenues generated through the Company’s “digital shopfront” were channelled into an account of the Company with the Commonwealth Bank of Australia (the CBA Account). Mr Baker exercised exclusive control over the CBA Account and Messrs Lambourne and Pollett trusted Mr Baker implicitly as a partner, friend and business associate. After Mr Lambourne resigned as a director in August 2012, Messrs Lambourne and Pollett did not have access to or look at the CBA Account statements until after the commencement of these proceedings in November 2016.

73. As the Punters Show became more widely known, racing experts appeared on the Punters Show and used the Company’s digital shopfront to promote and sell their products. Sales were processed through the Company’s merchant facilities and the Company retained half of the proceeds of sales by way of commission. By early 2015, some 15 providers were using the Company’s shopfront facilities. Online bookmakers also found the Company’s website an attractive marketing medium. Online bookmakers were known as “affiliates” and their “banners”, which included an electronic link to their own sites, were prominently displayed and promoted on the Company’s website. Punters could open accounts directly through a bookmaker’s electronic link. The Company received a “trailing commission” from each affiliate. Mr Lambourne asserted that, while such commissions should be due and payable up to the present time, they do not appear to have been credited to the CBA Account.

74. When the Company began operations, Mr Lambourne accepted Mr Baker’s estimate that it would be about 12 months before he could expect to receive revenue from the Company. However, he expected to receive the proceeds of sale of his own “products”, which were being sold through the Company without any deduction for commission. However, between 2010 and July 2015, no regular accounting or payment system was established for distributing profits to the Participants.

75. Mr Lambourne believed that, by early 2014, the Company’s business was doing well and he considered that it was time to take stock and to distribute some profits. He began inquiring about the distribution of profits.

76. Mr Lambourne trusted Mr Baker when he said words the following effect:

“The problem is that our overheads are too high, and we are not selling enough products. As soon as the cash flow improves I will get you guys more money. It all takes time to start a new business like this. Digital media is all new but people will take to it soon!”

In response to such statements, Mr Lambourne said words the following effect:

“Dallas mate I really need to know when I can expect to get some money from you. Michelle (referring to my partner) is working part-time and we have huge expenses with renovations, school fees ...”

After numerous conversations to that effect, Mr Baker organised a meeting at the offices of the Company’s accountants, Messrs Stanley & Williamson, for 9 December 2014. Mr Baker said words to the following effect about the proposed meeting:

“All will be revealed! The accountants will be there. You can ask them all the hard questions. You will understand!! [sic]”

77. On 9 December 2014, Mr Lambourne and Mr Pollett attended the offices of Messrs Stanley & Williamson. Much to Mr Lambourne’s surprise, Mr Buckingham was present at the meeting. Mr Baker had not mentioned anything about Mr Buckingham attending the meeting. Mr Lambourne had first met Mr Buckingham in about 2013 at a race meeting in Newcastle. Mr Buckingham had introduced himself and said words to the following effect:

“Congratulations. I love your show. We should have a long chat about it one of these days.”

Mr Buckingham had appeared on the Punters Show at the invitation of Mr Baker in 2014.

78. At the meeting on 9 December 2014, Mr Pollett said to Mr Baker in an angry tone:

“I thought we were here to discuss our [C]ompany privately among ourselves, with our accountant. Why the Fxxx have we got him here?”

Mr Baker replied to the following effect:

“Todd’s come all the way from Newcastle to help with the cash flow issues. Please show him some respect! Todd and I have prepared a presentation which will explain to you the next step we need to take to cash in on our hard work so far. We need to increase our volume and reduce our overheads. Todd and I have done a great presentation to explain how this can be achieved.”

A PowerPoint presentation was then given to the meeting.

79. During the meeting, Mr Baker recommended on numerous occasions that the Participants should “piggy back” onto Mr Buckingham’s group of companies, which would be listed as “TopBetta”. Mr Baker said that the redesign of the Punters Show website had already started, that TopBetta had done some market research and the Punters Show products were “a big hit” for the punters. He said that there was potential synergy between Mr Buckingham’s companies and the Company and that the Participants would benefit from cross-promotion with TopBetta.

80. During the meeting, Mr Lambourne learnt from exchanges between Mr Pollett and the accountants that Mr Baker had been withdrawing funds from the CBA Account on an “ad hoc” basis to such an extent that the accountants had insisted upon the withdrawals being recorded as a weekly $2,000 salary. Mr Lambourne felt hurt that Mr Baker had been taking such significant sums out of the Company on such a regular basis while Mr Lambourne, himself was receiving relatively little money and then only after applying intense pressure to Mr Baker.

81. Towards the end of the PowerPoint presentation, Mr Baker said words to the following effect:

“We need new partners and capital so we can go to the next level quickly and start cashing in on our hard work so far”.

Mr Pollett appeared extremely upset and said words to the following effect:

“All three of us are in this together. Not interested!! [sic] You seem to have been planning things without talking to us first! I came here to understand why everyone is excited about our website and our products, but we are not getting cash into our pockets. That’s what I came here to find out! I’m not interested in more partners or selling out. I’m getting out of here!”

Mr Pollett looked at Mr Lambourne and said “are you coming?” and walked out of the meeting. Mr Lambourne was disappointed at not being able to report some good news of impending cash to his family and followed Mr Pollett out of the meeting.

82. Numerous text messages were exchanged between Mr Lambourne and Mr Baker in which Mr Lambourne asked for funds from sales of his products, since the Company did not charge commission on sales of Mr Lambourne’s products. Cash flow issues continued unabated and unexplained into 2015. Mr Lambourne found that the revenue shortage was much harder to bear knowing that Mr Baker was drawing a regular weekly salary of $2,000 and that he had been holding onto Mr Lambourne’s money from the sales of Mr Lambourne’s products.

83. Mr Lambourne’s income from the Company continued to decrease without any acceptable explanation from Mr Baker. His financial position became quite tenuous. However, Mr Lambourne found it awkward to take any strong measures, such as threatening legal action, to force Mr Baker to provide a full accounting. He had considered that it was essential for the three Participants to work together and to appear to get on well.

The Strategic Partnership

84. In about April 2015, Mr Baker said to Messrs Lambourne and Pollett words to the following effect:

“Sorry guys, the cash flow will not improve. You guys must really think again about working with Todd. He’s pretty much our only hope right now. With Todd we can reduce our overheads, get into more efficient revenue collection systems. Because Todd will be listing on the Stock Exchange, the Punters Show will get exposure if we help Todd promote the listing. You guys will get a guaranteed minimum income from Todd and long-term the Punters Show will become much better known and increase its client base as well!! [sic]

I’ll talk to Todd again and see what I can do.”

85. Several days later, Mr Baker invited Messrs Lambourne and Pollett to attend a meeting with Mr Buckingham at the Pyrmont Point Hotel on 4 May 2015 (the May Meeting). Messrs Lambourne and Pollett attended the May Meeting.

86. At the meeting, Mr Lambourne’s affidavit recounts that a conversation to the following effect took place:

“Mr Buckingham looked at [Messrs Pollett and Lambourne] and said words to the following effect in what [Mr Lambourne] then considered to be a compassionate tone:

‘Look, I know you guys are passionate about the Punters Show and want to keep your independence and all that but [Mr Baker] has been telling me you’ve been struggling even harder since our last meeting. [Mr Baker] and I have been talking. I think I could organise some regular cash flow for you without involving new capital or new partners. I love the Punters Show brand and would not want to change it. You guys and my group could form a strategic partnership and get to a win/win situation. All you have to do is find the time to promote us for the listing which must happen this year. [Mr Baker] is keen - what do you think?’

[Mr Lambourne] said:

‘Staying independent and speaking our mind sounds good! What do you have in mind?’

[Mr] Buckingham replied in words to the effect:

‘It would be great to have guys like you helping us out. Your show is unique and people who believe in digital/internet businesses think it’s the future. I can pay each of you a monthly fee for you to help us promote TopBetta for the listing. [Mr Baker] has already agreed on his terms with me. …it’s up to each of you to do your own deal with me now ...’

Later [Mr] Buckingham said:

‘As we said in December, we think the Punters Show has “pulling power” with the public. You just need to increase volume and bring your overheads down and the cash flow will improve. It’s a no-brainer. What we do is: jazz up your website, cut out your management and merchant facilities expenses, we’ll free up [Mr Baker] from all the administrative stuff and video production downloading etc, so that he can do more value-add work like marketing and PR for both the Punters Show and 12Follow. We can collect all the Punters Show fees through our existing 12Follow merchant facilities. Our’s is better because we have “recurring billing” which saves the punters having to put their credit card details each time they buy a product on line. Our team can manage all the accounting and report to you and to your providers on a regular and more professional basis than you’re doing at the moment. As far as I can see, this is a win-win situation for everyone. You guys are personalities but will get even more publicity from your work for the listing. We’ll get your punters interested in the new stuff we are offering through the fantasy gaming. That’s the next big thing in the industry. It’s already booming in the States. [Mr Pollett] – you’re great at tournaments – you can help us launch the social gaming side of the business. You all win by piggy-backing on our listing publicity but you keep your providers and affiliates as well as go on with your own products. We also won’t charge any commission for managing your personal products.’

[Mr Lambourne] replied:

‘That sounds good. How much do we get paid for doing the promotion work?’

[Mr] Buckingham said:

‘We can start straight away as soon as we settle on the money. Let’s have a drink now and drink to our listing!’

While having a drink [Mr] Buckingham looked at me and said:

‘[Mr Lambourne], you think about it and ring [me] and we’ll discuss your fee.’

[Mr Buckingham then said to Mr Pollett]:

‘[Mr Pollett] you ring [me] and we’ll do the same.’”

87. On 7 May 2015, Mr Pollett told Mr Lambourne that Mr Buckingham had agreed to pay Mr Pollett $108,000 and suggested that Mr Lambourne speak to Mr Buckingham as soon as possible. Mr Lambourne then spoke to Mr Buckingham and an exchange to the following effect took place:

Mr Lambourne:   “You already know my situation with a young family and Michelle not being able to work full time, I’ve worked out I need a minimum income of $104,000 plus GST for the next twelve months before I can consider anything. I also need a lump sum of $30,000 immediately. [Mr Baker] says he’s already talked to you about this.”

Mr Buckingham:   “That’s great … done. Let’s go!! [sic] I’ll ask [Mr Baker] to start on the promotion stuff straight away.”

Mr Lambourne said that by that, Mr Buckingham meant that he would “up my profile so that I would add value to the TopBetta promotion”. Mr Lambourne asserted that part of the agreement for starting with TopBetta was the promise that TopBetta would pay him the sum of $30,000 as soon as they started the promotional work. That assertion was made without objection.

88. Soon after that conversation, Mr Buckingham arranged for Mr Baker to film and produce an in-depth interview with Mr Lambourne. The interview covered more than half an hour and reviewed Mr Lambourne’s “journey from competing with my school friends picking winners on the TAB to my work as a bookie’s clerk and bookmaker”. The interview also traced “the technological developments and cultural changes within the racing industry” during Mr Lambourne’s career up to the point of starting the Punters Show with Messrs Pollett and Baker.

89. By 21 July 2015, Messrs Buckingham and Baker had caused a website known as “the Punters Show 2.0” to “go live”. The original website for the Punters Show was disconnected and the related merchant facilities of the Company were also disconnected.

90. Mr Lambourne expected that the revenue previously collected by the Company’s merchant facilities was now being collected through the 12Follow merchant facilities on behalf of the Company. He expected that 12Follow would account to the Company and to the Company’s providers and affiliates. He also understood that 12Follow would charge a reasonable management fee that would be substantially lower than the Company’s previous in-house management costs when Mr Baker was handling the management with one full-time paid assistant. He expected that his own products would continue to be sold without deduction of commission.

91. By 27 July 2015, Mr Lambourne had not received any payment. On about that day he telephoned Mr Buckingham who said words to the following effect to him:

“With all this listing stuff happening we need to avoid the Punters Show accounts being mixed up with ours – and then needing auditing and all that stuff. As soon as we have done with the listing phase there will be a full accounting and you will be paid.”

Messrs Lambourne and Pollett continued their work through the Punters Show and helped to promote TopBetta and its gaming products as and when requested by Mr Buckingham.

92. Mr Lambourne believed that Mr Baker was still looking after his interests and the interests of Mr Pollett and the Company in their dealings with all third parties, including Mr Buckingham. Thus, whenever Mr Lambourne raised with Mr Baker the fact that he had received no payment, Mr Baker told him that they needed to go easy and be patient and that Mr Buckingham was their “best bet”. He suggested that they show Mr Buckingham how they could help him and wait until “they list”.

93. In August 2015, TopBetta received a capital raising proposal from a stockbroking firm. The proposal involved an initial public offering (IPO), rather than the “backdoor listing” that had previously been proposed. On 12 October 2015, at Mr Buckingham’s request, the three Participants took part in a day-long photographic shoot as part of promotional work for the listing of TopBetta. The photos reflected the image that TopBetta wished to promote about the Punters Show team in connection with the proposed IPO.

94. On 25 November 2015, TopBetta issued a prospectus for its IPO to raise $6 million. The prospectus claimed that TopBetta was the first Australian-based wagering operator to combine a standard wagering platform with a “fantasy wagering platform”, including the capability of conducting fantasy wagering tournaments. “Fantasy wagering” was said to be a closed competition in which each player would pay a small entry fee but would be given a large quantity of “fantasy” chips with which to bet on real races, with a large return in real money if the fantasy bets placed by the player were more successful than the other players in the competition. 12Follow was said to be the first service to use customers’ mobile phones to follow their favourite runners offering a mobile content platform with analyst commentary. The IPO described Operis as licensed to conduct business as a bookmaker. No reference was made in the prospectus to the Punters Show, to Mr Lambourne or to Mr Pollett.

95. On 11 December 2015, TopBetta was listed on ASX, $6 million having been raised by means of the IPO. TopBetta made an announcement to the ASX in which it described the offer as “heavily oversubscribed”. That figure of $6 million was the focus of the claim by the Claimants for equitable compensation as being indicative of the value of the Punters Show.

96. On 3 January 2016, TopBetta made a further announcement to the ASX that it had entered into an exclusive partnership with EON Sports Radio Pty Limited (EON Sports Radio), a new digital platform, to provide unique content to EON Sports Radio from TopBetta’s “the Punters Show” premium content providers. Mr Buckingham was quoted as saying that he was looking forward to the launch of a Saturday morning racing show on EON Sports Radio, as follows:

“The ‘Punters Show’ format has not been done this way before and it will be great for our listeners to actually hear from professional punters on how they will be handling the day’s racing …”.

Thus, the Claimants assert, the Punters Show and its products, together with Messrs Lambourne and Pollett, were an important part of the content then offered by TopBetta to its customers and an important drawcard for TopBetta’s online business platforms.

97. On 28 January 2016, Mr Lambourne asked Mr Buckingham about the $30,000 payment due to him. Mr Buckingham replied “send us an invoice and I’ll make sure you get paid within fourteen days from the date of invoice”. Mr Lambourne sent an invoice on the same day. By 15 February 2016, Mr Lambourne had still not received any payment. Mr Buckingham said words the following effect:

“We’re still finishing contracts. Things get a bit more complicated with a public company. We will pay you the $30,000 and the monthly payments will start as soon as contracts are signed.”

Mr Lambourne was never provided with any contractual document for consideration or signature. No contract was signed between the Company and any of the Buckingham Interests.

98. On 24 February 2016, Mr Lambourne received a payment of the sum of $9,166. He assumed that the payment was being made pursuant to the arrangements discussed in May 2015 whereby he was to be paid at a minimum rate of $104,000 per annum plus GST. Mr Lambourne received similar payments on 15 March, 15 April, 14 May and 13 June 2016. Some payments were made through a bank account of TopBetta and others were made through a bank account of 12Follow.

99. On 12 April 2016, Mr Lambourne again enquired about the $30,000 payment. Mr Buckingham responded:

“Sorry for the delay. We will settle everything by the end of this month.”

On about 5 May 2016, Mr Buckingham telephoned Mr Lambourne and said words to the following effect:

“We’ll settle that invoice for $30,000 this week as promised.”

On 14 May 2016, Mr Buckingham sent a text message to Mr Lambourne saying:

“Sorry I didn’t get back to you through the week mate, the accountant now has the files and he is finalising the amounts outstanding.”

On 12 June 2016, Mr Buckingham telephoned Mr Lambourne and said words to the following effect:

“The $30,000 will be paid by 30 June for sure.”

End of the Strategic Partnership

100. The edition of the Punters Show for 6 June 2016 contained remarks concerning jockeys injured in falls during thoroughbred horse races. Mr Baker and the Buckingham Interests characterised the remarks as “offensive” and “inflammatory”. On the other hand, Mr Lambourne suggested that TopBetta had promoted the Punters Show as “outspoken and controversial”. On 12 June 2018, Mr Buckingham published an email that announced that Mr Lambourne had been “stood down” for two weeks, apparently as a consequence of the remarks made on 6 June 2016. The email was addressed to consultants for the Punters Show and providers of material for the Punters Show.

101. Mr Lambourne denies that he was ever “stood down” from the Punters Show. He considered that the comments in question formed part of the type of commentary from which the Punters Show had established its popularity and commercial value. Shortly afterwards, Mr Baker telephoned Mr Lambourne and said words to the following effect:

“Mate do not worry about that announcement. We need to keep the racing people sweet. This is good stuff for publicity. You are not suspended. Don’t mind the statement. [Mr Buckingham] had to do it. There is no such thing as bad publicity.”

102. At 9.22 am on 19 July 2016, Mr Baker sent to Mr Lambourne by email a document headed “Punters Show / 12Follow / TopBetta Transition”. The document file name, as it appeared in the email, was “Punters Show termination agreement.docx”. The “AIM” of the document was stated to be as follows:

• to separate the Punters Show from the direct connection with TopBetta;

• to ensure the smooth transition for all service providers who have requested that business remains status quo in terms of payments and workload for them;

• get the Punters Show into a position to move forward;

• remove the $100,000 of debt that is currently on the Punters Show books; and

• allow 12Follow to move forward.

103. The document proposed that the following steps, inter alia, take place on 1 August 2016:

• the Punters Show is returned to current ownership of Mr Baker as director and shareholder and Messrs Lambourne and Pollett as shareholders;

• Mr Baker resigns as a director and shareholder and Messrs Lambourne and Pollett will appoint a director or directors;

• TopBetta to pay the sum of $100,000 to the Punters Show to cover debts still existing in the Punters Show being $60,000 for tax, $10,000 for accountants and $30,000 to Mr Lambourne;

• 12Follow to continue to provide the service of financial administration for the current service providers;

• the payment to TopBetta of $100,000 is in exchange for 12Follow to continue to provide the existing products it currently does retaining any revenues generated from those products, outside the products of Messrs Lambourne and Pollett; and

• the Punters Show to deal directly with service providers for deals associated with the Punters Show.

104. A list of providers was set out in the following terms:

“- Darren Potter

- Steve Fletcher

- John McLeod

- John Walter

- Warren Huntly

- Aaron Barby

- Greyhounds

- Hong Kong

- Vince Accardi”.

Immediately below that list, the document provided as follows:

“TopBetta will provide a website including back-end payment system for the branched off Punters Show that can be used by Punters Show

TopBetta will provide full assistance in the transition stage with the administrative issues that will no-doubt arise

All content from external providers can be used by Punters Show (i.e. Melbourne Punters Show, John Walter videos)

Database passed on of 5,000 built up over the years, mainly through people who have purchased products

Social media (Twitter approx. 4,500 followers, Facebook 7.500 [sic]) passed on

Matt Taylor has elected to continue with TopBetta/12Follow

Jake Henson has elected to continue with TopBetta/12Follow”.

105. On 19 July 2016, TopBetta paid Mr Lambourne the sum of $4,583. That is the last payment he has received. On 25 July 2016, Mr Buckingham said:

“TopBetta does not owe [Mr] Lambourne any money.”

106. On 22 July 2016, Mr Lambourne sent an email to Mr Buckingham saying:

“As a gesture of goodwill I request that you make payment prior to Tuesday’s (26/7) meeting on the attached invoice.

This invoice has now been outstanding for nearly six months. You have promised to make this payment in three face-to-face meetings, three telephone calls, two emails and one text message.”

Mr Buckingham responded later in the day saying:

“I am a little confused by this email and SMS. What will we be getting for this payment?”

Mr Lambourne responded saying:

“The invoice relates to services rendered prior to the introduction of legacy payments, services you have already received.

We agreed upon this invoice at our meeting on 28 January 2016, I emailed it to you the next day.”

107. Mr Buckingham responded later on 22 July 2016 saying:

“This was to be included in the purchase of The Punters Show as it is a debt owed by the business.

If we purchased The Punters Show we would not be having a conversation at all, we would own it and be able to do what we like with the business.

I am trying to help you out as much as I can and have proposed a solution.

We didn’t receive ANY services for a payment of $30k as you were paid for your services up until that point, and in fact the payments made to you over the previous 6 months ($9k/month) are now wasted payments as I am sure you would agree were substantially more then [sic] any services provided by yourself. Keep in mind we have paid you this money in a period where you produced around $10-12k in sales[.]

Happy to have a discussion on Tuesday to get your thoughts but we will not be wasting any further time trying to sort out a solution.

You guys will need to decide which way you go and if you want the business back you can take over the running of this from the 1st August”.

108. At 8.14 am on 25 July 2016, Mr Lambourne sent by email a letter addressed to Mr Baker and Mr Buckingham saying as follows:

“Thank you [Mr Buckingham] for your email of 19th July.

I am writing to both yourself and [Mr Baker] jointly for obvious reasons.

It now seems clear that [Mr Baker] is working for interests other than Punters Show Pty Limited, herein referred to as “the company”.

As you are both aware there has been a long history of promises made and contractual obligations not respected since [Mr Baker] first introduced the company to TopBetta.

One clear example is the $30,000 debt owed to me since at least 21^st July, 2015.

It therefore is pointless to fool ourselves that anything will change.

I am well aware that [Mr Baker] and [Mr Buckingham] have been travelling interstate in a bid to massage the company’s clientele away from the company and otherwise misusing information belonging to the company.

It seems clear that [Mr Baker] (whether aided/abetted by TopBetta or not) has been in serious breach of his duties as the Company’s sole director.

[Mr Baker] would be aware of his fiduciary duties towards the company and all its shareholders.

TopBetta (whether aided/abetted by [Mr Baker] or not) has not only breached various contractual agreements between itself and the company but in addition and in conjunction with [Mr Baker] has been actively interfering with the company’s contractual relationships with third parties.

My respectful suggestion is that all issues concerning the clear need for all relations to be terminated as soon as possible should be made the subject of an urgent mediation process as soon as possible. This would include [Mr Baker] resigning as a director of the company forthwith.

My enquiries reveal that entities such as the Australian Dispute Centre could organise this for a reasonable fee.

My request is that you jointly or severally provide written undertakings by 4.00 pm on Monday 25 July 2016 to the following effect:

1- That the sum of $30,000 will be paid to me on or before close of business Friday 29 July 2016.

2- That until further notice TopBetta will cease and desist contacting any of the following (Darren Potter, Steve Fletcher, John McLeod, John Walter, Warren Huntly, Aaron Barby, Brendan McCoy, Alan Aitken, Vince Accardi) to discuss anything to do with the company except in relation to ongoing day to day issues related to provision of services by the company.

3- Similarly for [Mr Baker] whether in his personal capacity or in his capacity as the Company’s director;

4- That [Mr Baker] and TopBetta will provide to each of the company's shareholders on or before Monday 1 August 2016 a full reconciliation and accounting of all funds received by either TopBetta or [Mr Baker] as agents/trustees for the company since 21^st July 2015.

5- That on account of [Mr Baker’s] egregious behaviour in his capacity as the company director, both Dallas and Top Betta will cause to be returned to me at 37 Knight Street Erskineville on or before Monday 1 August 2016 the following property of the company: Motor Vehicle and Computer Equipment listed as fixed assets on the company’s balance sheet and books of account whether in digital form or not.

6- That both TopBetta and [Mr Baker] will agree to an urgent mediation organised by and through the Australian Dispute Centre, such mediation to be commenced on or before 29 July 2016.

If the above undertaking, as requested, is not provided on or before 4.00pm on Monday 25 July 2016, c/o my email address herein, then I reserve the right to approach the Supreme Court Corporations List Duty Judge to obtain an ‘ex parte’ injunction against both TopBetta and [Mr Baker].

Incidentally the Duty Judge will be Justice Brereton who knows a thing or two about the Racing industry.

Please advise the details of any lawyer you may have retained, or will retain, so that we may inform His Honour, should the need to seek the Injunction arise.

I hope you will both use this window of opportunity to try to sort this matter honourably and without the need for expensive lawyers and/or damage to reputation.”

109. Mr Lambourne sent another email to Mr Baker and Mr Buckingham at 12.32 pm on 25 July 2016 saying as follows:

“Dear [Mr Baker],

I refer to our telephone conversation at 9.33am today.

I believe I have already demonstrated my patience and willingness to discuss issues.

Unfortunately the history of our dealings seems to reflect the fact that you and your associates have been the only ones to benefit from my past generosity of spirit, which some may describe as gullibility.

There is no point in any further discussion until there is some form of written assurance that you and your associates have the wherewithal to meet promises made.

To be clear: my position as set out in my email sent at 8.14am today has not changed.

It will not change until you and your associates provide evidence of their willingness to reach a genuine and constructive compromise.

My request for written undertakings and commitment to a professionally run mediation remains unchanged.

Please advise in writing before the deadline.

There is no need for further telephone discussions.”

Mr Buckingham responded at 2.22 pm on 25 July 2016 saying:

“I understand this is a very difficult time at the moment and a lot to get our heads around.

Rest assured, I am in no way trying to undermine the Punters Show website. TopBetta have made its mind up to walk away from this business and we are comfortable with our decision.

I have put a proposal through to you to try and work out a solution that works for all parties which included a payment of $100k, substantially more then [sic] the $30k you have proposed.

Currently TopBetta/12Follow are still doing all the work for the business as an act of goodwill while we work out a resolution and this is costing a lot of time, money and resources[.]

[Mr Lambourne], If you are in a position to provide all of the infrastructure and any responsibility is taken away from Top Betta to do any continued work then I am more then comfortable with this and will wish you all the best, we can work on a transition this week for this to happen.

We will not be in a position to guarantee any payment by 4.00pm today until we have agreed to terms formally[.]

[Mr Baker] has mentioned you and Glenn were disappointed with only receiving payment up until 30th June, you will both receive 100% of any sales you have generated for the month of July and this will be paid when accounting is done on 15th August[.]

I am still available to meet up tomorrow if you feel appropriate”.

110. At 3.57pm on 25 July 2016, Mr Baker responded to Mr Lambourne’s email and letter of 8.14 am pm saying as follows:

201. The Summary asserted that, instead of Mr Baker sharing the financial returns of the Punters’ Show fairly with Messrs Lambourne and Pollett, Mr Buckingham induced Mr Baker to divert the assets and resources of the joint venture to the benefit of the Buckingham Interests. The Summary asserted that, instead of allowing the success of the Punters Show to lift the reputation of Messrs Lambourne and Pollett within the thoroughbred racing industry, Mr Buckingham damaged them as from June 2016.

202. The Summary asserted that the unconscientious conduct of Mr Baker and Mr Buckingham included:

• using the business resources of the Punters Show, including the talents of Messrs Lambourne and Pollett, for the benefit of the Buckingham Interests;

• using those resources as a head start for the ASX listing of TopBetta on 11 December 2015; and

• using those resources to support the share price of TopBetta in the vital first two years after listing on the ASX while Mr Buckingham sought to focus on the core technological expertise of the Punters Show business, which eventually supported the share price of TopBetta.

205. The Claimants asserted in the Summary that the onus was on Mr Baker to establish the extent to which he and the Buckingham Interests severally and jointly should disgorge the benefits and profits obtained as from August 2014. They said that, without the Punters Show resources, including “the talents” of Messrs Lambourne and Pollett, the Buckingham Interests would not have had the “headstart” that allowed TopBetta to reach a $19 million capital valuation on 11 December 2015. They asserted that, rather than dissociating themselves from their previous unconscientious conduct, the Buckingham Interests continued, after 11 December 2015, not only to despoil the Punters Show business but also to despoil the personal reputation of Messrs Lambourne and Pollett within “the intimate community of Thoroughbred Racing professionals”.

206. The Summary asserted that the benefits, profits and advantages obtained by the Buckingham Interests were very similar to those proposed at the presentation on 9 December 2014. The Claimants said that Mr Buckingham well knew as from that day that Messrs Lambourne and Pollett were strongly against the proposals contained in the presentation of that day.

207. The Summary contended that, between 2014 and 2017, the Buckingham Interests had more efficient sales and marketing management facilities but its digital platform lacked the vital “content” without which it could not establish the viability of its business model and technology. The Summary asserted that it was only through misappropriation of the content of the Punters Show that the Buckingham Interests managed to convince the public of the value of its digital technology, which has now become the core business of the Buckingham Interests.

208. The Summary asserted that, without the Punters Show products and services, the Buckingham Interests had, figuratively speaking, “an empty pot with no honey”. The Claimants said that it was the Punters Show products and services that “attracted the bees to Buckingham’s otherwise uninviting honeypot” and that it was only once the investment community had become familiar with the ecosystem around “the honeypot” that the Buckingham Interests were able surreptitiously to alter the quality and nature of “the honey without the ‘bees’” losing interest and abandoning the honeypot of the Buckingham Interests.

209. It is significant that no mention was made in the Summary of the alleged “improper withdrawals” made by Mr Baker of the funds of the Company.

210. In their detailed written submissions in support of the appeal, dated 28 February 2021 (the Submissions), the Claimants set out in more detail contentions similar to those contained in the Summary. Having asserted the existence of a fiduciary duty owed by Mr Baker to Messrs Lambourne and Pollett and the content of that duty, the Submissions addressed the question of breach of that duty. The Submissions then addressed the question of breach by asserting that it was self-evident from the statement of facts contained in the Submissions that Mr Baker had breached his specific duties. Thus, the Submissions asserted, Mr Baker accepted employment from the Buckingham Interests but failed to tell Messrs Lambourne and Pollett and did not make the required disclosure after being asked in writing to do so. Thus, it was asserted, Mr Baker was employed by the Buckingham Interests at a minimum salary of $100,000 per annum by 1 May 2015, to be increased to $120,000 per annum after the expected listing of TopBetta. It was said that whenever Mr Lambourne complained about Mr Buckingham’s tardiness in relation to the payment of $30,000, Mr Baker would warn him “not to upset the applecart” because Mr Buckingham “is our best bet”. Neither Mr Baker nor Mr Buckingham ever informed Messrs Lambourne and Pollett that Mr Baker had started to work for the Buckingham Interests.

211. The Claimants asserted that the presentation on 9 December 2014 indicated that Mr Baker had already placed himself in a situation of potential conflict by entering into arrangements with Mr Buckingham about the Punters Show business without revealing the arrangements to Messrs Lambourne and Pollett. They asserted that Mr Baker “sold or allowed Punters Show products to be sold through the 12 Follow website” and that Mr Baker did not account for any revenue raised from the sales by 12 Follow. However, the Submissions provide no particulars of those assertions.

212. The Submissions asserted Mr Baker was “cannibalising” the Punters Show business and favoured Mr Buckingham, a director of a competitor, prior to the presentation on 9 December 2014. Again, no particulars of that assertion were provided.

213. Next, the Submissions assert that Mr Baker was disloyal to Messrs Lambourne and Pollett personally in relation to the “individual products” that he had undertaken to manage for them. They asserted also that Mr Baker was disloyal to Messrs Lambourne and Pollett personally in relation to the promotion and sale of products from other providers that were meant to be sold exclusively on the Punters Show website for the joint and equal benefit of the three Participants. They say that Mr Baker was disloyal in relation to new products that he had helped to create and that were meant to be sold exclusively on the Punters Show website for the joint and equal benefit of the three Participants and was disloyal towards Messrs Lambourne and Pollett personally and to the Punters Show business when he allowed the Buckingham Interests “to cross promote and sell Punters Show products” on the website of 12Follow in circumstances where 12Follow was a substantially inferior but direct competitor. They asserted that, by allowing the Punters Show products to be sold on the 12Follow website, Mr Baker was in fact raising the profile and goodwill value of 12Follow while reducing the profile of the Punters Show through its association with 12 Follow. They asserted that Mr Baker was allowing the clear distinction between “the unique Punters Show range of products” to be lost by allowing an inferior and less presentable website to deal in similar products, thus losing the uniqueness of the Punters Show website.

214. There is no clear evidence that Mr Baker was employed by the Buckingham Interests prior to the arrangements entered into in May 2015. The Claimants place reliance on a document that refers to payments made to Mr Baker. Mr Lambourne asserted that the document was sent to him by Mr Baker shortly before the litigation commenced. There was no other explanation of the provenance of the document. Further, there is no evidence as to the circumstances giving rise to the payments and, in any event, the first payment to Mr Baker recorded is a payment made in July 2015, after the Company entered into the so-called strategic partnership.

215. In response to questions from the primary judge, the Claimants identified the allegations in the Amended Statement of Claim in paras [44], [45] and [46] as the basis upon which their case on breach of fiduciary duty was put. As indicated in Appendix 1 to these reasons, the Amended Statement of Claim alleges that Mr Baker failed to provide information regarding the financial state of the Company or its business to Messrs Lambourne and Pollett and encouraged them to enter into the strategic partnership proposal by misleading them as to the financial state of the Company. The Amended Statement of Claim alleges that Mr Baker revealed the whole of financial and other confidential information of the Company to the Buckingham Interests without any attempt to preserve the confidentiality of the information or acquire any compensation or license fee from the Buckingham Interests. No mention is made of the employment of Mr Baker prior to the “strategic partnership” being entered into in May 2015. More importantly, there is in fact no evidence of the financial information alleged to have been provided by Mr Baker to the Buckingham Interests prior to the 9 December 2014 presentation.

216. The Claimants complain that Mr Baker sold or allowed to be sold the products of the Company through the 12Follow website. That, of course, was the object of the “strategic partnership”, namely, that the products of the Company would be marketed through a new website controlled by 12Follow. It is difficult to see, therefore, how Messrs Lambourne and Pollett could complain that they did not know that the Company’s products were being sold from the 12Follow website.

217. As the Buckingham Interests point out, the Claimants did not identify precisely what was “cannibalised”. There was no evidence before the primary judge to support such an allegation and no such breach was articulated in the Amended Statement of Claim.

218. The allegations of disloyalty to Messrs Lambourne and Pollett appear to be based on the conduct of the parties after “the strategic partnership” was entered into. Clearly, it could not be a breach of duty by Mr Baker to assist in the performance of the obligations that arose under the strategic partnership. In effect, the only true complaint that can be advanced is that the strategic partnership itself involved a breach of fiduciary duty on the part of Mr Baker.

219. However, there is no evidence to indicate that, in promoting the proposed strategic partnership, Mr Baker was not endeavouring to advance the interests of the Company and, by doing so, the interests of the Participants as shareholders of the Company. There was no transfer to the Buckingham Interests of any proprietary interest in any asset owned by the Company. The business of the Punters Show remained the property of the Company. It is simply not possible to discern how the giving effect to the strategic partnership damaged the interests of the Company. Ultimately, Messrs Lambourne and Pollett fell out with the Buckingham Interests. However, the Company received all of the intellectual property that was necessary for it to continue with the Punters Show business if it wished to do so.

220. Nothing has been advanced in the written submissions filed in support of the appeal on behalf of the Claimants or in the oral address by Mr Lambourne on the hearing of the appeal to indicate that any error was made by the primary judge in the conclusions summarised above. There was no error on the part of her Honour in concluding that there was no breach by Mr Baker of any duty owed to Messrs Lambourne and Pollett or to the Company.

221. There is no basis for disturbing the conclusion by the primary judge that there was no breach of fiduciary duty on the part of Mr Baker. Accordingly, there is no need to address the question of whether or not the Buckingham Interests were knowingly involved or knowingly participated in any such breach. It follows that the claims based on breach of the fiduciary duty must be rejected.

Conclusion

222. In the light of the above conclusions, I would dismiss the appeal. In the light of the compromise of the claim for $30,000, it would be appropriate to afford the parties the opportunity of making further submissions as to costs, if they are so advised. The record should be altered to show that the name of the third respondent has been changed to “Betmakers Technology Group Limited”.

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Appendix 1

The Amended Statement of Claim

The substantive prayers for relief in the Amended Statement of Claim were, relevantly, as follows:

1. claim by Mr Lambourne against Mr Buckingham and TopBetta for the sum of $30,000;

2. claim by Messrs Lambourne and Pollett against Mr Baker for damages or equitable compensation;

3. claim by the Company against Mr Baker for damages or equitable compensation;

4. claims by the Company against Mr Baker for damages pursuant to s 1317H of the Corporations Act for breaches of ss 180, 181, 182 and 183 of the Corporations Act;

5. claims by the Company against the Buckingham Interests for damages pursuant to s 1317H of the Corporations Act by reason of their knowing involvement in breaches of ss 180, 181, 182 and 183 of the Corporations Act;

6. claim by Messrs Lambourne and Pollett against Mr Baker for damages pursuant to s 236 of the Australian Consumer Law in relation to breaches by Mr Baker of s 18 of the Australian Consumer Law;

7. claims by Messrs Lambourne and Pollett against the Buckingham Interests for equitable compensation; and

8. claims by the Company against the Buckingham Interests for equitable compensation.

Mr Baker and the Buckingham Interests asserted that prayers 4, 5 and 6 were not pressed.

Paragraphs 52 to 54 inclusive make allegations as to the relief claimed against Mr Baker. Those allegations may be restated as follows:

• In consequence of the breaches by Mr Baker of fiduciary duties owed to Messrs Lambourne and Pollett, Mr Baker caused Messrs Lambourne and Pollett loss and damage as follows:

(i)   Mr Baker failed to deal with and account to Messrs Lambourne and Pollett for the revenue generated by the Company’s business through the sale of products of Messrs Lambourne and Pollett;

(ii)   Messrs Lambourne and Pollett have lost the share of profit that would otherwise have been derived by them from the conduct of the Company’s business; and

(iii)   that the whole of the business of the Company was transferred to TopBetta without any proper or adequate compensation to reflect the true value of the business and assets conveyed to TopBetta.

• Alternatively, but for the breaches of s 18 of the Australian Consumer Law, Messrs Lambourne and Pollett would not have entered into the May 2015 agreement and would not have agreed to the Company entering into the strategic partnership and would not have suffered the loss of the value of their shares which, after 2015, became valueless.

• In consequence of the breach by Mr Baker of the duties owed by him to the Company, the Company has suffered loss and damage consisting of:

(i)   loss of the revenue that the Company misappropriated by Mr Baker; and

(ii)   loss of the value of the business and assets of the Company transferred to TopBetta without any proper compensation or payment.

Paragraphs 7 to 15 of the Amended Statement of Claim made Allegations concerning “Formation of Joint Venture” and may be restated as follows:

• In or about late 2010, the Participants agreed:

(i)   to form and conduct a business to produce and broadcast a regular programme on Internet television to be called the “Punters Show”;

(ii)   to promote, market and sell products of the Participants associated with horseracing from the website associated with the programme;

(iii)   to promote, market and sell products of third parties who would pay a commission to the business;

(iv)   to provide to persons described as “affiliates” the facility to place bets directly with clients of the Punters Show in exchange for a trailing commission for future bets placed by clients of the Punters Show;

(v)   to generate revenue from advertisers;

(vi)   to generate revenues from the appearances by Messrs Lambourne and Pollett as “talent” for a fee; and

(vii)   to generate revenue from extending the Punters Show media presence through radio and pay television channels.

• It was further agreed between the Participants in relation to the conduct of the Punters Show business that:

(i)   the Participants would jointly own directly or indirectly the digital shopfront, platform and website;

(ii)   the Participants would be entitled to sell their own products through the business free of any charge or commission and would receive the whole of the revenue from the sale of their respective products;

(iii)   the Participants would share equally in the profits from the conduct of the other activities of the business;

(iv)   Mr Baker would manage and administer the marketing, promotion and sales of the products, as well as collect revenue, deduct fees and account to the vendors of the products on a regular basis;

(v)   Mr Baker would also manage, administer and promote all aspects of the business and the Punters Show brand, simultaneously with the personal promotion of Messrs Lambourne and Pollett as “talent” within the racing industry;

(vi)   Messrs Lambourne and Pollett would devote their time and skill to the production of broadcasts of the Punters Show;

(vii)   the business would manage, promote and sell only those products for which it obtained exclusive sales rights; and

(viii)   the business would be conducted by a company to be incorporated and managed by Mr Baker in which each of the Participants would have an equal shareholding.

• In accordance with the agreement described above, Mr Baker caused the Company to be incorporated and caused 25 shares in the capital of the Company to be issued to each of the Participants;

• In reliance upon representations made by Mr Baker, Messrs Lambourne and Pollett agreed for Mr Baker, from December 2010:

(i)   to act as the sole director of the Company;

(ii)   to exercise exclusive control and supervision of the Company’s bank account, finances and accounting;

(iii)   to determine and pay to them such monies as they were entitled to receive from the business and in accordance with their agreement; and

(iv)   to determine and pay all and any legitimate expenses of the business to any third parties.

• In consequence of the above, there existed between the Participants at all times up to July 2016 mutual trust and confidence in relation to the conduct of the business and the affairs of the Company;

• In consequence of the above matters, Mr Baker owed Messrs Lambourne and Pollett, from the time of the formation of the business until late 2016 fiduciary duties to act in the best interests of Messrs Lambourne and Pollett, to avoid a conflict of Mr Baker’s interest with that of Messrs Lambourne and Pollett and not to misuse any opportunity or advantage gained from acting on behalf of Messrs Lambourne and Pollett in relation to the following matters:

(i)   The promotion and marketing of the products of Messrs Lambourne and Pollett through the Punters Show;

(ii)   the collecting and accounting to Messrs Lambourne and Pollett for the proceeds of sale of their respective products; and

(iii)   promoting Messrs Lambourne and Pollett as “talent”.

• At all material times, in consequence of being a director of the Company, Mr Baker owed fiduciary duties to the Company:

(i)   to avoid conflicts between his interests and those of the Company; and

(ii)   not to use information gained by him in his capacity as a director, to advance the interests of himself or third parties at the expense of the Company.

• At all material times, Mr Baker was under duties as a director of the Company, imposed by ss 180, 181, 182(1)(a), 182(1)(b), (183)(1)(a) and (183)(1)(b) of the Corporations Act.

Paragraphs 16 to 20 of the Amended Statement of Claim, which make allegations in relation to “improper withdrawals” by Mr Baker, may be restated as follows:

• Between August 2012 at the latest and August 2016, Mr Baker withdrew the sum of $833,000 from accounts of the Company, including $187,791 in cash from automatic teller machines;

• The majority of those monies were withdrawn by Mr Baker in breach of his duties to Mr Lambourne and Mr Pollett and in breach of his duties to the Company;

• A substantial proportion of the monies withdrawn by Mr Baker for his own private purposes as described above constituted the proceeds from the sale of the products of Messrs Lambourne and Pollett for which Mr Baker was obliged to account for Messrs Lambourne and Pollett;

• A substantial portion of the monies withdrawn by Mr Baker for his own personal purposes constituted revenue of the Company in relation to which Mr Baker was bound to account to the Company, to ensure that it had paid all of its expenses and in relation to such proportion as represented profit from the conduct of the Company’s business, to distribute that equally among the Participants or otherwise cause it to be invested in the Company’s business;

• By withdrawing those sums that should have been accounted for to the Company, Mr Baker breached his general fiduciary obligations to the Company and his statutory obligations to the Company;

• If and to the extent that Mr Baker has purported to pay money to himself for services performed by him to the Company, such payments constituted a breach of the duties owed by Mr Baker to Messrs Lambourne and Pollett directly or was a breach of the duties owed by him to the Company.

The particulars of the allegations in relation to “improper withdrawals” by Mr Baker of $833,000 in breach of his duties to Mr Lambourne and Mr Pollett were follows:

• During the relevant period Mr Baker caused $320,000 to be paid to Mr Pollett and $216,000 to Mr Lambourne, each of whom produced the majority of the product for sale through the Company’s business and the majority of the sums paid to Mr Baker could not have been in regard to the sale of products of Mr Baker through the Company’s business;

• Mr Baker would have sold approximately $100,000 of his products through the Company during the relevant period;

• The Company has declared no dividends since incorporation;

• At no material time did Mr Baker inform Mr Lambourne or Mr Pollett that he was making substantial payments to himself from the funds of the Company or otherwise seek their consent or approval for making substantial payments for himself;

• Mr Baker had no right or entitlement to be paid by the Company the amounts that he caused the Company to pay him; and

• The said payments were upon the private living expenses and entertainment expenses of Mr Baker.

In relation to the allegation of breach of general fiduciary obligations to the Company by Mr Baker in withdrawing the sums, the following particulars were provided:

• in paying the monies to himself, Mr Baker failed to account for the monies to the Company in accordance with his obligations as a director;

• Mr Baker preferred his own personal interests to the interests of the Company in dealing with the money; and

• Mr Baker misused his control as sole director of the Company and sole control of the Company’s bank accounts to access money and pay himself sums to which he had no lawful entitlement.

Finally, the allegation that the payments made by Mr Baker to himself constituted a breach of the duties owed by Mr Baker to Messrs Lambourne and Pollett directly or a breach of the duties owed by him to the Company was particularised as follows:

• Each of the Participants worked full time in the conduct of the business of the Company;

• No salary was paid to Mr Lambourne or Mr Pollett as remuneration of the work performed by them on behalf of the Company’s business;

• Mr Baker was already paying from the Company bank account a salary for an assistant;

• the Participants had agreed at the commencement of the business that the revenue of the Company would be deployed in payment of expenses and in payment in regard to any products sold by the business and otherwise divided equally;

• Mr Baker never informed Messrs Lambourne and Pollett that he was paying himself any sum to which they would not have been equally entitled; and

• in causing himself to be paid any such sum and not paying an equal sum to each of Messrs Lambourne and Pollett, Mr Baker used his control and knowledge of the affairs of the Company to advance his own interests in breach of his duty to the Company and its members as a whole.

Paragraphs 21 to 24 inclusive consist of allegations that Mr Baker made representations to Messrs Lambourne and Pollett concerning the financial state of the business of the Punters Show. Those allegations do not appear to have been pressed as separate causes of action.

Paragraphs 25 to 34 inclusive of the Amended Statement of Claim appear under the heading:

“[Mr Baker’s] Conduct in Improperly Favouring the Interests of the [the Buckingham Interests]”

The allegations may be relatively restated as follows:

• By early 2012 and up to July 2016, the Company held valuable intellectual property, confidential information and goodwill associated with the Punters Show business in that:

(i)   the Punters Show was a frequently watched Internet television programme on thoroughbred horse racing;

(ii)   the name the “Punters Show” was a recognisable mark or name to those interested in following thoroughbred horse racing and obtaining tips;

(iii)   the Punters Show programme attracted a number of recognised experts providing services and products in relation to thoroughbred horse racing, whose services were being advertised through the Punters Show programme and platform;

(iv)   the Company held data relating to approximately 3,980 registered clients;

(v)   the Company held data relating to more than 4,427 registered Twitter accounts;

(vi)   the Company held data relating to more than 7,468 Facebook accounts;

(vii)   the Company held information and data relating to its billings since 2010, which was a valuable resource in regard to the determination of products likely to be profitable in a business such as that conducted by the Punters Show;

(viii)   the Company was recognised amongst aficionados of thoroughbred horse racing and held goodwill associated with the Punters Show programme.

• In about mid-2014, without prior consultation or consent of Messrs Lambourne or Pollett, 12Follow was:

(i)   selling the same products that had previously been sold exclusively from the Punters Show digital shopfront;

(ii)   promoting the fact that 12Follow had a “strategic alliance” with the Punters Show;

(iii)   promoting the claim that the Punters Show business was part of 12Follow’s stable of products and experts; and

(iv)   being provided with direct access to the “back of house” facilities of the Punters Show and all of the Company’s commercially valuable data.

• 12Follow could not have benefited from the matters, facts and circumstances just set out without the consent of Mr Baker.

The Amended Statement of Claim then makes allegations in paras 35 to 43 inclusive in relation to arrangements described as “May 2015 Agreement”, which are also referred to as “the strategic partnership”. The allegations may be restated as follows:

• On or about 4 May 2015, Mr Buckingham made certain representations to Messrs Lambourne and Pollett concerning 12Follow, Operis and TopBetta and the benefits that would ensue for the Participants and Company if the Company entered into a strategic partnership with 12Follow and TopBetta;

• At the time of the representations, Mr Baker urged and encouraged Messrs Lambourne and Pollett to agree to the strategic partnership proposed by Mr Buckingham and to the detailed terms and conditions proposed by him;

• Messrs Lambourne and Pollett agreed to the proposed strategic partnership and to the terms and conditions proposed by Mr Buckingham because they believed that:

(i) the Company and its business we were in a poor financial state as described by the representations made by Mr Baker in breach of s 18 of the Australian Consumer Law;

(ii)   the business would be unable to provide them with adequate income in the immediate future;

(iii)   the business was not as valuable as they had anticipated it would be;

(iv)   the intellectual property, confidential information, data and goodwill of the Company and its business were not a valuable asset that could have been sold or licensed to TopBetta for a substantial sum;

(v)   the strategic partnership proposed was the only practical means by which the business could be carried forward so as to yield sufficient income to support them; and

(vi)   the strategic partnership proposed was the only practical means by which the business could be carried forward so as to maintain the integrity and exclusivity of their joint venture under the agreement made in 2010.

• Those beliefs were induced by the representations made by Mr Baker and the statements made by Messrs Buckingham and Baker;

• In consequence of the agreement made in May 2015, Mr Buckingham caused a new website known as the “Punters Show 2.0” to be created and that website commenced its consumer facing trading activity soon after 21 July 2015;

• As a further consequence of the May 2015 Agreement, Messrs Lambourne and Pollett received monthly payments variably from either TopBetta or 12Follow bank accounts;

• As at 21 July 2015, all commercially valuable data previously stored on the original Punters Show data storage facilities was transferred to the Punters Show 2.0 website controlled by TopBetta;

• That commercially valuable data included all the valuable intellectual property, confidential information and goodwill associated with the Punters Show business described above;

• The representations made by Mr Buckingham and Mr Baker concerning the strategic partnership did not materialise after July 2015; and

• The substance and practical effect of the strategic partnership was to cause the whole of the goodwill, intellectual property, confidential information and commercially valuable data that had been held by the Company prior to May 2015 to be transferred irretrievably to TopBetta without any compensation to the Company for the value of those assets, thereby depriving the Company of a valuable business.

Paragraphs 44 to 46 inclusive of the Amended Statement of Claim make allegations as to breaches of duty by Mr Baker in relation to the May 2015 Agreement. The allegations may be restated as follows:

• In relation to the making of the May 2015 Agreement, Mr Baker owed fiduciary duties directly to Messrs Lambourne and Pollett in relation to the information that Mr Baker provided and otherwise failed to provide to Messrs Lambourne and Pollett regarding the financial state of the Company or its business and in relation to the advisability of entering into the May 2015 strategic partnership agreement;

• Such fiduciary duties arose from the following:

(i)   the strategic partnership was equivalent to a disposal by the Company for the whole of its business undertaking and was similar or comparable to a sale by Messrs Lambourne and Pollett of their shares in the Company;

(ii)   Mr Baker had full knowledge of the true financial state of the Company and the business and of the advantages to the Buckingham Interests of the arrangement that was proposed;

(iii)   Mr Baker knew that the goodwill, intellectual property, confidential information and commercially valuable data of the Punters Show business constituted valuable assets for which persons such as the Buckingham Interests would be prepared to pay a substantial sum to acquire in May 2015; and

(iv)   Messrs Lambourne and Pollett were, to Mr Baker’s knowledge, reliant upon him for information concerning the financial state of the Company and its business and the advisability of entering into the strategic partnership.

• Mr Baker breached those duties to Messrs Lambourne and Pollett in encouraging them to enter into the strategic partnership proposal in that Mr Baker:

(i)   misled Messrs Lambourne and Pollett as to the financial state of the Company;

(ii)   knew that the intellectual property, confidential information, data and goodwill of the Company were valuable assets;

(iii)   ought to have advised Messrs Lambourne and Pollett that the strategic partnership inadequately compensated the Company for the benefit of those assets; and

(iv)   failed to advise Messrs Lambourne and Pollett that the substantial effect of the performance of the strategic partnership was to strip the Company of its business and irretrievably transfer it to TopBetta with the consequence that Messrs Lambourne and Pollett would go from being the major shareholders of a company through which they owned and controlled the Punters Show business, to having no control whatsoever over the business that they had helped to establish.

• Mr Baker breached his fiduciary duties and statutory duties to the Company with respect to the May 2015 Agreement and thereby caused it loss and damage in that:

(i)   prior to the May 2015 Agreement, Mr Baker revealed the whole of the financial and other confidential information of the Company to the Buckingham Interests without any attempt to preserve the confidentiality of the information or acquire any compensation or license fee from the Buckingham Interests; and

(ii)   Mr Baker exercised his powers as director of the Company to cause it to enter into the May 2015 Agreement and thereby cause it to be stripped of the whole of its business and all of its intellectual property, confidential information and goodwill, without any adequate compensation for the value of those assets.

Paragraphs 47 to 51 inclusive of the Amended Statement of Claim are concerned with the alleged involvement of the Buckingham Interests in breaches of duty by Mr Baker.

Appendix 2

Schedules of Non-business-related Expenses

Schedule A. Period: Please refer to paragraph 21 of Lambourne Affidavit

Shows sample of [Mr Baker’s] Personal Wants Funded from Company Account from 30/7/13-5/6/14:

DATE	TRANSACTION DESCRIPTION	$
1	30/7/13	The Sleep Doctor DEE WHY	2000.00
2	13/2/14	Crystal Car Wash 0001 Brookvale	550.00
3	27/2/14	Tennis Warehouse Fitzroy Aus	596.95
4	3/3/14	Potts Point Bistro Potts Point AU	900.00
5	4/3/14	Kingsley Steak and Woolloomooloo AUS	550.00
6	6/3/14	Sheraton On The Park S Sydney NS AUS	448.90
7	12/3/14	Manly Seaside Phoeni Manly NS AUS	350.00
8	1/4/14	Novotel Darling Harbour Sydney NS AUS	245.63
9	8/4/14	Beauty Mineral Hillsdale NSW	250.00
10	9/4/14	Sovereign Place Serv Balgowlah NS AUS	610.00
11	10/4/14	Peter Doyles at the Quay AUS	334.10
12	23/4/14	Darling Hotel at The Star Pyrmont	757.35
13	28/4/14	Adina Apartment Hotel Coogee NS	866.60
14	21/5/14	ThaiAIRW Sydney AUS	3576.96
15	22/5/14	Ribs & Rumps OPE Manly NS AUS	284.50
16	5/6/14	SYD APRT EPARK ONL28 Sydney	160.00
17	5/6/14	SYD APRT EPARK ONL28 Sydney	249.00

SCHEDULE B: Table showing ONLY a small sample of [Mr Baker’s] personal wants paid through company accounts from 30/6/14-8/1/16:

Date	Transaction Description	$
1	3/7/14	Crowne Plaza Coogee Beach	690.20
2	17/7/14	LK Royal Suite Chonburi Thailand accommodation	1326.13
3	10/9/14	Crowne Plaza Coogee Beach	476.04
4	7/10/14	QANTAS AI24412083100	943.00
5	10/10/14	Virgin AU7952116638302 Spring Hill Aus	910.70
6	10/10/14	Virgin AU7952116638424 Spring Hill Aus	416.70
7	14/10/14	Cecconis Cantina Melbourne	455.00
8	12/11/14	Novotel Newcastle	469.38
9	14/4/15	The Facial Rejuvenat Sydney	2900.00
10	20/7/15	Miele Australia Frenches Forest	737.16
11	23/10/15	Sunglasses Hut Warringah Mall	300.00
12	8/1/16	Entourage Limousines Artarmon	440.00

SCHEDULE C: SUMMARY TABLE OF PERSONAL EXPENDITURE FOR [Mr Baker] FROM 2011 – 2016

Type of Expenditure	$
1	Brothels	5250.00
2	Chiropractor	2905.00
3	Liquor Purchases	11711.00
4	Parking/Speeding fines	2592.00
5	Cash withdrawals	187791.00

Endnotes

Decision last updated: 24 September 2021