Little Smiles (WA) Pty Ltd v Spencer - [2024] WASC 472

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   LITTLE SMILES (WA) PTY LTD -v- SPENCER [2024] WASC 472
CORAM:   GLANCY J
HEARD:   22 & 23 APRIL 2024
DELIVERED          :   11 DECEMBER 2024
FILE NO/S:   CIV 2382 of 2023
BETWEEN:   LITTLE SMILES (WA) PTY LTD
Plaintiff
AND
JAMIE LEE SPENCER
Defendant

Catchwords:

Whether funds paid to defendant were loans from the plaintiff which were required to be repaid or gifts made to her - Whether defendant received funds of the plaintiff on trust and must account to the plaintiff for the funds - Whether defendant must repay to the plaintiff money which she received as a result of impermissibly increasing her pay - Whether defendant breached duties owed to the plaintiff for which damages should be paid - Whether plaintiff entitled to permanent injunctions to prevent further breaches of duties owed to the plaintiff

Legislation:

Corporations Act 2001 (Cth)
Limitations Act 2005 (WA)

Result:

Judgment in favour of the plaintiff - Order for Injunction granted

Category: B

Representation:

Counsel:

Plaintiff	:	Mr K De Kerloy
Defendant	:	In Person

Solicitors:

Plaintiff	:	Rowick & Bucolo Lawyers
Defendant	:	In Person

Case(s) referred to in decision(s):

Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114
Australian Securities and Investment Commission v Avestra Asset Management Ltd (in liq) (2017) 348 ALR 525
Australian Securities and Investment Commission v Mauer‑Swisse Securities Ltd [2002] NSWSC 741; (2002) 42 ACSR 605
Australian Securities and Investment Commission v McDougall [2006] FCA 427
Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664
BPESAM IV M Limited v DRA Global Ltd [2020] FCA 738
EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd [No 3] [2013] WASC 183
GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2002] VSC 487
Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6
McKenzie v McDonald [1927] VLR 134
Monarch Investments Pty Ltd v Yeramba Estates Pty Ltd (1997) 37 IPR 363
Nocton v Lord Ashburton [1914] AC 932
Schmidt v AHR Kalimpa Pty Ltd [2020] VSCA 192
Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17
Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544

GLANCY J:

Introduction

In February 2023, the Plaintiff, Little Smiles (WA) Pty Ltd, was incorporated for the purposes of conducting the business known as 'Little Smiles' which the Defendant, Ms Spencer, had until then been working to establish as a sole trader. The business involved the provision of oral health services to children attending child‑care centres. It was agreed between those involved that, upon incorporation, Ms Spencer would be a director of the Plaintiff, and would continue to work in the business as a contracted oral health therapist.
Dr Negoescu was a dentist with whom Ms Spencer had a pre‑existing professional relationship. In her evidence, she described him as a mentor and long‑term friend. He became an initial investor in the Plaintiff. He also became a shareholder in the Plaintiff.
Ms Spencer and the other director, Ms Williams, who also worked in the business as a dental nurse and in business development, were the other two shareholders of the Plaintiff.
Before the Plaintiff was incorporated, an agreement was reached between Dr Negoescu, Ms Williams and Ms Spencer about how Ms Spencer and Ms Williams were to be paid. The Plaintiff alleges that Ms Spencer failed to comply with the terms of the agreement and in breach of their agreement and without authority, overpaid herself.
The Plaintiff also alleges that Ms Spencer received funds into her personal bank account which were payments for services provided to clients of the business at a time when the business was operational. The Plaintiff alleges that Ms Spencer therefore held those funds on trust for the Plaintiff and has failed to account to it for the funds.
The Plaintiff also says that Dr Negoescu wrote cheques to Ms Spencer which were in fact, and were understood by her to be, funds loaned to the Plaintiff which it then loaned to her. The Plaintiff says that she has failed to repay the loans despite being called upon to do so.
In November 2023, Ms Spencer resigned as a director of the Plaintiff. The Plaintiff alleges that Ms Spencer subsequently cancelled upcoming appointments and used its confidential information to contact the Plaintiff's clients in an effort to secure future work for herself.
By writ of summons dated 5 December 2023, the Plaintiff sought various orders. The relief claimed in the summons was:
1.An injunction be granted restraining the defendant until further order from:
1.1Using confidential information of the plaintiff to contact childcare centres that the plaintiff has formed a relationship with and the parents and guardians of clients of the plaintiff;
1.2Diverting the Stripe payment receipts from the plaintiff to her personal account;
1.3Using the trading names 'Big smiles little smiles', 'little smile' or and variation of it.
2.A mandatory inunction be granted requiring the defendant on or before 8 December 2023 to:
2.1re-instate access to the plaintiff of the Dentally software and immediately cease accessing the software;
2.2transfer the domain name bigsmilelittlesmiles.com.au to the plaintiff;
2.3restore the content of the Instagram Account and provide the access details to the plaintiff;
2.4transfer the business name Little Smiles to the plaintiff;
2.5transfer the Google Business Account for Little Smiles to the Plaintiff;
2.6Deliver up the tangible assets of the plaintiff held by the defendants.
3.Damages.
4.An account of any funds of the plaintiff received by the defendant.
5.Interest on any award of damages pursuant to s 32 of the Supreme Court Act 1935 from the date of these proceedings until payment or judgment.
6.Costs.
7.Such further or other order as this Honourable Court deems fit.
On 13 December 2023, Lundberg J granted the mandatory injunction. There was therefore no need to consider that issue further in the substantive proceeding. His Honour also granted an interim injunction.
Ms Spencer admits that she owes the Plaintiff the sum of $4,584,[1] but otherwise denies the claim. She submits that:
1.the money paid to her by Dr Negoescu via the cheques was given as gifts and does not need to be repaid;
2.the funds paid into her personal bank account before the Plaintiff opened its own account, were payments for services she provided to clients as a sole trader before the Plaintiff was operational and therefore she did not hold it in trust for Plaintiff and does not have to account to the Plaintiff for it;
3.money paid into her account after 24 February 2023 was for work she undertook as a 'sole trader' after that date for the Plaintiff and therefore does not need to be paid to the Plaintiff;
4.she changed her remuneration arrangements as she was entitled to do as a director, and told Ms Williams, who, by her silence, should be taken to have acquiesced to the change and, therefore, Ms Spencer did not overpay herself;
5.she retained intellectual property which belonged to her and which she wished to use to continue her 'vision and mission' as a sole trader after resigning from the company, and she knew the Plaintiff would be okay to continue without it; and
6.she cancelled appointments for the benefit of the Plaintiff because without her, the Plaintiff could not have performed the services at the scheduled appointments. She expected that the Plaintiff could then have rescheduled them when it had found an oral health therapist capable of performing the services.
[1] Exhibit 1, Defendant's response to Plaintiff's Notice to Admit Facts filed 8 April 2024 at [15] (Exhibit 1) now be referred to as Defendant's Admissions in response to Plaintiff's Notice to Admit Facts filed 8 April 2024.

Outcome

For the reasons that follow I have found that the Plaintiff has made good its allegations against Ms Spencer, although not as to the entirety of the amount sought. I have also determined that it is appropriate to grant the permanent injunctions sought.

Standard and onus of proof

The Plaintiff bore the onus of proving its claims to the civil standard, that is, on the balance of probabilities. Where, in these reasons, I state that I am satisfied as to the existence of a fact, I should be understood to mean that I am satisfied to that standard.

Witnesses and evidence

The Plaintiff called: Dr Alexander Negoescu, Ms Dionne Williams and Mr Grant Burgess.
Dr Negoescu is a dentist who is also a shareholder in the Plaintiff and was a significant initial financial backer or investor in the Plaintiff.
Ms Williams is director of the Plaintiff and works as a dental nurse and in business development in that business.
Mr Burgess is an accountant and was, at various times, engaged to provide services to the Plaintiff and advice to Dr Negoescu, Ms Williams and Ms Spencer as to their shareholdings in the Plaintiff.
The Plaintiff also tendered various documents into evidence.
The Defendant gave evidence herself and also tendered documents in her case.

Defendant as a litigant-in-person

Ms Spencer was a litigant in person. Before the hearing commenced she was provided with a document headed 'Trial Procedure' which is Annexure A to these reasons. Annexure A was intended to provide assistance to her in understanding how a civil trial was conducted. Because I had made orders that the affidavits of witnesses would be taken as the evidence‑in‑chief of any witness who was made available for cross‑examination, Ms Spencer was also told by my Associate via email that the trial procedures outlined in Annexure A would be adapted so that witnesses would not be required to give their evidence‑in‑chief orally.
As it was, Dr Negoescu, Ms Williams and Ms Spencer, particularly Ms Spencer, all gave some oral evidence‑in‑chief which extended beyond what was in their affidavits. Neither party claimed that the other party's witness or witnesses doing so caused them any prejudice and I did not consider that any prejudice was occasioned by that additional evidence‑in‑chief being given in that way.
Ms Spencer had considerable difficulty in giving her evidence and in cross‑examining witnesses. That is not unusual for a litigant‑in‑person. I was grateful by the approach taken by the Plaintiff's counsel who, on occasions, permitted me to assist Ms Spencer to properly formulate her questions, and was restrained in his approach to taking objections. His approach permitted the trial to be conducted efficiently but also allowed Ms Spencer to present her case as well as possible in the circumstances.
In cross‑examination, Ms Spencer frequently resorted to asking 'do you have any evidence of that' after a witness gave evidence about a particular matter. I have understood that what she was meaning to convey by that question, was that there were no documentary records to support the witness' oral evidence as to that fact or matter and that without such evidence, I should not find the fact to have been proved.

Issues

Many of the orders which the Plaintiff originally sought were resolved as a result of Ms Spencer's compliance with the orders made by Lundberg J on 13 December 2023.
Ms Spencer admits that she owes the Plaintiff the sum of $4,584 which she agreed was loaned to her by the Plaintiff and which she used to pay for coaching services provided to her by MJB Seminars.[2]
[2] ts 166, 23 April 2024.
The Plaintiff abandoned its claim for damages for reputational loss.[3]
[3] ts 78, 22 April 2024.
Accordingly, the Plaintiff submits that the issues to remaining to be determined in this matter are as follows:
Issue 1:whether Ms Spencer received loans from the Plaintiff (via Dr Negoescu) which she is now obliged to repay;
Issue 2:whether Ms Spencer received into her personal bank account, monies belonging to the Plaintiff which she then held on trust for the Plaintiff and for which she must now account to the Plaintiff;
Issue 3:whether Ms Spencer impermissibly overpaid herself the sum of $23,752.69 which she must repay to the Plaintiff;
Issue 4:whether the cancellation by Ms Spencer of the appointments scheduled for 22, 28, 29 and 30 November 2023, and 7 and 12 December 2023 at Keiki Early Learning Centres in breach of her obligations as a director caused the Plaintiff financial loss for which damages should be awarded; and
Issue 5:whether Ms Spencer should be permanently restrained from using the Plaintiff's confidential information, comprising of its client lists in particular ways and from using misleading trading names such as 'Big Smiles Little Smiles', 'Little Smiles Big Smiles' or 'Little Smiles' or any variation of those names.

Credibility of witnesses

Some of the issues can be resolved by reference to the documents. However, aspects of the case, in particular whether the payments made by Dr Negoescu were loans or gifts and what Ms Spencer's intention was in cancelling appointments with Keiki Early Learning Centres in November and December 2023, turn on an assessment of the credibility of witnesses. My findings in relation to the credibility of the witnesses is, therefore, dealt with next.

Ms Spencer

As I have already indicated, despite attempts to assist Ms Spencer to understand how the trial would be conducted, she struggled with the requirement to put her own case to witnesses whose evidence contradicted hers. I do not draw any legal conclusions against her from her failure to do so.
Ms Spencer impressed me as a person who was genuinely committed to what she described in her evidence as her 'noble' 'mission and vision' and 'professional aspirations' to 'improve the oral health of children throughout Western Australia in child‑care centres and in their homes'.[4] Establishing the Plaintiff as a way of achieving that aim was clearly a passion project for Ms Spencer.
[4] ts 197, 23 April 2024.
I regard Ms Spencer to have been honest in some limited aspects of her evidence, particularly in her admission that she did not understand that her duties as a director prevented her from doing some of the things she did after resigning as a director of the Plaintiff. Ms Spencer gave evidence that this occurred because in her previous work she had never had what she described as a 'non‑compete' obligation when she ceased that work.[5] In my view, ignorance of the implications of the duties as a director and the implications of the corporate structure which had been established and through which the business was to be conducted are the explanations for some of Ms Spencer's conduct which gave rise to this proceeding.
[5] ts 170, 23 April 2024.
However, I do not accept Ms Spencer's evidence in many important respects. In particular, I do not accept the evidence that she believed that the money paid by cheque by Dr Negoescu to her were gifts was honestly given. I cannot find that evidence to have been truthful when consideration is given to the contemporaneous communications between the parties about the payments which is at odds with Ms Spencer's evidence. I will set that evidence out later in these reasons. Further, I do not regard it as plausible in the context of their relationship. It is inherently unlikely, there being only a business relationship between them that extended to a mentor-mentee relationship that Dr Negoescu would gift such a considerable sum of money to Ms Spencer.
Additionally, for reasons which are set out below, I do not accept Ms Spencer's evidence that when she cancelled the scheduled appointments at the Keiki Early Learning Centre she believed that she was acting in the best interests of the Plaintiff. Rather, when regard is had to the totality of her conduct at that time, I am satisfied and find that she intended to cancel the appointments so that she could re‑establish her own private sole-trader business and provide services to the children at those child‑care centres herself.

Ms Williams

Ms Williams impressed me as an honest witness. She was frank in saying, in essence, that she took on the role of director of a company at a time when she was busy with her role as a mother and with trying to grow the business' clients and that, as a result, she left the financial aspects of the company to Ms Spencer when she should not have done so.
Ms Williams' evidence was not contradicted by any of Ms Spencer's evidence.

Dr Negoescu

Like all of the Plaintiff's witnesses, Dr Negoescu's evidence‑in‑chief was for the most part contained in his affidavits, Exhibits 2 and 3. He did give some additional oral evidence‑in‑chief. Although Ms Spencer did not expressly put to him each aspect of his evidence which she says is wrong, it was apparent from her own evidence which evidence was in dispute.
That dispute principally lies in whether, as Dr Negoescu contends, the cheques made out to Ms Spencer from Dr Negoescu were loans to the Plaintiff, which it then loaned to Ms Spencer as advances on her income, or whether, as Ms Spencer contends, they were gifts from him to her. I accept Dr Negoescu's evidence as to that matter because it was consistent with contemporaneous documents and the evidence of the actions of Ms Spencer herself. It is also a more plausible explanation about the payments, especially having regard to the nature of their relationship.
Also in dispute is the question of when the Plaintiff commenced operating. Again, I prefer the evidence of Dr Negoescu on that issue. It was consistent with the evidence of Ms Williams and Mr Burgess, and in my mind, it was logical, whereas Ms Spencer's evidence on that issue was not.
Because I found Dr Negoescu's evidence on those matters to have been honest and accurate, I have come to the view that the entirety of his evidence was honest, accurate and reliable, although of course I would have been free to accept some of his evidence and reject other aspects of it. There was nothing in any of his evidence or the way in which he gave it that would permit me to find that it was anything less than honest, accurate and reliable.

Mr Burgess

Mr Burgess is an accountant who assisted in a professional capacity in the incorporation of the Plaintiff and in setting up the entities that would hold shares in the company for Dr Negosecu, Ms Spencer and Ms Williams.
Mr Burgess' evidence was generally unchallenged. On the one matter, which concerned whether he had established the initial shareholdings as directed, he accepted that if the documentary evidence established that the shareholdings upon incorporation were not in accordance with the instructions he had been given, then he had made a mistake both in giving effect to his instructions and in his evidence about what he had done.
Apart from in relation to that issue, there is no basis upon which I could find his evidence was anything less than honest, accurate and reliable. Even in relation to that issue, I find his evidence was honestly given but that his evidence‑in‑chief in respect of it was not accurate. In the end, nothing turned on the evidence about the initial allocation of shares in the Plaintiff.

Findings of fact as to the establishment of the business when it commenced operating, agreements as to the payment of wages and expenses and the resignation of Ms Spencer

I am satisfied as to, and make the following uncontroversial findings of fact.
1.Ms Spencer is an oral health therapist.[6]
[6] Exhibit 2, Affidavit of Alexander Listern Negoescu sworn 12 April 2024 at [7] (Exhibit 2).
2.Dr Negoescu is a dentist.[7]
[7] Exhibit 2 at [1].
3.Ms Williams is a dental nurse.[8]
[8] Exhibit 4, Affidavit of Dionne Kathryn Williams sworn 1 December 2023 at [11] (Exhibit 4).
4.Ms Spencer and Ms Williams had both worked with Dr Negoescu prior to 24 February 2023.[9]
5.The Plaintiff was incorporated on 24 February 2023.[10]
6.The Plaintiff was incorporated for the purposes of providing dental hygiene services to children attending child-care centres. The Plaintiff was able to provide those services to children either at the relevant child-care centre or at their homes.[11]
7.The business idea was Ms Spencer's. She had begun to provide services in that way some time earlier, but decided that she needed an investor to assist in the growth of the business. Importantly, she also needed a dentist to allow her to use their Medicare provider number so that she could service private patients.[12]
8.When first approached about investing in the business and allowing Ms Spencer to use his Medicare provider number, Dr Negoescu initially declined to become involved. When approached by Ms Spencer again in late 2022 or early 2023, Dr Negoescu considered doing so with the additional involvement of Ms Williams who, he thought, would protect his interests and be suited to helping with business development.[13]
9.Ms Spencer and Ms Williams were properly appointed directors of the Plaintiff upon incorporation.[14]
10.It was intended that, at the time of incorporation Ms Williams and Dr Negoescu would each hold, as trustees of their superannuation funds, 25% of the shares in the Plaintiff and that Ms Spencer would hold 50% of the shares in the Plaintiff as trustee of her superannuation fund.[15]
11.Upon incorporation the shares were not allocated in the proportions intended by the parties and each was issued one‑third of the shares. The shareholding was subsequently adjusted to reflect the parties' agreement as to the number of shares each was to be allocated.[16]

Establishing the business

[9] Re Ms Williams, Exhibit 4 at [10] and [11]; Re Ms Spencer, ts 163, 22 April 2024 and Exhibit 2 at [6] ‑ [11].

[10] Exhibit 1 and ts 189, 23 April 2024.

[11] ts 108, 22 April 2024.

[12] ts 97, 22 April 2024.

[13] ts 84, 22 April 2024.

[14] Exhibit 8, Affidavit of Grant Listern Burgess sworn 12 April 2024 (Exhibit 8) at [5] and Annexure GLB2.

[15] Exhibit 4 at [13.4].

[16] Exhibit 8 at [5] and Annexure GLB2.

I make the following additional findings of fact in relation to the establishment of the Plaintiff.
Dr Negoescu and Ms Spencer gave evidence and I find, that at the time it was agreed that Dr Negoescu would become involved in the business, which would be conducted through a company, Ms Spencer already had some child‑care centres as clients and had in place a website, an Instagram account, a Facebook account, and a Stripe account, which was a means by which payments to her could be made. She had used those tools a means of assisting in her work as a sole trader oral health therapist.[17]
[17] Exhibit 2 at [16].
Dr Negoescu gave evidence that in recognition of the fact that Ms Spencer had contributed time and financial resources in developing the business idea up to that point, and in order to buy into the business, Dr Negoescu paid Ms Spencer the sum of $30,000. He described this as a contribution towards the 'set up costs'.[18] In his affidavit of 12 April 2024 he said it was a payment to 'reimburse the defendant for previous expenses'. The cheque for $30,000 (number 6671) was written from the Negus Dental bank account (Dr Negoescu's business account) on 22 March 2023.
[18] ts 88, 22 April 2024; Exhibit 2 at [20] and [51].
Ms Spencer agreed that she received those funds and that they were deposited into her bank account.[19]
[19] Exhibit 1 at [14].
Ms Spencer did not accept that the $30,000 was consideration for Dr Negoescu receiving a half interest in the Plaintiff upon its incorporation. Her evidence was simply that the payment was made to her because Dr Negoescu 'believed in her and wanted to support her'.[20]
[20] ts 171, 23 April 2024.
Further, Ms Spencer did not accept that the incorporation of the Plaintiff to operate the business and the payment of that $30,000 to her meant that the assets which she had, before incorporation, been using in conducting the business as a sole trader (including the Stripe account, the Facebook account and the Instagram Account), consequently became assets of the Plaintiff.
I accept Dr Negoescu's evidence as to the reason he made the payment. But doing so does not necessarily mean that I should reject Ms Spencer's evidence as to her understanding of the reason for the payment to her. The difference might have been explained by a failure to communicate properly about the issue and therefore a failure to come to a meeting of the minds.
However, I cannot accept that Ms Spencer gave honest evidence as to her belief about why the payment of $30,000 was made to her. It simply cannot be that, knowing that Dr Negoescu had initially rejected her proposal to become involved in the business she was developing because he did not think it would be financially beneficial for him, he would shortly thereafter have 'believed in her' and wanted to support her so much that he would pay her $30,000 for no benefit to either himself or the Plaintiff, which they were incorporating for the very purpose of conducting the business Ms Spencer had developed, but was unable to run profitably as a sole trader. I do not consider that Ms Spencer's evidence may have been the result of a genuine misunderstanding or naivety. Ms Spencer's explanation for the payment is not credible in the context of:
a.her and Dr Negoescu having only a professional working relationship; and
b.their intention to establish a business through which they would provide oral health services.
It is important to note that the Plaintiff has not sought the return of the $30,000. The facts concerning its payment are part of the background to the case and the evidence about it goes to my assessment of Dr Negoescu's and Ms Spencer's credibility, and to the issue of the ownership of the disputed intellectual property, and whether the permanent injunctions sought by the Plaintiff should be granted.

Agreement as to payments of wages or contractor fees

I set out next my factual findings as to the issue of whether Ms Spencer was to be paid a wage or as a contractor to the Plaintiff.
Each witness gave evidence that at the time the Plaintiff was being incorporated, it was agreed that:
1.Ms Spencer would be paid as a contractor and would receive 35% of the fees paid for services provided by her to children at child‑care centres which were clients of the Plaintiff;[21] and
2.Ms Williams would also be paid as a contractor but would be paid at the fixed rate of $1,000 net per week.[22]
[21] Exhibit 3, Affidavit of Alexander Negoescu sworn 16 April 2024 at [4] - [5] (Exhibit 3).
[22] Exhibit 8 at [5].
That evidence was consistent with Mr Burgess' written record of the meeting of 21 February 2023 at which that agreement was made.[23]
[23] Exhibit 8 at pages 2 ‑ 3 and Annexure GLB1.
It was also consistent with a text message sent from Ms Spencer to Dr Negoescu (and Ms Williams) on 24 May 2023 at 5:43:43 pm which, I find, amounted to an acceptance that she was to be paid 35% of her billings.[24] That text said:
Just confirmed my pay we have seen and billed $16,114.35 from the 9th of May till today. So 35% of that is $5650.52.
We still have outstanding account at $4673 are private accounts minus 1 CDBS payment of $148.35 which we need to process.
Are you both happy for me to pay myself?
I'm hungry and poor.
[24] Exhibit 2, Annexure AN7 at page 109.
On the basis of that evidence I find that, at the time the Plaintiff was incorporated, it was agreed that Ms Spencer would be paid as a contractor an amount equal to 35% of the fees she generated for the business by performing work as an oral health therapist.

When did the Plaintiff commence operating

Dr Negoescu's evidence was that, upon incorporation, the Plaintiff commenced operating and Ms Spencer's work was all undertaken on behalf of the business even though it did not have a bank account opened at that time.
Mr Burgess' evidence was that it took some time after the Plaintiff was incorporated for it to establish bank accounts.
Ms Spencer said in her evidence that although the Plaintiff incorporated in mid‑February 2023 it did not commence operations until June 2023 and that between February and June 2023 she continued to work as a sole trader undertaking the very kind of work which she was also then trying to develop for the benefit of the Plaintiff as a director. She rejected the suggestion that there was ever a merger between her business and the Plaintiff's.[25]
[25] ts 193, 23 April 2024.
I reject Ms Spencer's evidence as implausible and illogical. I find that it is much more likely that from incorporation, all her business development and work as an oral health therapist was done for and on behalf of the company which she had formed with Ms Williams and Dr Negoescu. There was no reason why that would not have been the case. Further, it is a position consistent with the evidence given by Dr Negoescu, whose evidence I accept.
I find therefore that the Plaintiff commenced operation upon incorporation.

The use of Dr Negoescu's credit cards for business expenses

I next set out my findings concerning the arrangements made between Dr Negoescu and Ms Spencer about the use that could be made of Dr Negoescu's credit cards.
Dr Negoescu, Ms Williams and Ms Spencer each gave evidence that Dr Negoescu allowed his American Express credit card to be used for the payment of various business expenses at the time when the Plaintiff was not able to make those payments from its own funds.
Dr Negoescu said in his evidence-in-chief that, in February 2023, after confirming that he was going to become involved in the business, Ms Spencer told him she had some business expenses to pay and he then allowed her to use his American Express card to make the payments.[26] He also gave evidence that he allowed Ms Spencer to use his Commonwealth Bank credit card for the payment of business expenses of the Plaintiff.[27]
[26] Exhibit 2 at [42].
[27] Exhibit 2 at [43].
Dr Negoescu's statements for those two accounts are in evidence.[28] They show that the following amounts were charged to Dr Negoescu's cards on the following dates:
[28] The relevant statements for the American Express account are at Exhibit 2, Annexure AN13 at pages 424 ‑ 483. The relevant statements for the Commonwealth Bank account are at Exhibit 2, Annexure AN14 at pages 484 ‑ 493.

Date Company Amount

February 7 2023

Pinch Payments

$2,274.35

March 8 2023

Figs

$504

March 9 2023

Seton Greystanes

$310.50

March 16 2023

Godaddy

$119.41

March 19 2023

Zoom

$242.27

March 20 2023

Adam Dental

$113.99

March 20 2023

Mayfair

$287

April 8 2023

Pinch Payments

$1739.07

May 8 2023

Pinch Payments

$1100.32

May 24 2023

Wall Art Australia

$398.51

May 25 2023

Horizon Accounting

$1371.70

June 2 2023

Horizon Accounting

$436.70

June 8 2023

Pinch Payments

$1367.34

July 2 2023

Horizon Accounting

$436.70

July 5 2023

MJB seminars

$1000

Total

$20,947.24

Dr Negoescu accepted that, other than the four payments to MJB Seminars totalling $4,584, these were payments made for business expenses of the Plaintiff. His evidence was that the amount of $4,584 was therefore to be treated as a loan to Ms Spencer by the Plaintiff and needs to be repaid.
Ms Spencer accepted that she owes the Plaintiff the sum of $4,584 as repayment of the amount charged for MJB seminars.[29]
[29] ts 171, 23 April 2024.
I am satisfied and I find that the parties agreed that payments of sums totalling $4,584 to MJB seminars using Dr Negoescu's credit card were to be treated as a loan from Dr Negoescu to the Plaintiff which the Plaintiff then loaned to Ms Spencer. I also find that Ms Spencer owes the Plaintiff the sum of $4,584 as she has failed to repay the loans.

Dr Negoescu refuses to allow Ms Spencer to continue to use his provider number

Dr Negoescu gave evidence that following a meeting on 25 October 2023 between himself, Ms Williams and Ms Spencer, he informed Ms Spencer that he would no longer allow her to use his Medicare provider number for the billing of private patients.[30]
[30] Exhibit 2 at [91].
Ms Spencer accepted that Dr Negoescu's evidence on that issue was correct.[31]
[31] ts 96, 22 April 2024.
I am satisfied and find that on 25 October 2023, Dr Negoescu informed Ms Spencer that she was no longer authorised to use his provider number for the billing of patients.

Ms Spencer's resignation

It was agreed between the parties, and I find that Ms Spencer resigned as a director on 24 November 2023.[32]

Issue 1 - whether Ms Spencer received loans from the Plaintiff which she is required to repay

[32] Exhibit 4 at [5] and Annexure DUR8 at page 33.

I turn next to consider the issue of whether Ms Spencer received the funds from the particular cheques as claimed and, if so, whether the funds were provided to her as gifts by Dr Negoescu or as loans from the Plaintiff which she must repay.

Did Ms Spencer receive the funds from the cheques?

Dr Negoescu gave evidence that on the following dates he wrote the following cheques to Ms Spencer from his Bankwest Negus Dental Services Pty Ltd bank account (in addition to cheque 6671 for $30,000 referred to above):[33]
1.1 March 2023 - cheque 5562 in the sum of $5,000;
2.8 May 2023 - cheque 5586 in the sum of $6,000;
3.12 May 2023 - cheque 5590 in the sum of $3,000;
4.19 June 2023 - cheque 5637 in the sum of $2,000;
5.19 June 2023 - cheque 5638 in the sum of $6,000;
6.19 June 2023 - cheque 5639 in the sum of $2,000;
7.30 June 2023 - cheque 5651 in the sum of $4,000; and
8.13 July 2023 - cheque 5653 in the sum of $3,000.
[33] Exhibit 2 at [55].
His evidence was that those were payments made as loans to the Plaintiff of funds which the Plaintiff then lent to Ms Spencer as advances on her income. His evidence was that he had agreed to support the Plaintiff's development in that way because it was still needing to grow to the point where it could be profitable.
Ms Spencer accepts that she received cheque numbers: 5562 ($5,000), 5590 ($3,000), 5651 ($4,000) and 5653 ($3,000).[34] On the basis of that admission, I am satisfied and find that she did receive the funds in those amounts from cheques written by Dr Negoescu from the Negus Dental account.
[34] Exhibit 1 at [20].
Ms Spencer maintains that those funds which she did receive from Dr Negoescu by way of cheque (other than cheque 6671 for $30,000, which the Plaintiff does not seek to have repaid) were gifts made to her by Dr Negoescu at times when she was unable to meet her personal expenses while the business was still in its infancy.
As to the remaining cheques (being 5586 ($6,000), 5637 ($2,000), 5638 ($6,000) and 5639 ($2,000)) Ms Spencer denied that she received them and, therefore, denied that she either cashed the cheques or received the funds.
Ms Spencer admitted, and I find, that she is the sole holder of the ANZ bank account [redacted]889 and the ANZ bank account [redacted]862. She also accepted in cross-examination, and I find, that she operates ING bank account [redacted]277.
Bank statements from the relevant period show, and I find, that the cheque stub for cheque 5586 records that the cheque for $6,000 was written from the Negus Dental Pty Ltd account to 'Lil Smiles' and was dated as 8 May 2023.[35] The relevant bank statement for Ms Spencer's ANZ Account [redacted]889 shows that the sum of $6,000 was deposited into that account on 10 May.[36]
[35] Exhibit 2 at page 45.
[36] Exhibit 2 at page 77.
On the basis of the evidence Dr Negoescu gave that he provided that cheque to Ms Spencer, and the evidence of the cheque stub and Ms Spencer's bank statement, I am satisfied and find that, despite the cheque being written to cash, it was given to Ms Spencer and deposited into her ANZ account [redacted]889.
The cheque stub for cheque 5637 records that the cheque was written from the Negus Dental account to 'Little Smiles' for the sum of $2,000 on 19 June 2023.[37] On the basis of that evidence and that of Dr Negoescu, I am satisfied and find that it was so written.
[37] Exhibit 2 at page 30.
The cheque stub for cheque 5639 records that it was written from the Negus Dental account on 19 June 2023 to 'Lil Smiles' for the sum of $2,000.[38] I find that it was so written.
[38] Exhibit 2 at page 31.
Dr Negoescu's evidence was that Ms Spencer collected cheques 5637 and 5639 from him on 19 June 2023.[39]
[39] Exhibit 2 at [69].
In his evidence-in-chief, Dr Negoescu said that on 6 November 2023, he wrote to Bankwest requesting a cheque trace for, among others, cheques 5637 and 5639. He said that he received a copy of a letter from Bankwest in response informing him that their records indicated that Ms Spencer cashed cheque 5637 on 19 June 2023.[40] A copy of that letter is in evidence.[41] While it does not, in fact, state that the cheque was cashed by Ms Spencer, it shows that two cheques written from the Dental Service Pty Ltd account, each to the value of $2,000, were cashed on 19 June 2023. The Bankwest letter also attaches a copy of the signed acknowledgement of receipt in relation to cheque 5637 and cheque 5639 which shows each was cashed by 'J Spencer'.
[40] Exhibit 2 at [68].
[41] Exhibit 2 at page 30.
Ms Spencer acknowledged in cross-examination that the signatures on the acknowledgement of receipt for each of the relevant cheque was hers.[42]
[42] ts 178, 23 April 2024.
On the basis of the evidence, I am satisfied and find that on 19 June 2023, Dr Negoescu provided Ms Spencer with two cheques, being cheques 5639 and 5637, each for the sum of $2,000 and that Ms Spencer cashed each of those on 19 June 2023.
The cheque stub for cheque 5638 records that the cheque was written to 'Smiles' on 19 June 2023 in the amount of $6,000.[43] On the basis of that evidence and that of Dr Negoescu, I am satisfied and find that it was so written.
[43] Exhibit 2 at page 30.
Dr Negoescu gave evidence that on 19 June 2023, Ms Spencer collected cheque 5638 at the same time she collected cheques 5637 and 5639 from the Above and Beyond Dental clinic, which he operated.[44] I accept that evidence and find that she did so.
[44] Exhibit 2 at [69].
Dr Negoescu's evidence-in-chief is that he contacted Bankwest and requested a cheque trace for cheques written on 19 June 2023. He said:[45]
Copy of the correspondence from Bankwest in relation to those cheques confirming that on the 19th of June 2023 the Defendant collected the cheques and cashed the cheque is annexed and marked AN11.
[45] Exhibit 2 at [69].
In fact, the letter from Bankwest, dated 5 January 2024,[46] does not confirm that Ms Spencer collected the cheques. Nor does it deal at all with cheque 5638 ($6,000). It identifies only that on 19 June 2023 the two cheques for $2,000 were cashed by someone signing as 'J Spencer'. There is no other document in Annexure AN11 that is the bank's response to a cheque trace for cheque 5638 dated 19 June 2023.
[46] Exhibit 2, Annexure AN11 at page 341.
Nevertheless, I have already found, on the basis of Dr Negoescu's own evidence, that Ms Spencer collected cheque 5638 from his dental clinic on 19 June 2023.
There is no evidence of cheque 5638 being cashed by Ms Spencer and no deposit for the amount of $6,000 being made into any of her accounts at around that time.
Ms Spencer's bank records for her ING bank account [redacted]277 show that on 19 June 2023 the sum of $3,000 was deposited into that account.[47] On the basis of that evidence, I am satisfied and find that the sum of $3,000 was deposited into Ms Spencer's account on 19 June 2023.
[47] Exhibit 2 at page 228.
The records for Ms Spencer's ANZ account [redacted]992 also show that on 19 June the sum of $3,800 was deposited into that account.[48]
[48] Exhibit 2, Annexure AN12 at page 405.
I do not accept Ms Spencer's evidence that she did not receive the funds from cheque 5638. Her denial of that fact can be set aside because:
1.her denial in relation to the other two cheques written on 19 June 2023 was not credible in light of the evidence that she signed the bank records concerning the cashing of those cheques, causing me to doubt her credibility more generally;
2.there is no other reasonable explanation for where the funds from cheque 5638 went, in circumstances where Ms Spencer collected the cheque, the cheque was presented and the funds were withdrawn from Dr Negoescu's account; and
3.Ms Spencer offered no other explanation for where she would have obtained the funds other than from depositing some of the funds from the cheque perhaps together with funds from other cashed cheques. In circumstances where no other explanation was offered, and where she gave evidence that she was having trouble paying her bills and so she was being 'gifted' money from Dr Negoescu until such time as the business was profitable, in my view the possibility that at about the same time as she was receiving funds of very similar amounts from Dr Negoescu there was another source of the $6,800 deposited into Ms Spencer's account on 19 June is fanciful.
It follows that I am satisfied and find that Ms Spencer received the sum of $31,000 from cheques written by Dr Negoescu from the Negus Dental cheque account (in addition to the $30,000 paid to buy into the business).

Gifts or loans?

Ms Spencer's evidence was that the funds she received by way of cheques from Dr Negoescu were gifts to her and not loans from the Plaintiff.[49] She maintains that funds were provided to her (and to Ms Williams) because Dr Negoescu 'believed in us'.[50] She gave evidence that the payments 'contributed to her livelihood while she was working to create growth for the company'.[51] She said that there is no paperwork indicating the payments were loans.
[49] ts 180, 23 April 2024.
[50] Exhibit 2 at page 527 and ts 180, 23 April 2024.
[51] ts 185, 23 April 2024.

Dr Negoescu said that in discussions between himself, Ms Williams and Ms Spencer over the course of a couple of weeks in February 2023, it was decided that Ms Williams and Ms Spencer would work in the Plaintiff's business with Ms Spencer providing dental hygiene services and Ms Williams assisting with marketing and nursing. He gave evidence that it was also agreed that he would not work in the business but would provide money to cover remuneration, materials and business support services for a period which would allow the business time to become self‑funding.[52] Dr Negoescu also said that he was prepared to support the business financially by providing loans to it until it was self‑sustaining. His evidence was that his support included providing cheques directly to Ms Spencer, Ms Williams and other contractors to the business, as loans to the Plaintiff for payment of wages.[53]
[52] Exhibit 2 at [22].
[53] Exhibit 2 at [52].
The evidence that Dr Negoescu provided cheques to Ms Williams and others is corroborated by an examination of the cheque stubs for various cheques written from the Negus Dental bank account and from the information provided to Dr Negoescu by Bankwest in response to requests for traces of various cheques.[54] Those documents show that cheques were also written to 'lil smiles fw', 'dionne smiles', 'lil Smiles Dionne', 'Lil smiles - brooke', 'Brooke - lil smiles' and 'd williams lil smiles'.[55] I accept Dr Negoescu's evidence and I find that Ms Dionne Williams and Brooke Negoescu were both contractors of the business at some time.[56]
[54] Exhibit 2, Annexure AN11 at pages 340 - 342 and Annexure AN12 at pages 343 - 346.
[55] Exhibit 2 at [55].
[56] Exhibit 2 at [56].
In support of the position that the amounts provided to Ms Spencer are to be regarded as loans from the Plainitff is a series of emails exchanged between Ms Spencer and Dr Negoescu on 3 July 2023, which was just prior to the time when cheque 5651 ($4,000) was given to Ms Spencer. The emails state:[57]
Ms Spencer: Hey Alex can I come grab a cheque today for my rent and my bills then after this fortnight we're paying ourselves from the business I hate asking and feel guilty but it's just been hard lately
Dr Negoescu: Ok - I loan to smiles - Smiles pay you
Ms Spencer: Thank you I will be in soon
Ms Spencer: Do you mind doing one for 4K for the month and I can send Rheas sister to come get it I'm sending all the emails out to the daycares this morning while Brooke and Dionne are doing all the colds calls
Ms Spencer: If you write it too
Jamie Lee Spencer
And I will get the accountant to add it to the loan spreadsheet
[57] Exhibit 2 at [20].
From that text exchange I am satisfied and find that it is clear that Ms Spencer knew and accepted that certain amounts being paid to her by Dr Negoescu were to be treated as loans made by him to the business which the business was then lending to her. That is clearly her understanding at the time that cheque 5651 ($4,000) was given to her.
In light of that exchange, I find that the sum of $4,000 paid by cheque 5651 was a loan from Dr Negoescu to the Plaintiff which the Plaintiff then loaned to Ms Spencer.
I am satisfied and find that the fact that Ms Spencer was referring to the existence, at that time, of a loan spreadsheet to which she would add the amount of $4,000, indicates that this was not the only occasion on which she knew that she was to treat money provided to her by Dr Negoescu as a loan from him to the Plaintiff and from it to her. If this were the only such occasion or the first such occasion, she would not have referred to adding the sum to the loan spreadsheet. It is also consistent with the fact that when Dr Negoescu identified that Ms Spencer had used his credit card to pay for her personal coaching with MJB Seminars, he sent her an email telling her that those payments would need to be treated as a loan which she would have to repay; a statement with which she agreed in her response.[58]
[58] Exhibit 2 at [44] ‑ [45].
Ms Williams gave evidence that, from March 2023 to 30 June 2023, Ms Spencer received several cheques from Dr Negoescu for contractor fees in the sum of $1,000 - $2,000 on each occasion. She said that she did not know the exact amounts of the cheques which Ms Spencer received. Ms Williams also gave evidence that she received contractor's fees of $1,000 per week. She said the payments were made by cheques written to her and Ms Spencer from the 'Negus Dental' cheque account rather than to the Plaintiff and then to Ms Spencer and herself.[59]
[59] Exhibit 4.
Ms Williams' evidence did not assist in determining whether the payments which Ms Spencer received were loans or simply financial support to those involved in the Plaintiff company at a time when it was not yet financially viable. It did not assist because she has said nothing about that issue despite it being a central matter in this case. One might have thought as a director she may have known. But I have accepted her evidence that she did not pay attention to the company's financial position. Therefore, I do not consider any relevant inference can be drawn from the failure to give evidence in relation to this issue.
That said, I have found Dr Negoescu to be a credible and reliable witness, whereas I have found that Ms Spencer was not credible in various aspects of her evidence. While there is no documentary evidence that each payment was a loan from Dr Negoescu to the Plaintiff and then from the Plaintiff to Ms Spencer beyond the one email to which I have referred, I am satisfied that that one email exchange provides some general corroboration of Dr Negoescu's position.
Dr Negoescu, Ms Williams and Ms Spencer each gave evidence that Dr Negoescu allowed Ms Spencer (and in at least one instance Ms Williams) to use his American Express credit card and his Commonwealth Bank card to pay for business expenses because, in the early days, the business was not able to purchase necessary items without his financial support.[60]
[60] Exhibit 2 at [51] and [75] and ts 22 - 24, 22 April 2024.
I have considered the possibility that there was no meeting of the minds in relation to these payments made by cheque to Ms Spencer. However, I do not find that that was the case. Given Dr Negoescu's evidence, which I accept, that he had initially declined to become involved in the business because he did not consider that Ms Spencer had developed a successful business model and that he had later come to the decision to invest when he decided that the revised business model then being proposed by Ms Spencer may be successful, I consider that it is inherently unlikely that he would have been prepared to make gifts to Ms Spencer of an amount of $31,000. In my view, it is inherently unlikely that such a significant sum of money would be gifted from Dr Negoescu to a someone with whom he had a business association, even one who regarded him as a friend and mentor. It is made more unlikely, in my view, by the fact that Ms Spencer had acknowledged in writing that one of the payments was to be treated as a loan from Little Smiles and added to an already existing spreadsheet of loans, and that she agreed that the payment she made to MJB Seminars with his credit card was a loan.
Having regard to all of the evidence, I am satisfied and find that the payments made to Ms Spencer by cheques 5562, 5586, 5590, 5637, 5638, 5639, 5561 and 5563 were to be treated as loans from the Plaintiff to Ms Spencer, and Ms Spencer was aware of that at the time each payment was made.
As I have already indicated, Ms Spencer's evidence as to this issue caused me to doubt her credibility on other contentious matters and to conclude that I could only accept her evidence where it was corroborated by other evidence.

Does Ms Spencer need to repay the loans?

The arrangement for the repayment of the loans made by the Plaintiff to Ms Spencer were non-existent. In Western Australia, a cause of action for the repayment of the debt repayable on demand accrues when there is a failure to comply with a demand for repayment.[61]
[61] Limitation Act2005 (WA) s 59.
To the extent that Ms Spencer claimed in her case that she used the funds to purchase items needed for the business, two things can be said. First, having regard to my view as to Ms Spencer's credibility, in circumstances where there is evidence that Dr Negoescu's credit cards were used to pay for business expenses during the same period, I find that I cannot accept this evidence to be truthful - particularly in light of [101]. Secondly, even if Ms Spencer did use the funds paid to her by cheque to purchase business expenses, what Ms Spencer did with the money does not change whether it was paid to her as a loan by the Plaintiff. If she used funds loaned to her in her personal capacity to pay business expenses, she may have had some entitlement to counterclaim for repayment or set off of those sums so used. But no counterclaim was ever made in the proceeding.
Having found that the payments totalling $31,000 were made as loans from the Plaintiff to Ms Spencer, I find that Ms Spencer should be ordered to repay the amount loaned to her by the Plaintiff.

Issue 2 - Did Ms Spencer receive funds of the Plaintiff on trust which she must account to it?

The Plaintiff claims that payments received into Ms Spencer's bank accounts for work she performed at child-care centres and on home visits after the company commenced operations belong to it. The Plaintiff seeks an order that Ms Spencer pay it those sums, less the 35% which it had been agreed that Ms Spencer would receive as contactor payments for performing the work.
I have already found that the parties had agreed that Ms Spencer would be paid as a contractor 35% of any services performed by her as an oral health therapist in the Plaintiff's business. For reasons set out at [134] ‑ [141] I have also found that Ms Spencer had no entitlement to be paid at a varied rate.
I have also found that the Plaintiff was incorporated on 24 February 2023 and commenced operating at that time.

The evidence of Dr Negoescu,[62] Ms Spencer,[63] Ms Williams,[64] and Mr Burgess was that there were some difficulties in establishing a bank account for the company. I find that this was the case.
[62] Exhibit 2 at [41].
[63] ts 164, 23 April 2024.
[64] Exhibit 4 at [20]
Mr Burgess gave evidence that the Plaintiff's first bank account was established on 16 May 2023.[65] On the basis of that evidence, I am satisfied and find that that was the case.
[65] Exhibit 8 at [6].
The Plaintiff claims that, as a result of the difficulties with establishing its bank account, payments which would, absent that difficulty, have been made into its bank account for work performed on the Plaintiff's behalf were paid instead into Ms Spencer's account on trust for the Plaintiff until such time as the Plaintiff's bank account was established.
The Plaintiff seeks an order that Ms Spencer account to it for those payments, less the 35% of the fees which she generated which Ms Spencer was entitled to have been paid contractor fees.
Ms Spencer gave evidence that she operated a Stripe account through which payments for her oral health services were made and paid into her ANZ bank account [redacted]992 while she was a sole trader.[66] She also accepted that after the Plaintiff commenced operations, payments continued to be made into that account using that Stripe payment method.[67]
[66] ts 191 - 192, 23 April 2024.
[67] ts 192, 23 April 2024.
Ms Spencer gave evidence that these payments were for work which had been booked and organised before the Plaintiff had incorporated and which she performed as a sole trader before the Plaintiff began operating.[68] Ms Spencer's evidence was that the company began operating in June 2023.[69] Ms Spencer rejected the suggestion that there was ever a merger between her own business and the Plaintiff.[70]
[68] ts 192, 23 April 2024.
[69] ts 189, 23 April 2024.
[70] ts 193, 23 April 2024.
I have rejected Ms Spencer's evidence that the Plaintiff, although incorporated in February 2023, did not commence operating until June 2023 and have found its operations commenced upon incorporation.
Ms Williams gave evidence that the following sums of money, totalling $3,779.73 were paid via the Stripe payment method into Ms Spencer's bank account on the dates identified below, all of which were after the incorporation of the Plaintiff:
1.23 February 2023 - $490.34;
2.7 March 2023 - $147.07;
3.8 March 2023 - $147.07;
4.9 March 2023 - $147.07;
5.13 March 2023 - $245.02;
6.29 March 2023 - $249.14;
7.30 March 2023 - 245.02;
8.31 March 2023 - $392.09;
9.17 April 2023 - $250.00;
10.17 April 2023 - $392.40;
11.18 April 2023 - $735.67; and
12.21 April 2023 - $196.20.
Ms Spencer's bank account records, which are in evidence, identify that those sums of money referred to at [125.1] ‑ [125.12] were received into Ms Spencer's bank account on the days set out in those paragraphs. Ms Spencer did not deny receiving those funds. I am satisfied and find that the amounts set out at [125.1] ‑ [125.12] were paid to her via the Stripe account on those days.
Ms Spencer says that these payments were for work she performed as a sole trader. She gave evidence that the payments were 'possibly' from providing services to child-care centres.[71] Her evidence was that Ms Williams attended those appointments as the dental assistant to her 'sole trader'.[72] I do not accept that was the case. In circumstances where the Plaintiff had been established and had commenced operations and where Ms Spencer was providing services to the very clients the Plaintiff was established to service, I find that any work performed for those clients was done as a contractor to the Plaintiff. Further, had Ms Williams attended those appointments as a dental assistant working for Ms Spencer who was then working in her capacity as a sole trader, Ms Spencer could have produced records showing that she had paid Ms Williams for that work. She did not.
[71] ts 193, 23 April 2024.
[72] ts 193, 23 April 2024.
It follows that I am satisfied, and I find, that for reasons of necessity, the payments were made into Ms Spencer's bank account, but that they were payments which belonged to the Plaintiff and which she held on trust for the Plaintiff.
Ms Spencer must account to the Plaintiff for those payments and pay the Plaintiff those amounts less the 35% it was agreed she would receive for performing the work which generated the payments.
Ms Williams gave evidence that, on 28 March 2023, the sum of $741.75 was paid into Ms Spencer's ANZ bank account [redacted]992 from Medicare.
Ms Spencer accepted that that payment was for work she performed for a private patient.[73] Again, Ms Spencer says that this was work she performed as a sole trader rather than as a contractor to the Plaintiff. In cross‑examination, Ms Spencer accepted that the patient was possibly a child from one of the child‑care centres serviced by the Plaintiff, although she denied the Plaintiff was trading at the time.[74]
[73] ts 193, 23 April 2024.
[74] ts 193, 23 April 2024.
For the same reasons I have given in relation to the earlier payments, I do not accept Ms Spencer's evidence that this payment was for work which she undertook as a sole trader and was not work performed for the Plaintiff. I find it was a payment received for work performed by her on the Plaintiff's behalf. Accordingly, it also follows that she held that money on trust for the Plaintiff and must account to it for the amount less the 35% which the Plaintiff accepts she was entitled to in accordance with the terms of its arrangement with her.
During the period February 2023 until April 2023, Ms Spencer received into her personal bank account a total of $4,717.68 by way of payments for work performed for the Plaintiff being the amounts referred to in [125] and [130]. She is required to account to the Plaintiff for the sum of $3,066.49, which is 65% of that amount.

Issue 3 - Did Ms Spencer impermissibly overpay herself $23,752.69 and if so, does she need to repay that sum to the Plaintiff?

Ms Spencer gave evidence that, of her own accord, in July 2023, she decided to vary the amount which she was to be paid. She says that she determined that she would be paid a salary of $2,500 per week and that Ms Williams would be paid $1,500 per week.[75]
[75] Exhibit 1 at [23].
Ms Spencer now acknowledges that it was a financial mistake to have done so, but does not agree that she had no entitlement to make the change.[76]
[76] ts 165, 23 April 2024.
Ms Williams gave evidence that in early July 2023, and without consultation with Dr Negoescu, Ms Spencer made arrangements with the Plaintiff's accountant that she (Ms Spencer) would receive a net salary of $2,500 per week and Ms Williams would receive a net salary of $1,500 per week. She said that equated to Ms Spencer receiving an annual salary, before superannuation, of approximately $190,060 for what was, effectively, two days per week work.[77]
[77] Exhibit 4 at [35].
Ms Williams' evidence was that she never agreed that she or Ms Spencer should be paid in the way Ms Spencer determined.[78] She says that she received her pay at the new rate for a period of time but also said that this was not because she had agreed to the change but because she simply failed to pay attention to the financial side of the business, which she left to Ms Spencer.[79]
[78] Exhibit 4 at [39] and ts 148, 23 April 2024.
[79] ts 135, 23 April 2024.
There is no record of any resolution of the directors agreeing to the new payment arrangement.
Ms Spencer submits that because Ms Williams was aware of the change and did not say anything either in agreement or disagreement with it, she (that is, Ms Spencer) was entitled to assume it had been agreed upon.
I do not regard Ms Williams to have acquiesced to the change by her acceptance of payment at the higher rate. It was not her evidence that she was aware she was being paid at a higher rate at the time. While it might be expected that a person was aware of what they are being paid, she was not asked if she knew at the time that her pay had increased. She was not asked. Further, in light of her evidence that she did not pay attention to the financial side of the business, knowledge and acquiescence cannot be inferred.
In my view, the amount which Ms Spencer was to be paid and whether she was to be treated as a contractor to the Plaintiff or as an employee of the Plaintiff was a matter for the Plaintiff to determine. As a company acts through its directors it was, therefore, a matter for the directors to determine. There is no evidence that the two directors ever reached an agreement to the changed payment arrangements. Ms Williams gave evidence that there was never such an agreement. I accept Ms Williams' evidence as to that issue. There was also no evidence that Ms Williams, as a director, had agreed to adopt as her own decisions made by Ms Spencer about financial matters.
In the circumstances, I am satisfied and find that the directors did not agree to change Ms Spencer's remuneration. I also find that Ms Spencer had no authority to be paid in the way she was.

Overpayment

Ms Spencer accepts that in July 2023, she made contact with Horizon Accounting, which was the Plaintiff's firm of accountants at the time, and made arrangements with them that she be paid $2,500 per week net salary from that time onwards. She accepts that from that time until October 2023, she was paid that amount every week from the Plaintiff's bank account. I am satisfied and find that she was.
Mr Burgess' evidence was that from the period 19 May 2023 to 6 November 2023 (being the time when payments for services began to be paid into the Plaintiff's own bank account and the Plaintiff's final payment to Ms Spencer) the Plaintiff's total income was $97,554.73.[80] Mr Burgess also gave evidence that Ms Spencer was paid a total of $57,896.84 in that same period out of the Plaintiff's bank accounts.[81] Mr Burgess calculated, and I find, that this represented the payment to Ms Spencer of 59% of the Plaintiff's income in that period.
[80] Exhibit 8 at [14.1].
[81] Exhibit 8 at [14.5].

Mr Burgess' evidence was that 35% of the Plaintiff's total revenue for that period would amount to $34,144.15 and that it follows that Ms Spencer was therefore overpaid the sum of $23,752.69 of that period.[82]
[82] Exhibit 8 at [14.6].
Ms Spencer did not challenge Mr Burgess' calculation as to the overpayment other than by her challenge to the notion that she was overpaid at all because, on her case, she was entitled to vary her remuneration as she did.
Ms Spencer has not raised in her evidence or her oral submissions anything to suggest that financial information on which the calculations were based was incorrect.
In circumstances where I have found that Ms Spencer was not entitled to unilaterally vary her payment arrangements, I am satisfied and find that she was overpaid the sum of $23,752.69.
Ms Spencer must account to the Plaintiff for that sum and repay to the Plaintiff $23,752.69 which she was overpaid.

Issue 4 - Whether Ms Spencer cancelled appointments and caused the Plaintiff's financial loss for which damages should be awarded

The evidence of Dr Negoescu, Ms Williams and Ms Spencer was that before Ms Spencer's resignation, the Plaintiff had appointments scheduled to perform oral hygiene services at six Keiki Early Learning Centres.[83] The appointments were booked for 22, 28, 29, 30 November and 7 and 12 December 2023.[84] I am satisfied and find those appointments were booked at those child‑care centres for those dates.
[83] ts 85, 22 April 2024; ts 139 and 182, 23 April 2024.
[84] Exhibit 7, Affidavit of Dionne Kathryn Williams sworn 15 April 2024 at [13] (Exhibit 7).
Ms Williams gave evidence that after Ms Spencer's resignation, she made arrangements to have another oral health therapist attend those appointments. Her evidence was that the alternative oral health therapist subsequently declined to perform the work because she was Ms Spencer's friend and said that this made her feel uncomfortable taking on the work.[85]
[85] ts 133, 23 April 2024.
Ms Williams gave evidence that on 20 November 2023, before Ms Spencer had resigned as a director of the Plaintiff but after being told she could not use Mr Negoescu's Medicare provider number, Ms Spencer wrote to the Keiki Early Learning Centre management and cancelled the appointments which were booked.[86]
[86] Exhibit 7 at [13] and Annexure DW9.
Ms Spencer agreed in her evidence that she had informed the management of Keiki Early Learning Centres that the appointments would not be conducted on the scheduled days.[87]
[87] ts 180, 23 April 2024.
However, in her evidence she characterised her action as 'rescheduling' the appointments for the benefit of the Plaintiff because the Plaintiff had no oral health therapist capable of attending the appointments. Her evidence was that 'rescheduling' was intended to allow the Plaintiff time to find an oral health therapist who would attend at a later time.[88]
[88] ts 180 - 182, 23 April 2024.
On 20 November 2023, Ms Spencer sent an email Keiki Early Learning Centre management in the following terms:[89]
[89] Exhibit 7, Annexure DW19 at pages 6 ‑ 7.
Hey there, Keiki early learning families!
I hope you're all doing fantastic. I have got some news to share about our dental sessions with little smiles.
We're bummed to say that we've had to hit the pause button on these sessions for now.  But hang tight, because they'll be back and better than ever in February 2024! We get it; it's a bit of a wait, but we promise it will be worth it.
Rest assured, we'll be in touch with a shiny new date before the year wraps up. 
In the meantime, if you've got any concerns about you kiddo's pearly whites or just want to chat about their oral health needs, we're all ears! You can reach me directly on 0428*****6 or shoot me an email at [email protected]. I'm here to help!
I will be offering home visit's [sic] to all of you during December if this is an option you would like to explore - if so please sms me on 0428*****6 with your details or send me an email to [email protected]
If you're thinking your little one needs a preventative oral care appointment, no worries. We recommend checking out a local dental practice or a cool pediatric [sic] dental clinic for some extra TLC. 醴✨
Thanks a million for your understanding and ongoing support. WE can't wait to bring these awesome dental health sessions to our young learners very soon!
Warm and toothy regards,
Jamie Lee
Little Smiles
[email protected]
Contact number: 0428*****6
Given that it was addressed to the Keiki Early Learning families and having regard to its content, especially the reference to home visits, it was obviously intended by her that it be forwarded to the parents of the children attending the Keiki Early Learning Centres.
As can be seen, Ms Spencer signed off her email referring to 'Little Smiles' but indicated that all contact for the booking of at‑home appointments be directed to an email address which was Jamie‑[email protected]. That was not the Plaintiff's email address but was sufficiently close to it that it was, in my view, apt to confuse.
On 26 November 2023, just one day after resigning as a director of the Plaintiff, Ms Spencer sent an electronic distribution email (EDM) to 26 child‑care centres. The email was sent from 'Jamie-lee Spencer <[email protected]>'. The evidence is that these 26 centres were child‑care centres which the Plaintiff had previously attended or was then scheduled to attend.[90]
[90] Exhibit 4 at page 41.
The EDM advised the recipients that Ms Spencer had 'recently embarked on a new professional journey by establishing Tiny Teeth'. It went on to say:[91]
[91] Exhibit 4, Annexure DW10.
While I have cherished my time at Little Smiles, this new chapter, Tiny Teeth, is dedicated to continuing the exceptional dental care services you've come to expect.
The great news for both our families and centres is that there will be no changes required on your end.
Everything from scheduling to services will remain exactly the same, but with the added excitement of new products and services on the horizon!
I'm excited to inform you about our upcoming dental visit scheduled for Wednesday 6^th of March 2024.
…
I'm committed to ensuring a seamless transition for all our clients and look forward to continuing to serve your community under Tiny Teeth.
…
Also, exciting news for 2024 - we're rebranding! …
Jamie Lee Spencer
Founder and Oral Health Therapist of tiny Teeth
In my view, Ms Spencer's claim that on 20 November 2023, she was 'saving the company' by cancelling bookings that she knew they would not be able to meet so as to allow it an opportunity to rebook later,[92] is not at all credible in light of the following matters:
1.the communications with Keiki Early Learning Centre management which, I find, by the use of her phone number and a different though similar email address, indicate that she was intending to divert the work to herself; and
2.the fact that only six days later she was, by her EDM, seeking to obtain that work for herself under a different, but very similar business name, and a different contact address and informing those she contacted that the Plaintiff was 'rebranding'.
[92] ts 182, 23 April 2024.
Ms Spencer's evidence about this issue, which was self‑serving and not credible, made me question her credibility more generally and contributed to the view that I took that I would not accept her evidence unless it was consistent with the facts which could be found from other evidence which I did believe.
The Plaintiff claims that Ms Spencer's conduct was in breach of her statutory and fiduciary duties and that it caused the Plaintiff loss and damage for which it should be compensated.
The Plaintiff submits that, the principal breaches concerned Ms Spencer's cancelling of the appointments scheduled for November and December at the Keiki Early Learning Centres, misuse of its confidential information (being its client list), and her attempts to divert business opportunities to herself through the use of that information.
The loss which the Plaintiff claims it suffered as a result of this conduct was:
1.the loss of earnings which it would have made if the appointments it had with the Keiki Early Learning Centres on 22, 28, 29 and 30 November and 7 and 12 December 2023 had not been cancelled; and
2.the loss of profit it would have earned from repeat and potential future bookings.
The Plaintiff says it is entitled to equitable compensation for those losses.
The Plaintiff also submits that Ms Spencer's reluctance to hand over, and her tardiness in handing over, the Plaintiff's property caused it loss and damage which were only mitigated by the prohibitory and mandatory injunctions granted by Lundberg J on 13 December 2023. The Plaintiff says this is relevant to understanding the need for a permanent injunction.

Equitable obligations of directors

Murphy JA gave an overview of the law of fiduciary relationships in Streeter v Western Areas Exploration Pty Ltd [No 2][93] (with which McLure P and Buss JA agreed). I can do no better than to adopt his Honour's explanation:
The critical feature of a fiduciary relationship is that the fiduciary undertakes or agrees to act for or in the interest of another person. The fiduciary acts in a representative character: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 96 - 97.
The essence of a fiduciary relationship is that one party exercises power on behalf of another and pledges himself or herself to act in the best interests of the other: Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165, 196 - 197 [71].
Within the scope of the fiduciary relationship the fiduciary must give undivided loyalty to the person to whom the obligation is owed: Breen v Williams [1996] HCA 57; (1996) 186 CLR 71, 93, 108; Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 465. Within that scope, fiduciaries must subordinate their own interests to the interests of the other person to whom they stand in a fiduciary relationship: Furs Ltd v Tomkies (1936) 54 CLR 583, 590 (Latham CJ).
The undivided loyalty is secured by the general principle of equity concerning the obligation of a person in a fiduciary relationship to account for undisclosed personal benefits or gains. In Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 198 - 199 Deane J said:
The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one 'fundamental rule' embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the 'use of fiduciary position' doctrine is but an illustration or part of a wider 'conflict of interest and duty' doctrine (see, eg Phipps v Boardman [[1967] 2 AC, 123]; NZ Netherlands Society 'Oranje' Inc v Kuys [[1973] 1 WLR, 129]), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee: see Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd [(1958) 100 CLR 342, 350]. That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed.
[93] Streeter v Western Areas Exploration Pty Ltd [No 2] [2011] WASCA 17 [364] - [367].
It is well understood that fiduciary relationships include the relationship of a director and company.[94]
[94] EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd [No 3] [2013] WASC 183 [420] (Beech J).
However, as Beech J observed in EC Dawson, the scope of a fiduciary duty and whether it has been breached in any particular case is 'highly sensitive to the facts of the case'.[95]
[95] EC Dawson [424].
The duties owed are commonly referred to as the 'conflict rule' and the 'profit rule'.
The conflict rule provides, in general terms, that a fiduciary cannot, without the informed consent of the person to whom the fiduciary owes their duties, act in conflict with the bona fide best interests of that person to promote their own personal interests by making or pursuing a gain in circumstances where there is a conflict between their personal interests and those of the person to whom the duty is owed.
The profit rule is, generally speaking, that a fiduciary must account for a profit or benefit obtained if that profit or benefit was obtained by reason of the fiduciary's position or by reason of his taking advantage of opportunity or knowledge derived from his or her position as a fiduciary.[96]
[96] Streeter v Western Areas Exploration Pty Ltd [No 2] [73] (McLure P), citing Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 557.
When a fiduciary relationship exists, a fiduciary cannot unilaterally absolve themselves of liability by resigning from fiduciary office in order to take the profit for which they should otherwise account.

Statutory duties of directors

Chapter 2D of the Corporations Act 2001 (Cth) (Corporations Act) sets out the statutory duties of officers and employees of a company to which the Corporations Act applies. Of relevance in this case are the obligations and duties set out in s 181, s 182, s 183 and s 185 of the Corporations Act.
Those sections provide as follows:
181Good faith – civil obligations
Good faith - directors and other officers
(1)A director or other officer of a corporation must exercise their powers and discharge their duties:
(a)in good faith in the best interests of the corporation; and
(b)for a proper purpose.
Note 1: This section is a civil penalty provision (see section 1317E).
Note 2:Section 187 deals with the situation of directors of wholly owned subsidiaries.
(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.
Note 1:Section 79 defines involved.
Note 2:This subsection is a civil penalty provisions (see section 131(7)E.
182Use of position – civil obligations
Use of position - directors, other officers and employees
(1)A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.
Note:This subsection is a civil penalty provisions (see section 131(7)E.
(2)A person who is involved in the contravention of subsection (1) contravenes this subsection.
Note 1:Section 79 defines involved.
Note 2:This subsection is a civil penalty provisions (see section 131(7)E
183Use of information – civil obligations
Use of information - directors, other officers and employees
(1)A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.
Note 1:This duty continues after the person stops being an officer or employee of the corporation.
Note 2:This subsection is a civil penalty provisions (see section 1317E).
(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.
Note 1:Section 79 defines involved.
Note 2:This subsection is a civil penalty provisions (see section 131(7)E.
Section 185 of the Corporations Act deals with the interaction of s 180 to s 184 with other laws concerning duties and liabilities of persons arising because of their role in a corporation. It provides:
185Interaction of sections 180 to 184 with other laws etc.
Sections 180 to 184:
(a)have effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation; and
(b)do not prevent the commencement of civil proceedings for a breach of duty or in respect of a liability referred to in paragraph (a).
This section does not apply to subsections 180(2) and (3) to the extent to which they operate on the duties at common law and in equity that are equivalent to the requirements of subsection 180(1).
Section 185 is referring (at least) to the fiduciary obligations to which I have referred above.

Remedies for breach of fiduciary duties and remedies under the Corporations Act

A breach of a fiduciary duty will give rise to a number of possible remedies. They include a constructive trust over, or order for the return of, any property or benefit derived in breach of the fiduciary duty, liability to pay equitable compensation to a beneficiary who has suffered loss and a personal liability to account for profits made that are attributable to the breach. The choice of remedy is for the beneficiary to elect, subject to discretionary considerations.[97]
[97] EC Dawson [433] citing Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6 [183] - [187] and Warman at (556, 559, 569 ‑ 570).
The Corporations Act also empowers the Court to order that a director who, by their breach of director's duties, has caused the company (and any other person) to suffer loss or damage, to pay compensation for that loss or damage, to account for any profits made in breach or to return any property acquired as a result of a breach of director's duties.[98]

Did Ms Spencer's conduct in cancelling the scheduled appointments and attempting to divert the work to herself breach an equitable or statutory duties owed to the Plaintiff?

[98] Corporations Act s 1317H.

I find that Ms Spencer's conduct in cancelling the appointments was a breach of her fiduciary and statutory obligation to act in the Plaintiff's best interests. In particular, her conduct in cancelling scheduled appointments and sending the emails to Keiki Early Learning Centres on 20 November 2023 breached the obligations of a current director set out in s 181, s 183 and s 184 of the Corporations Act because that action was not taken in the best interests of the Plaintiff but to obtain a benefit for herself.
In addition, the action Ms Spencer took after resigning as a director of the Plaintiff in trying to divert work from Keiki Early Learning Centres to herself was also a breach of her fiduciary obligations and s 183(1) of the Corporations Act, which applies not just to directors but to persons who have been directors of a corporation. The Plaintiff says it should be compensated for that breach.

The Plaintiff submits that the calculation for damages in cases of fiduciary breach is not as strict as the calculation of damages in ordinary torts or contract cases because it is prophylactic.[99] That is, the court is less interested in trying to assess the quantum of damages than in trying to prevent those types of breaches by the award of damages.

What compensation, if any, should be paid to the Plaintiff for those breaches?

[99] ts 28, 22 April 2024.

In Schmidt v AHR Kalimpa Pty Ltd,[100] the Court of Appeal considered the principles which applied in consideration of the assessment of compensation for breach of fiduciary duties. They were said to be:
1.The court in its equitable jurisdiction has power to award compensation for breach of fiduciary duties.
2.Equitable compensation is aimed at restoring the innocent party, as nearly as possible, to the position in which he or she would have been had the breach of the fiduciary duty not occurred. This is to be contrasted with an account of profits where the errant fiduciary will be ordered to render an account of the profits made within the scope and ambit of his or her duty.
3.The obligation to pay damages is more absolute than the common law obligation to pay damages for tort or breach of contract, the obligation is therefore not limited or influenced by common law principles relating to remoteness of damage, foreseeability or causation.
4.Equitable compensation is to be assessed at the time of trial with the full benefit of hindsight.
5.Equitable compensation is to be assessed according to the nature of the fiduciary obligation whose breach is to be redressed. It is often calculated by reference to the loss suffered by the innocent party but in some cases it may be appropriate to compensate by reference to the profits earned by the person who committed the breach of fiduciary duty.
6.The person to whom the fiduciary owed the duty bears the onus of establishing the quantum of his or her claim.
7.While a fiduciary need not act dishonestly or fraudulently in order to be liable for breach of a fiduciary duty however consideration to the severity of the breach and the extent of the fiduciary culpability may be relevant to the assessment of compensation.
[100] Schmidt v AHR Kalimpa Pty Ltd [2020] VSCA 192 [181] citing Nocton v Lord Ashburton [1914] AC 932, 956 ‑ 957; and McKenzie v McDonald [1927] VLR 134, 146 - 147.
The Plaintiff submits, in reliance upon the principles identified in Schmidt, that Ms Spencer's assertion that the Plaintiff would be unable to continue to service the existing appointments with the Keiki Early Learning Centres without her assistance was irrelevant to the causal inquiry which I need to undertake in the assessment of damages because the equitable test for causation requires only a 'but for' link to be satisfied. That is, Ms Spencer's breach of fiduciary duty in cancelling the appointments and seeking the business for herself caused the Plaintiff to:
a.suffer loss of revenue from servicing the existing (but cancelled) appointments; and
b.lose the chance of receiving further revenue from future appointment.
The Plaintiff also submits that it is entitled to damages for loss of revenue it would have made from future services it would have provided at Keiki Early Learning Centres but for Ms Spencer's frustration of its relationship with the management of those centres.
In GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers,[101] Warren CJ described the measure of equitable compensation as the 'sum which would restore the Plaintiff to the position he or she would have been had the breach [of equitable obligation] not occurred'.
[101] GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2002] VSC 487 (GM & AM Pearce).
Tipping J said in Bank of New Zealand v New Zealand Guardian Trust Co Ltd (Bank of New Zealand):[102]
[O]nce the Plaintiff has shown a loss arising out of a transaction to which the breach was material, the Plaintiff is entitled to recover unless the Defendant fiduciary, upon whom is the onus, shows that the loss or damage would have occurred in any event, ie without any breach on the fiduciary's part … Policy dictates that fiduciaries be allowed only a narrow escape route from liability based on proof that the loss or damage would have occurred even if there had been no breach.
[102] Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664, 687.
The Plaintiff claimed that the amount lost to it by the cancellation of scheduled appointments was somewhere between $25,000 and $50,000 and accepted that the amount would need to be adjusted to account contingencies.
I have rejected Ms Spencer's evidence that she cancelled the bookings scheduled at Keiki Early Learning Centres for the Plaintiff's benefit because she was no longer able to provide the services and held the view that the Plaintiff would not be able to obtain another oral health therapist to perform the services.
Ms Williams gave evidence, which I accept, that the one oral health therapist which she had invited to take on those appointments had declined to do so because, as Ms Spencer's friend, she felt uncomfortable stepping in to perform the work.[103]
[103] ts 132, 23 April 2024.
Ms Williams did not give any evidence about whether she approached other oral health therapists and what the prospects of finding someone else would have been. The Plaintiff did not lead any evidence as to the market for contractors in this field was at the time.
It may have been pointless for Ms Williams to make inquiries as to the availability of alternative oral health therapists given that the approach taken by the managers of the Keiki Early Learning Centres to the departure of Ms Spencer from Little Smiles, to which I will refer at [190] ‑ [191] below.
Ms Williams' evidence was that when she approached Keiki Early Learning Centre management about rescheduling the visits, she was informed that, because of the relationship they had with Ms Spencer, who was no longer a part of Little Smiles, they no longer wished to have the Plaintiff provide its services at their centres. The email of 14 February 2024 from Ms Callie Ross of Keiki Early Learning Centre said:[104]
Hi Dionne,
Thanks for reaching out last month. I just want to confirm in writing that as discussed, Keiki Early Learning has chosen not to partner with Little Smiles moving forward.
It was a pleasure working with you in 2023 and I'd like to wish you all the best for the future 
Kind regards,
Callie
[104] Exhibit 7, Annexure DW20 at page 8.
And subsequently in an email sent on 1 March 2024 Ms Ross wrote:[105]
[105] Exhibit 7, Annexure DW20 at pages 10 – 11.
Dear Dionne,
I hope this note finds you well. As the representative of Keiki Early Learning, and reaching out as it has come to my attention that there seems to be a misunderstanding regarding our current engagement status with Little Smiles.
As discussed on 4 January, our initial collaboration with Little smiles were significantly influenced by our esteem for Jamie Lee, whose role as an oral health therapist was invaluable to our community. A decision was not merely about a company; it was about the people, like Jamie, who directly impacted our families with their dedication and care. I entered a verbal agreement with Jamie Lee to trial her services in all of our early learning centres, and there has never been a formal arrangement contract to continue the services.
Our centres are committed to providing the best possible care and service to the families we serve, based on their feedback. This commitment often requires us to explore and engage with various service providers who can meet our evolving needs. It's in this spirit of ensuring the highest quality of care that we must assert a right to make such choices freely, without any undue influence or representation to the contrary.
I wish to clarify, with all due respect, that any association Little Smiles concluded on 4th January 2024 was clarified in writing on 14 February 2024. Since then, we have not entered into any new arrangements or renewals of services. I kindly request any portrayal of Keiki Early Learning is a current client approvals must be discontinued.
…
Kind regards,
Callie Ross
Marketing Manager
Ms Williams gave evidence that she estimated that had the bookings gone ahead as planned, the Plaintiff would have provided services to 140 patients and charged $200 per patient. She based that calculation on information she obtained from Ms Spencer from a text message sent to her on 28 March 2023 which said:[106]
Just to get you a bit excited if we see 20 kids in each session at Keiki over those two days its $8000 in cash flow this is going to be amazing once we get this hard bit of setting everything up to work in a super smooth easy system it will be so so simple! We are nearly there! X
[106] Exhibit 7 at [13].
Ms Spencer did not give any evidence to contradict the basis of Ms Williams' calculation of the loss occasioned to the Plaintiff by the cancellation of those appointments.
Adopting Ms Spencer's assessment of the number of children who would be seen at each visit and the amount each would be charged as set out in that text, the revenue generated would have been $28,000. Ms Spencer (or a substitute contractor) would have been entitled to 35% of the fees. As a consequence, based on the predicted number of children who would have been seen at each appointment, the amount the Plaintiff would have made would have been $18,200 from those visits.
The Plaintiff also seeks compensation for the loss of the opportunity to profit from future appointments at Keiki Child Care Centres which would likely have been made if it the November appointments had not been cancelled. It seeks compensation for only one set of repeat bookings of an equivalent number of appointments in recognition that what may have happened after that is just too uncertain.
In this case, Ms Spencer has not established and did not submit that regardless of her conduct, the bookings would have been cancelled and the loss suffered by the Plaintiff.
I am satisfied that in relation to the loss caused by the cancellation of the booked appointments, the calculation of 20 children per day at the sum of $200 per child is appropriate. That results in a loss of $18,200 after deduction of 35% of the fees to which the oral health therapist would have been entitled.
The Plaintiff submits that I should then make a deduction for contingencies. A contingency recognises that a predicted future event which is possible, in this case the loss of the future revenue from the cancelled bookings, cannot be predicted with certainty. Other things, such as cancellations by clients unrelated to her conduct may have occurred. I accept that the figure of $18,200 should be adjusted for contingencies. I will apply a figure of 20% in recognition of the fact that the bookings were cancelled close to the dates scheduled to occur and, were likely to have gone ahead, but recognising that there was a possibility of cancellation by Keiki Early Learning Centres or parents of individual children, even if Ms Spencer had remained involved and in recognition of the possibility that not every appointment may have resulted in the Plaintiff providing services to 20 children.
The result of that is that Ms Spencer will be ordered to compensate the Plaintiff for loss caused by the cancellation of those appointments in the sum of $14,560.
The Plaintiff also claims damages for the loss of future revenue derived from providing services through Keiki Early Learning Centres, which they lost as a result of Ms Spencer's breach of her fiduciary and statutory obligations.
The Plaintiff submits that there was at least a chance that it would have continued and kept the business (being the business derived through its ongoing association with Keiki Early Learning Centres).[107] The Plaintiff seeks to be compensated for only one additional series of appointments at those child-care centres, but also accepts that it was less certain that those future bookings would have occurred. Nevertheless, it claims that by Ms Spencer's conduct, it lost the chance of earning revenue from such visits, and should be compensated for the loss of that chance. The Plaintiff submits that a generous deduction for contingencies somewhere between 40% and 60% would be appropriate.[108]
[107] ts 208, 23 April 2024.
[108] ts 209, 23 April 2024.
In my view, taking a robust approach to both the assessment of damages and the application of a contingency, I would start at the same starting point as was the case in relation to the cancelled bookings. That is, the Plaintiff lost the opportunity to have repeat bookings of 140 children per day at $200 per child over six days of appointments. Given that the oral heath therapist providing the services was entitled to retain 35% of the fees generated that would amount to $18,200.
In this case though there was a greater possibility that factors unrelated to Ms Spencer's conduct would have intervened and reduced the possibility of the Plaintiff providing the services. I would therefore reduce the damages by applying a contingency of 50%. Accordingly, I will award the Plaintiff damages of $9,100 for the chance of earning income from repeat bookings at Keiki Early Learning Centres which was lost to it by Ms Spencer's breach of duties.

Issue 5 - Whether permanent injunctions sought should be granted

The Plaintiff seeks a permanent injunction restraining Ms Spencer, her servants and agents from:
1.using confidential information of the plaintiff to contact child‑care centres specified in Attachment A to these orders (Child‑care Centres) or the parents or guardians of the patients who attend the Child-care Centres (Parents and Guardians);
2.using the trading names 'Big Smiles little smiles', 'little smiles' or any variation of those names; and
3.holding herself out to Child-care Centres and Parents and Guardians as being associated with, or as successor of, the business of the Plaintiff.
Those are the same terms on which the interlocutory injunction was granted by Lundberg J on 13 December 2023.
The Plaintiff submits that because Ms Spencer has, by her past conduct, indicated a willingness to use the Plaintiff's confidential information, being its client lists, to offer her services to those clients and, in doing so, to use trading names which are deceptively similar to the Plaintiff's and by suggesting that she is still associated with the Plaintiff which was 'rebranding' in order to direct those clients to herself, a risk of her continuing to do those things continues and therefore permanent injunctions are appropriate.
The court may grant a permanent injunction under s 1324 of the Corporations Act or in the exercise of its equitable jurisdiction. In both cases, the grant of a permanent injunction is a discretionary remedy.
Section 1324 of the Corporations Act provides:
(1)Where a person has engaged, is engaging in or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a)a contravention of this Act; or
(b)attempting to contravene this Act; or
(c)aiding, abetting, counselling, procuring a person to contravene this Act or
(d)inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f)conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first-mentioned person from engaging in the conduct and, if in the opinion of the Court, it is desirable to do so, requiring that person to do any act or thing.
…
(6)the power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
(a)whether or not it appears to the Court that the person intends to engage in or continue to engage, in conduct of that kind; and
(b)whether the person has previously engaged in conduct of that kind; and
(c)whether there is an imminent danger of substantial damage to any person if the first-mentioned person engages in conduct of that kind.
…
(10)where the Court has power under this section to grant an injunction restraining a person from engaging in particular conduct or requiring a person to do a particular act or thing, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person.
In Australian Securities and Investment Commission v McDougall, Young J stated that s 1324 permits the court to grant an injunction 'on such terms as the court thinks appropriate'.[109]
[109] Australian Securities and Investment Commission v McDougall [2006] FCA 427 [64].
It has been said that 'the court, in exercising its statutory jurisdiction is not to be confined by the considerations which would be applicable if it was exercising its traditional equity jurisdiction'.[110] This is because permanent injunctions may be granted under s 1324 of the Corporations Act in circumstances where it is likely they would not be granted in equity. For example, in equity an injunction would be unlikely to be granted where there is no risk of the conduct to be restrained by an injunction occurring, whereas s 324(6)(a) specifically permits the granting of an injunction in such a circumstance. Further, in equity, an injunction will not be granted where damages is an appropriate remedy.
[110] Australian Securities and Investment Commission v Mauer‑Swisse Securities Ltd [2002] NSWSC 741; (2002) 42 ACSR 605 [36].
In equity, an injunction serves a protective purpose.[111] Therefore, there must be some utility in the grant of the injunction. There must also be sufficient nexus between the conduct which has been found to amount to a contravention of an obligation and the injunctive order sought. Whether that nexus exists is a matter of judgment.[112]
[111] Australian Securities and Investment Commission v Avestra Asset Management Ltd (in liq) (2017) 348 ALR 525 [235].
[112] BPESAM IV M Limited v DRA Global Ltd [2020] FCA 738 [227], citing Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 [39].
In order to grant a quia timet injunction, to restrain threatened rather than actual wrongful acts, actual damage need not be shown. What is sufficient is the real and tangible risk of damage occurring.[113]
[113] Monarch Investments Pty Ltd v Yeramba Estates Pty Ltd (1997) 37 IPR 363, 375.
I am satisfied and find that, for the purposes of s 1324(1) of the Corporations Act, the Plaintiff is a person whose interest have been affected by Ms Spencer's breach of her obligations under that Act and whose interests would be affected by any further breach.
I have found that, after Ms Spencer had ceased to be permitted to use Dr Negoescu's provider number, and while she was still a director of the Plaintiff, Ms Spencer cancelation of appointments with Keiki Early Learning Centres was a breach of the fiduciary duty which she owed to the Plaintiff and a breach of duties she owed to the Plaintiff under the Corporations Act.
I have also found that after her resignation as a director, Ms Spencer breached her fiduciary obligation to the Plaintiff and her obligations under the Corporations Act by trying to divert the Plaintiff's business to herself by implying that she was still associated with the Plaintiff's company which was simply 'rebranding'.
Further, I find that Ms Spencer did not understand the duties to the Plaintiff that she owed as a director or former director. I have come to this view because she relied on the fact that there was no 'non‑compete' restriction in her arrangements with the Plaintiff to justify her approaches to its clients. That said, I also find that Ms Spencer must have known what she was doing was wrong or she would not have endeavoured to hide from the clients the fact that she had parted ways with the Plaintiff by claiming that nothing had changed other than a rebranding.

I did not detect that Ms Spencer had a greater appreciation of her obligations at the time of trial than she did in 2023 or that she was in any way apologetic for her conduct.
In her evidence Ms Spencer said that it was her 'mission and vision and lifelong commitment to a cause which has defined her emotional and personal aspirations, which is to provide oral health care in a supportive environment to children across Western Australia'.[114]
[114] ts 160, 23 April 2024.
Ms Spencer also gave evidence that she intends to continue to provide oral health services to children in a way which I find to be essentially the same as those provided by the Plaintiff despite the fact that she says she now also intends to differentiate her services form the Plaintiff's by providing 'airway checks' and advice about sleep as part of her services.[115]
[115] ts 194, 23 April 2024.
From that evidence, I am satisfied and find that Ms Spencer intends to continue to work in a market in competition with the Plaintiff.
In all of the circumstances, I find that there is a more than a fanciful risk that Ms Spencer may continue to associate herself with the Plaintiff, may use trading names which approximate that of the Plaintiff and may make use of the contact details of clients of the Plaintiff in an endeavour to secure future work for herself. Given her intention to work with children, I am also satisfied and find that it is not a fanciful risk that she will endeavour to use a business name proximate to Little Smiles in order to highlight her services are offered to children and that she is likely to endeavour to find clients through her contacts with the child‑care centres with whom she had a pre-existing relationship, either through her work with the Plaintiff or which were her own clients prior to the incorporation of the Plaintiff but which became clients of the Plaintiff upon its incorporation and the payment to her of the $31,000.
Accordingly, I find that it is appropriate to grant the injunctions sought by the Plaintiff.
I find that the terms of the permanent injunction sought by the Plaintiff are appropriate to be made in the exercise of the court's power conferred both by equity and pursuant to s 1324 of the Corporations Act.
The Plaintiff's client lists are Annexure B to these reasons.

Interest

In its Writ of Summons, the Plaintiff seeks interest on the amounts awarded. The Plaintiff will be entitled to interest. However, I will hear from the parties as to when, in respect of each separate head of loss or damage, the interest should be calculated.

Orders

In light of the findings I have made, I will hear form the parties as to the orders that should follow.

Annexure A

Annexure B
[Redacted pursuant to order 4 of the orders made on 11 December 2024].

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FS
Associate to the Hon Justice Glancy
11 DECEMBER 2024

Date	Company	Amount
February 7 2023	Pinch Payments	$2,274.35
March 8 2023	Figs	$504
March 9 2023	Seton Greystanes	$310.50
March 16 2023	Godaddy	$119.41
March 19 2023	Zoom	$242.27
March 20 2023	Adam Dental	$113.99
March 20 2023	Mayfair	$287
April 8 2023	Pinch Payments	$1739.07
May 8 2023	Pinch Payments	$1100.32
May 24 2023	Wall Art Australia	$398.51
May 25 2023	Horizon Accounting	$1371.70
June 2 2023	Horizon Accounting	$436.70
June 8 2023	Pinch Payments	$1367.34
July 2 2023	Horizon Accounting	$436.70
July 5 2023	MJB seminars	$1000
Total	$20,947.24