Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12
Hearing dates:
15, 16 November 2021
Decision date:
16 February 2022
Before:
Macfarlan JA at [1]; Gleeson JA at [2]; Leeming JA at [3].
Decision:
1. Appeal allowed in part.
2. Vary order 6 made on 24 November 2020 by inserting the words “until 31 October 2011” after the words “at the Cadia mine”, so that the order reads in full
“6. Declare that, at the election of the Company, by its liquidators, the Company is entitled as against RK Murdoch Pty Limited (RKM) and Tilecote Farm Pty Limited (previously known as Bright Pear Pty Limited) (BPPL) to:
“(a) an account of the profits earned by RKM and BPPL from the work done by those companies at the Cadia mine until 31 October 2011, as that term is used in the judgment dated 28 October 2020 (Cadia Work); or
(b) compensation for any loss by reason of the Cadia Work.”
3. Set aside order 10 made on 24 November 2020.
4. MDL to pay 50% of the appellants’ costs of the appeal.
5. Direct the parties to file and serve agreed short minutes of order, or in lieu of agreement, minutes of the orders each proposes and short submissions in support, not exceeding 5 pages, in respect of (a) the quantification of the profit derived by RKM and Bright Pear at the Cadia mine until 31 October 2011, (b) the form of the order concerning the profits derived by RKM and Bright Pear and (c) the order which should be made as to the costs in the Equity Division, within 14 days of today, with a view to any dispute being resolved on the papers.
6. Grant leave to MDL to file a cross-appeal, confined to grounds 1-8 of the draft cross-appeal in the papers but excluding grounds 2(b), 5(b) and 8(b), and dispense with the need to file and serve such cross-appeal, and otherwise dismiss the notice of motion filed 31 March 2021.
7. Dismiss the cross-appeal, with costs.
Catchwords:
EQUITY – fiduciary obligations – scope of duty – company’s contracts to provide crushing services to a mine were performed by a director’s and employee’s own companies without disclosure – whether constituted a breach of duty – whether inability of company to perform its obligations a defence – whether acquisition of separate quarry in Victoria within scope of duty – scope of fiduciary duty identified by company’s actual course of conduct – primary judge correct to hold that performance of company’s existing contracts was breach of duty, and acquisition of separate quarry in Victoria not in breach of duty
EQUITY – remedies for breach of fiduciary duty – account of profits – contracts entered into by companies controlled by director and employee in breach of fiduciary and statutory duties – contracts incapable of rescission – whether principles in Peninsular and Oriental Steam Navigation…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12
Case
[2022] NSWCA 12
Decision Date
CaseChat Overview and Summary
The appeal concerned alleged breaches of fiduciary duties by directors and an employee of Mudgee Dolomite & Lime Pty Ltd (in liq) ("MDL"). The dispute arose from the fact that companies controlled by these individuals, RK Murdoch Pty Limited ("RKM") and Tilecote Farm Pty Limited (previously known as Bright Pear Pty Limited) ("BPPL"), performed crushing services for a mine that MDL had contracted to provide. The primary judge had found that the performance of MDL's existing contracts by RKM and BPPL constituted a breach of fiduciary duty, but that the acquisition of a separate quarry in Victoria did not.
The court was required to determine the scope of the fiduciary duties owed by the directors and employee to MDL, and whether the performance of MDL's contracts by their associated companies constituted a breach. It also had to consider the availability of remedies, specifically an account of profits, and whether the principles established in *Peninsular and Oriental Steam Navigation Co v Johnson* precluded such an account in this context. Furthermore, the court had to assess whether any relief should be withheld on discretionary grounds, particularly in light of MDL's knowledge of the ongoing profits derived by RKM and BPPL. Finally, the court considered an appeal concerning procedural fairness and the application of coincidence evidence rules.
The appellate court affirmed the primary judge's finding that the performance of MDL's existing contracts by RKM and BPPL was a breach of fiduciary duty. The court reasoned that the scope of the fiduciary duty was to be identified by MDL's actual course of conduct, which included its existing contracts. The court distinguished *Peninsular and Oriental Steam Navigation Co v Johnson*, holding that its principles, which limit accounts of profits to cases where a fiduciary acquires property on behalf of a principal, were inapplicable to contracts for the supply of services. However, the court found that MDL had sufficient information after October 2011 to make it inequitable to seek an account of profits thereafter, applying a "stand by" principle. The court also dismissed the procedural fairness and evidence grounds of appeal.
The appeal was allowed in part, with the order for an account of profits being varied to apply only until 31 October 2011. One of the original orders was set aside, and MDL was ordered to pay 50% of the appellants' costs of the appeal. Directions were given for the parties to file agreed minutes of order or proposed minutes regarding the quantification and form of the profit order, and costs in the Equity Division. Leave was granted to MDL to file a limited cross-appeal, which was subsequently dismissed.
Orders
Orders of the court
1. Appeal allowed in part.
2. Vary order 6 made on 24 November 2020 by inserting the words “until 31 October 2011” after the words “at the Cadia mine”, so that the order reads in full
“6. Declare that, at the election of the Company, by its liquidators, the Company is entitled as against RK Murdoch Pty Limited (RKM) and Tilecote Farm Pty Limited (previously known as Bright Pear Pty Limited) (BPPL) to:
“(a) an account of the profits earned by RKM and BPPL from the work done by those companies at the Cadia mine until 31 October 2011, as that term is used in the judgment dated 28 October 2020 (Cadia Work); or
(b) compensation for any loss by reason of the Cadia Work.”
3. Set aside order 10 made on 24 November 2020.
4. MDL to pay 50% of the appellants’ costs of the appeal.
5. Direct the parties to file and serve agreed short minutes of order, or in lieu of agreement, minutes of the orders each proposes and short submissions in support, not exceeding 5 pages, in respect of (a) the quantification of the profit derived by RKM and Bright Pear at the Cadia mine until 31 October 2011, (b) the form of the order concerning the profits derived by RKM and Bright Pear and (c) the order which should be made as to the costs in the Equity Division, within 14 days of today, with a view to any dispute being resolved on the papers.
6. Grant leave to MDL to file a cross-appeal, confined to grounds 1-8 of the draft cross-appeal in the papers but excluding grounds 2(b), 5(b) and 8(b), and dispense with the need to file and serve such cross-appeal, and otherwise dismiss the notice of motion filed 31 March 2021.