Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 5)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2019 02810

TIMOTHY NORMAN PORTER & ANOR (according to the Schedule)	Plaintiffs
v
MULCAHY & CO ACCOUNTING SERVICES PTY LTD (ACN 105 360 325) & ORS (according to the Schedule)	Defendants

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JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	20-23, 27-30 March 2023
DATE OF JUDGMENT:	25 January 2024 (First Revision 8 April 2024)
CASE MAY BE CITED AS:	Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 5)
MEDIUM NEUTRAL CITATION:	[2024] VSC 6 (First Revision (8 April 2024): [269])

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CONTRACT — Damages — Expectation and reliance loss — Alternative categories — Impact of COVID‑19 pandemic — Expectation loss assessed at date of trial — Confidential information — Loss of opportunity — Sellars discount — Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; European Bank Ltd v Evans (2010) 240 CLR 432; Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310; Vision Australia Ltd v Elisha [2023] VSCA 265 referred to, Johnson v Perez (1988) 166 CLR 351, 123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464, Golden Strait Corpn vNippon Yusen Kubishika Kaisha [2007] 2 AC 353; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Masters Home Improvement Pty Ltd v North East Solution Pty Ltd (2017) 372 ALR 440; Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375, applied.

EQUITY — Equitable remedies — Equitable compensation — Principles — JAB Nominees (Aust) Pty Ltd v Auswild [2020] VSC 731; Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664, followed — Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193; GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113; Australian Executor Trustees (SA) Limited v Kerr (2021) 151 ACSR 204, applied — Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1, cited.

EQUITY — Equitable remedies — Account of profits — Onus — Quantification — Interest of the wrongdoer in business greater than interest plaintiff would have acquired — Plaintiff entitled to an account of all profits — Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1, applied — Warman International Ltd v Dwyer (1995) 182 CLR 544; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296, cited.

EQUITY — Equitable remedies — Constructive trust — Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 — Asserted limitation on availability of the remedy — Unnecessary to decide — McNab v Graham (2017) 53 VR 311; Williams v Central Bank of Nigeria [2014] AC 1189; Chickabo Pty Ltd v Zphere Pty Ltd (No 3) [2020] VSC 464, cited — Other means available to quell the controversy — Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566, applied — Constructive trust refused.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	P Cawthorn KC with P Caillard	Nevetts Lawyers
For the First and Second Defendants	P Solomon KC with K Anderson	Clyde & Co
For the Third Defendant	S Hay KC with L Molesworth	Holding Redlich

TABLE OF CONTENTS

A. Introduction................................................................................................................................... 1

B. The Lay Evidence.......................................................................................................................... 9

B1. Mr Porter.................................................................................................................................. 9
B2. Mr Conheady......................................................................................................................... 10
B3. Mr Matthews......................................................................................................................... 10

C. Claim items 3(a) and (b)............................................................................................................. 12

D. Scenario 2..................................................................................................................................... 24

D1.... The evidence....................................................................................................................... 25
D2.... Findings concerning Scenario 2....................................................................................... 31

E. The Expert Evidence.................................................................................................................... 33

E1. Loss of profit calculation..................................................................................................... 34
E1.1. Contested Item 1: EBITDA multiple...................................................................... 38
E1.2. Contested Item 2: Impact of using forecast 2023 figures in calculation of future maintainable earnings........................................................................................... 48
E1.3. Contested Item 3: Directors’ fee adjustment........................................................ 51
E1.4. Contested Item 4: Unfair dismissal claim............................................................. 56
E1.5. Contested Item 5: Value of debt............................................................................. 57

E2. Account of profits................................................................................................................. 58
E2.1. Contested Item 6: The basis to calculate historical profits................................. 60
E2.2. Contested Item 7: Net value of BFMM units........................................................ 68
E2.3. Contested Item 8: Present value of future distributions..................................... 70
E2.4. Contested Item 9: Present value of future expenses........................................... 71
E2.5. Historical directors’ fees.......................................................................................... 72

F. Mr Porter’s contract damages.................................................................................................... 73

F1. The principles........................................................................................................................ 73
F2. The claims and earlier findings........................................................................................... 77
F3. Causation............................................................................................................................... 79
F4. Remoteness............................................................................................................................ 81
F5. When should damages be assessed?.................................................................................. 82
F6. Loss of opportunity: Sellars discount................................................................................ 85
F7. What expectation loss did Mr Porter sustain?.................................................................. 89
F8. Wasted expenditure.............................................................................................................. 92

G. Mr Conheady’s claims for relief.............................................................................................. 93

G1. Contract damages................................................................................................................ 94
G2. Equitable compensation.................................................................................................... 100
G2.1 The principles.......................................................................................................... 100
G2.2 Causation and quantification................................................................................ 103
G2.3 40% or 80% or no compensation.......................................................................... 104
G2.4 Does Mr Conheady have an entitlement to equitable compensation?........... 107

G3. Account of profits: BFMM................................................................................................ 111
G3.1 The submissions...................................................................................................... 112
G3.2 Consideration.......................................................................................................... 113

G4. Account of profits: The Mulcahy parties........................................................................ 119
G5. Constructive trust.............................................................................................................. 122
G5.1 Is there power to make the declaration sought?................................................ 123
G5.2 Should a declaration be made?............................................................................. 125
G5.3 Findings concerning the constructive trust claim.............................................. 127

Disposition...................................................................................................................................... 127

HIS HONOUR:

A. Introduction

These reasons concern the relief to which the first plaintiff (‘Mr Porter’) and the second plaintiff (‘Mr Conheady’) are entitled against the first and second defendants on the one hand (‘the Mulcahy parties’) and against the third defendant (‘BFMM’) on the other. The entitlement of Mr Porter and Mr Conheady to relief is dictated by the findings made following the conclusion of the liability trial in Porter v Mulcahy & Co Accounting Services Pty Ltd (‘the liability reasons’).[1]
[1][2021] VSC 572 (First Revision (1 February 2022)) (‘Liability reasons’).
The liability reasons concerned Mr Porter’s and Mr Conheady’s opportunity to purchase and the actual purchase by BFMM of a controlling interest in Chris Debono Pty Ltd, trading as Chris’s Body Builders (‘CBB’ or ‘the CBB Business’), a business established and Crist John Debono (‘Chris’) and his brother Anthony Debono.
In the liability reasons, I found that on 29 June 2017 Mr Porter retained the Mulcahy parties to provide advice concerning the proposed purchase of a controlling interest in the CBB Business (’29 June 2017 Retainer’). I found that on 16 November 2017 Mr Conheady retained the Mulcahy parties to advise him on the planned acquisition of a controlling interest in the CBB Business (‘Conheady Retainer’). I found breaches of the Conheady Retainer by the Mulcahy parties when they usurped Mr Conheady’s opportunity to acquire a controlling interest in the CBB Business for their own benefit and for the benefit of BFMM. I found breaches of the confidentiality obligations in the 29 June 2017 Retainer. I found that the Mulcahy parties owed fiduciary duties to Mr Conheady, and that they breached those duties. Further, that BFMM knowingly assisted the Mulcahy parties in breach of fiduciary duty.[2]
[2]Liability reasons, [611].
The issues in the relief trial were framed by the plaintiffs’ updated statement of relief (‘updated statement’) and by the responsive statements filed by each of the Mulcahy parties and BFMM. There was some narrowing of the issues in closing submissions.
The plaintiffs’ updated statement filed at the outset of the relief trial set out the following claims:
Damages
2.The Plaintiffs claim damages for breach of contract by James Mulcahy and Mulcahy & Co Accounting Services Pty Ltd (the Mulcahy Parties). The damages claimed are expectation loss for the benefit that the Plaintiffs could expect to have received had the breach of retainer not occurred: net lost cash flows (~~$3,749,647~~$3,136,266), value of shareholding (~~$22,599,119~~$22,518,000) less value of debts (~~$3,957,951~~$3,447,064) = ~~$22,390,815.~~ $22,207,202 (Scenario 2), alternatively, net lost cash flows (-$1,069,062), value of shareholding ($14,181,017) less value of debts ($3,447,064) = $9,664,591 (Scenario 1)
The Plaintiffs refer to the expert report of Greg Meredith dated 18 July 2022 (Meredith Report) at [3.1.1]-[3.1.2], the supplementary report of Greg Meredith dated 20 February 2023 (Supplementary Meredith Report) at [2.1.1(b)] and the Joint Report of Mr Meredith and Ms Wright dated 17 March 2023 (Joint Report) at paragraph 2.1(a) and (b) and Tables 1 and 2.
3.In addition, the Plaintiffs are entitled to:
(a)80% of 56%[3] of $1,779,231, being amounts for truck bodies Porter Plant has paid to third parties for bodies that would have been manufactured by Chris Debono Pty Ltd (CBB): ($797,095); and
[3]Being the higher post-acquisition net profit margin referred to at paragraph [3.3.27] of the Meredith report.
(b)80% of 56% of $7,603,778, being costs Porter Plant will incur in building bodies of assets pursuant to its VicRoads contract: ($3,406,492).
Those losses were incurred by Porter and Conheady as they have not obtained their 80% share of the profit that CBB would have obtained on those contracts.
4.Finally, the First Plaintiff (Porter) claims the following costs incurred in pursuit of the opportunity to acquire an interest in CBB which were lost as a result of that opportunity being usurped by the Defendants.
a.$25,027.20 incurred with Fordham Business Advisors Pty Ltd;
b.$27,627.76 incurred with Nevett Ford Lawyers;
c.$8,388.48 incurred with Munday Wilkinson Chartered & Forensic Accountants; and
d.$14,300 incurred with Mitchell Munn Valuations Pty Ltd.
Equitable compensation
5.The Second Plaintiff (Conheady) also claims equitable compensation:
i)from the Mulcahy Parties for breach of fiduciary duties; and
ii)from the Third Defendant (BFMM) for having knowingly assisted the Mulcahy Parties to breach those fiduciary duties:
~~$22,390,815~~$22,207,202 (Meredith report at [3.1.1] (Scenario 1), alternatively $9,664,891 (Scenario 2), Supplementary Meredith Report at Tables 1 and 2, Joint Report at Tables 1 and 2), and the other sums referred to in paragraph 3(a) and (b) above.
(To preserve his position Porter claims this sum too, as well as the out‑of‑pocket expenses described in paragraph 4 above).
Account of profits
6. Conheady also claims an account of profits:
i)from the Mulcahy Parties for breach of fiduciary duties; and
ii)from BFMM for having knowingly assisted the Mulcahy Parties to breach those fiduciary duties.
This reflects an account of profit received by the Mulcahy Parties and BFMM from the date of acquisition by BFMM as well as an assessment of the future income stream brought to present value, being ~~$16,928,703~~$11,013,138 (Meredith report at [4.1.1], Supplementary Meredith Report at [3.1.1] and Table 8, Joint Report at Table 3).
The plaintiffs say the impact of the legal fees incurred by BFMM of ~~$590,273~~$849,555 in defence of this proceeding should be excluded from the award of an account of profits, meaning the amount to be accounted for is ~~$17,518,976~~$11,862,693 (Meredith report at [4.1.4], Supplementary Meredith Report at [3.2.4], Joint Report at paragraph 3.3(b)). This amount will need to be recalculated by reference to all further costs incurred by BFMM in defence of this proceeding following the conclusion of the second trial.
(To preserve his position Porter claims this sum too).
Constructive Trust
7.Conheady claims a declaration that the shares owned by BFMM in CBB are held on a constructive trust for him.
8.The court should order that the Mulcahy parties and/or BFMM take any steps necessary by transfers of shares or other steps so as to give effect to the constructive trust.
(To preserve his position Porter claims the right to this remedy too).
The Mulcahy parties’ responsive statement includes the following:
B. THE PRECISE CLAIM OF MR PORTER
…
7.The precise breach was a breach of confidence. It concerned information conveyed in a September 2017 offer; together with the circumstance that Mr Porter had, subsequently, not secured funding at the level he desired to fund the offer. The information was found to be misused in January 2018.
8.It is critical to focus on the counterfactual in January 2018 for the purpose of evaluating loss. The counterfactual is that an offer would have been forwarded to purchase the business informed by everything except for the confidential information conveyed by Mr Porter to Mr Mulcahy in September 2017. It is not understood, yet, what loss Mr Porter contends he thereby sustained.
C. THE PRECISE CLAIM OF MR CONHEADY
9.Whether in equity or at common law, the precise claim of Mr Conheady is a foregone opportunity claim.
10.There are six relevant integers.
First integer: what was the likelihood of a “Porter/Conheady vehicle” obtaining a controlling economic interest in the CBB business?
….
12.It cannot at present be precisely countenanced what concessions will be made. With some confidence, however, it can already be submitted that the likelihood of a Porter/Conheady vehicle obtaining an economic interest will, on the balance of probabilities, be found to be less than 100 per cent.
Second integer: in the event that the First integer is found to be satisfied, what economic interest would that Porter/Conheady vehicle have obtained?
13.… the best evidence (in the hypothetical scenario) of the economic interest is the Westpac proposal in February 2018. On that evidence, the economic interest that would have been obtained was 65 per cent. ...
14.An alternative analysis is that the Porter/Conheady vehicle would have sought, and obtained, an 80 per cent controlling interest. …
Third integer: what proportion of that economic interest would have been to the benefit of the Second Plaintiff, Mr Conheady?
15.The interest/share Mr Conheady would have held in a Porter / Conheady vehicle will also be the subject of significant cross‑examination.
16.The likely answer at the end of that is as follows: between a very small per cent and 50 per cent.
Fourth integer: what price would have been paid for the controlling economic interest obtained in the CBB business?
17.The best evidence (and indeed a true proxy) is the price that was paid by the successful purchaser in March 2018…
Fifth integer: what was the true value to the Porter / Conheady vehicle of the interest it would have acquired?
18.This is the central conceptual issue.
19.On any realistic analysis, it is likely to comprise the sum of: the price that would have been paid by the Porter/Conheady vehicle, together with any “special value” available to the Porter/Conheady vehicle upon a successful purchase.
…
Sixth integer: any other loss.
21.There is none.
Conclusion
22.The claim available to Mr Conheady can sufficiently be described by the following equation: assuming that the corporate vehicle would have purchased a 65 per cent interest in CBB [Second Integer], the relevant equation is as follows: CBB 65% Value [Fifth Integer] less CBB 65% Price [Fourth Integer] multiplied by (the probability in percentage terms attributed to the likelihood of that opportunity [First Integer]; together with the percentage interest/share in the vehicle that would have been held by Mr Conheady [Third Integer]).
23.If, instead, the Court concludes that the vehicle would have purchased an 80 per cent controlling interest in CBB [Second Integer], the relevant equation is as follows: CBB 80% Value [Fifth Integer] less CBB 80% Price [Fourth Integer] multiplied by (the probability in percentage terms attributed to the likelihood of that opportunity [First Integer]; together with the percentage interest/share in the vehicle that would have been held by Mr Conheady [Third Integer]).

So far as the Mulcahy parties sought to rely upon the ‘third integer’ as defined in their responsive statement, in Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 4)[4] I determined that it was not open to the Mulcahy parties to advance that contention.
[4](Unreported, Supreme Court of Victoria, 21 March 2023).
The BFMM amended responsive statement includes the following:
3.        As to the equitable compensation …:
(a)       …
(b)if the Court is minded to order BFMM to pay equitable compensation to Mr Conheady, the relief ordered should be no more than $294,263 being the loss of profits suffered by Mr Conheady as calculated by Ms Dawna Wright under her “Alternative 1” scenario…
4.        As to the account of profits …:
(a)       …
(b)if the Court is minded to order BFMM account to Mr Conheady, the relief ordered should be no more than $819,044, being the account of profits of a 40% interest in CBB under Alternative 1…
5.As to the claim for constructive trust … BFMM says that no such order of constructive trust should be ordered…
Some of the remedies for which the plaintiffs contend are inconsistent alternatives. As held by Bergin J in Club of the Clubs Pty Ltd v King Network Group Pty Ltd (No 2),[5] where different equitable remedies are sought against different defendants, one of whom is primarily liable and the other an accessory, the plaintiff is not precluded from making a split election and is entitled to choose the most advantageous remedy available to it in all the circumstances.[6]
[5][2007] NSWSC 574.
[6]Ibid [37].
At the start of the relief trial, the Mulcahy parties submitted that the plaintiffs should be put to their election at the conclusion of openings and prior to evidence. On 21 March 2023, in Porter & Anor v Mulcahy & Co Accounting Services Pty Ltd & Ors (No 3),[7] I ruled against requiring the plaintiffs to elect prior to the delivery of these reasons.
[7][2023] VSC 135.
The parties provided written and oral submissions at the outset of the relief trial. Closing submissions were oral only which, with the benefit of hindsight, left some gaps in submissions concerning some of the contested issues.
It is critical to consider the position of Mr Porter and Mr Conheady separately and to consider the separate relief claimed by Mr Conheady against the Mulcahy parties and against BFMM.
Evidence was given by the plaintiffs, Mr Porter and Mr Conheady, and by Mr Matthews on behalf of BFMM. While some factual issues fell away during the trial, others remained.
Competing factual contentions that remained live include whether the plaintiffs have established claim items 3(a) and (b) of their updated statement. For the reasons discussed in section C I do not consider claim items 3(a) or (b) to be made out.
The Mulcahy parties contended for a 5‑15% discount in damages otherwise calculated relying on the principles in Sellars v Adelaide Petroleum NL (‘Sellars’)[8] (a ‘Sellars discount’). For the reasons discussed in section F6 I do not consider a Sellars discount is appropriate.
[8][1994] HCA 4; (1994) 179 CLR 332.
Expert accounting evidence was given by Greg Meredith on behalf of the plaintiffs and by Dawna Wright on behalf of the defendants. Both experts undertook their calculations as at 30 June 2022. There are differences of opinion between them that bear on the calculation of loss and on the quantification of an account of profits.
Two alternative scenarios were considered by the experts concerning damages for breach of contract and equitable compensation; ‘Scenario 1’ and ‘Scenario 2’. Scenario 1 is the calculation of loss of profits assessed at the date of trial using the actual profit and loss performance of CBB from 2018. Scenario 2 is the calculation of loss of profits by reference to projections prepared by Mr Conheady in 2018.
For the reasons discussed in section D2 I do not accept that Scenario 2 provides an appropriate basis for the assessment of damages for breach of contract or for the assessment of equitable compensation.
Mr Meredith and Ms Wright prepared a joint expert report dated 17 March 2023 (the ‘Joint Report’). The experts gave concurrent evidence concerning the two scenarios, and concerning the appropriate calculation of loss of profits and of an account of profits. The experts gave evidence on a topic‑by‑topic basis in accordance with an agreed agenda.
The contested expert opinion issues are dealt with in section E.
Mr Porter’s entitlement to damages for breach of contract is discussed in section F. Mr Conheady’s various claims for relief are discussed in section G.

For the reasons discussed in section F, Mr Porter is entitled to expectation damages for breach of contract against the Mulcahy parties in the sum of $4,832,445.50 based on a 40% interest in CBB calculated in accordance with Scenario 1. For the reasons discussed in section E1, I have preferred the opinions expressed by Mr Meredith in relation to each of the contested issues between the experts concerning the calculation of loss of profit.

Mr Porter’s reliance loss is $47,715.68. However, he is not entitled to recover damages for both expectation and reliance loss. Because Mr Porter’s claim for expectation loss is recoverable, his claim for reliance loss is not.

For the reasons discussed in section G1, Mr Conheady is entitled to an award of damages for breach of contract against the Mulcahy parties in the sum of $4,832,445.50 based on a 40% interest in CBB calculated in accordance with Scenario 1. For the reasons discussed in section G2, Mr Conheady is entitled to equitable compensation against the Mulcahy parties and against BFMM, also in the sum of $4,832,445.50 based on a 40% interest in CBB calculated in accordance with Scenario 1.

Mr Conheady is also entitled to an account of profits against BFMM. For the reasons discussed in section G3, I have rejected BFMM’s submission that the account of profits should be limited to a calculation based on a 40% interest only in CBB. For the reasons discussed in section E2, I have preferred the opinions expressed by Mr Meredith in relation to each of the contested issues between the experts concerning the quantification of the account of profits. Mr Conheady is entitled to an account of profits against BFMM in the sum of $11,013,138. In addition, Mr Conheady is entitled to an order for an account for past legal fees, $849,555. Mr Conheady is not entitled to an account for future legal fees.

For the reasons discussed in section G4, Mr Conheady is entitled to an account of profits against Mr Mulcahy in the sum of $702,000, representing historical directors’ fees of $312,000 together with the present value of future profits in the sum of $390,000.

For the reasons discussed in section G5, Mr Conheady is not entitled to a declaration of a constructive trust over BFMM’s shares in CBB.

B. The Lay Evidence

Three lay witnesses gave evidence; Mr Conheady, Mr Porter and Mr Matthews.

None of the other directors of BFMM; Mr Broadbent, Mr Ford or Mr Mulcahy; each of whom gave evidence at the liability trial, gave evidence in the relief trial. Nor did Chris Debono, who gave evidence in the liability trial, or any other member of the Debono family give evidence in the relief trial.

B1. Mr Porter

Mr Porter gave evidence concerning the intended conduct of the CBB Business following the acquisition of a controlling interest by the plaintiffs and the work which Porter Plant would have engaged CBB to perform had the acquisition gone ahead.

Mr Porter said he regarded CBB as a ‘solid fit’ with Porter Plant going forward. He had discussed bringing a Porter Plant depot in Melbourne into the CBB area.

Mr Porter gave evidence about how the proposed acquisition would have been financed; the proposal from Westpac of a $7 million facility on 8 February 2018, and of cash reserves and assets accessible by him to cover any funding shortfall. I accept that Mr Porter is, and in 2017/2018 was, a person of considerable financial substance who could have funded any shortfall in external funding of the proposed acquisition of the CBB Business by or on behalf of the plaintiffs.

Mr Porter sold the totality of his interest in Porter Plant to Kanamoto in October 2020. Following the sale, he remained the managing director of Porter Plant until June 2022.

B2. Mr Conheady

Mr Conheady gave evidence of his agreement with Chris Debono for the purchase of an 80% share in CBB for $9.6 million with each of Chris and Anthony Debono retaining a 10% share. He also gave evidence of the plaintiffs’ intention to use CBB as a supplier to Porter Plant.

Mr Conheady gave evidence of the plaintiffs’ intention to change the management structure of the business; to promote Cornelius Mitchley (‘Mitch’) to the position of General Manager, enabling Chris Debono to reduce his working hours.

B3. Mr Matthews

Mr Matthews gave evidence in chief directed to four topics:

(a) the payment of $200,000 by CBB in settlement of a claim by the former CEO of CBB who left the business on 28 June 2020;

(b) directors’ fees paid by CBB of $78,000 per annum to each of the directors; Chris and Anthony Debono, Mr Mulcahy, Mr Broadbent, Mr Ford and Mr Matthews, the last four of whom are directors of BFMM;

(c) the amount paid pursuant to the Share Sale Agreement between CBB, Chris Debono, BFMM and its directors by way of adjustments relating to work in progress (WIP) and stock; and

(d) loan repayments made by BFMM relating to its $8 million loan obtained to fund the interest which it acquired in the CBB Business. BFMM has no business other than concerning its investment in CBB.

There was some exploration in cross‑examination of Mr Matthews of the first issue, the $200,000 payment. That topic concerns the unfair dismissal claim discussed in section E1.4.

The second issue, directors’ fees paid or payable to the directors of BFMM in their capacity as directors of CBB, was also the subject of cross‑examination. That topic is discussed in section E1.3.

Mr Matthews was also questioned about the other two topics to which his evidence in chief was directed, and more broadly in relation to the business.

Mr Matthews confirmed that the Debono family is still very much involved in the CBB Business. In June 2020, the son of Chris Debono, Christopher Debono, who has an engineering background, became general manager / CEO. At the time of trial, Anthony Debono, Chris Debono, his son Christopher, and another family member, Benjamin Debono, continued to be employed. Chris Debono remains as managing director with an advisory board comprising the BFMM directors.

Mr Matthews was cross‑examined about a February 2019 document titled ‘CBB Share Structure & Proposed Share Structure’, which showed the holding of shares in CBB by BFMM, with Mr Broadbent, Mr Ford, Mr Mulcahy and Mr Matthews each holding their respective interests in CBB via BFMM. The structure document adopted a value of $16 million net for CBB.

Evidence was given of a company called DDBFMM Investments (the letters standing for Debono and Debono, Broadbent, Ford, Mulcahy and Matthews), which owns industrial land in Ballarat. Mr Matthews gave evidence of an intention to develop that land for use by CBB and that rent of approximately $120,000 per year has been paid. As neither party contended for a normalisation adjustment to profit on account of that rent, and no party contended for any other financial adjustment on account of that land, it is unnecessary to say anything further about it.

C. Claim items 3(a) and (b)

As part of their claims for damages for breach of contract, the plaintiffs claim 80% of 56% of $1,779,231 in relation to Porter Plant truck bodies and 80% of 56% of $7,603,778 concerning Porter Plant’s contract with VicRoads. These claims are separate to the claims for damages for breach of retainer considered by the expert accountants. They depend on lay evidence.

Mr Porter gave evidence that, since 1 July 2018, Porter Plant has outsourced the fabrication of trailers and truck bodies to third parties as per the spreadsheet relied on by the plaintiffs. As at July 2022, Porter Plant had approximately 65 orders for the future construction of vehicles for VicRoads, work which Mr Porter said could have been placed with CBB if the plaintiffs had purchased a controlling interest in the business. In addition, Porter Plant would have engaged CBB to manufacture forward spreading asphalt units to be supplied to VicRoads. Mr Porter said he knew from his tour of the plant with Chris Debono that CBB had the right mentality in the business to develop new products, such as the forward asphalt spreader.

Mr Porter gave evidence that he did not have an expectation that there could be new work for CBB in the way of body building for Porter Plant at the time he and Mr Conheady were seeking to purchase a controlling interest in CBB. The opportunity in relation to body building for Porter Plant was ‘going forward’.

Mr Conheady gave evidence that, in about August 2021, Porter Plant secured an agreement with Head of Transport for Victoria (‘VicRoads’) for the supply by hire of certain items of plant and equipment for a seven‑year period, plus options for an additional two years (‘the VicRoads Contract’). His evidence was that many of the items to be hired under the VicRoads Contract could and would have been manufactured by CBB if he and Mr Porter had completed their purchase.

Schedules 1 and 2 to Mr Conheady’s first witness statement are two spreadsheets prepared to support claims 3(a) and (b).

Schedule 1 is a spreadsheet titled ‘Porter Excavations Pty Ltd – Builds at CBB’. Schedule 1 lists the plant and equipment that Mr Conheady expected Porter Plant would have built at CBB if he and Mr Porter had completed their purchase of a controlling interest in the CBB Business. The spreadsheet shows that Porter Plant spent approximately $5,018,044 acquiring plant and equipment from third parties between July 2018 and June 2022 where the body component could have been fabricated by CBB. Mr Conheady calculated the total cost Porter Plant paid to third party manufacturers to build plant bodies which could have been built by CBB and paid directly to them if he and Mr Porter acquired the CBB Business as $1,779,231.

Schedule 2 is a spreadsheet titled ‘VicRoads Contract – Builds at CBB’. Schedule 2 lists all plant and equipment Porter Plant is required to supply pursuant to the VicRoads Contract which Mr Conheady expects would have been built at CBB if he and Mr Porter completed their proposed purchase. The spreadsheet shows that Porter Plant will spend $16,003,887 to supply equipment under the VicRoads Contract by engaging third parties to manufacture the assets required, $7,603,778 of which relates to costs incurred in building the bodies of assets which Porter Plant would have used CBB to build.

In his evidence in chief, Mr Conheady explained the basis of the calculations in the Schedules 1 and 2. He said that, given that Porter Plant buys a high volume of plant and equipment, including items that were or could be manufactured by CBB, he and Mr Porter had discussed funnelling such work to CBB. Mr Conheady understood that, with some modest upgrades to its machinery and training, CBB would be capable of manufacturing items Porter Plant already purchased from CBB, as well as items Porter Plant purchased from third parties.

Claims 3(a) and (b) assume that, had the plaintiffs been successful in acquiring a controlling interest in CBB, the work the subject of the claims would have been directed to CBB. They also assume that, had the work been directed to CBB, the relevant profit margin on the work would have been 56%, being the higher post‑acquisition net profit margin identified by Mr Meredith. The claims depend for their success on a finding that CBB had or could have been provided with the capacity to carry out the work and upon a finding that the costs and margins that would apply to such work are as contended for by the plaintiffs.

The Mulcahy parties disputed any entitlement on the part of the plaintiffs to recover claim items 3(a) and (b), or either of them. They submitted that for either of these claims to succeed, the plaintiffs need to prove all the links in the chain of causation and that they failed to do so.[9]
[9]Relying on the discussion by Brennan J in Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 358–359.

The defendants advanced three reasons why the plaintiffs failed to prove claims 3(a) and (b). The first, because CBB did not have the capacity to perform the work and to make the profit as calculated. The second reason, the plaintiffs failed to demonstrate that CBB had the ability to undertake some of the work, including the work to design and manufacture a forward spreading unit. The third reason, the claim period extends from July 2018 through to June 2022. It was submitted that the plaintiffs have not established that any purchases would have been made after Porter Plant was sold in October 2020.

I agree, for the first reason identified by the Mulcahy parties, that claim items 3(a) and (b) are not proved. If it were necessary to determine, I do not consider that the second reason is a barrier to the plaintiffs otherwise succeeding on the claims. I also do not consider the evidence relating to the third reason undermines the validity of the claims if otherwise made out, which, because of the first reason, I do not consider to be the case.

Turning to the first reason, the relief claimed assumes that CBB had or that arrangements could and would be put in place to ensure that it had the necessary additional capacity to undertake 100% of the additional work.

Mr Conheady’s evidence was that Porter Plant would not have sought to ‘jump the queue’ on other orders. Therefore, whether or not the Porter Plant revenue was realisable depended on CBB having or ensuring there was the necessary additional capacity.

The Mulcahy parties submitted that Mr Conheady and Mr Porter ‘both knew when they were looking at it that the order book was large and that the business was at that time at capacity’. That submission accords with the evidence, including the evidence of Mr Porter given in the relief trial. Mr Porter agreed that, in February 2018, there was a lag of ‘many months’ in the CBB order book.

Mr Matthews gave evidence, which I accept, that the capacity issues have continued since 2018 and remain an issue for the business. As at 2023, there was a 12‑month wait on products.

The Mulcahy parties submitted that absent further expense on capital or labour, there was no capacity in the business to do the work the subject of claims 3(a) and (b). Given the continued delays in meeting orders from 2018 to 2023, of which Mr Matthews gave evidence, and the way in which the plaintiffs put this claim, no ‘queue jumping’, I agree. I am not satisfied that there was capacity in the business for the Porter Plant work the subject of these claims with the existing capital base and labour force arrangements in place.

The plaintiffs sought to meet the capacity issue by referring to changes they proposed to implement to the business and to improvements to efficiency.

Mr Conheady gave evidence that, over a 12‑24 month period after acquisition, the plaintiffs’ intentions for the CBB Business were to:

(a) create an insurance repair division;

(b) improve the utilisation of under‑utilised assets, such as the CBB spray booth and sandblasting operations;

(c) grow and improve CBB’s spare parts division;

(d) leverage existing assets by introducing a double shift or changing shift patterns, taking into account CBB’s large order book and wait time issues; and

(e) investigate offshore fabrication to generate greater output.

It was Mr Conheady’s evidence that these plans were based on leveraging CBB’s existing infrastructure, people, processes and systems, and customers.

In a February 2019 document, the CBB board’s desire to specifically focus on growth of 15% (revenue or EBIT) was recorded, with key business considerations and priorities identified including supervision in production review and, specifically, productivity. While Mr Matthews could not recall the target, he accepted that 12 to 15% sounded like the sort of growth figures the directors would normally be wanting. In cross‑examination he agreed that, to increase productivity, assets could be leveraged to make them work better for the business.

There was no real dispute that the plaintiffs had the plans for the business of which Mr Conheady gave evidence. The contest was whether or not the plaintiffs’ plans would have increased capacity sufficiently for CBB to take on the Porter Plant work and the cost impact of the implementation of those plans.

The first measure identified by the plaintiffs to improve output was changes in shift patterns.

Mr Porter considered capacity could be increased because the business did not work Saturdays and there was no overtime. He said he was told by Chris Debono:

[D]efinitely … they didn’t work Saturdays, that he was over it and he was - it’s an area in the business that could’ve been ramped up a bit. There was no overtime.

Mr Conheady said that he formed the view that more work could be undertaken with the existing staff working longer hours:

I asked Mr Debono about multiple shift patterns and working weekends and the like. Ah, he mentioned that a lot of overtime wasn’t worked and weekends were worked historically but they weren’t worked anymore. Um, he was aware that he was potentially losing some orders through customers because the time was so long, ah, but, um, you know, given where he was just coming back to work from his health scare, looking to pull back from the business, I think he was accepting of it - the fact that, ah, he’d lost a bit of energy to sort of drive the business forward.

While the opportunity to change work patterns was no doubt there, there was no evidence led by the plaintiffs of precisely what changes to shift patterns would be implemented, whether the existing or a new or expanded labour force would be willing to undertake such shift work and, if so, at what cost to the bottom line.

Separately, what occurred in fact after BFMM’s purchase of the business does not provide support for the ability of the existing CBB Business to undertake the Porter Plant work even with additional shifts.

The plaintiffs referred to Mr Matthews’ evidence about periods of time in 2021 and 2022 when employees worked on Saturdays to increase productivity and to deliver products in a more timely fashion when the waitlist became too long. They submitted this evidence demonstrates that the increase in shifts and weekend work was an opportunity available to the business which the business took up for a limited time to increase output. That is an accurate submission. However, it fails to recognise that, even with those changes, the delays bedevilling the business in 2018 continue in 2023 even without the extra work the subject of claims 3(a) and (b).

Mr Matthews said that, in 2022, the plant had operated on Saturdays for four months and that it had done so for two or three months in 2021 to increase production. He gave evidence that the number of staff of the business had increased during the last two years, but that there has been ‘a bit of turnover’ and it had been necessary to look offshore for workers such as welders under visas. Evidence was given that the business had invested in a robot, which at the time of trial was being installed, and a new jib crane with the intention to purchase a number of those cranes in the expectation that expenditure on these items would improve productivity. While there was evidence of these steps having been taken or being taken, delays in meeting orders remained an issue for the business as it was being conducted at the time of trial.

The second measure Mr Conheady identified that could be used to increase productivity and capacity was offshore manufacturing.

Mr Conheady described the use of offshore manufacturing as ‘effectively … leveraging somebody else’s manufacturing facility and their people as well’. Mr Conheady, a former management consultant at AT Kearney, gave evidence that he had specific expertise in offshore manufacturing from his time working at Pacific Brands. In cross‑examination, Mr Matthews accepted that offshoring was an available opportunity.

I accept that Mr Conheady planned to investigate offshore manufacturing, and that offshore manufacturing was an available opportunity. There is no evidence the business has in fact gone down this path. There was no detailed evidence of how offshore manufacturing would have been undertaken, of comparative costs, of the impacts, if any, on product quality, and of how the use of offshore manufacturing would impact on capacity. There was a lack of evidence about the practical steps that would be required and would be taken to implement the plaintiffs’ plans. How realistic was the prospect of offshore manufacturing as the basis for undertaking the additional work or increasing the capacity of the existing business to enable the work to be undertaken?

The plaintiffs submitted that the defendants did not call Chris Debono or anyone else involved in the operations of the business to disprove Mr Porter’s and Mr Conheady’s evidence concerning the capacity issues and the measures proposed. The problem with this submission is that it is for the plaintiffs to prove the business had the capacity to undertake the additional work the subject of the claims for which they contend. It is not a matter for the defendants to disprove.

The evidence is insufficient to establish on the balance of probabilities that changes in shift patterns or other changes in the use of domestic labour alone, or in combination with the use of offshore manufacturing, or other initiatives proposed by the plaintiffs would have enabled the capacity issues experienced by the business to have been addressed and would have enabled CBB to undertake the Porter Plant work.

As a separate matter, there was no evidence concerning cost impacts that would arise if there were to be additional labour or changes in shifts or additional capital invested in order to increase production to enable this work to be done, or concerning the cost of work to be performed offshore. The Mulcahy parties submitted the onus of establishing the loss required the plaintiffs to have adduced evidence of the impacts if any on the cost base of the measures proposed, which they did not do. I agree.

The spreadsheets prepared by Mr Conheady did not assume that there would be overtime required to complete the Porter Plant work. The plaintiffs’ case was based on profit margin at the existing facility.

Mr Conheady gave evidence that further capital expense would be minimal and he assumed the costs, including labour, were included in the applicable profit margin. The plaintiffs submitted that the evidence in support of the proposition that the margins would have remained the same was Mr Meredith’s finding of a net profit margin of 56%. They accepted there was no other evidence directed to the margin issue.

Mr Meredith gave evidence that it would be appropriate to quantify this loss by estimating a net profit margin that would have been applied to the sales based on historical net profit margins, which have ranged between 36%‑52% in the years prior to the acquisition of CBB by BFMM and 51%‑56% in the years after the acquisition of CBB by BFMM. In their updated statement, the plaintiffs adopted the higher post‑acquisition net profit margin of 56%. However, the profit margins referred to by Mr Meredith are historical profit margins of CBB. They do not relate to the manufacture of the Porter Plant products. They do not factor in additional capital or labour costs. The 56% margin does not include any element of offshore manufacturing as the business has no history of that activity. While the margins do reflect some overtime, it is not safe to equate that amount of overtime with the unknown and unquantified amount of overtime that would be required in order to perform the work for Porter Plant.

I do not consider Mr Meredith’s evidence concerning margins to be of assistance concerning items 3(a) and (b).

In his first report Mr Meredith declined to make an adjustment to the trading results for potential revenue from Porter Plant. He did so because, primarily, he had not been able to establish:

(a)whether CBB would have had capacity to take on this work without any impact on other sources of revenue

(b) the likely costs associated with this work.

Neither of those gaps in the information available to Mr Meredith was satisfactorily addressed at trial. The capacity to carry out the work required by items 3(a) and (b) is not proved. The plaintiffs have not proved what the cost base would have been as a result of the proposed changes. The margin to be applied when calculating the loss sustained from the inability to perform such work, assuming capacity, was not proved. For those reasons, claim items 3(a) and (b) are not made out.

The second reason raised in cross‑examination is whether CBB had the ability to undertake some of the work, including manufacturing a forward spreading unit for VicRoads.

Mr Conheady accepted that CBB has never produced a forward spreading unit. Although he maintained that it was ‘basic engineering’ and ‘just an extension … on their current range’, he accepted that he did not have any personal experience and his assessment of CBB’s ability to produce the products was based only on a tour of CBB’s factory.

Mr Porter gave evidence that the forward spreading unit which Porter Plant has patented is the only design of its kind in Australia, and that Porter Plant is in a unique position to supply those vehicles. The work that would have been undertaken by the CBB Business was instead contracted out to Flocon Industries Pty Ltd, a third party manufacturer.

In cross-examination, Mr Porter gave evidence:

[W]hen I first went to do a shed tour with Mr Debono I was shown a, um, a trailer body that he was manufacturing in the back of the, um, the shed. It was in its very early stages of a moving-forward, which is, um, exactly the mentality that we’ve got in the forward spreading truck. So I knew that, um, they’ve got that mentality in the business.
What do you mean by mentality?---Being able to develop a new product.

I accept Mr Porter’s evidence and that he and Mr Conheady would have sought to have CBB build that part of the forward spreading units contracted out to Flocon Industries. No evidence was called by any of the defendants to contradict this evidence or to the effect that the business would not be able to manufacture the required parts of the forward spreading unit for which Porter Plant held the patent or that the business lacked the ability to carry out other aspects of the work.

I am satisfied from the fact that Porter Plant held the patent, the evidence concerning the general quality of work performed by CBB given in the liability trial, and the evidence of Mr Porter about his visit to the CBB premises and his observations concerning a ‘moving‑forward’ unit, that the second reason identified is not a valid reason for refusing this aspect of the plaintiffs’ claim. I find that, if there was capacity to do so, the business had the ability to manufacture the elements of the forward spreading unit manufactured by Flocon Industries and to carry out the other work the subject of the item 3(a) and (b) claims.

The third issue is that, while the calculation of the item 3(a) and (b) claims extends to 30 June 2022, Porter Plant was sold in October 2020 to a Japanese company, Kanamoto.

It was submitted that given that the logic of this aspect of the claim was for Mr Porter to capture the profit margin of the Porter Plant work, the opportunity ceased with the October 2020 sale. Mr Porter did not maintain any equity in the business following the sale, and neither did Mr Conheady (who never held such an interest).

Mr Conheady described the rationale underpinning the inclusion in the claims of work undertaken after October 2020:

Well, we took a snapshot from the July 18 to June 22. Porter Plant is an ongoing business even though Tim [Porter] has sold out on that date to a new owner, so Porter Plant still requires plant equipment in its course of business. And this document was prepared around that date, so that drew a line in the sand about how far we can go with the company records at that point in time.
…
Porter Plant the company is an ongoing entity. It requires plant and it continues to trace [sic] with CBB and these were items that would’ve been put through CBB um post transaction date of October 2020 with the benefits accruing to the shareholders which would’ve been Tim and myself. So, that’s why so that the, the hire company is continuing.

Mr Porter remained managing director of Porter Plant until June 2022. Mr Conheady continues to be employed by Porter Plant. In cross‑examination, Mr Porter did not agree that the opportunity to direct the work described in his evidence to CBB ended with the sale to Kanamoto. He regarded the opportunity as ongoing during the period through to June 2022, during which period he remained a consultant to Porter Plant.

Mr Conheady could not recall whether Porter Plant business was directed to CBB between July 2018 and October 2020, but said he ‘would assume so if we had a body to build’. His evidence was that the way in which Porter Plant directed its business did not materially change after Kanamoto acquired the business.

It was not suggested by the Mulcahy parties that the pricing of the products the subject of the two claims factored in a level of pricing that exceeded competitive market pricing. I accept Mr Conheady’s evidence that after Kanamoto assumed ownership of Porter Plant in October 2020 ‘we were just using our suppliers in our normal course of business based on what our requirements were’. It was not suggested that the items of work claimed, and in the volumes identified in Schedules 1 and 2, were other than items required in the ordinary course of the business of Porter Plant.

While it would have been necessary for the plaintiffs to have disclosed their conflict of interest to Kamamoto, I accept Mr Porter’s evidence that the opportunity was ongoing through to June 2022. I do not regard the October 2020 sale of the business as bringing these claims or either of them to an end, or constituting facts that mean the claims, if otherwise substantiated, are either not proved or must fail.

In further response to claims 3(a) and (b), the Mulcahy parties advanced a submission concerning loss. Referring to Johnson v Gore Wood & Co (‘Johnson v Gore Wood’),[10] they submitted claims 3(a) and (b) are claims for reflective loss. It was submitted the Court should be cautious about simply allocating this purported loss to the plaintiffs, as their framing of the relief case was that income would go to their new vehicle as trustee of a new unit trust, and from that vehicle to their individual trust structures.
[10][2002] 2 AC 1.

In Johnson v Gore Wood, Lord Bingham summarised the applicable principles:[11]

(1) Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder’s shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company’s assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss. So much is clear from Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, particularly at pp 222–223, Heron International, particularly at pp 261–262, George Fischer, particularly at pp 266 and 270–271, Gerber and Stein v Blake, particularly at pp 726–729. (2) Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding. This is supported by Lee v Sheard [1956] 1 QB 192, 195–196, George Fischer and Gerber. (3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other. I take this to be the effect of Lee v Sheard, at pp 195–196, Heron International, particularly at p 262, R P Howard, particularly at p 123, Gerber and Stein v Blake, particularly at p 726. I do not think the observations of Leggatt LJ in Barings at p 435B and of the Court of Appeal of New Zealand in Christensen v Scott at p 280, lines 25–35, can be reconciled with this statement of principle.

[11]Ibid 35–36.

The plaintiffs responded by submitting that Johnson v Gore Wood makes the point that when a company sues for loss and a shareholder claims to have suffered a corresponding loss, it is an abuse of process to sue for the same loss. That circumstance has nothing to do with the present case.

I agree. This is not a case where both the individuals and their corporate entities are seeking to recover the same loss. The unit trust structure that was proposed was never established. There is no claim by Porter/Conheady related entities. No issue of reflective loss arises.

D. Scenario 2

Scenario 2 was advanced by the plaintiffs in their updated statement as the basis upon which relief for breach of contract and/or equitable compensation assessed as at the date of trial should be based.

There was some confusion and some moving around by the plaintiffs during the course of the trial and in closing submissions concerning how they relied on Scenario 2. There was also some inconsistency between how Mr Meredith integrated information provided to him into his consideration of Scenario 2 and how the plaintiffs relied on Scenario 2.

Scenario 2 is based on projections for the business prepared by Mr Conheady in 2018. The experts considered the projections as one of two alternate scenarios when seeking to assess loss at the date of trial. Neither expert used the 2018 projections to assess loss at the 2018 date of breach.

The difficulty about using Scenario 2 to assess damages in 2022 is that there is an inherent conflict between adopting a valuation at the date of trial, which takes into account the effect of events subsequent to the breach, and using projections prepared in 2018, which do not take into account the actual performance of the business subsequent to the breach. In this case that includes using projections that cover extended periods where the business was required to deal with the pressures arising from the COVID‑19 pandemic.

There is also a tension between the plaintiffs relying on a 2018 view of future profitability for the assessment of damages for breach of retainer, which as a general rule will be assessed at the date of breach, and relying on the same projections as the basis for an assessment of equitable compensation for which, as the Court of Appeal said in Schmidt v AHRKalimpa Pty Ltd (‘Schmidt’),[12] the normal rule is to assess compensation as at the time of the trial, with the ‘full benefit of hindsight’.[13]
[12][2020] VSCA 193.
[13]Ibid [184] (Kyrou, Hargrave and Emerton JJA).

D1. The evidence

Mr Meredith reported that he presented both Scenarios 1 and 2 in order to allow the Court to decide which scenario is most reasonable considering all the evidence.

Scenario 1 is based on the actual trading results of CBB under BFMM majority ownership, including taking into account actual financial results to 30 June 2022.

The documents upon which Mr Meredith relied when expressing his opinions concerning Scenario 2 include document reference 725, an Excel document described as ‘2018_2023 Forecasts_CBB__3 Way_Normalised_Aligned to 1 Jan 2018_5 Year Repayment Option_Quarterly_65% Owned_22.1.18 Version’ prepared by Mr Conheady, document reference 723, a working draft of Mr Porter’s 2022 witness statement, and document reference 736, a working draft of Mr Conheady’s 2022 witness statement.

Mr Conheady’s evidence was that:

[T]he financial modelling [in the excel spreadsheet] was based on the historic performance of the organisation and had been relatively stable over the 15, 16, 17 financial years and that provided the basis looking forward we didn’t bake any opportunities into the outlook.

Scenario 2 assumes that the business would continue to trade at similar levels to prior years. Mr Meredith considered that Scenario 2 was based on reasonable projections, which were generally consistent with historical trading results prior to FY18. It was his evidence that, while he did not undertake a line‑by‑line analysis to satisfy himself that the forecast was properly and correctly prepared, he did form a view as to reasonableness based on revenue, gross profit and EBITDA. Ms Wright opined that, even if the projections were reasonable in 2018, the task for the experts was to undertake a valuation as at 2022.

Mr Meredith’s first report states:

3.3.22‘Scenario 2’ has been prepared based on the projections prepared by Porter and Conheady for the purposes of the Westpac proposal documents.
3.3.23The projections:
(a)       relate to calendar years 2018 to 2022
(b)reflect the structure and financing of the transaction in Scenario 2, consistent with the description of these components set out in paragraphs 3.3.3 to 3.3.13
(c)assumed the business would continue to trade at similar levels to prior years, noting that:
(i)projected revenue was $17.43 million, in comparison to prior year revenues of:
(1)       $16.89 million in FY14
(2)       $15.58 million in FY15
(3)       $18.15 million in FY16
(4)       $17.75 million in FY17
(ii)projected EBIT of $5.21 million, in comparison to prior year EBIT figures of:
(1)       $5.26 million in FY14
(2)       $4.78 million in FY15
(3)       $5.58 million in FY16
(4)       $6.36 million in FY17.

Mr Meredith continued:

3.3.24 I have considered adjusting the projections for hindsight, particularly in relation to the market conditions in relation to COVID‑19 and rising material prices, but have not made any adjustments because I am unable to quantify these changes with a reasonable degree of certainty.

As Mr Meredith reported, the actual trading results of CBB after BFMM acquired its controlling interest were generally significantly below historical results prior to the acquisition. They were also significantly below the projections for the business prepared by Mr Conheady.

It was put to Mr Matthews and raised in closing submissions that, in litigation against CBB, the former CEO had raised questions about the accuracy of the accounts of CBB. It was submitted the allegations in the statement of claim by the former CEO concerned fundamental issues of accounting for income, accounting for expenses and claims that income was understated and expenses artificially inflated. Mr Matthews denied the validity of the allegations, but they raised issues outside his involvement in the business.

It is not appropriate to draw an inference that the accounts of the business understate profit in circumstances where the former CEO who made the allegations relied on did not give evidence, where the allegations were untested allegations denied in the defence in the proceeding, and where no request to investigate these matters was made of either of the accounting experts, who were also not questioned about the alleged discrepancies.

The extract below from Mr Meredith’s first report sets out the position about earnings over time and includes some commentary concerning Scenario 2:

6.3.1 Since the acquisition of CBB in FY19, there has been moderate volatility in CBB’s earnings, as shown in Table 10. This volatility was driven by:
(a) the impact of the business changing ownership in FY19
(b)the emergence of COVID‑19, primarily from FY21 onwards (impacting labour costs and availability)
(c)rising material prices, primarily from FY19 onwards (impacting gross margins).

6.3.2In Scenario 2, it was forecast that CBB would have stable earnings until 2022 of:
(a)revenue of $17.43 million
(b)gross profit of $9.14 million
(c)EBITDA of $5.31 million
(d)EBIT of $5.21 million
(e)profit before tax of $5.21 million.

6.3.3In my view, the earnings in Scenario 2 (under ownership of Porter and Conheady) may have been more immune to the drivers of volatility as set out in paragraph 6.3.1 because of the significant orders that would have flowed to CBB from Porter Plant (as discussed in paragraphs 3.3.25 to 3.3.28), which may have allowed Porter and Conheady to:
(a)increase revenues to maintain total profits, despite falling margins
(b)protect profits margins by:
(i) directing more profitable work to CBB from Porter Plant
(ii) being less likely to have to undertake low margin work.

When discussing factors he considered might assist the Court to determine in favour of adopting Scenario 2, Mr Meredith referred, amongst other things, to the Porter Plant work:

(b)in favour of adopting the ‘Scenario 2’:
(i)the actual trading results of CBB under BFMM have generally been significantly below historical results before the acquisition and the projections prepared by Porter and Conheady, which indicates that the cause of the difference in trading results may be due to the changes made under BFMM ownership
(ii)Porter and Conheady had intended to increase the profitability of the business by directing orders from Porter Plant to CBB, which increases the likelihood that the projections prepared by Porter and Conheady would have eventuated
(iii)the projections prepared by Porter and Conheady directly reflect their best estimates of the Scenario 2 being modelled, notwithstanding they do not incorporate:
(1) hindsight (which may have the effect of decreasing the cash flows due to the impacts of COVID‑19 and rising material costs)
(2) the ideas for improving CBB as set out in the Porter and Conheady statements (which may have the effect of increasing the cash flows)

The problem with this discussion is that, even though the statements with which Mr Meredith was briefed included reference to the Porter Plant proposed purchases, it is no part of the Scenario 2 projections to include or to take into account the impact of the proposed Porter Plant work. In those circumstances it is not open for the Court to find, as was the opinion expressed by Mr Meredith in section 6.3.3 of his first report, that the impact of the proposed Porter Plant work is a reason to conclude that, under Conheady/Porter management, the business might have been more immune to the drivers of volatility than under BFMM management.

Mr Meredith referred in his report to Mr Porter and Mr Conheady’s ideas for improving the business described in their witness statements in the context of Scenario 2. However, there was some confusion about this issue. Senior counsel for the plaintiffs opened the case on the basis that Scenario 2 was based on the plaintiffs’ plans for the business. It was clarified in closing submissions that the projections were based on there being ‘no changes to the way the business operated’.

Ms Wright held to the view that Scenario 2 is not an appropriate basis to assess loss of profits suffered by the plaintiffs:

5.4.7.…
(a)I have been provided with the FY22 financial statements recording the ‘actual’ financial performance of CBB. In my view, it is more accurate and appropriate to adopt actual financial information where it is available, rather than rely on projections which are only estimates made at a point in time;
(b)The Conheady Projections were prepared by the Plaintiffs in 2018 and therefore do not reflect the actual performance or the actual market conditions relevant to operations for the period between 2018 and 2022 (including the effects of COVID‑19);
(c)The Conheady Projections do not appear to take into account any capacity constraints that CBB has faced or may face after 2018. For example:
(i) Board minutes dated 9 October 2018 show that sick leave was having a detrimental effect on the business: “9 staff away Monday 8th. Lack of productivity killing the business output. Need to review policy to pay out unused sick leave? Voucher at end of month if haven’t had a sick day?”;
(ii) Board minutes dated September 2021 highlight the difficulties faced by CBB in obtaining supplies: “Shipping costs going…Parts hard to get for various reasons”

(d)I have not been provided with information detailing the underlying basis for the Conheady Projections; and

5.4.8.For the reasons discussed above, in my view, it is inappropriate to rely on a forecast prepared in 2018 for the purpose of assessing the cash flows that would have been generated by CBB between 2018 and 2022, when the financial statements recording the ‘actual’ cash flows are available for that period (from FY18 to FY22).

In cross-examination, Mr Conheady accepted that things like wages, the availability of labour and the cost of componentry and materials would affect the cost base. Mr Conheady accepted that there has been ‘a fair bit of inflation in durable goods … over the past … one to two years’. When asked whether the model that underlies Scenario 2 takes that into account, his evidence was:

No, … the model was … performed in constant dollars, so – and that was the assumption I made, so any – any uplift in prices, the assumption would’ve been there would be an uplift in – in revenue to hold dollar margin constant.

Mr Meredith gave evidence that, if valuing in 2022, ‘there’s always going to be an issue … [using Scenario 2] because of the effluxion of time’.

D2. Findings concerning Scenario 2

Scenario 2 was relied on in the updated statement as the primary basis for the calculation of damages for breach of contract and for equitable compensation.

The Mulcahy parties opened that equitable compensation should be assessed at the date of trial but in closing said that 2018 was more appropriate. Their opening submission was correct. In accordance with authority including Schmidt, equitable compensation is to be assessed with the full benefit of hindsight. The plaintiffs did not contend to the contrary. That being the case, an assessment of loss of profit based on Scenario 2 which proceeds on the basis of a 2018 projection and which has nothing to do with hindsight is irrelevant to the assessment of equitable compensation.

In closing submissions, the plaintiffs contended that, in contract, it is appropriate to value the business as at the date of trial rather than as at the date of breach. It was submitted that Scenario 2 was advanced in answer to the defendants’ contentions that the date of breach should be adopted when assessing loss in contract.

However, if the correct date to assess damages for breach of contract is the date of breach, while the 2018 projections provide a starting point, there is no expert evidence that builds on that starting point to provide an evidentiary basis to assess loss as at 2018 by reference to Scenario 2.

In support of the adoption of Scenario 2 as at the date of trial, in closing submissions the plaintiffs relied on Mr Meredith’s evidence that the cause of the difference between the projected and actual results after 2018 may be changes made under BFMM’s ownership and that the plaintiffs had intended to increase the profitability of CBB by directing orders to CBB. That submission was made notwithstanding the plaintiffs’ submission at paragraph 119 above that the projections were based on there being no changes to the way the business operated.

BFMM contended that the plaintiffs did not demonstrate that the actual performance of CBB when compared to the 2018 projections was in any way a result of mismanagement of CBB by the BFMM appointed directors.

I agree with BFMM. It was not put to Mr Matthews in cross‑examination that the BFMM appointed directors had acted to stifle growth or business performance or that decisions made by or as a result of the presence of the BFMM appointed directors of CBB had an adverse impact on CBB’s performance. In re‑examination, Mr Matthews was asked whether the board had taken any decision deliberately to suppress profits, to which he responded ‘No. Absolutely not’.

The impact of BFMM’s majority ownership on the performance of the CBB Business to which Mr Meredith referred is speculation only. There was no evidence of adverse impacts on the business of decisions taken by the BFMM appointed directors of CBB after BFMM assumed a controlling interest in the business.

I do not consider the plaintiffs’ reliance on Scenario 2 for an assessment of damages for breach of contract or equitable compensation as at 2022 as contended for in the updated statement to be persuasive. There are a number of reasons why that is the case:

(a) First, Scenario 2 is based on a projection when there is an available alternative, Scenario 1, based on actual performance.

(b) Second, although allegations were made concerning the accounts of CBB after 2018, there is no reason to doubt the genuineness or the accuracy of the actual performance of the business as recorded in the accounts.

(c) Third, one of the factors Mr Meredith identified in his report as weighing in favour of Scenario 2, further work from Porter Plant, is separately claimed as items 3(a) and (b). That work is not included in and does not form part of the basis of the projections that underpin Scenario 2.

(d) Fourth, as Mr Conheady was obliged to concede and as submitted by BFMM, Scenario 2 does not factor in increases in material and labour costs. It is a calculation in constant 2018 dollars. The projections also do not take into account actual capacity constraints encountered by the business as noted by Ms Wright.

(e) Fifth, as Ms Wright observed, Mr Conheady’s projections do not reflect the actual market conditions relevant to operations of the business for the period between 2018 and 2022. Mr Conheady could not have foreseen and his projections do not factor in the impact on the business of the COVID‑19 pandemic; impacts on labour costs and availability, on cash flows and on rising material prices to which Mr Meredith referred.

(f) Sixth, Scenario 2 fails to take into account the volatility in earnings to which Mr Meredith referred in section 6.3.1 of his report.

(g) Seventh, a lesser consideration, if Scenario 2 were to be adopted, the modelling undertaken by Mr Meredith would need to be adjusted to take into account the 1% management fee Mr Porter and Mr Conheady proposed to charge. The plaintiffs did not prove Scenario 2 on a basis that incorporated that fee as an expense, even though that is their case.

(h) Eighth, in the case of equitable compensation, the law requires the use of hindsight, which is inconsistent with the use of Scenario 2.

E. The Expert Evidence

Mr Meredith provided two reports. The first dated 18 July 2022, and the second dated 20 February 2023. When preparing his second report, Mr Meredith had available and considered the complete financial records of CBB and BFMM for the 2022 financial year, together with monthly management accounts from July 2022 to December 2022 and management projections for the 2023 financial year. He took into account this additional information in updating the opinions in his first report. His second report also responded to Ms Wright’s second report.

Ms Wright prepared two reports, the first dated 25 November 2022 and the second dated 6 December 2022. It is unnecessary to refer to Ms Wright’s first report as it was superseded by her second report.

Both experts worked cooperatively to provide the Joint Report. Both embraced the objective of the Joint Report process, namely, to identify areas of agreement and disagreement. It is important to record that in seeking to do so, the experts needed to grapple with different methodologies which they had adopted in their reports. That is particularly the case concerning their approaches to an account of profits detailed in Table 3 of the Joint Report. Because their methodologies when addressing that topic were quite different, their individual reports are of greater assistance in relation to that topic than the Joint Report which, if taken in isolation from their individual reports, might provide a misleading impression of their opinions.

I found both experts to be helpful in identifying and explaining the areas of difference and their reasons for disagreement. The experts and all counsel involved are to be commended for the efficient and helpful manner in which the concurrent evidence was conducted, including cross‑examination on the contested topics.

E1. Loss of profit calculation

The experts agree that an appropriate methodology to calculate the loss of profit is to calculate the difference between the but‑for scenario and the actual scenario.

In his second report Mr Meredith set out the approach, common to both experts when seeking to calculate the loss to Mr Porter and Mr Conheady, described by the experts as loss of profit from breach of retainer. It is helpful to reproduce an extract from that report which includes a convenient identification of differences between Mr Meredith’s first report and his second report and differences between his opinions and those expressed by Ms Wright in her report:

1.3.1    The loss to Porter and Conheady “resulting from the breach of retainer”:
…
(b)has been revised to between $4,832,446 and $11,131,100 to each of Porter and Conheady (collectively between $9,664,891 and $22,262,201) having since been provided:
(i)        the FY22 accounts
(ii)       managements FY23 forecast
(iii)monthly management accounts from July 2022 to December 2022

(c)is based on the application of my approach to calculate future lost cash flows beyond 31 March 2022 by:
(i)valuing the market value of the shares in CBB based on two scenarios
(ii)apportioning for the defendants would‑be 80% shareholding
(iii)valuing the would‑be net debts in relation to the acquisition of CBB

(section 4)
(d)should be split evenly between Porter and Conheady in accordance with their equal would‑be shareholdings

(e)       is different to that set out in the Wright Report due to:
(i)        the future maintainable earnings adopted
(ii)       the EBITDA multiple
(iii)      the line fee calculation on the bank debt

(f) with respect to Scenario 1 is set out below:
(g) with respect to Scenario 2 is set out below:

Because the loss of profit calculations in Tables 1 and 2 are based on an 80% interest in CBB, assuming an individual plaintiff’s damages are to be calculated based on a 40% interest, the loss of profits for that plaintiff calculated in accordance with Scenario 1 as per Mr Meredith is $4,832,445.50. As per Ms Wright the corresponding amount is either $294,262.50 as per Alternative 1 or $468,762.50 as per Alternative 2. The total loss of profits calculated by Mr Meredith in accordance with Scenario 2 is $22,262,201. For each plaintiff based on a 40% interest, their individual losses are 50% of $22,262,201; $11,131,100.50.

[110]Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 14 [13] (citations omitted).

BFMM submitted Ancient Order of Foresters supports the position that the principle an errant fiduciary must disgorge ill‑gotten gains is subject to the principle that equity limits the disgorgement of any gains made in breach of fiduciary duty so as not to unjustly enrich. A critical issue is the extent to which adjustment should be made to any prima facie award; and whether an account of profits should be granted based upon 100% of the profits of BFMM’s interest in CBB (being 67%), or 40% of the profits of the overall CBB Business (being so much of the CBB Business that Mr Conheady sought to acquire). BFMM submitted the maximum profit Mr Conheady can require be disgorged is 40% of the total income of CBB, not the full 67% which BFMM in fact received. Mr Conheady submitted that to restrict relief to 40% is contrary to the decision of Mason J in Hospital Products.[111]
[111]Citing Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 107; see also Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 420 [575] (Finn, Stone and Perram JJ).

G3.2 Consideration

It is convenient to begin consideration of this topic by referring to some introductory remarks by Dr Peter Devonshire in his 2013 text ‘Account of Profits’:[112]

3.3.1 Introduction
It has been said that the primary remedy for breach of fiduciary duty is an account of profits flowing from the breach.[113] When a fiduciary makes an unauthorised gain, equity’s objective is essentially confiscatory. An account of profits performs the crucial function of stripping the wrongdoer of illicit gains.[114] The liability to account is personal.[115] The precise form of an order for account in a given case expresses the court’s perception of the nature of the wrongdoing.

[112]Peter Devonshire, Account of Profits (Thomson Reuters, 2013), [3.3.1].

[113]Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [53] per Gault J. Alternatively the plaintiff may elect to receive equitable compensation if the defaulting fiduciary did not make a gain, or any gain was exceeded by the plaintiff’s loss. It is also open to the court to grant proprietary relief in the form of a constructive trust, or security by way of an equitable lien or charge. See further Foskett v McKeown [2001] 1 AC 102 (HL) at 130 for discussion of the plaintiff’s election where the trustee’s gain takes the form of property acquired with trust funds.

[114]Proprietary relief in the form of a constructive trust may be imposed over the defendant’s property but this is usually granted where a personal order fails to achieve the court’s remedial objective. See Farah Constructions Pty Ltd v Say‑Dee Pty Ltd [2007] HCA 22, (2007) 230 CLR 89 at [200].

[115]Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 395.

In Warman,[116] the High Court put the position as follows:[117]
[116][1995] HCA 18; (1995) 182 CLR 544.
[117]Ibid 560–561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) (citations omitted).

But a distinction should be drawn between cases in which a specific asset is acquired and cases in which a business is acquired and operated. Such a distinction was drawn by Upjohn J in In re Jarvis (decd) in the context of considering a defence of laches, acquiescence and delay. However, in our view, the distinction is also relevant in the context of the fiduciary’s liability to account for profits. In In re Jarvis (decd), Upjohn J said:
“In dealing with [a] business, the principles applying are quite different from those in the case of a specific asset, such as a renewed lease.”

…
In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal’s goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal’s property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff’s property but the product of the fiduciary’s skill, efforts, property and resources.

Where the defendant contends it would be inequitable to order an account of the entire profits, the onus is on the defendant to establish that is the case.[118] Ancient Order of Foresters, amongst others, is authority for that proposition.[119] There are generally two ways of doing this. Either to establish an allowance for costs incurred and labour and skill employed should be applied or to demonstrate the profit was ‘beyond the scope’ of the wrongdoing, in that it has no reasonable connection with the wrongdoing, such that it would be inequitable for the defendant to account for it.[120]
[118]Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298, 383–384 [334]–[335] (Heydon JA), applying Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561–562 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
[119]Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 14 [13] (Kiefel CJ, Keane and Edelman JJ), 38 [91] (Gageler J).
[120]Ibid 14–15 [14]–[16] (Kiefel CJ, Keane and Edelman JJ), 38–39 [92] (Gageler J).

BFMM submitted in circumstances where it has expended resources and relied upon expertise in developing the CBB Business, it is appropriate for the Court to reduce any profit that might be ordered to be disgorged to Mr Conheady on account of that contribution. It relied on Grimaldi v Chameleon Mining NL (No 2) (‘Grimaldi’),[121] where Finn, Stone and Perram JJ said:[122]

Contemporary Australian authority conforms to the above: where a portion of the profits made is “not the product or consequence of the plaintiff’s property but the product of the fiduciary’s skill, efforts, property and resources”, it would be inequitable to order an account of the “entire profits”: Warman, at 561. However, it is for the fiduciary to establish that inequity: ibid.

[121][2012] FCAFC 6; (2012) 200 FCR 296, 406–411 [517]–[535] (Finn, Stone and Perram JJ).

[122]Ibid 409 [528].

BFMM also referred to Warman, to which reference was made in Grimaldi, where the High Court said:[123]

Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case. However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profit‑sharing but will make allowance for skill, expertise and other expenses.

[123]Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 562 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ) (citations omitted). Similar sentiments were expressed in Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 406–407 [517] (Finn, Stone and Perram JJ).

The burden is on BFMM to show how it contributed to increasing or maintaining the value of the business and the profits for which Mr Conheady contends it must account. In Ancient Order of Foresters, Gageler J explained the onus of proof in cases such as the present, including emphasising the persuasive burden which the defaulting fiduciary must discharge in order to establish that the liability to account should be fixed at less than the full advantage obtained:[124]

The reasoning in Warman makes explicit that where there is shown to exist a causal connection between a fiduciary’s breach of fiduciary obligation and a benefit or gain to the fiduciary or knowing participant, the onus shifts to the defendant to establish that it is inequitable to order that the defendant account for the value of the whole of the identified benefit or gain. The shifting of onus is explicable in part, but only in part, as putting the burden of proof of contested questions of fact on a party who is a proven wrongdoer. The burden on the defendant is not just evidentiary; more fundamentally, it is persuasive. The obligation of the defendant, imposed as an incident of “the fiduciary relation itself”, is to “justify” the “private advantage” that has been obtained.

[124]Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 38 [91] (citations omitted).

With the exception of the argument that the directors’ fees ought not be disgorged, either directly or indirectly, and that they represent a just allowance, this is not a case where the defendants claim ‘just allowances’ for their contribution to the CBB Business. If it had been such a case, it might have raised issues of whether such allowances should be made having regard to findings in the liability reasons concerning the defendants’ conduct.[125] As no such claims are made, the impact of the defendants’ conduct on the relief to be granted does not fall for consideration.
[125]See Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298 (Spiegelman CJ and Heydon JA), and in particular Mason P in dissent at 331 [165]–[166].

The claim by BFMM is that because the asset in question is a business, upon which it has expended resources, and to which it contributed expertise, it is not appropriate to require it to disgorge all of the profits.[126]
[126]Citing Australian Postal Corporation v Lutak (1991) 21 NSWLR 584, 596 (Bryson J) and Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110, 140 (Hill J).

The problem with BFMM’s submissions is that BFMM did not lead any evidence and nor did it advance submissions that sought to establish how its expenditure on resources or its expertise, whether via the BFMM directors or otherwise, contributed to the profits of the business. The onus was on BFMM to establish the causal connection. It did not undertake that task. It failed to show that any proportion of profits over the period from 2018 was generated by the ‘skill, efforts, property and resources’ of the fiduciary.[127] It did not discharge the onus.
[127]Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ); Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 409 [528] (Finn, Stone and Perram JJ).

This is not a case where, as discussed in Ancient Order of Foresters, the profit generated by the business was ‘beyond the scope of the liability for which the wrongdoer should account for profits’.[128] The percentage of profits of CBB for which BFMM is being called upon to account does not impinge on the profits derived from the business by the Debono brothers. It is restricted to the percentage derived by the wrongdoers themselves.
[128]Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 15 [15] (Kiefel CJ, Keane and Edelman JJ).

Mr Conheady and Mr Porter intended to acquire an 80% controlling interest in CBB. In place of that occurring, BFMM acquired a 67% controlling interest. Mr Conheady intended the Debono brothers would continue to be actively involved in the business, and remain as minority shareholders. That is what occurred.

BFMM submitted to order an account of 100% of BFMM’s profits would result in an award greater than the potential loss (or foregone profits) experienced by Mr Conheady and that this points to such an order being punitive in nature and is contrary to the principle that an order should not be penal.[129] It submitted the ‘measure of liability’ should be ‘related to the plaintiff’s own interest’ being a 40% interest in the CBB Business[130] and that it would be ‘inequitable to order an account of the entire profits’ of BFMM’s interest.[131]
[129]Citing Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 39 [94] (Gageler J); Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 406 [514(i)]) (Finn, Stone and Perram JJ).
[130]Quoting PhippsvBoardman [1964] 1 WLR 993, 1017–18 (Wilberforce J).
[131]Quoting Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

This submission seeks to equate what is required on an account of profits with the loss suffered by Mr Conheady. That is not the task that is required. The task is to assess what part of the profits obtained by the defaulting fiduciary must be accounted for so as to ‘[strip] the wrongdoer of illicit gains’.[132] The benefits that flowed to BFMM from breach of fiduciary duty were not limited to 40% of the business. The benefits that flowed to BFMM are represented by the 67% interest in the business and the benefits attributable to that interest.
[132]Peter Devonshire, Account of Profits (Thomson Reuters, 2013), [3.3.1].

I do not accept the submission that to order BFMM to account on the basis of its full 67% interest rather than on the basis of the 40% interest which Mr Conheady would himself have acquired, is to punish BFMM or to cause Mr Conheady to be unjustly enriched. As discussed in Warman, it is for the defendant to show that to order a full account of the profit received would be inequitable.[133] BFMM has not discharged that burden. If there had not been the breach of the fiduciary duty that I have found, BFMM would never have acquired a 67% interest in the CBB Business, it would never have received the profits for which I find it must account.
[133]Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 561 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).

When determining what relief is appropriate, it is important to bear in mind as stated by Gageler J in Ancient Order of Foresters:[134]

82The principles applicable to the assessment of liability to account for a dishonest and fraudulent breach of fiduciary duty, like many principles of equity, “have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case”. Sufficiently for the circumstances of the present case, and consistently with the reasoning in Warman, they can be stated as follows.
83The “cardinal principle of equity” is “that the remedy must be fashioned to fit the nature of the case and the particular facts”. Contrary to approaches which have emerged in some English cases since Warman, identification of a benefit or gain for which a defendant fiduciary or knowing participant is to be ordered to account is the outcome neither of judicial discretion nor of the determination of a mere factual issue of causation. Identification of the benefit or gain is a matter of judgment informed by equitable principle. However contestable the judgment to be made might be on the facts of a particular case, the judgment to be made is one which admits only of a unique outcome which, once made, falls to be appraised on appeal according to a standard of correctness.

[134]Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 35–36 [82]–[83] (citations omitted).

In this case the circumstances dictate that the remedy that must be fashioned to fit the nature of the case is a remedy that requires BFMM to account for profits based on 67%, the whole of BFMM’s interest in CBB, calculated in accordance with the quantification of account of profits as discussed and found in section E2.

I do not consider that to order an account of profits based on the actual 67% interest of BFMM is anything other than ‘practically just’. Adopting the language of Gageler J, I do not consider that to require BFMM to account for the whole of its gain ‘would amount to a windfall to the plaintiff of such a nature or to such a degree that the accounting would fail to vindicate the purposes underlying equity’s imposition of the fiduciary obligation that has been breached’.[135]
[135]Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 38–39 [92].

In addition, the amount to be awarded on account of profits is to include the sum of $849,555 incurred by BFMM in defence of the proceeding. Both experts, although they used different methodologies, in some way deducted the legal expenses incurred by BFMM when calculating the profits of BFMM. This was inherent in Mr Meredith’s calculation because he looked at the distributions from BFMM to unitholders, and was explicit in Ms Wright’s calculation where she deducted expenses incurred by BFMM of $2,092,392 (amended to $2,092,393 in the Joint Report), including legal fees of $849,555. Ms Wright observed in her report that ‘[t]o the extent these legal costs relate to these proceedings (or are otherwise not attributable to BFMM’s interest in CBB), then my opinion of the account of profits derived by BFMM from its interest in CBB would be increased by this amount’. There was no suggestion the sum of $849,555 does not represent legal costs of the proceeding. BFMM must in addition account for those past legal costs.

I do not agree with Mr Conheady that there should be a calculation of costs of the proceeding incurred by BFMM since 30 June 2022 and a further accounting by BFMM in relation to that expenditure. No submissions were advanced by Mr Conheady in support of such an order. The account of profits calculation was done as at 30 June 2022. The costs are said to be BFMM’s costs, paid by BFMM. If BFMM used profits of CBB distributed to it after 30 June 2022 to pay its legal expenses, that expenditure would be expenditure out of profits for which BFMM is already otherwise required to account.

G4. Account of profits: The Mulcahy parties

By the updated statement, Mr Conheady claims an account of profits from the Mulcahy parties reflecting ‘an account of profit received by the Mulcahy Parties and BFMM from the date of acquisition by BFMM as well as an assessment of the future income stream brought to present value, being $11,013,138’. In closing submissions, the claim for an account of profits from the Mulcahy parties was a much more limited claim, and then against Mr Mulcahy personally only. It was a claim restricted to past directors’ fees or directors’ fees which would in the future be received by Mr Mulcahy. However, the wider claim in the updated statement was not formally abandoned.

The first difficulty with the claim against the Mulcahy parties in the updated statement is that the Mulcahy parties comprise both Mulcahy & Co Accounting Services Pty Ltd and Mr Mulcahy personally. Mulcahy & Co Accounting Services Pty Ltd does not and never has held any interest in CBB or in BFMM. Mr Conheady has no entitlement to an account of profits against the first defendant.

The second difficulty is that the sum of $11,013,138 reflects Mr Meredith’s assessment of the total profits associated with BFMM’s 67% interest in CBB. On no view did Mr Mulcahy or interests associated with him purchase, and nor do he or his interests hold, a 67% interest in the CBB Business. Mr Mulcahy and his interests hold 16.67% of CBB through their 25% interest in BFMM. There is no evidence Mr Mulcahy or his interests received or in the future will receive profit or a share of profit that is not limited to the extent of that interest in BFMM, and through BFMM in CBB. An account of profits against Mr Mulcahy to which Mr Conheady is entitled must be approached on that basis.

No attempt was made by Mr Conheady to quantify the claim against Mr Mulcahy by reference to the interest held by or associated with him. In the Joint Report the experts did not seek to quantify the profits for which Mr Mulcahy should be personally ordered to account. The only relevant topic considered was Mr Mulcahy’s directors’ fees, considered by Ms Wright only.

As Ms Wright explained in her report, based on the available information, she was unable to quantify the profits received by or attributable to Mr Mulcahy:

7.3.9.Mr Mulcahy is a shareholder and director of BFMM as trustee for the BFMM Investments Unit Trust (which holds the 80 shares (67%) in CBB). I understand based on an account transaction listing provided that Mr Mulcahy’s family trust is a unitholder of the BFMM Unit Trust. Based on the documents provided to me, including the Shareholders Agreement, I have not identified any profit derived by Mr Mulcahy from an investment in CBB. The reasons for my conclusion are that:
(a)Mr Mulcahy is not a shareholder in CBB, and therefore CBB profits are not attributable to Mr Mulcahy;
(b)The trustee does not derive profits from the Unit Trust (nor does Mr Mulcahy as a shareholder of the trustee); and
(c)I do not have any information about the distributions of Mr Mulcahy’s family trust and whether any distributions that may have been made to Mr Mulcahy were derived from the Unit Trust that were, in turn, derived from CBB.

7.3.10.To the extent that the profits of the BFMM Unit Trust were distributed to the unitholders, and that such distributions were made to Mr Mulcahy’s family trust, and Mr Mulcahy is a beneficiary of that trust, then I would consider that Mr Mulcahy has derived a profit from the acquisition by BFMM of its interest in CBB. I do not have information allowing me to quantify such profit derived by Mr Mulcahy, if any. To the extent Mr Mulcahy has received such profit, then in my view, it is already taken into account in my account of profits derived by BFMM. Accordingly, if such profit were considered to be attributed to Mr Mulcahy, then it would need to be deducted from my account of profits derived by BFMM.

Ms Wright was not cross‑examined about these parts of her report. There was no discussion at the trial about gaps in financial documents produced by Mr Mulcahy and no complaint was made about the adequacy of his discovery. I accept Ms Wright’s evidence in relation to the claim set out in the updated statement. It is not proved.

In closing submissions there was discussion of whether an order should be made requiring Mr Mulcahy to account for past directors’ fees in the sum of $312,000, as well as future profit to be derived by him in the form of directors’ fees of $78,000 per year in his capacity as a director of BFMM. Although this alternative claim was not set out in the updated statement, the question of directors’ fees was a contested issue as part of the relief trial.

If it were not for Mr Mulcahy’s position as a director of BFMM and his interest or the interest of those associated with him in BFMM, he would not be a director of CBB and he would not have received or be entitled to receive directors’ fees for the past. Nor would he have an expectation of receiving directors’ fees in the future relating to his directorship of CBB. The fees are a means of distributing profit to those interested in CBB via BFMM. Mr Mulcahy must account to Mr Conheady for his directors’ fees.

Ms Wright calculated an allowance for future directors’ fees of $187,200, calculated as Mr Mulcahy’s annual directors’ fee of $78,000 multiplied by her adopted multiple of 2.4x.

Mr Conheady submitted that Mr Meredith’s adopted multiple of 5x should be applied to an annual directors’ fee of $78,000 and an order made that Mr Mulcahy account for future profits of $390,000 in addition to the historical directors’ fees of $312,000 paid to Mr Mulcahy, a total of $702,000.

Consistent with my earlier findings concerning the multiple to be adopted, I consider that a multiple of 5x should be applied to Mr Mulcahy’s future directors’ fees. Accordingly, the amount to be included in an account of profits against Mr Mulcahy in respect of future directors’ fees is $390,000.

Mr Conheady is entitled to an order against Mr Mulcahy requiring him to account for past profits in the sum of $312,000 together with future profits in the sum of $390,000, a total of $702,000.

G5. Constructive trust

Mr Conheady claims a declaration that the shares owned by BFMM in CBB are held on constructive trust for him.

There are two issues in relation to this claim. The first, whether the constructive trust remedy is available against a person who has knowingly received trust property or who has assisted in a breach of fiduciary duty under the second limb in Barnes v Addy. The second issue, assuming the remedy to be available, is whether a constructive trust should be imposed in the case.

G5.1 Is there power to make the declaration sought?

Concerning the first issue, citing Ancient Order of Foresters and other authorities, Mr Conheady submitted that a knowing accessory is liable to account as a constructive trustee and that to impose a constructive trust is the usual remedy where a third party has misused trust property and been a knowing assistant in breach of trust.[136]
[136]Citing Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1, 32 [74] (Gageler J); Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 415–416 [557] (Finn, Stone and Perram JJ); Consul Development Pty Limited v DPC Estates Pty Limited [1975] HCA 8; (1975) 132 CLR 373, 408 (Stephen J).

Mr Conheady referred to Hospital Products, where Mason J described the principle in relation to a constructive trust arising out of breaches of fiduciary duty:[137]

Any profit or benefit obtained by a fiduciary [in breach of the proscriptions on conflict of duty and interest or on misuse of position] is held by him as a constructive trustee … Once it is established that the fiduciary is liable to account for a profit or benefit which he has obtained there can be no objection to his being held to account as a constructive trustee of that profit or benefit. It can make no difference that it was not his duty to obtain the profit or benefit for the person to whom the duty was owed. What is important is that the advantage has accrued to him in breach of his fiduciary duty or by his misuse of his fiduciary position. The consequence is that he must account for it and in equity the appropriate remedy is by means of a constructive trust.

[137]Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 107–108.

BFMM submitted that there is no basis in law, or as a matter of discretion, to impose a constructive trust over the shares held in CBB. It submitted the orthodox form of relief against a defendant found to be a knowing accessory of property obtained in breach of fiduciary duty is to restore the value of any property by way of equitable compensation. It submitted a constructive trust is not available as a wholly discretionary remedy to be imposed for the indulgence of ‘idiosyncratic notions of fairness and justice’; rather ‘proprietary rights fall to be governed by principles of law’.[138]
[138]Quoting Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 615–616 (Deane J).

BFMM submitted it is clear that a defendant’s liability under Barnes v Addy exposes a defendant to in personam liability as distinct from the creation or recognition of a proprietary interest.[139] It submitted that whilst the term ‘constructive trustee’ has also been used in the context of accessory or recipient liability arising under Barnes v Addy, this practice has been the source of considerable confusion and should be disregarded. The phrase commonly applied — that a knowing accessory or recipient should be ‘liable to account as constructive trustee’ — merely means that they are liable to restore the property by equitable compensation. In Williams v Central Bank of Nigeria,[140] Lord Sumption JSC observed that a defendant exposed to liability under Barnes v Addy ‘may be required by equity to account as if they were trustees or fiduciaries, although they are not’.[141] In this context, use of the term ‘constructive trustee’ should be regarded as ‘nothing more than a formula for equitable relief’.[142]
[139]Citing Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 359 [253] (Finn, Stone and Perram JJ).
[140][2014] UKSC 10; [2014] AC 1189.
[141]Ibid 1198 [9].
[142]Ibid 1198 [10]; quoting Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555, 1582.

It was submitted that these remarks were endorsed by the Court of Appeal in McNab v Graham,[143] where Tate JA noted that persons described as ‘constructive trustees’ with respect to Barnes v Addy ‘are not a true trustee’.[144] Whilst ‘[t]rue trusts are concerned with property and property interests’, liability arising under Barnes v Addy ‘does not arise by reason of a promise to transfer title to property to which they have a legal right. Their liability is only liability as an accessory to a breach’.[145]
[143][2017] VSCA 352; (2017) 53 VR 311.
[144]Ibid 340 [96].
[145]Ibid.

BFMM submitted that it is therefore wrong to conclude that a constructive trust is one of a range of available remedies in respect of a claim based on liability under Barnes v Addy. A claim for a constructive trust is a separate and distinct claim which is, in fact, based on a claim to equitable title. A true constructive trust rests on the existence of property rights (which was not found in the liability reasons), and is not purely remedial.

The plaintiffs do not accept the limitations on the availability of the remedy for which BFMM contends. They referred to the availability of the relief as stated by Sifris JA in Chickabo Pty Ltd v Zphere Pty Ltd (No 3):[146]

Where a party holds the proceeds (or traceable proceeds) of a breach of fiduciary duty, proprietary relief in the form of constructive trust may be available.

[146][2020] VSC 464, [38] (citations omitted).

It is unnecessary to resolve the controversy between the parties concerning the availability of the constructive trust remedy. That is because the claim by Mr Conheady for a declaration that BFMM’s shares are held on constructive trust for him may be disposed of by reference to the second contested issue, on the assumption the remedy is available.

G5.2 Should a declaration be made?

BFMM submitted that even if the Court can grant a constructive trust over the CBB shares, it should not do so in this case in the exercise of its discretion. That was submitted to be so given the availability of alternative remedies (i.e. equitable compensation and an account of profits) that are capable of quelling the dispute.

BFMM submitted that the constructive trust is a ’second order remedy’ and should not be imposed if alternative orders are capable of doing full justice between the parties.[147] The courts have held that an account of profits, rather than a declaration of a constructive trust over part of a business, may be more appropriate to be ordered if the latter would ‘thrust the parties into a continuing business relationship where it was clear that there was no confidence or comity between them’.[148] The same applies where a constructive trust might involve an innocent third party being in an unwanted relationship with the plaintiff.[149]
[147]Citing Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, 172 [200] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).
[148]Quoting Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 554 (Mason CJ, Brennan, Deane, Dawson and Gaudron JJ).
[149]Citing Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296, 404–405 [510] (Finn, Stone and Perram JJ).

BFMM submitted that in circumstances where the ordinary order is sufficient to do justice between the parties and a constructive trust will unfairly prejudice Mr Conheady over other unsecured creditors of BFMM, a constructive trust cannot, and should not, be imposed as an exercise of discretion.

BFMM referred to Giumelli v Giumelli (‘Giumelli’),[150] where Gleeson CJ, McHugh, Gummow and Callinan JJ emphasised the need to ‘avoid injustice to others’ in the determination of final orders, as well as avoiding relief that would go ‘beyond what was required for conscientious conduct’ by the defendants.[151]
[150][1999] HCA 10; (1999) 196 CLR 101.
[151]Ibid 125 [50].

BFMM referred to Farah Constructions Pty Ltd v Say‑Dee Pty Ltd,[152] where the High Court criticised the Court of Appeal’s award of a constructive trust, citing Giumelli for the proposition that ‘[o]rdinarily relief by way of constructive trust is imposed only if some other remedy is not suitable’.[153]
[152][2007] HCA 22; (2007) 230 CLR 89.
[153]Ibid 172 [200] (Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

BFMM also referred to John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (‘John Alexander’s Clubs’),[154] where the High Court emphasised three points. First, ‘[a] constructive trust ought not to be imposed if there are other orders capable of doing full justice’.[155] Second, ‘care must be taken to avoid granting equitable relief which goes beyond the necessities of the case’.[156] Third, ‘third party interests must be borne in mind in deciding whether a constructive trust should be granted’.[157]
[154][2010] HCA 19; (2010) 241 CLR 1, 45–46 [128]–[129] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).
[155]Ibid 45 [128].
[156]Ibid 45–46 [129].
[157]Ibid 46 [129].

In closing submissions Mr Conheady submitted that a constructive trust is the usual remedy in circumstances such as the present. Whether an alternative remedy might be available that can do justice to Mr Conheady needs to await the outcome of the relief trial.

G5.3 Findings concerning the constructive trust claim

In Bathurst, the High Court made it clear that before a court imposes a constructive trust as a remedy it should first decide whether there are other means available to quell the controversy.[158] In this case there are other means. As against BFMM, Mr Conheady is entitled to equitable compensation and to an account of profits.
[158]Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566, 585 [42] (Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

I agree with BFMM that this is not an appropriate case for a declaration that BFMM holds its shares on constructive trust for Mr Conheady. Adopting the language in John Alexander’s Clubs, an account of profits is ‘capable of doing full justice’ in this case.[159] In those circumstances, a constructive trust ought not be imposed. I will not grant the declaratory relief sought.
[159]John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1, 45 [128] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).

Disposition

In relation to the claims for relief by Mr Porter, subject to any submissions from the parties as to arithmetic error:

(a) Mr Porter is entitled to an order that the Mulcahy parties pay damages to him for breach of contract in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(b) otherwise the claims for relief by Mr Porter as set out in the updated statement are refused.

In relation to the claims for relief by Mr Conheady, subject to any submissions from the parties as to arithmetic error:

(a) as against the Mulcahy parties, Mr Conheady is entitled to damages for breach of contract in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(b) as against the Mulcahy parties, Mr Conheady is entitled to equitable compensation in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(c) as against Mr Mulcahy, Mr Conheady is entitled to an account of profits in the sum of $702,000 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(d) as against BFMM, Mr Conheady is entitled to equitable compensation in the sum of $4,832,445.50 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(e) as against BFMM, Mr Conheady is entitled to an account of profits in the sum of $11,013,138, together with amounts expended on legal fees to 30 June 2022 of $849,555 a total of $11,862,693 together with interest on that sum in such amount as agreed or in default of agreement as determined by the Court;

(f) otherwise the claims for relief by Mr Conheady as set out in the updated statement are refused.

I direct Mr Conheady to elect between inconsistent remedies by 4:00pm on 16 February 2024 by giving notice of his election to the defendants and providing a copy of that notice to my chambers. I do not consider the timing of the requirement to elect should be deferred until the later determination by the Court of any unresolved issues.

The statement of claim claims interest against all defendants. The plaintiffs are directed to inform the defendants of the details of the basis or bases of their claim(s) to interest by 4:00pm on 13 February 2024. The parties are directed to confer with a view to reaching agreement in relation to interest by 4:00pm on 20 February 2024. If there are matters that separate the parties in relation to interest, the parties are directed to exchange and to file submissions of no more than 4 pages dealing with those issues by 12:00pm on 22 February 2024.

I direct the parties to confer and to provide draft final orders, marked up to show any areas of disagreement, including in relation to any arithmetic issues by 12:00pm on 22 February 2024.

I will list the proceeding for mention on Friday, 23 February 2024.

For the avoidance of doubt the time for any appeal will not commence to run until 4:00pm on 23 February 2024 or further order.

SCHEDULE OF PARTIES

TIMOTHY NORMAN PORTER

First Plaintiff

CHRISTOPHER GERARD CONHEADY

Second Plaintiff

- and -

MULCAHY & CO ACCOUNTING SERVICES PTY LTD (ACN 105 360 325)

First Defendant

JAMES EDWARD MULCAHY

Second Defendant

BFMM INVESTMENTS PTY LTD (ACN 625 266 891)

Third Defendant

[2024] VSC 6

25 January 2024 (First Revision 8 April 2024)