Soia v Bennett [No 5] - [2012] WASC 289

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: SOIA -v- BENNETT [No 5] [2012] WASC 289

CORAM: COMMISSIONER SLEIGHT

HEARD: 20, 23-27 & 30-31 MAY 2011, 1-3, 7-10, 16 & 2023 JUNE 2011, 22-26 & 2931 AUGUST 2011, 12 & 56 SEPTEMBER 2011, 45 OCTOBER 2011, 15 & 22 DECEMBER 2011

DELIVERED : 16 AUGUST 2012

FILE NO/S: CIV 1130 of 2003

BETWEEN: KIM PETER SOIA
First Plaintiff
PERSONALIZED TUITION SERVICES PTY LTD (ACN 009 099 71)
Second Plaintiff
AND
MARTIN LAWRENCE BENNETT
Defendant

Catchwords:

Fair Trading Act 1987 (WA) - Whether representations as to funding of joint venture misleading or deceptive conduct - Representations as to future matter - Issue of what representations were made - Turns on its own facts

Contract - Whether representations as to funding of joint venture contractual undertakings - Informal contracts - General principles - Nature of undertakings made - Turns on its own facts

Estoppel - Promissory estoppel and unconscionable conduct - Whether representations made - Turns on its own facts

Waiver - General principles - Whether equivalent to estoppel by silence - Whether silence constituted waiver - Turns on its own facts

Limitation periods - When causes of action arose - Whether claims under the Fair Trading Act 1987 (WA) statute barred - Whether contractual claims statute barred - Where amendments to the pleadings created a new cause of action - Whether indorsement of claim wide enough to cover amendments

Legislation:

Fair Trading Act 1987 (WA)
Limitation Act 1935 (WA)

Result:

Plaintiffs' claims dismissed

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr E W Alstergren & Mr C J Twidale
Second Plaintiff            :     Mr E W Alstergren & Mr C J Twidale
Defendant:     Dr J T Schoombee & Mr N Ebbs

Solicitors:

First Plaintiff                :     Galic & Co
Second Plaintiff            :     Galic & Co
Defendant:     Bennett & Co

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

ABB Service Pty Ltd v Hetherington [2001] WASCA 417
BBB Constructions Pty Ltd v Aldi Foods Pty Ltd [2010] NSWSC 1352
Beatty v Guggenheim (1919) 225 NY 380; (1919) 122 NE 378
Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242; (1983) 78 FLR 171; (1983) 1IPR 496
Bovino Pty Ltd v Casey Group Holdings Pty Ltd [2010] VSC 391
Christie v Purves [2007] NSWCA 182
Clifford v Vegas Enterprises Pty Ltd (No 5) [2010] FCA 916; (2010) 272 ALR 198
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601
Commonwealth of Australia v Cornwell [2007] HCA 16; (2007) 234 ALR 148
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
Commonwealth v Verwayne (1990) 170 CLR 394
Concrete Constructions Group Ltd v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290
Duke Group Ltd v Pilmer (1999) 73 SASR 64
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; (1986) 63 ALR 600
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82; (1984) 55 ALR 25
Gould v Vaggelas (1984 ‑ 1985) 157 CLR 215
Grundt v The Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Hadley v Baxendale (1854) 9 Ex 341; (1854) 156 ER 145
Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539
High Time Investments Pty Ltd v Lungan [No 2] [2010] WASC 296
Holt v Biroka Pty Ltd (1988) 13 NSWLR 629
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810; (2008) ATPR 42‑240
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640
Hughes v St Barbara Mines Ltd [No 3] [2008] WASC 220
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125; (1989) 84 ALR 119
In the matter of Auzhair Supplies Pty Ltd (a deregistered company) and Auzhair 1 Pty Ltd; Greenaway v Auzhair 1 Pty Ltd [2010] NSWSC 1339
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110
Malec v JC Hutton Pty Ltd [1990] HCA 20, (1990) 169 CLR 638
Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494
Mears v Safecar Security Ltd [1983] QB 54
Morgan v Banning (1999) 20 WAR 474
Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65
Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 204 ALR 26; (2004) 216 CLR 388
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191
Re Ku‑ring‑gai Co‑operative Building Society (No 12) Ltd (1978) 36 FLR 134
Read v Brown (1888) 22 QBD 128
Reardon Smith Line v Hansen‑Tangen (1976) 1 WLR 989; [1976] 3 All ER 570
Robinson v Harman (1848) 1 Ex 850; (1848) 154 ER 363
Rossen v Airey [2012] WASCA 26
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Soia v Bennett [No 2] [2011] WASC 133
Soia v Bennett [No 3] [2011] WASC 361
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Toteff v Antonas (1952) 87 CLR 447; (1952) 25 ALJR 732
Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd (1994) 2 VR 106
Walton Stores Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; (1992) 66 ALJR 839
Watson v Foxman (1995) 49 NSWLR 315
Watts v Turpin [1999] WASCA 216; (1999) 21 WAR 402

Table of Contents

Introduction

Pleadings

Summary of issues to be decided

Chronology of events

(1)          Background
(2)          Funding Representations
(i)       Meeting on 23 February 1999
(ii)      Meeting on 5 March 1999
(iii)     Meeting of 30 March 1999
(iv)     Meeting of 4 May 1999
(v)      Telephone call of 17 May 1999
(vi)     25 May 1999 - World Masters of Business Conference
(vii)    Telephone call of 31 May 1999
(viii)     Meeting of 11 June 1999 (first draft shareholders' agreement)
(ix)     Meeting of 14 June 1999
(x)      Meeting of 18 June 1999
(xi)     Meeting of 21 June 1999
(3)          Meeting of 30 June 1999
(4)          Sinclair budget, Chromium and Pretzel Logic reports
(5)          Meeting of 28 July 1999
(6)          Meeting on 2 August 1999
(7)          Abandonment of feasibility prototype
(8)          Meeting in or about late August 1999
(9)          Delay in acquiring equipment
(10)         Third draft shareholders' agreement
(11)         MarketForce Advertising
(12)         Mr Sinclair's budget estimates of 4 October 1999
(13)         Letter from Mr Soia dated 27 October 1999
(14)         Signed shareholders' agreement - 29 October 1999
(15)         Global Education
(16)         Meetings on 18, 19 and 22 November 1999
(17)         Payment on 10 December 1999
(18)         Meetings prior to Christmas 1999
(19)         Meeting on 9 February 2000
(20)         Meeting on 2 March 2000
(21)         Meetings on 10 and 17 March 2000
(22)         Outside investors
(23)         Meeting on 31 March 2000
(24)         Payment on 17 April 2000
(25)         Approach to Mr Caruso of Aerodata
(26)         Meeting of 2 May 2000
(27)         Further payments to Mr Soia
(28)         Citifield reconciliation document
(29)         Contract of sale with Aerodata
(30)         Letter from Mr Soia to Mr Bennett dated 22 August 2000
(31)         Letter from Mr Soia to Mr Bennett dated 30 August 2000
(32)         Letters exchanged in late September 2000
(33)         Collapse of Aerodata transaction
(34)         Termination of joint venture

Overview of development of ITC

(i)          Staffing
(ii)         Programme production
(iii)        Funding provided
(iv)         Equipment, technology and other expenditure needs of ITC

Credibility

(a)          Mr Soia
(b)          Mr Bennett
(c)          Ms L'Herpiniere

Factual findings

Relevant legal principles

Findings made

(1)          Funding representations
(i)       Meeting of 23 February 1999
(ii)      Meeting of 5 March 1999
(iii)     Meeting of 30 March 1999
(iv)     Telephone conversation of 17 May 1999
(v)      25 May 1999
(vi)     Meeting of 31 May 1999
(vii)    Meeting of 11 June 1999
(viii)     Meeting of 14 June 1999
(ix)     Meeting of 18 June 1999
(x)      Meeting of 21 June 1999
(2)          Meeting of 30 June 1999
(3)          Meeting of 28 July 1999
(4)          Abandonment of feasibility prototype phase
(5)          Meeting in late August 1999
(6)          Shareholders' agreement and meeting of 29 October 1999
(7)          The behaviour of Mr Soia
(8)          Delay in production of income
(9)          Collapse of Aerodata transaction
(10)         Cause of collapse of ITC

Issues

1.           Did Mr Bennett make the representations as alleged by the plaintiffs in pars 3, 5 and 6 of the statement of claim?
(a)      Representations pleaded in par 3 of the statement of claim
(b)      Representations pleaded in par 5 of the statement of claim
(c)      Representations pleaded in par 6 of the statement of claim
2.           Was it a necessary implication that the representations were conditional upon and limited to circumstances where ITC generated income materially of the magnitude and over the time periods covered in the budget document dated 30 June 1999?
3.Did Mr Bennett by his representations engage in misleading or deceptive conduct within the meaning of s 10 of the FTA?
(i)     Relevant legal principles
(ii)    Conclusions
4.If Mr Bennett engaged in misleading or deceptive conduct within the meaning of s 10 of the FTA, is a claim under the FTA statute barred?
(i)       Claim by Mr Soia
(ii)      Claim by PTS
(iii)     Limitation argument based upon amendments to the pleading
5.           Did Mr Bennett enter into a contract with Mr Soia as alleged by Mr Soia?
(i)       Relevant legal principles
(ii)      Conclusions
6.           If Mr Bennett made the alleged representations and/or entered into a contract with Mr Soia as alleged, is Mr Bennett estopped from (a) relying upon an implication that ITC would earn income materially of the magnitude and over the time periods covered in the budget document dated 30 June 1999 and sufficient income to cover the development costs and management fees payable and (b) relying on an implied term that Mr Soia and Mr Bennett would cooperate at a reasonable level in the running of the business of ITC?
(a)          Relevant legal principles
(b)          Is Mr Bennett estopped from relying upon, or did he waive the benefit of, an implication that ITC would earn income materially of the magnitude and over the time periods covered in the budget document dated 30 June 1999 and sufficient to cover the development costs and management fees payable?
(c)          Is Mr Bennett estopped from relying upon an implied term that Mr Soia and Mr Bennett were required to cooperate at a reasonable level in the running of the business?

7.           If Mr Bennett entered into a contract with Mr Soia as alleged by Mr Soia, did Mr Bennett breach the contract?
8.           If Mr Bennett had breached the contract, is the claim statute barred?
9If Mr Bennett engaged in misleading or deceptive conduct within the meaning of s 10 of the FTA, or was in breach of a contract with Mr Soia, what, if any, damages did the plaintiffs suffer?
(i)       Claim under the FTA
(ii)      Claim by Mr Soia under the FTA and for breach of contract

Technology issues

Staffing problems

Marketability of the video material

Outcome

Annexure A: Pleadings

(a)          Representations
(i)       Funding Representations
(ii)      Representation as to the extent of the funding
(iii)     Representation as to management fees
(b)          Reliance
(c)          FTA claim
(d)          Limitation pleading under the FTA
(e)          Contractual claim
(f)          Statute of limitations plea

COMMISSIONER SLEIGHT:

Introduction

This is a case about a failed joint business venture between the first plaintiff, Mr Soia, a private tutor of school aged students, and the defendant, Mr Bennett, a prominent Perth lawyer. The joint venture involved the proposed creation of an online internet tuition service for students. In June 1999 a company, Internet Tuition College Pty Ltd (ITC), was formed to conduct the business. Mr Soia and Mr Bennett were directors of the company. Jeneva Holdings Pty Ltd (Jeneva), a company of Mr Soia's, and Citifield Holdings Pty Ltd (Citifield), a company of Mr Bennett's, each held 50 % of the shares of ITC.
Prior to the venture being entered into, Mr Soia, through his company, the second plaintiff Personalized Tuition Services Pty Ltd (PTS), ran a successful tuition business based in Perth for school students. Mr Soia and Mr Bennett had initially met as a result of Mr Bennett's son being tutored by Mr Soia. Later, Mr Soia became a client of Mr Bennett's law firm.
The joint venture was entered into without a written agreement setting out the nature of the interests of the parties in the joint venture and their respective obligations. After protracted negotiations, a written shareholders' agreement was entered into, but this was primarily concerned with the issue of division of profit. Mr Soia did not receive, nor was it recommended by Mr Bennett, that Mr Soia seek independent legal advice. It was admitted by Mr Bennett in his evidence that he ought to have recommended to Mr Soia that he seek independent legal advice (ts 2172). Had a written agreement been signed by the parties setting out the nature of their respective interests and obligations in the joint venture, then it is likely this action would have been avoided.
Mr Soia alleges that the joint venture was on the basis that he would devote himself solely to the development of the business and Mr Bennett would provide necessary funding to develop the business. Pursuant to the joint venture, Mr Soia says he took steps to close down his existing tutoring business conducted by PTS so that he could devote his time to the development of the joint venture. The joint venture, in the form of a business conducted by ITC, eventually failed. ITC became insolvent and was placed into liquidation. Mr Soia claims that the joint venture failed because Mr Bennett failed to meet his commitment to fund the development of the business. Mr Soia and PTS commenced these proceedings in 2003 seeking damages against Mr Bennett based on misleading and deceptive conduct, contrary to s 10 of the Fair Trading Act 1987 (WA) (the FTA); and, in addition, Mr Soia seeks damages against Mr Bennett for breach of contract.
Central to the plaintiffs' case is an allegation that, at a meeting on 30 June 1999, Mr Bennett represented and undertook to fund ITC for a period of two years, pursuant to the expenditure side of a budget document produced at the meeting (the budget document dated 30 June 1999), which included provision for a management fee payable to Mr Soia of $200,000 in the first year of operation and $300,000 in the second year of operation. The plaintiffs' case is that at this meeting it was also agreed that ITC would not earn any income for the first two years. Unless I am satisfied that such representations were made, the plaintiffs' claims must fail, as these representations are the cornerstone of the claims under the FTA and the contractual claim.
The plaintiffs' claims are denied by Mr Bennett. He says he never agreed to fund the development of the joint venture in accordance with the expenditure side of the budget document dated 30 June 1999 and denies that this document was produced at the meeting on 30 June 1999. Alternatively, Mr Bennett contends that if he agreed to fund the venture in accordance with the expenditure side of the budget document dated 30 June 1999, then such an undertaking to fund the venture was conditional on ITC earning an income as provided in the budget document, which ITC failed to do. Mr Bennett also claims that, having provided substantial funding without the business earning any income, and/or with a breakdown of his relationship with Mr Soia, he was entitled to cease funding the business, which he did in September 2000.

Pleadings

The plaintiffs' claims rely upon three sets of alleged representations made by Mr Bennett:
(i)Representations made between 23 February 1999 and 19 June 1999 (par 3 of the amended statement of claim). Essentially it is pleaded that Mr Bennett made general representations that he would fund the development of the joint venture business, including payment to Mr Soia of management fees in return for Mr Soia devoting himself solely to the development of ITC (the Funding Representations). The Funding Representations were alleged to have taken place on 23 February 1999, 5 March 1999, 30 March 1999, 4 May 1999, 17 May 1999, 25 May 1999, 31 May 1999, 14 June 1999 and 18 June 1999.
(ii)Representations made on 30 June 1999 (par 5 of the amended statement of claim). Essentially it is pleaded that Mr Bennett made representations that he would fund the development of the joint venture business for a period of two years in accordance with the expenditure items in the budget document dated 30 June 1999, which included payment to Mr Soia of a management fee of $200,000 in the first year and $300,000 in the second year.
(iii)A representations made in July 1999 (par 6 of the amended statement of claim). The representation pleaded is that Mr Bennett represented that he would cause Mr Soia to be paid $250,000 remuneration in the first year.
As indicated above the cornerstone of the plaintiffs' case rests upon representations allegedly made at a meeting on 30 June 1999.
The pleadings are relatively extensive and raise issues of implied terms, uncertainty, limitation periods, estoppel, waiver and damages. A summary of the pleadings is set out in Annexure A to the decision.

Summary of issues to be decided

The central issues to be decided in this case are as follows:
1.Did Mr Bennett make the representations as alleged by the plaintiffs in pars 3, 5 and 6 of the statement of claim?
2.Was it a necessary implication that the representations were conditional upon and limited to circumstances where ITC generated income materially of the magnitude and over the time periods covered in the budget document dated 30 June 1999?
3.Did Mr Bennett by his representations engage in misleading or deceptive conduct within the meaning of s 10 of the FTA?
4.If so, is a claim under the FTA statute barred?
5.Did Mr Bennett enter into a contract with Mr Soia as alleged by Mr Soia?
6.If Mr Bennett made the alleged representations and/or entered into a contract with Mr Soia as alleged, is Mr Bennett estopped from:
(a)relying upon an implication that ITC would earn income materially of the magnitude and over the time periods covered in the budget document dated 30 June 1999 and sufficient income to cover the development costs and management fees payable?; and
(b)relying on an implied term that Mr Soia and Mr Bennett would cooperate at a reasonable level in the running of the business of ITC?
7.If Mr Bennett entered into a contract with Mr Soia as alleged by Mr Soia, did Mr Bennett breach the contract?
8.If Mr Bennett had breached the contract, is the claim statute barred?
9.If Mr Bennett engaged in misleading or deceptive conduct within the meaning of s 10 of the FTA, or was in breach of a contract with Mr Soia, what, if any damages did the plaintiffs suffer?

Chronology of events

Before considering each of these issues, it is necessary that I summarise the evidence concerning the chronological sequence of events leading up to the collapse of the joint venture between Mr Soia and Mr Bennett.

Background

Prior to 1999, Mr Soia had been operating a private tuition business, tutoring primary and secondary school students. He had operated this business since 1978. He operated the business initially as a self‑trader and subsequently through a company, the second plaintiff, PTS. Mr Soia promoted his business with his own newspaper and this contained promotional material which boasted Mr Soia was 'the best tutor in the world'.

Mr Bennett was admitted to practice as a legal practitioner in December 1978 and from 1998 ‑ 2006 he was the principal of the legal practice, Bennett & Co. In March 2006 until February 2011, Mr Bennett was special counsel for the firm of Lavan Legal which was created in 2006 when Bennett & Co merged with the firm of Phillips Fox. In 2011 Mr Bennett separated from Lavan Legal and recreated Bennett & Co.
Mr Soia first met Mr Bennett on 13 May 1998 when Mr Soia began tutoring Mr Bennett's son. The tutoring occurred over a period from 13 May 1998 to 10 September 1998. On 28 October 1998, Mr Soia attended Mr Bennett's firm's premises to instruct him in relation to a legal dispute with a PTS staff member. During the consultation on 28 October 1998, Mr Soia says that Mr Bennett first raised the idea of establishing an internet tuition business. According to the evidence of Mr Soia, Mr Bennett indicated that he believed that an internet tuition business could potentially reach an international audience and the business could make millions of dollars. Mr Soia, although proclaiming not to have any knowledge about the internet or computers, expressed interest in the idea.
According to the evidence of Mr Soia, he met with Mr Bennett in his office on 26 November 1998 to further discuss the idea of establishing an internet tuition business. Mr Soia, in his evidence, said that Mr Bennett put forward a proposal that they employ about 1,000 tutors to answer student questions nationally and internationally by email.
Mr Soia said, in his evidence, that he rejected this proposal as he did not believe it was practical. It would not be possible to control the quality output and integrity of 1,000 independent tutors and the costs of engaging such tutors would be prohibitive. Mr Soia said that Mr Bennett invited an alternative idea and Mr Soia stated that he would give the matter further consideration and advise Mr Bennett of his further ideas on the proposal of an internet tuition business.
Mr Bennett, in his evidence, confirmed the general content of these discussions. He described in his evidence Mr Soia's initial reaction to the proposal to create an internet tutorial business as being generally dismissive.

Funding Representations

Meeting on 23 February 1999

The evidence of Mr Soia was that he attended a meeting at Mr Bennett's office on 23 February 1999. Mr Soia testified that at this meeting he suggested to Mr Bennett that the internet tuition business would only be profitable if it provided pre‑recorded educational seminars that could be accessed by students on the internet. Mr Soia indicated that he had concluded that such a system would revolutionise education, and educational videos could be provided to an international audience at a low unit cost per user. He expressed that the scheme had the potential to make 'massive profits'.
Mr Soia said that Mr Bennett said that if Mr Soia could develop the ideas further, then Mr Bennett would be interested in forming an internet tuition business with Mr Soia, which Mr Bennett likened to the partnership of 'Rolls and Royce'. Mr Soia said that Mr Bennett said he would fund the business and that Mr Soia would be free to create the educational content of the business.
Mr Soia said Mr Bennett said words to the effect 'being in partnership with me will allow you to reach your full potential. With my money you will have the chance to develop your ideas fully' (ts 475).
Mr Bennett, in his evidence‑in‑chief, did not specifically respond to the evidence or pleading that a meeting took place on 23 February 1999. He stated that he could not recall the dates of specific discussions with Mr Soia due to the passage of time. However he confirmed in his evidence that a number of discussions occurred in February and March 1999 and Mr Soia remained dismissive of the idea of providing a tutorial service over the internet. Mr Bennett also stated in his evidence Mr Soia expressed concern that transmitted lectures could be saved by students and distributed to other students free of charge. Although this was an issue to be dealt with, Mr Bennett said he was confident that it could be overcome.

Meeting on 5 March 1999

Mr Soia's evidence was that on 5 March 1999 he met with Mr Bennett at Mr Bennett's office. Mr Soia's evidence was that Mr Bennett indicated that he was enthusiastic about the concept of the business proposed by Mr Soia which Mr Bennett believed could be joined with his ideas which included online chats, online group meetings and lecture notes in audio and written formats. Mr Soia stated Mr Bennett indicated that he thought the business could 'make millions of dollars'.
Mr Soia said that Mr Bennett indicated that he had prepared an investor's scheme which he said 'would give us the money we need to make this great idea a reality'. Mr Bennett then introduced his financial controller, Mr John Bestall, who produced two documents of alternative proposed investors' schemes. The first scheme provided for the selling of 900 units at a value of $16,667 per unit to produce a total investment income of $15 million, of which $6 million would be paid to a company, Bennett Management Pty Ltd and $1 million to Mr Soia. Mr Soia would have a 1% interest in the company operating the business.
The second investor's scheme again involved producing a total investment package of $15 million by the sale of units but the distribution was altered so that Bennett Management Pty Ltd would receive $3 million and a company Soia Management Pty Ltd would receive a payment of $3 million. Mr Soia would retain a 3.33% interest in the company operating the business.
Mr Soia's evidence was that each of the two documents presented by Mr Bestall at the meeting included a company cash flow proposal document. Also presented at the meeting was a report from a company Chromium Global. The cash flow proposal documents were different for each investment proposal. However, they had the common feature that they covered a 12‑year period commencing from 30 June 1999. Both cash flow documents contained a predicted income in the first year of in excess of $5 million and expenditure in excess of $1 million. Both provided for establishment expenses of $280,000. One of the cash flow documents provided for a management fee of $650,000 to be paid annually to Mr Soia and the other a management fee of $63,000 in the first year (and increased thereafter).
Mr Soia's evidence was that he rejected both proposals for the calling of outside investors and indicated to Mr Bennett that he was not interested in making 'a quick buck' (ts 488). He indicated to Mr Bennett that if they were to go into business together then they would each have a 50% interest in the business, with Mr Bennett equity funding the business and with Mr Soia completing the development of the educational content of the business. Mr Soia said it was agreed that they would further explore as to how the business could proceed at a subsequent meeting.
Mr Bennett, in his evidence‑in‑chief, did not specifically respond to the evidence or pleading that a meeting took place on 5 March 1999. However, Mr Bennett stated that in late February/early March 1999, he had discussed with an accountant, Mr Bestall (financial manager of Bennett & Co), the setting up of an internet tuition business and asked Mr Bestall to prepare some financial models (which Mr Bennett later in his evidence described as 'accounting doodlings' (ts 1914)). Mr Bennett acknowledged that the documents prepared by Mr Bestall included a document which was in the form of a cash flow budget document for a 12‑year period commencing from 1 July 1999. Mr Bennett also acknowledged that he engaged the services of a company, Chromium Global, to conduct a review of how the website could operate within the framework he imagined. He said he received a report from Chromium Global in early March 1999 (defendant's trial bundle vol 4, pages 967 ‑ 975).
The Chromium Global report recommended a stage development of the joint venture, commencing with a feasibility study and design overview. The report indicated capital costs of establishing the business to be $230,000, plus ongoing recurring yearly costs of $70,000.
Mr Bennett stated in cross‑examination he had no recollection of any meeting with Mr Soia attended by Mr Bestall. He denied discussing the financial documents prepared by Mr Bestall with Mr Soia. Mr Bennett acknowledged that he had discussed with Mr Soia the Chromium Global report and in the context of an estimate by Chromium Global of approximately $200,000 to develop the business, Mr Bennett agreed to fund the development of the business (ts 2007).

Meeting of 30 March 1999

Mr Soia's evidence was that on 30 March 1999 he again met with Mr Bennett at Mr Bennett's office and they further discussed the internet tuition business.
Mr Soia says it was agreed, on the recommendation of Mr Bennett, the next step would be to hire an internet or technology consultant to gain insight into the existing technology, and the infrastructure and labour necessary to establish the business. Mr Soia's evidence was that subsequently Mr Bennett arranged for Mr Geoffrey Drake‑Brockman of Pixel Enterprises Pty Ltd to provide such advice.
Mr Bennett, in his evidence‑in‑chief, did not specifically respond to the evidence or pleading that a meeting took place on 30 March 1999. Nor, in his evidence‑in‑chief, did Mr Bennett either specifically deny or confirm the conversation as alleged by Mr Soia. However Mr Bennett did state that he met with Mr Soia in late March 1999 when they discussed the establishment of ITC. Mr Bennett said they discussed that ITC could potentially be up and running by August 1999. Mr Bennett also said that he and Mr Soia discussed the fact that they should use PTS's intensive TEE cramming sessions in July 1999 and that it may be possible to film these sessions and use their contents as the basis of a feasibility prototype to showcase ITC. He said it was agreed by Mr Soia and himself that once the feasibility prototype was created and the concept proven, ITC would then produce a series of recorded lessons. Mr Bennett said that by the end of the discussions Mr Soia was enthusiastic about ITC and was willing to commit to ITC his experience and knowledge as a tutor and the extensive intellectual property built up by PTS (ts 1792).
Mr Bennett said that it was agreed that he would engage a technology expert who would evaluate whether or not ITC could actually operate with the technology available at that time. Once the report was available Mr Soia and Mr Bennett would then decide whether to proceed with ITC.

Meeting of 4 May 1999

It is common ground that pursuant to discussions that took place on or about the 30 March 1999, Mr Drake‑Brockman of Pixel Enterprises Pty Ltd was engaged to prepare a technology report. Mr Soia in his evidence said he met with Mr Bennett on 4 May 1999 with Mr Drake‑Brockman and discussed with Mr Drake‑Brockman the concept that Mr Soia and Mr Bennett had in mind. In particulars pleaded by the plaintiffs, it is alleged that at this meeting that Mr Drake‑Brockman was informed that Mr Bennett was funding the business. However, no evidence was given by Mr Soia of this alleged part of the conversation.
Mr Bennett's evidence did not refer to any meeting with Mr Soia and Mr Drake‑Brockman on 4 May 1999. According to Mr Bennett he contacted Mr Drake‑Brockman in about late March 1999. He said that he instructed Mr Drake‑Brockman that he wanted him to analyse the ITC concept and give an expert opinion as to whether it was a viable business concept with reference to any technological issues he could foresee. Mr Bennett said he met with Mr Drake‑Brockman in April 1999 and briefed him on details of ITC and its anticipated commercial details. Mr Bennett included in his brief to Mr Drake‑Brockman an estimate of a potential market of approximately 10,000 students in Western Australia each doing four TEE subjects and 100,000 students Australia wide.

Telephone call of 17 May 1999

Mr Soia's evidence was that on 17 May 1999, he was telephoned by Mr Bennett. Mr Soia testified that he recalls Mr Bennett saying words to the effect 'I will support you and I will fund the project all the way. This internet tuition business can make both of us into very wealthy men. You really have to stop doing your tuition and concentrate on this internet business' (ts 494). Mr Soia said that Mr Bennett then invited him to a World Masters of Business Conference.
Mr Bennett, in his evidence‑in‑chief, did not specifically respond to the evidence or pleading that a conversation took place on 17 May 1999. Nor, in his evidence‑in‑chief, did Mr Bennett either specifically deny or confirm the conversation as alleged by Mr Soia. Under cross‑examination, Mr Bennett stated that he recollected inviting Mr Soia to the conference but he did not recall discussing ITC's business. He disputed the words that Mr Soia claimed were said by Mr Bennett during this telephone conversation concerning the funding of the business. Mr Bennett denied that he suggested to Mr Soia that he should stop doing his tuition business and concentrate on ITC's business (ts 2015).

25 May 1999 - World Masters of Business Conference

Mr Soia's evidence was that on 25 May 1999, on the invitation of Mr Bennett, Mr Soia attended the World Masters of Business Conference which included speakers Mikhail Gorbachev, General Schwarzkopf and Kevin Trudeau. Also attending the conference with Mr Bennett and Mr Soia were Mr Bennett's partner (in Bennett & Co) Mr David Shaw, Mr Shaw's wife and an Apex Rent‑A‑Car director and his partner.
Mr Soia's evidence was that during conversations with the other guests, Mr Bennett repeatedly promoted the likely success of the internet tuition business and stated that they were going to use 'cutting edge streaming video' to communicate Mr Soia's pre‑recorded filmed lectures. Mr Soia's evidence was that Mr Bennett said, 'I'm going to fund this venture and Kim is going to put his brilliant educational knowledge online' (ts 496).
Mr Soia stated that Mr Bennett also said words to the effect, '[n]ow all I have to do is convince him is to stop doing that bloody tuition and concentrate on educating the world'. Mr Soia's evidence was that Mr Bennett also said to Mr Soia, 'Soia you must stop your tuition and concentrate on this project … it's huge' (ts 496).
Mr David Shaw, who attended under subpoena to give evidence on behalf of the plaintiffs, could not recall any specific conversation at the World Masters of Business Conference, but vaguely recalled discussions at the time that Mr Bennett was to fund the venture and they expected to make millions of dollars (ts 1210). Mr Shaw said he could recall that Mr Bennett was excited by the whole concept. He remembered Mr Bennett saying words to the effect that he was paying Mr Soia (ts 1213). Mr Soia said Mr Bennett discussed the venture regularly at daily boardroom lunchtime meetings, mentioning they were going to make millions and that their business would be the first of its kind, a student tutoring service on the internet. Mr Shaw said he observed in his dealings with Mr Soia that Mr Soia was extraordinarily excited by the venture and talked about almost nothing else other than he was going to make millions of dollars out of the venture (ts 1214).
Mr Bennett, in his evidence‑in‑chief, did not specifically respond to the evidence or pleading that a discussion took place on 25 May 1999 at the World Masters of Business conference. Nor, in his evidence‑in‑chief, did Mr Bennett either deny or confirm the conversation as alleged by Mr Soia. In cross‑examination, Mr Bennett said that he did not recollect using the words Mr Soia attributed to him and he did not believe that he would have said words that they were forming a business because at that stage they had not received anything from Mr Drake‑Brockman. Under cross‑examination, he stated that he was fairly sure he didn't say the words, 'I am going to fund the venture'. Mr Bennett said that at that stage they were not committed to the venture. It was simply in concept stage. Mr Bennett said that he would have said, '[i]f it goes ahead, I am going to fund the concept and Kim is going to supply all the intellectual, all the tuition services' (ts 2020).
Also in his evidence Mr Bennett said, '[w]e were talking about transmission in Australia and it was what I had in mind. The funding was the Chromium Global‑type costs. I said that' (ts 2020).

Telephone call of 31 May 1999

The evidence of Mr Soia was that he telephoned Mr Bennett on 31 May 1999, to inform Mr Bennett that Mr Soia intended to sell two of his tuition centres so that he could devote more time to the internet tuition business. Mr Soia's evidence was that he decided to reduce his PTS tuition commitment as a result of Mr Bennett's repeated representations that he would fund the development of the new business and their mutual enthusiasm for the new education system they proposed to create (ts 497).
Mr Soia's evidence was that Mr Bennett said, in this telephone conversation on 31 May 1999, that to make the project work Mr Soia would have to stop the private tuition he was conducting and concentrate on developing the business.
Mr Soia said that he informed Mr Bennett that he was excited about the project, but needed the assurance of Mr Bennett that he would fund the project completely and would pay Mr Soia at least a few hundred thousand dollars per year so that Mr Soia could meet his commitments.
Mr Soia's evidence was that in response Mr Bennett said, 'I will fund the business and I will make sure you have enough money, so that you do not have to worry about anything' (ts 497). Mr Soia said that he indicated to Mr Bennett that he would rely upon Mr Bennett and would begin to wind down PTS's business to concentrate on the internet tuition business.
Mr Soia's evidence was that he indicated to Mr Bennett that a proper budget for the business needed to be prepared and that Mr Soia would need to be paid regularly so that he could concentrate fully on developing the ideas of the business.
Mr Soia said that Mr Bennett said he would write a proper budget and would make sure that Mr Soia was provided with everything that he needed to develop his ideas including payments to Mr Soia.
Mr Soia says that subsequent to this conversation, and in reliance upon Mr Bennett's representations, Mr Soia made arrangements to sell properties which were owned by PTS and from which the company had conducted its tutoring business. Mr Soia's evidence was that on 8 June 1999, he signed an authority for an agent to sell PTS's premises at Unit 3, 45 Winton Road, Joondalup. The property was subsequently sold on 12 June 2002. Further, on 14 June 1999, Mr Soia listed for sale PTS's premises situated at Unit 4, 4 Gugeri Street, Claremont, which was subsequently sold on 4 August 1999.
Mr Bennett in his evidence‑in‑chief did not specifically respond to the evidence or pleading that a conversation took place on 31 May 1999.
However, Mr Bennett stated in cross‑examination that there was no discussion between he and Mr Soia to the effect that Mr Soia would close down his tutoring business and that Mr Bennett would fund ITC to the extent of paying to Mr Soia $200,000 per year. Mr Bennett stated that at this time he thought, naïvely perhaps, ITC's activities would not impinge upon Mr Soia's tutoring business. Mr Bennett stated that as he understood the situation, Mr Soia had been tutoring for years, had all the material he needed to tutor at his fingertips and his tutoring of students was outside normal school hours. Mr Bennett said the situation changed in August 1999 when Mr Soia informed Mr Bennett that he could not do both his tutoring for PTS and prepare scripts for lessons for ITC (ts 2026).

Meeting of 11 June 1999 (first draft shareholders' agreement)

Mr Soia said that he and his fiancée, Ms L'Herpiniere, met with Mr Bennett in Mr Bennett's office on 11 June 1999. At this meeting Mr Bennett produced a draft shareholders' agreement (defendant's trial bundle vol 9, pages 2772 ‑ 2777) which his firm had prepared. The document that had been prepared by Bennett & Co was framed in very general terms. The parties to the draft agreement were Citifield and Jeneva. The document did not contain any provision as to the contributions or roles of Mr Soia and Mr Bennett in the proposed business.
Mr Soia stated that he was not satisfied with the document as it did not deal with the discussions or plans regarding the internet tuition business and Mr Soia requested a further agreement to be prepared which specifically dealt with the internet tuition business.
Mr Bennett, in his evidence‑in‑chief, did not refer to this meeting of 11 June 1999. However he acknowledged that at this time a draft shareholders' agreement was prepared by his office and presented to Mr Soia.

Meeting of 14 June 1999

On or about the 14 June 1999, the initial report of Mr Drake‑Brockman of Pixel Enterprises Pty Ltd dated 14 June 1999 (the Pixel report) (plaintiffs' trial bundle vol 1, pages 115 ‑ 133) was provided to Mr Soia and Mr Bennett. The Pixel report examined the technical requirements for the venture proposed by Mr Soia and Mr Bennett. The report also included a draft plan for implementing the proposed joint venture.
The Pixel report specifically stated that the author did not consider the question of the commercial viability of the proposal. Likewise, areas such as marketing, take‑up rates, business structures and human resources implications were not considered. However, some references were made to these areas where necessary.
The report was based upon a proposal that ITC would stream video‑recorded lessons, initially with Mr Soia as the sole presenter. Mr Drake‑Brockman advised that streaming of the video material could be achieved. He noted that technology was rapidly expanding and that there were a number of websites of large tertiary institutions and mature age training sites using streaming as a means of lecture delivery.
The report contained an identification of the market to be targeted. It stated that there were 250,000 school students in Western Australia. Across Australia‑wide there were three million students who were potential users. It was expected that a population of over 40 million school students existed in the USA. Assuming that 25% of these students had access to the internet and that 1% of them subscribed to ITC, it was estimated that the following subscription levels could be achieved:
•Western Australia 625
•Australia (including WA) 7,500
•USA 100,000
It was assumed that, within Australia, 7,500 active subscribers could be achieved within 24 months of the system's launch.
The report recommended that ITC perform in‑house the production and encoding of the video material to be sent via the internet but that it fully outsource hosting servers to send the video‑stream to the ultimate consumer.
The report suggested three development phases. These were identified as follows:
•Phase 1: feasibility prototype (target end date 30 July 1999) - cost $50,000.
•Phase 2: Western Australian Year 12 (target end date 8 September 1999) - cost $96,000.
•Phase 3: all Australia, all years (target end date 8 February 2000) - cost $338,000.
Accordingly, the report estimated after implementation of phase 2 (at a total cost of $146,000) the business would be productive of income as at the target date 8 September 1999. The report also estimated that after these three phases had been implemented (at a total cost of $484,000) there would be annual running costs of $1,310,000.
The Pixel report stated that after completion of the feasibility prototype ITC should 're‑estimate the balance of the project'.
The evidence of Mr Soia was that he met with Mr Bennett and Mr Drake‑Brockman at Mr Bennett's office on 14 June 1999. Mr Soia's evidence was that they discussed the Pixel report, including the on‑going need for support and development at an annual cost of approximately $1.3 million. It was agreed that Mr Soia would prepare a response to Mr Drake‑Brockman's report.
Mr Bennett in his evidence stated that on or about 14 June 1999 Mr Drake‑Brockman provided the Pixel report to Mr Bennett and Mr Soia. Mr Bennett stated he recalled discussing the contents of the Pixel report with Mr Soia.
It is common ground that Mr Soia was very unhappy with the Pixel report. In a letter dated 17 June 1999 (plaintiffs' trial bundle vol 1, pages 135 ‑ 146), Mr Soia wrote to Mr Bennett, stating:
I believe the Technology Plan greatly underestimates expected user frequency and consequently the ongoing costs of external providers will be greater than the Technology Plan suggests.
Mr Soia went on to state that, in his opinion, the target market achievable was as follows:
•Western Australia   3,125
•Australia      37,500
•USA    500,000
Mr Soia also stated in his letter to Mr Bennett that he believed Mr Drake‑Brockman's estimates of the costs of producing the video lectures were grossly inadequate (Mr Drake‑Brockman had allowed $130,000 for production of 510 hours of video‑recorded lectures). Mr Soia's letter stressed that he believed the quality of the videos was paramount to the success of the proposed joint venture. Mr Soia also stated that it was imperative that the lectures could be watched, but not downloaded. Mr Soia was also unhappy with a proposal of Mr Drake‑Brockman of outsourcing the streaming of the videos by an external provider. Mr Soia did not reject the idea of a feasibility prototype and suggested in the letter to Mr Bennett that this could be conducted using existing students of PTS in‑house.
Mr Drake‑Brockman was asked to prepare a response to the concerns of Mr Soia and he prepared a further report dated 21 June 2011 (plaintiffs' trial bundle vol 1, pages 166 ‑ 175). Mr Drake‑Brockman advised that some caution should be exercised in proceeding with the project. He stated as follows:
If the projections transpire to be too optimistic, then too much may have been invested in technology infrastructure and this may reduce the profitability of the venture. Conversely, if the projections turn out to have been too conservative, then larger computers and related equipment will be required and additional costs will be incurred to upgrade and change platforms. In this context, if there is a degree of uncertainty over volume and growth rates, then there is appeal in using an outsourced provider of infrastructure (page 168).
Mr Drake‑Brockman also advised that although streamed videos operate without a download, it was theoretically possible for a talented systems engineer to intercept a video‑stream in transit or capture the video as it plays on the computer monitor. He advised that anything that played on a computer monitor could in theory be captured and effectively downloaded if sufficient ingenuity was used.
In response to this further report Mr Soia sent a letter dated 24 June 1999 to Mr Drake‑Brockman (plaintiffs' trial bundle vol 1, pages 178 ‑ 185), in abusive tones, criticising Mr Drake‑Brockman's advice. In this letter Mr Soia described Mr Drake‑Brockman as engaging in 'insubordination' and stated:
I do not appreciate your sarcasm, sense of self righteousness or negative attitude (page 179).
Later in the letter Mr Soia stated as follows:
Should you wish to alter your position from 'Technologist' to satirical short story writer please put your request in writing. I will give your request polite and thorough consideration (page 182).
The caustic nature of these remarks by Mr Soia reveal something of Mr Soia's obsessive attitude in relation to the joint venture. This is something I will elaborate on later in this decision.
Mr Soia rejected Mr Drake‑Brockman's estimates of the amount of users of the proposed video lessons and also rejected his advice concerning outsourcing.
Mr Soia's evidence was that as a result of the dissatisfaction with Mr Drake‑Brockman, Mr Soia started to search for a cameraman with internet experience. Mr Soia said he approached a Mr Sinclair in late June 1999. Mr Sinclair was an experienced video cameraman and technician. The details of Mr Sinclair's engagement will be provided later in this decision.
Mr Bennett's evidence was that they decided to proceed with a feasibility prototype by video‑recording the July 1999 cramming sessions conducted by PTS.

Meeting of 18 June 1999

Mr Soia, in his evidence, said that a further meeting occurred on 18 June 1999 between himself and Mr Bennett at Mr Bennett's office. Mr Soia says that Mr Bennett said words to the effect 'we are 50/50 partners, my 50% is my equity funding of the project and your 50% is to create the education product' (ts 505).
Mr Bennett, in his evidence‑in‑chief, did not specifically respond to the evidence or pleading that a meeting took place on 18 June 1999. Nor, in his evidence‑in‑chief, did Mr Bennett either deny or confirm the conversation as alleged by Mr Soia. In cross‑examination, Mr Bennett did not dispute that such a meeting occurred, but denied that he used the word 'partner' or the words 'equity funding'. He stated that at no time did he envisage a partnership would be created. Likewise he never intended that the funding he provided would be equity funding.

Meeting of 21 June 1999

On 21 June 1999, Mr Soia says that he attended Mr Bennett's office and spoke to Mr Bennett prior to going to a mediation conference in the Supreme Court concerning litigation being conducted by Mr Bennett's firm on behalf of Mr Soia.
Mr Soia's evidence was that Mr Bennett said, '[w]ith my money and your unique ideas and motivational teaching style, this company will be a huge success', or words to that effect (ts 505).
Mr Bennett, in his evidence‑in‑chief, did not respond to the evidence of Mr Soia. In cross‑examination Mr Bennett denied that such a meeting took place.

Meeting of 30 June 1999

Mr Soia's evidence was that on 30 June 1999 he attended a meeting at Mr Bennett's office for the purpose of agreeing on an ITC expenditure budget. He says that Mr Bennett provided him at this meeting with the budget document dated 30 June 1999, together with a written 'to do' list.
Mr Soia's evidence was that Mr Bennett said that the budget document dated 30 June 1999 was the budget Mr Bennett proposed for the funding of the company. Mr Soia said that they looked at the amount of money that was required for the first two years and they agreed that the budget document dated 30 June 1999 would be used as a fundamental expenditure budget for the funding of the company (ts 512).
The document itself, a copy of which was tendered into evidence (plaintiffs' trial bundle vol 1, page 196), was not confined to being an expenditure budget. The document was entitled:
Cash flow commencing 1 July 1999
Company cash flow proposal
The document is divided into yearly columns, covering a 12‑year period commencing from 1 July 1999. Each yearly column contained three sections; predicted income, expenditure and balance on hand at the year end.
In the first year, the document records a predicted income of $1,595,000, the bulk of which is income earned from subscriptions from students. The student subscriptions are based upon an estimated 2,500 students. Included in the income calculation is an amount of $35,000 for interest earned on a cash reserve of $1 million. No explanation is given in the document as to the source of this cash reserve. In the second year it is estimated the subscription level will be 5,000 students and in the third year 7,500 students. The third year subscription levels coincide with the estimates used in the Pixel report of the potential Australian wide subscription levels.
The expenditure in the first year totals $1,765,765, leaving a net balance for the year end of a loss of $170,765. In the second year, the income is expected to increase to $3,155,000, expenditure increased to $1,986,080, leaving a net balance for the year end of $998,155. In the third year, the income was expected to increase to $4,715,000, expenditure increased to $2,645,666, leaving a net balance for the year end of $3,067,489.
According to the budget document, by year 12, the predicted yearly income would increase to $7,295,216 and the balance on hand at year end would be $25,850,145.
The document provided for a management fee to be paid to Mr Soia in the first year of $200,000, the second year $300,000, the third year, $400,000 and thereafter in each subsequent year, up to year 12, of $650,000.
Expenditure items in the first year include figures extrapolated from the Pixel report prepared by Mr Drake‑Brockman, including expenditure to achieve the three‑phase development identified in the Pixel report.
A photocopy of the document (plaintiffs' trial bundle vol 1, page 201) was retained by Mr Soia (Mr Soia stated the original had been misplaced) and contains written notations made by Mr Soia which he said were made at the meeting and were the subject of discussion with Mr Bennett. Some of these notations relate to the income side of the document. Mr Soia made a notation of 'seems pessimistic' against the student subscription levels in the income section of the first year of operation.
Notwithstanding the entries on the document relating to income, Mr Soia stated under cross‑examination that it was agreed with Mr Bennett that they would proceed on the basis that there may not be any income earned for the first two years of the business and that Mr Bennett would totally fund the business for this two‑year period (ts 882, 885). He admitted that there had been discussion concerning the income figures on the document but claimed nothing came of it.
Mr Soia's evidence was that at the meeting of 30 June 1999, Mr Bennett said words to the effect 'now that you have the draft shareholders' agreement and my promise to fund the Budget you really do need to stop doing regular tuition and concentrate upon developing ITC' (ts 524). Mr Soia says he believed and trusted Mr Bennett because he was Mr Soia's lawyer. Mr Soia said that as a result of what was said he decreased his days he tutored from seven to three days. He also decided not to operate large seminars for years 11 and 12 students during the period of September/October 1999 school holidays.
Mr Bennett's evidence‑in‑chief only very briefly dealt with what occurred at the meeting on 30 June 1999. He stated that at this meeting they discussed the creation of an ITC feasibility prototype using PTS's July cramming session. He stated there was never any mention of the adoption of a budget for ITC and a budget document was never presented or discussed at the meeting. He stated it was too early for any budget discussions to occur. No evidence was given in Mr Bennett's evidence‑in‑chief as to when or how the budget document dated 30 June 1999 was prepared or used in discussion.
In cross‑examination, Mr Bennett stated that the budget document dated 30 June 1999 was prepared by Mr Bestall in the ilk of earlier 'budgetary documents prepared by Mr Bestall' (ts 2063). The earlier budgetary documents were prepared on Mr Bennett's general instructions but were described by Mr Bennett as 'accounting doodlings' (ts 1922). Mr Bennett described the budget document which Mr Soia alleged was produced on 30 June 1999 as a projections budget for a business that was still in concept only (ts 1947).
In support of Mr Bennett's evidence that the purpose of the meeting on 30 June 1999 was to create a feasibility prototype, Mr Bennett in his evidence referred to a letter from Mr Soia to Mr Bennett dated 29 June 1999 (defendant's trial bundle vol 4, page 1105). This letter raised concerns by Mr Soia about using a live production of the July 1999 cramming sessions for a feasibility prototype. At that time it had been proposed to simply video‑record such a lecture and use the recorded lecture as a feasibility prototype. Mr Soia in the letter expressed the view that a live recording was likely to be too disruptive. He proposed instead a video‑recording of a non‑live lecture using the transcript of a cramming lecture. The letter of 29 June 1999 stated 'I agree we must have the Prototype completed to a tight deadline' (page 1107).
Mr Bennett also relies upon notes which he says he took at the time and which make no mention of the budget document.
It is common ground that at the meeting on 30 June 1999, Mr Soia and Mr Bennett discussed a 'to do' list prepared by Mr Bennett (the preparation of this 'to do' list and the discussion concerning it was not mentioned by Mr Bennett in his evidence‑in‑chief but he agreed in cross‑examination that the 'to do' list was discussed). Both Mr Soia and Mr Bennett retained a copy of the 'to do' list and made personal notations on it (plaintiffs' trial bundle vol 1, pages 203 ‑ 213).
The 'to do' list contained, amongst other things, an entry as follows:
Budget
-Prepare cash flow budget based upon MLB's budget
-Estimate cashflow from prototype.
Mr Bennett's evidence was the reference to 'MLB's budget' was not a reference to the budget document dated 30 June 1999 relied upon by Mr Soia but a reference to an expenditure budget Mr Bennett had prepared for the feasibility prototype (ts 2072) (plaintiffs' trial bundle vol 1, page 214). This document provided for an expenditure on the feasibility prototype of $382,602. It included an allowance for wages for a Mr Sinclair and secretarial staff but made no provision for managerial fees payable to Mr Soia. Mr Soia was not sure if this feasibility prototype budget was discussed at the 30 June 1999 meeting or at a later meeting on 28 July 1999 (ts 944). Mr Soia's evidence was that the reference to the 'MLB's budget' was a reference to the budget document dated 30 June 1999 presented, in accordance with his evidence, at the meeting on 30 June 1999.

Sinclair budget, Chromium and Pretzel Logic reports

After the meeting of 30 June 1999, Mr Soia instructed Mr Sinclair to prepare an equipment budget and proposal. The document produced by Mr Sinclair was dated 24 July 1999 (defendant's trial bundle vol 9, pages 2908 ‑ 2935). The document provided a budget for the purchase of equipment to allow ITC to 'produce the 180 hours of product required for the 1999 November Examination Prediction Course Prototype' (page 2927). According to the evidence of Mr Bennett there were a number of redrafts of this document.
The budget document provided for a total expenditure on the prototype of $175,713.49 with the last items of equipment to be ordered on 20 August 1999. The budget contained no allowance for staff wages or management fees.
In July/August 1999, ITC engaged Chromium, a company that provided internet design and technology solutions. By a document dated 16 August 1999, Chromium provided a quote of $74,600 for designing and developing a website for ITC (defendant's trial bundle vol 4, pages 1142 ‑ 1150).
Also, Mr Bennett engaged another company, Pretzel Logic, that also gave a quote for website development (which included an item for 'content development'). The total quote was $454,935 and included the observation that 'the time frame in which you wish to finish this project is unrealistic' (plaintiffs' trial bundle vol 1, pages 287 ‑ 307). In a follow up facsimile, Pretzel Logic recommended a delay to the launch of ITC to February 2000 (plaintiffs' trial bundle vol 1, page 307).

Meeting of 28 July 1999

Mr Soia's evidence was that he and Mr Bennett met on 28 July 1999. Mr Soia's evidence was that at this meeting Mr Bennett presented Mr Soia with a corporate structure and budget which had been prepared by Mr Bennett and Mr Bestall (plaintiffs' trial bundle vol 2, pages 387 ‑ 409).

The budget contained no income components. In other words, it was an expenditure budget only. It contained no indication of the period of the budget. Mr Soia's explanation for this document was that it was an initial expenditure budget as at July 1999 and therefore did not include all items of expenditure contained in the budget document dated 30 June 1999 produced at the meeting on 30 June 1999 (ts 949).
The budget provided for the following expenses:

Staffing:

(which included a fee of $250,000 payable to Mr Soia)

$ 407,000

Technology:

(which included $170,352 for a feasibility prototype)

238,079

Studio:

41,245

Website Development:

121,750

Advertising:

(it is agreed that this is a typographical error and should have read $25,000)

250,000

Legal Accounting:

20,000

Insurance:

5,000

The total budget:

$ 857,995

Mr Bennett acknowledges that he had prepared the expenditure budget document which contained provision for a management fee payable to Mr Soia of $250,000. However he stated in cross‑examination that the budget was in contemplation of ITC proceeding beyond the feasibility prototype stage. Mr Bennett stated that he was prepared to pay Mr Soia $250,000 per annum if and when the business was operational and successful (ts 2108). He stated at the time he prepared the expenditure budget document they were working towards getting an operational feasibility prototype out by July 1999 and broadcasting on the internet successfully by October 1999 (ts 2109).
Mr Soia, in his evidence, maintained that although Mr Bennett had included an allowance of management fees of $250,000 in the budget document presented at the meeting, there was already in existence an agreement reached on 30 June 1999 that Mr Soia be paid a management fee in the first year of $200,000.

Meeting on 2 August 1999

Mr Soia's evidence was that at a meeting on 2 August 1999 he was provided with a second draft shareholders' agreement prepared by Mr Bennett. This draft agreement (plaintiffs' trial bundle vol 1A) provided inter alia as follows:
5.The intention of the parties is that the business should be developed as quickly as possible to the highest quality standard and be accessible to as many people as possible. To that extent the best and most economic delivery system shall be developed and utilised. The intent of the shareholders shall be to apply initial profits.
5.1to retire loans;
5.2in equal priority to return to Soia a reasonable allowance in respect of foregone income.
The agreement also provided that if the business was not successful within a period of 12 months that content material developed be returned to Jeneva and Soia; and that the physical assets of ITC be realised to repay funds advanced by Citifield and Mr Bennett.
Mr Soia sent a note to Mr Bennett (defendant's trial bundle vol 10, pages 3282 ‑ 3298) concerning the draft shareholders' agreement. The note also included, after making the observation that the draft agreement appeared to provide ITC would own all of the intellectual property, the following comment:
If this is so I am surrendering 20 years of work and a successful small business for $250,000 of deferred wages (page 3287).
Mr Soia, in his evidence, said that by 'deferred wages' he was making a reference to the fact that the wages were not payable until after the shareholders' agreement was signed (ts 991). Mr Bennett says his understanding was 'deferred wages' meant not payable until the business was up and running and earning an income (ts 2523).

Abandonment of feasibility prototype

Mr Bennett's evidence was that at some time in or about late August 1999 Mr Soia and Mr Bennett agreed to abandon the proposal to conduct a feasibility prototype. Mr Bennett's evidence was that Mr Soia was reluctant to deliver the ITC feasibility prototype on the internet because the concept might be stolen. That meant that from some time in late August 1999 the business concept proceeded on the basis that ITC would progress to full production. Mr Soia in his evidence acknowledged that they had concluded that a feasibility prototype was not appropriate and that equipment purchased for the feasibility prototype would be used to produce the final tuition product of ITC. Mr Soia maintained that although they had discussed using a feasibility prototype to test the technology and the concept of the joint venture, he and Mr Bennett had already agreed at the 30 June 1999 meeting to proceed with the joint venture business in accordance with the budget document dated 30 June 1999 (ts 1046). In other words, it was never the case that the joint venture was tied to a successful completion of a feasibility prototype phase.

Meeting in or about late August 1999

Mr Bennett's evidence was that in or about late August 1999 he went to PTS's office in Morley and had discussions with Mr Soia. Mr Bennett's evidence was that during this discussion Mr Soia indicated he was going to give up PTS and concentrate entirely on production of the material for ITC. Mr Bennett said that he told Mr Soia that he need not resign his business and that they still had problems to solve concerning streaming. Further, Mr Bennett said he told Mr Soia that Mr Bennett could not afford to pay Mr Soia the income he would lose from closing down PTS. Mr Bennett said that he told Mr Soia that the financial requirements of ITC were in excess of the amount that he had budgeted to invest and what he had the financial capacity to invest. He suggested to Mr Soia they should look to introduce other financiers. Mr Bennett said Mr Soia rejected this idea and stated that they should proceed to develop ITC between the two of them (ts 1813).
Mr Bennett said shortly after the meeting he was approached by Mr Soia who sought assistance as he was having difficulties with a financial matter. Mr Bennett said he arranged on 25 August 1999 to pay $10,000 to Mr Soia as a loan to assist him.
Mr Soia in his evidence did not deal directly with the circumstances of the payment of the $10,000 on 25 August 1999. However, in a letter to Mr Bennett dated 2 May 2000 (plaintiffs' trial bundle vol 4, pages 74 ‑ 100) Mr Soia stated:
On 25 August 1999 after I had made repeated visits to your office you made a $10,000 'loan' payment was made into my Company account. I was very frustrated that the $10,000 was deemed a 'loan' when I had been pledged $25,000 of Director's Fees on 3 August 1999 (page 76).
No evidence was given by Mr Soia of any discussion on 3 August 1999 which was alluded to in the letter to Mr Bennett dated 2 May 2000.
Subsequently, Mr Bennett signed a document dated 2 May 2000 whereby he agreed that the $10,000 was part of a consultation fee paid to PTS (plaintiffs' trial bundle vol 4, page 72). Mr Bennett's evidence was that he signed this document at the request of Mr Soia who wanted the loan recharacterised.

Delay in acquiring equipment

Part of the equipment included in the feasibility prototype budget was a piece of equipment known as a Media 100 V80 which was used to compress recorded video material so that it could be streamed on the internet. According to the evidence of Mr Soia, the equipment was also necessary to integrate the video, graphics, audio and other aspects of the recorded material.
The evidence of Mr Soia was that this equipment was ordered in September 1999. The total cost of the equipment required was $73,108. This was confirmed in a report from Mr Sinclair in September 1999 which contained a written projected expenditure budget (plaintiffs' trial bundle vol 3, pages 676 ‑ 687). The same budget document provided for payment of management fees to Mr Soia, but not until 31 December 1999. Mr Sinclair was not called to give evidence at the trial and it is not clear on whose instructions or on what basis he included these figures in the budget document.
Mr Soia's evidence was that the equipment ordered was not supplied until November 1999 due to Mr Bennett failing to pay for the equipment until November 1999. The equipment was delivered on 17 November 1999.
The equipment was paid for under a leasing arrangement with the Commonwealth Bank that had been organised by Mr Bennett. The leasing document was signed by Mr Bennett on 8 November 1999. Mr Bennett's evidence was that a delay occurred in arranging the finance because the bank initially prepared director guarantee documents which included Mr Soia and Mr Soia refused to sign those documents.
Mr Bennett's evidence was that any delay in the supply of equipment was not caused by him failing to make payment promptly but due to the fact that there was a delay in the delivery of the equipment. Mr Bennett's evidence was that the payment was only due once the equipment had arrived (ts 2160).
Mr Soia conceded in cross‑examination that the delay in the supply of the equipment did not prevent him and the staff from continuing to prepare and record lessons on video with a view to having these later compressed by the equipment once the equipment arrived.

Third draft shareholders' agreement

The evidence of Mr Soia was that he prepared a third draft shareholders' agreement and presented this to Mr Bennett on 8 September 1999 (ts 557; defendant's trial bundle vol 10, page 3299 ‑ 3313).
The draft agreement provided inter alia:
10.Jeneva and Soia and PTS and Soia shall make no financial contribution to the development of the business at any time. The twelve (12) month initial development phase will be funded entirely by Citifield and Bennett. Thereafter it is anticipated ITC will be self‑funded.
...
19.It is agreed that Jeneva and Soia will be paid a management and administration fee of $250,000 for the first 12 months of 1 July 1999 to 30 June 2000. This management and administration fee does not constitute sale of intellectual property to ITC, Citifield or Bennett.
The first instalment of this management and administration fee will be $50,000 and paid no later that [sic] 31 October 1999. Thereafter, $25,000 will be paid monthly on the last day of the month into an account specified by Jeneva and Soia.
The agreement then went on to provide for a minimum management and administration fee to be paid to Jeneva and Soia in the years 2000 and 2001 of $500,000, increased in 2003 to $1 million and further increases thereafter.
Mr Soia's evidence, by way of explanation for this document, was that it was a draft only and was presented as a 'shake‑up' (ts 1010), as a result of Mr Bennett failing to meet his commitments. Notwithstanding the demands for payment of a management fee as indicated in this draft agreement, Mr Soia maintained in his evidence that an agreement had been finalised on 30 June 1999 that he be paid a management fee of $200,000 as per the budget document dated 30 June 1999.
It is common ground that the third draft of the shareholders' agreement presented on 8 September 1999 was not agreed to.

MarketForce Advertising

In September 1999, Mr Bennett engaged MarketForce Advertising to prepare a marketing plan and marketing expenditure for ITC to launch its product in or about October or November 1999. MarketForce Advertising prepared alternative marketing plans (plaintiffs' trial bundle vol 2, pages 544 ‑ 592). A marketing plan which involved advertising on television and by newspaper in the months of October and November 1999 was costed at $113,068.07. A marketing program involving radio and newspaper was costed at $72,574.33.

Mr Sinclair's budget estimates of 4 October 1999

On or about 4 October 1999, Mr Sinclair of ITC prepared an ITC financial report (plaintiffs' trial bundle vol 3, pages 676 ‑ 687) which was made available to both Mr Soia and Mr Bennett. A budget contained in the report made no provision of management fees payable to Mr Soia up to 31 December 1999 but during the period from 31 December 1999 to 28 February 2000 provided for a management fee payable to Mr Soia of $160,000. The budget also recorded a loan that had been made to Mr Soia of $10,000. Mr Sinclair estimated that the projected expenditure of the business up to 28 February 2000 would be $828,986.36.

Letter from Mr Soia dated 27 October 1999

On 27 October 1999 Mr Soia sent a letter to Mr Bennett (defendant's trial bundle vol 13, pages 4201 ‑ 4203). The letter complained that Mr Bennett had failed to provide 'the budgeted financial requirements' of ITC which included $755,143 for equipment and wages for employees and '$250,000 to Kim Peter Soia for compensation for loss of income foregone for the initial 12 month period'. The letter also referred to an agreement by Mr Bennett that he would pay $25,000 on 30 August 1999 and $50,000 on 19 October 1999, neither of which had been paid. The letter threatened that if Mr Bennett did not meet his financial commitments then Mr Soia would have no option but to return his full attention to his previous business of PTS.
Mr Bennett stated in cross‑examination that he did not respond in writing either to Mr Sinclair's report of 4 October 1999 or Mr Soia's letter dated 27 October 1999, as Mr Bennett was meeting with Mr Soia on 29 October 1999. Mr Bennett stated that he did not wish to inflame the situation prior to this meeting. He thought Mr Soia's reference, in his letter dated 27 October 1999, to a payment to be made of $25,000 was a reference to a loan, as Mr Bennett had previously indicated he would provide financial assistance by way of a loan of some money, as he did when he made a payment of $10,000.

Signed shareholders' agreement - 29 October 1999

Mr Soia's evidence was that on 29 October 1999, in company with Ms L'Herpiniere, he attended a meeting with Mr Bennett at Mr Bennett's office to sign a shareholders' agreement.
At the meeting the shareholders' agreement was signed by Mr Bennett and Mr Soia (and executed by their respective companies Citifield and Jeneva) and dated 29 October 1999 (defendant's trial bundle vol 10, pages 3030 ‑ 3035). This document is largely silent as to the contributions to be made by Mr Soia and Mr Bennett and any definition of their obligations under the joint venture. There is no mention of any management fee payable to Mr Soia. Likewise, there is no definition of Mr Bennett's obligations to fund the development of the business. The agreement did provide for an academic dividend to be paid by way of a priority dividend to Jeneva at the rate of 15% of operational profit if the net operational profits were less than $20 million and at a reduced scale if the operating profit exceeded $20 million.
The shareholders' agreement further provided for the following matters:
(a)Mr Soia was to be in charge and responsible for the preparation and compilation of the academic material for use by the company (cl 2.2(a));
(b)Mr Bennett shall be responsible for the legal and administrative affairs relating to the operations of the company (cl 2.2(b)); and
(c)in the event of the company's business not proceeding for any reason whatsoever, including lack of economic success of the business, a disagreement between Citifield and Jeneva of a fundamental nature, or Citifield disposing of its shares in the company without consent of Jeneva, then Mr Soia shall have the right to acquire all the intellectual property of ITC for the sum of $100 (cl 3.1(b)).
Mr Soia, in cross‑examination, stated that Mr Bennett said to him that they already had a 'budgetary agreement' and that it was unnecessary to include in the shareholders' agreement all of the details suggested by Mr Soia relating to their respective contributions to the joint venture. Mr Soia said that Mr Bennett said, 'I am giving you that advice' (ts 1049). In cross‑examination, Mr Bennett was not directly asked about whether he made these comments to Mr Soia, but admitted that he did not suggest to Mr Soia before signing the shareholders' agreement that he should receive independent advice. As mentioned earlier in this decision, Mr Bennett conceded that he ought to have done so.
Mr Soia's evidence was that at the meeting on 29 October 1999 he complained that he had foregone hundreds of thousands of dollars of income pursuing the ITC project to the exclusion of his PTS business. Mr Soia said that he told Mr Bennett that if management fees could not be paid, Mr Soia would have to conduct through PTS the November 1999 pre‑examination seminars and courses to earn money to pay overdue accounts. Mr Soia's evidence was that Mr Bennett said that he wanted Mr Soia to be 100% involved in the development of ITC and Mr Bennett would pay outstanding management fees immediately (ts 567). The evidence of Mr Soia as to this conversation was supported by the evidence of Ms L'Herpiniere.
Mr Bennett in his evidence stated that at the meeting Mr Soia had presented a list of outstanding accounts. Mr Bennett stated that these accounts included legal fees owed to Bennett & Co and a loan made to Mr Soia by Citifield. Mr Bennett said that he explained to Mr Soia that Mr Soia's personal debts had nothing to do with ITC. Mr Bennett said that he recommended that Mr Soia go back to tutoring with PTS and do the next set of cramming sessions to get extra income. Mr Bennett said that he told Mr Soia he would do what he could to help Mr Soia. Mr Bennett said that he told Mr Soia that he need not pay the outstanding fees to Bennett & Co, nor repay the loan of $10,000 to Citifield.
Mr Bennett maintained there was no understanding to pay management fees to Mr Soia until ITC was operational and earning an income (ts 2180).

Global Education

Mr Bennett in his evidence stated that in September/October 1999 there was a shift in Mr Soia's outlook for ITC. Mr Soia wanted to name the company 'Global Education Pty Ltd' or 'Success Corporation Pty Ltd'. Mr Soia wanted to develop the business globally and wanted the name of the company to be as recognisable as names such as Microsoft, McDonalds, Coca‑Cola and others. At Mr Soia's request, Mr Bennett reserved the names 'Global Education' and 'Success Corporation'.

Meetings on 18, 19 and 22 November 1999

On 18 November 1999, Mr Soia stated in his evidence that he attended a meeting at Mr Bennett's office. Mr Soia's evidence was that at the meeting Mr Bennett informed Mr Soia that Mr Bennett was unable to fund ITC further and was unable to pay promised management fees. However, a cheque for $7,576.26 had been received from Optel Audio Visual Pty Ltd by way of a refund from a deposit paid for equipment which was subsequently financed through the Commonwealth Bank. Mr Soia's evidence was that Mr Bennett indorsed the cheque payable to Mr Soia, but when Mr Soia attempted to bank the cheque it was rejected.
Mr Soia's evidence was that he attended Mr Bennett's office on 19 November 1999 and Mr Bennett acknowledged that management fees were due and said he would pay management fees into Mr Soia's account.
Mr Soia's evidence was that he also wrote to Mr Bennett by letter dated 19 November 1999 (plaintiffs' trial bundle vol 3, page 772 ‑ 777). This letter states that Mr Bennett had agreed to pay $250,000 to Mr Soia for 'compensation for loss of income foregone during the initial 12 month period'. The letter further says 'I have at this stage only been "loaned" $10,000 and have had to endure considerable financial hardship'. The letter is four pages long and largely details what Mr Soia alleged were broken promises to pay amounts to Mr Soia. In the letter Mr Soia threatens to put the operation of ITC on hold and return to devoting his full attention to his tutoring business of PTS unless Mr Bennett meets his commitments as perceived by Mr Soia.
Mr Soia's evidence was that he met with Mr Bennett on 22 November 1999 and that Mr Bennett did not dispute his obligation to pay Mr Soia management fees and arranged a payment of $25,000 that day.
Mr Bennett, in his evidence, did not acknowledge receipt of the letter dated 19 November 1999. However he acknowledged in his evidence that Mr Soia had approached Mr Bennett with a list of outstanding bills. Mr Bennett said that Mr Soia urgently needed money and, as Mr Bennett was worried about Mr Soia's state of mind and behaviour, Mr Bennett indorsed the Optel Audio Visual cheque so as to make it payable to Mr Soia to provide him with funds. Mr Bennett in his evidence said that he met with Mr Soia on 19 November 1999 and agreed to pay Mr Soia $25,000 by the next business day. It is not in dispute Mr Bennett arranged payment of $25,000 to Mr Soia on 22 November 1999. Mr Bennett's evidence was that he made this payment as a loan. Mr Bennett said Mr Soia asked him to lend him some more money and he agreed to do so by the end of the month. Mr Bennett said at the time he felt the business was in disarray (at this stage Mr Sinclair and another employee Mr Fraser had resigned) and he was also concerned for Mr Soia who had mentioned to Mr Bennett that he feared that he had a genetic disorder of Huntington's disease.

(b) Background details

The claim by Mr Bennett for costs is from 21 February 2011. The relevant costs determination is the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) made pursuant to the LPA 2008.
At all relevant times Mr Bennett was represented by Bennett & Co which was an incorporated legal practice under the LPA 2008. At all relevant times the practice of Bennett & Co was owned by Lawfirst Pty Ltd. Up until 24 January 2012 Mr Bennett was the sole director, secretary and shareholder of the company.
On 20 May 2011 Mr Bennett entered into a written cost agreement with Bennett & Co for the legal practice to represent Mr Bennett in this action.

(c) Submissions of the parties

The submissions of the plaintiffs is that at all relevant times Mr Bennett was represented by a legal practice of which he was the principal and it was akin to the situation spoken of by Parker J in Dobree v Hoffman of a practitioner/litigant being represented by his own firm. Accordingly it is submitted that the rule of practice should apply that costs should not be awarded in favour of the defendant Mr Bennett on the basis that he was effectively acting on his own behalf.
The submissions presented on behalf of Mr Bennett were as follows:
1.The so‑called rule of practice in Dobree v Hoffman is contrary to High Court authority.
2.A claim by for costs by the defendant Mr Bennett is distinguishable from Dobree v Hoffman as the legal practice of Bennett & Co was not a party to the proceedings.
3.The incorporation of Bennett & Co meant that the defendant Mr Bennett was represented by a separate legal entity and the rule of practice in Dobree v Hoffman did not apply.

(d) Conclusions

Although counsel for Mr Bennett submitted that Dobree v Hoffman was contrary to High Court authority, he conceded that it was the duty of a single judge of this Court to follow the Full Court decision: Huntingdale Village Pty Ltd (Receivers and Managers Appointed) v Corrs Chambers Westgarth [24].
However, I have come to the conclusion for reasons set out below that the rule of practice in Dobree v Hoffman should not be applied in the present case.
As stated above, in 1996 when Dobree v Hoffman was decided the Legal Practitioners Act 1893 was the applicable legislation governing legal practice. There was no provision for a legal practice to be conducted by an incorporated body. Accordingly, where two or more persons operated a legal practice in 1996 they did so in partnership and were otherwise subject to the provisions of the Partnership Act 1895 (WA). A partnership is not a separate legal entity. Hence, the comment by Parker J in his decision that 'any fees paid or payable to the partnership by the solicitor litigant are also paid or payable to the solicitor litigant by virtue of the partnership'. In this case unless the corporate veil is lifted, the solicitors on the record, Bennett & Co, are a legal entity quite separate from Mr Bennett. Also, unlike the situation in Dobree v Hoffman, Mr Bennett was a party to these proceedings as an individual quite separate from the operation of the legal practice of Bennett & Co. In other words Bennett & Co was not a party to the litigation.
The rule that self represented litigants are not entitled to costs for their own time and inconvenience is built upon the premise that costs awarded are confined to money paid or liabilities incurred for professional legal services: Cachia v Hanes. The majority in that case stated:
It has not been doubted since 1278, when the Statute of Gloucester introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation. They were never intended to be comprehensive compensation for any loss suffered by a litigant.
In my opinion, the potential for receipt of profit by Mr Bennett from any award of costs is, in the context of this case, not sufficient to extend the Dobree v Hoffman rule of practice to the present situation where Mr Bennett is represented by a legal practice which is not a party to the proceedings and which is a separate legal entity to him. The circumstances are somewhat analogous to cases where corporate litigants have been represented by solicitors employed by the corporate litigant. The traditional approach has been to award costs on the basis of comparable costs which would have been incurred and allowed on taxation had an independent solicitor been engaged, without enquiry as to how these compare with the expense of the internal employment of a solicitor. In other words, on the taxation, the taxing officer need not conduct an enquiry as to the extent the corporation might profit from costs been allowed on the basis of an independent solicitor acting: Commonwealth Bank of Australia v Hattersley (2001) 51 NSWLR 333, 337 [11].
In Re Eastwood (decd) [1975] Ch 112, Russell LJ (with whom Stamp & Lawton LJJ agreed) relevantly stated:
In summary, therefore, in our opinion: (1) It is the proper method of taxation of a bill in a case of this sort to deal with it as though it were the bill of an independent solicitor, assessing accordingly the reasonable and fair amount of a discretionary item such as this, having regard to all the circumstances of the case. (2) ... (3) It is a sensible and reasonable presumption that the figure arrived at on this basis will not infringe the principle that the taxed costs should not be more than an indemnity to the party against the expense to which he has been put in the litigation. (4) There may be special cases in which it appears reasonably plain that that principle will be infringed if the method of taxation appropriate to an independent solicitor's bill is entirely applied: but it would be impracticable and wrong in all cases of an employed solicitor to require a total exposition and breakdown of the activities and expenses of the department with a view to ensuring that the principle is not infringed, and it is doubtful, to say the least, whether by any method certainty on the point could be reached. To adapt a passage from the judgment of Stirling J in Re Doody [1893] 1 Ch at 137 to make the taxation depend on such a requirement would, as it seems to us, simply be to introduce a rule unworkable in practice and to push abstract principle to a point at which it ceases to give results consistent with justice (132).
Counsel for Mr Bennett in oral submissions has made it clear that Mr Bennett does not seek any allowance for costs for legal services for time spent by Mr Bennett or Mr Colin Edward Chenu (a current director of Lawfirst Pty Ltd) in preparing or attending the trial (ts 27). Essentially Mr Bennett is seeking a costs award which covers the expense of employed solicitors, Ms Onofaro and Mr Ebbs of Bennett & Co, and independent counsel, Dr Schoombee, representing Mr Bennett in these proceedings. Ms Onofaro attended the trial as instructing solicitor and Mr Ebbs attended the trial as second counsel. It is clear from the length of the trial and the amount of the documentation involved that considerable expense was incurred by Bennett & Co in providing the legal services necessary to represent Mr Bennett at the trial. I conclude that it would be unjust to deny an allowance to Mr Bennett for the provision of legal services provided by Bennett & Co in such circumstances. I do not believe that such an order is contrary to the rule of practice stated in Dobree v Hoffman which is confined to the situation where the law practice providing legal services is a party to the action although, according to the obiter judgment of Parker J, this rule of practice could be extended in an appropriate case where the practitioner/litigant is represented by his or her firm of solicitors. Whether the rule of practice is extended to such circumstances is a matter for the discretion of the court awarding costs. Although I conclude that the fact that the practitioner/litigant is represented by an incorporated legal practice does not necessarily preclude a court denying costs applying the rationale of Dobree v Hoffman, in this case, for the reasons I have given earlier, I conclude that it is not appropriate to exercise my discretion to place such a blanket limitation on costs awarded. However, in line with the concession made by counsel appearing for Mr Bennett I believe it is appropriate that I make an order that any allowance for costs on taxation not include an allowance for the time spent by Mr Bennett and Mr Chenu preparing the case for the defendant.

Issue three

The defendant seeks the following special costs orders:
1.Pursuant to section 280(2)(c) of the Legal Profession Act 2008, any limits fixed by any applicable costs determination are removed with respect to the following items;
(a)Item 3(a) - Defence;
(b)Item 7(b) - Giving Discovery;
(c)Item 8 - Inspection;
(d)Item 17 - Getting Up; and
(e)Item 20 - trial.
2.The Defendant be allowed costs in respect of;
(a)running transcript;
(b)two Counsel attending the trial; and
(c)one solicitor attending and instructing counsel at the trial.
Section 280(2) of the LPA 2008 provides:
(2)Despite subsection (1), if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the court or officer may do all or any of the following -
(a)order the payment of costs above those fixed by the determination;
(b)fix higher limits of costs than those fixed in the determination;
(c)remove limits on costs fixed in the determination;
(d)make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or assessed.
Martin CJ in Heartlink Ltd v Jones as Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 considered the provisions of s 215(2) of the Legal Practice Act 2003 (WA) which is in identical terms to s 280(2) of the LPA 2008.The principles which emerged from that decision are as follows:
1.Before the court can make an order under the subsection, the court must form an opinion which has two components. Firstly, whether the costs determination is inadequate; secondly, whether the inadequacy is because of the unusual difficulty, complexity or importance of the matter [11].
2.The policy considerations which should guide the court when considering such an application are, firstly, that the court should not usurp the role of the taxing officer and, secondly, that at least where party/party costs are concerned, the court should make an order that would give effect to the general principle of allowing the successful party to be compensated for their costs by the unsuccessful party, where appropriate [13].
3.The requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination [16].
4.The courts should discourage a requirement that to prove inadequacy the applicant must present a detailed evaluation in the form of a draft bill of taxation. Instead it is desirable that the issue of inadequacy be evaluated as a matter of impression rather than detailed evaluation [20] ‑ [21].
5.The word 'unusual' in the subsection only qualifies the word 'difficulty' and did not qualify the words 'complexity' or 'importance' [17].
6.The word 'importance' need not be given a meaning restricting it to importance to the community. Importance can arise either because of the significance of the issues to the parties or because of the significance of the issues to other prospective parties or to the public or the community [19].
7.Nothing that a court does in determining an application can in any way bind or impinge upon the decisions to be made by the taxing officer as to whether or not work was appropriately and reasonably done, or as to the proper amount to be allowed in respect of that work. The question for determination on the application is not whether the bill will, in fact, tax out at more than the limit, but rather whether there is a fairly arguable case that it may tax out at an amount above the limit [25].
The application for special orders by Mr Bennett is supported by an affidavit of Ms Onofaro sworn 24 September 2012 and an affidavit of Mr Ebbs sworn 15 October 2012.
The application by the defendant seeks to remove any limits fixed under the scale of costs contained in the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) for the items of defence, discovery, inspection, getting up and trial.

(a) Defence - Item 3(b) of the scale of costs

The maximum allowance under the scale for preparing a defence document is an allowance of 10 hours at a rate of $429 per hour leading to a maximum of $4,290. The final defence document filed in this matter dated 23 December 2011 followed a number of amendments which were allowed both before and after the trial. The final defence document consisted of 30 paragraphs. There is no indication from the affidavit material before me as to why the maximum amount claimable under the scale is inadequate. Based upon the length of the pleading I am not able to conclude that there is an arguable case that the maximum allowance is inadequate. Accordingly, I make no order in relation to the limit fixed in the scale for the preparation of the defence document.

(b) Discovery - Item 7(b) of the costs scale

The maximum amount allowed for discovery under the scale is 10 hours for a senior practitioner leading to a maximum amount of $4,290. The affidavit of Ms Onofaro states that the defendant's solicitors spent in excess of 50 hours in providing discovery and supplementary discovery. I am satisfied by way of impression that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that is fixed under the scale based upon the number of hours spent. Accordingly, I am prepared to remove the limit in relation to this item.

(c) Inspection of documents - Item 8 of the scale of costs

The affidavit of Ms Onofaro deposes that the plaintiffs discovered 128 documents in the initial discovery and provided informal discovery of approximately 173 documents (by informal lists dated 17 February 2011, 18 February 2011, 13 May 2011 and 16 May 2011). The maximum amount fixed under the costs determination is limited to $429 per hour. The scale does not provide any limit to the number of hours. I am not satisfied that the hourly rate is inadequate. Accordingly, I am not prepared to remove the limit in relation to inspection. Ultimately it will be a matter for the taxing officer to assess if the amount claimed is reasonable in terms of the total time spent for inspection.

(d) Getting up - Item 17 of the scale of costs

The amount fixed under the scale is a maximum of 120 hours by a senior practitioner totalling $51,480.
The affidavit of Ms Onofaro deposes that the solicitors for the defendant spent approximately in excess of 150 hours undertaking getting up work, additional work preparing trial bundles, 50 hours reviewing 37 individual tutorial presentations of Mr Soia and in excess of 40 hours preparing submissions. Based upon this affidavit material and the length of the trial, I am satisfied by way of impression that there is a fairly arguable case that the limits provided in the scale of costs are inadequate. Accordingly I am prepared to make an order removing the limit in relation to this item.

(e) Trial - Item 20

The amount fixed under the scale is as follows:
(a)3.5 days preparation and first day of trial - $15,345;
(b)counsel fee for the second and each successive day of the hearing - $3,410;
(c)instructing legal practitioner attending trial - $429 per hour;
(d)attending on reserve decision (including preparation, consideration of reasons for decision and all necessary work and attendances to obtain final orders) - $429.
Based upon the length of the trial, the frequent adjournments (which would have necessitated additional preparation) and the complexity of the issues, I am satisfied by way of impression that it is fairly arguable that the limits for items (a), (b) and (d) above are inadequate. However I am not satisfied that it is fairly arguable that (c) is inadequate. Accordingly, I am prepared to make an order removing the limits in relation to items 20(a), (b) and (d) above.
The conclusions I have reached that it is fairly arguable that the limits set in the scale of costs for discovery, getting‑up and trial are inadequate are based upon the number of hours involved. I do not conclude that it is fairly arguable that the hourly rates of charge for fee earners prescribed in the costs determination are inadequate.
The second matter for consideration is whether the inadequacies that I have identified are based upon the unusual difficulty, complexity or importance of the matter.
Applying the principles that I have summarised earlier in this decision, I am satisfied, as demonstrated by the number of evidentiary and legal issues canvassed in my judgment in this matter, the length of the trial and the amount of documentation involved, that the inadequacies I have identified are due to the complexity of the matter. Also, the size of the claim made by Mr Soia, being in excess of $30 million, also leads me to the conclusion that the inadequacies partly arise because of the importance of the claim to the parties.
The defendant Mr Bennett also seeks special orders as to transcript; two counsel attending the trial; and one solicitor attending and instructing counsel at the trial. Order 66 r 18 of the RSC provides that a court may make an order allowing costs for any item not provided in the relevant scale. Given the length of the trial and a number of adjournments during the course of the trial, I am satisfied that a special order should be made for an allowance in respect of the costs of obtaining a running transcript. However, in relation to the order sought for two counsel and an instructing solicitor attending trial, these items are covered by the relevant scale and are a matter for assessment by the taxing officer: Seaman 66.11.11; item 20 of the relevant scale.

Issue four

The defendant Mr Bennett seeks an order against the plaintiffs and their solicitor, Mr T Galic, jointly and severally to pay the defendant's costs incurred on an indemnity basis in respect of an application by the defendant seeking an order allowing the extraction of the judgment in this action.
The background to this issue is that the decision in the action was handed down on 16 August 2012. On that date the plaintiffs were represented in court by Mr Galic. Counsel for the defendant applied for judgment dismissing the plaintiffs' claims. Mr Galic did not oppose such an order for judgment being made. The question of costs was adjourned sine die. On 30 August 2012 Mr Galic caused a letter to be sent to the Supreme Court of Western Australia requesting that the judgment not be extracted until the plaintiffs had an opportunity to make an application to reopen their case. As a result of this letter the defendant's solicitors enquired with the court orders division of the Supreme Court whether the judgment filed by the defendant's solicitors had been extracted. The defendant's solicitors were informed the matter had been referred to Commissioner Sleight's associate. Despite a written request from the defendant's solicitors to the plaintiffs' solicitors that the plaintiffs withdraw their opposition to the extraction of the judgment, the plaintiffs through their solicitors failed to take any steps to either withdraw the letter to the Supreme Court requesting the judgment not be extracted or make any application to the court. Faced with this impasse, the defendant's solicitors filed an application seeking an order that the court orders division of the Supreme Court be required to process the extraction of the judgment filed by the defendant's solicitors. On 12 September 2012 I made an order that the court orders division of the Supreme Court allow the extraction of the judgment and reserved costs.

Order 66 r 5 provides as follows in relation to orders be made against a solicitor personally.
5.Lawyer may be ordered to pay costs etc.
(1)Where in any proceedings costs are incurred by a party -
(a)as a result of any improper, unreasonable, or negligent act or omission; or
(b)which, in the light of any such act or omission occurring after they were incurred, the Court considers it is unreasonable to expect that party to pay,
the Court may order any practitioner whom it considers to be responsible (whether personally or through a servant or agent) -
(c)to pay those costs personally or to indemnify any party who has been ordered to pay those costs; or
(d)not to claim any relevant costs or fees; or
(e)to refund any relevant costs or fees which may have been paid already.
(2)No order under this rule shall be made against a practitioner unless he has been given a reasonable opportunity to appear before the Court and show cause why the order should not be made, except where any proceeding in court or in chambers cannot conveniently proceed, and fails or is adjourned without useful progress being made -
(a)because of the failure of the practitioner to attend in person or by a proper representative; or
(b)because of the failure of the practitioner to deliver any document for the use of the Court which ought to have been delivered, or to be prepared with any proper evidence or account, or otherwise to proceed.
(3)The Court may before making an order under this rule refer the matter to the taxing officer for inquiry and report.
(4)The Court may direct that notice of any proceedings or order against a practitioner under this rule shall be given to his client in such manner as may be specified in the direction.
The jurisdiction to make an order against a legal practitioner personally should be exercised with caution. Generally, practitioners should be free to act for their clients without being inhibited by a threat of personal liability for costs: Re Bendeich (1994) 53 FCR 422; (1994) 126 ALR 643 [10].
An applicant's right for an order for payment of costs by a practitioner personally depends upon showing that the practitioner has been in breach of his or her duty to the court (Seaman 66.5.6). The court only has jurisdiction to make an order for payment of costs against the practitioner under the rule where the improper, unreasonable or negligent conduct complained of has caused an unjustifiable waste of costs: Ridehalgh v Horsefield [1994] Ch 205, 207; [1994] 3 WLR 462, 482 ‑ 483; Seaman 66.5.5 and 66 5.7.
In response to the defendant's application for costs Mr Galic has sworn and filed an affidavit sworn 12 October 2012. Mr Galic did not seek independent representation on the application. On the application the plaintiffs were represented by Mr Garnsworthy on instructions from Galic & Co.
In his affidavit, Mr Galic states that he concluded that there might be a basis for an application to reopen the case on the basis of a pleading issue arising from [291] in Soia v Bennett [No 5]. This related to the plaintiffs' claim for damages under the Fair Trading Act 1987 (WA). In my reasons for decision I stated as follows:
289According to the factual findings I have made earlier in this decision, the representational basis of the plaintiffs' claim of misleading or deceptive conduct has largely disappeared. The only relevant proven representations are set out earlier in this decision in my conclusions relating to par 3 of the statement of claim.
290I find that these representations were to future matters and, accordingly, the plaintiffs' claims under the FTA based upon a 'falsification' (that is, that the representations were not carried out) cannot succeed as a matter of law.
291It was never the pleaded case of the plaintiffs that:
(a)Mr Bennett did not have reasonable grounds for making the alleged representations; or
(b)that it could be implied from Mr Bennett's alleged non‑compliance that when he made the alleged representations that he did not intend to carry out the representations or have the capacity to do so.
292The plaintiffs sought to overcome this legal obstacle to their claims by applying, after the close of evidence and after the close of addresses, to amend the statement of claim to plead in the alternative to the falsification claim that the representations were to future matters and they were made without reasonable grounds. I disallowed the proposed amendments given the lateness of the application and the unfairness that would arise: Soia v Bennett [No 3] [2011] WASC 361 (Soia v Bennett [No 3]). The particulars of the proposed amended claim were as follows:
'The defendant at the time he made the representations had no intention of funding the business or did not have reasonable grounds for saying he was going to fund the business to the extent required for its development as set out in the budget of $1,765,765 for the first year and $1,980,000 for the second year or the management fees listed therein as $200,000 for the first year and $300,000 for the second year or to pay any management fees at all until the business had its own income.'
293Even if I had allowed the amendment, consistent with my factual findings, the claim would have been defeated on the basis that the representations were not made as alleged in these particulars.
Mr Galic states that in July 2009 the plaintiffs had applied to amend the statement of claim to plead that 'there was no reasonable grounds for the making of the said representations as the defendant did not have the financial capacity required and/or the means necessary to make good the said representations'. Mr Galic stated that Master Sanderson disallowed the proposed amendment. Mr Galic stated that his recollection (my emphasis) was that the proposed amendment was disallowed by Master Sanderson on the grounds that 'he did not consider the proposed amendments to be necessary'.
The explanation given by Mr Galic provides no reasonable explanation or justification for requesting that the judgment not be extracted. Trial counsel had already made an application to amend the statement of claim by pleading that there were no reasonable grounds for Mr Bennett making the alleged representations and this application had been dismissed: Soia v Bennett [No 5] [292]; Soia v Bennett [No 3] [2011] WASC 361. Further, at no time did the plaintiffs file an application to reopen as foreshadowed in the letter sent by Mr Galic to the Supreme Court dated 30 August 2012.
Mr Galic sought to justify his steps in frustrating the extraction of the judgment on the basis that he was unable to seek advice from trial counsel due to a fee dispute. Further that at the time he was under personal pressure due an illness in his family. Other than these broad contextual circumstances, Mr Galic gave no explanation as to why an appropriate application was not filed with the court on urgent basis.
I conclude that in the circumstances Mr Galic has acted unreasonably by seeking to delay the extraction of the judgment and/or not filing an urgent application to the court seeking a stay of the extraction of the judgment. This caused an obvious expense to the defendant by forcing an application to be made to the court compelling the extraction of the judgment. I consider it is unreasonable to expect either Mr Galic's clients to pay the these costs or the defendant. I consider that Mr Galic was responsible for the unreasonable decision to frustrate the extraction of the judgment entered. Accordingly, I conclude that an order should be made that Mr Galic pay the costs of this application. For the same reasons, I conclude the costs should be on an indemnity basis: Seaman 66 1.66.

Orders

For the above reasons I make the following orders:
1.The plaintiffs pay 50% of the defendant's costs of the action to be taxed if not agreed, from 21 February 2011, and for the purpose of such taxation:
(i)no allowance be made for time spent for legal services of Mr Bennett and Mr Colin Edward Chenu of Bennett & Co;
(ii)pursuant to s 280 (2) (c) of the LPA 2008, any limits fixed by any relevant costs determination are removed with respect to:
(a) Item 7(b) - Giving Discovery;
(b) Item 17 - Getting-up; and
(c) Item 20 - Trial
(where the limits fixed by the relevant costs determination are based on a formula of the number of hours multiplied by the rate of charge for a senior or junior practitioner, the limits are removed only as to the number of hours).
2.The plaintiffs' solicitor, Mr T Galic, pay personally the defendant's costs on an indemnity basis with respect to the application by the defendant seeking orders permitting the defendant to extract a judgment in accordance with the order of Commissioner Sleight made 16 August 2012.
The defendant also sought reserved costs. However, no orders for reserved costs were identified in written or oral submissions. In the absence of any orders for reserved costs being identified or submissions being presented in support of such orders, I have not included in my orders any provision for reserved costs.
Finally, I will hear counsel as to any application for costs in relation to the hearing for costs.

Staffing: (which included a fee of $250,000 payable to Mr Soia)	$ 407,000
Technology: (which included $170,352 for a feasibility prototype)	238,079
Studio:	41,245
Website Development:	121,750
Advertising: (it is agreed that this is a typographical error and should have read $25,000)	250,000
Legal Accounting:	20,000
Insurance:	5,000
The total budget:	$ 857,995