Strategic Management Australia AFL Pty Ltd v Precision Sports & Entertainment Group Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2014 5854

BETWEEN

STRATEGIC MANAGEMENT AUSTRALIA AFL PTY LTD (ACN 146 799 162)	Plaintiff
and
PRECISION SPORTS & ENTERTAINMENT GROUP PTY LTD (ACN 169 978 755) & ORS (ACCORDING TO THE ATTACHED SCHEDULE)	Defendants

AND BETWEEN

LIAM MICHAEL PICKERING	Plaintiff by Counterclaim
and
STRATEGIC MANAGEMENT AUSTRALIA AFL PTY LTD (ACN 146 799 162) & ANOR (ACCORDING TO THE ATTACHED SCHEDULE)	Defendants by Counterclaim
AND BETWEEN CHILLIMIA PTY LTD (ACN 114 860 365) & ANOR (ACCORDING TO THE ATTACHED SCHEDULE) and STRATEGIC MANAGEMENT AUSTRALIA AFL PTY LTD (ACN 146 799 162) & ORS (ACCORDING TO THE ATTACHED SCHEDULE)	S ECI 2014 000316 Plaintiffs Defendants

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	1-3 December 2015, 7-10 December 2015, 14 December 2015, 16 December 2015, 3-4 February 2016
DATE OF JUDGMENT:	7 June 2016
CASE MAY BE CITED AS:	Strategic Management Australia AFL Pty Ltd & Anor v Precision Sports & Entertainment Group Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2016] VSC 303

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CORPORATIONS – Whether directors and officers of corporation had duty to ensure that income received from managing AFL players extended to the expiry of the player’s contract with the football club – Whether duty to ensure that Representation Agreements were co-terminus with Player Contracts

CONTRACT – Representation Agreement – Construction –Whether agent entitled to Fee only during the Term of the Representation Agreement or for the entire duration of the Player Contract if it is longer

CONTRACT – Employment Contract – Oral – Terms to be implied – Whether a term to use reasonable care and skill – Whether a term to act honestly and in good faith – Whether terms breached by employees by failing to secure income stream

CORPORATIONS – Duty of care and diligence s 180(1) Corporations Act 2001 (Cth) – Whether director and officer in breach of duty by failing to secure income stream

CORPORATIONS – Duty of good faith s 181(1) Corporations Act 2001 (Cth) – Whether director and officer in breach of duty by failing to secure income stream

CORPORATIONS – Use of position and information s 182(1) and 183(1) Corporations Act 2001 (Cth) – Whether director and officer used their position and information in breach of the sections

CORPORATIONS – Fiduciary duty – Whether director and officer in breach of fiduciary duty – Whether compensation payable

CORPORATIONS – Oppression – Whether capital raising to fund litigation with consequent dilution of shareholding oppressive – Whether capital raising contrary to interests of members as a whole or unfairly prejudicial or unfairly discriminatory against a member – Sections 232(d) & 232(e) Corporations Act 2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D H Denton QC with Mr A Denton	Altus Lawyers
For the Defendant	Mr M Osborne QC with Mr D McAloon	B₂B Lawyers

HIS HONOUR:

I INTRODUCTION AND BACKGROUND
A. Introduction

The Court has before it two proceedings that were heard together: S CI 2014 05854 (‘Main Proceeding’) and S ECI 2014 000316 (‘Oppression Proceeding’).

The Main Proceeding was instituted by Strategic Management Australia AFL Pty Ltd (‘Strategic’) on 31 October 2014 against Precision Sports & Entertainment Group Pty Ltd (‘Precision’), Liam Michael Pickering (‘Pickering’) and James Pitcher (‘Pitcher’).

The Oppression Proceeding was instituted by Chillimia Pty Ltd (‘Chillimia’) and Pickering on 20 October 2014 against Strategic, Jaszac Two Pty Ltd (‘Jaszac’) and Jason Sourasis (‘Sourasis’).

Both proceedings relate to the conduct of an AFL player management business, undertaken by Strategic, and the breakdown in the relationship between Strategic’s directors and shareholders, Pickering and Sourasis.

In very broad terms, the proceedings can be described as a partnership breakdown between Sourasis and Pickering over the manner in which the Strategic business was conducted.

B. Main proceeding

In summary, Strategic alleges that:

(a) Pickering, as Managing Director of Strategic, breached his contractual obligations to Strategic by failing, refusing, or neglecting to: recruit current and future AFL players as clients of Strategic; encourage those players to use the services of the Strategic Group;[1] manage the business and affairs of Strategic within the guidelines established by its board of directors; direct and monitor the activities of Strategic in a manner that safeguarded the assets of Strategic and optimised in the best interests of all shareholders of Strategic; meet regularly with Sourasis to ensure that Sourasis was provided in a timely manner with all information and access to management necessary for Strategic; maintain relationships and communicate with client athletes on all matters on behalf of Strategic; represent and negotiate agreements for AFL player clients as a representative of, and on behalf of, Strategic; and ensure the timely registration of all contracts relating to AFL players with the relevant bodies.[2]
[1]The Strategic Group included various companies other than Strategic. The intent was to provide a one stop shop for professional sportspeople.
[2]Statement of Claim (SOC) at [34].

(b) Pitcher, as a trusted employee and officer of Strategic, breached his contractual duties owed to Strategic by failing, refusing or neglecting to recruit current and future AFL players as clients of Strategic; encourage those players to use the services offered by the Strategic Group; obey reasonable and lawful directions given in relation to his employment; and ensure the timely registration of all contracts relating to AFL players with the relevant bodies.[3]
[3]SOC at [35].

(c) Each of Pickering and Pitcher breached fiduciary duties owed to Strategic by reason of their positions of trust and confidence in that they failed to act with utmost good faith; with fidelity to Strategic; in good faith in their dealings with Strategic; impartially and in the interests of Strategic.

(d) Further, each of Pickering and Pitcher obtained, or sought to obtain, a collateral advantage from their position of trust; they made secret profits unknown to Strategic; put themselves in a position of conflict of interest or conflict of interest and duty; diverted business opportunities away from Strategic to Precision; and disclosed to Precision information including Strategic and its AFL player contracts.[4]

(e) Finally, by reason of the above, each of Pickering and Pitcher breached their statutory duties owed to Strategic under the Corporations Act 2001 (Cth) (the Act).[5]

[4]SOC at [38].

[5]Sections 180, 181, 182(1)(a), 182(1)(b), and 183(1)(a) — SOC at [36].

Strategic seeks damages; exemplary damages; equitable compensation; account of profits;[6] and restitution against Precision, Pickering and Pitcher.
[6]Including orders and directions for an account and inquiry as may be necessary.

In response to the above allegations, Pickering filed a counterclaim on 23 December 2014 alleging that:

(a) Sourasis had engaged in misleading or deceptive conduct by making representations to Pickering in around June 2010 to November 2010 that: Pickering would own 50% of Strategic; Sourasis would own 50% of Strategic in exchange for a capital contribution to fund its operations; Strategic would receive up to 25% of revenue generated by other entities in the Strategic Group from the referral to those businesses of Strategic AFL Players and Coaches; and Pickering would be paid an annual salary of $200,000;[7]

(b) Sourasis engaged in further misleading and deceptive conduct by making representations to Pickering in around June and July 2013 that: the “sign on” fee of $200,000 had been paid to Pickering in full; and Strategic would receive 33% of SMA Accounting for a consideration of $60,000.[8]

[7]Defence and Counterclaim (Def and CC) at [5(f)]; [57]-[62].

[8]DEF and CC at [64]-[70].

C. Oppression proceeding

By way of Points of Claim (POC) filed on 23 December 2014 (POC), Chillimia (a member of Strategic) and Pickering allege that the following matters amounted to oppressive conduct in relation to the affairs of Strategic:

(a) Pickering was delayed his share allocation and appointment as managing director;[9]
[9]POC at [12].

(b) Pickering was not paid his “sign on” fee of $200,000;[10]
[10]POC at [13]-[14].

(c) Strategic made monthly overhead payments of $3,718.75 between 1 August 2013 and 2 May 2014 to Strategic Financial Group Australia Pty Ltd (‘Strategic Financial’);[11]
[11]POC at [15]-[22].

(d) Sourasis caused Strategic to repay him monies that he lent to Strategic contrary to an alleged “Funding Obligation” (wherein Sourasis was to provide capital contributions to Strategic in exchange for his shareholding);[12]
[12]POC at [8(c)]; [26]-[33]; [36]; [49]-[50].

(e) Sourasis failed to disclose to Pickering an agreement between Michael Firrito (‘Firrito’) and Sourasis/Strategic that Firrito would provide up to a $200,000 line of credit in exchange for a 20% shareholding of Strategic;[13]
[13]POC at [23]; [33]-[35].

(f) Sourasis failed to disclose to Pickering a secured loan agreement Strategic entered into with Strategic Group on 4 June 2012 and the obligation on Strategic to repay said loan;[14]
[14]POC at [40]-[45].

(g) Strategic paid $35,000 to SMA Accounting Pty Ltd (‘SMA Accounting’) between 25 May 2012 and 11 July 2012, purportedly to acquire an interest in SMA Accounting, though Strategic did not acquire any interest and did not disclose these payments to Pickering;[15]
[15]POC at [52]-[58].

(h) Sourasis failed to disclose to Pickering that he had procured that Strategic enter into a loan agreement with his mother, Kerry Sourasis, for the sum of $90,000 on 27 March 2012;[16]
[16]POC at [59]-[63].

(i) Chillimia and Pickering were not provided with information about Strategic’s books and records prior to 2 May 2014 despite requests on 6 March 2013, 8 April 2013, 21 June 2013, 29 July 2013, and 22 August 2013;[17]
[17]POC at [64]-[69].

(j) Sourasis removed confidential information from the premises of Strategic on 11 December 2013;[18]
[18]POC at [70].

(k) After 2 May 2014, Strategic made payments of: $5,000 per month from June 2014 onwards to Sourasis as Managing Director; $3,500 on 27 May 2014 to Tim Le Nevez in wages; $2,500 on 6 May 2014 and 26 May 2014 and $4,000 per month from 23 June 2014 onwards to Shaun Trenton in wages; and $8,498.06 per month from June 2014 onwards to Strategic Group.[19]
[19]POC at [78]-[88].

(l) Although solicitors for Chillimia and Pickering requested documents on 22 September 2014, 1 October 2014 and 28 November 2014, they were not provided with documents until 12 December 2014;[20]

(m)Strategic resolved to increase its share capital on 14 October 2014 by raising a further $250,000 to fund litigation against Pickering, Pitcher and Precision (‘Capital Raising’);[21] and

(n) Sourasis made comments in the Herald Sun newspaper to dissuade Pickering from maintaining proceedings on 14 November 2014.[22]

[20]POC at [89]-[93].

[21]POC at [95]-[101].

[22]POC at [102]-[103].

By Originating Process filed 20 October 2014, Chillimia and Pickering seek the following:

(a) An order authorising Chillimia and Pickering to inspect the books of Strategic;[23]
[23]Pursuant to s 247A, alternatively s 198F(2) of the Act.

(b) A declaration that the offer or allotment by Sourasis of the shares the subject of the resolution of members of Strategic passed 14 October 2014 is contrary to ss 181(1)(a) and 182(1)(a) of the Act;

(c) An order restraining Sourasis from allotting, granting options over or otherwise disposing of the shares the subject of the resolution of members of Strategic passed 14 October 2014;[24]
[24]Pursuant to s 1324(1) of the Act.

(d) An order restraining Jaszac (a member of Strategic) from accepting any shares offered to it by Strategic, as a consequence of, and following passage of the resolution passed 14 October 2014;[25]
[25]Pursuant to s 1324(1) of the Act.

(e) An order that a receiver be appointed to Strategic;[26] alternatively, an order that Jaszac transfer the 600 shares held by it to Chillimia at their par value, alternatively at fair value, on the condition that Chillimia and Pickering undertake forthwith to change the name of Strategic to a name which does not include the words “Strategic Management” or any derivation thereof;[27] alternatively, an order that Strategic be wound up;[28] alternatively, an order that Jaszac and Sourasis purchase Chillimia’s shares in Strategic at fair value;

(f) An order that a person who is an official liquidator, be appointed to undertake an investigation as to the affairs of Strategic and be engaged to prepare financial statements on behalf of Strategic;[29] and/or

(g) An order that Chillimia and Pickering have leave to commence a proceeding in the name of Strategic against Jaszac and Sourasis, for the recovery of all amounts owing to Strategic pursuant to Jaszac and Sourasis’ loan accounts with Strategic.[30]

[26]Pursuant to s 233(1)(h) of the Act.

[27]Pursuant to s 233 of the Act.

[28]Pursuant to s 233(a) of the Act.

[29]Pursuant to s 233(1)(j) and/or s 323 of the Act.

[30]Pursuant to s 233(j) alternatively s 237 of the Act.

Both parties have claimed the widest possible relief, as is often the case with an acrimonious and very public falling out. However, as the case unfolded, the issues, evidence and relief claimed became more focused, as referred to below.

D. Relevant Background

Following a career as an AFL footballer, from 2001 Pickering has worked as an AFL player agent. This role entails representing AFL players in negotiations regarding their playing contracts, endorsements and sponsorship opportunities. The AFL Players’ Association (‘AFLPA’) regulates player agents, including by requiring that agents be accredited and that they use a standard form Representation Agreement which governs the player-agent relationship.

In 2001, Pickering established the AFL Division of International Management Group (‘IMG’) and, as head of that division over the ensuing ten years, managed a large number of the AFL’s best-known players.

From 2008, Pitcher worked at IMG with Pickering in the role of AFL Client Manager. Pitcher is also an accredited AFL player agent.

In 2010, Pickering was introduced to Sourasis, who was the Managing Director of the Strategic Group. By this time, Pickering had extensive contacts and personal goodwill in the AFL industry. Sourasis had no experience as an agent for professional sportspeople and was not an accredited AFL player agent, having failed the AFLPA accreditation examination. Sourasis sought Pickering out to discuss the prospect of Pickering being involved in a new sports management business that Sourasis wished to conduct under the auspices of the Strategic Group.

Over ensuing months, Sourasis made a series of statements to Pickering designed, it was suggested, to entice Pickering to resign from IMG and join Sourasis’ prospective sports management business.[31] These included promises by Sourasis that, if Pickering agreed to join the Strategic Group:
[31]The Pre-Commencement Representations are listed in full at paragraph 5(f) of the Defence & Counterclaim in the Main Proceeding.

(a) Pickering would own 50% of the new sports management business;

(b) Sourasis would acquire his equity by way of a capital contribution to fund the start up and initial operating costs of the business;

(c) Pickering would be the Managing Director of the business, would receive an annual salary of $200,000 and would be paid a $200,000 “sign on” fee;[32] and

(d) the new sports management business would derive a share of the revenue generated by referrals of its managed players to other entities within the Strategic Group.

[32]Sourasis acknowledges that it was agreed that Pickering would be paid $200,000 but describes it as a “catch-up payment” and alleges that it was “paid to Pickering or his related entities in September 2012”: [8(f)(iii)] of Points of Defence in the Oppression Proceeding.

In around January 2011, Pickering decided to accept Sourasis’ proposal. As part of the deal it was agreed that Pitcher would also come over to Strategic. As a consequence, Pitcher and then Pickering resigned from IMG. In April 2011, Pitcher commenced working for Strategic. Pickering resigned from IMG in September 2011 but did not formally join Strategic until September 2012 as his employment agreement with IMG contained a 12-month non-competition restraint.

Strategic was incorporated with the intention of its agents providing management services to AFL Players and Coaches and, in return for the said services, Strategic would be entitled to a percentage of each contract and/or endorsement they negotiated for each Player or Coach.

In October 2011 IMG unexpectedly closed its AFL management division and AFL Players and Coaches began signing Representation Agreements with Strategic.

In September 2012 Pickering commenced working at Strategic. The issue of shares to Chillimia and the formal appointment of Pickering as managing director of Strategic only occurred much later. By this time Strategic (with Sourasis as its sole director) had been deriving income from the player management business (conducted principally by Pitcher with Pickering’s input and oversight) for almost twelve months.

During this period (and according to Pickering without his knowledge) Sourasis transferred significant sums of money from Strategic to himself and to related persons and entities as follows:

(a) $50,000 on 31 October 2011 to Sourasis’ personal bank account;

(b) $5,000 on 10 November 2011 to Sourasis’ personal bank account;

(c) $25,000 on 21 February 2012 to Sourasis’ personal bank account;

(d) $90,000 on 27 March 2012 to an account in the name of Sourasis’ parents (Kerry and Phillip);

(e) $30,000 on 25 May 2012 to a bank account of SAA (a company owned and controlled by Sourasis);

(f) $55,000 on 4 June 2012 to an account in the name of Sourasis’ parents (Kerry and Phillip);

(g) $50,000 on 6 July 2012 to an account in the name of Strategic Financial Planning Australia Pty Ltd (‘SFPA’) (another company owned and controlled by Sourasis); and

(h) $5,000 on 11 July 2012 to a bank account of SAA.

During the period September 2012 to January 2013, Sourasis and Pickering were still engaged in discussions relating to the terms of their arrangement, the necessary structuring of the management company and matters ancillary and incidental thereto. The discussions were ongoing, inconclusive and unimplemented, leading to an emerging frustration between the parties culminating in a meeting in January 2013 in Chelsea. During this period Sourasis continued to manage his group of companies with less than full regard to the corporate form.

Over the course of the next year the relationship between Sourasis and Pickering gradually and progressively deteriorated ultimately leading to the resignation of Pickering and Pitcher on 1 May 2014. The evidence establishes that their decision to leave and set up a rival player management company was made well before their resignation and whilst they were still employed by Strategic. It is unclear, and indeed it matters not, precisely when this decision was made.

The position in the month before leaving is not in dispute. Sourasis sought but was refused access to the player Representation Agreements. Pickering and Pitcher, both Accredited Agents, declined to give consent to the release of the player Representation Agreements to Sourasis. A number of these contracts had expired. No steps had been taken by either Pickering or Pitcher to renew them, despite the fact that in many cases they were negotiating with clubs without Representation Agreements in place, in clear breach of the AFLPA regulations.

It is convenient to start a more detailed chronology in January 2013. At this time, Pickering was becoming more anxious. No shares had been issued to his nominated company, Chillimia. He had not formally been appointed managing director of Strategic although he was acting in such capacity. He was also concerned that he had only received $107,000 of the ‘sign-on fee’ payment he was promised. No employment agreement or shareholder agreement had been signed. He was concerned about the corporate structure and the fairness and desirability of Firrito holding 20% in Strategic. Matters came to a head and on 8 January 2013. As noted, Pickering and Sourasis met in Chelsea to discuss the structure of Strategic, the growth of the sports management business and the desirability of extending into other sports.

Following the meeting Sourasis changed the name of Strategic, incorporated other companies and instructed his solicitor to prepare employment and shareholder agreements.

In February 2013 Pitcher suggested to Pickering that knowledge and information in relation to the day-to-day management of Strategic be kept internal and confidential. It is not without significance that at this time, that is 25 February 2013, the Representation Agreement signed by David Talia was the last to be lodged with the AFLPA. Pickering was also pressing Sourasis for a summary of what was discussed at Chelsea. Also at this time, Sourasis kept operating all bank accounts of the Strategic Group and continued to make and repay loans without consulting or informing Pickering, although this is disputed by Sourasis.

In March 2013, Pitcher’s desire to keep the player information confidential and in-house was repeated. Questions were also raised about Sourasis’ large shareholding in Strategic in circumstances where all the work being done, and connections with the players, were those of Pickering and Pitcher. At this stage Pickering asserted that he was a 50% shareholder in Strategic, despite having previously agreed to 40%. Also at about this time Pickering was unhappy about a number of transactions on the Strategic bank account and requested Sourasis to provide a summary and reconciliation of expenses and details in relation to a number of loans.

By July 2013, things came to a head. Both Pickering and Sourasis were unhappy and frustrated. On 2 July 2013, Pickering sent Sourasis a letter complaining about a range of matters. The letter was drawn with the assistance of lawyers. The relationship between the men was fragile and precarious. In the preceding months various drafts of the employment and shareholder agreement were discussed but the parties could not agree on a final version and none was or has been signed. Pickering also requested that he formally be appointed a director of Strategic, that the accounts of the company and various transactions be subject to a due diligence by Tudor & Co and that he become a signatory on all Strategic bank accounts. Sourasis objected and said that they needed to discuss the formal documents. At this time Sourasis continued to operate the Strategic account — which had not yet been reconciled — in relation to expenses and loans. The inevitable culmination was the letter of 2 July 2013. It sets out in detail all of these complaints.

Although Sourasis completely disagreed with the assertions the relationship never recovered.

Over the next few months, and for the rest of the year, things did not improve. Pitcher suggested to Pickering that they should not be associated with Sourasis and his brand and that they should bite the bullet and go. Pickering and Pitcher also wanted Strategic to move away from the Strategic offices. They were also clearly of the view that they had established the business, and that Sourasis and Firrito were the beneficiaries of a huge return for no risk or input. In August 2013, Pickering was appointed a director and Chillimia was issued with 400 shares in Strategic. Disputes as to loans and expenses and lack of information and transparency continued. It was also agreed that expenses needed to be reconciled.

In September 2013, Pickering requested Morrows to undertake a review of Strategic’s financial statements. However, it is the involvement of Morrows in November 2013 that is more critical. Morrows’ internal emails, obtained on subpoena, disclose a desire on their part to bring over and somehow incorporate Strategic’s sports management business into Morrows, culminating in a request on 6 November 2013 to Pitcher to provide a whole range of confidential and financial information in relation to players that would ‘move across’ in relation to both management and accounting services. In addition, or perhaps as part of their remit, Morrows was at this stage providing Pickering with advice in relation to a possible buy out of the other interests in Strategic.

During November 2013, Sourasis saw an email from Morrows to Pickering dealing with a buy out and the misappropriation of funds by Sourasis. Despite various meetings and explanations matters were not resolved.

In December 2013, Sourasis removed confidential documents from the offices of Strategic to make copies. Later in the month Pickering emailed Sourasis about a possible split.

This was the state of play at the beginning of 2014. There was clearly a breakdown and mutual lack of trust in the relationship between Pickering and Sourasis. It was inevitable that they would not stay together. However for some reason it took four months for Pickering and Pitcher to leave. What was done or not done in those four months is relevant.

In January 2014 Pickering and Sourasis discussed ballpark valuations but were very far apart. Exit strategies were discussed.

In February 2014 Morrows requested copies of player contracts and details of players’ incomes and endorsements.

In March 2014 Pitcher prepared an email listing the prospects of Strategic clients that he thought would obtain a new contract in the next season. He also emailed to his private gmail account copies of Representation Agreements and endorsement agreements of Strategic clients. The documents were forwarded to Mr Robertaccio, an employee of Morrows. At this time neither Pickering nor Pitcher responded to requests from Sourasis, including an urgent request to be provided with a list of all Strategic players that had not lodged Representation Agreements with AFLPA. Sourasis therefore approached the AFLPA who indicated that the consent of the Accredited Agent was required. It was not forthcoming.

Other significant events occurred during March 2014. Pickering and Pitcher stopped attending the offices of Strategic. They sought legal advice. They discussed with Morrows appropriate names and structures for a new sports management company. Pickering sent many text messages to players managed by Strategic indicating the ‘need to catch up ASAP’. Although both parties were anxious to advance a separation, Sourasis was most concerned about the Representation Agreements. In late March 2014 the Herald Sun published an article headed ‘Lance Franklin’s player agent Liam Pickering is set to split from Strategic Management Group’.

Despite offers and counter-offers in April 2014, nothing was resolved and nothing changed. Pickering wanted financials for all the Strategic Group entities and Sourasis wanted documentation about the Representation Agreements. On 14 April 2014, Precision was incorporated. Pickering and Pitcher resigned from Strategic on 1 May 2014.

During May and following, many players and coaches resigned from Strategic and signed Representation Agreements with Precision. The letters of resignation (about 31) were prepared by Pitcher. The position of each player falls within one of three categories which will be discussed later.

The only other significant event in 2014 was a resolution of Strategic in October to implement the Capital Raising to fund the litigation against Pickering and Pitcher. The amount raised was $250,000 which had the effect of diluting the interest of Chillimia to less than 1%. Needless to say Chillimia did not contribute, and raises this purported Capital Raising as a further act of oppression.

There are further facts and details that will be referred to where appropriate.

II MAIN PROCEEDING
E. Breach by Pickering and Pitcher — Category 1A

The alleged breaches by Pickering and Pitcher, said to have caused loss and damage to Strategic, need to be considered, not in a vacuum, but by reference to the precise factual position that allegedly gave rise to a duty, the breach of which caused loss. A number of categories were put forward.

The first category (called Category 1A) and by far the largest concerns players that did have current Representation Agreements with Strategic at the time the player entered into a Playing Contract with a football club, but the Playing Contract extended beyond (and in many cases well beyond) the expiry of the Representation Agreement.

The question that arises is whether, in such circumstances, Strategic is entitled to commission for the term or remaining term of the Player Contract that extends beyond the expiry of the Representation Agreement, on the basis that Strategic negotiated the Player Contract at the time that it had a valid and subsisting Representation Agreement. It was contended that fourteen players fall within this category.

Jed Bews was given as an example of this category. His Representation Agreement expired on 31 October 2013. Prior to such expiry he signed a Player Contract with the Geelong Football Club on 13 August 2013. The Player Contract was negotiated by Strategic but extended well beyond 31 October 2013 and into 2015.

Strategic submitted that it was entitled to commission for the entire duration of the Player Contract that it had negotiated, despite the expiration of its Representation Agreement with Bews and despite Bews’ move to Precision in May 2014 and his execution of a new Representation Agreement with that entity.

The submission was put first on the basis of a proper construction of the Representation Agreement, which it was submitted provided for commission beyond the expiry of the Representation Agreement and indeed for the duration of the Playing Contract. The alternative and broader basis was breach of duty by failing to ensure that Strategic’s Representation Agreement was coterminous with the Playing Contract.

It was submitted, in this regard, that both Pickering and Pitcher failed to protect the income stream that was generated as a result of their endeavours on behalf of Strategic. Put simply — and however the duty (and its source) is cast — it was contended that Pickering and Pitcher were each obliged to ensure that fees generated from Player Contracts negotiated by them on behalf of Strategic were paid and payable for the entire duration of that contract. After all, this was the business of Strategic and it should receive the full benefit of its endeavours.

The defendants submitted that both submissions had no merit. First, as a matter of construction of the Representation Agreement, they submitted commission was only payable up to the expiry of the Representation Agreement, notwithstanding the extended duration and later expiry of the Player Contract. Second, it was submitted that there was no duty as alleged, whether arising out of contract, fiduciary duty or statutory duty. It was submitted further that even if there was such a duty, breach and loss had not been established.

EI. The construction point

It is necessary to set out the relevant provisions of the Representation Agreement.

1. DEFINITIONS
1.1In this Agreement unless the context otherwise requires or permits:
(f)‘Fees’ means the amounts payable by the Player to the Agent in accordance with this Agreement and as set out in schedule item 2.

2. TERM
2.1This agreement will commence on the date of signing by both parties (‘Commencement Date’) and subject to earlier termination, will end on:
i. [31^st October 2013] or
ii.31 October in the final year of the Player’s Playing Contract which has been negotiated by and on behalf of the Company by an Accredited Agent during the term of this Agreement,

whichever is the earlier (‘the ‘Term’).

…
5. PLAYER OBLIGATIONS
5.1 The Player agrees to:
(a)subject to clause 5.2, pay to the Company the Fees in accordance with schedule item 2.

5.2The obligation of the Player to pay the Fee is subject to the Company performing the Services and providing the Player with a valid tax invoice specifying the amount due and including a description of the Services provided by the Company during the relevant invoice period.

6. PAYMENT OF FEES & EXPENSES
6.1The payment of the Fee by the Player shall be made by the Player to the Company:
(a)in [12] equal instalments during each year of the term of the Playing Contract within 14 days of receipt by the Player of a valid tax invoice specifying the amount due and including a description of the Services provided by the Company; or

(b) in such other manner as agreed by the parties in writing.
6.2In the ordinary course of events, but subject to clause 7.2, the Company will be entitled to receive its Fee for the performance of the Services under this Agreement once the Player receives the compensation upon which the Fee is based.
6.3Except where this Agreement is terminated under clause 7.2, the Company shall continue to be entitled to receive from the Player payment of the component of the Fee specified in Schedule Item 2 on income earned by the Player from marketing and promotional arrangements arising directly from an agreement (not including a renewal, extension or variation made after the termination or expiration of this Agreement) negotiated by the Company during the Term of this Agreement.

7. TERMINATION
7.4Notwithstanding the provisions of clauses 7.1-7.3 above, either Party to this Agreement may terminate it without cause on the giving of three (3) months notice in writing to the other Party. Termination by:
(a)the Player in accordance with this clause shall not exclude the obligation of the Player to pay the Company the Fees the Company is duly entitled to under clause 5.1 of this Agreement for the Term;
(b)the Company in accordance with this clause, shall result in the Company not being entitled to receive any further fees and require the Company to refund a pro-rata portion of any advance fee payment received as it relates to the period post-termination.

8. FINAL YEAR NEGOTIATIONS
8.1A Player shall be entitled to utilise the services of a different company which engages agent/s accredited under the Regulations during the final year of this Agreement, provided that this shall not remove the obligation of the Player to pay the Company the Fees the Company is duly entitled to under this Agreement.
8.2In the event a Player desires to utilise the services of a different company, which engages agent/s accredited under the Regulations, during the final year of this Agreement pursuant to clause 8.1 above, the Player is required to make an election in writing notifying the Company and the relevant AFL Club, which third party shall conduct any negotiations on his behalf.
8.3In the event a Playing Contract is negotiated by a third person not party to this Agreement, the Company shall be entitled to recover the fees owing to him/her for the length of this Agreement but shall not be entitled to recover any fees applicable to any upgrade in value of the existing Playing Contract or any fees applicable to any new term of a Playing Contract negotiated by such third person.

Schedule
ITEM 1: THE SERVICES
The Company agrees to provide the following Services to the Player during the Term (indicate the type of Services by ticking the appropriate box):
⃞Represent the Player and provide advice, counsel and assistance to the Player in procuring, extending, negotiating, executing, performing and enforcing a Playing Contract with an AFL Club;
⃞Provide advice, counsel and assistance (including taking such steps as are reasonably necessary to promote the Player) to the Player in procuring, extending, negotiating and performing marketing and promotional opportunities/public speaking engagements and other endorsement arrangements;

⃞       Other services — as set out below:
ITEM 2:        THE FEE
In consideration for the Company performing the Services, the Player agrees to pay to the Company the following Fees during the Term (indicate the fee arrangement by ticking the appropriate box and completing the details for that item):
⃞A sum of money equal to the following percentages of the Football Payments received by the Player pursuant to his Playing Contract per annum provided the Agent has negotiated such Playing Contract and the contract is signed by the Player:
(a)       Year 1 – [ 4 ] per cent (if no fee is charged insert “O”).
(b)       Year 2 – [ 4 ] per cent.
(c)       Year 3 (and subsequent year/s if applicable – [ 4 ] per cent.
⃞A sum of money equal to [ 20 ] percent of the total fees received by the Player for marketing and promotional opportunities arranged by the Agent;

Each party pointed to clauses that supported its contended construction. Strategic submitted that the fee obligations extended for the duration of the Playing Contract, despite the earlier expiry of the Representation Agreement, and made specific reference to clauses 6.1(a) and the first box under item 2, which link payments to the Playing Contract.

The defendants referred to various clauses that referred to the players’ payment obligation being limited to the Term, being the duration of the Representation Agreement. Reference was specifically made to clauses 2.1, 5.1(a), 5.2, 7.4(a), 8.3 and item 2. Consistent with this construction, payments continued to be made to Strategic for the entire duration of the Term of its Representation Agreements, notwithstanding Precision having entered into new Representation Agreements with such players.

I agree with the defendants’ construction of the Representation Agreement. This construction is supported by the specific clauses referred to. The Fees are only payable during the Term. The specific obligation to ‘pay … the Fees’ (clause 5.1(a)) is subject to ‘the Company performing the Services’ (clause 5.2). The Company performs the Services during the period or Term of the Representation Agreement (Schedule —item 2). In my view clause 6, and the first box under item 2 of the Schedule, assumes that the Company is still performing the Services and that the Representation Agreement is still current, that is the Term, has not expired.

E2. Employment Contract

As pointed out, there is no written employment agreement.

However, it is trite that all employees must, during the course of their employment, act honestly, in good faith,[33] and with the care, skill and competence of a person in their position.[34]
[33]Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104.
[34]Harmer v Cornelius (1858) 141 ER 94.

Further, at general law, an obligation to use reasonable care and skill is implied in the employment contract of an executive director:[35]

Generally a chief executive is a director to whom the board of directors had delegated its powers of management of the corporation’s business. Usually the chief executive is employed under a contract of service which will either include an express term or, in the absence of an express term, an implied term, that the chief executive will exercise the care and skill to be expected of a person in that position. The degree of skill required of an executive director is measured objectively.[36]

[35]Lister v Romford Ice and Cold Storage Co Ltd [1957] AC 55; AWA Ltd v Daniels (t/as Deloitte Haskins & Sells) (1992) 7 ACSR 759.

[36]AWA Ltd v Daniels (t/as Deloitte Haskins & Sells) (1992) 7 ACSR 759, 867.

The duty of care and skill is also implied by the law of torts.[37] The duty to take reasonable care is not limited to special skills required by the employment, but extends to all tasks, whether specialised or not.[38]
[37]Matthews v Kuwait Bechtel Corp [1959] 2 QB 57.
[38]Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555; Kashemije Stud Pty Ltd v Hawkes [1978] 1 NSWLR 143; Janata Bank v Ahmed [1981] ICR 791.

The position and responsibility of each of Pickering and Pitcher, as indeed was acknowledged and admitted by them, required them to protect the revenue of Strategic in order to ensure that fees generated from the negotiation of Player Contracts continued (and were properly and legally recoverable) so far as possible for the entire duration of the Player Contract.[39] In fact this was one of their main or critical tasks.[40]
[39]It is no answer to suggest that payment of fees continued anyway because of the relationship of the parties. It is this exposure, which is by no means theoretical that required addressing. It is not without interest to note that the new Representation Agreements address this issue.
[40]Other breaches were also alleged but only faintly pressed. For example, it was alleged that Pickering failed to meet regularly with Sourasis and failed to provide him with information and also failed to maintain and develop relationships.

They failed to secure the necessary income. They have properly acknowledged and admitted this.[41] I do not accept their explanation or submission made on their behalf. It is simply no answer or excuse to say that their failure was unintentional, ‘ad hoc and inadvertent’ and that this was not unusual in the industry. They should have checked the Representation Agreements or ensured that there was a proper system in place so as to enable this to take place. In many cases that fall within this Category, the Representation Agreements expired a short time after the Player Contracts were executed. No attempt was made to extend the Representation Agreements. This created the very exposure that should have been protected against.
[41]T 742, 743, 746 (Pickering); T 910 (Pitcher).

Pickering and Pitcher, being accredited AFL Agents, were bound by the AFLPA Regulations Governing Accredited Agents. They were aware of the regulations, including clause 8.1 that required a Representation Agreement be in place before negotiating a Player Contract and clause 8.6 that required the termination date for the Representation Agreement to be no later than 31 October of the final year of the Player Contract.

It is clear that 31 October of every year was and remains a critical date in the AFL player management industry. At the very least, Representation Agreements needed to be reviewed at or around this critical date. Failure to do so is, in my view, a failure to exercise the required care and skill entrusted to Pickering and Pitcher, experts and highly experienced player agents.

The fact that players continued to pay fees to Strategic after the expiry of their Representation Agreement and until Precision ‘signed them up’ — described by the defendants as a windfall — is not to the point. The fees, based on Player Contracts negotiated by Strategic, should have continued for the duration of the Player Contract.

The defendants submitted that breach was not established because there was no evidence that the players would have signed a new Representation Agreement for the duration of their Player Contract.[42] It was submitted and repeatedly emphasised that the onus was on Strategic and it failed to discharge the onus. Further, it was submitted that Strategic had not established that the failure to extend the Representation Agreements to coincide with the end of the Player Contracts, was a departure from the ordinary standard of care of player agents.
[42]Even if extended, any Representation Agreement could of course end before and even well before the end of the Player Contract.

I do not accept the submission. At a minimum, and as reluctantly acknowledged and accepted by both Pickering and Pitcher, the breach lies in failing to endeavour to get the players to execute new Representation Agreements. However I consider that it is open to the Court, on the evidence, to draw the necessary inference that if requested by either Pickering or Pitcher, a player would have signed a new Representation Agreement. The inference is not only entirely open and appropriate on the evidence, it is compelling. In my opinion this inference is sufficient, without more, to enable the Court to convincingly, and with a high degree of probability, conclude what would have happened.[43] Both Pickering and Pitcher were well known to the players and had developed a professional relationship with them. They were well known and well connected in the industry and there is every reason to believe (and it is certainly more probable than not) that the players would have extended, renewed or signed Representation Agreements if requested, as indeed most of them did when requested to do so for the benefit of Precision. There is, however, a qualification that arises directly out of this very fact.
[43]Accordingly, Strategic has discharged the onus of proving that on the balance of probabilities the relevant players would have signed, and the reference by the defendants to several cases dealing with evidence in relation to causation (collected in a schedule) are of limited relevance.

At some point, probably around March 2014, and because of this special relationship between agent and player, Pickering and Pitcher would have been obliged to tell players that they, that is Pickering and Pitcher, may not continue to provide the services for the full Term of any new Representation Agreement signed with Strategic because of their intending departure. In such event a player probably would not have signed. More about this later.

In my opinion, for the reasons given, breach of their respective employment agreements is made out in relation to both Pickering and Pitcher.[44] Even if I am wrong in relation to the construction point, it was still highly desirable, as indeed properly acknowledged, to ensure that the Representation Agreements, so far as possible (which I have found by inference to be highly probable), covered the entire duration or term of the Playing Contract, in order to ensure that Strategic got its just rewards for negotiating the Player Contract.
[44]Accordingly it is unnecessary to determine whether ‘The Lock Step Term’ should be implied into the employment agreements (paras 6.4, 14.2 and 38 of the Amended Statement of Claim). For completeness, I should state that in my view no such term should be implied.

Finally I do not accept that evidence was required to demonstrate a departure from the ordinary standard of care or indeed what the standard or practice of player agents was at the time. The standard and breach is obvious and self-evident as explained above.

There are, however, a few players in this Category that require special mention and consideration. The players are Lance Franklin, Dane Swan and Jay Schultz.

In relation to Lance Franklin, the Representation Agreement expired on 31 October 2013 and the Player Contract with the Sydney Swans was executed on 13 November 2013. It was submitted that the ‘deal’ was effectively concluded prior to 31 October 2013. Although the position of Franklin differs to the other Category 1 Players, to the extent that they had Representation Agreements in place at the time of the execution of the Player Contracts, and is probably better dealt with under Category 2, the result is the same, and all the more so. There should have been a Representation Agreement in place at the time of execution of the Player Contract (i.e 13 November 2013), and this Agreement should have continued in line with the Playing Contract.

In relation to Dane Swan, the Representation Agreement expired on 31 October 2014 and the Player Contract was executed on 24 January 2014. This case is more difficult in two respects. First, in January 2014 did Pickering or Pitcher have an obligation to inform Swan that they may leave Strategic? Secondly, the Representation Agreement did have many months to go at the time the Player Contract was executed, albeit the Player Contract extended into 2016. The question is whether these two factors call for a different analysis? In my opinion, although the facts are approaching the grey area, the obligation or duty on the part of Pickering and Pitcher was the same. They remained at Strategic for many months and the Representation Agreement would not cover the years 2015 and 2016, the consequences of Strategic’s negotiations.

In relation to Jay Schultz, the Player Contract was executed on 13 November 2013 with no Representation Agreement in place. Schultz is better dealt with in Category 2.

In relation to the other players within this Category, at the time that their respective Player Contracts were entered into, it must or ought to have been apparent that their respective Representation Agreements would expire shortly thereafter and well before the end of the recently negotiated Player Contracts. This vulnerable position needed to be addressed to protect against the very position that finds the parties before this Court.

E3. Statutory duty — care and diligence

Section 180(1) of the Corporations Act is in the following terms —

180(1)Care and diligence — directors and other officers. A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a)were a director or officer of a corporation in the corporation's circumstances; and
(b)occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

Note: This subsection is a civil penalty provision (see section 1317E).

In Vrisakis v ASC,[45] Ipp J, citing authority, said that:

The test is basically an objective one in the sense that the question is what an ordinary person, with the knowledge and experience of the defendant might be expected to have done in the circumstances if he was acting on his own behalf.

[45](1993) 9 WAR 395.

The test has been applied in numerous subsequent cases[46] and the standard imposed is essentially the same as the standard imposed upon directors under the common law. The argument that a lower standard applies, because the section is a civil penalty provision has been rejected.[47]
[46]ASIC v Adler (2002) 41 ACSR 72 (Adler); see Austin, R P; Ramsay, I M, Fords Principles of Corporations law, looseleaf service, Lexis Nexis, [8.305] (Ford).
[47]Australian Securities & Investments Commission v Vines (2005) 55 ACSR 617. See also Re HIH Insurance Ltd (in prov liq); ASIC v Adler (2002) 41 ACSR 72; and cases cited in Ford at [8.305.6].

In assessing whether the standard of care has been breached, it is necessary to examine the company and its business operations and the specific role of the director or officer within the company. According to Brereton J in Australian Securities & Investments Commission v Maxwell[48] it was necessary to look at the company’s circumstances which included:

… the type of company, the provisions of its constitution, the size and nature of the company’s business, the composition of the board, the director’s position and responsibilities within the company, the particular function the director is performing, the experience or skills of the particular director, the terms on which he or she has undertaken to act as a director, the manner in which responsibility for the business of the company is distributed between its directors and employees, and the circumstances of the specific case[49]

[48](2006) 59 ACSR 373.

[49]Ibid 397.

Where a director is in a position of potential conflict special vigilance may be required and safeguards may need to be put in place.[50] In ASIC v Australian Property Custodian Holdings[51] the court, citing Adler, held that the directors were liable because of the conflict of interest, of which the directors were aware, and in such circumstances, ‘special vigilance and scrupulous concern’ was needed.[52]
[50]Adler at 166.
[51][2013] FCA 1342 at [600].
[52]See also Investa Properties v Nankervis (No 7) [2016] 109 ACSR 465.

There are of course, as may be expected, many cases dealing with s 180(1). The company’s circumstances and role and responsibility of the relevant director — and whether they measured up — vary from case to case. It is necessary to examine the peculiar facts and circumstances and assess, according to the test, whether the director or officer measured up.

In this case it is unnecessary to examine the general law duties of directors. There is a general law duty of care and skill[53] and for the purposes of this case it is not relevantly different to the statutory provision and need not be examined further.[54]
[53]Permanent Building Society (in liq) v Wheeler (1994) 14 ACSR 109 (Wheeler).
[54]The cases on reasonable care, skill and diligence support the approach taken in dealing with s 180(1).

An examination of the company’s circumstances and the roles of Pickering and Pitcher lead to the inevitable and clear conclusion that they are in breach of s 180(1). The core business of the company was the derivation of income by way of fees and commission from managing AFL players. The source of the income was the existence of a current, valid and enforceable Representation Agreement. Without it income could not be derived. Pickering and Pitcher were the parties responsible for ensuring that this income continued and that the income stream was not in any way impaired. They failed.

For the reasons set out above in relation to the breach of the Employment Agreement, I consider that both Pickering and Pitcher failed to adequately protect the income stream of Strategic. A reasonable person in their position would have made sure that such income was adequately protected. The evidence is out of their own mouths. They failed to exercise the required degree of care and skill and are accordingly in breach of s 180(1) of the Corporations Act.

E4. Statutory duty — good faith

Section 181(1) of the Corporations Act is in the following terms:

181(1) Good faith--directors and other officers. A director or other officer of a corporation must exercise their powers and discharge their duties:
(a)in good faith in the best interests of the corporation; and
(b)for a proper purpose.

Note 1: This subsection is a civil penalty provision (see section 1317E).

Having found that both Pickering and Pitcher failed to act with the required care and diligence, in breach of an implied term of their (oral) employment agreement and in breach of s 180(1) of Corporations Act, it is strictly not necessary to deal with the remaining alleged breaches. However, as the authorities suggest, these breaches are usually underpinned by the same facts.

I will state my conclusions briefly.

Most cases under s 181(1), which concerns the separate duties referred to in subparagraphs (a) and (b), involve an assessment of a positive act or decision made by a director or officer. The quality of the decision is then tested. The common law duties are equivalent.[55]
[55]Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 89 ACSR 1 at [942] and [1979] (‘Bell’).

The requirement to act in good faith in the best interests of the company (subparagraph (a)) is critical and fundamental. The test is an objective one. It requires directors and officers to focus on and consider the company’s separate interests and not their own. The decision must be considered on its own facts including the constitution of the company, the nature, scope and extent of directors duties, the decision under consideration and other relevant circumstances. In many cases it is obvious and apparent that the interests of the company have been disregarded. Usually others benefit and the company is impoverished.

The principle is not easy to articulate but in many cases easy to identify because simply put it is clear that the director is doing the wrong thing and substantially or in many cases totally disregarding the interests of the company. Of course it is the best interests of the company as a whole which includes the shareholders who have risked their capital.

Again, each case needs to be considered in accordance with its peculiar facts and circumstances. It is often easy to identify the breach. Of course in many, if not most, cases a breach of the first of the two duties will axiomatically involve a breach of the second and indeed usually other statutory duties.

It must follow that in failing to properly secure its income stream Pickering and Pitcher did not act in good faith in the best interests of the company as a whole.

E5. Statutory duty — use of position

Section 182(1) of the Corporations Act is in the following terms:

182(1)Use of position--directors, other officers and employees. A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.

Note: This subsection is a civil penalty provision (see section 1317E).

It is not strictly necessary to deal with this issue.

Whether a director, officer or employee gains an advantage or causes detriment is a question of fact. Each case must be considered in accordance with its peculiar facts and circumstances. It may not be necessary to show advantage or detriment. The High Court held in Chew v R[56] that it is the purpose of the transaction that is important and not necessarily the consequences.
[56](1992) 173 CLR 626.

A classic example is the case of Jeffree v NCSC.[57] In Jeffree a director of a corporate trustee authorised the sale of trust assets, albeit at full value, to a new corporate trustee to save those assets from an expected arbitration award and to gain an advantage for himself and his family. The Western Australian Full Court held that this was a breach of s 182(1). There are of course many other examples of the improper use of position.[58]
[57][1990] WAR 183 (Jeffree).
[58]See Ford at [9.282.12].

The test of impropriety is objective and it is not necessary to show dishonest or improper intent.[59] The question is whether the conduct breached the norm of conduct expected of a person in the same position and circumstances. This usually involves breach of a contractual or equitable obligation.[60]
[59]R v Byrnes (1995) 183 CLR 501 (Byrnes). See also Ford at [9.282.9].
[60]Doyle v Australian Securities & Investments Commission (2005) 227 CLR 18, Griffiths & Beerens Pty Ltd v Duggan (2008) 66 ACSR 472, Manildra Laboratories Pty Ltd v Campbell [2009] NSWSC 987.

Although Pickering and Pitcher have each gained some advantage from their respective positions in Strategic in as much as they have used their knowledge and position to in effect bring about the transfer of most of the AFL Players from Strategic to Precision, I do not, in all of the circumstances, consider that it has been established that they have done so improperly for the reasons set out below.

E6. Statutory duty — use of information

Section 183(1) of the Corporations Act is in the following terms:

183(1)Use of information--directors, other officers and employees. A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.

Note 1:This duty continues after the person stops being an officer or employee of the corporation.

In view of the decision I have come to it is strictly not necessary to deal with this aspect.

However, ss 182(1) and 183(1) almost always overlap, as the authorities suggest. It follows that for the above reasons and for the reasons referred to below I am not satisfied that the improper use of information has been made out.

E7. Fiduciary duty

Having found that Pickering and Pitcher were in breach of various statutory duties, as identified, it follows, given the nature and extent of such breaches that they are also, so far as may be relevant, in breach of their fiduciary duties to Strategic. The analysis and entitlements to compensation are essentially the same.[61]
[61]Hydrocool Pty Ltd v Hepburn (2011) 279 ALR 646. See also Westpac Banking Corporation v The Bell Group Ltd (In Liq) (No 3) [2012] WASCA 157, [855]-[870].

However, there is one further or remaining aspect that having been pleaded (but not fully developed in argument), is necessary to deal with and is conveniently dealt with under this heading. Strategic pleaded and submitted that in breach of fiduciary (and other duties)[62] duty, Pickering and Pitcher made plans and took steps to set up a competing AFL sports management business before their resignation (as director and employer in the case of Pickering and officer and employee in the case of Pitcher) and then immediately commenced the competing business upon such resignation.[63]
[62]An employee also has an implied duty of fidelity to the employer not to destroy the necessary confidence between employer and employee and not to engage in competition with the employer (see Investa Properties v Nankervis (No 7) [2016] 109 ACSR 456, [65]).
[63]Relevant facts and matters are set out at [34]–[43] and [86].

According to the authorities, engaging in such conduct may well be actionable.

In Courtenay Polymers v Deang,[64] Whelan J said —
[64][2005] VSC 318 (‘Courtenay Polymers’).

[89]The position here seems to me to be relevantly the same as that recently dealt with by the Full Court of the Supreme Court of South Australia in Southern Real Estate Pty Ltd v Dellow [2003] SASC 318. There the Court was considering the position of a former employee and director of a company which conducted a real estate business including management of a rent roll. The defendant in that case made plans and took steps to set up a competing rent management business before her resignation as a director and employee, and she then commenced the competing business immediately upon resignation.
[90]The principles which emerge from that decision, and which I adopt, are the following:
1.Obligations of loyalty owed by an employee are subsumed in the more onerous fiduciary duties owed as a director.
2.The statutory and fiduciary duties of directors exist side by side. There is both a statutory and a fiduciary duty on directors to act in the best interests of the company and not to promote their own interests or the private interests of others.
3.Taking steps which are against the company’s interests with a view to resignation and subsequent involvement in a competing business will be, in the absence of full disclosure or other extraordinary circumstances, a breach of both statutory and fiduciary duty, even if those steps involve no misuse of confidential information.
4.The statutory and fiduciary duties of directors do not simply end at the point of resignation, but there is uncertainty as to when a former director might properly begin to compete with the company. Where a former director covertly puts everything in place so as to be in a position to compete with the company immediately upon resignation, and does in fact enter into competition immediately following resignation, there is no need to determine at what point the director might properly have commenced a competing business.

91Applying those principles to Mr Deang’s position, his breach of both his statutory and fiduciary duties is clear. In breach of his fiduciary duties and in breach of s 181 of the Corporations Act 2001 (Cth), he has not acted in the best interests of Courtenay Polymers, the company of which he was a director, but has instead sought to advance his own interests and the interests of APC. I also conclude Mr Deang has breached s 183 in that he has improperly used information, being all the information he had concerning ARI, to gain advantage for himself and APC and cause detriment to Courtenay Polymers.

In Courtenay v Polymers damages was not dealt with. In the case referred to in the above passage (Southern Real Estate) the damage or loss comprised the diminution in the value of the rent roll. However, given Ms Dellow’s position — she managed the rent roll and was the contact point for clients — the value of the rent roll was discounted by one-third to reflect the fact that she had built up the rent roll.[65]
[65]Southern Real Estate Pty Ltd v Valerie Dellow v Wayne Arnold [2003] SASC 318, [50]–[55].

Strategic did not separately quantify such loss. This is not meant as a criticism. Rather, Strategic took a more nuanced approach and focused on the three categories identified. Strategic properly conceded that Pickering and Pitcher (and Precision) were entitled to compete. However, as I understand the submission, the evidence relating to their conduct prior to resignation was used primarily to establish, explain, confirm and underpin their various breaches as alleged and established.[66]
[66]My understanding is supported by the fact that none of the authorities referred to in this section were cited by either party.

In any event, and so far as may be relevant, I am not satisfied that Pickering and Pitcher crossed the line. They set up Precision before they left and may have had some discussion with players after having decided to leave. They knew what all the relevant information was without the documentation. In any event, they could have obtained the necessary information (even if confidential) from the players. They were entitled to use their substantial knowledge, experience and contacts. The players were not signed up with Precision until after they left. Pickering and Pitcher were entitled to approach the players after they left and sign them up and request any information from them that they did not have. Any confidential information was that of the client in any event.

Further, in relation to any breach (and compensation or account of profits in this regard), it must be said, in any event, that the matters referred to in [67] above are relevant. If, during the period of any conflict, players were referred to Sourasis or others (in order to avoid any conflict), it is not only more probable than not, but inevitable, that such players would not have appointed or re-appointed Strategic.

Further, Precision was entitled to ‘sign-up’ those players that terminated the services of Strategic, and its income derived from such contracts. Accordingly, I consider, so far as may be relevant, that there is no, or an insufficient, causal relationship between the profits flowing to Precision and any breaches of fiduciary duty.[67]
[67]Streeter v Western Areas Exploration Pty Ltd (2011) 278 ALR 291. See also Links Golf Tasmania Pty Ltd v Sattler [2012] FCA 634, [562] and Nicholls & Ors v Michael Wilson & Partners Ltd [2012] NSWCA 383, [122].

F. Category 1B

This category is essentially the same as Category 1A but relates, for the most part, to Marketing Agreements made while the Representation Agreement was current and operative. Strategic claims the relevant commission on all marketing payments resulting from such Marketing Agreements notwithstanding expiry of the Term. Eight players are involved. In relation to Nathan Brown, Justin Koschitzke, Jack Riewoldt (McDonalds agreement), the Marketing Agreements were entered into after expiry of the Representation Agreements.

The position, in my opinion, in relation to each of the scenarios in this category is as follows —

(a) In relation to the Marketing Agreements entered into before expiry of the Representation Agreement, but having limited effect after expiry, the position appears to be similar to Category one, that is, that the Representation Agreements should have been co-terminous with the Marketing Agreements. However, there is a difference. In the cases of Gary Ablett (save for the Gatorade agreement), Tom Boyd, and Jordan Lewis the Representation Agreements all expired on 31 October 2015. The respective Marketing Agreements were entered into as follows

•        Ablett —       23/8/12 for 2014      Host Plus Agreement
—       23/8/12 for 2015      Host Plus Agreement
—       4/2/13 for 2014        Nike Agreement
—       4/2/13 for 2015        Nike Agreement
—       4/2/13 for 2016        Nike Agreement
—       1/11/12 for 2014      AFL Queensland Agreement
—       1/11/12 for 2014      AFL NAB Agreement
—       1/11/12 for 2015      AFL NAB Agreement
—       1/11/12 for 2015      AFL Queensland Agreement

• Boyd — 14/11/13 Armour Sponsorship Agreement
— 26/12/13 AFL Gatorade Ambassador

• Lewis — 4/3/14 Fox Footy AFL 360 Panel list
— 1/11/13 for 2014 Bonus All Aust & B & F

Each Marketing Agreement entered, into at a time when the respective Representation Agreements were operative and for the most part expired years later, related to negotiated marketing activities that were to take place for the most part during the period of the Representation Agreement or shortly after its expiry. In these cases I do not consider that there is any breach on the part of Pickering or Pitcher. Whether, in these circumstances the respective player is obliged to pay commission is of course another matter.

(b) The Gatorade marketing agreement with Gary Ablett was entered into after the resignation of Pickering and Pitcher and in circumstances where the Strategic Representation Agreement had been validly terminated. In these circumstances, there is, in my view, no entitlement, on the part of Strategic to commission.

(c) In the case of Nathan Brown, Justin Koschitzke, Jack Riewoldt (McDonalds agreement) the Marketing Agreements were entered into after expiry of the Representation Agreements. For the reasons given Pickering and Pitcher are in breach of duty and accordingly liable to make compensation.

(d) In the case of Jack Riewoldt (Nike agreement) the Representation Agreement should have been extended to coincide with the Marketing Agreements which had a long way to go after the expiry of the Representation Agreement. This substantial difference in degree distinguishes liability in this instance from no liability in the cases referred to in (a) above.

(e) In relation to Dane Swan (Diadora Agreement), I do not consider that there has been any breach. The marketing agreement, entered into on 1 March 2012 covers the period 2012-2014. The Representation Agreement ended on 31 October 2014. Whether Swan is liable for commission is of course another matter. The same probably applies to the other two marketing agreements.

G. Category 1C

This category is the same as Category 1A but relates to the coaching contract of John Longmire. The coaching contract was entered into on 1 November 2013 and related to the years 2014-2017. As at 1 November 2013 the Representation Agreement was still current. It was entered into on 1 February 2013 and expired on 31 January 2015. The coaching contract continues to 2017. The arguments are the same as the arguments in relation to Category 1A.

In my opinion the same result must follow.

H. Category 2

The three players in this category did not have Representation Agreements at the time their Player Contracts were executed. Two out of the three had expired a year earlier and the third a month earlier.

The same result must follow. This is even more so in relation to this category. The AFL Players Association regulations require agents to have a Representation Agreement in place prior to negotiating a Player Contract. Both Pickering and Pitcher were aware of and bound by this regulation. They had a duty to ensure that a Representation Agreement was in place at the time they negotiated the respective Player Contracts and as pointed out should have ensured that it continued for the entire duration of each respective Player Contract.

I. Category 3

This category relates to five players that had Representation Agreements with Strategic expiring on 31 October 2014. In each case the Player Contract was entered into after the player (validly) terminated the services of Strategic but in circumstances where such contract was, for the most part, effectively negotiated by Strategic (through Pickering and Pitcher) during the currency of its Representation Agreement with the relevant player. All that remained in each case, it was contended, was for the Player Contract to be signed. It was submitted that the breach of duty arises from the failure to sign the player up in a timely manner and before leaving, in order to enable Strategic to earn commission, at least up to the date of the expiry of the respective representation agreements.

This category is the most difficult. However, for reasons that follow, I am not satisfied that Strategic has made out this part of its case.

First, it is necessary to identify the precise breach. What did Pickering and Pitcher do wrong? They were entitled, permitted and indeed obliged to negotiate Player Contracts and they did. Although not identified with precision, presumably the breach is the failure to ensure the relevant Player Contracts were signed and not delayed for the benefit of Pickering, Pitcher and Precision, as ultimately turned out to be the case.

Assuming the relevant Player Contracts were able to be executed and there was nothing further to be done, a finding that I am probably unable to make on the evidence, I consider that in the circumstances of this case and in the context of the extent and scope of the relevant duty, particularly given the proximity to their departure, Pickering and Pitcher would have been obliged to tell the relevant players, before they executed their respective Player Contracts, that, notwithstanding the expectations of the players, they were leaving Strategic and would not be providing the required services for the remainder of the Representation Agreement the player had with Strategic. Of course, given their potential conflict, they were also obliged to keep their employer (in this case Sourasis) fully informed.

In my opinion, had they told the relevant players that they were about to leave Strategic and set up Precision (which they were entitled to do), the relevant players would not have executed their respective Player Contracts. They would have waited until after Pickering and Pitcher had left Strategic. Had this been disclosed to Sourasis there is nothing he or Strategic could have done to compel the players to execute the contracts.

If there was any breach of duty as identified, I do not consider that in the circumstances it caused any compensable loss.

First, to the extent that the breach comprises preparatory impermissible conduct associated with establishing a new and competing business (which I have found not to be the case) there is relevantly no loss because players, properly informed, would not have signed. Why would they? Their allegiance was to those individuals that were looking after them, namely Pickering and Pitcher. It is inconceivable that, fully and properly informed, they would have signed.

Secondly, so far as failure to sign is concerned, and in addition to the above, the evidence does not establish that the player contracts would in fact have been signed.

If I am wrong, the loss would only extend to and for long as the representation agreement was on foot, a matter of months after leaving. The loss does not exceed $50,000.

Finally, it is not clear why Kurt Aylett and Tory Dickson fall within this category. Their cases are best dealt with under category one.

J. Precision

Given the nature, extent, and timing of the various breaches, I do not consider that there is any liability on the part of Precision. All of the relevant breaches took place prior to the incorporation of Precision and although from a practical or commercial point of view it was the beneficiary of such breaches, I am not satisfied that Strategic has established any proper basis for legal liability. There is no proper accessorial liability type claim. Precision was only incorporated on 14 April 2014. The constructive trust claim presumably assumes an entitlement on the part of Strategic to income for the entire duration of the Player Contract, a construction that I did not favour. Further, there is no proper or adequate basis for an account of profits from Precision. Finally, I do not consider that there has been any misuse of confidential information in the circumstances.

K. Result

It follows that Strategic has been impoverished and suffered loss and damage as a result of the conduct of Pickering and Pitcher. The parties should endeavour to agree on the final figure for damages consistent with these reasons.[68]
[68]The calculations made by George Kompos in his expert reports (Exhibits P7 & P8) will require adjustment consistent with these reasons.

L Pickering’s Counterclaim

Pickering’s counterclaim must be dismissed.

The suggested representations are set out at paragraph [8] above.

The evidence does not support a conclusion that Sourasis represented to Pickering that Pickering or his interests would have a 50% interest in Strategic. In fact, the evidence, including admissions by Pickering, was that he, or his interests would receive a 40% interest.

The evidence does not support the further suggested representation that Strategic would receive 25% of the revenue generated by other entities within the Strategic Group from the referral of players and coaches and, in any event, there is no evidence of any loss or damage to Strategic or Pickering.

There is no issue in relation to Pickering’s annual salary of $200,000. In relation to the sign on fee of $200,000, it was paid, albeit late, including the tax which was paid even later.

In the final analysis, the evidence in support of the making of the specific representations (other than the annual salary and sign on fee) is unconvincing. Further, reliance, falsity and loss have not been established.

In any event, and perhaps more relevantly, the counterclaim has no effect on the claims made by Strategic. The counterclaim does not respond to the claims made by Strategic and in particular does not, even if successful, alter or affect any of the obligations on the part of Pickering.

The fact that Pickering, or more particularly Chillimia, did not receive its 40% interest in Strategic ‘from day one’ and that Pickering was not formally appointed a director until much later do not, in the circumstances, lead to any relevant relief.

Assuming these specific representations were made, they related to future matters and the fact is that the shares were subsequently issued to Chillimia and Pickering was formally appointed a director, although he acted in the role of managing director from the outset. At no stage did Sourasis dispute the shareholding of Chillimia or directorship of Pickering. Regrettably the paperwork and formality followed much later. However, in the circumstances this does not in any way establish the falsity of the representations.

Sourasis never denied the substance of these representations, they came to pass and everyone assumed and acted from the outset on the basis that this was the position.

Finally, there is no loss. Chillimia was issued with shares and in view of my finding below, still holds them. Pickering was always the managing director, albeit in a de facto capacity, and was eventually formally appointed.

The same analysis applies in relation to the other pleaded representations. The sign on fee and tax in relation thereto was paid and never denied by Sourasis. Everyone assumed it would be paid and it was.

Finally, it was submitted that had Pickering ‘not been misled, he would either have not joined (or more particularly) would have left in August 2013’. On this basis it was submitted that had Pickering left in August 2013, Pitcher would have left and there would be no loss arising out of the failure to renew, extend or replace the Representation Agreements. Also, it was submitted that the misleading and deceptive conduct entitles Pickering to relief from any liability to Strategic that might otherwise arise and disentitles Strategic to any equitable relief because Strategic does not have clean hands.

The submission is, in my opinion, misconceived, and is rejected.

First, those representations that related to future matters were eventually fulfilled and came to pass. Further, prior to the date of fulfilment, and as pointed out, all parties acted on the assumption that they represented the correct position of the parties. There was and was never likely to be any denial, and there is no identifiable loss.

Second, as pointed out, those representations that related to revenue generated from referrals were vague, non-specific and without any evidential foundation. The evidence does not establish that such representations were made.

Third, even if the representations were made, as pointed out, loss has not been established. In relation to those representations that may have been made, the usual loss and remedy would be requiring that which was represented to take place. It did. Of course, other wider remedies may have been possible depending on the circumstances.[69] Forgiving or excusing a defaulting director is not one of them. The director owes and continues to owe duties to the company, in this case Strategic, irrespective of any representation made by another director and whether or not such representations by Sourasis are imputed to Strategic. Insofar as it is submitted that Pickering would have resigned in August 2013, I do not accept this as a fact. Had he threatened to do so the paperwork would have accelerated to reflect the basis on which everyone was operating under in any event.
[69]Indeed other remedies may well have been available because of Sourasis’ ongoing failure to implement the agreement.

Finally, Pickering did not resign in August 2013. In fact in early August he was formally appointed a director and shares were issued to Chillimia. He elected to continue despite a fractious relationship with Sourasis. The parties tried to work things out. For so long as he continued in office and as an employee he had important duties to Strategic that he failed to perform. To the extent that these breaches give rise to compensation, it is disingenuous to suggest that such compensation can be recovered or excused because Pickering should not (or would not but for the representations) have acted in such capacity. The submission holds no attraction at all.

III THE OPPRESSION PROCEEDING
M. The law

The critical question is, whether in the circumstances alleged, the conduct of the affairs of Strategic, including the Capital Raising was contrary to the interests of the members (of Strategic) as a whole (s 232(d) or was oppressive, unfairly prejudicial or unfairly discriminatory against Chillimia (s 232(e)). The grounds are separate[70] but of course overlap.
[70]Turnbull v NRMA Ltd (2004) 50 ACSR 44 at 49-52 (Campbell J); see also Ford at [10.450.3].

The authorities establish that an isolated act can attract relief[71] and that it is not necessary that the ‘oppression’ continue and exist at the time of the application or the trial.[72] Further, the critical issue is one of fairness which is judged objectively by a commercial bystander, not in a vacuum, but in the context of the facts and circumstances existing at the time of the ‘oppression’.[73]
[71]Re Norvabron Pty Ltd (No 2) 1986 11 ACLR 279.
[72]Ford at [10.445.6].
[73]Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704; Chase Corp (Aust) Ltd v North Sydney Brick & Tile Co Ltd (1994) 34 NSWLR 1. See also Ford at [10.450.6].

If a majority shareholder’s dominant purpose in raising capital through a share issue is to reduce the proportional shareholding of the minority, unfairness and oppression may be established.[74] This is, or may be, all the more so in small companies where the assumption and expectation is that the parties will be equal, or close to equal shareholders, akin to a quasi-partnership. Of course, it all depends on the peculiar facts and circumstances.
[74]Whitehouse & Anor v Carlton Hotel Pty Ltd [1986-1987] 162 CLR 285, 289.

In most of the relevant reported cases, the court found that the main purpose of the issue of shares was to dilute the interests of another shareholder with the obvious commensurate gain to the other shareholder(s). Usually the share issue and its improper purpose is transparent and obvious.[75] However, sometimes it is contrived and not as obvious.[76] This is always a question of fact derived from the evidence and the drawing of necessary inferences.
[75]Wallington v Kokotovich Constructions Pty Ltd (1993) 11 ACSR 759; Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197; Harrington v Sensible Funerals Pty Ltd (2007) 61 ACSR 359.
[76]Hannes v MJH Pty Ltd (1992) 7 ACSR 8; Netbush Pty Ltd v Fascine Developments Pty Ltd (2005) 23 ACLC 1123; Raymond v Cook (1998) 29 ACSR 252.

In the recent case of Corbett v Corbett Court Pty Ltd & Ors,[77] the issue of shares in a family company to one sibling that had the effect of diluting the interests of the other six siblings was held to be oppressive in circumstances where there was no need to raise any further equity and the moving course was to resolve an impasse with his siblings.
[77][2015] FCA 1176.

The improper exclusion from participation in management and the denial of access to information can also constitute oppressive conduct.[78]
[78]See Ford at [10.460.15] and [10.460.18].

The misappropriation or misuse of company funds involving a breach of fiduciary duty can also constitute oppression of a minority shareholder.[79]
[79]Martin v Australia Squash Club Pty Ltd (1996) 14 ACLC 452.

Finally, in my opinion a member is entitled to rely on a breach of duty or conduct engaged in prior to such party becoming a member. Being a member at the commencement of the oppression proceedings is sufficient. A company is an abstract legal entity with perpetual succession and it is undesirable, unnecessary and incorrect to isolate, quarantine or freeze in time particular breaches or conduct and confer a remedy only to those members at the time. Breaches usually have an ongoing and compounding effect, making such isolation difficult, impractical, inappropriate and wrong.

N. Oppression is established

In my opinion, and in the particular circumstances of this case, the Capital Raising constitutes oppression of the other shareholder in Strategic, namely Chillimia. I find that the main purpose of the Capital Raising was to dilute the shareholding of Chillimia, and this constitutes oppressive prejudicial and discriminatory conduct that is most unfair for obvious reasons.

The suggestion that the Capital Raising was undertaken for the purpose of funding this proceeding (notwithstanding that it might have had that effect in part) is without merit and is rejected.

First, Sourasis said on more than one occasion when giving evidence that his family was wealthy and could afford to provide funds as indeed they did from time to time. All funds provided by Sourasis were specifically by way of loans. Those loans and generally the free, continuous and unsupported movement of funds in and out of Strategic (with the resultant and not unreasonable suggestion that Sourasis used Strategic as his personal ATM — a finding that it is not necessary to make) was a disproportionally and unreasonably large part of the case. The point is that funds required by Strategic were always obtained by way of loans.

Second, it is obvious that the legal costs of this proceeding exceeded the sum raised by many multiples. How was the balance funded?

However although the Capital Raising is a sufficient ground of oppression, there are undoubtedly further relevant matters, namely the operation and management of Strategic by Sourasis and the state of the books and records of the company. What a mess! A further aspect relates to loans to and from Strategic including the documentation and recording thereof. What a mess!

The evidence is substantial. However it is not necessary to go on for page after page dealing with the detail of these matters. It is not productive and of marginal relevance given my finding of oppression.

It is sufficient to say (and find as I do) that as was conceded by Sourasis the books and records of Strategic were indeed a mess. The reasons are less important. The consequences of the mess and inadequate record keeping are severe in the context of this case. Substantial funds were drawn out by Sourasis, ostensibly on the basis that he was simply being repaid funds advanced to Strategic (directly and indirectly) to enable it to operate. However, the evidence is woefully lacking in relation to any such correlation. Rather, it is more likely than not that Sourasis withdrew funds on the basis of the state of the account of Strategic and without regard to the precise amount he (or his entities) was owed. Further the evidence relating to the various written loan agreements was unconvincing, in many respects false, and is rejected. I also reject the evidence of Sourasis to the effect that he disclosed and discussed the loans with Pickering. The evidence was totally unconvincing and is not supported by any contemporaneous or other written document, correspondence or note.

Annexure 2 to the written submissions filed by the Precision parties is a table of the transfer of funds out of Strategic by Sourasis prior to 1 May 2014. The information referred to in the annexure is supported by the evidence.

The total amount withdrawn during the period 31 October 2011 to 4 November 2014 was $387,000. The first two transfers ($50,000 and $5,000) appear to be in repayment of amounts advanced by Sourasis or his related entity to Strategic. The loan to Kerry Sourasis of $90,000 (item 3) has been repaid. Of the loan of $55,000 made on 4 June 2012, $30,000 was repaid on 27 June 2013. An amount of $15,000 was paid to Firrito on 4 April 2014. Accordingly, after taking into account the above payments, a balance of $197,000 represents the net transfer out. This represents the net figure after taking into account repayments made ($55,000, $90,000 and $30,000) and proper payments made ($15,000). Sourasis contended that the balance represented a debt owing by Strategic because he and other entities in the Strategic Group, namely SFGA had incurred expenditure or paid amounts on behalf of Strategic for which Strategic was liable. As pointed out, the books are a mess and the evidence does not support such a conclusion. The suggested arrangements were not in writing and were not agreed. The transfer of funds within a group with different shareholders, on an ad hoc basis without supporting documentation is at the very least undesirable and in this case a breach of duty and relevantly oppressive. The point does not lose any force because Morrows expressed the view that a full reconciliation may not reveal any loss to Strategic.

Further, in relation to the loan to Kerry Sourasis (item 3 of the Schedule), both Jason Sourasis and Kerry Sourasis gave false evidence regarding the preparation and execution of the Kerry Sourasis Secured Loan Agreement. The loan agreement is dated 26 March 2012. When confronted with the fact that the witness to the loan agreement was not employed by the Strategic Group at the time, Sourasis was evasive but persisted with his account. His mother, however, contradicted this account. She gave evidence that the loan agreement was printed and signed in June 2014 and that there was a further version of the document witnessed by a different employee.

The evidence in relation to the execution of the Kerry Sourasis Secured Loan Agreement is a total fabrication and is rejected. The evidence unfolded in the following way —

(a) Sourasis gave evidence first. Before Kerry Sourasis gave evidence, Sourasis’s evidence that the Kerry Sourasis Secured Loan Agreement had been executed in March 2012 had been exposed in cross-examination as false. The recorded witness was not employed at the time.

(b) Kerry Sourasis could therefore not maintain the evidence in her witness statement (para 34) as to the creation of that document, presumably because Sourasis informed her after giving his evidence that the creation of the false document had been exposed.

(c) The dilemma thus created for Kerry Sourasis was that if she gave truthful evidence about the preparation and backdating of the document in late 2014, the fact that Sourasis had been lying would merely be further confirmed, as would the falsity of her own witness statement.

(d) A further version of events not previously given by either Sourasis or Kerry Sourasis was therefore created for the dual purpose of attempting to maintain the purported truth of Sourasis’s version, whilst at the same time explaining the obvious exposure of the backdating. That version as asserted by Kerry Sourasis in cross-examination was that the document had really been executed in March 2012, but had been lost[80] (thus being consistent with Sourasis’s version as to its execution), and that a replacement had been printed and signed in June 2014, with Mrs McHugh as witness (thus being consistent with the exposed backdating). Further, that shortly after this, when it was realised that Madeleine McHugh had not been employed by SMA in 2012 and should not have witnessed the “replacement”, a third version was executed and witnessed by Zoe Jess[81] and had purportedly been given to the Plaintiff’s solicitors.

(e) The purported third version was called for and not produced,[82] thus confirming (if any further confirmation was needed) the falsity of Kerry Sourasis new account.

(f) Kerry Sourasis absurdly sought to maintain in cross examination[83] that she had not discussed the document with Sourasis after he gave his evidence, despite conceding she had discussed his evidence with him. She also sought to maintain that her witness statement remained true and correct.[84]

[80][T 497 L 1-20].

[81][T 503 L 11-12].

[82]As to the call see T 504; as to the response see T 590.

[83][T 500 L 24].

[84][T 500 L 7-12].

In all of the circumstances the affairs of Strategic, conducted by Sourasis as identified above constitute conduct that is discriminatory, unfairly prejudicial and oppressive as against Chillimia. The conduct is also contrary to the interests of the members of Strategic as a whole. The finding is inescapable on the evidence.

Accordingly, the remedies provided in s 233 are enlivened. The obvious remedy is that Jaszac purchase Chillimia’s 40% interest in Strategic at a value to be agreed taking into account these reasons, failing which to be determined by a Special Referee or the Court. If, for whatever reason this does not occur, within a time frame to be determined, I will wind up Strategic.

IV ORDERS
O. Disposition of proceedings

In the result both parties have won and lost.

In the Main Proceeding, Strategic is entitled to damages or compensation in an amount to be determined.

In the Oppression Proceeding, Chillimia is entitled to be paid for the value of its shareholding in Strategic before the Capital Raising and taking into account the amount that Pickering and Pitcher are liable for.

I will hear from the parties as to the precise form of order, the further disposition of the matter and costs.

[2016] VSC 303

7 June 2016