Lambourne v Baker

1. [1]

   BASTEN and GLEESON JJA: The appellants challenge orders made by Rees J in the Equity Division (Corporations List) dismissing proceedings brought by them against the respondents.1 The first two appellants, Marc Lambourne and Glenn Pollett, established an on-line business giving tips on horse-racing called the Punters Show. With the first respondent, Dallas Baker, they established a company, Punters Show Pty Ltd, which was the third appellant. At the material time, Mr Baker was the sole director of the company. The appellants’ primary claims were that Mr Baker, in breach of his fiduciary duties to the company and to them personally, disposed of the assets of the company to the second respondent, Todd Buckingham, and a company associated with him, then known as TopBetta Holdings Ltd, the third respondent. Mr Lambourne also had a personal claim against Mr Buckingham for an outstanding debt of $30,000.

2. [2]

   On 16 August 2021, after the hearing of the appeal, the solicitors for the respondents notified the Court that Mr Lambourne’s personal claim against Mr Buckingham had been resolved.

3. [3]

   There remained two outstanding issues. The first involved a claim for recoupment of certain “improper withdrawals” made by Mr Baker, the then director of Punters Show Pty Ltd, from the company’s accounts. The amount of that claim included cash withdrawals of $187,791 and Items relating to such matters as “brothels”, “chiropractor”, “liquor purchases” and “parking/speeding fines” of $22,458, giving a total of $210,249. The claim was one which the company, now under the control of Messrs Lambourne and Pollett, was entitled to make. The respondents resisted the claim for recoupment of improper withdrawals on the basis that it had not been pursued at trial.

4. [4]

   The second issue involved a claim for equitable compensation based on either the destruction of the value of Punters Show Pty Ltd through a strategic partnership with TopBetta, or as the value obtained by TopBetta through its association with Punters Show Pty Ltd when TopBetta listed on the ASX.

Improper withdrawals claim

1. [5]

   The respondents gave no evidence in resistance to this claim. However it was not dealt with by the trial judge. The only issue on appeal was whether it had been abandoned at trial. That requires consideration of the course taken by the appellants at the trial.

2. [6]

   That course has been recounted by Emmett AJA below and may be dealt with succinctly for present purposes. The starting point is the pleading in the amended statement of claim filed on 31 May 2018. Other than claims for costs and interest, the relief claimed was identified in eight paragraphs. Each was carefully formulated with respect to particular parties. Relevantly for present purposes par 3 read as follows:

3. [7]

   Paragraphs 1-15 were introductory. The first cause of action was addressed under the heading “Breaches of duty – improper withdrawals” and comprised pars 16-20. Relevantly, these provided:

4. [8]

   In an affidavit sworn on 28 May 2018, Mr Lambourne stated:

5. [9]

   At the beginning of the hearing on 26 February 2019 Mr Lambourne, who appeared in person and was given leave to appear for Mr Pollett and the company (as he was in this Court), opened the plaintiffs’ case by referring to the amended statement of claim and his own affidavit, together with the exhibit to his affidavit, ML1, which contained the summary of the alleged misappropriations and supporting documentation. The judge then asked him for a general overview of the case. [1] Mr Lambourne explained the main elements of the plaintiffs’ complaints.

6. [10]

   Counsel for Mr Baker (Mr Silver) noted that at or before an earlier directions hearing Mr Lambourne had identified “the basis of the claim as a Barnes v Addy type claim and that’s repeated in the submissions.” [2] Mr Silver continued:

7. [11]

   During further exchanges, Mr Silver reiterated his understanding that the claim now made was basically one reliant on Barnes v Addy. The point taken was a little curious; the claim against Mr Baker did not turn upon him being privy to a breach of trust committed by others (as in Barnes v Addy), but on him being the party who breached his fiduciary obligations. Counsel for the other defendants (Mr Buckingham and companies associated with him) took no part in the discussion with the trial judge, although the claims against them involved participation in Mr Baker’s breaches of fiduciary duty, which might properly have been described as Barnes v Addy claims.

8. [12]

   In any event, the trial judge made it clear that however the matter had been opened up to that point, there was, in effect, no abandonment of causes of action set out in the amended statement of claim. She concluded: [4]

9. [13]

   Mr Silver then indicated his understanding of the process, took no objection to Mr Lambourne’s affidavit and did not require Mr Lambourne for cross-examination. Mr Lambourne then read his affidavit and the exhibit ML1 was admitted without objection. [5]

10. [14]

    Once the plaintiff’s case was closed, the defendants indicated that they did not read their affidavits and tendered no evidence. Mr Lambourne was clearly taken by surprise. Discussion followed as to whether he could read one of Mr Buckingham’s affidavits or otherwise rely upon the verified defences, no doubt for the purpose of cross-examining the deponents. However, no such course was ultimately pursued. The matter proceeded to final submissions.

11. [15]

    In his final submissions, Mr Silver adverted to the claim of misappropriation in the following terms: [6]

12. [16]

    The statement that there had been no case pleaded that the company had suffered loss because of revenue taken from the company was factually erroneous, as has been demonstrated above. The case was expressly pleaded.

13. [17]

    Oral submissions concluded with written submissions by Mr Silver which included the following propositions:

14. [18]

    The remainder of the submissions were addressed to the allegation that TopBetta had benefited from the transfer of the benefits of the Punters Show business to it, the benefit flowing from the public listing.

15. [19]

    The written submissions in reply for the plaintiffs dated 1 March 2019 immediately took issue with par 5 of Mr Baker’s submissions that no Barnes v Addy case had been pleaded against him. That was stated to be false by reference to various paragraphs in the background part of the amended statement of claim; the submission concluded by referring to “breaches of such duties as set out at paragraphs 16 to 19 – except for the allegation at the end of paragraph 19; and his statutory obligations to the company; and 20.”

16. [20]

    In this Court, counsel for Mr Baker asserted that the claim against his client for improper withdrawals from the company bank account had only been made in submissions in reply in the trial court. That was not correct: what was pointed out in the reply was that the claim had been fully pleaded. The problem lay elsewhere. The problem was that the pleaded claim against Mr Baker with respect to improper withdrawals was not a Barnes v Addy claim at all: Mr Baker was not a person who received property as the result of a breach by a fiduciary, nor was he knowingly involved in a breach of a fiduciary; Mr Baker was the miscreant fiduciary. The company brought a claim against Mr Baker for equitable compensation. Although Mr Silver said that Mr Lambourne had referred to a “Barnes v Addy claim at a directions hearing”, and had filed an outline of submissions prior to the commencement of the trial described as submissions “as to compensation under the Barnes v Addy type claim”, at no stage did Mr Silver articulate what he understood that phrase to mean. When it was relied upon for Mr Baker before the trial judge, no explanation was given as to what was referred to by that phrase although it seems that the trial judge was conscious of the fact that there was a pleading of direct (not derivative) liability on the part of the company. (That pleading, correctly, did not refer to Barnes v Addy.)

17. [21]

    It is necessary then to turn to the manner in which the claim was dealt with by the primary judge. At the outset of her judgment, she adopted the analysis of counsel for Mr Baker, stating at [4]:

18. [22]

    In dealing with a claim for equitable compensation, the judge correctly noted that the rule in Barnes v Addy [7] “extends liability for breach of trust to third parties in certain circumstances”, [8] those being cases of “knowing receipt” and “knowing assistance” in a breach of fiduciary duty. [9] In dealing with the pleaded case, the primary judge outlined the claims by Mr Lambourne and Mr Pollett that Mr Baker owed them fiduciary duties which had been breached. There was no reference to the company’s claim against Mr Baker. The conclusion reached was expressed as follows:

19. [23]

    Two factors emerge from this consideration. The first is that at no point did the primary judge suggest that the claim pleaded in paragraphs 16-19 of the amended statement of claim had been abandoned. It was simply not addressed. Secondly, the omission was understandable, given the emphasis placed by Mr Lambourne on the claim, which he valued in the millions of dollars, based on the use of the Punters Show business to boost the listing price and valuation of TopBetta.

20. [24]

    Nevertheless, the fact remains that the claim was overlooked. That it was pleaded, and supported by evidence to which no objection was taken, demonstrates that it should have been addressed. In this Court, counsel for Mr Baker did not submit that it was not raised in submissions, but only that it was referred to in “reply submissions made after the end of the hearing”. [10]

21. [25]

    Counsel did not submit that the matter was not raised by the submission in reply; nor did he suggest that he had had no opportunity to deal with it. No doubt it would have required leave to file a further submission, but that could have been sought had he been taken by surprise, or believed that his client was prejudiced by the reply submission.

22. [26]

    In these circumstances, the judge was in error in not dealing with the claim for the “improper withdrawals”. It was expressly raised, supported by evidence and referred to in the submissions in reply. Given the basis on which the matter had proceeded at trial, it is clear that the way was left open to the defendants to reconsider their forensic strategy if the plaintiffs’ position changed in relation to the pleaded claims. They were entitled to raise the issue if they perceived that the written submissions in reply involved a change in position. At least, Mr Baker was entitled to, as it was not suggested that any of the other defendants was affected by any change in position. Mr Baker took no step.

23. [27]

    In these circumstances, the claim should have been upheld and judgment may now be given in this Court. The claim was effectively limited to the amount of $210,249. The liability was not to the individual shareholders, but to the company which they now control.

Claim for lost value of Punters Show

1. [28]

   The far larger claim for equitable compensation based on the misuse of the reputation and assets of Punters Show Pty Ltd must be rejected for the reasons given by Emmett AJA.

Notice of motion to call further evidence

1. [29]

   By a further amended notice of motion efiled on 23 June 2021, Mr Lambourne sought a number of orders, most of which were unnecessary or fell away in the course of the hearing. However, in part the orders sought to rely on further evidence. That application was rejected and the motion dismissed. Emmett AJA has explained the reasons for that order.

Costs

1. [30]

   Mr Lambourne’s individual claim against Mr Buckingham having been settled, that issue has been dealt with by way of a consent judgment. However so much of the hearing as was concerned with that claim should not be the subject of any separate order for costs.

2. [31]

   The claim for the improper withdrawals properly arose between the company, Punters Show Pty Ltd, and Mr Baker. In this Court, Mr Silver appeared for all five respondents and Mr Lambourne appeared in person on behalf of himself, Mr Pollett and the company, pursuant to leave. There is, therefore, some awkwardness in dividing up the costs of the proceedings.

3. [32]

   Rather than attempt such a division, the Court should order that there should be no order as to the costs in this Court. The costs of the trial may be dealt with on the same basis. The parties can seek to reopen those order by a notice of motion filed within 14 days, in the ordinary course.

4. [33]

   EMMETT AJA:

Introduction

1. [34]

   In pursuance of the so-called joint venture, Mr Baker, who was then a bankrupt, caused the third appellant, The Punters Show Pty Limited (the Company), to be incorporated on 20 December 2010 and caused 25 shares in the capital of the Company to be issued to each of the Participants. Following his discharge from bankruptcy, Mr Baker became the only director of the Company on 24 August 2012.

2. [35]

   Mr Lambourne, Mr Pollett and the Company (together, the Claimants) claim that, in consequence of the arrangements briefly described above, Mr Baker owed Messrs Lambourne and Pollett certain fiduciary duties. They also claim that Mr Baker owed fiduciary duties to the Company in consequence of his being a director of the Company. The Claimants assert that Mr Baker has acted in breach of those fiduciary duties and claim equitable compensation in respect of the loss they allege that they have suffered as a consequence of such breaches of duty.

3. [36]

   The principal breach of fiduciary duty on the part of Mr Baker was said by the Claimants to derive from an agreement made in May 2015 whereby the second, third, fourth and fifth respondents, Mr Todd Buckingham, Betmakers Technology Group Limited, formerly known as TopBetta Holdings Limited (TopBetta), 12Follow Pty Limited (12Follow) and Operis Momentus Pty Limited (Operis) respectively, would enter into a “strategic partnership” with the Company. The Claimants assert that Mr Baker urged and encouraged Messrs Lambourne and Pollett to agree to the proposed strategic partnership and that they did so because of misrepresentations alleged to have been made by Mr Baker in circumstances where Mr Baker’s own interests were in conflict with his fiduciary duties to Messrs Lambourne and Pollett and to the Company. The Claimants also claim that Mr Buckingham, TopBetta, 12Follow Pty and Operis (together, the Buckingham Interests) were knowingly involved in Mr Baker’s breaches of fiduciary duty and are therefore liable to pay equitable compensation to them.

4. [37]

   In addition, Mr Lambourne claimed that Mr Buckingham agreed to pay to him or to cause to be paid to him the sum of $30,000 as consideration for his agreeing to begin promotional work for TopBetta and its associated companies. Mr Lambourne asserted that Mr Buckingham promised that, if the Buckingham Interests entered into the proposed strategic partnership, Mr Buckingham would ensure the immediate payment to Mr Lambourne of the sum of $30,000. However, after the hearing of the appeal, the parties informed the Court that the $30,000 claim by Mr Lambourne against TopBetta has been settled and that it is no longer pursued by Mr Lambourne. Accordingly, it is not necessary to say anything further on that question, although it may be relevant to the question of costs.

5. [38]

   By originating process filed on behalf of the Claimants in the Corporations List of the Equity Division on 17 November 2016, the Claimants commenced proceedings against Mr Baker and the Buckingham Interests. I have set out in Appendix 1 to these reasons a summary of the relief claimed and the allegations made by the Claimants in their amended statement of claim filed on 31 May 2018 (the Amended Statement of Claim). The allegations are relevant to a contention advanced in the appeal on behalf of Mr Baker that it is not now open to the Company to seek recovery from him of amounts that were alleged in the Amended Statement of Claim to be “improper withdrawals” by him from the Company.

6. [39]

   On 13 December 2019, for reasons published on that day, a judge of the Equity Division sitting in the Corporations List (the primary judge) ordered that the originating process be dismissed and ordered that the Claimants pay the costs of Mr Baker and the Buckingham Interests. The Claimants now appeal to this Court from the orders made by the primary judge.

7. [40]

   Although the Claimants had legal assistance in connection with the formulation of the Amended Statement of Claim, they were not legally represented at the hearing before the primary judge or on the hearing of the appeal. Leave was given both at the hearing before the primary judge and on the hearing of the appeal for Mr Lambourne to address the Court on his own behalf and on behalf of Mr Pollett and the Company. Although Mr Lambourne completed law studies, he has not practised. At the hearing before the primary judge, Mr Baker, on the one hand, and the Buckingham Interests, on the other, were separately represented. However, all five respondents were represented by the same counsel and solicitors on the hearing of the appeal.

Application to Adduce Further Evidence

1. [41]

   A considerable part of the first day of the hearing of the appeal was taken up with an application by the Claimants for leave to adduce further evidence in pursuance of a further amended notice of motion dated 23 June 2021. After considering written submissions and hearing oral argument, the Court indicated to Mr Lambourne that the application to adduce further evidence would be refused on the basis that special grounds had not been established. The Court indicated that it would give reasons for dismissing the application when disposing of the appeal. Those reasons follow.

2. [42]

   The further evidence sought to be adduced consists of the following:

3. [43]

   The hearing before the primary judge took an unusual course. Directions had been given for the parties to file affidavit evidence on which they wished to rely and several affidavits were filed on behalf of the Claimants, including affidavits by Mr Lambourne and Mr Pollett as well as affidavits by Mr William Saunders and Mr Paul Daily. The affidavit by Mr Baker of 21 September 2018 was filed on his behalf and the affidavit by Mr Buckingham of 21 September 2018 was filed on behalf of the Buckingham Interests.

4. [44]

   Prior to the commencement of the hearing, significant parts of the affidavits filed on behalf of the Claimants were objected to on behalf of Mr Baker and the Buckingham Interests. As I have indicated, the Claimants were represented by Mr Lambourne. However, after Mr Lambourne finished his opening address to the primary judge, counsel for Mr Baker indicated that all objections to the affidavits filed on behalf of the Claimants were withdrawn and none of the deponents was required for cross-examination. Counsel for the Buckingham Interests adopted a similar position. Further, counsel for Mr Baker and for the Buckingham Interests also indicated that none of the affidavits filed on their behalf would be read at the hearing.

5. [45]

   The primary judge expressly drew Mr Lambourne’s attention to the fact that none of the defendants’ affidavits was to be read. When Mr Lambourne said that he was “somewhat confused by what’s going on”, her Honour drew Mr Lambourne’s attention to the fact that although affidavits sworn by Mr Baker and Mr Buckingham had been served, the defendants did not propose to call any evidence and were not reading those affidavits or calling those witnesses to give evidence. Her Honour pointed out that the documents that were exhibited to or were attached to those affidavits, as matters then presently stood, were not part of the evidence before her Honour and drew Mr Lambourne’s attention to that fact in case it may be that he might wish to rely on some of the documents. Her Honour pointed out that, if there were documents upon which Mr Lambourne wished to rely, he could tender them in circumstances where the defendants’ affidavits were not read. Mr Lambourne said that he understood. He then asked for an adjournment so that he could consider which of the documents annexed to the defendants’ affidavits he needed for his case.

6. [46]

   The primary judge indicated that Mr Lambourne should be given an opportunity to think about whether he needed any of the documents annexed to or exhibited to the defendants’ affidavits and whether he wished to tender them if he needed them. Her Honour then suggested that an adjournment of half an hour would afford Mr Lambourne the opportunity of considering the material and Mr Lambourne responded that that would be convenient. After the adjournment, Mr Lambourne indicated that he was able to ascertain the annexures that he wanted to tender.

7. [47]

   Mr Lambourne then said that he had not had sufficient time to consider the defendants’ affidavits. The primary judge responded:

8. [48]

   The primary judge then asked Mr Lambourne whether he wished to begin his closing argument or closing submissions that afternoon. Mr Lambourne responded that he had no anticipation of needing to be ready to submit final submissions or closing remarks. Her Honour acknowledged that things had moved “quite differently from what you might have expected” and then said:

9. [49]

   Mr Lambourne then said that he was curious as to whether he needed the affidavit regarding the annexures to address any issue that might arise from the email. He said that what concerned him about the email was “the use of an auditor to sign off on something that perhaps needs re-investigation”. The primary judge then said:

10. [50]

    Mr Lambourne then asked about “the sworn defences”, saying that there were substantial statements in the sworn defences. Her Honour responded that it was not necessary to tender Court pleadings, which formed part of the Court file. Her Honour said that they were verified by the parties who filed them so that Mr Lambourne could take her Honour, in due course, to admissions that had been made or statements that had been made in the defences. Her Honour confirmed that the defences formed part of the Court record and then said:

11. [51]

    The following exchange then occurred:

12. [52]

    The primary judge then indicated that she proposed to adjourn the hearing until the following day. When asked whether he had a sense of how much time he would need for closing submissions, Mr Lambourne responded:

13. [53]

    When the hearing resumed on the following day, the primary judge inquired of Mr Lambourne as to whether he had any rough sense of timing as to how long he might take with closing submissions. Mr Lambourne responded by thanking her Honour for adjourning on the previous day and that he was sure he would take at least until lunchtime.

14. [54]

    Counsel for Mr Baker then referred to a communication on the previous day that the Claimants were going to reopen their case to apply for exemplary damages. Mr Lambourne indicated that he was “not planning to do anything at the moment” but that he reserved his rights. The primary judge indicated to Mr Lambourne that the point had been reached where “the territory is now very defined” and that, if Mr Lambourne wished to “change the territory”, he would need to do that immediately. Mr Lambourne confirmed that he did not “plan to do anything along those lines”. No mention of material in the defendants’ affidavits was made at that time.

15. [55]

    The email of 12 June 2016 was referred to in Mr Lambourne’s affidavit, which was read at the hearing before the primary judge. It was clearly available to the Claimants at that time. Further, it is unlikely that the email would have any effect on the ultimate result. The thrust of the arguments advanced on behalf of the Claimants is that the email was relevant to whether Mr Buckingham participated in a fraudulent and dishonest design with Mr Baker to remove Messrs Lambourne and Pollett from the business of the Punters Show. Adding the whole of the contents of the email would not advance the Claimants’ case that there was a dishonest and fraudulent design between Messrs Buckingham and Baker.

16. [56]

    Clearly enough, the Claimants had the opportunity to make use of the affidavits of Messrs Buckingham and Baker. It was open to them to tender the affidavits as admissions by Mr Baker or Mr Buckingham as the case may be. Questions may have arisen as to whether Mr Buckingham’s affidavit would have constituted admissions as against Mr Baker and whether Mr Baker’s affidavit would have constituted admissions as against the Buckingham Interests. Nevertheless, the Claimants had ample opportunity following adjournments to consider the question of tendering the affidavits as admissions and, if need be, to obtain legal advice on that question.

17. [57]

    It is relevant, of course, that the Claimants were not represented by lawyers at the hearing. However, the primary judge intimated that some use could be made of the affidavits if the Claimants sought to do so. Her Honour properly observed that it was not for her to give legal advice. Of course, if the affidavits had been tendered, Mr Baker or the Buckingham Interests may well have chosen to go into evidence by way of response. If they were now admitted on a basis that has not been made entirely clear to this Court, there would be a very real prospect of the need for a new trial. In any event, it is not apparent, even if the affidavits were admitted as admissions, how the admissions would have any effect on the ultimate outcome.

18. [58]

    The hearing of an appeal in the present circumstances is by way of rehearing on the basis of the evidence before the trial judge. However, the Court may receive further evidence but must not do so except on special grounds. As a general rule, three conditions would need to be met before further evidence would be received. [11] First, it is necessary to show that the evidence could not have been obtained with reasonable diligence for use at the trial. Secondly, it must be shown that the evidence is such that there would be a high degree of probability that there would be a different result if the further evidence were admitted. Thirdly, the evidence must be credible. All of the further evidence sought to be adduced was available to the Claimants at the hearing before the primary judge. Accordingly, they failed to satisfy the first condition. In those circumstances, the Court considered that no basis had been established from the grant of leave to adduce the proposed further evidence.

The Claimants’ Uncontested Evidence

1. [59]

   The evidence of the Claimants consisted of affidavits by Mr Lambourne, Mr Pollett, Mr George Saunders and Mr Thomas Daily, which were read without objection, and none of those deponents was required for cross-examination. In addition, Mr Lambourne tendered some documents, including documents that were annexed to the affidavit of Mr Baker or the affidavit of Mr Buckingham. What follows is taken from those unchallenged affidavits and documents.

2. [60]

   Immediately after finishing high school, Mr Lambourne worked from time to time with bookmakers. From a young age, he accumulated form guides from “The Australian” newspaper and reviewed them from time to time in search of “winning patterns or systems”. In the 1980s, Mr Lambourne visited racecourses and stayed at the course for more than an hour after the last race watching replays of the races. While completing law studies at the University of New South Wales, Mr Lambourne worked for numerous bookmakers, including Mr Peter Todd, whom Mr Lambourne described as “one of Sydney’s leading bookmakers”. Mr Lambourne assisted Mr Todd with the work of “setting the market” for each race in Sydney.

3. [61]

   Mr Lambourne held a licence as a bookmakers’ clerk from 1983 until 2017. Between 1990 and 1999, he also held a bookmakers’ licence. Mr Lambourne has worked for at least 15 Sydney bookmakers and often stood in for bookmakers who could not attend a particular race meeting and ran their bookmakers’ stands for them. By about 2009, Mr Lambourne was recognised within the thoroughbred racing industry as an expert form analyst, “market setter” and media commentator. Many bookmakers, jockeys and professional punters retained his services.

4. [62]

   Mr Pollett has also had substantial expertise in the thoroughbred racing industry. He and Mr Lambourne have been personal friends for about 25 years. By about 2009, Mr Pollett had built up a 25-year reputation in horse racing circles as “a colourful and cavalier bookmaker, punter and professional poker player”. Mr Pollett’s particular skill was to predict winners from looking at horses in the mounting yard before each race.

5. [63]

   By 2009, Mr Baker was known as an entrepreneur in the thoroughbred racing industry. He worked as a writer and producer on a digital platform known as “Racenet”, which at that time was the leading online data repository for the thoroughbred racing industry. Mr Lambourne first met Mr Baker when Mr Lambourne appeared on a radio show produced by Mr Baker. Mr Lambourne considered that Mr Baker was “brimming with good ideas and sold his ideas well”.

6. [64]

   In 2009, Mr Baker invited Mr Lambourne and Mr Pollett to appear on the “Racenet” programme to talk about thoroughbred racing. After a few more on-air talks, they developed a show that was streamed weekly on “Racenet”. The streamed videos became known as “the Punters Show”. Mr Lambourne and Mr Pollett were not paid for appearing on “Racenet” and relied on Mr Baker’s representations that the demands for their services and products would increase from exposure on “Racenet”.

7. [65]

   In 2009, Mr Lambourne was selling “products” such as:

8. [66]

   Mr Lambourne characterised the Punters Show as being “unique and ground breaking” and as being “controversial” because it competed with form guides and thoroughbred racing commentary published by newspaper groups and popular radio stations. Mr Lambourne said that those publishers were controlled by the “TAB” and that he, Mr Pollett and Mr Baker shared “the anti-TAB” anti-establishment philosophy and campaigned for “the rights of the average punter”.

9. [67]

   After the popularity of the Punters Show increased, Mr Baker said to Mr Lambourne and Mr Pollett words to the following effect:

10. [68]

    At the time of the conversation just referred to, Mr Baker did not have any “products”. Mr Lambourne considered that he had nothing to lose in joining with Mr Baker in the proposed business since he very much enjoyed presenting the Punters Show with Mr Baker and Mr Pollett. Mr Lambourne, Mr Pollett and Mr Baker agreed that:

11. [69]

    As I have said, Mr Baker subsequently caused the Company to be incorporated and each of the Participants was allotted 25 of the 75 issued shares in the capital of the Company. At the time of incorporation of the Company, Mr Baker said words to the following effect:

12. [70]

    Mr Pollett resigned as a director of the Company on 14 January 2011. Mr Lambourne resigned as a director on 24 August 2012 following Mr Baker’s discharge from bankruptcy. Mr Baker was appointed as the only director from that time and at all times until 17 October 2017, Mr Baker was, in practical terms, the Company’s sole director and secretary. Notwithstanding the incorporation of the Company, between the date of incorporation and 1 August 2016, the Company never held a directors’ meeting, or a members’ meeting, had never declared dividends and never raised any capital.

13. [71]

    The Punters Show continued to be presented on “Racenet” until 11 April 2011. By that time, Mr Baker had organised for “shopfront, merchant facilities and website” for the Punters Show to “go live”. The Participants then began producing the Punters Show exclusively for the Company’s website, in support of the Company’s “digital shopfront”.

14. [72]

    Messrs Lambourne and Pollett understood that all revenues generated through the Company’s “digital shopfront” were channelled into an account of the Company with the Commonwealth Bank of Australia (the CBA Account). Mr Baker exercised exclusive control over the CBA Account and Messrs Lambourne and Pollett trusted Mr Baker implicitly as a partner, friend and business associate. After Mr Lambourne resigned as a director in August 2012, Messrs Lambourne and Pollett did not have access to or look at the CBA Account statements until after the commencement of these proceedings in November 2016.

15. [73]

    As the Punters Show became more widely known, racing experts appeared on the Punters Show and used the Company’s digital shopfront to promote and sell their products. Sales were processed through the Company’s merchant facilities and the Company retained half of the proceeds of sales by way of commission. By early 2015, some 15 providers were using the Company’s shopfront facilities. Online bookmakers also found the Company’s website an attractive marketing medium. Online bookmakers were known as “affiliates” and their “banners”, which included an electronic link to their own sites, were prominently displayed and promoted on the Company’s website. Punters could open accounts directly through a bookmaker’s electronic link. The Company received a “trailing commission” from each affiliate. Mr Lambourne asserted that, while such commissions should be due and payable up to the present time, they do not appear to have been credited to the CBA Account.

16. [74]

    When the Company began operations, Mr Lambourne accepted Mr Baker’s estimate that it would be about 12 months before he could expect to receive revenue from the Company. However, he expected to receive the proceeds of sale of his own “products”, which were being sold through the Company without any deduction for commission. However, between 2010 and July 2015, no regular accounting or payment system was established for distributing profits to the Participants.

17. [75]

    Mr Lambourne believed that, by early 2014, the Company’s business was doing well and he considered that it was time to take stock and to distribute some profits. He began inquiring about the distribution of profits.

18. [76]

    Mr Lambourne trusted Mr Baker when he said words the following effect:

19. [77]

    On 9 December 2014, Mr Lambourne and Mr Pollett attended the offices of Messrs Stanley & Williamson. Much to Mr Lambourne’s surprise, Mr Buckingham was present at the meeting. Mr Baker had not mentioned anything about Mr Buckingham attending the meeting. Mr Lambourne had first met Mr Buckingham in about 2013 at a race meeting in Newcastle. Mr Buckingham had introduced himself and said words to the following effect:

20. [78]

    At the meeting on 9 December 2014, Mr Pollett said to Mr Baker in an angry tone:

21. [79]

    During the meeting, Mr Baker recommended on numerous occasions that the Participants should “piggy back” onto Mr Buckingham’s group of companies, which would be listed as “TopBetta”. Mr Baker said that the redesign of the Punters Show website had already started, that TopBetta had done some market research and the Punters Show products were “a big hit” for the punters. He said that there was potential synergy between Mr Buckingham’s companies and the Company and that the Participants would benefit from cross-promotion with TopBetta.

22. [80]

    During the meeting, Mr Lambourne learnt from exchanges between Mr Pollett and the accountants that Mr Baker had been withdrawing funds from the CBA Account on an “ad hoc” basis to such an extent that the accountants had insisted upon the withdrawals being recorded as a weekly $2,000 salary. Mr Lambourne felt hurt that Mr Baker had been taking such significant sums out of the Company on such a regular basis while Mr Lambourne, himself was receiving relatively little money and then only after applying intense pressure to Mr Baker.

23. [81]

    Towards the end of the PowerPoint presentation, Mr Baker said words to the following effect:

24. [82]

    Numerous text messages were exchanged between Mr Lambourne and Mr Baker in which Mr Lambourne asked for funds from sales of his products, since the Company did not charge commission on sales of Mr Lambourne’s products. Cash flow issues continued unabated and unexplained into 2015. Mr Lambourne found that the revenue shortage was much harder to bear knowing that Mr Baker was drawing a regular weekly salary of $2,000 and that he had been holding onto Mr Lambourne’s money from the sales of Mr Lambourne’s products.

25. [83]

    Mr Lambourne’s income from the Company continued to decrease without any acceptable explanation from Mr Baker. His financial position became quite tenuous. However, Mr Lambourne found it awkward to take any strong measures, such as threatening legal action, to force Mr Baker to provide a full accounting. He had considered that it was essential for the three Participants to work together and to appear to get on well.

26. [84]

    In about April 2015, Mr Baker said to Messrs Lambourne and Pollett words to the following effect:

27. [85]

    Several days later, Mr Baker invited Messrs Lambourne and Pollett to attend a meeting with Mr Buckingham at the Pyrmont Point Hotel on 4 May 2015 (the May Meeting). Messrs Lambourne and Pollett attended the May Meeting.

28. [86]

    At the meeting, Mr Lambourne’s affidavit recounts that a conversation to the following effect took place:

29. [87]

    On 7 May 2015, Mr Pollett told Mr Lambourne that Mr Buckingham had agreed to pay Mr Pollett $108,000 and suggested that Mr Lambourne speak to Mr Buckingham as soon as possible. Mr Lambourne then spoke to Mr Buckingham and an exchange to the following effect took place:

30. [88]

    Soon after that conversation, Mr Buckingham arranged for Mr Baker to film and produce an in-depth interview with Mr Lambourne. The interview covered more than half an hour and reviewed Mr Lambourne’s “journey from competing with my school friends picking winners on the TAB to my work as a bookie’s clerk and bookmaker”. The interview also traced “the technological developments and cultural changes within the racing industry” during Mr Lambourne’s career up to the point of starting the Punters Show with Messrs Pollett and Baker.

31. [89]

    By 21 July 2015, Messrs Buckingham and Baker had caused a website known as “the Punters Show 2.0” to “go live”. The original website for the Punters Show was disconnected and the related merchant facilities of the Company were also disconnected.

32. [90]

    Mr Lambourne expected that the revenue previously collected by the Company’s merchant facilities was now being collected through the 12Follow merchant facilities on behalf of the Company. He expected that 12Follow would account to the Company and to the Company’s providers and affiliates. He also understood that 12Follow would charge a reasonable management fee that would be substantially lower than the Company’s previous in-house management costs when Mr Baker was handling the management with one full-time paid assistant. He expected that his own products would continue to be sold without deduction of commission.

33. [91]

    By 27 July 2015, Mr Lambourne had not received any payment. On about that day he telephoned Mr Buckingham who said words to the following effect to him:

34. [92]

    Mr Lambourne believed that Mr Baker was still looking after his interests and the interests of Mr Pollett and the Company in their dealings with all third parties, including Mr Buckingham. Thus, whenever Mr Lambourne raised with Mr Baker the fact that he had received no payment, Mr Baker told him that they needed to go easy and be patient and that Mr Buckingham was their “best bet”. He suggested that they show Mr Buckingham how they could help him and wait until “they list”.

35. [93]

    In August 2015, TopBetta received a capital raising proposal from a stockbroking firm. The proposal involved an initial public offering (IPO), rather than the “backdoor listing” that had previously been proposed. On 12 October 2015, at Mr Buckingham’s request, the three Participants took part in a day-long photographic shoot as part of promotional work for the listing of TopBetta. The photos reflected the image that TopBetta wished to promote about the Punters Show team in connection with the proposed IPO.

36. [94]

    On 25 November 2015, TopBetta issued a prospectus for its IPO to raise $6 million. The prospectus claimed that TopBetta was the first Australian-based wagering operator to combine a standard wagering platform with a “fantasy wagering platform”, including the capability of conducting fantasy wagering tournaments. “Fantasy wagering” was said to be a closed competition in which each player would pay a small entry fee but would be given a large quantity of “fantasy” chips with which to bet on real races, with a large return in real money if the fantasy bets placed by the player were more successful than the other players in the competition. 12Follow was said to be the first service to use customers’ mobile phones to follow their favourite runners offering a mobile content platform with analyst commentary. The IPO described Operis as licensed to conduct business as a bookmaker. No reference was made in the prospectus to the Punters Show, to Mr Lambourne or to Mr Pollett.

37. [95]

    On 11 December 2015, TopBetta was listed on ASX, $6 million having been raised by means of the IPO. TopBetta made an announcement to the ASX in which it described the offer as “heavily oversubscribed”. That figure of $6 million was the focus of the claim by the Claimants for equitable compensation as being indicative of the value of the Punters Show.

38. [96]

    On 3 January 2016, TopBetta made a further announcement to the ASX that it had entered into an exclusive partnership with EON Sports Radio Pty Limited (EON Sports Radio), a new digital platform, to provide unique content to EON Sports Radio from TopBetta’s “the Punters Show” premium content providers. Mr Buckingham was quoted as saying that he was looking forward to the launch of a Saturday morning racing show on EON Sports Radio, as follows:

39. [97]

    On 28 January 2016, Mr Lambourne asked Mr Buckingham about the $30,000 payment due to him. Mr Buckingham replied “send us an invoice and I’ll make sure you get paid within fourteen days from the date of invoice”. Mr Lambourne sent an invoice on the same day. By 15 February 2016, Mr Lambourne had still not received any payment. Mr Buckingham said words the following effect:

40. [98]

    On 24 February 2016, Mr Lambourne received a payment of the sum of $9,166. He assumed that the payment was being made pursuant to the arrangements discussed in May 2015 whereby he was to be paid at a minimum rate of $104,000 per annum plus GST. Mr Lambourne received similar payments on 15 March, 15 April, 14 May and 13 June 2016. Some payments were made through a bank account of TopBetta and others were made through a bank account of 12Follow.

41. [99]

    On 12 April 2016, Mr Lambourne again enquired about the $30,000 payment. Mr Buckingham responded:

42. [100]

    The edition of the Punters Show for 6 June 2016 contained remarks concerning jockeys injured in falls during thoroughbred horse races. Mr Baker and the Buckingham Interests characterised the remarks as “offensive” and “inflammatory”. On the other hand, Mr Lambourne suggested that TopBetta had promoted the Punters Show as “outspoken and controversial”. On 12 June 2018, Mr Buckingham published an email that announced that Mr Lambourne had been “stood down” for two weeks, apparently as a consequence of the remarks made on 6 June 2016. The email was addressed to consultants for the Punters Show and providers of material for the Punters Show.

43. [101]

    Mr Lambourne denies that he was ever “stood down” from the Punters Show. He considered that the comments in question formed part of the type of commentary from which the Punters Show had established its popularity and commercial value. Shortly afterwards, Mr Baker telephoned Mr Lambourne and said words to the following effect:

44. [102]

    At 9.22 am on 19 July 2016, Mr Baker sent to Mr Lambourne by email a document headed “Punters Show / 12Follow / TopBetta Transition”. The document file name, as it appeared in the email, was “Punters Show termination agreement.docx”. The “AIM” of the document was stated to be as follows:

45. [103]

    The document proposed that the following steps, inter alia, take place on 1 August 2016:

46. [104]

    A list of providers was set out in the following terms:

47. [105]

    On 19 July 2016, TopBetta paid Mr Lambourne the sum of $4,583. That is the last payment he has received. On 25 July 2016, Mr Buckingham said:

48. [106]

    On 22 July 2016, Mr Lambourne sent an email to Mr Buckingham saying:

49. [107]

    Mr Buckingham responded later on 22 July 2016 saying:

50. [108]

    At 8.14 am on 25 July 2016, Mr Lambourne sent by email a letter addressed to Mr Baker and Mr Buckingham saying as follows:

51. [109]

    Mr Lambourne sent another email to Mr Baker and Mr Buckingham at 12.32 pm on 25 July 2016 saying as follows:

52. [110]

    At 3.57pm on 25 July 2016, Mr Baker responded to Mr Lambourne’s email and letter of 8.14 am pm saying as follows:

53. [111]

    At 10:10 pm on 25 July 2016, Mr Lambourne sent a further email to Messrs Baker and Buckingham saying:

54. [112]

    Mr Baker responded at 10.46 pm saying as follows:

55. [113]

    Mr Buckingham responded that evening at 10:53 pm saying:

56. [114]

    At 10.35 am on 26 July 2016, Mr Baker sent an email to Mr Lambourne saying relevantly as follows:

57. [115]

    Mr Lambourne responded later on 26 July 2016 saying:

58. [116]

    On 27 July 2016, Mr Buckingham sent an email to Mr Lambourne with copies to Messrs Baker and Pollett in which he said, relevantly, as follows:

59. [117]

    On 27 July 2016, Mr Lambourne sent a further email to Mr Buckingham with a copy to Mr Baker saying relevantly:

60. [118]

    On 29 July 2016, Mr Baker sent an email to Mr Lambourne saying relevantly as follows:

61. [119]

    On 5 August 2016, 12Follow published an announcement relevantly in the following terms:

62. [120]

    On 15 August 2016, Mr Lambourne sent to Mr Baker a proposed resolution by the shareholders of the Company dealing with the registered office of the Company, the appointment of a secretary and appointment of directors.

63. [121]

    Mr Baker responded later on 15 August 2016 saying relevantly as follows:

64. [122]

    Because Messrs Baker and Buckingham had exclusive control of all data on the Punters Show 2.0 website and all sales were made directly through the 12Follow merchant facilities, it was not possible for Mr Lambourne to issue an invoice for his own products in response to Mr Buckingham’s email requesting an invoice. [12] Mr Lambourne then sent an email to Mr Baker referring to Mr Buckingham’s email and saying:

65. [123]

    Mr Lambourne understood by that email that Mr Buckingham and Mr Baker would immediately return the Company’s data to Mr Pollett and to him. That would have allowed them to continue the Punters Show but with their own merchant facilities and no support from TopBetta or Mr Buckingham. He understood that that was in line with the strategic partnership arrangements entered into in May 2015.

66. [124]

    Mr Lambourne sent emails to Mr Baker on 16 August 2016 and 17 August 2016 requesting copies of taxation returns lodged on behalf of the Company. He received no response.

67. [125]

    Clearly, the so-called “strategic partnership” had come to an end by August 2016. The proceedings in the Corporations List were commenced thereafter, resulting in dismissal as indicated above, and the commencement of the appeal.

68. [126]

    By this time, Mr Lambourne believed that Messrs Baker and Buckingham were, in practical terms, controlling the “Punters Show 2.0” platform. He considered that he and Mr Pollett had no choice but to start a new business as soon as possible in order to try to regain the goodwill of their clients. Mr Lambourne and Mr Pollett chose the name “Racing Rant” for their new business.

69. [127]

    Messrs Lambourne and Pollett, together with Mr Lambourne’s partner, Dr Michelle Sutherland, began building a new website from which they have to “post” their work, including the televised panel discussion that had previously been known as the “Punters Show”. Mr Lambourne considered that they could no longer use the name “Punters Show” because they had no control over the associated data and were unsure of what Messrs Buckingham and Baker were planning. He believed that Messrs Buckingham and Baker had been flying interstate to convince providers to the Punters Show to remain with 12Follow after the announcement of early August.

Grounds of Appeal

1. [128]

   In their amended notice of appeal filed on 12 March 2021, the Claimants relied on some 12 grounds of appeal. However, only six grounds were pressed on the hearing of the appeal. Those grounds may be restated as follows:

2. [129]

   It is significant that there is no complaint in the amended notice of appeal that the primary judge failed to find that Mr Baker had a liability to repay to the Company the amount of “inappropriate withdrawals” by him that were alleged in the Amended Statement of Claim. The significance of the absence of such a complaint will become apparent in the next section of these reasons.

Alleged Abandonment of Claims

1. [130]

   In the appeal, the Claimants pursued recovery on behalf of the Company of monies characterised by the Amended Statement of Claim as “improper withdrawals”. However, Mr Baker asserts that a claim for repayment by him of “improper withdrawals” was not open in this Court because the allegations as to those matters were not pressed before the primary judge. Mr Lambourne, on behalf of the Company, did not accept that any such claim had been abandoned before the primary judge.

2. [131]

   On the other hand, Mr Lambourne’s oral submissions did not place any great emphasis on a claim by the Company for recovery of the amount of the “improper withdrawals”. Mr Lambourne adverted to the question by saying that Mr Baker “squeezed the cashflow by virtue of spending on his own personal wants” and referred to the Schedules that appear in Appendix 2 to these reasons. Mr Lambourne was asked whether there was evidence before the primary judge verifying, by reference to primary documents, such as bank statements, that certain amounts of money were spent by Mr Baker, being evidence that verified the assertion in Mr Lambourne’s affidavit that Mr Baker, for example, spent money at Crystal Car Wash. He was asked whether there was evidence that verified the payments rather than simply a schedule. By way of response, Mr Lambourne referred to an email that he received from Mr Baker on 29 July 2016, which was to the following effect:

3. [132]

   Thus, when Mr Lambourne was asked whether more precision could be given as to the figure that he said represented Mr Baker’s personal expenditure, he referred again to the Schedules in Appendix 2. That exchange was in the following terms:

4. [133]

   Subsequently, Mr Lambourne said as follows:

5. [134]

   Mr Baker does not point to any specific abandonment by the Claimants but relies rather on an implied abandonment by reason of the absence of specific mention of the claim before the primary judge. The burden of establishing abandonment of pleaded claims by unrepresented parties may be somewhat greater than in the case of legally represented parties. In the circumstances, it is necessary to consider the relevant allegations made by the Claimants in the Amended Statement of Claim, the evidence and the conduct of the proceedings before the primary judge.

6. [135]

   In the Amended Statement of Claim, the Claimants assert that, when he was the only director of the Company, Mr Baker caused funds of the Company to be paid to himself or for his benefit. Those payments are characterised as “improper withdrawals” and it is asserted that they constituted a breach by Mr Baker of duties he owed to the Company and to Messrs Lambourne and Pollett.

7. [136]

   The allegations of “improper withdrawals” are made in paras 16 to 20 of the Amended Statement of Claim. Paragraph 16 claims that from between August 2012 or earlier and August 2016 Mr Baker withdrew $833,000 from the accounts of the Company, including $187,791 in cash from ATMs. However, there is no prayer for relief consisting of a money claim for $833,000 or any other sum, such as the sum of $210,249 representing the total of Mr Baker’s personal expenses incurred from 2011 to 2016 extracted in Mr Lambourne’s affidavit. Further, those paragraphs do not themselves focus on the payments made to Mr Baker as being specific breaches for which specific recovery might be sought. Rather, the claims made in the Amended Statement of Claim generally are focused on recovery of equitable damages or compensation, calculated by reference to the alleged value of the Company’s business.

8. [137]

   Specifically, in paras 52 to 54 of the Amended Statement of Claim, which summarise the relief claimed, there is no claim that the Company suffered loss or damage by reason of moneys being wrongly withdrawn by Mr Baker. Rather, it is alleged that Mr Baker caused loss and damage to the Claimants in that:

9. [138]

   The Amended Statement of Claim sought damages pursuant to s 1317H of the Corporations Act 2001 (Cth) (the Corporations Act) for breaches of ss 180, 181, 182 and 183 of the Corporations Act. Under s 180, a director of a corporation must exercise his or her powers and discharge his or her duties with an appropriate degree of care and diligence. Under s 181, a director of a corporation must exercise his or her powers and discharge his or her duties in good faith in the best interests of the corporation and for a proper purpose. Under s 182, a director of a corporation must not improperly use his or her position to gain an advantage for himself or herself or someone else or cause detriment to the corporation. Under s 183, a person who obtains information because he or she is, or has been, a director of a corporation must not improperly use the information to gain an advantage for himself or herself or someone else or cause detriment to the corporation. Under s 1317H, the Court may order a person to compensate a corporation for damage suffered by the corporation if the person has contravened any of those provisions and the damage resulted from the contravention.

10. [139]

    Clearly enough, unauthorised withdrawal of money of the Company by Mr Baker would constitute a contravention of those provisions of the Corporations Act. Nevertheless, there is no specific claim for sums totalling $833,000 or $210,249 that the Company now seeks to recover in the appeal. Further, there is no ground of appeal directed specifically to that claim. While there is a ground that her Honour wrongly determined that there was no evidence of breach of duty on the part of Mr Baker, that ground does not refer expressly to misappropriation by Mr Baker of funds of the Company to his personal use or for his personal benefit.

11. [140]

    The primary judge did not deal with a claim that Mr Baker, in effect, misappropriated funds of the Company to his own personal use. Mr Baker contends that the explanation for the absence of reference in her Honour’s reasons to that claim is that it was not advanced before her Honour. Thus, at the beginning of the reasons, her Honour said that, although the Amended Statement of Claim contained a number of causes of action, the following two claims were pressed at the hearing:

12. [141]

    The primary judge also observed that the asserted loss of the Claimants, as put at the hearing, departed markedly from the way in which it had been pleaded. Her Honour observed that the defendants adopted the position that there was no evidentiary basis to support the asserted loss and thus the Barnes v Addy claim failed for that reason alone. As will appear below, her Honour accepted that assessment of the position as being correct.

13. [142]

    Mr Lambourne’s written submissions filed on behalf of the Claimants before the primary judge on 20 February 2019 asserted that the main issue of concern was in relation to the “damages” issue. The submissions asserted that the Participants agreed to enter into a joint enterprise for the purpose of exploiting the Punters Show as originally presented on “Racenet”. It was alleged that Mr Baker managed and controlled the financial records of the Company and took all decisions relating to the everyday running of the Company, such that the Claimants were entirely dependent upon Mr Baker for any documentation or information concerning the internal workings of the Company as well as any dealings between the Company and Mr Baker or the Buckingham Interests.

14. [143]

    Mr Lambourne’s written submissions said that there were numerous difficulties, if not impossibilities, with the Court making a fair assessment of the value of the Company or its business at any particular time, including as at May 2015, 11 December 2015 or 5 August 2016. They were respectively the dates on which the strategic partnership commenced, the date on which TopBetta was listed on ASX and the day when Messrs Lambourne and Pollett discovered that Mr Baker was working for TopBetta and they no longer had control of the Punters Show business. The submissions then dealt with the possible assessment of compensation. There was no mention of any claim against Mr Baker in respect of alleged misappropriation or “improper withdrawals”.

15. [144]

    In written submissions made by Mr Baker to the primary judge, no mention was made of “improper withdrawals”. Similarly, the written submissions filed on behalf of the Buckingham Interests made no mention of “improper withdrawals”. They now say that that was because no mention had been made in Mr Lambourne’s submissions.

16. [145]

    On the first day of hearing before the primary judge, after her Honour had dealt with leave for Mr Lambourne to appear on behalf of Mr Pollett and Company, Mr Lambourne indicated that the Claimants relied upon the Amended Statement of Claim and the affidavits to which I have referred above. Her Honour then heard opening oral submissions on behalf of the Claimants by Mr Lambourne. In the course of the submissions, her Honour inquired of Mr Lambourne as to the compensation sought by the Claimants. Her Honour noted that there was a monetary claim for $30,000 and then a wider claim for equitable compensation and damages. Her Honour inquired as to what “general sense” Mr Lambourne could give her as to the amount of the equitable compensation or damages sought by the Claimants. Mr Lambourne’s response was that the Claimants were entitled to upwards of $1,500,000 “given that the crystallised gains that were made by listing TopBetta using Punters Show revenue”.

17. [146]

    The primary judge then asked Mr Lambourne whether, in quantifying the damages, Mr Lambourne would be taking her Honour to the documents that were available and would point out how to calculate or assess the damages. Mr Lambourne responded that the Claimants were arguing that the Punters Show brought considerable benefit to TopBetta in enabling it to go from a proposed backdoor listing to a $5 million to $6 million public offering with content services valued at $1.8 million in the public offering. He said that the Claimants contended that the valuation of the benefit to TopBetta of the Punters Show was more relevant than the actual valuation of the Punters Show as a going concern. Mr Lambourne said, that the listing of TopBetta on the ASX would not have been possible without the revenue stream from the Punters Show and no other part of the TopBetta business was growing but was in fact diminishing.

18. [147]

    The primary judge then asked Mr Lambourne whether he was inviting her to draw an inference from the figures as to how TopBetta’s business was comprised before it acquired the Punters Show and what it was then launched for, that the “uplift” was referrable to the Punters Show or that some part of it was referrable to the Punters Show and that that would be the measure of damages. Mr Lambourne responded “yes”.

19. [148]

    After a short adjournment, for the purpose of considering objections to affidavits, counsel for Mr Baker referred to submissions made orally by Mr Lambourne at an earlier directions hearing and in an email to the Court identifying the claim as being based on Barnes v Addy. Counsel for Mr Baker observed that, while that was a different claim from the claim made in the Amended Statement of Claim, which was articulated to be the loss of the value of the Company, Mr Baker now understood that the Claimants were claiming on two fronts, being the $30,000 claim against Mr Buckingham and the Buckingham Interests and a claim for equitable damages or compensation, the quantum of which is based on the increased value of the shares in TopBetta.

20. [149]

    Counsel for Mr Baker said that those were the sum total of the claims against the defendants and that he would approach the objections to affidavits in a way that was “a bit more direct”. He said that, on the basis of the claims now pressed against the defendants, the objections to Mr Pollett’s affidavit were withdrawn in full and neither Mr Saunders nor Mr Daily would be required for cross-examination. Counsel for Mr Baker also said that, if given five more minutes, the process of objections to Mr Lambourne’s affidavit might be made very much shorter and it may be unnecessary to go through each of the objections.

21. [150]

    The primary judge then observed that the written submissions for the Claimants were based on Barnes v Addy but that the Amended Statement of Claim was more wide-reaching. Her Honour said that, given that the Claimants were self-represented, her Honour had in mind that things may change and move as the hearing goes on. Her Honour invited counsel for Mr Baker to take such course as he thought appropriate but that if the Claimants were to take “a different view” as the case unfolded, her Honour was not going to stop them from pursuing a pleaded part of their claim that was not referred to in their written submissions. Her Honour observed that one needed to be careful, where parties are not represented, to try to confine them to particular technicalities that might be easier to do where a party is represented by senior counsel. Counsel for Mr Baker accepted what her Honour said but observed that the Claimants had been represented “virtually the whole time in these proceedings” by solicitors and junior counsel.

22. [151]

    The primary judge responded that the Claimants were not then represented and that, with a six-day trial, “we’re all going to get through this carefully”. Counsel for Mr Baker accepted what her Honour said. He then observed that he did not cavil with the basis of the damages claim if it is the loss of the value of the business that was being claimed. However, counsel said, it was important for the defendants to know what the Claimants were seeking against the various defendants in order to know how to run their case. Counsel said that Mr Baker was quite content to proceed on “this Barnes v Addy or whatever other basis the claim for the transition of this business created a loss and, on the claim for $30,000”. Counsel said, however, that without knowing what the case is otherwise, it was going to be very difficult for the defendants to proceed and work out what to cross-examine on.

23. [152]

    The primary judge then observed that she suspected that that was why the matter had been listed for six days to allow a bit more time for those things to be explored so that all of the disputes between the parties could be finally resolved. Her Honour again invited counsel for Mr Baker to take his own course and said that her hesitation was that where she had a litigant-in-person, a pleading and written submissions, she was not going to stop the Claimants from articulating their claim within the confines of those two documents as the evidence unfolded.

24. [153]

    Counsel for Mr Baker then said that the submissions on behalf of the Claimants, which were in response to a Court order to articulate their claims, articulated a claim based on Barnes v Addy, as well as the claim for $30,000. They are the two claims mentioned by the primary judge at the commencement of her Honour’s reasons. The primary judge observed that that was the way the Claimants had articulated their claim in their written submissions and in their oral opening and said that she was not suggesting or inviting the Claimants to spread their claims more broadly.

25. [154]

    The primary judge then observed that the hearing was taking place against the backdrop of an amended statement of claim that puts matters more widely and that, if the Claimants proceed in the manner explained by Mr Lambourne, counsel for Mr Baker was “on notice of that”. Her Honour said that, if at some point Mr Lambourne decided that he wanted to pursue some other aspect of the Amended Statement of Claim, her Honour could not see why she would stop him doing that, but that, if he decided to go further afield, counsel for Mr Baker may “need to revisit something”. Her Honour said that the directions given previously did not exclude the Claimants from relying on a pleaded cause of action. Her Honour said that it was a matter for counsel for Mr Baker but he could proceed on the basis of what Mr Lambourne had outlined. Her Honour said that, if Mr Lambourne changed his mind and wanted to go further or wider, it would be necessary to revisit the extent to which Mr Baker might want to take other objections to other affidavits or change his course accordingly. Counsel for Mr Baker said that he understood.

26. [155]

    Counsel for Mr Baker then said that, on the basis of what had been said and the written submissions, no objections to Mr Lambourne’s affidavit would be pressed. Neither counsel for Mr Baker nor counsel for the Buckingham Interests wished to say anything further in opening. Accordingly, her Honour invited Mr Lambourne to read his affidavits. Her Honour then took as read, without objection, an affidavit by Mr Lambourne of 26 May 2018. The documents exhibited to the deponent at the time of swearing the affidavit were also admitted without objection.

27. [156]

    Paragraph 86 of Mr Lambourne’s affidavit was in the following terms:

28. [157]

    Schedule A draws attention to para 21 of an affidavit by Mr Lambourne. That appears to be a mis-reference, since para 21 of the affidavit has nothing to do with expenses. The heading of Schedule A states that it is a sample of Mr Baker’s “personal wants funded from company account” from 30 July 2013 to 5 June 2014. The total of the amounts in Schedule A is $12,729.99. Schedule B is said to be a table “showing only a small sample [Mr Baker’s] personal wants paid through company accounts” from 30 June 2014 to 8 January 2016. The total of the amounts in Schedule B is $10,064.31.

29. [158]

    Schedule C is said to be a “summary table of personal expenditure for [Mr Baker] from 2011 to 2016”. The total of the amounts in Schedule C is $211,249. The total of the amounts in Schedule A and Schedule B is $22,794.30. If the amount of cash withdrawals shown in Schedule C, of $188,791 is added to that total, the aggregate is $211,585.30. There is thus a difference of $336.30 between that total and the total of the amounts in Schedule C. There was no reconciliation of those figures and there was no other explanation of the amounts in the three schedules.

30. [159]

    That would be understandable if para 86 and the three schedules were regarded as being irrelevant to the claims being pressed by the Claimants before the primary judge. On the other hand, had the primary judge and counsel for Mr Baker understood that the Claimants were seeking judgment for the Company against Mr Baker in the amounts derived from the three schedules, one would have expected a reconciliation and further explanation.

31. [160]

    While each of the amounts in Schedule A and Schedule B has a description, the total of $188,791 in Schedule C for “cash withdrawals” has no narrative to indicate the purpose of the withdrawals. The only evidence about them is the bald assertion in para 86 of Mr Lambourne’s affidavit that the amounts are “non-business-related expenses”. While it may be possible, from the narrative describing the amounts in Schedule A and Schedule B, to conclude that the withdrawals from the Company for those purposes were for “non-business-related expenses”, there is nothing but a bald assertion about the total amount of “cash withdrawals”.

32. [161]

    The affidavit evidence as to those matters would probably have been rejected had objection been taken on behalf of Mr Baker. If the Company was not pursuing the claims articulated in the Amended Statement of Claim of improper withdrawals, that material would appear to be quite irrelevant. Further, had objection been taken to it on grounds other than relevance, it would almost certainly have been rejected as no more than a submission. It is against that background that Mr Baker now contends to this Court that the Company abandoned any claim for recovery from Mr Baker of the amounts of the alleged “improper withdrawals”.

33. [162]

    Since Mr Lambourne’s affidavit was read without objection, there is unchallenged evidence that there were withdrawals from the Company’s account that were “non-business-related”. An inference can be drawn that the withdrawals were made without the knowledge or consent of Mr Lambourne or Mr Pollett, although there is no express evidence from them to that effect. If the finding can be made that the withdrawals were made for “non-business-related” expenses without the knowledge or consent of two of the three equal shareholders of the Company, it would follow that Mr Baker acted in breach of duties owed by him to the Company in his capacity as a director or officer of the Company. That is to say, it appears that the Company authorised its bankers to permit Mr Baker to make the withdrawals in question. Since they were not for the proper purposes of the Company, his actions in effecting the withdrawals constituted breach of his duties to the Company. Without anything further, if a claim for repayment of the amounts shown in the schedules were pressed at the hearing before the primary judge, it is likely her Honour would have directed the entry of judgment in favour of the Company against Mr Baker for some amount.

34. [163]

    On the other hand, if such a claim had been expressly pressed before the primary judge, it might be expected that the conduct of the case might have been considerably different from the standpoint of Mr Baker. It might be expected that objections to Mr Lambourne’s affidavit would have been pressed and that Mr Baker may well have gone into evidence to explain the withdrawals, depending upon how successful the objections were.

35. [164]

    After hearing submissions on the admissibility of evidence, the primary judge heard oral submissions from Mr Lambourne. In the course of that process, the primary judge drew Mr Lambourne’s attention to the commencement of the Amended Statement of Claim, which set out the types of claims being made by the Claimants as follows:

36. [165]

    That exchange is hardly consistent with Mr Lambourne pressing the claims in relation to “improper withdrawals” which would fall clearly within ss 180, 181, 182, 183 and 79 of the Corporations Act. The abandonment of claims 1, 2 and 3 and pressing only claims 4 and 5, being for breach of fiduciary duties and equitable damages, suggests that an independent claim in relation to “improper withdrawals” was not being pressed.

37. [166]

    While the topic of “improper withdrawals” was not expressly mentioned in terms during the hearing before the primary judge, counsel for Mr Baker, in the course of final oral address, said as follows:

38. [167]

    The reference to “the lengthy argument” about “misappropriation” of the Company’s revenue, in context, was a reference to the discussion about allegations that TopBetta (along with Mr Buckingham and/or Mr Baker) had “misappropriated” the Company’s revenues for the purpose of improving TopBetta’s performance on the stock market, which actually occurred during the hearing before the primary judge. Counsel for Mr Baker was taking issue with that claim, which Mr Lambourne asserted in oral submissions, with corresponding references in his affidavit, but which seemingly was not articulated in the pleadings.

39. [168]

    Thus, during the hearing, Mr Lambourne said the following:

40. [169]

    By way of further example, in his reply submissions, Mr Lambourne provided particular reference to his affidavit, which gives more details of the relevant “misappropriation”:

41. [170]

    That paragraph in Mr Lambourne’s affidavit referred to relevantly concerns allegations that Messrs Baker and Buckingham had altered a website to divert customers from the Punters Show shopfront to 12Follow merchant facilities. Mr Lambourne alleged that TopBetta’s claimed 300% increase in revenue was the result of Messrs Baker and Buckingham misappropriating or passing off the Company's figures as TopBetta’s and/or misappropriating the Company’s income by misappropriating products such as ProBetta Live and “robsmail.com.au”, thereby causing the sales proceeds to be collected through 12Follow’s merchant facilities and selling the Company’s products directly on 12Follow’s merchant facilities in direct competition with the Company’s own shopfront.

42. [171]

    Thus, it is clear enough that the “misappropriation” to which counsel for Mr Baker was referring when he mentioned “the lengthy argument” about “misappropriation” was not the “improper withdrawals” alleged in the Amended Statement of Claim. The only evidence of “improper withdrawals” consisted of the schedules annexed to Mr Lambourne’s affidavit, to which reference is made above.

43. [172]

    Towards the end of Mr Lambourne’s oral address, the following exchange occurred with the primary judge:

44. [173]

    Mr Baker made written closing submissions to the primary judge, which said that the Claimants had outlined two claims in their opening submissions, being the claim for $30,000 against Mr Baker and the Buckingham Interests and the claim under Barnes v Addy against all of the defendants. Paragraph 5 of Mr Baker’s closing submissions said that a claim based on Barnes v Addy was not pleaded against Mr Baker. In reply to Mr Baker’s closing submissions, Mr Lambourne filed submissions dated 1 March 2019, the day after the hearing before the primary judge concluded. In those submissions, Mr Lambourne dealt point by point with the written submissions made on behalf of Mr Baker. The only possible reference to the “improper withdrawals” was as follows:

45. [174]

    The claims numbered 1, 2 and 3 in the Amended Statement of Claim were not pressed. Further, as I have said, the claims articulated in paras 16 to 20 of the Amended Statement of Claim are not expressly dealt with in the prayers for relief. It is of some significance that para 15 of the Amended Statement of Claim, the last allegation under the rubric “Formation of Joint Venture”, is the allegation that Mr Baker was under duties as a director of the Company imposed by ss 180, 181, 182 and 183 of the Corporations Act. Thus, that assertion comes before the rubric “Breaches of Duty - Improper Withdrawals”, under which par 16 to 20 are set out. The Amended Statement of Claim is unclear as to whether the allegations made under that rubric depended upon the allegation in the previous paragraph that Mr Baker was under the duties imposed by the Corporations Act. While breaches of duties owed to the Company were mentioned throughout, and often alongside breaches of duties owed to Messrs Lambourne and Pollett, the thrust of the particulars furnished by the Amended Statement of Claim is breaches of duties owed by Mr Baker to Messrs Lambourne and Pollett derived from the so-called “joint venture” pleaded earlier in the Amended Statement of Claim.

46. [175]

    Further, there was no reference to a claim in respect of “improper withdrawals” in Mr Lambourne’s opening submissions, nor in the course of oral submissions or nor in any of his closing submissions. The only focus in each was on the sum of $30,000 and the breach of duty by Mr Baker in relation to the arrangements made with the Buckingham Interests, the two matters referred to by the primary judge at the commencement of her reasons. Further, it is of some significance that, as indicated above, no complaint is made by the Claimants in their amended notice of appeal about any failure on the part of the primary judge to find in favour of the Company in relation to any claim on behalf of the Company in relation to the “improper withdrawals”.

47. [176]

    On the hearing of the appeal, counsel for Mr Baker expressly eschewed any express abandonment of claims by the Claimants. However, counsel asserted that “it was very clear” that claims in respect of the “improper withdrawals” were not being pursued. Reference was made to the observation by the primary judge that, if the Claimants addressed their case more widely than the pleaded case and the two causes of action identified above, the defendants would be entitled to change their position and run the case on that assumption.

48. [177]

    Counsel for Mr Baker asserted that there was no change in the Claimants’ approach to the case and, therefore, no objections were taken and witnesses were not cross-examined. He asserted that the evidence was not challenged purely because it was thought that there was no need to do so in respect of the “improper withdrawals”. It is important, therefore, to consider the chronology of events in order to determine whether it could be said that, in reliance upon the stance adopted by the Claimants, Mr Baker’s counsel elected to abandon objections to affidavits and elected not to cross-examine the deponents.

49. [178]

    Counsel for Mr Baker asserted to this Court that the position adopted “very early in the piece”, after discussion about the two claims that were to be pressed by the Claimants as articulated above, was that there would be no objection to the evidence. The primary judge expressed “a slight hesitation” given that the Claimants were self-represented and said that she had in mind that things “may change and move as the hearing goes on”. Her Honour said to counsel for Mr Baker that he should take the course that he thinks appropriate but that, if the Claimants were to take a different view, as the case unfolded, she was not going to stop them pursuing “a pleaded part of their claim if it is not referred to in their submissions”.

50. [179]

    Counsel for Mr Baker then said that, in terms of what the Claimants were seeking against the various defendants, it was important for the defendants to know how to run the case. He said that they were quite content to proceed “on this Barnes v Addy, or whatever other basis the claim for a transition of the business created a loss” and on the $30,000 claim, if they are the cases made out. He said that they would “approach the case on that basis” but that it would be difficult to proceed and work out what to cross-examine on because there were lots of documents and lots of issues.

51. [180]

    Counsel for Mr Baker accepted that the primary judge said that she was not going to stop the Claimants from articulating the claim within the confines of the pleadings as the evidence unfolded, her Honour was not taken through any of the documentation that supported the claim by the Claimants other than the claim for $30,000 and the breach of fiduciary duty leading to what the primary judge characterised as “the uplift claim”. The “uplift claim” was the claim that the value of the business of the Company, which was alleged to have been appropriated by TopBetta, was to be measured by reference to the increase in the value of the listed shares in TopBetta.

52. [181]

    The primary judge cautioned counsel for Mr Baker on the basis that she had litigants-in-person before her. Her Honour observed that the contents of the Claimants’ submissions as to liability for loss and relief did not exclude them from relying upon a pleaded cause of action. Her Honour said that it was a matter for counsel but he could proceed on the basis of what Mr Lambourne had outlined. However, her Honour said, if Mr Lambourne changed his mind and wanted to go further or wider, the extent to which counsel for Mr Baker might take some other objection would have to be revisited and he would have to change his course accordingly.

53. [182]

    Once Mr Lambourne had read the affidavits on behalf of the Claimants, which contained the evidence about alleged misappropriations of funds of the Company by Mr Baker, counsel for Mr Baker had to make a forensic judgment, namely, whether to read Mr Baker’s affidavit or not or to object to evidence that, it was contended, was no longer relevant. Counsel for Mr Baker suggested that there is no need to object to evidence that is relevant only to a claim that has not been articulated and is otherwise irrelevant. Indeed, there may well be occasions where evidence that is irrelevant to the issues is admitted without objection. However, in such circumstances, it would be unfair for that evidence to be relied upon, on appeal for example, in support of a claim that had not been articulated at first instance. Nevertheless, the position will be very different where the evidence is relevant to a claim that is articulated in the pleadings and is not abandoned. Thus, the question is whether a claim on behalf of the Company for recovery of the “improper withdrawals” was articulated before the primary judge.

54. [183]

    Had counsel for Mr Baker objected to the relevant parts of Mr Lambourne’s affidavit and the schedules prepared by him, as he may well have done on the basis of what is now put on behalf of Mr Baker, it would have been necessary for the primary judge to explore with Mr Lambourne the basis upon which he was tendering that material. It would then have been incumbent upon Mr Lambourne to support the relevance of the material by reference to paragraphs 16 to 19 of the Amended Statement of Claim or accept that it was irrelevant.

55. [184]

    It is by no means clear whether Mr Lambourne would have supported the relevance of the material. For example, Mr Lambourne characterised the claim in respect of “improper withdrawals” being made on behalf of the Company as Barnes v Addy claims. Whereas the claims made against the Buckingham Interests can fairly be characterised as Barnes v Addy claims, the claim by the Company against Mr Baker was not a Barnes v Addy claim. In his submissions of 1 March 2019, Mr Lambourne referred to the breaches of duty set out in paragraphs 16 to 19 of the Amended Statement of Claim. He characterised those claims as part of the Barnes v Addy case pleaded against Mr Baker.

56. [185]

    Clearly enough, Mr Lambourne did not comprehend the distinction between a Barnes v Addy claim against a person not directly involved in a breach of fiduciary duty, on the one hand, and the claims that might have been formulated against Mr Baker directly on the basis of improper withdrawals. Even allowing for the fact that Mr Lambourne and the other Claimants are not practising lawyers, it is difficult to see in the submissions of 1 March 2019 a claim for repayment by Mr Baker to the Company of monies improperly withdrawn. Rather, the submissions are directed towards the loss of the value of the business of the Company. There is nothing in the submissions that would have alerted Mr Baker and his legal representatives to a specific claim on behalf of the Company for repayment of monies alleged to have been improperly withdrawn. There is no other reference in the submissions made by Mr Lambourne either in writing or orally directed to the allegations made in paragraphs 16 to 19 of the Amended Statement of Claim.

57. [186]

    The question is whether Mr Baker was fairly entitled to conduct the proceedings before her Honour on the basis that the only claims that were being pressed by the Claimants were Mr Lambourne’s claim for $30,000 and the claim for equitable compensation based on benefits alleged to have been lost to the Company by reason of the deployment of the Punters Show in the affairs of TopBetta. There has been no evidence from the respondents before this Court to the effect, for example, that the forensic decision not to object to the Claimants’ affidavits, not to require the deponents of the affidavits for cross-examination and not to go into evidence was made on the basis that no independent claim for the “improper withdrawals” was being pursued. Nevertheless, an inference is certainly available that the forensic judgment made by counsel for Mr Baker not to deal with any claims other than the claim for $30,000 and the claim for loss of the business was based on the understanding that the Claimants were not pressing an independent cause of action in relation to the “improper withdrawals”. That inference can be drawn in the light of the exchanges between the parties and the primary judge.

58. [187]

    The primary judge did not direct her attention to any possible independent cause of action by the Company. There was no formulation in the Amended Statement of Claim of the amount claimed in such a cause of action. I consider, on balance, notwithstanding the material under the rubric “improper withdrawals” in the Amended Statement of Claim, the hearing before the primary judge was conducted on the basis that the Claimants were not pressing an independent cause of action for the Company to recover from Mr Baker the amounts of the “improper withdrawals”. In the circumstances, it would be unfair to permit the Company to depart from the basis upon which Mr Lambourne conducted the proceedings at first instance.

59. [188]

    If the claim were to be allowed, it could be necessary to remit the proceedings for a further hearing. However, that possibility has not been suggested.

Breaches of Fiduciary Duties owed to all Claimants

1. [189]

   The Claimants allege that Mr Baker breached fiduciary duties owed by him both to Messrs Lambourne and Pollett and to the Company. The fiduciary duties are said to arise out of the arrangements entered into by the Participants in late 2010 and the appointment of Mr Baker as the only director of the Company, which the Claimants characterise as a “joint venture”. It does not appear that the Company was regarded as a party to the so-called joint venture. Rather, the Participants were the parties to the so-called joint venture and the Company was the vehicle for the conduct of the joint venture. That is of significance in determining to whom Mr Baker owed fiduciary duties.

2. [190]

   There are also allegations in paras 25 to 34 of the Amended Statement of Claim relevant to the contention advanced on behalf of the Claimants that the Buckingham Interests were knowingly involved in breaches of duty by Mr Baker. I shall return to that question below, to the extent that it is relevant.

3. [191]

   It is clear enough that the Participants engaged in a venture whereby the Company was incorporated and one-third of the issued share capital of the Company was allotted and issued to each of the Participants. Shortly afterwards, Mr Baker became the sole director of the Company. However, the pleading is not entirely consistent with that structure.

4. [192]

   The principal thrust of the claims advanced on behalf of the Claimants is that Mr Baker acted in breach of fiduciary duties allegedly owed by him both to Messrs Lambourne and Pollett and to the Company by inducing them to enter into the “strategic partnership”, whereby the Company was deprived of the benefit of its substantial asset, “the Punters Show”, and Messrs Lambourne and Pollett were deprived of the opportunity of being paid monies due to them by the Company for sale of their “products” and of the benefit of the value that their shares in the Company would have had but for the loss of the Punters Show. While there is an element of duplication, it was not contended by the Claimants that they were entitled to recover compensation for the Company for loss of the benefit of the Punters Show as well as compensation for loss of value in their shares. The essence of their claim was for the asserted value of the Punters Show. There was no evidence of that value as such. Rather, the Claimants sought to have inferences drawn as to the value from the circumstances of the IPO of TopBetta.

5. [193]

   The primary judge observed that the Claimants asserted that, at the time of the May Meeting, Mr Baker owed fiduciary duties directly to Messrs Lambourne and Pollett. Her Honour noted that the particulars in support of that allegation amounted, essentially, to the proposition that the strategic partnership amounted to a sale of the business of the Punters Show, for which substantial sums should have been paid and that Messrs Lambourne and Pollett were reliant on Mr Baker to provide them with information about the financial state of the Company and whether to enter into the strategic partnership. Her Honour observed that, at the time of the May Meeting, Messrs Lambourne and Pollett were shareholders of the Company and that, in that capacity, they had what was in effect an indirect interest in the net assets of the Company. Thus, her Honour said, the capacity in which Messrs Lambourne and Pollett claimed that Mr Baker owed fiduciary duties to them was as shareholders of the Company. However, as her Honour observed, directors do not ordinarily owe fiduciary duties directly to shareholders.

6. [194]

   The general principle is that a director’s fiduciary duties are owed to his or her company and not to shareholders. [14] After referring to authorities said to support the existence of exceptions to that general rule, the primary judge observed that this case was not one where Messrs Lambourne and Pollett were “at the mercy” of Mr Baker. Rather, between them, Messrs Lambourne and Pollett held two-thirds of the issued share capital and thus retained control of the Company in general meeting, although they chose to leave it to Mr Baker to carry on the day-to-day management of the Company. There was no sale of shares in the Company and no sale or transfer of property of the Company. As her Honour said, Messrs Lambourne and Pollett retained the full range of remedies for which company law provides, including suing for breach of duty owed to the Company, by a derivative suit if necessary. In any event, it was within their power to remove Mr Baker and appoint themselves or some other person as directors of the Company. Her Honour concluded that there was no compelling reason why a fiduciary duty would have been owed by Mr Baker, as a director of the Company, to Messrs Lambourne and Pollett, as shareholders of the Company.

7. [195]

   In any event, the primary judge concluded, if Mr Baker owed such a duty to Messrs Lambourne and Pollett, there was no evidence that Mr Baker had breached such a duty. Mr Baker, as a director of the Company, appears to have perceived that it would be in the interests of the Company to enter into arrangements with TopBetta, as a result of which he expected that benefits would flow to the Company and would have benefited all shareholders equally. Such benefits included the payment of outstanding debts of the Company, more regular income for Messrs Lambourne and Pollett, improving profitability by reason of the transfer of the administrative side of the Company’s business to an apparently more organised, more efficient and more substantial operation in the guise of TopBetta and 12Follow, and enhanced profile for the Punters Show and its products by being associated with a publicly listed company, namely, TopBetta.

8. [196]

   The primary judge observed that the evidence indicated that Mr Baker’s efforts were directed to achieving benefits for the Company and all of its shareholders and did not suggest that Mr Baker’s intentions were other than good or that he intended to treat the shareholders of the Company differently in relation to the benefits sought to be attained through the strategic partnership. Her Honour considered that the evidence pointed to a straightforward attempt by a director to improve the financial position of his company or to realise or enhance the value of the assets of his company in the performance of his duties as a director. Her Honour concluded that the claim for equitable compensation by Mr Lambourne and Mr Pollett against Mr Baker failed by reason of the absence of any evidence that any duty to them was breached, assuming that a duty was owed directly to them.

9. [197]

   The primary judge accepted that, as a director of the Company, Mr Baker owed fiduciary duties to the Company. Her Honour observed that the claim advanced on behalf of the Claimants was that Mr Baker breached his fiduciary duties to the Company by revealing the whole of its financial and confidential information about its business, without any compensation. Alternatively, the claim was that he caused the Company to enter into the strategic partnership as a result of which it was stripped of all of its assets for no compensation. Her Honour was not persuaded that there was any such breach.

10. [198]

    Thus, the primary judge observed that the evidence did not reveal what financial or other confidential information of the Company, if any, was provided by Mr Baker to the Buckingham Interests. Her Honour observed that there was no evidence that anything Mr Baker told Messrs Lambourne and Pollett about the financial position of the Company before the May 2015 meeting was incorrect. In particular, there was no evidence to suggest that the cash flow problems referred to by Mr Baker in his discussions with Messrs Lambourne and Pollett did not in fact exist. Rather, the evidence suggested that the Company owed money to its accountant and to the Commissioner of Taxation, which it had difficulty in paying.

11. [199]

    Further, the primary judge considered that there was nothing to suggest that the advantages of the proposed strategic partnership with TopBetta were not, in fact, fairly described by Mr Baker. Thus, her Honour considered that it appeared that TopBetta was a more substantial enterprise that may well have offered advantages to the Company if it took advantage of the administrative and information technology capacities of TopBetta by means of the strategic partnership. Her Honour observed that it was unclear how entry into the strategic partnership with TopBetta failed to compensate the Company adequately for the benefit of its assets. Rather, the evidence indicated that TopBetta offered to pay various sums of money to the Company and to Messrs Lambourne and Pollett as consideration for entry into the strategic partnership. It was not suggested by the Claimants that the assets of the Company were sold to TopBetta and there was no evidence that any asset of the Company passed to TopBetta.

12. [200]

    In any event, when “the strategic partnership” failed, the Punters Show website, the domain name, the information technology passwords and the database belonging to the Company were all returned promptly to Mr Lambourne and Mr Pollett. There was no evidence that TopBetta or 12Follow retained any property or assets of the Company. However, while the business of the Company was returned to the control of Messrs Lambourne and Pollett, they appear to have lacked the necessary administrative, information technology and accounting experience to exploit the Company’s business further.

13. [201]

    The Claimants summarised their main arguments in a written submission dated 12 April 2021 (the Summary). The Summary began with the proposition that Mr Baker owed fiduciary duties to each of Messrs Lambourne and Pollett by reason of the arrangement that was characterised in the submission as “the ad hoc ‘Joint Venture’”. Thus, the Claimants urged, the imposition of fiduciary duties on Mr Baker predated any putative duty owed by Mr Baker as a director of the Company, whether in December 2010 or in August 2012. In any event, they asserted, Mr Baker’s exercise of discretionary powers as a director of the Company was at all times constrained by, and subservient to, Mr Baker’s pre-existing fiduciary duties to each of Messrs Lambourne and Pollett, such that. “Equity’s Conscience” would not allow Mr Baker to use the Company as a shield to avoid the “prophylactic policy” behind fiduciary duties.

14. [202]

    The Claimants contended that the purpose of the so-called joint-venture had been to optimise the reputation of the Participants within the thoroughbred racing industry and the financial rewards for each of them. They say that an ancillary joint purpose had been to provide an alternative channel of communication and platform for “thoroughbred racing aficionados” interested in challenging the power of the regulatory and commercial establishment within the industry. They say that, by 2014, the Participants had largely achieved that goal, in that the Punters Show was recognised as a unique and influential platform within the industry. They asserted that, notwithstanding the lack of any proper accounting, the Punters Show business appears to have been more valuable than Mr Baker and Mr Buckingham asserted.

15. [203]

    The Summary asserted that, instead of Mr Baker sharing the financial returns of the Punters’ Show fairly with Messrs Lambourne and Pollett, Mr Buckingham induced Mr Baker to divert the assets and resources of the joint venture to the benefit of the Buckingham Interests. The Summary asserted that, instead of allowing the success of the Punters Show to lift the reputation of Messrs Lambourne and Pollett within the thoroughbred racing industry, Mr Buckingham damaged them as from June 2016.

16. [204]

    The Summary asserted that the unconscientious conduct of Mr Baker and Mr Buckingham included:

17. [205]

    The Claimants asserted in the Summary that the onus was on Mr Baker to establish the extent to which he and the Buckingham Interests severally and jointly should disgorge the benefits and profits obtained as from August 2014. They said that, without the Punters Show resources, including “the talents” of Messrs Lambourne and Pollett, the Buckingham Interests would not have had the “headstart” that allowed TopBetta to reach a $19 million capital valuation on 11 December 2015. They asserted that, rather than dissociating themselves from their previous unconscientious conduct, the Buckingham Interests continued, after 11 December 2015, not only to despoil the Punters Show business but also to despoil the personal reputation of Messrs Lambourne and Pollett within “the intimate community of Thoroughbred Racing professionals”.

18. [206]

    The Summary asserted that the benefits, profits and advantages obtained by the Buckingham Interests were very similar to those proposed at the presentation on 9 December 2014. The Claimants said that Mr Buckingham well knew as from that day that Messrs Lambourne and Pollett were strongly against the proposals contained in the presentation of that day.

19. [207]

    The Summary contended that, between 2014 and 2017, the Buckingham Interests had more efficient sales and marketing management facilities but its digital platform lacked the vital “content” without which it could not establish the viability of its business model and technology. The Summary asserted that it was only through misappropriation of the content of the Punters Show that the Buckingham Interests managed to convince the public of the value of its digital technology, which has now become the core business of the Buckingham Interests.

20. [208]

    The Summary asserted that, without the Punters Show products and services, the Buckingham Interests had, figuratively speaking, “an empty pot with no honey”. The Claimants said that it was the Punters Show products and services that “attracted the bees to Buckingham’s otherwise uninviting honeypot” and that it was only once the investment community had become familiar with the ecosystem around “the honeypot” that the Buckingham Interests were able surreptitiously to alter the quality and nature of “the honey without the ‘bees’” losing interest and abandoning the honeypot of the Buckingham Interests.

21. [209]

    It is significant that no mention was made in the Summary of the alleged “improper withdrawals” made by Mr Baker of the funds of the Company.

22. [210]

    In their detailed written submissions in support of the appeal, dated 28 February 2021 (the Submissions), the Claimants set out in more detail contentions similar to those contained in the Summary. Having asserted the existence of a fiduciary duty owed by Mr Baker to Messrs Lambourne and Pollett and the content of that duty, the Submissions addressed the question of breach of that duty. The Submissions then addressed the question of breach by asserting that it was self-evident from the statement of facts contained in the Submissions that Mr Baker had breached his specific duties. Thus, the Submissions asserted, Mr Baker accepted employment from the Buckingham Interests but failed to tell Messrs Lambourne and Pollett and did not make the required disclosure after being asked in writing to do so. Thus, it was asserted, Mr Baker was employed by the Buckingham Interests at a minimum salary of $100,000 per annum by 1 May 2015, to be increased to $120,000 per annum after the expected listing of TopBetta. It was said that whenever Mr Lambourne complained about Mr Buckingham’s tardiness in relation to the payment of $30,000, Mr Baker would warn him “not to upset the applecart” because Mr Buckingham “is our best bet”. Neither Mr Baker nor Mr Buckingham ever informed Messrs Lambourne and Pollett that Mr Baker had started to work for the Buckingham Interests.

23. [211]

    The Claimants asserted that the presentation on 9 December 2014 indicated that Mr Baker had already placed himself in a situation of potential conflict by entering into arrangements with Mr Buckingham about the Punters Show business without revealing the arrangements to Messrs Lambourne and Pollett. They asserted that Mr Baker “sold or allowed Punters Show products to be sold through the 12 Follow website” and that Mr Baker did not account for any revenue raised from the sales by 12 Follow. However, the Submissions provide no particulars of those assertions.

24. [212]

    The Submissions asserted Mr Baker was “cannibalising” the Punters Show business and favoured Mr Buckingham, a director of a competitor, prior to the presentation on 9 December 2014. Again, no particulars of that assertion were provided.

25. [213]

    Next, the Submissions assert that Mr Baker was disloyal to Messrs Lambourne and Pollett personally in relation to the “individual products” that he had undertaken to manage for them. They asserted also that Mr Baker was disloyal to Messrs Lambourne and Pollett personally in relation to the promotion and sale of products from other providers that were meant to be sold exclusively on the Punters Show website for the joint and equal benefit of the three Participants. They say that Mr Baker was disloyal in relation to new products that he had helped to create and that were meant to be sold exclusively on the Punters Show website for the joint and equal benefit of the three Participants and was disloyal towards Messrs Lambourne and Pollett personally and to the Punters Show business when he allowed the Buckingham Interests “to cross promote and sell Punters Show products” on the website of 12Follow in circumstances where 12Follow was a substantially inferior but direct competitor. They asserted that, by allowing the Punters Show products to be sold on the 12Follow website, Mr Baker was in fact raising the profile and goodwill value of 12Follow while reducing the profile of the Punters Show through its association with 12 Follow. They asserted that Mr Baker was allowing the clear distinction between “the unique Punters Show range of products” to be lost by allowing an inferior and less presentable website to deal in similar products, thus losing the uniqueness of the Punters Show website.

26. [214]

    There is no clear evidence that Mr Baker was employed by the Buckingham Interests prior to the arrangements entered into in May 2015. The Claimants place reliance on a document that refers to payments made to Mr Baker. Mr Lambourne asserted that the document was sent to him by Mr Baker shortly before the litigation commenced. There was no other explanation of the provenance of the document. Further, there is no evidence as to the circumstances giving rise to the payments and, in any event, the first payment to Mr Baker recorded is a payment made in July 2015, after the Company entered into the so-called strategic partnership.

27. [215]

    In response to questions from the primary judge, the Claimants identified the allegations in the Amended Statement of Claim in paras [44], [45] and [46] as the basis upon which their case on breach of fiduciary duty was put. As indicated in Appendix 1 to these reasons, the Amended Statement of Claim alleges that Mr Baker failed to provide information regarding the financial state of the Company or its business to Messrs Lambourne and Pollett and encouraged them to enter into the strategic partnership proposal by misleading them as to the financial state of the Company. The Amended Statement of Claim alleges that Mr Baker revealed the whole of financial and other confidential information of the Company to the Buckingham Interests without any attempt to preserve the confidentiality of the information or acquire any compensation or license fee from the Buckingham Interests. No mention is made of the employment of Mr Baker prior to the “strategic partnership” being entered into in May 2015. More importantly, there is in fact no evidence of the financial information alleged to have been provided by Mr Baker to the Buckingham Interests prior to the 9 December 2014 presentation.

28. [216]

    The Claimants complain that Mr Baker sold or allowed to be sold the products of the Company through the 12Follow website. That, of course, was the object of the “strategic partnership”, namely, that the products of the Company would be marketed through a new website controlled by 12Follow. It is difficult to see, therefore, how Messrs Lambourne and Pollett could complain that they did not know that the Company’s products were being sold from the 12Follow website.

29. [217]

    As the Buckingham Interests point out, the Claimants did not identify precisely what was “cannibalised”. There was no evidence before the primary judge to support such an allegation and no such breach was articulated in the Amended Statement of Claim.

30. [218]

    The allegations of disloyalty to Messrs Lambourne and Pollett appear to be based on the conduct of the parties after “the strategic partnership” was entered into. Clearly, it could not be a breach of duty by Mr Baker to assist in the performance of the obligations that arose under the strategic partnership. In effect, the only true complaint that can be advanced is that the strategic partnership itself involved a breach of fiduciary duty on the part of Mr Baker.

31. [219]

    However, there is no evidence to indicate that, in promoting the proposed strategic partnership, Mr Baker was not endeavouring to advance the interests of the Company and, by doing so, the interests of the Participants as shareholders of the Company. There was no transfer to the Buckingham Interests of any proprietary interest in any asset owned by the Company. The business of the Punters Show remained the property of the Company. It is simply not possible to discern how the giving effect to the strategic partnership damaged the interests of the Company. Ultimately, Messrs Lambourne and Pollett fell out with the Buckingham Interests. However, the Company received all of the intellectual property that was necessary for it to continue with the Punters Show business if it wished to do so.

32. [220]

    Nothing has been advanced in the written submissions filed in support of the appeal on behalf of the Claimants or in the oral address by Mr Lambourne on the hearing of the appeal to indicate that any error was made by the primary judge in the conclusions summarised above. There was no error on the part of her Honour in concluding that there was no breach by Mr Baker of any duty owed to Messrs Lambourne and Pollett or to the Company.

33. [221]

    There is no basis for disturbing the conclusion by the primary judge that there was no breach of fiduciary duty on the part of Mr Baker. Accordingly, there is no need to address the question of whether or not the Buckingham Interests were knowingly involved or knowingly participated in any such breach. It follows that the claims based on breach of the fiduciary duty must be rejected.

Conclusion

1. [222]

   In the light of the above conclusions, I would dismiss the appeal. In the light of the compromise of the claim for $30,000, it would be appropriate to afford the parties the opportunity of making further submissions as to costs, if they are so advised. The record should be altered to show that the name of the third respondent has been changed to “Betmakers Technology Group Limited”.

   1. (1)

      claim by Mr Lambourne against Mr Buckingham and TopBetta for the sum of $30,000;

   2. (2)

      claim by Messrs Lambourne and Pollett against Mr Baker for damages or equitable compensation;

   3. (3)

      claim by the Company against Mr Baker for damages or equitable compensation;

   4. (4)

      claims by the Company against Mr Baker for damages pursuant to s 1317H of the Corporations Act for breaches of ss 180, 181, 182 and 183 of the Corporations Act;

   5. (5)

      claims by the Company against the Buckingham Interests for damages pursuant to s 1317H of the Corporations Act by reason of their knowing involvement in breaches of ss 180, 181, 182 and 183 of the Corporations Act;

   6. (6)

      claim by Messrs Lambourne and Pollett against Mr Baker for damages pursuant to s 236 of the Australian Consumer Law in relation to breaches by Mr Baker of s 18 of the Australian Consumer Law;

   7. (7)

      claims by Messrs Lambourne and Pollett against the Buckingham Interests for equitable compensation; and

   8. (8)

      claims by the Company against the Buckingham Interests for equitable compensation.