In the matter of Carbon Copies Composites Pty Ltd

By Originating Process filed on 2 November 2022 and Amended Statement of Claim (“ASOC”) filed by leave on 18 July 2023, Mr Vaughan Wellington seeks a range of relief in derivative proceedings bought with leave granted to him under s 237 of the Corporations Act 2001 (Cth) (“Act”), in his capacity as a director of Carbon Copies Composites Pty Ltd (recs and mgrs apptd) (“Company”), and in his personal capacity. The Company was incorporated to develop, and then sell commercially, an all-electric carbon fibre aircraft known as the E75 Electron (“Aircraft”). Mr Wellington and the Second Defendant, Mr Hutchison, were directors of the Company since its incorporation, and each holds (in Mr Wellington’s case, through an associated entity) 49.25% of the shares in the Company. Mr Wellington provided funds to the Company between 2018 and 2021 in order to develop the Aircraft, and claims that he did so in reliance upon representations made by Mr Hutchison as to the expected progress of the project and when a flying prototype of the Aircraft would be completed and its cost to that stage. The First Defendant, Mr Darren Vardy in his capacity as receiver and manager appointed to the Company’s assets, has advised the Court that he is unfunded in the receivership and has not taken an active role in the proceedings.

I first set out a chronology of events, drawn from matters admitted in the pleadings, the documents in evidence and partly from the affidavit evidence and cross-examination. This chronology sets out the findings that I have reached, to the extent that it addresses disputed matters. I will address the affidavit evidence and cross-examination further below.

Mr Wellington and Mr Hutchison met in 2018 while the former was having work done on a property and the latter was working as a handyman with a small building company in Bowral. In late 2018, discussions took place between Mr Wellington and Mr Hutchison in relation to Mr Hutchison’s interest in developing the Aircraft (Wellington 27.10.22 [7]-[8], [10]; Hutchison 20.3.23 [3]-[5]). On 9 November 2018, Mr Hutchinson texted Mr Wellington suggesting dinner at the Mittagong RSL and said that “I wanted to pick your brain on how I would go about getting funding for an electric plane project” (Hutchison 6.7.23, Annexure E). It appears the discussion at that dinner was not particularly formal or structured.

In late October or early November 2018, and likely after the dinner on 9 November, Mr Wellington and Mr Hutchison discussed the possibility of Mr Wellington funding the Aircraft’s development at least to the point of showing a model of the Aircraft at the Avalon air show in Victoria and then at a later air show in Oshkosh, Michigan in the United States of America. In his affidavit evidence, Mr Wellington claims (Wellington 27.10.22 [12]) that Mr Hutchison said:

On 27 November 2018, Mr Hutchison sent an email to Mr Wellington (Wellington 27.10.22 [15]; Hutchison 20.3.23 [8]; Ex P1, CB 66) which set out a “breakdown” of costs from then to the Avalon air show and the Oshkosh air show. Mr Hutchison there observes that:

Mr Wellington’s evidence is that, in late November 2018, he decided to invest in the development of the Aircraft (Wellington 27.10.22 [18]). He is likely mistaken as to that timing since he had advised Mr Hutchison, by email dated 30 November 2018 (Ex P1, CB 68) that “[t]here really are too many competitors and planes with what appears to be a fairly limited market”, suggesting that he was then not convinced of the merit of the project. Nonetheless, it appears Mr Wellington committed to the proposal by mid-December 2018 and the Company was incorporated on 17 December 2018 (Wellington 27.10.22 [25]-[26]). In cross-examination, Mr Wellington explained his change of mind between 30 November 2018 and mid-December 2018 as to whether to participate in the project, at least partly, by referring to other discussions which had taken place between him and Mr Hutchison about investing in the Company, getting a bank account and drawing up a model for the Avalon air show to determine public interest in the Aircraft (T58). Mr Wellington denied that he changed his mind between those dates because (as Mr Hutchison contends) he was shown a foam model of the Aircraft and a drawing on a mobile phone of the Aircraft. Mr Wellington’s evidence is that he provided his first $50,000 funding to the Company without being shown drawings or models of what the Company was to produce (T59-60). I address the dispute as to that matter below.

Between November 2018 and the incorporation of the Company in mid-December 2018, Mr Hutchison prepared several design files in relation to the Aircraft which, he says, related to the two-seater version preferred by Mr Wellington (Hutchison 6.7.2023 [23], [27]). I accept that these files were created in this period, where that finding is supported by “date modified” dates which appear in respect of corresponding files in a listing of the files that were provided by Mr Hutchison to Mr Vardy as receiver of the Company’s assets in December 2022 (Ex P1, 779). On balance, I think it likely that Mr Hutchison also made a simple miniature foam model of the proposed Aircraft at about that time, which he says was made using a computer numerical control (“CNC”) machine to cut the foam from one of these designs (Hutchison 6.7.23 [24]). I have no doubt that Mr Hutchison prepared these design files and the model for the purpose of their being used by the Company to develop the Aircraft, with funding that he anticipated would be provided by Mr Wellington, and I address the significance of that matter below.

As I noted above, there is a dispute as to whether Mr Hutchison showed drawings or a model or picture of the proposed Aircraft that he had put on his mobile phone to Mr Wellington between November 2018 and Mr Wellington’s decision to invest in the project and the incorporation of the Company in mid-December 2018. Mr Wellington’s evidence was that Mr Hutchison did not provide any drawings or plans of the model, or the concept, to him at that time (Wellington 27.10.22 [13]). By a second affidavit dated 2 February 2023, Mr Wellington again referred to his earlier evidence that Mr Hutchison had not provided him with drawings or plans of the model or concept for the Aircraft in November or December 2018 and said that Mr Hutchison did not show him a design of the Aircraft before 14 December 2018 (Wellington 2.2.23 [3]-[5]. By his affidavit dated 20 March 2023, Mr Hutchison responded that he had shown Mr Wellington drawings of the Aircraft and the CNC foam model of it, implicitly by that time (Hutchison 20.3.23 [7]) and he expanded on that evidence by a late affidavit dated 6 July 2023, which I address below. On 2 December 2018, Mr Hutchison emailed a picture he had created of the proposed Aircraft to himself (Hutchison 6.7.23, Annexure D) and his evidence is that he then showed that picture to Mr Wellington on his phone (Wellington 6.7.23) [29]).

It is not necessary to decide whether Mr Wellington’s or Mr Hutchison’s evidence should be preferred in that respect, although I generally prefer Mr Wellington’s evidence to Mr Hutchison’s evidence for the reasons noted below. I recognise that Mr Hutchison had good reason to show such design drawings and the model and picture on his phone to Mr Wellington, to seek to persuade him to go forward with funding the development of the Aircraft, and that something occurred in this period to lead Mr Wellington to develop a greater enthusiasm for the project. On the other hand, it seems to me that Mr Hutchison was and is protective of the design of the Aircraft and it may be unlikely that he would have disclosed its design to Mr Wellington, even without providing him with an electronic copy of it, before Mr Wellington was committed to funding the Company. It is not necessary to decide the dispute as to this matter, given the findings that I reach on other grounds below.

By an exchange of emails on 26 December 2018, Mr Wellington and Mr Hutchison again discussed the nature of the proposed Aircraft, with Mr Wellington recognising that Mr Hutchison wanted to produce a high performance light weight aerobatic aircraft under 600kg but expressing the view that that was a limited market in Australia, and raising the possibility of a crop duster, and Mr Hutchison responding identifying the features of an aircraft within the light sport aircraft category (Wellington 27.10.22 [23]; Hutchison 20.3.23 [12]; Ex P1, CB 84). In late December 2018 or on 1 January 2019, Mr Wellington made a first transfer of $50,000 from his personal bank account to the Company’s bank account (ASOC [17], [61]; Wellington 27.10.22 [29]). I refer below to Mr Wellington’s claim that events between 27 November 2018 and 17 December 2018 gave rise to the “Agreement Representations”.

From early January 2019, the Company made weekly payments of $1,750 to Mr Hutchison and there is a dispute as to whether that payment was a salary paid to him as an employee of the Company (Wellington 27.10.22 [30]; Hutchison 20.3.23 [13]).

On 31 January 2019, Mr Hutchison emailed Mr Wellington indicating the name “E75 Electron” for the Aircraft and that he was working on the logo, marketing material, business cards and website (Wellington 27.10.22 [32]) and, on 5 February 2019, Mr Hutchison registered the domain name “electron.aero” in the name of the Company (Wellington 27.10.22 [33]). On 12 February 2019, Mr Hutchison sent an email to Mr Wellington dealing with the website for the Company and the Aircraft (Wellington 27.10.22 [34]; Hutchison 20.3.23 [14]).

In late February and early March 2019, Mr Wellington and Mr Hutchison attended the Avalon air show in Victoria. Mr Wellington claims that Mr Hutchison informed interested parties at the air show that the Aircraft would be air ready and flying within the next 12 months, probably by February 2020 (Wellington 27.10.22 [35]-[36]; Hutchison 20.3.23 [16]-[17]). I refer below to Mr Wellington’s claim for the “First Flying Representation” arising out of this matter. I think it likely that interested parties would have understood that the production of the Aircraft was likely to be an engineering challenge and would have understood that statement, if it was made, as an optimistic projection.

On 5 or 6 March 2019, Mr Hutchison forwarded Mr Wellington an email with a further budget for the Oshkosh air show (Wellington 27.10.22 [40]; Ex P1, CB 118). That email described the attached budget as a “pretty rough Oshkosh budget” and noted that “[m]ost things have a fair bit of fluff in them just for safety”. Neither observation suggested that the budget provided a firm basis for future costs to be incurred in the development of models for the air shows or the Aircraft. That budget allowed 22 weeks of work for Mr Hutchison and another person, as well as several categories of work, prior to the Oshkosh air show. It is apparent that, by the time of the proposed budget of 5 March 2019, there had been a substantial increase, by about $50,000, in the earlier estimated costs for the costs of attending the Oshkosh air show from the earlier estimate of late November 2018. The uncertainties in the budgeting process must have been apparent to Mr Wellington by that date and he acknowledged in cross-examination that he did not question the increase in the budget and recognised that budgets tended to change (T72).

In his second affidavit dated 20 March 2023, Mr Hutchison took issue with aspects of Mr Wellington’s evidence as to discussions concerning the Oshkosh air show and he gave evidence of his preparation of a budget for that air show. His evidence was that he was aiming to produce a kit for the Aircraft for the Oshkosh air show in 2020; that he said words to that effect; and he “hope[d]” to have Aircraft flying in February 2020, prior to the Oshkosh air show in 2020 (Hutchison 20.3.23 [19]. I do not accept that these discussions were directed to the question of Mr Hutchison’s “hope[s]” as to the development of the Aircraft, in the sense of a mere aspiration, since there would be no utility in Mr Hutchison discussing mere aspirations with Mr Wellington and potential customers, as distinct from what he realistically expected could be achieved. I address Mr Hutchison’s cross-examination as to this matter and Mr Wellington’s claim for the “Oshkosh Budget Representation” arising from this matter below.

On 15 March 2019, Mr Wellington contributed a further $150,000 to funding the Company (ASOC [61], Wellington 27.10.22 [42]). By email dated 16 March 2020 (Ex P1, CB 245), Mr Wellington advised that he would provide funding for the Company in the form of a loan where he observed that:

By an email dated 28 June 2019, (Hutchison 6.7.23, Annexure L), Mr Hutchison advised Mr Wellington that:

In late July and early August 2019, Mr Wellington and Mr Hutchison attended the Oshkosh air show. Mr Wellington’s evidence is that Mr Hutchison told him and others that he was “confident” that there would be a flying version of the Aircraft in the next 12 months and, on other occasions, saying that the aircraft would be flying by February 2020 (Wellington 27.10.22 [46]-[47], denied Hutchison 20.3.23 [19]). I refer below to Mr Wellington’s claim for the “Second Flying Representation” arising from this matter. Again, it seems to me that Mr Wellington and others would then have recognised that the production of the Aircraft was likely to be an engineering challenge and would have understood such a statement as an optimistic projection.

On 8 August 2019 (Wellington 27.10.22 [53]; Hutchison 20.3.23 [22]; Ex P1, CB 209), Mr Hutchison sent Mr Wellington a budget breakdown for a flying prototype, estimating completion by February 2020 under cover of an email that read:

On 9 August 2019, Mr Wellington responded to Mr Hutchison’s email concerning the new budget as follows (Ex P1, CB 217):

Mr Hutchison then advised Mr Wellington, also on 9 August 2019 (Ex P1, CB 219) that he did not then have assets to contribute to the project, and, in response to Mr Wellington’s questions, answered:

On 13 August 2019, Mr Wellington deposited a further amount of $43,973.20 into the Company’s bank account (ASOC [61], Wellington 27.10.22 [57]).

On 14 October 2019, Mr Wellington deposited a further $50,000 into the Company’s bank account (ASOC [61], Wellington 27.10.22 [58]).

By 28 October 2019, Mr Wellington was seeking to accelerate the development of the Aircraft, emailing Mr Hutchison (EX P1, 226) (in capitals) that “WE REALLY NEED TO GET OUR SKATE’S [sic] ON” and referring to two other reports relating to electric aircraft components. Mr Hutchison responded as to the two other reports and advised that:

On 8 November 2019, the Company registered the “Electron” trademark, comprised of a sketch of the Aircraft and the word “Electron” with a stylised propellor, in the Company’s name (Wellington 27.10.22 [62]; Ex P1, CB 228).

On 10 November 2019, Mr Wellington advised Mr Hutchison, with a copy to Ms Joelle Maxfield who was assisting with administrative work in the Company, as follows (Ex P1, CB 230):

By email dated 18 November 2019 (Ex P1, CB 231) Mr Hutchison advised Mr Wellington that the cost of production of the Aircraft had been revised down by $11,000 which would increase profit per aircraft sale, noting that “[w]e are a bit low on cash flow at the moment so the next payment would be very much appreciated” and observed that:

Mr Wellington pleads (ASOC [61]) that, on 20 January 2020, he advanced a further $50,000 to the Company.

By an email dated 20 February 2020 to Mr Hutchison (Ex P1, CB 235), Mr Wellington referred to his then discontent with the then state of the Company’s accounts and observed that:

Mr Wellington pleads (ASOC [61]) that, on 6 March 2020, he advanced a further $50,000 to the Company.

On 2 April 2020 (Ex P1, CB 247) Mr Hutchison raised the possibility of appointing a general manager to the Company with Mr Wellington; Mr Wellington responded that he doubted the need for a general manager but indicated that he was “listening”; and Mr Wellington also inquired as to progress as follows:

On 19 April 2020, Mr Hutchison registered “Electron Aero” as a business name in the Company’s name (Wellington 27.10.22 [71]; Ex P1, CB 250).

By emails dated 6 May and 28 May 2020, Mr Hutchison requested Mr Wellington to provide further funds to the Company (Wellington 27.10.22 [74], [77]). Mr Wellington pleads (ASOC [61]) that, on 29 May 2020, he advanced a further $25,000 to the Company.

Between 26 June and 20 July 2020, Mr Wellington and Mr Hutchison exchanged emails as to the execution of further documents in relation to the Company (Wellington 27.10.22 [78]). Mr Wellington pleads (ASOC [61]) that, on 28 July 2020, he advanced a further $25,000 to the Company.

On 18 August 2020, Mr Hutchison emailed Mr Wellington requesting further funds for the Company (Wellington 27.10.22 [80]). Mr Wellington pleads (ASOC [61]) that, on 25 August 2020, he advanced a further $25,000 to the Company.

On 28 August 2020, a resolution was passed at a board meeting of the Company attended by Mr Wellington and Mr Hutchison to execute a Loan Agreement and General Security Deed concerning amounts advanced by Mr Wellington to the Company (Wellington 27.10.22 [81]) and, on 1 September 2020, Mr Wellington executed a Loan Agreement and General Security Deed with the Company (Wellington 27.10.22 [82], Ex P1, CB 338, 351). Mr Wellington pleads (ASOC [61]) that, on 7 September 2020, he advanced a further $25,000 to the Company.

On 18 September 2020, Mr Hutchison advised Mr Wellington that he had been able to obtain a registration for the proposed Aircraft (which was not then complete) with the Civil Aviation Safety Authority using the letters “VH-CCC” (Wellington 27.10.22 [85]; Ex P1, CB 422). It appears Mr Hutchison secured that registration in his own name rather than in the Company’s name (Ex P6) but I am inclined to accept his evidence that he did that because it was easier to obtain an aircraft registration in a personal name than a company name and that such registration numbers were quickly taken up when they became available.

On 31 October 2020, Mr Hutchison emailed Mr Wellington requesting that more funds be loaned to the Company (Wellington 27.10.22 [86]; Ex P1, CB 424)

By email dated 17 November 2020, Mr Wellington introduced Mr Elkins to assist Mr Hutchison to complete a flying version of the Aircraft (Wellington 27.10.22 [87]; Ex P1, CB 425) and, on 20 November 2020, Mr Wellington sent Mr Hutchison an email attaching a project spreadsheet from Mr Elkins (Wellington [89]; Ex P1, CB 429).

In early December 2020, Mr Elkins spent a week with Mr Hutchison in the Company’s workshop. Mr Elkins’ evidence is that he and Mr Hutchison worked together on the development of a project timeline and a budget (Elkins 27.10.22 [4]). A report prepared by Mr Elkins dated 11 December 2020 (Ex P2, 2) noted that there were approximately 300 components in the Aircraft and that the time required by Mr Hutchison to complete work on those items (as at December 2020) was approximately 1,200 hours and approximately 1,800 hours of other resources would be required. Mr Elkins also divided the components of the Aircraft into 24 wider categories, comprising items such as the horizontal tail plan, tail cone, elevators, vertical tail, rudder, fuselage, cowling and wings. That report also annexed a record prepared by Mr Hutchison or those working with him as to individual components which, as Mr Hutchison explained in cross-examination, identified details concerning the moulding process for many components. Mr Elkins also indicated a further breakdown of sub-components within the various categories, and an assessment of the extent to which they were complete based on discussions with Mr Hutchison and others. The listing of components and sub-components in Mr Elkins’ report records incomplete design work as at December 2020, which included design work on the elevators, the trim tab servos for the rudder, aspects of the fuselage firewall, the rudder pedal mechanism, tie down points for the wings and tail, the canopy hinge, aspects of the undercarriage, the footstep and control stick torque tube bracket, and matters relating to the motor, propellor and spinner, batteries, joystick handgrips and several aspects of the avionics (Ex P2, 16ff). I address Mr Hutchison’s cross-examination as to aspects of this report below.

By a letter dated 4 March 2021 (Hutchinson 6.7.23, Annexure H1), KPMG Law (“KPMG Law”) set out the terms under which it would be engaged to provide certain services to the Company and Mr Wellington accepted those terms on behalf of the Company. The scope of the engagement related to the preparation of a terms sheet to document material terms of a founders agreement, the preparation of a founders agreement (which was never executed by Mr Hutchison) and an intellectual property (sometimes abbreviated as “IP”) review having the following elements:

Mr Wellington pleads (ASOC [61]) that, on 29 March 2021, he advanced a further $200,000 to the Company. It is notable that he did so after the delays to which I had referred above had occurred and after Mr Elkin’s assessment of the extent to which the Aircraft was complete and the work that remained to be done. Where Mr Wellington by then knew of the delays and risks attached to the development of the Aircraft, It is plainly possible that that amount was then advanced because Mr Wellington was exposed to the loss of his existing investment if he did not continue to provide funding to the Company. As will emerge below, that is not Mr Wellington’s evidence or the way in which he puts his case.

The Company, or at least Mr Wellington or Mr Elkins, appears to have understood that the Company owned intellectual property relating to the Aircraft, prior to a dispute that later arose as to that matter. A document prepared by KPMG in April 2021, headed “Business Design Workshop Report” (Ex P2, 57) recorded information provided to KPMG that:

Also in April 2021, KPMG Law provided a review to the Company which dealt, inter alia, with intellectual property rights in respect of the Aircraft (Ex P2, 115). That document noted that it was likely that intellectual property rights (in the form of copyright works) subsist in key documents and other materials which had been created in connection with the design and production of the Company’s core products including plans, design drawings, documented production methods and assemblage instructions and noted that the Company had not registered any designs in respect of the Aircraft. KPMG Law observed (Ex P2, 117) that:

KPMG Law in turn recommended:

By email dated 11 April 2021 (Ex P1, CB 436), Mr Hutchison sent Mr Wellington a copy of a non-disclosure agreement with a third party working with the Company, Electro.Aero Pty Ltd. Clause 1.1 of that agreement (Ex P1, CB 439) assumes that the Company owned intellectual property relating to the Aircraft, providing as follows:

Also in April 2021, the Company was negotiating an agreement with another third party, Orbx, for the development of a package which could be used for simulator software and a draft agreement recorded (Ex P1, CB 452) that:

Mr Wellington had also clearly recognised at least one of the matters that was delaying development of the Aircraft by early 2021, when he advised representatives of KPMG on 17 April 2021 (Ex P1, CB 466) that:

By May 2021, the Company had requested KPMG to assist in seeking government grants and external funding for the project and, on 25 May 2021, Mr Wellington forwarded an email chain to Mr Hutchison dealing with matters including intellectual property protection (Wellington 27.10.22 [98]-[99]; Ex P1, CB464).

On 20 June 2021, Mr Wellington emailed Mr Hutchison and Mr Elkins a draft “business plan” (Ex P1, 473) which referred to both his and Mr Hutchison’s qualifications as follows:

On 21 June 2021, Mr Wellington emailed Mr Hutchison noting that the batteries for the Aircraft had arrived and dealing with the completion of a draft information memorandum prepared by KPMG (Wellington 27.10.22 [101]; Ex P1, CB 469). Correspondence then followed concerning the draft business plan (Wellington 27.10.22 [102])

In early August 2021, Mr Wellington and Mr Hutchison again exchanged emails in relation to the estimated date for the Aircraft to be flying (Wellington 27.10.22 [108]; Ex P1, CB 514). Mr Wellington pleads (ASOC [61]) that, on 12 August 2021, he made his last advance of $25,000 to the Company.

On 5 September 2021, Mr Wellington emailed Mr Hutchison concerning a meeting with KPMG as to business plans as well as fundraising for the Company (Wellington 27.10.22 [109]; Ex P1, CB 518).

On 19 September 2021, there was further correspondence between Mr Wellington and Mr Hutchison as to the date for a flying Aircraft (Wellington 27.10.22 [110]; Ex P1, CB 521). On 29 September 2021, Mr Wellington sent Mr Hutchison an email concerning the progress of the project and KPMG’s requirements to raise finance for the Company (Wellington 27.10.22 [111]; Ex P1, CB 522).

On 1 October 2021, Mr Elkins was appointed a director of the Company and Mr Wellington and Mr Hutchison each transferred him a parcel of shares in the Company (Wellington 27.10.22 [112]; Elkins 27.10.22 [1]).

On 6 December 2021, Mr Wellington sent Mr Hutchison an email in relation to progress of the Aircraft and introduced two further parties to assist the Company in raising funds (Wellington 27.10.22 [113]; Ex P1, CB 523).

On 7 December 2021, Mr Elkins sent Mr Hutchison an email (Hutchison 6.7.23, Annexure I) requesting that he execute a Deed of Assignment of intellectual property attached to that email. That deed (which Mr Hutchison did not execute) recited that the assignor, implicitly Mr Hutchison, owned the “Assigned Intellectual Property” and that term was defined as:

Mr Hutchison may have misunderstood the effect of that draft deed, since he replied “I’m sorry, why are we giving away IP?” (Wellington 27.10.22 [114], Hutchison 20.3.23 [29]; Ex P1, CB 532). By a further email dated 7 December 2021 (Hutchison 6.7.23, Annexure J), Mr Elkins responded that the proposed assignment was, “not giving away – securing your personal IP on the plane to [the Company] so that [the Company] owns it”. That email indicated that at least Mr Elkins believed or assumed that Mr Hutchison owned intellectual property that he had developed in relation to the Aircraft, and may have prompted Mr Hutchison to take the same view and seek to leave open the possibility of exploiting that intellectual property for himself, whether by licensing it to the Company for a further fee or using it himself. I will address the correctness or otherwise of that belief or assumption below. There was further discussion of documents at a meeting on that date although what was said is disputed (Wellington, 27.10.22 [115]; Hutchison 20.3.23 [30]).

On 12 December 2021, Mr Wellington emailed Mr Hutchison advising that, in order to secure the fundraising, there needed to be a document which confirmed the ownership of the intellectual property in the Aircraft (Wellington 27.10.22 [117]; Ex P1, CB 540).

The topic of intellectual property in the Aircraft was then discussed at a board meeting on 17 December 2021 attended by Mr Wellington, Mr Hutchison and Mr Elkins. The minutes of that directors meeting (Ex P1, CB 542) record discussions as to progress with the Aircraft, fund raising plans and the assignment of intellectual property. Mr Hutchison begins by stating that “he is not sure of content meaning for the IP assignment deed”, and Mr Elkins is recorded as advising of the “need to assign the IP in the [Aircraft] to [the Company]”, and stating that “[c]urrently, as the designer [Mr Hutchison] holds this IP personally but needs to confirm that it is ‘owned’ by [the Company]”. The minutes recorded that:

Similar evidence as to that meeting is led in each of Mr Wellington’s and Mr Elkins’ affidavits (Wellington 27.10.22 [118]-[119], Elkins 27.10.22 [16]-[19]). In his second affidavit dated 20 March 2023, Mr Hutchison addressed (Hutchison 20.3.23 [31]) events at that board meeting. He took issue with the minutes of that board meeting and denied that he had said the words recorded in them that “In my view, the Company already owns the IP. I’m not signing”. I do not accept Mr Hutchison’s evidence in that regard. By contrast with the positions put at that meeting, Mr Wellington now contends that the intellectual property, where developed by Mr Hutchison as a director of the Company, is the Company’s property and Mr Hutchison denies that proposition.

By an email dated 19 December 2021 (Hutchison 17.2.23, Annexure A), Mr Elkins sent Mr Hutchison the review of, inter alia, intellectual property rights provided by KPMG Law in April 2021, to which I referred above.

In early March 2022, there was discussion as to possible commercial terms in respect of a resolution of the differences that had by then arisen between the Company’s shareholders (Wellington 27.10.22 [123]). On 11 March 2022, Mr Wellington, Mr Hutchison and Mr Elkins executed a Heads of Agreement (Wellington 27.10.22 [125]) which did not resolve disputes as to ownership of intellectual property, which were again raised at a meeting on 12 April 2022 between Mr Wellington and Mr Hutchison (Wellington 27.10.22 [130]-[133])

On 18 May 2022, Mr Wellington’s solicitors wrote to Mr Hutchison concerning termination of the Heads of Agreement and a suggested default under the Loan Agreement and a demand for a repayment of Mr Wellington’s loan (Wellington [138], CB 576)

On 23 May 2022, Mr Hutchison incorporated a new company, Dasoru Pty Limited (“Dasoru”), of which he was sole director, secretary and shareholder (Wellington 27.10.22 [160]; Ex P1, CB 658). I address Mr Hutchison’s evidence concerning that company and the Plaintiffs’ claim concerning that company below.

By email dated 5 June 2022 (Wellington [140]; Ex P1, CB 581), Mr Hutchison contended that the Company did not own the intellectual property for the Aircraft, in the context of a debate about funding of the Company, and observed in that email that:

By a further email dated 7 June 2022, Mr Hutchison again claimed that he had the right to the intellectual property of the Aircraft (Wellington 27.10.22 [141]) and observed that:

On 13 June 2022, Mr Wellington appointed Mr Vardy as receiver and manager of the Company’s assets pursuant to the General Security Deed and Loan Agreement (Wellington 27.10.22 [142]; Ex P1, CB 585).

As at October 2022, Mr Hutchison appeared to have been in possession of at least some intellectual property that was relevant to the development of the Aircraft. By an email dated 5 October 2022 (Elkins 27.10.22, Annexure C), Mr Elkins advised Mr Hutchison that:

Mr Hutchison responded by an email dated 6 October 2022 (Elkins 27.10.22, Annexure C), asking:

I have addressed aspects of the affidavit evidence in setting out the chronology of events above. I now turn to the parties’ wider affidavit evidence. I have applied well-established principles in assessing that evidence and the witnesses’ evidence in cross-examination. I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318–319; Varma v Varma [2010] NSWSC 786 at [424]–[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (“Colorado Products”) at [10].

I have applied the principles applicable to assessing claims for representations in oral form as helpfully summarised by Slattery J in Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [87] as follows:

I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[29]:

I have here also drawn on my summary of the applicable principles in Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705 at [5] and No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345 at [53]ff.

Mr Wellington reads his first affidavit dated 27 October 2022, which outlines the circumstances in which he met Mr Hutchison and became involved with a project to develop the Aircraft, investing as a shareholder in the Company and lending money to the Company in connection with that project. I have largely addressed his evidence as to those matters in setting out the chronology of events above. Mr Wellington also refers to subsequent steps taken to progress the development of the Aircraft and to attendance at air shows where models of the Aircraft were displayed. Mr Wellington refers to his introduction of Mr Elkins, who also gave affidavit evidence and was cross-examined, to the project with a view to assisting its completion, and to the circumstances in which KPMG was engaged to assist with capital raising efforts.

Mr Wellington also addresses the circumstances in which the relationship between the shareholders and directors broke down, as between Mr Wellington and Mr Elkins on the one hand and Mr Hutchison on the other. As I have noted above, that occurred in the context that Mr Wellington and Mr Elkins were seeking to have Mr Hutchison, as well as other consultants to the Company, execute deeds of assignment of intellectual property rights that would clarify, confirm, or possibly establish the Company’s ownership of intellectual property that was used to develop the Aircraft. That dispute appears to have crystallised at the time of the board meeting on 17 December 2021 to which I referred above, although attempts to clarify the position in respect of intellectual property had occurred prior to that meeting and continued into the early part of 2022.

Mr Wellington also refers to the execution of a Heads of Agreement between the shareholders in March 2022, which does not appear to have resolved the disputes between them. His evidence is that he had seen the Aircraft in a 75–80% finished state in April 2022 (Wellington 27.10.22 [130]), although it has apparently since been disassembled. There is a dispute between the parties, which I need not resolve, as to whether that was done for the purpose of painting the Aircraft, but there appears to be no dispute that the Aircraft has not since been reassembled. Mr Wellington’s evidence is that Mr Hutchison did not execute or return documents contemplated by the Heads of Agreement by May 2022, and Mr Wellington subsequently terminated the Heads of Agreement and a loan agreement between him and the Company and demanded repayment of his loan to the Company. As I noted above, following further disputes, Mr Wellington then appointed Mr Vardy as receiver and manager of the Company’s assets, exercising his rights as a secured lender to the Company.

By a second affidavit dated 2 February 2023, Mr Wellington responded to Mr Hutchison’s account of events and I have addressed aspects of his evidence in the chronology that appears above. Mr Wellington also there gave evidence to seek to establish his reliance on the representations he claims were made by Mr Hutchison. His evidence was that, had he known that Mr Hutchison had already designed the Aircraft by 14 December 2018, he would not have become a shareholder of the Company or loaned money to the Company (Wellington 2.2.23 [7a]). That question does not arise, because I do not find that Mr Hutchison had completely or substantially designed the Aircraft (if that is understood to include the numerous components needed for its production) by 14 December 2018, although he had done several design drawings, prepared a foam model and a picture of it by that time. I also think it unlikely that Mr Wellington would then have recognised any possible adverse implications of that matter for the Company’s ownership of intellectual property in the Aircraft, where he had not taken legal advice at that time and it seems to me that he would have likely have treated that matter as a positive rather than a negative in his investment decision-making.

Mr Wellington’s evidence was also that, had he known that Mr Hutchison would, or intended to, retain ownership of the design for the Aircraft or its parts or its components, he would not have loaned money to the Company (Wellington 2.2.23 [7b]). I accept that he would likely have taken that view, but I find below that Mr Hutchison did not form such an intention until the issue of ownership of intellectual property was later highlighted in discussions as to the assignment of intellectual property rights to the Company. Mr Wellington’s evidence is also that, had he known at the Avalon air show in February 2019 that the Aircraft would not be flying within 12 months, he would have not lent money to the Company, and had he known of the increased cost of developing the Aircraft and that it would not be flying by February 2020, he would have not lent money to the Company. There is a significant degree of artificiality in that evidence, which emerged in Mr Wellington’s cross-examination. I accept that Mr Wellington would not have lent money to the Company had it been plain, at the outset, that the development of the Aircraft would be long delayed and significantly more costly than originally anticipated. However, Mr Wellington also plainly recognised the risks attached to the development of a prototype of an electric aircraft and continued to lend money to the Company as those risks began to emerge. This evidence also does not recognise or address the obvious difficulty that, once Mr Wellington had invested a significant amount in the development of the Aircraft, his ceasing to fund its future development would have put his existing investment at risk, and that omission significantly reduced the cogency of that evidence.

By a further affidavit dated 26 April 2023, Mr Wellington took issue with aspects of Mr Hutchison’s earlier evidence in the proceedings. It is largely not necessary to resolve disputed details of the early conversations between Mr Hutchison and Mr Wellington. Mr Wellington also addressed a dispute between the parties as to the difficulties of retaining adequately skilled employees and workers for the project. Little turned on that matter, where the question whether Mr Hutchison had reasonable grounds for the alleged representations is to be assessed at the time they were made and not by reference to these later difficulties. Mr Wellington also referred to matters raised in Mr Hutchison’s affidavit evidence as to the circumstances in which the loan agreement between Mr Hutchison and the Company was provided to Mr Hutchison and signed, but nothing turns on that matter where no challenge to that loan agreement is raised in these proceedings.

By a fourth affidavit dated 11 July 2023, Mr Wellington responded to Mr Hutchison’s late affidavit dated 6 July 2023. He again denied that he was shown a model aircraft by Mr Hutchison or a picture of the aircraft in December 2018, and I have addressed that question above. He maintained he relied on budgets provided by Mr Hutchison in deciding to loan funds to the Company, without acknowledging his recognition of the risks attached to the development of the Aircraft, which he fairly acknowledged in parts of his cross-examination, or the fact that decisions to invest later funds must have been made in the context of the amount of funds that he already had at risk if the project was abandoned. He also referred to matters relating to the falling out between the parties, particularly in mid-December 2021, but those matters are of little relevance to the relief sought in these proceedings.

Mr Wellington was cross-examined at substantial length. He was a largely credible, although occasionally somewhat defensive or argumentative, witness; he readily acknowledged his lack of recollection of some matters; and he made significant admissions which were adverse to his representational claims. There were occasions, in Mr Wellington’s cross-examination, where he did not accept the implications of matters that he had accepted or later retreated from matters that he had previously acknowledged. Nonetheless, I am satisfied that Mr Wellington was doing his best to tell the truth and that he was a largely reliable witness.

Mr Wellington fairly acknowledged in cross-examination that he knew the budget for the Aircraft could change where “[w]e are building a prototype” (T73-74); that the construction of the Aircraft required “[q]uite a deal of skill” and that there were a lot of unknowns in building that prototype (T74). Mr Wellington’s evidence in cross-examination was also that Mr Tolhurst, who was working part-time with Mr Hutchison on building the plane, mentioned to Mr Wellington that there were faults in the plane (T87-88) and that would plainly be another significant indicator to Mr Wellington of the risks involved in the development process. Mr Wellington’s evidence was, oddly, that he had not told Mr Hutchison of those faults, although he sought to explain that on the basis that he understood that Mr Tolhurst had already told Mr Hutchison of them (T89). Mr Wellington fairly accepted that extra time would be involved in rebuilding parts that had a fault, and his evidence was that quite a number of parts were rebuilt, and he would expect that to happen in a prototype plane, although he then somewhat retreated from that evidence (T90). While he did not accept that he would have expected the plane to take longer to build than first estimated (T90), he again acknowledged that there were a lot of unknowns in building the plane when it was first proposed, because it was a prototype; and that estimates of how long things would take and how much they would cost could change over time (T91). That evidence was, however, inconsistent with his further evidence that he “expected that we would be on time” (T91). Mr Wellington initially gave evidence that his conversation with Mr Tolhurst, identifying the faults with the aircraft, was in mid-June or early June 2019, before the Oshkosh air show, although further cross-examination as to the time at which Mr Tolhurst ceased work with the Company raised a question whether he was wrong as to the timing of that conversation (T92-93). On the second day of his cross-examination, Mr Wellington acknowledged that he was confused about when Mr Tolhurst was employed by the Company, but again said that he had a discussion with Mr Tolhurst concerning potential design flaws in the Aircraft just before Mr Tolhurst left the Company (T149). That evidence is consistent with Mr Elkins’ evidence that Mr Tolhurst had also told him of such flaws.

Mr Wellington’s evidence in cross-examination was that he was not definitive as to the amount that he was prepared to invest in the development of the Aircraft, and the amount that he would invest depended upon the level of public interest in the Aircraft at the Avalon and Oshkosh air shows. He accepted that he would have been prepared to invest up to one million dollars in the Aircraft if the “future indicated that that was a worthwhile investment” (T150). I understood his evidence to indicate that, understandably, he would assess the position as to further funding of the Company on an ongoing basis. There is no reason to think that Mr Wellington had made an early decision to put the entirety of the funds that he was potentially prepared to invest at risk, irrespective of the progress of the development of the Aircraft or the level of public interest in it.

Mr Wellington accepted that he was willing to provide further funds for the development of the Aircraft after February 2020, when it was apparent that it had not yet reached a flying state (T150). He also maintained, and I accept, that the timeline of development of the Aircraft was a factor in his decision whether to invest further funds (T151). His evidence was that he relied on estimates of the completion date of the Aircraft in determining whether to invest further funds into the Company and denied that he had already decided to invest further funds into the Company prior to those estimates (T152). I accept that evidence, with the qualification that he was plainly aware of the risk that these estimates would not be met. In cross-examination, Mr Wellington repeated his affidavit evidence that, at the Oshkosh air show, Mr Hutchison was assuring customers that the Aircraft would be flying “very soon” (T154) and then retreated, to some extent, from his earlier recognition of the risks involved in development of the Aircraft, which undermined any firm date for its completion (T154).

Mr Wellington was also cross-examined as to whether Mr Hutchison had undertaken work in the garage at his home, before the Company rented premises, and as to Mr Hutchison’s use of his own computers and cutting and model-making machines prior to March 2019 (T157). I address the relevance of this matter to whether Mr Hutchison was employed by the Company and whether intellectual property relating to the Aircraft that was developed by him was owned by the Company below.

Mr Wellington accepted that, when Mr Hutchison declined to sign assignment agreements relating to intellectual property, Mr Wellington became concerned about the Company’s future, because of issues as to the Company’s ability to raise funds “without a clear perspective” (T159). I understand that evidence to refer to the Company’s need to be able to demonstrate to future investors that it owned the intellectual property relating to the Aircraft, which was emphasised by KPMG since April 2021.

Mr Wellington also read an affidavit dated 27 October 2022 of Mr Elkins. Mr Elkins became a director of the Company on 1 October 2021, holds a relatively small number of shares in the Company and was also appointed the chair of the Company. He had experience in project management and business development, and, as I noted in dealing with the chronology of events above, he spent a week with Mr Hutchison at the Company’s workshop in December 2020, working on a project timeline and budget. Mr Elkins gave evidence (admitted with a limiting order under s 136 of the Evidence Act 1995 (Cth) (“Evidence Act”) as his understanding) of reasons why he understood the Aircraft and intellectual property relating to it was the Company’s property. He referred to steps taken by the Company, including by Mr Hutchison, to seek to protect intellectual property in the Aircraft, including obtaining non-disclosure agreements from Mr Tolhurst and from third parties with which the Company was dealing in relation to electric propulsion systems and a flight simulator. Mr Elkins was also required to execute a non-disclosure agreement in his role with the Company. He also referred to work with marketing advisors, including KPMG, and fundraising plans for the Company and expressed the view that intellectual property needed to be assigned to the Company to allow fundraising.

Mr Elkins addressed the engagement of KPMG to assist with external funding from January 2021 and referred to KPMG’s advice that ownership of the Aircraft and the intellectual property needed to be formalised to allow potential investors to be comfortable in investing funds in the Company, where the Company had engaged employees, contractors and Mr Hutchison in developing the Aircraft and the intellectual property. Mr Elkins’ evidence is that he raised that matter with Mr Hutchison after KPMG had raised it and that Mr Hutchison responded that it was “not a priority” and his priority was to “get the plane flying” (Elkins 27.10.22 [8]). His evidence is that he raised the assignment deed in respect of intellectual property with Mr Hutchison on several subsequent occasions and Mr Hutchison responded in the same way on those occasions (Elkins 27.10.22 [9]). Mr Elkins’ evidence was that Mr Hutchison never said to him that Mr Hutchison owned the Aircraft or the intellectual property or that the intellectual property was not the Company’s property (Elkins 27.10.22 [11]). That is consistent with my finding below that Mr Hutchison likely did not take that position until the issue of the assignment of intellectual property was pressed in late 2021. Mr Elkins’ evidence is that he gave a copy of the proposed assignment deed to Mr Hutchison in mid-November 2021 (Elkins 27.10.22 [14]) and Mr Hutchison again responded that it was “not a priority” but said he would “get to it". I accept Mr Elkins’ evidence in preference to Mr Hutchison’s evidence in that respect. Mr Elkins also addressed events at the Company’s board meeting on 17 December 2021 (Elkins 27.10.22 [19]).

By a second affidavit dated 13 July 2023, in response to Mr Hutchison’s 6 July affidavit, Mr Elkins identified several people who had worked with the Company and explained the content of a report that he had prepared after meeting with Mr Hutchison and Mr Wellington in December 2020 (Ex P2, 1), in evidence that was largely admitted with a limiting order under s 136 of the Evidence Act as directed to his understanding. He again expressed the view, admitted as evidence of his understanding, that he then believed the intellectual property in the Aircraft belonged to the Company. Mr Elkins expressed the view that the Aircraft was approximately 75% complete by early 2021 (Elkins 13.7.23 [11]). He referred to the need for additional capital to move from the development stage to the production stage for the Aircraft and to KPMG’s retainer to provide assistance in obtaining external funding and business development. His evidence is that he kept Mr Hutchison informed of those matters, although his emails were no longer available after receivers were appointed to the Company’s assets. His evidence is also that he believed that he sent the intellectual property review report prepared by KPMG in April 2021 to Mr Hutchison, consistent with his usual practice, and I think it is likely that occurred where there was no reason for him not to have done so given the parties’ then commercial relationship.

Mr Elkins took issue with Mr Hutchison’s view that the Company never had the “right resources” to complete the Aircraft and he identified employees and third parties who were engaged to assist the Company with these matters (Elkins 13.7.23 [12]). As I have noted above, little turns upon that given the way in which the Plaintiff puts its representational case. Mr Elkins also referred to a discussion with Mr Tolhurst in April 2022, where Mr Tolhurst had referred to “design flaws” in the Aircraft, but says that he does not know whether those design flaws were big or small or what they were (Elkins 13.7.23 [14]). Mr Elkins also expressed the view, in evidence admitted with a limiting order as his understanding, that Mr Hutchison had greater skill with spreadsheets and budgeting than Mr Hutchison now acknowledges (Elkins 13.7.23 [15]).

Mr Elkins was also cross-examined. He was a careful and precise witness and I generally accept his evidence. He was at time cautious in relation to the documents which were shown to him, where he no longer had access to his email to verify the form in which they had previously been sent to him. I do not think that caution was unreasonable, or that it involved any lack of constructiveness on his part, although there does not appear to be any issue as to the authenticity of those documents.

Mr Elkins reiterated, in cross-examination, that his practice was to send documents to the directors including Mr Hutchison as he received them although he acknowledged that there may be cases in which he had not done so (T167). He took issue with the correctness of the reference in KPMG’s intellectual property report to Mr Hutchison’s status as a contractor, and his evidence in cross-examination was that Mr Hutchison was in a different category from the various contractors used by the Company, as he was a director and shareholder in the Company (T178-179). I accept Mr Elkins’ evidence in cross-examination that there was no particular reason for him to seek to correct that reference at the time, where he was generally in agreement with KPMG’s recommendations as to what should be done to clarify the status of the intellectual property concerning the Aircraft.

Mr Elkins was cross-examined at some length as to his understanding of whether Mr Hutchison owned the intellectual property relating to the Aircraft so far as he was a contractor to the Company and he held to his belief that the Company owned that intellectual property, although it would be desirable to confirm that by the proposed assignment deed. Little turns on the cross-examination of Mr Elkins or other witnesses as to that matter, where ownership of that intellectual property will be determined, first, by the mixed question of fact and law of whether Mr Hutchison was an employee of the Company; second, whether his development of intellectual property in that capacity had the consequence that it was the Company’s property; and, third, whether his statutory and fiduciary duties as a director of the Company prevent him asserting a right to ownership to that property in a manner that would advance his own interests over the Company’s interests. I address these issues below. Mr Elkins was also cross-examined as to Mr Wellington’s conduct, and particularly his consideration of locking Mr Hutchison out of the premises, when the relationship between the parties deteriorated. That cross-examination did not recognise that Mr Wellington’s position was directed to the position of a breakdown in the parties’ relationship, and little turns on it, in any event, for the issues that I have to decide.

Mr Hutchison read a brief affidavit dated 17 February 2023 which related to documents held on a USB drive that he provided to the receivers of the Company, and I will address the contents of that USB drive below.

By a second affidavit dated 20 March 2023, Mr Hutchison took issue with aspects of Mr Wellington’s evidence of the initial conversations between him and Mr Wellington. As I noted above in dealing with the chronology of events, his evidence was that Mr Wellington had not initially said that the funding Mr Wellington provided to the Company would be treated as a loan, although it is not apparent that it could have been treated in any other way without substantially diluting Mr Hutchison’s equity interest in the Company. As I also noted above, Mr Hutchison’s evidence was that he had shown Mr Wellington drawings and a foam model of the Aircraft, implicitly in November or early December 2018, and he took issue with Mr Wellington’s evidence to the contrary. Mr Hutchison did not then produce the drawings or the model to which he referred, which he first produced with his late affidavit dated 6 July 2023. Mr Hutchison also contested the characterisation of the remuneration paid to him as salary and implicitly contested the Plaintiffs’ claim that he was an employee of the Company and that intellectual property that he developed was the Company’s property. His evidence was that no PAYE tax was taken out of his remuneration, workers compensation insurance was not paid, no holiday leave was recorded and the Company did not make superannuation contributions for him. His evidence was that he registered a domain name using the words “Carbon Copies” in 2006 and a business name using the words “Carbon Copies Composites” in 2004 and indicated that he was then happy for the Company to use his business name and his website but that he did not transfer ownership of the business name or website to the Company. I have addressed Mr Hutchison’s evidence in this affidavit as to the budget for the Oshkosh air show in dealing with the chronology of events above. Mr Hutchison’s evidence was also that the Company was ultimately not able to engage suitably qualified and skilled workers to build the Aircraft. I have also addressed Mr Hutchison’s evidence concerning the 17 December 2021 board meeting in dealing with the chronology of events above.

Mr Hutchison led fuller evidence by his very late affidavit dated 6 July 2023, which I granted leave for him to read for the reasons set out in a separate unreported judgment. He there sought to explain why he had not previously produced design files which he created in 2018 to the receivers of the Company until 23 June 2023. Mr Hutchison’s evidence was again that he created a foam model of the Aircraft in late November or early December 2018 and showed that model to Mr Wellington in November or December 2018 and that he also showed a picture of the proposed Aircraft to Mr Wellington on 2 December 2018 or shortly thereafter. Mr Wellington denies that matter in his affidavit in reply and I have addressed this issue above. Mr Hutchison also claims (Hutchison 6.7.23 [32]) to have done “some preliminary designs” on a single seater electric aircraft in November 2018 but says, without further explanation, that he does not have access to those designs.

Mr Hutchison then sets out his background, which includes his completion of an aeronautical engineering degree and employment as a technical officer, tutor and research assistant at the University of Sydney, his subsequent involvement in the manufacture of unmanned aerial vehicles in other organisations, his work as an aeronautical engineering officer with the Royal Australian Navy and later work in a company in developing drone technology. He also refers to his work as a handyman with a small building company in Bowral, which led to his initial meeting with Mr Wellington. He again refers to his use of the name “Carbon Copies Composites” for a long period prior to the incorporation of the Company.

Mr Hutchison’s evidence, which I am inclined to accept, is that he did not give consideration to who owned the intellectual property in the design of the Aircraft between 2018 and 2020. His evidence (Hutchison 6.7.23 [49]) is also that he considered “the Company was entitled to use the design to build the plane if I was a director and/or a major shareholder”. I think it unlikely that Mr Hutchison had thought about that matter in the relevant period, and it is plain that he then took the contrary position that he was entitled to the intellectual property in the Aircraft to the exclusion of the Company once the relationship between the shareholders had deteriorated in early 2021. His evidence (Hutchison 6.7.23 [50]) is that he “did not give consideration to transferring [his] rights to the intellectual property to the [C]ompany”. That evidence assumes, of course, both that Mr Hutchison had such rights and that he would be entitled to exercise them in a way that preferred his own interests to the Company’s interests and I address those issues below. His evidence, which I am also inclined to accept, is that he first thought that he may own the intellectual property when he was asked to execute a deed of assignment that would confirm the Company’s ownership of that intellectual property in December 2021 (Hutchison 6.7.23 [55]).

Mr Hutchison also addressed the limited extent of his involvement with KPMG, which seems to me reflects his limited interest in the financial management of the Company as distinct from matters relating to the development of the Aircraft. His evidence is that that he was not shown a report prepared by KPMG Law in April 2021 concerning ownership of the intellectual property in the Aircraft until he was sent that report by Mr Elkins on 19 December 2021 (Hutchison 6.7.23 [61]). I have referred above to Mr Elkins’ evidence that he kept Mr Hutchison informed of that report, and likely provided him with the report in or around April 2021. Nothing turns on this dispute, where neither the ownership of the intellectual property, as a matter of law or fact, nor the extent of Mr Hutchison’s duties as a director of the Company depend on when he was advised of that report. Mr Hutchison also addresses matters which led to his dissatisfaction with Mr Wellington and Mr Elkins at the directors’ meeting on 17 December 2022 and presumably contributed to the breakdown of the relationship between the shareholders. Again, nothing turns on that matter for the questions that I have to decide.

Mr Hutchison reiterates his position, advanced in his earlier affidavit, that PAYE tax was not paid by the Company on the amount that was paid to him by way of remuneration from December 2018 until April 2022 and that no holiday leave accrued for him, no superannuation contributions were made for him and no workers compensation premiums were paid in respect of him (Hutchison 6.7.23 [67]). His evidence is that he was not directed in his daily work for the Company by any person, and it is apparent that the Company’s other directors would not have had the technical skills to give such direction. Mr Hutchison also refers to his belief that he was a subcontractor to the Company (Hutchison 6.7.23 [69]), although that subjective belief is of limited relevance to the proper characterisation of the relationship.

Mr Hutchison led evidence that sought to support his estimate of the time which would be required to produce two models for the Avalon air show which was to take place in late February 2019, and to his earlier experience in building models of drones and unmanned aeronautical vehicles prior to December 2018. His evidence was that Mr Wellington did not fund the Company until late December 2018, reducing the time in which funding was available to build the models (Hutchison 6.7.23 [72]). Mr Hutchison also referred to the work undertaken toward building a full size, non-flying, model for the Oshkosh air show which was to take place in July 2019, and his evidence is that he was not able to complete the full-size model when the person assisting him in building that model fell ill in May 2019. He refers to his email sent to Mr Wellington in that respect on 28 June 2019, to which I referred above.

Mr Hutchison also refers to problems which arose in the manufacture of the Aircraft, and particularly emphasises difficulties in obtaining skilled workers who were sufficiently productive. Little turns on that evidence, where the adequacy of the basis for the alleged representations is to be determined at the time they were made. I address the Plaintiffs’ representational case further below. Mr Hutchison’s evidence (Hutchison 6.7.23 [91]) is also that he had no training or skill in producing budgets, but the budgets he produced were based on his estimate of the time necessary to complete the project “with the right resources and an estimate of the cost of those resources” and his evidence is that the Company did not ever have the “right resources” to complete the project. Mr Hutchison also addressed the risk that he would be locked out of the premises after the relationship between the parties deteriorated and his understanding of the loan agreement and security deed executed between the Company and Mr Wellington, but I need not address these issues to determine the matters which I have to decide.

By a further affidavit dated 17 July 2023, Mr Hutchison referred to the date on which he registered a domain name “dasoru.com.au” (which has personal significance for him) in 2017, and incorporated a company under that name in May 2022 (Ex P1, 658), of which he was the sole director and shareholder. His affidavit evidence was that he created that company to create and sell handmade wood products; that that company does not have a bank account and he uses his personal business account for it; and that company does not do work relating to fixed wing aircraft but has purchased and on-sold parts for vertical take-off drones. An Instagram page annexed to that affidavit contained advertisements for wood products. In cross-examination, Mr Hutchison’s evidence was that he incorporated that company in May 2022 for the business activities which he had undertaken throughout his career, which included the manufacture of drones (T297-298). He denied that he incorporated that company in order to continue the development of the Aircraft, although he had by then asserted ownership of the intellectual property relating to the Aircraft. It is not necessary to reach a finding as to his evidence in that respect in order to determine a claim concerning that company in the proceedings, where there is no suggestion that he in fact used that company in any matter relating to the Aircraft.

Mr Hutchison was cross-examined at some length. Mr Bulley submits that Mr Hutchison’s evidence should be treated with caution. He points out that, understandably, Mr Hutchison is heavily invested in the case and submits that he gave his oral evidence in a calculated way and with answers that were “at best evasive and sometimes argumentative”. It seems to me that Mr Hutchison took every opportunity in cross-examination to seek to make points that he thought would advance his claim to have designed the Aircraft before the Company was incorporated, so as to seek to displace any ownership of intellectual property by the Company. He was at times a somewhat evasive witness, and often responded to questions in cross-examination by interpreting them in a narrow or technical way rather than responding to their substance. He frequently answered to questions as to specific matters with words to the effect of “I’ll have to check my records”, where it suited his case to do so, although the questions were directed to matters that he would likely recall or would have reviewed in the course of these proceedings, but readily volunteered his recollection or understanding of other matters which he considered advanced his case. On occasion, he took advantage of the fact that he had a greater understanding of aeronautical engineering than Mr Bulley to avoid engaging with questions in cross-examination. He also appears to have responded to questions relating to the “design” of the aircraft by treating that concept as excluding steps that were required by way of structural and engineering analysis to develop a functional design of the Aircraft to the point of manufacture and any sale of the Aircraft to users in kit form or otherwise. That narrow approach to the concept of “design” assisted him to maintain his claim in cross-examination that he had completed the “design” of the Aircraft before the Company was incorporated.

In cross-examination, Mr Hutchison characterised the information that he had provided to cost of building the airframe and attending the Oshkosh air show in 2019 as “my estimate” (T198) and rejected the characterisation of the remuneration payable weekly to him as “salary” (T198-199), although he had himself used that term in an email dated 27 November 2018 to which I refer below (Ex P1, CB 66). Mr Hutchison described the drawings attached to his affidavit dated 6 July 2023 as an “aerodynamic model” of the aircraft (T202) and indicated that the technical detail for the specifications of the Aircraft was incorporated in the CAD files (T203). Neither party led evidence that establishes when the numerous individual CAD files were created. Mr Hutchison’s maintained in cross-examination that the design of the Aircraft was done in November and early December 2018 (T205), prior to the Company’s incorporation and relied on the drawings attached to his July affidavit as completing the “design” of the Aircraft, although it is apparent that the numerous individual CAD files relating to particular elements of the Aircraft design could not have been created in the month between Mr Hutchison’s first drawings and the Company’s incorporation. Mr Hutchison also sought to minimise the extent to which the design changed over time, after November or December 2018, giving evidence that “[s]ometimes things [we]re tweaked” (T207) and denying that components were redesigned, before indicating that whether that occurred depended on the component and that he would have to check records to see what aspects of the design was “tweaked” (T207). I do not accept Mr Hutchison’s later evidence in cross-examination that the design of the Aircraft was “set in stone” as at December 2018 (T263), even if was there using the term “design” in the narrow way that I noted above.

Mr Hutchison characterised the information he had provided to Mr Wellington and to persons attending the Oshkosh air show, as to the date by which the Aircraft would be flying, as “the plan” and what he “hope[d] to do” and emphasised that he did not “guarantee” that result (T221). His evidence was that the information he later provided to Mr Wellington that there would be a flying prototype by the time of the Oshkosh air show in July 2020 was “a plan” (T229).

Mr Hutchison was also cross-examined at some length as to Mr Elkins’ report prepared in December 2020 and to the estimates of the extent to which components of the Aircraft were complete in that report, and he accepted that those estimates were at least partly sourced from information that he had provided, although he said that it was not only himself who provided Mr Elkins with that information (T236).

Mr Hutchison was cross-examined (T239ff) as to the contents of the USB drive (Ex P1, CB 719ff) that he provided to Mr Vardy as receiver and manager of the Company’s assets on 12 December 2022, pursuant to the Court’s order made on 2 December 2022. A listing of the files on that USB drive indicated many items relating to the design and construction of the Aircraft, many of which were in CAD format. Those items were arranged in folders and subfolders relating to matters such as the aerofoils for the Aircraft, busbars, the electric motor which was to power the Aircraft, an onboard computer, bulkheads, canopy, moulds, wings, cockpit, engine mount, fuselage, fuselage mould, horizontal tail, rudder, rudder pedals and vertical tail. Mr Hutchison’s evidence was that some of those items including the onboard computer and electric motor were sourced from third parties, and the relevant information may have been downloaded from the internet rather than developed by him. He also contended that the design of items such as the fuselage and wings was derived from the drawings he prepared in November and December 2018 (T206). I will assume, without deciding, the correctness of Mr Hutchison’s evidence as to that matter. Nonetheless, the number of these items indicates that a substantial amount of work was involved in preparing them and I infer that they were necessary for the development and any production of the Aircraft by reason of the fact that they were obviously prepared for that purpose. Mr Bulley put to Mr Hutchison that many of these items were modified, after the Company was incorporated, by reference to a “date modified” record on that listing. I accept Mr Hutchison’s evidence that that date is inconclusive, where it is possible that the “date modified” will be updated on the last date the file was accessed rather than modified. Nonetheless, I infer that many of these items were prepared after the Company was incorporated, by reason of their number and the apparently detailed character of the design issues they addressed. In the event, little turns on that, where I find below that the Company’s right to use the intellectual property relating to the Aircraft extends to intellectual property relating to the Aircraft that was prepared before it was incorporated.

Mr Hutchison was also cross-examined as to his understanding of ownership of intellectual property in the Company and as to the need to clarify that matter in order to obtain external funding from the Company and emphasised that he did not seek to support attempts to obtain external funding (T255ff). Mr Hutchison was also cross-examined as to design work that remained to be done in respect of the Aircraft and Mr Elkins’ report dated December 2021 in that regard (T264ff). He denied that there were numerous items where there was still design to be done in relation to the Aircraft and said that “I don't know that I even went through the report … I was busy building the [A]ircraft” (T266). I prefer Mr Elkins’ assessment of the then state of the Aircraft in that report to Mr Hutchison’s evidence in cross-examination, although I recognise he may again have treated the concept of “design” in a narrow way in his answer, to exclude any development work beyond the documents prepared in November or December 2018. I approach Mr Hutchison’s evidence that he did not read that report with caution, and note that it would have been highly irresponsible for him to take that approach.

In cross-examination, Mr Hutchison indicated that two websites were used in respect of the Aircraft (T281ff), one with the domain name “Carboncopies.com.au” which had been registered to Mr Hutchison some years before the Company was incorporated, and which he says that he permitted the Company to use, and the other with the domain name “Electron.aero” which was registered in the Company’s name. Mr Hutchison was also cross-examined as to an engineering status update in respect of the Aircraft prepared by a third party consultant in June 2022 (Ex P1, CB 612ff; T295ff)). He also took issue with aspects of this report, so far as it referred to matters which occurred prior to the inspection, which were presumably not directly known to that consultant, although little turns on that dispute. He was also cross-examined as to the circumstances in which he had claimed ownership of intellectual property relating to the Aircraft following discussions with Mr Wellington in 2022 (T291ff) and by email dated 5 June 2022 (Ex P1, CB 581).

Mr Wellington, in his personal capacity, brings misleading and deceptive conduct claims against the Company and Mr Hutchison. He identifies many representations that he contends were misleading and deceptive for the purposes of the Competition and Consumer Act 2010 (Cth) sch 2 – Australian Consumer Law (“ACL”). The multiplication of representational claims is, of course, often not a virtue. The claims raise legal issues as to the scope of misleading and deceptive conduct, the scope of conduct in trade and commerce, whether representations relate to future matters and causation, and it is convenient to address these issues at this point before turning to the pleaded representations in turn.

I outlined the applicable principles in a claim for misleading or deceptive conduct, which are too well known to require extended analysis, in Changizi v Rizaie [2021] NSWSC 613 at [93]-[94] as follows:

These principles were also helpfully summarised by Payne JA (with whom Bell CJ and White JA agreed) in Lin v Zheng [2023] NSWSCA 174 (“Lin v Zheng”) at [31]-[33], delivered after judgment in this matter was reserved, as follows:

Mr Wellington pleads that several representations were made with respect to future matters for the purposes of s 4 of the ACL. In submissions, Mr Bulley rightly excludes claims for misleading omissions from that category and limits it to the First Flying Representations; the Oshkosh Budget Representations; the Second Flying Representations; the Flying Prototype Representations; the Second Flying Prototype Representations; and the Third Flying Prototype Representations as defined, which I address below. He draws attention to s 4(1) of the ACL which provides that where a person makes a representation with respect to any future matter and does not have reasonable grounds for making the representation, the representation is taken, for the purpose of the ACL (which includes s 18 of the ACL), to be misleading. He points out that by s 4(2) of the ACL the maker of a representation as to a future matter bears an evidentiary onus and, for the purpose of s 4(1), that party is taken not to have had reasonable grounds for making a representation with respect to a future matter unless evidence is adduced to the contrary.

Mr Bulley rightly points out that a representation as to a “future matter” is one that expressly or by implication makes a prediction, forecast or projection or otherwise conveys something about what may (or may not) happen in the future: Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162 (“Woolworths”). Whether a statement relates to a future matter depends upon the words used and the context in which they were used: Digi-tech (Australia) Ltd v Brand (2004) 62 IPR 184; [2004] NSWCA 58. In Woolworths at [132], the Court observed that:

That approach was followed by Kunc J in Haiye Developments Pty Ltd v Commercial Business Centre Pty Ltd [2022] NSWSC 937 at [384]. In Lin v Zheng at [34]-[36], Payne JA in turn observed that:

Mr Wellington also brings two claims in respect of conduct that he alleges was misleading or deceptive by omission. The applicable principles in such a claim were summarised by the Court of Appeal in OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [178] as follows:

Mr Wellington also contends that representations made by Mr Hutchison as a director, shareholder, employee or contractor of the Company to Mr Wellington as a director or shareholder of the Company were made in trade or commerce, and questions of that kind have also been addressed by the case law. In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; 92 ALR 193; [1990] HCA 17, the High Court considered the position as to statements made by a foreman to a construction worker in giving instructions in the workplace. The plurality observed (at CLR 604) that:

Several cases have considered the status of internal communications within corporate governance. In NRMA Ltd v Yates (2000) 18 ACLC 45; [1999] NSWSC 859, Santow J held that communications between a director of a company and its members about matters relevant to an election were made to influence the corporation’s future trade and commerce, and were within the scope of the prohibition on misleading or deceptive conduct; a different view was taken by Windeyer J in Yates v Whitlam (1999) 32 ACSR 595; [1999] NSWSC 976 and the difference between the two approaches was noted by Austin J in Cleary v Australian Co-Operative Foods (No 2) (1999) 32 ACSR 701; [1999] NSWSC 1062 at 114. Those cases were considered in New Cap Reinsurance Corporation Ltd v Daya (2008) 66 ACSR 95; [2008] NSWSC 64 where Barrett J held that representations made during a board meeting by officers and employees of a company to its directors were wholly internal to the company and were not made “in trade or commerce”, but took a different view in respect of representations made to a due diligence committee meeting which involved persons external to the company.

In Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343, the Court of Appeal (Campbell JA; Hodgson and McColl JJA agreeing) considered, inter alia, the question of whether loans obtained by an individual and a company he controlled for investment with a third party was conduct “in trade or commerce” for the purpose of s 51AC of the Trade Practices Act 1974 (Cth) (“TPA”). Campbell JA observed (at 247) that:

In Vanguard Financial Planners Pty Ltd v Ale (2018) 125 ACSR 1; [2018] NSWSC 314 at [202]ff, I held that certain representations as to accounts between shareholders in a company were not in trade or commerce. I also reviewed the applicable principles in Re Orix Australia Corporation Ltd [2020] NSWSC 1770 at [31].

Mr Wellington’s claims also, inevitably, raise questions of whether he suffered loss by reason of the allegedly misleading conduct. The principles applicable to causation in a misleading and deceptive conduct case were set out by the High Court in Gould v Vagellas (1985) 157 CLR 215 (“Gould v Vagellas”) at 236, where Wilson J observed that:

That approach was followed by the Full Court of the Federal Court in Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233 at 240-241 and by Roberts-Smith J in SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 at [400]. Mr Bulley also refers to the observations of the Full Court of the Federal Court in Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274; (1988) 84 ALR 700 at 712-713, in respect of a predecessor provision in the Trade Practices Act 1974 (Cth), that:

In Lin v Zheng at [50]-[53], after noting the passage from Gould v Vaggelas to which I referred above, Payne JA observed that:

I also recognise that Mr Wellington puts his case, in respect of the loans that he made to the Company, as a “no transaction” case and I bear in mind the observations of Ward CJ in Eq (as the President then was) in Stav Investments Pty Ltd v Taylor [2022] NSWSC 208 at [541] as to the nature of a “no transaction case”, that the plaintiff(s) in such a case should:

Turning to the first of the pleaded representations, Mr Wellington pleads (ASOC [8]) that:

Mr Hutchison denies (Defence [6]) the representation pleaded in ASOC [8a]; he denies ASOC [8b] and ASOC [8c] but says he provided a breakdown of estimated costs for two models for the Avalon air show; he denies ASOC [8d] but pleads, not very differently, that he had a plan to have a full size airframe (static, not flying) for Oshkosh; he denies ASOC [8e] but pleads, again not very differently, that a breakdown of the estimated cost would be $120,150; he denies ASOC [8f] and pleads that he proposed he work full-time if the project was to go ahead and he receive $1750 per week, implicitly challenging the characterisation of that payment as a salary; and he denies ASOC [8g] and ASOC [8h], although it appears to have been contemplated that Mr Wellington would in fact fund the Company’s development of the Aircraft. It is not necessary to reach a finding as to the dispute as to the content of the pleaded representation given the findings that I reach below as to this claim. Mr Wellington then pleads (ASOC [9], denied Defence [7]) that he relied on the First Representations.

As Mr Bell notes, while the pleaded representation refers to 7 November 2018, it is particularised by reference to the email dated 27 November 2018 (Ex P1, CB 66) to which I referred above. Mr Bulley addresses this representation and other representations together in submissions. Mr Bell responds that the email dated 27 November 2018 is “merely an estimate of costs based on what is known at that point in time” and that “[a] reasonable person would know these were merely ballpark figures and ballpark estimates because nothing had been determined at that stage.” Mr Bell also submits that Mr Wellington was then prepared to invest at least $500,000 plus the cost of models and air shows and had already decided to and agreed to invest or loan money to the Company and did not rely on what Mr Hutchison is alleged to have represented. I have not accepted, in my review of the evidence above, that Mr Wellington made an unconditional commitment to investing that amount, as distinct from indicating his willingness to invest on the basis of a review, inter alia, of interest in the proposed Aircraft at the air shows. Mr Bell also submits that Mr Hutchinson gave an estimate of three months to build two models for the Avalon air show in this email; Mr Wellington only provided funds at the end of December 2018, leaving only two months to complete two models; and there was not enough time to complete the second model and the parts of the second model were stored in the workshop (Hutchison 6.7.23 [74]).

It is not clear from the Amended Statement of Claim whether Mr Wellington brings a direct representational case against Mr Hutchison, or only relies on the representation pleaded in ASOC [8] to support his pleaded claim against the Company and his pleaded accessorial claim against Mr Hutchison, although he sought relief against Mr Hutchison which assumed a representational claim and not only an accessorial claim had been brought against him. To the extent that such a claim was brought against Mr Hutchison in respect of the First Representations, it cannot succeed for the reasons noted below.

Mr Wellington pleads (ASOC [57], denied Defence [44]) that, relevantly, the First Representations were made by Mr Hutchison in his capacity as a director of the Company; were made in trade and commerce; and were representations as to future matters. Assuming, without deciding, that the First Representations were made, they were not made by Mr Hutchison as a director of the Company which was not incorporated until 17 December 2018. I accept that any such representations were made by Mr Hutchison in trade or commerce in respect of a possible investment in the development of the Aircraft. I address the question whether the particular representations were representations as to future matters below. Mr Wellington then pleads (ASOC [58], denied Defence [44]) that, by s 4 of the ACL, each of the First Representations were misleading. He does not seek to falsify those representations on any other basis.

Turning now to the several pleaded representations, it seems to me that the representation pleaded at ASOC [8a] relates to Mr Hutchison’s then belief in the merit of the Aircraft and should not be characterised as a representation as to the future. Mr Wellington did not submit and the evidence does not establish that the proposed design and development of the Aircraft lacked merit and this representation is not falsified.

It seems to me that the representation pleaded at ASOC [8b] relates to Mr Hutchison’s then plans for the Avalon air show and should not be characterised as a representation as to the future. It is not falsified on that basis. If (contrary to my view) that representation should be characterised as a representation as to the future, it seems to me that Mr Hutchison’s evidence of the design drawings that he had already done and his experience in aircraft modelling sufficiently supported his stated plan to show two models of the Aircraft at that air show. I address the limited extent to which he fell short of that plan below. It seems to me that the representation pleaded at ASOC [8c] relates to a future matter, but it is directed to building two scale models of the Aircraft for the Avalon air show and not a flying Aircraft. I have referred above to Mr Hutchison’s evidence that he had already done some design drawings of the Aircraft and to his substantial experience with aircraft models. I am satisfied that Mr Hutchison has led evidence that he had sufficient experience and prepared a sufficient breakdown of forecast costs to establish reasonable grounds for the plan to build two Aircraft models and the costs estimates referred to at ASOC [8c], given the limited nature of the task. In the event, Mr Hutchison built one (but not two) scale model of the Aircraft in time for the Avalon air show.

It seems to me that the representation pleaded at ASOC [8d] relates to Mr Hutchison’s then plans for the Oshkosh air show and should not be characterised as a representation as to a future matter. It is not falsified on that basis. If (contrary to my view) that representation should be characterised as a representation as to the future, it seems to me that Mr Hutchison’s evidence of the design drawings that he had already done and his experience in aircraft modelling again sufficiently supported his stated plans for building a non-flying full-size model for the Oshkosh air show. It seems to me that the representation pleaded at ASOC [8e] relates to a future matter, but it is directed only to building a non-flying full-size model of the Aircraft for the Oshkosh air show and not to a flying Aircraft. I have referred above to the evidence that Mr Hutchison had already done design drawings of the Aircraft and to his aircraft modelling experience. I am satisfied that Mr Hutchison has led evidence that he had sufficient experience and prepared a sufficient breakdown of forecast costs to establish reasonable grounds for the plan to build a non-flying full-size model of the Aircraft for the Oshkosh air show and for the costs estimate referred to at ASOC [8e]. That full-size model was ultimately not built in time, at least in part by reason of a lack of skilled labour to assist Mr Hutchison in that task.

I am not satisfied that the representations in respect of ASOC [8f] or [8g] were made using the term “salary” to refer to an employment relationship or so as to accept that Mr Hutchison was an employee rather than a contractor. In any event, they are not falsified on the findings that I reach below and the representation as to the amount payable to Mr Hutchison weekly was true. I am satisfied that Mr Hutchison has led evidence to establish reasonable grounds for the representation at ASOC [8h] where the project could only be funded with Mr Wellington’s funding. It follows that the representations pleaded at ASOC [8], to the extent they were made, have not been falsified.

Mr Wellington then pleads (ASOC [59], denied Defence [44]) that:

Mr Wellington pleads (ASOC [60]-[61], denied Defence [44]) that he relied on each of the pleaded representations including the First Representations and that, by reason of the Company’s misleading and deceptive conduct, Mr Wellington has suffered loss and damage, particularised by his loans made to the Company. This claim also cannot succeed given the findings that I have reached above. Mr Wellington also pleads (ASOC [62], denied Defence [44]) that Mr Hutchison was a person involved in making each of the pleaded representations including the First Representations. This claim cannot succeed in respect of the First Representations where a claim of misleading and deceptive conduct has not been established and an accessorial claim cannot then succeed.

Turning to the second of the pleaded representations, Mr Wellington pleads (ASOC [10]) that:

Mr Hutchison (Defence [8]) denies the non-disclosure pleaded in ASOC [10a]; admits ASOC [10b]-[10d]; and says that he showed Mr Wellington the design of the proposed aircraft prior to the Company being incorporated. Mr Wellington then pleads and Mr Hutchison denies (ASOC [11], Defence [9]) that Mr Wellington relied on the Omission Representations.

Mr Bulley submits that:

Mr Bell responds that Mr Wellington had already seen the design for the Aircraft in late November or early December 2018, a matter that I have not found it necessary to decide above; that neither Mr Hutchinson nor Mr Wellington had given thought to the ownership of the design of the Aircraft, parts or components or to the licensing of intellectual property; and that it was not reasonable for Mr Wellington to expect Mr Hutchinson to provide this information to him when Mr Hutchison did not know it himself and Mr Wellington had not given any thought to it.

It is again not clear from the Statement of Claim whether Mr Wellington brings a direct representational case against Mr Hutchison in respect of this claim, or only relies on the omissions pleaded in ASOC [10] to support his pleaded claim against the Company and his pleaded accessorial claim against Mr Hutchison, although he again sought relief against Mr Hutchison which assumed a representational claim and not only an accessorial claim had been brought against him. To the extent that such a claim was brought against Mr Hutchison in respect of the Omission Representations, it cannot succeed for the reasons noted below.

Mr Wellington pleads (ASOC [57], denied Defence [44]) that the Omission Representations were made by Mr Hutchison, in his capacity as a director of the Company; were made in trade and commerce; and were representations as to future matters; and (ASOC [58], denied Defence [44]) that, by s 4 of the ACL, the Omission Representations are taken to be misleading. As at 27 November 2018, these representations were not made by Mr Hutchison as a director of the Company, which did not exist until 17 December 2018, and the claim against the Company cannot succeed prior to that date for that reason. It is not necessary to decide whether the pleaded omissions were made by Mr Hutchison as a director of the Company or can be attributed to the Company after that date, or were made in trade or commerce rather than in the Company’s internal affairs, given the findings that I reach on other grounds below. In closing submissions, Mr Bulley rightly abandoned any claim that the Omission Representations were representations as to a future matter, so s 4 of the ACL does not apply to them.

Turning now to the pleaded omissions, Mr Wellington does not plead or establish that, at any point up to mid-2022, Mr Hutchison had in fact already designed the whole Aircraft or a substantial part of it, so far as non-disclosure of that matter is alleged by ASOC [10a]. That has not been established on the evidence at the pleaded date of the First Representations, 27 November 2018, where Mr Hutchison had only prepared several design or conceptual drawings, drawn a picture of the proposed Aircraft and made a basic foam model of it between November and mid-December 2018. Even apart from the question of what was completed by 27 November 2018, I do not accept that what had been done by Mr Hutchison at that date amounted to the design of the whole Aircraft or a substantial part of it, given the amount of work that remained to be done to complete that design, as is apparent from the chronology I set out above. Where that proposition is not established, a failure to disclose it was not misleading or deceptive at that date. Mr Wellington was then made aware of the progress of the design and development of the Aircraft after the Company was established.

In respect of ASOC [10b], it seems to me that, as at 27 November 2018, Mr Hutchison’s design or conceptual drawings of the Aircraft, the picture of it and the foam model could also not be fairly characterised as a design of parts of, or components of the Aircraft, where they focussed on its overall shape and not its component parts, which would be the subject of the detailed work that was later required. Where that proposition is also not established at that date, a failure to disclose it was also not misleading or deceptive at that date. After that date, it was plainly apparent to Mr Wellington that Mr Hutchison was designing parts or components of the Aircraft and there was no later failure to disclose that matter.

In respect of ASOC [10c]-[10d], Mr Wellington does not plead or establish that, until late 2021, Mr Hutchison had formed any intention or had any understanding that he would retain ownership of the design for the Aircraft or its parts or its components, or licence intellectual property to the Company, and the evidence indicates that he likely formed that intention or understanding when the Company drew attention to the legal advice it had received that he likely owned the relevant intellectual property and sought an assignment of it to confirm the Company’s ownership of it. It is not apparent how a failure to disclose an intent or understanding that Mr Hutchison did not then have prior to that date could be misleading or deceptive, and it must have been apparent to Mr Wellington that Mr Hutchison was moving toward that position from late 2021 onwards.

For these reasons, I am not persuaded that Mr Wellington has established that any omission to disclose these matters was misleading or deceptive or likely to mislead or deceive, and a claim against Mr Hutchison or the Company on that basis cannot succeed on that basis. It is therefore not necessary to address Mr Wellington’s further claims that he relied on the Omission Representations (ASOC [60], denied Defence [44]); by reason of the Company’s misleading and deceptive conduct, he suffered loss and damage, particularised by his loans made to the Company (ASOC [61], denied Defence [44]); or his further claim put in Mr Bulley’s submissions for costs associated with the appointment of Mr Vardy as receiver to the Company. Mr Wellington also pleads (ASOC [62], denied Defence [44]) that Mr Hutchison was a person involved in making the Omission Representations. This claim cannot succeed where the claim against the Company of misleading and deceptive conduct has not been established and an accessorial claim cannot then succeed.

Third, Mr Wellington pleads (ASOC [12]) that, between 27 November 2018 and 17 December 2018, Mr Hutchison and Mr Wellington formed an agreement for the development and commercialisation of the Aircraft (“Agreement”) and (ASOC [13]) that:

Mr Hutchison responds (Defence [11]) by denying the Agreement pleaded and contending that the terms of the Agreement were that a new company would be incorporated for the purpose of building the models and Aircraft and to assess their commercial potential; Mr Hutchison and Mr Wellington would be equal shareholders and directors; Mr Hutchison would work full time to build the models and Aircraft; he would be paid $1750 per week; Mr Wellington would provide the funds for the Company; and the Company would reimburse the funds back to Mr Wellington when and if it was able to. Mr Bell submits that the terms of the Agreement are broadly admitted, other than that Mr Hutchison was to be paid a salary (as a basis for the assertion of Mr Hutchison being an employee) and that Mr Wellington would assist with ideas. Mr Bell further submits that there is no misrepresentation.

To the extent that there is a difference between the parties as to the terms of the Agreement, I accept that the Agreement did not commit the parties to commercialising the Aircraft until its feasibility was established, but it also did not leave either shareholder free to take the Aircraft for himself or itself after the Company had funded its development; I think it unlikely that the parties had specifically addressed or then agreed whether Mr Hutchison would be paid a salary as an employee or treated as an independent contractor, and it is plain that they had not then recognised any significance of that matter for ownership of intellectual property developed by Mr Hutchison; and it is not necessary to decide whether they had then agreed that Mr Wellington would fund the Company by loan where a loan agreement was later executed and there was no apparent commercial alternative to that course if Mr Hutchison’s equity in the Company was not to be diluted by interests associated with Mr Wellington contributing further funds as equity. Mr Wellington pleads (ASOC [14]) that he relied on the Agreement Representations.

It is again not clear from the Amended Statement of Claim whether Mr Wellington brings a direct representational case against Mr Hutchison in respect of this claim, or only relies on the representations pleaded in ASOC [13] to support his pleaded claim against the Company and his pleaded accessorial claim against Mr Hutchison, although he again sought relief against Mr Hutchison which assumed a representational claim and not only an accessorial claim had been brought against him. If such a claim is brought, it seems to me that Mr Wellington has not falsified the pleaded Agreement Representations, to the extent that they were made by Mr Hutchison, for the reasons noted below.

Mr Wellington then pleads (ASOC [57], denied Defence [44]) that, relevantly, the Agreement Representations were made by Mr Hutchison, in his capacity as a director of the Company; were made in trade and commerce; and were representations as to future matters. Assuming, without deciding, that the Agreement Representations were made, they were not made by Mr Hutchison as a director of the Company, which did not exist until 17 December 2018, and the claim against the Company cannot succeed for that reason. I accept that the pleaded representations were likely made by Mr Hutchison in trade or commerce in respect of a possible investment in the project. It seems to me that they were not representations as to the future but rather as to the then terms of the alleged Agreement.

Mr Wellington then pleads (ASOC [58], denied Defence [44]) that, by s 4 of the ACL, each of these representations are taken to be misleading. That claim must also fail where the representations do not relate to future matters, but the terms of a present agreement, and the Plaintiffs do not seek to falsify them on any other basis. In any event, it appears that it is now common ground that ASOC [13a]-[13c] of the pleaded representations were true; any issue as to ASOC [13d] relates only to whether the amount paid to Mr Hutchison would be treated as a salary paid to an employee or remuneration paid to an independent contractor and the pleaded representation has not been falsified given my findings below; and ASOC [13e]-[13h] also accurately represented the parties’ arrangements.

Mr Wellington then pleads (ASOC [59], denied Defence [44]) that:

Mr Wellington pleads (ASOC [60], denied Defence [44]) that he relied on each of the pleaded representations including the Agreement Representations. It is not necessary to decide that question where these representations have not been falsified. Mr Wellington also pleads (ASOC [61], denied Defence [44]) that, by reason of the Company’s misleading and deceptive conduct, he has suffered loss and damage, particularised by his loans made to the Company. This claim cannot succeed given the findings that I have reached above. Mr Wellington also pleads (ASOC [62], denied Defence [44]) that Mr Hutchison was a person involved in making each of the pleaded representations including the Agreement Representations. This claim must also fail in respect of the Agreement Representations where a claim against the Company for misleading and deceptive conduct has not been established and an accessorial claim cannot then succeed.

Fourth, Mr Wellington pleads (ASOC [25], denied Defence [21]) that, at the Avalon air show (in late February and early March 2019), Mr Hutchison represented to Mr Wellington that the Aircraft would be flying within the next 12 months (“First Flying Representation”). As I noted above, Mr Wellington relies on his evidence (Wellington 27.10.22 [35]-[36]) that Mr Hutchison informed him and attendees at the Avalon air show that “[w]e are aiming to have a protype of the Aircraft air-ready and flying within the next 12 months, probably by February 2020”.

Mr Bulley also refers to Mr Hutchison’s evidence in cross-examination, where he said that he could not recall making that statement (T214) but later accepted that the “plan” was to have the Aircraft flying by that time (T221). Mr Wellington pleads (ASOC [26], denied Defence [21]) that he relied on the First Flying Representation. In closing submissions, Mr Bulley also refers to the evidence on which Mr Wellington relies for this representation and submits the representation was as to a future matter. Mr Bell responds that Mr Hutchison’s evidence is that he said that “[w]e hope to get a kit ready by mid-2020” (Hutchison 20.3.23 [17]); that Mr Wellington leads no evidence from any interested customer of what was said at the Avalon air show; and that Mr Wellington should not be believed as to what was said at the Avalon air show. Mr Bell concludes that “[i]t does not make sense that Mr Hutchison would make a representation like it was alleged to have been made to Mr Wellington and to interested customers [and h]e would be more cautious.”

It is again not clear from the Amended Statement of Claim whether Mr Wellington brings a direct representational case against Mr Hutchison, or only relies on the representation pleaded in ASOC [25] to support his pleaded claim against the Company and his pleaded accessorial claim against Mr Hutchison, although he again seeks relief against Mr Hutchison which assumed a representational claim and not only an accessorial claim had been brought against him. If he brings such a claim against Mr Hutchison, it cannot succeed because I find that Mr Hutchison did not make an unqualified representation in the form pleaded. It seem to me plain that both Mr Hutchison and Mr Wellington knew the complexities and uncertainties involved in developing a flying prototype of the Aircraft, and the many adverse contingencies that obviously could and in fact did cause delay in the Aircraft’s design (using that term in a wider sense than Mr Hutchison uses it) and construction. The statements made by Mr Hutchison in an oral discussion with Mr Wellington as to the timing of a flying Aircraft prototype were impliedly qualified by the complexities and uncertainties known to both of them. Mr Hutchison’s not reminding Mr Wellington of the obvious in each such discussion did not give rise to the pleaded unqualified representation, particularly where Mr Wellington’s own evidence is that Mr Hutchison here used qualified language such as “aiming” and “probably”. I also find below that Mr Wellington did not rely on the pleaded unqualified representation and it did not cause him loss.

Mr Wellington then pleads (ASOC [57], denied Defence [44]) that, relevantly, the First Flying Representation was made by Mr Hutchison, in his capacity as a director of the Company; was made in trade and commerce; and was a representation as to future matters. I accept this representation (if made) was made by Mr Hutchison in his capacity as a director of the Company. On balance, I accept that this representation (if made) was made in trade or commerce, where it was made in the commercial setting of the Avalon air show, although the question of the likely completion date of the Aircraft was also an important question to be addressed between the Company’s directors and shareholders in its internal management. I also accept that the representation (if made) was a representation as to a future matter.

Mr Wellington then pleads (ASOC [58], denied Defence [44]) that, by s 4 of the ACL, this representation is taken to be misleading. Mr Bulley addresses the operation of this section in closing submissions, in respect of several representations of this kind, as follows:

Mr Bell responds by reference to Mr Hutchison’s experience in building and designing aerial vehicles (Hutchison 6.7.23 [35]-[39]); he submits that there was no challenge as to Mr Hutchison’s experience in designing and building aerial vehicles; that Mr Hutchison based his estimate of the work to be done in building models on unmanned aerial vehicles that he had built at Sydney University and other models including the panels for a small size replica of a DC-10; and that there was also no challenge to this evidence. He submits that, on that basis, Mr Hutchinson had a proper basis for his estimates and “the Court should accept that Mr Hutchison made reasonable estimates as to time and cost based on his experience.” He also submits that the budgets prepared by Mr Hutchison were only “an estimate based on other factors occurring”, and the basis of the budgets were set out in them. Mr Bell also submits that the delays in the development of a flying prototype of the Aircraft resulted from a lack of skilled workers to assist Mr Hutchison and submits that Mr Wellington “knew at all times that competent, skilled staff were needed [and h]e knew that they were not located employed.”

Had I found the pleaded representation to have been made in the unqualified form pleaded, I would have that found that it was taken to be misleading, where it seems to me that Mr Hutchison has not led evidence that established reasonable grounds for this prediction. While I have recognised the evidence of Mr Hutchison’s qualifications and experience above, it seems to me that they would be insufficient to support an unqualified representation as to the completion date of a flying Aircraft prototype (as distinct from earlier non-flying models of the Aircraft) where there is no evidence that he undertook any structured assessment of the steps and components necessary to build a flying prototype or the order in which they would be undertaken and built or how delays in any one step would affect other steps.

Mr Wellington then pleads (ASOC [59], denied Defence [44]) that:

Mr Wellington pleads (ASOC [60], denied Defence [44]) that he relied on each of the pleaded representations including the First Flying Representation. Mr Bulley in turn emphasises Mr Wellington’s evidence that “he relied upon each and every of the representations made by Mr Hutchison”. Mr Bell responds that:

I am not satisfied that Mr Wellington’s reliance on the pleaded unqualified representation, if it were made, is established. Mr Wellington was a sophisticated and experienced businessman and, to his credit, he frankly acknowledged in his evidence in cross-examination (to which I referred above) that he had recognised the several material risks that would have undermined the pleaded unqualified representation.

Mr Wellington also pleads (ASOC [61], denied Defence [44]) that, by reason of the Company’s misleading and deceptive conduct, he has suffered loss and damage, particularised by his loans made to the Company. This claim cannot succeed where I am not satisfied that the pleaded unqualified representation was made and Mr Wellington had recognised the relevant risk and continued making loans after the delays and difficulties with the development of the Aircraft emerged. Mr Wellington again pleads (ASOC [62], denied Defence [44]) that Mr Hutchison was a person involved in making each of the pleaded representations including the First Flying Representation. It is not necessary to decide this claim where his claim against the Company on this basis has not been established and an accessorial claim cannot then succeed.

Fifth, Mr Wellington pleads (ASOC [27]) that, on 5 March 2019, Mr Hutchison represented that there was an increase in the cost required to attend the Oshkosh air show, from $120,150 to $169,950 (“Oshkosh Budget Representation”) and that he relied on this representation (ASOC [28]). Mr Hutchison responds (Defence [22]) that on 5 March 2019 he provided Mr Wellington with a rough draft Oshkosh budget and otherwise denies the pleaded representation.

Mr Bulley refers to the evidence on which Mr Wellington relies for this representation and submits the representation was as to a future matter. Mr Bell responds that the budget was merely an estimate and Mr Hutchison’s estimate was based on the assumptions in the budget; it is a statement of Mr Hutchison’s belief or opinion based on the calculations in the budget and on his experience and not a representation of fact; there is no evidence that the calculations made at the time are incorrect; and a worker assisting Mr Hutchison fell ill and the full-size non-flying model of the Aircraft could not be produced on time.

I deal with this claim more briefly where it overlaps with claims that I have addressed in more detail above. I accept that a representation substantially to this effect was made by Mr Hutchison’s email with a further budget for the Oshkosh air show (Wellington 27.10.22 [40], CB 117). I also accept that, as Mr Wellington contends, this representation was made by Mr Hutchison in his capacity as a director of the Company. However, it seems to me that, by contrast with a representation made at an air show, it was made in the Company’s internal management and not in trade or commerce, where the questions of the cost of attendance at this air show needed to be addressed between the Company’s directors and shareholders in its internal management. To the extent that this was a representation as to a future matter rather than a representation of Mr Hutchison’s then opinion, it seems to me that Mr Hutchison has led evidence that establishes reasonable grounds for it having regard to his experience in the field and the relatively detailed breakdown of the components of the budget. I am also not persuaded that Mr Wellington gave any significant weight to this matter, which was one component of a more substantial project, in making further loans to the Company.

For these reasons, this claim cannot succeed against Mr Hutchison (if a direct representational claim is brought against him) or against the Company. The accessorial claim against Mr Hutchison cannot succeed where the claim against the Company does not succeed.

Sixth, Mr Wellington pleads (ASOC [30], denied Defence [25]) that, during the Oshkosh air show, Mr Hutchison represented to Mr Wellington that the Aircraft would be flying by February 2020 (“Second Flying Representation”). As I noted above, Mr Wellington relies on his evidence (Wellington 27.10.22 [46]-[47]) that Mr Hutchison informed him and attendees at the Oshkosh air show that “[w]e are confident that we will have a flying version of the aircraft in the next 12 months” and that “[t]he aircraft will be flying by February 2020.”

Mr Bulley refers to the evidence on which Mr Wellington relies for this representation; points out that, in cross-examination, Mr Hutchison denied making any representations to this effect (T220) but, as noted above, accepted that it was the “plan” that a version of the Aircraft would be flying by February 2020 (T221); and submits the representation was as to a future matter. Mr Bell responds that Mr Hutchison was hoping to have the Aircraft flying prior to Oshkosh 2020, in about February 2020, and that fits in with having a kit available for sale in July at Oshkosh 2020; Mr Hutchison did not make the representation; and, if he did, Mr Wellington had already agreed to fund development of the Aircraft. I have found above that Mr Wellington’s offer of funding contemplated review of, inter alia, the level of public interest in the Aircraft at the air shows.

I again deal with this claim more briefly where it overlaps with claims that I have addressed in more detail above. I recognise that this representation is in less qualified language than the First Flying Representation, where Mr Wellington attributes the term “confident” to Mr Hutchison. Assuming, without deciding, that term was used, it seems to me that the statements made by Mr Hutchison in an oral discussion as to the timing of a flying Aircraft with Mr Wellington were nonetheless again impliedly qualified by the risks, complexities and uncertainties known to both of them, and Mr Wellington could not have understood Mr Hutchison’s confidence to have displaced those risks. An unqualified representation in the terms pleaded is therefore not established. I am also not persuaded that Mr Wellington relied on such a representation for the reasons noted above in respect of the First Flying Representation. This claim otherwise raises the same issues as the First Flying Representation and cannot succeed for the same reasons.

Seventh, Mr Wellington pleads (ASOC [32]) that, on 8 August 2019, Mr Hutchison represented to Mr Wellington that the cost to design and develop the Aircraft to the stage of a flying prototype would be $220,600 and that the Aircraft would be flying by February 2020 (“Flying Prototype Representations”). Mr Hutchison responds (Defence [26]) that, on 8 August 2019, he forwarded a budget breakdown for a flying prototype to February 2020 and otherwise denies the pleaded representation. I have addressed the emails and budgets relating to this claim in the chronology set out above. Mr Wellington then pleads (ASOC [33], denied Defence [27]) that he relied on the Flying Prototype Representations.

Mr Bulley refers to the evidence on which Mr Wellington relies for this representation and submits that the representation was as to a future matter. Mr Bell responds that the document referred to does not make the allegations pleaded; that it is a budget and estimate providing an arithmetical total based on the calculations contained in it; that the estimate of costs to February 2020 was directed to the position where the Aircraft was to be flying by that date; that the budget is an internal document and not provided in trade and commerce; it is not a representation of fact but an estimate or opinion based on Mr Hutchison’s experience and the calculations in the document; that it assumes skilled staff available to do the work required, who were not available; and that Mr Wellington did not rely on the document to provide funds in any event, since he had already agreed to fund the construction of the Aircraft.

I again deal with this claim more briefly where it overlaps with claims that I have addressed in more detail above. It is again not clear from the Amended Statement of Claim whether Mr Wellington brings a direct representational case against Mr Hutchison, or only relies on the representation pleaded in ASOC [32] to support his pleaded claim against the Company and his pleaded accessorial claim against Mr Hutchison, although relief was sought against Mr Hutchison which assumed a representational claim and not only an accessorial claim had been brought against him. If Mr Wellington brings such a claim, it cannot succeed since the representation was not made in the unqualified form pleaded, for the same reasons that the First Flying Representation and the Second Flying Representation were not made in unqualified form; it seems to me that it was not made in trade or commerce, for the reason noted below in respect of the claim against the Company; and Mr Wellington did not rely on such a representation and it did not cause him loss.

Mr Wellington then pleads (ASOC [57], denied Defence [44]) that, relevantly, the Flying Prototype Representations were made by Mr Hutchison, in his capacity as a director of the Company; were made in trade and commerce; and were representations as to future matters. I accept that, if these representations had been made in the form pleaded, they would have been made by Mr Hutchison as a director and shareholder of the Company to Mr Hutchison also as a director and shareholder of the Company. By contrast with representations made in the commercial setting of air shows, I do not accept that this representation would have been made in trade or commerce, where the questions of the cost to design and the likely completion date of the Aircraft needed to be addressed between the Company’s directors and shareholders in its internal management. While I recognise that these matters were relevant to Mr Wellington’s decisions as to future funding of the Company, the same could be said of all significant internal discussions between Mr Hutchison and Mr Wellington as the Company’s directors and shareholders and it does not follow that all such discussions were in trade or commerce for that reason.

I accept that this representation, had it been made in the unqualified form pleaded, would have been a representation as to the future. Mr Wellington pleads (ASOC [58], denied Defence [44]) that, by s 4 of the ACL, these representations are taken to be misleading. I accept that Mr Hutchison has led evidence that would have established reasonable grounds for this budget, had it been made against an assumed completion date, given his experience and subject to the uncertainties that Mr Wellington had recognised. However, it seems to me that Mr Hutchison’s evidence would not establishes reasonable grounds for an unqualified prediction of the completion date for a flying prototype where (as I noted above) there is no evidence that he undertook structured assessment of the steps and components necessary to build a flying prototype, or the order in which they would be undertaken and built and how delays in any one step would affect other steps. Any unqualified representation as to that matter would have been undermined by the obvious complexity of the construction of a prototype electric aircraft and the many adverse contingencies that obviously could and in fact did cause delay in the Aircraft’s design and construction. This finding does not assist Mr Wellington, where I have found that these representations were qualified by his and Mr Hutchison’s shared knowledge of that complexity and those contingencies were equally obvious to Mr Wellington and were recognised by him.

Mr Wellington again pleads (ASOC [59], denied Defence [44]) that:

Mr Wellington also again pleads (ASOC [60], denied Defence [44]) that he relied on each of the pleaded representations including the Flying Prototype Representations. That proposition is also not established where, as I noted above, Mr Wellington acknowledged in cross-examination that he had recognised the several material risks that later undermined this budget and anticipated completion date. Mr Wellington again pleads (ASOC [61], denied Defence [44]) that, by reason of the Company’s misleading and deceptive conduct, he has suffered loss and damage, particularised by his loans made to the Company. This claim also cannot succeed where he recognised the relevant risks and continued making loans after the delays and difficulties with the development of the Aircraft emerged.

Mr Wellington then pleads (ASOC [62], denied Defence [44]) that Mr Hutchison was a person involved in making each of the pleaded representations including the Flying Prototype Representations. An accessorial claim cannot succeed where Mr Wellington has not established this claim against the Company.

Eighth, Mr Wellington pleads (ASOC [34], denied Defence [27]) that, on 9 August 2019, Mr Hutchison repeated the First Flying Representation, the Second Flying Representation, and the Flying Prototype Representations. The claim put on this basis cannot succeed for the same reasons that the claims in respect of any repeated representations have not succeeded.

Ninth, Mr Wellington pleads (ASOC [37]) that, on 18 November 2019, Mr Hutchison represented to him that the then cost to design and develop the Aircraft to the stage of a flying prototype would be $122,700; that most of the moulding was complete and that the Company would be making parts shortly; and that the Aircraft would be flying by February 2020 (“Second Flying Prototype Representations”). Mr Hutchison responds (Defence [29]) that he provided an updated budget to Mr Wellington on 18 November 2019; he denies the representation as to the cost of a flying prototype; he admits that he represented that most of the moulding was complete and that the Company would be making parts shortly; and denies that he represented that the Aircraft would be flying by February 2020. I referred to the relevant email and attached budget in the chronology of events set out above.

Mr Bulley again refers to the evidence on which Mr Wellington relies for this representation and submits that the representation was as to a future matter. Mr Bell largely repeats his submissions as to the First Flying Prototype Representations and adds that Mr Wellington had been informed on 28 October 2019 of the need for two to three skilled staff (Ex P1, CB 226), a matter that I address below.

I also deal with this claim more briefly where it overlaps with claims that I have addressed in more detail above. It seems to me that Mr Hutchison has led evidence that establishes reasonable grounds for this costs estimate having regard to his experience in the field and the relatively detailed breakdown of the components of the budget and the representation as to the position as to the moulding and making of parts have a reasonable basis on the evidence. By this time, Mr Hutchison had also drawn Mr Wellington’s attention in his 28 October 2019 email (Ex P1, 226) to the fact that he did not see the Aircraft as flying by February 2020 as matters then stood, at least without the assistance of additional qualified staff. The pleaded claim in respect of the date the Aircraft would be flying cannot succeed for that reason and must also fail for the same reasons that the claim in respect of the Flying Prototype Representations failed.

Tenth, Mr Wellington pleads (ASOC [41], denied Defence [33]) that, in around February 2020, Mr Hutchison represented to Mr Wellington that the Aircraft would be flying by the time of the Oshkosh air show in 2020 (“Third Flying Representation”). This claim refers to the email exchange between Mr Wellington and Mr Hutchison in February 2020 (Ex P1, 235) that I addressed in the chronology of events above. That email records Mr Wellington’s understanding that Mr Hutchison was then indicating that the Aircraft would be flying by the next Oshkosh air show in mid 2020, rather than by February 2020 as had previously been foreshadowed.

Mr Bulley again refers to the evidence on which Mr Wellington relies for this representation and submits that the representation was as to a future matter. Mr Bell submits that there is no evidence that the representation was made and that it would fall into the same category as the Second Flying Representation if it had been made.

By contrast with representations made in the commercial setting of air shows, I do not accept that any representation of this character (so far as it gave rise to the understanding that Mr Wellington recorded) was made in trade or commerce, where the questions of the cost to design and the likely completion date of the Aircraft needed to be addressed between the Company’s directors and shareholders in its internal management. This claim must also fail for the same reasons the claims in respect of the First Flying Representation and the Second Flying Representation failed.

Eleventh, Mr Wellington pleads (ASOC [46]) that Mr Hutchison did not advise Mr Wellington that there was a “serious problem” with the design, development or demonstration of the Aircraft ("Second Omission Representation”). Mr Wellington does not identify that “serious problem” by way of any pleaded facts and, it appears, was not asked to and did not particularise it. Mr Hutchison responds (Defence [36]) that he kept Mr Wellington informed of the progress of the building of the Aircraft and otherwise does not admit the paragraph.

I had initially understood this claim to relate to the suggested flaw or flaws in the design of the Aircraft to which Mr Tolhurst had drawn Mr Wellington’s and Mr Elkins’ attention, to which I referred above. A claim on that basis could not succeed because the evidence does not establish that such a flaw or problem in fact existed. Where the existence of the pleaded “serious problem” is not established, there is no basis to find that a failure to disclose it is misleading or deceptive.

However, in submissions, Mr Bulley treated this claim as instead relating to the delay in constructing the Aircraft. He submits that Mr Hutchison ought to have acted in a way which did not mislead or deceive as to the progress of the development of the Aircraft; that, prior to February 2020, Mr Wellington’s evidence is that he was not aware that there would not be a flying prototype of the Aircraft by that time (a proposition that, I interpolate, is falsified by the 28 October 2019 email from Mr Hutchison which I noted above); and that, where Mr Wellington and Mr Hutchison were both directors and shareholders in a company specifically incorporated to develop and commercially sell the Aircraft and where Mr Wellington was providing all the funding, a failure on the part of Mr Hutchison to disclose those things was misleading and deceptive. Mr Bell responds that Mr Hutchison had been informed repeatedly of problems with obtaining staff to work on the Aircraft; there were no serious problems with the design and development of the Aircraft other than that skilled staff could not be obtained to build it; and that Mr Wellington did not rely on the omission to provide funds in any event, where he had already agreed to fund the construction of the Aircraft.

There is no evidence that the issues that delayed the development of the Aircraft, and particularly resourcing issues, existed for any significant period before they were apparent to Mr Wellington, and they were recognised by Mr Wellington in his emails concerning the lack of a timeline for completion of the Aircraft and in the communications between Mr Hutchison and Mr Wellington and with KPMG concerning the lack of resources to build the Aircraft to which I referred above. There is no basis to find that a failure to disclose that matter existed or was misleading or deceptive, where I have held that the issues giving rise to delay and the delay itself were apparent to Mr Wellington as those issues developed.

Because Mr Wellington has failed in his several misleading and deceptive conduct claims, it is not necessary to address the further difficulty as to how he could at once recover the loans he made to the Company to fund the development of the Aircraft, and at the same time retain the benefit, as a shareholder in the Company, of any orders that preserved its ability to conduct the development of the Aircraft, implicitly using components which were developed using those loans.

The next question is whether Mr Hutchison was an employee of the Company or an independent contractor to the Company. Mr Wellington, on behalf of the Company, seeks a declaration (ASOC [83A], Relief [14A]) that, by virtue of an employment relationship between the Company and Mr Hutchison, any property that is or relates to the Aircraft that Mr Hutchison designed or developed during his period of employment is property of the Company and an order that he deliver that property to the Company. Mr Wellington pleads (ASOC [18]-[19]) the nature of the work undertaken by Mr Hutchison and alleges that Mr Hutchison received a salary of $1,750 weekly, in accordance with the terms of the pleaded Agreement. Mr Hutchison responds (Defence [16]-[17]) that he “admits he worked full-time to build the models and the electric aircraft until about May 2022” and that he received the equivalent of $1,750 per week from December 2018 until April 2022, but does not accept the description of that remuneration as a "salary" by otherwise denying the paragraph. Mr Wellington in turn pleads (ASOC [19A]) that, between 17 November 2018 when the Company was incorporated and April 2022, Mr Hutchison was employed by the Company. Mr Wellington then pleads (ASOC [83A]) that, by virtue of the employment relationship, property that relates to the Aircraft that Mr Hutchison designed or developed during the period of employment is the Company’s property.

Earlier case law treated the question whether a worker was an employee of a company or an independent contractor to the Company as determined by asking whether the putative employer could control not only what work was to be done but how it was to be done: Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd [1924] 1 KB 762 at 766-768. In Stevens v Brodribb Sawmilling (1986) 160 CLR 16; [1986] HCA 1, Mason J criticised the focus on the control test and observed that the “totality of the relationship” between the parties should be considered, observing (at 28-29) that:

In Hollis v Vabu (2001) 207 CLR 21; [2001] HCA [44 at [24], the High Court (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ) referred to a multifactorial test of employment that had regard to the “totality of the relationship” between the parties. In Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215 at 229-231, the Australian Industrial Relations Commission (Lawler VP, Hamilton DP and Bacon C) referred to a non-exhaustive list of indicia of whether an employment relationship existed, including:

Mr Bell also refers to ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532 at [29], where Perram J observed that:

In Construction, Forestry, Maritime, Mining and Energy Union v Personal Contracting (2022) 398 ALR 404; [2022] HCA 1 (“CFMMEU”), the High Court again considered the question whether a worker was an employee or a contractor. That case was partly directed to the approach to be taken to a written contract in determining that question, but that matter does not arise here where it is not suggested that there was a written employment contract between the Company and Mr Hutchison. However, Kiefel CJ, Keane and Edelman JJ also observed (at [33]) that the multifactorial approach did not provide an external test or requirement by which the materiality of the elements may be assessed. Their Honours also observed (at [34]) that in a test of the “totality of the relationship”:

Their Honours also observed (at [37]-[39]) that the appropriate question is to ask is whether the worker is working in his own business or in the putative employer’s business, and that:

Their Honours emphasise (at [61]) that these matters do not suggest that “it is not appropriate, in the characterisation of a relationship as one of employment or of principal and independent contractor, to consider ‘the totality of the relationship between the parties’ by reference to the various indicia of employment.” They also referred (at [73]) to the importance of the “right to control,” observing that:

Their Honours also referred (at [74]), with approval, to the observation of the High Court (Dixon CJ, Williams, Taylor and Webb JJ) in Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561; [1955] HCA 73 at 571, in holding that a circus trapeze artist was an employee, that:

Gageler and Gleeson JJ in turn observed (at [158]) that the right to control was the most important indicium in a finding of employment, finding by reference to the facts of that case, that:

I also recognise that significant weight is to be given to whether a worker is free to delegate or subcontract performance of the work to other persons, without any qualification or conditions; an employment contract is regarded as one that involves a commitment of personal service; an unlimited power to delegate or subcontract has often been seen as incompatible with that concept; and a qualified or occasional power to delegate or subcontract (for example, only with permission of the hirer) may suggest that the worker is a contractor: Queensland Stations v Federal Commissioner of Taxation (1945) 70 CLR 539; Australian Air Express v Langford (2005) 147 IR 240; Tobiassen v Reilly (2009) 178 IR 213; [2009] WASCA 26; Stewart’s Guide to Employment Law (Federation Press, 7th ed, 2021) at 56; C Sappideen et al, Macken’s Law of Employment (Thomson Reuters, 9th ed, 2022) at 55.

In closing submissions, Mr Bulley refers to aspects of the evidence which I note below and submits that:

Mr Bell responds that there is no evidence that PAYE tax was deducted from Mr Hutchison’s remuneration or that holiday pay was paid or accrued for Mr Hutchison or that workers compensation, superannuation contributions or long service leave was paid or accrued for Mr Hutchison; the Company’s accounts do not indicate that Mr Hutchison was an employee of the Company; Mr Wellington agreed in cross examination that CNC cutting machines used to cut the foam in the development of the Aircraft were owned by Mr Hutchison (T133) that no-one was directing Mr Hutchison’s work on the Aircraft (T134); and Mr Bell concludes that “[c]learly Mr Hutchison was not an employee of the [C]ompany.”

I here have regard to the several matters identified in the case law as relevant to the characterisation of the relationship between the Company and Mr Hutchison. I give significant weight to the question whether Mr Hutchison was working in his own business or in the Company’s business, consistent with the approach taken in CFMMEU. It is plain that he undertook his work activities and the design of the Aircraft within the Company’s business from the point at which it was incorporated. The funding for the work that he performed was provided by the Company; and, from the point at which the Company leased premises, that work was performed in the Company’s premises and the Aircraft components were developed, assembled and stored there. Mr Hutchison directed the work of other Company employees and received administrative and other assistance from them, and there is no suggestion that he did or could provide aircraft design services to third parties. It seems to me plain that the Company had the legal right to control his performance of the work that he did, albeit that the other directors would practically rely on his expertise in aeronautical engineering, and that right was exercised in the context of, initially, a cooperative relationship between the Company’s shareholders and directors. Mr Hutchison was not free to delegate or subcontract the performance of the work to other persons, without any qualification or conditions, where the arrangements plainly contemplated that he personally would work on developing the Aircraft on a full time basis.

It appears that Mr Hutchison provided and maintained some tools or equipment, using his own computer and CNC software that he owned to operate foam cutting equipment, but that appears to have been a pragmatic decision rather than a requirement of his role, where the Company was funded to acquire equipment in situations where Mr Hutchison did not already own it and could make it available. The Company seems to me to have had the right to suspend or dismiss Mr Hutchison, for example, for safety or other reasons, although a decision to do so would have had adverse practical consequences. To the extent that Mr Hutchison dealt with third parties, such as KPMG and suppliers of components, he appears to have represented the Company, rather than identified himself as a contractor to the Company. There is no suggestion that Mr Hutchison spent any significant part of his remuneration on business expenses, which appear to have been paid by the Company.

I recognise that the Company’s accounts (Ex D2) did not treat payments to Mr Hutchison as salary or wages and did not record superannuation contributions made in respect of him, and the amounts paid to him were recorded within research and development costs.

On the other hand, the remuneration paid to Mr Hutchison was characterised as a salary in some other documents. In his breakdown of the costs that would be incurred for the Avalon air show and the Oshkosh air show provided to Mr Wellington on 27 November 2018 (Ex P1, CB 66), Mr Hutchison twice referred to “salary” payable to him weekly. In closing submissions, Mr Bell submits that this document is authored by a layperson, namely Mr Hutchison; he does not refer to employment but used a descriptor of the $1750 per week; and the document merely gives “some idea of Mr Hutchison’s estimates of costing and timing at that very preliminary stage”. A general ledger for the period December 2018 to June 2022 (Ex P3) recorded payments to Mr Hutchison from 1 July 2021 onward, characterised as “wages”, although Mr Hutchison denied any involvement with the preparation of that document in cross-examination. Mr Bell submits that the descriptions are merely a descriptor, not a determination of Mr Hutchinson’s status. Mr Hutchison also did not invoice the Company for the work that he says he performed as contractor, where no such invoices were produced by him in response to a notice to produce (Ex P4). The remuneration paid to Mr Hutchison was also described as “wages” in the narration in his bank statements (Ex P5), which he accepted in cross-examination was likely provided by him at the time that payment was first made (T276). Mr Bell submits that this document is a description of the payment by a layman and is not a determination of Mr Hutchison’s status. It seems to me that these matters have less significance than the Company’s failure to deduct PAYE tax from that remuneration or make superannuation contributions for Mr Hutchison or provide him with paid holidays or sick leave. I treat these matters as relevant to but not determinative of the proper characterisation of the relationship between Mr Hutchison and the Company.

On balance, weighting the factors noted above in the manner indicated in CFMMEU and assessing them in their totality, it seems to me that Mr Hutchison was an employee of and not a contractor to the Company and, to the extent that PAYE tax was not deducted from his remuneration and superannuation contributions were not made for him, that was in error. The fact that Mr Hutchison is a director of the Company does not exclude a conclusion that he is also an employee of the Company: Lee v Lee's Air Farming Ltd [1960] AC 12 as followed in Hamilton v Whitehead (1988) 166 CLR 121; Taxa Australia Pty Limited v Wang [2018] NSWSC 1412 at [91]; C Sappideen et al, Macken’s Law of Employment (Thomson Reuters, 9th ed, 2022) at 62 [2.400].

A consequential question is whether Mr Hutchison or the Company “owned” the intellectual property in the Aircraft, on the basis that Mr Hutchison was an employee of the Company.

Mr Bulley submits that whatever Mr Hutchison designed in November or December 2018 was designed for the purposes of advancing the project that he and Mr Wellington had agreed to commence; he refers to the fact that the Company was incorporated “for the singular purpose of developing and commercialising the Aircraft” and to the arrangement for Mr Wellington to fund the venture and Mr Hutchison would work full-time to develop the Aircraft; and he submits that “[a]ny intellectual property relating to the Aircraft developed by Mr Hutchison or the Company (by his efforts) became the intellectual property of the Company” and “any suggestion by Mr Hutchison that he retained some ownership of any “designs” which may have been created by him prior to the incorporation of the Company ought not… be accepted”.

Mr Bulley also refers to the decisions in Gardex Ltd v Sorata Ltd [1986] RPC 623 (“Gardex”), Concrete Pty Limited v Parramatta Design & Developments Pty Limited (2006) 229 CLR; [2006] HCA 55 (“Parramatta Design”), Gram Engineering Pty Ltd v BlueScope Steel Ltd [2013] FCA 508 (“Gram Engineering") and JR Consulting & Drafting Pty Limited v Cummings [2014] NSWSC 1252 (“JR Consulting") which I address below. He submits that, as I have held above, Mr Hutchison was an employee of the Company pursuant to a contract of service and that the intellectual property relating to the Aircraft belongs to the Company, either by virtue of Mr Hutchison being a director or employee of the Company or pursuant to a contract of service, and refers to evidence of Mr Hutchison’s work with the Company. He submits that Mr Hutchison does not lead any evidence in his affidavits as to the state of design of the Aircraft prior to the Company’s incorporation, other than the drawings attached to his affidavit affirmed 6 July 2023 and notes his acceptance in cross-examination that those drawings were “conceptual” drawings (T203). He also addresses the evidence as to the extent to which the “design” of the Aircraft was developed over time, which I address below.

Mr Bell responds that:

Mr Bell in turn submits that Mr Hutchison was not an employee of the Company, a matter that I have determined above, and the “design” of the Aircraft occurred prior to 17 December 2018. Presumably, that proposition is directed to the design drawings and model of the Aircraft that Mr Hutchison prepared prior to that time, and not to the many software files that were subsequently developed in respect of components of the Aircraft. Mr Bell treats the latter as a “specification of a building part” rather than “design” of the Aircraft, although it is not apparent why the characterisation of property as relating to either “design” or a “specification of a building part” has any significance for its ownership. Mr Bell also points to Mr Hutchison’s lack of focus on the question who “owned” the intellectual property in the Aircraft until a dispute as to that question arose as I noted above.

The parties assumed the correctness of the KPMG intellectual property advice (to which I referred above) and assumed that Mr Hutchison would own intellectual property created while he was a contractor to the Company but, implicitly, not own intellectual property created while he was an employee of the Company, and the Company would own that property. Their approach to evidence was plainly informed by that assumption, where Mr Wellington sought to establish and Mr Hutchison sought to displace an employment relationship. I now turn to the correctness of that assumption.

In Gardex, to which Mr Bulley refers, Falconer J held that a company owned a design created by a company’s managing director who was also an employee under a contract of service. In Victoria University of Technology v Wilson (2004) 60 IPR 392; [2004] VSC 33 (“Wilson”), Nettle J noted at [104] that:

The observations of Nettle J in Wilson were cited with approval by the Court of Appeal (Campbell JA, Spigelman CJ and Allsop P agreeing) in Oates v Consolidated Capital Services Ltd [2009] NSWCA 183 at [142], [154] and by the Full Court of the Federal Court in University of Western Australia v Gray (2009) 259 ALR 224; [2009] FCAFC 116 at [150].

In a detailed review of the relevant principles in University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498 (“Gray”), which was subsequently upheld by the Full Court, French J observed (at [130]) that the character of a contract as a contract of employment does not of itself require the implication of a term that would prevent an employee from taking the benefit of an invention made by the employee during the term of service even if made in part in the employer’s time and using some of the employer’s human and material resources. However, his Honour went on to observe that:

In Gram Engineering at [391]-[407], to which Mr Bulley also refers, Jacobson J applied Gardex in holding that a company was entitled to be registered as the owner of a design where a director was paid a salary in regular weekly or monthly instalments, although not employed under a written contract of employment.

I also noted several of the relevant cases in JR Consulting at [79]-[80] as follows:

That decision was largely affirmed on appeal in JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; (2016) 116 IPR 440; [2016] FCAFC 20. As I noted in JR Consulting, these principles may be modified under s 35 of the Copyright Act 1968 (Cth) in relation to a literary, dramatic or artistic works in an appropriate case. However, the parties did not suggest that section applied here and I need not address it further.

Here, Mr Hutchison was employed in the Company for the purpose of developing the Aircraft, and that supports the implied term to which French J referred in Gray, within the undocumented Agreement that both parties accept existed. Mr Hutchison, as a director of the Company with the responsibility for the design of the Aircraft, was in a senior role, albeit in a small company, and that carried the implied duty of good faith to which French J referred in Gray. The consequence is that the intellectual and other property developed by Mr Hutchison relating to the Aircraft, at least from the point of the Company’s incorporation, was subject to the trust to which French J referred. I will address the position as to property developed in the period before the Company’s incorporation, between November and mid-December 2018, below.

Mr Wellington pleads (ASOC [63], admitted Defence [45]) that Mr Hutchison owed the Company a statutory duty to act in good faith and for a proper purpose, relying on s 181 of the Act; that (ASOC [64], admitted Defence [45]) Mr Hutchison owed the Company a statutory duty not to improperly use his position to gain an advantage for himself or cause a detriment to the Company, relying on s 182 of the Act; and that (ASOC [65], admitted Defence [45]) Mr Hutchison owed the Company a statutory duty not to improperly use information to gain an advantage for himself, or cause a detriment to the Company, relying on s 183 of the Act.

It is sufficient that I briefly identify the content of these duties and I have drawn on my decisions in Colorado Products and Re Australian International Yacht Club Pty Ltd (2021) 152 ACSR 492; [2021] NSWSC 586 in this regard. Section 181 of the Act requires a director or officer of a corporation to 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. I summarised the relevant principles in respect of that section in Colorado Products (at [419]-[421]) as follows:

Section 182 of the Act prohibits a director, secretary, officer or employee of a corporation from improperly using his or her position to gain an advantage for himself or herself or someone else, or cause detriment to the corporation. I summarised the applicable principles in Colorado Products (at [432]–[433]) as follows:

Mr Wellington pleads (ASOC [66], denied Defence [46]) that, by Mr Hutchison, as a director of the Company, asserting that the legal and equitable interest in the intellectual property of the Aircraft is his, Mr Hutchison breached ss 181, 182 and 183 of the Act. I accept that Mr Hutchison plainly made that claim, at least from the point at which a dispute as to the request that he assign any intellectual property rights he held in the Company arose, and he continued to do so at the hearing, with the qualification in his evidence as to a limited licence to which I referred above. The question whether that claim is a breach of duty raises the questions whether Mr Hutchison owned the intellectual property in the Aircraft, as a matter of law and fact, and whether any licence agreement existed which authorised the Company to use that intellectual property and qualified any rights that would otherwise arise from his ownership of the intellectual property.

Where the Company owned the intellectual property created by Mr Hutchison relating to the Aircraft from the commencement of his employment with the Company in December 2018, Mr Wellington must succeed in his claim brought for the Company that Mr Hutchison, as a director of the Company, in asserting that the legal and equitable interest in the intellectual property of the Aircraft is his, at least without recognising the Company’s right to use that intellectual property to develop the Aircraft to the exclusion of his doing so for his own rather than the Company’s benefit, breached s 181 of the Act, which requires that directors avoid conflict between their personal interests and those of the company. It is not necessary to decide whether he also breached ss 182 and 183 of the Act in that regard, although I recognise that it is not apparent that he has either used the Company’s property or its information in a manner that is inconsistent with those sections.

Mr Wellington also pleads (ASOC [67], denied Defence [46]) that Mr Hutchison has breached sections 181, 182 and 183 of the Act by, on 23 May 2022, incorporating Dasoru; maintaining control of a St George Bank account in the name of “Carbon Copies Composites”; and maintaining control of the domain name “www.carboncopies.com.au”. I do not accept that those matters, without more, establish that breach, where it is not shown that Mr Hutchison has used the new company, the bank account or the website in a manner that is inconsistent with the conduct of the Company’s business.

Mr Wellington then pleads (ASOC [68], admitted Defence [47]) that Mr Hutchison, as a director of the Company owed fiduciary duties to the Company including a duty not to allow any conflict between his duties as a director and his personal interests and a duty not to profit (implicitly, without the Company’s consent) by reason of his position as a director. It is again sufficient to address the content of these duties briefly. A director of a company is a recognised category of fiduciary and the “no conflict” rule applies to a director as a status-based fiduciary. The “no conflict” rule has a strict application when it applies in the sense that, if a transaction has occurred in conflict of interest, a company director cannot avoid a breach of that rule by asserting the fairness of the transaction or that it was in the company’s best interests or that the director was not acting with subjective dishonesty. I observed (by reference to authority) in Colorado Products at [351]:

In Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37, Payne JA (with whom Gleeson and Leeming JJA agreed) summarised the no conflict and no profit rules as follows (at [105]):

The case law has also long held that, at least in respect of the general law, a director’s resignation to pursue a conflict of interest does not discharge him or her from the rule against conflict of interest: Addstead Pty Ltd (in liq) v Liddan Pty Ltd (1997) 70 SASR 21; 25 ACSR 175; Nicholls & Ors v Michael Wilson & Partners Ltd [2012] NSWCA 383 at [177]-[178]; Schmidt v AHRKalimpa Pty Ltd (recs apptd) [2020] VSCA 193 at [93]ff.

Mr Wellington then pleads (ASOC [69], denied Defence [48]) that the matters pleaded in ASOC [66]-[67] also amount to a breach of fiduciary duties. For the reasons noted above in respect of the breach of the statutory duties, I find that Mr Hutchison’s reliance on his ownership of intellectual property relating to the Aircraft to assert a right to use it for his own and not the Company’s purposes, without recognising the Company’s right to use that intellectual property to develop the Aircraft to the exclusion of his doing so for his own rather than the Company’s benefit, also breached the conflict of interest rule.

I would also reach that conclusion on an alternative basis, even if Mr Hutchison was a contractor to and not an employee of the Company, and in respect of intellectual property relating to the Aircraft that may have been brought into existence by Mr Hutchison in the period before the Company was incorporated. A somewhat similar issue was considered by the High Court in Parramatta Design. In that case, Parramatta Design & Developments Pty Ltd (“PDD”) provided architectural services; its sole director and shareholder, Mr Fares, who was an architect, and a solicitor, Mr Barrak, established a property development company (“Landmark”) and entered into a joint venture agreement with another company (“Toyama”) to develop land. PDD provided architectural services for the joint venture, including, for a fee, preparing plans for the proposed development, and then further plans with no charge. The relationship between the joint venturers then deteriorated; trustees for the sale of the site were appointed under s 66G of the Conveyancing Act 1919 (NSW); and PDD notified the trustees that it was the owner of the copyright in the plans embodied in the development consent and that it refused to grant a licence to any prospective purchaser of the site. The purchaser of the site, Concrete Pty Ltd (“Concrete”) brought proceedings claiming that it had an implied licence to use the plans and that PDD’s assertions to the contrary amounted to unjustifiable threats in contravention of s 202 of the Copyright Act 1968 (Cth).

On appeal to the High Court, Gummow ACJ held (at [12]-[17]) that the joint venture between PDD, Landmark and Toyama possessed fiduciary characteristics, and to allow PDD to assert copyright in the plans and drawings so as to deny Concrete its consent to use the plans and drawings would be to allow PDD to pursue its own interests in conflict with the purposes of the joint venture. His Honour observed (at [15]) that:

Kirby and Crennan JJ reached the same result by reference to the architect’s role in the venture and also held (at [95]) (with Gummow ACJ agreeing at [16]) that, in the absence of any reservation of copyright in the plans and drawings or the withdrawal of the development application prior to its determination, the implied licence to use the plans and drawings in favour of the purchasers was irrevocable (at [16], [95]). Hayne J similarly held (at [122]-[124]) that PDD, Landmark and Toyama were engaged in a common business enterprise; a relationship of mutual trust and confidence arose between the participants; and following the breakdown of the relationship:

In Geltch v MacDonald & Ors [2007] NSWSC 1000 (“Geltch”) at [49], Brereton J noted the application of these principles in a partnership context, although holding they were there narrowed by the terms of a lease.

I recognise that Parramatta Design was concerned with a fiduciary relationship arising from a joint venture and Geltch was concerned with a partnership. I do not accept Mr Bulley’s submission that the arrangements between Mr Wellington and Mr Hutchison gave rise to a joint venture of that character. Here, Mr Hutchison owed statutory and fiduciary duties to the Company, likely to the exclusion of any fiduciary duties owed by him to other directors or shareholders in the Company: Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21; Crossman v Taylor (No 3) [2012] FCA 734 at [300]ff. However, it seems to me that, adopting the language of Gummow ACJ in Parramatta Design, to allow Mr Hutchison to assert ownership of intellectual property relating to the Aircraft, or copyright or design rights in the plans and drawings for it, so as to deny the Company the right to use the plans and drawings would be to allow him to pursue his own interests in conflict with the Company’s interests and his duties to it.

As I noted above, Mr Hutchison conceded that he thought a limited licence existed in his affidavit dated 6 July 2023, although I have not accepted that evidence, which is likely a late invention where he had either assumed that the Company owned the intellectual property or given no thought to that question until the Company sought an assignment to confirm the position. I have found above that Mr Hutchison prepared the design files and the model that he created in November and December 2018 for the purpose of their being used by the Company to develop the Aircraft, with funding that he anticipated would be provided by Mr Wellington, and I am satisfied that there was no identified alternative that would have allowed the development of the Aircraft in that way. This was not a case that Mr Hutchison had prepared those files and models with any intent or capacity to fund the development of the Aircraft himself. I have found above that subsequent steps in the development of the Aircraft, including the creation of numerous additional design files dealing with particular components, were undertaken by Mr Hutchison as an employee of the Company and funded by the Company.

It seems to me that, even if (contrary to my findings) Mr Hutchison was a contractor rather than an employee of the Company, and to the extent that he had developed designs for the Aircraft prior to the Company’s incorporation and “owned” those designs, he could not rely on that ownership to deny the Company an exclusive and irrevocable entitlement to use that intellectual property to develop the Aircraft, where he was also a director of the Company. Consistent with the result reached in Parramatta Design, and with the “no conflict” element of his fiduciary duties owed to the Company, he cannot deny that the Company has an irrevocable licence to use the intellectual property relating to the Aircraft to his exclusion, whether or not part of that property is owned by him. The same result may well arise as an implied term of the parties’ arrangement, in the manner noted by the High Court in Realestate.com.au Pty Ltd v Hardingham (2022) 406 ALR 678; [2022] HCA 39. It seems to me that the parties and a reasonable bystander would recognise that it was inconceivable that Mr Hutchison could be paid by the Company for several years, with funding provided by Mr Wellington; develop a design for the Aircraft at the Company’s cost; then announce that he had resigned as a director and disposed of his shares in the Company and would use, licence or monetise the intellectual property relating to the Aircraft for himself and to the Company’s exclusion. The result is a fortiori where, here, Mr Hutchison continues to be a director of the Company.

Mr Wellington, on his own behalf and on behalf of the Company, seeks numerous orders by way of relief. First, he seeks an order (ASOC [70], Relief [1]) that Mr Hutchison be permanently restrained from accessing, downloading, transferring, interfering with, disclosing, disseminating, altering, removing, deleting, copying, using, or commercially exploiting the Property other than in his role as a director and for the purposes of the Company. The term “Property” is there defined, in relation to the Aircraft, as:

Mr Bulley submits and I accept that the property that falls within this definition (subject to the Company establishing its right to it) has been identified in the course of the evidence as including aircraft parts (T233, T235, T270-272); material mixtures and production methods (T235); software that would be integrated with the Aircraft, as distinct from third party software for design programs that were owned by Mr Hutchison and were of general application, rather than developed for the Aircraft (T265-268); patterns or “plugs” used in creating moulds for construction of parts of the Aircraft and those moulds (T267-268) any aircraft assembly instructions (T269-T270); the files and the contents of the USB delivered to Mr Vardy as receiver on 12 December 2022 (T270); further files and contents of the USB delivered to Mr Vardy on 23 June 2022 (Hutchison 6.7.2023, [21]–[22]) and any printed form of these files, including those appearing in Mr Hutchison’s affidavit dated 6 July 2023 (Hutchison 6.7.23, Annexures B,C,D); and structural configurations and calculations (T300-3017).

I am satisfied that I should make this first order, on the basis of my findings that design drawings and the model were prepared by Mr Hutchison in anticipation of the Company’s development of the Aircraft in late November or early December 2018; Mr Hutchison’s status as an employee of the Company after its incorporation and the Company’s ownership of property created after its incorporation; and my findings as to breach of fiduciary duty, where Mr Hutchison asserts a continued right to use the intellectual property relating to the Aircraft for his own and not the Company’s benefit.

Second, Mr Wellington seeks a declaration (ASOC [71], Relief [2]) that the Property was and is the Company’s Property and, third, he seeks an order (ASOC [72], Relief [3]) that Mr Hutchison transfer the Property to the Company. The basis for this relief is established in respect of intellectual property relating to the Aircraft created after Mr Hutchison commenced employment with the Company from its incorporation. On balance, I am persuaded that that declaration should be limited to the Company’s entitlement to an irrevocable licence to use the Property relating to the Aircraft created prior to its incorporation (and, I have found above, in anticipation of its incorporation) to the exclusion of Mr Hutchison, whether or not that property is “owned” by Mr Hutchison. It seems to me that the case law which I have referred above does not support the imposition of a trust over that Property, where it was created prior to the incorporation of the Company.

Fourth, Mr Wellington initially sought an order (ASOC [73], Relief [4]) requiring Mr Hutchison to restore the Property to the condition that it was in as at 12 April 2022. That relief was rightly not pressed in closing submissions. I can see no basis on which I could make a mandatory order in that form, not least because the condition of the Property as at that date is not adequately identified.

Fifth, Mr Wellington seeks a declaration (ASOC [74], Relief [5]) that Mr Hutchison used the Company’s Property, without any authorisation, improperly and contrary to the obligations binding on Mr Hutchison as a director to the detriment of the Company. I cannot make that declaration where it is not established that Mr Hutchison has in fact used that Property to the Company’s detriment, where interlocutory orders were previously made by the Court that placed that Property in the receiver’s custody, although he has asserted a right to do so.

Next, Mr Wellington seeks declarations (ASOC [75]-[78], Relief [6]-[9]) that Mr Hutchison breached his fiduciary duties owed to the Company; breached s 181 of the Act because he did not discharge his duties in the Company's best interests and for a proper purpose; breached s 182 of the Act because he improperly used his position with the Company to gain advantage for himself and caused detriment to the Company; and breached s 183 of the Act because he improperly used the Company’s Property to gain advantage for himself and caused detriment to the Company. There is no utility in bare declarations in that form, where I have reached the necessary findings above.

Tenth, Mr Wellington initially sought an order (ASOC [79], Relief [10]) that an account for profits be taken to determine the profits made by Mr Hutchison arising from the breaches referred to in the declarations sought above, and, eleventh, he sought an order (ASOC [80], Relief [11]) that Mr Hutchison pay to the Company the amount of profits assessed pursuant to the account ordered to be taken. That relief was rightly not pressed in closing submissions, where there is no evidence that Mr Hutchison has used the Property to make such a profit, and interlocutory orders were previously made by the Court that placed that Property in the receiver’s custody.

Twelfth, Mr Wellington initially sought an order (ASOC [81], Relief [12]) that Mr Hutchison pay (unquantified) compensation to the Company under s 1317H of the Act for the contraventions referred to in the declarations sought above. That order was rightly not pressed where there is no evidence that Mr Hutchison made a profit and no evidence is led by Mr Wellington to allow the quantification of any loss suffered by the Company. Thirteenth, Mr Wellington initially sought an order (ASOC [82], Relief [13]) that Mr Hutchison pay the Company (unquantified) equitable compensation or equitable damages and, fourteenth, an order (ASOC [83], Relief [14]) that Mr Hutchison pay (unquantified) damages to the Company. Those orders are rightly also not pressed where no evidence is led by Mr Wellington to allow quantification of any loss suffered by the Company.

Fourteenth, Mr Wellington seeks a declaration (ASOC [83A], Relief [14A]) that, by virtue of the employment relationship between the Company and Mr Hutchison, any property that is or relates to the Aircraft that he designed or developed during his period of employment is the Company’s property and an order that he deliver that Property to the Company. That relief overlaps with the relief sought in ASOC [71]-[72], Relief [2]-[3] and I am satisfied that it should properly be ordered.

Next, Mr Wellington, in his personal capacity, seeks declarations (ASOC [84]-[85], Relief [15]-[16]) that the Company engaged in misleading and deceptive conduct within the meaning of the ACL and that Mr Hutchison engaged in misleading and deceptive conduct within the meaning of the ACL and was involved in the Company’s contravention of the ACL. I will not make those declarations in respect of the Company and Mr Hutchison’s accessorial liability where their basis is not established and they would be anterior to a claim for compensation that is not established. I will not make a declaration that Mr Hutchison engaged in (rather than was accessory to) such conduct where, as I noted above, it is unclear whether Mr Wellington brought such a case and otherwise for the same reasons.

Seventeenth, Mr Wellington seeks, under s 232 of the ACL, an order (ASOC [86(a)], Relief [17(a)]) that Mr Hutchison be permanently restrained from accessing, downloading, transferring, interfering with, disclosing, disseminating, altering, removing, deleting, copying, using, or commercially exploiting the Property other than in his role as a director and for the purposes of the Company. While I have made a corresponding order above, no basis for making it arises from these claims. Mr Wellington also seeks orders (ASOC [86(b)-(c)], Relief [17(b)-(c)]) that Mr Hutchison transfer the Property to the Company and requiring him to restore the Property to the condition that it was in as at 12 April 2022. No basis for making those two orders arises from the misleading and deceptive conduct claims and the latter of them was rightly not pressed in closing submissions.

Eighteenth, Mr Wellington seeks, pursuant to s 236 of the ACL, an order (ASOC [87], Relief [18]) that Mr Hutchison pay damages to him and nineteenth, he seeks an order (ASOC [88], Relief [19]) under s 237 of the ACL that Mr Hutchison pay damages to him and the receivers of the Company. No basis has been established for ordering that Mr Hutchison repay the amounts lent by Mr Wellington to the Company or the costs of appointment of the receiver that he claims and the evidence led by Mr Wellington does not establish any other basis on which damages could be quantified.

Mr Wellington also seeks (ASOC [89], Relief [20]) costs, including costs on an indemnity basis. Plainly, the proceedings have led to a mixed result, and I will hear the parties in this regard, if they cannot reach agreement as to costs.

Mr Wellington has not established his claim for interest (ASOC [90]; Relief [21]) where he has not established a claim for a monetary recovery to which interest could apply.

I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days, or otherwise their respective short minutes of order and submissions not exceeding 10 pages in Arial font 12, one and a half spacing, as to the differences between them.