Anderson v Canaccord Genuity Financial Ltd

1. [1]

   HER HONOUR: This matter involves a dispute between several parties arising out of events occurring in 2009 as a result of which the plaintiff asserts that the defendants caused the destruction of the property acquisition, development and funds management business of the Ashington group of companies.

2. [2]

   The background to the dispute (which I will set out more fully in due course) is not uncomplicated. In summary, the plaintiff (Mrs Daniela Anderson) brings the present proceeding as the assignee of causes of action from the liquidator of Ashington Capital Pty Ltd (Ashington Capital) and Ashington Management Pty Ltd (Ashington Management), two companies in the Ashington group of companies.

3. [3]

   The Ashington group of companies at the relevant time included Ashington Group Pty Ltd (Ashington Group), Ashington Capital, Ashington Management and Ashington Real Estate Pty Ltd (Ashington Real Estate). As adverted to above, each of Ashington Group, Ashington Capital and Ashington Management is now in liquidation. Broadly speaking, the Ashington companies carried on a property development business through two wholesale unregistered unit trusts (Ashington Development Fund) (referred to here as ADF and ADF2) and associated sub-trusts, through which the core of the Ashington group business (the property development projects) was conducted.

4. [4]

   Companies in the Ashington group held units in ADF and ADF2. Ashington Capital was the trustee of each of the trusts and sub-trusts; and it appointed Ashington Management as the development manager of each of the trusts and sub-trusts.

5. [5]

   The primary equity investors in ADF and ADF2 trusts were large superannuation funds – Sunsuper Pty Ltd as trustee for Superannuation Fund (Sunsuper); LUCRF Pty Ltd as trustee for LUCRF Super (LUCRF); Commonwealth Superannuation Corporation as trustee for Military Superannuation and Benefit Fund No 1 (Military Super) and HEST Australia Pty Ltd as trustee for the Health Employees Superannuation Trust Australia (HESTA). I refer to those investors as the superannuation fund investors (in distinction to the minority Ashington unitholders in those unit trusts).

6. [6]

   As noted, Ashington Capital acted as trustee for ADF and ADF2; and earned trustee and management fees in that role; and Ashington Management acted as development manager for the property development activities carried on within the funds and earned development management fees in that role. As at 2009, Ashington Capital and Ashington Management were respectively entitled to receive trustee fees of approximately $1.6 million and management fees of approximately $4.8 million annually for the property development projects undertaken through the respective unit trusts and associated sub-trusts.

7. [7]

   Ashington Real Estate acted as a real estate agent for the sale or leasing of completed projects and collected sales commissions.

8. [8]

   Another entity within the Ashington group, Ashington Capital Int. Pty Ltd (ACIL), was established to act as a trustee and manager for a proposed new investment fund (originally proposed to be called ADF 3 but which in due course became referred to as the Ashington Opportunistic Fund No 3, to which I will refer as AOF3). I understand the reference to an opportunistic fund, as its name indicates, to be one that invests “opportunistically” in properties or projects in, say, a distressed market.

9. [9]

   The plaintiff here claims equitable compensation and damages from the various defendants, alleging that they wrongfully caused the destruction of the Ashington business. In particular, the plaintiff alleges that a “Consortium” was formed between various of the defendants in October and November 2009 with the objective of taking Ashington’s business (there referring to Ashington as a collective term to include both Ashington Capital and Ashington Management) for their own benefit. The plaintiff essentially alleges a conspiracy unlawfully to take Ashington’s business from it.

10. [10]

    The value of the business is a matter in contention. The plaintiff’s expert, Mr Brendan Halligan, initially valued it as being some $140 million. However, in the course of the hearing Mr Halligan accepted that if the value of AOF3 and future funds was removed from that figure then the value of the business was reduced to somewhere in the range of $5.25 and $16.9 million (T 1259). By contrast, the defendants’ expert, Mr Jeffrey Hall, values the business at nil.

Parties

1. [11]

   The plaintiff is the wife of Mr Craig Anderson (a discharged bankrupt) who was the founder and driving force behind the Ashington group. Mr Anderson is the principal protagonist in the proceeding and was cross-examined at some length. I will refer to his evidence in due course. Mr Anderson is a former director and shareholder of Ashington. Mr Craig Minahan, another director of Ashington, also gave evidence in the proceeding. The plaintiff was represented at the hearing by Mr Braham SC with Mr Kabilafkis and Mr Bhasin of Counsel.

2. [12]

   The first defendant, Patersons Securities Ltd (Patersons) (now known as Canaccord Genuity Financial Ltd), is a stockbroking and financial services/corporate advisory firm. For ease of reference, I will continue to refer to it as Patersons (since that is the name by which it was known at the relevant time). Mr Raymond Shorrocks, who gave evidence in the proceeding, was a director of Patersons from 12 July 2004 to 30 January 2009 and an alternate director of Patersons from 17 March 2009 until around April 2018; and its Head of Corporate Finance – Sydney at the relevant time (Mr Shorrocks’ affidavit affirmed 7 September 2018 at [2]-[4]). Other employees of Patersons at the relevant time who feature in the relevant events were Mr Martin Carolan (Ms Garrett’s then husband) and Mr Paul Doherty. Patersons was represented at the hearing by Mr Redwood SC with Ms Bathurst of Counsel.

3. [13]

   The second defendant, Ms Nicola Garrett (Ms Garrett) held a role within the Ashington group in the second half of 2009 until 16 November 2009. The third defendant, Mr Samuel Renauf (Mr Renauf), also held a role within the Ashington group from around July until on or about 22 December 2009. Whether Ms Garrett and Mr Renauf were employees or consultants of Ashington is a matter in dispute. Ms Garrett and Mr Renauf are, in essence with the fourth defendant (see below), alleged to have been the architects of the plan wrongfully to take Ashington’s business. It is alleged that they supplied confidential information with respect to Ashington’s business to the fifth and sixth defendants (see below) and facilitated contact between those defendants and the superannuation fund investors who were members of the ADF and ADF2 unit trusts. It is alleged that both Ms Garrett and Mr Renauf were to benefit from the taking of Ashington’s business as it was proposed that they would be employed by the new entity taking control of the business. Ms Garrett and Mr Renauf were jointly represented in the proceeding by Ms Painter SC with Mr Bagley of Counsel. Neither Ms Garrett nor Mr Renauf gave evidence at the hearing though there was no suggestion that they were incapable of so doing.

4. [14]

   The fourth defendant, PPB Pty Ltd (PPB), is an insolvency firm. Mr Peter Block and Mr Brett Lord of PPB were involved in the relevant events. PPB was represented at the hearing by Mr Ng with Mr Sud of Counsel. No one from PPB gave evidence at the hearing.

5. [15]

   The fifth defendant, Acorn Capital Ltd (Acorn), is an investment company. Relevant persons at Acorn were Mr Robert Routley and Mr Matthew Sheehan. Neither gave evidence at the hearing. Mr McGrath SC with Ms Williams of Counsel represented Acorn at the hearing.

6. [16]

   The sixth defendant, Albany Capital Investors Pty Ltd (Albany), is a company engaged in funds management and associated with a well-known family in Victoria, the Alter family. Relevant persons at Albany were Mr Byron Ko and Mr Neil Tremaine. Neither gave evidence in the hearing. Albany was represented at the hearing by Mr Sexton SC with Ms Cameron of Counsel.

7. [17]

   Ashington Capital and Ashington Management are the seventh and eighth defendants, respectively. No claims were made against those companies (both of which are in liquidation) and they took no part in the hearing.

Plaintiff’s complaint

1. [18]

   In summary, the plaintiff complains that, as a result of the wrongful conduct of the respective defendants, the business of Ashington was destroyed; and that Ashington lost the opportunity of a successful outcome to what is referred to as the Stonington Capital Raising (that being the attempt to refinance existing mezzanine facilities in respect of the acquisition of the Stonington Property – see below), which was the subject of a mandate known as the Patersons Mandate). It is said that the Patersons Mandate was converted into a vehicle for advancing the defendants’ own plan to take over Ashington’s business; that this resulted in the loss of Ashington’s existing income stream in the form of trustee and management fees; and that it also destroyed Ashington’s ability to establish future funds (in respect of which it is noted that in 2009 plans were already in development) and to earn the associated management and trustee fees therefrom, including loss through the damage the defendants’ actions caused to Ashington’s reputation in the market.

2. [19]

   The plaintiff accepts that, in the aftermath of the global financial crisis (in 2008), the Ashington business faced difficulties securing debt financing that it needed to finance the purchase of three properties (the Noosa, Double Bay, and Stonington properties) in respect of which it had exchanged contracts to purchase before the collapse of Lehman Brothers. The purchases of all three properties were completed in November 2008, December 2008, and February 2009, respectively. However, the plaintiff concedes that there were features of the finance in relation to the acquisition of the Double Bay and Stonington properties that led to problems in 2009.

3. [20]

   The plaintiff also accepts that the request by Ashington in June 2009 for the mezzanine facilities to be repaid through the injection of additional equity by ADF2 unitholders created “disquiet” amongst the superannuation fund investors about the terms of the Investec Stonington Facility and as to the quality of communication by Mr Anderson with superannuation fund investors. However, the plaintiff maintains that at this stage there was still significant value in Ashington’s business (and it must be said that Mr Anderson himself appears to have been confident – although perhaps optimistically so – that the superannuation fund investors’ concerns could be adequately addressed or assuaged). It is said that Ashington’s business still involved (through ADF and ADF2) the management of a portfolio of high-quality assets with sound fundamentals; and that, provided that Ashington could resolve its immediate funding difficulties, it had strong prospects of restoring investor confidence and maintaining and developing its business.

4. [21]

   In particular, the plaintiff says that the fortunes of Ashington depended upon it being able to refinance the Investec Stonington Facility (and it contends that the actions of Ms Garrett and Mr Renauf, with the knowing assistance of the other defendants, destroyed that prospect). The key aspects of Ashington’s strategy in that regard were identified as being to raise alternative mezzanine financing through a capital raising to be conducted by Patersons under the Patersons Mandate (and to “manage” the superannuation fund investors and financiers to gain time for this to occur).

5. [22]

   Mr Anderson’s evidence is that he reposed considerable trust in Ms Garrett, who “formally commenced” as Head of Funds Management with Ashington in mid-September 2009, and gave her primary responsibility for managing the Stonington Capital Raising on behalf of Ashington. Ms Garrett’s responsibilities included liaising with Patersons, meeting with prospective investors, overseeing access to an electronic data room established for prospective investors, and keeping Investec informed of the progress of the capital raising.

6. [23]

   The plaintiff says that, from late September until late November 2009, Mr Anderson relied almost entirely on Patersons, Ms Garrett and Mr Renauf to conduct communications with PPB and the superannuation fund investors, and to raise the finance to retire the Investec debt, recapitalise the Stonington Trust, and release the uncalled equity into the Double Bay (Project X Hotel) Trust. It is said that the Ashington business depended for its survival on those critical steps and that Mr Anderson had no reason to believe that Patersons, Ms Garrett and Mr Renauf were not “up to that task”.

7. [24]

   The plaintiff accepts that Ashington was unable to repay the respective Stonington facilities when they fell due at the end of August 2009; and that Ashington Capital therefore fell into default. However, the plaintiff says that the lenders were willing to allow time for a refinancing solution to be found. In this regard, the plaintiff notes that, even though Investec issued notices of default when unitholders did not meet calls made in September 2009 for the remaining $6 million of uncalled equity from the unitholders in ADF2, Investec did not otherwise take steps to enforce its security while Ashington was exploring options to refinance the Investec Stonington Facility.

8. [25]

   As to the prospect of Ashington being able to establish future funds and earn ongoing trust and management fees, the plaintiff emphasises that, in the months following the collapse of Lehman Brothers, Ashington continued successfully to raise bank debt project funding for its projects, raising approximately $206 million, comprising: (a) in relation to the Project X Hotel Trust, $50.375 million in senior debt from National Australia Bank (NAB) and St George Bank (St George) and $14.62 million from NAB in late September and early October 2009 (the Project X Facilities); (b) in relation to the Stonington Trust, $23 million in senior debt from Westpac (the Westpac Stonington Facility), and $10 million in mezzanine debt from Investec in December 2008 (the Investec Stonington Facility); (c) in relation to the Noosa Trust, $65.1 million in senior debt from Suncorp Metway in around October 2008; and (d) in relation to the 10 Wylde Street Trust, an offer in October 2008 of $37.44 million in senior debt from Westpac and $5.03 million in mezzanine debt from Investec.

9. [26]

   The plaintiff says that Ashington’s strategy for the refinancing of the mezzanine facilities ultimately failed because, unbeknownst to him, Ms Garrett was pursuing her own venture (with the assistance of the other defendants). In particular, the plaintiff’s complaint is that, soon after Ms Garrett and Mr Renauf commenced working on the Stonington Capital Raising, PPB suggested to Ms Garrett and Mr Renauf that they would be better off working to replace Ashington (rather than to save it). It is said that, from no later than 2 October 2009, rather than performing their fiduciary obligations to Ashington, Ms Garrett and Mr Renauf took advantage of their unique position of trust within Ashington to work to establish a competing venture that would replace Ashington as manager of the developments and as trustee of the trusts (and which would effectively hand the management of the trusts to Ms Garrett and Mr Renauf themselves).

10. [27]

    The plaintiff says that this scheme was dishonest both in concept and execution. It is said that, over the next eight weeks, Ms Garrett and Mr Renauf repeatedly lied to Mr Anderson as to their intentions, their actions, and the progress and likelihood of completing the original capital raising (which they had in fact abandoned). The plaintiff contends that Ms Garrett and Mr Renauf (and PPB) also lied to the existing superannuation fund investors by telling them that there was no interest in providing finance for the Stonington Trust unless the manager was replaced; and lied to the incoming investors (Acorn and Albany), at least initially, by telling them that the existing superannuation fund investors had unanimously decided to replace Ashington (when no such decision had been taken).

11. [28]

    The plaintiff says that Ms Garrett and Mr Renauf were given critical assistance by employees of Patersons. In particular, it is said that Mr Carolan and Mr Doherty facilitated the scheme by arranging a crucial introduction for Ms Garrett and Mr Renauf with the potential replacement managers, and by quelling any interest in the Stonington Capital Raising that was, or would have been, expressed by the many potential financiers available to Patersons, and which would have provided superannuation fund investors with an alternative to changing managers. Indeed, as noted above, the plaintiff says that, after 2 October 2009, the Stonington Capital Raising was abandoned entirely.

12. [29]

    The plaintiff contends that Ms Garrett and Mr Renauf were also assisted by PPB in important respects. It is said that PPB “pitched” the replacement manager scheme to Ms Garrett and Mr Renauf on 1 October 2009 (notwithstanding that PPB was aware that they were employees of Ashington and bound by fiduciary obligations owed to Ashington) and that PPB then arranged to provide Acorn and Albany with information they required to determine their interest in replacing Ashington (notwithstanding that to do so was in breach of obligations of confidence that arose in equity, and pursuant to their agreement with Ashington). It is said that PPB participated in misleading the superannuation fund investors in emails in the period from 6 to 9 October 2009, and subsequently in November 2009, when the superannuation fund investors relied on PPB to tell them the “pro’s and con’s” of the (competing) Parissen Proposal.

13. [30]

    The plaintiff says that a key aspect of the development of the “Garrett plan” (to replace Ashington – see the pleading at [99]) was the disclosure of a significant amount of Ashington’s confidential information to Albany and Acorn, in breach of fiduciary, contractual and equitable obligations owed to Ashington. It is said that this included Albany and Acorn accessing information contained in a data room set up for the purpose of the Stonington Capital Raising, which access was facilitated by Patersons and Ms Garrett, despite it being clear that Albany and Acorn were not interested in pursuing the mandated Stonington Capital Raising. The plaintiff says that this also included the provision of a large volume of Ashington’s confidential information to Acorn and Albany by PPB in 33 emails sent on 16 October 2009 in response to Mr Routley’s request (in which he confirmed Albany and Acorn’s interest in replacing Ashington as the manager of ADF and ADF2).

14. [31]

    Mr Anderson complains that he was kept in the dark as the “plan” to replace Ashington developed, believing throughout that Patersons, Ms Garrett and Mr Renauf were working on the Stonington Capital Raising in accordance with the Patersons Mandate (with Albany and Acorn as potential lenders for the mandated mezzanine facility), while PPB was advising the superannuation fund investors. Mr Anderson says that he was encouraged in that belief by Ms Garrett, including through periodic updates provided by her to the effect that discussions with potential investors for the mandated Stonington Capital Raising (including Albany and Acorn), were ongoing, without revealing that Ms Garrett was in fact pursuing an alternative agenda.

Chronology of Events

1. [32]

   At this stage, suffice it to note that the persons associated with the superannuation fund investors and their advisers were as follows. Sunsuper (whose representatives included Ms Megan Chan and Mr David Hartley) was advised by Sovereign Investment Research (Sovereign) – Mr Ray King, Ms Helen Murdoch and Mr Danny Cohen; LUCRF (whose representatives included Mr David McCusker and Mr David Tieu) was advised by Arcadia Funds Management Ltd and Arcadia Advisory Pty Ltd (together, Arcadia) – Mr Hamish Flett and Mr Gerald Daly; HESTA (whose representatives were Mr Scott Hastings and Mr Robert Fowler) was advised by Frontier Investment Consulting Pty Ltd (Frontier) – Mr Leigh Gavin, Mr Jonathon Stagg and Mr Tom Frederick; and Military Super (whose representatives included Mr Paul Watson and Mr Peter Hodgson) was advised by Strategic Capital Management (SCM) – Mr Peter Dedes. A number of the advisers to the superannuation fund investors gave evidence at the hearing; relevantly, as to the superannuatin fund investors’ lack of confidence in Ashington and Mr Anderson towards the end of 2009. I refer to that evidence in due course.

2. [33]

   Mr Anderson founded the Ashington group and was the Managing Director of each of the companies in that group at all relevant times. In around 1994, Mr Anderson commenced his property development business with the redevelopment of a hotel and office block in Sydney’s CBD which was marketed as “Ashington House”. Mr Anderson redeveloped six other commercial and retail buildings in the Sydney CBD in the period up to 2003.

3. [34]

   In 2003, Mr Anderson incorporated a number of companies in the Ashington group, including Ashington Management, which was established to employ staff necessary for the Ashington group’s property development business.

4. [35]

   In 2005, the Ashington group decided to target industry superannuation funds to fund its property development projects. In November 2005, Ashington Capital was incorporated; and thereafter two wholesale unregistered property investment unit trusts were established: the Ashington Development Fund (ADF), which raised just over $50 million from investors, closing in May 2006 (see below); and the Ashington Development Fund No 2 (ADF2), which raised some $80 million from investors, closing in September 2007, for the purpose of acquiring and developing property assets on the eastern seaboard of Australia (also see below). ADF and ADF2 used a combination of unitholder equity and third-party debt to finance the acquisition and development of various properties.

5. [36]

   A number of sub-trusts were established, each in respect of a particular property development project. Ashington Capital was the trustee of each of the various sub-trusts of ADF and ADF2. The sub-trusts below ADF were the Cross+ Trust; the Potts Point Trust; the 10 Wylde Street Trust; and the Project X Hotel Trust (in the last, ADF had a 25% interest) (see below). The sub-trusts below ADF2 were the Stonington Trust and the Noosa Trust (and ADF2 had a 75% interest in the Project X Hotel Trust) (see below).

6. [37]

   Each of the sub-trusts of ADF was also an unregistered unit trust. Ashington Capital (as trustee of ADF) held 100% of the units in the Cross+ Trust, the Potts Point Trust and the 10 Wyle Street Trust, and 25% of the units in the Project X Hotel Trust. Ashington Capital (as trustee of ADF2) held the remaining 75% of the units in the Project X Hotel Trust.

7. [38]

   The superannuation fund investors had ultimate control over the Ashington funds insofar as they had the ability to require the compulsory retirement of the trustee on a 75% vote (a matter admittedly known to Mr Anderson at all relevant times since inception of the funds).

8. [39]

   Also, it is relevant to note that cl 16.4 of each of the constitutions of the respective sub-trusts provided that:

9. [40]

   ADF was constituted on 19 May 2006. As noted above, Ashington Capital was appointed the trustee. The units in ADF were held by the following entities: Sunsuper (as to $20 million), LUCRF (as to $15 million), Military Super (as to $10 million), Ashington Group (as to $2 million), Ashington Capital as trustee for ADF Investment Trust (ADFIT) (as to $3 million), Lantern Super Pty Ltd (as to $100,000) and Henelait Pty Ltd (as to $100,000), totalling $50.2 million. Between them the superannuation fund investors held 90% of the units of ADF. Ashington Capital as trustee of ADFIT and Ashington Group were minority unitholders in ADF (between them holding approximately 10% of the units).

10. [41]

    Under ADF’s constitution, Ashington Capital was required to hold the Assets on trust for the Members (see cl 2.1) (“Assets” being defined in cl 27.1 as “all the property, rights and income of the Trust, but not application money or property in respect of which Units have not yet been issued, proceeds of redemption which have not yet been paid or any amounts in the distribution account or uncalled amounts on Partly Paid Units”); and any Assets held by Ashington Capital as trustee of ADF were required to be “clearly identified as property of the Trust and held separately from the assets of the Trustee and any other managed investment scheme” (cl 2.2). Clause 6 dealt with the application procedures in respect of the units: cl 6.1 provided that an applicant for units must complete an application in a form approved by the Trustee (if the Trustee so requires), the terms of the application form being approved by Ashington Capital; and, under cl 6.2, payment for the units was required to be in cash accompanying an application for units or “be received by, or made available to, the Trustee or the Custodian within such period before or after the Trustee receives the application as the Trustee determines from time to time”. Pursuant to cl 6.6, units were taken to be issued on the later of: (a) acceptance by the Trustee of the application; or (b) receipt by the Trustee of the application money.

11. [42]

    Clause 7 dealt with “Partly Paid Units”. Under cl 7.1, the Trustee was entitled to determine that any unit or class of units be partly paid. If it did so and there was an Uncalled Amount in respect of a unit, by giving 14 days’ notice, Ashington Capital could call on a Member to pay all or any part of the Uncalled Amount, subject to the rights, obligations and restrictions attaching to any units or Class (cl 7.3(a)). It should be noted that, under cl 7.3(b), Ashington Capital could only make such a call if it also made the same call on all other members who held units of that class which were similarly partly paid. (Complaint is here made that in relation to various calls on uncalled capital at least in relation to ADF2, the Ashington investors did not in fact contribute any capital themselves; rather, it appears that there was a retrospective book entry to offset management or other fees against uncalled capital contributions.)

12. [43]

    Clause 13 dealt with the powers of the Trustee. Clause 14 dealt with the retirement of the Trustee, providing, relevantly, that:

13. [44]

    Clause 19 of the constitution of ADF (mirrored in the later constitution of ADF2) provided, relevantly, that:

14. [45]

    Clause 21 dealt with the remuneration and expenses of the Trustee. Pursuant to cl 21.1, Ashington Capital, as trustee for ADF, was entitled to be paid a management fee of 1.25% per annum of Paid-up Equity (less any amounts of the Trust capital which had been returned to Members and less any realised capital losses of the Trust). Further, pursuant to cl 21.2, all expenses incurred by the Trustee in connection with the Trusts were payable or reimbursable out of the Assets but such reimbursement or payment was only available in relation to the proper performance of the Trustee’s duties as trustee of the Trust and could only be paid out of the Assets to the extent that such reimbursement was not prohibited by the Corporations Act 2001 (Cth) (Corporations Act). That included expenses connected with the fees of any development manager, including fixed fees and incentive-based fees paid pursuant to a development management agreement (cl 21.2(f)).

15. [46]

    Clause 27.4 provided that the constitution was legally binding and bound the Trustee as well as all of the Members.

16. [47]

    The Information Memorandum for ADF was issued in 2006 (see Ex M at 139). It included the following statements.

17. [48]

    First, that the “Primary Objective” of ADF was to “provide investors with a 20% pre-tax return on invested capital after fees and other costs” (although it noted that this was not a forecast). The fund structure and size was said to be up to $100 million and it was stated that “[n]o subscriptions will be accepted unless the Minimum Capital Commitment of $60 million is achieved”. (Patersons here points out that only $50 million of capital was committed.)

18. [49]

    Under the heading “Ashington Fees will Align with Investor Returns”, the Trustee Fee was described as per cl 21.1 of the constitution and the Development Management Fee was described as “2.75% for projects with a projected life of less than 2 years and 4.25% for projects with a projected life of more than 2 years”. There was also an “Incentivised Performance Fee” which was described as “50:50 sharing of profits after Investors have received a 15% pre-tax IRR after all fees and expenses”.

19. [50]

    Section 4 of the Information Memorandum dealt with “Project Investment Criteria”. Under the heading “Project Debt”, it stated:

20. [51]

    (For the later ADF2, the terms of the constitution and the Information Memorandum mirrored those of ADF as set out above.)

21. [52]

    The application form for units in ADF (and later ADF2) confirms the applicant’s knowledge and understanding of the Information Memorandum and binds the applicant to the terms of the ADF constitution (Ex M at 204).

22. [53]

    The Cross+ Trust was established by a Deed Poll dated 19 May 2006 in relation to the purchase and development of a property at Kings Cross Road, Potts Point (the former Millennium Hotel in Kings Cross) (Kings Cross Property). This property was redeveloped (by 2008) into a 78-room luxury boutique hotel, office suites, retail premises and a penthouse residential apartment.

23. [54]

    Ashington Capital held 100% of the units in the Cross+ Trust as trustee of ADF. Ashington Capital appointed Ashington Management as development manager of the Cross+ Trust.

24. [55]

    The Potts Point Trust was established also by a Deed Poll dated 19 May 2006 in relation to the purchase and development of a property at Macleay Street, Potts Point (the former Potts Point post office – Potts Point Property). This property was redeveloped, between 2006 and 2009, into an “Emporio” style neighbourhood retail market, seven high-end retail stores and 41 luxury strata office suites over five floors.

25. [56]

    Again, Ashington Capital held 100% of the units in the Potts Point Trust as trustee of ADF; and Ashington Capital appointed Ashington Management as development manager.

26. [57]

    On 30 May 2006, St George Bank Ltd (St George) offered Ashington Capital a facility in the sum of $31.3 million for the Potts Point Trust (Ex M at 243).

27. [58]

    On 10 November 2006, St George offered a facility in the sum of $39,107,000 for the Cross+ Trust (Ex M at 295).

28. [59]

    On 15 March 2007, Investec Bank (Australia) Ltd (Investec) provided a term sheet to Ashington Group offering an initial facility of $10.78 million towards the purchase price of $15.5 million for a property at 10 Wylde Street, Potts Point (a 38 serviced apartment complex in Potts Point) (Wylde Street Property). The maturity date of the facility was 24 months from the initial drawdown date (Ex M at 320ff).

29. [60]

    In 2007, an Information Memorandum was issued for ADF2. Relevantly, it included the statement that:

30. [61]

    Investors were thus advised that all funding for development projects carried out through ADF2 would be obtained at the level of the sub-trusts, and that the liability for any borrowings would not be visited on Ashington Capital in its capacity as trustee of ADF2. This became an issue of no little contention with the superannuation fund investors, as I will explain in due course. Suffice it here to note that Ashington Capital did not honour the commitment made in the Information Memorandum insofar as the Information Memorandum represented that borrowings and liabilities (other than tax liability) would be confined to the sub-trust level. The structure of the trusts and sub-trusts also caused a potential problem in that regard (which the plaintiff contends explains references in various of the superannuation fund investors’ contemporaneous documents as to removal of the trustee – to which I refer in due course).

31. [62]

    On 20 September 2007, ADF2 was constituted. Ashington Capital was appointed trustee. The units in ADF2 were held by the following: Sunsuper (as to $20 million), LUCRF (as to $15 million), Military Super (as to $15 million), Ashington Group (as to $2 million), HESTA (as to $25 million) and Ashington Capital as trustee for ADF Investment Trust (No 2) (as to $3 million), totalling $80 million. Between them the superannuation fund investors thus held 93.75% of the units of ADF2.

32. [63]

    As noted, the superannuation fund investors (HESTA, Military Super, Sunsuper and LUCRF) thus held the majority of the units in each of ADF and ADF2; and Ashington group entities held 10% of the units in ADF and 6.25% of the units in ADF2.

33. [64]

    The Project X Hotel Trust (sometimes referred to as the Double Bay Trust) was established by a Deed Poll in relation to the purchase of a property at Cross Street, Double Bay (the Sir Stamford Hotel) (Double Bay Property), for which development approval was sought for a mixed-use five-star boutique hotel of 60-80 rooms, 40-50 apartments and retail space (with a “fall-back” strategy to refurbish the building and convert it into strata apartments). The units in the Project X Hotel Trust were held as to 25% by Ashington Capital as trustee for ADF and 75% by Ashington Capital as trustee for ADF2. Ashington Capital was appointed trustee of the Project X Hotel Trust and it appointed Ashington Management as development manager.

34. [65]

    The Noosa Trust was established by a Deed Poll dated 12 March 2008 in relation to the acquisition of a 50% interest in the Sheraton Noosa Hotel in Noosa (Noosa Property) (as part of a joint venture with the Valad Property Group (Valad) which held the other 50% interest in the property). There was a longer-term plan to demolish and rebuild the Noosa Property as a mixed-use project incorporating retail, a boutique hotel and apartments. Ashington Capital was appointed trustee of the Noosa Trust and appointed Ashington Management as the development manager of the trust.

35. [66]

    On 14 March 2008, Ashington Capital, Ashington Management and Trust Company Ltd entered into a Development Management Deed for the Noosa Trust (Ex M at 869).

36. [67]

    On 5 May 2008, Ashington Capital, as trustee of the Noosa Trust, entered into a Fee Agreement with Valad Funds Management Ltd (Valad Funds Management) (see Ex M at 19490). By this agreement, Ashington Capital was obliged to pay Valad Funds Management a fee of $20 million on the date five years after the completion of the acquisition of the Sheraton Noosa resort by a joint venture vehicle established by Ashington Capital and Valad “[i]n consideration of Valad introducing Ashington to the Project, by arranging for the issue of units in the Trust and shares in the Company to Ashington” (cl 2.1). The $20 million fee was not disclosed to the superannuation fund investors.

37. [68]

    The Stonington Trust was established by Deed Poll on 23 May 2008 in relation to the purchase of a property at Glenferrie Road, Malvern, Victoria (the Stonington Property). Ashington Capital held 100% of the units in the Stonington Trust as trustee of ADF2. Ashington Capital was appointed trustee of the Stonington Trust and appointed Ashington Management as development manager.

38. [69]

    Ashington Capital issued an Information Memorandum in respect of the Stonington Trust. Consent had been obtained for the contemplated property development which included a master planned luxury residential development consisting of 14 apartments in a four-storey building, 12 duplex-style apartments over five mansion style dwellings and 50 townhouses and an existing heritage building known as “The Stables”.

39. [70]

    On the same day (23 May 2008), Ashington Capital, Ashington Management and Trust Company Ltd entered into a Development Management Deed for the Stonington Trust (Ex M at 1007).

40. [71]

    The vendor of the Stonington Property was Hamton JV (Malvern) Pty Ltd (Hamton). Ashington Capital, as trustee of the Stonington Trust, entered into a Contract of Sale with Hamton and The Trust Company Ltd (as Custodian) on 28 May 2008. That contract provided for a sale price of $46.5 million, a deposit of $4.65 million, and a settlement date of 3 November 2008. The contract of sale was then varied by a Deed of Variation of Contract dated 14 August 2008, pursuant to which, amongst other things, the purchase price was amended to $47,469,890 and the deposit varied to $4,546,989. A final set of variations to the contract was effected by means of a Second Deed of Variation of Contract dated 12 December 2008, pursuant to which, amongst other things, the deposit payable by Ashington Capital, as trustee of the Stonington Trust, was increased from $4,546,989 to $9,196,989 and the date for payment of the balance of the purchase price varied to 30 January 2009.

41. [72]

    The funding for the purchase of the Stonington Property was obtained by Ashington Capital, as trustee of the Stonington Trust, from various sources (which I explain in more detail in due course): first, from Westpac Banking Corporation (Westpac) pursuant to a facility agreement entered into on 18 November 2008 (Westpac Stonington Facility); and the balance through agreements entered into on the day of settlement (which ultimately was 25 February 2009), those being a facility agreement with Investec, by which Investec provided mezzanine finance of $10 million (Investec Stonington Facility) and vendor finance from Hamton. Establishment of 10 Wylde Street Trust – 12 August 2008 The 10 Wylde Street Trust was established by Deed Poll on 12 August 2008 to hold the Wylde Street Property referred to above. Ashington Capital held 100% of the units in the 10 Wylde Street Trust as trustee for ADF. Ashington Capital was appointed trustee of the trust and it appointed Ashington Management as development manager. Development consent was obtained in 2008 to demolish the existing structure and build a new residential apartment complex (for which a construction debt facility was obtained but not ultimately utilised following sale of the site at the request of the superannuation fund investors (see below)).

42. [73]

    At this point it is convenient to note that, as trustee of the ADF and ADF2 trusts, respectively, Ashington Capital was entitled to an annual trustee fee of 1.25% of drawn equity less any capital returned to investors and realised net capital losses. As at December 2009, Ashington Capital claimed an entitlement to an annual trustee fee of $562,000 in respect of ADF (representing 1.25% of drawn capital of $45 million); and, in respect of ADF2, an annual trustee fee of $1 million (representing 1.25% of drawn capital of $80 million).

43. [74]

    Ashington Capital (as trustee of each sub-trust) entered into development management agreements with Ashington Management under which Ashington Management would manage the development of each project undertaken by the ADF and ADF2 sub-trusts and was entitled to a fee of 4.25% of development costs over the forecast life of each project. The plaintiff has calculated that, as at December 2009, Ashington Management was entitled to receive annual management fees of approximately $4.8 million comprising $1.56 million in respect of the Stonington Trust, approximately $1.8 million in respect of the Noosa Trust and $1.42 million in respect of the Project X Hotel Trust. (The development of the other projects of ADF and ADF2 had by then either concluded or all budgeted management fees had already been earned, with the result that no other management fees were payable to Ashington Management.)

44. [75]

    On 15 September 2008, the collapse of Lehman Brothers precipitated the Global Financial Crisis of 2008 (the GFC). It is not disputed that, following the commencement of the GFC, the Ashington Funds came under considerable financial strain. At that stage, as noted above, Ashington Capital had already entered into commitments for the purchase of the Stonington Property and in relation to the acquisition and proposed development of the Double Bay Property.

45. [76]

    At around the time of the GFC, Ashington Capital had been developing a strategy to establish a third fund, initially intended to be called Ashington Development Fund 3 (ADF3) but later revised to be the Ashington Opportunistic Fund 3 (AOF3). The board minutes for the board meeting of Ashington Capital on 24 July 2008 recorded fund raising activity for proposed AOF3 (then referred to as ADF3); and the board papers for the board meetings of Ashington Group and Ashington Capital on 18 September 2008, noted a proposal to increase the size of AOF3 from $150 million to $200 million and that presentations had been made to current investors. Mr Anderson’s evidence is that he intended AOF3 to raise US$200 million and to target international investors. In late 2008, Jones Lang LaSalle was appointed to represent Ashington in its international capital raising.

46. [77]

    However, towards the end of 2008, a decision was made to defer the establishment of AOF3. Minutes of a board meeting of Ashington Capital on 18 September 2008 included, as to the proposed new fund, that due to heavy falls in equity markets and investors being overweight in property, “there are few or no investments for the remainder of the calendar year and ADF No.3 would be deferred until next year” (Ex M at 1415).

47. [78]

    On 30 September 2008, a Compliance Report to the Board of Ashington Capital recorded known breaches during and since the end of the quarter as including “ADF2 investment in Double Bay Project exceeding $30M”; and noted that audited financial statements were not issued to ADF and ADF2 investors by 31 October 2008 (Ex M at 1590-1591).

48. [79]

    Also, on 30 September 2008, NAB and St George wrote to Ashington Group attaching a revised term sheet offering senior debt of $50.375 million to fund the acquisition of the Double Bay Property (Project X Facility) (see Ex M at 1531). The maturity date of the facility was 31 December 2008.

49. [80]

    On 3 October 2008, NAB Capital wrote to Ashington Group providing a term sheet for finance of junior debt of $14.62 million for the Double Bay Property. The maturity date of the facility was 31 December 2009. A subsequent review of Ashington Capital’s records performed by KordaMentha indicates that $14,635,000 was advanced under the Project X Mezzanine Facility from NAB.

50. [81]

    The terms of the Project X Facility are set out, in part, in a Security Trust and Intercreditor Deed dated 15 October 2008 entered into by Ashington Capital, as trustee for each of the Project X Hotel Trust, ADF and ADF2; and by NAB, St George and Ashington Stamford Issuer Pty Ltd (Ashington Stamford) (Project X Security Deed). The terms of the principal facility are set out in: (a) a Note Facility Deed – Senior Note Facility (NAB) dated 15 October 2008 between Ashington Capital as trustee of the Project X Hotel Trust, Trust Company Ltd as custodian of the Project X Hotel Trust, Ashington Stamford and NAB (Project X NAB Facility), under which the facility limit was $25,187,502 and the Facility End Date was 31 December 2009 (Ex M at 1891); (b) a Note Facility Deed – Senior Note Facility (St George) dated 15 October 2008 between Ashington Capital as trustee of the Project X Hotel Trust, Trust Company Ltd as custodian of the Project X Hotel Trust, Ashington Stamford and St George (Project X St George Facility), under which the facility limit was $25,187,502 and the Facility End Date was 31 December 2009 (Ex M at 10578); and (c) a Note Facility Deed – Mezzanine Note Facility dated 15 October 2008 between Ashington Capital as trustee of the Project X Hotel Trust, Trust Company Ltd as custodian of the Project X Hotel Trust, Ashington Stamford, National Australia Bank Ltd (NAB) and nabCapital (a division of NAB) (Project X Mezzanine Facility), under which the facility limit was the lesser of $14,625,000 and the difference between 84% of the value of the Double Bay Property and the limits in the senior facilities (Ex M at 10610); (together, the Project X Note Facilities).

51. [82]

    The principal security contemplated under the Project X Security Deed was a first ranking real property mortgage over the Double Bay Property. A mortgage in favour of NAB over the Double Bay Property was registered on 15 October 2008. Ashington Capital as trustee for each of ADF and ADF2 also granted an equitable mortgage over all the units in the Project X Hotel Trust.

52. [83]

    Pursuant to cl 23.8 of the Project X Security Deed, Ashington Capital, as trustee of ADF2, was required to ensure that at any given time it had minimum uncalled capital or free cash of not less than $15 million (less certain amounts) “which in the records of ADF2 is allocated solely to its obligations under the Finance Documents” (the Project X Uncalled Capital Undertaking). The amounts deducted from the $15 million requirement included interest and line fees paid under the Project X Facility (such that the amount of uncalled capital the subject of this undertaking would reduce over time).

53. [84]

    Pursuant to cl 33.1(d), a default would occur under the Project X Security Deed if, among other things, Ashington Capital was in breach of any obligation under a Finance Document (which would include the Project X Uncalled Capital Undertaking) and remained in breach for 10 business days after the earlier of being notified of the failure to comply or becoming aware of the breach.

54. [85]

    The Project X Note Facilities each adopted the defined terms used in the Project X Security Deed. The term “Finance Document” was defined in the Project X Security Deed so as to include that deed as well as each of the Project X Note Facilities. The Project X NAB Facility and the Project X St George Facility each provided that a “Default” under those deeds occurred if “(whether or not within an Obligor’s control) an event or circumstances specified as a ‘Default’ or ‘Event of Default’ (however described) in a Finance document occurs” (see, for example, cl 16.1 of the NAB Facility). Therefore, a breach of the Project X Uncalled Capital Undertaking would constitute a default under the Project X Security Deed and the two senior note facilities.

55. [86]

    The Project X NAB Facility and the Project X St George Facility each provided, at cl 16.2, that if a “Default” subsisted, NAB or St George could, in effect, cancel all or any part of the Facility Limit, terminate their obligations under the Finance Documents, and demand immediate repayment of all money owing to them in connection with the Finance Documents. Following this, NAB as Security Trustee under the Project X Security Deed could enforce the securities granted under the Project X Facility, including the first ranking mortgage over the Double Bay Property, in accordance with the process set out in the Project X Security Deed.

56. [87]

    As will become apparent in due course, an issue arose with the superannuation fund investors as to the implications for the funds arising out of the Project X Uncalled Capital Undertaking.

57. [88]

    On 2 October 2008, Investec wrote to Ashington Capital as trustee for the 10 Wylde Street Trust, attaching a term sheet offering a $42.47 million facility to fund the refinance of the existing Investec facility and to finance construction of the development (Wylde Street Facility) (Ex M at 1593ff). The facility comprised a $37.44 million Westpac senior debt facility and a $5.03 million Investec junior debt facility. The maturity date of the facility was 22 months from initial drawdown.

58. [89]

    The 8th drawdown for ADF2 was made by Ashington Capital on each of the unitholders’ existing capital commitments on 3 November 2008.

59. [90]

    On 10 November 2008, and hence only shortly after the 8th drawdown for ADF2, Ashington Capital, as trustee for ADF2, wrote to the asset consultants for each of the superannuation fund investors in ADF2, advising that the Double Bay Project was now likely to require an additional $18 million in equity above that forecast in the Information Memorandum and asking that all of the superannuation fund investors commit to increasing the fund equity in ADF2 by $20 million to comply with covenants (i.e., the Project X Uncalled Capital Undertaking) under the finance facilities for the Double Bay Project (Ex M at 1960). The letter stated that ADF2 was not “capitalised sufficiently to continue meeting this banking covenant” and that “it is not intended to draw on the majority of this increased commitment (as it is our intention to replace it by sale of a 50% interest in the project)”.

60. [91]

    At the time of this (the first) additional equity request, Ashington was negotiating with financiers for loan facilities to acquire the Stonington Property and had engaged the firm then known as Mallesons Stephen Jaques (Mallesons) to assist with those negotiations.

61. [92]

    Various of the defendants have pointed to the evidence of discontent on the part of the superannuation fund investors in respect of the $20 million funding request as demonstrating that (contrary to the plaintiff’s submissions) investor “disquiet” with the actions of the Ashington group preceded the request for additional equity that Ashington Capital made in mid-2009.

62. [93]

    On 13 November 2008, Mr Gavin (principal adviser to HESTA), sent an email to Mr Fowler and Mr Hastings explaining the request for extra capital raising and saying that the only alternative to providing extra capital raising was to find a buyer prior to receiving development approval (noting that most returns in a development are earned by getting the planning approval). Mr Gavin stated that “I don’t know if we have much choice but it is very disappointing” (Ex M at 1419). The email stated:

63. [94]

    On 3 December 2008, Mr Gavin sent an email to Mr Anderson, copied to Mr Fowler and Mr Hastings, stating that HESTA would not contribute more equity unless all unitholders did so (Ex M at 1975). On 4 December 2008, Mr Gavin sent an email to Mr King (Sunsuper’s adviser), copied among others to Mr Fowler and Mr Hastings, stating broadly that HESTA would only commit extra equity if more than 75% of the unitholders in ADF2 agreed to do so (Ex M at 1977).

64. [95]

    As part of the funding for the acquisition costs of the Stonington Property, Ashington Capital entered into a facility with Westpac (pursuant to an offer dated 7 November 2008) as senior lender for $23 million on 18 November 2008 (the Westpac Stonington Facility).

65. [96]

    On 12 December 2008, Ashington Capital, as trustee for the Stonington Trust, entered into a loan agreement with Hamton (the vendor of the Stonington Property) to borrow $1,968,032.33. This loan was amended on 10 February 2009 to increase the borrowing to $2,188,546.33 (see Ex M at 2382).

66. [97]

    On 25 February 2009, Hamton and Ashington Capital, as trustee of the Stonington Trust, agreed terms that Hamton would provide Ashington Capital vendor finance of $2,621,103 (by way of deferral of part of the purchase price), repayable on 1 July 2009 with an applicable interest rate of 20% per annum (Hamton Vendor Finance), as well as reimbursement of an expense in the amount of $258,607 (see Ex M at 2428). Mr Anderson personally guaranteed the Hamton Vendor Finance.

67. [98]

    Minutes of a board meeting of Ashington Capital on 16 December 2008 recorded that: following meetings with existing and new investors there were one or two genuine prospects for ADF3; however, “virtually all Australian investors are overweight in property investment and as a result it is unlikely that any domestic investors will make a commitment to ADF No 3. before mid 2009”; that ADF was “drawn fully on its investor capital and is now operating from Sale proceeds and short-term loans from ADF2”; and that ADF was experiencing a fund performance downgrade and liquidity issues.

68. [99]

    On 23 December 2008, Mr Anderson signed the indicative term sheet sent by Investec (on 11 December 2008), proposing a senior debt facility from Westpac of $23 million and a junior debt facility from Investec of $10 million in order to fund the purchase of the Stonington Property.

69. [100]

    The indicative term sheet identified the borrower as Ashington Capital, as trustee for the Stonington Trust. However, while the proposed borrower was at the sub-trust level for the Stonington Trust, the proposed security for the finance facility was at the head trust and sub-trust level as it included: a first ranking fixed and floating charge over Ashington Capital, as trustee for ADF2; a guarantee and indemnity by ADF2; and ADF2 to have made a capital call of no less than $10 million to be paid on the last day of the facility for the sole purpose of repaying the facility. It also provided for Investec to obtain security which included a second ranking mortgage over the Stonington Property; a second ranking fixed and floating charge over the assets and undertakings of Ashington Capital as trustee for the Stonington Trust; and for the entry into a priority deed between Investec and Westpac (which held the first ranking mortgage over the Stonington Property).

70. [101]

    The terms of the Investec indicative term sheet and the fact that it had been signed by Mr Anderson were not communicated to the superannuation fund investors until about June 2009. Relevantly, the ADF2 Quarterly Investor Report No 5 for the period ended 31 December 2008 to unitholders, made no mention of the Investec indicative term sheet although did record that “[f]inance offers have been received from Westpac (Senior) and Investec (Mezzanine)” (Ex M at 2146).

71. [102]

    On 23 December 2008, the following investors applied for units in ADF2 equal to each investor’s pro-rata share of the $20 million to be raised: each of National Nominees Ltd, as nominee for both Military Super ($3.75 million) and Sunsuper ($5 million); JP Morgan Chase Bank as custodian for LUCRF ($3.75 million); Ashington Capital ($750,000); and Ashington Group ($500,000).

72. [103]

    Application for Units forms included the statement that they were “subject to the terms of the Fund constitution, and the information memorandum” (see, for example, Ex M at 2109).

73. [104]

    I interpose here to note that, following the contribution by the superannuation fund investors of $20 million of additional equity in December 2008 for the purpose of compliance with the Project X Uncalled Capital Undertaking, an issue arose whereby the trust comprised in ADF2 had contributed the whole of the additional $20 million raised such that the equity in the Project X Hotel Trust was no longer contributed by ADF and ADF2 in their unit proportions of 25% to 75% (see the 18 June 2009 email from Ashington’s Chief Financial Officer, Mr Scott Steel, to Mr Anderson, copied to Mr Tony Marsden (Ashington’s accountant), Ms Elizabeth Briggs (an Ashington funds manager) and Mr Minahan, in which Mr Steel explains this issue – see below).

74. [105]

    On 27 December 2008 at 8.20pm, Mr Steel emailed Mr Anderson (copied to others at Ashington), expressing his concerns about the impact of the Stonington acquisition on ADF2, stating (with emphasis as per the original) that (Ex 17 at 173-175):

75. [106]

    In cross-examination, Mr Anderson justified the course he had adopted, of proceeding to settle the Stonington acquisition, as follows (T 461.18-23):

76. [107]

    Mr Anderson’s evidence is that in late December 2008 he approached Ms Garrett, who was then responsible for global capital raising at Valad, proposing that Ms Garrett join Ashington as its Head of Funds Management, which role would include assisting Ashington to raise capital for AOF3. Mr Anderson has deposed that he met with Ms Garrett in late December 2008 at the Westin Hotel and discussed the possibility of Ms Garrett working with Ashington (see [130] of Mr Anderson’s 19 December 2017 affidavit).

77. [108]

    Mr Anderson has also deposed that, in January 2009, he and Mr Peter Seaton (of Ashington) met with Ms Garrett at the Westin Hotel and proposed that they send her an offer of employment (see [131] of Mr Anderson’s 19 December 2017 affidavit).

78. [109]

    According to Mr Anderson, Ms Garrett asked that Mr Renauf, with whom she worked at Valad, also join Ashington.

79. [110]

    Ms Garrett denies that she was employed by Ashington Management but “admits that she was engaged as a contractor by [Ashington Management] from on or about 1 September 2009 until she became a consultant to [Parissen] on or about 16 November 2009”; Mr Renauf denies that he was employed by Ashington but admits that he was “engaged as a contractor by [Ashington Management] during 2009 until he became a consultant to Parissen on or about 22 December 2009”.

80. [111]

    While, over the period from late December 2008 to early 2009, the superannuation fund investors all subscribed for the $20 million additional capital in ADF2 in shares pro rata to their respective shares in the total number of units in ADF2, it is relevant to note that HESTA did so only on the basis of a side letter from Ashington Capital. This occurred in the following circumstances.

81. [112]

    From 22 December 2008 to 15 January 2009 there was correspondence between HESTA, Frontier and Ashington in relation to HESTA’s concern that the December 2008 additional capital only be used for the Double Bay Project.

82. [113]

    On 6 January 2009 at 12.14pm, Mr Gavin sent an email to Ms Briggs and Mr Anderson, copied to Mr Hastings and Mr Fowler. In that email, Mr Gavin stated that HESTA had received legal advice from Freehills about the additional equity request and raised the issue as to whether those funds could be quarantined to the Double Bay Project and not be used for another project, saying that:

83. [114]

    On 6 January 2009 at 3.41pm, Ms Briggs responded to Mr Gavin’s question by email (also sent to Mr Anderson). Ms Briggs dismissed Mr Gavin’s concerns, stating that it was “not possible for the additional equity to be quarantined to the Double Bay sub trust as this would not satisfy the covenant for Double Bay which sits at the head trust level” and “[t]o quarantine the $20M in this way would effectively defeat the purpose of the capital raising”. Mr Gavin replied by email to Ms Briggs and Mr Anderson that day asking, “[h]ow are you ensuring the uncalled equity at the head trust level set aside for Double Bay is “protected” from the other projects? Investors can’t be put in a situation where they need to replenish the head trust level guarantee for Double Bay if another project performs very poorly and the creditor takes action against Ashington such that it erodes the uncalled equity at the head trust level”.

84. [115]

    On 7 January 2009, Mr Anderson and Ms Briggs received legal advice from Mallesons about the proposed HESTA Side Letter and schedule 1 accompanying the Written Resolution of Members to the effect that (Ex 17 at 39):

85. [116]

    On 9 January 2009 at 6.44pm, Mr Gavin emailed Ms Briggs (copied to Mr Anderson as well as Mr Hastings and Mr Fowler of HESTA), repeating his concerns about the First Additional Equity Request and asked to be sent or told about the covenants or guarantees that Ashington had or were likely to give to the banks in relation to Stonington. (Acorn points out that, despite that direct request, no one at Ashington told Mr Gavin or anyone else at HESTA about the details in, or provided a copy of, the Investec indicative term sheet. Acorn says that this is contrary to Mr Anderson’s self-serving evidence in cross-examination that if a request for information was received from one of the superannuation fund investors he would provide that information.)

86. [117]

    On 12 January 2009 at 11.59am, Ms Briggs replied to Mr Gavin (copied to Mr Anderson, Mr Hasting and Mr Fowler), again dismissing Mr Gavin’s concerns and stating that:

87. [118]

    Ms Garrett and Mr Renauf say that this statement was at the very least misleading (and they point out that, by February 2009, the uncalled capital had been double pledged to secure Double Bay and also to secure the Investec Stonington Facility). Ms Briggs’ evidence in cross-examination was that this email appeared to be an “important communication” and that based on her usual practice at the time, the email would have been checked before it was sent or it would have been dictated to her (T 803). Acorn notes that Mr Anderson did not contact Mr Gavin to correct that response; and Acorn says that Ashington had no reasonable basis on 12 January 2009 to assert that Mr Gavin’s concerns were unfounded.

88. [119]

    On 13 January 2009 at 5.46pm, Mr Gavin replied to Ms Briggs’ email, stating:

89. [120]

    On 14 January 2009, Mr Anderson said that the “primary purpose” of the $20 million increase in commitment to ADF2 was “unequivocally for the Double Bay project” and explained the position as follows (Ex M at 2319; see T 338.23-6):

90. [121]

    Mr Anderson proposed a meeting on 19 January 2009 to “reach an agreement that is in the best interests of investors”. On 15 January 2009 at 11.35am, Mr Gavin sent an email to Mr Anderson and Ms Briggs, in which he repeated his position, stating:

91. [122]

    HESTA’s position was that it would only pledge the additional equity if it was used for the specific purpose of the Double Bay Project (Ex M at 2319).

92. [123]

    On 16 January 2009, at the time that Mr Anderson was meeting with Mr Gavin to discuss his concerns about the use of the funds, Mr Steel emailed Mr Paul Hameister from Hamton (the vendor of the Stonington Property) and said “[i]n order to secure a Mezz offer from Investec, we offered to secure their position with a guarantee from the head trust (ADF2)” (Ex M at 2340). (Ms Garrett and Mr Renauf point to this as indicating that Mr Anderson was deliberately misleading at least HESTA about the purpose of the capital raising.)

93. [124]

    On 21 January 2009, the Ashington Development Fund No 2 Supplementary Agreement was executed by HESTA, JP Morgan Nominees Australia Ltd as custodian for HESTA and ADF2 (the HESTA Side Letter), concerning the use of additional capital only for the Double Bay Project. The HESTA Side Letter contained the statement that the “The Trustee will use the Additional Capital to meet the existing bank finance covenant … for the [Double Bay Project]” (cl 1.1; Ex M at 2344). On 12 February 2009, Ms Briggs wrote to Mr Hastings enclosing the HESTA Side Letter executed by Mr Anderson as director of Ashington Capital in its capacity as trustee of ADF2.

94. [125]

    Subsequently, the 29 January 2009 Investments and Governance Report to the HESTA Board, including the statement (Ex M at 2355):

95. [126]

    Ms Garrett and Mr Renauf submit that Mr Anderson executed the side letter with no intention of ever complying with it. At [224] of his 9 December 2019 affidavit, Mr Anderson deposed that:

96. [127]

    On 4 February 2009, HESTA applied for additional units in ADF2, attaching a resolution of members of the same date. Schedule 1 to the resolution titled “Terms of the Proposed Offer” confirmed that the “Trustee intends to use the [$20 million] to meet bank finance covenants on the Double Bay project” (Ex M at 2369).

97. [128]

    On 18 February 2009, Ashington Capital made the 11th drawdown for ADF2 on the unitholders.

98. [129]

    Settlement of the purchase of the Stonington Property was due to take place on 25 February 2009. As above, Ashington Capital financed the purchase with the Westpac Stonington Facility, the Hamton Vendor Finance and the Investec Stonington Facility (see below).

99. [130]

    On 25 February 2009, Ashington Capital, as trustee of ADF2, and Investec entered into a facility agreement whereby Investec provided mezzanine finance in the sum of $10 million for the Stonington Property (the Investec Stonington Facility). The Investec Stonington Facility was to be repaid within 6 months (i.e. by 25 August 2009).

100. [131]

     As security for the $10 million facility, Ashington Capital granted Investec: (i) a first ranking fixed and floating charge over all the property, assets and undertakings of ADF2 (with the exclusion of the units held by ADF2 of the Noosa Trust and Project X Hotel Trust and of the benefit of unitholder loans from ADF2 to the sub-trusts); (ii) a first ranking mortgage over all units in the Stonington Trust; and (iii) a guarantee by Ashington Capital, as trustee for the Stonington Trust.

101. [132]

     Ashington Capital, as trustee for ADF2 covenanted to maintain uncalled capital in the fund of $10 million and to make calls in amounts up to $10 million when directed to do so by Investec, with the funds to be paid immediately to Investec (the Stonington Uncalled Capital Undertaking). Ashington Capital also signed a power of attorney allowing Investec to make calls over the uncalled capital.

102. [133]

     The Investec Stonington Facility incorporated by reference an Investec document entitled “General Terms and Conditions December 2008 Version”, cl 6.1(b) of which made it an “Event of Default” if there were a breach of any undertaking in the Investec Stonington Facility, including the Stonington Uncalled Capital Undertaking (see Ex M at 4960ff).

103. [134]

     Pausing here, PPB says that, on and from 25 February 2009 (when Ashington Capital entered into the Investec Stonington Facility), Ashington Capital was subject to conflicting obligations with respect to its uncalled capital: namely, the Project X Uncalled Capital Undertaking and the Stonington Uncalled Capital Undertaking. PPB says that Ashington Capital was thus in breach of each of those undertakings, and in default of its obligations under the Investec Stonington Facility, the Project X Security Deed and the various Project X facilities. PPB points out that Ashington Capital had also obtained borrowings at the head trust level, as distinct from SPV (special purpose vehicle) level, contrary to the commitments made in the Information Memorandum for ADF2. These matters in due course assumed much significance in terms of the relationship between Mr Anderson and superannuation fund investors and their asset consultants (see below).

104. [135]

     Acorn says that it is significant that, although the settlement of Stonington in February 2009 with finance provided by Westpac and Investec was disclosed to the superannuation fund investors in the ADF2 Quarterly Investor Report No 6 for the period ended 31 March 2009, neither the terms of the Investec Facility nor the existence of the Hamton Vendor Finance (and that it was secured by Mr Anderson’s personal guarantee) were mentioned to the superannuation fund investors in any way until many months later. It is said by Acorn that it was obvious in February 2009 that he should have disclosed this information to the unitholders at that time.

105. [136]

     The plaintiff says that, shortly before settlement of the Stonington Property purchase was due to take place, Investec altered the terms upon which it was prepared to enter into the Investec Facility; and that this included a change in the capacity in which Ashington Capital was borrowing (from Ashington Capital as trustee for the Stonington Trust to Ashington Capital as trustee for ADF2). The plaintiff says that Ashington Capital negotiated to exclude, from the fixed and floating charge it provided as security to Investec, the rights, title and interest of Ashington Capital in the units held by ADF2 in the Project X Hotel Trust and the Noosa Trust, effectively limiting Investec’s security over units in the ADF2 sub-trusts to those in the Stonington Trust. The plaintiff says that Investec also required Ashington Capital to covenant to ensure that there was minimum uncalled capital of $10 million in ADF2, and to provide it with a power of attorney enabling Investec to make calls on unitholders on uncalled capital to discharge the debt owed to it; and that there were other changes in the commercial terms which it is accepted were also unfavourable to Ashington.

106. [137]

     Ashington’s position is that it considered that it was appropriate to accept Investec’s altered terms in order to avoid the likelihood of failing to complete the purchase (which would have put at risk a $12 million deposit paid to the vendor and would have exposed unitholders to legal action by the vendor).

107. [138]

     PPB cavils with the proposition that the terms of the Investec Stonington Facility were the result of a late alteration of proposed terms by Investec, pointing out that the Investec indicative term sheet provided by Investec on 11 December 2008 foreshadowed security at the head trust level and the uncalled capital undertaking (see above).

108. [139]

     Ashington Capital advanced the Stonington Project through the design and approval process, launched a sales and marketing campaign and prepared the site for construction. By June 2009, bulk earthworks had been completed and the Stonington Property was ready for construction.

109. [140]

     Meanwhile, on 25 February 2009 (at 6.19pm), Mr Carolan sent an email to Mr Anderson and Mr Minahan attaching a “proposal from Nicki and Sam” that Ms Garrett and Mr Renauf receive a base salary of $350,000, a 5% equity stake, bonuses and one voting seat on the Ashington board (Ex M at 2403-2406). Patersons says that, on its face, this appeared to be a proposal from Ms Garrett and Mr Renauf to bring a significant part of the Valad business to Ashington. (Patersons says that, while this proposal was sent from Mr Carolan’s Patersons’ email address, this was not a Patersons’ proposal; rather, it was a proposal from Ms Garrett and Mr Renauf being conveyed by Mr Carolan qua husband.)

110. [141]

     Mr Anderson has deposed (at [133] of his 19 December 2017 affidavit) that, in late February 2009, he had a conversation with Ms Garrett during which she told Mr Anderson that she was going to resign from Valad, take 3 months’ “gardening leave” and start with Ashington at the end of June 2009. (Ultimately, it appears that Ms Garrett was required to take 6 months’ gardening leave but that she may have commenced work for Ashington prior to the expiry of that period – see below.)

111. [142]

     Around the same time, in early 2009, Ms Garrett (who was not only then an employee at Valad but also a former employee of Patersons) introduced Mr Shorrocks (the Head of Corporate Finance – Sydney at Patersons, to whom Mr Carolan reported) to Mr Minahan and Mr Anderson; the purpose of this introduction being to discuss, at a “high level”, a series of different transactions with which Patersons might be able to assist Ashington.

112. [143]

     The minutes of the Ashington Capital board meeting on 26 February 2009 noted that two technical compliance breaches had been reported to the Corporate Governance Committee. The Board Paper stated that “Australian Industry Superannuation Funds, are unlikely to be significant investors during the remainder of the 2009 calendar year”; and that the close date for the fund had been revised to 31 March 2009 (Ex M at 2430-2453).

113. [144]

     To set the context as to the position of Ashington in March 2009, it is relevant to note that, on 12 January 2009, Mr Steel sent an email to Mr Marsden indicating cashflow issues arising from the settlement of the Stonington Property and stating that “[h]opefully, you are able to defer most payment requests to the end of Jan” (Ex 17 at 50).

114. [145]

     On 3 March 2009, Mr Steel sent an email within Ashington, copied to Mr Anderson, in which he stated that “[i]n simple terms, we need $21M up to the end of July. We have available $14M. Therefore, we need to shuffle/defer/reduce our expenditure by $7M!!!!” (Ex M at 205).

115. [146]

     On 17 March 2009, Mr Steel sent an email to Mr Anderson about the funds’ cashflow and noted that, even after a revision of expenditure, there would be a $5.5 million deficit across ADF and ADF2 for the period up to 30 July 2009. (Ex M at 2507).

116. [147]

     On 1 April 2009, Mr Marsden (the Ashington group accountant) emailed Mr Anderson, copying Mr Steel, asking for approval for payments and said that “Mallesons & Maddocks – approx. $60k each. These are the invoices that are 120+ days old (and Maddocks in particular are ready to stop work if this isn’t paid. Martyn is being pushed to collect more than this)” and that “post creditor M&W Zander – $33k. These invoices are around 6 months old and have only recently been approved, they have been chasing for months”.

117. [148]

     On 24 March 2009, Ashington Capital made the 12th drawdown for ADF2 on the unitholders.

118. [149]

     As adverted to above, there is some doubt as to when Ms Garrett actually commenced work within Ashington (possibly because Ms Garrett was meant to be on six months’ “gardening leave” from Valad).

119. [150]

     There is an email sent from Ms Briggs to Ms Garrett’s Gmail account on 6 April 2009 at 9.16am in which Ms Briggs forwards Ms Garrett a draft term sheet for AOF3 (see [149] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 2604ff), which suggests that Ms Garrett may have been involved at least to some extent from around April 2009. Ms Garrett responded by email from her Gmail account at 4.31pm on 9 April 2009 with comments and suggestions in relation to the term sheet (see [150] Mr Anderson’s 19 December 2017 affidavit; Ex M at 2603-2604).

120. [151]

     However, it appears Ms Garrett was not formally acting in the role of Head of Funds Management until September 2009. Mr Renauf, on the other hand, had a shorter period of gardening leave and seems to have commenced as Head of Development from April 2009 (a role he performed until December 2009 when both he and Ms Garrett left the Ashington group).

121. [152]

     On 17 April 2009, at 11.40am, Ms Garrett sent an email to Mr Anderson, proposing an insertion for the board paper for the next Ashington directors’ meeting relating to Ms Garrett and Mr Renauf and what they could offer; and including reference to them being on gardening leave for six and three months, respectively (see [152] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 227). The email included information in respect of potential capital raisings (referred to as “Project Mac” and “Project Spring”) and the transfer of management rights in relation to two Valad funds.

122. [153]

     On the same day (17 April 2009) at 3.26pm, Mr Anderson sent an email to Ms Garrett requesting a copy of Ms Garrett and Mr Renauf’s resumes for inclusion in the Ashington Board paper (see [153] Mr Anderson’s 19 December 2017 affidavit; Ex M at 229).

123. [154]

     In response to the above email, Ms Garrett sent an email to Mr Anderson on 20 April 2009 at 10.55am, attaching her resume and offered to add all of her investor discussion notes into a customer relationship management system if Ashington had one (see Ex M at 2621).

124. [155]

     As noted above, Mr Anderson was first introduced to Patersons in early 2009 by Ms Garrett and Mr Minahan. On 24 April 2009, Mr Shorrocks (of Patersons) sent an email to Mr Minahan, copied to Ms Garrett’s Gmail account, attaching a letter confirming a mandate “exclusively to approach the Stamford Group with a view to agreeing the terms of a due diligence period” during which a private client of Patersons of substantial net worth would seek to reach terms to acquire the Sir Stamford at Circular Quay (see Ex M at 2629); and on 29 April 2009, Mr Carolan sent an email to Mr Minahan, copied to Ms Garrett, referring to the attached letter. At around the same time (16 April 2009), Ashington was in receipt of a further mandate from Patersons in respect of a high-net-worth individual who was interested in investing in the Four Seasons Hotel, George Street, Sydney (a transaction of which Mr Shorrocks had no specific recollection – T 738).

125. [156]

     On 28 April 2009, Mr Seaton (of Ashington) sent an email to Mr Anderson attaching links to employment agreements for each of Ms Garrett and Mr Renauf (see [155] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 2626, 2762ff). (There is no suggestion that any employment agreements were ever executed by Ms Garrett and Mr Renauf.)

126. [157]

     On 1 May 2009, Ms Julie Watts, on behalf of Mr Minahan, sent an email to Ms Garrett (also addressed to Mr Renauf) attaching an employment agreement including a salary and sign-on fee (see [156] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 236), which email Ms Garrett sent to Mr Renauf.

127. [158]

     On 4 May 2009, Ashington Capital and Ashington Group held board meetings. The development of 10 Wylde Street was put “on hold” in May 2009. The board meeting paper stated that “a decision has been made to put the demolition of the building [10 Wylde Street] on hold due to financiers increasing their requirements for pre-sales from the previously agreed $20 million sale, and Investec (the land lender) becoming uncomfortable that the demolition was adding value to the property” (Ex M at 2959).

128. [159]

     In late May 2009, Mr Shorrocks, Mr Minahan, Ms Garrett and Mr Renauf travelled to Hong Kong for what was referred to as the Asian road show to meet with potential investors interested in investing in Australian property. The trip to Asia was for the purpose of introducing Patersons’ clients to Ashington, as potential investors in future Ashington projects, including AOF3. Mr Shorrocks recalled that there were four or five meetings, each with a different potential investor, one of which was Och-Ziff Capital Management Group (Och-Ziff) (T 744-755).

129. [160]

     On 12 May 2009, Mr Anderson sent an email to Ms Garrett’s Gmail account seeking some clarity about “plans for next week” (i.e., the Asian read show) (see [144] Mr Anderson’s 19 December 2017 affidavit; Ex M at 3010). Ms Garrett’s response on the same day was that she had locked in four meetings for Hong Kong on Tuesday and was trying to fill in Wednesday; and that she and Mr Renauf had been working on a presentation and the feasibilities.

130. [161]

     On 14 May 2009, Mr Seaton sent an urgent print request for business cards for Ms Garrett and Mr Renauf as they were needed for the “Asian road show” (Ex M at 3050).

131. [162]

     On 22 May 2009, Ms Garrett sent an email from her Gmail account to Mr Anderson (with a copy to Mr Minahan and Ms Briggs) reporting on the progress in relation to interested investors in Projects Spring and Mac and the trip to Asia (see Ex M at 3053-3054).

132. [163]

     Ultimately, while there was some initial follow up from Och-Ziff, nothing came of those meetings in Hong Kong or the opportunities with respect to the Sir Stamford Hotel Circular Quay and the Four Seasons Hotel, at least insofar as Patersons was concerned.

133. [164]

     By letter dated 31 May 2009, Ashington Capital’s solicitors, Mallesons, gave Ashington Capital advice about the “fund issues with the finalised Investec Facility documents” (see Ex M at 5381).

134. [165]

     Mallesons identified a number of inconsistencies between the terms of the Investec Stonington Facility and securities; and the obligations of Ashington Capital identified in the ADF2 Information Memorandum and the ADF2 constitution, including that: entry by Ashington Capital as trustee of ADF2 into a direct loan with Investec was inconsistent with the ADF2 Information Memorandum (which stated that liabilities be quarantined to the assets of each project); that provision of the fixed and floating charge to Investec was also inconsistent with the ADF2 Information Memorandum obligation that liabilities be quarantined to the assets of each project; and that the undertaking to maintain uncalled capital of $10 million during the life of the Investec Facility “appears to be inconsistent” with the ADF2 Information Memorandum statement that ADF2 uncalled capital will be called/used to invest in new development opportunities rather than used as a reserve to secure the provision of finance. Mallesons noted that granting a power of attorney to Investec allowing it to make a call on the unitholders at any time for the debt outstanding on the Investec Facility raised questions whether Ashington Capital had exercised its trustee powers in the best interests of the unitholders; and that the Investec Facility documents containing restrictions on the right of the unitholders to transfer their ADF2 units was at odds with the ADF2 constitution. The letter also noted that the Investec Facility documents contained restrictions on the right of the unitholders to replace Ashington Capital as trustee of the Stonington Trust or ADF2.

135. [166]

     The letter expressed the view that investors could become concerned that ADF2 was abandoning the structure in that Information Memorandum. The letter advised Ashington Capital to disclose to the investors in ADF2 “that ADF2 entered into a direct loan with Investec and that the liability for the loan is not quarantined to the assets of Stonington project”; the key terms of the fixed and floating charge taken by Investec; and the fact of the Stonington Uncalled Capital Undertaking. (Ashington Capital made no such disclosure until after it had requested additional equity from the superannuation fund investors for the purpose of repaying Investec – see below.)

136. [167]

     It is noted that in cross-examination Mr Anderson resisted any suggestion that he understood, following this advice, that the undertakings with respect to uncalled capital in the Investec Stonington Facility, as well as the grant of a power of attorney in favour of Investec, involved a breach of obligation or a breach of trust (T 471.45-472.46). Mr Anderson stated that the phrasing “appears to be inconsistent” in the advice, is “wishy washy” and that “I probably didn’t find it, and I don’t find it now necessarily [to] be inconsistent with the IM”.

137. [168]

     The plaintiff accepts that, by mid-2009, Ashington was facing a number of difficulties that posed a risk to its business. The plaintiff says that, central to these difficulties, was the need to refinance the Investec Stonington Facility and Hamton Vendor Finance (which were due for repayment on 25 and 23 August 2009, respectively). The various defendants emphasise the financial difficulties that Ashington was experiencing at this time.

138. [169]

     The 31 March 2009 quarterly report to unitholders acknowledged that “[t]he facility component provided by Investec was on unreasonable terms which were amended within 24 hours of settlement” (Ex M at 2557).

139. [170]

     As noted, the Investec Stonington Facility was due to expire on 25 August 2009.

140. [171]

     On 1 June 2009, Mr Anderson sent emails to Ms Megan Chan (of Sunsuper) and Mr Hamish Flett (of Arcadia, advising LUCRF) seeking a commitment to pay a proposed extra $15 million equity injection for Stonington by 18 June 2009 (the Second Additional Equity Request). The purpose of this (second) additional equity request was to pay out the mezzanine facilities (i.e., the Investec Stonington Facility and the Hamton Vendor Finance) amounting to $12.5 million and “a $2.5m ‘buffer’ for additional interest and costs in the Stonington Project, facilitating construction funding and build commencement on a proposed start date of 1 July 2009” (Ex M at 3063). Investec had indicated that it was not prepared to extend the Investec Facility.

141. [172]

     Similar requests were made of the other superannuation fund investors, resulting in communications between representatives of the superannuation fund investors in early June 2009 in relation to the Second Additional Equity Request.

142. [173]

     There is no doubt that this request led to disquiet and discussion amongst superannuation fund investors (and that it caused superannuation fund investors to question not only the Stonington Trust issues but also the overall performance of ADF2).

143. [174]

     On 2 June 2009 at 10.52am, following receipt of the Second Additional Equity Request, Mr Dedes (of Strategic Capital Management, adviser to Military Super) emailed Mr Anderson and stated (Ex M at 3070):

144. [175]

     On 4 June 2009 at 10.55am, Mr Anderson responded to this email, stating that the project models would be sent by Mr Steel. Mr Anderson stated (with emphasis added per Acorn) (Ex M at 3072):

145. [176]

     Mr Anderson agreed in cross-examination that “these risks” included a reference to the risks with the funding for Stonington but Mr Anderson rejected the assertion that this response was untruthful because “all risks” were not known until April/May (T 358). Acorn says that no weight should be placed on that answer. Acorn says that there is no evidence of any risks relating to Stonington which were “not clear” to Anderson as soon as the Investec Stonington Facility was executed. Ms Garrett and Mr Renauf similarly say that this statement was at the very least misleading. It is said that the issues with the Stonington debt were clear months earlier between November 2008 and February 2009 when the First Additional Equity Request was made (with respect to Double Bay) and the Stonington facilities finalised. It is also said that, as far back as November 2008, Mr Anderson knew that Stonington would require further equity (Ex 17 at 53), in part because Investec required it (Ex 17 at 56). It is thus submitted that Mr Anderson intentionally misled investors about these issues to improve his chances of raising the $15 million of funds he needed to keep Ashington afloat.

146. [177]

     By early June 2009, the superannuation fund investors and advisers had begun coordinating their response to Ashington in relation to the Second Additional Equity Request and ADF2.

147. [178]

     On 4 June 2009 at 1.35pm, Mr Flett (LUCRF’s consultant from Arcadia) emailed Ms Chan (portfolio manager at Sunsuper) requesting a discussion about ADF2. Ms Chan agreed to having such a discussion with the involvement of Mr King (Sunsuper’s consultant from Sovereign).

148. [179]

     Mr King then sent a reply by email on 4 June 2009 at 2.35pm to Ms Chan, Mr Flett, Mr Dedes and Mr Gavin (representatives of all of the superannuation fund investors) in which he stated that “[i]t is highly unlikely that any of us will be satisfied with the information provided by Ashington in support of the additional equity raising” and proposed that the unitholders adopt a coordinated approach on the matter. Mr King suggested that the superannuation fund investors “should seek further information asap” from Ashington and attached a draft response for comment from the others.

149. [180]

     Mr Gavin forwarded Mr King’s email to HESTA representatives (Mr Hastings and others) on 5 June 2009 at 2.10am, stating that Mr King was “rounding up” the superannuation fund investors, commending a coordinated response, and commenting that “everyone is extremely frustrated with the poor investor communication…when they have known for months that this problem was looming”. Mr Gavin gave his suggested comments on Mr King’s document.

150. [181]

     Mr Flett replied to the group email on 5 June 2009 at 9.06am, agreeing to a coordinated response, and stating that a key concern is “whether there is some major issue here that we are not really being told about ie breach of a financing covenant, cross‑collateralization of loan obligation etc”.

151. [182]

     On 5 June 2009 at 10.27am, Mr Hastings responded with comments on Mr King’s document and stated (Ex M at 3094):

152. [183]

     At 10.38am, Mr Gavin emailed unitholder representatives regarding concerns the ADF2 investors were experiencing in relation to Ashington and the request for additional equity. Mr Gavin’s email included that “I completely agree with all your sentiments. As Ray [King] and I discussed yesterday, the investor communication at Ashington continues to be poor, and we’re all getting a bit of [sic] sick of the little surprises that seem to appear in the quarterly reports, plus the last-minute requests for additional equity”. Mr Gavin also stated (Ex M at 3096):

153. [184]

     At 4.07pm, Mr King (of Sovereign) sent an email to Mr Anderson (copied to various asset consultants) responding to the request for additional equity in Stonington and requesting information identified in an attached note. The email included the statement that “[g]enerally unitholders are very concerned about the lack of information in the equity request, the tight time frame for a decision and the misinformation already provided to unitholders”, and that “[w]e are in agreement that we would like to progress discussions as a group”. Mr King’s attached note alluded to other emerging investment opportunities and stated that a far better case needed to be prepared to justify the additional equity injection into the Stonington Project. Mr King’s note questioned, among other things, whether Ashington had a reasonable basis to believe that investors could withdraw the additional equity once replaced by debt in 6 months; why Westpac did not want mezzanine lending in the structure; and when the debt facilities had to be repaid (Ex M at 3120-3123). The note also sought detailed financial projections for the financial impacts of various options.

154. [185]

     Pausing here, Acorn points out that Mr King’s 5 June 2009 email plainly indicated that the superannuation fund investors were not happy with their relationship with Ashington as trustee and manager of their funds; and, further, they had already concluded that Ashington had misinformed them.

155. [186]

     In cross-examination, Mr Anderson stated that he did not regard this email as indicating that the superannuation fund investors were unhappy with him and understood simply that the superannuation fund investors “were just having a difficult time, like everybody was” (T 638-639). Acorn submits that Mr Anderson’s evidence in this regard should be rejected.

156. [187]

     Meanwhile, on 7 June 2009, Maddocks applied to wind up Ashington for its unpaid invoices.

157. [188]

     On 8 June 2009, Ms Garrett sent an email to Mr Anderson commenting on a business plan for the next two years, there referring to the proposed AOF3.

158. [189]

     On 10 June 2009 at 6.46pm, Mr Anderson sent an email to Mr King (copied to other superannuation fund investors’ consultants) answering the questions in Mr King’s note of 5 June 2009 and attaching the Stonington monthly project control group report for May 2009. As to the settlement of the Stonington purchase on 25 February 2009, Mr Anderson explained that Investec had made clear that the Investec Stonington Facility must be repaid by no later than 25 August 2009 and said that Investec was “charging a prohibitive rate of an 18% margin above cost of funds to motivate an alternative funding solution” (Ex M at 3396). In relation to the financial structuring of the Investec Stonington Facility, Mr Anderson stated that:

159. [190]

     In cross-examination, Mr Anderson’s evidence was that he did not realise at the time that the first of the sentences extracted above was wrong (T 371-372). Acorn in its submissions says that this evidence, from a sophisticated funds manager, beggars belief and that it should be rejected as self-serving and dishonest. Acorn says that such an understanding would likely be due to exclusions in the security for the Investec Stonington Facility of units held by ADF2 in the Noosa and Project X Hotel Trust. However, Acorn points out that, by 10 June 2009, Mr Anderson had already read the Mallesons advice (which had advised Ashington Capital to disclose “that ADF2 entered into a direct loan with Investec and that the liability for the loan is not quarantined to the assets of the Stonington project”).

160. [191]

     In the 10 June 2009 letter, Mr Anderson expressed the view that it was “commercially acceptable at the point of settlement” to proceed with providing security over uncalled capital. Mr Anderson referred to the Hamton Vendor Finance of $2.5 million being repayable on 1 July 2009 (but the defendants note that he made no mention that he had personally guaranteed that amount).

161. [192]

     Relevantly, on 11 June 2009 at 9.29am, Mr Steel sent an email to Mr Anderson, copied among others to Mr Minahan, pointing out that the 10 June 2009 response was inaccurate insofar as it said that the Investec Stonington Facility would not affect other projects (Ex M at 3692):

162. [193]

     It is noted that Mr Anderson did not communicate with the superannuation fund investors to tell them that what he had said in his letter on 10 June 2009 was wrong.

163. [194]

     Mr Fowler (HESTA’s Executive Manager)’s evidence is that he was extremely concerned to learn (from the 10 June 2009 email) that the Investec Stonington Facility was secured by uncalled capital, which he regarded as contrary to the HESTA Side Letter (Ex 14 at 5).

164. [195]

     On 11 June 2009 at 2.30pm, Mr Gavin emailed Mr Hastings about Mr Anderson’s 10 June 2009 email to the superannuation fund investors, stating:

165. [196]

     (Acorn says that Mr Gavin’s worries were very well founded; that he had now learnt for the first time that his concerted efforts on behalf of HESTA to ensure that the First Additional Equity Request was quarantined to Double Bay had been unsuccessful; and it is said that Ashington’s behaviour was “the antithesis of a trustee acting with utmost candour”.)

166. [197]

     Mr Anderson has deposed that, on 12 June 2009, he and Mr King had a telephone discussion during which Mr King requested an update in relation to the Double Bay and Noosa projects (see [198] of Mr Anderson’s 19 December 2017 affidavit).

167. [198]

     On 12 June 2009, a meeting was held in Sydney between representatives of the superannuation fund investors (with representatives in Melbourne participating by telephone) and Mr Anderson (and other senior Ashington staff) to discuss the Second Additional Equity Request. In attendance at that meeting were at least Ms Chan of Sunsuper, Mr Cohen and Mr King, advising Sunsuper, Mr Dedes, of LUCRF and Mr Flett advising LUCRF.

168. [199]

     Each of Ms Chan (Ex M at 3717), Mr Cohen and Mr King jointly (Ex M at 3714) and Mr Flett (Ex M at 3719) prepared contemporaneous file notes of the 12 June 2009 meeting. Mr Dedes also recorded his recollection of the meeting on 12 June 2009 in a subsequent report he prepared on 29 July 2009.

169. [200]

     Those notes indicate that the discussion included: that Investec had security over uncalled capital; that it was a “surprise” to many investors that the $10 million mezzanine facility was secured against uncalled capital as investors believed that was for the Double Bay Project; that Ashington may have over pledged the uncalled equity commitments (which was the “main concern” for investors); that the Stonington Project was “now in a critical funding position as the original vendor finance ($2.5 million) is repayable on the 1 July 09 and the Mezzanine Finance ($10 million from Investec) must be repaid by 25/8/09” and that management did not think additional finance could be procured from Westpac or that a replacement mezzanine financier was available; that the options for unitholders included committing no further equity, committing their pro rata share of the requested equity, or attempting to refinance the mezzanine loan; and that some unitholders wanted their lawyers to review the documents because of their concerns about the use of the additional equity provided for the Double Bay Project. Superannuation fund investors indicated that “it is highly unlikely that Investors would commit further equity in the time fames required based upon the information made available from Ashington”; and that Ashington should prepare alternative strategies for funding the project and that investors required more information. It is also recorded that the investors now sought further information on the status of other projects and funding commitments.

170. [201]

     The joint note made by Mr King and Mr Cohen (advising Sunsuper) of this meeting (it records their perception that “the manager is very bullish (perhaps overly so) on the residential market in Melbourne and has suggested that price is no issue in this market. Most unitholders at the meeting were not convinced however the prices secured so far have been above the manager’s valuation” (Ex M at 3714).

171. [202]

     Under the heading “Current Capital Structure for the Stonington Project”, in this note, there is reference to Mr Anderson having given a personal guarantee for the whole of the “$2.5m vendor finance arrangement which is due for repayment on the 1st of July”. Under the heading “Conclusion and issues to follow up” it is said:

172. [203]

     Pausing here, Acorn says that this note recorded that the unitholders had collectively and directly communicated to Mr Anderson that they would not provide any further equity to ADF2. It is said that it was clear that by this decision Mr Anderson would then come under considerable pressure personally to repay Hamton on his personal guarantee of the vendor finance. The joint file note also records that the superannuation fund investors were aware that providing no further equity meant that the value of the entire fund could be lost, as the note stated:

173. [204]

     Mr Hartley (Chief Investment Officer of Sunsuper)’s evidence is that when he was told by Ms Chan about this meeting he developed concerns about the problems that Ashington had caused and he began to lose trust and confidence in Anderson and Ashington as trustee and manager of the Ashington Funds (Ex 13).

174. [205]

     On 16 June 2009 at 7.28pm, Mr Anderson sent an email to asset consultants attaching overview papers for each of the Noosa and Double Bay Projects (“as requested in last Friday’s meeting”, dealing with asset strategy, project status, financials and risks) (Ex M at 3730ff). The paper in relation to the Noosa Project also dealt with alternate exit strategies and equity divestment. Acorn points out that there was no mention in the Noosa report of any $20 million fee payable to Valad (nor any prior communication with the superannuation fund investors of that fact). It is also noted that Mr Anderson promised a report on the Stonington Project “on Friday”. Acorn says that Mr Anderson knew that he was under considerable time pressure to respond to the unitholders.

175. [206]

     On 17 June 2009, Mr Anderson and Mr Steel met with Mr King in his Melbourne office to discuss how to structure Ashington Capital’s responses to information requests from the superannuation fund investors (see [202] of Mr Anderson’s 19 December 2017 affidavit).

176. [207]

     On 18 June 2009 at 10.11am, Mr Anderson emailed Mr Marsden, Ms Briggs and Mr Steel, stating that (Ex 17 at 75):

177. [208]

     Acorn says that this is inconsistent with Mr Anderson’s repeated evidence in cross-examination that he was “not focused on maintaining [the superannuation fund investors’] favour”, and he “never thought about keeping the investors happy” (T 630-631).

178. [209]

     On 18 June 2009, Ms Garrett sent an email from her Gmail account to Mr Anderson, with a copy to Mr Minahan and Mr Renauf, attaching presentation slides to describe the direction she was planning for the funds management division of Ashington (see [164] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 3750).

179. [210]

     On 19 June 2009, Ashington Capital drew down the 13th capital call (of $4 million) from unitholders in the ADF2 fund. Patersons points out that this drawdown would be in breach of the Investec Facility as ADF2 would no longer have $10 million of uncalled capital.

180. [211]

     On 19 June 2009 at 2.54pm, Mr Anderson sent an email to Mr King and other asset consultants, attaching a Stonington residential report, Stonington financial report and “Investec Facility Documents” (referring to the Investec indicative term sheet and “a copy of the final documentation”). However, the email did not in fact attach the Investec Stonington Facility Agreement. Patersons says that the fact that the borrowing had occurred at the head trust level was “hidden” in an annexure to one of the guarantee documents.

181. [212]

     Mr Anderson accepted that the Investec Stonington Facility Agreement was missing from the package of documents sent to investors (T 645.35-44) and that, if the facility agreement had been provided, it would have shown that Ashington Capital had entered into an agreement at the head trust level (T 646.22). Mr Anderson maintained in cross-examination that it was “not a secret at this point in time” (T 646.26) and “not a secret that there was a head trust loan” (T 648.11-17). (Ms Garrett and Mr Renauf say that there is no evidence to support this claim.)

182. [213]

     The email stated that significant changes occurred during the negotiation period from December to February because Westpac did not consent to a Deed of Priority/Intercreditor Deed that would have satisfied Investec’s original requirement for property security.

183. [214]

     On 19 June 2009, at 3.20pm, Mr Gavin sent an email to HESTA representatives (Mr Hastings and Mr Fowler) relating to the Investec Stonington Facility documents, saying that he would consider whether HESTA had a legal case against Ashington and that “I don’t know if this is fraudulent, but at the very least, it’s grossly negligent”. (Pausing here, whether Mr Gavin’s concern was justified or not, its articulation bespeaks a high level of concern by at least one of the superannuation fund investors at this stage.)

184. [215]

     Mr Gavin then emailed the other superannuation fund investors on 19 June 2009 at 4.10pm and provided them with a copy of the HESTA Side Letter. Mr Gavin stated that he asked Mr Anderson to prepare this side letter for all superannuation fund investors “as it didn’t make sense for only one investor to have it in place. Craig said he would do that. Did your respective clients receive the same side letter?”. Mr Gavin stated (Ex M at 4004):

185. [216]

     On 19 June 2009 at 10.30pm, Mr Flett responded by email to Mr Gavin and the other unitholders to say that LUCRF did not receive the benefit of any side letter, stating that “I am afraid the more that I hear the more I wonder what we don’t know about this matter and the other projects” (Ex M at 4100).

186. [217]

     On 23 June 2009 at 9.04am, Ms Chan also emailed Mr Anderson (copying Ms Briggs) asking for information around what the call was for; and Ms Briggs responded by email that day at 10.43am again repeating that the draw was “specifically for Double Bay expenditure for the months of June, July and August a major component being quarterly interest due to NAB and St George” (Ex 13 at 18240).

187. [218]

     On 25 June 2009 at 3:58pm, Mr Anderson sent an email to the asset consultants entitled “ADF2 investor information request” (prompted by a request from Mr Gavin on 23 June 2009 that he quantify the fund’s position in respect of its liabilities and that the superannuation fund investors wanted to meet “without the manager”). The email attached a Noosa Venture Trust special purpose financial report dated 30 April 2009, a letter from the consultant architects on the Double Bay Project, and a cash flow projection for ADF2 from May 2009 until December 2010. Mr Anderson’s email stated that the additional equity requirement request in relation to Stonington of $15 million remained, stating that it was not unreasonable in the current lending environment and that Ashington believed that no further equity requests will be required (see Ex M at 4177). (Ms Garrett and Mr Renauf say that this was at least misleading, and more likely untrue, as around this time Mr Anderson and Mr Steel were debating making a funding request in the order of $25-$40 million.)

188. [219]

     Acorn says that it should be found that Mr Anderson had no reasonable basis to state that no further equity would be required. It is noted that, a few days later, on 2 July 2009 at 10.43am, Mr Steel emailed Mr Anderson stating that “$15m will not be enough to fund the Stonington Project” (Ex 33 at 517), and that on 3 July 2009 at 11.35pm, Mr Steel emailed Mr Anderson stating that “[o]ne major problem we have is that the $15M we’ve requested will not be enough. We may need to strategically work this into the Key Item List” (see below in chronology; Ex M at 4612). Further, it is noted that in an internal Ashington email on 9 July 2009 at 5.50pm, Mr Anderson estimated that “the amount of investor support required to operate ADF2 on the least amount of capital possible” equated to “an additional $5-6M above the $15M Stonington request and the $6M undrawn for Double Bay” (Ex M at 4732).

189. [220]

     Acorn here emphasises that, on the same day as sending the email on 25 June 2009, to the superannuation fund investors, Mr Anderson was debating with Mr Steel the adequacy of disclosure to the superannuation fund investors. Mr Steel stated in an email to Mr Anderson on 25 June 2009 at 1.11pm that “Investors simply want clarity of the risks and the quantification thereof. Fund managers should provide this. We continually skirt the issue, which continually gets us in trouble…We are continually knocked for selective disclosure … and we continually ignore this criticism by being selective in our disclosure” (Ex 17 at 87). (Acorn says that Mr Anderson should have accepted the truth of Mr Steel’s observations rather than to have brushed them aside in the manner that his email in response did.)

190. [221]

     Later, on 25 June 2009, the asset consultants for the superannuation fund investors met to discuss the 1 June 2009 additional equity funding request (see [205] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 4173).

191. [222]

     Meanwhile, Ms Garrett (from her Gmail account) sent an email to Mr Minahan and others reporting on ongoing discussion with potential investors that arose out of the May trip to Hong Kong (see Ex M at 4198ff).

192. [223]

     After obtaining the approval of other investors, on 26 June 2009 at 10.47am, Mr Gavin (of Frontier, advising HESTA) sent an email to Mr Anderson, copied to the asset consultants, responding to Mr Anderson’s 25 June 2009 email, stating that:

193. [224]

     The email also noted that “the investors have requested that Ashington’s chairman [Mr Mark Bouris] make himself available on Friday 3 July so investors can explain the gravity of the situation as we perceive it”. The proposed alternative options involved the sale of different assets (including Stonington) or bringing in new investors.

194. [225]

     On 26 June 2009 at 5.50pm, Mr Anderson replied to Mr Gavin’s 26 June 2009 email, stating that “[w]e agree that ADF No. 2 is not sufficiently capitalised to undertake all three projects. We have acknowledged this for some time, supported by our plan to sell a 50% interest in Double Bay releasing circa $30M. We have also been exploring the majority of the options outlined in points i-vi in your email. This will be detailed in a thorough response mid next week as requested”.

195. [226]

     Mr Anderson’s 26 June 2009 email to superannuation fund investors stated that Ashington had cancelled the proposed 13th (29 June) drawdown to “ensure that we avoid the risk of breaching the Stonington lending covenant”, and indicating that Ashington had been negotiating a waiver of the covenant with Investec. In that email, Mr Anderson noted that cancelling the drawdown would have other implications which he wanted to discuss with the superannuation fund investors in a teleconference planned for Monday 29 June 2009. (Acorn says that the primary implication was clear – that it would place Ashington in default with the financiers for Double Bay.)

196. [227]

     On 28 June 2009 at 3.32pm, Mr Anderson sent an email to Mr Steel and Mr Minahan saying that at the teleconference with the superannuation fund investors he proposed “to respond fairly strongly that all the alternatives may work over time but there is no choice but to put $15m in now unless they want to “blow up” the fund” (see also T 381).

197. [228]

     On 29 June 2009, Ashington’s property managers held a conference call with the superannuation fund investors to discuss the current and immediate lack of liquidity in the fund; the upcoming funding challenges; and selling assets in the current market. Mr Anderson was in attendance (see [142] of Mr Anderson’s 9 December 2019 affidavit). In an email to Mr McCusker containing notes of the conference call, Mr Tieu recorded: that “[m]anagers wanted to make it clear to investors that they are taking the fund’s liquidity issues ‘deadly seriously’”; that the Investec Facility must be repaid by 25 August 2009 and is secured against uncalled capital commitments; and concluded that “[i]nvestors are hesitant about tipping in additional equity, and would like the managers to present a broader range of solutions for full consideration, including the option of sourcing new mezz debt”. Mr Hastings recorded that Mr Anderson said that they were going to get the Double Bay approval.

198. [229]

     Mr Dedes also recorded his recollection of the meeting on 29 June 2009 in a subsequent report he prepared on 29 July 2009 (Ex M at 5080).

199. [230]

     Acorn says that it should be inferred that Mr Anderson told the superannuation fund investors at this teleconference that if they did not put in any additional equity that it would “blow up the fund” but that the superannuation fund investors indicated that they would not do so until they had further options to consider.

200. [231]

     Mr Hastings’ file note of a phone conference on 30 June 2009 with Ashington recorded that “Investec won’t give a waiver of breach but said breach and try to remedy between now and August but this means Investec has reserved its rights to walk in at any time”

201. [232]

     An internal Military Super document notes on 30 June 2009 that superannuation fund investors had instructed Ashington to explore other options for refinancing Stonington, that investors had informed Ashington that no further equity would be provided by the unitholders and that investors were considering placing an independent person within Ashington to be part of the process (Ex M at 2402).

202. [233]

     Ms Briggs emailed unitholder representatives on 30 June 2009 advising that Ashington was remaking the 13th capital call.

203. [234]

     At 11.30am on 30 June 2009, Mr Anderson advised that they had communicated with Investec, were able to proceed with the 13th draw, and had “examined resolutions to the temporary breach with [Investec] and have until the facility expiry date of 25 August to resolve”. Patersons and Acorn submit that this reassurance was not accepted at face value by the superannuation fund investors. Acorn notes that Mr Jonathan Stagg (HESTA’s consultant from Frontier) emailed Mr Anderson at 12.16pm on 30 June 2009, stating that:

204. [235]

     On 30 June 2009 at 1.08pm, Mr Flett responded to Mr Stagg’s email to Mr Anderson asking, “[i]s there a letter from Investec confirming the waiver and any conditions?”. (Acorn says that the superannuation fund investors were right to be concerned, as there was no formal agreement with Investec.)

205. [236]

     On 30 June 2009 at 4.17pm, Mr Stagg (of Frontier, advising HESTA) sent an email to Mr Anderson and various asset consultants, stating that the superannuation fund investors had agreed to pay the $4 million capital call in respect of interest due to NAB and St George on the Double Bay facility and stating that “[i]nvestors recognise that this action leaves the Investec mezzanine facility in a breach position … and further understand that Investec have not provided a waiver in relation to this breach, with Investec effectively reserving its rights”. The email stated:

206. [237]

     Acorn says that it was necessary to request the “full extent of all these facilities” because, as at 30 June 2009, the superannuation fund investors still had not been provided with a copy of the Investec Stonington Facility. Acorn says that Mr Anderson’s evidence in cross-examination (that he just read this email as asking for “additional facilities” with Investec, i.e., in addition to the Investec Stonington Facility) should be rejected as self-serving (T 648).

207. [238]

     Moreover, it is noted that at this time there was an awareness within Ashington of the concerns which Mr Stagg had raised. Following advice from Mallesons, Ms Briggs had emailed Mr Steel on 30 June 2009 at 8.49am stating:

208. [239]

     Thus, Acorn says that Ms Briggs was aware of the very solvency issue arising from the Investec Stonington Facility which had imperilled the Ashington Funds and about which Mr Steel had warned in December 2008. It is noted that at this time, Mr Anderson was aware that it was important he obtained investor support before Westpac and Investec expired, as they would otherwise default (T 654).

209. [240]

     On 1 July 2009 at 10.57am, Mr Anderson forwarded Mr Stagg’s email of 30 June 2009 to Mr Steel and Mr Minahan, stating, amongst other things, that “I don’t want to write (other than to tell him [Mr Stagg] to stop criticising us in communal emails when they don’t understand what they are talking about) or teleconference anymore” (Ex 17 at 128).

210. [241]

     Mr Steel replied to Mr Anderson’s email on 2 July 2009 at 12.50am, stating that “this is a very discerning letter from Frontier which indicates that, contrary to your comment below, they clearly understand what they are talking about”. Mr Steel said that his view was that they should consider liquidating the fund, showing that liquidation would require $10 to $15 million which would be more than would be recovered from increased values received in disposal of assets, show clear milestones in the strategy and, take out Investec which would put assets back in control of investors. Mr Steel thought the benefits of this strategy were that it was diverting Ashington Capital and its directors from exposure to the breach; eliminated the possibility “that investors see other strategies as smoke and mirrors, over optimistic and/or evasive”; allowed them another chance of convincing investors of preferred strategy; avoided the appointment of an administrator/receiver; and minimised the loss to investors under any other plan. Mr Steel commented on a number of Mr Anderson’s opinions by responses in red text (italicised below):

211. [242]

     Mr Anderson sent a reply email to Mr Steel on 2 July 2009 at 8.34am, stating that, although he respected Mr Steel’s perspective and saw value in Mr Steel’s comments, Mr Steel was “not aware of the content of many of the other meetings and conversations that [had] taken place”.

212. [243]

     On 2 July 2009 at 10.43am, Mr Steel emailed Mr Anderson stating that “$15m will not be enough to fund the Stonington Project”.

213. [244]

     On 3 July 2009 at 4.25pm, Mr Anderson replied to Mr Stagg’s email of 30 June 2009, copied to the other superannuation fund investors, attaching a schedule of debt in place for ADF2. (Acorn says that a key piece of information missing from this table was the identity of the borrower for the various loan facilities.) The schedule said that Double Bay had an uncalled capital undertaking as “ADF2 has undertaken to maintain uncalled capital or free cash to cover interest and fees for term of the facility” (Ex M at 4606).

214. [245]

     On 3 July 2009 at 11.35pm, Mr Steel emailed Mr Anderson stating that “[o]ne major problem we have is that the $15M we’ve requested will not be enough. We may need to strategically work [sic] this into the Key Item List” as preparations were made for a “Final presentation to ADF2 Investors”.

215. [246]

     From as early as 1 July 2009, Ashington Management had ceased paying workers’ compensation premiums and proceedings were ultimately commenced on 15 June 2010 by the Workers Compensation Nominal Insurer against Ashington Management to recover the unpaid amount.

216. [247]

     Meanwhile, on 1 July 2009, Arcadia (the adviser to LUCRF) noted in the LUCRF Investment Committee property portfolio report that Ashington had over pledged the uncalled equity commitments made for the Double Bay Project and the Stonington Project (Ex 16 at 53-54).

217. [248]

     Also on 1 July 2009 at 10.07am, Mr Peter Hodgson (adviser to Military Super) emailed Mr Dedes and said “we should be putting in some form of IA [investigating accountant] to look at these investments for unitholders”, which email he forwarded to Mr Paul Watson (the Chief Executive Officer of Military Super), stating “I am a bit grumpy about this”. Mr Watson responded to Mr Hodgson, concurring with this, and requesting that Strategic Capital Management liaise with the advisers to the other superannuation fund investors. Mr Hodgson responded in an email at 4.23pm saying that “they should get no more funding until we are clear about all this” and suggesting that the best option might be a forced sale of some of the properties.

218. [249]

     Mr Dedes responded to Mr Hodgson’s email at 10.53am advising him that the two recent meetings with Ashington had highlighted issues to the superannuation fund investors “that were never disclosed”, which had prompted them to seek additional information on all projects.

219. [250]

     By this stage, therefore, Military Super was advocating appointing an investigating accountant and was considering that there should be a very careful consideration as to whether Ashington was in breach of its obligations to investors; and the view had been formed that Military Super should not pay any further capital calls to Ashington until the position was clarified.

220. [251]

     On 3 July 2009, Mr Seaton sent an email internally within Ashington to arrange car parking facilities for each of Ms Garrett and Mr Renauf (see [162] of Mr Anderson’s 19 December 2017 affidavit; Ex M at 4608).

221. [252]

     On 3 July 2009, solicitors acting for Hamton (Middletons) wrote to Mallesons (acting for Ashington Capital) noting that Ashington Capital had not paid any of the principal and interest due on the vendor finance loan from Hamton, and agreed not to pursue enforcement action until 25 August 2009 in exchange for being paid penalty interest at the rate of 20% (Ex M at 4614).

222. [253]

     On 7 July 2009, there was a meeting between Mr Flett, Mr King, Mr Jonathan Stagg (HESTA) and Mr Dedes to discuss Ashington’s request for an additional $15 million to pay out the mezzanine debt facility. A file note of that meeting prepared by Mr Dedes recorded in the “Background” section that the two meetings with Ashington had “yielded very little” and “created an element of distrust”; and that Strategic Capital Management had called the meeting to inform the other unitholders of Military Super’s decision not to participate in any more capital calls and to employ and investigating accountant (Ex M at 4633).

223. [254]

     The file note recorded that the superannuation fund investors agreed that, due to their “inability to feel confident with the quality of information”, they should move to appoint an investigating accountant as soon as possible (with two recommendations being PPB and KordaMentha); and that the other superannuation fund investors “would probably require a legal review of the implications” of Military Super’s decision not to provide further capital “before making a decision”.

224. [255]

     Under the heading “Legal Review”, it is recorded that “[w]e should get advice on the process required to terminate the manager”. (Acorn says that it should be inferred that this “we” was a reference to all of the superannuation fund investors). The notes record that the decision was sensitive as any move to terminate the manager could result in the Development Application for Double Bay not being approved which would erode all equity in the deal.

225. [256]

     It is relevant here to note that, as early as 7 July 2009, there was therefore reference in contemporaneous documents to consideration being given as to the possible termination of the manager (the proposal coming from within the group of superannuation fund investors, not through any of Patersons, PPB, Ms Garrett or Mr Renauf) and, further, that the suggestion for removal of the manager was not here linked to the issue of concern as to the trust/sub-trust structure – rather, it was expressed by reference to lack of confidence in the information received from the manager.

226. [257]

     Mr Dedes also recorded his recollection of the meeting on 7 July 2009 (which he calls the “third meeting”) in a subsequent report he prepared on 29 July 2009 (which Acorns notes is consistent with the other records of the meeting on 7 July 2009). Acorn says that this seems to be the same meeting that Mr Hastings recorded in a note taken around this time, stating (Ex M at 4582):

227. [258]

     Acorn says that the above indicates how “parlous and tenuous” the relationship between the superannuation fund investors and Ashington had become. It is said (and I agree) that these were very serious steps for the superannuation fund investors to be taking.

228. [259]

     On 7 July 2009, Mr Tony Marsden (of Ashington) sent an internal email to Mr Nick Wyeth, copied to Mr Matthew Bailey, attaching a schedule of creditors of Ashington Capital, Ashington Management, ADF and ADF2 and the sub-trusts; recording $2.49 million owed to creditors as at 6 July 2009.

229. [260]

     At 6.20pm on 7 July 2009, Mr Anderson sent an email to the asset consultants (headed “Closure of ADF2 investor request”), advising them that it was essential to bring the Second Additional Equity Request “to a close”, seeking a face to face meeting with investors on 16 July 2009 and foreshadowing a final presentation putting forward Ashington’s case to deal with various topics including an analysis of the consequences of deciding to support (or not to support) the manager’s recommendation (see Ex M at 4632). Mr Anderson promised to provide a “review of the Manager’s decisions and actions over the past 12 months and proposed improvements to investor communications”.

230. [261]

     On 8 July 2009, Ms Garrett sent an email to Deutsche Bank referring to Mr Renauf as previous Head of Acquisitions at Valad “who left with me to join Ashington” and that Ms Garrett was on extended gardening leave (Ex M at 4635).

231. [262]

     The following day (9 July 2009), Mr Anderson sent an email to Ms Garrett and Mr Renauf referring to corporate credit cards that were being arranged for them (see Ex M at 4740).

232. [263]

     The evidence of Mr Thow (then Chair of LUCRF’s Investment Committee) is that by 8 July 2009 had developed such serious concerns in relation to the management of the Ashington Funds (having read the report dated 1 July 2009 from Arcadia on the Second Additional Equity Request and the LUCRF Investment Oversight Committee report dated 3 July 2009 which highlighted the double pledging of uncalled capital, the lack of quarantining of liabilities and serious liquidity issues) that he started to lose trust and confidence in that management (Ex 16).

233. [264]

     On 9 July 2009, there was a board meeting of Ashington Capital, the minutes of which record that the chairman (Mr Mark Bouris) said (Ex M at 4725ff):

234. [265]

     In an internal Ashington email on 9 July 2009 at 5.50pm (which followed the Board meeting), Mr Anderson set out the matters which had been resolved at that meeting and set out his estimate that “the amount of investor support required to operate ADF2 on the least amount of capital possible” equated to an additional $5-6 million above the uncalled capital of $6 million and the $15 million for Stonington.

235. [266]

     Ms Garrett and Mr Renauf say that the 9 July board meeting papers (Ex M at 4637ff) put Mr Anderson’s “spin” on events, pointing to the reference in the papers to Frontier, the adviser to HESTA, not wanting to provide additional equity because of technical issues and that “[i]nvestors / asset consultants believe that we did not inform them early enough of the challenges we are confronting on Stonington”.

236. [267]

     At the board meeting on 9 July 2009, Mr Anderson is reported as having noted that “all investors are working together – therefore we need to get support from a majority”; that a “question mark has been raised over the way we have conducted ourselves in the settlement for Stonington”; that “it is irrational for investors not to commit the additional equity”; and that “investors do not always act rationally because…they don’t always understand the problem” or “they may write off their investment in ADF2 because there are other much larger funds also requiring additional capital”. (Ms Garrett and Mr Renauf say Mr Anderson here displayed an arrogant and contemptuous attitude to investors.)

237. [268]

     Mr Dedes (of Strategic Capital Management, adviser to Military Super) sent an email on 10 July 2009 to Mr Watson of Military Super in which confirmed that he had relayed to the other unitholders Military Super’s decision not to provide further funding; and that the other unitholders were prepared to pay their portion of costs relating to legal advice and an investigating accountant.

238. [269]

     On 10 July 2009, in an email at 6.54am to Ashington personnel including Mr Anderson and copied to Mr Bouris, Mr Steel summarised the two key breaches of trustee obligations as followed:

239. [270]

     On 10 July 2009 at 2:50pm, Mr Bouris sent a reply email to Mr Steel advising that he “would like to see a far more robust compliance and disclosure environment” (Ex 33 at 524).

240. [271]

     Later on 10 July 2009, Mr Anderson sent an email to the superannuation fund investors and asset consultants, with a paper on Ashington decision making, “to address some issues that have been raised by investors relating to Ashington’s decision making process and actions in the financing and settlement of the Stonington Project, the context in which these decisions were made, and the compliance of these actions with Fund covenants” (Ex M at 4749). The paper recognised that the Investec Stonington Facility was non-compliant with the ADF2 Information Memorandum; and that the fund did not have enough capital to meet both the Double Bay and Investec Stonington Facility funds covenants (and thus was in breach of those facilities) (see [136] of Mr Anderson’s 9 December 2019 affidavit).

241. [272]

     That paper relevantly stated:

242. [273]

     PPB points out that, as the entirety of the uncalled capital in ADF2 as at 25 February 2009 was required in order to comply with the Project X Uncalled Capital Undertaking, it is apparent that, upon signing the Investec Stonington Facility, Ashington Capital as trustee of ADF2 was immediately in breach of both the Project X Uncalled Capital Undertaking and the Stonington Uncalled Capital Undertaking.

243. [274]

     The paper recognised this, stating that:

244. [275]

     PPB says that the characterisation of the insufficiency of uncalled capital in ADF2 to meet the undertakings given in the Project X Security Deed and in the Investec Stonington Facility as a “technical breach in compliance”, combined with the insistence that the decision to settle on the purchase of the Stonington Property was “in the best interest of investors”, bespeaks a denial by Mr Anderson of any impropriety in relation to Ashington Capital’s entry into the Investec Stonington Facility.

245. [276]

     Patersons says that, while this paper attempted to address the superannuation fund investors’ concerns, including by introducing a “new fund compliance and communication regime” which (significantly on the plaintiff’s case) involved the recruitment of Ms Garrett, the reality was that the superannuation fund investors had entirely lost trust and confidence in Ashington and that Mr Anderson’s marketing of a new plan to them was never going to restore their confidence. It is noted that, three days before receiving this paper, the unitholders had resolved, as a block, to appoint an investigating accountant and to obtain legal advice as to Ashington’s termination.

246. [277]

     Acorn notes that this paper disclosed breaches directly for the first time. It notes that in his email, Mr Anderson advised that “the timing and extent of communications to investors surrounding these issues could have been better”, outlined a range of enhancements to communications and compliance processes and promised to “ensure Ashington’s future performance in this area is enhanced”. (Acorn says that that promise was not kept.) It is noted that, at this time, Mr Anderson was aware that it was important he obtained investor support before the Westpac and Investec facilities expired, as they would otherwise default (T 654).

247. [278]

     Mr Hartley’s evidence (of Sunsuper) is that he was particularly concerned by what he learnt from Mr Anderson’s email of 10 July 2009, considering that it raised questions about the competence and honesty of Ashington and that an independent review of Ashington’s actions was required (Ex 13).

248. [279]

     Mr Anderson forwarded his email of 10 July 2009 and its attachment to Mr Bouris by email on 12 July 2009 at 3.26pm, stating that it “deals thoroughly with Ashingtons decision-making processes around the Stonington settlement and the new proposed communications and compliance measures” (see Mr Bouris’ response on 13 July 2009 below to this suggestion).

249. [280]

     On 13 July 2009, at 3.32am, Mr Steel sent an email to Mr Anderson (which he copied, inter alios, to Mr Bouris) in which he stated that he had prepared cashflow projections under different scenarios which indicated a need for a further $24 million (up from $15 million) to take them to 30 June 2010 and that if they presented that to the superannuation fund investors they would “need to make a very strong case to ‘entice’ the investors not to walk”.

250. [281]

     On the same day, at 3.38am, Mr Steel sent an email to Mr Anderson, Mr Minahan, Ms Briggs and others at Ashington with further thoughts in relation to the investor strategy saying that “our strategy may be weak in terms of ‘enticing’ investors to commit” and that “[i]nvestors currently have many competing investment options, therefore we need (or must be prepared) to demonstrate that our investment is compelling enough to attract the dollars required. We need to convince them not to walk!”

251. [282]

     On 13 July 2009, Mr Anderson sent an email to persons within Ashington (Mr Steel, Mr Minahan, Ms Lee, Mr Bailey and Ms Briggs) stating “[o]f course we have to be prepared for anything investors raise but we are trying to get to a position where the asset consultants are comfortable that the “Manager” is the best person to work through the current environment”. (Pausing here, this suggests that Mr Anderson was cognisant of the possibility that the manager might be replaced, insofar as he appeared to consider it necessary to assure asset consultants that the current manager – Ashington Management – was the best option to work through the current situation. This does not appear to be linked to the issue as to the structure of the head trust and sub-trusts.)

252. [283]

     On 13 July 2009 at 4.16pm, Mr Bouris replied to Mr Anderson’s email containing the 10 June 2009 paper sent to the investors. Mr Bouris stated that the paper missed the point that the superannuation fund investors would be seeking to know “from Ashington, and [sic] verified from an independent party, what their exposure will be over the next 12 months so that they do not need to go back to their funds and ask for more money during that period”. Mr Bouris stated that his opinion that Ashington needed to rebuild credibility “to avert any possible action to terminate the management agreement”.

253. [284]

     Pausing here, the recognition in this email of the possibility of action to termination of the management agreement again is not expressly linked to a structuring issue but on one view it may be that the structing issue cannot wholly be separated from the need to rebuild credibility which likely arises from a number of factors, one being the structure of the facilities and the exposure at the head trust level that was in breach of IM and without disclosure to investors. Certainly by 10 July 2009 Mr Bouris was aware both that there was an issue as to breach of the Information Memorandum and of Mr Steel’s view that “… we are guilty of obtaining debt at the head trust level when the IM stated we would use only non recourse debt to fund projects”.

254. [285]

     In any event, Mr Bouris said that he regarded himself as compromised as a director because decisions would be attributed to him and he was “not comfortable with that proposition”.

255. [286]

     On 10 July 2009, Mr Dedes sent an email to Mr Ian Carson of PPB attaching a letter in relation to the retainer of PPB to conduct a review. The letter set out the scope of work as follows (see Ex M at 4753ff; [145] of Mr Anderson’s 9 December 2019 affidavit):

256. [287]

     The following day Mr Carson forwarded that email to Mr Brett Lord of PPB.

257. [288]

     Following amendments after discussions between Mr Carson, Mr Lord and Mr Dede, on 15 July 2009, Mr Martin Quinlan from PPB sent an email to Mr Dedes, attaching a finalised proposal for PPB’s review of ADF2 (the PPB Proposal).

258. [289]

     The PPB Proposal set out the “key issues” included: reviewing the carrying value of the projects the subject of ADF2; reviewing the financing arrangements with respect to those projects; as well as considering the “management” of the fund. As to the key issue of “Management”, it was said that “[b]ased on the request that an independent review be undertaken on the Fund by the unitholders, issues relating to the position of the Manager/Trustee will be paramount. We will consider all options in dealing with such, potentially including a compulsory retirement and replacement if necessary”. (Acorn thus says that, from this time, “all options” were open in relation to the advice from PPB.)

259. [290]

     On 15 July 2009, Mr Dedes forwarded the PPB Proposal and a proposal from KordaMentha to the superannuation fund investors for their approval, with a recommendation for PPB.

260. [291]

     On 16 July 2009, asset consultants emailed each other in support of PPB’s proposal and that PPB be appointed to advise the superannuation fund investors.

261. [292]

     The PPB Mandate letter was signed that day. By the PPB Mandate, the superannuation fund investors appointed PPB to undertake an independent review of Ashington’s financial modelling of the Stonington Project and to provide a strategic and financial review of ADF2 more generally. Patersons emphasises that PPB was engaged (independently of Ashington) to assess and verify the information presented to investors by Ashington Capital and Ashington Management; and to prepare a report in relation to the Stonington Trust to assist the investors in deciding whether to provide additional equity to Ashington Capital to finance the project.

262. [293]

     Acorn accepts that the PPB Proposal (above) was more extensive than the PPB Mandate Letter. In particular, it is noted that the PPB Mandate Letter did not explicitly refer to PPB considering the compulsory retirement and replacement of Ashington as trustee and manager of ADF2. However, Acorn says that it is not clear that the superannuation fund investors turned their mind to the differences between the PPB Proposal and the PPB Mandate Letter, and specifically, whether they had intended for the PPB Mandate Letter not expressly to refer to PPB exploring the removal of the trustee and manager of ADF2. Acorn says that none of the superannuation fund investor witnesses who gave evidence (Mr Hartley, Mr Fowler, Mr McCusker, Mr Dedes and Mr Thow) was cross-examined on his understanding of the PPB Proposal. In any event, Acorn points to Mr Dedes’ evidence in cross-examination that he expected that PPB was involved in all the conversations about the objective of removing Ashington as trustee and manager (T 1089). Acorn says that, implicit in that statement, was that PPB was aware that this was an objective (which Acorn says is consistent with the terms of the PPB Proposal).

263. [294]

     Mr Thow’s evidence, which Acorn points out was unchallenged in cross-examination, was that he expected PPB’s mandate to have included doing what they could to save the equity already committed to the Ashington Funds, and, in his opinion, “that would not have involved continuing to work with those at Ashington who had been managing the Ashington Funds as trustee and manager unless that was the only option available” (Ex 16). In cross-examination, Mr Hartley accepted that that he was not aware of any instruction given by Sunsuper to advise on the removal of Ashington as trustee or manager but he maintained his evidence that he expected this was an option PPB would consider (T 982-983).

264. [295]

     Acorn says that this evidence favours the conclusion that part of PPB’s role was to consider the removal of Ashington as trustee of the Ashington Funds.

265. [296]

     On 16 July 2009, a meeting took place in Melbourne between Mr Anderson and the asset consultant representatives (some participating by telephone). Mr Minahan and Ms Lee (from Ashington Capital) attended as did Mr Stagg, Mr Dedes, Mr Flett, Mr King, Mr Hastings, Mr Fowler, Mr McCusker, Ms Chan and Mr Cohen (see [210]-[212] of Mr Anderson’s 19 December 2017 affidavit).

266. [297]

     In evidence is a copy of the presentation with handwritten notes on it, Mr Cohen’s note of it and Mr Hastings’ note of it (which Acorn says are all broadly confirmatory of what took place) (Ex M at 4803ff, 4826).

267. [298]

     In this meeting, Ashington requested $25 million from the superannuation fund investors until 30 June 2010 to allow the Investec Stonington Facility to be paid and the remaining capital to cover interest guarantees (T 395); and Mr Anderson said that this would provide 12 months to dispose of part or all of an ADF2 asset. The position of the Investec Stonington Facility was discussed in terms that, if it was not paid out by 25 August 2009, Investec would seek to take control of the “Fund assets at a Fund level” and it was said that default under the Investec Stonington Facility would “also escalate bank and finance-related risk and issues for other fund assets”. This was recorded by Mr Cohen in terms that “going into default with the mezzanine piece could effectively contaminate the entire fund”. (Acorn says that this was a stark reminder of the extent of the consequences of Mr Anderson’s actions in entering into the Investec Stonington Facility in February 2009.) In the presentation Mr Anderson is recorded as describing the planning approval for Double Bay as delayed but expected in September and “a certainty”. Acorn says it appears that the Ashington personnel were told at this meeting that Military was looking at a legal review and that PPB had been hired with a result expected in the following three to four weeks.

268. [299]

     Mr Anderson has deposed that, late in the afternoon on 16 July 2009, Mr Dedes informed Mr Anderson that PPB had been selected to undertake a review (see [213] of Mr Anderson’s 19 December 2017 affidavit).

269. [300]

     On 17 July 2009, there was a meeting between Mr Anderson and Mr Lord (a partner of PPB). Prior to the meeting, Mr Lord had requested, in email correspondence, information required to commence the review.

270. [301]

     Acorn says that there is no reason to doubt that the information PPB had requested was subsequently provided (noting that Mr Steel’s email of 20 July 2009 at 9.57am to Mr Peter Block (a partner of PPB) and Mr Lord stated that the information was being collected would be ready within 24 hours).

271. [302]

     The PPB Confidentiality Agreement dated 20 July 2009 (PPB Confidentiality Agreement) was signed by PPB (Mr Lord) and Ashington Capital on or about 21 July 2009, governing confidential information provided by Ashington Capital and related entities to PPB for the “Approved Purpose”, defined as being “for the purpose of assisting [PPB] to conduct a review and prepare a report of [ADF2] as instructed by investors in [ADF2]” (Ex M at 4837).

272. [303]

     Clause 4 required PPB to maintain the confidential nature of the Confidential Information (defined to mean “all information … disclosed or otherwise made available by us or our Representatives to you or your Representatives … for or in connection with the Approved Purpose”); clause 5 (subject to inapplicable exceptions) prohibited PPB from disclosing the Confidential Information to any person; and clause 6 (also subject to exceptions) prohibited PPB from using, disclosing or reproducing any of the Confidential Information for any purpose other than the Approved Purpose.

273. [304]

     Mr Lord sent an email to other PPB personnel on 21 July 2009 attaching a slide from the 16 July 2009 presentation by Ashington Capital to superannuation fund investors that dealt with disposal scenarios.

274. [305]

     On 21 July 2009, Ms Briggs emailed Mr Dedes the 13th drawdown notice for ADF 2 directed to Military Super and he forwarded it to Mr Lord.

275. [306]

     On 21 July 2009, Ms Briggs sought advice from Mallesons about ADF2 making a loan to ADF in order to enable ADF to continue to fund 25% of the Double Bay Project. The advice received from Mallesons stated that, if any such loan is made, it will “need to be disclosed to ADF2 and ADF investors because it involves a conflict of interest” (Ex 17 at 142). Reference was there made to an email on 9 July 2009 that David Eliakim (a partner of Mallesons) had sent to Mr Anderson, Mr Steel and Ms Briggs where the potential conflict of interest was addressed in detail. (Complaint is here made that such disclosure was not promptly made to the superannuation fund investors.)

276. [307]

     On 22 July 2009, Mr Fowler reported to HESTA’s board that the unitholders “are now sufficiently concerned with the viability and solvency of [ADF2] to have appointed an independent advisor to assess the current and future viability of the Fund in the current market environment” (Ex M at 5099).

277. [308]

     On 22 July 2009, Mr Steel sent an email to Mr Anderson, copied to Mr Minahan, entitled “ADF Liquidity” which recorded that they needed to address “ADF’s liquidity/solvency issue”. Mr Steel and Mr Anderson discussed the possibility that it might not be sufficient to resolve the liquidity issue to sell Double Bay because Investec would also need to be repaid in relation to the Wylde Street Facility.

278. [309]

     On 22 July 2009, a valuation report for the Stonington Site was produced for Westpac.

279. [310]

     On 23 July 2009, Mr Steel sent an email to Mr Block and Mr Lord of PPB, attaching copies of the Investec Security documents.

280. [311]

     On 29 July 2009, there was a meeting between superannuation fund investors’ representatives and PPB (on which meeting no little weight was placed by various of the defendants in their submissions).

281. [312]

     The file note prepared by Ms Chan of Sunsuper of the meeting on 29 July 2009 between the superannuation fund investors and Mr Lord, stated (Ex M at 5077):

282. [313]

     On the same day (29 July 2009), Mr Dedes (Military Super) prepared a report in which he stated that the superannuation fund investors had “started a legal review of the Fund documents” that would initially focus on: (i) the unitholders position if they no longer provided the balance of committed capital; and (ii) the process for termination of the manager and responsible entity.

283. [314]

     Various of the defendants point to these documents as making clear that, at that time, the termination of Ashington Capital as trustee of ADF2 was very much in the forefront of the superannuation fund investors’ minds. PPB argues that, read together, these documents dispel the notion that PPB and the ADF2 investors were at this time concerned only with structural weaknesses associated with the fact that Ashington Capital was also the trustee of the sub-trusts within ADF and ADF2. Acorn says that (and I agree) whether these statements are interpreted as a reference to a structural issue with the form of securities within ADF2 giving rise to a need to change the trustee or the need to change the trustee due to a loss of trust and confidence in Ashington by the superannuation fund investors, they reflect a very significant problem in relation to ADF2 with which the superannuation fund investors were dealing at that time.

284. [315]

     The plaintiff, however, interprets the reference in Ms Chan’s note to a need to change the trustee as arising from the difficulty with having the same trustee at both the head and sub-trust level and says that this reference could be read as meaning that there be a change to the trustee in that regard but not an overall change of trustee at the head trust level.

285. [316]

     In any event, PPB submits that, having regard to these documents, the proposition put by the plaintiff (in submissions at [20]) to the effect that “[p]rovided that Ashington could resolve its immediate funding difficulties, it had strong prospects of restoring investor confidence and maintaining and developing its business” is not sustainable. (There is much force to that submission.)

286. [317]

     Reference is made to Mr Hartley’s evidence, for example, is that (at about this time) he commenced forming the view that the superannuation fund investors should consider whether Ashington should be removed as trustee because he no longer trusted Mr Anderson and had lost confidence in Ashington.

287. [318]

     On 4 August 2009, Mr Bouris sent an email to Mr Anderson stating that (Ex M at 5591):

288. [319]

     On 4 August 2009 at 1.38pm, Mr Anderson sent an email to Mr Bouris about his understanding of PPB’s investigations, stating that PPB had advised that they would be recommending that the unitholders contribute the Second Additional Equity Request and had not been critical of the way Ashington dealt with the Stonington settlement.

289. [320]

     On 6 August 2009 at 8.49pm, Mr Bouris emailed Mr Anderson that “I think that whatever happens it would appear that what has happened will adversely effect [sic] the nature of the mandate going forward with the investors”.

290. [321]

     Meanwhile, the possible change of trustee was also clearly discussed in a meeting of superannuation fund investors and PPB on 5 August 2009, as the following day (6 August 2009) at 1.52pm, Mr Flett (of Arcadia, adviser to LUCRF) emailed Mr Lord (of PPB), copied to Mr Dedes, stating that he had had “a couple of additional thoughts about ADF No1” and that the “[k]ey issue is will change of Trustee require the approval of the financiers to each of the underlying SPV – we need to get our hands on the financing documents (first) before considering if and how we might change the trustee from [Ashington Capital]”.

291. [322]

     On 6 August 2009, St George wrote to Ashington Capital providing a Letter of Variation for the Potts Point Trust, reducing the facility limit to $13,005,000 and extending the term to 31 August 2009 (see Ex M at 5105).

292. [323]

     Meanwhile over the weekend of 8 and 9 August 2009, Ms Garrett sent emails from her Gmail account: on 8 August 2009 to Mr Anderson (copied to Mr Renauf, herself at Ashington and Mr Minahan) in relation to the proposed handover of projects on which she was working while she was away on holidays with her husband and attaching a proposed organisation and bonus structure, noting that she would “be contactable on my Ashington blackberry”; and to Mr Minahan and Mr Anderson, respectively, attaching a handover sheet in respect of current and future projects of Ashington.

293. [324]

     On 7 August 2009, Mr Block (of PPB) sent an email to asset consultants, attaching a structure document showing Investec having security for the Investec mezzanine funding over Ashington Capital and ADF2, rather than only Stonington Trust.

294. [325]

     On 10 August 2009, Mr Block sent an email to Mr Lord and asset consultants attaching an agenda for a proposed conference call between representatives of PPB and the superannuation fund investors on 11 August 2009, on which agenda the following items were included:

295. [326]

     On 10 August 2009, Mr Anderson met with PPB and then sent an email at 3.19pm to Mr King to brief him as he was not able to attend PPB’s teleconferences. Mr Anderson noted two issues: (i) that PPB recommended that Investec be paid out but the superannuation fund investors did not agree; and (ii) that on the basis that “asset consultants will not recommend further equity under any circumstances”, Ashington proposed an alternate solution, supported by PPB, that the $6 million remaining uncalled capital be used for both Double Bay and Stonington to provide until 31 December 2009 to dispose of assets, which solution was also not supported by the asset consultants. Mr Anderson said that the asset consultants’ approach “is uncommercial and will in our opinion lead to decimation of ADF2 equity” (Ex M at 5126).

296. [327]

     On 11 August 2009, there was a conference call between Mr Block, Mr Lord and asset consultants.

297. [328]

     On 11 August 2009, Mr Anderson emailed Mr Minahan, Mr Steel, Mr Bailey, Mr Lee and Mr Seaton about PPB’s review of ADF2 and said “[PPB] have reservations about the profit margin in Stonington being sufficient to justify the risk of development and recommended investors contribute capital in the short term” (Ex M at 5129).

298. [329]

     On 12 August 2009 at 11.53pm, Mr Gavin sent an email to Mr Block, Mr Lord and asset consultants commenting on the HESTA Side Letter (and attaching the emails of 22 June and 12 January 2009 from Ashington Capital to Mr Gavin), concerning the use of funds for the Double Bay Project (commenting that the email of 12 January 2009 from Ashington stated that “that they would not promise equity two or three times (which is painfully ironic now)”, and saying “we put these in place (in writing) to try and ensure that Ashington would not use additional capital for anything other than Double Bay, and to try and ensure that additional commitments would not be promised two or three times. Unfortunately this does not seem to have worked”.

299. [330]

     On 14 August 2009, Mallesons wrote to Mr Anderson regarding the structuring of Ashington Capital’s development funds, stating that “[w]e understand that in the course of PPB reviewing the structure of [ADF] and [ADF2] and the associated sub-trusts on behalf of investors, queries have been raised regarding the multiple roles which [Ashington Capital] assumes in the structure” (Ex M at 5342). By 20 August 2009, Mr Anderson had asked Ms Briggs to advise on how the removal of Ashington Capital as trustee would impact Ashington Management’s entitled to Development Management fees (Ex 23). Prior to providing that advice, Ms Briggs discussed the issue with Mr Edwards (of Mallesons) (Ex 25). It is submitted that the decision to request this advice was driven by a real concern held by Mr Anderson, reflective of the statements made to him by superannuation fund investors at the time. At the very least, it indicates that Mr Anderson had in mind the possibility that Ashington Capital might be removed as trustee.

300. [331]

     PPB produced the first “Strategy Update” report to the ADF2 investors (excluding Ashington) on 14 August 2009 (First PPB Report). The report stated that it was produced in accordance with PPB’s engagement letter dated 16 July 2009 and solely for the information of the investors of ADF2 (also referred to as “the Fund” in the First PPB Report).

301. [332]

     The 14 August 2009 report noted that PPB was mandated by the Fund investors to perform “a commercial review of three projects within the Fund, assess the feasibility of each project and understand the potential for further financial support to be required from the investors” and that PPB’s review “has highlighted the need for a definitive short-term strategy to minimise the risk of the Fund collapsing whilst exploring the options available to the investors and the costs associated with those options”. The report also made certain recommendations about how such a strategy might be pursued.

302. [333]

     In the report, PPB noted that superannuation fund investors were reluctant to advance further moneys and recommended that a stand-still arrangement with Investec and other lenders be sought pending a short-term sale of the Stonington Property.

303. [334]

     PPB considered it “appropriate that management be directed by the investor group to work co-operatively with PPB to achieve short term goals and refine a medium-term strategy to determine what ongoing viability the Funds may have”; and said that with regard to the future direction of the Fund, in PPB’s view it was “too early to determine conclusively the best course of action”.

304. [335]

     The report stated that, in order to implement that strategy, PPB would require a mandate with “4 arms”. The second of those arms was “to assist the company in achieving a legally effective restructure of the current trustee and security arrangements”. PPB stated that the current funding structure did not “quarantine the group from enforcement action by lenders to the trusts should one of the sub-trust assets default on its debt or other creditor obligations”. The report noted that “a lender enforcing its securities is likely to do so at both the asset and the trust company level, resulting in potential cross defaults against other debt facilities in ADF No. 2 and also ADF No. 1” and that “a major short term goal is to take steps to avoid any further events of default that could lead to the appointment of an insolvency practitioner to ACL [Ashington Capital]”.

305. [336]

     Pausing here, Patersons says that the debate as to the scope of such a mandate is largely a matter between PPB and the plaintiff; but it says that even if the plaintiff is correct (and that second “arm” was restricted to PPB assisting in the restructure of the sub-trusts so that the head trustee (Ashington Capital) was not the trustee of all of them), that does not really matter for the purposes of the causation question in the present case. Patersons points out that the fourth “arm” of PPB’s ongoing mandate included developing “a medium term strategy for the Fund, in the best interests of the Fund investors”. It is said that that would include exploring the removal of Ashington Capital as trustee and Ashington Management as development manager (and Patersons says that Mr Anderson was cognisant of that fact at the time in August 2009).

306. [337]

     Pausing here, the plaintiff’s interpretation of the second “arm” is consistent with the content of the First PPB report. Beyond the executve summary, under section 2.3 “Risk of Current Structure – Ashington Capital (ACL)

307. [338]

     Further, the First PPB Report advised that “PPB be additionally retained by [Ashington Capital] to provide advice to [Ashington Capital] in respect of investor supported strategies”.

308. [339]

     Mr King’s response to the email from Mr Block on 14 August 2009 suggested that Ashington might be entitled to see the report. Mr Block responded that, because the report was prepared for investors, there was no legal requirement for Ashington to have it (which I interpose to note is a clear contemporaneous indication of PPB’s view as to by whom PPB had been retained). However, Mr Block noted that he had discussed the material issues with Mr Anderson on several occasions.

309. [340]

     Mr Anderson’s evidence is that he was not provided with the First PPB Report at the time it was issued and that he “pursued PPB for copies of the PPB strategy updates for some time in late 2009” and was “eventually” provided with PPB Report in late 2009 (his 19 December 2017 affidavit at [224]). Acorn says that this evidence is false as Mr Block emailed Mr Anderson the First PPB Report on 21 August 2009, a week after the report was provided to the superannuation fund investors. At the very least, it would appear that Mr Anderson’s affidavit evidence to the contrary was incorrect.

310. [341]

     Mr Anderson’s evidence is that he considered that an immediate sale of Stonington, as recommended by PPB, would be unnecessarily destructive of unitholder value.

311. [342]

     On 16 August 2009 at 6.25pm, Mr Anderson sent an email to the superannuation fund investors, marked for their urgent attention, in which he warned that the superannuation fund investors “must be cognizant that actions taken in the next 24 hours will determine the future of both funds” for the reasons he there set out, which included the assertions that “the effluxion of time has placed the Manager and the Fund in a more acute and tenuous position” and that “[t]he Manager’s ability to effectively deal on assets has been undermined by the wholesale level of inaction of the past 60 days”. Mr Anderson noted that PPB’s ultimate advice “does not represent PPB’s initial advice (which was to pay out the Investec facility by its expiry date of 25 August) but is the only recommendation which investors will support”. Mr Anderson set out why he regarded the PPB Recommendation to investors (to request Investec to extend the facility without offering any inducement to do so) to be fundamentally flawed and also set out the Manager’s Recommendation in relation to the Investec Stonington Facility (that an inducement must be offered to Investec to extend the facility). Mr Anderson warned about Investec taking control of the asset and the possibility of heavy losses in such an event.

312. [343]

     Mr Anderson described PPB’s recommendation as “fundamentally flawed” and the superannuation fund investors as “misguided”. Acorn says that the tone and content of this email was insulting because of Mr Anderson’s lack of responsibility for the position in which he had placed the Ashington Funds and the superannuation fund investors by proceeding with the Stonington settlement in February 2009 in the manner he did; and says that the email betrays the desperation of Mr Anderson for the position in which he and Ashington were now placed (namely, that if demand were made by Investec on 25 August 2009 it was likely that it would not be met, Investec would take control of the Stonington asset which would trigger cross defaults across both Ashington Funds; in circumstances where Mr Anderson had personally guaranteed the Hamton Vendor Finance which was due).

313. [344]

     In the email Mr Anderson also stated that “[a]ny concern surrounding the Double Bay government approval has no foundation for the reasons set out in the attached document”, which asserted that “[c]ontinuing to raise a concern around the approval simply reflects a failure in understanding the approval process” and that “[a]pproval will be granted in late September or early October” (Ex M at 5344ff).

314. [345]

     On 17 August 2009, Mr Gavin (on behalf of HESTA) met with Mr Anderson and Mr Minahan to discuss the situation.

315. [346]

     On 17 August 2009 at 6.58pm, Mr Gavin wrote to the superannuation fund investors and PPB, reporting that he had met with Mr Anderson and Mr Minahan. Mr Gavin said that he conveyed to them that it “is highly unlikely that HESTA will be committing any additional equity to ADF 2, at least not in the time frame required for Investec and the vendor finance, and probably never”, which he said had surprised them. Mr Gavin expressed the opinion that it was imperative that, at the meeting of superannuation fund investors to be held the following day (18 August 2009) at 3pm, they come up with a proposal which PPB (perhaps with Ashington) could deliver to Investec late in the afternoon “even if that outcome is to encourage them to proceed with the wind up of the Stonington trust and (and try and ensure the losses are quarantined to Stonington)”. Mr Gavin stated that Ashington had asked to address the superannuation fund investors at the commencement of the next day’s meeting and Mr Gavin asked whether everyone was in favour of that.

316. [347]

     On 18 August 2009 at 11.37am, Mr Stanley Hurwitz of Investec sent an email to Mr Steel asking him to prepare the documentation to drawdown the remaining $6 million of uncalled capital and transfer the funds to Investec, which email Mr Steel then forwarded to Mr Anderson and Ms Briggs.

317. [348]

     On 18 August 2009 at 12.10pm, Ashington Capital made the 14th drawdown for ADF2, which Ms Briggs described in an email that day as having been formally requested by Investec.

318. [349]

     On 18 August 2009 at 12.10pm, Mr Anderson sent an email to the superannuation fund investors in advance of their meeting at 3pm that day to consider the First PPB Report. Mr Anderson noted the “significant disappointment in an element of the structuring of the project finance in the settlement of the Stonington project” but said that “the manager was compelled to take extraordinary measures in extraordinary times under great duress” in relation to the financing of the settlement of Stonington. Mr Anderson said that Ashington’s primary objective was at all times to act in the best interests of investors, a key element of which was to preserve and protect the significant equity already invested in the project. The email assured the superannuation fund investors that “we are committed to working closely with investors to ensure that they are fully informed at all times”. The email said that the assets in the fund would require “skill and expertise to either realize [sic] and or develop”. The email noted that a meeting was taking place later that day between PPB and the superannuation fund investors to discuss the First PPB Report, and asked to be able to review issues arising out of the meeting and respond.

319. [350]

     On 18 August 2009 at 2.56pm, Mr McCusker sent an email to members of the LUCRF Investment Committee providing an update on the Ashington funds and attaching the First PPB Report. The email summarised PPB’s suggested short-term goals and recommendations; summarised three communications from Ashington; and provided the Investment Oversight Group (IOG) response. The email suggested that LUCRF should support the engagement of PPB to assist Ashington in the execution of the strategy detailed in the First PPB Report.

320. [351]

     On 18 August 2009, at 3pm, PPB and Ashington met with the superannuation fund investors, which Ms Chan recorded in a note. In Ms Chan’s note, she recorded that Ashington had “met with Frontier and now see exactly how disenchanted unitholders are” (Ex 13 at 18322). The outcome of the meeting was for the superannuation fund investors to review PPB’s strategy and agree on a course of action.

321. [352]

     On 19 August 2009 a report to the HESTA board for its August 2009 meeting noted that unitholders remained concerned with the viability and solvency of ADF2 following an interim report from PPB.

322. [353]

     On 19 August 2009, Mr Steel forwarded to Mr Bouris the 31 May 2009 Mallesons’ advice dated 31 May 2009 (see above) that he sent to Mr Bouris “originally on 10 July” as to the matters in relation to ADF2 which Mallesons considered should be disclosed to superannuation fund investors.

323. [354]

     On 19 August 2009, Investec wrote to Ashington Capital, as trustee of ADF2, declaring ongoing breaches of the Investec Stonington Facility, demanding immediate payment of some $10.139 million and cancelling the Investec Stonington Facility.

324. [355]

     In particular, the Investec notice of default indicated that Ashington Capital had breached the ongoing covenants contained in cll 19.1(c), 19.1(d) and 19.2(b) of the Investec Stonington Facility. By those clauses, Ashington Capital had undertaken: to ensure that the aggregate of uncalled capital of ADF2 was not less than $10 million; to notify Investec of any proposal which would have the effect of reducing the uncalled capital of ADF2 below those levels existing at the time of the first drawing; and not to make any calls on unitholders including calls under uncalled additional equity without Investec’s written consent. The Investec notice of default noted that $10,139,331.51 remained owing as at 18 August 2009 and made a demand for that money. Investec continued to reserve its rights. Investec utilised its power of attorney to call for the $6 million in uncalled capital.

325. [356]

     At the same time, Investec’s lawyer also wrote to Ashington Capital and its directors putting them on notice of the claims which Investec had against both Ashington Capital, in its personal capacity (as opposed to its capacity as trustee), and against the directors.

326. [357]

     On 19 August 2009 at 12.40pm, Mr Bouris sent an email to Mr Anderson resigning as chairman of Ashington, and director of the Ashington companies, citing “grave concerns” about what he had been told at the June 2009 Ashington board meeting (Acorn says this is clearly a mistaken reference to the July 2009 board meeting) and what he had been told by one of the superannuation fund investors and by Mr Hurwitz of Investec. Mr Bouris, in an email later that day at 1.22pm, said that new information had come to his attention (including the Mallesons advice dated “4th August 2009” – it is likely this is a reference to the 14 August 2009 advice), which if he had known about at the time would have caused him to have “brought my decision forward”.

327. [358]

     On 19 August 2009, in response to Mr Steel’s request for the Westpac Stonington Facility to be extended to 11 January 2010, Westpac indicated that approval would depend on Ashington Capital meeting certain pre-conditions, including: paying down the facility by $5.4 million and paying interest in advance.

328. [359]

     On 20 August 2009 at 11.40am, Mr Block (of PPB) sent a mandate letter by email to Mr Anderson “outlining [PPB’s] role going forward” which was stated to be agreed by the superannuation fund investors. The letter asked Ashington Capital to sign and return a copy of the letter as an acknowledgement of agreement to its terms. The mandate letter stated that PPB had been engaged by the unitholders of ADF and ADF2 to assist Ashington Capital as trustee to do a number of things including “achieving a legally effective restructure of the current trustee and security arrangements”, “achieving a divestment of certain assets of the funds” and “recommending a medium term strategy for the funds”. It sought Ashington Capital’s authorisation and agreement to PPB approaching and holding meetings with, communicating with and requesting information from, all financiers to ADF and ADF2 “and all other third parties that are relevant to the ongoing operation and viability of the Funds” and to provide PPB with correspondence between Ashington Capital and those third parties. Further, PPB emphasised that PPB would not be acting for the Ashington Capital in any capacity and that, by signing and returning the letter, Ashington Capital agreed with those terms and represented and warranted to PPB that “PPB is not acting as a fiduciary for or as an adviser to [Ashington Capital] in any capacity whatsoever”. Each of HESTA, Sunsuper and LUCRF subsequently sent an email on 24 August 2009 to Mr Anderson confirming its agreement with that letter.

329. [360]

     On about 20 August 2009, Mr Steel sought advice from Ms Briggs about whether he owed directors’ duties and whether they might have been breached. Ms Briggs advised, by email on 20 August 2009 at 9.02am, that she thought that Mr Steel would be classified as an officer of Ashington and that therefore he owed directors’ duties to the company. Ms Briggs said that, in her opinion, both the duty to act in good faith in the interests of the company and duty to use powers and exercise duties in good faith and for a proper purpose may have been breached. In relation to the duty to exercise care, skill and diligence, Ms Briggs advised that “[a]rguably deciding to enter into an agreement to purchase Stonington (when we knew there was never going to be enough equity) and Double Bay (when we knew the equity required exceeded the max. that could be spent on any one project) was not acting in the interests of the company”. (Ultimately, on 13 November 2009 at 9.46am, Mr Steel emailed Mr Eliakim of Mallesons asking if he could recommend someone at Mallesons to provide him with personal advice on whether he owed directors duties to Ashington under the Corporations Act – Ex 17 at 215.) This is of relevance insofar as it indicates a genuine concern on Mr Steel’s part as to the position at that time (which goes beyond him merely being a “worrier”, as Mr Anderson has suggested).

330. [361]

     On 20 August 2009 at 7.10pm, Mr Anderson sent an email to the asset consultants requesting that Ashington be advised of the outcome of the unitholders’ meeting held on 18 August 2009 and requesting clarification of PPB’s role and access, if appropriate, to the PPB report.

331. [362]

     On 21 August 2009 at 4.16pm (the day after the 20 August 2009 draft version of the PPB Mandate Letter was sent by PPB to Ashington Capital), Ms Briggs sent Mr Anderson and Mr Steel an email stating, among other things (Ex 23):

332. [363]

     In cross-examination, Mr Anderson denied being concerned, at the time of receiving the 20 August 2009 PPB draft mandate letter, about the risk that Ashington Capital might be terminated as trustee of ADF2; and denied being concerned about the potential consequences to Ashington if Ashington Capital were removed as trustee of ADF2 (T 932-933). Mr Anderson said, as to Ms Briggs’ email above, that he “wasn’t the driver of that email” (T 933). Acorn says that this evidence is unbelievable and dishonest, deliberately so. Acorn contends that Mr Anderson knew at this time that there was a very real potential for the unitholders to seek the removal of Ashington Capital as trustee. Acorn says that the fact that Ms Briggs was asked to provide advice on these questions at that time is only explicable because Mr Anderson had those concerns.

333. [364]

     Further, it is said that the evidence indicates that Ms Briggs had consulted Mallesons in providing this advice (noting that in an email of 11 November 2009 at 11.37am to Mallesons, Ms Briggs refers to these same questions, stating that she had spoken to Mallesons “about these issues a few months ago”), which Acorn says indicates the seriousness of the view within Ashington that there was a very real prospect that Ashington might be removed.

334. [365]

     PPB similarly submits that it should be inferred that, having read the draft 20 August 2009 PPB mandate letter, Mr Anderson and Mr Steel were prompted (by the reference to the restructure of current trustee arrangements) to ask what consequences would ensue if Ashington Capital were removed as trustee of ADF2. PPB argues that this destroys any suggestion that reasonable persons in the position of PPB and Ashington Capital respectively would have been ad idem in understanding, as at 25 August 2009, that the words “legally effective restructure of current trustee and security arrangements” were intended only to refer to the remedying of some structural weakness associated with Ashington Capital being the trustee of the head trusts and the sub-trusts in the Ashington business.

335. [366]

     On 21 August 2009 at 5.01pm, Mr Block sent an email to the asset consultants attaching the PPB Strategy Report No 2 dated 21 August 2009 (Second PPB Report). Shortly thereafter, at 5.40pm on 21 August 2009, Mr Block sent an email to Mr Anderson and Mr Steel, copied to Mr Lord, attaching the PPB Strategy Report No 1 dated 14 August 2009 (Ex M at 5412ff).

336. [367]

     The Second PPB Report: stated, among other things that the report was produced in accordance with PPB’s engagement letter dated 16 July 2009, and was solely for the information of the investors of ADF2; and that Investec had “issued immediate notices of demand to Ashington, following their advisement of the breach of the uncalled equity undertaking in their facility agreement” (noting that the total amount demanded was $10 million plus interest). The report referred to the potential for any enforcement action by Investec (such as the appointment of a receiver) to push Westpac to enforce its securities at Stonington, disturb or defer the planning approval for Double Bay and cause enforcement actions across the sub-trusts of both funds.

337. [368]

     The report referred to conversations PPB had had with Ashington and specifically with Mr Anderson and noted that superannuation fund investors adopted PPB’s “recommendations last week” and, accordingly, PPB had “forwarded a letter to Ashington clarifying our ongoing role” (which was attached as annexure B to the report).

338. [369]

     PPB advised the superannuation fund investors that “Investec has greater leverage as a result of the contagion which they can spread to the other assets in the Fund, most notably Double Bay, which is sensitive given the final stages of the planning approval process. We believe that enforcement of Investec’s securities may jeopardise the ability to secure the Part 3A planning approval for Double Bay”. (Patersons notes that the development application for the Double Bay Property was refused for unrelated reasons.)

339. [370]

     PPB advised the superannuation fund investors that it was of the view that “Investec will require a financial inducement to extend their facility, pending a sale of Stonington” and that the option PPB considered most palatable was a “shortfall guarantee that would be granted to Investec”. PPB recommended that the Stonington Property be put on the market immediately. The report said that the only other option was for the unitholders to “do nothing” and risk the likely appointment of a receiver to Ashington Capital by Investec.

340. [371]

     Also, relevantly, the Second PPB Report advised on the cashflow of ADF2, concluding that “[i]n order to survive until 30 September 2009, the Fund will require approximately $3.8 [million] (August and September expenses not including the September payment of interest for Double Bay of $1.4 min) in addition to the accommodation necessary to be provided to Investec”.

341. [372]

     Acorn says that, at around the time of the Second PPB Report, all of the superannuation fund investors had reached the view that they were ready for the removal of Ashington.

342. [373]

     It is noted that Mr Dedes (Military Super) gave evidence that he had formed the opinion that Ashington Capital and Ashington Management needed to be removed as trustee and manager of ADF, ADF2, and the sub-trusts, believing that it was necessary to remove Ashington if the unitholders hoped to extract any value from the trust assets (Ex 15 at 576); that Mr Thow (LUCRF) no longer had any trust and confidence in the ability of Ashington as trustee and manager of the Ashington Funds and considered that PPB was working to save the equity already committed to ADF and ADF2, which would not have involved continuing to work with Ashington unless that was the only option available; and that, after considering the two PPB Reports, Mr Fowler (HESTA) says he also lost confidence and trust in Ashington Capital around this time (Ex 14 at 560-561).

343. [374]

     Mr Hartley (Sunsuper) gave evidence that he no longer trusted Ashington and formed the view that Ashington needed to be replaced. Acorn says that (contrary to the plaintiff’s closing submissions) it is not material whether Mr Hartley communicated this view to the Board of Sunsuper prior to there being any viable alternative to Ashington for the Board to consider. It is noted that Mr Hartley’s evidence is that he was the primary decision-maker at Sunsuper in relation to investments and the only person with relevant authority in this regard, and that at all times the Board usually followed the recommendations he made to them about investments (Ex 13 at 17825-17826). (Moreover, Acorn says that it is significant that Mr Hartley was not examined about his views as expressed in both his outline and in his affidavit in the later Mapeline proceedings – see below - about the conduct of Ashington during 2009.)

344. [375]

     As adverted to above, on 24 August 2009, Mr McCusker of LUCRF sent an email to Mr Anderson, copied to Mr Lord and Mr Flett, confirming that PPB had been engaged by the superannuation fund investors.

345. [376]

     On 24 August 2009, Arcadia Funds Management provided a quarterly property portfolio report for the LUCRF Investment Committee (in advance of its 2 September 2009 meeting) relating to its property portfolio, addressing the performance of ADF and ADF2 and stating that “there remains a high probability that any one of a series of these issues could result in a total loss of equity in ADF2. In addition, there is now also a heightened risk that these issues will also contribute to a significant loss of remaining equity in ADF1” (Ex M at 5690).

346. [377]

     On 24 August 2009, Mr Dedes (advising Military Super) sent an email to Mr Hodgson as to the Second PPB Report, stating that “it is difficulty to build an investment case for any further funds to be committed”.

347. [378]

     On 24 August 2009, there was a meeting between the superannuation fund investors and PPB. A note prepared by Mr Cohen and Mr King (Sovereign, advising Sunsuper) recorded that, at the meeting, a majority of the superannuation fund investors decided that they would not offer a shortfall guarantee to Investec and that there would be no further equity injection to service the Investec Stonington Facility and that PPB would meet with Investec to inform it (Ex M at 5806).

348. [379]

     Acorn says that matters in relation to the funds only deteriorated further from this point, noting that Mr Thow (of LUCRF) in his oral evidence said of the LURCF Investment Committee that “we’d never had such a distressed asset in our …property portfolio….lose such value, so everyone was quite concerned about the state of the Ashington funds…it had heightened awareness amongst the committee, because we’d never lost this amount of money in our property portfolio, before” (T 1117-1118).

349. [380]

     On 25 August 2009, Ms Briggs sent an email to Mr Block, copied to Mr Lord, Mr Anderson and Mr Steel, attaching a version of the 20 August 2009 draft PPB mandate letter with handwritten amendments made by Ms Briggs. The mandate was amended in accordance with those requests and the PPB Mandate Letter, as revised, was signed by PPB and Ashington Capital on 25 August 2009.

350. [381]

     According to the 25 August 2009 PPB Mandate Letter, PPB was engaged by the “investors in the Funds” to assist Ashington Capital in: holding discussions with financers and valuers, obtaining valuations of the funds’ assets to assist in determining their ongoing viability and assisting the fund’s management in relation to approval applications; achieving a legally effective restructure of the current trustee and security arrangements; achieving a divestment of certain assets of the funds; and recommending a medium-term strategy for the funds.

351. [382]

     It recorded that, by signing the letter, Ashington Capital authorised and agreed to:

352. [383]

     The 25 August 2009 PPB Mandate Letter made clear that PPB would “not be acting for the Trustee in any capacity”. The PPB Mandate Letter also included a representation and warranty by Ashington Capital that:

353. [384]

     On 26 August 2009, Mr Marsden emailed Mr Steel and Mr Anderson and said “overnight [I]nvestec charged $180k interest to ADF2 account for the Stonington facility. I hadn’t taken this into account … with the current default position & negotiations CA had mentioned we wouldn’t be paying them until something is finalised. This has put a pretty big hole in our current cash. Can we please discuss this morning”. Mr Steel replied to Mr Anderson and Mr Marsden “shit!!”. Mr Anderson replied to Mr Steel and Mr Marsden stating, “I didn’t plan to pay them and didn’t realize that’s how they get paid each month … that would have been useful info to share”.

354. [385]

     On 26 August 2009, Mr Steel sent an email to Mr Block, copied to Mr Lord, requesting a copy of the Second PPB Report, on the basis that Ashington was not only the manager but also a unitholder. Mr Block replied that he would send the document provided all unitholders agreed at the 5.30pm meeting.

355. [386]

     On 26 August 2009, Mr Anderson sent an email to Mr King, copied to Mr Steel, saying that Mr Steel was in the process of completing a paper for investors dealing with the issues discussed that day and asking for Mr King to review it prior to distribution.

356. [387]

     There was a teleconference on 26 August 2009 between Mr Block and the superannuation fund investors’ representatives at which Ashington’s request for release of the Second PPB Report was discussed.

357. [388]

     On 27 August 2009 at 11.09am, Mr Flett sent an email to PPB and the superannuation fund investors referring to the teleconference on 26 August 2009. Mr Flett’s email indicates that it was reported at the meeting that Investec asserted to PPB that it might appoint a receiver at any time and had reserved their rights to pursue the unitholders for the uncalled $6 million. Mr Flett noted that this caused the superannuation fund investors to assume that there might be legal proceedings from the superannuation fund investors or financiers (including against Ashington Capital). The email also recorded that the superannuation fund investors decided that they would “not provide any further information to Ashington Capital Limited (without approval of our lawyers) and that all documents going forward from PPB should be privileged and also not provided to [Ashington Capital]” (Ex M at 5833). (Acorn says that this again reflects that the relationship between Ashington and the unitholders was irreparably damaged by this time.)

358. [389]

     Mr King responded to this email on 27 August 2009, stating that some communication with Ashington was necessary, but that he agreed that they should be “very careful” and recommended that they have a discussion just amongst the superannuation fund investors, the consultants and the superannuation fund investors’ lawyer (David Burridge of Norton Gledhill).

359. [390]

     On 27 August 2009 at 5.10pm, Mr Steel sent an email to the superannuation fund investors proposing “an alternative short-term solution for serious consideration by” them as set out in an attached presentation entitled “ADF2 Investor Presentation, Ashington Recommended Short-Term Strategy, 27 August 2009”.

360. [391]

     The presentation questioned the decision by the superannuation fund investors to sell the “Stonington asset to fund the payout the Stonington debt providers”, stating that “[t]his decision crystallises a loss of circa $22M of Investors equity never to be recovered!”.

361. [392]

     Ashington’s recommendation was to defer all decisions on all assets until 31 October 2009, to continue to procure construction funding for Stonington and for superannuation fund investors to contribute $15 million additional capital to take out the Investec and vendor finance, supported by a principal guarantee from Ashington.

362. [393]

     At 7.24pm on 27 August 2009, Mr Gavin sent an email to the asset consultants relating to Mr Steel’s request for a principal guarantee, saying that:

363. [394]

     On 28 August 2009, there was correspondence between the superannuation fund investors and PPB as to the substance of Ashington’s proposal to provide a $15 million principal guarantee.

364. [395]

     At 12.23pm on 28 August 2009, Ms Chan (Sunsuper) emailed the asset consultants as to whether any superannuation fund investors were paying the call due the following week.

365. [396]

     On 28 August 2009 at 4.15pm, Mr Steel sent an email to the asset consultants with further details of the proposed guarantee; namely, that if Stonington was sold and there was an insufficient net proceeds of sale in order to repay the superfunds the additional $15 million of equity contributed by them, then Ashington would guarantee the shortfall.

366. [397]

     Mr Flett sent an email to the asset consultants at 4.59pm attaching that email and saying that Mr Steel had called him “off the bat” and wanted their feedback on Ashington’s proposals. Mr Flett said that he told Mr Steel that any feedback would be provided through PPB. (Acorn says that this email indicated that it had been made very clear to Ashington that it was to communicate with PPB, not the superannuation fund investors.)

367. [398]

     In an email on 28 August 2009 at 6.54pm to the superannuation fund investors, Mr Block (of PPB) sent an email to the asset consultants noting that he had just had a lengthy call with Mr Anderson to discuss the proposed guarantee. Mr Block stated that PPB had reviewed the proposal and spoken to Mr Anderson about it and that, while in principle PPB agreed with a form of the proposal, PPB considered that “$15mln will not de-risk the vehicle for any real length of time”. Mr Block said that there might be some sense in Ashington’s proposal but that he thought $19 million would be needed rather than $15 million; and that the only way the money could be repaid would be by a sale of Stonington and that a shortfall on the sale was likely. Mr Block said that he had asked Mr Anderson to consider how the shortfall on the sale would be funded and that delaying making a decision for three months would push out funding commitments to the following year which may increase funding needs.

368. [399]

     On 28 August 2009 at 10.43am, Mr Marcus Faulkner of Westpac sent an email to Mr Steel, attaching a letter from Westpac to Ashington Capital as trustee for the Stonington Trust which recorded that Westpac’s senior debt of $26 million expired on 26 August 2009. The letter stated that Westpac would retire the commercial bills to an “unpaid bills account” on 31 August 2009, where a rate of interest of 17.1% would apply. Westpac reserved its rights under its Business Finance Agreement dated 7 November 2008. The letter stated that the bank would seek a reduction of the facility to $17.6 million in order to restore a 50% loan-to-value position. The plaintiff points out that Westpac did not there seek to exercise its security held against the Stonington Property. Mr Steel forwarded the Westpac letter to both Mr Anderson and PPB.

369. [400]

     Meanwhile, on 28 August 2009, Mr Burridge (Norton Gledhill) emailed to Mr Dedes a draft letter to Investec that had the intention of communicating the superannuation fund investors’ position before they received a letter of demand. Mr Dedes circulated that draft for review by the asset consultants.

370. [401]

     At 1.21pm on 31 August 2009, Mr Lord (of PPB) sent an email to the superannuation fund investors, noting that the scope of PPB’s original review had expanded considerably “as a result of several urgent and significant issues uncovered” and now encompassed ADF and ADF2. Mr Lord proposed that PPB’s mandate now be split between transaction management for Ashington Capital as trustee for the Stonington Trust to manage the sale process for the Stonington Property and investor advisory services to the superannuation fund investors. (Acorn says that there was a significant sense of urgency for everyone involved in dealing with these issues and the urgency never went away.)

371. [402]

     At 2.39pm on 31 August 2009, Mr Anderson sent an email to Mr Block, copied to Mr Lord and Mr Steel, explaining the drivers behind Ashington’s ADF2 investor presentation (presented on 28 August 2009), namely, to maximise the fund’s internal rate of return and minimise future equity requirements of the fund. Mr Anderson maintained that the only solution to eliminate short term fund impediments was for superannuation fund investors to contribute $15 million. (Acorn says that the proposal ultimately went nowhere.)

372. [403]

     On 31 August 2009, Mr Wyeth (of Ashington) sent an email to Mr Anderson, copied to others at Ashington, attaching a schedule of creditors for Double Bay and Stonington.

373. [404]

     Also, on 31 August 2009, St George wrote to Ashington offering to vary the facility for the Cross+ Trust by reducing the limit and extending the term to 30 September 2009 (see Ex M at 5945).

374. [405]

     On 31 August 2009, PPB (on behalf of the superannuation fund investors) sent a letter to Mr de Rooy of Investec, with respect to the Investec notice of default. The letter stated that PPB had been engaged by investors to review ADF2 (Ex M at 6005ff). PPB said that investors declined to provide further funding to ADF2 and that “their reluctance is born largely by a lack of detailed information regarding the current market value of the assets and the equity attributable to members both at the asset level and also at the fund level”.

375. [406]

     That letter stated that PPB, on behalf of the superannuation fund investors, was working with Ashington Management to ready the Stonington Property for sale. The letter also noted that PPB had discussed with the superannuation fund investors what “additional measures” could be taken to strengthen Investec’s position. It was noted that the superannuation fund investors might be in a position to recommend to their respective trustee board that Investec be granted further security over the Project X Hotel Trust. It was further noted that Ashington had approached the superannuation fund investors directly with an alternative proposal (i.e., the proposal that included the input of an additional $15 million in equity backed by a principal guarantee from Ashington).

376. [407]

     From September 2009 to mid-November 2009, Ms Garrett held the role of Head of Funds Management at Ashington Management (on a salary of $350,000) (albeit that she was clearly performing some activities referable to Ashington before that time). From at least July 2009 (see Ex C at Tab 1) (but in some submissions put as being from around April 2009) up to December 2009, Mr Renauf held the role of Head of Acquisitions at Ashington Management (also on a salary of $350,000).

377. [408]

     Ms Garrett and Mr Renauf here assert that they were independent contractors. The plaintiff contends that they were employees occupying senior positions but says that, in any event, their fiduciary and contractual duties owed to Ashington do not depend upon the classification of their relationship as one of employment (see the discussion of this issue in due course below).

378. [409]

     On 1 September 2009 at 8.27pm, Mr Block sent an email to the superannuation fund investors reporting on a meeting with Investec in which Investec threatened imminent legal action against Ashington Capital and the superannuation fund investors over non-payment of the capital call; indicating that Investec had received advice that it could sue investors directly for any called but unpaid capital contributions.

379. [410]

     On 1 September 2009, Mr Gavin sent an email to Mr Block, copied to Mr Fowler and Mr Hastings, advising that HESTA consented to PPB’s letter to Investec being provided to Ashington, saying that “I think the letter conveys that the situation is more positive than it really is – i.e., it doesn’t really convey the loss of confidence from the investors towards the Manager. I understand this is probably important in relation to Investec and trying to buy time” (Ex M at 6060).

380. [411]

     On 2 September 2009, there was a telephone conference between Sunsuper, HESTA and LUCRF (a file note was prepared by Mr Hartley of Sunsuper of this meeting – Ex M at 6064). The minutes record that the attendees discussed Investec’s uncalled capital rights and that “Ashington appears to have made a commitment to Investec that is contrary to a prior agreement with unitholders regarding application of money from calls”. On the same day, LUCRF’s Investment committee agreed with the IOG and Arcadia’s recommendation not to pay capital calls to ADF2.

381. [412]

     On 3 September 2009, Norton Gledhill (solicitors acting for the superannuation fund investors) sent a without prejudice letter to Mr de Rooy (of Investec) (as this was later treated as an open letter, a copy of the letter was in evidence in the proceeding). In that letter, which addressed the position in relation to the uncalled capital, Mr Burridge advised that the superannuation fund investors considered their equity had been pledged in breach of various agreements (Ex M at 6067). Mr Burridge requested that Investec continue discussions with PPB to achieve a mutually beneficial outcome.

382. [413]

     On 3 September 2009 at 6.58pm, Mr Block (of PPB) sent an email to the superannuation fund investors, outlining his discussion with Mr de Rooy, following Investec’s receipt of the Norton Gledhill letter. It stated that Investec was unsatisfied with the offer and that Mr Block expected Investec would: exercise its power of attorney and make a capital call on behalf of Ashington Capital, as trustee for ADF2; commence legal action by Investec after the 14 day satisfaction period; reserve its rights to appoint a receiver to ADF and ADF2. Further, Mr Block stated that Investec would look to “collapse the trusts” in order to access any equity value in the trusts (Ex M at 6065).

383. [414]

     On 4 September 2009, Mr Steel emailed Mr Lord saying, “to follow on from Craig’s email last Wednesday regarding the terms of your engagement for the disposal of Ashington, I have now had a chance to discuss internally with Craig Minahan and Elizabeth” (Ex M at 6072). (Ms Garrett and Mr Renauf say that it would be inferred that Mr Anderson’s knowledge of PPB’s engagement was the same as Mr Steel’s.)

384. [415]

     On 7 September 2009, Investec made the 14th drawdown for ADF2 on the superannuation fund investors (in the name of Ashington Capital, as trustee of ADF2), exercising the power of attorney granted under the Investec Stonington Facility, giving notice under cl 7.3 of the ADF2 constitution that the 14th drawdown was required to be paid to the Trust Company by 4pm on 22 September 2009. The letters to superannuation fund investors attached a copy of the Investec Power of Attorney granted by Ashington Capital as trustee for ADF2; and specified the particular unitholder’s contribution to the drawdown (see, for example, Ex M at 6083ff).

385. [416]

     On 7 September 2009, Allens Arthur Robinson (the solicitors acting for Investec) sent a letter to Ashington Capital, as trustee for ADF2, recording alleged breaches by it of the Investec Stonington Facility Agreement dated 25 February 2009. Claims were asserted against each of Ashington Capital, Mr Minahan, Mr Anderson and Mr Bouris.

386. [417]

     At 1.25pm on 9 September 2009, an Investec email recorded that it would appoint receivers to Ashington Capital “this afternoon”.

387. [418]

     An email from Mr Andrew Major (of HESTA) to Mr Gavin, Mr Fowler, Mr Hastings, and HESTA staff recorded Mr Major’s opinion that it was premature to write-down HESTA’s investments in ADF2 to zero but that the investments could be recorded as impaired as they were unlikely to recover their capital and not at the manager’s valuation.

388. [419]

     At 5.46pm on 9 September 2009, Mr Anderson sent an email to others at Ashington recording that he had spoken to creditors holding approximately $600,000 of debt and requested more time.

389. [420]

     Following a request by Mr Block on 9 September 2009 for an update on Wylde Street, Double Bay and Stonington, Mr Steel emailed Mr Block and Mr Lord, copied to Mr Anderson, on 10 September 2009 at 12.32pm. In relation to Wylde Street, Mr Steel said: that the sale process was running “on the quiet” but that if no formal offers were received by 15 October 2009 they would consider appointing an external agent; that the Investec facility would expire on 31 October 2009 and that he would start discussions with Investec within 7 days advising it of the intention to sell; and that a quote for the valuation of Wylde Street was being finalised.

390. [421]

     In relation to Stonington, Mr Steel reported that: PPB had been appointed on a non-exclusive basis; that the sale process for Stonington was occurring while they were “currently” also informally pursuing two alternative options for Stonington – either mezzanine debt/preferred equity to take out Investec or temporary mezzanine debt/preferred equity converting to equity to continue with the development; that Ashington had met with Westpac on 8 September 2009 to “lay all cards on the table” and ask Westpac to defer the LVR [Loan Value Ratio] pay down and extend the current facility, and “hopefully” capitalise interest until sale proceeds are received; and that this meeting went well and there was no indication that Westpac would take further action.

391. [422]

     In relation to Double Bay, Mr Steel said that agents had been appointed to seek out interested parties and there were three options for a sell down strategy. It was said that there was a short list of approximately 15 candidates with 6 signed confidentiality agreements and a due diligence site established “with relevant collateral”; and the deal completion target date was 31 December 2009.

392. [423]

     Mr Steel stated that there were discussions with Westpac in relation to the “looming 30 September review date and potential LVR pay down”, noting Westpac’s view that if Ashington to made the LVR pay down it would assist in the potential renewal of the facility at 31 December 2009, but that due to liquidity issues Ashington would formally request to defer the review to 31 October 2009.

393. [424]

     On 10 September 2009 at 3.05pm, Mr Steel copied the above information in an email to Mr Anderson and others at Ashington (including Mr Renauf) and copied to Ms Garrett.

394. [425]

     Mr Block sent an email at 5.13pm on 10 September 2009 to asset consultants in relation to Investec, confirming matters said to have been decided at a meeting with the superannuation fund investors that day, namely that: PPB would advise Investec that superannuation fund investors would grant it an exit fee of $1 million in exchange for a standstill agreement to allow an orderly sale of Stonington; that Ashington Capital would be instructed to proceed with the sale of Wylde Street; and that superannuation fund investors were to instruct Mr Burridge of Norton Gledhill to respond to Investec’s formal notice of default. (Those action items were set out in an internal HESTA communication of the same date.)

395. [426]

     By early September 2009, therefore, the position was that the Investec Stonington Facility had expired, and the superannuation fund investors had not agreed to contribute additional equity to repay the Stonington facilities. Ashington decided to engage Patersons to raise mezzanine capital from alternative sources (the Stonington Capital Raising). Ms Garrett, who had previously worked at Patersons (before her employment at Valad) where she had reported directly to Mr Shorrocks, led discussions with Patersons about the Stonington Capital Raising.

396. [427]

     On 11 September 2009 at 11.27am, Ms Garrett (signing the email as “Wifey” from her Gmail address) emailed to Mr Carolan a draft letter from Patersons to Mr Minahan confirming that Ashington Group would exclusively mandate Patersons to raise $15 million in relation to the Stonington Project. Ms Garrett asked Mr Carolan to “chuck this on letterhead and send it to Craig [Minahan] and Sam [Renauf]”.

397. [428]

     Shortly thereafter, at 11.52am, Mr Carolan sent an email to Mr Renauf and Mr Minahan (copied to Mr Shorrocks and Mr Mark Hinsley, a junior employee of Patersons in the corporate department) attaching a letter in relation to Patersons undertaking a capital raising for the Stonington Project. The attached letter bore Mr Shorrocks’ electronic signature and largely replicated the text that had appeared in Ms Garrett’s email to Mr Carolan of 11.27am. It is clear, therefore, that Mr Carolan was not the author of the initial draft of what became the Patersons Mandate. In particular, the letter confirmed that Ashington would mandate Patersons exclusively to approach its clients with a view to a transaction involving the “Stonington development”. The transaction contemplated in the letter was to raise up to $15 million on terms which included a 20% capitalising coupon and a term of 12 months.

398. [429]

     Pausing here, Patersons says that this is the first document in evidence which shows Mr Shorrocks becoming aware of the proposed transaction. It is noted that, while Mr Shorrocks had attended a lunch with Ms Garrett and Mr Hinsley on 9 September 2009, he did not recall any deal or “new convertible offering” being discussed at that lunch (T 751).

399. [430]

     Mr Shorrocks received a further email from Mr Carolan shortly after 11.54am on 11 September 2009 stating that Ashington needed quickly to refinance another mezzanine debt facility with Investec “due to Investec pulling the plug on the sector” and that Mr Carolan would talk to Campbell Smith about it the following week. (Mr Campbell Smith was a “high-net-worth” client of Patersons who resided in Queensland, to whom Mr Carolan later sent a term sheet in respect of the proposed transaction – T 752.)

400. [431]

     As to Mr Carolan’s comment that Investec was “pulling the plug on the sector”, Mr Shorrocks’ evidence is that he was not familiar with this issue at the time (T 752). Patersons says that the evidence overwhelmingly suggests that it was Ashington’s defaults under the Investec Stonington Facility which led to Patersons being retained.

401. [432]

     On 11 September 2009 at 11.47am, Ms Briggs sent an email to an information analyst at Mallesons (Mr Iwata), giving instructions to set up a due diligence data room for Stonington on “MatterWeb” (Stonington Data Room), an electronic secure cloud facility. This was done on the instructions of Mr Anderson and after Ms Briggs had spoken to Mr Eliakim of Mallesons about it. Users of Stonington Data Room were required to enter a username and password to enter the database, both of which were supplied (upon request by Ms Briggs) directly by Mallesons. As part of maintaining a secure database, Mallesons kept a record of every user who accessed the Stonington Data Room as well as a record of every user who accessed a document within the Stonington Data Room (Access Logs). Ms Briggs instructed that the contacts provided on the site should be Mr Wyeth and Mr Renauf.

402. [433]

     At 12.05pm on 11 September 2009, an email communication between Frontier and HESTA records that “Investec has become more vocal about appointing a receiver to [Ashington Capital]”.

403. [434]

     On 11 September 2009 at 12.38pm, Ms Garrett sent an email to Mr Anderson and Mr Minahan, copied to Mr Renauf and Mr Steel, saying that, to take out Investec quickly, they needed to make their offer compelling. Ms Garrett stated that, after discussion with members of Patersons (and Wilsons) and comparison with other convertible and hybrid structures, it was clear that Ashington needed to have a cash component in the coupon. Ms Garrett recommended the following:

404. [435]

     Mr Steel’s response (by email to Ms Garrett, Mr Anderson, Mr Minahan and copied to Mr Renauf) included that quarterly interest of 10% “is very good – we won’t get any better than that”. At 1.31pm on 11 September 2009, Ms Garrett responded, asking whether it was possible for the “head entity to provide a parent guarantee over the coupon” and saying that “we did this as a sign of support at Valad”.

405. [436]

     Mr Steel’s response at 2.06pm on 11 September 2009 was that to do so they would need to ask superannuatin fund investors and that superannuation fund investors would be required to commit more equity which was unlikely to occur. Ms Garrett responded at 2.20pm that she agreed and suggested that Ashington itself (not the investors) fund the cash component of the coupon if required (perhaps out of fees), noting that investors would not have a problem with that and that Valad had done that for “troubled projects”.

406. [437]

     On 11 September 2009 at 4.55pm, Mr Anderson sent an email to Mr de Rooy, attaching a letter referring to a conversation between them earlier that afternoon and setting out the steps which were currently being taken by Ashington to resolve the matter with the Investec Stonington Facility promptly. Those included the following. First, that Ashington had entered into a Sales Agency Agreement with PPB, which had in turn appointed Stonebridge Capital to sell Stonington, with the online due diligence site to be available the following Thursday. Second, that Ashington had been undertaking a capital raising for its third opportunity fund which had introduced a number of investors interested in making direct investments into Australian property and Ashington was introducing Stonington to those investors. Third, that Hamton (i.e., a former owner of Stonington), had commenced a due diligence process to re-enter into “some form of ownership” of the Stonington Property. The letter noted Ashington’s recruitment of Ms Garrett, and that she was working on a payout of the Investec Stonington Facility via an alternative mezzanine facility and “[u]ndoubtedly she will also introduce a number of other alternative options”.

407. [438]

     On 11 September 2009, Mr Block sent an email to Mr de Rooy of Investec, copied to Mr Lord, referring to a discussion the previous day. The email attached the executed agency agreement appointing PPB in relation to the Stonington sale; set out PPB’s current understanding of Westpac’s position, noting that Westpac’s facility had expired on 25 August 2009 and that Westpac was moving to credit; set out a proposal for a standstill agreement to be executed to allow an orderly sale of Stonington in exchange for a fee of up to $1 million; and proposed strategies to collateralise Investec’s position with the equity from Double Bay.

408. [439]

     On 11 September 2009, Sunsuper, wrote down its $20 million investment in ADF from $13 million to $6.4 million; and its $23.5 million investment (of which a further $1.5 million had not been paid) in ADF2 to $3.125 million (Ex M at 7079ff).

409. [440]

     On Sunday, 13 September 2009, Ms Garrett emailed various people at Ashington, noting that they had “limited time to take out the Stonington mezzanine”, that she had already arranged a breakfast meeting with Campbell Smith and that she had lined up a number of other potential investors. Ms Garrett planned a meeting the following day (at noon on 14 September 2009) with Mr Renauf, Mr Steel, Mr Minahan and Mr Anderson to finalise the deal structure so that summary material could be provided to investors.

410. [441]

     On 15 September 2009 at 5.18pm, Mr Iwata sent an email to Ms Briggs providing her with access to the Stonington Data Room.

411. [442]

     On 16 September 2009, Mr Block sent an email to the asset consultants noting that, while Investec was yet to respond to PPB’s proposal formally, it was under consideration and Investec had advised that the proposal demonstrated a good amount of goodwill.

412. [443]

     On 16 September 2009, Ashington Capital as trustee of the Project X Hotel Trust sent a letter to St George and NAB requesting an extension or the removal of the review of the Double Bay facility set to occur on 30 September 2009.

413. [444]

     On 16 September 2009, Mallesons confirmed that documents contained on a CD had been uploaded into MatterWeb.

414. [445]

     On 16 September 2009, Mr Fowler prepared an update to the HESTA Board advising that that it would not be paying the recent Ashington capital call because the “purpose of use [was] not consistent with the side letter” (Ex M at 7909).

415. [446]

     On 17 September 2009, Mr Faulkner of Westpac sent an email to Mr Steel, copied to Mr Anderson and Ms Briggs, recording (further to the letter of 28 August 2009) that the Westpac Stonington facility had expired on 28 August 2009; and that “[t]he facility has not been extended and is in default with the rights of the Bank reserved”.

416. [447]

     On 18 September 2009, Norton Gledhill (on behalf of Military Super, HESTA and LUCRF), wrote to Investec disputing its power to make a call for an additional $6 million of capital from investors and reiterating the superannuation fund investors’ concern at funds being used in a manner inconsistent with the proposed uses of the funds as agreed between Ashington Capital as trustee for ADF2 and the superannuation fund investors in early 2009. The letter conveyed the reasons why the superannuation fund investors would not pay the call made by Investec under its power of attorney.

417. [448]

     On 21 September 2009, Ashington Capital as trustee for ADF2 issued a 14th drawdown notice for unitholders’ capital at the rate of 3c per unit, requesting the funds by 28 September 2009. The call on unitholders for $3 million was to meet a quarterly interest payment on the Project X Facilities (in relation to Double Bay) due on 1 October 2009, and pay development management fees, current trade creditors at the asset level and provided for future trade creditors. This was the third time the “14th drawdown” had been made, having been made already by Ashington Capital on 18 August 2009 and by Investec on 7 September 2009.

418. [449]

     On 21 September 2009, at 10.57am, Mr Gavin emailed Mr Block and Mr Lord, requesting a breakdown from Ashington as to how it intended to use the funds for the 14th drawdown.

419. [450]

     On 21 September 2009, Ms Briggs sent various emails to Mr Block (copying most of them to Mr Anderson and Mr Lord) confirming that the funds from the drawdown notice issued that day would exclusively be used for Double Bay and providing a breakdown.

420. [451]

     On 21 September 2009 at 11.03am, Mr Dedes emailed Mr Burridge from Norton Gledhill about the proposed drawdown. By return email that day at 11.48am on 21 September 2009, (copied to Mr Watson of Military Super) Mr Burridge advised that the proposed use of the drawdown was “clearly” not “consistent with Investec’s security position and what PPB have been told by Investec” (Ex M at 7218).

421. [452]

     On 21 September 2009 at 12.07pm, Mr Block sent an email to the asset consultants in relation to a telephone meeting proposed for 23 September to address: media strategy; the 21 September drawdown notice; Investec’s response to the PPB offer; and the proposed sale of Wylde Street.

422. [453]

     On 21 September 2009, Mr Aaron So (of St George) sent an email to Mr Marsden (of Ashington) noting that Ashington Management’s and the Cross Restaurant Pty Ltd’s accounts were overdrawn.

423. [454]

     On 21 September 2009 at 3.57pm, Ms Garrett forwarded to Mr Carolan a draft term sheet for the Stonington Capital Raising. The draft term sheet proposed a six-month term and a cash coupon of 20% per annum. Ms Garrett noted in her email to Mr Carolan that “[w]e need a mandate to cover this (4%, ideally not exclusive as I would like to chase Wessex and others as well) plus a formulated termsheet by noon tomorrow”. Ms Garrett stated that the “key message is that this is in effect a “money for jam” investment we have been put into a tight spot by Investec but the project itself is performing well”. Ms Garrett said that if it was not performing well then Westpac would not have offered to provide construction finance; and that the best comfort that the short term mezzanine provider gets that their money is safe is that not only is Westpac staying in but that it is “prepared to pony up a shitload of construction finance and they would not be continuing negotiations if they did not think we could complete on getting Asian investor to take on half the project”. The email said that Ashington had undertaken to repay the mezzanine facility before the construction finance arrangement was concluded with Westpac; and that “it is a great deal”.

424. [455]

     On 21 September 2009, at 4.09pm, Ms Garrett emailed Mr Carolan a project overview document for the Stonington Project.

425. [456]

     On the evening of 21 September 2009, there was a “three-way conference call” between Garrett and the “Patersons’ team” relating to the proposed mandate.

426. [457]

     Ms Garrett summarised the nature of this call, and some questions that arose out of that call, in an email to Mr Renauf sent at 9.25pm from her Gmail account (subject: “Stonington queries”) (copied to her Ashington email account). Ms Garrett there said that she had just been chatting to the Patersons group, who had made various information requests and had noted that they “think a four-week timeframe is required” for the capital raising. The email: queried why the Investec mezzanine facility had run out if the project was on schedule and doing so well; stated that they needed to set out the use of funds in a term sheet, noting that they did not want to say that the money is required to pay creditors or the existing vendor as this looked terrible; stated that this needed to be discussed with Mr Minahan, Mr Anderson and Mr Steel, and that they “cannot misdeploy funds again”; and stated that the term sheet should probably note repayment of Investec and working capital for the third stage of the project. Ms Garrett stated “let me know if you think we should send this to [Craig Minahan] and [Craig Anderson] (we probably should?)”.

427. [458]

     Mr Renauf’s response to the above was that these were fair questions, but some seemed to be “overkill” from a delivery issue and the process moving forward; and that he would commence working through some of the answers.

428. [459]

     On 22 September 2009, Mr Block emailed the superannuation fund investors and asset consultants with further details regarding the 21 September 2009 capital call. PPB advised that, while there was a commercial case to meet the call, there was also a concern that any funds contributed would be directed to Investec given their its security position.

429. [460]

     On 22 September 2009 at 11.35am, Mr Shorrocks sent an email to Mr Minahan and Mr Renauf, copied to Ms Watts (of Ashington) and Mr Carolan, attaching a draft mandate. The email stated (Ex M at 7274):

430. [461]

     The draft of the mandate attached to that email identified “Ashington Property Group” as the client (or “Company”) and stated that Patersons was “keen to assist the Company to meeting its objectives through a successful capital raising” of $10-15 million “in project funding via a Short-term Mezzanine Finance Facility” where the funds would be “applied to restructure existing debt facilities currently in place for the Stonington development project”. The indicative structure of the transaction involved a borrowing of $10-$15 million for a six-month period with a 30% per annum coupon payable at the end of the term.

431. [462]

     In this version of the draft there were three stated “conditions to the Mandate”, namely that: the findings and outcomes of Patersons’ own due diligence investigations are satisfactory to Patersons; the “Company” finalises the offer pricing and timing parameters of the Mezzanine Facility to Patersons’ satisfaction; and final approval by Patersons’ “New Issues Committee”.

432. [463]

     The indicative timetable contained in the draft mandate provided for a week of marketing, a week for due diligence and a further week for financial close. (The plaintiff points out that Mr Shorrocks accepted in cross-examination that this statement reflected his honest opinion at the time that the type of timetable anticipated was achievable – T 753.)

433. [464]

     On 22 September 2009, at 11.47am (in the context of an email communication between Ms Garrett and Mr Carolan seemingly about difficulties with her joining Ashington), Mr Carolan confirmed that the “[m]andate has been sent to Craig, Sam & Julie” to which Ms Garrett replied at 12.15pm, “[t]hanks very much for the mandate. Hopefully we can at least get that done with me working in the background”. (Pausing here, this appears to indicate that Ms Garrett was well aware that such involvement was or could be a breach of her gardening leave obligations to Valad.)

434. [465]

     At 2.25pm on 22 September 2009, Mr Minahan sent an email to Mr Anderson and Ms Briggs, copied to Mr Renauf, attaching a copy of the 11.35am email and asking Ms Briggs to review it, suggesting that comments from Mr Minahan, Mr Renauf and Mr Anderson be combined and consolidated on the proposed mandate.

435. [466]

     Meanwhile at 2.05pm, Mr Carolan had sent an email to Ms Watts attaching a draft term sheet and asking her to print and provide a copy to Ms Garrett, saying that it needed some further work. At 4.59pm that day, Mr Carolan sent Ms Garrett a copy of that email.

436. [467]

     At 6.04pm on 22 September 2009, Ms Briggs sent an email to Mr Anderson with her comments in relation to the draft Patersons Mandate, including that the contracting entity ought to be Ashington Capital as trustee for ADF2:

437. [468]

     In response, Ms Garrett, from her Gmail account emailed Ms Briggs (copied to Mr Minahan, Mr Anderson, herself at Ashington and Mr Renauf) at 6.21pm on 22 September, stating that she would be making a large number of changes to the mandate that night to align it to the Investec proposal and would need Ms Briggs to look at those the following morning. Commenting on the matters raised by Ms Briggs, Ms Garrett said:

438. [469]

     The plaintiff says that, in context, this was a reference to PPB pausing the sale process for Stonington to allow the capital raising to proceed, and Investec also allowing time for this to occur, as the plaintiff says is clear from a draft proposal put to Investec the following day.

439. [470]

     On 22 September 2009, Investec wrote to Ashington Capital as trustee for the Wylde Street Trust, advising that Investec had no intention to grant any further extensions to the Investec facility dated 25 February 2009 and that the indicative payout as at 31 October 2009 would be $10.844 million (Ex M at 7301).

440. [471]

     On 23 September 2009, Mr Burridge of Norton Gledhill wrote to Mr Anderson asking how Ashington Capital could ensure that any payments made pursuant to the 21 September 2009 capital call would be used exclusively for the Double Bay Project. Mr Burridge emailed a copy of that letter to the superannuation fund investors and PPB.

441. [472]

     On the morning of 23 September 2009, Ms Garrett and Mr Carolan worked together on a draft “Proposal – Stonington Mezzanine Finance Facility”, intended to be sent on Ashington letterhead, setting out the terms on which Ashington would seek time from Investec to find a replacement mezzanine funder (Investec Proposal).

442. [473]

     In particular, at 7.22am on 23 September 2009, Ms Garrett emailed Mr Carolan a draft of the term sheet proposed to be put on “Ashington Letterhead”. At 9.21am that day, Ms Garrett sent an email to Mr Renauf, Mr Minahan, Mr Anderson and Ms Briggs, copied to Ms Watts, attaching the updated Investec proposal, and requesting that everyone review it and let her know any comments. Ms Garrett also sent a copy of the proposal to Mr Carolan.

443. [474]

     The draft proposal was described as:

444. [475]

     The draft proposal included, under the heading “timetable”:

445. [476]

     Patersons points out that the proposed six-week timetable was at a time when neither Patersons nor Ms Garrett had any real appreciation of the magnitude of the financial and investor problems confronting ADF and ADF2.

446. [477]

     The document stated that:

447. [478]

     Relevantly, the draft proposal stated that the six-week timetable commenced once two conditions precedent had been satisfied, namely “[r]eceipt of Investec’s written approval of the Proposal” and “PPB’s mandate with respect to the Stonington asset is terminated”.

448. [479]

     From 12.18pm to 1.11pm on 23 September 2009, Mr Carolan sent a succession of emails to Mr Shorrocks, Mr Minahan and Mr Anderson with revised versions of the Patersons Mandate for review and approval.

449. [480]

     The revisions included the following.

450. [481]

     First, the client or “Company” was changed from “Ashington Property Group” to “Ashington Capital Limited as trustee for Ashington Development Fund No. 2”. This reflects Ms Briggs’ feedback on the draft. As noted in correspondence above, Ms Garrett stated that the earlier draft referred to the “Ashington Property Group” as a placeholder because she did not know at that time who the contracting entity was.

451. [482]

     Second, two additional “conditions to the mandate” were added, namely that Ashington receive written approval from Investec for the Mezzanine Facility to replace their existing debt facility (cl 4(a)) and Ashington “resume full control of the sell-down process underway for the Stonington project”, including that the PPB mandate is concluded (cl 4(b)). Mr Shorrocks did not recall having any input into these conditions precedent but said that it was quite possible that Mr Carolan added these two conditions to the mandate at that time (T 754). Mr Shorrocks considered the two conditions were to be satisfied once Patersons had successfully raised capital under the mandate (see T 754-760). Patersons says that these additions make sense in the context of the “Investec Proposal” which Ms Garrett had circulated that morning (see above).

452. [483]

     A further iteration of the mandate was emailed to Mr Minahan and Mr Anderson (copied to Mr Shorrocks, Ms Watts and Mr Renauf) at 12.54pm on 23 September 2009 and then the “absolute final version” was emailed to those persons at 1.11pm. Mr Minahan replied to that email at 1.15pm, stating “will execute and send back”.

453. [484]

     Mr Anderson’s evidence is that on 23 September 2009 he signed a version of the Patersons Mandate received at 1.17pm (seemingly, the last of the three versions sent that day) but cannot locate a signed copy of it. While there is no final copy of the signed Patersons Mandate in evidence, there is no dispute between the plaintiff and Patersons that the version of the Patersons Mandate attached to Mr Carolan’s email of 1.11pm was the version that Mr Anderson gave evidence he signed on or about 23 September 2009. Ms Briggs sent Mr Anderson a text message at 2.29pm that day stating “[j]ust delivered the pattersons [sic] mandate” and Mr Carolan sent an email to Mr Minahan at 3.03pm, which stated “signed acceptance received”.

454. [485]

     After entry into the Patersons Mandate, Mr Anderson says he had only infrequent communications with Mr Shorrocks in relation to the fundraising activities being undertaken by Patersons, otherwise leaving it to Ms Garrett to engage with Patersons and to keep him updated (see his 19 December 2017 affidavit at [252]-[253]).

455. [486]

     Under the mandate entered into on 23 September 2009 by Ashington Capital and Patersons (the Patersons Mandate), Patersons was engaged as “Lead Manager” to raise $11-15 million in mezzanine finance to restructure the existing debt facilities for the Stonington Property.

456. [487]

     In addition to Mr Shorrocks, the Patersons personnel involved in the Stonington Capital Raising were Mr Carolan (Associate Director – Corporate Finance) and Mr Doherty (Director – Institutional Dealing). Mr Carolan was the member of Patersons’ corporate finance team with conduct of the transaction. Mr Carolan reported directly to Mr Shorrocks. He was then married to Ms Garrett. Mr Doherty was based in Melbourne and had relationships with Patersons’ institutional clients, who were potential investors for capital raisings undertaken by the corporate finance team.

457. [488]

     Clause 1 of the Patersons Mandate provided that:

458. [489]

     Clauses 2.1 and 2.2 set out an indicative structure and timetable proposed for the Mezzanine Facility.

459. [490]

     Clause 3 (Good Faith Term) provided that:

460. [491]

     Clause 3.1 provided that in its role as Lead Manager, “Patersons’ tasks and responsibilities will be to provide the [Ashington Capital] with all necessary assistance in arranging the Mezzanine Facility as is customary and appropriate in capital raisings of this nature”. The clause then went on to set out what Patersons would do, as required or as necessary.

461. [492]

     Clause 3.1(b) provided for Patersons to familiarise itself to the extent deemed appropriate and necessary with the Ashington Capital’s business, operations, properties, financial condition and prospects, it being understood that Patersons should, during the course of such familiarisation, “rely entirely on publicly available information and any other information supplied by [Ashington Capital] and its advisers without independent investigation or verification”.

462. [493]

     Clause 3.1(e) provided that Patersons had the exclusive and unfettered right (but not with any obligation) to offer any and all of the Mezzanine Facility to any investor at its sole and absolute discretion/direction, save that Patersons would only seek commitments from and make offers to investors whom it reasonably believed were institutional or sophisticated investors. (The plaintiff says that this provision for absolute discretion made Ashington Capital vulnerable to and dependent upon Patersons in respect of the Stonington Capital Raising).

463. [494]

     Clause 3.1(f) provided for Patersons generally to manage the Mezzanine Facility, allocations and facilitate settlement.

464. [495]

     Clause 4 set out the “conditions to the mandate” and provided that Patersons’ participation and assistance as Lead Manager for the Mezzanine Facility was subject to certain conditions and that all of those conditions had to be satisfied, in Patersons’ sole and absolute opinion (or subsequent waiver by Patersons), before Patersons proceeded on the terms outlined in the Patersons Mandate (Conditions Precedent). Those conditions included those which were canvassed in the “Investec Proposal” document referred to above, namely: Ashington Capital as trustee of ADF2 receiving written approval from Investec for the Mezzanine Facility to replace the Investec facility; and Ashington Capital as trustee of ADF2 resuming full control of the sell-down process underway in respect of the assets the subject of the Stonington Trust including by concluding the PPB Mandate.

465. [496]

     Clause 5 provided for Patersons’ fees and was to the effect that, other than reimbursement for out-of-pocket expenses directly related to the Patersons Mandate, Patersons’ fees were to be calculated as a percentage of the gross amount raised from all sources for the Mezzanine Facility.

466. [497]

     Clause 6.4 dealt with confidentiality and provided (Patersons Confidentiality Term):

467. [498]

     Clause 6.5 (which the plaintiff says made Ashington Capital vulnerable to the misuse of its information by Patersons) concerned access to information (Patersons Access to Information Term):

468. [499]

     Clause 7.2 dealt with Conflicts of Interest and provided (the plaintiff says consistently with the fiduciary nature of Patersons’ obligations):

469. [500]

     Clause 7.3 (which dealt with termination) provided, inter alia:

470. [501]

     Clause 9 relevantly provided that the appointment of Patersons as Lead Manager would take effect upon receipt of the signed “Acceptance of Mandate” which was attached to the Patersons Mandate.

471. [502]

     Shortly after entry into the Patersons Mandate, Patersons began approaching potential investors and distributing a marketing term sheet setting out the key terms of the proposed Stonington Capital Raising (see below). Mr Anderson’s evidence is that he was provided with feedback that investor response to the proposal was strong.

472. [503]

     On 23 September 2009, Colliers issued a valuation of Wylde Street with an “as is” market value of the land of $19 million exclusive of GST and an “as if complete” market value of $61.27 million exclusive of GST (Ex M at 7378ff).

473. [504]

     During the course of the afternoon of 23 September 2009, there were communications between Mr Anderson and Mr de Rooy as to the proposal to pay out the Investec Stonington Facility. Mr de Rooy’s response was that, until Mr Anderson was able to satisfy him that Westpac was agreeable to the Stonington Property being taken off the market, Mr de Rooy would not be able to discuss the proposal with “Credit”. Those email communications were forwarded to Ms Garrett later that afternoon. (The plaintiff says that at around this time it appears that Investec was developing its own forbearance proposal but that there is no evidence that this was ever provided to Ashington.)

474. [505]

     On 24 September 2009, at 6.11am, Ms Garrett sent an email to Mr Renauf saying that Mr de Rooy wanted a meeting that day “to make modifications to PSL mandate and proposal”. (The plaintiff refers to email exchanges on 24 September 2009 between Ms Garrett and Mr Renauf and between Ms Garrett, Mr Renauf and Mr Steel, suggesting that Investec had expressed a potential difficulty with putting a pause on the sale process due to concerns about Westpac’s position as senior lender but that by 27 September 2009 Ms Garrett had allayed those concerns and Mr de Rooy had expressed a willingness to be involved in meetings with superannuation fund investors.)

475. [506]

     On 24 September 2009 at 9.47 am, Mr Carolan sent an email to Ms Garrett at her Gmail address attaching a term sheet to be sent to Patersons clients for the Stonington Capital Raising (Patersons Stonington Term Sheet).

476. [507]

     The key terms identified on that term sheet were as follows:

477. [508]

     The key features were thus: a minimum amount of $11 million with the right to accept up to $15 million, with a minimum $2 million investment; a six-month term; a 30% per annum coupon payable at the end of the term; a repayment waterfall involving $23 million to Westpac as senior lender, $11 million to the proposed incoming mezzanine investors, and $22 million in equity; and an expected sale price of $55 million if the sell-down process was unsuccessful, but with a conservative independent valuation of $43 million having been obtained (at which price, the plaintiff says that the senior and mezzanine debt providers would not suffer any loss).

478. [509]

     On 24 September 2009 at 12.46am, Mr Carolan emailed the Patersons Stonington Term Sheet to Mr Doherty and Mr Trevor Pike (both Directors of Institutional Dealing at Patersons) with a view to them providing it to potential investors within there networks, noting there location in Melbourne where the Stonington Project was based. After summarising the terms, Mr Carolan stated, “in worst case situation you get your cash and coupon protected with only the existing equity holders losing their cash”. Mr Carolan requested that they not commence until “we give the ok”. The email included:

479. [510]

     In furtherance of the Patersons Mandate, the Patersons Stonington Term Sheet was thereafter distributed by each of Mr Carolan, Mr Doherty and Mr Shorrocks to several potential high-net-worth investors over the period 24 September 2009 to around 2 October 2009 to gauge their interest in making an investment in the proposed mezzanine facility. So, for example, Mr Carolan sent an email to a potential investor (Mr Campbell Smith) attaching a copy of the Patersons Stonington Term Sheet, saying that the offer was very attractive and that, with a fire sale value of $43 million, the cash and coupon of the investor was protected in a wind up situation.

480. [511]

     On 24 September 2009 at 2.40pm Mr Block sent an email to Mr Anderson with a copy to Mr Lord seeking information in relation to Wylde Street and Double Bay, and proposing “measurable milestones” for the sale of Wylde Street.

481. [512]

     On 25 September 2009 at 10.37am, Mr Anderson sent an email to Mr Lord and Mr Block (with a copy to various asset consultants) addressing issues raised by PPB in relation to the current $3 million draw for the Double Bay Project. Mr Anderson stated that the funds could be directed to the Double Bay SPV (special purpose vehicle) bank account to ensure the proceeds are not delivered to Investec and that while Investec could be entitled to the funds if they were paint into the ADF2 bank account, without Investec having taken further steps to control the bank account, the money would only be the subject of a floating charge. As to the “true equity position” of Double Bay, Mr Anderson said that could only be confirmed in the coming two to eight-week period, as Ashington awaited the development planning approval and the completion of the Colliers valuation.

482. [513]

     At 10.45 am on 25 September 2009, Mr Block sent an email to Mr Anderson, copied to Mr Lord and asset consultants, requesting a copy of any legal advice received by Ashington Capital regarding the Investec fixed charge.

483. [514]

     On 25 September 2009 at 2.20pm, Ms Briggs sent an email to Mr Block copied to Mr Lord, Mr Anderson and Mr Minahan (subject “various matters/milestones”) in relation to milestones, the sale of Wylde Street and the appointment of Colliers to value both Double Bay and Wylde Street. Mr Minahan forwarded Ms Briggs’ email at 2.42pm to Mr Anderson, Ms Briggs, Ms Garrett, Mr Renauf and Mr Steel, saying that “this should have been covered off this morning with Sam and Nicki” and that Ms Garrett was the “point of contact going forward” and that “ALL investor/PPB communication is to be vetted by her and approved by her. Sam Renauf must be copied in on all correspondence”. (The plaintiff says that putting Ms Garrett and Mr Renauf in charge of communications with PPB and the superannuation fund investors was consistent with the strategy whereby superannuation fund investors had been advised in July 2009 of their appointment as part of a new compliance and communication regime.)

484. [515]

     Ms Briggs acknowledged this instruction in an email sent to Ms Garrett (at her Gmail address) on 25 September 2009 at 3.23pm in which she stated “CA [Mr Anderson] has told me that you are the point of contact for all PPB/investor correspondence” and that, therefore, she would not respond to PPB’s request for a copy of Mallesons’ advice as to the Investec fixed charge until they had discussed it.

485. [516]

     In cross-examination, Mr Anderson confirmed that he had given this instruction as (T 524):

486. [517]

     The NSW Planning Assessment Commission completed a review dated 25 September 2009, undertaken at the request of the Minister for Planning, which concluded that the Department of Planning’s recommendation to refuse development approval for Double Bay was reasonable. It is unclear who was given access to this review on that date.

487. [518]

     On Saturday, 26 September 2009, at 11.44am, Mr Steel sent an email to Mr Anderson copied to Mr Minahan and to Ms Garrett and Mr Renauf, referring to a discussion about the draw request and the difficulties arising from the crystallisation of Investec’s fixed and floating charge.

488. [519]

     Meanwhile, at 1.44pm, Mr Steel sent an email to Ms Garrett, stating:

489. [520]

     On Sunday 27 September 2009 at 5.09pm, Ms Garrett, from her Gmail account, sent an email to Mr de Rooy, copied to Mr Renauf, referring to a brief discussion on the Friday and seeking to confirm with him that: Patersons had agreed to amend their mandate so that existing equity investors (not Investec) must agree to a 14 day stand-still of the PPB Mandate; and that the Investec Proposal had been amended so that existing equity investors (not Investec) must agree to conclude the PPB Mandate as to the sale of the Stonington Project when the replacement facility was in place. Ms Garrett said that she was meeting with potential investors next week and that there had been a positive preliminary response. Mr de Rooy responded to that email and said he awaited Ms Garrett’s advice on whether she required his involvement in any investor meetings. Ms Garrett later responded to this on 29 September 2009, asking Mr de Rooy to be available, if possible, for a phone call during the investor meetings that had been arranged.

490. [521]

     On 28 September 2009, Ms Garrett prepared a draft proposal document to be sent to the superannuation fund investors. The plaintiff says that this document emphasised the importance placed on Ms Garrett and Mr Renauf in seeking to secure a successful outcome for the Stonington Capital Raising.

491. [522]

     The draft proposal document (Ex M at 7631ff; see a further version of this proposal in Ex M at 7511ff) included statements that: (i) the proposal “has been prepared by and will be managed by individuals recently recruited to Ashington, Nicki Garrett and Sam Renauf”; (ii) “Nicki/Sam have discussed the Stonington Proposal with Investec (meetings with Michael de Rooy) and Michael has advised that he is supportive of the Proposal as it provides Investec with a ‘quick and clean’ means of repayment”; and (iii) “Patersons has already undertaken preliminary discussions with a number of its clients and has a positive response to the Replacement Facility. Importantly, Patersons is primarily targeting individuals with whom Nicki/Sam have a prior relationship”.

492. [523]

     The draft proposal noted that Patersons had agreed a six-week completion timetable but expected to implement a replacement facility ahead of schedule given “the positive discussions already undertaken with prospective investors and the fact that the majority of those being targeted have a prior relationship with Nicki/Sam”.

493. [524]

     The proposal stated (and the plaintiff emphasises this), that “[a] component of the pitch being made to the New Mezzanine Investors is that Nicki/Sam will manage the Stonington sell-down process over the coming six months and that this underpins the expected repayment of the Replacement Facility”.

494. [525]

     On 28 September 2009, the Minister for Planning formally refused the development application in respect of the Double Bay Property (Project X) (Ex M at 7656; Ex M at 7847ff). Ashington began considering its options in response, including an appeal of the decision, a “fall back option” of seeking development consent to convert the existing building into strata apartments, and re-opening the hotel in the existing building. Acorn points out that this was obviously seen as bad news by the unitholders. Mr Tieu sent an email on 30 September 2009 at 5.32pm to Mr McCusker and others at LUCRF saying, “[m]ore bad news for ADF2”. Mr Anderson described the aftermath of it as “last week was the most disappointing in our nine-year history” in an email on 8 October 2009 at 6.33pm to all Ashington staff.

495. [526]

     Mr Steel’s reaction to the rejection of the Double Bay proposal (recorded in an email he sent to his wife on 29 September 2009 at 3.37pm) was that this had a serious impact on Ashington.

496. [527]

     On 28 September 2009 at 8.44am, Mr Anderson sent an email to Mr Minahan, Ms Briggs, Ms Garrett and Mr Renauf confirming that “all correspondence to investors and related parties will be generated by [Garrett] only”.

497. [528]

     Meanwhile, on 28 September 2009, Ms Garrett sent an email to Ms Chan (Sunsuper) and Mr Flett (Arcadia, adviser to LUCRF), copied to Mr Renauf, confirming a meeting on 29 September 2009 at 4.30pm at Ashington’s office and noting that “we are briefing PPB in advance of this meeting. I have also had several discussions with Michael de Rooy with regard to our proposal and he is supportive as it provides Investec with the quickest and cleanest means of repayment”.

498. [529]

     On 29 September 2009, Ms Garrett from her Gmail account sent an email to Mr Renauf, copied to her office account, with the subject “Melbourne meetings – to discuss with Sam”. The email contained a “to do” list that noted that she had arranged meetings with HESTA and Frontier (advisors to HESTA) for 2pm, and needed to arrange times with LUCRF and Mr Ray King (Sovereign Investment Research, advisors to Sunsuper), who would ideally join or dial in to the 2pm meeting.

499. [530]

     On 29 September 2009, at around 12.30pm, Ms Garrett emailed Mr David McCusker of LUCRF stating “[a]s per my voicemail, I have recently joined Ashington to head up their funds management division”, and sought to arrange a meeting with him in Melbourne.

500. [531]

     On 29 September 2009, at 6.55am, Ms Garrett emailed Mr de Rooy (copying Mr Renauf) noting that Ms Garrett and Mr Renauf would meet with the bulk of the Sydney-based investors or asset consultants that day at 4.30pm, and with the Melbourne-based investors the following day at 2pm. Ms Garrett noted that she had been unable to contact Mr Peter Dedes, but that she was confident that he would support the proposal. Ms Garrett also noted that she and Mr Renauf had had two positive meetings with Patersons’ clients the previous day and remained hopeful that they would have both parties signed up shortly. (This is the first of the emails to which the plaintiff points as evidencing the meetings that the plaintiff says were the genesis of the Garrett plan.)

501. [532]

     Ms Garrett sent Mr Carolan an updated version of the Patersons Mandate at 12.45pm on 29 September 2009 with changes in mark-up, saying “I am trying to be sensitive to Equity Investors who are a pain in the ass and I need to get them over the line”.

502. [533]

     At 3.47pm, Mr Carolan responded attaching an updated Patersons Mandate (Updated Patersons Mandate). The Updated Patersons Mandate included, as a condition to the mandate, further condition (c) to section four which stated that “[i]f required by incoming investors, Nicola Garrett and Sam Renauf are named as key persons with respect to the Stonington project”. (The plaintiff says that this communication to Mr Carolan is a reflection of Ms Garrett’s understanding that it might be critical to attracting new investors at this point in time, and obtaining existing investors’ support for the capital raising, that Patersons be able to present Ms Garrett and Mr Renauf as the people at Ashington responsible for running the Stonington Project.)

503. [534]

     Patersons notes that Mr Shorrocks was not shown the Updated Patersons Mandate and did not provide his authority for any change to the Patersons Mandate. (Patersons also points out that the plaintiff has now abandoned all allegations specifically in respect of the Updated Patersons Mandate.)

504. [535]

     It appears that in the afternoon of 29 September 2009, Ms Garrett and Mr Renauf met with superannuation fund investors in Sydney and put forward the proposal of securing new mezzanine finance for Stonington.

505. [536]

     The following morning (30 September 2009), Ms Garrett met with PPB and one or more of the superannuation fund investors. Patersons notes that there is no evidence of what was discussed at this meeting but says that it may be inferred (from the transcript of Ms Garrett’s liquidator’s examination (Ex A), as well as the notes of one of the existing investors (Ex M at 7932-7933)), that the superannuation fund investors communicated to Ms Garrett and PPB that they were open to exploring all options with PPB, including removing Ashington Capital and Ashington Management as trustee and development manager respectively from ADF and ADF2 at this meeting.

506. [537]

     A document titled “Ashington insolvency update and write-down strategy” annexed to the LUCRF property portfolio review for the quarter ended 30 June 2009 annexed a note by Mr McCusker and/or Mr Tieu of LUCRF (the accuracy of which Mr McCusker said he had no reason to doubt – T 1063) that made reference to the 29 September 2009 meeting. That note records, after noting the rejection of planning approval for Double Bay, that:

507. [538]

     The other contemporaneous evidence of what occurred at the meetings with superannuation investors on or around 29 and 30 September 2009 is a handwritten note by Mr Hastings of HESTA that was produced in answer to a subpoena. While undated, it appears from its contents (including its reference to a meeting with Ms Garrett and Mr Renauf, the rejection of Double Bay, and its consistency with the typed report above) that it relates to the meeting held on 30 September 2009. It relevantly states (Ex M at 7621-7622):

508. [539]

     The plaintiff says that the reference to Hamton becoming the manager of the Stonington Project and the associated comment about the change of manager have not been explained by the superannuation fund witnesses, nor by any of the other parties to those meetings. The plaintiff says that it is impossible, from the limited documentary evidence, to understand to what it refers save that it appears that at some stage Hamton may have been willing to resume the property and the project on terms that are not disclosed, but which would have involved the superannuation funds retaining 50% of the project. It is noted that that course does not seem to have been advanced.

509. [540]

     Meanwhile, on 30 September 2009 at 7.48am, Mr Carolan sent an email to Mr Pike and Mr Doherty, attaching the 24 September 2009 Patersons Stonington Term Sheet and stating (Ex M at 7699):

510. [541]

     “Thorney” was a reference to one of Mr Doherty’s institutional clients. Mr Tim Hannon was a fund manager at Goldman Sachs, who had recently established a boutique funds management firm called Derwent Capital. He was a client of Mr Doherty and had previously invested through Mr Carolan and Ms Garrett (when she was employed by Patersons).

511. [542]

     Mr Carolan sent a private email to Ms Garrett at 9.27am, reporting feedback from Mr Pike that the rate looked “too good to be true” and that “there must be some risk in it”, requesting that Ms Garret meet with them in Melbourne the next day.

512. [543]

     On 30 September 2009 at 10.44am, Mr Doherty sent an email to Mr Routley (then Head of Private Markets at Acorn, a boutique investment manager) copied to Paul Palumbo, with the heading “Investment Opportunity – Mezzanine Finance Facility”, attaching the 24 September 2009 Patersons Stonington Term Sheet and stating, “[w]hile this appears to be ‘too good to be true’, this is a solid project with an opportunity representing a low risk, high return financing arrangement for the prospective investor”.

513. [544]

     Mr Routley replied to that email on the same day at 11.01am advising that he had “had a brief look. Unfortunately we can’t do pure debt, needs to have some equity convertibility”.

514. [545]

     On 30 September 2009 at 11.22am, Mr Doherty then forwarded this exchange with Mr Routley by email to Mr Carolan, saying:

515. [546]

     In respect of Mr Doherty’s reference to “Thorney having a look”, Mr Doherty’s affidavit affirmed 10 September 2018 at [24] records that he cannot recall how he first made contact with Thorney in relation to this transaction, yet based on his general practice, he expected he made contact by telephone.

516. [547]

     Mr Carolan replied to Mr Doherty’s email at 11.24am on 30 September 2009, asking whether Mr Routley would “look at converting equity into an unlisted property fund? If so we can look at recutting the deal as a fall back option”. (Mr Doherty understood Mr Carolan’s email to be a reference to whether Acorn might be able to invest if there was a form of conversion of debt into equity – Mr Doherty’s 10 September 2018 affidavit at [28].)

517. [548]

     At 11.34am, Mr Doherty sent an email to Mr Routley asking him, “[i]f this converted into equity into an unlisted property fund would that be of interest?”, to which Mr Routley replied, “[i]t would certainly allow us to do the deal but we would still be a low probability to complete” noting a preference to invest in the manager. Mr Doherty forwarded this email to Mr Carolan at 11.48am on 30 September 2009 who in turn forwarded it to Ms Garrett at 11.51am on 30 September 2009. In his email to Ms Garrett, Mr Carolan stated:

518. [549]

     Later that day, Mr Doherty and Mr Carolan exchanged emails confirming a meeting with Thorney at 10.30am on Friday, 2 October 2009.

519. [550]

     Mr Anderson, Mr Steel, Mr Renauf and Ms Briggs were updated of this proposed meeting by Ms Garrett at 5.03pm on Wednesday 30 September 2009. In that email Ms Garrett said:

520. [551]

     Mr Steel replied to this email later than evening stating “Good Work Nicki!!” and asking if she got investor sentiment on the call to pay interest on Double Bay, to which Ms Garrett replied (to Mr Steel only) “I can get that from existing investors BUT they have asked me to sign 12 month commitment. Sorry, racing to Patersons as need to see Paul but will debrief tomorrow (we have lots to do). Please keep to yourself as I am not sure about committing just yet”. (Pausing here, this suggests: first, that Ms Garrett was not yet committed, or did not regard herself as committed, to Ashington; second, that Ms Garrett was not hiding from at least Mr Steel that she might not be “committed”; third, Ms Garrett was presenting the request for a 12-month commitment as coming from the existing superannuation fund investors.)

521. [552]

     Patersons says that the evidence is sparse and inconclusive as to whether Ms Garrett in fact met with Mr Doherty on the afternoon of 30 September 2009 (as the line “need to see Paul” in the above email suggests). When examined in 2013 by the liquidator’s representative, Mr Doherty did not recall whether he met with Ms Garrett before his receipt of the 2 October 2009 email (see below) from her.

522. [553]

     Shortly before the above response to Mr Steel, Ms Garrett had sent an email to Mr Renauf with the text “Doherty and Marts are on fire … Paul thinks he will get more meetings as well”.

523. [554]

     On 30 September 2009 at 5.31pm, Mr Block sent an email to Mr Renauf (copied to Mr Lord) which referred to a meeting between them held that morning, said that there were a number of issues they wanted to discuss with Mr Renauf and Ms Garrett as soon as possible (including the unitholders’ reaction to Stonington and the strategy surrounding Double Bay). Mr Block suggested that they meet the following day and asked for a number of items, including the Patersons Stonington Term Sheet and Patersons Mandate. (This is the second of the emails to which the plaintiff points as evidence of the meetings the plaintiff said led to the genesis of the Garrett plan.)

524. [555]

     As to the meetings referred to in Garrett’s 30 September 2009 email, the meeting with Thorney was rescheduled to Monday 5 October 2009. The meeting with Acorn also appears to have been changed to 3.30pm on 5 October 2009.

525. [556]

     On 30 September 2009 at 11.15am, Mr Anderson sent an email to Mr de Rooy saying that interest on Stonington would be paid that morning.

526. [557]

     That evening, Mr de Rooy emailed Ms Garrett asking if there was any update from her end as to the Stonington Capital Raising, noting that he received a call from Mr Block of PPB to discuss the concept of Investec providing comfort to investors that they were comfortable for the asset sale process to be varied to allow Ashington to raise funds via the proposal as discussed. The plaintiff thus says that, while Mr de Rooy had indicated to Mr Block that Investec’s formal position was to reserve its rights, he also expressed a willingness to take to his credit department a proposal from investors to allow a timeframe for Ashington to raise funds with a fallback sale process if the capital raising was unsuccessful.

527. [558]

     On 30 September 2009 at 5.52pm Mr Hastings (HESTA) sent an email to Mr Block (PPB) copied to Mr Lord and assets consultants saying that HESTA agreed to the “next steps” proposed by Ms Garrett and Mr Renauf to investors, on the basis that Investec entered into a letter of comfort arrangement.

528. [559]

     On 30 September 2009, Mr Anderson sent an email to Ms Garrett (both at her office and Gmail address) and Mr Renauf (copied to others at Ashington), advising that he had initial appeal process comments from Blakes in writing for potential use in the St George/NAB meeting and with investors. This was to show that it was still possible to get Department of Planning approval in “a reasonably short timeframe ie in the early months of the new year”. On the same day, Blake Dawson wrote to Ashington confirming instructions given in a meeting that afternoon that Ashington Management wished to lodge an appeal against the Minister for Planning’s rejection of the Double Bay development application.

529. [560]

     As at 30 September 2009, the MYOB records recorded payables due of: $939,690.27 for Project X Hotel Trust; $1.273 million for Stonington Trust; and $522,295.10 for Wylde Street Trust.

530. [561]

     On 30 September 2009, Savi Communications Pty Ltd (Savi Communications) filed a statement of claim against Ashington Capital claiming a debt of $54,199.01, which had been outstanding, in part, since March 2009 (Ex M at 7794ff).

531. [562]

     The superannuation fund investors did not meet the call for $3 million uncalled capital by 1 October 2009, leading Ashington Capital to default on the Project X Facilities.

532. [563]

     On 1 October 2009, Mr Steel sent an email to Mr Anderson, Mr Renauf and Ms Garrett (at both her Gmail and office accounts), copied to Ms Briggs, Mr Minahan and Mr Bailey, setting out matters that he thought the banks would raise at “tomorrow’s bankers meeting”.

533. [564]

     On 1 October 2009, LUCRF’s investment meeting was held; Mr McCusker presented a report recommending the write-down of LUCRF’s investments in ADF and ADF2.

534. [565]

     On 1 October 2009 at 8.32pm, Mr Alex Vynokur of Apex Capital Partners Pty Ltd (Apex Capital) sent an email to Ms Garrett and Mr Renauf with an indicative proposal in respect of Stonington, namely that Apex Capital with a co-investor, would provide fresh equity capital into Stonington and seek to renegotiate or repay the existing Investec Stonington Facility; indicating that Apex Capital wanted to take over the management of the Stonington development and that, upon recapitalision, own a substantial majority equity stake in Stonington. It sought a 14-day exclusivity period to complete initial due diligence. Mr Renauf forwarded Apex Capital’s email to Ms Garrett’s Gmail account that night.

535. [566]

     At 12.58pm on 2 October 2009, a person apparently associated with Alex Vynokur (simon@ewessex) emailed Mr Renauf as to the investment opportunity, noting a concern that the Stonington Project had an insufficient margin. At 2.59pm, Mr Vynokur sent an email to Ms Garrett and Mr Renauf, copied to “Simon” and Mr Jason Gellert, attaching a further letter dated 2 October 2009 titled “Indicative Non-Binding Proposal in relation to the Stonington Malvern Development” by Apex Capital and its co-investor. The key elements of the proposal were that the “Investor” would seek to refinance the existing mezzanine debt facilities with a new funding activity, potentially converting into equity; would provide fresh equity capital into the Stonington development; and would take over the management of the Stonington development, “bringing a strong capability in delivering residential property projects”. The letter sought a meeting at the first available opportunity and to obtain access to the necessary information to complete a transaction within the shortest possible timeframe.

536. [567]

     On 2 October 2009 at 7.25 am, in an email to Mr Renauf commenting on an indicative non-binding proposal in relation to Stonington that had been received the previous day from Mr Alex Vynokur of Apex Capital, Ms Garrett noted that while it was good to get a letter “if we want to execute on the plan we discussed with PPB then this offer does not work for us as it involves APEX taking over the management of the Stonington development” (Ex C).

537. [568]

     The plaintiff says that this 2 October 2009 email is a clear indication that Ms Garrett was willing to suppress offers to participate in the refinance of the Investec facility if it was inconsistent with the plan Ms Garrett and Mr Renauf had discussed with PPB. The email also noted that it was unlikely to be appealing to existing investors as would involve them having to undertake due diligence on a new delivery team (which the plaintiff says is hardly likely to have been a comment Ms Garrett would have made had the superannuation fund investors already indicated that they were open to new management).

538. [569]

     On 2 October 2009, at 7.32 am, in a “to-do” list copied to Mr Renauf, Ms Garrett included an entry for “NG [Ms Garrett] to take SR [Mr Renauf] through her thoughts on PPB suggested plan”.

539. [570]

     On 2 October 2009 at 12.15pm, Ms Garrett sent an email to Mr Carolan, as to how the transaction might be presented to potential investors. The email from Ms Garrett from her Ashington email address had the subject, “[w]hy is it so good”. It stated:

540. [571]

     Mr Carolan replied to this email at 12:15pm, stating “Perfect!” Ms Garrett then forwarded this email chain to her Gmail address at 3.33pm that day.

541. [572]

     Meanwhile, at 12.21pm on 2 October 2009, shortly after the above email, Mr Carolan send an email to Mr Stuart Foster (of Fostock), a potential investor, copied to Mr Shorrocks essentially repeating the text of Ms Garrett’s message and attaching the Patersons Stonington Term Sheet.

542. [573]

     On 2 October 2009, Mr Carolan sent to Mr Shorrocks a pro forma email to be sent to potential investors attaching a copy of the Patersons Stonington Term Sheet, and on the same day sent a copy of the term sheet with the email to Mr Chris Ryan copied to Mr Shorrocks.

543. [574]

     On 2 October 2009, at 12.48 pm, Ms Garrett sent an email to Mr Carolan:

544. [575]

     Mr Carolan subsequently emailed Ms Garrett advising that Mr Doherty’s contact with Acorn was Mr Routley, who managed the unlisted fund, and asking Ms Garrett to call Mr Doherty.

545. [576]

     The plaintiff says that it can be inferred that Ms Garrett then spoke with Mr Doherty, following which Ms Garrett sent Mr Doherty an email on 2 October 2009 at 3.45pm, copied to Mr Carolan, in which the plaintiff says that Ms Garrett set out in detail the “PPB suggested plan”:

546. [577]

     Mr Doherty gave evidence in his affidavit, and during the liquidator’s examination of him, that he did not recall having a discussion with Ms Garrett prior to receiving the 3.45pm 2 October 2009 email. However, when asked about this email and who Ms Garrett said would be the new manager, Mr Doherty responded “she said it might be her”. Mr Doherty also gave evidence during the liquidator’s examination that, following his receipt of the 3.45pm 2 October 2009 email, he booked “a meeting with Acorn explaining that – or just asking if I could get them in front of – asking if they would take a meeting to hear what Nicky had to say”. Mr Doherty did not recall if he was any more expansive when he booked this meeting.

547. [578]

     The plaintiff complains that, despite Patersons being mandated by Ashington, and Ms Garrett making plain to Mr Doherty that she was pursing an opportunity to replace Ashington (for whom she worked), Mr Doherty assisted her by arranging a crucial introductory meeting with Mr Routley for Monday 5 October 2009 “to advance the PPB and Garrett plan”.

548. [579]

     Pausing here, the above 3.45pm email is significant for a number of reasons; not least because there is nothing in the contemporaneous documents in evidence to suggest that the existing superannuation fund investors had formulated any such process at that stage (albeit that there had been some reference to the possible termination of the manager – and as to seeking advice on that issue). I return to this in due course. However, it is relevant here to note that there is a strong inference from the chronology of events that Ms Garrett was telling one thing to potential investors and another to the existing superannuation fund investors (and nothing about this to Mr Anderson). Weight is placed by the plaintiff on the reference here to the process being managed by PPB and [Ms Garrett] and Mr Renauf.

549. [580]

     Mr Doherty responded to Ms Garrett’s email copying Mr Carolan, to the effect that he had “locked in” Mr Routley from Acorn for 3.30pm Monday (i.e., 5 October 2009.

550. [581]

     On 2 October 2009, at 3.53 pm, Mr Carolan emailed Ms Garrett with the subject header “all looks good to me… you can trust Paul” (and no text in the body of that email).

551. [582]

     In the afternoon of 2 October 2009, Ms Garrett again met with PPB, as evidenced by an email discovered by Investec where Ms Garrett’s executive assistant passed a message on to Mr de Rooy that Ms Garrett’s meeting with PPB was running longer than expected. That evening, Ms Garrett forwarded to Mr Anderson and Mr Minahan an update that she had provided to Mr de Rooy, noting the proposal that had been received from Apex Capital but stating that Ms Garrett had deferred a response until after she had met with interested parties in Melbourne on Monday (5 October 2009). The plaintiff points out that, unbeknownst to Mr Minahan and Mr Anderson, those “interested parties” were not interested in the Stonington mezzanine proposal.

552. [583]

     Meanwhile, it seems that Mr Anderson was continuing to seek to identify potential investors and sent an email to Mr Renauf, copied to Ms Garrett in relation to persons at Sensata and Icon Constructions.

553. [584]

     On 2 October 2009 at 6.33pm, Mr Renauf sent an email to Mr Vynokur at Apex Capital and Ms Garrett at Ashington, copied to simon@wessex and Mr Gellert, in response to Apex Capital’s indicative proposal. Mr Renauf stated that there had been some difficulty getting a formal response but that their initial thoughts were to provide a non-exclusive period until a formal term sheet was signed.

554. [585]

     On 2 October 2009, NAB issued default notices to Ashington Capital as trustee of the Project X Hotel Trust, ADF and ADF2; and to Trust Company as custodian of the Project X Hotel Trust and Ashington Stamford; one default notice in respect of NAB’s position as senior note facility subscriber and the other as a mezzanine facility provider, relying on failure to pay amounts due on 30 September 2009. On 6 October 2009, St George also issued a default notice as senior note facility subscriber.

555. [586]

     On Saturday, 3 October 2009, there was a series of communications between Mr Steel and Ms Garrett (on their respective Gmail, not office, accounts), commencing with an email from Mr Steel at 10.21am. In that email, Mr Steel (seemingly writing communications and to be seen more widely within Ashington) writes:

556. [587]

     It also said that, having regard to what had happened in the past week, it was time to think about the “fee streams” for all of her efforts; that she was acting as a “representative of Ashington” and that Ashington’s ability to pay was a risk that was of concern to everyone and that “you are better to act in your own capacity (or as a representative of a New entity) whereby you are paid a fee from the fund stakeholders for the various workout strategies” (similar to a liquidator or receiver) and that “it is better (for you and your team) to have a direct mandate (for your recovery efforts) with Investors/financiers/PPB than with Ashington”.

557. [588]

     In the course of those email communications, Ms Garrett referred to “madly putting together the Stonington presentation for Monday’s meetings” and said she had been instructed by PPB in writing (a copy of which instruction does not appear to be in the evidence) that Mr Anderson was not to attend, which she said was “bloody awkward” as he was flying down. Mr Steel told Ms Garrett not to worry because Mr Anderson had three meetings set up independent of her meetings.

558. [589]

     At 5.03pm on 3 October 2009, Mr Steel sent an email to Ms Garrett’s Gmail address reattaching a debt schedule for ADF and ADF2, stating that:

559. [590]

     Pausing here, PPB says that it is immaterial whether Mr Steel’s allegations were true; what PPB says is significant is that they were made by the chief financial officer of the Ashington group and that they concerned possible dishonesty on the part of Mr Anderson, not merely in failing to disclose matters to investors, but also in altering the minutes of a meeting of the Board of Ashington Capital.

560. [591]

     At 5.32pm on 3 October 2009, Ms Garrett sent an email from her Gmail address to Mr Renauf, Mr Steel, Mr Anderson, (and others at Ashington), with the subject “Stonington Model – Weekend Review Required”. Ms Garrett commented that the model supported figures in the presentation she was providing to prospective investors on Monday and assumed replacement mezzanine finance of $15 million was received at the end of October, that would be replaced with $21 million of preferred equity in January 2010. Ms Garrett said that the incoming equity investors would get a priority return of capital and 100% of profit generating an equity IRR of greater than 35%, and the existing equity investors would receive 100% of their capital back. Mr Steel responded, noting that he had compared the Stonington Model, that assumed a stage 1 construction loan of $32 million, and a hypothetical indicative stage 1 loan calculated using Westpac’s formula that resulted in a loan of approximately $28 million.

561. [592]

     Mr Steel also emailed to Ms Garrett at her Ashington email address (at 1.25pm that day) information as to the amount of cash invested in each of Project X, Noosa and Stonington extracted from the 30 September 2009 ADF2 balance sheet.

562. [593]

     From 3 October 2009, Ms Garrett commenced preparing a Stonington PowerPoint presentation (Stonington PowerPoint). There are several versions of the presentation in evidence, mostly sent between Ms Garrett and Mr Carolan.

563. [594]

     The structure of the PowerPoint consisted of: Background/Introduction; Ashington Corporate Structure; Staged Investment Opportunity – Stonington Project: (i) Replacement Mezzanine Finance Facility; (ii) Preferred Equity (sell-down); Appendices: (i) Stonington Project Overview; (ii) Stonington Project Key Assumptions.

564. [595]

     Some versions of the PowerPoint included a section titled: ‘Go Forward’ Corporate Structure. That slide stated “NG [Ms Garrett] to insert”. No content was included on that slide in any of the versions in evidence.

565. [596]

     All versions of the presentation also included an introductory paragraph stating that:

566. [597]

     Acorn says that whilst the final version of this presentation is not precisely clear from the evidence, the plaintiff appears to have accepted in opening submissions that the presentation included the above content.

567. [598]

     Although it was not included in the structure, the versions of the PowerPoint included various iterations of a slide titled either “Project Management” or “Key Personnel Appointments”.

568. [599]

     In what appears to be the first version of the draft attached to an email Ms Garrett to herself at her Ashington address and to Mr Carolan at 5.45pm on 3 October 2009, that slide was headed “Project Management”. It stated that “Project Stonington will be managed by key personnel” and identified Mr Renauf (described as Head of Acquisitions and Development) as one such person in respect of “Real Estate Planning and Development” and Ms Garrett (described as Head of Funds Management) as another person under the banner of “Funds Management”. The footnote to Mr Renauf’s name stated that he had “signed an employment contract with Ashington Group but is currently on ‘gardening leave’ as per the terms of his employment arrangement with Valad. Commences post 1 July”. Similarly, with respect to Ms Garrett it was stated “Nicki has signed an employment contract with Ashington Group but is currently on ‘gardening leave’ as per the terms of her employment arrangement with Valad. Commences post 1 July”.

569. [600]

     By contrast, later versions of this slide no longer referred to an employment contract. The footnote for Mr Renauf recorded, “Sam was recruited 7 months ago but has been on extended “gardening leave” as per the terms of his employment arrangement with Valad”. The footnote for Ms Garrett was identical.

570. [601]

     Pausing here, the plaintiff points out that although there might be thought to be some inconsistency in the timing of emails in relation to the power point presentations over the weekend of 3 to 4 October 2009 (in that the email attaching the “Background slide” content appears to have been sent before Ms Garrett’s 4 October 2009 1.19pm email), it is common ground as between the plaintiff and Patersons (which produced the emails) that emails printed by Ms Joan Warren are timestamped either two or three hours earlier than the AEST time (Ms Warren being located in Western Australia) (with emails on or before 3 October 2009 being two hours behind, and emails on or after 4 October 2009 being three hours behind as daylight saving time commenced in NSW and Victoria on 4 October 2009).

571. [602]

     On 4 October 2009 at 2:19pm, Ms Garrett emailed Mr Carolan, the subject of which was “‘Go Forward’ Corporate Structure Slide”. The text of the email stated:

572. [603]

     The plaintiff seeks an inference to be drawn that that the presentation included the above content (based on a process undertaken with another slide whereby Ms Garrett emailed Mr Carolan the content for the slide in an email and it was included in a subsequent version of the PowerPoint). Further, the plaintiff says that the suggestion in the above slide that existing equity investors had unanimously supported the recommendation was untrue; and that in fact the plan was being driven by PPB (and was revealed to the superannuation fund investors on 9 October 2009). Reference is made to Ms Garrett’s evidence in her liquidator’s examination to the effect that at this time she had not canvassed the views of superannuation fund investors as to whether or not Ashington should be removed as trustee or manager.

573. [604]

     On 4 October 2009 at 2.19pm, Ms Garrett sent an email to Mr Renauf attaching the version of the presentation that Mr Carolan had emailed her as at 1.29pm, stating in the email:

574. [605]

     On 4 October 2009 at 2.34pm, Mr Carolan emailed a further iteration of the presentation to Ms Garrett. In this version the “Go Forward Corporate Structure” had been removed.

575. [606]

     That version of the presentation was emailed by Ms Garrett to Mr Renauf on 4 October 2009 at 2.41pm (Ex C). Among other things, the email stated:

576. [607]

     The plaintiff says that it should be inferred from the above that Ms Garrett had spoken with Mr Routley at some time on 2 October 2009 or over the weekend about the plan that had been developed with PPB and confirming their meeting on 5 October. Acorn accepts that it can be inferred from this email that Mr Routley and Ms Garrett had spoken prior to this point but says that there can be no comfortable inference (contrary to the plaintiff’s closing submissions) about what was said between them (other than that Ms Garrett promised Mr Routley that she would address the contents of the “Go Forward” at their meeting). (I interpose to note that Ms Garrett’s statement that she did not know how to send it to Mr Renauf for review is likely to be in light of Mr Steel’s email to Ms Garrett earlier that day that stated that “Julie” could see all of Mr Renauf’s emails, and, if so, indicates that Ms Garrett did not want others at Ashington to view the content in the “Go Forward” slide.) I also note that it is not clear what had occurred to make this slide, or the presentation as a whole, “a bit redundant now”.

577. [608]

     On 4 October 2009 at 5.10pm, Mr Carolan emailed Ms Garrett a further iteration of the presentation. The attachment had the document name “Stonington_051009_vfinal.ppt”. This version did not include the “Go Forward Corporate Structure” slide.

578. [609]

     On 4 October 2009 at 8.54pm, Ms Garrett sent an email to Mr Renauf telling him to “just chill tomorrow”, stating that she proposed to “bluff Acorn and Thorney” at the meeting the following day “so as not to piss off Paul and then advise later in week that Investors had a change of heart on revised structure”.

579. [610]

     On 4 October 2009 at 11:36am, Ms Garrett sent an email to Mr Renauf, Mr Steel and Ms Briggs asking that certain documents be included in the data room including Knight Frank’s $43 million valuation, Mallesons’ advice that “our mechanism” provides second ranking security plus term sheet for the replacement finance, the Investec mezzanine finance documentation, Stonington feasibility and builder quote.

580. [611]

     In an email of 4 October 2009 at 12:49pm, Mr Steel stated, in relation to equity in Double Bay, that Mr Anderson’s view was that he “didn’t want to show a large amount owing from ADF1 in the books of ADF2 (violates constitution big time and investors would flip)… also if the amount is recorded as a loan from ADF1, then Investec has potential charge under their ADF2 fixed and floating … this then stretches their security to ADF1. NAB’s concern was the ability for ADF1 to pay their interest (if it had cash) without Investec intercepting”.

581. [612]

     A series of meetings was planned for 5 October 2009 in Melbourne. At 2.56pm on 4 October 2009, Mr Anderson sent an email to Ms Garrett (at her Ashington and Gmail address) and Mr Renauf with details of his time in Melbourne trip, including a meeting with Icon at 4pm at which he assumed Mr Renauf would attend unless he confirmed otherwise. Ms Garrett responded later that day, noting she had a meeting schedule with Acorn at 3.30pm for at least an hour which conflicted with Icon.

582. [613]

     Mr Anderson was planning to meet with what he described as a “long shot financing alternative, ex CEO Investec who is very keen on Stonington” (this is a reference to Wingate), Mr Paul Hameister (the Managing Director of Hamton, the previous owner of the Stonington Property) and (as noted above) Icon Constructions. Patersons says that it is unclear whether there was a meeting with Thorney scheduled for that day as well. Mr Doherty deposed that he has no recollection of that meeting. Further, there is email correspondence between Mr Doherty, Mr Alan Miller and Mr Avee Waislitz (Mr Doherty’s contact at Thorney) which suggests that the Thorney meeting might have been further deferred to Monday 12 October 2009.

583. [614]

     On 5 October 2009, Mr Minahan sent an email to Mr Anderson, Mr Renauf and Ms Garrett as to a number of meetings with potential investors in Hong Kong and Singapore; and Ms Garrett forwarded Mr Minahan’s email to Mr Carolan as to whether they could “target a few of these for the mezz or pref equity deal”. Patersons says that this was a reference to the two alternatives described in the Stonington PowerPoint dated 5 October 2009 (i.e., a replacement mezzanine finance facility or a preferred equity sell-down).

584. [615]

     Relevantly, it was on 5 October 2009 that the first meetings took place with Acorn and then Albany. The first (short) meeting with Acorn took place on 5 October 2009 at 3.30pm, at Acorn’s offices in Melbourne (in attendance were Ms Garrett and Mr Renauf, Mr Doherty, Mr Carolan and Mr Routley (of Acorn)). At the beginning of that meeting, Mr Routley said that Acorn would not be able to invest without the involvement of the Alter family and suggested that Ms Garrett, Mr Carolan and Mr Doherty meet with Mr Ko (of Albany), which subsequently occurred at Albany’s offices. That meeting with Mr Ko was for approximately 30 minutes, and occurred without Mr Routley.

585. [616]

     Patersons says that, save for Mr Doherty’s examination transcript and affidavit, the evidence of what was discussed at these meetings is sparse. Mr Doherty’s recollection of the Acorn/Albany 5 October 2009 Meetings is set out in [35]-[38] of his 10 September 2018 affidavit as follows:

586. [617]

     Patersons says that this affidavit evidence is consistent with Mr Doherty’s evidence as to the 5 October 2009 Meetings under examination by the liquidator’s representative:

587. [618]

     It is noted that Ms Garrett also admitted in her examination that her “understanding of when the discussions first commenced with Acorn and with Pacific [Acorn] was that there were two streams being investigated, one was a direct investment into the Stonington sub-trust either as a two part investment, so replacement mez with a preferred equity piece, or you could invest into Stonington and also into Newco, and that the form of Newco would involve the replacement of Ashington as trustee and manager” (Ex A).

588. [619]

     Acorn says that the shortness of the meeting with Mr Routley (together with what he said at it about the limitations of any involvement by Acorn without the Alter family) indicates that Ms Garrett could not have said very much during it and that she certainly could not have made the full presentation of 30 minutes with him “to explain situation” (as she said to Mr Carolan in her email on 2 October 2009 at 12.48pm), or what she had thought would be at least an hour (as she had said to Mr Anderson in her email of 4 October 2009 at 9.27pm).

589. [620]

     Further, it is said that Ms Garrett could not have left the Stonington PowerPoint with Mr Routley at the meeting either, because in an email on 8 October 2009 at 7.25pm Mr Routley asked Ms Garrett to send “a soft copy” to him, to which she responded by email that day at 9.39pm to Mr Renauf that she was “[n]ot too sure about doing this” (although I interpose to note that it might equally be that all he had was a hard copy). Acorn says that there is no evidence that Ms Garrett acceded to Mr Routley’s request or that he had the Stonington PowerPoint in his possession from any other source, attaching significance to this because Acorn draws the inference that Mr Routley did not have the Stonington PowerPoint displayed or given to him at the meeting on 5 October 2009 and therefore says that he could not have seen that it was stamped with the word “Ashington” on each slide.

590. [621]

     Instead, Acorn says that the only proper inference of what was said by Ms Garrett to Mr Routley at the meeting on 5 October 2009 or in any telephone call prior to it were the matters that found their way into the email sent to Mr Swan on 8 October 2009 (see below).

591. [622]

     The plaintiff, however, says that at the 5 October 2009 meetings, Ms Garrett told Mr Routley and Mr Ko that Ms Garrett and Mr Renauf were going to be the new fund manager. In this regard, the plaintiff says that it can be inferred that the presentation was given at those meetings, noting that: it was clearly prepared for that purpose; Ms Garrett recorded in her email that she had promised something (the “Go Forward” slide) to Mr Routley; a version of the PowerPoint was produced by Mr Ko, and (as noted above) that on 8 October 2009 (see below) Mr Routley requested a soft copy of the Stonington PowerPoint. The plaintiff says that Ms Garrett expressed some reluctance to provide the soft copy, surmising that Ms Garrett no doubt recognised the risk to her if Mr Anderson “got wind of her plan”.)

592. [623]

     Later on 5 October 2009 there was a meeting between Ms Garrett, Mr Doherty and representatives of Thorney.

593. [624]

     The plaintiff complains that, over the ensuing weeks, “in flagrant disregard of their contractual and fiduciary obligations owed to Ashington” Ms Garrett and Mr Renauf pursued an opportunity that involved the replacement of Ashington Capital and Ashington Management as trustee and manager respectively of ADF and ADF2 by new entities established by Acorn and Albany, in which Ms Garrett and Mr Renauf would have a financial interest. The plaintiff says that Ms Garrett and Mr Renauf did so with the knowledge and assistance of Patersons, PPB, Albany and Acorn. Indeed, the plaintiff in closing submissions says that PPB gave very careful thought as to how to “pitch” the plan to replace Ashington to superannuation fund investors over the period from 6-9 October 2009, once it knew that Acorn and Albany were interested in the scheme.

594. [625]

     At 7.12am on 6 October 2009, Ms Garrett sent an email to various persons at Ashington copied to Mr Renauf, Mr Steel and Mr Anderson, saying that there had been “good meetings with prospective investors in Melbourne yesterday on the replacement mezz for Stonington” and confidentiality agreements were going to be executed that day “and they will grill us on the feaso amongst other things”.

595. [626]

     On 6 October 2009, Mr de Rooy sent an email to Ms Garrett, copied to Mr Renauf, stating that he needed “something a little more concrete backed up with a revised Patersons Term Sheet” and some revised hard timelines as soon as possible as he needed to give “Credit and Group Legal” some tangible evidence that repayment without accelerating legal action was a realistic option. In response to that email, Ms Garrett advised that the meetings in Melbourne had gone well, and that a more formal progress report would be forthcoming.

596. [627]

     On 6 October 2009 at 10.47am, Mr Ko emailed Mr Carolan his own “member profile”. Separately, on the same day at 12.48pm, Mr Ko emailed Mr Carolan a profile of the Pacific Group of Companies. Mr Carolan sent an email at 2.59pm asking if Mr Ko could also “provide a couple of financial metrics i.e. NTA and or total assets”, noting that this was “to provide PPB and the banks with a sense of size/scale of potential investment partner”. Later that day, Mr Carolan forwarded a draft confidentiality undertaking to Mr Ko, copied to Mr Doherty.

597. [628]

     Meanwhile, at 12.01pm on 6 October, Mr Anderson sent an email to Ms Garrett (at both her Ashington and Gmail addresses) copied to others including Mr Renauf, Mr Steel and Mr Minahan. Mr Anderson advised that from the meetings in Melbourne he had two genuine parties interested in taking the “mezz/equity position”, both of which appeared to be backed by family investment houses and both had been advised that there was a need for another “circa $22m equity”. Mr Anderson said the reason their interest was genuine was because the families live locally and know the property well and requested their advisers contact us. One of those seems to have been Wingate (because at 1.36pm Mr Anderson sent an email to persons at Wingate, copied to Ms Briggs, referring to a meeting on 5 October 2009 and saying that Ms Briggs would provide a copy of a confidentiality agreement in regards to the Stonington opportunity). On 6 October 2009 at 5.08pm, Mr Anderson sent an email to Mr Renauf, Ms Garrett and Mr Steel advising of his telephone discussion with the Head of Property Finance Vic at Westpac (Mr Tim Keating) and indicating that Ashington had received three offers of additional equity for the project that would enable Ashington to pay interest on the land but also put in the equity to “lubricate the construction”.

598. [629]

     At 7:34pm, Mr Anderson advised Ms Garrett that the interested parties he had met with were Wingate and Icon Constructions (in concert with Sensata and who he advised were high-net-worth families in Melbourne).

599. [630]

     Mr Anderson sent an email to representatives of both Sensata and Icon Construction on 6 October 2009, copied to Ms Briggs, referring to the meeting on 5 October 2009 and advising that Ms Briggs would provide copies of a confidentiality agreement.

600. [631]

     As noted above, at 5:07pm on 6 October 2009, Mr Carolan emailed Mr Ko (copied to Mr Doherty) attaching a copy of a confidentiality agreement. Mr Carolan asked Mr Ko if he could arrange for it to be executed and returned to Mr Carolan in the morning. Mr Carolan also said, “[i]t might also be an idea to have it passed on to the guys at Acorn if they are also to receive detailed documentation as we move through the process”.

601. [632]

     Patersons says that it appears that on the same day (6 October 2009) Mr Carolan spoke to Mr Ko and arranged a call scheduled for 10.00am on 7 October 2009. Mr Carolan informed Mr Doherty of this arrangement in an email to him at 2.15pm on 6 October 2009 asking Mr Doherty if he could “let Rob at Acorn know that we will contact him after this call? Please advise that Nicki has been back-to-back with PPB, Westpac & St George working through issues today and an update will be provided tomorrow”. Mr Carolan also asked Mr Doherty to provide him contact details for Mr Routley as there was a “need to get him a CA [confidentiality agreement] for execution”. Mr Doherty provided those details to Mr Carolan on the morning of 7 October 2009 indicating that he had “spoken to Rob & told him you will send the CA [confidentiality agreement] through this morning. He has been talking to Byron and is going to be on the 10am call as well”.

602. [633]

     On 6 October 2009 at 1.50pm, Ms Briggs sent an email to Mr Block and Mr Lord, copied to Mr Renauf, Ms Garrett, Mr Anderson and Mr Steel, attaching the NAB notice of default in relation to the Double Bay facility dated 2 October 2009. Mr Block forwarded that notice to the asset consultants, copied to Mr Lord, noting that they were “working with [Arnold Bloch Leibler] and the new ‘Ashington’ employees on a go forward structure”.

603. [634]

     At 4.27pm on 6 October 2009, Ms Briggs sent an email to Mr Block and Mr Lord, copied to Mr Renauf, Ms Garrett, Mr Anderson and Mr Steel, attaching the St George notice of default in relation to the Double Bay facility.

604. [635]

     On 7 October 2009 at 2:02pm, Mr Block forward the St George default notice to the consultants, stating “we continue to work co-operatively with Nikki & Sam re the re-cap proposal but what is clear is that any proposal would see the management and trustee arrangements changed so that Ashington are no longer involved. We have sought ABL’s [Arnold Bloch Leibler] advice on this and we should have their thoughts pretty soon this afternoon. It looks as if this may be mechanically easier to affect [sic] than first thought”.

605. [636]

     On 6 October 2009, Mr Block emailed Ian Carson of PPB noting that “Investec are reserving their rights against a default at the fund level”, and going on to state:

606. [637]

     The Alter family and Acorn were listed in the email as “potential investors” who (amongst others) “[a]ll have expressed comfort in seeing ABL & PPB involved and all would like to secure equity in the new management company”. The plaintiff points to this as evidence that PPB was aware that Ms Garrett and Mr Renauf had “recently joined Ashington”, at the same time that PPB was working with them on a plan to replace Ashington as trustee and manager (and PPB was contemplating having a financial interest in the “Newco” that was to take over Ashington’s business).

607. [638]

     On 6 October 2009 at 4.16pm, Mr Block sent an email to Mr Renauf copied to Ms Garrett (at her Ashington address) and Mr Lord, saying:

608. [639]

     Ms Garrett forwarded this email to Mr Carolan stating, “[s]ome good news at last…”.

609. [640]

     On 6 October 2009 at 11.26pm, Ms Garrett from her Gmail account sent an email to Mr de Rooy, copied to Mr Renauf attaching a progress report on performance of the Patersons Mandate for the Stonington Capital Raising. Ms Garrett forwarded that email and the progress report to Mr Anderson and Mr Steel, referring to a positive teleconference that she and Mr Renauf had had with “Kevin” (McCabe) late that evening.

610. [641]

     Meanwhile, also on 6 October 2009, a meeting took place between Mr Anderson, Mr Renauf and Ms Garrett with three representatives of St George, at the Ashington offices to provide St George with an update on matters including Ashington Capital’s proposed strategy in relation to the Double Bay development approval and discussions with investors. At that meeting the St George representatives expressed disappointment at Ashington Capital’s failure to provide previous disclosure of the status of the Stonington issue (i.e., the situation in relation to the Stonington Uncalled Capital Undertaking); and serious concern about the solvency of ADF2. Reference was made to the possible intention of appointing an investigating accountant (Ex M at 8457ff).

611. [642]

     On 7 October 2009, there were communications between Mr Doherty and Mr Carolan relating to the proposed conference call arranged for 10am with Mr Ko.

612. [643]

     On 7 October 2009 at 9.07am, Mr Ko sent an email to Mr Routley and Mr Sheehan with Mr Ko’s edits to the proposed confidentiality undertaking with Ashington Capital.

613. [644]

     On 7 October 2009 at 9.12am, Mr Ko sent an email to Mr Carolan and Ms Garrett stating that he thought Mr Routley (of Acorn) should join the call as they were working together. Mr Carolan replied at 9:42am to that email stating “catch you in 20 min for the call at 10am”. There are no contemporaneous emails about what was said during that call.

614. [645]

     Just prior to the meeting, at 9.50am and 9.56am, Mr Ko and Mr Sheehan (copying in Mr Routley) exchanged emails in relation to proposed amendments to the draft confidentiality undertaking. Mr Sheehan provided their marked-up amendments by email at 10.01am to Mr Carolan, copying Mr Routley and Mr Ko. Later that day by email at 12.52pm Mr Carolan said he would follow up the requested changes and come back to Mr Sheehan.

615. [646]

     At 12.52pm on 7 October 2009, Mr de Rooy responded to Ms Garrett’s email containing the Investec progress report. Mr de Rooy asked Ms Garrett to provide a timeframe for when Investec would be repaid and to reconfirm the offer. Mr de Rooy asked whether Mr McCabe would be willing to put up a bank guarantee or letter of credit to secure the Investec repayment and what quantum was being offered for a delayed settlement to 10 January 2010; and said that once those questions were answered and the amended Patersons term sheet provided, he would discuss further with Credit. In the meantime, Investec continued to reserve all its rights in relation to the notices of default.

616. [647]

     On 7 October 2009 at 1.18pm, Mr Renauf sent an email to Ms Lee and Mr Bailey at Ashington, with a copy to Mr Anderson, recommending to “hold off” on the appeal and media release for Double Bay.

617. [648]

     On 7 October 2009 at 2.33pm, Mr Vynokur of Apex Capital sent an email to Mr Renauf, copied to simon@wessex, Ms Garrett and Mr Jason Gellert, responding to Mr Renauf’s 2 October email and asking as to the status of Stonington and whether Mr Renauf was in a position to provide detailed project information in relation to Stonington and potentially other Ashington projects.

618. [649]

     On 7 October 2009, Mr Block emailed the asset consultants and superannuation fund investors, saying that “their [sic] are rumours in property circles regarding the ongoing solvency of Ashington…we note that St George have also issued a default notice as of yesterday re the Double Bay facility”.

619. [650]

     On 7 October 2009 at 3.05pm, a representative of Wingate sent a signed version of the confidentiality agreement to Ms Briggs (copied among others to Mr Anderson) in relation to the Stonington Project.

620. [651]

     On 7 October 2009 at 5.08 pm Arnold Bloch Leibler’s memorandum of advice in relation to the ADF and ADF2 funds and “the procedure for removal of the Trustee, Ashington Capital” was sent by email to Mr Block and Mr Lord. The advice was forwarded to Ms Garrett (at Ashington) and Mr Renauf that same day (and on-forwarded by Ms Garrett to her Gmail account).

621. [652]

     On 7 October 2009, the LUCRF Investment Committee approved write-downs for the ADF and ADF2 funds from $7.9 million to $4.3 million and $15.4 million to $1.9 million, respectively.

622. [653]

     On 8 October 2009 at 9.39am, Mr Block sent an email to Mr Renauf, copied to Ms Garrett asking for an updated schedule of the unsecured creditors at the trust level for the Wylde Street, Stonington and Double Bay Trusts; and at 11.30am Mr Steel sent an email to Mr Block copied to various people including Mr Renauf, attaching schedules of the creditors.

623. [654]

     On 8 October 2009 at 12.27pm, Mr Sheehan sent an email to Mr Carolan in respect of the requested changes to the confidentiality agreement, saying that Acorn was keen to commence review. Mr Carolan’s response was that he was “still waiting on the Ashington lawyers to respond … I will chase them again and come back to you ASAP”. Mr Sheehan forwarded the email chain to Mr Routley. The final confidentiality agreement for Acorn was emailed to Ms Garrett by Ms Briggs at 2.11pm. Ms Garrett then forwarded the confidentiality agreement to Mr Ko and Mr Routley at 2:29pm and invited them to see the Stonington Property in Melbourne on Monday 12 October 2009. Ms Garrett advised Mr Routley that she could “arrange someone from Ashington to be there to let you in”.

624. [655]

     Patersons says that there is no evidence that Mr Carolan took this form of the confidentiality agreement to “the Ashington lawyers”. Patersons says that it appears from the documentary record that what occurred was that the form of confidentiality agreement with Acorn’s and Albany’s mark-ups was provided by Mr Carolan to Ms Garrett who then asked Ms Briggs to type into a Word version of the confidentiality agreement the handwritten mark-ups requested by Acorn and Albany. This version of the confidentiality agreement was then forwarded by Ms Garrett to Mr Routley and Mr Ko on 8 October 2009 at 2.29pm. Ms Garrett then forwarded this email to Mr Carolan.

625. [656]

     Both Acorn and Albany provided their executed confidentiality agreements to Ms Garrett on the afternoon of 8 October 2009. Mr Ko subsequently forwarded Acorn’s confidentiality agreement to Mr Carolan separately. The Undertaking was in the same form for both Acorn and Albany, providing that each must use any “Confidential Information” provided to it solely for the “Purpose”, and not use the “Confidential Information” for any other purpose. “Confidential Information” was defined to mean all information provided by Ashington Capital to Albany/Alcorn “including the Transaction Documents and any information relating to the Transaction Documents for the Purpose”. “Transaction Documents” were defined to mean documents in the Stonington Data Room and any other documents which Ashington Capital advised Albany/Acorn were Transaction Documents prior to disclosing them. “Purpose” was defined in the recitals to the Undertaking as the provision of information to enable each of Acorn and Albany to “evaluate, consider and negotiate a transaction in relation to the [Stonington Property]”. Mr Carolan subsequently replied to this email stating, “[w]e will raise the security issue on stonington with Ashington in advance of your discussions on Monday. We can also confirm any DA [development approval] issues”.

626. [657]

     On 8 October 2009 at 6.51pm, Ms Garrett sent an email to Mr Sheehan and Mr Routley (copied to Mr Ko and Ms Briggs) to say that Ms Briggs would send them the data room access details.

627. [658]

     As to Acorn’s and Albany’s subsequent access to the Stonington Data Room, Patersons says that it was not involved in that process. Patersons says that what occurred was that, following the provision of the signed confidentiality agreements to Ms Garrett, Ms Garrett indicated that Ms Briggs “will send you the data room access details shortly”. Ms Briggs (who was copied into that email) gave evidence in her first affidavit that she understood this to be an instruction from Ms Garrett to arrange for Acorn and Albany to access the Stonington Data Room. Ms Briggs confirmed in her oral evidence that her usual practice was that, upon receipt of this email and signed confidentiality agreements, she would have arranged with Mallesons that Acorn and Albany be given access to the Stonington Data Room. On 9 October 2009, Ms Briggs emailed Ms Clare Morgan (of Mallesons) asking that she provide Mr Ko and Mr Sheehan access to the Stonington Data Room. Ms Morgan confirmed that access details had been sent to those persons shortly thereafter on 9 October 2009.

628. [659]

     At some time on 8 October 2009 prior to sending the Swan Email referred to below, Mr Routley deposed that he had a telephone discussion with Mr Ko, in which Mr Ko informed him that: (a) Mr Ko had met with Ms Garrett and Mr Doherty; (b) Ashington had two unlisted property development funds; (c) the ADF funds were in distress and were looking to raise new capital; (d) Sunsuper, Military Super, LUCRF and HESTA were unitholders in the funds; (e) the superannuation fund investors were dissatisfied with Ashington Capital and Ashington Management, had decided not to provide any further funding, were going to terminate the mandates of Ashington Capital and Ashington Management, had appointed PPB to review the ADF funds; (f) he was interested in exploring a co-investment with Acorn (see Mr Routley’s 10 August 2018 affidavit at [29]).

629. [660]

     On 8 October 2009 at 11.26pm, Mr Routley sent an email (on which Acorn places much emphasis) to his Acorn colleagues Mr Anthony Swan and Mr Sheehan (Swan Email) providing a “basic overview of the opportunity” mentioning that the “situation is still very fluid”, and further stating:

630. [661]

     Acorn says that the Swan Email is a critical document to Acorn’s defence, emphasising that much of it is consistent with the representations about PPB, and Ms Garrett and Mr Renauf’s involvement with PPB and the unitholders, which were made in the Stonington PowerPoint. It is submitted that it should be inferred that, prior to sending the Swan Email, Mr Routley was aware of certain aspects of the content of the Stonington PowerPoint (without actually having received or been shown it), either by discussions with Mr Ko or aspects of it having been raised (briefly) at the meeting on 5 October 2009 with Ms Garrett, Mr Carolan and Mr Doherty. However, Acorn emphasises (as adverted to earlier) that there is no evidence that Mr Routley ever received a soft copy of the Stonington PowerPoint (and Acorn says that his email to Ms Garrett requesting a copy of it earlier in the evening on 8 October 2009 outlined above and her response to Mr Renauf plainly suggests Ms Garrett did not provide him with it) or ever had a hard copy of it in his possession.

631. [662]

     Mr Routley then forwarded the Swan Email to Mr Ko on 9 October 2009, noting that “[t]his is more a status report than recommendation…”. The Swan Email was not sent to either Ms Garrett or Mr Renauf for their review and consideration (Acorn notes that this is despite the plaintiff’s assertion that by this stage Acorn was working with them as part of the Consortium).

632. [663]

     The plaintiff says that the Swan Email is consistent with a finding that Ms Garrett, Mr Carolan and Mr Doherty had put the Patersons Mandate on hold. (Patersons does not appear to contest this.)

633. [664]

     Meanwhile, at 1.07 pm on 8 October 2009, Ms Garrett sent an email to Ms Briggs, copied to Mr Anderson and Mr Renauf, advising that she needed material for NAB and St George ASAP (being Blakes’ advice on the Double Bay appeal process, PPB report and 30 September accounts) and adding the Patersons report and the Investec report. Mr Anderson responded to Ms Garrett and Ms Briggs, copied to Mr Renauf and Mr Steel, that he had agreed to provide St George with a package of material “which demonstrates right up to the point of draw that we expected to pay their intere[s]t” and that he had spoken to NAB and that NAB was expecting a proposal from Ashington (which he said Ms Briggs could assemble with a little guidance from Ms Garrett).

634. [665]

     On 8 October 2009 at 2.16pm, Ms Garrett sent an email to NAB copied to Mr Renauf, attaching information that she said should assist their assessment of the Ashington situation (the Blakes’ advice; the PPB report; the Patersons Mandate; and the status report sent to Investec). Ms Garrett said she would send the 30 September accounts when received and advised that investors had engaged Norton Gledhill to provide legal advice (and gave that firm’s contact details).

635. [666]

     On 8 October 2009 at 2.34pm, Ms Garrett sent the three St George representatives the material referred to above (other than the contact details).

636. [667]

     At 4.18pm on 8 October 2009, Mr Anderson sent an email to NAB in relation to Double Bay. The stated purpose of the email was to substantiate that, in the months preceding Ashington Capital’s failure to pay interest in advance for the 1 October quarter, the fund manager was acting in the best interests of the NAB/St George banking syndicate. A copy of that email was sent to Ms Garrett and Mr Renauf. At 4.33pm, Mr Anderson sent a similar explanation to St George as to how, in the months preceding the failure to pay interest due on 1 October 2009, Ashington had been acting in the best interests of St George/NAB.

637. [668]

     Ms Garrett sent an email to Mr Block and Mr Lord, copied to Mr Renauf, at 6.47pm forwarding the email Mr Anderson’s email to NAB that afternoon. Mr Block’s blunt response was that Mr Anderson’s assertions to NAB “are absolute and complete crap”.

638. [669]

     On 8 October 2009, Mr Block sent an email to the asset consultants organising an update meeting to discuss the Stonington refinance, restructure discussions, Wylde Street and other matters at 2pm Friday 9 October 2009. Mr Block also sent an email to Mr Anderson, Ms Briggs and Mr Steel, copied to Mr Lord, seeking an update on the sale of Wylde Street.

639. [670]

     On 8 October 2009, Mr Anderson sent an email to all Ashington staff, in the aftermath of the Double Bay development refusal recording, inter alia, that Ashington was making difficult decisions with regards to cost saving exercises and that Ashington’s response and future plans would require investor and banking support.

640. [671]

     On 8 October 2009, Knight Frank prepared a valuation of Stonington that contemplated a staged development approach, resulting in an “as if complete” gross realisable value of $142 million including GST (Ex M at 8754ff).

641. [672]

     On 8 October 2009, at 6.40pm Mr de Rooy sent an email to Ms Garrett and Mr Renauf, requesting an update and suggesting that in the event that McCabe or another party wanted to do the deal, they buy the Investec debt and step straight into Investec’s security position/charge documentation (which Ms Garrett forwarded to Mr Carolan the following day). At 11.22pm, Ms Garrett responded to Mr de Rooy, advising that they were working around the clock and that she would send a more detailed report along with timeline and revised Patersons Mandate the following day.

642. [673]

     On 8 October 2009, at 7.48pm, Mr Block sent an email to Mr Carson (of PPB), asking how it had gone with Mr Ko. Mr Carson responded later that evening (10.35pm) that it was “[v]ery positive” and that he was “desperate to work with us”.

643. [674]

     On 9 October 2009 at 9.45am, Mr Carolan sent an email to Ms Garrett’s Gmail account (subject line “Alter – Byron”) stating:

644. [675]

     Ms Garrett replied:

645. [676]

     Mr Carolan’s response was that he was happy not to go unless it was looking more solid.

646. [677]

     On 9 October 2009, Mr Carolan sent an email to Mr Renauf, copied to Ms Garrett (subject line “Sydney Property Group”) advising that Mr Ko was keen to take a tour of other Sydney based projects (in particular Double Bay) on Wednesday.

647. [678]

     On 9 October 2009 at 10.28am, Ms Garrett and Mr Anderson received an email from NAB, attaching a letter of that date from NAB to Ashington Capital as trustee for the Project X Hotel Trust, ADF and ADF2 and to Ashington Stamford and Trust Company Ltd as custodian of the Project X Hotel Trust in relation to NAB’s Double Bay Property Security Trust and Intercreditor Deed, recording that the beneficiaries had instructed NAB to provide formal notice of default for failure to pay amounts due on 30 September 2009; and that the beneficiaries, NAB, St George and the Security Trustee reserved their rights.

648. [679]

     On 9 October 2009, Daniel Gallen of Balmain Commercial sent an email to Mr Steel attaching a letter addressed to Ashington Croup and recording an offer to refinance Investec’s facility in relation to the Wylde Street Trust. Mr Anderson’s position on 9 October 2009 was that he did not see a benefit to the offer as it did not create a liquidity event; and Mr Steel commented that although the liquidity event is the sale, the offer takes out Investec.

649. [680]

     At 12.06pm on 9 October 2009, Mr Anderson sent an email to Mr Block, copied to Mr Lord, Ms Garrett, Mr Renauf, Ms Briggs and Mr Steel, attaching a report on the sale process of Wylde Street.

650. [681]

     On 9 and 10 October 2009, someone using Mr Sheehan’s login details accessed the MatterWeb for the Stonington Data Room. The Access Logs record that only two documents were accessed by someone at Acorn. Of those two documents, only one substantive document was accessed, being a project model excel spreadsheet entitled “336 Glenferrie Road/19_Project_model.003916.xls” (the other document being merely an index to the MatterWeb) (the Project Model Document). Acorn says that it was incumbent upon the plaintiff to establish the identity of that excel spreadsheet (and that the plaintiff has not done so).

651. [682]

     At 12.43pm on 9 October 2009, Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, attaching an update on Stonington. Ms Garrett advised that her main concern as to completion was the risk that Westpac might not provide an extension on the land facility; saying that she had received a verbal assurance but not written confirmation from “Credit” and that she would keep Mr de Rooy informed. At 4.43pm, Mr de Rooy responded to Ms Garrett’s email, copying Mr Renauf and Mr Sargeant (of Investec), referring to Ms Garrett’s comments in the status report she provided on 6 October 2009 regarding Mr McCabe. Mr de Rooy asked whether Ashington would deal exclusively with Mr McCabe if he committed to the facility or whether Ashington was obliged to deal with all the other interested parties within the indicative Patersons timetable; and said that Investec was very interested to know about the outcome of Mr McCabe’s review of his ability to post a bank guarantee/letter of credit to secure a deferred settlement to a date post 10 January 2009.

652. [683]

     It appears that, on or about 9 October 2009, a discussion took place between Ms Garrett, Mr Renauf, PPB and the superannuation fund investors. The plaintiff says that the “Garrett plan” was revealed in this discussion.

653. [684]

     A paper prepared by Mr Peter Dedes of SCM for the Military Super board, dated 12 October 2009, records that Ms Garrett and Mr Renauf had met with investors and indicated that they could raise capital for Stonington and Wylde Street, and Investec had allowed them time to explore the recapitalisation; and that Ms Garrett and Mr Renauf had indicated that, while they could raise equity to recapitalise Double Bay, if successful they would require the restructuring of the fund, the replacement of Ashington as manager and trustee, and they would take control of Double Bay, Stonington and Wylde Street. It was noted that interested parties included Alter (i.e., Albany) and Acorn.

654. [685]

     A handwritten note of that meeting was produced by Mr Hamish Flett of HESTA which records the following:

655. [686]

     On 10 October 2009 at 7.52am, Mr Ko emailed Ms Garrett, Mr Carolan, Ms Briggs (copying in Mr Routley and Ms Morgan of Mallesons) requesting further documents be included in the Stonington Data Room. Acorn says that the fact that this email was sent to Ms Briggs (a representative of Ashington) indicated that there was no particular secrecy about what Mr Ko and Mr Routley were doing. Mr Routley replied that day by email at 4.35pm to Mr Ko, commenting that the lack of data in the Stonington Data Room raised questions about “how serious they are about getting the deal done” and that they were going to need something from the investors because “[i]f all new investments in trust have to be done by way of pro-rata investment then just one of the investors can starve capital ad force the project into liquidation”. Mr Routley said that they had to make it clear that they were not interested in buying time just to sell the asset (assuming this was not the value maximising decision). Mr Ko’s response was that he agreed.

656. [687]

     At 5.45pm on 10 October 2009, Ms Garrett forwarded to Mr Renauf the email received from Mr Ko requesting further documents in the Data Room and saying that Mr Ko had left a detailed message as to what would be covered on the Monday. Ms Garrett said that she and Mr Renauf should find time to prepare on Sunday if he still wanted to go (to Melbourne); and that, if not, that was fine by her as she was actually ready to provide her resignation. (This, to me, has the flavour of someone frustrated with the negotiations; not someone planning to take away the business of Ashington.)

657. [688]

     At 5.42pm on 10 October 2009, Ms Garrett emailed Mr Anderson (copied to Mr Minahan and Mr Renauf) suggesting that the four have a group call or catch up on the Sunday 11 October 2009 (to ensure that nothing got lost in translation) and that this could replace the scheduled get together on the Monday morning as she and Mr Renauf were on the 6.30am flight to Melbourne on the Monday. Ms Garrett said that they could also update Mr Anderson on the Friday afternoon meetings.

658. [689]

     At 5.47pm, Ms Garrett forwarded to Mr Renauf the email she sent to Mr Anderson at 5.42pm, and saying, “[t]his was sent to stop him calling me today as I have been ignoring his calls but he is leaving persistent messages. If you don’t want to do it, no problem by me. I am happy to simply bail”. (Again, this seems to me to be inconsistent with someone intent on progressing the diversion of Ashington’s business for her own purposes.)

659. [690]

     On 11 October 2009 at 6.34pm, Ms Garrett replied to Mr Ko’s email (including Mr Carolan, Ms Briggs, Mr Routley, Mr Renauf and Ms Morgan as recipients) confirming that she would pull together the requested information early the following week and that she was arranging a Sydney asset tour for Wednesday (14 October 2009) and would see him at 9.30am the next day (being Monday 12 October 2009) (which Acorn says was obviously for the Stonington tour). The Stonington Property was located in Melbourne, and as such, an asset tour in Sydney would necessarily include other assets of ADF and ADF2, such as the Double Bay Property, the Wylde Street Property or the Kings Cross Property. Again, it is said that the fact that Ms Briggs and Ms Morgan (as representatives of Ashington) were included on this email indicated no particular level of secrecy about these matters. (Acorn says that Ms Briggs’ evidence that she did not know from this email that touring the Sydney assets would have nothing to do with a capital raising in relation to Stonington should not be accepted.)

660. [691]

     After receiving Ms Garrett’s email, on 11 October 2009 at 7.51pm, Mr Routley sent an email to Mr Sheehan, stating that “I now have a low expectation of this deal” and noting that the documents Mr Ko had asked for were “basic and should have been provided. No-one can invest without them”, causing him to “[q]uestion how serious they are about getting a deal done”. Mr Sheehan replied by email at 8.35pm that day commenting “[y]ou never know. Things had been pretty fluid and they may not have had time to put these documents together” and saying that they “must be serious about a deal” as “the alternative is insolvency and real value loss for the unitholders”.

661. [692]

     Acorn says that it should be inferred that on Monday 12 October 2009 Mr Routley and Mr Ko toured the Stonington Property as arranged and referred to in Ms Garrett’s email of 8 October 2009 at 2.29pm (see above).

662. [693]

     On Monday 12 October 2009 at 3.58am (presumably this timestamp is wrong since it seemingly precedes the trip to Melbourne to which the email refers), Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, apologising for the lack of contact and stating that she and Mr Renauf had just returned from Melbourne. Ms Garrett stated that they made good progress with the Alter family (who she said were well known to Investec and definitely had the financial capability to close the proposed transaction within the prescribed timeframe); that she had had some disturbing advice in relation to approaches to agents by Investec; and that she did not have access to the Patersons Mandate from her home computer but would send the following day.

663. [694]

     On 12 October 2009, Mr de Rooy responded to Ms Garrett’s email arranging a time to have a discussion and noting that her comments as to approaches to agents by Investec was “really disturbing”. Ms Garrett responded, copying Mr Renauf, asking if Mr de Rooy had any time the following day to meet with Alter.

664. [695]

     On 12 October 2009, Ashington was advised that was being commenced (by an entity Fulton Hogan) legal action against it in relation to outstanding moneys.

665. [696]

     On 12 October 2009, Ms Briggs sent an email to HESTA and others recording the value of HESTA’s investment in ADF2 at cost of $28.6 million and at a firesale of $3.1 million. Mr Hastings at HESTA confirmed that HESTA should writedown its investment to $3.1 million. On the same day Mr Hastings emailed Mr Gavin regarding an article about Ashington in The Australian titled, “Advisers called in after twin towers take tumble”.

666. [697]

     On 12 October 2009, Ms Garrett emailed Mr Anderson that the meeting with Thorney went well; and that Thorney was concerned to ensure that they had the Westpac extension prior to committing to site inspections (and suggesting that she and Mr Renauf might meet Thorney in Melbourne on Friday).

667. [698]

     Between 12 and 14 October 2009, Mr Ko and Mr Routley prepared drafts of a letter, the final form of which appears to be dated 14 October 2009 and addressed to “The Unitholders, Ashington Development Fund 1, Ashington Development Fund 2, C/- Brett Lord, PPB” (14 October Letter). That final letter was hand delivered to PPB on 14 October 2009, when Mr Ko and Mr Routley were in Sydney for the Sydney asset tour.

668. [699]

     On 12 October 2009 at 11.08pm, Mr Routley sent an email to Mr Ko attaching a marked up version of a proposed letter of offer from Albany and Acorn to the unitholders of ADF and ADF2 (dated 14 October 2009) with respect to a “proposed investment and transfer of management rights of the Funds to the Consortium”, the “Consortium” being defined to mean Albany and Acorn; noting that it was to be hand-delivered to PPB in the Sydney meeting. The plaintiff points out that Mr Routley’s changes included the addition of the following words, which the plaintiff says make plain his awareness that Ms Garrett and Mr Renauf were “Ashington personnel”:

669. [700]

     Mr Ko responded at 11.46pm attaching an alternative draft letter of offer, which referred to discussions between “Nicola Garrett and Sam Renauf with [Albany] and [Acorn]” and set out a proposed investment, the objective of which included “[t]o acquire the RE and management rights for [ADF and ADF2]”. The plaintiff says that that document indicated that their preliminary review of the ADF and ADF2 properties led them to view the projects as having sound property fundamentals including specifically their location and underlying demand for the development product.

670. [701]

     On 12 October 2009, NAB informed Ashington that they were appointing David Winterbottom of KordaMentha as investigating accountant to review the Double Bay Project. NAB and St George did not take steps to enforce their security pending KordaMentha’s review (which was undertaken whilst Ashington was seeking to progress the Stonington Capital Raising). (The plaintiff maintians that, had the Stonington Capital Raising been successful, the Investec and Hamton facilities would have been fully paid and the unitholders would have become legally liable to meet a call for capital of $6 million. It is said that the remaining funds from the new lender, the funds from this call, and funds from the sale of the Wylde Street Property would have meant that Ashington Capital would have been able to complete Stage 1 of the Stonington Development, as well as improving Ashington’s negotiating position with Westpac and NAB/St George.)

671. [702]

     On 12 October 2009, Mr Block sent an email to Mr de Rooy, copied to Mr Lord, attaching a letter confirming that Ashington was pursuing a capital raising exercise with regard to a possible recapitalisation of the Stonington unit trust and that following the adoption of this strategy “the sale process which we were mandated to pursue has been put on hold”. The letter set out a timetable for the sale process assuming recommencement of the sale process on 19 October 2009.

672. [703]

     Mr Dedes prepared a Board report for Military Super on the Ashington funds on 12 October 2009.

673. [704]

     On 13 October 2009, Ms Garrett sent an email to Mr McCabe at 12.36am, telling him that things had been moving quickly and that “in our discussions with various private investors with respect to the Stonington opportunity we realised that we were aiming too small and should be focussed on the current broader market opportunity”. Ms Garrett stated:

674. [705]

     Ms Garrett identified four opportunities and said that she was close to securing the capital to deliver on each. Ms Garrett asked whether Mr McCabe would be interested in being on the board and potentially taking on an equity stake; and asked to visit him in London and share with him her detailed business plan and the work completed to date on each of the opportunities. Mr McCabe expressed interest and suggested a conference call.

675. [706]

     On 13 October 2009, Mr de Rooy sent an email to Ms Garrett copied to Mr Renauf confirming arrangements for a telephone call and a meeting with Alter on 14 October 2009.

676. [707]

     On 13 October 2009, apparently following a meeting the previous day at which it was agreed to keep a running schedule of all creditors who had issued final demands or commenced legal proceedings, Ms Briggs sent an email to Mr Steel and Mr Anderson attaching a schedule of outstanding creditors (containing four Stonington creditors, one Cross+ Trust creditor and one Project X Hotel Trust creditor).

677. [708]

     By 19 October 2009, at least one creditor had ceased providing services to Ashington as a result of unpaid invoices, preventing real estate listings from being published (Ms Garrett and Mr Renauf note that this was despite payment of this account being “important”, and the amount being relatively small). That particular creditor was seeking a payment of $10,529 to reactivate the account (with the rest to be paid pursuant to a payment arrangement). Mr Steel stated in an email that this needed Mr Anderson’s approval as they had agreed not to make any payments until the next cashflow meeting. Ms Emily Lee (of Ashington), responded that Mr Anderson had earlier agreed to pay by installments ($4500, then $4000, then the remaining $4534.47) over a number of weeks.

678. [709]

     On 13 October 2009 Ms Briggs requested that Mallesons grant Mr James Orloff (of Smorgon) access to the Stonington Data Room.

679. [710]

     On 13 October 2009, Mr Anderson emailed Ms Garrett (at her Ashington and Gmail accounts) and Mr Renauf, saying that he had three groups inspecting the Stonington Property that day and hopefully this could create some competitive tension with Ms Garrett’s prospects.

680. [711]

     On 13 October 2009, Mr Carolan sent an email to Ms Garrett with the subject “payment from ashington”, stating:

681. [712]

     On 13 October 2009 at 1.56pm, Mr Sheehan (who with Mr Ko and Mr Routley was working on a draft letter to the superannuation fund investors via PPB setting out their joint investment proposal) sent an email to Mr Ko copied to Mr Routley (subject line “Ashington letter”) in advance of Mr Ko and Mr Routley’s meeting later that afternoon. Mr Sheehan said, “here is where we got to on the Ashington letter” and advising that Mr Routley would bring a copy of the letter with him to Sydney for Mr Ko to sign for the meeting the following day. On 13 October 2009, at 2.18pm, Mr Ko responded to that email saying he had reviewed the letter and it was excellent and that he would revert if there was any feedback from the meetings that day.

682. [713]

     Mr Ko met with PPB and Investec on 13 October 2009. Following the meeting, Mr Ko provided Mr Routley with an update. Mr Routley emailed Mr Sheehan at 10.13pm to say that the “motivation from unitholders is pending legal action from Investec, as expected. Investors would prefer to see a deal to be done” and that they would know more the next day.

683. [714]

     Mr Routley deposed that after the meeting on 14 October 2009, Mr Ko and Mr Routley prepared a list of additional documents and information to be provided to Albany/Acorn for due diligence purposes (Mr Routley’s 10 August 2018 affidavit at [50]). On 14 October 2009, Mr Carolan arranged a due diligence review session for the Stonington Project.

684. [715]

     On 14 October 2009 at Ms Briggs’ request for a “soft copy”, Ms Garrett sent an email to Ms Briggs and Mr Anderson, copied to Mr Renauf, attaching the 5 October 2009 Stonington PowerPoint. Ms Briggs had asked: “Can you send me a soft copy of the Stonington Project Investment Opportunity presentation (as attached).” I read this as Ms Briggs having a hard copy and perhaps have even scanned it and attached it to the email but that what she was seeking is the powerpoint file.

685. [716]

     On 14 October 2009 at 8.42am, Mr Carolan sent an email to Ms Garrett (at her Ashington email address), enclosing a copy of the Patersons Mandate to share with Investec.

686. [717]

     On 14 October 2009 at 9.39am, Mr Burns of NAB sent an email to Mr Gadallah (at St George) copied to KordaMentha, saying that Ms Garrett had called to say that Ashington was meeting with potential investors that day and would not be able to join them; and that they had been talking with this particular investor “solidly” for some time.

687. [718]

     The Albany and Acorn joint letter of offer to superannuation fund investors appears to have been provided to PPB at the 14 October 2009 meeting attended by Mr Routley, Mr Block, Mr Lord and Mr Nicholas Warden (of PPB), Mr Ko and Mr Tremaine (of Albany) at PPB’s offices.

688. [719]

     The 14 October 2009 letter was prepared on the joint letterheads of Albany and Acorn and is addressed to the unitholders care of PPB. The 14 October 2009 letter defined Acorn and Albany as “the consortium”.

689. [720]

     The 14 October 2009 letter included, amongst other things, the following: (a) the title “Refinancing of $10.3 Mezzanine Facility provided by Investec to Ashington Development Fund 2 and Transfer of Management Rights (Proposed Investment)”; (b) a reference to discussions between Garrett and Renauf with Albany and Acorn; (c) a statement that the letter was indicative only, not an offer and not capable of acceptance; (d) an expression of hope that the 14 October 2009 letter would assist “the ADF 1 & 2 unitholders… and PPB” to determine whether they wish to continue discussions with the Acorn and Albany; (e) an outline of Acorn and Albany’s objectives, including assuming the management rights for ADF and ADF2; (g) a desire that “the Unitholders…view our proposal as a friendly solution to assist with short term financing problems, but provide a long term solution in the best interests of Unitholders”; (h) a statement that the Acorn and Albany were open to considering investments over and above the Proposed Investment; (i) a summary of the respective businesses of Albany and Acorn, including also describing them as “[t]he Partners”; and (j) a process and timetable of approximate dates of completion, which included agreeing terms of employment for the management team, which would be “principally” Ms Garrett and Mr Renauf, by 21 October 2009 as well as due diligence and a term sheet for the proposed transaction, both being completed by 6 November 2009.

690. [721]

     On 14 October 2009 at 3.55pm, Mr Anderson sent Mr Orloff (of Smorgon) a version of the Stonington PowerPoint, referring to a meeting that morning.

691. [722]

     At 5pm on 14 October 2009, Mr Ko met with Mr de Rooy and Ms Garrett.

692. [723]

     On 14 October 2009, there was a St George Internal Advance Application to extend the Cross+ and Potts Point residual debt expiry date to 30 November 2009 and to carry current excess for 19 days to 31 October 2009, represented by the quarterly interest in advance for the Project X Hotel Trust, subject to investigating accountant and Phillips Fox documentation review; and noting that Ashington Capital as trustee for the Stonington Trust is also currently in default.

693. [724]

     On 15 October 2009, Ms Garrett sent email to Mr Carolan noting that Mr McCabe wanted Ms Garrett and Mr Renauf to meet in London the following week. Mr Carolan responded that Ms Garrett should go to London.

694. [725]

     On 15 October 2009 at 11.47am, Mr Routley sent an email to Mr Ko, Mr Sheehan and Mr Swan, attaching a copy of a news article concerning rumours about a sale of the Potts Point Property by Ashington and that stating that “PPB had been appointed by investors to work with Ashington”.

695. [726]

     On 15 October 2009 at 3.01pm, Ms Garrett sent an email to Mr Minahan, Mr Anderson and Mr Steel, copied to Mr Renauf, saying that Joe (presumably Joe Burns of NAB) had asked her to meet with KordaMentha the following day and that in light of “today’s press” PPB had been asked by superannuation fund investors to review the assets again. Ms Garrett said that Mr Renauf would liaise with them on the information required by Mr Block. Ms Garrett said that she had a conference call with the Alter family at 4pm and Thorney at 5pm and that the meeting between Mr Ko and Investec went well. Ms Garrett said that neither the Alter family nor Thorney was “phased” by Westpac’s decision.

696. [727]

     At 5.20pm on 15 October 2009, Mr Anderson responded to Ms Garrett’s 3.01pm email, saying that Mr Steel should attend the KordaMentha meeting and noting that Ms Briggs was preparing weekly reports for Investec, Wylde Street and PPB.

697. [728]

     At 7.50pm, Ms Garrett sent an email to Mr Anderson saying that KordaMentha had asked her to attend the meeting alone.

698. [729]

     Mr Anderson says that, concerned by an apparent lack of tangible progress on the Stonington Capital Raising during October 2009, he held direct discussions with other parties who expressed interest in entering into a transaction with Ashington, including discussions with Wingate Group. On 15 October 2009 at 3.51pm, Mr Anderson sent an email to persons at Wingate, attaching a version of the Stonington PowerPoint.

699. [730]

     On 15 October 2009 at 4.24pm, Mr Block sent an email to the asset consultants providing an update on the meeting with Alter (i.e., Albany) and Acorn the previous day to “discuss their interest in pursuing the Ashington assets”. The email stated that Mr Ko wanted to provide a conceptual deal by the middle of the following week and while they saw some value in the asset management strategy “their real interest is to use these assets as seeds for a broader fund management business”. The email said that Alter and Acorn “see no value in retaining Ashington and any ‘deal’ would incorporate the effective and cost-efficient removal of existing management” and any “deal” would include the removal of Ashington as the manager. The email also said that Alter/Acorn undertook a site visit of the Wylde Street and Double Bay and a street visit of the Cross+ and Potts Point properties “which were conducted with Ashington’s approval and with a member of staff present”.

700. [731]

     Mr Block requested the asset consultants’ approval to provide the required information to Acorn/Alter on a “needs be” basis for them to gain a better understanding of the assets. While consent for the provision of this information to Albany and Acorn for this purpose was sought from superannuation fund investors, the plaintiff points out that it was not sought from Ashington.

701. [732]

     In relation to this, Mr Gavin noted in an email to HESTA on 16 October 2009:

702. [733]

     Acorn says that this email is completely consistent with the long held attitude of the superannuation fund investors at this time that being the desire to see the removal of Ashington and to try to find a proposal which would restore some value to their equity (or “save the equity” as Mr Thow termed it).

703. [734]

     On 16 October 2009, there were emails from the asset consultants responding to Mr Block’s email and giving approval to the disclosure of information to Acorn and Albany.

704. [735]

     On 15 October 2009 at 5.36pm, Ms Garrett sent an email to Mr Anderson, copied to Mr Minahan, Mr Renauf and Mr Steel, saying that “Paul” had contacted Mr de Rooy and advised he has an action against Ashington and you in respect of Stonington; and that as a consequence, Mr de Rooy was querying the standstill arrangement. Ms Garrett said that “we were due to have dial in with Alter and Investec to pass “‘gate one’ on standstill tomorrow morning”. On 15 October 2009 at 5.41pm, Mr Anderson sent an email in reply saying, “[i]t would be nice to know who contacted who first. Hamton just like Investec have an action pending. The Hamton action is slow and Investec position will be resolved way earlier. Why don’t I come to meeting with Michael he has nothing to worry about and it won’t impact the standstill”. Ms Garrett’s response at 5.48pm was that Mr Anderson was welcome to come to the meeting but Mr de Rooy was not favourably disposed towards any of the Ashington directors.

705. [736]

     On 15 October 2009 at 9.59pm, Mr Routley sent an email to Mr Ko with a “List of Issues” attached, which covered matters including the “Termination of Management Agreement”, to which Mr Ko then responded by email with some additions. Acorn says that the list is a good “ready reckoner” of the issues that were bedevilling Ashington, ADF, ADF2 and the superannuation fund investors at that time, including: whether there was any equity in the developments; whether there was any value worth rescuing; breach of mandate; breach of licence conditions; solvency; Investec default and potential litigation against the investors; vendor finance litigation (and the personal guarantee) and the payment to Valad due in four years (in relation to the Noosa Property).

706. [737]

     On 16 October 2009 at 10.46am, Mr Ko sent an email to Mr Routley with a draft email to PPB for discussion.

707. [738]

     On 16 October 2009 at 11.46am, Mr Routley sent an email to Mr Block, Mr Warden and Mr Lord, copied to Mr Ko and Mr Sheehan, referring to the meeting held with them and Mr Tremaine on 14 October and saying that, while he understood that there were significant issues with respect to ADF and ADF2, its financing arrangements and the respective properties, he confirmed their interest in “replacing Ashington as a manager of ADF 1 & 2” and investing their capital to replace/refinance the Investec mezzanine facility. The email enclosed a list of information that Mr Routley wanted to receive as a matter of urgency. (The plaintiff says that Mr Routley’s request identified a plethora of documents required at fund and sub-trust level, including constitution documents.) Mr Block responded that “[c]learly that is a lot of information!!”, noting that “[w]e have access to a fair degree of what has been requested and will start sending what we can to you”. Mr Block also noted that PPB had put together an “issues document” and would be happy to discuss it that afternoon. Mr Block then sent an email to Mr Renauf and Ms Garrett, forwarding that email at 11.52am, saying that, “[w]e have a fair bit of that info – lets discuss how to get it to them”.

708. [739]

     On 16 October 2009 at 2.03pm, Mr Block sent an email to Ms Briggs and Mr Lord with a copy to Mr Anderson, querying why Ashington changed agents on the sale of Wylde Street. At 2.06pm Mr Anderson forwarded the email to Mr Minahan saying, “FYI – suggest you meet peter and explain”.

709. [740]

     On 16 October 2009 from 2.10pm through to 4.37pm, Mr Block sent a number of emails to Mr Ko, Mr Sheehan and Mr Routley attaching several documents, including ADF and ADF2 structure summaries and the Ashington corporate diagram and fee structure summaries; ADF2 Information Memorandum with tax opinion part 1; tax opinion part 2; tax opinion part 3; the constitutions of ADF and ADF2; the Second PPB Report; the First PPB Report and annexures; the Development Management Deeds for the Stonington, Wylde Street, Cross+, Potts Point and Double Bay trusts; services agreement between Noosa Venture 1 Pty Ltd, Valad Funds Management Ltd and Ashington Management; Balance Sheets and Financials of ADF2 and its sub-trusts; documents relating to Investec’s facility with ADF2; information in relation to the Noosa Venture Trust; information in relation to Westpac’s senior debt for the Stonington Trust; Stonington sale documents and vendor finance documents; information in relation to called and uncalled capital in ADF; Double Bay debt legals; information as to various charges; facility documents for Wylde Street, Double Bay, Ashington Group and Cross+; Wylde Street valuations Parts 1 and 2; constitutions for the sub-trusts for Stonington, Kings Cross, Potts Point and Wylde Street and for Noosa; the Noosa Valuation; acquisition and feasibility documents for Double Bay Part 1 and Board submission Stamford Plaza Part 1; acquisition documents for Double Bay part 2; acquisition documents and final feasibility in Board report for April 2008 re Noosa; acquisition and feasibility documents part q for Stonington; acquisition and feasibility documents part 2 for Stonington; trade creditors as at 30 September 2009 for Stonington Trust, Wylde Street Trust and Project X Hotel Trust; Double Bay valuation; and Balance Sheets for Wylde Street Trust, Cross+ Trust, Noosa, Double Bay and Stonington as at 30 September 2009.

710. [741]

     In the course of so doing, at 2.45pm, Mr Block emailed Ms Briggs asking her to send him the constitution for Ashington Capital; and at 2.56pm Mr Routley sent an email to Mr Block seeking further information about the called and uncalled capital for ADF. Mr Block suggested a phone conference at 3pm that day. On 19 October 2009 at 10am, Ms Briggs sent an email to Ms Garrett forwarding the email received from Mr Block at 2.45pm on 16 October 2009 and saying:

711. [742]

     Ms Garrett responded to this at 10.07pm that day, stating “[t]he breadth of the PPB mandate seems to shift every day!” and that she had a meeting with them tomorrow in which she hoped to “get resolution on the reason for the information request”. (Pausing here, Ms Garrett must have known the reasons for the information request as she was sent the emails requesting information from Albany/Acorn. Hence, the inference is that she was attempting to hide that knowledge from others at Ashington.)

712. [743]

     Also on 19 October 2009, Ms Garrett sent an email to Mr Renauf, forwarding the email chain commencing with Mr Routley’s email at 11.46am on 16 October 2009 (see above), followed by Mr Block’s email to Mr Renauf and Ms Garrett sent at 11.52am) on 16 October 2009 (marked with high importance), saying that “This is the key thing for us today. If you have time it would be great if you could look at my letter in response”.

713. [744]

     On 16 October 2009 at 11.30am, Mr Block sent an email to Ms Garrett’s Gmail address, stating “as discussed” and attaching a “Key Issues” paper. On 16 October 2009 at 5.51pm, Mr Block emailed Mr Sheehan, Mr Routley and Mr Ko (copying Ms Garrett and Mr Lord) the “Key Issues” document (PPB Key Issues Paper) which, amongst other things, gave an overview of the assets within the various sub-trusts that were comprised within ADF and ADF2, and: highlighted breaches of the trustee’s obligations at the head trust and sub-trust levels; stated that the removal of the trustee had been investigated by their lawyers, Arnold Bloch Leibler, who have advised that the trustee could be summarily removed from its position upon a circular resolution of members holding at least a 75% majority, observing that “[w]e note that our clients have indicated their willingness to support such a move, in light of a revised proposal”; stated that it is not as easy to remove Ashington Management as development manager as PPB are “not as clear on the breaches of the Development Management Agreements”; referred to PPB seeking advice from Arnold Bloch Leibler and that there are two options: voluntary removal of the manager and a possible court application seeking orders removing the trustee and manager, subject to the support of the unitholders and lenders; and stated that, “[g]iven the fundamental and serious breaches of duty by the Trustee, together with the financial position of ACL, [PPB] are of the view that an application to the Court for the appointment of Provisional Liquidator to ACL is likely to be successful and further, that the Provisional Liquidator would be able to give effect to a restructure and removal of the Manager should this position not be achieved by negotiation”.

714. [745]

     (Relevantly, this seems in its terms to be PPB advising Ms Garrett and Mr Renauf of the superannuation fund investors’ support for removal of trustee, i.e., that PPB was raising the issue with Ms Garrett rather than vice versa.)

715. [746]

     On Sunday, 18 October 2009 at 4.22pm, Ms Garret forwarded the PPB Key Issues Paper to Mr Renauf’s Gmail address.

716. [747]

     On 16 October 2009 at 4.01pm, Mr Thomas of Westpac sent an email to Mr Steel, copied to others at Westpac, stating that Westpac was prepared to extend the maturity for its Commercial Bill Line facility in relation to the Stonington Trust until 31 December 2009 subject to certain conditions, but that Mr Steel had advised that they could not make the $850,869 interest payment on 16 October 2009 and on that basis Westpac had withdrawn its offer to extend the matured Commercial Bill Line facility. The email reserved the right to appoint an investigating accountant and/or receiver and manager; and concluded, “[p]lease note that the Bank will not provide funding to complete your Stonington project”.

717. [748]

     On 16 October 2009, Mills Oakley on behalf of Icon Constructions sent a creditors’ statutory demand to Ashington Capital as trustee for the Stonington Trust in the sum of $50,050.

718. [749]

     On 18 October 2009 at 4.37pm, Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, attaching a progress report on the Stonington Capital Raising dated 16 October 2009.

719. [750]

     On 19 October 2009, NAB and St George appointed KordaMentha as investigating accountant to undertake a review of the financial position of ADF2.

720. [751]

     On Monday, 19 October 2009, Ms Garrett sent to Ms Cassandra Matthews (of KordaMentha), copied to Mr Renauf, an email Ms Garrett had sent to NAB personnel (on 8 October) attaching documents and said that she and Mr Renauf were in the process of collating further information on Double Bay.

721. [752]

     On 19 October 2009 at 9.34am, Mr Winterbottom (of KordaMentha) sent an email to NAB and St George banking personnel (subject line “Ashington – 33 Cross Street, Double Bay”), setting out details of a meeting he had with Ms Garrett and Mr Renauf. Mr Winterbottom stated:

722. [753]

     The reference to “keeping their employment options open and fluid” seems to be consistent with Ms Garrett’s earlier email to Mr Steel as to her not being necessarily prepared to commit for 12 months as superannuation fund investors had wanted; and is contemporaneous evidence that Ms Garrett did not regard herself as contractually bound to employment with Ashington.

723. [754]

     On 19 October 2009 at 9.32am, Mr Block sent an email to Mr Sheehan, Mr Routley and Mr Ko, commenting on the Cross+ Project and saying that it was the seed asset acquired by Ashington prior to the development of ADF and included in the fund by way of a risk assumption agreement rather than a sale into the fund for stamp duty reasons. The email attached documents, including the Information Memorandum for ADF and documents relating to the Cross+ Project.

724. [755]

     On 19 October 2009 at 10.05 am, Mr Ko sent an email to Mr Block, copied to Mr Routley and Mr Lord (with the subject header ASH – Project X Hotel) stating that PPB had previously indicated to “us” that “the issue of security for the proposed replacement mezzanine/preferred equity and the viability of ADF2 going forward for existing investors is predominantly contingent on the ability to provide a property solution to Project X” and that “they” agreed “with this thesis”. Mr Ko requested that arrangements be made for Mr Tremaine and accompanying builders to visit the Double Bay Property and requested information regarding the Double Bay Project. The email noted that “[o]btaining this information would be very useful as we are having difficulty reconciling this particular project at the moment”.

725. [756]

     On 19 October 2009 at 11.16am, Mr Block sent an email to Mr Sheehan, Mr Routley and Mr Ko, attaching the Risk Assumption Agreement for the Kings Cross Property (part of the Cross + Trust).

726. [757]

     On 19 October 2009 at 11.19am, Mr Block sent an email to Mr Renauf and Ms Garrett with the subject heading “FW Ash – Project X Hotel”, forwarding the 10.05am email from Mr Ko and saying “Some info – Byron need; can you plse assist? Also they wish to lock in a time for a more detailed site visit”.

727. [758]

     At 11.20am, Mr Block responded to Mr Ko’s 10.05am email, with a copy to Mr Routley and Mr Lord, saying that he would “liaise with Ashington and revert on both fronts as soon as practicable”. (Acorn says that this was an important indicator to Mr Ko and Mr Routley that PPB was liaising directly with Ashington to get access to the Double Bay Property and to obtain additional documents to satisfy the information requests. Acorn says that, outwardly, it is not suggestive of any particular secrecy about what was occurring.)

728. [759]

     At 12.32pm, Mr Block sent a couple of emails to Mr Ko, copied to Mr Routley and Mr Lord, attaching various documents in relation to the Double Bay Project; first, the floor plans and sale Information Memorandum for Double Bay; and then CBRE and retail estimates for Double Bay. This included documents labelled, “SUBJECT TO CONFIDENTIALITY UNDERTAKING. Do not distribute or copy”.

729. [760]

     At 12.38pm on 19 October 2009, Ms Garrett responded to Mr Block’s email of 11.19am, saying that they could secure this data and arrange for more detailed site visits; and that she had some issues “from an Ash perspective” to discuss with him and would call at a convenient time. Mr Block’s response was that he had been corresponding with Mr Ko, who wanted to talk to Ms Garrett that afternoon. At 12.53pm, Ms Garrett responded that she had spoken to Mr Ko and would update Mr Block when she called.

730. [761]

     On 19 October 2009 at 10.19am, Mr Ko sent an email to Mr de Rooy, with the subject “Ashington Development Fund 2 – replacement of Investec Mezzanine Facility”, referring to their meeting the previous week and saying that he was working with Ms Garrett and PPB to create a new investment structure which would allow them to pay out in whole the mezzanine debt facility that Investec had provided to ADF2. The email raised the possibility of purchasing or refinancing the Investec senior debt position in the Wylde Street Property and asked for Mr de Rooy’s thoughts on that possibility. Mr Ko sent to Ms Garrett at 10.20am a copy of that email. (Acorn points out that there is no evidence that Mr Routley was aware of this communication.)

731. [762]

     On 19 October 2009 at 2pm, Ms Garrett sent an email from her Gmail address to Mr Ko, copied to Mr Renauf with the subject “proposed package – Nicki/Sam”, setting out suggestions concerning base salary ($350,000), equity in Newco, and bonus structure/carry arrangements. The email noted that each of Ms Garrett and Mr Renauf “currently have a base salary of $350k per annum” and were offered “5% each of equity in Ashington when they made the decision to join the company”. Ms Garrett proposed the same salary under the Alter/Acorn structure, along with a bonus structure potentially involving a share in profits. Mr Ko forwarded a copy of Ms Garrett’s email to Mr Routley at 3.12pm.

732. [763]

     On 19 October 2009 at 2.02pm, Ms Garrett sent an email to Mr Carolan, copying this email, saying that “Byron [Ko] is pressuring me for this information, hopefully this looks reasonable. Thought I had better keep you in the loop”. Mr Carolan replied, “We can discuss later tonight”.

733. [764]

     Meanwhile, as adverted to above, on 19 October 2009, Ms Garrett, in communications copied to Mr Renauf, made arrangements with Mr Block for a call that day and a meeting on 20 October 2009. The plaintiff says that, over the course of October and November 2009, Ms Garrett, Mr Renauf, PPB, Albany and Acorn worked collaboratively to develop and execute a secret plan to replace Ashington with a new trustee and manager.

734. [765]

     On 19 October 2009 at 2.57pm, Mr Peter Fossey of NAB sent an email to Ms Garrett and Mr Anderson, copied to NAB and St George personnel, attaching an engagement letter for KordaMentha to conduct a strategy and financial review of Ashington Capital.

735. [766]

     At 4.30pm on 19 October 2009, Mr Ko and Ms Garrett had a conference call.

736. [767]

     On 19 October 2009 at 5.17pm, Mr de Rooy sent an email to Mr Sargeant (of Investec) and others, attaching the update received from Ms Garrett on 16 October 2009 and reporting on a telephone call with Ms Garrett that morning. Mr de Rooy noted that they had discussed three “serious parties” (Acorn/Pacific, Mr McCabe and the Smorgon Family). Noting that Credit wanted to decide in mid-October whether to pursue legal action, Mr de Rooy requested this be extended to the end of October and reviewed at that time. Mr de Rooy said that working with Ms Garrett and Mr Renauf on either a mezzanine facility or alternative “asset sale” would provide a better ultimate outcome to Investec than commencing legal recovery action.

737. [768]

     On 20 October 2009 at 8.04am, Ms Garrett sent an email to Mr Block, copied to Mr Renauf, saying that she and Mr Renauf had been “summoned” to a meeting at 9am at Ashington (postponing a planned catch up to 10am) and that “[w]e had a good catch up with Byron [Ko] and Kevin [McCabe] yesterday and Sam [Renauf] made progress on offers”. Ms Garrett and Mr Renauf apparently then met with Mr Block at 10am on 20 October 2009.

738. [769]

     On 20 October 2009 at 12.31pm, Mr Routley sent an email to Mr Block asking for the unitholder structure regarding the called and uncalled capital for ADF. Mr Block responded at 1.43pm, providing that information.

739. [770]

     On 20 October 2009 at 2.57pm, Ms Garrett sent an email to Mr Ko, Mr Routley and Mr Tremaine, copied to Mr Block, Mr Lord and Mr Renauf (“re Stonington queries”) attaching a document said to address their three queries with respect to the Stonington sales contracts.

740. [771]

     On 20 October 2009 at 3.55pm Mr Block sent an email to Mr Routley attaching balance sheets for ADF and ADF2 as at 30 September 2009, referring to communications he had with Mr Steel about the Double Bay Project. The email stated that the attachments should explain their questions and that Mr Steel had advised that the “split in Project X is because of tax and other reasons for why the debt has been recorded the way it was. It has not been split on a 75/25 basis”.

741. [772]

     On 20 October 2009 at 4.06pm, Mr Renauf sent an email to the development managers at Ashington (Mr Bailey and Mr Wyeth) requesting documents in relation to Double Bay (as requested in Mr Ko’s 10.05am 19 October email). Mr Wyeth responded at 5.47pm attaching the requested documents. Mr Renauf then sent those documents at 7.15pm by email to Mr Tremaine (of Albany), copied to Ms Garrett.

742. [773]

     Meanwhile, on 20 October 2009 at 4.40pm, Mr Block sent an email to Mr Routley, stating that Mr Block had requested explanations from Mr Steel in relation to a number of errors Mr Block had found in the documents provided by Ashington. (Acorn says that this and the 3.55pm communication from Mr Block indicate that PPB was telling Mr Routley that PPB was obtaining information from Ashington – in this instance, the Chief Financial Officer).

743. [774]

     On 20 October 2009, from 2.54pm, through to 12.55pm on 21 October 2009 there were emails between Mr Block and Mr Steel relating to debt and equity in Double Bay.

744. [775]

     Meanwhile, on 20 October 2009, Mr Ko sent an email to Mr Craig Shepard of KordaMentha arranging to meet with him to discuss the Double Bay development (copying Mr Shepard’s response to Mr Routley). (As noted above, KordaMentha had been appointed to advise the senior lenders of the Double Bay Property (NAB and St George) in relation to their various loan facilities.)

745. [776]

     On 20 October 2009 at 3.02pm, Ms Garrett sent an email to Ms Cassandra Matthews (333 Consulting – apparently linked to KordaMentha) copied to Mr Renauf, saying that they had been advised the Double Bay valuation was imminent and had been working on various workout possibilities and should be in a position to share those the following day.

746. [777]

     On 20 October 2009 at 6.43pm, Ms Matthews sent an email to Ms Garrett, copied to Mr Renauf and various persons at KordaMentha (including Mr Winterbottom), suggesting a meeting the following day at 3.30pm and attaching a list of information she wanted in relation to Double Bay.

747. [778]

     On 20 October 2009 at 10.31pm, Ms Garrett emailed Ms Matthews, copied to Mr Renauf, Mr Winterbottom and others at KordaMentha, saying that she and Mr Renauf would start to work through their request the following day; that they had been working on a broad equity solution for a number of assets in Ashington funds, including Double Bay and that prospective investors (the Alter family and Acorn) were travelling from Melbourne to Sydney for a “detailed full day workshop” the following day. The email noted that both Mr Anderson and Mr Steel were available at that time and that Ms Garrett and Mr Renauf were free most of Thursday (22 October 2009). At 10.38pm, Ms Garrett forwarded to Mr Anderson and Mr Steel, copied to Mr Renauf, the email from Ms Matthews sent at 6.43pm on 20 October 2009.

748. [779]

     On 20 October 2009 at 9.21pm, Ms Garrett emailed the development managers at Ashington to reschedule a 10am meeting to 12pm on the basis that she had been “summoned” by PPB for a meeting a 10.30am.

749. [780]

     On 20 October 2009 at 3.30pm, Mr Sam Alter, Mr Tremaine, Mr Ko and Mr Routley held a meeting to discuss the results of due diligence and security for investment.

750. [781]

     Over the course of 20 October 2009 and 21 October 2009, Mr Routley and Mr Ko exchanged a number of versions of a draft letter to investors that originated with the 14 October 2009 letter from Albany and Acorn.

751. [782]

     This culminated in an updated offer to the superannuation fund investors in a letter dated 21 October 2009 that Mr Ko handed to Mr Lord on 21 October 2009. The letter was on joint Albany/Acorn letterhead and proposed a preferred equity issue in which Albany and Acorn, as well as the ADF2 Investors, would participate (21 October Letter). The final version signed appears to have been signed by Mr Ko, for himself, and also by Mr Ko “for Rob Routley Acorn Capital”.

752. [783]

     The 21 October Letter included, amongst other things: (a) the title “Ashington Development Fund 1 and 2 and Transfer of Management Rights (“Proposed Investment”)”; (b) a reference to the meeting with PPB on 14 October 2009 and subsequent discussions; (c) a reference to continuing discussions between Ms Garrett and Mr Renauf with Albany and Acorn (Acorn together with Albany defined as “the Consortium”) (d) a statement that they are seeking to work cooperatively with the Unitholders and advisers; (e) a reference to the opportunity they have had to conduct very preliminary due diligence on ADF and ADF2; (f) a statement that the letter was indicative only, not an offer and not capable of acceptance as any potential offer will require completion of further due diligence and documentation; (g) an outline of the Consortium’s objectives, including assuming the fund and property management rights for ADF2; (h) proposing an investment of capital in ADF2, with a willingness to underwrite up to $15 million in preferred equity with the Unitholders participating in their respective proportions; (i) an outline of a preliminary strategy and recommendations with an initial focus on ADF2 (which involved the Investec mezzanine debt being immediately resolved, equity provided for Stonington and an exit strategy within 6-12 months, refurbishment of the Double Bay Property for residential and retail and hold the Noosa Property until an appropriate strategy is determined) and that overall ADF should be managed by PPB with the Consortium sub-managing the Wylde Street Project and the 25% interest of ADF in Double Bay; (j) the comment that the original purchase price for Stonington of $46 million was excessive and the original feasibility had flawed assumptions about the ability of the development plan to deliver the underlying revenue forecasts; (k) a summary of the respective businesses of Albany and Acorn as the Consortium, including also describing them as “[t]he Partners”; and (l) a process and timetable of approximate dates of completion, which a detailed due diligence being finalised and provision of a term sheet for the proposed transaction, both by “[ ] November 2009”. The document did not include reference to the employment of Ms Garrett and Mr Renauf.

753. [784]

     The 21 October Letter concluded by proposing a meeting with all of the superannuation fund investors and their advisers/consultants in the following week.

754. [785]

     On 21 October 2009 at 5pm, representatives of the superannuation fund investors attended a teleconference with PPB to discuss the proposal received from Acorn/Albany. The plaintiff says that it appears that the content of that letter was relayed to investors by PPB by phone. Ms Chan of Sunsuper produced a note of a teleconference with Mr Block of PPB on 21 October 2009, noting that Alter and Acorn were proposing a “$15m mezzanine piece” for Stonington and noting that Double Bay required $167 million to complete with a new development approval, assuming existing investors put in 67% pro-rata to receive a return of about 95%. The plaintiff notes that Mr Hartley’s recollection is that this was the only recapitalisation proposal advanced by PPB for consideration by the superannuation funds; and that, according to Mr Hartley, the Alter and Acorn proposal was put to the superannuation fund investors on the basis that it required a transfer of management to Alter/Acorn as a condition of the finance that they were offering (T 1001).

755. [786]

     On 21 October 2009, Mr Block sent two emails (6.23pm and 6.41pm) to Mr Ko and Mr Routley with a copy to Mr Lord, providing feedback on the 21 October Letter and the meeting held that day between PPB and asset consultants to the superannuation fund investors.

756. [787]

     In the first, Mr Block referred to the proposal, stating that: they had discussed the proposal with “our clients” that afternoon (inferred to be the superannuation fund investors) and provided them with a broad overview of the proposal; there was limited support for such a conceptual plan; the superannuation fund investors were not minded to support significant equity raisings in the funds from their own resources; they were instructed to seek a revised proposal on the basis that funding for Double Bay, Stonington and Noosa be provided by third parties; it would be prudent for Mr Ko and Mr Routley to provide a more detailed outline regarding their proposed management capabilities; and in replacing Ashington, the superannuation fund investors would want to be convinced of the new manager’s capabilities in respect of both funds management and high end residential development.

757. [788]

     In the second, Mr Block said that he would appreciate Mr Ko and Mr Routley’s thoughts regarding the Wylde Street Property and how they propose to move forward with it, which would involve outlining how existing investor equity would be dealt with and procurement of additional costs to finalise the project.

758. [789]

     On 21 October 2009 at 7.02pm, Mr Ko forwarded Mr Block’s emails to Ms Garrett, asking her to let him know if she received this email from Mr Block. (Acorn notes that there is no evidence that Mr Routley knew of this communication between Mr Ko and Ms Garrett.)

759. [790]

     PPB forwarded the 21 October 2009 letter to superannuation fund investors the following day with a covering email which stated, inter alia, that “[t]he consortium want to secure the management rights to the assets”.

760. [791]

     On 21 October 2009 at 6.30am, Mr de Rooy sent an email to Ms Garrett asking for her daily bullet point update after her telephone conversation with Mr McCabe. Ms Garrett sent that update at 7.47am to Mr de Rooy, copied to Mr Renauf. In that update, Ms Garrett advised that there was a detailed workshop in Sydney that day with PPB, Mr Renauf, Alter and Acorn on Stonington and Wylde Street; the Smorgon family had advised they were not progressing with the transaction; the call with Mr McCabe went well and she was flying with Mr Renauf to the UK the following week with a view to concluding the transaction; and that the “PSL syndicate” was on track with two high-net-worth individuals who had a Q&A session the previous day. Ms Garrett send a copy of that email to Mr Anderson and Ms Briggs at 7.57am with the comment “he now wants daily updates”.

761. [792]

     In response to this chain of emails, on 21 October 2009 at 10.52am, Mr Anderson sent an email to Ms Garrett, copied to Mr Renauf, Mr Minahan and Ms Steel asking why PPB was sitting in on this meeting “or any other meeting like it”; and saying that PPB was racking up enormous fees but not contributing to anything; was probably detrimental to the exercise; and would make it impossible for Ms Garrett to negotiate Ashington’s position in the projects in their presence.

762. [793]

     In response to the 10:52am email, Ms Garrett sent an email to Mr Anderson at 12.12pm, copied to Mr Renauf, Mr Minahan and Mr Steel, saying that:

763. [794]

     On 21 October 2009 at 7.57am Mr Renauf sent an email to Mr Tremaine (Albany) copied to Ms Garrett, asking him to confirm flights for Friday so that Mr Renauf could arrange meetings and access.

764. [795]

     On 21 October 2009 at 11:42am, Mr Minahan sent an email to Mr Block with a copy to Mr Anderson attaching a spreadsheet in respect of Wylde Street, commenting on the sale process and saying that they proposed to list Wylde Street on the open market.

765. [796]

     On 22 October 2009 at 9.02am, Mr Ko sent an email to Ms Garrett and Mr Routley, seeking their thought on a draft email response to PPB. In the draft email, Mr Ko indicated that Albany would not pursue the investment if the superannuation fund investors were unwilling to provide any additional capital.

766. [797]

     Ms Garrett responded to Mr Ko’s email (copied to Mr Routley and Mr Renauf) at 10.41am, noting that she considered investors would provide capital but were concerned about the quantum required and highlighting that PPB had not provided the investors with a copy of the letter yet. Ms Garrett said that she and Mr Renauf could source a joint venture partner with a buy in price of $70million+ on Double Bay immediately. Ms Garrett said, amongst other things, that she was not sure if the deal would work for Acorn or Albany if the superannuation fund investors provided half the required capital and the “Consortium” providing the other half, and that “it may just feel all “too hard” … and with PPB and four separate asset consultants involved in this transaction it would be like herding cats from start to finish!”. (Acorn says that this communication from Ms Garrett was not suggestive of a person seeking to drive the implementation of any form of their own plan to take over the management of ADF and ADF2 as part of an alleged “Consortium”.)

767. [798]

     On 22 October 2009 at 2.05pm and 2.09pm, Mr Ko sent two emails to Ms Garrett and Mr Renauf, in the first, attaching another draft letter to superannuation fund investors “for discussion” and then correcting that draft shortly thereafter in the second email. The letter provided two options – one being “no further capital”; the other being “alternate – a staged solution”. (Acorn says that there is no evidence of any discussion with Ms Garrett of the contents of that letter.)

768. [799]

     On 22 October 2009 at 9.12am, Mr Ko sent an email to Ms Garrett and Mr Renauf referring to the possibility of doing a “hit and run” on the Ashington assets. Mr Ko stated:

769. [800]

     Ms Garrett’s response to this (by email, copied to Mr Renauf, at 10.27am) was that she would “very much like to work with [Mr Ko and Alter] on the ‘hit and run’ transaction” and that she had buyers lined up for Wylde Street, Double Bay and Stonington. Ms Garrett stated:

770. [801]

     (Again, Acorn emphasises that there is no evidence that Mr Routley knew of these communications between Mr Ko, Ms Garrett and Mr Renauf.)

771. [802]

     Meanwhile, on 22 October 2009 at 9.52am, Mr Block sent an email to the asset consultants, reporting on his meeting the previous day with Mr Ko and Mr Routley and attaching the 21 October Letter which he summarised in his email; as well as summarising his email response to Mr Ko in relation to the letter.

772. [803]

     On 22 October 2009 at 9.57am, Mr Ko sent an email to Mr de Rooy (Pacific – Stonington) attaching his “internal solution for Stonington”, which involved the further development of the Stonington Property pursuant to a strategy including: the sell down of the mansion apartments in one lot to the Smorgon Group on completion of the early construction works; and the construction of early works by Icon Construction to avoid the development permit expiring. Mr Ko said they would “void” all existing presales and, rather than develop the site, subdivide the site into 17 allotments for sale to the open market for which he envisaged a sale price of the remaining lots totalling about $38.5 million. Mr Ko said that Icon Constructions identified this opportunity. Mr Ko said that the net revenue of the proposal was about $39 million which involved a return of capital equivalent to 25.6%.

773. [804]

     On 22 October 2009 at 4.47pm Mr Ko sent a letter to Mr de Rooy attaching a copy of the 22 October 2009 Letter to the superannuation fund investors (below), stating that it was his “final position to PPB”. Mr de Rooy’s response at 5.43pm was that Investec needed $11.3 million out of the deal, as the investors offered a $1 million fee for Investec to enable an orderly sale of Stonington, and the same fee arrangement was expected from any mezzanine deal. Mr Ko responded at 6.46pm that Alter would honour that arrangement (which Mr de Rooy noted at 6.48pm).

774. [805]

     On 22 October 2009 at 11.22am, Mr Block sent an email to Mr Ko and Mr Routley with a copy to Mr Lord, referring to a discussion with them and saying that he thought it would make sense for Mr Ko and Mr Routley to share the “detailed feasibility numbers” with PPB and superannuation fund investors, particularly with respect to Double Bay/Wylde Street and to a lesser extent Stonington. Mr Block suggested that they speak that afternoon, once Mr Ko and Mr Routley had had a chance to review and discuss with Mr Renauf.

775. [806]

     On 22 October 2009 at 4.34pm, Mr Ko sent an email to Mr Lord and Mr Block, copied to Mr Sheehan and Mr Routley, attaching a “draft” letter dated 22 October 2009 under joint Albany/Acorn letterhead to the superannuation fund investors, stating that:

776. [807]

     The letter then stated that, if the superannuation fund investors were unwilling to contribute further capital, then the best course would be for a financier to provide short term mezzanine finance while negotiations took place with Ashington “to conduct an orderly wind up of the assets in consultation and co-operation with the financiers”. The alternative solution was for Acorn/Albany to manage the Stonington Project and obtain development approval for Double Bay following an equity injection of $17.7 million (of which Acorn/Albany would contribute $4.43 million, with the balance of $13.27 million being raised by the superannuation fund investors); with no solution for ADF.

777. [808]

     At 5.28pm, Mr Block sent the asset consultants the further offer that had been received from Acorn and Albany.

778. [809]

     On 22 October 2009 at 4.56pm, Mr Ko sent an email to Mr Garrett and Mr Renauf (both on their Gmail accounts) copied to Mr Routley (re “draft response to PPB”). Mr Ko said that, with the letter being sent, they would have “clean hands” and that “we have both registered our interest and given them an alternative minimising the capital call. If they don’t for this then I think we immediately commence discussions to acquire the properties”. Ms Garrett responded to that “clean hands” email at 6.37pm, copied to Mr Renauf, saying that the superannuation funds, perhaps guided by PPB, probably would not accept the latest proposal (saying that “I suspect the existing investors (perhaps guided by PPB) are unlikely to accept the offer (which is very foolish and short-sighted)”) and that she and Mr Renauf were on “stand-by to share with [him] the details of our buyers and how we would work together in that regard”. Mr Ko responded at 8.03pm to Ms Garrett and Mr Renauf that he looked forward to speaking with them the following morning.

779. [810]

     On 22 October 2021, a Sunsuper Investment Recommendation Form was prepared by Ms Chan which referred to the fact that “[b]oth the Manager and the underlying projects have come under significant stress over the past 4 months in the main due to mismanagement of both the structures and investments”. (Acorn says that this is further evidence of the superannuation fund investors’ prevailing negative view of Ashington.)

780. [811]

     The revised Acorn/Albany proposal put to superannuation fund investors by PPB on 22 October 2009 was followed by a discussion on 23 October 2009. Mr Hastings of HESTA took a file note of the teleconference, which records that “Ashington behaviour is a concern. PPB have been made aware of some questionable activities (liabilities etc, another national campaign on Wylde St)”.

781. [812]

     A file note by Sovereign Investment Research noted that PPB was concerned about Ashington having changed sales agents for Wylde Street, as they felt that it might be detrimental to its value. (The plaintiff says that it is in that context that Norton Gledhill wrote to Ashington Capital on 23 October 2009 expressing concerns that unitholders were not being kept properly informed, and requested that Ashington provide such information as was sought by PPB to them, to which on 26 October 2009, Mr Anderson and Mr Minahan responded, expressing surprise given their discussions with PPB.)

782. [813]

     Meanwhile, on Friday 23 October 2009, at 9.18am, Ms Garrett sent an email to Mr Renauf with a “to do” list:

783. [814]

     Ms Garrett said in that email that “I have thoughts on how to have our arrangements sorted but too hard over the phone. I can’t reach lawyer”.

784. [815]

     Pausing here, “Thunder”, as I understand it, is a reference to a project involving a boutique real estate advisory business project that Ms Garrett was pursuing at the time (and that she was exploring with a Mr Tim Hannon of Derwent Capital) (see communications later between Mr Carolan and Mr Hannon) and hence is not relevant to the issues in the present proceeding.

785. [816]

     On 23 October 2009 at 9.22am, Ms Garrett sent an email to Mr Renauf saying that they were not going to London now.

786. [817]

     On 23 October 2009 at 11.45am, Ms Garrett sent an email to Mr Anderson, Mr Steel, Mr Bailey and copied to Mr Renauf, saying that Ms Matthews would no longer be working on the Ashington matter. Ms Garrett said that KordaMentha were expecting the Ashington material that afternoon and wanted Ms Garrett to bring it as KordaMentha wanted a briefing on the capital raising efforts. Ms Garrett said that KordaMentha would then meet with Mr Anderson, Mr Steel and Mr Bailey the following week to discuss Double Bay.

787. [818]

     At 11.49am on 23 October 2009, Mr Anderson responded by email to Ms Garrett, Mr Steel and Mr Bailey, copied to Mr Renauf, saying that they had booked in Monday at 2pm in the office with KordaMentha and told them all the information would be available at that time. Ms Garrett responded that KordaMentha were under the distinct impression that the material would be ready that afternoon, stating that Ms Matthews said Mr Anderson had advised as such. Ms Garrett’s view was that at least some of the material should be delivered that afternoon; otherwise the report back to the banks would be that Ashington had not delivered any of the requested information. Mr Anderson’s response (at 12.13pm) was that he was very careful not to give Ms Matthews that impression.

788. [819]

     On 23 October 2009 at 11.55am, a representative of DTZ (Debenham Thouard Zadelhoff – a commercial real estate company) sent an email to Ms Briggs, copied to Mr Minahan and Mr Anderson which attached a signed confidentiality agreement in relation to the Stonington Project; and at 12.01pm, Ms Briggs replied, sending a copy of the Stonington PowerPoint (amended from the 14 and 15 October versions to remove all references to the replacement mezzanine finance facility). Ms Briggs instructed Mallesons to grant Ms Alison Meadows of DTZ access to the Stonington Data Room.

789. [820]

     On 23 October 2009 at 12.48pm, Mr Steel sent an email to Mr de Rooy and others attaching an update report on Wylde Street. Investec responded at 1.31pm, noting that there was an offer of $17 million and asking why it was not being progressed. Mr Steel forwarded this email to Mr Anderson and Mr Minahan asking them to provide a response for him. On 23 October 2009 at 5.05pm, Ms Briggs sent the update report on Wylde Street to Mr Block, copied to Mr Lord.

790. [821]

     On 23 October 2009 at 3pm, Mr Ko sent an email to Mr Block and Mr Lord, copied to Mr Sheehan and Mr Routley, referring to a telephone conversation the previous day and the current view of the superannuation fund investors not to contribute any further capital; saying that:

791. [822]

     On 23 October 2009 at 4.57pm, Mr Block sent an email to Mr Ko and Mr Lord, copied to Mr Sheehan and Mr Routley, responding to Mr Ko’s 3pm email. In the email, Mr Block said that:

792. [823]

     Acorn says that this communication is squarely at odds with any alleged “Consortium” agreement between Albany and Acorn on the one hand and Ms Garrett and Mr Renauf on the other hand). Mr Block said that “the property assets in question here still possess sound underlying fundamentals and will form the basis of a healthy ongoing portfolio for whomever wishes to move forward on this”.

793. [824]

     On 24 October 2009 at 9.31pm, Mr Ko forwarded this email to Mr de Rooy. Meanwhile, on 23 October 2009 at 4.22pm, Mr Burridge of Norton Gledhill sent an email to Mr Anderson and Mr Minahan, attaching a letter on behalf of the superannuation fund investors to the directors of Ashington Capital, expressing the concerns of the superannuation fund investors that they were not being kept properly informed about the activities of ADF, ADF2 and the sub-trusts; and asking that information about the current financial status, dealings with financiers and proposals and plans of ADF, ADF2 and the sub-trusts be promptly provided to PPB. (Mr Anderson accepted in cross-examination that this letter was a serious step for the superannuation fund investors – T 659.) Mr Burridge sent a copy of that letter by email to the asset consultants at 4.29pm.

794. [825]

     On 23 October 2009 at 5.05pm, Ms Garrett sent an email to Mr Lord, copied to Mr Renauf, saying that, “[i]t has been manic today so they have been unable to find a timeslot to firm up approach with you on CFAL [seemingly a reference to item 2 on Ms Garrett’s 23 October 2009 “TO DO LIST”. We don’t want to miss this opportunity and so are keen to understand whether you think it would be possible for us to discuss our thoughts on the asset by phone early next week. We could then arrange to meet with Andrew early the following week or do you think that will be leaving things too late?”.

795. [826]

     On 23 October 2009 at 11.05pm, Mr Ko sent an email to Mr Block and Mr Lord outlining some transaction ideas and seeking their guidance on those ideas. Mr Ko said he was sending the email to them on the basis that it or its contents could not be communicated to the superannuation fund investors without his consent. Mr Ko said that he was “not writing on behalf of the Consortium. If either transaction idea proceeds, we will invite Acorn to participate”. Mr Ko said the email’s sole purpose was for Mr Ko to gauge what PPB’s advice would be on the following ideas. The first transaction idea was that Albany (with or without Acorn) purchase all the units in ADF2; the second was that Albany (again, with or without Acorn) assume all future capital commitments on certain terms. On 26 October 2009 at 9.35am, Mr Ko forwarded this email to Mr Routley for his information.

796. [827]

     The plaintiff notes that, between 23 and 26 October 2009, Mr Routley and Mr Ko continued to have discussions about a possible revised investment proposal.

797. [828]

     On around 24 October 2009, Ms Garrett and Mr Renauf flew to London to meet with Mr McCabe (the plaintiff says that this was ostensibly to pursue the Stonington Capital Raising).

798. [829]

     On Monday, 26 October 2009 at 10.54am, Mr Harrison of Wingate sent an email to Mr Steel, copied to Mr Anderson, attaching Wingate’s term sheet to Ashington Capital as trustee for the Wylde Street Trust in relation to a senior debt facility. This term sheet proposed indicative terms to refinance Wylde Street by way of senior debt in the sum of $13 million.

799. [830]

     On 26 October 2009 at 11.41pm, a manager in PPB Real Estate sent an email to Mr Lord copied to Mr Block, asking for clarity as to whether or not PPB Real Estate would be brought back into the process and saying that they were confused as to what role (if any) they were undertaking in the transaction.

800. [831]

     As adverted to above, on 26 October 2009 at 6.21pm, Mr Anderson responded to the 23 October Norton Gledhill letter, by letter attached to an email to Mr Burridge copied to the asset consultants. Mr Anderson and Mr Minahan wrote that they were “surprised to receive [Mr Burridge’s] letter”, they stated:

801. [832]

     Mr Burridge replied to this on 27 October 2009 at 10.09am, disputing Ashington Capital’s account of events.

802. [833]

     On 27 October 2009 at 3.58pm, Mr Ko sent an email to Mr Routley with an attached document headed “Stonington Development Sources and Uses of Funds” and asked Mr Routley what he thought of the enclosed numbers, saying that the “excess cash at the end will be used to fund the DA going forward and our costs”.

803. [834]

     On 27 October 2009 at 5.12pm, Ms Lee sent an email to Mr Minahan, copied to Mr Anderson and another, with a draft media statement for the sale of the Wylde Street Property.

804. [835]

     On 27 October 2009 at 7.33pm, Mr Anderson sent an email to Ms Garrett and Mr Renauf copied to Mr Minahan, seeking an update on discussions with Mr McCabe and noting that “we appear to have a good back up on both Wylde and Stonington with Wingate Group”; that the KordaMentha meeting went well; and that Mr de Rooy had been calling each day and wanted to know how they were going with Mr McCabe. On Wednesday 28 October 2009 at 12.45pm, Ms Garrett responded, saying that the talks with Mr McCabe were going well and that she was still pushing the Stonington/Wylde deal. (The plaintiff notes that in Ms Garrett’s liquidator’s examination she admitted that she had discussed with Mr McCabe the proposal to replace Ashington as trustee and manager (Ex A).)

805. [836]

     On 27 October 2009 at 10.24pm, Mr Carolan sent Ms Garrett an email setting out his thoughts for a boutique incubator model, being the terms on which an investor (a boutique incubator) will provide start-up capital for a funds management business.

806. [837]

     On 28 October 2009 at 7.36pm, Mr Anderson sent an email to Ms Garrett (copied to Mr Renauf and Mr Minahan) asking if the Alter family was still interested in Stonington. It appears that Mr de Rooy was still pressing Mr Anderson for an update at this stage.

807. [838]

     On 28 October 2009 at 8.58pm, Mr Harrison from Wingate sent an email to Mr Anderson agreeing to extend the offer on Wylde Street to 6 November 2009.

808. [839]

     On Thursday 29 October 2009 at 7.21am, Mr Ko sent an email to Mr Block and Mr Lord, copied to Mr Sheehan, Mr Routley and Mr Tremaine, responding to Mr Block’s 23 October email. Mr Ko said that Albany and Acorn were considering putting a “final proposal” to the superannuation fund investors:

809. [840]

     On 29 October 2009 at 1.43pm, Mr Gavin sent an email to the superannuation fund investors in which he referred to a conversation with Mr Block that morning during which he mentioned “that Albany & Acorn have come back with something that looks more interesting, which I believe he has spoken to most of you about…but I think this option is at least worth hearing more about”. Mr Gavin suggested one more telephone conference between the superannuation fund investors with PPB before coming to a conclusion, and that they would “probably need to ask PPB to excuse themselves from that bit of the meeting”. Mr Gavin stated, “[i]f the latest proposal doesn’t have investor support, I imagine Nicky and Sam will walk away too”. (Acorn says that this indicates that the superannuation fund investors were very much in control of the process of determining the removal of Ashington and the appointment of a replacement.)

810. [841]

     Mr Block responded to Mr Ko’s 7.21am email at 3.15pm on 29 October 2009, in an an email to Mr Ko and Mr Lord, copied to Mr Sheehan and Mr Routley, noting that he had discussed the matter with the superannuation fund investors and their consultants and that there was “some support” for Mr Ko’s “conceptual plan”. Mr Block then identified a number of issues (seven in all, including “Management changes etc as per out previous correspondence”), which he said the superannuation fund investors required Acorn and Albany to address, and concluded by suggesting that “if these issues can be worked through … we receive a proposal along with your feasibility numbers on Stonington, Double Bay and Wylde to move forward”. (It is noted that it was the “conceptual plan” thus advanced by Mr Ko that ultimately formed the basis for Parissen’s proposal to investors in November 2009.) Meetings were arranged for Albany and Acorn to present their proposal to superannuation fund investors in Sydney and Melbourne on 6 November 2009.

811. [842]

     On 29 October 2009 at 12.18pm, Mr Ko sent an email to Mr Routley and Mr Tremaine, attaching a feasibility model prepared by Mr Tremaine in respect of the Stonington Project. Mr Ko noted that the feasibility did not include funds management fees.

812. [843]

     On 29 October 2009, Mr Anderson met with Mr de Rooy to discuss the position in relation to Wylde Street and Stonington. At 6.25pm that day (29 October 2009), Mr Anderson sent an email to Mr Steel, Mr Minahan and others at Ashington, copied to Ms Garrett and Mr Renauf, reporting on the meeting with Mr de Rooy for Mr Anderson to gain a better understanding of the status of each of the Ashington facilities. Mr Anderson referred to the potential investors in two groups: (i) Ms Garrett’s options, being Mr McCabe, Alter Family and Paterson’s clients; (ii) Mr Anderson’s options, being Wingate Group and Smorgon. Mr Anderson noted that Smorgon was not proceeding but that a written offer was expected from Wingate the following week. Mr Anderson noted that he had been unable to elaborate very significantly on Ms Garrett’s options as he was not sure “where these were at”. The email stated that the meeting was long but productive and that Mr Anderson believed that “Michael [de Rooy] will continue to support Ashington in the Investec credit process as long as we update him very regularly”. Mr Anderson said that, “[i]t is also interesting to note that constantly throughout the meeting Michael was highly critical of PPB’s conduct and he does not believe that they have acted Investors interest nor have they conducted themselves professionally”. The email referred to a “joint report” being prepared by Ms Garrett (but none appears to have been produced in the proceeding). (The plaintiff says that it can be inferred that Smorgon’s interest in the mezzanine finance was diverted to the Acorn/Albany proposal, based on an email from Mr Ko to Ms Garrett and Mr Renauf of 14 November 2009 – see below; noting that Smorgon had agreed to provide mezzanine funding to complete the Stonington Project.)

813. [844]

     By 29 October 2009, Ashington Management was unable to meet its obligations to pay rent. Mr Anderson required finance staff to provide the four weekly cashflow to him twice a week.

814. [845]

     In a funds management update on 29 October 2009, Mr Fowler (of HESTA) stated that “[p]ositive developments have occurred at Ashington with two new senior employees have joined” and expressed his view that the “new personnel are acting in a far more appropriate manner than the existing management have to date”.

815. [846]

     On 30 October 2009 at 12.35pm, Ms Briggs sent an email to Mr Block and Mr Lord attaching the weekly update on Wylde Street.

816. [847]

     On 30 October 2009 at 2.59pm, Mr Block sent an email to the asset consultants summarising the latest proposal from Albany and Acorn. The email attached the Wylde Street update from Ashington. Mr Block stated that Mr Ko would wish formally to present their plan to investors in Sydney/Melbourne the next Friday (6 November 2009). Mr Block set out the key terms of the proposal, which involved an initial $20 million injection of funds of which $10.3 million would cover the Investec mezzanine debt, $3 million would go towards Stonington’s vendor finance, $2.5 million to unsecured creditors, $2.5 million to Stonington’s site works and $1.5 million to “other”. Mr Block said that $10 million would be injected as mezzanine debt and $10 million would be a debt instrument at the fund level of which $4 million would come from the consortium (defined as Acorn and Albany) and $6 million from the superannuation fund investors, being the remaining uncalled capital of their initial commitment. The email also referred to the return to Australia on 30 October 2009 of Ms Garrett and Mr Renauf after their meeting with Mr McCabe in London.

817. [848]

     On 30 October 2009 at 5pm, Mr Anderson sent an email to Mr Block with a copy to Mr Lord, passing on the Wingate letter of 26 October 2009 (which offered indicative terms on a refinance package of senior debt of $13 million for Wylde Street). Mr Anderson said that he only organised the refinance as a backup if Investec were not happy with the sale process but that Investec had now confirmed that it was happy with the sale process and therefore the offer was not being disclosed to Investec. Mr Anderson also advised that Wingate had extended taking up the offer for another week.

818. [849]

     On 30 October 2009 at 5.47pm, Mr Anderson sent an email to Mr de Rooy attaching an update on the Stonington Capital Raising deal with Wingate, Alter and Mr McCabe. In relation to Alter, the update recorded that “the Alter Family focus has incorporated increasing the equity commitment by also involving the Wylde Street property. This adds an additional level of complexity that we wish to avoid”.

819. [850]

     On 30 October 2009 at 7.37pm, Mr Anderson sent to the asset consultants and to PPB the quarterly investor reports for ADF and ADF2 as at 30 September 2009.

820. [851]

     On 30 October 2009 at 10.06pm, Mr Cameron Hume of RSM Bird Cameron (as it then was), Ashington Capital’s then auditor, sent an email to Mr Steel stating that “we are required under the Corporations Act, in relation to Ashington Capital’s licence requirements to inform ASIC of any adverse conditions experienced by a licence holder” and that it proposed to send a draft letter to ASIC.

821. [852]

     On Sunday 1 November 2009 at 8.18pm, Ms Garrett sent an email to Mr de Rooy, copied to Mr Renauf, apologizing for not getting in touch the previous week and referring to Mr de Rooy’s meeting with Mr Anderson that last week. Ms Garrett said that there were some challenges with Mr McCabe’s prospective investment; but that Alter was once again interested. Ms Garrett forwarded a copy of that email to Mr Anderson and Mr Minahan, copied to Mr Renauf at 8.20pm on 1 November 2009. The plaintiff says that that email was intended to mislead Mr Anderson who continued to believe Ms Garrett was pursuing mezzanine funding for Stonington.

822. [853]

     On 2 November 2009, Ms Garrett and Mr Renauf met with Mr Ko.

823. [854]

     On 2 November 2009 at 9.43am, Ms Garrett sent an email to Mr Anderson and Mr Renauf saying she was not sure why she was not copied into the original note to Mr de Rooy and asking about the Wingate capital raising. Mr Anderson at 10.09am sent an email to Mr Renauf and Ms Garrett attaching the note to Mr de Rooy.

824. [855]

     On 2 November 2009 at 10.19am, Ms Garrett sent an email to Mr Anderson and Mr Minahan, copied to Mr Renauf, referring to an article in the Financial Review and saying that as a consequence of the article there were concerns among existing investors and Patersons. Ms Garrett said that she would deal with Patersons separately and assumed from the report to Mr de Rooy that Mr Anderson’s preference was to use Wingate over the PSL consortium, “so I guess the PSL concerns are not overly important to Ashington”. Ms Garrett said investors were asking why they were not forewarned of the upcoming article and terms of the proposed equity investment.

825. [856]

     Mr Anderson’s response, by email sent at 10.59am to Ms Garrett and Mr Minahan, copied to Mr Renauf was that:

826. [857]

     On 2 November 2009 at 5.28pm, Mr Block sent an email to Mr Anderson (stated to be on behalf of the superannuation fund investors) requesting a detailed update on Wingate’s potential offer to provide mezzanine/preferred equity.

827. [858]

     Over the course of 2 and 3 November Mr Ko corresponded with PPB confirming two meetings with the superannuation fund investors on Friday 6 November 2009. On 4 November 2009, Mr Ko forwarded the meeting details to Mr Routley, Mr Tremaine, and to Ms Garrett and Mr Renauf (at their respective Gmail addresses).

828. [859]

     On 3 November 2009, Investec issued a demand for payment to Ashington Capital as trustee for the Wylde Street Trust, in respect of the default of the Wylde Street Facility, demanding payment of $10.78 million immediately.

829. [860]

     On 3 November 2009 at 11.28am, Mr Ko sent an email to Ms Garrett, Mr Routley and Mr Tremaine, attaching a memorandum addressed to those persons setting out issues to be canvassed in a proposed conference call to be held on 4 November 2009 at 2pm. The first item on the agenda was “agreement on preconditions to all of us proceeding forward”. The “us” on the agenda item was divided into 3 groups with initials denoting: Alter/Acorn, Tremaine and Garrett/Renauf. (It should be noted that the plaintiff places execution of the “Garrett plan” as commencing from around 1 November 2009.) The issues also included a “presentation to equity investors on Friday 6 November” that would cover “[e]xpectation Management”.

830. [861]

     On Wednesday, 4 November 2009, Investec sent a letter to the directors of Ashington Capital as trustee for ADF2 in respect of default of the Investec Stonington Facility, requiring a signed term sheet to be in place by 6 November and a binding unconditional agreement to be in place to refinance Investec by 13 November 2009, failing which Investec would consider all options available to it.

831. [862]

     On 4 November 2009 at 8.36am, Mr Ko sent an email to Mr Routley attaching an outline of draft presentation slides to the superannuation fund investors, which included the introduction of Parissen and the management team; and the statements that, “[o]ur main limitation has been access to information …” and that Parissen is a “joint venture between the Alter Family and Acorn Capital” and will be “led by Byron Ko and Neil Tremaine”.

832. [863]

     At 8.54am, Mr Ko sent Mr Routley a draft email to Mr Block. On 4 November 2009 at 9.25am, Mr Ko sent the foreshadowed email to Mr Block and Mr Lord, copied to Mr Routley and Mr Tremaine, seeking “urgent clarification of two issues from PPB”: first, that “[w]e need to understand how PPB intends to address the issue of access to information” to form a definitive view on the asset and business strategy; and second, to “understand both the process and timeframe for removal of the manager”. Mr Block responded to this email at 10.53am, to Mr Ko and Mr Lord (copying in Mr Routley and Mr Tremaine), agreeing that these “remain key issues” and saying that PPB “have some strategies” to discuss with Mr Ko.

833. [864]

     On 4 November 2009 at 11.54pm, Mr Ko sent Mr Routley and Mr Tremaine a marked-up further draft of the outline of the proposed presentation to the superannuation fund investors, for discussion.

834. [865]

     On 4 November 2009 at 12.46pm, Mr Anderson sent an email to Mallesons (Andrew Norman and David Eliakim), copied to Ms Garrett, Mr Steel and Ms Briggs, saying that he wanted to bring all relevant parties together under the email; and that Ashington’s aim was to introduce either the Alter family or Wingate as the provider of funds “(circa $22m-23m) during November to drive completion of this project including the payout of Investec and Hamton”. The email said that Mr Eliakim (from Mallesons) and Ms Garrett would finalise terms and structure with preferred party and complete the transaction.

835. [866]

     On 4 November 2009 at 5.41pm, Mr Ryan Levin of Wingate sent an email to Mr Anderson, copied to Mr Harrison of Wingate, providing the detail of the potential transaction structure discussed that afternoon and asking Mr Anderson to call and discuss.

836. [867]

     On 4 November 2009 at 3.44pm, Mr Block sent an email to Mr Anderson, copied to Mr Lord, following up on his information request of 2 November 2009 in relation to Wingate and asking for information on the Hamton legal action. On Thursday, 5 November 2009 at 10.17am, Ms Briggs sent an email to Mr Block, copied to Mr Lord and Mr Anderson attaching: the Hamton statement of claim, Ashington defence, and Mallesons advice on the litigation.

837. [868]

     On 5 November 2009 at 1.28pm, Mr Anderson sent an email to Mr Block with a copy to Mr Lord, attaching email communications between Mr Wyeth of Ashington and Mr Harrison of Wingate, about a refinancing proposal for the Stonington Project, although it is not clear what was provided.

838. [869]

     On 5 November 2009 at 3.30pm, Mr Anderson, Mr Steel and Mr Minahan met with Cameron Hume (Audit Partner at RSM Bird Cameron Partners) in relation to the proposed correspondence to ASIC about potential insolvency; and it was agreed by the auditor that the letter would not be submitted until 9 November 2009.

839. [870]

     On 5 November 2009 at 3.42pm, Mr Knight (of Ashington) sent an email to Mr Anderson and Mr Minahan, copied to Mr Steel, advising that Colliers had reported an extensive buyer enquiry for Wylde Street following an email to its database and an advertisement the day before.

840. [871]

     On 5 November 2009 at 5.49pm Ms Garrett from her Gmail account sent an email to Mr Block and Mr Lord, copied to Mr Renauf, forwarding an email from Ms Briggs at 5.46pm, attaching a demand from Investec re Wylde Street, stating “no surprises, just for your information”. Mr Block’s response (by email on 6 November 2009 at 8.55am) was that Wingate’s refinance proposal on Wylde Street should be immediately pursued and Investec advised; indicating that Investec should be kept “on side”.

841. [872]

     On 5 November 2009 at 5.45pm, Mr Paul Mirams of KordaMentha reported in an email to his fellow partners that he had spoken to Wingate “off the record” and that he understood that its “pricing will effectively mean no return to current unitholders but some opportunity to recover part of the original investment in a few years time”. Mr Mirams also noted that Wingate was “in the deal” but would not meet Investec’s timeline; and that McCabe was also unlikely to meet the timeline.

842. [873]

     On 5 November 2009 at 8.43pm, KordaMentha personnel sent an email suggesting a call with the banks due to a concern that Ashington would go into voluntary administration.

843. [874]

     On 6 November 2009, there was a teleconference between Michael White of Westpac and Mr Winterbottom of KordaMentha in relation to Ashington Capital.

844. [875]

     On 6 November 2009, presentations were made to the superannuation fund investors, with Ms Garrett, Mr Routley and Mr Ko in attendance.

845. [876]

     On 5 November 2009 at 6.50pm, Mr Ko sent an email to Ms Garrett, Mr Routley and Mr Tremaine attaching the presentation to investors that he had omitted to include with his 7.49am email that day. It noted, inter alia, that Parissen Property Group (a joint venture between the Alter family and Acorn) “proposes to invite Nicky Garret and Sam Renauf to join the team” and proposed the “[r]emoval of Ashington from trustee and management roles across ADF 1 & 2”.

846. [877]

     On 5 November 2009 at 6.50pm, Mr Ko sent an email to Ms Garrett, Mr Routley and Mr Tremaine a more advanced presentation for the Unitholders dated 6 November 2009. The advanced form of presentation included the following statements:

847. [878]

     On 6 November 2009, Ms Garrett sent a copy of that presentation to Mr Carolan to be printed. Mr Carolan forwarded it to Mr Routley noting that “Nicki & Co require the attached … to be printed for the afternoon meetings in Melbourne”.

848. [879]

     The plaintiff emphasises that this presentation was not made known to Mr Anderson.

849. [880]

     That presentation was entitled “Parissen Property Group: Presentation to Ashington Development Funds Investors”. It described Parissen as a “newly created fund manager focused on opportunistic and distressed property investments” and a “joint venture between the Alter Family (51%) and Acorn Capital (49%)” with the joint venture being “led by Byron Ko and Neil Tremaine”. It stated that Parissen proposed to invite Ms Garrett and Mr Renauf “to join the team”. As to the structure, the presentation identified as the first of its elements the “removal of Ashington from trustee and management roles across ADF1 & ADF 2 Trusts” and the “[i]ntroduction of new [Parissen] trustee and manager entities at sub-trust levels and the application of ‘best of breed’ corporate governance moving forward”.

850. [881]

     Between 6 and 10 November 2009, Mr Sheehan, Mr Ko and Mr Routley commenced preparation of an indicative term sheet to submit to the superannuation fund investors, subject to due diligence and further information and documents. The drafts setting out the basis of the Parissen proposal were provided by Mr Ko to PPB for comment and were also shared with Ms Garrett and Mr Renauf. The plaintiff says that PPB kept the existing investors informed of the developing proposal from Parissen, while expressing negative views about the Wingate Proposal.

851. [882]

     On 6 November 2009 at 12.04pm, Mr Anderson sent an internal email to Mr Minahan and Mr Wyeth, copied to Mr Steel, Ms Garrett and others, forwarded the email received from Mr Levin on 4 November 2009 as to the structure of Wingate’s potential investment. Mr Anderson said that Wingate had come back that morning on the basis that they would prepare a term sheet not conditional on construction finance and that they wanted to get an understanding that Ashington would be able to obtain a facility and an agreed level of presales for Stage 2 construction. Mr Anderson said it was agreed that Ashington would prepare an application to CBA. Ms Garrett responded to this at 1.43pm saying, “[w]e are working with Alter. I have left messages with CBA and will follow up this afternoon”.

852. [883]

     At 4.01 pm on 6 November 2009, Mr Anderson sent an email to Mr de Rooy and Ms Garrett forwarding a copy of the email sent on 4 November 2009 by Wingate setting out a proposal for Stonington. At 4.43pm, Mr Anderson sent an email to Mr Farrel Meltzer (Wingate) saying that he “went out on a limb pushing the Wingate case over the Alter Family”. At 6.10pm, Mr Harrison of Wingate sent an email to Mr Anderson saying “we will be providing a term sheet to you outlining the general structure of our proposal by Monday November 9”. On 6 November 2009 at 6.27pm, Mr Anderson sent an email to Mr de Rooy copied to Ms Garrett, forwarding Mr Harrison’s email as confirmation that Wingate would provide a term sheet by Monday. At 8.13pm on 6 November 2009, Ms Garrett sent Mr Anderson and Mr de Rooy an email, copied to Mr Renauf, saying that she had been “thrashing out” a term sheet with Alter that would be done by Monday. The plaintiff says that this was not true, as Ms Garrett had in fact been presenting the Parissen proposal to the super fund investors with Mr Ko in Melbourne.

853. [884]

     On 6 November 2009 at 1.45pm, Colliers sent an email to Mr Minahan, Ms Briggs and Ms Knight, copied to others, saying that there had been a very high and positive response rate in the first week promoting the sale of Wylde Street.

854. [885]

     On 6 November 2009 at 12.11pm, Mr Carolan sent an email to Ms Kylie Dickson of Patersons, with the heading “MC WIP template” (presumably a reference to Mr Carolan’s work in progress).

855. [886]

     On 6 November 2009 at 2.15pm, Ms Garrett from her Gmail address, sent an email to Mr Carolan as to what he could say to Mr Tim Hannon (of Derwent Capital), saying “Maybe in the email say you were sad to hear that Thunder is no longer but hope to stay in touch. You could note how busy I have been this week given it is my last for Ash investors …”. As noted above, Project Thunder is not relevant to the present proceeding. However, what is relevant is that Ms Garrett here appears to be suggesting that this was to be her last week at Ashington or for Ashtingon investors.

856. [887]

     At 2.31pm, Mr Carolan emailed Mr Hannon saying “… strange to hear Thunder is no longer but hope to stay in touch… Nicki has been working around the clock with Ashington as I thought it was her last week or so before joining forces”. Mr Hannon’s response at 3.38pm included “I was disappointed with Thunder. I just got the feeling you guys didn’t want me to be involved”. Mr Carolan then responded at 4pm saying “Typical of Nicki .. she is working to death on something that is not her responsibility (Ashington farck-ups) … the plan last week was to secure McCabe’s funding to seed Thunder and I thought that was successful”. Mr Carolan forwarded these emails to Ms Garrett saying “see below for email banter with Tim … I think this captured your point to me. Seems like some miscommunication unless of course you don’t want him to be involved”.

857. [888]

     Meanwhile, on 6 November 2009 at 2.26pm, Mr Anderson sent an email to Ms Garrett saying he wanted to discuss a couple of things when she had a minute. Mr Anderson says that, at the time he was negotiating a term sheet with Wingate on 6 November 2009, Ms Garrett informed him that a term sheet from Albany was imminent and was expected on 9 November 2009; and the plaintiff says that this was not true.

858. [889]

     On 6 November 2009 at 6.18pm, Mr Anderson sent an email to Mr Block copied to Mr Lord, summarising matters arising during the week in relation to Wylde Street, Stonington and Double Bay, and attaching documents including the Investec demand of 4 November 2009 and a draft strategy document dated 3 November 2009 for Double Bay.

859. [890]

     Ms Garrett, Mr Lord and Mr Renauf organised a meeting on Monday 9 November 2009 at 4.30pm in correspondence between them on Sunday 8 November and Monday 9 November 2009.

860. [891]

     On 8 November 2009 at 9.34pm, Mr Ko sent an email to Ms Garrett, Mr Renauf and Mr Tremaine attaching a memorandum proposing that they receive a salary of $240,000 plus superannuation, along with an equity ratchet structure. After receiving these, Ms Garrett emailed Mr Carolan and told him to log into her Gmail and “check out Byron latest two emails.. [t]he ratchet and consultancy look good to me, esp the ratchet”. (Mr Ko sent Ms Garrett and Mr Renauf a draft employment term sheet on 16 November 2009.)

861. [892]

     On 8 November 2009 at 9.37pm, Mr Ko sent an email to Ms Garrett and Mr Renauf at their Gmail addresses attaching a memorandum in relation to a proposed consultancy arrangement “to allow you to resign from Ashington after the terms sheet is signed with investors this week”. The memorandum noted that Mr Ko would be “grateful if you give consideration to resigning from Ashington as soon as practicable after we complete a terms sheet and take up a consultancy contract with us” and that Mr Ko “wanted to start planning to enable [Ms Garrett and Mr Renauf] to … [m]inimise the conflict issues” and “[w]ork aggressively to complete the assumption of ADF1 & ADF2”. Mr Ko stated that the consultancy fees of $5,030.77 per week would be funded by Pacific and Acorn. (Acorn says that there is no evidence that this email was sent to Mr Routley.)

862. [893]

     On 9 November 2009 at 10.19am, Ms Garrett sent an email to Mr Anderson, copied to Mr Renauf, saying that Mr de Rooy had just advised her that Hamton had sought “special leave to have the Ashington business wound up tomorrow”.

863. [894]

     On 9 November 2009 at 5.59pm, Mr Block sent an email to the superannuation fund investors, stating that he had spoken to Mallesons about the Hamton legal action and that Mallesons advised that “Hamton had accelerated the legal process to seek a summary judgment” and “they consider that Hamton have a strong chance of securing the judgment on Weds”. Mr Block also stated that the action was against both Ashington Capital and Mr Anderson personally.

864. [895]

     On 9 November 2009 at 4.08pm, Mr Gavin sent an email to the superannuation fund investors about the important role of PPB “in the next few days”, saying that “I think it’s also important that [PPB] stay involved to hopefully avoid Craig doing something silly in the coming days (which we are increasingly concerned about)”. (Acorn says that this was another example of the distrust that existed between the superannuation fund investors and Ashington.)

865. [896]

     On 9 November 2009 at 4.25pm, Mr Ko sent an email to Mr de Rooy attaching a term sheet intended to be advanced to PPB, showing how Investec would be repaid from new equity.

866. [897]

     On 9 November 2009 at 6.43pm, Mr Harrison of Wingate sent an indicative term sheet to Mr Anderson recording a proposal for the provision of finance to pay out Investec (the Wingate Proposal). The terms of that proposal included that: a principal sum of $9 million would be advanced to Ashington Capital as trustee of the Stonington Trust for a term of 24 months at an interest rate of 42% per annum capitalised and compounding monthly in arrears; by way of security, Ashington Capital as trustee of the Stonington Trust would grant a fixed and floating charge over its assets and undertaking, as well as a registered mortgage in respect of the Stonington Property, both of which would rank behind Westpac’s securities; and any facility agreement would be subject to conditions precedent including there being “[c]urrent indicative terms for a construction facility for Stages 1 and 2 issued by a ‘Big Four’ Senior Lender which, in [Wingate’s] opinion, are capable of being fully satisfied by the Borrower”. Wingate was to receive a profit share on the project, a $300,000 establishment fee, and a $200,000 per annum management fee. As noted, there were various conditions precedent.

867. [898]

     On 9 November 2009 at 7.45pm, Mr Hume of RSM Bird Cameron sent an email to Mr Anderson, attaching s 990K of the Corporations Act. At 1.28am on 10 November 2009, Mr Hume sent an email to Mr Anderson attaching a copy of a letter to ASIC about Ashington’s financial difficulties noting that it had come to the attention of RSM Bird Cameron during the audit for the year ended 30 June 2009 that ADF 1 and 2 were in financial difficulty and may not be in a position to meet their debts as and when they fell due.

868. [899]

     On Tuesday 10 November 2009 at 7.46am, Ms Garrett from her Gmail account forwarded to Mr Carolan an email which Mr Ko had sent to Ms Garrett and Mr Renauf attaching flight tickets for travel to Melbourne, and Ms Garrett asked Mr Carolan to print them off for her and Mr Renauf, saying “bit awkward to do it here”.

869. [900]

     On 10 November 2009 at 9.31am, Mr Ko sent an email to Mr Routley, Mr Sheehan, Mr Tremaine, Ms Garrett and Mr Renauf, attaching a draft of a term sheet for a proposal from Parissen to recapitalise ADF2 with $20 million, with $6 million to come from the superannuation fund investors. An objective of the term sheet was stated to be “[r]emoval of the Ashington Group from ADF as trustee, manager and real estate services provider” and “assumption of ADF2 trustee and management responsibilities by [Parissen] controlled entities”.

870. [901]

     At 9.35am, Mr Ko sent an email to Mr Sheehan with a copy to Mr Routley, Mr Tremaine, Ms Garrett and Mr Renauf, requesting legal advice about a number of matters relating to the structure of ADF2 and investment structuring. Among other things, in the email Mr Ko asked “[w]ill any or all of the above options pose more or less risk to a) Alter/Acorn as manager or b) Acorn/Alter as investors in diluting/dealing with Ashington’s interest?” and said:

871. [902]

     Acorn points out that there is no evidence that Mr Sheehan responded to this email.

872. [903]

     On 10 November 2009 at 10.04am, Mr Routley sent an email to Mr Ko, attaching an initial due diligence questionnaire “that ideally needs to be completed by [Ashington] and PPB”. Mr Ko responded at 12.09pm attaching a proposed organisation chart for the new Parissen entity listing Ms Garrett under “Funds Management” and Mr Renauf and Mr Tremaine under “Development”, all reporting to the Managing Director. Ms Garrett was also listed under “Finance Administration – Client Service/Reporting”.

873. [904]

     On 10 November 2009 at 12.28pm, Mr Routley sent an email to Mr Ko, copied to Mr Sheehan, suggesting that the investment into ADF2 should be by way of a participation loan at ADF2 level, unless it should be at sub-trust level for “litigation reasons”. Mr Ko responded to that email at 12.44pm stating that he had not had much experience with participating loans and asked a number of questions, saying “let’s try to discuss this afternoon”.

874. [905]

     On 10 November 2009 at 12.47pm, Mr de Rooy sent an email to Ms Garrett saying that:

875. [906]

     On 10 November 2009 at 12.21pm, Mr Anderson sent an email to Ms Garrett with the subject “Hamton – CONFIDENTIAL good news” saying that “Hamton are adjourning”.

876. [907]

     On 10 November 2009 at 8.20pm, Mr Block sent an email to the asset consultants noting that the Hamton legal proceedings had been adjourned and that Hamton had agreed to allow Ashington until 30 November 2009 for payment. He said that “Craig [Anderson] is punting he will have the money by the end of the month”.

877. [908]

     On 10 November 2009 at 1.28pm, Mr Hume of RSM Bird Cameron sent an email to Mr Anderson, copied to Mr Eliakim of Mallesons and Mr Paul Heiler of RSMI, attaching an amended version of the draft letter dated 29 October 2009 to ASIC. The draft letter recorded that, in accordance with its obligations under s 990(k) of the Corporations Act and Regulatory Guide 34, it had identified that Ashington Capital as trustee for ADF and ADF2 were in financial difficulty and may not be in a position to meet their debts as and when they fell due.

878. [909]

     On 10 November 2009 at 2.54pm, Ms Garrett, from her Ashington email address sent an email to Mr Block, copied to Mr Renauf, saying “The big lunch is planned for Wed next week [i.e., 18 November]” and that she had told “the Arab” that he needs to take us for copious drinks soon.

879. [910]

     On 10 November 2009 at 3.40pm (in what the plaintiff says was perhaps the first step in the design to create pressure on Ashington to cause its resignation), Norton Gledhill, acting for the superannuation fund investors sent an email to Mr Anderson and Mr Minahan, attaching a letter to Ashington Capital requesting information in relation to the Wingate Proposal. In that letter, Norton Gledhill stated that investors expected to be “properly consulted, in advance, of any decision being made in relation to the dealings with Wingate”. (It is apparent that the subsequent decision of Mr Anderson to sign the Wingate term sheet without consultation with the superannuation fund investors caused considerable dissatisfaction with them, to say the least.)

880. [911]

     Mr Anderson was cross-examined on whether he appreciated that this letter was a “a very serious request about a very important matter to the investors” and his response was that he thought the letter was “bizarre” (T 663). Acorn maintains that this reflected Mr Anderson’s failure to understand and respect the request by superannuation fund investors for prompt and accurate disclosure of information on important matters. It is also said to be inconsistent with Mr Anderson’s evidence that understood the superannuation fund investors wanted to be properly consulted and his self-serving assertion that he in fact “properly consulted them” (T 934).

881. [912]

     On 10 November 2009 at 4.13pm, Mr Steel sent an email to Mr Anderson and others at Ashington, copied to Mr Minahan, saying “until we take care of the bank covenants, the PXHT bank account is basically frozen”. Mr Steel said that as “the banks are ‘secured’ creditors and trade creditors are ‘unsecured’, the payment of unsecured creditors prior to the payment of secured creditors places the directors at risk”; and that “if we wish to pay the creditors…Ashington Group must make the payment on behalf of the fund”. At 5.15pm, Mr Bailey of Ashington sent an email to Mr Steel and Mr Anderson, copied to others at Ashington saying that “in short, if we can’t pay anybody we will have to close the building. We need to pay cleaners, essential services maintenance, electricity etc and if we can’t the building will be unsafe to occupy”. Mr Steel responded at 5.34pm that the directors must make a decision as to whether they are willing to risk being reimbursed and whether they have the capacity as a group to make the commitment.

882. [913]

     Mr Anderson responded at 7.15pm to Mr Steel and Mr Bailey only, that “there are times when a face to face conversation is more appropriate and considered than global emails. In tough times, more than ever leadership is needed”.

883. [914]

     By 10 November 2009, Mr Steel had advised Ms Briggs, who in turn advised Mr Anderson that (Ex 17):

884. [915]

     Meanwhile on 10 November 2009 at 5.19pm, Mr Ko sent an email to Ms Garrett and Mr Renauf at their Gmail addresses and to Mr Tremaine, Mr Sheehan and Mr Routley, attaching “a first draft of a task list that I think needs to be done by the team”, which assigned responsibility by initials to Mr Ko, Mr Routley, Mr Sheehan, Ms Garrett, Mr Renauf and Mr Tremaine across each of the project stages of financial modelling, due diligence, manager, investment approval, deal negotiation and implementation.

885. [916]

     On 10 November 2009 at 5.30pm, Mr Block sent an email to Mr Ko, copied to Mr Lord, attaching trade creditors of Ashington Capital and following up on matters discussed in a phone call that day. Mr Block said that, in connection with the arrangements with ADF, he would like to discuss with Arnold Bloch Leibler but that subject to them being able to work through an investor consent that could work well. Mr Ko forwarded that email to Mr Routley at 5.46pm that day.

886. [917]

     On 10 November 2009 at 5.34pm, Mr Block sent an email to the asset consultants advising that Mr Anderson had sought an interview with the Australian Financial Review (AFR). Mr Block said that Ashington had received a proposal from Wingate and that he had “the terms are pretty ugly”, but that it had not yet been sent to PPB. Mr Block also said that he had had detailed discussions with Mr Ko and his team that day and expected something from him in the next day or so.

887. [918]

     On 10 November 2009 at 5.37pm, Mr Routley sent an email to Mr Ko, Ms Garrett and Mr Renauf on their Gmail addresses, Mr Tremaine and Mr Sheehan, advising that he had just “organised a dataroom” and would “upload data and send invites”.

888. [919]

     On 10 November 2009, Ashington filed an appeal in the Land and Environment Court in relation to the Double Bay decision.

889. [920]

     A St George “Application Summary – Decision History” document dated 10 November 2009 recorded loan breaches by Ashington to date.

890. [921]

     On 10 November 2009, Mr Steel forwarded to Ms Briggs the email that she had sent him and Mr Anderson on 21 August 2009 about the removal of Ashington Capital as trustee, seeking to clarify the structure of the Development Management Deed.

891. [922]

     There followed a chain of emails on 11 and 12 November 2009 between both Mr Steel and Ms Briggs, and also Mr Steel, Ms Briggs and Mr Anderson about the current structure and the financial consequences for Ashington Management if Ashington Capital was removed as trustee. Mr Anderson was cross-examined about those emails. Mr Anderson maintained his position that, even by mid-November 2009, he had “very little focus” on whether Ashington Capital would be removed as trustee as “there was no evidence available to me that anyone was contemplating on sacking the trustee at that time” (T 936-937). Mr Anderson denied that he knew there was a possibility that the superannuation fund investors might remove Ashington Capital as trustee (yet Acorn notes that Mr Anderson’s own email on 12 November 2009 at 4.35pm within this email chain spoke in terms of “[i]f ACL atf SPV gets sacked”). Mr Anderson in cross-examination dismissed that the fact that Mr Steel as Ashington’s Chief Financial Officer had written to Ms Briggs to reagitate earlier advice she had given about Ashington Capital’s removal as trustee as no more than a reflection that Mr Steel “by nature was a worrier”, and that Ms Briggs likely sought external advice from Mallesons because Mr Steel “harassed” Ms Briggs about it (T 940).

892. [923]

     Acorn says that this evidence is absurd, especially in light of the fact that Ms Briggs had checked the advice with Mallesons in her email to Mr Edwards of Mallesons on 11 November 2009 at 11.37am (which was sent at 12.18pm by Mr Eliakim to Mr Anderson because Mr Eliakim was concerned that Mallesons might not recover their fees for giving it) (Ex 25). Acorn says that it is quite plain that for Ashington Capital to be removed at trustee of ADF and ADF2 at that time would have been very significant, if not catastrophic, for Ashington’s business. Acorn maintains that Mr Anderson’s evidence in the witness box in this regard was unsatisfactory and dishonest in that he failed to accept those obvious propositions.

893. [924]

     On 11 November 2009 at 11.23am, Mr Block sent an email to Mr Anderson seeking more details of the Wingate Proposal and repeating the superannuation fund investors’ concerns in relation to the process.

894. [925]

     On 11 November 2009 at 11.57am, Mr Anderson sent an email to Mr Block (copied to Mr Lord and Mr Burridge) in which he explained why he had not sent the Wingate Term Sheet to him, saying that he got it the previous morning (which Acorn says was not correct – technically it appears that Mr Anderson received it at 6:43pm on 9 November but whether he read it then is not clear) and indicated that it would be supplied. However, Mr Anderson said that he “did not forward it to you because there were numerous issues/inaccuracies which we would like to resolve before it gets your review”. Mr Anderson said in that email that he did not recall PPB “raising a concern about the Stonington Pref Equity process” and stated that Ashington ran a professional process with due diligence undertaken via a due diligence site. On 11 November 2009 at 12.12pm, Mr Block responded to this by email to Mr Anderson pointing out that they had “been in constant dialogue with you concerning this matter, given its importance to investors and the future of the fund”. (Acorn says that this was yet another indication of Mr Anderson’s poor views of his serious obligations of disclosure to the superannuation fund investors.) On 11 November 2009 at 11.59am, Mr Anderson sent an email to Mr Block (copying Mr Lord and Mr Burridge) with the Wingate Term Sheet attached.

895. [926]

     Meanwhile, on 11 November 2009 at 11.59am, Mr Anderson sent an email to Ms Garrett (who must have been in Melbourne at this time) and to Mr Minahan, passing on this email to PPB. Ms Garrett’s response at 4.47pm was that she “got a shitty phone msg but have not yet responded as took a tumble today and decided I could respond to Peter [Block] tomorrow”.

896. [927]

     On 11 November 2009 at 4.13pm, Mr Wyeth (of Ashington) sent an email to Mr Renauf, Ms Garrett and Mr Bailey, summarising the current terms of the Wingate Proposal and forwarding an email sent to Mr Levin of Wingate as to why the Wingate Proposal did not work for Ashington.

897. [928]

     On 11 November 2009 at 1.38pm, Mr Steel sent an email to KordaMentha saying:

898. [929]

     On 11 November 2009 at 4.48pm, Mr Ko sent an email to Mr Block and Mr Lord, attaching a draft term sheet for discussion and noting an intention formally to submit it to superannuation fund investors the following day. The draft term sheet set out a proposal from Parissen to recapitalise ADF2 with $20 million, with $6 million to come from the superannuation fund investors. Mr Ko stated that, “Acorn is still reviewing and therefore this documents [sic] is also subject to their comments”, which Mr Ko then forwarded by email at 4.52pm to Ms Garrett, Mr Tremaine and Mr Renauf.

899. [930]

     An Internal Oversight Group IOG report for the LUCRF Investment Committee dated 11 November 2009 outlines detail of a proposal by a new entity called Parissen to take over as trustee and manager of the Ashington funds.

900. [931]

     On 11 November 2009 at 5.49pm, Mr Hastings (of HESTA) sent an email to Ms Briggs stating that HESTA would value its investment in ADF2 on the basis of a firesale of all assets and requested an updated valuation based on that scenario.

901. [932]

     On 11 November 2009 at 5.33pm, Ms Garrett sent an email to Mr Anderson confirming that she had spoken to PPB and two investors about a possible AFR story.

902. [933]

     On 11 November 2009, Wingate improved its refinance offer on Wylde Street, increasing the principal amount from $13 million to $15.3 million.

903. [934]

     On 11 November 2009, Coopers Lawyers on behalf of Savi Communications sent a letter to Ashington Capital stating that judgment had been entered against it in the sum of $56,088.72 on 10 November 2009 and attaching the notice of order made by the Court.

904. [935]

     On 11 November 2009, St George sent a letter to Ashington about its facilities being in default and stating that St George wished to engage Grant Thornton to undertake a limited scope review of Ashington Group.

905. [936]

     On Thursday, 12 November 2009 at 8.58am, Mr Steel sent an email to Mr Block, copied to Mr Lord. The email from Mr Steel noted issues including: the recording of “excess” contributions or “loans” made by ADF2 to the Double Bay Property; the recording of a future $20 million fee payable to Valad on completion of the Noosa Project; certain “going concern issues” which Mr Steel summarised as that “in general both funds are illiquid and dependent on future events to occur” which included not just the Stonington recapitalisation but also the sale of the Wylde Street Property, an agreed strategy with the financiers of the Double Bay Project and an unfavourable valuation of Stonington; as well as certain “compliance issues” which included an inter-trust loan of $2.3 million, the defaults on the banking covenants as well as the borrowing at the head trust level which had occurred with respect to the Investec Stonington Facility. Mr Steel there recorded his view that the auditors were reluctant to issue their report prior to the outcome of the Stonington Capital Raising. On 12 November 2009 at 9.05am, Mr Block forwarded that email to Mr Ko and Mr Lord. On 12 November 2009 at 7pm, Mr Ko forwarded the email to Ms Garrett and Mr Renauf on their Gmail addresses, and to Mr Routley, Mr Tremaine and Mr Sheehan.

906. [937]

     On 12 November 2009 at 4.58pm, Mr Ko sent an email to Mr Block and Mr Lord, attaching a term sheet of the Parissen proposal “for distribution”, with some marking up.

907. [938]

     On 12 November 2009 at 6.31pm, Mr Carolan sent an email to Ms Dickson attaching a document recording his ‘Work in Progress’, which noted the Ashington Property Group at the top of the list under the heading “Mandated”, with the transaction description of “Mezzanine Finance Facility”.

908. [939]

     On 13 November 2009 at 8.37am, Ms Garrett informed Investec that Acorn and Albany had submitted a term sheet to PPB, which PPB was going to recommend to investors. At 9.22am, Mr de Rooy requested that Ms Garrett push for a timetable for completion of the deal by close of business that day. Ms Garrett responded at 2.40pm that she was “pushing as hard as I can”.

909. [940]

     Meanwhile, on 13 November 2009 at 9.59am, Mr Ko sent an email to Mr Block and Mr Lord, copied to Mr Routley, attaching a final term sheet for the proposal from Parissen to recapitalise ADF2 with a minimum of $24 million, with $6 million to come from the superannuation fund investors, to be applied across the Stonington Project and the Double Bay Project. At 5.33pm, that day, Mr Block forwarded that email to Mr Warden copied to Mr Lord.

910. [941]

     On 13 November 2009 at 5.28pm, Mr Block sent an email to Mr Warden and Mr Lord at PPB, forwarding the email chain between Mr Wyeth and Mr Renauf attaching Stonington Project Summary Financials.

911. [942]

     On 13 November 2009 at 5.33pm, Mr Anderson sent an email to Mr Block, copied to Mr Lord and Mr Burridge, outlining significant events that week. The email stated that the Hamton legal action had been adjourned to 7 December 2009; that a term sheet had been received from Wingate late on 9 November 2009 but that the Wingate Term Sheet “requires clarity in many areas to permit the development of a financial model that would allow Ashington to communicate to investors the terms of the offer”; and that “Ashington’s development team is working with Wingate to develop a financial model which clearly articulates the terms of this arrangement”. Mr Anderson concluded by saying “[u]pon agreement, a proposal will be forwarded to PPB for consideration with investors”.

912. [943]

     On 13 November 2009 at 5.37pm, Mr Block sent an email to asset consultants advising that an updated term sheet had been received from Mr Ko that would be circulated on the Monday; that Mr Ko was seeking exclusivity for two weeks (which Mr Block recommended); and that they had “very serious concerns” about the Wingate Proposal.

913. [944]

     On 13 November 2009 at 6.11pm, Mr Burridge sent an email to Mr Anderson and Mr Minahan, copied to Mr Lord and Mr Block, attaching a letter in relation to the Wingate Proposal; requesting that Ashington keep them updated as to the detail of any discussions and correspondence Ashington was having with Wingate and noting the expectation of the superannuation fund investors “to be properly consulted, in advance, about any dealings with Wingate”. Norton Gledhill stated that PPB had serious concerns about the Wingate Proposal. (Again, Acorn says that Mr Anderson’s response in cross-examination (that upon receiving this letter he “question[ed] the genuineness of PPB. That’s all” – T 665) should be understood as nothing more than a self-serving response for a trustee in Ashington Capital’s position.)

914. [945]

     Meanwhile on 13 November 2009, a progress report on the Wylde Street sale process was being prepared by Ashington.

915. [946]

     On 14 November 2009 at 2.21am, Mr Ko sent an email to Ms Garrett and Mr Renauf at their Gmail addresses, and to Mr Tremaine, noting that Victor Smorgon Group had agreed to provide Parissen with mezzanine funding to complete the Stonington Project and seeking comments on whether to make an offer to the Victor Smorgon Group to match the offer from Apex Capital.

916. [947]

     Shortly after the above email, Mr Ko sent an email to Ms Garrett, Mr Renauf and Mr Tremaine, asking everyone to participate in a conference call at 8.30pm on Sunday 15 November 2009 to prepare for the upcoming week, and listing a series of points he wished to discuss, including: review and finalisation of the Parissen financial model; review of the Parissen shareholder presentation, Parissen shareholder terms sheet and team members employment terms sheet; briefing on plans for a meeting to discuss implementation with Mr Philip Chester of Arnold Block Leibler; review the status of the due diligence request; and Victor Smorgon Group’s possible funding for Stonington.

917. [948]

     On 14 November 2009 at 9.51am, Mr Ko sent an email to Mr Block, Mr Lord and Mr Carson at (PPB), which he then sent to Mr Routley, Mr Sheehan, Ms Garrett and Mr Renauf (at their Gmail addresses) and Mr Tremaine. In this email Mr Ko said:

918. [949]

     On 14 November 2009 at 10.19am, Mr Ko sent an email to Mr Routley reporting on a long conversation Mr Ko had had with Mr Tremaine regarding Mr Renauf’s value to the Parissen management team. Mr Ko said that Mr Tremaine’s opinion was that Mr Renauf’s value was significant and that Mr Tremaine would not join PPB and leave “the Pacific family” if Mr Renauf was not part of the team going forward. Mr Ko said that, without Mr Tremaine, Parissen could not go forward in his view and that this placed a different dimension on things for him.

919. [950]

     Mr Routley’s evidence (see at [82] of his 10 August 2018 affidavit) is that he stepped back and allowed Mr Ko to put together an investment proposal via the Parissen model in the period mid-to-late November 2009. His evidence (at [83]) is that Mr Ko informed him that the superannuation fund investors supported the appointment of the Parissen entity as the new trustee.

920. [951]

     On 16 November 2009 at 9.40am (in perhaps one of the more intriguing communications in evidence), Mr Carolan sent an email to Mr Doherty, saying “please keep anything re Alter investment 100% confidential! Very important this is not leaked in anyway or we will be shot”. (The plaintiff says that from this it is plain that Patersons and Ms Garrett and Mr Renauf were well aware that their conduct could not be defended, if uncovered.)

921. [952]

     On 16 November 2009 at 9.42am, Mr Anderson sent an email to St George and NAB attaching a letter from Ashington Capital to the banks in regard to the bank account for the Double Bay Property being overdrawn and their defaults and seeking bank support to have a separate bank account to pay for creditors in relation to security, fire safety inspections and maintenance and electricity (so that the building could stay open).

922. [953]

     On 16 November 2009 at 12.16pm (the plaintiff says once it was clear that her proposal was going to be accepted by superannuation fund investors), Ms Garrett sent an email from her Gmail account to Mr Anderson and Mr Minahan, copied to Mr Renauf, advising that she had decided not to “formalise my employment arrangement with the group”. Effectively, this was Ms Garrett’s resignation from her position with Ashington.

923. [954]

     On 16 November 2009 at 2.52pm, Mr Ko sent an email to Ms Garrett, Mr Renauf and Mr Tremaine attaching a draft employment terms sheet. Acorn says that there is no evidence that this was sent to Mr Routley.

924. [955]

     On 16 November 2009 at 5.27pm, Mr de Rooy sent an email to Mr Anderson copied to Ms Garrett, referring to their telephone conversation that morning and requesting a timeframe for an update on the Wingate and Alter/Acorn Proposals. Mr Anderson replied at 5.50pm that:

925. [956]

     Mr Anderson provided an update on the progression of Wingate, noting that “Mallesons have begun the financial structuring work to cater to the terms of their offer”; and that a revised off would be finalised in the next 48 hours. Mr Anderson offered to meet on Wednesday (18 November 2009), which Mr de Rooy confirmed in his reply at 6.03pm.

926. [957]

     On 16 November 2009 at 7.11pm, Mr Lord sent an email to Mr Ko, with a copy to Mr Warden, giving an extract of an email sent to Mr de Rooy on 11 September 2009 in relation to the proposed “exit fee” of $1 million.

927. [958]

     On 17 November 2009 at 11.46am (the day after she had made known that she was ceasing her role with Ashington), Ms Garrett sent an email to Mr Anderson, saying that they needed to chat about Alter. Ms Garrett said that Alter (effectively Albany and Acorn) had “lost faith in Ashington as Manager” and that they were “looking at ways they can still provide investment but in a protected fashion”; and Ms Garrett said that Alter was speaking directly to PPB and that she was not across all of the detail. Mr Anderson responded at 5.36pm, requesting a 30-minute catch up the following morning; and Ms Garrett agreed.

928. [959]

     On 17 November 2009 at 2.30pm, Mr Ko sent an email to Mr Warden (of PPB), copied to Mr Lord and Mr Block, attaching a list of “missing” documents that had been requesting and which he wanted to review as a matter of urgency (including documents relating to each of ADF2, the custodian, Double Bay, Stonington and Noosa). Acorn says that there is no evidence that this was sent to Mr Routley.

929. [960]

     On Tuesday 17 November 2009 at 10.02am, Mr Winterbottom sent an email to the banks (NAB/St George) copied to KordaMentha personnel, noting that they were meeting with Ms Garrett and Mr Renauf that afternoon (who had just returned from London where they were meeting with potential investors). Mr Winterbottom said that Investec had been in regular contact with Mr Anderson; and that KordaMentha had gained some “high level financial information” in respect of Ashington Group, which they were incorporating in their report.

930. [961]

     On 17 November 2009 at 6.28pm, Mr Ko sent an email to Mr Shepard, following their telephone conversation that day. Mr Ko confirmed that “[they] are working with equity investors in ADF1 & 2 to provide a solution to both funds”. The email sets out elements of the proposed terms, including that there be a standstill agreement for 24 months from NAB/St George in return for certain things, including the new equity being dedicated to seeking a development application for mixed use within the existing building envelope. The email noted that the Alter family and Acorn’s proposal had the support of Mr de Rooy from Investec. Mr Ko said that he understood that David Winterbottom was acting for NAB/St George and that Acorn/Albany would like to brief him but that “we have some sensitivity about approaching St George with this proposal as they are the bankers for Ashington Group Limited, “the manager”“. Mr Shepard sent an email to Mr Winterbottom at 6.33pm, noting that Mr Ko was keen to have a chat and asking if Mr Winterbottom was available.

931. [962]

     Mr Winterbottom sent an email internally within KordaMentha at 6.54pm that day, noting that he had just spoken to Mr Ko, that Mr Ko was worried about St George telling Ashington and that Mr Ko was reluctant to give the proposal to them in detail until there was “some assurance in place”.

932. [963]

     On 17 November 2009 at 8.43pm, Mr Winterbottom sent an email to various persons at NAB and St George, saying that KordaMentha met with Ms Garrett and Mr Renauf that afternoon, and that they would “not be accepting employment with Ashington as initially intended”; but would be working alongside the Alter family with a view to restructuring and recapitalising ADF2. Mr Winterbottom summarised the proposal in relation to this; and said that subsequent to the meeting he had received a call from Mr Ko who broadly confirmed the proposal outlined but was reluctant to provide the proposal to them at that point as he was aware that St George lended funds to other parts of Ashington and was concerned about disclosure. The email noted that “they are still planning out how to gain control of Ashington and need to get formal confirmation from Investors that they will go with the PSCG [Parissen] proposal”.

933. [964]

     On 18 November 2009 at 8.15am, Mr Winterbottom informed NAB and St George that he had spoken with Michael White of St George who was working on an internal solution to the confidentiality issue raised by Mr Ko.

934. [965]

     On 18 November 2009 at 8.37am, Mr Winterbottom sent an email to Mr White reminding Mr White not to pass on any of the details of the Parissen Proposal to any people internally who may be “running with the Group exposure going forward, nor obviously to Ashington”.

935. [966]

     On 18 November 2009 at 6.21pm, Mr Winterbottom sent an email to Mr Ko, stating that it had been agreed by the relevant teams within St George not to disclose the Parissen Proposal to Ashington and provided Mr Ko with Mr White’s contact details.

936. [967]

     At 6.32pm, Mr Winterbottom sent an email to NAB/St George personnel, Mr Mouawad and another at KordaMentha (Paul Mirams) and Mark Clifton at Freehills, forwarding the above email and stating that, “St George now have separate teams dealing with the Double Bay and Other exposures. I will follow up Pacific Shopping Centres [Alter] shortly to determine when we can expect their proposal”. In reply to the 6.21pm email, Mr Ko responded at 8.19pm that he would provide a copy of the term sheet the following day.

937. [968]

     Meanwhile, at 8.17am, Mr Mouawad of KordaMentha sent an email to Mr Steel raising concerns about Ashington’s balance sheets; to which Mr Steel responded at 11:22am. At 11.42am, sent an email asking if Mr Steel’s previous response meant that Ashington was yet to contribute $4.5 million of its capital calls; to which Mr Steel responded, “yes”.

938. [969]

     On Wednesday, 18 November 2009 at 12.17pm, Mr Lord sent an email to the asset consultants advising that a number of matters in relation to the Parissen (Alter/Acorn) Proposal had progressed during the last 24-48 hours and that they would send an update report to investors later that day or the next at the latest. The email recorded Parissen’s suggestion that, in order for their due diligence to be completed, they should assume the role as trustee of both ADF and ADF2, the benefits of which would be to “remove Ashington from its capacity as trustee and prevent the incurring of any further liabilities at Fund or sub-trust level” and allow Parissen full access to records to complete their due diligence.

939. [970]

     The email stated that PPB supported this proposal in circumstances where Mr Anderson was contemplating executing the Wingate Proposal. PPB believed that the replacement of the trustee should occur for both funds as Mr Anderson proposed to use surplus funds released from a purported refinance of Wylde Street against the interest costs in relation to Double Bay. The email stated that if Parissen did not wish to proceed after finishing its due diligence “other opportunities will need to be explored”.

940. [971]

     On 18 November 2009 at 3.53pm, Mr Anderson sent an email to Mr Levin requesting changes to the Wingate Proposal to “allow it to be a little more ‘user friendly’”.

941. [972]

     On 18 November 2009 at 8.59pm, Mr Warden of PPB sent an email to Mr Lord, Mr Block and the asset consultants attaching PPB’s Strategy Report No 3, with the following documents: Parissen Final Terms Sheet; Stonington Feasibility; Double Bay Feasibility; Curriculum Vitaes (Third PPB Report).

942. [973]

     PPB recommended the Parissen deal and the removal of Ashington. In so doing, PPB noted that, according to advice it had received from Arnold Bloch Leibler, while the trustee could be removed by members holding 75% of votes, the management agreements between Ashington Management and each sub-trust had no applicable termination clauses, and material breaches of those agreements had not been committed by Ashington Management.

943. [974]

     PPB canvassed several options to effect Ashington’s removal as trustee and manager, which included seeking to provide an incentive for Ashington voluntarily to resign from those positions; replacing the trustee and seeking to terminate the management agreements forthwith, exposing the trusts to the risk of claims for unpaid and unearned management fees running to several million dollars; or seeking otherwise to terminate the management agreements through Court proceedings (the outcome of which would be uncertain).

944. [975]

     Relevantly, the Third PPB Report amongst other things, stated that: (a) it was produced in accordance with PPB’s engagement letter dated 16 July 2009 and solely for the information of the investors of ADF2; (b) there was a “clear and imminent risk of a further deterioration in the solvency position of both Funds as a consequence of potentially capricious behaviour of the manager (i.e. the signing of the Wingate proposal)”; (c) a recapitalisation of the funds and sub-trusts was unlikely to occur whilst Ashington was trustee and manager; (d) an outline of the Parissen plan to recapitalise ADF2; (e) the key benefits of the Parissen proposal include the removal of the immediate insolvency threats, address the issues on the Stonington and Double Bay Projects and remove management; (f) if the superannuation fund investors do nothing it is arguable that equity will completely disappear across both funds but if the Parissen Proposal proceeds they should be $12 million “in front”; (g) PPB recommends that the superannuation fund investors consider changing the trustee of both ADF and ADF2 from Ashington to Parissen, which would prevent Ashington incurring further liabilities and allow Parissen to complete due diligence; (h) a summary of the recent events on Stonington, Double Bay, Noosa and Wylde Street; (i) an outline of the parties approached in the refinance the Investec Stonington Facility, the vendor finance and unsecured creditors at Stonington (including Mr Ko of Pacific, Mr Routley of Acorn and Wingate); (j) an outline of the Wingate Proposal and the problems with it; (k) that Ashington may execute the term sheet with Wingate and incur the application fee without further consultation with the superannuation fund investors and PPB, noting that this is a major factor in PPB’s recommendation to replace Ashington Capital as trustee.

945. [976]

     (Acorn says that there is no evidence that Mr Routley received the Third PPB Report.)

946. [977]

     On Thursday 19 November 2009 at 7.54am, Mr Ko sent an email to Mr Winterbottom, copied to Mr Shepard and Ms Garrett (at her Gmail address) attaching a copy of the Parissen Proposal. Mr Ko said that if Parissen was not appointed a fiduciary for the ADF2 assets within the next 21 business days or if agreement cannot be reached with the existing financiers, then they will approach “your clients” with two propositions for Double Bay, one being outright purchase, and the other being a joint venture.

947. [978]

     In response to the above email, on 19 November 2009 at 9.54am, Mr Winterbottom sent an email to Mr Ko, copied to Mr Mirams, asking if Mr Ko and Mr Tremaine would be available to have a call with Mr Mirams (head of 333 Real Estate – KordaMentha) and him the following day.

948. [979]

     On 19 November 2009 at 10.52am, Mr Ko sent an email to Mr de Rooy to update him on the progress of the term sheet and sought his assistance.

949. [980]

     On 19 November 2009, the superannuation fund investors had a meeting with PPB and (according to Ms Chan and Mr Weaver’s note of the meeting) agreed to appoint Parissen as long as there was “a strong process regarding the retirement and appointment of trustee” with “PPB to arrange by advising Ashington”. Mr Hastings’ note is to a similar effect.

950. [981]

     Meanwhile, on 19 November 2009, Parissen Property Group Pty Ltd (later renamed Scarborough Pacific Group Pty Ltd and then FGHA Pty Ltd) (to which I refer as Parissen) was incorporated for the purpose of investing in ADF and ADF2, with Mr Ko as a director and secretary. Acorn had no management or shareholding interest in Parissen until April 2010 (see below).

951. [982]

     On 20 November 2009 at 10.25am, Mr Ko sent an email to Mr Lord, Mr Warden and Mr Chester (of Arnold Bloch Leibler) requesting a copy of the Unitholders Agreement between Valad and ADF2 regarding Noosa. Mr Ko said that he appreciated “all of the effort that you are making in this transaction [t]o work for all the parties”.

952. [983]

     On 20 November 2009 at 10.40am, Mr Anderson sent an email to Mr Steel saying that he did not think that they “should acknowledge that the shortfall in capital raising for ADFIT becomes an Ashington liability”.

953. [984]

     On 20 November 2009 at 2.53pm, Mr de Rooy sent an email saying that he and Mr Lord had discussed the concept of a “pre-pack receivership appointment” in the event that Ashington Management “attempted to obstruct the processes/outcomes you have requested of Investors/Ashington”.

954. [985]

     Meanwhile, on Sunday, 22 November 2009 at 12.51pm, Mr Ko sent an email to Mr de Rooy in answer to the 2.53pm 20 November email, advising that the investors had accepted the Parissen terms sheet, although it needed to be signed. Mr Ko said it looked unlikely that the transaction would complete before Investec’s 30 November deadline. Mr Ko committed to keep Mr de Rooy abreast at all times with the information required by Investec.

955. [986]

     Over the period from 18 to 20 November 2009, Mr Anderson negotiated amendments to the Wingate Proposal. (Complaint is made that Mr Anderson executed an amended Wingate Proposal (see below), without advising Norton Gledhill, PPB or the superannuation fund investors. Acorn says that Mr Anderson’s evidence in cross-examination, at T 665, that he did not sign the amended Wingate Proposal without proper consultation with the superannuation fund investors or PPB must be rejected as dishonest.)

956. [987]

     Returning to the chronology, on 20 November 2009, Wingate provided indicative terms for Stonington which the plaintiff says were materially improved and which were accepted by Mr Anderson and Mr Minahan (Amended Wingate Proposal). Mr Anderson’s position is that at this stage he still remained in the dark about the Parissen Proposal and that the Wingate term sheet involved a debt transaction for which approval from superannuation fund investors was not necessary. The term sheet was signed in the absence (Mr Anderson thought) of any alternative. It was sent to PPB on Monday 23 November 2009. PPB emphasises that the Wingate indicative terms sheet was signed by Mr Anderson and Mr Minahan without consulting the superannuation fund investors and without seeking the consent of Westpac to Wingate taking a mortgage over the Stonington Property.

957. [988]

     On Monday 23 November 2009 at 2.34pm, Mr Steel sent an email to Ms Tina Wang (of Ashington) instructing her to pay the Wingate establishment fee ($50,000) from the Stonington Trust. It is noted that this was a component of an establishment fee payable under the Amended Wingate Proposal on acceptance of its term sheet – and that it was paid even though cash was not available in the Stonington Trust.

958. [989]

     On 23 November 2009 at 2.42pm, Mr de Rooy sent an email responding to Mr Ko’s email of 22 November, saying that the 30 November deadline is a “desirable”; but noted that Investec appreciated that significant steps required to close the transaction. Mr de Rooy stated that he hoped to continue to work with “your Group” to achieve a resolution as soon as possible. At 2.53pm on 23 November 2009, Mr Ko forwarded that correspondence to Ms Garrett.

959. [990]

     On 23 November 2009 at 7.30pm, Mr Anderson sent an email to Mr Lord, copied to Mr Block, attaching a report of significant events from the past week, including the sale process for Wylde Street and attaching an unexecuted copy of the revised term sheet from Wingate dated 20 November 2009. Mr Anderson advised that Ashington had given Wingate an exclusive dealing period of three weeks and asserted advantages to the superannuation fund investors of the deal, including the payout of Investec and removal of the threat of further legal action, the payout of the Hamton Vendor Finance and all other creditors, the de-risking of the project to remove stage 3 construction and a return to the superannuation fund investors of about $15 million.

960. [991]

     Acorn says that it is significant that Mr Anderson did not advise PPB that Ashington had in fact already executed the term sheet (on 20 November 2009). Acorn says that it is clear that, despite Mr Anderson’s attestations to the contrary in cross-examination, Ashington had a track record, from the time of the Investec Facility through to executing the Amended Wingate Proposal of seeking to conceal from the superannuation fund investors fundamentally important matters concerning ADF and ADF2.

961. [992]

     On 23 November 2009, Ashington received an offer from MV Developments to purchase the Wylde Street Property for $18 million.

962. [993]

     On 23 November 2009, KordaMentha issued its Investigative Accountants Report. In that report, KordaMentha stated, amongst other things:

963. [994]

     On 24 November 2009, KordaMentha held a meeting with NAB in relation to that report.

964. [995]

     On 24 November 2009 at 7.34pm, Mr Ko sent an email to Mr Lord, asking him to meet with Mr Anderson and Mr Minahan the next day (25 November 2009). Mr Lord responded to this at 6.53am on 25 November 2009 that he was just waiting for confirmation of any outstanding approvals from investors or their committees. Copies of these emails were sent by Mr Ko to Ms Garrett and Mr Renauf (at their Gmail addresses) and Mr Tremaine on 25 November 2009 at 7am.

965. [996]

     On 24 November 2009 at 8.37pm, Mr Warden sent an email to the asset consultants confirming that the during the conference call between the superannuation fund investors and PPB on 19 November 2009 “there was a consensus amongst investors providing PPB with a mandate to commence negotiations with Ashington for their removal as trustee and manager of both ADF1 & ADF2”.

966. [997]

     On 25 November 2009, PPB published its amended report No 3 (Amended Third PPB Report). PPB sent that report by email to the asset consultants at 3.57pm that day, seeking their approval for PPB to commence negotiations with Ashington for their removal as trustee and manager of both ADF and ADF2. The Amended Third PPB Report referred to greater returns for the superannuation fund investors under the Parissen Proposal, including that they would be $18 million “in front” of a “do nothing” scenario.

967. [998]

     On 25 November 2009 at 8.51pm, Mr Warden sent an email to asset consultants advising that PPB had learnt (not from Ashington) that Ashington had executed the Wingate Proposal and therefore that discussions to commence the removal of Ashington should commence urgently. Mr Warden sought immediate instructions from the superannuation fund investors to expedite the process of removing Ashington as trustee and manager, including confirmation that PPB had the authority to convey a message to Ashington that investors had lost confidence in Ashington, will not support Ashington any further as trustee and manager and plan to remove Ashington as trustee/manager in the short term.

968. [999]

     The plaintiff says that the Amended Third PPB Report misled superannuation fund investors as to the terms of the Wingate and Parissen proposals. The plaintiff says that presumably this was done in order to persuade the superannuation fund investors to accept PPB’s preferred Parissen Proposal. It is said that the report contained an analysis of an “inferior” Wingate Proposal (dated 9 November 2009) that had never been accepted by Ashington and had been superseded by an improved offer (dated 20 November 2009). The changes between the 9 November 2009 and 20 November 2009 Wingate term sheets included an increase in funding from $9 million to $11 million, a 4% reduction in the rate of interest, a reduced profit share, a deferral of the majority of the establishment fee, and the inclusion of obligations on Wingate to assist with the terms of the sales of stage 3 and the Stables and with obtaining construction finance. The proposal also involved a projected return to investors of approximately $15 million.

969. [1000]

     The plaintiff says that, on the other hand, PPB’s summary of the Parissen Proposal failed to make clear that it involved the abandonment of the superannuation fund investors’ existing equity interest in ADF2, and involved the amendment of unitholdings according to the additional equity investment to be made (of $6 million for the super funds and $14 million for Parissen). It is said that that critical aspect of the proposal is only apparent from a close examination of the Parissen term sheet. Reference is made to the evidence of Mr Hartley in this regard (T 1004-1005):

970. [1001]

     PPB sought authority from the superannuation fund investors to convey to Ashington that the investors had no confidence in the trustee and manager, would not support its ongoing business and planned to remove Ashington as trustee and manager in the short term. It is said that the superannuation fund investors gave their approval having been faced with circumstances of urgency. It is noted that on 27 November 2009, Mr Lord met with Mr Anderson and Mr Minahan to communicate that message.

971. [1002]

     On 25 November 2009 at 10.02am, Mr Ko sent an email to Mr Warden (copied to Mr Lord, Mr Chester of Arnold Bloch Leibler, and Mr Block) acknowledging receipt the previous day of a CD-Rom and attaching a document list of outstanding documents; and outlining areas to cover before making the new investment (property, financial and legal due diligence). The email requested further documents if they had them “otherwise we will wait until we take over” and noted that “we recognise that the above matters can only be covered with proper access to the information which will be gained after we are appointed a Trustee and Manager”.

972. [1003]

     On 25 November 2009 at 11.14am, Mr Ko sent an email to Mr Routley and Mr Sheehan (copied to Ms Garrett at her Gmail address and Mr Tremaine) discussing interim operational funding. The email proposed funding arrangements for Parissen’s operating costs (which did not include the capital required to be invested to recapitalise ADF2). In summary, Albany, through Pacific Shopping, was to provide unsecured loans to Parissen to meet transaction and employee costs until an agreed date and that when Parissen issued equity to Acorn and “Investor 3” (65%), the same ratio of the unsecured loans would be repaid using that equity; and at the same time Pacific would convert its remaining 35% to equity leaving it as a 35% partner in Parissen (with Acorn and Investor 3 going forward).

973. [1004]

     On 25 November 2009 at 11.22am, Mr Ko sent an email to Mr Lord with a copy to Mr Carson (with the subject line: PPB as manager of ADF). Mr Ko stated that “[w]e have received oral legal advice with respect to ADF1 that the manager will not require an AFS licence”. Mr Ko enquired whether Arnold Bloch Leibler had provided similar advice and, if so, “will PPB act as the Fund Manager for ADF1 as we have previously discussed, if we are prepared to act as the Trustee?”. Mr Ko asked, if that was the case, whether PPB would undertake its own due diligence of ADF and its assets simultaneously to Parissen completing due diligence on ADF2 and its assets.

974. [1005]

     On 25 November 2009 at 1.26pm, Mr de Rooy sent an email internally within Investec reporting on Mr de Rooy’s meeting with Mr Anderson and his conversation with Mr Ko that morning. Mr de Rooy there noted that Mr Anderson had advised that:

975. [1006]

     Mr de Rooy noted that Mr Anderson had said that it was a debt transaction so there was “no need to involve the investors”. Mr de Rooy further noted that Mr Ko “had instructed Brett Lord of PPB (as advisor to the Investors) to ‘kick’ Ashington out” as trustee/manager and that the investors accepted that proposal. Mr de Rooy noted that Mr Ko was coming to Sydney to get the deal done next week and that Mr Lord had given an assurance that he could deliver the change in trustee and resolve the issue of Ashington Management claiming a right to ongoing management fees despite the change in trustee.

976. [1007]

     On 26 November 2009, each of LUCRF, Sunsuper and HESTA sent emails authorising PPB to convey the message to Ashington contained in Mr Warden’s email of 25 November 2009 and stated that they should have formal approval by the following Wednesday (2 December 2009). Mr Thow’s unchallenged evidence was that a “significant part of the attraction of the Parissen proposal was that it did not involve working with Ashington”.

977. [1008]

     On Friday 27 November 2009 at 9.40am, Mr Ko sent an email to Mr Lord and Mr Warden with a copy to Mr Block, Mr Tremaine and Mr Routley, noting that PPB had advised that the four major investors had accepted PPB’s strategy, and thanking them for their efforts over the past 24 hours and looking forward to hearing from them that afternoon as to how the discussions went.

978. [1009]

     On 27 November 2009 at 10.15am, Mr Ko sent an email to Mr Routley with a first draft of the “Manager Financial Model” being a cash flow forecast over three years for Parissen.

979. [1010]

     On 27 November 2009 at 1.51pm, Mr Steel sent an email to Grant Thornton setting out a “high level overview of the strategy” of ADF and ADF2.

980. [1011]

     On 27 November 2009 at 2.59pm, Mr Wyeth sent an email to Mr Block, Mr Lord and copied to Mr Anderson, Mr Renauf and Mr Bailey, noting that the planned meeting that afternoon would not proceeding and attaching a summary of the Wingate Proposal for the Stonington Project.

981. [1012]

     On 27 November 2009, Mr Lord conveyed to Mr Anderson and Mr Minahan that superannuation fund investors wanted the removal of Ashington as trustee and manager. Mr Anderson says that this was the first time that he became aware that there was a proposal to remove Ashington as trustee and manager. (The plaintiff says that by that stage the plan had been afoot for almost two months, and that Ashington had missed its opportunity to refinance the Investec Stonington Facility and to repair its relationship with superannuation fund investors and financiers.)

982. [1013]

     On 27 November 2009, an internal memorandum to the Board Executive of HESTA prepared by Mr Hastings, recommended that the Board Executive approve the removal of Ashington Capital as trustee of the ADF 2 and Ashington management as the manager of the ADF2. On 27 November 2009, HESTA made the decision to approve the removal of Ashington Capital as trustee of ADF2.

983. [1014]

     The internal HESTA memorandum of 27 November 2009 (where the Wingate Proposal was being considered), noted that Mr Anderson had provided a personal guarantee to secure around $2.5 million of vendor finance to the settle the purchase of Stonington in 2008 and stated that, “[i]t is almost certain the personal situation in which he has found himself has motivated him to accept any proposal which deals with this issue without due consideration as to whether it is in the bests interests of the fund and unitholders”.

984. [1015]

     On 30 November 2009 at 11.25am, there was an email from Sovereign Investment to Sunsuper recommending removal of Ashington as trustee and manager. On or before 30 November 2009, a Sunsuper “Investment Recommendation Form” recorded a recommendation that Sunsuper approve the Parissen Proposal and Ashington’s removal as manager and trustee of ADF and ADF2; which recommendation was approved on that date.

985. [1016]

     On 30 November 2009, at 5.38pm, Mr Block sent an email to the superannuation fund investors advising, amongst other things, that Mr Lord had met with Mr Anderson and Mr Minahan on Friday (27 November 2009) to discuss their removal as trustee and manager and that there was a further meeting scheduled for the next day. The email stated that the “messages were understood” and that they would revert over the weekend with their responses. Mr Block said that Mr Anderson and Mr Minahan had “in the short term vowed to continue”. Mr Block also said that if they did not achieve a concrete position at that time then the removal would need to be addressed more definitely with a circular resolution to remove them as trustee, which would “allow Parissen to undertake further due diligence and further pressure Ashington towards their ultimate removal”.

986. [1017]

     On 30 November 2009, Mr Ko and Mr Lord communicated about organising a catch up, deciding to meet at Mr Lord’s office at 9:15am prior to their meeting with Valad the following day. Mr Ko also asked Mr Lord about his meeting with Mr Anderson that day. Mr Lord’s response to this, at 6.29pm, was that further feedback from KordaMentha was that Mr Anderson was adopting the business as usual approach. Mr Lord said, “we are getting the trustee removal documents prepared for execution by investors once the final sign-offs are obtained”. Mr Ko forwarded those emails to Ms Garrett and Mr Renauf at 6.42pm that day.

987. [1018]

     Meanwhile, at some time in the afternoon of 30 November 2009, Mr Carolan was called into a meeting with the Executive Head Director of Corporate Finance at Patersons. His employment with Patersons was terminated with immediate effect. (It is not suggested that the termination was linked in any way to Mr Carolan’s dealings in relation to the matters the subject of this proceeding.)

988. [1019]

     On 1 December 2009 at 7.43 and 7.55am, Mr Ko sent to David Holland of Baker McKenzie emails, copied to Ms Garrett, attaching documents relating to ADF and ADF2.

989. [1020]

     On 1 December 2009, there were email communications between Mr Steel and Mr de Rooy as to Wylde Street’s outstanding land tax.

990. [1021]

     On 2 December 2009 at 10.55am, Mr Anderson sent to Mr King (adviser to Sunsuper) a letter to investors in relation to ADF and ADF2.

991. [1022]

     On 2 December 2009 at 3.16pm, Mr Anderson sent an email to Mr Flett (adviser to LUCRF) copied to Mr McCusker (and also sent to Mr King and Ms Chan), attaching a letter responding to the suggestion for removal of Ashington as trustee and manager. (A copy was forwarded by Mr Flett to Mr Block and Mr Lord, among others. Mr Block forwarded a copy to Ms Garrett) In that letter, Mr Anderson set out in summary form the benefits of the Wingate Proposal; noted that Ashington had been excluded from the process in relation to the Parissen Proposal; and responding to the three points that Mr Lord had spoken about at the meeting asking Mr Anderson to step aside. Mr Anderson sought the opportunity to present directly to investors in order to move forward. Mr Anderson confirmed that he would work with PPB if there was no alternative but said that the superannuation fund investors should be aware that PPB “have contributed to an unsatisfactory set of circumstances to date”.

992. [1023]

     On 2 December 2009 at 3.59pm, Mr Gavin sent an email to Mr Anderson indicating that HESTA had “lost confidence” in Ashington when it contravened the terms of the HESTA Side Letter.

993. [1024]

     On 2 December 2009 at 5.51pm, Mr Block sent an email to the asset consultants confirming that they were moving forward with the agreed instructions to remove Ashington as trustee notwithstanding the letter received that afternoon from Mr Anderson.

994. [1025]

     In a meeting on 2 December 2009, the LUCRF Investment Committee endorsed Parissen’s replacement of Ashington Capital as trustee of ADF and ADF2. On around 2 to 3 December 2009, Military also made the decision to appoint Parissen as trustee of ADF and ADF2.

995. [1026]

     On 3 December 2009 at 9.28am. Mr de Rooy sent an email to Mr Lord indicating that Investec was looking to appoint receivers.

996. [1027]

     On 3 December 2009 at 6.02pm, Mr Block sent an email to the asset consultants attaching documentation prepared by Arnold Bloch Leibler for the removal of Ashington.

997. [1028]

     On 4 December 2009 at 11.03am, Mr Block responded by email to a request by Mr Dedes (adviser to Military Super) seeking an assurance that despite changing the trustee they maintained the right to pursue Ashington Capital and its directors. On Friday, 4 December 2009 at 11.06am, Mr Block sent an email to asset consultants, as requested by Parissen, forwarding a letter outlining Parissen’s role.

998. [1029]

     On 4 December 2009 at 1.27pm, Stuart Jones of Rose & Jones Property sent an email to Mr Lord expressing an interest in purchasing the assets of ADF and ADF2.

999. [1030]

     On 4 December 2009 at 5.36pm, Mr Ko sent an email to Mr Tremaine and Ms Garrett, forwarding a letter received from Clayton Utz (representing Valad) in relation to the Noosa Trust. The letter noted that the replacement of Ashington as trustee of the Noosa Trust was a change control event pursuant to the unitholders’ agreement between Valad and Ashington and could also trigger a review under the Suncorp-Metway Ltd finance facility; and therefore, required Valad’s prior consent. It was said that Valad would also seek the consent of Suncorp.

1000. [1031]

      On Monday 7 December 2009, Mr Anderson sent an email to Mr Mirams of KordaMentha in which Mr Anderson acknowledged that it was challenging to satisfy the condition precedent in the Wingate Proposal for construction finance.

1001. [1032]

      On 7 December 2009, Arnold Bloch Leibler sent to Ashington original executed resolutions for the removal of Ashington as trustee. At 5:45pm, Mr Block sent an email to the asset consultants reporting that the “package” had been delivered to Ashington that afternoon. Mr Block noted that they decided to have Arnold Bloch Leibler forward the documents in order to “save our bullets for the main game” and had given Mr Anderson until 5pm the following day to sign the documents.

1002. [1033]

      On 7 December 2009, judgment was given by the Supreme Court of Victoria in favour of Hamton against Ashington Capital as trustee of the Stonington Trust for $3.091 million. The judgment noted that the plaintiff wholly discontinued that proceeding as against the second defendant, being Mr Anderson.

1003. [1034]

      On 7 December 2009, in an email to Mr Mirams of KordaMentha, Mr Anderson said that Ashington had entered into a ‘heads of agreement’ for the sale of the Wylde Street Property.

1004. [1035]

      On 7 December 2009, Arnold Bloch Leibler (acting for PPB) sent a letter to Mr Anderson rejecting assertions made by Ashington about PPB’s conduct and confirming that PPB was acting for the existing superannuation fund investors in their own right and not for the Trust Funds.

1005. [1036]

      On 8 December 2009 at 4.47pm, Mr Block sent an email to the asset consultants seeking their confirmation as to whether their organisation would be prepared to support a court action to force Ashington to execute the signed resolution of a 90% majority of members to remove Ashington as trustee. At 5.34pm, Mr Hastings responded confirming that HESTA was supportive of court action being taken if Ashington failed to execute the resolution. Mr Block’s response at 6.29pm was that Ashington had advised that Mallesons would respond on its behalf; and he said that Mr Ko was considering whether Alter/Acorn would contribute to funding the contemplated court action against Ashington.

1006. [1037]

      At around 10am on 10 December 2009, Mr King and Mr Anderson had a lengthy telephone discussion about Ashington’s removal. Mr King emailed his synopsis of that conversation to the asset consultants and PPB at 10:18am on 11 December 2009. Mr King conveyed that Mr Anderson: was critical of PPB; defensive of the HESTA Side Letter; concerned about reputational damage to Anderson; said that Ashington would resign subject to certain conditions.

1007. [1038]

      On 11 December 2009 at 10.13am, Mr Anderson sends an email to Mr King saying that Ashington was agreeable to an amicable resolution. Mr King’s response at 10.24am was that investors would meet when they received the note of the terms of Ashington’s retirement.

1008. [1039]

      On 11 December 2009 at 10.32am, Mr Anderson sent an email to Mr King specifying seven points that, in Ashington’s opinion would “facilitate a clean, amicable departure”. At 4.20pm, Mr King responded saying that they required further information and that PPB would progress the next stage on behalf of the superannuation fund investors.

1009. [1040]

      On 11 December 2009 at 2.21pm, Mr Block sent an email to Mr Ko, attaching the “first offer” of Ashington to retire as fund manager for ADF and ADF2, noting that “there will be plenty of toing and froing yet”. Mr Ko forwarded this in separate emails to Mr Winterbottom of KordaMentha, Mr Tremaine and Mr Routley, Ms Garrett and Mr Renauf.

1010. [1041]

      On 14 December 2009 at 9.40am, Mr Jones (of Rose and Jones) sent an email to Mr Lord following up “to discuss opportunities that may exist in any and all of the properties in the development fund of Ashington”. Mr Lord responded at 3.21pm on 15 December 2009 confirming that “this is a matter that is of interest to my clients” and saying that they were progressing with negotiations.

1011. [1042]

      On 14 December 2009 at 11.31pm, Mr Steel sent an email to Mr Anderson, copied to Mr Minahan, recording the urgent need to consider elevating Wingate from a sub-trust to a head trust level in order “to trump or match the Alter offer”.

1012. [1043]

      In the morning of 14 December 2009, Mr Block met with Mr Steel; indicating that an amicable solution made the most sense.

1013. [1044]

      On 14 December 2009 at 5.41pm, Mr Steel sent an email to Mr Block, copied to Mr Lord, seeking clarity as to why Alter was being appointed as trustee before its due diligence; noting the possibility of Alter discontinuing after due diligence or “cherry picking” projects. Mr Block responded that Alter’s offer had been agreed by all superannuation fund investors and was not subject to further negotiation.

1014. [1045]

      On 15 December 2009 at 11.33am, Mr Steel sent an email to Mr Block and Mr Lord, confirming that the variation to the constitution (for removal) would be signed as requested. Mr Steel asked if Ms Garrett or Mr Renauf were involved in any way with the Parissen Proposal.

1015. [1046]

      On 15 December 2009 at 6.40pm, Mr Anderson sent an email to Mr Levin (Wingate) advising that Mr de Rooy would not be recommending the Wingate Proposal to Credit.

1016. [1047]

      On 15 December 2009, Mr Anderson sent Mr Block and Mr Lord a letter attaching executed supplemental deeds in relation to ADF and ADF2. Mr Anderson’s letter made clear that the documentations was provided on the basis that the conditions Ashington had outlined (see above) would be “dealt with expeditiously and in good faith”.

1017. [1048]

      On 16 December 2009, the unitholders of ADF2 passed a formal resolution. Mr Ko sent an email to Mr Winterbottom at 5.58pm stating that:

1018. [1049]

      Mr Ko sought a time on 17 December 2009 to speak with Mr Winterbottom regarding obtaining the banks’ consent to the appointment of Parissen as trustee at the sub-trust level of Double Bay and a standstill for an agreed period of time to allow a commercial deal to be negotiated with the banks by Parissen Capital. Mr Winterbottom forwarded this to the banks for consideration.

1019. [1050]

      On 17 December 2009 at 4.20pm, Mr de Rooy sent an email to Mr Levin and Mr Harrison of Wingate saying that:

1020. [1051]

      On 17 December 2009, Arnold Bloch Leibler sent to Mallesons written resolutions from the superannuation fund investors directing Ashington to retire as trustee of ADF and ADF2. Mallesons advised Arnold Bloch Leibler that it did not consider Ashington had an obligation under the trust constitutions to act in accordance with directions from members.

1021. [1052]

      On Friday, 18 December 2009, at 5.27pm, Mr Lord sent an email to Mr de Rooy, copied to Mr Block and Mr Ko, stating that he had still not yet received confirmation that the directors of Ashington had executed the Deed of Retirement & Appointment as directed by investors. Mr De Rooy referred to his email earlier this week outlining “hurdles” to be overcome in relation to the introduction of fresh capital, including the completion of due diligence in relation to Stonington, in parallel to the Double Bay and Noosa. Mr de Rooy said that the requirement for due diligence was driven by the inability of the existing manager/trustee to provide accurate timely information in relation to certain aspects of the head trusts or sub-trusts.

1022. [1053]

      On Sunday 20 December 2009 at 5.37pm, Ms Garrett sent an email to Mr Lord, copied to Mr Renauf, with the subject “PPG [Parissen] business overview” and attaching a business overview of Parissen. Ms Garrett stated that the attached business overview should give Mr Lord a good feel for her proposed business offering. Ms Garrett said that the key business line in which PPB would be interested was part two of the execution plan (to “deliver expertise, experience and capital to underperforming property assets controlled by financial institutions”). Ms Garrett said that Mr Sam Alter would seed a workout fund with a 20-30% holding and that he put her in touch with three different groups in Melbourne who she had met the previous week and all of which said they would follow Mr Alter into a fund of this nature. Ms Garrett was also confident that Mr McCabe would support the proposed fund. Ms Garrett said that the unresolved challenge for PPB/Parissen was to try to secure some form of priority access over the work-out pipeline. Ms Garrett was hopeful that she could arrange a meeting with “Andrew” at least to float the idea with him.

1023. [1054]

      On 22 December 2009 at 9.46am, Mr Anderson sent an email to Mr Miram at KordaMentha confirming that Ashington proposed to “retire at a head trust level today and at a subtrust level over the next six weeks as Alter complete individual project due diligence”.

1024. [1055]

      On 22 December 2009 at 1.01pm, Mr Anderson sent an email to Mr Minahan and Mr Steel, copied to Ms Briggs attaching a draft letter as to the proposed removal of Ashington as trustee, saying that as trustee of ADF and ADF2 “we remain focused on our fiduciary duties to investors and will of course act in accordance with the wishes of investors. We are committed to, and continue to be so committed, to an amicable settlement and a handover of fund responsibilities, supported by a request from investors”. Mr Block sent an email to asset consultants attaching that letter and saying that it was “merely a stalling/delaying tactic”.

1025. [1056]

      On 22 December 2009 at 2.08pm, Mr Mirams sent an email to NAB/St George personnel, copied to Mr Winterbottom and Mr Mouawad at KordaMentha, reporting on a conversation with Mr Anderson that morning (which he there summarised). Mr Mirams said that he had been informed by Mr Anderson that Alter had approached Wingate to see if they would continue with their deal under Alter once Ashington stepped aside and that Wingate was less than impressed. Mr Mirams stated, “the point being that the Alter deal looks more and more like a mere change of personnel while trying to access the capital required from existing known sources being $6m from existing investors, Stonington funding from Wingate, proceeds of sale of Wylde Street”.

1026. [1057]

      On 22 December 2009, there was a without prejudice meeting in the afternoon by Mr Ko with senior and mezzanine lenders.

1027. [1058]

      On 22 December 2009 at 5.19pm, Mr Block sent an email to Mr Lord and Mr de Rooy, copied to Mr Ko, in which Mr Block said that he had hoped the Deeds of Retirement/Appointment would have been executed that day; but expected that to occur the following day when an issue regarding the financial services licence was resolved. Mr Block confirmed that as soon as Parissen was appointed it would complete due diligence in relation to the proposed recapitalisation of the sub-trusts and that would include discussions with all financiers including Investec. Mr Block said that he would advise Mr de Rooy once Ashington had signed the Deeds of Retirement.

1028. [1059]

      On 23 December 2009 at 6.47am, Mr Ko sent an email to Baker McKenzie, copied to PPB, Ms Garret, Mr Renauf and Mr Tremaine, passing on an email from Freehills attaching a proposal by letter dated 22 December 2009 from NAB and St George with regard to Double Bay (the proposal referring to a presentation made on 22 December 2009 by Mr Ko).

1029. [1060]

      On 23 December 2009 at 11.15am, Arnold Bloch Leibler sent a letter to Mallesons, noting an understanding that Ashington was finalising a sale of the Wylde Street Property; and asserting that such a sale would be in breach of Ashington’s duties as trustee. Mr Anderson forwarded the email to Mr King, asking that he pass on Ashington’s response to other investors, PPB and their solicitors. Mr Anderson said that Ashington had never been involved in any such transaction, and that since the date of their meeting on 10 December 2009, Ashington would not entertain any major transaction without consulting the investors and their representatives. Mr King responded that he did not recall that letter from Arnold Bloch Leibler having been circulated (as had been standard practice) and was not sure why it was sent.

1030. [1061]

      On 23 December 2009, Ashington Capital resigned as trustee of ADF and ADF2, and Parissen was appointed, pursuant to Deeds of Appointment and Retirement as Trustee. Mr Anderson has deposed that he formed the view that Ashington had no choice but to retire as trustee and manager of the funds, stating in his 19 December 2017 affidavit at [476]:

1031. [1062]

      Mr Anderson further says that, contrary to his understanding that there would be a swift transition of all of its functions in relation to ADF and ADF2 to Parissen, Parissen failed to develop a transition plan and Ashington Capital remained trustee of the various sub-trusts and Ashington Management remained manager of those sub-trusts well into 2010, although unremunerated.

1032. [1063]

      Clause 2 of the respective Deeds of Appointment and Retirement for ADF and ADF2 relevantly provided that: the Retiring Trustee thereby retired on and from the Effective Date as Trustee of the Trust and was discharged, released and retired from all duties and obligations in relation to the Trust arising on and from the Effective Date; and on and from the Effective Date, the Retiring Trustee was discharged, released and retired from all rights and powers reposed in or conferred on it as Trustee of the Trust.

1033. [1064]

      Clause 3 of each of the Deeds relevantly provided:

1034. [1065]

      Under cl 5(a) of each of the Deeds, Ashington Capital agreed to transfer all of the assets of ADF and ADF2 to Parissen. The “Effective Date” was defined as the date of the Deed.

1035. [1066]

      On 31 December 2009 at 10.14am, Mr Routley sent an email to Mr Ko, copied to Mr Sheehan, outlining Acorn’s further due diligence requirements and summarising Mr Routley’s understanding of Acorn’s proposed investment in Parissen and expectations moving forward. Those expectations were divided into an initial phase and a growth phase. The initial phase involved: Ashington’s removal as manager and trustee of ADF and ADF2 and stabilisation of the existing Ashington trusts. As part of the due diligence process Mr Routley asked for formal correspondence on a number of matters, including the organisation structure and delineation of responsibilities (shareholders, board of directors, CV’s of Mr Ko, Mr Tremaine, Ms Garrett and Mr Renauf), manager financials, fund financials and investment structure. Mr Routley concluded by commenting, amongst other things, that Acorn “cannot commit until” various issues outlined by Mr Routley in the email “will be resolved”, and those issues included “terms for removal of manager” and “audit status and level of assurance around opening balances and contingents”.

1036. [1067]

      In January 2010, Parissen conducted accounting and financial due diligence on the funds with the assistance of Moore Stephens and legal due diligence on the funds with the assistance of Baker McKenzie. Parissen reported to the superannuation fund investors about the status of these investigations in January 2010, including that the investigations to date had identified a number of potentially serious matters.

1037. [1068]

      On 6 January 2010, Parissen sent separate letters to Ashington for each sub-trust, prohibiting Ashington from incurring debts or entering into agreements while Ashington remained trustee of the sub-trust.

1038. [1069]

      On 13 January 2010 at 3.51pm, Mr Block sent to asset consultants Strategy Update No 4 which summarised the events that had transpired since the retirement of Ashington Capital as trustee of ADF and ADF2 (Fourth PPB Report). This included Parissen’s talks with financiers about the various projects, the progress of Parissen’s due diligence and the terms put forward by Mr Anderson “to facilitate a clean and amicable departure of Ashington from all roles”.

1039. [1070]

      On 8 February 2010, Mr Minahan told Mr Shorrocks at a lunch the two had, that Acorn had invested. Mr Shorrocks gave evidence in his affidavit that this was significant to him as he had no knowledge of this investment, or the manner of the investment, and thought that it may have entitled Patersons to a fee under the Patersons Mandate. After this lunch, Mr Shorrocks called Mr Doherty as to whether he was aware of Acorn’s investment and Mr Doherty said that he was not aware of it (Mr Shorrocks’ 7 September 2018 affidavit at [42]).

1040. [1071]

      On 11 February 2010, Baker McKenzie emailed to Parissen a document addressing concerns in relation to ADF and ADF2 and prepared a presentation titled “Ashington Legal review report”.

1041. [1072]

      On 23 February 2010, Ashington Capital, Parissen and Mallesons signed an escrow letter concerning the transition process of Ashington retiring as trustee from each sub-trust.

1042. [1073]

      On 23 February 2010, Anderson and two Parissen entities entered into a Deed of Indemnity whereby Mr Anderson was indemnified against the personal guarantees he gave in respect of the Hamton Vendor Finance.

1043. [1074]

      On 24 February 2010, Ashington Capital, Ashington Management and various Parissen entities entered into a Deed of Termination and Release concerning the termination of the Development Management Deeds for the Project X Hotel Trust, Potts Point Trust, Stonington Trust and Wylde Street Trust.

1044. [1075]

      On 10 March 2010, Mr Block sent an email to asset consultants attaching Strategy Report No 5 which noted that Ashington Capital did not meet any of the capital calls and that Ashington had agreed to pay a $20 million fee to Valad in connection with the Noosa Project (Fifth PPB Report). The report attached legal advice from Baker McKenzie and accounting advice from Moore Stephens. Amongst other things, the report identified various accounting and trustee irregularities in how Ashington had managed ADF and ADF2.

1045. [1076]

      After Parissen had completed due diligence, Parissen gave a presentation dated 26 March 2010 to Acorn on the terms of a proposed deal for Acorn to become a shareholder of Parissen.

1046. [1077]

      The first bullet point of the executive summary in that presentation stated that “Parissen Property Group Pty Ltd (‘Parissen’) has been established as a boutique institutional property fund manager focused on distressed and opportunistic property investment”. Parissen’s strategy was identified as being that:

1047. [1078]

      (The plaintiff says that this strategy is identical to Ashington’s strategy for AOF3.)

1048. [1079]

      In March 2010 there were complaints by Mr Anderson as to the progress of the transition plan and in April 2010 an assertion that Parissen is in breach of the transition plan. An amendment to the Deed of Termination and Release was entered.

1049. [1080]

      In April 2010, various Ashington and Parissen entities entered into a Deed of Acknowledgement with Ms Garrett and Mr Renauf. That deed noted (at cl 2.1):

1050. [1081]

      On 16 April 2010, Ashington, Parissen and others entered into a Deed of Release – Cross+ Trust whereby Ashington Bayswater took over the ownership and control of that trust, subject to the debt, without any further obligation to ADF.

1051. [1082]

      In or around April 2010, Acorn decided to invest in the Parissen model by acquiring shares in Parissen together with structured debt which involved advancing loan funds to, and purchasing existing debt owed by, the Double Bay Project X sub-trust. On 19 April 2010, Acorn’s investment committee approved the investment in Parissen and on 20 April 2010 Acorn’s directors resolved for Acorn to enter into the relevant documents for the investment in Parissen.

1052. [1083]

      On 22 April 2010, Acorn, through a custodian company (National Nominees Ltd), became a shareholder of Parissen. Mr Routley became a director of Parissen on 23 November 2010, a position he held until 20 February 2012.

1053. [1084]

      On 22 April 2010, Ashington and Parissen Capital (Project X) Pty Ltd entered into a Deed of Appointment and Retirement as trustee of the Project X Hotel Trust (Double Bay property).

1054. [1085]

      On 13 May 2010, Ms Garrett issued a press release announcing the involvement of Mr McCabe and the Scarborough Group in the Parissen Group.

1055. [1086]

      On 14 May 2010, Ashington Capital retired as the trustee of the Stonington Trust by Deed of Appointment and Retirement as Trustee; and of the Wylde Street Trust on 26 August 2010. Parissen entities never became trustee of the Potts Point Trust (despite, it is said, having agreed to do so) and in April 2010 Ashington ultimately agreed to retain management of the Cross+ Trust and purchase the units in that trust from ADF.

1056. [1087]

      On 14 April 2011, Ashington Capital and Ashington Management were placed into liquidation.

1057. [1088]

      In 2013 proceedings were commenced in the Commercial List of this Court (the Mapeline proceedings) by Mapeline Pty Ltd (Mapeline) effectively against the superannuation fund investors, alleging a breach of an agreement (the Retirement Agreement) allegedly entered into between Ashington Capital (on its behalf and on behalf of Ashington Management) with the defendants. The terms allegedly breached by the superannuation fund investors were for all untis held by “Ashington and Associates” to be redeemed at the 30 June 2009 audited unit price and for a “wind up” fee of $2.5 million to be paid to Ashington Capital.

1058. [1089]

      Mapeline was the assignee of all of the right, tile and interest of Ashington Capital and Ashington Management in the closes in action being the causes of action pleaded in the Commercial List Statement.

1059. [1090]

      The total loss and damage there claimed was $6,253,125.

1060. [1091]

      Mr David Hartley (Sunsuper’s then Chief Investment Officer), swore an affidavit in the Mapeline proceeding which relevantly stated (at [73]-[74]):

1061. [1092]

      Mr Dedes swore an affidavit in the Mapeline proceeding, deposing at [22]:

1062. [1093]

      By Deed of Option Agreement dated 29 September 2015, pursuant to his powers under s 477 of the Corporations Act, the liquidator of Ashington Capital and Ashington Management granted the plaintiff an option to acquire the “Conspiracy Claim”.

1063. [1094]

      Clause 2.1 of the Deed of Option provided that:

1064. [1095]

      “Conspiracy Claim” was defined in cl 1.1 as:

1065. [1096]

      As to the manner of exercise of the option, cl 3 provided that the plaintiff could exercise the option by forwarding a notice in writing to the liquidator within six months of the date of the Deed of Option. The exercise of the option was subject to the conditions, those being the making of payments to the liquidator: the “Conspiracy Claim Payment” (being $250,000 (including GST)) and the “Costs Contribution” (being the sum of $5,000 (including GST)).

1066. [1097]

      Upon exercising the Option, under cl 5.1, the plaintiff was obliged to “use reasonable endeavours to fund and pursue the Conspiracy Claim, against one or more of the persons the subject of the claim”. If the outcome of so doing is a “Tangible Benefit” (defined in cl 1.1 as “the amount of any judgment, arbitration, award or settlement of the Conspiracy Claim, as the case may be”), the plaintiff is obliged to pay the liquidator an amount equivalent to 10% of that Tangible Benefit, upon the Tangible Benefit or any part of it being received by the plaintiff or anyone else on behalf of the plaintiff.

1067. [1098]

      The option was exercised on 29 September 2015.

Key Dates

1. [1099]

   In summary, as to the timeline of events, it is relevant to keep in mind the following key dates.

2. [1100]

   On 15 September 2008, the collapse of Lehman Brothers triggered the GFC. As at September 2008, Ashington Capital, as trustee for ADF2, was already committed to the purchase of the Stonington Property (pursuant to the contract entered into in May 2008) and was seeking funding for that acquisition; and Ashington Capital, as trustee for ADF2, was also seeking funding in connection with the proposed development of the Double Bay Property (and had recorded in internal documents that it was in breach in that it had exceeded the $30 million limit on funds invested in that property).

3. [1101]

   In October 2008, Ashington Capital entered into a finance facility with NAB for the Project X Trust (i.e., the Double Bay Property) as part of which it gave the Project X Uncalled Capital Undertaking.

4. [1102]

   On 10 November 2008, Ashington Capital issued the request for an additional $20 million in equity from the ADF2 unitholders, this capital raising being for the Double Bay Project ($18 million for the project itself and around $2 million to meet the banking requirements – i.e., the Project X Uncalled Capital Undertaking). This gave rise to a level of disquiet amongst superannuation fund investors, who nevertheless met the call for additional equity and applied for additional units in ADF2 in the period December 2008 to January 2009. However, one of the superannuation fund investors (HESTA) demanded (and received) a side letter dated 21 January 2009 from Ashington Capital, pledging that the funds raised would be used exclusively for the Double Bay Project. The quarantining of these funds was, in effect, required to honour the representation in the ADF2 Information Memorandum, namely that each acquisition and development would occur in a special purpose vehicle and that liabilities would be quarantined at the sub-trust level. That pledge was breached when Ashington Capital entered into the Investec Stonington Facility documents in late February 2009.

5. [1103]

   By mid-December 2008, the Board of Ashington Capital had recorded that existing ADF2 investors were unlikely to invest in the proposed new development fund (ADF3); that ADF was unable to meet its commitments as an ADF2 unitholder in relation to the Double Bay Project and so ADF 2 was meeting those contributions; and that ADF was experiencing a fund performance downgrade and liquidity issues.

6. [1104]

   On 23 December 2008, Ashington Capital signed the Investec indicative term sheet in respect of funding for the Stonington acquisition (a fact not disclosed to superannuation fund investors until June 2009). The Investec terms included an undertaking to have $10 million uncalled capital available (i.e., the Stonington Uncalled Capital Undertaking). Ashington Capital had earlier in December 2008 entered into an agreement for the provision of vendor finance in connection with that acquisition (Hamton Vendor Finance).

7. [1105]

   On 27 December 2008, Ashington Capital’s CFO (Mr Steel) made a strong recommendation that Ashington Capital not proceed with the Stonington acquisition, pointing out among other things, that the combination of undertakings for the Stonington and Double Bay Projects meant that Ashington Capital would not be in a position realistically to meet the banking covenants for the duration of the Investec Stonington Facility. Mr Anderson formed the view that the best way to protect investors’ equity was to proceed with the acquisition and refinance the Investec Stonington Facility within six months.

8. [1106]

   On 25 February 2009, the Stonington Property settled. The amended Investec Stonington Facility for mezzanine finance of $10 million was entered into on that date, with a required repayment date of 25 August 2009. By entering into the Investec Stonington Facility, Ashington Capital put itself in breach of the respective Uncalled Capital Undertakings (and had obtained borrowings at the head trust level contrary to the representations made in the ADF2 Information Memorandum).

9. [1107]

   On 26 February 2009, the Ashington Capital Board revised the close date for the proposed ADF3 to 31 March 2009 and recorded that it was unlikely that Australian industry superannuation fund investors would subscribe to it.

10. [1108]

    In March 2009, Ashington’s CFO pointed to cashflow difficulties and a likely deficit across ADF and ADF2 for the period up to 30 July 2009.

11. [1109]

    By April 2009, arrangements were being put in place for Ms Garrett and Mr Renauf to join Ashington (their precise start dates being uncertain due to “gardening leave” requirements imposed by their former employer, Valad).

12. [1110]

    By letter dated 31 May 2009, Mallesons advised Ashington Capital as to “fund issues with the finalised Investec documents” and advised that Ashington make disclosure to superannuation fund investors of certain matters in relation to the Investec Stonington Facility. (Mr Anderson did not do so at that time.)

13. [1111]

    On 1 June 2009, Ashington Capital sought the superannuation fund investors’ commitment to an additional $15 million equity raising for the Stonington Project (to pay out the mezzanine facilities and allow a $2.5 million buffer for additional interest and costs). This led to further disquiet on the part of superannuation fund investors and discussions amongst the investors and their asset consultants with a view to providing a coordinated response to the second request for additional capital. (By early July 2009, Ashington’s CFO was advising Mr Anderson that the $15 million requested would not be enough.)

14. [1112]

    On 10 June 2009, in response to a request for information from the superannuation fund investors, Mr Anderson advised that neither the Westpac nor the Investec facilities had recourse to other ADF2 projects (which was incorrect – a matter to which Ashington’s CFO drew Mr Anderson’s attention on 11 June 2009). Mr Anderson informed the superannuation fund investors that the Investec Stonington Facility was secured by uncalled capital.

15. [1113]

    On 12 June 2009, there was a meeting between the superannuation fund investors and Mr Anderson, at which Mr Anderson’s personal guarantee of the Hamton Vendor Finance was disclosed and superannuation fund investors communicated that they would not provide any further equity to ADF2.

16. [1114]

    On 19 June 2009, Ashington Capital drew down the 13th capital call (of $4 million) from unitholders in ADF2 (said to be for Double Bay expenditure, leaving only $6 million undrawn capital for Double Bay – and hence involving a breach of the Investec $10 million Uncalled Capital Undertaking). That draw down was cancelled on 26 June 2009 to avoid “the risk of breaching the Stonington lending covenant” but Mr Anderson pointed out that this would have other implications. The 13th capital call was later re-made on 30 June 2009.

17. [1115]

    On 26 June 2009, Mr Anderson acknowledged that ADF2 was not sufficiently capitalised to undertake all three projects (including Stonington and Double Bay). Internally, Mr Anderson suggested that investors had no choice but to put in $15 million or blow up the fund. On 29 June 2009, Ashington’s property managers held a conference call with the superannuation fund investors at which the seriousness of the funds’ liquidity issues were discussed.

18. [1116]

    By 1 July 2009, one of the superannuation fund investors (Military Super) was querying whether Ashington was in breach of its obligations to investors and suggesting appointing an investigating accountant to look at the investments for unitholders – this was seemingly the genesis of the idea that led to the appointment of PPB (see below).

19. [1117]

    Also, in around July 2009, Mr Renauf commenced as Head of Acquisitions at Ashington Management.

20. [1118]

    On 10 July 2009, Mr Anderson sent an email to the superannuation fund investors, with a paper that acknowledged that the Investec Stonington Facility was non-compliant with the ADF2 Information Memorandum and that ADF2 did not have enough capital to meet both the Double Bay and Investec Facility covenants and was thus in breach of those facilities.

21. [1119]

    By 13 July 2009, it appears that there was some recognition within Ashington of the possibility of action by investors to terminate the management agreement (see Mr Bouris’ 13 July 2009 email).

22. [1120]

    On 16 July 2009, the PPB Mandate was signed, pursuant to which the superannuation fund investors appointed PPB to undertake an independent review of Ashington’s financial modelling of the Stonington Project and to provide a strategic and financial review of ADF2 more generally. (In PPB’s proposal document issued before the PPB Mandate was signed, one of the key issues was said to be “management” and there was reference to consideration of all options “potentially including a compulsory retirement and replacement if necessary” (although I note that this was not included in the signed PPB Mandate.)

23. [1121]

    On about 21 July 2009, PPB and Ashington Capital signed the PPB Confidentiality Agreement dated 20 July 2009 under which PPB was required to maintain the confidential nature of the confidential information provided to it by Ashington Capital and related entities for the “Approved Purpose” (that being the purpose of assisting PPB to conduct a review and prepare a report of ADF2 as instructed by investors in ADF2).

24. [1122]

    On 29 July 2009, there was a meeting between the superannuation fund investors and PPB at which, among other things, a structural problem with the trusts and sub-trusts was identified (and Sunsuper’s representative noted “very messy, need to change trustee”). Military Super’s representative indicated that the superannuation fund investors had started a review which would focus initially on, among other things, the process for termination of the manager and responsible entity.

25. [1123]

    As at early August 2009 (whether or not associated with the structural problems that had been identified or otherwise), the superannuation fund investors and PPB were considering the removal of Ashington Capital as trustee (and PPB was also looking at a “review of management”).

26. [1124]

    On 14 August 2009, PPB produced its First Strategy Report to superannuation fund investors, recommending among other things that a stand-still arrangement be sought with Investec and other lenders pending a short-term sale of the Stonington Property; and recommending that PPB be “additionally retained” by Ashington Capital to provide advice to it in respect of “investor supported strategies”. The report identified that, to implement the strategy set out in the report, PPB would require a mandate including “to assist the company in achieving a legally effective restructure of the current trustee and security arrangements”.

27. [1125]

    On 19 August 2009, Investec issued a notice of default, demanding repayment of some $10.139 million and cancelled the Investec Stonington Facility. Investec utilised its power of attorney to call for the $6 million in uncalled capital. Its lawyers put Ashington Capital and its directors on notice of claims which Investec had against the company in its personal capacity and against the directors.

28. [1126]

    On 19 August 2009, Mr Bouris resigned as chairman of the Ashington companies.

29. [1127]

    Meanwhile on 14 August 2009, Mallesons had written to Mr Anderson regarding the structuring of Ashington Capital’s development funds. By 20 August 2009, Mr Anderson had instructed Ms Briggs to seek Mallesons’ advice about the removal process. Also, on 20 August 2009, Mr Steel sought advice from Ms Briggs as to any breach by him of his duties as a potential director or officer.

30. [1128]

    On 20 August 2009, PPB forwarded to Mr Anderson a draft mandate letter concerning its role going forward and stating that PPB had been engaged by the superannuation fund investors to assist Ashington Capital as trustee (including to achieve a legally effective restructure of the current trustee and security arrangements). The mandate letter emphasised that PPB would not be acting for Ashington Capital in any capacity.

31. [1129]

    On 21 August 2009, Ms Briggs gave advice to Mr Steel and Mr Minahan (responding to a request the day before) as to the entitlement to development management fees if Ashington Capital was removed as trustee and a new trustee appointed.

32. [1130]

    On 21 August 2009, PPB produced its second strategy report, on receipt of which the superannuation fund investors agreed not to provide further information to Ashington Capital without approval of their lawyers and that it was necessary to involve the superannuation fund investors’ lawyer (Mr Burridge of Norton Gledhill) in discussions. Around this time, it appears that various (if not indeed all) of the superannuation fund investors formed the view that Ashington should be removed as trustee and manager of ADF and ADF2.

33. [1131]

    On 25 August 2009, the second PPB Mandate was signed (a revised version of the 20 August draft). It recorded that PPB had been engaged by the “investors in the Funds” and authorised the provision of information to assist the mandate which included “achieving a legally effective restructure of the current trustee and security arrangements” and recommending a medium-term strategy for the Funds. It also made clear that PPB was not acting for the trustee in any capacity.

34. [1132]

    On 25 August 2009, the Investec Stonington Facility expired and Ashington Capital was in default thereunder.

35. [1133]

    On 27 August 2009, Ashington’s CFO proposed an alternative short-term solution for consideration by superannuation fund investors in respect of ADF2, questioning the decision as to the sale of Stonington and proposing the deferral of decisions on all assets until 31 October 2009, continued attempts to procure construction funding for Stonington, and for superannuation fund investors to contribute $15 million additional capital to take out Investec and the Hamton Vendor Finance, supported by a principal guarantee from Ashington.

36. [1134]

    On 28 August 2009, the Westpac Stonington Facility of $26 million expired. Westpac reserved its rights, advising that it would require a reduction of the facility to $17.6 million.

37. [1135]

    On 31 August 2009, PPB wrote to superannuation fund investors advising as to the expanded scope of its original review (now encompassing both funds); and proposing that the mandate be split as between transaction management for Ashington Capital to manage the sale of Stonington (on the one hand) and investor advisory services to the superannuation fund investors .

38. [1136]

    From at least September 2009, Ms Garrett held the role of Heads of Funds Management at Ashington Management.

39. [1137]

    On 1 September 2009, Investec threatened immediate action against Ashington Capital and unitholders of ADF2 if the uncalled capital call was not paid. PPB proposed to Investec that there be a sale of the Stonington Property to pay the Investec Stonington Facility.

40. [1138]

    On 3 September 2009, Norton Gledhill responded to Investec advising that the superannuation fund investors considered that equity had been pledged in breach of various agreements. This was followed by a discussion between PPB and Investec in which there was a threat to “collapse the trusts” in order to access any equity value in the trusts.

41. [1139]

    On 7 September 2009, Allens Arthur Robinson, acting for Investec, issued breach notices. By 9 September 2009, Investec was threatening the appointment that day of receivers to Ashington Capital.

42. [1140]

    On 10 September 2009, the superannuation fund investors instructed PPB to advise Investec that the superannuation fund investors would grant it an exit fee of $1 million in exchange for a standstill agreement to allow an orderly sale of Stonington and that Ashington Capital would be instructed to proceed with the sale of Wylde Street.

43. [1141]

    From 11 September 2009, Ms Garrett and Mr Carolan were in communication as to the terms of a proposed Patersons mandate, whereby Patersons would be mandated to undertake a capital raising of $15 million in relation to the Stonington Project.

44. [1142]

    On 15 September 2009, a data room was set up at Mallesons in relation to the Stonington Capital Raising.

45. [1143]

    On 23 September 2009, after various revisions, the Patersons Mandate was signed by Ashington Capital and Patersons. The mandate provided that Patersons was engaged to raise $11-15 million in mezzanine finance to restructure the existing debt facilities for the Stonington Property (i.e., the alternative proposal to the sale of Stonington).

46. [1144]

    On 25 September 2009, within Ashington, Ms Garrett and Mr Renauf were put in charge of communications with PPB and superannuation fund investors.

47. [1145]

    On 25 September 2009, the development application for Double Bay was refused (a decision regarded by all as having significant detrimental impact for Ashington).

48. [1146]

    On 29 and 30 September 2009, there were meetings by Ms Garrett and Mr Renauf with superannuation fund investors at which agreement was reached for amendment to the Patersons Mandate (for the Stonington Capital Raising) and for the PPB mandate in relation to the sale of Stonington to be put on hold for a 14-day period. There seems to have been some suggestion at the meeting of 30 September 2009 (see Mr Hastings’ note) that Hamton might have been willing to “become the manager of the project”; and there was reference to removal of the trustee and to the expiry of facilities making “a change of management cleaner”.

49. [1147]

    From 30 September 2009, Patersons commenced forwarding the proposed Patersons Stonington Term Sheet to potential investors.

50. [1148]

    On 30 September 2009, the proposed term sheet was sent by Mr Doherty of Patersons to Mr Routley of Acorn, with reference to an investment opportunity in the form of a mezzanine finance facility. Mr Routley’s response was that Acorn could not do pure debt and needed to have some equity convertibility. Later, on 30 September 2009, in response to Mr Doherty’s query of whether a conversion into equity in an unlisted property fund would be of interest, Mr Routley advised that Acorn’s preference would be to invest in the manager. Significantly, this appears to be the first suggestion in the contemporaneous documents in evidence that there might be a transaction involving investment in the manager (other, perhaps, than the cryptic reference to Hamton becoming the manager of the project). Thus, at this stage any suggestion in relation to the manager did not emanate from either PPB or from Ms Garrett and Mr Renauf. However, this expression of preference by Mr Routley clearly led to some consideration being given to the ongoing role of manager of the fund(s) (and in due course the proposal for replacement of the manager).

51. [1149]

    On 1 October 2009, there was default in relation to the Investec facilities (because superannuation fund investors did not meet the $3 million uncalled capital call) and shortly thereafter the NAB/St George Facility with respect to Double Bay also went into default.

52. [1150]

    On 1 October 2009, Apex Capital sent an email with an indicative proposal in relation to Stonington that contemplated Apex Capital taking over management of the development and having a substantial majority equity stake; and seeking a 14-day exclusivity period to complete due diligence. An indicative non-binding proposal was sent through on 2 October 2009. Ms Garrett’s comment to Mr Renauf on this was that “if we want to execute on the plan we discussed with PPB then this offer does not work for us as it involves APEX taking over the management of the Stonington development”.

53. [1151]

    On 2 October 2009, Ms Garrett sent an email to Mr Doherty (copied to Mr Carolan) signed off as “will be the new Fund Manager” setting out the opportunity for an incoming investor to invest in the Stonington Project and have a significant equity interest in “Newco” which would be established by existing equity investors and would replace Ashington as manager of the funds. This email referred to concerns held by existing equity investors about the security arrangements adopted by Ashington. (The plaintiff places much emphasis on this email as effectively being the “Garrett plan”.)

54. [1152]

    Over the weekend of 3 to 4 October 2009, in advance of meetings scheduled in Melbourne on 5 October 2009, Ms Garrett and Mr Carolan worked on a PowerPoint presentation that included a “Go Forward” corporate structure that contemplated a new entity being established as the fund manager to replace Ashington. There seemed to be some doubt expressed in the communications as to whether that proposal would proceed; or be included in the slides.

55. [1153]

    On 3 October 2009, Ashington’s CFO (Mr Steel) communicated to Ms Garrett concerns he had as to non-disclosure of a $20 million fee to Valad in relation to the Noosa Trust and as to alteration to Board minutes (as to which there is nothing other than his assertion in this email).

56. [1154]

    On 5 October 2009, Ms Garrett and Mr Renauf met in Melbourne (with Mr Carolan and Mr Doherty of PPB) first, with Mr Routley (of Acorn) and then (at Mr Routley’s suggestion but without his attendance) with Mr Ko (of Albany), at which a proposal for funding which involved the replacement of Ashington as trustee and manager was discussed.

57. [1155]

    Meanwhile, on 5 October 2009, Mr Anderson appears to have been progressing other opportunities for the Stonington Capital Raising. Mr Anderson reported on 6 October 2009 that there were three additional parties that were interested (Wingate, Icon Constructions and a high-net-worth individual from Melbourne). (A signed confidentiality agreement was forwarded by Wingate to Ms Briggs in relation to the Stonington Project on 7 October 2009.)

58. [1156]

    On 6 October 2009, confidentiality agreements were forwarded to Mr Ko and subsequently to Mr Routley (and in due course executed).

59. [1157]

    On 6 October 2009, NAB issued notices of default in relation to Double Bay.

60. [1158]

    Also on 6 October 2009, there was an email within PPB as to the “newco opportunity”, listing the Alter family (Albany) and Acorn as potential investors; and referring to the new management team. Mr Block of PPB sent to Mr Renauf and copied to Ms Garrett an email asking for resumes for the “team” and referring to management fees and the scope of the management agreement.

61. [1159]

    On 7 October 2009, there were communications updating Investec as to progress in relation to the Patersons Mandate for the Stonington Capital Raising and referring to a telephone conference with an overseas investor (Mr McCabe); and communications with Apex Capital.

62. [1160]

    On 7 October 2009, PPB emailed superannuation fund investors to the effect that any recapitalisation proposal would see the management and trustee arrangements changed so that Ashington was no longer involved. Later on 7 October 2009, Arnold Bloch Leibler sent advice in relation to the procedure for removal of Ashington Capital as trustee to PPB, which advice was forwarded to Ms Garrett and Mr Renauf.

63. [1161]

    On 8 October 2009, Mr Routley sent an internal briefing note to his colleagues at Acorn (Mr Swan and Mr Sheehan), which he copied the next day to Mr Ko. Among other things it recorded Mr Routley’s understanding that a decision had been made to terminate Ashington as manager and responsible entity of both ADF and ADF2. The note referred to the consortium as “Albany/Acorn”; said that the recapitalisation/rescue effort was being led by Ms Garrett (who was believed to be known and endorsed by the investors and PPB). Interestingly, the note stated that “PPB contacted her and let her know that Ashington was not going to retain [I assume] management rights for the funds and that she should work with them [PPB] to solve current funding issues and work out how to move forward. Mr Routley stated that Ms Garrett’s focus has been to “resolve the senior debt issues” and confirm “the ability to transfer the management rights before firming up the new mezz investor and manager”.

64. [1162]

    On or about 9 October 2009, a discussion took place between Ms Garrett, Mr Renauf, PPB and the superannuation fund investors at which the plaintiff says the “Garrett plan” was revealed (see superannuation fund investors’ notes of that meeting).

65. [1163]

    On 10 October 2009, seemingly expressing some frustration with the dealings with Mr Ko, Ms Garrett sent an email to Mr Renauf suggesting that she was “actually ready to provide her resignation”. That frustration may have been mirrored by Mr Routley, who was critical of the level of information in the Stonington Data Room (see his email of 11 October 2009 to Mr Sheehan).

66. [1164]

    On 12 October 2009, Ms Garrett and Mr Renauf met with Mr Ko and Mr Routley in Melbourne. It seems that around this time Ms Garrett was avoiding responding to Mr Anderson’s calls.

67. [1165]

    On 14 October 2009, the Albany and Acorn joint letter of offer to superannuation fund investors was provided to PPB.

68. [1166]

    Meanwhile, on 14 October 2009, Mr Anderson communicated with Mr Orloff of Victor Smorgon as to the Stonington Project Investment Opportunity Presentation; and on 15 October 2009, Mr Anderson sent this to Wingate.

69. [1167]

    On 16 October 2009, PPB sent to Ms Garrett a key issues paper which included reference to the advice received from Arnold Bloch Leibler as to the removal of the trustee.

70. [1168]

    Around 16 October 2009, information was provided by PPB to Acorn and Albany (with the consent of the superannuation fund investors) but potentially beyond the scope of the PPB mandate.

71. [1169]

    On 19 October 2009, NAB and St George appointed KordaMentha as investigating accountants to review the Double Bay Project.

72. [1170]

    Also on 19 October 2009, Ms Garrett and Mr Ko communicated in relation to the proposed new salary arrangements for Ms Garrett and Mr Renauf.

73. [1171]

    On 21 October 2009, a second joint Acorn/Albany offer was sent to the superannuation fund investors via PPB. It also contemplated the contribution by the superannuation fund investors of further capital.

74. [1172]

    On 22 October 2009, Mr Ko sent an email to Ms Garrett and Mr Renauf referring to the possibility of a “hit and run” on the Ashington assets if the superannuation fund investors did not set out the proposal.

75. [1173]

    On 23 October 2009, referring to a telephone conversation the previous day, Mr Ko sent an email to PPB, copied to Acorn suggesting that the legacy issues created by Ashington as a management team may have resulted in hurdles too high for Albany/Acorn to meet; and indicating an intention not to proceed if that were to be the case.

76. [1174]

    On 23 October 2009, PPB’s response was that the existing investors did not wish to pursue a strategy that involved them providing further funding; rather, they wished to pursue a strategy which delivered both a capital and management solution from a third party,

77. [1175]

    Also on 23 October 2009, Norton Gledhill wrote to Mr Anderson and Mr Minahan requesting that the superannuation fund investors be kept properly informed about the activities of the funds.

78. [1176]

    On around 24 October 2009, Ms Garrett and Mr Renauf flew to London to meet with Mr McCabe (Mr Anderson understood at the time that this was to pursue the Stonington Capital Raising). Ms Garrett in her liquidator’s examination says that she discussed with Mr McCabe the proposal to replace Ashington as trustee and manager.

79. [1177]

    On 26 October 2009, Wingate forwarded an indicative term sheet to refinance the Wylde Street debt facility.

80. [1178]

    On 29 October 2009, Mr Ko advised PPB that Albany and Acorn were considering putting a “final proposal” to the superannuation fund investors. That proposal (summarised in an email sent on 30 October 2009 by PPB to superannuation fund investors) was presented in meetings held on 6 November 2009.

81. [1179]

    On 30 October 2009, Ashington’s auditor expressed concerns as to Ashington’s ability to meet its debts as and when they fell due and advised that it was required to inform ASIC of this.

82. [1180]

    On 30 October 2009, Mr Anderson passed on to PPB a copy of Wingate’s indicative term sheet to refinance Wylde Street; and updated Investec on the Stonington Capital Raising deal with Wingate, Alter and Mr McCabe.

83. [1181]

    The plaintiff places commencement of execution of the Garrett plan from about 1 November 2009.

84. [1182]

    On 4 November 2009, Mr Ko and Mr Routley prepared for the presentation to superannuation fund investors to be held on 6 November 2009; and on 5 November 2009 there were communications with Ms Garrett and others in relation to the presentation. On 6 November 2009, Ms Garrett forwarded a copy of the presentation to Mr Carolan to be printed, which was then forwarded to Mr Routley.

85. [1183]

    Presentations to the superannuation fund investors were made on 6 November 2009.

86. [1184]

    Meanwhile on 6 November 2009, Wingate indicated that it would prepare a term sheet that was not conditional on construction finance.

87. [1185]

    On 8 November 2009, Mr Ko forwarded to Ms Garrett and Mr Renauf a memorandum in relation to a proposed consultancy agreement suggesting that they give consideration to resigning from Ashington as soon as practicable after completion of a term sheet (and referring to planning to enable conflict issues to be minimised).

88. [1186]

    On 9 November 2009, Wingate provided an indicative term sheet with a mezzanine funding proposal for Stonington (i.e., the Wingate Proposal).

89. [1187]

    On 10 November 2009, Norton Gledhill wrote to Ashington requesting information in relation to the Wingate Proposal and stated that the superannuation fund investors expected to be properly consulted in advance of any decision with respect to the dealings with Wingate. (Mr Anderson’s view was that, as it was a debt transaction, he was not obliged to consult with them).

90. [1188]

    On 10 November 2009, Mr Steel found an email Ms Briggs had sent to him and Mr Anderson on 21 August 2009 about the significance of the removal of Ashington Capital as trustee for Ashington Management’s fees; and at 9.43pm on 10 November 2009, Mr Steel asked Ms Briggs about her advice on that matter. On 11 and 12 November 2009 there were emails between both Mr Steel and Ms Briggs, and also Mr Steel, Ms Briggs and Mr Anderson about the financial consequences for Ashington Management if Ashington Capital was removed as trustee.

91. [1189]

    On 11 November 2009, PPB sought details from Mr Anderson about the Wingate Proposal and expressed concerns about the process.

92. [1190]

    On 11 November 2009, a draft term sheet in relation to the Acorn/Albany proposal was sent to PPB (i.e., the Parissen Proposal). Separately, a revised refinance offer was sent by Wingate.

93. [1191]

    On 16 November 2009, Mr Carolan sent his “we will be shot email”, asking Mr Doherty to keep anything in relation to the Alter investment 100% confidential.

94. [1192]

    On 16 November 2009, Ms Garrett resigned her employment with Ashington (and Mr Ko sent a draft employment term sheet to Ms Garrett and Mr Renauf).

95. [1193]

    On 19 November 2009, the superannuation fund investors met with PPB and agreed to appoint Parissen as long as there was a strong process regarding the retirement of Ashington and the appointment of the new trustee. The superannuation fund investors agreed to give PPB a mandate to commence discussions with Ashington for its removal as trustee and manager.

96. [1194]

    On 19 November 2009, Parissen was incorporated.

97. [1195]

    On 20 November 2009, Mr Anderson executed an amended Wingate term sheet (without advising Norton Gledhill, PPB or the superannuation fund investors).

98. [1196]

    On 22 November 2009, Mr Ko advised Investec that the superannuation fund investors had accepted the Parissen Proposal and said that he had written to PPB and Arnold Bloch Leibler requesting a conference to discuss the timetable for its implementation.

99. [1197]

    On 23 November 2009, KordaMentha reported that its review of the balance sheet of ADF2 indicated that the Ashington unitholders had not funded approximately $4.6 million of capital calls in ADF2 and that there was no capacity for the respective entities to fund their outstanding capital calls or their portion of the remaining $6 million in uncalled capital.

100. [1198]

     On 23 November 2009, Mr Anderson instructed payment of part of the Wingate establishment fee.

101. [1199]

     On 25 November 2009, the superannuation fund investors were advised by PPB that PPB had learnt that Ashington had executed the Wingate Proposal and sought immediate instructions for PPB to expedite the process for removal of Ashington as trustee/manager. That approval was given on 26 November 2009.

102. [1200]

     On 27 November 2009, PPB informed Mr Anderson and Mr Minahan that the superannuation fund investors wanted to remove Ashington as trustee and manager. Discussions in relation to this ensued, including instructions given to Arnold Bloch Leibler for preparation of documentation for that to occur.

103. [1201]

     On 22 December 2009, Mr Anderson confirmed to KordaMentha that Ashington proposed to retire as trustee at the head trust level that day and at sub-trust level over the next six weeks (as Alter completed due diligence on the individual projects).

104. [1202]

     On 23 December 2009, Ashington Capital retired as trustee of the two funds and Parissen was appointed.

105. [1203]

     On 14 April 2011, Ashington Capital and Ashington Management went into liquidation.

Most likely genesis of the “plan” to remove Ashington as trustee/manager

1. [1204]

   It seems to me from the above chronology of events, and placing weight on the contemporaneous documents, that the most likely genesis of the so-called plan to remove Ashington as trustee and manager was the response from Mr Routley of Acorn when he received the Patersons Stonington Term Sheet from Mr Doherty on 30 September 2009 to the effect that Acorn could not do “pure debt” and that there needed to be some equity convertibility. That led to Mr Carolan asking whether Mr Routley would look at converting equity into an unlisted property fund (which Mr Carolan suggested might be a “fall back option” – presumably a fall back to the Stonington Capital Raising per se); and Mr Routley’s response that, while this would allow Acorn to do the deal, Acorn would still be a “low probability to complete” and that its preference would be to invest in the manager.

2. [1205]

   True it is, that there had been consideration of the structure of the trusts and head trusts at an earlier time (prompted by the concern that arose when it was discovered that the Investec Stonington Facility had been secured at head trust level) and it is clear that there was discussion amongst superannuation fund investors to the effect that the structure of the trusts was very “messy”. However, at that stage I consider that the matters recorded as having been discussed were focussed on the structure of the head trust and sub-trusts in the context of the fund borrowings; not on the removal of Ashington due to concerns raised about the funds’ performance, or Mr Anderson’s conduct, or the quality of communications, or the like.

3. [1206]

   It is evident that from before 30 September 2009 one or more of the superannuation fund investors or their consultants was or were dissatisfied with Ashington’s performance and, in particular with Mr Anderson; and there was contemplation by one or more of them from a time earlier than 30 September 2009 as to the possible removal of one or both of the Ashington companies from their roles as trustee and manager. However, I am not persuaded that there was a clear consensus on the part of superannuation fund investors as at 30 September 2009 for the removal of the Ashington companies from their then roles (and indeed the meetings on 29 and 30 September 2009 are inconsistent with there having been a decision as to their removal at that time).

4. [1207]

   It is also apparent that Mr Anderson was alive at a relatively early stage to the possibility that Ashington might be removed as trustee or manager (or perhaps both) insofar as advice was sought around the end of August 2009 from Mallesons on that issue; and again this issue was apparent when Mr Bouris resigned as chairman. The context in which the Mallesons advice was sought seems to have been a concern as to the ongoing entitlement to development management fees if there was a change but there was nevertheless recognition of the possibility for removal of the trustee or manager to which Mr Anderson had turned his mind at the time.

5. [1208]

   In terms of the proposal for the refinancing of the Stonington facilities, the relevant chronology appears to be that: PPB (appointed by the superannuation fund investors) had promulgated the proposal that the Stonington Property be sold (a proposal with which Mr Anderson did not agree) and the superannuation fund investors at first agreed with that course; Mr Anderson then pursued the Patersons Mandate under which potential investors were sought to raise $11 to $15 million in mezzanine finance in order to pay out Investec (and Hamton) and permit construction of the proposed development of Stonington to commence (i.e., the Stonington Capital Raising). Ms Garrett (in particular) and Mr Renauf were active in the development of the Patersons Mandate and Ms Garrett was credited with persuading the superannuation fund investors (at the 29/30 September 2009 meetings) to put the sale of Stonington (and PPB’s sale mandate) on hold for a short time to permit the Stonington Capital Raising to be pursued. As at late September 2009, they were the only two options apparently being considered in relation to the refinancing of the Stonington debt.

6. [1209]

   The first suggestion that involved the position of manager of the funds (subject to the qualification I make below as to Mr Hastings’ undated file note after the meetings on or around 29/30 September 2009) was, as noted above, Mr Routley’s response to the Patersons Stonington Term Sheet (i.e., that Acorn could not do pure debt and that Acorn’s preference would be to invest in the manager). That response (to Mr Doherty) was conveyed to Mr Carolan, who the suggested to Ms Garrett that Acorn “might look at a direct investment into the manager”.

7. [1210]

   While Mr Hastings’ file note (see chronology above) suggests that there was some consideration at around this time that Hamton might become the manager of the Stonington Project; and there was a reference in the file note both to removal of the trustee (it being said that, to do so, the unsecured creditors would need to be removed) and to a “change of management” (which was said to be “cleaner” with facilities “expired/coming due”), there is no reference in Mr McCusker and Mr Tieu’s file note of the meeting on 30 September 2009 to the removal of the manager or trustee. I consider it more likely that Mr Hastings’ file note was prepared at a later time (albeit including reference to some matters going back to around 30 September 2009). The plaintiff places this file note at some time around 9 October 2009 by reference to its contents.

8. [1211]

   Therefore, I am not persuaded that as at 30 September 2009 the superannuation fund investors had turned their minds as a group to the replacement of the Ashington companies as trustee/manager. What is clear is that Mr Carolan considered that Mr Routley’s response pointed to the possibility of Acorn investing in the manager (hence the position of the manager was under consideration at least in that context).

9. [1212]

   The next relevant document to consider in relation to the genesis of the “plan” is the making of an indicative non-binding proposal by Apex Capital on 1 October 2009 (followed up by a letter the following day) which contemplated the refinance of the existing mezzanine debt facilities but on the basis that the “investor” would take over management of the Stonington development. The significance to be attached to this proposal, to my mind, lies in the response to it by Ms Garrett in her email to Mr Renauf (namely that “if we want to execute on the plan we discussed with PPB then this offer does not work for us as it involves Apex taking over the management of the Stonington development”). I do not attach so much significance to the comment that this offer “does not work for us”, since the “us” could conceivably be a reference to Ashington or to those pursuing the Patersons Mandate. However, what it does clearly indicate is that there had been something discussed with PPB, to which Ms Garrett ascribed the description of a “plan” or from which Ms Garrett had drawn the conclusion that a “plan” of some description had been discussed. Again, I do not attach particular significance to the reference to a “plan”, as such; it could perhaps have simply been a reference to some discussion as to proposed steps or a strategy that might be followed. Rather, what is significant is that it shows that there must have been some discussion with PPB at least about a strategy or proposed steps (if not a concluded “plan”, as such) proposed to be executed or at least being considered, with which a take-over by Apex Capital of the management of the Stonington development would be inconsistent.

10. [1213]

    Certainly, there appear to have been discussions between Ms Garrett and Mr Renauf with PPB on or around 30 September 2009 (for example, there is a reference in an email from Mr Renauf on 30 September 2009 to a meeting to be held at PPB’s office at 10.20 am on 1 October 2009 ) and the inference to be drawn from the 2 October 2009 email is that the meeting with PPB was before receipt of the Apex Capital letter of 2 October 2009. However, it is unclear what “plan” Ms Garrett was suggesting they might want to “execute on” (except to the extent that it would not have involved Apex Capital taking over the management of the Stonington development). (PPB, as I discuss in due course, submits that it is most likely that there was a meeting on 1 October 2009 at which Ms Garrett referred to a proposal to replace the Ashington entities as trustee and manager. I accept that a meeting at that time is likely to have occurred. I am just not persuaded that I can conclude that at that meeting Ms Garrett proposed the replacement of the Ashington entities – though I accept that the possibility of such a replacement may well have been discussed; since at the very least the proposal in relation to management rights being assumed by Apex Capital was inconsistent with whatever was then in contemplation by Ms Garrett and Mr Renauf).

11. [1214]

    By 2 October 2009, there is no doubt that Ms Garrett was seeking to progress what she described as a “significant opportunity to invest in to the Manager”, as she raised with Mr Carolan and then explored in more detail in her 2 October 2009 email to Mr Doherty. It is in that email (with the sign-off from Ms Garrett as “will be the new Fund Manager”) that there is the first suggestion that superannuation fund investors had been prompted to “investigate options to transfer key assets to a new Manager” (albeit no suggestion that there had been a decision to that effect); and, significantly, the reference to an opportunity for an incoming investor to invest in a new company that would replace Ashington as manager of the funds and receive the fund management fees. I accept that what can be drawn from the reference to “will be the new Fund Manager” is problematic – it might be, as suggested for Ms Garrett and Mr Renauf, a mere cutting and pasting error but there is no evidence of this (and Ms Garrett gave no evidence herself that this was a typographical error); it might also be a tongue in cheek reference to an anticipated or hoped for management role. At the very least, it would surely have conveyed to the reader that Ms Garrett was anticipating some part to play in the new fund manager role that was contemplated as part of the significant investment opportunity there being touted.

12. [1215]

    Further, and again I consider this to be significant, Ms Garrett here emphasised that the process (which contemplated the removal of Ashington as manager) was “highly confidential”, from which I would comfortably infer (coupled with the fact that at no time did Ms Garrett communicate to Mr Anderson that such a proposal was being considered) that Ms Garrett was seeking to conceal, from at least Mr Anderson, that she was promoting or proposing to promote a proposal whereby an investor would be offered the opportunity to replace the manager. It is hard to see what would otherwise be particularly confidential about the opportunity to refinance the Stonington Project (since it was already being marketed under the Patersons Mandate by way of the Patersons Stonington Term Sheet). That said, the fact that (with hindsight) I would infer that Ms Garrett was seeking to conceal this proposal from Ashington or Mr Anderson at the time does not mean that those with whom Ms Garrett was dealing at the time would thereby have been put on notice that this was the case.

13. [1216]

    As I have commented already, I consider it relevant that by this stage there is no evidence that the superannuation fund investors had made any (formal or informal) decision to terminate the appointment of Ashington Management as manager (or Ashington Capital as trustee, for that matter) of the funds; yet Ms Garrett is here clearly conveying to Mr Doherty that the superannuation fund investors are at least investigating options for this to occur.

14. [1217]

    As to the weight to be placed on the assertion by Ms Garrett that the process “is being managed by PPB and myself and Sam Renauf”, one difficulty that I have in attaching much weight to that statement as against PPB is that, on the plaintiff’s own case, Ms Garrett was lying to the superannuation fund investors when she told them that incoming investors would only invest if the manager was replaced and lying to potential incoming investors when she told them that the superannuation fund investors had decided to replace Ashington as manager of the funds. If so, there is nothing to enable me to place much weight on her assertion in this email that the process was being managed by Ms Garrett and PPB (since this could equally have been a misleading statement, for example, it could equally have been the situation that this was a process being “managed” by Ms Garrett with Mr Renauf’s assistance and with no real input at this stage at least from PPB; and the reference to PPB on that hypothesis could simply have been an attempt to introduce credibility into the scenario). I note that Ms Garrett’s propensity to stretch the truth is evident in various other communications, not least the suggestion conveyed to Mr Anderson that she was ill at the time that it appears she must have been in Melbourne progressing the Parissen Proposal. Thus, once one embarks on speculation that Ms Garrett was lying in certain of the communications, it is difficult not to speculate as to other communications. What is more relevant is what such a statement would have conveyed to a reasonable person in the position of the reader of the communications.

15. [1218]

    What next appears in the documents is the suggestion in the “Go Forward” presentation slides prepared by Ms Garrett (with Mr Carolan’s assistance) over the weekend 3 to 4 October 2009, is the assertion by Ms Garrett that PPB had recommended that the sub-trusts containing key projects be transferred out of the existing Ashington structure to a new corporate trustee (to quarantine them from any possible future issues within the Ashington Group), which new corporate trustee would replace Ashington as manager of the key projects and receive the fund management fees; and that the superannuation fund investors had unanimously supported this recommendation. The slide also referred to a recommendation by PPB that Ms Garrett and Mr Renauf be the replacement key personnel in the new corporate trustee with back office support from PPB. Whether or not this recommendation in fact came from PPB (as asserted), it is a clear indication that one proposal then being considered involved the replacement of Ashington Capital as trustee and Ashington Management as manager, with PPB, and Ms Garrett and Mr Renauf, to be involved in the new management role.

16. [1219]

    It is difficult not to conclude otherwise than that the statement that the superannuation fund investors had unanimously supported the recommendation for the replacement of Ashington as trustee and manager was untrue or at the very least a misleading overstatement (although, as I explain in due course, there are cogent submissions put forward by at least Albany for the proposition that this was in fact the case). Certainly, there is nothing in the documents of the superannuation fund investors that records any such formal approval at that stage (and in this regard it is not insignificant that when a decision was ultimately made in November 2009 it was formally documented). At most, this statement could have been conveying the sentiment of the superannuation fund investors as conveyed in meetings or discussions with them but the notes of the 29/30 September 2009 meetings do not go so far as to suggest an unanimous support of any recommendation for the replacement of Ashington as either trustee or manager at that stage. Nor is it clear on the evidence that there was any recommendation to that effect by PPB at that stage.

17. [1220]

    Intriguingly, it appears that something happened in the course of that weekend to make Ms Garrett suggest to Mr Renauf (in her 4 October 2009 emails at 2.19pm and 2.41pm) that the “Go Forward” structure had become redundant but I cannot see from the documents what may have led to that comment. However, what is telling is Ms Garrett’s email of 4 October 2009 at 2:41pm to Mr Renauf where she states that she will take the “go-forward corporate structure section…as a separate set of slides as this is probably more appropriate”. Ms Garrett goes on to refer to having promised Mr Routley that something would be forthcoming (in the context of the reference to the removal of the go forward slide), which suggests at least that Ms Garrett had had a discussion with Mr Routley in which some such document had been promised. What was said in any such discussions is little more than speculation other than it seems evident that Ms Garrett understood that a document of some kind would be produced as to the proposal. However, the recognition that is “more appropriate” to keep that slide separate to me indicates that Ms Garrett was very aware that the information in the “go forward” structure was not in line with her employment.

18. [1221]

    By 6 October 2009, whatever PPB’s involvement had been up to that point in formulating or developing the idea for a “Newco” replacement of the trustee and manager, it is clear that Mr Block of PPB was endorsing that proposal internally within PPB as the “only sensible way forward”. That 6 October 2009 email recorded that Ms Garrett and Mr Renauf had “recently joined Ashington” and were currently working on a proposal “with our input” to replace Investec and to re-capitalise the Stonington sub-trust (which was objectively true) and stating that the potential incoming investors would only consider a “re-cap” proposal with a new structure (which was not so evidently the position at the time). The letter also said that “[w]e” are working with Arnold Bloch Leibler to action that plan (and referred to PPB as a potential equity investor in the new company). This is consistent with the fact that Arnold Bloch Leibler in due course provided advice as to the procedure for the removal of the trustee/manager.

19. [1222]

    Thus, whoever’s “plan” it had initially been, by 6 October 2009 the key person at PPB involved in discussions with the superannuation fund investors (Mr Block) was here acknowledging to others at PPB that PPB was working on it with Ms Garrett and Mr Renauf. The relevance of whose plan it actually was in fact is suggested by various of the defendants to be moot (and I largely agree). It seems to me at most to go to the knowing assistance claims since PPB was never retained by the Ashington companies and was surely able to put to the superannuation fund investors whatever proposal it thought merited consideration. However, the complaint is that, in so doing (in relation to the replacement of the trustee and manager), PPB knowingly assisted breaches of fiduciary duty by Ms Garrett and Mr Renauf. To that extent it might arguably be relevant as to whether or not it was PPB’s idea in the first instance or whether PPB simply took on board and assisted an idea that Ms Garrett and Mr Renauf concocted. Ultimately, however, I consider that nothing turns on whose idea it was; and that there are equally plausible arguments that it was PPB’s initial “plan” after PPB became aware of Acorn’s potential interest in investment in the manager or it was Ms Garrett and Mr Renauf’s suggestion after they had become aware of the potential for investment in the manager. As for the claim against Ms Garrett and Mr Renauf, themselves, it does not seem to advance matters much whether or not it was originally their “plan” as such; the real complaint is as to their conduct in pursuing it without disclosure to Mr Anderson and Ashington.

20. [1223]

    In this context it is relevant to note how the formation of the so-called Garrett plan is pleaded by the plaintiff and the time at which the “Consortium Objective” was allegedly formed (since that pre-dates the involvement of at least Albany and, to a large extent, Acorn as well):

State of ADF and ADF2 as at September 2009

1. [1224]

   At this point it is convenient to note the position of the respective development funds as at September 2009. Marketing material prepared in contemplation of AOF3 in early 2009 included statements that “Ashington Development Fund No. 1 and Ashington Development Fund No. 2 are forecast to return 18% and 21% IRR [internal rates of return] respectively”. Ms Garrett and Mr Renauf say that, although Mr Anderson sought to distance himself from the significance of these representations in cross-examination, neither fund was performing as had been promised and this was central to investors’ decision to remove Ashington as trustee. (In that regard, the contemporaneous documents certainly support the conclusion that the superannuation fund investors were most concerned by the financial performance of their investments – which is unsurprising since this was money held on trust by the superannuation funds, ultimately for the benefit of those for whom superannuation funds were held; and the evidence of various of the superannuation fund witnesses in the hearing made that abundantly clear.)

2. [1225]

   First, as to ADF, a Board Meeting Paper dated 16 December 2008 identified a substantial downgrade to the overall investor IRR, and that “Liquidity within [ADF1] remains a major issue”. At 16 December 2008, the IRR was forecast to reduce from 17.7% to 6.9% in the period between 20 June and 30 September 2009. By 30 June 2009, ADF had ceased reporting its IRR figure to the superannuation fund investors and the net tangible asset (NTA) per unit was 0.639. By 30 September 2009, the NTA per unit was 0.381.

3. [1226]

   It is apparent (and I do not understand it to be disputed by the plaintiff) that each of the sub-trusts of ADF was in financial distress by September 2009.

4. [1227]

   As to 10 Wylde Street, the development depended on Investec’s support. By March 2009, there was difficulty as to further funding from Investec; and Mr Steel had advised Mr Anderson that demolition could not be commenced without the consent of Investec, which was unlikely to be provided unless the facility was extended. The report for the board meeting on 4 May 2009 confirmed that “a decision has been made to put the demolition of the building on hold due to financiers increasing their requirements for pre-sales from the previously agreed $20m sale, and Investec (the land lender) becoming uncomfortable that the demolition was adding value to the property”. By 30 September 2009, the asset strategy for the 10 Wylde Street Trust had been revised to dispose of the site, in order to create liquidity in ADF, because of difficulties in obtaining finance. Ms Garrett and Mr Renauf note that the report also revealed that as at 30 September 2009, the project was expected to result in an overall loss of $5.163 million. Mr Steel’s board report from July 2009 noted that it was not possible to give Investec the security it required at the head trust level, “without investor approval, because the security indirectly affects the other assets within the fund”.

5. [1228]

   Second, as to the Potts Point Property, by 31 March 2009 the project had a gross realisation (of $94,000) and the IRR was also forecast to be negative (-2.61%). By September 2009, the negative gross realisation was -$2.219 million. A draft valuation was expected to be 20-25% lower than expected.

6. [1229]

   Third, as to the Cross+ Trust, by 31 March 2009 the project had a negative gross realisation of -$6.872 million. By 30 September 2009, it was noted that marketing of the project had been limited due to a lack of capital and finance available, and the project had a negative gross realisation of -$9.074 million. The target IRR was 21% but by the end of the project it was down to -5% (T 302.26-9).

7. [1230]

   Fourth, as to Double Bay (in which Ashington Capital held a 25% interest as trustee for ADF), by September 2009, ADF did not have enough cash to meet its contributions to the Double Bay project and contributions were met from ADF2 (without the superannuation fund investors in ADF2 being so informed).

8. [1231]

   As to ADF2, by 30 June 2009 the NTA per unit was 0.8798; and by 30 September 2009 the NTA per unit was 0.9172, but with a market adjusted value of 0.347. Two of the three sub-trusts were in financial distress.

9. [1232]

   First, as to Double Bay (in which project the ADF2 trust owned 75%). An undated (and unauthored) position paper, following the rejection on 29 September 2009 of the Double Bay development approval application, stated that the banks were likely to “reduce the LVR on the current facility from 65% to ~50%. With the re-valuation of the property (refurbishment scheme) likely to be the same or less than the previous valuation, $77.5m, this will leave a funding gap of ~$25m that will need to be filled”. The paper stated that any new development approval of the site would take approximately 9-12 months, and that the redevelopment was estimated to cost an additional $5.5 million. Ms Garrett and Mr Renauf say that Ashington simply did not have the time or the funds to pursue any alternative plan.

10. [1233]

    Second, as to Stonington, on 16 December 2008, a paper to the Ashington board noted that Ashington was unable to procure debt funding for the following reasons: “a) [s]ources of Capital have dried up; b) the capacity of ADF2 to meet its future commitments without the certainty of a sell down in Double Bay was challenged by financiers; c) the ability of ADF2 to remain onside of its existing covenants further restricted the capacity of the fund to borrow; d) financiers unwillingness to lend on non income-producing assets; e) lateness of the request for funding due to delay in receiving the evaluation; f) financiers inundated with funding requests; g) lower Senior LVR’s being offered by Banks, resulting in the need for Mezzanine finance”. On 22 July 2009, Charter Keck Cramer prepared a Valuation Report of the Stonington Property for Westpac giving a valuation of $35.2 million (excluding GST) (which Ms Garrett and Mr Renauf emphasise was well below the purchase price paid by Ashington only five months earlier of around $45.5 million). Although there was a revised valuation, this only resulted in an increase in the value to $42.244 million, and the value was subject to assumptions and exclusions provided by Ashington, it being noted that the valuation “does not represent the market value of the land as a whole, but rather the collective value of the five stages, assuming they are developed independently from each other, and importantly, on a project related basis”.

11. [1234]

    Third, as to the Noosa Property, by at least 30 September 2009, the original plans to develop Noosa were essentially put on hold, with the commencement of development deferred by at least 12 months, and a further delay anticipated depending on the outcome of negotiations with the hotel manager. (Further, as noted in due course, it appears that the $20 million Valad Noosa fee was not disclosed to the superannuation fund investors).

Plaintiff’s claims

1. [1235]

   In summary, the plaintiff’s claims as against the various defendants are as follows.

2. [1236]

   As against Ms Garrett and Mr Renauf, the claims are for breach of fiduciary duties (not to use his/her position for their own or a third party’s advantage; and to avoid any potential or actual conflict between their duties as an employee and officer of Ashington Management (or alternatively their role and duties with respect to Ashington Capital and Ashington Management) and their personal interest or the interest of any third person); knowing assistance in the alleged breaches by each other and by Patersons of their respective alleged fiduciary duties to Ashington Capital and Ashington Management; and breach of implied terms of good faith and honesty in her employment contract with Ashington Management; as well as implied terms of confidentiality and non-disclosure.

3. [1237]

   As against Patersons, the claims are for: breach of fiduciary obligations to Ashington Capital and Ashington Management, in relation to the performance of the Patersons Mandate, not to use its position for its own or a third party’s advantage and to avoid any potential or actual conflict between its duties as an advisor to the Ashington companies and its own personal interest or the interest of any third person (by reason of Patersons’ involvement in the alleged Consortium); for breach (again through its involvement in the Consortium) of various terms of the Patersons Mandate (express terms of good faith and non-disclosure of information of which it became aware in relation to the mandate; and an implied term that it would act in a manner to avoid conflicts of interest or, if a conflict of interest arose, would advise Ashington Capital forthwith, make full disclosure and take instructions on whether to cease acting); for knowing assistance in respect of the alleged breaches of fiduciary duty by Ms Garrett and Mr Renauf; and for breach of obligations of good faith and confidence (or alternatively equitable duties of confidence) allegedly owed to Ashington Capital and Ashington Management by gaining access to the information of Ashington Capital and Ashington Management in order to further the objective of the Consortium and concealing that matter from Mr Anderson, and Ashington Capital and Ashington Management.

4. [1238]

   As against PPB, the claims are for knowing assistance in Ms Garrett’s and Mr Renauf’s breaches of fiduciary duties; and for breach of obligations of confidentiality and good faith under the PPB Confidentiality Agreement.

5. [1239]

   Finally, as against both Albany and Acorn, the claims are for knowing assistance in Ms Garrett’s, Mr Renauf’s and Patersons’ alleged breaches of fiduciary duties; and for breach of their respective confidentiality undertakings.

Summary of conclusions

1. [1240]

   In summary, for the reasons set out below, I have concluded as follows.

2. [1241]

   First, that the causes of action for breach of fiduciary duty, insofar as those duties were owed to Ashington Capital in its capacity as trustee, were not assignable by the liquidator since, by then, the proper plaintiff in whom any such cause of action reposed was Parissen. Similarly, the causes of action for breach of contract and for equitable duties of confidence were not assignable insofar as they relate to obligations owed to Ashington Capital in its capacity as trustee and not in its own right.

3. [1242]

   That said, any cause of action for breach of fiduciary duties owed by Ms Garrett or Mr Renauf arising out of their common law employment relationship with Ashington Management (or the Ashington group entities as a whole) or for breach of contractual or other obligations owed to their employer, would be a cause of action reposing in the relevant Ashington entity or entities in its or their own right and I find that such a cause of action was assignable (and validly assigned) by the liquidator of the Ashington entities.

4. [1243]

   As to the assignment of a bare right to litigate (in the form of the chose in action for knowing assistance in breach of fiduciary duty), on the reasoning of the Court of Appeal in Western Australia in Krishell Pty Ltd v Nilant (2006) 32 WAR; [2006] WASCA 223 (Krishell), this would not be assignable by the liquidator. However, I have concluded that the reasoning in EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 (EC Dawson Investments); Re Colorado Products Pty Ltd (In Prov Liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (Re Colorado Products) should be followed and such claims were assignable. Given the findings I make in relation to the knowing assistance claims, nothing turns on this conclusion.

5. [1244]

   Second, as to the position of Ms Garrett and Mr Renauf, I find that they were in an employment relationship with Ashington Management and thus owed duties of good faith and loyalty, as an incidence of that employment relationship to the Ashington entities as a group, in particular to Ashington Management but extending to Ashington Capital as part of their employment role with Ashington Management (albeit that there was no concluded and binding contract of employment). I accept that there would also be duties of confidence arising out of that employment relationship (although in the absence of a concluded contract there might be issues as to the identification of the confidential information subject to any such obligation).

6. [1245]

   Although there is complaint that there was no pleading of a common law employment relationship, it seems to me apparent that the pleading alleges an employment relationship (and I note that the existence of such a relationship was acknowledged by Ms Garrett and Mr Renauf when resolving the dispute after the termination of their employment) and there does not appear to me to be any real prejudice occasioned by the fact that the particulars of that relationship were not expressed to be as such, since the facts and circumstances as to their employment were squarely in issue on the pleaded case in any event. The fact that the reference to “employment relationship” was deleted in the course of amendment in the plaintiff’s submissions in relation to Mr Renauf does not alter my conclusion in this regard as I consider it to be clear that the allegation was an allegation that Mr Renauf was employed within the Ashington group (and that the evidence establishes that he was) from which such duties would flow as an incident of that relationship.

7. [1246]

   However, I do not accept that Ms Garrett and Mr Renauf owed fiduciary duties to the Ashington entities. While they occupied roles that, at least by title, accorded them seniority within the companies; and while they were given the responsibility of being the primary communication with the superannuation fund investors and PPB, the ultimate exercise of decision-making power and discretion reposed in Mr Anderson (and, perhaps to a lesser degree, Mr Minahan). The Ashington entities were no more vulnerable to an abuse of their employment position than any other employer who reposes trust in an employee to liaise with clients or potential clients without immediate supervision. That does not render all such employees fiduciaries.

8. [1247]

   Third, as to the position of Patersons, I find that it did not owe fiduciary duties to the Ashington entities; rather, that the relationship was a conventional commercial relationship governed by the contract entered into with Ashington Capital as trustee for ADF2, and that Patersons was not in the position of a trusted financial adviser giving rise to fiduciary obligations.

9. [1248]

   Those conclusions dispose of the bulk of the claims against the defendants other than Ms Garrett and Mr Renauf. However, in the event that I am wrong on any of the above conclusions, I have addressed the breach of fiduciary duty and knowing assistance claims and in that respect I have concluded as follows.

10. [1249]

    If Ms Garrett and Mr Renauf did indeed owe fiduciary duties to Ashington Capital in its own right or to Ashington Management, then I find that those duties were breached by their conduct in pursuing (and not disclosing to Mr Anderson or anyone else at the relevant level within the Ashington group, such as Mr Minahan) the proposal for the refinancing of the Stonington Project that involved the replacement of the Ashington entities from their trustee and management roles (and hence, inevitably, the loss of development, management and trustee fees for those roles), particularly when coupled with the prospect of personal benefit for them in the form of roles within the contemplated replacement manager. I do not accept that it is an answer to this breach of fiduciary duty to say that they perceived it to be (or indeed that it objectively may have been) in the best interests of the underlying beneficiaries of the trusts (or authorised by those beneficiaries – the superannuation fund investors).

11. [1250]

    Moreover (and this does not depend on a finding that there were fiduciary duties owed), I have concluded that Ms Garrett and Mr Renauf were in breach of the duties of good faith, honesty and loyalty owed to the Ashington entities as an incident of their employment relationship by reason of the conduct referred to above. (And, hence, the claims for breach of contract as against Ms Garrett and Mr Renauf are made good.)

12. [1251]

    As to Patersons, I do not accept that either Mr Carolan or Mr Doherty was himself in a position vis-à-vis the company to constitute its directing mind and will for the purposes of the primary rules of attribution of knowledge to corporate entities. In the case of Mr Carolan, it is accepted by Patersons that, by reason of the delegation to him by Mr Shorrocks of responsibility in relation to the Patersons Mandate, his knowledge and actions would be attributed to it provided they were in the course of his employment and not derived or committed as a frolic of his own. However, in that regard, I have concluded that Mr Carolan was indeed acting on a frolic of his own (and consciously contrary to his obligations to his employer) when assisting Ms Garrett and Mr Renauf on the proposal for the replacement of Ashington entities as trustee and manager; and hence his knowledge and conduct should not be attributed to Patersons.

13. [1252]

    As to the issue of vicarious liability, I consider that the reasoning of Coulthard v South Australia (1995) 63 SASR 531 (Coulthard) (see below) should be followed and I proceed on the basis that vicarious liability principles can apply to equitable wrongs such as a second limb knowing assistance Barnes v Addy claim (see Barnes v Addy (1874) LR 9 Ch App 244) (and, in response to the criticism that this is an impermissible usurpation of the role of the ultimate appellate court, I can do no more than say that that is not my intention and simply plead in aid the fact that I am following intermediate appellate court authority which as a matter of judicial comity I would be bound to follow unless convinced it was plainly wrong). However, again, nothing turns on this since I consider that those principles do not assist the plaintiff where Mr Carolan was clearly acting on a frolic of his own – outside the scope of his employment and in fraud of his employer.

14. [1253]

    Had I concluded otherwise in relation to Mr Carolan’s position then I would have concluded that Patersons was in breach of any fiduciary duty it owed to the Ashington entities in all the circumstances by reference to his conduct and knowledge in relation to the abandonment of the Stonington Capital Raising and pursuit of a plan that involved the removal of the Ashington entities from their respective trustee and manager roles. As it is, however, the breach of fiduciary duty claim is not made good.

15. [1254]

    As to the various breach of contract claims, relating to the alleged confidential information, I have concluded that none has been made good.

16. [1255]

    As to the knowing assistance claims (assuming I be wrong on the issue as to whether Ms Garrett and Mr Renauf owed and were in breach of fiduciary duties – and assuming that such causes of action were assignable by the liquidator to the plaintiff), I nevertheless find that they are not made good other than in respect of Ms Garrett and Mr Renauf (who clearly had the requisite knowledge and assisted in the steps that in this hypothesis would amount to breach of fiduciary duty by each other and, assuming Patersons owed and breached any fiduciary duty, by Patersons). As to Patersons, it would be liable for knowing assistance in Ms Garrett and Mr Renauf’s breaches of fiduciary duty assuming Mr Carolan’s knowledge was (contrary to my conclusions) attributed to it.

17. [1256]

    As to the remaining defendants (PPB, Acorn and Albany), I do not accept that each had the requisite knowledge of facts and circumstances to give rise to a second limb Barnes v Addy knowing assistance claim, particularly having regard (in the case of Acorn and Albany) to what was conveyed to them at the time they were approached to the effect that a decision had already been made by the superannuation fund investors to replace the trustee/manager of the funds (and irrespective of whether such a decision had in fact been made at that time).

18. [1257]

    If the fiduciary duty/knowing assistance claims had been made good, then on the issue of causation I would have found that Ms Garrett and Mr Renauf’s conduct had a sufficient causal nexus to the claimed loss of the opportunity for the Ashington entities to receive the income streams from their roles as trustee and manager respectively and the opportunity to expand those roles into future funds (albeit that there were clearly also other contributing causes to the decision of the superannuation fund investors to replace the Ashington entities and to accept the Parissen Proposal).

19. [1258]

    While I consider that the prospects of the counterfactual posited by the plaintiff were very low (i.e., that the Stonington Capital Raising would have been achieved within the requisite time frame) and I consider that, even if achieved, on the balance of probabilities, it would not have resolved the financial difficulties for the Ashington entities or the group as a whole, on the issue of causation per se, I would have been satisfied that Ms Garrett and Mr Renauf’s conduct (and other defendants’ knowing participation therein – assuming the requisite knowledge had been established) satisfied the test of causation for equitable compensation. On that basis, it also would have satisfied the test for causation for damages for breach of contract, since it was clearly foreseeable that such an opportunity would be lost as it was the very aim of the conduct that the Ashington entities be replaced.

20. [1259]

    As to the quantification of loss, I have concluded that, as at 30 September 2009, the Ashington companies (and relevant sub-trusts) were not a going concern and, indeed, if not insolvent already then bordering on insolvency. I have concluded that even on the plaintiff’s counterfactual that position would not have been resolved by the Stonington Capital Raising (which, in any event, I consider unlikely to have been achieved within the relevant timeframe). I place no weight on Mr Halligan’s opinions (which are based on assumptions not made good and overly optimistic scenarios). I also consider that the claim could not extend to loss of the business of Ashington Real Estate. As to whether the Ashington entities in question would have been the entities that would have participated in the future funds, the contemporaneous documents suggest otherwise; though I accept that there could have been a change in decision at a relevant stage in order to leave the business in the hands of the entities then in control of the Ashington business.

21. [1260]

    I place weight on, and accept, the conclusions of Mr Hall to the effect that the value of the business as at 30 September 2009 (on any of the scenarios considered) would have been nil. However, there must have been a slim chance that if the financial difficulties had been overcome then Mr Anderson may have been able to continue the business and, although I accept that it is highly unlikely that the superannuation fund investors would have continued in future funds it is also inherently improbable that if something could have been salvaged from the debacle confronting the Ashington funds at the time the superannuation investors (and financiers) would not have been prepared to accommodate this (provided, and this is the critical provision, that it did not require good money to be thrown after bad; and from financiers’ perspectives resulted in a prompt repayment of the facilities).

22. [1261]

    I accept the force of the complaint by the defendants as to the mixture of scenarios across the different arithmetical calculations (the MFI 36 document handed up in closing submissions by the plaintiff for example) but ultimately if I were to assess the loss for the purposes of an equitable compensation claim, I would have held that there was an opportunity that was lost; that the percentage likelihood of the Stonington Capital Raising being achieved in a sufficient timeframe (or doing more than providing a brief respite) was very small (less than 10%; indeed I would place it at no more than 5%); that the likelihood of AOF3 proceeding within a timely fashion was also very small (noting that it had been deferred once already and would have been affected to at least some extent by reputational damage if ADF and ADF 2 had produced losses; and the proposal of future funds was (to adopt Patersons’ words) vanishingly small. The compensation exercise was so beset with difficulties in the way of contingencies and the like that any equitable compensation that I would have awarded would have been no more than 5% of an amount representing a calculation where all projects were sold or abandoned and there were no repeating funds. Mr Hall’s 18 April 2019 report produces a negative figure for those assumptions (i.e., -5.8 million) even without considering issues such as the offsetting deductions. Even on Mr Halligan’s calculations the figure (albeit including a value for the Ashington units in the respective funds) was $5.247 million (from which deduction would need to be made).

23. [1262]

    The plaintiff’s aide memoire (MFI 36) put forward two scenarios, each commencing with Mr Hall’s calculations (based on Attachment 10 to his second report (Table 6) (which assumes ADF, ADF2 and AOF3 and no repeating funds; the projects completed computed as per the June 2009 costs reports; Wyle Street sold; the remaining projects completed a year late and AOF3 capitalised at $200 million starting in January 2011) i.e., $6.7 million and then adding or deducting various amounts and applying a 10% discount for the possibility of failure of the Stonington Capital Raising, to produce a value of the lost business, on the first scenario at $29 million and on the second at $10.6 million. Both scenarios have an air of unreality about them. Adopting for present purposes Mr Halligan’s (optimistic) $5.247 million figure and discounting to reflect a 5% prospect of the lost opportunity (i.e., the Stonington Capital Raising occurring) would produce a loss of roughly $260,000. Even a 10% prospect of success does not assist the plaintiff greatly. A 5% prospect on the plaintiff’s second scenario still produces only around $530,000. On the most realistic scenarios the loss is therefore much smaller than the plaintiff has contended, even adopting favourable assumptions to the plaintiff.

24. [1263]

    Had I been required to assess the amount payable for equitable compensation I would therefore have concluded that it was no more than $930,000 (pre-interest) and more likely $260,000 (pre-interest) and that this would be reduced to nothing by the offsetting claims, in particular the unpaid capital calls (as to which there was some dispute as to the amount for which allowance should be made but even adopting the lesser figure in the plaintiff’s calculations). As it is, the issue does not arise on the findings I have made as to the claims for which equitable compensation would have been payable.

25. [1264]

    As to the damages for breach of contract, the same exercise would follow. I interpose only to note that in circumstances where the loss of opportunity cannot be accurately quantified (and indeed on the most likely scenario seems to have reduced to nil) only nominal damages should be awarded. I consider that the conduct of Ms Garrett and Mr Renauf in breaching their duties of good faith and honesty had serious, if not precisely quantifiable financial consequences, and should be reflected in an award of nominal damages to vindicate the plaintiff’s position (albeit only in a small amount).

Issues as to assignment of choses in action to plaintiff

1. [1265]

   The plaintiff’s standing to sue the respective defendants rests on the Deed of Option Agreement dated 29 September 2015 pursuant to which the liquidator of Ashington Capital and Ashington Management, invoking the power pursuant to s 477 of the Corporations Act, granted to the plaintiff an option to purchase all the rights, title and interests of Ashington Capital and Ashington Management in the causes of action pleaded (see [182A] of the pleading). In [182] of the statement of claim, the plaintiff alleges that the causes of action identified in [182A] were the property of Ashington Capital and Ashington Management.

2. [1266]

   It is convenient at this point to deal with the issues raised by the defendants as to the efficacy of the purported assignment of various of the causes of action here sought to be maintained by the plaintiff.

3. [1267]

   There is no dispute that the Deed of Option was entered into between the plaintiff and the liquidator; nor that the option was duly exercised by the plaintiff insofar as it required her to pay the requisite fees to the liquidator. It is, however, emphasised by the defendants that what the liquidator purportedly assigned were causes of action of Ashington Capital and Ashington Management (but not those of any other member of the Ashington group of companies) which arose out of the events in 2009.

4. [1268]

   In their respective defences, the defendants variously allege: (i) that the plaintiff lacks legal title to the causes of action sued upon (due to a failure to comply with s 12 of the Conveyancing Act 1919 (NSW) (Conveyancing Act), including a failure to give the defendants notice that the Deed of Option had been entered into before the proceeding was commenced); (ii) that the liquidator was unable to assign various causes of action because they were not property of Ashington Capital and/or Ashington Management capable of disposition under s 477(2)(c) of the Corporations Act; and (iii) that each of the causes of action was an “Asset” as defined in the constitution of ADF or ADF2 (and so was held on trust by Ashington Capital for the benefit of ADF or ADF2, respectively) and was transferred as part of all trust assets to Parissen when Ashington Capital retired as trustee of ADF and ADF2 on 23 December 2009 (and hence that Ashington Capital ceased to have standing to pursue any of the causes of action and could not have assigned them to the plaintiff pursuant to the Deed of Option). I address each in turn.

5. [1269]

   As to the alleged failure to comply with s 12 of the Conveyancing Act, the plaintiff points out that this issue relates only to the legal causes of action brought in the proceeding for breach of contract and not to the equitable causes of action (which the plaintiff says were effectively assigned to her in equity upon the exercise of the plaintiff’s option to purchase them). It is said that an action commenced by the assignee of a legal cause of action before notice to perfect the legal assignment under s 12 of the Conveyancing Act is given (i.e., when the assignee is a mere equitable assignee of a legal chose in action) is not a nullity; rather, that, at most, the assignor should be joined to the proceeding prior to judgment (as has here occurred by the joinder of Ashington Capital and Ashington Management as the 7th and 8th defendants) to ensure that the assignor is bound by the judgment and cannot sue again on the cause of action. It is further noted that the need to join the assignor is a rule of procedure, compliance with which may be the subject of dispensation.

6. [1270]

   The defendants did not dwell on this issue in submissions. Having regard to the joinder of the 7th and 8th defendants, I consider that the issue here raised as a defence to the claim goes nowhere, for the reasons submitted by the plaintiff.

7. [1271]

   The second of the contentions raised by the defendants in this context is that certain of the causes of action (namely, the claims for breaches of fiduciary duty and knowing assistance in such breaches) were not assignable to the plaintiff by the liquidator under s 477(2)(c) of the Corporations Act, on the basis that such claims are purely personal rights (or bare rights to litigate) and therefore do not fall within the definition of “property” of the company in s 9 of the Corporations Act. It is said by Patersons (whose submissions on the assignment issue were broadly adopted by other defendants) that, but for her husband’s involvement in the proceeding, the plaintiff has no personal or genuine commercial interest.

8. [1272]

   Pursuant to s 477(2)(c) of the Corporations Act, the liquidator of a company may “sell or otherwise dispose of, in any manner, all or any part of the property of the company”. Under s 9, “property” is defined to mean “any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action”. The expression “thing in action” is the equivalent of a chose in action (see Krishell) at [73]; [100]). The power “otherwise [to] dispose of” property of the company “in any manner” includes a disposition of a chose of action by way of an assignment (see Krishell at [75]; [101]).

9. [1273]

   Patersons points to the reasoning of McLure JA, as her Honour then was, in Krishell (at [73]-[75]) to the effect that: “thing in action” in s 9 of the Corporations Act means chose in action; chose in action is a personal right of property which can only be claimed or enforced by action, as distinct from taking physical possession; an essential criterion of the chose in action is that the right be of a proprietary character, so that a purely personal right is not a chose in action because it is not property; and some bare rights to litigate (for example, a right to litigate in tort) are not capable of being assigned under the general law (her Honour referring to Poulton v The Commonwealth (1953) 89 CLR 540 at 602 per Williams, Webb and Kitto JJ).

10. [1274]

    I note that in Krishell McLure JA went on to state (at [77]) that “[a] bare right of action that is itself incapable of being assigned can be assigned if it is annexed or ancillary to property”, including a right of action in tort; and (at [78]) that a sufficient interest or genuine commercial interest in the right to litigate may render a right of action property that is capable of assignment (citing Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703).

11. [1275]

    In Krishell, Wheeler JA similarly said (at [39]) that a right of litigation can be considered property if it can be characterised as a chose in action (that be a right of a proprietary or quasi-proprietorial nature); and that a right to sue may be incapable of assignment because it is not a chose in action and thus, not property capable of assignment (or because of the rules of maintenance, or for other reasons).

12. [1276]

    Patersons also points to MG Corrosion Consultants Pty Ltd v Gilmour (2012) 88 ACSR 170; [2012] FCA 383, where Barker J held that a derivative action on behalf of a company against one of its directors (including a claim for breach of fiduciary duty) was not a claim “in relation to any of [the company’s] property” within the meaning of s 440D(1) of the Corporations Act (referring to the reasoning in Krishell) (see at [11]-[13]).

13. [1277]

    Patersons acknowledges that other first instance courts have not adopted the Krishell chain of reasoning in considering whether a breach of fiduciary duty claim is assignable by a liquidator (citing EC Dawson Investments and RE Colorado Products); but contends that it is open to this Court to reach such a conclusion (and that this is correct in principle).

14. [1278]

    To the extent that the approach in Krishell to the question of assignments of bare causes of action was informed by the cases that consider principles of maintenance and champerty (see at [39]), the public policy roots of this principle are emphasised. Patersons points out that the present proceeding involves: a purported assignment of the causes of action on the final day of the limitation period to a plaintiff who is a stranger to the subject matter of the proceeding; a proceeding being commenced against six defendants, comprising a myriad of claims, which proceeding has extended for some five years at significant cost to all parties; the proceedings being brought by an impecunious plaintiff against whom the defendants can have little prospect of recovering any amount to which they are entitled above the security provided; the conduct of a six-week trial; and a contest over a business which it is submitted was worth nothing at the relevant time.

15. [1279]

    Patersons submits that the pursuit of speculative bare rights to litigate by impecunious strangers to the underlying facts and the alleged equitable wrongs committed by the prospective defendants should not be encouraged (noting that the plaintiff is here funded by third-party litigation funding).

16. [1280]

    Pausing here, a number of those propositions are of course contentious, not least the proposition that the Ashington business was worth nothing at the relevant time. Furthermore, the complaint as to the time that has elapsed and costs incurred in the litigation is one that will no doubt be emphasised in other contexts.

17. [1281]

    Patersons accepts that an assignment may be valid by a liquidator to: (a) an entity controlled by a former director of the company of a cause of action for breach of fiduciary duty against the former director (as was the context in EC Dawson Investments at [910]-[916] per Beech J); or (b) two former shareholders in the company said to be the victim of the breaches of fiduciary duty (as was the context in Re Colorado Products at [344]-[346] per Black J); but says that this does no more than reflect the already existing exception to the principle that a personal right to litigate cannot be assigned (which applies where the assignee has a genuine and substantial commercial interest in the claim that exists independent of the assignment). Patersons argues that such an exception is not available here, the context being quite different from those cases referred to above. (Pausing here, it does not appear from their Honours reasons in EC Dawson Investments and Re Colorado Products, respectively, that their Honours relied solely on that exception (as to this, see below).)

18. [1282]

    The plaintiff in response maintains the contention that the causes of action were assignable by the liquidator under s 477(2)(c) of the Corporations Act, and says that there is no basis for reading down the liquidator’s ample powers under s 477(2)(c), which the plaintiff says extend to the assignment of a “bare” cause of action to a person with no prior interest in it. The plaintiff says that there is nothing otherwise inherent in the species of causes of action brought in the present case which would render them unassignable.

19. [1283]

    As to the question whether s 477(2)(c) renders assignable a bare right to litigate, the distinction between personal and proprietary rights to litigate is not expressly drawn in the statutory provision itself.

20. [1284]

    In EC Dawson Investments, Beech J noted that a third exception (to the otherwise unassignability of a bare right to litigate) arises in the exercise of the power of a liquidator or trustee in bankruptcy to sell the property of the company (or bankrupt), and that this turns on an interpretation of ss 477(2)(c) and 9 of the Corporations Act (see at [891]-[892], [898]). Beech J considered the authorities in support of the view that a claim by a company for breach of fiduciary duty is property capable of being sold or assigned by its liquidator (see [898]-[904]). Beech J understood the reasons of Wheeler and McLure JJA in Krishell to mean that s 477(2)(c) only empowers a liquidator to assign a right of action if that right is “proprietary” in nature; and disagreed with that construction.

21. [1285]

    As to whether a right of action is only assignable if it is of a proprietary nature, Beech J stated:

22. [1286]

    Beech J followed authority to the effect that the non-assignability of a right of action was based on public policy related to maintenance and champerty and not the proprietary nature of the right of action, and that, as those policy reasons do not apply to an assignment by a liquidator (or trustee in bankruptcy), there is no impediment to the assignment of a right of action such as that of breach of fiduciary duty. Beech J concluded (at [915]), that the breadth of the definition of property in s 9, combined with the purpose of s 477(2)(c), similarly supported the interpretation that a claim for breach of fiduciary duty was capable of assignment under those statutory provisions. Black J in Re Colorado Investments considered that Beech J’s reasons were thorough, and his Honour’s conclusions correct (I agree). Black J also noted the desirability of consistent decision-making with respect to uniform national legislation, and said that, in circumstances where the correctness of Beech J’s decision was not in doubt, it should be followed. I consider it appropriate to take that course.

23. [1287]

    Therefore, I find that the breach of fiduciary duty and knowing assistance claims were capable of assignment under ss 477(2)(c) and 9 of the Corporations Act.

24. [1288]

    As to the last of those contentions (in essence that some of the causes of action were not the liquidator’s causes of action to assign), this relates to the capacity in which the relevant choses in action were held by Ashington Capital (i.e., whether in its personal capacity or as trustee). This relates to the “Conspiracy Claim” as defined in the Deed of Option and the claims for breach of contract (variously the Patersons Mandate or the respective confidentiality agreements) or for breach of confidentiality obligations or breach of confidence made variously against Patersons, PPB and Acorn/Albany. (It does not relate to the breach of knowing assistance claims.)

25. [1289]

    For this submission, reliance is placed by the defendants on the fact that, under the constitutions of both ADF and ADF2 (see cl 2.1), the trustee was required to hold the “Assets” of the Trust for Members (which in respect of both trusts was Ashington Capital until its retirement and the appointment of Parissen as trustee of the two trusts on 23 December 2009).

26. [1290]

    The definition of “Assets” (see cl 27.1 of the ADF constitution extracted earlier and mirrored in cl 25.1 of the ADF2 constitution) is clearly broad enough to capture the “Conspiracy Claim” as defined in the Deed of Option (and the plaintiff accepts this).

27. [1291]

    As to the contract claims, it is contended by the defendants that the various contracts (the Patersons Mandate and the respective confidentiality undertakings) were entered into by Ashington Capital in its capacity as trustee for ADF 2 and for the benefit of the trust/unitholders. It is said that this is consistent, for example, with the purpose of the Patersons Mandate being to raise finance so as to discharge a liability of the ADF2 trust to Investec at the head-trust level; and with the fact that any fees earned by Patersons under the Patersons Mandate would presumably have been paid from the trust property of ADF2.

28. [1292]

    It is argued that, upon a change of trustee under both constitutions, the “Assets” of ADF and ADF2 become the property of the new trustee (Parissen) (for “Members”) and thus that, upon its retirement as trustee, Ashington Capital did not continue to hold or have any interest in those Assets (whether for Members or otherwise). Patersons points out that, under cl 14.5 of the ADF constitution and cl 14.3 of the ADF2 constitution, any replacement trustee was required to execute a deed by which it covenanted to be bound by the relevant constitution as if it had originally been a party to it; and it refers to cll 2-3 and 5(a) of the respective Deeds of Appointment and Retirement of Trustee for both ADF and ADF2, entered into on or about 23 December 2009 (see above).

29. [1293]

    Thus, it is said that Ashington Capital’s retirement as trustee of ADF2 and the agreement to transfer all of the Assets of ADF2 to Parissen had the effect that, by the time Ashington Capital was placed into liquidation on 14 April 2011, the Assets of the respective trusts (including any causes of action arising out of the Patersons Mandate) were not Ashington Capital’s assets; and, therefore, they were not assets that the liquidator was able to sell or dispose of under s 477(2)(c) of the Corporations Act. In other words, it is said that the entity with standing to enforce a pre-existing right of action arising from a contract (such as the Patersons Mandate) that was held on trust by the former trustee is the new trustee (i.e., Parissen). Reliance is placed in this regard on the decision in Owners of Strata Plan No 5290 v CGS & Co Pty Ltd (2011) 81 NSWLR 285; [2011] NSWCA 168 at [59], where Sackville AJA (with whom Giles and Campbell JJA agreed) concluded in effect that s 477(2)(c) of the Corporations Act does not empower a liquidator to sell or dispose of the property which the company itself is not able to assign or which is property inherently incapable of being assigned. Applying that reasoning, it is said that this issue affects all of the claims against the defendants for breach of contract or breach of confidentiality obligations owed to Ashington Capital as trustee of ADF or ADF2.

30. [1294]

    Acorn further says that, in the absence of a vesting order under s 474(2) of the Corporations Act, the appointment of a liquidator to a company does not divest the company of its beneficial ownership in, or render the liquidator a trustee of, the company’s assets (noting that no order was obtained under s 474(2) before the purported assignment by the liquidator pursuant to s 477(2)(c) of the Corporations Act of causes of action held by Ashington Capital and Ashington Management).

31. [1295]

    The plaintiff’s response to the assertion that the relevant causes of action (i.e., those other than knowing assistance claims) were not trust assets transferred to Parissen, the plaintiff points out that this issue can only relate to the claims brought by Ashington Capital (since Ashington Management never held any assets as a trustee).

32. [1296]

    The plaintiff maintains that the specific causes of action assigned by the liquidator of Ashington Capital were not rights held by Ashington Capital on trust for the benefit of the unitholders of ADF and/or ADF2.

33. [1297]

    As to the claims for breach of fiduciary duty owed by Ms Garrett and Mr Renauf, it is said that such duties arose from their engagement as senior employees of (or contractors to) Ashington Management, being duties to advance the interests of the Ashington Group (including Ashington Capital). It is said that their position is akin to that of directors owing fiduciary duties to a trustee company (referring to Young v Murphy; Swinbank v Murphy (1994) 13 ACSR 722; [1996] 1 VR 279 (Young v Murphy), where the Victorian Court of Appeal found that such duties were owed to the company irrespective of its business activities as a trustee, and rejected an argument that a cause of action for breach of such a duty was trust property).

34. [1298]

    As to the first of those propositions, I accept that the assets of Ashington Management were not held by it as a trustee. As to the second proposition, I accept that a cause of action by Ashington Capital for breach of fiduciary duty owed to it in its own right (say, as here argued, in its capacity as employer of Ms Garrett and Mr Renauf) is not a cause of action held by it as trustee for the benefit of beneficiaries of the trust (it is a different issue as to whether there is any fiduciary duty owed at all). Similarly, a claim for breach of contract arising out of employment or an employment relationship with Ashington Management or Ashington Capital is not one that would be held on trust by either of those entities.

35. [1299]

    In respect of all of the causes of action brought in the proceedings, the plaintiff says that relief is sought for damage caused to Ashington Capital’s existing and potential income stream in the form of trustee fees to which it was personally entitled, and in which the unitholders of ADF and/or ADF2 had no beneficial interest; and that those causes of action do not involve any loss caused to the investments held by Ashington Capital on behalf of the unitholders of ADF or ADF2. As such, it is said that there is no basis upon which such causes of action were rights held on trust by Ashington Capital for the benefit of unitholders of either ADF or ADF2.

36. [1300]

    As to the plaintiff’s assertion that the relevant causes of action against the defendants were not “vested” in Ashington Capital in its capacity as trustee of the Stonington Trust because the relief sought is for damage caused to Ashington Capital’s existing and potential income stream (a matter said to be personal to Ashington Capital), I agree with the defendants’ submission that the nature of the relief is not the issue. If the relevant contract in question was held by Ashington Capital in its position as trustee, then so also must be the cause of action for breach (which would ultimately enure for the benefit of the beneficiaries of the trust). Similarly, causes of action for breach of duties of confidence owed to Ashington Capital in its capacity as trustee must be for the benefit of the trust and ultimately would enure to the benefit of the beneficiaries (i.e., the unitholders).

37. [1301]

    In the alternative, the plaintiff submits that nothing in the Deeds of Appointment and Retirement evinces an intention to extinguish Ashington Capital’s accrued rights, such that (at most) their effect was either to transfer to the new trustee (for the benefit of unitholders) only that part of the causes of action which related to the unitholders’ losses or the entire cause of action subject to Ashington Capital retaining a beneficial interest in the part of the cause of action related to its personal loss. In either case, it is said that Ashington Capital remains beneficially entitled to the relief sought. I accept the distinction between Ashington Management and Ashington Capital (and that there is a distinction to be drawn between claims held by the latter in its own right and those held as trustee) and I agree that the Deeds of Appointment and Retirement operated only to transfer causes of action held by Ashington Capital in its capacity as trustee of ADF 2.

38. [1302]

    As to the complaint based on lack of notification pursuant to s 12 of the Conveyancing Act, as noted above, this did not appear to be pursued with any force by the defendants; and it seems to me that it is effectively met by the joinder of the 7th and 8th defendants.

39. [1303]

    As to the “bare right to litigate” argument, as adverted to above I consider that the reasoning in EC Dawson Investments and Re Colorado Products should be followed. I am conscious that Krishell is a judgment of an intermediate appellate court but, to the extent that it proceeds on the basis that a chose in action is only arguable if proprietary in nature the conclusion suffers from the difficulties identified by Beech J in EC Dawson Investments and were it to be necessary I would, with respect, have concluded it to be plainly wrong.

40. [1304]

    As to the assignability of causes of action which were held by Ashington Capital in its capacity as trustee of ADF or ADF2, those were not assignable by the liquidator, having vested in the new trustee (Parissen) before the time of the assignment. As the confidentiality undertakings entered into by each of Albany and Acorn on 8 October 2009 were with Ashington Capital as trustee of the Stonington Trust, any causes of action arising out of breach of that agreement vested in Parissen on its appointment as new trustee; those undertakings clearly being expressed to be enterd into by Ashington Capital as trustee. A similar conclusion must be reached with respect to the various breaches of contract pleaded against Patersons in relation to the Patersons Mandate which was between Patersons and Ashington Capital as trustee for ADF2.

41. [1305]

    As to PPB, the issues is more problematic. The PPB Confidentiality Agreement dated 21 July 2009 was entered into by PPB and Ashington Capital without an express acknowledgment that it was doing so in its capacity as trustee. In its terms, there is nothing to suggest that Ashington Capital was entering into the agreement in that capacity. The fact that its acknowledged purposes was to assist in the review and report of ADF 2 “as instructed by investors” in ADF2 does not to my mind indicate that it was an agreement entered into as trustee; and the reference to the Ashington Capital’s related entities suggests otherwise. The agreement was drafted by Mallesons (see the footer). It might be expected that if it had been Ashington Capital’s intention to enter to the agreement as trustee this would have been expressly stated.

42. [1306]

    AS to the proposition that the agreement was entered into ultimately for the benefit of the superannuation fund investors, that is not inconsistent with Ashington Capital holding the benefit of the confidentiality obligations under the agreement in its own right.

43. [1307]

    I have concluded that the PPB Confidentiality Agreement was entered into by Ashington Capital in its personal capacity; and, therefore, causes of action relating to breach of that Confidentiality Agreement were capable of assignment.

44. [1308]

    This issue does not arise for claims made by Ashington Management (which was not a trustee). Nor would it affect claims by Ashington Capital in its personal capacity (which to my mind would include claims for breach of duties of good faith arising from the employment relationship between it and Ms Garrett and Mr Renauf, although if the relevant employer was Ashington Management then the cause of action would be its to pursue unless the employment duties related to others in the Ashington group, which conceivably they did).

45. [1309]

    Accordingly, I consider that the Krishell reasoning applies to render ineffective the claims for knowing assistance; that the breach of contract claims in relation to breach of confidence were held by Ashington Capital as trustee and therefore vested in Parissen before the purported transfer by the liquidator and were therefore not assignable property of the company; but that claims for breach of obligations of good faith arising from the employment relationship were owed to the Ashington entities in their own right (not vested in Parissen) and were assignable.

46. [1310]

    Therefore, with respect to the various breach of contract claims pleaded, only the breaches of the PPB Confidentiality Agreement and breaches of implied terms of Ms Garrett and Mr Renauf’s alleged employment contracts remain on foot.

47. [1311]

    As to the equitable duties of confidence that are pleaded, to the extent that the claims would be covered by a contractual obligation the terms of that contract would apply. As to my equitable obligations arising, dependently of the relevant contracts, those claims would be assignable, as with the other choses of action for the reasons above.

Evidence

1. [1312]

   Much criticism was made by the defendants of Mr Anderson’s evidence. Mr Anderson was variously described as an unsatisfactory and unreliable witness; as a witness on whose evidence, including his affidavit evidence, there should be no reliance except where it is against his interests or independently corroborated; and as not being a witness of truth. Ms Garrett and Mr Renauf also say that reliance should not be placed on any of Mr Anderson’s contemporaneous emails or presentations unless contrary to his interest (as I understand it, this is on the basis that Mr Anderson may there have painted a self-serving picture of events in his contemporaneous communications). Ms Garrett and Renauf have prepared an annexure (Annexure C) to their submissions summarising what they submit are some of Mr Andersons’s more obvious lies (which I address briefly below).

2. [1313]

   It is, however, relevant at the outset to note the submission by Patersons to the effect that the documentary evidence is sufficient in and of itself to dismiss the plaintiff’s case (i.e., without the need for adverse credit findings) but that such credit findings might need to be made in respect of Mr Anderson given that Mr Anderson’s affidavit evidence is the foundation for critical assumptions given to the plaintiff’s expert witnesses (Mr Wist and Mr Halligan) whose evidence founds the plaintiff’s case on loss and damage. Patersons says that one of the reasons why those assumptions have not been proven is that they are wholly dependent on Mr Anderson’s evidence being accepted as truthful (as to historical matters) or credible (as to future and hypothetical matters). While I accept that much of the expert evidence of Mr Wist and Mr Halligan turns on the assumptions they were give, ultimately it does not seem to me necessary to make adverse credit findings against Mr Anderson in order to conclude (as I have) that much of the assumptions as to loss and damage were optimistic and not borne out by the evidence. In any event and for other reasons, I consider the expert evidence of Mr Wist and Mr Halligan to be of little assistance (as to which I say more below).

3. [1314]

   Turning then to some of the matters raised as going adversely to Mr Anderson’s credit, Ms Garrett and Mr Renauf refer to the evidence as to control of the Ashington group. They say that, contrary to Mr Anderson’s evidence that he ran the business with a “collaborative approach” that involved equal contribution from each head of department, in fact Mr Anderson “micro-managed” each aspect of the Ashington group and that Mr Minahan was no co-equal. In particular, it is said that Mr Anderson exercised control over at least: the Patersons Mandate; the decision to sell 10 Wylde Street; the project costs reports; investment papers; the payment of money; decisions about whether to disclose breaches of trust; and access to the data room. Pausing here, I accept that the documentary evidence supports the conclusion that Mr Anderson was the primary decision-maker; however, it is apparent that Mr Minahan was also involved in the decision-making process and I draw little from any down-playing by Mr Anderson of his role in that regard. It is also of relevance in that context that Mr Anderson seems to have been prepared to have allowed senior staff such as Ms Garrett and Mr Renauf considerable latitude in dealing unsupervised with potential investors, which rather tells against the proposition that he was a “micro-manager”.

4. [1315]

   Patersons emphasises the following two issues, as matters that it says are particularly damaging to Mr Anderson’s credit.

5. [1316]

   First, Mr Anderson’s evidence that Ashington Capital (as trustee for ADFIT) and Ashington Group were not required to contribute capital in cash for the subscription price in their units, in accordance with the terms of the ADF2 constitution and their applications for units in ADF2 but, instead, (according to “industry practice”) were able to offset those amounts from fees earned by other entities within the Ashington Group (Ashington Capital, Ashington Management and Ashington Real Estate, for example) years into the future.

6. [1317]

   Patersons says that Mr Anderson’s evidence that it was an “exception” that was discussed with the superannuation fund investors (in particular, Mr Barry Brakey) is not credible. Patersons points out that it was contrary to the terms of the ADF2 constitution (which Mr Anderson accepted included an express obligation that the trustee was required to treat all unitholders equally). Further, Patersons points out that it was not documented anywhere else, including in Mr Anderson’s own affidavits read in this proceeding; and it was not raised with Ashington’s auditors. Patersons says that it is extremely implausible that this was an acceptable business practice likely to be accepted by co-investors, and notes that it was not put to any of the superannuation fund investor witnesses in cross-examination that there was any industry practice of the kind suggested.

7. [1318]

   I accept that there is nothing independently to corroborate Mr Anderson’s evidence in cross-examination as to a discussion with Mr Brakey to the effect that Mr Anderson has now recalled and that the practice of offsetting contributions by reference to management fees or the like does not appear to have been documented at the time (and was not recorded by the auditors). I cannot conclude on the evidence that this was consistent with industry practice (because there is no evidence as such). However, whether or not it was consistent with industry practice (and whether or not the superannuation fund investors would have accepted it at the time) is not to my mind really to the point. It certainly was a matter that would have done little to assuage superannuation fund investors’ concerns or to placate them once they had otherwise lost trust and confidence in Ashington but here it is being raised as going to Mr Anderson’s credit as a witness. My observation of Mr Anderson in the witness box was that he appeared genuinely to believe that there was an industry practice that permitted such offsetting to take place. Therefore, at most it seems to me to have been an ex post facto justification of the fact that cash contributions were not made but not something that leads me to make an adverse credit finding.

8. [1319]

   Second, Patersons says that Mr Anderson’s evidence that he was shocked and did not think about the potential for Ashington Capital’s removal as trustee of ADF and ADF2 as at August 2009, and going forward to November 2009, is inconsistent with the documents produced by the liquidator (which came to light after privilege claims that I considered to be unfounded had been made over them). Patersons says that Mr Anderson’s refusal to acknowledge that these documents were illustrative of his acute consciousness of the real possibility of the unitholders’ removal of Ashington Capital as trustee at that critical time for the purposes of this case is significantly damning to his credit.

9. [1320]

   I accept that the evidence supports the conclusion that Mr Anderson was aware of the possibility or potential for Ashington Capital to be removed as trustee from at least August 2009. Further, I cannot accept Mr Anderson’s evidence in cross-examination that he was unaware of this at the time. However, I bear in mind the passage of years since then and think it not surprising that Mr Anderson may not have recalled seeking advice on that aspect of the matter at that particular time. What I suspect came as a shock to Mr Anderson at the time was not the possibility of the removal of Ashington Capital as trustee but the discovery that the superannuation fund investors were actively pressing that proposal at the time. It is apparent from the contemporaneous evidence (and from Mr Anderson’s evidence in the witness box) that Mr Anderson was confident (perhaps in hindsight over-confident) of his ability to placate the superannuation fund investors (and probably “gambled” on being able to regain their confidence or trust). However, I do not regard Mr Anderson’s evidence on this issue as particularly damaging to his credit overall.

10. [1321]

    Ms Garrett and Mr Renauf characterise Mr Anderson’s evidence in cross-examination as an attempt to cast blame for the failure of the Ashington business in all directions except towards himself, pointing to the following evidence given by Mr Anderson: that the $1.5 million in funds taken from ADF2 to a company he controlled was “lazy accounting” by his accounting staff (T 432.38); that investors would have to be “really stupid” not to see that that he was taking money from ADF2’s $20 million raising to fund ADF because “blind Freddy” could see it (T 423.40-44); that Mr Gavin (an asset consultant advising investors) was “possibly” lying when he told Mr Anderson that other investors wanted comfort that the $20 million would only be used for the Double Bay Property (T 337.33); and that superannuation fund investors were “confused” (T 416.11) and had received too much information, which they were struggling to digest (T 391.16-18), did not “understand what they were talking about” (Ex 17) and were “shambolic” in responding to proposals (T 399.39). Ms Garrett and Mr Renauf characterise this proceeding as one further example of Mr Anderson’s predilection to blame others for his own business failures (like, they say, the abandoned Mapeline proceeding or any of the previous proceedings in Victoria and in NSW in which Mr Anderson has been involved since 2010 – about which I have little information – see T 316.19).

11. [1322]

    Criticism is made that, despite being a professional trustee, Mr Anderson apparently did not know what a breach of trust was (T 465.22-24); that he believed that investors were not entitled to involve themselves in the decision-making of the trust (at least with respect to whether Ashington accepted the Wingate Proposal) (T 499.42-44); and he repeatedly claimed that he could disregard the representations made in the Information Memorandum and the HESTA Side Letter if he considered any of his proposed actions to be, in his view, in the interests of members (for example, T 404.14-32; T 417.33-418.7; T 418.35-41; T 460.34-40; T 473.1-10).

12. [1323]

    Ms Garrett and Mr Renauf also say that a persistent theme of Mr Anderson’s evidence was an arrogant and unwarranted contempt for the abilities of investors and their advisers.

13. [1324]

    I accept that Mr Anderson has shown a tendency in effect to place blame on or be critical of others (particularly, insofar as he was dismissive of the superannuation fund investors or their consultants and was dismissive of Mr Steel’s concerns or worries). I cannot comment on other proceedings about which, as noted above, I know very little. Nevertheless, I consider that Mr Anderson’s evidence in the witness box was consistent with the flavour that emerged from the contemporaneous documents – i.e., that the position of the Ashington entities and funds in 2009, following the GFC, was one of financial difficulty and one in which Mr Anderson was desperately trying to keep the business afloat and to meet its financing commitments. He was, to speak colloquially, no doubt juggling a number of balls in the air at the time. The contemporaneous documents paint a picture of a business or financial entrepreneur who did not lack confidence in his abilities and who was perhaps less averse to business risk than others (such as, for example, Mr Steel appears to have been).

14. [1325]

    I have no doubt that Mr Anderson may have considered Mr Steel a worrier or the superannuation fund investors too cautious; may have had a tendency to adopt a “crash through or crash” mentality; and may well be accused of painting an incomplete (whether intentionally so or otherwise) or overly rosy picture of certain events (such as his confidence in the likely outcome of the Double Bay development application) or glossing over particular problems. Interestingly, I note that the submissions for the plaintiff concede that Mr Anderson was “perhaps a little too dismissive of the cautious culture in which the investors – as trustees governed by voluminous legislation – operated”. That accords with my view that Mr Anderson was confident (and as it turned out over-confident) of his ability to persuade the superannuation fund investors to his view; and that may explain the perceived inconsistency between his exhortation to Mr Steel to treat the superannuation fund investors like gold and the seemingly dismissive attitude displayed by Mr Anderson in the witness box as to their abilities.

15. [1326]

    That said, having had the opportunity to observe Mr Anderson in the witness box over a number of days (including when he was recalled for further cross-examination), and in Court during the whole of the hearing, I considered Mr Anderson to be genuinely attempting to give an accurate recollection of events (imperfect as it was on occasion) and to be a witness of truth – although his recollection was not always reliable and no doubt (unconsciously or otherwise) there was a tendency to gloss over some matters (including those that might not have painted him or Ashington in a good light). Mr Anderson displayed good humour throughout; was not inclined to argument; and was prone to making wry observations of events that to me had the ring of truth. He reacted on the whole calmly to prolonged (and vigorous) cross-examination and, when not in the witness box, paid close attention to the evidence and submissions (not least during the submissions on the quantification of loss when I expressed concerns as to the underlying rationale of some of the expert evidence). Mr Anderson’s evidence as to the breach of trust questions should be understood in the context that the Mallesons’ advice did not expressly refer to a breach of trust (and there is room for argument as to whether breach of the representations made in the Information Memorandum would amount to a breach of trust. As to the responses given in relation to breach of the Information Memorandum covenants (sch as suggestion that the intention at the time was to do certain things but that intention could change), while that may not reflect well on Mr Anderson it does not mean he was an untruthful witness. I do not accept that Mr Anderson was a dishonest witness.

16. [1327]

    That said, as with all cases where there is oral evidence of events that occurred many years ago, I place more weight on contemporaneous documents than the oral evidence of witnesses (see Watson v Foxman (1995) 49 NSWLR 315). In this case, I also consider that the contemporaneous documents (not just those of Mr Anderson) must be approached with a degree of caution, noting that a number of those have been shown to be self-serving to a degree or are at least likely to have been influenced by the perspective being sought to be advanced by the author of the documents in question. Nevertheless, there are certain contemporaneous documents (to which I have referred and will refer) that seem to me to paint a reliable picture of the relevant author’s perception of events at particular times (such as the 6 and 8 October 2009 emails referred to above) and others that shed light on what must have been discussed at the time (such as the 2 October 2009 email on which the plaintiff places much weight).

17. [1328]

    Ms Briggs was a junior funds administrator within Ashington at the relevant time (a law graduate but with not much experience in the legal profession at that stage). (Somewhat surprisingly, Ms Briggs’ “Linkedin” page states that she was employed by Ashington Group for 4 years and two months, first as “Funds Management”, and second as “Corporate Legal Counsl” from January 2009 (a time before she was admitted to practise as a lawyer (see Ex 20) but that was of relevance only to the legal professional privilege claim that was ultimately not maintained by the liquidator of the Ashington companies).)

18. [1329]

    Ms Briggs had taken various notes at the time and I accept that there is no reason not to place reliance on her contemporaneous emails and handwritten notebooks from 2008 and 2009, since it is not suggested that Ms Briggs had any personal interest in the events in question.

19. [1330]

    A striking feature of Ms Briggs’ evidence in the witness box was that she had no independent recollection of any aspect of her role during the relevant period for the purposes of this litigation notwithstanding that in Ms Briggs’ first affidavit filed in 2017, Ms Briggs recounted details of the contents of documents that were sent a long time ago (and which have since been deleted), including the details of to whom the documents had been sent. In an affidavit filed immediately before the commencement of the hearing (described as significant “back-tracking” from certain of the matters she referred to in her first affidavit), Ms Briggs resiled from much of that evidence, claiming no longer to have any recollection at all; and in the end she was only able to give evidence of her general practice assisted by the contemporaneous documents.

20. [1331]

    With all due respect to her, that seems to me an unsatisfactory state of affairs. One would expect that if a deponent had conscientiously prepared an affidavit by reference to documents at the time, then that would be a matter that would give the deponent comfort in being able to adhere to the (admittedly refreshed) recollection by the time of cross-examination; i.e., that although the witness had no actual recollection of events in the witness box the witness might have confidence in the manner in which an earlier recollection had been deposed by reference to documents at that earlier time. It may be, to give Ms Briggs the benefit of the doubt, that this was all that she was intending by the second affidavit to say, although that was not clear.

21. [1332]

    Patersons submits that reliance should be placed on Ms Briggs’ first affidavit. As adverted to above, I would accept that if Ms Briggs had conscientiously abided by her obligations as a witness when the first affidavit was prepared then one would assume that Ms Briggs must have had sufficient independent recollection of events to have been able to attest to the matters therein set out. Nevertheless, by the time of the hearing that earlier recollection could hardly be tested in any sensible fashion given Ms Briggs’ lack of recollection in the witness box. For that reason, I place more weight on Ms Briggs’ contemporaneous notes (contained in her workbooks) (see Ex 11, Ex 5 and Ex 6) and email communications. I do, however, accept her oral evidence as to matters of general practice (including that email communications would not have been sent by her without authorisation and to the effect that she would have referred matters to Mr Anderson in that regard).

22. [1333]

    Patersons called Mr Raymond Shorrocks to give evidence and submits (and I agree) that Mr Shorrocks was a reliable witness whose evidence should be accepted. Indeed, the plaintiff does not challenge his evidence in closing submissions. There is no suggestion that Mr Shorrocks personally had any relevant knowledge of the matters of which complaint is here made by the plaintiff. That is amply demonstrated by the fact that Mr Shorrocks made enquiry in 2010 as to whether Patersons was entitled to a fee arising from the Patersons Mandate (an enquiry which would have been pointless had Mr Shorrocks realised that in effect the Patersons Mandate had been abandoned from early October 2009).

23. [1334]

    In this context, I note the submission made for Patersons that it was, in essence, as much a victim of the alleged misconduct of Ms Garrett and Mr Renauf as was Ashington (since it deprived Patersons of a not insubstantial fee), a matter relied upon by Patersons, as I understand it, not as something that would preclude liability for knowing assistance as such; but, rather, as a matter that makes implausible the notion that Patersons would knowingly have been involved in such conduct. It also makes explicable to my mind the “we will be shot email”, in the sense that if (as he surely must have done) Mr Carolan appreciated that what was being proposed was inconsistent with the Patersons Mandate and would deprive Patersons of a potential fee, then it makes it more likely that he would have contemplated that reprisals against him within Patersons for engaging in such conduct would be severe.

24. [1335]

    HESTA’s staff, as noted above, included Mr Fowler and Mr Hastings (investment analysts). Its investment adviser was Mr Gavin (Senior Consultant and Head of Property Research at Frontier).

25. [1336]

    Mr Fowler gave evidence in the proceeding. Mr Fowler’s evidence was to the effect that: when he read Mr Anderson’s letter of 10 June 2009 (see above) on or about the date of the letter he was extremely concerned to learn that the Investec Stonington Facility was secured by uncalled capital and he regarded this security as being contrary to the commitment made by Ashington Capital in the HESTA Side Letter, an issue which he deposed caused him to lose confidence and trust in Ashington Capital (see his affidavit at [19]-[20]; Ex 14 at [27]); that PPB was engaged to undertake a detailed review of ADF2 as the superannuation fund investors were concerned about the fund’s viability and solvency (see his affidavit at [22]-[23]); and that, after reading the PPB Strategy Updates No 1 and 2, he considered that the Investec Stonington Facility was a significant problem, for the reasons set out in his affidavit ([25]-[26]).

26. [1337]

    Mr Fowler said that the reason for his recommendation for Mr Anderson’s (effectively Ashington’s) removal as manager was because, from June to November 2009, the relationship with the manager was “deteriorating” (T 1038.33-48). Indeed, Mr Fowler’s attitude by 11 December 2009, when PPB reported on Ashington’s proposed conditions for termination, was that he wanted to agree to as few as possible of Ashington’s proposed terms for its removal from ADF2 because of his views that Ashington Capital had breached HESTA’s trust in relation to the HESTA Side Letter (see his affidavit at [35]; Ex 14). There can be no doubt that Mr Fowler held a very dim view of the breach of the HESTA Side Letter.

27. [1338]

    Mr Fowler accepted in cross-examination that he was unable to recall events in 2009 without refreshing his recollection from contemporaneous documents; and that in relation to HESTA’s investment in Ashington, Mr Fowler relied heavily on information and advice from Mr Gavin and Mr Hastings.

28. [1339]

    I considered Mr Fowler’s evidence to be plausible. The contemporaneous communications make clear that Mr Fowler had indeed lost trust and confidence in Ashington and Mr Anderson. The precise timing of this is not critical in my opinion. It is sufficient to note that, by the time of the impugned conduct (i.e., from early October 2009), it is apparent with hindsight that Mr Anderson would have had a considerable task ahead of him to regain that trust and confidence.

29. [1340]

    Military Super’s staff included Mr Hodgson. Its investment adviser was Mr Dedes of Strategic Capital Management.

30. [1341]

    Mr Dedes gave evidence in the proceeding to the effect that: by July 2009, he had become concerned about the performance of Ashington (and in particular about the performance of Ashington as trustee and manager of ADF, ADF2 and the sub-trusts); he was aware that the projects that comprised the investment were not performing well and he was concerned about Ashington’s performance (see his affidavit at [11], Ex 15); by late August 2009, he had formed the opinion that Ashington Capital and Ashington Management needed to be removed as trustee and manager respectively of ADF, ADF2 and the sub-trusts (see his affidavit at [22]); and as at late August 2009 he was aware that Ashington Capital had used capital, that had been invested in ADF2 by the superannuation fund investors on the basis that it would only be used for the Double Bay Project, for various other purposes. Mr Dedes’ view was that it was necessary to remove Ashington if the superannuation fund investors hoped to extract any value from the remaining trust assets (see his affidavit at [22]).

31. [1342]

    The plaintiff says that, while Mr Dedes did not recall being aware of Patersons being engaged by Ashington, this is explicable on the basis that it is likely that he did not attend the meetings on 29 and 30 September, and may only have become aware of the proposal in early October once it had “morphed” into a proposal to replace Ashington (or else that he has just forgotten aspects of the events that occurred long ago). Insofar as Mr Dedes stated that the whole purpose of removing Ashington as trustee was to remove the risk to the fund structure arising from the Investec Stonington Facility borrowing being entered into at head trust level, the plaintiff notes that that purpose would have been achieved upon a successful capital raising to replace the Investec Stonington Facility without the removal of Ashington.

32. [1343]

    In my opinion, Mr Dedes’ evidence was plausible and corroborated by the contemporaneous evidence. Again, the precise timing of his view that the Ashington entities should be removed is not in my opinion determinative.

33. [1344]

    LUCRF’s staff included Mr McCusker and Mr Thow. Its investment adviser was Mr Flett of Arcadia.

34. [1345]

    Mr McCusker gave evidence in the proceeding to the effect that: prior to the June 2009 $15 million additional equity request, he had been losing confidence in Mr Anderson and had serious concerns over the performance of Ashington (his primary concern at that time being the accuracy of information provided to investors as to the performance of the funds in light of the GFC); he was concerned that ADF and ADF2 might not survive for much longer; and he questioned whether Mr Anderson was being truthful in his communications with the group of superannuation fund investors and was dissatisfied with the lack of information provided to support the additional equity request (see his 7 November 2018 affidavit at [28]-[35]). Mr McCusker’s evidence was that he was concerned that Ashington’s forecasts and reports in 2008 and 2009 were “unrealistically optimistic” (see his 16 February 2021 affidavit at [18]).

35. [1346]

    Mr McCusker’s evidence is that he was concerned in June 2009 that the Investec Stonington Facility had been advanced at the ADF2 (or head trust) level and secured against uncalled capital, as this was contrary to the structure of ADF2 where risks and liabilities for each project should be quarantined to a sub-trust (see his 16 February 2021 affidavit at [24]); and he thought Ashington and Mr Anderson had not been candid with superannuation fund investors when he found out that there was a double commitment of uncalled equity (at [24]). Mr McCusker deposed that, while he had not yet formed the view that Ashington should be removed as trustee, he took a very negative view of Ashington and Mr Anderson when he found out (on about 15 June 2009) that Ashington had over-pledged the uncalled equity and that he then had very low trust and confidence in Ashington as a manager (see his 16 February 2021 affidavit at [5]; [29]). He says that he completely lost trust and confidence in Ashington as he learned more about the management of ADF and ADF2 (at [5]).

36. [1347]

    Mr McCusker has deposed that he agreed to the appointment of PPB because “LUCRF had lost or was losing confidence in a manager very quickly. To my mind, such an appointment is a serious step, and was consistent with the very low trust and confidence I had in Ashington at that time” (see his 16 February 2021 affidavit at [35]).

37. [1348]

    In cross-examination, it was suggested to Mr McCusker that he could not possibly place in time the recollection of his state of mind around the time of the Second PPB Report on 21 August 2009, of which he gave the following evidence at [42] of his affidavit of 16 February 2021:

38. [1349]

    However, PPB points out that Mr McCusker did place that evidence in time in his affidavit, in that at [43]-[44], Mr McCusker gives evidence of recalling that even though he thought it would be in LUCRF’s interests to remove Ashington as fund manager in due course, he chose not to do so because the Minister’s decision in relation to the Double Bay development application was still pending and because no suitable replacement had yet been identified. PPB says that, in doing so, Mr McCusker places his evidence in time by reference to events which occurred in late September and early October – he could not have held this state of mind after these events took place. I note that Mr McCusker did not there depose to a concern that a suitable replacement had not been identified but rather, that “removing a fund manager is a difficult process and that at the outset legal advice would need to be obtained”.

39. [1350]

    By 24 August 2009, and following the actions taken by Investec in respect of the Stonington Project, Mr McCusker’s evidence is that he did not consider Mr Anderson to be an appropriate person to deal with the financiers as it appeared to Mr McCusker that Mr Anderson had lost their confidence and trust. It was Mr McCusker’s view that an independent party was required to negotiate with the financiers to the ADF and ADF2 on the investors’ behalf so as to avoid the risk of the funds collapsing (see his 7 November 2018 affidavit at [59]).

40. [1351]

    The plaintiff points out that Mr McCusker accepted that his ability in 2021 to recall particular conversations or thoughts he had at particular times in 2009 depended entirely on having his recollection refreshed by reference to contemporaneous documents; but says that Mr McCusker “became entrenched” in adhering to his affidavits as they placed specific events in 2009 in time in the absence of supporting contemporaneous documents (despite accepting that it was “possible” that events may have occurred later than he deposed, on the basis that it was also “possible” that they occurred as set out in his affidavit). It is said that Mr McCusker adopted that position despite having no apparent recollection of fundamental aspects of events in 2009, such as the report by PPB containing Parissen’s proposal to recapitalise the Ashington funds and take over its management.

41. [1352]

    The plaintiff says that, at its highest, Mr McCusker’s confidence in the accuracy of the time he placed certain events or thoughts was that he was comfortable with their accuracy at the time he swore his affidavits. (I think this overstates the position somewhat in that Mr McCusker was able to place certain of his views by reference to chronological events, as noted above). The plaintiff nevertheless says that Mr McCusker’s evidence should not be accepted to the extent that it is not supported by contemporaneous documents.

42. [1353]

    In particular, the plaintiff submits that the evidence at [33]-[34] of Mr McCusker’s affidavit of 7 November 2018 should be rejected, as should Mr McCusker’s evidence at [42] and [47] of his affidavit of 16 February 2021 (in which Mr McCusker deposes to holding a belief around 21 August 2009 and subsequently having a conversation at an Investment Committee meeting on 2 September 2009 regarding the need to remove Ashington as manager) on the basis that it is not supported by any contemporaneous documents, and to which no reference was made in his November 2018 affidavit or in his earlier Mapeline affidavit. The plaintiff says that, at best, these appear to be expressions of Mr McCusker’s unexplained belief as to discussions that “would have come up” at the time. (PPB’s response to this has been noted above.)

43. [1354]

    PPB says that Mr McCusker was not challenged as to [52] of his affidavit of 16 February 2021, in which he confirmed holding the view that Ashington should be removed as trustee at the time (around 30 September 2009) when the Double Bay development approval was refused. PPB emphasises that this was before the formation of the Consortium alleged by the plaintiff. I note that it is two days prior to the pleaded date (2 October 2009) on which the plaintiff says that the Consortium had formed “or was forming”. (see at [99AA](f)).

44. [1355]

    In cross-examination, questioned about what he remembered outside the documentary evidence, Mr McCusker said (with some feeling, in what seemed to me to be a genuine response that had the ring of truth) that “the things you don’t forget are the double pledging. The things you don’t forget is the inflated sales report and the lack of awareness of the current market environment” (T 1068.45-48).

45. [1356]

    I regarded Mr McCusker as a genuine witness. I accept that he was basing his recollection largely (but not wholly) on contemporaneous documents but I consider that he was genuine in his views as to what had happened. I accept that Mr McCusker’s recollection of the timing of his discussion at the investment committed meeting as to Ashington’s removal is not reflected in the contemporaneous documents and as noted earlier, I place weight on the contemporaneous documents. However, what certainly rang true and was wholly plausible was Mr McCusker’s unhappiness with the events that had transpired; and that it was tied to events earlier than the alleged formation of the Consortium.

46. [1357]

    Mr Thow gave evidence to the effect that: he first became aware of concerns in relation to the management of the Ashington funds when he read the reports for the Investment Committee meeting on 8 July 2009 (see his outline of evidence at [18], Ex 16); he was particularly concerned to understand why the uncalled capital appeared to have been double pledged to financiers without the approval of the unitholders, why the liabilities in relation to the ADF2 had not been effectively quarantined from ADF, and the serious liquidity issues facing the Ashington Funds; and that learning about those matters led him to start losing trust and confidence in the management of the Ashington funds (see his outline of evidence at [21]).

47. [1358]

    Mr Thow has deposed that, by 2 September 2009, he no longer had any trust and confidence in the ability of Ashington as trustee or manager of the Ashington funds; and his recollection (consistent with Mr McCusker’s view) was that at this time the Investment Committee had no interest in committing further capital to the Ashington funds (see his outline of evidence at [29]).

48. [1359]

    By the time of the Parissen Proposal (11 November 2009): Mr Thow had already lost trust and confidence in Ashington acting as trustee and manager of ADF and ADF2; he understood from what he heard at the Investment Committee meetings that it was the collective view of the Investment Committee (and it was one that he held), that LUCRF did not want to work any further with Ashington unless there were no other options available to LUCRF to restore value in its investment in the Ashington funds; and, to Mr Thow, a significant part of the attraction of the Parissen Proposal was that it did not involve working with Ashington (see his outline of evidence at [35]).

49. [1360]

    Mr Thow further deposed that, had he been aware during 2009 that Ashington had been in breach of fiduciary duties or powers as trustee or manager of the Ashington funds, it would have caused him to lose more trust and confidence in Ashington and would have given him further cause to consider removing Ashington as manager of ADF and ADF2 (see his outline of evidence at [41]).

50. [1361]

    In cross-examination, Mr Thow said that the circumstances during this time were unusual because “we’d never had such a distressed asset in our property – property portfolio … lose such value, so everyone was quite concerned about the state of the Ashington funds” (T 1117.48-1118.4) (again, this was said in a heartfelt way and was evidence that rang true to me).

51. [1362]

    The plaintiff points to the acceptance by Mr Thow that, in looking back at events in 2009, he was reliant on documentary records of decisions made and views held. It is noted that Mr Thow’s role as a member of the Investment Committee involved reading papers provided to the Committee, but that he was not involved in any of the detailed investment activity which was delegated to Mr McCusker and his team; and that Mr Thow did not have any direct involvement with Ashington. All of that may be accepted but it does not gainsay that, by the time of the events in question (from early October 2009 to December 2009) Ashington would have faced an uphill battle to say the least in attempting to win back the trust and confidence of the superannuation fund investors.

52. [1363]

    Again, I consider that Mr Thow was a genuine witness, whose recollection nevertheless was broadly based on the documents. Mr Thow genuinely, in my opinion, caveated his opinion as to not wishing to work with Ashington by the proposition that this was unless there were no option available to LUCRF to restore value to its investment. This makes clear in my view that Mr Thow’s principal concern (unsurprisingly) was the value of the investment for the benefit of the superannuation fund and that he quite properly left open the possibility that, but for the impugned conduct, some other financing proposal that left Ashington in place could have been accepted by LUCRF (which I accept supports, or is at least not inconsistent with, the plaintiff’s posited counterfactual). However, what is also apparent from the chronology of events is that there was no other financing option realistically available at the time apart from the Wingate Proposal which presented its own difficulties and was not acceptable to the superannuation fund investors. Therefore, while it supports the loss of a chance theory it does not take matters very far.

53. [1364]

    Sunsuper’s staff included Ms Chan and Mr Hartley. Its investment advisers were Mr King and Mr Cohen of Sovereign. Mr Hartley gave evidence on the basis of an outline of evidence. The plaintiff even accepted (in its submissions at [21]) that, “at its highest”, the evidence indicated that Mr Hartley “had an unexpressed expectation that removal of Ashington was an option that PPB might consider”.

54. [1365]

    Mr Hartley’s evidence was to the effect that: the additional equity request in June 2009 was of concern to him at the time because it came so soon after the first additional equity request and because Sunsuper had been told that financing was in place for Stonington Project (see his outline of evidence at [42]); and, after Ms Chan’s report of the 12 June 2009 meeting, he formed the view that meeting that Ashington appeared to have failed in exercising the duties of manager and trustee, had been untruthful in communications with the superannuation fund investors and that the financial difficulties facing the Stonington Project were serious (see his outline of evidence at [45]). Mr Hartley considered that the financing documents for the Investec Stonington Facility were deeply troubling (see his outline of evidence at [49]-[50]).

55. [1366]

    Mr Hartley places the time from which he began to lose trust and confidence in Mr Anderson, and in turn Ashington, as trustee and manager of the Ashington Funds as being from mid-to-late June 2009 (see his outline of evidence at [51]). By at least 29 July 2009, Mr Hartley’s opinion was that Ashington had not been transparent in their dealings with unitholders, saying that “I no longer trusted Craig Anderson and I had lost confidence in Ashington as trustee and manager of the Ashington Funds. Further, I was concerned whether ACPL [Ashington Capital] and Ashington Group Pty Ltd (a related entity to ACPL) had met their own obligations as unitholders to pay money in response to calls made by ACPL” (see his outline of evidence at [70]).

56. [1367]

    Mr Hartley’s evidence is that, by 25 November 2009, he would not have agreed to the Wingate Proposal if it involved retaining Ashington as trustee and manager and that he was not interested in any proposal in which Mr Anderson and Ashington remained involved (see outline of evidence at [96]).

57. [1368]

    The plaintiff points to the differences between the outline of evidence prepared for Mr Hartley and an affidavit prepared by him in 2014 in connection with the Mapeline proceeding. It is noted that in cross-examination Mr Hartley accepted that it was very difficult for him to pinpoint, without reference to documents, what he was thinking in any particular month in 2009. The plaintiff says that Mr Hartley’s evidence was a reconstruction based on the recollection he did have and documents that he had seen. In particular, the plaintiff points out that Mr Hartley’s outline of evidence in the present proceeding identified matters said to have deeply troubled him in June 2009 which were not raised in the corresponding passages in his Mapeline affidavit.

58. [1369]

    The plaintiff notes that, in cross-examination, Mr Hartley accepted that, while he was able to identify matters of concern regarding Ashington that arose during 2009, it was impossible for him (unaided by documents) to identify when in 2009 particular concerns arose; and that he could not remember when in 2009 he began to lose trust and confidence in Mr Anderson and Ashington (cf, the statement being included in his outline of evidence, though not in his Mapeline affidavit, that this occurred in mid-to-late June). It is noted that Mr Hartley similarly conceded in cross-examination that it was possible he had misplaced entirely his recollection, recorded in his outline of evidence but not in the equivalent paragraph in his Mapeline affidavit, a concern said to have arisen shortly after 29 July 2009 as to whether Ashington Capital and Ashington Group had met their own obligations to meet ADF2 calls. The plaintiff points out that Mr Hartley only met Mr Anderson once, and was otherwise reliant on Ms Chan, Mr King, and others to pass on information about Ashington.

59. [1370]

    In response to the above criticisms concerning the differences between Mr Hartley’s Mapeline affidavit and his outline of evidence, Acorn argues that this criticism proceeds on the false premise that the matters in both proceedings were the same or focused on causation issues in relation to trust and confidence in Ashington (whereas Acorn says that they did not). It is noted that Mr Hartley’s evidence in re-examination was to the effect that he did not have a complete understanding of the issues in either the Mapeline proceeding or the current proceeding; and that Mr Hartley prepared the Mapeline affidavit in 2014. Further, it is said that although the issues in that case did not turn on when and whether Sunsuper had determined to remove Ashington, Mr Hartley’s evidence did include significant detail about when and why he lost trust and confidence in Ashington.

60. [1371]

    As to Mr Hartley’s memory of events, including his thoughts, in 2014 (which it is accepted is likely to have been better than in 2021), Acorn points out that this also applies to the nature of the responses the plaintiff obtained from Mr Hartley in cross-examination, such as Mr Hartley’s agreement that the reference in Ms Chan’s “Need to change the trustee. Very messy” file note was referring to structural issues which PPB had identified; his acceptance that he might have misplaced his recollection as to the timing of when he lost trust and confidence in Ashington; and his acceptance that he would have been open to considering a recommendation from PPB that included retaining Ashington. Acorn says that, given Mr Hartley’s admittedly poor recollection, for the above to hold any relevant weight, the plaintiff needed to take Mr Hartley to the PPB Proposal (to which Sunsuper consented, which expressly referred to the removal of Ashington as trustee and manager – not there in terms limited to a technical structuring outcome); and to the numerous paragraphs in Mr Hartley’s Mapeline affidavit (where he explained the progression of his loss and confidence in Ashington), in order to refresh Mr Hartley’s memory.

61. [1372]

    I consider Mr Hartley to be an honest witness who sought to give his genuine recollection of events. It is clear that Mr Hartley relied heavily on the documentary evidence to aide his memory. As above, I give greater weight to the chronology of events as it arises out of the documents.

62. [1373]

    The defendants contend that the evidence of the representatives of the superannuation fund investors is evidence of persons disinterested in the outcome of the case and should be accepted. I agree and I accept Patersons’ observation that it is unsurprising that all of these witnesses were reliant on documentary records made at the time, since over a decade has lapsed since the matters in issue occurred in mid-to-late 2009.

63. [1374]

    I accept that the evidence of these witnesses is broadly consistent with the chronology of events earlier set out and that the contemporaneous documentary record permits the conclusion that, by 30 September 2009, the superannuation fund investors had lost trust and confidence in Ashington Capital, Ashington Management and Mr Anderson; and had begun seriously exploring issues as to Ashington Capital’s and Ashington Management’s performance and their possible termination as trustee and manager.

64. [1375]

    I certainly accept that there was a loss of trust and confidence by the time of the impugned conduct. While I have difficulty concluding that the superannuation fund investors had decided to withdraw support for Ashington before the events commencing on around 2 October 2009, I certainly accept that by that time it was a possibility well and truly on the cards.

65. [1376]

    As to the cross-examination of those witnesses on the timing of the loss of confidence, I consider that their evidence is broadly consistent with the contemporaneous documents. I accept that, for whatever reason, by June 2009, the superannuation fund investors were seeking advice about the process and were actively discussing Ashington’s removal as trustee; and that, from at least August 2009, Ashington and Mr Anderson were sufficiently on notice of this possibility to have sought advice from Mallesons about the process. Nevertheless, while I accept that there was discussion about the removal of Ashington Capital as trustee from an earlier stage by June/July 2009, I consider that this was most likely in the context of the recognition of the so-called structural problem that had arisen; and, while the fact that Mr Anderson sought advice from Mallesons in August 2009 indicates a concern as to potential removal, it says nothing about what the superannuation fund investors then proposed at the time. Therefore, I do not accept that this compels the conclusion that there was a decision to replace Ashington Capital as trustee because of a lack of trust and confidence as at, say, 2 October 2009. However, it makes clear that it was in contemplation.

66. [1377]

    As to the cross-examination relating to whether the superannuation fund investors failed to appreciate the effect of the Parissen Proposal, in part because it called for the existing equity effectively to be written off, I consider that this is not to the point as the contemporaneous documentary evidence shows that superannuation fund investors had already effectively written off Ashington as an investment by the time that proposal came to be considered.

67. [1378]

    Thus, while I accept that there were the ordinary difficulties in recollection of events and conversations many years before, the evidence of the superannuation fund investor witnesses was consistent with contemporaneous documents and should be accepted (albeit with some caution as to the reliability of the timing placed on events and thoughts).

68. [1379]

    The plaintiff places weight on the fact that, faced with serious allegations of wrongdoing, only one of the six defendants (Patersons) called a lay witness (not taking into account in this regard, it would seem, the evidence called by representatives of the superannuation fund investors). Reference is made in this regard to what was said in Chong v CC Containers Pty Ltd (2015) 49 VR 402; [2015] VSCA 137 at [212] per Redlich, Santamaria and Kyrou JJA and Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] per Heydon, Crennan and Bell JJ, namely, that the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) has particular application where the party is the uncalled witness.

69. [1380]

    The plaintiff notes that affidavits attested by each of Ms Garrett, Mr Renauf, Mr Ko and Mr Routley were served in the proceeding; and that it was not until the close of the plaintiff’s case that the respective defendants indicated their intention not to call those witnesses. It is said (though I was not made aware of this at the time, it being raised only in closing submissions), that Ms Garrett and Mr Renauf were present in Court during much of the hearing, including the cross-examination of Mr Anderson. I am unable to comment on this submission since I was not in a position to know who was or was not at the back of the courtroom during the hearing – other than Mr Anderson, who gave evidence, and the plaintiff, who was seated with Mr Anderson throughout most of the hearing. Nevertheless, whether or not, or for how long, Ms Garrett and Mr Renauf were physically present in the courtroom probably makes no difference because there was nothing to suggest that either Ms Garrett or Mr Renauf was unable to give evidence in the proceeding had she or he wished to make herself or himself available for cross-examination.

70. [1381]

    The plaintiff says that not only should it be inferred that nothing these witnesses could have said would have assisted their cases (and that adverse inferences may more confidently be drawn from the evidence led by the plaintiff) but also that the failure to give evidence in their own defence has particular significance in relation to Ms Garrett and Mr Renauf, who it is said have foregone the opportunity to explain why inferences of dishonesty that arise on the documents (and which were made explicit in opening) should not be drawn.

71. [1382]

    The plaintiff submits that it should be inferred that, in pursuing the plan to replace Ashington, Ms Garrett and Mr Renauf were acting to advance their own personal interests at the expense of Ashington, as part of a dishonest and fraudulent scheme; and that Mr Ko and Mr Routley were aware that Ms Garrett and Mr Renauf were senior employees of Ashington acting in breach of their fiduciary duties by advancing a scheme to replace Ashington.

72. [1383]

    For completeness, I note that no adverse inference is sought to be drawn against Patersons arising from the fact that neither Mr Doherty nor Mr Carolan gave evidence (this is so on the basis that neither was available to give evidence). With respect to Mr Doherty, the plaintiff and Patersons agreed to the tender of an affidavit prepared by him as well as to the transcript of the liquidator’s examination of him.

73. [1384]

    I should note also that extracts of the transcript of Ms Garrett’s liquidator’s examination were tendered (Ex A) but only as evidence in the case against Ms Garrett (and that these extracts were admitted on the basis that it was admissible as an admission against interest under that exception to the hearsay rule; although a portion was even then only provisionally admitted – see below). Similarly, extracts of the transcript of Mr Ko’s liquidator’s examination were tendered (Ex B) but only in the case as against Albany. I address below the provisional ruling in relation to a portion of Ms Garrett’s transcript.

74. [1385]

    It is not disputed that a Jones v Dunkel inference, where available, is limited to circumstances where the evidence permits an inference adverse to a party to be drawn (see Frangieh v Deputy Commissioner of Taxation (2018) 367 ALR 557; [2018] NSWCA 337 at [131] per White JA (with whom Beazley P, as Her Excellency then was, and Meagher JA agreed). The so-called rule only arises where a party is required to explain or contradict something and the absence of a witness cannot be used to “fill gaps or to convert suspicion into inference” (Jones v Dunkel at 313 per Menzies J). Ms Garrett and Mr Renauf say that, in a case such as this, the possibility of an inference is no substitute for the requirement that a plaintiff prove its case; and they maintain that, in this case, the plaintiff has failed to meet that onus. Pausing here, I accept that this is the case; nevertheless it is also the case that Ms Garrett and Mr Renauf have made a voluntary (no doubt forensic) decision not to give evidence and if there are matters that they could be expected to have explained – such as their knowledge of particular matters or what transpired at meetings or in discussions – then I would more readily draw what are otherwise available inferences on the evidence. (As it is, it has not been necessary to do so; I have drawn the conclusions reached on the basis of the evidence before me placing weight on contemporaneous documents.)

75. [1386]

    I also note that the application of Jones v Dunkel must be carefully approached in a fraud case of the type here pleaded, as it is required to be proved by the plaintiff to the Briginshaw standard (see Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34). In this context, Acorn refers to what was said in Poole v Chubb Insurance Company of Australia Ltd [2014] NSWSC 1832 by Stevenson J at [99] to the effect that, although a fraud case could be proved from circumstantial evidence, it was for the plaintiff to make good the very serious allegations it had made by clear and cogent admissible evidence and that it was not for the defendant to explain that he had not behaved as the plaintiff had contended or to contradict inferences that might be available from documents created by others by calling the author of those documents or others named in them. Acorn also cautions against the drawing of uncertain inferences in favour of a wrongdoer (referring in this regard to the breaches by Ashington of its trustee obligations that have been identified by Ms Garrett and Mr Renauf – see below).

76. [1387]

    As to PPB, it submits that the documentary evidence sufficiently explains what was understood by, or known to, such PPB personnel as Mr Block and Mr Lord in relation to the steps being taken in October and November 2009 to procure the replacement of the Ashington entities as trustee and manager; and that the plaintiff has led no evidence to show that Mr Block or Mr Lord understood the attitude of the potential investors to be otherwise than as described in Mr Block’s email of 6 October 2009 to Mr Carson. That being so, it is said that there is nothing for PPB to explain or contradict. I agree. But for that email, I would have been inclined to the view that there was something for PPB to explain – namely, its knowledge as at the time of the proposal put to Acorn and Albany as to the position of the superannuation fund investors. However, there is no reason to suspect that Mr Block was doing anything other than accurately conveying his understanding of events at the time to his colleagues (and superior) at PPB. I consider the email significant for this reason. Hence I draw no adverse inference from the fact that neither Mr Block nor Mr Lord gave evidence.

77. [1388]

    As to the plaintiff’s submission that an inference should be drawn from the lack of evidence by Mr Ko and Mr Routley that they were aware that Ms Garrett and Mr Renauf were senior employees of Ashington acting in breach of their fiduciary duties by advancing a scheme to replace Ashington (see plaintiff’s closing submissions at [12]; T 1445.06), both Acorn and Albany make submissions against this.

78. [1389]

    Acorn says that this inference departs from the fraudulent “scheme” (defined in the third further amended statement of claim as “Garrett’s plan” – see above) but in any event, Acorn says that the totality of the plaintiff’s evidence does not enable the drawing of the inference as to knowledge for which the plaintiff contends. It is said that the documentary evidence sufficiently explains what was known (or understood) by Acorn in relation to Ms Garrett and Mr Renauf. In particular, Acorn places emphasis on the 8 October 2009 email from Mr Routley to Mr Swan as setting out in detail Mr Routley’s understanding of all matters relevant to the plaintiff’s case during the critical days.

79. [1390]

    To the extent that the plaintiff invites the further inference that Ms Garrett spoke to Mr Routley at some point prior to the meeting on 5 October 2009 “about the plan that had been developed with PPB”, Acorn says that submission should be rejected for two reasons: first, that the basis for that assumption (being a document tendered by the plaintiff towards the close of the case – Ex C at Tab 8), is one which is not pleaded or particularised by the plaintiff against Acorn (and the plaintiff must be kept to the pleaded case); and, second, that the 8 October 2009 email, having been drafted after the 5 October 2009 meeting, is the best contemporaneous evidence of what Mr Routley knew and understood from the facts he had been told. It is submitted that it would constitute impermissible gap filling and speculation for an inference of knowledge on the part of Acorn (or an honest and reasonable person in Mr Routley’s position) to be inferred beyond what is apparent from the content of that email. Acorn submits that Mr Routley did not need to explain that he did not engage in knowing assistance; rather, that the plaintiff must prove that he has. It is said that the absence of Mr Routley as a witness does not, of itself, prove anything other than his evidence would not have assisted Acorn.

80. [1391]

    Finally, Acorn notes that, in oral closing submissions, the plaintiff made an additional Jones v Dunkel submission. The plaintiff submitted that it could be inferred, from the draft letter dated 12 October 2009 prepared by Mr Routley, which refers to “other” Ashington personnel, that Mr Routley knew that Ms Garrett and Mr Renauf were employees of Ashington. Acorn says that it was not necessary for Mr Routley to “explain” the meaning of the use of the word “other”, particularly in circumstances where the plaintiff is relying on the fourth category of knowledge as articulated in Baden Delvaux & Lecuit v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509; [1992] 4 All ER 161 (Baden Delvaux) to make out the case of knowing assistance. Acorn says that there is no relevant ambiguity that Mr Routley was required to explain and that the plaintiff’s construction of the use of the word “other” can comfortably be rejected.

81. [1392]

    Albany’s position differs slightly in that it has admitted in its defence that it knew Ms Garrett and Mr Renauf were employees of Ashington Management (see its defence at [264]) and it says that it is not contentious that they were “in senior roles” (see [283(a)] of the third further amended statement of claim); but Albany contends that there must nevertheless be a close analysis of the interaction between Ms Garrett and Mr Renauf and Albany in the context of the evidence concerning the superannuation fund investors’ desire to remove Ashington Capital and Ashington Management.

82. [1393]

    Albany says that the so-called “rule” has no special or different application in claims involving knowing assistance in breaches of fiduciary duty (referring, by way of example, to Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 (Equiticorp) per Clarke and Cripps JJA); and that, in circumstances where the plaintiff has tendered contemporaneous documents which provide Albany with the evidentiary basis to defend the claims against it, there is no basis for the implicit assertion that Mr Ko “fears the witness box” (referring to Equiticorp, Albany says it is entitled to defend the claims against it by reference to the evidence tendered by the plaintiff).

83. [1394]

    Further, Albany says that the plaintiff has not identified (let alone formulated with precision), any specific inference which it is asserted should be more readily drawn by reason of Albany not calling Mr Ko; and that it is not appropriate to contend that effectively the whole of a party’s case should be inferred because no witness is called. Albany says that the inferences about Albany’s knowledge which can fairly be drawn (which I address in due course) do not require any further evidence from Mr Ko for a finding that Albany’s conduct was not unconscionable or unconscientious.

84. [1395]

    I do not draw any adverse inference from the absence of either Mr Routley or Mr Ko from the witness box. The contemporaneous documents in my opinion sufficiently make clear what was made known to them (and through them to Acorn and Albany) as to the position of the superannuation fund investors at the time (whether that information was correct or not is another matter) and the email of 8 October 2009 is significant in this regard.

85. [1396]

    Thus, I consider that, as in many cases where Jones v Dunkel is invoked, it ultimately has little role to play in the determination of the issues here raised.

86. [1397]

    As noted above, portions of the transcript of Ms Garrett’s examination by the liquidator in October 2013 were admitted in evidence. Relevantly, on 2 October 2013, Ms Garrett gave the following evidence.

87. [1398]

    At T 14.11ff, that the option of replacing Ashington as a manager was something that was floated to all of the investors that had been approached post the Double Bay application being rejected; and that it was part of the marketing material that “we” (Ms Garrett and the PPB team) had put together “after we had discussions with PPB”.

88. [1399]

    When discussions first commenced with Acorn and with Pacific, Ms Garrett understood that there were two streams being investigated: one was a direct investment into the Stonington sub-trust, either as a two part investment, so the prospective investor could replace the mezzanine finance with a preferred equity piece; or they could invest into Stonington and also into “Newco” (which would replace Ashington as trustee and manager) (T 38.28).

89. [1400]

    At T 41.45, Ms Garrett confirmed, by reference to an email sent on 6 October 2009 that she met with Mr Ko on 5 October 2009; and at T 42.19, Ms Garrett confirmed that the “opportunity” she had referred to being excited about was that of Pacific Group investing into Newco. Ms Garrett also agreed that at least one possible outcome of that investment was the removal of Ashington as manager and trustee of ADF2. As to informing Mr Anderson of this, at T 42, Ms Garrett stated that it was not a very “usual situation” so Ms Garrett felt that it was in the best interests of the superannuation funds to convey progress to PPB not to Mr Anderson or Mr Minahan. However, she agreed that in her mind she was contracted to Ashington.

90. [1401]

    At T 44.32 (which was only provisionally admitted), Ms Garrett’s evidence was that she did not recall canvassing the views of “underlying investors” (i.e., the superannuation fund investors) as to whether or not Ashington should be removed as manager and trustee; and that she did not recall whether she had communications herself with any of the investors after the negotiations with the Consortium commenced (but then said that “potentially I did have conversations with them”). The reason that this was only provisionally admitted was that it was not clear that it would fall within the admissions exception to the hearsay rule. I remain doubtful that this aspect of the transcript amounts to an admission that is admissible; at best it is admissible for the statement that Ms Garrett did not recall doing certain things (the weight which could be attached to this being low). The acceptance that “potentially” she did have conversations with the superannuation fund investors does not assist in the determination of the issues in the case because of its vagueness. I reject this portion of the transcript.

91. [1402]

    As to Ms Garrett’s meeting with Mr McCabe in London, Ms Garrett agreed that she had discussed with him the proposal to replace Ashington as the trustee or fund manager (T 57.50-58.1).

92. [1403]

    At T 63.41, Ms Garrett accepted that when she provided information to Mr Ko and Mr Routley the purpose was to assist them in doing due diligence for their proposed investment which involved the replacement of Ashington.

93. [1404]

    At T 66, Ms Garrett agreed that, as at 6 November 2009, she had not advised Ashington of its proposed removal and (though this was admitted only as to her understanding of others’ conduct) so far as she knew no one else had.

94. [1405]

    Also tendered in evidence were portions of the transcript of Mr Ko’s examination by the liquidator on 3 October 2013.

95. [1406]

    At T 32.24, Mr Ko accepted that as at 14 October 2009 it was his intention to assume the management rights for the ADF funds. At T 32.29, he accepted the proposition that “by this stage the plan had crystallised”, such that the entities that were coming together to further the investment were Ms Garrett, Mr Renauf, Acorn and Albany.

96. [1407]

    At T 42.24-27, Mr Ko recalled that someone had raised Wingate as a possibility to refinance Investec; and he thought this was Ms Garrett.

97. [1408]

    At T 42.42, Mr Ko gave evidence that he was aware that Ms Garrett and Mr Renauf had gone to London to see Mr McCabe. Mr Ko said that Ms Garrett and Mr Ko said Mr McCabe was interested in being an investor to replace Ashington as manager and that now “we” (presumably Albany) “had expressed that we weren’t going to do it that they were going to pursue that”.

Expert evidence

1. [1409]

   Objections to the expert evidence of the other party were reserved for argument in closing submissions and for decision in the final judgment. For the plaintiff’s part, in the context of the nature of the expert evidence sought to be adduced by the parties and the issues in dispute, it says that the question of strict admissibility need not be decided but, rather, that this informs the assessment of the weight of the evidence.

2. [1410]

   The defendants, however, maintain that there is a fundamental difficulty with the reports of Mr Halligan (and to a certain extent with those of Mr Wist) in that they are almost entirely based on assumed facts which have not otherwise been proven; and, as a consequence, the reports are not admissible. Reference is made to the statement in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 (Makita) at [85] per Heydon JA (approved by the High Court in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 (Dasreef) at [37]), that “… if evidence tendered as expert opinion evidence is to be admissible… so far as the opinion is based on ‘assumed’ or ‘accepted’ facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it”; and that if this matter “is not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight”. The High Court in Dasreef emphasised, however, that the statement of Heydon JA in Makita ought to be read subject to the consideration that “[t]he admissibility of opinion evidence is to be determined by application of the requirements of the Evidence Act rather than by any attempt to parse and analyse particular statements in decided cases divorced from the context in which those statements were made”.

3. [1411]

   Relevantly, Patersons says that no assistance can be derived from the reports of Mr Halligan; that not only are the assumptions unproven and wrong, but that Mr Halligan himself expressly disavowed any responsibility to assess the reasonableness of those assumptions, even on such important matters as going concern where he acknowledged he had the expertise and experience to engage on this fundamental issue but declined to do so.

4. [1412]

   Mr Wist is relied upon by the plaintiff as a “market expert”. Mr Wist’s expertise is set out in section 4 of his report of 23 February 2018. In his professional career, Mr Wist has worked as a valuer and investment adviser and analyst in relation to the real property market (commencing in 1988 as a valuer, working in 1993 as a property investment analyst and adviser, working in 1998 as an analyst and adviser of listed and unlisted property investments, in 2010, becoming a property asset consultant, and in 2013 becoming the property fund investment manager for eight unlisted property investment trusts). The plaintiff thus submits that Mr Wist has expertise, by dint of his training, study and experience, in property investment valuation and in the management of property trusts, both listed and unlisted.

5. [1413]

   In his first report, Mr Wist was asked (and expressed opinions on the assumption that the “activities of the Consortium had not taken place”) about the prospects or likelihood of: Ashington raising equity from offshore investors in AOF3; AOF3 identifying and securing property which suited its intended asset profile on Australia’s eastern seaboard; and Ashington establishing further property fund(s) after AOF3 and those further property fund(s) investing in property in the eastern seaboard of Australia. Mr Wist also there expressed opinions about the “reputation” of Ashington in the market in 2009 “prior to the Consortium activities”; and as to the impact of Ashington Management’s replacement as fund manager of ADF and ADF2 by Parissen on Ashington’s reputation and on Ashington’s ability to raise equity from institutional investors.

6. [1414]

   In answering the questions in his first report (see his letter of instructions at [9]), Mr Wist was asked to assume, inter alia, that: each of the events stated in the chronology annexed to the letter of instructions took place on the date stated; the “Consortium was formed as alleged in the Amended Statement of Claim and undertook the activities as alleged”; and the allegations of breaches by Ashington made by Baker McKenzie and Moore Stephens in various PPB Strategy Reports were not communicated to Ashington or the market.

7. [1415]

   In his second report, Mr Wist was asked (and expressed his opinion on) a further five supplementary questions concerning: the likelihood of Ashington constituting particular further funds; whether AOF3 and ADF3 would have been profitable; the typical range of per cent return on capital invested in property funds from 2011 to 2017; Ashington receiving “an incentivised Performance Fee” (on the assumption of AOF3 commencing on January 2010 with equity contributed of $200 million and ADF3 commencing in July 2011 with equity contributed of $150 million); and his opinion on the “reasonableness of the provisional assessment of feasibility” of various properties identified by Ashington as prospective property acquisitions for the purposes of value-adding or redevelopment.

8. [1416]

   A further supplementary report was prepared by Mr Wist shortly prior to the hearing (on 4 February 2021) identifying particular material relied upon in his earlier reports.

9. [1417]

   The plaintiff says that the evidence of Mr Wist establishes the following propositions: (a) that in the aftermath of the GFC there were a number of distressed property assets on the market; (b) that this created an opportunity for investors to purchase property in favourable terms; (c) that the Australian economy was improving relative to the rest of the world; and (d) that both in Australia and overseas there was a substantial market for high-net-worth and institutional investors to pursue a high risk, high return opportunistic strategy even as the majority of investors had made a “flight to quality”.

10. [1418]

    In particular, the plaintiff says that (in evidence accepted by Professor Gray), Mr Wist has set out the fact that, by reason of the superannuation in Australia, billions of dollars poured into superannuation funds every year, and that those funds had internal allocation rules that prescribed a certain proportion to be invested into listed and unlisted property funds. In 2010, superannuation funds with more than four members held $36.2 billion in real property investments, 73% of which was in unlisted property investments. By 2013, this had risen to $44.3 billion and 76% respectively. Furthermore, in the period October 2009 to June 2010, JP Morgan reported that wholesale unlisted property trusts had issued $2.31 billion in equity, supplemented by $1.98 billion of secondary units transfers and possible equity raising of another $2.4 billion (Mr Wist’s 23 February 2018 report at [10.37]ff).

11. [1419]

    The plaintiff says that this money represented an appetite for investment into unlisted property funds. It is said that although the majority of the market may have been wary of property investments in the aftermath of the GFC, some sophisticated investors with an appetite for risk (and higher returns) would have pursued the countercyclical strategy set out by Mr Wist.

12. [1420]

    The plaintiff argues that the fact that the listed market was liquid and the unlisted market was illiquid (and in respect of wholesale unlisted funds, limited to wealthy private investors and institutions) meant that new investments in listed property funds could be made by purchasing units on the exchange, while new investments in wholesale unlisted funds could generally only be made by subscribing to new funds established for that purpose. In these circumstances, it says that the fact that there were no new IPOs of A-REITS (Australian Real Estate Investment Trusts – i.e., ASX-listed property funds) in the period has no forensic significance (especially when Ashington was pursuing overseas investors for AOF3). The plaintiff emphasises in this context the evidence that Ashington was substantially advanced in its meetings with overseas investors.

13. [1421]

    Further, the plaintiff says that there is contemporaneous evidence that, at the sophisticated edge of the market, an opportunity had developed in the aftermath of the GFC for exactly the kind of strategy that Ashington was pursuing with AOF3; in that this is said also to have been the core of the Parissen strategy (referring to the Parissen presentation to Acorn on 26 March 2010 – see chronology above).

14. [1422]

    The defendants object to the entirety of Mr Wist’s evidence.

15. [1423]

    First, it is said that the opinions expressed in the three reports of Mr Wist are not based on specialised knowledge, such that they are not admissible under s 79 of the Evidence Act 1995 (NSW) (Evidence Act). It is noted that, for Mr Wist’s opinion to be admissible under s 79, it is necessary that Mr Wist had relevant specialised knowledge based on his training, study or experience and identified with precision his field of specialised knowledge. In this context, “knowledge” connotes more than subjective belief or unsupported speculation; instead meaning “any body of known facts or ... any body of ideas inferred from such facts or accepted as truths on good grounds” (R v Tang (2006) 65 NSWLR 681; [2006] NSWCCA 167 at [137]-[139] per Spigelman CJ (with whom Simpson and Adams JJ agreed); see also Honeysett v R (2014) 253 CLR 122; [2014] HCA 29 at [23] per French CJ, Kiefel, Bell, Gageler and Keane JJ).

16. [1424]

    Insofar as Mr Wist’s expertise is said to be in the area of property funds management, the defendants say that there is a serious question as to whether the knowledge possessed by an expert in the securitised wholesale property funds industry is knowledge sufficiently organised or recognised to be accepted as a reliable body of expert knowledge and that Mr Wist has not demonstrated that he has relevant specialised knowledge based on his training, study or experience as required by s 79 of the Evidence Act.

17. [1425]

    Further, it is said that, even if it is possible to glean from Mr Wist’s reports that he in fact possesses specialised knowledge, it is not clear how he applies that specialised knowledge to arrive at the opinions he expresses. Complaint is made that, even with Mr Wist’s supplementary report served on 4 February 2021, it is difficult to “unscramble” Mr Wist’s opinion from other findings, conclusions or inferences of fact drawn by him from the material briefed to him; and that parts of Mr Wist’s reports consist of broad-brush conclusions drawn from the set of documents that had been briefed to him (as to which see further below).

18. [1426]

    By way of example, reference is made to [11.12] of Mr Wist’s first report, which was based on his review of the exhibits to Mr Anderson’s 19 December 2017 affidavit and “the various correspondence documents prepared by Ashington” (not identified with specificity until the 4 February 2021 supplementary report). Mr Wist there opined that “Ashington was a fund manager in the property industry with a reasonable track record and with appropriate property sourcing networks and therefore could have deployed invested capital into acquisitions of property on the eastern seaboard of Australia”. Complaint is made that these inferences or conclusions that are drawn from documents and the affidavit evidence of Mr Anderson have not been shown to be based on any specialised knowledge possessed by Mr Wist (and it is said that any such conclusions are ones that could be drawn, if accepted, by reference to the documents alone).

19. [1427]

    The defendant’s position is that it is not possible to determine whether Mr Wist’s opinions are in fact wholly or substantially based on his specialised knowledge or experience (and it is said that, whether as a matter of inadmissibility or weight, Mr Wist’s opinions do not assist the plaintiff). I agree that there is a difficulty in determining from the reports what precisely Mr Wist’s conclusions are drawn from and whether they are based on any specialised knowledge or experience as such.

20. [1428]

    As to the admissibility of Mr Wist’s evidence, the plaintiff draws a distinction between two kinds of opinions expressed by Mr Wist: first, the general evidence of market conditions (referring to section 9 of his first report and section 7 of his second report), with which it is said the defendants’ expert (Professor Gray) agrees (and which the plaintiff maintains is not in dispute); and, second, the opinions contained in the answers to the specific questions put to Mr Wist concerning the prospects of Ashington raising funds.

21. [1429]

    As to the first of those kinds of opinions (i.e., the evidence of general market conditions), the plaintiff says that this is well within Mr Wist’s expertise in real property investments and funds management; and is not evidence which could be received on the basis of judicial notice or common experience. (Given that there seems to be no dispute as to the general market conditions at the time, and Professor Gray does not disagree with this evidence, I would simply admit it subject to weight.)

22. [1430]

    As to the second of those kinds of opinion (i.e., the answers to specific questions), the plaintiff accepts that Mr Wist’s final answer to each question must be qualified by the fact that he has given general answers not tied to Ashington’s specific circumstances. (Pausing here, this of itself seems to me to deprive the opinions there expressed of much use in the proceeding.) The plaintiff accepts that the question of Ashington’s ability to raise funds is a question for determination by the Court on all the evidence adduced in the proceeding). However, the plaintiff submits that the factors that Mr Wist identifies as germane to the question of whether funding would have been available fall within his expertise; are not within the common experience of educated persons; are admissible; and of significant probative value.

23. [1431]

    The second basis for the defendants’ objection to Mr Wist’s evidence (apart from the objection noted above as to Mr Wist’s expertise and whether, and if so how, his conclusions are drawn from that expertise), is that the information provided to Mr Wist was selective and that the assumptions on which his evidence is based have not been made good.

24. [1432]

    Mr Wist was provided with the affidavits of Mr Anderson of 19 December 2017 and 19 April 2018 (which the defendants maintain are materially unreliable in significant respects including in relation to AOF3); some exhibits to those affidavits; the PPB Strategy Reports (which the defendants say Mr Wist was effectively asked to ignore); the Information Memorandum for AOF3 and the sample portfolio for AOF3. In his oral evidence, Mr Wist confirmed that his answers assumed the correctness of Mr Anderson’s affidavits and said that he was “agnostic” to any of the activities (i.e., of Ashington) about which there might have been evidence before the Court.

25. [1433]

    In particular, the defendants say that the chronology provided to Mr Wist sets out a selective history of events over the course of 2006 to 2010 which does not give an accurate picture of the state of the Ashington funds management business over that period.

26. [1434]

    Relevantly, the following matters are identified as missing from the chronology provided to Mr Wist (and not to be found in the material with which he was briefed): any context in respect of the total loss of confidence as between Ashington and the superannuation funds; any information about the poor financial state of the Ashington business in the lead up to the impugned conduct; any information about the instability experienced at the Ashington Board level in 2009, including the fact that Ashington’s independent chairman, Mr Bouris, resigned on 19 August 2009; and any media reports or press commentary going to the reputation and track record of Ashington investors (all of which were matters that Mr Wist accepted in cross-examination were a “very important” or “very relevant” consideration to the likelihood of raising equity for a fund such as AOF3 in 2010; though Mr Wist also said that in his reports he was “agnostic to any Ashington-related media”) .

27. [1435]

    The defendants say that the fact that the plaintiff accepts that Mr Wist’s “final answer to each question must be qualified by the fact that he has given general answers not tied to Ashington’s specific circumstances” does not cure the inadmissibility of his reports. Ultimately, the position of the defendants is that Mr Wist’s opinions (at least insofar as they go to the issue of whether Ashington lost the opportunity to establish AOF3 and any of the other future funds and earn fee income from them) do not assist the plaintiff to discharge the evidentiary burden in respect of this issue.

28. [1436]

    The defendants’ expert, Professor Gray, is an academic and a consultant.

29. [1437]

    Professor Gray was asked and answered questions (divorced, the plaintiff says, from the factual circumstances of Ashington) about the general performance of listed and unlisted Australian property funds, and the considerations that would have an impact on the likelihood of investors being willing to contribute equity to an unlisted Australian property fund in the period 2009-2010. Professor Gray then used those opinions as the basis for answering more specific questions about the likelihood that Ashington would have been able to raise equity for AOF3 in January 2010.

30. [1438]

    As to the general performance of Australian property funds during 2009-2010, Professor Gray noted that the period was one of distress and consolidation, and found that: (i) ASX-listed property funds declined in value by over 70%; (ii) Australian property funds traded at a material discount to net tangible assets; (iii) equity capital was raised for the purpose of balance sheet repair –at material discounts to the value of net tangible assets and to the already materially reduced stock prices; (iv) redemptions were frozen for a number of unlisted funds; (v) independent expert valuation reports expressed negative sentiment for the sector; and (vi) borrowing rates rose sharply.

31. [1439]

    As to the prospect of Australian property funds raising equity during 2009-2010, Professor Gray found that a number of such funds did raise equity during that period (that in 2009 generally went towards balance sheet repair and in 2010 generally went towards strengthening balance sheets to support future acquisitions). Professor Gray found that no initial public offerings of new funds occurred in 2009-2010 and that the Australian dollar had recovered by 2009 and remained at elevated levels through to 2013 (a consideration Professor Gray deemed relevant as foreign investors would be disincentivised by the prospect of exchange rate losses).

32. [1440]

    In that context, Professor Gray considered that it was highly unlikely that any Australian property fund would have been in a position to raise equity for the purpose of investing in new assets in the period through to mid-2010. However, Professor Gray noted two examples of listed funds raising equity for new investments in property assets in late 2010. Consequently, Professor Gray concluded that it was unlikely that a new fund would have been able to raise new equity for the initial purchase of assets into the fund until at least late 2012. Professor Gray’s view was that: an existing ASX-listed property fund (A-REIT) may have been able to raise new equity to fund new investments to expand an existing portfolio of assets by 2010; there is nothing to suggest that it would have been likely, or even possible, for a new ASX-listed property fund to enter the market until late 2012 (there being no evidence of such an event occurring); it was unlikely that there would have been market appetite for an equity issuance to fund new investment for listed funds before 2010; it was highly unlikely that a new unlisted fund would have been able to issue new equity for the initial purchase of assets into the fund any time during 2009-2010. Professor Gray concluded that investors would have regard to pricing, liquidity, track records of other funds in the same stable, and other equity raising when determining whether to invest into an unlisted fund during 2009-2010.

33. [1441]

    As to whether Ashington Capital would have been able to raise the proposed amount of equity capital in January 2010, Professor Gray concluded that it was highly unlikely due to Ashington’s limited track record as a fund manager; its lack of experience in completing the projects proposed; the negative press in relation to Ashington and the high level of gearing (proposed to be 60%).

34. [1442]

    The plaintiff does not suggest that Professor Gray’s report is inadmissible. Indeed, the plaintiff accepts that Professor Gray has very impressive credentials as an academic and a consultant (though pointing out that these are in the field of economics and finance and noting that there is only one reference in his curriculum vitae to real property, namely, an article concerned with linkages between the values of financial assets, commodities and real property). Rather, the plaintiff emphasises that, in cross-examination, Professor Gray admitted that he did not have any personal knowledge of what was occurring in the market with respect to unlisted property trusts in the period following the GFC in 2008-2010; and, for that reason, was reliant upon publicly available data. (The defendants argue that Professor Gray’s analysis of empirical data is the more reliable.)

35. [1443]

    The plaintiff identifies the most significant dispute between Mr Wist and Professor Gray as being the use of data regarding listed property trusts (A-REITs) in answering the question of the availability of investor funds for an opportunistic development fund of the kind of AOF3 (and in the period after that for both future development and opportunistic funds); and submits that the evidence of Mr Wist (given his expertise in the property market) ought to be preferred.

36. [1444]

    It is noted that Professor Gray stated more than once in cross-examination that he did not use the data concerning A-REITs (ASX-listed property funds) “just because” it was the only publicly available information but, rather, he used that data because what occurred in the property market was so stark that it must have been reflected in the unlisted market. The plaintiff accepts that the impact (of the GFC) on property assets was stark (though it is said that the fall in property prices was not comparable to the 80% fall in listed unit prices); and the plaintiff accepts that the freezing of some unlisted trusts (to which Professor Gray referred) would have been a consequence of this. However, the plaintiff says that Professor Gray was unable to proffer any reason why the same would be the case with respect to investor sentiment for new funds.

37. [1445]

    The defendants’ position is that Professor Gray’s report, insofar as it is based on facts observed by him (such as the press articles about Ashington with which he was briefed), identifies and admissibly proves those facts. As adverted to above, the defendants say that confidence can be placed in Professor Gray’s opinions as they are largely based on empirical analysis and first principles. It is noted in this context that Mr Anderson himself could not point to a single example of a substantial unlisted property fund raising equity capital in the relevant period. The defendants here invoke Blatch v Archer (1774) 98 ER 969 and suggest that, if such evidence existed, Mr Anderson would have been in a position to advance it.

38. [1446]

    I accept that Mr Wist is in a position to give evidence based on his experience as a property market valuer as to his perception of general market conditions at the relevant time and, as noted above, where this evidence is not broadly disputed by Professor Gray, I would admit it. Ultimately however, all that Mr Wist’s evidence goes to in my opinion is that at the relevant time (2009-2010) there was a large pool of superannuation funds available in Australia for investment (and hence there was a possibility that, if AOF3 had been established, there might have been a pool of potential investors who could have been targeted as proposed investors in the fund). Other than that, insofar as Mr Wist’s opinions assumes the correctness of the account of events given by Mr Anderson or set out in the chronology provided to him, this has obvious difficulties. Reference has been made above to Makita as to the inadmissibility of experts reports where underlying assumptions have not been made good. Where opinions are founded on underlying assumptions that have not been established, it is difficult to see that they are wholly or substantially based on the expert’s specialised knowledge for the purposes of s 79 of the Evidence Act. That seems to me to be the position here.

39. [1447]

    Particularly in light of the plaintiff’s concession as to the second report, I consider that reliance cannot be placed on its conclusions; and it should be rejected.

40. [1448]

    As to Professor Gray’s report, I do not accept that the criticism of Professor Gray is well-founded. Professor Gray has relied on empirical data and was unable to find data of unlisted real property investment funds in Australia over the relevant period. That does not demonstrate that it was impossible for such a fund to have been established but it makes it difficult to conclude that there was a realistic possibility that it could successfully have been established at the relevant time. In any event, the contemporaneous evidence as to the deferral of AOF3 plans over the period from 2008/2009 of itself establishes that, on the balance of probabilities, even but for the impugned conduct, such a fund would not have been established by Ashington in early 2010.

41. [1449]

    The parties ultimately appeared to be agreed that the evidence of these expert insolvency practitioners is admissible only insofar as it concerns the reconstruction of the accounts of the Ashington entities and trusts; but that the ultimate question of solvency in each case is to be determined by the Court on the available evidence as to whether particular debts were due and payable and whether there were financial resources available to meet those debts. In those circumstances, it is not necessary to explore in detail these reports.

42. [1450]

    Nevertheless, for completeness I note that the defendants’ insolvency expert, Mr Gothard, in his report of 21 June 2019, concluded that Ashington Capital was insolvent from 19 August 2009 by reason of the debt due and payable to Investec; that at least four of the trusts and sub-trusts were insolvent by 30 September 2009 including ADF2 and the Stonington Trust; and that ADF was likely insolvent. Mr Gothard produced a supplementary report dated 22 October 2019, in which he concluded that his opinion as to the solvency of each of the Ashington funds and sub-trusts had not changed since the preparation of his first report. In respect of Ashington Capital, Mr Gothard maintained his view that it was insolvent from 19 August 2009 because, at that time, it became liable for at least $9 million due and payable under the Investec Stonington Facility and it had insufficient financial resources to satisfy that debt.

43. [1451]

    The plaintiff’s insolvency expert, Mr John Melluish (with whom Mr Gothard agreed) accepted that all of the following matters recorded in a file note of the liquidator of Ashington Management (who had reviewed the management accounts for Ashington Management for the financial years 2009 and 2010) were indicators of the insolvency of Ashington Management (T 1127.20-1132.24): trading losses for the 2009 financial year of $478,394.91 and $2,555,576.34 for the 2010 financial year; a working capital deficiency in the 2010 financial year of $4,774,266.42; a net assets deficiency in the 2009 financial year of $930,883.42 and the 2010 financial year of $3,486,459.76; a consistent negative asset position throughout the first half of the 2010 financial year; an overall net loss of $559,661 throughout the first half of the 2010 financial year; increasing tax and payroll liabilities over first half of the 2010 financial year; the other matters identified in [15.2.3] of Mr Gothard’s first report which included a loan to Ashington Group (unlikely to be a financial resource available to Ashington Management); that the majority of trade debtors were unrecoverable based on the fact that the funds and sub-trusts were insolvent; that certain assets were not able to be financial resources available to Ashington Management given their estimated nil realisable value; a St George facility was due and payable by Ashington Management from at least 11 November 2009; the balance sheet for Ashington Management as of June 2009 which recorded net assets were negative $930,883.42; and that as at 8 October 2009, Ashington Management had certain “active chaser” creditors to whom moneys in small amounts were outstanding by several months.

44. [1452]

    The difference between the two in essence was as to whether certain debts were due and payable depending on factual assumptions rather than specialised insolvency expertise.

45. [1453]

    Acorn says that Mr Melluish’s evidence is misconceived. In supporting his opinion that there were viable third-party borrowing options available to Ashington during the relevant period, Mr Melluish relies upon the Wingate Term Sheet dated 26 October 2009. Mr Melluish considers that the offer was a genuine offer capable of being accepted, and accordingly assumes that $13 million of further borrowings could be available to Ashington. However, Acorn says that the foundation for this analysis collapses at the outset because the conditions precedent to the Wingate Term Sheet were not capable of being accepted by Ashington.

46. [1454]

    On the other hand, Acorn contends that the defendants’ expert evidence (from Mr Stephen Gray, Mr Peter Gothard and Mr Jeffrey Hall) is compelling and methodologically robust. Mr Gray concludes that investors would have been wary of investing in property funds in a post-GFC environment, including the funds promoted by Ashington; Mr Gothard concludes that Ashington Capital was insolvent from 19 August 2009 and most of the other entities, trusts and sub-trusts were insolvent or experiencing financial difficulties; and Mr Hall’s primary opinion is that the Ashington group was worthless as at 30 June 2009. It is said that this opinion is supported by the contemporaneous concerns of the superannuation fund unitholders as to Ashington’s financial state and multiple documents showing that Ashington was increasingly struggling to meet its financial obligations from mid-2009 onwards.

47. [1455]

    The most significant area of dispute in the expert evidence was as to the value based on the loss claimed by the plaintiff. This was variously expressed in the course of the hearing but ultimately seemed to be put as being the loss of the chance to retain or continue the whole of the existing (and prospective future) funds management business of Ashington, or, alternatively, the loss of Ashington Capital and Ashington Management to receive (or the loss of the chance to continue to earn) three streams of revenue in relation to ADF, ADF2, AOF3 and future funds (those being trustee fees, development management fees and sales commissions).

48. [1456]

    The plaintiff served a number of reports from Mr Halligan (six out of seven of which were tendered in the proceeding). Mr Halligan was instructed, on the basis of various assumptions, to determine the market value of the consolidated Ashington group as at 30 June 2009 or 30 September 2009.

49. [1457]

    Pausing here, one of the issues that arose was as to the extension of the loss claimed to loss of other entities in the Ashington group. For example, the claim to real estate agency commissions by Ashington Real Estate. Other issues that arose were as to whether the funds management business was in fact ever that of Ashington Capital and Ashington Management – but, rather that of the head company, Ashington Group; and as to whether the loss of an opportunity to establish future funds was a loss of Ashington Capital and Ashington Management, in circumstances where the contemporaneous documents revealed that other entities were to be established to conduct AOF3. Those issues are more appropriately dealt with when it comes to consideration of the quantum of loss. However, it does illustrate the difficulties associated with Mr Halligan’s reports, to the extent that those reports proceeded on the basis that the business being valued was of the consolidated Ashington group.

50. [1458]

    Further, there was an issue as to the date at which the valuation was to be varied out (30 June 2009 or 30 September 2009). It is difficult to see any basis for the former, in circumstances where the impugned conduct was not alleged to commence until late September or early October 2009.

51. [1459]

    Depending on the funds included in the valuation, and the particular assumptions utilised, Mr Halligan’s valuations ranged from $5.25 million to a staggering $140.9 million. The defendants’ expert, Mr Hall, to the contrary, valued the business of Ashington Capital and Ashington Management, as well as the consolidated group, as at both 30 June 2009 (since that was a date adopted by Mr Halligan) and 30 September 2009; and determined a nil valuation on a variety of assumptions (including on the basis of certain assumptions adopted by Mr Halligan). In closing submissions, to much complaint from the defendants, the plaintiff produced an aide memoire containing a series of calculations (adopting in effect figures drawn from different calculations that had been performed by Mr Hall) from which yet a further figure as to the calculation of loss was put forward. l consider the quantification of the plaintiff’s claimed loss in due course. Suffice it here to note that it may not be surprising that there was no commercial resolution of the dispute at an earlier stage if figures at the upper end of Mr Halligan’s range were being bandied around.

52. [1460]

    Insofar as it is said in the plaintiff’s closing submissions (at [241]-[242]) that the determination of the market value of the business (at whatever date) is an irrelevant exercise to the assessment of any equitable compensation owing to the plaintiff, Patersons submits that (if the exercises undertaken by both Mr Halligan and Mr Hall are in fact wholly irrelevant), then on one view both sets of reports could be put to one side and the conclusion should be that the plaintiff has not proven any loss and is not entitled to equitable compensation. I note that this perhaps oversimplifies the plaintiff’s submission at [241]-[242], which is that, rather than determining loss by assessing the market value of the business at the time, the loss should be calculated by valuing the net present value of the future income streams of fees and commission less the expenses it would have incurred in earning those income streams (i.e., the discounted cash flow method).

53. [1461]

    In any event, it is submitted that Mr Halligan’s reports are inadmissible because they proceed on factual assumptions for which there is no proper foundation (i.e., Mr Anderson’s evidence that Ashington was going to constitute new development funds which would have generated substantial profits). It is noted that Mr Halligan’s report assumes a counterfactual in which, had the alleged wrongful conduct not occurred, Ashington would have been successful in the Stonington Capital Raising and would not have been removed as either trustee or manager of ADF or ADF2. Acorn says that the objective and contemporaneous evidence does not support that assumption.

54. [1462]

    It is said that it follows, applying Makita at [85], that Mr Halligan’s reports are inadmissible or of de minimis weight (irrespective of whether they were of any weight in the first place, given the plaintiff’s case that an assessment of the market value of the business is irrelevant to equitable compensation).

55. [1463]

    The plaintiff on the other hand contends that many of the opinions of Mr Hall are inadmissible (and entitled to no weight) on the basis that they are beyond his expertise (see below).

56. [1464]

    Before I turn to the question of the assumptions on which Mr Halligan’s report is based, it is relevant to note one area of dispute between the parties, namely as to the criticism made of Mr Halligan for not forming his own view on particular matters. Mr Halligan and Mr Hall, pursuant to orders for expert witness conclaves, met in conclave and produced a joint report. That joint report contained large sections in which Mr Halligan’s response was simply not to engage on the issue by reference to his instructed assumptions.

57. [1465]

    The plaintiff says that any suggestion that Mr Halligan did not abide by the Expert Witness Code of Conduct is not correct. The plaintiff notes that cl 6(b) of the Code provides that experts are to “endeavour to reach agreement with the other expert witness (or witnesses) on any issue in dispute between them”. It is said that, where Mr Halligan has made an assumption (I would interpose to note an “instructed assumption”), he is not “in dispute” with an opinion on that topic expressed by Mr Hall and therefore is not to be criticised for failing to express, for the first time, an opinion during the conclave of experts. I consider, with all due respect to Mr Halligan, that this does not sufficiently take into account the duty of an expert to assist the Court; and because of my concern that the stance adopted has led to unnecessary (and in all likelihood wasted) cost, I feel it incumbent to record my observations in this regard.

58. [1466]

    The Expert Witness Code of Conduct contained in Sch 7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) makes clear that an expert witness has an overriding duty to assist the Court impartially on matters relevant to the expert witness’ area of expertise (see cl 2). The paramount duty of the expert witness is to the Court and not to any party in the proceedings (including the person retaining the expert witness. An expert witness is also not an advocate for a party (cl 2).

59. [1467]

    The expert witness must abide by any direction of the Court (cl 5), and the Court retains control over the giving of expert evidence (see, for example, r 31.17(a); r 31.20(1) of the UCPR). As per cl 3(i), the expert witness’ report must contain a declaration that the expert has made all the inquiries which the expert believes are desirable and appropriate (save for any matters identified explicitly in the report), and that no matters of significance which the expert regards as relevant have, to the knowledge of the expert, been withheld from the Court. The expert witness should identify any qualifications to which his or her report or opinion is subject (cl 3(j)).

60. [1468]

    With regard to conferences between experts (per cl 6), each must: (a) exercise his or her independent judgment in relation to every conference in which the expert participates pursuant to a direction of the court (for example, one given pursuant to rr 31.17 or 31.20 of the UCPR) and in relation to each report thereafter provided; and must not act on any instruction or request to withhold or avoid agreement; and (b) endeavour to reach agreement with the other expert witness (or witnesses) on any issue in dispute between them, or failing agreement, endeavour to identify and clarify the basis of disagreement on the issues which are in dispute.

61. [1469]

    Practice Note SC Gen 11 deals with Joint Conferences of Expert Witnesses and specifies the objectives of such conferences as including: the just, quick and cost effective disposal of the proceedings; the identification and narrowing of issues in the proceedings during preparation for such a conference and by discussion between the experts at the conference; the consequential shortening of the trial and enhanced prospects of settlement; apprising the Court of the issues for determination; binding experts to their position on issues, thereby enhancing certainty as to how the expert evidence will come out at the trial; and avoiding or reducing the need for experts to attend court to give evidence.

62. [1470]

    In the present case, the starting point must be that the primary duty of Mr Halligan as an expert witness was to furnish the Court with criteria enabling evaluation of the validity of the expert’s conclusions (see Makita at [87] per Heydon JA, as his Honour then was). In Makita, Heydon JA considered (at [79]) (citing National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The ‘Ikarian Reefer’) [1993] 2 Lloyd’s Rep 68) that an expert witness should provide independent assistance to the Court by way of objective, unbiased opinion in relation to matters within his or her expertise, and should make it clear when a particular question or issue falls outside his or her expertise.

63. [1471]

    In Allianz Australia Insurance Ltd v Mashaghati (2018) 1 Qd R 429; [2017] QCA 127 Sofronoff P (with whom McMurdo JA and Applegarth J agreed), noted the expert’s paramount duty to the Court (at [90]) as follows:

64. [1472]

    See also the observations of von Doussa J in Chapman v Luminis Pty Ltd (No 4) (Highland Island Bridge Case) (2001) 123 FCR 62; [2001] FCA 1106 at [297]:

65. [1473]

    The requirements that the Code of Conduct imposes on witnesses were considered in Wood v R (2012) 84 NSWLR 581; [2012] NSWCCA 21 at [725]-[729] by McClellan CJ at CL (with whom Latham and Rothman JJ agreed). His Honour there concluded that the Expert Witness Code of Conduct is not merely aspirational and that “[w]here an expert commits a sufficiently grave breach of the Code, a court may be justified in exercising its discretion to exclude the evidence under ss 135 or 137 of the Evidence Act”.

66. [1474]

    In Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 4) [2019] QSC 199, where Bond J considered whether to grant leave for the plaintiffs to adduce further expert evidence, in circumstances where a joint expert report and conclave had been commissioned by way of case management orders, his Honour noted (at [40]) that:

67. [1475]

    The difficulty I have in the present case is that, in Mr Halligan’s unwavering adherence to his instructed assumptions or facts, he would not engage with issues arising from Mr Hall’s reports when participating in the joint conclave and was not in a position to offer any opinion on those issues when the experts participated in the concurrent hearing of their evidence during the trial. To my mind that resulted in a waste of time and cost (as well as being of little use to me as the tribunal of fact). For an expert simply to refuse to engage in debate on issues arising in his or her opposing expert’s report makes a mockery of the expert witness process. It may well technically be correct to say that, where Mr Halligan has made an assumption as instructed, then he is not “in dispute” with an opinion on that topic expressed by Mr Hall but, if so, then it seems to me that he has not engaged in the process in any meaningful way. Indeed, one would not know if Mr Halligan was or was not “in dispute” at the end of the day on particular issues (such as the going concern issue) because Mr Halligan simply refused to express any view on the matter beyond, it would seem, parroting his instructed assumptions. I find that most unsatisfactory; and I rather think that the appropriate course would have been for there to have been a clearer articulation in the joint report of the impasse that had arisen and for the matter to have been relisted to explore the issue at a time when it would still conceivably have been possible for Mr Halligan meaningfully to engage in the joint conclave process.

68. [1476]

    In any event, what I am left with effectively is no assistance from Mr Halligan as to a number of issues on which Mr Hall has expressed an opinion (and where those opinions are relevant and not challenged by competing expert evidence there can hardly be complaint if those opinions are accepted).

69. [1477]

    Turning then to the admissibility of Mr Halligan’s reports, as noted above, it is submitted that Mr Halligan’s reports are inadmissible on the basis that the assumptions on which they are based have not been made good. Most of Mr Halligan’s assumptions are to be found in his letter of instructions in his first report dated 17 May 2018. Apart from the submission that the foundation for this report fails because Mr Anderson’s evidence should be rejected, Patersons (whose submissions were broadly adopted by the other defendants) says the following as to the key assumptions that have an impact on Mr Halligan’s calculations and why they have not been made good.

70. [1478]

    Patersons says that this assumption was called into question by the evidence of Mr Anderson himself, pointing to his acceptance in cross-examination (when shown the Ashington Group management accounts for 30 June 2009) that the management accounts “aren’t always a particularly accurate reflection” of the financial position of the companies (T 543.9). It is noted that Mr Anderson also agreed that audited financial accounts for both the funds, and Ashington Group and its subsidiaries, are plainly preferable (i.e., to unaudited reports) (T 539).

71. [1479]

    As to the unreliability of the management accounts, Patersons says that it is telling that the auditors were not willing to sign off on the accounts for the 2009 financial year because of going concern issues associated with the funds management business. It is noted that Mr Halligan was not briefed with this material, yet he agreed in the witness box that if the auditors considered themselves unable to sign off on the accounts for 30 June 2009 for ADF and ADF2 due to significant doubt as to whether Ashington was a going concern, that would be a “red flag” (T 1289-1290). It is said that Mr Halligan then acknowledged all of the matters of considerable relevance to the issues in this case that a prudent, independent auditor would have examined.

72. [1480]

    To the extent that Mr Halligan criticised (as being “naïve”) Mr Hall’s working capital analysis and construction of a balance sheet as indicative of the Ashington group not being a going concern, Patersons says that such criticism goes nowhere because, on Mr Halligan’s own admission, he had himself not “done the work” (on the basis of an instructed assumption that Patersons says has proven to be unreliable).

73. [1481]

    Leaving aside the complaint as to compliance with the Expert Witness Code, to which I have referred above, I agree that this first assumption is not made good. In particular, I have regard to the concerns expressed by Ashington’s own auditors as to the accounts at this time (including the concerns raised in the draft letter to ASIC) and the basis on which Mr Steel explained to KordaMentha that there was a delay in the finalisation of the audited accounts (see chronology of events above).

74. [1482]

    Patersons says that the values attributed by Mr Halligan to the unitholdings in ADF and ADF2 are based on this assumption (i.e., to the effect that all of the projects in these funds would have been fully developed) and that this bears no relation to the actual prospects for these projects as at 30 September 2009. It is said that this is plain on the documentary material with which Mr Halligan should have been provided and which should have been properly considered.

75. [1483]

    It is noted that Mr Hall, in his second report (at [50(iv)]), (which Patersons points out was not challenged by either Mr Halligan or the plaintiff in cross-examination) identifies the following assumptions made by Mr Halligan as to the relevant projects.

76. [1484]

    First, that the Wylde Street Project is assumed by Mr Halligan to be completed and fully sold by December 2010 (and to return a cash flow of $4.5 million above the original equity investment), which Patersons says is untenable (and see the defendants’ submissions later on this issue).

77. [1485]

    Second, that the Double Bay Property is assumed to have obtained all the necessary approvals and funding, with construction to commence in October 2010 and to be completed (with partial sales) by September 2012 (and ultimately to return a cash flow of $4.5 million above the original equity investment). Patersons says this ignores that the NAB and St George senior debt facility on the Double Bay Property of $6 million was in default; and that at the end of September 2009 the development application for the Double Bay Property was refused. To the extent that this assumption rests on Mr Anderson’s affidavit evidence that there would have been a successful appeal of this decision in the Land and Environment Court, Patersons says that evidence was not credible. Patersons says (and I agree) that the evidence was that the prospects of a successful appeal were difficult to assess and the position highly uncertain. Moreover, it is said that the alternative options proposed by Ashington in lieu of the original development plan would not have generated the cash flow assumed by Mr Halligan in his discounted cash flow models. It is noted that Mr Anderson accepted that the only option that might have yielded the return Mr Halligan assumes was if an appeal to the Land and Environment Court were successful; and that Mr Anderson accepted the risks and uncertainties inherent in this appeal (T 582). Patersons says that it would not be assumed that the superannuation fund investors would have injected more equity in the project given the chronology set out above. I agree.

78. [1486]

    Third, that the Stonington Project is assumed by Mr Halligan to commence construction in August 2009 with Stage 1 being completed by December 2010 and remaining stages completed and fully sold by December 2012 (and to return a cash flow of $18 million above the original equity investment). Patersons says that this assumption is wholly unrealistic, even if it is assumed that the Stonington Capital Raising were to have been successful. It is noted that the Stonington Capital Raising had the sole purpose of paying out the Investec Stonington Facility; and that there was no construction funding in place as at 30 September 2009 (and it is said that this was highly unlikely to be obtained in the timeframes assumed by Mr Halligan given the credit squeeze caused by the GFC, and the financial position of the Ashington group at the time). I agree that there were issues as to this assumption by Mr Halligan (and see the consideration of this issue in more detail when I come to consider the plaintiff’s posited counterfactual).

79. [1487]

    Fourth, that the development of the Noosa Property was in its early stages as at 30 September 2009, yet it is assumed by Mr Halligan to be completed and fully sold by September 2013 (and return a cash flow of $48.2 million above the original equity investment). It is said that as at 30 September 2009, little by way of tangible progress on the development appeared to have occurred and the superannuation fund investors were canvassing a sale of the property without development. I agree that the assumptions on which Mr Halligan’s opinions were made appear to be problematic as they are not supported by anything more than Mr Halligan’s instructions and Mr Anderson’s belief as to the project. (It is also not clear whether account has been taken of the $20 million Valad fee for this project.)

80. [1488]

    Patersons says (and I agree) that it follows from the above that the assumption given to Mr Halligan (i.e., that the forecasts of the amounts and timing of development management fees, sales commissions, return on equity of the projects in ADF and ADF2 as set out in the project cost reports dated June 2009 for each project are reasonable and appropriate) is also undermined. It is noted that Mr Halligan has relied on these project cost reports, and the forecasts in them, as informing his discounted cash flows not only for his valuations as at 30 June 2009, but also for his valuations as at 30 September 2009. Patersons says that there is a fundamental difficulty with this approach given that the situation of the project changed substantially in the period up to 30 September 2009; and that the forecasts Mr Halligan relies upon are divorced from the realities of what was occurring in the funds management business. I agree.

81. [1489]

    Patersons contends that, even accepting that one does not speculate against the plaintiff (and assuming that the Stonington Capital Raising would have been achieved), AOF3 would not have been constituted in January 2010, with equity commitments of $200 million (cf, plaintiff’s closing submissions at [278]-[282]). Patersons says that is so for the following reasons.

82. [1490]

    First, that even Mr Anderson (who Patersons says, and I would accept, was highly optimistic to say the least) accepted that the fund would not have been constituted with equity commitments of $200 million as at January 2010, it being noted that Mr Anderson accepted that the capital raising process is a “long, arduous, process” that could take up to 18 months (T 557). Patersons notes that this process had barely commenced as at 30 September 2009; and indeed that, by 3 July 2009, the preparation of documentation (that was being done with the input of lawyers particularly given the international focus of AOF3), had been put on hold until the end of 2009. It is noted that Mr Anderson ultimately maintained that the establishment of the fund was achievable by the second quarter of 2010 but Patersons says that, having regard to the objective facts, that too was unrealistic (T 569.1-5; T 605.41-44). I agree.

83. [1491]

    Second, that all the documentation that had been developed to launch AOF3 (such as the Ashington Opportunistic Funds Service Investor Presentation of June 2009) was outmoded and would have had to have been updated if preparation resumed at the end of 2009. For example, it is noted that the investor presentation referred to the chairman being Mr Bouris (though he had earlier resigned in August 2009). It is said that any plans for his replacement were amorphous and that there is no documentary record of such plans in evidence. Moreover, it is noted that the information as to Ashington’s past performance in that investor presentation would need to be updated to take into account the significantly worsened forecasts for the projects by 30 September 2009 and the significant development delays. Patersons says that the Information Memorandum also required updates (including with respect to its propounding of “Ashington’s strong brand equity” which Patersons says was far from the case as at 30 September 2009 having regard to Ashington Capital’s and Ashington Management’s relations with the superannuation fund investors at the time). Patersons also says that this is another matter which diminishes the weight which can be attached to Mr Wist’s opinion as to the likelihood of AOF3 being established by January 2010 because, as Mr Wist stated in cross-examination, he simply did not judge whether the Information Memorandum was complete and accurate (T 1193.25-26).

84. [1492]

    I accept that there would have been a need to update the investor presentation material if preparation for AOF3 resumed at the end of 2009 (although some of the changes required do not seem to have been likely to involve much delay – such as updating the position of the by then retired chairman). That said I accept that updating the Information Memorandum is likely to have required more significant time (and no doubt external legal input).

85. [1493]

    Third, that in the lead up to January 2010, there had been press coverage which (as Mr Anderson conceded) was damaging to Ashington’s brand and would have been a relevant consideration for potential investors into AOF3, making it less likely they would invest. Patersons says that this is supported by the opinion of Professor Gray who says that one of the key reasons why he is of the view that Ashington would not have been able to raise the proposed amount of equity capital in January 2010 was that there was recent negative press in relation to the fund manager. It is noted that Mr Wist ignored this negative press coverage (as instructed) but agreed generally that the reputation of the fund manager is an important consideration in evaluating the likelihood of raising equity in a fund such as AOF3 in 2010 (T 1183.10-12; T 1193.43-48). Properly to assess this factor would seem to me to require an analysis of the negative media coverage (which I do not here propose to explore) simply because if the negative coverage was due to any of the impugned conduct then it would surely need to be excluded on this counterfactual. That said, insofar as the negative press related to the Double Bay development approval rejection, then that is unrelated to the impugned conduct.

86. [1494]

    Fourth, it is said that (as both Professor Gray and Mr Wist agreed) the past performance of ADF and ADF2 would have been a highly relevant consideration as to whether investors would commit to $200 million in capital in AOF3 by January 2010. Patersons says in this regard that, as at September 2009: each of the sub-trusts of ADF was in distress (and, for ADF2, both the Project X Trust and the Stonington Trust were in financial distress); in respect of both ADF and ADF2, the internal rate of return for each of the projects had fallen significantly below the 20% return which is what Ashington was targeting for prospective investors in AOF3; Ashington Capital had committed numerous breaches of trust causing a loss of confidence in Ashington by the superannuation fund investors (a matter that Mr Wist agreed would be an important consideration for investors in AOF3); the chairman of the Board had resigned, thus destabilising the corporate governance of the Ashington Group (again, a matter Mr Wist agreed would be an important consideration for investors in AOF3); and the development application for the Double Bay Property had been refused at the end of September 2009 and yet this property was a significant selling point in the marketing material for AOF3.

87. [1495]

    Patersons submits that it can readily be inferred that these matters, all of which it says would have been revealed in due diligence undertaken by any potential investor in AOF3, would have dissuaded those investors from committing capital in AOF3 by January 2010 or at any time thereafter (and certainly not in 2010-2011).

88. [1496]

    Fifth, that in terms of the progress that Ashington had done to investigate potential properties for the proposed future fund (AOF3), Patersons says that all it amounted to was a sample, or indicative portfolio undertaken by Mr Minahan and Mr Paul Cloke (Ashington’s Head of Research). It is said that, while some preliminary discussions occurred with respect to Project Spring (the Four Seasons Hotel), they went nowhere. Moreover, it is said that, in terms of discussions that were had with potential investors in AOF3, Mr Anderson remembered names such as Ochziff and Shearwater but there is no evidence that those potential investors even committed to pursuing due diligence. Patersons says that the evidence of Mr Shorrocks does not assist the plaintiff (cf, the plaintiff’s closing submissions at [282]), since he merely thought there would be sufficient interest to pursue a trip to Asia; and it is said that this is far from establishing that capital would be committed by January 2010. It is said that, while the Board papers for the 9 July 2009 Board meeting recorded some “possible”, and two “probable”, potential investors for due diligence into the fund, Mr Anderson himself recognised that the process from that point to an investor committing capital was a “very slow process” with ADF taking “18 months to get three [super] funds” (T 573). It is noted that Mr Wist also agreed that even if Ashington was “coming off a standing start” from January 2010, the capital raising would have taken several months (T 1194).

89. [1497]

    Sixth, it is said that it would have been near impossible for Ashington to obtain around $400 million of debt finance in respect of the purchase and development of the properties the subject of the indicative portfolio for AOF3, particularly having regard Ashington’s relations with financiers in the second half of 2009 (which has been detailed above). It is said that this is another matter which diminishes the weight which can be attached to Mr Wist’s opinions (as to the likelihood of AOF3 being established by January 2010) because he agreed in cross-examination that he was not saying anything about the timing upon which the debt finance piece would have to be raised (T 1193).

90. [1498]

    Patersons says that all of these matters tend in favour of a conclusion that there was no substantial prospect of $200 million in AOF3 being raised in January 2010 (even assuming the impugned conduct of the defendants did not occur). I agree (and it is telling that Mr Anderson himself (quite fairly) accepted that the proposed AOF3 fund would not have been constituted by January 2010.

91. [1499]

    In that sense, Patersons says that it is not necessary to determine the dispute between Mr Wist and Professor Gray as to the use of data regarding listed property trusts to answer the question of the availability of investor funds for an opportunistic development fund of the kind of AOF3 (cf, plaintiff’s closing submissions at [233]-[235]). It is said that, even giving Mr Wist the benefit of the doubt, and assuming there was an appetite for international investment into unlisted property funds in the aftermath of the GFC (by pursuing the counter cyclical strategy set out by Mr Wist), that does not matter because on the facts of this case it can comfortably be concluded that there was no prospect of international investors committing $200 million into AOF3 by January 2010 or any time thereafter. I agree that that is certainly the case as to a commencement date of January 2010. I do not accept that it would not have been possible at any time thereafter (given the right set of circumstances and assumptions) but that is speculation and in any event it is immaterial when considering Mr Halligan’s reports which expressly assumed the correctness of this assumption.

92. [1500]

    Patersons says that it follows that, to the extent that Mr Halligan has adopted an assumption to the contrary (that AOF3 would be established in January 2010) and has run his models accordingly, his calculations are inadmissible. Patersons says that his assumption that Mr Wist’s reports are “valid” does not cure this problem. Patersons says that reliance on this assumption affects all of Mr Halligan’s reports, save for the fourth report (as amended by his sixth report) because in all of the other reports, Mr Halligan has included AOF3 in his calculations (see fourth column in MFI 32). I agree.

93. [1501]

    Patersons says that, if there was no prospect of AOF3 being established, then there could be no confidence that further development and opportunistic funds would be established every 12 months from January 2010.

94. [1502]

    It is said that such “explosive growth” (including that Ashington would have been able to take advantage of the “notorious recent property boom” in Australia which commenced in 2013) cannot be assumed (cf, plaintiff’s closing submissions at [283]). Patersons says that the present case is very different from the cases relied upon by the plaintiff – namely, Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; [1999] NSWCA 323 (Fightvision) and Norris v Blake by his Tutor Porter (No 2) (1997) 41 NSWLR 49 (Norris) – because here the funds management business of Ashington Capital and Ashington Management had a significant history (in respect of ADF and ADF2) and its past performance was strained. As reasoned with respect to AOF3, Patersons says that the evidence did not rise so high as to establish a “significant potential for growth” (cf, the position in the authorities to which reference has here been made).

95. [1503]

    Patersons says that it follows that, to the extent that Mr Halligan has adopted an assumption to the contrary (i.e., that those future funds would have been established) his calculations are inadmissible; and that this affects his first report as well as his fifth report (see second and third rows of MFI 32). I agree.

96. [1504]

    Patersons submits that, given the difficulties with Mr Halligan’s assumptions, reliance cannot be placed on his calculations as informing the quantification of any equitable compensation owed by the plaintiff. I agree (and in any event the plaintiff effectively does not rely on these reports given the way the loss of opportunity claim is now put – ironically, now relying instead on the calculations prepared by Mr Hall; as to which see the submissions as to loss considered later in these reasons). I therefore reject this evidence.

97. [1505]

    In essence, Mr Hall’s opinions are that: (a) Ashington (or more accurately Ashington Capital and Ashington Management) was (or were) not a going concern as at 30 September 2009; (b) consequently, the net realisable assets methodology is appropriate and that yields a valuation of nil; if it is assumed that Ashington was a going concern, the appropriate valuation methodology is a multiple of EBITA which also produces a nil figure as 30 September 2009; (c) as a cross-check to (b), applying a DCF (discounted cash flow) methodology on the assumptions Mr Hall considers are reasonable and that would be made by a prudent and informed purchaser as at 30 September 2009, the figure is also nil; (d) applying Mr Halligan’s DCF to his valuation of $5.25 million (excluding AOF3 and future funds) once proper regard is had to the effect of the offsetting arrangements (which the defendants contend are dubious) the figure is close nil and clearly less than nil once the revenue stream from Ashington Real Estate is removed.

98. [1506]

    The plaintiff says that (like Professor Gray, Mr Gothard and Mr Halligan), Mr Hall is not an expert in either property trusts or funds management, noting that there is no reference to either in his curriculum vitae. Complaint is made that Mr Hall has expressed opinions on topics such as the likely timeframes of developments and the likelihood of Ashington being replaced as trustee and manager (which Mr Hall does on the basis that, first, as an expert valuer he is experienced in applying valuation principles to a wide array of sectors, and second, he is applying valuation expertise because he is not in fact assessing how a development will progress or whether the superannuation fund investors would move to replace Ashington but, rather, he is assessing what a knowledgeable and willing purchaser would likely believe at the time). The plaintiff says there would be no criticism of such a method if Mr Hall were advising a potential purchaser or investor at the time but that this is not the circumstance in which Mr Hall’s evidence falls to be assessed.

99. [1507]

    Pausing here, this is in effect an issue that arises in my opinion due to the changing ways in which the claimed loss has been articulated – if what is said to have been lost is the “business” or funds management business of Ashington entities or the Ashington group as a whole, then I see no difficulty with the way that it has been valued by Mr Hall (and the criticism as to the assumptions he has adopted as to what a reasonable purchaser or investor would pay is not pressed by the plaintiff). However, as the case has progressed, what the plaintiff now presses is a claim for the loss of a chance to continue in business, continue to receive the revenue stream, and to establish future development and opportunistic funds. On that articulation of the claimed loss, it seems to be the plaintiff’s position that one simply works out (by way of adopting aspects of the experts’ modelling) the net present value or discounted cash flow of future prospective income streams and then applies a percentage discount to reflect the probability of that chance eventuating. Insofar as that is a very different exercise to the one initially contemplated, there is more than a little unfairness to the criticism of Mr Hall’s opinion evidence (and more than a little force to Patersons’ submission that if the market value of the business or group is now conceded to be irrelevant one could simply jettison much if not all of the expert reports going to the issue of loss).

100. [1508]

     The plaintiff says that there are two fundamental defects in Mr Hall’s evidence: first, that, as a question of law, the task of assessing the plaintiff’s loss in these proceedings is to be done by reference to the likely future cash flows and expenses on the counterfactual with the full benefit of hindsight (hence it is said that what a purchaser at the time would have paid for the Ashington business is entirely irrelevant); and, second, that, as a question of evidence, Mr Hall’s opinions on the matters which form the substratum of his calculations (such as the matters referred to above) are beyond his expertise (and in any event, are matters to be determined by the Court on the basis of evidence which in many respects has not been provided to Mr Hall).

101. [1509]

     The plaintiff emphasises that the determination of proper equitable compensation must be with the “full benefit of hindsight” (citing O’Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 (O’Halloran) at 273 per Spigelman CJ (with whom Priestley and Meagher JJA agreed); Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 at [35] per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ). It is noted that Mr Hall admitted that, with one exception, he did not have regard to evidence after 30 September 2009. The plaintiff points to the fact that the reports state that Mr Hall is assessing matters from the position of a potential purchaser or investor at the time. The plaintiff says that (though faithful to Spencer v The Commonwealth (1907) 5 CLR 418 (Spencer)) this is here an almost irrelevant exercise. (I interpose to note that this is the genesis for the observation by Patersons as to what flows from the now perceived irrelevance of the reports.) The plaintiff says that there is no suggestion in the evidence that the Ashington business might be sold.

102. [1510]

     Insofar as the plaintiff in closing submissions (at [238]-[243]) argues to the contrary, Patersons says that the orthodox approach on “ordinary valuation principles” of assessing fair value, including for loss of a commercial opportunity, in Spencer, applies irrespective of whether Mr Anderson was considering a sale of the Ashington business.

103. [1511]

     It is noted that Mr Halligan himself accepts that Spencer is the governing touchstone for his valuation. Patersons says that Spencer is not concerned with the subjective intentions of the putative seller; that while it hypothesises a notional sale in June or September 2009 as an assumption of such an analysis, the Spencer analysis is an objective exercise; that it proceeds on the basis of an hypothetical negotiation and sale between an hypothetical purchaser and hypothetical seller informed of all matters bearing on the value of the Ashington business at the date of valuation; and it presupposes a reasonable person being prepared to give what is valued in exchange for money. Patersons says that what matters in terms of valuing the loss of commercial opportunity upon a hypothesised sale on a Spencer analysis is not whether Mr Anderson would have in fact sold the Ashington business at that time but the value a fully informed hypothetical purchaser would have attached to it at the relevant time. It is significant that in concurrent evidence there was a large measure of agreement between the experts as to the application of the principles of Spencer to the valuation task in this case and the considerations that a hypothetical purchaser would investigate and take into account. Patersons emphasises that only one of the experts, Mr Hall, embarked on that exercise. I agree but, as explained above, this is not how the plaintiff now puts the claimed loss.

104. [1512]

     The plaintiff thus maintains that the market value of that business at the time has no bearing on the plaintiff’s loss and says that it follows that the capitalised maintainable earnings method is not appropriate (designed as it is solely to determine a market value). Further, it is said that the capitalised earnings method is also irrelevant because it was only performed by Mr Hall in relation to the value of the Ashington business as at 30 June 2009, which the plaintiff says renders that dispute now moot in any event.

105. [1513]

     The plaintiff in written submissions maintains that the lost business is, rather, to be valued by the net present value of the future income streams of fees and commission less the expenses it would have incurred in earning those income streams, in other words, by the discounted cash flow method (or DCF).

106. [1514]

     It is submitted that those income streams are to be determined with the full benefit of hindsight and in accordance with findings of fact on the counterfactual; and that (once it is understood that what a potential purchaser or investor, no matter how “knowledgeable”, thought at the time is irrelevant), Mr Hall’s opinions on matters not based on his valuation expertise are irrelevant. In this regard the plaintiff says that Mr Hall’s conclusions on the likely progress of the Ashington developments and the likelihood of Ashington being replaced are based on a careful review of the documents to which he has had access, not based on Mr Hall’s expertise. The plaintiff submits that Mr Hall’s opinions are those of an “expert (from a particular field or discipline) who is well endowed with intelligence, insight and common sense [which] may help someone unravel a problem in another field of expertise or discipline; but, he or she will not be proffering opinions on that subject matter that will be either helpful or admissible as evidence in Court” (Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at [671] per Allsop J, as his Honour then was). Furthermore, given that Mr Hall has not had regard to evidence after 30 September 2009, or attempted to adjust those events in accordance with an appropriate counterfactual, the plaintiff says that any assistance that might otherwise be gained from Mr Hall’s views falls away.

107. [1515]

     The plaintiff thus submits that, in those circumstances, all one is left with is Mr Hall’s reconstruction of Ashington’s accounts and (like Mr Halligan), his calculations based on various assumptions. The plaintiff contends that (despite complaint as to valuation models such as the one used by Mr Halligan) there is nothing in Mr Hall’s evidence to the effect that Mr Halligan’s spreadsheets make incorrect calculations on the discounted cash flow method (so long as the correct assumptions are made).

108. [1516]

     Patersons submits, in contrast, that reliance can be placed on the valuations of Mr Hall (noting that his opinions and the core assumptions he has applied are summarised in MFI 32).

109. [1517]

     Insofar as the plaintiff appeals to hindsight, Patersons says that there is no evidence that when Parissen took control of the Ashington funds business, it was profitable, and that hindsight does not assist the plaintiff. Further, Patersons says that it is wrong to say that the likely views of investors and purchasers at the date of valuation in 2009 are irrelevant to the quantification exercise in this particular case. It is submitted that, to conclude so much, is effectively to disavow the ordinary principles of fair value under Spencer that Mr Halligan himself purported to apply. In addition, Patersons says that the suggestion that the Court is not determining the fair value of Ashington in 2009 is directly inconsistent with the expert evidence upon which the plaintiff’s case on quantification relies.

110. [1518]

     Patersons points out that the plaintiff now propounds Mr Halligan’s valuation of the core business including AOF3 as at 30 September 2009 as a “good starting point” (see plaintiff’s submissions at [289]) and refers to Mr Hall’s Attachment 10 to his second report as the low end of the range the plaintiff is propounding (plaintiff’s closing submissions at [289]-[290]). Patersons says that should not be accepted. It is noted that Mr Hall’s Attachment 10 is based on Mr Halligan’s model, which Patersons says is flawed because of the unproven assumptions it adopts (and it is noted that Mr Hall was at pains in his oral evidence to make that clear).

111. [1519]

     Patersons says that this leaves Mr Hall’s unchallenged analysis, based on his significant experience as a valuer across a range of industries. It is said that it is a rigorous review of the primary records with which Mr Hall has been briefed, together with the application of reasonable assumptions that a financial advisor to a willing but not anxious hypothetical purchaser of the business would make as at the valuation date and following due diligence. Patersons points out that those assumptions were not reviewed by Mr Halligan and it is said that they were not seriously tested or challenged by the plaintiff through the cross-examination of Mr Hall. Patersons says that they are the only evidence of the assumptions that a prudent purchaser would have made in valuing the Ashington funds management business at 30 September 2009.

112. [1520]

     It is noted that Mr Hall’s analysis has led him to conclude that as at 30 September 2009 the Ashington funds business was not a going concern, a conclusion which Patersons says aligns with the conclusion that can be reached on the primary materials. It is said that Mr Hall was not challenged on his analysis and that Mr Halligan did not disagree with it (he simply expressed no view on it, despite it being within his expertise). It is noted that Mr Halligan also accepted in his oral evidence various indicia of the business not being a going concern, namely: the failure to complete a project; an important development application being refused; breaching banking covenants; a receiver being appointed to sell an asset; and threats from financial institutions to enforce debts that were due (T 1329-1331).

113. [1521]

     As to the appropriate valuation method, Patersons says that the plaintiff’s argument that equitable compensation’s appeal to hindsight necessarily means the discounted cash flow method is the only appropriate valuation method (plaintiff’s closing submissions at [241]) should be rejected. It is noted that Mr Halligan conceded that the discounted cash flow method “requires spelling out the expected cash flows going forward”; and it is said that it requires a sufficient amount of information (at least 10 years’ forecasts). Patersons says that there were no projections of expected cash flows generated by Ashington at the time and with which the experts were briefed; rather, that Mr Halligan’s discounted cash flow models are based entirely on his unfounded assumptions (which Patersons says are wrong or unreliable). It is said that, in the absence of suitable replacement information, there is no rationale for using the method. As to the discount percentage, it is noted that Mr Halligan conceded he assumed (although it was not part of his express assumptions) that the cash flows he used had already been probability weighted; he accepted that he did not apply his independent judgement to that exercise and did not know who undertook that step (if it was undertaken at all) (T 1313).

114. [1522]

     It is said that, even if the discounted cash flow methodology was accepted as being more apt to the assessment of equitable compensation, Mr Hall cross-checked his capitalised earnings methodology valuation against his own discounted cash flow (adopting his own, Patersons says, reasonable assumptions); and that this cross-check revealed that as at 30 September 2009, the value of the consolidated business was still nil using either method.

115. [1523]

     Patersons says that, because the value of what Ashington Capital and Ashington Management lost is zero, even on Mr Halligan’s methodology, it is not necessary to make the deductions for the offsetting and the discount referred to in the plaintiff’s closing submissions (at [292]). Patersons says that even if it were to be undertaken, the offsetting calculations undertaken by Mr Hall in his report of 16 March 2021 should be preferred; and that any discount applied to take into account the failure of the Stonington Capital Raising should be far greater than 10%.

116. [1524]

     Patersons also says that any figure of nominal loss would require a very significant discount to take into account the multiple, and to some degree independent, contingencies barring Ashington’s path to future profitability as at 30 September 2009, if there had been no alleged breach by the defendants. At the level of principle, Patersons accepts that the Court is not to approach discounts and contingencies in a rigidly arithmetical way. It is said that the discounting exercise associated with the assessment of the loss of opportunity is fundamentally of a qualitative nature.

117. [1525]

     Patersons says that it is significant in this regard that Mr Halligan recognised the importance of probabilistic-weighting in his discounted cash flow analysis but did not undertake such analysis himself and acknowledged that he did not even know whether the information he had been asked to base his figure on reflected any such analysis. Patersons says that plainly it did not; and that this is very significant as it means that even Mr Halligan’s final figure of $5.25 million is significantly inflated insofar as it takes no account of the contingencies and probabilities associated with the cash flows he has used.

118. [1526]

     Patersons emphasises that the plaintiff’s case is not a single loss of opportunity claim. Patersons says (rather evocatively) that it is a compounding loss of opportunity claim that “cascades to a point it ultimately collapses upon its own infinite regress into a sea of probability and speculation”. Patersons says that it depends on the contingencies and probabilities in such matters as: a successful Stonington Capital Raising on satisfactory terms and within a reasonable of time; the likelihood of that capital raising in turn solving the myriad of other problems confronting the financial position and prospects of ADF and ADF2 and of Ashington itself; the likelihood of retaining Ms Garrett and Mr Renauf well into the future to restore and build the business; the likelihood of future developments of the underlying properties of the sub-trusts, including a successful appeal in respect of Double Bay; and the likelihood of raising AOF3 and further future funds.

119. [1527]

     I consider that Mr Hall’s opinion is admissible and that the complaint as to the basis on which certain opinions have been expressed goes to weight (given that the complaint does not seem to be applicable on the scenario that Mr Hall was considering – namely the assessment of value of the business pursuant to Spencer).

120. [1528]

     For the reasons set out above, I consider that Mr Halligan’s reports are inadmissible and I reject them on the basis that the assumptions on which they are based have not been made good.

121. [1529]

     The real difficulty in the competing experts’ reports on this issue is that the experts have in a very real sense been addressing different issues, which makes assessment of the competing propositions difficult in the extreme. Ultimately, I accept that if the value of the business (or the group as a whole) is to be assessed as at 30 September 2009, then on the methodology explained capably by Mr Hall, it had a nil value. That is consistent with my conclusion (see below) that the group was insolvent or bordering on insolvency as at 30 September 2009.

122. [1530]

     If what falls to be considered is simply an arithmetical assessment of hypothetical future income streams (offset by liabilities or expenses of incurring such income streams) and discounted back to net present value, then Mr Hall’s calculations would produce again a nil value. The only way that a positive value seems to be postulated by the plaintiff is to take various parts of the calculations and to add in not simply AOF3 but a succession of future funds beyond the limit of the existing or replacement funds (i.e., on the assumption that once a fund comes to an end it will be replaced by another of equivalent or perhaps greater value). There is a large degree of speculation in that exercise (although I finally grasped the logic underlying it – see the debate at T 1514ff). However, even assuming that the figures put forward in closing submissions might be a realistic assessment of future fund income flows, there would then need to be a substantial discount to reflect a qualitative assessment of the contingencies that would have been faced on the plaintiff’s counterfactual and to apply a percentage to the prospect that the lost opportunity would have been achieved.

123. [1531]

     Ultimately, as I explain below, I consider that it is highly likely that the Stonington Capital Raising would not have been achieved; that even if it had been achieved it would not have resolved the financial difficulties faced by the Ashington group; and hence, that the prospect of obtaining the future income flows that it is said has been lost was extremely slim. I would apply a 5% chance at best of the future income flows having been achieved.

Provisional and deferred evidentiary rulings

1. [1532]

   I have ruled above on the remaining issue as to provisionally admitted evidence from Ms Garrett’s liquidator’s examination; and on the deferred objections to the expert reports.

2. [1533]

   As to Mr Anderson’s 25 May 2018 affidavit, I provisionally read [23] on the basis that the plaintiff needed to clarify that the statement was Mr Anderson’s evidence of Ashington’s business practices based on his experience. I will admit that paragraph.

Loss of trust and confidence in Ashington

1. [1534]

   It is convenient at this point to consider the submissions as to the superannuation fund investors’ loss of trust and confidence in Ashington and/or Mr Anderson, as this sets the context in which the defendants emphasise that the decision was ultimately made by the superannuation fund investors to pursue the Parissen Proposal (and is relied upon by the defendants variously for the proposition that the impugned conduct was not the cause of the claimed loss or that no loss was sustained as a result of the impugned conduct). The defendants maintain that this loss of trust and confidence made inevitable the ultimate retirement of the Ashington companies as trustee and manager, respectively. For example, Acorn and Albany submit they could not have caused any damage to Ashington Capital and Ashington Management because the decision to remove them occurred before Acorn and Albany were even approached.

2. [1535]

   Ms Garrett and Mr Renauf have also identified a number of alleged material breaches of trust committed by Ashington Capital by September 2009 which they say were of significant concern to the superannuation fund investors (I consider these in due course). It is submitted that (contrary to the pleading at [160]; [162]; [181]), the superannuation fund investors and financiers had lost confidence in Ashington and Mr Anderson due to these breaches of trust, the breaches of the finance facilities and the poor performance of the funds.

3. [1536]

   As noted above, each of the superannuation fund investors gave evidence as to the said loss of trust and confidence and there can be little doubt, having regard to the contemporaneous documents referred to in the chronology of events set out above, that there was a serious loss of trust and confidence (albeit that the timing of when that occurred for each of the superannuation fund investors was not entirely clear).

4. [1537]

   The defendants submit that this loss of trust and confidence in the Ashington entities (and Mr Anderson himself) occurred before the end of September 2009, pointing to: the contemporaneous documents revealing the concerns of Mr Gavin of HESTA that started in late 2008 and early 2009; and Mr Gavin’s communication to other superannuation fund investors on 17 August 2009 that it was highly unlikely that HESTA would be committing any additional equity to ADF 2 “at least not in the timeframe required for Investec and the vendor finance, and probably never”; and to the 27 August 2009 response by Mr Gavin to one of Mr Anderson’s recapitalisation proposals (see above). The defendants submit that the plaintiff’s suggestion, that the 27 August 2009 response demonstrated a willingness to consider proposals that involved Ashington remaining as trustee, ignores the reality that the willingness was qualified by an unachievable pre-condition (i.e., “$15m of hard cash put up”).

5. [1538]

   Reference is also made to the communications of concern by Mr Gavin on 1 September 2009 that a proposed letter to Investec did not really “convey the loss of confidence from the investors towards the Manager”; to the discussion on 9 September 2009 between Mr Gavin and others at HESTA as to the possibility of writing the investment in ADF and ADF2 down to zero (although concluding that this was premature); the 29 October 2009 fund management update by Mr Fowler that was critical of existing management to date (although positive as to the addition of Ms Garrett and Mr Renauf to Ashington); and the response to Mr Anderson’s Wingate Proposal, on 2 December 2009, in which Mr Gavin said that “as I have explained before, we lost confidence in management as soon as you contravened the terms of the side letter between HESTA and Ashington”. It is submitted that these communications cannot be reconciled with the notion that the loss of trust and confidence arose only after September 2009.

6. [1539]

   Acorn also points to the evidence of Mr Anderson in cross-examination to the effect that he never thought about keeping the superannuation fund investors happy (T 631.29-33) (although I note that Mr Anderson went on to state as part of his response that he thought about keeping them informed, making decisions in their best interest and keeping them content as investors).

7. [1540]

   Albany says that, by July 2009 (and independent of Ms Garrett and Mr Renauf’s involvement), the investors and the asset consultants who advised them had lost trust and confidence in Ashington, and in Mr Anderson specifically. Reference is made in this regard to the following: that the purpose of the PPB strategic and financial review of ADF2 was initially to “provide comfort to unit holders of the current and future viability” of ADF2 (see Mr Dedes’ approach of 2 July 2009); that at the time of this approach and in subsequent weeks and months, the asset consultants already had in their collective contemplation the termination of the Ashington entities. In this regard, Albany refers to: an email from Mr Hodgson to Mr Dedes on 10 July 2009, where Mr Hodgson asked about organising advice for the termination of the manager; Ms Chan’s meeting file note of 29 July 2009 where she notes “need to change trustee”; Mr Dedes’ 29 July 2009 property sector update report for ADF2 where he states that the PPB review will focus on “the process for termination of the manager and responsible entity”; and the email from Mr Flett to Mr Lord on 6 August 2009 in which Mr Flett notes information that is required to consider “how we might change the trustee”; the 13 July 2009 email by Mr Bouris to Mr Anderson (Mr Bouris having spoken to Mr Dedes on 9 July 2009), in which Mr Bouris raised that the “possible action” of the investors was to terminate the management agreement – although I note that it is unclear that Mr Bouris’ view was in any way informed by his discussion with Mr Dedes; and the proposal PPB submitted to the investors on 15 July 2009 in which PPB stated it would consider all options “potentially including a compulsory retirement and replacement if necessary”. Albany also points to Mr Hartley’s evidence that prior to the appointment of PPB, he expected PPB would specifically consider the removal of Ashington in its review when it considered “all options” (T 985.10-986.23).

8. [1541]

   Reference is made to the meeting between PPB and Ashington with the investors on 18 August 2009, at which the superannuation fund investors became aware of further significant breaches by Ashington, including the double pledging of uncalled capital to both NAB/St George and to Investec and entry into the Investec Stonington Facility at the head trust level; and events that followed receipt of that information.

9. [1542]

   Albany thus says that the “writing was on the wall” by late August 2009, without any involvement of Ms Garrett and Mr Renauf: that Ashington’s role with ADF and ADF2 was to end; and that it was simply a matter of how that was to be achieved without the investors losing the remaining value (if any) in their investments.

10. [1543]

    The plaintiff accepts that the superannuation fund investors were “unhappy”; that Mr Anderson and Ashington had failed commercially to obtain satisfactory terms to finance the acquisition of Stonington; and that Mr Anderson had, in the perception of the superannuation fund investors, been too slow to bring that matter to their attention and to find an acceptable solution that did not involve them putting in additional equity. However, the plaintiff says that no decision was taken, at any time until October/November 2009, to remove Ashington companies either as trustee of the funds or as manager of any of the developments.

11. [1544]

    The plaintiff submits that there is no contemporaneous documentary evidence to determine the precise time at which the superannuation fund investors formed views that would permit a conclusion that they would have resolved to remove Ashington in 2009. In particular, it is noted that there is no record of any superannuation fund investor recommending the removal of Ashington prior to November 2009. Reference is made, for example, to the minutes of Sunsuper Investment Committee meetings for August and November 2009 in which there is reference to management concerns in relation to another matter but not in relation to Ashington (references to Ashington being limited to a record of a write-down of Sunsuper’s investment in the November 2009 minutes) (Ex D).

12. [1545]

    It is noted that Mr Hartley accepted in cross-examination that if he had formed a fixed view about the need to replace Ashington that would have been raised at the Investment Committee level (T 1010.4-10); that he was not aware of Sunsuper giving any instruction prior to November 2009 for PPB to advise superannuation fund investors on the removal of Ashington (T 982.33-983.17). The plaintiff says that, at its highest, Mr Hartley had an “unexpressed expectation” that removal of Ashington was an option that PPB might consider; and maintains that in mid-August 2009 a change of the manager was not under active consideration.

13. [1546]

    Further, the plaintiff contends the removal of Ashington as trustee and manager of ADF and ADF2 was not part of PPB’s mandate from the superannuation fund investors. Reference is made in that regard to the draft scope of engagement provided by Mr Dedes to Mr Carson of PPB on 10 July 2009 (which noted that the purpose of that engagement was for PPB to perform a strategic and financial review of ADF2). The plaintiff says that while the anticipated scope of the engagement included PPB summarising the corporate and organisational structure of the fund and their implications for unitholders, the superannuation fund investors were not seeking legal advice from PPB. It is noted that PPB’s advice was sought by 25 August 2009 (when the Stonington facilities expired) as to the operation and viability of ADF2 (reference being made to Mr Dedes’ email of 14 July 2009 to PPB and to the definition of the “Approved Purpose” in the 20 July 2009 PPB Confidentiality Agreement).

14. [1547]

    Insofar as it is suggested that the reference to PPB’s role in assisting the trustee in “achieving a legally effective restructure of the current trustee and security arrangements” (see the PPB letter to Ashington on 25 August 2009) included consideration of the potential replacement of Ashington, the plaintiff notes that this phrase first appeared at page 12 of the First PPB Report dated 14 August 2009, setting out a proposal as to “PPB’s Ongoing Role” and that on 20 August 2009 (prior to Ashington signing the 25 August 2009 letter) PPB provided Ashington with a copy of this report. The plaintiff says that the meaning of the phrase is apparent from section 2.3 of that report, which identified as a risk of Ashington’s business structure that Ashington Capital acted as trustee for each of the ADF and ADF2 sub-trusts, with a number of charges registered against Ashington Capital. It is noted that PPB considered that this structure gave rise to a risk if any of the charges were acted upon; and that Mr Hartley understood the reference to “achieving a legally effective restructure” as referring to this concern (T 989.22-42). Similarly, it is said that Ms Chan’s notation, “[v]ery messy, need to change trustee” in her file note of the 29 July 2009 meeting between PPB and superannuation fund investors is a reference to this issue; and not to a proposal to replace Ashington as trustee and manager (as Mr Hartley accepted in cross-examination). The plaintiff also says that it appears that Norton Gledhill had doubts about whether PPB’s concerns in relation to this issue were well-founded (and that the concerns were never acted upon) (T 1086).

15. [1548]

    Insofar as the defendants assert that Ashington would have been replaced in any event (due to loss of trust and confidence on the part of the superannuation fund investors), the plaintiff points out that, on the relevant counterfactual, the Parissen Proposal is absent (though the plaintiff goes further and suggests that the counterfactual includes that the Stonington Capital Raising is successful). It is submitted that there is unlikely to have been anyone else willing and able to become trustee and manager (noting that the Parissen presentation to Acorn of 26 March 2010 referred, among other things, to the “majority of existing property fund managers facing financial and operational issues”).

16. [1549]

    The plaintiff points out that the management contract did not permit termination (I interpose to say, without cause) and says that it was appreciated that removing Ashington Management as the manager would have been very difficult (the plaintiff points out that the Parissen presentation to Acorn notes that the management agreements did not have termination rights and that the possible damages for repudiation of the agreements could total $9 million).

17. [1550]

    It is said that the contemporaneous (and the plaintiff contends reliable) evidence of the superannuation fund investors was that, although they were unhappy with Mr Anderson, they would have continued working with Ashington if there were no real alternative (and the plaintiff submits that this is especially so with Ms Garrett placed as the face of Ashington and in the context of the Stonington Capital Raising being successful, on the counterfactual the plaintiff propounds).

18. [1551]

    The plaintiff contends that, contrary to the suggestion that the removal of Ashington as trustee and manager was, in any event, probable or inevitable, the evidence demonstrates that the superannuation fund investors were (consistent with their own roles as trustees) open to consider a range of options that would protect their investments in ADF and ADF2. It is noted that, by 30 September 2009, the superannuation fund investors had agreed to the Stonington Capital Raising; and that the impetus for removing Ashington came from PPB, Ms Garrett and Mr Renauf, and was presented to the superannuation fund investors as a requirement of any new investors.

19. [1552]

    The plaintiff also points out that the provision to Investec of a shortfall guarantee (as recommended by PPB in its Second Report dated 21 August 2009) was not accepted by superannuation fund investors; and that (while the alternative proposal put forward on 27 August 2009 by Ashington which involved a deferral of any asset sales and a short-term injection of additional capital subject to a principal guarantee from Ashington) was not adopted, it was actively considered by PPB and the superannuation fund investors (with PPB expressing the view that it may be worthwhile but required additional and better quality collateral). It is said that that proposal would have involved Ashington continuing to progress the Stonington development, at least up until October 2009.

20. [1553]

    The plaintiff says that the principal concern of Mr Thow of LUCRF was to restore value to LUCRF investments in the Ashington funds; and that, in evaluating various options, LUCRF was heavily dependent upon PPB for independent advice. It is noted that Mr Hartley of Sunsuper accepted that he was open to consider whatever recommendations PPB made, whatever that implied in respect of the future involvement of Ashington; and that it was his expectation that any potential refinance option would be considered by PPB and, if thought viable, be put to investors whether or not it involved a change in management. The plaintiff says that an email from Mr Routley to Mr Sheehan on 13 October 2009 also supports the view that the superannuation fund investors’ main priority was dealing with the Investec default, rather than replacing Ashington.

21. [1554]

    By the end of October 2009, investors were also considering whether there was any value in continuing their engagement of PPB given the fees that they were incurring in doing so, and the risk that their investment in ADF and ADF2 may be worthless. In circumstances where the superannuation fund investors were contemplating writing off their investments entirely, the plaintiff says that it is implausible that they would not have considered proposals which offered a chance to recover some capital even if it involved retaining Ashington as trustee and manager.

22. [1555]

    The plaintiff also points to the difficulty in removing Ashington as trustee and manager of ADF and ADF2 as an additional factor weighing against the possibility that the superannuation fund investors would in any event have moved to do so. It is noted that Mr Hartley considered that removal of a trustee and manager would be complex, would take time, and that it would not be a simple exercise to find a replacement entity. Mr Hartley accepted that it would be necessary to find someone with the necessary standing and skills in both funds management and property development, with capacity and willingness to take over the Ashington projects which included partially completed developments, for the remaining fees available. Mr Hartley agreed that this would not be likely to be easy to identify. The plaintiff says that it would also be necessary to find someone willing to pick up existing relationships with the planners, architects, builders and designers engaged in each project.

23. [1556]

    The plaintiff says that this evidence is supported by the evidence of Mr Wist. The plaintiff submits that, on the counterfactual, with the Stonington Capital Raising successful, Ashington and the funds recapitalised, and with Ms Garrett and Mr Renauf as the new face of Ashington (with, if necessary, Mr Anderson having stepped aside from any role in funds management), and the absence of any rival proposal, that the superannuation fund investors would have continued to work with Ashington because that was the only way they could fulfil their duty to their own investors to maximise the equity of their investment.

24. [1557]

    The plaintiff says that the decision that the superannuation fund investors took to replace Ashington in late November 2009 must be understood in the context of urgency presented to them by PPB, and the incomplete and inaccurate picture provided by PPB as to the Parissen and Wingate Proposals.

25. [1558]

    As to the issue of urgency, it is noted that PPB’s Third Report referred to a clear and imminent risk of a further deterioration in the solvency position of both ADF and ADF2 as a consequence of potentially capricious behaviour of the manager (i.e. the signing of the Wingate Proposal).

26. [1559]

    The plaintiff points to Mr Hartley’s outline of evidence to the effect that his lack of interest in considering any proposal in which Ashington and Mr Anderson was involved (not referred to in his Mapeline affidavit) arose as a result of the matters concerning Mr Anderson’s conduct in relation to the Wingate deal as reported by PPB on 25 November 2009. The plaintiff notes that Mr Fowler gave evidence that oral updates were also provided to the Board as to the deteriorating relationship with Ashington during 2009 but the plaintiff points out that Mr Fowler does not recall meeting or speaking to the directors on the Board Executive in relation to the 27 November 2009 note, and would not necessarily have done so. The plaintiff submits that, in circumstances where Mr Fowler’s report to the board meeting immediately prior to the 27 November 2009 note (the report dated 29 October 2009) stated that positive developments had occurred at Ashington, it is improbable that any other reasons were advanced to the Board Executive in taking its decision to approve the removal of Ashington than those in the 27 November 2009 note.

27. [1560]

    As to the complaint made about the Third PPB Report, the plaintiff says that PPB failed to make clear that the Parissen deal involved the abandonment of the superannuation fund investors’ existing equity investments in ADF2 (totalling $94 million) and that this failure was replicated in a summary presented to the LUCRF Investment Committee on 2 December 2009. It is noted that the contents of PPB’s email of 25 November 2009 were communicated almost verbatim to the LUCRF Investment Committee in an Investment Oversight Report dated 27 November 2009.

28. [1561]

    The plaintiff notes that at various points PPB was considering an equity interest in the new manager, managing ADF assets itself, and forming a “joint venture” with Parissen. The plaintiff says that this interest was never disclosed to the superannuation fund investors. It is noted that Mr Hartley accepted that this was a matter that should have been brought to his attention and might have affected his willingness to treat PPB as an independent (rather than an interested) adviser; that Mr Fowler similarly would have expected to have been informed if PPB had an interest in the transaction other than as advisor to the superannuation fund investors; and that Mr McCusker had no recollection of being aware that PPB had in mind that it would have a role for itself in the recapitalisation and new management.

29. [1562]

    While I accept that the contemporaneous documents do not record that a decision to replace the Ashington entities had been made by the end of September 2009, there is no doubt that there was serious dissatisfaction on the part of superannuation fund investors by the end of August/early September 2009; and it is not insignificant that the superannuation fund investors had determined not to meet capital calls. I accept that the 2 December 2009 email certainly places Mr Gavin’s contemporaneous recollection of when he lost confidence in Ashington at a much earlier date than that for which the plaintiff now contends; and that the evidence of other superannuation fund investors similarly places their loss of trust and confidence earlier than the time of the impugned conduct.

30. [1563]

    That said, the conclusion that superannuation fund investors lost confidence in Ashington earlier that September/December 2009 does not lead to the conclusion that they had, at that earlier time, decided to replace Ashington entities as trustee/manager.

Perceived breaches of trust

1. [1564]

   As noted above, in the course of submissions as to loss of trust and confidence on the part of superannuation fund investors, various breaches of trust were identified as having been committed by Ashington Capital. This conduct is said to have contributed to the decision of superannuation fund investors to remove the Ashington entities. The plaintiff points out that such allegations are not pleaded. However, Ms Garrett and Mr Renauf cavil with the need to do so, referring to their denial that the Consortium was the cause of the plaintiff’s retirement, and pointing to Patersons’ defence at [64]. It is not necessary in my opinion to make any finding as to these alleged breaches of trust because the issue is not – with one qualification – so much an issue as to whether the conduct identified amounted to a breach of trust but, rather, as to whether there was a perception by the superannuation fund investors that there may have been or even that this was conduct contributing to the loss of trust and confidence in Ashington. The qualification I make is that the defendants rely on certain of this conduct as precluding reliance on the trustee’s right of indemnity (as I explain below).

2. [1565]

   The relevant duties said to have been breached are, variously, the proscriptive fiduciary obligations owed by Ashington Capital to its beneficiaries: first, the obligation to refrain from acting in circumstances where there is an actual conflict or a real or substantial possibility of conflict between duty and personal interests (the no-conflict rule); second, the obligation not to obtain or receive any benefit or gain for itself or another person by reason of its fiduciary position (the no-profit rule).

3. [1566]

   Reference is also made to the obligation of a trustee at general law to perform its duties and exercise its powers in the best interests of the members of the fund (those interests usually being equated with their financial interests). It is noted that this requires that a trustee make decisions with an adequate process to ensure that the decision is appropriate having regard to the financial interests of members. Ms Garrett and Mr Renauf submit that adequate processes must include, at a minimum, the processes promised to investors by Ashington in the Information Memoranda.

4. [1567]

   Finally reference is made to the duty of the trustee to exercise the same care and diligence as an ordinary prudent person of business would take in conducting the trust business as if it were the trustee’s own, including the duty to seek advice on matters which the trustee does not understand, and on receiving that advice to act with the same degree of care (pointing out that this requirement is not discharged merely by showing that the trustee acted in good faith and with sincerity). Ms Garrett and Mr Renauf further submit that a higher standard of care is to be exacted from a corporate or professional trustee which both holds itself out as having a special or particular knowledge, skill and experience, and which also, directly or indirectly, invites reliance upon itself by members of the public by virtue of that knowledge, skill and appearance.

5. [1568]

   It is noted that breach of the best interests and care duties is a breach of trust (citing, by way of example, Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR 41-864; [2002] NSWCA 29 (Gatsios Holdings) at [14]-[15] per Spigelman CJ) and that, to the extent that any of these breaches is outside the relevant power, done in bad faith, or exercised with an absence of the care and diligence that a person of ordinary prudence should exercise, the trustee would not be entitled to an indemnity from the trust assets (citing Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 (Nolan v Collie) at [53] per Ormiston JA (with whom Batt and Vincent JJA agreed)).

6. [1569]

   Turning then to the breaches of trust said by Ms Garrett and Mr Renauf to have occurred, they are as follows: first, Ashington Capital’s use of funds from the December 2008 capital raising for purposes other than the purpose that was promised in the subscription documents; second, the failure by Ashington Capital to quarantine costs and assets within each sub-trust (particularly in respect of the decision to execute the Investec Stonington Facility); third, the entry by Ashington Capital into undocumented “loans” to ADF and Ashington Group duty of Ashington Capital, as trustee of ADF2 (by December 2008, an undocumented loan by Ashington Capital of $1.8 million to Ashington Group and by 30 June 2009, an undocumented loan of $2.268 million to ADF) which it is submitted may be inferred were not on arms’ length terms; fourth, failure by Ashington Capital and Ashington Group to contribute capital in cash for the subscription price for units; fifth, the double pledge of uncalled equity in relation to the 2008 Double Bay capital call; sixth, the giving by Mr Anderson of a personal guarantee in connection with the Hamton Vendor Finance; and, seventh, the making of personal payments as “bonuses” at a time when it is said Mr Anderson knew there was no entitlement to the funds.

7. [1570]

   It is said that most of the above breaches amounted to a fundamental breach of trust, causing superannuation fund investors concern and causing them to remove Ashington Capital as trustee. It is said that this is a further reason to find that Ashington Capital was insolvent from June 2009, and that Ashington Capital was not a going concern.

8. [1571]

   Reference is also made in this context to disclosure breaches; breaches of accounting and audit obligations; and the breaches of finance facilities.

9. [1572]

   I do not propose to consider in detail the identified breaches (for the reason that what seems to me to be significant is the perception of breach rather than whether there would be liability for the contended breach). I simply note as follows.

10. [1573]

    As to the first, it is submitted that Sch 1, cl (b) of the Written Resolution of Members dated 22 December 2008, as incorporated into the Applications for Units dated 24 December 2008 and 4 February 2009, provided that the capital raising of $3.75 million in December 2008 and $6.25 million in January 2009 only be used to meet bank covenants on the Double Bay Project. Clause (b) of Sch 1 states that Ashington Capital “expects to use the Additional Commitment [i.e., the capital raising of up to $20 million] to meet existing and expected bank finance covenants on Fund projects (or other Fund costs) imposed as a result of a tougher lending environment” and that in particular, Ashington Capital “intends to use the Additional Commitment to meet bank finance covenants on the Double Bay project”. (I interpose to note that cl (b) clearly envisioned the use of the capital raising for projects other than Double Bay and that the aspirational language of “expects” and “intends” does not itself evince an intention to require use of the funds only for Double Bay.) By contrast, cll 1.1 and 1.2 of the HESTA Side Letter dated 21 January 2009 provided that Ashington Capital “will use the Additional Capital to meet the existing bank finance covenant, as specified in the Security Trust and Intercreditor Deed…for the project located at 33 Cross Street, Double Bay” and that it “will not reallocate any of the Additional Capital that is not required under the covenant”.

11. [1574]

    Ashington Capital in fact used the funds for purposes other than the meeting of bank covenants, in at least the following ways (Ex 8): on 18 February 2009 paying Hamton $218,496.91; paying Investec at least $162,706.85 in March 2009 and $180,139.73 on 27 April 2009 (i.e., the Stonington financer); contributing equity to Stonington of $6.2 million on 25 February 2009 and then continuing to make further material contributions to Stonington throughout 2009; on 13 March 2009 paying fees of $270,416 to Ashington Capital; and paying ADF the sum of $155,000 (possibly for its contribution to Double Bay). Most of the money was thus spent on Stonington rather than Double Bay and material amounts of money were used to pay fees and to support ADF.

12. [1575]

    It is noted that Mr Anderson ultimately acknowledged to superannuation fund investors that the capital had not been applied exclusively to the Double Bay Project (see chronology of events above). Ms Garrett and Mr Renauf say that the explanation given in re-examination by Mr Anderson (that payments to the Stonington sub-trust were actually re-payments of amounts that had been “borrowed” from Stonington) should be rejected as a lie. It is said that, aside from the fact that the explanation is unsupported by contemporaneous documents (such as loan ledgers, management accounts or loan documents), it would be an admission of a further breach of the obligation to quarantine assets. It is said that if Stonington was “lending” its equity to other sub-trusts, that would involve a failure to quarantine the assets and liabilities of each of the sub-trusts (this being an example of the second kind of breach identified). It is noted that, given the lack of contemporaneous documents, that “lending” would also be undocumented, and it should be inferred that it would not be on arms’ length terms. It is also noted that in the Mapeline proceeding (commenced in 2013), the plaintiff alleged that superannuation fund investors removed Ashington Capital as trustee because of this very breach, referred to as a “technical non-compliance in the allocation of [the] funds”.

13. [1576]

    As to the second, reference is made to the Information Memorandum for ADF2, which stated that “all revenue and costs associated with an acquisition, development and sale within an SPV will be quarantined to that SPV”.

14. [1577]

    The plaintiff cavils with this description as an obligation as such. In any event, it is clear that Ashington Capital acted contrary to this obligation (or representation) by executing the Investec Stonington Facility on 11 December 2008 on terms that provided for the debt of $10 million to be held at the head trust level rather than to be quarantined within the Stonington sub-trust. Not only did the facility include a charge given at the head trust level, it included a power of attorney that gave Investec the ability to call on the uncalled capital that was held at the head trust. I accept that the Investec Stonington Facility involved both debt and security at the head trust level.

15. [1578]

    Ms Garrett and Mr Renauf say that the gravity of the breach was compounded by Mr Anderson’s conduct in attempting to cover the breach up rather than frankly disclosing it to investors. It is submitted that it should be found that Mr Anderson’s evidence in relation to the breach displayed contempt for the investors and beneficiaries. Reference is made to the fact that: Mr Steel advised Mr Anderson not to proceed with the Stonington transaction because it was better to lose the deposit than put the entire fund in jeopardy by breaching the Double Bay Facility (Ex 17 at 173); both Ashington and Mr Anderson knew from at least November or December 2009 that some form of head trust debt or security would be required (referring to the disclosure by Ashington of Investec’s proposed terms to Hamton); that Ashington, and Mr Anderson, received specific advice from Mallesons about this by 31 May 2009, including the advice that Ashington Capital should disclose this to the superannuation fund investors.

16. [1579]

    Ms Garrett and Mr Renauf accuse Mr Anderson of falsely claiming in his affidavit that he did not know that there were a number of breaches of trust at either the head trust or sub-trust levels (Mr Anderson’s 9 December 2019 affidavit at [86]). Ms Garrett and Mr Renauf note that in cross-examination, Mr Anderson accepted that he was aware of “potential breaches of trust” but, when asked whether he understood from the advice that there was a breach of trust, said that “I still today don’t know what a breach of trust is, but I know that we certainly made what we believed was the very correct decision to protect investors’ capital at that time” and that “I don’t believe there was necessarily a view formed [in the Malleson’s advice] that there was a breach of trust” (T 465.17-24; T 473.1-10). Ms Garrett and Mr Renauf say that this evidence indicates Anderson’s persistent untruthfulness and his defiance of the obvious, even when contained in contemporaneous documents.

17. [1580]

    Ms Garrett and Mr Renauf also contend that Mr Anderson continued to obfuscate this issue by representing to the superannuation fund investors in the quarterly report that it had not been possible to obtain their consent to the issue because the changes were demanded by Investec at the last minute. Ms Garrett and Mr Renauf say that this was untrue because: it was Ashington, not Investec, who had proposed the head trust borrowing some time in November 2008; Ashington had known about the issue for months, as it was negotiating for additional equity; at the same time that Ashington was admitting the breach to investors and promising reform in its practices, it was proposing further breaches by offering up similar security to Investec in respect of the Wylde Street Facility (although I note that in support of this proposition Ms Garrett and Mr Renauf refer to an email of Mr Steel to Ms Briggs seeking advice on how to provide such a guarantee under the Information Memorandum or Trustee deed/constitution); and Ashington had also tried to pledge this equity to Hamton to avoid giving a personal guarantee.

18. [1581]

    As to the third, Ms Garrett and Mr Renauf say that the excess contributions were made by ADF2 to meet obligations to the Project X Hotel Trust, due to “ADF1’s cash constraints”. They note that on 30 September 2008, the inter-trust loan (but not the loan to Ashington Group) was disclosed to the Ashington Board in a Compliance Report. It is said that Mr Steel and Mr Anderson attempted to remove the loan by reallocating the equity stakes in Double Bay (which they say would itself have involved a breach of trust, namely erasing ADF’s equity interest in Double Bay without investor consent). Ms Garrett and Mr Renauf point to Mr Steel’s statement to the effect if those payments were treated as a loan, it likely gave Investec rights against ADF under Investec’s fixed and floating charge over ADF2.

19. [1582]

    In respect of the “loan” to Ashington Group, it is noted that Mr Anderson’s evidence is that he had no idea at the time that the money was transferred out of the trust accounts (T 431.1). However, Mr Anderson said that he did know about the loan’s repayment (which Ms Garrett and Mr Renauf say is both incredible and illogical) (T 433.4-15; T 430.25). It is said that Mr Anderson sought to place the blame on his “lazy” accountants (T 430.40-46; T 432.35-41). Ms Garrett and Mr Renauf say that this evidence should be rejected as a lie (and that it was a lie to cover up his obvious self-dealing at the expense of beneficiaries). It is submitted that, given the general liquidity failures of the Ashington Group, the reasonable inference to draw is that the funds were withdrawn from the trust for Ashington Group’s benefit so that Ashington Group could continue as a going concern.

20. [1583]

    Insofar as Mr Anderson’s evidence was that investors would have to be “really stupid” not to see that was happening, because “blind Freddy” could see it (T 423.40-44), it is said that this should be rejected; that it should be found that superannuation fund investors were not aware of the extent of Mr Anderson’s misconduct because Mr Anderson did not tell investors about the breach. Ms Garrett and Mr Renauf say that investors certainly did not give fully informed consent to the breach (and that Ashington itself had not worked out how to document or resolve these issues). It is noted that Mallesons gave advice about the conflicts created by the inter-trust loans as early as July 2009 (Ex 17 at 142), noting that the process set up to manage conflicts was unable properly to resolve the issue, because the conflicts committee for each fund had overlapping memberships.

21. [1584]

    As to the fourth, it is noted that each of Ashington Capital and Ashington Group was under an obligation to contribute capital in cash for the subscription price in units. It is said that Ashington Capital breached these obligations by failing to contribute cash in answer to various calls ($0.825 million in answer to the fourth call on 11 June 2008; $0.6 million in answer to the fifth call on 10 July 2008; $1.125 million in answer to the sixth call on 19 September 2008; $0.375 million in answer to the seventh call on 20 October 2008; $0.375 million in answer to the eighth call for capital on 3 November 2008; $0.3 million in answer to the ninth call on 1 December 2008; and $0.3 million in answer to the tenth call on 5 February 2009); and that Ashington Capital also breached these obligations by failing to require Ashington Group to contribute cash in answer to the relevant calls ($0.275 million in answer to the sixth call on 19 September 2008; $0.2 million in answer to the seventh call on 20 October 2008; $0.375 million in answer to the eighth call on 3 November 2008; $0.1 million in answer to the ninth call on 1 December 2008; and $0.1 million in answer to the tenth call on 5 February 2009).

22. [1585]

    Ms Garrett and Mr Renauf say that Ashington Capital and Mr Anderson understood that the superannuation fund investors required this equity commitment to demonstrate an alignment of interest; and that the failure to contribute was an express breach of the terms of the additional equity raising. It is noted that the superannuation fund investors relied on this breach in the Mapeline proceeding as part of their defence.

23. [1586]

    Insofar as Mr Anderson asserted that the calls were satisfied by a set-off (T 263.47) authorised in 2007 by three separate conversations, Ms Garrett and Mr Renauf contend that this is absurd and plainly false. Ms Garrett and Mr Renauf say that the evidence about these conversations is inconsistent with at least the following: (a) the email from Mr Anderson to Mr Dennis Mothoneos of SCM stating that “Ashington’s co-investment is in cash as was the case with ADF No. 1” (Ex 12); (b) the ADF and ADF2 constitutions (cll 6.2, 7.3(b), 7.5); (c) Mr Anderson’s affidavit evidence that Ashington Group and Ashington Capital invested in ADF2 on the “same” basis as the superannuation funds (his 19 December 2017 affidavit at [95]); (d) the matter not being mentioned in any of Mr Anderson’s earlier affidavits or in any contemporaneous email; and (e) Mr Halligan not being provided with an assumption about these matters.

24. [1587]

    Ms Garrett and Mr Renauf say that the document relied on by Mr Anderson relies on amounts for a set-off that: did not involve the same parties; included “invoices” for amounts said to be owing months or years after the capital call; and includes invoices for development management fees in 2010 despite Ashington Management and Ashington Capital retiring. It is noted that Mr Anderson’s evidence about this is that he gave the instructions about the offsetting arrangements after the fact (see T 279.26-29). It is noted that Mr Steel made no mention of this supposed instruction when he admitted to KordaMentha at the time that the contributions had not been met and noted that the amounts may not be recoverable. Ms Garrett and Mr Renauf point to Mr Anderson’s acceptance in cross-examination that “without further explanation” it “may appear absurd” that he had thought it was appropriate to meet a call in 2008 with an offset from a year later using money owed to another company (T 323.17-20). Ms Garrett and Mr Renauf say that in this respect Mr Anderson was correct; that the position is absurd. It is noted that Mr Anderson also accepted that there was no suggestion by Mr Steel in that correspondence that there was any set-off arrangement with institutional investors (T 278.45).

25. [1588]

    It is submitted that the failure of Ashington Capital and Ashington Group to contribute almost $4 million was likely a material contributing factor to the solvency issues in ADF2, and the inability of Ashington Capital and Ashington Group to satisfy their financial liabilities; and that these breaches compound the unlikelihood of AOF3 ever being established. It is said that, given that Ashington supposedly intended to use future fees to meet the calls that had already been made, it is difficult to see where the funds would come from to meet the $5 million contribution that it was proposing to make to AOF3.

26. [1589]

    It is said that this is a further reason to find that Ashington Capital and Ashington Group were insolvent from June 2009, and a further reason to find that Ashington Capital and Ashington Group were not a going concern. It is submitted that the solvency of these entities should be assessed on the basis that the obligation to meet these calls was a debt that was owing and that had not been paid.

27. [1590]

    As to the fifth perceived breach (double pledging of the uncalled equity), reference is made to Ms Briggs’ representation on 12 January 2009 to Mr Gavin that “Ashington would not promise equity two or three times, nor will investors need to be replenishing the Double Bay undertaking” and Ms Briggs’ evidence that with important emails such as this the usual practice was that the text of the email would have been dictated to her or checked by Mr Anderson prior to her sending it (T 803.35-40). It is noted that, less than a month later, Mr Anderson had agreed to “double pledge” the uncalled capital which was meant to be security for the St George/NAB Double Bay Facility ($15 million) as security for the Investec Stonington Facility ($10 million); and that, since only $20 million had been raised, the money was double pledged from the beginning and the situation then worsened as Mr Anderson continued to draw on the capital and use it for various purposes.

28. [1591]

    Ms Garrett and Mr Renauf point out that this was not drawn to the attention of investors until 3 July 2009, when Mr Anderson provided a schedule of debt for ADF2. Reference is made to Mr Steel’s communications on 10 July 2009 and 20 August 2009 as to the requirement to notify the banks when Ashington Capital became aware of a potential default, and his view that the Double Bay Facility was most likely was in default.

29. [1592]

    Reference is made to the Mallesons advice as to this issue (that the uncalled capital pledge was a breach of the Information Memorandum) and advising full and frank disclosure of this issue to the superannuation fund investors; and to Ms Briggs’ advice that the drawdown notice issued in August 2009 was a possible breach of various directors’ duties, including the good faith and reasonable care obligations and the duty to avoid insolvent trading (Ex 17 at 159).

30. [1593]

    As to the sixth identified breach, the allegation is that the personal guarantee of $2.5 million to secure the Hamton Vendor Finance (that was required to be repaid by 31 August 2009) gave rise to a personal conflict between Mr Anderson’s interests and the interests of the superannuation fund investors in the negotiation of the refinance. It is noted that Hamton began recovery proceedings against Ashington Capital in or around September 2009, joining Mr Anderson as a defendant to that proceeding; and that, by the time of the Stonington Capital Raising, Hamton was taking steps to strike out Mr Anderson’s defence. Ms Garrett and Mr Renauf say that Mr Anderson therefore had a material personal interest in the Stonington refinance and that this conflict was not reported to the superannuation fund investors until June 2009 and appears never to have been considered by Ashington’s corporate governance committee (whose role included the management of conflicts).

31. [1594]

    Ms Garrett and Mr Renauf say that superannuation fund investors were understandably concerned that Mr Anderson’s actions at this time (particularly in pressing the Wingate Proposal) were focussed on his personal desire to avoid bankruptcy (referring to the 27 November 2009 internal HESTA memorandum – see above). However, Mr Anderson denied that the personal guarantee made the Hamton litigation the “biggest risk” from his perspective, stating that “the debt issue and repayment was a bigger issue for Ashington than my personal guarantee” (T 478-479).

32. [1595]

    It is submitted that it should be inferred that Mr Anderson knew that this was a material conflict that should have been disclosed at the earliest opportunity; and that Mr Anderson did not follow the proper procedure for addressing conflicts. It is said that this was clearly a matter about which, according to the terms of the Information Memorandum, the conflicts committee ought to have made a decision, and then referred the issue to investors for approval. As such, it is submitted that any suggestion by the plaintiff that the Wingate Proposal did not require investor approval would be rejected.

33. [1596]

    The seventh alleged breach (which is not given as much emphasis as the first six) relates to various payments made from 7 October 2008 by Ashington Management to Josloe (a company controlled by Mr Anderson). The ledger recorded those payments under the heading “bonus payable”, in an account that remained in debit. It is said that Mr Anderson knew that he had no entitlement to the funds because Mr Steel had reminded him in the months before that the directors had agreed not to take bonuses. Ms Garrett and Mr Renauf say that, even though these are small amounts, they demonstrate on Mr Anderson’s part a willingness to treat the company’s funds as his own. It is said that, while these were not trust funds, the manner in which funds were “borrowed” from the trust to fund the Ashington Group suggests that Ashington Management’s capacity to make these payments to Mr Anderson was in part funded by trust proceeds. It is said that Mr Anderson’s statements about these matters should be treated with scepticism.

34. [1597]

    As to the disclosure obligation breaches (i.e., its obligation to provide superannuation fund investors with quarterly reports informing them of acquisitions, project delivery and financial status, marketing and sales of each project, and distributions), these arise by failing to disclose significant matters to the superannuation fund investors, including that: the Investec Stonington Facility had been executed on 11 December 2008 on terms that provided for security to be given at the head trust level rather than to be quarantined within the Stonington sub-trust; Ashington had agreed to pay a $20 million fee to Valad in connection with the Noosa Project; and that various loans had been made to ADF and Ashington Group which were undocumented, on terms that were not arm’s length, and likely unrecoverable.

35. [1598]

    Reference is made to the statement by Mr Steel to Mr Anderson on 25 June 2009 (Ex17 at 87) that “[w]e are continually knocked for selective disclosure ... and we continually ignore this criticism by being selective in our disclosure”. Ms Garrett and Mr Renauf say that members of Ashington staff were aware from at least July 2009 that there was a “high risk” that Ashington would default in making the payment to Valad (Ex 33 at 528-331). Reference is made to the 3 October 2009 email from Mr Steel to Ms Garrett as to this issue and to KordaMentha’s report of 23 November 2009 which identified the $20 million fee to Valad and stated that “whilst the fee payable may be capitalised, it is likely that impairment testing will be required resulting in further write downs”.

36. [1599]

    It is said that Ashington Capital was also in breach of its accounting and audit obligations. It is noted that Ashington Capital was required to distribute audited financial statements of ADF2 within 120 days of the 30 June balance date. Audited financial statements for the 2008 year were not issued to investors by 31 October 2008. An Ashington Board Meeting paper dated 16 December 2008 stated that, “[i]t is expected that audited financial statements will be issued to investors during the week ended 12 December 2008”.

37. [1600]

    Ms Garrett and Mr Renauf say that the reason for the failure to provide accounts appears to have stemmed from significant audit concerns raised by the auditors, pointing to the 30 October 2009 email (see chronology above) from Ashington Capital’s auditor to Mr Steel, attaching a draft letter to ASIC setting out RSM Bird Cameron’s view that Ashington was in financial difficulty; and the revised letter prepared on 10 November. Reference is also made to Mr Steel’s 12 November 2009 explanation for the audit delay (as to which see the chronology above).

38. [1601]

    Finally, reference is made to the alleged breaches by Ashington of all of its material finance facilities (as summarised in Annexure A to their closing submissions). Ms Garrett and Mr Renauf say that Mr Anderson’s evidence (to the effect that the banks would never enforce against Ashington) should be rejected as implausible. Ms Garrett and Mr Renauf point out that the contemporary notes prepared by Westpac, one of the financiers of Ashington, make clear that in 2009 there were a number of parties who could “collapse this group” and that unless the directors were able to raise more equity in the short term, Ashington would run out of working capital and likely be forced into voluntary administration.

39. [1602]

    For its part, PPB pleads a breach of trust in its defence as follows:

40. [1603]

    PPB relies on this for the argument that Ashington Capital cannot raise, for the purpose of the counterfactual analysis, the prospect of a successful Stonington Capital Raising or execution of the Wingate Proposal, because these proposals would have involved breaches of trust on the part of Ashington Capital (for the reasons that I set out in due course in considering the causation issue).

41. [1604]

    The plaintiff says that although Mr Anderson was criticised for the entry into the Investec Stonington Facility, no defendant put to him that there was some other better course that he should have adopted. It is said that this is critical to any allegation of wrongdoing. Complaint is made that much of the cross-examination of Mr Anderson on this issue alleged wrongdoing or breach of obligation without properly identifying the source of the obligation that was breached or the nature of the wrongdoing. Further, it is said that Mallesons did not advise Mr Anderson that that conduct was in breach of trust. The plaintiff accepts that entry into the Investec Stonington Facility was inconsistent with the intention expressed in the ADF2 Information Memorandum. However, it is said that that fact alone does not make it a breach of trust (a matter said to be explicitly acknowledged by the Information Memorandum). Indeed, it is said that, if there was no better option for investors (other than breaching the Stonington contract, losing the deposit, and making the fund liable for damages), then it might well have been a breach of Ashington Capital’s duties as trustee not to accept the terms offered by Investec.

42. [1605]

    (Pausing here, that gives rise to an interesting debate as to what a trustee ought to do if faced with the dilemma here postulated – one might well think that this would be a situation where judicial advice might be sought or, if that not be an appropriate case because it would involve determination of contested issues as to rights of beneficiaries or the like, that a prudent trustee might seek absolution in advance for a proposed breach of trust (see generally, Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42). Here, to the extent that there was any concern that breach of the Information Memorandum might be a breach of trust – and I understand the distinction being here drawn between failure to honour a representation made in an Information Memorandum, which may or may not ultimately be a breach of trust; and failure to act in accordance with express obligations under the trust deed – the only conclusion I would here make is that Mr Anderson appears to have been prepared to take the risk of committing a breach of trust (albeit that it is said that this was in order to avoid a greater loss to the beneficiaries), which would still be relevant to the issue as to the loss of trust and confidence on the part of the superannuation fund investors.)

43. [1606]

    Second, it is said that there is no merit to the suggestion advanced in cross-examination that Mr Anderson should have consulted with the superannuation fund investors before entering into the Investec Stonington Facility. It is said that nothing in the trust documents suggests that this was required, or appropriate; and that no witness for the superannuation fund investors suggested that they expected to be consulted as the transaction occurred, or that they would have made any other decision in the circumstances. Pausing here, whether or not there was any legal obligation to consult with the superannuation fund investors at that time, it is relevant to note that after disclosure in relation to the non-compliance with the Information Memorandum and at a time when the position in relation to refinancing seems to have been of no little urgency, the superannuation fund investors clearly sought through their lawyers to be consulted before decisions were made in relation to the refinancing and Mr Anderson did not do so before signing the Wingate Proposal.

44. [1607]

    Third, the plaintiff says that there is no merit to the suggestion that Mr Anderson sought to deceive the superannuation fund investors about the fact that the Investec Stonington Facility was borrowed at the head trust level. It is said that that suggestion was made on the basis of the fact that the email of 19 June 2009 did not attach the Investec Stonington Facility. However, it is noted that Mr Hartley accepted that reading the documents provided by Mr Anderson on 19 June 2009 revealed to him that the facility had been entered into at the head trust level. The plaintiff maintains that the fact that the borrowing had been undertaken at the head trust level was readily apparent from documents included in that pack identifying Ashington Capital as trustee for ADF2 as the borrower, including the company guarantee warranty and security documentation. (Pausing here, whether concerns of the superannuation fund investors or their asset consultants were well-founded in this regard does not seem to me to be to the point. The fact is that superannuation fund investors clearly had a perception at that time as to a breach of trust or the like. Indeed, Mr Gavin went so far as to suggest there might be fraud, which must surely be relevant to the issue as to their lack of trust and confidence in Ashington and Mr Anderson; that being relevant at the very least when assessing the counterfactual propounded by the plaintiff.)

45. [1608]

    Fourth, it is said that the fact that Mr Anderson had given a personal guarantee to support the vendor finance was not, of itself, a matter of particular concern to investors (referring to Mr McCusker’s evidence). That may or may not have been the case. It did, however, give rise to at least a potential conflict of interest on Mr Anderson’s part which he does not appear to have recognised at the time.

46. [1609]

    I consider these issues, so far as relevant, in considering the submissions on causation in due course.

Solvency issues

1. [1610]

   The various defendants raised issues as to the solvency of the Ashington companies, the trusts and the sub-trusts (an issue to which, as noted above, there was some expert evidence).

2. [1611]

   Broadly, it is submitted that, in the second half of 2009, and more particularly as at 30 September 2009, both Ashington Capital and Ashington Management, as well as most of the trusts and sub-trusts, were unable to pay all of their debts as and when they fell due (for reasons that had nothing to do with the conduct or activities of the defendants). It is said that the plaintiff’s submissions that the Ashington business was a going concern if the Stonington Capital Raising had completed must be considered in this light.

3. [1612]

   Albany does not plead that the Ashington companies or trusts were insolvent. Rather, Albany pleads (at [64(gg)]) that “the Ashington companies and the assets over which they had control were illiquid, under significant distress and of questionable value as at mid-late 2009”.

4. [1613]

   In that regard, Albany points to the distinction observed by Mr Hall (T 1295.1-33) between insolvency in accordance with the statutory definition and incapacity to fund business operations (the latter being in the defendants’ submission more significant in the present case). Further, Albany says that the distinction between solvency of the trusts/sub-trusts and solvency of the Ashington companies is of importance.

5. [1614]

   It is said that Ashington Capital and Ashington Management had suffered long-standing solvency issues; noting that it appears that as far back as 2007 Ashington entities had stopped paying superannuation; that, from at least 30 June 2007, the consolidated Ashington Group had increasing statutory taxation and payroll liabilities which increased from $721,825 in 2007 to in excess of $3 million by 30 June 2009; and that from at least 15 March 2007 (if not a year earlier) Ashington had a reputation from of not paying creditors within payment terms (Ex 17 at 12-13).

6. [1615]

   Mr Anderson in his oral evidence accepted that: the Ashington companies, and the ADF funds in particular, were “slow paying” everyone in their whole business (T 939.40); and, as at 1 July 2009, the Ashington companies were experiencing “cash flow challenges” (T 326.5-12), ADF was having financial “challenges” and the debt equity position of the funds was a “looming issue” (T 327.1-34).

7. [1616]

   Reference is made to the emails on 12 January 2009 and in March 2009, referring to cashflow difficulties, to the demands for payment and the winding up applications that were made (see chronology above), including the commencement of proceedings in late September 2009 by Savi Communications (in respect of a debt ultimately paid by a third party), which it is said, Ashington appears to have had no intention or ability to repay.

8. [1617]

   Reference is also made to Mr Steel’s 22 July 2009 email and to Mr Marsden’s communication on 26 August 2009 (as to the position) and the response to this; as well as the recognition in the First PPB Report dated 14 August 2009 that a critical flaw in the structure of the fund was that Ashington Capital as head trustee could be wound up if any of the debts was enforced. It is noted that the sub-trust structure was a source of fundamental risk because even an unsecured creditor had the power to collapse the whole fund. It is said that any submission by the plaintiff that this issue had resolved itself should be rejected; as resolution required Ashington Capital’s replacement as trustee and the introduction of separate trustees for each of the projects.

9. [1618]

   As to the position of the financiers, on 19 August 2009, Investec demanded immediate repayment of the debt under its $10 million mezzanine facility, also making demand on the guarantors; and by 9 September 2009, Investec was considering the appointment of receivers. (Albany emphasises that the Investec Stonington Facility had expired almost a month before Ashington took steps to source alternative finance in mid-September 2009.) This debt is significant in that it affected the solvency of the head trusts, not just the Stonington sub-trust; and Albany emphasises that there is no suggestion that Investec ever extended the due date or otherwise gave time to pay, notwithstanding that it did not immediately take steps to enforce its rights. Accordingly, Albany submits that those trusts were and remained insolvent after 19 August 2009, notwithstanding any hope or expectation that replacement funding might be obtained or that assets might be sold.

10. [1619]

    The Hamton Vendor Finance (of around $2 million), which had already been extended, was due and payable on 25 August 2009, together with penalty interest. Neither the Stonington sub-trust nor ADF2 had capacity to repay immediately that debt. In September 2009, Hamton commenced proceedings to recover that debt; judgment was entered in its favour on 7 December 2009. Thus, it had remained due and payable without any form of extension from 25 August 2009.

11. [1620]

    The Westpac Stonington Facility of $23 million expired on 26 August 2009 and Westpac reserved its rights in respect of that default. Again, Albany notes that there is no evidence of extension of due date or agreement to give time to pay. Accordingly, it is submitted that neither the Stonington sub-trust nor ADF2 had the capacity immediately to repay $23 million at any time after 26 August 2009; and that the sub-trust was and remained insolvent after that date.

12. [1621]

    On 30 September 2009, the NAB/St George senior debt facility on the Double Bay development of $6 million was not repaid; thus the facility went into default. None of the Project X Hotel sub-trust, ADF or ADF2 had the capacity to pay that amount on 30 September 2009. On 2, 6 and 9 October 2009, notices of default were issued and NAB/St George subsequently appointed KordaMentha and prepared a receivership plan. Accordingly, Albany notes that the debt remained due and payable without any form of extension from 30 September 2009.

13. [1622]

    The creditor summaries for Ashington entities and the various trusts at 30 September 2009 disclose creditors of: (a) $939,690.27 for the Project X Hotel Trust, of which over 70% were aged over 60 days; (b) $1,269,327.23 for the Stonington Trust, of which over 90% were aged over 60 days, and over 70% were aged over 90 days; (c) $522,295.10 for the 10 Wylde Street Trust, of which over 90% were aged over 60 days.

14. [1623]

    By 7 October 2009, Mr Dedes had sent an email referring to insolvency rumours. On 8 October 2009, there was communication within Ashington as to staff costs and on 12 October 2009 there was a meeting in which there was reference to a running schedule of creditors and ongoing difficulties in October 2009. (Reference is also made to the November communications from Mr Steel (see chronology of events) as to the account basically being frozen.)

15. [1624]

    Mr Anderson accepted that: by 16 October 2009, over $900,000 of creditors had been unpaid for over 90 days in the Stonington Trust (T 685.32); by early November 2009, head office expenses were not being paid, even in respect of very small amounts (T 686.6); as at 4 November 2009, ADF and ADF2 were “facing a number of financial challenges” (T 478.5); by 10 November 2009, “to some extent”, creditors of Ashington in relation to Double Bay “couldn’t be paid as and when their debts fell due … [but] as and when funds could be available”, including in relation to “quite small amounts, some of which had been outstanding since May 2009” (T 686.25-687.13); and by 23 November 2009, the Ashington Group’s financial difficulties, financier defaults and growing list of ageing unsecured creditors “needed resolution and a way forward” (T 547.7-19). Mr Anderson also accepted that, throughout the course of 2009, Mr Steel had expressed increasing concerns about the financial position and liquidity of the funds (although Mr Anderson did not accept those concerns were necessarily warranted) (T 548.15).

16. [1625]

    Meanwhile, on 31 October 2009, the Investec senior debt facility for the Wylde Street development ($10.78 million) expired and a demand for repayment of that debt was issued on 3 November 2009.

17. [1626]

    On the question of insolvency, the defendants point to: first, the lack of audited accounts for Ashington Capital, Ashington Management or the trusts for the 2009 financial year (pointing to the draft letter prepared by Ashington’s external auditors, RSM Bird Cameron, on 29 October 2009 to ASIC); second, (consistent with the auditors’ views at the time) the evidence that Ashington Capital did not have any means to pay several of its financiers or to continue to operate several of the projects held in the sub-trusts; and, third, that Ashington Management was also in financial difficulties and could not pay its debts when they fell due.

18. [1627]

    As to the first, it is noted that none of the matters referred to by RSM Bird Cameron (the impact of the economic conditions experienced by the sector which had the dual effect on both sales generated and property valuations; difficulties in obtaining finance and funding; the recent unsuccessful development application for the Double Bay Property) had anything to do with the activities of the defendants the subject of these proceeding; and pointing out that Mr Steel had forwarded the draft letter to Mr Anderson (and Ms Briggs) commenting that “this may be something that Investors would be interested in”. It is noted that in a separate email on 10 November 2009 to Ms Briggs, Mr Steel had stated that he could not and would not certify that Ashington Capital was able to pay all of its debts as and when they are due as all of Ashington Capital’s cash on hand was committed to supporting the St George “MOF” (multi option facility) for all Ashington Group entities. Patersons says that while there is no evidence that the auditor’s draft letter was ever shared with the superannuation fund investors; Mr Anderson did share it with Mallesons.

19. [1628]

    By 12 November 2009, Mallesons notified Mr Anderson of Ashington Capital’s ongoing obligations to notify ASIC of various circumstances as they arose in relation to its financial services business, including becoming aware of a significant breach of its licence conditions or general licensee obligations under ss 912A and 912B of the Corporations Act. Mallesons also advised Ashington Capital and its directors of the legal implications of trading while insolvent.

20. [1629]

    It is noted that on 12 November 2009, PPB enquired of Mr Steel as to the status of the audited accounts and that Mr Steel reported that the accounts had certain “disclosure/compliance issues” upon which Ashington was seeking RSM Bird Cameron’s and Mallesons’ advice (as detailed in the chronology).

21. [1630]

    As to the second, reference is made to the financiers’ demands referred to above. As to the third, the defendants emphasise this (i.e., Ashington Management’s financial situation) in circumstances where the plaintiff claims that Ashington Capital and Ashington Management lost the chance to retain the property management business and receive future income including development management fees.

22. [1631]

    As to the prospect of Ashington securing replacement funding, Albany says that the evidence shows: first, that the terms on which funding was sought were “very attractive” and looked “too good to be true” (indicating, it is said, that this was not an attractive investment and that a significant “sweetener” was required to gain any interest in the proposal); second, per cl 3.2(c) of the Patersons Mandate, that Patersons provided no assurance in relation to the capital raising and there is no evidence that Patersons ever received or provided to Ashington any offers on the terms proposed; third, the fact that investors such as Apex Capital and the Victor Smorgon Group may have been prepared to provide mezzanine funding for the Stonington Project if Ashington was removed and replaced by Acorn and Albany says nothing about the terms, if any, on which they would have been prepared to deal with Anderson and Ashington in late 2009; and, fourth, that the only proposal that Ashington actually received to refinance Stonington was the Wingate Proposal (see Mr Anderson’s own contemporaneous report to investors which refers to the “absence of any other offer”) and, for the reasons explained in PPB’s submissions, Albany says the terms of the Wingate Proposal could not be met (see below).

23. [1632]

    The defendants contend that the solvency of Ashington Management is of much greater significance to the issue of the loss of a chance to continue and develop a business, as that case is now put by the plaintiff (T 1505.18), because, if Ashington Management was, on the probabilities, insolvent in 2009 and, on the probabilities, likely to remain insolvent, even without the removal of Ashington Capital as trustee and Ashington Management as project manager, then that is an important factor relevant to the “‘going concern” issue and the business valuation issue. Albany says that the solvency of Ashington Management is intertwined with the capacity of the sub-trusts to pay management fees and thus with the solvency of the sub-trusts, but it is nevertheless relevant to consider the solvency of Ashington Management itself during the second half of 2009.

24. [1633]

    It is noted that neither Mr Gothard nor Mr Melluish addressed the position of Ashington Management, saying that there was insufficient information available to do so at the time they prepared their respective reports, including the joint report. However, Albany submits that there is sufficient evidence available in the proceeding to establish on the balance of probabilities that Ashington Management was unable to pay its own debts as and when they fell due from at least June 2009 (referring, for example, to the creditor summaries detailed above; an “outstanding creditors” table of 9 November 2009 emailed from Ms Briggs to Mr Anderson; Mr Steel’s 12 November 2009 response as to the delay of the audited accounts; Mr Steel’s email of 10 November 2009 as to the order in which creditors are to be paid – see the chronology; KordaMentha’s report dated 23 November 2009). It is said that these financial difficulties, particularly in respect of the payment of creditors, were clearly being experienced across the whole of the Ashington Group.

25. [1634]

    Albany says, significantly, that the profit and loss statement for the financial year ending 30 June 2009 showed a significant loss (of $478,394.91); that the balance sheet as at 30 June 2009 showed a significant deficiency of assets compared to liabilities; that there were substantial liabilities for unpaid taxes and superannuation; that small debts were outstanding for many months; and that the only source of income was from the sub-trusts, including Stonington and Double Bay (T 687.7).

26. [1635]

    The management accounts for August 2009 forecast cash flow losses for most months in 2009 in circumstances that the largest expense category was salaries payable by Ashington Management and the management fees from the sub-trusts were insufficient to meet those expenses. It is noted that there is no evidence of any inclination by directors or shareholders of Ashington Management in 2009 to fund its debts or of their capacity to do so. Mr Anderson confirmed that directors did not in fact inject any capital (T 687.5-15).

27. [1636]

    Albany says that there is evidence that not only were the debts of the sub-trusts being paid by reference to threats of enforcement rather than as and when they fell due but the same applied to Ashington Management. Albany says that, notwithstanding Mr Halligan’s suggestion that this situation may simply be indicative of poor bookkeeping rather than insolvency (T 1292.29), the contemporaneous documents do not support that possibility. Albany submits that, based on the contemporaneous material which is available, the probabilities are that Ashington Management was not in fact paying its debts as and when they fell due from at least June 2009, and that the compelling inference is that that was because it could not do so. I agree.

28. [1637]

    Further, Albany notes that, as Ashington Management’s income in 2009 depended upon the capacity of the sub-trusts, particularly Stonington and Project X Double Bay, to pay management fees (T 687.7; T 1130.40-50), the prospect of Ashington Management ceasing to be insolvent before it was wound up on a creditor’s petition depended upon those sub-trusts continuing to pay management fees. It is noted that this in turn depended upon the Stonington sub-trust obtaining funding of at least $15 million and on the Double Bay sub-trust obtaining funding of at least $6 million. Albany says both were improbable.

29. [1638]

    Thus, Albany says that the probabilities are that, even without any decision by the investors to remove Ashington Management as project manager for the sub-trusts and even without any improper conduct by any of the defendants, Ashington Management would have been wound up in insolvency, if not by late 2009 then in 2010.

30. [1639]

    Further, to the extent that it makes a material difference to the question of the value of the Ashington Management business as at either 30 June 2009 or 30 September 2009, it is said that Ashington Management was insolvent at both those dates and during the period between them, not merely in financial distress.

31. [1640]

    Patersons emphasises in this context that: there are business records in evidence which suggest that Ashington Management was unable to pay its own debts as and when they fell due, prior to 30 September 2009; Mr Anderson made certain admissions about the financial difficulties being experienced by not just the funds and sub-trusts but also Ashington generally, including in respect of the growing list of creditors over the second half of 2009; and Ms Briggs also admitted that part of her role was managing creditors, which included creditors of Ashington Management, in particular those who had commenced legal action in the second half of 2009. It is noted that Ms Briggs also acknowledged that by October 2009, staff cuts had to be made to Ashington Management having regard to the impact of the refusal of the development application for the Double Bay Property.

32. [1641]

    It is noted that, even after 30 September 2009, amongst the superannuation fund investors there was the view that “Craig Anderson is still delusional and still thinks this is a plan to keep his fund (and his business) going” (see Mr Gavin’s email on 16 October 2009 at 1.02pm to Mr Fowler and Mr Hastings). Acorn points out that Mr Anderson was still in control of Ashington at all relevant times; and says that the view expressed in this email demonstrates the attitude of the superannuation fund investors towards Ashington with Mr Anderson at the helm.

33. [1642]

    I accept that, on the balance of probabilities, both Ashington Capital and Ashington Management, as well as most of the trusts and sub-trusts, were unable to pay all of their debts as and when they fell due during at least the second half of the 2009 calendar year. I consider that by 30 September 2009 they were insolvent or bordering on insolvent and clearly not a going concern. Of particular significance is not only the inability to pay the debts but also for the auditors to finalise audited accounts and the lack of a source of repayment.

Attribution of knowledge and vicarious liability issues

1. [1643]

   Next I address issues which arose as to attribution of knowledge and vicarious liability (relevant to the claims made against Patersons), bearing in mind that, as observed, by Gleeson JA in Optus Administration Pty Ltd v Wright (2017) 94 NSWLR 229; [2017] NSWCA 21 at [280]:

2. [1644]

   It is significant, in both contexts, whether the relevant knowledge or acts/omissions occurred within the scope of the employee’s employment.

3. [1645]

   Those involved within Patersons in various aspects of the relevant events are three of its employees at the relevant time: Mr Shorrocks, Mr Doherty and Mr Carolan. It is not suggested that Mr Shorrocks had any personal knowledge of the impugned conduct on the part of Ms Garrett and Mr Renauf. Rather, the issue arises as to the knowledge and acts/omissions of Mr Carolan (who was Patersons’ contact in respect of the Patersons Mandate) and, to a lesser degree, Mr Doherty.

4. [1646]

   As to the principles applicable to the attribution of knowledge to a corporation, Patersons points to common law principles, including the principle of agency. Patersons notes that the knowledge of an agent is presumed to be that of the principal in circumstances where: the knowledge was acquired within the agent’s actual or apparent authority (including in the course of a transaction in which the agent was engaged on the principal’s behalf); the agent is under a duty to communicate the knowledge to the principal (noting that in many instances agents are under a general duty to communicate to their principal all material information they possess that pertains to the agency relationship); and the agent is not acting in total fraud of the principal. As to the latter, Patersons places weight on the principle applied in the United Kingdom that the law will not attribute the fraud or other unlawful conduct of the director to the company when it is itself the intended victim of that conduct.

5. [1647]

   Reference is made to the primary rules for attribution of knowledge, concerning identification of the “directing mind and will” of the corporation as stated by Reid LJ in Tesco Supermarkets Ltd v Nattrass [1972] AC 153; [1971] 2 AII ER 127 (Tesco) at 170. The distinction drawn in Tesco at 170 was as between a person who acts or speaks as the embodiment of the company and someone who is merely the company’s servant or agent; as to the latter case, it was said that any liability of the company can only be a statutory or vicarious liability.

6. [1648]

   Patersons says that the knowledge of the directing mind of a company will generally not be attributed to a company where the controlling mind was acting outside the scope of his or her authority and only for his or her own personal benefit (or presumably also the benefit of some related third party). The plaintiff says that the argument that conduct not intended to benefit a principal is outside the scope of an agent’s authority was rejected in Lloyd v Grace, Smith & Co [1912] AC 716; [1911-13] AII ER Rep 51 (Lloyd v Grace) at 735-738 per Macnaughten LJ, noting that Brennan J observed in National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251; [1986] HCA 21 (National Commercial Banking v Batty) at 276 that Lloyd v Grace established “that a principal is liable for the torts of an agent committed in the course of the business the agent is authorised to transact whether or not the tort is for the benefit of the principal”.

7. [1649]

   It is noted that where there may be more than one directing mind and will of a company it is necessary to consider the role and experience of an employee whose belief, opinion or state of mind is said to be attributable to the company (i.e., to specify some person or persons “so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company” – Brambles Holdings v Carey (1976) 15 SASR 270 (Brambles) at 279 per Bray CJ; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 (Krakowski) at 582-3 per Brennan CJ, Deane, Gaudron and McHugh JJ). Closeness or connection may be measured by reference to the relevant decision-making process and/or functional unit of the company. Knowledge of directors and senior management will usually be attributed to the company as a result of the application of principles of agency (Tesco at 171 per Reid LJ).

8. [1650]

   As to the question of aggregation of knowledge (relevant where knowledge of particular facts is distributed among a number of individuals such that no single person possesses all information necessary to establish a requisite element of a cause of action), Patersons notes that in Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421; [2016] FCAFC 186 (Kojic), Edelman J (sitting in the Federal Court as his Honour then was) suggested (at [94]) that there was little historical support for a concept of aggregation of knowledge and (at [101]) that there was “scant support in England and Australia for a doctrine which permits attribution to a corporation of an aggregate of the knowledge of various different agents” (see also at [80] per Besanko J; and [67] per Allsop CJ)).

9. [1651]

   Patersons argues that there is particular reluctance to make findings of dishonesty based on the application of attribution and aggregation rules in circumstances where no single person held a dishonest state of mind (citing Armstrong v Strain [1951] 1 TLR 856 at 872 per Devlin J albeit the reference there being to an aggregation of knowledge where there are two innocent states of mind (upheld in Armstrong v Strain [1952] 1 KB 232; [1952] 1 AII ER 139 (Armstrong)); and Frank Hammond Pty Ltd v Huddart Parker Ltd [1956] VLR 496 at 499-500, where Duffy J applied Armstrong).

10. [1652]

    Reference is also made by Patersons in this context to: the observation of Moore J in Elliott v Nanda (2001) 111 FCR 240; [2001] FCA 418 at [170], to the effect that “a corporation does not act fraudulently where several of its employees (involved in a corporation’s conduct) possess discrete pieces of information (by itself innocent information) which, if known to one employee, would evidence fraud”; Port Stephens Shire Council v Tellamist Pty Ltd (2004) 135 LGERA 98; [2004] NSWCA 353, where Ipp JA, in the context of an exemplary damages claim, doubted (at [408]) that the requisite mental element could be established by “a theory of collective knowledge”; Australian Competition and Consumer Commission v Radio Rentals Ltd (2005) 146 FCR 292; [2005] FCA 1133 at [176]-[183] per Finn J; and to Bilta (UK) Ltd (in liq) v Natwest Markets plc [2020] EWHC 546 (Ch); [2020] AII ER (D) 82 (Mar) (Bilta (UK) v Natwest), where, in the context of the attribution of knowledge of several employees for the purposes of a claim for knowing assistance, Snowden J observed (at [223]) that the Court should “not, of course, suggest that the separate states of knowledge of [the relevant employees] can be combined in any way for this purpose”.

11. [1653]

    In the present case, Patersons submits that there is no room for attributing the requisite knowledge to Patersons based on the primary rules of attribution for knowledge.

12. [1654]

    Patersons accepts that, as head of the corporate finance division, Mr Shorrocks arguably had the necessary seniority within Patersons to constitute the mind of Patersons (at least for the purposes of its capital raising activities) but it says (and I agree – see below) that Mr Shorrocks’ state of mind is one without any knowledge of the facts and circumstances here alleged to constitute the dishonest and fraudulent design by the alleged defaulting fiduciaries.

13. [1655]

    As to Mr Carolan and Mr Doherty, Patersons submits that in their appropriate areas, both were far removed from the embodiment of the company.

14. [1656]

    As to Mr Doherty, it is noted that he was not in charge of institutional dealing at Patersons and he did not occupy a position of high-level seniority within the organisation. Instead, it is said that Mr Doherty was a “relatively senior employee” on the institutional sales desk of Patersons (a trader with a book of clients and contacts). Similarly, it is noted that Mr Carolan reported to Mr Shorrocks (who in turn reported to Mr Aaron Constantine, Patersons’ Executive Director and Head of Corporate Finance) and it is said that Mr Carolan was evidently several layers below senior management within the corporate finance division. Patersons submits that, within their appropriate spheres, both Mr Doherty and Mr Carolan were a long way from an embodiment of the company.

15. [1657]

    The plaintiff refers to Mr Shorrocks’ evidence in cross-examination to the effect that Patersons’ role was to market the Stonington Capital Raising, to assist with investor due diligence and assist with financial close (with Mr Carolan principally responsible within Patersons for undertaking those tasks). It is said that, having placed Mr Carolan in that position, Patersons is answerable for the manner in which Mr Carolan has conducted himself in doing the business which it was the act of Patersons to place him in, even if it had not authorised any particular act or omission.

16. [1658]

    Patersons accepts that, as a general principle if a person is granted with authority to act on behalf of a company, by a directing organ of the company representing the directing mind and will, in relation to a transaction (or similar transactions), that person may, along with others, form part of the directing mind and will of the company for the transaction. Thus, it accepts delegation to a person as the directing mind and will of the company for the purpose of performing a particular function or “transaction” in question, without necessarily being its directing mind and will for other purposes. Patersons says that it is a question of fact whether Mr Shorrocks (who signed the Patersons Mandate on behalf of Patersons) and Mr Carolan (an “Associate Director” working under Mr Shorrocks) were both clothed with the necessary grant of authority to act on behalf of the corporate finance department of Patersons for the Patersons Mandate because of their identification as contact persons in the term sheet. However, Patersons emphasises that the corollary of the delegation principle is that it is only the delegated person’s acts and knowledge within the grant of authority to act on behalf of the company for the particular transaction that are directly attributed to the company and Patersons emphasises that Mr Carolan’s knowledge was inextricably bound up with knowledge substantially acquired from personal communications with his wife (which it says was outside of any authority given to him with respect to the Patersons Mandate and also his contract of employment).

17. [1659]

    As noted above, Mr Carolan was married to Ms Garrett. Patersons admits that Mr Carolan had the knowledge of Ms Garrett by reason of their personal relationship (a proposition that seems surprisingly broadly stated but, as I understand it, is meant to be limited to Ms Garrett’s knowledge of the relevant transactions relating to the Stonington refinancing and her employment with Ashington). However, Patersons says that Mr Carolan acquired that knowledge outside the scope of his employment, and his actual or apparent authority under the Patersons Mandate. Moreover, it is said that the acts and omissions of Mr Carolan which are alleged by the plaintiff to establish Patersons’ wrongdoing, were also acts and omissions outside the scope of Carolan’s employment with Patersons and his authority under the Patersons Mandate. Accordingly, it is submitted that Patersons is not liable for Mr Carolan’s conduct. Patersons emphasises the need for the plaintiff to satisfy on the Briginshaw standard, the level of knowledge required to sustain the serious allegations made against Patersons.

18. [1660]

    Further, Patersons says that the principle of attribution of knowledge has no application where the actions of the employee are in total fraud of the interests of the company and the company is itself a victim of the actions of the errant fiduciary and the participating employee. Patersons says that this is an apt description of the present situation, emphasising that the alleged actions of Ms Garrett and Mr Carolan, on the plaintiff’s case, operated to deprive Patersons of the prospect of a substantial fee for its capital raising activities under the Patersons Mandate.

19. [1661]

    Patersons says that, in the knowing assistance context, special and more difficult considerations arise when seeking to impute a corporation with the knowledge of its employees (referring to Royal Brunei Airlines v Tan [1995] 2 AC 378; [1995] 3 AII ER 97 and to the dissenting judgment of Van Rensburg JA in DBDC Spadina Ltd v Walton [2018] O.J. No. 578; [2018] ONCA 60 (DBDC v Walton), which reasoning was unanimously adopted on appeal by the Supreme Court of Canada – Christine DeJong Medicine Professional Corp v DBDC Spadina Ltd [2019] 2 SCR 530; [2019] SCC 30). It is noted that Rensburg JA held that: the director’s breaches of fiduciary duties were to both the applicants and the respondents (the alleged participants) (at [214]); and that equity ought not to allow a knowing assistance claim in these exceptional circumstances, where one group was defrauded and a claim is made against another group that was defrauded in a similar manner (at [248]); the knowledge of the directing mind of a company will not be attributed to a company where the controlling mind was acting totally in fraud of the company or only for their own benefit (at [232] to [237]); whilst knowing assistance does not require a defendant to have received a benefit, the issue of benefit was relevant to attribution because the very entities sought to be made liable for knowing assistance were themselves victims of the errant fiduciary’s fraud (at [234] and [246]); and, where a company is sued for knowing assistance, the plaintiff must demonstrate through evidence that the corporation committed specific acts that helped the errant fiduciary; and that being “used” by the errant fiduciary is not sufficient to find the company liable (at [221]-[231], [246]).

20. [1662]

    Patersons argues that, had it (through Mr Shorrocks) become aware of the alleged conduct by Ms Garrett, it could have brought a claim itself against Ashington under the Patersons Mandate. It is said that, in its dealings with Patersons (including Mr Shorrocks), Ashington had clothed Ms Garrett with actual and ostensible authority to further the Patersons Mandate for the mutual benefit of both parties; and that, by her actions, Ms Garrett caused Ashington to act in breach of the Patersons Mandate by failing to do all things necessary to advance it. Thus, it is said that, on the plaintiff’s case, the actions of Ms Garrett and Mr Carolan were contrary to the interests of both Ashington and Patersons; and resulted in Ashington itself breaching the Patersons Mandate. It is said that on such a characterisation of the situation the plaintiff itself would be driven to emphasise that Ms Garrett herself was off on a “frolic of her own”.

21. [1663]

    The plaintiff says in response that any argument that knowledge may not be attributed to a corporation from an agent acting contrary to its interests is inconsistent with developments since Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500; [1995] 3 AII ER 918 (Meridian) (citing Hurd v Zomojo Pty Ltd [2015] FCAFC 148 at [168] per Beach J). It is noted that the central proposition advanced by Hoffmann LJ in Meridian, that “an attribution rule for a particular purpose” must be “tailored … to the terms and policies of the substantive rule” of liability at hand, has been readily accepted by intermediate appellate courts in Australia (citing Director of Public Prosecutions (Reference No 1 of 1996) [1998] 3 VR 352 at 354-355 per Callaway JA (with whom Phillips CJ and Tadgell JA agreed); Director General, Department of Education and Training v MT (2006) 67 NSWLR 237; [2006] NSWCA 270 at [16]ff per Spigelman CJ (with whom Ipp JA and Hunt AJA agreed); North Sydney Council v Roman (2007) 69 NSWLR 240; [2007] NSWCA 27 at [28] per McColl JA; Hallmark Construction Pty Ltd v Harford (2020) 294 IR 359; [2020] NSWCA 41 at [73] per Basten JA (with whom Meagher JA and Emmett AJA agreed)). It is said that, on that approach, the recognition that a dishonest agent cannot assert attribution to his or her corporate principal in defending a claim by that principal, on grounds of policy, does not imply that the employer is also immune from the agent’s knowledge in a claim by a third party. It is said that so much has been recognised by the Hong Kong Court of Final Appeal (in Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue (2014) 17 HKCFAR 218; [2014] HKCU 608 at [80] per Lord Walker of Gestingthorpe NPJ (with whom Ma CJ, Ribeiro PJ and Bokhary NPJ agreed), and twice by the Supreme Court of the United Kingdom, in decisions cited without disapproval by the Victorian Court of Appeal (see Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1; [2015] UKSC 23 (Bilta (UK) v Nazir) at [85]-[86] per Lord Sumption JSC, [208] per Lord Toulson and Lord Hodge JJSC; Singularis Holdings Ltd (in liq) v Daiwa Capital Markets Ltd [2020] AC 1189 at [30] per Baroness Hale of Richmond PSC (with whom Lord Reed DPSC, Lord Lloyd-Jones, Lord Sales JJSC and Lord Thomas of Cwmgiedd agreed); Australia Kunquian International Energy Co Pty Ltd v Flash Lighting Co Ltd [2020] VSCA 239 at [149]-[150] per Kyrou, Niall and Hargrave JJA).) It is thus submitted that knowledge acquired by Mr Carolan is attributable to Patersons regardless of whether his actions were for the benefit of the company.

22. [1664]

    Patersons accepts that authorities such as Meridian provide for a flexible approach to the attribution of knowledge as each case will largely turn on its own facts and the particular statutory or general law setting (Meridian itself being an example of this). Similarly, Patersons says that references to partnership cases such as Polkinghorne v Holland (1934) 51 CLR 143; [1934] HCA 28 and National Commercial Banking v Batty concern the attribution of conduct in a very different legal context.

23. [1665]

    The plaintiff further says that Patersons has also failed to advance evidence that establishes the pursuit of the plan was totally contrary to its interests. (Pausing here, Patersons responds that there is no substance to this submission. Apart from the fact that it is obvious from the structure of the Patersons Mandate, Patersons says it is not disputed that it received no fee under the Patersons Mandate from the ultimate transaction and that Mr Shorrocks’ evidence confirms as much.)

24. [1666]

    As to Mr Shorrocks’ statement in cross-examination to the effect that the institutional dealing side of Patersons would generally earn a fee for effecting transactions on behalf of institutional clients with whom Patersons had relationships. The plaintiff says it should be inferred that Mr Doherty perceived that a benefit to his relationship with Mr Routley (from which Patersons would generate fees) arose by introducing Mr Routley to a transaction which accorded with Mr Routley’s expressed preference to “invest in the manager”. (Apart from the complaint that this allegation forms no part of the plaintiff’s case as pleaded or particularised, Patersons says that the plaintiff has also mischaracterised the effect of Mr Shorrocks’ evidence as to the fee earned by the institutional dealing side of Patersons. It is said that that was not some free-standing fee separate from the fee earned under the Patersons Mandate; rather, it was a reference to the portion of Patersons’ fee under the Patersons Mandate that the institutional dealing side would receive. Patersons says that, since no fee was received at all under the Patersons’ Mandate, Mr Doherty and the institutional dealing arm received no fee. Patersons notes that there is no evidence for the suggestion of some other amorphous benefit Mr Doherty derived in furthering his “relationship” with Mr Routley; nor was any such suggestion put to him by the liquidator (who Patersons notes retains a 10% interest in the plaintiff’s claims) in his liquidator examination.)

25. [1667]

    It is further said that even if Mr Carolan’s intentions precluded attribution of his knowledge to Patersons, it would not preclude vicarious liability founded upon Mr Carolan’s wrongdoing (as to which see below).

26. [1668]

    In supplementary submissions as to the issue of attribution of knowledge, Patersons referred to Bilta (UK) v Nazir, which addressed the question of attribution of unlawful acts of a director of a company where the company is the victim of the unlawful act. Patersons urges caution in considering the decision of the Supreme Court of the United Kingdom in Bilta (UK) v Nazir (since its full effect on Australian law has not been comprehensively considered by an intermediate Australian appellate court or the High Court).

27. [1669]

    Patersons notes that Bilta (UK) v Nazir was principally concerned with “primary rules of attribution”, to use Hoffman LJ’s terminology in Meridian, as to when the knowledge and acts of a company’s agents (usually its directors and senior management) will be directly attributed to the company (the issue in that decision being the application of the illegality defence). It is noted that the issue of primary attribution arises in these proceedings because Patersons contends (see its closing submissions at [156]) that neither the knowledge nor acts of Mr Carolan or Mr Doherty is directly attributable to Patersons based on ordinary principles.

28. [1670]

    Patersons refers to the decisions of Neuberger LJ at [7]-[9]; Mance LJ at [35]-[50]; Toulson and Hodge LJJ at [180]-[208], to the effect that consideration must be given to the nature and factual context of the claim in question; context including the factual and statutory background, and also the nature of the proceedings in which the question of attribution arises.

29. [1671]

    As to the plaintiff’s reference to various statements of Sumption LJ ([81]-[89]) in Bilta (UK) v Nazir as supporting a very restrictive operation of the so-called “fraud exception” or “breach of duty exception” to the primary rules of attribution, Patersons argues that the thrust of the plaintiff’s submission is that the exception is essentially confined to the “paradigm case” of a claim by the company against its directors where the directors seek to impute their fraud or dishonesty back to the company so as to defeat the claim; noting that a distinction was also drawn by the plaintiff with “third parties” suing a company.

30. [1672]

    Patersons accepts that it is generally true that, where the purpose of attribution is to apportion responsibility as between a company and its agents, it might give rise to a different outcome to when the purpose is to apportion responsibility between the company and a third party. However, Patersons point to the following matters in relation to this submission.

31. [1673]

    First, it notes that the exception is not confined to the paradigm case suggested by the plaintiff (referring to the observations of Toulson and Hodge LJJ in Bilta (UK) v Nazir (at [181]) to the effect that the fraud exception is the classic example of non-attribution but not the only exception to the otherwise general rule that attribution occurs (their Lordships expressing the view that the fraud exception “is not confined to fraud but is simply an instance of a wider principle that whether an act or a state of mind is to be attributed to a company depends upon the context in which the question arises”). Patersons points out that the decision from which the exception is often traced (In re Hampshire Land Company [1896] 2 Ch 743) was not an instance of the paradigm case.

32. [1674]

    Patersons also refers to von Doussa J’s exposition of the exception in Beach Petroleum NL v Johnson (1993) 43 FCR 1 (Beach Petroleum) at 31-32, where the limitation on the exception identified was where the director’s activities were partly for the benefit of the company. Patersons notes that in the present case Mr Carolan’s activities were not partly for the benefit Patersons and says that there has been no suggestion otherwise. Further, it is noted that (as noted in Bilta (UK) v Nazir), the exception has been deployed in situations where the issue is the legal effect of relations between the company and a third party.

33. [1675]

    In that regard, Patersons emphasises its submission that attribution does not apply where the party seeking to rely on attribution (the plaintiff), as against the other party to the transaction (Patersons), was itself engaged in the very fraud and deception about which it complains. Patersons says that the joint conduct of Ms Garrett and Mr Carolan was clearly conduct between a husband and wife (and not their respective employers) and to the mutual detriment of both Ashington and Patersons; and submits that this is also a relevant consideration in assessing whether vicarious liability should be imposed).

34. [1676]

    Generally, the state of mind of an individual who, on the facts, acts as the directing mind and will of a company, will be imputed to the company. It is broadly accepted (and does not appear to be in dispute between Patersons and the plaintiff) that individuals who may constitute the directing mind and will of a company are more likely to hold senior roles as directors and officers of the company, although this is ultimately a question of fact. However, an individual may also represent the directing mind and will of a company with respect to a particular transaction, if that individual has been granted authority to act on behalf of the company in relation to that transaction (see Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 225 FLR 1; [2008] WASC 239 at [6143]-[6144] per Owen J). Patersons does not cavil with this proposition.

35. [1677]

    A company will not be imputed with the knowledge of the relevant individual unless that individual was acting with the scope of his or her actual or apparent authority (Beach Petroleum). Further, the company will not be imputed with the knowledge of the agent if that knowledge is obtained by the individual otherwise than in its capacity as agent, unless the agent was under a duty to communicate the information to the company and the company under a duty to investigate it (Halsbury’s Laws of Australia at [120-3045]; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 (Farah Constructions) at [127] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ). Further to that point, knowledge that is acquired privately by the agent or in a previous transaction is not necessarily imputed to the principal (El Ajou v Dollar Land Holdings Plc [1993] 3 AII ER 717 at 741 per Millett J). The agent’s knowledge will be imputed to the company regardless of whether the agent acted for the benefit of the company (Lloyd v Grace; Beach Petroleum).

36. [1678]

    The issue of aggregation of knowledge was not raised by the plaintiff, but it was addressed in some detail by Patersons. The authorities diverge on whether the knowledge of a number of agents to a transaction can be aggregated to ascertain the company’s state of mind. This debate turns on an interpretation of the High Court’s reasons in Krakowski; and in particular, the statement (at 583) that “a division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them”.

37. [1679]

    In Westpac Banking Corporation v Bell Group (in liq) (No 3) (2012) 44 WAR 1; [2012] WASCA 157 (Bell Group), Drummond AJA (with whom Lee J agreed on this point at [1100]) interpreted Krakowski as a case “in which knowledge held by separate employees and agents of a company was aggregated to enable a finding that the company had a fraudulent state of mind not held by any individual employee”; and understood the High Court to have justified this approach because the various officers, employees and external agents “had responsibility to act for the company in different aspects of the one transaction” (see at [2183]-[2184]).

38. [1680]

    Edelman J, then sitting in the Full Court of the Federal Court, took the view in Kojic (at [149]) that the Bell Group decision on this point was plainly wrong for multiple reasons, including that (contrary to the understanding in Bell Group), the High Court did not aggregate the knowledge of the three relevant agents in Krakowski; rather, the High Court considered that the lack of fraudulent knowledge on the part of the agent that made the false representation did no dispose of the matter, as two other agents of the impugned company possessed the relevant knowledge that amounted to fraudulent intention (at [125]). Allsop CJ agreed with Edelman J on this point (see at [31], [62], [65]); as did Besanko J (at [78]). I do not propose to detail the extent of the Full Court of the Federal Court’s reasons; however, I note that I respectfully consider the reasons of the Full Court of the Federal Court persuasive in relation to this issue. Regardless, while this point was argued by Patersons, I note that the plaintiff has not made submissions on aggregation of the knowledge of the Patersons employees and it does not appear to form part of the plaintiff’s argument or their particulars of knowledge (Ex L).

39. [1681]

    As to the so-called “exception” to attribution, the ordinary rule of attribution does not apply where the person whose knowledge is sought to be attributed to the company acted totally in fraud of the company with respect to the transaction, or as a whole; and not partly for the company’s benefit (Beach Petroleum). As stated by von Doussa J in Beach Petroleum, “[i]f the director is guilty of fraudulent conduct which is not totally in fraud of the corporation, and by design or result the fraud partly benefits the company, the knowledge of the director in the transaction will be attributed to the company”. In Bilta (UK) v Nazir, Neuberger LJ (with whom Clarke and Carnwath LJJ agreed), stated (at [9]) that this rule “is certainly not limited to cases of fraud”, and considered that:

40. [1682]

    (See also the judgment of Toulson and Hodge LJJ at [181].)

41. [1683]

    As adverted to above, I find that Mr Shorrocks’ knowledge, as head of the corporate finance division of Patersons, was attributable to Patersons. Mr Doherty’s knowledge is not attributable to Patersons on an application of the primary rules of attribution. Even within the transaction, Mr Doherty’s level of involvement and decision-making were below that of a “directing mind and will”. As to Mr Carolan, I accept that, to the extent that he was subject of at least an informal delegation by Mr Shorrocks of responsibility under the Patersons Mandate his knowledge may be attributed to Patersons. However, I have concluded that the relevant knowledge (of Ms Garrett’s so-called plan) was acquired outside the scope of his employment, and hence is not properly to be attributed to Patersons. I reiterate that I do not consider that the knowledge of Mr Shorrocks, Mr Doherty and Mr Carolan can be aggregated so as to construct a state of mind held by Patersons.

42. [1684]

    In those circumstances it is not strictly necessary to consider the ambit of the “fraud” exception to the principles of attribution of knowledge to a corporate entity. I consider that there is force to the submission of the plaintiff that the fraud exception is more applicable where the attribution of knowledge is being raised in circumstances where the claim is for fraud against the employer, but I accept that that is not the only circumstance in which it would be inappropriate to attribute knowledge to the company. The concerns raised by Patersons in that context might more appropriately be dealt with in moulding the equitable relief to suit the particular circumstances. Nevertheless, had it been necessary to consider the exception, I would have found that, as Mr Carolan’s actions were clearly in fraud of Patersons, and its interests and obligations under the Patersons Mandate, and Patersons did not benefit from those actions (and indeed lost the potential to receive a fee had the mandated capital raising been successful), Mr Carolan’s knowledge should not be imputed to Patersons.

43. [1685]

    As an alternative argument, the plaintiff contends that Patersons is vicariously liable for Mr Carolan’s and/or Mr Doherty’s conduct. Patersons says that the application of the doctrine of vicarious liability to equitable liability remains uncertain. Patersons points out this question arises only if it is concluded that the knowledge and acts of Mr Carolan and Mr Doherty are not attributable to Patersons under the primary rules of attribution.

44. [1686]

    It is noted that vicarious liability is founded, broadly, on the premise that an employer is liable for the wrongdoing of an employee where that wrongdoing is done in the course of the employee’s employment (citing Deatons Pty Ltd v Flew (1949) 79 CLR 370; [1949] HCA 60 at 381 per Dixon J, as his Honour then was).

45. [1687]

    Reference is also made to New South Wales v Lepore (2003) 212 CLR 511; [2003] HCA 4 (NSW v Lepore) (at [40]; [51]), where Gleeson CJ noted the distinction between unauthorised acts which are within, and those that are outside, the course of the employment; and referred (at [42]) to Sir John William Salmond’s Salmond on Torts (9th ed, 1936, London: Sweet & Maxwell) (Salmond), where it is said that “an employer is liable even for unauthorised acts if they are so connected with authorised acts that they may be regarded as modes – although improper modes – of doing them, but the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it, but is an independent act”. Patersons notes the limitation on the test, as articulated in Salmond, as noted in Lloyd v Grace at [733] and NSW v Lepore at [228], that even where the fraudulent employee acts for its own benefit and not the benefit of the employer, the employer may be liable for “the particular act” performed without authority where it has placed the employee in a position “to do that class of acts” giving rise to the liability.

46. [1688]

    It is noted that in NSW v Lepore (at [231]), Gummow and Hayne JJ identified two elements indicative of vicarious liability: first, that vicarious liability may exist if the wrongful act is done in intended pursuit of the employer’s interests or in intended performance of the contract of employment (which Patersons says would not cover the conduct of Mr Carolan in this case); and, second, that vicarious liability may be imposed where the wrongful act is done in ostensible pursuit of the employer’s business or in the apparent execution of authority which the employer holds out the employee as having.

47. [1689]

    Patersons says that, in the present case, the person at Ashington (with ostensible authority herself) to whom Mr Carolan’s actions were being projected or “held out” was Ms Garrett (the alleged errant fiduciary). It is noted that Gummow and Hayne JJ (at [232]) emphasised as relevant the question as to who stood to benefit from the employee’s conduct. (This seems to overstate their Honours reasons, which noted that light may be shed on the central question of “what the employer was actually employed to do and held out as being employed to do”, by looking to the “subsidiary question of who stood to benefit from the employee’s conduct” – but their Honours cautioned “that inquiry must not be permitted to divert attention from the more basic question we have identified”.) Patersons again emphasises that Patersons did not stand to gain from Mr Carolan’s conduct since the conduct alleged by the plaintiff served to deny Patersons the prospect of the benefit under the Patersons’ Mandate.

48. [1690]

    Patersons refers to the observation by the High Court in Prince Alfred College Incorporated v ADC (2016) 258 CLR 134; [2016] HCA 37 (Prince Alfred College), at [80], to the effect that “the fact that employment affords an opportunity for the commission of a wrongful act is not of itself a sufficient reason to attract vicarious liability”; the majority there considering whether the role given to the employee and the nature of the employee’s responsibilities provided not only an opportunity but also was the occasion for the commission of the wrongful act. Similarly, emphasis is placed by Patersons on the decision of the Supreme Court of the United Kingdom in Various Claimants v Wm Morrison Supermarkets plc [2020] 2 WLR 941; [2020] UKSC 12 (Morrison), where it was said (at [35]) that vicarious liability requires consideration of more than whether employment provided an employee with an opportunity to carry out the relevant wrongful act and whether the conduct was exclusive to the employee’s duties, as even so, the conduct may so clearly depart from the scope of employment. Their Lords in Morrison also considered it significant that the employee was not acting in furtherance of his employer’s business but for purely personal reasons (at [31]-[32]). Reed LJ referred (at [47]) to the distinction drawn by Nicholls LJ in Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366; [2002] UKHL 48 (Dubai Aluminium) at [32], between cases “where the employee was engaged, however misguidedly, in furthering is employer’s business, and cases where the employee is engaged solely in pursuing his own interests: on a ‘frolic of his own’”.

49. [1691]

    As to whether conduct is in the course of employment or, rather, the employee was “on a frolic” of his own, reference is made to origins of the phrase in the summing up of Parke B in Joel v Morison (1834) 172 ER 1338 and to authorities which have applied the doctrine. For example, NSW v Lepore at [46], where Gleeson CJ stated that acts are outside the course of employment when they are independent of the employment “of which no more could be said than that the employment created the opportunity for the wrongdoing”; and Zakka v Elias [2013] NSWCA 119 (Zakka v Elias), where there was no vicarious liability for want of the solicitor’s work being undertaken in the scope of her employment (see at [137]-[142]).

50. [1692]

    If vicarious liability applies to Barnes v Addy claims, Patersons accepts that it is responsible for Mr Doherty’s knowledge and acts, but contends that Mr Carolan is outside of the operation of principles of vicarious liability.

51. [1693]

    Patersons submits that what is decisive on the present facts is that Mr Carolan’s conduct, in assisting to advance what (on the plaintiff’s case) was his wife’s agenda, was: squarely outside the scope of his employment; directly inconsistent with what he had been tasked by Mr Shorrocks to do under the Patersons Mandate; totally contrary to the interests of his employer (indeed, so contrary to the interests of his employer that Mr Carolan wrote the “we will be shot” email); for his own personal benefit (in furthering the private interests of his wife); undertaken without any disclosure to his superior (Mr Shorrocks); and was conduct enabled from knowledge derived substantially from personal communications with his wife outside the scope of his professional employment with Patersons. Hence, it is said that, the insufficiency of the nexus between Mr Carolan’s unauthorised acts, undertaken in combination with the acts of his wife on behalf of Ashington, and the scope of his employment with Patersons, render Mr Carolan’s conduct outside any theory of vicarious liability.

52. [1694]

    The plaintiff says that, as Mr Carolan was plainly an employee for whose conduct Patersons was ordinarily liable, the only issue raised is whether he so acted “as to be in effect a stranger in relation to his employer” on “a frolic of his own” (see Bugge v Brown (1919) 26 CLR 110; [1919] HCA 5 at 118, 128 per Isaacs J). It is submitted that English and Australian authority has long rejected the argument that an employee’s conduct done without actual authority, and contrary to an employer’s interests, is beyond the scope of his or her employment. It is noted that the Privy Council stated in Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1981] 2 NSWLR 1; [1982] AC 462 at 5 that, since the decision in Lloyd v Grace “it has never been held, or contended, that for liability to exist, the act must be done for the benefit of the master”. The plaintiff says that the significance of Lloyd v Grace (in recognising vicarious liability for unauthorised acts contrary to an employer’s interests) was specifically recognised in the two High Court authorities cited by Patersons in its opening submissions (i.e., NSW v Lepore at [44] per Gleeson CJ, at [110] per Gaudron J, at [229], [232], [239] per Gummow and Hayne JJ; and Prince Alfred College at [48] per French CJ, Kiefel, Bell, Keane and Nettle JJ).

53. [1695]

    Applying the language of Gummow and Hayne JJ in NSW v Lepore, the plaintiff says that, as the “class of acts” that Mr Carolan was authorised to do plainly included marketing the Stonington Capital Raising, assisting with investor due diligence and assisting with financial close, the plaintiff says that Patersons is answerable for his liabilities even if his particular acts or omissions were unauthorised or contrary to Patersons’ interests.

54. [1696]

    In supplementary submissions, the plaintiff expanded on the question of vicarious liability, arguing that the application of the principle of vicarious liability to equitable wrongs generally (including knowing assistance) is supported by authority in England, Canada and Australia, by general principles of equity and by the policy considerations underpinning vicarious liability (see Majrowski v Guy’s and St Thomas’s NHS Trust [2007] 1 AC 224; [2006] UKHL 34 (Majrowski) at [10] per Nicholls LJ).

55. [1697]

    Reference is made to the observation of the plurality in the High Court (Kiefel CJ, Keane and Edelman JJ) in Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 (Ancient Order of Foresters) at [5], that “there is no novelty in equity attributing to one person the wrongful acts of another”; and to the statement of Millett LJ in Dubai Aluminium at [104] that “the vicarious liability of partners for equitable wrongdoing was certainly known to the Court of Chancery at least as early as 1842”. It is noted that in both the above decisions, reference was made to Brydges v Branfill (1842) 12 Sim 369 (Brydges v Branfill) at 389, in which solicitors were held jointly and severally liable for a fraud by their client that was known by their co-partner. Millett LJ noted in Dubai Aluminium at [105] that the guilty partner in Brydges v Branfill was “guilty of dishonest assistance, not of knowing or even dishonest receipt, and the only basis on which his partners could have been liable was that they were vicariously liable for his wrongdoing”.

56. [1698]

    The plaintiff here submits that vicarious liability has been applied to wrongdoing involving fiduciaries, including knowing assistance, in several cases in the partnership context (Dubai Aluminium at [104]; Strothier v 3464920 Canada Inc [2007] 2 SCR 177; [2007] SCC 24 at [100] per Binnie, Deschamps, Fish, Charron and Rothstein JJ; Northampton Regional Livestock Centre Co Ltd v Cowling [2016] 1 BCLC 431; [2015] EWCA Civ 651 at [45], [89]-[96] per Tomlinson LJ (with whom King and Arden LJJ agreed); and the plaintiff refers to RA Banks, Lindley & Banks on Partnership (20th ed, 2017, Sweet & Maxwell) at [12-89]-[12-91], [12-103], [13-13]).

57. [1699]

    The plaintiff contends that there is no principled basis for distinguishing the vicarious liability of partners from that of employers (noting that when the vicarious liability of partners was codified in s 10 of the Partnership Act 1890 (UK) (and its successors), it was assimilated to that of employers and the same criterion adopted (as recognised in Dubai Aluminium at [106] per Millett LJ)).

58. [1700]

    The plaintiff says that the vicarious liability of employers for equitable wrongs generally was accepted by Millett J (as his Lordship then was) in Agip (Africa) Ltd v Jackson [1990] Ch 265; [1992] 4 AII ER 385 at 296, where an accountant was held liable for acts by his partner and his employee constituting knowing receipt of trust money. Reference is also made in this context to Bilta (UK) v Natwest at [214]-[216] per Snowden J (to which Patersons has also referred, as noted above), where the Snowden J considered that, to the extent that the employees of the relevant company dishonestly assisted in breaches of duty or knowingly participated in fraudulent trading, the relevant company would be vicariously liable for the employees’ conduct (the plaintiff thus saying that the application of vicarious liability to equitable wrongs “is now taken for granted in England”).

59. [1701]

    The plaintiff points to intermediate appellate authority in Australia in support of it position, noting that in Coulthard, all members of the Supreme Court of South Australia in banco proceeded on the basis that an employer could be vicariously liable for breach of an equitable duty of confidence. King CJ there noted (at 353) that it was “to be expected that equity would follow the law in such circumstances and that the common law doctrine of the vicarious liability in tort of an employer for the acts of employees in the course of their employment would apply in equity to breaches of confidence”.

60. [1702]

    The plaintiff says that the maxim that “equity follows the law” (to which King CJ referred in Coulthard) is reflected not only in the recognition of legal entitlements by courts of equity, but also in the application by analogy of common law and statutory rules to equitable rights, duties, powers and liabilities (referring by way of example to Friend v Brooker (2009) 239 CLR 129; [2009] HCA 21 (Friend v Brooker) at [38] per French CJ, Gummow, Hayne and Bell JJ; Gerace v Auzhair Supplies Pty Ltd (in liq) (2014) 87 NSWLR 435; [2014] NSWCA 181 at [71] per Meagher JA, (with whom Beazley P, as Her Excellency then was, and Emmett AJA agreed). Thus, it is said that, in the absence of any “ground for refusing to apply” a rule of law to equitable relations the principle is that equity follows the law (Sexton v Horton (1926) 38 CLR 240; [1926] HCA 25 at 250 per Higgins J); and that where that principle applies, equity follows “the rules of law in their current state” from time to time (Delehunt v Carmody (1986) 161 CLR 464; [1986] HCA 67 at 473 per Gibbs CJ).

61. [1703]

    The plaintiff says that, as vicarious liability would reinforce the strictness of fiduciary obligations, it does not prompt any “concern with proceeding by analogy with tort” of the kind recognised in other contexts (particularly on issues of causation) (the plaintiff there referring to Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534 (Canson Enterprises) at [3] per McLachlin J for Lamer CJ and l’Heureux-Dubé J). It is said that, not only would an employer’s vicarious liability leave the primary or ancillary liability of the employee intact, but it would further protect the beneficiary against the risk of non-recovery from the employee and furnish an incentive for the employer to deter breaches of fiduciary duties by its employees. Thus, the plaintiff argues that vicarious liability would advance the “goals of equity” in regulating any fiduciary relationship, by serving both “to enforce the trust which is at its heart” and “to deter fiduciaries from abusing their powers” (the plaintiff citing from Canson Enterprises at [3], [10]).

62. [1704]

    As a matter of policy, the plaintiff says that the predominant policy consideration underpinning the principle of vicarious liability is that “under contemporary Australian conditions, the conduct by the defendant of an enterprise in which persons are identified as representing that enterprise should carry an obligation to third persons to bear the cost of injury or damage to them which may fairly be said to be characteristic of the conduct of that enterprise” (citing Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 (Hollis v Vabu) at [42] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Ira S Bushey & Sons Inc v United States (1968) 398 F 2d 167 at 171 per Friendly J; Bazley v Curry [1999] 2 SCR 534 at [22] per McLachlin J for the Court).) It is noted that this primary policy consideration was set out by Professor Fleming in The Law of Torts (9th ed, 1998, Law Book Co) at 410, as quoted in Hollis v Vabu at [86] by McHugh J):

63. [1705]

    Reference is made to the statement of Nicholls LJ in Majrowski (at [10]) that “the policy reasons underlying the common law principle are as much applicable to equitable wrongs and breaches of statutory obligations as they are to common law torts” and to the observation of Millett LJ in Dubai Aluminium (at [107]) that, given the loss distribution rationale of vicarious liability, “there is no rational ground of restricting the liability to torts, or for excluding liability in equity, particularly when equitable liability often has its counterpart at common law”.

64. [1706]

    The plaintiff further says that, as equity is “peculiarly adapted to provide a law of business organisations”, equitable wrongs are at least as characteristic of enterprises in an information economy as torts were in an industrial economy (citing Gageler J, writing extra-judicially in ch 8, “Expansion of the Fiduciary Paradigm into Commercial Relationships: The Australian Experience”, in Devonshire and Havelock, The Impact of Equity and Restitution in Commerce (2019, Hart Publishing) at 165; Leeming JA, “The Role of Equity in 21st Century Commercial Disputes” (2019) 47 Australian Bar Review 137; cf, GT Schwartz, “Tort Law and the Economy in Nineteenth-Century America: A Reinterpretation” (1981) 90 Yale Law Journal 1717 at 1742-1743). Further, it is said that vicarious liability is at least as effective a deterrent against the commercial misconduct typically regulated in equity as it is against torts which may involve a failure to take reasonable care.

65. [1707]

    As to the first instance decision in Lifeplan Australia Friendly Society Ltd v Woff (2016) 259 IR 384; [2016] FCA 248 (Lifeplan Australia), where Besanko J at [374] was not prepared to apply the principle of vicariously liability for equitable wrongdoing, the plaintiff says that that decision is distinguishable (or should not be followed), having regard to his Honour’s reasons.

66. [1708]

    First, the plaintiff says that the proposition that vicarious liability is generally concerned with loss to a third party rather than gains made by a defaulting fiduciary or their employer is inapplicable in the present case, where only equitable compensation is sought.

67. [1709]

    In respect of the second reason (the lack of Australian authority for vicarious liability for equitable wrongs), the plaintiff points out that his Honour declined to follow Coulthard without any suggestion that it was “plainly wrong” (cf, Farah Constructions at [135] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ).

68. [1710]

    As to his Honour’s third reason (that recognition of vicarious liability would “make significant inroads on the carefully constructed rules of third party liability discussed in Barnes v Addy” – at [374]), the plaintiff says that this was expressly limited to the situation there under consideration, namely, one involving the liability of the new employer of the defaulting fiduciary. The plaintiff submits that such a concern has no application where (as here) the question is as to an employer’s vicarious liability, applying ordinary principles, for its existing employee’s liability arising under Barnes v Addy principles.

69. [1711]

    The plaintiff submits that it follows that vicarious liability applies (subject to its ordinary limitations) to make an employer liable for the employer’s employees’ knowing assistance to a third party’s breaches of fiduciary duty.

70. [1712]

    Patersons’ supplementary submissions address in some detail the issue of whether vicarious liability applies to equitable wrongs.

71. [1713]

    Patersons submits that the extension of common law principles of vicarious liability to equitable Barnes v Addy claims is not supported by authority; nor is it supported by legitimate modes of development of the common law; or by broader considerations of principle and coherence in the law.

72. [1714]

    As to the question of authority, Patersons refers to the rejection in Lifeplan Australia, by Besanko J (at [362]-[374]) of the application of vicarious liability to equitable wrongdoing; and to the decision by the Queensland Court of Appeal in Illuzzi v Edwards (1997) Q ConvR 54-490; [1997] QCA 204 (Illuzzi) per Fitzgerald P and Lee J.

73. [1715]

    Patersons says that the extension of the common law doctrine of vicarious liability to the distinct species of equitable wrong for knowing assistance in a dishonest and fraudulent design for breach of a fiduciary duty would be a significant change to the existing common law position that can only be taken by the High Court (noting that this was the view Nettle JA, as his Honour then was, in Narain v Euroasia (Pacific) Pty Ltd (2009) 26 VR 387; [2009] VSCA 290 (Narain) at [44], in considering whether to expand the common law principle in Yerkey v Jones (1939) 63 CLR 649; [1939] HCA 3 beyond instruments of suretyship). (I interpose to note that in Narain, Nettle JA stated that “we are not to depart from another state appellate court’s interpretation of the common law of this country unless we think it is plainly wrong”, a seemingly different proposition from the one put by Patersons.) Patersons points in this regard to the admonition by Gaudron and McHugh JJ in Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 at 115 (Breen v Williams) as to the limits of the development of common law (i.e., that advances in the common law must begin from a baseline of accepted principle and proceed by conventional methods of legal reasoning). Patersons says that the effect of “enmeshing” vicarious liability and the specie of equitable wrongdoing for knowing assistance “would fracture the skeleton of principle which gives the body of our law its shape and internal consistency” (citing Mabo v Queensland (No 2) (1992) 175 CLR 1; [1992] HCA 23 at 29 per Brennan J).

74. [1716]

    Patersons points to the distinct historical and theoretical foundations and rationales for these two separate streams of jurisprudence (vicarious liability and liability for knowing assistance) and makes the following submissions.

75. [1717]

    First, that the doctrine of vicarious liability is an unstable and incoherent foundation for doctrinal expansion into equitable wrongs; and would be at odds with the cautious, incremental approach based on decided cases advanced by the High Court in Breen v Williams. It points to the observation by Professor Atiyah as to the difficulty in identifying a compelling and unifying justification for this species of liability in tort (PS Atiyah, Vicarious Liability in the Law of Torts (1967, Butterworths), ch 2).

76. [1718]

    Reference is made to the observation of the High Court in Prince Alfred College (at [39]) that “[c]ommon law courts have struggled to identify a coherent basis for identifying the circumstances in which an employer should be held vicariously liable” and the conclusion (at [46]) to “continue with the orthodox route of considering whether the approach taken in decided cases furnishes a solution to further cases as they arise”; and to NSW v Lepore (at [106] per Gaudron J).

77. [1719]

    Patersons says that Lloyd v Grace is a problematic case and submits that a majority of the High Court in NSW v Lepore was disposed to explain Lloyd v Grace on an alternative basis or to construe it very narrowly (citing NSW v Lepore at [127] per Gaudron J, at [237]-[238] per Gummow and Hayne JJ, at [343] per Callinan J). Reference is also made to Prince Alfred College at [49]-[50], [56] and [80] in this regard.

78. [1720]

    Patersons argues that vicarious liability should be confined to negligence and good faith torts, noting the observation of Gageler and Gordon JJ in Prince Alfred College at [128], that decisions concerning vicarious responsibility for intentional wrongdoing are particularly fact specific. Patersons says that they provide no general justification for vicarious liability for intentional or dishonest wrongdoing more broadly; and, as such, they provide no principled and compelling justification for extension of vicarious liability generally to equitable claims for knowing assistance in a dishonest and fraudulent design. (Although, I note that (at [80]) in Prince Alfred College, French CJ, Kiefel, Bell, Keane and Nettle JJ stated that, “the fact that a wrongful act is a criminal offence does not preclude the possibility of vicarious liability”, referring to Lloyd v Grace, and noted the need to consider “any special role that the employer has assigned to the employee and the position in which the employee is thereby placed vis-à-vis the victim” and particular features including “authority, power, trust, control and the ability to achieve intimacy with the victim”. Of course, much of what is said is particular to the kind of case there under consideration. However, the majority’s reasons indicate that, where appropriate, vicarious liability may be imposed for intentional wrongdoing; and also highlight the fact specific exercise of assessing whether the employee’s acts are within the course of employment.)

79. [1721]

    Patersons says that: the “within the course of employment” test has led to factual distinctions and that the sufficiency of connection test for vicarious liability, and its application under Australian law, is uncertain; and the test itself provides no independent conceptual support for extending vicarious liability into equitable wrongdoing. Patersons argues that the accessorial involvement in the primary breach of fiduciary duty owed by a non-employee to another third party is far from intuitively connected to what the employee has been tasked to do by the employer under the employee’s contract of employment (I interpose to note that the correctness or not of this submission could only be determined by application of the facts of each particular case). Patersons says that the difficulty in finding a principled basis for extending vicarious liability to equitable wrongs is that a principled explanation for this branch of the law has itself remained elusive.

80. [1722]

    Second, Patersons maintains that the doctrine of vicarious liability is fundamentally directed to common law torts (not equitable wrongs) and should properly be seen as part of tort law. Patersons points in this regard to the disparate rationales and policy considerations that have been advanced in support of vicarious liability in the employer/employee context, noting that each of these rationales has been discredited to varying degrees as a satisfactory all-embracing theory for vicarious liability. Patersons argues that all the rationales are peculiar to tort law and says that none of these rationales justifies expansion of vicarious liability to equitable wrongs. Patersons notes that the rationale for Barnes v Addy liability is to protect the integrity of the office of fiduciary and “is bound up with the historically strong prophylactic and protective function of equity’s trust jurisdiction” (citing P Ridge in ch 6 “Participatory Liability for Breach of Trust or Fiduciary Duty” of J Glister and P Ridge, Fault Lines in Equity (2012, Hart Publishing) at 137). It is submitted that imposing strict, vicarious liability on an employer for an employee’s participation in a primary breach of fiduciary duty owed to another person would not rationally serve that function and purpose. While accepting that many “economic torts” have a general affinity with knowing assistance equitable wrongdoing; and many instances of “wrongdoing” are capable of being characterised as either or both economic torts and knowing assistance equitable liability, Patersons says that economic torts should not be conflated with knowing assistance liability in equity (especially for the purposes of the tortious doctrine of vicarious liability).

81. [1723]

    Insofar as there is a suggested competing thesis advanced by Professor Neyer as a justification for the doctrine of vicarious liability (referred to by the High Court in Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 (Sweeney) at [12] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ) (in an employer’s promise in the contract of employment to indemnify the employee for legal liability suffered by the employee in the conduct of the employer’s business), Patersons says that this theory of vicarious liability would not support extension of vicarious liability to knowing assistance in a dishonest and fraudulent design of another.

82. [1724]

    Third, Patersons emphasises the need for coherence in the law and for any change and extension in the common law to be achieved in a doctrinally coherent way. Patersons argues that the effect of applying the doctrine of vicarious liability to knowing assistance equitable wrongdoing would be significantly to extend the field of operation and reach of this distinct species of equitable participatory liability; and would also constitute a significant expansion in the operation of accessorial liability to corporations. Patersons submits that the use of the common law doctrine of vicarious liability to extend the reach of Barnes v Addy liability for knowing assistance would be to commingle two separate and distinct streams of jurisprudence in an unpredictable, unprincipled and incoherent manner (and would not be consistent with the orthodox methods of developing equitable principles).

83. [1725]

    Fourth, Patersons says that there is a conceptual asymmetry with Barnes v Addy (endorsing the reasoning of Besanko J in Lifeplan Australia). Patersons submits that it would attach no-fault liability to a defendant for conduct that is quintessentially fault-based (i.e., that even though the employer’s conscience is not ex hypothesi tainted, the employer would be held liable for an equitable wrong that has conscience at its heart). Patersons says that moulding appropriate relief for a defendant in such a circumstance highlights the conceptual asymmetry in combining the common law doctrine of vicarious liability to equitable participatory liability rooted in unconscientious conduct (since the classic remedy for knowing assistance liability of an account of profits would rarely, if ever, be available because the corporation would have derived no benefit to which an account of profits could attach).

84. [1726]

    Fifth, Patersons says that the plaintiff’s reliance on English decisions in the partnership context affords no principled justification for the extension of common law vicarious liability for corporations into equitable wrongdoing, noting that Dubai Aluminium is explicable on a different basis (the question before the House of Lords there concerning a claim for contribution against a partner in a firm of solicitors who was held liable for knowing assistance in a fraudulent scheme and turned on the meaning and scope of the phrase “any wrongful act or omission” in s 10 of the Partnership Act 1890 (UK)). (I consider the reasoning in Dubai Aluminium in detail below.)

85. [1727]

    As to the reference by the plaintiff to the observations of Kiefel CJ, Keane and Edelman JJ in Ancient Order of Foresters at [5], Patersons notes that Foresters knew (through the knowledge of its Board and Chief Executive Officer) that the errant fiduciary’s company was appropriating the business connections of Foresters’ competitors and was found liable accordingly; and that the further question raised was whether further acts of the errant fiduciaries could be attributed to Foresters from when it subsequently employed them on the basis of vicarious liability. It is noted that that issue arose in circumstances where it had already been found that Foresters had assisted the errant fiduciaries in their dishonest and fraudulent design. Patersons says that this is a very different situation to the attribution of Mr Carolan’s knowledge and acts to Patersons here, so as to ground equitable liability in the first place. It is said that the observation of the plurality (at [5]) was made in that context and was unremarkable in the observation that equity will sometimes attribute the wrongful acts of one to another. As noted, Patersons points out that the plurality expressly eschewed deciding the issue of vicarious liability and Gageler J (at [64]) concluded the circumstances presented an “inappropriate vehicle for exploring any question of vicarious liability for equitable wrongdoing”. (I note briefly that the issue of vicarious liability did not need to be decided by the High Court in Ancient Order of Foresters as to hold Foresters vicariously liable could add nothing to Foresters’ duty to account as a knowing participant in Mr Woff’s and Mr Corby’s breaches of duty, that being the reason why it was inappropriate for the Court to come to a conclusion on the issue in that case, but I deal in further detail with this case below.)

86. [1728]

    As to the principle of vicarious liability, as emphasised by Patersons, vicarious liability is a form of strict (no fault) liability; a rule of law that imposes liability upon an employer for the acts of its employee notwithstanding that the employer had no involvement in or knowledge of the employee’s wrongdoing (see Bartonshill Coal Company v Jane McGuire (1858) 3 Macq 300 at 306 per Chelmsford LC).

87. [1729]

    The liability of an employer for the acts of his or her employee does not extend to acts that occur outside the scope of the employee’s employment. As King CJ noted in Coulthard:

88. [1730]

    As already noted, in Australia, the application of vicarious liability to equitable wrongs is unsettled (see Ancient Order of Foresters at [64]). That said the majority (Kiefel CJ, Keane and Edelman JJ) observed in Ancient Order of Foresters (at [5]) that “there is no novelty in equity attributing to one person the wrongful acts of another” (an observation that would no doubt encompass the well-established principles of third-party liability in Barnes v Addy).

89. [1731]

    In Coulthard, the Full Court of the South Australian Supreme Court, considering whether the State could be held vicariously liable for the unauthorised disclosure of confidential information by an unknown employee (or person), held that the State was not vicariously liable for the act of the unknown employee who disclosed the confidential information as there was no evidence to show that the information was taken by a person in the course of their employment. The issue was thus determined by application of the principles of vicarious liability. On the question whether vicarious liability applies to the equitable wrong of breach of confidence raised in that case, King CJ stated (at 535):

90. [1732]

    King CJ’s reasoning was thus on the basis of: first, the analogy of the particular equitable wrong with a common law tort; second, the equitable maxim that equity follows the law; and, third, that equity would act upon the conscience of the employer to accept responsibility for the employee’s wrong. The separate judgments of Perry and Debelle JJ in Coulthard proceeded on the basis that vicarious liability applied to equitable wrongdoing. The application of the principle of vicarious liability was thus there applied to the breach of an equitable obligation of confidence (here, it is sought to be applied to a different equitable wrong).

91. [1733]

    Two years later, the Queensland Court of Appeal had cause to consider this issue in Illuzzi. There, the appellant claimed that the particular religious institution in question was vicariously liable for the conduct of the respondent (Edwards) who held an official position within the institution as a “counsellor”. The appellant had succeeded at first instance in obtaining a judgment against Edwards, however, it was unsuccessful as against the religious institution. The trial judge found that Edwards had neither actual nor apparent authority from the religious institution to obtain a financial benefit from the appellant. On appeal, Fitzgerald P and Lee J dealt with the submission as to the issue of vicarious liability as follows:

92. [1734]

    In a separate judgment, Williams J expressed reservations as to the application of the concept of vicarious liability, stating that:

93. [1735]

    Thus, while in Coulthard, King CJ concluded that equity would act upon the conscience of the employer to accept responsibility for the employee’s breach of confidence occurring in the course of the employee’s employment, in Illuzzi, the majority did not find anything in the religious institution’s conduct which would make it conscientious for it to compensate for the acts of a “counsellor” within the institution (without expressly holding that the principle of vicarious liability was inapplicable to an equitable wrong). Given the differences between Edwards’ role as a “counsellor” within the religious institution and an employment relationship, and the relationship that Edwards held with the appellant beyond the scope of Edwards’ role within the institution, a direct comparison between Coulthard and Illuzzi is problematic.

94. [1736]

    Turning then to Lifeplan Australia, the applicants had alleged that Ancient Order of Foresters in Victoria Friendly Society Ltd (Foresters) was vicariously liable for the equitable wrongdoing of two former employees of Lifeplan Australia (Mr Woff and Mr Corby) (see at [362]), who, in late 2010, became employees of Foresters, a newly established competitor of Lifeplan Australia (taking with them confidential information of Lifeplan Australia). As noted by Besanko J at [363], the applicants had submitted that the wrongful conduct had occurred in the course of the employees’ employment by Foresters “in the sense that Foresters received and used the benefit of the contract pads and the funeral directors’ mailing list, and that it was part of the funeral fund business”. Reliance was placed by the applicants on Dubai Aluminium for the proposition that Foresters should be held vicariously liable for the equitable wrongdoing of Mr Woff and Mr Corby, in the same way as it would be held liable for torts committed by Mr Woff and Mr Corby in the course of their employment.

95. [1737]

    Besanko J extracted (at [365]), the following passage from Millett LJ’s judgment in Dubai Aluminium (at [107]):

96. [1738]

    Besanko J also referred (at [366]-[367]) to the decision of the High Court as to the rationale for vicarious liability in NSW v Lepore (Gleeson CJ at [45]; and the discussion by Gummow and Hayne JJ at [197]-[201]; and by Kirby J at [301]-[306]). His Honour observed (at [368]) that if the rationale for vicarious liability was loss distribution, that rationale would not support an extension of the doctrine to equitable wrongdoing where the particular relief claimed is an account of profits (there is, of course, no claim for an account of profits in the present case).

97. [1739]

    His Honour then referred to the two Canadian authorities, relied upon by the applicants, that held vicarious liability applied to equitable wrongdoing (57134 Manitoba Ltd v Palmer [1989] BCJ No 810 (Manitoba) at [24] per Esson JA (with whom Hinkson and Macdonald JJA agreed) and Clayburn Industries Ltd v Piper [1998] BCJ No 2831 per Burnyeat J), before turning to the decision in Coulthard.

98. [1740]

    At [374]-[375], his Honour concluded:

99. [1741]

    It is clear from Besanko J’s reasoning that his Honour was only considering the application of vicarious liability to equitable wrongs where the remedy sought is an account of profits as opposed to equitable compensation. Besanko J’s reasons for not applying vicarious liability to equitable wrongdoing was that: (i) generally, vicarious liability is concerned with loss to a third party rather than gains made by breaches of fiduciary duty; (ii) the authority of Coulthard is limited as this issue was not extensively discussed; and (iii) vicarious liability would impinge on principles of third-party liability in Barnes v Addy.

100. [1742]

     On appeal in the Full Court this issue was not addressed. In the High Court of Australia the issue was raised in Ancient Order of Foresters (at [5] per Kiefel CJ, Keane and Edelman JJ and at [64] per Gageler J). At [5], the majority said:

101. [1743]

     Dowsett J, in Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Pty Ltd (2018) 259 FCR 43; [2017] FCAFC 141 (Oliver Hume), did not need to consider the point in detail but noted that Besanko J’s decision in Lifeplan Australia cast doubt on the application of vicarious liability to equitable wrongdoing, stating at [110] that:

102. [1744]

     As it stands, therefore, the case law remains inconclusive on this point. Lifeplan Australia (at first instance) and Illuzzi indicate that there is no application of the principle of vicarious liability to equitable wrongs in Australia. However, the decision in Illuzzi is seemingly complicated by the nature of the relationship between Edwards and the religious institution, which was not one of employer and employee and one where Edwards’ relationship with the appellant extended beyond the ambits of his role within the religious institution and his impugned acts were not with the apparent or actual authority of the institution. Moreover, it does not appear that their Honours’ attention was drawn to Coulthard. Besanko J’s reasoning in Lifeplan Australia is yet to be considered by an appellate court. Kiefel CJ, Keane and Edelman JJ, while not delving into Besanko J’s reasoning, noted that “there is no novelty in equity attributing to one person the wrongful acts of another” and pointed to the long history of the application of vicarious liability for equitable wrongs to partnerships in the United Kingdom (indeed spanning 32 years prior to the seminal decision in Barnes v Addy ‒ see Brydges v Branfill at 389). Dowsett J, also not dealing with the issue, recognised that Lifeplan Australia provided “reason to doubt” the application of vicarious liability to equitable wrongs but his Honour did not treat the issue as settled.

103. [1745]

     The principles as to the precedential status of judicial decisions are well-known (see Hamilton Island Enterprises Pty Ltd v Commissioner of Taxation (1982) 1 NSWLR 113 at 119 per Rogers J; La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201 at 204 per Burchett J; Hunter v Hanson [2014] NSWCA 263 at [71] per McColl JA (with whom Macfarlan JA agreed); Farah Constructions at [135] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; BHP Billiton Iron Ore Pty Ltd v National Competition Council (2007) 162 FCR 234; [2007] FCAFC 157 (BHP Billiton) at [86] per Greenwood J (with whom Sundberg J agreed)).

104. [1746]

     As noted in BHP v Billiton “the circumstances which might properly lead to a departure from an earlier authority will necessarily vary according to the content of the case and the issues and therefore no prescriptive rules ought to be formulated”. As the plaintiff here points out, Besanko J in Lifeplan Australia made no finding that Coulthard was “plainly wrong”. Rather, his Honour formed the view that the issue of whether vicarious liability applied to equitable wrongs was not raised, or at least not raised in “a major way”, in Coulthard and departed from it on that basis.

105. [1747]

     Where that leaves the issue, in terms of authority, is that there is intermediate appellate authority (Coulthard) where the issue has been considered and where it has been concluded that vicarious liability can apply to equitable wrongdoing (at least for breach of equitable confidence claims) whereas in Illuzzi doubt was cast on that proposition and it was rejected at first instance by Besanko J in Lifeplan Australia.

106. [1748]

     The plaintiff here places some weight on the position in the United Kingdom on this principle. Cognisant of the caution raised by the defendants on reliance on those authorities it is nevertheless helpful to review the position in England.

107. [1749]

     Dubai Aluminium (relied upon by the plaintiff and considered by Besanko J in Lifeplan Australia) concerned the liability of innocent partners in a firm for the equitable wrongdoing of one of the firm’s partners (Mr Amhurst). The matter proceeded on the assumption (as the substantive claimed had been settled) that Mr Amhurst was liable for dishonest assistance in breach of fiduciary duty or trust, in drafting a bogus consultancy agreement for a client (Mr Salaam) and giving advice and assistance to other wrongdoers who were not clients of the firm. The firm was seeking contribution from Mr Salaam (and another participant) for the $10 million payment made in settlement of the claim against the firm. In order for the firm’s contribution claim to be successful, it needed to show that it was liable for the wrongful acts of Mr Amhurst. This gave rise to consideration of s 10 of the Partnership Act 1890 (UK), it being submitted that this was limited to common law torts and therefore, the firm could not be vicariously liable for Mr Amhurst’s equitable wrongdoing under that section.

108. [1750]

     The House of Lords held that a fault-based equitable wrong constituted a “wrongful act” within the meaning of s 10 of the Partnership Act 1890. Although it is plain that Dubai Aluminium turned on the interpretation of that statutory provision, their Lordships’ reasons provide insight into the application of vicarious liability to equitable wrongs. Indeed, academic commentary on the decision has observed that although the discussion in Dubai Aluminium was within the framework of s 10 “the approach of the House of Lords was to treat the issue as one which engaged issues of vicarious liability generally” (see A Stafford QC and S Ritchie Q, Fiduciary Duties: Directors and Employees (2nd ed, 2015, Jordan Publishing Limited)), the authors there considering that “it is evident from the speeches delivered by Lords Nicholls and Lord Millett that they would decide a claim on the same principles of vicarious liability whether or not the claim was governed by the Partnership Act 1890”. This accords with my reading of their Lordships’ judgment (and how it has been dealt with in the United Kingdom subsequently). Therefore, I find it difficult to dismiss their Lordships’ reasoning on the basis that it is purely a matter of statutory construction (as the defendants here contend).

109. [1751]

     Nicholls LJ (with whom Slynn and Hutton LJJ agreed) began by stating (at [10]-[11]) that:

110. [1752]

     It is relevant to note that at [11], although in the context of an analysis of s 10, the reasoning of Nicholls LJ is similar to that of King CJ in Coulthard in that his Lordship there draws an analogy between the relevant equitable wrong and a common law tort, and highlights the inconsistency of holding an employer vicariously liable for the latter and not the former. Nicholls LJ went on to state (at [12]) that:

111. [1753]

     Unlike Besanko J in Lifeplan Australia (at [374]), Nicholls LJ in Dubai Aluminium (at [12]) appears to consider that holding an employer/partner liable for the equitable wrong of an employee/partner accords with the principles of third-party liability in Barnes v Addy. Hobhouse LJ did not wish to add anything on the s 10 point.

112. [1754]

     Millett LJ’s judgment in Dubai Aluminium to which reference was made in Lifeplan Australia began by concurring that the scope of the phrase “by any wrongful act or omission of any partner” was in the widest terms with no indication that it ought to be limited to common law torts. His Lordship then considered the history of the application of vicarious liability of partners for equitable wrongdoing (from [104]ff), including the passage (at [107]) that has been extracted above. At [108] his Lordship said:

113. [1755]

     Pausing here, I note that s 10 of the Partnership Act 1892 (NSW) (Partnership Act 1892) is in materially the same terms as the UK counterpart. Young J, as his Honour then was, stated in Chittick v Maxwell (1993) 118 ALR 728 (Chittick v Maxwell) at 733-734 that s 10 of the NSW legislation was directed to common law wrongs and not to breaches of fiduciary duty (see Estate Realties Ltd v Wignall [1992] 2 NZLR 615 at 633–5) and went on to say that:

114. [1756]

     However, in Hraiki v Hraiki [2011] NSWSC 656 (Hraiki), White J (as his Honour then was), having referred to the decision in Chittick v Maxwell, considered the reasoning of the House of Lords in Dubai Aluminium to be persuasive and followed that reasoning as to the scope of the similarly worded s 10 in the Partnership Act 1892 (see [75]-[76]). Therefore, at least within the context of the application of s 10 of the Partnership Act 1892, the reasoning of Dubai Aluminium has been followed in Australia; and vicarious liability has been held to apply to equitable wrongdoing.

115. [1757]

     The application of vicarious liability to equitable wrongs outside of an analysis under s 10 of the Partnership Act 1890 is now well established in the United Kingdom and Dubai Aluminium is seen as authority for that proposition (see Morrison at [51], [55] per Reed LJ (with whom Hale, Kerr, Hodge, Lloyd-Jones LLJ agreed); and see Majrowski at [10] per Nicholls LJ). See also the inclusive statement of the principle of vicarious liability in McGowan & Co Ltd v Dyer (1873) LR 8 QB 141 at 145 by Blackburn J with reference to Joseph Story, Commentaries on the Law of Agency (1839, Cambridge Press) (Story on Agency) (as referred to in Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd (2016) 250 FCR 136; [2016] FCAFC 78 at [145] by the Full Court of the Federal Court (Davies, Gleeson and Edelman JJ)).

116. [1758]

     The plaintiff also refers to the decision in Manitoba, to which I have referred above, and in which Esson JA (with whom Hinkson and Macdonald JJA agreed) approved the following passage of Broom’s Legal Maxims (as quoted by Southin J, as her Honour then was, in Allen v Richardsons Greenshields of Canada Ltd [1988] BCJ No 123 (Allen v Richardsons) at 23):

117. [1759]

     Of the cases cited in Allen v Richardsons in support of the application of vicarious liability beyond tort law, reference may be made to Barwick v English Joint Stock Bank (1867) LR 2 Exch 259 (Barwick), where the Court of Exchequer considered whether a bank would be answerable for the fraud of its employee and Willes J stated, when delivering judgment of the Court (Blackburn, Keating, Mellor, Montague Smith and Lush JJ) at 266 that “… with respect to the question, whether a principal is answerable for the act of his agent in the course of his master’s business, and for his master’s benefit, no sensible distinction can be drawn between the case of fraud and the case of any other wrong” and went on to say that:

118. [1760]

     Thus, in Barwick, the Court of Exchequer placed emphasis on the application of the principle of vicarious liability but saw no reason to discriminate between the various types of wrongs to which the principle may apply. Sir Montague Smith, delivering the judgment of their Lordships (Sir James Colvile, Sir Barnes Peacock, and Sir Robert Collier) in Mackay v The President, Directors and Co of the Commercial Bank of New Brunswick (1874) LR 5 PC 394 (Mackay v Commercial Bank), emphatically approved the reasoning in Barwick at 411-412, stating that “the best definition of [vicarious liability], in their Lordships’ judgment, is to be found in the case of Barwick, when the judgment of the Exchequer Chamber was delivered by one of the most learned Judges who ever sat in Westminster Hall”.

119. [1761]

     In Houldsworth v City of Glasgow Bank (1880) 5 App Cas 317, having restated the principle of vicarious liability applicable to “every such wrong of his servant or agent” as stated by Willes J in Barwick, Selborne LJ opined (at 326) that there is “no exception” to that principle. Selborne LJ stated that the principle was “not of the law of torts, or of fraud or deceit, but of the law of agency” (at 327). Selborne LJ went on to note (at 328) that:

120. [1762]

     In Equity, one of the main heads of which has always been the redress of fraud, the constructive imputation of fraud to persons not really guilty of it has never been treated as the ground of relief, though the law of agency was administered according to the same rules in Equity as at Common Law, and though in Equity, as well as at law, an innocent principal might suffer for the fraud of an agent. It may readily be accepted that a satisfactory rationale for the application of vicarious liability to the employment relationship has remained elusive (see Sweeney at [11] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; NSW v Lepore at [196] per Gummow and Hayne JJ, at [299] per Kirby J; Hollis v Vabu at [35] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ; C Sappideen and P Vines, Flemings The Law of Torts (10th ed, 2011, Lawbook Co) (Flemings) at 438-439), but there can be little doubt that the nature (or incidence) of the employment relationship has significantly evolved since the origins of the principle of vicarious liability, and that the modern doctrine emerged “not by way of an exercise in analytical jurisprudence but as a matter of policy” (Hollis v Vabu at [34]; see also NSW v Lepore at [300] per Kirby J).

121. [1763]

     Further, it is recognised that none of the various policy reasons for the imposition of vicarious liability on an employer has been accepted as completely satisfactory (see the High Court in Hollis v Vabu at [35]) and that the policy behind the principle has not been “fully articulated” (at [11]). Regardless of this, Kirby J cautions in NSW v Lepore (at [331]) against turning “the clock of vicarious liability backwards” and “ignoring recent legal developments that have grown out of the recognition of the character of, and risks inherent in, the typical enterprise that employs others”. Moreover, the continued application by the High Court of vicarious liability to tortious conduct (including conduct amounting to intentional and criminal wrongdoing) means that some combination of these policy reasons must justify the doctrine and its imposition on employers.

122. [1764]

     As adverted to above, the principal policy reason, stemming from the significance of the employment relationship, has been worded in alternative ways resulting in slightly different meanings. It has been stated that, by putting an employee in the position to do a certain class of acts, the employer is liable for the manner in which the employee conducts himself in performing the business of the employer (see NSW v Lepore at [45] per Gleeson CJ). Alternatively, it has been said that a person who employs others in pursuit of their own economic interests should “in fairness” be held liable for losses incurred in the course of that economic pursuit (see Flemings at 438-439). Alternatively, it has been stated to the effect that, as economic activity carries a risk of harm, the person responsible for the risk created due to their economic enterprise should be liable for loss suffered in the course of that enterprise (Majrowski at [9] per Nicholls LJ). I have extracted about the High Court’s construction in Hollis v Vabu at [42] (see also NSW v Lepore at [197] per Gummow and Hayne JJ). Thus, there are relevant characteristics of the modern employment relationship that continue to be recognised as serving as a basis for the imposition of vicarious liability.

123. [1765]

     Other rationales include the principle of loss distribution (see NSW v Lepore at [197], [303]; Majrowski at [9]; Flemings at 438); and the deterrent effect of the imposition of vicarious liability (NSW v Lepore at [198], [305]; Majrowski at [9]; Flemings at 438; cf, Gummow and Hayne JJ in NSW v Lepore at [199]).

124. [1766]

     As noted, one of the reasons raised in the authorities for the application of the principle of vicarious liability to equitable wrongdoing is the maxim “equity follows the law”. In Re Diplock; Diplock v Wintle [1948] Ch 465; 2 All ER 318 at 482 per Lord Greene MR stated that:

125. [1767]

     The decision of Brydges v Branfill, as pointed to by Millett LJ in Dubai Aluminium, is relevant to the history of the application of vicarious liability in courts exercising equitable jurisdiction. Moreover, the statement of the principle of vicarious liability by Willes J (although in 1867 the Court of Exchequer had lost its equitable jurisdiction) as applicable to “every such wrong of the servant or agent as is committed in the course of the service and for the master’s benefit” indicates that the development of the principle was concerned more so with the imposition of vicarious liability due to the employment relationship than limiting the imposition of the principle to certain kinds of wrongs.

126. [1768]

     This accords with the reasoning of King CJ in Coulthard and Nicholls LJ in Dubai Aluminium, namely, that where an analogy may be drawn with a common law tort, it is difficult to reason that an employer should not be vicariously liable for the analogous equitable wrong. The reason for this, conceptually, is that the principle of vicarious liability is concerned with the nature of the employment relationship.

127. [1769]

     In Lifeplan Australia, Besanko J considered that vicarious liability was concerned (in the general run of cases) with loss to a third party, rather than gains made by breaches of fiduciary duty; and that this militated against the application of vicarious liability to equitable wrongs. However, the present case is one where the remedy of equitable compensation is sought (including for breaches of fiduciary duty and knowing assistance therein). The purpose of equitable compensation is to make good losses that were caused by the breach of an equitable obligation such that the defendant is put as nearly as possible in the position that he or she would have been in had there been no breach (see In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) [2021] NSWSC 966 (Earth Civil) at [2235]; Canson Enterprises; Hill v Rose [1990] VR 129 at 143-144 per Tadgell J). The resort to equitable compensation indicates that an account may not always be available or appropriate in the circumstances to make good the fiduciary or trustee’s breach. It may certainly be that a knowing assistant has not made any gains in assisting the fiduciary in a dishonest and fraudulent breach of duty but, regardless, the assistant is held liable as though that person was the fiduciary (Earth Civil at [984]; Farah Constructions at [160]; Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 (Hasler v Singtel Optus) at [75]; [109]; [123]; [129]-[139] per Leeming JA; Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; [2018] VSCA 84 (Harstedt) at [80]; Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2005] NSWSC 482 at [33] per Hamilton J). In the circumstances, the loss distribution basis for the imposition of vicarious liability would serve a similar purpose in availing the beneficiary with a plaintiff that is more likely to be able to make good the loss (and more able to protect itself against such liabilities).

128. [1770]

     In Lifeplan Australia, Besanko J formed the view that the issue of the application of vicarious liability to equitable wrongs was not the subject of extensive consideration in Coulthard. However, the reasons of King CJ, while brief, were incisive (and in many ways presaged the later reasons of the House of Lords in Dubai Aluminium). In the broader history of the principle, including its application in Brydges v Branfill and the developments in Canada and the United Kingdom, Coulthard forms part of the thread of cases illuminating an ancestry and a practice of courts administering equitable jurisdiction applying the principle of vicarious liability.

129. [1771]

     Finally, Besanko J formed the view that the application of vicarious liability to equitable wrongs would make significant inroads on principles of third-party liability in Barnes v Addy. It is well-known that there are two limbs to such liability (knowing receipt and knowing assistance – see Lord Selborne LC at 251-252). Emphasis was there placed on the proposition that barring the requisite knowledge and involvement, a stranger should not be held liable as a constructive trustee merely because the stranger acts as the agent of a trustee in transactions within its legal powers. However, in this sense it may be said that an employer made liable on the principles of vicarious liability is not a stranger; rather, on this hypothesis the employer has put the employee in the position to perform the class of acts that enabled the employee to breach or assist in a breach of duty. The fact that conceptually the principles of third-party liability in Barnes v Addy and vicarious liability may serve distinct purposes (broadly speaking, the one being to protect and uphold fiduciary obligations the other being to hold the employer responsible for wrongful conduct sufficiently connected with the course of employment) does not to my mind provide a reason why liability under Barnes v Addy cannot co-exist with the application of vicarious liability to equitable wrongs. I do not accept that application of the principle of vicarious liability to equitable wrongs will necessarily derail the knowing assistance principles. This may be yet another area of the law where the same conduct may give rise to different causes of action (with different elements to be proved and potentially different remedies that could be available).

130. [1772]

     Ultimately, my review of the authorities and the reasons given in those authorities as to the application of vicarious liability to equitable wrongs leads me to conclude that I should follow Coulthard (with all due respect and conscious of the contrary view taken by Besanko J in Lifeplan Australia), noting that the High Court has left open the possibility of such an application of the principle of vicarious liability. Insofar as it is suggested that such a conclusion would involve an impermissible extension of common law principles to equitable wrongdoings at this level of the judicial hierarchy, I consider that I am bound to follow intermediate appellate authority unless persuaded that it is plainly wrong. Insofar as it is suggested that such an extension is unprincipled or would be based on an unsecure foundation or would lead to incoherence in the law, I disagree (but accept that is thus for others in due course no doubt to determine).

131. [1773]

     Thus, I have concluded that (assuming the basis for application of the principle of vicarious liability is here established on the facts) Patersons could be held vicariously liable for conduct of Mr Doherty and Mr Carolan amounting to an equitable wrong. However, as it transpires, I consider that no such liability arises in the present case, as a threshold matter because I am not persuaded that there were fiduciary duties owed as alleged, and even if there were and they were breached then: as to Mr Doherty, because it has not been established that he knowingly assisted in such breaches; and, as to Mr Carolan, because his knowledge and actions were outside the scope of and not sufficiently connected with his employment (he being clearly on a frolic of his own).

Claims

1. [1774]

   Turning then to the claims made against the various defendants, I propose to deal first with liability in respect of the claims for breach of fiduciary duty (and, where relevant, breach of contractual obligations to like effect), then the various knowing assistance before turning to the for claims for breach of contract or breach of confidence; and then issues as to causation and quantification of loss.

Fiduciary duties

1. [1775]

   The alleged fiduciaries to be considered are Ms Garrett and Mr Renauf, on the one hand, and Patersons, on the other. It is necessary to determine whether these defendants owed fiduciary obligations and, if so, whether those fiduciary obligations were breached.

2. [1776]

   In summary, Ms Garrett is alleged to have owed fiduciary obligations by reason of: her responsibilities and authority at Ashington, and her title of Head of Funds Management (see [196]; [197(a)] of the third further amended statement of claim); her acting as Ashington’s liaison for the Stonington Capital Raising; her knowledge that Ashington Capital had to refinance the Investec security quickly; that she was under minimal supervision; had the authority of Ashington Management; and had Ashington’s trust and confidence (see [197(c)-(h)] of the pleading).

3. [1777]

   It is pleaded (at [197(g)]) that Ms Garrett had “both scope and opportunity to exercise the discretions and powers in her role at Ashington unilaterally in a way which could affect detrimentally the interests of the Ashington companies”. (Ms Garrett and Mr Renauf say that this is a non sequitur and that none of the foundational facts supports the conclusion that Ms Garrett had any discretions or powers.)

4. [1778]

   Particulars were sought of the duties, responsibilities, and authority of Ms Garrett on which the plaintiff relied to support the existence of a fiduciary duty. In response, the plaintiff referred to specific paragraphs of Mr Anderson’s 19 December 2017 affidavit, and the documents referred therein (namely, [130], [148], [153], [156], [172], [236], [249], [250], [253], [257], [263], [264]-[269], [276], [280]-[284], [372]). Ms Garrett and Mr Renauf say that a close analysis of the identified paragraphs is of no assistance (suggesting that this is nothing more than a recitation of the paragraphs of Mr Anderson’s affidavit that contain the word “Garrett”). By way of example, reference in that regard is made to [153], which refers to a request for a resume.

5. [1779]

   Ms Garrett’s case is that she possessed no authority capable of establishing a fiduciary duty.

6. [1780]

   Mr Renauf is alleged to have owed fiduciary obligations by reason of: his duties, responsibility and authority at Ashington; his title of Head of Acquisitions and Planning; his access to confidential information; the trust and confidence placed in him by Ashington Management (see [223]; [224] of the pleading).

7. [1781]

   Particulars were sought of the duties, responsibilities and authority of Mr Renauf on which the plaintiff relied to support the existence of a fiduciary duty. The plaintiff’s response referred to paragraphs of Mr Anderson’s 19 December 2017 affidavit, and the documents referred to therein (namely, [157], [171], [257], [280]-[284], [325], [372]). Again, complaint is made by Ms Garrett and Mr Renauf that these particulars are essentially meaningless. It is noted that [171] is a reference to a fortnightly meeting; [257] is a reference to Mr Renauf attending meetings with superannuation fund investors; [280]-[284] refer to discussions and emails involving Ms Garrett. Ms Garrett and Mr Renauf say that (contrary to [224(f)] of the pleading) there is no evidence of Mr Renauf’s actual duties, or evidence of him holding or exercising any relevant power or authority.

8. [1782]

   It is submitted that the allegations of breach are equally defective. For example, it is said that the allegation that Mr Renauf was present at meetings can hardly be a basis for establishing a fiduciary duty which was breached (see [219(b)] of the pleading); nor can receipt of an email be a breach of fiduciary obligation (referring to [219(c)] and [219(d)] of the pleading). As to the reference to “keeping [matters] secret” it is noted that the proscriptive nature of fiduciary duties does not impose an obligation to disclose matters.

9. [1783]

   As noted earlier, Ms Garrett and Mr Renauf were both employed by Valad prior to February 2009. Although there was no copy of their Valad employment contracts in evidence, it does not appear to be disputed (and I would infer from the contemporaneous documents) that those contracts contained (respectively) “gardening leave” clauses of six months (in the case of Ms Garrett) and three months (in the case of Mr Renauf). By way of contemporaneous evidence supporting such an inference I note that: Ms Garrett in her own documents referred to the Valad contracts imposing non-compete clauses of 6 months and 3 months and in an email (sent on 9 August 2009 containing an “Action Sheet” for Ashington projects) advised that “Valad has confirmed that my last day of gardening leave is Friday, 11 September. So my start date at Ashington will be Monday, 14 September”.

10. [1784]

    While there is some lack of clarity as to Ms Garrett’s precise start date at Ashington, the plaintiff suggests – and I would accept – that this appears to be a product of concerns regarding her contractual obligations to Valad. Certainly, while it is apparent that, by 21 September 2009, Ms Garrett was working from the Ashington offices, the documents suggest (see chronology of events above) that Ms Garrett actually started doing work for the Ashington group at an earlier stage. It appears that, from April 2009, Ms Garrett provided some assistance with AOF3 and attempted to find new business for Ashington Capital in the form of “club deals”, including involvement in progressing “Project Spring” and “Project Mac”, and dealing with overseas investors about potential investments (such as “Och Ziff”). These projects (which were never completed) appear to have still been continuing by 3 September 2009, although in the following week Ms Garrett’s attention had been redirected to Stonington.

11. [1785]

    There is no dispute that Mr Renauf started work with Ashington in July 2009 (Ex C at Tab 1).

12. [1786]

    There is also no dispute that Ms Garrett and Mr Renauf never executed an employment agreement with any entity in the Ashington group (Mr Anderson accepts this in his 19 December 2017 affidavit at [158]).

13. [1787]

    Draft agreements for each of Ms Garrett and Mr Renauf were sent to Ms Garrett by email on 1 May 2009 but those agreements left unresolved what I would accept to be key issues, including the scope of employment and the entirety of the remuneration conditions (while detailing a salary of $350,000, 5% equity vested within a six month period (including one board seat), a sign on fee of 70% of the salary, and superannuation at 9% of the salary, the contract did not deal with executive bonus payments or deal with the equity arrangement in detail – Mr Minahan noting in the email that separate agreements would be made).

14. [1788]

    As at 1 July 2009, the terms of a sign on bonus were still being negotiated and there were still negotiations as at 8 August 2009 in relation to the bonus structure. (I interpose to note that, within Ms Garrett and Mr Renauf’s “proposed bonus structure” sent on 8 August 2009, they propose that the carried interest allocation “is shared equally between the four key executives, namely, CA, CM, SR and NG” and state that “the concept of ‘carried interest’ is normally confined to Directors/Founders/ Nominated Key Personnel”, therefore, at that stage, Ms Garrett and Mr Renauf sought to place themselves at the same level as Mr Anderson and Mr Minahan, at least with respect to entitlement to bonuses.) Ms Garrett and Mr Renauf emphasise that there are no contemporaneous documents that suggest these negotiations ever concluded. It is thus submitted by them that it should be found that no concluded contract was ever agreed.

15. [1789]

    It is not disputed that, while working within the Ashington group, each of Ms Garrett and Mr Renauf was paid a salary of $350,000, plus superannuation, and that each had Ashington business cards, an Ashington e-mail address, a work station at Ashington’s offices, laptop, mobile phone, corporate credit card, after-hours building access and car parking.

16. [1790]

    Ashington Management’s general ledger electronic clearing account (1-1420) records that Mr Renauf was paid $4,587 on 7 July 2009, in accordance with a request made of Ashington’s in-house accountant (Mr Marsden) on that day, and that there were regular and periodic payments to Mr Renauf of $8,841 (Ex C at Tab 14). On 10 July 2009, Mr Renauf was asked to provide his tax file number to Ashington for tax purposes. His email signature identifying him as “Head of Acquisitions” was set up on 24 July 2009 (the email noting that Ms Garrett’s would be created in September) (Ex C at Tab 4).

17. [1791]

    Reference is also made to the email sent on 13 October 2009 by Mr Carolan to Ms Garrett referring to a payment Ms Garrett had received of $4,080 described as “salary” from Ashington the previous week. It is noted that this payment corresponds with entries in Ashington Management’s general ledger electronic clearing account (1-1420) recording a payment of $4,080 to Ms Garrett on 8 October 2009.

18. [1792]

    Within Ashington, Ms Garrett and Mr Renauf were given the titles of Head of Funds Management and Head of Development respectively (in which roles the plaintiff maintains that Ms Garrett and Mr Renauf were senior employees and owed fiduciary duties to Ashington not to use their positions for their own, or a third party’s, advantage and to avoid any potential or actual conflict between their duties to Ashington and their personal or third-party interests).

19. [1793]

    The position of the plaintiff appears to be that there was an acceptance of the terms set out in the draft employment agreement issued to Ms Garrett and Mr Renauf (by reference to matters such as the payment of salary), even though a written contract of employment was never executed.

20. [1794]

    Ms Garrett and Mr Renauf say that it would not be inferred that a contract had been concluded, noting that there is no pleading of any material facts that would be necessary for an inference to be drawn about a concluded agreement. In particular, it is noted that there are no material facts of “acceptance” (a necessary component of contract formation). Rather, at [206]ff and [233]ff of the pleading, there are pleaded express and implied terms that assume the existence of a contract of employment. It is said that the plaintiff should be held to the pleading, and not permitted to advance unpleaded allegations.

21. [1795]

    Ms Garrett and Mr Renauf say that they never concluded the negotiations of their employment contract and were still negotiating at least one essential term of that contract by the time of their resignations. It is said that this is sufficient to dispose of the plaintiff’s contention that there was a concluded contract. In that regard, it is submitted that the “course of communications” referred to in the plaintiff’s oral closing submissions must be a reference to unpleaded material facts that could not support the ‘unequivocal’ assent required by the authorities; and that the plaintiff’s submission (at [161]) that the terms of what was plainly a draft agreement provided to Ms Garrett and Mr Renauf were binding on them should be rejected.

22. [1796]

    Further, Ms Garrett and Mr Renauf say that if, contrary to their contentions, there was a concluded contract, then it is necessary to consider whether the terms pleaded can be implied. Ms Garrett and Mr Renauf say that there is no basis to imply any of the terms alleged by the plaintiff (i.e., terms of good faith, honesty, best interest) unless an employment contract was concluded. It is said that the Court would not find a concluded employment contract; and that none of the purported implied terms satisfies the BP Refinery test (referring to BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 286 where Viscount Dilhorne, Simon and Keith LJJ held that to imply a term into a contract, it must: be reasonable and equitable; necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; be so obvious that “it goes without saying”; be capable of clear expression; not contradict any express terms of the contract).

23. [1797]

    As a matter of legal principle, it is noted that a contract will fail where an essential term is not agreed (see Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [31] per French CJ, Kiefel and Bell JJ); that price is an essential term (see JW Carter, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths) (Contract Law in Australia) at [4-01]; May and Butcher v R [1934] 2 KB 17; [1929] AII ER Rep 679, where price held to be an essential term of sale at 21 per Viscount Dunedin); that an agreement to agree on essential terms is not enforceable as a contract (Coal Cliff Collieries Pty Ltd v Sijehama (1991) 24 NSWLR 1 at 22 per Kirby P (with whom Waddell AJA agreed), 40 per Handley JA); that for conduct to amount to an acceptance of an offer it must be an unequivocal assent to the terms of the offer, and “the character and circumstances of the conduct” must indicate unambiguously the parties intended to contract and that “no explanation can be given of it unless it refers to the contract in question” (Brambles Holding Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 (Brambles) at [173] per Mason P, Heydon JA and Ipp AJA (which I extract below); Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 at [5]-[6] per Macfarlan JA (with whom Beazley JA, as Her Excellency then was, agreed)); and that the conduct must be capable of proving all the essential elements of an express contract (Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11, 117-11, 118 per McHugh JA (with whom Hope and Mahoney JJA agreed)).

24. [1798]

    In Brambles what was said at [173] was:

25. [1799]

    I cannot accept that there was a binding contract of employment. There was no signed contract of employment; key terms of the draft contracts were still either being negotiated or perhaps had been left for future negotiation (in circumstances where there were pressing other matters to which to attend and at some point it appears that at least Ms Garrett was undecided as to whether to continue working at Ashington – irrespective of the outcome of the proposals for refinancing). The parties simply seem to have been proceeding on the basis that there was some informal agreement or understanding that the two would perform the roles indicated by their titles and be treated as employees of the organisation with a concluded contract still to be executed. I do not accept that the evidence establishes an unequivocal acceptance by conduct of the draft contract (and even if it did I doubt that it would be enforceable absent agreement on what were clearly key terms of remuneration).

26. [1800]

    That leaves to be determined the status of Ms Garrett and Mr Renauf within the Ashington group. The plaintiff says (and I agree) that there is no evidence to support the contention that Ms Garrett and Mr Renauf were independent contractors (such as the issuing of invoices to Ashington for their services); and the plaintiff says that it was not asserted by either of them during the course of their employment with Ashington that she or he was an independent contractor.

27. [1801]

    Relevantly, when Ms Garrett and Mr Renauf settled a dispute between them and the Ashington entities arising out of the termination of their employment on 16 April 2020, they did so by entering into a deed in which they acknowledged they had been employees of Ashington. The Deed of Acknowledgement to which reference is here made was between various Ashington entities, Parissen and another Parissen entity, and each of Ms Garrett and Mr Renauf. Clause 2.1 of the Deed provided that:

28. [1802]

    Pausing here, this is clearly an acknowledgment of an employment relationship (with the “Ashington Parties” plural) that had been terminated; it does not in terms acknowledge an employment contract as such.

29. [1803]

    In my opinion, the evidence comfortably leads to the conclusion that there was a common law employment relationship between the respective parties, not documented by any binding agreement. That gives rise to the pleading issue raised by Ms Garrett and Mr Renauf.

30. [1804]

    In closing submissions, the plaintiff relied in the alternative on a common law employment relationship. Ms Garrett and Mr Renauf say that this allegation is not pleaded and that the plaintiff should not be allowed to pursue a claim based on an unpleaded common law employment relationship. (It is further said that this appears to have been expressly abandoned in respect of Mr Renauf (at [223]) where the only reference to an “employment relationship” has been struck through – this appears to be a reference to [223] of the third further amended statement of claim, the equivalent paragraph of which in the third further amended statement of claim does not refer to Mr Renauf’s “employment relationship”.) It is noted that there is a difference between a cause of action based on a pleaded contract and one based on a common law relationship of employment. Ms Garrett and Mr Renauf say that each of the factors identified in the plaintiff’s submissions at [147]ff is a material fact that ought to have been pleaded in support of this new cause of action (and there has been no application for amendment in that regard, notwithstanding the issue being raised during the opening submissions).

31. [1805]

    I consider this pleading issue in due course. Suffice it at this stage to note that the plaintiff says that the existence of fiduciary duties owed by Ms Garrett and Mr Renauf to Ashington Management and Ashington Capital does not depend on the characterisation of their relationship with Ashington Management as one of employment.

32. [1806]

    I have referred above to the particulars that were provided as to the basis on which it is said that each of Ms Garrett and Mr Renauf owed fiduciary duties to the Ashington entities.

33. [1807]

    Reliance is placed by the plaintiff on what said by Mason J, as his Honour then was, in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 (Hospital Products) where his Honour included “employer and employee” among the list of “accepted fiduciary relationships)” and said (at 97, [68]), that:

34. [1808]

    The plaintiff says that the relationship between a company and its senior employees generally (if not invariably) satisfies that description. It is said that that fiduciary relationship has the result that a “senior employee who takes up a business opportunity within the scope of the company’s actual or potential line of business, without the consent of the company upon full disclosure of the facts, may be required to account to the company for any profit made or to compensate it for any loss suffered” (Colour Control Centre Pty Ltd v Ty (1996) 39 AILR 5-058; [1995] NSWSC 96 (Colour Control Centre) at [46] per Santow J); and that the “unconscionability which attracts equitable remedies in such circumstances” may be seen to lie “in pursuit by the fiduciary of self-interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal”, such as the interests of a third party (Ancient Order of Foresters at [69] per Gageler J).

35. [1809]

    The plaintiff points out that fiduciary duties do not arise from a person holding a particular status but, rather, from what the person undertakes (or is deemed to have undertaken) to do in the particular circumstances. Reference is also here made to Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 (Grimaldi v Chameleon Mining), where the Full Court of the Federal Court (Finn, Stone and Perram JJ), while noting that there was “no generally agreed and unexceptional definition” of a fiduciary, said (at [177]) that:

36. [1810]

    It is noted that features such as ascendancy, influence, vulnerability, trust, confidence or dependence (though not determinative) may indicate the actual circumstances in which such a reasonable expectation (that a party will act in another’s interest to the exclusion of his or her own or a third party’s interest) arises; and that the existence of such factors is equally capable of giving rise to fiduciary duties owed by an independent contractor or employee (referring to the observations of Wigney J in SBA Music Pty Ltd v Hall (No 3) [2015] FCA 1079 (SBA Music) at [14]).

37. [1811]

    The plaintiff says that the obligations of such an employee may readily extend to other companies in a corporate group who rely, in practical terms, on the employee (referring in that context to Oliver Hume where the Full Court found that the employee of a parent company in a corporate group owed fiduciary duties directly to a subsidiary company). It is noted that Greenwood J (with whom White J agreed) in Oliver Hume followed the approach of Finn J in Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; [1995] FCA 1663 in focussing on the practical factual position rather than legal form of the relationship. The plaintiff says that such an approach is consistent with the recognition that even an independent contractor may owe fiduciary duties if “reliance is placed on [him or her] in relation to tasks of special responsibility critical to the financial and reputational well-being of the enterprise” (SBA Music at [14] per Wigney J).

38. [1812]

    The plaintiff points out that the circumstances giving rise to such duties in Oliver Hume included the functions actually performed by the fiduciary, the level of responsibility conceded to him, the capacity to shape and influence decision-making concerning the subsidiary, the vulnerability of the subsidiary to action taken by him and the awareness he must reasonably have been taken to have that he was performing functions that were in fact for the benefit of the subsidiary.

39. [1813]

    The plaintiff argues that Ms Garrett and Mr Renauf were engaged by the Ashington group in senior and important roles (both generally and specifically in relation to the Stonington Capital Raising) which empowered them to affect the interests of Ashington Capital and Ashington Management in a legal and practical sense, and made those companies vulnerable to the abuse by them of their position. Hence, it is said that both owed fiduciary duties to Ashington Management and to Ashington Capital.

40. [1814]

    In particular, the plaintiff says that in the period up until 30 September 2009 Ms Garrett and Mr Renauf were placed in charge of all of Ashington’s dealings with Patersons, Investec, PPB, the superannuation fund investors, and any new investors. It is said that the evidence of Ms Garrett’s activities during this phase (referring to her involvement in the development and entry into the Patersons Mandate, her dealings with Investec, and her communications with superannuation fund investors – see chronology above) shows that Ms Garrett (and Mr Renauf) were trusted by Ashington, and given considerable responsibility and independence; and that Ms Garrett, in particular, had good existing relationships with Mr de Rooy (of Investec) and some of the representatives of the superannuation fund investors, which it is said gave her the ability to influence those people. It is noted that Ms Garrett’s opinion in contemporaneous emails was that the Patersons Mandate would likely succeed. The plaintiff submits that Ms Garrett and Mr Renauf were able to persuade the superannuation fund investors to place the sale of the Stonington Property on hold and to allow Ashington 14 days to advance the Patersons Mandate (with a view to replacing Investec, and proceeding with the development); and similarly persuaded Investec to allow six weeks for the mezzanine finance capital raising to be achieved.

41. [1815]

    In that regard, the plaintiff says that Ms Garrett and, to a lesser extent, Mr Renauf were central to the capital raising efforts; and that, recognising that his actions had tarnished Ashington’s relationship with investors, Mr Anderson placed Ms Garrett and Mr Renauf at the centre of his strategy to deal with the Stonington Capital Raising and, in doing so, it is said that Mr Anderson placed Ashington’s financial survival in their hands. It is noted that Mr Anderson had directed staff that communications were to occur through Ms Garrett and made her the primary point of contact for Investec, existing investors, PPB, Patersons and incoming potential investors (see chronology above).

42. [1816]

    The plaintiff points out that, after entry into the Patersons Mandate, Mr Anderson had only infrequent communications with Mr Shorrocks in relation to the fundraising activities being undertaken by Patersons, otherwise leaving it to Ms Garrett to engage with Patersons and keep him updated on progress; and that Patersons’ role was to market the Patersons Mandate, assist with investor due diligence and assist with financial close (with Mr Carolan principally responsible within Patersons for undertaking those tasks).

43. [1817]

    The plaintiff emphasises the importance placed by Ashington on Ms Garrett and Mr Renauf in seeking to secure a successful outcome for the Stonington Capital Raising by reference to the proposal that was prepared on 28 September 2009 to be sent to the existing superannuation fund investors (see chronology above).

44. [1818]

    The plaintiff says that the existence of such fiduciary duties is also apparent from the terms of the employment agreement which was provided to each of Ms Garrett and Mr Renauf on 1 May 2009 (and it is said that this reflected the practical factual relationship with Ashington whether or not the agreements were contractually binding). In particular, reference is made to: cl 1.1.4 of the (unexecuted) employment agreements which prohibited each of them from engaging in any activity that conflicted or was likely to conflict with the interests of Ashington (defined to mean Ashington Management) or the Group (defined to mean Ashington Management and all of its related entities as defined in s 9 of the Corporations Act, which includes Ashington Capital); and cl 9.1 which required that each maintain the confidentiality of Confidential Information (defined broadly to include information related to Ashington Management or a related entity). (Pausing here, I have difficulty in reliance being placed on the terms of draft unexecuted employment agreements in determining whether fiduciary duties were here owed by Ms Garrett and Mr Renauf. The simple fact is that those agreements were not ever executed.)

45. [1819]

    Further, it is said that, as employees, Ms Garrett and Mr Renauf also owed a duty of honesty as an incident of their fiduciary relationship; and that the concealment of facts which they had a duty to disclose plainly constitutes breach of that duty. It is submitted that so much follows, a fortiori, from authority to the effect that each could have been obliged, in the circumstances, to disclose the other’s misconduct to the company. I consider the good faith/honesty obligations arising out of the employment relationship in due course.

46. [1820]

    Ms Garrett and Mr Renauf say that they were not fiduciaries because they did not exercise any power or discretion on behalf of Ashington Capital or Ashington Management; and that, if they were fiduciaries, any duty would be limited to the exercise of a specific power or discretion (and they say that none has been identified).

47. [1821]

    In that regard, Ms Garrett and Mr Renauf note that a fiduciary undertakes to act in the interests of another in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense; this being the critical feature of fiduciary relationships (referring to Hospital Products at 96-97 per Mason J) and that it is necessary to identify with care the particular duties undertaken by the employee and to ask whether, in all the circumstances, the employee has placed himself or herself in a position where he or she must act solely in the interests of the employer (Woolworths Ltd v Olson (2004) 184 FLR 121; [2004] NSWSC 849 (Woolworths v Olson) at [212] per Einstein J). It is noted that the question is one of degree and involves looking at the vulnerability of the employer and whether the relationship requires a standard of loyalty exceeding that in the employment contract.

48. [1822]

    Ms Garrett and Mr Renauf accept that the “responsibilities and functions” of an employee may also support the existence of a fiduciary relationship (citing Gunasegaram v Blue Visions Management Pty Ltd; Same v Chidiac (2018) 129 ACSR 265; [2018] NSWCA 179 (Gunasegaram) at [55] per Meagher JA) but say that, in analysing this issue, the relevant questions to ask are as follows (referring to Oliver Hume at [247] per Greenwood J (with whom White J agreed at [413])).

49. [1823]

    First, whether there was a power or discretion to be exercised by Ms Garrett and Mr Renauf which would affect the interests of Ashington Management and/or Ashington Capital in a legal or practical sense and, if so, whether Ms Garrett and Mr Renauf agreed or undertook, expressly or impliedly, to act for or on behalf of or in the interests of Ashington Management and/or Ashington Capital in the exercise of that power or discretion (i.e., whether Ms Garrett and Mr Renauf were acting in a “representative character” in the exercise of “their responsibility”).

50. [1824]

    Second, whether Ms Garrett and Mr Renauf were afforded a “special opportunity” by reason of their position as employees and fiduciaries of Ashington Management and/or Ashington Capital to exercise a relevant power or discretion to the “detriment” of Ashington Management and/or Ashington Capital thus rendering Ashington Management and/or Ashington Capital “vulnerable to abuse” by Ms Garrett and Mr Renauf of “their position”.

51. [1825]

    Third, whether Ms Garrett and Mr Renauf came “under a duty” to exercise a power or discretion in the interests of Ashington Management and/or Ashington Capital partly by reason of the circumstance that the exercise of the power or discretion could “adversely affect” the interests of Ashington Management and/or Ashington Capital in a legal or practical sense and partly because Ashington Management and/or Ashington Capital was “at the mercy of” Ms Garrett and Mr Renauf in that sense.

52. [1826]

    It is noted that the scope of the fiduciary’s duties must be accommodated to the particular circumstances of the underlying relationship that gives rise to the duties in the first place (reference being here made to Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 (Howard) at [34] per French CJ and Keane J; Hospital Products at 102 per Mason J.

53. [1827]

    Further, Ms Garrett and Mr Renauf contend that the scope of the fiduciary’s duties owed to a trustee company is informed by the following propositions: (a) that the best interests of a trustee company are the best interests of its beneficiaries (citing Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302; [2015] VSCA 9 (Rowley Super) at [228] per Garde AJA, which I extract below); (b) that it has been recognised that “[i]t is not in the best interests of the company for it to act in breach of its duties of a trustee, for the company has assumed the responsibilities of that office and must see to it that they are fulfilled” (Rowley Super at [228]); and (c) that it would be a breach of fiduciary duty to fail to consider the legitimate interests of the beneficiaries of a trustee company (Ying Mui v Hoh (No 6) [2017] VSC 730 (Ying Mui) at [395] per Vickery J).

54. [1828]

    Ms Garrett and Mr Renauf contend that, where there is a conflict between the interests of a trustee company and the interests of its beneficiaries, an employee or director of the trustee company must act in the interests of beneficiaries; and hence they maintain that it must follow that, in acting in the interests of beneficiaries, the employee does not act in breach of duty. They say that, if they did owe duties to Ashington Capital, those duties could not have required them to act in a way that put the interests of Mr Anderson and Ashington Capital above the interests of beneficiaries (i.e., the interests of the superannuation fund investors for whom Ashington Capital was a corporate trustee).

55. [1829]

    Ms Garrett and Mr Renauf say that (contrary to the plaintiff’s submissions at [153]), there is no evidence of Ms Garrett and Mr Renauf exercising power or discretion or being “empowered” in any way. It is noted that Ms Garrett and Mr Renauf were not directors of Ashington Capital or Ashington Management; that there was no formal delegation of any power to Ms Garrett and Mr Renauf; that there was no delegation by Mr Anderson to Ms Garrett or Mr Renauf; and that Mr Anderson accepted as much (see as to Ms Garrett, T 507.45-50; T 508.15; see as to Mr Renauf, T 524.43-50). It is said that Ms Garrett and Mr Renauf did not have the authorisation to approve an investment or execute a term sheet; that, ultimately, in every instance Mr Anderson would make the relevant decision; and that, even if Mr Minahan was a decision-maker, there is no evidence that Ms Garrett and Mr Renauf were also decision-makers.

56. [1830]

    It is thus contended that Ms Garrett and Mr Renauf did not owe a fiduciary obligation because they did not undertake to act in in the interests of Ashington in the exercise of a power or discretion. Ms Garrett and Mr Renauf say that, no matter their titles, they were “finders” not decision-makers. It is contended that Ms Garrett and Mr Renauf: occupied roles that did not involve the exercise of any powers or discretions; did not agree or undertake, expressly or impliedly, to act for or on behalf of or in the interests of Ashington Management and/or Ashington Capital in the exercise of any power or discretion; were not afforded a “special opportunity” by reason of their position as an employee and fiduciary of Ashington Management or Ashington Capital to exercise a relevant power or discretion to the “detriment” of Ashington Management or Ashington Capital; and did not have the ability to bind Ashington.

57. [1831]

    It is not disputed that fiduciary duties are proscriptive, not prescriptive, as they are obligations not to do particular actions (Breen v Williams at 113 per Gaudron and McHugh JJ; Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 at [105] per Besanko J (with whom Finkelstein and Jacobson JJ agreed); Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37 at [121]-[122] per Payne JA (with whom Gleeson and Leeming JJA agreed)). It is noted that the duty is a duty not to use the fiduciary’s position for the fiduciary’s own advantage and to avoid any potential or actual conflict between the interests of the plaintiff and the fiduciary’s own interests (Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 at 198-199 per Deane J; Breen v Williams at 108; Hospital Products at 67 per Gibbs CJ, 107 per Mason J).

58. [1832]

    Ms Garrett and Mr Renauf say that if they owed any fiduciary obligation, the scope of the duty was to act in the interests of beneficiaries (i.e., the superannuation funds) to the extent of any conflict with the interests of Ashington. They say that the identification of an investment opportunity is in the best interests of a trustee company if it is in the best interests of the beneficiaries; even if the interests of the trustee (or Mr Anderson) was not best served by that opportunity. Thus, it is said that if, contrary to their submissions, the Consortium proposal was not in the interests of Ashington, that was because Ashington’s interests conflicted with the interests of beneficiaries. Further, it is said that there was no breach of fiduciary obligation because the beneficiaries knew of, and approved, the Consortium proposal from its inception (and the Consortium proposal was in the interests of beneficiaries).

59. [1833]

    To the extent that the plaintiff seeks to impose or rely on a positive obligation on the part of Ms Garrett and Mr Renauf actively to disclose matters to Mr Anderson, Ms Garrett and Mr Renauf say that this should be rejected. In this regard, Ms Garret and Mr Renauf refer to the allegations about receiving and keeping secret the October 2009 emails about the opportunity for assets of Ashington to be transferred to a new manager (see [105]; [107]; [192(c)-(d)] of the third further amended statement of claim) and keeping the Arnold Bloch Leibler advice secret from Ashington (see [109]; [192(e)] of the third further amended statement of claim).

60. [1834]

    As noted above, I do not accept that there was a concluded employment contract as such, given that essential terms of the contract remained the subject of negotiation.

61. [1835]

    However, I do accept that there was an employment relationship between Ms Garrett and Mr Renauf and Ashington Management (the entity which paid their salaries) and that the employment relationship was one that encompassed a role of some kind more generally within the Ashington group (as evident by the presentations made by them on behalf of Ashington Capital and as acknowledged in the settlement deed following the termination of their employment).

62. [1836]

    In that regard, it is relevant to note that distinctions have been drawn between an employment relationship and a contract of employment, particularly with regard to termination (see the discussion in Tullett Prebon (Australia) Pty Ltd v Purcell (2008) 175 IR 414; [2008] NSWSC 852 at [30] per Brereton J, as his Honour then was; Tullett Prebon (Australia) Pty Ltd v Purcell [2009] NSWSC 1079 at [40]-[41]: Melbourne Stadiums Ltd v Sautner (2015) 317 ALR 665; [2015] FCAFC 20 at [187] per White J).

63. [1837]

    As to whether Ms Garrett and Mr Renauf, as employees under a common law relationship agreement (since I accept that there was no concluded employment agreement as such), owed fiduciary duties to any of the Ashington companies, the starting point is the consideration in the authorities that the more senior an employee, the more likely that the employee’s duties will be fiduciary in nature (see, for example, Colour Control Centre at [48] per Santow J).

64. [1838]

    In Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104 at [129], Rothman J (referring to Concut Pty Ltd v Worrell (2000) 176 ALR 693; [2000] HCA 64 (Concut)) affirmed that the relationship of employer and employee was one “importing implied duties of loyalty, honesty, confidentiality and mutual trust” (citing Concut at [51] per Kirby J).

65. [1839]

    However, in Woolworths v Olson (at [214]), Einstein J noted that the mere existence of an employment relationship does not necessarily give rise to a fiduciary duty. It is to be “contrasted with a number of other relationships which can readily and universally be recognised as ‘fiduciary relationships’ because the very essence of the relationship is that one party must exercise his powers for the benefit of another” (see Nottingham University v Fishel [2000] IRLR 471 (Nottingham University) at 483 per Elias J). In Woolworths v Olson (at [214]), Einstein J relied on the following passages in Nottingham University (at 483ff):

66. [1840]

    Fiduciary duties may be derived from the existence of a contract of employment (see Spigelman CJ in Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; [2003] NSWCA 10 at [43]-[44]). However, the lack of an employment contract is not a bar to the finding of fiduciary duties (see AMP Services Ltd v Manning [2006] FCA 256 (AMP Services v Manning) at [55] per Finkelstein J; Labelmakers Group Pty Ltd v LL Force Pty Ltd (No 3) [2013] FCA 1059 at [82] per Tracey J).

67. [1841]

    Relevantly in AMP Services v Manning Finkelstein J considered (at [55]) that fiduciary obligations arose by reason of the fact that the relevant person (Ms Manning) though not an employee of the entity in question (Arrive) had been retained by AMP Services to work for Arrive; had been appointed as the head of Arrive’s Victorian office “and thus undertook to act in its interests”; had been given powers which would affect the interests of Arrive; and there was a relationship of trust and confidence between Ms Manning and Arrive. His Honour held that the absence of a contract of employment did not deny the fiduciary character of the relationship between Arrive and Ms Manning.

68. [1842]

    Thus, the absence of an executed contract is not a bar to a finding that fiduciary duties arose out of the employment relationship between Ms Garrett and Mr Renauf and Ashington Management (if not Ashington Capital).

69. [1843]

    As discussed by Foster J in Bayley and Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 (Bayley v DBR) at [230]-[232], while it is more often accepted that senior employees with managerial responsibilities owe fiduciary obligations, the question as to the existence of fiduciary duties on the part of the employee remains one of degree. The following factors are relevant to the existence of a fiduciary relationship: (i) the latitude afforded to the employee; (ii) the level of vulnerability arising from the potential misuse of power granted by the employer to the employee; (iii) whether the employment relationship demands a standard of loyalty exceeding the duty of fidelity prescribed by the employment contract (see Bayley v DBR at [232]). Further to this, I note the factors set out by Einstein J in Woolworths v Olson extracted above, particularly as to what is considered the “critical feature”, that “the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect in a legal or practical sense the interests of that other person”.

70. [1844]

    In the present case, the individuals in question clearly occupied senior positions (apart from their titles, it appears that they had the responsibility of liaising directly with potential investors and the superannuation fund investors and within Ashington there was a direction that all communications with the latter were to be through them). That said, I accept that the precise nature of their roles and duties was not clear (and I regard their resumes as of little use in enlightening me in this regard – not least because such documents may well be seen as self-serving).

71. [1845]

    However, it does not appear to be the case that powers or discretions as such were delegated to or exercisable by either of them. The high point of the nature of their employment relationship seems to be that there was trust and confidence reposed in them to negotiate commercial deals and to “package” proposed refinancing arrangements. True it is that they appear to have been effectively left unsupervised (although there was evidence that Mr Anderson sought to be involved from time to time and was dissuaded from so doing) but it is clear that they were expected to report on their activities and that they were not the ultimate decision-makers. I accept that they were in a position where the Ashington companies were vulnerable if they chose to abuse their position (but to a certain extent that might be said of many employees of professional services firms once they have a degree of autonomy). It is significant in my opinion that, unlike the position in AMP Services v Manning, there is no suggestion that they were given powers as such, the exercise of which would affect the interests of the Ashington group.

72. [1846]

    Ultimately, one might test it this way - say a senior associate in a transactional team at a law firm or accounting firm is given the responsibility of dealing with the firm’s clients or prospective clients directly (and without immediate supervision, albeit with an expectation that there would be a report back to the relevant principal of the firm who would make the relevant decisions), this would leave the firm no doubt vulnerable to abuse or exploitation by the employee, but I am not persuaded that this amounts to a fiduciary relationship without more.

73. [1847]

    In particular, I am not satisfied that the relationship is one that requires a standard of loyalty beyond that of an ordinary employment relationship with a senior employee. Certainly, I consider that Ms Garrett and Mr Renauf were more than “finders”, in the sense that Ashington (and Mr Anderson in particular) relied on them (or at least Ms Garrett) to negotiate with and make presentations to potential investors and the superannuation fund investors. However, neither was in the position to commit Ashington to any exercise of power or discretion.

74. [1848]

    I note that, while much has been said (and there is much in the contemporaneous documentation) about Ms Garrett’s role in the scheme of things, Mr Renauf (with no disrespect to him) appears to have been something of a “sidekick” or subordinate to Ms Garrett (even though they were on equivalent remuneration packages). Perhaps I am doing a disservice to Mr Renauf in that regard (since he at least appears to have had the responsibility for progressing deals such as the sale of 10 Wylde Street). However, Mr Renauf was copied into most of the communications; was sufficiently involved in the matter to have been described as an essential part of the new management team; and in any event, Mr Renauf could have given evidence to explain that his role was materially different in scope or significance to that of Ms Garrett or to shed light on his position; and he did not do so.

75. [1849]

    I would therefore infer that the roles of both Ms Garrett and Mr Renauf were essentially equivalent in status (although Ms Garrett seems to have had the principal role in preparing for presentations to superannuation fund investors and potential investors) and I am reinforced in that conclusion by the documentary evidence that portrayed Mr Renauf’s proposed involvement in the new entity as an essential part of the Parissen Proposal.

76. [1850]

    Ultimately, however, I am not persuaded that either Ms Garrett or Mr Renauf owed fiduciary duties (as opposed to duties of good faith, honesty and loyalty) to the Ashington companies.

77. [1851]

    It is also relevant here to address the submission that Ms Garrett and Mr Renauf ultimately owed duties to the beneficiaries or to the effect that their duties to the Ashington entities could not have been breached if they were acting in (what they perceived to be or what might in hindsight be said to be) the best interests of the beneficiaries (i.e., the superannuation fund investors).

78. [1852]

    In a discussion concerning the fiduciary duties of a director to a trustee company, Phillips J in Young v Murphy, stated (at 301-302) that “if the company be a trustee for others of certain property held by it or if the company carries on trading as a trustee for others, that matters not (at least ordinarily) to the definition of the duties owed by the directors to the company”. In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd (2004) 22 ACLC 724; [2003] QSC 402 at [35], Chesterman J considered that Young v Murphy indicated that employees and directors of a trustee company do not owe fiduciary obligations directly to beneficiaries.

79. [1853]

    In Rowley Super at [227]-[229] Garde AJA stated that:

80. [1854]

    The difficulty here is whether an employee holds a duty to its employer that is equivalent to a director or officer’s duty to act in the best interests of the company or, for present purposes, the trustee company.

81. [1855]

    It is well established that a duty to act in good faith towards the employer is implied into the employment contract (Robb v Green [1895] 2 QB 315 at 317 per Lord Mesher MR). This is commonly referred to as a duty of fidelity. However, that is not equivalent to the greater obligation of a fiduciary to act in the best interests of another. As already addressed, such a fiduciary duty does not automatically arise in every employment relationship (Investa Properties Pty Ltd v Nankervis (No 7) (2015) 333 ALR 193; [2015] FCA 1004 (Investa Properties) at [66]; Nottingham University v Fishel); and when a fiduciary duty does arise its scope must be considered in light of the employment contract and the particular circumstances of the employment relationship in question. As Foster J stated in Bayley v DBR:

82. [1856]

    I do not accept that it follows that the characterisation of a director’s duty to act in the best interests of a trustee company means that an employee of the trustee company would owe fiduciary obligations or other obligations to the beneficiaries of the trustee company; even where a fiduciary duty arose (as its scope would depend on the particular facts and circumstances). Further, I do not consider that it is an appropriate answer to an allegation for breach of duties (of whatever kind) owed to the employer that the employee considered the conduct to be in the best interest of the beneficiaries (or that it might objectively be seen as being in the best interest of the beneficiaries). The duties owed by Ms Garrett and Mr Renauf (albeit that I consider they were not fiduciary) were owed to their employer – and if there was perceived to be a conflict between those duties and the interests of beneficiaries the answer would not lie in Ms Garrett and Mr Renauf simply choosing unilaterally to breach their duties of good faith and honesty to their employer.

83. [1857]

    That said, relevant to note at this point is that I have concluded that Ms Garrett and Mr Renauf did not owe fiduciary duties to the Ashington companies or group.

84. [1858]

    As to the position of Patersons, the plaintiff points to the appointment of Patersons under the Patersons Mandate in September 2009 as lead manager to raise $11-15 million in mezzanine finance in order to restructure the existing debt facilities for the Stonington Property; emphasising that Patersons’ function was that of an adviser, rather than a financial counterparty, to Ashington Capital.

85. [1859]

    The plaintiff says that the terms of the Patersons Mandate give rise to fiduciary duties owed by Patersons to both Ashington Capital and Ashington Management (the latter not itself a party to the contract albeit that it is said that it was included within the definition of the entities to which obligations were owed), irrespective of whether the Patersons Mandate, or any particular terms of it, came into effect. In particular, it is said that, in engaging Patersons for the purposes of the Stonington Capital Raising, both Ashington Capital’s and Ashington Management’s income streams were vulnerable to the abuse by Patersons of its position (in precisely the way which occurred when Patersons helped to advance a proposal to replace those entities as trustee and manager).

86. [1860]

    The plaintiff alleges that the fiduciary relationship between Patersons and Ashington Capital (as well as Ashington Management) arose from the particular features and circumstances of the Patersons Mandate (see at [237] of the pleading), it being alleged that Patersons was under a fiduciary obligation to Ashington Capital and Ashington Management: not to use its position for its own or a third party’s advantage; and to avoid any potential or actual conflict between its duties as an advisor to the Ashington companies and its own personal interest or the interest of a third party.

87. [1861]

    In this regard, the plaintiff says that contractual and fiduciary relationships can co-exist and that there is nothing in the Patersons Mandate between Ashington Capital and Patersons that would operate to exclude or modify such fiduciary duties. The plaintiff submits that the relationship between financial adviser and client is one involving elements of trust, confidence and vulnerability requiring undivided loyalty and giving rise to fiduciary duties; and that, consistent with this, a broker seeking to raise capital for commission has been compared to a stockbroker who owes fiduciary duties to their client.

88. [1862]

    The plaintiff says that the existence of fiduciary duties owed by Patersons directly to Ashington Capital and Ashington Management is bolstered in circumstances where, through its further amended defence, Patersons no longer contends that Patersons was under no obligation to take further steps to progress the Patersons Mandate due to a failure to satisfy particular conditions precedent. (That concession is said to have been inevitable in the light of Mr Shorrocks’ evidence that such conditions were only intended to be satisfied once capital had been successfully raised – T 754-760.)

89. [1863]

    Patersons says that the allegation that it owed fiduciary obligations to Ashington Capital and Ashington Management is flawed on the basis that a fiduciary relationship cannot be superimposed upon a contract in order to alter the operation of that contract, on its proper construction. It is said that, in circumstances where the contractual relationship between Patersons and Ashington Capital (in its capacity as trustee of ADF2) was purely of a commercial kind between two sophisticated corporate parties, no fiduciary obligation arose. Reference is made to Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193 (Schmidt) at [89]-[90], where the Victorian Court of Appeal noted that there is no comprehensive statement of the criteria by reference to which the existence of a fiduciary relationship may be established; that the creation of a joint venture relationship is not, in itself, determinative of whether a fiduciary relationship exists; and that, once a fiduciary relationship is found to exist, the duties of the fiduciary will vary according to the circumstances which generate the relationship (i.e., the scope of the fiduciary duty will depend on the nature of the relationship and the facts of the case; and may be determined by reference to the terms of the agreement giving rise to those obligations and also by reference to the course of dealings actually pursued by the parties) (see at [89]ff).

90. [1864]

    Patersons says that the alleged fiduciary duty here does not fall within any established category of fiduciary duty, noting that Patersons was not engaged by Ashington as its stockbroker (as, for example, in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25); rather, Patersons’ corporate finance division was engaged as a “Lead Manager” to assist Ashington raise capital. It is said by Patersons that the role of a “Lead Manager” in a capital raising is analogous to other underwriting and capital raising activities performed by financial institutions and is fundamentally different in character to the role of stockbroker or investment adviser in advising a client (often an individual) whether or not to buy securities.

91. [1865]

    It is noted that the imposition of a fiduciary duty has been rejected in not dissimilar contexts, including where the arrangement is the result of arm’s length negotiation between sophisticated parties which is inconsistent with the relationship of trust and dependency from which fiduciary duties arise (citing EBC, Inc v Goldman Sachs & Co, 91 AD.3d 211 (N.Y. App. Div 2011)). It is noted that one of the indicia of a fiduciary relationship (vulnerability) is invariably absent in that context. It is said that the absence of vulnerability is even clearer here because the sophisticated corporate client was led by Mr Anderson who professes to have extensive knowledge and experience in capital raising (including through ADF, AFD2 and the proposed AOF3) and the operation of financial markets.

92. [1866]

    Patersons points out that each sub-paragraph of [238] of the statement of claim (with the exception of (m), which is merely ancillary to the preceding sub-paragraphs) specifically refers to, and is premised upon the existence of, the Patersons Mandate. It is submitted that this conflation of Patersons’ contractual obligations with a broader fiduciary duty allegedly owed to Ashington Capital and Ashington Management is conceptually flawed.

93. [1867]

    First, Patersons says that its contractual obligations were only owed to Ashington Capital as trustee for ADF2 (i.e., for the benefit of the unitholders in that trust); there was no other relationship (pleaded or otherwise) between Patersons and Ashington Management. Patersons says that a fiduciary relationship cannot be superimposed upon a contract in order to alter the operation that the contract was intended to have according to its proper construction (citing John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [91]-[92] per French CJ, Gummow, Hayne, Heydon and Kiefel JJ). In circumstances where Ashington Management was not a party to the Patersons Mandate in any capacity, it is said that the plaintiff has pleaded no justification for any fiduciary obligations that Patersons may have owed to Ashington Capital being extended such that identical obligations were also owed to Ashington Management. A related difficulty with the alleged fiduciary duty is said to be that it assumes that Patersons’ contractual obligations were for the benefit of Ashington Capital in its own capacity; as distinct from in its capacity as trustee for the unitholders of ADF2.

94. [1868]

    Second, that where an arrangement between parties is of a purely commercial kind, and they deal at arms’ length and on equal footing, no fiduciary duty generally arises. Patersons says that, in circumstances in which Ashington Capital and Ashington Management were plainly sophisticated commercial entities involved in property transactions of significant value, the relationship between those companies and Patersons cannot be characterised as one of a fiduciary nature. It is said that the fact that Ashington Capital and Ashington Management might have relied on Patersons to source potential investors in the Stonington Capital Raising, and conduct the transaction as Lead Manager should such an investor or investors be located, does not give rise to a fiduciary relationship.

95. [1869]

    Third, that a fiduciary obligation cannot modify the operation or effect of a statute (as to allow it to do so would be “to give equity supremacy over the sovereignty of Parliament” – see Cubillo v Commonwealth (2001) 112 FCR 455; [2001] FCA 1213 at [465] per Sackville, Weinberg and Hely JJ). Patersons points out that its business is heavily regulated (and was at the relevant time). It notes that under s 912A(aa) of the Corporations Act it was required to “have in place adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in relation to activities undertaken” by it. It is said to be clear from the text of s 912A(aa), that Patersons’ statutory obligation with respect to conflicts of interest was to “manage” (not to eliminate or avoid) any such conflicts. It is said that the plaintiff’s pleaded case does not acknowledge the distinction between this statutory obligation and the strict duty in equity of a fiduciary to eliminate or avoid conflicts that was recognised in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; [2007] FCA 963 at [311] per Jacobson J.

96. [1870]

    Finally, it is said that, even if Patersons did owe a fiduciary obligation to Ashington Capital and Ashington Management not to obtain a benefit from the its position and to avoid conflicts of interest, that obligation would not extend to requiring it expressly to disclose to Ashington Capital and Ashington Management the alleged activities of the Consortium (assuming Patersons had any such knowledge). Patersons emphasises that equity imposes on the fiduciary proscriptive (not prescriptive) obligations not to obtain any unauthorised benefit from the relations (the no profit rule) and not to be in a position of conflict (the conflict rule); and that if these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach; but that the law in Australia does not otherwise impose positive (prescriptive) legal duties on the fiduciary to act in the interests of the person to whom the duty is owed.

97. [1871]

    In essence for the reasons put forward by Patersons, I have concluded that Patersons was not in a fiduciary relationship with the Ashington entities; and did not owe any of them fiduciary obligations. I see the relationship as a commercial one where Patersons was mandated to procure a financing outcome (though did not guarantee such an outcome) but was not a financial adviser as such. While Ashington may have had confidence in Patersons’ ability to raise capital for Stonington, the relationship was not one of trust, arising out of vulnerability on the part of Ashington. The relationship between Ashington Capital (the contracting party) and the other Ashington entities (to the extent a relationship existed), on the one hand, and Patersons, on the other, was an arms’ length relationship.