J and E Vella Pty Ltd v Hobson

1. [1]

   MITCHELMORE JA: I have had the significant advantage of reading in draft the reasons of Adamson JA and of Stern JA, the detail of which enables me to state my reasons for agreeing with Stern JA briefly. The background to the formation of Beverage Freight Services Pty Ltd (BFS) and its shareholders and directors is addressed by Stern JA, and I will proceed on the basis of familiarity with her Honour’s reasons in that regard. Unless otherwise indicated, references to paragraph numbers below are to the reasons of the primary judge.

2. [2]

   The principal issue on the appeal concerned the primary judge’s findings about what occurred at a meeting at Ingleburn RSL on 28 August 2012, which was attended by Michael Vella and Joseph Vella on behalf of J and E Vella Pty Ltd, Brian Hobson on behalf of Hynadam Pty Ltd, and Brett Soper on behalf of Mechita Pty Ltd. The meeting was also attended by Robert Fielding and Peter Versluis from Risk Connect Australia (Risk Connect), who were engaged by BFS in about July 2012 to facilitate discussions between Michael Vella, Mr Hobson and Mr Soper with a view to resolving disputes arising from the business and operations of BFS: at [18].

3. [3]

   The evidence led on behalf of the appellants and the respondents about the Ingleburn meeting diverged as to its outcome. As the primary judge summarised their respective positions, according to Michael Vella and Joseph Vella (for the appellants) agreement was reached at the end of the meeting “to wind up BFS and transfer its business to a new company owned by the three active BFS shareholders”: at [272]. Their recollection differed from that of Mr Hobson, Mr Soper and Mr Fielding, whose evidence was that the agreement reached at the end of the meeting was limited to winding up BFS, after which the shareholders were to “go their separate ways with each of them free to seek work from Schweppes”: at [272]. Mr Versluis had no recollection of what occurred at the meeting independently of the minutes, and her Honour placed no weight on his evidence: at [276].

4. [4]

   Given the passage of time between the Ingleburn meeting and the proceedings, the primary judge was mindful of the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319: at [26]. Her Honour acknowledged that primary emphasis was required to be given in the circumstances to the objective surrounding facts that were either undisputed or established by contemporaneous documents, and the inherent probabilities and improbabilities: at [27], citing inter alia Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[31]. At the same time, her Honour recognised that “witness testimony may still be of value and importance, including by providing evidence of the context in which relevant documents and events must be understood”: at [27]. In support of the latter proposition, her Honour cited ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24; (2021) 388 ALR 128 (“ET-China.com”) at [25]-[29], in which Bell P (Bathurst CJ agreeing) stated at [28]-[29]:

5. [5]

   In the present case, the minutes of the Ingleburn meeting were prepared by Mr Fielding. The minutes are extracted in the reasons of Stern JA at [187] below. Both parties sought to rely on the terms of the minutes, which were prepared contemporaneously to the meeting, in support of their respective cases as to the outcome of the meeting. In those circumstances, other contemporaneous documents were important, but so also was the evidence of witnesses going to the context in which those documents were prepared and in which the meeting took place.

6. [6]

   In ET-China.com at [181]-[188], Bell P also summarised the approach to appellate review in respect of credit findings. As his Honour there stated, in Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55], Bell, Gageler, Nettle and Edelman JJ provided an important clarification of what Gleeson CJ, Gummow and Kirby JJ had said in Fox v Percy at [25] regarding the task of appellate review. Their Honours in Lee stated that where factual findings “are likely to have been affected by the impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence”, appellate restraint is required with respect to those findings “unless they are ‘glaringly improbable’ or ‘contrary to compelling inferences’”. Like Stern JA (at [214]-[216]), I consider that the clarification provided in Lee v Lee as to the nature of factual findings that call for appellate restraint is apposite and applicable in the present case.

7. [7]

   In accepting the evidence of Mr Hobson, Mr Soper and Mr Fielding (at [272]) about the outcome of the Ingleburn meeting, the primary judge observed that Mr Hobson and Mr Soper gave an account of what was said at the meeting that was in quite different terms, but the differences were not as to matters of substance: at [273]. Mr Fielding’s account of the meeting was “in different terms again”, but nonetheless corroborated the substance of the separate accounts given by Mr Hobson and Mr Soper: at [273]. Her Honour further observed that the evidence of Mr Hobson and Mr Soper in cross-examination, to the effect that they recalled what occurred at the end of the meeting because of the surprise that it caused them, was “inherently plausible in circumstances where Brian Hobson had suggested and arranged the meeting as a facilitated discussion to resolve their disputes and there is no evidence to suggest that he or Brett Soper intended or believed that the meeting would end their business relationship with JEV and the Vella family”: at [274].

8. [8]

   Stern JA has catalogued the issues between the Vellas, on the one hand, and Mr Hobson and Mr Soper on the other, in the period before the Ingleburn meeting (see [166] to [179] below). The range of issues, the proposed solutions thereto, and the level of agreement and/or disagreement about those proposed solutions was apparent from the Discussion Paper that Mr Fielding prepared in advance of the Ingleburn meeting, an updated version of which he provided at the meeting. The adverse impact of those disputes on relationships between the Vellas, on the one hand, and Mr Hobson and Mr Soper, on the other, was readily apparent from the minutes that Mr Fielding took of his meeting with the Vellas, parts of which are extracted in Stern JA’s reasons at [185].

9. [9]

   The Discussion Paper, as expressly stated at its conclusion, was “intended as a guide for discussion as a means of obtaining a framework that satisfies all parties and defines the mechanism which will allow the company to operate successfully in the future”. The primary judge accepted that the “framework” for resolving the disputes included incorporating a company with a shareholders’ agreement or rules governing each area of dispute, and then conducting the BFS activities through that new company rather than through BFS: at [136]. Her Honour’s reading of the references to a new company in the Discussion Paper was supported by the evidence of Michael Vella, Mr Hobson and Mr Fielding: at [136], [140].

10. [10]

    The new company proposal was thus, in her Honour words, “inextricably linked” to the resolution of the substantive disputes between the parties: at [140]. That conclusion was supported by Mr Fielding, whose evidence was the subject of a substantial challenge that the primary judge summarised at [296] and rejected at [297]-[311]. One of the bases on which the appellants challenged Mr Fielding’s evidence was that he was not an independent witness, as he had a motive to support the respondents’ case having regard to the advice he gave in relation to setting up Beverage Distribution Australia Pty Ltd (BDA) and acting as BDA’s accountant. As the primary judge found, that Mr Fielding became the accountant for BDA (but not for Mr Hobson, Mr Soper or any other companies associated with them) was “hardly sufficient motive to confect his evidence”: at [308].

11. [11]

    As the primary judge later observed, there was “no evidence of any purpose that would have been served by transferring the business of BFS to a new company without the parties having resolved the disputes that were the cause of anger and distrust (at least on the part of Michael Vella)”: at [158] (emphasis added). The purpose that Michael Vella advanced in this regard in his evidence was addressing the problem said to have been created by the cessation of involvement in BFS’ business of one of its shareholders, Evermay Pty Ltd (Evermay). Stern JA has dealt in detail with the primary judge’s rejection of Michael Vella’s evidence about the significance of Evermay as an issue, and with the appellants’ challenge to that rejection. As Stern JA states below (at [231], [238]), the absence of any reference to Evermay in the contemporaneous documentary evidence, and the inconsistencies in Michael Vella’s own evidence, irrevocably damaged a key plank in the appellants’ case theory, that the outcome of the Ingleburn meeting was explicable by reference to this purpose and that it was a matter of overarching importance at the time.

12. [12]

    I also agree with Stern JA (at [238]) that, by contrast, the evidence of Mr Hobson, Mr Soper and Mr Aikin about the references in contemporaneous documents to Beverage Logistics Services Pty Ltd (BLS) did not go to a matter that would be inferred to be of great significance to them at the time. In summarising the appellants’ submission that Mr Hobson should not be accepted as credible witness, her Honour noted that the appellants sought to characterise the manner in which he gave his evidence as “cagey”, in the sense that “any assent to a question was given hesitantly and with a rising inflection which suggested that he was seeking to anticipate where the question was leading”: at [294]. That characterisation did not accord with her Honour’s observation of Mr Hobson during cross-examination. As her Honour described it, “[h]e answered questions in a slow and careful manner that indicated to me that he was doing his best to accurately recall the matters he was being asked about, nine years after the relevant events”: at [294]. Specifically in relation to the questions he was asked about BLS and Beverage Logistics Pty Ltd (BLPL), her Honour stated (at [294]):

13. [13]

    As to the evidence of Mr Aikin, in circumstances where her Honour accepted that it was likely that the existence of BLS had been disclosed to Schweppes (and thus to Mr Aikin) before August 2012 (at [231]), and having regard to the passage of time, his evidence that he had inadvertently used BLS instead of BFS in the document entitled “Beverage Logistics Services – Chain of Responsibility Infringement” (the COR Notice) was plausible. The appellants’ contrary submission, that Mr Aikin was engaged, in giving evidence, in a “steadfast refusal to come clean” about referring to BLS in the COR Notice and was prepared to be dishonest under oath because he was in the respondents’ camp, was fairly described by the primary judge as having no rational basis: at [329]. Mr Aikin was a former employee of Schweppes who had both left Schweppes and retired some years before giving evidence. It does not follow from the existence of a long-term working relationship between Mr Hobson and Mr Aikin, who were engaged by separate and independent entities the contract between which required coordination, that Mr Aikin’s evidence could not be accepted as credible or reliable. Further, as her Honour observed at [328], it was not put to Mr Aikin in cross-examination that he had a reason to embellish or tailor his evidence to suit the respondents.

14. [14]

    Contrary to the appellants’ submission, Mr Aikin’s evidence about his phone conversation with Michael Vella in or about September 2012, in which Michael Vella sought Schweppes work, was not inconsistent with Michael Vella’s evidence that JEV could not perform all of the Schweppes work on its own. As the primary judge found, inconsistency only arose if one understood Mr Aikin’s evidence of the conversation as involving Michael Vella pitching for all of the Schweppes work previously done by BFS: at [336]. Her Honour was correct to accept the respondents’ submission that it should not be so understood.

15. [15]

    Mr Aikin’s account of this phone conversation with Michael Vella was also not inconsistent with Michael Vella’s emails to Mr Hobson and Mr Soper of 30 August 2012 and 4 September 2012. As her Honour clarified, the agreement that she found had been reached at the end of the Ingleburn meeting was “not that JEV would ‘throw away’ its Schweppes delivery work or ‘walk away’ from that work, as the plaintiffs’ submissions suggested from time to time” (emphasis in original). Rather, it was “that BFS would be wound down and each of JEV, Hynadam and Mechita would be free to seek Schweppes work independently of BFS”: at [316]. So construed, that JEV continued to send trucks to BFS for Schweppes delivery work after the Ingleburn meeting was, as her Honour observed, consistent with that agreement: at [321]. Her Honour had earlier made the following finding in this regard, at [266]:

16. [16]

    Her Honour did consider the appellants’ submission that it was inherently implausible that JEV would have “thrown away” the steady source of work from BFS to work directly for Schweppes, particularly against the background of Schweppes having recently suspended its trucks: at [313]. Her Honour’s reasons for rejecting the submission at [314] bear repeating:

17. [17]

    By contrast, the account of the Ingleburn meeting on which the appellants relied involved Mr Hobson and Mr Soper agreeing with the Vellas to take the business forward by transferring it to BLS, only swiftly to form a new company, BDA, which required bringing in a third party, and obtaining the agreement of Schweppes to transfer the contractual arrangements to BDA, so as to cut the Vellas out. As the respondents submitted on the appeal, in circumstances where Mr Hobson had raised engaging Risk Connect to see if the shareholders could resolve their differences, if what had actually happened at the meeting was an agreement to transfer the business to BLS and continue working together it was implausible that Mr Hobson and Mr Soper would leave the meeting and instead start up a new business and a new company without the Vellas. In the context of cross-examination on the contents of the minutes of the meeting, Mr Hobson gave the following evidence in this regard, which in the circumstances, and having regard to his responsibilities for BFS’ operational logistics, was eminently credible:

18. [18]

    I agree with the orders proposed by Stern JA.

19. [19]

    ADAMSON JA: I have had the advantage of reading the reasons of Stern JA (and the concurring reasons of Mitchelmore JA) and gratefully adopt her Honour’s summary of the evidence and of the findings of Williams J (the primary judge). However, I disagree with the orders proposed by Stern JA and with her Honour’s endorsement of the primary judge’s assessment of credibility of the witnesses and ultimate findings. In these circumstances, it is necessary to undertake the task required pursuant to s 75A of the Supreme Court Act 1970 (NSW).

20. [20]

    References to paragraph numbers in these reasons are, unless otherwise stated, references to the reasons of the primary judge: In the matter of Beverage Freight Services Pty Ltd [2022] NSWSC 874.

Introduction

1. [21]

   Up until about the end of August 2012, Michael Vella (the son of Joe Vella, the second appellant, who was a director of J&E Vella Pty Ltd (J&E Vella) (the first appellant), Brian Hobson (the first respondent and a director and sole shareholder of Hynadam Pty Limited (Hynadam), the second respondent) and Brett Soper (the third respondent and a director and shareholder of Mechita Pty Ltd (Mechita), the fourth respondent) had, through their respective companies, delivered Schweppes soft drinks, pursuant to a contract between Schweppes and Beverage Freight Services Pty Ltd (BFS), a company of which their companies were shareholders and they were directors. The reason for this arrangement was historic and had its genesis in Schweppes’ stipulation that it deal with only one company, rather than each delivery company separately.

2. [22]

   The appeal, as with the hearing before the primary judge, principally turned on a factual question: whether, as the respondents alleged (and the primary judge found) the appellants, at the meeting at the Ingleburn RSL on 28 August 2012 (the Ingleburn meeting) voluntarily terminated their association with the respondents and therefore gave up their right to deliver soft drinks manufactured by Schweppes in conjunction with the respondent (the Hobson hypothesis); or, whether, as the appellants alleged, they did not do so but were shut out of performance by the respondents who, without reference to the appellants, entered into a new contract with Schweppes, from which the appellants were excluded (the Vella hypothesis).

3. [23]

   If this factual question is answered in the way for which the appellants contended, further questions arise as to whether they are entitled to the relief claimed. These matters only need to be addressed if the appellant is successful in overturning the principal factual finding.

4. [24]

   The task of fact-finding which confronted the primary judge was affected by a number of factors which made contemporaneous conduct and documents particularly important. The crucial meeting at the Ingleburn RSL on 28 August 2012 (at which it was alleged that the appellants walked away from the association with the respondents) took place almost nine years before the hearing before the primary judge. Those present at the meeting were Michael Vella, Mr Soper, Mr Hobson, as well as Robert Fielding and Peter Versluis, who were acting as facilitators and moderators. At least the first three were financially interested in the outcome of the proceedings. Mr Fielding became associated with the entity which subsequently provided the services to Schweppes and Mr Versluis had almost no recollection of what had occurred. Another witness, Robert Aikin, was the relevant person at Schweppes through which all communications occurred. He was largely ignorant of the association between the three companies which provided the delivery services to Schweppes, as he dealt almost exclusively with Mr Hobson.

5. [25]

   These circumstances, including the passage of time, make the following dicta particularly apposite to the present case.

6. [26]

   Lord Pearce in Onassis v Vergottis [1968] 2 Lloyd’s Rep 403 said, of credibility at 431:

7. [27]

   McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 said, of human memory of conversations, at 319:

8. [28]

   In Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, Gleeson CJ, Gummow and Kirby JJ said at [31]:

9. [29]

   Although there are some references to demeanour in the primary judge’s reasons, her Honour said at [290] that she accepted “the evidence of Brian Hobson, Brett Soper and Robert Fielding after weighing it against all of the contrary evidence and the inherent probabilities and improbabilities in light of relevant objective facts.” On this basis, I consider that it is open to this Court to review the findings pursuant to s 75A of the Supreme Court Act in accordance with the principles in Warren v Coombes (1979) 142 CLR 531; [1979] HCA 9.

10. [30]

    Consistently with the approach endorsed in Fox v Percy, I propose to assess the primary judge’s findings by, first, identifying and analysing the “contemporary materials, objectively established facts and the apparent logic of events” (the objective evidence); secondly, testing the parties’ hypotheses against these matters; and, thirdly, testing the oral evidence given by witnesses against the objective material and by reference to the matters referred to by Lord Pearce in Onassis v Vergottis, such as “the balance of probability”, the contemporaneous documents and the witness’s “motive” as “one aspect of probability.”

11. [31]

    This approach differs from that of the primary judge (which will be considered in more detail below). The primary judge’s assessment of credibility rested primarily on her Honour’s finding that Michael Vella’s evidence was neither credible nor reliable because of his evidence that the Ingleburn meeting concerned, at least in part, the removal of Evermay Pty Ltd (Evermay) as a shareholder of BFS because it was no longer part of the association and had ceased to perform work for Schweppes. The documents do not expressly refer to Evermay. The primary judge’s rejection of Mr Vella’s evidence in turn led her to accept the respondents’ witnesses evidence (apart from Mr Versluis, who was assessed as having no recollection of what occurred). On this basis, the primary judge found that the Hobson hypothesis had been established, the Vella hypothesis had been excluded and that the appellants had not made out their claim.

The objective evidence

1. [32]

   The objective evidence is summarised below.

2. [33]

   From at least the mid-1990’s until 2001, the Vellas, through J&E Vella; Mr Hobson, through Hynadam; and Mr Soper (through Mechita) each delivered the products of various beverage companies. For convenience all such companies will be referred to as Schweppes.

3. [34]

   In about 2000, Schweppes stipulated that all of its freight services be provided by one company.

4. [35]

   In 2001, Mr Hobson, Mr Soper, Joe and Michael Vella met at Greystanes with other deliverers of Schweppes products, Stephen Phillips, who was the principal of Evermay, and Glen Alderton, who was the principal of Alderton Transport Pty Limited (Alderton) (the Greystanes meeting). Mr Hobson told those present at the meeting that Schweppes wanted to deal with only one company and that they should incorporate a company, which was incorporated as BFS, of which he would be managing director, for which his company, Hynadam, would charge the shareholders a management fee. The delivery work would be allocated equally between the participants who, through their companies (who would each hold shares in BFS), would render an invoice to BFS, which would render a total invoice to Schweppes. On payment by Schweppes, BFS would forward the balance of the outstanding amounts on invoices rendered by the participants, less a deduction for the management fee.

5. [36]

   BFS was incorporated on 21 August 2001. Its original shareholders and directors were as follows:

6. [37]

   In September 2001, BFS started to perform delivery services for Schweppes and continued to do so until August 2012.

7. [38]

   The consequence of the arrangement agreed to at the Greystanes meeting was that BFS did not make a profit but was, effectively, a clearing house or conduit for money paid by Schweppes for delivery of its products by any of BFS’s shareholders.

8. [39]

   From August 2001, Mr Hobson performed the role of operations manager for BFS and, as such, negotiated contract terms and liaised with Schweppes on behalf of BFS and allocated the work between the shareholders of BFS. He worked from an office within the Schweppes facility at Prospect.

9. [40]

   From time to time, there were issues between the shareholders of BFS as to the allocation of work. For example, the minutes of meetings of BFS recorded that on 21 August 2002 and 28 July 2004 the Vellas raised concerns that their vehicles were not being allocated the same amount of work as was being allocated to other shareholders.

10. [41]

    By about 2002, Mr Alderton was no longer involved in the operations of BFS. BFS wrote to Mr Alderton on 29 August 2002 requesting his attendance at a special meeting to resolve his future position within BFS. Ultimately, on 23 October 2003, Mr Alderton resigned as a director of BFS and relinquished his shareholding in BFS. Thus, the shareholders and directors of BFS were, as at that date, the following:

11. [42]

    In about August 2005, Robert Aikin was appointed as the National Transport Manager for Schweppes. He was based in Melbourne and spoke with Mr Hobson between 5 and 15 times a day. He visited the Prospect office every couple of months. Mr Aikin had no direct contact with the Vellas, who depended on Mr Hobson and Mr Soper to inform them of what Schweppes required.

12. [43]

    On 21 October 2004 Beverage Logistics Pty Ltd (BLPL) was incorporated. Its directors and shareholders were Mr Hobson, Mr Sobara and Mr Soper. BLPL did not operate and was deregistered on 12 March 2010.

13. [44]

    In October 2010, Stephen Phillips submitted his resignation as a director of BFS and ceased to be its company secretary (a role which was then filled by Michael Vella). However, Evermay no longer performed deliveries for Schweppes and was, accordingly, paid no money by BFS. Neither at that time, nor at any later time, did Mr Phillips’ company cause any inconvenience to BFS nor did it claim to be entitled to any revenue from BFS or Schweppes. Unlike, Mr Alderton’s company (see above), Evermay did not relinquish its shareholding in BFS.

14. [45]

    On 7 February 2011, a new company, Beverage Logistics Services Pty Ltd (BLS) was incorporated. The shareholders and directors of BLS were the following:

15. [46]

    The incorporation was designed to reflect the circumstance that these three companies were, as at that date, the only companies providing delivery services to Schweppes through BFS, Evermay and Mr Phillips having ceased their involvement.

16. [47]

    Despite its incorporation on 7 February 2011, BLS did not become party to the arrangement with Schweppes and nothing concrete was done at that stage to formalise its intended status as the entity through which Schweppes was to deal.

17. [48]

    By about mid-2012, there were several issues which caused friction between Mr Hobson and Mr Soper on the one hand and the Vellas on the other. For example, on 1 June 2012, Mr Hobson and Mr Soper caused BFS to enter into a three-year lease of property at Arndell Park (the lease) at an annual rent of $77,160, with an option to renew for a further term of three years. The Vellas did not approve of the lease. In addition, the Vellas again alleged (as they had done in 2002 and 2004) that the work was being unequally allocated.

18. [49]

    At about that time, Mr Hobson and Mr Soper engaged Risk Connect Australia to mediate the issues in dispute between the active shareholders of BFS. Mr Fielding and Mr Versluis were the persons appointed by Risk Connect to carry out this task.

19. [50]

    To that end, Mr Hobson and Mr Soper met with Mr Fielding and Mr Versluis on 24 July 2012. On 9 August 2012, there was a “directors meeting” of BLS which was attended by Mr Hobson and Mr Soper. Mr Fielding was also present. Although Michael Vella was a director of BLS, he was not made aware of the meeting.

20. [51]

    At some stage after the meeting on 9 August 2012, Mr Fielding and Mr Versluis prepared a discussion paper listing the various issues between the parties, which included the lease, the allocation of work (which was accepted ought be equal between the 12 trucks of which 4 were owned by each shareholder of BLS) and the possible transition of the delivery business from BFS to BLS (which had been incorporated over a year earlier).

21. [52]

    Further iterations of the discussion paper were prepared, which included at least one where the responses of the three shareholders were recorded. The document registered the three shareholders’ agreement with the following:

22. [53]

    The only reasonable inference is that the reference to “BLPL” (which had been deregistered in 2010) was an error and that the document intended to refer to BLS, being the only entity of which only Michael Vella, Mr Hobson and Mr Soper were directors and of which their companies were the only shareholders (as referred to in 1.12 of the table).

23. [54]

    On 2 August 2012, Mr Aikin sent an email to Mr Soper and Mr Hobson and Mr Hobson’s son, Brett Hobson, to which was attached a Chain of Responsibility Incident Report (COR) and a spreadsheet (the COR letter). The COR letter said, relevantly:

24. [55]

    The balance of the letter set out 13 listed vehicles which were immediately suspended from performing work for Schweppes, pending the provision of certification. Of the 13 vehicles listed in the COR letter, which had been immediately suspended, five belonged to Mechita; five belonged to Hynadam; and the remaining three belonged to J&E Vella.

25. [56]

    The significance of this letter is twofold. First, it referred to BLS, which, as referred to above was not the contracting party with Schweppes (that party was BFS) but which had the same shareholders and directors as BFS minus Mr Phillips and Evermay. Thus, the inference arose that Schweppes had been told of BLS and that the members of the co-operative were contemplating using BLS as the vehicle through which the Schweppes work would be performed.

26. [57]

    Secondly, the COR letter demonstrated that there was a lack of compliance across the co-operative’s fleet in that each of the active shareholders had non-compliant trucks.

27. [58]

    On 16 August 2012, Mr Soper sent an email to Mr Aikin listing each of the 13 suspended vehicles, together with a further two vehicles which belonged to J&E Vella. In respect of each vehicle other than the J&E Vella vehicles, Mr Soper identified the date on which each vehicle’s speed limiter had been checked at the last service drive test and the (future) date on which each vehicle had been “[b]ooked into Detroit for limiter to be checked”. The dates for the latter event were dates between 20 August 2012 and 24 August 2012. No dates were provided for either category in respect of any of the J&E Vella vehicles, beside which there was a blank.

28. [59]

    At 9.03am on 17 August 2012, Mr Aikin responded to Mr Soper and Mr Hobson by email in the following terms:

29. [60]

    It was not until 2.38pm on 21 August 2012 that Mr Soper advised the Vellas of the information he had given to Schweppes (in his email to Mr Aikin of 16 August 2012 set out above) and of his email from Mr Aikin of 17 August 2012 that the five Vella vehicles were “not to be used for Schweppes work until each vehicle has been booked in for speed limiter checks and certified that those limiters are set to 100KPH.” Mr Soper also said:

30. [61]

    Twelve minutes later, at 2.50pm on 21 August 2012, Michael Vella sent the requisite information and certificates in respect of three of the trucks, which had been tested and certified on 20 August 2012.

31. [62]

    At 2.55pm on 21 August 2012, Michael Vella wrote to Mr Soper in the following terms:

32. [63]

    At 2.14pm on 22 August 2012, Michael Vella sent the requisite information in respect of one of the remaining vehicles to Mr Soper and, at 2.29pm, he sent the requisite information in respect of the last of the five vehicles to Mr Soper. Further testing data was provided at 4.04pm on 23 August 2012.

33. [64]

    On 22 August 2012, Mr Fielding and Mr Versluis met with Michael and Joe Vella, who communicated their grievances about allocation of work, the lease and the shared liability for the administration fee if the work allocation was unequal. Mr Fielding made handwritten notes of the meeting.

34. [65]

    The Ingleburn meeting commenced at 2pm on 28 August 2012 and lasted for about two hours. After the Ingleburn meeting, Mr Fielding prepared the minutes, which read as follows:

35. [66]

    It was common ground that the minutes were inadequate to explain all that happened at the meeting. The cessation of BFS’s trading activities is consistent with the Vella hypothesis that BLS, which is referred to in the minutes, was to be used. There was no mention in the minutes of Michael Vella withdrawing J&E Vella’s trucks from the co-operative. I regard this as a telling omission. The weight to be given to the minutes is otherwise relatively low as they were prepared by Mr Fielding, it can be assumed at the behest of Mr Hobson and Mr Soper, and were never sent to Michael Vella for his confirmation of what occurred, although they were sent to Mr Hobson for his signature, which was provided.

36. [67]

    On 29 August 2012, Coastal Beverage Logistics Pty Ltd (Coastal), of which Erron Jameson was the principal, was registered as a corporation.

37. [68]

    On 30 August 2012, both Hynadam Nominees Pty Ltd (Hynadam Nominees) and Mechita Nominees Pty Ltd (Mechita Nominees) were incorporated, at the suggestion and with the assistance of Mr Fielding. Mr Hobson and his son, Brett Hobson, were the directors of Hynadam Nominees and Mr Hobson was its sole shareholder. Mr Soper was the sole director of Mechita Nominees and its shareholders were Mr Soper, his wife and Mr Sobara.

38. [69]

    On 30 August 2012, Mr Fielding arranged for the incorporation of Beverage Distribution Australia Pty Limited (BDA). Its directors were Mr Soper, Brett Hobson and Mr Jameson and its shareholders were Hynadam Nominees, Mechita Nominees and Coastal.

39. [70]

    On 30 August 2012 at 4.19pm, Michael Vella sent an email to Mr Hobson and Mr Soper in the following terms:

40. [71]

    No response to this email was ever received.

41. [72]

    On 31 August 2012, Mr Soper sent an email to Mr Aikin, which was copied to other Schweppes employees (but not to the Vellas), in the following terms:

42. [73]

    At 2.39pm on 4 September 2012, Michael Vella sent an email to Mr Soper and Mr Hobson as follows:

43. [74]

    No response to this email was ever received.

44. [75]

    On 5 September 2012, Mr Aikin forwarded Mr Hobson’s email of 31 August 2012 internally within Schweppes and said:

45. [76]

    On 10 September 2012, BDA started to provide freight services to Schweppes for which it was paid. There was no formal novation of Schweppes’ contract with BFS. J&E Vella’s trucks no longer performed Schweppes delivery work from this date.

Testing the parties’ hypotheses against the objective evidence

1. [77]

   The objective evidence was that the combination of Hynadam, Mechita and J&E Vella had provided freight services to Schweppes since October 2010, when Evermay ceased taking part in the provision of such services. The departure of Evermay had led to the incorporation of BLS to regularise the shareholding of the company providing the services to Schweppes with the entities which were actually providing the services.

2. [78]

   From time to time there were disagreements between the entities which provided services to Schweppes. In particular the Vellas, who had no direct contact with Schweppes, complained about the unequal distribution of work and about what BFS had done without consultation, such as entering into the lease, for whose debts (such as the rent) BFS was liable.

3. [79]

   The emails exchanged between Mr Soper and Michael Vella in August 2012 before the Ingleburn meeting were consistent with the Vella hypothesis that the Vellas wished to continue as equal partners with Hynadam and Mechita in providing freight services to Schweppes in that they showed:

   1. (1)

      Michael Vella’s concern that J&E Vella’s name was being besmirched by Mr Soper (by his not providing information within his knowledge about the Vella trucks having been booked in for testing at the same time as the Hynadam and Mechita trucks), which was expressed before the respondents contended that Michael Vella had indicated that he wanted to go his own way (which Mr Hobson said first arose at the Ingleburn meeting); and

   2. (2)

      the speed with which Michael Vella provided the certificates and other documentation to Mr Soper (for provision to Schweppes) to ensure that the suspension of the J&E Vella trucks would be lifted and they could continue to carry out the freight services on an equal basis with the other shareholders.

4. [80]

   These emails were also consistent with the Vella hypothesis that, by about this time, Hynadam and Mechita were considering the option of shutting the Vellas out of the Schweppes work but continuing to provide the services themselves with another, more compliant and less demanding, party. Further, Mr Soper’s selective reporting to Schweppes of the testing of non-compliant trucks (which excluded J&E Vella’s trucks) and his delay in notifying Michael Vella of the situation tends to indicate that he had a motive to cast J&E Vella in a bad light with Schweppes.

5. [81]

   Michael Vella’s email of 30 August 2012 to Mr Hobson and Mr Soper indicates that he notified them that J&E Vella had four trucks available on 28 August 2012 (the day of the Ingleburn meeting), 29 August 2012 and 30 August 2012 but that he was notified that they did not need all of the trucks and that, on 30 August 2012, only three of the J&E Vella trucks were required.

6. [82]

   These emails as well as the recipients’ non-response tend to establish the Vella hypothesis (and exclude the Hobson hypothesis) for the following reasons:

   1. (1)

      they demonstrate that whatever transpired in the Ingleburn meeting was not such as to change Michael Vella’s conduct, which was to provide his share of trucks (being 4 trucks) to be used for the Schweppes work, every day, and to complain about the distribution of work if he perceived that one of the others (Hynadam or Mechita) was providing more than its quota of four trucks a day;

   2. (2)

      it would be highly unlikely for Michael Vella to write emails in such terms and complain about the unequal distribution of work if, as the Hobson hypothesis would have it, he had concluded the Ingleburn meeting by informing them, in anger, that J&E Vella would leave the co-operative and go its own way as a result of the dispute as to distribution of work being irreconcilable or ongoing;

   3. (3)

      they show that Mr Hobson and Mr Soper needed to continue to use at least three J&E Vella trucks up to and including at least 4 September 2012 because, although BDA and Coastal had been incorporated, Schweppes had not yet effected the change (which is inconsistent with the Hobson hypothesis that the relationship with J&E Vella ended at the conclusion of the Ingleburn meeting); and

   4. (4)

      had the relationship between J&E Vella on the one hand and Hynadam and Mechita in fact finished at the conclusion of the Ingleburn meeting (because of Michael Vella’s desire to end it), Mr Soper and Mr Hobson could be expected to have responded to Michael Vella’s emails of 30 August 2012 and 4 September 2012 by confirming that he was the one who had left the quasi-partnership, that they were no longer “equal partners” and that, on that basis, his trucks could and would no longer be used. That Mr Soper and Mr Hobson remained silent is telling and strongly supported the Vella hypothesis.

7. [83]

   The respondents submitted that, at the conclusion of the Ingleburn meeting, there was an agreement that BFS would be wound up in future and that, accordingly, there would not necessarily be an immediate cessation of operations. On this basis, they submitted that J&E Vella’s provision of trucks through to September 2012 was not inconsistent with the Hobson hypothesis. It is, however, difficult to reconcile this submission with the terms of Michael Vella’s email of 28 August 2012 and 4 September 2012, which was in similar terms (see below).

8. [84]

   The email sent by Mr Hobson to Schweppes on 31 August 2012 is telling. First, Schweppes acted on it, which demonstrated Mr Hobson’s power to act on behalf of the co-operative of Hynadam, Mechita and J&E Vella since he was the conduit from the co-operative to Schweppes, which did not have recourse to anyone else in the co-operative. Secondly it was untrue in several respects. The reference to “merger” was inaccurate since all that was to occur was that J&E Vella was to be replaced by Coastal as shareholder in the company which was to contract with Schweppes. There was a reference to George Macdonald & Sons, which was wrong as it was not a shareholder of BDA. The text of the email tends to show that Mr Hobson did not expect to be questioned by Schweppes as to what he had just done. Further, the email shows that he expected to be able to usher in BDA in substitution for BFS and BLS, which he had earlier mentioned to Mr Aikin, without any resistance or inquiry from Schweppes.

The oral evidence

1. [85]

   I turn now to consider the oral evidence which was, in the main, unsatisfactory and demonstrated that record-keeping, beyond invoices and accounting documentation, was not a priority for the participants. It is not particularly fruitful to examine in any detail the oral evidence about the period before the Ingleburn meeting since it is the period immediately following that meeting which is most probative. The discussion below will, subject to some exceptions, focus on the days following the meeting.

2. [86]

   Mr Hobson accepted in cross-examination that “the Vellas had been complaining about unequal distributions for a long time”. However, Mr Hobson agreed that at no time prior to the Ingleburn meeting had either Joe or Michael Vella ever told him that they wanted to leave the business.

3. [87]

   Mr Hobson’s evidence that the Vellas’ departure was first mentioned at the Ingleburn meeting was inconsistent with Mr Aikin’s evidence that some time prior to that meeting the Vellas had indicated that they did not want to remain in “that partnership”. The evidence of Mr Aikin was unreliable in that respect.

4. [88]

   Mr Hobson, Mr Soper and Mr Aikin were each cross-examined about the references to BLS in various documents which pre-dated the Ingleburn meeting (including the COR letter from Schweppes). It is highly significant that none of these men was able to provide any explanation for these references and each provided glaringly improbable answers which suggested a degree of collusion and a consciousness that an admission that BLS was to be the vehicle was contrary to the respondents’ case.

5. [89]

   Mr Hobson’s cross-examination about the reference in the COR letter from Schweppes serves as an example:

6. [90]

   Nonetheless, Mr Hobson accepted the possibility that he suggested to Mr Fielding that BLS could be used, as follows:

7. [91]

   Notwithstanding this concession, Mr Hobson could not explain why Mr Fielding referred to BLS, the shareholders of which would be Mr Hobson, Mr Soper and Mr Vella in the discussion paper which was prepared in advance of the Ingleburn meeting, as demonstrated by the following exchange:

8. [92]

   Mr Soper, too, made a partial concession about the purpose of BLS in the following passage:

9. [93]

   Mr Fielding admitted that he was unable to explain how the introduction of BLS was going to resolve any of the issues and suggested that the cross-examiner ask Mr Versluis.

10. [94]

    Mr Aikin was cross-examined about the COR letter as follows:

11. [95]

    Mr Soper was unable to say anything about why or the circumstances in which BLS was incorporated.

12. [96]

    An obvious inference to be drawn from the references to BLS was that, as the discussion paper extracted above indicated, the parties intended to continue with a new corporate entity (BLS) in which Evermay was not a shareholder and had informed Schweppes of this prospect to prepare it for a change in entity (this inference was strongly supported by the reference to BLS in Mr Hobson’s email of 31 August 2012).

13. [97]

    The respondents emphasised the fact that neither Mr Phillips nor Evermay was causing any problem or inconvenience at that stage and submitted, in effect, that there was no need, in these circumstances, to regularise the legal position so as to make the shareholders and directors of the corporate vehicle correspond with the companies who owned the trucks and were actually doing the work. However, this point loses impact when one has regard to the fact that, as referred to above, the departure of Mr Alderton was addressed by his resignation as a director and his relinquishment of his shareholding. The departure of Mr Phillips needed to be addressed in a similar or analogous manner. That it was not a pressing issue did not mean that it was not an issue.

14. [98]

    Although it was not expected that the use of BLS would resolve the ongoing disputes between Michael Vella on the one hand and Mr Soper and Mr Hobson (about the lease and the distribution of work), the use of BLS would at least result in the work being performed for Schweppes by a company whose shareholders corresponded with those performing the work and ensure that Mr Phillips would have no claim on an operating entity, once BFS was wound up and BLS put in place as the relevant entity.

15. [99]

    The respondents’ witnesses’ refusal (subject to the important concessions by Mr Hobson and Mr Soper referred to above) to accept the obvious and compelling explanation for the references to BLS is telling and ought, in my view, to have caused the primary judge to question their honesty and appreciate their significant motive to discredit Michael Vella specifically and the Vella hypothesis generally.

16. [100]

    Michael Vella categorically denied the Hobson hypothesis in this cross-examination as follows:

17. [101]

    Mr Soper was asked about the portion of the minutes of the Ingleburn meeting in which it was recorded, “Consensus from each director was achieved in respect of the allocation of work, use of [BLS] …” He said that it was “not correct” and, as far as he knew, “wrong”. There was no explanation for such a significant error. The primary judge did not consider that this affected Mr Soper’s credibility or reliability. Having reviewed the evidence, I take a different view.

18. [102]

    The evidence of Michael Vella that J&E Vella could not have taken on the Schweppes contract itself was not seriously challenged. Although J&E Vella had a trucking business separate from the work it performed for Schweppes, it had no resources to perform the office/administrative work to meet Schweppes’ requirements (which was conducted by Mr Hobson and Mr Soper) and had only four trucks available to commit to the Schweppes work. His evidence, if accepted, had the result that he had no motive to walk away from the Schweppes work and every motive to continue performing it (because it returned over $1 million gross per annum to J&E Vella). Further, even though there were other parts of the Vellas’ business, the evidence does not explain why the Vellas would be willing to forego a third of their gross income, particularly in circumstances where Joe and Michael Vella had expressed similar grievances about work allocation for many years and yet remained in the business.

19. [103]

    Although, in the events that have happened, J&E Vella found work for the four trucks which had previously been dedicated to the Schweppes work, the objective probabilities of Michael Vella giving up that work in the course of the Ingleburn meeting must be assessed at the time of the meeting and not with the benefit of hindsight.

20. [104]

    Mr Hobson was entirely unable to explain why he did not respond to these emails, as is evident from the following exchange in his cross-examination:

21. [105]

    Michael Vella deposed in his affidavit that in September 2012 Mr Hobson rang him and told him that they had been unsuccessful in renewing the contract with Schweppes and that, at the end of the week, they were out of a job because Schweppes did not want to use BFS anymore and was going to use McDonald & Sons. Mr Hobson said that Schweppes had asked him to stay on for six weeks “to show him the ropes”. Mr Hobson said that he had a letter from Schweppes. Michael Vella was “shocked and surprised” because J&E Vella was taking gross income of $1-1.2 million per year from the Schweppes contract. When he asked Mr Hobson for a copy of the letter, Mr Hobson replied that it was in his briefcase and he would have to find it and give it to him. Michael Vella repeated his request for the letter but did not receive it.

22. [106]

    Michael Vella also deposed that, on the following Monday morning, he went to work and found that all of the trucks he used for the Schweppes work were in the Minto yard. He had a conversation with Mr Hobson as follows:

23. [107]

    Michael Vella’s evidence was that on 10 September 2012, he rang Mr Aikin and spoke to him for the first time. He gave evidence that he asked Mr Aikin for a letter of termination because Mr Hobson would not give it to him.

24. [108]

    Mr Aikin’s affidavit evidence of this conversation was that he received a call from Michael Vella at home in September 2012 in which Michael Vella said:

25. [109]

    Mr Aikin deposed to the balance of the conversation in which he told Michael Vella that Schweppes would not use their trucks because of the non-compliance with speed limiters. This statement does not take into account that each of Hynadam, Mechita and J&E Vella had been found to have non-compliant trucks but that these trucks had been rectified and tested at about the same time and returned to service, thereby remedying the reason for their suspension.

26. [110]

    Mr Aikin’s evidence in cross-examination was as follows:

27. [111]

    This portion of the cross-examination is significant because it casts substantial doubt on the version of the conversation to which Mr Aikin deposed in his affidavit, which made no mention of Michael Vella asking for a letter of termination or Mr Aikin telling him that there was no such letter. Importantly, Mr Aikin’s evidence about the letter of termination corroborated Michael Vella’s version of the events, which was that he had been told by Mr Hobson that Schweppes had terminated the contract and that there was nothing they could do about it. Further, it provided support for Michael Vella’s evidence that, as he had been unable to obtain the letter of termination from Mr Hobson, he approached Mr Aikin (with whom he had never had any contact) in order to get the letter.

28. [112]

    The opening statement in the passage extracted from Mr Aikin’s evidence above (that Michael Vella told him that they had agreed to go their separate ways) conveniently matches the Hobson hypothesis but does not fit with Michael Vella’s emails of 28 August 2012 or 4 September 2012 or his evidence that J&E Vella did not have the capacity to perform the Schweppes contract by itself.

29. [113]

    Mr Aikin confirmed in his evidence that, up until the time of his retirement in March 2016, he continued to deal with Mr Hobson, who was his main point of contact. This evidence placed him firmly in the respondents’ camp.

30. [114]

    In this context, Mr Aikin’s evidence about Michael Vella pitching for the whole of the Schweppes work was glaringly improbable since it was only when Michael Vella spoke to Mr Aikin on 10 September 2012 that he learned that there was no termination letter, since Schweppes was not the party which had done the terminating. That it correlated with the respondents’ case theory was telling and demonstrated where Mr Aikin’s allegiance lay. Mr Aikin would have no reason to remember the detail of his conversation with Michael Vella on 10 September 2012: first, it was the first time he had ever spoken with him; second, the call was taken when Mr Aikin was at home; and, third, Mr Aikin’s only commercial interest was in maintaining a good delivery service for Schweppes soft drinks which, as far as he was concerned, had been, and would continue to be, provided by Mr Hobson and his associates (the identity of which was of no particular concern to Schweppes), with whom he had a good working relationship for the 11 years before the conversation and the four years after the conversation. Having regard to these matters, Mr Aikin may, over time, have come to see and “remember” the narrative which suited Mr Hobson’s interests. His concession about the termination letter having been mentioned has all the more forensic force, given these factors.

31. [115]

    Although he was not financially interested in the respondents’ business, Mr Aikin’s long-standing and continuous relationship with Mr Hobson (with whom he spoke several times a day over the relevant period) had the result that Mr Aikin could not, contrary to her Honour’s finding, be regarded as an independent witness.

The primary judge’s findings

1. [116]

   The primary judge’s principal findings were as follows:

Consideration

1. [117]

   Section 75A of the Supreme Court Act provides that the appeal shall be by way of “rehearing”: s 75A(5). The section confers on this Court the same powers and duties as the primary judge, including those concerning “the drawing of inferences and the making of findings of fact”: s 75A(6)(b). This Court “may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires”: s 75A(10).

2. [118]

   The primary judge’s reasons make it plain that, subject to one matter, the findings of credit set out above rejecting Michael Vella and accepting the respondents’ witnesses were based on matters other than demeanour. The possible exception comprises the primary judge’s findings about Mr Hobson and Mr Soper, extracted below:

3. [119]

   I regard these reasons as rejecting the appellants’ demeanour-based submissions but not as making demeanour-based findings. In effect, the primary judge can be taken to have said in the passage extracted above, in effect, that the appellants submitted that Mr Hobson’s demeanour was unsatisfactory but that the primary judge did not evaluate him in that way. The primary judge was careful to record throughout the judgment that her findings of credibility were based on the documents and objective probabilities.

4. [120]

   The difference between demeanour-based findings and other findings is important because, if a primary judge’s assessment of the credibility or reliability of witnesses was not based on their demeanour, the appellate court is in as good a position as her Honour to draw inferences from proven facts and the evidence as a whole: Warren v Coombes at 537-551 (Gibbs ACJ, Jacobs and Murphy JJ). However, if the findings of fact reflect the primary judge’s advantage in seeing and hearing the witnesses, an appellate court may only overturn such findings as are “glaringly improbable” or “contrary to compelling inferences”: Fox v Percy at [25]-[30] (Gleeson CJ, Gummow and Kirby JJ). Their Honours said, of present relevance:

5. [121]

   In the present case, I do not consider that the primary judge’s findings on credit reflected her Honour’s advantage in seeing and hearing the witnesses (except in so far as she was thereby able to reject the appellants’ submissions about Mr Hobson and Mr Soper set out above). Her Honour’s reliance on events and documents rather than demeanour was appropriate, particularly given the time period involved. As referred to above, the Ingleburn meeting took place about nine years before the hearing. Further, the judgment was delivered over a year after the hearing had completed and therefore the primary judge’s recollection of the demeanour of witnesses, as well as the pressures on a conscientious judge to give reasons in a timely way, may have played a role in creating what I consider to be the errors in fact-finding set out below: see Monie v Commonwealth of Australia (2005) 63 NSWLR 729; [2005] NSWCA 25 at [43] (Hunt AJA, Bryson JA agreeing) and Giles JA at [2]-[4].

6. [122]

   In these circumstances, I consider the appropriate test to be the one articulated in Warren v Coombes, since the inferences were drawn from the uncontroverted facts (such as, what was to be made of the lack of reference to Evermay in the contemporaneous documents, which referred to BLS, or why there was no answer to Michael Vella’s emails to Mr Hobson of 28 August 2012 and 4 September 2012, or why Michael Vella asked for a termination letter from Mr Aikin on 10 September 2012). However, even if the appropriate test were the one set out in Fox v Percy, and required the overturned findings to be “glaringly improbable” or “contrary to compelling inferences”, I consider that the findings which ought be overturned (addressed below) also fall into that category.

7. [123]

   As Stern JA has noted, the primary judge’s findings of credit against Michael and Joe Vella were substantially based on the view her Honour took of Michael Vella’s evidence about Evermay. Michael Vella’s evidence was that Evermay was a topic of conversation at the Ingleburn meeting and that, prior to the meeting, Mr Hobson had told him that he had been advised that they had to get Mr Phillips out of the company altogether by “closing” BFS and starting a new company, this being the main reason for starting the new company. The primary judge not only rejected that evidence but rejected the balance of Michael Vella’s evidence on the basis of her rejection of his evidence concerning Evermay. Her Honour’s principal reason for rejecting this evidence was that neither Evermay nor Mr Phillips was mentioned in contemporaneous documents such as the Discussion Paper or the minutes of the Ingleburn meeting. A subsidiary reason was the view her Honour had formed of the respondents’ witnesses (which was related to her rejection of Michael Vella’s evidence).

8. [124]

   One of the difficulties with this finding of credit is that her Honour did not factor into her assessment of Michael Vella’s evidence that the removal of Evermay was a significant issue at the time in light of the considerable documentary evidence to indicate that BLS was to be used in future as the corporate vehicle through which J&E Vella, Hynadam and Mechita would provide freight services to Schweppes. While the contemporaneous documents did not refer to Evermay or Mr Phillips in terms, they did refer to BLS, whose only purpose was to act as a substitute for BFS and would have the same shareholders and directors as BFS, apart from Mr Phillips and Evermay, who would play no role in BLS. Thus, the references to BLS, as distinct from BFS, carried with them, by necessary implication, references to Mr Phillips and Evermay. When viewed in this way, Michael Vella’s understanding of the position (that Evermay and Mr Phillips comprised an issue for the Ingleburn meeting) corresponded and was corroborated by the contemporaneous documents.

9. [125]

   For the reasons given above, the only reasonable inference available is that, at some time before the COR letter, either Mr Hobson or Mr Soper told Schweppes of BLS’s existence (it having been incorporated the previous year), and indicated that it was, or was to be, the relevant entity for the provision of such services. Such was the relationship between Mr Hobson and Mr Aikin (who spoke several times a day), that it can be inferred that Mr Aikin simply noted the change and referred to it in the COR letter, without feeling the need to enquire further. The reliance placed by Mr Aikin on Mr Hobson to be the spokesperson for the co-operative is nowhere better exemplified than in his email of 31 August 2012 to Mr Aikin in which he informed Mr Aikin that BFS (and BLS, which he must have mentioned to Mr Aikin previously for it to warrant mention in this email) would be going through a restructure, that BDA would be the new corporate entity to perform the Schweppes work and that they would like the change to take effect from 3 September 2012 “if possible”.

10. [126]

    It is also telling that the discussion paper prepared (in various versions) by Mr Fielding, in items 1.12, 1.13 and 1.15 referred to a new company, “BLPL”, of which the companies controlled by Michael Vella, Mr Hobson and Mr Soper were equal shareholders and the three men were directors. In these circumstances, it is hardly surprising that Michael Vella considered that it was significant for the co-operative to operate through a company which did not have Evermay as a shareholder.

11. [127]

    The primary judge ought not, in my view, to have so lightly dismissed the significance of the somewhat evasive and glaringly improbable evidence given by Mr Hobson, Mr Soper and Mr Aikin that they, in effect, could not explain the references to BLS in the documentation. That these three men were at such pains to deny the obvious effect of the documents ought to have weighed more heavily against their credit because it demonstrated not only their motive but also that each was aligned in, including in the case of Mr Aikin, giving evidence which favoured the respondents.

12. [128]

    Further, I consider that the primary judge was in error in not appreciating the significance of Mr Hobson telling Mr Aikin of BLS in about August 2012. There is no conceivable reason why Mr Hobson would have told Mr Aikin about BLS unless it had been intended that BLS would be the corporate vehicle which would replace BFS as the entity through which the co-operative would perform the work for Schweppes. Thus, this compelling inference (that Mr Hobson did tell Mr Aikin about BLS) was probative of that matter and, therefore, had considerable forensic significance, not only as to what happened, but also as to whether Michael Vella ought be believed when he said that removing Evermay and Mr Phillips from the picture was still an issue in August 2012 and a subject of discussion at the Ingleburn meeting.

13. [129]

    Further, the primary judge, having found Michael Vella not to be a witness of credit on this (flawed) basis, proceeded to accept the evidence of Mr Hobson, Mr Soper and Mr Aikin, without detailed analysis. In these circumstances, the primary judge’s focus on Evermay did not adequately discharge the obligation of the tribunal of fact to assess the evidence as a whole, which included the important period immediately following the Ingleburn meeting.

14. [130]

    Mr Aikin’s concession about the termination letter having been sought by Michael Vella is very telling because he was plainly in the respondents’ “camp” and not, as the primary judge found, an independent witness. He was the representative of Schweppes and had been dealing with Mr Hobson and Mr Soper as relevant points of contact for years (this is discussed further below). As far as the evidence revealed, Mr Aikin had only one conversation with Michael Vella (which was on 10 September 2012).

15. [131]

    There was no reason, on either the Vella hypothesis or the Hobson hypothesis, for there to be a termination letter from Schweppes to the co-operative. Mr Hobson’s statement to Michael Vella was, if Michael Vella’s evidence were to be accepted, a ruse to explain why J&E Vella had lost the right to deliver Schweppes goods and to obscure the real reason: that Mr Hobson and Mr Soper had, for their own benefit and to the detriment of J&E Vella, decided that it was more advantageous to excise J&E Vella from the co-operative.

16. [132]

    Mr Fielding, who with Mr Versluis was brought in to mediate the disputes between the parties, was retained by BDA, the new corporate vehicle which Mr Hobson and Mr Soper used to contract with Schweppes to provide delivery services, as its accountant and, therefore, had a continuing business relationship with Mr Hobson and Mr Soper. Where the passage of time can be expected to dim actual recollection, continuing association may incline a witness to see past events in a particular light. On the Vella hypothesis, Mr Fielding had assisted Mr Hobson to deprive J&E Vella of its share of the Schweppes work. Therefore, he was implicated, if the appellants’ case were accepted. In this sense, he had an important motive to support the respondents’ case.

17. [133]

    For the reasons given above, and following a review of the evidence, I find the following facts:

18. [134]

    It was not necessary for the primary judge, on the basis of the facts which her Honour found, to address the question of breach of fiduciary duty because, even if such a duty had existed, there would have been no breach as, on the primary judge’s findings, Michael Vella was the one responsible for terminating the co-operative relationship between J&E Vella, Hynadam and Mechita.

19. [135]

    The primary judge found, at [379]-[407], that neither Mr Hobson nor Mr Soper owed fiduciary duties to the appellants. Her Honour found that they undertook to act for BFS and not for the co-operative or any other of BFS’s shareholder: [401]. The primary judge rejected the quasi-partnership analysis: [404]. The primary judge concluded that the appellants had failed to establish that Mr Hobson or Mr Soper owed them fiduciary duties from the time of the incorporation of BFS to the Ingleburn meeting and that, in light of her Honour’s findings about what occurred at that meeting, did not owe duties thereafter.

20. [136]

    This analysis fails, in my view, to have regard to the authorities which establish that a fiduciary relationship will be found to have been created where there is mutual confidence and trust between parties in a quasi-partnership, whose agreement has not been formalised in a comprehensive commercial agreement: United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 12; [1985] HCA 49. In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64, which concerned the relationship between a manufacturer and a distributor of medical products, Mason J, at 96-97, described fiduciary relationships as relationships of trust and confidence or confidential relations and identified, as a critical feature of all such relationships that the fiduciary undertakes or agrees to act for or on behalf of the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. His Honour said that the fiduciary comes under a duty to exercise a power or discretion in the interests of the person to whom it is owed because the fiduciary’s exercise of the power or discretion can adversely affect the interests of the person to whom the duties are owed and because the latter is at the mercy of the former.

21. [137]

    I consider that the following features of the parties’ relationship establish that it was one of mutual trust and confidence such as to give rise to a fiduciary duty owed by Mr Hobson and Mr Soper to J&E Vella.

22. [138]

    All of the Schweppes work was allocated to BFS. Mr Hobson then internally (that is, without the knowledge or involvement of Schweppes) allocated each trucking job to an individual shareholder (J&E Vella, Hynadam or Mechita), which performed the work and then issued an invoice to BFS, whereupon BFS invoiced Schweppes for the work. BFS did not own any trucks. All trucks which performed the work for Schweppes were owned by the shareholders, which each bore their own expenses: [47], [61]. It was not intended that BFS make a profit and no dividends were ever paid to any shareholders: [73]. BFS’s costs (which largely comprised salaries paid by BFS to Mr Soper and Mr Hobson for their managerial roles) were covered by a 10% margin on each invoice issued to Schweppes [68]. BFS’s annual income from the Schweppes work (which amounted to millions of dollars ([73]) was not split between the shareholders. Instead, each shareholder was paid for each trucking job which it performed for BFS.

23. [139]

    Therefore, each individual shareholder’s income from the venture depended on, first, BFS continuing to perform the Schweppes work; and, second, how the Schweppes work was allocated between the BFS shareholders. The bargain reached between the shareholders was for the achievement, not only of each shareholder’s interest in maximising the number of jobs allocated to and performed by the shareholder, but also of the achievement of the joint interest (in performing all of the jobs for which Schweppes needed trucks to the satisfaction of Schweppes). In these circumstances, the contractual relationship between the parties was, in substance, a “joint venture”, of a kind which gave rise to fiduciary obligations. Because of the informality which characterised the parties’ day-to-day operations, the relationship could only operate on the basis of mutual trust and confidence. Each shareholder was reliant on the others performing the work allocated to them in order that their collective obligation to Schweppes could be discharged. The primary judge was in error to find to the contrary.

24. [140]

    The primary judge found that the appellants were not in a position of vulnerability of the type found in Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWSC 199. Her Honour considered that, because the appellants were shareholders of BFS with an entitlement to board representation they were not in a “powerless position” or disenfranchised. However, each case must be viewed by reference to its own facts and circumstances.

25. [141]

    The primary judge, at [398]-[400], correctly accepted what Young JA (Allsop P and Macfarlan JA agreeing) said in Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654, that the “critical question” was whether “in all the circumstances, there was a special opportunity for [the director] to act to the detriment of the other shareholders so that he owed a duty to them”.

26. [142]

    I consider that this critical question ought have been answered in the affirmative. Mr Hobson was the “operations manager” of BFS and was responsible for negotiating contract terms and liaising with Schweppes on behalf of BFS. He was also responsible for the day to day running of BFS, allocating or overseeing the allocation of Schweppes work to the BFS shareholders, legislative compliance, and liaising with truck drivers: [69]. Because he had the sole responsibility of allocating Schweppes work between the shareholders of BFS, he could determine the income which each shareholder earned from that work. Mr Soper was BFS’s financial controller and, as such, prepared and issued invoices to Schweppes and verified and paid the invoices submitted by BFS’s shareholders.

27. [143]

    Further, Mr Hobson and Mr Soper operated from an office at the head office of Schweppes (which was initially at Alexandria and later moved to Prospect): [71]. They had exclusive access to Mr Aikin in respect of all services provided by BFS to Schweppes from August 2001 to September 2012: [24]. They were, in effect, the face of BFS, as far as Mr Aikin was concerned. Their involvement is to be contrasted with that of Michael Vella, whose first ever conversation with Mr Aikin was on 10 September 2012, when the Schweppes work had already been redirected to BDA: [328]. Accordingly, Mr Hobson and Mr Soper had a “special opportunity” to act to the detriment of J&E Vella. That J&E Vella was a shareholder and Michael Vella was a director of BLS did not render the appellants other than vulnerable to the power, control and influence wielded by the respondents over them in this setting.

28. [144]

    J&E Vella reposed trust and confidence in the respondents not to act to their detriment in the allocation of work or other matters concerning the Schweppes work. Because the respondents dealt directly with Schweppes on behalf of BFS and J&E Vella, they were in a position where they could affect the interests of J&E Vella in a legal and practical sense. As referred to above, their power to do so is established beyond question by the circumstance that, in a single email (dated 31 August 2012) they could exclude J&E Vella from the work which it had performed for the last eleven years, without demur from Schweppes which, for its own commercial reasons, had required there to be one contracting party, not three. The effect of this email also demonstrates J&E Vella’s vulnerability to the respondents’ breach. Although such vulnerability, of itself, does not establish a fiduciary relationship, it is commonly a characteristic of those to whom fiduciary duties are found to be owed.

29. [145]

    In these circumstances, the parties’ relationship did not accommodate or allow for:

    1. (1)

       the respondents being entitled to pursue their own interests without regard to Michael Vella’s interests or those of J&E Vella;

    2. (2)

       the respondents being able to use their position (as the gate-keepers between BLS’s shareholders and Schweppes or otherwise) to exclude J&E Vella from the Schweppes work;

    3. (3)

       the respondents being entitled to substitute some other person (such as Coastal) to provide the services which J&E Vella was entitled to provide and had provided during the period of the relationship;

    4. (4)

       the respondents being entitled to take the benefit of the Schweppes work for themselves; or

    5. (5)

       the respondents being entitled to use their position to exclude J&E Vella from the Schweppes work and take the benefit of the whole of it for themselves or enter into a new arrangement whereby a third party (Coastal) would provide the services which J&E was entitled to provide.

30. [146]

    While the respondents argued that no fiduciary obligation arose from the parties’ relationship, the main thrust of their case at trial (and on appeal) was a factual one: that Michael Vella had unilaterally terminated the relationship at the Ingleburn meeting and that, accordingly, the respondents owed no fiduciary duties to the appellants henceforth. When one has regard to the applicable legal principles, one can understand why this factual issue dominated the trial and the appeal. For the reasons given above, I am satisfied that the appellants have proved that Michael Vella did no such thing at the Ingleburn meeting and that the appellants were, in effect, double-crossed by the respondents, who breached the fiduciary duties they owed to them for their own benefit and to the detriment of the appellants by replacing J&E Vella with Coastal.

31. [147]

    It follows from the above analysis that I reject the respondents’ submission that Crawley v Short did not apply because the crucial element that the fiduciary be required to have undertaken to act for the other party was not established. Whether or not Mr Hobson undertook to act for J&E Vella, the system which was in place in their day-to-day operations meant that they did in substance act for J&E Vella, by taking it upon themselves (with the concurrence of the shareholders of BFS) to allocate the work to J&E Vella and administer the Schweppes contract in the manner set out above. While J&E Vella knew what work it did itself (because it was allocated to them and they invoiced BFS for it and was paid by BFS for it), they did not know, beyond observation of the numbers of other shareholders’ trucks at various locations, exactly how the work was being allocated and what percentage of the Schweppes work was being undertaken by the other shareholders. These were matters from which they were excluded. Their fate was, in a real and practical sense, in Mr Hobson’s hands. Further on the basis of Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 (Stellar Vision), I reject the respondents’ submission that to recognise a fiduciary duty in the present case would be an unjustified extension of the categories of fiduciary duty.

32. [148]

    Stellar Vision is more apposite authority than Crawley v Short, in part because of its salient factual similarities to the present case. In that case, the appellant (Stellar Vision) was a co-tenderer for patient entertainment systems for hospitals in the Western Sydney Local Area Health District (WSLAHD) with a company (Questek) which was acquired by the respondent (Hills). As WSLAHD required that the contract be with a single entity, it was agreed that Questek would be the party with which WSLAHD contracted, although the tender was a joint one. Stellar Vision worked to develop the software for use in the contract. Subsequently, the respondent contracted with WSLAHD to supply patient entertainment services but excluded the appellants from participation and made arrangements for another entity to provide the services which the appellant would have provided.

33. [149]

    This Court relevantly found that the primary judge erred in finding that the parties were not in a fiduciary relationship on the basis that their relationship was not one of mutual trust and confidence and Hills had not undertaken or agreed to act for or on behalf of or in the interests of Stellar Vision in the exercise of a power or discretion which would affect the interests of Stellar Vision in a legal or practical sense. This Court found that both such requirements were present because the joint tender had used their combined resources and, as the party who dealt with WSLAHD, and ultimately the only contracting party, Hills was in a position where it could and did exercise a discretion which affected the interests of Stellar Vision, both in a legal and practical sense by excluding Stellar Vision, which was vulnerable to Hills’ breach in this regard. While the Court also decided the case on another basis, it confirmed the separate entitlement to relief based on breach of fiduciary duty.

34. [150]

    As in Stellar Vision, the greater access of one party (Hills in that case, the respondents in the present case) to the contracting party (WSLAHD in that case, Schweppes in this case) was exploited to the detriment of the other party, contrary to the relationship of mutual trust and confidence and in breach of fiduciary duties which arose in those circumstances.

Relief

1. [151]

   Because of the findings made by the primary judge, it was not necessary for her Honour to consider the question of relief. The parties in this Court accepted that, if the appeal were allowed, the matter would have to be remitted to the primary judge to determine what relief ought be granted.

Proposed orders

1. [152]

   Mine is a dissenting opinion. The orders which I would propose but for that matter are as follows:

   1. (1)

      Allow the appeal.

   2. (2)

      Remit the matter to the primary judge for the determination of what relief ought be granted.

   3. (3)

      Order the respondents to pay the appellants’ costs of the appeal.

2. [153]

   STERN JA: This appeal arises out of a dispute between J and E Vella Pty Ltd (“JEV”, the first appellant) and two companies, Hynadam Pty Ltd (“Hynadam”, the second respondent) and Mechita Pty Ltd (“Mechita”, the fourth respondent) with which JEV cooperated to provide freight services to Cadbury Schweppes Pty Ltd (“Schweppes”) from August 2001 until August 2012. This was effected through a corporate entity, Beverage Freight Services Pty Limited (“BFS”, the fifth respondent) which effectively acted as a clearing house, allocating freight services contracted by Schweppes to JEV, Hynadam and Mechita, but without making any profit from those services. In August 2012 this cooperative relationship was brought to a sudden end, shortly after a meeting between representatives of JEV, Hynadam and Mechita, and two facilitators, on 28 August 2012 (“the Ingleburn Meeting”). Thereafter, the arrangement between Schweppes and BFS terminated but entities related to Hynadam and Mechita (the seventh and eighth respondents, respectively), together with one other freight company continued to provide those services. They did so through a new corporate entity, Beverage Distribution Australia Pty Ltd (“BDA”, the sixth respondent) which again acted as a clearing house. The effect of this was that JEV was effectively excluded from providing freight services to Schweppes.

3. [154]

   JEV and Joseph Vella (an owner and director of JEV and the second appellant) allege that Mr Brian Hobson (the first respondent), director of Hynadam, and Mr Brett Soper (the third respondent), director of Mechita, acted in breach of fiduciary duties which they owed to JEV and Joseph Vella in bringing about the termination of the arrangement between Schweppes and BFS and causing instead a new arrangement, which excluded JEV, to be entered into between Schweppes and BDA. It is alleged that a number of other entities, all respondents to the appeal, were knowingly concerned in those breaches. The primary judge, after a trial which lasted for eight days, dismissed their claims.

4. [155]

   On appeal, the principal factual issue is whether the primary judge erred in the findings that her Honour made as to what occurred at the Ingleburn Meeting. Specifically, whether or not her Honour erred in finding, consistent with the respondents’ evidence, that at that meeting Michael Vella, the son of Joseph Vella and a director of BFS, agreed with Mr Hobson and Mr Soper that each of JEV, Hynadam and Mechita would henceforth seek work directly from Schweppes and would no longer deal with Schweppes on the previous cooperative basis through BFS, which would be wound up. By contrast, the appellants’ account was that there was no such parting of ways at the Ingleburn Meeting. Rather, the meeting concluded with JEV, Hynadam and Mechita determining to continue their arrangement to provide freight services to Schweppes through a corporate clearing house, but to do so through a new corporate entity, being Beverage Logistics Services Pty Ltd (“BLS”). This factual dispute is at the heart of the appeal. The appellants accept that if it is resolved against them, the appeal fails.

5. [156]

   In support of their contention that the primary judge erred in resolving that key primary factual issue against them, the appellants contend that the primary judge erred as regards the following four intermediate factual findings.

   1. (1)

      In August 2012 Mr Hobson and Mr Soper did not consider that the shareholding in BFS of Evermay Pty Ltd (“Evermay”), a company which had until 2010 also been part of the cooperative arrangement described above, was a problem for BFS. The appellants’ contention was that Mr Hobson and Mr Soper were concerned about this at that time. They contend that that concern explains why JEV, Hynadam and Mechita decided to provide freight services to Schweppes through BLS rather than BFS. Thus, they contend, the ongoing concern by each of Mr Hobson, Mr Soper and Michael Vella about Evermay’s shareholding in BFS supports their account that it was decided at the Ingleburn Meeting to continue jointly to provide freight services to Schweppes but to do so through BLS notwithstanding that there remained matters in dispute between JEV, Hynadam and Mechita.

   2. (2)

      Prior to August 2012 there had been no discussion of an intention to divert the business of BFS to BLS between Mr Hobson and Mr Aikin, at that time National Transport Manager for Schweppes Australia. The appellants’ contention was that there had been such discussion. They contended that that supported their primary contention that JEV, Hynadam and Mechita agreed at the Ingleburn Meeting to migrate the role of BFS to BLS. This was because the fact that Mr Hobson discussed an intention to migrate the business to BLS disclosed a fixed plan of Mr Hobson, and by implication also Mr Soper, for that to happen irrespective of whether the various disputes between JEV, Hynadam and Mechita were resolved.

   3. (3)

      The proposal to transfer the role of BFS to a new company jointly owned by Mr Hobson, Mr Soper and Michael Vella in July-August 2012 emanated from Mr Fielding or Mr Versluis, being the facilitators working with the companies to resolve their differences in July-August 2012, and not from Mr Hobson or Mr Soper. The appellants’ contention was that that proposal emanated from one of Mr Hobson or Mr Soper and that that, in turn, suggested that a restructure was already in train and was not conditional upon the parties resolving their differences at the Ingleburn Meeting.

   4. (4)

      On or about 10 September 2012, as Mr Aikin said, Michael Vella told Mr Aikin that the shareholders in BFS had decided to go their separate ways and that the Vellas wanted to keep doing the transport work for Schweppes through their own company NSW Freightlines, not BFS. Michael Vella gave a very different account of that conversation. This was important because Mr Aikin’s account was inconsistent with the appellants’ account of what occurred at the Ingleburn Meeting.

6. [157]

   If the key overarching factual issue as to what occurred at the Ingleburn Meeting is resolved in the appellants’ favour, but not otherwise, there are three legal issues that arise. First, whether Mr Soper and Mr Hobson owed a fiduciary duty to JEV in the circumstances. Second, if so whether it was breached. Third, whether any of the respondents were knowingly concerned in any such breaches.

7. [158]

   For the reasons set out below, in addition to the matters set out in the reasons of Mitchelmore JA, with which I agree, the primary judge did not err in her Honour’s findings as to the key overarching factual issue. It necessarily follows that the appeal should be dismissed.

Factual Background

1. [159]

   The factual background to the dispute before this Court is very fully set out in the primary judgment. The following is taken from her Honour’s careful analysis and, where relevant, the underlying documents.

2. [160]

   In about 2000, Mr Hobson and Michael Vella each became aware that Schweppes wished to have all of its freight services provided by one company rather than contracting with several freight companies. This was a matter of administrative convenience for Schweppes. In January 2001, Mr Hobson, Mr Soper, Ralph Sobara (a co-owner of Mechita), Joseph Vella, Michael Vella, Stephen Phillips (director of Evermay) and Glen Alderton (director of Alderton Transport Pty Ltd (“Alderton Transport”)) had a meeting referred to as the “Greystanes Meeting”. They agreed to form a new company. BFS was incorporated on 22 August 2001 for this purpose. The five companies would have equal shares in BFS, and the directors of BFS were to be Michael Vella, Mr Hobson, Mr Soper, Mr Phillips and Mr Alderton. Joseph Vella was not a director of BFS but Michael Vella was.

3. [161]

   Mr Hobson offered to be the manager, a role he described as involving the running of the business on a day to day basis and being the “point of contact for Schweppes.” The others agreed with his suggestion. Initially Mr Phillips took on the management of the “finance side of things” but that role was taken over by Mr Soper in or about December 2001.

4. [162]

   The primary judge found that an agreement was formed between JEV, Hynadam, Mechita, Evermay and Alderton Transport at the Greystanes Meeting. Her Honour found that it was a term of this agreement that Mr Hobson would be BFS’ contact person for Schweppes. Her Honour also found it was agreed that freight services from Schweppes would be allocated by a representative of BFS on the basis that each company would receive an approximately equal share, provided that they “turned up” for work. It was agreed that each of the companies would invoice BFS for the work it performed and BFS would then consolidate those invoices and send a single invoice to Schweppes. BFS would pay the companies for the deliveries performed and would charge each of the companies an administration fee on each invoice to cover its costs. Implicit in these terms is that it was not intended that BFS would make a profit. Its role was limited to being the administrative interface with Schweppes and allocating work as between the shareholders on the agreed basis. It is in that sense that I have described it as a clearing house.

5. [163]

   Prior to 2001, some of the companies had a long history of providing freight services to Schweppes but JEV had only recently commenced doing so.

6. [164]

   Throughout the period 2001 to 2012 Mr Hobson and Mr Soper operated out of the BFS office located within Schweppes’ head office. Mr Hobson was responsible for liaising with Schweppes on behalf of BFS. It is apparent that he had frequent contact with Mr Aikin over that period and that Mr Soper also had contact with Mr Aikin. By contrast, Michael Vella did not have any contact with Mr Aikin. He spoke to him for the first time in September 2012, after the Ingleburn Meeting.

7. [165]

   From some time in 2002, Mr Alderton and Alderton Transport ceased to be involved in the operations of BFS. This led to Mr Alderton ceasing to be a director and Alderton Transport being removed as a shareholder of BFS in October 2003. In October 2010 Mr Phillips resigned as director of BFS. Mr Phillips’ company Evermay remained a shareholder of BFS but did not provide any freight services for Schweppes from around this time as Mr Phillips was experiencing health issues. On 7 February 2011 BLS was incorporated and there was no real dispute that this was done to effect the removal of Evermay as a shareholder of the company through which the business was carried on and to exclude Mr Phillips from the beverage freight operation.

8. [166]

   In around June 2012 Mr Hobson and Mr Soper caused BFS to enter into a lease of premises at Arndell Park. As at August 2012, Michael Vella was very upset because he considered that this lease had been entered into without his agreement and he did not want BFS to lease a warehouse when there was a JEV warehouse which he considered could be used at no cost to BFS. There was also a dispute as to whether Michael Vella should be added as guarantor of the lease. This was one of the active disputes between the parties as at August 2012.

9. [167]

   Joseph and Michael Vella had also been raising concerns about the allocation of work for some time prior to August 2012. This was another of the active disputes between the parties as at August 2012.

10. [168]

    Financial analysis before the Court showed that JEV had total transport revenue of $4,933,762 in 2011 of which $1,198,711.11 was from Schweppes work. In 2012, it had total revenue of $4,998,105 of which $1,008,529.26 was from Schweppes work. Michael Vella’s evidence was that the NSW Freightlines business that JEV operated, and which was separate from the Schweppes work through BFS, was more profitable to JEV than the Schweppes work which it undertook through BFS.

11. [169]

    In early August 2012 an issue arose as to whether trucks performing freight services contracted by BFS had speed limiters fitted as required. On 2 August 2012 Mr Aikin sent an email to Mr Hobson, Brett Hobson (Mr Hobson’s son) and Mr Soper attaching a “Business Logistics Services - Chain of Responsibility” incident report (“COR”). This identified that a number of vehicles, described as “BLS vehicles” (the use of BLS rather than BFS has some significance, considered below) were consistently exceeding the 100km/h speed limit for heavy vehicles. Thirteen vehicles were identified, three of which were JEV vehicles, and the remainder either Hynadam or Mechita vehicles. The COR said that those vehicles were immediately suspended from performing work for Schweppes and Schweppes required immediate action including certification that their speed limiters had been serviced and reset. Once documentary evidence of this was provided the vehicles could recommence working for Schweppes.

12. [170]

    After receiving that email, Mr Hobson had a conversation with Mr Aikin, the result of which was that none of the trucks were suspended provided that BFS could confirm that they were speed limited. Then on 16 August 2012 Mr Hobson, using Mr Soper’s email account, sent an email to Mr Aikin with the subject “BFS SPEED LIMITED”, setting out that he had:

13. [171]

    He then listed the vehicles in a table, with columns headed “REGO no”, “Speed limiter checked at last service drive test” and “Booked into Detroit for limiter to be checked”. As regards each of the Hynadam and Mechita vehicles he included dates in the second and third columns, but as regards each of the JEV vehicles, he left those columns blank.

14. [172]

    On 17 August 2012 Mr Aikin responded to this email with the following:

15. [173]

    This email was forwarded by Mr Soper to Mr Versluis on 20 August 2012 at 2.55pm.

16. [174]

    On 21 August 2012 at 2.38pm Mr Soper sent an email to Mr Hobson, Michael and Elizabeth Vella (who held an administrative role with JEV) informing them of the contents of the 16 August 2012 email to Mr Aikin and stating that he had received correspondence from Schweppes advising that five of the JEV vehicles were not to be used in Schweppes work until each vehicle had been booked in for speed limiter checks and certified that the limiters were set to 100km/h. He added that it would be necessary for BFS to source vehicles from other subcontractors in the meantime to ensure that it complied with the Schweppes agreement.

17. [175]

    Within a couple of minutes of receiving this email Michael Vella sent three emails to Mr Soper. One email sent at 2.50pm attached certificates confirming speed limiters were set at 100km/h for two of the JEV vehicles identified in Mr Soper’s email. Clearly angry, the second email sent at 2.55pm (expletives deleted), stated:

18. [176]

    The third email, sent at 2.59pm attached an email that had been sent to Mr Hobson at 6.55am on 21 August 2012, setting out that a third of the vehicles would be taken to Detroit that morning.

19. [177]

    Michael Vella’s evidence was that prior to Mr Hobson sending the 16 August 2012 email to Mr Aikin, neither Mr Hobson nor Mr Soper checked with him as to whether his trucks had had, or were booked in for, speed limiter certification.

20. [178]

    Notwithstanding the instruction of Mr Aikin set out in his email of 17 August 2012 and the email of 21 August 2012, it is apparent from Michael Vella’s affidavit sworn on 23 February 2017 that Mr Hobson did not in fact require that the JEV trucks cease working for Schweppes until they had speed limiter checks performed. Rather the JEV trucks kept working for Schweppes but were pulled out of Schweppes work only whilst their speed limiters were being tested.

21. [179]

    On 22 and 23 August 2012 Michael Vella sent Brett Hobson certificates confirming that the speed limiters were set to 100km/h for the remaining three vehicles identified in the email of 21 August 2012. None of the certificates provided to Mr Soper or Brett Hobson were forwarded to Mr Aikin. Mr Soper’s evidence was that he did not have any reason not to forward them on. He was not sure why he didn’t send them on.

22. [180]

    Mr Versluis and Mr Fielding (both of Risk Connect Australia) became involved in late July 2012 on account of the growing tensions between Hynadam, Mechita and JEV. Mr Hobson and Mr Soper did not know either Mr Versluis or Mr Fielding before this process.

23. [181]

    Mr Versluis and Mr Fielding met with Mr Soper and Mr Hobson for the first time on 24 July 2012. On 25 July 2012 Mr Versluis sent an email to Mr Soper copied to Mr Fielding. Mr Soper made some handwritten annotations on a copy of that email. This suggests that, at some time around then, there was discussion of setting up a new company. This is because the handwritten text includes:

24. [182]

    Mr Versluis and Mr Fielding subsequently produced a Discussion Paper dated 11 August 2012 (“Discussion Paper”). The Discussion Paper included reference to a new company, described as Beverage Logistics Pty Limited (“BLPL”), through which it was proposed that the business of BFS would in future be operated. There is no dispute that the description of this company as BLPL is an error (that company had been deregistered years earlier) and it was meant to be a reference to BLS. The Discussion Paper, relevantly, included the following (substituting BLS for BLPL):

25. [183]

    The Discussion Paper also included items relating to allocation of work and profit, truck ownership, policies to be agreed about allocation of work and income flows, a shareholders agreement and obtaining future work.

26. [184]

    The Discussion Paper did not refer to Evermay or to Mr Phillips.

27. [185]

    One of Mr Fielding or Mr Versluis met with Michael Vella on an unknown date (probably in late July or early August). Mr Fielding and Mr Versluis then met with Joseph, Elizabeth and Michael Vella on 22 August 2012. The notes of that meeting were in evidence, but no notes of any other meetings that Mr Versluis or Mr Fielding attended were in evidence. Those notes contained 44 separate items including the following:

28. [186]

    At the Ingleburn Meeting, Mr Fielding gave each of Michael Vella, Mr Hobson and Mr Soper an updated version of the Discussion Paper which included a column which summarised the conversations that had taken place and the position of each of the parties as communicated to Mr Fielding or Mr Versluis. It is clear from this that a number of disputes remained unresolved as between Michael Vella on the one hand, and Mr Hobson and Mr Soper on the other. By way of example, there was a dispute as to how income should be distributed. The Vellas proposed equality of income distribution whereas Mr Hobson and Mr Soper proposed performance-based income distribution. There was a dispute as to whether there should be compensation for lost earnings. The Vellas were pushing for compensation for lost earnings but Mr Hobson and Mr Soper disagreed with this. There was a dispute as to the provision of guarantees in respect of the Arndell Park lease, which the Vellas refused but Mr Hobson and Mr Soper required. There was a dispute as to whether or not each shareholder should supply an equal number of trucks for the use of BLS as the Vellas contended. There was also a dispute as to whether or not all staff should be employed by BLS, as the Vellas contended. As regards items 1.12, 1.13 and 1.15, the proposal to conduct ongoing operations through BLS, the comments attributed to all three directors was “agree”.

29. [187]

    After the Ingleburn Meeting concluded, but on the same day, Mr Fielding prepared a document described as “Minutes” of the meeting. In those Minutes the purpose of the meeting was described as being “[t]o discuss and resolve the current difficulties in the operations of the company.” The document continued:

30. [188]

    The document was signed by Mr Hobson, but not by any of the other directors. There is an issue as to whether or not it was sent by post to Michael Vella.

31. [189]

    On 29 August 2012 Mr Fielding was instructed by one of Mr Hobson or Mr Soper to set up a new company. On 30 August 2012 it was confirmed that the directors of the new company would be Mr Hobson, Mr Soper and Mr Jameson, whose company, George McDonald & Sons, had been a subcontractor to BFS and had trucks which were compliant with Schweppes’ requirements. The new company, BDA, was registered on 30 August 2012. The shareholders were Mechita Nominees Pty Ltd (which later changed its name to McIntyre Holdings NSW Pty Ltd), a corporate trustee associated with Mr Soper, Hynadam Nominees Pty Limited, a corporate trustee associated with Mr Hobson and Coastal Beverage Logistics Pty Ltd, a company associated with Mr Jameson. Mr Fielding was appointed as the accountant for BDA.

32. [190]

    On 30 August 2012, Michael Vella sent an email to Brett Hobson and Mr Soper stating:

33. [191]

    There was no reply to that email.

34. [192]

    On 31 August 2012, Mr Hobson (using Mr Soper’s email address) sent an email to Mr Aikin, copied to other Schweppes personnel, which stated:

35. [193]

    Michael Vella sent a further email to Brett Hobson and Mr Soper on 4 September 2012 stating:

36. [194]

    Again, there was no reply to that email.

37. [195]

    On 5 September 2012 Mr Aikin sent an email to various individuals within Schweppes, copied to Mr Hobson and Mr Soper with the subject:

38. [196]

    In the body of the email Mr Aikin wrote that from 10 September 2012 BFS would undergo a change of name and ownership. The new name would be BDA. He asked that arrangements be made to accept BDA as a vendor from 10 September 2012.

39. [197]

    It appears that some JEV vehicles were used for BFS work up until 10 September 2012, but not thereafter.

40. [198]

    Michael Vella’s evidence was that on around 10 September 2012 he spoke to Mr Hobson. Mr Hobson told him that Schweppes had terminated BFS’ services. Mr Hobson denied any such conversation.

41. [199]

    Also on 10 September 2012 Michael Vella called Mr Aikin and spoke to him for the first time. The terms of that conversation are disputed. On Michael Vella’s account he called Mr Aikin after having been told by Mr Hobson that Schweppes had terminated BFS’ services. Michael Vella says he asked Mr Aikin for the termination letter and in response Mr Aikin told him that there was no letter of termination. Mr Aikin said that Mr Hobson had contacted him and told him that the company would have new directors, would be restructured and would then continue to provide services on the same terms but as BDA. Michael Vella says that he told Mr Aikin that this was not so.

42. [200]

    Mr Aikin’s account of the call, set out in his affidavit, was that Michael Vella told him that:

43. [201]

    Mr Aikin then said that Schweppes had given JEV ample time to react to the speed limiter compliance breaches but JEV “chose not to do anything about it.’’ He says that Michael Vella responded by saying:

44. [202]

    He says Michael Vella later said:

The primary judgment

1. [203]

   The primary judge dismissed the appellants’ claims. Evidence was heard over five hearing days. There were multiple affidavits from each of the key witnesses and each of those witnesses was the subject of lengthy cross-examination.

2. [204]

   The primary judge found that neither Michael nor Joseph Vella were credible or reliable witnesses. By contrast, her Honour accepted the evidence of each of Mr Soper, Mr Hobson, Mr Fielding and Mr Aikin. Her Honour did not rely upon the evidence of Mr Versluis as it became apparent during his cross-examination that he had no recollection of what occurred at the Ingleburn Meeting.

3. [205]

   The primary judge explained that her conclusions as to the evidence of each witness were reached having weighed the evidence of each witness “against all of the contrary evidence and the inherent probabilities and improbabilities in light of relevant objective facts”. It is in any event readily apparent from the primary judgment that her Honour’s findings as to the credibility and reliability of the various witnesses were based upon a consideration of the evidence as a whole but also to some extent upon her impression of the various witnesses when they gave evidence. By way of example, in rejecting the appellants’ submission that Mr Hobson was not a witness of reliability or credibility and that he gave evidence in a “cagey” manner, the primary judge found that:

4. [206]

   Also, as regards Mr Fielding, the primary judge found (emphasis in original):

5. [207]

   The primary judge rejected Michael and Joseph Vella’s accounts of what occurred at the Ingleburn Meeting and instead accepted the evidence of Mr Hobson, Mr Soper and Mr Fielding as to this. Accordingly, the primary judge found that at the conclusion of the Ingleburn Meeting, there was ultimately no agreement except that BFS would be wound up and the shareholders in BFS would go their own separate ways, with each free to seek Schweppes work independently of BFS. The primary judge thus rejected the appellants’ contention that the Ingleburn Meeting concluded with an agreement between the directors that the business of BFS would be wound up and transferred to a new company owned by the three active shareholders in BFS. The primary judge found that the proposal to set up a new company was dependent upon the shareholders and directors agreeing how the new company would be operated, including in relation to the allocation of work and responsibility for trucks.

6. [208]

   As regards the conversation between Michael Vella and Mr Aikin on 10 September 2012, the primary judge preferred Mr Aikin’s account, noting that Mr Aikin’s account did not have Michael Vella pitching for the whole of the Schweppes work.

7. [209]

   The primary judge found that no fiduciary duties were owed by Mr Hobson or Mr Soper to JEV or Joseph Vella and that there was no undertaking or agreement by any of the alleged fiduciaries to act for, on behalf of, or in the interests of JEV or Joseph Vella. Her Honour found that Mr Hobson and Mr Soper relevantly were acting for, on behalf of, or in the interests of BFS and not for JEV or Joseph Vella. Thus, whilst there were some cases, such as Brunninghausen v Glavanics (1999) 46 NSWLR 538; [1999] NSWCA 199 and Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654, in which a fiduciary duty had been owed by a director to a shareholder, this was not such a case. Her Honour also rejected the contention that BFS was a partnership in a corporate guise.

8. [210]

   Her Honour found that even if there had been a fiduciary relationship, such relationship would not have continued beyond the Ingleburn Meeting and would not have been breached by the conduct of Mr Hobson and Mr Soper incorporating BDA after the Ingleburn Meeting.

9. [211]

   It necessarily followed that the claim that Hynadam, Mechita, BDA, Hynadam Nominees and Mechita Nominees were knowingly concerned in any breach failed.

The challenges to the primary judge’s key factual findings

1. [212]

   As set out above, the key issue on appeal is whether the primary judge erred as regards the principal factual finding as to what was agreed at the Ingleburn Meeting. The appellants submit that her Honour also erred in the four intermediate factual findings set out above.

2. [213]

   Any consideration of these issues is necessarily informed by the fact that each of these findings flowed inexorably from the primary judge’s adverse credibility findings as regards Michael and Joseph Vella, and her Honour’s acceptance of the evidence of each of Mr Soper, Mr Hobson, Mr Fielding and Mr Aikin.

3. [214]

   It is well recognised that where the credibility of witnesses is involved, the trial judge enjoys advantages over an appellate court by reason of having seen the witnesses and having been immersed in the milieu of the trial. In such a case, the trial judge’s findings are “likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence”: Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 (“Lee”) at [55]. Even if the Court does not expressly rely upon demeanour, as Tobias AJA held in Vagg v McPhee (2013) 85 NSWLR 154; [2013] NSWCA 29 at [84]-[85], where findings of credit are clearly in issue “it is unlikely that…presentation in the witness box was not keenly observed and taken into account” and in making such findings a trial judge “enters upon a complex intellectual process involving the interaction of documentary material, elements of testimony from different witnesses and matters of emphasis none of which readily appear from reading a transcript.”

4. [215]

   As stated in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [29] (“Fox v Percy"), and as summarised in Lee at [55], in order to succeed in appealing findings influenced by the credibility of witnesses it is necessary to establish that the primary judge’s findings were “glaringly improbable” or “contrary to compelling inferences”. The appellants accepted in their written submissions that they needed to meet that threshold.

5. [216]

   In oral submissions, however, Senior Counsel for the appellants submitted that the primary judge’s findings were based upon plausibility rather than credit, such that “the strict Fox v Percy” approach did not apply. I would reject that characterisation. Whilst I accept that the supposed categories of fact finding are “so porous that no definitive test is possible”: Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 at [15] (Basten JA), in this case the primary judge’s findings were most likely affected by impressions about the credibility and reliability of the witnesses formed as a result of seeing and hearing the witnesses give evidence. That is so even though her Honour’s findings as to credit were informed by an assessment of the evidence as a whole, including the plausibility of the accounts of the various witnesses having regard to the documentary evidence. In these circumstances, the appellants face the high hurdle set out above in seeking to have those findings set aside.

6. [217]

   In considering the appellants’ challenges to the key primary and four intermediate findings of fact it is important to return to the basis of the key finding that:

7. [218]

   As set out above, that finding flowed from the primary judge’s acceptance of the evidence of Mr Hobson, Mr Soper, Mr Fielding and Mr Aikin, and rejection of the evidence of Michael and Joseph Vella as to what occurred at the Ingleburn Meeting and more generally. It is thus necessary for the appellants to satisfy this Court that those credibility findings should be set aside on appeal, at least as regards the key evidence of Michael Vella.

8. [219]

   The primary judge’s adverse finding as to the credibility of Michael Vella was based significantly upon a rejection of his evidence as to the significant role that Evermay continuing to be a shareholder of BFS played in August 2012. The primary judge rejected his evidence as to this for six reasons. First, the primary judge identified, as was not contentious on appeal, that there was no evidence that Evermay’s continuing shareholding in BFS ever caused any problems. The primary judge noted that this was consistent with Michael Vella’s evidence in his affidavit sworn 4 December 2015 that:

9. [220]

   The primary judge found that this evidence was inconsistent with Michael Vella’s later account that, at least by August 2012, the continuing shareholding that Evermay held in BFS was described by Mr Hobson as a problem. Thus, in his affidavit sworn on 3 February 2021, Michael Vella said that in about August 2012 Mr Hobson said to him:

10. [221]

    Moreover, during cross-examination, when it was put to him that the “question of Ste[phen] Phillips” was not raised by him at his meeting with Mr Fielding, Michael Vella said that the question of Mr Phillips was “absolutely” raised, “[t]hat was the major reason.” It is not clear here whether Michael Vella was saying that the issue of Mr Phillips was the major reason for the meeting or that it was the major reason for something else. Ultimately, however, this uncertainty is of no moment. It is clear that Michael Vella was suggesting that Evermay’s shareholding in BFS was a significant matter raised at his meeting with Mr Fielding. Michael Vella also gave evidence in cross-examination that he was sure that Mr Phillips was “the major topic” of his discussion with Mr Fielding at their meeting, and that that was “the start of it”.

11. [222]

    As the primary judge found, there is some inconsistency between Michael Vella’s affidavit evidence in December 2015 that did not suggest any perception by the directors of BFS as at August 2012 of any ongoing problem with Mr Phillips (or more properly Evermay) remaining a shareholder of BFS and his later evidence that this was perceived to be a problem (at least by Mr Hobson) in around August 2012 and that this was a major topic of discussion at the meeting with Mr Fielding. The fact that Mr Phillips’ resignation as director was the impetus for the incorporation of BLS in February 2011 does not explain why Mr Phillips or Evermay would be a “major” topic at that meeting in August 2012. In his December 2015 affidavit, Michael Vella also set out that the meeting with Risk Connect Australia was organised “so we could discuss the recent issues that had arisen, including the problem with Steve Phillips.” This evidence again is inconsistent with Michael Vella’s evidence (in the same affidavit) that suggested that the continuing shareholding of Mr Phillips was not problematic at that time. It is also implausible given that there was no suggestion that Mr Phillips or the Evermay shareholding in BFS was causing any “problem” as at August 2012.

12. [223]

    Second, the primary judge found that Michael Vella’s evidence that Mr Phillips was the major topic of his discussion with Mr Fielding was inconsistent with Michael Vella’s evidence in his affidavit sworn in December 2015 that Mr Fielding had been engaged to facilitate a discussion between Mr Soper, Mr Hobson and himself about their dispute concerning the Arndell Park lease, rather than the parties taking a “legal route.” Her Honour did not err in so finding. It is implausible that a meeting precipitated by a desire to resolve the disputes between Mr Soper, Mr Hobson and Michael Vella would focus in any significant way upon Mr Phillips who, according to Michael Vella’s account, was not causing him or others any problems.

13. [224]

    Third, the primary judge found that Michael Vella’s account that Mr Hobson had told him that an issue with Mr Phillips’ continuing shareholding in BFS was that Mr Phillips was being paid dividends, and that this needed to cease, was implausible given the agreed position of the parties that BFS was not intended to make a profit and that there was no suggestion in the evidence that BFS ever paid dividends. Further, there was nothing in the evidence that Mr Phillips asserted any rights as a shareholder of BFS after he ceased to be a director in late September 2010. As the primary judge found, this implausibility casts doubt upon the credibility of Michael Vella’s account of this conversation, which was denied by Mr Hobson.

14. [225]

    Fourth, the primary judge found that Michael Vella’s willingness to change his evidence to suit his understanding of the appellants’ claims and case theory was demonstrated by his evidence in cross-examination. In this regard the primary judge relied upon a passage of evidence in which Michael Vella first agreed that the six matters set out in item 1.11 of the Discussion Paper were the most important “matters” discussed “that Mr Fielding saw fit to write down” and were “all of the issues then facing the shareholders of BFS” but then, when his failure to refer to Mr Phillips was put to him by the cross-examiner, Michael Vella gave the evidence set out above that Mr Phillips was absolutely raised at this meeting and was the “major reason”. As the primary judge found, this passage of evidence supports an inference that Michael Vella was seeking to ensure that his evidence supported the “case theory” that the motivation for shifting the BFS business to a new corporate entity in August 2012 was to remove Evermay as a shareholder of BFS. This casts real doubt upon Michael Vella’s credibility and reliability as a witness.

15. [226]

    Fifth, the primary judge noted that neither the initial nor the updated version of the Discussion Paper contained any reference to Evermay’s continued shareholding in BFS being a problem that JEV, Hynadam or Mechita wished to resolve. The primary judge described Mr Fielding’s evidence as being that he could not recall Evermay’s shareholding in BFS being raised with him as a problem and that, if it had been, he would have included it in the Discussion Paper. A close reading of Mr Fielding’s evidence discloses that, whilst he did say that he did not recall removing Mr Phillips as a shareholder being an issue of contention and that he was not aware that Evermay being a shareholder of BFS was a problem, he said that if this had been raised with him it would have been “included in the questionnaire following the initial meetings with each of the directors of BFS”. The questionnaires were not in evidence.

16. [227]

    In my judgment, notwithstanding that Mr Fielding did not say that he would have included any issue raised with him in the Discussion Paper, his evidence is still inconsistent with that of Michael Vella to the extent that he says that he was not aware that Evermay being a shareholder was a problem. Moreover, even in the absence of any direct evidence from Mr Fielding as to this, the fact that there is no reference whatsoever in either version of the Discussion Paper to Evermay’s shareholding being an issue is evidence which casts doubt on the reliability of Michael Vella’s evidence that this was a “major reason” or “major topic” in the discussion he had with Mr Fielding. As the primary judge found, it is inherently plausible that any issue raised would have been included in the Discussion Paper.

17. [228]

    Sixth, the primary judge accepted Mr Hobson’s evidence that nobody was raising Evermay’s shareholding in BFS as an issue in August 2012. The primary judge found that this evidence was inherently plausible. The primary judge also found that Mr Hobson was a credible witness. Mr Hobson’s evidence as to this was inconsistent with Michael Vella’s account that Evermay’s presence was regarded by Mr Hobson and Mr Soper as a problem for BFS as at August 2012. That was a further reason to reject Michael Vella’s evidence. As discussed below, there is no error in her Honour’s finding that Mr Hobson was a credible witness. In these circumstances, her Honour did not err in finding that this undermined Michael Vella’s credibility.

18. [229]

    Ultimately, the primary judge found that Michael Vella had:

19. [230]

    In the light of the matters set out above, this finding is neither glaringly improbable nor contrary to compelling inferences. Nor is it wrong. The creation of BLS in February 2011 on account of Evermay remaining a shareholder in BFS, and the fact that Evermay remained a shareholder, does not support Michael Vella’s evidence that the removal of Evermay from BFS was a “major reason” or “major topic” of discussion in his meeting with Mr Fielding, or that any “problem” with Mr Phillips or Evermay was raised in August 2012. The difficulty with this evidence lies in the significance that Michael Vella sought to give to Evermay’s continuing shareholding in BFS as an issue or problem in August 2012 in circumstances where the objective evidence did not support that characterisation of the issue. Given that that was a key plank in the appellants’ case theory, the obvious, and correct, inference to draw is that Michael Vella’s evidence as to this was neither credible nor reliable.

20. [231]

    The absence of any reference to Evermay or Mr Phillips in the notes of Mr Fielding’s meeting with Michael Vella and in the “Minutes” of the Ingleburn Meeting are further matters which undermine the credibility of Michael Vella’s evidence as to the significant role that removal of Evermay as a shareholder of BFS played in August 2012. Whilst it was the case that the removal of Evermay as a shareholder was not a point of dispute between Mr Soper, Mr Hobson and Michael Vella, and would not have been raised as a dispute as such, that does not explain why it is not recorded in any way in any of these documents. It is particularly significant that there is no reference to Evermay or Mr Phillips in Mr Fielding’s notes of his meeting with Michael, Joseph and Elizabeth Vella.

21. [232]

    The appellants submit that the primary judge’s finding that Evermay’s shareholding was not the reason for the business to be migrated to BLS in August 2012 was “completely implausible” and that that finding in turn tainted the primary judge’s assessment of Michael Vella’s credit. The appellants submit that this is so because BLS had been incorporated in February 2011 to exclude Evermay as a shareholder and “nothing had changed” in that regard since that time. Whilst at times Senior Counsel for the appellants’ submitted that the “Evermay” issue was not critical to the appellants’ case, his overarching submission was that “Mr Vella was correct in holding the view that Evermay was significant” and that the Evermay shareholding was “the only sensible reason why they were going forward with the new company.”

22. [233]

    The appellants’ submission does not grapple with the substantial matters casting doubt upon the credibility and reliability of Michael Vella’s evidence, as set out above. As is convincingly shown by the primary judge’s analysis, there was an obvious and material disjunct between Michael Vella’s evidence that Evermay’s shareholding in BFS was not causing any problems as such (albeit that in February 2011 BLS had been incorporated to remove Evermay as a shareholder) and his evidence that this was a “problem” and was perceived by Mr Hobson as a “problem” in August 2012 and that this was a matter to which he gave primacy in his discussions with Mr Fielding. There is also the important contextual evidence that neither Evermay nor Mr Phillips is mentioned in any contemporaneous document. Moreover, the evidence of Mr Fielding and the Discussion Paper show that the purpose of moving to a new corporate entity was linked to resolution of the disputes between the shareholders of BFS. Having regard to these matters, the primary judge’s conclusion was not implausible.

23. [234]

    By contrast, it is inherently plausible that the directors of BFS would consider it sensible to use BLS as their corporate vehicle moving forward if they could resolve their disputes and agree upon key terms of a shareholders’ agreement. That would enable a fresh start and the introduction of measures to address some of the matters which had been perceived to be problems. That appears to be the proposal in the Discussion Paper. At the same time, the use of BLS would avoid the need to set up a further company and have the coexistent benefit of removing Evermay as a shareholder. Thus, the proposal in the Discussion Paper to use BLS does not, of itself, connote any particular impetus as at August 2012 to remove Evermay as a shareholder of BFS.

24. [235]

    The appellants also submit that the references to BLS (rather than BFS) in the COR, in the two versions of the Discussion Paper and in the email from Mr Hobson to Mr Aikin on 31 August 2012 were only consistent with a clear plan on the part of Mr Hobson and Mr Soper to migrate the business to BLS irrespective of whether Hynadam, Mechita and JEV resolved their disputes. I do not agree. The references to BLS in the various documents discussed above do not readily bear the weight of supporting a conclusion that Mr Hobson and Mr Soper were, by early August 2012, planning to move the business to BLS irrespective of whether their disputes with the Vellas were resolved.

25. [236]

    There are a number of possible explanations for those references that do not support the appellants’ contention. By way of example, after Mr Fielding or Mr Versluis suggested migrating to a new company it is inherently plausible that Mr Hobson or Mr Soper may have mentioned to them that BLS had already been set up. BLS could then easily have been mentioned to Mr Aikin as something that was being considered after the first meeting between Mr Hobson, Mr Soper, Mr Fielding and Mr Versluis. Whilst that may not have been particularly sensible, given the embryonic stage of the dispute resolution process in which Mr Fielding and Mr Versluis were engaged, it would explain the use of BLS in the COR. That may also explain why Mr Hobson told Mr Aikin that there was to be a restructure of “BFS and BLS” in an email after the Ingleburn Meeting. Whilst this is just an example of the possibilities, it illustrates the fallacy in the appellants’ contention that those references “were only” consistent with a clear plan to migrate the business irrespective of whether the various disputes were resolved.

26. [237]

    Whilst none of Mr Hobson, Mr Soper or Mr Aikin gave cogent evidence as to why BLS was included in these documents, they were being asked to explain this over nine years after the event. It is inherently likely that they may have forgotten the detail of such matters. Whilst the suggestion that this was a “mistake” or slip was far from convincing, that does not undermine her Honour’s finding.

27. [238]

    Nor does the evidence of Mr Hobson, Mr Soper and Mr Aikin as to these references to “BLS” undermine the credibility of their evidence as to other key matters, such as the outcome of the Ingleburn Meeting (as regards Mr Hobson and Mr Soper) and their respective conversations on 10 September 2012 (as regards Mr Hobson and Mr Aikin). Such inconsistencies are in a very different category to those which the primary judge identified in Michael Vella’s evidence. The latter went to the very heart of his case theory that the outcome of the Ingleburn Meeting was explicable by reference to the aim of excluding Evermay as a shareholder of BFS. They also undermined his key narrative that this was a matter of overarching importance at the time. As regards the failure by Mr Hobson, Mr Soper and Mr Aikin to provide any convincing explanation for the reference to BLS in the various documents, this does not go to a matter which would be inferred to be of great significance to them at the time. It is most readily explicable by a lack of ongoing recollection after the passage of some time.

28. [239]

    Similarly, whilst the appellants’ identified inconsistencies in the evidence of Mr Hobson, Mr Soper and Mr Fielding as to who first raised the prospect of migrating the business of BFS to BLS in July-August 2012, this does not undermine the primary judge’s finding that the “new company proposal…emanated from Robert Fielding and/or Peter Versluis”. No one suggested in evidence that it came from anyone else. Rather, Mr Hobson suggested it came from Mr Fielding, Mr Fielding suggested it came from Mr Versluis, and Mr Versluis was not specifically tested on this factual issue and had a generally poor recollection. Again, given that the witnesses were seeking to recall matters of some detail from many years earlier, inconsistencies as to such details are not surprising. They do not cast doubt upon the primary judge’s finding that the likelihood was that the suggestion of migrating the business of BFS to a new company came from one of Mr Fielding or Mr Versluis. Moreover, the primary judge found that Mr Versluis had no recollection of the Ingleburn Meeting. It is likely that his recollection of any earlier meetings in which he participated was similarly unreliable.

29. [240]

    In any event, there is an inherent plausibility in the primary judge’s finding that the proposal to migrate to a new company came from Mr Fielding or Mr Versluis. The Discussion Paper which either or both of them prepared was heavily focussed upon the benefits of the business being migrated to a different corporate entity once the shareholders in BFS had resolved their key disputes. In those circumstances, it would make sense that they suggested this, albeit that clearly one or both of Mr Hobson or Mr Soper must have told them about the existence of BLS.

30. [241]

    The appellants also contend that the primary judge erroneously found that there was an inconsistency between the appellants’ contention that Mr Hobson and Mr Soper were planning in June 2012 to exclude the Vellas from the Schweppes delivery work and their contention that, prior to the Ingleburn Meeting, there was agreement to move the Schweppes delivery work from BFS to BLS irrespective of whether or how the disputes between the shareholders resolved. The appellants submit that there was no such inconsistency because they only “faintly” put the prospect that Mr Hobson and Mr Soper were planning to exclude the Vellas as “a mere potential.”

31. [242]

    Having regard to the way in which the appellants put their case before the primary judge, this contention should be rejected. In their written submissions below, the appellants contended that:

32. [243]

    That is not a contention that could aptly be described as “faint”. To describe a plan as a “potential” plan does not detract from the force of the submission advanced as to the motivation for Mr Hobson and Mr Soper entering into the Arndell Park lease. The inconsistency is even more clear from the appellants’ contention in their written submissions below that:

33. [244]

    The appellants also submit that the primary judge erred in finding that the proposal to migrate the business of BFS to BLS was contingent upon the three shareholders resolving their disputes. In this regard, the primary judge’s finding was that it was apparent from consideration of the Discussion Paper as a whole that:

34. [245]

    The appellants contend that this finding, which was critical to the primary judge’s conclusions as to the Ingleburn Meeting, was based upon an inadequate factual foundation. The appellants say that the primary judge should have found that the proposal to migrate the business of BFS to BLS was “preordained” since at least July 2012.

35. [246]

    In my judgment the primary judge’s conclusion that a new company was raised as a way forward in the event that the shareholders resolved their substantive disputes was well supported by the Discussion Paper. This was predicated upon a range of measures being introduced into the structure of BLS, as the new corporate entity for the business, which were designed to effect modifications as to how the business should be operated. That could only be done if the disputes between the shareholders as to key elements of how the business was conducted, such as income distribution, employment of staff by the company, acquisition of trucks by the company and responsibility of the directors for guarantees, were resolved. The primary judge’s finding is also supported by Mr Fielding’s evidence that Mr Hobson was happy to go forward with the new company provided there was agreement reached as to the various matters in dispute, including equality of contributions, all directors being guarantors on the lease, and in relation to the ownership of the trucks.

36. [247]

    The primary judge’s findings as to the role of Evermay in August 2012 informed her Honour’s subsequent rejection of Michael Vella’s evidence as to his conversation with Mr Hobson in early September 2012, his evidence as to him wanting to stay in business with Mr Hobson and Mr Soper notwithstanding that he regarded them as dishonest and greedy, his evidence as to what was agreed at the Ingleburn Meeting and his evidence as to what was said during his conversation with Mr Aikin on 10 September 2012. It also informed the primary judge’s finding that her Honour would not accept Michael Vella’s evidence “unless it is corroborated by a reliable and independent source or consistent with the inherent probabilities.”

37. [248]

    The primary judge gave detailed reasons for rejecting Michael Vella’s evidence as to the agreement that he said had been reached at the Ingleburn Meeting. In particular, the primary judge found that his evidence as to the Ingleburn Meeting was “inextricably tied to the notion that it was necessary” to remove Evermay as a shareholder and to his evidence as to discussions about this in the lead up to the Ingleburn Meeting. Thus, for example, in his affidavit sworn on 3 February 2021 Michael Vella said that the discussion about any new structure of company at the Ingleburn Meeting in August 2012 was “only because of the exit of Stephen Phillips and his company.” The primary judge also found that it was inherently implausible that Mr Phillips and Evermay were discussed at the Ingleburn Meeting in circumstances where the BFS directors had ongoing and acrimonious disputes that they were trying to resolve. Mr Phillips and Evermay were not involved in those disputes and neither was causing any difficulty for the active BFS shareholders.

38. [249]

    Her Honour was plainly correct in this analysis. If, as her Honour found, Michael Vella’s evidence as to the significance of the situation with Evermay was unreliable, that both removed a key plank upon which the appellants’ relied to explain their position as to what occurred at the Ingleburn Meeting and undermined the credibility of Michael Vella’s evidence in relation to what occurred at that meeting.

39. [250]

    The primary judge also found that it was “highly implausible” that the BFS directors would agree to go to the trouble of transferring the business of BFS to a new company when they had not resolved significant disputes and Evermay was not causing any problems at the time. The primary judge found that this implausibility was demonstrated by Michael Vella’s evidence that there was no need to get in contact with Mr Soper or Mr Hobson about the new company following the Ingleburn Meeting because:

40. [251]

    Further, the primary judge found that it was inherently unlikely that, as Michael Vella said in his affidavit dated 4 December 2015, Mr Versluis or Mr Fielding suggested at the Ingleburn Meeting that the business of BFS be moved to “a new company” and that Mr Hobson, Mr Soper and he were to be the “directors and shareholders of the new company”, in circumstances in which, having regard to the Discussion Paper, it was plain that Mr Versluis and Mr Fielding were well aware that there was an existing company, BLS, through which the business of BFS could potentially be run. The primary judge was correct that this was implausible. The suggestion that the directors agreed a new company was to be set up also sits uneasily with the appellants’ reliance upon a clear pre-existing plan of Mr Hobson and Mr Soper to migrate the business to BLS.

41. [252]

    Michael Vella gave evidence in his affidavit sworn 23 February 2017 that:

42. [253]

    The primary judge found that there was a “troubling inconsistency” between the notion that the business of BFS would be transferred to a new company if, at that time, Mr Soper and Mr Hobson were contemplating selling out of the company in any event. That was a further matter casting doubt upon the reliability and credibility of Michael Vella. The primary judge was correct to identify this as an inconsistency. It is a further matter which casts doubt on the apparent clarity of Michael Vella’s evidence as to what was discussed. Michael Vella’s suggestion that the reason for moving the business to a new company was so they no longer had to pay Mr Phillips directors fees or dividends is also implausible given that, as set out above, Mr Phillips retired as a director in 2010 and there is no evidence that dividends were ever paid by BFS.

43. [254]

    Having regard to the matters set out above, the primary judge was plainly correct to reject Michael Vella’s evidence as to what occurred at the Ingleburn Meeting.

44. [255]

    The primary judge also rejected Joseph Vella’s evidence as to what occurred at the Ingleburn Meeting. This was in part because in his affidavit he stated that “one of the main agenda items” for the Ingleburn Meeting was “to discuss how to remove Steve Phillips as a director of BFS. We also needed to discuss what was needed to get his company removed as a shareholder.” For the reasons the primary judge gave as regards Michael Vella’s evidence, her Honour found this was implausible having regard to the objective facts. There is no error in that analysis.

45. [256]

    The primary judge also found that Joseph Vella’s evidence in cross-examination, that there was a resolution to wind the company up and to enter a new company together, was directly inconsistent with his affidavit evidence that there was discussion at the Ingleburn Meeting of Mr Hobson or Mr Soper selling or pulling out from BFS and Michael saying that if that happened, he would probably buy them out. His affidavit continued:

46. [257]

    Additionally, in oral evidence in chief Joseph Vella was asked if he could recall whether there was anything that was ultimately agreed upon between the parties at that meeting, to which he responded “I can’t remember.” Ultimately, as the primary judge found, this evidence undermines the credibility and reliability of Joseph Vella’s other evidence as to what occurred at the Ingleburn Meeting.

47. [258]

    The primary judge also found that it became plain during Joseph Vella’s cross-examination that he had been “falsely claiming in cross-examination to have a recollection of the [Ingleburn Meeting] that he thought would assist the plaintiffs’ claims.” In this regard the primary judge was referencing the following passages in Joseph Vella’s cross-examination:

48. [259]

    Reading the transcript, this passage of evidence appears equally consistent with Joseph Vella effectively admitting that he had given evidence that was not true and with him simply being confused. The evidence was that he was not someone who could read and write English. However, having regard to her Honour’s other reasons as set out above her Honour was correct to reject Joseph Vella’s account of the Ingleburn Meeting.

49. [260]

    By contrast, the primary judge found that Mr Hobson, Mr Soper, Mr Fielding and Mr Aikin were all credible and reliable witnesses. Her Honour found that the evidence of Mr Hobson, Mr Soper and Mr Fielding that Mr Phillips was not discussed at the Ingleburn Meeting was inherently plausible having regard to the fact that there was no mention of Evermay or Mr Phillips in the Discussion Paper or in the “Minutes” of the Ingleburn Meeting, and because there was nothing to suggest that the Evermay shareholding was perceived to be a problem as at August 2012. Her Honour also found that, understood in the context of the genesis of and intention behind the proposal to transfer the business of BFS to BLS, the “Minutes” of the Ingleburn Meeting were consistent with the evidence of Mr Soper, Mr Hobson and Mr Fielding.

50. [261]

    The primary judge rejected the appellants’ submission that Mr Fielding was not an independent witness. In this regard, the primary judge accepted the respondents’ submission that:

51. [262]

    Her Honour rejected a suggestion of an undisclosed pre-existing relationship between Mr Fielding and Mr Hobson as something which did not rise above the level of speculation. Her Honour rejected any suggestion of collusion as between witnesses who were called by the respondents.

52. [263]

    There is no error in her Honour’s conclusions as to the independence, credibility or reliability of these witnesses.

53. [264]

    The appellants contend that it is inherently implausible that the Vellas would have peremptorily decided to terminate the relationship with Hynadam and Mechita at the Ingleburn Meeting. They contend that this was so for the following reasons:

    1. (1)

       They were aware that the Schweppes business model concerned the centralisation of services through a single entity and that Schweppes had no interest in doing work with a number of different parties.

    2. (2)

       The Vellas would not have thrown away revenue of over a million dollars to try to “go it alone” in those circumstances.

    3. (3)

       The Vellas had not previously indicated any intention to walk away from the business.

    4. (4)

       At the time it is apparent that Michael Vella thought his company’s reputation had been damaged by reason of the speed limiter issue.

    5. (5)

       The Vellas did not have the vehicles to service Schweppes work on their own.

    6. (6)

       Such a finding is inconsistent with the emails Michael Vella sent after the Ingleburn Meeting which suggest that he expected JEV to continue doing work for Schweppes.

54. [265]

    Neither individually nor cumulatively do these matters give rise to any implausibility in the primary judge’s findings.

55. [266]

    The notes from Mr Fielding’s discussion with Michael Vella support a conclusion that Michael Vella was, by August 2012, deeply frustrated by the conduct of Mr Hobson and Mr Soper. The notes suggest that Michael and Joseph Vella were by then close to, or at the point of, deciding to split from them, even if that meant that JEV would lose the Schweppes work, if the disputes could not be resolved to their satisfaction. Those notes include references to “Not worth grief”, “MV more important to concentrate on NSW Freight”, “problem is greed. both BH and BS”, “Not worth brain damage”, “Cut nose to spite face – JV not willing to put up with any more”, and there was also reference to either Michael or Joseph Vella going to a solicitor, references to “legal action” and to directors being “under investigation”. I accept the respondents’ submission that the notes of the meeting between Michael Vella and Mr Fielding do contain some indications that if the disputes were not resolved, JEV may well walk away from the relationship.

56. [267]

    At around that time, or possibly shortly after, Michael Vella discovered that Mr Hobson and Mr Soper had given Mr Aikin information about their own trucks being booked in for speed limiter certification but had not sought to find out or inform Mr Aikin that the same was true for the JEV vehicles. That clearly, and understandably, made him angry. He communicated that in no uncertain terms less than a week before the Ingleburn Meeting. That is likely to have undermined his faith in a functional working relationship with Mr Hobson and Mr Soper moving forwards.

57. [268]

    Moreover, as set out above, whilst clearly highly remunerative, the Schweppes work accounted for only approximately a third of the JEV revenue. Michael Vella gave evidence that the NSW Freightlines business was in fact more profitable for JEV than the Schweppes work. The significance of this is that the Schweppes work was not the only source of income for the business. It was not even the predominant source of income.

58. [269]

    All of these matters support the plausibility of Michael Vella communicating at the end of the Ingleburn Meeting that he wanted out even if that meant that JEV was not able to continue with the Schweppes work and that it may well lose the income from Schweppes. It is plausible that he would have reacted in this way given the extent to which the disputes between the shareholders were not able to be resolved at that meeting.

59. [270]

    Further, whilst it is clear that as at 2001 the shareholders in BFS understood that Schweppes wanted to deal only with one administrative entity for the freight work, and there is nothing to suggest that anyone had suggested that this had changed, it is not implausible that in August 2012 Michael Vella might have pitched for at least some of the Schweppes work and been hopeful of getting it. Mr Aikin’s evidence was consistent with the Vellas, whether through JEV or NSW Freightlines, seeking to take some of the Schweppes work. It might have been a long shot, but it is not inherently implausible. The issue that had arisen as to speed limiters does not undermine this conclusion. Michael Vella may well have felt that he could explain JEV’s position as to this to Mr Aikin, and that that issue had not irrevocably soured Mr Aikin’s opinion of JEV.

60. [271]

    Moreover, whilst there was no evidence that the Vellas had the vehicles to service the Schweppes work on their own, and Michael Vella denied in his evidence that they could do so, that would not have precluded him pitching for some of the Schweppes work.

61. [272]

    Michael Vella’s emails after the Ingleburn Meeting are not inconsistent with the primary judge’s findings as to the outcome of the Ingleburn Meeting. The agreement was that the BFS business would be wound down, not ceased immediately. Michael Vella may, in those circumstances, have expected that at least in the interim his trucks would continue to perform the Schweppes work. In that scenario, it would have been highly likely to have angered him to find that this was not the case. That would readily explain the terms of the emails that he sent after the Ingleburn Meeting.

62. [273]

    The primary judge found that aspects of Michael Vella’s evidence about what occurred after the Ingleburn Meeting were implausible. Her Honour found that Michael Vella’s account that he was surprised to find JEV trucks sitting idle in its Minto yard on 10 September 2012 was implausible if, as Michael Vella said, the previous week Mr Hobson had told him that Schweppes had not renewed the BFS contract and that BFS had “till the end of the week and we’re out of a job.” Further, Michael Vella’s evidence that he then rang Mr Hobson to ask him what was happening was inconsistent with his evidence of the conversation with Mr Hobson the previous week.

63. [274]

    The primary judge also found that Michael Vella’s evidence that Mr Hobson had said to him, during the conversation on around 10 September 2012, that he did this “for my son” was implausible because there was no evidence that Mr Hobson or Hynadam were better off financially under the arrangements with BDA than they had been under the arrangements with BFS.

64. [275]

    The appellants contend that the only plausible explanation for Michael Vella mentioning a letter of termination during his conversation with Mr Aikin on 10 September 2012, as Mr Aikin accepted he may have done, is Mr Hobson having previously told Michael Vella that Schweppes had terminated BFS’ contract. Thus, they submit, the primary judge should have accepted Michael Vella’s account of what occurred after the Ingleburn Meeting. This they submit, in turn, undermines the respondents’ account of what occurred at the Ingleburn Meeting. The primary judge rejected this contention. Her Honour found that there were a number of possible reasons for Michael Vella mentioning a “letter of termination” to Mr Aikin, some of which would assist the appellants and some of which would not. Her Honour found that it would be speculation to seek to choose between those possibilities. Her Honour also rejected the contention that any mention of a letter of termination was inconsistent with Michael Vella telling Mr Aikin that “we have decided to go our separate ways with Brett and Brian and BFS.”

65. [276]

    Her Honour did not err in the treatment of this evidence. It is of course correct that one possibility is that Michael Vella referred to a “letter of termination” because, as he claimed, Mr Hobson had told him that Schweppes had terminated their contract. Had the primary judge been persuaded by the evidence as a whole that that was the more likely explanation for this reference, then that would have assisted the appellants’ case. However, as is set out in considerable detail above, the evidence as a whole suggested that this was not the more likely possibility. Thus, in context, the evidence did not assist the appellants’ case.

66. [277]

    The primary judge also rejected the appellants’ contention that Mr Aikin was not generally a credible witness. Her Honour accepted the evidence of Mr Aikin, preferring his account of the conversation with Michael Vella on 10 September 2012. The primary judge found that Mr Aikin was an independent witness who had no reason to embellish or tailor his evidence to suit the respondents. Her Honour found that the appellants’ submission to the contrary was scandalous and without any rational foundation. Her Honour found that:

67. [278]

    In my judgment there is no error in her Honour’s acceptance of the evidence of Mr Aikin.

Conclusion as to the factual challenges

1. [279]

   It follows from my analysis set out above that the challenges to the primary judge’s key factual conclusions should be rejected. As set out in detail above, the primary judge did not err in the conclusions her Honour reached. In these circumstances, the appellants plainly failed to show that her Honour’s conclusions were glaringly improbable, as was necessary for the reasons set out above.

Challenges to the primary judge’s findings as to the fiduciary duty claims

1. [280]

   The appellants accepted that their challenges to the primary judge’s findings that no fiduciary duty was owed or breached, and the consequent rejection of the knowing assistance claims, were contingent upon them succeeding in their challenge to the primary judge’s conclusion as to what occurred at the Ingleburn Meeting.

2. [281]

   In these circumstances, those grounds of appeal should also be dismissed.

Conclusion

1. [282]

   Neither party made any submissions as to the costs of the appeal. In these circumstances, there is no reason why the appellants should not pay the respondents’ costs of the appeal.

2. [283]

   For the reasons set out above, the orders that I propose are:

   1. (1)

      The appeal is dismissed.

   2. (2)

      The appellants pay the respondents’ costs of the proceedings.