In the matter of 1derful Pty Limited

By Originating Process filed on 7 November 2023 (“OP”), the Plaintiffs, Mr Bunbury and others, seek a wide range of relief against the Defendants, Fletch Capital Pty Ltd (“Fletch”), Mr Craig Seymour and Mr Michael Birch.

The First Plaintiff, Mr Bunbury, is a director of each of the Third Plaintiff (“1derful”) and Fourth Plaintiff (“1derful Group”) (together, “Companies”) since 15 June 2021 and owns, with his wife, 17,500 shares each in 1derful Group. He also claims (Statement of Claim (“SOC”) [4]) that the Companies are indebted to him for, inter alia, deferred wages in an amount not less than $437,500.05 (gross) and other loaned monies. He brings these proceedings, by leave, as a derivative action. The Second Plaintiff (“St Jean”) owns 10,000,000 of the 13,130,540 shares issued in 1derful Group, representing approximately 76.16% of its total shares.

The Plaintiffs allege (SOC [9]) and I find that business operated by the Companies involved proprietary technology and a licensing arrangement with Mastercard and other partners which, subject to regulatory approval, would permit the provision of branded debit and credit products for particular businesses that allowed clients to use branded debit and credit cards to provide instalment and hybrid payment options. Importantly, an agreement dated 25 January 2023 with Mastercard (“Mastercard Agreement”) provided for the payment of performance-based incentives by Mastercard to 1derful, although I will recognise the suspension of that agreement and its significance for the value of the Companies’ business below. A wholly-owned subsidiary of 1derful, 1derful Lending Pty Ltd (“1derful Lending) held an Australian credit licence from the Australian Securities and Investments Commission (“ASIC”) (SOC [10]). The Defendants claim not to know what business the Companies operated and do not admit these paragraphs; those pleadings are plainly improper, where the Defendants had detailed knowledge of the Companies’ business by reason of the conduct to which I refer below and procured the transfer of that credit licence to an entity associated with Fletch.

The Second Defendant, Mr Seymour, is the sole director of Fletch and a director of Jigsaw Works Pty Ltd (“Jigsaw Works”) which is a shareholder in Fletch. The Third Defendant, Mr Birch, is a director of Midialel Pty Ltd (“Midialel”) which is also a shareholder in Fletch. The Fourth Defendant, Mr Ball, was at one point purportedly appointed as receiver to the assets of the Companies. The Plaintiffs do not press a claim for relief against Mr Ball who was excused from attendance at the hearing.

I will set out the Plaintiffs’ claims, which involve allegations of impropriety against the Defendants, below. In determining these claims, I have regard to the approach identified in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (“Briginshaw”) and its equivalent under s 140 of the Evidence Act 1995 (NSW) (“Evidence Act”). Where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is sought to be proved. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450; [1992] HCA 66, the plurality observed that:

Section 140 of the Evidence Act similarly provides that, in a civil proceeding, the Court must find the case of a party proved if it is so satisfied on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject matter of the proceeding and the gravity of the matters alleged. I approach the evidence in the Plaintiffs’ claim on that basis.

I now turn to the affidavit evidence and cross-examination. In addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Varma v Varma [2010] NSWSC 786 at [424]-[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (“Colorado”) at [10].

I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]:

I have here drawn on my summary of the applicable principles in K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603 at [40]ff and Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547 at [49]ff. I will reach findings as to several of the events addressed in the affidavit evidence in the chronology set out below.

While I have also addressed issues of credit of witnesses below, both generally and in respect of particular issues, I have borne in mind the cautionary observations of Basten JA (Handley JA agreeing) in Sangha v Baxter [2009] NSWCA 78 at [155], applied by Nixon J in Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 at [42] (“Firmtech”), that:

By his affidavit dated 6 November 2023, initially read in respect of an application for leave to bring derivative proceedings, Mr Bunbury refers to his and his wife’s shareholdings in St Jean and his claim to be a creditor of the Companies in respect of unpaid wages and other monies and to his being a shareholder in the Companies. His evidence, led without objection, was that the Companies conducted a financial technology business in which valuable technology and relationships with credit card service provider Mastercard and other business partners and service providers were developed (Bunbury 6.11.23 [6(a)]). He refers to the Companies’ need for further capital and the risk of default in relation to existing debtor finance and, in evidence admitted with a limiting order under s 136 of the Evidence Act as submission and as his understanding, to the engagement of Messrs Seymour and Birch to assist the Companies in relation to resolving demands made on them and locate further equity or debt finance. Mr Bunbury there outlined (Bunbury [6]) the steps, now apparent from the documentary evidence, by which Fletch took an assignment of the debt owed by the Companies to PI Lorica Pty Ltd (“PIL”), demanded payment of that debt by the Companies and, on the same day, purported to take possession of the Companies’ business and then purported to sell the Companies’ business to itself.

Mr Bunbury then provides a more detailed outline of 1derful’s business (Bunbury 6.11.23 [18]ff), in evidence led without objection, and of Messrs Seymour’s and Birch’s role, in evidence that was partly admitted with a limiting order under s 136 of the Evidence Act as submission or in respect of his understanding. Again, little turns upon Mr Bunbury’s account of those matters where they are established by the documentary evidence which I address below. I will address Mr Bunbury’s evidence of several dealings with Mr Seymour below. Mr Bunbury also there addressed steps taken by Fletch and a receiver that it purportedly appointed, after it had acquired PIL’s debt and purportedly sold 1derful’s business to itself.

By a second affidavit dated 4 December 2023, Mr Bunbury led evidence as to the Company’s creditors and previous capital raisings and, in evidence admitted with a limitation under s 136 of the Evidence Act, as to the valuations which were implied by those previous capital raisings in substantial amounts. That affidavit exhibited the investor slide decks that formed part of the discussions with investors in respect of those capital raisings. Mr Bunbury also there referred to the appointment of a third party, Bayleaf Capital Pty Ltd (“Bayleaf Capital”), to assist in raising debt and equity for the 1derful Group and, in evidence partly admitted with a limiting order under s 136 of the Evidence Act as submission and partly as Mr Bunbury’s understanding, to valuation work undertaken by Bayleaf Capital in respect of the capital raisings. Mr Bunbury also referred to other funding and revenue of the Companies, including a convertible note arrangement with a third party and the receipt of research and development tax incentive rebates from the Australian Government, and revenues from business “partners” including implementation fees, interchange fees, debt interest margin fees, and incentive payments which were payable by Mastercard under the arrangement between 1derful and Mastercard.

By a third affidavit dated 16 February 2024, substantial parts of which were admitted with limiting orders under s 136 of the Evidence Act as submission or Mr Bunbury’s understanding, Mr Bunbury addressed additional emails which he contended demonstrated Mr Seymour’s involvement in 1derful’s work in assisting the Companies in refinancing the PIL debt and in raising equity and debt, including the financing of secured debt. Little turns on Mr Bunbury’s understanding of those matters, where the course of events is evident in emails and text messages which I address below. Mr Bunbury also there addressed the Companies’ creditors, in evidence largely admitted by way of submission or his understanding, broadly directed to establishing creditors’ continued support for the Companies. He also addressed, in evidence also largely admitted as evidence of his understanding or as submission, matters on which he relied to contend that 1derful’s business was likely to succeed, although there was plainly substantial uncertainty as to that question given its financial position in 2023, the suspension of its relationship with Mastercard and its inability to pay a large amount due to Mastercard, which I will address below, and the early stage of its business.

By his further affidavit dated 21 June 2024 Mr Bunbury takes issue with significant aspects of Mr Seymour’s evidence. By a further affidavit dated 18 September 2024, Mr Bunbury addressed aspects of the first expert report of Mr Kompos on which the Defendants rely. His evidence, admitted with a limiting order as submission under s 136 of the Evidence Act, was that Mr Kompos had misunderstood various sources of the Companies’ revenue and their nature and classification. His evidence was that the revenue that the Companies received from Mastercard was a marketing incentive paid by Mastercard, not a proportion of transaction values associated with throughputs on cards, and that Mr Kompos had incorrectly assumed that Douugh Australia Pty Ltd (“Douugh”) was the only customer of 1derful by August 2023.

Mr Bunbury also there addressed the circumstances in which Mastercard had suspended its licence agreement with 1derful and the steps which had to be taken before Mastercard would exercise a discretion whether to renew that licence agreement which included, critically, the repayment of a substantial amount to Mastercard, as well as other steps relating to matters such as the provision of corporate structure and other information to Mastercard, implementing an automatic direct debt facility from the Companies’ bank account in Mastercard’s favour (which would presumably only have had utility if the Companies had sufficient funds to make the relevant payments), the provision of financial information and a detailed sales pipeline and addressing other matters. Mr Bunbury also set out the steps that he contended the Companies had taken to complete the requests from Mastercard and identified several other steps that he claimed the Companies were in the process of finalising. He was cross-examined at length as to those matters; limited documentation was produced in respect of them; and Mr Bunbury conceded that the relevant information had not been submitted to or accepted by Mastercard at the point at which Fletch acquired the Companies’ business in the manner that I set out below. As Mr Bunbury fairly recognised, those issues were of lesser significance where, without additional funding, the Companies plainly could not repay the amount due to Mastercard, which Mr Bunbury acknowledged was a significant matter for Mastercard. Mr Bunbury also there led further evidence as to the revenue received by the Companies by way of R&D tax rebates.

Mr Bunbury was cross-examined briefly by Mr Walker, with whom Mr Schatz appears for Mr Seymour and Fletch, largely in relation to the dealings between Mr Bunbury and Mr Dahan concerning a winding up application that were brought against 1derful and then dismissed when a company associated with Mr Dahan, Hennesey Capital Partners Pty Ltd (“HCP”), acquired the debt owed to those creditors; HCP’s engagement of Green Jigsaw Pty Ltd (“Green Jigsaw”), a company associated with Mr Seymour; the Companies’ payment of the invoice rendered by Green Jigsaw; and the terms in which Mr Seymour had informed Mr Bunbury that CK Advisory Group Pty Ltd trading as Fifo Capital Northern Beaches (“FIFO Capital”) had engaged Mr Seymour or an associated company.

Mr Bunbury was also cross-examined, at greater length, by Mr Cheshire who appears for Mr Birch in respect of matters largely related to the value of its business and, in particular, the state of its relationship with Mastercard. Mr Bunbury acknowledged (T114) the significance of Mastercard to the Companies’ business and acknowledged (T120) the receipt of a breach notice from Mastercard in May 2023 and a suspension notice on 1 July 2023. He also acknowledged the risk that the Companies’ access to Mastercard facilities would be lost by reason of these matters (T122). Mr Bunbury also acknowledged (T123) that 1derful had not addressed all of the matters that Mastercard required it to address by 3 October 2023, when Fletch acquired the Companies’ business. It was plain that Mr Bunbury’s evidence in chief, and to a lesser extent his evidence in cross-examination, significantly overstated the extent of the Companies’ progress in addressing those issues. It was also plain, as Mr Bunbury ultimately recognised in cross-examination (T134) that the issues between the Companies and Mastercard had existed long before the appointment of a receiver by Fletch to the Companies’ business. Mr Bunbury did not accept the significance of the matters raised in the correspondence from Mastercard for the value of the Companies’ business (T141); it seems to me that those matters would plainly be relevant to a valuation of that business, although any purchaser of the business would likely purchase it only if it had sufficient confidence it could resolve those matters commencing with payment of the amount due to Mastercard, which was the approach taken by Fletch when it acquired that business. Mr Bunbury rightly acknowledged that any failure to reinstate the Mastercard Agreement would have a significant impact upon the Companies’ business (T141).

Mr Cheshire also cross-examined Mr Bunbury as to the preparation of documents which were produced to the Court on 1 October 2024 (Ex P5), which purported to record progress in addressing the issues between the Companies and Mastercard; it is not necessary to address the position in respect of those documents, where it is plain enough that the issues with Mastercard were not close to resolution when the Companies lost control of their business, not least because the Companies did not then have access to the funds necessary to repay the amount then due to Mastercard. Mr Bunbury claimed to have addressed matters with Mastercard in oral discussions, but the optimistic account he gave of those discussions was not consistent with correspondence between the Companies and Mastercard in the relevant period and I approach Mr Bunbury’s evidence in that respect with caution. Mr Bunbury fairly accepted (T164) that “the most critical factor” for Mastercard was funding, and that Mastercard required the repayment of the balance owing to them and was concerned as to the Companies’ ability to “forward fund obligations”. I accept that evidence and there is no suggestion that the Companies then had the capacity to address their funding difficulties, other than by the efforts that were then purportedly being made by Mr Seymour and Mr Birch. Mr Bunbury was also cross-examined as to the fact that several staff had left the Companies prior to October 2023 (T173ff); I accept that that is a significant matter, although I bear in mind that a purchaser of the Companies’ business would likely either already have qualified staff who could work in such a business or would employ such staff.

Mr Cheshire cross-examined Mr Bunbury further as to his dealings with Mr Birch and as to steps taken to seek to address the application to wind up 1derful brought by Think Grow Pty Ltd (“Think Grow”), in which Quadiq Pty Ltd (“Quadiq”) joined as supporting creditor, and a threatened winding up application by Techwondoe Limited (“Techwondoe”). Mr Bunbury did not accept that the issues with Techwondoe were unresolved (T102) and it is not necessary to resolve that question in order to determine these proceedings. Mr Cheshire also cross-examined Mr Bunbury as to the arrangements with PIL, and I accept his evidence that he understood that Mr Birch and Mr Seymour were working to refinance the PIL facility on the basis that a new financier would acquire PIL’s debt (T205); that is, importantly, an entirely different proposition to an acquisition of PIL’s debt for the purpose of immediately relying on an existing default, exercising the security, and selling the Companies’ assets to the securityholder, which were the steps taken by Fletch which I address below.

I recognise that Mr Bunbury has an obvious economic interest in the outcome of the proceedings and his evidence is likely affected, consciously or unconsciously, by that interest. I generally accept his evidence, so far as it goes to the question whether Messrs Seymour and Birch had led him and the Companies to believe that they were working to advance the Companies’ interests, where that evidence is consistent with the position as it emerges from the contemporaneous documents. Mr Bunbury either did not himself recognise, or was not frank about, the extent of the difficulties facing the Companies in their relationship with Mastercard or the depth of the Companies’ and his own financial difficulties at the relevant time. At the same time, I recognise that companies that are financially vulnerable or on the brink of failure are no less entitled to honest assistance from those who claim to be working in their interests than companies which are in a strong position and have less need for such assistance.

Mr Seymour and Fletch read Mr Seymour’s affidavit dated 10 April 2024. Mr Seymour’s evidence is that he is a director and shareholder of Jigsaw Works which owns shares in a number of businesses including Green Jigsaw and Fletch. Mr Seymour denies that he was engaged by Mr Bunbury or any of the companies associated with Mr Bunbury including the Companies (Seymour 10.4.24 [16]). He contends that Green Jigsaw was engaged by HCP from 20 June 2023 to assist in dealing with the winding up application brought against 1derful in order to give HCP and Murray Darling Capital (“MDC”) “control of the process” and avoid a winding up of 1derful. He also contends that Jigsaw Works was engaged by FIFO Capital from around 18 July 2023 until September 2023 to provide advice to FIFO Capital in respect of FIFO Capital’s position as a secured creditor of the Companies (Seymour 10.4.24 [18]). The existence of those arrangements would not, of course, necessarily exclude the existence of an undertaking given by Mr Seymour to act in the interests of the Companies and/or Mr Bunbury in the relevant circumstances, nor does a fiduciary duty owed by Mr Seymour depend upon the existence of a contractual engagement by Mr Seymour by the Companies. Mr Seymour addresses further steps taken by him and others in respect of the winding up application and his dealings with Mr Bunbury in respect of that winding up application, although the detail of those steps are not material to any matter that I decide.

Mr Seymour’s evidence, first given in cross-examination, was also that Mr Dahan (through HCP) had sought to acquire the Companies’ debt at least “in part” for the purpose of subsequently acquiring the Companies’ business. His evidence in cross-examination, apparently in respect of HCP’s purpose, was that:

Mr Seymour also claimed in cross-examination (T265) that the “term sheets” for refinancings issued by Mr Bunbury and his solicitor had the same effect as the transaction later executed by Fletch. That proposition was plainly not correct, where those term sheets were directed to a refinancing of the Companies by which they retained their assets, and not the forced sale of those assets by the securityholder to itself. Mr Seymour, in cross-examination, also sought to rebut criticism of the acquisition of the Companies’ assets on the basis that the Business Sale Agreement (“BSA”) executed by Fletch as controller of the Companies and Fletch as purchaser contemplated a valuation of the business to be completed after its transfer to Fletch (T266); however, that proposition had the obvious difficulties that Fletch would control how and whether that valuation took place and, in the event, Fletch did not complete that valuation. It is no answer to those difficulties that Fletch chose not to do so because Mr Bunbury had asserted a lien over critical assets to prevent its acquisition of those assets, where it had not in fact paid their fair value. It also appears from Mr Seymour’s cross-examination (T267) that this is not the first occasion on which steps of this kind have been taken, since he referred to HCP having taken the same approach with his assistance in respect of a third party “a couple of years ago.”

I recognise that Mr Seymour pointed in cross-examination to a likely explanation for the concealment of aspects of the transaction from the Companies and Mr Bunbury, namely a concern that Mr Bunbury would remove assets from the Companies (T324), and I recognise that Mr Bunbury later asserted a lien over the Companies’ assets to avoid providing them to the receiver appointed by Fletch. Mr Seymour acknowledged in cross-examination that he took the view that it would be possible to lift the suspension of the Companies’ Mastercard privileges and rebuild the relationship with Mastercard using Fletch, although he claimed that it would cost “millions of dollars” to do so (T331). His evidence (T331-332) was also that Fletch later did not obtain a valuation of the Companies business, as contemplated by the BSA, because it had not acquired the assets or necessary passwords and could not obtain a specialist report to assess the technology; he understood that Mr Bunbury trusted him and continued to trust him into September 2023, in the context that he was working on the overall engagement from HCP; he understood that Mr Bunbury had involved him in the Company’s finances and Mr Bunbury’s personal finances and given him information about those finances, in the context of that engagement; he acknowledged that he had not disclosed Mr Birch’s intention to acquire the assets of the Companies through Fletch to Mr Bunbury; he denied that he intended to acquire the Companies’ assets at less than true value or anticipated that such an acquisition would not later be challenged because Mr Bunbury would by then be bankrupt and the Companies in liquidation; and he denied that he intended those assets be acquired in a manner that would damage the Companies or their creditors.

I should also record that, at the conclusion of Mr Seymour’s cross-examination, I raised several matters with Mr Seymour, including the possibility that the Court may refer the matter to ASIC for it to consider whether to make a banning order against him, and I afforded him the opportunity to respond to that possibility. He responded as follows (T335):

I should make two observations as to that answer. The first is that, even if Mr Seymour’s concerns that Mr Bunbury would take or secure the Companies’ assets if he had been made aware of Fletch’s plans were well-founded, that provides no justification for non-disclosure to the Companies or Mr Bunbury in the relevant circumstances. Disclosure which is required by law or commercial morality is often practically disadvantageous to a party who complies with that obligation. Second, this was, at best, a belated acknowledgment of the substantial issues arising from non-disclosure in this matter.

Mr DeBuse, who appears for the Plaintiffs, submitted that:

Mr Seymour was generally accurate in respect of the chronology of events and his affidavit evidence had plainly been prepared with close attention to the contemporaneous documents. He was otherwise an unsatisfactory witness. His evidence was replete with non-responsive answers and attacks on the Companies and Mr Bunbury, which he plainly perceived would advance his interest in showing that, because they were not forthcoming as to the extent of their financial difficulties or were likely to fail in any event, there was no difficulty with the course he had adopted. He sought to maintain that his associated company was in reality working for FIFO Capital from mid-July 2023, where I will find below that he had engineered such a retainer in order to promote his own and Mr Birch’s interests to the disadvantage of FIFO Capital and the Companies. Mr Seymour, in cross-examination, also did not frankly acknowledge the extent to which, from at least mid-July 2023, he was working to advance his own interests to the potential (and ultimately actual) detriment of the Companies and FIFO Capital, with the exception of the concessions that he made at T331-332 and T335. I largely accept his evidence his identification of the chronology of events but I largely do not accept his evidence as to the content of conversations or the purpose or commercial substance of steps that he and Mr Birch took unless it is corroborated by contemporaneous documents. I will refer to several events addressed by Mr Seymour’s evidence in the chronology below.

Mr Seymour and Fletch also read the affidavit dated 10 April 2024 of Mr Dahan, who is the sole director of HCP. Mr Dahan refers to the circumstances in which Mr Birch introduced him to Mr Bunbury, initially in connection with Mr Bunbury’s seeking finance to purchase a property personally, and to the extension of Mr Dahan’s involvement to raising funds for the Companies. Mr Dahan’s evidence is that he raised $2 million in capital for the Companies from several investors in about June 2020. His evidence is that he became aware of a winding up application in respect of 1derful brought by Think Grow in May 2023 and Mr Bunbury then requested his assistance to raise funds to resolve that winding up application.

Mr Dahan’s evidence was initially that he had numerous conversations with Mr Bunbury in relation to the winding up application in early June 2023, in which he proposed that HCP would acquire 1derful’s debts to Think Grow and Quadiq in order to resolve the winding up application. Mr Dahan accepted in cross-examination that those conversations did not occur until later, after he had engaged Mr Seymour and his associated company in relation to the winding up application, and Mr Seymour had developed that proposition. Mr Dahan then set out a conversation with Mr Birch and Mr Seymour on 20 June 2023, although his evidence in cross-examination was that he had several conversations with Mr Seymour prior to that date, a proposition that Mr Seymour denied. It was plain from Mr Dahan’s evidence on cross-examination that he had little real recollection of events and I give little weight to his account of that or other conversations. Mr Dahan also addressed steps which were taken to refinance a personal asset of Mr Bunbury, an expensive motor vehicle, and the way in which the resulting funds were disbursed, although it was not apparent that that matter has any significance for any issue that I have to determine in the proceedings. Mr Bunbury denies aspects of Mr Dahan’s affidavit as to the dealings between the Companies and HCP, but it is not necessary to resolve any of the disputed matters in order to determine these proceedings.

Mr Dahan was cross-examined at some length. He accepted in cross-examination that the purpose expressed by Mr Birch or Mr Seymour for the meeting held on 16 August 2023 (which I address below) was, among other things, to discuss plans to acquire the Companies’ assets (T137). That proposition is significant so far as events had then moved beyond a refinancing of the Companies’ debt, which would have involved the acquisition of the debt and the security, to the additional steps which would be involved in enforcing that security so as to acquire those assets. After Fletch had acquired the Companies’ assets, Mr Dahan suggested to Mr Bunbury that the latter’s having an interest in what remained would be better than nothing (T237); little turns on that, where the Companies had by that point lost their business to Fletch in the manner I set out below. Mr Dahan accepted that, although he became aware of Mr Birch’s and Mr Seymour’s discussions about acquiring the Companies’ assets at an earlier time, he first disclosed that matter to Mr Bunbury in December 2023, after Fletch’s forced acquisition of those assets was complete (T240).

Mr DeBuse submitted that:

I accept that Mr Dahan’s lack of recollection was such that he was able to give little useful evidence in his affidavit or cross-examination. Neither his affidavit nor his cross-examination significantly advanced any issue in the proceedings.

Mr Birch relied on his affidavit dated 10 April 2024. His evidence is that he has worked in the financial services industry since his graduation, and that he became a partner of MDC in about October 2019. His evidence is that he also owns a stake in Trilogy, which has been working with The Agency Group Australia Pty Ltd (“The Agency”) to acquire and manage residential real estate agencies in New South Wales and Queensland (Birch [9]). He also established Handy Payments Pty Ltd (“Handy Payments”) in January 2020 to provide loans for landlords to fund maintenance, renovations and other landlord expenses (Birch [10]). Mr Birch had known Mr Bunbury for about 10 years and his children had attended the same kindergarten and the same school. I will refer to Mr Birch’s evidence as to the events in issue in setting out the chronology of events below.

Mr Birch, in cross-examination, sought to characterise his role as working for Gibraltar Capital Pty Ltd (“Gibraltar Capital”) in its capacity as a trustee which was preparing a fund in which lenders introduced by Mr Bunbury would invest (T369). I do not accept that characterisation, where Gibraltar Capital’s role was plainly not, in practice, limited to passively awaiting the arrival of investors introduced by Mr Bunbury and Mr Birch was engaged on an ongoing basis with potential investors. Mr Birch’s evidence (T376) was also that he had advised 1derful he was not trying to locate or identify funding for 1derful. I also do not accept that evidence given Gibraltar Capital’s description of its role in the contemporaneous correspondence with PIL and Mastercard, which I address below.

Mr Birch, in cross-examination, also gave evidence that he had not read (or at least did not recall reading) much of the correspondence directed to him in respect of the latter part of the transaction, including the detailed road maps in respect of the relevant transactions and letters which he had forwarded to third parties which identified him as the contact point. I will address those matters in the chronology below. I also cannot accept Mr Birch’s evidence in this regard. It seems to me highly implausible that, for example, Mr Birch would forward letters to third parties that identified him as the contact point, without informing himself as to their content so as to deal with any contact that those third parties then made with him. I also address Mr Birch’s claim to have had no substantive involvement in the matter after 25 August 2023 below. Mr Birch did not accept in cross-examination (T404) that it would be commercially unethical if the transaction was intended to bring about Fletch’s acquisition of the Companies’ assets for itself, or without informing Mr Bunbury or the Companies of that intention, but did accept that it would be commercially unethical if it was undertaken for the purpose of acquiring those assets at less than true value.

I recognise that, as I have noted above, it is possible that a witness may be in error in aspects of his or her evidence or to give false evidence in aspects of his or her evidence and nonetheless to give truthful evidence in other aspects of his or her evidence, but there seems to me to be little room for Mr Birch to have been innocently mistaken as to his recollection whether he read correspondence as to critical matters and as to his knowledge of critical aspects of the transaction in the period prior to its implementation; and the unreliability of his evidence as to these matters undermines the reliability of his evidence generally. I largely cannot accept Mr Birch’s evidence as to contested matters unless it is corroborated by contemporaneous documents.

The Plaintiffs read, in reply, an affidavit dated 18 September 2024 of Mr Kopp, who is a director of FIFO Capital. Mr Kopp was not cross-examined to contest the truth of his evidence which is supported by notes of conversations with Mr Seymour which were unchallenged. I refer to his evidence in the chronology which appears below. Mr Kopp’s uncontested evidence, led in response to paragraphs 97-98 of Mr Seymour’s affidavit, was also that Mr Seymour had also made several statements to him prior to October 2023 that 1derful was worth at least $2 million and that FIFO Capital would be repaid in respect of the transaction, which has not occurred.

I now turn to the expert valuation evidence led by the parties and other valuation evidence, which is relevant both to the Plaintiffs’ causes of action and to their claim for damages or compensation. The Plaintiffs read an affidavit dated 17 March 2024 of Mr Davies and relied on his report dated 17 March 2024. Mr Davies had used revenue per customer figures and identified the number of customers falling within particular cohorts, based upon a third party’s contemporaneous projection, to derive an implied enterprise valuation by reference to the Companies’ H1 2024 projected revenues. He reached an unadjusted enterprise value of in excess of $33.7 million by that method, which he then increased by applying a control premium of 27.5% and discounted for a lack of marketability by 19.1%, and applied a further discount factor to take account of, inter alia, the risks attached to the Companies’ business to achieve present value of the adjusted enterprise value of the Companies of in excess of $29.7 million. Mr Davies alternatively assessed the current value of the Companies, on the basis the revenues were not evident and the relationship with Mastercard had “stalled”, as nil.

By a second affidavit dated 23 September 2024, Mr Davies expanded on his qualifications and experience and provided a limited explanation of the basis on which the comparable companies to which he had referred were selected, referring to their “similar profit margin expectations”. An immediate difficulty with that approach is that any profit margin expectations of the Companies depended, critically, on their ability to survive their significant financial difficulties By a third affidavit dated 26 September 2024 and a further report attached to that affidavit, Mr Davies expanded on the process which had derived the H1 2024 revenues used in his report, by a method described as “cohort modelling”. It is not necessary to address that method at any length, where the assumptions which underlay it were plainly not established for the reasons noted below. Mr Davies also explained the approach to growth adopted in that report, but the basis of that approach was also not established, where it assumed the Companies’ ability to acquire further customers which also depended on their capacity to fund their ongoing business. Mr Davies also explained the approach which he had adopted to a control premium and to a discount for lack of marketability, at least to some extent, and the role of a chartered accountant, Mr Tan, who had assisted him with the financial modelling undertaken for the purposes of his report.

Mr Cheshire cross-examined Mr Davies as to, inter alia, his failure to adjust the projected revenue of the Companies for the year ended 30 June 2023 by reference to their actual revenue for that period, which would have been known by the valuation date adopted for Mr Davies’ report and by the date that report was prepared; and as to the identification of comparable companies from which he derived the revenue multiple which he applied. Both issues undermined Mr Davis approach; as to the latter, companies that were of greater financial strength than the Companies was not appropriate comparators, even if they were in the same line of business as the Companies. Mr Cheshire also cross-examined Mr Davies in respect of the discount rate and the discount for lack of marketability that he had adopted, but it is not necessary to address those matters where the fundamental difficulty with Mr Davies’ report is that the Plaintiffs have not established the assumptions upon which it depends.

In closing submissions, Mr Cheshire also challenged Mr Davies’ expertise. It seemed to me that he had strong expertise as to the particular complexities involved in the valuation of start-up technology companies, although I recognise he is not an accountant and typically values start up technology companies in a commercial context and with the assistance of valuers or chartered financial analysts, as he had done in his report in this matter. I accept that Mr Davies had sufficient expertise to express a view as to the value of the Companies’ business. Mr Cheshire also submits that Mr Davies evidence was “partisan and unsatisfactory”. I do not share that view and it seemed to me that Mr Davies gave generally reasonable, thoughtful and constructive evidence in cross-examination, within the limits of the assumptions he had been given and the difficulty of the valuation task, in response to a vigorous cross-examination by Mr Cheshire.

However, there were fundamental difficulties with the assumptions Mr Davies had made in valuing 1derful’s business. First, as I noted above, Mr Davies applies a multiple to a contemporaneous projection made by a third party of 1derful’s future sales and revenue for H1 2024 to derive his valuation; however, there is no evidence that supports the correctness of that projection and no evidence of any substantive review or testing of it by the Companies’ management. The revenue involves implied assumptions as to the Companies’ future customer numbers and revenue per customer, and the same difficulties arise with those assumptions. Second, although Mr Davies was not entirely consistent in his evidence in this respect, he appears to have assumed that the Companies would be able to reinstate their agreement with Mastercard for the purposes of the valuation and the evidence also does not establish a reasonable basis for that assumption, although a third party acquiring the business might well have been able to do so. I recognise that, as I noted above, Mr Cheshire cross-examined Mr Bunbury at length as to the issues in the Mastercard relationship and his closing submissions advance detailed criticisms of Mr Bunbury’s evidence and deal, at length, with Mastercard’s then unsatisfied requirements before it would exercise any discretion to reinstate that relationship. It is not necessary to address those issues or those submissions at length where, even apart from them, the evidence does not provide a sufficient basis to find that relationship would be reinstated while the Companies retained the business, and were in real financial difficulty, rather than after a sufficiently funded third party had purchased that business. Third, Mr Davies’ valuation assumed the continuance of the Companies’ business in circumstances that their substantial financial difficulties suggested a probability that it would fail in the short to middle term. Fourth, there is no basis to think that his discount figure was sufficient to adjust for the substantial risk that then existed in the Companies’ business. These matters are sufficient, without more, to have the result that I could not accept Mr Davies estimated fair enterprise value of the Companies as at 31 August 2023 in the amount of $29.7 million, or any figure of that magnitude, and I could not adjust that figure in any way that would allow it any reasonable basis.

The Defendants read the affidavit dated 3 June 2024 of Mr Kompos and relied on his report of the same date. Mr Kompos set out his background in his report, which indicated that he has insolvency experience and performed a contract role at a financial services provider between 2017 and 2018 and has subsequently undertaken forensic accounting work. Mr Kompos’ first report dated 3 June 2024 was relatively short and indicated that his valuation was directed to:

Mr Kompos indicated, in paragraph 13 of his report, that he had adopted “market value” as the basis for the valuation; that, however, is inconsistent with the statement in Appendix 3 of his report that the report had been prepared in accordance with business valuation standard APES 225 and adopted a “liquidation value” of the relevant assets. That approach likely reflected an assumption that he was asked to make, that the Companies were insolvent. However, that assumption was not proved, although the Companies were at least in significant financial difficulty. Mr Kompos plainly adopted a liquidation value in his report, since he applied an 80% discount to the value of the Companies’ assets for insolvency, although the Companies’ insolvency had not been proved; the Companies were not in liquidation at the date of the valuation at 31 August 2023 and are not now in liquidation; Fletch as the purchaser of the assets was also not then or now in liquidation; and, contrary to the view asserted by Mr Kompos without any substantial reasoning, it was not apparent that the value of the assets to a potential purchaser would have been affected by a liquidation of the Companies as vendor, still less in a way that warranted an 80% discount. Mr Walker rightly did not seek to defend that important aspect of Mr Walker’s report in closing submissions.

Mr Kompos defined the concept of market value as follows:

Mr Kompos’ report also referred to an additional instruction that other key personnel had departed 1derful at the valuation dates; I assume that instruction was of some significance for his report, but he did not address its relevance to his reasoning process; or how he had adjusted for the likelihood that a purchaser of the Companies’ business would have or employ staff who would provide expertise. In his first report, Mr Kompos made a further assumption, which proved to be incorrect, as to the nature of Mastercard revenue appearing in the Companies’ management accounts for the period ended 31 May 2023. He also made a second assumption, which was not established, that Douugh was 1derful’s only customer by August 2023.

Mr Kompos outlined his valuation methodology, in a broadly orthodox way, although largely without addressing complexities in respect of the valuation of startup businesses which have been recognised in the academic literature that I note below. He fairly recognised that:

Mr Kompos observed (at [2.2.19]) that he had utilised a multiple of revenue methodology as:

That approach points to the difficulty of relying on historical revenue or forecasting future revenue in respect of a startup business, prior to the point at which that business has achieved a stable revenue stream, when much of the value of its business is likely to be in the prospect of future increased revenue.

Mr Kompos then noted (at [3.1.1]) that he had applied a capitalisation revenue approach by assessing 1derful’s recurring revenue at the valuation dates in applying an “appropriate multiple” from comparable company data. It seems to me that methodology did not here adequately take account of future increases in revenue, whereas a willing vendor and willing purchaser would likely have had regard to the prospect of increased future revenues in negotiating a purchase price for a start-up business. The multiples adopted by Mr Kompos did not adequately address this issue, where they appear to have been drawn from companies with more established businesses than the Companies, as Mr Kompos recognised (at [3.3.4] of his report). Mr Kompos also identified (at [3.3.13]) further matters which he contended made it inappropriate to value the Companies’ business as a “going concern” and expressed the view, by reference to unidentified experience in insolvency administrations, that a purchaser would likely pay in the order of 20% of the value of the assets to acquire them. On that basis, Mr Kompos valued the Companies’ business at $343,126, but discounted its market value to $69,000. As I noted above, Mr Walker did not seek to support that discount in closing submissions. I would have given little weight to these aspects of Mr Kompos’ first report, where his approach in determining the going concern valuation of the Companies’ business seems to me to have had insufficient regard to its prospective character and the insolvency discount to the value of the Companies’ business that he adopted did not have any substantial basis.

Mr Kompos also advanced several criticisms of Mr Davies’ report. He accepted that Mr Davies’ use of a “guideline public company methodology” was comparable with Mr Kompos’ multiple of revenue methodology, although they seem to have differed in their approach to future earnings, and he accepted that two companies identified by Mr Davies were comparable companies. Mr Kompos criticised Mr Davies’ determination of a value based on a 75% percentile of comparable companies and expressed the view that the revenue multiple applied by Mr Davies was too high; expressed the view that the revenue multiples adopted by Mr Davies could not be applied to the projected revenues used in Mr Davies’ report; and noted that Mr Davies had not adequately tested whether the Companies’ revenue projections were reasonable. These criticisms have considerable force, but the more fundamental difficulty with Mr Davies report is, as I have noted above, that the growth assumptions adopted in Mr Davies’ report were not established.

The Defendants also relied on a second affidavit of Mr Kompos dated 30 September 2024 and his further report, responding to Mr Bunbury’s affidavit dated 18 September 2024 which challenged the factual basis of the assumptions made in his earlier report, and responding to Mr Davies’ further reports dated 23 and 26 September 2024. In that further report, Mr Kompos accepted that, having regard to Mr Bunbury’s evidence and the terms of the Mastercard Agreement, the assumptions on which he had relied in his earlier report (at [1.3.1]) as to the nature of revenue received by the Companies from Mastercard was incorrect. Mr Kompos expressed the view that that would reduce his assessment of recurrent revenue in the Companies’ business and result in a minor reduction in the valuation of the business to $64,000.

In his second report, Mr Kompos acknowledged that assumptions which he had been provided and adopted in his first report as to the number of customers of 1derful by August 2023 and its earnings from credit and debit card transactions appeared to be incorrect and indicated that he no longer relied on them, and abandoned the analysis in paragraph 3.2.2 and part of paragraph 3.2.3 in his first report. On that basis, Mr Kompos indicated that he would revise the going concern valuation of the Companies’ business upward to $533,072, which he again discounted by 80% on a liquidation basis, to reach a value of $107,000. He conditioned that revision on 1derful’s receiving payment of the invoices it had issued, but did not explain why a revenue-based approach would depend on the fact of payment, particularly in the complex factual circumstances of this case, rather than on the Companies’ entitlement to payment of those invoices. While Mr Kompos’ revised valuation on a going concern basis is somewhat more realistic than his earlier valuations, it still seems to me to have had insufficient regard to the prospective character of the business and the insolvency discount to the value of the Companies’ business that he adopted still did not have any substantial basis.

In his second report, Mr Kompos also responds to Mr Davies’ assessment of comparable companies and to Mr Davies’ treatment of revenue and expresses the view that the revenue projections adopted by Mr Davies in his report were unrealistic. I have concluded above that the basis for those revenue projections has not been established. Mr Kompos also addresses the control premium, discount for marketability and use of comparable companies’ data in Mr Davies’ further evidence. It is not necessary to address his further evidence in that respect, other than to note that I do not accept his evidence that it is not appropriate to take account of synergistic benefits which is, first, a bare assertion; second, implausible, where a willing vendor and willing purchaser would likely negotiate the treatment of those benefits; and, third and for completeness, inconsistent with the view has been expressed by a sophisticated academic commentator in W Bratton, “Fair Value as Process: A Retrospective Reconsideration of Delaware Appraisal” (2023) Del J Corp L 497 at 521-522.

Mr Kompos’ assessment of the value of the Companies’ business was significantly less than Mr Seymour’s contemporaneous assessment of its value as not less than $2 million, to which I refer below, and also significantly less than the amount that Fletch and its (then) parent company, Axiom, an apparently informed purchaser which was assisted by Messrs Seymour and Birch who were plainly sophisticated market participants, was prepared to pay PIL to secure the opportunity to acquire the business by the exercise of security. That difference likely reflects the fact that Mr Seymour and Fletch both rightly recognised that the value of the Companies’ business to a purchaser was largely a matter of its potential and its technology rather than its then revenue and Mr Kompos’ valuation, as I noted above, had not adequately accounted for that potential. Mr Kompos was cross-examined at some length. It emerged, in the course of that cross-examination, that he had a past professional association with Mr Seymour, although I recognise that that association was not recent. I have concluded that Mr Kompos’ reports provide little assistance in valuing the Companies’ business and are likely a less realistic valuation of that business than Mr Seymour’s contemporaneous assessment of the value of the business before the transaction was implemented.

For completeness, I should also note that the expert witnesses and the parties paid limited attention to the complexities of the valuation of startup technology companies, which have been recognised in academic literature. Mr DeBuse drew attention in closing submissions to the detailed analysis of these issues in one paper, [1] and to academic commentary and Delaware case law concerning valuation principles generally. [2] The parties did not address other legal commentary as to these matters [3] and I should not do so where the parties have not done so.

I have considered whether, notwithstanding that I cannot accept either of the parties’ expert evidence, I can proceed by reference to the value of the Companies’ business that was recognised by Mr Seymour, when he repeatedly told FIFO Capital that the value of that business was not less than or in excess of $2 million. I should here summarise the evidence as to that matter, which I have addressed in the chronology above. On 28 August 2023, and after a meeting with Mastercard to discuss the proposed acquisition of the Companies’ business and potential reinstatement of the Mastercard Agreement, Mr Seymour had advised Mr Kopp of FIFO Capital that, if the valuation of the Companies “comes back at $2 million, then there would be enough money to pay FIFO Capital” and that “[i]f or when Mastercard turns the agreement back on, then the value of the assets is still significantly higher” (emphasis added) (Kopp [11(f)]). Although that observation contemplated a future valuation made under the BSA, which Fletch did not later complete, it was plainly directed to the value of that business before the suspension of the Mastercard Agreement was lifted, likely taking into account the prospect that it would be lifted, which would be increased if and when that Agreement was reinstated. On the same day, Mr Seymour again advised Mr Kopp and another director of FIFO Capital of his assessment that the Companies’ assets “are worth at least $2 million every day of the week” and that he could not see the assets “being worth less than $2 million”, comprising value for the customers, the strategy, the credit licence, the agreements and the code (Kopp [11(f)]). Mr Kopp’s unchallenged evidence (Kopp [14]) is also that Mr Seymour made several statements to him during the months prior to October 2023 that “1derful was worth at least $2 million” and, in an email dated 6 October 2023 (Ex D1/2, CB 2318), Mr Kopp reminded Mr Seymour that he had several times expressed that view and Mr Seymour did not deny doing so in his email in response.

This assessment of the value of the Companies’ business may be admissible as an admission against Mr Seymour and Fletch; Mr Cheshire rightly points out that it is not admissible as an admission against Mr Birch; in any event, I treat it as evidence of the value of the minimum value of that business, as assessed by a sophisticated participant in the transaction who had a real incentive to reach an accurate commercial valuation; was conscious of the uncertainty arising from the need to reinstate the Mastercard Agreement and of the prospects of its renewal; and must have known that this matter was of real importance to FIFO Capital as a second-ranking creditor whose prospects of recovery depended on the value of that business. I am satisfied that the $2 million figure likely reflected an implicit assessment of the prospect that the renewal of the MasterCard Agreement could be achieved, and recognised that value would be increased (as the conversation with Mr Kopp indicated) when and if that was achieved.

I now set out the chronology of events, for which I have drawn upon the pleadings, the parties chronologies, the affidavit evidence and cross-examination and documents tendered. This chronology incorporates my findings as to contested matters as necessary.

The Companies were both incorporated on 3 October 2019 (Ex P1, CB 109-130) and, on 15 June 2021, Mr Bunbury was appointed as the director of each of the Companies. The Companies received both client revenue and refundable R&D tax offset payments over the relevant period. In the financial year ending 30 June 2020, 1derful received a refundable R&D tax offset in the sum of $307,032.57 (Ex P2, CB 640, 646). In the financial year ending 30 June 2021, 1derful received a refundable R&D tax offset in the sum of $977,584.64 (Ex P2, CB 642-643, 646). In the financial year ending 30 June 2022, 1derful received a refundable R&D tax offset in the sum of $1,515,132.41 (Ex P2, CB 645). In the financial year ending 30 June 2023, a Research and Development Tax Incentive Schedule was prepared, estimating the sum of 1derful’s ‘Refundable R&D tax offset’ to be $573,586.22 (Ex P2, CB 647-649).

Mr Birch’s evidence (Birch [12]) is that he had a conversation with Mr Bunbury in early February 2020 in which Mr Bunbury requested “help with finding short term capital for my new business 1derful”, which he described as a “new fintech business”, and Mr Bunbury then outlined the services which 1derful was to provide. Mr Bunbury denies (Bunbury 21.6.24 [34]) aspects of that paragraph of Mr Birch’s affidavit. Mr Birch’s evidence is that he then introduced Mr Bunbury to several of his contacts, including Mr Dahan from HCP and that Mr Dahan helped Mr Bunbury raise capital for 1derful and also for Mr Bunbury’s personal purposes. His evidence (Birch [16]) is that, from 2020 to mid-2022, he introduced Mr Bunbury to business contacts, but he was not involved in discussions between Mr Bunbury and those other contacts and that (Birch [17]):

In December 2020, Mr Birch and Mr Bunbury had an inconsequential exchange as to the form of Mr Bunbury’s business card which referenced other entities, including a company associated with Mr Birch, Handy Payments (Ex P4, CB 1035) and they then had subsequent dealings in respect of Handy Payments (Ex P4, CB 1037, 1115).

On 14 October 2021, Mr Birch sent an email to Mr Bunbury enclosing an Engagement Letter from MDC in relation to “Capital Advisory Services”, in his capacity as a partner in that firm, and the covering email referred to client opportunities including one with The Agency (Ex P4, CB 1138). The Engagement Letter recorded the services to be provided as:

On 20 January 2022, Mr Birch sent a text message to Mr Bunbury saying “… saw funding came in, glad you got it away” and requesting payment of his fees (Ex P4, CB 1039) and then sent several texts pressing Mr Bunbury for payment of his fees, presumably relating to the earlier engagement (Ex P4, CB 1040). On 13 February 2022, Mr Birch sent Mr Bunbury an invoice (issued in the name of his company, Midialel) for “consulting services” provided between 16 and 19 January 2022 in the sum of $11,000 (Ex P4, CB 1143, 1147) and, in March 2022, he reissued that invoice including an additional late payment fee (Ex P4, CB 1147). Mr Birch then refers in his affidavit evidence (Birch [18]-[19]) to an email dated 2 April 2022 to Mr Bunbury, which he characterises as expressing his “dismay” at Mr Bunbury’s “complete disregard for the contacts that I introduced him to”, and says that, after that email, he “parted ways” with Mr Bunbury. Mr Birch subsequently sent Mr Bunbury further text messages pressing for payment of fees in April 2022 (Ex P4, CB 1043) and, on 2 May 2022, Mr Birch issued a further invoice to Mr Bunbury for “consulting services provided in August 2021 to secure urgent short term funding for Mastercard facility” in the amount of $4,231.54, also including late payment fees (Ex P4, CB 1148).

In July 2022, Mr Birch again pressed Mr Bunbury for payment of fees and there was a suggestion that he would approach lenders in 1derful’s refinancing process if he was not paid, by a text message dated 7 July 2022 (Ex P4, CB 1045) as follows:

In August 2022, Mastercard provided the Companies with a “1derful & Mastercard B2B Revised Commercial Offer” which included details on the “Key Components of Commercial Offer” and “Incentive Breakdown” (Ex P2, CB 656).

Mr Birch’s evidence (Birch [25]) is that he had taken steps with a third party (“Volt”) to seek to develop a payment and lending platform for the residential property industry; Volt then went into voluntary administration in late 2022; and he then “had to find another entity who could provide a payment platform that Handy Payments could work with to provide a solution for landlords and tenants.” His evidence is that he then approached Douugh in that regard and was told that Douugh was using 1derful to back its platform.

Earlier winding up proceedings brought against 1derful were dismissed on or about 20 January 2023 (Ex P1, CB 113).

On 25 January 2023, Mastercard and 1derful entered into the Mastercard Agreement (Bunbury 4.12.23 [31]; Bunbury 16.2.24 [17(b)]; Ex J1, CB 3301).

On 31 January 2023, 1derful entered a Facility Agreement and General Security Deed (“Security Deed”) with PIL by which 1derful borrowed $322,000 from PIL (SOC [11], largely admitted D1/2 Defence [11], D3 Defence [11]; Ex P1, CB 146, as amended); 1derful Group and Mr Bunbury guaranteed 1derful’s indebtedness to PIL; and the Companies granted PIL a security interest in all of their present and after-acquired property, as security for all money owing by them to PIL from time to time (Security Deed, cl 2.1, Ex P1, CB 211). Under cl 6 of the Facility Agreement (as amended), 1derful was required to repay the loans on the ‘Termination Date’, 31 March 2023 (Ex P1, CB 159). It was also a term of the Facility Agreement that PIL would only assign any of its rights and obligations under the finance documents including the Facility Agreement and Security Deed to another bank or financial institution or to a trust fund or other entity which is regularly engaged in or established for the purpose of making or purchasing or investing in loan securities or other financial assets including credit derivatives (SOC [12], denied D1/2 Defence [12], D3 Defence [12]).

On 13 February 2023, 1derful entered into a Heads of Agreement with Douugh (Ex J1, CB 3296) providing for it to assist Douugh with the launch of an account and card program in the Australian market by offering a “Credit-as-a-Service” (“CaaS”) white-label product and additional services.

On 2 March 2023, the Companies, Mr Bunbury and PIL executed a First Deed of Amendment and Restatement of the Facility Agreement in respect of the PIL facility (“Amended Facility Agreement”) (Ex P1, CB 146, 234), and the Companies borrowed an additional $261,000 from PIL.

On 16 March 2023, PIL requested copies of the latest available balance sheets prepared for the Companies and, by 31 March 2023,1derful had defaulted on the terms of the Amended Facility Agreement as it failed to repay the loan on the termination date of the Amended Facility Agreement (Bunbury 7.11.23 [6(c)], accepting the fact of default).

Mr Birch’s evidence (Birch [26]) is that he received a telephone call from Mr Dahan on about 21 April 2023 where Mr Dahan advised that he was “looking to help 1derful raise some short term capital”; pointed to Mr Bunbury’s poor reputation in the debt markets and to his significant personal borrowings; and advised that:

On 24 April 2023, Think Grow brought an application to wind up 1derful in the Supreme Court of Victoria (Seymour [339]; Ex P1, CB 113), and Quadiq subsequently appeared as a supporting creditor in that application.

By letter dated 4 May 2023, (Ex P1, CB 370; Ex D1/2, CB 1706), PIL notified the Companies and Mr Bunbury that there had been continuing defaults, including a failure to repay the loan by the due date, and the fact that a winding-up application had been brought against 1derful, and advised that PIL reserved its rights and 1derful was not permitted to operate or withdraw money from its bank accounts.

Mr Birch refers (Birch [30]-[31]) to his attending a meeting on 5 May 2023 with Mr Bunbury and another employee of 1derful to run through its capabilities and customer pipeline, although he does not address what occurred at that meeting; and he refer to a further telephone conversation with Mr Dahan, in which he says he asked whether 1derful was solvent and Mr Dahan referred to his understanding from Mr Bunbury that “the company is in a good spot financially” and offered to send, and subsequently sent, further financial information.

Mr Birch’s company, Handy Payments, entered into a non-binding Heads of Agreement (“Handy Payments HOA”) with 1derful on 9 May 2023 (Birch [31]; Ex P1, CB 138), which identified the parties’ objectives and their proposed commercial relationship as follows:

Mr Birch’s evidence (Birch [34]-[35]) is that he received an information memorandum and “pitch deck” from Mr Bunbury on 10 May 2023 and he says that he noted that the debt to PIL (which was known to Mr Birch) was not mentioned in that pitch deck and there was no mention of any winding up proceedings being on foot and no mention that 1derful was in financial distress. Mr Birch also refers to a further conversation, on 10 May 2023, with Mr Bunbury, where Mr Birch referred to the Companies’ “large debt” to PIL and the other funding that Mr Dahan had sourced for Mr Bunbury personally and, on Mr Birch’s account, Mr Bunbury advised that “[t]he company is in a great spot and I am fine” and that Mr Dahan was “sorting out investors” with Sequoia Financial Group Ltd (“Sequoia”) and another listed entity. Mr Birch’s evidence (Birch [38]) is that Mr Bunbury also advised him that:

Further correspondence as to the relationship between the Companies and Handy Payments followed in mid-May 2023 (Ex P3, CB 738).

It appears that, about this time, Mr Bunbury told Mr Birch that he needed to raise more money for 1derful and Mr Birch again made introductions to his business contacts. Mr Cheshire submits and I accept that, given the project contemplated by the Handy Payments HOA, it was in Mr Birch’s interests that 1derful be able to survive so that it could develop the technology and provide it commercially, including to Handy Payments. It was also in Mr Birch’s interests that he be remunerated for his financial work and I will refer to issues that arose in respect of that remuneration below. It again appears there was no formal agreement, retainer or engagement of Mr Birch in this regard.

On 19 May 2023, Mr Birch emailed an application for short-term debt funding for 1derful to a potential lender (Ex P4, CB 1048). He advised the potential lender that:

On 22 May 2023, Mr Birch organised a conference with Mr Bunbury at The Agency’s offices (Ex P3, CB 798) and, on 24 and 25 May, exchanged emails with Mr Bunbury relating to capital raising for 1derful and the relationship between 1derful and Handy Payments (Ex P1, CB 142). Mr Bunbury there proposed that Mr Birch be appointed as head of capital and funding for 1derful on a contract basis for 3 – 6 months and Mr Birch responded proposing that he acted in the capacity of “adviser” or “director”. Mr Bunbury advised Mr Birch of 1derful’s capital raising objectives as follows:

Mr Birch’s evidence is also that, on 23 May 2023, he received a telephone call from Mr Bunbury requesting his assistance to “raise further capital for 1derful” and advising that the Companies “need more cash injection to deliver the tech for Handy Payments” and suggesting that Mr Birch could be given the role of the Companies’ head of capital and funding. Mr Birch also refers to a further conversation with Mr Bunbury in May 2023 (Birch [44]) in which he again sought confirmation of the Companies’ solvency and Mr Bunbury informed him that:

In cross-examination, Mr Birch denied that he was working on a capital raising for the Companies as at 24 May 2023, although he then retreated from that denial. It seems to me that the correspondence at this time is only consistent with an involvement of that kind.

By letter dated 25 May 2023, Mastercard advised Mr Bunbury that 1derful was operating in breach of the Mastercard rules and obligations of a Principal Member and that entitled Mastercard to take action, including termination of membership, and demanded payment of an outstanding amount of $871,000. The evidence does not indicate that the Companies made any substantial progress in making that payment and I do not accept Mr Bunbury’s evidence that they had significantly advanced resolution of the other issues to which Mastercard had referred.

Mr Birch refers to a meeting with Mr Bunbury, an employee of 1derful and Mr Nardone of The Agency in June 2023 where Mr Birch introduced 1derful as a potential provider of card services for The Agency through Handy Payments (Birch [46]). Further meetings concerning that matter with The Agency took place from June until early July 2023 (Birch [47]).

On 5 June 2023 (Ex P1, CB 255), Mr Birch advised Mr Dowsett, a representative of another potential funder, that:

Mr Birch’s evidence is that he was also “getting in contact with potential investors in respect of raising capital for 1derful” and that, in June 2023, he contacted Saltbush Capital to discuss financing 1derful, and he refers to a statement of assets and liabilities sent by Mr Bunbury to Saltbush Capital on 6 June 2023 and says (Birch [53]):

Mr Birch then refers (Birch [54]ff) to his further dealings with Saltbush Capital and his evidence is that he subsequently became aware of the winding up application in respect of 1derful from Mr Brydges of Saltbush Capital who had learned of the application from a client which was undertaking due diligence on 1derful. His evidence is that he advised Mr Bunbury of his view that the Companies were “un-investable” (Birch [58]). Mr Bunbury denies (Bunbury 21.6.24 [48(c)]) that Mr Birch advised him of that view. It is not necessary to resolve that dispute to determine the proceedings.

In any event, Mr Birch was still seeking to raise funds for the Companies in the second half of June 2023. On 19 June 2023, he sent a text message to Mr Dahan (Ex D3/8, CB 2607) advising that:

By an email on that date (Ex P1, CB 253) Mr Birch advised Mr Isbell that:

That email then suggested the potential terms for short term receivable funding for the Companies and also described the “rationale” for the transaction as that:

Mr Birch refers (Birch [59]) to a subsequent telephone conversation with Mr Bunbury on 19 June 2023, when he says that he advised Mr Bunbury that:

Mr Birch’s evidence is that, in late June 2023, he nonetheless formed the view that he “needed to try and aid 1derful to get through the winding up order” in order to manage his relationship with The Agency (Birch [62]) and he refers to Mr Dahan’s contact with Mr Seymour and Mr Seymour’s involvement from that time (Birch [62]). He also acknowledges (Birch [63]) his long involvement with Mr Seymour, since he and Mr Seymour had been to kindergarten together. Mr Birch refers to HCP’s engagement of Mr Seymour and to subsequent dealings with Mr Seymour and Mr Dahan in respect of the winding up.

Mr Seymour’s evidence (Seymour 10.4.24 [19]ff) is that was approached by Mr Birch and Mr Dahan of HCP in late June 2023 and informed that the Companies were the subject of a winding up application; that HCP was undertaking a capital raising exercise and 1derful needs an urgent strategy to delay or set aside the winding up process so that it could complete the capital raising exercise underway by HCP; that MDC was assisting HCP in raising capital for 1derful by introducing the Companies to potential investors and individuals. Mr Seymour there refers to a statement by Mr Dahan that the fundraising target for 1derful was $2.5 million and that HCP had “$1.5 million committed funds” from Sequoia and was expecting further funding from Sequoia or other venture capital companies within the next two weeks. Mr Seymour attributes further comments to Mr Birch to the effect that 1derful had reasonable “turnovers” but “no substantial revenue”, was heavily in debt, and probably could not borrow money in its own right other than from lenders of last resort, and that it was substantially funded by PIL and FIFO Capital which were both secured creditors. Mr Seymour also refers to Mr Dahan’s offer that HCP would raise and provide short term funding to deal with the winding up application, provided that there was adequate security for the funds raised, and to his referring to the possibility of Mr Bunbury personally providing security in exchange for funding.

Mr Seymour’s evidence is that he then raised the possibility of assignment of the debt, in order to avoid a preference claim against funding creditors as follows:

Mr Seymour exhibits handwritten notes taken during that conversation (Ex D1/2, CB 1710). Mr Seymour’s evidence is that there was no formal letter or written agreement in relation to Green Jigsaw’s suggested engagement by MDC and HCP, given time constraints and his previous “close, ongoing relationship” with Mr Birch. As I noted above, Green Jigsaw’s engagement by MDC and HCP would not prevent an undertaking by Mr Seymour to act in the Companies’ or Mr Bunbury’s interests from giving rise to fiduciary obligations owed by him to them.

Mr Seymour’s evidence is that, on 20 June 2023, he telephoned Mr Bunbury and advised that:

Mr Seymour refers to subsequent telephone conversations with several persons in which he sought loan funds for the Companies; by approaching those third parties on the Companies’ behalf, Mr Seymour seems to me to have assumed the role of acting for those Companies in respect of the transaction, notwithstanding any previous engagement with HCP. He also refers to his approach to the solicitor for the party which had brought the winding up application in respect of a proposed acquisition of that party’s debt.

At about this time, Mr Seymour emailed a third party (Ex D1/2, CB 2029) seeking a short term borrowing of $200,000 for a period of 60 days to pay out Think Grow and Quadiq and setting out potential terms for that borrowing, on the basis that HCP agreed to guarantee it. That email noted that:

Mr Seymour’s evidence is that he told Mr Bunbury in a telephone conversation on 26 June 2023 (Seymour 10.4.24 [101(b)]) that he was engaged by HCP and not 1derful and that “the pathway to HCP’s desired outcome was also 1derful’s best outcome”. Mr Seymour did not subsequently advise the Companies of any change in that consistent objective when he commenced to advance his and Fletch’s interest in a forced acquisition of the Companies’ business. Mr Seymour’s evidence (Seymour 10.4.24 [101(c)]) is that, on 27 June 2023, he told Mr Bunbury that he “[did] not work for you” and was “not interested in dealing with you any further”. Mr Bunbury denies (Bunbury 21.6.24 [23]) aspects of Mr Seymour’s account of this conversation. In any event, Mr Seymour subsequently continued to deal with the Companies and Mr Bunbury and (subject to the pleading points that I address below) the relief sought by the Plaintiffs in these proceedings does not require the existence, or continuance, of a contractual relationship between Mr Bunbury (or the Companies) and Mr Seymour.

By his email dated 30 June 2023 to Mr Bunbury, copied to Mr Birch (Ex P4, CB 1022), Mr Seymour referred to Mr Dahan’s advice to Mr Seymour that Mr Dahan was working with Mr Bunbury and Mr Birch “around security” and observed that:

Mr Seymour’s evidence (Seymour 10.4.24 [38]) is that, on 6 July 2023, he had a conversation with Mr Bunbury which commenced with a self-serving statement that:

By an email dated 10 July 2023 (Ex D1/2, CB 2048) from Mr Bunbury to Mr Singh of Techwondoe (which was providing technology services to the Companies and was also a creditor of the Companies) and copied to Mr Seymour, Mr Bunbury advised Mr Singh that:

By email dated 10 July 2023 (Ex D1/2, CB 2050), Mr Bunbury sent Mr Seymour a document titled “1derful Secured Debt Overview” which he described as “an overview of the secured debt refinancing we are looking to do” and indicated that the Companies were “happy to make any amendments you require”. He also indicated that:

On 10 July 2023, Mr Seymour emailed Mr Bunbury with comments and questions concerning that document (Ex P1, CB 288). Mr Seymour refers in his affidavit evidence to his exchange with Mr Bunbury about 10 July 2023 concerning that document and says that his email dated 10 July 2023 was sent “as part of [his] engagement with HCP”. He also refers to a conversation with Mr Birch on 10 July 2023, where he expressed pessimism as to the Companies’ capacity to raise funds to grow their business. By a further email dated 10 July 2023, Mr Bunbury provided Mr Seymour with a revised draft of the secured debt overview (Ex D1/2, CB 2062) incorporating many of Mr Seymour’s suggestions.

On 18 July 2023, Mr Seymour emailed Mr Bunbury an invoice dated 18 July 2023 in the name of Green Jigsaw (Ex P1, CB 284) addressed to 1derful Group for the sum of $22,000. The covering email to that invoice plainly recognised the risk to 1derful arising from the winding up application, observing that:

Mr Seymour’s affidavit evidence acknowledges that, on 18 July 2023, Green Jigsaw invoiced 1derful for the work that he claims it performed in respect of its engagement with HCP (Seymour [53]).

On 19 July 2023, Mr Seymour issued Mr Bunbury a second invoice dated 19 July 2023 in the name of Green Jigsaw for the sum of $15,000 relating to out-of-pocket expenses described as financing charges for a third party and Mr Bunbury responded that “This has also been paid…”. (Ex P1, CB 293; Ex J1, CB 3650).

Mr Bunbury’s evidence (Bunbury 16.2.24 [11]) is that, in mid-July 2023, prior to emails relating to Mr Seymour’s engagement by FIFO Capital which I address below, a conversation took place in which Mr Seymour advised Mr Bunbury:

Mr Seymour responds (Seymour 10.4.24 [117]) to Mr Bunbury’s evidence of this conversation with a lengthy and self-serving conversation set out in direct speech, as follows:

I prefer Mr Bunbury’s account of this conversation to Mr Seymour’s account of this conversation, where Mr Bunbury’s account is consistent with Mr Seymour’s email correspondence that confirmed that he remained on 1derful’s “team” notwithstanding his engagement by FIFO Capital. Even on Mr Seymour’s own account of the conversation, he did not frankly explain to Mr Bunbury that he had initiated the engagement with FIFO Capital and had prepared the terms on which FIFO Capital would engage him; and the proposition that he wanted 1derful “to succeed and achieve its aims” did not disclose an intent to use the FIFO Capital engagement as a means to advance his own interests in respect of a potential acquisition of the Companies’ business. Mr Seymour’s account of this conversation also provides no explanation of why he had any commercial interest in taking these steps or ensuring that he would remain “in the room” or why he wished to have a mandate to liaise with all creditors including PIL or to have a good idea of what PIL’s investigating accountant, Byrons, were saying to PIL. I find that he by then wished to advance his interest in acquiring the 1derful business, without disclosure of that intent to the Companies. When I raised that possible finding with him at the conclusion of his cross-examination, he said he had nothing to say about it; I infer that nothing he could sensibly have said would have assisted in avoiding that finding.

Mr Seymour refers to the engagement of Jigsaw Works by FIFO Capital, following his conversation with Mr Birch and Mr Kopp on 14 July 2023. Mr Seymour’s evidence (Seymour 10.4.23 [49]) is that, on that date, he telephoned Mr Bunbury as to FIFO Capital’s engaging Mr Seymour personally as its “investigating accountant” to keep FIFO Capital informed of the progress of the capital raising process. Mr Bunbury denies Mr Seymour’s account of that conversation (Bunbury 21.6.24 [13]) and claims Mr Seymour then approached him “with the idea that he would speak with FIFO Capital to avoid them taking any default or enforcement action against the Companies”. Mr Seymour’s conduct in respect of these matters had little in common with the ordinary role of an investigating accountant; and Mr Seymour neither sought nor obtained the Companies’ or Mr Bunbury’s fully informed consent to that engagement.

Mr Kopp’s evidence (Kopp 18.9.24 [7]) is that he also received a telephone call from Mr Seymour, on 14 July 2023, and he had not previously known Mr Seymour. Mr Seymour referred, in that conversation, to his close relationship with Mr Birch; he told Mr Kopp that he had received a call from Mr Birch and Mr Dahan about 1derful and they had asked him to “manage some creditors of 1derful and assist with a winding up application that had been lodged against 1derful”; and Mr Seymour then said that he knew Mr Bunbury; he knew “details about the 1derful business”; he was “across the financial position of 1derful” and knew about their creditors; and that:

Mr Seymour then told Mr Kopp (Kopp 18.9.24 [7(e)]) that Mr Bunbury had asked Mr Seymour if he knew of anyone who would like to invest in 1derful and indicated that he was in discussions with two potential investors, one of which was “very keen”, and then said that:

Mr Kopp annexed his notes from that conversation, although it is apparent that they were prepared after that conversation, because they also record subsequent events, including Mr Kopp’s recognition that Mr Seymour was not “acting solely for FIFO Capital” and “was primarily engaged by 1derful and/or [HCP] who he had stated on our phone call and on email were the parties paying him”. Mr Kopp there recorded the conclusions which he had drawn from that conversation as follows:

I find that, at least by this date, Mr Seymour sought to remain involved in the matter and to appear to be acting for FIFO Capital in the matter so as to advance his interest in an acquisition of the Companies’ business without regard to the interests of either FIFO Capital or the Companies and in a manner that was ultimately adverse to both.

Mr Kopp referred to subsequent emails by which Mr Seymour had drafted the terms of his suggested engagement by FIFO Capital, which Mr Kopp then adopted. Mr Kopp’s evidence (Kopp 18.9.24 [9(d)]), which I accept, was also that:

By an email dated 18 July 2023 (Ex D1/2, CB 2073) Mr Kopp of FIFA emailed Mr Seymour, in the terms drafted by Mr Seymour, that:

By email dated 19 July 2023 (Ex P1, CB 292), Mr Seymour advised Mr Bunbury of the substance of that engagement, namely that:

This email did not seek the Companies’ consent to Jigsaw Works or Mr Seymour accepting such a retainer but simply advised that it had done so. That email plainly also did not constitute consent to the steps which Mr Seymour later took to advance his own and Fletch’s interests at the expense of the Companies, where it referred to “ensuring an outcome in the best interests of all parties”.

Mr Seymour then emailed Mr Bunbury (Ex P1, CB 291; Ex D1/2, CB 2114) that:

In cross-examination (T279), Mr Seymour sought to characterise his reference to his interest in “ensuring 1derful’s survival” as directed to survival of the Companies’ business rather than the Companies. I do not accept that he had fairly or frankly drawn that distinction in this email, which would have been understood as communicating his commitment to promoting the Companies’ survival. Again, no subsequent disclosure by him displaced that commitment. That email cannot give rise to informed consent (which was in any case not sought) for the conduct that followed, where the suggestion that Mr Seymour would not now be seen as “1derful’s man” was put as advantageous rather than disadvantageous to the Companies, and the email also committed to nothing changing in Mr Seymour’s approach, necessarily by comparison with his previous work with the Companies.

On 20 July 2023, Mr Bunbury and Mr Seymour also exchanged text messages (Ex P1, CB 321-322) and Mr Seymour advised Mr Bunbury that:

Mr DeBuse put to Mr Seymour in cross-examination that he was telling creditors that he was not “1derful’s man” but was telling Mr Bunbury and the Companies that he was on their “team”. Mr Seymour responded (T287) that in July 2023:

Mr Seymour was at that time also dealing with Mr Wang of PIL and Mr Kopp of FIFO Capital in respect of its loan to 1derful and was reporting to Mr Bunbury as to those dealings. Mr Seymour’s evidence (Seymour 10.4.24 [62]) is that he contacted Mr Wang of PIL on 20 July 2023 and advised Mr Wang that Jigsaw Works was acting as an investigating accountant engaged by FIFO Capital, a characterisation of its role that I reject, and Mr Wang advised him that 1deful was in default and PIL had appointed an investigating accountant. His account of that conversation is not consistent with his contemporaneous advice to Mr Bunbury (Ex P1, CB 321) that:

Mr Seymour’s evidence (Seymour 10.4.24 [64]) is that he attended, on 26 July 2023, a video conference with Mr Dahan, Mr Birch, Mr Wallace of Gibraltar Capital Pty Ltd, Mr Hodda of Quest Securities (Australia) Ltd, Mr Robertson of Quest Securities and Mr Fabbri of Sequoia. He refers to Mr Fabbri’s advice that his client, Mr Siah, had a “strong interest” in being the “anchor investor” within a funding package, but concerns regarding Mr Bunbury’s corporate governance and financial management, and he refers to a suggestion made by Mr Birch that Mr Seymour “s[i]t in the middle”. He also refers to the circulation of a draft term sheet for a proposed funding transaction on 27 July 2023 and to his sending Mr Kopp a summary of that meeting and that draft term sheet. Mr Seymour accepted in cross examination (T293) (as he had to) that he was then encouraging Mr Bunbury to believe that Mr Seymour “could be trusted and 1derful could trust [him]”. Mr Bunbury then advised on 28 July 2023 that he was “happy with the proposed terms”.

On 28 July 2023, Mr Birch emailed Mr Bunbury a draft term sheet (Ex D1/2, CB 2152) which he noted was currently with a solicitor, implicitly for legal advice. The draft term sheet referred to the lender as “XYZ Wholesale Fund” referred to a refinancing of debt facility and invoices from Mastercard in the amount of $4 million, with a term of one year, at the very high interest rate of 4% per month, paid monthly in advance and with an “equity kicker”. By email dated 28 July 2023 (Ex D1/2, CB 2155), Mr Bunbury told Mr Birch that he was “happy with the term sheet” and requested that it be circulated. Another term sheet with the same date and substantially the same terms was headed “1derful Group Investment Fund” (Ex P2, CB 631).

On 31 July 2023, Mastercard suspended the Mastercard Agreement and outlined a “pathway” for 1derful to resume its Principal Membership Activity with Mastercard (Bunbury 18.9.24 [16]; Ex J2, CB 5694).

By his email dated 2 August 2023 to Mr Singh of Techwondoe (Ex D1/2, CB 2321), Mr Seymour also referred to his engagement by FIFO Capital and referred to the arrangements by which HCP would take an assignment of debts underpinning the winding up application and put a proposal to Mr Singh as to Techwondoe’s debt. Mr Seymour (Seymour 10.4.24 [68]ff) outlines further steps in respect of the winding up in early August 2023 and he refers to a conversation with Mr Bunbury’s solicitor on 4 August 2023 concerning Mr Bunbury’s personal financial position which is also not material to matters which I need to decide.

On 7 August 2023, Mr Birch sent a copy of the term sheet he had prepared on 28 July (to which I referred above) to a third party (Ex P2, CB 627) and, in a subsequent conversation with a representative of that third party, Mr Birch advised him that the Companies had raised approximately $2 million and had an information memorandum in the market; they had made arrangements to register a wholesale managed investment scheme to hold investor capital for the Mastercard arrangement; that he was a “strong supporter” of Mr Bunbury, and the third party agreed that “if they had everything underway to support 1derful” then that third party would work with them rather than run a parallel process (Ex P2, 627).

Mr Seymour also refers (Seymour 10.4.24 [75]ff) to subsequent communications from 9 August 2023 concerning the status of the Mastercard Agreement. His evidence suggests that Mr Bunbury had not promptly informed Mr Seymour or Mr Birch of the suspension of that agreement, had occurred on 31 July 2023.

Mr Birch refers (Birch [74]) to a telephone conversation with Mr Seymour on 10 August 2023, where Mr Seymour advised Mr Birch that Mr Dahan wanted Mr Seymour “to help [Mr Bunbury] and 1derful to get out of all of the debt” and observed that “[t]he debt situation is pretty bad”. The subsequent steps taken by Mr Seymour, Mr Birch and Fletch were not consistent with that request. Mr Birch’s evidence is that he then told Mr Seymour:

Mr Seymour in turn referred to a proposed meeting with Mr Bunbury and Mr Bunbury’s legal adviser to discuss 1derful’s solvency and Mr Bunbury’s personal financial position and Mr Birch says that Mr Seymour claimed that “I am trying” to assist Mr Bunbury. Again, the subsequent steps taken by Mr Seymour were not consistent with that claim.

Mr Birch’s evidence (Birch [70]) is also that, on 10 August 2023, he had a telephone conversation with Mr Bunbury as follows:

Mr Bunbury denies that conversation (Bunbury 21.6.24 [53]). I am unable to accept that a conversation occurred on that date in those terms, where (as Mr DeBuse put to Mr Birch in cross-examination) that would be wholly inconsistent with Mr Birch’s communication with Mr Wang of PIL on the same date, which I address below. I do not accept Mr Birch’s attempt to explain that inconsistency in cross-examination. Even if Mr Birch’s account of that conversation were accepted, it discloses steps toward a potential financing of the Companies, not a proposal that a company associated with him or Mr Seymour would acquire the PIL debt and use it to undertake a forced acquisition of the Companies’ business.

By email dated 10 August 2023 (Birch [71]; Ex P1, CB 263, 265), Mr Birch advised Mr Wang of PIL that he was “a member of the Gibraltar Capital team working with [Mr Bunbury] and 1derful on the refinance and new facility” and attached a draft deed of assignment. The draft deed of assignment provided for an assignment to Gibraltar Capital as trustee of 1derful Group Investment Fund. Plainly, the covering email indicated to PIL that this proposal was being put on 1derful’s behalf and does not disclose any plan for any new entity associated with Mr Birch and Mr Seymour to bring about the forced acquisition of the Companies’ business.

Mr Birch refers (Birch [73]) to a conversation with Mr Bunbury on 15 August 2023, when he says he again advised Mr Bunbury that “I want nothing to do with 1derful” and that Handy Payments was also terminating its agreements with 1derful. Mr Birch did not thereafter have nothing to do with 1derful but was instead closely involved with the steps which led to Fletch’s forced acquisition of the Companies’ business.

Shortly after Mr Birch had represented to PIL that he was a member of the Gibraltar Capital team “working with” Mr Bunbury and 1derful on the refinancing, and also shortly after he says he had told Mr Bunbury that he wanted “nothing to do with” 1derful, he sent an email to Mr Beaumont and others to organise a meeting. His evidence (Birch [75]) is that:

That email (Ex D3/8, CB 2631) was sent to Messrs Beaumont and Ngyuen (who appear to have been advisers to Douugh), Mr Niardone (of The Agency), Mr Rettke (of Realty Assist), Mr Dahan (there described as an investor and corporate adviser with a debt and equity position in 1derful), Mr Seymour (there described as founder of Jigsaw Works, with a corporate and insolvency background and as “Adivsing [sic] 1derful, engaged by 1derful second ranking creditor (FIFO Capital) on recovery” [emphasis added]) and Mr Wallace (associated with a funding warehouse) in relation to a confidential meeting concerning the Companies to be held on 16 August. Mr Birch there described himself by reference to his relationship with The Agency and Handy Payments which he noted “has Agreements with 1derful for provision of payment and lending services across real estate sector etc”. His email emphasised that Mr Birch assumed everyone was “under Confidentiality” and referred to the “aim” and agenda of that meeting as follows:

The stated aim and agenda for this meeting make clear that by this point Mr Birch was no longer seeking to raise funding for 1derful but was instead promoting a proposal by which 1derful would be subsumed within a larger listed entity. There is no suggestion that he had obtained the Companies’ consent to that course by that time, on an informed basis or at all, and the Companies were not invited to that meeting.

Mr Seymour’s evidence (Seymour 10.4.24 [81]) is that he attended this meeting, which he describes as an informal meeting of customers, potential customers and potential investors in the Companies, at Gibraltar Capital’s offices on 16 August 2023. His evidence is that Mr Taylor of Douugh advised that “1derful’s agreement with Mastercard had been suspended and 1derful has failed to deliver the contracted products to Douugh”; I again note that suspension had occurred on 31 July 2023. He also refers to concerns as to the Companies raised by other persons present at the meeting and to his statement that he was engaged by FIFO Capital and he claims that several potential investors there said that investors would not provide funding to 1derful in its current form. Mr Seymour’s evidence in cross-examination was that he first opened the email indicating the meeting was “under confidentiality” while walking to the meeting and he did not consider the meeting to be a “secret”. I do not accept that evidence, if it is intended to suggest that Mr Seymour did not recognise that the plan that was discussed at that meeting was to be concealed from, and was in fact concealed from, the Companies and Mr Bunbury.

Mr Kopp’s evidence (Kopp [11(a)]) is that, on 16 August 2023, Mr Seymour advised him that Mr Birch had already set up a special purpose vehicle and “we have the deed of assignment ready to go” and that special purpose vehicle would purchase the debt of PIL and that:

Mr Seymour also there referred to the fact that FIFO Capital would be paid out and that the process was “all subject to Mastercard’s willingness to engage with the proposed deal” and advised Mr Kopp that:

Mr Seymour also then advised Mr Kopp that:

Mr Kopp also refers to Mr Seymour’s advice to him that:

On 18 August 2023 (Ex D3/8, CB 2634) Mr Taylor of Douugh emailed Mr Beaumont and Mr Birch stating that:

Mr Seymour’s evidence (Seymour 10.4.23 [83]; Ex D1/2, CB 2205) is that, on 21 August 2023, he sent an email to Mr Beaumont of Munich Partners Capital which he described as attaching a diagram of “proposed pathways for the [Companies] and all subsidiaries to continue their business operations”, which the email described as an “execution road map”. Mr Seymour’s description of that document was false where it provides, not for the Companies to continue that business, but instead for Fletch to exercise PIL’s security so as to acquire that business. Mr Seymour also says that the “road map” assumed that 1derful would be placed in liquidation on a winding up application and that Mr Bunbury would be made bankrupt, based on unidentified information he had obtained as “investigating accountant” for FIFO Capital and unidentified information from the meeting on 16 August 2023. He acknowledged in cross-examination (T302) that he had not sent the road map that he prepared to Mr Bunbury but contended that the arrangement was disclosed at a meeting with Mr Bunbury and Mr Robertson. I do not accept Mr Seymour’s evidence in that respect, which again fails to distinguish between, on the one hand, a refinancing of the Companies’ borrowings which would have allowed the Companies to retain their assets and, on the other, a third party’s acquisition of the loan and security held by PIL so as to exercise rights as a secured creditor and acquire the Companies’ assets in a forced sale.

By a further email dated 21 August 2023 (Ex D1/2, CB 2319), Mr Seymour sent Mr Birch an email under the heading “1derful Road Map” attaching a diagram for the process by which a new fund associated with Gibraltar Capital would acquire PIL’s loan and then take possession of the Companies’ business assets. On 22 August 2023, Mr Birch emailed Mr Laurance of Axiom Properties Ltd (“Axiom”), with a copy to Mr Seymour, the “road map” in an attachment titled ‘1derful – Douugh.pdf’ (Ex D3/8, CB 2637). The email stated:

The attachment refers to a proposal for a debt fund, Gibraltar Capital, to acquire a charge over 1derful from PIL and identifies FIFO Capital as the second ranking secured creditor; that debt fund is then to take possession and ownership of 1derful’s business assets; and after a “value add” that debt fund is to vend those assets into Douugh. A detailed outline of the relevant steps includes reference to a demand for payment to 1derful following which the “debt fund takes direct possession of ALL 1derful assets” and transfers ownership of 1derful assets to SPV Co (or to itself) and commissions a valuation “based on circumstances in existence (both known and unknown) at time of possession” and “accounts to 1derful for price of business assets, formalises debts with FIFO Capital as second ranking secured creditor, not likely to be anything for unsecured creditors.” The road map also identifies unresolved questions, including as to any role of Mr Bunbury with Douugh or as a discrete sales channel, or not at all. It is notable, first, that the steps set out in the road map were largely adopted in Fletch’s acquisition of 1derful’s assets and, second, that the road map does not contemplate any possibility that 1derful would repay its loan in response to the demand made to it.

Mr Birch claimed in cross-examination (T378) that he forwarded the road map prepared by Mr Seymour to Mr Laurance of Axiom but did not have the purpose of Axiom taking up that plan and that:

Mr Birch also claimed (T379) that he did not read the road map “in detail”, although he acknowledged that he was aware of “some elements” of what Mr Seymour put in that document. It seems to me to be highly implausible that Mr Birch would not have carefully reviewed that document given his real commercial interest in the proposal, at least through Handy Payments’ interest in obtaining services from the Companies or a third party which acquired their business. I find that Mr Birch was at least aware of the substance of that plan and I do not accept his evidence if he is intending to suggest the contrary. That document would have made clear to Mr Birch, had he read it as I find he did, that what was proposed was a forced acquisition of the Companies’ business by a fund associated with Gibraltar Capital, or of which Gibraltar Capital was trustee, which would acquire PIL’s security then exercise rights as a securityholder to sell the Companies’ business to an associated special purpose vehicle. As I noted above, that approach was subsequently adopted by Fletch.

Also on 22 August 2023 (Ex P1, CB 280), Mr Birch emailed Mr Wang of PIL responding to Mr Wang’s question whether the parties were “still on track for completion of the debt assignment this week”, with a reference to the possible assignment of that debt to Gibraltar Capital which was known to Mr Bunbury, advising that:

Mr Seymour refers (Seymour 10.4.24 [85]) to a video conference with Mr Bunbury and his solicitor, Mr Robertson, on 23 August 2023. By that time, about three weeks had elapsed since Mastercard had suspended the Mastercard Agreement and Mr Bunbury there put the position with Mastercard in optimistic terms. Mr Bunbury there advised Mr Seymour of significant amounts owed by the Companies to third parties, plainly on the assumption that Mr Seymour would use that information for the Companies’ benefit and not to advance his personal interests. Mr Seymour refers to his preparation of an Excel spreadsheet addressing the position and to discussions concerning Mr Bunbury’s personal financial position that are not relevant to any matter which I need to decide. Mr Bunbury denies (Bunbury 21.6.24 [20]) that Mr Seymour said that he would be “reporting this back to FIFO Capital”, but it is not necessary to determine the dispute as to whether that was said.

Mr Seymour acknowledged in cross-examination (T311) that, as at 23 August 2023, he understood that Mr Bunbury trusted him and that Mr Bunbury’s then perception was that he had been providing assistance to the Companies to deal with their creditors and that he had encouraged that perception. Mr Seymour’s evidence in cross-examination was also that he “didn’t regard [him]self as having any obligation at all to Mr Bunbury” that he “wasn’t working for” Mr Bunbury (T312). The former proposition is inconsistent with the standards of commercial morality that would be expected of a participant in the financial services and credit industries in the relevant circumstances.

By an email dated 23 August 2023 (Ex D3/8, CB 2642) titled “Eyes Only – Call Me”, Mr Seymour provided Mr Birch with a spreadsheet setting out balance sheets for 1derful and Mr Bunbury. Mr Birch said that he understood from the reference to “eyes only” (Ex D3/8, CB 2642) that Mr Seymour was asking him to keep the information secret and then said that “I’m not sure what he was asking me”; I also do not accept that evidence, where that language was only consistent with a request for secrecy. Mr Birch also denied in cross-examination that he recognised that the information contained in the document which Mr Seymour provided to him had been provided by Mr Bunbury and Mr Robertson to Mr Seymour for the purpose of assisting Mr Bunbury. I do not accept that evidence, where it would have been plain to Mr Birch and to any reasonable person that Mr Bunbury would not have provided detailed information as to his personal financial position to Mr Seymour unless he expected Mr Seymour to use it for his benefit rather than adversely to him.

Mr Birch’s affidavit evidence is that he identified several “discrepancies” in the attached document from the position that had previously been advised to him by Mr Bunbury. Mr Birch claims (Birch [85]) that:

Mr Birch’s affidavit evidence (Birch [88]) is then, in something of a non sequitur, that:

Between 10 and 24 August 2023, Mr Bunbury sought to contact Mr Birch on many occasions and Mr Birch repeatedly texted that that he would call back but did not do so (Bunbury 6.11.23 [40]; Ex P4, CB 1225ff).

On 25 August 2023, Mr Birch sent Mr Wang, with a copy to Mr Seymour, an email titled “1derful debt assignment” which attached the letter dated 25 August 2023 (Ex D3/8, CB 2650) from Gibraltar Capital, signed by Mr Wallace, and that email stated:

That letter set out a proposed acquisition and assignment of PIL’s debt and the associated first ranking charge; indicated that Gibraltar Capital was satisfied with the proposed deed of assignment and had provided the deed to an unidentified “client principal”; sought further information as to the debt; and stated that:

Mr Seymour accepted in cross-examination that he was likely to have drafted that letter, so far as it used the kind of phrasing that he would use; Mr Seymour maintained that 1derful was in fact supportive of the proposal set out in that letter. I accept that the Companies and Mr Bunbury had expressed support for a refinancing of the Companies by Gibraltar Capital or a fund of which it was trustee which would have been in the Companies’ interests. I reject any suggestion that the Companies or Mr Bunbury had supported the proposal, in the form that the road map then took, which contemplated a forced acquisition of the Companies’ business, where that aspect of the true proposal had not been disclosed to them. Both Mr Seymour and Mr Birch, in cross-examination, repeatedly, but misleadingly, relied on the Companies’ suggested support for those aspects of the proposal of which they were aware as justification for those aspects of the proposal that had not been disclosed to the Companies. Mr Birch denied (T382) that he had carefully read this letter and his evidence was that he was “just advised to forward that to Mr Wang”. I also do not accept that evidence.

Also on 25 August 2023, Mr Birch forwarded a letter dated 25 August 2023 from Mr Wallace of Gibraltar Capital to Mastercard (Birch [90]; Ex D3/8, CB 2653) describing it as “a proposal from the Group looking to work through a proposed recapitalisation of 1derful Group”. That letter referred to the contracts between Mastercard and 1derful, which could not have been known to Gibraltar Capital other than by reason of Mr Birch’s and Mr Seymour’s previous engagements, and stated that:

The proposition that the Companies knew of the matter would be correct, if that matter was a proposed refinancing where Gibraltar Capital acquired the debt and the security with the intent of the loan then remaining on foot and the Company conducting its business; but that is wholly inconsistent with the transaction that was then contemplated by the road map, which provided that the debt and security would be acquired, the loan called and the security exercised, and the Companies’ assets then sold to the special purpose vehicle in a forced sale.

Gibraltar Capital also there pointed to the virtues of, and the difficulties facing, the Companies, observing that:

That letter then set out a fuller explanation of Gibraltar Capital’s proposal for a “recapitalisation” of 1derful under its control and solicited Mastercard’s involvement with the proposal. That letter did not inform Mastercard of the extent to which the proposal was to be implemented by the forced acquisition of 1derful’s business, by taking an assignment of the debt, calling in the loan within a short time and the new lender then transferring 1derful’s business to itself.

Mr Seymour accepted in cross-examination that he likely drafted this letter. I do not accept Mr Birch’s evidence in cross-examination that he forwarded that letter without reading it, where it seemed to me inconceivable that he would have sent a letter that invited Mastercard to contact him without reading the document that set out the proposal that would be the subject of such a contact. Mr Bunbury denies that he had given Mr Birch authority to communicate with Mastercard for or in relation to the Companies and his evidence was that he did not know that Mr Birch was communicating with Mastercard at that time (Bunbury 21.6.24 [58]). As I noted above, I accept that Mr Bunbury knew of aspects of a proposal for Gibraltar Capital as trustee of a fund to refinance the Companies’ debt, but he and the Companies plainly did not then know of the intent to undertake a forced sale of the Companies’ assets in the manner contemplated by the road maps to which I referred above.

Mr Birch claimed (T389) that this letter related to a proposal from Mr Bunbury, Mr Robertson, Gibraltar Capital and Mr Seymour, and not from Axiom, and he denied that the relevant group was Mr Birch, Mr Wallace and Mr Seymour. That answer again highlights the ambiguity that arises from the fact that Gibraltar Capital had, at a prior point, involved itself with a proposal that involved a true refinancing of the Companies but, by this point, the road map was articulating a different proposal, involving the acquisition of PIL’s debt and the associated security as a step to the forced acquisition of the Companies’ assets.

Mr Seymour’s evidence (Seymour 10.4.24 [88]) is also that:

Mr Birch’s evidence in cross-examination (T403) was that he had no substantive involvement in the matter after 25 August 2023, because he had “gone away at that point” and that:

He went on to say (T403-404):

I do not accept that evidence, if it is intended to suggest that Mr Birch did not pay attention to aspects of the transaction or attempts by Mr Bunbury to contact him, from that time, because he was otherwise occupied with these transactions or activities in regional New South Wales. That evidence is inconsistent with Mr Birch’s contact with Mastercard on 28 and 29 August 2023 and with Axiom on 18 September 2023, which I address below. Mr Birch also did not give that explanation when he did not respond, in late August 2023 and September 2023 to numerous messages from Mr Bunbury requesting him to contact Mr Bunbury (Ex P4, CB 1226-1228). He also did not give that explanation when, after the transaction completed, he advised Mr Wang of PIL (Birch [94]-[95]; Ex D3/8, CB 2683) that he “went missing at the end of the process”, not because he was busy or in regional New South Wales, but because “the team made decisions that were not consistent with a number of the items we discussed”. That advice necessarily implied that Mr Birch knew of those decisions and that he disapproved of them in unidentified ways. I accept that, as Mr Cheshire submits, I should not disbelieve Mr Birch’s evidence as to this matter by reason of these possible inconsistencies, which were not squarely put to Mr Birch in cross-examination. I do not accept this evidence because of the view that I have reached as to his credit on other grounds.

On 28 August 2023, Mr Wormald of Mastercard emailed Mr Birch with a copy to Mr Seymour (Ex D3/8, CB 2661) advising:

Mr Seymour then sent an email dated 28 August 2023 (Ex D1/2, CB 2210) to Mr Kopp and another representative of FIFO Capital which he says outlined his recommended approach and his assessment of the situation. That email addressed the likely position if 1derful was placed in liquidation and PIL appointed a receiver or some other type of controller or took direct possession of all of its assets; the position if PIL acted before a liquidation; and the possibility of action by FIFO Capital with the result that PIL would likely then exercise its rights to protect its position. Mr Seymour then observed that:

Mr Seymour then dealt with the possibility that Mastercard would reinstate the Mastercard Agreement on the basis that $1 million was paid to Mastercard and Mastercard then paid $1 million back in the form of incentive payments and observed that “[t]his is extremely plausible and would be expected as the default position” and observed that the Mastercard Agreement would then need to be assigned to the SPV. He identified a second possibility that Mastercard would reach a new agreement with the SPV and a third possibility that Mastercard refused to enter into a new agreement, which he assessed as “unlikely” but “the worst possible case”. By this point, Mr Seymour was plainly in direct communication with Mastercard and developing a proposal which would lead to the Companies’ loss of their businesses and, in his continuing dealings with the Companies, he concealed both of those matters.

Mr Kopp’s evidence (Kopp [11(f)]) is that, on 28 August 2023, Mr Seymour advised him that Mastercard had responded to Mr Seymour and Mr Birch and that they “expect to put our foot on the company tomorrow”. Mr Kopp asked what was meant by that and Mr Seymour responded:

Mr Seymour then advised Mr Kopp that, if the valuation of the Companies “comes back at $2 million, then there would be enough money to pay FIFO Capital” and that:

Mr Kopp’s evidence (Kopp [11((i)]) is that, in a follow up call between Mr Kopp, another director of FIFO Capital and Mr Seymour on that day, Mr Seymour again referred to his assessment that the Companies’ “assets are worth at least $2m every day of the week” and that:

On 29 August 2023, Mr Birch followed up with Mr Martin of Mastercard, with a copy to Mr Seymour, advising that:

Mr Martin responded (Ex D3/8, CB 2664) on the same day, thanking Mr Birch for the “outreach” and indicating that he could call later that day and “share initial thoughts on path forward”.

Mr Birch’s evidence (Birch [87]) is also that, at the end of August 2023:

An information memorandum was prepared for 1derful in September 2023 (Ex P2, CB 550ff) which sought further investment in 1derful, in a manner that was wholly inconsistent with the approach then being promoted by Mr Birch and Mr Seymour and their associates.

Mr Kopp also addresses (Kopp [13]) a further telephone conversation with Mr Seymour on 7 September 2023, where Mr Seymour advised him that Axiom was buying the PIL debt. Mr Seymour’s affidavit evidence (Seymour 10.4.24 [88]) is that, by 12 September 2023, Axiom had agreed to invest and establish Fletch.

On 13 September 2023, Mr Seymour sent an email to Mr Laurance Towey of Axiom and Mr Birch (Ex P9) advising that:

It is plain enough that the intent of the suggested termination of the relationship between Handy Payments and the Companies (which Mr Birch claims to have previously terminated orally) was to depress the value of the Companies, so far as it was proposed that Fletch exercise the security rights and sell the Companies’ business to itself.

Also on 13 September 2023, Mr Seymour emailed Mr Laurence and Mr Towey of Axiom and Mr Birch an updated version of the road map enclosed with the email sent by Mr Birch on 22 August 2023 (Ex P10). That email referred to a previous meeting with, inter alia, the Chief Financial Officer at Douugh and attached an updated road map which noted that “[s]o far as Douugh is concerned, there are a number of stages that must NOT be done out of sequence.” Mr Birch’s evidence was that he could not recall looking at that email. I do not accept that he did not review that email, given his previous involvement in events and the significance of the transaction for Handy Payments and for him.

In a subsequent conversation, on 14 September 2023, Mr Seymour advised Mr Kopp that Mr Seymour would “sit over the top of the transaction” and that “Axiom would have to follow the road map that [he] had previously articulated regarding accounting back to other creditors” and, later, that Axiom were not prepared to pay out PIL in full, they would be making a “low-ball” offer to PIL and that “this wasn’t good for FIFO Capital”.

At least by 18 September 2023, Mr Birch and Handy Payments committed themselves to participation in Fletch’s forced acquisition of the Companies’ business. A letter dated 18 September 2023 to Axiom (Birch [93]; Ex D3/8, CB 2669), signed by Mr Birch stated that:

On 22 September 2023, Fletch was incorporated (SOC [22]; Ex P1, CB 105) with Mr Seymour as its sole director and company secretary. Mr Seymour’s evidence (Seymour 10.4.24 [88]) seeks to explain why Fletch was incorporated, in order to implement an assignment of PIL’s debt to Fletch. Mr Seymour’s company, Jigsaw Works, then held 5 of its 80 shares; Mr Birch’s company, Midialel, held 5 of its 80 shares and Axiom held 70 of its 80 shares (SOC [22]-[23], admitted D1/2 Defence [22]-[23], D3 Defence [22]-[23]). I accept that Fletch did not have a banking or financial institution licence nor was it regularly engaged in or established for the purpose of making or purchasing or investing in loan securities or other financial assets, including credit derivatives (SOC [24], partly admitted and partly not admitted D1/2 Defence [24], D3 Defence [24]).

The Plaintiffs plead (SOC [25], denied D1/2 Defence [25], D3 Defence [25]) and I find that Mr Seymour and Mr Birch developed a plan for Fletch to acquire the Companies’ business by, first, acquiring at a discount the debt of PIL owed by the Companies; then demanding payment of the debt within a very short time, knowing (through Messrs Seymour and Birch) that the Companies could not pay that debt within that short time; then purportedly exercising the power of controller to sell the Companies’ business to itself without marketing or taking any steps to identify the value of that business; then transferring the shareholding held by 1derful in 1derful Lending to Fletch, to allow it to obtain its Australian credit licence, and then causing that Australian credit licence to be reissued to 1derful Lending under the changed name of APL Lending Pty Ltd (“APL Lending”); and finally appointing a receiver to the Companies knowing that no assets remained in them so that no steps could be easily taken to recover those assets. I recognise that plan was developed, and steps added and modified, over time. The Plaintiffs refer to these steps as “the Scheme”; I will also use that term although it has a pejorative implication, where that implication is supported by the findings that I have reached. The Plaintiffs plead (SOC [26]) and I accept that each of Fletch and Messrs Seymour and Birch took part in the Scheme.

By a Deed of Assignment dated 25 September 2023 (SOC [29(a)], admitted D1/2 Defence [29(a)], D3 Defence [29(a)]; Ex D3/8, CB 2671, 2676) between PIL and Fletch, PIL assigned to Fletch all of its rights, title and interest in relation to the Facility Agreement and Security Deed for the sum of $700,000 and there recorded the secured loan balance as $942,326. The Plaintiffs plead (SOC [35], denied D1/2 Defence [35], D3 Defence [35]) and I accept that the assignment of the debt from PIL to Fletch was not authorised by the terms of the Facility Agreement and Fletch received the assignment in knowledge of that breach and intending to take advantage of that breach, although that conclusion is not necessary to the outcome of these proceedings. On 26 September 2023, PIL gave notice of that assignment to the Companies and Mr Bunbury (Ex P1, CB 344).

On 27 September 2023, the winding up application brought by Think Grow was dismissed (Ex P1, CB 346). Mr Seymour pleads that, on the same day, his engagement with FIFO Capital ceased (D1/2 Defence [17.3(a)]). Also on that day, (at 11.21am) Fletch gave the Companies notice of the assignment, and demanded payment of the outstanding $942,326 by 4pm on that same day (Ex P1, CB 339). At 4.29pm on that day, Fletch gave the Companies notice that because its demand had not been met, it was entering into possession and taking control of the Companies’ assets, including its business, pursuant to cl 8.1 of the Security Deed (SOC [29(b)], admitted D1/2 Defence [29], D3 Defence [29]); Bunbury 6.11.23, [6(f)-(g)]; Ex P1, CB 340, 348, 350) and notified the ASIC that Fletch was now the controller of the Companies’ property (Ex P1, CB 354). Mr Seymour’s affidavit refers (Seymour 10.4.24 [93]ff) to these events but does not address their obvious intent to ensure that the Companies had no prospect of making the relevant payments, however unlikely it may have been that they could have funded those payments in any case.

Mr Bunbury refers in his affidavit evidence (Bunbury 6.11.23 [42]) to an exchange of text messages with Mr Seymour on 27 September 2023 and to a subsequent telephone conversation with Mr Seymour, in which Mr Seymour did not disclose his role in relation to the proposed acquisition of PIL’s debt by Fletch. Mr Seymour responds (Seymour 10.4.24 [110]) that he told Mr Bunbury in that conversation that:

Mr Seymour also send a text on that date (Ex P8), the addressees of which are not identified, as follows:

Mr DeBuse submits that:

On 3 October 2023, by the BSA (Ex P1, CB 410), Fletch, in its capacity as controller, purportedly sold to Fletch the assets of the Companies, including their business, for the sum of $757,273 exclusive of GST. Under cl 7 of the BSA, the sale price was subject to adjustment upon a valuation of the Companies’ assets by which, if the value of the assets exceeds the $757,273 purchase price, Fletch was to apply the difference towards repayment of the amounts owing to it (Ex P1, CB 418). That valuation was never undertaken. That sale also took place without any marketing campaign or attempts at a sale to other potential purchasers (SOC [29(c)], admitted D1/2 Defence [29], D3 Defence [29]). All receivables that were or that became due were to be assigned to Fletch (cl 9) and the agreement provided for the novation and assignment of all continuing contracts to Fletch (cl 6.2).

Also on 3 October 2023, Fletch passed a written resolution purportedly as sole shareholder appointing Mr Seymour in place of Mr Bunbury as sole director of 1derful Lending (Ex P1, CB 430) and Fletch, as controller, transferred the shares of 1derful Lending to itself (Ex D1/2, CB 2286); on 10 October 2023, 1derful Lending was renamed APL Lending (Ex P1, CB 437); on 13 October 2023, Fletch and PIL jointly appointed Mr Ball as receiver of the Companies’ assets (Bunbury 6.11.23 [16]; Ex P1, CB 131-134); and, on 16 October 2023, the Australian credit licence held by 1derful Lending was reissued in the name of APL Lending (SOC [29(d)-(f)], admitted D1/2 Defence [29], D3 Defence [29]; Bunbury 6.11.23, [71]; Ex P1, CB 448).

By an email dated 4 October 2023, Mr Birch advised Mr Wang of PIL (Birch [95]; Ex D3/8, CB 2683) as follows:

Shortly after the purported sale, Axiom, which was the majority shareholder in Fletch, made an announcement (Ex P2, CB 661) to the Australian Stock Exchange which emphasised the benefits of the forced acquisition of the Companies’ business by Fletch as follows:

The annual report of Axiom for the financial year 2023-2024 also referred to the acquisition of the Companies by Fletch and observed (Ex P11, p 7) that:

The Plaintiffs seek (OP [8], SOC [1]) a declaration that, relevantly, Mr Seymour breached fiduciary obligations owed to the Companies. The Plaintiffs plead that Mr Seymour was engaged for reward by the Companies and possibly Mr Bunbury from in or around July 2023 to provide advice and assistance in relation to solvency refinancing and capital raising for the Companies (SOC [17]). Mr Seymour and Fletch deny this claim and plead that Green Jigsaw was engaged jointly by MDC and HCP from 20 June 2023 to 17 July 2023, and Jigsaw Works was then engaged by FIFO Capital (D1/2 Defence [17]).

This first step of the Plaintiffs’ claim for breach of fiduciary duty against Mr Seymour is somewhat narrowly pleaded, with the claim that Mr Seymour was engaged “for reward” by the Companies. Mr Walker submits, in closing, that the Plaintiffs have departed from their pleaded case in closing submissions by contending that, between April and September 2023, Mr Seymour was engaged by the Companies to act for them in relation to corporate advice, raising funds, and other issues and that the sale of the Companies’ business to Fletch was at a known undervalue and in breach of Mr Seymour’s fiduciary duties. Mr Walker submits that the Plaintiffs have not sought to amend their case, and no departure from the pleaded case has been “agreed to or permitted”.

It is therefore necessary to addresses the function of pleadings here. I proceed on the basis that the role of the pleadings is to promote the just resolution of the proceedings. That proposition emerges clearly enough from the judgment of the Full Court of the Federal Court in Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356; (2010) 273 ALR 664; [2010] FCAFC 133 at [49]ff (“Betfair”), as follows:

The Court then observed (at [55]ff) that the relevant question is whether the respondents knew the case they had to meet. In dealing with a similar position to that taken by Mr Seymour and Fletch here (and elsewhere by Mr Birch), the Full Court observed that:

In Betfair the Court concluded (at [59]) that the relevant issue was “clearly in play” in those proceedings and that “any deficiency in the premise upon which that issue was pleaded should have been dealt with by the trial judge as a matter of substance rather than as a point of pleading”. There should be no surprise in that proposition. These propositions have subsequently been approved and applied by the Full Court of the Federal Court (on an appeal from a case involving, inter alia, copyright heard in this Court) in JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; [2016] FCAFC 20 at [410]ff and again in Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd (2024) 302 FCR 375; [2024] FCAFC 17 at [236]ff.

Consistent with authority, I do not read the Plaintiffs’ pleading of breach of fiduciary duty narrowly or technically. Notwithstanding the evidence directed to the question whether HCP and FIFO Capital had engaged Green Jigsaw and Jigsaw Works, by contrast with the Companies or Mr Bunbury engaging Mr Seymour, it was plain that the Plaintiffs’ case extended to a claim for breach of fiduciary duty arising from the dealings between Mr Seymour, the Companies and Mr Bunbury, and was not limited to a duty arising from a formal contract between the Companies or Mr Bunbury and Mr Seymour personally. I have no doubt that Mr Seymour knew that he needed to meet a wider case that he had undertaken to act in the Companies’ and Mr Bunbury’s interests, even if not by a formal contract, and had thereby assumed fiduciary duties to the Companies and Mr Bunbury and had breached them, even if he hoped to take a successful pleading point to avoid a determination of that wider case on its merits. He was not caught by surprise although his hope to hold the Plaintiffs to a narrow case that may fail on technical grounds has been disappointed. I am comfortably satisfied that there is here no denial of procedural fairness and no practical injustice (using the language in Gerrard Toltz Pty Ltd v City Garden Australia Pty Ltd (in liq) (No 2) [2024] NSWCA 232 (“Gerrard Toltz”) at [103]-[108]) in determining this claim by reference to the dealings between Mr Seymour, the Companies and Mr Bunbury that were in issue at the hearing.

Now returning to the Plaintiffs’ pleaded case, they also plead (SOC [18], largely denied D1/2 Defence [18]) that Mr Seymour only became aware of the details of the existence of the Companies’ debts, the nature and financial circumstances of its business and the opportunity that it involved, by reason of his engagement to provide assistance to the Companies. Given the findings that I reach on other grounds, it is not necessary to decide that question, although I accept that he plainly obtained information about the Companies as a purported adviser to them and representative for them. The Plaintiffs also allege (SOC [19], denied D1/2 Defence [19]) that Mr Seymour did not inform Mr Bunbury or the Companies that he had ceased working to achieve a capital or debt raising for the benefit of the Companies; or to negotiate with PIL on their behalf. I accept that, as has emerged from the chronology above, Mr Seymour did not frankly or fairly inform them of that matter or advise them when he chose to advance his own, and then Fletch’s, interest in a forced acquisition of the Companies’ assets.

The Plaintiffs plead (SOC [20]; denied D1/2 Defence [20]) that, by reason of the circumstances of their retainer and the trust and confidence reposed in, relevantly, Mr Seymour of which he was aware or should have been aware, he owed a fiduciary obligation to Mr Bunbury and the Companies. They plead (SOC [21]; denied D1/2 Defence [21]) that those fiduciary obligations included obligations not to take advantage for their personal profit of the confidential information of the Companies of which they were allegedly aware; not to prefer their personal interests to that of Mr Bunbury and the Companies; and not to let their duty as agents and confidants of Mr Bunbury and the Companies conflict with their obligations to other third parties. The Plaintiffs also plead (SOC [33], denied D1/2 Defence [33], D3 Defence [33]) that, relevantly, Mr Seymour aided and abetted, procured and counselled or was knowingly involved in the Scheme in breach of, inter alia, his fiduciary obligations. While this pleading is oddly phrased, I understand it to be an allegation of breach of fiduciary duties owed by him, not an allegation of knowing assistance in a breach of fiduciary duty owed by a third party.

I now address the applicable principles in respect of the claims for breach of fiduciary duty. In Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 (“Hospital Products”), Mason J observed (at 96-97) that “the critical feature” of the traditional fiduciary relationship was the undertaking or agreement by the fiduciary to “act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense” and that:

Professor Finn subsequently observed in his essay, “The Fiduciary Principle” in T G Youdan (ed) Equity, Fiduciaries and Trusts (1989) at 46, in a passage cited with approval by the Full Court of the Federal Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 541; [1996] FCA 870, and by Ball J in DIF III – Global Co-Investment Fund LP v Babcock & Brown International Pty Limited [2019] NSWSC 527 (“DIF III”) at [145], that fiduciary duties can arise where:

In Bristol & West Building Society v Mothew [1998] Ch 1, Millett LJ similarly observed (at 18) that:

Although the relationship between a party providing services to a client in the financial sector and that client is not a status-based relationship, the Courts have readily found that fiduciary duties can arise in that context. In Aequitas Ltd v Sparad No 100 Ltd (formerly Australian European Finance Corp Ltd) (2001) 19 ACLC 1006; [2001] NSWSC 14, Austin J held that an adviser owed fiduciary duties where it undertook to act in the interests of the client and not solely in its own interests, and the client was in a position of vulnerability (at [310]); and the client trusted the adviser and had placed itself in the adviser’s hands on the assumption that the adviser would not act in its sole best interest but would act in the interests of the client (at [313]); that approach was approved and applied by Jagot J (then sitting in the Federal Court of Australia) in Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 (“Bathurst Regional Council”).

In Australian Securities & Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; 62 ACSR 427; [2007] FCA 963 (“Citigroup”), Jacobson J referred, inter alia, to Hospital Products and observed (at [272]) that:

In John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 (“John Alexander’s Clubs”) at [87], a unanimous High Court in turn identified the “critical feature” of fiduciary relationships as being that:

In Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 (“Grimaldi”), the Full Court of the Federal Court observed (at [177]) that a fiduciary duty may exist:

In Wingecarribee Shire Council v Lehman Bros Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028, Rares J held that Grange Securities Limited, which advised local councils in respect of their purchase of complex financial products, owed them fiduciary duties as a financial adviser and breached the prohibition on conflicts of interest by reason of a conflict between its duty to give sound financial advice to, or make investment decisions on behalf of, the councils and an undisclosed interest in earning large fees or profits in sales of those products.

In Bathurst Regional Council, Jagot J similarly held that a financial adviser to local councils owed them fiduciary duties and breached the prohibition on conflict of interest by reason of undisclosed commercial pressures upon it to distribute relevant products in order to restore the success of its business. The Full Court of the Federal Court dismissed an appeal from that decision in ABN Amro Bank NV v Bathurst Regional Council & Others (2014) 309 ALR 445; [2014] FCAFC 65 and, as Mr Walker notes, there summarised the applicable principles (at [1066]) as follows:

Mr Walker also refers to my summary of the relevant principles in Vanguard Financial Planners Pty Ltd v Ale (2018) 354 ALR 711; [2018] NSWSC 314 at [51]–[60] and submits that, for a fiduciary relationship to be established, there must be an express or implied undertaking or agreement given by a person to act in the interests of another in the conduct of the relationship between them. Mr Cheshire refers to Ball J’s observation in DIF III at [146]–[147], where his Honour held that a promoter in respect of an ongoing business did not owe fiduciary duties, and observed that:

In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 (“Ancient Order of Foresters”) at [67] to [70], Gageler J in turn explained that the duty of loyalty is imposed, in equity, on fiduciaries “by means of two overlapping ‘proscriptive obligations’”, observing that (footnotes omitted):

In Porter v Mulcahy & Co Accounting Services Pty Ltd [2021] VSC 572 at [488], in the context of a claim for breach of fiduciary duties against an accountant, Delaney J observed that:

I recognise that, even if the Court holds that there was a fiduciary duty, the scope of that obligation must be considered, and I will also address that question below. In Anderson v Canaccord Genuity Financial Ltd (2023) 113 NSWLR 151; [2023] NSWCA 294 at [152]ff, the Court of Appeal observed that the “scope” of fiduciary obligations refers to the scope, or subject matter, of the area within which the fiduciary is not free to act self-interestedly and approved the statement in Grimaldi at [143] that:

Mr DeBuse recognises that the existence of a retainer is disputed by, relevantly, Mr Seymour, notwithstanding references to payment and invoices rendered to the Companies in his affidavit evidence. As I noted above, the existence of a retainer is not necessary to the existence of fiduciary obligations owed by Mr Seymour to the Plaintiffs, and I have found that Mr Seymour was not caught by surprise by the wider case that was brought against him. Mr DeBuse submits that there is evidence that the Plaintiffs reposed trust and confidence in Mr Seymour, of which he knew, and that trust and confidence was sufficient to require him to act in a manner which did not permit him to take advantage for his personal profit of the confidential information of the Companies of which he was aware; prefer his personal interests to that of Mr Bunbury and the Companies; and let his duty as agent and confidant of Mr Bunbury and the Companies conflict with his obligations to other third parties.

As I noted above, Mr Walker responds that the Plaintiffs’ breach of fiduciary duty case is brought against Mr Seymour on the basis that he was “engaged” by the Companies “for reward” in or around July 2023 to advise and assist them in relation to solvency, refinancing and capital raising (SOC [17]) and the Plaintiffs contend that Mr Seymour became aware of the nature of the Companies’ business and its financial circumstances in that way (SOC [18]) and I have addressed that pleading point above. Mr Walker also submits that there is no contract or other contemporaneous record of the terms of the alleged engagement or the reward said to have been offered to Mr Seymour on his engagement, although he acknowledges that, as I noted above, on 10 July 2023, Mr Bunbury advised Mr Seymour that he “would welcome an opportunity to compensate you for your help” (Ex D1/2, CB 2050) and, I should add, Mr Seymour invoiced the Companies for the work he had done in respect of the winding up. Mr Walker also submits that Mr Seymour’s involvement with the Companies, and the information he discovered about the Companies, came about through the appointment of Green Jigsaw by HCP in June-July 2023 and Jigsaw Works by FIFO Capital from 18 July 2023 until 27 September 2023. I have addressed the evidence concerning those matters above.

Mr Walker also submits that Mr Seymour informed Mr Bunbury of his engagement by HCP on 20 June 2023, and reiterated that again on 6 July 2023 and also advised third parties of his engagement by HCP. Mr Walker also points to the email drafted by Mr Seymour then sent by Mr Kopp for FIFO Capital to Mr Seymour on 18 July 2023. Mr Walker also draws attention to an email from Mr Seymour to Mr Bunbury on 1 September 2023 attaching a letter sent by Mr Seymour to a third party, Techwondoe, which advised that “Jigsaw Works is engaged by FIFO Capital” and to other communications referring to FIFO Capital and sent to FIFO Capital. I have addressed these engagements above.

Mr Walker submits that the Plaintiffs’ subjective trust and confidence in Mr Seymour will not establish a fiduciary duty; that the true question is whether, determined objectively, the requisite undertaking was given by Mr Seymour; and that an engagement of Mr Seymour would also not be enough, of itself, to establish the existence of a fiduciary relationship. He submits that:

Mr Walker also addresses the question of the scope of any duty owed by Mr Seymour if, contrary to his submission, such a duty existed. He contends, inter alia, that “[t]he [P]laintiffs have not identified the particular functions and responsibilities over which they contend the obligations are said to extend in the circumstances of their particular relationship with Mr Seymour”; Mr Seymour had acquired information about the Companies from Mr Dahan before the time of his alleged engagement; Mr Seymour was engaged by FIFO Capital and Mr Bunbury asked Mr Seymour to act on the mandate, although I note that Mr Seymour had emphasised the distinction between Green Jigsaw and himself in that regard; and Mr Bunbury’s evidence was that Mr Seymour was seeking to advance his own plans to commercialise various ideas he had using 1derful’s product and technology platform. None of these matters narrow the scope of the fiduciary duties that arise from the wider undertakings given by Mr Seymour to act in the Companies’ interests which I address below.

I have summarised the early work done by Mr Seymour to assist the Companies, in connection with HCP’s engagement of Green Jigsaw, above. By his email dated 30 June 2023 to Mr Bunbury, copied to Mr Birch (Ex P4, CB 1022), Mr Seymour offered to assume an oversight role “so that you don’t get taken advantage of” in dealing with HCP and “assured” Mr Bunbury that he was “on the case.” I noted above that Mr Seymour accepted in cross-examination (T276) that his reference to “get taken advantage of” involved his suggesting to Mr Bunbury that Mr Bunbury could rely upon Mr Seymour as somebody who would be honest and take care of his interests, and the reference to his being “on the case” provided assurance to Mr Bunbury that he was providing assistance to Mr Bunbury and the Companies. I have found that, in mid-July 2023, Mr Seymour advised Mr Bunbury that, although he was attempting to have FIFO Capital engage him, he would “still be working for 1derful to achieve its aims”. I have also found above that, by his email dated 19 July 2023 to Mr Bunbury (Ex P1, CB 291; Ex D1/2, CB 2114) in connection with the engagement that he sought out for Jigsaw Works by FIFO Capital, Mr Seymour represented to Mr Bunbury that “our interest lies in ensuring 1derful’s survival, recapitalisation and success”; and that, notwithstanding that creditors would perceive him as “one of “them” and not “1derful’s man … [n]othing changes in my approach.” I have also found above that, by his text message on 20 July 2023 (Ex P1, CB 321-322), Mr Seymour advised Mr Bunbury that, inter alia, “I’m on your team – emphasis on YOUR”. I have rejected Mr Seymour’s attempt in cross-examination (T287) to limit this commitment to Mr Bunbury personally rather than the Companies. I also noted above that Mr Seymour ultimately accepted in cross-examination (T331-332) that Mr Bunbury trusted him and continued to trust him into September 2023, although he sought to place that trust in the context that he was working on the overall engagement from HCP. While a party’s trust in another is not sufficient to establish a fiduciary duty without more, it here plainly arose from the undertakings that Mr Seymour had in fact given to act in the Companies’ and Mr Bunbury’s interests which I have noted above.

These matters provide sufficient basis to find, and I find, that Mr Seymour had undertaken to act in the interests of at least the Companies, and possibly also Mr Bunbury, to the exclusion of his own, despite his companies’ engagement by third parties, and thereby displaced the concern that might well otherwise have arisen that he had accepted several conflicting obligations and could not be trusted to act in the Companies’ interests. Once that undertaking was given, none of Mr Seymour’s references to Green Jigsaw’s or Jigsaw Works’ engagement for HCP or FIFO Capital sought or obtained the Companies’ or Mr Bunbury’s consent to Mr Seymour preferring the interests of those third parties or his own interests to the Companies’ or Mr Bunbury’s interests or made the full and frank disclosure that would be necessary to avoid a breach of a fiduciary duty. Although Mr Walker rightly recognises that fiduciary duties extend only to the scope of the engagement, Mr Seymour’s undertaking to act in the Companies’ interests was plainly given in respect of refinancing of the Companies and dealing with their creditors, and was sufficiently wide that the steps that he took, with Fletch and Mr Birch, to bring about the forced acquisition of 1derful’s business breached both the no conflict and the no profit rules.

The Plaintiffs also plead (SOC [37(a)], partly not admitted and partly denied D1/2 Defence [37]) that, at all material times between the beginning of September 2023 and the acquisition of the Companies’ business by Fletch, relevantly, Mr Seymour was using his knowledge of the Companies’ business including confidential knowledge to obtain an advantage for himself, Mr Birch or Fletch in breach of his fiduciary obligations. It is not necessary to determine this claim where I have found the breach of fiduciary duties to be established on other grounds.

The Plaintiffs seek (OP [8], SOC [1]) a declaration that, relevantly, Mr Birch breached fiduciary obligations owed to the Companies. The Plaintiffs plead (SOC [13]-[14], denied D3 Defence [13]-[14]) that, between April and May 2023, the Companies and Mr Bunbury in his personal capacity engaged Mr Birch for reward to provide advice and assistance in the raising of debt and equity and to develop business for the Companies and that Mr Birch was engaged to negotiate with PIL and to find alternative finance for the Companies, until August 2023 when Mr Birch failed to respond to communications from the Companies. I accept that Mr Birch’s engagement, although in informal terms, contemplated that he would be paid for his services and he was, at least once, paid for those services. The Plaintiffs also plead (SOC [15]) that Mr Birch did not inform them that he had ceased working to achieve a capital or debt raising or negotiating with PIL for the benefit of the Companies. I have not accepted Mr Birch’s evidence that he did tell Mr Bunbury of that matter above and I have found that, at least by mid-August 2023, Mr Birch was advancing his own and the other Defendants’ interest in achieving a forced acquisition of the Companies’ assets, rather than any refinancing proposal in any usual sense.

The Plaintiffs also allege (SOC [16], largely denied D3 Defence [16]) that Mr Birch only became aware of the details of the existence of the Companies’ debts, the nature and financial circumstances of its business and the opportunity that it involved, by reason of his engagement to provide assistance to them. It is not necessary to determine that question, given the findings that I reach on other grounds, although I accept that he plainly obtained information about the Companies in dealing with them.

The Plaintiffs plead (SOC [20]; denied D3 Defence [20]) that, by reason of the circumstances of their retainer and the trust and confidence reposed in, relevantly, Mr Birch of which he was aware or should have been aware, he owed a fiduciary obligation to Mr Bunbury and the Companies. They plead (SOC [21]; denied D3 Defence [21]) that those fiduciary obligations included obligations not to take advantage for their personal profit of the confidential information of the Companies of which they were allegedly aware; not to prefer their personal interests to that of Mr Bunbury and the Companies; and not to let their duty as agents and confidants of Mr Bunbury and the Companies conflict with their obligations to other third parties. They also plead (SOC [33], denied D3 Defence [33]) that, relevantly, Mr Birch aided and abetted, procured and counselled or was knowingly involved in the Scheme in breach of, inter alia, his fiduciary obligations. While this pleading is oddly phrased, I understand it to be an allegation of breach of fiduciary duties owed by him, not an allegation of knowing assistance in a breach of fiduciary duty owed by a third party.

Mr DeBuse recognises that the existence of a retainer is disputed by, relevantly, Mr Birch, notwithstanding references to payment and invoices rendered to the Companies in his affidavit evidence. The existence of a retainer is not, of course, necessary to the existence of fiduciary obligations owed by Mr Birch to the Plaintiffs, and I have addressed the role of pleadings in this regard in dealing above with the claim for breach of fiduciary duty against Mr Seymour. Mr DeBuse submits that there is evidence that the Plaintiffs reposed trust and confidence in, relevantly, Mr Birch, of which he was aware, and that trust and confidence was sufficient to require him to act in a manner which did not permit him to take advantage for his personal profit of the confidential information of the Companies of which he was aware; prefer his personal interests to that of Mr Bunbury and the Companies; and let his duty as agent and confidant of Mr Bunbury and the Companies conflict with his obligations to other third parties.

Mr Cheshire responds that Mr Birch denies that the relationship between him and the Plaintiffs gave rise to fiduciary duties; that he breached an obligation within the scope of any fiduciary duty; that any breach on his part caused loss to any of the Plaintiffs; that the Plaintiffs have suffered any loss, generally and also having regard to the provision for adjustment of the purchase price in cl 7 of the BSA; the Plaintiffs’ claim to avoid the transfer and thus have the business returned; and he also relies, at least in the case of Mr Bunbury, on the reflective loss principle.

It seems to me that, although Mr Birch worked with the Companies on financing proposals, the dealings between Mr Birch on the one hand and Mr Bunbury and the Companies on the other simply do not show any undertaking by Mr Birch to act in the interests of the Companies (or Mr Bunbury) to the exclusion of his own or third parties’ conflicting interests, or to subordinate his own interests to those of the Companies or Mr Bunbury, so as to give rise to fiduciary duties that he owed to the Company or Mr Bunbury. The Plaintiffs’ claim for breach of fiduciary duty against Mr Birch fails for that reason. Had I reached the contrary view, it would have been plain that the steps which Mr Birch, together with Mr Seymour and Fletch, took to bring about the forced acquisition of 1derful’s business would have breached the no profit and the no conflict rules.

The Plaintiffs also plead (SOC [37(a)]), partly not admitted and partly denied D3 Defence [37]) that, at all material times between the beginning of September 2023 and the acquisition of the Companies’ business by Fletch, relevantly, Mr Birch was using his knowledge of the Companies’ business including confidential knowledge to obtain an advantage for himself or Mr Seymour or the First Defendant in breach of his fiduciary obligations. It is not necessary to determine this claim where the existence of fiduciary duties is not established.

The Plaintiffs also seek a declaration (OP [2]), SOC [2]) that Fletch was knowingly concerned or has knowingly benefitted from breach of fiduciary obligations owed by Messrs Seymour and Birch to the Companies. They plead (SOC [37(b)], partly not admitted and partly denied D1/2 Defence [37], D3 Defence [37]) that Fletch’s acquisition of the Companies’ business was obtained by it in circumstances where it knew that it had acquired the business through the breach by Messrs Seymour and Birch of their fiduciary duties. I have held above that Mr Seymour had assumed and breached such duties.

In Ancient Order of Foresters at [71], Gageler J observed that liability for knowing assistance will arise under the second limb of Barnes v Addy (1874) LR 9 Ch App 244 where the conduct which constitutes the breach transgresses ordinary standards of honest behaviour, and the participant has knowledge of circumstances which would indicate the fact of the dishonesty on behalf of the fiduciary to an honest and reasonable person. I also summarised the applicable principles in Re Sirrah Pty Ltd (In Prov Liq) (2021) 152 ACSR 212; [2021] NSWSC 413 at [151]-[152] as follows:

Here, Mr Seymour’s conduct constituted a breach of fiduciary duty which was dishonest in the relevant sense and Fletch assisted with that breach, by involving itself in the acquisition of the Companies’ business in the manner I have set out above. Fletch had knowledge of circumstances which would indicate the fact of and nature of that breach to an honest and reasonable person where it knew, through Mr Seymour, of Mr Seymour’s dealings with the Companies, the obligations that he had assumed to them and the conduct that amounted to a breach of fiduciary duty on his part: Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 582; [1995] HCA 68; Firmtech at [539]. I find that Fletch was knowingly involved in Mr Seymour’s breach of fiduciary duty on that basis.

The Plaintiffs seek (OP [3], SOC [3]) a consequential order that Fletch holds on trust or constructive trust for the Companies the whole of the business purportedly transferred to it by the Companies. They plead (SOC [38], denied D1/2 Defence [38], D3 Defence [38]) that, by reason of Fletch’s knowing involvement and receipt of the business and, alternatively, by its involvement in the Scheme, Fletch holds the Companies’ business on constructive trust for the Companies.

I bear in mind that a constructive trust is not necessarily imposed as a remedy for breach of fiduciary duty: Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59 at [42]; Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [10]. In John Alexander’s Clubs at [128]-[129], in a case of alleged breach of fiduciary duty, the High Court observed that a constructive trust “ought not to be imposed if there are other orders capable of doing full justice” and that:

In Grimaldi at [567], the Full Court of the Federal Court observed that a Court would ordinarily award proprietary relief against a knowing recipient where the property received was still extant, although it added that:

I am satisfied that remedy is available and appropriate here given the findings that I have reached above. There may be a question, which may need to be subject of further submissions in respect of orders, as to whether a proprietary remedy by way of constructive trust is inconsistent with the Companies recovering further compensation for the loss of value of the business while it was in Fletch’s hands. It may not be necessary to determine that issue, where it appears that the Court could order both the return of the business and compensation by way of statutory remedies for the contraventions of s 12CB of the Australian Securities and Investment Commission Act 2001 (Cth) (“ASIC Act”) or the corresponding provision in s 21 of the Australian Consumer Law (“ACL”) which I address below.

The Plaintiffs also seek an order (OP [4(b)], SOC [4(b)]) that the transfer of the business of the Companies to Fletch is void or voidable pursuant to a breach of the self-dealing rule. It is not necessary to determine that claim where the Plaintiffs have succeeded on other grounds.

The Plaintiffs also seek (OP [4(a), SOC [4(a)]) an order that the transfer of the business of the Companies to Fletch is void or voidable pursuant to s 37A of the Conveyancing Act 1919 (NSW) (“Conveyancing Act”). The Plaintiffs plead (SOC [31], denied D1/2 Defence [31], D3 Defence [31]), inter alia, that the Scheme was in breach of s 37A of the Conveyancing Act.

Section 37A of the Conveyancing Act relevantly provides that:

In Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3, the High Court observed (at [20], [31]-[32]) that the section is to be accorded a “liberal construction” and extends to prohibit conduct which may “delay, hinder or defraud” a creditor or potential creditor, and the Court may infer an intention by the transferor of property to defeat or delay creditors, even in the absence of direct evidence of that intention where that outcome was the necessary consequence of a voluntary settlement.

In Patel v Lal [2011] NSWSC 603 at [6], Biscoe AJ similarly observed that:

Mr DeBuse submits that:

Mr Walker responds that the elements of s 37A of the Conveyancing Act are that there must be an “alienation” which must be of “property” and the alienation must be made with the “intention to defraud creditors”. He refers to Hall v Poolman (2007) 215 FLR 243; [2007] NSWSC 1330 at [550]-[553], where Austin J recognised that a person who acts “collusively” with a debtor may be held accountable under s 37A of the Conveyancing Act, and to the same view taken by the Full Court of Federal Court in Zreika v Royal (2019) 271 FCR 65 at [303]; [2019] FCAFC 82, where the Court stated that the alienation “need not occur solely by reason of acts by the fraudulent debtor”. Mr Walker submits that the transfer of the business by Fletch occurred after it took the assignment from PIL and submits that, where Fletch acted in accordance with the rights assigned to it by taking control of the assets, those steps cannot have been taken to defraud creditors of the Companies.

Mr Walker accepted in closing submissions that the relevant disposition was undertaken by the Companies, albeit under the control of Fletch as their controller. Mr Walker submitted that no intention to defraud creditors was established, by reason of the contractual mechanism to determine the value of the assets in the BSA. However, the BSA had the result that the amount of that payment was determined, the information and assumptions provided to a valuer and, in consequence, the amount of that valuation were all in Fletch’s control and, as events demonstrated, whether that clause was complied with was also in Fletch’s control. The arrangement operated, in effect, and it must have been apparent to Fletch that it operated, to allow Fletch to pay less than the value of the business by controlling, or abandoning, the valuation process and additional payment as it wished.

Mr Cheshire also addresses this claim, although it is only made against Mr Birch, as an element of the claim in conspiracy against him. He submits that the Plaintiffs do not plead any material facts or provide particulars to support an allegation of an intent to defraud creditors and that the pleading in respect of the claim under s 37A of the Conveyancing Act is of a “device” to acquire the debt and the business at an undervalue (SOC [25], [28]). He also submits that the alienation was of interests of the business and at least Mr Bunbury has no actionable remedy to found this cause of action, where his position is no more than an impermissible claim for reflective loss, and he refers to Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd [2022] NSWSC 937 (“Haiye”) at [442]ff in this regard.

I accept that it would ordinarily not be the case that the sale of secured property by or on behalf of a secured creditor at market value in exercising its security rights could be attacked under s 37A of the Conveyancing Act as made with the intent to defraud lower ranking secured or unsecured creditors. I have recognised above that the BSA was structured in a manner that allowed Fletch control over the valuation process and any additional payment and over whether that payment was made. I will find below that that had the consequence that the sale of the Companies’ business could be, and was, implemented in a manner that contravened s 420A of the Corporations Act 2001 (Cth) (“Corporations Act”) and amounted to statutory unconscionability under s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL. I am not persuaded that the sale of the Companies’ business had the requisite intent to defraud creditors, including an intent to defeat creditors, even reading that concept broadly, where what occurred was no more than Fletch’s exercise of its rights as secured creditor and controller to its advantage in a manner that was calculated to, and did, give rise to a sale of the Companies’ business at undervalue. The sale of the Companies’ business cannot be set aside on that basis, although it can be set aside as a result of the contravention of s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL.

The Plaintiffs also seek (OP [5]-[6], SOC [5]-[6]) an order setting aside the BSA. and an order (or possibly more precisely a declaration) that the BSA between the Companies and Fletch was the result of unconscionable conduct either at general law or under the ASIC Act. The Plaintiffs relevantly plead (SOC [19]) that Mr Seymour did not inform them that, relevantly, he had ceased working to achieve a capital or debt raising for the Companies; and that (SOC [31], denied D1/2 Defence [31], D3 Defence [31]) the Scheme was unconscionable (within the meaning in the ASIC Act) both at general law and by virtue of s 12CC of the ASIC Act. The latter reference plainly should have been to s 12CB of the ASIC Act, as Mr Walker rightly recognised.

Mr DeBuse submits that:

Mr Walker submits, for Mr Seymour and Fletch, that the Plaintiffs make a bare assertion in the SOC that the Scheme was unconscionable within the meaning of s 12CC of the ASIC Act (SOC [31(b)]) and rightly points out that the relevant section is in fact s 12CB of the ASIC Act. He submits the Plaintiffs have not identified whether the impugned conduct relates to the supply or possible supply of “financial services” to a person, the acquisition or possible acquisition of “financial services” from a person, who the relevant parties to the relationship of supplier and acquirer are said to be, or what the “financial service” is said to be having regard to the variety of forms of “financial service” contained in s 12BAB of the ASIC Act. Mr Walker rightly anticipated in his opening submissions that the Court would also have regard to the corresponding provisions contained in s 21 of the ACL, although he retreated from that recognition in closing submissions. He submits that any assessment of unconscionable conduct under the ASIC Act will involve a wide-ranging inquiry because the section stipulates that the conduct must be unconscionable in all the circumstances. Mr Walker also submits that that necessitates a person alleging unconscionable conduct to plead, with clarity, the factual basis on which section 12CB of the ASIC Act is said to apply and, it is suggested, that requires that the unconscionable conduct claim under s 12CB of the ASIC Act must be dismissed.

In closing submissions, Mr Walker presses the pleading point in respect of this claim. He submits that the Plaintiffs fail to plead the nature of the “financial services” that is said to have been provided unconscionably by Mr Seymour (or Fletch) under the ASIC Act (T95). He accepts that:

Mr Walker’s submission that the Court cannot have regard to the corresponding provisions in the ACL would have the result that, if a legal representative pleads the ASIC Act and the ACL in the alternative, a claim can succeed; but the claim would fail if the alternative is not pleaded, even where there is no suggestion that Mr Walker and those instructing him did not know that the provisions in ss 12CB-12CC of the ASIC Act were substantially identical to ss 21-22 of the ACL; and there is no plausible basis to put, and Mr Walker did not put, that Mr Seymour or Fletch would have led different evidence or conducted the case in any way differently if the claim against them was pleaded by reference to ss 21-22 of the ACL rather than by reference to ss 12CB-12CC of the ASIC Act. That submission would have the consequence that the claim under ss 21-22 of the ACL could succeed if Counsel for the Plaintiffs had sought to amend the SOC to include it even in reply submissions, where that amendment would likely have been allowed where it would cause no prejudice to Mr Seymour and Fletch, other than by exposing them to a determination on the merits [4] ; but that claim would fail if Counsel for the Plaintiffs failed to do so. That result would hardly promote the just resolution of these proceedings.

Mr Walker also submits that:

It is to the credit of Mr Seymour’s and Fletch’s legal representatives that they were alert to the subtleties of the definition of “financial services” in s 12BAB of the ASIC Act, which might have escaped the attention of many other practitioners, and a prompt (or even a late) amendment by the Plaintiffs to plead reliance on ss 21-22 of the ACL would no doubt have been preferable to the less formal course that they adopted. However, Mr Walker’s submission begs a fundamental question: how would the interests of justice be promoted by leaving the Plaintiffs to fail, if they would have succeeded on the merits, because their legal representatives could have but did not cure the pleading “deficiencies” by including reference to the corresponding provisions in the ACL, and their doing so would not have affected the conduct of the Defendants’ case?

Mr Walker also makes submissions as to whether the services provided by Mr Seymour were a “financial service” within s 12BAB of the ASIC Act. I need not address those submissions, where they were plainly services within the scope of ss 21-22 of the ACL, and I do not accept that the pleading prevents the Plaintiffs relying on those provisions. Mr Walker also submits that:

I do not accept that the pleading of this claim prevents its determination on its merits. The material facts that are said to give rise to the Scheme were pleaded and the parties’ conduct addressed in the affidavit evidence and Mr DeBuse provided a detailed opening by reference to the documents which would not have caused the slightest surprise to the Defendants. It does not seem to me that there was ever any real doubt as to the facts is issue in the unconscionability case against Mr Seymour and Fletch. I am comfortably satisfied that there is here no denial of procedural fairness and no practical injustice (using the language in Gerrard Toltz at [103]-[108]) in determining the claim for statutory unconscionability under both ss 12CB-12CC of the ASIC Act and the corresponding provisions in ss 21-22 of the ACL, and the contrary approach would not promote the just determination of the proceedings.

It is convenient to first deal with the claim against Mr Seymour and then the claim against Fletch. I have referred above to the Plaintiffs’ pleading (SOC [19]) that Mr Seymour did not inform the Plaintiffs that, relevantly, he had ceased working to achieve a capital or debt raising for the Companies and their pleading (SOC [31], denied D1/2 Defence [31]) that the Scheme was unconscionable within the meaning in the ASIC Act both at general law and by virtue of s 12CC of the ASIC Act. The Plaintiffs also plead (SOC [33], denied D1/2 Defence [33]) that Mr Seymour aided and abetted, procured and counselled or was knowingly involved in the Scheme “so as to through [his] unconscientious conduct result in injury to the Plaintiffs” [emphasis added]. While this pleading is again oddly phrased, I understand it to be allegation of unconscionable conduct on Mr Seymour’s part arising from his involvement with the Scheme.

Dealing first with Mr Seymour’s position generally, he knew the content of the successive road maps which he had prepared, the fact that the transaction was structured (as he had advised Mr Kopp) to catch Mr Bunbury and the Companies by surprise, the fact (as he recognised in cross-examination) that Mr Bunbury then trusted him and that he had not disclosed the fact that he had ceased to seek funds for the benefit of the Companies and was now advancing his (and later Fletch’s) interests rather than the Companies’ interests. He knew that he had assessed the value of the Companies’ business, as he had told Mr Kopp, as not less than $2 million. He knew, where he signed the BSA for Fletch as controller of the Companies and vendor of the business and as purchaser of that business that it would be sold and acquired at substantially less than the value he understood it to have. He knew that the BSA was structured so that the amount of any additional payment would be determined by the information and assumptions that Fletch (under his control) provided to a valuer and he knew that whether that clause would be complied with, and whether any further amount would be paid to the Companies, was also in Fletch’s (and his) control. It must also have been apparent to Mr Seymour that that clause would allow Fletch to pay less than the value of the business by limiting the information provided to a valuer or abandoning the valuation process and additional payment as it wished. Mr Seymour was also closely involved in planning and implementing the sale of the Companies’ business to Fletch in the manner I have set out above.

Turning now to the applicable provisions and the case law, s 12CB of the ASIC Act prohibits a person, in trade or commerce, engaging in conduct that is, in all the circumstances, unconscionable, in connection with, relevantly, the supply or possible supply of financial services to a person. The scope of the prohibition is clarified by the statement of legislative purpose in s 12CB(4) which provides, inter alia, that it is Parliament’s intention that this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct. The term “financial services” is defined in s 12BAB of the ASIC Act and there is an open question whether the services that Mr Seymour provided to the Companies had the nature of financial services; however, little turns on that question where the corresponding provision in s 21 of the ACL applies if Mr Seymour provided services to the Companies and s 12CB of the ASIC Act does not apply. Section 21 of the ACL in turn prohibits a person, in trade or commerce, in connection with the supply or possible supply of services to a person engaging in conduct that is, in all the circumstances, unconscionable.

It seems to me that Mr Seymour supplied financial services or services to the Companies, at least on an informal basis, where, from 20 June 2023, he approached third parties to obtain loan funds for the Companies and held out that he was doing so on the Companies’ behalf; on 14 July 2023, he advised Mr Bunbury that he would be working for the Companies although he would be engaged by FIFO Capital for a nominal fee, and he advised Mr Bunbury that he would assist the Companies to achieve their aims; and on 20 July 2023, he affirmed his role as part of the Companies’ “team”, although he ultimately acted inconsistently with that role.

I now turn to the relevant case law. The scope of s 21 of the ACL was considered by the High Court of Australia in Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; (2019) 368 ALR 1; [2019] HCA 18. The several judgments there recognise that the section requires the Court to have regard to specified factors, which will be relevant to whether statutory unconscionability will be found. Keane J there held the section was not limited to conduct that was “unconscionable” under the general law, but the term “unconscionable” in the section had its ordinary meaning, including exploiting or unconscientiously taking advantage of a special disadvantage; and Gageler J held that the section was not limited by equitable standards, but the use of the term “unconscionability” nonetheless “signif[ied] the gravity of the conduct necessary to be found by a Court in order to be satisfied of a breach of that standard”, and the section was not confined to circumstances where the defendant had exploited a special disadvantage. His Honour observed (at [87], [93]) that:

The minority, Nettle and Gordon JJ (in a joint judgment) and Edelman J, arguably read the scope of the section more widely; Nettle and Gordon JJ treated the list of factors in s 12CC of the ASIC Act as indicative that statutory unconscionability is wider than unconscionability under the general law; and Edelman J emphasised that statutory unconscionability could be established by conduct that would not establish unconscionability in equity.

In Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; (2021) 151 ACSR 98; [2021] FCAFC 40, the Full Court of the Federal Court held that it was not necessary to establish a pre-existing disability, vulnerability or disadvantage, or that a party took advantage of such a disability, vulnerability or disadvantage, in order to establish statutory unconscionability, which could be established if the conduct was against conscience, as informed by the norms and values of acceptable commercial behaviour, including honesty, fairness in dealing with customers in the performance of commercial bargains. The Court also observed (at [80]-[83]; [91]) that the exploitation of a pre-existing vulnerability or disadvantage is often a feature of unconscionable conduct but is not necessary to establish such conduct and also observed (at [92]) that:

In Australian Securities and Investments Commission v National Australia Bank Ltd (2022) 164 ACSR 358; [2022] FCA 1324 at [299], Derrington J summarised the applicable principles as follows:

The question whether conduct is unconscionable will be determined by reference to the ordinary meaning of the term, having regard to the factors specified in s 12CC of the ASIC Act (and the corresponding provision in s 22 of the ACL) which identify a non-exhaustive set of factors relevant to whether the conduct is unconscionable: Australian Securities and Investments Commission v Westpac Banking Corp (Omnibus) (2022) 159 ACSR 381; [2022] FCA 515 at [19]. I here have regard to those factors.

The Court may have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to the relative strengths of the bargaining positions of the supplier and the service recipient or customer. I am satisfied that the Companies were here in a position of significant disadvantage, because of their vulnerable financial position, the connection which Mr Seymour had developed with the Companies’ creditors, and the inequality of information which arose from Mr Seymour’s non-disclosure of his dealings with the Companies’ creditors, and the fact that he had ceased to work in the Companies’ interests from at least mid-August 2023.

The Court may also have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to whether any unfair tactics were used against the service recipient or customer or a person acting on behalf of the service recipient or customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the services. I am comfortably satisfied that Mr Seymour here used unfair tactics in his dealings with the Companies. I find that, at least by 14 July 2023, Mr Seymour engineered a continued engagement with FIFO Capital after representing to them that he would be paid by HCP or the Companies, in order to advance his (and later Fletch’s) interests in an acquisition of the Companies’ business without regard to the interests of either FIFO Capital or the Companies and in a manner that was ultimately adverse to both. He falsely advised Mr Bunbury, at the time that he sought an engagement with FIFO Capital, that he was then working to advance the Companies’ aims; he committed to act as part of the Companies’ “team” and then acted contrary to their interests; he concealed the approach to Mastercard and the meeting on 16 August 2023 from the Companies; and he concealed the fact that, at least from that time, he was working not to advance the Companies’ aims or interests but to purchase the PIL debt through a special purpose vehicle (later Fletch) and then exercise rights as a creditor in a manner that would catch the Companies by surprise and deprive them of any opportunity to respond to the seizure of their assets.

The Court may also have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to the extent to which the supplier unreasonably failed to disclose to the service recipient or customer any intended conduct of the supplier that might affect the interests of the service recipient or customer and any risks to the service recipient or customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient). Mr Seymour here failed to disclose to the Companies his intended conduct in respect of the matters referred to above and the Scheme and the risks that the Companies would be deprived of their assets in a transaction at undervalue, where they had no reason to foresee that Mr Seymour, who had committed to act as part of their “team” and advance their aims, would seek to bring about that result. The Court may also have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to the extent to which the supplier and the service recipient or customer acted in good faith. I am satisfied, for the reasons noted above, that Mr Seymour did not act in good faith in respect of these matters.

I am satisfied that, generally and having regard to these matters, the conduct of Mr Seymour contravened ss 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL. The matters which give rise to unconscionability include the matters that I have noted above, that Mr Seymour had represented to the Companies and Mr Bunbury that he was working as part of the Companies’ team to advance their interests, notwithstanding other engagements, including for FIFO Capital, and concealed the extent to which he was pursuing his own interests in a manner that was detrimental to the Companies and Mr Bunbury; he then caused Fletch to take an assignment of PIL’s rights in the loan and the security and caused Fletch to exercise the rights available to the lender on default in a manner that was calculated to ensure that the Companies lost any opportunity to repay the loan and appropriate the Companies’ assets; and he made no attempt, at the time of the acquisition or subsequently, to cause Fletch to assess or pay the fair value of the assets rather than acquiring them at the price that it was prepared to pay. Mr Walker did not make any submission to the contrary, if his submission that the claims under s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL were not available to the Plaintiffs was not accepted.

Turning now to the position in respect of Fletch, it knew, from the date of its incorporation on 22 September 2023 with Mr Seymour as its sole director and company secretary, the matters then known to Mr Seymour. However, it seems to me clear that Fletch did not provide financial services or services to the Company, where it was established to acquire the Companies’ business and had no other relationship with the Companies or Mr Bunbury. The claim under s 12CB of the ASIC Act (or s 21 of the ACL) against Fletch must fail on that basis.

Turning now to the position in respect of Mr Birch, I have referred above to the Plaintiffs’ pleading (SOC [15]) that Mr Birch did not inform the Plaintiffs that, relevantly, he had ceased working to achieve a capital or debt raising for the Companies and their pleading (SOC [31], denied D1/2 Defence [31], D3 Defence [31]) that the Scheme was unconscionable (within the meaning in the ASIC Act) both at general law and by virtue of s 12CC of the ASIC Act. The Plaintiffs plead (SOC [33], denied D3 Defence [33]) (in the same form as the corresponding allegation against Mr Seymour) that Mr Birch aided and abetted, procured and counselled or was knowingly involved in the Scheme “so as through [his] unconscientious conduct result in injury to the Plaintiffs.” While this pleading is again oddly phrased, I understand this to be an allegation of unconscionable conduct on Mr Birch’s part arising from his involvement with the Scheme.

I have referred to Mr DeBuse’s submissions above. Mr Cheshire submits that the Plaintiffs’ case is no more than a pleading of unconscionability without identifying the relevant material facts and particulars; as to unconscionability under the general law, there is no pleading (with the necessary material facts and particulars) of a special disadvantage under which any of the Plaintiffs were suffering or of any of the Defendants having unconscientiously taken advantage of it; and, as to unconscionability under the ASIC Act, there is no pleading (with the necessary material facts and particulars) of each of the ingredients of s 12CB of the ASIC Act. He also submits that Mr Bunbury would have no actionable remedy to found this cause of action, because his position is no more than an impermissible claim for reflective loss.

Mr Cheshire also submits that:

I understand the decisions to which Mr Cheshire refers to reflect familiar and well-established principles as to the function of pleadings; for example, in Karzi, Leeming JA observed (at [7]) that an issue was plainly not pleaded; Adamson JA (at [130]) defined the role of pleadings in uncontroversial terms by reference to well-established case law; and Basten J accepted (at [176]) that a matter was not pleaded. Here, by contrast, the relief sought in the Originating Process identified a claim for unconscionability under the ASIC Act; relevant facts including non-disclosures by Mr Birch and the elements of the alleged Scheme were pleaded, albeit briefly; a claim that the Scheme was unconscionable under s 12CC of the ASIC Act was pleaded, and it was not hard to recognise (as Mr Walker did) that this was intended to be a reference to s 12CB of the ASIC Act; it was also not hard to recognise (as Mr Walker also did in opening submissions) that there were corresponding provisions in the ACL; and the real question is whether the claim was sufficiently pleaded to give fair notice of the case that Mr Birch had to meet. However, that question turns upon the matters addressed in the case law to which I have referred above and depends upon questions of procedural fairness and practical injustice identified by the Court of Appeal in Gerrard Toltz to which I also referred above. Mr Birch cannot establish that he lacked fair notice of the case against him, or a lack of procedural fairness or practical injustice, by merely asserting his intent to hold the Plaintiffs to their pleading at the commencement of the hearing, for the reasons I have also noted above. It does not seem to me that there was ever any real doubt as to the scope of the unconscionability case against Mr Birch or the conduct which underpinned it.

I have addressed the scope of ss 12BAB, 12CB and 12CC of the ASIC Act and ss 21-22 of the ACL above in dealing with the claims against Mr Seymour and Fletch. It seems to me that Mr Birch supplied financial services or services to the Companies, although he did not have a concluded contract to do so, where he approached third parties to provide funding to the Companies with their authority and I have not accepted his evidence that he terminated that arrangement on 10 August 2023.

The findings that I have reached above establish that Mr Birch knew the matters discussed at the meeting on 16 August 2023 which he had organised; he knew, from 18 August 2023, that Douugh had recognised that the first step in the proposed transaction was for secured creditors to take control of the Companies’ business; he knew, from 21 or 22 August 2023, the content of the road maps where I have not accepted his evidence to the contrary; he knew that he had not disclosed these matters to Mr Bunbury or the Companies and was not returning Mr Bunbury’s calls at least from 10 to 24 August 2023; he took active steps to promote the transaction by contact with PIL and Mastercard on 25 August 2023, where I have not accepted his denial that he knew the content of the letters that he had forwarded to them; he knew of the updated version of the road map sent to him on 13 September 2023, where I have not accepted his denial of that matter; and, at least by 18 September 2023, Mr Birch and Handy Payments committed themselves to participation in Fletch’s forced acquisition of the Companies’ business, by taking up an interest in Fletch through Mr Birch’s company, Midialel.

As I noted above, the Court may have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to the relative strengths of the bargaining positions of the supplier and the service recipient or customer. I am satisfied that the Companies were here in a position of significant disadvantage in respect of Mr Birch for the same reasons they were in such a position in respect of Mr Seymour. As I also noted above, the Court may have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to whether any unfair tactics were used against the service recipient or customer or a person acting on behalf of the service recipient or customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the services. I am satisfied that Mr Birch here used unfair tactics in his dealings with the Companies, where he took advantage of Mr Bunbury’s apparent reliance on him and Mr Seymour to progress fund raising efforts; on 10 August 2023, he falsely represented to PIL that he, with Gibraltar Capital, was working with Mr Bunbury (and, by exclusion, not against their interests on the refinance and new facility); he concealed his dealings with third parties including dealings with Mastercard and the meeting on 15 August 2023 from the Companies; and he concealed the fact that, at least from 16 August 2023 if not before, he and Mr Seymour were working not to advance the Companies’ aims or interests but to purchase the PIL debt through a special purpose vehicle and then exercise rights as a creditor in a manner that would catch the Companies by surprise and deprive them of any opportunity to respond to the seizure of their assets.

The Court may also have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to the extent to which the supplier unreasonably failed to disclose to the service recipient or customer any intended conduct of the supplier that might affect the interests of the service recipient or customer and any risks to the service recipient or customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen that would not be apparent to the service recipient). I am comfortably satisfied that Mr Birch also here failed to disclose to the Companies his intended conduct in respect of the matters referred to above and the Scheme and the risks that the Companies would be deprived of their assets in a transaction at undervalue, and deprived of any prospect of benefit from the future success of their business, where they had no reason to foresee that Mr Birch, who was apparently working to advance their aims, would bring about that result. As I also noted above, the Court may also have regard, for the purposes of s 12CC of the ASIC Act and s 22 of the ACL respectively, to the extent to which the supplier and the service recipient or customer acted in good faith. I am comfortably satisfied, for the reasons noted above, that Mr Birch did not act in good faith in respect of these matters.

On the basis of the principles I have set out above and the findings as to Mr Birch’s conduct that I have summarised in paragraph 285, it seems to me that his knowledge and involvement in these matters was sufficient to contravene s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL.

The Court may grant an injunction in respect of conduct which would contravene ASIC Act s 12CB (or the corresponding provision in s 21 of the ACL) under s 12GD of the ASIC Act (or the corresponding provision in s 232 of the ACL), against a person who contravened the sections or a person who was knowingly involved in the contravention. A person who suffers loss or damage by conduct of another person that contravenes s 12CB of the ASIC Act (or the corresponding provisions in s 21 of the ACL) may recover the amount of the loss or damage by action against that other person or any other person involved in the contravention under s 12GF of the ASIC Act (or the corresponding provisions in s 236 of the ACL). The Court may also order relief under s 12GM of the ASIC Act (or the corresponding provisions in s 243 of the ACL) in respect of a contravention of ss 12CB of the ASIC Act (or the corresponding provisions in s 21 of the ACL) including, importantly, making an order declaring a contract void or varied. An order may also be made against a person who was involved in the contravention.

Mr DeBuse submits that:

I accept that the assignment of the loan from PIL to Fletch cannot be set aside, where PIL has not been joined as party to the proceedings, and the Plaintiffs no longer pursue that relief. However, an order could be made under s 12GM of the ASIC Act (or the corresponding provision in s 243 of the ACL) setting aside the BSA so that the Companies regain control of their business and Fletch is reinstated as a lender to the Companies and any consequential orders necessary to bring about the retransfer of assets from Fletch to 1derful could be made, although that order would potentially be inconsistent with the equitable relief by way of constructive trust that is also sought by the Plaintiffs. I address the question of the Companies’ claim for damages against the Defendants below.

The Plaintiffs also seek (OP [7]) a declaration that, in exercising a purported power of sale as a controller of the Companies’ business and the transfer of credit licenses held by 1derful Lending, Fletch breached its obligations to the Companies as a controller pursuant to s 420A of the Corporations Act and acted mala fide and against good faith and without a proper purpose. They plead (SOC [27], not admitted D1/2 Defence [27], D3 Defence [27]) that the Scheme has resulted in the business of the Companies being transferred to Fletch at less than its market value and (SOC [28], denied D1/2 Defence [28]) that the Scheme had, as its object, the defrauding of the other creditors and members of the Companies; the acquisition of the business of the Companies at an undervalue; and the breach of the obligations of a controller pursuant to s 420A of the Corporations Act.

The Plaintiffs also plead (SOC [34], denied D1/2 Defence [34]) that the sale of the business was undertaken by Fletch as a controller in breach of the duty of care imposed by s 420A of the Corporations Act. They particularise that allegation on the basis that:

Mr DeBuse also draws attention to the observations of the Court of Appeal in Boz One Pty Ltd v McLellan (2015) 105 ACSR 325; [2015] VSCA 68 at [167] that:

Mr DeBuse submits that:

Mr Walker recognises that, where property has a market value, s 420A(1)(a) of the Corporations Act requires a controller to take all reasonable care to sell the property for not less than its market value and it appears to be common ground that the Companies’ business had such a market value. Mr Walker submits and I proceed on the basis that a controller need not necessarily take all of the steps particularised by the Plaintiffs, namely a marketing campaign, seeking other potential buyers, or seeking the Plaintiffs’ advice about potential buyers, to meet the requirements of s 420A of the Corporations Act and the Plaintiffs bear the onus of establishing a breach of that section: ABCD Corporation Pty Ltd v Sampson [2017] NSWSC 597 at [33]-[34], [38], [47]-[51]. Mr Walker also submits that Fletch caused the BSA to expressly provide for market value consideration to be given through the adjustment mechanism provided in cl 7 and that that was a prudent step for a controller to take when selling to itself. However, Fletch here failed to undertake the process to which it had committed to achieve a sale at market value.

Mr Walker initially submitted that the evidence in these proceedings shows the $757,273 in consideration already given for the business significantly exceeds the market value of $69,000 which is attributed to it in Mr Kompos’ first report, although he subsequently abandoned reliance on that figure. As I have noted above, I do not accept Mr Kompos’ evidence as to the value of the business in that report, which takes no account of the fact that a willing but not anxious purchaser would plainly have regard to the prospects of the business, including with adequate funding, in determining its market value. Mr Walker also submitted, in closing, that the requirement in s 420A is to take all reasonable care to sell for market value; if the market value is achieved, the inquiry goes no further; and a finding that the value of the business when it was sold on 3 October 2023 was equal to or less than $757,273 means this case must fail as that sum of money was the minimum consideration to be given under the BSA. I have not reached that finding for the reasons noted above.

I am satisfied that Fletch did not take all reasonable care to sell the Companies’ business to itself for market value, where it made no attempt to market the business or ascertain its true market value and cl 7 of the BSA does not assist it where that process would have been undertaken under its control and was not in any case implemented. I am also satisfied that the business was in fact sold at undervalue. It seems to me that the then market value of the business was not less than Mr Seymour’s contemporaneous assessment of that value as not less than $2 million, and a vendor would not have sold that business in a market transaction for a price that did not recognise its prospects, notwithstanding that the Companies were then in very difficult financial circumstances. I am reinforced in that view by the fact that the Defendants’ witnesses, including Mr Dahan and Mr Seymour, themselves recognised the strong prospects of the Companies’ underlying business.

Mr DeBuse accepts that the loss suffered by a contravention of s 420A of the Corporations Act is usually the equity of redemption and the usual remedy of a mortgagor in respect of property sold by a controller is the taking of accounts: Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd [2002] NSWSC 16 at [105]-[106]. Mr Walker similarly submits that the primary remedy for breach of s 420A is the equivalent of an account to recover surplus proceeds of sale where a mortgagee breaches its duties to a mortgagor: Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 at [94]. The parties accepted that no formal taking of accounts would be required where the mathematics of an account was simple. Here, the amount recoverable as surplus proceeds would be the value of the business as assessed by Mr Seymour, quantified as $2 million, less the debt of $942,326 due to Fletch as a result of the assignment. However, the Companies will need to elect between that remedy, which would be inconsistent with the return of the business to them, and the orders for a constructive trust over the business or the return of the business and compensation for the loss of its value to which they would be entitled on other grounds.

For completeness, although there was reference in correspondence between the parties’ legal representatives and in submissions to the Court’s powers in an inquiry as to a controller’s conduct under s 423 of the Corporations Act, Counsel accepted that there was no need to address any question whether relief was available under that section.

The Plaintiffs also seek an order (OP [9], SOC [9]) that the Australian credit licence now held by APL Lending be transferred to the Companies and (SOC [10]) an order that Mr Seymour and Fletch do all things necessary to transfer the shares in APL Lending to 1derful. I would make that order against Mr Seymour and Fletch under s 12GF of the ASIC Act or the corresponding provision of the ACL given the findings I have reached above, but for the fact that APL Lending is not party to the proceedings. The proper course in these circumstances will be now to make an order joining APL Lending as party to the proceedings and relist the matter to allow it to lead evidence and make submissions if it resists such an order.

The Plaintiffs seek (OP [10]-[11], SOC [11]-[12]) an order that Fletch and Messrs Seymour and Birch be permanently restrained from using or transferring any proprietary code developed for or by the Companies and that they destroy and provide an affidavit to the Court attesting to the destruction of any proprietary code developed for or by the Companies. That order should be made under s 12GD of the ASIC Act or the corresponding provision of the ACL in order to support the return of the Companies’ business to the Companies, if the Plaintiffs elect for that remedy.

The Plaintiffs seek (OP [12], SOC [8]) a declaration that Fletch and Messrs Seymour and Birch engaged in a conspiracy to unlawfully injure the Plaintiffs. The Plaintiffs plead (SOC [31], denied D1/2 Defence [31], D3 Defence [31]) that the Scheme was unlawful and was in breach of s 37A of the Conveyancing Act and was carried out to defraud creditors and was unconscionable within the meaning in the ASIC Act both at general law and by virtue of s 12CC of the ASIC Act. The Plaintiffs then plead (SOC [32], denied D1/2 Defence [32], D3 Defence [32]) that the Scheme was a conspiracy between Fletch, Mr Seymour and Mr Birch to injure the Plaintiffs by unlawful means. In oral closing submissions, Mr DeBuse pressed this claim (T498) although recognised a possible overlap of damages awarded for conspiracy with compensation that may be order for breach of fiduciary duty.

Mr Walker submits, in opening, that the elements of such a conspiracy are summarised in Haiye at [510] as the entry into an agreement or combination to perform unlawful acts; by the agreement or combination, an intention to injure the plaintiff; that the agreement or combination be executed in whole or in part; and by their execution of the agreement or combination the defendants have caused loss or damage to the plaintiff. Mr Cheshire also refers to the observations of the High Court in Talacko v Talacko (2021) 272 CLR 478 at [25]; [2021] HCA 15 (omitting citations) as follows:

Mr Cheshire also submits that the relevant acts must be unlawful towards, and therefore actionable by, the plaintiff and the plaintiff must establish that the defendant knew both that the conduct in question was unlawful and that it was the unlawful part of it that would cause loss to the plaintiff: OBG v Allan [2008] 1 AC 1 at 32; C Sappideen & Ors, Fleming’s The Law of Torts, 11th ed, Lawbook Co 2024 at [28.230] and the cases there cited.

Mr Walker submits that conspiracy, like fraud, is an allegation which should not be lightly made, and ought to be pleaded with precision. I bear in mind that, in Haiye at [495], Kunc J observed that:

Mr Walker also submits that, although the pleaded Scheme is here alleged to have been unlawful on the basis of an alleged breach of s 37A of the Conveyancing Act and a contravention of the prohibition on unconscionable conduct under the ASIC Act, the failure to properly plead the claim of conspiracy will justify its rejection. In opening submissions, Mr Walker also submits that the conspiracy claim also fails because it is not open to plead, as an alternative to a substantive cause of action, the tort of conspiracy to commit that substantive wrong: Haiye at [503]-[504], and [511].

Mr Cheshire also criticises the pleading of the Plaintiffs’ conspiracy claim and submits that there is a pleading that the Defendants took part in the Scheme (SOC [26]), “but not of any agreement between them, let alone one to act by unlawful means and with the intent of damaging the Plaintiffs (let alone of the necessary material facts and particulars)”; that there is no pleading (with the necessary material facts and particulars) that each of the Defendants knew both that the conduct in question was unlawful and that it was the unlawful part of it that would cause loss to the Plaintiffs, or any pleaded material facts and particulars to support such allegations; and no loss is pleaded beyond an unspecified and conclusory loss and damage (SOC [39]). Mr Cheshire also submits that s 37A of the Conveyancing Act does not make an alienation of property unlawful (for the purposes of the tort of conspiracy or at all), but provides a specific remedy, namely that it is voidable, and thus cannot be relied upon as the basis of a conspiracy by unlawful means; although he acknowledges an observation to the contrary in Fatimi Pty Ltd v Bryant (2004) 59 NSWLR 678 at [32]; [2004] NSWCA 140.

I note that, in Mackinnon as Plaintiff representative of 153 Plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as “STC Sports Trading Club” (No 8) [2019] NSWSC 1658 at [45], Stevenson J observed that the tort of conspiracy may take two forms, the second of which was:

As I noted above, Counsel also drew attention to Kunc J’s helpful review of the applicable principles in Haiye which I adopt with gratitude. His Honour there noted (at [408]-[410]) that:

Kunc J also there observed (at [417]), in respect of the statutory liability for conspiracy under the Trade Practices Act 1974 (Cth) or the ACL that:

His Honour returned to these issues (at [503]ff) and observed that:

His Honour also helpfully summarised the elements of a claim for an unlawful means conspiracy as follows:

His Honour then held (at [511]) that:

I will reach the same result below in respect of the claims for conspiracy against Mr Seymour and Birch, against whom the Plaintiffs had actionable claims for contraventions of s 12CB of the ASIC Act (or the corresponding provision in s 21 of the ACL) but not in respect of Fletch, where no such claim was available for the reasons noted above.

I bear in mind the serious character of this allegation and the application of the Briginshaw standard and s 140 of the Evidence Act in determining it. I also recognise the fact that an intention to injure the Plaintiffs, or some of them, is an essential element of the claim. I have not found that a contravention of s 37A of the Conveyancing Act is established here. I have found that a contravention of the statutory prohibition on unconscionable conduct, under s 12CB of the ASIC Act or s 21 of the ACL is established on the part of Messrs Seymour and Birch. The claim for conspiracy goes no further than the matters alleged to give rise to statutory unconscionability on their part and does not support a finding of conspiracy against them that is coincident with their substantive wrong.

However, I have held above that Fletch did not contravene s 12CB of the ASIC Act (or the corresponding provision in s 21 of the ACL) because it did not provide financial services or services to the Companies and those sections did not apply to it, and that leaves open the possibility that the Companies can succeed in their claim for conspiracy against Fletch. I am satisfied that Fletch knew, from the date of its incorporation on 22 September 2023 with Mr Seymour as its sole director and company secretary, the matters then known to Mr Seymour which I have set out above, both in the chronology and in dealing with the claim for statutory unconscionability against him. I have also reached findings as to Fletch’s conduct in the chronology set out above, and I find that it joined with Mr Seymour and Mr Birch in the plan that it take an assignment of PIL’s rights in the loan and the security and then in exercising its rights as secured creditor in a manner that was calculated to ensure that the Companies lost any opportunity to repay the loan and allow it to appropriate the Companies’ assets; at the time of the acquisition or subsequently, in its capacity as controller, it did not cause Fletch to assess or pay the fair value of the assets rather than acquiring them at the price that it was prepared to pay; and it knew through Mr Seymour, that these matters were being concealed by Mr Seymour from the Companies.

I am satisfied that the entry by Fletch into a combination with at least Mr Seymour to perform unlawful acts, by way of contraventions of the statutory prohibition on unconscionable conduct, under s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL, is established. I am satisfied that Fletch’s intention, through Mr Seymour, to injure the Plaintiffs by that combination is established, where that was the necessary and obvious consequence of concealing its and Mr Seymour’s intentions and implementing a forced acquisition of the Companies’ business by surprise and at undervalue. It is plain that the agreement or combination was executed in whole or in large part, and largely in accordance with the plans which had been made by Mr Seymour to implement it. I am satisfied that by their execution of that combination, Fletch and at least Mr Seymour have caused loss or damage to the Companies, being at least the loss of a business which then had a value of at least $2 million (in Mr Seymour's own assessment) and the loss of any prospect that the Companies could have raised further funding, restored their relationship with Mastercard and then increased the value of that business. I am therefore satisfied that the claim in conspiracy is established against Fletch. I will return to the Plaintiffs' claim for exemplary damages arising from this claim below.

The Plaintiffs also sought (OP [13], SOC [13]) an order that the appointment of Mr Ball as receiver is void or voidable and invalid. The Plaintiffs plead (SOC [43], denied D1/2 Defence [43], D3 Defence [43]) that the power to appoint a receiver contained in the general security documents purportedly assigned by PIL to Fletch was to be used in good faith and for a proper purpose and, in appointing Mr Ball as receiver, Fletch did not act in good faith or for a proper purpose. The appointment of Mr Ball as receiver was part of the course of conduct that I have found contravened s 12CB of the ASIC Act or the corresponding provision in s 21 of the ACL. My preliminary view is that that appointment should be set aside to give effective relief against that conduct, but I should allow Mr Ball a further opportunity to be heard prior to making that order, where he has not actively participated in this hearing.

The Plaintiffs claim (OP [14]-[16], SOC [14]-[16]) damages against each of the Defendants, including for trespass and exemplary damages; compensation pursuant to s 1317H of the Corporations Act and equitable compensation, or alternatively, an account of profits. The Plaintiffs plead (SOC [39]-[40], denied D1/2 Defence [39]-[40], D3 Defence [39]-[40]) that, by reason of the Scheme, the alleged breach of fiduciary obligations or the unlawful conspiracy, they have suffered loss and damage and they are entitled to damages or account or equitable compensation from the Defendants. I assume this claim extends to a claim for damages arising from the alleged breach of s 12CB of the ASIC Act (and, by extension, the corresponding provision in s 21 of the ACL) by way of statutory unconscionability. The Plaintiffs also plead (SOC [41], denied D1/2 Defence [41], D3 Defence [41]) that there should be an inquiry as to such amount as is due as damages or equitable compensation following the reconveyance of the business from Fletch to the Companies. The parties ultimately accepted that there would be no need for a separate inquiry as to loss so long as the loss following from a sale of the business at undervalue could be readily calculated.

Mr DeBuse draws attention to the observations of Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at [83]; [1991] HCA 54 that:

I accept that this is not a case where an assessment of the amount of damages recoverable by the Companies has no rational basis or would be a mere guess, although that assessment will be made on incomplete or imperfect evidence where, for the reasons noted above, I do not accept the valuations of the Companies’ business made by Mr Davies or Mr Kompos and prefer Mr Seymour’s contemporaneous assessment of its value as not less than $2 million: contrast the position where no rational basis for an assessment of damages is available, recognised in Troulis v Vamvoukakis [1998] NSWCA 237 and McCrohan v Harith [2010] NSWCA 67 at [128].

I consider that I can properly take a robust approach as to damages where the Defendants’ conduct took the business out of the Companies hands and had the result that its future performance in the Companies’ hands, which would have underpinned its then value, cannot now be known with certainty. I have not neglected Mr Cheshire’s submission that Mr Davies (whose evidence I addressed above) did not identify any difficulty in “working out damages” by identifying “records that ought to have been available but were not.” That submission does give sufficient weight to the real difficulty that, obviously enough, a start up company could never have records of, or know as a fact, the future growth in the revenue of a business that it was prevented from conducting. For these reasons, I accept that Mr Seymour’s contemporaneous assessment of the value of the business as at least $2 million as sufficiently reliable evidence of its then value and I adopt that figure in preference to the much higher value derived by Mr Davies and the lower values derived by Mr Kompos. I am left with a lingering unease that I should have been more robust and adopted a higher value to reflect the potential of that business, notwithstanding the then suspension of the Mastercard Agreement and the Companies’ critical financial difficulties. An appellate court may have the opportunity to address that question, and possibly the wider difficulties in the valuation of start-up technology companies, if an appeal is brought from this judgment.

For the reasons set out above, I would make the order sought by the Plaintiffs (depending on their election) that would bring about the return of the Companies business to the Companies, albeit in a degraded state where that business currently likely has no value and where the development of that business will likely be significantly delayed or may now be impossible. Fletch would then be reinstated as a lender to the Companies, where the transfer of the business to it was set aside, but the amount of damages (including any exemplary damages, to which I return below) awarded against it may well exceed the amount of that loan. That order would not be inconsistent with an order for damages or compensation in favour of the Companies calculated by reference to the loss suffered by the Companies on the transfer of business at an undervalue, where that loss is not reduced by the return of the business after its value is lost.

On that basis, the amount recoverable by the Plaintiffs in addition to an order setting aside the BSA and providing for the return of the business, whether as equitable compensation for breach of fiduciary duty and knowing assistance against Mr Seymour and Fletch, or damages for contravention of s 12CB of the ASIC Act (or s 21 of the ACL) against Mr Seymour and Mr Birch, or as compensatory damages for conspiracy against Fletch, would be in each case $2 million derived from Mr Seymour’s contemporaneous assessment of the value of the business. The Plaintiffs cannot recover damages for trespass since they did not bring or establish a claim for trespass. They have also not established a basis for damages under s 1317H of the Corporations Act, either by way of compensatory damages or any loss of profits.

The Plaintiffs could notionally have also sought to quantify their loss arising from a delay in developing that business, which would have involved the complex exercise of modelling the value or profit of the business but for the wrongful conduct to a date in the middle term; modelling any lesser value or profit of the business to that date, where the wrongful conduct has occurred; and then calculating the loss to that date and discounting it to its present value. There would likely have been real practical difficulties in the Plaintiffs establishing loss on that basis here, given the level of speculation that would be involved in doing so where the Companies’ then start-up business, and they did not do so.

The Plaintiffs have established their claim for conspiracy against Fletch and exemplary damages may be ordered against Fletch on that basis, as sought by the Plaintiffs. However, I should allow submissions as an award of exemplary damages and its quantum, prior to making orders, where that issue was not sufficiently addressed by the parties in closing submissions.

The Plaintiffs also plead (SOC [42], denied D1/2 Defence [42], D3 Defence [42]) a set-off of such damages or equitable compensation as are due from Fletch in equity against any amount that may be found by this Court to be due in respect of the debt assigned to Fletch by PIL. No submission was put that set-off would not be available and the amount of damages awarded to the Companies substantially exceed the amount of that loan.

Mr Bunbury also claims (SOC [44], not admitted D1/2 Defence [44], D3 Defence [44]) a lien on all of the information and knowledge he has acquired by reason of his employment with the Companies, as against Mr Ball as receiver who it is alleged continues to seek such information, where Mr Bunbury has not been paid his deferred wages and other loaned monies and the disclosure of further information to the receiver will assist in the Scheme. It is not necessary to determine this claim, at least if Mr Ball’s appointment as receiver will be set aside in any event.

It appears that Messrs Seymour and Birch are active participants in the Australian financial services or Australian credit industries. I raised with each of them, at the close of their cross-examination, the possibility that findings might be made, inter alia, that they had not acted honestly or in accordance with their moral obligations. Findings of that kind would be relevant to the question whether a banning order could or should be made by ASIC in respect of either of them. I have considered the question whether this judgment should be referred to ASIC and allowed the parties an opportunity to be heard in that regard. I have ultimately concluded that it is not necessary to do where the judgment, the affidavits that were read and the evidence that was tendered are now all matters of public record. It is open to the Plaintiffs to draw this judgment to ASIC’s attention if they wish to do so and then open to ASIC to take such steps as it considers appropriate in respect of the matters addressed in this judgment. There is no need for the Court to take any further steps in that regard.

The Companies will need to elect between potentially inconsistent remedies, for example, a constructive trust or an injunction requiring return of the business and compensation for the loss of value of the business while it has been in Fletch’s hands, or an account arising from a breach of s 420A of the Corporations Act as quantified above. I understand it to be common ground that, where the Companies recover their loss, it will not be necessary to determine Mr Bunbury’s claims since he would have no recoverable loss other than that deriving from the Companies’ loss.

I direct the parties to submit to my Associate agreed short minutes of order to give effect to this judgment (including as to any election between remedies, any consequential steps and exemplary damages) and as to costs or, if there is no agreement between them, their respective short minutes of order and submissions not exceeding 15 pages (in Arial font 12, one and a half spacing) by 4pm on 22 November 2024, and their respective submissions in reply not exceeding 8 pages (in Arial font 12, one and a half spacing) by 4pm on 29 November 2024.