Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12 Hearing dates: 15, 16 November 2021 Decision date: 16 February 2022 Before: Macfarlan JA at [1]; Gleeson JA at [2]; Leeming JA at [3]. Decision: 1. Appeal allowed in part. 2. Vary order 6 made on 24 November 2020 by inserting the words "until 31 October 2011" after the words "at the Cadia mine", so that the order reads in full "6. Declare that, at the election of the Company, by its liquidators, the Company is entitled as against RK Murdoch Pty Limited (RKM) and Tilecote Farm Pty Limited (previously known as Bright Pear Pty Limited) (BPPL) to: "(a) an account of the profits earned by RKM and BPPL from the work done by those companies at the Cadia mine until 31 October 2011, as that term is used in the judgment dated 28 October 2020 (Cadia Work); or (b) compensation for any loss by reason of the Cadia Work." 3. Set aside order 10 made on 24 November 2020. 4. MDL to pay 50% of the appellants' costs of the appeal. 5. Direct the parties to file and serve agreed short minutes of order, or in lieu of agreement, minutes of the orders each proposes and short submissions in support, not exceeding 5 pages, in respect of (a) the quantification of the profit derived by RKM and Bright Pear at the Cadia mine until 31 October 2011, (b) the form of the order concerning the profits derived by RKM and Bright Pear and (c) the order which should be made as to the costs in the Equity Division, within 14 days of today, with a view to any dispute being resolved on the papers. 6. Grant leave to MDL to file a cross-appeal, confined to grounds 1-8 of the draft cross-appeal in the papers but excluding grounds 2(b), 5(b) and 8(b), and dispense with the need to file and serve such cross-appeal, and otherwise dismiss the notice of motion filed 31 March 2021. 7. Dismiss the cross-appeal, with costs. Catchwords: EQUITY – fiduciary obligations – scope of duty – company's contracts to provide crushing services to a mine were performed by a director's and employee's own companies without disclosure – whether constituted a breach of duty – whether inability of company to perform its obligations a defence – whether acquisition of separate quarry in Victoria within scope of duty – scope of fiduciary duty identified by company's actual course of conduct – primary judge correct to hold that performance of company's existing contracts was breach of duty, and acquisition of separate quarry in Victoria not in breach of duty EQUITY – remedies for breach of fiduciary duty – account of profits – contracts entered into by companies controlled by director and employee in breach of fiduciary and statutory duties – contracts incapable of rescission – whether principles in Peninsular and Oriental Steam Navigation Co v Johnson (1938) 60 CLR 189; [1938] HCA 16 precluded account of profits – consideration of breadth and continuing applicability of principles in Peninsular and Oriental Steam Navigation Company v Johnson – principles only applied to cases where fiduciary acquires property when acting on behalf of principal – principles inapplicable to contracts for the supply of services EQUITY – remedies for breach of fiduciary duty – account of profits – discretionary withholding of relief – where principal is less than fully informed, but nonetheless "stands by" while fiduciaries continue to derive profits – whether principal had sufficient information to make it inequitable to stand by while profits continued to be made, and thereafter to obtain an account of those profits – profits made after October 2011 held not to be within account APPEAL – procedural fairness – complaint that aspects of reasoning at first instance denied procedural fairness – appeal by rehearing – not said that different evidence would have been led – no retrial sought – appellate court empowered and required to make appropriate findings – any denial of procedural fairness incapable of being material – in any event no denial of procedural fairness EVIDENCE – coincidence evidence – whether primary judge's reasoning contravened coincidence rule – evidence tendered without objection – reasoning concerning company's actual course of conduct not amount to use of evidence contrary to s 95 of Evidence Act 1995 (NSW) Legislation Cited: Corporations Act 2001 (Cth), ss 79, 194, 237, 1317H Evidence Act 1995 (NSW), ss 95, 98 Supreme Court Act 1970 (NSW), s 75A Cases Cited: Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1; [2014] WASC 102 Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64 Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408 Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384; [1929] HCA 24 Boardman v Phipps [1967] 2 AC 46 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 Carpenter v Pioneer Park Pty Ltd (2008) 71 NSWLR 577; [2008] NSWSC 551 Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; 245 ALR 780 Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 Colour Control Centre Pty Ltd v Ty [1995] NSWSC 96 Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55 Cook v Deeks [1916] 1 AC 554 Costa Rica Railway Co Ltd v Forwood [1901] 1 Ch 746 Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101; [1993] HCA 54 Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 Duplate Corporation v Triplex Safety Glass Co 298 US 448 (1936) Eaton v Rare Nominees Pty Ltd (2019) 2 QR 222; [2019] QCA 190 Edmonds v Donovan (2005) 12 VR 513; [2005] VSCA 27 El-Haddad v R (2015) 88 NSWLR 93; [2015] NSWCCA 10 Erlanger v The New Sombrero Phosphate Company (1878) 3 App Cas 1218 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Galati v Deans (No 2) [2018] NSWSC 1813 Garnac Grain Co Inc v H M F Faure & Fairclough Ltd [1968] AC 1130 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179; 129 ACSR 265 Hamilton v Whitehead (1988) 166 CLR 121; [1988] HCA 65 Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; [2014] HCA 21 In re Cape Breton Company (1885) 29 Ch D 795 In re Coomber [1911] 1 Ch 723 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 Jacobsen v Jacobsen [2017] NSWSC 1590 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Jenyns v Public Curator (Qld) (1953) 90 CLR 113; [1953] HCA 2 Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23 Manly Fast Ferry Pty Ltd v Wehbe [2021] NSWCA 67 Mudgee Dolomite & Lime Pty Ltd v Robert Francis Murdoch; In the matter of Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510 Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 My Kinda Town Ltd v Soll [1982] FSR 147 Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110 New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 Novoship (UK) Ltd v Mikhaylyuk [2012] EWHC 3586 (Comm) O'Sullivan v Management Agency and Music Ltd [1985] QB 428 Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd [2011] FCAFC 166; 285 ALR 63 Peninsular and Oriental Steam Navigation Co v Johnson (1938) 60 CLR 189; [1938] HCA 16 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165; [2001] HCA 31 R v Byrnes (1995) 183 CLR 501; [1995] HCA 1 Re Jarvis Deceased [1958] 1 WLR 815; [1958] 2 All ER 336 Re Pauling's Settlement Trusts [1962] 1 WLR 86; [1961] 3 All ER 713 Siddell v Vickers (1892) 9 RPC 152 South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; 177 ALR 611 Spellson v George (1992) 26 NSWLR 666 Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; 278 ALR 291 Sydney Trains v Batshon [2021] NSWCA 143 Tang Man Sit v Capacious Investments Ltd [1996] AC 514 Tecnicas Reunidas SA v Andrew [2018] NSWCA 192 Tracey v Mandalay Pty Ltd (1953) 88 CLR 215; [1953] HCA 9 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18 White v Johnston (2015) 87 NSWLR 779; [2015] NSWCA 18 Windsor v Health Care Complaints Commission [2020] NSWCA 110 Woolworths Ltd v Kelly (1991) 22 NSWLR 189 Texts Cited: R Austin, H Ford and I Ramsay, Company Directors: Principles of Law and Corporate Governance (LexisNexis Butterworths, 2005) M Conaglen, Fiduciary Loyalty: Protecting the Due Performance of Non-Fiduciary Duties (Hart Publishing, 2010) J Glister, "Diverting Fiduciary Gains to Companies" (2017) 40(1) UNSWLJ 4 D Kershaw, "Corporate Law's Fiduciary Personas" (2020) 136 Law Quarterly Review 454 M Lobban, "Erlanger v The New Sombrero Phosphate Company (1878)" in C Mitchell and P Mitchell (eds) Landmark Cases in the Law of Restitution (Hart Publishing 2006) D O'Sullivan, S Elliott and R Zakrzewski, The Law of Rescission (2nd ed, Oxford University Press, 2014) P Sales, "The Interface between Contract and Equity" (Lehane Memorial Lecture, Sydney, 28 August 2019) Category: Principal judgment Parties: Robert Francis Murdoch (First Appellant; First Cross-Respondent) Stephen Murdoch (Second Appellant; Second Cross-Respondent) R K Murdoch Pty Ltd (Third Appellant; Third Cross-Respondent) Tilecote Farm Pty Ltd (formerly known as Bright Pear Pty Ltd) (Fourth Appellant; Fifth Cross-Respondent) Mudgee Dolomite & Lime Pty Ltd (in liq) (Respondent; Cross-Appellant) Brian Murdoch (Applicant for leave to bring cross-appeal in name of Mudgee Dolomite & Lime Pty Ltd (in liq)) Rahul Goyal and Jenny Nettleton in their capacity as Liquidators of Mudgee Dolomite & Lime Pty Ltd (in liq) (Second and Third Respondents to Brian Murdoch's motion) Kurdeez Minerals Pty Ltd (ACN 149 390 090) (Fourth Cross-Respondent) Representation: Counsel: J C Kelly SC; Dr C Mantziaris (Appellants and Cross-Respondents) V Bedrossian SC; M Jaireth; B Smith (Mudgee Dolomite & Lime Pty Ltd (in liq)) V Bedrossian SC; M Jaireth (Brian Murdoch) B Smith (Liquidators)