New South Wales Court of Appeal Say-Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 CITATION: This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S): 7 July 2005 JUDGMENT DATE: 15 September 2005 JUDGMENT OF: Mason P at 1; Giles JA at 2; Tobias JA at 3 DECISION: 1. Appeal allowed; 2. Orders made by Palmer J on 19 August 2004 and 22 November 2004 be set aside; 3. The parties to bring in draft Short Minutes of Order within 14 days to reflect the relief to be granted as indicated in the reasons for judgment; 4. Costs to follow the event; 5. Liberty be granted to the parties to apply, at the direction of the President, to Tobias JA on 48 hours' notice for further directions in the event that they are unable to agree on an appropriate form of Short Minutes to give effect to the reasons for judgment. CATCHWORDS: EQUITY - Fiduciary Obligations - Joint venture for redevelopment of property - Fiduciary duties arising out of joint venture - Scope of fiduciary duties - Development application refused on basis that property needed to be amalgamated with adjoining properties to maximise potential - Fiduciary subsequently acquired adjoining properties - Whether fiduciary duties breached - Fiduciary's obligations of disclosure - No conflict rule - No profit rule - Causal link between fiduciary relationship and profit - EQUITY - Constructive Trusts - Whether adjoining properties held on constructive trust - Recipient liability - First limb in Barnes v Addy - Actual or constructive knowledge on part of recipient of breach of fiduciary duty - Restitutionary approach to recipient liability based on unjust enrichment - Whether acquisition of indefeasible title prevented claim for relief - Whether fiduciary entitled to allowance for entrepreneurial skills Conveyancing Act 1919 LEGISLATION CITED: Environmental Planning and Assessment Act 1979 Real Property Act 1900 Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation (1983) 1 NSWLR 1 Barnes v Addy (1874) LR 9 Ch App 244 Bailey v Namol (1994) 53 FCR 102 Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 Biala Pty Ltd v Mallina Holding Ltd (No 2) (1993) 13 WAR 11 Birtchnell v Equity Trustees Executors and Agencies Co Ltd (1929) 42 CLR 384 Blythe v Northwood [2005] NSWCA 221 Bogdanovic v Koteff (1988) 12 NSWLR 472 Breskvar v Wall (1971) 126 CLR 376 Brickenden v London Loan & Savings Co [1934] 3 DLR 465 Browne v Dunn (1894) 6 R 67 Brunninghausen v Glavanics (1999) 46 NSWLR 538 Chan v Zacharia (1984) 154 CLR 178 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Farah Construction Pty Ltd v Say-Dee Pty Ltd [2004] NSWSC 800 Fox v Percy (2003) 214 CLR 118 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1 Frazer v Walker [1967] 1 AC 569 Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32 Hagan v Waterhouse (1991) 34 NSWLR 308 Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191; (2000) 22 WAR 198 CASES CITED: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Koorootang Nominees Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] 3 VR 16 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 Kelly v CA & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 Maguire v Makaronis (1997) 188 CLR 449 Re Montagu's Settlement Trusts [1987] Ch 264 National Australia Bank Ltd v Rusu [2001] NSWSC 32 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 NIML Ltd v Man Financial Australian Ltd [2004] VSC 449 Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 Paul A Davies (Aust) Pty Ltd v Davies [1983] 1 NSWLR 440 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 Phipps v Boardman [1965] 1 Ch 992; [1967] 2 AC 46 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378 Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285 Tara Shire Council v Garner [2003] 1 Qd R 556 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 Warman International Ltd v Dwyer (1995) 182 CLR 544 Say-Dee Pty Limited Farah Constructions Pty Limited Farah Elias PARTIES: Lesmint Pty Limited Margaret Elias Sarah Elias Jade Elias FILE NUMBER(S): CA 40780/04 A: Mr A Sullivan QC / Mr D Raphael COUNSEL: 1-6R: Mr M Einfeld QC / Mr V Gray A: Esplins, Solicitors, Sydney SOLICITORS: 1-6R: Strathfield Law, Enfield LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC1956/03 LOWER COURT JUDICIAL OFFICER: Palmer J IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40780/04 MASON P GILES JA TOBIAS JA Thursday 15 September 2005 SAY-DEE PTY LTD v FARAH CONSTRUCTIONS PTY LTD & ORS FACTS Say-Dee Pty Ltd (Say-Dee) and Farah Constructions Pty Ltd (Farah) entered into a joint venture to purchase and redevelop the property at No. 11 Deane Street, Burwood (No. 11) (the joint venture). Say-Dee was a company in which Ms Dalida Dagher and Ms Sadie Elias (Dalida and Sadie respectively) were the sole directors and shareholders. Dalida and Sadie had no prior experience in property development. Farah was a company which at all material times was controlled by Mr Farah Elias, who was no relation to Sadie (Mr Elias). Mr Elias was an experienced real estate developer. By agreement between the parties, Say-Dee was to provide the finance for the joint venture while Mr Elias was to be responsible for managing the progress of the development application with Burwood Council (the Council) as well as the ultimate construction and sale of the development. Upon completion of the joint venture, the profits were to be distributed equally between Say-Dee and Farah. The development application lodged by Mr Elias with the Council was ultimately refused. The basis of that refusal was that the site was too narrow for the proposed development. According to the reports of the Council officers, the full development potential of the site could only be achieved by the amalgamation of No. 11 with adjoining properties. Mr Elias subsequently sought to acquire two properties adjoining No. 11, which were suitable for an amalgamated development, namely, Nos. 13 and 15 Deane Street, Burwood (Nos. 13 and 15). This was ultimately achieved by Mr Elias causing those properties to be purchased by various parties associated with him, namely, Lesmint Pty Ltd (Lesmint) (a company controlled by Mr Elias), Mrs Margaret Elias (Mr Elias' wife) and Sarah and Jade Elias (Mr Elias' two daughters). It was common ground that Farah owed fiduciary duties to Say-Dee. The issue was the scope of those duties. Say-Dee claimed that Farah breached its fiduciary duties by reason of Mr Elias' conduct in failing to disclose information pertinent to the joint venture to Say-Dee – namely, the opinion of the Council that No. 11 could not be developed to its maximum potential unless it was amalgamated with one or more adjoining properties – and in subsequently exploiting that information for the benefit of Farah by causing Nos. 13 and 15 to be acquired by parties associated with Farah. The primary judge, Palmer J, found that Mr Elias had disclosed to Dalida and Sadie Farah's proposed acquisitions of Nos. 13 and 15 and invited Say-Dee's participation in those acquisitions. In relation to the scope of Farah's fiduciary duties, the primary judge ultimately found that all Farah contracted to do was to manage the redevelopment of No. 11 alone; it did not contract to provide Say-Dee with opportunities to participate in any project beyond the boundaries of that property. Accordingly, his Honour held that Farah was under no fiduciary duty to disclose to Say-Dee the opportunity to acquire either No. 13 or No. 15, nor was it under any fiduciary inhibition in acquiring those properties itself. It was against the above findings that Say-Dee appealed to the Court of Appeal. HELD per Tobias JA (Mason P and Giles JA agreeing) allowing the appeal: The primary judge erred in finding that Mr Elias disclosed to Dalida and Sadie his proposed acquisition of Nos. 13 and 15, and invited their participation in that investment. That finding was both glaringly improbable and contrary to compelling inferences ([129], [131]). Even if the primary judge was correct in finding that Mr Elias did inform Dalida of his proposal to acquire Nos. 13 and 15, Farah was still in breach of its fiduciary duties by Mr Elias' failure fully to disclose to Dalida and Sadie the true reason as to why each of those properties should be acquired, namely, that if No. 11 was to be developed to its maximum potential then it was a requirement of the Council that it be amalgamated with adjoining properties ([59]-[61], [63]-[64], [68], [71], [73], [197]). The twin fiduciary duties of Farah were not to withhold information or otherwise act in a manner which either brought Farah's personal interests into conflict with its fiduciary obligations or resulted in it making a profit as a consequence of the knowledge it gained in the course of undertaking those obligations ([171], [197]). Birtchnell v Equity Trustees Executors and Agencies Co Ltd (1929) 42 CLR 384; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1; Kelly v CA & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248; News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; Brunninghausen v Glavanics (1999) 46 NSWLR 538; Blythe v Northwood [2005] NSWCA 221 considered. Acting on behalf of the joint venturers, Mr Elias acquired from the Council valuable information about a method of exploiting the development potential of No. 11. When he used that information without the fully informed consent of Dalida and Sadie, he breached both the "no conflict" rule, because his interest as a purchaser of Nos. 13 and 15 clashed with his duty to them as his fellow joint-venturers, and the "no profit rule", because the information spurred him to acquire Nos. 13 and 15 and to profit thereby ([173]-[174], [182], [197]). The primary judge erred in holding that the fiduciary obligations of Farah did not extend beyond redevelopment within the boundaries of No. 11. The subject matter of the joint venture was the redevelopment of No. 11 with a view to maximising profit. Accordingly, the fiduciary obligations of Farah were to disclose fully and accurately to Say-Dee all matters pertinent to any such redevelopment ([140], [177]-[178], [197]). The opportunity to acquire the adjoining properties, when such acquisition was essential to enhance the development potential of No. 11 and to overcome the Council's opposition to the redevelopment of that property on its own, was such a matter ([177]-[179], [197]). It was irrelevant that Dalida and Sadie would have declined for financial reasons any invitation to participate in the acquisitions ([192], [197]). Brickenden v London Loan & Savings Co [1934] 3 DLR 465; Phipps v Boardman [1967] 2 AC 46; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 considered. The necessary causal link between the fiduciary relationship and the profit received by Farah was established by the fact that, in the course of performing his fiduciary duties, Mr Elias received the critical information from the Council and, as a consequence thereof, set about the acquisition of Nos. 13 and 15 ([143], [146], [149], [194], [196]). Mrs Elias and her two daughters fell within the "recipient liability" limb of Barnes v Addy (1874) LR 9 Ch App 244. The requirement of knowledge on their part of the defaulting fiduciary's wrongful conduct was satisfied by the fact that they were taken to have the knowledge of Mr Elias in circumstances where he was acting as their agent in the acquisition of No. 15 ([214]-[215]). There was support for the proposition that, because Mrs Elias and her two daughters were unjustly enriched by the acquisition of their interests in No. 15, they were "recipients" within the meaning of the first limb in Barnes v Addy, even in the absence of actual or constructive knowledge on their part of Farah's breach of fiduciary duty ([232]-[233]). Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548; Koorootang Nominees Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] 3 VR 16; National Australia Bank Ltd v Rusu [2001] NSWSC 32; NIML Ltd v Man Financial Australian Ltd [2004] VSC 449 considered. The fact that Mrs Elias and her two daughters acquired an indefeasible title to their units in No 15 did not prevent Say-Dee from bringing against them a claim in personam for relief ([237]-[238]). Frazer v Walker [1967] 1 AC 569 applied. Accordingly, Farah, Lesmint, Mr and Mrs Elias, and their two daughters held their respective interests in Nos 13 and 15 on constructive trust for the joint venture ([233], [235], [238]). The surreptitious conduct and bad faith on the part of Mr Elias should not necessarily disentitled him to some allowance for his entrepreneurial skills in acquiring Nos. 13 and 15. However, any such allowance should not be liberal ([249]-[252]). Phipps v Boardman [1965] 1 Ch 992; Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32 considered . IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40780/04 MASON P GILES JA TOBIAS JA Thursday 15 September 2005 SAY-DEE PTY LTD v FARAH CONSTRUCTIONS PTY LTD & ORS Judgment 1 MASON P: I agree with Tobias JA. 2 GILES JA: I agree with Tobias JA. 3 TOBIAS JA: The appellant, Say-Dee Pty Ltd (Say-Dee), was at all material times a company in which Ms Dalida Dagher and Ms Sadie Elias were the sole directors and shareholders. The first respondent, Farah Constructions Pty Ltd (Farah), was a company which at all material times was controlled by the second respondent, Mr Farah Elias (Mr Elias). Mr Elias was no relation to Ms Sadie Elias. Mr Elias also controlled the third respondent, Lesmint Pty Ltd (Lesmint). The fourth respondent, Ms Margaret Elias, is his wife. The fifth and sixth respondents, Sarah Elias and Jade Elias, are his daughters. 4 For ease of reference and without intending any disrespect to any of the parties, I shall hereafter refer to Ms Dagher and Ms Elias as Dalida and Sadie respectively. 5 On 2 April 1998 Say-Dee and Farah entered into a contract to purchase the property at No. 11 Deane Street, Burwood (No. 11) as tenants in common in equal shares. Settlement of that purchase took place on 17 September 1998. At that time there was erected on No. 11 a run-down building containing four small residential units. Accordingly, the purpose of acquiring No. 11 was for its redevelopment potential. However, it was a relatively small and narrow site. According to Mr Elias, it had an area of 453.5m², a width of 11.49m and a depth of 39.47m. 6 To advance the purpose that underlay its purchase on 5 January 2000 Mr Elias lodged with Burwood Council (the Council) a development application with respect to No. 11 that was ultimately refused by the Council on 3 April 2001 (the first development application). The basis of that refusal was that the proposed development was too large for the site, or in other words, that the site was too small and narrow to enable its development potential to be maximised under the applicable planning controls. According to the reports of the senior Council officers, that potential could only be achieved by the amalgamation of No. 11 with adjoining properties. 7 According to Say-Dee, but without its knowledge, Mr Elias then set about acquiring No. 15 Deane Street, Burwood (No. 15) which he achieved by four contracts dated 30 June 2001 entered into respectively by the third, fourth, fifth and sixth respondents as purchasers of each of the four strata units contained in the building erected upon that property. Those contracts were completed on 20 November 2001. 8 On 13 December 2001 Mr Elias lodged a further development application (the second development application) with the Council with respect to No. 211 which proposed a smaller development than that the subject of the first development application. However, by letter dated 12 March 2002 the Council's town planner with whom Mr Elias had been dealing (Mr Michael Sue) wrote a letter setting out the deficiencies of the application and which reiterated that the site was too narrow to maximise its development potential without its amalgamation with adjacent sites. 9 On 15 August 2002 Mr Elias caused Lesmint to enter into a contract to purchase No. 13 Deane Street, Burwood (No. 13) which was completed on 6 November 2002. Subject to the one-half interest of Say-Dee in No. 11, Mr Elias now had control, so it was alleged, of an amalgamated site comprising Nos. 11, 13 and 15 Deane Street. In the meantime, on 27 August 2002, some 12 days after Lesmint had entered into the contract to purchase No. 13, Mr Elias caused the second development application with respect to No. 11 to be withdrawn. 10 By summons filed on 19 March 2003, Farah sought the appointment of a trustee for sale of No. 11 pursuant to s 66G of the Conveyancing Act 1919. Say-Dee responded by filing a cross-claim. It conceded that if it failed in its cross-claim, the orders sought by Farah in its Summons must be made. Accordingly, the issues in the litigation were those raised by Say-Dee's cross-claim. 11 By its cross-claim, Say-Dee alleged that Farah, as a consequence of the conduct of Mr Elias, had acquired an interest in Nos. 13 and 15 in breach of the fiduciary duties which it owed to Say-Dee under an alleged partnership or joint venture to acquire and redevelop No. 11. The primary judge, Palmer J, recorded that alleged breach by Farah as involving the acquisition by Mr Elias of information which he failed to disclose to Dalida and Sadie, namely, that No. 11 could not be developed to its maximum potential unless it was amalgamated with one or more adjoining properties. In this respect, the only potential adjoining properties with which No. 11 could be amalgamated were Nos. 13 and 15 as No. 9 Deane Street had already been developed to its maximum potential. 12 It was then alleged that Mr Elias exploited that information for the benefit of Farah by causing Nos. 13 and 15 to be acquired by Lesmint, Mrs Elias and their two daughters who were alleged to have been knowing participants in Farah's breach of its fiduciary duties. 13 The primary judge made a number of findings rejecting Say-Dee's allegations: [2004] NSWSC 800. In particular his Honour found, for reasons to which I shall return, that he was not satisfied that Mr Elias had failed to disclose to Dalida and Sadie on behalf of Say-Dee Farah's proposed acquisitions of Nos. 13 and 15 or that he had failed to invite Say-Dee's participation in those acquisitions. On the contrary, his Honour found (at [55]) that he was satisfied that Mr Elias did so disclose the proposed acquisitions and that he did invite Say-Dee's participation therein, but that that invitation was declined. On this basis alone his Honour was prepared to dismiss Say-Dee's cross-claim. Both those findings of fact were challenged before this Court. 14 However, the primary judge also dealt with the scope of Farah's fiduciary duties to Say-Dee. He found, firstly, (at [67]) that the common intention of the parties was to develop No. 11 in the best and most profitable way permitted by the Council but, secondly, that all Farah contracted to do was to manage the redevelopment of No. 11 alone and that it had not contracted to provide opportunities for Say-Dee to participate in any project other than with respect to such development as could be constructed wholly within the boundaries of No. 11 (at [75]). 15 Accordingly, his Honour held (at [77]) that Farah was under no fiduciary duty to disclose to Say-Dee the opportunity to acquire either No. 13 or No. 15 nor was it under any fiduciary inhibition in acquiring those properties for itself directly or indirectly. It followed that Say-Dee's cross-claim failed and was dismissed. It is against that dismissal that Say-Dee appeals to this Court. In particular, it challenges his Honour's findings with respect to the scope of Farah's fiduciary duties and that it was not in breach of them even if the Elias interests had acquired Nos. 13 and 15 with the knowledge of Say-Dee. The relevant facts in greater detail 16 Dalida and Sadie through Say-Dee were at all material times partners in a business which ran service stations and coffee shops. They had had no experience with respect to the development of land. On the other hand, Farah had for some time carried on business as a real estate developer. Mr Elias had been involved in property development in Sydney continuously since 1988 and in his evidence he described himself as a property developer by profession. 17 In 1998, Dalida and Sadie had some capital that they wished to invest and contemplated for the first time becoming involved in real estate development notwithstanding that they had no prior experience in that field. Through a mutual friend they were put in contact with Mr Elias who introduced them to No. 11 which, apparently, was for sale. Mr Elias considered No. 11 to be a prime development site as it was directly opposite Burwood Railway Station and was zoned Business Special 3(c2) under the Burwood Planning Scheme Ordinance (the BPSO), a deemed environmental planning instrument under the Environmental Planning and Assessment Act 1979 (the EP&A Act). Furthermore, the property was proposed to be zoned Town Centre Commercial 3(t2) under a draft Town Centre Commercial Local Environmental Plan (the draft LEP) and draft Development Control Plan No. 46 (the draft DCP) which were then in the process of preparation within the Council. Under the latter instruments a maximum floor space ratio of 3:1 was permitted upon No. 11 with a maximum height of four to five storeys. 18 According to the Council officers' reports, No. 11 had an area of 343m² with an average width of 11.07m, a depth of 30.47m and a fall of 1.6m from the front to the rear boundary. At the time of its acquisition by Say-Dee and Farah on 2 April 1998, it was occupied (as recorded in the Council reports) by a run-down two storey residential flat building containing four small units. Nos. 11, 13 and 15 each had a frontage to Deane Street. Nos. 13 and 15 separated No. 11 from Mary Street to the west. To its rear, and fronting George Street, was No. 18 George Street, whereas immediately to the rear of No. 15, and on the corner of Mary and George Streets, was No. 20 George Street (No. 20 George). According to the Council's documents, to which I shall refer further later in these reasons, No. 9 Deane Street (immediately to the east of No. 11) was occupied by a four-storey commercial building whereas No. 13 and No. 20 George were each occupied by an old two-storey residential flat building. The Police Youth Club occupied No. 15 on the corner of Mary and Deane Street. 19 According to the primary judge, the four units in the existing building on No. 11 were run down. Mr Elias' proposal was that they would be refurbished and rented out during the time it would take to prepare a development application, lodge it with the Council and have it approved. It was contemplated that the rental income from the units would service the interest payable on the loan which would be required for the balance of the purchase price of No. 11 after taking account of the capital to be contributed by Say-Dee. The purchase price of No. 11 was $630,000 of which Say-Dee contributed $230,000 together with stamp duty of $31,500, the balance being sourced in a loan from the National Australia Bank. It was proposed that the redevelopment of No. 11 would be partly commercial and partly residential and that upon the sale of the project, the net profit would be divided equally between Say-Dee and Farah. 20 Dalida and Sadie agreed with the proposal put to them by Mr Elias. Because of his experience in property development and their lack of it, it was agreed that Mr Elias would be solely responsible for preparing all development applications to the Council and otherwise dealing with the Council with respect thereto. As his Honour found (at [12]), the essential terms of the agreement between the parties were set out in a letter dated 20 April 1998 from Say-Dee's solicitors to Farah's solicitors in the following terms: "Re: JOINT VENTURE AGREEMENT – SAY-DEE P/L & FARAH P/L Property: DEANE STREET, BURWOOD Our Ref: DP.KM.980189.SB We understand that the parties to the purchase of the above property, wish to formalise their arrangement in a joint agreement. As we understand the situation: 1. Both parties are the purchasers in equal shares. 2. Say-Dee is to advance to the joint venture $225,000.00. 3. Balance of funds to be borrowed by the joint venture and secured by way of mortgage over the subject property. 4. Upon completion of the project the profits are to be allocated as follows: a) 1st priority – repay Say-Dee $225,000.00. b) 2nd priority – pay all agents commission and legal expenses. c) 3rd priority – distribute balance 50/50 to joint ventures. Please let us know if the above is in accordance with your clients instructions. Do you propose to prepare a Joint Venture agreement for our clients consideration?" 21 No joint venture agreement was prepared but it was not disputed that the terms of the agreement between the parties were as set out in the letter of 20 April 1998. As I have indicated, it was also agreed that Mr Elias would undertake the sole responsibility for managing the progress of the development application with the Council as well as the ultimate construction and sale of the development once approved. 22 In due course the four units in No. 11 were refurbished and rented out. Mr Elias undertook the preparation of the first development application to the Council which was lodged on 5 January 2000. It proposed an eight-storey mixed commercial and residential development consisting of commercial premises on the ground floor and 30 one-bedroom units on the upper floors. Due to the proposed basement garage being one storey above natural ground level at the rear or northern boundary, Council officers defined the car parking level as an extra storey. However, because of the narrowness of the site, only four off-street car parking spaces together with a loading bay could be provided therein. 23 The development the subject of the first development application proposed a floor space ratio which significantly exceeded the maximum of 3:1 permitted under the draft LEP. This resulted in amendments to the proposal which were submitted by Mr Elias on 23 March 2000 in an attempt to reduce the floor space ratio. In a report to Council's Building and Development Committee dated 4 April 2000 by the Acting Group Manager, Environmental and Community Services, it was acknowledged that the proposal was permitted under both the draft LEP as well as the BPSO. However, according to the Council's calculations, the floor space ratio was 3.7:1 and therefore still exceeded the permitted maximum whereas the height of the building was considered to be an eight-storey building when the maximum permitted was five storeys. Accordingly, it was concluded that the proposal did not satisfy the objectives and development standards of either the draft LEP or the draft DCP with regard to floor space ratio, height of development and streetscape issues. Nevertheless, at its meeting on 26 April 2000, the Building and Development Committee resolved that the application be deferred for further consultation to allow the issues raised by the applicant and Council staff to be considered. 24 Farah submitted further amended plans on 27 April 2000 which reduced the height of the development by one storey. In a report dated 20 June 2000 to the Building and Development Committee by the Group Manager, Environmental and Community Services, it was noted that no additional consultation had been held with Council staff regarding the planning issues referred to in the report of 4 April 2000. The problem with the amended application was that it still proposed a floor space ratio of 3.21:1 which exceeded the maximum of 3:1 permitted under the draft LEP and proposed a height of seven storeys as against the permitted maximum of five storeys. Furthermore, according to the Council's requirements, a total of 34 car parking spaces were required, whereas only four had been provided. 25 The report recommended that the application be refused on eight grounds. Relevantly it contained the following conclusions: "The amendments proposed do not satisfy the Draft Town Centre Commercial LEP and DCP for a maximum of 4/5 storeys and a maximum FSR of 3:1. Even if the building did conform with such standards, it is considered that the site is too narrow to maximise its development potential. Further, the amendments do not give consideration to the other identified Planning issues, i.e. compliance with off-street parking requirements, satisfying urban design and a streetscape controls or consider Council's policy related to the use of SEPP No. 1 in this instance. The proposed development is considered an over-development of a narrow 11m wide site as evidenced by the inability to provide for car parking due to the lack of manoeuvring space available. The site should be amalgamated with the adjoining properties to achieve its maximum development potential and a more appropriate development permissible under the Draft Town Centre Commercial LEP No. 46 and DCP No. 10. " (emphasis added) 26 A copy of the report had been provided to Mr Elias prior to the Committee's meeting on 26 June 2000 which he attended. Mr Elias made representations at the meeting to the effect that a relaxation of the relevant development standards might be made after discussion with the Department of Urban Affairs and Planning (DUAP). 27 The Committee's decision was conveyed to Farah by letter dated 28 June 2000. It was to defer the application to allow issues raised by Mr Elias, including the matter of affordable housing, to be discussed with DUAP. By letter dated 12 July 2000 Mr Elias on behalf of Farah wrote to the Chairman of Council's Building and Development Committee making further submissions as to why the first development application should be approved. The letter referred to a meeting held between the Council's Group Manager, the Manager of the Building and Development Department and Mr Elias on 11 July 2000, and recorded that the issues of concern to those officers were floor space ratio and height. Mr Elias addressed those issues and suggested that the Council give consideration to the merit of the proposal as providing affordable housing and housing for elderly people which was, according to him, a policy of the State Government. 28 On 3 April 2001, the Group Manager, Environmental and Community Services, prepared a third report to the Building and Development Committee. It was noted that the application, model and supporting documentation had been forwarded to DUAP on 21 July 2000 and that by letter dated 8 March 2001 DUAP had replied with an urban design assessment of the proposal carried out by its Urban Design Advisory Service. That assessment and, in particular, that of its Urban Design Advisory Service was summarised in the report in the following terms: "The Urban Design assessment suggests that the site is too small to achieve its full development potential and return a positive urban design outcome. The site needs to be amalgamated with adjacent sites to maximise its development potential . The provision of off-street parking is inadequate and the inability of the vehicles to adequately manoeuvre reinforces the need for a larger site. The narrowness of the site together with the resulting urban design of the proposal would create an undesirable streetscape that is contrary to the urban design controls that seek to achieve a 'human scaled streetscape with active frontages and a moderate scaled street wall'. " (emphasis added) 29 In his conclusion to his report, the Group Manager observed as follows: "The assessment report suggests that the site is too small to support the scale of development being sought and suggests that the site should be amalgamated with adjacent sites to achieve a proper urban design outcome as part of a new development proposal . Under the circumstances, it is considered that the application should be refused as there is no scope for a redesign of the proposal ." (emphasis added) He again recommended that the application be refused. 30 Again, Mr Elias addressed the Committee at its meeting on 3 April 2001 when the report was considered. This time the Committee unanimously adopted the Group Manager's recommendation that the application be refused whereupon the Manager, Building and Development, under delegated authority, adopted the Committee's recommendation so that his decision became that of the Council. 31 Mr Elias was formally notified of the Council's decision in a Notice of Determination of a development application issued pursuant to s 81(1)(a) of the EP&A Act and dated 4 April 2001 which, after noting that the application had been refused, stated six reasons for the refusal which I record in full: " Reasons for Refusal 1. The use of a State Environmental Planning Policy No. 1 Objection is inappropriate, in this instance, to permit the proposed variation to the Floor Space Ratio and as such, Council has no power to approve the application. 2. The proposal is excessive in height, bulk and scale and inconsistent with the development guidelines of the Draft Town Centre LEP and DCP with regard to streetscape and urban design objectives, development envelope and height. 3. The inadequate provision of off-street parking, manoeuvring and non-provision of a car wash bay. 4. The proposal is not in the public interest. 5. The proposal would set an undesirable precedent for similar mixed commercial and residential development in the area. 6. The subject site is considered too small to achieve its full development potential and return a positive urban design outcome ." (emphasis added) 32 It was following the Council's refusal of the first development application on 4 April 2001 that Mr Elias, his wife and two daughters on 30 June 2001 each entered into a contract to purchase one of the four units in No. 15 for a total purchase price of $1,080,000. There is a conflict in the evidence with respect to the circumstances in which this acquisition occurred to which I shall refer hereafter. 33 On 7 December 2001, Farah lodged the second development application with respect to No. 11. This application had a reduced residential component but an increased commercial component. Again, there is a conflict in the evidence as to the extent to which, if at all, this proposal was discussed between Mr Elias on the one hand and Dalida and Sadie on the other. In any event, the application was the subject of the letter of Mr Michael Sue to Mr Elias dated 12 March 2002 (referred to in [8] above) in which the latter was advised, inter alia, that the height and bulk of the building was considered excessive although there was scope to reduce both. Importantly, the letter contained the following statement: "Council further wishes to advise you of the UDAS Report on the previous application on the subject site concerning the car parking and urban design issues. The report noted that the site is too narrow to maximise its development potential and that the site needs to be amalgamated with adjacent site(s) in order to achieve its potential . Further, the site is too small to provide the necessary car parking amongst other design recommendations. No. 9 Deane Street should not be used as a visual reference point, rather the adjacent residential flat buildings with a 'contemporary interpretation'. " (emphasis added) 34 On 15 August 2002 Mr Elias caused Lesmint (which he controlled) to enter into a contract to purchase No. 13 for $1,680,800 which was completed on 6 November 2002. However, by letter dated 27 August 2002 from Farah to the Council and signed by Mr Elias, the second development application was withdrawn and an application made to the Council for a refund of unexpended lodgement fees. It was not suggested in the evidence that Dalida and/or Sadie were either consulted or aware of this withdrawal. 35 As evidenced by the affidavit and oral testimony of the main players, the above narrative supports the following conclusions. Firstly, Mr Elias was at all relevant times aware that the Council had set its mind against the redevelopment of No. 11 on its own because it was too small and narrow to achieve its maximum development potential and provide a positive urban design outcome. Secondly, Mr Elias was at all relevant times aware that the Council required No. 11 to be amalgamated with adjoining sites (which would include Nos. 13 and 15) in order to achieve those objectives. Thirdly, Mr Elias was aware of the foregoing when, on 30 June 2001, he caused himself, his wife and two daughters to purchase the four units in No. 15. Fourthly, although in December 2001 he lodged the second development application with the Council which related only to No. 11, Mr Elias was aware from Mr Sue's letter of 12 March 2002 that that application was doomed to failure for the very same reasons as had been advanced by the Council in its rejection of the first development application. Fifthly, some five months later he caused Lesmint to enter into a contract to purchase No. 13 and then 12 days later wrote to the Council withdrawing the second development application he had lodged with respect to No. 11. 36 The timing of these events, involving as they do Mr Elias' knowledge of the Council's implacable attitude towards the redevelopment of No. 11 on its own and its requirement that if it was to be redeveloped it must be amalgamated with adjoining or adjacent sites, when taken in conjunction with the acquisition by Mr Elias (through a company he controlled and members of his immediate family) of the two adjoining properties, raises starkly the following issues upon which the parties were in dispute before the primary judge: firstly, the extent to which, if at all, Mr Elias informed Dalida and Sadie as to the Council's attitude to the redevelopment of No. 11; secondly, whether it was as a consequence of the Council's consistent advice to Mr Elias as to the necessity to amalgamate No. 11 with adjacent sites in order to maximise its development potential that Mr Elias caused Nos. 15 and 13 to be acquired; thirdly, whether Mr Elias informed Dalida and Sadie that he had the opportunity to purchase Nos. 15 and 13 and, if so, whether he invited them to participate in their acquisition and in any proposed redevelopment of the three properties as an amalgamated site; and fourthly, whether he fully disclosed to them at the time of the respective acquisitions that the reason for those acquisitions was to enable No. 11 to be developed to its maximum potential as advised by the Council. The factual issues in dispute before the primary judge 37 It was generally common ground between the parties that, firstly, it did not matter whether the arrangement (to use a neutral term) between Say-Dee and Farah was a partnership or a joint venture. This was because, secondly, Farah accepted that under either arrangement it owed Say-Dee fiduciary duties. One of the contested issues between the parties was the scope of those duties. 38 The primary factual issues in contention were two-fold. The first concerned the nature and extent of the information (if any) provided by Mr Elias to Dalida and Sadie concerning the reasons conveyed to Mr Elias by the Council as to its rejection of the first development application. The second related to whether Mr Elias informed Dalida and Sadie that there was an opportunity to acquire No. 15, and later No. 13; whether he informed them that those properties should be acquired because of the Council's requirement that to maximise No. 11's development potential there was a need to amalgamate it with the adjoining properties; and whether he offered Say-Dee the opportunity of joining in those acquisitions or either of them for the purpose of advancing the redevelopment of No. 11. 39 So far as Mr Elias' state of knowledge prior to the acquisition of No. 15 on 30 June 2001 was concerned, the critical information he had by then obtained from the Council as to its refusal to consent to the first development application was that: (a) No. 11 was too small and too narrow for the proposed development, which constituted an overdevelopment of No. 11 due, in the main, to its inability to provide the required number of onsite car parking spaces, and thus, due to its narrowness, its redevelopment to its maximum potential would result in an inappropriate development from an urban design point of view so that (b) the maximum development potential of No. 11 which would be satisfactory from an urban design perspective could only be achieved if the site was amalgamated with adjoining properties. In this respect, the relevant adjoining properties were Nos. 13 and 15. 40 I will deal in turn with each of the two factual issues in contention, noting first the primary judge's findings, and then my findings with respect thereto where those of his Honour have been challenged on the appeal. What knowledge, if any, did Dalida and Sadie have as to the Council's view that No. 11 needed to be amalgamated with the adjoining properties to achieve its maximum development potential? 41 The primary judge found (at [27]) that Dalida and Sadie were informed by Mr Elias that the Council had rejected the first development application "because there were too many units in the submission". However, they were adamant that they were not told of the opinion of the author of the Council reports that No. 11 was too narrow to enable its development potential to be maximised and that, in order to do so, it needed to be amalgamated with adjoining properties. 42 Although Mr Elias maintained that he kept Dalida and Sadie informed of his discussions with the Council officers, he did not expressly say that he had made known to them that No. 11 was too narrow to enable its development potential to be maximised and that, accordingly, it should be amalgamated with the adjoining properties. 43 At [66] the primary judge noted that counsel for Farah accepted that that information had been conveyed by the Council to Mr Elias in the course of Farah's management of the project and was, therefore, information which should have been conveyed to Say-Dee. His Honour then found that that information was not, "in terms", so conveyed. 44 It is appropriate to refer at this point to Farah's submission that the information that No. 11 was too narrow to enable its development potential to be maximised and that to do so required its amalgamation with the adjoining properties, although not conveyed as his Honour found "in terms", was nevertheless conveyed "in effect" or "in substance". The primary judge made no such finding because he held (at [67]) that the fact that the critical information was not "in terms" conveyed to Say-Dee did not matter as, firstly, the view of the Group Manager, Environmental and Community Services of the Council that No. 11 was too narrow to enable its maximum development potential to be achieved did not mean that no development of any sort was possible on the site and, in any event, Farah's fiduciary duties extended no further than the development of No. 11 within its own boundaries (see at [75]). 45 Nevertheless, Farah submitted before the primary judge and repeated before this Court that the necessity to amalgamate No. 11 with adjoining properties because of its narrowness would, as a matter of common sense, have been obvious to Dalida and Sadie. The basis of this submission was that they knew that the Council had rejected the first development application because No. 11 was too small and too narrow to accommodate the development proposed in accordance with the Council's planning controls. 46 Accordingly, so it was contended, it must follow that it would have been obvious to them that in order for the development the subject of either the first or second development applications (and particularly the first) to be approved, it would be necessary to amalgamate No. 11 with one or more adjoining properties to form a larger site. 47 As his Honour found (at [27]), and as had been admitted by Say-Dee on the pleadings (see [33] of the cross-claim), Mr Elias had informed Dalida and Sadie that the Council had rejected the first development application because "there were too many units in the proposal set out in the plans" and that it was therefore "too big". Sadie, when cross-examined, understood the latter expression to mean that the proposal contained more units than was allowed. 48 However, Farah submitted that in his evidence Mr Elias had said that he had met regularly with and telephoned Dalida and Sadie during early 2001 informing them of the progress of the first development application and the process which the Council was undertaking including the obstacles being encountered. However, Mr Elias spoke only in these general terms in [20] of his affidavit of 19 February 2004, and his evidence was denied by Dalida and Sadie in their affidavits in reply. Dalida did admit in her affidavit in chief that Mr Elias had informed them that the Council had rejected the first application "because there were too many units in the submission" and that he was "working on a new application with fewer units". 49 However, Mr Elias' evidence was somewhat more specific in cross-examination where the following exchange occurred (Black 111V-112E): "Q. I want to suggest to you, sir, that you never at any stage told my clients that it was the view of the council that to maximise the development potential of 11 Deane Street the property ought to be amalgamated with adjoining properties, what do you say to that? A. I've always told them. Q. You've always told them that? A. That's right. Q. Can you show me one place in your affidavit where you say that? A. From memory a response to their affidavit. I've just said that I've always told them whatever is necessary to tell them what's going on all the time." 50 Mr Elias also said (Black 115) that he always picked up the Council reports on a Friday afternoon and obtained two copies, one of which he left with Dalida and Sadie which he went through with them, and the other of which he kept for himself. Dalida and Sadie denied this. 51 However, on 16 July 2001 Farah sent to Say-Dee a letter which, relevantly, was in the following terms: "Re Deane Development Trust Property: 11 Deane Street, Burwood Over the past year or so we have regularly kept you informed of the current status of the property … The management of the trust has now required critical attention due to the culmination of the following events: · After several months of submissions to the Burwood Council and the State Government, the Council has refused the current development application and we enclose copies of that correspondence. This process incurred a great deal of time and expense on our part with no foreseeable returns. · …The situation is now more than urgent, we must come to some decision and arrangement in relation to the Trust and the property without any further delays." (emphasis added) 52 In [24] of his affidavit Mr Elias referred to this letter and to a meeting at his office in late August 2001. He then deposed to the following: "I used the letter as an agenda for the meeting and ticked off each item as we discussed it. We discussed the refusal of the Application from Council and agreed to resubmit a new plan with more commercial component." 53 There is indeed a tick against the first dot point of this letter. However, the correspondence referred to in that paragraph was neither tendered nor identified otherwise in the evidence, whether affidavit or oral. It was not suggested by Dalida or Sadie that they did not receive the letter of 16 July 2001: nor did they deny any part of [24] of Mr Elias' affidavit to which I have referred above. Nevertheless, Farah submitted that the reference in the letter to the refusal of the Council of what was the first development application and the enclosure of copies of "that correspondence", when taken in conjunction with Mr Elias' evidence in his affidavit that there was discussion of the Council's "refusal of the Application", led to the inference that that correspondence must, at the very least, have included the Council's Notice of Determination of the development application of 4 April 2001 in which the last reason for refusal was that the "… subject site is considered too small to achieve its full development potential and return a positive urban design outcome." 54 Accordingly, Farah submitted that Dalida and Sadie were aware of this reason for refusal from which it was obvious as a matter of common sense that the full development potential of No. 11 could only be achieved if it was amalgamated with adjoining properties. It was further submitted that the primary judge had chosen his words carefully when he held (in [66]) that the information that No. 11 was too narrow to maximise its development potential and that it should be amalgamated with the adjoining properties was not "in terms" conveyed to Say-Dee. However, by so doing, it was contended that his Honour had not ruled out a finding that the substance or effect of that information had been conveyed or at least appreciated by Dalida and Sadie. 55 It is true that in [60] and [61] of his judgment the primary judge concluded that, in his cross-examination, Mr Elias was making an honest endeavour to give answers truthfully and carefully and that his impression of him was that he was an essentially truthful witness. Nevertheless, it is clear that his Honour did not accept Mr Elias' evidence in every respect. In particular, he did not accept his evidence (recorded in [49] above) that he had "always told" Dalida and Sadie that it was the view of the Council that to maximise the development potential of No. 11 the property ought to be amalgamated with adjoining properties. Had that evidence of Mr Elias been accepted by his Honour, he could not have made the finding that he did in [66] that that information was "not, in terms, conveyed to Say-Dee". 56 Furthermore, Mr Elias had given sworn evidence both in his affidavit and orally that he had given Dalida and Sadie "all Council reports relating to the property". Again, the primary judge made no finding that would indicate that he had accepted that evidence. Although it was put squarely to Mr Elias that he had not told Dalida and Sadie of the Council's position with respect to the amalgamation of No. 11 with adjoining properties, no challenge to the opposite effect was put to either woman. So far as Dalida was concerned, the only cross-examination that might have touched on that subject was in the following exchange (at Black 32 U-W): "Q. When you look at the situation today, you would recognise, wouldn't you, if you were signing a second DA application in 2001, there must have been a reason why the first DA application hadn't been successful? A. Yes, George told us it wasn't successful. Q. When did he tell you that? A. After it was rejected by the Council." It is telling that the cross-examiner did not follow up this line of questioning and, in particular, did not ask the obvious question: what reasons did Mr Elias give you as to why the Council had rejected the application? 57 It is clear from the Council reports that the first development application was refused on a number of grounds that related, not only to the fact that the development was "too big" in that it was excessive in height, bulk and scale and in that it did not comply with the development standards with respect to floor space ratio and number of storeys as permitted in the draft LEP, but also because No. 11 was both too small and too narrow to accommodate the required number of off-street car parking spaces. Nevertheless, under the development standards of the draft LEP, a floor space ratio of 3:1 was permitted in a building of a height of up to five storeys. That was the maximum potential development of No. 11 to which, in my opinion, reference was made in the various Council reports to which I have referred, as well as in its formal reasons for the refusal of the first development application. 58 There was no doubt that No. 11 was under-developed. The existing building was only two storeys and contained four units. It is equally clear, and in fact common ground, that Mr Elias was an experienced developer and that Dalida and Sadie were not. In fact, this was their first venture into the field of property development. It was an essential part of the arrangement between the parties that all matters relating to the preparation of an appropriate development application and the ultimate obtaining of development consent were entirely the responsibility of Farah through Mr Elias. 59 Even if the correspondence enclosed with the letter of 12 July 2001 included Council's Notice of Determination of 4 April 2001 (and it was not suggested that there was any other relevant correspondence) so that Dalida and Sadie became aware of the Council's formal reasons for refusal, it does not follow, as a consequence of being informed that No. 11 was considered too small to achieve its full development potential and return a positive urban design outcome, that, given their complete lack of knowledge of or experience in the intricacies of land development, they appreciated in any meaningful sense that the Council would only consent to the redevelopment of No. 11 to anything like its maximum potential under the draft LEP and draft DCP if it was amalgamated with the adjoining properties. 60 Furthermore, as the primary judge pointed out during the course of final addresses (Black 134), although it might be common sense that if one is told that a site is too small for a particular development one will need a larger site for the purpose, the Council in the present case was saying more than that: there was, as his Honour correctly termed it, "the additional dimension" that the senior planners of the Council were telegraphing that if a development of the nature of that proposed was to be recommended by the officers for approval, it would be necessary to amalgamate No. 11 with the adjoining properties. In other words, as his Honour suggested, the particular relevance of the information in question and the fact that it emanated from the senior Council planners was, not so much that as a matter of common sense the rejection of the development application because the site was too small meant that a larger site was probably necessary, but that the Council reports were conveying or telegraphing a particular piece of information with respect to the Council's future attitude to any proposed development if No. 11 was amalgamated with the adjoining properties, namely, that subject to achieving a positive urban design outcome, it would most likely be approved or, at least, recommended for approval. 61 It is that aspect of the relevant information that to a developer would be critical. In other words, a developer would only be influenced in incurring the expense and effort of amalgamating a larger site if the Council's senior officers had made it clear, in a written report, that such an amalgamation would likely bear fruit in the form of an approval of the proposed development. Accordingly, even if Dalida and Sadie were aware of the Council's formal reasons for refusal as set out in the Notice of Determination dated 4 April 2001, that information fell short of any knowledge or appreciation on their part of the real significance of that information, namely, the requirement to amalgamate No. 11 with adjoining properties in which event the likelihood of approval would be considerably enhanced. In fact it was never suggested to either of them in cross-examination that they had any such knowledge or appreciation. This is, perhaps, not surprising given that it was common ground that they had placed their total trust and confidence in Farah through Mr Elias to do whatever was necessary to achieve a profitable redevelopment of No. 11. 62 Of course, it should not be forgotten that at no time was it proven that Dalida and Sadie received a copy of the Notice of Determination from Mr Elias and at no time was it proven that the correspondence referred to in the letter of 12 July 2001 included that document as the letter was tendered without any annexures. Neither of them was cross-examined on that letter or as to the identity of the enclosed correspondence. Nor was Mr Elias asked to identify it. 63 Finally and most importantly, notwithstanding that the primary judge considered that Mr Elias was essentially a witness of truth, his Honour was not prepared to make a positive finding that Dalida and Sadie were in fact informed by him, expressly or implicitly, that the full development potential of No. 11 could only be achieved if it was amalgamated with the adjoining properties and that that, in effect, was a requirement of the Council if it was to approve a development which would achieve its maximum potential, being a development which conformed with the development standards of the draft LEP as well as the Council requirements with respect to on-site parking and an appropriate urban design outcome. 64 Accordingly, in my opinion, the primary judge was correct in finding that "in terms" Mr Elias did not convey to Dalida and Sadie that the Council was of the view that No. 11 was too narrow to maximise its development potential and that that potential could only be achieved if it was amalgamated with the adjoining properties. Nor, in my opinion, ought this Court to find, because his Honour certainly did not, that that information, although not conveyed "in terms", was conveyed either in effect or in substance. Therefore, Farah's submissions to the contrary should be rejected and the question posed in the heading to [41] above should be answered: None. What knowledge, if any, did Dalida and Sadie have of Mr Elias' intention to acquire Nos. 13 and 15? 65 In respect of this issue, there was also conflicting evidence. Mr Elias maintained that, before he procured the purchase of either of Nos. 13 or 15, he informed both Dalida and Sadie about the possibility of acquiring those properties. Dalida and Sadie denied that they were ever so informed. It is appropriate to set out Mr Elias' evidence in [22] of his affidavit which is revealing for what he did not say rather than for what he did say: "In early 2001 I was negotiating on the purchase of two sites at 20 George Street and 15 Deane Street. At the same time, I became aware that Miss Elias had been diagnosed with cancer and I made an extra effort to keep the accounts in order without referring this issue to Miss Dagher and Miss Elias. In late May 2001, I met Miss Dagher and said to her: I said: 'I have been negotiating some options to purchase on 20 George Street and 15 Deane Street and the owners don't want options, they want to sell outright. The owners want two million dollars. Are you interested in these properties?' " 66 Mr Elias' evidence was that Dalida informed him that she and Sadie were not interested as they were in no financial position to commit themselves to such an acquisition. It should be noted that the proposal was for the acquisition of both No. 15 and No. 20 George. Although both were in the same block as No. 11, neither adjoined it although No. 15 was separated from No. 11 only by No. 13. Although it is clear that No. 15 was an adjoining or adjacent property to No. 11 for the purpose of site amalgamation as contemplated by the Council, No. 20 George was not. Nevertheless, it is apparent that, if Mr Elias' evidence was to be accepted, what was offered was the opportunity to acquire both and not No. 15 on its own. 67 Mr Elias' offer to Dalida having been rejected, he caused contracts for the purchase of the four strata units at No. 15 and the four strata units at No. 20 George to be acquired, one each by himself, his wife and two daughters or their nominees pursuant to eight contracts exchanged on 30 June 2001. The total purchase price of No. 15 was $1,080,000 and that of No. 20 George $980,000: a total of $2,060,000. Although the vendor companies were different, it is clear from the contracts that were in evidence that they were commonly controlled. It is apparent that both properties were offered for sale in one line or as a package. 68 What is revealing from the evidence of Mr Elias referred to above is not only that the offer to participate, if it occurred at all, was with respect to No. 20 George as well as No. 15 but also that he did not inform Dalida as to why the acquisition of either or both properties might be advantageous to Say-Dee given the Council's attitude to the redevelopment of No. 11. Furthermore, Mr Elias did not suggest to Dalida that, because of the Council's attitude, she and Sadie should consider joining in the acquisition of No. 15 alone, there being no suggestion by Mr Elias that there was any necessity for them also to be involved in the purchase of No. 20 George. 69 As to the acquisition of No. 13, Mr Elias' evidence (in [26] and [27] of his affidavit) was that in August 2002 he telephoned Dalida and informed her that No. 13 had come onto the market. He said that he informed her that No. 13 was a good proposition for redevelopment in conjunction with No. 11. When asked the purchase price by Dalida, he informed her that it was $1.55 million, possibly more. When she asked him whether that was too much, his response was "Look Dalida, it is not a matter of how much. It's a matter of not letting it go. I don't want anybody else to buy this property except for us." 70 According to Mr Elias, Dalida then indicated that she and Sadie were not in a position to purchase anything at that time as they were having financial difficulties. She said she was not interested in more investment but that Mr Elias should purchase No. 13 and: "if we can later develop it with 11 Deane Street, we can take a space equivalent to our space in 11 Deane Street. Otherwise if we get a good price for our property we will consider selling it. It is too much pressure on us at this point in time." Mr Elias then said that it would be difficult for him to purchase No. 13 on his own and that they should purchase it together. When Dalida informed him that they could not do anything at that time, he replied that he would have to make other arrangements on his own. 71 It is appropriate to interpose at this point two observations. The first, to which I have already referred, is that on Mr Elias' own evidence, when in late May 2001 he met Dalida and asked her whether she was interested in the acquisition of No. 15 and No. 20 George, he did not inform her as to why their acquisition would be beneficial to them; nor did he inform her that, subject to acquiring No. 13, the acquisition of No. 15 would complete the amalgamation which the Council required if the maximum development potential of No. 11 was to be achieved. Further, as I have already observed, Mr Elias only offered Dalida the opportunity of acquiring an interest in both properties and not in No. 15 alone. 72 The second observation is that similar comments can be made with respect to Mr Elias' evidence, if otherwise accepted, with respect to the proposed acquisition of No. 13. It is true that, according to his evidence, he told Dalida that it was "a good proposition for redevelopment in conjunction with 11 Deane Street" and that it was "a matter of not letting it go. I don't want anybody else to buy this property except for us." 73 Although it is apparent from this exchange that Mr Elias was proposing that Dalida and Sadie be involved in the acquisition of No. 13, nevertheless the real reason why it was a "good proposition" and why it should not be let go was not conveyed, namely, that if No. 11 was to be redeveloped at all to its maximum potential then it was a requirement of the Council that it be amalgamated with at least No. 13, if not both Nos. 13 and 15. In other words, the real reason necessitating the acquisition of No. 13 was not conveyed by Mr Elias to Dalida. Rather, Mr Elias was insisting that No. 13 should be acquired by both parties as it would be "difficult for me to do it on my own". This evidence was said by the primary judge (at [54]) to have conveyed an indication on the part of Mr Elias that he did not have the financial strength to acquire No. 13 and that he was looking to Dalida and Sadie to assist him in that regard. Even if that was so, it fell well short of disclosure by Mr Elias to the two women of the real reason as to why he wished them to be involved and as to why it would be a "good proposition" for redevelopment in conjunction with No. 11. 74 However, it seems to me that Mr Elias chose his words carefully and certainly did not convey in terms to Dalida that if No. 11 was to be redeveloped at all it was essential that that occur in conjunction with No. 13. In other words, he did not disclose to Dalida the whole truth. If the scope and extent of Farah's fiduciary duties extended to this information, then as Ipp J pointed out in Biala Pty Ltd v Mallina Holding Ltd (No 2) (1993) 13 WAR 11 at 58, Farah through Mr Elias "was bound to state everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which was not so, or to omit no one fact within its knowledge the existence of which might in any degree affect the decision to be taken by" Say-Dee through Dalida and Sadie. 75 It was submitted by Farah that the above finding that Mr Elias did not make full disclosure to Dalida of the real reason for "not letting [No. 13] go" was not open because then senior counsel for Say-Dee had in address to the primary judge (at Black 134F-J) conceded that, although he was submitting that there had not been full disclosure with respect to No. 15, he could not make that submission with respect to No. 13. 76 At the hearing of the appeal, senior counsel for Say-Dee sought the Court's leave to withdraw that concession. That leave was opposed by senior counsel for Farah upon the basis that it was a considered decision of senior counsel and was not made either inadvertently or unadvisedly. Nevertheless, it was conceded by senior counsel for Farah that, even if the concession had not been made, his client's evidence would have been no different. 77 In my opinion, leave should be granted for Say-Dee to withdraw the concession. It was only made in final addresses and in any event was not accepted by the primary judge when he found (in [66]) that the information which was the subject of the concession, had not "in terms" been conveyed to Say-Dee by Mr Elias. The true position, in my opinion, is as I have set out in [73] above based, as it is, on Mr Elias' own evidence. I turn, therefore, to Dalida and Sadies' evidence relevant to this issue and their knowledge of the proposal of Mr Elias to acquire the two properties. 78 Dalida swore two affidavits that, in part, related to the acquisition of No. 13. According to her first affidavit sworn 18 June 2003 she and Sadie were informed in mid to late 2002 by Mr Elias that he was purchasing other properties in the area, but he neither informed them as to which properties he was buying nor of any details of the purchase. Dalida denied, in her second affidavit of 17 June 2004 in response to that of Mr Elias in which he gave evidence of his alleged disclosure of the possibility of purchasing Nos. 13 and 15, that the conversations with her recounted by Mr Elias ever occurred. 79 However, in her first affidavit, Dalida recounted a meeting between herself, Sadie and Mr Elias in late October 2002 when he informed them that both development applications for No. 11 had been rejected. This was not entirely correct as the second development application was not rejected but withdrawn by Mr Elias on 27 August 2002. Nevertheless, Dalida recounted in [33] of that affidavit her response to this information which was to ask: "then why don't we do a development with the building next door which you own?". His Honour held (at [39]) that this made it unequivocally clear that she knew by the time of this meeting in October 2002 that Mr Elias' interests owned "the building next door", namely, No. 13. It will be remembered that the contract to purchase No. 13 was entered into on 15 August 2002. 80 The primary judge then referred to [28] of Dalida's second affidavit in which Mr Elias informed her and Sadie "around September/October 2002" that there was a buyer for No. 11, that he wished to sell and that he intended to sell all his other properties in the area as well. She recounted that Sadie then said to Mr Elias: "What other properties do you own in the area?" To which he replied: "Next door to 11 and next door to that." 81 On the basis of the foregoing evidence, his Honour (at [41]) concluded that in the first version of this conversation Dalida was suggesting a joint development with Nos. 11 and 13 to which Mr Elias countered that he was selling all his properties. In the later version according to Dalida, Mr Elias said that he was selling his properties and, when asked by Sadie what they were, informed the two women that they were Nos. 13 and 15. 82 According to the primary judge (at [42]), the foregoing affidavit evidence of Dalida revealed a significant inconsistency at least as of October 2002 in her testimony, namely, that her first affidavit indicated that she was apparently then aware that Mr Elias (or his interests) was the owner of No. 13, which had been purchased under contract dated 15 August 2002 and completed on 6 November 2002, whereas in the later version of this conversation in Dalida's second affidavit, Sadie had to ask Mr Elias what other properties he owned in the area and was then informed that he owned Nos. 11 and 13. 83 It followed, according to his Honour, that if the first version was correct, at least Dalida was aware of the acquisition of Nos. 13 and 15 prior to October 2002 which, according to his Honour (at [42]) "would leave unchallenged the evidence of Mr Elias in his affidavit that he had told her before the proposed acquisitions were made." 84 This conclusion of his Honour is, with respect, in part incorrect. No. 15 was acquired by contracts dated 30 June 2001. No. 13 was acquired by contract dated 15 August 2002. The conversation recounted by Dalida in her first affidavit as to "the building next door which you own" took place in October 2002 and was, in its terms, a reference to No. 13 which was the only building "next door". So much was acknowledged by his Honour in [39] where he said "This evidence makes unequivocally clear Ms Dagher knew by the time of his meeting in October 2002 that Mr Elias' interests owned ' the building next door ', i.e. No 13." 85 Although the inconsistency in her evidence on which his Honour relied may well relate to the acquisition of No. 13, it cannot also be related, as his Honour has done in [42] of his judgment, to the acquisition of No. 15 which occurred on 30 June 2001. Accordingly, in my opinion, there is no inconsistency in the evidence of Dalida with respect to her alleged lack of knowledge of the acquisition by Mr Elias and his family of No. 15 and, for that matter, No. 20 George. 86 The primary judge then turned to the evidence of Sadie who, in her first affidavit of 19 June 2003, deposed to a conversation between herself, Dalida and Mr Elias in late 2002 whereby Mr Elias said that he was buying some other properties in the area but never informed them of the identity of the properties he was purchasing or any details thereof. Nor did he offer that the women become involved in their purchase. 87 His Honour referred to a further paragraph in the same affidavit where Sadie deposed to the meeting in October 2002, which Dalida had also recounted in her first affidavit. Their versions were generally consistent in that when Dalida suggested that they should reduce the number of units in the proposed development of No. 11, Mr Elias said that was going to sell his other properties to which, according to Sadie, Dalida replied: "We don't want to sell, we really want to develop this property and think it would be a really great site. Why don't we get together and do a big development with your other properties?" 88 I have already noted, when dealing with the manner in which his Honour approached the affidavit evidence of Dalida, that Mr Elias' evidence which his Honour accepted – that he told her of the proposed acquisitions of both Nos. 13 and 15 – was not supported by Dalida's statement in her first affidavit when she asked "Why don't we do a development with the building next door which you own?" which his Honour accepted (at [39]) referred only to No. 13. It must follow that, at least on this evidence, there is nothing to suggest that Dalida was aware prior to 30 June 2001 (being the date upon which Mr Elias and his family entered into the contracts to acquire No. 15) that Mr Elias was negotiating to purchase No. 15 Deane Street and No. 20 George. There is nothing to support his evidence that in May 2001 he informed Dalida at a meeting with her alone (because Sadie was ill at the time) that he was in the process of such negotiations. 89 The same observation may, in my view, be made with respect to the evidence of Sadie to which I have referred above. It is true that at the October 2002 meeting she attributed to Dalida the statement "Why don't we get together and do a big development with your other properties?" and that that was a reference to both Nos. 13 and 15. His Honour's conclusion (at [45]) was that by October 2002, Sadie already knew that Mr Elias and his interests owned Nos. 13 and 15. But even if that finding applied to both Sadie and Dalida, it did not warrant a finding that, on or prior to 30 June 2001 and, in particular, in May 2001, they had been made aware by Mr Elias that he was negotiating to purchase No. 15. 90 In her third affidavit of 16 August 2004, Sadie gave a different version of the October 2002 conversation that was, according to his Honour (at [46]), very close to that given by Dalida in her second affidavit. However, his Honour noted (at [47]) that neither Dalida nor Sadie was cross-examined with respect to the inconsistencies he had identified; nor did either of them explain how they arose. This was no doubt because they were simply not asked. His Honour thus concluded that the evidence of the two women on this point was in an "unsatisfactory state". 91 After referring to Dalida's evidence concerning the financial position of Say-Dee at the time of acquisition of Nos. 13 and 15, and concluding that in her affidavit she had been "less than frank and forthcoming", the primary judge concluded (at [54]) that it was inherently probable that Mr Elias would have asked Dalida and Sadie if they were interested in acquiring Nos. 13 and 15 as his unchallenged evidence was that he found great difficulty in raising the money for these acquisitions. 92 In my opinion Mr Elias' unchallenged evidence does not support this finding. Paragraph 22 of his affidavit of 19 February 2004 (Blue 1/98) refers to the fact that since early 2001 (which in cross-examination he said was probably in March) he had been negotiating to purchase No. 15 and No. 20 George, and that in late May 2001 he asked Dalida whether she was interested in these properties. However, in neither his affidavit nor oral evidence is there a reference to any suggestion that he was seeking Dalida's interest in those properties because he was finding difficulty in raising the purchase price. 93 Furthermore, the only evidence of Mr Elias to support the primary judge's finding (at [54]) that it was his unchallenged evidence that he found great difficulty in raising money, not only for the acquisition of No. 15 but also of No. 13, was that in [27] of his affidavit Mr Elias responded to Dalida's intimation that she and Sadie were not in a position to purchase No. 13 as they were having financial difficulties in the following terms: "Mr Elias Dalida, it will be difficult for me to do it on my own. We should do it together. We must … Dalida We can't do anything now George Mr Elias That's OK. I'll have to make other arrangements on my own then." 94 Mr Elias' evidence was that he then successfully tendered to purchase No. 13 for $1,680,000 and that he borrowed the money from St George Bank using personal and company guarantees. 95 As I have noted in [73] above, his Honour interpreted Mr Elias' statement that "it will [be] difficult for me to do it on my own" as indicative of the difficulty he would have in raising the money to acquire No. 13. However, in my opinion the difficulty to which Mr Elias was referring was that of redeveloping No. 13 in conjunction with No. 11. This follows from the immediately preceding statement in [27] of his affidavit where he attributed to Dalida's lack of interest in more investment, a statement by her that Mr Elias should buy No. 13 and that, if it was later developed with No. 11, she and Sadie "can take a space equivalent to our space in 11 Deane Street". Accordingly, the unstated and undisclosed difficulty to which Mr Elias was referring was not related to the question of the cost of acquiring No. 13, or, for that matter, the cost of redevelopment but to the difficulty of developing No. 13 otherwise than in conjunction with the redevelopment of No. 11. 96 Nevertheless, his Honour correctly opined (at [54]) that Nos. 13 and 15 were obviously suitable for an amalgamated development with No. 11. After noting that there was no suggestion in the evidence of any reason, whether of animosity, necessity or greed, for Mr Elias to keep secret from Dalida and Sadie the possibility of a larger development incorporating all three pieces of land, his Honour observed: "It would have made obvious commercial sense for Mr Elias to endeavour to raise funds for the proposed acquisition of Nos. 13 and 15 from his co-investors in No. 11. If, as he says, he had asked Ms Dagher and Ms Elias, it is probable that he would have met with the response which he says he received." By this his Honour meant that they would have declined to invest upon the basis that they were in financial difficulty. 97 Accordingly, his Honour concluded (at [55]) in the following terms: "I am not satisfied that Mr Elias failed to disclose to Say-Dee the proposed acquisition of Nos. 13 and 15 and failed to invite its participation in the investment. On the contrary, I am satisfied that he did so and that his invitation was declined, as he says." 98 This finding of his Honour was based, firstly, upon his previous findings in [47] relating to the inconsistencies in Dalida and Sadie's evidence with respect to their knowledge of the acquisition by Mr Elias or his interests of No. 13 and/or No. 15 prior to October 2002; secondly, upon his findings in [54] that Mr Elias found great difficulty in raising the money for the acquisition of Nos. 13 and 15 so that it was inherently probable that he would have asked the two women if they were interested in joining in the acquisition of the properties; thirdly, that Nos. 13 and 15 were obviously suitable for an amalgamated development with No. 11 and, therefore, it would have made commercial sense for Mr Elias to endeavour to raise funds for their acquisition from his co-investors in No. 11; and, fourthly, that there was no suggestion in the evidence of any reason such as necessity or greed for Mr Elias to keep secret from Dalida and Sadie the possibility of a larger development incorporating all three parcels of land. 99 A further reason recorded by the primary judge in [56] as supporting his finding in [55] that Mr Elias did disclose to Dalida and Sadie the proposed acquisition of Nos. 13 and 15 and invited Say-Dee's participation therein, was his finding that it was inherently probable that Say-Dee would have declined that invitation as a consequence of its financial inability at the time to accept it. 100 The only basis upon which this further reason could support his Honour's finding at [55] was that it was consistent with Mr Elias' evidence referred to at [53] that when he proposed to Dalida the acquisition of Nos. 13 and 15, Mr Elias was told that their businesses were "not going too well" and that it looked as if Say-Dee could lose $350,000 in a café business at Miranda "so that it could not afford any more investment in the Deane Street development". 101 The primary judge's impression (at [61]) of Mr Elias was that he was "an essentially truthful witness" and that he did not think (at [58]) that Mr Elias was being untruthful in the evidence he gave in cross-examination on the present issue notwithstanding a number of apparent contradictions. Given those findings together with his finding (at [48]) that Dalida's evidence concerning the financial position of Say-Dee at the time of the acquisition of Nos. 13 and 15 "had been less than frank and forthcoming", I can accept his Honour's conclusion that if Dalida and/or Sadie had been asked to participate in those acquisitions, they would have declined for financial reasons. But it does not necessarily follow that his Honour was correct in finding that they were so asked: their financial difficulties may have been imparted by them to Mr Elias at different times and in different contexts. After all, it was common ground that they met up for coffee at Burwood on numerous occasions during the relevant period. 102 However, if the primary judge's finding in [55] is to be overturned, it will need to be established that his acceptance of Mr Elias' essential truthfulness on this issue was contradicted by other more compelling evidence. 103 Accordingly, Say-Dee submitted that his Honour's finding in [55] that Mr Elias gave Dalida and Sadie the opportunity to participate in the purchase of Nos. 13 and 15 before acquiring those properties was either glaringly improbable, contrary to compelling inferences, the result of his Honour palpably misusing his advantage as the trial judge or the result of legal error: see Fox v Percy (2003) 214 CLR 118 at 128 [29]; 138-139 [65]-[66]. 104 It was further submitted that, although his Honour found (at [60] and [61]) that Mr Elias was essentially a truthful witness, he had overlooked the fact that at least two of his factual findings were directly inconsistent with Mr Elias' sworn evidence. 105 The first of those was that in [59] of his judgment his Honour had found that in late 2002 or early 2003 Mr Elias had put to Dalida and Sadie an offer to purchase No. 11 representing that he was a consultant to the offeror when, in fact, his interests solely controlled the offeror. However, his Honour discounted what was clearly grossly misleading and deceptive conduct on Mr Elias' part by finding that "his motivation for this misrepresentation was to avoid the disputation which was likely to arise if he himself made an offer directly." 106 It was submitted that there was no evidence of Mr Elias to support that last proposition and that is so. Furthermore, the finding was directly contrary to Mr Elias' sworn affidavit evidence in which he asserted that, when around December 2002 Dalida and Sadie said to him that they knew he was the actual purchaser of No. 11, he responded, "I always told you". That evidence was simply false and is patently inconsistent with the motive for not telling them that he or his interests was the proposed purchaser attributed to him by the primary judge. 107 The motivation for Mr Elias' attempted deception of the two women with respect to the true identity of the proposed purchaser of No. 11, namely, to avoid the disputation which was likely to arise if he himself made the offer directly, did not form the basis of any submission that was made to the primary judge by Mr Elias at the trial. Nor, as I have said, did Mr Elias himself give evidence of any such motivation that would, of course, have been inconsistent with his sworn affidavit and oral evidence that he had always told Dalida and Sadie that he was the prospective purchaser of No. 11. 108 Secondly, it was submitted that his Honour had overlooked the fact that, notwithstanding that Mr Elias had given sworn testimony that Dalida and Sadie were made aware by him of the reasons for the Council's refusal including that he had provided them with a copy of the Council reports earlier referred to, and his direct testimony (at Black 111V-X) that he always told them that it was the view of the Council that to maximise the development potential of No. 11 the property ought to be amalgamated with adjoining properties, his Honour was not prepared to accept that evidence. On the contrary, at [66] he concluded that he was prepared to find that that information was not, in terms, conveyed to Say-Dee. A number of other inconsistencies in the evidence of Mr Elias were relied upon by Say-Dee but it is unnecessary to detail them for present purposes. 109 I also have difficulty with his Honour's finding (at [54]) that it was inherently probable that Mr Elias would have asked Dalida and Sadie if they were interested in joining in the acquisition of Nos. 13 and 15 as that made "obvious commercial sense" although I agree with his finding that the two sites were obviously suitable for an amalgamated development with No. 11. I shall return to this difficulty below but suffice it to say for present purposes that the suitability of the sites for an amalgamated development to which his Honour referred, coupled with the fact that Mr Elias' knowledge of the necessity for that amalgamation to occur if the Council's consent was to be obtained was not conveyed by him to Dalida and Sadie, weakened considerably the probability that Mr Elias would have sought out the investment of Say-Dee in the acquisition of Nos. 13 and 15. One might ask rhetorically, why share with Say-Dee the profits of an amalgamated development when there was no necessity to do so? I tender that question upon the basis of my conclusion that there was no evidence to support his Honour's finding (at [54]) that Mr Elias found great difficulty in raising the money for the acquisition of the two properties and his later attempt to purchase No. 11 from Say-Dee and Farah by a company he controlled but without informing Dalida and Sadie of that fact. 110 Say-Dee challenged the primary judge's reliance upon the inconsistencies in the evidence of Dalida and Sadie with respect to whether they became aware that Mr Elias or his interests had acquired Nos. 13 and 15 prior to October 2002. It was submitted that each of the relevant paragraphs in the two affidavits of each witness related to the same conversation but that Dalida's account in her second affidavit was only an expanded version of that conversation deposed to in her earlier affidavit and placed in context, by reference to earlier parts of the conversation (which were omitted from the first account), the statement made by her in her first affidavit: "[t]hen why don't we do a development with the building next door which you own?" and that in her second affidavit: "well, why aren't we building together?" 111 It was further submitted that it was not open to his Honour to rely on the inconsistencies for the purpose of rejecting the evidence of Dalida and Sadie wherein they denied that they were aware that Mr Elias was negotiating to acquire Nos. 13 and 15 or that he had offered them the opportunity of investing in those properties, given that the rule in Browne v Dunn (1894) 6 R 67 had not been complied with. In my opinion, there is no substance in either of these criticisms. No basis exists in the evidence for the suggestion that the account given by Dalida in her second affidavit of the October 2002 conversation was intended by her as an expanded version of that conversation as set out in her earlier affidavit. There is no doubt that the two versions are inconsistent in a relevant respect and thus, as the primary judge found (at [47]), left her evidence on this point in an "unsatisfactory state". 112 The so-called principle in Browne v Dunn was the subject of more detailed exposition by Hunt J in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation (1983) 1 NSWLR 1 at 16 et seq. Relevantly for present purposes, is the principle or, more accurately, the practice that if counsel proposes to submit that a witness's evidence should not be accepted then that witness as a matter of fairness should be allowed an opportunity to deal with the suggestion: see Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 per Glass JA, with whom Reynolds JA agreed, at 224. 113 It is true that counsel for Farah did not cross-examine Dalida or Sadie at the trial with respect to the subject inconsistency. It was in [33] of her first affidavit that Dalida made the statement "[t]hen why don't we do a development with the building next door which you own?" In Mr Elias' affidavit, his response to [33] of Dalida's affidavit was that he denied the conversations attributed to him therein. In her first affidavit, Sadie had at [30], when dealing with the October 2002 meeting, attributed to Dalida the statement "we don't want to sell, we really want to develop this property and think it would be a really great site. Why don't we get together and do a big development with your other properties?" 114 Mr Elias made no reference in his affidavit in reply to [30] of Sadie's affidavit. He neither confirmed nor denied the terms of the conversation as therein related by Sadie. In that affidavit he referred to a conversation in August 2002 prior to his acquisition of No. 13 (to which reference has already been made) but made no reference to a conversation in October 2002. The nearest his evidence came to dealing with the same subject matter as that conversation which involved the sale of No. 11 was contained in [29] of that affidavit which, he said, took place around Christmas 2002 when, according to Mr Elias, Dalida asked him how much they could get for No. 11 to which Mr Elias replied "around one and a half million". There is no suggestion in Mr Elias' version that he had made an offer for the property in the sum of $1.5 million or that Dalida had replied that she and Sadie did not wish to sell but, rather, wanted to develop No. 11 "and do a big development with your other properties". 115 According to Mr Elias, Dalida had indicated that she and Sadie wanted around $1.7 million before they would sell No. 11 and that a few days later he met with the two women and had with him an option and contract for sale of No. 11 for $1.8 million. 116 Accordingly, there is no evidence on the part of Mr Elias which supports the first version of the October 2002 conversation sworn to by Dalida and Sadie whereby they spoke in terms which indicated to his Honour their awareness at that time that Mr Elias or his interests had acquired Nos. 13 and 15. 117 Of course, Mr Elias had in [22] of his affidavit sworn that he had indicated to Dalida in May 2001 that he was negotiating the purchase of No. 15 and No. 20 George and had asked her whether she was interested in those properties. Further, in [27] of his affidavit he further swore that he had conversed with the two women in August 2002 with respect to the acquisition of No. 13, conversations which they denied outright. 118 The point is that after the affidavits were filed, it was clear that there was a conflict in the evidence between Dalida and Sadie on the one hand and Mr Elias on the other as to whether he had informed them or either of them that he was negotiating to acquire No. 15 and then No. 13 and that in respect of each he had offered them the opportunity of partaking in the investment. It was thus clear that their evidence relating to this issue was in conflict with that of Mr Elias from which it followed that the parties were fully aware at the time the trial commenced that, on the critical issue which went to the breach by Farah of its fiduciary duties to Say-Dee, the parties were at issue. Accordingly, there was no occasion to apply the rule in Browne v Dunn. 119 It will be appreciated from the foregoing that there are significant aspects of Mr Elias' evidence which would have justified the primary judge in refusing to accept it with respect to the question of whether he informed Dalida and/or Sadie of the opportunity to acquire No. 15 and later No. 13 and, if he had so informed them, whether he invited them to join in those acquisitions. The primary judge, for the reasons to which I have referred in [98] above, accepted that Mr Elias was an essentially truthful witness and, coupled with the other considerations to which he had referred, was prepared to conclude that he should accept Mr Elias' evidence that he had offered Dalida and Sadie the opportunity to participate in the acquisition of Nos. 13 and 15. Say-Dee accepts that that finding can only be the subject of appealable error if it meets one or more of the four criteria referred to in Fox v Percy. Of those criteria, only two are presently relevant: was his Honour's finding glaringly improbable and/or was it contrary to compelling inferences? 120 The hurdle which Say-Dee must successfully negotiate to justify a finding in the terms referred to is extremely high. A suspicion that the finding was improbable or that there were contrary inferences is insufficient: the improbability must be glaring or the inferences compelling. It is insufficient that if a judge of this Court were the trial judge he or she would have come to a different conclusion. 121 There is in my opinion much to be said for the view that it was to Mr Elias' and/or Farah's financial advantage to keep secret from Dalida and Sadie the fact that he or his interests had acquired Nos. 13 and 15 to enable them to be amalgamated with No. 11 in order to meet the Council's requirement for the realisation or achievement of the maximum development potential of No. 11. 122 Such a conclusion is supported firstly, by the critical finding of the primary judge that the Council's consistent attitude that No. 11 was too narrow to maximise its development potential and that it should be amalgamated with adjoining properties was not, in terms, conveyed to Say-Dee. Secondly, there was no finding by his Honour that such information was conveyed either in effect or in substance: nor should there have been. Thirdly, Dalida and Sadie were completely inexperienced in the development of real estate whereas Mr Elias was highly experienced. Fourthly, in cross-examination Mr Elias accepted that the whole purpose of redevelopment was to maximise the potential development of property (Black 63U-V), that his own view accorded with that of the Council that No. 11 was too narrow to maximise its development potential (Black 82, 84G-J) and that that potential could only be realised if it was amalgamated with the adjoining properties (Black 64V-65G). Fifthly, Mr Elias withdrew the second development application with respect to No. 11 12 days after he had caused Lesmint to enter into a contract to purchase No. 13. Sixthly, the purpose of that withdrawal was that it was "a lot better" (and made commonsense as he already owned No. 15) to purchase No. 13 and amalgamate the three sites (Black 97W-98F). Seventhly, at the time of the Council's first report referring to the necessity to amalgamate No. 11 with the adjoining properties, he accepted that to minimise complications he should explore the possibility of acquiring the adjoining properties in order to get the development of No. 11 through Council with the least resistance (Black 99-100). And, eighthly and also critically, having acquired Nos. 13 and 15, and knowing that he did not control No. 11 as it was half-owned by Say-Dee, he falsely informed Dalida and Sadie that he was only acting as a consultant to the company making the offer to purchase that property when the truth was that he controlled the company making the offer. 123 Finally, there was no suggestion by the primary judge that he did not accept that part of Dalida's first affidavit (in [30]) in which at the meeting in late October 2002, Mr Elias indicated that he had been approached by a group of people wanting to buy No. 11 to which she responded (in [31]): "Why would we want to sell the property rather than develop it ourselves?" To this, Mr Elias responded (at [32] of Dalida's affidavit) that they had already submitted two development applications to the Council and that they had both been rejected. This was only a half-truth as he withdrew the second development application, although it was likely that it would have been rejected if it had been pressed. Paragraph 33 of Dalida's first affidavit contained the conversation that Dalida attributed to Mr Elias where he said he was selling all his properties as well. It was on this occasion, according to Dalida, that the offer of $1.5 million was made by Mr Elias which was considered by him to be a " fantastic offer " but which Dalida rejected. However, in [34] of her affidavit, Dalida deposed that two days later Mr Elias rang and informed her that he had " negotiated the price upwards to $1.8 million and have got a contract ready ". 124 That he had so negotiated the price was false to his knowledge as it misleadingly conveyed that he had negotiated the price upwards with the potential purchaser to whom he was only a consultant and otherwise unrelated. And it was false notwithstanding that in his affidavit he denied those parts of the conversations attributed to him in [31], [32] and [33] of Dalida's affidavit but did not deny that in [34]. 125 Dalida's evidence with respect to Mr Elias making the offer of $1.5 million for the purchase of No. 11 in October 2002 on behalf of a third party, telling the two women that they were wasting their time in attempting to get a development application through Council for No. 11, indicating that he was going to sell his other properties as well and, a few days later, informing Sadie that he now could get $1.8 million for No. 11 is consistent with the testimony of the two women in their second affidavits with respect to those parts of the October 2002 conversation to which I have referred. 126 As I have already observed, in his affidavit Mr Elias deposed that this discussion occurred around Christmas 2002, that it was Dalida who asked how much they could get for No. 11 and that, when Mr Elias said $1.5 million, they said that they would sell for $1.7 million. A few days later, according to Mr Elias, he met with the two women and provided them with an option and contract for the sale of the property for $1.8 million. Further, as already noted, Mr Elias did not when dealing with Sadie's first affidavit deny the conversations set forth in [30] and [31] thereof. 127 There is no suggestion in the primary judge's reasoning that he rejected the version of the October 2002 conversation deposed to by Dalida and Sadie except with respect to the question of whether they were as at that time aware that Mr Elias or his interests had acquired No. 13 and/or No. 15. Their versions were consistent (and they were not challenged in cross-examination with respect to them) that during that conversation it was Mr Elias who came forward with an offer to purchase No. 11 on behalf of some third parties for whom he said he was acting as a consultant, and that they did not wish to sell but that Mr Elias pressed upon them that they should sell as he intended to sell his other properties and this was the appropriate course as the Council had twice refused a development application with respect to No. 11. 128 Furthermore, as I have observed, the primary judge (at [59]) clearly accepted, contrary to the sworn evidence of Mr Elias, that it was he who put forward to Dalida and Sadie an offer to purchase No. 11 representing that he was a consultant to the offeror when in fact his interests solely controlled that party. 129 In my opinion, the foregoing considerations lead inevitably to the conclusion that it was glaringly improbable that Mr Elias disclosed to Dalida and/or Sadie his proposed acquisition of Nos. 13 and 15 from which it would follow that he did not invite their participation in that investment. Furthermore, in my opinion the evidence and considerations to which I have referred at the very least compel the inference that he kept the acquisition of those properties to himself. 130 It follows that if Mr Elias kept that information to himself then, in the light of his knowledge (which was not disclosed by him to Dalida and Sadie) that the Council would only consent to the redevelopment of No. 11 to its maximum potential if it was amalgamated with the two sites which Mr Elias had caused to be acquired by his interests, that would place him in a strong bargaining position to buy out the half interest of Say-Dee in No. 11. This would be particularly so if, firstly, he gave the impression (which he clearly did) to Dalida and Sadie that he had no interest in the offeror and, secondly, he made statements to the women that, due to the fact that the Council had rejected the two development applications with respect to No. 11, he proposed to sell his other properties meaning thereby Nos. 13 and 15. 131 Accordingly, the present is one of those rare cases where, in my opinion, the finding of the primary judge that Mr Elias disclosed to Dalida and Sadie the proposed acquisition of Nos. 13 and 15 and invited their participation in that investment was both glaringly improbable and contrary to compelling inferences and should, therefore, be set aside. That conclusion is founded on Mr Elias' own evidence coupled with the findings of the primary judge. Although it is not demeanour based, it does conflict with his Honour's finding referred to in [55] above and in [58] of his judgment. But that is because his Honour did not, as I there noted, accept Mr Elias' evidence on all issues and, in particular, upon the critical matters that underpin my conclusion that the question posed in the heading to [65] above should be answered: None. The nature and scope of Farah's fiduciary duties 132 It was submitted before the primary judge (and accepted by him at [65]) that it was part of the obligation of Farah to disclose to Say-Dee any relevant information about the Council's attitude to the redevelopment of No. 11. It was common ground, and his Honour held, that this obligation was inherent in the contractual duties undertaken by Farah which also bore a fiduciary character. 133 His Honour accepted that the relevant information, assuming there was a fiduciary duty to disclose it, was the view of the Council that No. 11 was too narrow to maximise its development potential and that in order for that potential to be achieved No. 11 should be amalgamated with adjoining properties. That information was, his Honour found, not conveyed. The question then arose as to whether the scope of Farah's fiduciary duties extended to its disclosure. 134 The primary judge accepted (at [67]) that it was the common intention of the parties at the time of the acquisition of No. 11 that it be redeveloped in the best and most profitable way as permitted by the Council. The Group Manager who prepared the relevant Council reports considered that the development the subject of the first development application submitted by Farah was much too large for the site and that if it was to be developed to its maximum potential, it would need to be incorporated with adjoining properties. 135 In response to a submission on behalf of Say-Dee that Farah was not entitled to exploit the information for its own benefit without the informed consent of Say-Dee, his Honour opined (at [68]) that that information was "really no more than that if Say-Dee and Farah wanted to construct a development of the size proposed they would have to acquire adjoining properties and that that would involve an acquisition of property beyond that which had been agreed between the parties." 136 It was clear from the evidence and his Honour so found (at [69]) that at the time of the acquisition of No. 11 it was the parties' clear intention that it was that property and only that property that was intended for redevelopment pursuant to the joint venture agreement into which they had then entered. At that time there was no intention that the subject matter of the agreement be expanded from the development of No. 11 to the development of any additional property. 137 Accordingly, it was submitted on behalf of Farah that the scope of the venture was the development of No. 11 and nothing more. It therefore followed (at [71]) that the scope of the fiduciary obligations owed by Farah extended no further than the boundaries of that property. The economic interests of the parties beyond the development of No. 11 were, so it was submitted, untouched by any fiduciary obligation so that if Farah became aware of opportunities to develop other properties, it owed no duty to disclose those opportunities to Say-Dee or to invite Say-Dee to participate therein. 138 The primary judge (at [34]) accepted Farah's submission that the scope of its fiduciary duties was defined by the nature and scope of the obligations which it assumed in its contract with Say-Dee. He concluded in these terms: "75. All that Farah contracted to do was to manage the development of No 11. It did not contract to provide opportunities for Say-Dee to participate in any project other than such development as could be constructed within the boundaries of No 11. The fiduciary obligations of Farah cannot be extended to cast upon it burdens which do not find their source in the contract which Farah entered. This principle is aptly illuminated in Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, at 16. 76. Here, Say-Dee seeks to impose upon Farah a fiduciary duty to make available to it the opportunity to invest in one or more development projects which are quite different from the one which was the subject of its contract with Say-Dee, namely, a possible development of No 13, or a possible development of No 15, or a possible amalgamated development of Nos 13 and 15, or a possible amalgamated development of Nos 11, 13 and 15. Farah did not contract to do anything in relation to any such developments and it cannot be required by resort to the law of fiduciaries to undertake responsibilities or obligations which have no source in its contractual responsibilities. 77. In my opinion, Farah was under no fiduciary duty to disclose to Say-Dee the opportunity to acquire Nos 13 and 15, nor was it under any fiduciary inhibition in acquiring those properties for itself directly or indirectly." The findings of the primary judge as to the purpose of the venture 139 His Honour's critical finding which underpinned his conclusion with respect to the scope of Farah's fiduciary duties to Say-Dee was that the contract between the parties did not provide opportunities for Say-Dee to participate in any project other than such development as could be constructed within the boundaries of No. 11. In this respect, his Honour was of the view (at [67]) that although No. 11 was too narrow to maximise its development potential, that did not mean that no development of any sort was possible on that site. Literally this is true. It would, for instance, have been possible either to retain the existing development of four units upon No. 11 or to demolish that building and to erect, say, another building containing two, three or four units that complied in all respects with Council's requirements with respect to floor space ratio, number of storeys and car parking requirements. 140 But that was not the purpose of the venture. Its purpose was the redevelopment of No. 11 in such a manner and to such an extent as would, with the Council's approval, maximise the profit which might be generated therefrom. Mr Elias accepted in cross-examination that as a developer, the whole purpose of the exercise was to attempt to maximise the development potential of the site. Yet as and from June 2000 when the Council's first report came to his knowledge, he was aware that it was the Council's view that to achieve the maximum development potential of No. 11, it would be necessary to amalgamate it with adjoining properties, a view with which he concurred. It was never the intention of the parties, except temporarily, to retain the existing improvements upon No. 11. On the contrary, their intention was ultimately to demolish those improvements and erect a building that would make the maximum profit that could be achieved with the Council's approval. The point was made by Mr Elias when he was asked the following (at Black 63): "Q. It is inherent in the nature of property development that the property developer wants to get the maximum development that he can on the property, do you agree? A. That's true. … Q. The developer is always trying to push the envelope to see how far council will let him go? A. Correct." 141 It defies common sense to suggest that the purpose or object of the subject venture was otherwise than to maximise the development potential of No. 11. The problem was that Mr Elias, who had sole responsibility for the preparation and carrying out the redevelopment in order to achieve that objective, was aware, at the latest by early June 2000, that that objective could not be achieved unless No. 11 was amalgamated with adjoining properties. It was only if this occurred that there was at least a likelihood that Council would approve a redevelopment of No. 11 to its maximum potential. 142 Although Mr Elias denied in cross-examination that he negotiated the purchase of No. 15 on the basis that, subject to ultimately obtaining No. 13, that was the only way he was going to achieve a redevelopment of No. 11, he conceded that it was on his initiative that he approached the owner of No. 15 in March 2001 to acquire that property and that in 1998 or 1999 he had approached the owner of No. 13 to acquire that property but was told not to bother contacting him again as the owner would sell when he was ready. However, ultimately in early August 2002 he ascertained that the owner of No. 13 was prepared to sell whereupon he immediately negotiated to purchase that property. 143 Given Mr Elias' evidence in cross-examination that it was virtually inherent in the nature of property development that where a council rejects an application upon the basis that the site is being overdeveloped, the reaction of the experienced developer (such as himself) is to explore the possibility of acquiring the block next door and thus amalgamating a larger site, it is difficult to accept that Mr Elias acquired Nos. 13 and 15 otherwise than for the purpose of their ultimate amalgamation with No. 11 in order to maximise the development potential of the latter as the Council had consistently required. 144 In any event there was no finding by the primary judge to the contrary, namely, that No. 13 and 15 were acquired by Mr Elias or his interests independently of any intention to amalgamate them with No. 11 for the purpose of meeting the Council's requirement with respect to the redevelopment of No. 11. On the contrary, inherent in his Honour's acceptance that Mr Elias disclosed to Dalida and Sadie his proposed acquisition of Nos. 13 and 15 and invited their participation in the acquisition of those properties, and his finding (at [54]) that the properties were obviously suitable for an amalgamated development with No. 11 so that it was inherently probable that Mr Elias would have asked Dalida and Sadie if they were interested in acquiring them, is an implicit finding that No. 15, and later No. 13, were in fact acquired by Mr Elias to facilitate the redevelopment of No. 11. To adopt an apt expression used by his Honour at [54] of his judgment, it "made obvious commercial sense" for Mr Elias to acquire Nos. 13 and 15 as soon as they were available in order to achieve what the Council required with respect to the development of No. 11. 145 The foregoing conclusion is also supported by Mr Elias' evidence in cross-examination in the following exchange (Black 105-106): "Q. I'm saying when you were first dealing with the owner of 15 your hope was first, 'I hope I can do a deal with you', agree? A. With 15? Q. Yes. Your first hope was 'I hope I can do a deal with you, the owner of 15' ? A. I was always hoping that I would be able to do something with 15. Q. So that thereafter the owner of 13 might hopefully sooner rather than later come to you and say 'I've decided to sell 13' ? A. Yeah, I've always hoped that. Q. And so then you would have the three properties in align? A. I was hoping that even 18 George Street could come in. Q. Just concentrating for a moment on Deane Street. You were hoping by this process to get the three properties in align, that's correct, isn't it? A. Something to that effect. Q. And that would allow you to develop them together, agree? A. Maybe. Q. In a way that would be likely to find less resistance with council than your previous attempts to develop number 11? A. No, not really. Q. You didn't think that if you took a proposal up to council involving the joint development of 11, 13 and 15 you were likely to run into less resistance than you ran into when you attempted to develop 11 by itself? A. I wouldn't have expected to have less resistance at all." 146 Mr Elias' answers to the last three questions in the above exchange were disingenuous to say the least and inconsistent with the following evidence which he had given earlier at Black 99-100: "Q. Was it council's view that 11 Deane Street should be amalgamated with adjoining sites to maximise its development potential just the sort of challenge to a property developer as yourself to which you referred this morning? A. Yes. Q. It was a challenge which had to be met, agree? A. That's right. Q. And if your initial plans in relation to 11 did not include adjoining properties, you would need to be flexible and explore the possibility of acquiring the adjoining properties so that you could get the development of 11 through council with the least resistance, would you agree with that? A. Probably to minimise the complications. Sure. … Q. When did you form the view that in order to get the development of number 11 Deane Street through council with the least resistance that you would need to amalgamate the properties with 13 and 15? A. Since I've read the first report." 147 At Black 101 the following exchange took place: "Q. Didn't you tell his Honour on a number of occasions both before lunch and after lunch that you came to the realisation that if you wished to get development application of 11 through council with the least resistance you would need to amalgamate 13 and 15 Deane Street? A. I never said 15 and 13. I said – I've accepted the view of the council of the need to maximise the site but I never said 15 or whatever. I don't even remember that." That answer is inconsistent with Mr Elias' evidence in the last question and answer set out in the preceding paragraph. 148 In my opinion it is apparent from the evidence of Mr Elias which I have extracted above that after the acquisition of No. 11 it was always his desire to acquire Nos. 13 and 15 no doubt because, as he said at Black 98D-F, "I've always believed if you have more the better." Accordingly, having acquired No. 11, he took the opportunity when it arose to acquire first No. 15 and then No. 13. Although the acquisition of No. 15 would not permit its amalgamation with No. 11 until he could acquire No. 13, he always anticipated that this would eventually occur and when it did, he took immediate advantage of it. 149 For the foregoing reasons, coupled with those referred to in [144] above, I would reject Farah's submission that there was no evidence to support a finding that either No. 15 or then No. 13 were acquired by Mr Elias for the purpose of their amalgamation with No. 11 or that either was acquired by virtue or as a result of Mr Elias' knowledge obtained from the Council that No. 11 could not be developed to its maximum potential without the necessity of acquiring of Nos. 13 and 15. The legal principles concerning the scope of fiduciary duties 150 I turn now to the relevant legal principles. A convenient starting point is the decision of Bryson J (as he then was) in Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 15 where his Honour said: "It is in no way difficult but is ordinarily to be expected that a person under a fiduciary obligation to another should be under that obligation in relation to a defined area of conduct, and exempt from the obligation in all other respects. Except in the defined area, a person under a fiduciary duty retains his own economic liberty." 151 His Honour then referred to a number of authorities in support of that proposition. For present purposes it is sufficient to refer, as did Bryson J, to the following passage from the judgment of Mason J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97: "That contractual and fiduciary relationships may coexist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction." 152 After referring to Dr Finn's treatise Fiduciary Obligations (1977) at 233-236, Bryson J continued (at 16): "In particular, in conformity with principles which appear from the citations I have already made, the court treated the terms of the agreement between the parties as the source of their fiduciary relationship and the reference point for determining its scope." 153 There is no doubt that in the present case it was the agreement between the parties with respect to No. 11 that constituted the source of Farah's fiduciary duties. It was also, as Bryson J observed, "the reference point for determining its scope". However, it was not necessarily the endpoint for determining that scope. 154 In Noranda itself, clause 7.8 of the relevant agreement set out in great detail the fiduciary obligations of the relevant parties. It was submitted that in addition to the obligations created by that provision, fiduciary obligations existed in consequence of the relations created by the terms of the joint venture agreement as a whole. However, in the opinion of Bryson J (at 17) "[i]t would not be right to impose on the parties fiduciary obligations wider or different to those which in careful terms they imposed on themselves . The parties' agreement is the prime source for discerning the existence of a fiduciary obligation." (emphasis added) 155 After citing from the joint judgment of Mason, Brennan and Deane JJ in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 10 and 11, in which their Honours observed that whether or not the relationship between joint venturers was fiduciary depended upon the form which the particular joint venture took and upon the contents of the obligations the parties themselves had undertaken, Bryson J continued (at 17F): "There is, as this submission would suggest, a source of fiduciary obligations in the general law which is additional to the terms of the parties agreements but there are in my opinion no grounds for imposing on the parties' wider obligations than those which by their agreement they imposed on themselves. One way of conceiving of the limit of their fiduciary obligations is to conceive of it as the limit of the activities as to which the parties have mutual trust and confidence in each other." 156 One of the authorities referred to by Bryson J in Noranda was Birtchnell v Equity Trustees Executors and Agencies Co Ltd (1929) 42 CLR 384 at 408 where Dixon J (speaking of a partnership) said: "The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties whether embodied in written instruments or not, but also from the course of dealing actually pursued by the firm." 157 It was submitted by Farah that no course of dealing between the parties had occurred which would have expanded the venture set out in the agreement embodied in the letter of 20 April 1998 which I have set out in [20] above. However, that agreement was very bare in its terms and certainly did not set out in any detail or at all the fiduciary obligations which the parties and, in particular, Farah through Mr Elias undertook. This is in stark contrast with cl 7.3 of the agreement in Noranda. Nevertheless it was common ground that Farah's obligations under the agreement were the preparation of an appropriate development application, the advancing of that application through the Council, the obtaining of Council's approval, the construction of the development and its sale for profit. 158 In Kelly v CA & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248 at 256, Mahoney JA, with whom Priestley and Clarke JJA agreed, after referring to the kinds of relationship which give rise to fiduciary obligations, observed that: "the content of those obligations may be affected by the circumstances of the relationship." An understanding of the purpose or nature of the relationship is therefore crucial to a determination of the scope or extent of the fiduciary obligations arising from it. However, the relationship between the parties including its object or purpose needs to be considered in the context of the principles which inform the nature of a fiduciary relationship. 159 The Full Court of the Federal Court (Lockhart, von Doussa and Sackville JJ) in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 undertook a comprehensive analysis of fiduciary duties at 538-541. Relevantly for present purposes their Honours noted (at 539) that it had "long been recognised that the nature and extent of the duties depends on the circumstances surrounding the particular relationship and the context in which relief is sought." 160 Their Honours referred (at 540-541) to the judgment of Mason J in Hospital Products (at 96-97) where he observed that: "[the] fiduciary undertakes or agrees to act for and 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 person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise a power or discretion to the detriment of the other person who is accordingly vulnerable to abuse by the fiduciary of his position." Their Honours thus recognised that it was the obligation to act in the interests of another that was the foundation of the fiduciary relationship. 161 Referring to the judgment of Gibbs CJ, with whom Wilson J substantially agreed, in Hospital Products (at 68-70) their Honours observed that the Chief Justice had accepted that, in the circumstances, it was not inappropriate to apply the test that a fiduciary relationship exists where the facts of the case establish that, in a particular matter, a person has undertaken to act in the interests of another and not in his or her own interests. The Court of Appeal in Hospital Products had added that it is the fiduciary's undertaking to subordinate his or her interests that gives rise to the beneficiary's expectation or trust and confidence that the fiduciary will act accordingly. 162 In conclusion, the joint judgment stated (at 541) that the relevant question, in the words of Professor Finn, was whether: "the actual circumstances of a relationship are such that one party is entitled to expect that the other will act in his interests in and for the purposes of the relationship. Ascendancy, influence, vulnerability, trust, confidence or dependence doubtless will be of importance in making this out, but they will be important only to the extent that they evidence a relationship suggesting that entitlement." 163 In Brunninghausen v Glavanics (1999) 46 NSWLR 538 at 557 [94], Handley JA, with whom Priestley and Stein JJA agreed, cited the following passage from the judgment of Mason J in Hospital Products at 96-97 where his Honour said (with emphasis added by Handley JA): "… The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf 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 . The relationship … is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. … It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owned and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed." 164 Handley JA then added (at 557 [95]): "Mason J held (at 107) that a fiduciary is liable to account for a profit or benefit if it was obtained inter alia '… by reason of the fiduciary position or by reason of the fiduciary taking advantage of opportunity or knowledge which he derived in consequence of his occupation of the fiduciary position'. " 165 The most recent exposition of the principles relating to the scope and nature of the duties of a fiduciary is contained the decision of this Court in Blythe v Northwood [2005] NSWCA 221. The leading judgment was that of Mason P with whom Giles and Bryson JJA agreed (the latter adding some short observations of his own). 166 The President commenced the relevant part of his judgment with an extensive citation from the judgment of Deane J in Chan v Zacharia (1984) 154 CLR 178 at 198-199, the relevant parts of which for present purposes I set out hereunder: "The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one 'fundamental rule' embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. … Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee … That constructive trust arises from the fact that a personal benefit or gain has been so obtained or received and it is immaterial that there was no absence of good faith or damage to the person to whom the fiduciary obligation was owed. In some, perhaps most, cases, the constructive trust will be consequent upon an actual breach of fiduciary duty: eg, an active pursuit of personal interest in disregard of fiduciary duty or a misuse of fiduciary power for personal gain. … The principle governing the liability to account for a benefit or gain as a constructive trustee is applicable to fiduciaries generally including partners and former partners in relation to their dealings with partnership property and the benefits and opportunities associated therewith or arising therefrom: see Birtchnell v Equity Trustees; Consul Development Pty Ltd v DPC Estates Pty Ltd. " 167 Having referred to the above dictum of Deane J, the President then continued in the following terms: "183. In Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 198 [74] the High Court emphasised that the relevant fiduciary obligations are proscriptive rather than prescriptive in nature; and that there is not imposed upon fiduciaries a quasi-tortious duty to act solely in the best interests of their principals. The joint judgment of McHugh, Gummow, Hayne and Callinan JJ approved the following passage from Breen v Williams (1996) 186 CLR 71 at 113) In this country, fiduciary obligations arise because a person has come under an obligation to act in another's interests. As a result, equity imposes on the fiduciary proscriptive obligations – not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach. But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of a person to whom the duty is owed. See also Triffitt Nurseries v Salads Etcetera Ltd [2000] Lloyds Rep 74 (Eng CA). 184. The emphasis in Pilmer upon the proscriptive or prohibitory nature of the rules is reinforced by the universal recognition of the deterrent and prophylactic functions of those rules. Equity, though sometimes coy of admitting punitive intent (cf Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298), has long been anxious to proclaim a deterrent role for its stringent rules in this area. In Bray v Ford [1896] AC 44 at 51-2 Lord Herschell observed: It does not appear to me that this really is, as has been said, founded upon principles of morality. I regard it rather as based upon the consideration that, human nature being what it is, there is danger of a person holding a fiduciary position being swayed by interest rather than duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule. 185. See also Warman International Ltd v Dwyer (1995) 182 CLR 544, where the Court said (at 557-8): A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position. The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves 'at a level higher than that trodden by the crowd'. The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage." 168 After referring (at [187]) to Birtchnell at 408 (which I have cited in [156] above) and to Phipps v Boardman [1967] 2 AC 46, the President observed (at [194]) that the latter did "not contradict the proposition (well-established in Australia: see Birtchnell ) that the scope of the equitable obligation [of the fiduciary] depends on the precise nature and scope of the relationship in each individual case. The fiduciary is not accountable for profits derived outside the scope of the relationship or required, outside that scope, to prefer the principal's interest over those of the fiduciary." Application of the legal principles to the present case 169 The foregoing authorities establish that the relevant critical elements of the relationship between Say-Dee and Farah which informed the scope of the latter's fiduciary duties to the former were: (a) The nature of the obligations undertaken by Farah for the purpose of the redevelopment of No. 11 which was to obtain all such knowledge and information from the Council as would enable the parties to achieve the maximum development potential of that property; (b) The fact that Say-Dee reposed in Farah its trust and confidence that Farah would perform those obligations in the interests of both parties to the joint venture, thereby subordinating its own interests to those of Say-Dee; (c) The consequent entitlement of Say-Dee to expect that Farah would act in its interests in and for the purpose of the joint venture; (d) The dependence of Say-Dee on Farah, due to the former's inexperience and the latter's experience in developing real estate, that any knowledge or information obtained by Farah from the Council in performing its part of the joint venture would not be used by Farah to advance its own interests to the exclusion of those of Say-Dee; (e) The fact that the obligations undertaken by Farah under the joint venture arrangement provided it with a special opportunity to obtain knowledge or information from the Council concerning the redevelopment of No. 11 to the exclusion of Say-Dee with the consequences that the latter was wholly dependent upon Farah to disclose fully that knowledge or information to it and not to use it to further its own interests at the expense of those of Say-Dee without the latter's fully informed knowledge and consent. 170 In the present case it is common ground that Say-Dee reposed in Farah trust, confidence and dependence with respect to achieving the objective of the joint venture which was to redevelop No. 11 to its maximum potential in order to achieve a profit. Say-Dee's expectation of Farah and its trust and confidence that Farah through Mr Elias would act in its interests, required Farah not to conduct itself in its own interests to the detriment of Say-Dee's interests when it came to gaining information and the taking of steps which might result in the redevelopment of No. 11 to its maximum potential. 171 The fiduciary obligations or duties of Farah in these circumstances were, therefore, not to withhold information or otherwise act in a manner which, in a practical sense, either brought Farah's personal interests into conflict with its fiduciary duties and obligations or resulted in it making a profit or obtaining a benefit or an advantage from its actions as a consequence of the knowledge or information it acquired from the Council as a result of the special opportunities which it obtained by reason of the obligations it undertook as its contribution to the joint enterprise. 172 These twin proscriptive duties to avoid an undisclosed conflict of interest or the making of an unauthorised profit have been aptly described as functioning in order to "neutralise influences likely to sway the fiduciary away from properly performing" the non-fiduciary duties that lie at the core of the original consensual arrangement between the parties: see Matthew Conaglen, "The Nature and Function of Fiduciary Loyalty" (2005) 121 LQR 452 at 453. 173 Acting on behalf of the joint venturers in relation to No. 11, Mr Elias acquired from the Council valuable information about a method of exploiting the development potential of that property. This information (withheld from Dalida and Sadie) provided vital intelligence that was capable of being put to valuable use either in selling No. 11 to the adjoining owners or in contemplating an expansion of the original enterprise by purchasing the adjoining properties. Additionally, it formed part of the intellectual stock-in-trade of the original joint venture if it needed to be wound up when it came to an end as a result of the Council's refusal to permit redevelopment of No. 11 standing along (cf Chan at 182-3). 174 When Mr Elias used this information without the informed consent of Dalida and Sadie, he breached both arms of the proscriptive duty. Mr Elias breached the "no conflict" rule because any interest as purchaser of Nos. 13 and 15 was bound to clash with his duty to them as his fellow joint venturers in that he was, without their knowledge, armed with vital information that gave him the jump on Say-Dee in any possible sale of No 11. And he breached the "no profit" rule because the information he obtained regarding the Council's intentions as to the development of No. 11 so as to achieve its maximum potential spurred him or those in his camp to acquire Nos. 13 and 15 and to profit thereby to a degree yet to be ascertained. 175 Although Farah submitted that Say-Dee's case below was run solely as a "no profit" rather than as a "no conflict" case, the result is the same. This is because the Elias family members and Lesmint were, in my opinion, complicit in the acquisition of Nos. 15 and 13 respectively in that they were not bona fide purchasers without notice and for value of the fruits of the valuable intelligence obtained by Mr Elias with respect to the Council's intransigent attitude to the redevelopment of No. 11 of which, through Mr Elias as their agent, they took advantage by purchasing those properties. That was sufficient to engage the first limb or recipient arm of Lord Selborne LC's dictum in Barnes v Addy (1874) LR 9 Ch App 244 at 251-252, a matter to which I shall return later in these reasons at [210] et seq. 176 Finally, I need to refer to the confined scope of Farah's fiduciary duty as found by the primary judge and recorded in [138] above, namely, that it did not extend beyond the boundaries of No. 11 and that to hold otherwise would extend the contract entered into between the parties to include the development of No. 13 and/or No. 15. 177 The scope or extent of Farah's fiduciary duties to which I have referred does not mean, as Farah contended and as the primary judge seems to have thought, that the joint venture agreement between the parties was expanded, to include the acquisition and redevelopment of Nos. 13 and 15 in conjunction with No. 11. As I have hopefully demonstrated, Farah's duty was to disclose fully and accurately to Say-Dee through Dalida and Sadie its proposal to acquire those properties and the true reason for the necessity that they be acquired and to provide them, if they so wished, with the opportunity to join in their acquisition and redevelopment in conjunction with No. 11. There could, of course, be no extension of the agreement to redevelop No. 11 alone until Dalida and Sadie agreed thereto. There was therefore no question, as Farah submitted there was, of the disclosure of that information having the effect of expanding the venture so as to incorporate the purchase and development of the adjacent properties. Such a submission misunderstands the nature of a fiduciary's duty of disclosure so as to avoid acting to the detriment of the interests of the party to whom the duty is owed. 178 Accordingly, I am of the opinion that the primary judge erred in holding (at [75]) that the fiduciary obligations of Farah did not extend beyond any matter material to the redevelopment of No. 11 on its own. As Say-Dee submitted, the subject matter of the joint venture was the redevelopment of No. 11 with a view to maximising profit. Accordingly, the fiduciary obligations of Farah extended to all matters pertinent to any such redevelopment. The opportunity to purchase the adjoining properties, when the acquisition of those properties had the potential to enhance the development potential of No. 11 and to overcome the Council's opposition to the redevelopment of that property on its own, was plainly such a matter. 179 180 I would, with respect, go further than that submission and hold that the acquisition of Nos. 13 and 15 not only had the potential to enhance the redevelopment prospects of No. 11 but also, as the Council reports made plain, was essential for the realisation of that potential. Did Farah breach its duties as a fiduciary? 181 Although the primary judge ultimately concluded (at [77]) that Farah was under no fiduciary duty to disclose to Say-Dee the opportunity to acquire Nos. 13 and 15 and, further, was under no fiduciary inhibition in acquiring those properties for itself either directly or indirectly, his Honour found (at [62]) that even if Farah had a fiduciary duty to Say-Dee to offer it the possibility of participation in the acquisition and development of Nos. 13 and 15, it had discharged that duty in that Mr Elias had informed Dalida and/or Sadie that he was negotiating to purchase Nos. 13 and 15 and had invited them to participate therein, an offer which they had declined. 182 Say-Dee submitted that on two bases his Honour had erred in finding that Farah's fiduciary duty had been discharged by the provision of the information referred to. Firstly, that information had never in fact been disclosed, a proposition with which I agree for the reasons referred to earlier in this judgment. But, secondly, even if it had, there had not been full disclosure as required by the authorities: see, eg, [74] above. As I have already observed, it was not in contest that subject to the question of the scope of the relevant fiduciary duty, if it had the scope which in my opinion it did, the duty then extended to disclosing to Say-Dee that the Council was of the view that No. 11 was too narrow to maximise its development potential which could only be achieved if it was amalgamated with adjoining properties. 183 As his Honour expressly found (at [66]) that that information had not, in terms, been conveyed to Say-Dee and as I have rejected Farah's submission that it was conveyed in effect or in substance, it must follow that, subject to the matters to which I refer hereafter, Farah was in breach of its fiduciary duties when, through those in its camp, it took advantage of that information to acquire Nos. 13 and 15 for the purpose of profiting therefrom. Furthermore, by acquiring those properties Farah placed itself in a particularly strong bargaining position to acquire Say-Dee's one-half interest in No. 11. It was thus strategically positioned to impose significant pressure upon Say-Dee to sell that interest to Farah or its nominee at a discounted price which reflected the fact that Farah was, as the adjoining owner, the only potential purchaser of No. 11 as a whole. That position was made all the stronger as Say-Dee only had a one-half interest to sell and Farah owned the other half. The question of causation 184 As I have already observed, the primary submission of Farah was that the agreement between it and Say-Dee was to redevelop No. 11 and only No. 11 so that any fiduciary duty to which it was subject was similarly confined. Accordingly, so the submission ran, the fact that the Council would not approve the redevelopment of No. 11 to its maximum potential without its amalgamation with adjoining properties was irrelevant information so that the acquisition of Nos. 13 and 15 by the interests of Mr Elias, for the purpose of amalgamation with No. 11 so that the three sites could be redeveloped as one, did not involve any breach of duty on Farah's part. 185 I have already indicated (in [178] above) that, in my opinion, the premise that underlies this submission is misconceived. In any event, it is contrary to the decision of the House of Lords in Phipps v Boardman [1967] 2 AC 46 at 103C-E per Lord Cohen; 108G–109D per Lord Hodson and 117D-G per Lord Guest. The passage from the speech of Lord Cohen is authority for the proposition that fiduciaries are liable to account for profits they make if information gained by them arose out of the performance by them of their contractual obligations (as was clearly the case here) and where that information provided them with the opportunity to purchase property where there was a possibility that the other party might wish to participate in the acquisition thereof. 186 Nevertheless it was submitted by Farah that in the present case there was no possibility that Dalida and Sadie would have wished or been able to participate in the relevant acquisition. It was contended that the evidence of Mr Elias referred to in [66] and [70] above established, and his Honour found (at [55]), that they were having financial difficulties at the time of the acquisition which would have made it inherently probable that they would have declined to participate therein. As will be seen, this finding by his Honour has been taken out of context. Accordingly, so it was submitted, any breach by Farah of its fiduciary duties could not have been causative of any loss of profit which Say-Dee may have sustained as a consequence of that breach with the consequence that Farah was not required to account to Say-Dee for any profit it made or might make from the transactions. 187 Farah's contention is, however, contrary to and misunderstands the basis upon which a fiduciary is bound to account for any profit it makes from the breach of its fiduciary duties. It is not a question of the beneficiaries of the fiduciary's duties sustaining a loss of a profit or benefit which it seeks to recover, but of the defaulting fiduciary having to account for the profit or benefit it has made as a result of its breach of duty. 188 The relevant principle was stated by Lord Thankerton in delivering the opinion of the Privy Council in Brickenden v London Loan & Savings Co [1934] 3 DLR 465 at 469 where his Lordship said: "When a party, holding a fiduciary relationship, commits a breach of its duty by non-disclosure of material facts, which his constituent is entitled to know in connection with the transaction, it cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction, because the constituent's action would be solely determined by some other factor, such as the valuation by another party of the property proposed to be mortgaged. Once the Court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant." 189 The principle that a fiduciary can only defend a claim made upon him or her for an account of profits by establishing that he or she made those profits with the knowledge and consent of the party to whom the fiduciary duty was owed, was stated by Lord Hodson in Phipps v Boardman (at 105) in the following terms: "The proposition of law involved in this case is that no person standing in a fiduciary position when a demand is made upon him by the person to whom he stands in the fiduciary relationship to account for profits acquired by him by reason of his fiduciary position and by reason of the opportunity in the knowledge, or either, resulting from it, is entitled to defeat the claim upon any ground save that he made profits with the knowledge and assent of the other person." 190 His Lordship later observed (at 108-109): " Regal (Hastings) Ltd v Gulliver differs from this case mainly in that the directors took up shares and made a profit thereby, it having been originally intended that the company should buy these shares. Here there was no such intention on the part of the trustees. There is no indication that they either had the money or would have been ready to apply to the Court for sanction enabling them to do so . On the contrary, Mr Fox, the active trustee and an accountant who concerned himself with the details of the trust property, was not prepared to agree to the trustees buying the shares and encouraged the appellants to make the purchase. This does not affect the position. As Keech v Sandford shows, the inability of the trust to purchase makes no difference to the liability of the appellants [the fiduciaries], if liability otherwise exists . The distinction on the facts as to the intention to purchase shares between this case and Regal (Hastings) Ltd v Gulliver is not relevant. The company ( Regal ) had not the money to apply for the shares upon which the profit was made. The directors took the opportunity which they had presented to them to buy the shares with their own money and were held accountable. Mr Fox's refusal as one of the trustees to take any part in the matter on behalf of the trust, so far as he was concerned, can make no difference. Nothing short of fully informed consent which the learned judge found not to have been obtained could have enabled the appellants in the position which they occupied having taken the opportunity provided by that position, to make a profit for themselves ." (emphasis added) 191 To similar effect is the passage from Lord Guest's speech to which I have referred. After citing from the various speeches in Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 his Lordship said (at 117): "Applying these principles to the present case I have no hesitation in coming to the conclusion that the appellants hold the … shares as constructive trustees and are bound to account to the respondent. It is irrelevant that the trustees themselves could not have profited by the transactions . It is also irrelevant that the appellants were not in competition with the trustees in relation to the shares … The appellants argued that as the shares were not acquired in the course of any agency undertaken by the appellants they were not liable to account. Analogy was sought to be obtained from the case of Aas v Benham where it was said that before an agent is to be accountable the profits must be made within the scope of the agency (see Lindley LJ). That, however, was a case of partnership where the scope of the partners' power to bind the partnership can be closely defined in relation to the partnership deed. In the present case the knowledge and information obtained by Boardman was obtained in the course of the fiduciary position in which he had placed himself. The only defence available to a person in such a fiduciary position is that he made profits with the knowledge and assent of the trustees. It is not contended that the trustees had such knowledge or gave such consent." (emphasis added) 192 After citing the passage from Brickenden which I have recorded above as well as other authorities, this Court (Spigelman CJ, Sheller and Stein JJA) in Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 in a joint judgment said (at 92 [440]): "It is important to emphasise that the proposition on which reliance is placed refers only to an act of non-disclosure by a fiduciary of 'material facts which his constituent is entitled to know in connection with the transaction'. The central word in the formulation in Brickenden is the word 'material'. Before applying the principle, it is necessary to identify a fact which is 'material' in the requisite sense. Once the fact is so identified, the principle establishes that the defaulting fiduciary will not succeed in an argument that, even with disclosure of this material fact, the transaction would still have gone ahead ." (emphasis added) See also Regal (Hastings) Ltd v Gulliver 144G-145A; Biala at 81; Warman International Ltd v Dwyer (1995) 182 CLR 544 at 558; Maguire v Makaronis (1997) 188 CLR 449 at 486. 193 In the present case, the "material facts" which Dalida and Sadie were entitled to known in connection with any invitation by Mr Elias to participate in the acquisition of Nos. 13 and 15 was that the Council regarded the acquisition of those properties and their amalgamation with No. 11 as essential if No. 11 was to be redeveloped to its maximum potential. To adopt and adapt that part of the citation from Beach Petroleum which I have emphasised, Farah as the defaulting fiduciary cannot succeed in an argument that, even if it had disclosed those material facts, Dalida and Sadie would still have declined, for financial reasons, the invitation to participate in the acquisitions so that the transaction would still have gone ahead. In any event, his Honour's finding that they would have declined the invitation was, as I have already observed, one made in the absence of any knowledge on the part of Dalida and Say-Dee of the relevant "material facts". It would therefore be pure speculation as to whether or not, if there had been full disclosure of those facts, Mr Elias' alleged invitation to participate in the acquisition of Nos. 13 and 15 would have been accepted. As Lord Thankerton noted in Brickenden, speculation as to what course Say-Dee would have taken is irrelevant. 194 In fairness to the primary judge it should be said that he did not refer to this submission that the chain of causation was broken by the fact that Say-Dee was not in a position to participate in the relevant transactions due to a lack of funds. This was no doubt because it was clearly erroneous. As I have indicated, he utilised his finding that it was inherently probable that Say-Dee would have declined through financial inability the invitation of Mr Elias to participate in the acquisition of Nos. 13 and 15 in support of his finding that such an invitation was in fact extended by Mr Elias to Dalida and Sadie. But as Say-Dee submitted, and as the authorities to which I have referred above confirm, that fact is irrelevant. 195 The information obtained by Mr Elias from the Council to which reference has already been made was clearly obtained in the course of the fiduciary position in which Farah had placed itself as the party responsible for all dealings with the Council concerning the redevelopment of No. 11. As I am of the opinion that it was as a consequence of its knowledge of that information as so derived that Mr Elias and the interests which he controlled (including the members of his family) acquired Nos. 13 and 15 for the purpose of meeting the Council's requirement that those properties be amalgamated with No. 11 in order to facilitate the redevelopment of the latter to its maximum potential, it follows that the necessary causal link between the deriving by Farah of that information in the course of performing its fiduciary duties and the benefits and advantages from those acquisitions obtained by Farah and those in its camp without the fully informed knowledge and consent of Dalida or Sadie as the directors of Say-Dee, has been established. 196 For the reasons to which I have referred, in my opinion Mr Elias caused those acquisitions to occur without that knowledge or consent. But even if he had made them aware of his proposal to acquire those properties and even if he had invited them to participate therein so that the properties were acquired with their knowledge and assent, that knowledge and assent was vitiated by the fact that, as the primary judge found, the real reason for the acquisition of those properties had not been disclosed to them by Mr Elias: in other words, there had not been full, strict and accurate disclosure by him of the information that he had obtained in the course of performing Farah's fiduciary duties in circumstances where, as Lord Hodson said in that part of his speech which I have emphasised in [191] above, nothing short of a fully informed consent was required but was not obtained. 197 Finally, in terms of causation, it was common ground that Say-Dee was required to establish a causal link between the fiduciary relationship between it and Farah on the one hand and the profit or benefit received by Farah or interests with which it was associated on the other. As I have concluded in [197] above, that causal link was established by findings with respect to the scope of the relevant fiduciary duties, the fact that in the course of performing those duties Farah received the critical information from the Council and that as a consequence thereof it, through Mr Elias and the other interests which he controlled, set about the acquisition of No. 15 in June 2001 and, when the opportunity arose, the acquisition of No. 13 in August 2002. Those are the only relevant causal links that, in my opinion, were required to be established and, in my view, they were for the reasons to which I have referred above. I would add that it is not insignificant that Farah's retainer with respect to the redevelopment of No. 11 was still current when the acquisition of Nos. 13 and 15 were made. Conclusion on liability 198 My conclusions on liability may be summarised as follows: (a) The scope of Farah's fiduciary duty extended to disclosing knowledge or information of the Council's requirements with respect to the redevelopment of No. 11 to its maximum permissible potential even if that involved the redevelopment of No. 11 in conjunction with adjoining properties; (b) This was because the object or purpose of the joint venture was the redevelopment of No. 11 in a manner which would achieve its maximum development potential thus maximising the profits of the venture; (c) To Farah's knowledge those requirements could only be achieved by the amalgamation of No. 11 with adjoining properties; (d) Mr Elias did not disclose that knowledge or information to Dalida and/or Sadie; it was vital intelligence acquired by him while acting in his role as a fiduciary; (e) Even if the primary judge was correct (which I do not consider he was) in finding that Mr Elias did inform Dalida of his proposal to acquire Nos. 13 and 15, Farah was still in breach of its fiduciary duties by failing fully to disclose to Dalida and Sadie the true reason as to why each of those properties should be acquired; (f) Farah through Mr Elias took advantage of the knowledge and information referred to in causing Lesmint, Mrs Elias and the two daughters to acquire Nos. 13 and 15 for the purpose of profiting or benefiting therefrom; (g) The nature of Farah's fiduciary duties was such that it was proscribed from using the knowledge and information in question for the purpose of benefiting from the acquisition of Nos. 13 and 15 without the fully informed knowledge and consent of Say-Dee which was not obtained; (h) It was irrelevant that Dalida and Sadie declined for financial reasons the invitation of Mr Elias (if made) to participate in the investment in Nos. 13 and 15; a fortiori if they had been fully informed as to why this acquisition was material in the relevant sense; (i) Farah must now account in an appropriate manner for the benefit or profit it or those in its camp have made or will make from the acquisition of Nos. 13 and 15 flowing from the ability to amalgamate those properties with No. 11 for the purpose of maximising the development potential of the amalgamated site. What is the appropriate relief to which Say-Dee is entitled? 199 Say-Dee submits that it is entitled to the relief claimed in its Amended Cross-Claim including, in particular, a declaration that Farah, Lesmint, Mr Elias, Mrs Elias and their two daughters, Sarah and Jade, hold their respective interests in Nos. 13 and 15 on constructive trust for the benefit of the joint venture between Say-Dee and Farah. It also seeks an order that Maxwell Prentiss and Steven Parbery of Prentiss Parbery Barilla, Chartered Accountants of Sydney (the receivers) be appointed as receivers of Nos. 11, 13 and 15 (collectively, the properties). 200 Consequential orders are sought to the effect that the receivers be given certain powers including the power to sell the properties in one line after the making of such development applications as it may be advised to the Council for the purpose of obtaining such consents in relation to the properties as are considered appropriate to enable the best price to be obtained on the sale of the properties. After paying out of the gross proceeds of sale all such monies as might be required to discharge all registered mortgages and the present obligations of the partnership to its various secured and unsecured creditors, there should be a reference to an Associate Judge for the taking of accounts with respect to the contributions to the acquisition and development of the properties by the parties and/or any other relevant matters. 201 In the circumstances, Say-Dee also submitted that on the taking of accounts an Associate Judge should be directed that the profit to be obtained from the sale of the properties in one line be determined by apportioning the purchase price for each of the three properties to the total price for which all three are sold and that, after allowing for all costs and expenses of each purchase including the discharge of any mortgages raised on the purchase, legal costs, disbursements, interest on monies borrowed and borrowing costs and the like, the net profit so found should be divided between Say-Dee and Farah in equal shares. Furthermore, it was submitted that the Associate Judge should also be directed that no allowance should be made for the entrepreneurial efforts of Mr Elias due to the stealthy manner in which he went about the acquisitions of Nos. 13 and 15 and his efforts to conceal them from Say-Dee. 202 Alternatively, orders were sought that the properties vest in the receivers as trustees for sale pursuant to the provisions of s 66G of the Conveyancing Act and that it be referred to an Associate Judge to calculate the equitable compensation payable by the Farah interests to Say-Dee. However, it was Say-Dee's primary case that there should be a taking of accounts in the manner described above. 203 Although I have found that the acquisitions of Nos. 13 and 15 were so related to the affairs of the joint venture that they could properly be said to have occurred in the course of Farah's and Mr Elias' management of the development of No. 11 and in utilisation of the opportunities and special knowledge gained by them as the parties with the sole responsibility for dealing with the Council with respect to the redevelopment of No. 11, nonetheless, it was also necessary for Say-Dee to establish that the acquisition of Nos. 13 and 15 would result in a profit to Farah and the other purchasers. It was submitted by Farah that there was no evidence to support the conclusion that the acquisition of Nos. 13 and 15 and their amalgamation with No. 11 would in fact result in a profit. 204 Farah further submitted firstly, that Say-Dee was not entitled to any relief against the wife and daughters of Mr Elias who were the owners of three of the units in No. 15. Mrs Elias had provided, so it was contended, consideration in respect of the purchase of at least her unit in that property by agreeing to allow the family home (apparently owned by her but possibly jointly with Mr Elias: see Black 98P-T) to be mortgaged for the purpose of raising the necessary funds from National Australia Bank for the purchase. Further, this agreement was subject to the interests of her daughters being protected by each of them becoming an owner of a unit in No. 15 so that the contract she made with Mr Elias was not only for her benefit but also for that of her daughters within the principle stated by the High Court in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107. 205 It was submitted that Mr Elias had performed this contract by having three of the units transferred into the names of his wife and two daughters. However, the evidence of Mr Elias relied upon by Farah (and which is confined to that at Black 98F-T and 104N-105M) was to say the least vague. In my opinion it came down to little more than that as it was proposed to provide the family home as part or collateral security for the acquisition of No. 15, it was Mrs Elias' wish that the benefit of the transaction should be for the maintenance of her two daughters. In my view, the evidence of Mr Elias upon which reliance is placed to attract the so-called Trident principle did not constitute an enforceable contract. It is true that Mr Elias (at Black 98P) speaks in terms of the house being mortgaged as he and his wife had to borrow in order to purchase it. However, the evidence referred to establishes no more than an arrangement between Mr Elias and his wife that if the house was to be further mortgaged in order to provide collateral security for the acquisition of No. 15, Mrs Elias and the children should benefit by each receiving a unit. I therefore do not accept that that evidence amounted to some form of contract between Mr and Mrs Elias which was intended to create binding legal relations. Mr Elias accepted (at Black 105K-M) that beyond the arrangement to which I have referred, neither his wife nor children had any involvement in the transaction. 206 Say-Dee submitted that there was no evidence that the daughters were other than volunteers. At the time of the acquisition of No. 15 in June 2001, Jade and Sarah were aged nearly 16 and 17 years respectively. As to the so-called Trident principle, no contract, whether based on that principle or at all, was pleaded; nor was any submission made to the primary judge that there was any such contract and, of course, it was not the subject of any finding by him. Furthermore, it was submitted that the so-called Trident principle has never been applied or considered in Australia outside the context of insurance policies. Should "recipient liability" be imposed upon Mrs Elias and her two daughters? 207 Before the primary judge the foundation for the submission that Mrs Elias and her two daughters were not accountable to Say-Dee was that none of them was guilty of any commercial dishonesty in taking advantage of the opportunity to acquire No. 15 as they had no knowledge that its acquisition was made in circumstances which amounted to a breach of fiduciary duty on the part of Farah. (As Lesmint was controlled by Mr Elias, no similar argument was advanced with respect to its acquisition of No. 13.) 208 However, in my opinion Farah and Mr Elias cannot ignore the breach of their fiduciary duties which I have found they committed and the benefits to be derived therefrom by the device of utilising Mrs Elias and her daughters as "innocent" (in the sense that they may have been unaware of Mr Elias' breach of his fiduciary duties) purchasers of the units in No. 15. Thus both before the primary judge and this Court Say-Dee submitted that each of Mrs Elias and her two daughters fell within the first limb of Lord Selborne LC's much-quoted dictum in Barnes v Addy at 251-252, which was summarised by Lord Nicholls of Birkenhead, when delivering the advice of the Privy Council in Royal Brunei Airlines SDN v Tan Kok Ming [1995] 2 AC 378 at 382, as being "concerned with the liability of a person as a recipient of trust property or its traceable proceeds." (original emphasis) 209 It is now well established that whereas the second limb of Barnes v Addy, now known as "accessory liability", applies where a third party knowingly assists a trustee (or fiduciary) in a breach of the trustee's or fiduciary's duties and thus requires actual knowledge on the part of the third party of the breach, the first limb, which is known as "recipient liability", on one view does not. Nevertheless, the authorities, to a greater or lesser extent, favour the proposition that liability under the first limb of Barnes v Addy requires some form of knowledge on the part of the recipient of the benefit of the fiduciary's breach of duty. The crucial question that seems to have occupied a deal of judicial time is the nature and extent of that knowledge. 210 The relevant authorities relating to the recipient liability or first limb of Barnes v Addy were subjected to a detailed and penetrating analysis by Hansen J in Koorootang Nominees Pty Ltd v Australian & New Zealand Banking Group Ltd [1998] 3 VR 16 at 78 et seq. His Honour's introductory observation to this undertaking was that the circumstances in which a constructive trust will be imposed upon a person who receives trust property following a breach of trust "is in a state of some uncertainty". However, one thing appears clear. Dishonesty is not a relevant element of recipient liability. Actual or constructive knowledge is sufficient. 211 In the present case there was no evidence that Mrs Elias, let alone her two daughters, had actual knowledge that their respective interests in No. 15 had been acquired on their behalf by Mr Elias in breach of his fiduciary duties to Say-Dee. However, in [176] above I concluded that the Elias family members were complicit in the acquisition of their units in No. 15 in circumstances which attracted the first limb of Barnes v Addy. It is now necessary to explain further that finding. 212 Although Say-Dee's Amended Cross-Claim alleged (in [45]) that each of Mrs Elias and her two daughters stood in a fiduciary position to Say-Dee by virtue of their acting at the request and direction of Mr Elias when acquiring their respective units, this was denied in [33] of their Defence to the Cross-Claim. However, it is to be noted that no defence of bona fide purchase for value without notice was pleaded. This may not be surprising given that their pleaded liability by Say-Dee was that they were fiduciaries. 213 Nevertheless, in their supplementary written submissions on the question of relief, Mrs Elias and the daughters submitted, as I have already noted, that Mrs Elias gave consideration by contracting with Mr Elias to allow the mortgaging of the family home to secure the necessary borrowings for the acquisition of No. 15 only if she and her daughters' interests were protected. Say-Dee responded by asserting in its written supplementary submissions in reply that there was no evidence that the daughters provided any consideration for the purchase of the units in their names and that no such consideration moved from Mrs Elias who did not give evidence at the trial although she was available to do so. It was therefore submitted that a Jones v Dunkel inference could be drawn at least with respect to her state of knowledge. 214 I have already concluded (at [207] above) that in my opinion, Mrs Elias did not enter into an enforceable contract with her husband. Furthermore, neither the daughters (certainly) nor Mrs Elias (probably) were purchasers of their units in No. 15 for value. But even if Mrs Elias did provide value, did she and her daughters acquire their interests with constructive knowledge of Mr Elias' and/or Farah's breaches of their fiduciary duties? 215 In the present context, constructive knowledge at least includes imputed knowledge; that is, Mrs Elias and her daughters will be taken to have the knowledge of Mr Elias where he was acting as their agent in the acquisition of their units in No. 15: cf Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 695 [77]; 696-697 [87]-[90] per Handley JA, with whom Meagher and Powell JJA agreed. The question, then, is whether he was so acting. In my opinion he clearly was. It was he who found and negotiated the purchase of No. 15. He agreed that all the necessary dealings with respect to that acquisition were by him. Beyond Mrs Elias agreeing to putting up the family home as collateral security for the purchase, she had no involvement whatsoever in the transaction. 216 It is thus clear that in arranging for three of the units in No. 15 to be purchased in the names of each of Mrs Elias and their two daughters, Mr Elias was acting as their agent. It follows that his knowledge of the breaches of his and/or Farah's fiduciary duties to Say-Dee is thus imputed to the family members for whom he was transacting those purchases. Each therefore had constructive knowledge of their husband's/father's wrongful conduct. Accordingly, the first or recipient liability limb of Barnes v Addy was satisfied. 217 Even if Mrs Elias and her daughters had no constructive knowledge of the nature of that referred to above, the question arises as to whether, not being purchasers of their interests in No. 15 for value, and not having changed their position as a consequence of their respective acquisitions, they nevertheless hold those interests, given the circumstances in which Mr Elias acquired the units in their names, on constructive trust upon the basis that they were so acquired for the profit or benefit of Mr Elias and/or Farah and (perhaps indirectly) his family to the exclusion of Say-Dee and in breach by Farah and/or Mr Elias of its/his fiduciary duties. This question was not specifically exposed in any detail by the parties but nevertheless warrants consideration as it bears upon the true foundation of the first limb of Barnes v Addy upon which Say-Dee did clearly rely. 218 If the question so posed is answered in the affirmative, then knowledge, actual or constructive, of the recipient of the benefit of the fiduciary's breach of duty may become irrelevant. It would mean that the foundation upon which recipient liability rests is different to that of accessory liability. In particular, it would rest on a claim for restitution based on the unjust enrichment of Mrs Elias and the daughters at the expense of Say-Dee. The restoration of trust property still in the possession of the party said to be unjustly enriched by its receipt was hinted at by Vice-Chancellor Megarry in a passage from his judgment in Re Montagu's Settlement Trusts [1987] Ch 264 at 276 cited by Hansen J in Koorootang at 88. His Lordship made it clear that restoration in these circumstances was required unless the recipient was a purchaser (assumingly for value) without notice. 219 Nevertheless, Hansen J considered (at 99) that the principles underpinning liability for "knowing receipt" were still the subject of controversy. At 100 his Honour refers to three competing approaches to this issue: the "property approach", the "conscience approach" and the "restitutionary approach", the latter being based upon the avoidance of unjust enrichment. What is presently important with respect to the differences between these approaches is that, under the first, the recipient must have notice or knowledge of the beneficiary's interest and, under the second, must be guilty of unconscientious conduct which itself implies some level of knowledge. It is only under the third that actual or constructive knowledge that the property has been received in breach of the fiduciary's duties is unnecessary. 220 According to Hansen J (at 100): "[t]here is considerable persuasion in the third view of recipient-liability. According to that view the liability of a person in receipt of misapplied trust property is most appropriately governed and explained by the law of restitution or unjust enrichment. For this reason, and in order to be consistent with other forms of restitutionary liability (such as restitution of mistaken payments, as to which see David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353), the liability of the recipient should be strict but subject to defences such as bona fide purchase and change of position. In other words, the knowledge of the recipient of trust property is not relevant in considering whether the elements of recipient-liability are established. Rather, the beneficiary is prima facie entitled to restitution of trust property if he can show that the transaction by which the trust property was transferred to the defendant was vitiated by some recognised 'unjust' factor." 221 Hansen J then considered the academic support for the third view, the leading proponent of which was the late Professor Peter Birks. It is a view which, according to his Honour, derives support from the speech of Lord Goff of Chieveley, with whom Lords Bridge, Griffiths and Ackner agreed, in Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 at 578-579 although this was not a breach of fiduciary duty case. What their Lordships made clear, however, was that a claim in restitution for the recovery of property by which the recipient has been unjustly enriched at the expense of the claimant can only be denied where the recipient is a bona fide purchaser for value or where an innocent recipient has so changed his or her position that he or she will suffer an injustice if called upon to restore the property in whole or in part. Subject only to those "defences", the liability of the recipient is strict. 222 The approach in Lipkin received the support of Lord Nicholls, writing extra-judicially in 1998. In his article "Knowing Receipt: The Need for a New Landmark" in W R Cornish et al (eds) Restitution Past, Present and Future, Ch 15, his Lordship opines at 238-9 (omitting citations): "The decision in Lipkin Gorman v Karpnale has been rightly described as a catalyst for the evolution of a more rational remedial structure. Encouraged by this major development in the law, the restitutionary approach has been widely hailed as showing the way forward for recipient liability … There is force in this view. In this respect equity should now follow the law. Restitutionary liability, applicable regardless of fault but subject to a defence of change of position, would be a better-tailored response to the underlying mischief of misplaced property than personal liability which is exclusively fault-based. Personal liability would flow from having received the property of another, from having been unjustly enriched at the expense of another. It would be triggered by the mere fact of receipt, thus recognising the endurance of property rights. But fairness would be ensured by the need to identify a gain, and by making change of position available as a defence in suitable cases when, for instance, the recipient had changed his position in reliance on the receipt." 223 According to Hansen J in Koorootang (at 102), the adoption of the restitutionary approach would have the consequence that the plaintiff need only prove: (a) enrichment of the defendant; (b) at the expense of the plaintiff, which is (c) unjust on the ground of some recognised factor. 224 In the circumstances of the present case there can be no doubt as to the factors (a) and (b) and, in my opinion, factor (c) is satisfied by the fact that Mr Elias caused Mrs Elias and their two daughters to acquire their respective interests in No. 15 in breach of Farah's fiduciary duty to Say-Dee. Furthermore, Say-Dee's claim for restitution is a personal claim against parties still in possession of the very property acquired in their name in breach of that duty. Being a claim in personam recognised by equity, it matters not that those parties are registered as the proprietors of the property in question (as to which see below). 225 Although Hansen J in Koorootang concluded (at 105) that he favoured the view that liability of a recipient of trust property is restitution based so that liability is strict subject only to defences of bona fide purchaser (for value) and/or change of position, as the plaintiff in that case did not conduct its case on the basis that recipient liability was strict, it was unnecessary for his Honour to come to a concluded view on the issue. Nevertheless, his Honour decided that there was a rational and principled distinction between the two limbs of Barnes v Addy. His view as to the foundation of recipient liability under the first limb, although obiter, was clear and, in my respectful view, compelling. 226 There is only one decision of the High Court that bears (but indirectly) upon this issue. In Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373, Stephen J, with whom Barwick CJ agreed, cited the following passage from the dissenting judgment of Jacobs P in the Court of Appeal in that case [1974] 1 NSWLR 443 at 459: "The point of the difference between the person receiving trust property and the person who is made liable, even though he is not actually a recipient of trust property, is that in the first place knowledge, actual or constructive, of the trust is sufficient, but in the second place something more is required, and that something more appears to me to be the actual knowledge of the fraudulent or dishonest design, so that the person concerned can truly be described as a participant in that fraudulent dishonest activity." 227 However, this case was concerned with the second limb of Barnes v Addy and not the first. It is authority for the proposition that there is a distinction between the two and that dishonesty or lack of probity is not a necessary element for recipient liability. This fact is now well entrenched in Australian law: Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285; Tara Shire Council v Garner [2003] 1 Qd R 556 at 577; Hancock Family Memorial Foundation Ltd v Porteous (1999) 151 FLR 191 at 209 per Anderson J, affirmed in (2000) 22 WAR 198 per Ipp, Owen and McKechnie JJ; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 164; Koorootang at 105 per Hansen J; Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 at 173-4, 176 per Smith J. Stephen J in Consul Development was not called upon to consider restitutionary principles as the foundation underpinning the first limb of Barnes v Addy. 228 Since Koorootang was decided in 1997 there have been a number of cases, of which those referred to in the preceding paragraphs are examples, which have considered the first limb of Barnes v Addy but on the conventional basis of the necessity to prove actual or constructive knowledge by the recipient of the breach of trust. None have sought to grapple with the proper rationale upon which recipient liability should be founded. This may well be because in all of them the issue of whether recipient liability can apply in the absence of proof of actual or constructive knowledge did not arise for consideration either because the plaintiff was able to establish the necessary knowledge of the relevant breach or because the case was decided upon other grounds, such that comments upon recipient liability were obiter. Nonetheless, there are dicta which seem to favour the restitutionary approach advocated by Professor Birks and favoured by Hansen J: see NIML Ltd v Man Financial Australian Ltd [2004] VSC 449 [53]-[63] per Harper J; Tara Shire Council at 576 [61]; National Australia Bank Ltd v Rusu [2001] NSWSC 32 at [43]-[44] per Bryson J. 229 In NIML, Harper J ultimately decided the case on the basis that the defendant did not fall within the first limb in Barnes v Addy because it did not actually receive the relevant trust property. Nevertheless, his Honour considered whether constructive knowledge was a necessary element in cases where recipient liability was pleaded. In his Honour's view (at [53]): "it is an essential ingredient in the cause of action pleaded by [the plaintiff] against [the defendant] that the latter either had constructive knowledge of the general nature of [the defaulting fiduciary's]dishonesty or was unjustly enriched by its receipt " (emphasis added) 230 Later in his judgment, Harper J (at [62]-[63]) refers in some detail to Koorootang, noting Hansen J's preference for the restitutionary view of recipient liability based upon unjust enrichment and in relation to which the knowledge of the recipient is irrelevant. Although it was not necessary for Harper J to decide NIML on that basis, his comments above represent some support for the view that, where the recipient is unjustly enriched, the first limb in Barnes v Addy may be satisfied even in the absence of any kind of knowledge on the part of that recipient. 231 Similarly, in Rusu, Bryson J (as he then was) ultimately determined that the defendants were not recipients of the relevant trust funds and as such did not fall within the first limb of Barnes v Addy. However, his Honour did offer the following comments on recipient liability: "In [ Royal Brunei ] their Lordships at 386E-386F distinguished recipient liability from accessory liability, apparently on the basis that dishonesty is not an element of recipient liability. Their Lordships were not called on to deal fully with recipient liability but they appear to have expressed the basis of the distinction with the observation: 'Recipient liability is restitution-based; accessory liability is not'. The principles which deeply underlie equity suggest that a restitution-based remedy must have some basis in the position in conscience of the person against whom it is awarded so that it must be shown that a recipient did not receive the payment for value or had notice of another person's equitable interest in the money; or at the very least, it should be open to him to show that he did give value and had no notice." (emphasis added) 232 Again, his Honour's comments seem to provide support for the proposition that where the recipient is not a purchaser for value the first limb in Barnes v Addy may be satisfied without the necessity to establish actual or constructive knowledge. 233 Writing extra-judicially in January 2003, Mason P referred in favourable terms to Lord Nicholls' call, recorded in [225] above, to abandon the fault-based idea of knowing receipt in favour of the strict liability restitutionary approach subject to a change of position defence: (2003) 77 ALJ 358 at 368. The President nevertheless accepted that the issue had yet to be determined conclusively by the High Court. 234 But in the absence of any High Court authority to the contrary, I see no reason why the proverbial bullet should not be bitten by this Court in favour of the Birks/Hansen approach. In my opinion there is support for the adoption of the restitutionary approach in Lipkin in the House of Lords and in the exposition on the subject by Hansen J in Koorootang at 99-105. 235 On the foregoing basis, Mrs Elias and the two children are liable to account for any profit or benefit they derived from the acquisition of their respective interests in No. 15 as a result of Mr Elias' and Farah's breach of their fiduciary duties. They hold those interests on constructive trust for the joint venture. 236 As I have observed in [176] above, Mrs Elias and her two daughters, as a consequence of the breach by Farah and/or Mr Elias of its/their fiduciary duties, received the benefit therefrom without payment of any relevant consideration therefor. In other words, they may have been bona fide purchasers but not for value. 237 It is well accepted that a fiduciary who profits from his breach of fiduciary duty is liable to account for that profit and that the remedy of an account of profits is appropriate in such a case. The relevant principles are summarised in Meagher, Gummow and Lehane's Equity Doctrines and Remedies, 4th ed [5-245] pp 201-202; [5-250] pp 204-206. Subject to what follows, in my opinion Say-Dee is entitled to a declaration that Farah, Mr and Mrs Elias, Ms Sarah Elias and Ms Jade Elias and Lesmint hold their respective interests in Nos. 13 and 15 on a constructive trust. Did the fact that Mrs Elias and the two daughters acquired an indefeasible title to their units in No 15 make any difference? 238 Farah then submitted that, on the basis that Mrs Elias and her two daughters became registered as proprietors for an estate in fee simple in each of the units they acquired in No. 15, their legal title thereto was impregnable: Breskvar v Wall (1971) 126 CLR 376; Bogdanovic v Koteff (1988) 12 NSWLR 472. These authorities establish, so it was contended, that the indefeasibility provisions of the Real Property Act 1900 such as s 42 applied to a registered proprietor of land who takes as a volunteer so that he or she takes title free from prior equities of which he or she has no notice. Furthermore, the present was not a case where the exception to indefeasibility based on fraud in the relevant sense had been established. 239 Say-Dee submitted that this was not a matter that was ever pleaded, nor was any such submission made to the primary judge in the court below. However, the principle of immediate indefeasibility from registration is subject to any personal obligation by which the registered proprietor might be forced in personam to deal with the registered title in some particular manner. The crucial passage in Frazer v Walker [1967] 1 AC 569 at 585 states that "this principle in no way denies the right of a plaintiff to bring against a registered proprietor a claim in personam founded in law or in equity, for such relief as a court acting in personam may grant." 240 A further fallacy in Farah's argument is that if it applies to Mrs Elias and the two daughters, then it must also apply to Mr Elias and Lesmint, each of whom became registered for an estate in fee simple in a unit in No. 15 and the whole of No. 13 respectively. It is not suggested by Farah that indefeasibility of title prevents a declaration that Mr Elias and Lesmint hold their interests in No. 13 and 15 on constructive trust. If this be so, then the same principle applies to Mrs Elias and the two daughters where they have benefited from and are in receipt of an interest in the property the acquisition of which constituted a breach by their husband and/or father of his fiduciary duties. Accordingly, in my opinion, Mrs Elias and her daughters as well as Mr Elias and Lesmint hold their respective interests in Nos. 13 and 15 on a constructive trust. 241 As I have noted, Say-Dee submitted that receivers should be appointed of Nos. 11, 13 and 15, which should then be sold in one line and the relevant profit resulting from that sale should be determined by apportioning the purchase price of each of the three properties to the total price for which all three are sold. After allowing for all costs and expenses in respect of each purchase (including the discharge of any relevant mortgages), the net profit should then be divided equally so that Say-Dee receives 50% of the net profit on one hand and Farah, Mr and Mrs Elias, the two daughters and Lesmint receive 50% on the other. 242 However, Farah submitted that Say-Dee is not entitled to a declaration that the relevant Farah interests hold their interests in Nos. 13 and 15 upon a constructive trust for the No. 11 venture as Say-Dee contends. Rather, the "profit" for which the Farah interests are accountable is the difference (as at the date of trial) in the value of Nos. 13 and 15 insofar as that value is attributable to their aggregation with No. 11 and not to the values of Nos. 11, 13 and 15 aggregated together. As I understand this submission, the relevant "profit" to which Say-Dee would be entitled is 50% of the aggregated site value of Nos. 11, 13 and 15 over and above the aggregated site value of Nos. 13 and 15. It is only the difference between those two sums in respect of which a relevant profit has been made from Farah and/or Mr Elias' breach of fiduciary duty. 243 It is not entirely clear to me why it is necessary, on Say-Dee's submission, for the relevant profit to be determined by apportioning the purchase price for each of the three properties to the total price for which all three are sold in one line and then, after allowing for costs and expenses, dividing the net profit equally between Say-Dee on the one hand and the Farah interests on the other. It seems to me that Say-Dee's submission does not require any such apportionment: it merely seeks that the three properties be sold in one line and that from the gross proceeds of sale there should be deducted all relevant costs and expenses including borrowing costs and charges and the resultant net profit divided equally as if all three properties were part of the joint venture. 244 Farah does not appear to accept that the three properties should be sold in one line but, rather, that they should be valued in their aggregated state and that value used to determine the relevant profit in respect of which Say-Dee would be entitled to 50%. However, such a submission smacks of one which favours equitable compensation rather than an award of an account of profits. If Farah's submission is accepted, then the Farah interests will be entitled to retain their respective interests in Nos. 13 and 15 with the result that they will reap any future increase in the value of those properties in circumstances where they already hold a one half interest in No. 11. 245 Furthermore, that would place Say-Dee at a distinct disadvantage in circumstances where the only purchaser for its one half interest in No. 11 would be the Farah interests as the adjoining owners of Nos. 13 and 15 and the half owner of No. 11. There can be no relevant market for a half-interest in a property. It is true that that might place Say-Dee in a position whereby it can hold the Farah interests to ransom depending upon the extent to which the Council would permit them to redevelop Nos. 13 and 15 without including No. 11. On the other hand if, as the primary judge found, Say-Dee is in financial difficulties and that is still the case, then it would be in a position of significant disadvantage in terms of bargaining with the Farah interests for the sale to them as the only purchaser of its one half interest in No. 11. I have already referred in [184] above to the position of Farah to exert undue pressure upon Say-Dee to sell that interest to Farah or its nominee. 246 In my opinion the proper orders or directions should be those advanced by Say-Dee. Subject to the question of any allowance for the entrepreneurial efforts of Mr Elias in acquiring Nos. 13 and 15 to enable them to be amalgamated with No. 11, in my opinion the orders sought by Say-Dee should be made. Accordingly, receivers should be appointed to obtain a development consent from the Council with respect to the amalgamated site if advised that this would increase its value on sale and it should then be sold in one line. The costs and expenses associated with any application to the Council for development consent should be borne equally by Say-Dee as to 50% and the Farah interests as to 50%. 247 Upon the sale of the amalgamated site in one line, which would involve the discharge of the various mortgages upon the properties, there should be a reference to an Associate Judge for the taking of accounts between the parties in order to determine the net profit generated by the sale. That profit should then be divided equally between Say-Dee on the one hand and the Farah interests on the other. 248 A final matter requiring consideration concerns the allowance, if any, which should be made for the entrepreneurial activities of Mr Elias in acquiring No. 13 and 15 to enable them to be amalgamated with No. 11. Say-Dee has submitted that, although the acquiring parties "placed their assets on the line" when acquiring Nos. 13 and 15 (or at least No. 15), there was little or no evidence before the Court of what risks, if any, they took in making those acquisitions. Accordingly, Say-Dee submitted that any allowance for Mr Elias' entrepreneurial skills should be, at the highest, a minimum amount and should in fact be nothing. This was a case, so it was contended, where there was active concealment on the part of Mr Elias even if it be found, contrary to the view I have formed, that the primary judge was correct in finding that Dalida and Sadie were aware that Mr Elias was negotiating to purchase No. 15 and then No. 13 and that he invited Say-Dee to participate therein. 249 It was submitted that findings as to any conscious wrong-doing by, or absence of bona fides of, Mr Elias as the directing will and mind of Farah were relevant to any limitations which might otherwise be placed upon an appropriate allowance to be made by the Court to the defaulting fiduciary as a consequence of its entrepreneurial skills and efforts. 250 It was further submitted that the authorities established that a fiduciary is required to account to the beneficiary for the gain it has made from a breach of its duties, and that equity grants such relief as is appropriate in the circumstances to take that gain away from the defaulting fiduciary: Paul A Davies (Aust) Pty Limited v Davies [1983] 1 NSWLR 440 at 444. 251 There is no doubt that Mr Elias, as the managing director of Farah, utilised his own skill and other assets to arrange loans for the funds necessary to enable the acquisition of No. 13 in the name of Lesmint and No. 15 in the name of himself, his wife and infant daughters. It is reasonable to assume that he and his wife gave personal guarantees for the repayment of the sum loaned at least in respect of the acquisition of No. 15. It was therefore submitted that these contributions were matters proper to be brought to account as just allowances, at least where the relevant entrepreneur is not guilty of conscious wrongdoing. On this basis, it was proper that there be provision made in any final accounting for just allowances which should be assessed on a "liberal scale". 252 However, it seems well established that the mere acceptance of personal covenants to repay a mortgage advance in the present circumstances is not to be treated as a provision by Mr and Mrs Elias of their own monies: see Davies at 455 per Mahoney JA; see also Hagan v Waterhouse (1991) 34 NSWLR 308 at 355 per Kearney J; Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1 at 12. In the present case there has been misleading conduct on the part of Mr Elias and, therefore, Farah. Say-Dee made reference to a passage in the judgment of Brinsden J in Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32 at 37 where his Honour cited from Lord Denning MR in Phipps v Boardman when in the Court of Appeal [1965] 1 Ch 992. At 1020, his Lordship referred to the making of an allowance for remuneration for the defaulting trustees' working skills as the beneficiary's claim for repayment cannot be allowed to extend further than the justice of the case demands. Accordingly, the Court, in its discretion, may allow the defaulting party some recompense unless he has been guilty of any dishonesty, bad faith or surreptitious dealing in which event the discretion may be exercised against allowing any such remuneration or reward. 253 In Green & Clara, Brinsden J pointed out (at 38) that the conduct of the defaulting fiduciary must be taken into account in deciding what is a just allowance bearing in mind that this branch of the law is prophylactic and not solely restitutionary, there being a penal element calculated to deter others from behaving in the same way. However, in that case it was held that there should still be an allowance but not one which was liberal: see also Bailey v Namol (1994) 53 FCR 102 at 112. 254 In my opinion, although there has been a not insignificant degree of surreptitious conduct and bad faith on the part of Mr Elias as the managing director of Farah, nonetheless that should not necessarily disentitle him to some allowance for his entrepreneurial skills and efforts in acquiring Nos. 13 and 15. However, any such allowance should not be liberal but its ultimate amount should be left to the determination of the Associate Judge in the light of the extent to which the acquisition of Nos. 13 and 15 has added to the value of No. 11 and in the light of the ultimate net profit which is achieved by the amalgamation of the three properties and their ultimate sale with or without the benefit of a development consent from the Council. What orders should now be made? 255 For the foregoing reasons, in my opinion the appeal should be allowed, the orders made by Palmer J on 19 August 2004 and 22 November 2004 be set aside and the parties directed to bring in draft Short Minutes of Order within 14 days to reflect the relief which I have indicated above should be granted. Costs should follow the event. I would grant the parties liberty to apply, at the direction of President, to me on 48 hours' notice for further directions in the event that they are unable to agree on an appropriate form of Short Minutes to give effect to these reasons for judgment. ********** 03/08/2006 - Removal of excess paragraph numbers with flow on effect - Paragraph(s) (from [168]) 03/08/2006 - Minor typographical/style amendments - Paragraph(s) [171], [172], [178], [190], [195], [208], [216], [221], [220], [227] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.