FEDERAL COURT OF AUSTRALIA

Investa Properties Pty Ltd v Nankervis (No 7) [2015] FCA 1004

IN RESPECT OF THE AMENDED APPLICATION FILED ON 17 OCTOBER 2013 THE COURT DECLARES THAT:

1.    Ashley Nankervis breached his fiduciary duties to the first applicant, Investa Properties Pty Ltd ACN 084 407 241, in respect of Lot 191 and Lot 170 (as defined in the attached reasons for judgment).

2.    Ashley Nankervis breached his statutory obligations to the first applicant, Investa Properties Pty Ltd ACN 084 407 241, under section 182 and section 183 of the Corporations Act 2001 (Cth) in respect of Lot 170.

3.    Adam Barclay breached his fiduciary duties to the second applicant, Investa Residential Group Pty Ltd ACN 098 527 390, in respect of Lot 191.

4.    Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 breached its fiduciary duties to the second applicant, Investa Residential Group Pty Ltd ACN 098 527 390, in respect of Lot 191.

5.    Otherwise:

(a)    Ashley Nankervis did not breach his statutory obligations to the first applicant, Investa Properties Pty Ltd ACN 084 407 241, under section 182 and section 183 of the Corporations Act 2001 (Cth), in respect of Lot 191;

(b)    Ashley Nankervis was not subject to, and did not breach, any fiduciary duties to either of the applicants in respect of the decommissioning and relocation of a sales office, formerly located on the Brentwood Site (as defined in the attached reasons for judgment);

(c)    Ashley Nankervis was not subject to, and did not breach, any fiduciary duties or statutory obligations to the second applicant, Investa Residential Group Pty Ltd ACN 098 527 390, in respect of Lot 191 or Lot 170;

(d)    Adam Barclay was not subject to, and did not breach, any fiduciary duties to the second applicant, Investa Residential Group Pty Ltd ACN 098 527 390, in respect of Lot 170;

(e)    Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 was not subject to, and did not breach, any fiduciary duties to the second applicant, Investa Residential Group Pty Ltd ACN 098 527 390, in respect of Lot 170;

(f)    Adam Barclay was not subject to, and did not breach, any fiduciary duties to the first applicant, Investa Properties Pty Ltd ACN 084 407 241, in respect of Lot 191 or Lot 170;

(g)    Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 was not subject to, and did not breach, any fiduciary duties to the first applicant, Investa Properties Pty Ltd ACN 084 407 241, in respect of Lot 191 or Lot 170.

AND THE COURT ORDERS THAT:

1.    The cross-claim of Ashley Nankervis against Adam Barclay and Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 filed 15 November 2013 be dismissed.

2.    The cross-claim of Adam Barclay against Ashley Nankervis filed 18 November 2013 be dismissed.

3.    The cross-claim of Adam Barclay against Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 filed 15 December 2012 be dismissed.

4.    The cross-claim of Adam Barclay against Vero Insurance Limited ABN 48 005 297 807 filed 15 December 2012 be dismissed.

5.    The cross-claim of Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 against Adam Barclay filed 10 December 2012 be upheld.

6.    Costs be reserved.

7.    The matter be listed for further directions at 9.30 am on 21 October 2015 in respect of:

(a)    remedies of the applicants under the amended application filed 17 October 2013;

(b)    remedies of Oliver Hume South East Queensland Pty Ltd ACN 128 863 230 in respect of its cross-claim filed 10 December 2012;

(c)    costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Overview of the proceedings

1    The claims in these proceedings arise from the sale of two parcels of land in south east Queensland, namely:

    "Lot 191", which formed part of a residential property development called "Brentwood" or "Brentwood Site", and which is located on Augusta Parkway at Bellbird Park, near the city of Ipswich in Queensland; and

    "Lot 170" (referred to at various times as the "Fossil Site", "Brittains Road" and "The Outlook").

2    The applicants, which are companies forming part of the Investa Property Group, claim that the two properties were sold at an undervalue as a result of the actions of:

    Mr Ashley Nankervis (the first respondent), a former senior employee;

    Mr Adam Barclay (the second respondent), an individual real estate agent who had an involvement in the sales; and

    Oliver Hume South East Queensland Pty Ltd (the fourth respondent) ("Oliver Hume SEQ"), the real estate agency company of which Mr Barclay was at material times director and general manager.

3    The details of the applicants' claims against the respondents are set out in the amended application and the third version of the statement of claim, both filed on 17 October 2013. However, stated succinctly, the applicants claim that they have suffered losses in respect of the sales of Lot 170 and Lot 191 because Mr Nankervis and Mr Barclay, in breach of their respective duties to the applicants, and for their own benefit, caused those properties to be sold to entities with which they were associated, at an undervalue. Any liability of Oliver Hume SEQ in these proceedings arises solely because of the actions of Mr Barclay.

4    As is already clear, several iterations of the pleadings have been filed in these proceedings. Currently before the Court are the following applications:

    the amended application filed on 17 October 2013 ("amended application");

    the statement of claim (version 3) filed on 17 October 2013 ("amended statement of claim");

    a cross-claim brought by Mr Nankervis against Mr Barclay and Oliver Hume SEQ filed 15 November 2013;

    a cross-claim brought by Mr Barclay against Mr Nankervis filed 18 November 2013;

    a cross-claim brought by Mr Barclay against Oliver Hume SEQ filed 15 December 2012;

    a cross-claim brought by Mr Barclay against Vero Insurance Limited ABN 48 005 297 807 filed 15 December 2012; and

    a cross-claim brought by Oliver Hume SEQ against Mr Barclay filed 10 December 2012.

5    In the circumstances it is both logical and efficient to deal with the claims of the applicants against the respondents before turning to the cross-claims in this case.

6    Finally, I note that the applicants have elected to claim equitable compensation because of the sale of the relevant properties at an undervalue, rather than claiming an account of profits. To that extent, it is necessary that I should consider whether Lot 191 and Lot 170 were sold at an undervalue. An estimate of equitable compensation payable (if any), as well as any award of costs is, however, an issue for consideration following further submissions from the parties.

The parties

The Investa Group

7    The Investa Property Group owns and manages real estate in Australia. "Investa Land" is a name used to refer to the sub-group of companies which manages property developments, and includes the two applicant companies. The first applicant, Investa Properties Pty Ltd ("Investa Properties"), acted as the land development division of the Investa Property Group (and in that capacity was also known and referred to as "Investa Land"). The second applicant, Investa Residential Group Pty Ltd (formerly known as Clarendon Residential Group Pty Ltd) ("Investa Residential") is a wholly-owned subsidiary of Investa Properties and was the registered proprietor and vendor of the land forming the subject of these proceedings.

8    In the amended statement of claim, the applicants plead that for the purposes of carrying out land development, Investa Properties:

a)    employed all staff of the Investa Property Group;

b)    maintained offices and equipment;

c)    engaged architects, planners, engineers, other professional consultants, builders and contractors;

d)    provided or arranged finance for the purpose of acquiring and developing land;

e)    incorporated or acquired subsidiaries for the purposes of acquiring land at its direction, holding the legal title to land on its behalf, selling land at its direction, and remitting the proceeds of sale at its direction; and

f)    through its directors, officers and employees, implemented the policy decisions of Investa Property Group Holdings Pty Ltd and made all managerial level decisions relating to the acquisition, development and sale of land.

9    It is uncontentious that Investa Residential, at the direction of Investa Properties, was responsible for contracting with real estate agents in relation to the sale and marketing of the land the subject of these proceedings.

Investa Land's managers and employees

10    Investa Land's operations were managed by a Group Executive, who at times material to these proceedings was Mr Lloyd Jenkins. As Group Executive, Mr Jenkins was responsible for approving the acquisition, sale and development of land or referring decisions to the Chief Executive Officer, depending on the amount of money involved. The general managers in New South Wales, Queensland, Victoria and Western Australia reported to Mr Jenkins as Group Executive. At various times, the Queensland general managers were Mr Mark Waters, Mr Gavin Stubbs, Mr Lloyd Jenkins (in addition to his responsibilities as Group Executive) and Mr Cameron Holt.

Ashley Nankervis

11    The first respondent, Mr Ashley Nankervis, was employed by Investa Properties from around 5 April 2006 pursuant to a written contract of employment dated on or about 8 March 2006. Initially he was employed in the role of Development Manager and later as Senior Development Manager. Mr Nankervis was responsible for the overall management of the Brentwood Site and for signing off on all relevant "stage releases" of the Brentwood Site.

12    The applicants pleaded that Mr Nankervis was employed by the first applicant in a senior role between 5 April 2006 and 26 May 2010. These dates were not disputed by Mr Nankervis.

Oliver Hume South East Queensland Pty Ltd and Adam Barclay

13    The fourth respondent, Oliver Hume SEQ, was a licensed real estate agency under the now-repealed Property Agents and Motor Dealers Act 2000 (Qld) ("PAMDA") during the relevant period.

14    The second respondent, Mr Adam Barclay, was at material times a director and employee of Oliver Hume SEQ and a licensed real estate agent under PAMDA. In 2006, Mr Barclay became Oliver Hume SEQ's general manager. In relation to both sites the subject of these proceedings, Mr Barclay was the primary contact in Oliver Hume SEQ in dealings with either or both of the applicants.

15    The roles of Oliver Hume SEQ and Mr Barclay so far as concerns the two properties were the subject of dispute. It is not in dispute that Oliver Hume SEQ was formally engaged in accordance with a "Form 22a - appointment of real estate agent" under PAMDA for a period of time in relation to the marketing and sale of Lot 191. It is equally common ground that no equivalent form was ever completed by the parties in relation to Lot 170.

The properties

Lot 191

16    Lot 191 is the smaller of the two lots of land the subject of these proceedings. It is a 1,079 square metre parcel located within the Brentwood development, being part of the Stage 2A development of the Brentwood site.

17    On or about 16 July 2009, Investa Residential appointed Oliver Hume SEQ as a real estate agent using the PAMDA Form 22a. It was an exclusive agency appointment, relating to Stage 2A (that is, Lots 173 to 215) and Stage 2B (Lots 216 to 249) of the Brentwood Site.

18    On or about 21 October 2009, a delegated authority approval submission for the development and sale of Stage 2A lots at the Brentwood Site was prepared by Mr Damian Long, and recommended by Mr Nankervis and others, in terms recommending that lots be sold at an average lot price of $194,000. Specifically, Mr Long's submission recommended a sale price of Lot 191 of $210,000, being the listed price of $225,000 less a rebate of $15,000.

19    On or about 23 December 2009, Investa Residential entered a Deed of Put and Call giving call rights to Queensland Property Centre Pty Ltd ("Queensland Property Centre") for the purchase of Lot 191 with an exercise price of $195,000. In that deed, Queensland Property Centre was described as "the grantee".

20    Materially, the Deed of Put and Call executed by Investa Residential and Queensland Property Centre permitted the Call Option to be exercised by a nominee of the grantee. This in fact occurred. By contract of sale between Investa Residential and another entity, Spencer Projects Pty Ltd ("Spencer Projects") dated 25 June 2010, Lot 191 was sold to the nominee, Spencer Projects, for a contract price of $290,000, settling on 28 June 2010.

21    It appears that Queensland Property Centre was a company under the control of Mrs Kym Barclay, the wife of Mr Adam Barclay. Further it appears that Spencer Projects was a company of which Mrs Barclay was initially the sole director and shareholder, however on the day of registration Mrs Barclay appointed her daughter, Ms Jaide Spencer Crosbie as sole director, and transferred to her all of the company's shares.

22    The applicants submitted that they only retained $190,497.14 of the settlement monies and paid $96,000 to Queensland Property Centre pursuant to the terms of the Deed of Put and Call. The main allegation of the applicants in relation to Lot 191 is that it was sold at an undervalue and without full disclosure to a company owned and controlled by Mr Barclay's wife, Mrs Barclay. The applicants' case is that the true value of Lot 191 at the time of the deed was $290,000.

23    The applicants also say that Mr Nankervis and Mr Barclay took steps to subdivide Lot 191 without disclosing that they were doing so and that, as a result, a sale price was approved for the property which did not reflect its true value.

Lot 170

24    Lot 170 was the larger of the two lots, being a 7.25 hectare parcel of land situated near the western boundary of the Brentwood Site. It is not in dispute that, in its raw state, the land was steep, and could be described as challenging for developers. It was sold as an en globo site, in that although it was intended for subdivision, it was sold as a single lot.

25    On or about 20 February 2009, Investa Residential entered into a deed of Put and Call, giving rights to a company, Two Eight Two Nine Pty Ltd ("Two Eight Two Nine"), with an exercise price of $1,454,545. A formal contract of sale was entered into between these parties on 25 June 2009. The sole shareholder of Two Eight Two Nine was Mr David Tonuri.

26    The applicants' position in the amended application was that the value of Lot 170 at this time was $3 million. This position appeared to vary during the proceedings, such that the applicants claimed in the amended statement of claim that Lot 170 was worth $4 million. During the proceedings the applicants' case was that the true value of Lot 170 was $4 million.

27    The applicants referred to two diagrams showing Lot 170 in its surrounding area, both before and after its subdivision.

28    The basis of the claims made by the applicants in respect of Lot 170 is that, at some time prior to 20 January 2009, Mr Nankervis and Mr Barclay entered into an agreement with Mr Tonuri pursuant to which Mr Nankervis and Mr Barclay would participate in and derive profits from the sale to Mr Tonuri or his nominee and the subsequent development of Lot 170. The existence of such an agreement is contested by Mr Nankervis and Mr Barclay.

The sales office

29    The sales office owned by Investa Residential was located on the Brentwood Site. The applicants claim that in or around March 2010, it was removed and relocated to the site of a project owned by Mr Tonuri, at the instigation of Mr Nankervis, and that this was done without the authorisation of either applicant. The applicants claim that the cost of replacing the sales office is approximately $100,000.

30    The applicants seek relief against only Mr Nankervis in respect of the sales office.

DETAILS OF THE APPLICANTS' CLAIMS

31    The claims of the applicants against the respondents as set out in the pleadings may be summarised as follows.

As against Mr Nankervis

32    In the amended application the applicants plead:

1.    Against the first respondent, Ashley Colin Nankervis

1.1.    In respect of the land known as Lot 191, Brentwood Site:

(a)    Mr Nankervis must account as a defaulting fiduciary to the applicants, Investa Properties and Investa Residential, for the value of Lot 191 at the time of sale. The value of the property was $290,000, but Investa Residential received only $195,000.

(b)    Alternatively, Mr Nankervis must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Properties or Investa Residential, or both of them, for the sale of Lot 191 at an undervalue.

(c)    Alternatively, Mr Nankervis must compensate Investa Properties pursuant to s 1317H of the Corporations Act 2001 (Cth). Pursuant to s 1317H(2), the damage suffered includes profits made by any person resulting from the contraventions of s 182 and 183 alleged (in paragraph 136 of the amended application), and includes the profit of $95,000 to Queensland Property Centre on completion of the sale to Spencer Projects.

1.2.    In respect of the land known as Lot 170, Brentwood Site:

(a)    At the election of Investa Properties or Investa Residential or both of them, Mr Nankervis must account as a defaulting fiduciary to Investa Properties or Investa Residential or both of them for either:

(i)    Any profit he or any entity that was associated with him, or that he controlled, made or derived from the sale of Lot 170 to Two Eight Two Nine Pty Ltd, or from the development or resale of Lot 170; or:

(ii)    The value of Lot 170 at the time of sale. The value of the property was $3,000,000 but Investa Residential received only $1,454,545.

(b)    Alternatively, Mr Nankervis must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Properties or Investa Residential, or both of them, for the sale of Lot 170 at an undervalue.

(c)    Alternatively, Mr Nankervis must compensate Investa Properties pursuant to s 1317H of the Corporations Act 2001. Pursuant to s 1317H(2), the damage suffered includes profits made by any person resulting from the contraventions of s 182 and 183 alleged (in paragraph 194 of the amended application).

1.3.    Further, Mr Nankervis must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Residential, for the decommissioning and relocation of a sales office, formerly located on the Brentwood site.

33    In the amended statement of claim, the applicants plead further, in summary:

    Investa Properties employed Mr Nankervis initially in the position of Development Manager and then in the position of Senior Development Manager (reporting to the Queensland General Manager) pursuant to a contract of employment signed by Mr Nankervis on 8 March 2006.

    Mr Nankervis' duties included:

(a)    preparing financial and feasibility reports and reporting to internal management, including making recommendations on relevant matters;

(b)    project management including managing project negotiations and ensuring all contracts were accurately prepared and delivered in accordance with Investa Properties' obligations;

(c)    managing all projects to ensure compliance with all relevant regulatory, legislative and corporate policy requirements and obligations;

(d)    managing land sales including tracing of land sales on a weekly basis;

(e)    managing project negotiations and ensuring the accurate preparation of contracts and liaising with and appointing contractors and planners on behalf of Investa Properties; and

(f)    approving and/or recommending sales prices for lots within the Brentwood site.

    By reason of the positions he held, the responsibilities he discharged, and the relationship between the applicants, Mr Nankervis was an employee of Investa Properties and owed fiduciary obligations to Investa Properties and Investa Residential.

    Mr Nankervis also owed obligations to Investa Properties pursuant to s 182 and s 183 of the Corporations Act 2001 (Cth) ("the Corporations Act").

    From at least 19 October 2009 to 29 October 2009 Mr Nankervis and Mr Barclay were involved in taking steps to subdivide Lot 191 into two lots. This was before recommending to Investa Properties that Lot 191 be sold at $210,000 (after rebate), and without disclosing to Investa Properties or Investa Residential that he was involved in taking steps to subdivide Lot 191 into two lots.

    On or about 18 December 2009 Mr Nankervis approved the sale price in respect of a Deed of Put and Call for Lot 191 to Queensland Property Centre in the amount of $195,000, being $15,000 less than the price after rebate that Investa Properties had approved on 23 October 2009. Mr Barclay's wife, Mrs Barclay, incorporated Queensland Property Centre on 21 October 2009, and for all intents and purposes, was the sole director and sole shareholder. At no time did Mr Nankervis disclose to Investa Properties or Investa Residential that Queensland Property Centre was owned and controlled by Mr Barclay's wife.

    On 10 June 2010, Mrs Barclay incorporated Spencer Projects. On or about 18 June 2010, Mr Damian Long, another development manager employed by Investa, approved the sale price of Lot 191 to Spencer Projects as trustee for the Spencer Trust in the amount of $290,000. The relevant contract was executed on 25 June 2010 and the contract settled on 28 July 2010. At no time did Mr Nankervis disclose to Investa Properties or Investa Residential that Spencer Projects was owned and controlled by Mr Barclay's wife.

    In respect of Lot 191, Mr Nankervis was in breach of s 182 and s 183 of the Corporations Act because, inter alia, he improperly used his position as an employee to gain an advantage for himself, or for Mr Barclay, or for companies controlled by Mr Barclay's wife in that, in the course of his duties, he obtained information including as to the potential subdivision of Lot 191, the identity of the company which had a Deed of Put and Call, and the ownership and control of Spencer Projects.

    By letter of 16 July 2008, and/or by email of 27 November 2008, Mr Nankervis, acting for either Investa Properties or Investa Residential (or both of them), offered Oliver Hume SEQ the commission for the en globo sale of Lot 170. Thereafter Oliver Hume SEQ, in particular through Mr Barclay, performed numerous services in connection with the sale and marketing of Lot 170, including weekly reports provided by Mr Barclay at the end of 2008 and the beginning of 2009.

    On or about 22 July 2008, Ipswich City council conditionally approved an application made on behalf of Investa Properties and Investa Residential to reconfigure Lot 170 from one lot into 77 lots, and provided preliminary approval for building works to be carried out, subject to development permits in respect of any operational works being received before such works were commenced. An application was made on behalf of Investa Properties and Investa Residential on or about 11 August 2008, to obtain further development permits in respect of operational road works.

    Some time before 26 November 2008, Investa Residential had entered into a contract to sell Lot 170 to Brittains Road Pty Ltd. It was apparent from the beginning of November 2008 however, that Brittains Road Pty Ltd would probably not complete the contract.

    By letter of 26 November 2008 to Mr Barclay, Citimark Properties Pty Ltd ("Citimark") offered to purchase the Fossil Site for $3.7 million ("the Citimark offer").

    The contract between Investa Residential and Brittains Road Pty Ltd terminated on or about 30 January 2009.

    On or about 5 November 2008, CB Richard Ellis prepared a valuation report for ANZ Banking Group in respect of Lot 170, valuing it at $4 million exclusive of GST ("the CB Richard Ellis report"). A copy of this report was received by Mr Nankervis on 16 December 2008.

    The CB Richard Ellis report described Lot 170 as follows:

Moderately sloping site subject to a Difficult Topography Overlay with approximately 14% of the site sloping between 20% and 25% along the eastern boundary.

Requirement for substantial retaining wall works.

Majority of lots on the eastern side of the state [sic] will require benching and a split level house design.

    On or about 16 December 2008, Mr Nankervis met with Mr Daryl Walker, director of Projex North Pty Ltd ("Projex North") to discuss the redesign of Lot 170. On the same date, Mr Walker provided Mr Nankervis initial engineering advice in relation to the redesign of Lot 170, and Mr Nankervis emailed that engineering advice to Mr Barclay and Mr Tonuri. On or about 16 December 2008, Mr Nankervis received a letter from Mr Walker containing a design amendment proposal, which relevantly provided:

Assessment of the existing design with Mr Ashley Nankervis revealed that a design which provided significantly flatter allotments could be achieved by adjusting the levels of Road 2 and Road 3.

    From about December 2008, Mr Nankervis was involved in submitting an amended Operational Roads Works Approval to the Ipswich City Council which sought levelling and retaining of Lot 170 to create flat lots.

    At a time unknown to Investa Properties and Investa Residential, but before 20 January 2009, an agreement was entered between Messrs Nankervis, Barclay and Tonuri, pursuant to which Mr Nankervis and Mr Barclay would participate in and derive profits from the sale to Mr Tonuri, or his nominee and the subsequent development of Lot 170.

    On or about 6 February 2009, Mr Nankervis prepared a Delegated Authority Approval proposing the sale price for Lot 170 in the amount of $1,454,545 exclusive of GST. This recommendation was on the basis that:

The site is irregular in shape and heavily vegetated with steep topography, rising from the southeast to the northwest and is unattractive to our target market as only speciality [sic] custom built housing can be built on the site. The housing product made to accommodate steep slope of 10% to 15%. No slap on ground product will be achieved and this is compounded by the tree retention Council require and also approval limitations in association with the degree of earthworks allowed on the site, there is no ability to level the site.

    The price of $1,454,545 did not reflect the potential market value of Lot 170, taking into account the CB Richard Ellis report, the design amendment proposal of Projex North, and the amended Operational Road Works Approval Application to the Ipswich City Council. It is also clear that, in light of the proposed works in respect of Lot 170, statements in Mr Nankervis' Delegated Authority Approval submission concerning:

(a)    "only speciality custom built housing can be built on the site";

(b)    "the housing product needs to accommodate steep slope of 10% to 15%";

(c)    "no slap on ground product will be achieved"; and

(d)    "there is no ability to level the site";

were incorrect.

    On or about 10 February 2009, Investa Properties and Investa Residential approved the sale of Lot 170 at $1,454,545.

    On or about 20 February 2009, Investa Residential and Two Eight Two Nine entered into a Deed of Put and Call in respect of Lot 170, for the sum of $1,454,545.

    On a date prior to 4 March 2009, Mr Nankervis commissioned Projex North to assess the design for Lot 170, and on 6 March 2009, Mr Walker emailed Mr Nankervis and Mr Barclay an engineering report for Lot 170, dated 12 January 2009, and slope analysis plans prepared by Hyder Consulting Pty Ltd ("Hyder Consulting").

    On 25 June 2009, Investa Residential entered into a contract for the sale of Lot 170 to Two Eight Two Nine for $1,454,545. The contract was completed on 31 July 2009.

    At a time when Mr Nankervis was an employee of Investa Properties, he was engaged by or performed services and duties for and on behalf of Mr Tonuri/Two Eight Two Nine, and provided information to him/it. This included:

(a)    preparing financial and feasibility reports;

(b)    project management including managing project negotiations;

(c)    managing land sales, including tracking land sales on a periodic basis;

(d)    managing project negotiations, preparing contracts and liaising with and appointing contractors and planners; and

(e)    approving and/or recommending sales prices for lots.

    A sales office owned by Investa Residential was located on the Brentwood Site, however in or around March 2010, it was removed and relocated to the site of a project owned by Mr Tonuri. This was done without the authorisation of Investa Properties or Investa Residential. The cost of replacing the sales office is approximately $100,000.

    Mr Nankervis breached his fiduciary obligations to Investa Properties and Investa Residential and his statutory obligations under s 182 and s 183 of the Corporations Act in that he:

(a)    entered into the agreement with Mr Barclay and Mr Tonuri in respect of Lot 170;

(b)    made incorrect statements to Investa Properties in relation to Lot 170;

(c)    recommended a sale price of $1,454,545 without taking into account or disclosing to Investa Properties or Investa Residential factors which meant the site was not as difficult to develop as he claimed;

(d)    provided services to Mr Tonuri and Two Eight Two Nine; and

(e)    relocated and decommissioned a sales office.

As against Mr Barclay

34    In the amended application the applicants plead:

2.    As against the second respondent, Adam Kimberly Barclay:

2.1.    In respect of Lot 191:

(a)    Mr Barclay must account as a defaulting fiduciary to Investa Residential Group for the value of Lot 191 at the time of sale. The value of the property was $290,000, but Investa Residential received only $195,000.

(b)    Alternatively, Mr Barclay must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Residential for the sale of Lot 191 at an undervalue.

2.2.    In respect of Lot 170:

(a)    At the election of Investa Properties or Investa Residential or both of them, Mr Barclay must account as a defaulting fiduciary to Investa Properties or Investa Residential or both of them for either:

(i)    any profit that he or any entity that was associated with him, or that he controlled, made or derived from the sale of Lot 170 to Two Eight Two Nine Pty Ltd, or from the development or resale of Lot 170; or

(ii)    the value of Lot 170 at the time of sale. The value of the property was $3,000,000, but Investa Residential Group received only $1,454,545.

(b)    Alternatively, Mr Barclay must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Properties or Investa Residential, or both of them for the sale of Lot 170 at an undervalue.

35    In the amended statement of claim, the applicants plead further, in summary:

    By reason of the arrangements entered into between Investa Residential on the one hand, and Oliver Hume SEQ on the other, and in circumstances where Mr Barclay had been the instrument of Oliver Hume SEQ in respect of the entry into those agreements, Mr Barclay had fiduciary obligations to Investa Residential while providing real estate services in relation to Lot 191. Those duties included an obligation not to assist any associated person or entity purchase Lot 191 without full disclosure to and the informed consent of Investa Residential.

    From at least 19 October 2009 to 29 October 2009, Mr Nankervis and Mr Barclay were involved in taking steps to subdivide Lot 191 into two lots.

    When a Deed of Put and Call in respect of Lot 191 was executed by Queensland Property Centre, Mr Barclay did not disclose to Investa Residential or Investa Properties that, in effect, the sole director and sole shareholder of that company was his wife, Mrs Barclay.

    At no time did Mr Barclay disclose to Investa Properties or Investa Residential that Spencer Projects was owned and controlled by his wife.

    Mr Barclay had fiduciary obligations to Investa Properties and Investa Residential in relation to Lot 170, in that he was employed to perform Oliver Hume SEQ's obligations as real estate agent and was involved in a significant way in providing Oliver Hume SEQ's services to Investa Properties and Investa Residential.

    Mr Barclay had a fiduciary obligation to Investa Properties and Investa Residential to tell them that Citimark had made an offer on 26 November 2008 in respect of Lot 170, and the details of the offer (in particular that the offer to purchase was for the amount of $3.7 million).

    At a time when Mr Barclay was employed by Oliver Hume SEQ and providing services to Investa Properties and Investa Residential in respect of the marketing and sale of Lot 170, he was engaged by or performed services and duties for and on behalf of Mr Tonuri/Two Eight Two Nine, and provided information to him/it. This included:

(a)    preparing financial and feasibility reports;

(b)    project management including managing project negotiations;

(c)    managing land sales, including tracking land sales on a periodic basis;

(d)    managing project negotiations, preparing contracts and liaising with and appointing contractors and planners; and

(e)    approving and/or recommending sales prices for lots.

    Mr Barclay breached his fiduciary obligations to Investa by entering into the agreement with Mr Nankervis and Mr Tonuri in relation to Lot 170 and providing services to Mr Tonuri and/or Two Eight Two Nine.

As against Oliver Hume SEQ

36    In the amended application, the applicants plead:

3.    Oliver Hume SEQ

3.1.    In respect of Lot 191:

(a)    Oliver Hume SEQ must account as a defaulting fiduciary to Investa Residential for the value of Lot 191 at the time of sale. The value of the property was $290,000, but Investa Residential received only $195,000.

(b)    Alternatively, Oliver Hume SEQ must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Residential Group for the sale of Lot 191 at an undervalue.

3.2.    In respect of Lot 170:

(a)    At the election of Investa Properties or Investa Residential, or both of them, Oliver Hume SEQ must account as a defaulting fiduciary to Investa Properties or Investa Residential, or both of them for either:

(i)    any profit that it or any entity that was associated with it, or that it controlled, made or derived from the sale of Lot 170 to Two Eight Two Nine Pty Ltd, or from the development or resale of Lot 170; or

(ii)    the value of Lot 170 at the time of sale. The value of the property was $3,000,000, but Investa Residential received only $1,454,545.

(b)    Alternatively, Oliver Hume SEQ must give equitable compensation, in such form and in such amount as the Court in its discretion considers just, to Investa Properties or Investa Residential, or both of them, for the sale of Lot 170 at an undervalue.

37    In the amended statement of claim, the applicants plead further, in summary:

    On or about 1 October 2008, Investa Residential entered into an agreement with Oliver Hume SEQ, being an Appointment of Real Estate Agent – Sales and Purchases (Form 22a) pursuant to PAMDA.

    Mr Barclay, on behalf of Oliver Hume SEQ, signed a further agreement on or about 16 July 2009 with Investa Residential called "Appointment of Real Estate Agent – Sales and Purchases (Form 22a) pursuant to PAMDA. That agreement contained the following notice:

When performing this service, the agent must comply with the code of conduct for agents as set out in the Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001 (Qld).

    The terms of this notice were incorporated into the agreement as a contractual term. It followed that the agreement of 16 July 2009 contained an express term to the effect that, when performing the services that the agreement provided for, Oliver Hume SEQ must comply with the code of conduct for agents as set out in PAMDA (amended statement of claim para 102G).

    In those agreements, Investa Residential appointed Oliver Hume SEQ as real estate agent in connection with the sales and marketing of the development of the Brentwood site.

    At material times, Mr Barclay was a director and employee of Oliver Hume SEQ, and was its agent with actual or ostensible authority act for it in relation to providing real estate agent services to Investa Residential. Mr Barclay was also the signatory on behalf of Oliver Hume SEQ in relation to the agreements, the individual in charge of its business and the individual who dealt with the people at Investa Properties in relation to development and sale of land. In particular, Mr Barclay reported to Mr Nankervis and Mr Long.

    Oliver Hume SEQ did not disclose to Investa Residential or Investa Properties that Lot 191 was the subject of a Deed of Put and Call in favour of Queensland Property Centre, a company controlled by Mr Barclay's wife, or that Lot 191 was sold to Spencer Projects, being another company controlled by Mr Barclay's wife. In this respect, Oliver Hume SEQ did not act with good faith, breached fiduciary obligations to Investa, and breached express and implied terms of its agreements with Investa.

    Oliver Hume SEQ had fiduciary obligations to Investa Properties and Investa Residential while providing services in relation to Lot 170.

    Oliver Hume SEQ had a fiduciary obligation to Investa Properties and Investa Residential to tell them that Citimark had made an offer on 26 November 2008 in respect of Lot 170, and the details of the offer (in particular that the offer to purchase was for the amount of $3.7 million).

    Oliver Hume SEQ breached its fiduciary obligation to Investa Properties and Investa Residential in relation to Lot 170, as a result of Mr Barclay entering into the agreement with Mr Nankervis and Mr Tonuri in relation to Lot 170 and providing services to Mr Tonuri and/or Two Eight Two Nine.

Remedies claimed against the respondents

38    The remedies claimed by the applicants against the respondents can be summarised as follows.

Mr Nankervis

39    In respect of Lot 191:

    account by Mr Nankervis as a defaulting fiduciary to Investa Properties and Investa Residential for the value of Lot 191 at the time of sale, on the basis that the value of the property was $290,000, but Investa Residential received only $195,000.

    alternatively, equitable compensation for the sale of Lot 191 at an undervalue.

    alternatively, compensation payable to Investa Properties pursuant to s 1317H of the Corporations Act.

40    In respect of Lot 170:

    At the election of Investa Properties or Investa Residential, or both of them, Mr Nankervis must account as a defaulting fiduciary to either or both applicants for either:

o    any profit he or any entity that was associated with him or that he controlled, made or derived from the sale of Lot 170 to Two Eight Two Nine, or from the development or resale of Lot 170; or

o    the value of Lot 170 at the time of sale. The value of the property was $4 million, but Investa Residential received only $1,454,545.

    Alternatively, equitable compensation for the sale of Lot 170 at an undervalue.

    Alternative, compensation payable to Investa Properties pursuant to s 1317H of the Corporations Act.

    Equitable compensation for the decommissioning and relocation of the sales office.

Mr Barclay

41    In respect of Lot 191:

    Account by Mr Barclay as a defaulting fiduciary to Investa Properties and Investa Residential for the value of Lot 191 at the time of sale, on the basis that the value of the property was $290,000, but Investa Residential received only $195,000.

    Alternatively, equitable compensation for the sale of Lot 191 at an undervalue.

42    In respect of Lot 170:

    At the election of Investa Properties, or Investa Residential, or both of them, Mr Barclay must account as a defaulting fiduciary to either or both applicants for either:

o    any profit he or any entity that was associated with him or that he controlled, made or derived from the sale of Lot 170 to Two Eight Two Nine, or from the development or resale of Lot 170; or

o    the value of Lot 170 at the time of sale. The value of the property was $4 million, but Investa Residential received only $1,454,545.

    Alternatively, equitable compensation for the sale of Lot 170 at an undervalue.

Oliver Hume SEQ

43    In respect of Lot 191:

    Account by Oliver Hume SEQ as a defaulting fiduciary to Investa Properties and Investa Residential for the value of Lot 191 at the time of sale, on the basis that the value of the property was $290,000, but Investa Residential received only $195,000.

    Alternatively, equitable compensation for the sale of Lot 191 at an undervalue.

44    In respect of Lot 170:

    At the election of Investa Properties, or Investa Residential, or both of them, Oliver Hume SEQ must account as a defaulting fiduciary to either or both applicants for either:

o    any profit it or any entity that was associated with it or that it controlled, made or derived from the sale of Lot 170 to Two Eight Two Nine, or from the development or resale of Lot 170; or

o    the value of Lot 170 at the time of sale. The value of the property was $4 million, but Investa Residential received only $1,454,545.

    Alternatively, equitable compensation for the sale of Lot 170 at an undervalue.

DEFENCES OF THE RESPONDENTS

45    The defences of the respondents to the claims of the applicants can be summarised as follows.

Mr Nankervis

46    Mr Nankervis relied on a second amended defence filed on 15 November 2013.

47    In summary, Mr Nankervis says as follows:

    The description of his duties during the period of his employment in paragraph 5 of the amended statement of claim is incorrect.

    He did not owe to Investa Properties and Investa Residential the fiduciary obligations in paragraph 16(a) of the amended statement of claim.

    He denied that he was responsible for signing off on all relevant stage releases in the Brentwood site (amended statement of claim para 19(b), second amended defence para 12(c)).

    He admitted that he signed the approval submission in respect of the Delegated Authority Approval proposing Lot 191 be sold for the amount of $210,000 (after rebate), but otherwise says that it was actually prepared by the development manager, Mr Long, and reviewed and revised by the Chief Financial Officer and the Group Executive before he signed it (second amended defence para 60).

    He denied that he was involved in taking steps to subdivide Lot 191 into two lots as alleged in paragraphs 103(a) and 104 of the amended statement of claim.

    He denied the allegation at paragraph 110 of the amended statement of claim that he had approved the sale price in respect of a Deed of Put and Call for Lot 191 to Queensland Property Centre in the amount of $195,000. Rather, at paragraphs 68(c) and 69(d) of his second amended defence, Mr Nankervis said that:

o    the Sales Advice Vacant Land (referred to in the particulars) was a summary of the deed of Put and Call Option proposed to be entered into in respect of five lots in Brentwood Stages 2A and 2B;

o    the document was prepared by the sales agent for the Brentwood Development;

o    the proposed sale of five lots to Queensland Property Centre was a bulk sale;

o    during the Global Financial Crisis, and especially during 2009, the applicants were willing to discount prices significantly to achieve bulk sales;

o    the bulk sales of lots in Brentwood Stage 2A included pre-sales to Garrick Bull, DHA, Broadsword and Queensland Lifestyle Company, which are referred to in the "Contract Status Report" attached to the Approval Submission for Brentwood Stage 2A;

o    discounted pricing for bulk sales was approved by the Board or the Project Control Group for the Brentwood site; and

o    lot 191 was subsequently sold by Investa Residential for $290,000, well in excess of the approved net price of $210,000.

    He did not know that Mr Barclay had the interest alleged by the applicants in Lot 191 arising from the Deed of Put and Call, and in any event, was not under a duty to disclose this fact to the applicants.

    He had no knowledge of Spencer Projects which was not incorporated until 10 June 2010, and in any event ceased his employment with Investa Properties on 26 May 2010.

    In relation to the allegations of the applicants concerning the CB Richard Ellis report prepared for ANZ Banking Group in respect of Lot 170, at paragraph 105(b) of his second amended defence, Mr Nankervis says:

o    a valuation report had been prepared for the applicants by Jones Lang Lasalle, in or about June 2008, which provided an indicative assessment in the range of $2.1 million to $2.3 million;

o    in or about early July 2008, after taking this valuation into consideration, the Group Executive approved disposal of Lot 170 under a "wholesale sell off" with a minimum sale price of $1.8 million with the objective of achieving a sale of the property by 31 December 2008;

o    in or about early August 2008, the Group Executive approved a reduction in the minimum sale price to $1.75 million;

o    in or about August 2008, the second applicant entered into a contract for sale of Lot 170 with Brittains Road Pty Ltd for $1,613,636 (excluding GST);

o    the CB Richard Ellis report was prepared for the ANZ Banking Group Ltd based upon instructions, inputs and assumptions provided by Brittains Road Pty Ltd;

o    on or shortly after 16 December 2008, Mr Nankervis went through the costings in the CB Richard Ellis report with Ms Nicole Prout, the applicants' Project Accountant in Queensland, and they considered that the costings were unrealistic;

o    at or about the same time Mr Nankervis also received a copy of the CB Richard Ellis report from Mr Waters, who had been the Queensland General Manager until in or about November 2008 (when he was appointed Queensland Manager of Clarendon Homes) and he continued to have responsibility for the contract with Brittains Road Pty Ltd with Mr Stubbs, the new Queensland General Manager; and

o    Mr Nankervis discussed the CB Richard Ellis report with Mr Waters and they were both of the opinion that it was overly optimistic in its assumptions given the market conditions.

    In relation to the allegations of the applicants at paragraphs 169-173 of the amended statement of claim concerning Mr Nankervis' meeting with Mr Walker on or about 16 December 2008 to discuss the redesign of Lot 170, and Mr Nankervis' interactions with Mr Tonuri, he says at paragraph 106 of his second amended defence:

o    in late 2008 and 2009 during the Global Financial Crisis, the Investa Property Group was under intense financial pressure and was attempting to sell assets wherever possible;

o    in or about November 2008 it was apparent to Mr Waters and Mr Stubbs that the contract with Brittains Road Pty Ltd was unlikely to complete;

o    during the period from in or about November 2008 to in or about February 2009, Mr Stubbs instructed Mr Nankervis to the effect that he should do anything and everything he could to ensure that a sale of Lot 170 was achieved;

o    during November and December 2008, Mr Stubbs, Mr Long and Mr Nankervis undertook an extensive off-market campaign to find a buyer for Lot 170;

o    the only sale that achievable at the times was the sale to Two Eight Two Nine for $1.6 million (including GST).

    In relation to the allegations of the applicants at paragraph 174 of the amended statement of claim concerning Mr Nankervis' involvement in submitting an amended Operational Roads Work Approval to the Ipswich City Council which sought levelling and retaining of Lot 170 to create flat lots, he says at paragraph 107 of his second amended defence:

o    he was involved in submitting a request for amendment of the development approval for reconfiguring one lot into 77 lots in respect of Lot 170;

o    the principal purpose of the request was to address road design to meet safety concerns raised by the Ipswich City Council and compliance with the Council's Master Plan for the Brentwood Site on interface issues;

o    the levelling and retaining of the site to create flatter lots was incidental but necessary to make Lot 170 more saleable;

o    the person who was most interested in purchasing Lot 170 was Mr Tonuri, who told Mr Nankervis in or about November 2008 that he wanted a permit that was unconditional. The plan amendments were undertaken to obtain a permit that was unconditional;

o    design changes to allow for flatter allotments were undertaken to satisfy Mr Tonuri's concern about the saleability of steep allotments;

o    all of this information was known to Mr Stubbs because of his direct involvement in the marketing campaign for Lot 170 and in negotiations with Mr Tonuri, and the progress of plan amendments were reported to the Project Control Group.

    In relation to allegations of the applicants at paragraph 176 of the amended statement of claim concerning the basis of Mr Nankervis' recommendation that Lot 170 be sold for $1,454,545, Mr Nankervis says at paragraph 109 of his second amended defence that he basis of the recommendation that Lot 170 be sold at that price was:

o    the comparative price analysis undertaken by Jones Lang LaSalle;

o    the need of Investa Properties to achieve a sale to gain revenue;

o    the sale to Two Eight Two Nine was the only achievable sale at the time; and

o    the proposed sale price was just below the price previously agreed by Investa Residential to sell to Brittains Road Pty Ltd and the Jones Lang LaSalle valuation obtained by Investa Residential in June 2008.

    In relation to allegations of the applicants at paragraphs 186 and 187 of the amended statement of claim to the effect that Mr Nankervis was engaged by or provided services for and on behalf of Mr Tonuri or provided information to Mr Tonuri or a person or persons associated with Two Eight Two Nine, Mr Nankervis says at paragraphs 114-116 of his second amended defence that:

o    Mr Tonuri worked for a bank and was not experienced in property development;

o    Mr Tonuri told Mr Nankervis in early 2009 that he would need help in getting the right consultants and getting the Lot 170 project up and running, and Mr Nankervis said that he would assist Mr Tonuri if Mr Tonuri purchased Lot 170;

o    Mr Nankervis was motivated to do so in order to achieve the sale, and because it was in the interests of Investa Residential for him to be involved so as to most effectively resolve the interface issues between Lot 170 and the balance of the Brentwood site and requirements of the Brentwood Master Plan, including sewer alignment, pathway connections and the road frontage works;

o    he did not provide services alleged by the applicants including preparation of financial and feasibility reports, project management, land sales management and project negotiation management – rather the assistance Mr Nankervis provided to Mr Tonuri was that:

•    he provided introductions to consultants and contractors;

•    he attended a meeting between Mr Tonuri and a finance broker;

•    he ran a feasibility model using inputs provided by Mr Tonuri; and

•    the project was managed by Projex North which was engaged by Two Eight Two Nine;

o    the assistance he provided to Mr Tonuri was generally given outside business hours in return for no payment, and did not conflict with his responsibilities to Investa Properties.

    In relation to allegations of the applicants at paragraphs 191-193 of the amended statement of claim concerning the sales office, Mr Nankervis says at paragraphs 119-122 of his second amended defence that:

o    by late 2009, when Investa Residential was pre-selling and preparing for the delivery of Stages 1D, 1E and 1F of the Brentwood site, the relevant sales office had not been used for approximately two years, had been vandalised and was in disrepair. The estimated cost of repairing and removing the sales office from the site exceeded $50,000.

o    in or about December 2009, Mr Holt, the Queensland General Manager, instructed that the sales office was to be removed from the site at no cost to Investa Residential. Subsequently, in or about January or February 2010, Mr Barclay proposed to Mr Nankervis that the sales office be relocated to the Outlook Project at no cost to Investa, and Mr Nankervis agreed.

    He did not profit from transactions involving either Lot 191 or Lot 170.

Mr Barclay

48    Mr Barclay relies on a defence filed on 18 November 2013. In summary, he says as follows:

    Investa Properties was the relevant party at all times, not Investa Properties. At paragraph 1A(c)(ii) of his defence, Mr Barclay says:

(i)    the land the subject of this proceeding was not held beneficially by Investa Residential for Investa Properties;

(ii)    if funds were provided by Investa Properties to Investa Residential those funds were by way of a loan on commercial terms; and

(iii)    Investa Residential was the registered owner of the subject land from any beneficial holding and was the party who contracted with real estate agents and entered into land contracts.

Further at paragraph 1B(a) of his defence, Mr Barclay says that it was Investa Residential which contracted for the purchase and sale of land within the Brentwood site, and the entity which entered into agreements with real estate agents.

    In relation to the allegations of the applicants at paragraph 27 of the amended statement of claim concerning the appointment of Oliver Hume SEQ as real estate agent by Investa Residential, Mr Barclay admits that Oliver Hume SEQ agreed to conduct sales and marketing of certain lots but says further at paragraph 8 of his defence that:

o    the applicants acted on their own behalf for the sale of all land at the Brentwood Site as well as negotiated or dealt with at least 10 different agencies involving more than 100 different purchasers;

o    no agent was appointed for the sale of Lot 170; and

o    unless an appointment is in the approved form 22a pursuant to PAMDA an appointment is ineffective.

    The claim of the applicants in paragraph 102G of the amended statement of claim, that the notice on the agreement entered by the applicants and Oliver Hume SEQ on 26 July 2009 meant that there was incorporated a condition that the agent must comply with the code of conduct for agents in PAMDA, was wrong in law.

    Neither he nor Oliver Hume SEQ owed obligations to Investa Residential pursuant to the provisions of PAMDA.

    In relation to the claims of the applicants in paragraph 102L of the amended statement of claim that Mr Barclay owed fiduciary obligations to Investa Residential, Mr Barclay denies that such fiduciary obligations are owed.

    In relation to the claim of the applicants at paragraph 107 of the amended statement of claim that he did not, at any time prior to Mr Nankervis recommending to Investa Properties the sale of Lot 191 at $210,000 (after rebate), disclose to the applicants that he was taking steps to subdivide Lot 191, Mr Barclay says at paragraph 34 of his defence that:

o    he verbally informed the applicants through Mr Nankervis, who consented to and encouraged the sale;

o    by email on or about 19 October 2009, Mr Barclay emailed the applicants asking whether or not there would be any issues with subdividing Lot 191, and the applicants (through Mr Nankervis) consented and encouraged the sale; and

o    Mr Barclay initiated the proposal to the applicants for them to subdivide the larger lots in stage 2A and 2B of the Brentwood Site to achieve lower priced lots for sale during the Global Financial Crisis, however the applicants responded, inter alia, that they did not have the budget allowance or cash resources to carry out the subdivisions and they needed to increase cash flow by sales of existing lots.

    In relation to the claim of the applicants in paragraph 108 of the amended statement of claim that the price of $210,000 for Lot 191 did not reflect its potential market value (given that it could be subdivided), Mr Barclay says at paragraph 35 of his defence that:

o    the actual price paid was the market value of Lot 191 with or without the knowledge of the potential to subdivide;

o    the applicants were informed of the potential to subdivide Lot 191 but declined the opportunity to do so;

o    the Global Financial Crisis resulted in the applicants deciding to sell the Brentwood Site as a whole and there being less demand for larger lots;

o    the applicants breached s 93 of the Valuation of Land Act 1944 (Qld) and s 81 of the Land Titles Act 1994 (Qld) by not disclosing rebates and therefore distorting the real market value of lots in the Brentwood Site and the surrounding area;

o    the applicants failed to comply with regs 7(1), 11, 14 and 16 of the Property Agents and Motor Dealers (Property Developer Practice Code of Conduct) Regulations 2001 (Qld) by, inter alia, conduct whereby board list prices and list prices were artificially and misleadingly distorted, because of rebates given by the applicants in respect of lots sold;

o    the applicants sold other lots greater than 900 m to their own employees at similar prices;

o    Lot 190 was valued by Bank of Queensland on 2 August 2010 at $200,000 being the best comparative sale;

o    in Delegated Authority Approval papers of the applicants dated 3 March 2009 the applicants authorised lots to be sold at an average of $190,000 per lot;

o    market conditions were deteriorating in 2009 as a result of the Global Financial Crisis, and were affecting nearby developments operated by Stockland as well as sales rates of the Brentwood Site; and

o    subdivision of Lot 191 required complex steps and associated costs.

    In relation to the claim of the applicants in paragraph 111 of the amended statement of claim that the price of $195,000 for Lot 191 approved by Mr Nankervis on or about 18 December 2009 in the Deed of Put and Call was $15,000 less than the price of $210,000 approved by Investa Properties on 23 October 2009, Mr Barclay says that $195,000 was the market price, Lot 191 was sold as part of a bulk sale of other lots, the sale price of $195,000 was approved by the applicants and in any event the prices of Investa land were distorted by the applicants as a result of rebates which were not disclosed to the market.

    In relation to the claim of the applicants at paragraph 120 of the amended statement of claim that Mr Barclay did not disclose to the applicants that the other party to the Deed of Put and Call was a company controlled by his wife, Mr Barclay says at paragraph 46 of his defence that he verbally informed Mr Nankervis of this fact and that Mr Nankervis encouraged these actions.

    In relation to the sale price of $290,000 achieved for the sale of Lot 191 to Spencer Projects, Mr Barclay at paragraph 58 of his defence, says that the real value of Lot 191 was not $290,000, and the only reason Investa Residential achieved that sale price was because the transaction between Spencer Projects and Queensland Property Centre was a related party transaction.

    In relation to the allegations of the applicants at paragraphs 162A-162G of the amended statement of claim concerning Lot 170, Mr Barclay says at paragraph 60 (inter alia):

o    he undertook no activities set out in a letter of 16 July 2008 whereby Investa Residential offered Oliver Hume SEQ the commission for the en globo sale of Lot 170;

o    as at 16 July 2008, Oliver Hume SEQ had not been appointed as the sales agent for any Lots within the Brentwood development;

o    the applicants were actively marketing Lot 170 internally while at the same time contacting real estate agents including Oliver Hume SEQ to consider selling Lot 170;

o    Brittains Road Pty Ltd was sourced as buyer internally from the marketing activities by the applicants;

o    Mr Barclay undertook no marketing activities of Lot 170 on behalf of the applicants, or at all

o    the email of 27 November 2008 from Mr Nankervis to Oliver Hume SEQ specifically stated that the applicants would not formalise the engagement of Oliver Hume SEQ until Oliver Hume SEQ advised. No agreement was ever formalised in fact or pursuant to PAMDA because there was no agreement to formalise;

o    between 27 November 2008 and February 2009, Mr Barclay and Mr Nankervis (on behalf of the applicants) agreed that Oliver Hume SEQ would seek its commission from Two Eight Two Nine through the sales of the developed sites or vacant land sales of Lot 170 by Two Eight Two Nine. However, Oliver Hume SEQ did not receive any commission from the applicants for the sale of Lot 170 to Two Eight Two Nine in accordance with that agreement;

o    in or about mid 2008, Mr Barclay on behalf of Oliver Hume SEQ was requested by Mr Geoff McWilliam, on behalf of Citimark, to source potential sites for development. In or about November 2008, Mr Barclay identified Lot 170 as such a site and Citimark made an offer on 26 November 2008 in respect of Lot 170, however the offer was withdrawn within several days; and

o    the marketing report relied upon by the applicants in paragraph 162C of the amended statement of claim with reference to the Fossil Site was actually produced by Oliver Hume SEQ in relation to the Brentwood Site, and not Lot 170.

    In relation to the offer of $1,454,545 for Lot 170, Mr Barclay says at paragraph 63 of his defence, inter alia, that at or about 10 February 2009 when the Delegated Authority Approval prepared by Mr Nankervis and signed by Mr Nankervis, Mr Stubbs (the General Manager Queensland) and Mr Jenkins (Group Executive), it was recognised that:

o    the Brittains Road contract had terminated. In that contract Investa Residential had previously agreed to sell Lot 170 to Brittains Road Pty Ltd for $1,613,636 excluding GST;

o    a sales and marketing campaign had been undertaken by Oliver Hume SEQ off market, at no cost to Investa;

o    there was no interest in the site by corporate players and only five persons at a local level had been interested; and

o    it was agreed that Oliver Hume SEQ would be acting on the buyer's behalf and not that of Investa Residential and would seek its commission from the buyer not the applicants.

    He admits he provided services for and on behalf of Mr Tonuri and Two Eight Two Nine and provided information and assistance to them from August 2009.

    In relation to the relocation of the sales office, at paragraph 85 of his defence, Mr Barclay denies that neither applicant authorised the relocation because Mr Nankervis agreed for it to be removed from the Brentwood site at Mr Barclay's cost. At paragraph 87 of his defence he denies that the applicants could have reused the sales office because:

o    the applicants were using display homes for sales offices in subsequent stages in the Brentwood Development;

o    the sales office was damaged and required extensive cash payments to improve;

o    the sales office was not modern or presentable to a standard required by the applicants for their sales display;

o    the applicants required increases in cash flow and saved cash flow by not having to refurbish a damaged sales office and keeping it in storage for subsequent use in subsequent stages of the Brentwood Development; and

o    the applicants made the commercial decision to have the sales office removed at no cost, therefore saving approximately $50,000 in cash outlays.

Oliver Hume SEQ

49    Oliver Hume SEQ relies on a defence filed on 15 November 2013. In summary, it says as follows:

    In respect of the claims of the applicants concerning the execution of contract for the sale of Lot 170, Oliver Hume SEQ says at paragraph 4 of its defence:

o    an appointment of a person as a purported real estate agent is ineffective unless it is in the approved form in accordance with provisions of PAMDA, being Form 22a;

o    a Form 22a was not executed by either applicants, or Mr Barclay, or Oliver Hume SEQ in relation to Lot 170; and

o    this may be compared with the Form 22a prepared by Mr Barclay and executed by Investa Residential and Oliver Hume SEQ on 30 September 2008 in relation to other lots, and a subsequent Form 22a signed by Mr Nankervis on behalf of Investa Residential and Mr Barclay on behalf of Oliver Hume SEQ on 16 July 2009 in relation to Lots 173-215 and 216-249 Whipstick Boulevard in the Brentwood Development.

    In relation to Mr Barclay, Oliver Hume SEQ says at paragraph 6 of its defence:

o    Mr Barclay was employed on 15 March 2004 as Sales Manager, and his title changed to General Manager – Queensland Land and New Homes in September 2006;

o    on 1 November 2006, Mr Barclay signed an employment contract, and subsequently on 27 August 2008 he signed another employment contract to become the General Manager – Queensland Land and New Homes for Oliver Hume SEQ. In both contracts he agreed, inter alia, that he would not engage in any private business activities or provide any commercial or professional services to a person or organisation without prior written consent of Oliver Hume SEQ;

o    on 1 July 2009 AKB Qld Pty Ltd of which Mr Barclay was the sole shareholder and director became a shareholder of Oliver Hume SEQ, and was the only Queensland based shareholder of Oliver Hume SEQ at the material time;

o    Mr Barclay was nominated as the officer in effective control of Oliver Hume SEQ's Corporate Licence from 2006;

o    on 14 April 2011, Mr Barclay's employment with Oliver Hume SEQ was terminated and he was removed as a director;

o    from 11 December 2007 to 14 April 2011 Mr Barclay was authorised by Oliver Hume SEQ to sign the following categories of documents on its behalf as the only director of Oliver Hume SEQ based in Queensland:

•    PAMDA forms;

•    lease agreements with a second director;

•    capital expenditure up to $5,000;

•    employment agreements for staff;

•    consultancy agreements;

•    all other agreements together with a second director; and

o    other than in these respects, Mr Barclay had no actual or apparent authority to act for Oliver Hume SEQ in matters relating to the provision of real estate agent services to Investa Residential.

    It denies that any agreement between it and either of the applicants contained terms imported by the notice on the Form 22a as claimed by the applicants. The contents of the Real Estate Agency Practice Code of Conduct were not terms or conditions of the contract.

    It denies that any fiduciary obligation which consisted of the duties or obligations particularised at paragraphs 102J and 102L of the amended statement of claim arose as between either of the applicants and Oliver Hume SEQ.

    At paragraph 22 of its defence, Oliver Hume SEQ says that it was to provide real estate agent services in accordance with the terms of the Form 22a signed on 16 July 2009 which included the sale and marketing of Lot 191, but that was all.

    Oliver Hume SEQ had no knowledge concerning the entry into the Deed of Put and Call by Queensland Property Centre.

    Oliver Hume SEQ had no knowledge of the steps taken by Mr Nankervis and Mr Barclay to subdivide Lot 191 into two lots, and says at paragraph 41 of his defence that it that conduct was engaged in it was not undertaken with the knowledge, consent or approval of Oliver Hume SEQ. Such conduct or knowledge could not be imputed to Oliver Hume SEQ.

    In relation to steps taken by Mr Nankervis and Mr Barclay pursuant to the subdivision of Lot 191 pleaded by the applicants at paragraph 139 of the amended statement of claim, Oliver Hume SEQ, at paragraph 41 of its defence, denies that it breached any express or implied terms of any agreement and any fiduciary obligation.

    It denies that there was any contract of engagement with the first or second applicant in relation to Lot 170 as pleaded in paragraph 162C of the amended statement of claim. Any services provided by Mr Barclay were not performed on behalf of, or with the authority of, or as agent for Oliver Hume SEQ.

    It denies the claim of the applicants in paragraph 162D of the amended statement of claim that Oliver Hume SEQ was in a position of confidence in relation to Investa Properties and Investa Residential, and further denies the claims in paragraphs 162E and 162F of the amended statement of claim that it owed any fiduciary obligations in relation to Lot 170.

    In relation to the claims of the applicants at paragraphs 164A-167 of the amended statement of claim, Oliver Hume SEQ says at paragraph 51 of his defence, inter alia:

o    on 13 June 2008, after the preparation of an "Indicative Assessment" for the second applicant by Jones Lang LaSalle, the second applicant's business plan valued Lot 170 at $3,100,000;

o    on 3 July 2008, however the State Manager of the second applicant recommended that Lot 170 be disposed of under a "wholesale sell off" with the minimum sale price to exceed $1,800,000. This recommendation was approved by Mr Maurice Felizzi, the Group Executive for the second applicant on or about 7 July 2008. That recommendation was followed up on 11 August 2008 with a further recommendation that Lot 170 be sold with the minimum price to exceed $1,750,000, which recommendation was again approved by Mr Felizzi;

o    on 11 August 2008, the second applicant entered into a contract to sell Lot 170 to Brittains Road Pty Ltd for $1,775,000 (inclusive of GST). Oliver Hume SEQ was not identified in the contract as being the vendor's agent for the sale;

o    on or about 19 August 2008, Mr Barclay sought a quotation from CB Richard Ellis to provide a report for Lot 170. CB Richard Ellis prepared a report, for the ANZ Banking Group, on the instruction of Brittains Road Pty Ltd, valuing the land at $4,000,000;

o    by letter dated 26 November 2008 to Mr Barclay, Citimark offered to purchase Lot 170 for $3,700,000 including GST. Oliver Hume SEQ had no knowledge of this offer;

o    on 27 November 2008 Mr Nankervis emailed Mr Barclay to the effect that the Brittains Road Pty Ltd contract looked precarious and that Investa Residential wanted Oliver Hume SEQ to procure a back-up sale contract for around $1,800,000, but would not formalise Oliver Hume SEQ's engagement until Mr Barclay advised them;

o    by 2 December 2008 Mr Barclay had made contact with Mr Tonuri in relation to purchasing Lot 170;

o    a further memorandum was prepared by Mr Nankervis to the Group Executive of Investa Residential on 28 January 2009 recommending that Lot 170 be sold for $1,600,000, followed by a Delegated Authority Approval Submission prepared by Mr Nankervis on 6 February 2009, recommending that it be sold under a "wholesale sell off" for $1,454,545 exclusive of GST;

o    on 13 February 2009 Ms Prout, an employee of one of the Investa companies, wrote to Mr Andrew Murray (Legal Counsel of the Investa property group) and Mr Duncan Peacock (the Chief Financial Officer of the Investa Property Group) and stated, inter alia, that it appeared that the book value for Lot 170 was $2.976 million, and having regard to the loan amount referable to the site she had arrived at a debt of $1,361,923; and

o    CB Richard Ellis prepared a report of Lot 170 on 6 May 2009 on the instructions of Mr Tonuri for mortgage security purposes, and CB Richard Ellis valued Lot 170 at $4 million.

    The second applicant subsequently sold Lot 170 to Two Eight Two Nine for $1,454,545 on 25 June 2009 by a contract of sale, in which no selling agent was identified. Oliver Hume SEQ received no commission in relation to the sale of Lot 170.

    Oliver Hume SEQ says at paragraph 64 of its defence that it provided no services to Mr Tonuri and/or Two Eight Two Nine.

    At all material times, Mr Nankervis was the servant or agent of the applicants, and in so far as any loss was suffered by the applicants in respect of the Lot 191 contract or the Lot 170 contract it was caused by the applicants by their agent, Mr Nankervis.

RELEVANT ISSUES FOR DETERMINATION

50    At the commencement of the trial of these proceedings the parties estimated that a period less than three weeks of Court time would be required for the hearing. Despite the fact that, in my view, the questions before the Court for consideration and determination were broadly straightforward, the time allowed for the trial proved to be a significant underestimation. By the closure of the proceedings, approximately six weeks of Court time had been occupied in this matter, with the expectation that, in future, further directions will be necessary for submissions by the parties concerning compensation (if any) and costs.

51    One reason for the escalation was that both Mr Nankervis and Mr Barclay were self-represented throughout the trial, and it is clear that the conduct of a trial over multiple weeks proved challenging to them, and required considerable time over and above that which would have been required by experienced legal representatives in the conduct of their cases. In making this comment, I make no criticism of them in respect of their conduct of their cases.

52    However an additional, and in my view unfortunate, reason for the prolongation of the proceedings was that the trial was characterised at various times by an extraordinary degree of animosity between Counsel, and between certain Counsel and litigants in person. While such animosity inevitably translates into proceedings of heightened tension, a more problematic outcome is that the high standards of professional conduct and reasonable co-operation of litigants, which this Court has reasonably come to expect, was absent. Indeed there was almost nothing upon which the parties could agree, even the matters for determination by this Court on the filed pleadings.

53    A draft joint statement of issues for determination was provided by the applicants, with objection by Counsel for Oliver Hume SEQ. I note that it is Court document 261 in these proceedings. It was the subject of comment by Mr Barclay and Oliver Hume SEQ, but apparently no comment by Mr Nankervis. It is a document which is of some assistance as an aide to the Court, but little more.

54    In my view at this stage there are three key issues for determination in respect of the primary proceedings:

1.    Did any of the respondents owe fiduciary, statutory or other duties to any of the applicants in respect of Lot 191, Lot 170 and/or the sales office?

2.    If yes, did the conduct of any of the respondents breach those fiduciary, statutory or other duties?

3.    If yes, what loss or damage is attributable to that breach of fiduciary or statutory duties in respect of Lot 191, Lot 170 and/or the sales office?

55    I now turn to consideration of these issues.

ISSUE 1: DID ANY OF THE RESPONDENTS OWE FIDUCIARY, STATUTORY OR OTHER DUTIES TO EITHER OF THE APPLICANTS IN RESPECT OF LOT 191, LOT 170 OR THE SALES OFFICE?

Did Mr Nankervis owe fiduciary duties to either of the applicants?

The applicants' submissions

56    The applicants, at paragraph 16 of their amended statement of claim, allege that:

16.    By reason of the positions of Development Manager and Senior Development Manager held by Nankervis, and the responsibilities that he discharged, and the relationship between Investa Properties and Investa Residential as alleged in paragraphs 1A and 2 above, at all material times during his employment, Nankervis:

(a)    had fiduciary obligations to Investa Properties and Investa Residential Group to:

(i)    act in good faith and with fidelity;

(ii)    avoid and disclose to Investa Properties or to Investa Residential Group all actual or perceived conflicts of interest;

(iii)    act in the best interests of Investa Properties and Investa Residential Group; and

(iv)    give Investa Properties and Investa Residential Group the full benefit of his knowledge and skill, and in particular, pass on to Investa Properties or to Investa Residential Group all information that he had about the marketing and sale of the properties that were the subject of his employment, that might be relevant to the marketing and sale;

(v)    not profit from his position, other than by receiving remuneration in the course of his employment with Investa Properties, without full disclosure to and the informed consent of Investa Properties and Investa Residential Group; and

(vi)    not assist

•    any person with whom he was associated; or

•    any entity in which he had an interest; or

•    any person or entity from whom or from which he could expect a benefit;

to purchase any of the properties he was engaged in the marketing and sale of, without full disclosure to and the informed consent of Investa Properties and Investa Residential Group; and

(b)    was an employee of Investa properties within the meaning of sections 182 and 183 of the Corporations Act 2001 (Cth).

57    The applicants submitted that Mr Nankervis' position as an employee of the first applicant Investa Properties alone gave rise to fiduciary obligations as the employee-employer relationship is an established category of fiduciary relationship: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 per Gibbs CJ at 68, and Finn PD, "Contract and the Fiduciary Principle" (1989) 12 UNSW Law Journal at 87.

58    The scope of Mr Nankervis' obligations as a fiduciary, the applicants submit, is derived from his position as development manager, with responsibilities for the sale of Investa's residential land in Queensland. The applicants said that Mr Nankervis was responsible for:

a)    Preparing feasibility studies, the purpose of which was to calculate the expected return from a purchase or development, or give an indicative assessment of the price at which it could be sold; and

b)    Preparing reports and other documents for Investa's decision-makers to assist them in deciding whether to sell land, how to sell it and at what price. The documents covered facts about the market generally, the particular market in which the land was to be sold, and the land itself. They included Nankervis's own recommendation as to sale price. They also included proposed recommendations to be adopted by the intermediate decision-making levels for submission to the ultimate decision-makers.

59    The applicants also said that the structure of the decision-making process meant that there was a high reliance on Mr Nankervis' professional expertise, and also on his good judgment, impartiality and honesty. As such, the no-conflict rule and no-profit rule were said to apply particularly in these areas and as such if Mr Nankervis was involved in reporting for and making recommendations in relation to the sale of any property, he could not be involved in the purchase of the property without full disclosure of all facts relevant to the purchase, the consent of the principal and purchase for full value.

Mr Nankervis' submissions

60    In paragraph 10(a) of his defence Mr Nankervis denied the allegations in paragraph 16(a) of the amended statement of claim, however at paragraph 10(b) he admitted the allegation in paragraph 16(b) of the amended statement of claim.

61    In his written submissions, Mr Nankervis said that "[e]mployment relationships are not fiduciary in nature as employees are not required to pursue their employer's interests at the expense of their own". Mr Nankervis submitted that the applicants must establish a "fact-based fiduciary relationship", which he said does not arise on the facts of this case.

62    Mr Nankervis cited a number of cases in his written submissions, notably the recent decision of the Full Court of this Court in ABN Amro Bank NV v Bathurst Regional Council (2014) 309 ALR 445 at [1066] setting out the principles referable to the existence of a fiduciary relationship. Mr Nankervis submitted that the principles outlined are indicative of a general reluctance of courts to impose fiduciary obligations where sophisticated parties are acting at arm's length and where there is no clear undertaking by one party to act as a fiduciary and solely in the interests of the other party. He submitted that the application of the relevant principles reveals that no fiduciary obligations can be made out on the facts pleaded as the applicants were sophisticated parties employing a senior employee under the terms of an employment contract which governed all of the terms and conditions of his employment.

63    While Mr Nankervis denied the description of his duties pleaded by the applicants (which correspond to those outlined in the applicants' submissions), I note that he did not explain the nature of his duties in either his defence or his submissions, or how the applicants were in error in their description of his duties.

Consideration – Mr Nankervis and existence of fiduciary obligations

64    A person who is an employee under a contract between himself or herself and an employer can be in the position of owing duties to the employer at law by virtue of that contract, and in equity depending on the position and the nature of the relationship.

65    It is settled law that, as a general proposition, an employee has an implied duty of fidelity to the employer not to engage in conduct which "impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee" (Commonwealth Bank of Australia v Barker (2014) 312 ALR 356 at [30]; Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66; Concut Pty Ltd v Worrell (2000) 176 ALR 693). This duty requires that an employee will not, for example, wrongly appropriate property of the employer (Concut), or more generally engage in competition with the employer (Blyth Chemicals, Griffiths & Beerens Pty Ltd v Duggan (2008) 66 ASCR 472).

66    It is also clear, however, that the simple fact that a person is an employee does not mean that he or she owes fiduciary obligations to the employer. The overlap between duties owing at common law by an employee, and fiduciary obligations possibly owing by an employee, were carefully and comprehensively examined in Nottingham University v Fishel [2000] ICR 1462 at 1490-1491. In that case, Elias J observed as follows:

It is true that in [A.G. v Blake [1998] Ch 439] Lord Woolf, giving judgment for the Court of Appeal said that the employer-employee relationship is a fiduciary one. But plainly the Court was not thereby intending to indicate that the whole range of fiduciary obligations was engaged in every employment relationship. This would be revolutionary indeed, transforming the contract of employment beyond all recognition and transmuting contractual duties into fiduciary ones. In my opinion the Court was merely indicating that circumstances may arise in the context of an employment relationship, or arising out of it, which, when they occur, will place the employee in the position of a fiduciary. In Blake itself, as I have indicated, it was the receipt of confidential information. There are other examples. Thus every employee is subject to the principle that he should not accept a bribe and he will have to account for it (and possibly any profits derived from it) to his employer. Again, as Fletcher-Moulton L.J. observed in Coomber v Coomber [1911]1 Ch.723 at 728, even an errand boy is obliged to bring back my change, and is in fiduciary relations with me. But his fiduciary obligations are limited and arise out of the particular circumstances, namely that he is put in a position where he is obliged to account to me for the change he has received. In that case the obligation arises out of the employment relationship but it is not inherent in the nature of the relationship itself.

As these examples all illustrate, simply labelling the relationship as fiduciary tell us nothing about which particular fiduciary duties will arise. As Lord Browne-Wilkinson has recently observed in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206: "... the phrase 'fiduciary duties' is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. This is not the case". This is particularly true in the employment context. The employment relationship is obviously not a fiduciary relationship in the classic sense. It is to be contrasted with a number of other relationships which can readily and universally be recognised as "fiduciary relationships" because the very essence of the relationship is that one party must exercise his powers for the benefit of another. Trustees, company directors and liquidators classically fall into this category which Dr. Finn, in his seminal work on fiduciaries, has termed "fiduciary offices". (See PD Finn, "Fiduciary Obligations" (1977)). As he has pointed out, typically there are two characteristics of these relationships, apart from duty on the office holder to act in the interests of another. The first is that the powers are conferred by someone other than the beneficiaries in whose interests the fiduciary must act; and the second is that these fiduciaries have considerable autonomy over decision making and are not subject to the control of those beneficiaries.

By contrast, the essence of the employment relationship is not typically fiduciary at all. Its purpose is not to place the employee in a position where he is obliged to pursue his employer's interests at the expense of his own. The relationship is a contractual one and the powers imposed on the employee are conferred by the employer himself. The employee's freedom of action is regulated by the contract, the scope of his powers is determined by the terms (express or implied) of the contract, and as a consequence the employer can exercise (or at least he can place himself in a position where he has the opportunity to exercise) considerable control over the employee's decision making powers. This is not to say that fiduciary duties cannot arise out of the employment relationship itself. But they arise not as a result of the mere fact that there is an employment relationship. Rather they result from the fact that within a particular contractual relationship there are specific contractual obligations which the employee has undertaken which have placed him in a situation where equity imposes these rigorous duties in addition to the contractual obligations. Where this occurs, the scope of the fiduciary obligations both arises out of, and is circumscribed by, the contractual terms; it is circumscribed because equity cannot alter the terms of the contract validly undertaken. The position was succinctly expressed by Mason J in the High Court of Australia in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR …

(Emphasis added.)

67    These comments are relevant in Australia (cf comments of the Full Court of this Court in University of Western Australia v Gray (2009) 259 ALR 224 at [92]).

68    Whether in the employment relationship there are specific contractual obligations which the employee has undertaken which have placed him or her in a situation where equity imposes these rigorous duties in addition to the contractual obligations is a question of fact in each case.

69    Although very junior employees may be the repository of fiduciary obligations (the classic example being that of the errand boy, given by Fletcher Moulton LJ in Re Coomber [1911] 1 Ch 723 at 728, as noted by Mason J in Hospital Products at 102) nonetheless it may be easier to identify a fiduciary relationship between an employer and a senior employee in whom greater responsibility is reposed. This point was recognised by the Supreme Court of Canada in the leading case of Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371 where the Court said:

What is not in doubt is that they acted respectively as president and executive vice-president of Canaero for about two years prior to their resignations. To paraphrase the findings of the trial judge in this respect, they acted in those positions and their remuneration and responsibilities verified their status as senior officers of Canaero. They were "top management" and not mere employees whose duty to their employer, unless enlarged by contract, consisted only of respect for trade secrets and for confidentiality of customer lists.

…

The distinction taken between agents and servants of an employer is apt here, and I am unable to appreciate the basis upon which the Ontario Court of Appeal concluded that O'Malley and Zarzycki were mere employees, that is servants of Canaero rather than agents. Although they were subject to supervision of the officers of the controlling company, their positions as senior officers of a subsidiary, which was a working organization, charged them with initiatives and with responsibilities far removed from the obedient role of servants.

It follows that O'Malley and Zarzycki stood in a fiduciary relationship to Canaero, which in its generality betokens loyalty, good faith and avoidance of a conflict of duty and self-interest. Descending from the generality, the fiduciary relationship goes at least this far: a director or a senior officer like O'Malley or Zarzycki is precluded from obtaining for himself, either secretly or without the approval of the company (which would have to be properly manifested upon full disclosure of the facts), any property or business advantage either belonging to the company or for which it has been negotiating; and especially is this so where the director or officer is a participant in the negotiations on behalf of the company.

An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company, or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired.

(emphasis added.)

70    Principles articulated in Canadian Aero Services in respect of the fiduciary obligations of senior employees have been adopted in Australia in such cases as Bayley and Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341; Nicholls v Michael Wilson and Partners Ltd [2012] NSWCA 383; Colour Control Centre Pty Limited v Ty [1995] NSWSC 96; Minlabs Pty Ltd v Assaycorp Pty Ltd (2001) 37 ACSR 509; Weldon and Co v Harbinson [2000] NSWSC 272 and Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd (2011) 285 ALR 63, and were also the subject of learned consideration in Batty R, "Examining the Incidence of Fiduciary Duties in Employment" (2012) 18 Canterbury Law Review 187.

71    Turning to the circumstances of Mr Nankervis in respect of the sale of Lot 191 and Lot 170, I am satisfied that Mr Nankervis owed fiduciary obligations to his employer, Investa Properties, in respect of both properties.

72    An important point taken by the respondents during the course of the trial was that the applicants are separate corporate entities, and that a relationship with one of them does not necessarily equate to a relationship with the other. The second and fourth respondents have maintained throughout the proceedings that they in particular have no relationship with the first applicant, Investa Properties, of which Investa Residential is a wholly owned subsidiary, on the basis that Investa Properties was not the registered proprietor of any of the subject lands, had no entitlement to any claim for profits or monies for breach of contract or for any other contravention in relation to Lot 191 or Lot 170. In Investa Properties Pty Ltd v Nankervis (No 2) [2013] FCA 468, I accepted the proposition that a fiduciary obligation owed to a subsidiary company does not automatically transmit fiduciary obligations owed to its holding company. This principle equally applies where a fiduciary obligation is owed to the holding company – those obligations are not automatically owed to the subsidiary.

73    So far as concerns Mr Nankervis however, there is no real dispute by Mr Nankervis that his duties in his employment with Investa Properties included duties in relation to Lot 191 and Lot 170 as claimed by the applicants in their submissions, notwithstanding that Investa Residential was the registered owner of both Lots. It is also clear that, so far as concerned employees in the position of Mr Nankervis, the corporate veil between Investa Properties and its subsidiary Investa Residential was blurred, such that although he was formally employed by Investa Properties he had actual authority to take steps in respect of land (including Lot 191 and Lot 170) formally owned by Investa Residential. That this is so is clear from evidence of Mr Nankervis himself to the effect that he was not actually sure which company was his employer (transcript 30 September 2014 p 2097 l 40). In this context I also note the evidence of Mr Holt, Chief Executive Officer of Investa Land, in his affidavit of 6 December 2013, concerning the restructure of the Investa Property group in or about August 2008 and previous names of companies in the group, and the evidence of Mr Stubbs, that in late 2008 there was a restructuring of the Investa Property Group in that the management and leadership of the commercial and industrial development business, and the residential development business, were combined (transcript 10 June 2014 p 525 ll 4-8).

74    The evidence of Mr Jenkins was that there was a "chain of command" in the Queensland office of Investa, by which Mr Waters, and subsequently Mr Stubbs as Queensland State Manager had responsibility for development management requests and reports as well as supervising other staff (transcript 3 June 2014 p 130). It appears that Mr Waters had initial responsibility in relation to the contract with Brittains Road Pty Ltd concerning Lot 170. Mr Waters continued to have responsibility in relation to the proposed sale of Lot 170 following the internal restructure in the Investa Property Group which resulted in Mr Stubbs moving into Mr Waters' position of Queensland State Manager, because Mr Waters had a good relationship with Mr Bill Thompson, the principal of Brittains Road Pty Ltd. Once the contract involving Brittains Road Pty Ltd "fell over" because the purchaser was unable to complete it, it appears that Mr Waters had no further engagement with any of the lots in the Brentwood site (evidence of Mr Stubbs 10 June 2014 p 530 ll 22-32).

75    Notwithstanding the roles of Mr Waters and Mr Stubbs, it is also clear that in his position as senior development manager, Mr Nankervis played a key role in acquiring intimate knowledge of land under his management, including Lot 191 and Lot 170, and passing that knowledge with informed recommendations in respect of development or other use of that land to more senior management in Investa Properties. From early 2008, Mr Nankervis' role included the preparation of the notes or minutes of Project Control Group (PCG) meetings, which were monthly meetings attended by senior representatives to discuss processes and strategies going forward for the second applicant's residential properties in south east Queensland. Further, the evidence before the Court is that development managers in the position occupied by Mr Nankervis prepared Board papers, including delegated authority approval submissions to go to the Board for approval in respect of dealings with these lots (transcript 5 June 2014 pp 290-291). A key delegated authority approval submission for the Board was prepared by Mr Nankervis on 6 February 2009 in relation to Lot 170, in which Mr Nankervis wrote:

The site is irregular in shape and heavily vegetated with steep topography, rising from the south east to the north west, and is unattractive to our target market as only specialty custom built housing can be built on the site. The housing product needs to accommodate steep slope of 10 to 15 degrees, no slab on ground product will be achieved, and this is compounded by the tree retention that council require, and also approval limitations in association with the degree of earthworks allowed on the site. There is no ability to level the site …

The table above shows that the sale is at the lower end of the range, however the subject property is considered to be inferior to the other sides due to the steep topography and heavy vegetation. Essentially, the site is discounted to account for the additional house building costs.

76    Mr Jenkins gave evidence – not controverted – that group executives in his position, who made decisions concerning disposal of Investa land, were guided by advice provided by development managers and senior development managers (transcript 3 June 2014 p 148 ll 5-19, p 149 ll 1-9). This evidence was supported by Ms Nicole Prout, finance manager with Investa Properties between March 2008 and September 2013, who said during cross-examination:

It is not the case that managers like Nankervis or whatever just make a recommendation and it's signed off; there is a whole process of scrutiny that must gone through before it is ultimately signed off. That was your experience with the company; was it not?---Yes. But it very much relies on the information that you are given by the DMs; Development Managers.

77    Further, it is plain that development managers and senior development managers in Mr Nankervis' position were engaged in preparation of financial and budgetary documentation in relation to development projects concerning Investa land under their management. In her affidavit affirmed 5 December 2013, Ms Prout deposed, inter alia, that:

    Her responsibilities as finance manager included preparation of business plan models in conjunction with development managers, and assisting development managers prepare monthly cash flow forecast models.

    During her employment as Queensland finance manager she had regular contact with Mr Nankervis and others in the residential properties team, by way of face to face meetings and telephone discussions.

    From October to December 2008, she had very frequent contact with Mr Nankervis and the others to prepare and modify their financial models and budgets for the 2009 calendar year.

    By about mid-October 2008, she and Mr Stubbs, with assistance from Messrs Nankervis, Long and Hopkins, were in the process of preparing the 2009 calendar year budget.

    In November and December 2008 she received emails from Mr Nankervis attaching cash flow forecast spreadsheet and a forecast settlements summary in respect of the Brentwood Estate.

78    I also note that in her affidavit of 14 May 2014, Ms Prout deposed that she did not see the CB Richard Ellis report on or about 16 December 2008, and even if she had she would have relied on Mr Nankervis for his opinion on whether the costings contained within the report were reasonable based on his experience.

79    Indeed, I note in cross-examination that Mr Nankervis conceded that his role included tracking and reporting on costs and revenues of a project, and making recommendations to more senior management in respect of projects (transcript 29 September 2014 pp 1906-1907).

80    Mr Nankervis was not only a development manager, he was a senior development manager in Investa Properties. As is clear from the evidence before the Court, it was his job to prepare financial and other reports, make recommendations, deal directly with real estate agents on behalf of Investa, and acquire knowledge in relation to such matters as the likely prospects for development. It is not in dispute that these responsibilities extended to both Lot 170 and Lot 191.

81    These duties appeared to be exercised by Mr Nankervis with a minimum of supervision from managers above him in the organisational structure of Investa Properties. In this context, I note that where there is scope for an employee to carry out his or her duties in an unsupervised manner, the employer is vulnerable and more trust and confidence is likely to be placed in an employee. In such circumstances it may be said that there is a greater likelihood for there to be a legitimate entitlement of fiduciary loyalty (cf Batty R, "Examining the Incidence of Fiduciary Duties in Employment" (2012) 18 Canterbury Law Review 187 at 204).

82    It is clear that the relationship between Mr Nankervis and Investa Properties was such that persons who were required to make decisions for Investa Properties in relation to dealings or disposal of development lands relied on Mr Nankervis' knowledge and recommendations to achieve the best results. While his contractual relationship with his employer was such that it could properly be said that a duty of fidelity was an aspect thereof, in my view the scope of his duties and responsibilities, and the knowledge and value judgement which were intrinsic to his role and upon which Investa Properties relied, were such that the relationship was fiduciary.

83    To that extent, Mr Nankervis was obliged to avoid circumstances where his duty to Investa Properties conflicted with his personal interest or that of a third party. He was also obliged to avoid profiting from his position with Investa Properties. It is well-settled that these obligations are inherent in the fiduciary relationship. The position concerning a fiduciary and the "conflict rule" was recognised in 1896 when Lord Herschell explained that:

It is an inflexible rule of a Court of Equity that a person in a fiduciary position… is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict.

(Bray v Ford [1896] AC 44 at 51, cf for example Boardman v Phipps [1967] 2 AC 46 at 123; Chan v Zacharia (1984) 154 CLR 178 at [23]; Breen v Williams (1996) 186 CLR 71 at 113, 137-138; Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165 at [74]; Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at [158].)

84    "Interest" in this context can also extend to that of a third party: as was explained in Settlement Agents Supervisory Board v Property Settlement Services Pty Ltd [2009] WASCA 143 at [70]-[74]:

The object of the first limb of the conflict rule is to prevent a person who has undertaken to act for someone else from allowing any personal interest to sway or influence that person away from the proper performance of his or her duty to the principal: Chan v Zacharia (198 - 199). A conflict of interest and duty will exist if the interest in question is in opposition to, or in tension with, the duty of loyalty. That will be the case if there is a real and sensible possibility that the interest might sway or influence an agent away from the proper exercise of its duties (which includes powers) to the principal.

(emphasis added.)

(cf Buitendag v Ravensthorpe Nickel Operations Pty Ltd [2014] WASCA 29 at [55].)

85    A helpful and learned explanation of the "profit rule", to which it is no defence that the principal was unwilling, unlikely or unable to make the profits for which an account is taken or that the fiduciary acted honestly and reasonably, may be found in Finn PD, Fiduciary Obligations (Law Book Company, 1977), where the learned author states:

568.    A common, though not very illuminating formulation of a trustee's "fiduciary duty" is that he must not profit, directly or indirectly, from the execution of his trust … A quite indefinite liability is now imposed on fiduciaries, irrespective of whether they have deprived their beneficiaries of some profit-making advantage if, in deriving that profit on their own account, they have made use of their fiduciary position. The ancient decision of Keech v Sandford is usually claimed s progenitor of this liability.

(footnotes omitted.)

(cf comments in Regal (Hastings) Ltd v Gulliver [1942] 1 All ER 378 at 382 and 392; Warman International Ltd v Dwyer (1995) 182 CLR 544 at 558; Maguire & Tansey v Makaronis (1997) 188 CLR 449; Hospital Products at [27]; McCann v Switzerland Insurance (2000) 203 CLR 579; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [514].)

Did Mr Nankervis have statutory duties to either of the applicants in respect of Lot 191 or Lot 170?

86    Section 182 and s 183 of the Corporations Act provide as follows:

182    Use of position--civil obligations

Use of position--directors, other officers and employees

(1)    A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a)    gain an advantage for themselves or someone else; or

(b)    cause detriment to the corporation.

Note:        This subsection is a civil penalty provision (see section 1317E).

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1:        Section 79 defines involved.

Note 2:        This subsection is a civil penalty provision (see section 1317E).

183    Use of information--civil obligations

Use of information--directors, other officers and employees

(1)    A person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to:

(a)    gain an advantage for themselves or someone else; or

(b)    cause detriment to the corporation.

Note 1:        This duty continues after the person stops being an officer or employee of the corporation.

Note 2:        This subsection is a civil penalty provision (see section 1317E).

(2)    A person who is involved in a contravention of subsection (1) contravenes this subsection.

Note 1:        Section 79 defines involved.

Note 2:        This subsection is a civil penalty provision (see section 1317E)

87    Mr Nankervis was an employee of Investa Properties. In light of his position and authority in the company. I am satisfied that he was subject to the obligations imposed by s 182 and s 183 to Investa Properties in respect of both properties.

Did Mr Nankervis have duties to either of the applicants in respect of the sales office?

88    The applicants submit, in summary, that:

    Following completion of the sale of Lot 170 by Investa to Two Eight Two Nine, Mr Nankervis, without any authority to do so, had Investa's sales office at the Brentwood site removed to Lot 170.

    On 12 February 2010, whilst employed by Investa Properties, Mr Nankervis emailed Mr Walker of Projex North and Mr Barclay, advising that the "Brentwood Sales Office power will be disconnected next Tuesday" and that "we need to arrange the re-location of the office".

    Mr Walker subsequently instructed Shadforths Civil Contractors to assist Projex North in removing the sales office from Brentwood North and relocating it to Lot 170.

    By letter dated 22 March 2010, Mr Nankervis, on Investa letterhead, wrote to Uber Projects Pty. Ltd. c/- Scott Jenkinson of Warlow Scott Solicitors. The letter states "All ownership of sales [sic] office, materials and content are assigned to Uber Projects Pty. Ltd. by way of compensation for the works that were carried out for nil cost to Investa Property Group".

    Mr Barclay and his wife were both directors and shareholders of Uber Projects Pty. Ltd.

    The sales office was relocated to Lot 170.

    On 27 August 2010, Mr Barclay emailed Mr Tonuri and Mr Nankervis and said, "Lot 48 sales office secured".

    In circumstances where Investa was seeking to remove the sales office from Brentwood Site, and Two Eight Two Nine required a sales office at "The Outlook" (formerly Lot 170), Mr Nankervis failed to:

o    relocate the sales office to an alternate site owned by Investa;

o    inform Mr Holt or anyone at Investa that there was an opportunity to sell the sales office to Two Eight Two Nine or any other entity; and

o    disclose to Holt or anyone at Investa that the sales office was being relocated to "The Outlook" for use in a development project in which Mr Nankervis held a one-third beneficial interest.

    By failing to utilise the sales office in another Investa project or alternatively pursue an opportunity to sell the sales office to an interested third party, Mr Nankervis failed to obtain the sales office's maximum realisable value.

89    In particular, I note evidence of Mr Holt in his affidavit of 6 December 2013 to the following effect:

218.    The relocation of the Brentwood sales office to the Outlook project (which was previously the Fossil Site and owned by Tonuri's company) was the type of information that Nankervis should have told me about, either in person or otherwise.

219.    Whilst I may have been informed by Nankervis of the removal of the Brentwood sales office, I was not informed by Nankervis that the Brentwood sales office would be relocated to the Outlook project.

220.    I additionally expected that if Nankervis were to arrange for the removal of the Brentwood sales office, that he would obtain the maximum realisable value if there was an opportunity to sell it to a third party.

90    At the hearing Mr Nankervis gave the following evidence, in relation to this issue, in summary:

    The sales office sat on three stages of the Brentwood development, which included the office, car park and gardens and playground for stages 1D, E and F, which all had road frontage. Investa was looking for cash into the business and no expenditure in the business during that critical phase of December 2009. In particular, Mr Holt was looking to save $5 million.

    Mr Holt realised getting rid of the sales office opened up an opportunity for 21 lots that had already been serviced and had road frontage, so it was an opportunity to get cash in the business.

    Removing the sales office entailed expenditure in including disconnecting the services, removing a car park, removing a playground, removing a landscape garden, removing signage, and removing the whole thing to a development site, so that lots could be surveyed, pegged and sold.

    Mr Holt instructed Mr Nankervis to try and get rid of the sales office at nil cost.

91    Evidence in relation to the sales office was also given by Mr Long and Mr Tonuri.

92    At the hearing Mr Long said:

Yes. In the discussions around that sales office and those stages of that development, with Mr Holt and the development team, do you recall, because of the business plan and the cost predicament that was placed on the Queensland group, that the sales office had to be removed at a nil cost to investor?---I remember – I remember the discussion about making sure we got rid of it. I can't remember the dollar figure discussion that was had at the time.

Can you recall any further details around those discussions that were had with Mr Holt in Ann Street? Just because - - -?---The discussion was that it needed to go and it just needed to get off the site, so essentially the development could occur.

Yes. So you would confirm that for the development to occur in line with the business plan, the sales office had to be removed as a priority?---It had to be removed. I don't know about the priority. I'm not sure – I can't remember the timings.

(Transcript 11 June 2014 p 696 ll 19-33.)

93    In his statement, Mr Tonuri gave the following evidence:

87.    In about March 2010, I was told by Mr Barclay that Oliver Hume South East Queensland could arrange for a sales office in the locality that was no longer needed by Investa to be relocated to Lot 170 and used as a sales office for the marketing of the finished lots.

88.    Mr Barclay told me that the sales office was essentially "free to a good home" and that it could be relocated if I paid for the transportation and recommissioning costs of approximately $60,000. It seemed like a good arrangement to me. I gathered that property development companies die this from time to time when one project had sold out.

94    From this evidence it is difficult to identify the nature of any duty owed by Mr Nankervis to either of the applicants in relation to the sales office. At its highest, it seems that Mr Nankervis was instructed to have the sales office removed from the Brentwood site.

95    On examination of the evidence I accept Mr Nankervis' evidence that he was instructed to have the sales office removed, if possible, at nil cost to Investa. Mr Holt's evidence in relation to the sales office is vague, and in my view influenced by subsequent events involving Mr Nankervis and Two Eight Two Nine. In contrast, Mr Nankervis' recollection of the task he was asked to perform in relation to the sales office is relatively detailed. Notwithstanding that Mr Long's memory of relevant events is vague, I consider that it is consistent with Mr Nankervis' recollection – namely that the sales office was something which Investa wished to be "rid of".

96    I give Mr Tonuri's relatively little weight, primarily for reasons to which I will later turn, but also because his evidence relates to an understanding communicated to him by Mr Barclay rather than anyone at Investa, and is perforce of indirect uncertain reliability as to the state of mind of either of the applicants.

97    The nature of a "fiduciary obligation" was explained in Grimaldi as follows:

[177]    As to who is a " fiduciary", while there is no generally agreed and unexceptionable definition, the following description suffices for present purposes: a person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest: on who is a fiduciary , see Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 ("Hospital Products") at 96-97; News Limited v Australian Rugby Football League Ltd [1996] FCA 1256; (1996) 64 FCR 410 at 538-541; and see generally Conaglen, Fiduciary Loyalty, Ch 9 (2010).

[178]    As Australian law presently stands, the obligation of loyalty imposed upon a fiduciary is expressed in two overlapping proscriptive "themes" which govern the fiduciary's liability to account to his or her own beneficiary. The best known formulation of these is that of Deane J in Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 at 198-199:

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.

98    In my view, Mr Nankervis' task to organise removal of the sales office cannot properly be described as one arising from an undertaking from which Investa would be reasonably entitled to expect that he would act in Investa's interest to the exclusion of his own or a third party's interest, and in respect of which Mr Nankervis was expected to disclose any interest in the outcome. The facts before the Court are not akin to cases where a beneficiary cannot take advantage of an opportunity and the opportunity is instead – profitably – appropriated by the fiduciary without the informed consent of the beneficiary (cf Regal (Hastings) Ltd v Gulliver; Boardman v Phipps at 109; Furs Ltd v Tomkies (1936) 54 CLR 583, and see the discussion of relevant issues by Young J in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413).

99    Such evidence as is before the Court suggests that Investa was indifferent as to the fate of the sales office – the applicants simply wanted it removed. It was of no value to them – rather it was an impediment to another profit-making activity. Mr Nankervis' evidence supports a finding that his authority extended to a decision to give the sales office away for no cost, provided it was removed from the Brentwood site and Investa incurred no costs in its removal. Presumably this authority could have extended to the dismantling and destruction of the sales office, provided it cost Investa nothing. In my view, it would have extended to Mr Nankervis removing the sales office and keeping it for himself.

100    The duty imposed on Mr Nankervis in relation to the removal of the sales office was to undertake that removal efficiently and at no cost to Investa. In my view this duty arose either at common law or within the terms of his employment contract with the first applicant. In any event, it appears that the task of organising the removal of the sales office was performed by him satisfactorily in accordance with his instructions. I am not persuaded that either the existence or performance of this task enlivened the interest in equity in the circumstances of this case. I am not of the view that any conduct of Mr Nankervis in relation to the sales office entitled either of the applicants to equitable compensation as has been sought.

Did Mr Barclay and Oliver Hume SEQ owe fiduciary duties to either of the applicants in respect of Lot 191 and Lot 170?

Lot 191

The applicants' submissions

101    Oliver Hume SEQ was appointed as a real estate agent by Investa Residential to sell Lot 191 pursuant to a PAMDA Form 22a on 16 July 2009. The relationship was effectively terminated on 8 February 2010. These facts were not disputed.

102    The applicants submitted that the principal-agent relationship is a category-based fiduciary relationship which exhibits the features of trust, confidence and vulnerability giving rise to the no-conflict rule.

103    The applicants claimed that the Form 22a contained the following notice which they say formed an express contractual term between Oliver Hume SEQ and Investa Residential:

When performing this service, the agent must comply with the code of conduct for agents as set out in the Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001 (Qld).

104    Materially, the applicants note in the amended statement of claim that the Real Estate Agency Practice Code of Conduct provided that a real estate agent must:

    comply with a fiduciary obligation incurred as a real estate agent (reg 6);

    act in a client's best interests unless it is unlawful or unreasonable to do so (reg 9); and

    not accept an appointment to act, or continue to act, as a real estate agent for a client if doing so will place the agent's duty or interests in conflict with the client's interests (reg 17).

105    The applicants pleaded that it was a term of the agreement between Oliver Hume SEQ and Investa Residential, implied by law, that Oliver Hume SEQ owed duties to Investa Residential to:

(a)    take reasonable care in the performance of its duties;

(b)    act with fidelity and good faith; and

(c)    act with mutual trust and confidence.

106    The applicants pleaded further that Oliver Hume SEQ owed Investa Residential (not Investa Properties as far as Lot 191 is concerned) the following fiduciary obligations:

(a)    to act in good faith and with fidelity;

(b)    to avoid and disclose to Investa Residential all actual or perceived conflicts of interest;

(c)    to act in the best interests of Investa Residential;

(d)    to give Investa Residential the full benefit of the knowledge and skill of its employees, and in particular, to pass on to Investa all information that it or they had about the marketing and sale of the properties that were the subject of its appointment, that might be relevant to the marketing and sale;

(e)    not to profit from its position, and not to allow its employees to profit, other than by receiving remuneration in accordance with its appointment, without full disclosure to and the informed consent of Investa Residential; and

(f)    not to assist:

•    any person with whom it or any of its employees was associated; or

•    any entity which it, or any of its employees, or a person whom it or any of its employees was associated with or had an interest in; or

•    any person or entity from whom or from which it or any of its employees could expect a benefit;

to purchase Lot 191, without full disclosure to and the informed consent of Investa Residential.

107    In relation to Mr Barclay, the applicants claim that he owed fiduciary obligations to Investa Residential because he was employed by and was involved in providing the real estate services of Oliver Hume SEQ for the sale of Lot 191 (amended statement of claim paras 102K and 102L). In submissions, the applicants expanded slightly on this point by claiming that Mr Barclay was Oliver Hume SEQ's employee solely responsible for the day-to-day carriage of Lot 191 and in that respect was personally in a fiduciary relationship with Investa.

Oliver Hume SEQ's submissions

108    Oliver Hume SEQ accepted that it was in a fiduciary relationship with the second applicant in relation to Lot 191, because it was party to a contract of agency established by a Form 22a and it received a commission in respect of the sale of Lot 191.

109    Oliver Hume SEQ submitted however that the fiduciary duty owed by Oliver Hume SEQ and Mr Barclay was limited to disclosing any interests they held in the sale of Lot 191. Further, and in any event, Oliver Hume SEQ submitted that Mr Barclay had acted fraudulently in respect of Lot 191 and in total fraud of the knowledge of Oliver Hume SEQ.

Mr Barclay's submissions

110    Mr Barclay submits that he was not in a fiduciary relationship with Investa in respect of Lot 191 because, in summary:

    if any fiduciary obligations arose they were owed by Oliver Hume SEQ to Investa Residential, because Oliver Hume SEQ was appointed as the real estate agent for Lot 191 on or about 16 July 2009 in accordance with Form 22a PAMDA. The contractual relationship was between those parties, and constrained any fiduciary obligations. No obligations under the 2009 PAMDA appointment were imposed on Mr Barclay and he could not be sued for non-performance of those obligations.

    The PAMDA appointment of Oliver Hume SEQ was terminated on 18 January 2010, at which time Oliver Hume SEQ ceased to be an agent. The parties in the Lot 191 Deed of Put and Call and the Lot 191 Contract were separate legal entities and the pleadings disclosed no connection between those entities and no connection between the Lot 191 Deed of Put and Call and the Lot 191 Contract. In this respect, Investa Residential failed to establish any basis upon which Oliver Hume SEQ (and therefore Mr Barclay) continued to owe fiduciary obligations at the time of the Lot 191 contract.

Consideration – Oliver Hume SEQ and Lot 191

111    It is clear from the submissions of Oliver Hume SEQ that it accepts the existence of a fiduciary relationship with the second applicant, Investa Residential, in respect of the sale of Lot 191. Indeed it is the nature of the fiduciary duties which are in contention. Mr Barclay however submits that no such relationship existed between himself and Investa Residential.

112    The relationship of real estate agent and the principal appointing the agent is usually accepted as being a fiduciary relationship. An early authority on point is McKenzie v McDonald [1927] VLR 134 where Dixon AJ observed at page 145:

He assumed the function of advising and assisting a woman in a difficult situation in the acquisition of a residence by means of the disposal or pledging of her property. He was necessarily furnished with an intimate knowledge of her financial position, her obligations, and family needs. He proceeded to advise her upon the wisdom and practicability of raising money by mortgage, and acted for her in an effort to do so. He undertook the sale of her farm, and acquired such information as he could in relation to it, and offered his counsel as to its condition and the price she had asked and in effect should ask. In this circumstance he was, in my opinion, an agent who came within "the rule of the Court ; which, however, does not prevent an agent from purchasing from his principal, but only requires that he shall deal with him at arm's length, and after a full disclosure of all that he knows with respect to the property" ...

(emphasis added.)

113    More recent cases have continue to support this proposition.

114    In Gathergood v Blundell & Brown Ltd [1991] 1 NZLR 405, the Court of Appeal of New Zealand found that a real estate agent was subject to the obligations not to profit from a position of trust and not to allow a conflict to arise between duty and interest.

115    In Pedersen v Larcombe [2008] NSWSC 1362 Palmer J observed:

[48]    If [the real estate agent] Mr Larcombe entered into a relationship of agency with Mr Pedersen for the sale of the Property which was unqualified by any special limitation, he thereby accepted a fiduciary position which imposed upon him a duty of loyalty, i.e. a duty to act in the best interests of Mr Pedersen in carrying out the agency. Correspondingly, Mr Larcombe could not, in carrying out his agency, place himself in a position in which his personal interest conflicted with his duty to advance the interests of Mr Pedersen. He could not even place himself in a position in which there was a significant potential for such a conflict.

[49]    If Mr Larcombe, or his alter ego, Varinya, has received a benefit or gain as a breach of his duty of loyalty then Mr Larcombe or Varinya must account for that benefit or gain to Mr Pedersen. Mr Larcombe and Varinya may escape liability for what otherwise would be a breach of fiduciary duty only if Mr Larcombe made full disclosure to Mr Pedersen of all relevant circumstances constituting the breach, and Mr Pedersen freely gave consent …

116    Recognition of the fiduciary nature of the relationship between principal and real estate agent can also be seen in Sultana Investments Pty Ltd v Cellcom Pty Ltd [2009] 1 QdR 589; Gonsalves v Debreczeni [1998] NSWSC 588 and Currabubula Holdings Pty Ltd v DRE Downtown Real Estate Pty Ltd [1998] 135 NSW 47. In this context I note in particular the following comments of the Court in Gonsalves:

The authorities seem to suggest (though none actually deal with the point in open discussion), that the fiduciary duty of a licensed real estate agent who is employed by a corporation is exactly the same as that of the corporation. It is almost as if for fiduciary purposes the corporate veil is lifted. Examples are Blundell & Brown Ltd v Gathergood [1989] ANZ Conv Rep 599, affirmed by the New Zealand Court of Appeal as Gathergood v Blundell & Brown Ltd [1991] 1 NZLR 405 and Council of Auctioneers & Agents v G J Alexander Pty Ltd [1972] 2 NSWLR 375. This is in accordance with principle, because as Finn says, op cit, at para 411, "Any person employed, or engaged as agent , to assist or to advise a fiduciary in the discharge of the fiduciary's duties to his beneficiary will himself be held to be in a confidential relationship with that beneficiary." Prime examples are Ex parte James [1803] EngR 536; (1803) 8 Ves 337; 32 ER 385 and De Bussche v Alt (1878) 8 Ch D 286.

117    Key differences between real estate agents and other types of agents lie in the fact that, generally speaking, real estate agents conduct businesses wherein they act for multiple vendors who are potentially competing to sell property, and further that, as a general proposition, real estate agents cannot bind their principals to contracts of sale. In this respect, the fiduciary obligations owed by real estate agents to their principals are inevitably moulded by the nature of the agreement and any specific terms of appointment. The general principle that fiduciary relationships may be shaped by co-existing contractual arrangements was reiterated by Mason J in Hospital Products at 99-100 where his Honour observed:

That contractual and fiduciary relationships may co-exist 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.

(cf Gummow J in Breen v Williams at 132-133; John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 206 ALR 462 at [90]-[93]; Commonwealth Bank of Australia v Barker (2013) 214 FCR 450 at [104]; Blackmagic Design Pty Ltd v Overliese (2011) 276 ARR 646 at [117]; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 206; Bacnet Pty Limited (ACN 115 594 075) v Lift Capital Partners Pty Limited (in liquidation) (2010) 266 ALR 666 at [107].)

118    That real estate agents are not "agents" within the normal understanding of this term is an issue which was examined in Premium Real Estate Ltd v Stevens [2009] 2 NZLR 384, where a real estate agent retained by vendors of a valuable residential property did not tell the vendors that the purchaser she was introducing to them, and to whom they sold the property, was a property speculator with whom the real estate agent had an ongoing business relationship. Elias CJ said:

[23]    Real estate agents, like other canvassing agents, introduce purchasers and vendors who contract directly rather than by the agent. Such canvassing agents are said by the editors of Bowstead and Reynolds on Agency to be "on the fringe of the central agency principles used by the common law". A real estate agent's relationship with the principal is shaped by contract. Although subject to fiduciary obligations towards the principal, the scope of the obligations depends on the scope of the duties he is asked to undertake.

[24]    A canvassing agent must act in good faith in what he does and may not obtain a benefit for himself or another without the informed consent of the principal …

…

[26]    Under general agency principles, an agent must keep his principal informed about matters of concern to him. It may be queried whether a general obligation of this nature is realistically expected of canvassing agents such as real estate agents. There seems little authority on the point …

[27]    It seems to me arguable that there is no general rule that real estate agents who introduce purchasers to deal directly with a vendor breach fiduciary obligations imposed within the scope of their contract if they fail to communicate information about the purchaser which might be material. It depends on the context. Real estate agents are obliged to pass on offers to vendors, because such obligation is squarely within the scope of what they are engaged to do. If the non-disclosed information affects advice given by the agent (such as advice as to price or terms), non-disclosure may well breach the obligation of loyalty. There will be breach of the obligation of loyalty if non-disclosure amounts to the preference of the interests of the agent or another party (as may be the case, for example, if a risk associated with the purchaser material to the sale is not disclosed in order to complete a sale and obtain commission). I have reservations, however, whether a more general duty to provide material information, such as it is appropriate to impose upon agents who have power to bind their principals, applies in all cases. It may set the standard to be required of a canvassing agent too high.

(footnotes omitted.)

119    Blanchard J for the majority said:

[68]    … It is beyond doubt that in that capacity Premium was a fiduciary for the Stevens and owed them a duty of loyalty. It is responsible for any breach of that duty by any of its employees. To fail to disclose a material matter about the person being introduced as a prospective purchaser – a matter objectively likely to operate on the principal's judgment – is a breach of the duty of loyalty.

[69]    In our view, the courts below were quite correct in finding that a breach of that duty was committed by Ms Riley when she failed to inform the Stevens that Mr Larsen was a person who frequently bought residential properties and shortly afterwards resold them at a profit. That information was very likely to have affected the Stevens' attitude towards his offer and the response they would make. It would have alerted them to the fact that he might well be intent on buying and reselling their property within a relatively short period of time and that, if so, he probably considered it was worth significantly more than he was offering. That was a matter very material to their consideration of his offer and of the possibility of their property attracting a better offer from someone who was not a dealer but wanted the house as a family home.

120    That it is the business of real estate agents to act, simultaneously, for multiple principals was discussed by Blanchard J in Stevens:

[75]    Their Lordships said [in Kelly v Cooper [1993] AC 205] that it is the business of estate agents to act for numerous principals and that where properties are of a similar description, there will be a conflict of interest between the principals, each of whom will be concerned to attract potential purchasers to their property rather than that of another. Despite this conflict of interest, estate agents must be free to act for several competing principals otherwise they will be unable to perform their functions. In the course of acting for each of their principals, the Board said, estate agents will acquire information confidential to that principal. It could not be sensibly suggested that an estate agent is contractually bound to disclose to any one of his principals information which is confidential to another of his principals.

[76]    To this point, we respectfully agree with the Privy Council's reasoning. Anyone who lists a property with a real estate agent must be taken to accept that the agent will simultaneously be offering competing properties for sale. An agent who did not have numerous offerings would be unlikely to attract many buyers … [However] As the editors of Bowstead and Reynolds on Agency say, the implication of a term excluding fiduciary duties, or particular duties, is not easy to justify.

121    The effect this business model has on the fiduciary relationship with each principal was examined by Professor Dal Pont who observed in relation to Kelly v Cooper [1993] AC 205 and Stevens as follows:

Estate agents, like other fiduciaries, must eschew an engagement where a duty to a third party conflicts with the fiduciary duty to their principal ("duty-duty" conflict). However, as the scope of fiduciary duties owed by an agent to a principal is defined by the terms of the contract of agency, the scope of certain fiduciary duties may be modified or excluded by its express or implied terms. This may be necessary, say, where the agent's business is to act for multiple principals, whose interests may in some circumstances conflict … The decision in Kelly has been criticised for negating the fiduciary standard by "setting the agent's duties at a level no higher than that of business competitors dealing at arm's length", and indeed it appears to buck the more recent trend of English case law towards strictness in fiduciary duties …

(footnotes omitted.)

(Dal Pont GE, Equity and Trusts in Australia (6th ed, Lawbook Co, 2015) para 4.185.)

122    In this case, Oliver Hume SEQ was appointed as real estate agent in relation to the sale of Lot 191 pursuant to a Form 22a under the PAMDA. I note that PAMDA has now been repealed, effective 1 December 2014. At all material times however it was in force and is applicable in this case.

123    Section 154 of PAMDA provided for a regulation to prescribe a code of conduct about real estate agency practice. Such a regulation was promulgated in the form of the Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001 (Qld) (the Regulation). The Schedule to the Regulation contained a Code of Conduct, the object of which was to increase the accountability of real estate agents for their actions in carrying on the business of a real estate agent (Schedule s 2(1)). Section 4 of the Schedule provided further that the Code of Conduct contained provisions with which a real estate agent must comply, and that the Code of Conduct overrode any instruction or request that did not comply with the code from a client or, in the case of an employed the real estate agent, from the agent's employer.

124    Part 2 of the Schedule to the Regulation sets out general rules of conduct. Section 6 provided:

A real estate agent must comply with a fiduciary obligation incurred as a real estate agent.

125    Materially other rules with which real estate agents were subject comply included:

    to act with honesty, fairness and professionalism (s 7);

    to exercise reasonable skill, care and diligence (s 8);

    to act in the client's best interests (s 9);

    to act in accordance with the client's instructions (s 10);

    to keep the client informed of developments (s 11);

    in the case of real estate agents who are principal licensees employing registered employees – to take reasonable steps to ensure a registered employee of the agent complies with the Act and the Code of Conduct in relation to the agent's business (s 12);

    to avoid engaging in conduct that is fraudulent or misleading (s 14);

    to refrain from accepting an appointment to act, or continuing to act, as a real estate agent for a client if doing so would place the agent's duty or interests in conflict with the client's interests (s 17).

126    Section 21 also provided:

Advice about market price or rent

(1)    A real estate agent, in attempting to obtain an appointment to sell, buy, exchange or lease property, must not knowingly mislead a person about the property's market price.

(2)    If a real estate agent gives a person an opinion about the market price or market rent for property, the agent must not accept instructions from the person to act as a real estate agent for the property unless the agent has given the person a written statement of the material facts that the agent has taken into account in forming an opinion about the property's market price or market rent.

(3)    A real estate agent appointed to sell, buy, exchange or lease property must keep the client informed, in accordance with the client's instructions, if any, of the agent's opinion about the current market price or market rent of the property.

(4)    Also, the real estate agent must tell the client if the agent considers the selling or purchase price of property expected by the client is substantially more or less than the market price of the property.

127    The Form 22a agreement prescribed by PAMDA, and pursuant to which Oliver Hume SEQ was appointed, relevantly provided:

    the appointment was limited to Stage 2A and 2B (including Lot 191);

    retail sales were to attract a fee of 2% of the sale price plus GST;

    bulk deals (6 or more) were to attract a fee of 3% plus GST;

    the client was Clarendon Residential Group Pty Ltd (now Investa Residential), signed on its behalf by Mr Nankervis;

    the agent was Oliver Hume SEQ, contact details being those of Mr Barclay;

    the appointment was a single appointment for an exclusive listing;

    the appointment was not assignable to another real estate agent by Oliver Hume SEQ;

    Oliver Hume SEQ would book advertising on realestate.com using its account and Clarendon Residential Group Pty Ltd would be responsible for payment of all accounts.

128    Statutory in form, the rules in the Schedule to the Regulation impose remarkably similar obligations on real estate agents to those imposed by equity, as is plain from a comparison of the rules with the principles in the cases I set out earlier in this judgment. Importantly, PAMDA does not purport to extinguish any fiduciary obligations otherwise existing between the principal and the real estate agent. Indeed while s 6 of the Schedule specifically provides that real estate agents "must comply with a fiduciary obligation incurred as a real estate agent", this seems to rather preserve equitable obligations existing beyond those which might be incorporated into the statutory obligations specifically set out in the Schedule itself. Such obligations would include that a fiduciary wishing to purchase from the principal must deal at arm's length and after a full disclosure of all that known with respect to the property (McKenzie), that the fiduciary must not profit from the position of trust held (Gathergood, Stevens), and that the fiduciary must disclose a material matter about the person being introduced as a prospective purchaser (Stevens).

129    In the circumstances, I see no reason why the obligations, prescribed by rules in the Code of Conduct in the Regulation which I have set out, and the wider fiduciary obligations I have just listed, were not owed by Oliver Hume SEQ to Investa Residential. Those obligations certainly extend beyond the limited duty to disclose any interests Oliver Hume SEQ held in the sale of Lot 191 as submitted by Oliver Hume SEQ in this case. In any event, even had the parties sought to agree to so limit the statutory obligations otherwise owed by Oliver Hume SEQ, it appears that such a limitation would have been ineffective in light of the terms of s 4 of the Schedule to the Regulation. Further there is certainly nothing in the contract embodied in the Form 22a which prima facie modifies the fiduciary obligations existing in equity by Oliver Hume SEQ to Investa Residential.

130    The position is different in respect of Mr Barclay. He submits that no obligations under the 2009 PAMDA appointment of Oliver Hume SEQ were imposed on Mr Barclay and he could not be sued for non-performance of those obligations. I accept that this is the case. However as I have already noted, PAMDA does not purport to extinguish fiduciary obligations otherwise existing between real estate agent and principal.

Consideration – Mr Barclay and Lot 191

131    Mr Barclay was a director of Oliver Hume SEQ, and was the primary contact at Oliver Hume SEQ with Investa Residential in respect of Lot 191. As was explained by Professor Finn (as his Honour then was) in his landmark text Fiduciary Obligations (Law Book Company, 1977) in relation to such relationships:

411.    Any person employed, or engaged as agent, to assist or to advise a fiduciary in the discharge of the fiduciary's duties to his beneficiary will himself be held to be in a confidential relationship with that beneficiary. A trustee for sale, for example, may employ an agent actually to effect the sale, and

… as a trustee for the sale of an estate could not purchase the estate for himself, so the agent of the trustee employed for the purpose of the sale could not purchase it.

412.    … However, before the agent or employee will attract the disability also imposed on his principal or employer, it must be shown that he has been involved in some significant way with the duties assumed by his principal or employer in relation to the property in question

(footnotes omitted.)

132    Later the learned author continued in relation to an employee of a person in a fiduciary relationship with a beneficiary potentially placing himself or herself into a position of conflict of duty and interest:

468.    … But the supervision of Equity begins at the point where it can be proved positively that a person has, by his own undertaking, consented to act in a particular matter in a capacity other than as his own principal – where he has undertaken "to act in the interests of another person" …

469.    The one area where contention does arise when it is sought to impose a fiduciary character on a person, is the chain relationship, that is, where B agrees to act on A's behalf in some matter and then employs or relies on C actually to perform the undertaking. In Powell & Thomas v Evan Jones & Co for example, agents were employed on a commission basis to obtain an advance of money. With the principal's consent a sub-agent was employed, the sub-agent and the agents agreeing to share the agent's commission … It was confirmed in the Court of Appeal that, irrespective of whether or not there was privity between the sub-agent and the principals, their relationship was a fiduciary one … This decision was followed in New Zealand in a case where a law-clerk, employed by his principals to assist clients to invest in securities, sold his own security to a client without disclosing his interest.

But these cases aside, the courts have had difficulties in adapting the conflict rule to chain relationships. It seems to be settled – though by no means satisfactorily – that where B is in a fiduciary relationship with A, and he employs C actually to perform part of his engagement with A, C will not, ipso facto, also be in a similar relationship with A. Consequently an employee is not necessarily a fiduciary of his employer's beneficiary simply because, in the course of his employment, he does something which will ultimately benefit that beneficiary. The cases, however, give no real guidance as to when an A-C relationship will be fiduciary. The only working hypothesis which can be advanced is that if B is engaged by A to perform some service on his behalf, and then B passes that work onto C, C being given the substantial performance of B's undertaking and knowing that what he is doing is for A's benefit, then the A-C relationship will be a fiduciary one for the purposes of the services C in fact renders.

(footnotes omitted.)

133    In relation to this point – while not of a superior Court, the decision of the South Australian District Court in Moffa v Newmark Commercial Pty Ltd (No 2) [2003] SADC 148 is directly relevant in its consideration of the principles explained in Finn. In that case, the Court found that the real estate agent Newmark Commercial Pty Ltd, through its employees Horner and D'Alessandro, had committed breaches of duty to the plaintiffs in its capacity as agent and fiduciary, including by acting on both sides of a sale transaction. At [8] the learned District Court Judge said:

In my opinion, the case before me falls within the second category discussed by Finn. Having taken on the substantial performance of Newmark Commercial's undertaking and in the knowledge that what they were doing was for Newmark Commercial's benefit, Horner and D'Alessandro can be treated as having been in a fiduciary relationship with the plaintiffs for the purposes of the services that they rendered.

134    His Honour also referred to Grantwell Pty Ltd v Franks (1993) 61 SASR 390 where the majority of the Full Court of the Supreme Court of South Australia held the duties of a fiduciary were owed to the purchasers by both the employee and his employer company (a real estate agent). His Honour concluded:

[11]    … In this case, I consider that the nature and proximity of Horner and D'Alessandro's relationship with Moffa was such as to impose upon each of them, as well as upon Newmark Commercial, a fiduciary duty to the plaintiffs.

[12]    In the result, the plaintiffs are entitled to judgment against Newmark Commercial for breaches of duty as agent and fiduciary, and against each of Horner and D'Alessandro for breaches of duty as fiduciary.

135    In this context I also note the decision of the High Court of New Zealand in Turner v Sigglekow [2010] NZHC 1825, where the Court accepted that a vendor had standing to commence proceedings against the employee of the appointed real estate agent, and comments in Gonsalves.

136    In my view, for similar reasons to those found in the cases I have just examined, Mr Barclay was in a fiduciary relationship with Investa Residential in respect of Lot 191. He was the primary contact at Oliver Hume SEQ with Investa Residential, in respect of Oliver Hume SEQ's engagement as real estate agent by Investa Residential, for the sale of Lot 191. He was a director of Oliver Hume SEQ, its most senior officer in the Queensland office, and at all material times was in charge of the Queensland office (transcript 3 October 2014 p 2387). He was responsible for the implementation of the Oliver Hume strategy for Queensland, business development and sourcing new projects for project marketing, and was the person at Oliver Hume SEQ to whom the sales manager reported (transcript 3 October 2014 p 2388 ll 19-31). His was the signature on the Form 22a agreement between Investa Residential and Oliver Hume SEQ concerning the disposition of Lot 191 and the role of Oliver Hume SEQ in assisting Investa Residential to sell that property. To conclude other than that Mr Barclay was in a fiduciary relationship with Investa in relation to Lot 191, would be to ignore the plain facts before the Court.

Lot 170

The applicants' submissions

137    In paragraph 162E of the statement of claim the applicants plead:

162E.    Because of facts alleged above, Oliver Hume SEQ had fiduciary obligations to Investa Properties and Investa Residential Group while providing services in relation to Lot 170:

(i)    To act in good faith and with fidelity;

(ii)    To avoid and disclose to Investa Properties or Investa Residential Group all actual or perceived conflicts of interest;

(iii)    To act in the best interests of Investa Properties and Investa Residential Group;

(iv)    To give Investa Properties and Investa Residential Group the full benefit of the knowledge and skill of its employees, and in particular, to pass on to Investa Properties or to Investa Residential Group all information that it or they had about the marketing and sale of the properties that were the subject of its appointment that might be relevant to the marketing and sale;

(v)    Not to profit from its position, and not to allow its employees to profit, other than by receiving remuneration in accordance with its appointment, without full disclosure to and the informed consent of Investa Properties and Investa Residential Group; and

(vi)    Not to assist:

•    Any person with whom it or any of its employees was associated; or

•    Any entity in which it, or any of its employees, or a person whom it or any of its employees was associated with or had an interest in; or

•    Any person or entity from whom or from which it or any of its employees could expect a benefit,

to purchase Lot 170, without full disclosure to and the informed consent of Investa Properties and Investa Residential Group.

138    In this respect the applicants submit as follows:

    the respondents sought to portray the activity of Oliver Hume SEQ in relation to Lot 170 as a voluntary and self-interested response to an offer made to real estate agents generally.

    this is not the case however because Investa made a specific request to Oliver Hume SEQ to do something on its behalf, namely to use its market resources to find a purchaser of a particular property, on specified conditions.

    Investa made no such request in similar terms to any other agent. The minutes of the meeting of Investa's Project Control Group record that only Oliver Hume had been asked to find a back-up purchaser for Lot 170 – they do not refer to any other agent doing so.

    Investa also required that Oliver Hume SEQ report regularly on its progress in finding a purchaser, and Oliver Hume SEQ agreed to do this and generally complied.

    Once Oliver Hume SEQ had agreed to find a purchaser, Mr Barclay told the applicants that Oliver Hume SEQ contacted and interviewed potential purchasers, conducted site inspections, acted as an intermediary between Investa and the purchasers, advised on the pros and cons of different purchasers and actively selected the purchasers to whom it would promote the sale.

    The fiduciary relationship between either or both of the applicants as beneficiary and Oliver Hume SEQ as fiduciary was not based upon a formal appointment as agent for sale – rather it arose because Oliver Hume SEQ undertook to act for Investa in a matter requiring a high degree of trust and confidence in its honesty and integrity, and in which either or both of the applicants were vulnerable to dishonest or unscrupulous activity.

    The no-conflict rule in particular applied to Oliver Hume SEQ in its dealings with the applicants, because it was in a position where its director and state general manager Mr Barclay had a substantial personal interest in the relevant transactions.

    Mr Barclay dealt with either or both of the applicants in relation to Lot 170 as agent for Oliver Hume SEQ, and as he was Oliver Hume SEQ's employee solely responsible for the day to day carriage of the matter, he was personally in a fiduciary relationship with either or both of the applicants in relation to Lot 170.

Oliver Hume SEQ's submissions

139    Oliver Hume SEQ submits, in summary:

    Investa Residential initially offered Oliver Hume SEQ (through Mr Barclay) the agency for the en globo sale of Lot 170 on 16 July 2008, with the commission to be 1% of the final contract price. The offer was never taken up, and no Form 22a was entered into. This was likely due to the fact that Investa Residential shortly thereafter sourced its own potential purchaser of the site.

    When the second applicant entered into a contract of sale with Brittains Road Pty Ltd to sell Lot 170 on 11 August 2008 for a contract price of $1,750,000 (inclusive of GST), this sale was achieved as a result of the internal efforts of Investa Residential. No agent was involved and none identified in the contract.

    On 27 November 2008, Mr Nankervis wrote by email to Mr Barclay in relation to Lot 170, which included the following:

We are willing to pay Oliver Hume 1% sales commission for an en globo sale, but if you feel that you have a better opportunity in seeking your sales commission at the purchaser end feel free to pursue. We will not formalise your engagement to act on our behalf at this stage until you advise.

    That email specifically noted that the second applicant would not formalise Oliver Hume SEQ's engagement to act on behalf of Investa Properties at that stage until Mr Barclay advised. There is no evidence before the Court that either of the applicants formally appointed Oliver Hume SEQ as agent in relation to the sale of Lot 170. Mr Stubbs in cross-examination accepted that this was the case (transcript 10 June 2014 p 615 ll 45-46).

    It appears that the applicants had contemplated using a number of agents for the sale of the site. In an email from Mr Jenkins to numerous parties in the Capital Transactions Team of Investa on 18 February 2009, headed "Investa Land Divestment Strategy – Plan B", Mr Jenkins wrote:

Just wanted to provide some clarity in relation to the Investa Land divestment process and co-ordination. The Investa Land Senior team will be responsible for the planning and implementation of the Divestment Strategy with the assistance where required of the Office Cap Trans team. As the success or otherwise of our divestment strategy is so critical to the survival of the Investa Land business, I will be leading this process with proactive input from my Senior State based team.

We will meet and provide you (Cap Trans team) with weekly updates on our progress. In addition we will be seeking your input and assistance with sourcing potential Purchasers and with the preparation of D/D data rooms, etc.

    On 20 February 2009, Mr Jenkins sent a subsequent email, the heading of which was "Divestment Strategy – Plan B", to Investa staff including Mr Cameron Holt, Mr Gavin Stubbs and Mr Nankervis, attaching the "Project Plan & Initial Divestment contact list". The Divestment Contact List identified agents in respect of Brentwood North as "Oliver Hume – Adam Barclay, LJ Hooker – Kevin Doodney, Ray White Special Projects".

    The fiduciary relationship is pleaded to have arisen because Investa Residential "engaged" Oliver Hume SEQ and thereby Mr Barclay to provide services to Investa Residential in connection with the sales and marketing of other lots in the Brentwood site (amended statement of claim para 162D(a)). It is then alleged that acting "pursuant to that engagement", Oliver Hume provided services and became aware of plans, approvals, reports and knowledge about the applicants' intentions (amended statement of claim para 162D(b)-(d)). However, on the evidence before the Court there was no "engagement" imposing mutual obligations on any party. At its highest, Mr Barclay was engaging in activity "on spec" and could at any time have walked away.

    There was no retainer of Oliver Hume SEQ by either of the applicants in relation to Lot 170.

    While a commercial relationship not involving a contractual arrangement can give rise to a fiduciary duty, the applicants do not identify the precise features of any alleged relationship between Oliver Hume SEQ and either of the applicants which made it a fiduciary relationship, including any power or discretion which either of the applicants reposed in Oliver Hume SEQ.

Mr Barclay's submissions

140    Mr Barclay submits, in summary:

    A failure to make an appointment using the PAMDA Form results in an ineffective appointment: Yong Internationals Pty Ltd v Gibbs [2011] QCA 161.

    It is unclear on what basis the first applicant asserts that it was owed a fiduciary duty by Mr Barclay in relation to Lot 170. Lot 170 was owned by the second applicant. The first applicant had no interest in it.

    If any fiduciary obligation were owed to Investa Residential in relation to Lot 170, it was owed by Oliver Hume SEQ rather than Mr Barclay. It is not alleged that Mr Barclay was ever the agent of the applicants or that he was to serve exclusively or solely the interests of Investa Residential.

    The email from Mr Nankervis to Mr Barclay of 27 November 2008 revealed that the applicants chose not to retain Oliver Hume SEQ in relation to the sale of Lot 170 because it did not want to commit itself to pay commission. Rather, the applicants encouraged Oliver Hume and Mr Barclay to secure a sale as a buyer's agent and receive commission from any buyer. Contact with potential purchasers by Oliver Hume SEQ and Mr Barclay was on that basis.

    The provision of services by Oliver Hume SEQ was in relation to particular lots – there was no general principal/agent relationship between it and Oliver Hume SEQ.

Consideration – Oliver Hume SEQ and Lot 170

141    It is clear that any relationship between either of the applicants and Oliver Hume SEQ arose through communications between Mr Nankervis on the one hand, and Mr Barclay for Oliver Hume SEQ on the other hand. It is common ground that no formal appointment of Oliver Hume SEQ as real estate agent was ever made by either of the applicants pursuant to PAMDA.