Federal Court of Australia

Flageul v WeDrive Pty Ltd [2020] FCA 1666

ORDERS

THE COURT ORDERS THAT:

1.    The proceeding be dismissed.

2.    There be no order as to costs.

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

REASONS FOR JUDGMENT

STEWARD J.:

1    Once again, a chief executive officer (“C.E.O.”) has had a tragic falling out with his fellow board members. The applicant (“Mr. Flageul”) was C.E.O. of the first respondent, WeDrive Pty Ltd (“WeDrive”), a company incorporated on 25 August 2017. Mr. Flageul (as trustee of the We Drive Melbourne Trust) was also a shareholder in, and a director of, WeDrive. On 21 December 2017, the second respondent (“Mr. Mace”), a non-executive director of WeDrive (and, through a company owned or controlled by him, its majority shareholder), terminated Mr. Flageul’s employment as C.E.O. Subsequently, Mr. Flageul resigned as a director of WeDrive and sold his shares in that company for $1. Mr. Flageul has sued WeDrive, Mr. Mace, and another director of WeDrive, who is the third respondent (“Mr. Taylor”). Mr. Taylor also owned shares in WeDrive through a company he either owned or controlled, and was the executive chairman of WeDrive. Mr. Flageul seeks the payment of pecuniary penalties under the Fair Work Act 2009 (Cth.) (the “F.W. Act”), damages pursuant to that Act, the Corporations Act 2001 (Cth.) (the “Corporations Act”) and the Australian Consumer Law (“A.C.L.”) as set out in Sch. 2 to the Competition and Consumer Act 2010 (Cth.), as well as certain declarations. His causes of action comprise claims of adverse action, breach of s. 358 of the F.W. Act, and claims of oppression and unconscionable conduct on the part of the respondents. An additional claim alleging misleading and deceptive conduct was not pursued before me.

2    The trial took place over five long days and was confined to the issue of the liability of the respondents. It was heard using Microsoft Teams because of the prevailing COVID-19 pandemic. The Court is grateful to Counsel and their respective instructing solicitors for their co-operation and courtesy in ensuring the successful completion of such a large and complex matter in very trying conditions.

3    For the reasons which follow, and with very great respect, I reject each of Mr. Flageul’s claims.

Overview of the Case

4    It is useful to give an overview of Mr. Flageul’s claims against the respondents. For many years Mr. Flageul sought to develop an application or “app” called “WeDrive.” The app was intended to permit a member of the public who had driven to an event, but did not want to drive home (or could not drive home), to be allocated a driver who would arrive at the event and drive the member of the public home in their car; that driver would then be collected by another driver (a co-driver). By early 2017, considerable work had been completed in the development of this app, which was owned by Mr. Flageul’s company, WeDrive Australia Pty Ltd (“WeDrive Australia”).

5    Mr. Mace was, and remains, a majority shareholder, director and executive chairman of Multi Services Solutions Group Pty Ltd (“M.S.S. Group”). Mr. Christopher Russell was at the time the C.E.O. of this company. It owned six subsidiaries which carried on, as I understood it, distinct businesses. One of these was called M.S.S. Transport Services Pty Ltd (“M.S.S. Transport”). M.S.S. Transport carried on a business of outsourced car detailing for hire car companies. This included, for this purpose, the provision of staff to collect hire vehicles. Mr. Matthew Barker was, and remains, the managing director of M.S.S. Transport. Mr. Taylor was the non-executive chairman of M.S.S. Group. He was also a director of other unrelated companies.

6    In 2017, Mr. Barker told Mr. Mace that M.S.S. Transport needed to acquire certain technology to enable it to develop that company’s business. Mr. Barker was of the view that it would be more expensive and more difficult for M.S.S. Transport to develop that technology itself from inception. Mr. Barker told Mr. Mace that Mr. Flageul, who he had met earlier, had developed technology that might suit the needs of M.S.S. Transport. In May 2017, Messrs. Mace and Barker met with Mr. Flageul. He gave them a presentation in which he demonstrated how the WeDrive app worked. Mr. Flageul told Messrs. Mace and Barker that his business was breaking even and that he needed assistance to expand it. Mr. Mace decided to investigate the WeDrive business with a view to investing in it.

7    What followed was a period of due diligence. This due diligence was conducted largely by Mr. Taylor. Amongst other things, Mr. Flageul answered a due diligence questionnaire. Questions were asked about ownership of the core assets of his business. At the time, Mr. Flageul failed to disclose that WeDrive Australia did not own all of the intellectual property required for the app. He conceded before me that this had been a “mistake.”

8    In August 2017, when WeDrive was incorporated, WeDrive Australia assigned its intellectual property rights to this company. Mr. Flageul (as trustee of the We Drive Melbourne Trust) was issued 20% of WeDrive’s shares. Mr. Taylor’s company was issued 19% of WeDrive’s shares. Mr. Mace’s company was issued 51% of WeDrive’s shares in consideration of the payment of $400,000 by his company to WeDrive. That payment was subsequently made in two tranches of $200,000.

9    Thereafter, work commenced on the further development of the app. The cost of doing this was much more expensive than anticipated. Mr. Flageul contends that from August to December 2017 he made a series of complaints or inquiries to, amongst others, Messrs. Mace and Taylor. He alleges that each of these constituted the exercise of a workplace right. Eventually, Mr. Flageul was dismissed. He contends that he was dismissed because of the complaints and/or inquiries he made.

10    He also contends that he was mentally unwell at the time of his dismissal. Notwithstanding this, he claims that he was coerced into selling his shares in WeDrive for $1 to M.S.S. Group and into resigning as a director of WeDrive. He submitted that his dismissal, the sale of his shares and his resignation as a director was the product of oppressive conduct by Messrs. Mace and Taylor. He also submits that Messrs. Mace and Taylor took unconscionable advantage of, amongst other things, his allegedly poor mental state.

11    The respondents disagree. They submit that the reason for Mr. Flageul’s dismissal was principally his failure to disclose WeDrive’s lack of ownership of the intellectual property associated with the app. Until resolved, this left WeDrive without the legal ability to exploit its technology fully. Whilst that issue was subsequently cured, Messrs. Mace and Taylor felt that they could no longer trust Mr. Flageul. They considered that they had been misled. The business was also costing more than expected, and was generating much less revenue than anticipated. In December 2017, the WeDrive business was in losses. It was expected to be insolvent by January 2018. Mr. Mace had effectively lost all of the money he had invested. Both he and Mr. Taylor also sold their shares to the M.S.S. Group for $1. They had offered to sell those shares to Mr. Flageul for that price. He declined that offer. Messrs. Taylor and Mace also resigned as directors of WeDrive.

12    Finally, Mr. Flageul contends that he was subsequently engaged as an independent contractor to perform the same or substantially the same work he had previously undertaken as a C.E.O. over January 2018. The respondents deny this. They contend that Mr. Flageul had never been offered any ongoing employment following his termination in December 2017.

Applicable Legislation

13    Mr. Flageul’s claims under the F.W. Act are governed by the general protections provisions in Pt. 3-1. Section 340 of the F.W. Act relevantly provides:

Protection

(1)    A person must not take adverse action against another person:

(a)    because the other person:

(i)    has a workplace right; or

(ii)    has, or has not, exercised a workplace right; or

(iii)    proposes or proposes not to, or has at any time proposed or proposed not to, exercise a workplace right; or

(b)    to prevent the exercise of a workplace right by the other person.

14    Section 341(1) defines the term “workplace right” as follows:

Meaning of workplace right

Meaning of workplace right

A person has a workplace right if the person:

(a)    is entitled to the benefit of, or has a role or responsibility under, a workplace law, workplace instrument or order made by an industrial body; or

(b)    is able to initiate, or participate in, a process or proceedings under a workplace law or workplace instrument; or

   (c)    is able to make a complaint or inquiry:

(i)    to a person or body having the capacity under a workplace law to seek compliance with that law or a workplace instrument; or

(ii)    if the person is an employee—in relation to his or her employment.

15    Section 342 defines the term “adverse action.” It relevantly includes the dismissal of an employee by her or his employer.

16    Relevant to the alleged breach of s. 340 is s. 360, which addresses situations where there are multiple reasons for taking action. It provides:

Multiple reasons for action

For the purposes of this Part, a person takes action for a particular reason if the reasons for the action include that reason.

17    Also relevant to the alleged breach of s. 340 is s. 361(1), which prescribes a presumption that relevantly adjusts the onus of proof. It is in these terms:

Reason for action to be presumed unless proved otherwise

(1)    If:

(a)    in an application in relation to a contravention of this Part, it is alleged that a person took, or is taking, action for a particular reason or with a particular intent; and

(b)    taking that action for that reason or with that intent would constitute a contravention of this Part;

it is presumed that the action was, or is being, taken for that reason or with that intent, unless the person proves otherwise.

18    Section 358 relevantly provides:

Dismissing to engage as independent contractor

An employer must not dismiss, or threaten to dismiss, an individual who:

(a)    is an employee of the employer; and

(b)    performs particular work for the employer;

in order to engage the individual as an independent contractor to perform the same, or substantially the same, work under a contract for services.

19    Section 570 is part of a miscellaneous set of provisions and deals with costs. It relevantly provides:

Costs only if proceedings instituted vexatiously etc.

(1)    A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.

 (2)    The party may be ordered to pay the costs only if:

(a)    the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

(b)    the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or

   (c)    the court is satisfied of both of the following:

(i)    the party unreasonably refused to participate in a matter before the FWC;

    (ii)    the matter arose from the same facts as the proceedings.

20    As to the claims about oppression, s. 232 of the Corporations Act relevantly provides:

Grounds for Court order

The Court may make an order under section 233 if:

    (a)    the conduct of a company’s affairs; or

 (b)    an actual or proposed act or omission by or on behalf of a company; or

 (c)    a resolution, or a proposed resolution, of members or a class of members of a company;

is either:

    (d)    contrary to the interests of the members as a whole; or

 (e)    oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.

21    Section 233(1) provides:

Orders the Court can make

(1)    The Court can make any order under this section that it considers appropriate in relation to the company, including an order:

(a)    that the company be wound up;

(b)    that the company’s existing constitution be modified or repealed;

(c)    regulating the conduct of the company’s affairs in the future;

(d)    for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;

(e)    for the purchase of shares with an appropriate reduction of the company’s share capital;

(f)    for the company to institute, prosecute, defend or discontinue specified proceedings;

(g)    authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;

(h)    appointing a receiver or a receiver and manager of any or all of the company’s property;

(i)    restraining a person from engaging in specified conduct or from doing a specified act;

(j)    requiring a person to do a specified act.

22    As to the claims about unconscionable conduct, s. 20(1) of the A.C.L. relevantly provides:

Unconscionable conduct within the meaning of the unwritten law

(1)    A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time.

The Witnesses

23    Much of the case turns upon the Court making findings of fact about what was, or was not, said at various meetings and during various telephone conversations. Mr. Flageul’s evidence about what was said was relevantly contradicted, in whole or in part, by all of the other witnesses called to give evidence (save for Mr. Flageul’s partner). The Court was thus required to decide whose evidence, about what was said and what was done, should be preferred. In that respect, I have principally relied upon the contemporaneous evidence before me, at least as a starting point, in fact finding. Where appropriate I have drawn inferences from the contemporaneous documents if such inferences accord “with the probabilities of ordinary human experience”: Republic of Nauru v. WET040 (No 2) [2018] HCA 60; (2018) 93 A.L.J.R. 102 at 109 [35]; see also Sanders v. Glev Franchises Pty Ltd [2002] FCA 1332 at [53].

24    Mr. Flageul gave evidence-in-chief by affirming five affidavits. His life partner, Ms. Joanne O’Donovan, who was also employed at WeDrive, affirmed two affidavits. Mr. Mace swore two affidavits. Mr. Taylor swore one affidavit, as did Mr. Russell. Mr. Barker swore two affidavits. All of these affidavits, together with their accompanying exhibits, were admitted into evidence. Both sides had intended to make a series of objections to the admissibility of parts of these affidavits. But in the circumstances (which included the holding of a virtual hearing), it was thought more efficient to have the Court receive all of this evidence, leaving the parties to make submissions about weight, which they did. No party objected to this course of action.

25    I was not entirely impressed with the evidence given by Mr. Flageul. He had a great interest in the outcome of this case, and so I have treated his evidence with considerable caution. My general impression of him is that he at times exaggerated his evidence. That is not to say that he was dishonest; I think he tried to give his evidence truthfully. But he seemed overeager to explain his story, which when combined with a degree of exuberance, led him to embellish his account of what occurred. At times he introduced new parts of his story which had not appeared in the very many affidavits he had affirmed and which had been read into evidence. He often became argumentative. He was sometimes evasive. The language used in his affidavits did not help. His recollection of key events, in which he alleged he had exercised a workplace right, was often expressed in highly conclusionary language. For example, the following appears in his first affidavit:

On 29 September 2017 and 5 October 2017, I verbally complained and/or enquired with Gregg Taylor, the Third Respondent as to the payments made by the First Respondent to Dave Nicholson that in the absence of a consultancy agreement between the First Respondent and Dave Nicholson (associate of the Second Respondent and Third Respondent), or being held liable to any Key Performance Indicators, that I be provided by reasons [sic] as to any payment made by the First Respondent to Dave Nicholson or other alleged contractors.

…

On 10 November 2017, I verbally complained and/or enquired to Steven Mace, the Second Respondent as to the payments made by the First Respondent to Dave Nicholson on the basis that any payment to Dave Nicholson was unreasonable as there was no consultancy agreement between the First Respondent and Dave Nicholson.

…

On 24 November 2017, I emailed Christopher Russell, the Third Respondent, Gregg Taylor and Matthew Barker and complained and/or enquired about when the marketing campaign would commence for the First Respondent, since Dave Nicholson and the Third Respondent did not initiate or organise any marketing campaign in Sydney, which was within the responsibility of the Third Respondent and Dave Nicholson.

(My emphasis.)

All of the alleged exercises of workplace rights were described in this way in Mr. Flageul’s first affidavit. Expressed in such conclusionary terms, it is difficult to give extensive weight to this type of evidence. That is especially because, on many occasions, it was never effectively corroborated.

26    Another difficulty I had with Mr. Flageul’s evidence is that he sometimes added to his account of what had occurred with each successive affidavit. In the first, he appeared to give a comprehensive account of his version of what had occurred. The second contained some corrections to the first. But in the third, fourth and fifth affidavits, sometimes perhaps as an understandable reaction to the evidence filed and served on behalf of the respondents, he introduced new details with no real explanation as to why those details had not appeared in his first affidavit. Unless otherwise corroborated, it was hard to give a great deal of weight to these additions, which were sometimes no more than a denial of the truth of the evidence contained in the respondents’ affidavits. Mr. Flageul added further details in the virtual witness box. For example, he claimed for the first time to have received an offer from, and to have reached agreement with, Mr. Mace to become an independent contractor on 23 January 2018. In finding facts, I have accordingly focused upon Mr. Flageul’s first affidavit, and the transcript of his cross-examination, unless what had been affirmed in the further affidavits was material in some way.

27    I have also treated the evidence of Ms. O’Donovan with similar caution. It was led in an attempt to corroborate Mr. Flageul’s evidence about the exercise by him of workplace rights. Because Ms. O’Donovan was and is Mr. Flageul’s life partner, she shares a similar interest in the outcome of this matter. But there were other difficulties with her evidence. For example, she gave hearsay evidence of conversations she overheard whilst Mr. Flageul was on the telephone with, for example, Messrs. Mace or Taylor. She tried to corroborate Mr. Flageul’s recollection of the day he was terminated by giving hearsay evidence of Mr. Flageul ringing her to give his account of what occurred. I have decided that none of this evidence can be given any real weight. That was so for a number of reasons. First, the language used in her affidavits was often conclusionary in nature, argumentative and speculative. As an example of this, the following appeared in her second affidavit:

I refer to paragraphs 50 and 51 of the affidavit of Steven Mace and say that it is strange to me that Steven Mace first tried to use the WeDrive Mobile Application on 11 September 2017, after he invested in WeDrive business. [sic]

28    What Ms. O’Donovan thought was “strange” is not evidence. Secondly, in her second affidavit, she added statements to describe an important conversation between Messrs. Flageul and Mace which did not appear in her first affidavit. No sufficient explanation was given for this discrepancy. In cross-examination, she said that her first affidavit had been prepared using notes she had made at the time of this conversation. These notes were never produced because they had not been kept. No adequate explanation was given about their loss. Thirdly, I also find that in cross-examination, Ms. O’Donovan tried too hard to align her testimony with that of Mr. Flageul, especially in relation to the issue concerning how automated the app was in the second half of 2017. Thus, for example, the following exchange took place:

Yes. And it’s correct, isn’t it, then on that explanation that you would have expected them to think that this technology, provided you had drivers available, was capable of dispatching drivers automatically?---Yes. It was.

Yes. Well, would it surprise you to hear, Ms O’Donovan, or change your mind – would it change your mind if you heard that Mr Flageul had a different view of what the technology could do?---Yes.

29    Later on, the following exchange took place:

Mr Flageul accepted yesterday, in cross-examination, when I asked him if it provided for the automatic dispatching of drivers, and this is at page 50 of the transcript, line 15, your Honour.

HIS HONOUR: Thank you.

MR MEAGHER: I asked him the question:

Well, do you say it could be done in September when Mr Mace complained to you.

And Mr Flageul said:

No.

But do you now accept that it couldn’t automatically dispatch drivers in September 2017?---Yes, if he answered that I will accept it.

And isn’t it the case then that whatever Yan says on this issue, you will accept as being correct?---Well, I wouldn’t say whatever he says, but yes, I would – I would – I would defer to his greater knowledge of the technology than mine.

And I suggest to you, Ms O’Donovan, that you’ve deferred to Mr Flageul’s explanation of events more generally in respect of the matters in issue of this case; do you agree with that?---No.

(My bolded emphasis; italicised emphasis in transcript.)

30    I adopted a similar level of caution when assessing the credit of Messrs. Mace and Taylor. As respondents they also had a direct interest in the outcome of the case. However, my impression of them both is that they were less committed to winning the case than Mr. Flageul and Ms. O’Donovan. Generally speaking, they gave evidence that was less argumentative. They did not seem to embellish or exaggerate matters as much as Mr. Flageul. If anything, they both appeared to be “sick of” dealing with Mr. Flageul and just wanted to be rid of him. The clear impression I had of Mr. Mace is that he felt betrayed by Mr. Flageul and blamed him for losing the money he had invested in WeDrive. The equally clear impression I have of Mr. Taylor is that he struggled to deal with Mr. Flageul.

31    Neither Mr. Barker nor Mr. Russell had any direct interest in the outcome of this matter. However, both were and remain business associates of Mr. Mace. I therefore applied some measure of caution in assessing their respective creditworthiness. Having said that, they both impressed me as witnesses and I formed the view that they gave accurate answers in cross-examination to the extent of their recollection of events. Mr. Barker had never thought that the WeDrive business would ever work. He only became involved with WeDrive as a “favour” to Mr. Mace. Mr. Russell also did not think much of the WeDrive app. He also only became involved towards the end of 2017 to see whether the WeDrive business could in some way be saved. He hoped that he would never see or hear of Mr. Flageul ever again.

32    Mr. Flageul filed with the Court a table setting out the weight he contended I should give to certain parts of the affidavits filed by the respondents. In what follows, I have given this table due consideration.

33    Both sides called witnesses to give expert evidence concerning Mr. Flageul’s mental state in 2017. Mr. Flageul relied upon a report of Mr. David Horne (I note that he is a Doctor of Philosophy), a clinical psychologist, whilst the respondents relied upon a report of Professor Peter Doherty, a psychiatrist. Each was cross-examined. For reasons which are set out below, I found neither report to be probative of Mr. Flageul’s mental state in 2017. However, both experts properly discharged their duty to the Court and gave their evidence in an entirely honest and professional way. The Court is grateful to them for what assistance they could give.

Agreed Statement of Facts

34    The parties agreed on certain facts. They documented that agreement as follows (I have removed applicable headings):

1.    On 8 December 2014, WeDrive Australia Pty Ltd (ACN 603 262 675) (“WeDrive Australia”) was incorporated for the purpose of conducting the “WeDrive” business (“Business”).

 2.    The Applicant (“Flageul”) was:

(a)    a director of WeDrive Australia from 8 to 24 December 2014, and from 10 March 2015 to 22 February 2018; and

   (b)    a shareholder in WeDrive Australia at various times.

3.    On or about 16 May 2017, a meeting occurred between Flageul, Matthew Barker (a director of MSS Transport Services Pty Ltd (ACN 611 381 607) (“MSST”)) and the Second Respondent (“Mace”) (Executive Chairman and a director of Multi Services Solutions Group Pty Ltd (ACN 602 539 873)) at which Flageul gave a presentation about the Business to Barker and Mace.

4.    On 25 August 2017, the First Respondent (“WeDrive”) was incorporated, for the purpose of purchasing WeDrive Australia’s assets (including the Application) and its business (as those terms are defined in the document referred to in subparagraph 5(a) below).

5.    On 31 August 2017, WeDrive acquired WeDrive Australia’s business and assets (as those terms are defined in the document referred to in subparagraph 5(a) below). A suite of documents was executed giving effect to that transaction, including:

(a)    a “Business and Asset Purchase Agreement “;

(b)    a “Subscription and Shareholders’ Deed “; and

(c)    an “Executive Services Agreement” in regard to Flageul.

6.    As at 1 September 2017, WeDrive’s:

(a)    shareholders were:

(i)    Mace Group Pty Ltd, ACN 103 666 235 as trustee of the WeDrive Management Trust: 100 shares (10 per cent);

(“Mace Group”)

(ii)    R E Taylor Pty Ltd, ACN 614 465 717 as trustee of the TF Trust: 190 shares (19 per cent);

(“R E Taylor”)

(iii)    Flageul as trustee of the WeDrive Melbourne Trust: 200 shares (20 per cent);

(iv)    Mace Group as trustee of the Mace Family Trust: 510 shares (51 per cent);

(b)    directors were:

     (i)    Flageul;

     (ii)    Mace; and

     (iii)    Taylor.

7.    Mace Group was, at all times material to this proceeding, controlled by Mace.

8.    R E Taylor was, at all times material to this proceeding, controlled by Taylor.

9.    Flageul was employed by WeDrive from around 1 September 2017 to around 22 January 2018, on a full-time basis:

   (a)    in the role of “Chief Executive Officer “; and

(b)    with a remuneration of $150,000.00 per annum, inclusive of superannuation.

10.    On 10 November 2017, there was a board meeting of WeDrive at which a proposal for a merger between WeDrive and MSST was presented, with a PowerPoint presentation entitled “MSST_WeDrive Merger Discussion” (“Merger Proposal”), and the board of WeDrive unanimously voted in favour of the merger.

11.    On 21 December 2017, Flageul was dismissed as an employee of WeDrive with effect from 22 January 2018.

12.    On 22 December 2017, Flageul signed a document entitled, “Heads of Agreement: Sale of entire issued capital in WeDrive Pty Ltd.”

  13.    On 3 January 2018, Flageul ceased being a director of WeDrive.

  14.    On or about 22 January 2018, Flageul ceased employment with WeDrive.

(Footnotes omitted.)

The Court is grateful to the parties for their co-operation.

The Facts

Due Diligence

35    Mr. Barker gave evidence that he wanted to streamline the M.S.S. Transport business with an app that would enable rental car clients to be able to request movements of rental vehicles electronically. He raised this idea with Mr. Mace. He suggested that Mr. Barker should conduct some research and report back to him. That research led Mr. Barker to discover a business then conducted by Mr. Flageul through WeDrive Australia. That business appeared to Mr. Barker to offer a chauffeur “you drink, we drive” style service. He emailed WeDrive Australia. Mr. Flageul then rang Mr. Barker.

36    There was some dispute before me about the initial objectives of the M.S.S. Group. Mr. Flageul recalled that Mr. Mace wanted to invest in his business and that this was not confined to the use of his app. In cross-examination, however, Mr. Flageul accepted that the focus of the M.S.S. Group was on acquiring an ability to use the app to improve the business of M.S.S. Transport. As Mr. Barker said in his first affidavit:

I explained the MSS Transport business to Mr Flageul, and identified some potential synergies with WeDrive Australia such as using its technology to assist MSS Transport to automate the allocation of drivers and minimise manual labour.

37    Mr. Barker’s memory is supported by the contemporaneous documents. In, for example, an email sent by Mr. Flageul to Mr. Barker on 30 May 2017, Mr. Flageul said that WeDrive Australia’s “strategic objectives” included:

To develop a technology to enhance WeDrive and MSS Transport productivity.

To roll the technology out to all other MSS subsidiaries and consider white-labelling external licensing.

38    I find that Mr. Mace, and the M.S.S. Group, were interested in using the intellectual property developed by Mr. Flageul to enhance the businesses of that group, and in particular, the business of M.S.S. Transport. That intellectual property primarily constituted the WeDrive app. As at May 2017, neither WeDrive Australia nor Mr. Flageul owned all of that intellectual property. Nor was the app at that stage fully functional. It was not, for example, yet fully automatic. In an email sent by Mr. Barker to Messrs. Taylor and Mace in early June 2017, Mr. Barker outlined some of the features of the app which he thought it needed to achieve. He wrote as follows:

The app would need to be able automatically add CPI to the rate annually with a Y/N indicator in the back end dependent on the agreement

The app would need to be able to create jobs for either single movements or upload mass movements of cars.

The app would need to be able to have different approval levels depending on the needs of the client. This is especially important as different clients will have very different needs here.

For example at AVIS a fleet controller has high discretionary spend whereas at Hertz location management cannot even approve the purchase of a stapler without the need for escalation and approval.

It would need to send push notifications to the agreed sign off person in real time for approval before we move the vehicle. We would need a pre-approved signal so we can get ready but not get the notification to execute until the final client approver has hit go.

We would then need to decide if the alert goes to the subby or we coordinate manually. Initially I suspect the latter for a few weeks but we would need the capability for the “order” to go straight through to the driver with the subby boss getting a notification. I would not want them to be able to refuse the Job if it has been approved by us and I would want us to have the control.

39    The degree to which the app was automated by the time WeDrive had acquired it was the subject of considerable dispute. In an email sent by Mr. Flageul to Mr. Mace on 31 May 2017, he said that he needed $150,000 for the development of the “system” as it then was, but that this was only a “bulkpart [sic] figure”. Importantly for Mr. Flageul’s case, the email set out the development that needed to occur. This included the following:

- Stage 1 will cater for the needs of WeDrive and MSS transport (relocating, geo-locating/tracking, semi­automated** scheduling and dispatching)

…

**Semi-automated means all dispatch processes will be automated as much as possible with the ability given to operators to manually dispatch and or overwrite automation when if required.

40    There was some conflict and ambiguity concerning the evidence given by Mr. Flageul and Ms. O’Donovan about this issue. Mr. Flageul said that the app was only automatic when drivers were available, but not when they were not; in that case a manual system of ringing for a driver needed to take place. It is not clear to me whether this aspect of the app was ever fixed or whether the app was always going to be dependent upon a pool of drivers being available. In contrast Ms. O’Donovan said, as between WeDrive and a customer, the app was automated (assuming there were available drivers), or became automated at some point later in 2017, but another app, used by the co-driver (i.e. the driver that would collect the driver used by the customer) was not yet automated. Compounding the issue was Ms. O’Donovan’s deference to the views of Mr. Flageul which I have described above.

41    In contrast, Messrs. Mace and Taylor were firmly of the view that Mr. Flageul had told them that the app was fully automated. Mr. Mace recalls being shown by Mr. Flageul in May 2017 how the app worked and it appeared to him to work perfectly well and automatically. He subsequently tested it himself, with mixed results (see below). Mr. Barker had tested the app in May 2017 and it did not work then (see below). In my view, I find that the app was not fully automated in May and June 2017, and remained in that state throughout 2017. I further find that Messrs. Mace and Taylor nonetheless believed that the app was fully automated before making their investment in WeDrive. Whether that was because they were misled by Mr. Flageul, or had misunderstood what he had said (for example in the email set out above), I need not decide. Neither, in that respect, had any expertise in the field of information technology.

42    On 16 May 2017 WeDrive Australia entered into a contract with Contact Point IT Services Pty Ltd (“Contact Point”, sometimes referred to in contemporaneous documents as “Contactpoint”) for the maintenance and enhancement of the app. It was Mr. Flageul’s uncontradicted evidence that Contact Point enhanced the app using a combination of pre-existing codes created by developers who had worked for WeDrive Australia, as well as codes created by Contact Point. Critically, the terms of this contract provided for Contact Point to retain ownership of the intellectual property developed by it in association with the app. Clauses 33 and 34 thus provided:

WeDrive hereby acknowledges that Contactpoint retains full ownership of the Intellectual Property in any UI/UX design and programming developed in association with the App.

Upon go live of changes to the App and payment in full for the services provided as part of each project, Contactpoint shall assign a perpetual and transferable license to use within the App such Intellectual Property to WeDrive. This license will allow WeDrive or their agents to make changes to any aspect of the App, except for the purpose of creating derivative works based on the code. This licence does not allow the distribution of the code to any other party or publishing of the code into a public domain.

43    These clauses fettered WeDrive Australia’s ownership of the intellectual property needed to exploit and develop the app fully. They lie at the heart of this dispute. That is because Mr. Flageul never disclosed their existence to Mr. Mace and the M.S.S. Group until December 2017. Indeed, he never disclosed the existence of this contract at all during the M.S.S. Group’s due diligence of WeDrive Australia which took place in June 2017. He nonetheless conceded in cross-examination that he knew by August 2017 that Messrs. Mace and Taylor, as potential investors, were “particularly concerned” that WeDrive Australia was the owner of all of the relevant intellectual property to be assigned to WeDrive.

44    On 29 May 2017, Mr. Mace met with Mr. Flageul, Ms. O’Donovan and others. In the course of that meeting, Mr. Mace gave evidence that the following took place:

(a)    Mr Flageul provided a copy of WeDrive Australia’s financials which I recall demonstrated initial monthly losses of about $22,000, gradually improving to losses of about $1,000 per month, as at May 2017;

(b)    I recall asking Mr Flageul what had transpired to significantly reduce WeDrive’s losses. He said WeDrive Australia now had more clients on the back of corporate offerings and was better at controlling its costs. He said in the worst case, an injection of $8,000 per month would cover all losses and the wages for himself and Ms [O’Donovan].

(c)    Mr Taylor suggested it appeared from what Mr Flageul had told us about WeDrive Australia’s current trading performance and new strategy in relation to acquiring corporate clients, an investment of $300,000 would allow the business to continue to grow for about 12 months, until it was self-sustainable;

(d)    Mr Flageul said that WeDrive Australia had about $30,000 of outstanding invoices to clear for corporate development expenses. It was then discussed between us that an investment of $400,000 would cover the business until WeDrive Australia could become profitable, based on a 12 month projection;

(e)    I said we would be interested in acquiring the trading assets of WeDrive Australia, rather than the corporate entity, and that we would set up a new corporation for that purpose;

(f)    We agreed that the ownership structure of the new entity would be 75% MSS Transport and 25% Mr Flageul, and discussed the roles that Mr Flageul, Mr Taylor, Mr Barker and I would take:

i.    As Mr Flageul had built the business, it was agreed that he would have the title of CEO. His role and responsibilities were agreed to be focussing on expanding the business and developing the technology to suit corporate clients, and modifying it for use by MSS Transport. Mr Flageul would also be appointed as a director;

ii.    Mr Barker or Mr Taylor would be appointed as a director and tasked with mentoring Mr Flageul, controlling financial management and assisting with marketing. In addition, Mr Barker would have operational responsibility for liaising with Mr Flageul to supply labour from MSS Transport for [sic]; and

iii.    I would observe the Board of Directors, so I could keep an eye on the progress of the business.

45    Mr. Flageul denied most of the foregoing. Neither he nor Mr. Mace were materially cross-examined about their divergent recollections. Mr. Taylor corroborated Mr. Mace’s testimony, but only to an extent. I otherwise accept that Mr. Mace’s recollection as set out above, is what he “took away” from his meeting. In particular, I accept that Mr. Mace believed that the business had only about $30,000 of outstanding invoices to pay. Whether that recollection was mistaken, as Mr. Flageul asserted, I need not decide. I further accept Mr. Mace’s understanding of WeDrive Australia’s financials as representative of his appreciation of the state of the WeDrive business. It formed the basis for Mr. Mace’s ultimate investment of $400,000. In that respect, it was a strong theme in Mr. Mace’s evidence that the business ended up needing far more financial assistance than that outlined by Mr. Flageul at this meeting. In particular, he discovered that the business needed far more than $8,000 per month to make good its ongoing losses. Thus in cross-examination, Mr. Mace said:

Were you concerned that the expenses were too high at the end of September 2017 of WeDrive Proprietary Limited?---I was concerned – from referring it back to the Sydney – original Sydney meeting when $8000 a month would have covered – they had gone from losing 22,000 a month – got it back to close to a thousand give or take towards break even. And a thousand – $8000 a month was going to cover the ongoing trading, and we were incurring significant financial results and expenses. Yes. I was concerned about.

46    The M.S.S. Group due diligence was undertaken largely by Mr. Taylor. It culminated in the completion by Mr. Flageul of a due diligence questionnaire in which he gave the following answers to the following questions (the reference to the “Company” is to WeDrive Australia):

6. Does the Company have clear title to its core assets? Have any claims been made against core assets? Are there any encumbrances against core assets?

a. NO

…

16. Are there any other matters that Mace should be aware of in relation to the Offer?

a. NO

47    These answers were wrong or at least not accurate. WeDrive Australia did not have “clear title” to its core assets, and Mr. Mace should have been told about the contract with Contact Point. Nonetheless, in one of his affidavits, Mr. Flageul sought to brush aside the significance of his answers. He said that there was nothing in the contract “of any concern” to him and that at the time of due diligence he was “primarily concerned with the handover process.” He repeatedly said that neither Mr. Mace nor Mr. Taylor had ever asked for a copy of the Contact Point contract (unsurprisingly, in my view, because they were unaware of it) and that its existence would not have mattered but for M.S.S. Transport’s attempt to “improperly” acquire the intellectual property in December 2017. These explanations are illustrative of the argumentative nature of some of Mr. Flageul’s evidence-in-chief. In any event, in cross-examination, Mr. Flageul accepted that he had made a “mistake”. Whilst he claimed that it had never occurred to him at the time to tell the M.S.S. Group parties about the contract with Contact Point, he now candidly acknowledged that this was “madness”. Thus in cross-examination he said:

And did it not strike you, Mr Flageul, that you needed to check and disclose any other parties’ interest in the code that is part of the application prior to agreeing to this agreement?---Okay. So if we were talking about now and I’m a different businessperson now, I would say that it was madness that I did not think about it at the time, but I’m a different person now. At the time, I was a small business owner. And what I’m pointing here is section 25. The seller has not intentionally withheld or concealed. And the answer is yeah, I agree with you that I should have, but I didn’t. But by no means was that intentional. It just did not strike. I will bring you to a matter. You can interrupt me if you think it’s irrelevant. But I remember, on 21 December, Mr Mace questioned me on that, and he said, “Did you actually commit a lawyer to read over that agreement that you signed with Contact point?” And I said, “No” And I remember him shaking his head, probably thinking, “What an idiot”, and I would have agreed with that, because I should have. That probably would have saved me a lot of that trouble.

He ultimately accepted that “in retrospective [sic] and hindsight”, he should have disclosed the Contact Point contract to the M.S.S. Group as part of the due diligence process.

48    I observe that in cross-examination, Mr. Taylor said that he had, at the time, asked Mr. Flageul about his answer to the first question in the questionnaire set out above. In response, Mr. Flageul did not disclose the existence of the Contact Point contract, but rather, the existence of a dispute concerning the ownership of some other intellectual property referable to the app. Steps were taken to resolve that dispute before WeDrive was set up by having certain third parties assign the necessary intellectual property to WeDrive Australia.

49    I find Mr. Flageul’s general attitude to the issue of the ownership of WeDrive Australia’s intellectual property to have been cavalier. When he was cross-examined about the Contact Point contract the following exchange took place which is illustrative of this finding:

So you did think about the IP, but you didn’t stop to think about who actually owned all the different parts of the IP?---I thought – I thought I owned the IP. I thought I owned the IP, and I would still maintain that I owned the vast majority, apart from maybe a couple of traits, of course. But the vast majority of the IP was still owned. And I never – yeah, I agree. I probably didn’t read carefully every single paragraph, but in my mind, I owned the IP.

50    On 14 August 2017, WeDrive Australia and a company which appeared to be owned by Mr. Mace (called Investment Vehicle Pty Ltd) entered into a “Memorandum of Understanding.” An earlier version of this had been distributed by Mr. Mace on 31 May 2017. It included the following breakdown as to how Mr. Mace’s $400,000 was to be used by WeDrive:

Mace will contribute the following for 75% in WeDrive:

1.    $250,000 for working capital to be deposited in 12 month instalments; and

2.    $150,000 for a capital works to the ITC of the business. The funds to be approved by the Board prior to commitment and available as required over the next 12 months; and

3.    Services Agreement between WeDrive to MSS Transport Pty Ltd for drivers (*); and

4.    Access to Mace corporate network for retail and corporate clients.

(*) To be negotiated direct with MSS Transport Pty Ltd but a contract allowing MSS Transport Pty Ltd first right of refusal to supply labour as per agreed terms and conditions.

51    The executed Memorandum of Understanding, dated 14 August 2017, did not include the foregoing clause. It anticipated the incorporation of a new entity which would acquire 80% of the shares in WeDrive Australia and for “Mace” to contribute $400,000 as working capital. It also provided for the appointment of Mr. Flageul as the “CEO”, with an annual salary of $150,000. Before me, Mr. Flageul asserted that part of the “deal” included Mr. Taylor bringing in $400,000 of revenue. But this was not a term of the Memorandum of Understanding. It was not a term of any agreement. It was not referred to in any contemporaneous records, contrary to what Mr. Flageul had said in his third affidavit (the one email cited by Mr. Flageul did not refer to this alleged promise). And Mr. Taylor denied that he had given such a promise. In these circumstances, I am not persuaded that it was ever made.

52    The Memorandum of Understanding listed the strategic priorities of the parties as follows:

It is agreed the Strategic Priorities of WeDrive is essential to the short success of the business. It is equally important to the Investment criteria for Mace. The following priority has been agreed by the Parties;

 1.    WeDrive current strategy and growth to profitability

 -    Focus on retail client growth in Sydney and Melbourne

 -    Focus on corporate client and venue growth in these markets

-    Trading performance to trade profitability in its own right which is estimated at~100 jobs/day (currently~7jobs/day)

2.    Technology to support the above strategy in a reliable and professional manner.

53    The Memorandum of Understanding records that the value of WeDrive had been “set” at $1,600,000 for “the purpose of this Investment opportunity.”

54    Consistently with a focus on ownership of the necessary intellectual property, and given the pre-existing dispute over part of that property, in late August 2017 Mr. Flageul executed two “IP Assignment Agreements.” The first was entered into by WeDrive Australia (as trustee of the We Drive Melbourne Trust) and certain third parties who retained intellectual property associated with the app. It provided for the assignment of that intellectual property to WeDrive Australia in consideration of the payment of $1 to each assignor. The second was entered into by WeDrive Australia and Mr. Flageul and it provided for the assignment to WeDrive Australia (as trustee of the We Drive Melbourne Trust) of any intellectual property owned by Mr. Flageul as a result of his employment (or other relationship) with that company.

The Agreements

55    Ultimately, the business structure foreshadowed in the executed Memorandum of Understanding was not adopted by the parties. Instead, WeDrive was incorporated and shares were issued by it to Mr. Flageul (as trustee of the We Drive Melbourne Trust) and to companies associated with Messrs. Mace and Taylor in the proportions set out above. Again, it was critical for this new entity to acquire from WeDrive Australia all of the assets, including intellectual property, associated with development of the app. A “Business and Asset Purchase Agreement” was entered into by WeDrive and WeDrive Australia (as trustee of the We Drive Melbourne Trust) which provided for the sale by WeDrive Australia of its “Business” and “Sale Assets” to WeDrive in consideration for the issue of 200 shares in the capital of WeDrive to WeDrive Australia or its nominee. I infer that WeDrive Australia nominated Mr. Flageul in his capacity as trustee. The term “Sale Assets” was defined to mean “all of the assets used in the conduct of the Business being the assets set out in Schedule 1.” The assets listed included the “Business IP”. This term was defined in the following way:

Business IP means the intellectual property owned and used by the Seller in the conduct of the Business, including the Domain Name, the App, the Code and the social media accounts used in the Business.

(My emphasis.)

56    The “Business IP” thus included all of the intellectual property used by WeDrive Australia in carrying on its business, whether owned by WeDrive Australia or not.

57    The term “Business” was defined as the business “known as “WeDrive” undertaken by” WeDrive Australia. The term “App” was defined as being the “WeDrive ride sharing application owned by” WeDrive Australia. That company also gave a series of warranties relating to the intellectual property being sold. They were as follows:

9    The Seller has an enforceable right to use the Business IP, and it has not entered into any contract, arrangement or understanding to dispose of such right of use, other than in implementing the transactions contemplated by this document.

10    The use by the Seller of the Business IP, and the conduct of the Business by the Seller does not breach or infringe any Intellectual Property Right of any other person in any way which may give rise to a claim against the Buyer.

 11    No person is Infringing or has infringed any Business IP.

12    No person other than the Seller has any right to use the Business IP and there has been no unauthorised use by any person of the Business IP.

13    Nothing has been omitted to be done by the Seller and as far as the Seller is aware no other circumstances exists that may affect the validity or ownership of the Business IP.

14    Each contractor engaged by the Seller for the purpose of undertaking any activity that has given rise to or may give rise to the creation of Intellectual Property Rights used In connection with the Business has executed an assignment of that Intellectual Property Right to the Seller.

58    Because of the terms of its contract with Contact Point, it appears that WeDrive Australia did not sell all of the intellectual property “used” by it in its business to WeDrive. That was probably a breach of the terms of sale, and probably also constituted a breach of the warranties set out above. However, neither Mr. Mace nor Mr. Taylor have sought to sue WeDrive Australia for these possible breaches and these issues were not the subject of any argument before me.

59    WeDrive, Mr. Flageul (as trustee of the We Drive Melbourne Trust) and entities associated with Messrs. Mace and Taylor also entered into a “Subscription and Shareholders’ Deed.” It contained terms concerning the composition of WeDrive’s board, the proceeding of board meetings and shareholder meetings, and the possible future sale of shares in WeDrive. Certain identified matters required the approval of “Mace”. These related to fundamental aspects of WeDrive’s business, such as the approval of each budget and business plan, the alteration of the constitution of the company, the payment of dividends, and so on. Mr. Flageul in his written submissions relied upon the following clauses of this deed:

(a)    Clause 4.7 “Fees and expenses of Directors”, which provides that the Company will pay certain costs of travel and insurance, and “such other director fees (if any) to each Director as agreed by the Board from time to time”;

(b)    Clause 6.2 “Authorised expenditure”, which provides that the Company must not and must not allow any officer or employee to commit any resources of the company other than in accordance with an Approved Budget and Business Plan or the policies and procedures of the company determined by the Board; and

(c)    Clause 7.3 “Management Reports”, which provides that the Company must provide to each director sufficient management and financial information and reports to allow them to monitor the efficient conduct of the business from time to time.

60    By cl. 2.1, Mr. Mace’s company was obliged to subscribe for 510 shares in WeDrive by paying a total of $400,000. As noted further below, there was some dispute about whether this took place and whether some part of what was paid was subsequently re-characterised as a loan to WeDrive which was then written off. For the purposes of this proceeding, these issues do not matter. I readily accept that Mr. Mace invested substantial funds into WeDrive, probably in the aggregate of $400,000, and that, at least in an economic sense, he has lost these funds. He derived no profit from his investment. He was paid no dividends, and, as described below, he sold his 510 shares for less than $1.

61    Mr. Flageul also entered into an “Executive Services Agreement” with WeDrive. This was Mr. Flageul’s employment contract. It appointed him to be the C.E.O. of WeDrive with an annual salary of $150,000. It provided for a six month period of probation. During this time, WeDrive was entitled to terminate Mr. Flageul’s employment if it determined that he was “unsuitable for the role” “for any reason” upon one month’s written notice. As it happens, Mr. Flageul’s employment was terminated within this period.

62    This agreement prescribed Mr. Flageul’s duties in cls. 8.1 and 8.2 as follows:

General duties

The Executive will:

(a)    devote the whole of the Executive’s time, attention and skill during normal business hours, and at other times as reasonably necessary, to the duties of office in a proper and efficient manner;

(b)    diligently and faithfully perform the duties assigned to the Executive from time to time and comply with all lawful directions given to the Executive by the Company and any person duly authorised by the Company;

(c)    use best endeavours to promote and enhance the interests, welfare, Business, profitability, growth and reputation of the Company;

 (d)    not intentionally do anything which is or may be harmful to the Company;

 (e)    perform his/her duties and responsibilities in a proper and efficient manner;

(f)    conduct himself in accordance with the commercial and ethical standards commensurate with the Position;

(g)    promptly report to the Company or such person as the Company may from time to time determine, all information and explanations as it may require in connection with matters relating to the Employment or the Business; and

(h)    not act, or be seen to be acting, in conflict with the best interests of the Company.

Specific duties

The specific duties of the Executive are set out in Item 5 of the Schedule.

Item 5 of the Schedule to this agreement said that Mr. Flageul’s specific duties were to be “[a]s directed by the Board from time to time”.

63    This agreement also imposed on Mr. Flageul both a general duty to report to the board and a more specific obligation to provide “full information” about the conduct of WeDrive’s business, including “management reports, sales reports, [and] evaluation reports” and any other information reasonably required by the board. It also prescribed that Mr. Flageul might be required to act as a director of WeDrive. As it happens, this did take place. Finally, in addition to its rights applicable during Mr. Flageul’s probationary period, WeDrive had a general right to terminate his employment with one month’s written notice.

64    Mr. Flageul’s life partner (Ms. O’Donovan) also entered into a contract of employment with WeDrive. She was appointed the “Operations and Corporate/Venues Account Management” officer with an annual salary of $100,000.

65    Certain other agreements were executed by the parties but it is unnecessary for me to describe them.

The Course of WeDrive’s Business

66    Before turning to consider the particular complaints or inquiries Mr. Flageul claims he made whilst C.E.O. of WeDrive, I should give an account of what took place from the commencement of WeDrive’s business in September 2017 until Mr. Flageul left in January 2018.

67    The parties did not agree upon Mr. Flageul’s actual role and responsibilities at WeDrive. The respondents were of the view that whilst he had been appointed C.E.O., his real focus was on the commercial development of the app and on sales. Mr. Flageul disagreed. He was of the view, concordantly with the terms of his contract, that his role was much broader and that, as such, he was entitled to access at all times the financial records of the company. How else, he asked, was he to fulfil his reporting obligations?

68    There is a contemporaneous document which appears to support the position of the respondents. At the time of executing the agreements described above, 31 August 2017, Mr. Mace held a meeting with Mr. Flageul, Ms. O’Donovan, Mr. Taylor and another person to discuss the roles and responsibilities of WeDrive’s executives and senior staff. Notes were made on a whiteboard and photographs of those notes were in evidence before me. One page bears the heading “How Do We Do It? Roles and Responsibilities.” One role was labelled “Technology/App”. The notes show that “Yan”, which is Mr. Flageul’s Christian name, was given this responsibility. Another role was labelled “Financials/Accounts”. This responsibility was given to “GT”, which I infer is a reference to Mr. Taylor. Another role is given both to Mr. Flageul and Ms. O’Donovan, namely “Administration/Rostering”. Roles were also allocated to Mr. David Nicholson, who had been engaged by WeDrive to grow the Sydney market. That market included sales for New South Wales. Other aspects of this document are too faint to make out. In any event, Mr. Mace’s evidence was that at this meeting it was decided that Mr. Flageul was to oversee (and expand) existing operations in Victoria, and to target new corporate business in both the states of Victoria and New South Wales, in addition to dealing with obtaining contractors for the WeDrive business. One of Mr. Flageul’s key responsibilities, according to Mr. Mace, was to develop WeDrive’s technology for application to new corporate clients. I have no reason to doubt Mr. Mace’s recollection. It is corroborated by the C.E.O. report prepared by Mr. Flageul himself for WeDrive’s first board meeting (described below). In it he described his roles as being “Business development – Innovation”, “Technology – ICT”, and “Sales – Venues – corporates Melbourne.” In contrast, Mr. Taylor’s role was described by Mr. Flageul as being “Finance – Corporate Governance.” He was, in a sense, WeDrive’s chief financial officer (“C.F.O.”) and worked, it would appear, on a part-time basis. Mr. Flageul contended that because Mr. Taylor was not a full-time executive, it should be implied that Mr. Flageul had greater operational responsibility for WeDrive’s business. I decline to make that implication. WeDrive’s business was not large, and it was not shown that it needed a full-time C.F.O.

69    WeDrive had three directors. They were Mr. Flageul, and Messrs. Mace and Taylor. The impression I formed was that Mr. Mace, as a non-executive director, did not intend to perform any substantial executive work for WeDrive. He was content for the company to be run by Mr. Flageul and Mr. Taylor.

70    WeDrive commenced its business undertaking at the start of September 2017. Between that time and 21 December 2017, its earnings were unexpectedly low. Mr. Mace’s money was poured into developing the app and in paying salaries and other fees. A snapshot of its financial position can be discerned from a profit and loss statement drawn up for the month ended 30 November 2017, which included details of WeDrive’s financial performance in the preceding months. The statement showed that WeDrive incurred a net loss of $94,502 in the month of September, a net loss of $83,540 in the month of October, and a net loss of $120,687 in the month of November. The year to date aggregate net loss was $298,728 (which appears to reflect a rounding error of $1). Year to date income was $70,135 (which appeared to incorporate a refund of $70), including $29,880 of income for November. Mr. Russell recalled sales of $29,000 for November which was said to have been far less than a budgeted figure of $80,000. I find that the income was much lower than expected. I also note that WeDrive had year to date paid $45,045 in directors fees and $101,677 in “IT Expenses.”

71    From inception, Mr. Mace’s investment in WeDrive was not supported by his business partners. From May 2017, Mr. Barker was sceptical. He had tried to use the app to book a driver during that month. It did not work. Instead, someone called him to allocate a driver manually. He asked that driver whether the app usually worked to allocate drivers. He was told that everything was done manually. When he raised his experience with Mr. Flageul his concerns were brushed aside. He said he was told that only small technical improvements needed to be made. Mr. Barker warned Messrs. Mace and Taylor about his concerns. He did not want to be involved with WeDrive, but did agree to supply drivers from M.S.S. Transport if they were needed. Mr. Russell was also sceptical. He was concerned about the amount of money needed to develop the app in order to make it usable for M.S.S. Transport.

72    On 11 September 2017, Mr. Mace attempted to use the app as a test. When he went to log a job request, he persistently received a message stating that all of the drivers were busy and to call a phone number to make a booking. He then sent the following email to Messrs. Flageul and Nicholson, with a copy to Mr. Taylor:

Hi Gents,

Just tried to use the service and got this. What is this?

Surely the drivers are available and the system auto logs the jobs?

73    Mr. Flageul replied by explaining that full automation for “ASAP bookings” would be implemented in “stage 2”, with completion before mid-October. Mr. Mace responded with the following:

I thought this was part of the system ‘working’ before settlement…

74    Later in September 2017, Mr. Mace tested the app again. This time it appeared to work. But Mr. Mace subsequently found out from Mr. Flageul that on that occasion, once again, some form of manual intervention had taken place to get a driver to him. Mr. Mace became significantly concerned.

75    By early October 2017, tensions between Messrs. Flageul and Taylor began to appear. A very heated telephone call took place between them on 2 October 2017 which I describe below. In particular, Mr. Flageul was of the view that the business was not doing as well in Sydney but that this was not his fault. On 4 October 2017, Mr. Taylor sent Mr. Flageul an email about this issue in which he referred to Mr. Flageul using the “wrong tone and in which he asked him to be “more professional and balanced.” Mr. Taylor wrote:

Your qualitative feedback is also the wrong tone speaking with an US versus THEM approach with Sydney and Melbourne.

Yes a CEO monthly report is required though please try to make it more professional and balanced.

76    Mr. Flageul responded by saying that he was “disappointed” with the suggestion of a lack of professionalism. He wrote:

I am disappointed to read your reference to lack of professionalism.

It is simply a Sydney and Melbourne division that is essential to correlate with the performance based scheme you and Steve initiated and WeDrive’s strategic plans.

WE (as all of US) are yet to see any result from Sydney hence the obligation I have to highlight this with maximum clarity.

77    Mr. Taylor responded by observing that this was yet another disappointing email and that he did not want to get into a “slanging match.” He wrote:

Yan

Another disappointing email. I STRONGLY suggest you stop sending these emails and we organise a discussion because you are only making things worse for yourself.

I am not getting into a slanging match. Though your one sided comments below further highlights [sic] my point. There are many issues that need to be addressed and they are not only Sydney related.

Enough

These emails are illustrative of the growing tension between Messrs. Taylor and Flageul.

78    In October 2017, Mr. Taylor raised a possible investment in or partnership with a business known as Ugo Transfers. Mr. Mace asked Messrs. Barker and Russell to look into it. Within days, however, the focus turned to a possible merger between M.S.S. Transport and WeDrive. Mr. Mace said in cross-examination that drastic changes were by now needed because “the financial performance of the business had fallen off a cliff within one month of taking over.” He listed some of his objectives in an email sent to Messrs. Taylor, Barker and Russell using Mr. Mace’s M.S.S. Group email address. Mr. Flageul was not copied in on this email because Mr. Mace said that his thoughts were just possibilities that he wanted to raise first with the M.S.S. Group executives before consulting with Mr. Flageul. Those objectives included the following:

1.    Ensuring MSS Group as a minimum retain their 75% benefits from MSST and now WeDrive (given they will be absorbing the running and the losses of WeDrive); and

 2.    The revised restructure includes hard, but necessary in my view, changes; and

 *    [Ms. O’Donovan] replaced as sales resource in VIC; and

 *    [Mr. Nicholson] replaced as sales resource in NSW; and

 *    No requirement for WeDrive board of directors (& associated fees)

 3.    Existing MSST budgets will not be impacted negatively by any transaction

The email then stated:

I understand there are some blunt statements/changes but I think we all agree time is of the essence and we need to move forward with haste and in the best interest of the best interest of the business. [sic]

79    Subsequently, a slideshow outlining a proposal for a merger between WeDrive and M.S.S. Transport was prepared at the end of October 2017. Under a heading entitled “Proposed Operational Structure”, one slide identified Mr. Flageul as the “Client Solutions Manager” of the merged business, with Mr. Barker identified as its managing director. In another slide the future directors of WeDrive, shown as a subsidiary of M.S.S. Transport, are listed; they do not include Mr. Flageul, although there appears to be provision for an additional director to be appointed. In cross-examination, Mr. Mace emphasised that the slides were prepared for the purposes of discussion only. He said at that time it was possible that, if the merger had proceeded to completion, Mr. Flageul might have been appointed as the additional director.

80    In another slide there appears two estimated valuations of WeDrive. The first, labelled “Post capital raising valuation”, records that WeDrive was worth $1,600,000 (being the figure used in the Memorandum of Understanding). In another, labelled “Using Tech multiple”, it was recorded that WeDrive was worth $1,338,000, based on a chosen multiple. At the bottom of the slide the following notation appears:

NB: It should be noted that the business would need to prove to the market this is a technology led business as opposed to a services business…

81    Another slide sought to record the “Current EV”, or enterprise value, of the shares held by, amongst others, Mr. Flageul in WeDrive. That value was recorded as being $320,000. The slide then lists a series of conditions or qualifications. One of these was as follows:

Valuations are not warranted and should be reviewed in detail and satisfied by each individual.

82    Mr. Flageul sought to rely upon these estimated valuations as proof of the value of the WeDrive business and his stake in it. In cross-examination, Mr. Mace said that the figure of $1,600,000 did not reflect the actual value of WeDrive and that the figures generally came from Mr. Taylor. Mr. Mace said the figure of $1,600,000 had originally been deployed as a measure to divide up the proposed shares of each investor in the newly merged business. He said that the figures disclosed in the slide show were based upon a lot of “ifs.” In cross-examination Mr. Taylor said the figure of $1,600,000, as used in the Memorandum of Understanding, was “derivative of what the required capital was and what the required percentage holding of the respective parties would be.” Mr. Russell was also asked about these numbers. He said that the multiple used was “laughable and not really worthy of discussion.” Mr. Barker did not regard the estimated values as being realistic “in any way, shape or form”. He was unconvinced by them. That was because he did not think that the WeDrive product worked. In my view, the estimated values set out in the slides are not evidence of the actual value of WeDrive as at the end of October 2017 (or indeed as at the date of Mr. Flageul’s dismissal). Rather, the disclosed values were no more than rough estimates deployed for the purposes of facilitating initial discussions for a possible merger between WeDrive and M.S.S. Transport, and no more.

83    On 10 November 2017, the board of WeDrive held its first meeting. The board unanimously approved the pursuit of a merger with M.S.S. Transport. Mr. Flageul’s evidence was that from this point onwards the merger was definitely going to proceed. Whilst he accepted that there were certain formalities that would need to be observed to complete the merger, in his mind the concept of a merger was, to use his language, a “done deal.” Messrs. Mace and Taylor did not agree with this evidence. They both were of the view that a merger with M.S.S. Transport was far from being a foregone conclusion. The minutes of the meeting of the board perhaps give the most accurate record of what the board agreed. They record the following:

[Mr Mace] presented the Merger Proposal between WeDrive and MSS, documented attached. The Board unanimously voted in favour of the Proposal and agreed to move to documentation and implementation stage.

84    Mr. Flageul asserts that he was assured at this meeting that he was going to be the C.E.O. and a director of the merged business. He states that if this had not been so, he would have voted against the merger. Mr. Mace denied that this assurance was given.

85    For the purpose of this board meeting, Mr. Flageul circulated by email his first C.E.O. Operations Report. It set out what WeDrive was currently “delivering” as follows:

-    Designated driving services to both individuals and corporations

-    Valet parking services at sporting events

-    Technology for venues to place booking on behalf of their clients

-    Technology for Lexus to place booking on behalf of their clients

-    Technology for corporations to self-manage corporate accounts and respective corporate users.

86    The report noted that in Melbourne there had been a very slow start but that sales had since increased significantly. Sales had not, however, improved in Sydney. The report also described the difficulty of finding suitable drivers. Driver recruitment was low and problematic.

87    On 10 November 2017, a boxing match was held at the Cronulla Sutherland Leagues Club. One of the boxers, a Mr. Paul Gallen, was apparently well known in Sydney. Through the intervention of Mr. Mace he had secured an agreement between WeDrive and the Cronulla-Sutherland Sharks (which I understand to be a club committed to the sport of Rugby League), for the “Sharks” to use WeDrive’s services. In the period leading up to the match, Mr. Gallen had been promoting the use of the app. It was expected that the app would be used at the boxing match. This was thus an important moment for WeDrive’s business in the Sydney market. Mr. Mace had understood from either Mr. Taylor or Mr. Nicholson that Mr. Flageul had arranged for “countless drivers” to be available. However, the app failed to work or said that there were no drivers available. Accordingly, WeDrive apparently failed to conduct a single job on the night. Mr. Mace, in the weeks following, received constant criticism about WeDrive. Mr. Flageul said that no-one told him about the complaints. He said WeDrive did not have enough drivers, and that when a driver was not available, the app was designed to refuse the booking request. He said that the deal between the “Sharks” and WeDrive was impossible to deliver and he asserted that “[a]ll parties were aware of this concern.” However, there is no contemporaneous evidence which supports this contention.

88    On 13 November 2017, Mr. Mace sent an email to Mr. Flageul (copied to “all parties”) to pass on a complaint that he had received from a customer in Victoria. Mr. Mace also complained that he had understood that the business needed only an investment of around $25,000 to $30,000 to stabilise the app. Instead, over $100,000 had been spent and the app still did not seem to work. He wanted the following feedback:

1) how come we’ve spend more than 3 times the represented amount; and

2) still have stability issues; and

3) estimate (cost & time) of future investment to achieve system stability

89    Mr. Flageul replied by saying about $68,000 had been spent on other projects approved by Mr. Taylor. On that basis he considered that “[w]e are therefore roughly within projected …budget.” He said that the customer complaint was not about the stability of the app but concerned “user experience (UI/UX) – feel and flow”. This led Mr. Taylor to send the following stinging email back to Mr. Flageul:

Yan your reply below is disappointing and quite simply misleading.

Let me start with a definition of accountability…

90    Mr. Taylor rejected the proposition that the customer complaint was not about the stability of the app. He wrote that it was “a reflection of how the app has been designed and delivered since inception even after an additional $100k of spend, in which you driven and had your recommendations and priorities approved [sic].” He said that the app was a “business loser”. He thus wrote:

[Q]uite simply, the current WeDrive app should never have been in the state that it is considered a “business loser” especially in the context of how it has been consistently portrayed since our initial discussions that involved [Mr. Mace] and I and even [Mr. Barker] in the early days.

We now have [Mr. Mullins] on board to provide a balanced view on the technology, which will be useful to all stakeholders.

Mr. Mullins was an information technology contractor used by the M.S.S. Group.

91    Subsequently, on 15 November 2017, Mr. Mace again emailed Mr. Flageul about the budget blowout. He wrote:

We can go through in more detail tomorrow. I appreciate I am ITC illiterate but I just want to understand;

1) where the actual $30k represented blew out to $100k; and

2) why we still have stability issues; and

3) cost to ensure stability; and

4) list of desired enhancements, estimates and ROI

See you in the morning.

92    Mr. Flageul replied by observing that “stability is all about exactly that … to stay stable and unchanged. When one adds any new feature, then the stability is compromised and requires work to re-establish … stability.” In one of his affidavits, Mr. Flageul asserts that he never said that $100,000 would be needed to stabilise and develop the app in order to make it fully automatic; I note, however, that Mr. Flageul’s reply email does not say this. Notably also, Mr. Flageul’s email does not contain any denial that Mr. Flageul had made a representation to Mr. Mace that $30,000 was all the funding that would be needed.

93    Throughout November and early December 2017, the M.S.S. Group undertook a form of due diligence of WeDrive to determine whether some type of merger with M.S.S. Transport was feasible. This was largely conducted by Messrs. Russell and Barker. Mr. Barker was open to a merger with WeDrive. He had been told by Mr. Mace that the business had been losing money. Nonetheless, initially at least, he thought that a merger might be promising. Indeed, by mid-November an “in principle” merger had been agreed to. In contrast, Mr. Russell had no real interest in WeDrive, and was only prepared to investigate a merger as a “favour” to Mr. Mace.

94    The type of merger changed during this period. Instead of a formal legal merger resulting in one legal entity owning both businesses (which the M.S.S. Group rejected at some point) a synthetic merger was considered. For that purpose, Messrs. Barker and Taylor examined the possibility of a back office “merger” of WeDrive and M.S.S. Transport in order to find cost savings and efficiencies that might help prop up the WeDrive business. In that respect, it would appear that because the word “merger” continued to be used by the parties, Mr. Flageul may have laboured under the misconception that the original proposal considered by WeDrive’s board on 10 November 2017 was still being pursued. In any event, Mr. Barker assumed a leadership role in trying to “salvage” what was left of WeDrive. Whilst in cross-examination he professed to have taken over as a new C.E.O., no such formal appointment was ever made and no other M.S.S. Group witness corroborated this claim. Perhaps, like the inapt use of the word “merger”, Mr. Barker had misunderstood his role. The evidence, nonetheless, shows him guiding WeDrive’s business, save for issues concerning information technology. These were the concern of Mr. Russell. The shift to this different type of “merger” originated, so it would appear, from an email sent by Mr. Mace to Mr. Russell on 15 November 2017 which is in the following terms:

Agenda

* Merger summary, new structure and responsibilities (GT)

* Cultural Expectations (CR)

* Merged Co., MSST and WeDrive KPI’s (MB)

* Where are we today - ITC and operations (YF)

* Where are we today - sales (TT)

* Go to market plan (MB, TT, YF)

A) consumer

B) corporate

* Marketing (GT)

95    As a result of the investigations undertaken by Messrs. Taylor and Barker, Mr. Russell said he became very concerned about what he saw as “the money bleed.” On 20 November 2017, he sent Mr. Flageul an email to invite him to a meeting at which the following topics were to be covered:

1.    Current capability of systems

2.    Developments improvement in progress (when due and outcomes)

3.    All outstanding, but approved Development / improvements

4.    Any proposed and awaiting approval or prioritisations – business cases included and costings

96    A meeting with Messrs. Flageul, Russell, Barker and Mullins then took place on 23 November 2017. It was Mr. Barker’s evidence that at this meeting he realised that the app really required significant development and improvements before it could work automatically. Mr. Russell gave evidence that his impression was that many of the capabilities of the app were either incomplete or required significant investment. After the meeting, Mr. Flageul circulated an email in which he set out a summary of priorities and actions. Mr. Russell responded by saying that all works that had already been commenced were now “ON HOLD”. He wrote as follows:

To be very clear, the actions out of yesterday as discussed during day [sic] and again in my wrap up.

1.    All works that have not commenced are now ON HOLD. Nothing new to commence into the below [sic] has occurred.

2.    [Mr Mullins] to send across his notes to [Mr. Barker] on all projects or mods mentioned during days discussions

3.    Yan to meet with contract point and put a value to all small projects along with larger ones. Yan to also scope up with [Mr. Mullins] two additional projects identified yesterday as important.

The outcome Yan needs to send back to [Mr. Barker]

1.    a list of all projects in progress. Finish date, go live date, current cost and what’s left to pay.

2.    a full list of all projects, no matter what size, a firm price for big ones and a approx costs [sic] for the under $2000 items.

3.    scope up new items identified yesterday with approx costs

4.    [Mr. Barker] to discuss with [Mr. Taylor] what has been taken up in current financials and what we have left in proposed budget for 2017/l8

5.    [Mr. Russell] and [Mr. Barker] to define business strategy and products to insure [sic] IT investments matches strategic initiatives. To be approved by MSS stakeholders and board.

6.    Matt to issue consolidated minutes / notes from yesterday once all updates received

7.    follow up meeting, conference call for next Thursday to ‘start’ to prioritise works based in business strategy, marketing plans and business priorities and budgets. NO priorities where agreed yesterday, just discussed.

97    Mr. Russell subsequently discovered that WeDrive had outstanding invoices from Contact Point which had remained unpaid in the sum of $58,680.

98    On 6 December 2017, Mr. Mullins sent an email to Mr. Russell which informed him that “WeDrive/MSS” needed to take ownership of the account where the code for the app was stored. Mr. Russell agreed that this needed to occur. Mr. Mullins then sent the following email on 8 December 2017 to Mr. Flageul seeking migration of the code to the M.S.S. Group:

Hi Yan,

Would it be possible to include me in the next meeting you have with Contact Point? I’d like to be part of the technical discussions to start preparing for the transfer of development to our team. With the projects due to be completed in the next 2 weeks I don’t see a great risk in Contact Point becoming disengaged.

On Monday, I’d like to contact them and request for them to migrate the code repository into the new GitHub account which I have created under MSS Group’s name. We will need to invite their developers to the account and they can transfer the code into it. That way you’ll always be in control of the code.

The MSS Group repository is setup using the MSS IT Admin account mss_adm@mssgroup.com.au which Paul Hughes and I have access to.

99    On the same day, Mr. Russell sent an email to Messrs. Mullins and Taylor which asked for a full copy of the code to be obtained. On 11 December 2017, Mr. Mullins then sent an email to Ms. Heather Maloney of Contact Point requesting access to the WeDrive source code repository. Ms. Maloney replied on 13 December and said that Contact Point could only give conditional access to the code because all development of the software since Contact Point’s engagement, and which had utilised Contact Point’s “pre-existing codebase”, was “obviously … the IP of Contactpoint.” Ms. Maloney wrote:

However, the software is provided on the basis that:

1.    It is provided purely for the purpose of access in the event of Contactpoint no longer having a business relationship with WeDrive, and WeDrive having fulfilled all contractual obligations with Contactpoint.

2.    It will not be accessed for the purpose of creating “derivative works” based on the code.

3.    It will not be distributed to any other party, nor displayed to any other party e.g. via a website or code repository.

Whilst the copyright in the software developed prior to the engagement of Contactpoint is not our intellectual property, all development since has utilised our pre-existing codebase and IP, and obviously is the IP of Contactpoint. It goes without saying that the IP in the concept / business model is of course solely owned by WeDrive.

100    Mr. Mullins replied by email very early on 14 December 2017 to ask whether there was some form of agreement between WeDrive and Contact Point concerning the ownership of intellectual property. He wrote that it was his understanding that WeDrive owned all the “IP in use”. The email states:

In regards to “all development since has utilised our pre-existing codebase and IP, and obviously is the IP of Contactpoint” was there a Development Agreement between WeDrive and ContactPoint which covers the ownership of IP? We’ll need to understand which components you’re referring to. This one is a little surprising as we’re under the impression that WeDrive own all the IP in use and see the development completed so for as providing WeDrive with a strategic advantage over competitors and would have expected the code to be unique to that of WeDrive’s requests for proposal.

(Emphasis in original.)

101    Ms. Maloney responded by email (with a copy to Mr. Russell) and explained that WeDrive and Mr. Flageul (which I infer was intended to be a reference to WeDrive Australia) did have an agreement which addressed ownership of the intellectual property. It was the contract I have described above. Ms. Maloney wrote:

Yes, we have an agreement with Yan – our standard terms and conditions cover this IP ownership arrangement.

With regard to the IP ownership, I’m sure you can appreciate that part of the advantage that Contactpoint brings to our clients is a body of code and domain experience that we have developed over the years, and continually enhance, which enables us to provide value to our clients and efficient services. That is why we must retain ownership of IP, because it is also used in previous clients’ projects.

As per our T&Cs, WeDrive will have a perpetual and transferrable license to use the IP but not to become vendors of software or re-purpose software, or make it publicly available for others.

102    Mr. Russell promptly emailed Mr. Mullins and wrote: “In English? I’m struggling with what below [sic] means.” Mr. Mullins wrote back to say that it looked like there was an agreement “of sorts.” Importantly, he also wrote that, as a consequence, WeDrive/MSS “can’t re-sell the code as a product with their code in it.” Mr. Russell replied: “[t]hat means, Yan shouldn’t have sold it to [Mr. Mace] either??”

103    Earlier, Mr. Flageul had separately responded to Ms. Maloney’s first email in which she had declared Contact Point’s ownership of the intellectual property. He wrote: “[a]greed by me as industry standard safeguard.” This led to a response sent by email by Mr. Russell as follows:

I’m unsure what your saying in below email, Are you agreeing with Heather that Contact point owns the IP in your opinion for all works done on the code since they took over? So in essence they own part of WeDrive code??

I would have assumed they where on an hourly rate for delivery the scopes you gave them and a fee to secure the code in there house. This is confusing.

Can you please confirm, as per my request and [Mr. Mullin’s] email, what exact legal instrument You have for this arrangement (if not one in place, any emails in not), a copy of the NDA also please. [sic]

If you could respond clearly we can discuss later this morning as running to a meeting now.

104    By email sent on 14 December 2017 by Mr. Flageul to Mr. Russell (and copied to Messrs. Barker and Mullins), Mr. Flageul confirmed Contact Point’s ownership of the relevant intellectual property. He wrote:

What it means is that Contact Point have used some of their know-how and pre-made codes to build our technology. This know-how and bit-strips of codification would be documented and evidenced to prove it was created by Contact Point prior to WeDrive engaging them in a contract.

WeDrive owns the entire IP including these pre-made codes. The IP ownership can be transferred / sold to another company providing that the purpose of the technology is not changed to a point where it has nothing to do with the nature of WeDrive business logic and/or existing technology.

This is to prevent us from creating our own tech development company and use their know-how and pre-made codes to create and sell other products.

I hope this clarifies.

105    Mr. Russell did not immediately tell Mr. Mace about this ownership issue because Mr. Mace was due to celebrate his birthday over the weekend; Mr. Russell did not want to “wreck” his celebration. However, he did inform Mr. Barker.

106    During his cross-examination, Mr. Flageul accepted that his relationship with Messrs. Barker and Russell got “worse” because he had not disclosed Contact Point’s ownership of the relevant intellectual property. The following exchange took place:

And I suggest to you that the reason it got worse from this point onwards was because the investing parties in WeDrive thought that they had purchased all the IP in the app; do you agree with that?---Yes, it could be. It could be. Yes. No, look, as we discussed earlier, I totally agree with the fact that back in May 2017 I should have been a lot more careful. I agree with that. But it was never misleading nor known to me that I was misleading anyone. That’s my point. My point is that it was a mistake back in 2017, May 2017 when I was – I was young ..... When this came to light in one day I actually fixed the problem on the 18th or 19th - - -

107    Messrs. Russell and Barker met with Mr. Mace on 18 December 2017. They told him about Contact Point’s ownership of the intellectual property. They also told him that they were no longer prepared to go along with the merger. Mr. Mace was very disappointed. He instructed his solicitors to prepare a necessary Deed of Assignment and Release between WeDrive and Contact Point. When cross-examined, Mr. Russell explained what he said to Mr. Mace in the following startling terms:

I met with him at a café in Cronulla. I told him I had found Yan impossible to deal with. I found their insolvency issue, I found the application didn’t work, and I also had major issues about the expenses – the financials and misrepresentation of financials and stuff. So the reality is, I told him on the Monday morning this is a disaster even from us trying to help you clean it up point of view. That is what led, I think, to Steve writing that email to try and come up with another solution to salvage the money he had already invested and, in what we could see in the coming months, the business being completely insolvent.

The email referred to by Mr. Russell is explained below. I otherwise accept the truth of this evidence.

108    At about this time, Mr. Mace received WeDrive’s profit and loss statement for the period 1 September to 30 November 2017. Mr. Mace observed that this document disclosed an overall loss of almost $300,000 for that period. For the month alone of November, the loss was $120,687.

109    Mr. Taylor had a telephone conversation with Mr. Flageul on 18 December 2017. The nature of that conversation is disputed. Mr. Taylor said that during this conversation he asked Mr. Flageul for the code for the app. Mr. Taylor said that the code was owned by WeDrive and that it was going to become a problem if it could not access the code. He said that Mr. Flaguel said he “appreciated what [Mr. Taylor] was doing and he would try to get to the bottom of it”. But according to Mr. Taylor, Mr. Flageul did not like the tone of his voice. According to Mr. Flageul, this was because Mr. Taylor was shouting at him. Mr. Flageul said he was threatened with these words: “stop playing games with us or you are going to make it very difficult for yourself very soon…” He said his integrity was questioned. On the same day, Mr. Flageul sent an email to Mr. Mace (described in more detail below) informing Mr. Mace that Mr. Taylor had questioned his integrity and had threatened him. Mr. Flageul’s version of what took place was not put to Mr. Taylor in cross-examination.

110    In these circumstances, I am prepared to find that the conversation between Messrs. Taylor and Flageul was considerably heated. I will also accept that Mr. Taylor questioned Mr. Flageul’s integrity as this is corroborated by the email, Mr. Flageul sent on the same day to Mr. Mace. I also accept that Mr. Flageul honestly thought that Mr. Taylor was threatening him. Again, this is corroborated in the same email, although the nature of the threat is not specified. Given the high emotion of this telephonic exchange, Mr. Flageul may have misinterpreted what Mr. Taylor was saying to him. A strongly worded demand for the production of the code, might easily have been treated by Mr. Flageul as some form of threat. I daresay that Mr. Taylor was very angry to discover that Contact Point retained ownership of the intellectual property. I also find that his relationship more generally with Mr. Flageul by this time was strained; the strain got worse as a result of the news about Contact Point. I am not otherwise prepared to find that Mr. Taylor threatened Mr. Flageul in the specific way he suggests. In the absence of some further corroboration, given Mr. Flageul’s interest in the outcome of this proceeding, and given my observations, made earlier, about his performance in the virtual witness box, his testimony alone is not a sufficient discharge of his onus of proof.

111    On the next day (19 December 2017), Mr. Flageul had another heated telephone conversation, this time with Mr. Mace. Mr. Mace candidly admitted that he told Mr. Flageul that he was “absolutely filthy” because Mr. Flageul had signed the Business and Asset Purchase Agreement stating that WeDrive Australia owned all of the relevant intellectual property when it in fact did not. Mr. Mace said in cross-examination that he “was pacing up and down the street”. He was “fuming.” He also said that Mr. Flageul said to him that he did not know that signing the contract with Contact Point would give it ownership of the relevant intellectual property, that he was sorry and that hewould “fix it.” Mr. Mace said that he told Mr. Flageul that Contact Point had to assign the necessary intellectual property to WeDrive. Mr. Flageul’s version of this conversation is different. He said that he was told by Mr. Mace that if he did not get Contact Point to assign the intellectual property he “would sue [Mr. Flageul] for $300,000 and run [him] to the ground.” This particular alleged statement was not put to Mr. Mace in his cross-examination. It is not otherwise corroborated. In such circumstances, I find that this telephone conversation was probably very heated, but again I do not otherwise find that Mr. Mace threatened to sue Mr. Flageul or run him to the ground. I do note that in cross-examination, Mr. Flageul conceded that Mr. Mace had good reason for being unhappy. He said:

But I would agree that yeah, he had matters for being unhappy. That, I can’t disagree with. That’s fair enough, because yeah, I made a mistake. So – but I promised to him that I was going to rectify that on the day, and I did.

112    Mr. Mace says that he then contacted Ms. Maloney of Contact Point. She ultimately agreed, he said, to an assignment of the intellectual property needed fully to exploit and develop the app to WeDrive. The stated consideration in the Deed of Assignment and Release ultimately entered into by Contact Point and WeDrive on 19 December 2017 was only $1. In his first affidavit, Mr. Flageul gives hearsay evidence of conversations between Mr. Mace and Ms. Maloney that were said to have taken place in 19 December 2017. Given that he did not call Ms. Maloney to give evidence, I place no weight on that evidence. Following acquisition of the outstanding code by WeDrive, Mr. Flageul asked Mr. Russell if the “Contact Point commenced tasks [can] resume.” Mr. Russell replied that this work was “[s]till on hold until further review and updates provided today.”

113    On the same day (19 December 2017), Mr. Mace sent an email to Messrs. Russell, Taylor and Barker as well as to Mr. Flageul, calling for a WeDrive board meeting in two days (21 December 2017). He proposed an agenda which included, I infer, a proposed discussion of Mr. Flageul’s behaviour. The agenda items were as follows:

1.    Behaviour (SM)

*    Non disclosures

*    Communication

2.    Code/IP/Contact Point (SM)

3.    Results (GT)

4.    Sales (CR)

5.    ITC spend breakdown YTD (CR)

*    Summary in excel

Copy of every invoice with detail

*    Proposed projects with estimates and benefits

6.    Operations Update

*    Drivers (MB)

7.    Short term strategy moving forward

8.     Long term strategy and the process

114    Mr. Mace wrote that Messrs. Russell and Barker would attend as observers on behalf of the Mace interests. He also asked that the meeting be kept “factual and respectful at all times.” This email attached the profit and loss statement referred to above for WeDrive. It also attached a balance sheet for the months of 30 September through to 31 December 2017 (the last month, I infer, was an estimate). As at 30 November 2017, the assets of WeDrive included cash at bank of $171,313, nil current assets, and fixed assets of $6,752. In contrast, its liabilities were booked at $69,693. I infer, given WeDrive’s poor financial performance, that the cash at bank represented the remaining money injected into the company by Mr. Mace. The balance sheet also shows that the loss of earnings of $298,728 as at 30 November 2017 was expected to grow to $335,559 by the end of December. In other words, but for the cash invested by Mr. Mace and deposited at the bank, according to the accounts WeDrive was already hopelessly insolvent. Because of the “money bleed” observed by Mr. Russell, even with the cash at bank I accept that there was a real risk that WeDrive would have been actually insolvent by January 2018. In cross-examination, Mr. Flageul sought to impugn the accuracy of these accounts. But he produced no material to contradict their contents.

115    In his closing submissions, Mr. Flageul also submitted that the concerns held about WeDrive’s solvency were “contrived.” He sought to rely on accounts, and other documents, prepared well after the termination of Mr. Flageul’s employment, to contend that WeDrive was solvent in December 2017. Technically, that was so, but only because of the cash at bank. WeDrive’s profit and loss statement otherwise showed the incurrence of the losses I have already described.

116    On 20 December 2017, Mr. Mace sent another email to Messrs. Russell and Taylor (but not to Mr. Flageul) entitled “MSS / WeDrive Moving forward”. By this email, Mr. Mace sought confirmation from Messrs. Russell and Taylor about the following “revised take over economics of WeDrive”:

1.    No longer a Merger – by this I mean MSS will not being merging their transport business in to a jointly beneficial vehicle

2.    MSS Group to acquire 100% of WeDrive Pty Ltd (assets, liabilities, future trading and current cash on hand)

 3.    Settlement 1 /1 /18

 4.    Revised economics as per below

117    What followed was a plan for the “full acquisition” of WeDrive by M.S.S. Transport and the issue of certain “W” class shares. Under this plan, Mr. Flageul’s original proposed 7.5% shareholding in a future merged entity, was reduced to two tranches of “2.5% of EV above $2M if WeDrive is divested and [Mr. Flageul] is working in the business” and “2.5% of EV above $10M is WeDrive is divested and [Mr. Flageul] is working in the business.” Mr. Barker was recorded as getting “5% of EV above $0 if WeDrive is divested and [Mr. Barker] is working in the business”.

118    Importantly, the email then states that the foregoing changes were the result of WeDrive not being in a “standalone position to trade solvently from early January/February 2018”; that there had been “[s]ignificant misrepresentations about code accessibility and IP ownership”; that there had been misrepresentations about both “technology functionality” and the cost to achieve functionality; that there had been non-disclosure by Mr. Flageul of a new larger competitor in the market that he had been “monitoring for a long time”; and that there had been significant understatements of “the current trading loss run rate.”

119    Mr. Mace was cross-examined about this email. This is what he relevantly said (the references to “Yan” are to Mr. Flageul):

And at this point in time we’re now down to the point where we have had – we’re getting to the point where – we’re at a head now – it’s a solvency issue. There was no way I was going to put any further capital into this business. Yan’s ethics and conduct, in my view, could have been terminated for any one of those reasons let alone all of them combined and my primary focus was solvency and keeping people in jobs. So this was, again, a point of discussion for the next board meeting in December. You can’t have a business that – it can eat through that capital in – in a matter months after takeover when it was – it only needed $8000 a month. So – and a – and a way – a way of doing that is a potential W class share where it was absorbed into the business into the – as I say, it’s 100 per cent takeover. A lot of the expenses could be absorbed into the wider MSS business and I was still – still prepared to have an olive branch out there in a special class of share with WeDrive as W class shares – WeDrive shares, that if the business could have actually performed like the representations which he originally gave from the outset, that I would still reward Yan. But clearly – clearly what he – what he had represented at that point was not the case but I was still trying to do the right thing, even by Yan let alone all the employees and keep the business running. So – yes, that – that is a proposal that I was trying to get the MSS team to – to get on board with.

In all the circumstances, I accept the truth of the foregoing evidence.

120    An attempt was made before me to downplay the concerns held at this stage by Messrs. Mace and Taylor about the ownership of the intellectual property. After all, it was said, the problem had been fixed when Contact Point assigned the relevant intellectual property to WeDrive. It was also said that the whole event had been a “storm in a teacup” and that it had been irrational to dismiss Mr. Flageul on this basis. With great respect, that observation misses the point. The issue concerning the ownership of that intellectual property was emblematic of a much more significant problem that existed with Mr. Flageul; Messrs. Mace and Taylor, I find, had simply ceased to trust him. The ownership issue merely brought that simmering issue to the boil. As Mr. Taylor said during his cross-examination:

It’s the case by then, isn’t it, that there was no real problem anymore with Contactpoint because a settlement had been reached with Contactpoint on 19 December. You were aware of that, weren’t you, that contact point had signed a deed under which it assigned any rights in might have in the software to WeDrive Proprietary Limited?---Again, I was not party to that, but I understand that had occurred. But I believe the key point was around integrity, trust and relationship. Because what that inferred was – not only inferred, what had been very clear was Mr Flageul had misrepresented his ownership, failed to disclose and was not acting in the best interest of WeDrive Proprietary Limited through that process. So that I was – so it’s not simply a matter of, “Let’s forget about all the ethical and legal issues. There’s – we’ve fixed them now, so let’s pretend it didn’t happen.” It was all – the whole context was very important, not just the actual ownership and restatement of the ownership of the rights.

(My emphasis.)

In all the circumstances, I accept the truth of this answer.

121    On 20 December 2017, Mr. Taylor discussed the 20 December 2017 email with Mr. Mace. They considered terminating Mr. Flageul’s employment. In cross-examination Mr. Taylor said:

Now, can I ask you whether there was any discussion on the phone of the intention on the next day, which was to be the – which was, in fact, the 21 December board meeting, whether there was any discussion on the phone of an intention to terminate Mr Flageul’s employment on the next day?---Yes. We had raised concerns about his operating performance; the major concern about the issue around the ownership and access to the IP that had arisen over recent weeks, and the frail financial position that WeDrive was in and ability to fund a – what was a several hundred thousand dollar a year chief executive that was not performing to – to expectations both quantitatively and qualitatively. So, yes, that was raised and I also think it’s important to note here at this point and this sequence is I – I’ve effectively agreed to having no – the business having no value in my – and having no shares in that business and stepping away from the business so it was not just Yan, it was also myself that was also being requested to (1), I conceded my equity share, and (2), I – I – it was been agreed that I would also be removed from the business for the reasons outlined so it was entirely consistent. So I’m not running the business at this point. I’m not making the decisions; hopefully that’s very clear.

122    Mr. Taylor went on to give evidence that he did not know whether Mr. Flageul’s employment would be terminated the next day. It depended, he said, on Mr. Flageul’s response to Mr. Mace’s proposed changes.

123    On 21 December 2017, the board of WeDrive met in Sydney. Immediately prior to this board meeting, Messrs. Mace and Taylor met Mr. Flageul. At this meeting, Mr. Flageul was dismissed as WeDrive’s C.E.O. What occurred at both meetings is disputed.

124    Mr. Flageul did not appear to have any recollection of the first meeting. He gave evidence that the termination of his employment took place at the board meeting. Although it perhaps does not matter, Mr. Flageul also contends that he was dismissed as a director of WeDrive. Mr. Flageul accepts that Mr. Mace told him that the reason for his dismissal was his failure to disclose Contact Point’s ownership of the relevant intellectual property. Mr. Flageul describes this in his third affidavit as follows:

Steven Mace informed me that the reason for my dismissal was my alleged failure to disclose the ownership of the intellectual property in the WeDrive Mobile Application before and after the asset purchase transaction between WeDrive Australia and WeDrive Pty Ltd. I said that Greggory Taylor and Steven Mace should have made enquiries regarding the contract between WeDrive Australia and Contact Point.

125    Plainly, dismissing Mr. Flageul for the foregoing reason was legitimate and does not, for the reasons expressed below, constitute the taking of adverse action against him for the purposes of the F.W. Act. It follows, although this was not put directly to Mr. Mace, that Mr. Flageul’s case must rest on the proposition that Mr. Mace’s explanation for his dismissal was false.

126    Mr. Flageul also recalls that Mr. Mace told him that he would sue Mr. Flageul for loss or damage caused by the non-disclosure of the intellectual property ownership issue and further, that unless he was prepared to sell his 200 shares in WeDrive for $1, WeDrive would also sue him. Mr. Flageul said that he protested his innocence and said that he had complied with all requests during the due diligence of WeDrive Australia’s former business. Mr. Flageul gave evidence that Messrs. Mace and Taylor accused him of failing to disclose the true financial position of WeDrive Australia. Mr. Flageul said he never did this. He said that he was not responsible for WeDrive’s financial state. He said he was given 10 minutes to decide whether to sell his shares. He telephoned Ms. O’Donovan. He said he felt “confused and stunned.” He said he realised that he had no option but to sell his stake in WeDrive.

127    Mr. Flageul said potential multimillion dollar deals he had initiated with Crown Perth and B.M.W. Australia were discussed together with his engagement as an independent contractor of WeDrive to finalise these proposals. He said the board also discussed developing the app to compete with “Uber” and further developing WeDrive’s technology “across the MSS Group to create an integrated management system called WeSuite.”

128    Ms. O’Donovan gave evidence of what Mr. Flageul told her during their telephone conversation. Whilst I was prepared to admit her hearsay statements into evidence, I nonetheless do not think that they can usefully corroborate Mr. Flageul’s account of what took place. They have no weight. That is because she was not at the meeting. At best, they are only evidence of what Mr. Flageul told her at the time, and their probative value probably rises no higher than Mr. Flageul’s own testimony.

129    Mr. Mace has a distinct recollection of the pre-board meeting with Mr. Flageul and Mr. Taylor. This is what he remembers:

I said to Mr Flageul that although he had told us, prior to WeDrive Pty Ltd purchasing the business, there were trading losses, all of a sudden we are losing a hundred grand or more in single months which he had never told us. I said I was not prepared to keep funding it and I did not think he was a good fit to be the CEO of WeDrive Pty Ltd. I said he was either a fraud or incompetent, and complained about the ownership of the technology. Mr Flageul said he was really sorry and it should not have ended up like this. I said he may be able to sit on the board and no one could touch his shares, but his role as CEO was terminated.

130    The next day (22 December 2017) he sent Mr. Flageul an email attaching a letter giving Mr. Flageul notice of his termination as C.E.O. of WeDrive. That relevantly gave the following reasons for the termination of Mr. Flageul’s employment:

As discussed with you, the Company has been and continues to undertake investigations regarding your conduct as an employee of the Company and your dealings with respect to the recent transaction under which the Company purchased certain assets from WeDrive Australia Pty Ltd as trustee of the WeDrive Melbourne Trust (Transaction). In particular, the Company remains concerned about your failure to disclose material issues to the Company both before and after completion of the Transaction.

The foregoing is contemporaneous evidence of the reasons for Mr. Flageul’s dismissal as C.E.O. of WeDrive.

131    Mr. Flageul was given one month’s notice. The letter went on to state that until 22 January 2018 (the date his termination would come into effect), Mr. Flageul was obliged to continue his duties under his Executive Services Agreement.

132    In cross-examination, Mr. Mace maintained his version of what happened at this first meeting:

And at that meeting you told Mr Flageul that he was dismissed as chief executive officer of WeDrive Proprietary Limited, did you not?---No, that’s not correct. We – that didn’t happen at the board meeting. We had a meeting with Yan prior to the board meeting in which we went through his conduct, of all those items pretty much was listed in that other document, from, you know, not owning the code, misleading on the code component, the trading performance of the business, the – another big one that came from left field the – all these new expenses that come from left field. Yan admitted to paying for them on his own personal credit card prior to the transaction and because the business couldn’t afford them. Therefore, now that the business was under new ownership, it went through to business. You know, and trying to explain to them that the understating of expenses went to the value of the business. All these sort of things. That ultimately went – led to the – you know, the termination of him and cost control, since we were heading into to the point of solvency. So that happened before the board meeting and it was – it was absolutely done before the board meeting and, at the end of that, I said this doesn’t – this does not – has no reflection on shareholding and directorship at this point in time, but your role as chief executive, based on your conduct, yes. He was terminated prior to the board meeting.

133    Then there was this exchange:

After that conversation, do you say that Mr Flageul then attended a board meeting?---So after – after I went through the reasons why, he – he actually hugged me and then – and he did his usual way of greeting someone, he would kiss me on the cheek. And he apologised. He said that, you know, he can’t believe it went down this path. This is his whole life’s work. He’s, “Sorry, mate. I’m sorry, mate. I’m sorry, mate. I can’t believe it has got to this point.” And we told him to – actually, I think Gregg him to take a break. And so we had to get into the board meeting. And then we – then we walked back over to a sectioned-off area where we had, in the hotel, for the board meeting, of which we had invited guests to that board meeting, which was Matt Barker and Chris Russell, because it was key to the potential discussion of solvency, moving forward, and they had done some work on the due diligence of reducing down the costs base – it had just gone through the roof – and the IT bills. So that was the purpose of those guys being there, which Yan knew about, and Yan did not say a word about them being there. And we proceeded to have a board meeting.

134    Mr. Taylor’s recollection of this first meeting accords with that of Mr. Mace. He said that Mr. Mace told Mr. Flageul that he was “going to have” to be “let … go” because of Mr. Flageul’s “misrepresentations, performance and communication issues” which had been raised with him. He said that Mr. Mace told Mr. Flageul that WeDrive’s business had no money and that the intellectual property had no value. He also recalled that Mr. Flageul said he was sorry that he had let them down.

135    In his third affidavit, Mr. Flageul denied Mr. Mace’s account of what took place, although (as noted above) he accepted that the proffered reason for his dismissal was his non-disclosure of Contact Point’s ownership of the intellectual property. He denied he had ever said he was sorry; he denied that he was told that he might be able to retain his directorship. He then added some new evidence. He said he did not know that WeDrive was making losses because he had been denied access to the Xero accounting system (described below), although in cross-examination he admitted that he had access to the accounts I described above. He said that Mr. Mace had said to him “you are fucking fired.” As I understood it, Mr. Flageul said that Mr. Mace had told him that he could acquire WeDrive if Mr. Flageul could find someone with $300,000 to invest in the company. In cross-examination, Mr. Flageul admitted that Messrs. Mace and Taylor had complained to him at this first meeting about revenue being substantially lower than what had been forecast. However, in substance, he said this was not his fault. I reject Mr. Flageul’s claim that he did not know that WeDrive was making losses. He was sent WeDrive’s profit and loss statement and balance sheet when he received Mr. Mace’s email of 19 December 2017.

136    The second meeting held on 21 December 2017 was the WeDrive board meeting. Messrs. Russell and Barker also attended this event as observers. I do not need to repeat Mr. Flageul’s evidence-in-chief concerning this meeting which I have set out above.

137    Mr. Mace gave evidence that at the board meeting, Mr. Russell expressed no confidence in WeDrive. Mr. Russell said that its trading losses were higher than those disclosed in the accounts. According to Mr. Mace, Mr. Flageul responded by saying that he used to pay for lots of costs himself so that they would not “sink” into WeDrive Australia. Messrs. Russell and Barker both said they were opposed to any merger. Mr. Mace said he was not prepared to invest any more of his own money. He said that he offered to sell WeDrive to Mr. Flageul for $1, but Mr. Flageul declined this offer, saying “he could not afford to keep it afloat”. He made the same offer to Mr. Taylor, who declined and said “it would run out of money in a couple of days”. He then made this offer to Messrs. Russell and Barker. They said that they were “not keen” but would consider the offer over a couple of days. Shortly afterwards, they accepted the offer, provided that each of Messrs. Mace, Taylor and Flageul assigned their shares and stepped down as directors of WeDrive. The WeDrive board agreed to this proposal.

138    Mr. Mace also gave evidence that he never threatened to sue Mr. Flageul unless he transferred his shares. His memory is that he said he would have considered pursuing Mr. Flageul for his $400,000 if his lawyers had suggested he should do this. He also recalls telling Mr. Flageul to use his notice period to pursue potential clients for WeDrive as a way of mitigating the losses that had been incurred. He said Mr. Flageul was very apologetic and even kissed his cheek. He agreed that Mr. Flageul was given 10 minutes to consider what he wished to do with his shares.

139    Again, during his cross-examination, Mr. Mace maintained this recollection of what took place at the board meeting. Thus, the following exchange took place:

All right. Was there any mention of MSS acquiring Mr Flageul’s shares in WeDrive Pty Ltd for $1 on that day?---When no one wanted anyone’s shares, I said, “You could ask the MSS guys if they were interested?” To which they said they, “Would have to take it away and consider it, because of the trading performance of the business.” After the other shareholders rejected their shares to be sold for $1. Sorry. We all said – I said first, “Does anyone want my shares for $1?” And Yan said, “No.” And then, I asked Mr Taylor and he said, “No.” Mr Taylor then asked Yan, does he “want his shares for $1?” And he said, “No.” And Yan – Yan asked if we “wanted his shares?” And I said, “I don’t want your shares. I don’t believe in you and I don’t believe in this business any further. But the MSS guys might be able to salvage something. Do you guys have any interest?” At which point they said, you know, they huffed and puffed a bit and they said they “would have to take it away”. Because of what they have discovered, the financials were moving from month to month, they didn’t know what the impact would be, how much they would lose, to then try and turn the business around in the foreseeable months to whether it was even worth to even buy it for $1. That was the context of it and how it was said. So no I didn’t offer them a session to buy it for $1, no.

140    Mr. Taylor’s recollection was that at the board meeting Mr. Mace asked Mr. Flageul what he wanted to do. Mr. Flageul said he had no answers and was sorry. Mr. Taylor said that Mr. Mace expressed the view that WeDrive had no value and offered to sell it to Mr. Flageul for $1. Mr. Flageul declined this offer. Mr. Taylor recalls that Mr. Flageul was told to go for a walk or ring someone as Mr. Mace said that they were talking about “giving up on the business” and that it was a “serious decision”. Mr. Flageul did this. He returned and said he could not buy WeDrive. It was Mr. Taylor’s evidence that Mr. Mace said that the only options left were either a purchase of WeDrive by the M.S.S. Group or the placement of WeDrive into administration. Mr. Taylor recalls that Mr. Mace said that he would talk to Messrs. Russell and Barker to see if the M.S.S. Group would buy WeDrive. Mr. Taylor then announced his resignation as executive chairman and director of WeDrive.