Federal Court of Australia

Scott v Equatorial Launch Australia Pty Ltd (in liquidation) (No 2) [2026] FCA 788

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to provide proposed orders reflecting the Court’s reasons and any short submissions (of no more than three pages) in respect of their proposed orders to the Associate to Justice Dowling by 4:00 pm on 29 June 2026.

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

REASONS FOR JUDGMENT

DOWLING J

Introduction

1    Equatorial Launch Australia Pty Ltd (ELA) planned to establish Australia’s first commercial spaceport. It perceived a growing demand for rocket launches and had secured a lease over property in East Arnhem Land for that purpose.

2    Mr Scott Wallis was ELA’s founder and, from at least 2016, was a director and board member. In 2015 Ms Carley Scott was the Chief Executive Officer of Developing East Arnhem Limited (DEAL) which sought to facilitate investment and economic development in East Arnhem Land. In that capacity Ms Scott first met, and dealt with, Mr Wallis.

3    In late 2017 Mr Wallis discussed with Ms Scott the possibility of her taking up the role of Chief Executive Officer (CEO) of ELA.

4    From April 2018 Ms Scott performed work for ELA as a “contractor” in the role of CEO reporting to Mr Wallis. In August 2018 Ms Scott registered Aerospace Industry, Research, Management and Operations Pty Ltd (AirManOps). Ms Scott and Mr Wallis agreed that Ms Scott would invoice ELA under AirManOps for the contracting services she performed. Ms Scott continued to perform work for ELA as a contractor throughout 2018 and 2019.

5    The parties agree that in October 2019 Ms Scott and Mr Wallis agreed a Commitment Amount Contract (CAC). That contract provided for a commitment amount of $5 million, in $1.00 convertible notes, payable by ELA to Ms Scott, or an entity of her choosing, for work undertaken for ELA. The CAC provided a payment schedule for the staggered receipt of that amount over five years. The CAC recognised the start-up nature of ELA, the work already performed by Ms Scott, and her future commitment to ELA.

6    The CAC also provided that if the engagement of Ms Scott ceased for any reason after 30 April 2021 and prior to 1 May 2023, the full commitment amount would be payable to Ms Scott, provided certain funding hurdles were met and the payment did not place ELA in a position of insolvency. The parties are in dispute about whether the CAC was later varied or replaced so as to remove the funding hurdles, whether it was later replaced by an Employee Share Option Plan (ESOP), and the extent of the insolvency proviso. Ms Scott says that the CAC was varied to remove the funding hurdles, in writing, during a video call she had with Mr Wallis between March and July 2021 (the varied CAC, VCAC). She says she did not agree to replace her entitlements under the VCAC with an ESOP.

7    The parties agree that in November 2019, Ms Scott and ELA entered into an employment contract for the employment of Ms Scott as ELA’s CEO. Her employment commenced on 22 November 2019. She reported to ELA’s board of directors. She received a salary of $250,000.00 per annum. The staggered commitment amount entitlements under the CAC were to be reduced by the amount of that annual salary. The parties disagree about whether the employment contract included the terms and conditions contained in the CAC, or any variation or replacement of the CAC. They also disagree about other entitlements under the employment contract.

8    In August 2021 Mr Michael Jones commenced as the Chair of the Board of ELA. Ms Scott and Mr Jones appeared to have had different approaches for the operation and success of ELA. Those differences and other matters led to the end of Ms Scott’s employment with ELA. Ms Scott’s employment with ELA came to an end in March 2022. Ms Scott then made requests in September 2022 and December 2024 for the amounts she said were due to her under the CAC or VCAC.

9    While the parties made submissions by reference to a joint list of 49 issues for determination, all of those issues relate to Ms Scott’s entitlements under the CAC and employment contract, and the reasons that ELA submits Ms Scott has no, or limited, entitlements under those agreements.

10    For the reasons that follow I accept that the CAC was made in October 2019. I accept that it was varied in 2021 to remove the funding hurdles. I do not accept that it was replaced by an ESOP. While I accept some of the matters raised by ELA in its defence, I find that Ms Scott is entitled to $2,367,430.25 under the VCAC and $17,458.58 under her employment contract.

SUMMARY OF THE TOPICS ADDRESSED

11    As explained, the trial proceeded by reference to a joint list of 49 issues. Those issues are, where necessary, addressed below. They are considered within the following broad topics:

(1)    The background to, and the making of, the CAC;

(2)    The initial discussion to vary the CAC, the making of the employment contract, and whether the CAC was later varied or replaced (to make the VCAC), and if so, was there valid consideration, and what were the terms of the VCAC;

(3)    Whether any VCAC was replaced by the ESOP and whether Ms Scott was estopped from relying on any VCAC;

(4)    The application of the provisions of the Corporations Act 2001 (Cth) dealing with the obligation, and exemptions, for benefits in connection with the loss of office to have member approval;

(5)    The operation and effect of that part of the CAC that entitled Ms Scott to convert the notes to cash or shares “provided this does not place the company in a position of insolvency”;

(6)    The 2022 request by Ms Scott to receive the benefits under the VCAC, and the challenges to that election, its effectiveness, and its consequences;

(7)    The 2024 request by Ms Scott to receive the benefits under the VCAC and its effectiveness;

(8)    Whether Ms Scott is disentitled to any relief under the VCAC because of any serious misconduct by her; and

(9)    Ms Scott’s entitlements under the employment contract, including the phone allowance, the vehicle allowance and the reimbursement of work expenses.

The voluntary winding up of ELA

12    After the hearing but before this judgment was delivered, ELA passed a resolution for its voluntary winding up. On 20 March 2026 the matter returned before me. Ms Scott appeared but the liquidator did not. Ms Scott said: (a) that in the circumstances it was not necessary to seek leave to proceed under s 500(2) of the Corporations Act; and (b) alternatively, that leave should be granted. For reasons delivered on that day I ordered that the parties be granted leave to proceed with the proceeding.

WITNESSES AND OTHER KEY PERSONS

Ms Carley Scott

13    As explained, from April 2018 Ms Scott performed work for ELA as a contractor in the role of CEO. That continued until she commenced as an employee of ELA, still in the role of CEO, in November 2019. That employment came to an end in March 2022. The CAC was made on 3 October 2019. It was varied to remove the funding hurdles, in writing, during a video call Ms Scott had with Mr Wallis between March and July 2021.

14    Ms Scott gave evidence over four days of hearing. I accept the material parts of her evidence. She gave her evidence in a careful and precise way. She often, but not always, made a note of a conversation and those notes were consistent with her oral evidence. Likewise, there was often, but not always, a documentary trail consistent with Ms Scott’s oral evidence. Overall, I found her evidence to be credible and truthful.

15    ELA submitted, amongst other criticisms, that Ms Scott’s failure to implement until 2021 the changes to the CAC that her and Mr Wallis had discussed in 2019, was incredible in the light of the care and precision she otherwise displayed. I accept Ms Scott’s explanation that that failure was a reflection of her relationship with, and trust in, Mr Wallis. She explained that, in circumstances where she was very busy, she trusted Mr Wallis to implement the removal of the funding hurdles when it was necessary and appropriate to do so. For that reason, she did not make it a priority to ensure it happened earlier.

16    ELA’s defence depended on establishing that Ms Scott’s evidence about the variation to the CAC in 2021 involved a fabrication of evidence and documentation by her. For reasons explained I reject that submission.

Mr Scott Wallis

17    Mr Wallis was ELA’s founder. He was a director of ELA from 26 March 2016 to 30 August 2022. From February 2017 to 15 August 2021, he was its sole director and board member. The CAC was made between Ms Scott and Mr Wallis on behalf of ELA in October 2019. I find that the CAC was varied by Ms Scott and Mr Wallis on behalf of ELA between March and July 2021. ELA accepts that if I find Mr Wallis did agree to that variation, he had authority to do so.

18    Ms Scott filed two witness outlines of Mr Wallis and issued a subpoena for him to give evidence. ELA issued two subpoenas for Mr Wallis to produce documents. Mr Wallis provided documents in response to the subpoenas to produce documents. Mr Wallis did not give evidence. He made application to set aside the subpoena to give evidence on health grounds. I granted that application: Scott v Equatorial Launch Australia Pty Ltd (Application to Set Aside Subpoena) [2025] FCA 109.

19    One consequence of Mr Wallis not giving evidence was that ELA made an application under ss 135 and 136 of the Evidence Act 1995 (Cth) to exclude, or limit the use of, an email authored by Mr Wallis. That email of Mr Wallis responded to an email from Ms Scott attaching a varied copy of the CAC. Mr Wallis said, “I agree to the below”. I refused that application. It is addressed further below.

Mr Michael Jones

20    Mr Jones was, at the time of giving his evidence, the CEO of ELA.

21    One significant aspect of Mr Jones’ evidence was given in support of ELA’s submission that Ms Scott replaced her entitlements under the CAC or VCAC by agreeing to an ESOP. Those circumstances are explained in detail below. In summary, Mr Jones gave evidence of his understanding of the establishment and agreement by Ms Scott of an ESOP. Mr Jones denied the occurrence of a number of conversations relied on by Ms Scott on that topic. However, I assess Mr Jones’ evidence alongside the documentary evidence. For reasons explained, that documentary evidence does not satisfy me that (a) all parts of the proposed ESOP arrangement (including with respect to accrued rights and future rights) were agreed between Ms Scott and ELA; (b) that all necessary documentation for Ms Scott’s participation in the ESOP was completed; and (c) that Ms Scott’s unequivocal agreement to participate in the ESOP was recorded. Where Mr Jones’ evidence was not consistent with those documentary failures I do not accept it. Where it was not consistent with the evidence of Ms Scott I prefer the evidence of Ms Scott. I do not doubt that Mr Jones was determined to have Ms Scott forgo her entitlements under the VCAC. It was an agreement that was not negotiated by him. I do not doubt that he worked hard in an effort to have Ms Scott enter the ESOP so as to replace the VCAC entitlements. However, I find that determination and desire resulted in his overstatement of Ms Scott’s agreement, tacit or otherwise.

Mr Garry Lowrey

22    Mr Lowrey was, at the time of giving evidence, a non-executive Director of ELA. He gave evidence about his introduction to and early involvement with ELA, its capital raising activities, his awareness of the CAC and his participation in the efforts to establish an ESOP. Those circumstances, and my conclusions about them, are explained below.

Mr Ben Melin

23    Mr Melin is a director of DLK Advisory Pty Ltd, an accounting and advisory company. In that capacity he was responsible for, amongst other matters, the preparation of ELA’s statutory accounts. He gave evidence about the communications and tasks that led to the preparation of those accounts. In particular, he gave evidence about the version of the CAC provided to him in January 2020 by Ms Scott and communications about the VCAC in July 2021. He also gave evidence about discussions with Ms Scott, Mr Lowrey, Mr Wallis and Mr Jones about the ESOP. Again, those circumstances, and my conclusions about them, are explained below.

Mr Andrew Walker

24    Mr Walker described himself as a businessman. He was, at the time of giving evidence, a Director and Chair of Equatorial Launch Group Pty Ltd (ELG), the sole shareholder of ELA and the entity through which shareholders who previously held shares directly in ELA then held their interest in ELA’s business. He was also the Chairman and Director of Blackfyre Global, a majority shareholder in ELA’s business.

25    Mr Walker gave evidence about his decisions to invest in ELA’s business, and his later decision to not extend that investment. He also gave evidence about ELA’s ability, and efforts, to raise capital in 2022 and later. That evidence is relevant to the insolvency proviso in the CAC and VCAC and is considered below.

Mr Shane Deane

26    Mr Deane gave expert evidence including by providing a “Limited Scope Insolvency Report” dated 22 October 2024. He also provided a “Second Limited Scope Solvency Report” dated 13 February 2025. He was asked to “consider the effect on the solvency of the [ELA] Company accounting for the hypothetical conversion of the convertible notes on 28 September 2022 or at any time up to and including 30 April 2023”. More specifically “whether the Company would have become insolvent on 28 September 2022 if it incurred an obligation to immediately pay Ms Scott the amount or alternate amount specified” by her as the result of the obligations under the CAC.

27    Mr Deane concluded, based on the information set out by him and the analysis contained in this report, that ELA would become insolvent from an immediate obligation to pay Ms Scott on 28 September 2022 or any time up to 30 April 2023. This is considered further below.

Mr Shaun McGushin

28    Mr McGushin was not a witness. He is identified here to contextualise his participation in the circumstances explained below. Mr McGushin was, at the relevant times, a lawyer employed by Ash Street Lawyers. In that capacity he made, or received, communications about both the CAC and the ESOP. Those communications are detailed below.

Ms Scott’s introduction and early engagement with ELA

29    Much of Ms Scott’s introduction and early engagement with ELA was not controversial. The findings that I make about that period are as follows.

30    Ms Scott first met Mr Wallis in 2015. She was at that time the CEO of DEAL, which aimed to facilitate investment and economic development opportunities in East Arnhem Land. DEAL provided ELA with some initial funding.

31    In September and October 2017, Mr Wallis and Ms Scott discussed the possibility of Ms Scott joining ELA as CEO. They continued discussions into early 2018. On 31 January 2018, Mr Wallis sent Ms Scott an email offering a package of $3 million over three years:

Dear Carley

I am writing to confirm our discussions regarding your remuneration should you agree to join Equatorial Launch Australia as Chief Executive Officer.

An initial three year contract is offered with the total package being $3m. The following breakdown is structured to provide an incentive element whilst also reflecting ELA’s expected increasing cashflow.

(1)    1st six months - $300,000

(2)    2nd six months - $450,000

(3)    3rd six months - $450,000

(4)    4th six months - $550,000

(5)    5th six months - $600,000

(6)    6th six months - $650,000

If you agree to the package we can then work together to define the breakdown between various elements/methods of remuneration, KPIs, and other sections of your employment contract.

I look forward to you leading ELA and establishing Australia’s first commercial spaceport.

Yours Sincerely

Scott

32    Ms Scott sent a text to Mr Wallis the following day saying that the email “Looks like a good foundation”. On 4 February 2018, Mr Wallis emailed Ms Scott a draft employment agreement. He sent a further draft proposed contract to Ms Scott on 9 March 2018. On 9 and 10 April 2018, Ms Scott visited Mr Wallis at the ELA offices in Canberra, where they discussed possible investment opportunities, staffing arrangements, the range of developments required to enable the business to progress, and the potential elements of Ms Scott’s CEO role.

33    Ms Scott formed the view that there “was a lot of work to do and a high degree of personal risk associated with taking up a position with ELA”, including “personal financial risk given ELA did not appear to have the financial capacity to pay me a salary”. On about 10 or 11 April 2018, Mr Wallis and Ms Scott had a discussion in which Ms Scott suggested that she provide services as a consultant or external contractor instead of an employee. Ms Scott said that if she was to start working as CEO immediately, they would need to agree to the same annual amount as a contractor as she would receive if employed as CEO, namely the $1 million per annum previously discussed. Ms Scott said it could be structured as cash or shares to be accrued and paid as the business progressed. Mr Wallis was happy to proceed on that basis. Between 16 April 2018 and 19 April 2016, Ms Scott and Mr Wallis exchanged correspondence about draft versions of a quote for contracted CEO services and a confirmation of acceptance of quote letter. Ms Scott was prepared to commence work without a signed contract in place, on the understanding that Mr Wallis had agreed her base remuneration and would formalise the contractual documentation at a later stage.

34    Ms Scott first performed work for ELA from April 2018. She performed that work as a contractor and in the role of CEO. Her evidence was that her initial work fell into four connected categories. First, processes to secure a NASA launch contract. Second, efforts to progress the capacity for a site in East Arnhem Land to host rocket launches. Third, supporting funding and investment discussions. Fourth, “internal and external communications and organisational development”.

35    While Ms Scott attended the ELA offices in Canberra from time to time, the vast majority of this initial work was performed by her at her home in Victoria or while visiting the Northern Territory.

36    From her commencement Ms Scott reported to Mr Wallis in his capacity as Chair and Founder of ELA. Ms Scott described multiple phone calls and messages each day with Mr Wallis. She said her working relationship with Mr Wallis was positive, respectful, and intellectually stimulating.

37    In or around April 2018 Ms Scott and Mr Wallis exchanged electronic signatures. They provided each other with permission to apply the signature to documents when approval was given by them.

38    Ms Scott understood that ELA had engaged her as a contractor, and her evidence is that she intended to invoice ELA for her services on that basis, but felt she could not invoice for services straight away given ELA’s financial position.

39    Ms Scott did not have an ELA credit card. She often paid for work related expenses including travel accommodation with her personal credit or debit card and sought reimbursement. Ms Scott’s general practice was that before incurring these costs she spoke to Mr Wallis and sought his approval, and that once approved she incurred the expense and prepared to invoice it to ELA.

40    In August 2018, Ms Scott registered AirManOps. She is the sole director and secretary of AirManOps. It was registered for the primary purpose of invoicing ELA for contracting work, but she also planned to undertake additional activities through AirManOps where agreed with ELA. Ms Scott told Mr Wallis when she registered AirManOps and they agreed to keep an “open dialogue” to identify and address any concerns of potential impact on ELA. Mr Wallis said he was comfortable with Ms Scott invoicing ELA under the AirManOps business name for her contracting services.

The Commitment Amount Contract of 3 October 2019

41    As explained, it was not in dispute that Ms Scott and ELA entered into the CAC in October 2019. In the absence of Mr Wallis, the oral evidence of that agreement and the events leading to it were largely given by Ms Scott. Based on that evidence, and the documents to which I refer below, the findings that I make about those events are as follows.

42    On 30 September 2019, Ms Scott and Mr Wallis discussed the introduction of funding hurdles tied to ELA’s investment targets in what would become Ms Scott’s CAC. Ms Scott took notes of this discussion in a notebook. Those notes relevantly state: “may put hurdles”, with those words underlined. Ms Scott recalls that in this conversation, she and Mr Wallis “raised the concept of putting hurdles or financial hurdles into the documentation, in particular talking about phase 2 which wasn’t defined”.

43    As at 30 September 2019, ELA did not have set board-approved targets for phase 1 (otherwise referred to as series A funding, meaning funding to establish a very small baseline for the company) and phase 2 (otherwise referred to as series B funding, meaning funding the growth of the company) of its development. In other words, as the evidence established, ELA’s funding targets were up in the air. Setting targets was the role of the chair with the approval of the board. As at September 2019, the board constituted only Mr Wallis.

44    On 1 October 2019, Ms Scott emailed Mr Wallis attaching a letter addressed to Mr Wallis. The letter included a draft CAC. In that draft, Ms Scott seemingly provided for the insertion of funding hurdles, as follows:

Payment Standard Schedule: Release of the Commitment Amount by ELA to Ms Scott will consider the following schedule:

(1)    First 6 months: $350,000*

(2)    Second 6 months: $400,000*

(3)    Third 6 months: $500,000*

(4)    Fourth 6 months: $500,000

(5)    Third year: $1,250,000

(6)    Fourth year: $1,000,000Fifth year: $1,000,000

…

Should the engagement of Ms Scott cease for any reason prior to May 2023, the full Commitment Amount in this agreement will be payable to Ms Scott as cash or shares at her sole discretion (as set out under Conversion) provided that series A and B funding has been secured.

45    Ms Scott wrote the words “provided that series A and series B funding has been secured”. To those words, Ms Scott inserted a comment in the document stating: “Does this address the concern about ensuring benefit to company? Series B of $50M would make it similar to a 10% finders fee.” Ms Scott recalled that the comment was inserted to reflect discussions that she had been in with Mr Wallis about whether funding hurdles would be included, what they would be, and how they might be structured within the document.

46    On 2 October 2019, Mr Wallis emailed Ms Scott attaching his comments on the draft CAC that was provided by Ms Scott the day before. Mr Wallis inserted the following in underline:

Should the engagement of Ms Scott cease for any reason, after 30 April 2021, and prior to 1 May 2023, the full Commitment Amount in this agreement will be payable to Ms Scott as cash or shares at her sole discretion (as set out under Conversion) provided that $70M of funding (equity and/or loans) has been secured; noting estimates for Seed and Series A of $20M and $50M for Series B).series A and B funding has been secured. If Ms Scott ceases before 1 May 2021, or funding has not been secured, then she would be entitled to a pro-rata payment (cash and/or shares) of $1M per year less any payments made under an employment contract or other bonus.

47    Ms Scott recalled that she was not surprised by the insertion of the detailed funding hurdle of $70 million, because “we had talked about those figures”. However, she recalled that she had some hesitation that the funding hurdles had not “been calculated with the degree of confidence that I think gave me great confidence in those being what we were seeking”.

48    On 3 October 2019, Ms Scott sent Mr Wallis an email at 1.06 pm attaching a version of the CAC. Ms Scott had affixed her signature to the CAC, while Mr Wallis had not. Mr Wallis replied to Ms Scott’s email at 1.26 pm on 3 October 2019, writing “You have my permission to insert my signature in the Word doc. Please include me as a BCC in the email to PIIF”. That permission was consistent with their earlier agreement about the use of the electronic signature. ELA does not contest that the CAC was made on 3 October 2019, but rather it alleges that Mr Jones, on behalf of ELA, and Ms Scott, agreed to replace all entitlements to be conferred under that CAC with Ms Scott’s participation into a restructured ESOP (the ESOP Agreement).

49    The terms of the CAC made on 3 October 2019 pleaded by Ms Scott include:

Period of commitment: April 2018 to 30 April 2023

Commitment Amount: AUD $5,000,000 (Five Million Dollars), payable by ELA to Carley Scott or transferrable to an entity of her choosing for work undertaken for and on behalf of ELA.

Commitment Type: AUD $5,000,000 $1.00 Convertible Notes

Payment Standard Schedule: Release of the Commitment Amount by ELA to Ms Scott will consider the following schedule:

(1)    First 6 months: $350,000*

(2)    Second 6 months: $400,000*

(3)    Third 6 months: $500,000*

(4)    Fourth 6 months: $500,000

(5)    Third year: $1,250,000

(6)    Fourth year: $1,000,000

(7)    Fifth year: $1,000,000

*Note: The first three milestones will be considered to have been reached upon signing of this agreement and may be noted in formal company documentation as a convertible note commitment as an option that may be converted to cash or shares at any point to May 2023.

Any other agreements will be replaced by the above schedule, which addresses a commitment by ELA to engage Ms Carley Scott from April 2018 and for the duration noted within the PIIF high level Term Sheet and convertible note documentation.

Security: A charge over assets of the Company which is above that of any shareholder loans or unsecured creditors.

Other Costs: expenses plus 20% administration fee upon provision of invoice for expenses incurred related to performance of the CEO role and general support to ELA and paid in further $1 Convertible Notes.

Conversion and Alteration:

Superseding the standard schedule, Ms Scott or an entity of her choosing may at their sole discretion convert the Notes to shares or cash at any time over a five-year period provided this does not place the company in a position of insolvency. Conversion of Notes will be at a share price that is the lower of:

a) A 25% discount to the share price paid for an equity investment made by an independent and qualified investor (‘significant and independent equity investment’) for a cash contribution of no less than $1M, but otherwise on same terms; or

b) $80m divided by the number of shares on issue at the date of this letter.

c) $3 per share for the first $750,000 and $5 per share thereafter.

ELA requires an opportunity to see Ms Scott enter an employment contract that will satisfy investors. A standard employment contract is included at Attachment A to this document. The contract for $250,000 per annum in cash will be activated upon a decision by the Board and agreement by the CEO that the Company has received significant independent investment, is generating suitable revenue, and is in a position to make regular salary payments of this amount each year to the CEO.

This contract and annual salary amount will not extinguish the Commitment Amount due to Ms Scott under this Agreement. Salary payments made under the contract may be subtracted from the Commitment Amount in this Agreement annually, on and upon the anniversary following execution by both parties (ELA and Ms Scott) of the contract at Attachment A.

Should the engagement of Ms Scott cease for any reason after 30 April 2021 and prior to 1 May 2023, the full Commitment Amount in this agreement will be payable to Ms Scott as cash or shares at her sole discretion (as set out under Conversion) provided that $70M of funding (equity and/or loans) has been secured; noting estimates for Seed and Series A of $20M and $50M for Series B). If Ms Scott ceases before 1 May 2021, or funding has not been secured, then she would be entitled to a pro-rata payment (cash and/or shares) of $1M per year less any payments made under an employment contract or other bonus.

The Agreement to vary the CAC and the Employment Contract

50    Again, in the absence of Mr Wallis, the oral evidence of the variation to the CAC and the events leading to it were largely given by Ms Scott. Based on that evidence, and the documents and other evidence to which I refer below, the findings that I make about those events are as follows.

51    In the days after signing the CAC, Ms Scott had further conversations with Mr Wallis in which Mr Wallis indicated that ELA did not have a solid commitment to the funding hurdles. Ms Scott recalls Mr Wallis reflecting that he was seeking less than the $70 million in funding, and that the board would not approve a proposal for $70 million in funding. Mr Wallis wanted to seek less than $70 million to reduce dilution to the company’s value. As a result of these conversations, Ms Scott became more concerned about the funding hurdles being included in the CAC.

52    On 10 October 2019, Ms Scott spoke with Mr Wallis about the funding hurdles. She said that the funding hurdles were a distraction in that they are not accurate and not a fair requirement if the Board would not approve those amounts. Mr Wallis said that he agreed and that the funding hurdles should be removed.

53    On 18 October 2019, Ms Scott again spoke with Mr Wallis about the funding hurdles. Ms Scott asked Mr Wallis if he still agreed about removing the funding hurdles, and Mr Wallis said yes. Mr Wallis also asked Ms Scott to change the contract and backdate it to 27 September 2019.

54    That discussion about the removal of the funding hurdles occurred in circumstances where ELA was gaining significant momentum with regulators, core customers, and funders.

55    After the conversation with Mr Wallis on 18 October 2019, Ms Scott did not take any immediate steps to remove the funding hurdles from the CAC. She also did not take steps to ensure that the full extent of her discussion with Mr Wallis on 18 October 2019 was recorded in writing. She explained that this was so because, at the time, she was engaged in other important tasks to build ELA. She also explained that, though the removal of the funding hurdles was significant to her, she had a great deal of faith in Mr Wallis and understood his position clearly. As explained above, I accept that evidence.

56    At the hearing Ms Scott explained that she did not “rely on an oral variation to the [CAC]” or an “oral agreement” arising from the above conversations between her and Mr Wallis in October 2019. She said that she did not rely on those conversations as “having contractual force and effect”. In other words, Ms Scott did not rely on the pleadings at 39A and 39E of the Second Further Amended Statement of Claim which alleged an oral agreement between her and Mr Wallis on 18 October 2019. Instead, Ms Scott’s submission was that the CAC was varied as the result of the document produced following the video call between her and Mr Wallis between March and July 2021. Those 2021 circumstances are explained below.

57    From 18 October 2019 onwards, Ms Scott’s understanding was that the funding hurdles would be removed from the CAC. Ms Scott understood that the CAC was still in place, that it was able to be amended, and that Ms Scott and Mr Wallis had an understanding that there would be no hurdles in their arrangement. Consistent with the submissions explained above, it was now Ms Scott’s position that it was not the intention of the parties to make a concluded agreement in October 2019, unless and until they varied the CAC in writing. She says that was done in 2021.

58    On 14 January 2020, Mr Melin, ELA’s accountant, was composing financial statements for ELA, and requested from Ms Scott her employment contract and the CAC. Ms Scott sent the CAC (with funding hurdles in it) to Mr Melin. Ms Scott explained that she sent the CAC with funding hurdles to Mr Melin because that was her understanding of the document that was in force, in writing, at that time. Ms Scott accepts that if agreement was reached in October 2019, she should have disclosed it to Mr Melin. Ms Scott did not put in writing to Mr Melin that she and Mr Wallis had verbally agreed to remove the hurdles. However, she said that she believes she told Mr Melin of that agreement to remove the hurdles.

Entering into the employment contract on 19 November 2019

59    The parties agree that on or about 19 November 2019, Ms Scott and ELA entered into an employment contract for the employment of Ms Scott as ELA’s CEO. They agree that the terms of the employment contract included at least that:

(1)    Ms Scott would be employed as CEO of ELA from 22 November 2019 until 30 April 2023;

(2)    Ms Scott would perform the duties set out in the job description attached to the employment contract (the duties clause);

(3)    Ms Scott would report directly to ELA’s Board of Directors;

(4)    ELA would pay Ms Scott $250,000 gross per annum plus superannuation for the first year, subject to increase each year thereafter (the salary clause);

(5)    ELA would provide Ms Scott with a vehicle allowance of $25,000 per annum that must be spent on a vehicle that carried ELA branding with provision for fuel and maintenance costs (the vehicle allowance clause);

(6)    ELA would provide Ms Scott with a mobile phone allowance of $1,200 per annum (the mobile phone allowance clause); and

(7)    the terms and conditions set out in the employment contract may only be varied by a written agreement signed by both Ms Scott and ELA.

60    The parties disagree about whether the employment contract included the terms and conditions contained in the CAC, or any variation or replacement of that CAC. This is considered further below.

61    On 8 September 2020, Ms Scott sent her employment contract to Mr Lowrey and Mr Daniel Kim from Greenwich Capital Partners, and extracted parts of her CAC. Ms Scott understood Mr Lowrey was considering the money he had lent ELA and its share value. She understood that Mr Lowrey had requested those documents from her in order to assist that consideration. The extracts of the CAC provided by Ms Scott to Mr Lowrey contained the funding hurdles as included on 3 October 2019. At the date of her email of 8 September 2020, Ms Scott understood she had reached agreement verbally with Mr Wallis that the funding hurdles should be removed. Ms Scott said she understood that she had to have a finalised written document that was able to be relied on and put out to other parties. Ms Scott understood that the document she provided to Mr Lowrey was the document that was in force at that time.

62    On 4 March 2021, Ms Scott again emailed Mr Lowrey and referred to parts of the CAC in her email.

63    Ms Scott said she did not take any steps before March 2021 to amend the CAC to reflect her discussion with Mr Wallis on 18 October 2019 because she was prioritising tasks that were important for the company to progress and because she trusted Mr Wallis.

64    In early to mid-2021, significant work was being done to progress funding discussions and update ELA’s documents, including business plans and financial documents including Ms Scott’s contract. Updating ELA’s documents was necessary as investors such as the Northern Territory were looking to define their investment. As part of the process of updating ELA’s business records to progress investment, Ms Scott said that she wanted to make sure that her CAC was as accurate as possible.

The video call between Ms Scott and Mr Wallis between March and July 2021

65    On a date between 4 March 2021 and 19 July 2021, Ms Scott and Mr Wallis participated in a video call in which Mr Wallis said to Ms Scott he had made changes to the CAC. Mr Wallis showed Ms Scott, over the video call, a hard copy of the contract with his handwritten mark-ups on it.

66    Ms Scott explains that the video call occurred during that period because it was after her communication with Mr Lowrey on 4 March 2021 (see above at [62]) and before her amendment of the CAC on 19 July 2021 (see below at [74]).

67    During that video call, Ms Scott retrieved from ELA’s shared file system a copy of the CAC (with hurdles) and displayed it on a shared screen. Ms Scott and Mr Wallis worked through the document on the shared screen, Mr Wallis told Ms Scott each of the changes he wished to make, and Ms Scott and Mr Wallis made the changes to the document on the shared screen. Those changes reflected Mr Wallis’ handwritten mark-ups in the hard copy of the document held by Mr Wallis. Each time a change was made to the online document on screen, both Ms Scott and Mr Wallis stated their agreement to the change.

68    After going through Mr Wallis’ changes one by one and making changes to the online document, Mr Wallis and Ms Scott did a final read-through of the amended document. Ms Scott asked Mr Wallis if the changes made were correct, and he said yes.

69    Mr Wallis requested that Ms Scott put his electronic signature on the document they had created during the video call and Ms Scott said she would do so. Ms Scott put Mr Wallis’ electronic signature into the document.

70    Ms Scott believes she saved the document to ELA’s “Zoho drive”, but does not positively recall.

71    Ms Scott does not have a copy of the version of the document created in the video call. Ms Scott does not believe she sent the document created with Mr Wallis to him or anyone else.

72    As explained Ms Scott says the video call took place on a date between 4 March 2021 and 19 July 2021, however she does not recall precisely when the video call took place. Ms Scott made a diary note on a date she thinks was in July 2021, in which she wrote Mr Wallis was “OK” with backdating her contract to a September 2019 date.

73    On 19 July 2021, as ELA was going into more detailed investment discussions, Ms Scott worked on updating a range of documents such as business plans. Ms Scott wished to make sure she had up to date copies of documents and that she had done everything she had told Mr Wallis she would do.

74    As a result, on 19 July 2021, Ms Scott:

(1)    retrieved from ELA’s files an original document [draft of the CAC] on which Mr Wallis had provided commentary, in order to update the commentary leading to the document’s final version;

(2)    marked up that version of the contract with the changes that she and Mr Wallis had earlier agreed in the video call. Ms Scott knew what changes were agreed because of the existing document with those changes in place;

(3)    did not mark up any changes to the document that, as she understood it, Mr Wallis had not agreed;

(4)    put the date of 27 September 2019 on the document because Mr Wallis requested the document be backdated to then;

(5)    affixed Mr Wallis’ electronic signature to the document on 19 July 2021, and cannot be sure whether she obtained his approval in writing to do so on that day (although she had obtained it in the video call);

(6)    kept a copy of this marked-up document in the ELA files; and

(7)    saved a copy without the track changes in it and then, she believes, saved a copy into PDF onto ELA’s systems. Ms Scott does not believe she sent a version of the document with comments and mark-ups to anyone else.

75    Ms Scott created the marked-up version of the contract because Mr Wallis had asked her to. Ms Scott and Mr Wallis had also discussed putting comments into the document. The creation of a written record of comments made in relation to changes to the contract was consistent with Mr Wallis’ and Ms Scott’s general practice.

76    On 19 July 2021, Ms Scott sent what she understood to be the agreed to and approved VCAC and her employment contract to Mr Melin. That email read:

Hi Ben

Please find attached agreements with SW and ELA. I seek your advice (to me personally, as opposed to the company) on how to best amend the documents to limit tax obligations.

The intent was to see that $1M of remuneration was awarded per annum, with an understanding that any interruption to payment / inability to pay in cash as regular monthly sums would be catered for in a structure that allowed for additional benefit to reflect the risk of non-payment, opportunity/real cost of non timely payment and reputational risk of working with a high risk early stage enterprise that was facing some significant challenges.

To capture this, the word document attached was agreed to by SW. I would need to seek his approval for any changes and am keen to do that this week as we finalise the obligations of the company for inbound investor awareness.

Kind Regards

Carley Scott, OAM

77    Ms Scott and Mr Wallis had spoken about making sure that their contracts were tax effective for both ELA and for them personally, and Ms Scott had told Mr Wallis she would check with an accountant about the tax effectiveness of the structure they had in place. It was also important to Ms Scott that the documents she was relying on be understood by Mr Melin, even though she knew the personal advice might need to come from another individual.

78    At or around 3.20 pm on 21 July 2021, Ms Scott texted Mr Wallis: “the other thing we need to sort is both of our contracts. No one calling for them yet, but I did need to update mine to cover off tax, and we’ll need a signature on yours also.”

79    At 5.44 pm, Ms Scott and Mr Wallis had a voice call. Ms Scott recalled that the topic of this call was about her contract. She explained:

I had the copy that we had made together. It had the marked up copy. I had sought tax advice. I didn’t really give Ben [Melin] enough time to give that tax advice, admittedly. But I was keen to make sure that we had a record that that was the actual contract that we had both agreed to as we went into further conversations with investors. So this was a really purposeful call to say to Scott, “I’ve got the document that we’ve agreed to, go through the changes again to make sure I felt comfortable that he was aware of those changes. He had said words to the effect of, yes, he agreed with those changes. I had said to him, “Please make sure you read it again well. I’m going to send it to you now and then I want your approval on it as well.” So it was a very purposeful call to create a record of the agreement that we had had.

80    Ms Scott gave further evidence that she felt the need to send Mr Wallis the VCAC because she wanted a written trail of Mr Wallis’ agreement to the final contract, particularly given the significance of the removal of the funding hurdles and in circumstances where Mr Wallis had raised the prospect of adding a bonus into the agreement.

81    On 21 July 2021 at 5.50 pm, Ms Scott emailed the employment contract and VCAC to Mr Wallis. The email read:

Hi Scott.

These are the copies I have on record. Can you please confirm.

Kind regards

Carley Scott, OAM

82    Ms Scott sent the email to create, what she described as, a strong record of agreement. She gave evidence that she was “quite confident that Mr Scott was aware of what the document was and … what were the contents of that document”.

83    At 6.44 pm on 21 July 2021, Mr Wallis replied to Ms Scott’s email, stating:

Hi Carley

I agree to below.

Kind regards

Scott

84    On or around 7.09 pm, Ms Scott texted Mr Wallis: “Thank you on contract.” Ms Scott explained that by those words, she meant to thank Mr Wallis for sending the confirmation email above.

85    At 7.17 pm on 21 July 2021, Ms Scott sent the employment contract and the VCAC to Mr Lowrey. That email read:

Hi Garry

CEO documents attached.

Kind regards

Carley Scott, OAM

86    Ms Scott sent the above email to Mr Lowrey at his request.

87    As explained, ELA’s defence depended on establishing that Ms Scott’s evidence about this variation to the CAC in 2021 involved a fabrication of evidence and documentation by her, and that the missing record of the document made during the video call is telling. As I have said, I generally found Ms Scott’s evidence to be careful, credible, and truthful. Whilst ELA made submissions about the unreliability of the evidence of the critical events, Ms Scott’s evidence was not directly contradicted by any witness. For those reasons, and consistent with the other findings above, I accept Ms Scott’s evidence about this variation.

Sections 135 and 136 ruling

88    For completeness, at the hearing, ELA sought to exclude the email from Mr Wallis to Ms Scott at 6.44 pm on 21 July 2021 pursuant to s 135 of the Evidence Act. That section relevantly provides that the court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party. In the alternative, in the event I allowed the evidence to be included, ELA sought that the use of the evidence be limited to its non-hearsay purpose pursuant to s 136 of the Evidence Act. It said that there is a danger that allowing the evidence to be used for its hearsay purpose might be unfairly prejudicial to ELA.

89    The email is relied upon by Ms Scott for the hearsay purpose of the truth of the asserted fact that Mr Wallis had read the email and attachment and agreed to it. It is relied upon as evidence that Mr Wallis, on behalf of ELA, authorised the removing of the funding hurdles. Given Mr Wallis was not available to give evidence, this is hearsay evidence for the purpose of s 59 of the Evidence Act. Ms Scott relied on the exceptions to hearsay evidence in s 63 (exception if maker not available) and s 66A (contemporaneous statements about, relevantly, a person’s knowledge or state of mind). The email was admitted into evidence.

90    ELA contended that the inability to cross-examine Mr Wallis on the email and the circumstances leading up to the email constitute unfair prejudice, such that it should be excluded under s 135, or alternatively limited to its non-hearsay purpose pursuant to s 136. ELA relied upon R v Suteski [2002] NSWCCA 509; 56 NSWLR 182 at [126]-[127] (Wood CJ at CL) for the proposition that an inability to cross-examine a witness can constitute unfair prejudice for the purposes of ss 135 and 136. While the bare fact that a witness cannot be cross-examined is not necessarily decisive, whether unfair prejudice arises depends on the character of the evidence and the significance of the inability to cross examine in terms of the nature or strength of the potential prejudice. ELA said that what Mr Wallis meant in the email is equivocal, such that it has reduced probative value when the Court cannot hear from cross-examination on this evidence. ELA also said that while Ms Scott has had an opportunity to give evidence, the only way for ELA to test Mr Wallis’ email is through cross-examination of Mr Wallis, such that the prejudice to it in being unable to cross-examine Mr Wallis is significant.

91    In Steven Moore (a pseudonym) v The King [2024] HCA 30; 282 CLR 460 the High Court said at [32] (Gageler CJ, Edelman, Steward, Gleeson and Beech-Jones JJ) that “without more” an inability to cross-examine the maker of a representation cannot justify the exclusion of evidence of that representation which is sought to be admitted under an exception to the hearsay rule, as “otherwise the power of exclusion would swallow the exception”. However, the High Court accepted in principle that unfair prejudice can arise from procedural considerations such as where an inability to cross-examine the person who made a hearsay representation “will affect the ability of the fact-finder to assess rationally the weight of the evidence”: at [34]-[35]. In making that assessment, the High Court considered the possible significance of cross-examination, and whether there were other means of assessing the reliability of the evidence: at [34], [36]-[42]. I note that while that case concerned unfair prejudice arising under s 137 (as did the comments of Wood CJ at CL in Suteski), the phrase “unfair prejudice” and its cognate phrase “unfairly prejudicial” is used in ss 135, 136 and 137 and is given the same meaning in each section: Ainsworth v Burden [2005] NSWCA 174 at [99] Hunt AJA (Handley and McColl JJA agreeing).

92    At the hearing, I refused ELA’s application under s 135. I considered that the evidence even without cross-examination is of significant probative value. The email could rationally affect the assessment of the probability of the existence of a fact in issue to a significant extent. It goes directly to Mr Wallis’, and by extension ELA’s, authorisation of the funding hurdles being removed. That is a significant issue in this case. Even accepting for the sake of argument some level of ambiguity in what was meant by Mr Wallis’s email, I considered it is still of high probative value. The parties were able to, and did, make submissions as to its meaning and weight. While there is a level of unfair prejudice arising to ELA from an inability to cross-examine Mr Wallis on the email and the surrounding circumstances, I do not consider that the unfair prejudice outweighs that probative value, let alone substantially outweighs it.

93    For similar reasons, I also found that the evidence should not be limited to its non-hearsay purpose pursuant to s 136. In Seven Network Ltd v News Ltd (No 8) [2005] FCA 1348; 224 ALR 317, Sackville J at [21] called for caution in applying s 136 in cases like the present:

In my opinion, considerable care should be exercised before s 136 of the Evidence Act is invoked to limit the use of evidence on the ground that its use might be unfairly prejudicial to a party in a procedural sense. I agree with Mr Sheahan that the policy apparently underlining provisions such as ss 60 and 77 of the Evidence Act should not be undercut by the making of orders under s 136 as a matter of course. This is particularly so where a judge, rather than a jury, is the trier of fact, since the danger of unfairness to a party might be expected to be mitigated by the judge attributing less weight to material that cannot adequately be tested in cross-examination. Even so, the circumstances may be such that the power conferred by s 136 will not only be enlivened but it will be appropriate for the Court to make a direction limiting the use of otherwise admissible evidence.

94    While s 136 does not require that the probative value is “substantially” outweighed by the danger that the evidence might be unfairly prejudicial to a party, s 136 is still a discretion that requires a weighing exercise. Having regard to the significant probative value of the evidence, I am satisfied that it is appropriate not to limit the use of the evidence.

Conclusion on the VCAC

95    As discussed above, I accept Ms Scott’s evidence that the CAC was varied.

96    For completeness, I note that ELA argued that the variation was ineffective because it was not agreed to with any actual or apparent authority for and on behalf of ELA. However, ELA clarified at the hearing that its case was that Mr Wallis did not agree to the variation. It accepted that if I found that Mr Wallis did agree to the variation then ELA does not dispute that he had the requisite authority. Given my findings above, the variation is not ineffective on this basis.

97    Similarly, ELA advanced an argument that the variation was ineffective because it was not in writing. However, at hearing ELA accepted that if I accepted Ms Scott’s evidence that the changes were agreed in the video call, and that the 19 July 2021 version of the document reflected these changes, then this argument would fall away. As discussed above, I find that the variation was in writing and the VCAC is not ineffective on this basis.

The alleged ESOP Agreement replacing the VCAC entitlements

98    The parties are in dispute about whether Ms Scott and ELA agreed to replace all entitlements conferred under the VCAC with Ms Scott’s participation into a restructured ESOP. ELA submitted that Ms Scott and ELA had a “tacit agreement” which may be inferred from the parties’ conduct. It submitted that an enforceable contract can be inferred when the “manifest intention of the parties, objectively ascertained, evinces a tacit agreement”, relying on King Tide Company Pty Ltd v Arawak Holdings Pty Ltd [2017] QCA 251 at [20] (Bond J) and Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-8 (McHugh JA, Hope and Mahoney JJA agreeing). ELA submits the effect of that tacit agreement was that the VCAC and any benefits under it were replaced by Ms Scott’s rights under the ESOP Agreement. In the alternative, ELA pleads that Ms Scott represented or promised ELA that she wished to replace the VCAC with the ESOP agreement, and that Ms Scott is estopped from resiling from her representation or promise.

99    ELA’s evidence as to the ESOP was principally given by Mr Jones. ELA also relied in part on Ms Scott’s silence by “continuing work to prepare ELA for a share allocation to her under the ESOP, and to prepare documentation to give effect to the ESOP”, in founding the existence of the ESOP Agreement. Ms Scott denied that she entered into an ESOP replacing her VCAC entitlements.

100    I accept there were detailed discussions about an ESOP for Ms Scott. I accept that those discussions were relatively advanced. However, I do not accept that those conversations were concluded such that a “tacit agreement” was reached between Ms Scott and ELA by which Ms Scott agreed to replace all entitlements to be conferred under the VCAC with participation in the ESOP. I also do not accept that Ms Scott’s conduct is sufficient to found an estoppel claim.

101    I set out the most salient aspects of Ms Scott and Mr Jones’ evidence below. Where I refer to documents, those documents are the documents relied upon by Ms Scott and ELA in their closing submissions, and any further documents that closely relate to those documents. I set out the competing evidence and the findings about the crucial aspects of that evidence.

102    The establishment of an ESOP by ELA was under consideration from about July 2021. There was no dispute between the parties that Ms Scott was open to participating in an ESOP in exchange for cancelling her contractual entitlements under the VCAC.

103    Mr Jones gave evidence that the establishment of an ESOP was being considered in the context of efforts for potential investors, including from the Northern Territory Government. He said that the ESOP would enable ELA to represent to certain target investors that it did not have a potential contingent liability to Ms Scott under the VCAC, thereby making ELA a more attractive investment. He said that ELA valued the commitment amount that Ms Scott had already accrued under the VCAC amounting to 1.1 million shares, although he noted that the valuation was “always a question of some mirth in the company”. He accepted that valuation did not include what Ms Scott might be entitled to in the future under the VCAC.

104    Ms Scott said that she considered an ESOP would be a positive program for ELA and for her personally. She said that she believed the ESOP would provide an opportunity to restructure what she had as an agreement (under the VCAC) into something more tax effective. She understood that converting her entitlements under the VCAC to the ESOP could have personal tax benefits to her of up to $2.5 million. She said that she believed she was entitled to approximately 1.1 million shares under the ESOP.

105    I accept that in July 2021 it was DLK Advisory’s role, amongst others, to assess or calculate the shares Ms Scott was owed under the VCAC, and to put together a series of documents in order for Ms Scott to forgo the VCAC in exchange for participation in an ESOP. Ms Scott understood that those documents would include, for example, ESOP rules, a cancellation form, and a new employment contract. Ms Scott also said there would need to be a discussion about what was in a new employment contract. From July through to September 2021 Ms Scott had discussions with DLK Advisory as to how to accurately reflect Ms Scott’s existing entitlements under the VCAC in any ESOP entitlements.

106    On 20 August 2021, Ms Scott had a discussion with Mr Lowrey, Mr Jones, and Mr Melin about the ESOP. Ms Scott said that either in this meeting or in another meeting, Mr Melin stated to Ms Scott that there would be a package of new documents, including a cancellation document in respect of the VCAC, and that Ms Scott should make sure she was happy with the reflection of her benefits in the ESOP before she signed it. I accept that from about this time Ms Scott understood there would be a process to complete ESOP documents, a proposed new agreement for her, and that between that set of documents, Ms Scott’s existing entitlement under the VCAC would be reflected in equal benefits in the future documentation.

107    Mr Jones accepted in cross-examination that in order for the “ESOP deal to get done”, Ms Scott had to sign a document cancelling the VCAC, sign an acceptance of offer of shares for the ESOP, sign a new employment contract, and be a party to the new shareholder agreement. Mr Jones also accepted that he understood that ELA required Ms Scott’s consent for any new employment contract and could not impose a new arrangement on her without her consent. For reasons that will be explained, those documents were never completed by Ms Scott.

108    On 1 September 2021, Ms Scott emailed Mr Melin stating:

Hi Ben

FYSA: Michael as new Chair will likely seek to encourage the ESOP process to include a renegotiation of my contract and targets.

I will be keen to retain the existing right and see that any subsequent contract and negotiation and setting of new targets is undertaken separately, noting that Michael is yet to have a good grasp of what the business and market is, and what targets should be set.

-

Kind Regards,

Carley Scott, OAM

109    Ms Scott said that she sent this email because she was concerned there might be an attempt to walk back or change the VCAC, and she wanted to make clear that her position remained the same. That is, she wanted the same agreement value (as she had under the VCAC) coming into an ESOP.

110    The parties agree that on 4 September 2021, Ms Scott attended a governance meeting with Mr Jones and Mr Wallis. Ms Scott gave evidence that Mr Jones proposed that a new arrangement be put in place. She said Mr Jones said that if Ms Scott did not like that arrangement, Mr Jones would cancel her previous agreement and put in place whatever agreement he desired. Ms Scott said that Mr Jones’ comments started to erode her trust in the process and procedural steps that would be followed regarding a new agreement.

111    On 7 September 2021, Ms Scott received an email from Mr Wallis attaching an updated share register document. The email relevantly stated:

I assume Carley’s shares can be put under the Employee fund so we can remove her from the list… IMPORTANTLY for Carley, I note she had $5M allocated for shares in the Share Register - this assumed no salary/superannuation payments. Carley has been paid, and will continue to receive, a cash salary component so the original share options should be reduced. I have nominally changed the Share Register contingent liability to what is likely to be more realistic (cash component of $250K per year plus 10% Super).

The figure in the share register that Mr Wallis sent showed 795,000 shares. ELA submitted that the share register “recorded a total combined maximum possible shares for Ms Scott and Airman Ops Business Trust as 795,000 shares”. Ms Scott gave evidence that she did not understand Mr Wallis to mean that the maximum number of shares that might be allocated to Ms Scott was 795,000 shares.

112    At the time of sending the email described above, Mr Wallis also sent Ms Scott a message on the Signal application: “I have noticed you have $5M allocated to you in the Share Register for shares. I am writing an email to you, Garry and Michael suggesting that was allocated in case you took up your full remuneration in shares. Please feel free to correct me if I am wrong in what I am saying in the email.”

113    About 30 minutes later, Ms Scott responded to Mr Wallis’s text: “You are correct. Not a problem”. ELA submitted that Ms Scott’s response reflects Ms Scott’s acknowledgement that her maximum possible share entitlement was less than $5 million and therefore 1.1 million shares, as set out in Mr Wallis’ updated share register. Ms Scott gave evidence that her response meant “that the $5 million in the share register was an allocation to reference the full amount of the $5 million agreement that I had”. She additionally stated that at the time of receiving this message, she had not read Mr Wallis’ email attaching the share register. I do not accept that it follows from Ms Scott’s email answering Ms Wallis’ question, directed to her maximum share allocation, that she did, or was prepared to, accept the 1.1 million shares set out in Mr Wallis’ updated register.

114    Mr Wallis responded to Ms Scott’s text saying: “feel free to push back if you think I am disadvantaging you”. Ms Scott did not respond to this text. However, given Ms Scott’s evidence as to what she meant by her text at [113], I consider it does not follow that she did or was prepared to accept the shares as set out in the updated register.

115    The next day, 8 September 2021, Ms Scott spoke with Mr Wallis. Mr Wallis asked her if ELA owed her the full $5 million in the VCAC right then. Ms Scott confirmed that ELA did not and there would need to be a calculation of where Ms Scott was in the five-year period.

116    Ms Scott took a note of this conversation, which relevantly read:

SW call – check. DLK ->

117    At 1.08 pm on 8 September 2021, Mr Jones texted Ms Scott, relevantly stating: “Hey can you call me as soon as possible re your shares”.

118    Shortly after this text message Mr Jones called Ms Scott. Ms Scott says that Mr Jones also asked her whether ELA owed her the full $5 million in the VCAC right then, and that Ms Scott told Mr Jones he needed to speak to DLK Advisory to get an accurate calculation of the accrual of her entitlements. Ms Scott took a note of this conversation, which reads:

MJ call shares? #

CS - X$5M now – but in [unknown] / contract. [unknown] share [unknown] now must reflect contract -> minus payments. Pls check w/ DLK – must for accuracy

119    Mr Jones gave evidence that he did not recall if he spoke with Ms Scott on 8 September 2021, but he said “I assume yes, because we were speaking multiple times almost every day”. However, Mr Jones did not accept that, if he spoke to her on that day, the content of the conversation was as described by Ms Scott. Ms Scott’s evidence is consistent with her note made at the time. For that reason, and also because of my above conclusions about Ms Scott’s evidence generally, I accept Ms Scott’s evidence about that conversation.

120    On 8 September at 1.38 pm Mr Jones emailed ELA’s advisers, copying Ms Scott. Mr Jones relevantly stated:

We are currently looking at the exact number of shares the Company is obligated to issue under her current contract (taking into account salary payments made). We were working off 1.1 million shares (850k and 250k groups). However, Scott [Wallis] now believes the correct number is 795k shares (620k and 175K respectively) based on salary payment made and the share price.

121    On 8 September 2021, Mr Lowrey called Ms Scott and asked if she had seen Mr Jones’ email, which identified 795,000 shares for Ms Scott. I accept Ms Scott’s evidence that this call was the first time she became aware of the 795,000 figure. Ms Scott said that when she read Mr Jones’ email, she was concerned that the 795,000 share allocation was not accurate and that the calculation had not been performed by ELA’s accountants. Ms Scott’s evidence was that she had understood the 795,000 figure to be an approximate figure. I accept that evidence.

122    Ms Scott’s evidence was that in the later part of 8 September 2021 she spoke to Mr Jones again. She said that in this conversation she spoke about her concerns that the 795,000 figure was not accurate. She said further that she asked him to speak to DLK Advisory to get an accurate figure. Ms Scott took a note of this conversation. The note relevantly states:

MJ – Asserts all is progressing

CS - ? 795,000 correct?

MJ – Yes. Garry advice.

CS – spoke w/Garry – he said not on his advice.

MJ – Garry taking Scott’s calculation

CS – concerned about accuracy significantly wrong (100s, thou)

Ask – MJ - did you check w/ DLK to confirm

MJ – No. Advises 795K shares more tax effective. ESOP. Better option no tax [illegible]

Trying to dismiss [illegible] process b/c he personally believes its an acceptable outcome??

123    Mr Jones denied that a conversation of this substance happened. He said that he does not know how the 795,000-share figure was arrived at, but that he understood that from about 8 September 2021, the figure that was being used from that point forward was 795,000. He said that he did not understand that the 795,000-share figure would compensate Ms Scott for future benefits under the VCAC, and that his intention was to compensate Ms Scott for those future benefits in another agreement. Mr Jones did not give evidence of the preparation of another agreement for those future benefits. He gave evidence that as at 8 September, those future arrangements had not been decided yet.

124    Again, Ms Scott’s evidence is largely consistent with her note made at the time. For that reason, and also because of my above conclusions about Ms Scott’s evidence generally, I accept Ms Scott’s evidence about that conversation on 8 September 2021.

125    On 9 September 2021, Ms Scott received an email from Mr Jones in which he stated that the initial share issue to Ms Scott under the ESOP would be 795,000 shares, and the tax benefit would far outweigh the reduction from 1.1 million shares discussed. Ms Scott said that she was exceptionally frustrated reading this email as she thought there had been clear conversations with Mr Jones about her not agreeing to that calculation. Ms Scott did not understand the proposal to be the issue of 795,000 shares in an ESOP in return for the cancellation of all Ms Scott’s existing entitlements.

126    ELA submitted that three points emerge from Mr Jones’ email on 9 September. First, that from 9 September 2021, Mr Jones and others working on establishing the ESOP were proceeding on the basis that 795,000 shares would be allocated to Ms Scott under the ESOP and her entitlements under the VCAC would be cancelled. Second, Mr Jones considered the 795,000-share figure took account of the tax benefit to Ms Scott. Third, it was envisaged that ELA and Ms Scott would enter into a new employment agreement that would provide her with further incentives which would “improve on” the total benefits to her. However, that part of the transaction could be negotiated later. Even accepting those matters, they do not represent Ms Scott’s agreement, tacit or otherwise, to that amount.

127    Ms Scott gave evidence that she spoke to Mr Jones on 10 September 2021 about the email described above, asking him “what was sitting behind the text and what his understanding of it was”. She told him she disagreed with the 795,000 figure and wanted it to be checked, to which Mr Jones responded that “the horse [had] bolted”. Ms Scott told him that she did not agree that it was too late to do anything about it. Mr Jones’ evidence was that he can say “definitively” that this call did not happen. For reasons explained in more detail below, I accept Ms Scott’s evidence about this conversation.

128    On 13 and 14 September 2021, Ms Scott received three different written communications from Mr Jones. The first was an email sent from Mr Jones to Mr McGushin, copying in Mr Wallis and Ms Scott, amongst others. The email chain had been discussing an ELA shareholders deed. Mr McGushin had previously emailed in this email chain asking Mr Lowrey, “Not sure why we are including the Employee Share plan. There will not be any shares issued by then and so should be deleted?”. Mr Jones responded on 13 September, “Carleys 795,000 will be in the ESOP”.

129    On 14 September, Mr Jones emailed Mr David Lilja of DLK Advisory, asking how he was progressing with the ESOP. Again, he copied Ms Scott to this email. He said, “I would like to be able to say at the Shareholders meeting on Thursday that its in place. Likewise I would like to have Carley’s Shares in the plan ASAP.”

130    Also on 14 September, Mr Jones texted Ms Scott: “Carley Just for completeness (and the timing is awkward – ie I want your shares issued pre EGM) can you do a consent form please. No biggy if they don’t as the esop will be in place and we all know about them.” Ms Scott texted in response to this 1 minute later: “No problem!”. It is not clear what Ms Scott meant by “No problem!” Whatever Ms Scott meant she did not complete a “consent form” as requested by Mr Jones.

131    Ms Scott’s evidence was that at this point in time, she understood that negotiations in relation to her ESOP were incomplete. She said that she did not respond to Mr Jones’ communications to state in writing she did not have an agreement because at that time, she was in COVID-19 quarantine and prioritising working on preparation for NASA site set-up. In addition, Ms Scott understood it to be apparent she had not reached any agreement, as there was no new employment contract or cancellation document in existence with her signature on them, and there was insufficient time before the Extraordinary General Meeting (EGM) on 16 September 2021 to allow for all the documents to be completed. I accept that evidence. It is consistent with the lack of documentation completed to that point.

132    On 15 September 2021, Mr Lilja emailed Mr Jones, copying Ms Scott, attaching the following documents which were summarised in the email as:

1. Suggested agreement to cancel Carley’s historical/old arrangement

2. Proposed offer letter for Carley for shares under the start-up plan. All that needs to be confirmed is the number of shares to be issued (managing the 10% rule) – we have included the reference to price on the basis you may choose to issue shares to other current or future employees (including directors) under the same principles;

3. Proposed Employee Share Plan rules (initially relating to Carley’s shares);

4. Proposed offer letter for options under the start-up plan. All that needs to be determine vesting conditions (examples included that the board needs to determine) and then number of options (managing the 10% rule for Carley and 12.5% pool including Carley’s per your email Michael);

5. Proposed Employee Share option Plan rules; and

6. Our net tangible asset valuation for the purposes of determining the market value of shares issued to Carley and determining minimum exercise price for options granted under a start-up employee share plan.

133    Among the “key action points” listed in the email was: “Agree number of shares to be issued to Carley”. The parties agree that on 16 September 2021, Ms Scott attended an EGM where a resolution regarding the ESOP was passed. Specifically, it was resolved that “the board of directors is authorised to allocate or preserve sufficient shares or options to issue shares equivalent to up to 12.5% of the issued share capital of the Company from time to time pursuant to an Employee Share and Option Plan (ESOP) to be established by the Company on such terms as determined by the directors and to be administered by the directors or any committee of directors in accordance with the terms of the ESOP.”

134    Ms Scott gave evidence that she did not speak to the proposed resolution or otherwise about the ESOP at the EGM. Following the EGM, Ms Scott understood that Mr Jones was proceeding on the basis that she would participate in the ESOP. However, Ms Scott said she did not understand Mr Jones to be proceeding on the basis she would be allocated 795,000 shares under an ESOP in exchange for cancelling all her VCAC entitlements. Ms Scott said she understood the resolution was for the approval of the establishment of an ESOP, and separate from Ms Scott’s participation.

135    Mr Jones gave evidence that Ms Scott did speak to the resolution concerning the proposed ESOP, and said words to the effect of: “Yes, I think this is a good thing for the company to do, and I support it. In relation to my own terms and … the deal that is being put here, I believe that that is fair.”

136    I do not accept that Ms Scott said words to the effect of “In relation to my own terms and … the deal that is being put here, I believe that that is fair.” That statement is inconsistent with the findings that I make about Ms Scott’s conduct and communications before, and after, the date on which it is suggested Ms Scott said those words. It is inconsistent with Ms Scott’s written communications, including her email sent less than two weeks later describing the calculation as a “fair bit out”.

137    Ms Scott said that on or around 18 September 2021, she spoke with Mr Jones by telephone. She said that he asked her to sign the shareholders deed to indicate to the Northern Territory Government that Ms Scott would support the terms of the deed should she become a shareholder. Ms Scott said to Mr Jones that she did not believe she needed to sign it because she was not a shareholder, but Mr Jones said he still wanted Ms Scott to sign the deed for the Northern Territory Government.

138    While ELA relies upon the shareholders deed as an indication that Ms Scott “intended to become a shareholder”, it accepted that the document was “not legally effective”. Reading that concession with the balance of Ms Scott’s evidence that she was generally willing to participate if the plan was “like for like”, but had otherwise not agreed to do so, I do not accept that the deed is determinative in the establishment of a “tacit agreement”.

139    On 20 September 2021, ELA’s solicitors sent to the Northern Territory Government’s solicitors an email which attached a draft version of a share subscription investment agreement between Northern Territory and ELA. Ms Scott was copied into this email. I address the investment agreement with the Northern Territory Government and the associated disclosure letter below.

140    Later in the day on 20 September 2021, Ms Scott received another email from Mr Jones attaching a proposed new employment contract and a document cancelling Ms Scott’s “previous share/option/employment arrangements”. Mr Jones also noted in the email: “There is also the Official ESOP Share offer letter for you 795,000 to be issued under ESOP. I am finalising the ESOP conduct and rules … Please execute your offer acceptance ASAP and return. Please ensure the right Entity for issue is provided.” Ms Scott gave evidence that, on review of these documents, the proposal represented only 795,000 shares, it was not like for like with her existing entitlements, and the contract was otherwise still in draft form. Ms Scott’s view was that the documents Mr Jones sent her needed to reflect the VCAC. Ms Scott did not “execute [the] offer acceptance” as requested by Mr Jones.

141    Importantly, Mr Jones gave evidence that he accepted that as at 20 September 2021, the share plan terms had not been finalised, Ms Scott had not applied for shares, and Ms Scott had not been issued shares. He also accepted that 20 September 2021 was the first time that Ms Scott had been provided with the share offer and draft employment contract. He accepted that the documents represented a complete package for Ms Scott, that each component of the package had to be agreed, including the employment contract, and that the employment contract required amendment as at 20 September 2021.

142    Ms Scott did not sign the documents Mr Jones sent her on 20 September 2021. I accept her evidence that she also did not tell anyone that she would sign them.

143    On 21 September 2021, Mr Jones called Ms Scott to follow up on the documents he had sent her the night before. Ms Scott says that Mr Jones said words to the effect of “I’ve asked you about this several times. You say yes, but you keep avoiding it?”. While there is some dispute about the content of that call, there is no dispute about Mr Jones following up on the documents. In response to Mr Jones asking her to get onto signing the documents, Ms Scott said she had not received the full documentation they had been speaking about. It does not appear to be in dispute that the “full documentation” was not received by Ms Scott.

144    On 29 September 2021, Ms Scott emailed Mr Jones regarding the ESOP, relevantly stating: “Yes to AirManOps” and “Aside for you and I, believe the calc was a fair bit out which could be picked up via some options in a subsequent contract. Doesn’t seem to need to interfere with the completion docs now.” Ms Scott’s evidence was that “yes to AirManOps” indicated that, if there was an entity to allocate shares to in the ESOP, her preference was that it be AirManOps. Ms Scott’s evidence was that she did not have an agreement in place to take shares in the ESOP but thought it was reasonable to have a conversation about which entity she would take shares in. I accept that evidence.

145    Ms Scott also gave evidence that by “I believe the calc was a fair bit out”, she intended to convey that while they could have the conversation about shares, she believed the calculation was not correct. She gave further evidence that she did not wish to hold up the investment process, but was also not willing to accept only 795,000 shares at the time. The words written by Ms Scott speak for themselves. They do not reflect an acceptance of the 795,000 shares.

146    Later in the day on 29 September 2021, Ms Scott received an email from Mr Wallis in relation to her signing the shareholders deed for the Northern Territory Government. The email relevantly read: “You have not been issued shares in your name. You should not have been asked to sign the Deed, at least not in your personal capacity.” Mr Wallis emailed Ms Scott again that night, stating: “Suggest you not take shares in your name now as could create a tax issue”. Ms Scott gave evidence that these emails clarified in her mind that the process was not quite right.

147    Ms Scott and Mr Wallis then exchanged Signal messages in which Mr Wallis confirmed Ms Scott did not hold shares. Ms Scott then emailed Mr Jones (copying Mr McGushin, Mr Wallis and Mr Lowrey) stating “Hi all I have not been issued shares, so don’t believe I need to take them in own name right now. Michael, will try you again in morning.” Shortly after she sent a further email to Mr Jones stating: “To be clear, I have no shares issues [sic] so identifying which entity to list for me shouldn’t be an issue for this process right now. I likely should be removed from deed.”

148    On 29 September 2021, Mr Lowrey emailed Mr Wallis, copying in Ms Scott and Mr Jones, on the topic of whether shares had been issued to Ms Scott. Mr Lowrey relevantly stated:

If the issue is that they were issued to an Employee Share Plan and are now being transferred out of that into Carley's entity then we need to look at the facts. Does the employee share plan exist other than in name? If there is no entity it is arguable that they were ever actually issued. If that is the case then registering them now in Carley's entities name is the procedural implementation of what was approved.

149    In that same email chain and later in the evening of 29 September 2021, Mr Jones responded:

Carley,

As this wipes out the company's liability to you we needed to issue the shares and they needed to be timed with capital raising.

They are also in the schedules provided in the investment agreement and the shareholders deed we just need to make sure we are issuing them to the right entity and listing that as we get the re-signings done.

150    Ten minutes later, Mr Jones sent an additional email in that chain directed to Ms Scott:

Carley

This was not my idea, Garry did the calc with Romeo based on the two employment agreements which has a few adverse issues for you….such as 1.1m shares at $4 per share would give you and up front tax payable now liability of c. $1m in cash.hence why I ask if you were ok with the 795k in shares under the new scheme.

151    Ms Scott said that out of concern, she then forwarded Mr Melin the email chain with the message: “A bit concerned at how the below is playing out. Shares to be issued to individual under esop?”

152    Following those emails, on the evening of 29 September 2021, Ms Scott messaged Mr Jones the following:

Bit confused with the emails. Will get some rest and stuff an accountant look at it. Believe my shares were to be issued under ESOP, mitigating the upfront liability. I thought they had to be in my own name. The amount was incorrect but could be rectified by options. All seems a bit odd to be needing a rushed and unclear resolution to right now. Here’s to clear minds tomorrow.

153    On 30 September 2021, Ms Scott emailed Mr Jones the shareholding details for AirManOps. Ms Scott gave evidence that she provided the corporate entity name because Mr Jones had requested it, but did not believe she was agreeing any offer to enter into an ESOP. I accept that evidence.

154    On 1 October 2021, Ms Scott signed the shareholders deed again at Mr Jones’ request. Ms Scott gave evidence that Mr Jones advised her that he needed her signature on paper to prevent the Northern Territory investment being held up. I understood ELA’s earlier acceptance that the deed was not “legally effective” to apply equally to this second signing.

155    Mr Jones accepted that as of 1 October 2021 the draft employment contract had not been finalised.

156    On 11 October 2021, Mr Jones emailed Ms Scott an updated version of the documents sent to her on 11 October 2021, including an updated employment contract. Ms Scott gave evidence explaining errors in that contract, and changes between that contract and her existing employment contract including a reference to the grant of 795,000 shares. Ms Scott said that the employment contract did not provide like for like benefits with her existing VCAC. She did not execute the contract.

157    On or around 14 October 2021, Ms Scott had a conversation with Mr Wallis where she told him she cannot sign the new employment contract. Around the same time, Ms Scott gave evidence that she had a conversation with Mr Jones where she told him that she did not understand the full detail to the change in her role that was proposed in the contract and she was concerned that the 795,000 shares again seemed to be all that was offered, and that was not appropriate. Ms Scott asked Mr Jones to do the share calculation with DLK Advisory, and Mr Jones confirmed it had not been done. Again, I accept the evidence of that conversation.

158    On 20 October 2021, Ms Scott sought Mr Melin’s assistance with the calculations so that she could present them back to Mr Jones as a redrafted proposal. She emailed Mr Melin: “For our 2pm today, may you please have the calculation of outstanding shares acquired related to my contract? Aiming to present that to Michael as part of the redrafted CEO contract”.

159    Ms Scott never presented a redrafted contract to Mr Jones as she went on leave a number of days after this email was sent, and did not return to work after taking that leave because her employment was terminated.

The Northern Territory Investment Agreement

160    ELA submitted that, by Ms Scott approving a disclosure letter in respect of the Northern Territory Investment Agreement in September 2021, Ms Scott was conveying her concurrence with the ESOP Agreement. I set out the evidence relevant to this submission below.

161    Ms Scott gave evidence that around August 2021, Mr Jones had the lead in negotiating an investment agreement between ELA and the Northern Territory. On 23 August 2021, Mr Lowrey emailed Mr Jones, Mr Wallis and Ms Scott a spreadsheet that identified matters that needed to be disclosed to the Northern Territory government. The spreadsheet included “financial warranties”. Ms Scott gave evidence that, upon reading this document, she understood that ELA might need to disclose to the Northern Territory the convertible notes or shares for her and others.

162    In late August 2021, Ms Scott attended a meeting with Mr Lowrey and Mr Jones about the investment agreement and the disclosure letter. She said that either Mr Jones or Mr Lowrey said that they did not consider the VCAC could be included in ELA’s warranties as a convertible note. A discussion then followed about where the VCAC should be captured, and there was a conclusion that the right place for the disclosure of the VCAC was in ELA’s financial statements to be provided. Ms Scott’s evidence was that she was enthusiastic to see whether the CAC would be disclosed in the management accounts or annual reports.

163    On 1 September 2021, Mr Lowrey emailed Ms Scott, Mr Jones and others a list of representation and warranty disclosures. The list relevantly stated: “need to confirm how Carley [Scott] and Scott [Wallis] entitlements are to be treated”.

164    On 6 September 2021, Mr Lowrey emailed a further disclosure list to Ms Scott, Mr Jones and others. The list provided that “Carley incentive” needed to be “discussed with accountants/auditors” and “on [ ] the company established the [ELA Employee Incentive Scheme] and agreed to issue Carley Scott or her associate [ ] 1.1 million fully paid shares in ELA for consideration of $nil per share”.

165    Ms Scott said that after her initial conversation with Mr Lowrey and Mr Jones, Mr McGushin confirmed verbally at several points that the VCAC should be recorded in ELA’s financials. Mr McGushin did not give evidence. I accept Ms Scott’s evidence that Mr McGushin expressed that confirmation.

166    On 20 September 2021, Mr Jones emailed Ms Scott and others, allocating the task of “disclosure letter related warranties and representations” to Ms Scott, Mr Wallis and Mr Jones. On 21 September 2021, Andy Cowan, the Territory Investment Commissioner in the Northern Territory Government, emailed Mr Jones and Ms Scott attaching the share subscription agreement between ELA and the Northern Territory, which had been executed by the Northern Territory. The agreement identified that “ELA Employee Share Plan” held 795,000 ordinary shares. The agreement also warranted that ELA had not granted any option, convertible notes, warrant or other security convertible into shares or other right over the issued or unissued capital of ELA other than as disclosed in writing.

167    Ms Scott gave evidence that she did not understand the reference to “ELA Employee Share Plan” holding 795,000 ordinary shares to be a reference to the 795,000 ordinary shares proposed to be allocated to her or AirManOps. Instead, she understood the shares were to be allocated to an entity for ELA to hold. Ms Scott’s evidence was that she understood that if an ESOP was implemented, the shares might be issued to her. Ms Scott also understood that the warranty ELA gave in the shareholder subscription agreement did not capture the VCAC because she had explicit advice that the VCAC was captured under the financial information provided.

168    Between 22 and 28 September 2021, a final disclosure letter for the Northern Territory Government was prepared. On 22 September 2021, Ms Scott sent Mr Wallis (copying Mr Jones) a version of the disclosure letter for Mr Wallis’ signature. That version contained the words “A debt is owed to AirManOps (associate of Carley) for consulting work”. Ms Scott gave evidence that she understood that to be a reference to the AirManOps invoices, and that there was disclosure of the CAC in the financial items.

169    In a version of the disclosure letter sent by Mr McGushin to Ms Scott and others on 28 September 2021, additional words were added to the note about the AirManOps debt to state that it was to be “removed from accounts and settled at completion as part of consideration of ESOP share issue”. Ms Scott gave evidence that she noticed those words in the days after Mr McGushin sent the email. She stated that they did not surprise her because she understood she had agreed with Mr Jones on 22 September 2021 to cancel the invoices from ELA’s accounting systems, and she was in conversation with Mr Jones about a finalised package of information to enable her to enter into an ESOP.

170    Ms Scott gave further evidence that as at 28 September 2021, she had indicated she was open to participating in an ESOP arrangement, but understood she had not reached any agreement. She had understood the VCAC was identifiable to potential investors within ELA’s management accounts.

171    Ms Scott ultimately approved the disclosure letter on 5 October 2021. Ms Scott’s evidence was that the purpose of the disclosure letter was to “make sure there was a thorough understanding by investors in regard to elements that were outlined in the investment agreement”. The final version of the letter relevantly disclosed: “A debt listed as owed to Airman Ops (associate of Carley Scott) for consulting work and expenses. Is to be removed from accounts and settled at completion as part of consideration of ESOP share issue.”

172    The disclosure letter did not reference the VCAC. Ms Scott gave evidence that this aligned with the discussion she had had where the VCAC would be recorded in financial documents.

173    As noted above, ELA submitted that by approving the disclosure letter in September 2021, Ms Scott was conveying her concurrence with the ESOP Agreement. It submits that this is supported by the fact that Ms Scott took no steps to inform the Northern Territory that ELA’s position had changed from what Mr Jones had represented to the Northern Territory Government on 20 September 2021, that the contingent liability to Ms Scott was removed in exchange for the issue of ESOP shares.

174    I do not accept that the disclosure letter, by itself or cumulatively, establishes a tacit agreement. I accept Ms Scott’s evidence that the letter was for the purpose of providing investors with an understanding in relation to matters outlined in the investment agreement, and that she had understood the VCAC would be recorded in financial documents. I do not accept that it is evidence of her agreement to the ESOP.

175    In any event, Ms Scott approved the letter on 5 October 2021, some four days after the tacit agreement was alleged to have been reached. It is not clear how Ms Scott’s actions from 1 October 2021 to 5 October 2021 can constitute evidence of the agreement alleged to have already been reached.

Conclusion on ESOP

176    ELA accepted that Ms Scott did not sign the documents provided to her by Mr Jones on 20 September 2021. Nevertheless, it submitted that I should infer from the “acts and conduct of Ms Scott” before and after 20 September 2021, and those of Mr Jones, that a “tacit agreement” was reached between Ms Scott and ELA. It said that this tacit agreement was reached “by 1 October 2021”. By that agreement, it submitted that Ms Scott agreed to replace all entitlements to be conferred under the VCAC with participation in the ESOP Agreement.

177    I reject ELA’s submissions. I accept Ms Scott’s submission that she did not agree that she would enter into the ESOP Agreement.

178    As I say above, I found Ms Scott’s evidence to be credible and truthful. Consistent with the findings above and matters set out below, I am not satisfied that any of her communications or dealings with Mr Jones, or others representing ELA, established a tacit agreement to enter the ESOP and forgo her entitlements under the VCAC. Where there is a conflict between the evidence of Ms Scott and Mr Jones, I accept Ms Scott’s account. As explained, I do not doubt that Mr Jones was determined to have Ms Scott forgo her entitlements under the VCAC. It was an agreement that was not negotiated by him. He described the agreement as a subject of “mirth”. I do not doubt that he worked hard in an effort to have Ms Scott enter the ESOP so as to replace the VCAC entitlements. I find that determination and desire resulted in his overstatement of Ms Scott’s “tacit agreement”.

179    In rejecting ELA’s submission, I give substantial weight to Mr Jones’ evidence that certain documents were necessary to enter into the ESOP agreement. Mr Jones also accepted in his evidence that he could not unilaterally impose the ESOP on Ms Scott. Ms Scott did not execute the documents said to be necessary for her to enter into that agreement. ELA accepted that.

180    I additionally consider that Ms Scott’s conduct was consistent with someone who wanted to enter into an ESOP Agreement, but wanted to ensure that her entitlements would be like for like. Not being satisfied of that, she had not yet agreed to enter into the ESOP Agreement presented to her.

181    Together with my general comments above, there are a number of specific matters on which I rely in accepting Ms Scott’s account.

182    First, having regard to my conclusions on the conversations with Mr Jones which took place on 8 September 2021 where Ms Scott queried her entitlements under the VCAC, and on the conversations on 8 September 2021 and 10 September 2021 where she expressed concern over the 795,000 share figure, I consider this conduct indicates that no agreement in respect of the amount of shares under the ESOP Agreement had been reached.

183    Second, on 15 September 2021, Mr Lilja’s email to Mr Jones explicitly states that a key action item was to “agree number of shares to be issued to Carley”. This suggests that as at 15 September 2021, the share allocation to Ms Scott was not agreed.

184    Third, Mr Jones accepted that on 20 September 2021, the share plan terms were not finalised. He accepted that Ms Scott had not applied for shares and that she had not been issued shares. Mr Jones’ evidence to this effect was described at [141].

185    Fourth, as described at [141], Mr Jones provided Ms Scott the ESOP documents and asked for Ms Scott to execute those documents. Mr Jones accepted the 20 September 2021 was the first time that Ms Scott had been provided with the share offer and draft employment contract, that the documents represented a complete package for Ms Scott, that each component of the package had to be agreed, including the employment contract, and that the employment contract required amendment as at 20 September 2021. Ms Scott did not execute those documents.

186    Fifth, Mr Jones called Ms Scott on 21 September 2021 to follow up on the documents sent the night before. Following this call, Ms Scott still did not execute the documents. This call is described at [143].

187    Sixth, I take account of Ms Scott’s email on 29 September 2021 in which she referred to the share calculation in the ESOP being “a fair bit out”. These words do not reflect an acceptance of the 795,000 shares. The words point away from any tacit agreement pertaining to that amount.

188    Seventh, and relatedly, I have regard to Ms Scott’s emails on 29 September 2021 to Mr Melin and Mr Jones which stated she was “a bit concerned at how the below is playing out” and that she was a “bit confused with the emails” and would get “an accountant [to] look at it”. Again, this is not consistent with any tacit agreement forming or having been formed by that point.

189    Eighth, ELA’s acceptance that the shareholder deed was not legally effective undermines that document supporting Ms Scott’s tacit agreement to her share entitlement under the ESOP.

190    Ninth, Mr Jones accepted that as of 1 October 2021, when Ms Scott signed the shareholders deed, the draft employment contract had not been finalised. This is inconsistent with the tacit agreement having been formed by 1 October 2021.

191    Tenth, on 11 October 2021, Mr Jones emailed Ms Scott an updated version of the ESOP documents. This is described at [156]. Still, Ms Scott did not sign those documents. The sending of updated documents on 11 October 2021 is also directly inconsistent with a tacit agreement being formed on 1 October 2021.

192    Eleventh, Ms Scott emailed Mr Melin on 20 October 2021 asking him to “have the calculation of outstanding shares acquired in relation to [her] contract” for her to present to Mr Jones “as part of the redrafted CEO contract”. This email is described at [158]. Ms Scott’s explicit request for a “calculation” of shares and a “redrafted” CEO contract on 20 October is inconsistent with a tacit agreement being formed on 1 October.

The estoppel alternative must also fail

193    In the alternative to a “tacit agreement”, ELA submitted that Ms Scott is estopped from resiling from her representation or promise that she wished to replace the VCAC with the ESOP Agreement.

194    ELA relied on the same conduct outlined above as constituting a representation or promise that Ms Scott wished to replace the VCAC with the ESOP Agreement. ELA said that, acting in reliance on that representation or promise, ELA to its detriment organised its affairs on the basis that Ms Scott would be issued 795,000 shares under an ESOP. First, it points to ELA having provisioned 795,000 shares for Ms Scott in performance of the ESOP Agreement. Second, with the issue of the disclosure letter on 6 October 2021, ELA concluded the share subscription agreement with the Northern Territory. In this letter ELA made enforceable representations as to the existence of Ms Scott’s entitlement under the ESOP and as to there being no liability of the kind alleged by Ms Scott under the VCAC. Third, it established the ESOP. ELA said it organised its affairs without having the benefit of being able to remove Ms Scott’s contingent liability from its balance sheets.

195    ELA said that Ms Scott’s knowledge that ELA was acting in reliance can be inferred in particular from her approval of the disclosure letter and the warranties discussed above, and the fact she was a party to numerous email and text message communications concerning work to establish the ESOP and finalise the investment by the Northern Territory. ELA said it would therefore be unjust or inequitable for Ms Scott to resile from her representation or promise and she is estopped from doing so.

196    Ms Scott said that the estoppel claim fails variously: first because of a deficiency in ELA’s pleadings, being that ELA’s pleaded case in respect of estoppel relates to Ms Scott’s actions in August and September 2021, but that pleading incorporates a definition of the ESOP Agreement from earlier in the pleadings which define the ESOP Agreement as being in part constituted by conduct occurring in October 2021, second because of Mr Jones’ admissions at [141] above, third because ELA has not identified the relevant person or persons who were the mind of ELA to establish reliance, and fourth ELA did not explain how provisioning of shares or the issuing of the disclosure letter constitute a detriment.

197    For the same reasons that I found there is no tacit agreement, I do not consider that a representation or promise is made out. To the extent Ms Scott made a representation, it was to the opposite effect: that she was not prepared to enter into the ESOP Agreement in the terms of the documents sent to her on 20 September or 11 October 2021. The estoppel claim therefore fails at that threshold.

Is the VCAC ineffective because there was no fresh consideration

198    ELA said that the VCAC is ineffective because, as a variation of the CAC which removed the funding hurdles, it was not supported by any fresh consideration. ELA said that none of the terms inserted into the VCAC conferred any additional benefit on ELA and that any benefits flowed one way in Ms Scott’s favour.

199    While there was a pleading that the CAC was “replaced” by a second commitment amount contract, in the alternative to the contract being varied, Ms Scott did not submit there was any legal consequence to that difference. I understand that Ms Scott did not press an argument that, if there was a new contract created rather than an existing contract being varied, the consideration issue would no longer be an obstacle. The parties’ submissions instead focussed on the adequacy of continuing duties as consideration for a varied contract. I have approached this issue on that basis.

200    In Wigan v Edwards (1973) 1 ALR 497 at 512, Mason J said:

The general rule is that a promise [by an employee] to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the [employer] under that contract, and it is to do no more than the [employee] is bound to do under that contract. The rule expresses the concept that the new promise, indistinguishable from the old, is an illusory consideration.

201    ELA says that Ms Scott agreeing to provide ongoing services as a new promise, indistinguishable from her old promise, was an illusory consideration such that the agreement was ineffective.

202    The general rule is conditioned by the fact that, in certain circumstances, promises to perform an existing duty owed may be consideration. This may be the case where the promisor obtains a “practical benefit”, or avoids a detriment: see generally Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 (Santow J). The words “real benefit” have also been used in place of practical benefit: see Director of Public Prosecutions for the State of Victoria v Le [2007] HCA 52; 232 CLR 562 at [43] (Gummow and Hayne JJ); Hill v Forteng [2019] FCAFC 105; 138 ACSR 344 at [22] (Kerr, Bromwich and Wheelahan JJ).

203    Ms Scott says that her agreement to continue in employment constituted fresh consideration in support of the contract. She says that her “satisfaction in continuing” and the additional assurance that gave ELA of “keeping its CEO in good stead”, together with Mr Wallis being kept “happy” as the result of the extra certainty of her remaining was sufficient consideration. This submission appears to rely on the following exchange which took place at the hearing:

What did ELA get in return for the removal of the funding hurdle? Could you tell his Honour?---Your Honour, the discussion with Mr Wallis about removal of the funding hurdles, which would be something that I was looking for, and my satisfaction in continuing. It was agreed with Mr Wallis verbally around 18 October 2021, again, in a video call. So I disagree that there was no benefit to the company in keeping its CEO in a good stead.

But other than keeping you happy, ELA got nothing out of it, did it?---I believe there are follow on – a number of things that happen if your CEO is working well.

I understand that, but subject to my qualification, other than to keep you happy, ELA got nothing out of it?---Disagree.

204    Whether consideration can be found in cases of promises to perform an existing duty “can turn on subtle variations in the facts”: Forteng at [23]. It is “in essence, a fact-finding exercise, albeit requiring legal characterisation”: at [24]. In Forteng, the Full Court considered whether consideration was given in circumstances where the appellant, who was a director, shareholder, and employee of the respondent, had accepted a lower payment for the performance of substantially the same duties. The Full Court considered that, had the appellant not agreed to the variations, he was faced with the prospect that the respondent could instead lawfully terminate his contract, and that the value to him of the respondent remaining in business, assisted by all the directors effectively diverting their salaries into the business, was worth more to him than the payout he would have received upon termination had he not agreed to the variations: at [35]. The Full Court also considered circumstances where there was an “existential threat” that the business was failing and might not continue, which was neither hypothetical nor speculative. The Full Court continued at [39]-[40]:

Here, the bargain struck was for company money to be diverted away from directors’ remuneration as employees.  This was to Mr Hill’s immediate detriment, being the consideration flowing from him to Forteng.  In exchange, Forteng provided consideration by deploying those funds in an endeavour to ensure the survival, future growth and enhanced value of Forteng, as well as Mr Hill’s continued employment and remuneration well in excess of the value of the real possibility of only four weeks’ pay on lawful termination on notice.

…

Mr Hill was not simply unilaterally accepting less money to do the same as he had contracted for, but rather was trading that reduction for what he perceived to be immediate and continuing benefits. 

205    The Full Court in Forteng also relevantly cited at [23] the example given in Australian Woollen Mills Pty Ltd v Commonwealth [1954] HCA 20; 92 CLR 424 at 457 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ):

In Australian Woollen Mills, the example was given (at 457) of A saying to B “I will pay you £1,000 on your arrival in Sydney”. Without more, there is no binding contract due to the absence of a relationship between the two acts. But if A had earlier told B that it was of vital importance to him (A) that B should come to Sydney, and B objected because it might cause him a financial loss unrelated to anything to do with A, then B’s acceptance of the offer of payment might not only establish the agreement, but also the consideration for it.

206    In addition to the excerpt from the hearing outlined above, I am also mindful of Ms Scott’s evidence that Mr Wallis and the Board was not going to commit to or agree to the $70 million in investment reflected in the CAC, and that in those circumstances it was not a fair requirement and Mr Wallis said that the funding hurdles should be removed. I have also had regard to Ms Scott’s evidence as to Mr Wallis’ satisfaction in her remaining at ELA, pertaining to conversions on and before 18 October 2019:

My recollection is that Mr Wallis was really excited and pleased with the work that was being done, the enthusiasm that was being shown by core parties, a funder, a core customer, and also the regulators, which could be a real barrier to us achieving success. With the regulators in that discussion, from my perception of the discussion, were enthusiastic to work safely but collaboratively to investigate the opportunity for NASA to launch. So those discussions form part of the context of Mr Wallis seeing that there was a lot there to keep me at ELA and a lot of positive momentum going forward, and my reading of our discussion is that when we were talking about that he said that made him feel more comfortable in the removal of hurdles because he didn’t have the 70 million – or he didn’t want the $70 million, but also that he just felt a great deal of positivity in that I would be staying with the company.

After this discussion, Ms Scott, what did you understand the position to be in relation to the funding hurdles in the commitment amount contract?---That they would be removed.

(Emphasis added.)

207    Having regard to the evidence, and the principles described above, I am satisfied that the VCAC was supported by fresh consideration. That is, ELA received a “practical benefit” in the form of satisfaction that Ms Scott would be continuing at ELA in circumstances where the investment sought to be obtained was no longer realistic. ELA received this in exchange for its removal of the funding hurdles. The VCAC is therefore not invalidated for lack of consideration.

THE CORPORATIONS ACT ISSUES

208    ELA said Ms Scott is not entitled to the amount of $4,367,430.25 sought pursuant to the VCAC because the entire amount constitutes a retirement benefit which requires member approval under Div 2 of Pt 2D.2 of the Corporations Act. ELA said that member approval has not been given, and no relevant exemptions under Div 2 apply. ELA said that, because Div 2 prohibits the payment, such a payment would be unenforceable due to principles of statutory illegality.

209    Section 200B(1) of the Corporations Act, within Div 2, provides:

200B  Retirement benefits generally need membership approval

Benefits in connection with retirement if person has held a managerial or executive office

(1) An entity mentioned in subsection (1AA) must not give a person a benefit in connection with a person’s (the retiree’s) retirement from an office, or position of employment, in a company or a related body corporate if:

(a) the office or position is a managerial or executive office; or

(b) the retiree has, at any time during the last 3 years before his or her retirement, held a managerial or executive office in the company or a related body corporate;

unless there is member approval under section 200E for the giving of the benefit.

Note 1:    This subsection extends to benefits given by way of compensation for, or otherwise in connection with, a person’s loss of an office or position (see subsections 200A(1) and (3)).

Note 2: Sections 200F, 200G and 200H provide for exceptions to this subsection.

Note 3: The recipient of the benefit need not be the retiree.

Note 4:    This section has a modified operation in relation to CCIVs: see section 1224ZD.

210    Broadly speaking, the section seeks to prevent “golden handshakes” being paid to directors and certain other officers in retirement: see Randall v Aristocrat Leisure Ltd [2004] NSWSC 411 at [551] (Einstein J).

211    There is no dispute that ELA is a relevant entity for the purposes of s 200B(1). There is also no dispute that shareholder approval has not been provided for any payment made or purported to be made in respect of Ms Scott’s termination.

212    Ms Scott was terminated on 4 March 2022. This means that she was terminated more than three years, but less than four years, into the commitment period outlined in the VCAC. The parties agree that the $2 million in convertible notes which were to accrue in the fourth and fifth years of the commitment period (the prospective amount) constitute a “benefit in connection with [Ms Scott’s] retirement” for the purposes of s 200B(1). I have approached the matter on the basis of that agreement. The parties disagree about whether certain exceptions apply to mean that the prospective amount, or part of the prospective amount, does not require member approval. I will turn to issues in relation to the prospective amount further below.

213    The parties disagree about whether the remaining $3 million, which accrued during the commitment period and during Ms Scott’s engagement with ELA (the retrospective amount), engages s 200B(1). If it does engage s 200B(1), the parties likewise disagree about whether the entire $5 million amount, being the combined prospective and retrospective amounts, is subject to any exceptions and the effect of those exceptions.

214    The respected authors of Austin & Black’s Annotations to the Corporations Act have described the provisions in Div 2 as “exceedingly and probably excessively complicated”. I agree with that assessment. It is helpful to detail the constituent parts of s 200B(1) before first turning to the issue of whether the retrospective amount engages s 200B(1).

“Retirement”

215    Section 200B(1) restricts benefits in connection with a person’s retirement from an office, or position of employment, in a company or related body corporate.

216    The ordinary meaning of the word “retirement” would suggest Ms Scott did not “retire” from ELA. She was terminated. However, s 200A(1)(e) provides that, for the purposes of Div 2 of Pt 2D.2, retirement from an office or position includes “loss of the office or position”. In McBain v Bellamy’s Australia Ltd [2018] NSWSC 1152 at [19], Stevenson J said in respect of that definition:

Section 200A(1)(e) provides that “retirement from an office” includes “loss of the office”. It thus includes termination of employment, as occurred here.

(Emphasis added.)

217    Stevenson J did not otherwise explain that conclusion. However, there was no dispute between the parties as to the correctness of McBain, nor to the proposition that Ms Scott “retired” for the purposes of s 200B(1). While the combined effect of s 200A(1)(e) and McBain appears to significantly expand the ordinary meaning of the word “retirement”, in circumstances where there is no contest between the parties on this point, I accept that Ms Scott’s termination constituted a retirement for the purposes of s 200B(1).

“Managerial or executive office”

218    Section 200B(1) applies to a retiree’s retirement from “an office, or position of employment” in a company if (a) the office or position is a managerial or executive office or (b) the retiree has, at any time during the last 3 years before his or her retirement, held a managerial or executive office in the company.

219    Section 200AA defines “managerial or executive office” in two ways. The first way is in relation to companies to which s 300A of the Corporations Act applies (a listed disclosing entity). Section 300A provides that specific information must be provided by listed companies in an annual directors’ report for a financial year. Section 300A(1)(c) provides that the report must include the prescribed details in relation to the remuneration of each member of the key management personnel for the company (or consolidated entity). Section 200AA(1) provides that where s 300A applies for the previous financial year for the company, a person holds a managerial or executive office in the company during the current financial year if the person’s details were included in the directors’ report for that previous financial year in accordance with s 300A(1)(c).

220    The second way, which applies for body corporates not covered by s 200AA(1), is that a managerial or executive office is defined as an office of director of the body corporate, or any other office or position in connection with the management of the body corporate’s affairs that is held by a person who also holds an office of director of the body corporate or a related body corporate: s 200AA(3).

221    Ms Scott’s written submissions in reply characterise ELA in the second way rather than the first. There was otherwise no submission that ELA is a listed disclosing entity, and no direct evidence to that effect. In those circumstances, I accept that ELA was a company covered by the second definition outlined in s 200AA(3).

222    Section 200AA(3) directs attention at when the person became a director. Ms Scott was appointed as CEO as a contractor from April 2018. On 16 September 2021, she was appointed to the office of Director and held that office as well as the CEO office.

223    In its Third Further Amended Defence, ELA said that between 16 September 2021 and 26 October 2021, Ms Scott was a director of ELA, and at all material times she held managerial or executive office for the purposes of Pt 2D.2 of the Corporations Act. Given ELA’s use of the defined term “managerial or executive office” I understand the reference to “all material times”, to be referring to the period of Ms Scott’s directorship between 16 September 2021 and 26 October 2021.

224    I accept that, for the purposes of s 200B(1), the relevant office or position in question is the office or position of Director, or Director and CEO, which Ms Scott held from 16 September 2021 to 26 October 2021 (the date Ms Scott emailed Mr Jones resigning as Director), or alternatively 21 December 2021 (the date ASIC records state that Ms Scott ceased being a Director). I will return to this point in greater detail below when I discuss the exception under s 200F(2)(a)(ii).

What is the relevant “benefit”?

225    The parties disagree about the characterisation of the relevant “benefit” for the purposes of s 200B(1). This characterisation matters, because it impacts whether the benefit is given “in connection with” the retirement, and hence whether the benefit is subject to the prohibition in s 200B(1).

226    ELA defines the relevant benefit as the payment of cash, being the sum of money claimed by Ms Scott that follows from the contractual entitlement to the convertible notes. ELA say Ms Scott is seeking the enforcement of an alleged contractual entitlement to payment of cash in these proceedings and that she is not seeking to be provided with the convertible notes. ELA say that no “benefit” could be obtained by Ms Scott unless or until a right to convert was exercised, and that it was the act of termination which triggered any right that Ms Scott had to the full commitment amount. It says that before Ms Scott’s termination her entitlement to the retrospective amount in convertible notes had notionally accrued but was not payable, and it is not correct to characterise the accrued convertible notes as a separate component or “benefit” for the purposes of s 200B.

227    Ms Scott defines the relevant benefit as the option of convertible notes, rather than the receipt of the cash or shares itself. She says that the accrual of convertible notes is a benefit for the purposes of the Corporations Act because the notes are a legally enforceable option and therefore clearly fall within the broad definition of “benefit” in s 200AB and its subset definitions of “a payment or other valuable consideration” and “any legal or equitable right”.

228    Section 200 provides that for the purposes of Div 2, in determining whether a benefit is given:

(a)    a broad interpretation is to be afforded to benefits being given, even if criminal or civil penalties may be involved; and

(b)    the economic and commercial substance of conduct is to prevail over its legal form.

229    “Benefit” in Div 2 of Pt 2D.2 is given a broad definition by s 200AB(1) of the Corporations Act, and includes:

(a)    a payment or other valuable consideration;

(b)    any kind of real or personal property;

(c)    any legal or equitable estate or interest in real or personal property;

(d)    any legal or equitable right.

230    There are further things specified by the Corporations Regulations 2001 (Cth) as constituting, and not constituting, a benefit for the purposes of Div 2: see s 200AB(1)(e) and s 200AB(2) of the Corporations Act and reg 2D.2.02 of the Corporations Regulations. These are not relevant for present purposes.

231    In determining the relevant benefit given to Ms Scott under the VCAC, I am mindful that I am to focus on the economic and commercial substance of the conduct over its legal form: see Nichol v Discovery Africa Ltd [2016] FCAFC 182; 343 ALR 594 at [90]-[92] (Greenwood, McKerracher and Moshinsky JJ); Queensland Mining Corporation Ltd v Renshaw [2014] FCA 365; 229 FCR 13 at [80] (Perry J).

232    In my view, ELA’s submission that the notes had “notionally” accrued does not accurately capture the commercial substance of the VCAC. The commercial substance of the convertible notes scheme in the VCAC is to provide payments for Ms Scott’s services as CEO, in circumstances where ELA is a start-up that is unable to commit to a regular salary or contract payment and requires flexibility while it continues to develop. The convertible notes in respect of the retrospective amount were “given” to her for the purposes of s 200B(1) at the times outlined in the payment schedule outlined in the VCAC, during the course of Ms Scott’s engagement at ELA. I consider that Ms Scott’s acquisition of those convertible notes constitutes a benefit under s 200AB given that definition is expressed to extend to any “legal or equitable right”. The accrual of those convertible notes constitutes a benefit, and that benefit is distinct from Ms Scott’s ability to convert those notes into cash or shares in certain circumstances.

233    I therefore accept that, in respect of the retrospective amount, the proper characterisation of the “benefit” is the option of convertible notes, rather than the receipt of the cash or shares itself.

234    For completeness, I note that while ELA submitted that the $3 million in convertible notes for the retrospective amount cannot be disaggregated from the $2 million in convertible notes for the prospective amount, this argument falls away once the benefit is properly characterised as the option under the contract. I accept Ms Scott’s submission that the contract provides a textual basis for the disaggregation of the commitment amount into components, because it distinguishes between the retrospective and prospective amounts by expressing the benefits to be released over time. That the contract purports to allow Ms Scott to exercise conversion of the full commitment amount does not affect that the rights to certain amounts of convertible notes accrued to her over time and at particular times.

Is the benefit a “deferred bonus”?

235    ELA also submitted that the payment in respect of the retrospective amount is prohibited on the basis that such an entitlement constituted a deferred bonus within the meaning of reg 2D.2.02(3) of the Corporations Regulations, and such a deferred bonus was subject to automatic or accelerated vesting under reg 2D.2.03(1). ELA said that by operation of reg 2D.2.03 and s 200F(1)(b), the payment is therefore a prohibited benefit under s 200B to the extent the amount exceeds the cap in s 200G(3).

236    ELA’s submission rests upon a restriction provided by the Corporations Regulations. That regulation is said to be authorised by s 200F(1)(b) of the Corporations Act:

200F  Exempt benefits and benefits given in certain circumstances

(1) Subsection 200B(1) does not apply to:

…

(b) a benefit given in prescribed circumstances.

237    Regulation 2D.2.03(2) of the Corporations Regulations provides:

(2) For paragraph 200F(1)(b) of the Act, a benefit requires shareholder approval:

(a) if it:

(i) is a deferred bonus under paragraph 2D.2.02(2)(a); and

(ii) is subject to automatic or accelerated vesting under subregulation (1); and

(iii) exceeds the payment limit set by section 200G of the Act; and

(b) if it is not a benefit attributable to the release of a deferred bonus from a restriction due to death or incapacity.

238    The definition of “deferred bonus” under reg 2D.2.02(2)(a), the descriptions of automatic and accelerated vesting under reg 2D.2.03(1), and the payment cap under s 200G of the Corporations Act do not shed meaningful additional light on the issue.

239    In my view, the retrospective amount cannot be a deferred bonus. For the reasons previously explained, those amounts accrued to Ms Scott immediately at the times specified in the payment schedule of the VCAC and were not “deferred”, nor subject to automatic or accelerated vesting. ELA’s argument must therefore fail on that basis.

240    For completeness, there are two issues with the relevant provisions of the Corporations Act and Corporations Regulations which deserve comment. Similar issues have also been identified by the authors of Austin & Black’s Annotations to the Corporations Act.

241    First, there appears to be some doubt about whether s 200F(1)(b) is properly a regulation-making power. It does not use the word “regulations”. That is to be contrasted with other provisions in Div 2 that expressly refer to “regulations” to be made for certain purposes: see ss 200AB(1)(e), 200AB(2), 200A(1A), and 200E(2C). Section 200F(1)(b) uses the words “prescribed circumstances”. That phrase is given a defined meaning in s 200B(3) that refers quite narrowly to the giving of benefits to superannuation funds, although that definition is expressed to apply only for the purposes of s 200B. The history of s 200F(1)(b) suggests it was intended to pick up that definition in s 200B(3) rather than create a regulation making power: see Austin & Black’s Annotations to the Corporations Act at [2D.200F] for a description of this history.

242    Second, even if s 200F(1)(b) empowers regulations to be made, it follows by the terms of that section that those regulations are to prescribe benefits given in certain circumstances where the s 200B(1) requirement for shareholder approval does not apply. Regulation 2D.2.03(2) however provides for certain benefits that require shareholder approval. There appears to be some doubt about whether s 200F(1)(b) lawfully authorises a regulation of the type of 2D.2.03(2).

Was the benefit “in connection with” the retirement?

243    It is necessary to then consider whether the retrospective amount was given in connection with Ms Scott’s retirement.

244    Section 200A(1) provides that, for the purposes of Div 2:

(a) a benefit is given in connection with a person’s retirement from an office or position if the benefit is given:

(i) by way of compensation for, or otherwise in connection with, the loss by the person of the office or position; or

(ii) in connection with the person’s retirement from the office or position; and

(b) giving a benefit includes:

(i) if the benefit is a payment—making the payment; and

(ii) if the benefit is an interest in property—transferring the interest; and

(c) a person gives a benefit even if the person is obliged to give the benefit under a contract; and

(d) a pension or lump sum is paid or payable in connection with the person’s retirement from an office or position if the pension or lump sum is paid or payable:

(i) by way of compensation for, or otherwise in connection with, the loss by the person of the office or position; or

(ii) in connection with the person’s retirement from the office or position; and

    …

245    The Corporations Regulations also provide for further circumstances in which a benefit is given in connection with a person’s retirement: see s 200A(1A) of the Corporations Act and reg 2D.2.03(1) of the Corporations Regulations.

246    ELA said the retrospective amount was given in connection with Ms Scott’s retirement. It said that the words “in connection with” do not require there to be a causal connection or “but for” test between the retirement and the benefit, citing Renshaw at [71]-[74] (Perry J), which was in turn cited in Nichol at [18] (Greenwood, McKerracher and Moshinsky JJ). ELA further relied on Perry J’s statement in Renshaw at [16] that the statutory scheme:

cast[s] a broad net so as to ensure that all payments or other things given in connection with retirement are caught by the statutory requirement for shareholder approval save where the Act or regulations creates an exemption.

247    ELA said that the words “in connection with” merely require a relation between the giving of the benefit and the termination. It said that the test is satisfied because Ms Scott’s claim for payment based on the September 2022 election engages the clause of the VCAC that deals with what happens if her engagement ceases after 30 April 2021 and prior to 1 May 2023. ELA said Ms Scott’s claim to payment is therefore linked to the termination of her employment because it was the termination of her engagement which rendered the benefit payable in this case.

248    Ms Scott says it is not enough that on a “purely factual level” the right to convert was exercised in factual circumstances that involved termination. She says that there still needs to be a relationship between the giving of the benefit and the loss of the position, and there is no such relationship in respect of the retrospective amount.

249    As explained, the parties also made submissions on whether the commitment amount can be disaggregated into separate “retrospective” and “prospective” components. ELA submits that the payment is to be assessed as one indivisible amount, and that amount is all “in connection with” Ms Scott’s retirement. In my view, the contract itself provides for the release of the benefit to Ms Scott of certain amounts over time. Her rights to the retrospective amount accrued to her at certain milestones through the passage of time. She held those convertible notes whether her engagement ceased or not. This is in contrast to the prospective amount, which accrued to her by reason of the acceleration clause upon her termination, and which the parties accept was given “in connection with” Ms Scott’s retirement. Given that the contract is structured in this way, it is appropriate to distinguish between the retrospective and prospective amounts for the purposes of s 200B.

250    While I accept that the phrase “in connection with” is broad, the contention that the $3 million retrospective amount in convertible notes is a benefit given “in connection with” Ms Scott’s termination fails once the relevant benefit is correctly understood as the rights to the convertible notes accrued under the contract. As I have explained above, those rights accrued to Ms Scott at the temporal milestones outlined in the VCAC. It was the passage of time that released these rights to Ms Scott, rather than termination. There accordingly was no relationship between the accrual of that benefit and Ms Scott’s termination.

Conclusion

251    In light of the above findings, I consider that the $3 million retrospective amount in convertible notes is not subject to the prohibition in s 200B(1).

252    However, as explained, the parties agree that the $2 million prospective amount constitutes a benefit in connection with Ms Scott’s retirement for the purposes of s 200B(1). That amount is prima facie caught by s 200B(1) because member approval was not given for that benefit. I now consider if that amount is subject to any exemptions by operation of s 200F.

THE SECTION 200F EXEMPTIONS

253    Section 200F of the Corporations Act relevantly provides:

200F  Exempt benefits and benefits given in certain circumstances

(1)    Subsection 200B(1) does not apply to:

…

(aa) a benefit given under an order of a court; or

…

(2)    Subsection 200B(1) does not apply to a benefit given in connection with a person’s retirement from an office or position in relation to a company if:

(a) the benefit is:

(i) a genuine payment by way of damages for breach of contract; or

(ii) given to the person under an agreement made between the company and the person before the person became the holder of the office or position as the consideration, or part of the consideration, for the person agreeing to hold the office or position; and

(b) the value of the benefit, when added to the value of all other benefits (if any) already given in connection with the person’s retirement from offices or positions in the company and related bodies corporate, does not exceed the amount worked out under whichever of subsections (3) and (4) is applicable.

254    Ms Scott seeks specific performance of her cash entitlement to the benefits under the VCAC. Alternatively, she seeks damages and or recovery of debt of those amounts. Ms Scott said that an order in respect of those benefits would be “a benefit given under an order of a court” and exempt under s 200F(1)(aa). She said, further, that any benefit is exempt by operation of s 200F(2)(a)(ii). That is, she says it is a benefit given to her under an agreement, made before she became ELA’s CEO, as part of the consideration for her agreeing to hold that position.

255    For the reasons that follow, I find that the exemptions in s 200F do not apply.

The s 200F(1)(aa) exemption

256    Section 200F exempts certain benefits and benefits given in certain circumstances from s 200B(1). The exempt benefit provided for by s 200F(1)(aa) is “a benefit given under an order of a court”.

257    ELA contended that while s 200F(1)(aa) provides that the prohibition in s 200B(1) does not apply to a “benefit given under an order of a court”, there has not yet been any order of a court requiring ELA to make a payment to Ms Scott. It says the exemption in s 200F(1)(aa) therefore has no application to the question of whether s 200B prohibits ELA from making the payment sought under the VCAC. It says if a payment is prohibited by s 200B, and is merely capable of being, but has not yet been, enforced by court order requiring payment, then it is not exempt under s 200F(1)(aa). Ms Scott complained that that contention is circular. She said s 200B(1) only prohibits ELA from making the payment sought if the exemption in s 200F(1)(aa) does not apply. She said by the relief claimed in this proceeding, she seeks the enforcement of her contractual entitlement, and the enforcement of that entitlement by order of the Court would engage the exemption and negative the prohibition.

258    Ms Scott said that to approach the exemption in the way contended for by her would be consistent with the plain meaning of the text of the supplementary explanatory memorandum to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 (Cth) and consistent with the purpose of the provisions being to “shine daylight” onto “golden handshakes”, as it was described in Renshaw v Queensland Mining Corporation Ltd [2014] FCAFC 172; 229 FCR 56 at [29] (Rares, Griffiths and Gleeson JJ). She said that purpose is achieved if the payment is brought before the Court.

259    ELA said that the claimed benefit arises under a contractual term which directly contravenes Div 2 of Pt 2D.2. It said that s 200F(1)(aa) does not apply in such a case. ELA contrasts this with a court order for payment of damages where the damages do not represent the enforcement of a contractual term said to be prohibited by s 200B. ELA said Ms Scott’s construction would subvert the statutory purpose.

260    In construing the relevant statutory provisions, the Court’s task is to take the words that the provisions employ and ascribe to them meanings that the legislature should be presumed to have intended them to have: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [78] (McHugh, Gummow, Kirby and Hayne JJ).

261    That task starts and finishes with a statute’s text, read in its proper context: Federal Commission of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 at 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ). That context includes the position of the provision as it appears in the statute as a whole: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; 147 CLR 297 at 320 (Mason and Wilson JJ). Preference should be afforded to the construction that best achieves the objects of the statute: Acts Interpretation Act 1901 (Cth), s 15AA.

Section 200F(1)(aa) – Text, context, and purpose

262    Dealing first with the text of s 200F(1)(aa). Section 200B is directed at benefits given to a person, in connection with their loss of office or position, without member approval. Here the disputed benefit is the benefit given under the VCAC without member approval. To construe s 200F(1)(aa) as contended for by Ms Scott would mean that the Court’s order would have the effect of approving the benefit given under the VCAC.

263    In Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; 333 ALR 524, the appellant was a former joint-managing director of the respondent. The respondent had a right under the employment contract to terminate the appellant’s employment if he was guilty of any serious misconduct. The respondent terminated the appellant pursuant to that right, and sought a declaration from the Court that this was justified. The appellant made a cross-claim for damages for an alleged wrongful termination of his employment contract. The employer contended that if the cross-claim was successful, any determination of damages awarded by the Court for wrongful termination should be limited by the cap in s 200F(2). The Court also considered whether the relevant “benefit”, in the event of the payment of damages, would be “given under an order of the court” for the purposes of s 200F(1)(aa). The Court held that the appellant’s conduct warranted the description of “serious misconduct”, and hence there was no wrongful termination resulting in damages such that it was not necessary to decide the s 200F(1)(aa) issue: see [143], [231] and [237] (Payne JA (Gleeson and Leeming JJA agreeing)). However, the Court then discussed, as obiter, arguments arising under s 200F(1)(aa): at [237]-[260]. The Court considered that had the unlawful termination claim been successful, any payment of damages ordered in favour of the appellant would prima facie be a benefit “given under an order of a court” for the purposes of s 200F(1)(aa): at [245]. The Court considered that where the benefit the subject of the court order is one also properly characterised as a “genuine payment by way of damages for breach of contract”, s 200F(1)(aa) is capable of applying to that benefit and the benefit is not confined to the more limited exception in s 200F(2)(a)(i): at [247]-[260].

264    In Coope, there was no suggestion that the benefits arising under the appellant’s employment contract were prohibited by s 200B. The application of s 200F(1)(aa) arose only in relation to the award of damages for wrongful termination under a court order for payment of damages. The damages sought did not represent the enforcement of a contractual term prohibited by s 200B. In Ms Scott’s case the claimed payment arises under a term of the VCAC which I have found is covered by the prohibition in s 200B.

265    Ms Scott’s construction would provide the Court with an approval function in respect of the VCAC payment. Reading s 200F(1)(aa) in the context of the Corporations Act as a whole suggests that construction was not intended. Where the Act envisages that the Court will have an approval function it uses clear language, such as “the Court may approve”, “approved by order of the Court”, “with the approval of the Court” or a person “may apply to the Court for approval”: see for example ss 198G(3), 411(4), 420C(1), 444DA(5), 477(2A), 507(10), 661A(3), 664F(1), 983E(2). In some circumstances the Act sets out considerations that guide the Court’s approval: see s 444DA(5). There is no such language, or considerations, set out in s 200F(1)(aa). The text does not reveal the type of approval scheme contended for by Ms Scott.

266    As to purpose and as explained above, Ms Scott submitted that her construction is consistent with the purpose of the provisions being to “shine daylight” onto “golden handshakes”. She says that purpose is achieved if the payment is brought before the Court. Of course, that purpose might not always be met by the making of court orders. In Coope the respondent submitted that the statutory purpose might be subverted by parties to a contract of employment approaching the court and, by consent, having orders made for a payment on retirement: at [251]. Payne JA (with whom Gleeson and Leeming JJA agreed) rejected that argument, saying that “a court faced with a contrivance of the kind suggested by the respondent” has “power to bring the matter to the attention of relevant regulatory authorities who may seek to intervene and make submissions.”: at [258]. That assumes that the consent, and all of the circumstances behind it, are scrutinised by the Court, and the Court brings the matter to the attention of a relevant prospective intervenor or contradictor. There is still the risk that a court, when it is given consent orders and is not informed of all the circumstances, may make the proposed orders without being properly informed and the statutory purpose of s 200B may be subverted. In my view, respectfully, Payne JA’s statement in Coope cannot provide a complete explanation to this issue. Considering purpose this way is against Ms Scott’s construction and in favour of ELA’s construction.

267    Having regard to that text, context, and purpose, I do not consider that the s 200F(1)(aa) exemption applies in this case.

The s 200F(2) exemption

268    The exemption in s 200F(2)(a)(ii) provides that s 200B(1) does not apply to benefits given in connection with a person’s retirement from an office or position if the benefit is given to the person under an agreement made between the company and the person before the person became the holder of the office or position as the consideration, or part of the consideration, for the person agreeing to hold the office or position.

269    For the reasons given above I find that part of the benefit under the VCAC was a benefit given in connection with a loss of office or position. It then is necessary to assess whether the benefit was given under an agreement made before Ms Scott became the holder of the office or position; and whether the benefit was as consideration for Ms Scott agreeing to hold the office or position.

Was the agreement made before Ms Scott became the holder of the office or position?

270    The prohibition in s 200B(1) is directed at an office or position that is a “managerial or executive office”. As discussed above, I accept in this case that the applicable definition of “managerial or executive office” is that found in s 200AA(3), being that it is (a) an office of director of the body corporate; or (b) any other office or position in connection with the management of the body corporate’s affairs that is held by a person who also holds an office of director of the body corporate or a related body corporate.

271    Section 200F relevantly provides that s “200B(1) does not apply to a benefit given in connection with a person’s retirement from an office or position in relation to a company if…”. Subsection (2)(a)(ii) is then directed at agreements in relation to “the office or position”.

272    I construe the reference in s 200F(2) to “the office or position” to be the office or position the subject of s 200B(1), namely a “managerial or executive office”. It is logical and sensible that the exemption in s 200F(2) would be directed to the same office or position as the prohibition in s 200B(1). That is consistent with the use of the definite article “the” in “the office or position” in the text of s 200F(2)(a)(ii). Whilst “an office or position” is used in the chapeau to s 200F(2) that phrase is used as part of the sentence commencing “Section 200B(1) does not apply to … a person’s retirement from an office or position”.

273    The consequence of that construction is that the question of whether the CAC was made before Ms Scott became the holder of the office or position, is directed to the time before Ms Scott became a Director of ELA or the time before she became the CEO who also held an office of Director of ELA.

274    Ms Scott began performing services for ELA as CEO in April 2018. She became a Director in September 2021 pursuant to a resolution made at an Extraordinary General Meeting. She held the office of CEO and Director from that time until she ceased to be a Director on 26 October 2021, or alternatively 21 December 2021.

275    In those circumstances, I am satisfied that the CAC was made before Ms Scott became a Director of ELA or before she became the CEO who also held the office of Director of ELA.

Was the benefit in consideration for Ms Scott agreeing to hold the office or position?

276    As discussed above, the parties at the hearing focussed their submissions on whether the CAC was made before or after Ms Scott became CEO. However, for the reasons explained above, I construe the reference in s 200F(2) to “the office or position” to be the office or position the subject of s 200B(1), namely a “managerial or executive office”. Properly construed, the relevant “consideration” in s 200F(2)(a)(ii) is not whether the agreement is consideration or part of the consideration for Ms Scott agreeing to hold the position of CEO. Rather, the relevant consideration is whether she agreed to hold the position of Director or the position of CEO who also held the office of Director.

277    As discussed above, Ms Scott had performed the role of CEO since April 2018. She did not have a contract in place at that time but was rather acting in the role pursuant to an oral agreement with Mr Wallis. In 2018, Ms Scott had formed views that ELA was in a start-up phase and lacked fully developed plans and associated capital, and that it did not appear to have the financial capacity to immediately pay the monthly equivalent of her proposed annual remuneration package while engaging in broad development activities. She formed the view that ELA faced significant challenges beyond those of a regular start up. She assessed that there were several significant administrative challenges and risks outside regular operational conditions. She formed the view that there was a high degree of personal risk associated with her taking up a position with ELA, including that ELA did not appear to have the financial capacity to immediately pay her a salary. Ms Scott’s affidavit dated 16 July 2024 describes a conversation with Mr Wallis on or about 10 or 11 April 2018 where she said that if she were to start working and holding herself out as CEO immediately, she and Mr Wallis would need to agree for her to receive the same annual amount as a contractor as she would receive if employed as CEO, being the $1 million per annum figure she says Mr Wallis and her had previously discussed. She said it could be structured as cash or shares to be accrued and paid as the business progressed.

278    In 2019, ELA was seeking to obtain investment funding from Paspalis Innovation Funding (PIIF). One of the conditions of PIIF’s proposed investment in ELA was that ELA employ Ms Scott in the position of CEO pursuant to an employment contract. On 27 September 2019, Ms Scott emailed Mr Wallis draft versions of her CEO employment contract and the CAC. In the covering email, Ms Scott says in respect of the CAC:

Long form of the above which is working to see the continued good faith going both ways, where there is an understood level of discomfort on my end (since April 2018) due to the level of available cash toward salaries from standard revenue within the business, and likely a little on your end with the call to act in kind with faith that I wont i.e. call on the cash in an unreasonable manner.

Use of the Contract for PIIF is linked intrinsically and will indicate that the Agreement has been considered and accepted by ELA.

With the signed Agreement in place, I believe we can provide Paspalis with the missing piece of documentation - the agreed contract, and move forward to their investment being in bank.

279    The CAC itself then reflects this context in its preamble:

In updating and formalising agreements relating to services to ELA, I am pleased to provide the below … in relation to conditions and base contract benefits for work I am undertaking to represent the role of CEO, Equatorial Launch Australia (ELA or the Company).

ELA is a start-up company working to achieve a challenging feat … ELA has been unable to commit to a regular salary or contract payment and requires flexibility to enable ongoing representation and work while the entity continues to develop. In response to this, payment for services is structured as a combination of shares and cash (salary) payments with the below structure to provide ongoing flexibility to ELA and options to mitigate risk to both parties (ELA and Ms Carley Scott).

In addition to the flexibility agreed to, it is worth noting here that tasks undertaken to date by Ms Carley Scott (Ms Scott) including professional public representation have presented potential and actual significant costs relating to the personal financial position of Ms Scott and alternate role opportunities as she has continued to work in good faith with the Founder of ELA. This communication works to formalise the good faith discussions and lay the foundation for an ongoing contract to Ms Scott and receipt of investment into ELA.

280    The above evidence establishes only that the CAC was entered into as consideration for Ms Scott holding the position of CEO, notwithstanding that the CAC was entered into after she first held the role. There was substantial evidence about the circumstances and events leading to the making of the CAC and its variation the VCAC. However, there is nothing in that evidence, nor in any of the rest of the material before me, that provides support for the submission that the CAC (or VCAC) was entered into as the consideration, or part of the consideration, for Ms Scott agreeing to hold the “office of director” or the position of CEO “who also holds an office of director”.

281    As for the VCAC, as discussed above, the CAC was varied because of Ms Scott’s concerns that the funding hurdles were not a fair requirement if the Board would not approve those amounts. It was varied during a video call between March and July 2021 in the context of significant work being done to progress funding discussions and update ELA’s documents. I set out the evidence regarding the VCAC above at [65]-[87]. There is no evidence that the CAC was varied as consideration for Ms Scott holding the office of Director or the position of CEO who also held the office of Director.

282    For this reason, I am not satisfied that the exemption in s 200F(2)(a)(ii) applies.

Conclusion on Corporations Act issues

283    I therefore consider that the $2 million prospective amount is subject to s 200B(1) and that no relevant exemptions apply to that amount. The question is then, what are the consequences of that conclusion. ELA contends that the consequence of that payment being prohibited by statute is that ELA’s obligation to pay is unenforceable.

284    I accept, as ELA contends, that the consequence of a contract being prohibited by statute (including the performance of a contractual obligation being prohibited) is determined by construing the statute: Gnych v Polish Club Ltd [2015] HCA 23; 255 CLR 414 at [37]-[39] (French CJ, Kiefel, Keane and Nettle JJ) citing Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; 139 CLR 410 at 423 (Mason J). In construing the statute, the Court will have regard to its language, scope and purpose: Yango at 423.

285    In Gnych at [35] (French CJ, Kiefel, Keane and Nettle JJ), the High Court provided that an agreement may be unenforceable for statutory illegality where the agreement is to do an act the doing of which is prohibited by the statute. Gageler J said at [65]:

There is no reason why an implied statutory consequence cannot stop short of rendering an agreement made in breach of a particular statutory prohibition wholly unenforceable by all parties in all circumstances.  An implied statutory consequence might be limited, for example, to rendering an agreement unenforceable by a contravening party in the occurrence or non-occurrence of particular events. 

286    As part of the necessary constructional exercise, ELA directs attention to the purpose of Pt 2D.2 Div 2 of the Corporations Act and the context provided by the surrounding provisions.

287    ELA said the purpose of Pt 2D.2 Div 2 is to ensure member approval is obtained for benefits paid to former officers, subject to the exemptions and limitations for which the legislation specifically provides. I accept that purpose is furthered by contracts for payments in breach of s 200B being unenforceable.

288    ELA said that unenforceability is supported by the context of ss 200A(1)(c) and 200J(1). Section 200A(1)(c) provides that a person gives a benefit even if the person is obliged to give the benefit under a contract. I accept, as ELA contends, that the statute contemplates that the statutory prohibition is engaged, notwithstanding the existence of a contractual payment obligation. Section 200J(1) provides that if an entity contravenes s 200B by making a payment, the amount of the benefit: (a) is taken to be received by the recipient on trust for the entity; and (b) must be immediately repaid by the recipient to the entity. Section 200J(1A) provides that the amount repayable under s 200J(1) is a debt due to the entity and may be recovered by the entity in court. Again, I accept, as ELA contends, that the intent of s 200J is that the recipient not receive any legal entitlement to any benefit given in contravention of s 200B.

289    Ms Scott accepts that illegality or unenforceability may arise in relation to a component of the contractual entitlement if that component engages the prohibition in s 200B and is not otherwise saved from the prohibition by one of the exemptions. However, Ms Scott contends that the VCAC does not require the convertible notes, or the cash or shares into which they can be converted, to be paid to Ms Scott without membership approval. She contends the VCAC is silent on the matter of membership approval. However, the clause relevantly provides that the cash or shares will be payable to Ms Scott. It entitles her to the payment absent membership approval. She says further that the Corporations Act does not prohibit the making of an agreement to give a “golden handshake”, it only prohibits the making of the payment itself. In circumstances where Ms Scott contends, and I accept, that the relevant benefit paid is the convertible notes, Ms Scott’s submission is really begging the constructional question as to whether the Corporations Act intends to prohibit the enforceability of the agreement.

290    On Ms Scott’s construction, where member approval was not obtained, Pt 2D.2 was intended to operate such that ELA may still be required to make the payment pursuant to the contract and thereby commit a strict liability offence. It could then undertake the exercise and expense of seeking the recovery of the payment held on trust by the recipient, if necessary, through court proceedings, pursuant to s 200J. The time, expense, and inefficiency which would result from this construction is unlikely to have been intended by Parliament.

291    Whilst I accept that unenforceability is not a conclusion to be lightly reached and that it will depend on the constructional exercise in each case: see Equuscorp Pty Ltd v Haxton [2012] HCA 7; 246 CLR 498 at [23] (French CJ, Crennan and Kiefel JJ), I am satisfied that the provisions of Pt 2D.2, read with the statutory purpose, are consistent with an intention that a contractual obligation to make a payment prohibited by s 200B should be unenforceable.

292    Accordingly, in relation to the $2 million prospective amount, I accept ELA’s submission that the contract requires ELA to do the thing Pt 2D.2 was intended to prevent, being a payment of a benefit in connection with Ms Scott’s termination from ELA, absent approval from ELA’s members and where no relevant exemption applies. I therefore consider that the VCAC, to the extent that it requires payment of the $2 million prospective amount in convertible notes to Ms Scott, is unenforceable.

Is Ms Scott’s entitlement to relief constrained because of any insolvency issues

293    The parties disagree as to whether Ms Scott’s purported entitlement to a payment of cash pursuant to the VCAC is constrained by a condition that such a payment must not place ELA into insolvency.

294    It is helpful to set out the relevant passages of the CAC about conversion.

Conversion and Alteration:

Superseding the standard schedule, Ms Scott or an entity of her choosing may at their sole discretion convert the Notes to shares or cash at any time over a five-year period provided this does not place the company in a position of insolvency. Conversion of Notes will be at a share price that is the lower of:

a) A 25% discount to the share price paid for an equity investment made by an independent and qualified investor (‘significant and independent equity investment’) for a cash contribution of no less than $1M, but otherwise on same terms; or

b) $80m divided by the number of shares on issue at the date of this letter.

c) $3 per share for the first $750,000 and $5 per share thereafter.

ELA requires an opportunity to see Ms Scott enter an employment contract that will satisfy investors. A standard employment contract is included at Attachment A to this document. The contract for $250,000 per annum in cash will be activated upon a decision by the Board and agreement by the CEO that the Company has received significant independent investment, is generating suitable revenue, and is in a position to make regular salary payments of this amount each year to the CEO. This contract and annual salary amount will not extinguish the Commitment Amount due to Ms Scott under this Agreement. Salary payments made under the contract may be subtracted from the Commitment Amount in this Agreement annually, on and upon the anniversary following execution by both parties (ELA and Ms Scott) of the contract at Attachment A.

Should the engagement of Ms Scott cease for any reason after 30 April 2021 and prior to 1 May 2023, the full Commitment Amount in this agreement will be payable to Ms Scott as cash or shares at her sole discretion (as set out under Conversion) provided that $70M of funding (equity and/or loans) has been secured; noting estimates for Seed and Series A of $20M and $50M for Series B). If Ms Scott ceases before 1 May 2021, or funding has not been secured, then she would be entitled to a pro-rata payment (cash and/or shares) of $1M per year less any payments made under an employment contract or other bonus.

The Company may require Ms Scott to cause the conversion of all Notes in this Agreement into a combination of cash or Ordinary Shares (at her sole discretion) as part of a stock market listing on the ASX or comparable exchange, where shares are not in escrow, and the value on float returns to Ms Scott at least a AUD $5M.

Ms Scott will have the right to participate in any sale of the Company or its assets, including sufficient notice to Ms Scott to convert holding under this agreement into shares.

If after five years, Ms Scott or her nominated entity has not converted, Ms Scott may require payment of the Notes. The Parties note that ELA’s cash flow forecast shows that this payment would be readily achieved.

295    Putting the funding hurdles condition to one side, the CAC contemplated different mechanisms of payment to Ms Scott, which are influenced by the timing of when her engagement ceased. First, if her engagement ceased in the first three years of the commitment period, between April 2018 and 1 May 2021, Ms Scott would be entitled to a pro-rata payment (cash and/or shares) of $1 million per year less any payments made under an employment contract or other bonus. Second, if her engagement ceased in the last two years of the commitment period, between 1 May 2021 and 30 April 2023, the full commitment amount would be payable to Ms Scott as cash or shares at her sole discretion “as set out under Conversion”. The parties agree that “as set out under Conversion” refers back to the condition of “provided this [conversion] does not place the company in a position of insolvency”. Third, the CAC provides that, if after five years (that is, after the commitment period has finished) Ms Scott or her nominated entity has not converted, Ms Scott may require payment of the notes. Fourth, and for completeness, the CAC contemplates what was to occur if there was a float or sale of the business.

296    The VCAC varied the CAC to remove the funding hurdles, adjust the calculation of the share price described at a) to c), and remove the condition which contemplated payment where Ms Scott’s engagement ceased between April 2018 and 1 May 2021, that date having passed by the time the VCAC was agreed.

297    As noted above, the parties accept that a conversion exercised between 1 May 2021 and 30 April 2023 engages the insolvency proviso. The parties therefore accept that the September 2022 election falls within this period and is subject to the insolvency proviso. I will return to this issue further below. However, the insolvency proviso poses two issues for the parties at this juncture. First, is Ms Scott’s entitlement under the VCAC to require payment of the notes after five years conditioned by a requirement that Ms Scott’s engagement had not ceased prior to 1 May 2023? This is relevant because Ms Scott’s engagement ceased on 4 March 2022 during this period. Second, and relatedly, does the insolvency proviso apply to any requirement for payment made on or after 1 May 2023?

298    ELA said that the event which crystallised Ms Scott’s entitlement under the contract arose when her engagement with ELA ceased within the five-year commitment period. ELA said that Ms Scott was never guaranteed $5 million in cash within the commitment period, and that an entitlement to require payment of the notes in cash only arose if the other circumstances had not been engaged.

299    ELA said that the arrangement set out under the heading “Conversion and Alteration” contains an exhaustive account of Ms Scott’s rights in relation to these notes during the five-year commitment period, and these rights are connected to the provision of services by Ms Scott to ELA. ELA said the purpose of the clause is to give Ms Scott protection if, for whatever reason, her engagement ended early without her having the opportunity to serve out the commitment period as it would give her the potential to earn the full commitment amount. ELA also identified that the commercial purpose of the agreement was to ensure that during the five-year commitment period Ms Scott would accrue rights and entitlements, but ELA’s solvency position would not be imperilled by making a call for cash.

300    ELA said that on its construction Ms Scott would not be left with nothing after five years in the event conversion would place ELA in a position of insolvency, because it is only the conversion to cash that creates this issue and Ms Scott could convert to shares or a combination of cash and shares. ELA said that she was bound to make an election at the time of cessation between cash and shares (or a combination) because first the text of the contract does not support that she had a discretion to abstain from making any election at all, and second she could decline to make an election and wait until the end of the five-year period and claim an entitlement to all of the amount in cash even if she had not served the full commitment period.

301    For the following reasons, I do not accept those submissions.

302    First, the insolvency proviso under the heading “Conversion and Alteration”, which allows Ms Scott to convert the notes “provided this does not place the company in a position of insolvency”, is expressed to be “at any time over a five-year period”. By clear inference, this is referring to the five-year period covered by the commitment period between April 2018 and April 2023. On a plain reading of the text, there is no clear indication that the insolvency proviso applies to conversions after that period.

303    Second, there is no textual indication that the final paragraph, which provides Ms Scott’s right to require payment of the notes after five years, is a residual right that can only be exercised if none of the other circumstances contemplated during the commitment period eventuate. The only stated qualification on her right to require payment of the notes after five years is that she had not previously converted.

304    Third, the final paragraph does not contain words to the effect of “as set out under Conversion”, or other words linking this paragraph back to the insolvency proviso. These words are included earlier in the CAC and VCAC in relation to the condition applying after 30 April 2021 and before 1 May 2023. The words being included there, but omitted in the final paragraph, further suggests the insolvency proviso does not apply in relation to Ms Scott requiring payment of the notes after five years.

305    Fourth, Ms Scott’s construction is consistent with the purpose of the CAC and VCAC. The preamble to the CAC notes that ELA is a “start-up company” and that it “has been unable to commit to a regular salary or contract payment and requires flexibility… while the entity continues to develop” and that the tasks undertaken by Ms Scott “have presented potential and actual significant costs”. In the last paragraph excerpted above, the CAC states that “the Parties note that ELA’s cash flow forecast shows that this payment [Ms Scott requiring payment of the notes after five years] would be readily achieved”. This is consistent with a purpose that the parties were concerned about ELA’s solvency during the five-year period and sought to restrict Ms Scott’s capacity to require cash payment during that time, but that after five years it was anticipated that solvency would no longer be an issue and that Ms Scott would be free to require payment. Accepting Ms Scott’s construction is wholly consistent with the purpose and the plain reading of the text.

306    Fifth and relatedly, ELA said that if Ms Scott’s construction is correct, all she would need to do, even if her engagement had ceased, is wait until the five-year period had come to an end and then take the entitlement to cash. I accept this is a consequence of Ms Scott’s construction, but I do not consider it is at odds with the text or purpose of the contract. As said above, restricting Ms Scott from requiring payment until after five years had passed is consistent with the text, context, and purpose of the contract.

307    In light of this analysis, it follows that any election made between 1 May 2021 and 30 April 2023 is subject to the insolvency proviso, and any election made on or after 1 May 2023 is not. I do not accept that a requirement of payment made on or after 1 May 2023 is conditioned by a requirement that Ms Scott’s engagement had not ceased during the commitment period. With that in mind, I turn now to consider issues relating to the September 2022 election and December 2024 election.

THE SEPTEMBER 2022 ELECTION

308    On 28 September 2022, Ms Scott made an election to convert all of her accrued rights and entitlements under the VCAC to cash. She did so by her pleading at paragraph 44A of her Amended Statement of Claim dated 28 September 2022. ELA challenged that purported conversion on the following grounds. First, it said the cause of action in relation to the pleaded election fails in limine as the statement of claim does not plead all the necessary material facts to establish the cause of action, including the insolvency proviso. Second, it said the election is ineffective because Ms Scott failed to make the election under the VCAC within the time allowed for that election with the consequence that Ms Scott has forgone any entitlement. Third, it said the election is ineffective as the conversion would have placed ELA in a position of insolvency.

Does the election fail in limine because the insolvency proviso was not pleaded?

309    On 28 September 2022, Ms Scott filed an amended statement of claim. At [44A], the amended statement of claim provided:

Further, pursuant to the terms of:

(a) the Varied Commitment Amount Contract;

(b) alternatively, the Second Varied Commitment Amount Contract; or

(c) alternatively, the Commitment Amount Contract;

Ms Scott hereby exercises her right to elect to convert all of her accrued rights and entitlements to cash.

310    This 2022 election has since remained in the pleadings in substantially the same form. Ms Scott asserted that this election was effective.

311    Rule 16.05 of the Federal Court Rules 2011 (Cth) provides that a party need not state in a pleading that a condition precedent to the party’s right of action has been satisfied. However, a party who wants to deny that a condition precedent has been satisfied must expressly plead the denial.

312    In Deputy Commissioner of Taxation v Pratt Holdings Pty Ltd [2002] FCA 215; 49 ATR 178, Kenny J at [29] accepted the definition of “condition precedent” provided in Bullen & Leake and Jacob’s Precedents of Pleadings for the purposes of that case, stating that the definition accords with Australian authorities. Her Honour said:

A condition precedent is a condition, agreed between the parties or imposed by statute, the fulfilment of which is necessary before a party becomes entitled to sue.  It is not of the essence of the cause of action, but it has been made essential to it; it is not a substantive or constituent element of a cause of action, but it has been, as it were, superimposed upon it as an additional formality which must be fulfilled so as to give rise to the entitlement to sue.

313    Justice Kenny accepted that if a matter is “of the essence of a cause of action, then it must be pleaded”, as such matters are not, in effect, a condition precedent but rather part of the cause of action itself: at [30].

314    ELA contended that the insolvency proviso is not a condition precedent but rather an essential element of the cause of action on which Ms Scott sues. It said the proviso is as broad as, and qualifies the whole of, the contractual right. It said that Ms Scott cannot make out a prima facie case without alleging the contractual right, in its complete terms including the insolvency proviso, and negativing the insolvency proviso. It said that the onus of proving these elements lies with Ms Scott. ELA drew a distinction between cases where the exception or proviso is as wide as the promise and thus qualifies the whole of the promise, and cases where the proviso or exception merely excludes from the operation of the promise particular classes of cases which, but for the exception, would fall within it, leaving some part of the general scope of the promise unqualified. ELA said the question of determining which category of exception applies is a question of construction of the contract as a whole. It said the insolvency proviso is in the former category and Ms Scott’s failure to plead the insolvency proviso means her 2022 election fails in limine.

315    I accept that this issue requires a construction of the contract as a whole. I accept that this issue also influences who bears the onus of establishing that the election would have placed ELA into a position of insolvency.

316    The VCAC provides that Ms Scott or an entity of her choosing may at their sole discretion convert the notes to shares or cash at any time over a five-year period provided this does not place the company in a position of insolvency. This language and use of “provided” is consistent with a condition precedent.

317    I do not accept that the proviso is “as wide as the promise”. The proviso only operated during the commitment period in circumstances where conversion into cash would place ELA into a position of insolvency. It does not operate, for example, in circumstances where Ms Scott elects to convert to shares. It also does not operate where an election to cash would not place ELA into a position of insolvency. In those circumstances, the insolvency proviso would not condition Ms Scott’s rights to convert. There is therefore, to use the language of ELA’s submissions, “some part of the general scope of the promise unqualified”.

318    The potential harsh outcomes of ELA’s characterisation of the insolvency proviso also weigh against it being correct. ELA’s construction would put the onus on Ms Scott to establish that a conversion of cash would not place ELA into insolvency. ELA’s characterisation would have the result that, if Ms Scott purported to make an election which failed due to that conversion placing ELA into a position of insolvency, any subsequent election made during the five-year commitment period would require Ms Scott to prove ELA’s solvency position each individual time. This is a potentially harsh outcome given ELA is in a better position to obtain the necessary information and evidence as to its solvency than Ms Scott, even allowing for the fact that Ms Scott is a former CEO and would have a level of familiarity with ELA’s finances. It is unlikely that the parties intended for that to be required.

319    Given those conclusions, it follows that the insolvency proviso is a condition precedent which Ms Scott was not required to plead pursuant to r 16.05(1). ELA was therefore required to plead the denial of the satisfaction of the insolvency proviso pursuant to r 16.05(2). I consider ELA has done so at 44A(ac) of the Third Further Amended Defence where it pleaded that the 2022 election was ineffective as such a conversion would have placed ELA in a position of insolvency within the meaning of the insolvency proviso.

320    For those reasons, I consider that the September 2022 election does not fail in limine. The onus of establishing that the election would place ELA in a position of insolvency lies with ELA.

Was the election ineffective because Ms Scott failed to make an election within a reasonable time?

321    ELA said that the time to make an election under the VCAC had passed by the time Ms Scott purported to make an election in September 2022. It said that Ms Scott’s failure to make an election in the requisite time means she has forgone any entitlement, such that her purported election in September 2022 was ineffective.

322    Ms Scott’s employment was terminated on 4 March 2022. Her purported election took place on 28 September 2022, some six months and two weeks later.

323    There are two relevant sub-questions. First, can a term to make an election within a reasonable time be implied into the VCAC? Second, if so, was Ms Scott’s election outside of that time?

Can a reasonable period in which to make an election be implied into the VCAC?

324    The parties agree as to the relevant principles, as set out in Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd [2019] NSWCA 185; 101 NSWLR 679 at [99], [101], [104] and [109] (Bell P, Emmett AJA agreeing at [218]) and the authorities cited, namely:

(1)    An implication of a reasonable time when none is expressly limited is, in general, to be made unless there are indications to the contrary

(2)    What constitutes a reasonable time is a question of fact which will depend on the context in which the right arises and the circumstances of each particular case. Its limit is determined by reference to what is fair to both parties at the time of the exercise of the right.

(3)    The relevant time for considering what is a “reasonable” time is the time at which the right which is to be exercised is first capable of being exercised under the contract

(4)    What is a reasonable time in any given case may be affected by the nature of the obligation to be performed (for example, whether it is dependent on some third party performance or circumstances outside the control of the party under the obligation) or the right to be exercised (for example, whether the right is dependent upon the provision of some information that may need to be assessed before the right can be exercised or simply upon the happening of an event or the passing of a particular time).

(5)    the legal meaning of what is a reasonable time is to be ascertained as at the date of the contract, although what will be reasonable as a matter of fact will inevitably fall to be assessed by reference to circumstances as at the date on which the right is first capable of being exercised (or the date on which the obligation falls to be performed), viewed in the context of the contract as a whole

325    ELA said that when Ms Scott’s engagement ceased on 4 March 2022, that is when an election was to be made. It said that the VCAC provides that an election must be made “upon the cessation of engagement” but is otherwise silent as to when that election must be communicated. ELA said a reasonable time is implied in these circumstances.

326    I do not accept this submission. I consider that the VCAC does provide an express term as to the timing of the conversion. That time is for “any time over a five-year period”. I consider this is a textual “indication to the contrary” pointing against the implication of a time limit. Ms Scott could, by the express terms of the contract, convert at any time within the five year period. She was not required to exercise her right to convert within any shorter time period.

327    This conclusion is consistent with the context in which the right arises and the nature of the VCAC. It is a contract that contemplates rights and entitlements over a significant period of time. It is for a significant sum of money or shares. It is not in the nature of an investment contract which may have an element of speculation to it, it is a contract linked to Ms Scott’s provision of services as CEO. On the facts of this case, Ms Scott had completed almost four years out of the five-year commitment period. There is an acceleration clause which provides that if her engagement ceased during the last two years of the commitment period she would gain an entitlement to the full commitment amount. A construction which provides that Ms Scott would stand to lose her entitlement to the entire commitment amount, in circumstances where she had worked for the majority of the five-year commitment period and had one year and one month remaining, is a harsh outcome that stands at odds with the nature of the contract. There is no clear purpose for such an implied term.

328    I therefore consider that no term for making an election within a reasonable period may be implied into VCAC. The argument fails on this basis.

Was Ms Scott’s election outside that time?

329    Given my conclusion as to the implied term, it is not necessary for me to decide this question. However, I would consider, having regard to the Donau principles outlined above, that even if a reasonable term could be implied, Ms Scott’s election on 28 September 2022 was within a reasonable time.

330    ELA said that, in contrast to Donau, this is not a case where the exercise of the right was dependent upon the provision of information that might have informed the election to be made. ELA said that a reasonable time in these circumstances would have been “a matter of months”, but less than the six months and two weeks it took Ms Scott to make her election.

331    In my view, any implied period, having regard to the length of the VCAC, the acceleration clause which applied if Ms Scott’s engagement ceased within the last two years of the commitment period, and the significant sum of money or shares Ms Scott would stand to lose if an entitlement to conversion was not exercised, point towards an implied time period of at least longer than six months and two weeks.

Was the September 2022 election ineffective because of the insolvency proviso?

332    As explained, the VCAC includes an entitlement to convert the notes to shares or cash at any time over a five-year period provided this does not place the company in a position of insolvency.

333    As discussed above, the onus of establishing that the election would place ELA in a position of insolvency lies with ELA. For the reasons explained below, I consider that ELA have discharged that onus and that the September 2022 election was ineffective.

Defining insolvency and the test time and type

334    The parties agree that insolvency in the VCAC should be construed consistently with s 95A(1) of the Corporations Act. Section 95A(1) provides that a company is solvent if, and only if, it is able to pay all its debts, as and when they become due and payable. Section 95A(2) provides that a company which is not solvent is insolvent.

335    Section 95A reflects the cash flow test of insolvency which, in contrast to a balance sheet test, focuses on liquidity and the viability of the business. While an excess of assets over liabilities will satisfy a balance sheet test, if the assets are not readily realisable so as to permit the payment of all debts as they fall due, the company will not be solvent. Conversely, it may be able to pay its debts as and when they fall due, despite a deficiency of assets: see Crema Pty Ltd v Land Mark Property Developments Pty Ltd [2006] VSC 338; 58 ACSR 631 at [141] (Dodds-Streeton J).

336    The parties disagree as to the timing and type of circumstances that may be relevant in assessing insolvency, and particularly whether I might take into account Ms Scott’s willingness to defer or negotiate the debt. ELA said that the question of solvency is to be determined “by reference to the circumstances as they were known or ought to be known at the date at which the question of solvency is assessed, not in hindsight”. ELA accepted that the Court can apply its knowledge of post-event facts to determine whether the proffered expectations of the parties were or were not realistic. It said further, that in considering solvency, the question is whether the company is presently able to pay its debts out of its realisable assets but “consideration must be given to the future” and the company’s position is to be considered “dynamically over a period rather than an instant in time”.

337    Ms Scott submitted that the question of insolvency must be considered through the prism of the counterfactual. She said what actually happened does not bear on that question, because ELA proceeded on the basis that it denied any liability to Ms Scott. She said the question must be approached on the basis of what ELA would have done if it had accepted the liability to Ms Scott.

338    I accept that I must have some regard to the counterfactual. That is because the assessment I am making is, assuming ELA accepted liability to Ms Scott, that ELA was otherwise entitled to rely on the insolvency proviso. To assess the facts only by reference to ELA’s refusal to accept any liability risks an incomplete assessment of the circumstances. Even accepting that much, Ms Scott acknowledges that mere speculation will not suffice when it comes to considering her willingness to negotiate or defer the debt. I return to this approach in my consideration of Ms Scott’s submission that she and ELA would have participated in “discussions and negotiations in order to determine whether there was an outcome that allowed ELA to meet the liability and also to continue to trade”.

The report of Mr Deane and its assumptions

339    ELA relied on the expert reports of Mr Deane filed on 22 October 2024 and 13 February 2025. Mr Deane explains that as at 28 September 2022 (the date of Ms Scott’s first election), ELA was subject to two substantial claims. First, a claim by Telstra for $2,399,576 that arose in August 2022 as the result of ELA’s termination of Telstra’s services and for unpaid services provided. Second, Ms Scott’s debt claim which arose by reason of her election.

340    Mr Deane concludes that, considering ELA’s cash burn rate and its ongoing day-to-day obligations, and taking into account Telstra’s claim, a conversion of the convertible notes by Ms Scott on 28 September 2022, or at any time up to 30 April 2023, would have placed ELA in a position of insolvency. He reaches that conclusion whether Ms Scott’s demand was for the full amount owing, or the reduced rates of $4,367,430.25, or alternatively $3,211,265.87.

341    Mr Deane’s reports contained two assumptions. First, that ELA’s capacity to raise capital during the relevant period had been exhausted and there was no unexplored prospect that further capital could be raised. Second, that the launch pad and land and buildings identified as two principal assets in the asset register were not able to be borrowed against on commercial terms in light of the nature and location of those assets. Or more specifically, that any borrowings that would be able to be achieved would be on terms that would require very significant and regular repayment and so would detrimentally affect cashflow. Both of those assumptions were attacked by Ms Scott.

342    I will deal first with the ability to borrow against the launch pad facilities. Mr Melin, ELA’s accountant employed by DLK Advisory, gave evidence that these were principal assets of ELA. There was otherwise very little evidence about those facilities.

343    ELA’s audited financial report, as extracted in Mr Deane’s report of 22 October 2024 at page 15, identified that ELA had invested over $13 million in capital expenditure at its Arnhem Space Centre in the 2022 financial year. However, given the rather unique nature of the assets, that does not tell me very much about its ability to lend against those assets or if so, what might be the terms of such lending. I am not satisfied that there is a sufficient basis to undermine the assumption of Mr Deane. In other words, I accept Mr Deane’s assumption that the launch pad and the land and buildings were not able to be borrowed against on commercial terms in light of the nature and location of those assets, in order to meet Ms Scott’s election.

344    As to whether ELA’s capacity to raise capital during the relevant period had been exhausted, Ms Scott pleaded that ELA “was able to access funds to meet the conversion from its financial supporters”. In support of that pleading Ms Scott relied upon: (a) Mr Walker’s offer in April 2022 to provide ELA with a loan of up to $2 million to assist in meeting any cash requirements should it be required; and (b) ELA’s capacity to raise capital from its shareholders and/or investors.

345    As to (a) above, Ms Scott relied upon a board minute from April 2022 that provided: “AW has additionally offered the company a loan of up to $2M to bridge any cash requirements in future, should it be required”. The evidence established that Mr Walker did not make such a loan. The effect of Mr Walker’s evidence was that he had not made, and would not make, any funds available to ELA to meet any demands from Ms Scott, in 2022 or 2024. The context for that evidence was that Mr Walker was the signatory to Ms Scott’s termination letter dated 4 March 2022 in which he made allegations against Ms Scott of serious performance issues. ELA submitted, and I accept, that Mr Walker’s position was later reflected in email correspondence from Mr Walker expressed to be in his capacity as founder of Blackfyre Global to Mr Jones dated 10 February 2025 and the terms of a loan agreement between Aegis Prime LLC (a company associated with Mr Walker) and ELA dated 12 December 2024. That agreement provided that “under no circumstances are any of the Loan Funds provided by the Lender to be used for any settlement in the legal case brought by Carley Scott against the Borrower”. In cross-examination Mr Walker was asked: “If it were the case that ELA had successfully negotiated a potential resolution with Ms Scott that called for staggered payments in a way that allowed it to remain solvent, do you accept that you would have been willing to consider advancing those funds?” He answered, no. He was then asked: “And do you maintain that position, Mr Walker, even in circumstances where the consequence of not advancing funds would be that ELA had become insolvent?” He answered, yes.

346    As to (b) above, the evidence demonstrated that in September 2022 ELA unsuccessfully engaged in discussions with prospective investors in both Australia and the United States of America. In about April and May 2023 ELA raised approximately $2 million from its existing shareholders by the issue of convertible notes. At that time ELA unsuccessfully sought to raise additional capital by broadening the source of funds to companies or individuals outside the existing shareholders.

347    At the hearing, Mr Walker was cross-examined on the circumstances in September 2022. He said “The business was in dire straits. It couldn’t raise capital outside of the money that I was putting in”. He went on: “For example, we tried to get a convertible note away at two million. I put in – and that was in May ’23, for example – I put in one million. The general market could only get 800,000. By the time we raised again in March ’24, the company was so perilous that 98.7 per cent of its value had evaporated and shares were raised at an equivalent of … four cents a share”.

348    That evidence was consistent with ELA’s balance sheet at May 2023 which recorded a capital raise of $1,810,263. It is also consistent with the draft FY2024 annual report which recorded that in March 2024, an emergency capital raise was conducted for working capital, resulting in an injection of $5.88 million, of which Blackfyre Global (an entity associated with Mr Walker) injected $4 million.

349    I am satisfied that, given the position of ELA and its limited success in raising capital, that it did not have the capacity to raise sufficient money from its shareholders and investors to meet the September 2022 demand made by Ms Scott. I am satisfied that it was appropriate for Mr Deane to assume that matter for the purposes of his reports.

The ability of Ms Scott and ELA to defer or negotiate the September 2022 election

350    In order to resist the insolvency proviso, Ms Scott also deposed in her affidavit of 3 December 2024 that she would have been willing to agree to the staggered payment of her accrued rights and entitlements over time so as to avoid ELA going insolvent. There are a number of difficulties with that position.

351    First, when Ms Scott made the election in September 2022, she claimed the full amount of $4,572,426.64 (being $5 million less $427,573.36 in accordance with the salary payments clause) was immediately due and payable. That election was not accompanied by any proposal to negotiate or defer the terms of the payment. I note for completeness that the pleadings were later amended and the full amount claimed pursuant to the election was changed to $4,367,430.25 (being $5 million less $632,569.75 in accordance with the salary payments clause).

352    Second, there was no discussion or agreement between Ms Scott and ELA about the negotiation or deferral or the amounts said to be due and payable. On the evidence it appears that the first time that that possibility was raised was in Ms Scott’s affidavit of 3 December 2024. That is nearly two years after her election. Although to be fair to Ms Scott, it was not until the report of Mr Deane dated 22 October 2024 that Ms Scott would have been aware that ELA intended to rely upon the insolvency proviso to defeat the 2022 election.

353    Third, the evidence, such as it was, was little more than Ms Scott’s evidence of a willingness to have negotiated or deferred the amounts, and Mr Jones’ acceptance that ELA “would have entered into a discussion and a negotiation” because “that is the correct governance for a company to do” and that it would not have been “appropriate” to “immediately dismiss it … out of hand”. That does not tell me very much about the likely outcome of those negotiations. It does not provide sufficient certainty that an outcome acceptable to both parties could have been negotiated so as to avoid ELA’s insolvency.

354    That is especially so where Ms Scott did not give evidence that she would have accepted a lesser amount, but rather that the negotiations would have been directed to the deferral of the full amount.

355    Whilst Ms Scott gave evidence of her willingness to defer payments in the past, again that does not provide any certainty about the outcome of any negotiations arising from the September 2022 election.

356    ELA underscored that difficulty by reference to the debt it owed to Telstra. In September 2022 it owed Telstra $2,399,576. That claim was settled in January 2024. ELA agreed to pay only $902,470 in monthly instalments over 18 months, with a final payment of $170,000 payable upon the conclusion of ELA’s first orbital launch campaign in 2025. That, it suggested, demonstrated the limited scope for any negotiation that might have satisfied Ms Scott. I accept that matter adds to the lack of certainty about any negotiated outcome.

357    Even accepting the relevance of the counterfactual, and the expected desire of the parties to avoid the insolvency of ELA, the outcome of any negotiations is too speculative. Ms Scott accepted that mere speculation will not suffice.

The estoppel alleged by Ms Scott

358    At [29C(b)] of the Further Amended Reply Ms Scott alleges that there was a course of conduct between ELA and her sufficient to give rise to an estoppel preventing her from relying upon the stipulated time for payment in circumstances where doing so would place ELA into a position of, or put ELA at risk of, insolvency. In support of that allegation Ms Scott said between 2018 and 2021, ELA regularly failed to pay Ms Scott for, or paid Ms Scott late for, work performed by her on ELA’s behalf, and Ms Scott was willing to accept late payment in order to ensure that ELA was not trading insolvent and would succeed.

359    No closing submission of substance was made by Ms Scott in support of that allegation, although the allegation appeared to be maintained. In any event, the allegation has two difficulties. First, the dealings relied upon by Ms Scott from 2018 to 2021 were at a time when Ms Scott was the CEO of ELA. During that time, it might be expected that both Ms Scott and ELA would act in ELA’s interest. It is not clear how those dealings might readily apply to the circumstances where Ms Scott, as a former employee, is suing ELA for breach of agreement. ELA, submits, and I accept, that the cessation of Ms Scott’s engagement interrupted any course of conduct that might otherwise have existed in order to support such an allegation of estoppel.

360    Second, the pleading appears inconsistent with the demand made by Ms Scott elsewhere in her pleadings. As explained above, Ms Scott alleges that when she made the election in September 2022, the full amount of $4,367,430.25 (being $5 million less $632,569.75 in accordance with the salary payments clause) was immediately due and payable. There was no reconciliation of those seemingly incompatible positions.

361    I am not satisfied that there exists any estoppel that operates as alleged by Ms Scott.

Conclusion on September 2022 election issues

362    In all of those circumstances I conclude that the September 2022 election was ineffective because it would have placed ELA in a position of insolvency.

WERE MS SCOTT’S “ELECTION” RIGHTS SPENT BY THE SEPTEMBER 2022 ELECTION?

363    ELA submitted first, that on Ms Scott’s termination she was entitled to “elect between two inconsistent legal rights: cash or ELA shares”. It said the rights were inconsistent because “one of the rights may not be enjoyed without the extinction of the other”.

364    Second, it said that Ms Scott made an “election” to convert all her accrued rights and entitlements to cash by her pleading at paragraph 44A of her Amended Statement of Claim dated 28 September 2022. It said that election failed, including because of the insolvency term.

365    Third, it said that as the result of her “failed” election of 28 September 2022 to convert her accrued rights and entitlements to cash, Ms Scott only retained the right to convert all of her accrued rights and entitlements to shares. Therefore, her later election by her plea of 9 December 2024 for conversion to cash must fail.

366    ELA’s written closing submissions state that “on the proper construction of the pleaded Commitment Amount Contracts, Ms Scott’s entitlement to call for cash or shares was triggered on 4 March 2022, when Ms Scott’s engagement with ELA ceased within the commitment period”. ELA submitted further that such rights “having been spent by reason of the September 2022 election, the other contemplated pathways by which Ms Scott might have obtained or continued to accrue rights to shares or cash have no application”. It puts the same point another way, the “failed election does not produce the result that Ms Scott is free to surrender that right [the elected right to shares of September 2022] and seek to rely on other contractual rights under a different provision that might have been available to her in a different fact scenario”. Accordingly, ELA said that Ms Scott has no “entitlements arising from the requirement for payment [of her accrued rights and entitlements in cash]” as pleaded in paragraph 47G of her Second Further Amended Statement of Claim particularised by her correspondence of 9 December 2024.

367    The submission fails for a number of reasons. First, I am not satisfied that Ms Scott was required to elect between two inconsistent legal rights. The VCAC provides for one legal right; that is the right to convert the notes. That legal right provided a choice for Ms Scott to convert the notes into shares or cash, or some combination of shares and cash. That choice was not a choice between legal rights, but rather a choice within one legal right to convert the notes.

368    Second, the submission relies upon the premise that the “failed election does not produce the result that Ms Scott is free to surrender that residual right [the elected right to shares of September 2022] and seek to rely on other contractual rights under a different provision that might have been available to her in a different fact scenario”. That is, where Ms Scott made an election, which was not satisfied and the notes were not converted, she is forever bound to that election. ELA provided no authority for that approach or proposition.

369    Third, there is no express term of the VCAC that provides that a failed election (in respect of conversion of the notes to cash) results in the position that Ms Scott only retained the right to convert all of her accrued rights and entitlements to shares. ELA does not point to any such term. Fourth, and relatedly, it does not explain how and why such a term should be implied.

370    Fifth, the result of ELA’s submission in the present circumstances is that the failed exercise of Ms Scott’s election carried with it the consequence that all rights and entitlements to conversion of the notes to cash were lost. I was not directed to any text, context, purpose, or surrounding circumstances known to the parties, to support that construction.

371    I am not persuaded that by her failed election of 28 September 2022 to convert her accrued rights and entitlements to cash, Ms Scott only retained the right to convert all of her accrued rights and entitlements to shares. Consequently, I am also not persuaded that Ms Scott’s later requirement for payment by her correspondence of 9 December 2024 as pleaded at paragraph 47G of her Second Further Amended Statement of Claim for conversion to cash must fail.

Requirement for payment on 9 December 2024 ISSUES

Was the December 2024 requirement for payment invalid and ineffective?

372    ELA further attacks Ms Scott’s requirement for payment by her correspondence of 9 December 2024 as invalid and ineffective. That complaint again relies on the validity of the September 2022 election and posits that the 2024 requirement for payment was “an absolute demand for payment”. ELA then complains that the demand: (a) did not state what notes were said to have accrued to Ms Scott, in circumstances where Ms Scott had not provided five years of service; (b) did not specify the amount said to be payable, under any of the iterations of the contract relied on; and (c) did not clearly and unambiguously put the recipient, ELA, on notice of the claim and as to what Ms Scott required ELA to pay.

373    As explained, the VCAC provides that “If after five years, Ms Scott or her nominated entity has not converted, Ms Scott may require payment of the Notes”. Ms Scott submits that her correspondence of 9 December 2024 relevantly “require[d] payment” in accordance with the VCAC. There is nothing in the terms of the VCAC that stipulate the form or content of that request for payment. While the 9 December 2024 correspondence also contained a demand for payment, because payment had been refused, that does not alter or affect the contractual obligations to “require payment”. I am satisfied that the 9 December 2024 correspondence was a valid and effective method to “require payment”.

Was the December 2024 requirement for payment unconscientious and ineffective?

374    ELA further contended that the requirement for payment on 9 December 2024 was unconscientious and ineffective because “equity intervenes when the assertion by a person of a legal right would be unconscientious”. It relies on Dean-Willcocks v Nothintoohard Pty Ltd (in liq) [2006] NSWCA 311; 25 ACLC 109 at [6]-[7] (Spigelman CJ). ELA submitted that the requirement was unconscientious because: (a) at the time the demand was served, relief had been sought on the basis of the election made on 28 September 2022; (b) the demand constituted an absolute demand for payment which was not expressed as being premised on the election failing for any reason; and (c) the relief sought in this proceeding on the basis of the election made on 28 September 2022 had not been withdrawn.

375    In Dean-Willcocks, Spiegelman CJ said that “unconscientious” is a preferable term to “unconscionable conduct”. I understand that these terms refer to the same concept.

376    In oral submissions ELA complained that the 9 December 2024 requirement “was not expressed to be alternative. It was expressed to be an absolute demand, and it put ELA into a position where it was being sued on the basis of the claim then sought in the proceeding, and was alternatively being met with this additional demand for payment”. That, I understood, was the full extent of the alleged unconscientiousness or unconscionable conduct.

377    Ms Scott said her requirement for payment on 9 December 2024 followed ELA introducing for the first time the issue of insolvency through the report of Mr Deame dated 22 October 2024. She says that when she understood for the first time that ELA intended to defend the claim on that basis, she sought to invoke the alternative contractual right. She says there is nothing unconscientious about her conduct, in circumstances where ELA’s late introduction of the issue of insolvency represented a change in circumstances.

378    I do not accept ELA’s submission that the 2024 election “was not expressed to be alternative” to the 2022 election. The 2022 election is pleaded in the Second Further Amended Statement of Claim at [44A]. The entitlement to relief in respect of that election is pleaded at [44E]. At [47E], the Second Further Amended Statement of Claim states “If the election pleaded in paragraph 44A was ineffective … Ms Scott retained the benefit of the Varied Commitment Amount Contract”. The following paragraph [47F] provides that: “In the circumstances pleaded in paragraph 47E, as at 9 December 2024, Ms Scott was entitled to convertible notes”. Paragraph 47G then pleads “On 9 December 2024, Ms Scott required payment of the Notes to which she was entitled under the Varied Commitment Amount Contract”.

379    Read in this context, the pleadings in respect of the 2024 election are only expressed to be engaged if the 2022 election is ineffective. I therefore understand the 2024 election to be pleaded in the alternative to the 2022 election. No unconscientiousness or unconscionability can follow from that pleading.

380    In any case, without more I am not satisfied that Ms Scott’s assertion of her rights under the CAC are properly described as unconscientious or unconscionable.

The consequences of the December 2024 requirement for payment

381    As a result of failing to pay Ms Scott the amounts owed to her arising from the requirement for payment constituted by the 9 December 2024 election, ELA has breached the VCAC. The consequential relief in respect of that breach is addressed further below.

382    There is also a question about whether ELA has also breached the employment contract by failing to pay Ms Scott the amounts owed to her arising from the requirement for payment constituted by the 9 December 2024 correspondence. This turns on whether the VCAC was incorporated into the employment contract. ELA submitted that “not much turns on” the incorporation because the claims based upon breach of the employment contract cannot rise any higher than the claims based on the breach of the VCAC. I agree with that submission. It does not impact Ms Scott’s entitlements to relief if ELA has breached just the VCAC, or the VCAC and the employment contract. However, for completeness, I would find that the employment contract has been breached because the VCAC has been incorporated. I will return to this issue of incorporation further below.

383    Given I have found a breach of the VCAC and employment contract, it follows that Ms Scott has suffered loss and damage in not receiving her entitlements pursuant to her election.

384    Ms Scott seeks relief primarily by way of damages for breach of contract, and a claim for debt in the alternative. Ms Scott said whether it is a debt or damages turns on how sufficiently clear the amount owing is. She submitted that the sums are the same regardless of the basis on which the relief is granted. She said relief was pleaded in these two ways to prevent a technical failure of the claim. ELA accepted that if I accept Ms Scott’s case she is entitled to recover the amounts claimed, but it said that any such entitlement would constitute a debt rather than damages. I accept, as Ms Scott submits, that the result is the same.

Is Ms Scott disentitled to relief because of serious misconduct?

385    ELA said that there are implied terms in the VCAC that Ms Scott owed a duty of fidelity to ELA, and a duty to act in ELA’s best interests. ELA said that Ms Scott’s conduct in allegedly attempting to raise additional sums by the AirManOps invoices, and manipulating the terms of the CAC and representing that the document amended by Ms Scott on 19 July 2021 was the commitment amount contract, breached those duties and constituted serious misconduct. ELA contended that it was a term of the CAC or VCAC that it was permitted to summarily terminate Ms Scott if she engaged in serious misconduct, and that any accrued entitlements under the CAC or VCAC ceased to exist on the commission of such conduct.

386    ELA advance this argument as both part of its defence, and part of its Second Amended Cross-Claim dated 18 February 2025. Given the amendments made to the cross-claim by that amendment document, the claims for misconduct are the only claims remaining in the cross-claim.

387    There is no express term of the CAC or VCAC which states that ELA was permitted to summarily terminate it if Ms Scott engaged in serious misconduct and that any accrued entitlements ceased to exist on the commission of such conduct. If such a term exists, it needs to be an implied term.

388    By way of background, Ms Scott and Mr Wallis prepared, and agreed on, two documents across a similar period in 2019: the commitment amount contract dated 3 October 2019 and the employment contract dated 19 November 2019. The parties accept that the latter document is an employment contract and the former document is a “commercial” contract. The parties accept they deliberately set up two instruments. I understand the parties to have accepted that the latter document regulates the employment relationship between Ms Scott and ELA, while the former document concerns Ms Scott’s entitlements in respect of the commitment amount.

389    ELA said it is an implied term of the CAC and VCAC that ELA was permitted to summarily terminate it if Ms Scott engaged in serious misconduct and that any accrued entitlements under the contract ceased to exist on the commission of such conduct. ELA said these terms can be implied on two bases. The first basis is that the term is implied by law, as a necessary concomitant of the express terms, in that those express terms could not operate according to the parties’ manifested intention unless supplemented by the implied terms: referring to Blyth Chemicals Ltd v Bushnell [1933] HCA 8; 49 CLR 66 at 81-82 (Dixon and McTiernan JJ). The second basis is that the implied terms are necessary to give business efficacy to the express terms: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.

390    ELA said that while the CAC and VCAC were not contracts of employment, they were contracts which interacted with the employment contract. They contemplated the provision of personal services by Ms Scott to ELA, and those services attracted the accrual of certain rights and entitlements under the CAC and VCAC. ELA said also that there are express terms of the CAC and VCAC which refer to the connection between the provision of services and the service milestones to which notes were notionally allocated. ELA said that the CAC (and VCAC) is sufficiently connected to the employment contract such that it creates the circumstances for the implication of a term for termination on serious misconduct. ELA said that it is sufficiently connected to the employment contract because the employment contract expressly refers to the CAC.

391    For completeness, I note that while there was a dispute between the parties as to whether the CAC (and VCAC) was incorporated into the employment contract, I accept that deciding that point is “probably academic” for the purposes of this submission. The essence of ELA’s argument is that the VCAC is sufficiently connected with the employment contract so as to import into the VCAC the implied term.

392    I place weight on the fact that the employment contract and CAC were prepared, and entered into, by the same people at approximately the same time. That was a deliberate choice the parties made, to separate the employment and commercial contracts. The parties have not identified any authorities where such a term has been implied into a commercial contract of the same kind as the CAC. It is appropriate, as Ms Scott urges, to address the issue by reference to the established approach to the implication of terms into a contract.

393    In BP Refinery at 283, the majority of the Privy Council stated the conditions necessary to ground the implication of a term in a formal contract:

(1)    it must be reasonable and equitable;

(2)    it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3)    it must be so obvious that “it goes without saying”;

(4)    it must be capable of clear expression;

(5)    it must not contradict any express term of the contract.

394    These principles have been cited with approval by the High Court in Secured Income Real Estate v St Martins Investments Pty Limited [1979] HCA 51; 144 CLR 596 at 605-6 (Mason J), and more recently by this Court in Sheehy v Nuix Pty Ltd [2023] FCA 56; 166 ACSR 528 at [238] (Halley J).

395    The conditions in BP Refinery strongly suggest the term for which ELA contends should not be implied. First, it does not seem reasonable or equitable to imply a term that means Ms Scott could lose all of her accrued entitlement to the commitment amount contract. For example, if the CAC or VCAC were summarily terminated one week prior to the commitment period ending, she would lose almost $5 million in a contractual benefit, less the amount under the salary payment clause. ELA have not explained how this would be reasonable and equitable. Second, it is unclear how the CAC or VCAC require an entitlement to terminate to give it business efficacy. Rather, in the event that Ms Scott engages in serious misconduct, the employment contract could be terminated and then any consequences there are for the VCAC would follow pursuant to its express terms. The contract would still have business efficacy. Third and relatedly, it is not so obvious that it “goes without saying” that a “commercial” contract giving rise to an entitlement would be subject to a summary termination term and that any accrued entitlements would cease. Indeed, that would be novel. Fourth I accept that such a term would be capable of clear expression, but this must be considered together with the other conditions. Fifth, such an implied term would contradict the express terms of the VCAC. The VCAC sets out the circumstances in which Ms Scott is entitled to obtain the benefit of the contract, both within and beyond the commitment period, and contemplates what happens if Ms Scott’s engagement ceases within the period. An implied term for summary dismissal for serious misconduct would appear to be in conflict with those terms.

396    Assessing those conditions, together with the deliberate choice of the parties to set up two separate documents at a similar time in 2019, I consider that such a term cannot be implied into the VCAC (or CAC).

397    Having determined that, it is therefore unnecessary to decide if Ms Scott’s alleged conduct regarding the invoices and the VCAC breached any implied duty of fidelity or duty to act in ELA’s best interests. I add, for completeness, that any allegations directed to Ms Scott’s negotiation of the CAC, or variation of the CAC, with Mr Wallis could not constitute misconduct where I have accepted Ms Scott’s evidence of those events.

Entitlements under the employment contract

398    Ms Scott alleged she is entitled to a vehicle and mobile phone allowance pursuant to her employment contract. She alleged ELA breached the employment contract by failing to pay her those allowances. Ms Scott also alleged that she is entitled to reimbursement of work expenses in the amount of $14,750 in respect of travel to East Arnhem Land.

Mobile phone allowance

399    ELA accepted during the course of the hearing that Ms Scott was entitled to a mobile phone allowance of $1,200 per annum, and that ELA breached the employment contract by failing to pay Ms Scott that allowance. That allowance amounts to $2,742.97. That figure is agreed and admitted.

Vehicle allowance

400    Clause 5.5.2 of Ms Scott’s employment contract provides that “in addition [to Ms Scott’s remuneration], [Ms Scott] will be provided with a vehicle allowance of $25,000 per annum that must be spent on a vehicle that carries ELA branding, with provision for fuel and maintenance costs”.

401    The parties are agreed that, as ELA puts it, “on the proper construction of the Contract the vehicle allowance entitlement was conditioned on the application of such an allowance towards the specific purpose identified in the contract: the allowance had to be spent on a vehicle that carried ELA branding”. The parties disagree on whether Ms Scott was required to obtain the vehicle and brand it before becoming entitled to the allowance, or whether she was entitled to receive the allowance and then spend it for that purpose. Ms Scott says that if she was required to incur the expense and then seek reimbursement that is not consistent with the ordinary meaning of allowance.

402    The relevant ordinary meaning of allowance is money paid to meet an expense or requirement of employment. In Mutual Acceptance Co Ltd v Federal Commissioner of Taxation [1944] HCA 34; 69 CLR 389 Latham CJ said (at 396-397) that:

When the word is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service. Expense allowances, travel allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of a service...

403    That extract was cited with apparent approval in Australian Chamber of Commerce and Industry v Australian Council of Trade Unions [2015] FCAFC 131; 234 FCR 70 at [26] (Buchanan J, North J agreeing).

404    The allowance was not conditioned by a requirement that Ms Scott obtain an ELA branded vehicle before being entitled to the allowance. It was not a reimbursement. I accept that Ms Scott was entitled to a vehicle allowance of $25,000 per annum. In not paying Ms Scott a vehicle allowance, ELA breached the employment contract. However, the loss and damage must be assessed against the terms of the contract and the evidence.

405    The vehicle allowance clause provided that the funds “must be spent on a vehicle that carries ELA branding”. Had Ms Scott been paid the allowance it was money that must have been spent on a vehicle. The proper measure of loss and damage for ELA’s breach of the employment contract is Ms Scott’s loss of opportunity to have the money and spend it on the ELA branded vehicle. Ms Scott did not lead any evidence to quantify that type of loss. In the present circumstances it is Ms Scott who bears the burden of proving that there has been actual loss or damage caused by the breach of contract, and to prove the amount of that loss: Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768 at [37] (Hayne J, Gleeson CJ, McHugh and Kirby JJ agreeing). Ms Scott did not evidence an amount of loss referable to the loss of opportunity that I have described. I am not satisfied Ms Scott has established that she suffered loss or damage by reason of ELA’s failure to pay her the vehicle allowance.

Reimbursement of work expenses

406    The remaining question is whether Ms Scott is entitled to reimbursement of expenses said to be incurred by her for travel to East Arnhem Land in September and October 2021. Ms Scott says those amounts totalled $14,750 and were paid for by her using her personal funds and using her personal credit and debit card. She said they were all incurred in the performance of her work. She said that she did not get the chance to send the receipts or invoices to the ELA accountant before going on leave in October 2021.

407    ELA’s position is that Ms Scott’s pleading does not identify the basis upon which she is entitled to reimbursement of the expenses as cash and that, if the entitlement to reimbursement arises under the CAC, the CAC provides that expenses are to be recouped by way of convertible notes.

408    Ms Scott pleads that “in breach of the employment contract” ELA has “failed to reimburse Ms Scott for expenses incurred in respect of her employment”. The pleading apparently relies upon the CAC being incorporated into the employment contract: see [4(d)], [39C(d)] and [50(c)] of the Second Further Amended Statement of Claim. ELA denied that the CAC is incorporated into the employment contract. Ms Scott did not provide detailed submissions about that incorporation when addressing the expenses said to be due to her under the employment contract.

409    The employment contract relied upon by Ms Scott commences with the words:

“I [Mr Wallis] am pleased to confirm my offer of contract employment in the position of Chief Executive Officer with Equatorial Launch Australia (‘the employer’) on the terms and conditions set out in this letter”.

(Emphasis added.)

410    Under the heading “Terms and conditions of employment” the employment contract provides:

3.1 In addition to the provisions as provided in this letter, the terms and conditions of your employment will be those set out in:

3.1.1 applicable legislation including the National Employment Standards in the Fair Work Act 2009

3.1.2 the Agreement identifying convertible note and other conditions relevant to the work undertaken in good faith from 2018 and summarized as the delivery of no less than $5M in total benefit to be taken in shares or cash by May 2023.

(Emphasis added.)

411    The “Agreement” identified at clause 3.1.2 is unequivocally the CAC.

412    The employment contract concludes with clause 9 under the heading “Entire agreement”. It provides:

9.1 The terms, conditions and Agreement referred to in this letter constitute the terms and conditions of your employment.

9.2 The terms and conditions referred to in this letter may only be varied by a written agreement signed by both you and the employer.

(Emphasis added.)

413    The making of the CAC pre-dated the making of the employment contract. ELA accepts that the CAC was made on 3 October 2019. ELA admits that Ms Scott and ELA entered into the employment contract on 19 November 2019. The earlier CAC does not describe itself as providing “terms and conditions of employment”. Rather it refers to “payment for services” in possible contradistinction to a contract of service. It provides for amounts “payable by ELA to Carley Scott or transferable to an entity of her choosing for work undertaken on behalf of ELA”. It provides that Ms Scott will separately “enter an employment contract” and refers to an attached a “standard employment contract”.

414    The question is then whether the express reference to the CAC in the employment contract is intended to incorporate that CAC into the employment contract and establish the CAC as a “term and condition of employment”.

415    To ascertain whether the CAC is incorporated by reference it is necessary to ask whether the parties intended for the terms of the CAC to be given contractual effect as a term of employment: see Yousif v Commonwealth Bank of Australia (2010) FCAFC 8; 193 IR 212 at [93] (Kenny, Tracey and Jagot JJ). The text, context and object of the employment contract will be relevant, as may the matters known to both parties and the surrounding circumstances: see Yousif at [93]; and see generally Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; 177 ALR 193 (North J and Mansfield J).

416    Dealing first with text. As explained, the CAC does not purport to be a term and condition of employment. However, the employment contract expressly identifies it, at both cll 3.1.2 and 9.1, as a term and condition of employment. That text supports the intention of the parties to give the CAC effect as a term and condition of employment. As to purpose, the employment contract must intend to do something more than acknowledge the separate existence of the CAC where it chooses to describe it in both cll 3.1.2 and 9.1 as a term and condition of employment. That appears to be the purpose of cll 3.1.2 and 9.1.

417    That purpose is supported by the uncontested surrounding circumstances. The CAC was made on 3 October 2019 and the employment contract on 19 November 2019. The later document expressly referencing the earlier document, but now as a “term and condition of employment”.

418    To those matters I add that the CAC can be described as “contractual in nature” and “apt for incorporation” and provides “substantive rights” in the way those terms are used when considering the incorporation of an external source document: see Irving M, The Contract of Employment (2nd ed, LexisNexis Butterworths, 2019) at [7.24]-[7.25] and the cases cited there, in particular McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903; 168 IR 375 at [68]-[73] (Buchanan J); Alexander v Standard Telephones & Cables Ltd (No 2) [1991] IRLR 286 at 291-2 (Hobhouse J).

419    I am satisfied that ELA and Ms Scott intended for the terms of the CAC to be given contractual effect as a term and condition of employment.

420    Dealing then with ELA’s submission that Ms Scott does not adequately plead the contractual entitlement to the expenses and that if the CAC is the source of the entitlement it provides for payment of expenses in convertible notes.

421    As explained, Ms Scott expressly pleads in the Second Further Amended Statement of Claim that the employment contract includes the terms of the CAC, and alternatively the VCAC: see [4(d)]. At [39C(d)] Ms Scott pleads that the VCAC included a term that she was entitled to be reimbursed for expenses plus a 30% administration fee upon the provision of invoices for expenses incurred in relation to her position as CEO of ELA and general support to ELA, to be paid in cash or as further $1 convertible notes. She then pleads a breach of the employment contract by the failure to reimburse expenses incurred by Ms Scott in respect of her employment: see [50(c)]. She particularises a table of expenses from travel to East Arnhem Land in September and October 2021. She then refers to and repeats the matters alleged at [39]-[42] and [44]-[44E] of the pleadings, which includes the expenses term in the VCAC at [39C(d)], and pleads that the breach of the VCAC was a breach of the employment contract: at [52] and [52A]. I am satisfied that the pleading sufficiently identifies Ms Scott’s entitlement.

422    The CAC made on 3 October 2019 provided that Ms Scott was entitled to “expenses plus 20% administration fee upon provision of invoices for expenses incurred related to performance of the CEO role and general support to ELA, and paid in further $1 Convertible Notes”. Accordingly, ELA said if there was any breach Ms Scott would only be entitled to convertible notes, and not cash.

423    The VCAC varied this clause to provide that Ms Scott is entitled to “expenses plus 30% administration fee upon provision of invoice for expenses incurred related to the performance of the CEO role and general support to ELA, and paid in cash or further $1 Convertible Notes” (Emphasis added). The VCAC changed the entitlement to payment from convertible notes to convertible notes or cash. I note that while the VCAC also changed the administration fee from 20% to 30%, Ms Scott does not claim the administration fee.

424    For the reasons set out above, I have accepted that the VCAC was properly varied, made and agreed. I am also satisfied that cl 3.1.2 incorporates the CAC and any subsequent variation to it. That is, I am satisfied that cl 3.1.2 intends that the terms and conditions of employment alter with the contents of the CAC. Irving describes this as the “usual construction” where the incorporating term does not expressly address the issue: see [7.26]. That conclusion is supported by the circumstance that both the employment contract and the VCAC were consented to by the same parties, in contrast to cases where an external document may be varied unilaterally: see generally Riverwood at [111] (North J). It follows that the entitlement to be paid in cash as contained in the VCAC was incorporated into the employment contract. Accordingly, I am satisfied Ms Scott was entitled to be paid in cash for the expenses incurred by her.

425    The remaining question is whether the documentary evidence relied upon by Ms Scott adequately supports all of the expenses claimed by her. ELA submitted that the evidence tendered by Ms Scott captures receipts from transactions processed through a MasterCard debit card and a MasterCard credit card in Ms Scott’s name with such receipts totalling $7,985.65. It said that there is no “documentary support” for the balance of the expenses claimed.

426    The expenses Ms Scott claims, totalling $14,750, are set out in a table in the Second Further Amended Statement of Claim in the particulars to [50(c)].

427    Invoices, receipts, and booking documents were contained in the exhibit to Ms Scott’s affidavit dated 16 July 2024. Ms Scott tendered, without objection, further receipts, invoices, credit card statements, and bank statements in support of her claim for the expenses.

428    Ms Scott gave evidence that in September and October 2021, she had one credit card and one debit card in her name. There was some dispute about whether each of the expenses were incurred by Ms Scott using the credit and debit card held by her. However, I am satisfied that each of the expenses was incurred by Ms Scott and that Ms Scott has provided “documentary support” for those expenses, save for the expense of $34.39 for ‘Food and incidentals in Nhulunbuy’ on 14 October 2021. I set out in the table below the documentary support in respect of each claim.

429    Accordingly, I am satisfied that Ms Scott is entitled to the sum of $14,715.62 as reimbursement of expenses incurred by her in respect of travel to East Arnhem Land in September and October 2021.

Disposition

430    For the reasons explained above Ms Scott is entitled to the sum of $3 million pursuant to the terms of the VCAC. That amount represents what is referred to above as the retrospective amount under the VCAC and does not include the $2 million prospective amount. Ms Scott accepts and pleads that there should be a deduction of $632,569.75 in accordance with the clause in the VCAC, which provides that “salary payments made under the contract may be subtracted from the Commitment Amount”. There does not appear to have been any dispute between the parties as to the sum to be deducted by operation of that clause. Accordingly, Ms Scott is entitled to the sum of $2,367,430.25 pursuant to the terms of the VCAC.

431    For the reasons explained above, I find that ELA breached the employment contract. Ms Scott is entitled to the sum of $2,742.97 pursuant to the mobile phone allowance and $14,715.62 for reimbursement of the expenses incurred by her in her employment.

432    I will hear from the parties as to the orders they propose to give effect to these reasons.

Associate:

Dated:    19 June 2026