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Federal Court of Australia - Full Court Decisions |
Last Updated: 31 March 2006
FEDERAL COURT OF AUSTRALIA
Gibson Motorsport Merchandise Pty Ltd v Forbes [2006] FCAFC 44
FIDUCIARY RELATIONSHIPS – Motor sport
business – Negotiations for joint venture – Trial judge
finds no joint venture agreement
concluded – No appeal
therefrom – Contention on appeal that parties identified a business
opportunity that
could be exploited only if they acted
collaboratively – Whether parties owed fiduciary duties to each
other –
Content of fiduciary duties – If duties existed,
whether breached
PRACTICE AND PROCEDURE –
Appeal – Competency – Breach of contract –
Issues of liability and quantum split –
Notwithstanding split,
reasons for judgment of judge hearing liability issue contain observations about
period in respect of which
damages recoverable – No order made as to
that issue – Whether observations appealable – Whether
a
judgment
Federal Court of Australia Act 1976 (Cth)
s 24(1)(a)
United Dominions Corporation Ltd v
Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 applied
Waltons Stores (Interstate) Ltd
v Maher [1988] HCA 7; (1988) 164 CLR 387 cited
Blackpool and Fylde Aero Club v
Blackpool Borough Council [1990] EWCA Civ 13; [1990] 1 WLR 1195 cited
Brewer St
Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428 cited
Sabemo
Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880
cited
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64;
(1984) 156 CLR 41 cited
Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd
[1988] 2 Qd R 1 cited
Shanshal v Al-Kishtaini unreported QBD, 9
June 1999 cited
Arklow Investments Ltd v Maclean [2000] 1 WLR 594
cited
Chirnside v Fay [2004] 3 NZLR 637 cited
Furs Ltd v Tomkies [1936] HCA 3;
(1936) 54 CLR 583 cited
Day v Mead [1987] 2 NZLR 443
cited
Hodgkinson v Simms (1994) 117 DLR 4th 161
cited
Bristol and West Building Society v Mothew [1992] UKHL 1; [1998] Ch 1
cited
Breen v Williams [1995] HCA 63; (1996) 186 CLR 71 cited
Pilmer v Duke
Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 cited
Chan v Zacharia [1984] HCA 36; (1984)
154 CLR 178 cited
News Limited v Australian Rugby Football League Ltd
(1996) 64 FCR 410 cited
Woodson (Sales) Pty Ltd v Woodson (Australia)
Ltd (1996) 7 BPR 14,685 cited
US Airways Group Inc v British Airways
Plc 989 F Supp 482 cited
Butt v M’Donald (1896) 7 QLJ 68
cited
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 cited
Driclad Pty Ltd
v Federal Commissioner of Taxation [1966] HCA 59; (1968) 121 CLR 45 applied
Hi-Fert
Pty Ltd v Kiukiang Maritime Carriers Inc (1998) 155 ALR 94
cited
Landsal Pty Ltd v REI Building Society (1993) 113 ALR 643
considered
GIBSON
MOTORSPORT MERCHANDISE PTY LTD, ROBERT NOEL WATSON, FREDERICK CHARLES GIBSON,
NOEL WATSON (AUST.) PTY LTD, FC GIBSON PTY LIMITED,
THE WATSON GROUP AUSTRALIA
PTY LTD and SYNARBY PTY LTD v ROBERT JAMES FORBES, RACECAR PREPARATION &
MANAGEMENT PTY LTD and BOB
FORBES CORPORATION PTY LTD
VID 931
OF 2005
FINN, SUNDBERG and EMMETT JJ
31 MARCH
2006
MELBOURNE
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
|
BETWEEN:
|
GIBSON MOTORSPORT MERCHANDISE PTY LTD
(ACN 095 810 110) FIRST APPELLANT ROBERT NOEL WATSON SECOND APPELLANT FREDERICK CHARLES GIBSON THIRD APPELLANT NOEL WATSON (AUST.) PTY LTD (ACN 005 254 848) FOURTH APPELLANT FC GIBSON PTY LIMITED (ACN 082 475 706) FIFTH APPELLANT THE WATSON GROUP AUSTRALIA PTY LTD (ACN 091 455 426) SIXTH APPELLANT SYNARBY PTY LTD (ACN 057 500 973) SEVENTH APPELLANT |
|
AND:
|
ROBERT JAMES FORBES
FIRST RESPONDENT RACECAR PREPARATION & MANAGEMENT PTY LTD (ACN 095 359 041) SECOND RESPONDENT BOB FORBES CORPORATION PTY LTD (ACN 001 442 520) THIRD RESPONDENT |
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The stay of the primary judge’s orders 2, 3, 4, 5 and 13 imposed by order of Finkelstein J of 25 August 2005 be dissolved.
3. The parties bring in short minutes of orders containing an amended timetable for the steps the subject of the primary judge’s orders referred to in order 2 above.
4. The appellants pay the respondents’ costs of the appeal.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
REASONS FOR JUDGMENT
FINN J
1 I have had the advantage of reading the reasons and proposed orders of Sundberg and Emmett JJ with which I agree. I nonetheless wish to give short reasons of my own indicating why I consider the primary judge did not err in concluding that the parties did not, in the circumstances, owe fiduciary duties to each other. The joint judgment has set out in some detail both the factual setting of this matter and her Honour’s findings and conclusions. It is unnecessary for me to repeat these.
2 By way of background, it must be emphasised at the outset that ascribing the label "joint venture" to a business relationship between two or more parties does not of itself render that relationship fiduciary for some or all of its purposes. As was observed in United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 at 10-11:
"One would need a more confined and precise notion of what constitutes a ‘joint venture’ than that which the term bears as a matter of ordinary language before it could be said by way of general proposition that the relationship between joint venturers is necessarily a fiduciary one: but cf per Cardozo CJ, Meinhard v Salmon (1928) 249 NY 458, at p 462; 164 N E 545, at p 546. The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken."
3 It is important to understand how it is now said a fiduciary relationship arose in this matter. The appellants do not dispute the primary judge’s findings that no concluded contractual agreement for a "joint venture" was made at the 7 December 2000 meeting. They equally do not challenge her Honour’s finding that there was not an overarching contractual joint venture agreement concluded on or by 26 February 2001. Their case, founded on the alternative claim made in par 29 of the Third Further Amended Statement of Claim, is as follows: (i) On 7 December 2000 Watson, Gibson and Forbes identified a business opportunity ("the race team enterprise"); (ii) that opportunity could only be exploited if the parties acted collaboratively (or "cooperatively"), hence the participation of all three of them in its exploitation was envisaged; (iii) the particular way in which the opportunity was to be exploited and the detail of the business structures and arrangements to be established to that end were not then defined but would be worked out in negotiations between the parties; (iv) negotiations were then embarked upon and from early January business operations commenced though the totality of the arrangements envisaged between the parties and with associated entities had not by then been formalised; (v) on and from 7 December, Watson, Gibson and Forbes owed fiduciary duties to each other, the genesis and content of which was described in the appellants’ submissions (at [35]) in the following terms:
"Pursuit of the enterprise in the absence of settling those consensual terms [of their contemplated agreements] brought with it the consequence that each of Watson, Gibson and Forbes and each corporate party (save for BFC) reposed in the others mutual trust and confidence. They owed fiduciary duties to each other. Those fiduciary duties obliged Forbes to negotiate in good faith and seek to conclude all the contracts necessary to give effect to the arrangements or contemplated by the arrangements made on 7 December 2000. They prevented Forbes from pursuing his own separate interests in relation to the subject matter of the race team enterprise."
The primary breach of fiduciary duty alleged is that, in the event, Forbes and RPM appropriated the race team enterprise to themselves to the exclusion of Watson, Gibson and their companies.
4 While this case turns critically on the facts that the parties were negotiating for, and had in anticipation embarked upon, a business relationship, the claimed fiduciary relationship is not alleged to be the precursor of a fiduciary relationship that would in any event have been established between the parties when all of their agreements had been finalised and business structures put in place. As I understand the case, the appellants have not sought to establish that they were negotiating for a composite set of arrangements which together would have been fiduciary (or partially fiduciary) in character. It is unsurprising that this course was not taken given her Honour’s findings as to the several (not mutual) character of the various individual contracts concluded by 26 February 2001.
5 Distinctly, the appellants’ case is not that Watson, Gibson and Forbes entered into a discrete joint venture agreement (i) which was fiduciary itself in character; (ii) which appropriated the race team enterprise opportunity to them mutually (i.e. it precluded the exclusion of any of the participants); and (iii) importantly, to which the various contractual arrangements and structures in fact used in the conduct of the enterprise were subordinated.
6 Though the case as now presented does not descend in detail into the characteristics of the negotiating phase of the parties’ dealings which gave a fiduciary character to their relationship, it does seem to focus on three particular matters which were significant in that phase. These were that (i) the parties embarked on the enterprise without agreement as to all of its constituent contracts and structural arrangements; (ii) they reposed mutual trust and confidence in each other; and (iii) exploitation of the business opportunity required the cooperation of the parties. Each of these requires some examination.
(i) Commencement before finalisation of agreements
7 There is nothing intrinsically fiduciary about this phenomenon. It is a commonplace in business, particularly between parties who trust each other for whatever reason and who are prepared in consequence to assume the risk of embarking upon the projected business because they are confident that their proposed arrangement will not fall apart before finalisation. One need only point by way of illustration to case law on promissory estoppel: cf Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387; implied contract: Blackpool and Fylde Aero Club v Blackpool Borough Council [1990] EWCA Civ 13; [1990] 1 WLR 1195; Brewer St Investments Ltd v Barclays Woollen Co Ltd [1954] 1 QB 428; and quasi-contract (or restitution): Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880; where orthodox non-fiduciary relief has in appropriate circumstances been afforded a party where an envisaged business relationship did not eventuate despite work done in anticipation of it: see generally Dietrich, Restitution: A New Perspective, Federation Press (1998) 123 ff; see also Farnsworth "Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations" (1987) 87 Colum L Rev 217.
8 In the relatively uncommon class of case of present relevance where one party’s conduct prior to the expected finalisation of a business arrangement has been found to constitute a breach of fiduciary duty, two features are characteristically present. The first is that (a) the particular relationship being bargained for, and in relation to which anticipatory action may have been taken, was itself (or would have been) one having fiduciary characteristics; and (b) the factors in the projected relationship which would have authored those fiduciary characteristics were themselves pre-figured in, and hence coloured, the relationship as it evolved. The second feature relates to the quality of the parties’ fiduciary obligations. To the extent that their relationship is fiduciary – an important qualification, as often it will only be fiduciary in part: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 97-98 ("Hospital Products") – the duty of loyalty imposed on the negotiating parties will have obliged them to act in their mutual interests to the exclusion of their several interests.
9 The paradigm cases illustrating the above have involved negotiations for a partnership: see e.g. Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1; see also Lindley and Banks on Partnership, 16-03-16-06 (18th ed, 2002); or a joint venture having fiduciary characteristics: see e.g. Shanshal v Al-Kishtaini unreported QBD, 9 June 1999 (1999 WL477436) at 42 ff; cf Arklow Investments Ltd v Maclean [2000] 1 WLR 594 at -600; Chirnside v Fay [2004] 3 NZLR 637 at [47]-[51]. It was in such a context that Mason, Brennan and Deane JJ made the following observations in United Dominions (at 12):
"A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement. Likewise, the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such a relationship and have proceeded to take steps involved in its establishment or implementation."
10 As already noted, the appellants’ case is not that they were negotiating for a joint venture agreement with fiduciary elements or characteristics. On the contrary, as the primary judge found, their negotiations led over time to individual agreements designed to serve the several interests of the parties to them. While it may have been open to the parties to structure their relationship in whole or in part in a way that gave rise to mutual rights and obligations (or "joint interests"), they in fact chose otherwise for various reasons (save in relation to Gibson Motorsport Merchandise in which at least Watson and Gibson participated as joint venturers). If their relationship in the negotiating phase had any fiduciary characteristics, it had to be for reasons distinctive to the negotiating phase alone. The reason advanced by the appellants is that in that phase the parties reposed "mutual trust and confidence" in each other.
(ii) Mutual trust and confidence
11 It is well accepted that the fact that one party to a relationship subjectively trusted another (be it in the course of negotiations or otherwise) "is neither necessary for nor conclusive of the existence of a fiduciary relationship": Hospital Products, above at 69. Yet courts speak commonly enough of a fiduciary as being a person "occupying a position of trust and confidence": Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583 at 590; and of a fiduciary relationship as being one in which "one party is shown to repose substantial trust or confidence in the other": Day v Mead [1987] 2 NZLR 443 at 458; Hodgkinson v Simms (1994) 117 DLR 4th 161 at 193; Chirnside v Fay, above, at [52] ff. "The distinguishing obligation of a fiduciary is the obligation of loyalty": Bristol and West Building Society v Mothew [1992] UKHL 1; [1998] Ch 1 at 18. Once the character of that obligation is understood, the apparent inconsistency between the above two positions evaporates as is indicated below.
12 It is accepted in this country that a fiduciary’s duty of loyalty is essentially proscriptive in character: Breen v Williams [1995] HCA 63; (1996) 186 CLR 71 at 113; Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at [74]; and embodies the twin themes of precluding undisclosed conflict of duty and interest (or of duty and duty), and of prohibiting misuse of fiduciary position: see Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 at 198-199. Put compendiously the duty of loyalty can be said to oblige a fiduciary to act in the interests of the other party to the relationship or, in the case of a partnership or a joint venture having fiduciary incidents, in their joint interests to the exclusion of his or her own interests: see Breen v Williams, above, at 113; Bristol and West Building Society v Mothew, above, at 18. If there be trust and confidence present in a business relationship and if it be claimed that that trust and confidence is a building block in establishing that the relationship was a fiduciary one: cf News Limited v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 538-545; it must be shown that that trust was given, that that confidence was reposed, in a context which was capable of attracting, and did attract, a duty of loyalty. In a setting such as the present this would necessitate it being shown that, having regard in particular to what had been agreed and done and to what in consequence each party could properly anticipate would be done, their relationship was such that each could reasonably expect the others to act in their mutual interest to the exclusion of each’s own several interest in relation to at least a part or parts of the race team enterprise: Arklow Investments Ltd v Maclean, above, at 598; Woodson (Sales) Pty Ltd v Woodson (Australia) Ltd (1996) 7 BPR 14,685. Put shortly, if trust and confidence in another is to be relevant, it must relate to a reasonable expectation of loyalty: cf Dal Pont and Chalmers, Equity and Trusts in Australia, 94 (3rd ed, 2004).
13 The appellants have sought to characterise the relationship of the negotiating parties as one in which each of the parties "reposed in the others mutual trust and confidence" and they did so because they embarked on the enterprise without having settled the terms of the series of written agreements they contemplated making for the conduct of a race team and merchandising business. The use of the word "mutual" here is unhelpful as it presupposes the answer to what actually was in issue: were each of the parties entitled in the circumstances to expect loyalty from the others and if so in what matters? Whatever may have been the courses open to be taken by the parties in defining their relationship given the business opportunity identified on 7 December, that in fact taken and pursued was not one in which they established, or agreed to, mutual rights and obligations (or joint interests). The relationships they actually sought to establish in exploiting the business opportunity were ones based on severally owned assets, individual contracts and distinct business structures which served the several interests of the contractors. They may well have reposed a trust and confidence in each other reflecting an expectation that they could bring to an acceptable finalisation the various arrangements they had in contemplation. But that trust and confidence, if it was there, was not directed to the subordination of self interest to joint interest. There was nothing fiduciary about it.
(iii) Cooperation/Collaboration
14 I refer to this matter for the sake of completeness. It is an undertone in the appellants’ submission.
15 Though the following observation was made of New York law (in which a joint venture, as a fiduciary relationship, is seen as more closely resembling a partnership than may be the case in this country), it nonetheless expresses a view which is presently relevant:
"Entry into a series of cooperative agreements does not manifest an intent to enter a joint venture ... Many companies seek to cooperate with each other and reach agreements to implement such cooperation. However, most of these agreements do not create joint ventures. A joint venture represents more than ‘a simple contractual relationship’."
US Airways Group Inc v British Airways Plc 989 F Supp 482, 493 (SDNY 1997).
16 If the term "fiduciary relationship" be substituted for "joint venture", this observation reflects commonplace experience in this country. The short point to be made is that cooperative action, the pooling or sharing of resources (human and otherwise), or multiple, interlocking or interdependent contracts are characteristic of many types of business arrangements which only in a colloquial sense could be described as a "joint venture". Such arrangements may highlight the importance in a given instance of such implied duties as the duty to cooperate (cf Butt v M’Donald (1896) 7 QLJ 68). Rarely, though, will there be anything fiduciary about the arrangements themselves as they will not envisage a form or forms of cooperation which is or are potentially fiduciary in character (e.g. the sharing of control or of profits and losses; the creation of a commonly owned vehicle to effectuate what is agreed; the assumption of similar rights and obligations etc.).
17 The inchoate agreement of 7 December 2000 was one that was ripe with fiduciary potential. But that potential was never realised. As the actual contours of the participants’ relationships inter se began to take shape to accommodate the varying constraints on, and interests and requirements of, Watson, Gibson and Forbes, the manner of their cooperating assumed a distinctly non-fiduciary character. Her Honour unsurprisingly observed that there was a "considerable air of artificiality in the claim there was an overarching joint venture agreement concluded on or by 26 February" given the actual arrangements entered into by that date: see Reasons [176]. It involved no more than a series of simple contracts that were to define and serve the several interests of the participants in the venture. Theirs was a distinctively several, not joint, form of cooperation. It negatived, rather than suggested the existence of, a relationship with fiduciary characteristics.
18 In the event, the appellants have not demonstrated error in her Honour’s conclusion. There is no discernible basis for their contention that the parties’ relationship was, relevantly, fiduciary in character.
|
I certify that the preceding eighteen (18) numbered paragraphs are a true
copy of the Reasons for Judgment herein of the Honourable
Justice Finn.
|
Associate: 
Dated: 31 March 2006
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
|
GIBSON MOTORSPORT MERCHANDISE PTY LTD
(ACN 095 810 110) FIRST APPELLANT ROBERT NOEL WATSON SECOND APPELLANT FREDERICK CHARLES GIBSON THIRD APPELLANT NOEL WATSON (AUST.) PTY LTD (ACN 005 254 848) FOURTH APPELLANT FC GIBSON PTY LIMITED (ACN 082 475 706) FIFTH APPELLANT THE WATSON GROUP AUSTRALIA PTY LTD (ACN 091 455 426) SIXTH APPELLANT SYNARBY PTY LTD (ACN 057 500 973) SEVENTH APPELLANT |
|
|
AND:
|
ROBERT JAMES FORBES
FIRST RESPONDENT RACECAR PREPARATION & MANAGEMENT PTY LTD (ACN 095 359 041) SECOND RESPONDENT BOB FORBES CORPORATION PTY LTD (ACN 001 442 520) THIRD RESPONDENT |
REASONS FOR JUDGMENT
INTRODUCTION
19 This appeal arises out of a dispute relating to the establishment and operation of a motor sport business. The business involved entering and running motor cars in a series of motor races known as the AVESCO/TEGA V8 Championship Series and associated merchandising. The parties to the appeal played varying roles in establishing such a business and its subsequent operation over the course of approximately one year. The principal issue argued on the appeal was whether, and to what extent, fiduciary duties were owed by the respondents to the appellants following negotiations relating to the establishment of the business, and whether any such duties were breached by the respondents. A second question argued concerned the quantum of damages to which one of the appellants is entitled in consequence of repudiation of a contract made with one of the respondents.
20 The proceeding involved seven applicants and three respondents. The applicants were as follows:
• Gibson Motorsport Merchandise Pty Limited (‘Gibson Merchandise’);
• Robert Noel Watson (‘Mr Watson’);
• Frederick Charles Gibson (‘Mr Gibson’);
• Noel Watson (Aust) Pty Limited (‘Watson Aust’);
• FC Gibson Pty Ltd (‘FC Gibson’);
• The Watson Group Australia Pty Limited (‘Watson Group’);
• Synarby Pty Limited (‘Synarby’).
21 The respondents were as follows:
• Robert James Forbes (‘Mr Forbes’);
• Racecar Preparation & Management Pty Limited (‘Racecar’);
• Bob Forbes Corporation Pty Limited (‘Forbes Corporation’).
22 Mr Forbes has been involved with motor racing since the 1960s, when he competed as a driver in touring car competitions. Mr Forbes is the sole director of Forbes Corporation and has been a director of Racecar since its formation on 12 December 2000. Mr Gibson was at all material times the sole or controlling director of FC Gibson. Mr Gibson was also a director of Gibson Merchandise and was the principal of Synarby. Mr Watson has had an extensive involvement with the management of motor sports in Australia and has been involved with motor racing teams since the 1980s. Watson Aust and Watson Group were at relevant times controlled by Mr Watson. Mr Watson is also a director of Gibson Merchandise.
23 Mr Forbes and Mr Gibson had known each other for some years before the events that gave rise to the proceeding took place. Mr Gibson has known Mr Watson since 1983, when both were involved with Nissan, a car manufacturer.
24 The applicants in the original proceeding are the appellants in the appeal and the respondents in the original proceeding are the respondents to the appeal.
25 The TEGA/AVESCO V8 Championship Series is a series of motor races for V8 touring motor cars. The races are conducted by Touring Car Entrants Group Australia Pty Limited (‘TEGA’) through Australian Vee Eight Supercar Company Pty Limited (‘AVESCO’). AVESCO was formed by TEGA to conduct its operations on a more commercial and market orientated basis. When TEGA was formed as the organising body for Australian touring car racing, Mr Forbes became its founding chairman. He has also held office as a director of AVESCO and is a commissioner and director of the Australian Motor Sports Commission. Mr Watson has been a director of TEGA and was a founding director of AVESCO.
26 Mr Gibson had previously been the owner of certain assets that comprised, generally speaking, everything necessary to conduct a V8 supercar team in races conducted by TEGA/AVESCO. The assets consisted of mechanical plant and equipment, the business name ‘Gibson Motorsport’ and the benefit of a franchise agreement with TEGA. Mr Gibson sold the assets in question to Bronzco Pty Limited (‘Bronzco’) in December 1999. The assets and the racing team that used the assets were housed in a workshop owned by Angora Towers Pty Limited (‘Angora’), a company controlled by Mr Gibson.
27 Until late 2000, Mr Craig Lowndes was a professional racing car driver in a V8 Supercar team sponsored by Holden Limited (‘Holden’). The team, generally known as the Holden Racing Team, competed in the AVESCO/TEGA V8 Championship Series. Mr Lowndes was a successful and popular driver, having won the Australian Touring Car Championship in 1996, 1998 and 1999 and also having won the Bathurst 1000 Race in 1996. By late 2000, Mr Lowndes was dissatisfied with his existing contractual arrangements to drive for the Holden Racing Team and was considering options in respect of his future career.
28 During 2000, Mr Lowndes became acquainted with Mr Watson, who came to act as his manager, assisting him in evaluating the choices that were open to him. One of those choices involved driving for a racing team that used Ford cars made by Ford Motor Company of Australia Limited (‘Ford’). Another possible choice involved a new racing team, a proposal for which was then being considered by Messrs Gibson and Forbes, as Mr Watson knew. Mr Lowndes’ availability to drive for such a team was the catalyst for the proposals being considered by Messrs Gibson and Forbes. Each of Messrs Forbes and Gibson claimed independently to have had knowledge of the possibility of Mr Lowndes’ involvement in a new team. Each claims to have discussed the matter independently with Mr Watson during the course of October and November 2000.
29 In late November 2000, discussions took place between Mr Gibson and Mr Forbes concerning the possible formation of a V8 supercar motor racing team. The discussion was prompted by the availability for sale of the assets then held by Bronzco. At that time, Mr Gibson was also investigating the possibility of setting up a racing team in South Australia. The team would have been partly funded by the State of South Australia and Mr Gibson would also have invested his own assets in the venture. The proposal remained current until April 2001 when, according to Mr Gibson, ‘it faded away’.
30 On 7 December 2000, a meeting took place at Mr Watson’s premises in Coventry Street, South Melbourne. The meeting was attended by Mr Gibson, Mr Watson and Mr Forbes and, for part of the time, by Mr Stanley, who was Mr Forbes’ accountant. At the meeting, initial arrangements were made for establishing a motor racing team and the participants agreed on a number of basic points about the organisation of the team. It was common ground that the participants were in broad agreement as to the following:
• Mr Lowndes would drive for the team.
• Ford would support Mr Lowndes and would provide sponsorship funds to the team to help pay for the team’s expenses.
• Bronzco’s assets would be purchased by Mr Forbes for the purposes of operating the team.
• The team would continue to occupy the same workshop as it was occupying at the time, under a lease from Angora.
• Mr Gibson would manage the team.
• Mr Watson would promote the team and seek sponsorship for it.
• Mr Watson would develop and sell the team’s associated merchandise, through a separate entity, whose profits would be shared.
• 15 per cent of the wholesale price of the merchandise would be paid to Mr Lowndes as a royalty.
31 On 18 December 2000, two contracts were entered into in furtherance of the arrangements discussed on 7 December 2000. The first was ‘Agreement for Sale of Franchise’ between Gary Dumbrell Motorsport Pty Limited and FC Gibson, whereby FC Gibson paid $400,000 for the franchise agreement with TEGA. The second agreement was entitled ‘Contract of the Sale of Business’ between Bronzco and Racecar, whereby Racecar acquired the motor racing team assets for a sum in excess of $2 million. In addition, Bronzco transferred the ‘Gibson Motorsport’ business name to FC Gibson, which became registered in respect of that business name.
32 On 4 January 2001, Mr Lowndes, Craig Lowndes Pty Limited and Racecar entered into an agreement entitled ‘Driver Agreement’. The Driver Agreement conferred on Racecar the right to require Mr Lowndes to provide his driving services in the AVESCO/TEGA V8 Championship series and precluded him from driving for anyone else.
33 Gibson Merchandise was incorporated on 6 February 2001. Mr Forbes was sent a copy of a share certificate in favour of Forbes Corporation for 1,000 shares in Gibson Merchandise and Forbes Corporation was entered as a shareholder in the Register of Members. However, Forbes Corporation never actually applied and paid for those shares. Although Mr Forbes participated in a meeting of directors of Gibson Merchandise, received minutes of the meeting naming him as a director, was an authorised signatory to Gibson Merchandise’s bank account and received financial information concerning its affairs, he did not consent in writing to become a director of Gibson Merchandise.
34 Messrs Forbes, Gibson and Watson subsequently met on 26 February 2001. Although Mr Forbes expressed satisfaction about the progress in relation to the motor racing team up to that time, he was concerned to discuss the finances of the team, how much money was needed to support the team and the precise contractual arrangements that needed to be put in place. Mr Forbes prepared a document for discussion at the meeting. The document was entitled ‘Suggested Financial Arrangements Between Fred Gibson, Bob Forbes and Alan Heaphy at Racecar Preparation and Management Pty Ltd trading as Gibson Motorsport’. The part played by Mr Heaphy was not made clear in the appeal. The document contained, relevantly, the following:
‘OVERVIEW
...
Most of the financial gains will only come when the Business and TEGA Franchises are sold.
I suggest that we should all be confident that we will progress beyond the Ford review period at the end of next year and that we sell or restructure the business at the end of the 5 year Ford contract period and that we all share in the profit which has been made at that time.
...
STRUCTURE
Fred to be managing director of RPM P/L t/as Gibson Motor Sport. Alan to be General Manager Motorsport of Gibson Motorsport.
The Ford Contract should be in the name of F.C. Gibson Pty Ltd and a separate agreement be drawn up between F.C. Gibson Pty Ltd and RPM p/L for the services being provided by RPM P/L.
...
Fred having the contract directly with Ford reflects what Ford believe is actually happening....
Also, having the Ford contract directly with Fred (FC Gibson Pty Ltd) will obviate any of the problems that may arise from TEGA once the new Teams Agreement is in place.
FINANCIAL
...
Bob will leave the original agreed capital in the business (final amounts to be determined) and Bob will not charge interest on the agreed capital. The interest saved will contribute to the cost of running Rodney’s car.
WAGES AND PROFIT SPLIT
During the period Fred Gibson and Alan are to receive fair and reasonable wages for their employment plus all bona fide expenses and, naturally, the use of the cars being provided by Ford.
The net profit from the business will be divided up in the following percentages:
Fred %
Bob %
Alan %
The same percentages would be used when splitting up the profits from the TEGA Franchise. This profit will be a capital profit in the hands of F.C. Gibson Pty Ltd.
The payment times of the profit would need to be discussed between the partners at the end of each financial year. I currently envisage that we may not be able to distribute the profit each year as we may want to leave it in the company to invest in operating plant and equipment eg to purchase a test rig, to set up a paint and panel shop, to upgrade dynos, etc.
...’
35 Notwithstanding the arrangements described above, the participants in the meetings of 7 December 2000 and 26 February 2001 fell out. The falling out occurred no later than early September 2001. There is substantial dispute as to the effect of the meetings of 7 December 2000 and 26 February 2001. In particular there was a question as to the extent to which the meetings gave rise to any binding agreement or, in the alternative, whether the meetings gave rise to fiduciary duties on the part of the participants.
36 By their amended application, the applicants claimed relief of various kinds. As presently relevant, the relief claimed included the following:
(1) A declaration that Racecar hold the Joint Venture Assets (as defined) on trust for Messrs Watson, Gibson and Forbes.
(2) An order that Racecar account to Messrs Watson, Gibson and Forbes for its dealings with the Joint Venture Assets.
(3) An order that a charge granted by Racecar in favour of Mr Forbes and Forbes Corporation over the whole of the assets of Racecar, including the Joint Venture Assets, be set aside.
(4) Damages for breach of various agreements including:
• A Joint Venture Agreement to which each of Messrs Watson, Gibson and Forbes was alleged to be a party. • A Management Agreement between Watson Aust and Racecar Management. • A Services Agreement between Synarby and Racecar.
(5) Equitable compensation for breach of fiduciary duties said to be owed by one or other of the respondents to one or other of the appellants.
37 The applicants also claimed relief under the Trade Practices Act 1974 (Cth) (‘the Trade Practices Act’). While the claims under the Trade Practices Act constituted the basis for the jurisdiction of the Court, they do not appear to have played a significant part in the proceeding and are not relevant for the purposes of the appeal.
38 The third further amended statement of claim of 23 October 2003 (‘the Statement of Claim’) runs to some 85 pages. Much of that pleading is not relevant for the purposes of the appeal. The amended defence, dated 31 May 2004, itself runs to 43 pages. In addition, Racecar filed an amended cross-claim on 1 December 2003 (‘the Cross Claim’) seeking relief against Mr Gibson, FC Gibson and Gibson Merchandise. The claims made in the amended cross-claim are not in issue in the appeal.
39 The primary claim made by the appellants was that on 7 December 2000, or in the alternative on 26 February 2001, Messrs Watson, Gibson and Forbes entered into what was described as ‘the Joint Venture Agreement’, whereby they agreed to purchase, create and operate a motor sport business for the purpose of entering and running a Level One race team in the AVESCO/TEGA V8 Championship Series, using Mr Craig Lowndes as driver, and conducting associated merchandising. The Statement of Claim asserted that there were express terms of the Joint Venture Agreement. The alleged express terms are not presently relevant.
40 The Statement of Claim also alleged that, by reason of the relationship of the parties established by the Joint Venture Agreement, additional terms (‘the Implied Terms’) were implied, either in order to give business efficacy to the Joint Venture Agreement, or by operation of law. The Implied Terms were as follows:
(a) The parties will act fairly and in good faith toward each other in the course of conducting the proposed business.
(b) The parties will hold, exercise and require their respective nominees which they controlled to exercise, personal or proprietary rights held or acquired by them in the course of conducting the proposed business for the benefit of all of the parties.
(c) The parties will consult the others in good faith in so far as the proposed business was no longer capable of continuing in the manner envisaged by the parties, or no longer perceived by one or more of them as capable of so continuing, such consultation having as its purpose:
(i) the payment of just compensation for the contributions made by each of them;
(ii) the preservation of the value which inhered in the proposed business.
41 The Statement of Claim then asserted that, pursuant to the Joint Venture Agreement, Mr Forbes formed Racecar and held all its issued capital and that Racecar acquired legal ownership of certain assets and rights and acquired beneficial ownership of other assets and rights. Those assets and rights related to the motor racing activities and were referred to as ‘the Joint Venture Assets’. The Statement of Claim then asserted that, once the Joint Venture Assets were in the legal or beneficial ownership of Racecar, Racecar intended to hold and use them, and did hold and use them, for the purposes of the proposed motor sport business for the benefit of Messrs Watson, Gibson and Forbes. The Statement of Claim asserted that Racecar intended to become, and did become, trustee of the Joint Venture Assets and held them for the purposes of the proposed motor sport business and for the benefit of Messrs Watson, Gibson and Forbes.
42 The Statement of Claim then alleged conduct on the part of Mr Forbes that was said to constitute a breach by him of the Joint Venture Agreement. Assertions were also made that Racecar acted in breach of trust. Detailed particulars of such alleged breaches of contract and breaches of trust are set out in the Statement of Claim. It is not necessary for present purposes to set out those details.
43 The primary judge found that no joint venture agreement came into existence. In particular, her Honour found that the Joint Venture Agreement, as alleged, was never made. There is no claim in the appeal that the primary judge erred in that regard.
44 The Statement of Claim asserted, in the alternative, that if the Joint Venture Agreement did not come into existence as alleged, then from 7 December 2000, or alternatively from 26 February 2001, fiduciary duties were owed by each of Messrs Watson, Gibson and Forbes to the other and that Mr Forbes acted in breach of those duties. In that regard, the Statement of Claim alleges that, on and from about 7 December 2000, Messrs Watson, Gibson and Forbes negotiated the terms of an agreement to purchase, create and operate a proposed motor sport business and that, as a result of those negotiations, Messrs Watson, Gibson and Forbes owed to each other, as persons negotiating a joint venture, fiduciary duties to the effect of the Implied Terms.
45 The primary judge concluded that no fiduciary duties arose as a consequence of the meetings on 7 December 2000 or 26 February 2001. Accordingly, it was unnecessary for her Honour to consider whether there had been a breach of such duties.
46 However, her Honour found that there were breaches and repudiation of various agreements entered into between the parties. The only agreement relevant for the purposes of the appeal is a Services Agreement between Racecar and Synarby relating to Mr Gibson’s services as Team Principal. The relevant allegations in the Statement of Claim may be summarised as follows:
(1) On 26 February 2001, Synarby entered into a service agreement (‘the Services Agreement’) to supply the services of Mr Gibson to Racecar, for which Racecar would pay Synarby $250,000 per annum plus GST for so long as the Joint Venture Agreement continued.
(2) In breach of the Services Agreement, Racecar has failed and refused to pay Synarby for the services Racecar received under the Services Agreement in November 2001 and thereafter prevented Synarby from performing its obligations under the Services Agreement.
(3) Racecar thereby evinced an intention no longer to be bound by the terms of the Services Agreement.
(4) By reason of Racecar’s repudiation of the Services Agreement, Synarby has suffered loss and damage.
47 The primary judge found that, by 26 February 2001, the Services Agreement had been entered into between Racecar and Synarby, whereby Racecar retained the services of Mr Gibson as ‘Team Principal’ for an annual fee of $250,000. Her Honour found that, while there was no express provision agreed upon for the duration of the Services Agreement, the duration must implicitly be for the period during which Mr Lowndes was contractually bound to drive for Racecar under the Driver Agreement. Her Honour concluded that Racecar, through Mr Forbes, evinced an intention no longer to be bound by the Services Agreement and that that constituted repudiation by Racecar.
48 Synarby claimed loss of anticipated benefits in 2003, 2004 and 2005, on the basis that, but for the action of Mr Forbes in bringing about the severing of ties between Mr Lowndes and Racecar, Mr Lowndes would have continued to drive for Racecar until the end of 2005. The primary judge found, in effect, that Mr Gibson could have expected to play the role of Team Principal until the end of 2002, namely, the end of the period during which Mr Lowndes was contractually obliged to drive for Racecar.
49 Her Honour concluded that Racecar is liable to Synarby in respect of any sums due under the Services Agreement at the time of the repudiation by Synarby. Her Honour also found that Racecar is liable to Synarby for damages in respect of losses flowing from Racecar’s repudiation from 23 November 2001 until 31 December 2002. However, her Honour concluded that, having regard to the provisions of the Driver Agreement, Synarby’s claims were too remote, speculative, fanciful and unenforceable and that Synarby is not entitled to any damages for losses beyond the end of 2002.
50 Having published her conclusions, and her reasons for those conclusions, the primary judge adjourned the proceeding to enable the parties to bring in short minutes to give effect to those conclusions and for directions in relation to any further hearing that might be necessary in relation to quantum. On 3 August 2005, her Honour made orders requiring the parties to formulate the issues as to quantum that require determination, in the light of her Honour’s conclusions. Her Honour ordered that the proceeding be otherwise dismissed.
51 On 26 August 2005, another judge of the Court granted leave to the applicants to appeal from the order made by the primary judge that the proceeding be otherwise dismissed and ordered that there be a stay of certain of the other orders made by her Honour until the final determination of the appeal. Notice of appeal was filed on 12 September 2005 pursuant to the leave so granted.
RELEVANT FINDINGS OF THE PRIMARY JUDGE
52 The primary judge considered that it was clear, following the meeting of 7 December 2000, that any profits to be made from the proposed motor sport business were totally dependent on Mr Lowndes, on his driving skill and on his willingness to be contracted as a driver for the team. They were also dependent on the maintenance of Mr Lowndes’ skills and on his willingness to authorise use of any of his indicia and celebrity for the purposes of merchandising. Her Honour also found that it was tolerably clear, after the meeting, that any team set up and any future profits would also depend on the willingness of Ford to sponsor and to continue to sponsor the team.
53 The primary judge found that there was no concluded agreement for a joint venture at the meeting on 7 December 2000. Her Honour found that, at the conclusion of the meeting, it remained open for all parties to continue to negotiate on the precise terms of whatever contracts were necessary to run a team involving Craig Lowndes as the driver with the benefit of Ford sponsorship money. Her Honour found that, although the parties had agreed that there was scope for setting up a motor racing team and they discussed having a merchandising entity separate from an operating entity, there was no consensus or mutual assent about the necessary structural arrangements for the conduct of the motor racing team or the proposed motor sport business.
54 The primary judge considered that the fact that Messrs Gibson, Watson and Forbes agreed on certain matters at the meeting of 7 December 2000 did not reveal or evidence a common intention for a joint venture agreement or a common intention to be legally bound by what might be thought to be some recognisable incidents of a joint venture agreement, such as holding proprietary interests, either severally or jointly, in the assets of such a joint venture. The discussions about the holding of interests in the necessary assets of any proposed motor sport business, or the sharing of any fruits of the business, were preliminary and were to be considered further, not only by the parties, but also by their respective advisers. Her Honour considered that a large number of issues that were essential or critical to any joint venture remained outstanding on 7 December 2000 and required final agreement between the participants.
55 However, the primary judge found that, on or by 26 February 2001, Mr Gibson agreed to the following, for himself, in relation to the motor racing team:
(i) A lease by Angora to Racecar of the workshop then being used by the Bronzo team for a commercial rent;
(ii) A Services Agreement between Racecar and Synarby for the retention of the services of Mr Gibson as Team Principal, whereby Synarby would be paid $250,000 per annum;
(iii) The use by the team of the franchise agreement with TEGA, the earnings in respect of which would be passed to Racecar to assist in funding the race team;
(iv) Use by Racecar of Mr Gibson’s business name (‘Gibson Motorsport’), free of any licence fee;
(v) A one-third share in Gibson Merchandise.
56 The primary judge expressly found that Mr Gibson did not wish to be part of any overarching joint undertaking or jointly owned motor car racing team. Her Honour found that Mr Gibson’s licensing of the business name free of charge was taken into account when he and Mr Forbes agreed on the annual fee of $250,000 under the Services Agreement between Racecar and Synarby. Angora was to receive a commercial rent for the workshop. FC Gibson retained beneficial ownership of the franchise agreement with TEGA. Finally, Bronzco was a willing, and even anxious, seller who did not need to be persuaded by Mr Gibson to sell the assets to Racecar.
57 The primary judge concluded that Mr Gibson preferred to earn an annual fee and to receive various other sums individually, rather than through a joint undertaking with a view to mutual profit. Mr Gibson did not contribute capital to Racecar, which owned the team assets, having bought them from Bronzco for more than $2,000,000. He positively wanted to receive the individual payments referred to for his services and the workshop rather than realise the value of such contributions later, upon the ultimate disposition of team assets. He was prepared to allow earnings from the TEGA franchise to help fund Racecar and to authorise the use of the business name without a licence fee. However, Racecar was the source of both the rent payable to Angora and the annual fee of $250,000 for his services paid to Synarby.
58 The primary judge also found that, on or by 26 February 2001, Mr Watson had agreed to the following, for himself, in relation to the motor racing team:
• A Management Agreement between Watson & Associates (VIC) Pty Ltd (‘Watson Associates’), a company under his control, and Mr Lowndes, under which Mr Watson was to receive a fee for management services and possible commission fees on sponsorships.
• A Management Agreement between Watson Aust and Racecar, pursuant to which a commission was to be paid in respect of sponsorships secured or obtained by Mr Watson that were paid to Racecar.
• A management fee, to be paid in respect of managing Gibson Merchandise.
• A one-third share in Gibson Merchandise.
59 The primary judge expressly found that Mr Watson did not wish to be part of any overarching joint undertaking or jointly owned motor car racing team and was in fact constrained from such ownership by the terms of the management agreement with Mr Lowndes. Mr Watson preferred to earn fees and commissions individually, rather than through a joint undertaking with a view to mutual profit. Her Honour considered that Mr Watson’s procuring of Mr Lowndes as driver for the team was more correctly characterised as part of his management tasks for Mr Lowndes, for which he was paid by Mr Lowndes, rather than as a contribution to any joint venture. Mr Lowndes was a free agent, employing Mr Watson, and Mr Lowndes could chose to drive with the team or not, irrespective of Mr Watson’s advice.
60 The primary judge found that Mr Watson’s procuring of sponsorships was not a contribution to a joint venture. Her Honour found that, under his agreement, he was entitled to be paid commission on the initial Ford sponsorship procured by him. Had Mr Watson contributed the initial Ford sponsorship to the team, free of commission charges, her Honour may have reached a different conclusion as to whether or not there was an intention to form a joint venture. Her Honour concluded that Gibson Merchandise was set up separately from the race team and that that was deliberate. Mutual profits were intended to be enjoyed through Gibson Merchandise itself, rather than through an overarching joint venture.
61 The primary judge concluded that each of Messrs Watson and Gibson expressly rejected an opportunity to be part of a possible overarching joint venture with Mr Forbes. Mr Watson rejected the opportunity on 7 December 2000 and Mr Gibson rejected the opportunity on 26 February 2001. Her Honour considered that each of them was offered joint control over the entity that would conduct and take responsibility for the proposed racing business and that each declined. Her Honour also found that each was offered mutual commercial gains through the mechanism of sharing the profits or capital gain if and when the assets of the entity conducting the proposed racing business were eventually sold. Each of them declined that offer.
62 The fact that Messrs Watson and Gibson agreed to exercise joint control of, and to share profits in, Gibson Merchandise did not alter her Honour’s conclusion that there was no overarching joint venture agreement. Arrangements in relation to the setting up of Gibson Merchandise were never formally concluded, because Gibson Merchandise was not a necessary part of the proposed racing business. Rather, it was a separate entity dedicated to achieving derivative profits through the exploitation of the reputation of the proposed racing team and was dependent on Mr Lowndes’ authorising use of his name for commercial purposes.
63 The primary judge concluded that there was no joint venture agreement concluded or confirmed on 26 February 2001. Indeed, her Honour considered that there was a ‘considerable air of artificiality’ in the claim that there was an overarching joint venture agreement concluded on or by that day. The primary judge concluded that the conduct of the parties between 7 December 2000 and 26 February 2001 was consistent with the individual contracts that each of Mr Gibson and Mr Watson preferred, rather than being conduct from which an intention to form a joint undertaking for joint profits could be inferred.
64 The primary judge cited the following reasons:
• The team assets were not severally or jointly owned but were owned by Racecar. There was no entity to which each of Messrs Gibson, Watson and Forbes, or their associates, contributed capital or made other contributions: none of them made any contribution to Racecar. Mr Forbes was the sole shareholder of Racecar, the owner of the team assets. FC Gibson was the owner of the business name ‘Gibson Motorsport’. Angora was the owner of the workshop for which a commercial rent was charged and FC Gibson was the owner of the TEGA Franchise.
• Profits and gains of the proposed motor racing business were to be allocated individually, subject to individual contracts, rather than to be shared severally or jointly through any joint venture or partnership. The three individuals, through their companies, received their share of profits and gains through the arrangements described above.
• There was no several or joint liability. Thus, neither Mr Gibson nor Mr Watson had any risk or liability in respect of Racecar: Mr Forbes took the sole risk and liability in respect of Racecar.
• There was no community of interest in the purpose for which the motor racing team was established. Thus, Mr Forbes was primarily interested in operating a successful team in order to realise a capital gain on the ultimate disposition of Racecar. Mr Gibson was primarily interested in managing a successful team in order that Angora would receive rent for the workshop and Synarby would receive management fees and FC Gibson would realise a capital gain on the ultimate disposition of the TEGA franchise. Mr Watson was primarily interested in Mr Forbes operating and Mr Gibson managing a successful team so that he could earn commission on sponsorships from Racecar and earn management fees, through Watson Associates, for managing the separate merchandising company and so that he could earn an additional management fee and commission fees from Mr Lowndes pursuant to the management agreement between them. It was only in relation to Gibson Merchandise that it was contemplated that each of Messrs Forbes, Gibson and Watson would share profits.
65 The primary judge dealt directly with the alternative assertion that fiduciary duties arose, even though the Joint Venture Agreement as alleged did not come into existence. However, her Honour dealt with the question, albeit in a somewhat tangential fashion. Her Honour addressed the question of fiduciary duties in dealing with the pleading of an estoppel.
66 The Statement of Claim alleged an estoppel on the following basis:
• Messrs Gibson and Watson and their respective nominees undertook certain conduct on the assumption, from 7 December 2000 until 6 June 2001, that Messrs Watson, Gibson and Forbes owed fiduciary duties to each other as persons negotiating a joint venture to the effect of the Implied Terms.
• From 7 December 2000 until 6 June 2001, Messrs Gibson and Watson and their respective nominees, in making that assumption, relied on the conduct of Mr Forbes in negotiating a joint venture and on the conduct of Mr Forbes and his nominees in:
o causing Racecar to complete the purchase of assets from Bronzco,
o causing Racecar to enter into the Driver Agreement,
o becoming a shareholder of Gibson Merchandise,
o entering into a lease with Angora,
o establishing the business of Gibson Merchandise,
o attending a meeting on 18 May 2001 and
o attending a meeting on 1 June 2001.
• Mr Forbes seeks to resile from the assumption and in the circumstances it is unconscionable to do so.
• Accordingly, Mr Forbes is estopped from resiling from the assumption.
67 In dealing with those assertions, her Honour concluded that, to the extent that the appellants claimed that Messrs Watson, Gibson and Forbes owed fiduciary duties as persons negotiating a joint venture agreement, the evidence did not support such assertions. Her Honour considered that her findings, that Mr Watson and Mr Gibson specifically wanted to take individual benefits for themselves under individual contracts and rejected opportunities to have a share in the ownership, control, rights or obligations of Racecar, led to the conclusion that the relationships between the protagonists were to be governed by the common law in respect of contracts, without any specific, or far-reaching, duty to act in good faith. Her Honour considered that her conclusion, that there was no concluded Joint Venture Agreement and that such agreements as were the subject of negotiation were individual agreements, made it unnecessary to deal further with the claim.
68 Thus, in essence, the primary judge found that, while the parties were engaged in negotiation at various times, at no time were they engaged in negotiation directed towards establishing the relationship of joint venturers. That is to say, her Honour found, in effect, that Messrs Forbes, Watson and Gibson did not at any time agree to be, or accept each other, as participants in a joint venture. Rather, as her Honour found, each was negotiating towards specific contractual relationships as described above.
69 Implicit in those conclusions is a finding that neither Mr Watson nor Mr Gibson made the alleged assumption that fiduciary duties were owed by the three protagonists as persons negotiating a joint venture. That is to say, her Honour’s findings were, in effect, that each of the protagonists assumed that they were all negotiating at arms length towards achieving their own separate ends and objectives under the specific contractual relationships described.
70 However, while the primary judge found that no fiduciary duties were owed by the parties to each other, her Honour found that Racecar is liable to Synarby for breach of the Services Agreement. Her Honour also found that Racecar has a liability to Watson Aust under the Management Agreement. Next, her Honour found that the Management Agreement was effectively terminated when Mr Watson’s arrangement with Mr Lowndes came to an end in late November 2001. Finally, her Honour found that Racecar was liable to FC Gibson for amounts payable under the a Licence Agreement between Racecar and FC Gibson relating to the use of the ‘Gibson Motorsport’ name. The assessment of quantum in relation to those claims is yet to take place.
71 The primary judge found that, while there was no express provision agreed for the duration of the Services Agreement, the duration must implicitly be for the period during which Mr Lowndes was contractually bound to drive for Racecar. Her Honour found that Racecar, through Mr Forbes, evinced an intention no longer to be bound by the Services Agreement and that that constituted repudiation of the Services Agreement by Racecar. That repudiation occurred when Mr Forbes endeavoured to vary the Services Agreement by appointing a person over Mr Gibson, which had the inevitable effect of forcing Mr Gibson out, without his consent. The repudiation appears to have occurred and been accepted by Synarby at the end of 2001. Synarby claimed loss of anticipated benefits in 2002, 2003, 2004 and 2005, on the basis that, but for the action of Mr Forbes in bringing about the severing of ties between Mr Lowndes and Racecar, Mr Lowndes would have continued to drive for Racecar until the end of 2005.
72 The primary judge found that, without any material breach in his role as Team Principal and manager, Mr Gibson could have expected to play the role of Team Principal until the end of 2002, namely, the end of the period during which Mr Lowndes was contractually obliged to drive for Racecar. The primary judge concluded that Racecar was liable to Synarby in respect of any sums due under the Services Agreement at the time of the unequivocal recision by Synarby, through Mr Gibson. Her Honour also found that Racecar is liable to Synarby for damages in respect of losses flowing from Racecar’s repudiation from 23 November 2001 until 31 December 2002 but that Synarby is not entitled to any damages for losses beyond that date. The primary judge concluded that Synarby’s claims were too remote, speculative, fanciful and unenforceable, having regard to the provisions of the Driver Agreement between Mr Lowndes and Racecar.
73 The appellants formulated the issues in the appeal in the following way:
(1) Did what was agreed on 7 December 2000, when acted on by them in the establishment and operation of the Lowndes/Ford/Gibson motor racing team in early January 2001 and thereafter create fiduciary duties in Mr Forbes and entities controlled by him, owed to Messrs Watson, Gibson and their nominees?
(2) Did what occurred on 26 February 2001 extinguish or exhaust such fiduciary duties?
(3) Did the conduct of Mr Forbes and entities controlled by him breach the fiduciary duties they owed to Messrs Watson and Gibson and their nominees?
(4) Was Synarby entitled to damages for breach of the Services Agreement beyond the end of 2002?
74 The respondents quarrel with the appellants’ formulation of issues (1) and (2). They would reformulate issue (1) into two sub-issues, and reformulate issue (2), as follows:
(1.1) Whether the primary judge erred in dismissing the claim that fiduciary duties arose between the parties as persons negotiating a joint venture agreement and in making the findings that Messrs Watson and Gibson:
• did not wish to have interests and undertake obligations, risks or liabilities in a joint motor car racing team or undertaking with a view of mutual profit;
• declined the offers by Mr Forbes to take up such interests; and
• preferred to earn benefits separately.
(1.2) Whether the Court could recognise the fiduciary duties contended for by the appellants, given that they allegedly require negotiations and that their subject matter is uncertain.
(2) Whether any such alleged fiduciary duties could have enured to the point in time at which the appellants allege the first breach, namely, 7 September 2001.
The respondents agree with the formulation of issues (3) and (4) but point out that issue (3) arises only if the appellants succeed in the first two issues.
WHETHER FIDUCIARY DUTIES AROSE
75 The relationship between prospective partners or joint venturers may be a fiduciary one, notwithstanding that a formal agreement has not yet been executed. A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and may never reach, agreement upon the consensual terms which are to govern the arrangement between them. Thus, a fiduciary relationship, with attendant fiduciary obligations, may exist between prospective partners who have embarked upon the conduct of the partnership, business or venture before the precise terms of the partnership agreement have been settled. In such circumstances, the mutual confidence and trust that underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement. Further, the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such a relationship and have proceeded to take steps involving its establishment or implementation (United Dominions Corporation Ltd v Brian Pty Ltd [1985] HCA 49; (1985) 157 CLR 1 at 11-12).
76 Where two parties have agreed to be, and have been accepted as, participants in a joint venture, assuming the joint venture is to go ahead, and the parties have made, or agreed to make, financial contributions towards the costs of the project in which the parties have agreed to participate, the relationship between the parties will have assumed a fiduciary character. In those circumstances, the participants in the proposed joint venture are associated for a common end and any relationship between them is based upon a mutual confidence that they would engage in the particular activity or transaction for their joint advantage only. It does not matter that the relationship is one between prospective joint venturers before the terms of any joint venture agreement have been settled. But equally, it does not matter that the relationship is a limited preliminary joint venture to investigate and explore the possibilities of an ultimate joint venture. In either case, the relationship is a fiduciary one (ibid at pages 12-13).
77 The appellants say that fiduciary duties were owed by Mr Forbes to Messrs Gibson and Watson because, on 7 December 2000, the three had agreed to enter into a collaborative joint enterprise to set up and operate a motor racing team and merchandising business. Further, Messrs Forbes, Gibson and Watson and their companies established, and then conducted, that business, notwithstanding that the consensual terms of their arrangements were never wholly agreed or reduced to writing, as they had contemplated on 7 December 2000.
78 The appellants say that the findings of the primary judge demonstrate that Messrs Gibson, Watson and Forbes agreed on 7 December 2000 to enter into a collaborative joint enterprise to set up and operate a motor racing team and merchandising business. The decision to agree to pursue the opportunity together was born of pragmatism because each of them was under some limitation that restricted the successful pursuit of such a business without the participation of the others.
79 Thus, a limitation relating to Mr Watson resulted from his intention that he or an associated entity would enter into a management agreement with Mr Lowndes, if and when Mr Lowndes secured a release from his existing managing obligations to Holden. Mr Lowndes insisted that there be no connection between Mr Watson and the operating arm of the team. However, Mr Watson would not be prevented from participating in the team’s marketing and merchandising activities.
80 Mr Gibson was under a different limitation. He desired to keep open the possibility of establishing a separate motor racing team in Adelaide.
81 Finally, Mr Forbes could not acquire the TEGA franchise from Bronzco. Mr Forbes’ son, Rodney, was also going to be driving with the proposed team. Rodney Forbes was not considered to be ranked with Mr Lowndes as a champion driver. The fact that he was or might be a second driver in the team may have acted as a disincentive to Ford to sponsor the team. Ford valued highly the combination of a winning manager, Mr Gibson, and a winning driver, Mr Lowndes. Mr Lowndes and Ford were very pleased about Mr Gibson’s involvement. Ford regarded Mr Gibson as a leading team manager. When Ford was finally apprised of the somewhat complicated arrangements, whereby Racecar owned the team’s assets and FC Gibson owned the TEGA franchise, Ford was not unduly concerned. The only matter about which Ford eventually required assurance was that Ford sponsorship moneys would not be utilised for the purposes of Rodney Forbes’ car.
82 The appellants contend that those limitations precluded each of Messrs Watson, Gibson and Forbes from pursuing the proposed motor racing team and merchandising business independently of the others. They say that it was for that reason that each of them assented to the creation of an atypical structure, with FC Gibson owning the TEGA franchise under which the team was to operate, Racecar owning the assets with which the team would actually operate and Gibson Merchandise operating the merchandising activities of the team.
83 However, those considerations equally explain why the protagonists did not want, and could not participate in, a joint enterprise. If those considerations prevented them from engaging in the proposed business separately, they would equally prevent them from engaging in the business as a joint enterprise.
84 The appellants contend that, on and from 7 December 2000, Messrs Gibson, Watson and Forbes contemplated the making of a series of written agreements having as their object the establishment and conduct of the proposed race team and merchandising business. They say, however, that most of the agreements contemplated did not eventuate in the way that was expected. They dispute the findings made by the primary judge that individual contracts and arrangements were concluded on or by 26 February 2001 as the parties had contemplated.
85 The appellants say that the primary judge ought to have found that the arrangements agreed to on or by 26 February 2001 were not intended to be the final repository of all of the rights of Messrs Gibson and Watson in relation to the race team and merchandising business. They say that those rights were intended to be found in written agreements to be prepared by lawyers, which would set out their respective rights and obligations inter se. The contemplated agreements were:
• An agreement between Racecar and Gibson Merchandise concerning merchandising.
• An agreement between Forbes and Racecar, on the one hand, and Gibson and FC Gibson, on the other, concerning:
o the remittal of prize money and sponsorship money to Racecar;
o the provision of car and driver services to FC Gibson;
o the entry of Racecar’s car in the AVESCO/TEGA championship races under FC Gibson’s TEGA franchise;
o Racecar’s use of the Gibson Motorsport name and indicia.
• An agreement between FC Gibson and Gibson Merchandise concerning Gibson Merchandise’s use of Gibson Motorsport indicia.
• An agreement between Synarby and Racecar for the provision of Mr Gibson’s services as Team Principal.
• An agreement between Watson Aust and Racecar for the provision of sponsorship procuration services.
86 The appellants point to six matters, which they say indicate that her Honour’s finding as to the consequences of the meeting on 26 February 2001 were erroneous. First, the proposed lease between Racecar and Angora was not executed until 29 March 2001. However, the fact that the formal lease was not executed until 29 March 2001 is not inconsistent with the parties having reached consensus as to the essential terms of the proposed lease.
87 Secondly, the appellants say that the primary judge’s findings that FC Gibson would be the owner of the TEGA franchise is inconsistent with her Honour’s findings that Mr Forbes wanted, on 26 February 2001, to conclude a separate agreement between FC Gibson and Racecar for the services being provided by Racecar to FC Gibson. Such an agreement would have dealt with the entry by Racecar of its motorcars under FC Gibson’s TEGA franchise and the remittal of prize, tyre and appearance money from FC Gibson to Racecar. The appellants say that any such agreement was intended to provide for the remittal to Racecar by FC Gibson of sponsorship monies received from Ford.
88 However, those matters had been settled, by her Honour’s findings. Her Honour found that the initial Ford sponsorship agreement was specifically for the purposes of assisting Mr Lowndes to defray the costs and expenses directly incurred in racing his vehicle. Racecar was the entity that incurred the costs and expenses. The Ford sponsorship money was spent on the costs and expenses of running the team, especially Mr Lowndes’ car. Thus, there was no question of FC Gibson having to enter into an arrangement to provide the Ford sponsorship money to Racecar.
89 Thirdly, the appellants also say that the primary judge’s finding that Mr Gibson had authorised Racecar to use the business name, free of any licence fee, is inconsistent with the subsequent making of the Licence Agreement on 19 October 2001 between Gibson & FC Gibson, on the one hand, and Racecar, on the other. By the Licence Agreement, Racecar was granted a licence to use the ‘Gibson Motorsport’ name for the period from 1 November 2001 to 31 December 2002 for a fee of $100,000.
90 The Licence Agreement contained the following provisions as presently relevant:
‘THE NAME
[FC Gibson] and [Mr Gibson] by this Agreement licence and consents to the use of the Name whether alone or in combination with any other word, words, name or names being used by [Racecar] for trading or other purposes. (Clause 2.1)
THE DESIGN
[FC Gibson] and [Mr Gibson] by this Agreement licence and consents to the use of the design of the representation of the Name including the Intellectual Property Rights of the representation together with the colour, format, get up and style (the Mark) whether alone or in combination with any other word, words, name, names or other design or representation being used by [Racecar] for trading or other purposes. (Clause 2.2)
PAYMENT
In consideration of the licence of the Name and the Mark by [Mr Gibson] and [FC Gibson], [Racecar] agrees to pay to [FC Gibson] the sum of $100,000 plus GST payable by equal monthly instalments in advance beginning on the first day of January 2002 during the Term. (Clause 3.1)
...’
91 However, the Licence Agreement was entered into after the Services Agreement between FC Gibson and Racecar had been repudiated. At that time, Racecar required a licence fee for the use of the name. In the meantime, there had been a licence at will without any licence fee. By the time the Licence Agreement was made, the parties had fallen out.
92 Fourthly, the appellants say that the primary judge’s findings that the Management Agreement with Mr Watson was concluded on or by 26 February 2001 is inconsistent with her Honour’s subsequent finding that, in October 2001, it was clear that the position between Mr Watson and Racecar was unresolved. However, what was unresolved was a new arrangement that had to be put in place. Her Honour found that, at a meeting on 15 October 2001, the protagonists discussed a proposal from Mr Watson that, in its terms, appeared to accept that arrangements that had been in place would need to be renegotiated on different terms. Accordingly, there is no conflict between the two findings made by the primary judge.
93 Fifthly, the appellants point out that no merchandise agreement was entered into between Racecar and Gibson Merchandise. Her Honour found that, on 10 October 2001, Mr Forbes had indicated that Gibson Merchandise could continue to run the merchandising business but it would need to enter into a proper agreement with Racecar for that purpose. Her Honour also found that the position between Gibson Merchandise and Racecar was unresolved as at 19 October 2001. However, the fact that the arrangements had not been formalised is not inconsistent with the parties having reached consensus by 26 February 2001.
94 Sixthly, the appellants also pointed out that the management agreement between Mr Lowndes and Watson and Associates was not entered into until 20 June 2001. Once again, the time of formalisation of the arrangement is irrelevant to the question of when consensus was reached.
95 Finally, the appellants contended that her Honour’s finding that a mixture of informal, oral and formal written agreements were concluded on and by 26 February 2001 was inconsistent with her Honour’s findings that, on 14 February 2001, Messrs Gibson and Watson conferred with lawyers and explained many of the complexities of the arrangements so that contractual matters could then be documented. They say that the finding confirms that Messrs Gibson and Watson contemplated that contracts between their interests and those of Mr Forbes would be documented by lawyers.
96 However, the fact that further formalisation of the arrangements between the parties was contemplated does not necessarily lead to the conclusion that there was no binding agreement. Where parties who have been in negotiation reach agreement upon terms of contractual nature and also agree that the matter of their negotiation is to be dealt with by a formal contract, the parties may be regarded as having reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, notwithstanding that, at the same time, they propose to have the terms restated in the form that would be more precise but not different in effect (see Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360).
97 Even if the parties did not intend to be legally bound as from 26 February 2001, the primary judge clearly made a finding that they had reached consensus. Thus, while it is no doubt true that further negotiation may have been needed in order to formalise that consensus, that negotiation was not directed towards a joint enterprise or joint venture. It was directed to formalising the separate individual contracts upon which the parties had decided. That is to say, even if the parties had not yet reached finality as to the form of their various agreements, the question is whether the parties were negotiating towards the final form of contracts to give effect to a joint enterprise or joint venture to which they were to be parties or whether they were negotiating to the specific contractual relationships found by the primary judge.
98 It is significant that there is no challenge in the appeal by the appellants to the findings made by the primary judge that the protagonists did not want, and thus were not negotiating toward, a joint undertaking for mutual profit but rather toward individual profits from separate contracts and asset management. On her Honour’s assessment of the whole of the arrangements under discussion in the action, the protagonists were pursuing their several, and not joint or mutual, interests. Her Honour found that the protagonists did not want a joint undertaking for mutual commercial gain in relation to the operations of the race team and merchandising business.
99 The primary judge made no appellable error in concluding that the nature of the discussions and negotiations on 7 December 2000 and following was not such as to give rise to fiduciary duties. It is not strictly necessary, therefore, to deal with the question of whether the conduct of Mr Forbes constituted breach of any fiduciary duty. However, that question was argued in full and it is desirable to say something about it.
THE CONTENT OF THE ALLEGED FIDUCIARY DUTIES
100 The formulation of the alleged fiduciary duties by the appellants in their submissions on the appeal is not entirely consistent with their formulation in the Statement of Claim. As indicated above, the pleaded duties were:
(a) a duty to act fairly and in good faith toward each other in the course of conducting the joint motor sport business;
(b) a duty to hold and exercise personal or proprietary rights held or acquired by them in the course of conducting the joint motor sport business for the benefit of all of the parties;
(c) a duty to consult the others in good faith in so far as the joint motor sport business was no longer capable of continuing in the manner envisaged by the parties, such consultation having as its purpose the payment of just compensation for the contribution made by each of them and the preservation of the value that inhered in the joint motor sport business.
101 However, the appellants say, in their submissions in support of the appeal, that the pursuit of a joint enterprise in the absence of settling the consensual terms that the parties contemplated on 7 December 2001, had the consequence that, because each of Messrs Watson, Gibson and Forbes reposed in the others mutual trust and confidence, Mr Forbes was obliged to negotiate in good faith and to seek to conclude all of the contracts necessary to give effect to the arrangements contemplated on 7 December 2000 and was prevented from pursuing his own separate interests in relation to the race team and merchandising business.
102 The respondents make no complaint about the disconformity between the pleading and the submissions and have addressed the contentions in the appeal on the basis that it would be open to the Court to find such duties. However, they contend that there was no error on the part of the primary judge in failing to find that such duties arose.
103 The respondents contend that precision is required in the moulding of the duties to the particular relationship and contemplated arrangements, not least because of the need to provide guidance for the assessment of the claim for equitable compensation in relation to the alleged breaches of the duties. The respondents say that the vagueness of the appellants’ formulation and the lack of precision would make it impossible for the Court to quantify any equitable compensation.
104 The content of the fiduciary duties alleged on appeal was both positive and proscriptive. The former is a duty to promote joint interests, by seeking to conclude all the contracts necessary to give effect to, or contemplated by, the arrangements made on and from 7 December 2000. The latter is a duty not to pursue one’s own separate interests in relation to the subject matter of the joint enterprise.
DUTY TO NEGOTIATE IN GOOD FAITH
105 It may be that, where persons in a fiduciary relationship are negotiating with each other, an obligation of good faith will arise. That is to say, there may be a duty to negotiate in good faith, to the extent that they negotiate at all. However, a fiduciary relationship would not itself give rise to a duty to negotiate.
106 The positive duty alleged cannot be sustained, in the absence of a finding that the parties were engaged in negotiating the terms of a proposed joint venture. Even if the parties were negotiating towards the specific contractual relationships referred to above, that of itself would not give rise to a duty to negotiate in good faith. Where, as the primary judge found, there was no intention on the part of the protagonists to pursue a joint venture or joint undertaking, but an intention to pursue their own individual interests, there could be no such duty.
107 Assuming that a promise to negotiate in good faith can give rise to an enforceable contractual obligation, such an enforceable promise to negotiate in good faith does not of itself give rise to any fiduciary duty. A contractual obligation to negotiate in good faith will leave the party bound by that obligation to pursue self interest in endeavouring to reach consensus. Even if there is an obligation to negotiate in good faith to achieve binding contractual obligations, such an obligation would not require the parties to negotiate otherwise than in their own self-interest.
108 Only two of the alleged breaches of duty could conceivably be regarded as breaches of an obligation to negotiate in good faith. First, the appellants referred to a meeting on 15 October 2001. The primary judge found that, at that meeting, the protagonists discussed a proposal from Mr Watson. In its terms, the proposal appeared to accept that the arrangements that had been in place would need to be renegotiated on different terms. That could hardly be a breach of an obligation to negotiate in good faith to give effect to the arrangements that were discussed on 7 December 2000.
109 Secondly, the appellants say that Mr Forbes failed to proceed with the finalisation of a written management agreement involving Mr Watson, Watson Aust and Racecar. Drafts of a proposed management agreement were exchanged. The last draft was prepared in early November 2001, but no written agreement was ever concluded. The primary judge found that an agreement between Racecar and Watson Aust was in place by 26 February 2001, whereby Racecar would pay a commission of 10 per cent in respect of the initial Ford sponsorship in 2001 and 2002 and a commission of 20 per cent on additional sponsorships during the year 2001 together with a commission of 17.5 per cent for additional sponsorships obtained during 2002. There does not appear to be any basis for saying that, if a written management agreement had been entered into, the position of Mr Watson and Watson Aust would be any different.
110 The real thrust of the appellants’ alleged positive duty is that, by his conduct from 7 September 2001 to 19 May 2003, Mr Forbes effected the exclusion of Messrs Gibson and Watson from the motor sport and merchandising business, which was placed wholly in the hands of Mr Forbes. Mr Forbes was able to achieve that because formal agreements were not put in place as contemplated by the protagonists. On that basis, the appellants appear to be saying no more than there was a failure to negotiate in good faith to put in place agreements that would have bound Mr Forbes to contractual obligations that would have prevented him from excluding Messrs Gibson and Watson and putting the enterprise in his own hands.
111 The alleged positive duty did not arise.
DUTY NOT TO EXCLUDE THE OTHERS
112 The substantive complaint by the appellants is that Mr Forbes excluded Messrs Gibson and Watson and placed the business in his own hands and that was a breach of the fiduciary duty owed by him to Messrs Gibson and Watson. If the protagonists were in a fiduciary relationship in relation to the racing car and merchandising business it would not be difficult to conclude that that relationship gave rise to a duty on each party that that party would not exclude the others and place the business in his own hands.
113 Both in the Statement of Claim and in their submissions on appeal, the appellants point to specific conduct on the part of Mr Forbes that is alleged to have brought about the exclusion of Messrs Gibson and Watson and the placing of the enterprise in the hands of Mr Forbes. The allegations are by no means identical. However, no complaint has been made by the respondents concerning any disconformity between the Statement of Claim and the submissions on appeal.
114 The Statement of Claim alleged that Mr Forbes acted in breach of fiduciary duties, in that:
(a) On 7 September 2001 Mr Forbes sent a letter to Messrs Watson and Gibson refusing to complete an agreement made on 6 June 2001 for the sale by Mr Forbes to Messrs Gibson and Watson of shares in Racecar;
(b) On 7 September 2001 Mr Forbes made certain assertions in bad faith;
(c) Mr Forbes caused Racecar to refuse to pay Synarby for its provision of Mr Gibson’s services in November 2001;
(e) Mr Forbes caused Racecar to refuse to pay Watson Aust pursuant to a management agreement made between Racecar and Watson Aust;
(f) Mr Forbes caused Racecar to assert that that management agreement was terminable at Racecar’s will and purported to refuse Gibson Merchandise permission to use the name ‘Gibson Motor Sport’;
(g) Mr Forbes met with representatives of Ford during the period from late August 2001 to mid October 2001 in the absence of Messrs Gibson and Watson and without their knowledge or consent and caused Ford to refuse to perform its obligations toward F C Gibson under a five year Ford sponsorship agreement;
(h) Mr Forbes met with Mr Lowndes during the period from late August 2001 to mid October 2001 in the absence of Messrs Gibson and Watson and without their knowledge or consent and caused Mr Lowndes to continue to drive for Racecar absent the appellants;
(i) Mr Forbes took over the procuring of sponsorship, promotion, merchandising, licensing and supervising publicity for Race Team to the exclusion of the appellants and for the exclusive benefit of Mr Forbes and his nominee, Racecar;
(j) Mr Forbes told Messrs Gibson and Watson that Racecar was negotiating with Steve Horne to take over as Team Principal in lieu of Mr Gibson;
(k) In 2002 and 2003 Mr Forbes caused Racecar to conduct, and Racecar did conduct, an extensive elite level racing program for Forbes Corporation at a cost to Racecar of approximately $1,500,000 per annum using the Joint Venture Assets (or their traceable proceeds);
(l) On 19 May 2003 Mr Forbes and Forbes Corporation sought, and Racecar granted, debentures over the whole of the assets of Racecar (including the Joint Venture Assets and their traceable proceeds), the purpose and effect of which was to prevent Watson and Gibson enjoying the Joint Venture Assets and to benefit Forbes and Forbes Corporation improperly;
(m) Mr Forbes has caused Racecar to sell or threaten to sell and Racecar continues to threaten to sell the Joint Venture Assets.
115 The conduct that was said on the hearing of the appeal to give rise to breaches of the fiduciary duties alleged is as follows:
(a) Mr Forbes convened a secret meeting with Mr Lowndes on 27 and 28 September 2001 and procured his agreement to continue to perform his obligations under the Driver Agreement even if Mr Gibson ceased to act as Team Principal.
(b) Mr Forbes caused Racecar to repudiate the Services Agreement with Synarby.
(c) Mr Forbes caused Forbes Corporation to seek and obtain a dispensation from TEGA so that Racecar could race three cars under the Forbes Corporation franchise in the AVESCO/TEGA championship series in 2002 and 2003. That rendered it unnecessary to enter the Lowndes car under FC Gibson’s franchise.
(d) Mr Forbes caused Racecar to repudiate the Gibson Motorsport Licence Agreement made on 19 October 2001.
(e) Mr Forbes caused Racecar to trade under the business name ‘00 Motorsport’ rather than ‘Gibson Motorsport’ from early February 2002.
(f) Mr Forbes took over the procuring of sponsorship, promotion, merchandising, licensing and supervising publicity for the race team in place of Mr Watson and Gibson Merchandising.
(g) Mr Forbes caused Racecar to enter into written sponsorship agreements from 21 February 2002 to 6 March 2002, thereby putting Racecar in a position to deny commission fees for sponsorship arrangements that would otherwise have been payable to Watson Aust.
(h) Mr Forbes caused Racecar to enter into a written merchandising agreement with an entity other than Gibson Merchandise.
(i) Mr Forbes caused Racecar to grant a charge over its assets on 19 May 2003.
116 Much of the particulars both in the Statement of Claim and in the submissions are particulars of conduct that led to the exclusion of Messrs Gibson and Watson from the motor racing and merchandising business. If there were a negative duty as asserted in the submissions (but not pleaded) that conduct would amount to a breach of the duty.
117 However, while the primary judge found that there were breaches and repudiation of various agreements entered into between the parties, her Honour found that there was no duty. Thus, her Honour found that Racecar is liable to Synarby for breach of the Services Agreement. Her Honour also found that Racecar has a liability to Watson Aust under the Management Agreement. Next, her Honour found that the Management Agreement was effectively terminated when Mr Watson’s arrangement with Mr Lowndes came to an end in late November 2001. Finally, her Honour found that Racecar was liable to FC Gibson for amounts payable under the Gibson Motorsport Licence Agreement. The assessment of quantum in relation to those claims is yet to take place. That assessment has been stayed pending the determination of the appeal.
118 Racecar may be liable for breach of those various contracts. However, the appellants are not entitled to equitable compensation, by reason of the appropriation by one or other of the respondents of the fruits and profits of the motor sport and merchandising business.
119 While there was no order splitting quantum from liability, the case was conducted on the basis that all that was in issue was liability. In fact, it is fairly clear that the order setting the matter down for hearing should have done so on the question of liability only. From the transcript of a directions hearing before another judge it appears that the parties agreed that there should be a split, and the judge thought this was ‘the better course’. Further, in the course of ‘settling’ a minute of proposed order handed up by the appellants, his Honour said of proposed order 1, namely that ‘The proceeding be set down for trial on the question of liability only on a date to be fixed on an estimate of 10 days’:
"Well, proposed order number 1 I’ve already dealt with that in effect in a slightly different way."
The ‘slightly different way’ was to set aside three weeks for the hearing on liability. The order made some days later, however, simply set the proceeding down for hearing on a specified date on an estimate of three weeks.
120 The case proceeded before the primary judge on the basis that liability alone was in issue at that stage. As indicated at [50], her Honour directed the parties to bring in short minutes in respect of final orders on liability and for directions in relation to any further hearing in respect of quantum. On the appeal, Senior Counsel for the appellants informed the Court that the first instance hearing related to liability and not quantum.
121 In view of the basis upon which the case below proceeded, it might have been expected that the primary judge, having found a repudiation by Racecar, would have left the matter there and deferred any consideration of loss and damage to a later stage. Nevertheless, her Honour apparently thought it desirable to narrow the issue for determination on quantum by restricting any damages to losses flowing from the repudiation in respect of the period 23 November 2001 to 31 December 2002. It would have been open to the parties to invite the primary judge to make a declaration as to the basis upon which damages for repudiation of the Services Agreement were to be assessed. They did not do so.
122 Section 24(1)(a) of the Federal Court of Australia Act 1976 (Cth) confers jurisdiction to hear and determine appeals from judgments of the court constituted by a single judge. The word ‘judgment’ is relevantly defined in s 4 to mean ‘a judgment, decree or order’. The word ‘judgment’ in s 24(1)(a) and in provisions comparable thereto has been held to refer only to operative judicial acts, so that there is no appeal against reasons standing alone. In Driclad Pty Ltd v Federal Commissioner of Taxation [1966] HCA 59; (1968) 121 CLR 45 at 64 Barwick CJ and Kitto J said:
"The taxpayers lodged notices of appeal to the Full Court which were expressed as if the appeals were against the reasons of Taylor J relating to the ‘B’ part of the fund rather than against the orders that he made. Needless to say, this was erroneous, because it is of the nature of appeals, as s 73 of the Constitution recognizes, that they lie only against ‘judgments, decrees, orders and sentences’, not against reasons. The word ‘judgments’ in this connexion refers only to operative judicial acts, and is not used, as it often is in other contexts, as a convenient abbreviation for reasons for judgment."
See also Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (1998) 155 ALR 94 at 98.
123 In Landsal Pty Ltd v REI Building Society (1993) 113 ALR 643 at 651-52 the Full Court referred to earlier cases, including Driclad, in which the trial judge was seen to have intended to dispose, in a final way, of all the issues in the litigation which he was required to resolve, even though he had not formally incorporated all those determinations in an order of the court, as he could have done, and where it was held that an appeal was nevertheless competent. The Court then said (at 652-653):
"Driclad and Ah Toy [v Registrar of Companies (1985) 10 FCR 280] stand in sharp contrast to the present case. Here, O’Loughlin J was not exercising a jurisdiction which required him to make any final determination on the issues the subject of his findings. He was therefore entitled to refrain from incorporating his findings in an order which, if made, would have been appealable. He not only deliberately refrained from finally disposing of the limited range of issues upon which he reached his conclusions, which he could have done if he had chosen to incorporate his findings in an order, but also deliberately left himself with the task of determining all the outstanding issues of causation and quantum and the relief that should be granted before he would complete his function of hearing the litigation.
...
If, in the exercise of his inherent jurisdiction, a judge decides to conduct a trial in separate parts, there is no requirement that he make an order reflecting the conclusions he has reached part way through the hearing. Whether a judge, in exercising this particular jurisdiction has reached a conclusion on some of the issues part way through the task, which can be immediately made the subject of an appeal, depends upon whether he has either formally incorporated those conclusions in an order or can be seen to have intended to have done that. If in such a case it can be seen that the judge did not intend to make an order reflecting conclusions he has reached part way through conducting the trial of a matter, then there is nothing that can be the subject of an appeal, whether by leave or as of right."
124 The present case falls clearly within the observations just quoted. The case below was conducted on the basis that quantum was split from liability. The primary judge dealt with liability, and made orders reflecting her conclusion thereon. Her Honour made findings about the extent of the period in respect of which damages were recoverable by Synarby, but made no orders thereon, because the whole question of damages was for another day. All that was done was to give directions as to steps to be taken to ensure the efficient conduct of a hearing as to quantum. As appears from [50], her Honour directed the parties to bring in minutes in respect of ‘final orders on liability and for directions in relation to any further hearing in respect of quantum’. This the parties did. The orders relating to quantum were stayed pending the appeal. Subject to variation of the times within which the various steps are to be taken, the stay should be dissolved.
125 Accordingly the purported appeal from the primary judge’s findings set out at [72] is incompetent.
126 In all the circumstances, it is undesirable that the Full Court make any determination of the basis on which damages should be assessed. The assessment of damages should proceed on the basis that there has been no determination and that the parties are not bound by the opinion expressed by the primary judge.
127 The appeal should be dismissed with costs.
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I certify that the preceding one hundred and nine (109) numbered paragraphs
are a true copy of the Reasons for Judgment herein of
the Honourable Justices
Sundberg and Emmett.
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Associate:
Dated: 31 March 2006
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Counsel for the Appellants:
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B Shaw QC with S Wotherspoon and M Rivette
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Solicitor for the Appellants:
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Madgwicks
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Counsel for the Respondents:
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P Jopling QC with P Gray
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Solicitor for the Respondents:
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Allens Arthur Robinson
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Date of Hearing:
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13 February 2006
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Date of Judgment:
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31 March 2006
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URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2006/44.html